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Sensata Technologies Holding N.V.'s SEC Filings

SENSATA TECHNOLOGIES HOLDING PLC filed this Form S-1/A on 03/09/2010
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Commodity Risk


We enter into forward contracts with a third party to offset a portion of our exposure to the potential change in prices associated with certain commodities, including silver, gold, aluminum, nickel and copper, used in the manufacturing of our products. The terms of these forward contracts fix the price at a future date for various notional amounts associated with these commodities. Currently, the hedges have not been designated as accounting hedges. In accordance with ASC 815, we recognized the change in fair value of these derivatives in the statement of operations as a gain or loss as a component of Currency translation gain/(loss) and other, net. During fiscal years 2009, 2008 and 2007, we recognized a net gain/(loss) of $2.6 million, $(8.3) million and $(0.6) million, respectively associated with these derivatives.


The table below presents our commodity forward contracts as of December 31, 2009 and the estimated impact to pre-tax earnings associated with a 10% increase/(decrease) in the change in the related forward price for each commodity:


(Amounts in millions, except price per unit and notional amounts)   Increase/(decrease) to
pre-tax earnings due to


balance at
December 31,
    Notional   Contract
Price Per
  Average Forward
Price as of
December 31,
            10% increase
in the forward price
  10% (decrease)
in the forward price


  $ (0.2   273,695 troy oz   $ 17.50   $ 16.85   Various dates
during 2010
  $ 0.5   $ (0.5


  $      1,984 troy oz   $ 1,106.71   $ 1,097.15   Various dates
during 2010
  $ 0.2   $ (0.2


  $      207,912 pounds   $ 8.36   $ 8.43   Various dates
during 2010
  $ 0.2   $ (0.2


  $ 0.2      1,886,077 pounds   $ 0.94   $ 1.02   Various dates
during 2010
  $ 0.2   $ (0.2


In addition to the asset balances in the above table, we had an asset balance of $0.5 million related to commodity forward contracts that had expired prior to December 31, 2009 but settled within a few days after December 31, 2009.


Off-Balance Sheet Arrangements


From time to time, we execute contracts that require us to indemnify the other parties to the contracts. These indemnification obligations arise in two contexts. First, in connection with any asset sales by us, the asset sale agreement typically contains standard provisions requiring us to indemnify the purchaser for breaches by us of representations and warranties contained in the agreement. These indemnities are generally subject to time and liability limitations. Second, we enter into agreements in the ordinary course of business, such as sales agreements, which contain indemnification provisions relating to product quality, intellectual property infringement and other typical indemnities. In certain cases, indemnification obligations arise by law. We believe that our indemnification obligations are consistent with other companies in the markets in which we compete. Performance under any of these indemnification obligations would generally be triggered by a breach of the terms of the contract or by a third-party claim. Any future liabilities due to these indemnities cannot be reasonably estimated or accrued.


In May 2009, STI, an indirect and wholly-owned subsidiary of the issuer, negotiated a transition production agreement with Engineered Materials Solutions, LLC to ensure the continuation of supply of certain materials. Engineered Materials Solutions is a wholly-owned subsidiary of Wickeder Westfalenstahl Gmbh. The Electrical Contact Systems, or “ECS,” business unit of Engineered Materials Solutions is the primary supplier to us for