Littelfuse
Annual Report 2018

Plain-text annual report

2018 Annual Report Dear Shareholders, The strength of our global brand, technology leadership and strong execution of our growth strategy have positioned Littelfuse within the secular trends of a safer, greener and increasingly connected world. These long-term trends drive ever-greater sophistication in electrical architecture, increasing the content of our circuit protection, power control and sensing products in applications across industrial, transportation and electronics end markets. Our strategy accelerates organic growth with a complement of strategic acquisitions. The tremendous growth across our businesses has been driven by the execution of several initiatives related to this strategy: • • • Increased innovation across our protect, control and sense product portfolio to ensure enhanced performance and continued differentiation. Identification of cross-segment opportunities where we can leverage technologies and customer relationships to broadly take our products to market. Focus on underrepresented geographies and high-growth markets to expand our global reach and presence. We continue to add to our portfolio with strategic acquisitions. Our transactions align with our core technology competencies of circuit protection, power control and sensing. We remain disciplined with our acquisition efforts to ensure we meet our strategic and financial investment criteria and continue to focus on: Expanding our legacy circuit protection product portfolios. Strengthening our power control and sensing platforms. • • • Growing our geographic and market access. With our execution of this dual organic and strategic acquisition strategy, we have outpaced end market growth. Fiscal 2018 represented another year of significant execution of our growth strategy. Our global teams, in close collaboration with our customers and partners, captured many strategic wins in our target end markets. We drove superior results for our shareholders compared to 2017: • Net sales of $1.72 billion grew 41 percent with organic sales growth of 8 percent1. • GAAP diluted earnings per share (EPS) was $6.52, an increase of 25 percent. • • Cash flow from operating activities was a record $332 million, up 23 percent. Adjusted diluted EPS was $9.442, an increase of 22 percent. During the year, we took a significant step in expanding our power control platform with our strategic acquisition of IXYS Corporation—the largest acquisition in our history. This brings critical scale, volume and an extensive industrial electronics customer base to our power semiconductor business. As a result, we have expanded our power control technology platform, creating tremendous opportunities to capture high- growth end markets like industrial motor drives, renewable energy, electrical vehicle charging infrastructure and long-term transportation applications. The integration is going well; we have made significant progress and are seeing the benefits of our expanded portfolio and combined global teams. With our focus on serving customer needs and driving business optimization, we significantly grew revenue and generated cost synergies, both above our expectations. Our customers continue to view our operational excellence as a differentiator. As our business expands, we have taken steps to institutionalize our Littelfuse Operating System to ensure it remains a foundational part of our DNA. We are fully committed to fostering our high-performance, action-oriented, Lean and Six Sigma operating culture which is led by our diverse, experienced leadership team. Our global leaders are focused on continued differentiation and delivering results which are reflected in our sustained strong  2018 Annual Report operational performance. We have deployed a continuous improvement mindset across our global footprint to drive enhanced performance and to maintain the consistency and speed within our businesses that our customers have come to expect. Our receipt of many customer and industry awards in 2018 is recognition of the high-quality solutions, service and support we deliver to our customers everywhere, every day. Our strong financial performance over the last two years shows the success in our execution of our five- year growth strategy. Over this two-year period, we have achieved average annual revenue growth of 28 percent and average organic sales growth of 8 percent1. This growth, supported by our foundation of operational excellence, has driven sustained profitability and double-digit annual growth in earnings per share. We have generated free cash flow3 well in excess of net income and returned 30 percent of our free cash flow to shareholders through dividends and share repurchases while reinvesting in our business over the past two years. We are well underway to successfully delivering our growth strategy. The innovation, hard work and dedication of our 12,000 worldwide associates have made our achievements possible. Our strong commitment to customers continues to be a key asset in an increasingly dynamic marketplace. Overall, the company’s brand, positioning and foundation of operational excellence are all stronger today than two years ago when we communicated our five-year growth strategy. We are well prepared to meet the changing needs of our customers, pursue continued growth and maximize shareholder value. Looking ahead, we remain confident that our leading technologies, global footprint, close customer relationships and talented associates position us for continued growth in excess of the growth of the markets we serve. The evolution of our company continues to highlight the importance and value of our Board of Directors. Our Board is composed of seasoned business leaders with diverse backgrounds, skillsets, industry experiences and expertise and reflects a balance of fresh perspectives and continuity. Consistent with this approach, in addition to the appointment of Dr. Nathan Zommer in January 2018, I am pleased that Kristina Cerniglia joined our Board of Directors in December 2018, bringing over 30 years of financial experience with public companies. Further, I would like to recognize Ronald Schubel who will be retiring from our Board at the 2019 Annual Meeting after nearly 17 years of outstanding service, guidance and contributions. Continued diversification is top of mind as new directors are appointed to our Board in the future. In closing, thanks to our shareholders for your ongoing support of our company and the confidence you put forth in us as we continue to execute our growth strategy. Dave Heinzmann President and Chief Executive Officer CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (“PSLRA”) - The statements contained in the letter to shareholders and the other sections of this report and in the Company’s Annual Report on Form 10-K that are not historical facts are intended to constitute “forward-looking statements” entitled to the safe-harbor provisions of the PSLRA. These statements may involve risks and uncertainties, including, but not limited to, risks relating to product demand and market acceptance, economic conditions, the impact of competitive products and pricing, product quality problems or product recalls, capacity and supply difficulties or constraints, coal mining exposures reserves, failure of an indemnification for environmental liability, exchange rate fluctuations, commodity price fluctuations, the effect of the company’s accounting policies, labor disputes, restructuring costs in excess of expectations, pension plan asset returns less than assumed, integration of acquisitions, uncertainties related to political and regulatory changes and other risks that may be detailed in “Item 1A, Risk Factors” in the Form 10-K and in the Company’s other Securities and Exchange Commission filings. A reconciliation of these non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP is set forth on the following page: 1Organic sales growth is reported revenue less the impact of acquisitions, divestitures and foreign exchange from one year compared to a prior year. 2Adjusted diluted EPS excludes acquisition-related and integration costs, restructuring, impairment and other charges, certain purchase accounting adjustments and non-operating foreign exchange loss (gain), as applicable. 3Free cash flow is calculated as cash from operating activities less capital expenditures. LITTELFUSE, INC. GAAP TO NON-GAAP RECONCILIATION (In millions of USD except per share amounts unaudited) Non-GAAP EPS reconciliation GAAP diluted EPS EPS impact of Non-GAAP adjustments (below) Adjusted diluted EPS Non-GAAP adjustments - (income)/expense Acquisition related and integration costs Restructuring, impairment and other charges Amortization backlog - IXYS Change in control - IXYS Acquisition related stock-based compensation charge Purchase accounting inventory adjustments Non-GAAP adjustments to operating income Other expense, net Non-operating foreign exchange loss (gain) Non-GAAP adjustments to income before income taxes Income taxes Non-GAAP adjustments to net income Total EPS impact Net sales reconciliation Net sales growth Less: Acquisitions Divestitures FX impact Organic net sales growth Net sales reconciliation Net sales growth Less: Acquisitions Divestitures FX impact Organic net sales growth Free cash flow reconciliation Net cash provided by operating activities Less: Purchases of property, plant and equipment Free cash flow 2018 2017 $ $ 6.52 2.92 9.44 $ $ 2018 2017 $ 20.2 $ 12.6 12.4 2.1 4.5 36.9 88.7 0.9 (0.9) 88.7 15.1 73.6 2.92 $ $ $ $ 2018 vs. 2017 5.21 2.53 7.74 8.1 2.2 — — — — 10.3 — 2.4 12.7 (45.3) 58.0 2.53 Electronics Automotive Industrial Total 70% 58% — 1% 11% 6% — — 2% 4% 8 % 41 % — (6)% 1 % 13 % 32 % (1)% 2 % 8 % Electronics Automotive Industrial Total 2017 vs. 2016 24% 14% — —% 10% 9% 5% — —% 4% $ $ 1 % 16 % — (7)% 1 % 7 % 9 % (1)% 1 % 7 % 2018 2017 331.8 (74.8) 257.0 $ $ 269.2 (65.9) 203.3 NON-GAAP FINANCIAL MEASURES The information included in the letter to shareholders includes the non-GAAP financial measures of adjusted diluted earnings per share and organic net sales growth. These non-GAAP financial measures exclude the effect of certain expenses and income not related directly to the underlying performance of our fundamental business operations. The company believes that adjusted diluted earnings per share and organic net sales growth provide useful information to investors regarding its operational performance because they enhance an investor’s overall understanding of our core financial performance and facilitate comparisons to historical results of operations, by excluding items that are not related directly to the underlying performance of our fundamental business operations or historical business operations. The letter to shareholders also includes the non-GAAP measure of free cash flow. The company believes free cash flow is a useful measure of its ability to generate cash. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is included herein. The company believes that these non-GAAP financial measures are commonly used by financial analysts and others in the industries in which we operate, and thus further provide useful information to investors. Management additionally uses these measures when assessing the performance of the business and for business planning purposes. Note that our definitions of these non-GAAP financial measures may differ from those terms as defined or used by other companies. United States Securities and Exchange Commission Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 29, 2018 Or Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to Commission file number 0-20388 LITTELFUSE, INC. (Exact name of registrant as specified in its charter) (Mark one) [X] [ ] Delaware (State or other jurisdiction of incorporation or organization) 8755 West Higgins Road, Suite 500 Chicago, Illinois (Address of principal executive offices) 773-628-1000 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Common Stock, $0.01 par value 36-3795742 (I.R.S. Employer Identification No.) 60631 (ZIP Code) Name of Each Exchange On Which Registered NASDAQ Global Select MarketSM Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [ ] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10- K. [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “small reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act: Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ] Emerging growth company [ ] If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] The aggregate market value of 24,414,037 shares of voting stock held by non-affiliates of the registrant was approximately $4,409,178,694 based on the last reported sale price of the registrant’s Common Stock as reported on the NASDAQ Global Select MarketSM on June 30, 2018. As of February 18, 2019, the registrant had outstanding 24,706,335 shares of Common Stock, net of Treasury Shares. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Littelfuse, Inc. Proxy Statement for the 2018 Annual Meeting of Stockholders (the “Proxy Statement”) are incorporated by reference into Part III of this Form 10-K. 1 TABLE OF CONTENTS FORWARD-LOOKING STATEMENTS PART I Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. PART II Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B. PART III Item 10. Item 11. Item 12. Item 13. Item 14. PART IV Item 15. Item 16. Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management’s Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services Exhibits, Financial Statement Schedules. Form 10-K Summary Schedule II – Valuation and Qualifying Accounts and Reserves Signatures Exhibit Index Page 3 3 9 14 14 14 14 15 17 17 34 35 82 82 83 84 85 86 86 86 87 87 88 89 90 2 FORWARD-LOOKING STATEMENTS Certain statements contained in this Annual Report on Form 10-K that are not historical facts are intended to constitute “forward- looking statements” entitled to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995 (“PSRLA”). These statements may involve risks and uncertainties, including, but not limited to, risks relating to product demand and market acceptance; economic conditions; the impact of competitive products and pricing; product quality problems or product recalls; capacity and supply difficulties or constraints; coal mining exposures reserves; failure of an indemnification for environmental liability; exchange rate fluctuations; commodity price fluctuations; the effect of the company’s accounting policies; labor disputes; restructuring costs in excess of expectations; pension plan asset returns less than assumed; uncertainties related to political and regulatory changes; integration of acquisitions including the integration of the recently acquired business of IXYS Corporation (“IXYS”) and the risk that expected benefits, synergies and growth prospects of the acquisition of IXYS may not be achieved in a timely manner, or at all; and other risks that may be detailed in “Item 1A. Risk Factors” below and in the company’s other Securities and Exchange Commission filings. AVAILABLE INFORMATION The Company is subject to the reporting and information requirements of the Securities Exchange Act of 1934, as amended and as a result, are obligated to file annual, quarterly, and current reports, proxy statements, and other information with the United States Securities and Exchange Commission (“SEC”). The Company makes these filings available free of charge on its website (http://www.littelfuse.com) as soon as reasonably practicable after it electronically files them with, or furnish them to, the SEC. Information on the Company’s website does not constitute part of this Annual Report on Form 10-K. In addition, the SEC maintains a website (http://www.sec.gov) that contains the Company’s annual, quarterly, and current reports, proxy and information statements, and other information the Company electronically files with, or furnishes to, the SEC. The Company’s website and the information contained therein or connected thereto are not incorporated into this Annual Report on Form 10-K. ITEM 1. BUSINESS. GENERAL PART I Littelfuse, Inc., was incorporated under the laws of the State of Delaware in 1991. References herein to the “Company,” “we,” “our” or “Littelfuse” refer to Littelfuse, Inc. and its subsidiaries. References herein to “2018”, “fiscal 2018” or “fiscal year 2018” refer to the fiscal year ended December 29, 2018. References herein to “2017”, “fiscal 2017” or “fiscal year 2017” refer to the fiscal year ended December 30, 2017. References herein to “2016”, “fiscal 2016” or “fiscal year 2016” refer to the fiscal year ended December 31, 2016. The Company operates on a 52-53 week fiscal year (4-4-5 basis) ending on the Saturday closest to December 31. OVERVIEW Founded in 1927, Littelfuse is a global manufacturer of leading technologies in circuit protection, power control and sensing. Sold in over 150 countries, the Company’s products are found in automotive and commercial vehicles, industrial applications, data and telecommunications, medical devices, consumer electronics and appliances. With its broad product portfolio of fuses, semiconductors, polymers, ceramics, relays and sensors, and extensive global infrastructure, the Company’s worldwide associates partner with its customers to design, manufacture and deliver innovative, high-quality solutions for a safer, greener and increasingly connected world. Segments The Company conducts its business through three reportable segments: Electronics, Automotive, and Industrial. Within these segments, the Company designs, manufactures and sells components and modules for circuit protection, power control and sensing products throughout the world. The circuit protection products protect against electrostatic discharge, power surges, short circuits, voltage spikes and other harmful occurrences; our power control products safely and efficiently control power to mitigate equipment damage, minimize electrical hazards and improve productivity and our sensor products are used to identify and detect temperature, proximity, flow speed and fluid level in various applications. For segment and geographical information and consolidated net sales and operating income see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 16, Segment Information, of the Notes to Consolidated Financial Statements included in this Annual Report. • Electronics Segment: Consists of one of the broadest product offerings in the industry, including fuses and fuse accessories, positive temperature coefficient (“PTC”) resettable fuses, polymer electrostatic discharge (“ESD”) suppressors, varistors, 3 reed switch based magnetic sensing, gas discharge tubes; semiconductor and power semiconductor products such as discrete transient voltage suppressor (“TVS”) diodes, TVS diode arrays, protection and switching thyristors, silicon carbide, metal-oxide-semiconductor field-effect transistors (“MOSFETs”) and silicon carbide diodes; and insulated gate bipolar transistors (“IGBT”) technologies. The segment covers a broad range of end markets, including industrial and automotive electronics, electric vehicle infrastructure, data and telecommunications, medical devices, LED lighting, consumer electronics and appliances. Automotive Segment: Consists of a wide range of circuit protection, power control and sensing technologies for global original equipment manufacturers (“OEMs”), Tier-I suppliers and parts distributors in passenger car, heavy duty truck, off-road vehicles, material handling, agricultural, construction and other commercial vehicle industries. Passenger car fuse products include fuses and fuse accessories for internal combustion engine vehicles and hybrid and electric vehicles including blade fuses, battery cable protectors, resettable fuses, high-current fuses, and high-voltage fuses. Commercial vehicle products include fuses, switches, relays, and power distribution modules for the commercial vehicle industry. Automotive sensor products include a wide range of automotive and commercial vehicle products designed to monitor the passenger compartment occupants, safety and environment as well as the vehicle’s powertrain, emissions, speed and suspension. Industrial Segment: Consists of power fuses, protection relays and controls and other circuit protection products for use in various industrial applications such as oil, gas, mining, alternative energy - solar and wind, electric vehicle infrastructure, construction, HVAC systems, elevator and other industrial equipment. • • Strategy In December 2016, the Company announced its five-year strategic plan. Building upon its achievements from its previous five- year plan and leveraging the global mega trends of safety, energy efficiency and the connected world, the Company is targeting an average annual accelerated organic growth of 5-7 percent and growth from strategic acquisitions of 5-7 percent. The Company’s strategic goals include growing its circuit protection platform, accelerating growth in its power control platform and doubling its sensor platform. The Company expects to do this through content and share gains, targeting underpenetrated geographies and markets, leveraging investments in its people, innovations and operating systems, and capitalizing on growth opportunities where technologies and applications are converging across its segments, while continuing to acquire and integrate businesses that fit its strategic focus areas. Recent Acquisitions • • IXYS Corporation: On January 17, 2018, the Company acquired IXYS, a global pioneer in the power semiconductor and integrated circuit markets with a focus on medium to high voltage power semiconductors across the industrial, communications, consumer and medical markets. IXYS has a broad customer base, serving more than 3,500 customers through its direct sales force and global distribution partners. The purchase price for IXYS was $856.5 million, which included consideration of cash, Littelfuse common stock, and the value of converted, or cash settled IXYS equity awards. The operations of IXYS are included in the Electronics segment. U.S. Sensor: On July 7, 2017, the Company acquired the assets of U.S. Sensor Corporation (“U.S. Sensor”) for $24.3 million. U.S. Sensor manufactures a variety of high quality negative temperature coefficient thermistor probes and assemblies. The acquisition expands the Company’s existing sensor portfolio in several key electronics and industrial end markets. The operations of U.S. Sensor are included in the Electronics segment. • Monolith Semiconductor Inc.: On February 28, 2017, pursuant to a Securities Purchase Agreement between the Company and the stockholders of Monolith Semiconductor Inc. (“Monolith”), a U.S. start-up Company developing silicon carbide technology, the Company increased its investment in Monolith by acquiring approximately 62% of the outstanding common stock of Monolith for $15.0 million. During 2018, the Company acquired the remaining outstanding stock of Monolith for $9.0 million based on Monolith meeting certain technical and sales targets, and now owns 100% of Monolith. The operations of Monolith are included in the Electronics segment. • ON Portfolio: On August 29, 2016, the Company acquired certain assets of select businesses (the “ON Portfolio”) of ON Semiconductor Corporation for $104.0 million. The acquired business, which is included in the Electronics segment, consists of a product portfolio that includes transient voltage suppression (“TVS”) diodes, switching thyristors, and IGBTs for automotive ignition applications. The acquisition expands the Company’s offerings in power semiconductor applications as well as increases its presence in the automotive electronics market. The ON Portfolio products have strong 4 synergies with the Company’s existing circuit protection business, will strengthen its channel partnerships and customer engagement, and expand its power semiconductor portfolio. • Menber’s: On April 4, 2016, the Company completed the acquisition of Menber’s S.p.A. (“Menber’s”) headquartered in Legnago, Italy for $19.2 million (net of cash acquired and after settlement of a working capital adjustment). The acquired business is part of the Company's commercial vehicle product business within the Automotive segment and specializes in the design, manufacturing, and selling of manual and electrical high current switches and trailer connectors for commercial vehicles. The transaction expands the Company’s commercial vehicle products business globally. • PolySwitch: On March 25, 2016, the Company acquired 100% of the circuit protection business (“PolySwitch”) of TE Connectivity Ltd. for $348.3 million (net of cash acquired and after settlement of certain post-closing adjustments). The PolySwitch business, which is split between the Automotive and Electronics segments, has a leading position in polymer based resettable circuit protection devices, with a strong global presence in the automotive, battery, industrial, communications and mobile computing markets. PolySwitch has manufacturing facilities in Shanghai and Kunshan, China, and Tsukuba, Japan. The acquisition allows the Company to strengthen its global circuit protection product portfolio, as well as expands its presence in the automotive electronics and battery protection end markets. The acquisition also significantly increases the Company’s presence in Japan. Sales and Operations The Company operates in three geographic regions: Asia-Pacific, the Americas, and Europe. The Company manufactures products and sells to customers in all three regions. Net sales by segment for the periods indicated are as follows: (in millions) Electronics Automotive Industrial Total 2018 1,124.3 479.8 114.4 1,718.5 $ $ $ $ Fiscal Year 2017 661.9 453.2 106.4 1,221.5 Net sales in the Company’s three geographic regions, based upon the shipped-to destination, are as follows: (in millions) Asia-Pacific Americas Europe Total 2018 753.3 578.6 386.6 1,718.5 $ $ $ $ Fiscal Year 2017 541.1 436.5 243.9 1,221.5 2016 535.2 415.2 105.8 1,056.2 2016 444.8 411.1 200.3 1,056.2 $ $ $ $ The Company’s products are sold worldwide through distributors, a direct sales force and manufacturers’ representatives in certain regions. For the fiscal year 2018, approximately 70% of the Company’s net sales were to customers outside the United States (“U.S.”), including approximately 27% to China. The Company manufactures many of its products on fully integrated manufacturing and assembly equipment. The Company maintains product quality through a Global Quality Management System with most manufacturing sites certified under ISO 9001:2000. In addition, several of the Littelfuse manufacturing sites are also certified under IATF 16949 and ISO 14001. Additional information regarding the Company’s sales by geographic area and long-lived assets in different geographic areas is in Note 16, Segment Information, of the Notes to Consolidated Financial Statements included in this Annual Report. 5 BUSINESS ENVIRONMENT Electronics Segment The Company designs, develops and manufactures a wide range of components and modules that provide circuit protection, power control and sensing for a multitude of electronic and industrial applications. Circuit protection technologies in the Electronics Segment are designed to protect against harmful occurrences like voltage spikes, short circuits, power surges and electrostatic discharge. Products include a vast array of fuses and other circuit protection technologies used in a variety of electronic products including consumer electronics, automotive electronics, IT and telecommunications equipment, medical devices, lighting products, and white goods. The Company also offers a wide range of power control products used to convert and regulate energy and safely and efficiently control power across a broad spectrum of applications including industrial and automotive power systems, motor drives and power conversion applications. Products include a comprehensive portfolio of semiconductor components including thyristors, rectifiers and fast recovery diodes, IGBTs and wide band gap devices. The acquisition of IXYS is expected to accelerate the Company’s growth across the power control market driven by IXYS’s extensive power semiconductor portfolio in medium and high-power applications and technology expertise. The Company expects to continue to diversify and expand its presence within industrial electronics markets, leveraging the strong IXYS industrial OEM customer base. The Company also expects to increase long-term penetration of its power semiconductor portfolio in automotive markets, expanding its global content per vehicle. Another strategic area of focus in the Electronics Segment is the Company’s continued investment in silicon carbide, a promising semiconductor material that enables more efficient power conversion than traditional silicon-based devices. In October, the Company completed the acquisition of Monolith and now owns 100% of the company. The Monolith silicon carbide technology provides a very broad portfolio of products to address the medium- to high-end side of the growing power semiconductor electronics market. As products become increasingly sophisticated, smarter and more connected, the need for complex sensor technologies continues to grow. Sensors products in the Electronics Segment are used in a wide variety of applications including appliances, security systems, medical equipment, and consumer and industrial controls. Automotive Segment The Company is a primary supplier of fuses and circuit protection technologies to global automotive OEMs, through sales made to Tier One automotive suppliers, main-fuse box, and wire harness manufacturers that incorporate the fuses into their products, as well as automotive component parts manufacturers, and automotive parts distributors. The Company also sells its fuses in the replacement parts market, with its products being sold through merchandisers, discount stores, and service stations, as well as under private label by national firms. Circuit protection needs in the automotive space are expected to generate additional content-per-vehicle exceeding global auto production, with the increased electronification of vehicles, as well as the continued electrification of vehicles with the development and market penetration of hybrid and electric vehicles. Over the past several years, the Company has expanded the Automotive segment into the commercial vehicle market with various acquisitions, also expanding the Company’s portfolio of power control products. Additional products in this market include: power distribution modules, low and high current switches, solenoids and relays, battery management products, ignition key switches, and trailer connectors. Custom and market products are sold directly to a mix of OEMs, Tier One suppliers, aftermarket channels, as well as through general distribution. The Company also continues to expand its automotive sensor business and products and expects this market to provide future long-term growth opportunities. Products sold into the market include a wide range of automotive and commercial vehicle sensors designed to monitor the passenger compartment occupants, safety and environment as well as the vehicle’s powertrain, emissions, speed and suspension. A majority of the Company’s automotive sensor sales are made to Tier One suppliers. Industrial Segment The Company manufactures and sells a broad range of low-voltage and medium-voltage circuit protection products to electrical distributors and their customers in the construction, OEM and industrial maintenance, repair and operating supplies (“MRO”) markets. The Company also designs and manufactures protection relays for the global oil, gas and mining, and general industrial 6 markets. The Company sees growth opportunities by expanding both the end markets it serves and channel partnerships, as well as continuing to invest in new product development. Power fuses are used to protect circuits in various types of industrial equipment and in industrial and commercial buildings. Protection relays are used to protect personnel and equipment in harsh environments such as oil, gas and mining, and industrial environments from excessive currents, over voltages, and electrical shock hazards called ground faults. Major applications for protection relays include protection of motor, transformer, and power-line distribution circuits. Ground-fault relays are used to protect personnel and equipment in wet environments such as underground mining or water treatment applications where there is a greater risk for electricity to come in contact with water and create a shock hazard. PRODUCT DESIGN AND DEVELOPMENT The Company employs scientific, engineering, and other personnel to continually improve its existing product lines and to develop new products at its research, product design, and development (“R&D”) and engineering facilities with primary locations in China, Germany, Italy, Japan, Lithuania, Mexico, Philippines, Taiwan, United Kingdom, and the United States. The Company maintains a staff of engineers, chemists, material scientists and technicians whose primary responsibility is to design and develop new products. Proposals for the development of new products are initiated primarily by sales, marketing, and product management personnel with input from customers. The entire product development process usually ranges from a few months to a few years based on the complexity of development, with continuous efforts to reduce the development cycle. During fiscal years 2018, 2017, and 2016, the Company expended $87.3 million, $50.5 million, and $42.2 million, respectively, on R&D. PATENTS, TRADEMARKS, AND OTHER INTELLECTUAL PROPERTY The Company generally relies on patents, trademarks, licenses, and nondisclosure agreements to protect its intellectual property and proprietary products. In cases where it is deemed necessary by management, key employees are required to sign an agreement that they will maintain the confidentiality of the Company’s proprietary information and trade secrets. The Company owns a large portfolio of patents worldwide and new products are continually being developed to replace older products. The Company regularly applies for patent protection on such new products. While, in the aggregate, the Company’s patents are important in the operation of its businesses, the Company believes that the loss by expiration or otherwise of any one patent or group of patents would not materially affect its business. MANUFACTURING The Company’s manufacturing facilities are in China, Germany, Italy, Japan, Lithuania, Mexico, Philippines, Portugal, the United Kingdom, and the United States. The Company performs the majority of its own fabrication and maintains in-house capabilities for metal stamping, surface mount assembly, plating (silver, nickel, zinc, and oxides) and thermoplastic molding. In addition, the Company fabricates semiconductor wafers for certain applications and maintains in-house capability for epitaxy fabrication, die attach, and wafer probe testing. After sub-components are readied for assembly, final assembly is accomplished on fully automatic and semi-automatic assembly machines. Quality assurance and operations personnel, using techniques such as statistical process control, perform tests, checks and measurements during the production process to maintain the highest levels of product quality, including safety and reliability, and customer satisfaction. Additionally, the Company utilizes external wafer foundries and subcontracted test and assembly facilities for a portion of its semiconductor business. The principal raw materials for the Company’s products include copper and copper alloys, heat-resistant plastics, zinc, melamine, glass, silver, gold, raw silicon, solder, and various gases. The Company uses a single source for several heat-resistant plastics and for zinc but has specifically identified capable alternative heat-resistant plastics and zinc sources. All other raw materials are purchased from a number of readily available outside sources. MARKETING The Company goes to market through a worldwide selling organization consisting of direct sales personnel, distribution partners and manufacturers’ representatives. The direct sales force closely works with global OEM, Tier One automotive, consulting engineers, and major end user customers to design-in and sell the Company’s circuit protection, power control and sensing products. The distributors provide fulfillment for a majority of customers including those partnered with electronic manufacturing services (EMS). The direct sales force is supplemented with manufacturers’ representatives. The Company has sales offices and direct sales channels in all major regions of the world. 7 Electronics Segment Most Electronics segment products are sold through distribution partners, including global distributors such as Arrow Electronics, Inc., Future Electronics and TTI, Inc, and regional and high service distributors. Many of our products are incorporated into applications with complex design technical support requirements. These may be sold through our direct salesforce and fulfilled through our distribution partners. The Company is leveraging IXYS sales channels to continue growing OEM sales and customer relationships, and well as driving opportunities to cross-sell products. Automotive Segment The Company maintains a direct sales force to service all of the major automotive and commercial vehicle OEMs, system suppliers, and Tier One automotive and aftermarket customers globally. The Company also leverages its automotive customer relationships to sell products from the Electronics segment into automotive end markets, primarily to Tier One automotive customers. These revenues are reported in the Electronics segment. Industrial Segment The Company markets and sells its power fuses and protection relays through a direct sales force, manufacturers’ representatives, and electronics, industrial and electrical distributors, primarily across North America. The electrical and industrial distribution network is comprised of over 2,500 distributor branch locations. These distributors have customers that include electrical contractors, municipalities, utilities and factories. CUSTOMERS The Company sells to nearly 7,000 customers and distributors worldwide. Sales to Arrow Electronics, Inc., which were reported in our Electronics, Automotive and Industrial segments were 10.7% and 10.6% of consolidated net sales in 2018 and 2017, respectively, but less than 10% in 2016. No other single customer accounted for more than 10% of net sales during any of the last three years. During fiscal 2018, 2017, and 2016, net sales to customers outside the U.S. accounted for approximately 70%, 69%, and 66%, respectively, of the Company’s total net sales. COMPETITION The Company’s products compete with similar products of other manufacturers, some of which may have substantially greater financial resources than the Company. In the Electronics segment, the Company’s competitors include Eaton Corporation, Bel Fuse Inc., Bourns Inc., EPCOS, ON Semiconductor Corporation, Infineon Technologies, STMicroelectronics NV, Semtech Corporation, and Vishay Intertechnology Inc. In the Automotive segment, the Company’s competitors include Eaton Corporation, Pacific Engineering, MTA, CTS Corporation, Amphenol Corporation, Sensata Technologies Holding NV, and TE Connectivity Ltd. In the Industrial segment, the Company’s major competitors include Eaton Corporation, GE Multilin, and Mersen. The Company believes that it competes on the basis of innovative products, the breadth of its product line, the quality and design of its products, and the responsiveness of its customer service, in addition to price. BACKLOG The backlog of unfilled orders at December 29, 2018 was approximately $405.7 million, compared to $676.1 million at December 30, 2017 with the decrease primarily driven by the Automotive segment, partially offset by an increase from the Electronics segment. Substantially all the orders currently in backlog are scheduled for delivery in 2019. EMPLOYEES As of December 29, 2018, the Company employed approximately 12,300 employees worldwide. Approximately 20% of the Company's total workforce was employed under collective bargaining agreements at December 29, 2018. In Mexico, the Company has two separate collective bargaining agreements, one for 1,500 employees in Piedras Negras, expiring January 31, 2020 and the second for 650 employees in Matamoros, expiring January 1, 2020. In Germany, the Company has collective bargaining agreements with approximately 340 employees in Lampertheim and Essen, expiring March 31, 2020. In the United Kingdom, the Company has a collective bargaining agreement with some of the employees in Chippenham. Overall, the Company has historically maintained satisfactory employee relations and considers employee relations to be good. 8 ENVIRONMENTAL REGULATION The Company is subject to numerous foreign, federal, state, and local regulations relating to air and water quality, the disposal of hazardous waste materials, safety and health. Compliance with applicable environmental regulations has not significantly changed the Company’s competitive position, capital spending or earnings in the past and the Company does not presently anticipate that compliance with such regulations will change its competitive position, capital spending or earnings for the foreseeable future. The Company employs chemical engineers to monitor regulatory matters and believes that it is currently in compliance in all material respects with applicable environmental laws and regulations. Littelfuse GmbH, which was acquired by the Company in May 2004, is responsible for maintaining closed coal mines in Germany from legacy operations. The Company is compliant with German regulations pertaining to the maintenance of the mines and has an accrual related to certain of these coal mine shafts based on an engineering study estimating the cost of remediating the dangers (such as a shaft collapse) of certain of these closed coal mine shafts in Germany. The accrual is reviewed annually and calculated based upon the estimated costs of remediating the shafts. Further information regarding the coal mine liability accrual is provided in Note 1, Summary of Significant Accounting Policies and Other Information, of the Notes to Consolidated Financial Statements included in this Annual Report. ITEM 1A. RISK FACTORS. The Company’s business, financial condition, and results of operations are subject to various risks and uncertainties, including the risk factors it has identified below. Any of the following risk factors could materially and adversely affect the Company’s business, financial condition, or results of operations. These factors are not necessarily listed in order of importance. The Company’s industry is subject to intense competitive pressures. The Company operates in markets that are highly competitive. The Company competes on the basis of price, product performance and quality, service, and / or brand name across the industries and markets it serves. Competitive pressures could affect the prices the Company is able to charge its customers or demand for its products. The Company may not always be able to compete on price, particularly when compared to manufacturers with lower cost structures. Some of the Company’s competitors have substantially greater sales, financial and manufacturing resources and may have greater access to capital than the Company. As other companies enter its markets or develop new products, competition may further intensify. The Company’s failure to compete effectively could materially adversely affect its business, financial condition, and results of operations. The Company engages in strategic acquisitions and may not realize the anticipated benefits of the acquisitions and / or may encounter difficulties in integrating these businesses. The Company seeks to grow through strategic acquisitions. In the past, the Company has acquired a number of businesses or companies and additional product lines and assets. The Company intends to continue to expand and diversify its operations with additional future acquisitions. An acquired business, technology, service or product could under-perform relative to the Company’s expectations and the price paid for it, or not perform in accordance with the Company’s anticipated timetable. This could cause the Company’s financial results to differ from expectations in any given fiscal period, or over the long term. The success of these transactions also depends on the Company’s ability to integrate the assets, operations, and personnel associated with these acquisitions. The Company may encounter difficulties in integrating acquisitions with the Company’s operations and may not realize the degree or timing of the benefits that are anticipated from an acquisition. The Company may also discover liabilities or deficiencies associated with the companies or assets it acquires that were not identified in advance, which may result in significant unanticipated costs. The effectiveness of the Company’s due diligence review and its ability to evaluate the results of such due diligence are dependent upon the accuracy and completeness of statements and disclosures made or actions taken by the companies acquired or their representatives, as well as the limited amount of time in which acquisitions are executed. In addition, the Company may fail to accurately forecast the financial impact of an acquisition transaction, including tax and accounting charges. Acquisitions may also result in recording of significant additional expenses to the results of operations and recording of substantial intangible assets on the balance sheet upon closing. Any of these factors may adversely affect the Company’s financial condition and results of operations. 9 Reorganization activities may lead to additional costs and material adverse effects. In the past, the Company has taken actions to restructure and optimize its production and manufacturing capabilities and efficiencies through relocations, consolidations, plant closings or asset sales. In the future, the Company may take additional restructuring actions including the consolidating, closing or selling of additional facilities. These actions could result in impairment charges and various charges for such items as idle capacity, disposition costs and severance costs, in addition to normal or attendant risks and uncertainties. The Company may be unsuccessful in any of its current or future efforts to restructure or consolidate its business. Plans to minimize or eliminate any loss of revenues during restructuring or consolidation may not be achieved. These activities may have a material adverse effect upon the Company’s business, financial condition and results of operations. The Company may be unable to manufacture and deliver products in a manner that is responsive to its customers’ needs. The end markets for the Company’s products are characterized by technological change, frequent new product introductions and enhancements, changes in customer requirements and emerging industry standards. The introduction of products embodying new technologies and the emergence of new industry standards could render its existing products obsolete and unmarketable before it can recover any or all of its research, development, and commercialization expenses on capital investments. Furthermore, the life cycles of its products may change and are difficult to estimate. The Company’s future success will depend upon its ability to manufacture and deliver products in a manner that is responsive to its customers’ needs. The Company will need to develop and introduce new products and product enhancements on a timely basis that keep pace with technological developments and emerging industry standards and address increasingly sophisticated requirements of its customers. The Company invests heavily in research and development without knowing that it will recover these costs. The Company’s competitors may develop products or technologies that will render its products non-competitive or obsolete. If it cannot develop and market new products or product enhancements in a timely and cost-effective manner, its business, financial condition and results of operations could be materially adversely affected. The Company’s ability to manage currency or commodity price fluctuations or supply shortages is limited. As a resource-intensive manufacturing operation, the Company is exposed to a variety of market and asset risks, including the effects of changes in commodity prices, foreign currency exchange rates, and interest rates. The Company has multiple sources of supply for the majority of its commodity requirements. However, significant shortages that disrupt the supply of raw materials or result in price increases could affect prices the Company charges its customers, its product costs, and the competitive position of its products and services. The Company monitors and manages these exposures as an integral part of its overall risk management program, which recognizes the unpredictability of markets and seeks to reduce the potentially adverse effects on its results. Nevertheless, changes in currency exchange rates, commodity prices and interest rates cannot always be predicted. In addition, because of intense price competition and the Company’s high level of fixed costs, it may not be able to address such changes even if they are foreseeable. Substantial changes in these rates and prices could have a material adverse effect on the Company’s results of operations and financial condition. In addition, significant portions of its revenues and earnings are exposed to changes in foreign currency rates. As it operates in multiple foreign currencies, changes in those currencies relative to the U.S. dollar will impact its revenues and expenses. The impact of possible currency devaluation in countries experiencing high inflation rates or significant exchange fluctuations can impact the Company’s results and financial guidance. For additional discussion of interest rate, currency or commodity price risk, see Item 7A, Quantitative and Qualitative Disclosures about Market Risk. The Company’s effective tax rate could materially increase as a consequence of various factors, including interpretations and administrative guidance in regard to the Tax Act (defined below), U.S. and/or international tax legislation, mix of the Company’s earnings by jurisdiction, and U.S. and non-U.S. jurisdictional tax audits. On December 22, 2017, the U.S. enacted legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). Although certain administrative guidance has been issued, the appropriate application of many provisions of the Tax Act remain uncertain. As discussed more fully in Note 14, Income Taxes, of the Notes to Consolidated Financial Statements included in this Annual Report, adjustments to income tax expense may be necessary in future periods if provisions of the Tax Act, and their interaction with other provisions of the U.S. Internal Revenue Code, are interpreted differently than interpretations made by the Company, whether through issuance of additional administrative guidance, or through further review of the Tax Act by the Company and its advisors. Such adjustments could have a material adverse effect on the Company’s effective tax rate and cash flows. The Company is subject to taxes in the U.S. and numerous non-U.S. jurisdictions. Therefore, it is subject to changes in tax laws in each of these jurisdictions. The Company’s income tax rate in certain non-U.S. jurisdictions is substantially lower than the U.S. statutory tax rate. Legislative proposals have been made from time to time to reduce these tax benefits, in some cases with the tax increase phased in over a multi-year transition period. In addition, certain non-U.S. jurisdictions are considering tax legislation 10 based upon recommendations made by the Organization for Economic Co-operation and Development in connection with its Base Erosion and Profit Shifting study. The outcome of these and other legislative developments could have a material adverse effect on the Company’s effective tax rate and cash flows. The tax rates applicable in the jurisdictions within which the Company operates vary widely. Therefore, the Company’s effective tax rate may be adversely affected by changes in the mix of its earnings by jurisdiction. The Company’s tax returns are subject to examination by various U.S. and non-U.S. tax authorities, including the U.S. Internal Revenue Service. The Company regularly assesses the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of its provision for income taxes. However, there can be no assurance as to the outcome of these examinations. Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business and results of operations. The U.S. government has adopted a new approach to trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements. It has also imposed tariffs on certain foreign goods and products. These measures may materially increase costs for goods imported into the United States. This in turn could require us to materially increase prices to our customers which may reduce demand, or, if we do not or are unable to increase prices, could result in lower margins on products sold. Changes in U.S. trade policy have resulted in, and could result in more, U.S. trading partners adopting responsive trade policies making it more difficult or costly for us to export our products to those countries. A decline in expected profitability of the Company or individual reporting units of the Company could result in the impairment of assets, including goodwill and other long-lived assets. The Company holds material amounts of goodwill and other long-lived assets on its balance sheet. A decline in expected profitability, particularly if there is a decline in the global economy, could call into question the recoverability of the Company’s related goodwill and other long-lived tangible and intangible assets and require the write down or write off of these assets. Such an occurrence has had and could continue to have a material adverse effect on the Company’s consolidated results of operations, financial position and cash flows. A significant fluctuation between the U.S. dollar and other currencies could adversely impact the Company's revenue and earnings. Although the Company's financial results are reported in U.S. dollars, the majority of the Company’s operations consist of manufacturing and sales activities in foreign countries. The Company’s most significant net long exposure is to the euro. The Company’s most significant net short exposures are to the Chinese renminbi, Mexican peso, and Philippine peso. Changes in foreign exchange rates could have an adverse effect on the Company's results of operations, financial position and cash flows. The Company’s revenues may vary significantly from period to period. The Company’s revenues may vary significantly from one accounting period to another due to a variety of factors including: • • • • • • • • • • • • changes in customers’ buying decisions; changes in demand for its products; changes in its distributor inventory stocking; the Company’s product mix; the Company’s effectiveness in managing manufacturing processes; costs and timing of its component purchases; the effectiveness of its inventory control; the degree to which it is able to utilize its available manufacturing capacity; the Company’s ability to meet delivery schedules; general economic and industry conditions; local conditions and events that may affect its production volumes, such as labor conditions and political instability; and seasonality of certain product lines. The bankruptcy or insolvency of a major customer could adversely affect the Company. The bankruptcy or insolvency of a major customer could result in lower sales revenue and cause a material adverse effect on the Company’s business, financial condition, and results of operations. In addition, the bankruptcy or insolvency of a major auto 11 manufacturer or significant supplier likely could lead to substantial disruptions in the automotive supply base, resulting in lower demand for the Company’s products, which likely would cause a decrease in sales revenue and have a substantial adverse impact on the Company’s business, financial condition and results of operations. The Company is exposed to political, economic, and other risks that arise from operating a multinational business. The Company has significant operating activities in numerous countries around the globe that contribute significantly to its revenues and earnings. Sales to customers outside the United States constituted approximately 70% of the Company's net sales in fiscal 2018. Serving a global customer base and remaining competitive in the global marketplace requires the Company to place its production in countries outside the U.S., including emerging markets, to capitalize on market opportunities and maintain a cost- efficient structure. In addition, the Company sources a significant amount of raw materials and other components from third-party suppliers in low-cost countries. The Company’s operating activities are subject to a number of risks generally associated with multi-national operations, including risks relating to the following: • • • • • • • • • • • • • • • general economic conditions; currency fluctuations and exchange restrictions; import and export duties and restrictions; the imposition of tariffs and other import or export barriers; compliance with regulations governing import and export activities; current and changing regulatory requirements; political and economic instability; potentially adverse income tax consequences; transportation delays and interruptions; labor unrest; natural disasters; terrorist activities; public health concerns; difficulties in staffing and managing multi-national operations; and limitations on the Company’s ability to enforce legal rights and remedies. Any of these factors could have a material adverse effect on the Company’s business, financial condition and results of operations. Disruptions in the Company’s manufacturing, supply or distribution chain could result in an adverse impact on results of operations. The Company sources materials and sell product through various international network channels. A disruption could occur within the Company’s manufacturing, distribution or supply chain network. This could include damage or destruction due to various causes including natural disasters or political instability which would cause one or more of these network channels to become non-operational. This could adversely affect the Company’s ability to manufacture or deliver its products in a timely manner, impair its ability to meet customer demand for products and result in lost sales or damage to its reputation. Such a disruption could have a material adverse effect on the Company’s business, financial condition and results of operations. The inability to maintain access to capital markets may adversely affect the Company’s business and financial results. The Company’s ability to invest in its businesses, make strategic acquisitions, and refinance maturing debt obligations may require access to the capital markets and sufficient bank credit lines to support short-term borrowings. If the Company is unable to access the capital markets or bank credit facilities, it could experience a material adverse effect on its business, financial condition and results of operations. Fixed costs may reduce operating results if sales fall below expectations. The Company’s expense levels are based, in part, on its expectations for future sales. Many of the Company’s expenses, particularly those relating to capital equipment and manufacturing overhead, are relatively fixed. The Company might be unable to reduce spending quickly enough to compensate for reductions in sales. Accordingly, shortfalls in sales could materially and adversely affect the Company’s business, financial condition and results of operations. 12 The volatility of the Company’s stock price could affect the value of an investment in the Company’s stock and future financial position. The market price of the Company’s stock can fluctuate widely. Between December 30, 2017 and December 29, 2018, the closing sale price of the Company’s common stock ranged between a low of $155.15 and a high of $238.11. The volatility of the stock price may be related to any number of factors, such as volatility in the financial markets, general macroeconomic conditions, industry conditions, analysts’ expectations concerning the Company’s results of operations, or the volatility of its revenues as discussed above under “The Company’s Revenues May Vary Significantly from Period to Period.” The historic market price of the Company’s common stock may not be indicative of future market prices. The Company may not be able to sustain or increase the value of its common stock. Declines in the market price of the Company’s stock could adversely affect the Company’s ability to retain personnel with stock incentives, to acquire businesses or assets in exchange for stock and/or to conduct future financing activities with or involving the Company’s common stock. The Company is exposed to, and may be adversely affected by, potential security breaches or other disruptions to its information technology systems and data security. The Company relies on its information technology systems and networks in connection with many of its business activities. Some of these networks and systems are managed directly by the Company, while others are managed by third-party service providers and are not under the Company’s direct control. The Company’s operations routinely involve receiving, storing, processing and transmitting sensitive information pertaining to its business, customers, dealers, suppliers, employees, and other sensitive matters. As with most companies, the Company has experienced cyber-attacks, attempts to breach its systems, and other similar incidents, none of which have been material. Any future cyber incidents could, however, materially disrupt operational systems; result in loss of trade secrets or other proprietary or competitively sensitive information; compromise personally identifiable information regarding employees or customers or other third parties; and jeopardize the security of the Company’s facilities. A cyber incident could be caused by malicious outsiders using sophisticated methods to circumvent firewalls, encryption, and other security defenses. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, the Company may be unable to anticipate these techniques or to implement adequate preventative measures. Information technology security threats, including security breaches, computer malware, and other cyber- attacks are increasing in both frequency and sophistication and could create financial liability, subject the Company to legal or regulatory sanctions or damage the Company’s reputation with customers, dealers, suppliers, and other stakeholders. The Company continuously seeks to maintain a robust program of information security and controls, but the impact of a material information technology event could have a material adverse effect on the Company’s competitive position, reputation, results of operations, financial condition and cash flows. The Company’s business may be interrupted by labor disputes or other interruptions of supplies. A work stoppage could occur at certain Company facilities, most likely as a result of disputes under collective bargaining agreements or in connection with negotiations of new collective bargaining agreements. In addition, the Company may experience a shortage of supplies for various reasons, such as financial distress, work stoppages, natural disasters or production difficulties that may affect one of its suppliers. A significant work stoppage, or an interruption or shortage of supplies for any reason, if protracted, could substantially adversely affect the Company’s business, financial condition and results of operations. The transfer of the Company’s manufacturing operations and changes in its distribution model could disrupt operations for a limited time. Failure to attract and retain qualified personnel could affect the Company’s business results. The Company’s success, both generally and in connection with mergers and acquisitions, depends on the Company’s ability to attract, retain, and motivate a highly-skilled and diverse management team and workforce. Failure to ensure that the Company has the depth and breadth of personnel with the necessary skill set and experience could impede its ability to deliver growth objectives and execute the Company’s strategy. Competition for qualified employees among companies that rely heavily upon engineering and technology is at times intense, and the loss of qualified employees could hinder the Company’s ability to conduct research activities successfully and develop marketable products. Environmental liabilities could adversely impact the Company’s financial position. Foreign, federal, state and local laws and regulations impose various restrictions and controls on the discharge of materials, chemicals and gases used in the Company’s manufacturing processes or in its finished goods. These environmental regulations have required the Company to expend a portion of its resources and capital on relevant compliance programs. Under these laws and regulations, the Company could be held financially responsible for remedial measures if its current or former properties are contaminated or if it sends waste to a landfill or recycling facility that becomes contaminated, even if the Company did not cause 13 the contamination. The Company may be subject to additional common law claims if it releases substances that damage or harm third parties. In addition, future changes in environmental laws or regulations may require additional investments in capital equipment or the implementation of additional compliance programs. Any failure to comply with new or existing environmental laws or regulations could subject the Company to significant liabilities and could have a material adverse effect on its business, financial condition and results of operations. In the conduct of manufacturing operations, the Company has handled and does handle materials that are considered hazardous, toxic or volatile under federal, state, and local laws. The risk of accidental release of such materials cannot be completely eliminated. In addition, the Company operates or owns facilities located on or near real property that was formerly owned and operated by others. Certain of these properties were used in ways that involved hazardous materials. Contaminants may migrate from, within or through these properties. These releases or migrations may give rise to claims. Where third parties are responsible for contamination, the third parties may not have funds, or not make funds available when needed, to pay remediation costs imposed upon the Company under environmental laws and regulations. The Company is responsible for the maintenance of discontinued coal mining operations in Germany. The risk of environmental remediation exists and the Company is in the process of remediating the mines considered to be the most at risk. Customer demands and regulations related to conflict-free minerals may force the Company to incur additional expenses. The Dodd-Frank Wall Street Reform and Consumer Protection Act requires disclosure of use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries and efforts to prevent the use of such minerals. In the semiconductor industry, these minerals are most commonly found in metals. As there may be only a limited number of suppliers offering “conflict free” metals, the Company cannot be certain that it will be able to obtain necessary metals in sufficient quantities or at competitive prices. Also, the Company may face challenges with its customers and suppliers if it is unable to sufficiently verify that the metals used in its products are “conflict free.” The Company may not be successful protecting its patents and trademarks. The Company considers its intellectual property, including patents, trade names, and trademarks, to be of significant value to its business as a whole. The Company’s products are manufactured, marketed, and sold under a portfolio of patents, trademarks, licenses, and other forms of intellectual property, some of which expire or are allowed to lapse at various dates in the future. The Company develops and acquires new intellectual property on an ongoing basis and considers all of its intellectual property to be valuable. The Company's policy is to file applications and obtain patents for the great majority of its novel and innovative new products including product modifications and improvements. Based on the broad scope of its product lines, the Company believes that the loss or expiration of any single intellectual property right would not have a material adverse effect upon its business, financial condition or results of operations; however, multiple losses or expirations could have a material adverse effect upon the Company’s business, financial condition or results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS. None. ITEM 2. PROPERTIES. The Company’s engineering and research and development, manufacturing, sales, and distribution centers are located in approximately 65 owned or leased facilities worldwide with primary operations in China, Germany, Italy, Japan, Lithuania, Mexico, Netherlands, Philippines, South Korea, Taiwan, United Kingdom, and the United States totaling approximately 3.2 million square feet. The Company’s owned facilities include approximately 2.0 million square feet and the Company’s leased facilities include approximately 1.2 million square feet. The Company’s corporate headquarters is located in the U.S. in Chicago, Illinois. The Company believes its facilities are adequate to meet its requirements for the foreseeable future. ITEM 3. LEGAL PROCEEDINGS. The Company is not a party to any material legal proceedings, other than routine litigation incidental to its business. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 14 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES. Shares of the Company’s common stock are traded under the symbol “LFUS” on the NASDAQ Global Select MarketSM. Number of Holders As of February 18, 2019, there were 75 holders of record of the Company’s common stock. Dividend Policy The future dividend policy will be determined by the Board of Directors based upon its evaluation of earnings, cash availability, and general business prospects. Currently, there are restrictions on the payment of dividends contained in the Company’s credit agreements that relate to the maintenance of certain financial ratios. However, the Company expects to continue paying cash dividends on a quarterly basis for the foreseeable future. Recent Sales of Unregistered Securities There were no sales of unregistered securities by us or affiliates during the fiscal year ended December 29, 2018. Purchases of Equity Securities The Company’s Board of Directors authorized the repurchase of up to 1,000,000 shares of the Company’s common stock under a program for the period May 1, 2018 to April 30, 2019. The Company repurchased 391,972 shares of its common stock during fiscal 2018 and 608,028 shares may yet be purchased under the program as of December 29, 2018. As of February 18, 2019, the Company has repurchased 79,916 shares of its common stock since the fiscal year ended December 29, 2018. The table below presents shares of the Company’s common stock which were acquired by the Company during fiscal year ended December 29, 2018: Total number of shares purchased 200,000 100 191,872 391,972 Average price paid per share 179.55 175.00 166.64 — Total number of shares purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs 200,000 100 191,872 — 800,000 799,900 608,028 608,028 Period October 1 through October 31 November 1 through November 30 December 1 through December 29 Total Stock Performance Graph The following stock performance graph and related information shall not be deemed “soliciting material” or “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing. During June, 2018 Littelfuse common stock was moved from the Russell 2000 Index to Russell 1000 Index. The Company has included the Russell 1000 Index and Russell 2000 Index for the fiscal year ended December 29, 2018. The following stock performance graph compares the five-year cumulative total return on Littelfuse common stock to the five-year cumulative total returns on the Russell 1000 Index and the Dow Jones Electrical Components and Equipment Industry Group Index. The Company believes that the Russell 1000 Index and the Dow Jones Electrical Components and Equipment Industry Group Index represent a 15 broad market index and peer industry group for total return performance comparison. The stock performance shown on the graph below represents historical stock performance and is not necessarily indicative of future stock price performance. Littelfuse, Inc. Russell 1000 Russell 2000 Dow Jones US Electrical Components & Equipment 12/13 12/14 12/15 12/16 12/17 12/18 $ $ 100 100 100 100 $ 105 113 105 108 $ 118 114 100 102 $ 169 128 122 123 $ 221 156 139 157 193 148 124 138 The Dow Jones Electrical Components and Equipment Industry Group Index includes the common stock of A. O. Smith Corp.; AAON, Inc.; American Superconductor Corp.; AMETEK, Inc.; Amphenol Corp.; Arrow Electronics, Inc.; Avnet, Inc.; AVX Corp.; Capstone Turbine Corp.; CTS Corp.; General Cable Corp.; Hubbell Inc. Class B; Jabil Circuit, Inc.; KEMET Corp.; Littelfuse, Inc.; Methode Electronics, Inc.; Plexus Corp.; Powerwave Technologies, Inc.; Regal-Beloit Corp.; Vicor Corp.; and Vishay Intertechnology, Inc. For Littelfuse, Inc. and all indexes noted above, a $100 investment made on December 28, 2013 and reinvestment of all dividends is assumed. Returns for the Company’s fiscal years presented above are as of the last day of the respective fiscal year which was December 27, 2014, January 2, 2016, December 31, 2016, December 30, 2017, and December 29, 2018 for the fiscal years 2014, 2015, 2016, 2017, and 2018, respectively. 16 ITEM 6. SELECTED FINANCIAL DATA. The information presented below provides selected financial data of the Company during the past five fiscal years and should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8, Financial Statements and Supplementary Data, for the respective years presented: (in thousands, except per share data) Net sales Gross profit Operating income Net income Per share of common stock: Income from continuing operations - Basic - Diluted Cash dividends paid Cash and cash equivalents Total assets Short-term debt Long-term debt, less current portion 2018 $ 1,718,468 652,541 225,049 164,565 2017 $ 1,221,534 506,533 218,511 119,519 2016 $ 1,056,159 413,117 130,644 104,488 $ 2015 867,864 330,499 104,157 80,866 $ 2014 851,995 324,428 133,830 98,100 6.62 6.52 1.60 489,733 2,614,306 10,000 684,730 5.27 5.21 1.40 429,676 1,740,102 6,250 489,361 4.63 4.60 1.24 275,124 1,491,194 6,250 447,892 3.58 3.56 1.08 328,786 1,065,475 87,000 83,753 4.35 4.32 0.94 297,571 1,069,859 88,500 105,691 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion of Littelfuse’s financial condition and results of operations should be read together with the Consolidated Financial Statements and notes to those statements included in Item 8 of Part II of this Annual Report on Form 10-K. BUSINESS For a description of the Company’s business, segments and product offerings, see Item 1, Business. 2018 EXECUTIVE OVERVIEW Net sales increased by $496.9 million, or 40.7%, in 2018 compared to 2017. The increase was primarily driven by the acquisition of IXYS, which added $378.2 million in net sales and higher volume in Electronics segment due to strong demand across various end markets and geographies within the segment. Additionally, net sales increased by $16.7 million due to favorable changes in foreign exchange rates. The Company recognized net income of $164.6 million, or $6.52 per diluted share for the year ended December 29, 2018 compared to net income of $119.5 million, or $5.21 per diluted share, for the year ended December 30, 2017. The increase in net income reflects operating income increases in both the Electronics and Automotive segments and lower income tax expense driven by a one-time tax charge (the "Toll Charge") of $49.0 million in 2017 due to the enactment of the Tax Cuts and Jobs Act, partially offset by $36.9 million of purchase accounting inventory step-up charges, higher amortization expense and acquisition-related and integration charges related to the IXYS acquisition. Additionally, the per share results reflect an increase of 2.1 million shares in the weighted average diluted shares outstanding resulting from the shares issued in conjunction with the acquisition of IXYS. Net cash provided by operating activities was $331.8 million for the year ended December 29, 2018 as compared to $269.2 million for the year ended December 30, 2017. The increase in net cash provided by operating activities reflected higher earnings and favorable working capital management, which more than offset higher payments related to cash taxes and acquisition and integration costs. On January 17, 2018, the Company acquired IXYS, a global pioneer in the power semiconductor and integrated circuit markets with a focus on medium to high voltage power semiconductors across the industrial, communications, consumer and medical markets. IXYS has a broad customer base, serving more than 3,500 customers through its direct sales force and global distribution partners. The purchase price for IXYS was $856.5 million, which included consideration of cash, Littelfuse common stock, and the value of converted or cash settled IXYS equity awards. IXYS’ operations are included in the Electronics segment. 17 On July 6, 2018, the Trump administration imposed Section 301 tariffs on certain products (known as List 1) that are imported into the United States where the country of origin is China. Additionally, on August 23, 2018, List 2 was put into effect which imposed an additional 25% tariff to products on the list items. These tariffs primarily impact the Electronics segment and, to a lesser extent, our Automotive segment. The Company continues to evaluate the impact on our future results of operations. OUTLOOK Vision and Strategy The Company works with its customers to design and develop technologies that help them build safer, more reliable and more efficient products for a safer, greener and increasingly connected world in virtually every market that uses electrical energy, including automotive and commercial vehicles, industrial applications, data and telecommunications, medical devices, consumer electronics and appliances. Built upon that framework, the Company’s strategy is centered on growing its core circuit protection business, accelerating its growth in power control, and doubling its sensor platform. The Company’s strategic plan is focused on maximizing shareholder value by driving profitable sales growth, earnings per share growth, strong cash flow generation, and maintaining a balanced approach to capital allocation. The Company pursues the following major strategic initiatives, which are summarized below, along with more specific areas of focus. Strategic Objective 2019 and Future Priorities Double digit sales growth EPS growth Cash flow and liquidity Grow through increased product content with existing customers and increased market share Expand portfolio into new and underpenetrated geographies and end markets Increase innovation capabilities and investments Expand presence in products and applications that are converging across business segments Targeted mergers and acquisitions Focus on higher profitability growth opportunities Grow operating margins through operational excellence Disciplined approach to managing costs Disciplined management of working capital Prudent deployment of capital Disciplined approach to mergers and acquisitions Grow dividend in line with earnings Periodic share repurchases The Company’s strategy is to generate profitable sales growth. In order to accomplish this, the Company is focusing on accelerating organic growth by increasing its content and share gains, enhancing technology efforts to drive innovation, capitalizing on cross segment opportunities, and gaining traction in underpenetrated geographies and markets. The Company will continue to make targeted strategic acquisitions that align to its strategy and financial targets to support new business, products, markets, and technologies while leveraging existing customers. Management believes that sustaining profitability through a combination of profitable organic growth and acquisitions is critical to the Company’s competitiveness, while enhancing value the Company delivers to its customers. In addition, the Company continues to implement initiatives across all platforms to enhance productivity while managing its cost structure, including integration of operations and streamlining administrative and support activities to drive operating margins. The Company seeks to deploy its capital using a balanced approach. Priorities for capital deployment, over time, include investments to drive increased organic growth, targeted acquisitions that align to the Company’s strategic and financial metrics and returning capital to shareholders through dividends and periodic share repurchases. The Company uses several key indicators to gauge progress toward achieving these objectives. These indicators include organic sales growth, operating margins, cash flow from operations and capital expenditures. Through cycles, the Company targets double- 18 digit long-term (2017-2021) sales growth, split between 5-7% accelerated organic sales growth and 5-7% growth from strategic acquisitions, while targeting operating margins between 17% and 19% and double-digit earnings per share growth. Cash flow from operations less capital expenditures is targeted to approximate or exceed net income but in any given year can be significantly impacted by the timing of non-recurring or infrequent expenditures. Significant Accounting Policies and Critical Estimates Critical Accounting Policies and Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s most critical accounting policies are those that are most important to the portrayal of its financial condition and results of operations, and which require the Company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The Company has identified the following as its most critical accounting policies and judgments. Although management believes that its estimates and assumptions are reasonable, they are based upon information available when they are made, and therefore, actual results may differ from these estimates under different assumptions or conditions. The Company has reviewed these critical accounting policies and related disclosures with the Audit Committee of its Board of Directors. Significant accounting policies are more fully described in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report. Revenue Recognition On December 31, 2017, the Company adopted new guidance on revenue from contracts with customers using the modified retrospective method. The adoption did not have a significant impact on the Company’s consolidated financial statements. Revenue Disaggregation The following table disaggregates the Company’s revenue by primary business units for the fiscal year ended December 29, 2018: (in thousands) Electronics – Semiconductor Electronics – Passive Products and Sensors Passenger Car Products Commercial Vehicle Products Automotive Sensors Industrial Products Total Fiscal Year Ended December 29, 2018 Electronics Segment Automotive Segment Industrial Segment Total $ 648,967 $ 475,329 — $ — — — — — $ 1,124,296 $ 240,501 121,562 117,728 — 479,791 — $ 648,967 — — — — 475,329 240,501 121,562 117,728 114,381 114,381 114,381 $ 1,718,468 $ See Note 16, Segment Information, for net sales by segment and countries. Revenue Recognition The Company recognizes revenue on product sales in the period in which the Company satisfies its performance obligation and control of the product is transferred to the customer. The Company’s sales arrangements with customers are predominately short term in nature and generally provide for transfer of control at the time of shipment as this is the point at which title and risk of loss of the product transfers to the customer. At the end of each period, for those shipments where title to the products and the risk of loss and rewards of ownership do not transfer until the product has been received by the customer, the Company adjusts revenues and cost of sales for the delay between the time that the products are shipped and when they are received by the customer. The amount of revenue recorded reflects the consideration to which the Company expects to be entitled in exchange for goods and may include adjustments for customer allowance, rebates and price adjustments. The Company’s distribution channels are primarily through direct sales and independent third-party distributors. 19 The Company has elected the practical expedient under Accounting Standards Codification ("ASC") 340-40-25-4 to expense commissions when incurred as the amortization period of the commission asset the Company would have otherwise recognized is less than one year. Revenue and Billing The Company generally accepts orders from customers through receipt of purchase orders or electronic data interchange based on written sales agreements and purchasing contracts. Contract pricing and selling agreement terms are based on market factors, costs, and competition. Pricing is often negotiated as an adjustment (premium or discount) from the Company’s published price lists. The customer is invoiced when the Company’s products are shipped to them in accordance with the terms of the sales agreement. As the Company’s standard payment terms are less than one year, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company also elected the practical expedient provided in ASC 606-10-25-18B to treat all product shipping and handling activities as fulfillment activities, and therefore recognize the gross revenue associated with the contract, inclusive of any shipping and handling revenue. This is similar to the Company’s prior practice and therefore the effect of the new guidance is immaterial. Ship and Debit Program Some of the terms of the Company’s sales agreements and normal business conditions provide customers (distributors) the ability to receive price adjustments on products previously shipped and invoiced. This practice is common in the industry and is referred to as a “ship and debit” program. This program allows the distributor to debit the Company for the difference between the distributors’ contracted price and a lower price for specific transactions. Under certain circumstances (usually in a competitive situation or large volume opportunity), a distributor will request authorization for pricing allowances to reduce its price. When the Company approves such a reduction, the distributor is authorized to “debit” its account for the difference between the contracted price and the lower approved price. The Company establishes reserves for this program based on historic activity and actual authorizations for the debit and recognizes these debits as a reduction of revenue. Return to Stock The Company has a return to stock policy whereby certain customers, with prior authorization from Littelfuse management, can return previously purchased goods for full or partial credit. The Company establishes an estimated allowance for these returns based on historic activity. Sales revenue and cost of sales are reduced to anticipate estimated returns. Volume Rebates The Company offers volume based sales incentives to certain customers to encourage greater product sales. If customers achieve their specific quarterly or annual sales targets, they are entitled to rebates. The Company estimates the projected amount of rebates that will be achieved by the customer and recognizes this estimated cost as a reduction to revenue as products are sold. Allowance for Doubtful Accounts: The Company evaluates the collectability of its trade receivables based on a combination of factors. The Company regularly analyzes its significant customer accounts and, when the Company becomes aware of a specific customer’s inability to meet its financial obligations, the Company records a specific reserve for bad debt to reduce the related receivable to the amount the Company reasonably believes is collectible. The Company also records allowances for all other customers based on a variety of factors including the length of time the receivables are past due, the financial health of the customer, macroeconomic considerations and past experience. Historically, the allowance for doubtful accounts has been adequate to cover bad debts. If circumstances related to specific customers change, the estimates of the recoverability of receivables could be further adjusted. Inventory The Company performs regular detailed assessments of inventory, which include a review of, among other factors, demand requirements, product life cycle and development plans, component cost trends, product pricing, shelf life, and quality issues. Based on the analysis, the Company records adjustments to inventory for excess quantities, obsolescence or impairment when appropriate to reflect inventory at net realizable value. Historically, inventory reserves have been adequate to reflect inventory at net realizable values. 20 Goodwill The Company’s methodology for allocating the purchase price of acquisitions is based on established valuation techniques that reflect the consideration of a number of factors, including valuations performed by third-party appraisers when appropriate. Goodwill is measured as the excess of the cost of an acquired entity over the fair value assigned to identifiable assets acquired and liabilities assumed. Based on its current organization structure, the Company has seven reporting units for which cash flows are determinable and to which goodwill has been allocated. Goodwill is either assigned to a specific reporting unit or allocated between reporting units based on the relative excess fair value of each reporting unit. The Company annually tests goodwill for impairment on the first day of its fiscal fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company also performs an interim review for indicators of impairment each quarter to assess whether an interim impairment review is required for any reporting unit. As part of its interim reviews, management analyzes potential changes in the value of individual reporting units based on each reporting unit’s operating results for the period compared to expected results as of the prior year’s annual impairment test. In addition, management considers how other key assumptions, including discount rates and expected long-term growth rates, used in the last annual impairment test, could be impacted by changes in market conditions and economic events. Based on the interim assessments, management concluded that no events or changes in circumstances indicated that it was more likely than not that the fair value for any reporting unit had declined below its carrying value. Quantitative Assessment for Impairment For the seven reporting units with goodwill, the Company compared the estimated fair value of each reporting unit to its carrying value. If the carrying value of a reporting unit exceeded the estimated fair value, the difference between the estimated fair value and carrying value is recorded as the amount of the goodwill impairment charge. The results of the goodwill impairment test as of October 1, 2018 indicated that the estimated fair values for each of the seven reporting units exceeded their respective carrying values. Accordingly, there were no goodwill impairment charges recorded as part of the Company’s 2018 annual goodwill impairment test. As part of its impairment test for these reporting units, the Company engaged a third-party appraisal firm to assist in the Company’s determination of the estimated fair values. This determination included estimating the fair value of each reporting unit using both the income and market approaches. The income approach requires management to estimate a number of factors for each reporting unit, including projected operating results, economic projections, anticipated future cash flows, discount rates and the allocation of shared or corporate items. The market approach estimates fair values using comparable marketplace fair value data from within a comparable industry grouping. The Company weighted both the income and market approach equally to estimate the concluded fair value of each reporting unit. The determination of fair value requires the Company to make significant estimates and assumptions, which primarily include, but are not limited to: the selection of appropriate peer group companies; control premiums appropriate for acquisitions in which the Company competes; the discount rate; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization and capital expenditures. Goodwill Impairment Assumptions Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on the fair value of the reporting units. Future declines in the overall market value of the Company’s equity may also result in a conclusion that the fair value of one or more reporting units has declined below its carrying value. One measure of the sensitivity of the amount of goodwill impairment charges to key assumptions is the amount by which each reporting unit “passed” (fair value exceeds the carrying value) the goodwill impairment test. All seven of the reporting units passed the goodwill impairment test, with fair values that exceeded the carrying values by between 63% and 370% of their respective estimated fair values. As of the most recent annual test conducted on October 1, 2018, the Company noted that the excess of fair value over the carrying value, was 176%, 80%, 233%, 202%, 63%, 114%, and 370% for its reporting units: Electronics-Passive Products and Sensors, Electronics-Semiconductor, Passenger Car Products, Commercial Vehicle Products, Automotive Sensors, Relays, and Power Fuse, respectively. Relatively small changes in the Company’s key assumptions would not have resulted in any reporting units failing the goodwill impairment test. Generally, changes in estimates of expected future cash flows would have a similar effect on the estimated fair value of the reporting unit. That is, a 1.0% decrease in estimated annual future cash flows would decrease the estimated fair value of the reporting unit by approximately 1.0%. The estimated long-term net sales growth rate can have a significant impact on the estimated future cash 21 flows, and therefore, the fair value of each reporting unit. A 1.0% decrease in the long-term net sales growth rate would have resulted in no reporting units failing the goodwill impairment test. Of the other key assumptions that impact the estimated fair values, most reporting units have the greatest sensitivity to changes in the estimated discount rate. The estimated discount rate was 11.7% for the Electronics-Passive Products and Sensors, Commercial Vehicle Products, Automotive Sensors and Power Fuse reporting units, 9.7% for the Electronics-Semiconductor and Passenger Car Products reporting units, and 12.7% for Relays. A 1.0% increase in the estimated discount rates would have resulted in no reporting units failing the annual goodwill impairment test. The Company believes that its estimates of future cash flows and discount rates are reasonable, but future changes in the underlying assumptions could differ due to the inherent uncertainty in making such estimates. Additionally, price deterioration or lower volume could have a significant impact on the fair values of the reporting units. Long-Lived Assets The Company evaluates the recoverability of other long-lived assets, including property, plant and equipment and certain identifiable intangible assets, whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. Factors which could trigger an impairment review include significant underperformance relative to historical or projected operating results, significant changes in the manner of use of the assets or the strategy for the overall business, a significant decrease in the market value of the assets or significant negative industry or economic trends. When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the indicators, the assets are assessed for impairment based on the estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the carrying value of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying value over its fair value. During the year ended December 29, 2018, the Company recognized non-cash impairment charges of $1.6 million and $0.5 million related to a building for sale and the Custom Products reporting unit trade name, respectively, associated with the exit of the Custom business within the Industrial Segment. During the year ended December 30, 2017, the Company recognized a loss of $2.9 million related to certain machinery and equipment in the Electronics and Automotive segments due to changes in the expected use of these certain assets. Environmental Liabilities Environmental liabilities are accrued based on estimates of the probability of potential future environmental exposure. Costs related to on-going maintenance of environmental sites are expensed as incurred. If actual or estimated probable future losses exceed the Company’s recorded liability for such claims, it would record additional charges as other expense during the period in which the actual loss or change in estimate occurred. The Company evaluates its reserve for coal mine remediation annually utilizing a third-party expert. Pension and Supplemental Executive Retirement Plan The Company records annual income and expense amounts relating to its pension and postretirement benefits plans based on calculations which include various actuarial assumptions including discount rates, expected long-term rates of return and compensation increases. The Company reviews its actuarial assumptions on an annual basis as of the fiscal year-end balance sheet date (or more frequently if a significant event requiring remeasurement occurs) and modifies the assumption based on current rates and trends when it is appropriate to do so. The effects of modifications are recognized immediately on the Consolidated Balance Sheets but are generally amortized into operating earnings over future periods, with the deferred amount recorded in accumulated other comprehensive income (loss). The Company believes that the assumptions utilized in recording its obligations under its plans are reasonable based on its experience, market conditions and input from its actuaries and investment advisors. The Company maintains several pension plans in international locations. The expected returns on plan assets and discount rates are determined based on each plan’s investment approach, local interest rates and plan participant profiles. The discount rates for the Company’s defined benefit plans primarily in Europe and the Asia-Pacific regions at December 29, 2018 and December 30, 2017 were 3.1% and 3.1%, respectively. A 50 basis point change in the discount rates at December 29, 2018 would have the following effect on the projected benefit obligation: (in millions) Projected benefit obligation 0.5% Increase 0.5% Decrease $ (7.4) $ 8.1 22 Equity-based Compensation Equity-based compensation expense is recorded for stock-option awards and restricted share units based upon the fair values of the awards. The fair value of stock-option awards is estimated at the grant date using the Black-Scholes option pricing model, which includes assumptions for volatility, expected term, risk-free interest rate and dividend yield. Expected volatility is based on implied volatilities from traded options on Littelfuse stock, historical volatility of Littelfuse stock and other factors. Historical data is used to estimate employee termination experience and the expected term of the options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company initiated a quarterly cash dividend in 2010 and expects to continue making cash dividend payments in the foreseeable future. Total equity-based compensation expense for all equity compensation plans was $28.2 million, $17.3 million, and $12.8 million in 2018, 2017, and 2016, respectively. Further information regarding this expense is provided in Note 12, Stock-Based Compensation, of the Notes to Consolidated Financial Statements included in this Annual Report. Income Taxes The Company accounts for income taxes using the liability method. Deferred taxes are recognized for the future effects of temporary differences between financial and income tax reporting using tax rates in effect for the years in which the differences are expected to reverse. The Company recognizes deferred taxes for temporary differences, operating loss carryforwards and tax credit and other tax attribute carryforwards (excluding carryforwards where usage has been determined to be remote). Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. U.S. state and non-U.S. income taxes are provided on the portion of non-U.S. income that is expected to be remitted to the U.S. and be taxable (and non-U.S. income taxes are provided on the portion of non-U.S. income that is expected to be remitted to an upper-tier non-U.S. entity). Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Deferred income taxes are not provided on the excess of the investment value for financial reporting over the tax basis of investments in those non-U.S. subsidiaries for which such excess is considered to be permanently reinvested in those operations. Management regularly evaluates whether non-U.S. earnings are expected to be permanently reinvested. This evaluation requires judgment about the future operating and liquidity needs of the Company and its non-U.S. subsidiaries. Changes in economic and business conditions, non-U.S. or U.S. tax laws (such as the Tax Act), or the Company’s financial situation could result in changes to these judgments and the need to record additional tax liabilities. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. On December 22, 2017, the U.S. enacted legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). Among other things, the Tax Act reduces the U.S. corporate federal income tax rate from 35% to 21%, adds base broadening provisions which limit deductions and address excessive international tax planning, imposes a one-time tax (the “Toll Charge”) on accumulated earnings of certain non-U.S. subsidiaries and enables repatriation of earnings of non-U.S. subsidiaries free of U.S. federal income tax. Other than the Toll Charge (which, except for the IXYS impact, was applicable to the Company for 2017), the provisions are generally applicable to the Company in 2018 and beyond. In accordance with the guidance provided in SEC Staff Accounting Bulletin (“SAB”) No. 118, in the fourth quarter of 2017 the Company recorded a charge of $47.0 million as a provisional reasonable estimate of the impact of the Tax Act, including $49.0 million for the Toll Charge net of $2.0 million for other net tax benefits. In the fourth quarter of 2018, within the measurement period outlined in SAB No. 118, the Company finalized its estimates of the impact of the Tax Act as of December 30, 2017 and recorded a charge of $3.2 million, including $2.3 million for the Toll Charge and $0.9 million for the net impact of other items. In addition, the Company recorded $7.0 million for the Toll Charge associated with IXYS as part of the IXYS acquisition purchase price allocation. This was reflected in the opening balance sheet as an increase to goodwill and other long-term liabilities. One of the base broadening provisions of the Tax Act is commonly referred to as the tax on global intangible low-taxed income provisions (the "GILTI"). In accordance with guidance issued by the FASB staff, the Company has adopted an accounting policy to treat any GILTI inclusions as a period cost if and when incurred. Thus, for the year ended December 29, 2018, deferred taxes were computed without consideration of the possible future impact of the GILTI provisions, and any current year impact was recorded as a part of the current portion of income tax expense. 23 Further information regarding income taxes, including a detailed reconciliation of current year activity, is provided in Note 14, Income Taxes, of the Notes to Consolidated Financial Statements included in this Annual Report. Off-Balance Sheet Arrangements Other than non-cancellable operating lease commitments, the Company does not have off-balance sheet arrangements, financings or special purpose entities. In the financial review that follows, the Company discusses its consolidated results of operations, financial position, cash flows and certain other information. This discussion should be read in conjunction with the Company’s Consolidated Financial Statements and related notes. RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 29, 2018 AS COMPARED TO THE YEAR ENDED DECEMBER 30, 2017 The following table summarizes the Company’s consolidated results of operations for periods presented. The fiscal year 2018 includes approximately $88.7 million of non-segment charges, of which $82.9 million of charges are primarily related to the IXYS acquisition as described in Note 2, Acquisitions and Dispositions, of the Notes to Consolidated Financial Statements included in this Annual Report. These charges include $36.9 million of purchase accounting inventory step-up charges, $18.7 million in acquisition-related and integration costs primarily related to legal, accounting and other expenses, $12.4 million in backlog amortization costs, $8.3 million of employee termination costs and other restructuring charges, $4.5 million of stock compensation expense recognized immediately upon close for converted IXYS options related to prior service periods, and $2.1 million change in control expense related to IXYS. In addition, there were $5.8 million of employee termination costs, impairment and other restructuring charges and acquisition-related expenses for other contemplated acquisitions and included charges associated with the exit of the Custom business in the second quarter within the Industrial segment. The fiscal year 2017 includes approximately $10.3 million of non-segment charges. These included acquisition-related and integration costs related to legal, accounting and other expenses associated with completed or pending acquisitions of approximately $8.0 million, including $1.6 million of purchase accounting inventory charges related to the Company’s 2017 acquisition of U.S. Sensor as described in Note 2, Acquisitions and Dispositions, of the Notes to Consolidated Financial Statements included in this Annual Report, and $2.2 million of charges related to restructuring and production transfers in the Company’s Asia operations. Fiscal year 2018 also included approximately $0.9 million in foreign currency exchange gains primarily attributable to changes in the value of the euro, Mexico peso, Philippine peso and Chinese renminbi against the U.S. dollar, while fiscal year 2017 also included approximately $2.4 million in foreign currency exchange losses primarily attributable to changes in the value of the euro, Philippine peso and Chinese renminbi against the U.S. dollar. (in thousands, except % change) Net sales Gross profit Operating expenses Operating income Other income, net Income before income taxes Income taxes Net income Net Sales Fiscal Year $ $ 2018 1,718,468 652,541 427,492 225,049 (1,599) 204,942 40,377 164,565 $ 2017 1,221,534 506,533 288,022 218,511 (1,282) 204,037 84,518 119,519 Change % Change 496,934 146,008 139,470 6,538 (317) 905 (44,141) 45,046 40.7 % 28.8 % 48.4 % 3.0 % 24.7 % 0.4 % (52.2)% 37.7 % Net sales for 2018 of $1,718.5 million increased $496.9 million, or 40.7%, compared to the prior year with increases of $378.2 million and $6.5 million resulting from incremental net sales related to the IXYS and U.S. Sensor acquisitions, respectively, $16.7 million of favorable changes in foreign exchange rates, and volume growth across all three segments. 24 Gross Profit Gross profit was $652.5 million, or 38.0% of net sales, in 2018, compared to $506.5 million, or 41.5% of net sales, in 2017. The increase in gross profit reflects the IXYS acquisition and volume growth and expense leverage across all segments. The decrease in gross margin is primarily due to the purchase accounting inventory charges of $36.9 million, which negatively impacted gross margin by 2.1 percentage points, and an unfavorable mix of products from the IXYS acquisition, which historically had lower gross margins. Operating Expenses Total operating expenses were $427.5 million, or 24.9% of net sales, for 2018 compared to $288.0 million, or 23.6% of net sales, for 2017. The increase in operating expenses of $139.5 million was primarily due to the incremental operating expenses related to the IXYS and U.S. Sensor acquisitions, an increase in amortization expense of $27.5 million resulting from the acquisition of IXYS as well as higher acquisition-related and integration costs of $12.1 million. Total operating expenses as a percent of net sales increased from 23.6% in 2017 to 24.9% in 2018 primarily due to the higher amortization expense and acquisition-related and integration charges noted above. Operating Income Operating income for 2018 was $225.0 million, an increase of $6.5 million or 3.0% compared to $218.5 million for 2017. The increase in operating income is primarily due to the acquisition of IXYS and volume growth in the Electronics and Industrial segments, partially offset by $36.9 million of purchase accounting inventory charges, higher acquisition-related and integration charges and amortization expense. Operating margins decreased from 17.9% in 2017 to 13.1% in 2018 driven by the purchase accounting inventory charges, higher amortization expense and acquisition-related and integration charges that negatively impacted margins by 2.1%, 1.6% and 0.7%, respectively. Income Before Income Taxes Income before income taxes for 2018 was $204.9 million, or 11.9% of net sales compared to $204.0 million, or 16.7% of net sales, for 2017. In addition to the factors impacting comparative results for operating income discussed above, income before income taxes was unfavorably impacted by higher interest expense of $9.2 million mainly resulting from increased borrowings, partially offset by increases in foreign exchange gains of $3.2 million. Income Taxes Income tax expense for 2018 was $40.4 million, or an effective tax rate of 19.7% compared to income tax expense of $84.5 million, or an effective tax rate of 41.4%, for 2017. The 2018 income tax expense includes a charge of $3.2 million associated with finalizing the 2017 provisional reasonable estimate, including $2.3 million for the Toll Charge and $0.9 million for the net impact of other items. The 2017 income tax expense includes a charge of $47 million as a provisional reasonable estimate of the impact of the Tax Act, including $49 million for the Toll Charge net of $2 million for other net tax benefits. Additionally, our tax rates are lower than the applicable U.S. statutory tax rate primarily due to income earned in lower tax jurisdictions, partially offset by the impact of taxes on unremitted earnings, and, with respect to 2018, the impact of the GILTI provisions of the Tax Act and non-U.S. losses and expenses with no tax benefit. Segment Information The Company reports its operations by the following segments: Electronics, Automotive and Industrial. Segment information is described more fully in Note 16, Segment Information, of the Notes to Consolidated Financial Statements included in this Annual Report. The following table is a summary of the Company’s net sales by segment: 25 (in millions) Electronics Automotive Industrial Total Electronics Segment Fiscal Year 2018 2017 Change % Change $ $ 1,124.3 479.8 114.4 1,718.5 $ $ 661.9 453.2 106.4 1,221.5 $ $ 462.4 26.6 8.0 497.0 69.9% 5.9% 7.5% 40.7% The Electronics segment net sales increased $462.4 million, or 69.9%, in 2018 compared to 2017 due to incremental net sales related to the IXYS and U.S. Sensor acquisitions of $378.2 million and $6.5 million, respectively, volume growth driven by the continued strong demand across various end markets and geographies, and favorable foreign exchange impacts of $6.5 million. Automotive Segment Net sales in the Automotive segment increased $26.6 million, or 5.9%, in 2018 compared to 2017 due to volume growth across all businesses primarily led by the commercial vehicle and sensor businesses, and favorable foreign exchange impacts of $9.8 million. Industrial Segment The Industrial segment net sales increased $8.0 million, or 7.5%, in 2018 compared to 2017 primarily due to volume growth in the power fuse and relay businesses and favorable foreign exchange impacts of $0.4 million, partially offset by a decline in sales from the exit of the Custom business during 2018. Geographic Net Sales Information Net sales by geography represent net sales to customer or distributor locations. The following table is a summary of the Company’s net sales by geography: (in millions) Asia-Pacific Americas Europe Total Asia-Pacific Fiscal Year 2018 2017 Change % Change $ $ 753.3 578.6 386.6 1,718.5 $ $ 541.1 436.5 243.9 1,221.5 $ $ 212.2 142.1 142.7 497.0 39.2% 32.6% 58.5% 40.7% Asia-Pacific net sales increased $212.2 million, or 39.2%, in 2018 compared to 2017. The increase in net sales was primarily due to incremental net sales related to the IXYS acquisition of $173.9 million and volume growth across all segments as well as favorable foreign exchange impacts of $3.7 million. Americas Net sales in the Americas increased $142.1 million, or 32.6%, in 2018 compared to 2017 driven by incremental net sales related to the IXYS and U.S. Sensor acquisitions of $90.7 million and $5.5 million, respectively, volume growth across all segments and favorable foreign exchange impacts of $0.4 million. Europe European net sales increased $142.7 million, or 58.5%, in 2018 compared to 2017. The increase in net sales was primarily due to incremental net sales related to the IXYS acquisition of $113.6 million with volume growth across the Electronics and Automotive segments as well as favorable foreign exchange impacts of $12.6 million. 26 RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 30, 2017 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2016 The following table summarizes the Company’s consolidated results of operations for periods presented. The fiscal year 2017 includes approximately $10.3 million of non-segment charges. These included acquisition-related and integration costs related to legal, accounting and other expenses associated with completed or pending acquisitions of approximately $8.0 million, including $1.6 million of purchase accounting inventory charges related to the Company’s 2017 acquisition of U.S. Sensor as described in Note 2, Acquisitions and Dispositions, of the Notes to Consolidated Financial Statements included in this Annual Report, and $2.2 million of charges related to restructuring and production transfers in the Company’s Asia operations. The fiscal year 2016 includes approximately $50.0 million of non-segment charges. These included $14.8 million of charges related to the impairment of the Custom Products reporting unit, $21.4 million of acquisition and integration costs associated with the Company’s 2016 acquisitions, primarily PolySwitch, $7.8 million of non-cash fair value step-up inventory charges relating to the Company’s 2016 acquisitions, primarily PolySwitch, as described in Note 2, Acquisitions and Dispositions, of the Notes to Consolidated Financial Statements included in this Annual Report, $1.9 million in charges related to the closure of the Company’s manufacturing facility in Denmark, $1.6 million related to the Company’s transfer of its reed sensor manufacturing operations from the U.S. and China to the Philippines, and $2.5 million related to restructuring costs. Fiscal year 2017 also included approximately $2.4 million in foreign currency exchange losses primarily attributable to changes in the value of the euro, Philippine peso and Chinese renminbi against the U.S. dollar, while fiscal year 2016 also included approximately $0.5 million in foreign currency exchange losses primarily attributable to changes in the value of the euro, Philippine peso and Chinese renminbi against the U.S. dollar. (in thousands, except % change) Net sales Gross profit Operating expenses Operating income Other income, net Income before income taxes Income taxes Net income Net Sales Fiscal Year $ $ 2017 1,221,534 506,533 288,022 218,511 (1,282) 204,037 84,518 119,519 $ 2016 1,056,159 413,117 282,473 130,644 (1,730) 123,274 18,786 104,488 Change % Change 165,375 93,416 5,549 87,867 (448) 80,763 65,732 15,031 15.7 % 22.6 % 2.0 % 67.3 % (25.9)% 65.5 % 349.9 % 14.4 % Net sales for 2017 of $1,221.5 million increased $165.4 million, or 15.7%, compared to the prior year, resulting from the prior year acquisitions of PolySwitch, ON Portfolio, and Menber’s and $5.4 million from the current year U.S. Sensor acquisition. The remaining increase in net sales was primarily due to higher volume across all product lines in the Electronics segment and passenger car and commercial vehicle businesses within the Automotive segment partially offset by the divestitures of two non-core product lines within the Industrial segment in 2016. Gross Profit Gross profit was $506.5 million, or 41.5% of net sales, in 2017, compared to $413.1 million, or 39.1% of net sales, in 2016. The increase in gross profit and gross margin reflects the incremental net sales and improved leverage in expenses and profits related to the prior year acquisitions, primarily in the Electronics segment. Operating Expenses Total operating expenses were $288.0 million, or 23.6% of net sales, for 2017 compared to $282.5 million, or 26.7% of net sales, for 2016. The increase in operating expenses of $5.5 million was primarily due to acquisitions, higher selling costs, higher research and development costs of $8.3 million and an increase of $5.4 million in amortization expense of intangible assets due to the acquisitions, partially offset by the $14.8 million of goodwill and other intangible asset impairment charges recognized in 2016 and lower acquisition-related expenses and integration costs of $13.4 million. Selling, general, and administrative expenses 27 increased by $6.7 million to $212.8 million, but decreased from 19.5% to 17.4% as a percentage of net sales for 2017 compared to 2016 primarily as a result of lower acquisition-related expenses and integration costs of $13.4 million and cost control initiatives partially offset by the acquisitions. Operating Income Operating income for 2017 was $218.5 million, an increase of $87.9 million or 67.3% compared to $130.6 million for 2016. The increase in operating income was the result of acquisitions and higher volume in the Electronics segment. Operating margins increased from 12.4% in 2016 to 17.9% in 2017 due to the acquisitions, improvement in gross margins primarily driven by the Electronics segment, lower acquisition and integration related costs, the prior year goodwill and other intangible asset impairment charge and operational efficiencies. Also, the prior year goodwill and other intangible asset impairment charge reduced the operating margin by 1.4% in 2016. Income Before Income Taxes Income before income taxes for 2017 was $204.0 million, or 16.7% of net sales compared to $123.3 million, or 11.7% of net sales, for 2016. Income before income taxes was impacted by an increase in operating income described above, partially offset by higher interest expense of $4.8 million reflecting increased borrowings and unfavorable changes in foreign exchange rates of $1.9 million primarily as a result of fluctuations in the Chinese renminbi and Philippine peso against the U.S. dollar partially offset by fluctuations in the Euro against the U.S. dollar. Income Taxes Income tax expense for 2017 was $84.5 million, or an effective tax rate of 41.4% compared to income tax expense of $18.8 million, or an effective tax rate of 15.2%, for 2016. The increase in 2017 reflects a fourth quarter charge of $47 million as a provisional reasonable estimate of the impact of the Tax Act, including $49 million for the Toll Charge net of $2 million for other net tax benefits. Additionally, the effective tax rates for 2017 and 2016 are lower than the U.S. statutory tax rate primarily due to income earned in lower tax jurisdictions partially offset by the impact of taxes on unremitted earnings, and, with respect to 2016, a one- time deduction with respect to the stock of one of the Company’s affiliates, partially offset by the impact of the impairment of goodwill for which no tax benefit was recorded. Segment Information The Company reports its operations by the following segments: Electronics, Automotive and Industrial. Segment information is described more fully in Note 16, Segment Information, of the Notes to Consolidated Financial Statements included in this Annual Report. The following table is a summary of the Company’s net sales by segment: (in millions) Electronics Automotive Industrial Total Electronics Segment Fiscal Year 2017 2016 Change % Change $ $ 661.9 453.2 106.4 1,221.5 $ $ 535.2 415.2 105.8 1,056.2 $ $ 126.7 38.0 0.6 165.3 23.7% 9.2% 0.6% 15.7% The Electronics segment net sales increased $126.7 million, or 23.7%, in 2017 compared to 2016 primarily due to the PolySwitch, and ON Portfolio acquisitions in 2016, and the U.S Sensor acquisition in 2017 along with higher volume across the passives, sensors and semiconductor product lines. Automotive Segment Net sales in the Automotive segment increased $38.0 million, or 9.2%, in 2017 compared to 2016 primarily due to the incremental net sales associated with the PolySwitch and Menber’s acquisitions in 2016, higher volume in passenger car and commercial 28 vehicle products and favorable foreign exchange impacts of $1.9 million, partially offset by lower volume in automotive sensor products. Industrial Segment The Industrial segment net sales increased $0.6 million, or 0.6%, in 2017 compared to 2016 primarily due to higher volume across all product lines, partially offset by the divestiture of two non-core product lines, one in the fourth quarter of 2016 and the other in the first quarter of 2016. Geographic Net Sales Information Net sales by geography represent net sales to customer or distributor locations. The following table is a summary of the Company’s net sales by geography: (in millions) Americas Europe Asia-Pacific Total Americas Fiscal Year 2017 2016 Change % Change $ $ 436.5 243.9 541.1 1,221.5 $ $ 411.1 200.3 444.8 1,056.2 $ $ 25.4 43.6 96.3 165.3 6.2% 21.8% 21.7% 15.7% Net sales in the Americas increased $25.4 million, or 6.2%, in 2017 compared to 2016 resulting from acquisitions and higher volume in the passive and semiconductor product lines in the Electronics segment and the passenger car and commercial vehicle businesses in the Automotive segment that were partially offset by lower volume in sensor products in the Automotive segment and the divestiture of a non-core product line in the Industrial segment. Europe European net sales increased $43.6 million, or 21.8%, in 2017 compared to 2016. The increase in net sales was primarily due to acquisitions and increased net sales across all product lines in the Electronics segment and the passenger car and commercial vehicle products businesses in the Automotive segment. Asia-Pacific Asia-Pacific net sales increased $96.3 million, or 21.7%, in 2017 compared to 2016, primarily due to incremental net sales from prior year acquisitions and increased volume across all product lines in the Electronics segment. Liquidity and Capital Resources Cash and cash equivalents were $489.7 million as of December 29, 2018, an increase of $60.0 million as compared to December 30, 2017. As of December 29, 2018, $400 million of the Company's $489.7 million cash and cash equivalents was held by non-U.S. subsidiaries. Of the $400 million, at least $200 million can be repatriated with minimal tax consequences, although in certain cases a non-U.S. withholding tax would be payable but subsequently refunded. With respect to the remaining $200 million, the Company has recognized deferred tax liabilities on approximately $91.0 million as of December 29, 2018 because the amounts are not considered to be permanently reinvested, and the Company may access additional amounts through loans and other means. Repatriation of some non-U.S. cash balances is restricted by local laws. Management regularly evaluates whether foreign earnings are expected to be permanently reinvested. This evaluation requires judgment about the future operating and liquidity needs of the Company and its foreign subsidiaries. Changes in economic and business conditions, non-U.S. or U.S. tax laws could result in changes to these judgments and the need to record additional tax liabilities. The Company has historically supported its liquidity needs through cash flows from operations. Management expects that the Company’s (i) current level of cash, cash equivalents, and marketable securities, (ii) current and forecasted cash flows from 29 operations, (iii) availability under existing funding arrangements, and (iv) access to capital in the capital markets will provide sufficient funds to support the Company’s operations, capital expenditures, investments, and debt obligations on both a short-term and long-term basis. Revolving Credit Facility/Term Loan On March 4, 2016, the Company entered into a five-year credit agreement (“Credit Agreement”) with a group of lenders for up to $700.0 million. The Credit Agreement consisted of an unsecured revolving credit facility (“Revolving Credit Facility”) of $575.0 million and an unsecured term loan credit facility (“Term Loan”) of up to $125.0 million. In addition, the Company had the ability, from time to time, to increase the size of the Revolving Credit Facility and the Term Loan by up to an additional $150.0 million, in the aggregate, in each case in minimum increments of $25.0 million, subject to certain conditions and the agreement of participating lenders. On October 13, 2017, the Company amended the Credit Agreement to increase the Revolving Credit Facility from $575.0 million to $700.0 million and increase the Term Loan from $125.0 million to $200.0 million and to extend the expiration date from March 4, 2021 to October 13, 2022. The Credit Agreement also includes the option for the Company to increase the size of the Revolving Credit Facility and the Term Loan by up to an additional $300.0 million, in the aggregate, subject to the satisfaction of certain conditions set forth in the Credit Agreement. Term Loans may be made in up to two advances. The first advance of $125.0 million occurred on October 13, 2017 and the second advance of $75.0 million occurred on January 16, 2018. For the Term Loan, the Company is required to make quarterly principal payments of 1.25% of the original term loan ($2.5 million with the second advance on January 16, 2018) through maturity, with the remaining balance due on October 13, 2022. In addition to the quarterly principal payments, the Company paid $35.0 million of additional principal on the Term Loan during the fiscal year ended December 29, 2018. Outstanding borrowings under the Credit Agreement bear interest, at the Company’s option, at either LIBOR (fixed for interest periods of one, two, three or six-month periods) plus 1.00% to 2.00%, or at the bank’s Base Rate, as defined, plus 0.00% to 1.00%, based upon the Company’s Consolidated Leverage Ratio, as defined. The Company is also required to pay commitment fees on unused portions of the credit agreement ranging from 0.15% to 0.25%, based on the Consolidated Leverage Ratio, as defined in the agreement. The credit agreement includes representations, covenants and events of default that are customary for financing transactions of this nature. The effective interest rate on outstanding borrowings under the credit facility was 3.59% at December 29, 2018. Senior Notes On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and sold €212 million aggregate principal amount of senior notes in two series. The funding date for the Euro denominated senior notes occurred on December 8, 2016 for €117 million in aggregate amount of 1.14% Senior Notes, Series A, due December 8, 2023 (“Euro Senior Notes, Series A due 2023”), and €95 million in aggregate amount of 1.83% Senior Notes, Series B due December 8, 2028 (“Euro Senior Notes, Series B due 2028”) (together, the “Euro Senior Notes”). Interest on the Euro Senior Notes is payable semiannually on June 8 and December 8, commencing June 8, 2017. On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and sold $125 million aggregate principal amount of senior notes in two series. On February 15, 2017, $25 million in aggregate principal amount of 3.03% Senior Notes, Series A, due February 15, 2022 (“U.S. Senior Notes, Series A due 2022”), and $100 million in aggregate principal amount of 3.74% Senior Notes, Series B, due February 15, 2027 (“U.S. Senior Notes, Series B due 2027”) (together, the “U.S. Senior Notes due 2022 and 2027”) were funded. Interest on the U.S. Senior Notes due 2022 and 2027 is payable semiannually on February 15 and August 15, commencing August 15, 2017. On November 15, 2017, the Company entered into a Note Purchase Agreement pursuant to which the Company issued and sold $175 million in aggregate principal amount of senior notes in two series. On January 16, 2018, $50 million aggregate principal amount of 3.48% Senior Notes, Series A, due February 15, 2025 (“U.S. Senior Notes, Series A due 2025”) and $125 million in aggregate principal amount of 3.78% Senior Notes, Series B, due February 15, 2030 (“U.S. Senior Notes, Series B due 2030”) (together, the “U.S. Senior Notes due 2025 and 2030” and with the Euro Senior Notes and the U.S. Senior Notes due 2022 and 2027, the “Senior Notes”) were funded. Interest on the U.S. Senior Notes due 2025 and 2030 is payable semiannually on February 15 and August 15, commencing August 15, 2018. The Company was in compliance with its debt covenants as of December 29, 2018 and expects to remain in compliance based on management’s estimates of operating and financial results for 2019 and the foreseeable future. As of December 29, 2018, the 30 Company met all the conditions required to borrow under the Credit Agreement and management expects the Company to continue to meet the applicable borrowing conditions. Acquisitions During the year ended December 29, 2018, the Company paid $306.5 million, net of cash acquired, for the acquisition of IXYS. Pursuant to the Securities Purchase Agreement, the Company paid $9.0 million for the acquisition of the remaining 38% outstanding common stock of Monolith during the year ended December 29, 2018. The Company financed the cash portion of the acquisition with a combination of cash on hand and borrowings under the credit facility. During the year ended December 30, 2017, the Company paid $38.5 million, net of cash acquired, for the acquisitions of U.S Sensor and Monolith. The Company financed the cash portion of the acquisition with a combination of cash on hand and borrowings under the credit facility. During the year ended December 31, 2016, the Company paid $471.1 million of total purchase prices, net of cash acquired, for the acquisitions of the ON Portfolio, Menber’s and PolySwitch. The Company financed the cash portion of these acquisitions with a combination of cash on hand and borrowings under the credit facility. Cash Flow Overview Operating cash inflows are largely attributable to sales of the Company’s products. Operating cash outflows are largely attributable to recurring expenditures for raw materials, labor, rent, interest, taxes and other operating activities. The following describes the Company’s cash flows for the twelve months ended December 29, 2018 and December 30, 2017: (in millions) Net cash provided by operating activities Net cash used in investing activities Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Cash Flow from Operating Activities Fiscal Year 2018 2017 $ $ 331.8 (382.3) 121.9 (11.4) 60.0 429.7 489.7 $ $ 269.2 (96.1) (24.7) 6.2 154.6 275.1 429.7 Net cash provided by operating activities was $331.8 million for 2018, compared to $269.2 million during 2017. The increase in net cash provided by operating activities was primarily driven by higher earnings and favorable working capital management that more than offset higher payments related to cash taxes and acquisition and integration costs. Cash Flow from Investing Activities Net cash used in investing activities was $382.3 million for 2018, compared to $96.1 million during 2017. Net cash used for the acquisition of IXYS was $306.5 million in 2018 compared to acquisitions of $38.5 million in 2017 related to the acquisition of a majority stake in Monolith for $14.2 million and the acquisition of U.S. Sensor for $24.3 million. Capital expenditures were $74.8 million, representing an increase of $8.8 million compared to 2017. The Company also received proceeds of $9.6 million in 2018 primarily as a result of the sale of a building. Cash Flow from Financing Activities Net cash provided by financing activities was $121.9 million for 2018 compared to net cash used in financing activities of $24.7 million for 2017. The Company had $310.0 million of proceeds from the credit facility, term loan and senior notes payable partially offset by payments of $102.5 million on the credit facility and term loan in 2018 as compared to $149.4 million of proceeds from the credit facility, term loan and senior notes payable and $134.7 million of payments on the credit facility and term loan during 2017. The Company repurchased 391,972 shares of its common stock during fiscal 2018 totaling $63.6 million. 31 The following describes the Company’s cash flows for the twelve months ended December 30, 2017 and December 31, 2016: (in millions) Net cash provided by operating activities Net cash used in investing activities Net cash (used in) provided by financing activities Effect of exchange rate changes on cash and cash equivalents Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Cash Flow from Operating Activities Fiscal Year 2017 2016 269.2 (96.1) (24.7) 6.2 154.6 275.1 429.7 $ $ 180.1 (511.2) 284.2 (6.8) (53.7) 328.8 275.1 $ $ Net cash provided by operating activities was $269.2 million for 2017, compared to $180.1 million during 2016. The increase in net cash provided by operating activities was primarily driven by higher earnings, lower cash taxes, reduced acquisition and integration payments and the timing of supplier and customer payments. Cash Flow from Investing Activities Net cash used in investing activities was $96.1 million for 2017, compared to $511.2 million during 2016. Net cash used for acquisitions of $38.5 million in 2017 related to the acquisition of a majority stake in Monolith for $14.2 million and the acquisition of U.S. Sensor for $24.3 million. Net cash used for acquisitions of $471.1 million for 2016 primarily related to the acquisitions of PolySwitch for $344.5 million, the ON Portfolio for $104.0 million and Menber’s for $19.2 million. Capital expenditures were $65.9 million, representing an increase of $19.7 million compared to 2016. Cash Flow from Financing Activities Net cash used in financing activities was $24.7 million for 2017 compared to net cash provided by financing activities of $284.2 million for 2016. The Company had $149.4 million of proceeds from the credit facility, term loan and senior notes payable and $134.7 million of payments on the term loan and credit facility in 2017 as compared to $718.4 million of proceeds from the credit facility, term loan and senior notes payable and $421.2 million of payments on the term loan and credit facility during 2016. Dividends Cash dividends paid totaled $40.0 million, $31.8 million and $27.9 million for 2018, 2017 and 2016, respectively. On January 24, 2019, the Board of Directors of the Company declared a quarterly cash dividend of $0.43 per share, payable on March 7, 2019 to stockholders of record as of February 21, 2019. Capital Resources The Company expends capital to support its operating and strategic plans. Such expenditures include strategic acquisitions, investments to maintain capital assets, develop new products or improve existing products, and to enhance capacity or productivity. Many of the associated projects have long lead-times and require commitments in advance of actual spending. Share Repurchase Program The Company’s Board of Directors authorized the repurchase of up to 1,000,000 shares of the Company’s common stock under a program for the period May 1, 2018 to April 30, 2019 (“Share Repurchase Program”). During the fiscal year 2018, the Company repurchased 391,972 shares of its common stock. The Company did not repurchase any shares of its common stock during fiscal 2017. As of February 18, 2019, the Company has repurchased 79,916 shares of its common stock since the fiscal year ended December 29, 2018. 32 Contractual Obligations and Commitments The following table summarizes outstanding contractual obligations and commitments as of December 29, 2018: (in thousands) Long-term debt(a) Interest payments(b) Operating lease payments(c) Income Tax Obligation(d) Purchase obligations(e) Total Total Less than 1 Year 1 to 3 Years 3 to 5 Years $ $ 699,366 135,902 32,607 32,364 30,886 931,125 $ $ 10,000 19,124 9,133 3,571 27,814 69,642 $ $ 20,000 37,156 13,164 5,738 711 76,769 $ $ 286,036 29,440 7,536 8,045 700 331,757 $ $ Greater than 5 Years 383,330 50,182 2,774 15,010 1,661 452,957 (a) Excludes offsetting issuance costs of $4.6 million. Euro denominated debt amounts are converted based on the Euro to U.S. Dollar spot rate at year end. For more information see Note 9, Debt, of the Notes to Consolidated Financial Statements. (b) Amounts represent estimated contractual interest payments on outstanding debt. Rates in effect as of December 29, 2018 are used for variable rate debt. For more information see Note 9, Debt, of the Notes to Consolidated Financial Statements. (c) For more information see Note 7, Lease Commitments, of the Notes to Consolidated Financial Statements. (d) The Income Tax Obligation represents the remaining amounts payable in regard to the 2017 Littelfuse Toll Charge and the 2018 IXYS Toll Charge. The Company has elected to pay the 2017 Littelfuse Toll Charge and will elect to pay the 2018 IXYS Toll Charge over the eight-year period prescribed by the Tax Act. For more information see Note 14, Income Taxes, of the Notes to Consolidated Financial Statements. (e) Purchase obligations include purchase commitments and commitments for capital expenditures not recognized in the Company’s Consolidated Balance Sheets. In addition to the above contractual obligations and commitments, the Company had the following obligations at December 29, 2018: The Company has Company-sponsored defined benefit pension plans covering employees at various non-U.S. subsidiaries including the U.K., Germany, the Philippines, China, Japan, Mexico, Italy and France. At December 29, 2018, the Company had a net unfunded status of $32.2 million. The Company expects to make approximately $2.3 million of contributions to the plans in 2019. For additional information, see Note 11, Benefit Plans, of the Notes to Consolidated Financial Statements. The Company has a non-qualified Supplemental Retirement and Savings Plan which provides additional retirement benefits for certain management employees and named executive officers by allowing participants to defer a portion of their annual compensation. As of December 29, 2018, there was $9.1 million of accrued compensation benefits included in Other long-term liabilities. For additional information, see Note 11, Benefit Plans, of the Notes to Consolidated Financial Statements. As of December 29, 2018, the Company recognized various accruals related to employee compensation including its annual incentive program that are expected to be paid in 2019. Due to the uncertainty with respect to the cash outflows, the preceding table excludes unrecognized tax benefits of $18.3 million. The Company does not expect to make significant payments of these liabilities within the next year. For additional information, see Note 14, Income Taxes, of the Notes to Consolidated Financial Statements. Off-Balance Sheet Arrangements As of December 29, 2018, the Company did not have any off-balance sheet arrangements, as defined under SEC rules. Specifically, the Company was not liable for guarantees of indebtedness owed by third parties, the Company was not directly liable for the debt of any unconsolidated entity and the Company did not have any retained or contingent interest in assets. The Company does not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities. 33 Recent Accounting Pronouncements Recently issued accounting standards and their estimated effect on the Company’s Consolidated Financial Statements are described in Note 1, Summary of Significant Accounting Policies and Other Information, of the Notes to Consolidated Financial Statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company is exposed to market risk from changes in interest rates, foreign exchange rates and commodity prices. Interest Rates The Company had $155.0 million in debt outstanding at December 29, 2018 related to the unsecured revolving credit facility and term loan. Because 100% of this debt has variable interest rates, the Company is subject to future interest rate fluctuations in relation to these borrowings which could potentially have a negative impact on cash flows of the Company. A prospective increase of 100 basis points in the interest rate applicable to the Company’s outstanding borrowings under its credit facility would result in an increase of approximately $1.6 million in annual interest expense. The Company is not party to any currency exchange or interest rate protection agreements as of December 29, 2018. Foreign Exchange Rates The majority of the company’s operations consist of manufacturing and sales activities in foreign countries. The Company has operations in China, Germany, Mexico, Philippines, United Kingdom, Japan, Lithuania, Netherlands, Portugal, Singapore, South Korea, Spain, and the United States. During 2018, sales to customers outside the U.S. were approximately 70% of total net sales. During 2017, sales to customers outside the U.S. were approximately 69% of total net sales. Substantially all sales in Europe are denominated in euros and substantially all sales in the Asia-Pacific region are denominated in U.S. dollars, Chinese renminbi, Japanese yen, or Korean won. The company’s foreign exchange exposures result primarily from inter-company loans, external borrowings, sale of products in foreign currencies, foreign currency denominated purchases, employee-related and other costs of running operations in foreign countries. The company’s most significant foreign currency exposures are to the euro, the Chinese renminbi, Mexican peso, and Philippine peso. Changes in foreign exchange rates could affect the company’s sales, costs, balance sheet values and earnings. At December 29, 2018, the net value of the Company’s assets with exposure to foreign currency risk was approximately $143 million, with the largest exposure being Japanese yen denominated inter-company loans with a Euro functional currency subsidiary. The reduction in earnings from a hypothetical instantaneous 10% adverse change in quoted foreign currency spot rates applied to foreign currency sensitive asset instruments would be $14 million at December 29, 2018. At December 29, 2018, the net value of the Company’s liabilities with exposure to foreign currency risk was $348 million, with the largest exposure being U.S. Dollar denominated inter-company loans with a Euro functional currency subsidiary. The reduction in earnings from a hypothetical instantaneous 10% adverse change in quoted foreign currency spot rates applied to foreign currency sensitive liability instruments would be $35 million at December 29, 2018. As a result of the mix in currencies impacting the hypothetical 10% changes, the movements in some instruments would offset movements in other instruments reducing the hypothetical exposure to the Company. Commodity Prices The Company uses various metals in the manufacturing of its products, including copper, zinc, tin, gold, and silver. Prices of these commodities can rise and result in materially higher costs of producing our products. The Company believes it has adequate primary and secondary sources of supply for each of our key materials and that, in periods of rising prices, the Company expects to recover a majority of the increased cost in the form of higher selling prices. However, recoveries typically lag the effect of cost increases due to the nature of our markets. The cost of oil has fluctuated dramatically over the past several years. Consequently, there is a risk that a return to high prices for oil and electricity in 2019 could have a significant impact on the Company’s transportation and utility expenses. While the Company is exposed to significant changes in certain commodity prices and foreign currency exchange rates, the Company actively monitors these exposures and may take various actions from time to time to mitigate any negative impacts of these exposures. 34 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Index Page Report of Independent Registered Public Accounting Firm – Consolidated Financial Statements Report of Independent Registered Public Accounting Firm – Internal Control Over Financial Reporting Consolidated Financial Statements Consolidated Balance Sheets Consolidated Statements of Net Income Consolidated Statements of Comprehensive Income Consolidated Statements of Cash Flows Consolidated Statements of Equity Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies and Other Information 2. Acquisitions and Dispositions 3. Inventories 4. Property, Plant, and Equipment 5. Goodwill and Other Intangible Assets 6. Accrued Liabilities 7. Lease Commitments 8. Restructuring, Impairment and Other Charges 9. Debt 10. Fair Value of Assets and Liabilities 11. Benefit Plans 12. Stock-Based Compensation 13. Other Comprehensive (Loss) Income 14. Income Taxes 15. Earnings Per Share 16. Segment Information 17. Selected Quarterly Financial Data (Unaudited) 18. Related Party Transactions 36 37 38 39 40 41 42 43 51 58 58 59 60 60 61 62 64 67 71 73 74 78 78 81 82 35 Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders Littelfuse, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Littelfuse, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 29, 2018 and December 30, 2017, the related consolidated statements of net income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 29, 2018, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2018 and December 30, 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 29, 2018, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 29, 2018, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 22, 2019, expressed an unqualified opinion. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2014. Chicago, Illinois February 22, 2019 36 Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders Littelfuse, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of Littelfuse, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 29, 2018, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 29, 2018, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 29, 2018, and our report dated February 22, 2019 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Chicago, Illinois February 22, 2019 37 LITTELFUSE, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) ASSETS Current assets: Cash and cash equivalents Short-term investments Trade receivables, less allowances of $36,038 and $27,516 at December 29, 2018 and December 30, 2017, respectively Inventories Prepaid income taxes and income taxes receivable Prepaid expenses and other current assets Total current assets Net property, plant, and equipment Intangible assets, net of amortization Goodwill Investments Deferred income taxes Other assets Total assets LIABILITIES AND EQUITY Current liabilities: Accounts payable Accrued liabilities Accrued income taxes Current portion of long-term debt Total current liabilities Long-term debt, less current portion Deferred income taxes Accrued post-retirement benefits Other long-term liabilities Shareholders’ equity: Common stock, par value $0.01 per share: 34,000,000 shares authorized; shares issued, 25,641,959 and 23,153,396 in 2018 and 2017, respectively Treasury stock, at cost: 868,045 and 439,598 shares, respectively Additional paid-in capital Accumulated other comprehensive loss Retained earnings Littelfuse, Inc. shareholders’ equity Non-controlling interest Total equity Total liabilities and equity See accompanying Notes to Consolidated Financial Statements. 38 December 29, 2018 December 30, 2017 $ 489,733 34 $ 429,676 35 232,892 258,228 2,339 49,291 1,032,517 339,894 361,474 826,715 25,405 7,330 20,971 2,614,306 126,323 138,405 20,547 10,000 295,275 684,730 51,853 31,874 72,232 254 (116,454) 835,828 (97,924) 856,507 1,478,211 131 1,478,342 2,614,306 $ $ $ 182,699 140,789 1,689 37,452 792,340 250,577 203,850 453,414 10,993 11,858 17,070 1,740,102 101,844 100,415 16,285 6,250 224,794 489,361 17,069 18,742 62,580 229 (41,294) 310,012 (63,668) 722,140 927,419 137 927,556 1,740,102 $ $ $ LITTELFUSE, INC. CONSOLIDATED STATEMENTS OF NET INCOME (in thousands, except per share data) Net sales Cost of sales Gross profit Selling, general, and administrative expenses Research and development expenses Amortization of intangibles Impairment of goodwill and intangible assets Total operating expenses Operating income Interest expense Foreign exchange (gain) loss Other income, net Income before income taxes Income taxes Net income Income per share: Basic Diluted Weighted average shares and equivalent shares outstanding: Basic Diluted See accompanying Notes to Consolidated Financial Statements. Fiscal Year Ended $ December 29, 2018 1,718,468 1,065,927 652,541 $ December 30, 2017 1,221,534 715,001 506,533 $ December 31, 2016 1,056,159 643,042 413,117 288,001 87,301 52,190 — 427,492 225,049 22,569 (863) (1,599) 204,942 40,377 164,565 6.62 6.52 24,870 25,235 $ $ $ 212,833 50,489 24,700 — 288,022 218,511 13,380 2,376 (1,282) 204,037 84,518 119,519 5.27 5.21 22,687 22,931 $ $ $ 206,129 42,198 19,337 14,809 282,473 130,644 8,628 472 (1,730) 123,274 18,786 104,488 4.63 4.60 22,559 22,727 $ $ $ 39 LITTELFUSE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Net income Other comprehensive income (loss): Pension and postemployment adjustments, net of tax Unrealized loss on investments Foreign currency translation adjustments Comprehensive income See accompanying Notes to Consolidated Financial Statements. Year Ended December 29, 2018 164,565 $ December 30, 2017 119,519 $ December 31, 2016 104,488 $ 877 — (25,338) 140,104 $ 1,147 (974) 10,738 130,430 $ (3,261) (815) (24,832) 75,580 $ 40 LITTELFUSE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) OPERATING ACTIVITIES Net income Adjustments to reconcile net income to net cash provided by operating activities: December 29, 2018 Year Ended December 30, 2017 December 31, 2016 $ 164,565 $ 119,519 $ 104,488 Depreciation Amortization of intangibles Impairment charges Deferred revenue Non-cash inventory charges Stock-based compensation Excess tax benefit on share-based compensation Deferred income taxes Other Changes in operating assets and liabilities: Trade receivables Inventories Accounts payable Accrued liabilities and income taxes Prepaid expenses and other assets Net cash provided by operating activities INVESTING ACTIVITIES Acquisitions of businesses, net of cash acquired Proceeds from sales and maturities of short-term investments Decrease in entrusted loan Purchases of property, plant, and equipment Proceeds from sale of property, plant, and equipment Net cash used in investing activities FINANCING ACTIVITIES Proceeds of revolving credit facility Proceeds of term loan Proceeds from senior notes payable Payments of term loan Payments of revolving credit facility Net proceeds (payments) related to stock-based award activities Payments of entrusted loan Cash dividends paid Purchases of common stock Other Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year See accompanying Notes to Consolidated Financial Statements. 41 51,003 52,190 2,218 3,965 36,927 27,431 — (4,679) (50) (3,539) (33,971) 13,708 29,329 (7,269) 331,828 38,311 24,700 — — 1,607 16,315 — 17,063 6,048 (11,087) (20,180) 6,494 50,626 19,754 269,170 33,800 19,337 14,809 — 7,834 11,987 (3,421) (5,269) 3,973 (22,779) 8,539 19,190 (9,644) (2,711) 180,133 (318,474) (38,512) (471,118) 3,739 3,599 (65,925) 962 345 5,510 (46,228) 248 (96,137) (511,243) 15,000 9,375 125,000 (7,188) (127,500) (2,373) (3,599) (31,770) — (1,626) (24,681) 6,200 154,552 275,124 367,000 125,000 226,428 (89,688) (331,500) 20,494 (5,510) (27,866) — (162) 284,196 (6,748) (53,662) 328,786 275,124 1,407 — (74,753) 9,572 (382,248) 60,000 75,000 175,000 (42,500) (60,000) 18,857 — (39,993) (63,564) (903) 121,897 (11,420) 60,057 429,676 $ 489,733 $ 429,676 $ LITTELFUSE, INC. CONSOLIDATED STATEMENTS OF EQUITY Littelfuse, Inc. Shareholders’ Equity Common Stock Addl. Paid in Capital $ 224 $ 259,553 — Treasury Stock Accum. Other Comp. Inc. Retained (Loss) Earnings $ (32,766) $ (45,671) $ 557,769 — 104,488 — 7,471 — (28,908) — — (3,744) — — — 24,234 — — — — — — (27,866) $ (36,510) $ (74,579) $ 634,391 — 119,519 — Non- controlling Interest Total $ 143 $ 739,252 — — — — — $ 143 — $ — (6) — — — 137 — — — (6) — — — — — $ 131 104,488 (28,908) 7,471 (3,744) 24,238 (27,866) $ 814,931 119,519 10,911 16,315 (6) (4,784) 2,440 (31,770) $ 927,556 164,565 (24,461) — 27,431 (6) (7,252) 26,109 472,301 (67,908) (39,993) $1,478,342 10,911 — — — — — — — — (4,784) — — — — — (31,770) $ (41,294) $ (63,668) $ 722,140 — 164,565 — (24,461) (9,795) — — — — — — — (7,252) — 9,795 — — — — — (67,908) — — — — — — (39,993) $(116,454) $ (97,924) $ 856,507 (in thousands, except share and per share data) Balance at January 2, 2016 Net income Other comprehensive income, net of tax Stock-based compensation Withheld 31,040 shares on restricted share units for withholding taxes Stock options exercised, including tax impact of ($7,400) Cash dividends paid ($1.24 per share) — — — 4 — Balance at December 31, 2016 $ 228 $ 291,258 Net income Other comprehensive income, net of tax Stock-based compensation Non-controlling interest Withheld 30,459 shares on restricted share units for withholding taxes Stock options exercised Cash dividends paid ($1.40 per share) — — — — 1 — — 16,315 — — 2,439 — Balance at December 30, 2017 $ 229 $ 310,012 Net income Other comprehensive income, net of tax Cumulative effect adjustment Stock-based compensation Non-controlling interest Withheld 36,482 shares on restricted share units for withholding taxes Stock options exercised Issuance of common stock Repurchases of common stock Cash dividends paid ($1.60 per share) — — — — — 4 21 — — — — 27,431 — — 26,105 472,280 — — Balance at December 29, 2018 $ 254 $ 835,828 See accompanying Notes to Consolidated Financial Statements. 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies and Other Information Nature of Operations Littelfuse, Inc. and subsidiaries (the “Company”) is a global manufacturer of leading technologies in circuit protection, power control and sensing. The company's products are found in automotive and commercial vehicles, industrial applications, data and telecommunications, medical devices, consumer electronics and appliances. With its broad product portfolio of fuses, semiconductors, polymers, ceramics, relays and sensors, and extensive global infrastructure, the Company’s worldwide associates partner with its customers to design, manufacture and deliver innovative, high-quality solutions for a safer, greener and increasingly connected world. Fiscal Year References herein to “2018”, “fiscal 2018” or “fiscal year 2018” refer to the fiscal year ended December 29, 2018. References herein to “2017”, “fiscal 2017” or “fiscal year 2017” refer to the fiscal year ended December 30, 2017. References herein to “2016”, “fiscal 2016” or “fiscal year 2016” refer to the fiscal year ended December 31, 2016. The Company operates on a 52-53 week fiscal year (4-4-5 basis) ending on the Saturday closest to December 31. Basis of Presentation The Consolidated Financial Statements include the accounts of Littelfuse, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. The company’s Consolidated Financial Statements were prepared in accordance with generally accepted accounting principles in the United States of America and include the assets, liabilities, sales and expenses of all wholly-owned subsidiaries and majority-owned subsidiaries over which the Company exercises control. Use of Estimates The process of preparing financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities at the date of the Consolidated Financial Statements, and the reported amounts of revenues and expenses and the accompanying notes. The Company evaluates and updates its assumptions and estimates on an ongoing basis and may employ outside experts to assist in its evaluation, as considered necessary. Actual results could differ from those estimates. Cash Equivalents All highly liquid investments, with an original maturity of three months or less when purchased, are considered to be cash equivalents. Short-Term and Long-Term Investments As of December 29, 2018, the Company has an investment in Polytronics Technology Corporation Ltd. (“Polytronics”). The Company’s Polytronics shares held at the end of fiscal 2018 and 2017 represent approximately 7.2% of total Polytronics shares outstanding. The Polytronics investment is classified as available-for-sale and is carried at fair value. The fair value of the Polytronics investment was €8.9 million (approximately $10.2 million) at December 29, 2018 and €9.2 million (approximately $11.0 million) at December 30, 2017. As a result of the Company’s acquisition of IXYS, the Company has equity ownerships in various investments that are accounted for under the equity method. The Company owns 45% of the outstanding equity of Powersem GmbH, a module manufacturer based in Germany, approximately 20% of the outstanding equity of EB Tech Ltd., a company with expertise in radiation technology based in South Korea, and approximately 24% of the outstanding common shares of Automated Technology, Inc., a supplier located in the Philippines that provides assembly and test services. All equity-level investments are less than majority owned. The Company recognized $0.7 million in gains from its equity method investments for the fiscal year ended December 29, 2018. The balance of these investments under the equity method was $11.6 million as of the fiscal year ended December 29, 2018. See Note 18, Related Party Transactions, for further discussion. The Company has certain investments that are accounted for under the cost method that have a balance of investments under the cost method was $7.9 million as of the fiscal year ended December 29, 2018. 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-01, “Financial Instruments-Recognition and Measurement of Financial Assets and Financial Liabilities” which addressed certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. The ASU requires the Company to recognize any changes in the fair value of certain equity investments in net income. Previously these changes were recognized in other comprehensive income ("OCI"). The Company adopted the new standard on December 31, 2017, on a modified retrospective basis, recognizing the cumulative effect as a $9.8 million increase to retained earnings. As a result of the adoption of the new standard and change in fair value of our equity investments, for the twelve months ended December 29, 2018, the Company recognized an unrealized loss of $0.7 million in Other income, net in the Consolidated Statements of Net Income. The Company has investments related to its non-qualified Supplemental Retirement and Savings Plan. The Company maintains accounts for participants through which participants make investment elections. The investment securities are subject to the claims of the Company’s creditors. The investment securities are all mutual funds with readily determinable fair values and are classified as trading securities. The investment securities are measured at fair value. As of December 29, 2018 and December 30, 2017, there was $9.1 million and $8.0 million of marketable securities, respectively, related to the plan included in Other assets on the Consolidated Balance Sheets. Trade Receivables The Company performs credit evaluations of customers’ financial condition and generally does not require collateral. Credit losses are provided for in the financial statements based upon specific knowledge of a customer’s inability to meet its financial obligations to the Company. Historically, credit losses have consistently been within management’s expectations and have not been a material amount. A receivable is considered past due if payments have not been received within agreed upon invoice terms. Write-offs are recorded at the time a customer receivable is deemed uncollectible. The Company also maintains allowances against trade receivables for the settlement of rebates and sales discounts to customers. These allowances are based upon specific customer sales and sales discounts as well as actual historical experience. Inventories Inventories are stated at the lower of cost or net realizable value, which approximates current replacement cost. Cost is principally determined using the first-in, first-out method. The Company maintains excess and obsolete allowances against inventory to reduce the carrying value to the expected net realizable value. These allowances are based upon a combination of factors including historical sales volume, market conditions, lower of cost or market analysis and expected realizable value of the inventory. Property, Plant, and Equipment Land, buildings, and equipment are carried at cost. Depreciation is calculated using the straight-line method with useful lives of 21 years for buildings, seven to ten years for equipment, seven years for furniture and fixtures, five years for tooling and three years for computer equipment. Leasehold improvements are depreciated over the lesser of their useful life or the lease term. Maintenance and repair costs are charged to expense as incurred. Major overhauls that extend the useful lives of existing assets are capitalized. Goodwill The Company annually tests goodwill for impairment on the first day of its fiscal fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company compares each reporting unit’s fair value, estimated based on comparable company market valuations and expected future discounted cash flows to be generated by the reporting unit, to its carrying value. For the seven reporting units with goodwill, the Company compared the estimated fair value of each reporting unit to its carrying value. The results of the goodwill impairment test as of October 1, 2018 indicated that the estimated fair values for each of the seven reporting units exceeded their respective carrying values. As of the most recent annual test conducted on October 1, 2018, the Company noted that the excess of fair value over the carrying value, was 176%, 80%, 233%, 202%, 63%, 114%, and 370% for its reporting units; Electronics-Passive Products and Sensors, Electronics-Semiconductor, Passenger Car Products, Commercial Vehicle Products, Automotive Sensors, Relays, and Power Fuse, respectively. Relatively small changes in the Company’s key assumptions would not have resulted in any reporting units failing the goodwill impairment test. See Note 5, Goodwill and Other Intangible Assets, for additional information. 44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company also performs an interim review for indicators of impairment each quarter to assess whether an interim impairment review is required for any reporting unit. As part of its interim reviews, management analyzes potential changes in the value of individual reporting units based on each reporting unit’s operating results for the period compared to expected results as of the prior year’s annual impairment test. In addition, management considers how other key assumptions, including discount rates and expected long-term growth rates, used in the last annual impairment test, could be impacted by changes in market conditions and economic events. Based on the interim assessments as of December 29, 2018, management concluded that no events or changes in circumstances indicated that it was more likely than not that the fair value for any reporting unit had declined below its carrying value. Long-Lived Assets Customer relationships, trademarks and tradenames are amortized using the straight-line method over estimated useful lives that have a range of five to 20 years. Patents, licenses and software are amortized using the straight-line method or an accelerated method over estimated useful lives that have a range of five to 17 years. The distribution networks are amortized on either a straight- line or accelerated basis over estimated useful lives that have a range of three to 20 years. The Company assesses potential impairments to its long-lived assets if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impaired asset is written down to its estimated fair value based upon the most recent information available. Estimated fair market value is generally measured by discounting estimated future cash flows. Long- lived assets, other than goodwill and other intangible assets, that are held for sale are recorded at the lower of carrying value or the fair market value less the estimated cost to sell. During the fiscal year ended December 31, 2016, the Company recognized non-cash impairment charges totaling $6.0 million, of which $2.2 million related to the impairment of certain customer relationship intangible assets in the Custom Products reporting unit within the Industrial segment and $3.8 million related to the impairment of the Custom Products tradename. The impairment of the customer relationship intangible assets resulted from lower expectations of future revenue to be derived from those relationships while the tradename impairment resulted from lower expectations of future cash flows of the Custom Products reporting unit. Environmental Liabilities Environmental liabilities are accrued based on engineering studies estimating the cost of remediating sites. Expenses related to on-going maintenance of environmental sites are expensed as incurred. If actual or estimated probable future losses exceed the Company’s recorded liability for such claims, the Company would record additional charges during the period in which the actual loss or change in estimate occurred. Pension and Other Post-retirement Benefits The Company records annual income and expense amounts relating to its pension and post-retirement benefits plans based on calculations which include various actuarial assumptions including discount rates, expected long-term rates of return and compensation increases. The Company reviews its actuarial assumptions on an annual basis as of the fiscal year-end balance sheet date (or more frequently if a significant event requiring remeasurement occurs) and modifies the assumption based on current rates and trends when it is appropriate to do so. The effects of modifications are recognized immediately on the Consolidated Balance Sheets, but are generally amortized into operating earnings over future periods, with the deferred amount recorded in accumulated other comprehensive income (loss). The Company believes that the assumptions utilized in recording its obligations under its plans are reasonable based on its experience, market conditions and input from its actuaries and investment advisors. Revenue Recognition Adoption On December 31, 2017, the Company adopted new guidance on revenue from contracts with customers using the modified retrospective method. The adoption did not have a significant impact on the Company’s consolidated financial statements. Revenue Disaggregation The following table disaggregates the Company’s revenue by primary business units for the fiscal year ended December 29, 2018: 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) Electronics – Semiconductor Electronics – Passive Products and Sensors Passenger Car Products Commercial Vehicle Products Automotive Sensors Industrial Products Total Fiscal Year Ended December 29, 2018 Electronics Segment Automotive Segment Industrial Segment Total $ 648,967 $ 475,329 — $ — — $ 648,967 240,501 121,562 117,728 — — — — — 114,381 — — — — 475,329 240,501 121,562 117,728 114,381 $ 1,124,296 $ 479,791 $ 114,381 $ 1,718,468 See Note 16, Segment Information, for net sales by segment and countries. The Company recognizes revenue on product sales in the period in which the Company satisfies its performance obligation and control of the product is transferred to the customer. The Company’s sales arrangements with customers are predominately short term in nature and generally provide for transfer of control at the time of shipment as this is the point at which title and risk of loss of the product transfers to the customer. At the end of each period, for those shipments where title to the products and the risk of loss and rewards of ownership do not transfer until the product has been received by the customer, the Company adjusts revenues and cost of sales for the delay between the time that the products are shipped and when they are received by the customer. The amount of revenue recorded reflects the consideration to which the Company expects to be entitled in exchange for goods and may include adjustments for customer allowance, rebates and price adjustments. The Company’s distribution channels are primarily through direct sales and independent third-party distributors. The Company has elected the practical expedient under Accounting Standards Codification ("ASC") 340-40-25-4 to expense commissions when incurred as the amortization period of the commission asset the Company would have otherwise recognized is less than one year. Revenue and Billing The Company generally accepts orders from customers through receipt of purchase orders or electronic data interchange based on written sales agreements and purchasing contracts. Contract pricing and selling agreement terms are based on market factors, costs, and competition. Pricing is often negotiated as an adjustment (premium or discount) from the Company’s published price lists. The customer is invoiced when the Company’s products are shipped to them in accordance with the terms of the sales agreement. As the Company’s standard payment terms are less than one year, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company also elected the practical expedient provided in ASC 606-10-25-18B to treat all product shipping and handling activities as fulfillment activities, and therefore recognize the gross revenue associated with the contract, inclusive of any shipping and handling revenue. This is similar to the Company’s prior practice and therefore the effect of the new guidance is immaterial. Ship and Debit Program Some of the terms of the Company’s sales agreements and normal business conditions provide customers (distributors) the ability to receive price adjustments on products previously shipped and invoiced. This practice is common in the industry and is referred to as a “ship and debit” program. This program allows the distributor to debit the Company for the difference between the distributors’ contracted price and a lower price for specific transactions. Under certain circumstances (usually in a competitive situation or large volume opportunity), a distributor will request authorization for pricing allowances to reduce its price. When the Company approves such a reduction, the distributor is authorized to “debit” its account for the difference between the contracted price and the lower approved price. The Company establishes reserves for this program based on historic activity and actual authorizations for the debit and recognizes these debits as a reduction of revenue. Return to Stock The Company has a return to stock policy whereby certain customers, with prior authorization from Littelfuse management, can return previously purchased goods for full or partial credit. The Company establishes an estimated allowance for these returns based on historic activity. Sales revenue and cost of sales are reduced to anticipate estimated returns. 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Volume Rebates The Company offers volume based sales incentives to certain customers to encourage greater product sales. If customers achieve their specific quarterly or annual sales targets, they are entitled to rebates. The Company estimates the projected amount of rebates that will be achieved by the customer and recognizes this estimated cost as a reduction to revenue as products are sold. Allowance for Doubtful Accounts The Company evaluates the collectability of its trade receivables based on a combination of factors. The Company regularly analyzes its significant customer accounts and, when the Company becomes aware of a specific customer’s inability to meet its financial obligations, the Company records a specific reserve for bad debt to reduce the related receivable to the amount the Company reasonably believes is collectible. The Company also records allowances for all other customers based on a variety of factors including the length of time the receivables are past due, the financial health of the customer, macroeconomic considerations and past experience. Historically, the allowance for doubtful accounts has been adequate to cover bad debts. If circumstances related to specific customers change, the estimates of the recoverability of receivables could be further adjusted. Advertising Costs The Company expenses advertising costs as incurred, which amounted to $2.8 million in fiscal year 2018 and $2.9 million in both fiscal year 2017 and 2016, respectively, and are included as a component of selling, general, and administrative expenses. Shipping and Handling Fees and Costs Amounts billed to customers related to shipping and handling is classified as revenue. Costs incurred for shipping and handling of $12.3 million, $10.9 million, and $9.1 million in fiscal year 2018, 2017, and 2016, respectively, are classified in selling, general, and administrative expenses. Foreign Currency Translation / Remeasurement The Company’s foreign subsidiaries use the local currency or the U.S. dollar as their functional currency, as appropriate. Assets and liabilities are translated using exchange rates at the balance sheet date, and revenues and expenses are translated at weighted average rates. The amount of foreign currency gain or loss from remeasurement recognized in the income statement was a gain of $0.9 million in fiscal year 2018, a loss of $2.4 million in fiscal year 2017, and a loss of $0.5 million in fiscal year 2016. Adjustments from the translation process are recognized in “Shareholders’ equity” as a component of “Accumulated other comprehensive loss.” Stock-based Compensation The Company recognizes compensation expense for the cost of awards of equity compensation using a fair value method. Benefits of tax deductions in excess of recognized compensation expense are reported as operating cash flows. See Note 12, Stock-Based Compensation, for additional information on stock-based compensation. Coal Mining Liability Included in other long-term liabilities is an accrual related to former coal mining operations at Littelfuse GmbH (formerly known as Heinrich Industries, AG) for the amounts of €1.1 million ($1.3 million) and €0.9 million ($1.1 million) at December 29, 2018 and December 30, 2017, respectively. Management, in conjunction with an independent third-party, performs an annual evaluation of the former coal mining operations in order to develop an estimate of the probable future obligations in regard to remediating the dangers (such as a shaft collapse) of abandoned coal mine shafts in the former coal mining operations. Management accrues for costs associated with such remediation efforts based on management's best estimate when such costs are probable and reasonably able to be estimated. The ultimate determination can only be done after respective investigations because the concrete conditions are mostly unknown at this time. Other Income, Net Other income, net generally consists of interest income, royalties, change in fair value of available-for-sale securities, pension non-service costs and other non-operating expense (income). 47 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Income Taxes The Company accounts for income taxes using the liability method. Deferred taxes are recognized for the future effects of temporary differences between financial and income tax reporting using enacted tax rates in effect for the years in which the differences are expected to reverse. The Company recognizes deferred taxes for temporary differences, operating loss carryforwards, and tax credit and other tax attribute carryforwards (excluding carryforwards where usage has been determined to be remote). Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. U.S. state and non-U.S. income taxes are provided on the portion of non-U.S. income that is expected to be remitted to the U.S. and be taxable (and non-U.S. income taxes are provided on the portion of non-U.S. income that is expected to be remitted to an upper-tier non-U.S. entity). Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Deferred U.S. income taxes and non-U.S. taxes are not provided on the excess of the investment value for financial reporting over the tax basis of investments in those non-U.S. subsidiaries for which such excess is considered to be permanently reinvested in those operations. Management regularly evaluates whether non-U.S. earnings are expected to be permanently reinvested. This evaluation requires judgment about the future operating and liquidity needs of the Company and its non-U.S. subsidiaries. Changes in economic and business conditions, non-U.S. or U.S. tax laws, or the Company’s financial situation could result in changes to these judgments and the need to record additional tax liabilities. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. On December 22, 2017, the U.S. enacted legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). Among other things, the Tax Act reduces the U.S. corporate federal income tax rate from 35% to 21%, adds base broadening provisions which limit deductions and address excessive international tax planning, imposes a one-time tax (the “Toll Charge”) on accumulated earnings of certain non-U.S. subsidiaries and enables repatriation of earnings of non-U.S. subsidiaries free of U.S. federal income tax. Other than the Toll Charge (which, except for the IXYS impact, was applicable to the Company for 2017), the provisions are generally applicable to the Company in 2018 and beyond. In accordance with the guidance provided in SEC Staff Accounting Bulletin (“SAB”) No. 118, in the fourth quarter of 2017 the Company recorded a charge of $47.0 million as a provisional reasonable estimate of the impact of the Tax Act, including $49.0 million for the Toll Charge net of $2.0 million for other net tax benefits. In the fourth quarter of 2018, within the measurement period outlined in SAB No. 118, the Company finalized its estimates of the impact of the Tax Act as of December 30, 2017 and recorded a charge of $3.2 million, including $2.3 million for the Toll Charge and $0.9 million for the net impact of other items. In addition, the Company recorded $7.0 million for the Toll Charge associated with IXYS as part of the IXYS acquisition purchase price allocation. This was reflected in the opening balance sheet as an increase to goodwill and other long-term liabilities. Although certain administrative guidance has been issued, including final and proposed regulations, the appropriate application of many provisions of the Tax Act remain uncertain. The Company used its best judgment as to the application of these provisions in determining its final estimates of the impact of the Tax Act as of December 30, 2017, the Toll Charge associated with the IXYS acquisition as well as the Company’s income tax expense for the year ended December 29, 2018. Adjustments to income tax expense may be necessary in future periods if provisions of the Tax Act, and their interaction with other provisions of the U.S. Internal Revenue Code, are interpreted differently than interpretations made by the Company, whether through issuance of additional administrative guidance, or through further review of the Tax Act by the Company and its advisors. In this regard, on January 15, 2019, final regulations were issued addressing the Toll Charge (replacing the proposed regulations issued in August of 2018). The Company is evaluating these final regulations and has yet to determine their impact. The Company has elected to pay the 2017 Littelfuse Toll Charge and will elect to pay the 2018 IXYS Toll Charge over the eight- year period prescribed by the Tax Act. The long-term portion of these Toll Charges totaling $28.8 million (which includes the Littelfuse and IXYS Toll Charges, partially offset by foreign tax credits, the tax benefit of current year losses and the actual 2018 and anticipated 2019 annual installment payments) is recorded in Other long-term liabilities on the Consolidated Balance Sheet as of December 29, 2018. The anticipated 2019 annual installment payments are included in accrued income taxes. One of the base broadening provisions of the Tax Act is the tax on the global intangible low-taxed income ("GILTI") commonly referred to as the “GILTI” provisions. In accordance with guidance issued by the FASB staff, the Company has adopted an accounting policy to treat any GILTI inclusions as a period cost if and when incurred. Thus, for the year ended December 29, 2018, deferred 48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS taxes were computed without consideration of the possible future impact of the GILTI provisions, and any current year impact was recorded as a part of the current portion of income tax expense. Fair Value Measurements Certain assets and liabilities are required to be recorded at fair value on a recurring basis. Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The Company records the fair value of its available-for-sale securities and pension plan assets on a recurring basis. Assets measured at fair value on a nonrecurring basis include long-lived assets held and used, long-lived assets held for sale, goodwill and other intangible assets. The fair value of cash and cash equivalents, accounts receivable, short-term debt and accounts payable approximate their carrying values. The three-tier value hierarchy, which prioritizes valuation methodologies based on the reliability of the inputs, is: Level 1 – Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2 – Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 – Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. Recently Adopted Accounting Standards In January 2018, the FASB released guidance on the accounting for the GILTI provisions of the 2017 U.S. Tax Act. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to GILTI inclusions or treating any taxes on GILTI inclusions as period cost are both acceptable methods subject to an accounting policy election. The Company has adopted an accounting policy to treat any GILTI inclusions as a period cost if and when incurred. Thus, for the year ended December 29, 2018, deferred taxes were computed without consideration of the possible future impact of the GILTI provisions, and any current year impact was recorded as a part of the current portion of income tax expense. In March 2017, the FASB issued ASU No. 2017-07 “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-Retirement Benefit Cost,” which changed the presentation of net periodic pension and post-retirement benefit cost (net benefit cost) within the Statement of Income. Under the previous guidance, net benefit cost was reported as an employee cost within operating income. The amendment required the bifurcation of net benefit cost, with the service cost component to be presented with other employee compensation costs in operating income while the other components will be reported separately outside of income from operations. ASU No. 2017-07 was effective for the first quarter of 2018 with the Company adopting the new standard on December 31, 2017. In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Recognition and Measurement of Financial Assets and Financial Liabilities” which addressed certain aspects of the recognition, measurement, presentation and disclosure of financial instruments.The ASU requires the Company to recognize any changes in the fair value of certain equity investments in net income. Previously these changes were recognized in other comprehensive income ("OCI"). The Company adopted the new standard on December 31, 2017, on a modified retrospective basis, recognizing the cumulative effect as a $9.8 million increase to retained earnings. As a result of the adoption of the new standard and change in fair value of our equity investments, for the twelve months ended December 29, 2018, the Company recognized an unrealized loss of $0.7 million in Other income, net in the Consolidated Statements of Net Income. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic 606) which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition.” This ASU provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The Company adopted the new standard on December 31, 2017 using the modified retrospective method, however, no adjustment to retained earnings was needed. The new guidance did not have a material effect on the Company’s Consolidated Statements of Net Income. See the Revenue Recognition section above for further discussion. 49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes” (Topic 740). This ASU update requires entities to recognize the income tax consequences of many intercompany asset transfers at the transaction date. The seller and buyer will immediately recognize the current and deferred income tax consequences of an intercompany transfer of an asset other than inventory. The tax consequences were previously deferred. The Company adopted the new standard on December 31, 2017 and it did not have a material impact. Recently Issued Accounting Standards In February 2016, the FASB issued ASU No. 2016-02, "Leases" (Topic 842). This ASU requires lessees to recognize, on the balance sheet, assets and liabilities for the rights and obligations created by leases of greater than twelve months. The accounting by lessors will remain largely unchanged. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. Adoption requires using a modified retrospective transition with either 1) periods prior to the adoption date being recast or 2) a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption date with prior periods not recast.The Company adopted the standard on December 30, 2018 under the modified retrospective transition method with the cumulative-effect adjustment recognized to the retained earnings. The new standard provides a number of optional practical expedients in transition. The Company has elected the ‘package of practical expedients’, which permits it not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The Company has not elected the use-of-hindsight.The Company assessed its portfolio of leases and compiled a central repository of all active leases. Key lease data elements have been evaluated including developing a methodology for determining the incremental borrowing rate across all countries where we have operations. The Company has implemented a new leasing software and is in the process of assessing the design of the future lease process and drafting a policy to address the new standard requirements. While the Company is continuing to assess the potential impacts of ASU 2016-02, the Company estimates that the adoption of ASU 2016-02 will result in the recognition of right-of-use assets of approximately $27 million and related lease liabilities for operating leases on its Consolidated Balance Sheets, with no material impact to its Consolidated Statements of Net Income. In February 2018, the FASB issued ASU No. 2018-02 “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which permits the reclassification of tax effects stranded in accumulated other comprehensive income to retained earnings as a result of the Tax Act. The standard also requires entities to disclose whether or not they elected to reclassify the tax effects related to the Tax Act as well as their policy for releasing income tax effects from accumulated other comprehensive income. The standard allows the option of applying either a retrospective adoption, meaning the standard is applied to all periods in which the effect of the Tax Act is recognized, or applying the amendments in the period of adoption, meaning an adjustment is made to shareholder’s equity as of the beginning of the reporting period. ASU 2018-02 will be effective in the first quarter of 2019; however early adoption is permitted for interim and annual periods, including the reporting period in which the Tax Act was enacted. The adoption of this guidance will not have a material effect on our Consolidated Financial Statements. In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement." ASU 2018-13 modified the disclosure requirements in Topic 820, "Fair Value Measurement," based on the FASB Concepts Statement, "Conceptual Framework for Financial Reporting - Chapter 8: Notes to Financial Statements," including consideration of costs and benefits. The guidance is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years, with early adoption permitted. The company is currently evaluating the potential effects of this guidance on its Consolidated Financial Statements. In August 2018, the FASB issued ASU No. 2018-14 "Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, which amends ASC 715-20, Compensation - Retirement Benefits - Defined Benefit Plans - General. The amended guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans by removing and adding certain disclosures for these plans. The eliminated disclosures include (a) the amounts in OCI expected to be recognized in net periodic benefit costs over the next fiscal year, and (b) the effects of a one percentage point change in assumed health care cost trend rates on the net periodic benefit costs and the benefit obligation for post-retirement health care benefits. Additional disclosures include descriptions of significant gains and losses affecting the benefit obligation for the period. This guidance will be effective for financial statements issued for fiscal years ending after December 15, 2020. The adoption of this guidance will modify our disclosures but will not have a material effect on our Consolidated Financial Statements. In August 2018, the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force).” ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred 50 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The guidance is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating this guidance on its Consolidated Financial Statements. 2. Acquisitions and Dispositions The Company accounts for acquisitions using the acquisition method in accordance with ASC 805, “Business Combinations,” in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition. The operating results of the acquired business are included in the Company’s Consolidated Financial Statements from the date of the acquisition. IXYS Corporation On January 17, 2018, the Company acquired IXYS Corporation (“IXYS”), a global pioneer in the power semiconductor and integrated circuit markets with a focus on medium to high voltage power semiconductors across the industrial, communications, consumer and medical markets. IXYS has a broad customer base, serving more than 3,500 customers through its direct sales force and global distribution partners. The acquisition of IXYS is expected to accelerate the Company’s growth across the power control market driven by IXYS’s extensive power semiconductor portfolio and technology expertise. With IXYS, the Company will be able to diversify and expand its presence within industrial electronics markets, leveraging the strong IXYS industrial OEM customer base. The Company also expects to increase long-term penetration of its power semiconductor portfolio in automotive markets, expanding its global content per vehicle. Upon completion of the acquisition, at IXYS stockholders’ election and subject to proration, each share of IXYS common stock, par value $0.01 per share, owned immediately prior to the effective time were canceled and extinguished and automatically converted into the right to receive: (i) $23.00 in cash (subject to applicable withholding tax), without interest (referred to as the cash consideration), or (ii) 0.1265 of a share of common stock, par value $0.01 per share, of Littelfuse (referred to as the stock consideration). IXYS stockholders received cash in lieu of any fractional shares of Littelfuse common stock that the IXYS stockholders would otherwise have been entitled to receive. Additionally, each outstanding option to purchase shares of IXYS common stock granted under an IXYS equity plan were assumed by Littelfuse and converted into an option to acquire (i) a number of shares of Littelfuse common stock equal to the number of shares of IXYS common stock subject to such option immediately prior to the effective time multiplied by 0.1265, rounded down to the nearest whole share, with (ii) an exercise price per share of Littelfuse common stock equal to the exercise price of such IXYS stock option immediately prior to the effective time divided by 0.1265, rounded up to the nearest whole cent. Based on the $207.5 per share opening price of Littelfuse common stock on January 17, 2018, the consideration IXYS stockholders received in exchange of their IXYS common stock in the acquisition had a value of $814.8 million comprised of $380.6 million of cash and $434.2 million of Littelfuse stock. In addition to the consideration transferred related to IXYS common stock, the value of consideration transferred, and included in the purchase price, related to IXYS stock options that were converted to Littelfuse stock options, or cash settled, had a value of $41.7 million. As a result, total consideration was valued at $856.5 million. The total purchase price of $856.5 million has been allocated to assets acquired and liabilities assumed, as of the completion of the acquisition, based on estimated fair values. The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the IXYS acquisition: 51 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) Total purchase consideration: Cash, net of cash acquired Cash settled stock options Littelfuse stock Converted stock options Total purchase consideration Allocation of consideration to assets acquired and liabilities assumed: Current assets, net Property, plant, and equipment Intangible assets Goodwill Other non-current assets Other non-current liabilities Purchase Price Allocation 302,865 3,622 434,192 38,109 778,788 155,930 77,442 212,720 382,360 28,706 (78,370) 778,788 Approximately $49.1 million of net receivables was included in IXYS’s current assets, All IXYS goodwill, other assets and liabilities were recorded in the Electronics segment and primarily reflected in the Americas and European geographic areas. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining IXYS’s products and technology with the Company’s existing electronics product portfolio. Goodwill resulting from the IXYS acquisition is not expected to be deductible for tax purposes. The Company recorded $7.0 million for the Toll Charge associated with IXYS as part of the IXYS acquisition purchase price allocation (this reflects a reduction of $1.0 million recorded in the fourth quarter of 2018 and $2.0 million recorded in the third quarter of 2018 as a consequence of revisions to the Company’s original estimates. For additional information, see Note 14, Income Taxes. As a result of the Company completing its fair value analysis, in the fourth quarter of 2018, the company recorded a reduction of $2.6 million in certain investments held by IXYS. Included in the Company’s Consolidated Statements of Net Income for the fiscal year ended December 29, 2018 are net sales of approximately $378.2 million, and loss before income taxes of $22.2 million, since the January 17, 2018 acquisition of IXYS. The Company recognized approximately $11.9 million of stock compensation expense related to IXYS stock options converted to Littelfuse stock options during the fiscal year ended December 29, 2018, of which $4.5 million was recognized immediately as it related to prior service periods. As required by purchase accounting rules, the Company recorded a $36.9 million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was fully amortized as a non-cash charge to cost of goods sold during the first and second quarters of 2018, as the acquired inventory was sold, and reflected as other non-segment costs. During the fiscal year ended December 29, 2018, the Company incurred approximately $11.0 million of legal and professional fees related to this acquisition which were primarily recognized as selling, general, and administrative expenses. These costs were reflected as other non-segment costs. 2017 Acquisitions U.S. Sensor On July 7, 2017, the Company acquired the assets of U.S. Sensor Corporation (“U.S. Sensor”). The acquisition purchase price of $24.3 million, net of the finalization of an income tax gross up which was settled in the fourth quarter of 2017, was funded with available cash. The acquired business expands the Company’s existing sensor portfolio in several key electronics and industrial end markets. U.S. Sensor manufactures a variety of high quality negative temperature coefficient thermistors as well as thermistor probes and assemblies. Product lines also include thin film platinum resistance temperature detectors (“RTDs”) and RTD assemblies. The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the U.S. Sensor acquisition: 52 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) Total purchase consideration: Cash Allocation of consideration to assets acquired and liabilities assumed: Current assets, net Patented and unpatented technologies Trademarks and tradenames Non-compete agreement Customer relationships Goodwill Current liabilities Purchase Price Allocation $ $ $ 24,340 4,635 1,090 200 50 2,830 16,075 (540) 24,340 Included in U.S. Sensor’s current assets, net was approximately $1.5 million of receivables. All U.S. Sensor goodwill, other assets and liabilities were recorded in the Electronics segment and reflected in the United States geographic area. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining U.S. Sensor’s products and technology with the Company’s existing electronics product portfolio. Goodwill for the above acquisition is expected to be deductible for tax purposes. As required by purchase accounting rules, the Company recorded a $1.6 million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of goods sold during the third quarter of 2017, as the acquired inventory was sold, and reflected as other non-segment costs. Monolith In December 2015, the Company invested $3.5 million in the preferred stock of Monolith Semiconductor Inc. (“Monolith”), a U.S. start-up Company developing silicon carbide technology, which represented approximately 12% of the common stock of Monolith on an as-converted basis. The Company accounted for its investment in Monolith under the cost method with any changes in value recorded in other comprehensive income. The value of the Monolith investment was $3.5 million at December 31, 2016. On February 28, 2017, pursuant to a Securities Purchase Agreement between the Company and the stockholders of Monolith (“Securities Purchase Agreement”) and conditioned on Monolith achieving a product development milestone and other provisions, the Company acquired 62% of the outstanding common stock of Monolith for $15.0 million. The Securities Purchase Agreement includes provisions whereby the Company will acquire the remaining outstanding stock of Monolith (“non-controlling interest”) at a time or times based on Monolith meeting certain technical and sales targets. During the first quarter of 2018, Monolith met the next set of technical and sales targets. As a result, and pursuant to the Securities Purchase Agreement, in April 2018 the Company acquired an additional 19% of the outstanding common stock of Monolith for $5.0 million, of which $4.0 million was paid to the stockholders of Monolith. On October 5, 2018, the Company acquired the remaining 19% outstanding common stock for $5.0 million. The additional investment, in the first quarter of 2017, resulted in the Company gaining control of Monolith and was accounted for as a step-acquisition with the fair value of the original investment immediately before the acquisition estimated to be approximately $3.5 million. As the fair value of the investment immediately prior to the transaction equaled the carrying value, there was no impact on the Company’s Consolidated Statements of Net Income. As the Securities Purchase Agreement includes an obligation of the Company to mandatorily redeem the non-controlling interest for cash, the fair value of the non-controlling interest was recognized as a liability on the Company’s Consolidated Balance Sheets. The original investment of $3.5 million, additional cash consideration of $14.2 million (net of cash acquired), and the non-cash consideration of the fair value of the commitment to purchase the non-controlling interest of $9.0 million resulted in a purchase price of $26.7 million. Changes in the fair value of the non-controlling interest are recognized in the Company’s Consolidated Statements of Net Income. Commencing March 1, 2017, Monolith was reflected as a consolidated subsidiary within the Company’s Consolidated Financial Statements. Had the acquisition occurred as of January 1, 2017, the impact on the Company’s consolidated results of operations would not have been material. 53 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the Monolith acquisition: (in thousands) Total purchase consideration: Original investment Cash, net of cash acquired Non-cash, fair value of commitment to purchase non-controlling interest Total purchase consideration Allocation of consideration to assets acquired and liabilities assumed: Current assets, net Property, plant, and equipment Patented and unpatented technologies Non-compete agreement Goodwill Current liabilities Other non-current liabilities Purchase Price Allocation $ $ $ $ 3,500 14,172 9,000 26,672 891 789 6,720 140 20,641 (639) (1,870) 26,672 Included in Monolith’s current assets, net was approximately $0.7 million of receivables. All Monolith goodwill, other assets and liabilities were recorded in the Electronics segment and reflected in the United States geographic area. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining Monolith’s products and technology with the Company’s existing electronics product portfolio. Goodwill for the above acquisition is not expected to be deductible for tax purposes. 2016 Acquisitions ON Portfolio On August 29, 2016, the Company acquired certain assets of select businesses (the “ON Portfolio”) of ON Semiconductor Corporation for $104.0 million. The Company funded the acquisition with available cash and proceeds from its credit facility. The acquired business, which is included in the Electronics segment, consists of a product portfolio that includes transient voltage suppression (“TVS”) diodes, switching thyristors and insulated gate bipolar transistors (“IGBTs”) for automotive ignition applications. The acquisition expands the Company’s offerings in power semiconductor applications as well as increases its presence in the automotive electronics market. The ON Portfolio products have strong synergies with the Company’s existing circuit protection business and will strengthen its channel partnerships and customer engagement. The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the ON Portfolio acquisition: (in thousands) Total purchase consideration: Cash Allocation of consideration to assets acquired and liabilities assumed: Current assets, net Customer relationships Patented and unpatented technologies Non-compete agreement Goodwill 54 Purchase Price Allocation $ $ $ 104,000 4,816 31,800 8,800 2,500 56,084 104,000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS All the ON Portfolio business goodwill and other assets were recorded in the Electronics segment and are reflected in the Americas and Europe geographic areas. The customer relationships are being amortized over 13.5 years. The patented and unpatented technologies are being amortized over 6-8.5 years. The non-compete agreement is being amortized over 4 years. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining the ON Portfolio products with the Company’s existing power semiconductor product portfolio. $7.3 million of goodwill for the above acquisition is expected to be deductible for tax purposes. As required by purchase accounting rules, the Company recorded a $0.7 million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. All of the step-up was amortized as a non-cash charge to cost of goods sold during 2016, as the acquired inventory was sold, and reflected as other non-segment costs. Included in the Company’s Consolidated Statements of Net Income for the year ended December 31, 2016 are net sales of approximately $21.8 million since the August 29, 2016 acquisition of the ON Portfolio business. Menber’s On April 4, 2016, the Company completed the acquisition of Menber’s S.p.A. (“Menber’s”) headquartered in Legnago, Italy for $19.2 million, net of acquired cash and after settlement of a working capital adjustment. The Company funded the acquisition with cash on hand and borrowings under the Company’s revolving credit facility. The acquired business is part of the Company's commercial vehicle product business within the Automotive segment and specializes in the design, manufacturing, and selling of manual and electrical high current switches and trailer connectors for commercial vehicles. The acquisition expands the Company’s commercial vehicle products business globally. The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the Menber’s acquisition: (in thousands) Total purchase consideration: Cash, net of acquired cash Preliminary allocation of consideration to assets acquired and liabilities assumed: Current assets, net Property, plant, and equipment Customer relationships Patented and unpatented technologies Trademarks and tradenames Goodwill Current liabilities Other non-current liabilities Purchase Price Allocation $ $ $ 19,162 12,919 1,693 3,050 224 1,849 8,091 (7,220) (1,444) 19,162 All Menber’s goodwill and other assets and liabilities were recorded in the Automotive segment and reflected in the Europe geographic area. The customer relationships are being amortized over 10 years. The patented and unpatented technologies are being amortized over 5 years. The trademarks and tradenames are being amortized over 10 years. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining Menber’s products with the Company’s existing automotive product portfolio. Goodwill for the above acquisition is not expected to be deductible for tax purposes. As required by purchase accounting rules, the Company recorded a $0.2 million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of goods sold during 2016, as the acquired inventory was sold, with the charge reflected as other non-segment costs. Included in the Company’s Consolidated Statements of Net Income for the year ended December 31, 2016 are net sales of approximately $17.3 million since the April 4, 2016 acquisition of Menber’s. 55 PolySwitch NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On March 25, 2016, the Company acquired 100% of the circuit protection business (“PolySwitch”) of TE Connectivity Ltd. for $348.3 million, net of acquired cash and after settlement of certain post-closing adjustments. The Company funded the acquisition with available cash on hand and borrowings under the Company’s revolving credit facility. The PolySwitch business, which is split between the Automotive and Electronics segments, has a leading position in polymer based resettable circuit protection devices, with a strong global presence in the automotive, battery, industrial, communications and mobile computing markets. PolySwitch has manufacturing facilities in Shanghai and Kunshan, China and Tsukuba, Japan. The acquisition allows the Company to strengthen its global circuit protection product portfolio, as well as strengthen its presence in the automotive electronics and battery protection end markets. The acquisition also significantly increases the Company’s presence in Japan. The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the PolySwitch acquisition: (in thousands) Total purchase consideration: Original consideration Post closing consideration adjustment received Acquired cash Acquired cash to be returned to seller Total purchase consideration Allocation of consideration to assets acquired and liabilities assumed: Current assets, net Property, plant, and equipment Land lease Patented and unpatented technologies Customer relationships Goodwill Other long-term assets Current liabilities Other non-current liabilities Purchase Price Allocation $ $ $ $ 350,000 (1,708) (3,810) 3,810 348,292 60,228 51,613 4,290 56,425 39,720 165,088 11,228 (35,280) (5,020) 348,292 All PolySwitch goodwill and other assets and liabilities were recorded in the Electronics and Automotive segments and reflected in all geographic areas. The customer relationships are being amortized over 15 years. The patented and unpatented technologies are being amortized over 10 years. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining PolySwitch products with the Company’s existing automotive and electronics product portfolio. $103.8 million and $61.3 million of the goodwill for the above acquisition has been assigned to the Electronics and Automotive segments, respectively, with $64.9 million expected to be deductible for tax purposes. As required by purchase accounting rules, the Company recorded a $6.9 million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of goods sold during the second quarter of 2016, as the acquired inventory was sold, and reflected as other non-segment costs. Included in the Company’s Consolidated Statements of Net Income for the year ended December 31, 2016 are net sales of approximately $126.5 million since the March 25, 2016 acquisition of PolySwitch. 2016 Dispositions During the first quarter of 2016, the Company sold its tangible and intangible assets relating to a marine product line that it acquired as part of its acquisition of Selco A/S in 2011. In connection with this sale, the Company recorded a loss on sale of the product line of $1.4 million reflected within selling, general, and administrative expenses for the year ended December 31, 2016. This loss was recognized as an “other” charge for segment reporting purposes. 56 Pro Forma Results NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes, on an unaudited pro forma basis, the combined results of operations of the Company and IXYS as though the acquisition had occurred as of January 1, 2017. The Company has not included pro forma results of operations for U.S. Sensor or Monolith as these results were not material to the Company. The pro forma amounts presented are not necessarily indicative of either the actual consolidated results had the IXYS acquisition occurred as of January 1, 2017 or of future consolidated operating results. (in thousands, except per share amounts) Net sales Income before income taxes Net income Net income per share — basic Net income per share — diluted Pro forma results presented above primarily reflect the following adjustments: (in thousands) Amortization(a) Depreciation Transaction costs(b) Amortization of inventory step-up(c) Stock compensation(d) Interest expense(e) Income tax impact of above items For the Fiscal Year Ended December 29, 2018 December 30, 2017 $ 1,735,181 $ 272,724 215,228 8.61 8.53 1,564,956 142,150 75,604 3.05 3.00 For the Fiscal Year Ended December 29, 2018 December 30, 2017 $ 12,009 $ — 9,976 36,927 5,845 — (15,446) (25,203) 556 (9,976) (36,927) (6,635) (10,326) 29,336 (a) The amortization adjustment for the twelve months ended December 29, 2018 primarily reflects the reduction of amortization expense in the period related to the Order backlog intangible asset. The Order backlog has a useful life of twelve months and will be fully amortized in the fiscal 2017 pro forma results. The amortization adjustment for the twelve months ended December 30, 2017 reflects incremental amortization resulting for the measurement of intangibles at their fair values. (b) The transaction cost adjustments reflect the reversal of certain bank and attorney fees from the twelve months ended December 29, 2018 and recognition of those fees during the twelve months ended December 30, 2017. (c) The amortization of inventory step-up adjustment reflects the reversal of the amount recognized during the twelve months ended December 29, 2018 and the recognition of the full amortization during the twelve months ended December 30, 2017. The inventory step-up was amortized over five months as the inventory was sold. (d) The stock compensation adjustment reflects the reversal of the portion of stock compensation for IXYS stock options that were converted to Littelfuse stock options and expensed immediately during the twelve months ended December 29, 2018. The adjustment for the twelve months ended December 30, 2017 reflect the incremental stock compensation for the converted stock options. (e) The interest expense adjustment reflects incremental interest expense related to the financing of the transaction. The following table summarizes, on an unaudited pro forma basis, the combined results of operations of the Company and the acquired PolySwitch and the ON Portfolio businesses as though the acquisitions had occurred as of December 28, 2014. The Company has not included pro forma results of operations for Menber’s as these results were not material to the Company. The pro forma amounts presented are not necessarily indicative of either the actual consolidated results had the PolySwitch or ON Portfolio acquisitions occurred as of December 28, 2014 or of future consolidated operating results. 57 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) Net sales Income before income taxes Net income Net income per share — basic Net income per share — diluted For the Fiscal Year Ended December 31, 2016 $ 1,130,645 143,110 124,388 5.51 5.47 Pro forma results presented above primarily reflect: (i) incremental depreciation relating to fair value adjustments to property, plant, and equipment; (ii) amortization adjustments relating to fair value estimates of intangible assets; (iii) incremental interest expense on assumed indebtedness; and (iv) additional cost of goods sold relating to the capitalization of gross profit as part of purchase accounting recognized for purposes of the pro forma as if it was recognized during the Company’s first quarter of 2015. Pro forma adjustments described above have been tax affected using the Company's effective rate during the respective periods. The historical PolySwitch and ON Portfolio business results for the year ended December 31, 2016 does not include a provision for income taxes. Income tax expense for the historical ON Portfolio business was not provided on a standalone basis. 3. Inventories The components of inventories at December 29, 2018 and December 30, 2017 are as follows: (in thousands) Raw materials Work in process Finished goods Total 2018 2017 $ $ 69,883 88,505 99,840 258,228 $ $ 39,030 27,454 74,305 140,789 4. Property, Plant, and Equipment The components of net property, plant, and equipment at December 29, 2018 and December 30, 2017 are as follows: (in thousands) Land Building Equipment Accumulated depreciation and amortization Total 2018 2017 $ $ 25,630 114,636 583,043 (383,415) 339,894 $ $ 9,547 86,599 505,838 (351,407) 250,577 The Company recorded depreciation expense of $51.0 million, $38.3 million, and $33.8 million for the fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016, respectively. 58 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. Goodwill and Other Intangible Assets The amounts for goodwill and changes in the carrying value by segment are as follows: (in thousands) As of December 31, 2016 Additions(a) Foreign currency translation and other adjustments(b) As of December 30, 2017 Additions(c) Foreign currency translation adjustments As of December 29, 2018 Electronics $ $ $ 215,765 36,716 26,478 278,959 382,903 (5,823) 656,039 Automotive 144,585 $ — (8,756) 135,829 — (3,497) 132,332 $ $ Industrial Total $ $ $ 43,194 — (4,568) 38,626 — (282) 38,344 $ $ $ 403,544 36,716 13,154 453,414 382,903 (9,602) 826,715 (a) The 2017 additions resulted from the acquisitions of U.S. Sensor and Monolith. (b) Adjustments in 2017 reflect adjustments to reclass goodwill by segment as well as the impact of changes in foreign exchange rates. The impact of the reclassification was an increase in goodwill to the Electronics segment of $21.6 million and a decrease of goodwill of $16.8 million and $4.8 million to the Automotive segment and the Industrial segment, respectively. (c) The 2018 additions resulted primarily from the acquisition of IXYS. The components of other intangible assets at December 29, 2018 and December 30, 2017 are as follows: (in thousands, except weighted average useful life) Patents, licenses and software Distribution network Customer relationships, trademarks,tradenames, and other Total (in thousands, except weighted average useful life) Patents, licenses and software Distribution network Customer relationships, trademarks, and tradenames Total Weighted Average Useful Life (Years) 11.4 12.6 17.5 Weighted Average Useful Life (Years) 11.4 12.1 15.6 As of December 29, 2018 Gross Carrying Value 139,413 43,876 374,246 557,535 Accumulated Amortization 69,431 $ 34,564 92,066 196,061 $ As of December 30, 2017 Gross Carrying Value 141,520 46,233 162,679 350,432 Accumulated Amortization 59,609 $ 33,361 53,612 146,582 $ $ $ $ $ Net Book Value 69,982 9,312 282,180 361,474 Net Book Value 81,911 12,872 109,067 203,850 $ $ $ $ During the years ended December 29, 2018 and December 30, 2017, the Company recorded additions to other intangible assets of $212.7 million and $11.0 million, respectively, for acquisitions during those years, the components of which were as follows: 59 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except weighted average useful life) Patents, licenses and software Customer relationships, trademarks, and tradenames Order backlog Total 2018 2017 Weighted Average Useful Life (Years) 8.0 17.2 1.0 Amount 51,500 148,800 12,420 212,720 $ $ Weighted Average Useful Life (Years) 9.6 9.0 0.0 Amount 7,810 3,220 — 11,030 $ $ For intangible assets with definite lives, the Company recorded amortization expense of $52.2 million, $24.7 million, and $19.3 million in 2018, 2017, and 2016, respectively. Estimated annual amortization expense related to intangible assets with definite lives at December 29, 2018 is as follows: (in thousands) 2019 2020 2021 2022 2023 2024 and thereafter Total 6. Accrued Liabilities Amount 39,440 39,162 37,164 36,368 31,906 177,434 361,474 $ $ The components of accrued liabilities at December 29, 2018 and December 30, 2017 are as follows: (in thousands) Employee-related liabilities Other non-income taxes Professional services Interest Accrued share repurchases Restructuring liability Other Total 2018 2017 60,640 21,523 6,169 5,137 4,349 3,887 36,700 138,405 $ $ 51,239 15,207 2,214 2,477 — 1,459 27,819 100,415 $ $ Employee-related liabilities consist primarily of payroll, sales commission, bonus, employee benefit accruals and workers’ compensation. Bonus accruals include amounts earned pursuant to the Company’s primary employee incentive compensation plans. Other accrued liabilities include miscellaneous operating accruals and other client-related liabilities. 7. Lease Commitments The Company leases certain office and warehouse space as well as certain machinery and equipment under non-cancellable operating leases. Rent expense under these leases was $9.6 million, $11.6 million, and $12.6 million in 2018, 2017, and 2016, respectively. Rent expense is recognized on a straight-line basis over the term of the leases. The difference between straight-line basis rent and the amount paid has been recorded as accrued lease obligations. The Company also has leases that have lease renewal provisions. 60 As of December 29, 2018, all operating leases outstanding were with third parties. The Company did not have any capital leases as of December 29, 2018. Future minimum payments for all non-cancellable operating leases with initial terms of one year or more at December 29, 2018 are as follows: (in thousands) 2019 2020 2021 2022 2023 2024 and thereafter Total Future Minimum Payments 9,133 7,590 5,574 4,590 2,946 2,774 32,607 $ $ 8. Restructuring, Impairment and Other Charges The Company recorded restructuring, impairment and other charges-net for fiscal years 2018, 2017, and 2016 as follows: (in thousands) Employee terminations Other restructuring charges Total restructuring charges Impairment Total (in thousands) Employee terminations Other restructuring charges Total restructuring charges Impairment Total (in thousands) Employee terminations Other restructuring charges Total restructuring charges Impairment Total Fiscal Year Ended December 29, 2018 Electronics 8,742 $ 670 9,412 — 9,412 $ Automotive 634 $ 192 826 88 914 $ Industrial 127 $ — 127 2,130 2,257 $ $ $ Total 9,503 862 10,365 2,218 12,583 Fiscal Year Ended December 30, 2017 Electronics 1,244 $ 234 1,478 — 1,478 $ Automotive 371 $ — 371 — 371 $ Industrial 378 $ — 378 — 378 $ $ $ Total 1,993 234 2,227 — 2,227 Fiscal Year Ended December 31, 2016 Electronics 135 $ 1,609 1,744 — 1,744 $ Automotive 299 $ 75 374 — 374 $ Industrial 1,094 $ 783 1,877 14,809 16,686 $ $ $ Total 1,528 2,467 3,995 14,809 18,804 2018 For the year ended December 29, 2018, the Company recorded total restructuring charges of $10.4 million for employee termination costs and other restructuring charges related to lease termination and facility closure. These charges primarily related to the integration of IXYS and the reorganization of the IXYS Radio Pulse business within the Electronics segment and the reorganization of operations in the Commercial Vehicle Products business within the Automotive segment. 61 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 29, 2018, the Company recorded impairment charges of $2.2 million primarily related to the impairment of a building and a trade name associated with the exit of the Custom business within the Industrial segment. 2017 For the year ended December 30, 2017, the Company recorded total restructuring charges of $2.2 million for employee termination costs and other restructuring charges. The Company recorded $2.0 million for employee termination costs primarily related to the reorganization of selling, general, and administrative functions within the Electronics segments as well as the reorganization of certain operations. 2016 For the year ended December 31, 2016, the Company recorded total restructuring charges of $4.0 million for employee termination costs and other restructuring charges, of which $1.6 million related to a manufacturing product line relocation within the Electronics segment. The Company recorded $1.5 million for employee termination costs primarily related to the reorganization of certain operations in the Industrial and Automotive segments. Additionally, the Company recognized a charge for goodwill impairment of $8.8 million for its Custom Products reporting unit within the Industrial segment, and non-cash impairment charges of $6.0 million, of which $3.8 million related to the impairment of the Custom Products tradename and $2.2 million related to the impairment of certain customer relationship intangible assets in the Custom Products reporting unit within the Industrial segment. The restructuring reserves as of December 29, 2018 and December 30, 2017 are $3.9 million and $1.5 million, respectively. The restructuring reserves are included within accrued liabilities. Payments associated with employee terminations reflected in the above table were substantially completed by December 29, 2018. The Company anticipates the remaining payments associated with employee terminations will be completed in the first quarter of fiscal 2019. 9. Debt The carrying amounts of debt at December 29, 2018 and December 30, 2017 are as follows: (in thousands) Term Loan Euro Senior Notes, Series A due 2023 Euro Senior Notes, Series B due 2028 U.S. Senior Notes, Series A due 2022 U.S. Senior Notes, Series B due 2027 U.S. Senior Notes, Series A due 2025 U.S. Senior Notes, Series B due 2030 Other Unamortized debt issuance costs Total debt Less: Current maturities Total long-term debt Revolving Credit Facility / Term Loan 2018 2017 $ $ 155,000 133,417 108,330 25,000 100,000 50,000 125,000 2,619 (4,636) 694,730 (10,000) 684,730 $ $ 122,500 139,623 113,369 25,000 100,000 — — — (4,881) 495,611 (6,250) 489,361 On March 4, 2016, the Company entered into a five-year credit agreement (“Credit Agreement”) with a group of lenders for up to $700.0 million. The Credit Agreement consisted of an unsecured revolving credit facility (“Revolving Credit Facility”) of $575.0 million and an unsecured term loan credit facility (“Term Loan”) of up to $125.0 million. In addition, the Company had the ability, from time to time, to increase the size of the Revolving Credit Facility and the Term Loan by up to an additional $150.0 million, in the aggregate, in each case in minimum increments of $25.0 million, subject to certain conditions and the agreement of participating lenders. On October 13, 2017, the Company amended the Credit Agreement to increase the Revolving Credit Facility from $575.0 million to $700.0 million and increase the Term Loan from $125.0 million to $200.0 million and to extend the expiration date from March 62 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4, 2021 to October 13, 2022. The Credit Agreement also includes the option for the Company to increase the size of the Revolving Credit Facility and the Term Loan by up to an additional $300.0 million, in the aggregate, subject to the satisfaction of certain conditions set forth in the Credit Agreement. Term Loans may be made in up to two advances. The first advance of $125.0 million occurred on October 13, 2017 and the second advance of $75.0 million occurred on January 16, 2018. For the Term Loan, the Company is required to make quarterly principal payments of 1.25% of the original term loan ($2.5 million with the second advance on January 16, 2018) through maturity, with the remaining balance due on October 13, 2022. In addition to the quarterly principal payments, the Company paid $35.0 million of principal on the term loan during the fiscal year ended December 29, 2018. Outstanding borrowings under the Credit Agreement bear interest, at the Company’s option, at either LIBOR(fixed for interest periods of one, two, three or six-month periods) plus 1.00% to 2.00%, or at the bank’s Base Rate, as defined, plus 0.00% to 1.00%, based upon the Company’s Consolidated Leverage Ratio, as defined. The Company is also required to pay commitment fees on unused portions of the credit agreement ranging from 0.15% to 0.25%, based on the Consolidated Leverage Ratio, as defined in the agreement. The credit agreement includes representations, covenants and events of default that are customary for financing transactions of this nature. The effective interest rate on outstanding borrowings under the credit facility was 3.59% at December 29, 2018. As of December 29, 2018, the Company had $0.1 million outstanding in letters of credit and had available $699.9 million of borrowing capacity under the Revolving Credit Facility. At December 29, 2018, the Company was in compliance with all covenants under the Credit Agreement. Senior Notes On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and sold €212 million aggregate principal amount of senior notes in two series. The funding date for the Euro denominated senior notes occurred on December 8, 2016 for €117 million in aggregate amount of 1.14% Senior Notes, Series A, due December 8, 2023 (“Euro Senior Notes, Series A due 2023”), and €95 million in aggregate amount of 1.83% Senior Notes, Series B due December 8, 2028 (“Euro Senior Notes, Series B due 2028”) (together, the “Euro Senior Notes”). Interest on the Euro Senior Notes is payable semiannually on June 8 and December 8, commencing June 8, 2017. On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and sold $125 million aggregate principal amount of senior notes in two series. On February 15, 2017, $25 million in aggregate principal amount of 3.03% Senior Notes, Series A, due February 15, 2022 (“U.S. Senior Notes, Series A due 2022”), and $100 million in aggregate principal amount of 3.74% Senior Notes, Series B, due February 15, 2027 (“U.S. Senior Notes, Series B due 2027”) (together, the “U.S. Senior Notes due 2022 and 2027”) were funded. Interest on the U.S. Senior Notes due 2022 and 2027 is payable semiannually on February 15 and August 15, commencing August 15, 2017. On November 15, 2017, the Company entered into a Note Purchase Agreement pursuant to which the Company issued and sold $175 million in aggregate principal amount of senior notes in two series. On January 16, 2018, $50 million aggregate principal amount of 3.48% Senior Notes, Series A, due February 15, 2025 (“U.S. Senior Notes, Series A due 2025”) and $125 million in aggregate principal amount of 3.78% Senior Notes, Series B, due February 15, 2030 (“U.S. Senior Notes, Series B due 2030”) (together, the “U.S. Senior Notes due 2025 and 2030” and with the Euro Senior Notes and the U.S. Senior Notes 2022 and 2027, the “Senior Notes”) were funded. Interest on the U.S. Senior Notes due 2025 and 2030 will be payable on February 15 and August 15, commencing on August 15, 2018. The Senior Notes have not been registered under the Securities Act, or applicable state securities laws. The Senior Notes are general unsecured senior obligations and rank equal in right of payment with all existing and future unsecured unsubordinated indebtedness of the Company. The Senior Notes are subject to certain customary covenants, including limitations on the Company’s ability, with certain exceptions, to engage in mergers, consolidations, asset sales and transactions with affiliates, to engage in any business that would substantially change the general business of the Company, and to incur liens. In addition, the Company is required to satisfy certain financial covenants and tests relating to, among other matters, interest coverage and leverage. At December 29, 2018, the Company was in compliance with all covenants under the Senior Notes. The Company may redeem the Senior Notes upon the satisfaction of certain conditions and the payment of a make-whole amount to noteholders, and are required to offer to repurchase the Senior Notes at par following certain events, including a change of control. 63 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Interest paid on all Company debt was approximately $18.5 million, $13.4 million, and $8.6 million in fiscal year ended 2018, 2017, and 2016, respectively. Debt Issuance Costs The Company paid debt issuance costs of $0.9 million in relation to the $175 million Note Purchase Agreement that was entered on November 15, 2017. The Company incurred debt issuance costs of $1.6 million in relation to the 2017 amendment to the Credit Agreement which, along with the remaining balance of debt issuance costs of the previous credit facility, are being amortized over the life of the Credit Agreement. The Company incurred aggregate debt issuance costs of $1.8 million in relation to the Senior Notes issued previously which are being amortized over the respective lives of the Series A and B notes. Debt Maturities Scheduled maturities of the Company’s long-term debt for each of the five years succeeding December 29, 2018 and thereafter are summarized as follows: (in thousands) 2019 2020 2021 2022 2023 2024 and thereafter Scheduled Maturities 10,000 10,000 10,000 152,619 133,417 383,330 699,366 $ $ 10. Fair Value of Assets and Liabilities For assets and liabilities measured at fair value on a recurring and nonrecurring basis, a three-level hierarchy of measurements based upon observable and unobservable inputs is used to arrive at fair value. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about valuation based on the best information available in the circumstances. Depending on the inputs, the Company classifies each fair value measurement as follows: Level 1—Valuations based on unadjusted quoted prices for identical assets or liabilities in active markets; Level 2—Valuations based upon quoted prices for similar instruments, prices for identical or similar instruments in markets that are not active, or model-derived valuations, all of whose significant inputs are observable, and Level 3—Valuations based upon one or more significant unobservable inputs. Following is a description of the valuation methodologies used for instruments measured at fair value and their classification in the valuation hierarchy. Investments in Equity Securities Investments in equity securities listed on a national market or exchange are valued at the last sales price and classified within Level 1 of the valuation hierarchy. Such securities are further detailed in Note 1, Summary of Significant Accounting Policies and Other Information. Defined Benefit Plan Assets / Non-qualified Supplemental Retirement and Savings Plan Investments See Note 11, Benefit Plans, for description of valuation methodologies and investment balances for defined benefit plan assets and investments related to the Company’s Non-Qualified Supplemental Retirement and Savings Plan. 64 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS There were no changes during 2018 to the Company’s valuation techniques used to measure asset and liability fair values on a recurring basis. As of December 29, 2018 and December 30, 2017, the Company held no non-financial assets or liabilities that are required to be measured at fair value on a recurring basis. The following table presents assets measured at fair value by classification within the fair value hierarchy as of December 29, 2018: (in thousands) Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Investments in equity securities $ Mutual funds 10,312 $ 9,112 — $ — — $ — 10,312 9,112 The following table presents assets measured at fair value by classification within the fair value hierarchy as of December 30, 2017: (in thousands) Investments in equity securities Mutual funds Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total $ $ 10,993 7,962 — $ — — $ — 10,993 7,962 In addition to the methods and assumptions used for the financial instruments recorded at fair value as discussed above, the following methods and assumptions are used to estimate the fair value of other financial instruments that are not marked to market on a recurring basis. The Company’s other financial instruments include cash and cash equivalents, short-term investments, trade receivables and its long-term debt. Due to their short-term maturity, the carrying amounts of cash and cash equivalents, short-term investments and trade receivables approximate their fair values. The Company’s revolving and term loan debt facilities’ fair values approximate book value at December 29, 2018 and December 30, 2017, as the rates on these borrowings are variable in nature. The carrying value and estimated fair values of the Company’s Euro Senior Notes, Series A and Series B and USD Senior Notes, Series A and Series B, as of December 29, 2018 and December 30, 2017 were as follows: (in thousands) Euro Senior Notes, Series A due 2023 Euro Senior Notes, Series B due 2028 USD Senior Notes, Series A due 2022 USD Senior Notes, Series B due 2027 USD Senior Notes, Series A due 2025 USD Senior Notes, Series B due 2030 December 29, 2018 December 30, 2017 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value $ $ 133,417 108,330 25,000 100,000 50,000 125,000 $ 130,888 103,774 24,115 94,458 47,434 114,731 $ 139,623 113,369 25,000 100,000 — — 138,294 111,579 24,737 99,992 — — 65 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The fair value as of the measurement date, net book value as of the end of the year and related impairment charge for assets measured at fair value on a nonrecurring basis subsequent to initial recognition during the fiscal years ended December 31, 2016 were as follows: (in thousands) Goodwill Other intangible assets Total Fiscal Year Ended December 31, 2016 Impairment Charge Fair Value Measurement (Level 3) Net Book Value $ $ 8,794 6,015 14,809 $ $ — $ 680 680 $ — 660 660 Further information regarding the impairment charges of goodwill and intangible assets is provided in Note 8, Restructuring, Impairment and Other Charges, of the Notes to Consolidated Financial Statements included in this Annual Report. The company’s accounting and finance management determines the valuation policies and procedures for Level 3 fair value measurements and is responsible for the development and determination of unobservable inputs. The following table presents the fair value, valuation techniques and related unobservable inputs for these Level 3 measurements for the fiscal year ended December 31, 2016: (in thousands, except rates data) Tradename Customer relationships $ $ Fair Value Valuation Technique 680 Relief from royalty — Excess earnings Unobservable Inputs Discount rate: Royalty rate: Discount rate: Attrition rate: Rates 18% 1% 18% 5% 66 11. Benefit Plans NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company has Company-sponsored defined benefit pension plans covering employees in the U.K., Germany, the Philippines, China, Japan, Mexico, Italy and France. The amount of the retirement benefits provided under the plans is based on years of service and final average pay. IXYS Acquisition During 2018, as a result of the IXYS acquisition, pension liabilities were assumed by the Company in Germany, Philippines, and U.K. Benefit plan related information is as follows for the years 2018 and 2017: (in thousands) Change in benefit obligation: Benefit obligation at beginning of year Service cost Interest cost Net actuarial gain Benefits paid from the trust Benefits paid directly by the Company Settlements Acquisitions Effect of exchange rate movements Other Benefit obligation at end of year Change in plan assets at fair value: Fair value of plan assets at beginning of year Actual return on plan assets Employer contributions Benefits paid Settlements Acquisitions Effect of exchange rate movements Fair value of plan assets at end of year Net amount recognized/(unfunded status) 2018 2017 $ $ $ $ 67,268 2,266 3,104 (7,321) (2,479) (1,802) (1,291) 48,358 (6,918) 1,648 102,833 $ $ $ 48,123 (2,847) 2,341 (2,479) (1,291) 31,954 (5,125) 70,676 (32,157) $ 55,606 2,037 1,887 (433) (1,405) (1,098) (31) — 5,477 5,228 67,268 42,208 2,962 264 (1,405) — — 4,094 48,123 (19,145) Amounts recognized in the Consolidated Balance Sheets as of December 29, 2018 and December 30, 2017 consist of the following: (in thousands) Amounts recognized in the Consolidated Balance Sheets consist of: Noncurrent assets Current benefit liability Noncurrent benefit liability Net liability recognized 2018 2017 $ $ $ 811 (1,094) (31,874) (32,157) $ 78 (481) (18,742) (19,145) 67 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The amounts included in accumulated other comprehensive loss in the Consolidated Balance Sheets, excluding tax effects, that have not yet been recognized as components of net period cost as of December 29, 2018 and December 30, 2017 were as following: (in thousands) Net actuarial loss Prior service cost Total 2018 2017 9,777 1,607 11,384 $ $ 12,261 — 12,261 $ $ The estimated net actuarial loss which will be amortized from accumulated other comprehensive income (loss) into benefit cost in 2019 is approximately $0.2 million. The pre-tax amounts recognized in other comprehensive income loss in 2018 as components of net periodic benefit costs were as follows: (in thousands) Amortization of: Prior service cost Amount arising during the period: Net actuarial loss Settlement loss Foreign currency adjustments Total The components of pension expense for the fiscal years 2018, 2017, and 2016 are as follows: (in thousands) Components of net periodic benefit cost: Service cost Interest cost Expected return on plan assets Amortization of prior service Net periodic benefit cost Settlement loss / curtailment (gain) Total expense for the year 2018 2017 $ $ 2,266 3,104 (3,222) 291 2,439 238 2,677 $ $ 2,037 1,887 (1,990) 337 2,271 (25) 2,246 2018 291 (396) 238 744 877 2016 1,509 1,662 (1,935) 306 1,542 (36) 1,506 $ $ $ $ Weighted average assumptions used to determine net periodic benefit cost for the fiscal years 2018, 2017, and 2016 are as follows: Discount rate Expected return on plan assets Compensation increase rate 2018 2017 2016 2.8% 4.2% 5.0% 3.0% 4.5% 4.5% 3.7% 4.9% 5.3% The accumulated benefit obligation for the foreign plans was $99.6 million and $60.5 million at December 29, 2018 and December 30, 2017, respectively. 68 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table provides a summary of under-funded or unfunded pension benefit plans with projected benefit obligations in excess of plan assets as of December 29, 2018 and December 30, 2017: (in thousands) Projected benefit obligation Fair value of plan assets 2018 2017 $ $ 70,579 37,611 28,515 9,292 The following table provides a summary of under-funded or unfunded pension benefit plans with accumulated benefit obligations in excess of plan assets as of December 29, 2018 and December 30, 2017: (in thousands) Accumulated benefit obligation Fair value of plan assets 2018 2017 $ $ 66,049 36,003 18,990 6,003 Weighted average assumptions used to determine benefit obligations as of December 29, 2018, December 30, 2017 and December 31, 2016 are as follows: Discount rate Compensation increase rate 2018 2017 2016 3.1% 4.6% 3.1% 5.0% 2.6% 4.5% Expected benefit payments to be paid to participants for the fiscal year ending are as follows: (in thousands) 2019 2020 2021 2022 2023 2024-2028 Expected Benefit Payments $ 4,210 4,243 4,691 4,547 4,884 27,047 The Company expects to make approximately $2.3 million of contributions to the plans in 2019. Defined Benefit Plan Assets Based upon analysis of the target asset allocation and historical returns by type of investment, the Company has assumed that the expected long-term rate of return will be 4.5% on plan assets. Assets are invested to maximize long-term return taking into consideration timing of settlement of the retirement liabilities and liquidity needs for benefits payments. Pension plan assets were invested as follows, and were not materially different from the target asset allocation: Equity securities Debt securities Cash and cash equivalents, and other Asset Allocation 2018 2017 30% 66% 4% 100% 35% 64% 1% 100% The Company segregated its plan assets by the following major categories and level for determining their fair value as of December 29, 2018 and December 30, 2017. All plan assets that are valued using the net asset value per share (“NAV”) practical expedient have not been included within the fair value hierarchy but are separately disclosed. 69 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Cash and cash equivalents – Carrying value approximates fair value. As such, these assets were classified as Level 1. The Company also invests in certain short-term investments which are valued using the amortized cost method and at NAV. Equity – The values of individual equity securities were based on quoted prices in active markets. As such, these assets are classified as Level 1. Additionally, the Company invests in certain equity funds that are valued at calculated NAV. Fixed income – Fixed income securities are typically priced based on a last trade basis and are exchange-traded. Accordingly, the Company classified fixed income securities as Level 1. The Company also invests in certain fixed income funds which are valued at NAV. Insurance Contracts and other – This category includes insurance contracts that are valued by the re-insurer with the valuation inputs being not highly observable and traded on an open market. Accordingly, insurance contracts was categorized as Level 3. Additionally, this category includes other assets and liabilities including futures or swaps valued at NAV. For any Level 2 and Level 3 plan assets, management reviews significant investments on a periodic basis including investigation of unusual fluctuations in price or returns and obtaining an understanding of the pricing methodology to assess the reliability of third-party pricing estimates. The valuation methodologies described above may generate a fair value calculation that may not be indicative of net realizable value or future fair values. While the Company believes the valuation methodologies used are appropriate, the use of different methodologies or assumptions in calculating fair value could result in different amounts. The Company invests in various assets in which valuation is determined by NAV. The Company believes that the NAV is representative of fair value at the reporting date, as there are no significant restrictions on redemption of these investments or other reasons to indicate that the investment would be redeemed at an amount different than the NAV. The following table presents the Company’s pension plan assets measured at fair value by classification within the fair value hierarchy as of December 29, 2018: (in thousands) Equities Fixed income Insurance contracts and other Cash and cash equivalents Total pension plan assets Fair Value Measurements Using Level 2 Level 3 Level 1 NAV Total $ $ 1,361 $ — $ — $ 19,528 $ 3,336 — 702 — — — — 632 — 43,134 1,161 823 20,889 46,470 1,793 1,525 5,399 $ — $ 632 $ 64,645 $ 70,676 The following table presents the Company’s pension plan assets measured at fair value by classification within the fair value hierarchy as of December 30, 2017: (in thousands) Equities Fixed income Cash and cash equivalents Total pension plan assets Defined Contribution Plan Fair Value Measurements Using Level 2 Level 3 Level 1 NAV Total $ $ 1,031 $ — $ — $ 16,032 $ 8,088 173 — — — — 22,568 231 17,063 30,656 404 9,292 $ — $ — $ 38,831 $ 48,123 The Company also maintains a 401(k) savings plan covering substantially all U.S. employees. The Company matches 100% of the employee’s annual contributions for the first 4% of the employee’s eligible compensation. The Company may provide an additional discretionary match to participants and made discretionary matches of 2% of the employee’s eligible compensation for each of the years ended December 29, 2018, December 30, 2017 and December 31, 2016. Employees are immediately vested in their contributions plus actual earnings thereon, as well as the Company contributions. Company matching contributions amounted to $4.5 million, $3.5 million, and $3.2 million in 2018, 2017, and 2016, respectively. 70 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Non-qualified Supplemental Retirement and Savings Plan The Company has a non-qualified Supplemental Retirement and Savings Plan which provides additional retirement benefits for certain management employees and named executive officers by allowing participants to defer a portion of their annual compensation. The Company maintains accounts for participants through which participants make investment elections. The investments are subject to the claims of the Company’s creditors and the Company is responsible for the payment of all benefits under the plan from its general assets. As of December 29, 2018, there was $9.1 million of marketable securities related to the plan included in Other assets and $9.1 million of accrued compensation benefits included in Other long-term liabilities. The marketable securities are classified as Level 1 under the fair value hierarchy as they are maintained in mutual funds with readily determinable fair value. The Company made matching contributions to the plan of $0.4 million in 2018. 12. Stock-Based Compensation Equity Plans: The Company has equity-based compensation plans authorizing the granting of stock options, restricted shares, restricted share units, performance shares and other stock rights to employees and directors. As of December 29, 2018, there were 1.4 million shares available for issuance of future awards under the Company’s equity-based compensation plans. Stock options generally vest over a three, four or five-year period and are exercisable over either a seven or ten-year period commencing from the date of the grant. Restricted shares and share units granted by the Company generally vest over three to four years. Stock options and restricted share units may have accelerated vesting upon meeting certain qualified conditions. Upon completion of the IXYS acquisition, IXYS outstanding options were assumed by the Company and converted into options of 499,027 shares. The Company recognized approximately $11.9 million of stock compensation expense related to IXYS stock options converted to Littelfuse stock options during the fiscal year ended December 29, 2018, of which $4.5 million was recognized immediately as it related to prior service periods. See Note 2, Acquisitions and Dispositions, for further discussion. The following table provides a reconciliation of outstanding stock options for the fiscal year ended December 29, 2018. Outstanding December 30, 2017 Granted IXYS converted awards Exercised Forfeited Outstanding December 29, 2018 Exercisable December 29, 2018 Shares Under Option Weighted Average Price $ 404,301 78,721 499,027 (296,914) (15,779) 669,356 420,422 110.04 192.59 92.52 87.85 120.59 116.29 100.14 Weighted Average Remaining Contract Life (Years) Aggregate Intrinsic Value (000’s) $ 5.4 4.8 36,494 28,542 The following table provides a reconciliation of non-vested restricted share and share unit awards for the fiscal year ended December 29, 2018. Nonvested December 30, 2017 Granted Vested Forfeited Nonvested December 29, 2018 71 Weighted Average Grant-Date Fair Value Shares $ 199,693 77,430 (104,062) (12,267) 160,794 130.40 194.39 123.45 144.84 164.61 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The total intrinsic value of options exercised during 2018, 2017, and 2016 was $38.3 million, $2.2 million, and $13.3 million, respectively. The total fair value of shares vested was $20.8 million, $15.0 million, and $10.7 million for 2018, 2017, and 2016, respectively. The total amount of share-based liabilities paid was $1.1 million, $0.9 million and $0.6 million for 2018, 2017, and 2016, respectively. The Company recognizes compensation cost of all share-based awards as an expense on a straight-line basis over the vesting period of the awards. At December 29, 2018, the unrecognized compensation cost for options and restricted shares was $22.0 million before tax, and will be recognized over a weighted average period of 1.8 years. Compensation cost included as a component of cost of sales, research and development and selling, general, and administrative expenses for all equity compensation plans discussed above was $28.2 million, $17.3 million, and $12.8 million for 2018, 2017, and 2016, respectively. The total income tax benefit recognized in the Consolidated Statements of Net Income was $6.0 million, $6.0 million and $4.4 million for 2018, 2017, and 2016, respectively. The Company uses the Black-Scholes option valuation model to determine the fair value of awards granted. The weighted average fair value of and related assumptions for options granted are as follows: Weighted average fair value of options granted Assumptions: Risk-free interest rate Expected dividend yield Expected stock price volatility Expected life of options (years) 2018 $45.19 2.79% 0.77% 25.0% 4.4 2017 $30.77 1.79% 0.86% 23.0% 4.4 2016 $26.06 1.37% 0.97% 26.0% 4.6 Expected volatilities are based on the historical volatility of the Company’s stock price. The expected life of options is based on historical data for options granted by the Company. The risk-free rates are based on yields available at the time of grant on U.S. Treasury bonds with maturities consistent with the expected life assumption. Preferred Stock: The Board of Directors may authorize the issuance of preferred stock from time to time in one or more series with such designations, preferences, qualifications, limitations, restrictions, and optional or other special rights as the Board may fix by resolution. Share Repurchase Program The Company’s Board of Directors authorized the repurchase of up to 1,000,000 shares of the Company’s common stock under a program for the period May 1, 2018 to April 30, 2019. During the fiscal year 2018, the Company repurchased 391,972 shares of its common stock. As of February 18, 2019, the Company has repurchased 79,916 shares of its common stock since the fiscal year ended December 29, 2018. 72 13. Other Comprehensive (Loss) Income NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Changes in other comprehensive (loss) income by component for fiscal years 2018, 2017, and 2016 were as follows: December 29, 2018 Fiscal Year Ended December 30, 2017 December 31, 2016 (in thousands) Pre-tax Tax Net of tax Pre-tax Tax Net of tax Pre-tax Tax Net of tax Defined benefit pension plan adjustments Unrealized loss on investments Foreign currency translation adjustments Total change in other comprehensive (loss) income $ 924 $ 47 $ 877 $ 1,532 $ 385 $ 1,147 $ (4,563) $ (1,302) $ (3,261) — — — (974) (25,338) — (25,338) 10,738 — — (974) (815) — (815) 10,738 (24,832) — (24,832) $ (24,414) $ 47 $ (24,461) $ 11,296 $ 385 $ 10,911 $ (30,210) $ (1,302) $ (28,908) Accumulated Other Comprehensive Income (Loss) (“AOCI”): The following table sets forth the changes in the components of AOCI by component for fiscal years 2018, 2017, and 2016: (in thousands) Balance at January 2, 2016 2016 activity Balance at December 31, 2016 2017 activity Balance at December 30, 2017 Cumulative effect adjustment (a) 2018 activity Balance at December 29, 2018 Pension and postretirement liability and reclassification adjustments Gain (loss) on investments 11,584 (815) 10,769 (974) 9,795 (9,795) — — $ (8,722) $ (3,261) (11,983) 1,147 (10,836) — 877 (9,959) $ Foreign currency translation adjustments $ Accumulated other comprehensive income (loss) (48,533) $ (24,832) (73,365) 10,738 (62,627) — (25,338) (87,965) $ (45,671) (28,908) (74,579) 10,911 (63,668) (9,795) (24,461) (97,924) $ $ (a) The Company adopted ASU 2016-01 on December 31, 2017 on a modified retrospective basis, recognizing the cumulative effect as a $9.8 million increase to retained earnings. See Note 1, Summary of Significant Accounting Policies and Other Information, for further discussion. Amounts reclassified from accumulated other comprehensive (loss) income to earnings for fiscal years 2018, 2017, and 2016 were as follows: (in thousands) Pension and postemployment plans: Amortization of prior service Settlement loss/curtailment (gain) Total December 29, 2018 Fiscal Year Ended December 30, 2017 December 31, 2016 $ $ 291 238 529 $ $ 337 (25) 312 $ $ 306 (36) 270 The Company recognizes the amortization of prior service costs and settlement loss and curtailment gain in other income, net within the Consolidated Statements of Net Income. 73 14. Income Taxes NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On December 22, 2017, the U.S. enacted legislation referred to as the "Tax Act". Among other things, the Tax Act reduces the U.S. corporate federal income tax rate from 35% to 21%, adds base broadening provisions which limit deductions and address excessive international tax planning, imposes a Toll Charge on accumulated earnings of certain non-U.S. subsidiaries and enables repatriation of earnings of non-U.S. subsidiaries free of U.S. federal income tax. Other than the Toll Charge (which, except for the IXYS impact, was applicable to the Company for 2017), the provisions are generally applicable to the Company in 2018 and beyond. In accordance with the guidance provided in SEC SAB No. 118, in the fourth quarter of 2017 the Company recorded a charge of $47.0 million as a provisional reasonable estimate of the impact of the Tax Act, including $49.0 million for the Toll Charge net of $2.0 million for other net tax benefits. In the fourth quarter of 2018, within the measurement period outlined in SAB No. 118, the Company finalized its estimates of the impact of the Tax Act as of December 30, 2017 and recorded a charge of $3.2 million, including $2.3 million for the Toll Charge and $0.9 million for the net impact of other items. In addition, the Company recorded $7.0 million for the Toll Charge associated with IXYS as part of the IXYS acquisition purchase price allocation. This was reflected in the opening balance sheet as an increase to goodwill and other long-term liabilities. Although certain administrative guidance has been issued, including final and proposed regulations, the appropriate application of many provisions of the Tax Act remain uncertain. The Company used its best judgment as to the application of these provisions in determining its final estimates of the impact of the Tax Act as of December 30, 2017, the Toll Charge associated with the IXYS acquisition as well as the Company’s income tax expense for the year ended December 29, 2018. Adjustments to income tax expense may be necessary in future periods if provisions of the Tax Act, and their interaction with other provisions of the U.S. Internal Revenue Code, are interpreted differently than interpretations made by the Company, whether through issuance of additional administrative guidance, or through further review of the Tax Act by the Company and its advisors. In this regard, on January 15, 2019, final regulations were issued addressing the Toll Charge (replacing the proposed regulations issued in August of 2018). The Company is evaluating these final regulations and has yet to determine their impact. The Company has elected to pay the 2017 Littelfuse Toll Charge and will elect to pay the 2018 IXYS Toll Charge over the eight- year period prescribed by the Tax Act. The long-term portion of these Toll Charges totaling $28.8 million (which includes the Littelfuse and IXYS Toll Charges, partially offset by foreign tax credits, the tax benefit of current year losses and the actual 2018 and anticipated 2019 annual installment payments) is recorded in Other long-term liabilities on the Consolidated Balance Sheet as of December 29, 2018. The anticipated 2019 annual installment payments are included in accrued income taxes. One of the base broadening provisions of the Tax Act is commonly referred to as the “GILTI” provisions. In accordance with guidance issued by the FASB staff, the Company has adopted an accounting policy to treat any GILTI inclusions as a period cost if and when incurred. Thus, for the year ended December 29, 2018, deferred taxes were computed without consideration of the possible future impact of the GILTI provisions, and any current year impact was recorded as a part of the current portion of income tax expense. Domestic and foreign income (loss) before income taxes is as follows: (in thousands) Domestic Foreign Income before income taxes 2018 2017 2015 $ $ (49,995) $ 254,937 204,942 $ (20,496) $ 224,533 204,037 $ (9,563) 132,837 123,274 74 Federal, state and foreign income tax expense (benefit) consists of the following: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) Current: Federal State Foreign Subtotal Deferred: Federal and State Foreign Subtotal Provision for income taxes 2018 2017 2016 $ $ (3,193) $ 119 48,130 45,056 (3,896) (783) (4,679) 40,377 $ 34,060 450 32,945 67,455 16,562 501 17,063 84,518 $ $ (3,992) (648) 28,695 24,055 (1,594) (3,675) (5,269) 18,786 The current federal tax benefit for 2018 includes the benefit of current year losses (which served to partially offset the amount of the IXYS Toll Charge that would otherwise have been payable). The current federal and state income tax expense for 2017 includes the preliminary estimate of $49 million for the Toll Charge as discussed above, partially offset by $13.0 million of foreign tax credits. The current federal tax benefit for 2016 includes an estimated $3.0 million benefit as a result of the carry-back of the 2016 U.S. federal net operating loss to the 2014 tax year. A reconciliation between income taxes computed on income before income taxes at the federal statutory rate and the provision for income taxes is provided below: (in thousands) Tax expense at statutory rate of 21% (35% for 2017 and 2016) 2017 Toll Charge (and 2018 adjustment) Provisional Tax Act impact other than Toll Charge (and 2018 adjustment) Net impact associated with the GILTI tax provisions State and local taxes, net of federal tax benefit Non-U.S. income tax rate differential Impairment of goodwill without tax benefit Tax on unremitted earnings Non-U.S. losses and expenses with no tax benefit Nondeductible professional fees Tax deduction for stock of foreign subsidiary Other, net Provision for income taxes $ $ 2018 2017 2016 43,038 2,278 966 5,075 (1,238) (20,472) — 4,660 3,107 1,001 — 1,962 40,377 $ $ 71,413 49,000 (1,962) — 292 (47,077) — 12,202 — 1,240 — (590) 84,518 $ $ 43,146 — — — (415) (25,471) 3,088 2,747 — 313 (3,896) (726) 18,786 75 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Deferred income taxes are provided for the tax effects of temporary differences between the financial reporting bases and the tax bases of the company’s assets and liabilities. Significant components of the company’s deferred tax assets and liabilities at December 29, 2018 and December 30, 2017, are as follows: (in thousands) Deferred tax assets: Accrued expenses and reserves Foreign tax credit carryforwards Other U.S. tax attribute carryforwards Accrued restructuring Capital loss carryforwards Domestic and non-U.S. net operating loss and credit carryforwards Gross deferred tax assets Less: Valuation allowance Total deferred tax assets Deferred tax liabilities: Excess of book basis over the tax basis of assets Tax on unremitted earnings Total deferred tax liabilities Net deferred tax liabilities 2018 2017 $ 35,597 1,506 1,539 60 47 8,613 47,362 (4,794) 42,568 74,410 12,681 87,091 44,523 $ 24,094 1,053 — 156 3,165 5,778 34,246 (6,203) 28,043 21,254 12,000 33,254 5,211 $ $ The deferred tax asset valuation allowance is related to certain net operating loss and credit carryforwards which are not expected to be realized. The remaining net operating loss and credit carryforwards either have no expiration date or are expected to be utilized prior to expiration (which begin expiring in 2021). The deferred tax asset valuation allowance as of December 30, 2017 also included amounts related to a capital loss carryforward which expired in 2018. No deferred tax asset nor valuation allowance has been recorded for certain U.S. and non-U.S. net operating loss carryforwards for which the possibility of usage has been determined to be remote. The Company paid income taxes of $46.2 million, $31.8 million, and $35.6 million in 2018, 2017, and 2016, respectively, and received income tax refunds of and $4.3 million and $13.7 million in 2018 and 2017, respectively. Deferred income taxes are not provided on the excess of the investment value for financial reporting over the tax basis of investments in those non-U.S. subsidiaries for which such excess is considered to be permanently reinvested in those operations. The Company believes the determination of the amount of such deferred income taxes is impractical as it would depend upon income tax laws and circumstances at the time of the hypothetical distributions or dispositions. As of December 29, 2018, unremitted earnings of the Company’s non-U.S. subsidiaries was approximately $815 million. A distribution of such earnings will generally not be subject to U.S. federal income tax. The Company recognized deferred tax liabilities of $12.7 million ($12.5 million for non-U.S. taxes net of related U.S. foreign tax credits, and $0.2 million for U.S. state taxes) as of December 29, 2018 and $12.0 million ($11.8 million for non-U.S. taxes and $0.2 million for U.S. state taxes) as of December 30, 2017, related to taxes on certain non-U.S. earnings which are not considered to be permanently reinvested. Some of these non-U.S. taxes will provide a U.S. federal income tax benefit as a foreign tax credit, and the amounts as of December 29, 2018 are net of such benefit (some of which was recorded as part of finalizing the provisional reasonable estimate of the impact of the Tax Act). Due to the uncertainty in regard to the Tax Act’s provisions, no benefit was recorded for these foreign tax credits as of December 30, 2017. The Company has three subsidiaries in China which benefit from lowered income tax rates due to “tax holidays” which apply for three-year periods, subject to extension. One such tax holiday, which had expired in 2018, was extended in the fourth quarter of 2018, retroactive to the beginning of the year. Such tax holidays contributed $6.1 million in tax benefits, or $0.24 per diluted share, during 2018, with similar amounts expected in future years while such tax holidays are in effect. 76 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 29, 2018, December 30, 2017, and December 31, 2016 is as follows: (in thousands) Balance at December 31, 2016 Additions for tax positions taken in the current year Other Balance at December 30, 2017 Additions for tax positions taken in the current year Additions for tax positions related to the pre-acquisition periods of acquired subsidiaries Decreases due to a lapse in the statute of limitations Other Balance at December 29, 2018 $ Unrecognized Tax Benefits 8,617 $ 370 (1,327) 7,660 2,929 9,394 (1,257) (467) 18,259 $ The company recognizes accrued interest and penalties associated with uncertain tax positions as part of income tax expense. The company recognized interest expense of $1.5 million (net of a $0.3 million decrease due to a lapse in the statute of limitations), $0.9 million, and $0.9 million in 2018, 2017, and 2016, respectively. Accrued interest included in Other long-term liabilities within the Consolidated Balance Sheets was $5.9 million and $3.3 million as of December 29, 2018 and December 30, 2017, respectively. The amount of unrecognized tax benefits at December 29, 2018 was $18.3 million. This total represents the net amount of tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. Of this amount, approximately $3.5 million may be recognized in 2019 based upon the possible lapse in the statute of limitations. None of the positions included in unrecognized tax benefits are related to tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. The U.S. federal statute of limitations remains open for the Company for the 2014 tax year and later years, although the Company has been audited for the 2014 through 2016 tax years and the audit concluded in 2018 with no significant adjustments. The U.S. federal statute of limitations remains open for IXYS pre-acquisition tax periods ending March 31, 2016, March 31, 2017 and January 17, 2018. Non-U.S. and U.S. state statutes of limitations generally range from three to seven years, although certain jurisdictions do not have a statute expiration. Non-U.S. tax examinations occur from time to time, including examinations currently in process in Italy, the Philippines and Hong Kong. The company does not expect to recognize a significant amount of additional tax expense as a result of concluding these examinations. 77 15. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share: (in thousands, except per share amounts) Numerator: Net income as reported 2018 2017 2016 $ 164,565 $ 119,519 $ 104,488 Denominator: Weighted average shares outstanding Basic Effect of dilutive securities Diluted Earnings Per Share: Basic earnings per share Diluted earnings per share 24,870 365 25,235 22,687 244 22,931 22,559 168 22,727 $ $ 6.62 6.52 $ $ 5.27 5.21 $ $ 4.63 4.60 Potential shares of common stock attributable to stock options excluded from the earnings per share calculation because their effect would be anti-dilutive were 42,305, 37,443, and 53,448 shares in 2018, 2017, and 2016, respectively. On January 17, 2018, the Company acquired IXYS through a combination of cash, Littelfuse common stock, and the value of converted, or cash settled IXYS equity awards. The Company issued approximately 2.1 million shares of Littelfuse common stock and converted IXYS equity awards into approximately 0.5 million Littelfuse equity awards. 16. Segment Information The Company and its subsidiaries design, manufacture and sell components and modules for circuit protection, power control and sensing throughout the world. The Company reports its operations by the following segments: Electronics, Automotive, and Industrial. An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, and about which separate financial information is regularly evaluated by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources. The CODM is the Company’s President and Chief Executive Officer (“CEO”). The CODM allocates resources to and assesses the performance of each operating segment using information about its revenue and operating income (loss) before interest and taxes, but does not evaluate the operating segments using discrete balance sheet information. Sales, marketing, and research and development expenses are charged directly into each operating segment. Manufacturing, purchasing, logistics, customer service, finance, information technology, and human resources are shared functions that are allocated back to the three operating segments. The Company does not report inter-segment revenue because the operating segments do not record it. Certain expenses, determined by the CODM to be strategic in nature and not directly related to segments current results, are not allocated but identified as “Other”. Additionally, the Company does not allocate interest and other income, interest expense, or taxes to operating segments. These costs are not allocated to the segments, as management excludes such costs when assessing the performance of the segments. Although the CODM uses operating income (loss) to evaluate the segments, operating costs included in one segment may benefit other segments. Except as discussed above, the accounting policies for segment reporting are the same as for the Company as a whole. • Electronics Segment: Consists of one of the broadest product offerings in the industry, including fuses and fuse accessories, positive temperature coefficient (“PTC”) resettable fuses, polymer electrostatic discharge (“ESD”) suppressors, varistors, reed switch based magnetic sensing, gas discharge tubes; semiconductor and power semiconductor products such as discrete transient voltage suppressor (“TVS”) diodes, TVS diode arrays, protection and switching thyristors, silicon carbide, metal-oxide-semiconductor field-effect transistors (“MOSFETs”) and silicon carbide diodes; and insulated gate bipolar transistors (“IGBT”) technologies. The segment covers a broad range of end markets, including industrial and automotive electronics, electric vehicle infrastructure, data and telecommunications, medical devices, LED lighting, consumer electronics and appliances. 78 • • NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Automotive Segment: Consists of a wide range of circuit protection, power control and sensing technologies for global original equipment manufacturers (“OEMs”), Tier-I suppliers and parts distributors in passenger car, heavy duty truck, off-road vehicles, material handling, agricultural, construction and other commercial vehicle industries. Passenger car fuse products include fuses and fuse accessories for internal combustion engine vehicles and hybrid and electric vehicles including blade fuses, battery cable protectors, resettable fuses, high-current fuses, and high-voltage fuses. Commercial vehicle products include fuses, switches, relays, and power distribution modules for the commercial vehicle industry. Automotive sensor products include a wide range of automotive and commercial vehicle products designed to monitor the passenger compartment occupants, safety and environment as well as the vehicle’s powertrain, emissions, speed and suspension. Industrial Segment: Consists of power fuses, protection relays and controls and other circuit protection products for use in various industrial applications such as oil, gas, mining, alternative energy - solar and wind, electric vehicle infrastructure, construction, HVAC systems, elevator and other industrial equipment. The Company has provided this segment information for all comparable prior periods. Segment information is summarized as follows: (in thousands) Net sales Electronics Automotive Industrial Total net sales Depreciation and amortization Electronics Automotive Industrial Other Total depreciation and amortization Operating income (loss) Electronics Automotive Industrial Other(a) Total operating income Interest expense Foreign exchange (gain) loss Other income, net Income before income taxes 2018 2017 2016 1,124,296 479,791 114,381 1,718,468 61,779 23,333 5,661 12,420 103,193 241,426 54,982 17,335 (88,694) 225,049 22,569 (863) (1,599) 204,942 $ $ $ $ $ $ 661,928 453,227 106,379 1,221,534 35,215 22,459 5,337 — 63,011 155,880 62,571 10,334 (10,274) 218,511 13,380 2,376 (1,282) 204,037 $ $ $ $ $ $ 535,191 415,200 105,768 1,056,159 29,141 18,107 5,889 — 53,137 117,088 59,905 3,615 (49,964) 130,644 8,628 472 (1,730) 123,274 $ $ $ $ $ $ (a) Included in “Other” Operating income (loss) for 2018 is $88.7 million of charges primarily related to the IXYS acquisition, which include $36.9 million of purchase accounting inventory step-up charges, $18.7 million in acquisition-related and integration costs primarily related to legal, accounting and other expenses, $12.4 million in backlog amortization costs, $8.3 million of employee termination costs, impairment and other restructuring charges, and $4.5 million in stock compensation expense recognized immediately upon close for converted IXYS options related to prior service periods and $2.1 million change in control expense related to IXYS. In addition, there were $5.8 million of employee termination costs, impairment and other restructuring charges and acquisition-related expenses for other contemplated acquisitions which included $1.1 million of charges associated with the exit of the Custom business in the second quarter. Included in “Other” Operating income (loss) for 2017 are costs related to acquisition and integration costs associated with the Company’s completed and pending acquisitions in 2017 ($8.0 million in Cost of sales ("COS") and Selling, general, and 79 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS administrative expenses (“SG&A”), and charges related to restructuring and production transfers in the Company’s Asia operations ($2.2 million in SG&A). Included in “Other” Operating income (loss) for 2016 are costs related to the impairment of the Custom Products reporting unit ($14.8 million), acquisition and integration costs associated with the Company’s 2016 acquisitions ($29.2 million in COS and SG&A), transfer of the Company’s reed switch manufacturing operations from its Lake Mills, Wisconsin and Suzhou, China locations to the Philippines ($1.6 million in COS), impairment and severance costs related to the closure of the Company’s manufacturing facility in Denmark ($1.9 million in SG&A), and restructuring costs ($2.5 million in SG&A and Research and development expenses). The Company’s net sales, long-lived assets and additions to long-lived assets by country for the fiscal years ended 2018, 2017, and 2016 are as follows: (in thousands) Net sales United States China Other countries(a) Total net sales Long-lived assets United States China Mexico Germany Philippines Other countries Total long-lived assets Additions to long-lived assets United States China Mexico Germany Philippines Other countries Total additions to long-lived assets 2018 2017 2016 $ $ $ $ $ $ 511,544 468,174 738,750 1,718,468 58,691 95,806 70,495 36,548 32,459 45,895 339,894 5,567 29,286 18,723 5,208 7,605 8,364 74,753 $ $ $ $ $ $ 383,025 321,111 517,398 1,221,534 23,490 86,866 62,510 1,082 31,129 45,500 250,577 3,518 32,775 19,395 93 2,979 7,165 65,925 $ $ $ $ $ $ 356,674 263,701 435,784 1,056,159 23,731 65,345 52,262 1,313 33,345 41,179 217,175 4,694 13,181 15,667 965 5,096 6,625 46,228 (a) Each country included in other countries are less than 10% of net sales. For the year ended December 29, 2018, approximately 70% of the Company’s net sales were to customers outside the United States (exports and foreign operations), including approximately 27% to China. For the year ended December 30, 2017, approximately 69% of the Company's net sales were to customers outside the United States (exports and foreign operations), including approximately 26% to China. For the year ended December 31, 2016, approximately 66% of the Company's net sales were to customers outside the United States (exports and foreign operations), including approximately 25% to China. Sales to Arrow Electronics, Inc., which were included in the Electronics, Automotive, and Industrial segments, were 10.7% and 10.6% of consolidated net sales in 2018 and 2017, respectively, but less than 10% for 2016. No other single customer accounted for more than 10% of net sales during the last three years. 80 17. Selected Quarterly Financial Data (Unaudited) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The quarterly periods for 2018 are for the 13-weeks ended December 29, 2018, September 29, 2018, June 30, 2018, and March 31, 2018, respectively. The quarterly periods for 2017 are for the 13-weeks ended December 30, 2017, September 30, 2017, July 1, 2017, and April 1, 2017, respectively. (in thousands, except per share data) 2018 2017 4Q(a) 3Q(b) 2Q(c) 1Q(d) 4Q(e) 3Q(f) 2Q(g) 1Q(h) $ 402,281 $ 439,191 $ 459,183 $ 417,813 $ 304,849 $ 317,889 $ 313,355 $ 285,441 154,337 179,594 168,987 149,623 126,624 133,651 132,608 113,650 51,628 32,665 76,228 53,546 59,622 42,326 37,571 36,029 50,780 (10,819) 58,609 42,808 60,270 48,638 48,852 38,891 Net sales Gross profit Operating income Net income/(loss) Net income/(loss) per share Basic Diluted $ $ 1.31 1.29 $ $ 2.13 2.10 $ $ 1.69 1.67 $ $ 1.48 1.45 $ $ (0.48) $ (0.48) $ 1.88 1.87 $ $ 2.13 2.11 $ $ 1.71 1.69 In the fourth quarter of 2018, the Company recorded an estimated one-time tax charge of $3.2 million related to the (a) finalization of 2017 provisional reasonable estimate in connection with the Tax Act, partially offset by a $1.5 million benefit for previously unrecognized tax benefits in respect of which the statute of limitation has expired, $3.7 million in backlog amortization expense from the IXYS acquisition, $3.2 million in acquisition-related and integration costs and $2.4 million in restructuring, impairment and other costs. (b) in backlog amortization expense from the IXYS acquisition and $2.9 million in acquisition-related and integration costs. In the third quarter of 2018, the Company recorded $5.2 million in restructuring and impairment charges, $3.1 million In the second quarter of 2018, the Company recorded $19.0 million for purchase accounting inventory adjustments (c) associated with the acquisition of IXYS, $4.2 million in restructuring and impairment charges, $3.1 million in backlog amortization expense from the IXYS acquisition and $2.4 million in acquisition-related and integration costs. In the first quarter of 2018, the Company recorded $17.9 million for purchase accounting inventory adjustments (d) associated with the acquisition of IXYS, $11.7 million in acquisition-related and integration costs, $4.5 million of stock compensation expense recognized immediately upon close for converted IXYS options related to prior services periods, $2.5 million in backlog amortization expense, $2.1 million expense related to change in control and $0.8 million in restructuring costs. In the fourth quarter of 2017, the Company recorded an estimated one-time tax charge of $49.0 million for the (e) enactment of the Tax Act for deemed repatriation of unremitted earnings of foreign subsidiaries, $1.4 million in acquisition- related and integration costs and $0.7 million in restructuring and production costs related to the transfer of Asian operations. (f) million in restructuring and production costs related to the transfer of Asian operations. In the third quarter of 2017, the Company recorded $4.8 million in acquisition-related and integration costs and $1.5 (g) (h) In the second quarter of 2017, the Company recorded $0.3 million in acquisition-related and integration costs. In the first quarter of 2017, the Company recorded $1.5 million in acquisition-related and integration costs. 81 18. Related Party Transactions NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As a result of the Company’s acquisition of IXYS, the Company has equity ownerships in various investments that are accounted for under the equity method. The following is a description of the investments and related party transactions. Powersem GmbH: The Company owns 45% of the outstanding equity of Powersem GmbH (“Powersem”), a module manufacturer based in Germany. For the year ended December 29, 2018, the Company recorded revenues of $0.7 million from sales of products to Powersem for use as components in their products. For the fiscal year ended December 29, 2018, the Company purchased $4.5 million of products from Powersem. At December 29, 2018, the trade receivable balance from Powersem was $0.1 million and the accounts payable balance to Powersem was $0.2 million. EB Tech Ltd.: The Company owns approximately 20% of the outstanding equity of EB Tech Ltd. (“EB Tech”), a company with expertise in radiation technology based in South Korea. For the year ended December 29, 2018, EB Tech rendered processing services for the Company totaling $0.5 million. As of December 29, 2018, the Company’s accounts payable balance to EB Tech was $0.1 million. Automated Technology, Inc.: The Company owns approximately 24% of the outstanding common shares of Automated Technology, Inc. (“ATEC”), a supplier located in the Philippines that provides assembly and test services. For the year ended December 29, 2018, ATEC rendered assembly and test services to the Company totaling $9.9 million. As of December 29, 2018, the Company’s accounts payable balance to ATEC was $0.5 million. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, the Company recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Company is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As required by SEC Rule 15d-15(b), the Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to SEC Rule 13a-15 as of the end of the period covered by this report. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 29, 2018. Management’s Report on Internal Control over Financial Reporting Section 404 of the Sarbanes-Oxley Act of 2002 requires management to include in this Annual Report on Form 10-K a report on management’s assessment of the effectiveness of the Company’s internal control over financial reporting, as well as an attestation report from the Company’s independent registered public accounting firm on the effectiveness of the Company’s internal control over financial reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f). The Company’s internal control system was designed to provide reasonable assurance to its management and the Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined effective can provide only reasonable assurance with respect to financial statement preparation and presentation. A material 82 weakness is a deficiency, or a combination of deficiencies, in the internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statement will not be prevented or detected on a timely basis. The Company’s management, including the its Principal Executive Officer and Principal Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 29, 2018, based upon the updated framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 1992 and updated in May 2013. Based on this assessment, the Company’s management concluded that, as of December 29, 2018, the Company’s internal control over financial reporting was effective. Changes in Internal Control over Financial Reporting There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the 12 months or fiscal quarter ended December 29, 2018, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. ITEM 9B. OTHER INFORMATION. None. 83 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE. Except as set forth below, the information required by this item will be contained in the Company’s Proxy Statement related to our 2019 Annual Meeting of Stockholders (the "proxy statement") and is incorporated herein by reference. Information concerning directors and nominees for director is set forth in the section titled “Proposal No. 1 Election of Directors” in the Company’s proxy statement and is incorporated herein by reference. Information concerning the Company’s Audit Committee and Audit Committee financial expert is set forth in the section titled “Director Independence; Financial Experts” in the Company's proxy statement and is incorporated herein by reference. Information concerning the procedures by which security holders may recommend nominees to the Company’s Board of Directors is set forth in the section titled “Director Nomination” in the Company’s proxy statement and is incorporated herein by reference. Information concerning compliance with Section 16 of the Securities Exchange Act of 1934 is set forth in the section titled “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s proxy statement and is incorporated herein by reference. Executive Officers of the Registrant. The executive officers of the Company are as follows: Name David W. Heinzmann Meenal A. Sethna Ryan K. Stafford Matthew J. Cole Alexander Conrad Ian Highley Deepak Nayar Michael P. Rutz Age 55 Position President and Chief Executive Officer 49 51 47 53 55 59 47 Executive Vice President and Chief Financial Officer Executive Vice President, Chief Legal and Human Resources Officer and Corporate Secretary Senior Vice President, Business Development and Strategy Senior Vice President, Passenger Vehicle Business Senior Vice President and General Manager, Semiconductor Products and Chief Technology Officer Senior Vice President and General Manager, Electronics and Industrial Business Senior Vice President and General Manager, Semiconductor Products David W. Heinzmann, President and Chief Executive Officer and a member of the Board of Directors. Mr. Heinzmann began his career at Littelfuse in 1985 as a manufacturing engineer and has held positions of increasing responsibility since that time, including Vice President, Global Operations, from 2007 to 2014, and Chief Operating Officer from 2014 until assuming his current position in 2017. Meenal A. Sethna, Executive Vice President and Chief Financial Officer. Ms. Sethna joined Littelfuse in 2015 as Senior Vice President of Finance until assuming her current position in 2016. Prior to joining Littelfuse, Ms. Sethna served from 2011 to 2015 as Vice President and Corporate Controller of Illinois Tool Works Inc., a diversified manufacturer of specialized industrial equipment, consumables, and related service businesses. Ms. Sethna is a Certified Public Accountant in Illinois. Ryan K. Stafford, Executive Vice President, Chief Legal and Human Resources Officer and Corporate Secretary. Mr. Stafford joined Littelfuse as its first General Counsel in 2007 and became Corporate Secretary in 2017. Prior to joining Littelfuse, Mr. Stafford served in a number of roles at Tyco International Ltd., including Vice President of China Operations and Vice President & General Counsel for its Engineered Products & Services Business Segment. Matthew J. Cole, Senior Vice President, Business Development and Strategy. Mr. Cole joined Littelfuse in 2015 as Senior Vice President and General Manager, Industrial Business Unit, and held that position until assuming his current position in February 2019. Prior to joining Littelfuse, Mr. Cole served from 2009 to 2015 as Vice President and General Manager of the Advanced Measurement Technology division of AMETEK, a global leader in electronic instruments and electromechanical devices. 84 Alexander Conrad, Senior Vice President and General Manager, Passenger Vehicle Business. Mr. Conrad joined Littelfuse in 2005 as Sales Manager, Germany & Eastern Europe. He then held various positions of increasing responsibility at Littelfuse including Sales Director EMEA; Global Director of Sales; Managing Director, Passenger Car Products from 2013 to 2014; and Vice President, Passenger Car Products, from 2015 until assuming his current position in July 2018. Ian Highley, Senior Vice President and General Manager, Semiconductor Products and Chief Technology Officer. He joined Littelfuse in 2002 as Product Line Director, Semiconductor Products. Mr. Highley then held various positions of increasing responsibility at Littelfuse including General Manager, Semiconductor Products, and from 2012 until assuming his current position in 2015, Vice President and General Manager, Semiconductor Products. Deepak Nayar, Senior Vice President and General Manager, Electronics and Industrial Business. Mr. Nayar joined Littelfuse in 2005 as Business Line Director of the Electronics Business Unit. He then held various positions of increasing responsibility at Littelfuse including Vice President, Global Sales, Electronics Business Unit, and from 2011 until assuming his current position in February 2019, Senior Vice President, Electronics Business Unit. Michael P. Rutz, Senior Vice President and General Manager, Semiconductor Products. He shares this role with Mr. Highley. Mr. Rutz joined Littelfuse in 2014 as Vice President of Supply Chain and Operational Excellence. Mr. Rutz then served as Senior Vice President of Global Operations from 2015 until assuming his current position in February 2019. Prior to joining Littelfuse, Mr. Rutz served from 2011 to 2014 as Senior Vice President Global Supply Chain at WMS Industries Inc., a Chicago-based manufacturer of equipment and software for the gaming industry. Code of Ethics The company has adopted a Code of Conduct (Code of Ethics) that applies to all of the Company’s employees including the Company’s Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and persons performing similar functions. It has posted the text of the Code of Conduct on its website at http://investor.littelfuse.com/governance.cfm and intends to disclose on such website any amendments to, or waivers from the Code of Conduct. The company’s website is not incorporated by reference into this Annual Report. ITEM 11. EXECUTIVE COMPENSATION. Information concerning compensation of the Company’s executive officers and directors for the fiscal year ended December 29, 2018, is set forth in the sections titled “Compensation Discussion & Analysis,” “Compensation Tables” and “Director Compensation” in the Company’s proxy statement and is incorporated herein by reference, except the section titled “Compensation Committee Report” is hereby “furnished” and not “filed” with this Annual Report on Form 10-K. Information concerning compensation committee interlocks is set forth in the section titled “Compensation Committee Interlocks and Insider Participation” in the Company’s proxy statement and is incorporated herein by reference. 85 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Information concerning the security ownership of certain beneficial owners, the Company’s directors and executive officers as of March1, 2019, is set forth in the section titled “Ownership of Littelfuse, Inc. Common Stock” in the Company’s proxy statement and is incorporated herein by reference. Information concerning the Company’s equity compensation plans are set forth in the section titled “Compensation Plan Information” in the Company’s proxy statement and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE. Information concerning the independence of the Company’s directors, certain relationships and related transactions during 2018 and the Company’s policies with respect to such transactions is set forth in the sections titled "Director Independence; Financial Experts", “Related Person Transaction Policy” and “Related Party Transactions” in the Company’s proxy statement and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. Information concerning principal accountant fees and services is set forth in the section titled “Audit Related Matters” in the Company’s proxy statement and is incorporated herein by reference. 86 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. (a) Financial Statements and Schedules 1. The following Financial Statements are filed as a part of this report: i. ii. iii. vi. v. vi. Reports of Independent Registered Public Accounting Firms Consolidated Balance Sheets as of December 29, 2018 and December 30, 2017 Consolidated Statements of Net Income for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016 Consolidated Statements of Comprehensive Income for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016 Consolidated Statements of Cash Flows for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016 Consolidated Statements of Equity for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016 vii. Notes to Consolidated Financial Statements 2. The following Financial Statement Schedule is submitted herewith for the periods indicated therein. i. Schedule II - Valuation and Qualifying Accounts and Reserves Page 36 - 37 38 39 40 41 42 43 - 82 88 All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. 3. Exhibits. See Exhibit Index Item 16. FORM 10-K SUMMARY None. 90 87 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Description (in thousands) Fiscal year ended December 29, 2018 Allowance for losses on accounts receivable Reserves for sales discounts and allowances Fiscal year ended December 30, 2017 Allowance for losses on accounts receivable Reserves for sales discounts and allowances Fiscal year ended December 31, 2016 Allowance for losses on accounts receivable Reserves for sales discounts and allowances Balance at Beginning of Year Charged to Costs and Expenses (a) Deductions (b) Other (c) Balance at End of Year $ $ $ $ $ $ 1,172 26,344 2,079 23,825 319 17,168 $ $ $ $ $ $ 319 124,638 (557) $ $ $ (118,438) $ 128 2,432 3,068 106,781 (4,070) $ $ $ (104,941) $ 95 679 1,769 91,632 $ $ (42) $ (90,837) $ 33 5,862 $ $ $ $ $ $ 1,062 34,976 1,172 26,344 2,079 23,825 (a) Includes provision for doubtful accounts, sales returns and sales discounts granted to customers. (b) Represents uncollectible accounts written off, net of recoveries and credits issued to customers. (c) Represents business acquisitions and foreign currency translation adjustments. 88 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SIGNATURES Littelfuse, Inc. By: /s/ David W. Heinzmann David W. Heinzmann, President and Chief Executive Officer Date: February 22, 2019 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant on February 22, 2019 and in the capacities indicated. /s/ Gordon Hunter Gordon Hunter /s/ David W. Heinzmann David W. Heinzmann /s/ Kristina A. Cerniglia Kristina A. Cerniglia /s/ Tzau-Jin Chung Tzau-Jin Chung /s/ Cary T. Fu Cary T. Fu /s/ Anthony Grillo Anthony Grillo /s/ John E. Major John E. Major /s/ William P. Noglows William P. Noglows /s/ Ronald L. Schubel Ronald L. Schubel /s/ Nathan Zommer Nathan Zommer /s/ Meenal A. Sethna Meenal A. Sethna /s/ Jeffrey G. Gorski Jeffrey G. Gorski Chairman of the Board of Directors Director, President and Chief Executive Officer (Principal Executive Officer) Director Director Director Director Director Director Director Director Executive Vice President and Chief Financial Officer (Principal Financial Officer) Corporate Controller and Chief Accounting Officer (Principal Accounting Officer) 89 The following documents listed below that have been previously filed with the SEC (1934 Act File No. 0-20388) are incorporated herein by reference: EXHIBIT INDEX Description Stock Purchase Agreement, dated as of April 15, 2013, by and among Littelfuse, Inc. and Key Safety Systems, Inc. Stock and Asset Purchase Agreement, dated November 7, 2015, by and between Littelfuse, Inc. and TE Connectivity Ltd. Agreement and Plan of Merger, dated August 25, 2017, as amended by Amendment No. 1, dated December 4, 2017, by and among IXYS Corporation, Littelfuse, Inc., Iron Merger Co., Inc., and IXYS Merger Co., LLC. Certificate of Incorporation dated November 25, 1991, as amended April 25, 1997. Certificate of Designations of Series A Preferred Stock. Bylaws, as amended and restated January 24, 2019. Form of Non-Qualified Stock Option Agreement under the 1993 Stock Plan for Employees and Directors of Littelfuse, Inc. for employees.++ Form of Non-Qualified Stock Option Agreement under the 1993 Stock Plan for Employees and Directors of Littelfuse, Inc., for non-employee directors. ++ Form of Non-Qualified Stock Option Agreement under the Littelfuse, Inc. Equity Incentive Compensation Plan. ++ Form of Non-Qualified Stock Option Agreement under the Littelfuse, Inc. Outside Directors Stock Option Plan. ++ Amended and Restated Employment Agreement dated as of December 31, 2007, between Littelfuse, Inc. and Gordon Hunter .++ Littelfuse, Inc. Retirement Plan as Amended and Restated, effective January 1, 2008 .++ Form of Stock Option Award Agreement under the Littelfuse, Inc. Outside Directors' Equity Plan.++ Form of Restricted Stock Unit Award Agreement under the Littelfuse, Inc. Outside Directors' Equity Plan.++ Amended and Restated, Littelfuse, Inc. Deferred Compensation Plan for Non-Employee Directors.++ Incorporated by Reference Herein Form Exhibit Filing Date File No. 8-K 8-K 2.1 4/15/2013 0-20388 2.1 11/12/2015 0-20388 S-4/A Annex A 12/11/2017 333-22114 10-K 8-K 8-K 3.1 4.2 3.1 2/27/2017 12/1/1995 1/25/2019 0-20388 0-20388 0-20388 8-K 99.1 11/12/2004 0-20388 10-K 10.24 3/17/2005 0-20388 8-K 99.4 5/11/2006 0-20388 8-K 99.6 5/11/2006 0-20388 10-K 10-K 8-K 8-K 10.1 2/27/2008 0-20388 10.13 2/27/2008 0-20388 99.3 99.4 5/1/2008 0-20388 5/1/2008 0-20388 10-K 10.4 2/27/2008 0-20388 Exhibit No. 2.1+ 2.2+ 2.3+ 3.1 3.2 3.3 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 10.11 Form of Restricted Stock Award Agreement under the Littelfuse, Inc. Equity Incentive Compensation Plan .++ Form of Stock Option Award Agreement under the Littelfuse, Inc. Equity Incentive Compensation Plan .++ 8-K 8-K 10.1 4/28/2009 0-20388 10.2 4/28/2009 0-20388 90 Exhibit No. Description Form Exhibit Filing Date File No. Incorporated by Reference Herein First Amendment to the Amended and Restated Littelfuse, Inc. Retirement Plan, effective March 25, 2009.++ Littelfuse, Inc. Long-Term Incentive Plan, effective February 3, 2010.++ Form of Restricted Stock Unit Award Agreement (Outside Director) under the Littelfuse, Inc. Long-Term Incentive Plan.++ Form of Stock Option Award Agreement under the Littelfuse, Inc. Long-Term Incentive Plan.++ First Amendment to the Littelfuse, Inc. Long-Term Incentive Plan, effective July 27, 2012.++ Credit Agreement, dated as of May 31, 2013, among Littelfuse, Inc., as borrower, JPMorgan Chase Bank, N.A. as Agent, Bank of America, N.A., as Syndication Agent, Wells Fargo Bank, National Association and PNC Bank, National Association, as Co-Documentation Agents, J.P. Morgan Securities LLC, as Sole Bookrunner and Joint Lead Arranger, and Merrill, Lynch, Pierce, Fenner & Smith Incorporated, as Joint Lead Arranger. Master Increasing Lender Supplement, dated as of January 30, 2014, among Littelfuse, Inc., as borrower, JPMorgan Chase Bank, N.A. as Administrative Agent, and each of the banks, financial institutions and other institutional lenders listed on the respective signature pages thereof. Littelfuse, Inc. Annual Incentive Plan, effective January 1, 2014. ++ Amended and Restated Employment Agreement, effective as of January 1, 2014, between Littelfuse Europe GmbH and Dieter Roeder .++ Change of Control Agreement effective as of February 10, 2014, between Littelfuse, Inc. and Michael Rutz.++ Termination Amendment to the Littelfuse, Inc. Retirement Plan, effective July 31, 2014. ++ Change of Control Agreement effective as of January 1, 2015, between Littelfuse, Inc. and Gordon Hunter.++ Change of Control Agreement effective as of January 1, 2015, between Littelfuse, Inc. and Philip G. Franklin.++ Change of Control Agreement effective as of January 1, 2015, between Littelfuse, Inc. and Dieter Roeder.++ Change of Control Agreement effective as of January 1, 2015, between Littelfuse, Inc. and Ryan K. Stafford.++ Change of Control Agreement effective as of January 1, 2015, between Littelfuse, Inc. and Ian Highley.++ 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.20 10.21 10.22 10.23 10.24 10.25 10.26 10.27 10-K 10.30 2/26/2010 0-20388 8-K 10.1 5/5/2010 0-20388 S-8 S-8 4.4 4.6 5/19/2010 0-20388 5/19/2010 0-20388 10-K 10.36 2/27/2013 0-20388 8-K 10.1 6/5/2013 0-20388 8-K 10.1 2/4/2014 0-20388 DEF14A A 3/17/2014 0-20388 10-Q 10-Q 10-Q 8-K 8-K 8-K 8-K 10.2 10.1 5/2/2014 0-20388 5/2/2014 0-20388 10.1 10/31/2014 0-20388 10.1 12/22/2014 0-20388 10.2 12/22/2014 0-20388 10.4 12/22/2014 0-20388 10.5 12/22/2014 0-20388 10-K 10.11 2/24/2015 0-20388 91 Exhibit No. Description Form Exhibit Filing Date File No. 10.28 Change of Control Agreement effective as of January 1, 2015, between Littelfuse, Inc. and Deepak Nayar.++ 10-K 10.12 2/24/2015 0-20388 Incorporated by Reference Herein 10.29 10.30 10.31 10.32 10.33 10.34 10.35 10.36 10.37 10.38 10.39 Amendment No. 1, dated as of May 2, 2014, to Credit Agreement, dated as of May 30, 2013, by and among Littelfuse, Inc., as borrower, JPMorgan Chase Bank, N.A. as Agent, and each of the banks, financial institutions listed on the respective signature pages thereof. Amendment No. 2, dated as of January 14, 2015, to Credit Agreement, dated as of May 31, 2013, by and among Littelfuse, Inc., as borrower, JPMorgan Chase Bank, N.A. as Agent, and each of the banks, financial institutions listed on the respective signature pages thereof. Form of Restricted Stock Unit Award Agreement (Executive) under the Littelfuse, Inc. Long-Term Incentive Plan.++ Form of Restricted Stock Unit Award Agreement (Tier II Management) under the Littelfuse, Inc. Long-Term Incentive Plan.++ Amendment No. 3, dated as of May 4, 2015, to Credit Agreement, dated as of May 31, 2013, by and among Littelfuse, Inc., as borrower, JPMorgan Chase Bank, N.A., as Agent, and each of the banks, financial institutions listed on the respective signature pages thereof. Change of Control Agreement effective as of February 1, 2016, between Littelfuse, Inc. and Meenal A. Sethna. ++ Change of Control Agreement effective as of May 26, 2015 between Littelfuse, Inc. and Matt Cole.++ Credit Agreement, dated as of March 4, 2016 among Littelfuse, Inc. and Certain Subsidiaries as borrowers, Guarantors party thereto, Bank of America, N.A. as Agent, Swing Line Lender and L/C Issuer and JPMorgan Chase Bank, N.A. as Syndication Agent, BMO Harris Bank, N.A., PNC Bank, National Association and Wells Fargo Bank, National Association as Co-Documentation Agents, Merril, Lynch, Pierce, Fenner & Smith Incorporated, as Sole Bookrunner and Joint Lead Arranger and JPMorgan Chase Bank, N.A., as Joint Lead Arranger. 10-K 10.47 2/24/2015 0-20388 10-K 10.48 2/24/2015 0-20388 10-Q 10.2 7/31/2015 0-20388 10-Q 10.3 7/31/2015 0-20388 10-Q 10.1 7/31/2015 0-20388 8-K 10.1 2/3/2016 0-20388 10-K 10.13 3/1/2016 0-20388 Form of Stock Option Award Agreement (Executive) under the Littelfuse, Inc. Long-Term Incentive Plan. ++ 10-Q 8-K 10.1 10.3 3/10/2016 0-20388 5/6/2016 0-20388 Form of Stock Option Award Agreement (Outside Director – 2016 Grant) under the Littelfuse, Inc. Long- Term Incentive Plan. ++ Form of Restricted Stock Unit Award Agreement (Executive) under the Littelfuse, Inc. Long-Term Incentive Plan. ++ 10-Q 10.4 5/6/2016 0-20388 10-Q 10.5 5/6/2016 0-20388 92 Exhibit No. Description Form Exhibit Filing Date File No. Incorporated by Reference Herein Form of Restricted Stock Unit Award Agreement (Tier II Management) under the Littelfuse, Inc. Long-Term Incentive Plan. ++ Form of Restricted Stock Unit Award Agreement (Outside Director – 2016 Grant) under the Littelfuse, Inc. Long-Term Incentive Plan. ++ Form of Restricted Stock Unit Award Agreement (Executive) under the Littelfuse Inc. Long-Term Incentive Plan. ++ Executive Retirement Agreement entered into between Littelfuse, Inc. and Gordon Hunter, effective January 1, 2017. ++ Letter Agreement entered into between Littelfuse, Inc. and David W. Heinzmann. Effective January 1, 2017. + + Change of Control Agreement effective as of January 1, 2017, between Littelfuse, Inc. and David W. Heinzmann. ++ Littelfuse, Inc. 3.03% Senior Note, Series A, due February 15, 2022, and 3.74% Senior Note, Series B, due February 15, 2027 Note Purchase Agreement. Littelfuse, Netherland C.V. 1.14% Senior Note, Series A, due December 8, 2023, and 1.83% Senior Note, Series B, due December 8, 2028 Note Purchase Agreement. Subsidiary Guaranty Agreement, dated December 8, 2016. Subsidiary Guaranty Agreement, dated as of February 15, 2017. Restated Littelfuse, Inc. Supplemental Retirement and Savings Plan, effective January 1, 2017. ++ Amended and Restated Littelfuse, Inc. 401(k) Retirement and Savings Plan, effective January 1, 2017.++ Amended and Restated Littelfuse, Inc. Long-Term Incentive Plan. ++ Form of 2017 Restricted Stock Unit Award Agreement. ++ Form of 2017 Stock Option Award Agreement. ++ Amended and Restated Employment Agreement, effective as of April 18, 2017, between Littelfuse, Inc. and Dieter Roeder. ++ Employment offer letter between Littelfuse, Inc. and Jeffrey Gorski, dated June 28, 2017. ++ 10-Q 10.6 5/6/2016 0-20388 10-Q 10.7 5/6/2016 0-20388 8-K 8-K 8-K 8-K 8-K 8-K 8-K 8-K 10.1 7/26/2016 0-20388 10.1 11/16/2016 0-20388 10.2 11/16/2016 0-20388 10.3 11/16/2016 0-20388 10.1 12/9/2016 0-20388 10.2 10.4 10.2 12/9/2016 0-20388 12/9/2016 0-20388 2/15/2017 0-20388 10-K 10.50 2/27/2017 0-20388 10-K 10.51 2/27/2017 0-20388 8-K 8-K 8-K 10-Q 8-K 10.1 10.2 10.3 10.1 10.1 5/1/2017 0-20388 5/1/2017 5/1/2017 0-20388 0-20388 8/2/2017 0-20388 8/14/2017 0-20388 10.40 10.41 10.42 10.43 10.44 10.45 10.46 10.47 10.48 10.49 10.50 10.51 10.52 10.53 10.54 10.55 10.56 93 Exhibit No. Description Form Exhibit Filing Date File No. 10.57 Form of Change of Control Agreement (J. Gorski). ++ 8-K 10.2 8/14/2017 0-20388 Incorporated by Reference Herein First Amendment to Credit Agreement, dated as of November 1, 2016, among Littelfuse, Inc., certain subsidiaries of the company, as designated borrowers, certain subsidiaries of the company, as guarantors, the lenders party thereto and Bank of America, N.A., as agent. Second Amendment to Credit Agreement, dated as of October 13. 2017, among Littelfuse, Inc., certain subsidiaries of the company, as designated borrowers, certain subsidiaries of the company, as guarantors, the lenders party thereto and Bank of America, N.A., as agent. Joinder Agreement, dated as of October 13, 2017, by and between Iron Merger Co., Inc. and Bank of America, N.A., as agent. Joinder Agreement, dated as of October 13, 2017, by and between IXYS Merger Co., LLC and Bank of America, N.A., as agent. U.S. Subsidiary Guarantor Supplement, dated as of October 13, 2017, made by Iron Merger Co., Inc. in favor of the note purchasers and the other holders. U.S. Subsidiary Guarantor Supplement, dated as of October 13, 2017, made by IXYS Merger Co., LLC in favor of the note purchasers and the other holders. Cross Border Subsidiary Guarantor Supplement, dated as of October 13, 2017, made by Iron Merger Co., Inc. in favor of the note purchasers and the other holders. Cross Border Subsidiary Guarantor Supplement, dated as of October 13, 2017, made by IXYS Merger Co., LLC in favor of the note purchasers and the other holders. Note Purchase Agreement, dated November 15, 2017, among Littelfuse, Inc. and note purchasers listed on the signature pages thereto. Form of 3.78% Senior Note, Series B, due February 15, 2030. Form of 3.48% Senior Note, Series A, due February 15, 2025, Subsidiary Guaranty Agreement, dated as of January 16, 2018, made by LFUS LLC, Littelfuse Commercial Vehicle, LLC, Iron Merger Co., Inc., IXYS Merger Co., LLC and SymCom, Inc. in favor of the note purchasers and the other holders. Seventh Amended and Restated Employment Agreement, dated as of August 25, 2017, by and between IXYS Corporation and Nathan Zommer. ++ Littelfuse, Inc. Executive Severance Policy. ++ 8-K 10.1 10/16/2017 0-20388 8-K 8-K 8-K 8-K 8-K 8-K 8-K 8-K 8-K 8-K 8-K 8-K 8-K 10.2 10/16/2017 0-20388 10.3 10/16/2017 0-20388 10.4 10/16/2017 0-20388 10.5 10/16/2017 0-20388 10.6 10/16/2017 0-20388 10.7 10/16/2017 0-20388 10.8 10/16/2017 0-20388 10.1 11/15/2017 0-20388 4.2 4.1 11/15/2017 0-20388 11/15/2017 0-20388 10.2 1/18/2018 0-20388 10.3 10.4 1/18/2018 0-20388 1/18/2018 0-20388 10.58 10.59 10.60 10.61 10.62 10.63 10.64 10.65 10.66 10.67 10.68 10.69 10.70 10.71 94 Exhibit No. Description Form Exhibit Filing Date File No. 10.72 Form of Tier I Change of Control Agreement.++ 8-K 10.1 1/23/2018 0-20388 Incorporated by Reference Herein First Amendment to Littelfuse Deferred Compensation Plan for Non-Employee Directors, effective as of January 1, 2008.++ Second Amendment to the Littelfuse Deferred Compensation Plan for Non-Employee Directors, effective as of October 25, 2013.++ First Amendment to the Littelfuse, Inc. 401(K) Retirement and Savings Plan, effective January 1, 2018.++ Altra In-Plan Roth Rollover Amendment to the Littelfuse, Inc. 401(K) Retirement and Savings Plan, effective as of February 1, 2018.++ Form of Indemnity Agreement by and between Nathan Zommer and IXYS Corporation,++ IXYS Corporation 1999 Equity Incentive Plan, as amended.++ IXYS Corporation 2009 Equity Incentive Plan++ IXYS Corporation 2011 Equity Incentive Plan++ IXYS Corporation 2013 Equity Incentive Plan++ IXYS Corporation 2016 Equity Incentive Plan++ Zilog, Inc. 2002 Omnibus Stock Incentive Plan++ Zilog, Inc. 2004 Omnibus Stock Incentive Plan++ Form of Stock Option Agreement for the IXYS Corporation 1999 Equity Incentive Plan++ Form of Stock Option Agreement for the IXYS Corporation 1999 Equity Incentive Plan with net exercise provision.++ Form of Stock Option Agreement for the IXYS Corporation 1999 Equity Incentive Plan for non- employee directors++ Notice of Stock Option Grant and Agreement for the IXYS Corporation 2009 Equity Incentive Plan++ Form of Nonqualified Stock Option Agreement for Stock Options pursuant to the Zilog, Inc. 2002 Omnibus Stock Incentive Plan++ 10-K 10.73 02/23/2018 0-20388 10-K 10.74 02/23/2018 0-20388 10-K 10.75 02/23/2018 0-20388 10-K 10-K S-8 S-8 S-8 S-8 S-8 S-8 S-8 10.76 02/23/2018 0-20388 10.3 6/12/2008 000-26124 4.3 4.4 4.5 4.6 4.7 4.8 4.9 1/19/2018 333-221147 1/19/2018 333-221147 1/19/2018 333-221147 1/19/2018 333-221147 1/19/2018 333-221147 1/19/2018 333-221147 1/19/2018 333-221147 10-Q 10.3 11/9/2004 000-26124 10-K 10.23 6/22/2006 000-26124 10-K 10-Q 10.24 6/22/2006 000-26124 10.4 8/10/2009 000-26124 10-K 10.26 6/11/2010 000-26124 10.73 10.74 10.75 10.76 10.77 10.78 10.79 10.80 10.81 10.82 10.83 10.84 10.85 10.86 10.87 10.88 10.89 95 Exhibit No. 10.90 Description Form of Nonqualified Stock Option Agreement for Stock Options pursuant to the Zilog, Inc. 2004 Omnibus Stock Incentive Plan++ Incorporated by Reference Herein Form Exhibit 10-K 10.28 Filing Date 6/11/2010 File No. 000-26124 10.91 10.92 10.93 10.94 10.95 10.96 10.97 10.98 10.99 Notice of Stock Option Grant and Agreement for IXYS Corporation 2011 Equity Incentive Plan++ Notice of Stock Option Grant and Agreement for IXYS Corporation 2013 Equity Incentive Plan++ Notice of Stock Option Grant and Agreement for IXYS Corporation 2016 Equity Incentive Plan++ 10-Q 10-Q 10-Q 10.2 10.6 10.1 8/5/2011 000-26124 8/9/2013 000-26124 11/3/2016 000-26124 Joinder Agreement, dated as of March 14, 2018, by and between Clare Capital, Inc., Clare Components, Inc., Clare Electronics, Inc., Clare Instruments, Inc., Clare Services, Inc., Clare Technologies, Inc., Directed Energy, Inc., IXYS Buckeye, LLC, IXYS Integrated Circuits Division AV Inc., IXYS Integrated Circuits Divisions Inc., IXYS Long Beach, Inc., IXYS USA, Inc., Microwave Technology, Inc., Pele Technology, Inc., Reaction Technology Incorporation, Zilog, Inc., and Bank of America, N.A., as agent. U.S. Subsidiary Guarantor Supplement, dated as of March 14, 2018, made by Clare Capital, Inc., Clare Components, Inc., Clare Electronics, Inc., Clare Instruments, Inc., Clare Services, Inc., Clare Technologies, Inc., Directed Energy, Inc., IXYS Buckeye, LLC, IXYS Integrated Circuits Division AV Inc., IXYS Integrated Circuits Divisions Inc., IXYS Long Beach, Inc., IXYS USA, Inc., Microwave Technology, Inc., Pele Technology, Inc., Reaction Technology Incorporation and Zilog, Inc. in favor of the note purchasers and the other holders. Cross Border Subsidiary Guarantor Supplement, dated as of March 14, 2018, made by Clare Capital, Inc., Clare Components, Inc., Clare Electronics, Inc., Clare Instruments, Inc., Clare Services, Inc., Clare Technologies, Inc., Directed Energy, Inc., IXYS Buckeye, LLC, IXYS Integrated Circuits Division AV Inc., IXYS Integrated Circuits Divisions Inc., IXYS Long Beach, Inc., IXYS USA, Inc., Microwave Technology, Inc., Pele Technology, Inc., Reaction Technology Incorporation and Zilog, Inc. in favor of the note purchasers and the other holders. Note Purchase Agreement Subsidiary Guarantor Supplement, dated as of March 14, 2018, made by Clare Capital, Inc., Clare Components, Inc., Clare Electronics, Inc., Clare Instruments, Inc., Clare Services, Inc., Clare Technologies, Inc., Directed Energy, Inc., IXYS Buckeye, LLC, IXYS Integrated Circuits Division AV Inc., IXYS Integrated Circuits Divisions Inc., IXYS Long Beach, Inc., IXYS USA, Inc., Microwave Technology, Inc., Pele Technology, Inc., Reaction Technology Incorporation and Zilog, Inc. in favor of the note purchasers and the other holders. Consulting Agreement between Nathan Zommer and Littelfuse, Inc., effective August 1, 2018. Joinder Agreement, dated as of August 22, 2018, by and between Reaction Technology Epi, LLC and Reaction Tech RE, LLC and Bank of America, N.A., as agent. 96 10-Q 10.1 05/02/2018 0-20388 10-Q 10.2 05/02/2018 0-20388 10-Q 10.3 05/02/2018 0-20388 10-Q 10-Q 10.4 10.1 05/02/2018 0-20388 10/31/2018 0-20388 10-Q 10.2 10/31/2018 0-20388 10-Q 10.3 10/31/2018 0-20388 10-Q 10.4 10/31/2018 0-20388 10-Q 10.5 10/31/2018 0-20388 U.S. Subsidiary Guarantor Supplement, dated as of August 22, 2018, made by Reaction Technology Epi, LLC and Reaction Tech RE, LLC in favor of the note purchasers and the other holders. Cross Border Subsidiary Guarantor Supplement, dated as of August 22, 2018, made by Reaction Technology Epi, LLC and Reaction Tech RE, LLC in favor of the note purchasers and the other holders. Note Purchase Agreement Subsidiary Guarantor Supplement, dated as of August 22, 2018, made by Reaction Technology Epi, LLC and Reaction Tech RE, LLC in favor of the note purchasers and the other holders. Joinder Agreement, dated as of October 22, 2018, by and between each of (i) Littelfuse International Holding, LLC, (ii) Littelfuse Holding, LLC and (iii) Monolith Semiconductor Inc. and Bank of America, N.A., as agent. U.S. Subsidiary Guarantor Supplement, dated as of October 22, 2018, made by Littelfuse International Holding, LLC, Littelfuse Holding, LLC and Monolith Semiconductor, Inc. in favor of the note purchasers and the other holders. U.S. (November 2017) Subsidiary Guarantor Supplement, dated as of October 22, 2018, made by Littelfuse International Holding, LLC, Littelfuse Holding, LLC and Monolith Semiconductor, Inc. in favor of the note purchasers and the other holders. Cross Border Assumption Agreement, dated as of October 3, 2018, made by each of New Dutch B.V. and IXYS Dutch B.V. in favor of the note purchasers and the other holders. Cross Border Subsidiary Guarantor Supplement, dated as of October 22, 2018, made by Littelfuse International Holding, LLC, Littelfuse Holding, LLC and Monolith Semiconductor, Inc. in favor of the note purchasers and the other holders. Summary of Non-Employee Director Compensation.++ Subsidiaries. Consent of Independent Registered Public Accounting Firm. Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 10.100 10.101 10.102 10.103* 10.104* 10.105* 10.106* 10.107* 10.108* 21.1* 23.1* 31.1* 31.2* 32.1+++ 101.INS* XBRL Instance Document. 101.SCH* XBRL Taxonomy Extension Schema Document. 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document. 101.LAB* XBRL Taxonomy Extension Label Linkbase Document. 101.PRE* 101.DEF* XBRL Taxonomy Extension Presentation Linkbase Document. XBRL Taxonomy Extension Definition Linkbase Document. 97 * Filed with this Report. + Exhibits and schedules omitted pursuant to Item 601(b)(2) of Regulation S-K. Littelfuse agrees to furnish a supplemental copy of an omitted exhibit or schedule to the SEC upon request. ++ Management contract or compensatory plan or arrangement. +++ Furnished with this Report. 98 EXECUTIVE OFFICERS DAVID W. HEINZMANN President and Chief Executive Officer MEENAL A. SETHNA Executive Vice President and Chief Financial Officer RYAN K. STAFFORD Executive Vice President, Chief Legal and Human Resources Officer and Corporate Secretary MATTHEW J. COLE Senior Vice President, Business Development and Strategy ALEXANDER CONRAD Senior Vice President and General Manager, Passenger Vehicle Business IAN HIGHLEY Senior Vice President and General Manager, Semiconductor Products and Chief Technology Officer DEEPAK NAYAR Senior Vice President and General Manager, Electronics and Industrial Business MICHAEL P. RUTZ Senior Vice President and General Manager, Semiconductor Products BOARD OF DIRECTORS KRISTINA A. CERNIGLIA Senior Vice President and Chief Financial Officer Hillenbrand, Inc. TZAU-JIN CHUNG Operating Partner Core Industrial Partners, LLC CARY T. FU Co-Founder and Retired Chairman Benchmark Electronics, Inc. ANTHONY GRILLO Founder Ascribe Opportunities Management, LLC DAVID W. HEINZMANN President and Chief Executive Officer Littelfuse, Inc. GORDON HUNTER Chairman of the Board Retired President and Chief Executive Officer Littelfuse, Inc. JOHN E. MAJOR President MTSG WILLIAM P. NOGLOWS Chairman of the Board Cabot Microelectronics Corporation RONALD L. SCHUBEL Retired Executive Vice President and President of the Americas Region Molex Incorporated DR. NATHAN ZOMMER Founder, former Chairman and Chief Executive Officer IXYS Corporation CORPORATE INFORMATION ANNUAL MEETING The Annual Meeting of Littelfuse, Inc. will be held at 9:00 a.m. Central Time on April 26, 2019, at the O’Hare Plaza First Floor Conference Center, 8745 West Higgins Road, Chicago, IL 60631. Proxy materials and a copy of this report will be mailed or made available via the Internet in advance of the meeting to all shareholders of record as of March 1, 2019. COMMON STOCK Littelfuse, Inc. common stock is traded on the NASDAQ® Global Select Market under the symbol LFUS. SHAREHOLDER INFORMATION In addition to annual reports to shareholders, copies of the Company’s filings with the Securities and Exchange Commission are available on the Investor Relations section of our website at: investor.littelfuse.com. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Grant Thornton LLP 171 N. Clark Street Suite 200 Chicago, IL 60601 TRANSFER AGENT EQ Shareowner Services 110 Centre Pointe Curve Suite 101 Mendota Heights, MN 55110 1.800.468.9716 LITTELFUSE WORLD HEADQUARTERS Littelfuse, Inc. 8755 West Higgins Road Suite 500 Chicago, IL 60631 +1.773.628.1000 Littelfuse.com © 2019 Littelfuse, Inc. 

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