Special Note Regarding Forward-Looking Statements

This reportAnnual Report on Form 10-K contains forward-looking statementsboth historical and “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 27A of the Securities Act of 1933, as amended. Discussions containing suchAll statements other than statements of historical fact included that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements, may be foundincluding, in Items 1, 1A, 2, 3, 5, 7particular, the statements about our plans, objectives, strategies and 7A hereofprospects regarding, among other things, our financial condition, results of operations and elsewhere within this Report generally. In addition, when used in this Report, thebusiness. We have identified some of these forward-looking statements with words like “believe,” “may,” “will,” “should,” “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate” or “continue” and other words and terms of similar meaningmeaning. These forward-looking statements may be contained throughout this Annual Report on Form 10-K. These forward-looking statements are intendedbased on current expectations about future events affecting us and are subject to identify forward-looking statements.uncertainties and factors relating to, among other things, our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Many factors mentioned in our discussion in this Annual Report on Form 10-K, including the risks outlined under “Risk Factors,” will be important in determining future results. Although the Company (as defined below) believeswe believe that its plans, intentions andthe expectations reflected in or suggested by suchthese forward-looking statements are reasonable, such forward-looking statements are subject to a number ofwe do not know whether our expectations will prove correct. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, that could causeincluding those described under “Risk Factors” in this Annual Report on Form 10-K. Since our actual results, toperformance or achievements could differ materially from thethose expressed in, or implied by, these forward-looking statements, made in this Report. The more important of such risks and uncertainties are set forth under the caption “Risk Factors” and elsewhere in this Report. Many such factors are outside the controlwe cannot give any assurance that any of the Company. Consequently, suchevents anticipated by these forward-looking statements should be regarded solelywill occur or, if any of them does occur, what impact they will have on our business, results of operations and financial condition. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as our current plans, estimates and beliefs.of the date they are made. We do not undertake and specifically decline, any obligation to publicly release the results of any revisions toupdate these forward-looking statements that may be madeor the risk factors contained in this Annual Report on Form 10-K to reflect anynew information, future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements.otherwise, except as may be required under federal securities laws.

Important factors that could cause actual results to differ materially from the forward-looking statements made in this Annual Report on Form 10-K include but are not limited to: the sensitivity of our business to the number of flight hours that our customers’ planes spend aloft and our customers’ profitability, both of which are affected by general economic conditions; future geopolitical or other worldwide events; cyber-security threats and natural disasters; our reliance on certain customers; the U.S. defense budget and risks associated with being a government supplier; failure to maintain government or industry approvals; failure to complete or successfully integrate acquisitions; our indebtedness; potential environmental liabilities;supply chain constraints; increases in raw material costs, taxes and labor costs that cannot be recovered in product pricing; failure to complete or successfully integrate acquisitions; our indebtedness; current and future geopolitical or other worldwide events, including, without limitation, wars or conflicts and public health crises; cybersecurity threats; risks related to the transition or physical impacts of climate change and other natural disasters or meeting sustainability-related voluntary goals or regulatory requirements; our reliance on certain customers; the United States (“U.S.”) defense budget and risks associated with being a government supplier including government audits and investigations; failure to maintain government or industry approvals; risks related to changes in laws and regulations, including increases in compliance costs; potential environmental liabilities; liabilities arising in connection with litigation; risks and costs associated with our international sales and operations; and other factors.

In this report, the term “TD Group” refers to TransDigm Group Incorporated, which holds all of the outstanding capital stock of TransDigm Inc. The terms “Company,” “TransDigm,” “we,” “us,” “our” and similar terms, unless the context otherwise requires, refer to TD Group, together with TransDigm Inc. and its directwholly-owned and indirect subsidiaries.majority-owned subsidiaries for which it has a controlling interest. References to “fiscal year” mean the year ending or ended September 30. For example, “fiscal year 2017”2023” or “fiscal 2017”2023” means the period from October 1, 20162022 to September 30, 2017.2023.

PART I

ITEM 1.    BUSINESS

TransDigm Inc. was formed in 1993 in connection with a leveraged buyout transaction. TD Group, was formed in 2003 to facilitate a leveraged buyout ofthrough its wholly-owned subsidiary, TransDigm Inc. The Company was owned by private equity funds until its initial public offering in 2006. TD Group’s common stock, is publicly traded on the New York Stock Exchange, or NYSE, under the ticker symbol “TDG.”

Most of our products generate significant aftermarket revenue. Once our parts are designed into and sold on a new aircraft, we generate net sales from aftermarket consumption over the life of that aircraft, which is generally estimated to be approximately 25 to 30 years. A typical platform can be produced for 20 to 30 years, giving us an estimated product life cycle in excess of 50 years. We estimate that approximately 55%56% of our net sales in fiscal year 20172023 were generated from the aftermarket, sales, the vast majority of which come from the commercial and military aftermarkets. TheseHistorically, these aftermarket revenues have historically produced a higher gross marginprofit and have been more stable than net sales to original equipment manufacturers or OEMs.(“OEMs”).

We primarily design, produce and supply highly engineered proprietary aerospace components (and certain systems/subsystems) with significant aftermarket content. We seek to develop highly customized products to solve specific needs for aircraft operators and manufacturers. We attempt to differentiate ourselves based on engineering, service and manufacturing capabilities. We typically choose not to compete for non-proprietary “build to print” business because it frequently offers lower margins than proprietary products. We believe that our products have strong brand names within the industry and that we have a reputation for high quality, reliability and strong customer support.

Our business is well diversified due to the broad range of products that we offer to our customers. Some of our more significantOur major product offerings, substantially all of which are ultimately provided to end-users in the aerospace industry, include mechanical/electro-mechanicalelectromechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, NiCad batteries and chargers, engineered latching and locking devices, engineered rods, and locking devices, engineered connectors and elastomers,elastomer sealing solutions, databus and power controls, cockpit security components and systems, specialized and advanced cockpit displays, aircraftengineered audio, radio and antenna systems, specialized lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, advanced sensor products, switches and relay panels, thermal protection and insulation, lighting and control technology, military personnel parachutes, high performance hoists, winches and lifting devices, and cargo loading, handling and delivery systems.systems and specialized flight, wind tunnel and jet engine testing services and equipment. Each of our product offerings is composed of many individual products that are typically customized to meet the needs of a particular aircraft platform or customer.

The Company’s businesses are organized and managed in three reporting segments: Power & Control, Airframe and Non-aviation.

The Power & Control segment includes operations that primarily develop, produce and market systems and components that predominately provide power to or control power of the aircraft utilizing electronic, fluid, power and mechanical motion control technologies. Major product offerings include mechanical/electro-mechanicalelectromechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, databus and power controls, advanced sensor products, switches and relay panels, high performance hoists, winches and lifting devices, and cargo loading, handling and handlingdelivery systems. Primary customers of this segment are engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots. Products are sold in the OEMoriginal equipment and aftermarket market channels.

The Airframe segment includes operations that primarily develop, produce and market systems and components that are used in non-power airframe applications utilizing airframe and cabin structure technologies. Major product offerings include engineered latching and locking devices, engineered rods, and locking devices, engineered connectors and elastomers,elastomer sealing solutions, cockpit security components and systems, aircraftspecialized and advanced cockpit displays, engineered audio, radio and antenna systems, specialized lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, thermal protection and insulation, lighting and control technology, military personnel parachutes and cargo delivery systems.specialized flight, wind tunnel and jet engine testing services and equipment. Primary customers of this segment are airframe manufacturers and cabin system suppliers and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots. Products are sold in the OEMoriginal equipment and aftermarket market channels.

The Non-aviation segment includes operations that primarily develop, produce and market products for non-aviation markets. Major product offerings include seat belts and safety restraints for ground transportation applications, mechanical/electro-mechanicalelectromechanical actuators and controls for space applications, hydraulic/electromechanical actuators and fuel valves for land-based gas turbines, and refueling systems for heavy equipment used in mining, construction and other industries.industries and turbine controls for the energy and oil and gas markets. Primary customers of this segment are off-road vehicle suppliers and subsystem suppliers, child restraint system suppliers, satellite and space system suppliers, and manufacturers of heavy equipment used in mining, construction and other industries.industries and turbine original equipment manufacturers, gas pipeline builders and electric utilities.

For financial information about our segments, seerefer to Note 16,17, “Segments,” in the notes to ourthe consolidated financial statements included herein.

Consistent with our overall strategy, our sales and marketing organization is structured to continually develop technical solutions that meet customer needs. In particular, we attempt to focus on products and programs that will lead to high-margin, repeatable sales in the aftermarket.

We have structured our sales efforts along our major product offerings, assigning a business unit manager to certain products. Each business unit manager is expected to grow the sales and profitability of the products for which he or she is responsible and to achieve the targeted annual level of bookings, net sales, new business and profitability for such products. The business unit managers are assisted by account managers and sales engineers who are responsible for covering major OEM and aftermarket accounts. Account managers and sales engineers are expected to be familiar with the personnel, organization and needs of specific customers to achieve total bookings and new business goals atfor each account and, together with the business unit managers, to determine when additional resources are required at customer locations. Most of our sales personnel are evaluated, in part, on their bookings and their ability to identify and obtain new business opportunities.

Though typically performed by employees, the account manager function may be performed by independent representatives depending on the specific customer, product and geographic location. We also use a number of distributors to provide logistical support as well as serve as a primary customer contact with certain smaller accounts. Our major distributors are Aviall,Boeing Distribution Services, Inc. (a subsidiary of The Boeing Company) and Satair A/S (a subsidiary of Airbus S.A.S.). among others, are our major distributors.

We maintain approximately 60 principal100 manufacturing facilities. Most of our manufacturing facilities are comprised of manufacturing, distribution and engineering functions, and most facilities have certain administrative functions, including

We attempt to differentiate ourselves from our competitors by producing uniquely engineered products with high quality and timely delivery. Our engineering costs are recorded in cost of sales and in selling and administrative expenses and researchwithin our consolidated statements of income. Research and development costs are recorded in selling and administrative expenses inwithin our consolidated statements of income. The aggregate of engineering expense and research and development expense represents approximately 8%9% of our operating units’ aggregate costs, or approximately 4% of our consolidated net sales.sales for fiscal year 2023. Our proprietary products, and particularly our new product initiatives, are designed by our engineers and are intended to serve the needs of the aircraft component industry. These proprietary designs must withstand the extraordinary conditions and stresses that will be endured by products during use and meet the rigorous demands of our customers’ tolerance and quality requirements. Refer to Note 3, “Summary of Significant Accounting Policies,” in the notes to the consolidated financial statements included herein with respect to the total costs of research and development.

We use sophisticated equipment and procedures to comply with quality requirements, specifications and Federal Aviation Administration (“FAA”)aviation authority and OEM requirements. We perform a variety of testing procedures as required by our customers, such as testing under different temperature, humidity and altitude levels, flammability testing, shock and vibration testing and X-ray fluorescent measurement. These procedures, together with other customer approved techniques for document, process and quality control, are used throughout our manufacturing facilities. Refer to Note

We predominantly serve customers in the commercial, regional, business jet and general aviation aftermarket, which accountsaccounted for approximately 35%32% of total sales;our net sales for fiscal year 2023; the commercial aerospace OEM market, comprising large commercial transport manufacturers and regional and business jet manufacturers, which accountsaccounted for approximately 26%22% of total sales;our net sales for fiscal year 2023; and the defense market (which includes defense OEMs and aftermarket sales to the U.S. and friendly foreign governments), which accountsaccounted for approximately 34%39% of our net sales for fiscal year 2023. Non-aerospace net sales comprised approximately 7% of our net sales for fiscal year 2023.

The commercial aerospace industry was significantly disrupted by the COVID-19 pandemic and its adverse impact on air travel worldwide. To a lesser extent, the defense aerospace market was adversely impacted by the COVID-19 pandemic, with this impact arising primarily from supply chain shortages. This led to the defense market comprising a greater percentage of our net sales in fiscal years 2023, 2022 and 2021 compared to pre-pandemic historical levels. In fiscal years 2015 through 2019, defense market net sales ranged from 29% to 37% of total net sales. Non-aerospaceAs the commercial aerospace industry continues to recover, defense market net sales comprise approximately 5%continue to trend to account for a percentage of total net sales that is relatively in line with our total sales.historical levels prior to the COVID-19 pandemic. We began to see this expected trend in fiscal 2022 and this trend has continued in fiscal 2023, as defense sales represented 39% of net sales compared to 43% of net sales in fiscal 2022 and 50% of net sales in fiscal 2021.

Our customers include: (1) distributors of aerospace components; (2) worldwide commercial airlines, including national and regional airlines; (3) large commercial transport and regional and business aircraft OEMs; (4) various armed forces of the United States and friendly foreign governments; (5) defense OEMs; (6) system suppliers; and (7) various other industrial customers. For the year ended September 30, 2017, Airbus S.A.S. (which includes Satair A/S, a distributor of commercial aftermarket parts to airlines throughout the world) accounted for approximately 13% of our net sales and The Boeing Company (which includes Aviall, Inc., also a distributor of commercial aftermarket parts to airlines throughout the world) accounted for approximately 11% of our net sales. Our top ten customers for fiscal year 20172023 accounted for approximately 46%41% of our net sales. Products supplied to many of our customers are used on multiple platforms.

The markets in which we sell our products are, to varying degrees, cyclical and have experienced upswings and downturns. The demand for our commercial aftermarket parts and services depends on, among other things, the breadth of our installed OEM base, revenue passenger mileskilometers (“RPMs”RPKs”), the size and age of the worldwide aircraft fleet, the percentage of the worldwide fleet that is in warranty, and airline profitability. The demand for defense products is specifically dependent on government budget trends, military campaigns and political pressures.

The niche markets within the aerospace industry that we serve are relatively fragmented and we face several competitors for many of the products and services we provide. Due to the global nature of the commercial aircraft industry, competition in these categories comes from both U.S. and foreign companies. Competitors in our product offerings range in size from divisions of large public corporations to small privately-held entities with only one or two components in their entire product portfolios.

We compete on the basis of engineering, manufacturing and marketing high quality products, which we believe meet or exceed the performance and maintenance requirements of our customers, consistent and timely delivery, and superior customer service and support. The industry’s stringent regulatory, certification and technical requirements and the investments necessary

Companies engaged in supplying defense-related equipment and services to United States Government (“U.S. GovernmentGovernment”) agencies are subject to business risks specific to the defense industry. These risks include the ability of the U.S. Government to unilaterally: (1) suspend us from receiving new contracts and impose criminal penalties based on alleged violations of procurement laws or regulations;contracts; (2) terminate existing contracts; (3) reduce the value of existing contracts; (4) audit our contract-related costs and fees, including allocated indirect costs; (5) control and potentially prohibit the export of our products; and (6) seek repayment of contract related payments under certain circumstances. Violations of government procurement laws could result in civil or criminal penalties.

The commercial aircraft component industry is highly regulated by the FAAFederal Aviation Administration (“FAA”) in the United States and by the JointEuropean Union Aviation AuthoritiesSafety Agency in Europe and other agencies throughout the world, while the military aircraft component industry is governed by military quality specifications. We, and the components we manufacture, are required to be certified by one or more of these entities or agencies, and, in many cases, by individual OEMs, in order to engineer and service parts and components used in specific aircraft models.

We must also satisfy the requirements of our customers, including OEMs and airlines that are subject to FAA regulations, and provide these customers with products and services that comply with the government regulations applicable to commercial flight operations. In addition, the FAA requiresand other aviation authorities require that various maintenance routines be performed on aircraft components. We believe that we currently satisfy or exceed these maintenance standards in our repair and overhaul services. We also maintain several FAA approvedFAA-approved repair stations.

In addition, our businesses are subject to many other laws and requirements typically applicable to manufacturers and exporters. Without limiting the foregoing, sales of many of our products that will be used on aircraft owned by foreign entities are subject to compliance with export control laws and the manufacture of our products and the operations of our businesses, including the disposal of hazardous wastes, are subject to compliance with applicable environmental laws.

The key market factors in the commercial aftermarket include RPKs and the size and activity level of the worldwide fleet of aircraft and the percentage of the fleet that is in warranty. Throughout fiscal 2023, we continued to see a rebound in our commercial aerospace industry, includingend markets from the aftermarketCOVID-19 pandemic and OEM market, is impactedare encouraged by the healthprogression of the global economy and geo-political events around the world. The commercial aerospace industry had shown strength with increases in revenue passenger miles, or RPMs, between 2003 and 2008, as well as increases in OEM production and backlog. However, in 2009, the global economic downturn negatively impacted the commercial aerospace market recovery to date. Commercial air travel in domestic markets continues to lead the air traffic recovery with most domestic markets nearing, achieving or surpassing pre-pandemic air traffic levels. The pace of the international recovery has been slower than the domestic recovery and remains below pre-pandemic levels. However, RPKs, which is a key metric used to measure air traffic demand, continues to make positive strides as most countries have removed international traveler restrictions and there is pent-up demand for long-haul travel. Current industry causing RPMsconsensus indicates that worldwide RPKs will recover and surpass the calendar year 2019 (i.e., pre-pandemic levels) in calendar year 2024. Therefore, we expect the Company's commercial aerospace end markets to decline slightly. Thiscontinue progressing into fiscal 2024 barring any significant disruptions or setbacks.

The commercial OEM market sector beganrecovery is progressing with airlines returning to rebound in 2010the commercial OEMs to place orders; however, the continuation of commercial OEM supply chain challenges impacting manufacturers such as Boeing and positive growth has continued through 2017Airbus are slowing the pace of new aircraft manufacturing. Our commercial transport OEM shipments and revenues generally run ahead of Boeing and Airbus aircraft delivery schedules. As a result, and consistent with increases in RPMs, as well asprior years, our fiscal 2024 shipments will be a function of, among other things, the growthestimated 2024 and 2025 commercial aircraft production rates. In fiscal 2023, we experienced improved sales in the large commercial OEM sector (aircraft with 100 or more seats) with order announcementsprimarily due to increased production by The Boeing Companyand Airbus. Both Boeing and Airbus S.A.S. leadinghave disclosed further planned OEM production rate increases for calendar 2024.

Our businesses continually seek to planned increases in production. The 2018 leading indicatorsprovide innovative solutions for our customers and industry consensus suggest a continuation of current trendsothers in the commercial transport market sector supported by continued RPM growthaerospace and increases in production atdefense industries. Our current initiatives include creating new products that are more environmentally friendly, creating new products that will help further improve commercial airlines’ efforts to keep passengers healthy and safe, such as touch-free aircraft lavatory suite products and air shields to better cabin air quality. We strive to create new products that ensure the OEM level.safety of our customer’s endeavors on the land, sea and space.

Our military business fluctuates from year-to-year, and is dependent, to a degree, on government budget constraints, the timing of orders, political pressuresmacro and micro dynamics with respect to the U.S. Department of Defense (“DOD”) procurement policy and the extent of global conflicts. Itconflicts, such as the existing conflicts between Russia and Ukraine and Israel and Hamas. Also, delays in government spending outlays and government funding reprioritization, such as shifting funds to efforts to assist friendly countries in conflicts, provides for further unpredictability in the military spending outlook. For a variety of reasons, the military spending outlook is not necessarily affected by general economic conditions that affect the commercial aerospace industry.very uncertain, though recent DOD budgets have trended upwards.

Historically, our presence in both the commercial aerospace and military sectors of the aerospace industry mayhas served to mitigate the impact on our business of any specific industry risk. We service a diversified customer base in the commercial and military aerospace industry, and we provide components to a diverse installed base of aircraft, which mitigates our exposure to any individual airframe platform. At times, declines in net sales in one channel have been offset by increased net sales in another.another channel. However, due to differences between the profitability of our products sold to OEM and aftermarket customers, variation in product mix can cause variation in gross margin.profit.

Outside of the market disruptions caused by COVID-19, there are many short-termother factors (including customer inventory corrections,level adjustments, supply chain issues, unannounced changes in order patterns, strikes, facility shutdowns caused by fires, hurricanes, health crises or other incidents and mergers and acquisitions) that can cause short-term disruptions in our quarterly shipment patterns as compared to previous quarters and the same periods in prior years. As such, it can be difficult to determine longer-term trends in our business based on quarterly comparisons. To normalize for short-term fluctuations, we tend to look at our performance over several quarters or years of activity rather than discrete short-term periods.

We require the use of various raw materials in our manufacturing processes. We also purchase a variety of manufactured component parts from various suppliers. We also purchase replacement parts, which are utilized in our various repair and overhaul operations. At times, we concentrate our orders among a few suppliers in order to strengthen our supplier relationships. Most of our raw materials and component parts are generally available from multiple suppliers at competitive prices.

We have various trade secrets, proprietary information, trademarks, trade names, patents, copyrights and other intellectual property rights, which we believe, in the aggregate but not individually, are important to our business.

Our operations and facilities are subject to a number of federal, state, local and foreign environmental laws and regulations that govern, among other things, discharges of pollutants into the air and water, the generation, handling, storage and disposal of hazardous materials and wastes, the remediation of contamination and the health and safety of our employees. Environmental laws and regulations may require that the Company investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations. Certain facilities and third-party sites utilized by the Company have been identified

As of September 30, 2017,2023, we had approximately 9,20015,500 full-time, part-time and temporary employees. Approximately 11%18% of our full-time and part-time employees wereare represented by labor unions. Collective bargaining agreements between us and these labor unions expire at various dates ranging from February 2018up to November 2020. September 2027.

We consider our relationshipemployees to be our greatest asset. Succession planning and the development, attraction and retention of employees is critical for TransDigm and its operating units to sustain our three core value drivers (obtaining profitable new business, continually improving our cost structure and providing highly engineered value-added products to customers). To support the advancement of our employees, we offer training and development programs encouraging advancement from within and continue to fill our team with strong and experienced management talent. We leverage both formal and informal programs to identify, foster, and retain top talent at both the corporate and operating unit level.

TransDigm’s executive team also mentors rising talent on a more informal basis. This informal mentorship achieves a number of goals, including accelerating the development of top performers, increasing organizational learning, and improving employee performance and retention. The executive team also commits substantial time to evaluating the bench strength of our leadership and working with our leadership to improve their performance.

We are proud to offer attractive benefits packages that attract, retain, motivate and reward our talent, and we are committed to providing our employees and their families with programs that support their health and overall well-being. To assist employees with financial empowerment, we offer retirement savings plans. We also offer employees the ability to save money on a tax-free basis through flexible spending accounts and health savings accounts. TransDigm offers competitive compensation programs to our employees that includes base pay, bonus programs and equity programs. TransDigm employees also receive paid time off and holidays.

We do not believe our net sales are subject to significant seasonal variation; however, our net sales have generally been lower in the first quarter of our fiscal year compared to be satisfactory.the subsequent quarters due to fewer working days resulting from the observance of various holidays.

Set forth below are importantmaterial risks and uncertainties that could negatively affect our business and financial condition and could cause our actual results to differ materially from those expressed in forward-looking statements contained in this report. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and financial condition. You should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.

During a prolonged period of significant market disruption in the aerospace and defense industry, such as the adverse impact that the COVID-19 pandemic had on the commercial business is sensitive to the number of flight hours that our customers’ planes spend aloft, the size and age of the worldwide aircraft fleet and our customers’ profitability. These items are, in turn, affected by general economic and geopoliticalaerospace market, and other worldwide conditions.

Our two largest customers forIn fiscal year 2017 were Airbus S.A.S. (which includes Satair A/S) and The Boeing Company (which includes Aviall, Inc.). Airbus S.A.S.2023, no customer individually accounted for approximately13%10% or more of ourthe Company’s net sales and The Boeing Company accounted for approximately 11% ofsales; however, our net sales in fiscal year 2017. Our top ten customers for fiscal year 20172023 accounted for approximately 46%41% of our net sales. A material reduction in purchasing by one of our larger customers for any reason, including but not limited to general economic downturn,or aerospace downturns, decreased production, strike or resourcing, could have a material adverse effect on our net sales, gross marginresults of operations, financial position and net income.

As is customary in our business, we do not generally have long-term contracts with most of our aftermarket customers and, therefore, do not have guaranteed future sales. Although we have long-term contracts with many of our OEM customers, many of those customers may terminate the contracts on short notice and, in most cases, our customers have not committed to buy any minimum quantity of our products. In addition, in certain cases, we must anticipate the future volume of orders based upon the historic purchasing patterns of customers and upon our discussions with customers as to their anticipated future requirements, and this anticipated future volume of orders may not materialize.

We also have entered into multi-year, fixed-price contracts with some of our customers, pursuant to which we have agreed to perform the work for a fixed price and, accordingly, realize all the benefit or detriment resulting from any decreases or increases in the costs of making these products. This risk is greater in a high inflationary environment, such as currently. Sometimes we accept a fixed-price contract for a product that we have not yet produced, and this increases the risk of cost overruns or delays in the completion of the design and manufacturing of the product. Most of our contracts do not permit us to recover increases in raw material prices, taxes or labor costs.

A significant portion of our growth has occurred through acquisitions. Any future growth through acquisitions will be partially dependent upon the continued availability of suitable acquisition candidates at favorable prices and upon advantageous terms and conditions. We intend to pursue acquisitions that we believe will present opportunities consistent with our overall business strategy. However, we may not be able to find suitable acquisition candidates to purchase or may be unable to acquire desired businesses or assets on economically acceptable terms or may be unable to receive necessary regulatory approvals or support. In addition, we may not be able to raise the capital necessary to fund future acquisitions. Because we may actively pursue a number of opportunities simultaneously, we may encounter unforeseen expenses, complications and delays, including regulatory complications or difficulties in employing sufficient staff and maintaining operational and management oversight.

We regularly engage in discussions with respect to potential acquisition and investment opportunities. If we consummate an acquisition, our capitalization and results of operations may change significantly. Future acquisitions could result in margin dilution and further likely result in the incurrence of additional debt and contingent liabilities and an increase in interest and amortization expenses or periodic impairment charges related to goodwill and other intangible assets as well as significant charges relating to integration costs.

Acquisitions involve risks that the businesses acquired will not perform in accordance with expectations and that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove incorrect. In addition, we may not be able to successfully integrate any business we acquire into our existing business. The successful integration of new businesses, with the most significant recent acquisition being the Calspan Corporation (“Calspan”) acquisition in the third quarter of fiscal 2023, depends on our ability to manage these new businesses and cut excess costs. The successful integration of future acquisitions may also require substantial attention from our senior management and the management of the acquired business, which could decrease the time that they have to service, attract customers and develop new products and services or attend to other acquisition opportunities.

We have a significant amount of indebtedness. As of September 30, 2017,2023, our total indebtedness, excluding approximately $16$51 million ofin letters of credit outstanding, approximately $193 million of finance lease obligation liabilities and approximately $21 million of government refundable advances, was approximately $11.8$20 billion, which was 133.5%approximately 111% of our total book capitalization as a result of our dividends being funded, in part, with indebtedness and the addition of approximately $1.6 billion in net new incremental borrowings during fiscal 2017.capitalization.

In addition, we may be able to incur substantial additional indebtedness in the future. For example, asAs of September 30, 2017,2023, we had approximately $584$759 million of unused commitments under our revolving loan facility.credit facility and $100 million of additional borrowing capacity under our trade receivable securitization facility (the “Securitization Facility”). Although our senior secured credit facility and the indentures governing the various series of senior secured and senior subordinated notes outstanding (the “Indentures”“Notes”) contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and the indebtedness incurred in compliance with these qualifications and exceptions could be substantial. For example, if the usage of the revolving loan facility exceeds 25% 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 senior secured credit facility or the Indentures.indentures.

Our substantial debtAn increase in our indebtedness could also have other important consequences to investors. For example, it could:

In addition, allAll of our debt under the senior secured credit facility, which includes $7.0$6.2 billion in term loans and a revolving loancredit facility of $600$810 million, and the Securitization Facility bears interest at floating rates.variable rates primarily based on the Term Secured Overnight Financing Rate (“Term SOFR”). Accordingly, if Term SOFR or other variable interest rates increase, our debt service expense will also increase. Interest rate swap and cap agreements are usedIn order to managemitigate the interest rate risk of these variable rate borrowings, we have in the past entered into interest rate swap, cap, and collar agreements that cover a significant portion of the existing variable rate debt and may do so in the future, subject to market and other conditions. In connection with our term loans, we entered into various interest rate swap, cap and collar agreements associated with floating-rate borrowings underTerm SOFR. The Company's objective is to maintain an allocation of at least 75% fixed rate and 25% variable rate debt thereby limiting its exposure to changes in near-term interest rates. As of September 30, 2023, approximately 90% of our credit facilities.total debt was fixed rate. For information about our interest rate swap, cap and capcollar agreements, seerefer to Note 20,21, “Derivatives and Hedging Instruments,” in the notes to the consolidated financial statements included herein.

Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness, including debt under the Indentures.senior secured credit facility and the Notes. We cannot assure that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the senior secured credit facility or otherwise in amounts sufficient to enable us to service our indebtedness. If we cannot service our debt, we will have to take actions such as reducing or delaying capital investments, selling assets, restructuring or refinancing our debt or seeking additional equity capital.

Our ability to make payments on and to refinance our indebtedness, including the Indentures,Notes, amounts borrowed under the senior secured credit facility, amounts due under our Securitization Facility, and to fund our operations, will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

We cannot assure that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized on schedule, or at all, or that future borrowings will be available to us under the senior secured credit facility or otherwise in amounts sufficient to enable us to service our indebtedness, including the amounts borrowed under the senior secured credit facility, amounts borrowed under our Securitization Facility and the Indentures,Notes, or to fund our other liquidity needs. If we cannot service our debt, we will have to take actions such as reducing or delaying capital investments, selling assets, restructuring or refinancing our debt or seeking additional equity capital. We cannot assure that any of these remedies could, if necessary, be effected on commercially reasonable terms, or at all. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments, the Securitization Facility, the Indenturesindentures governing the Notes and the senior secured credit facility may restrict us from adopting any of these alternatives. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness on acceptable terms and wouldcould otherwise adversely affect the Indentures.our business, financial condition and results of operations.

Our senior secured credit facility and the Indenturesindentures governing the Notes contain a number of restrictive covenants that impose significant operating and financial restrictions on TD Group, TransDigm Inc. and its subsidiaries (in the case of the senior secured credit facility) and TransDigm Inc. and its subsidiaries (in the case of the Indentures)indentures) and may limit their ability to engage in acts that may be in our long-term best interests. The senior secured credit facility and Indenturesindentures governing the Notes include covenants restricting, among other things, the ability of TD Group, TransDigm Inc. and its subsidiaries (in the case of the senior secured credit facility) and TransDigm Inc. and its subsidiaries (in the case of the Indentures)indentures) to:

A breach of any of these covenants could result in a default under the senior secured credit facility or the Indentures.indentures governing the Notes. If any such default occurs, the lenders under the senior secured credit facility and the holders of the senior subordinated notesNotes 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 senior secured credit facility also have the right in these circumstances to terminate any commitments they have to provide further borrowings. In addition, subject to the terms of an intercreditor agreement, following an event of default under the senior secured credit facility or the indentures governing our various series of outstanding senior secured notes, the lenders under that facilitythereunder or the holders thereof, as applicable, 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 senior subordinated notes. If the debt under the senior secured credit facility or the senior subordinated notesNotes were to be accelerated, we cannot assure that our assets would be sufficient to repay in full our debt.

Our operations and facilities are subject to a number of federal, state, local and foreign environmental laws and regulations that govern, among other things, discharges of pollutants into the air and water, the generation, handling, storage and disposal of hazardous materials and wastes, the remediation of contamination and the health and safety of our employees. Environmental laws and regulations may require that the Company investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations. Certain facilities and third-party sites utilized by subsidiaries of the Company have been identified as potentially responsible parties under the federal superfund laws and comparable state laws. The Company is currently involved in the investigation and remediation of a number of sites under applicable laws.

Estimates of the Company’s environmental liabilities are based on current facts, laws, regulations and technology. These estimates take into consideration the Company’s prior experience and professional judgment of the Company’s environmental advisors. Estimates of the Company’s environmental liabilities are further subject to uncertainties regarding the nature and extent of site contamination, the range of remediation alternatives available, evolving remediation standards, imprecise engineering evaluations and cost estimates, the extent of corrective actions that may be required and the number and financial condition of other potentially responsible parties, as well as the extent of their responsibility for the remediation.

Accordingly, as investigationinvestigations and remediationremediations proceed, it is likely that adjustments in the Company’s accruals will be necessary to reflect new information. The amounts of any such adjustments could have a material adverse effect on the Company’s results of operations or cash flows in a given period. Based on currently available information, however, the Company does not believe that future environmental costs in excess of those accrued with respect to sites for which the Company has been identified as a potentially responsible party are likely to have a material adverse effect on the Company’s financial condition.

Because our productsFrom time to time, we are complicatedinvolved in lawsuits and highly engineered, we depend on an educated and trained workforce. There is substantial competition for skilled personnelregulatory actions brought or threatened against us in the aircraft component industry,ordinary course of business. These actions and proceedings may involve claims for, among other things, compensation for alleged personal injury, workers’ compensation, employment discrimination, or breach of contract. In addition, we couldmay be adversely affected by a shortagesubject to class action lawsuits, including those involving allegations of skilled employees. We may not be ableviolations of consumer product statutes or the Fair Labor Standards Act and state wage and hour laws. Due to fill new positions or vacancies created by expansion or turnover or attract and retain qualified personnel.

Our operations expose us to potential liabilities for personal injury or death as a result of the failure of an aircraft componentproduct that we have designed, manufactured or serviced. While we maintain liability insurance to protect us from future product liability claims, in the event of product liability claims our insurers may attempt to deny coverage or any coverage we have may not be adequate. We also may not be able to maintain insurance coverage in the future at an acceptable cost. Any liability not covered by insurance or for which third partythird-party indemnification is not available could result in significant liability to us.

In addition, a crash caused by one of our componentsproducts could damage our reputation for quality products. We believe our customers consider safety and reliability as key criteria in selecting a provider of aircraft components.products. If a crash were to be caused by one of our components,products, or if we were to otherwise fail to maintain a satisfactory record of safety and reliability, our ability to retain and attract customers may be materially adversely affected.

Companies across all industries are facing increasing scrutiny from stakeholders related to environmental, social and governance (“ESG”) matters, including practices and disclosures related to environmental stewardship; social responsibility; diversity, equity and inclusion; and workplace rights. Our ability to achieve our ESG goals, including our goal to achieve our Scope 1 and Scope 2 emissions by the year 2031, and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks, and may be dependent on the actions of suppliers and other third parties and significant technological advancements with respect to the development and availability of reliable, affordable and sustainable alternative solutions, all of which are outside of our control. If we are unable to meet our ESG goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for ESG issues, our reputation could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on ESG matters. If, as a result of data protection concerns.

As the nature, scope and complexity of ESG reporting, diligence and disclosure requirements expand, including the SEC’s recently proposed disclosure requirements regarding, among other matters, greenhouse gas emissions, we may have to undertake additional costs to control, assess and report on ESG metrics. Any failure or perceived failure, whether or not valid, to pursue or fulfill our ESG goals, targets and objectives or to satisfy various ESG reporting standards within the timelines we announce, or at all, could cause usincrease the risk of litigation.

Mergers and acquisitions have resulted in significant increases in identifiable intangible assets and goodwill. Identifiable intangible assets, which primarily include trademarks, trade names, trade secrets,customer relationships, and technology, were approximately $1.7$2.7 billion at September 30, 2017,2023, representing approximately 17%14% of our total assets. Goodwill recognized in accounting for the mergers and acquisitions was approximately $5.7$9.0 billion at September 30, 2017,2023, representing approximately 58%45% of our total assets. We may never realize the full value of our identifiable intangible assets and goodwill, and to the extent we were to determine that our identifiable intangible assets or our goodwill were impaired within the meaning of applicable accounting standards, we would be required to write-off the amount of any impairment.

The Company isWe are subject to income taxes in the United StatesU.S. and various non-U.S. jurisdictions. The Company’s domestic and international tax liabilities are dependent upon the location of earnings among these different jurisdictions. The Company’s future results of operations could be adversely affected by changes in the Company’s effective tax rate as a result of changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets, challenges by tax authorities or changes in tax laws or regulations. From time to time, changes in tax laws or regulations may be proposed or enacted that could adversely affect our overall tax liability. There can be no assurance that changes in tax laws or regulations, both within the U.S. and the other jurisdictions in which we operate, such as the proposed 15% global minimum tax under the Organisation for Economic Co-operation and Development (the “OECD”) Pillar Two, Global Anti-Base Erosion Rules (the “Pillar Two Rules”), will not materially and adversely affect our effective tax rate, tax payments, financial condition and results of operations. As of September 30, 2023, among the jurisdictions where the Company operates, only the U.K. has enacted legislation adopting the Pillar Two Rules, effective in fiscal 2025.

In addition, the amount of income taxes paid by the Company is subject to ongoing audits by U.S. federal, state and local tax authorities and by non-U.S. tax authorities. If these audits result in assessments different from amounts reserved, future financial results may include unfavorable adjustments to the Company’s tax liabilities, which could have a material adverse effect on the Company’s results of operations.

There has been significant volatility in the market price and trading volume of equity securities, which is unrelated to the operating performance of the companies issuing the securities. These market fluctuations may negatively affect the market price of our common stock. Shareholders may not be able to sell their shares at or above the purchase price due to fluctuations in the market price of our common stock. Such changes could be caused by changes in our operating performance or prospects, including possible changes due to the cyclical nature of the aerospace industry and other factors such as fluctuations in OEM and aftermarket ordering, which could cause short-term swings in profit margins. Or such changes could be unrelated to our operating performance, such as changes in market conditions affecting the stock market generally or the stocks of aerospace companies or changes in the outlook for our common stock, such as changes to or the confidence in our business strategy, changes to or confidence in our management, or expectations for future growth of the Company.

TransDigm’s principal leased properties (defined as greater than 20,000 square feet or related to a principal operation) as of September 30, 20172023 are as follows:

ITEM 3.    LEGAL PROCEEDINGS

DuringThe Company is involved in various claims and legal actions arising in the ordinary course of business, TransDigmbusiness. The Securities and Exchange Commission (“SEC”) regulations require us to disclose certain information about environmental proceedings when a governmental authority is from time to time a party to legal actions and otherthe proceedings relatedif we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to its businesses, productssuch regulations, the Company uses a threshold of $1 million or operations.more for purposes of determining whether disclosure of any such proceedings is required as we believe matters under this threshold are not material to the Company. While TransDigmthe Company is currently involved in somecertain legal proceedings, managementit believes the results of these proceedings will not have a material adverse effect on its financial condition, results of operations, or cash flows.

PART II

Our common stock is traded on the New York Stock Exchange, or NYSE, under the ticker symbol “TDG.” The following chart sets forth, for the periods indicated, the high and low sales prices of the common stock on the NYSE.

On November 3, 2017,As of October 12, 2023, there were 3034 stockholders of record of our common stock. We estimate that there werestock and approximately 62,000434,000 beneficial stockholders, as of November 3, 2017, which includes an estimated amountnumber of stockholders who have their shares held in their accounts by banks and brokers.

On October 14, 2016,During fiscal 2022, TD Group’s Board of Directors authorized and(the “Board”) declared a special cash dividend of $24.00$18.50 (in August 2022) on each outstanding share of common stock and cash dividend equivalent payments underon eligible vested options granted under its stock option plans. The record date for

On November 9, 2023, the special dividend was October 24, 2016, and the payment date for the dividend was November 1, 2016. On August 23, 2017,Company announced that TD Group’sGroup's Board of Directors authorized and declared a special cash dividend of $22.00$35.00 on each outstanding share of common stock and cash dividend equivalent payments underon eligible vested options grantedoutstanding under its stock option plans. The record date and payment date for the special dividend was September 5, 2017,is November 20, 2023 and November 27, 2023, respectively. The total estimated cash payment, to be funded by existing cash on hand, related to the special dividend and dividend equivalent payments in the first quarter of fiscal 2024 is approximately $2,020 million.

Set forth below is a line graph comparing the cumulative total return of a hypothetical investment in the shares of common stock of TD Group with the cumulative total return of a hypothetical investment in each of the S&P 500 Index and the S&P Aerospace & Defense Select Index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each of the indexes on September 30, 2018, and its relative performance is tracked through September 30, 2023.

On November 9, 2023, the Company announced that TD Group's Board of Directors authorized and declared a special cash dividend of $35.00 on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans. The record date and payment date for the special dividend is November 20, 2023 and November 27, 2023, respectively. The total estimated cash payment, to be funded by existing cash on hand, related to the special dividend and dividend equivalent payments in the first quarter of fiscal 2024 is approximately $2,020 million.

The change in trade accounts receivable during fiscal 2023 was a use of cash of $212 million compared to a use of cash of $190 million in fiscal 2022. The increase in the use of cash of $22 million is primarily attributable to the increase in sales volume and related timing of cash receipts. The Company continues to actively manage its accounts receivable, the related agings and collection efforts.

The change in inventories during fiscal 2023 was a use of cash of $261 million compared to a use of cash of $134 million in fiscal 2022. The increase in the use of cash of $127 million is primarily driven by increased purchasing from higher demand in fiscal 2023 as raw material inventory is up approximately $185 million compared to at September 30, 2022. The Company also continues to actively and strategically manage inventory levels in response to existing ongoing supply chain challenges.

On June 16, 2023, the Company entered into Amendment No. 12 2017. to the Second Amended and Restated Credit Agreement (herein, “Amendment No. 12”). Under the terms of Amendment No. 12, the Company, among other things, removed the option to utilize LIBOR as a benchmark rate for any revolving loans and all future loans under the Credit Agreement and replaced such rate with Term SOFR for all dollar denominated loans and with Euro Interbank Offered Rate (“EURIBOR”) for all euro denominated revolving loans.

Any future 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 facilityCredit Agreement and Indentures,indentures governing the Notes, 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 facilityTerm Loans Facility and Indenturesindentures and may be limited by future debt or other agreements that we may enter into.

The following performance graphtable summarizes the Company’s cash requirements from all significant contractual obligations as of September 30, 2023 (in millions):

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 Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent we specifically incorporate it by reference into such filing.

U.S. GAAP requires that the annual, and any interim, goodwill impairment assessment be performed at the reporting unit level. Our reporting units have been identified at the operating unit level, which is one level below our operating segments. Substantially all goodwill was determined and recognized for each acquisition. Duringreporting 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.

For information presented below should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” andabout new accounting standards, see Note 4, “Recent Accounting Pronouncements,” in the notes to the consolidated financial statements and accompanying notes included elsewhere herein.