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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 value TDG New 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.


INDEX
 
Page
Part I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets – April 3, 2021 and September 30, 2020
1
Condensed Consolidated Statements of Income – Thirteen and Twenty-Six Week Periods Ended April 3, 2021 and March 28, 2020
2
Condensed Consolidated Statements of Comprehensive Income – Thirteen and Twenty-Six Week Periods Ended April 3, 2021 and March 28, 2020
3
Condensed Consolidated Statements of Changes in Stockholders’ Deficit – Thirteen and Twenty-Six Week Periods Ended April 3, 2021 and March 28, 2020
4
Condensed Consolidated Statements of Cash Flows – Twenty-Six Week Periods Ended April 3, 2021 and March 28, 2020
6
Notes to Condensed Consolidated Financial Statements
7
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3 Quantitative and Qualitative Disclosure About Market Risk
Item 4 Controls and Procedures
Part II OTHER INFORMATION
Item 1 Legal Proceedings
Item 1A Risk Factors
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
Item 6 Exhibits
SIGNATURES


TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions, except share amounts)
(Unaudited)
April 3, 2021 September 30, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,072  $ 4,717 
Trade accounts receivable—Net 682  720 
Inventories—Net 1,240  1,283 
Prepaid expenses and other 364  240 
Total current assets 6,358  6,960 
PROPERTY, PLANT AND EQUIPMENT—Net 790  752 
GOODWILL 8,564  7,889 
OTHER INTANGIBLE ASSETS—Net 2,875  2,610 
DEFERRED INCOME TAXES —  17 
OTHER 152  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 facility 350  349 
Accounts payable 214  218 
Accrued and other current liabilities 740  773 
Total current liabilities 1,580  1,616 
LONG-TERM DEBT 19,402  19,384 
DEFERRED INCOME TAXES 484  430 
OTHER NON-CURRENT LIABILITIES 794  933 
Total liabilities 22,260  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
Additional paid-in capital 1,714  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 INTERESTS
Total stockholders’ deficit (3,521) (3,968)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT $ 18,739  $ 18,395 
See notes to condensed consolidated financial statements
1

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, 2021 March 28, 2020 April 3, 2021 March 28, 2020
NET SALES $ 1,194  $ 1,443  $ 2,301  $ 2,908 
COST OF SALES 602  625  1,169  1,288 
GROSS PROFIT 592  818  1,132  1,620 
SELLING AND ADMINISTRATIVE EXPENSES 162  180  358  381 
AMORTIZATION OF INTANGIBLE ASSETS 36  46  65  86 
INCOME FROM OPERATIONS 394  592  709  1,153 
INTEREST EXPENSE—NET 268  252  535  501 
REFINANCING COSTS 24  24  26 
OTHER INCOME (28) —  (33) (3)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 130  337  183  629 
INCOME TAX PROVISION 25  14  28  73 
INCOME FROM CONTINUING OPERATIONS 105  323  155  556 
(LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX —  (4) —  68 
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 
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 diluted 58.4  57.4  58.4  57.4 
See notes to condensed consolidated financial statements
2

TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in millions)
(Unaudited)
  Thirteen Week Periods Ended Twenty-Six Week Periods Ended
April 3, 2021 March 28, 2020 April 3, 2021 March 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 derivatives 43  (145) 56  (122)
Pensions and other postretirement benefits —  —  — 
Other comprehensive income (loss), net of tax, attributable to TD Group 43  (251) 167  (124)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO TD GROUP $ 147  $ 68  $ 321  $ 499 
See notes to condensed consolidated financial statements
3

TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Amounts in millions, except share amounts)
(Unaudited)

TD Group Stockholders
Common Stock Additional Paid-In
Capital
Accumulated Other Comprehensive Loss Treasury Stock
Number
of Shares
Par
Value
Accumulated
Deficit
Number
of Shares
Value Non-controlling Interests Total
BALANCE—September 30, 2019 57,623,311  $ $ 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 options 169,470  —  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 —  —  —  —  —  —  — 
BALANCE—December 28, 2019 57,792,781  $ $ 1,422  $ (4,699) $ (252) (4,161,326) $ (775) $ $ (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 options 440,793  —  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, 2020 58,233,574  $ $ 1,488  $ (4,401) $ (503) (4,198,226) $ (794) $ $ (4,205)
See notes to condensed consolidated financial statements








4

TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Amounts in millions, except share amounts)
(Unaudited)

TD Group Stockholders
Common Stock Additional Paid-In
Capital
Accumulated Other Comprehensive Loss Treasury Stock
Number
of Shares
Par
Value
Accumulated
Deficit
Number
of Shares
Value Non-controlling Interests Total
BALANCE—September 30, 2020 58,612,028  $ $ 1,581  $ (4,359) $ (401) (4,198,226) $ (794) $ $ (3,968)
Changes in noncontrolling interest of consolidated subsidiaries, net —  —  —  —  —  —  — 
Accrued unvested dividend equivalents and other —  —  —  (5) —  —  —  —  (5)
Compensation expense recognized for employee stock options —  —  43  —  —  —  —  —  43 
Exercise of employee stock options 240,979  —  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, 2021 58,853,007  $ $ 1,656  $ (4,314) $ (277) (4,198,226) $ (794) $ $ (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 options 207,509  —  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, 2021 59,060,516  $ $ 1,714  $ (4,215) $ (234) (4,198,226) $ (794) $ $ (3,521)
See notes to condensed consolidated financial statements
5

TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
Twenty-Six Week Periods Ended
April 3, 2021 March 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:
Depreciation 58  55 
Amortization of intangible assets and product certification costs 66  86 
Amortization of debt issuance costs, original issue discount and premium 17  16 
Amortization of inventory step-up — 
Amortization of loss contract reserves (27) (25)
Refinancing costs 24  26 
Gain on sale of businesses (1) — 
Non-cash stock compensation expense 70  37 
Deferred income taxes —  (9)
Foreign currency exchange loss 23 
Gain on insurance proceeds from fire (22) — 
Changes in assets/liabilities, net of effects from acquisitions and sales of businesses:
Trade accounts receivable 39  74 
Inventories 32  (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 activities 372  594 
INVESTING ACTIVITIES:
Capital expenditures (60) (50)
Acquisition of businesses, net of cash acquired (951) — 
Net proceeds from sale of businesses 35  904 
Insurance proceeds for fixed assets damaged from fire 24  — 
Net cash (used in) provided by investing activities (952) 854 
FINANCING ACTIVITIES:
Proceeds from exercise of stock options 69  69 
Dividend equivalent payments (73) (1,928)
Treasury stock purchases —  (19)
Proceeds from revolving credit facility 200  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, net 1,189  — 
Financing costs and other, net —  (8)
Net cash used in financing activities (73) (248)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (645) 1,201 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,717  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
6

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.
7

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.
8

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 
Inventories 27
Prepaid expenses and other 10
Property, plant and equipment 18
Goodwill 636
Other intangible assets 309
Other 34
Total assets acquired 1,065 
Liabilities assumed:
Accounts payable 15
Accrued and other current liabilities 38
Deferred income taxes 38
Other non-current liabilities 29
Total liabilities assumed 120 
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.
9

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.
10

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, 2021 September 30, 2020 Change
Contract assets, current (1)
$ 54  $ 36  $ 18 
Contract assets, non-current (2)
(2)
   Total contract assets 58  42  16 
Contract liabilities, current (3)
24  18 
Contract liabilities, non-current (4)
(1)
   Total contract liabilities 32  27 
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.
11

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, 2021 March 28, 2020 April 3, 2021 March 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 Group 104  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 outstanding 54.8  53.8  54.7  53.7 
Vested options deemed participating securities 3.6  3.6  3.7  3.7 
Total shares for basic and diluted earnings per share 58.4  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 
12

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, 2021 September 30, 2020
Raw materials and purchased component parts $ 865  $ 881 
Work-in-progress 360  358 
Finished goods 205  222 
Total 1,430  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, 2021 September 30, 2020
  Gross Carrying
Amount
Accumulated
Amortization
Net Gross Carrying
Amount
Accumulated
Amortization
Net
Trademarks & Trade names $ 994  $ —  $ 994  $ 958  $ —  $ 958 
Technology 2,018  638  1,380  1,842  589  1,253 
Order backlog (1)
15  11  93  93  — 
Customer Relationships 547  64  483  443  52  391 
Other 18  11  18  10 
Total $ 3,592  $ 717  $ 2,875  $ 3,354  $ 744  $ 2,610 
(1)Fully amortized order backlog associated with the Esterline acquisition has been written down from the gross carrying amount and accumulated amortization at April 3, 2021 due to being fully amortized. There is no impact on the net balance.
The aggregate amortization expense on identifiable intangible assets for the twenty-six week periods ended April 3, 2021 and March 28, 2020 was approximately $65 million and $86 million, respectively.
As disclosed in Note 3, "Acquisitions and Divestitures," the estimated fair value of the net identifiable tangible and intangible assets acquired are based on the acquisition method of accounting and are subject to adjustment upon completion of the third-party valuation. Material adjustments may occur. The fair value of the net identifiable tangible and intangible assets acquired will be finalized within the measurement period (not to exceed one year). Intangible assets acquired during the twenty-six week period ended April 3, 2021 are summarized in the table below (in millions):
Gross Amount Amortization
Period
Intangible assets not subject to amortization:
Goodwill $ 640 
Trademarks and trade names 34 
674 
Intangible assets subject to amortization:
Technology 163  20 years
Order backlog 15  1 year
Customer relationships 99  20 years
277 
Total $ 951 
13

The following is a summary of changes in the carrying value of goodwill by segment from September 30, 2020 through April 3, 2021 (in millions):
Power &
Control
Airframe Non-
aviation
Total
Balance at September 30, 2020 $ 4,141  $ 3,647  $ 101  $ 7,889 
Goodwill acquired during the period 636  —  640 
Goodwill divested during the period (4) —  (8) (12)
Currency translation adjustments 38  —  47 
Balance at April 3, 2021 $ 4,150  $ 4,321  $ 93  $ 8,564 
Given the continued adverse global economic and market conditions attributable to the COVID-19 pandemic, particularly as it pertains to the commercial aerospace sector, the Company continued to monitor for any indicators of impairment of goodwill and indefinite-lived intangible assets as of April 3, 2021. For certain reporting units that have higher commercial aerospace content and potentially present a higher risk for impairment, the Company performed a quantitative impairment test using an income approach in the prior year annual impairment assessment. In the current year, the Company reviewed for any changes in key assumptions used within the models. Key assumptions reviewed included revenue growth rates and EBITDA margins, available industry data and management’s determination of the prospective financial information with consideration of the estimated length of time for the commercial aerospace sector to rebound to pre-pandemic levels. As a result of the interim impairment testing performed as of April 3, 2021, no goodwill or indefinite-lived intangible assets was determined to be impaired.
9.    DEBT
The Company’s debt consists of the following (in millions):
April 3, 2021
Gross Amount Debt Issuance Costs Original Issue Discount or Premium Net Amount
Short-term borrowings—trade receivable securitization facility $ 350  $ —  $ —  $ 350 
Term loans $ 7,411  $ (43) $ (20) $ 7,348 
Revolving credit facility 200  —  —  200 
6.50% Senior Subordinated Notes due 2025 (2025 Notes)
750  (2) 750 
8.00% Senior Secured Notes due 2025 (2025 Secured Notes)
1,100  (8) —  1,092 
6.375% Senior Subordinated Notes due 2026 (6.375% 2026 Notes)
950  (5) —  945 
6.875% Senior Subordinated Notes due 2026 (6.875% 2026 Notes)
500  (4) (3) 493 
6.25% Senior Secured Notes due 2026 (2026 Secured Notes)
4,400  (51) 4,354 
7.50% Senior Subordinated Notes due 2027 (7.50% 2027 Notes)
550  (4) —  546 
5.50% Senior Subordinated Notes due 2027 (5.50% 2027 Notes)
2,650  (20) —  2,630 
4.625% Senior Subordinated Notes due 2029 (4.625% 2029 Notes)
1,200  (11) —  1,189 
Government refundable advances 30  —  —  30 
Finance lease obligations 101  —  —  101 
19,842  (148) (16) 19,678 
Less: current portion 277  (1) —  276 
Long-term debt $ 19,565  $ (147) $ (16) $ 19,402 

14

September 30, 2020
Gross Amount Debt Issuance Costs Original Issue Discount or Premium Net Amount
Short-term borrowings—trade receivable securitization facility $ 350  $ (1) $ —  $ 349 
Term loans $ 7,449  $ (48) $ (23) $ 7,378 
Revolving credit facility 200  —  —  200 
2024 Notes 1,200  (5) —  1,195 
2025 Notes 750  (3) 750 
2025 Secured Notes 1,100  (9) —  1,091 
6.375% 2026 Notes
950  (6) —  944 
6.875% 2026 Notes
500  (4) (3) 493 
2026 Secured Notes 4,400  (55) 4,350 
7.50% 2027 Notes
550  (5) —  545 
5.50% 2027 Notes
2,650  (21) —  2,629 
Government refundable advances 28  —  —  28 
Finance lease obligations 57  —  —  57 
19,834  (156) (18) 19,660 
Less: current portion 277  (1) —  276 
Long-term debt $ 19,557  $ (155) $ (18) $ 19,384 
Accrued interest, which is classified as a component of accrued and other current liabilities, was $130.7 million and $177.6 million as of April 3, 2021 and September 30, 2020, respectively.
Issuance of Senior Subordinated Notes due 2029 – On January 14, 2021, the Company entered into a purchase agreement in connection with a private offering of $1,200 million of 4.625% Senior Subordinated Notes due 2029 (the “4.625% 2029 Notes”) at an issue price of 100% of the principal amount. The 4.625% 2029 Notes were issued pursuant to an indenture, dated January 20, 2021, among TransDigm, Inc., as issuer, TransDigm Group, TransDigm UK and the other subsidiaries of TransDigm, Inc. named therein, as guarantors.
The 4.625% 2029 Notes bear interest at the rate of 4.625% per annum, which accrues from January 14, 2021 and is payable in arrears on January 15th and July 15th of each year, commencing on July 15, 2021. The 4.625% 2029 Notes mature on January 15, 2029, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the indenture.
The Company capitalized $11.3 million representing debt issuance costs associated with the 4.625% 2029 Notes during the twenty-six week period ended April 3, 2021.
Repurchase of Senior Subordinated Notes due 2024 – On January 14, 2021, the Company announced a cash tender offer for any and all of its outstanding 6.50% Senior Subordinated Notes due 2024 (the "2024 Notes"). On February 16, 2021, the Company redeemed the principal amount of $1,200 million, plus accrued interest of approximately $6.3 million and early redemption premium of $19.5 million.
The Company recorded refinancing costs of $23.6 million consisting of the $19.5 million early redemption premium and the write off of $4.1 million in unamortized debt issuance costs during the twenty-six week period ended April 3, 2021 in conjunction with the redemption of the 2024 Notes.
Subsequent Event - Issuance of Senior Subordinated Notes due 2029 – On April 12, 2021, the Company entered into a purchase agreement in connection with a private offering of $750 million of 4.875% Senior Subordinated Notes due 2029 (the “4.875% 2029 Notes”) at an issue price of 100% of the principal amount. The 4.875% 2029 Notes were issued pursuant to an indenture, dated April 21, 2021, among TransDigm, Inc., as issuer, TransDigm Group, TransDigm UK and the other subsidiaries of TransDigm, Inc. named therein, as guarantors.
The 4.875% 2029 Notes bear interest at the rate of 4.875% per annum, which accrues from April 12, 2021 and is payable in arrears on May 1st and November 1st of each year, commencing on November 1, 2021. The 4.875% 2029 Notes mature on May 1, 2029, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the indenture. The Company expects to use the net proceeds from the offering of the 4.875% 2029 Notes to redeem all of its outstanding 6.50% Senior Subordinated Notes due 2025 (the "2025 Notes"). As a result of the redemption of the 2025 Notes, the Company expects to pay an early redemption premium of $12.2 million, which will be expensed as a component of refinancing costs.
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Government Refundable Advances - Government refundable advances consist of payments received from the Canadian government to assist in research and development related to commercial aviation. The requirement to repay this advance is solely based on year-over-year commercial aviation revenue growth at CMC Electronics, which is a subsidiary of TransDigm. The balance was $30.2 million at April 3, 2021 and $28.4 million at September 30, 2020.
Obligations under Finance Leases - The Company leases certain buildings and equipment under finance leases. The present value of the minimum capital lease payments, net of the current portion, represents a balance of $101.1 million at April 3, 2021 and $56.8 million at September 30, 2020. Refer to Note 16, "Leases," for further disclosure on the Company's finance lease obligations.
10.    INCOME TAXES
At the end of each reporting period, TD Group makes an estimate of its annual effective income tax rate. The estimate used in the year-to-date period may change in subsequent periods.
During the thirteen week periods ended April 3, 2021 and March 28, 2020, the effective income tax rate was 19.6% and 4.2%, respectively. During the twenty-six week periods ended April 3, 2021 and March 28, 2020, the effective income tax rate was 15.5% and 11.6%, respectively. The Company's higher effective tax rate for the thirteen and twenty-six week periods ended April 3, 2021 was primarily due to the increase in the Company's net interest deduction limitation pursuant to IRC Section 163(j) partially offset by the discrete impact of excess tax benefits associated with share-based payments. The Company’s effective tax rate for the thirteen and twenty-six week periods ended April 3, 2021 was lower than the Federal statutory tax rate of 21% primarily due to the impact of excess tax benefits associated with share-based payments.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. The Company is no longer subject to U.S. federal examinations for years before fiscal 2015. The Company is currently under examination for its federal income taxes in the U.S. for fiscal 2016, in Belgium for fiscal years 2016 through 2018, in Canada for fiscal years 2013 through 2015, in France for fiscal years 2015 through 2019, and in Germany for fiscal years 2014 through 2017. The Company expects the examinations in France to be completed during the current fiscal year. In addition, the Company is subject to state income tax examinations for fiscal years 2015 and later.
At April 3, 2021 and September 30, 2020, TD Group had $41.6 million and $40.9 million, respectively, in unrecognized tax benefits, the recognition of which would have an effect of approximately $36.3 million and $35.7 million on the effective tax rate at April 3, 2021 and September 30, 2020, respectively. The Company believes the tax positions that comprise the unrecognized tax benefits will be reduced by approximately $21.3 million over the next 12 months. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense.
11.    FAIR VALUE MEASUREMENTS
The following table presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
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The following summarizes the carrying amounts and fair values of financial instruments (in millions):
April 3, 2021 September 30, 2020
Level Carrying
Amount
Fair Value Carrying
Amount
Fair Value
Assets:
Cash and cash equivalents 1 $ 4,072  $ 4,072  $ 4,717  $ 4,717 
Foreign currency forward exchange contracts and other (1)
2 —  — 
Liabilities:
Interest rate swap agreements (2)
2 80  80  56  56 
Interest rate swap agreements (3)
2 228  228  328  328 
Foreign currency forward exchange contracts and other (2)
2 —  — 
Short-term borrowings - trade receivable securitization facility (4)
2 350  350  349  349 
Long-term debt, including current portion:
Term loans (4)
2 7,348  7,236  7,378  7,004 
Revolving credit facility (4)
2 200  200  200  200 
2024 Notes (4)
1 —  —  1,195  1,194 
2025 Notes (4)
1 750  766  750  743 
2025 Secured Notes (4)
1 1,092  1,196  1,091  1,194 
6.375% 2026 Notes (4)
1 945  983  944  948 
6.875% 2026 Notes (4)
1 493  526  493  500 
2026 Secured Notes (4)
1 4,354  4,664  4,350  4,604 
7.50% 2027 Notes (4)
1 546  588  545  569 
5.50% 2027 Notes (4)
1 2,630  2,743  2,629  2,554 
4.625% 2029 Notes (4)
1 1,189  1,179  —  — 
Government refundable advances 2 30  30  28  28 
Finance lease obligations 2 101  101  57  57 
(1)Included in prepaid expenses and other on the condensed consolidated balance sheets.
(2)Included in accrued and other current liabilities on the condensed consolidated balance sheets.
(3)Included in other non-current liabilities on the condensed consolidated balance sheets.
(4)The carrying amount of the debt instrument is presented net of debt issuance costs, premium and discount. Refer to Note 9, "Debt," for gross carrying amounts.
The Company values its financial instruments using an industry standard market approach, in which prices and other relevant information are generated by market transactions involving identical or comparable assets or liabilities. No financial instruments were recognized using unobservable inputs (i.e., Level 3).
Interest rate swaps were measured at fair value using quoted market prices for the swap interest rate indexes over the term of the swap discounted to present value versus the fixed rate of the contract. The interest rate caps were measured at fair value using implied volatility rates of each individual caplet and the yield curve for the related periods.
The Company’s derivative contracts consist of foreign currency exchange contracts and, from time to time, interest rate swap and cap agreements. These derivative contracts are over-the-counter, and their fair value is determined using modeling techniques that include market inputs such as interest rates, yield curves, and currency exchange rates. These contracts are categorized as Level 2 in the fair value hierarchy.
The estimated fair value of the Company’s term loans was based on information provided by the agent under the Company’s senior secured credit facility. The estimated fair values of the Company’s notes were based upon quoted market prices. There has not been any impact to the fair value of derivative liabilities due to the Company's own credit risk. Similarly, there has not been any impact to the fair value of derivative assets based on the Company's evaluation of counterparties' credit risks.
The fair value of cash and cash equivalents, trade accounts receivable-net and accounts payable approximated carrying value due to the short-term nature of these instruments at April 3, 2021 and September 30, 2020.
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12.    DERIVATIVES AND HEDGING ACTIVITIES
The Company is exposed to, among other things, the impact of changes in foreign currency exchange rates and interest rates in the normal course of business. The Company’s risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes derivative financial instruments to offset a portion of these risks. The Company uses derivative financial instruments only to the extent necessary to hedge identified business risks and does not enter into such transactions for trading purposes. The Company generally does not require collateral or other security with counterparties to these financial instruments and is therefore subject to credit risk in the event of nonperformance; however, the Company monitors credit risk and currently does not anticipate nonperformance by other parties. These derivative financial instruments do not subject the Company to undue risk, as gains and losses on these instruments generally offset gains and losses on the underlying assets, liabilities, or anticipated transactions that are being hedged. The Company has agreements with each of its swap and cap counterparties that contain a provision whereby if the Company defaults on the credit facility the Company could also be declared in default on its swaps and caps, resulting in an acceleration of payment under the swaps and caps.
All derivative financial instruments are recorded at fair value in the condensed consolidated balance sheets. For a derivative that has not been designated as an accounting hedge, the change in the fair value is recognized immediately through earnings. For a derivative that has been designated as an accounting hedge of an existing asset or liability (a fair value hedge), the change in the fair value of both the derivative and underlying asset or liability is recognized immediately through earnings. For a derivative designated as an accounting hedge of an anticipated transaction (a cash flow hedge), the change in the fair value is recorded on the condensed consolidated balance sheet in accumulated other comprehensive loss to the extent the derivative is effective in mitigating the exposure related to the anticipated transaction. The change in the fair value related to the ineffective portion of the hedge, if any, is immediately recognized in earnings. The amount recorded within accumulated other comprehensive loss is reclassified into earnings in the same period during which the underlying hedged transaction affects earnings.
Interest Rate Swap and Cap Agreements – Interest rate swap and cap agreements are used to manage interest rate risk associated with floating-rate borrowings under our credit facility. The interest rate swap and cap agreements utilized by the Company effectively modify the Company’s exposure to interest rate risk by converting a portion of the Company’s floating-rate debt to a fixed rate basis through the expiration date of the interest rate swap and cap agreements, thereby reducing the impact of interest rate changes on future interest expense. These agreements involve the receipt of floating rate amounts in exchange for fixed rate interest payments over the term of the agreements without an exchange of the underlying principal amount. These derivative instruments qualify as effective cash flow hedges under U.S. GAAP. For these cash flow hedges, the effective portion of the gain or loss from the financial instruments was initially reported as a component of accumulated other comprehensive loss in stockholders’ deficit and subsequently reclassified into earnings in the same line as the hedged item in the same period or periods during which the hedged item affected earnings. As the interest rate swap and cap agreements are used to manage interest rate risk, any gains or losses from the derivative instruments that are reclassified into earnings are recognized in interest expense - net in the condensed consolidated statements of income.
The following table summarizes the Company's interest rate swap agreements:
Aggregate Notional Amount
(in millions)
Start Date End Date Related Term Loans Conversion of Related Variable Rate Debt to
Fixed Rate of:
$500 6/29/2018 3/31/2025 Tranche E
5.25% (3.0% plus the 2.25% margin percentage)
$750 6/30/2020 6/30/2022 Tranche E
4.75% (2.5% plus the 2.25% margin percentage)
$1,500 6/30/2022 3/31/2025 Tranche E
5.35% (3.1% plus the 2.25% margin percentage)
$1,000 6/28/2019 12/9/2025 Tranche F
4.05% (1.8% plus the 2.25% margin percentage)
$1,400 6/30/2021 12/9/2025 Tranche F
5.25% (3.0% plus the 2.25% margin percentage)
$500 12/30/2016 12/31/2021 Tranche G
4.15% (1.9% plus the 2.25% margin percentage)
$400 9/30/2017 9/30/2022 Tranche G
4.15% (1.9% plus the 2.25% margin percentage)
$900 12/31/2021 6/28/2024 Tranche G
5.35% (3.1% plus the 2.25% margin percentage)
$400 9/30/2022 6/28/2024 Tranche G
5.25% (3.0% plus the 2.25% margin percentage)
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The following table summarizes the Company's interest rate cap agreements:
Aggregate Notional Amount
(in millions)
Start Date End Date Related Term Loans Offsets Variable Rate Debt Attributable to
Fluctuations Above:
$750 6/30/2020 6/30/2022 Tranche E
Three month LIBOR rate of 2.5%
$400 6/30/2016 6/30/2021 Tranche F
Three month LIBOR rate of 2.0%
$400 12/30/2016 12/31/2021 Tranche G
Three month LIBOR rate of 2.5%
Certain derivative asset and liability balances are offset where master netting agreements provide for the legal right of setoff. For classification purposes, we record the net fair value of each type of derivative position that is expected to settle in less than one year with each counterparty as a net current asset or liability and each type of long-term position as a net non-current asset or liability. The amounts shown in the table below represent the gross amounts of recognized assets and liabilities, the amounts offset in the condensed consolidated balance sheet and the net amounts of assets and liabilities presented therein (in millions):
April 3, 2021 September 30, 2020
Asset Liability Asset Liability
Net derivatives as classified in the balance sheet (1)
$ —  $ (308) $ —  $ (384)
(1)Refer to Note 11, "Fair Value Measurements," for the condensed consolidated balance sheet classification of our interest rate swap agreements.
Based on the fair values of the interest rate swap and cap agreements determined as of April 3, 2021, the estimated net amount of existing gains and losses and caplet amortization expected to be reclassified into interest expense within the next twelve months is approximately $17.1 million.
Foreign Currency Forward Exchange Contracts – The Company transacts business in various foreign currencies, which subjects the Company’s cash flows and earnings to exposure related to changes in foreign currency exchange rates. These exposures arise primarily from purchases or sales of products and services from third parties. Foreign currency forward exchange contracts provide for the purchase or sale of foreign currencies at specified future dates at specified exchange rates, and are used to offset changes in the fair value of certain assets or liabilities or forecasted cash flows resulting from transactions denominated in foreign currencies. At April 3, 2021, the Company had outstanding foreign currency forward exchange contracts to sell U.S. dollars with notional amounts of $77.8 million. The maximum duration of the Company’s foreign currency cash flow hedge contracts at April 3, 2021 is 6 months. These notional values consist of contracts for the Canadian dollar and the European euro and are stated in U.S. dollar equivalents at spot exchange rates at the respective trade dates. Amounts related to foreign currency forward exchange contracts included in accumulated other comprehensive loss in stockholders' deficit are reclassified into net sales when the hedged transaction settles.
During the twenty-six week period ended April 3, 2021, the gains reclassified on foreign currency forward exchange contracts designated as cash flow hedges into net sales in the condensed consolidated statements of income were immaterial. The gains were previously recorded as a component of accumulated other comprehensive loss in stockholders' deficit. As of April 3, 2021, the Company expects to reclassify approximately $1.6 million of unrealized gains classified in other comprehensive income into net sales over the next 6 months.
During the twenty-six week period ended April 3, 2021, the gains recorded as a component of other income related to the ineffective portion of the foreign currency forward exchange contracts designated as cash flow hedges was immaterial.

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13.    SEGMENTS
The Company’s businesses are organized and managed in three reporting segments: Power & Control, Airframe and Non-aviation.
The Power & Control segment includes operations that primarily develop, produce and market systems and components that predominately provide power to or control power of the aircraft utilizing electronic, fluid, power and mechanical motion control technologies. Major product offerings 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, databus and power controls, advanced sensor products, switches and relay panels, high performance hoists, winches and lifting devices, and cargo loading, handling and delivery systems. Primary customers of this segment are engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots. Products are sold in the original equipment and aftermarket market channels.
The Airframe segment includes operations that primarily develop, produce and market systems and components that are used in non-power airframe applications utilizing airframe and cabin structure technologies. Major product offerings include engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, 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, thermal protection and insulation, lighting and control technology and parachutes. Primary customers of this segment are airframe manufacturers and cabin system suppliers and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots. Products are sold in the original equipment and aftermarket market channels.
The Non-aviation segment includes operations that primarily develop, produce and market products for non-aviation markets. Major product offerings include headsets for high-noise, medium-noise, and dismounted applications, seat belts and safety restraints for ground transportation applications, mechanical/electro-mechanical actuators and controls for space applications, hydraulic/electromechanical actuators and fuel valves for land based gas turbines, and refueling systems for heavy equipment used in mining, construction and other industries and turbine controls for the energy and oil and gas markets. Primary customers of this segment are off-road vehicle suppliers and subsystem suppliers, child restraint system suppliers, satellite and space system suppliers, manufacturers of heavy equipment used in mining, construction and other industries and turbine original equipment manufacturers, gas pipeline builders and electric utilities.
The primary measurement used by management to review and assess the operating performance of each segment is EBITDA As Defined. The Company defines EBITDA As Defined as earnings before interest, taxes, depreciation and amortization plus certain non-operating items recorded as corporate expenses including non-cash compensation charges incurred in connection with the Company’s stock incentive plans, restructuring costs related to the Company's cost reduction measures in response to the COVID-19 pandemic, foreign currency gains and losses, acquisition-integration costs, acquisition transaction-related expenses, and refinancing costs. COVID-19 restructuring costs represent actions taken by the Company to reduce its workforce to align with customer demand, as well as 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.). Acquisition-related costs represent accounting adjustments to inventory associated with acquisitions of businesses and product lines that were charged to cost of sales when the inventory was sold; costs incurred to integrate acquired businesses and product lines into the Company’s operations, facility relocation costs and other acquisition-related costs; transaction-related costs comprising deal fees; legal, financial and tax diligence expenses and valuation costs that are required to be expensed as incurred and other acquisition accounting adjustments.
EBITDA As Defined is not a measurement of financial performance under U.S. GAAP. Although the Company uses EBITDA As Defined to assess the performance of its business and for various other purposes, the use of this non-GAAP financial measure as an analytical tool has limitations, and it should not be considered in isolation or as a substitute for analysis of the Company’s results of operations as reported in accordance with U.S. GAAP.
The Company’s segments are reported on the same basis used internally for evaluating performance and for allocating resources. The accounting policies for each segment are the same as those described in the summary of significant accounting policies in the Company’s consolidated financial statements. Intersegment sales and transfers are recorded at values based on market prices, which creates intercompany profit on intersegment sales or transfers that is eliminated in consolidation. Intersegment sales were immaterial for the periods presented below. Certain corporate-level expenses are allocated to the operating segments.
20

The following table presents net sales by reportable segment (in millions):
Thirteen Week Periods Ended Twenty-Six Week Periods Ended
April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020
Net sales to external customers
Power & Control
Commercial OEM $ 127  $ 191  $ 253  $ 375 
Commercial Aftermarket 148  225  280  445 
Defense 366  331  709  679 
Total Power & Control 641  747  1,242  1,499 
Airframe
Commercial OEM 141  243  283  473 
Commercial Aftermarket 129  220  241  465 
Defense 243  192  453  391 
Total Airframe 513  655  977  1,329 
Total Non-aviation 40  41  82  80 
$ 1,194  $ 1,443  $ 2,301  $ 2,908 
The following table reconciles EBITDA As Defined by segment to consolidated income from continuing operations before income taxes (in millions):
Thirteen Week Periods Ended Twenty-Six Week Periods Ended
April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020
EBITDA As Defined
Power & Control $ 309  $ 381  $ 613  $ 766 
Airframe 208  296  385  602 
Non-aviation 16  14  31  26 
Total segment EBITDA As Defined 533  691  1,029  1,394 
Less: Unallocated corporate expenses 14  16  36  38 
Total Company EBITDA As Defined 519  675  993  1,356 
Depreciation and amortization expense 66  72  124  141 
Interest expense, net 268  252  535  501 
Acquisition-related costs 15  19  16 
Non-cash stock compensation expense 21  12  70  37 
Refinancing costs 24  24  26 
COVID-19 pandemic restructuring costs 18  —  39  — 
Other, net (23) (10) (1)
Income from continuing operations before income taxes $ 130  $ 337  $ 183  $ 629 
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The following table presents total assets by segment (in millions):
April 3, 2021 September 30, 2020
Total assets
Power & Control $ 7,013  $ 7,005 
Airframe 7,652  6,575 
Non-aviation 220  251 
Corporate 3,854  4,564 
$ 18,739  $ 18,395 
14.    RETIREMENT PLANS
The components of net periodic pension (benefit) cost for the Company's defined benefit plans were as follows (in millions):
Thirteen Week Periods Ended Twenty-Six Week Periods Ended
April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020
U.S. Pension Plans Non-U.S. Pension Plans U.S. Pension Plans Non-U.S. Pension Plans U.S. Pension Plans Non-U.S. Pension Plans U.S. Pension Plans Non-U.S. Pension Plans
Service cost $ —  $ $ $ $ $ $ $
Interest cost
Expected return on plan assets (4) (1) (5) (1) (9) (3) (9) (4)
Amortization —  —  —  —  —  — 
Net periodic pension (benefit) cost $ (3) $ $ —  $ $ (4) $ $ $
The net periodic pension (benefit) cost for the Company's post-retirement pension plans was immaterial for the thirteen and twenty-six week periods ended April 3, 2021 and March 28, 2020. The components of the defined benefit plans net periodic pension (benefit) cost, other than service cost, are included in other (income) expense in the Company's condensed consolidated statements of income.
On December 31, 2020, the Company approved an amendment and provided notice to participants, in accordance with regulatory requirements, of its intent to freeze the Esterline Retirement Plan (the "Plan"). The amendment, among other things, freezes the Plan to all future benefit accruals and participation by new or rehired employees on or after January 1, 2021. On March 30, 2021, the Company approved an amendment of its intent to terminate the Plan effective June 30, 2021 and provided notice to participants, in accordance with regulatory requirements. The Company anticipates the termination process will take approximately 18 to 24 months to complete. Upon settlement of the pension obligations, the Company will reclassify unrecognized actuarial gains or losses, currently recorded in accumulated other comprehensive loss in the condensed consolidated balance sheets, to the Company's condensed consolidated statements of income as settlement gains or charges in the second half of fiscal 2021.
22

15.    ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents the components of accumulated other comprehensive loss, net of taxes, for the twenty-six week periods ended April 3, 2021 and March 28, 2020 (in millions):
Unrealized gains (losses) on derivatives designated and qualifying as cash flow hedges (1)
Defined benefit pension plan activity (2)
Currency translation adjustment
Total
Balance at September 30, 2020 $ (302) $ (8) $ (91) $ (401)
Current-period other comprehensive income (loss), net of tax, attributable to TD Group 56  —  111  167 
Balance at April 3, 2021 $ (246) $ (8) $ 20  $ (234)
Balance at September 30, 2019 $ (172) $ (40) $ (167) $ (379)
Current-period other comprehensive income (loss), net of tax, attributable to TD Group (122) (8) (124)
Balance at March 28, 2020 $ (294) $ (34) $ (175) $ (503)
(1)Represents unrealized (gains) losses on derivatives designated and qualifying as cash flow hedges, net of taxes of $(13.5) million and $43.0 million for the thirteen week periods ended April 3, 2021 and March 28, 2020, respectively, and $(18.5) million and $34.0 million for the twenty-six week periods ended April 3, 2021 and March 28, 2020, respectively.
(2)There were no material pension liability adjustments, net of taxes, for the thirteen and twenty-six week periods ended April 3, 2021 and March 28, 2020.
Reclassifications out of accumulated other comprehensive loss for the thirteen and twenty-six week periods ended April 3, 2021 and March 28, 2020 were immaterial.
16.    LEASES
The Company leases certain manufacturing facilities, offices, land, equipment and vehicles. Such leases, some of which are noncancelable and, in many cases, include renewals, expire at various dates. Such options to renew are included in the lease term when it is reasonably certain that the option will be exercised. The Company’s lease agreements typically do not contain any significant residual value guarantees or restrictive covenants, and payments within certain lease agreements are adjusted periodically for changes in an index or rate.
The Company determines if an arrangement is a lease at inception. Operating lease assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The discount rate implicit within our leases is generally not determinable and therefore we determine the discount rate based on our incremental borrowing rate. The incremental borrowing rate for our leases is determined based on the lease term and the currency in which lease payments are made. The length of a lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. The Company made an accounting policy election to not recognize lease assets or liabilities for leases with a term of 12 months or less. Additionally, when accounting for leases, the Company combines payments for leased assets, related services and other components of a lease.
The components of lease expense for the are as follows (in millions):
Thirteen Week Periods Ended Twenty-Six Week Periods Ended
Classification April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020
Operating lease cost Cost of sales or selling and administrative expenses $ $ $ 14  $ 14 
Finance lease cost
Amortization of leased assets Cost of sales
Interest on lease liabilities Interest expense - net
Total lease cost $ 10  $ $ 19  $ 17 
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Supplemental cash flow information related to leases is as follows (in millions):
Twenty-Six Week Periods Ended
April 3, 2021 March 28, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases $ 14  $ 14 
Operating cash outflows from finance leases
Financing cash outflows from finance leases
Lease assets obtained in exchange for new lease obligations:
Operating leases $ 38  $ 15 
Financing leases 25  — 
Supplemental balance sheet information related to leases is as follows (in millions):
Classification April 3, 2021 September 30, 2020
Operating Leases
Operating lease right-of-use assets Other assets $ 107  $ 103 
Current operating lease liabilities Accrued and other current liabilities 22  22 
Long-term operating lease liabilities Other non-current liabilities 90  87 
Total operating lease liabilities $ 112  $ 109 
Finance Leases
Finance lease right-of-use assets, net Property, plant and equipment - net $ 108  $ 67 
Current finance lease liabilities Accrued and other current liabilities
Long-term finance lease liabilities Other non-current liabilities 99  55 
Total finance lease liabilities $ 101  $ 57 
As of April 3, 2021, the Company has the following remaining lease term and weighted average discount rates:
Weighted-average remaining lease term
Operating leases 8.1 years
Finance leases 22.1 years
Weighted-average discount rate
Operating leases 5.9%
Finance leases 7.2%
24

    Maturities of lease liabilities at April 3, 2021 are as follows (in millions):
Operating Leases Finance Leases
2021 $ 14  $
2022 25 
2023 19 
2024 16 
2025 13 
Thereafter 56  180 
Total future minimum lease payments 143  220 
Less: imputed interest 31  119 
Present value of lease liabilities reported $ 112  $ 101 
17.    COMMITMENTS AND CONTINGENCIES
On August 8, 2019, a fire caused significant damage to the Niort, France operating facility of the Leach International Europe subsidiary, which is reported within the Company’s Power & Control segment. The facility as well as certain machinery, equipment and inventory sustained damage. The Company suspended operations at the Niort facility as a result of the fire; however, had transferred certain operations to temporary facilities until operations were fully resto