to settle this claim in an effort to ensure a continuing positive relationship with this customer. As a result, we recognized a charge to earnings during 2008 in the amount of 9.5 million.
The settlement has not had a significant effect on the sales of any of our products. In addition, we believe that we still have a good relationship with this customer and continue to conduct business with them.
Controls business segment net revenue for fiscal year 2008
increased $34.5 million, or 6.6%, to $555.3 million from $520.8 million for fiscal year 2007. Controls net revenue increased 15.8% due to the acquisition of Airpax, 1.0% due to favorable foreign currency exchange rates, primarily the U.S.
dollar to Euro exchange rate, and 0.1% due to an increase in pricing. The increase in net revenue was partially offset by a 10.3% decline in volume. The decline in unit volume was due to overall softness in certain of the controls business
Cost of revenue
Cost of revenue for fiscal year 2008 and
2007 was $951.8 million and $944.8 million, respectively. Cost of revenue increased due primarily to the acquisition of Airpax. Excluding the impact of the Airpax acquisition, cost of revenue decreased primarily due to lower volumes and several
cost savings measures announced to offset the impact of lower sales. Cost of revenue for fiscal year 2007 increased approximately $4.5 million due to the sale of inventory acquired in connection with the First Technology Automotive and Airpax
acquisitions. Upon the acquisition of these businesses, we recorded the acquired assets, including inventory, at fair value in accordance with ASC 805. This resulted in a higher carrying value for this inventory and a corresponding increase in cost
of sales when it was subsequently sold. There was no similar charge recognized during fiscal year 2008. Depreciation expense for fiscal years 2008 and 2007 totaled $51.4 million and $58.2 million, respectively. For the fiscal years 2008 and
2007, $47.7 million and $55.7 million, respectively, of total depreciation expense incurred was included in cost of revenue.
Cost of revenue as a percentage of net revenue for fiscal years 2008 and 2007 was 66.9% and 67.3%, respectively. As a percentage of net
revenue, cost of revenue decreased due to the absence of any charges associated with acquired inventory as described above and the cost savings measures noted above.
Research and development expense
R&D expense for fiscal years 2008 and 2007 totaled $38.3 million and $33.9 million, respectively. R&D expense as a
percentage of net revenue for fiscal years 2008 and 2007 was 2.7% and 2.4%, respectively. R&D expense and R&D expense as a percentage of net revenue increased primarily due to our continued focus on development activities to accelerate
long-term revenue growth.
Selling, general and
for fiscal years 2008 and 2007 totaled $166.6 million and $166.1 million, respectively. SG&A expense as a percentage of net revenue for fiscal years 2008 and 2007 was 11.7% and 11.8%, respectively.
Amortization of intangible assets and capitalized software
Amortization expense associated with
definite-lived intangible assets and capitalized software for fiscal years 2008 and 2007 was $148.8 million and $131.1 million, respectively. The increase in amortization expense is primarily due to the inclusion of a full year of amortization
expense related to Airpax in fiscal year 2008. We completed the acquisition of Airpax in July 2007. Amortization expense as a percentage of net revenue was 10.5% and 9.3% for fiscal years 2008 and 2007, respectively. The increase in amortization
expense as a percentage of net revenue is due to the increase in amortization expense described above.