10-Q/APeriod: Q1 FY2009

TransDigm Group INC Quarterly Report (Amendment) for Q1 Ended Dec 27, 2008

Filed February 10, 2010For Securities:TDG

Summary

TransDigm Group Inc. (TDG) filed an amendment to its Form 10-Q for the quarter ended December 27, 2008, primarily to restate its earnings per share (EPS) calculations. This restatement accounts for "participating securities" using the two-class method, impacting both basic and diluted EPS and weighted-average shares outstanding. The company has identified and remediated a material weakness in its disclosure controls related to this EPS calculation. Operationally, the company reported an increase in net sales to $181.3 million for the thirteen-week period ended December 27, 2008, up from $163.1 million in the prior year period. Net income also saw a significant increase, rising to $39.6 million from $27.0 million in the comparable period. This improvement was driven by strong operational performance and aided by a lower effective income tax rate due to the retroactive reinstatement of the research and development tax credit.

Key Highlights

  • 1Restatement of EPS due to the adoption of the two-class method for participating securities (vested stock options).
  • 2Net sales increased by approximately 11.1% to $181.3 million for the thirteen-week period ended December 27, 2008.
  • 3Net income rose significantly to $39.6 million, a 46.9% increase compared to $27.0 million in the prior year period.
  • 4Effective income tax rate decreased to 35.0% from 36.4% primarily due to the retroactive R&D tax credit.
  • 5The company made a significant acquisition of Aircraft Parts Corporation (APC) for approximately $67.4 million.
  • 6A material weakness in disclosure controls related to EPS calculation was identified and subsequently remediated.
  • 7Goodwill increased substantially due to acquisitions, reaching $1.41 billion.

Frequently Asked Questions

The primary reason for filing the amendment was to restate the company's basic and diluted earnings per share (EPS) and weighted-average shares outstanding calculations. This restatement was necessary to properly account for 'participating securities,' specifically vested stock options that include non-forfeitable rights to dividends, using the two-class method.

The restatement led to lower reported basic and diluted EPS compared to the originally reported figures for the period. For instance, basic EPS was restated to $0.75 from $0.81, and diluted EPS was restated to $0.75 from $0.78. While this reduces the per-share earnings figures, it provides a more accurate reflection of earnings allocation according to accounting standards, ensuring all participating securities are appropriately considered.

Yes, TransDigm Group completed three significant acquisitions during the period: Aircraft Parts Corporation (APC) for approximately $67.4 million, the Unison Product Line for approximately $68.3 million, and CEF Industries, Inc. (CEF) for approximately $84.4 million. These acquisitions contributed to the increase in goodwill on the balance sheet.

Yes, the company identified a material weakness related to the application of the two-class method in calculating basic and diluted EPS. This led to a conclusion that disclosure controls and procedures were not effective as of December 27, 2008. However, the company has since implemented a review process to address this issue and believes the material weakness has been remediated.