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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 __________________________________________
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 7, 2014
 
__________________________________________ 
SENSATA TECHNOLOGIES HOLDING N.V.
(Exact name of Registrant as specified in its charter)
 
 __________________________________________

The Netherlands
 
001-34652
 
98-0641254
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
Kolthofsingel 8, 7602 EM Almelo
The Netherlands
(Address of Principal executive offices, including Zip Code)
31-546-879-555
(Registrant's telephone number, including area code)
 
(Former name or former address, if changed since last report)
 
 __________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

 




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Item 7.01
Regulation FD Disclosure
In connection with the previously announced acquisition of August Cayman Company, Inc. (“Schrader”) and the related financing commitment, Sensata Technologies B.V. (the "Issuer"), an indirect, wholly-owned subsidiary of Sensata Technologies Holding N.V. (the "Company” or "Sensata"), intends to offer, subject to market and other customary conditions, $400.0 million in aggregate principal amount of senior notes due 2024 (the "Notes") in a private offering that is exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). The Notes will be jointly and severally guaranteed, on a senior unsecured basis, by each of the Issuer's existing and future wholly-owned subsidiaries that guarantee the Issuer's senior secured credit facilities. The Notes and the guarantees will be the Issuer's and the guarantors' senior unsecured obligations and will rank equally in right of payment to all existing and future senior indebtedness of the Issuer or the guarantors, including the Issuer's senior secured credit facilities, 6.5% senior notes due 2019 and 4.875% senior notes due 2023. The Notes and the guarantees will rank senior in right of payment to all of the Issuer's and the guarantors' future indebtedness and other obligations that expressly provide for their subordination to the Notes and the guarantees. The Notes and the guarantees will be effectively junior to the Issuer's and the guarantors' existing and future secured indebtedness to the extent of the value of the assets securing that indebtedness, including any indebtedness under the Issuer's senior secured credit facilities. The Notes and the guarantees will also be structurally subordinated to all existing and future obligations, including trade payables, of any of the Issuer's subsidiaries that do not guarantee the Notes.
The Notes and the related guarantees will be offered only to persons reasonably believed to be "qualified institutional buyers" in reliance on the exemption from registration pursuant to Rule 144A under the Securities Act and to persons outside of the United States in compliance with Regulation S under the Securities Act. The Notes and the related guarantees have not been registered under the Securities Act or the securities laws of any state or other jurisdiction and may not be offered or sold in the United States without registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities or blue sky laws and foreign securities laws. This Current Report on Form 8-K is neither an offer to sell nor a solicitation of an offer to buy the Notes or any other securities and shall not constitute an offer, solicitation, or sale in any jurisdiction in which such offer, solicitation, or sale would be unlawful.
Included in the offering memorandum will be unaudited pro forma condensed combined financial statements giving effect to the anticipated acquisition of Schrader. These unaudited pro forma condensed combined financial statements are attached hereto as Exhibit 99.1 and are incorporated by reference herein. The information set forth in Exhibit 99.1 is subject to the risks, uncertainties, and limitations described or referenced therein.
In connection with the offering of the Notes, the Issuer disclosed certain information in an offering memorandum to prospective investors, including the information attached hereto as Exhibit 99.2, which is incorporated by reference herein.
The information contained in, or incorporated into, this Item 7.01, including Exhibit 99.1 and Exhibit 99.2 attached hereto, is being “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section, nor shall it be incorporated by reference into any registration statement or other filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference. This report shall not be deemed an admission as to the materiality of any information in this report that is being disclosed pursuant to Regulation FD.
Item 9.01
Financial Statements and Exhibits.

(b) Pro Forma Financial Information

The unaudited pro forma condensed combined financial statements of the Company at June 30, 2014 and for the six months ended June 30, 2014 and the year ended December 31, 2013, reflecting the acquisition of Schrader and the related financing transactions, are attached as Exhibit 99.1 to this Current Report on Form 8-K.
(d) Exhibits
99.1
 
Unaudited Pro Forma Condensed Combined Financial Statements as of June 30, 2014 and for the six months ended June 30, 2014 and the year ended December 31, 2013
99.2
 
Certain other information included in the offering memorandum

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 

 
 
 
 
SENSATA TECHNOLOGIES HOLDING N.V.
 
 
 
 
 
 
 
/s/ Paul Vasington
Date: October 7, 2014
 
 
 
Name: Paul Vasington
 
 
 
 
Title: Executive Vice President and Chief Financial Officer




4
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EXHIBIT INDEX
 

Exhibit No.
 
Description
 
 
99.1
 
Unaudited Pro Forma Condensed Combined Financial Statements as of June 30, 2014 and for the six months ended June 30, 2014 and the year ended December 31, 2013
99.2
 
Certain other information included in the offering memorandum
 




5
Ex991SchraderProformaFinancials

Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On August 15, 2014, Sensata Technologies B.V. (“STBV”), an indirect, wholly-owned subsidiary of Sensata Technologies Holding N.V. (“STHNV,” “Sensata,” “we,” “our,” or “us”), entered into a Share Purchase Agreement (the “Purchase Agreement”) with Schrader International, Inc., an exempted company incorporated with limited liability under the laws of the Cayman Islands (the “Seller”). Pursuant to the Purchase Agreement, STBV will purchase from the Seller all of the outstanding equity interests of August Cayman Company, Inc., the direct or indirect parent of various holding and operating companies comprising the Seller's business (“Schrader”), for an aggregate cash purchase price of $1.0 billion (including the repayment of all outstanding indebtedness under Schrader's existing credit facilities), subject to adjustment.
Schrader is headquartered in Denver, Colorado and has sales and design offices in the United States, the United Kingdom, Germany, China, Japan, and South Korea. Manufacturing facilities are located in the United States, United Kingdom, France, Brazil, and China. Schrader employs 2,500 people globally.
Schrader is a manufacturer of tire pressure monitoring sensors (“TPMS”), a safety feature now standard on all cars and light trucks sold in the United States and growing globally in Europe and Asia. Fuel economy and safety regulations in each region are driving the rapid adoption of TPMS. The proposed acquisition of Schrader (the “Acquisition”) adds TPMS and additional low pressure sensing capabilities to our position in automotive sensing. Throughout these unaudited pro forma condensed combined financial statements, the Acquisition and the related issuance of $1.0 billion of debt to fund the Acquisition are referred to as "the Transactions."
The following unaudited pro forma condensed combined financial statements have been prepared to give effect to the Transactions. The unaudited pro forma condensed combined balance sheet as of June 30, 2014 gives effect to the Transactions as if they had occurred on June 30, 2014. The unaudited pro forma condensed combined balance sheet is derived from the unaudited historical financial statements of Sensata and Schrader as of June 30, 2014 and June 28, 2014, respectively. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2014 and year ended December 31, 2013 give effect to the Transactions as if they had occurred on January 1, 2013. The unaudited pro forma condensed combined statements of operations are derived from the unaudited historical financial statements of Sensata and Schrader for the six months ended June 30, 2014 and June 28, 2014, respectively, and the audited historical financial statements of Sensata and Schrader for the year ended December 31, 2013.
The historical financial information of Sensata and Schrader has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma adjustments, i.e. material charges, credits, and related tax effects, that are (1) directly attributable to the Transactions, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on combined results. The unaudited pro forma condensed combined financial statements presented herein are based on the assumptions and adjustments described in the accompanying notes. The unaudited pro forma condensed combined financial statements are provided for informational purposes only and do not purport to represent what the financial position or results of operations would actually have been if the Transactions had occurred as of the dates indicated or what such financial position or results will be for any future periods. There were no transactions between Sensata and Schrader during the periods presented in the unaudited pro forma condensed combined financial statements that would need to be eliminated.
The unaudited pro forma condensed combined financial statements should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements and our historical audited and unaudited consolidated financial statements and related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Sensata’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed on February 6, 2014, and Sensata’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, filed on July 29, 2014.
The Acquisition will be accounted for in accordance with the acquisition method of accounting. Under the acquisition method of accounting, the estimated fair value of consideration transferred (i.e., the purchase price) is allocated to identifiable tangible and intangible assets acquired and liabilities assumed, based on their estimated fair

1

values as of the acquisition date. Any difference between the estimated purchase price and the estimated fair value of assets acquired and liabilities assumed is recorded as goodwill. The amounts allocated to the acquired assets and assumed liabilities in the unaudited pro forma condensed combined financial statements are based on management’s preliminary valuation estimates. Definitive allocations will be performed and finalized after the closing of the Acquisition based on certain valuations and other studies that will be performed by Sensata with the services of outside valuation specialists. Accordingly, the estimated purchase price allocation and related pro forma adjustments reflected in the following unaudited pro forma condensed combined financial statements are preliminary, have been made solely for the purpose of preparing these statements, and are subject to revision based on a final determination of fair value after the closing of the Acquisition. Differences between these preliminary estimates and the final purchase accounting will occur and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and the combined company’s future results of operations and financial position.
The unaudited pro forma condensed combined financial statements reflect the contemplated borrowings of $600.0 million under a new incremental term loan facility and an offering of $400.0 million of notes to finance the Acquisition. Amounts borrowed under the new incremental term loan facility and incurred under the notes and the applicable interest rates have been estimated for the purposes of preparing these unaudited pro forma condensed combined financial statements and are subject to change based on the actual amounts borrowed or issued, as applicable, related fees and expenses, and market changes that may result in a change in the actual interest rates applied to such amounts as compared to the rates assumed. The interest rate on the new incremental term loan facility is expected to be variable, and based on 3-month London Interbank Offered Rate ("Libor") + 275 basis points, with a Libor floor of 0.75%. Based on the 3-month Libor as of June 30, 2014, the interest rate on the new incremental term loan facility is expected to initially be 3.5%. If interest rates increased or decreased by 0.125% compared to the rates assumed, annual pro forma interest expense would not change given the Libor as of June 30, 2014. We have assumed an interest rate on the notes, which is expected to be fixed.

2


UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2014
(in thousands)
 
 

Sensata
 

Schrader
 
Reclassifications
(See Note 3)
 
Pro Forma Adjustments
(See Note 4)
 
Pro Forma Combined
Assets:
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
184,638

 
$
9,640

 
$
—

 
$
(23,250
)
(1)
$
171,028

Accounts receivable, net
 
352,623

 
85,660

 
—

 
—

 
438,283

Income tax receivables
 
—

 
411

 
(411
)
 
—

 
—

Other receivables
 
—

 
8,641

 
(8,641
)
 
—

 
—

Inventories
 
226,058

 
78,964

 
—

 
5,964

(2)
310,986

Deferred income tax assets
 
21,817

 
1,311

 
—

 
1,463

(3)
24,591

Prepaid expenses and other current assets
 
33,051

 
10,536

 
9,052

 
(2,457
)
(4)
50,182

Total current assets
 
818,187

 
195,163

 
—

 
(18,280
)
 
995,070

Property, plant and equipment at cost
 
752,636

 
177,692

 
—

 
(47,700
)
(5)
882,628

Accumulated depreciation
 
(360,166
)
 
(47,700
)
 
—

 
47,700

(5)
(360,166)

Property, plant and equipment, net
 
392,470

 
129,992

 
—

 
—

 
522,462

Goodwill
 
1,787,224

 
210,392

 
—

 
347,455

(6)
2,345,071

Other intangible assets, net
 
513,427

 
185,200

 
—

 
127,599

(7)
826,226

Deferred income tax assets
 
9,992

 
3,159

 
—

 
—

 
13,151

Deferred financing costs
 
17,329

 
—

 
7,381

 
7,619

(4)
32,329

Other assets
 
11,595

 
17,160

 
(7,381
)
 
—

 
21,374

Total assets
 
$
3,550,224

 
$
741,066

 
$
—

 
$
464,393

 
$
4,755,683

Liabilities and shareholders’ equity:
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
Current portion of long-term debt, capital lease and other financing obligations
 
$
7,984

 
$
31,922

 
$
—

 
$
(25,922
)
(8)
$
13,984

Accounts payable
 
223,163

 
66,968

 
—

 
—

 
290,131

Other payables
 
—

 
23,910

 
(23,910
)
 
—

 
—

Interest payable
 
—

 
642

 
(642
)
 
—

 
—

Income taxes payable
 
7,679

 
1,455

 
—

 
—

 
9,134

Accrued expenses and other current liabilities
 
135,929

 
27,115

 
24,552

 
17,151

(9)
204,105

 
 
 
 
 
 
 
 
(642
)
(4)
 
Deferred income tax liabilities
 
3,859

 
4,161

 
—

 
4,035

(3)
12,055

Total current liabilities
 
378,614

 
156,173

 
—

 
(5,378
)
 
529,409

Deferred income tax liabilities
 
307,653

 
35,499

 
—

 
17,384

(3)
360,536

Pension and post-retirement benefit obligations
 
19,568

 
—

 
2,949

 
—

 
22,517

Capital lease and other financing obligations, less current portion
 
47,359

 
—

 
—

 
—

 
47,359

Long-term debt, net of discount, less current portion
 
1,664,812

 
329,936

 
—

 
659,564

(8)
2,654,312

Other long-term liabilities
 
18,102

 
17,491

 
(2,949
)
 
(73
)
(4)
32,571

Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
Total liabilities
 
2,436,108

 
539,099

 
—

 
671,497

 
3,646,704

 
 
 
 
 
 
 
 
 
 
 

3

Shareholders’ equity:
 
 
 
 
 
 
 
 
 
 
Ordinary shares
 
2,289

 
2

 
—

 
(2
)
(10)
2,289

Treasury shares, at cost
 
(395,424
)
 
—

 
—

 
—

 
(395,424)

Additional paid-in capital
 
1,603,162

 
224,994

 
—

 
(224,994
)
(10)
1,603,162

Accumulated deficit
 
(66,657
)
 
(39,394
)
 
—

 
(10,237
)
(9)
(71,794)

 
 
 
 
 
 
 
 
39,394

(10)
 
 
 
 
 
 
 
 
 
(3,750
)
(1)
 
 
 
 
 
 
 
 
 
8,850

(3)
 
Accumulated other comprehensive (loss)/income
 
(29,254
)
 
16,365

 
—

 
(16,365
)
(10)
(29,254)

Total shareholders’ equity
 
1,114,116

 
201,967

 
—

 
(207,104
)
 
1,108,979

Total liabilities and shareholders’ equity
 
$
3,550,224

 
$
741,066

 
$
—

 
$
464,393

 
$
4,755,683


See the accompanying notes to unaudited pro forma condensed combined financial statements.

4


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2014
(in thousands, except share and per share amounts)

 
 


Sensata
 


Schrader
 

Reclassifications
(See Note 3)
 
Pro Forma Adjustments
(See Note 4)
 

Pro Forma Combined
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
1,127,447

 
$
261,003

 
$
—

 
$
—

 
$
1,388,450

Operating costs and expenses:
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 
725,645

 
187,685

 
4,147

 
—

 
917,477

Research and development
 
36,156

 
—

 
15,477

 
—

 
51,633

Selling, general and administrative
 
95,310

 
63,984

 
(31,240
)
 
—

 
128,054

Amortization of intangible assets
 
64,577

 
—

 
11,616

 
4,806

(11)
80,999

Restructuring and special charges
 
2,605

 
—

 
—

 
—

 
2,605

Total operating costs and expenses
 
924,293

 
251,669

 
—

 
4,806

 
1,180,768

Profit/(loss) from operations
 
203,154

 
9,334

 
—

 
(4,806
)
 
207,682

Interest expense
 
(47,099
)
 
(13,053
)
 
—

 
(10,930
)
(12)
(71,082)

Interest income
 
589

 
—

 
—

 
—

 
589

Other, net
 
4,470

 
—

 
—

 
—

 
4,470

Income/(loss) before taxes
 
161,114

 
(3,719
)
 
—

 
(15,736
)
 
141,659

Provision for/(benefit from) income taxes
 
28,848

 
(2,078
)
 
—

 
(3,570
)
(13)
23,200

Net income/(loss)
 
$
132,266

 
$
(1,641
)
 
$
—

 
$
(12,166
)
 
$
118,459

Earnings per share:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.77

 
 
 
 
 
 
 
$
0.69

Diluted
 
$
0.76

 
 
 
 
 
 
 
$
0.68

Weighted average ordinary shares outstanding:
 
 
 
 
 
 
 
 
 
 
Basic
 
171,412,979

 
 
 
 
 
 
 
171,412,979

Diluted
 
173,530,749

 
 
 
 
 
 
 
173,530,749


See the accompanying notes to unaudited pro forma condensed combined financial statements.

5


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2013
(in thousands, except share and per share amounts)

 
 


Sensata
 


Schrader
 

Reclassifications
(See Note 3)
 
Pro Forma Adjustments
(See Note 4)
 

Pro Forma Combined
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
1,980,732

 
$
455,427

 
$
—

 
$
—

 
$
2,436,159

Operating costs and expenses:
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 
1,256,249

 
328,793

 
7,360

 
5,964

(14)
1,598,366

Research and development
 
57,950

 
—

 
23,494

 
—

 
81,444

Selling, general and administrative
 
163,145

 
119,884

 
(52,978
)
 
—

 
230,051

Amortization of intangible assets
 
134,387

 
—

 
22,124

 
10,720

(11)
167,231

Impairment of goodwill
 
—

 
16,000

 
—

 
—

 
16,000

Restructuring and special charges
 
5,520

 
—

 
—

 
—

 
5,520

Total operating costs and expenses
 
1,617,251

 
464,677

 
—

 
16,684

 
2,098,612

Profit/(loss) from operations
 
363,481

 
(9,250
)
 
—

 
(16,684
)
 
337,547

Interest expense
 
(95,101
)
 
(27,189
)
 
—

 
(21,437
)
(12)
(143,727)

Interest income
 
1,186

 
—

 
—

 
—

 
1,186

Other, net
 
(35,629
)
 
—

 
—

 
—

 
(35,629)

Income/(loss) before taxes
 
233,937

 
(36,439
)
 
—

 
(38,121
)
 
159,377

Provision for/(benefit from) income taxes
 
45,812

 
(11,396
)
 
—

 
(8,374
)
(13)
26,042

Net income/(loss)
 
$
188,125

 
$
(25,043
)
 
$
—

 
$
(29,747
)
 
$
133,335

Earnings per share:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
1.07

 
 
 
 
 
 
 
$
0.76

Diluted
 
$
1.05

 
 
 
 
 
 
 
$
0.74

Weighted average ordinary shares outstanding:
 
 
 
 
 
 
 
 
 
 
Basic
 
176,090,688

 
 
 
 
 
 
 
176,090,688

Diluted
 
179,023,992

 
 
 
 
 
 
 
179,023,992


See the accompanying notes to unaudited pro forma condensed combined financial statements.

6



NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 1: Basis of Pro Forma Presentation
The unaudited pro forma condensed combined financial statements have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission for the purposes of inclusion in Sensata’s Current Report on Form 8-K prepared and furnished in connection with the Acquisition.
Certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures provided herein are adequate to make the information presented not misleading.
The following unaudited pro forma condensed combined financial statements have been prepared to give effect to the Transactions. The unaudited pro forma condensed combined balance sheet as of June 30, 2014 gives effect to the Transactions as if they had occurred on June 30, 2014. The unaudited pro forma condensed combined balance sheet is derived from the unaudited historical financial statements of Sensata and Schrader as of June 30, 2014 and June 28, 2014, respectively. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2014 and year ended December 31, 2013 give effect to the Transactions as if they had occurred on January 1, 2013. The unaudited pro forma condensed combined statements of operations are derived from the unaudited historical financial statements of Sensata and Schrader for the six months ended June 30, 2014 and June 28, 2014, respectively, and the audited historical financial statements of Sensata and Schrader for the year ended December 31, 2013.
The unaudited pro forma condensed combined financial statements should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements and our historical audited and unaudited consolidated financial statements and related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Sensata’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed on February 6, 2014, and Sensata’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, filed on July 29, 2014.
The unaudited pro forma condensed combined financial statements are provided for informational purposes only and do not purport to represent what the financial position or results of operations would actually have been if the Transactions had occurred as of the dates indicated or what such financial position or results will be for any future periods.
Note 2: Preliminary Purchase Price Allocation
The Acquisition has not been completed. We expect to complete the Acquisition on or around the closing date of the offering of the Notes. The unaudited pro forma condensed combined financial statements have been prepared to give effect to the Acquisition, which will be accounted for under the acquisition method of accounting, in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”) and which will use the fair value concepts defined in ASC Topic 820, Fair Value Measurements and Disclosures. ASC 805 requires, among other things, that identifiable tangible and intangible assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. Any difference between the estimated purchase price and the estimated fair value of assets acquired and liabilities assumed is recorded as goodwill.
The amounts allocated to the acquired assets and assumed liabilities in the unaudited pro forma condensed combined financial statements are based on management’s preliminary valuation estimates. Definitive allocations will be performed and finalized after the closing of the Acquisition based on certain valuations and other studies that will be performed by Sensata with the services of outside valuation specialists. Accordingly, the estimated purchase price allocation and related pro forma adjustments reflected in the unaudited pro forma condensed combined financial statements are preliminary, have been made solely for the purpose of preparing these statements, and are subject to

7

revision based on a final determination of fair value after the closing of the Acquisition. For example, if the fair value of the definite-lived intangibles changed by 10%, there would be a corresponding $3.3 million annual increase or decrease in amortization of intangible assets.
Based on management’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on estimates and assumptions that are subject to change, and other factors as described in the introduction to these unaudited pro forma condensed combined financial statements, the preliminary estimated purchase price is allocated as follows (in thousands):
Accounts receivable
 
$
85,660

Inventories
 
84,928

Prepaid expenses and other current assets
 
17,131

Property, plant and equipment
 
129,992

Goodwill
 
557,847

Customer relationships
 
185,500

Completed technologies
 
110,499

Other intangible assets
 
16,800

Other assets
 
9,780

Accounts payable
 
(66,968)

Accrued expenses and other current liabilities
 
(57,931)

Deferred income tax liabilities
 
(65,459)

Other long-term liabilities
 
(17,419)

Fair value of net assets acquired, excluding cash and cash equivalents
 
990,360

Cash and cash equivalents
 
9,640

Fair value of net assets acquired
 
$
1,000,000


After closing of the Acquisition, and prior to the end of the measurement period for finalizing the purchase price allocation, if information becomes available which would indicate adjustments are required to the purchase price allocation, such adjustments will be included in the purchase price allocation retrospectively. Such adjustments may be material.
Of the total estimated purchase price, $306.6 million has been allocated to definite-lived intangible assets, and $6.2 million has been allocated to indefinite-lived intangible assets. The definite-lived intangible assets consist primarily of customer relationships and completed technologies. The indefinite-lived intangible assets consist of in-process research and development. Definite-lived intangible assets will be amortized on a straight-line basis over their respective estimated useful lives, which, for customer relationships and completed technologies, are 10.5 and 9 years, respectively. The amortization expense associated with these definite-lived intangible assets will not be deductible for tax purposes.
Of the total estimated purchase price, approximately $557.8 million has been allocated to goodwill and is not deductible for tax purposes. Goodwill represents the excess of the purchase price of an acquired business over the fair value of the net tangible and intangible assets acquired and liabilities assumed. Goodwill is not amortized but instead is tested for impairment at least annually (more frequently if indicators of impairment arise). In the event we determine that goodwill has become impaired, we record an accounting charge for the amount of the impairment during the fiscal quarter in which the determination is made.
Note 3: Reclassifications
Due to regulatory considerations there were certain restrictions regarding the information that could be shared between Sensata and Schrader. Additional information may exist that could materially affect the assumptions and estimates and related pro forma adjustments. Certain reclassifications have been made to the historical financial statements of Schrader to conform them to Sensata accounting policies. Such reclassifications have been based on discussions with management of Schrader.

8

Upon completion of the Acquisition, we will perform an additional detailed review of Schrader’s accounting policies. As a result of that review, we may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the pro forma financial statements.
To reclassify Schrader’s balance sheet to conform to Sensata’s presentation as follows (in thousands):
 
 
As of June 30, 2014
Income tax receivables
 
$
(411
)
Other receivables
 
(8,641
)
Prepaid expenses and other current assets
 
$
9,052

 
 
 
Other assets
 
$
(7,381
)
Deferred financing costs
 
$
7,381

 
 
 
Other payables
 
$
(23,910
)
Interest payable
 
(642
)
Accrued expenses and other current liabilities
 
$
24,552

 
 
 
 
 
 
Other long-term liabilities
 
$
(2,949
)
Pension and post-retirement benefit obligations
 
$
2,949


To reclassify Schrader’s shipping and handling costs, research and development costs, and amortization of intangible assets from selling, general and administrative to other financial statement line items in the statements of operations to conform to Sensata’s presentation as follows (in thousands):
 
For the six months ended
June 30, 2014
 
For the twelve months ended
December 31, 2013
Cost of revenue
$
4,147

 
$
7,360

Research and development
15,477

 
23,494

Amortization of intangible assets
11,616

 
22,124

Selling, general and administrative
$
(31,240
)
 
$
(52,978
)

Note 4: Pro Forma Adjustments
The specific pro forma adjustments included in the unaudited pro forma combined financial statements are as follows:
(1)
To reflect the net cash expected to be paid related to the Acquisition, including $1.0 billion in payments made to the Seller less approximately $976.7 million net cash received from the issuance of new debt. Payments made to the Seller include $361.9 million to extinguish existing Schrader debt and a $638.1 million cash payment to the Seller. The cash received related to the issuance of $600.0 million in new incremental term loans and $400.0 million in new notes is net of a discount on the new incremental term loans of $4.5 million and financing costs of $18.8 million.
(2)
To reflect inventory at estimated fair value.
(3)
To reflect the estimated deferred tax assets and liabilities associated with the book to tax differences resulting from the acquisition, including the release of a portion of a valuation allowance.
(4)
To reflect the expected deferred financing costs of $15.0 million and the elimination of existing Schrader deferred financing costs and interest payable of $9.8 million and $0.7 million, respectively.
(5)
To reflect property, plant and equipment at estimated fair value.

9

(6)
To reflect $557.8 million in estimated goodwill related to the Acquisition and the elimination of Schrader's historical goodwill of $210.4 million.
(7)
To reflect $312.8 million in estimated identifiable intangible assets related to the Acquisition and the elimination of Schrader's historical intangible assets of $185.2 million.
(8)
To reflect a total of $1.0 billion incurred as a result of the expected issuance of the new incremental term loan facility and notes, net of a discount on the new incremental term loan of $4.5 million, and the elimination of the existing Schrader debt of $361.9 million.
(9)
To reflect accrual and related equity impact for estimated transaction costs expected to be incurred subsequent to the balance sheet date.
(10)
To reflect the elimination of Schrader's common stock, additional paid-in capital, accumulated deficit and accumulated other comprehensive income.
(11)
To reflect the estimated amortization of identifiable intangible assets related to the Acquisition and the elimination of Schrader's historical intangible asset amortization.
(12)
To reflect the estimated interest expense related to the new incremental term loan facility and notes, and the elimination of Schrader's historical interest expense. Interest expense reflects an assumed interest rate based upon the expected interest rate on the notes being offered. A 0.125% increase in the interest rate on the notes would increase our pro forma cash interest expense for the year ended December 31, 2013 by approximately $0.5 million and for the six months ended June 30, 2014 by approximately $0.3 million.
(13)
To reflect the benefit from income taxes related to the amortization of identifiable intangible assets expected to be acquired, interest expense and step-up in fair value of inventory.
(14)
To reflect an adjustment for the amortization of inventory step-up.

The unaudited pro forma condensed combined financial statements do not include adjustments for liabilities related to business integration activities for the Acquisition as we are in the process of assessing what, if any, future actions are necessary. However, liabilities ultimately may be recorded for costs associated with business integration activities for the Acquisition and such liabilities will be expensed as incurred in our consolidated financial statements.


10
Ex992OtherInformation


Exhibit 99.2
CERTAIN OTHER INFORMATION INCLUDED IN THE OFFERING MEMORANDUM
The following information is included in the offering memorandum for $400.0 million in aggregate principal amount of senior notes due 2024. Defined terms used but not defined in this exhibit have the meanings set forth below under "Certain Definitions." The disclosure of the information herein shall not be deemed an admission as to its materiality.
Description of the Business of Schrader
Schrader is a leading global manufacturer of sensing and valve solutions for automotive and industrial manufacturers. Schrader is headquartered in Denver, Colorado and has sales and engineering offices in the United States, the United Kingdom, Germany, China, Japan, South Korea and Luxembourg. Manufacturing facilities are located in the United States, United Kingdom, France, Brazil and China. Schrader employs approximately 2,500 people globally, including over 300 engineers. Schrader is a leader in tire pressure monitoring sensors (“TPMS”), a vehicle safety feature that is now standard on all cars and light trucks sold in the U.S. and growing in use globally with recent legislation in Europe and Korea, and is a leading supplier of TPMS sensors, valves, tools, and related training in the TPMS markets it serves. Schrader is also regarded as the first manufacturer of the pneumatic tire valve, which is the industry standard for motor vehicles globally.

1



Summary Pro Forma Financial Information of Sensata
Set forth below is our summary financial information for the twelve months ended June 30, 2014 after giving pro forma effect to the Transactions in the manner described below.
The summary unaudited pro forma condensed combined financial information of Sensata for the twelve months ended June 30, 2014 give pro forma effect to the Transactions as if the Transactions took place on January 1, 2013. The summary unaudited pro forma condensed combined information of Sensata is derived from the unaudited pro forma condensed combined financial statements included as Exhibit 99.1 to this Current Report on Form 8-K. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable.
This summary pro forma financial information and other data should be read in conjunction with the unaudited pro forma condensed combined financial statements and the accompanying notes included as Exhibit 99.1 to this Current Report on Form 8-K, our historical audited and unaudited consolidated financial statements and related notes, the summary historical financial information of Schrader furnished as Exhibit 99.1 to the Current Report on Form 8-K filed on October 3, 2014, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Sensata’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed on February 6, 2014, and Sensata’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, filed on July 29, 2014.
 
 
Pro Forma Twelve Months Ended
June 30, 2014
 
 
(Unaudited)
 
 
(in thousands)
Statement of Operations Data:
 
 
Net revenue
 
$
2,621,508

Operating costs and expenses:
 
 
Cost of revenue
 
1,708,683

Research and development
 
93,858

Selling, general and administrative
 
250,734

Amortization of intangible assets
 
164,772

Impairment of goodwill
 
16,000

Restructuring and special charges
 
4,099

Total operating costs and expenses
 
2,238,146

Profit from operations
 
383,362

Interest expense
 
(142,289
)
Interest income
 
1,227

Other, net(1)
 
3,642

Income before taxes
 
245,942

Provision for income taxes
 
27,798

Net income
 
$
218,144

 
 
 
Other Financial Data
 
 
EBITDA(2) 
 
$
647,225

Adjusted EBITDA(2)  
 
$
656,171

______________________

2



(1) Other, net for the the pro forma twelve months ended June 30, 2014 includes losses recognized on repurchases or refinancings of debt $1.9 million; currency remeasurement gains associated with debt of $0.2 million; and gains on commodity contracts of $8.5 million.
(2) We believe EBITDA and adjusted EBITDA give investors meaningful information to help them understand our operating results and to analyze our financial and business trends on a period-to-period basis. However, EBITDA and adjusted EBITDA have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analyses of our income or cash flows as reported under U.S. GAAP. The following table reconciles net income to EBITDA and adjusted EBITDA for the periods presented:
 
 
Pro Forma Twelve Months Ended
June 30, 2014
 
 
(Unaudited)
 
 
(in thousands)
Net income
 
$
218,144

Provision for income taxes and other tax related expense
 
27,798

Interest expense, net
 
141,062

Amortization and depreciation expense
 
260,221

EBITDA
 
647,225

Deferred gain on other hedges and gain on currency remeasurement on debt, net
 
(19,042
)
Financing and other transaction costs(a)
 
4,262

Restructuring and special charges(b)
 
(2,121
)
Schrader Adjustments to EBITDA(c)
 
25,847

Adjusted EBITDA
 
$
656,171

______________________
(a) Includes losses related to debt refinancing transactions, costs associated with our secondary equity offering transactions, and costs associated with acquisition activities.

(b) Restructuring and special charges for the pro forma twelve months ended June 30, 2014 includes the following:
(1) severance costs (including pension settlement charges) related to the restructuring plan we committed to in 2011 (the “2011 Plan”), excluding the impact of foreign exchange of $0.1 million;
(2) facility exit and other costs related to the 2011 Plan of $3.6 million; and
(3) costs associated with the retirement of our former Chief Executive Officer, and costs incurred, offset by insurance proceeds recognized, as a result of a fire in our South Korean facility, and other restructuring related charges of $(5.8) million.

(c) Reflects share-based compensation, one-time legal matters, tax indemnification adjustment, start-up costs, Brazil inventory adjustment and other adjustments, as set forth under footnote (1) under “Summary Historical Financial Information of Schrader” furnished as Exhibit 99.1 to the Current Report on Form 8-K filed on October 3, 2014. Such adjustments do not necessarily represent an indication of future adjusted EBITDA for the combined business.



3



Risk Factors Related to the Schrader Acquisition
The Schrader Acquisition may not achieve its intended results, and we and Schrader may be unable to successfully integrate our operations.
The integration of Schrader into our operations will be a significant undertaking and will require significant attention from our management team. The Schrader Acquisition involves the integration of two companies that previously operated independently and the unique business cultures of the two companies may prove to be incompatible. It is possible that the integration process could take longer than anticipated and could result in the loss of valuable employees, the disruption of each company’s ongoing businesses, processes and systems or inconsistencies in standards, controls, procedures, practices, policies and compensation arrangements, any of which could adversely affect our ability to achieve the anticipated benefits of the Schrader Acquisition. Our results of operations could also be adversely affected by any issues attributable to Schrader’s operations that arise or are based on events or actions that occur prior to the closing of the Schrader Acquisition. We may have difficulty addressing possible differences in corporate cultures and management philosophies between Schrader and us. The integration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits will be realized or, if realized, the timing of their realization. Failure to achieve these anticipated benefits could result in increased costs or decreases in the amount of expected revenue and could adversely affect the combined company’s future business, financial condition, operating results and prospects.
We may not realize the efficiencies and synergies that are anticipated from the Schrader Acquisition.
We currently anticipate significant synergies over the enterprise life of the combined company; however, we cannot assure you that these expected synergies will be fully realized, if at all.
Our actual synergies could differ materially from our current estimates. Actual synergies and the expenses required to realize these synergies could differ materially from these estimates, and we cannot assure you that we will achieve the full amount of overall synergies on the schedule anticipated or at all or that these synergies will not have other adverse effects on our business. In light of these significant uncertainties, you should not place undue reliance on our estimated present value of overall synergies expected over the enterprise life of the combined company.
New business initiatives and strategies may be less successful than anticipated and could adversely affect our business.
The introduction, implementation, success and timing of new business initiatives and strategies, including, but not limited to, initiatives to increase revenue or reduce costs, may be less successful or may be different than anticipated, which could adversely affect our business.
We will incur substantial transaction fees and costs in connection with the Schrader Acquisition and the other Transactions.
We expect to incur non-recurring transaction costs in connection with the Schrader Acquisition totaling approximately $11.7 million. In addition to these costs, we expect fees and costs of approximately $18.8 million in connection with the Financing Transactions, excluding any original issue discount. Additional costs will be incurred in the course of the integration of our and Schrader’s respective businesses. We cannot be certain that the expected elimination of duplicative costs or the realization of other expected efficiencies related to the integration of the two businesses will offset the transaction and integration costs in the near term, or at all.

4



The assumption of unknown liabilities in the Schrader Acquisition may harm our financial condition and results of operations.
As a result of the Schrader Acquisition, the Issuer will assume all of Schrader’s liabilities, including contingent liabilities. If there are significant unknown Schrader obligations, the combined company’s business could be materially and adversely affected. We may learn additional information about Schrader’s business that adversely affects the combined company, such as unknown liabilities, or issues that could affect our ability to comply with applicable laws. As a result, we cannot assure you that the Schrader Acquisition will be successful or that it will not, in fact, harm our business. Among other things, if Schrader’s liabilities are greater than expected, or if there are material obligations of which we do not become aware until after the time of completion of the Schrader Acquisition, our business could be materially and adversely affected. If we become responsible for substantial uninsured liabilities, these liabilities may have a material adverse effect on our financial condition and results of operations. We have no recourse against the Seller (whether through indemnity or otherwise) to cover any such liabilities.
We do not currently control Schrader and its subsidiaries and will not control Schrader and its subsidiaries until the consummation of the Schrader Acquisition.
We do not currently control Schrader and its subsidiaries and will not control Schrader and its subsidiaries until the consummation of the Schrader Acquisition. While the Schrader Acquisition Agreement imposes certain limitations on how Schrader manages its business, we cannot assure you that, prior to the consummation of the Schrader Acquisition, Schrader’s business will be operated in the same way as it would be under our control.
The pro forma financial statements included in Exhibit 99.1 attached to this Current Report on Form 8-K are presented for illustrative purposes only and may not be an indication of our financial condition or results of operations following the Schrader Acquisition.
The pro forma financial statements contained in Exhibit 99.1 attached to this Current Report on Form 8-K are presented for illustrative purposes only, are based on various adjustments, assumptions and preliminary estimates and may not be an indication of our financial condition or results of operations following the Schrader Acquisition for several reasons. Our actual financial condition and results of operations following the Schrader Acquisition may not be consistent with, or evident from, these pro forma financial statements. In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect our financial condition or results of operations following the Schrader Acquisition. Our potential for future business success and operating profitability must be considered in light of the risks, uncertainties, expenses and difficulties typically encountered by recently combined companies.
Risk Factor Related to Our Business
Export of our products are subject to various export control regulations and may require a license from either the U.S. Department of State, the U.S. Department of Commerce, or the U.S. Department of the Treasury. Any failure to comply with such regulations could result in governmental enforcement actions, fines, penalties or other remedies, which could have a material adverse effect on our business, results of operations or financial condition.
We must comply with the United States Export Administration Regulations, International Traffic in Arms Regulation (“ITAR”), and the sanctions, regulations, and embargoes administered by the Office of Foreign Assets Control (“OFAC”). Certain of our products that have military applications are on the munitions list of the ITAR and require an individual validated license in order to be exported to certain jurisdictions. Any changes in export regulations

5



may further restrict the export of our products, and we may cease to be able to procure export licenses for our products under existing regulations. For example, changes in the OFAC administrated embargo on trade with Iran have eliminated exceptions that may have previously permitted direct or indirect sales to that country. This area remains fluid in terms of regulatory developments. Should we need an export license, the length of time required by the licensing process can vary, potentially delaying the shipment of products and the recognition of the corresponding revenue. Any restriction on the export of a significant product line or a significant amount of our products could cause a significant reduction in revenue.
We have discovered in the past, and may discover in the future, deficiencies in our OFAC compliance program. Although we are currently undertaking efforts to enhance our OFAC compliance program, we cannot assure you that any such enhancements will ensure that we are in compliance with applicable laws and regulations at all times, or that OFAC (or other applicable authorities) will not raise compliance concerns or perform audits to confirm our compliance with applicable laws and regulations. Any failure by us to comply with applicable laws and regulations could result in governmental enforcement actions, fines or penalties, criminal and/or civil proceedings, or other remedies, any of which could have a material adverse effect on our business, results of operations or financial condition.
Description of Other Indebtedness - Senior Credit Facilities
Summarized below are the principal terms of the agreements that govern, or that we expect will govern upon the effectiveness of the Third Amendment (as defined below), the Issuer's senior secured credit facilities (the "Senior Credit Facilities"). This summary is not a complete summary of all of the terms of such agreements, and the final terms of the Third Amendment may differ materially from those set forth below.
General
On May 12, 2011, the Issuer entered into the Senior Credit Facilities with Morgan Stanley Senior Funding, Inc., as administrative agent (the “Administrative Agent”) and initial swing line lender, and the lenders and other parties named therein. The Senior Credit Facilities were amended by a first amendment on December 6, 2012 and a second amendment on December 11, 2013. The Issuer proposes to further amend the Senior Credit Facilities pursuant to a third amendment (the “Third Amendment”) on or about the closing date of the Schrader Acquisition.
The Senior Credit Facilities currently consist of a $250.0 million multi-currency revolving credit facility, which may be available in U.S. dollars and Euros, and a U.S. dollar term loan facility in an aggregate outstanding principal amount of approximately $471.7 million as of June 30, 2014.
The Issuer proposes to incur a $600.0 million new incremental term loan facility under the Senior Credit Facilities pursuant to the Third Amendment. The proceeds of the new incremental term loan facility are expected to be used, together with the proceeds of the offering of the Notes and cash on hand, to (i) fund the Schrader Acquisition, (ii) permanently repay all of the outstanding indebtendess under Schrader's existing credit facilities, and (iii) pay related transaction fees and expenses. The new incremental term loan facility will be arranged by Barclays Bank PLC, Morgan Stanley Senior Funding, Inc., Royal Bank of Canada and Goldman Sachs Bank USA.
Amounts under the revolving credit facility may be borrowed, repaid and reborrowed to fund our working capital needs and other general corporate purposes. No term loan borrowing, once repaid, may be reborrowed.
Borrowers and Guarantors
The borrowers under the Senior Credit Facilities are the Issuer and a wholly-owned subsidiary of the Issuer known as Sensata Technologies Finance Company, LLC, a Delaware limited liability company. All obligations under the

6



Senior Credit Facilities are unconditionally guaranteed by certain of our material U.S. subsidiaries and certain material subsidiaries located in the Netherlands, Mexico, Japan, Bermuda, Malaysia, Belgium, Bulgaria and the United Kingdom.
Maturity and Amortization
The maturity of the revolving credit facility is May 12, 2016. Loans made pursuant to the revolving credit facility must be repaid in full on or prior to such maturity date. The maturity of the existing term loan facility is May 12, 2019, and the maturity date of the new incremental term loan facility is expected to be the seventh anniversary of the effective date of the Third Amendment. The principal amount of the existing term loan facility amortizes, and the principal amount of the new incremental term loan facility is expected to amortize, in equal quarterly installments in an aggregate annual amount equal to 1% of the respective original principal amount thereof, with the balance payable at maturity.
Subject to certain exceptions, the existing term loan facility is, and the new incremental term loan facility will be, subject to mandatory prepayments equal to (a) 100% of the net cash proceeds from certain non-ordinary course sale or certain other dispositions of assets of the borrowers and their restricted subsidiaries or casualty events, subject to customary reinvestment provisions and certain other exceptions, (b) 100% (subject to reductions to 50% and 0% based on achievement of certain senior secured net leverage levels) of the net cash proceeds from issuances of certain indebtedness of the borrowers and their restricted subsidiaries (other than indebtedness permitted under the Senior Credit Facilities documentation), and (c) 25% (subject to a reduction to 0% based on achievement of a certain senior secured net leverage level) of annual excess cash flow of the borrowers and their restricted subsidiaries.
If a repricing event occurs with respect to the new incremental term loan facility prior to the date that is six months after the effective date of the Third Amendment, it is proposed that the Issuer will be required to pay a prepayment fee in the amount of 1.00% of the aggregate principal amount of the loans repaid or prepaid pursuant to such repricing event. 
The Senior Credit Facilities provide for the ability of the borrowers, the guarantors and their subsidiaries to repurchase loans through open market purchases and/or Dutch auctions open to all lenders on a pro rata basis and subject to certain other conditions.
Interest Rates
At the Issuer’s option, loans under the Senior Credit Facilities denominated in dollars may be maintained from time to time as (x) Base Rate (as defined below) loans, which bear interest at the Applicable Rate (as defined below) in excess of the Base Rate in effect from time to time, or (y) Eurodollar Rate (as defined below) loans, which bear interest at the Applicable Rate in excess of the Eurodollar Rate for the respective interest period. Revolving credit facility borrowings denominated in Euros shall be maintained from time to time as EURIBOR (as defined below) loans, which bear interest at the Applicable Rate in excess of EURIBOR for the respective interest period.
For purposes of the Senior Credit Facilities:
•
“Base Rate” is defined to mean the highest of (x) 1/2 of 1% per annum in excess of the federal funds rate, (y) the rate of interest published by the Wall Street Journal from time to time as the “prime rate” and (z) the Eurodollar Rate for a one month interest period plus 1.00%. “Eurodollar Rate” for any interest period is defined to mean (x) the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate by reference to a page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in U.S. dollars with a term equivalent to such interest period, determined

7



as of approximately 11:00 a.m. (London time) two business days prior to the first day of such interest period, (y) if the rate referenced in the preceding clause (x) is not available, the rate per annum determined by the Administrative Agent as the rate of interest at which deposits in U.S. dollars for delivery on the first day of such interest period in immediately available funds in the approximate amount of the Eurodollar Rate loan being made, continued or converted by the Administrative Agent and with a term equivalent to such interest period would be offered by the Administrative Agent’s London branch to major banks in the London interbank eurodollar market at their request at approximately 4:00 p.m. (London time) two business days prior to the first day of such interest period or (z) in the case of Eurodollar Rate loans that are term loans, if greater than the rate determined by the Administrative Agent pursuant to the foregoing clauses (x) and (y), 0.75%. “EURIBOR” means, in relation to any interest period, (x) the percentage rate per annum determined by the Banking Federation for the European Union for such period displayed on the appropriate page of the Telerate screen (the “Screen Rate”) or (y) if the Screen Rate is not available, the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Administrative Agent at its request quoted by the reference banks to leading banks in the European Interbank Market, as of 11:00 a.m. (Central European time) on the rate fixing day for the offering of deposits in Euro for a period comparable to such interest period; and
•
“Applicable Rate” is defined to mean (x) at any time in respect of the revolving credit facility, the applicable percentage determined in accordance with a pricing grid based on achievement of certain senior secured net leverage levels, (y) at any time in respect of the existing term loan facility, for Eurodollar Rate loans, 2.50% and for Base Rate loans, 1.50% and (z) as currently proposed in respect of the new incremental term loan facility, 2.75% and for Base Rate loans, 1.75%.
Availability
Loans under the new incremental term loan facility are proposed to be borrowed on the effective date of the new incremental term loan facility.
Security
The borrowers and each of the guarantors under the Senior Credit Facilities have granted the collateral agent under the Senior Credit Facilities on behalf of the secured parties, subject to certain exceptions, a valid and perfected first priority lien and security interest in substantially all of the following (in each case, subject to certain exceptions):
•
all shares of capital stock of (or other ownership interests in) the borrowers and each present and future material subsidiary of the borrowers or such guarantor; and
•
substantially all present and future property and assets, real and personal, of the borrowers or such guarantor.
Covenants
The Senior Credit Facilities require us to comply with customary affirmative and negative covenants, and with respect to the revolving credit facility, a springing financial maintenance covenant. Set forth below is a brief description of such covenants, all of which are subject to customary exceptions and qualifications.
Affirmative Covenants
The affirmative covenants require: (i) compliance with laws and regulations (including, without limitation, ERISA); (ii) payment of taxes and other material obligations; (iii) maintenance of appropriate and adequate insurance; (iv) preservation of corporate existence, rights, franchises, permits and licenses; (v) compliance with environmental laws; (vi) visitation and inspection rights; (vii) keeping of proper books in accordance with generally accepted

8



accounting principles; (viii) maintenance of properties; (ix) use of proceeds; (x) designation of restricted and unrestricted subsidiaries; (xi) maintenance of ratings; (xii) actions undertaken in connection with junior financing documents; (xiii) certain tax matters; (xiv) further assurances as to perfection and priority of security interests; (xv) causing certain subsidiaries to guarantee obligations and give security and (xvi) customary financial and other reporting requirements (including, without limitation, audited annual financial statements and quarterly unaudited financial statements, in each case prepared on a consolidated basis, notices of defaults, compliance certificates, forecasts, reports to shareholders and other creditors and other business and financial information as the Administrative Agent shall reasonably request).
Negative Covenants
The negative covenants include restrictions with respect to (i) liens; (ii) debt (including guaranties or other contingent obligations); (iii) mergers and consolidations, liquidations and dissolutions; (iv) sales, transfers and other dispositions of assets; (v) loans, acquisitions, joint ventures and other investments; (vi) dividends and other distributions to stockholders; (vii) designation of senior debt; (viii) becoming a general partner in any partnership; (ix) repurchasing shares of capital stock; (x) prepaying, redeeming or repurchasing subordinated debt; (xi) capital expenditures; (xii) granting negative pledges other than to the administrative agent and the lenders or the entering into any agreements that restrict or could restrict a restricted subsidiary’s rights to make restricted payments to any borrower or any guarantor; (xiii) changing the principal nature of our business; (xiv) conducting transactions with affiliates; (xv) amending organizational documents or amending or otherwise modifying the terms of any subordinated debt; (xvi) passive holding company status; and (xvii) changing accounting policies or reporting practices.
Financial Covenants
Under the revolving credit facility, we are required to maintain a senior secured net leverage ratio not to exceed 5.0:1.0 during periods when outstanding loans and letters of credit that are not cash collateralized for the full face amount thereof exceed 10% of the commitments under the revolving credit facility. In addition, we are required to satisfy this ratio in connection with any new borrowings under the revolving credit facility as of the time of such borrowings. This financial covenant, when required to be tested, is tested on a trailing four-quarter basis and on a pro forma basis in connection with any borrowing described in the foregoing sentence.
Events of Default
The Senior Credit Facilities provide for customary events of default, including: (a) failure to pay principal when due, or to pay interest or fees within five business days after the same becomes due or other amounts within ten business days after the same becomes due; (b) any representation or warranty proving to have been materially incorrect or misleading when made or confirmed; (c) failure to perform or observe covenants set forth in the loan documentation within a specified period of time, where customary and appropriate, after notice of such failure; (d) cross-defaults to other indebtedness in an amount not less than a specified threshold; (e) bankruptcy and insolvency defaults (with grace period for involuntary proceedings); (f) monetary judgment defaults in an amount in excess of a specified threshold not covered by insurance; (g) impairment of loan documentation or security; (h) change of control; (i) inability to pay debts as they become due and (j) standard ERISA defaults. A breach of the financial covenant does not result in an event of default under the existing term loan facility or the proposed new incremental term loan facility until 30 days after the required revolving lenders accelerate the revolving credit facility.

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Capitalization
The following unaudited table sets forth our consolidated capitalization as of June 30, 2014, on an actual basis and on an as adjusted basis to give effect to the Transactions as if such transactions were completed as of that date.
 
 
As of June 30, 2014 
 
 
Actual
 
As Adjusted 
 
 
(in millions)
Cash and cash equivalents(1)
 
$
184.6

 
$
171.0

 
 
 
 
 
Long-term debt, including current maturities:
 
 
 
 
Senior Credit Facilities:
 
 
 
 
Revolving credit facility(2)
 
$
—

 
$
—

Existing term loan facility(3)
 
471.7

 
471.7

New incremental term loan facility(3)
 
—

 
600.0

6.5% senior notes
 
700.0

 
700.0

4.875% senior notes
 
500.0

 
500.0

Notes offered hereby
 
—

 
400.0

Capital lease and other financing obligations
 
50.6

 
50.6

Total long-term debt
 
$
1,722.3

 
$
2,722.3

Total shareholders’ equity(4)
 
1,114.1

 
1,109.0

Total capitalization
 
$
2,836.4

 
$
3,831.3


(1)
Our cash and cash equivalents on an actual and as adjusted basis as of June 30, 2014 include $2.0 million that was held at Sensata Technologies Holding N.V. or another direct or indirect parent company of the Issuer. Our cash and cash equivalents on an as adjusted basis includes $9.6 million of cash and cash equivalents of Schrader, and has been adjusted to reflect approximately $23.3 million in fees and expenses associated with the Financing Transactions. However, our cash and cash equivalents has not been adjusted for approximately $11.7 million in fees and expenses associated with the Schrader Acquisition or to reflect the use of approximately $22.2 million of cash to fund the DeltaTech Acquisition and related estimated post-closing adjustments.
(2)
As of June 30, 2014, the revolving credit facility was $250.0 million. As of June 30, 2014, after giving pro forma effect to the Transactions, we had no outstanding borrowings under the revolving credit facility, excluding outstanding letters of credit in the amount of approximately $7.0 million. As of September 30, 2014, we had $160.0 million of borrowings under our revolving credit facility. These borrowings were used to fund the DeltaTech Acquisition. See “Description of Other Indebtedness-Senior Credit Facilities.”
(3)
As of June 30, 2014, outstanding term loans under the Senior Credit Facilities accrued interest at a rate of 3.25% per annum. As adjusted amount reflects new incremental term loan borrowings under the Senior Credit Facilities. See ”Description of Other Indebtedness-Senior Credit Facilities.”
(4)
Our total shareholders’ equity on an as adjusted basis gives effect to the Transactions as further described in the pro forma financial statements contained in Exhibit 99.1 attached to this Current Report on Form 8-K. We have made certain assumptions and estimates in connection with such amount. Therefore, such estimated amount may differ from the actual amount.


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Certain Definitions
The following definitions are used herein:
DeltaTech Acquisition
The acquisition of all of the outstanding equity interests of CoActive US Holdings, Inc., the direct or indirect parent of companies comprising CoActive Holdings, LLC’s DeltaTech Controls business, as previously disclosed in our Current Report on Form 8-K filed on July 7, 2014.
Financing Transactions
The issuance of the Notes and the incurrence of $600.0 million of new incremental term loan borrowings under the Issuer's existing senior secured credit facilities, along with the use of the related proceeds and cash on hand to (i) fund the Schrader Acquisition, (ii) permanently repay all outstanding indebtedness under Schrader's existing credit facilities, and (iii) pay related fees and expenses.
Guarantors
Those direct and indirect subsidiaries of the Issuer that will guarantee the Issuer’s obligations under the Notes. Prior to the consummation of the Schrader Acquisition, the “Guarantors” include the Sensata Guarantors and, immediately after the consummation of the Schrader Acquisition, the “Guarantors” include the Sensata Guarantors and the Schrader Guarantor.
Issuer
Sensata Technologies B.V., an indirect, wholly-owned subsidiary of Sensata Technologies Holding N.V.
Notes
The Issuer's $400.0 million aggregate principal amount of senior notes due 2024.
Schrader
August Cayman Company, Inc., an exempted company incorporated with limited liability under the laws of the Cayman Islands, and its direct and indirect subsidiary holding and operating companies comprising the business of Schrader International, Inc. prior to the Schrader Acquisition.
Schrader Acquisition
The purchase by the Issuer of all of the outstanding equity interests of August Cayman Company, Inc., the direct or indirect parent of various holding and operating companies comprising the business of Schrader International, Inc.
Schrader Acquisition Agreement
The share purchase agreement, dated August 15, 2014, among Sensata, the Issuer, and the Seller, as it may be amended from time to time.
Schrader Guarantor
The Issuer’s newly formed United Kingdom subsidiary, which will be the direct parent of August Cayman Company, Inc.

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Seller
Schrader International, Inc., an exempted company incorporated with limited liability under the laws of the Cayman Islands.
Sensata Guarantors
Certain of the Issuer’s subsidiaries in the United States and the Netherlands, as well as the Issuer's subsidiaries in the following jurisdictions: Belgium, Bermuda, Bulgaria, Japan, Malaysia and Mexico.
The Transactions
Those transactions including the Financing Transactions and the Schrader Acquisition.
U.S. GAAP
U.S. generally accepted accounting principles.



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