AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 5/6 · 18/10/2026
Moat69
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · Existing proprietary components and required aircraft-specific certification create substantive barriers and supplier qualification friction. Protection is product-dependent, with several competitors in many niches.
durability · 3/4 · Multi-year operating history, historical aftermarket stability and recurring aircraft consumption support persistence. Estimated aircraft lives do not guarantee supplier tenure; approved alternatives limit an exceptional grade.
customer dependency · 3/4 · Aircraft-specific certification and costly replacement support substantial operational dependency, indirectly corroborated by aftermarket demand. Customers retain termination rights and generally lack minimum purchase obligations.
erosion resilience · 2/4 · Historical profitability through the 2020–2021 sales downturn demonstrates resilience. Approved substitutes, government sourcing powers and recent margin compression temper that evidence; none alone establishes realized structural erosion.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · — · Management reports value-based pricing success and attributes profit improvements jointly to pricing and other drivers. The passages disclose no separable observed price outcome sufficient to assess realized pricing.
retention · 3/4 · Assessed indirectly from certification friction, historical aftermarket stability and increased aftermarket sales. These support repeat demand without establishing customer-level retention rates; utilization growth contributes and future purchases are not guaranteed.
margin resilience · 3/4 · The long comparative record demonstrates profitability during the pandemic sales decline and subsequent recovery. Third-quarter fiscal 2026 operating margin fell to 44.8% from 46.4%, showing limits. Mix, costs and acquisitions prevent attributing resilience solely to pricing.
contractual freedom · 2/4 · Most aftermarket business lacks long-term contracts, allowing opportunities to reset terms, but this does not prove unilateral price control. Multi-year fixed-price arrangements and government pricing review materially constrain freedom elsewhere.
Predictability100
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 4.43
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 2.93
Financial strength26
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 0.00
- netDebtEbitGrade
- 0.00
- interestCoverageGrade
- 3.42
- currentRatioGrade
- 100.00
- Debt / FCF (x)
- 16.13
- Net debt / operating income (x)
- 6.36
- Current ratio (x)
- 3.21
- cashInterestPaid
- 1481.00
- cashInterestCoverage
- 1.38
Capital allocation99
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 26.13
- 3-year average dilution (%)
- 0.01
- 3-year average SBC / revenue (%)
- 2.05
- cashConversionGrade
- 96.97
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Fiscal 2025 operating cash generation and maintained liquidity support funding capacity. Large debt-funded distributions, followed by $3.159 billion of acquisitions and $1.807 billion of repurchases during fiscal 2026's first nine months, create a mixed record. Incremental acquisition returns and repurchase value are unestablished.
incentive alignment · 3/4 · Adopted performance vesting, actual option activity, received five-year CEO grants and director ownership compliance support alignment. Dividend-equivalent concerns, dilution and incomplete target detail prevent an exceptional assessment.
execution · 3/4 · Long-term operating results, fiscal 2025 cash generation and fiscal 2026 sales and profit growth demonstrate execution. Attribution to management is indirect because acquisitions and favorable demand contribute; recent margin dilution and unproven acquisition returns limit the grade.
governance · 2/4 · Independent key committees, adopted compensation protections and reported effective disclosure controls support functioning oversight. Stockholder concerns about board independence and dividend equivalents make the evidence mixed; future board changes and advisory proposals are not completed improvements.
Evidence
We primarily design, produce and supply highly engineered proprietary aerospace components with significant aftermarket content.
Business: proprietary aerospace components and aftermarket content · Filed 07/11/2024
We, and the components we manufacture, are required to be certified by one or more of these entities or agencies, and, in many cases, by individual OEMs, in order to engineer and service parts and components used in specific aircraft models.
Business regulation: component and aircraft-specific certification requirements · Filed 07/11/2024
The industry’s stringent regulatory, certification and technical requirements and the investments necessary in the development and certification of products may create disincentives for potential new competitors for certain products.
Competition: development and certification investment · Filed 12/11/2025
If customers receive products that meet or exceed expectations and performance standards, we believe that they will have a reduced incentive to certify another supplier because of the cost and time of the technical design and testing certification process.
Competition: management's explanation of supplier switching friction · Filed 12/11/2025
Commercial aftermarket sales increased in fiscal 2025 compared to fiscal 2024 primarily due to the overall demand for air travel resulting in higher flight hours and utilization of passenger and freight aircraft as global air traffic continues to surpass pre-pandemic levels.
MD&A: fiscal 2025 commercial aftermarket sales and utilization · Filed 12/11/2025
The purchase prices paid reflect the current EBITDA As Defined and cash flows, as well as the future EBITDA As Defined and cash flows expected to be generated by the businesses, 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.
Acquisitions: recurring aftermarket consumption and estimated aircraft life · Filed 04/08/2026
Competition The niche markets within the aerospace industry that we serve are relatively fragmented and we face several competitors for many of the products and services we provide.
Competition: fragmented niches and several competitors · Filed 12/11/2025
As is customary in our business, we do not generally have long-term contracts with most of our aftermarket customers and, therefore, do not have guaranteed future sales.
Risk factors: absence of long-term aftermarket contracts · Filed 12/11/2025
Although we have long-term contracts with many of our OEM customers, many of those customers may terminate the contracts on short notice and, in most cases, our customers have not committed to buy any minimum quantity of our products.
Risk factors: OEM termination rights and minimum purchase commitments · Filed 12/11/2025
As a result of these audits, we could be asked to enter into an arrangement whereby our prices would be based on costs approved by the auditor, plus a nominal fee, the DOD could seek to pursue alternative sources of supply for our parts, or the U.S.
Government pricing audits: possible cost-based arrangements and alternative sourcing · Filed 12/11/2025
Although we believe in most cases that we could identify alternative suppliers, or alternative raw materials or component parts, the lengthy and expensive aviation authority and OEM certification processes associated with aerospace products could prevent efficient replacement of a supplier, raw material or component part.
Supplier risk: lengthy and expensive certification impedes replacement · Filed 12/11/2025
Intellectual Property We have various trade secrets, proprietary information, trademarks, trade names, patents, copyrights and other intellectual property rights, which we believe, in the aggregate but not individually, are important to our business.
Intellectual property: portfolio and management's assessment of importance · Filed 12/11/2025
JPE’s products are highly engineered, proprietary parts manufacturer approval (“PMA”) components with a strong presence across major commercial aerospace platforms.
Acquisitions: JPE proprietary approved components · Filed 04/08/2026
JPE, headquartered in Seattle, Washington, is a leading independent designer and manufacturer of aerospace aftermarket solutions, primarily proprietary original equipment manufacturer (“OEM”) alternative parts and repairs.
Acquisitions: JPE OEM-alternative parts and repairs · Filed 04/08/2026
VSA is a leading designer, manufacturer, and distributor of proprietary PMA and other aftermarket parts serving the commercial aerospace end market – primarily the general aviation and business aviation sectors.
Acquisitions: VSA proprietary PMA and aftermarket parts · Filed 04/08/2026
The Company's products are manufactured, marketed and sold using a portfolio of patents, trademarks, licenses, and other forms of intellectual property, some of which expire in the future.
Intellectual property: future expiration of portfolio rights · Filed 12/11/2025
This has generally enabled us to price our products to fairly reflect the value we provide and the resources required to do so.
Operating strategy: management's claim about value-based pricing · Filed 12/11/2025
More specifically, focusing our businesses on our value-driven operating strategy of obtaining profitable new business, carefully controlling the cost structure via productivity and cost improvements and pricing our highly engineered value-added products to fairly reflect the value we provide and the resources required to do so has historically resulted in improvements in gross profit and income from operations over the long-term.
MD&A: management's attribution of historical profit improvements to pricing and other drivers · Filed 04/08/2026
We also have entered into multi-year, fixed-price contracts with some of our customers, pursuant to which we have agreed to perform the work at a fixed price and, accordingly, realize all the benefit or detriment resulting from any decreases or increases in the costs of making these products.
Risk factors: multi-year fixed-price contracts and cost exposure · Filed 12/11/2025
Most of our U.S. Government contracts are based on a firm-fixed price where we take the risk of cost overruns.
Government contracts: firm-fixed prices and cost-overrun exposure · Filed 12/11/2025
Government may seek to review our costs to determine whether our pricing is “fair and reasonable.”
Government contracts: fair-and-reasonable pricing review · Filed 07/11/2024
GAAP Measures (Cont.) RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS TO EBITDA AND EBITDA AS DEFINED 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 ($) (in millions) Net sales $ 762 $ 828 $ 1,206 $ 1,700 $ 1,924 $ 2,373 $ 2,707 $ 3,171 $ 3,504 $ 3,811 $ 5,223 $ 5,103 $ 4,798 $ 5,429 $ 6,585 $ 7,940 $ 8,831 Income (loss) from continuing operations $ 163 $ 163 $ 152 $ 325 $ 303 $ 307 $ 447 $ 586 $ 629 $ 962 $ 841 $ 653 $ 681 $ 866 $ 1,299 $ 1,715 $ 2,074 Depreciation and amortization expense 28 30 61 68 73 96 94 122 141 129 226 283 253 253 268 312 367 Interest expense, net 84 112 185 212 271 348 419 484 602 663 859 1,029 1,059 1,076 1,164 1,286 1,572 Income tax provision (benefit) 88 88 77 163 146 142 189 182 209 24 222 87 34 261 417 500 555 Warrant put value adjustment — — — — — — — — — — — — — — — — — Extraordinary item — — — — — — — — — — — — — — — — — EBITDA 363 393 475 768 793 893 1,149 1,374 1,581 1,778 2,148 2,052 2,027 2,456 3,148 3,813 4,568 Merger expense — — — — — — — — — — — — — — — — — Refinancing costs — — 72 — 30 132 18 16 40 6 3 28 37 1 56 58 11 Acquisition and divestiture transaction-related costs 6 12 30 19 26 21 37 57 31 29 169 31 35 18 18 70 42 Non-cash compensation and deferred compensation costs 6 7 13 22 49 26 32 48 46 59 93 93 130 184 157 217 157 One-time special bonus — — — — — — — — — — — — — — — — — COVID-19 pandemic restructuring costs — — — — — — — — — — — 54 40 — — — — Gain on sale of businesses — — — — — — — — — — — — (69) (7) — — — Other — — — — 2 1 (2) — 13 5 6 20 (11) (6) 16 15 (18) Public offering costs — — — — — — — — — — — — — — — — — EBITDA As Defined $ 375 $ 412 $ 590 $ 809 $ 900 $ 1,073 $ 1,234 $ 1,495 $ 1,711 $ 1,877 $ 2,419 $ 2,278 $ 2,189 $ 2,646 $ 3,395 $ 4,173 $ 4,760 EBITDA As Defined Margin 49.2 % 49.8 % 48.9 % 47.6 % 46.8 % 45.2 % 45.6 % 47.1 % 48.8 % 49.3 % 46.3 % 44.6 % 45.6 % 48.7 % 51.6 % 52.6 % 53.9 % RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS TO ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE 2021 2022 2023 2024 2025 ($) (in millions) Income from continuing operations $ 681 $ 866 $ 1,299 $ 1,715 $ 2,074 Gross adjustments from EBITDA to EBITDA As Defined 162 190 247 360 192 Purchase accounting backlog amortization 11 7 4 13 21 Tax adjustment (146) (65) (73) (122) (116) Adjusted Net Income $ 708 $ 998 $ 1,477 $ 1,966 $ 2,171 Weighted-average shares outstanding under the two-class method 58.4 58.2 57.2 57.8 58.2 Adjusted Earnings Per Share $ 12.13 $ 17.14 $ 25.84 $ 33.99 $ 37.33 TransDigm Group Incorporated 2026 Proxy Statement A-3 k
Appendix A: 2009–2025 operating results and non-GAAP reconciliation · Filed 23/01/2026
25 Table of Contents Results of Operations The following table sets forth, for the periods indicated, certain operating data of the Company, including presentation of the amounts as a percentage of net sales (amounts in millions, except per share data): Thirteen Week Periods Ended June 27, 2026 % of Net Sales June 28, 2025 % of Net Sales Net sales $ 2,741 100.0 % $ 2,237 100.0 % Cost of sales 1,113 40.6 % 905 40.5 % Selling and administrative expenses 332 12.1 % 242 10.8 % Amortization of intangible assets 69 2.5 % 51 2.3 % Income from operations 1,227 44.8 % 1,039 46.4 % Interest expense-net 514 18.8 % 397 17.7 % Other expense — — % 7 0.3 % Income tax provision 173 6.3 % 142 6.3 % Income from continuing operations 540 19.7 % 493 22.0 % Less: Net income attributable to noncontrolling interests (1) — % (1) — % Net income attributable to TD Group $ 539 19.7 % $ 492 22.0 % Net income applicable to TD Group common stockholders $ 539 (1) 19.7 % $ 492 (1) 22.0 % Earnings per share attributable to TD Group common stockholders: Basic and diluted $ 9.39 (2) $ 8.47 (2) Weighted-average shares outstanding—basic and diluted 57.4 58.1 Other Data: EBITDA $ 1,345 (3) $ 1,123 (3) EBITDA As Defined $ 1,447 (3) 52.8 % $ 1,217 (3) 54.4 % (1)Net income applicable to TD Group common stockholders represents net income attributable to TD Group less special dividends declared or paid on participating securities, including dividend equivalents.
MD&A: third-quarter fiscal 2026 comparative operating results · Filed 04/08/2026
Excluding the dilutive impact from these acquisitions, cost of sales as a percentage of net sales decreased due to sales mix (higher commercial aftermarket sales as a percentage of net sales compared to prior year), the application of our three core value-driven operating strategy (obtaining profitable new business, continually improving our cost structure and providing highly engineered value-added products to customers) coupled with fixed overhead costs spread over a higher production volume.
MD&A: cost-of-sales improvement excluding acquisitions, mix and production volume · Filed 04/08/2026
Management’s consistent application of this approach resulted in the following improvements over FY 2024 performance: •11% increase in net sales to $8,831 million •21% increase in net income from continuing operations to $2,074 million •25% increase in earnings per share from continuing operations of $32.08 •14% increase in EBITDA As Defined of $4,760 million •Increased EBITDA As Defined margin to 53.9%, compared to 52.6% in FY 2024 •Stockholder distributions of $75.00 per share special dividend in October 2024 and $90.00 per share special dividend in September 2025 which equates to approximately $9.6 billion in returned capital to our stockholders •FY 2025 share repurchases that aggregate to 401,036 shares of common stock at an average price of $1,247 for a total amount of $500 million •Strong operating cash flow generation of $2.0 billion and ending FY 2025 with a cash balance of $2.8 billion •Successfully deploying over $0.9 billion in capital for acquisitions, including Servotronics and Simmonds Precision Products (Simmonds Precision Products acquisition closed shortly after FY 2025 year-end on October 6, 2025) •Refinanced approximately $6 billion of debt, representing over 20% of TransDigm’s 2025 gross debt, extended the maturity dates of our debt to optimize our capital structure mix of debt and equity, and raised approximately $5 billion of incremental new debt used primarily for a September 2025 $90.00 per share special dividend payment 2 2026 Proxy Statement TransDigm Group Incorporated Proxy Summary 32 Years of Growth and Improving Margins 18% FY 1993 – 2025 Net Sales compound annual growth rate (“CAGR”) since TransDigm’s formation in 1993 21% FY 1993 – 2025 EBITDA As Defined CAGR since TransDigm’s formation in 1993 54% EBITDA As Defined margin has improved to almost 54% in 2025 compared to 20% in 1993 Commercial aerospace market trends remained favorable as the industry continued to normalize throughout 2025.
Proxy summary: fiscal 2025 cash generation, acquisitions, distributions and refinancing · Filed 23/01/2026
Investing Activities. Net cash used in investing activities was $3,370 million during the thirty-nine week period ended June 27, 2026, consisting of the acquisitions of Simmonds, JPE and VSA and other acquisitions of businesses aggregating to $3,159 million, capital expenditures of $205 million and other investing transactions outflows of $6 million.
Liquidity: fiscal 2026 acquisition spending and capital expenditures · Filed 04/08/2026
The source of cash was attributable to the net proceeds from the February and April 2026 new debt issuances, including fees, aggregating to $3,467 million plus proceeds from stock option exercises of $116 million; partially offset by repurchases of common stock of $1,807 million, repayments on term loans plus other financing costs aggregating to $65 million, and dividend equivalent payments of $59 million.
Liquidity: fiscal 2026 debt proceeds, repurchases and financing outflows · Filed 04/08/2026
34 Table of Contents As of June 27, 2026, the Company has significant cash liquidity as illustrated in the table presented below (in millions): As of June 27, 2026 Cash and cash equivalents $ 2,773 Availability on revolving credit facility 864 Cash liquidity $ 3,637 We believe our significant cash liquidity will allow us to meet our anticipated funding requirements.
Liquidity: cash and revolving facility availability at June 27, 2026 · Filed 04/08/2026
Under the 2008 equity incentive program, generally all of the options granted will vest based on the Company’s achievement of established operating performance goals.
Stock compensation: adopted operating-performance vesting conditions · Filed 12/11/2025
The following table summarizes the activity, pricing and other information for the Company’s performance vested stock-based award activity during the fiscal year ended September 30, 2025: Number of Options Weighted-Average Exercise Price Per Option Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at September 30, 2024 3,779,503 $ 466.18 Granted — — Exercised (462,368) 288.80 Forfeited (86,209) 620.43 Expired — — Outstanding at September 30, 2025 3,230,926 $ 487.45 4.4 years $ 2,683,510,208 Expected to vest 478,730 $ 670.73 7.1 years $ 309,877,142 Exercisable at September 30, 2025 2,429,832 $ 376.64 3.6 years $ 2,287,395,248 2006 Stock Incentive Plan In conjunction with the consummation of the Company’s initial public offering, a 2006 stock incentive plan was adopted by TD Group.
Stock compensation: actual performance-option activity and exercisable awards · Filed 12/11/2025
In connection with his promotion — and consistent with our long-standing compensation practices — Mike received performance-based option grants that vest over five years as part of our FY 2026 grant cycle.
Compensation: CEO performance-based grants received with five-year vesting · Filed 23/01/2026
All of the non-employee directors are in compliance with the equity retention requirements.
Director ownership: actual compliance with equity retention requirements · Filed 23/01/2026
TransDigm has made significant enhancements to its compensation program over the last few years including not exercising discretion in payouts or vesting, enhancing disclosure, implementing new retirement language in option awards, refreshing its peer group, changing its NEO option granting practices, increasing stock ownership guidelines, incorporating double trigger change in control provisions for NEO options, adopting a clawback policy and enacting strike price reduction in lieu of cash dividend equivalent payments for directors.
Compensation: disclosed adopted protections and changes in practices · Filed 23/01/2026
The Board has determined that all members of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee are independent under applicable NYSE and SEC rules for committee memberships and that each member of the Audit Committee also meets the additional independence criteria set forth in Rule 10A-3(b)(1) under the Exchange Act.
Governance: committee independence determinations · Filed 23/01/2026
Corporate Governance Some stockholders suggested that, given our current Board leadership structure, we should consider improving the overall independence of our Board.
Stockholder engagement: concerns about overall board independence · Filed 23/01/2026
Certain investors and proxy advisory firms have raised the issue as to whether TransDigm should pay dividend equivalents only upon an exercise of the options; however, we believe that tying payment of the dividend equivalents to the exercise of an option would result in excise taxes under Section 409A.
Compensation: investor concerns about dividend-equivalent payment timing · Filed 23/01/2026
Based upon that evaluation, the President and Chief Executive Officer and Chief Financial Officer concluded that TD Group’s disclosure controls and procedures are effective to ensure that information required to be disclosed by TD Group in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to TD Group’s management, including its President and Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Controls and procedures: management's effectiveness conclusion at June 27, 2026 · Filed 04/08/2026
Historically, these aftermarket revenues have produced a higher gross profit and have been more stable than net sales to original equipment manufacturers (“OEMs”).
Business: historical relative stability of aftermarket revenues · Filed 12/11/2025
