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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 April 3, 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 54,892,142 as of April 30, 2021.


Table of Contents
INDEX
 
Page
Part IFINANCIAL INFORMATION
Item 1Financial Statements
Condensed Consolidated Balance Sheets – April 3, 2021 and September 30, 2020
Condensed Consolidated Statements of Income – Thirteen and Twenty-Six Week Periods Ended April 3, 2021 and March 28, 2020
Condensed Consolidated Statements of Comprehensive Income – Thirteen and Twenty-Six Week Periods Ended April 3, 2021 and March 28, 2020
Condensed Consolidated Statements of Changes in Stockholders’ Deficit – Thirteen and Twenty-Six Week Periods Ended April 3, 2021 and March 28, 2020
Condensed Consolidated Statements of Cash Flows – Twenty-Six Week Periods Ended April 3, 2021 and March 28, 2020
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)
April 3, 2021September 30, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$4,072 $4,717 
Trade accounts receivable—Net682 720 
Inventories—Net1,240 1,283 
Prepaid expenses and other364 240 
Total current assets6,358 6,960 
PROPERTY, PLANT AND EQUIPMENT—Net790 752 
GOODWILL8,564 7,889 
OTHER INTANGIBLE ASSETS—Net2,875 2,610 
DEFERRED INCOME TAXES 17 
OTHER152 167 
TOTAL ASSETS$18,739 $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 payable214 218 
Accrued and other current liabilities740 773 
Total current liabilities1,580 1,616 
LONG-TERM DEBT19,402 19,384 
DEFERRED INCOME TAXES484 430 
OTHER NON-CURRENT LIABILITIES794 933 
Total liabilities22,260 22,363 
TD GROUP STOCKHOLDERS’ DEFICIT:
Common stock - $.01 par value; authorized 224,400,000 shares; issued 59,060,516 and 58,612,028 at April 3, 2021 and September 30, 2020, respectively
1 1 
Additional paid-in capital1,714 1,581 
Accumulated deficit(4,215)(4,359)
Accumulated other comprehensive loss(234)(401)
Treasury stock, at cost; 4,198,226 shares at April 3, 2021 and September 30, 2020, respectively
(794)(794)
Total TD Group stockholders’ deficit(3,528)(3,972)
NONCONTROLLING INTERESTS7 4 
Total stockholders’ deficit(3,521)(3,968)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT$18,739 $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 Twenty-Six Week Periods Ended
 April 3, 2021March 28, 2020April 3, 2021March 28, 2020
NET SALES$1,194 $1,443 $2,301 $2,908 
COST OF SALES602 625 1,169 1,288 
GROSS PROFIT592 818 1,132 1,620 
SELLING AND ADMINISTRATIVE EXPENSES162 180 358 381 
AMORTIZATION OF INTANGIBLE ASSETS36 46 65 86 
INCOME FROM OPERATIONS394 592 709 1,153 
INTEREST EXPENSE—NET268 252 535 501 
REFINANCING COSTS24 3 24 26 
OTHER INCOME(28) (33)(3)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES130 337 183 629 
INCOME TAX PROVISION25 14 28 73 
INCOME FROM CONTINUING OPERATIONS105 323 155 556 
(LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX (4) 68 
NET INCOME105 319 155 624 
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS(1) (1)(1)
NET INCOME ATTRIBUTABLE TO TD GROUP$104 $319 $154 $623 
NET INCOME APPLICABLE TO TD GROUP COMMON STOCKHOLDERS$104 $319 $81 $438 
Earnings per share attributable to TD Group common stockholders:
Earnings per share from continuing operations—basic and diluted$1.79 $5.63 $1.40 $6.45 
(Loss) Earnings per share from discontinued operations—basic and diluted (0.07) 1.18 
Earnings per share$1.79 $5.56 $1.40 $7.63 
Cash dividends paid per common share$ $ $ $32.50 
Weighted-average shares outstanding:
Basic and diluted58.4 57.4 58.4 57.4 
See notes to condensed consolidated financial statements
2

Table of Contents
TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in millions)
(Unaudited)
 Thirteen Week Periods Ended Twenty-Six Week Periods Ended
April 3, 2021March 28, 2020April 3, 2021March 28, 2020
Net income$105 $319 $155 $624 
Less: Net income attributable to noncontrolling interests(1) (1)(1)
Net income attributable to TD Group$104 $319 $154 $623 
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss) (106)111 (8)
Unrealized gain (loss) on derivatives43 (145)56 (122)
Pensions and other postretirement benefits   6 
Other comprehensive income (loss), net of tax, attributable to TD Group43 (251)167 (124)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO TD GROUP$147 $68 $321 $499 
See notes to condensed consolidated financial statements
3

Table of Contents
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)
Changes in noncontrolling interest of consolidated subsidiaries, net— — — — — — — — — 
Accrued unvested dividend equivalents and other— — — (21)— — — — (21)
Compensation expense recognized for employee stock options— — 17 — — — — — 17 
Exercise of employee stock options440,793 — 49 — — — — — 49 
Treasury stock purchased— — — — — (36,900)(19)— (19)
Net income attributable to TD Group— — — 319 — — — — 319 
Foreign currency translation adjustments, net of tax— — — — (106)— — — (106)
Unrealized loss on derivatives, net of tax— — — — (145)— — — (145)
Pensions and other postretirement benefits adjustments, net of tax— — — —  — — —  
BALANCE—March 28, 202058,233,574 $1 $1,488 $(4,401)$(503)(4,198,226)$(794)$4 $(4,205)
See notes to condensed consolidated financial statements








4

Table of Contents
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, 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)
Changes in noncontrolling interest of consolidated subsidiaries, net— — — — — — —   
Accrued unvested dividend equivalents and other— — — (5)— — — — (5)
Compensation expense recognized for employee stock options— — 21 — — — — — 21 
Exercise of employee stock options207,509 — 37 — — — — — 37 
Net income attributable to TD Group— — — 104 — — — — 104 
Foreign currency translation adjustments, net of tax— — — —  — — —  
Unrealized gain on derivatives, net of tax— — — — 43 — — — 43 
Pensions and other postretirement benefits adjustments, net of tax— — — —  — — —  
BALANCE—April 3, 202159,060,516 $1 $1,714 $(4,215)$(234)(4,198,226)$(794)$7 $(3,521)
See notes to condensed consolidated financial statements
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TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
Twenty-Six Week Periods Ended
April 3, 2021March 28, 2020
OPERATING ACTIVITIES:
Net income$155 $624 
Income from discontinued operations, net of tax (68)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation58 55 
Amortization of intangible assets and product certification costs66 86 
Amortization of debt issuance costs, original issue discount and premium17 16 
Amortization of inventory step-up6  
Amortization of loss contract reserves(27)(25)
Refinancing costs24 26 
Gain on sale of businesses(1) 
Non-cash stock compensation expense70 37 
Deferred income taxes (9)
Foreign currency exchange loss23 1 
Gain on insurance proceeds from fire(22) 
Changes in assets/liabilities, net of effects from acquisitions and sales of businesses:
Trade accounts receivable39 74 
Inventories32 (97)
Income taxes payable/(receivable)38 (73)
Other assets(9)(32)
Accounts payable(7)(12)
Accrued interest(47)68 
Accrued and other liabilities(43)(77)
Net cash provided by operating activities372 594 
INVESTING ACTIVITIES:
Capital expenditures(60)(50)
Acquisition of businesses, net of cash acquired(951) 
Net proceeds from sale of businesses35 904 
Insurance proceeds for fixed assets damaged from fire24  
Net cash (used in) provided by investing activities(952)854 
FINANCING ACTIVITIES:
Proceeds from exercise of stock options69 69 
Dividend equivalent payments(73)(1,928)
Treasury stock purchases (19)
Proceeds from revolving credit facility200 200 
Repayment on revolving credit facility(200) 
Repayment on term loans(38)(19)
Redemption of 6.50% senior subordinated notes due 2024, net(1,220) 
Redemption of 6.00% senior subordinated notes due 2022, net (1,168)
Proceeds from 5.50% senior subordinated notes due 2027, net 2,625 
Proceeds from 4.625% senior subordinated notes due 2029, net1,189  
Financing costs and other, net (8)
Net cash used in financing activities(73)(248)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS8 1 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(645)1,201 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD4,717 1,467 
CASH AND CASH EQUIVALENTS, END OF PERIOD$4,072 $2,668 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest$565 $424 
Cash paid during the period for income taxes, net of refunds$26 $183 
See notes to condensed consolidated financial statements
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TRANSDIGM GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TWENTY-SIX WEEK PERIODS ENDED APRIL 3, 2021 AND MARCH 28, 2020
(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, engineered 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, 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 April 3, 2021, COVID-19 restructuring costs of approximately $17 million were incurred, of which $14 million was recorded in cost of sales and $3 million was recorded in selling and administrative expenses on the condensed consolidated statements of income. For the twenty-six week period ended April 3, 2021, COVID-19 restructuring costs of approximately $36 million were incurred, of which $26 million was recorded in cost of sales and $10 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 and consolidate certain facilities to align with customer demand. Additionally, for the thirteen and twenty-six week periods ended April 3, 2021, the Company incurred approximately $1 million and $3 million, respectively, 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.). For the thirteen and twenty-six week periods ended March 28, 2020, the Company incurred approximately $1 million of restructuring costs.
As of April 3, 2021 and September 30, 2020, the restructuring accrual associated with the costs incurred in response to the COVID-19 pandemic was approximately $32 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 increase in the accrual is primarily driven by costs to reduce its workforce that have been incurred but not paid; partially offset by payments against the accrual. The Company expects to incur additional restructuring and incremental costs 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.
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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 twenty-six week period ended April 3, 2021 are not necessarily indicative of the results to be expected for the full year.
Certain reclassifications have been made to the prior year financial statements to conform to current year presentation.
3.    ACQUISITIONS AND DIVESTITURES
Acquisitions
Cobham Aero Connectivity – On November 24, 2020, the Company entered into a definitive agreement to acquire all the outstanding stock of Chelton Limited, Chelton Avionics Holdings, Inc. and Mastsystem Int'l Oy, collectively, Cobham Aero Connectivity (“CAC”), for an enterprise value of $965 million, inclusive of tax benefits. The acquisition was substantially completed on January 5, 2021 and financed through existing cash on hand. The Company completed the remainder of the acquisition of CAC on February 12, 2021, also through existing cash on hand. 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's operating results are 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.
The Company accounted for the CAC acquisition using the acquisition method and included the results of operations of the acquisition in its condensed consolidated financial statements from the effective date of the acquisition. The Company made an initial allocation of the purchase price at the date of acquisition based upon its understanding of the fair value of the acquired assets and assumed liabilities. As of April 3, 2021, the measurement period (not to exceed one year) is open; therefore, the assets acquired and liabilities assumed related to the CAC acquisition are subject to adjustment until the end of the respective measurement period. The Company is in the process of obtaining a third-party valuation of certain intangible assets, tangible assets and liabilities of CAC. The fair values of acquired intangibles are determined based on estimates and assumptions that are deemed reasonable by the Company. Significant assumptions include the discount rates and certain assumptions that form the basis of the forecasted results of the acquired business including revenue, EBITDA, growth rates, royalty rates and technology obsolescence rates. These assumptions are forward looking and could be affected by future economic and market conditions. Pro forma net sales and results of operations for the acquisition had it occurred at the beginning of the applicable twenty-six week period ended April 3, 2021 or March 28, 2020 are not material and, accordingly, are not provided.
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The allocation of the estimated fair value of assets acquired and liabilities assumed in the CAC acquisition as of the acquisition date is summarized in the table below (in millions):
Assets acquired (excluding cash):
Trade accounts receivable$31 
Inventories27
Prepaid expenses and other10
Property, plant and equipment18
Goodwill636
Other intangible assets309
Other34
Total assets acquired1,065 
Liabilities assumed:
Accounts payable15
Accrued and other current liabilities38
Deferred income taxes38
Other non-current liabilities29
Total liabilities assumed120 
Net assets acquired$945 
The Company expects that of the approximately $636 million of goodwill recognized for the acquisition, approximately $56 million will be deductible for tax purposes. The Company also expects that of the approximately $309 million of other intangible assets recognized for the acquisition, approximately $108 million will be deductible for tax purposes. The goodwill and intangible assets will be deductible over 15 years.
Divestitures
Racal Acoustics – On January 29, 2021, TransDigm completed the divestiture of the Racal Acoustics business (“Racal”) to Invisio Communications AB ("Invisio") for approximately $20 million in cash. The gain on sale recognized as a result of the divestiture is immaterial and is classified as a component of other income within the condensed consolidated statements of income. Racal was acquired by TransDigm as part of its acquisition of Esterline Technologies Corporation ("Esterline") in March 2019 and was included in TransDigm's Non-aviation segment.
Avista – On November 17, 2020, TransDigm completed the divestiture of the Avista, Inc. business ("Avista") to Belcan, LLC ("Belcan") for approximately $8 million in cash. Avista was acquired by TransDigm as part of its acquisition of Esterline in March 2019 and was included in TransDigm's Airframe segment. The gain on sale recognized as a result of the divestiture is immaterial and is classified as a component of other income within the condensed consolidated statements of income. 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.
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ScioTeq and TREALITY Simulation Visual Systems – On March 1, 2021, TransDigm entered into a definitive agreement to sell its ScioTeq and TREALITY Simulation Visual Systems businesses (“ScioTeq and TREALITY”) to OpenGate Capital for approximately $200 million in cash. ScioTeq and TREALITY were acquired by TransDigm as part of its acquisition of Esterline in March 2019 and are included in TransDigm’s Airframe segment. The businesses develop and manufacture advanced visualization solutions primarily for the global defense, air traffic control, and security end markets. ScioTeq and TREALITY operate primarily from Belgium, with secondary locations in the United States. As of April 3, 2021, the operating results of these businesses are included within the Airframe segment, and the related assets and liabilities are classified as held-for-sale as components of prepaid expenses and other and accrued and other current liabilities in the accompanying condensed consolidating balance sheet. The ScioTeq and TREALITY divestiture is subject to regulatory approvals and customary closing conditions and is expected to be completed during the third quarter of fiscal 2021.
Subsequent Event - Technical Airborne Components – On April 12, 2021, TransDigm entered into a definitive agreement to sell its Technical Airborne Components (“TAC”) business to Searchlight Capital Partners for approximately $40 million in cash. TAC operates in Belgium and designs and produces rods and struts for helicopters, commercial planes, military aircraft and space programs. TAC is included in TransDigm’s Airframe segment. As of April 3, 2021, the criteria necessary to be classified as held for sale on the accompanying condensed consolidating balance sheet had not been met. The TAC divestiture was completed on April 27, 2021.
The ScioTeq and TREALITY and TAC divestitures are expected to result in a net gain on sale of businesses in the third quarter of fiscal 2021.
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.
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." Certain amendments were provided for in ASU 2021-01, "Reference Rate Reform (ASC 848): Scope," which was issued in January 2021. 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.
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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.
When contracts are modified to account for changes in contract specifications and requirements, the Company considers whether the modification either creates new or changes the existing enforceable rights and obligations. Contract modifications that are for goods or services that are not distinct from the existing contract, due to the significant integration with the original good or service provided, are accounted for as if they were part of that existing contract. The effect of a contract modification to an existing contract on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct and at relative stand-alone selling price, they are accounted for as a new contract and performance obligation, which are recognized prospectively.
The Company’s payment terms vary by the type and location of the customer and the products or services offered. The Company does not offer any payment terms that would meet the requirements for consideration as a significant financing component.
Shipping and handling fees and costs incurred in connection with products sold are recorded in cost of sales in the 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.
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):
April 3, 2021September 30, 2020Change
Contract assets, current (1)
$54 $36 $18 
Contract assets, non-current (2)
4 6 (2)
   Total contract assets58 42 16 
Contract liabilities, current (3)
24 18 6 
Contract liabilities, non-current (4)
8 9 (1)
   Total contract liabilities32 27 5 
Net contract assets$26 $15 $11 
(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.
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For the thirteen and twenty-six week periods ended April 3, 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 $40 million and $37 million as of April 3, 2021 and September 30, 2020, respectively. The increase in the allowance for uncollectible accounts during the twenty-six week period ended April 3, 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.
6.    EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share (in millions, except per share data) using the two-class method:
Thirteen Week Periods Ended Twenty-Six Week Periods Ended
April 3, 2021March 28, 2020April 3, 2021March 28, 2020
Numerator for earnings per share:
Income from continuing operations$105 $323 $155 $556 
Less: Net income attributable to noncontrolling interests(1) (1)(1)
Net income from continuing operations attributable to TD Group104 323 154 555 
Less: Special dividends declared or paid on participating securities, including dividend equivalent payments  (73)(185)
(Loss) income from discontinued operations, net of tax (4) 68 
Net income applicable to TD Group common stockholders - basic and diluted$104 $319 $81 $438 
Denominator for basic and diluted earnings per share under the two-class method:
Weighted-average common shares outstanding54.8 53.8 54.7 53.7 
Vested options deemed participating securities3.6 3.6 3.7 3.7 
Total shares for basic and diluted earnings per share58.4 57.4 58.4 57.4 
Earnings per share from continuing operations—basic and diluted$1.79 $5.63 $1.40 $6.45 
(Loss) Earnings per share from discontinued operations—basic and diluted (0.07) 1.18 
Earnings per share$1.79 $5.56 $1.40 $7.63 
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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):
April 3, 2021September 30, 2020
Raw materials and purchased component parts$865 $881 
Work-in-progress360 358 
Finished goods205 222 
Total1,430 1,461 
Reserves for excess and obsolete inventory(190)(178)
Inventories - Net$1,240 $1,283 
8.    INTANGIBLE ASSETS
Other intangible assets - net in the condensed consolidated balance sheets consist of the following (in millions):
 April 3, 2021September 30, 2020
 Gross Carrying
Amount
Accumulated
Amortization
NetGross Carrying
Amount
Accumulated
Amortization
Net
Trademarks & Trade names$994 $ $994 $958 $ $958 
Technology2,018 638 1,380 1,842 589 1,253 
Order backlog (1)
15 4 11 93 93  
Customer Relationships