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Sensata Technologies Holding N.V.'s SEC Filings

S-1/A
SENSATA TECHNOLOGIES HOLDING PLC filed this Form S-1/A on 03/09/2010
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Table of Contents

The main factors that influence our cost of revenue as a percent of net revenue include:

 

   

production volumes—fixed production costs are capitalized in inventory based on normal production volumes;

 

   

transfer of production to our lower cost production facilities;

 

   

the implementation of cost control measures aimed at improving productivity, including reduction of fixed production costs, refinements in inventory management and the coordination of purchasing within each subsidiary and at the business level;

 

   

product lifecycles, as we typically incur higher cost of revenue associated with manufacturing over-capacity during the initial stages of product launches and when we are phasing out discontinued products;

 

   

the increase in the carrying value of the inventory that was adjusted to fair value as a result of the application of purchase accounting associated with acquisitions;

 

   

depreciation expense, including amounts arising from the adjustment of property, plant and equipment to fair value associated with acquisitions; and

 

   

changes in the price of raw materials, including certain metals.

 

Research and Development

 

Research and development expenses consist of costs related to direct product design, development and process engineering. The level of research and development expense is related to the number of products in development, the stage of development process, the complexity of the underlying technology, the potential scale of the product upon successful commercialization and the level of our exploratory research. We conduct such activities in areas we believe will accelerate our longer term net revenue growth. Our basic technologies have been developed through a combination of internal development and third-party efforts (often by parties with whom we have joint development relationships). Our development expense is typically associated with:

 

   

engineering core technology platforms to specific applications; and

 

   

improving functionality of existing products.

 

Costs related to modifications of existing products for use by new customers in familiar applications is accounted for in cost of revenue and not included in research and development expense.

 

Selling, General and Administrative

 

Our selling, general and administrative, or “SG&A,” expense consists of all expenditures incurred in connection with the sales and marketing of our products, as well as administrative overhead costs, including:

 

   

salary and benefit costs for sales personnel and administrative staff, which accounted for approximately 57% of total SG&A expense for fiscal year 2009. Expenses relating to our sales personnel generally increase or decrease principally with changes in sales volume due to the need to increase or decrease sales personnel to meet changes in demand. Expenses relating to administrative personnel generally do not increase or decrease directly with changes in sales volume;

 

   

expense related to the use and maintenance of administrative offices, including depreciation expense;

 

   

other administrative expense, including expense relating to logistics, information systems and legal and accounting services;

 

   

general advertising expense; and

 

   

other selling expenses, such as expenses incurred in connection with travel and communications.

 

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