TransDigm(US:TDG)2025-08-05 20:04PART I FINANCIAL INFORMATION Financial Statements TransDigm Group reported increased net sales and net income for the third quarter and first thirty-nine weeks of fiscal 2025 compared to the prior year, with the balance sheet reflecting a significant decrease in cash due to a large special dividend payment, while the stockholders' deficit improved and cash flow from operations remained strong, offset by substantial financing outflows for dividends and stock repurchases Condensed Consolidated Balance Sheets As of June 28, 2025, total assets decreased to $22.7 billion from $25.6 billion, primarily due to a $3.5 billion reduction in cash used for a dividend payment, while total liabilities decreased and the stockholders' deficit improved from $(6.3) billion to $(5.0) billion Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 28, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Total Current Assets | $6,915 | $10,029 | | Cash and cash equivalents | $2,792 | $6,261 | | Total Assets | $22,700 | $25,586 | | Total Current Liabilities | $2,211 | $6,339 | | Dividends payable | $— | $4,216 | | Total Liabilities | $27,696 | $31,869 | | Total Stockholders' Deficit | $(4,996) | $(6,283) | Condensed Consolidated Statements of Income For the third quarter of fiscal 2025, net sales increased 9.3% year-over-year to $2.24 billion, and net income attributable to TD Group grew to $492 million from $461 million; for the thirty-nine week period, net sales rose 11.1% to $6.39 billion, with net income increasing to $1.46 billion from $1.25 billion in the prior year, and diluted EPS for the quarter was $8.47, up from $7.96 Key Income Statement Data (in millions, except per share amounts) | Metric | Q3 2025 | Q3 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $2,237 | $2,046 | $6,394 | $5,754 | | Gross Profit | $1,332 | $1,220 | $3,841 | $3,413 | | Income from Operations | $1,039 | $934 | $3,004 | $2,588 | | Net Income Attributable to TD Group | $492 | $461 | $1,464 | $1,246 | | Earnings Per Share (Diluted) | $8.47 | $7.96 | $24.31 | $19.81 | Condensed Consolidated Statements of Cash Flows For the thirty-nine weeks ended June 28, 2025, the company generated $1.53 billion in cash from operating activities, used $349 million in investing activities primarily for acquisitions, and had a significant $4.67 billion cash outflow from financing activities driven by $4.4 billion in dividend payments and $500 million in stock repurchases, resulting in a net decrease in cash of $3.47 billion Cash Flow Summary for Thirty-Nine Week Periods (in millions) | Cash Flow Activity | Ended June 28, 2025 | Ended June 29, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,531 | $1,473 | | Net cash used in investing activities | $(349) | $(1,739) | | Net cash (used in) provided by financing activities | $(4,669) | $152 | | Net decrease in cash and cash equivalents | $(3,469) | $(112) | - Major financing outflows in the first thirty-nine weeks of fiscal 2025 included $4.4 billion in dividend and dividend equivalent payments and $500 million for common stock repurchases13 Notes to Condensed Consolidated Financial Statements The notes detail significant corporate activities, including a series of acquisitions and a definitive agreement for another major purchase, debt refinancing, revenue recognition policies, segment performance, and stock repurchase activities, with a slight decrease in the effective tax rate compared to the prior year - The company has been highly acquisitive, entering a definitive agreement to acquire Simmonds Precision Products for ~$765 million, completing the acquisition of Servotronics for ~$133 million, and acquiring various product lines via its Extant Aerospace subsidiary for $212 million in the first thirty-nine weeks of fiscal 2025202138 - In May 2025, the company issued $2.65 billion of 6.375% Senior Subordinated Notes due 2033 and used the proceeds to redeem all of its outstanding 5.50% Senior Subordinated Notes due 2027 in June 20256466 - During the thirty-nine week period, the company repurchased 401,036 shares of its common stock for a total of $500 million, leaving $788 million available under its current repurchase program57 Segment Net Sales for Thirty-Nine Week Periods (in millions) | Segment | June 28, 2025 | June 29, 2024 | % Change | | :--- | :--- | :--- | :--- | | Power & Control | $3,274 | $2,838 | +15.4% | | Airframe | $3,007 | $2,795 | +7.6% | | Non-aviation | $113 | $121 | -6.6% | | Total Net Sales | $6,394 | $5,754 | +11.1% | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 11.1% year-to-date revenue growth to strong performance in the commercial aftermarket, driven by increased air travel, and growth in the defense sector from higher government spending, supplemented by recent acquisitions, while commercial OEM sales declined due to supply chain and production challenges; the company maintained strong profitability, with EBITDA As Defined margin expanding to 53.8%, and liquidity remains robust at $3.6 billion despite significant cash outflows Results of Operations The analysis details financial performance for both the third quarter and the first thirty-nine weeks of fiscal 2025, with net sales increasing 11.1% to $6.4 billion driven by 6.6% organic growth and 4.5% from acquisitions, led by defense (+12.3%) and commercial aftermarket (+9.5%) sales, while commercial OEM sales declined (-3.9%), and gross profit margin improved to 60.1% with net income rising 17.5% to $1.46 billion Net Sales Growth for Thirty-Nine Week Period Ended June 28, 2025 (in millions) | Sales Type | YTD 2025 | YTD 2024 | Change | % of Total Growth | | :--- | :--- | :--- | :--- | :--- | | Organic Sales | $6,092 | $5,712 | $380 | 6.6% | | Acquisition Sales | $302 | $42 | $260 | 4.5% | | Total Net Sales | $6,394 | $5,754 | $640 | 11.1% | - Organic sales growth for the thirty-nine week period was primarily driven by a $271 million (12.3%) increase in defense sales and a $168 million (9.5%) increase in commercial aftermarket sales, partially offset by a $50 million (3.9%) decrease in commercial OEM sales133 EBITDA As Defined by Segment for Thirty-Nine Week Periods (in millions) | Segment | YTD 2025 | YTD 2024 | % Change | Margin YTD 2025 | | :--- | :--- | :--- | :--- | :--- | | Power & Control | $1,868 | $1,626 | +14.9% | 57.1% | | Airframe | $1,613 | $1,443 | +11.8% | 53.6% | | Total Company | $3,441 | $3,023 | +13.8% | 53.8% | Liquidity and Capital Resources The company maintains a strong liquidity position with $3.65 billion available as of June 28, 2025, consisting of $2.8 billion in cash and $856 million in revolving credit facility availability, having allocated significant capital to a $4.2 billion special dividend, $500 million in stock repurchases, and acquisitions, while also refinancing $2.65 billion of debt and increasing its securitization facility capacity to $725 million Cash Liquidity as of June 28, 2025 (in millions) | Component | Amount | | :--- | :--- | | Cash and cash equivalents | $2,792 | | Availability on revolving credit facility | $856 | | Total Cash Liquidity | $3,648 | - Key transactions in fiscal 2025 include: - Payment of a $75.00 per share special dividend, totaling $4.2 billion - Repurchase of $500 million of common stock - Issuance of $2.65 billion in new notes to redeem existing notes - Agreement to acquire Simmonds Precision Products for ~$765 million and completion of the Servotronics acquisition for ~$133 million145 - As of June 28, 2025, approximately 75% of the company's gross debt was at a fixed rate, aligning with its objective to limit exposure to near-term interest rate changes149 Quantitative and Qualitative Disclosure About Market Risk The company reports that there have been no material changes to its market risks during the third quarter of fiscal year 2025 from those disclosed in its most recent Annual Report on Form 10-K - Market risks have not materially changed for the third quarter of fiscal year 2025 compared to the risks disclosed in the fiscal 2024 Form 10-K193 Controls and Procedures Based on an evaluation as of June 28, 2025, the company's management, including the CEO and CFO, concluded that its disclosure controls and procedures are effective, with no material changes in the company's internal control over financial reporting during the quarter - The President, CEO, and CFO concluded that the company's disclosure controls and procedures are effective as of the end of the reporting period194 - No changes occurred during the fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting195 PART II OTHER INFORMATION Legal Proceedings The company is involved in various legal actions arising in the ordinary course of business but does not expect them to have a material adverse effect on its financial condition, results of operations, or cash flows, with no material changes since the last annual report - The company believes the results of current legal proceedings will not have a material adverse effect on its financial condition or operations196 Risk Factors There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024 - No material changes to the risk factors described in the Form 10-K have occurred198 Unregistered Sales of Equity Securities and Use of Proceeds During the third quarter of fiscal 2025, the company repurchased 105,567 shares of its common stock at an average price of $1,240.91 per share, with $788 million remaining available for future repurchases under the authorized program as of the end of the quarter Issuer Purchases of Equity Securities (Q3 2025) | Period | Total Shares Repurchased | Average Price Paid Per Share | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | Mar 30 - Apr 26, 2025 | 105,567 | $1,240.91 | $788 million | | Total | 105,567 | $1,240.91 | $788 million | Other Information On June 2, 2025, the company's President and CEO, Kevin Stein, established a new Rule 10b5-1 trading plan for the sale of 171,500 shares of common stock issuable upon exercise of vested options, with the plan scheduled to begin on September 1, 2025 - President and CEO Kevin Stein entered into a new Rule 10b5-1 trading arrangement for the sale of 171,500 shares, effective September 1, 2025199 Exhibits This section lists all exhibits filed with the Form 10-Q, including an amendment to the Receivables Purchase Agreement, a listing of subsidiary guarantors, CEO/CFO certifications, and XBRL data files