Jacob Sayer - VP of Treasury and IR Martha Sullivan - President and CEO Paul Vasington - Chief Financial Officer.

Scott Davis - Barclays Shawn Harrison - Longbow Research William Stein - SunTrust Mark Delaney - Goldman Sachs Craig Hettenbach - Morgan Stanley Ambrish Srivastava - BMO Capital Markets Amit Daryanani - RBC Capital Markets Wamsi Mohan - Bank of America Rich Kwas - Wells Fargo Securities Jim Suva - Citi Christopher Glynn - Oppenheimer Matt Sheerin - Stifel.

Good morning and welcome to the Sensata Technologies Holding N.V. First Quarter 2015 Earnings Conference Call. At this time I would like to inform you, this conference call is being recorded and that all participants are in a listen-only mode.

For opening remarks and introductions, I will turn the call over to Jacob Sayer, Vice President of Treasury and Investor Relations. Mr. Sayer you may begin..

Thank you Steve and good morning everyone. Earlier today Sensata issued a press release describing our financial performance for the first quarter 2015. If you have not received a copy, you may obtain it from the Investor Relations section of our website at sensata.com.

This call is being webcast live and a replay will be available in the Investor Relations section of our website. Today’s discussion will contain forward-looking statements based on the business environment as we currently see it and as such does include certain risks and uncertainties.

Please refer to our press release and our 10-Q and 10-K filings for more information on the specific risk factors that could cause our actual results to differ materially from the projections described in today’s discussion. In addition to U.S.

GAAP reporting we report certain financial measures that do not confirm to Generally Accepted Accounting Principles. We believe these non-GAAP measures enhance the understanding of our performance.

Reconciliations between these GAAP and non-GAAP measures are included in the tables found in today’s press release as well as in the Investor Relations section of our website under Financial Reports. Comments made during today’s call will primarily refer to our non-GAAP financial results.

On the call with me today are Martha Sullivan, our President and Chief Executive Officer and Paul Vasington, our Chief Financial Officer. We’ll hold questions until after our prepared remarks but if you would like to get in the queue please do so by pressing the star key followed by the number 1.

I will now turn the call over to Martha to review highlights from the quarter and trends in the end markets we see.

Martha?.

Thank you Jacob. Thank you all for joining our first quarter 2015 conference call. Sensata is off to a good start in 2015. Financial highlights for the first quarter include record net revenues of $751 million, an increase of over 36% from the first quarter of 2014; adjusted net income for the first quarter of a $111 million or $0.65 per diluted share.

The acquisitions we completed last year are all on track with our expectations for performance and integration. The long-term value creation opportunity at Sensata continues to build. During the quarter, we saw progress on the regulatory front that will benefit Sensata.

The upgrades required by the Euro 6 emissions regulations are on track and our European automotive revenues are up 10% on a constant currency basis as a result. In China, performance sensing revenue is growing faster than the end market due to content growth. New business wins remain strong, signaling good future revenue growth.

We are driving margin benefits from best delivered cost and other continuous cost improvement programs and we continue to optimize our capital structure to minimize interest expense. However, coming into the first quarter, we knew that we would see volatility in the markets we serve.

This gave us time to prepare and to manage the business to a solid outcome. Currency exchange rates fluctuated in particular the euro to US dollar. Our robust currency hedging program ensured that the impact to earnings in the quarter was minimal.

In the heavy vehicle off-road market, production of agricultural, mining and construction equipment shrank dramatically as compared to last year. In Korea and Japan, auto production continues to shrink and is down an estimated 6% in the first quarter from the prior year.

In heating, ventilation and air conditioning, the shift in Spear [ph] standards at the end of 2014 caused the demand dislocation for the first half of 2015 and as a sign of witness there, China’s manufacturing PMI remains below 50.

However, Sensata’s content growth enabled us to manage through these headwinds and for the business to perform in line with expectations. We achieved the financial results we expected in the first quarter and the business continues to perform well in each of our largest end markets.

Our revenue from the European automotive end market grew 51% in the first quarter as compared to the year ago quarter, primarily as a result of the impact of the Schrader acquisition as well as content and market growth offset somewhat by the impact of foreign currency exchange rate movements.

On a constant currency basis and excluding the impact of acquisitions, our revenue from the European automotive end market grew 10% in the first quarter as compared to the prior year, primarily due to content growth including the impact of the Euro 6 emissions regulation.

Third party data shows European new passenger car registrations were up over 8% in the first quarter as compared to the prior year.

Accordingly while third party market forecasts are currently calling for European auto production to be flat this year, we included in our guide and continue to believe that we will see some modest unit growth there in 2015.

Our revenue from North American auto grew 67% in the first quarter year on year, reflecting the impact of acquisitions; production growth and sensing content growth in the region. We also continue to perform well in Asian automotive markets, with revenue up 17% from the year-ago quarter.

This increase is driven primarily by the impact of the acquisitions and faster than market growth in China offset somewhat by declining markets in Japan and Korea.

Our revenue from the heavy vehicle off-road market grew again this quarter, up 54% from a year ago, reflecting primarily the acquisitions of DeltaTech Controls offset somewhat by weakness in the off-road in Chinese commercial vehicle market. We also serve HVAC and industrial end markets with both sensors and electrical protection products.

The shift in Spear [ph] standard that occurred at the end of 2014 drove OEM to build ahead of the standard change creating access inventory in the channel which is now being worked down. Consequently, our revenue in the appliance and HVAC end market was down 6% in the first quarter, including the unfavorable impact of currency exchange rate.

For Sensata, the most important driver of organic revenue growth is designing new sensors into automotive, heavy vehicles, HVAC and industrial systems.

These sensors have long shipment cycles and represent sticky revenue, driving our organic revenue growth even in years like this one where we do not expect to see much unit growth in the markets we serve.

We collaborate closely with OEM customers to identify new applications driven by energy efficiency, safety and emissions requirements at early stages of development and then design mission-critical custom sensors that help enable these applications. Often those systems are designed and adapted to help an OEM meet regulatory requirements.

One such regulatory framework is the Euro 6 emissions requirement that becomes mandatory for all light vehicles in Europe starting this September. Auto OEMs are increasing the percentage of vehicles made that are compliant with these regulations and we are seeing good content growth in the European automotive end market as a result.

We estimate that roughly 50% to 60% of the light vehicles being produced in Europe today are compliant with the Euro 6 emissions requirement. Another beneficial regulation is the adaption of tire pressure monitoring in China. Recently, China’s automotive technology and research center released final specifications for a TPMS legislative mandate.

After a period of review, this sets the stage for the Ministry of Industry and Information Technology to issue the final mandate which could happen by the end of this year for adoption in 2018 or ‘19. Design wins are not always driven by regulation.

Sensata as a result of its acquisition of DeltaTech Controls recently won a significant design with a leading global off-road vehicle OEM to design new operator control for a new line of equipments starting in 2017. This deal is three times larger than any prior design win at DeltaTech.

Sensata’s industry leadership, global presence and a history of high quality assured this OEM that the company was the right partner for them. Expanding on M&A, the integration of each of last year’s acquisitions is on track.

We are currently in the process of centralizing Wabash’s manufacturing activities in Mexico and bringing products into our Oracle ERP system. The back office activities of both DeltaTech and Schrader are in the process of being integrated with Sensata.

Schrader is also growing very rapidly, up significantly in the first quarter from the same period last year. Given the ramp to serve European growth last year, Schrader’s growth will of course moderate as we move through 2015. Looking ahead, the M&A pipeline remains robust and we continue to pursue propitiatory discussions with potential partners.

M&A remains the top priority use for our free cash flow. I’d now like to turn the call over to Paul to review our first quarter results in more detail and to provide second quarter financial guidance.

Paul?.

Thank you, Martha. First quarter 2015 net revenue of $750.7 million increased 36.1% compared to the first quarter of 2014. Of this, acquisitions contributed 36.8% and organic revenue growth contributed 1.8% fueled by 3.1% organic growth in performance sensing which continues to see accelerating content growth.

Changes in foreign currency exchange rates primarily euro represented a net revenue headwind of 2.5%. The impact to adjusted net income from changes in foreign currency exchange rates was minimal in the quarter due to our robust currency hedging program. First quarter adjusted net income was $110.9 million or 14.8% of net revenue.

Adjusted EBITDA for the first quarter was $173.3 million or 23.1% of net revenue. When compared to the prior year, profitability indices are lower, primarily due to the impact of acquisitions which included integration cost of $3.6 million and annual price downs which predominantly go into effect at the start of the year.

Productivity gains, raw material savings, volume and operating efficiencies offset investments in research, development and engineering which are critical to the development in execution of our expanding pipeline of new business wins and opportunities.

The integration of our acquisitions is proceeding well and including the impact of financing and integration costs were in total accretive to Sensata’s adjusted net income to per diluted share. Schrader, our largest acquisition to date, performed in line with expectations.

Consistent with previous guidance, we expect Schrader to deliver $0.18 to $0.21 adjusted earnings per share accretion in 2015, growing from to $0.50 to $0.55 of adjusted earnings per share accretion after full integration and debt pay down.

Cash taxes in the first quarter were approximately $9 million or 5.9% of adjusted EBIT, consistent with our overall target. We expect cash taxes for the full year 2015 to be in the range of 5% to 6% of adjusted EBIT. Sensata operates on a dollar functional basis globally.

However, portion of our revenues and expenses are denominated in currencies other than U.S. dollar. To reduce earnings and cash flow volatility from the re-measurement of these transactions into U.S. dollars, we hedge a significant portion of our net earnings exposure to each currency.

Currently, we hedge out upto 24 months with the intent to hedge approximately 80% to 90% of the net earnings exposure prior to the beginning of each year. As a result, the impact on earnings represents a weighted average impact of prior movements in exchange rates.

In the first quarter, changes in foreign currency exchange rates had an unfavorable impact of approximately 2.5% to net revenue and $0.01 to adjusted net income per share. Foreign currency exchange rates remain volatile and are now more unfavorable than when reported results for the fourth quarter of 2014.

As a result, we expect a slightly greater impact from foreign currency exchange rates for the full year of 2015 or a 2% to 3% decline in net revenue and $0.03 to $0.05 unfavorable impact to adjusted net income per diluted share. Notwithstanding this change, we are maintaining our full year financial guidance.

In longer term, we continue to be proactive in our efforts to minimize earnings volatility from movements in foreign exchange rates. For example, we are starting the expansion of our manufacturing presence within the Eurozone to improve on delivered cost.

And we’re renegotiating local supply agreements to further enhance our cost position, both having the added benefit of naturally reducing our net foreign currency exposure over time.

First quarter 2015 non-GAAP results include an adjustment of $5.4 million to defer the impact of financial hedge losses related to euro denominated raw material purchases.

This non-GAAP adjustment aligns to timing of income statement recognition of lower euro denominated raw material costs and the intended offsetting impact of our euro financial hedges.

This adjustment is necessary since under GAAP our current risk management program to hedge net euro earnings does not allow for to deferral of hedge losses related to euro denominated inventory purchases.

The loss deferral recorded in this quarter will be realized in our non-GAAP results, once the underlying acquired raw materials are converted to finished good and subsequently delivered in future sales transactions.

This adjustment which is consistent in focus with our non-GAAP adjustment to defer the recognition of gains or losses on commodity hedges is appropriate given the significant movement in the euro to U.S. dollar exchange rate during the first quarter of 2015.

As intended, during the first quarter, we took advantage of the attractive capital market environment to further optimize our capital structure by refinancing our outstanding 6.5% 2019 senior notes, in an economically positive transaction.

To fund the purchase of the 6.5% notes, we issued 700 million in new notes at an interest rate of 5%, saving over 10 million annually in interest expense. Financing and other transaction costs of $19.8 million relating primarily to the refinancing were added back to our non-GAAP results.

$79 million of the 2019 notes that were not tendered last month have been called and will be mandatorily redeemed tomorrow. For the first quarter, free cash flow was $65 million, refinancing of our 6.5% notes put forward interest payments that would otherwise have been made in the second quarter, impacting free cash flow unfavorably by $15 million.

We invested $38 million capital expenditures during the quarter and working capital consumed cash as receivables expanded in line with higher revenue.

Inventory management improved significantly during the first quarter and days on hand declined to 62 as we worked down buffer inventory that was brought on last year to support customers during our ERP system upgrade. Cash at March 31, 2015 was $196 million.

And we continue to expect free cash flow to be between $400 million and $415 million during 2015. Our net leverage ratio at the end of March stood at 4.1 times. Capital allocation is a strategic imperative for Sensata and M&A remains a top priority for the use of free cash flow.

In the absence of near-term M&A, we’ll look to repay debt in order to bring the net leverage ratios within our long-term start of range of 2 to 3 times. Now, I’d like to comment on the performance of our two business segments.

Performance sensing net revenue was $591 million for the first quarter, up 50% from the year-ago quarter, as a result of acquired revenue and new robust program launches that continue to gain momentum, probably offset by the impact of changes in foreign currency exchange rates and the impact of product obsolescence.

Organic volume growth which excludes the impact of price downs grew 5.6% in the first quarter from the same period in 2014.

Performance sensing profit from operations was a $143.9 million, up 32% from the year ago quarter as result of the acquired revenue and organic volume probably offset by annual price downs which predominantly take effect at the start of the year.

Productivity gains offset investments in research, development and engineering which are critical to developing and executing on our expanding pipeline of new business wins and opportunity. Performance sensing profits from operations index 24.3% was lower than a first quarter of 2014, primarily due to the impact of acquisitions and annual price down.

Sensing solutions net revenue was a $159 million for the first quarter, up 1.6% for a year ago quarter due primarily to acquired revenues offset somewhat by lower volumes in the appliance and HVAC end markets and broadly weaker China and the unfavorable impact of changes in foreign currency exchange rates.

Sensing solutions profit from operations was $49.2 million, an increase of 2.5% for the same quarter last year.

Sensing solutions profit from operations index of 30.9% was higher than the first quarter 2014, primarily due to the impact of productivity enhancements offset somewhat by higher investments in research, development and engineering to support growth efforts in industrial sensing.

Corporate and other costs not included in segment operating income was $44.2 million in the first quarter. Guidance for the full year 2015 has not changed. Financial guidance for the second quarter of 2015 includes net revenue of $755 million to $795 million which at the midpoint is an increase of approximately 35% from the second quarter 2014.

Key revenue assumptions for the second quarter include largely flat markets with weaker HVOR in China demand offsetting minimal growth in automotive, expanding content especially in Europe and continued strong acquired revenue growth offset somewhat by unfavorable impacts on foreign currency exchange rates.

Our current build rate stands at approximately 84% of the midpoint of this guidance. Adjusted EBITDA of $180 million to $192 million, adjusted net income of $119 million to $129 million, and adjusted net income per diluted share was $0.69 to $0.75, reflecting a fully diluted share count of a 171.5 million shares.

Key profitability assumptions for the second quarter include, increasing productivity gains driven by higher volumes; accelerating material savings and improved operations offset somewhat by higher M&A integration costs and increased operating expenses.

In summary, we are pleased to report record revenue and earnings for Sensata for the first quarter of 2015. Sensata continues to deliver on its promise of strong double-digit revenue in earnings growth, partly enabled by superior capital deployment for high returning repeatable acquisitions.

And we would be happy to take questions that listeners may have. Operator, please introduce the first question..

[Operator Instructions] Your first question comes from the line of Scott Davis with Barclays. Your line is open..

Everything sounds pretty good, but I’m trying to reconcile the 1.8% core growth rate with the pickup in Euro 6 and just the strength; I think you said Europe plus 10%. Maybe I didn’t hear it right.

Is there a way to parse out the core growth a little bit and think in terms of the legacy Sensata businesses versus maybe Schrader and DeltaTech and such and really understand, is there something in this quarter that -- I think last quarter was something a little bit higher, maybe 2.5%.

Should we expect acceleration from here or is there something that’s just impacting that? I guess I’m just opening up to some additional comments is my question..

Scott, just to deal really straightforward with it, 1.8% is not including acquisitions, so there is no organic growth in terms of DeltaTech or Schrader in that number. But to give you a sense of it, we are seeing now installation of Euro 6, but that is going to accelerate as we move to the second half of the year.

So, the outcome here is not unexpected. I think the way to think about that is stronger organic growth in Europe, some end markets that are challenges for us. The off-road growth part of HVOR is down significantly and so in areas like in China down 30%; above 20% than the Americas and elsewhere.

And that has been a pretty strong growth driver for us, again not unexpected. We did not expect to get a lot of end market help this year. We’ve talked about the fact that our content growth is going to be stronger in the second half and the first half and there are two major drivers on that, one as you pout is Euro 6.

So right now we’re seeing that in our backlog of the second quarter but that does accelerate into the second half of the year. The other driver is the tail now on this program that has been driving obsolescence. So we talked about our occupant weight sensing program.

And we see the last of that revenue as we exited 2014 but when you look on a quarter of quarter comparison; it’s still a 1.5% headwind for us in the first half of the year. So those are some of the puts and takes. Yes, a little organic growth quarter for Sensata, not unexpected.

We’ve talked about how we expected the organic growth to play out down over the year..

And then just a quick follow-up, I know you mentioned the release fee, 7.7% R&D to sales.

When the acquisitions are fully integrated; is that the right level to think about or is there some scale you can get on the larger revenues where maybe you don’t have to spend quite as much as a percent of sales just because sales are so much higher?.

I think over time that their index can come down somewhat but that’s not primarily where we’re getting our leverage. I think the other way you got to think about that is in places like Schrader where we grow episodically, we’re going to go through periods where R&D is probably a little more volatile than we had inside of overall Sensata.

So, I think that we’ll see sound leverage but we’ve talked about staying inside our 5% to 7% over time. And I think that’s about where we expect this to run..

Thank you. Your next question comes from the line of Shawn Harrison with Longbow Research. Your line is open..

I guess I’d like to drill more just on where you’re thinking on global auto production, particularly within China and then within Europe, knowing that European registrations were strong and production is expected at essentially, at least by IHS and others to be flattish.

And then in China, TE Connectivity said they saw a little bit of softening in the market.

What are you seeing within China auto production?.

We’re seeing end vehicles softer in China. Let’s put it this way. We’re seeing the growth not as robust as it has been in the past; having said that, we’re still growing about 9% in China, well above the overall production rate. So, let me just give you a couple of things to think about on that front.

On overall China market, I think at this point we’re calling production is in about the 7% run rate. So, this is third-party, we’re not taking a different view than third-party outlook on that. Typically that’s an 8% to 9%. And as I pointed out, we’re growing at the 9% range and gain that’s content growth that drives that.

In terms of Europe, yes, it’s true; registrations have been growing nicely in Europe and pretty consistently. Production costs are still for flat. Our view is that production will be stronger than flat this year, not way stronger, probably in the 1% to 2%.

One of the reasons you see the disconnect between increasing registrations and then sort of flattish production is that vehicle inventories have been coming down over the past year in Europe. So that’s something we’ve been taking a look at to understand how production will play out and production is what drives our growth..

And then as a follow-up I guess, the currency impact, how much of that falls into the second quarter, Paul? And then, as we look to 2016, how much of a year-over-year impact right now would currency be, assuming you hedged all of 2016 out at 1.08 euro to the dollar or something like that?.

The first one, you saw the $0.01 impact in Q1. It’s a little bit larger in Q2; actually we got the higher revenue split we’re seeing with the ramp up of the euro, so we have got a little bit exposure there. Then in Q3 and Q4, it moderates down a bit. But all in all, we’re talking about $0.03 to $0.05 with a little heavier impact in Q2.

If you talk about ‘16, let’s just step back to think about where Sensata is in terms the heavy program. We hedge out of our 24 months. We hedge every month; we do it on a systematic basis. We have net revenue or net earnings in various currencies and net expenses, they offset each other.

So our net exposure is about -- annual exposure is about $250 million to $300 million of exposure. Based on we’re hedged today is great for today. We think there will be about a four times impact to the impact that we’re seeing in 2015, if you take that $0.03 or $0.05 range, so multiplied by four times.

That’s about the impact that we would expect assuming no changes in rates, no changes in exposure and no changes to our cost model that we are continuing to work continuously in the organization..

I think that final piece is really important to understand. Our cost structure is not fixed. And so we broke new ground on an additional manufacturing facility in Bulgaria; that building is almost up and running. We’ll be increasing our production rates in Bulgaria and that gives us a better overall alignment between euro cost and euro revenue.

And as Paul mentioned earlier, we continue to look at our overall procurement strategy and find ways to make sure that our cost structure is moving. It’s actually not static..

Thank you, your next question comes from the line of William Stein with SunTrust. Your line is open..

First, I wanted to delve into the TPMS business in China. At the Analyst Day, I think there was some discussion about some orders flowing despite the regulations not being adopted yet.

I think that was small or perhaps more forward-looking but if you can talk to what you see for demand trends there? And then also in your prepared remarks you talked about TPMS in China potentially being mandated this year.

I think that’s about two years ahead of expectations and we would love to hear about what do you think the sizing of that opportunity could be?.

Sure. This quarter we actually saw development on the regulation and that was an important development. So, we mentioned that there is Chinese Automotive Research and Technology Group and they are the rule making body for this type of regulation.

So they took a step to tighten, I’d say to further define that regulation this quarter, made that announcements. So you can actually Google and take a look at what they’re proposing.

That was a really important development; having said that there are things that have to happen around further defining the actual threshold for sensing and some of the very specific requirements. There will be deliberations around that and then there needs to be an enforcement policy over time.

So we think that this regulation is still very much on track with our investment thesis and that’s what we expected to see revenue tie to the regulations play out under 2018 late 2019 time horizon.

That’s an important growth trajectory for Sensata and for Schrader and it really allows us to continue to stay on this high single digit organic growth rate all in over time. In terms of what we think happening in China, again in tire pressure monitoring right now.

And we have seen some customers actually be interested in putting this into vehicles as a consumer feature. That tends to be high-end vehicles but not terribly important from a revenue perspective.

I’d say more importantly given the continuous movement of regulation, we are engaged with many more players now as they develop a response and prepare to meet the regulation over time..

And if I can follow up with 2015 question; you may have said this, I apologize if I missed it.

But the full year revenue growth now, can you review what that assumes from an organic growth versus a content growth and FX and M&A?.

No, we’re not guiding on all of those components. I think we’ve given you the impact that you can expect to see from the foreign currency exchange rate.

I’ll say this particular quarter was one that was sort of very, very strong on the acquisitions and a little later on the organic; we would expect to see that move a bit as move through the year, so improving on organic, probably little less help from acquisitions.

So directionally, we can give you a sense for that but we’re looking now as a move through the quarter, how those play out..

Thank you. Your next question comes from the line of Mark Delaney with Goldman Sachs. Your line is open..

First question is on the potential Euro 6 impact as we move through the year and I wanted to check is $75 million to $100 million still the right annualized benefit that the company expects to realize, especially given some of the positive trends you have been seen in the new car registration in the last couple of months out of Europe?.

Yes, we definitely separated out end markets from the overall impact of Euro 6, but just for the benefit of everybody on the call, the way we had scaled this opportunity was if we were moving from zero Euro 6 content in our revenue to full implementation, we expected that would deliver $75 million to $100 million annualized increased revenue.

So we had a little bit of that content late in 2014, little bit more as we moved through the first quarter. When we look at the run rate as we exit the year, that run rate translates now to -- I can probably narrow that for you, more like $80 million to $85 million on an annualized basis, so very much in line with how we guided..

And then for a follow-up question, has there been any change in the competitive 0environment on pricing, given that two of your big competitors are in Europe and Japan and should be benefiting from currency tailwinds?.

We have not seen a change in behavior on that front. And keep in line that the nature of competition in these markets and with these mission critical sensors is that when we’re competing, it’s for programs that are three to four and even five years out. And so currency fluctuation over time is just an effect of life.

I think we’ve got rational competitors and we certainly consider ourselves prudent. And so you think about economics over the long run and I’d be surprised to see them become extremely aggressive in the short-term..

Thank you. Your next question comes from the line of Craig Hettenbach with Morgan Stanley. Your line is open..

I appreciate the color on the control side and what you outlined on the inventory correction.

Can you just discuss where you are on that? And then, if you’re able to put that aside from an underlying demand perspective, how you see controls into Q2 and Q3?.

Yes, that’s one we’ve been spending some time on Craig, just given the impact of it. So we’re now, let me look at the backlog development into 2Q here. We’re seeing the rebound of that demand, so feeling confident that that was a one-time dislocation.

As we look ahead in terms of our solutions business, we look ahead to the balance of the year; the remaining headwind there is going to be just PMI oriented demand in China. So, when you look at the PMI index now in China at below 50, that’s going to continue to be challenge for the business.

We expect organic growth is going to rebound in sensing solutions, but still probably at the low single-digits..

And then as my follow-up, a lot of focus on just kind of FX translational impact; are you seeing anything in terms of customer demand or forecasting because of the volatility in the FX markets?.

Yes, keep in mind, given that we’re dollar functional, there is not a lot of translation impact; so, mostly we’re dealing with transactions. We’re not saying lot of change in customer behavior. In Europe, we’re largely euro denominated in our contracts already..

Thank you. Your next question comes from the line of Ambrish Srivastava with BMO Capital Markets. Your line is open..

Martha, I apologize if I missed it; just two couple, first one is on the U.S. production assumption for the year.

Did you give that number out?.

IHS has the reduction in North America for the full year at 2.7% growth..

And there has been a lot of change in the business.

Could you please just highlight what we should be expecting for normal seasonality for each quarter?.

So, we guided 775 at this for Q2. As we look to the second half, we see fairly flat revenue in Q3 and Q4. We see pretty -- you’ll see the seasonal decline in our sensing solutions business. However, we’ve got some great growth opportunities in industrial sensing that will litigate some of that.

We see this introduction really globally for auto in Q3 and in Q4. And we’ll see a little bit of a weakness in Schrader as their aftermarket business gets a little bit lighter in the first quarter. So, various puts and takes but basically it creates more of a balanced Q3 and Q4 revenue profile..

Thank you. Your next question comes from the line of Amit Daryanani with RBC Capital Markets. Your line is open..

I have two questions as well. Paul, just on the FX, I want to make sure I understand this properly.

Last quarter the take was $0.03 to $0.04 impact and now it’s at incremental $0.03 to $0.05, so really it’s $0.06 to $0.09 impact for 2015 versus last year, is that..?.

No, it’s $0.03 to $0.05 impact for 2015. It’s about a penny a quarter and we widened the range a bit because of the lower exchange rates we were seeing when we guided back in February. So, we just to expanded the range on the outer end by a penny..

And then if 4x is the potential impact to next year, if currency stay this way and nothing happens, right?.

Assuming a static environment today and no changes, our cost structure which we’re working very aggressively to drive down cost and moving our production to the Eurozone and looking at all of our supply contracts to improve our cost position; assuming that doesn’t happen, everything as is today, we think it’s about four times multiplier from more our current FX impact is on EPS for $0.03 to $0.05..

And then, just on the Euro 6, Martha, I was curious, I think I heard you right; is that 50% to 60% uptake rate already with Euro 6? How does that number stack up with -- versus your own initial expectations? I thought it’s a little higher than probably I would have thought it would be.

But I’m curious, how does that stack up for you versus what you guys are thinking? And does that potentially put some pressure on organic growth if this was a little more front half heavy than initially expected?.

I’d say frankly it’s coming in for this current quarter a little bit earlier than when we would have expected. So marginally, it’s slightly higher in the first, not way higher. So, one of the things I think that helped with some of the downside that we saw in the off-road and in this inventory dislocation issue.

So, I understand the margins coming in slightly earlier but not way off the overall expectations..

And then Martha, just finally, in terms of leverage ratios, do you feel comfortable where we are today, slightly above 4 to start looking at buybacks and M&A as you get into back of the year or would that be more 2016 focus?.

We’re comfortable; we’re certainly comfortable where we are operating. For those of you that know the history of Sensata, you’ve seen us operate with much more leverage. We don’t think we need to do that to take advantage of the M&A pipeline that we have in place. We have really strong cash performance.

If you look at the fact that we used $50 million of that cash; we further optimized the capital structure. Given the overall cash characteristics of the business and of the acquisitions, we think we’re in good shape with the dry powder that we need and where we’re operating from a leverage perspective..

Thank you. Your next question comes from the line of Wamsi Mohan with Bank of America. Your line is open. .

Martha, sorry, if I missed this, but could you just go back to sort of what the pressure was on the organic growth in the quarter? I think you said OWS is a headwind of 1.5 for the first half. I’m wondering if it’s higher than that in Q1.

And also, how much of an impact, negative impact, the inventory correction was in the quarter?.

OWS was about that same rate in the first quarter, so don’t want to overstate that. When we look at our overall solutions business, the major impact there was this inventory dislocation. And we saw on an organic basis, the solution is actually down year-over-year, so not insignificant but also not a sustaining issue for us.

So, those are the two sort of big takes in the first quarter. The other thing I would mention is that the off-road piece of our HVOR, while we continue to grow overall HVOR, we’re growing much more slowly and that’s an end market dynamic that continues to be headwind for us..

And Paul, the integration charges in the quarter were $3.6 million; how should we expect that to trend through the course of the year; any color you can share there?.

They’re going to increase and we said, we’re implementing and integrating those businesses and bringing them on Oracle. The cost to do that will increase over the course. So, I expect them to ramp up in Q2 and then sort of stay at that level for the rest of the year.

Make them down at the end of the year but it’s going to be a $1 million or so higher than what -- 1 million to 2 million higher than what you saw in Q1..

Thank you. Your next question comes from the line of Rich Kwas from Wells Fargo Securities. Your line is open..

I wanted to just revisit organic growth, Martha, on the outlook for the year and better than the revenue guide. When you gave the guide in February, it was 6% organic growth. That assumed some market growth offset by pricing.

Is that still intact here for the year?.

Yes, we don’t see a change to our overall expectations on what market’s going to do and where pricing lands. And given what we’re seeing on Euro 6 play out in our other wins, we do expect we’re going to see the content growth we’re relying on..

So going from 2 and then ramping up over the course of the year, getting to 6 is still a viable breadth?.

Absolutely, and thus far we’re making a point that we’ve expected, I think we’ve been deliberate about expecting that the first half is going to be lower than the second half for OWS, for Euro 6 which is still stronger than second half, even though we’re seeing some of that come into the second quarter now..

And then, when you look at the guide here. So, you maintain the guide, which is understandable.

But what gets you to the top end? What are the moving pieces that would drive you upside to the top end of the guidance or near the top half? How do you think about that?.

A lot more moving parts on our business right now.

So, if you think about some of the acquired businesses, we have the dynamic of a pretty aggressive ramp that’s underway with customers now in Europe, not unusual for just from a time -- getting time to market having those things coming earlier, then you get a longer run rate on that business in the current year.

When we look at just the impact of things like regulation that we’ll have, some of the early adopters moving more quickly to quick content in the vehicles ahead behind of regulation, a little bit of that potentially on the tire pressure front; some of that on what we call Euro 6 fee which is now bringing a new content in place as well.

I think having said all that, those tend to be longer cycle decisions. And so the biggest things that will probably move it to the upside or down are most likely going to be end market oriented..

And that’s assumed to be flat for the year or so?.

Yes, that is our overall assumption..

And then last one for me on China. The 9% comment, was that auto revenue or was that overall Sensata China revenue? Because versus the 7% auto production, I would think that you’d have more content growth above 2% versus underlying production.

So, I don’t know if there was some HVAC stuff in there and what not?.

Yes, that was in our performance sensing business and so that’s a combination of commercial truck end auto. Commercial truck is down about 32% from an end market standpoint in China. So you’re right, our out of content growth is growing much more strongly than the 9%..

And just last one, what’s your China commercial truck exposure?.

I don’t have that for you off the top of my head. I think in performance sensing, it’s about 25% and 30% of the overall business. So, fact check that for you..

Thank you. Your next question comes from the line of Jim Suva with Citi. Your line is open..

Martha, you made a comment about 2016 FX being $0.03 to $0.05 actually for this year, but then four times that for next year. But you said that assumes everything remains stable, status quo. And then later on you made some comments about also opening up a plant in Bulgaria and some things like that.

We think about that, it seems like that Bulgaria plant could offset some of that given its natural placement of where it is.

Could that offset like half of that or should we also be thinking that there’s going to be some ramping costs as you ramp that plant and some duplication costs and that will probably come in this year or next year? Because four times $0.03 to $0.05 is a pretty big number. And so, I assume you’re not going to stand still.

So I’m just trying to gravitate about what that really implies about what you are doing to that headwind..

So, let me give you a little more insight on that. We are not actually moving into Bulgaria for the first time. So, we have an existing production facility there today that supports about 20% of the overall revenues that we ship into Europe.

And so we’re actually expanding an existing site, which is much less investment intensive and takes a less time than going to a new location for the very first time. In fact that production begins at the end of this year. So, we think it could be a significant offset to the overall headwind on currency.

At the same time, we look at our, what we call our best cost sourcing programs and we see opportunity to take advantage of currency on that front as well. So, not in the position to stay exactly what that offset is going to be. But we think it will be important. As we get close to 2016, we’ll give you guys a better sense of that.

The other thing to keep in mind is Paul made the comment that if you freeze everything today, and that was just to give you guys, a sense for what it looks like all things frozen. So beyond the fact that our cost structure isn’t frozen, we’re in multiple currencies; we’re in multiple cost currencies all around the world.

So a big portion of what we ship into Europe actually comes out of Mexico in the peso. So as the dollar strengthens, we see some benefit to our -- what we call made currencies as well. So those are the things to keep in mind, in terms of the puts and takes.

We know, it’s an area of a lot of interest; we’ll continue to provide insight as we make progress on the overall cost structure..

Thank you. Your next question comes from the line of Christopher Glynn with Oppenheimer. Your line is open..

I just wanted to go a little deeper into your thoughts around balance sheet flexibility and lender tolerances, just given a pretty aggressive description of the pipeline and the imperative of continuing M&A, while leverage is a good bit above the target range..

As Martha said, M&A is our top priority for free cash flow. We continue to generate strong free cash flow; we’re using that free cash flow to pay down some of our variable debt, our term loans.

We think there is a great interest in Sensata from a credit perspective, when we did our last -- we did issue of the 5% 700 million notes and it’s four times oversubscribed. And so we’re very good credit, from the perspective of our investors; they like our story.

So I think there is plenty of financial flexibility through the debt markets and coupled with our strong cash flow I think gives us plenty of firepower to continue to pursue value creating acquisitions..

And just to put some further balance on that. We often get into the -- are you going to level up and do more acquisitions or are you going to pay down debt? And we think there is a real continuum on that side. So just given the cash flow of the business, we expect it to be back to the two to three leverage ratio by the end of the year.

And so we’re not looking at the scenario where the pipeline tells us we’ve got to significantly increase our current leverage. And so that’s just something to get a sense of how we think about it..

Just given the breadth of integration activity you have right now, at what point would it become a challenge in terms of biting off too much at once?.

One of the things that we did….

I mean operationally not financially..

No, I hear you and so the divestment is an important piece of that. That’s something we have been very thoughtful about in terms of the structure of the business and in some cases actually hiring ahead of the pipeline to make sure that we’ve got the bandwidth that we need to get things integrated.

And in the meanwhile, there is plenty of continuous improvement activity that we can drive with those resources. So, we’re going to be very careful to make sure that we don’t bite off more than we can chew. But I’d like you to understand we’re not highly gated at this point on digestibility..

Then last one is any impact on EPS from snow removal on the quarter? I’ll take that offline..

We’re really excited about the spring..

Thank you. Our next question comes from the line of Matt Sheerin with Stifel. Your line is open..

Just question regarding the margin expansion. Your guidance implies pretty good margin leverage, operating margin line, through the end of the year. It looks like there was a big step down in OpEx this quarter. Gross margin was lower obviously due to acquisitions.

As we think about how that plays out through the year, what do we expect SG&A to take up? You talked about integration costs and some other costs.

So what should we think about gross margin versus SG&A percentage through the year?.

I think on the gross margin line, you should expect gross margins to improve over the course of the year. And the pipe as I mentioned in prepared remarks is baked in early in the quarter and so that continues throughout the year.

But our productivity initiatives, raw material savings and operating efficiency, that all accelerates over the course of the year and we start seeing much greater attraction there and it starts to drive expansion in our gross margins and relative volume leverage that we’re getting from the higher volume that we’re going to be generating over the remaining nine months of the year.

From a cost perspective, we continue to invest in research, development and engineering to support those business opportunities and execute on those new wins. And from an SG&A perspective, I mentioned the integration cost rising a bit. And as of April we’ve kicked into a new competition cycle that drives up SG&A a little bit but not significantly.

So I think the cost stays right from the competition increases pretty ranged down for the rest of the year..

So, the fact that might be helpful, just an understanding our confidence to get to overall A&I margins at Sensata; if you look at our businesses that are not in the integration mode and so if you exclude, DeltaTech, Schrader and even while back where we were still spending money on the integration, our adjusted income index this quarter was 19.2% on those businesses not being integrated, so continuing to perform very well in the overall core business..

And that was significant [ph] over the course of the year..

And that caused the cost down; you talked about, is that around the 2% that you normally see?.

On the pricing, yes that’s about it..

Thank you. As there are no more questions, I’d like to turn the conference call back over to Mr. Sayer for closing remarks. Mr.

Sayer?.

Thanks Steve. I’d like to thank you all for joining our first quarter 2015 financial results call today.

Sensata will be participating in Wells Fargo Industrial Investor Conference in New York on May 6th; Oppenheimer’s Investor Conference in New York on May 12th; and Bank of America Merrill Lynch’s Technology Investor Conference in San Francisco in June 2nd.

We will also be participating in Leveraged Finance Conference sponsored by Morgan Stanley on June 4th and Barclays on June 11th. Each of these events will be webcast live and available for replay from the Investors section of our website at sensata.com.

We appreciate your continued interest in and support of Sensata and look forward to speaking to you on the road and again next quarter. Thank you and goodbye..

That concludes the call for today. You may now disconnect..