Benzinga | Dec 13, 2021 03:37PM EST

TransDigm Offers Statement Related To Dept. Of Defense's Inspector General Report On Co. Audit, Firm-Fixed Price Contracts

TransDigm Group Incorporated (NYSE:TDG) ("TransDigm" or "the Company") today issued the following statement regarding a report issued by the Inspector General Department of Defense ("DoD") on its audit of TransDigm and select firm-fixed price contracts between the DoD and TransDigm businesses:



"The report makes clear that there was no wrongdoing by TransDigm, its businesses, or by the DoD. TransDigm agrees with that conclusion.

However, TransDigm disagrees with many of the implications contained in the report, and objects to the use of arbitrary standards and analysis which render many areas of the report inaccurate and misleading. These include:

* The report expressly acknowledges that it used arbitrary standards that are not applicable to the audited contracts and warns that its arbitrary standards should not be used in the future. The use of inapplicable standards results in flawed analysis and is misleading.

* The report ignores significant real costs incurred by the business and contrary to law reports these costs as excess profit.

* The report presents profit percentages in a misleading and provocative manner. This includes computing profit as a percentage of cost rather than as a percentage of revenue--the internationally recognized method and business standard.

* Despite data demonstrating that the DoD paid lower prices compared to the commercial prices for similar parts, the report did not conduct a price analysis and instead implies that the DoD negotiated prices that were too high.

Since 2019, TransDigm has invested considerable resources to better support the DoD and provide more information about the value of its products. For this audit, TransDigm provided full access and cooperation to the IG to help promote a complete and accurate assessment of the Company and the value the Company provides to the DoD through its businesses.

Through regular engagement with DoD officials, there have been improvements to the procurement process, and the Company has received positive feedback from DoD customers. TransDigm and its businesses look forward to continuing these efforts and their support of the DoD."

More information regarding TransDigm's work with the DoD can be found at www.tdgdod.com.