TRANSDIGM GROUP INC. Forward-looking Statements The following discussion of the Company's financial condition and results of operations should be read together withTD Group's condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. References in this section to "TransDigm ," "the Company," "we," "us," "our," and similar references refer toTD Group ,TransDigm Inc. andTransDigm Inc.'s subsidiaries, unless the context otherwise indicates. This Quarterly Report on Form 10-Q contains both historical and "forward-looking statements" within the meaning of Section 21E of the Exchange Act, and 27A of the Securities Act. All statements other than statements of historical fact included that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements, including, in particular, the statements about our plans, objectives, strategies and prospects regarding, among other things, our financial condition, results of operations and business. We have identified some of these forward-looking statements with words like "believe," "may," "will," "should," "expect," "intend," "plan," "predict," "anticipate," "estimate" or "continue" and other words and terms of similar meaning. These forward-looking statements may be contained throughout this Quarterly Report on Form 10-Q. These forward-looking statements are based on current expectations about future events affecting us and are subject to uncertainties and factors relating to, among other things, our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Many factors mentioned in our discussion in this Quarterly Report on Form 10-Q, including the risks outlined under "Risk Factors," will be important in determining future results. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we do not know whether our expectations will prove correct. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including those described under "Risk Factors" in the Quarterly Report on Form 10-Q. Since our actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements, we cannot give any assurance that any of the events anticipated by these forward-looking statements will occur or, if any of them does occur, what impact they will have on our business, results of operations and financial condition. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. We do not undertake any obligation to update these forward-looking statements or the risk factors contained in this Quarterly Report on Form 10-Q to reflect new information, future events or otherwise, except as may be required under federal securities laws. Important factors that could cause actual results to differ materially from the forward-looking statements made in this Quarterly Report on Form 10-Q include but are not limited to: the impact that the COVID-19 pandemic has on our business, results of operations, financial condition and liquidity; the sensitivity of our business to the number of flight hours that our customers' planes spend aloft and our customers' profitability, both of which are affected by general economic conditions; future geopolitical or other worldwide events; cyber-security threats and natural disasters; our reliance on certain customers; theU.S. defense budget and risks associated with being a government supplier including government audits and investigations; failure to maintain government or industry approvals; failure to complete or successfully integrate acquisitions; our indebtedness; potential environmental liabilities; liabilities arising in connection with litigation; increases in raw material costs, taxes and labor costs that cannot be recovered in product pricing; risks and costs associated with our international sales and operations; and other factors. Refer to Part II, Item 1A included in this Quarterly Report on Form 10-Q and to Part II, Item 1A of the Annual Report on Form 10-K for additional information regarding the foregoing factors that may affect our business. Overview We believe we are a leading global designer, producer and supplier of highly engineered proprietary aerospace components with significant aftermarket content. We seek to develop highly customized products to solve specific needs for aircraft operators and manufacturers. We attempt to differentiate ourselves based on engineering, service and manufacturing capabilities. We typically choose not to compete for non-proprietary "build to print" business because it frequently offers lower margins than proprietary products. We believe that our products have strong brand names within the industry and that we have a reputation for high quality, reliability and strong customer support. Our business is well diversified due to the broad range of products that we offer to our customers. Our 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. Each of these product offerings is composed of many individual products that are typically customized to meet the needs of a particular aircraft platform or customer. 24 -------------------------------------------------------------------------------- Table of Contents For the first quarter of fiscal year 2022, we generated net sales of$1,194 million and net income attributable toTD Group of$163 million . EBITDA As Defined was$565 million , or 47.3% of net sales. Refer to the "Non-GAAP Financial Measures" section for certain information regarding EBITDA and EBITDA As Defined, including reconciliations of EBITDA and EBITDA As Defined to income from continuing operations and net cash provided by operating activities. The COVID-19 pandemic is continuing to cause an adverse impact on our employees, operations, supply chain and distribution system and the long-term impact to our business remains unknown. This is due to the numerous uncertainties that have risen from the pandemic, including the severity of the disease, the duration of the outbreak, the likelihood of resurgences of the outbreak, including due to the emergence and spread of variants, actions that may be taken by governmental authorities in response to the disease including vaccination mandates, the continued efficacy and public acceptance of vaccines, and unintended consequences of the foregoing. The commercial aerospace industry, in particular, has been significantly disrupted, both domestically and internationally, by the pandemic. The pandemic has resulted in governments around the world implementing stringent measures to help control the spread of the virus, including quarantines, "shelter in place" and "stay at home" orders, travel restrictions, business curtailments and other measures. As a result, demand for travel declined at a rapid pace beginning in the second half of fiscal 2020 and has remained depressed compared to pre-pandemic levels. However, commercial air travel has increasingly shown signs of recovery in recent months with increasing air traffic, primarily in certain domestic markets. The recovery in international commercial air travel has been slower with international travel only slightly recovered from COVID-19 pandemic lows. The exact pace and timing of the commercial air travel recovery remains uncertain and is expected to continue to be uneven depending on factors such as trends in the number of COVID-19 infections (e.g., impact of new variants of COVID-19 resurfacing), the continued efficacy and public acceptance of vaccines and easing of quarantines and travel restrictions, among other factors. The COVID-19 pandemic has also disrupted the global supply chain to a certain extent and availability of raw materials, particularly electronic parts. Because we strive to limit the volume of raw materials and component parts on hand, our business could be adversely affected if we were unable to obtain these raw materials and components from our suppliers in the quantities we require or on favorable terms. Although we believe in most cases that we could identify alternative suppliers, or alternative raw materials or component parts, the lengthy and expensiveFAA and OEM certification processes associated with aerospace products could prevent efficient replacement of a supplier, raw material or component part. We currently expect COVID-19 to continue to cause an adverse impact on our net sales, net income and EBITDA as Defined compared to pre-pandemic levels into fiscal 2022. Longer-term, because the duration of the pandemic is unclear, it is difficult to forecast a precise impact on the Company's future results. We will continue to evaluate the nature and extent to which COVID-19 will impact our business, supply chain, consolidated results of operations, financial condition, and liquidity. Critical Accounting Policies and Estimates The preparation and fair presentation of the consolidated unaudited interim financial statements and accompanying notes included in this report are the responsibility of management. The financial statements and footnotes have been prepared in conformity with generally accepted accounting principles inthe United States ("U.S. GAAP") for interim financial statements and contain certain amounts that were based upon management's best estimates, judgments and assumptions that were believed to be reasonable under the circumstances. On an ongoing basis, we evaluate the accounting policies and estimates used to prepare financial statements. Estimates are based on historical experience, judgments and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates used by management. A comprehensive discussion of the Company's critical accounting policies and management estimates and significant accounting policies followed in the preparation of the financial statements is included in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2021 , filed onNovember 16, 2021 . Refer to Note 4, "Recent Accounting Pronouncements," in the notes to the condensed consolidated financial statements included herein for further disclosure of accounting standards recently adopted or required to be adopted in the future. Acquisitions and Divestitures Recent acquisitions and divestitures are described in Note 3, "Acquisitions and Divestitures," in the notes to the condensed consolidated financial statements included herein. 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):
Thirteen Week Periods Ended
January 1, 2022 January 2, January 2, 2021
January 1, 2022 % of Net Sales 2021 % of Net Sales
Net sales $ 1,194 100.0 % $ 1,108 100.0 %
Cost of sales 533 44.6 % 567 51.2 %
Selling and administrative expenses 170 14.2 % 197 17.8 %
Amortization of intangible assets 36 3.0 % 29 2.6 %
Income from operations 455 38.1 % 315 28.4 %
Interest expense, net 264 22.1 % 267 24.1 %
Other income (2) (0.2) % (5) (0.5) %
Income tax provision 30 2.5 % 3 0.3 %
Income from continuing operations 163 13.7 % 50 4.5 %
Less: Net income attributable to noncontrolling
interests (1) (0.1) % - - %
Income from continuing operations attributable to
162 13.6 % 50 4.5 %
Income from discontinued operations, net of tax 1 0.1 % - - %
Net income attributable to TD Group $ 163 13.7 % $ 50 4.5 %
Net income (loss) applicable to TD Group common
stockholders $ 117 (1) 9.8 % $ (23) (1) (2.1) %
Earnings (loss) per share:
Earnings (loss) per share from continuing
operations-basic and diluted $ 1.96 (2) $ (0.42) (2)
Earnings per share from discontinued operations-basic and diluted
0.02 (2) - (2)
Earnings (loss) per share $ 1.98 $ (0.42) Weighted-average shares outstanding-basic and diluted 59.2
54.7
Other Data:
EBITDA $ 522 (3) $ 378 (3)
EBITDA As Defined $ 565 (3) 47.3 % $ 474 (3) 42.8 %
(1)Net income (loss) applicable to TD Group common stockholders represents net
income attributable to TD Group less special dividends declared or paid on
participating securities, including dividend equivalent payments of $46 million
and $73 million for the thirteen week periods ended January 1, 2022 and
January 2, 2021 , respectively.
(2)Earnings (loss) per share from continuing operations is calculated by
dividing net income (loss) applicable to TD Group common stockholders, excluding
income from discontinued operations, net of tax, by the basic and diluted
weighted average common shares outstanding. Earnings per share from discontinued
operations is calculated by dividing income from discontinued operations, net of
tax, by the basic and diluted weighted average common shares outstanding.
(3)Refer to "Non-GAAP Financial Measures" in this discussion and analysis for
additional information and limitations regarding these non-GAAP financial
measures, including a reconciliation to the comparable GAAP financial measure.
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Changes in Results of Operations
Thirteen week period ended January 1, 2022 compared with the thirteen week
period ended January 2, 2021
Total Company
•Net Sales. Net organic sales and acquisition and divestiture sales and the
related dollar and percentage changes for the thirteen week periods ended
January 1, 2022 and January 2, 2021 were as follows (amounts in millions):
Thirteen Week Periods Ended % Change
January 1, 2022 January 2, 2021 Change Net Sales
Organic sales $ 1,153 $ 1,057 $ 96 8.7 %
Acquisition and divestiture sales 41 51 (10) (0.9) %
Net sales $ 1,194 $ 1,108 $ 86 7.8 %
Organic sales represent net sales from existing businesses owned by the Company,
excluding sales from acquisitions and divestitures. Acquisition sales represent
net sales from acquired businesses for the period up to one year subsequent to
their respective acquisition date. Divestiture sales represent net sales from
businesses up to the date the respective divestiture was completed. Acquisition
and divestiture sales are excluded from organic sales due to the variability in
the nature, timing and extent of acquisitions and divestitures and resulting
variable impact on underlying trends. No acquisitions or divestitures occurred
in the first quarter of fiscal 2022. Therefore, the acquisition and divestiture
sales presented above relate to acquisitions and divestitures completed in
fiscal 2021. Refer to Note 3, "Acquisitions and Divestitures," in the notes to
the condensed consolidated financial statements included herein for further
information on the Company's acquisition and divestiture activity.
The increase in organic sales of $96 million for the thirteen week period ended
January 1, 2022 compared to the thirteen week period ended January 2, 2021 , is
primarily related to increases in commercial aftermarket sales ($112 million , an
increase of 49.7%) and commercial OEM sales ($28 million , an increase of 12.5%);
partially offset by decreases in OEM and aftermarket defense sales ($46 million ,
a decrease of 8.6%). The increase in commercial aftermarket sales is primarily
attributable to the continued recovery in commercial air travel demand,
particularly the increase in the utilization of narrow-body aircraft, and air
cargo demand and the resulting higher flight hours in the first quarter of
fiscal 2022 compared to the first quarter of fiscal 2021. The increase in OEM
sales is primarily attributable to a higher volume of narrow-body aircraft
deliveries by aircraft manufacturers to airlines and also expected production
rate increases of narrow-body aircraft compared to the first quarter of fiscal
2021. Partially offsetting the OEM sales growth are wide-body aircraft
production and delivery slowdowns due to the COVID-19 pandemic adversely
impacting international travel and also due to Boeing's quality control issues
with the 787 aircraft. The decrease in defense sales (for both OEM and
aftermarket) is primarily attributable to supply chain-induced delays in
fulfilling orders at certain operating units.
The decrease in acquisition and divestiture sales for the thirteen week period
ended January 1, 2022 is primarily attributable to the divestitures of ScioTeq
and TREALITY Simulation Visual Systems ("ScioTeq and TREALITY"), Technical
Airborne Components ("TAC"), Racal Acoustics ("Racal") and Avista, Inc.
("Avista"), all of which were completed in fiscal 2021; partially offset by the
acquisition of Cobham Aero Connectivity ("CAC"), which was completed in the
second quarter of fiscal 2021.
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•Cost of Sales and Gross Profit. Cost of sales decreased by $34 million , or
6.0%, to $533 million for the thirteen week period ended January 1, 2022
compared to $567 million for the thirteen week period ended January 2, 2021 .
Cost of sales and the related percentage of net sales for the thirteen week
periods ended January 1, 2022 and January 2, 2021 were as follows (amounts in
millions):
Thirteen Week Periods Ended
January 1, 2022 January 2, 2021 Change % Change
Cost of sales - excluding costs below $ 542 $ 545 $ (3) (0.6) %
% of net sales 45.4 % 49.2 %
Non-cash stock compensation expense 4 5 (1) (20.0) %
% of net sales 0.3 % 0.5 %
COVID-19 pandemic restructuring costs - 13 (13) (100.0) %
% of net sales - % 1.2 %
Foreign currency (gains) losses (1) 22 (23) (104.5) %
% of net sales (0.1) % 2.0 %
Loss contract amortization (12) (18) 6 33.3 %
% of net sales (1.0) % (1.6) %
Total cost of sales $ 533 $ 567 $ (34) (6.0) %
% of net sales 44.6 % 51.2 %
Gross profit $ 661 $ 541 $ 120 22.2 %
Gross profit percentage 55.4 % 48.8 %
In addition to the other factors summarized above, the decrease in the dollar
amount of cost of sales during the thirteen week period ended January 1, 2022
was primarily driven by a favorable sales mix, specifically, higher commercial
aftermarket sales as a percentage of net sales compared to commercial OEM net
sales in the comparable period one year ago. COVID-19 pandemic restructuring
costs were not material in the first quarter of fiscal 2022 and foreign exchange
rates, particularly the United States dollar compared to the British pound and
the Euro, were significantly less volatile compared to the first quarter of
fiscal 2021 when the U.S. dollar depreciated against both the British pound and
Euro resulting in foreign currency losses.
In addition, the continued application of our three core value-driven operating
strategies (obtaining profitable new business, continually improving our cost
structure and providing highly engineered value-added products to customers)
coupled with fixed overhead costs incurred being spread over a higher production
volume, resulted in gross profit as a percentage of net sales increasing by 6.6
percentage points to 55.4% for the thirteen week period ended January 1, 2022
from 48.8% for the thirteen week period ended January 2, 2021 .
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•Selling and Administrative Expenses. Selling and administrative expenses
decreased by $27 million to $170 million , or 14.2% of net sales, for the
thirteen week period ended January 1, 2022 from $197 million , or 17.8% of net
sales, for the thirteen week period ended January 2, 2021 . Selling and
administrative expenses and the related percentage of net sales for the thirteen
week periods ended January 1, 2022 and January 2, 2021 were as follows (amounts
in millions):
Thirteen Week Periods Ended
January 1, 2022 January 2, 2021 Change % Change
Selling and administrative expenses - excluding
costs below $ 133 $ 138 $ (5) (3.6) %
% of net sales 11.1 % 12.5 %
Non-cash stock compensation expense 33 44 (11) (25.0) %
% of net sales 2.8 % 4.0 %
Acquisition integration costs 3 1 2 200.0 %
% of net sales 0.3 % 0.1 %
Acquisition and divestiture transaction-related
expenses 1 2 (1) (50.0) %
% of net sales 0.1 % 0.2 %
Bad debt expense - 5 (5) (100.0) %
% of net sales - % 0.5 %
COVID-19 pandemic restructuring costs - 7 (7) (100.0) %
% of net sales - % 0.6 %
Total selling and administrative expenses $ 170 $ 197 $ (27) (13.7) %
% of net sales 14.2 % 17.8 %
The decrease in selling and administrative expenses during the thirteen week
period ended January 1, 2022 is primarily due to the realization of the cost
mitigation measures previously enacted in response to the COVID-19 pandemic as
well as the other factors summarized above. The decrease in non-cash stock
compensation expense is attributable to the impact on expense in the first
quarter of fiscal 2021 from the Black-Scholes fair value on certain fiscal 2021
and fiscal 2020 stock option grant modifications in connection with the change
in vesting terms approved by the Compensation Committee of the Board of
Directors. COVID-19 pandemic restructuring costs and bad debt expense was not
material in the first quarter of fiscal 2022 as the commercial aerospace market
continues to recover particularly when compared to the first quarter of fiscal
2021.
•Amortization of Intangible Assets. Amortization of intangible assets was $36
million for the thirteen week period ended January 1, 2022 compared to $29
million for the thirteen week period ended January 2, 2021 . The increase in
amortization expense of $7 million was due to the amortization expense
recognized on intangible assets from the acquisition of CAC.
•Interest Expense-net. Interest expense-net includes interest on borrowings
outstanding, amortization of debt issuance costs, original issue discount and
premium, revolving credit facility fees and interest on finance leases; slightly
offset by interest income. Interest expense-net decreased $3 million , or 1.1%,
to $264 million for the thirteen week period ended January 1, 2022 from $267
million for the comparable thirteen week period in the prior fiscal year. The
decrease in interest expense-net was primarily due to refinancing activities
completed in fiscal 2021 lowering the interest rate on certain senior
subordinated notes and also a decrease in the weighted average level of
outstanding borrowings, which was approximately $19.8 billion for the thirteen
week period ended January 1, 2022 and approximately $19.9 billion for the
thirteen week period ended January 2, 2021 . The decrease in the weighted average
level of borrowings was primarily due to the repayment of $200 million
previously drawn on the revolving credit facility. The weighted average interest
rate for cash interest payments on total borrowings outstanding for the thirteen
week period ended January 1, 2022 was 5.1%.
•Other Income. Other income was $2 million for the thirteen week period ended
January 1, 2022 compared to $5 million recorded for the thirteen week period
ended January 2, 2021 . Other income for the thirteen week period ended
January 1, 2022 is primarily driven by the non-service related components of net
periodic benefit costs on the Company's defined benefit pension plans
($1 million ). Other income for the thirteen week period ended January 2, 2021 is
primarily driven by the release of a litigation reserve ($3 million ) and the
non-service related components of net periodic benefit costs on the Company's
defined benefit pension plans ($2 million ).
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•Income Taxes. Income tax expense as a percentage of income before income taxes
was approximately 15.7% for the thirteen week period ended January 1, 2022
compared to 5.5% for the thirteen week period ended January 2, 2021 . The
Company's higher effective tax rate for the thirteen week period ended
January 1, 2022 was primarily due to the ratio of the discrete impact of excess
tax benefits from share-based payments to income from continuing operations
being lower in the thirteen week period ended January 1, 2022 resulting from an
increase in income from continuing operations before income taxes for the same
thirteen week period. The Company's effective income tax rate of 15.7% for the
thirteen week period ended January 1, 2022 was lower than the federal statutory
tax rate of 21.0%, primarily due to the discrete impact of excess tax benefits
associated with share-based payments during the first quarter of fiscal 2022.
•Income from Discontinued Operations, net of tax. Income from discontinued
operations, net of tax, for the thirteen week period ended January 1, 2022 was
$1 million , which was driven by a final working capital settlement received
related to the divestiture of the Souriau-Sunbank Connection Technologies
business ("Souriau-Sunbank") to Eaton Corporation plc ("Eaton") during the first
quarter of fiscal 2022. Refer to Note 3, "Acquisitions and Divestitures," in the
notes to the condensed consolidated financial statements included herein for
further information.
•Net Income Attributable to TD Group . Net income attributable to TD Group
increased $113 million , to $163 million for the thirteen week period ended
January 1, 2022 compared to net income attributable to TD Group of $50 million
for the thirteen week period ended January 2, 2021 .
•Earnings (Loss) per Share. Basic and diluted earnings (loss) per share was
$1.98 for the thirteen week period ended January 1, 2022 and $(0.42) per share
for the thirteen week period ended January 2, 2021 . Basic and diluted earnings
per share from discontinued operations was $0.02 for the thirteen week period
ended January 1, 2022 . There was no impact on earnings per share from
discontinued operations for the thirteen week period ended January 2, 2021 .
Business Segments
•Segment Net Sales . Net sales by segment for the thirteen week periods ended
January 1, 2022 and January 2, 2021 were as follows (amounts in millions):
Thirteen Week Periods Ended
January 1, 2022 % of Net Sales January 2, 2021 % of Net Sales Change % Change
Power & Control $ 650 54.4 % $ 601 54.2 % $ 49 8.2 %
Airframe 506 42.4 % 464 41.9 % 42 9.1 %
Non-aviation 38 3.2 % 43 3.9 % (5) (11.6) %
Net sales $ 1,194 100.0 % $ 1,108 100.0 % $ 86 7.8 %
Net sales for the Power & Control segment increased $49 million , an increase of
8.2%, for the thirteen week period ended January 1, 2022 compared to the
thirteen week period ended January 2, 2021 . The sales increase resulted
primarily from increases in organic sales in the commercial aftermarket ($58
million , an increase of 46.8%) and commercial OEM ($20 million , an increase of
19.1%); partially offset by decreases in organic OEM and aftermarket defense
sales ($30 million , a decrease of 8.8%). The increase in commercial aftermarket
sales is primarily attributable to the continued recovery in commercial air
travel demand, particularly the increase in the utilization of narrow-body
aircraft, and air cargo demand and the resulting higher flight hours in the
first quarter of fiscal 2022 compared to the first quarter of fiscal 2021. The
increase in OEM sales is primarily attributable to a higher volume of
narrow-body aircraft deliveries by aircraft manufacturers to airlines and also
expected production rate increases of narrow-body aircraft compared to the first
quarter of fiscal 2021. Partially offsetting the OEM sales growth are wide-body
aircraft production and delivery slowdowns due to the COVID-19 pandemic
adversely impacting international travel and also due to Boeing's quality
control issues with the 787 aircraft. The decrease in defense sales (for both
OEM and aftermarket) is primarily attributable to supply chain-induced delays in
fulfilling orders at certain operating units. The change in acquisition and
divestiture sales was not material for the thirteen week period ended January 1,
2022 .
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Net sales for the Airframe segment increased $42 million , an increase of 9.1%,
for the thirteen week period ended January 1, 2022 compared to the thirteen week
period ended January 2, 2021 . The sales increase resulted primarily from
increases in organic sales in the commercial aftermarket ($54 million , an
increase of 53.2%) and commercial OEM sales ($9 million , an increase of 7.4%);
partially offset by decreases in organic OEM and aftermarket defense sales ($15
million , a decrease of 7.9%). The increase in commercial aftermarket sales is
primarily attributable to the continued recovery in commercial air travel
demand, particularly the increase in the utilization of narrow-body aircraft,
and air cargo demand and the resulting higher flight hours in the first quarter
of fiscal 2022 compared to the first quarter of fiscal 2021. The increase in OEM
sales is primarily attributable to a higher volume of narrow-body aircraft
deliveries by aircraft manufacturers to airlines and also expected production
rate increases of narrow-body aircraft compared to the first quarter of fiscal
2021. Partially offsetting the OEM sales growth are wide-body aircraft
production and delivery slowdowns due to the COVID-19 pandemic adversely
impacting international travel and also due to Boeing's quality control issues
with the 787 aircraft. The decrease in defense sales (for both OEM and
aftermarket) is primarily attributable to supply chain-induced delays in
fulfilling orders at certain operating units. Acquisition and divestiture sales
decreased by $5 million for the thirteen week period ended January 1, 2022 due
to the impact on the comparable period from the divestitures completed in fiscal
2021.
Net sales for the Non-aviation segment decreased $5 million , a decrease of
11.6%, for the thirteen week period ended January 1, 2022 compared to the
thirteen week period ended January 2, 2021 . The sales decrease is due to the
impact on the comparable period ($4 million ) from the divestitures completed in
fiscal year 2021.
•EBITDA As Defined. Refer to "Non-GAAP Financial Measures" in this discussion
and analysis for further information on EBITDA as Defined. EBITDA As Defined by
segment for the thirteen week periods ended January 1, 2022 and January 2, 2021
were as follows (amounts in millions):
Thirteen Week Periods Ended
% of Segment % of Segment
January 1, 2022 Net Sales January 2, 2021 Net Sales Change % Change
Power & Control $ 328 50.5 % $ 304 50.6 % $ 24 7.9 %
Airframe 226 44.7 % 177 38.1 % 49 27.7 %
Non-aviation 14 36.8 % 15 34.9 % (1) (6.7) %
$ 568 47.6 % $ 496 44.8 % $ 72 14.5 %
Organic EBITDA As Defined represents EBITDA As Defined from existing businesses
owned by the Company as of January 1, 2022 , excluding EBITDA As Defined from
acquisitions and divestitures. EBITDA As Defined from acquisitions and
divestitures represents EBITDA As Defined from acquired businesses for the
period up to one year subsequent to the respective acquisition date and from
businesses up to the date the respective divestiture was completed. No
acquisitions or divestitures occurred in the first quarter of fiscal 2022. The
EBITDA as Defined from acquisition and divestitures relate to acquisitions and
divestitures completed in fiscal 2021.
EBITDA As Defined for the Power & Control segment increased approximately $24
million , an increase of 7.9%, resulting from higher organic sales, particularly
in the commercial aftermarket and OEM channels. Also contributing to the
increase in EBITDA as Defined was the application of our three core value-driven
operating strategies and positive leverage on our fixed overhead costs spread
over a higher production volume. The change in EBITDA As Defined for the Power &
Control segment from acquisitions and divestitures was immaterial for the
thirteen week period ended January 1, 2022 .
EBITDA As Defined for the Airframe segment increased approximately $49 million ,
an increase of 27.7%, resulting primarily from higher organic sales,
particularly in the commercial aftermarket and OEM channels. Also contributing
to the increase in EBITDA as Defined was the application of our three core
value-driven operating strategies and positive leverage on our fixed overhead
costs spread over a higher production volume. EBITDA As Defined for the Airframe
segment from acquisitions and divestitures increased by $1 million , primarily
due to the impact on the comparable period from the divestitures completed in
fiscal year 2021.
EBITDA As Defined for the Non-aviation segment decreased approximately $1
million , a decrease of 6.7%, due to the impact on the comparable period ($2
million ) from the divestitures completed in fiscal year 2021.
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Liquidity and Capital Resources
We have historically maintained a capital structure comprising a mix of equity
and debt financing. We vary our leverage both to optimize our equity return and
to pursue acquisitions. We expect to meet our current debt obligations as they
come due through internally generated funds from current levels of operations
and/or through refinancing in the debt markets prior to the maturity dates of
our debt.
The following tables present selected balance sheet, cash flow and other
financial data relevant to the liquidity or capital resources of the Company for
the periods specified below (amounts in millions):
January 1, 2022 September 30, 2021
Selected Balance Sheet Data:
Cash and cash equivalents $ 4,813 $ 4,787
Working capital 5,593 5,367
Total assets 19,242 19,315
Total debt (1) 19,814 19,998
TD Group stockholders' deficit (2,633) (2,916)
(1)Includes debt issuance costs and original issue discount and premiums. Reference Note 9, "Debt," in the notes to the condensed consolidated financial statements included herein for additional information.
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