TransDigm(TDG) - 2023 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION ITEM 1 Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income, changes in stockholders' deficit, and cash flows, along with detailed notes covering business description, acquisitions, accounting policies, debt, taxes, and commitments Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (Amounts in millions) | Metric | July 1, 2023 | Sept 30, 2022 | | :---------------------- | :----------- | :------------ | | Total Assets | $19,555 | $18,107 | | Total Liabilities | $21,942 | $21,873 | | Total Stockholders' Deficit | $(2,387) | $(3,766) | | Cash and cash equivalents | $3,071 | $3,001 | | Inventories—Net | $1,603 | $1,332 | - Total assets increased by $1,448 million, and total stockholders' deficit decreased by $1,379 million from September 30, 2022, to July 1, 2023[6] Condensed Consolidated Statements of Income Condensed Consolidated Statements of Income Highlights (Amounts in millions, except per share amounts) | Metric | 13 Weeks Ended July 1, 2023 | 13 Weeks Ended July 2, 2022 | 39 Weeks Ended July 1, 2023 | 39 Weeks Ended July 2, 2022 | | :----------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Sales | $1,744 | $1,398 | $4,733 | $3,919 | | Gross Profit | $1,029 | $816 | $2,750 | $2,213 | | Income from Operations | $783 | $599 | $2,067 | $1,574 | | Net Income Attributable to TD Group | $351 | $238 | $883 | $600 | | Earnings per share (basic and diluted) | $6.14 | $4.10 | $14.80 | $9.44 | - Net sales for the thirty-nine-week period increased by 20.8% year-over-year, while net income attributable to TD Group surged by 47.2% for the same period[8] Condensed Consolidated Statements of Comprehensive Income Condensed Consolidated Statements of Comprehensive Income Highlights (Amounts in millions) | Metric | 13 Weeks Ended July 1, 2023 | 13 Weeks Ended July 2, 2022 | 39 Weeks Ended July 1, 2023 | 39 Weeks Ended July 2, 2022 | | :----------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income attributable to TD Group | $351 | $238 | $883 | $600 | | Foreign currency translation adjustment | $31 | $(155) | $211 | $(208) | | Unrealized gains on derivatives | $35 | $24 | $26 | $252 | | Total Comprehensive Income Attributable to TD Group | $417 | $113 | $1,120 | $650 | - Total comprehensive income attributable to TD Group for the thirty-nine-week period increased by 72.3% year-over-year, largely due to a positive swing in foreign currency translation adjustment[9] Condensed Consolidated Statements of Changes in Stockholders' Deficit Changes in TD Group Stockholders' Deficit (Amounts in millions) | Metric | Sept 30, 2022 | July 1, 2023 | | :----------------------------------- | :------------ | :----------- | | Total TD Group stockholders' deficit | $(3,773) | $(2,394) | | Accumulated deficit | $(3,914) | $(3,034) | | Accumulated other comprehensive loss | $(267) | $(30) | - The total TD Group stockholders' deficit improved by $1,379 million from September 30, 2022, to July 1, 2023, primarily driven by net income and positive changes in accumulated other comprehensive loss[6][13] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows Highlights (Amounts in millions) | Metric | 39 Weeks Ended July 1, 2023 | 39 Weeks Ended July 2, 2022 | | :----------------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $913 | $675 | | Net cash used in investing activities | $(852) | $(505) | | Net cash used in financing activities | $(11) | $(1,116) | | Net increase (decrease) in cash and cash equivalents | $70 | $(979) | | Cash and cash equivalents, end of period | $3,071 | $3,808 | - Net cash provided by operating activities increased by $238 million year-over-year, contributing to a net increase in cash and cash equivalents of $70 million for the thirty-nine-week period, a significant improvement from a $979 million decrease in the prior year[15] Notes to Condensed Consolidated Financial Statements 1. DESCRIPTION OF THE BUSINESS TransDigm Group Incorporated is a leading global designer, producer, and supplier of highly engineered proprietary aircraft components for use on nearly every commercial and military aircraft, offering a broad range of specialized aerospace products - TransDigm is a leading global designer, producer, and supplier of highly engineered proprietary aircraft components for commercial and military aircraft[16] - The company offers a broad range of products including mechanical/electro-mechanical actuators, ignition systems, specialized pumps and valves, power conditioning devices, electric motors, batteries, latching devices, cockpit security components, displays, audio/radio/antenna systems, lavatory components, seat belts, interior surfaces, sensor products, switches, thermal protection, lighting, parachutes, hoists, winches, cargo systems, and testing services[16] 2. UNAUDITED INTERIM FINANCIAL INFORMATION The interim financial information is unaudited but includes all necessary recurring adjustments for fair presentation, prepared in conformity with U.S. GAAP, and should be read in conjunction with the prior fiscal year's Form 10-K - The financial information is unaudited but reflects all necessary normal recurring adjustments for fair presentation[17] - The financial statements are prepared in conformity with U.S. GAAP for interim financial statements[17] - Results for the thirty-nine-week period ended July 1, 2023, are not necessarily indicative of the results to be expected for the full year[17] 3. ACQUISITIONS The company completed the acquisition of Calspan Corporation for $729 million in May 2023 and finalized the DART Aerospace acquisition from May 2022, along with several smaller Extant Aerospace product line acquisitions, all aimed at strengthening its position in proprietary aerospace components with significant aftermarket content - Acquired Calspan Corporation on May 8, 2023, for $729 million, a leading independent provider of highly engineered testing and technology development services for the aerospace and defense industry[18] - Finalized the DART Aerospace acquisition (May 25, 2022) for $359 million, a leading provider of helicopter mission equipment solutions[20] - Completed an $11 million product line acquisition for Extant Aerospace in the thirty-nine-week period ended July 1, 2023, and a series of $88 million acquisitions in fiscal 2022[23][24] - These acquisitions strengthen and expand the company's position in niche markets with significant aftermarket content and provide opportunities to create value through core operating strategies[26] 4. RECENT ACCOUNTING PRONOUNCEMENTS The company adopted ASU 2020-04, 'Reference Rate Reform,' and related amendments, applying practical expedients to preserve cash flow hedge accounting for LIBOR to Term SOFR conversions, with no material impact on financial statements - Applied ASU 2020-04, 'Reference Rate Reform,' and related amendments (ASU 2021-01, ASU 2022-06) to ease accounting impacts of transitioning away from LIBOR[27] - Entered into LIBOR to Term SOFR basis interest rate swap and cap agreements, applying practical expedients to preserve existing swaps and caps as qualifying cash flow hedges[27] - The application of this standard did not have a material impact on the Company's condensed consolidated financial statements and disclosures[27] [5. REVENUE RECOGNITION](index=13&type=section&