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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended January 2, 2021
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from             to            
Commission File Number 001-32833
TransDigm Group Incorporated
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
41-2101738
(I.R.S. Employer Identification No.)
1301 East 9th Street,Suite 3000,Cleveland,Ohio 44114
(Address of principal executive offices) (Zip Code)
(216) 706-2960
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, non-accelerated filer, smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer  Accelerated Filer
Non-Accelerated Filer
  Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:Trading Symbol:Name of each exchange on which registered:
Common Stock, $0.01 par valueTDGNew York Stock Exchange
The number of shares outstanding of TransDigm Group Incorporated’s common stock, par value $.01 per share, was 54,688,918 as of January 25, 2021.


Table of Contents
INDEX
 
Page
Part IFINANCIAL INFORMATION
Item 1Financial Statements
Condensed Consolidated Balance Sheets – January 2, 2021 and September 30, 2020
Condensed Consolidated Statements of Income – Thirteen Week Periods Ended January 2, 2021 and December 28, 2019
Condensed Consolidated Statements of Comprehensive Income – Thirteen Week Periods Ended January 2, 2021 and December 28, 2019
Condensed Consolidated Statements of Changes in Stockholders’ Deficit – Thirteen Week Periods Ended January 2, 2021 and December 28, 2019
Condensed Consolidated Statements of Cash Flows – Thirteen Week Periods Ended January 2, 2021 and December 28, 2019
Notes to Condensed Consolidated Financial Statements
Item 2Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3Quantitative and Qualitative Disclosure About Market Risk
Item 4Controls and Procedures
Part IIOTHER INFORMATION
Item 1Legal Proceedings
Item 1ARisk Factors
Item 2Unregistered Sales of Equity Securities and Use of Proceeds
Item 6Exhibits
SIGNATURES


Table of Contents
TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions, except share amounts)
(Unaudited)
January 2, 2021September 30, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$4,907 $4,717 
Trade accounts receivable—Net627 720 
Inventories—Net1,284 1,283 
Prepaid expenses and other256 240 
Total current assets7,074 6,960 
PROPERTY, PLANT AND EQUIPMENT—Net777 752 
GOODWILL7,927 7,889 
OTHER INTANGIBLE ASSETS—Net2,604 2,610 
DEFERRED INCOME TAXES18 17 
OTHER157 167 
TOTAL ASSETS$18,557 $18,395 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt$276 $276 
Short-term borrowings—trade receivable securitization facility350 349 
Accounts payable197 218 
Accrued and other current liabilities740 773 
Total current liabilities1,563 1,616 
LONG-TERM DEBT19,394 19,384 
DEFERRED INCOME TAXES437 430 
OTHER NON-CURRENT LIABILITIES884 933 
Total liabilities22,278 22,363 
TD GROUP STOCKHOLDERS’ DEFICIT:
Common stock - $.01 par value; authorized 224,400,000 shares; issued 58,853,007 and 58,612,028 at January 2, 2021 and September 30, 2020, respectively
1 1 
Additional paid-in capital1,656 1,581 
Accumulated deficit(4,314)(4,359)
Accumulated other comprehensive loss(277)(401)
Treasury stock, at cost; 4,198,226 shares at January 2, 2021 and September 30, 2020, respectively
(794)(794)
Total TD Group stockholders’ deficit(3,728)(3,972)
NONCONTROLLING INTERESTS7 4 
Total stockholders’ deficit(3,721)(3,968)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT$18,557 $18,395 
See Notes to Condensed Consolidated Financial Statements
1

Table of Contents
TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in millions, except per share amounts)
(Unaudited) 
 Thirteen Week Periods Ended
 January 2, 2021December 28, 2019
NET SALES$1,108 $1,465 
COST OF SALES567 664 
GROSS PROFIT541 801 
SELLING AND ADMINISTRATIVE EXPENSES197 201 
AMORTIZATION OF INTANGIBLE ASSETS29 40 
INCOME FROM OPERATIONS315 560 
INTEREST EXPENSE—NET267 248 
REFINANCING COSTS 22 
OTHER INCOME(5)(3)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES53 293 
INCOME TAX PROVISION3 59 
INCOME FROM CONTINUING OPERATIONS50 234 
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX 71 
NET INCOME50 305 
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS (1)
NET INCOME ATTRIBUTABLE TO TD GROUP$50 $304 
NET (LOSS) INCOME APPLICABLE TO TD GROUP COMMON STOCKHOLDERS$(23)$119 
(Loss) Earnings per share attributable to TD Group common stockholders:
(Loss) Earnings per share from continuing operations—basic and diluted$(0.42)$0.83 
Earnings per share from discontinued operations—basic and diluted 1.24 
(Loss) Earnings per share$(0.42)$2.07 
Cash dividends paid per common share$ $32.50 
Weighted-average shares outstanding:
Basic and diluted54.7 57.4 
See Notes to Condensed Consolidated Financial Statements
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TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in millions)
(Unaudited)
 Thirteen Week Periods Ended
January 2, 2021December 28, 2019
Net income$50 $305 
Less: Net income attributable to noncontrolling interests (1)
Net income attributable to TD Group$50 $304 
Other comprehensive income, net of tax:
Foreign currency translation111 98 
Unrealized gain on derivatives13 23 
Pensions and other postretirement benefits 6 
Other comprehensive income, net of tax, attributable to TD Group124 127 
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO TD GROUP$174 $431 
See Notes to Condensed Consolidated Financial Statements
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TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Amounts in millions, except share amounts)
(Unaudited)

TD Group Stockholders
Common StockAdditional Paid-In
Capital
Accumulated Other Comprehensive LossTreasury Stock
Number
of Shares
Par
Value
Accumulated
Deficit
Number
of Shares
ValueNon-controlling InterestsTotal
BALANCE—September 30, 201957,623,311 $1 $1,379 $(3,120)$(379)(4,161,326)$(775)$10 $(2,884)
Changes in noncontrolling interest of consolidated subsidiaries, net— — — — — — — (6)(6)
Special dividends and vested dividend equivalents declared— — — (1,864)— — — — (1,864)
Accrued unvested dividend equivalents and other— — — (19)— — — — (19)
Compensation expense recognized for employee stock options— — 23 — — — — — 23 
Exercise of employee stock options169,470 — 20 — — — — — 20 
Net income attributable to TD Group— — — 304 — — — — 304 
Foreign currency translation adjustments, net of tax— — — — 98 — — — 98 
Unrealized gain on derivatives, net of tax— — — — 23 — — — 23 
Pensions and other postretirement benefits adjustments, net of tax— — — — 6 — — — 6 
BALANCE—December 28, 201957,792,781 $1 $1,422 $(4,699)$(252)(4,161,326)$(775)$4 $(4,299)

TD Group Stockholders
Common StockAdditional Paid-In
Capital
Accumulated Other Comprehensive LossTreasury Stock
Number
of Shares
Par
Value
Accumulated
Deficit
Number
of Shares
ValueNon-controlling InterestsTotal
BALANCE—September 30, 202058,612,028 $1 $1,581 $(4,359)$(401)(4,198,226)$(794)$4 $(3,968)
Changes in noncontrolling interest of consolidated subsidiaries, net— — — — — — — 3 3 
Accrued unvested dividend equivalents and other— — — (5)— — — — (5)
Compensation expense recognized for employee stock options— — 43 — — — — — 43 
Exercise of employee stock options240,979 — 32 — — — — — 32 
Net income attributable to TD Group— — — 50 — — — — 50 
Foreign currency translation adjustments, net of tax— — — — 111 — — — 111 
Unrealized gain on derivatives, net of tax— — — — 13 — — — 13 
Pensions and other postretirement benefits adjustments, net of tax— — — —  — — —  
BALANCE—January 2, 202158,853,007 $1 $1,656 $(4,314)$(277)(4,198,226)$(794)$7 $(3,721)
See Notes to Condensed Consolidated Financial Statements
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TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
Thirteen Week Periods Ended
January 2, 2021December 28, 2019
OPERATING ACTIVITIES:
Net income$50 $305 
Net income from discontinued operations (71)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation29 29 
Amortization of intangible assets29 40 
Amortization of debt issuance costs, original issue discount and premium9 8 
Amortization of loss contract reserves(18)(11)
Refinancing costs 22 
Non-cash stock compensation49 26 
Deferred income taxes5 (2)
Changes in assets/liabilities, net of effects from acquisitions of businesses:
Trade accounts receivable86 51 
Inventories1 (69)
Income taxes receivable/payable16 30 
Other assets3 (5)
Accounts payable(20)(14)
Accrued interest7 88 
Accrued and other liabilities28 6 
Net cash provided by operating activities274 433 
INVESTING ACTIVITIES:
Capital expenditures(31)(27)
Acquisition of businesses, net of cash acquired(6) 
Net proceeds from sale of businesses8 904 
Net cash (used in) provided by investing activities(29)877 
FINANCING ACTIVITIES:
Proceeds from exercise of stock options32 20 
Dividend equivalent payments(73)(64)
Repayment on term loans(19) 
Redemption of 6.00% senior subordinated notes due 2022, net (1,168)
Proceeds from 5.50% senior subordinated notes due 2027, net 2,625 
Financing costs and other, net 1 
Net cash (used in) provided by financing activities(60)1,414 
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS5 3 
NET INCREASE IN CASH AND CASH EQUIVALENTS190 2,727 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD4,717 1,467 
CASH AND CASH EQUIVALENTS, END OF PERIOD$4,907 $4,194 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest$252 $155 
Cash (refunded) paid during the period for income taxes, net$(5)$29 
See Notes to Condensed Consolidated Financial Statements
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TRANSDIGM GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN WEEK PERIODS ENDED JANUARY 2, 2021 AND DECEMBER 28, 2019
(UNAUDITED)
1.    DESCRIPTION OF THE BUSINESS AND IMPACT OF COVID-19 PANDEMIC
Description of the Business
TransDigm Group Incorporated (“TD Group”), through its wholly-owned subsidiary, TransDigm Inc., is a leading global designer, producer and supplier of highly engineered aircraft components for use on nearly every commercial and military aircraft in service today. TransDigm Inc., along with TransDigm Inc.’s direct and indirect wholly-owned operating subsidiaries (collectively, with TD Group, the “Company” or “TransDigm”), offers a broad range of proprietary aerospace products. TD Group has no significant assets or operations other than its 100% ownership of TransDigm Inc. TD Group’s common stock is listed on the New York Stock Exchange, or the NYSE, under the trading symbol “TDG.”
TransDigm's major product offerings, substantially all of which are ultimately provided to end-users in the aerospace industry, include mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, databus and power controls, cockpit security components and systems, specialized and advanced cockpit displays, aircraft audio 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, parachutes, high performance hoists, winches and lifting devices, and cargo loading, handling and delivery systems.
Impact of COVID-19 Pandemic - Restructuring Costs
The commercial aerospace industry continues to be significantly disrupted, both domestically and internationally, by the COVID-19 pandemic resulting in ongoing business challenges. Material actions to reduce costs in response to the impact that the pandemic has had on operating results include: (1) reducing the Company's workforce to align operations with customer demand through a reduction in force or through a realignment of certain business units; (2) implementing unpaid furloughs and salary reductions; (3) delaying non-essential capital projects and (4) minimizing discretionary spending.
For the thirteen week period ended January 2, 2021, COVID-19 restructuring costs of approximately $20 million were incurred, of which $13 million was recorded in cost of sales and $7 million was recorded in selling and administrative expenses on the condensed consolidated statements of income. These costs are primarily related to the Company's actions to reduce its workforce to align with customer demand. Additionally, the Company incurred approximately $1 million in incremental costs related to the pandemic that are not expected to recur once the pandemic has subsided and are clearly separable from normal operations (e.g., additional cleaning and disinfecting of facilities by contractors above and beyond normal requirements, personal protective equipment, etc.). There were no COVID-19 restructuring costs or incremental costs incurred related to the pandemic for the thirteen week period ended December 28, 2019.
As of January 2, 2021 and September 30, 2020, the restructuring accrual associated with the costs incurred in response to the COVID-19 pandemic was approximately $27 million and $13 million, respectively. This accrual is recorded as a component of accrued and other current liabilities on the condensed consolidated balance sheets. The Company expects to incur and pay additional restructuring costs during fiscal 2021 related to the COVID-19 pandemic though at a reduced level in comparison to fiscal 2020. The Company continues to analyze its cost structure and may implement additional cost reduction measures as necessary due to the ongoing business challenges resulting from the COVID-19 pandemic.
2.    UNAUDITED INTERIM FINANCIAL INFORMATION
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 year ended September 30, 2020 included in TD Group’s Form 10-K filed on November 12, 2020. 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, 2020 condensed consolidated balance sheet was derived from TD Group’s audited financial statements. The results of operations for the thirteen week period ended January 2, 2021 are not necessarily indicative of the results to be expected for the full year.
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3.    ACQUISITIONS AND DIVESTITURES
Acquisitions
Cobham Aero Connectivity – On November 24, 2020, the Company entered into a definitive agreement to acquire Cobham Aero Connectivity (“CAC”) for approximately $959 million in cash. The acquisition was substantially completed on January 5, 2021 and financed through existing cash on hand. A portion of the acquisition representing approximately 2% of the purchase price remains subject to Finnish regulatory approval and is expected to close during the second quarter of fiscal 2021. CAC operates from two primary facilities (Marlow, United Kingdom and Prescott, Arizona) and is a leading provider of highly engineered antennas and radios for the aerospace end market. The products are primarily proprietary with significant aftermarket content and have a strong presence across major defense platforms as well as select commercial applications. CAC will be included in TransDigm's Airframe segment.
The acquisition will strengthen and expand the Company’s position to design, produce and supply highly engineered proprietary aerospace components in niche markets with significant aftermarket content and provide opportunities to create value through the application of our three core value-driven operating strategies (obtaining profitable new business, improving our cost structure, and providing highly engineered value-added products to customers). The purchase price paid for the acquisition reflects the current earnings before interest, taxes, depreciation and amortization (EBITDA) and cash flows, as well as the future EBITDA and cash flows expected to be generated by the business, which are driven in most cases by the recurring aftermarket consumption over the life of a particular aircraft, estimated to be approximately 25 to 30 years.
Divestitures
Racal Acoustics – On January 29, 2021, TransDigm completed the divestiture of the Racal Acoustics business (“Racal”) to Invisio Communications AB for approximately $20 million in cash. Racal was acquired by TransDigm as part of its acquisition of Esterline in March 2019 and is included in TransDigm's Non-aviation segment. During the first quarter of fiscal 2021, the Company determined Racal met the criteria to be classified as held for sale. Therefore, the assets and liabilities of Racal, which are not material, have been presented as held for sale in the condensed consolidated balance sheet as of January 2, 2021.
Avista – On November 17, 2020, TransDigm completed the divestiture of the Avista, Inc. business ("Avista") to Belcan, LLC ("Belcan") for approximately $8 million. Avista was acquired by TransDigm as part of its acquisition of Esterline in March 2019 and was included in TransDigm's Airframe segment. During the fourth quarter of fiscal 2020, the Company determined Avista met the criteria to be classified as held for sale. Therefore, the assets and liabilities of Avista, which were not material, have been presented as held for sale in the condensed consolidated balance sheet as of September 30, 2020.
Souriau-Sunbank – On December 20, 2019, TransDigm completed the divestiture of the Souriau-Sunbank Connection Technologies business (“Souriau-Sunbank”) to Eaton Corporation plc (“Eaton”) for approximately $920 million. Souriau-Sunbank was acquired by TransDigm as part of its acquisition of Esterline in March 2019 and was included in TransDigm's Non-aviation segment. Refer to Note 18, "Discontinued Operations," for additional disclosures on the Souriau-Sunbank divestiture.
4.    RECENT ACCOUNTING PRONOUNCEMENTS
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (ASU 2016-13)," which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. The Company adopted ASU 2016-13 on October 1, 2020. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. Refer to Note 5, "Revenue Recognition," for additional disclosures.
In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” to eliminate Step 2 from the goodwill impairment test in order to simplify the subsequent measurement of goodwill. The guidance is effective for the Company on October 1, 2020. The adoption of this standard did not have a material impact on our condensed consolidated financial statements and disclosures.
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In December 2019, the FASB issued ASU 2019-12, “Income Taxes (ASC 740) - Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC 740 by clarifying and amending existing guidance. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendments is permitted, including adoption in any interim period for which financial statements have not yet been issued. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis. The Company is currently evaluating the impact of adopting this standard on our condensed consolidated financial statements and disclosures.
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform." This ASU provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate ("LIBOR"). The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The amendments in this ASU are effective through December 31, 2022. The Company is currently evaluating the impact of adopting this standard on our condensed consolidated financial statements and disclosures.
5.    REVENUE RECOGNITION
TransDigm's sales are concentrated in the aerospace 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 and friendly foreign governments, defense OEMs, system suppliers, and various other industrial customers.
The majority of the Company's revenue is recorded at a point in time. Revenue is recognized from the sale of products when control transfers to the customer, which is demonstrated by our right to payment, a transfer of title, a transfer of the risk and rewards of ownership, or the customer acceptance, but most frequently upon shipment where the customer obtains physical possession of the goods.
In some 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 the current year. 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 assesses 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.
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 condensed 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.
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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 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):
January 2, 2021September 30, 2020Change
Contract assets, current (1)
$49 $36 $13 
Contract assets, non-current (2)
2 6 (4)
   Total contract assets51 42 9 
Contract liabilities, current (3)
19 18 1 
Contract liabilities, non-current (4)
5 9 (4)
   Total contract liabilities24 27 (3)
Net contract assets$27 $15 $12 
(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 January 2, 2021, the revenue recognized that was previously included in contract liabilities was not material.
Refer to Note 13, “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.
The Company’s method for developing its allowance for credit losses is based on historical write-off experience, the aging of receivables, an assessment of the creditworthiness of customers, economic conditions and other external market information. All provisions for allowances for uncollectible accounts are included in selling and administrative expenses.
The allowance for uncollectible accounts was $41 million and $37 million as of January 2, 2021 and September 30, 2020, respectively. The increase in the allowance for uncollectible accounts in the first quarter of fiscal 2021 is primarily driven by additional collectibility risk assessed on receivables from certain customers that have been significantly adversely impacted by the COVID-19 pandemic. The allowance for uncollectible accounts is assessed individually at each operating unit by the operating unit’s management team.

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6.    (LOSS) EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted (loss) earnings per share (in millions, except per share data) using the two-class method:
Thirteen Week Periods Ended
January 2, 2021December 28, 2019
Numerator for (loss) earnings per share:
Income from continuing operations$50 $234 
Less: Net income attributable to noncontrolling interests (1)
Net income from continuing operations attributable to TD Group50 233 
Less: Special dividends declared or paid on participating securities, including dividend equivalent payments(73)(185)
Income from discontinued operations, net of tax 71 
Net (loss) income applicable to TD Group common stockholders - basic and diluted$(23)$119 
Denominator for basic and diluted (loss) earnings per share under the two-class method:
Weighted-average common shares outstanding54.7 53.6 
Vested options deemed participating securities 3.8 
Total shares for basic and diluted (loss) earnings per share54.7 57.4 
(Loss) Earnings per share from continuing operations—basic and diluted$(0.42)$0.83 
Earnings per share from discontinued operations—basic and diluted 1.24 
(Loss) Earnings per share$(0.42)$2.07 
7. 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):
January 2, 2021September 30, 2020
Raw materials and purchased component parts$900 $881 
Work-in-progress360 358 
Finished goods213 222 
Total1,473 1,461 
Reserves for excess and obsolete inventory(189)(178)
Inventories - Net$1,284 $1,283 
8.    INTANGIBLE ASSETS
Other intangible assets - net in the condensed consolidated balance sheets consist of the following (in millions):
 January 2, 2021September 30, 2020
 Gross Carrying
Amount
Accumulated
Amortization
NetGross Carrying
Amount
Accumulated
Amortization
Net
Trademarks and trade names$963 $ $963 $958 $ $958 
Technology1,856 613 1,243 1,842 589 1,253 
Order backlog91 91  93 93  
Customer relationships449 58 391 443 52 391 
Other18 11 7 18 10 8 
Total$3,377 $773 $2,604 $3,354 $744 $2,610 
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The aggregate amortization expense on identifiable intangible assets for the thirteen week periods ended January 2, 2021 and December 28, 2019 was approximately $29 million and $40 million, respectively. The estimated amortization expense is $115 million for fiscal year 2021, $114 million for each of the following four succeeding fiscal years 2022 through 2025 and $109 million for fiscal year 2026.
The following is a summary of changes in the carrying value of goodwill by segment from September 30, 2020 through January 2, 2021 (in millions):
Power &
Control
AirframeNon-
aviation
Total
Balance at September 30, 2020$4,141 $3,647 $101 $7,889 
Goodwill acquired during the period4   4 
Reclassification of goodwill to assets held-for-sale (Note 3)  (8)(8)
Currency translation adjustments15 27  42 
Balance at January 2, 2021$4,160 $3,674 $93 $7,927 
9.    DEBT
The Company’s debt consists of the following (in millions):
January 2, 2021
Gross AmountDebt Issuance CostsOriginal Issue Discount or PremiumNet Amount
Short-term borrowings—trade receivable securitization facility$350 $ $ $350 
Term loans$7,429 $(46)$(20)$7,363 
Revolving credit facility200   200 
6.50% senior subordinated notes due 2024 (2024 Notes) 1,200 (4) 1,196 
6.50% senior subordinated notes due 2025 (2025 Notes)750 (2)2 750 
8.00% senior secured notes due 2025 (2025 Secured Notes)1,100 (9) 1,091 
6.375% senior subordinated notes due 2026 (6.375% 2026 Notes)950 (6) 944 
6.875% senior subordinated notes due 2026 (6.875% 2026 Notes)500 (4)(3)493 
6.25% senior secured notes due 2026 (2026 Secured Notes)4,400 (53)5 4,352 
7.50% senior subordinated notes due 2027 (7.50% 2027 Notes)550 (4) 546 
5.50% senior subordinated notes due 2027 (5.50% 2027 Notes)2,650 (21) 2,629 
Government refundable advances30   30 
Finance lease obligations76   76 
19,835 (149)(16)19,670 
Less: current portion277 (1) 276 
Long-term debt$19,558 $(148)$(16)$19,394 

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September 30, 2020
Gross AmountDebt Issuance CostsOriginal Issue Discount or PremiumNet Amount
Short-term borrowings—trade receivable securitization facility$350 $(1)$ $349 
Term loans$7,449 $(48)$(23)$7,378 
Revolving credit facility200   200 
2024 Notes1,200 (5) 1,195 
2025 Notes750 (3)3 750 
2025 Secured Notes1,100 (9) 1,091 
6.375% 2026 Notes950 (6) 944 
6.875% 2026 Notes500 (4)(3)493 
2026 Secured Notes4,400 (55)5 4,350 
7.50% 2027 Notes550 (5) 545 
5.50 % 2027 Notes2,650 (21) 2,629 
Government refundable advances28   28 
Finance lease obligations57   57 
19,834 (156)(18)19,660 
Less: current portion277 (1) 276 
Long-term debt$19,557 $(155)$(18)$19,384 
Accrued interest, which is classified as a component of accrued and other current liabilities, was $185.0 million and $177.6 million as of January 2, 2021 and September 30, 2020, respectively.
Subsequent Event - Issuance of Senior Subordinated Notes due 2029 – On January 14, 2021, the Company entered into a purchase agreement in connection with a private offering of $1,200 million of 4.625% Senior Subordinated Notes due 2029 (herein, the “2029 Notes”) at an issue price of 100% of the principal amount. The 2029 Notes were issued pursuant to an indenture, dated January 20, 2021, among TransDigm, Inc., as issuer, TransDigm Group, TransDigm UK and the other subsidiaries of TransDigm, Inc. named therein, as guarantors.
The 2029 Notes bear interest at the rate of 4.625% per annum, which accrues from January 14, 2021 and is payable in arrears on January 15th and July 15th of each year, commencing on July 15, 2021. The 2029 Notes mature on January 15, 2029, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the indenture. The Company expects to use the net proceeds from the offering of the 2029 Notes to redeem all of its outstanding 2024 Notes.
Government Refundable Advances - Government refundable advances consist of payments received from the Canadian government to assist in research and development related to commercial aviation. The requirement to repay this advance is solely based on year-over-year commercial aviation revenue growth at CMC Electronics, which is a subsidiary of TransDigm. The balance was $29.8 million at January 2, 2021 and $28.4 million at September 30, 2020.
Obligations under Finance Leases - The Company leases certain buildings and equipment under finance leases. The present value of the minimum capital lease payments, net of the current portion, represents a balance of $75.6 million at January 2, 2021 and $56.8 million at September 30, 2020. Refer to Note 16, "Leases," for further disclosure on the Company's finance lease obligations.
10.    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 January 2, 2021 and December 28, 2019, the effective income tax rate was 5.5% and 20.1%, respectively. The Company's lower effective tax rate for the thirteen week period ended January 2, 2021, which also was lower than the Federal statutory tax rate of 21%, was primarily due to the significant discrete impact of excess tax benefits associated with share-based payments.
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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 2015. The Company is currently under examination for its federal income taxes in the U.S. for fiscal 2016, in Belgium for fiscal years 2016 through 2018, in Canada for fiscal years 2013 through 2015, in France for fiscal years 2015 through 2018, and in Germany for fiscal years 2014 through 2017. The Company expects the examination in France to be completed during the current fiscal year. In addition, the Company is subject to state income tax examinations for fiscal years 2015 and later.
At January 2, 2021 and September 30, 2020, TD Group had $42.2 million and $40.9 million, respectively, in unrecognized tax benefits, the recognition of which would have an effect of approximately $37.0 million and $35.7 million on the effective tax rate at January 2, 2021 and September 30, 2020, respectively. The Company believes the tax positions that comprise the unrecognized tax benefits will be reduced by approximately $22.0 million over the next 12 months. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense.
11.    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):
January 2, 2021September 30, 2020
LevelCarrying
Amount
Fair ValueCarrying
Amount
Fair Value
Assets:
Cash and cash equivalents1$4,907 $4,907 $4,717 $4,717 
Foreign currency forward exchange contracts and other (1)
23 3   
Liabilities:
Interest rate swap agreements (2)
266 66 56 56 
Interest rate swap agreements (3)
2302 302 328 328 
Foreign currency forward exchange contracts and other (2)
2  1 1 
Short-term borrowings - trade receivable securitization facility (4)
2350 350 349 349 
Long-term debt, including current portion:
Term loans (4)
27,363 7,223 7,378 7,004 
Revolving credit facility (4)
2200 200 200 200 
2024 Notes (4)
11,196 1,218 1,195 1,194 
2025 Notes (4)
1750 772 750 743 
2025 Secured Notes (4)
11,091 1,209 1,091 1,194 
6.375% 2026 Notes (4)
1944 983 944 948 
6.875% 2026 Notes (4)
1493 526 493 500 
2026 Secured Notes (4)
14,352 4,686