10-KPeriod: FY2015

TransDigm Group INC Annual Report, Year Ended Sep 30, 2015

Filed November 13, 2015For Securities:TDG

Summary

TransDigm Group Inc. (TDG) reported strong performance for the fiscal year ending September 30, 2015, with net sales reaching $2.71 billion, a 14.1% increase year-over-year. This growth was driven by a combination of organic sales increases across its Power & Control and Airframe segments, and significant contributions from recent acquisitions. The company's focus on proprietary, highly-engineered aerospace components, with approximately 90% of net sales from proprietary products and 80% from sole-source offerings, continues to underpin its robust business model. The company operates with a strong aftermarket revenue stream, with approximately 54% of sales in fiscal 2015 derived from aftermarket services, which historically provide higher gross margins and stability. Despite a significant increase in debt to support acquisitions and operations, TransDigm demonstrated robust operational execution, resulting in an increase in net income to $447.2 million. Investors should note the company's ongoing commitment to a selective acquisition strategy and its value-driven operating approach, which have been key drivers of its sustained growth and profitability.

Financial Highlights

53 data points
Beta

Revenue

$2.71B

53.6% Gross Margin

Net Income

$447.21M

16.5% Net Margin

EPS (Diluted)

$7.84

Total Assets

$8.30B

Cash & Equivalents

$714.03M

Free Cash Flow

$466.07M

Financial Statements
Beta
Revenue$2.71B
Cost of Revenue$1.26B
Gross Profit$1.45B
R&D Expenses$48.30M
SG&A Expenses$321.62M
Operating Income$1.07B
Net Income$447.21M
EPS (Basic)$7.84
Shares Outstanding (Basic)56.61M

Key Highlights

  • 1Net sales increased by 14.1% to $2.71 billion in fiscal year 2015, driven by both organic growth and strategic acquisitions.
  • 2Proprietary products accounted for approximately 90% of net sales, and sole-source products for approximately 80%, highlighting a strong competitive advantage.
  • 3Aftermarket sales represented a significant 54% of net sales, indicating a stable and high-margin revenue stream.
  • 4Net income grew by 45.7% to $447.2 million, demonstrating improved profitability.
  • 5The company's backlog increased to $1.43 billion, primarily due to acquisitions, signaling future revenue potential.
  • 6TDG continued its aggressive acquisition strategy, integrating several businesses to expand its product portfolio and market reach.

Frequently Asked Questions

TransDigm's business is organized into three segments: Power & Control, Airframe, and Non-aviation. The Power & Control segment, which develops systems providing power and control using electronic, fluid, and mechanical technologies, represented 49.1% of net sales in fiscal 2015. The Airframe segment, focused on non-power airframe applications and cabin structures, accounted for 47.3% of net sales. The Non-aviation segment, serving ground transportation, space, and industrial markets, comprised the remaining 3.6%.

TransDigm utilizes a mix of equity and debt financing. As of September 30, 2015, the company had substantial indebtedness of $8.43 billion. This leverage is primarily used to fund its growth strategy, including numerous acquisitions. While this level of debt presents risks, the company has taken steps to manage interest rate fluctuations through hedging instruments like interest rate swaps and caps.

TransDigm does not currently anticipate declaring or paying regular quarterly or annual cash dividends on its common stock. While the company has paid special cash dividends in the past (most recently in June 2014), future dividend payments, if any, are at the discretion of the Board of Directors and are subject to various factors, including contractual restrictions under debt agreements, earnings, and capital requirements.

TransDigm's growth strategy is primarily driven by two core elements: a value-driven operating strategy and a selective acquisition strategy. The value-driven approach focuses on obtaining profitable new business, improving its cost structure, and providing highly engineered, value-added products. Complementing this, the company actively pursues acquisitions of aerospace component businesses that align with its strategy, integrating them to enhance performance and leverage its operational expertise. As of the filing date, TransDigm had completed 55 acquisitions since its inception.