AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-3: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 29/10/2026
Moat69
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · Required aircraft-specific certification, costly supplier qualification and substantial proprietary-product sales establish meaningful current barriers. Several competitors serve many niches; proprietary status does not establish exclusivity.
durability · 3/4 · Recurring installed-component consumption, substantial aftermarket sales and the long operating record support persistence. Aircraft lives are estimates, and supplier tenure and protection from approved alternatives are not guaranteed.
customer dependency · 3/4 · Certification requirements and qualification friction support substantial product-level dependency, indirectly corroborated by aftermarket consumption. Customers retain termination rights and generally make no guaranteed aftermarket purchases.
erosion resilience · 2/4 · Continued profitability during the 2020–2021 sales contraction and subsequent recovery demonstrate resilience. Competition, approved alternatives and government sourcing powers constrain protection. Recent margin dilution is realized but does not itself establish structural erosion.
Pricing power63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 2/4 · Management reports historical profit improvements from a strategy explicitly including value-based pricing, alongside demonstrated profit growth. Actual competitive price adjustments and contractual cost-recovery limits temper that evidence. This is an indirect, mixed assessment: neither price direction nor a separate pricing contribution is disclosed.
retention · 3/4 · Assessed indirectly from certification friction, recurring aftermarket consumption, historical aftermarket stability and increased commercial aftermarket sales. These support repeat demand without establishing customer retention rates; utilization growth contributes and future purchases are uncommitted.
margin resilience · 3/4 · The comparative record shows sustained profitability through the 2020–2021 sales decline and subsequent recovery. Third-quarter fiscal 2026 operating margin declined to 44.8% from 46.4%, and thirty-nine-week gross margin declined to 59.3% from 60.1%. Acquisition dilution, mix and production volume limit attribution to pricing.
contractual freedom · 2/4 · The absence of long-term contracts with most aftermarket customers permits opportunities to reset terms, without proving unilateral price control. Multi-year fixed-price contracts, widespread limits on cost recovery and potential government pricing intervention materially constrain discretion.
Predictability100
5 consecutive published 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
- observedAnnualPeriods
- 5.00
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, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or reported pretax profit plus reported gross interest expense. Reported EBIT is distinct from GAAP operating income and gross interest. 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, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or EBIT calculated from reported pretax profit plus reported gross interest expense; the issuer-reported EBIT is distinct from GAAP operating income and gross interest; 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. ROIC remains undefined for nonpositive invested capital; the explicit asset-return alternative does not change the ROIC chart. Missing financial inputs alone never trigger an alternative. 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 of $2.0 billion supports funding capacity. Substantial debt-funded distributions, fiscal 2026 acquisition spending of $3.159 billion and repurchases of $1.807 billion create a mixed record. Financing remained outstanding after a proposed acquisition was withdrawn; incremental returns and repurchase value are unestablished.
incentive alignment · 3/4 · Disclosed performance thresholds, received CEO performance-based grants vesting over five years, director retention compliance and adopted compensation protections support alignment. Dividend-equivalent concerns and reliance on selected performance metrics limit the assessment; future scheduled grants are not treated as received.
execution · 3/4 · Long-term reported operating growth, fiscal 2025 cash generation and fiscal 2026 quarterly sales and operating-profit growth demonstrate execution. Attribution to management is indirect because acquisitions and favorable demand contribute; recent margin dilution and unestablished acquisition returns prevent an exceptional 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 record mixed. The completed advisory compensation vote and effective director appointment update the chronology without proving exceptional governance.
Evidence
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 / Governmental Regulation · Filed 07/11/2024
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.
Business / Competition / supplier certification · Filed 12/11/2025
Once our parts are designed into and sold on a new aircraft, we generate net sales from aftermarket consumption over the life of that aircraft, which is generally estimated to be approximately 25 to 30 years.
Business / aircraft aftermarket consumption · Filed 12/11/2025
We estimate that approximately 55% of our net sales in fiscal year 2025 were generated from the aftermarket, the vast majority of which come from the commercial and military aftermarkets.
Business / fiscal 2025 aftermarket sales share · Filed 12/11/2025
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 aftermarket stability · 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.
Results of operations / commercial aftermarket demand · Filed 12/11/2025
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.
Business / Competition · 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 / 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 and purchase obligations · Filed 12/11/2025
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 alternative parts and repairs · Filed 04/08/2026
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.
Risk factors / potential government pricing and alternative sourcing · Filed 12/11/2025
We estimate that approximately 90% of our net sales for fiscal year 2025 were generated by proprietary products.
Business / proprietary-product sales share · Filed 12/11/2025
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.
Business / Competition / development and certification barriers · 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.
Business / Intellectual Property · 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.
Management's discussion / historical operating strategy and pricing attribution · 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.
Business / intellectual-property expiration · Filed 12/11/2025
We adjust the prices of some of our products from time to time to stay competitive.
Risk factors / actual competitive price adjustments · Filed 12/11/2025
Most of our contracts do not permit us to recover increases in raw material prices, taxes or labor costs.
Risk factors / contractual limits on cost recovery · Filed 12/11/2025
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 · Filed 12/11/2025
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 / historical GAAP results and EBITDA 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.
Results of operations / third-quarter fiscal 2026 comparative results · Filed 04/08/2026
Gross profit percentage (Gross profit / Net sales)
59.3
%
60.1
%
Cost of sales during the thirty-nine week period ended June 27, 2026 increased as a percentage of net sales.
Results of operations / thirty-nine-week gross profit percentage · Filed 04/08/2026
This was primarily due to the dilutive impact of the fiscal 2026 and 2025 acquisitions.
Results of operations / acquisition-related gross margin dilution · 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.
Results of operations / margin drivers excluding acquisitions · Filed 04/08/2026
•Strong operating cash flow generation of $2.0 billion and ending FY 2025 with a cash balance of $2.8 billion
Proxy summary / fiscal 2025 operating cash flow and cash · Filed 23/01/2026
•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
Proxy summary / refinancing and debt-funded special dividend · 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 and capital resources / actual investing 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 and capital resources / financing proceeds and expenditures · Filed 04/08/2026
Notwithstanding the July 13, 2026 announcement that the Company elected to withdraw from its proposed acquisition of Stellant, there was no special mandatory redemption of the April 17, 2026 debt issuances and they remain outstanding.
Debt financing / outstanding financing after acquisition withdrawal · Filed 04/08/2026
TransDigm must achieve a 17.5% growth rate of our Annual Operating Performance per Diluted Share (“AOP”) metric for options to fully vest.
Executive compensation / full option-vesting performance threshold · Filed 23/01/2026
If our AOP achievement is less than 10%, our options do not vest.
Executive compensation / minimum option-vesting performance threshold · Filed 23/01/2026
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.
Executive compensation / received CEO performance-based grants · Filed 23/01/2026
All of the non-employee directors are in compliance with the equity retention requirements.
Director compensation / equity retention compliance · 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.
Executive compensation / investor concerns about dividend equivalents · 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.
Corporate governance / committee independence · 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.
Executive compensation / adopted compensation protections · 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.
Corporate governance / stockholder concerns about board independence · 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 · Filed 04/08/2026
3 – Approval, on an Advisory Basis, of the Compensation of the Company’s Named Executive Officers:
FOR
48,583,255
AGAINST
1,612,610
ABSTAIN
20,962
BROKER NON-VOTES
2,616,917
No other matters were brought before stockholders for a vote at the 2026 Annual Meeting.
Annual meeting results / actual advisory compensation vote · Filed 05/03/2026
On July 22, 2026, the Board of Directors (the “Board”) of TransDigm Group Incorporated (the “Company” or “TransDigm”) appointed Irina Krasik to the Company’s Board of Directors, effective immediately.
Item 5.02 / effective director appointment · Filed 24/07/2026
