What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-18 compared with 2020-02-21 · 530 added, 456 removed, 1000 unchanged (50% of the section changed)

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Related Party Transactions

Subsequent Events

Report of Independent Registered Public Accounting Firm

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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 26, 2020, 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 18, 2021, expressed an unqualified opinion.

Change in accounting principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for operating leases as of December 30, 2018 due to the adoption of ASU 2016-02, Leases (Topic 842).

Basis for opinion

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Analysis

Goodwill Impairment Analysis – Automotive Sensors and Electronics - Semiconductor reporting units

The Company’s consolidated goodwill balance was $816.8 million as of December 26, 2020.

As described in Note 1 to the consolidated financial statements, the Company evaluates goodwill for impairment at the reporting unit level annually and performed quantitative goodwill impairment assessment for each of its seven reporting units.

The quantitative impairment assessment involves the comparison of the fair value of a reporting unit to its carrying amount.

The Company used a weighting of the income and market approaches to determine the fair value of the reporting unit.

We identified the goodwill impairment analysis as a critical audit matter for certain reporting units because management's quantitative goodwill impairment test involved a high degree of auditor judgment due to the significant estimation required to

determine the fair value of the reporting unit.

In particular, the fair value estimate was sensitive to significant assumptions, such as forecasted revenues, operating income margins, long-term discount rate, perpetual growth rate, and estimated valuation multiples.

Our audit procedures related to the goodwill impairment analysis of certain reporting units included the following, among others.

We tested the design and operating effectiveness of key controls over the Company's goodwill impairment assessment process including review of the valuation model and significant assumptions used.

We tested the significant assumptions discussed above by assessing the reasonableness of management’s forecasts compared to current results and forecasted industry trends.

We performed sensitivity analyses of certain assumptions to evaluate changes in the fair value that would result from changes in the assumptions.

With the assistance of our valuation specialists, we evaluated the selection of the long-term discount rate and perpetual growth rate, including testing the underlying source information and the mathematical accuracy of the calculations by developing a range of independent estimates and comparing those to the rates selected by management.

We also involved our valuation specialists to evaluate the market approach, including evaluating the reasonableness of estimated valuation multiples.

The Company tests for impairment by comparing the estimated fair value of each reporting unit to its carrying value.

If the carrying value exceeds its estimated fair value, a goodwill impairment loss is recorded for the difference.

The Company recognized a non-cash impairment loss of $33.8 million related to the Automotive Sensors reporting unit during the year ended December 26, 2020.

We identified the goodwill impairment analysis for the Automotive Sensors and Electronic - Semiconductor reporting units as a critical audit matter because management’s goodwill impairment test involved a high degree of auditor judgment due to the significant estimation required to determine the fair value of each reporting unit.

In particular, the fair value estimate was sensitive to significant assumptions, such as forecasted revenues and cash flows, discount rates, and estimated valuation multiples.

Our audit procedures related to the goodwill impairment analysis of the Automotive Sensors and Electronic - Semiconductor reporting units included the following, among others.

We tested the design and operating effectiveness of controls over the Company's goodwill impairment assessment process, including review of the valuation model and significant assumptions used.

We tested the forecasted revenues and cash flows by assessing the reasonableness of management’s forecasts compared to current results and forecasted industry trends.

With the assistance of our valuation specialists, we assessed the discount rates by developing a range of independent estimates and comparing those to the rates selected by management.

We also involved our valuation specialists to evaluate the assumptions used in applying the market approach, including evaluating the reasonableness of estimated valuation multiples.

/s/ GRANT THORNTON LLP

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CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

December 28, 2019

December 29, 2018

(in thousands, except share and per share data) December 26, 2020 December 28, 2019

Current assets:

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Short-term investments 54 44

Trade receivables, less allowances of $42,043 and $36,038 at December 28, 2019 and December 29, 2018, respectively

Trade receivables, less allowances of $ 45,237 and $ 42,043 , respectively

232,760 202,309

Inventories 258,002 237,507

Prepaid income taxes and income taxes receivable 3,029 4,831

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Intangible assets, net of amortization 291,887 321,247

Goodwill 816,812 820,589

Investments 30,547 24,099

Deferred income taxes 11,224 8,069

Rights of use lease assets, net

Right of use assets, net 17,615 21,918

Other assets 18,021 14,965

Total assets $ 2,747,593 $ 2,559,898

LIABILITIES AND EQUITY

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34,000,000 shares authorized;

shares issued, 25,855,203 and 25,641,959 in 2019 and 2018, respectively

shares issued, 26,131,544 and 25,855,203 , respectively

Additional paid-in capital 907,858 867,996

Treasury stock, at cost:

1,644,283 and 1,473,901 shares, respectively

Additional paid-in capital

( 242,366 ) ( 216,447 )

Accumulated other comprehensive loss ( 91,157 ) ( 106,823 )

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Non-controlling interest 131 131

Total equity 1,608,773 1,496,014

Total liabilities and equity $ 2,747,593 $ 2,559,898

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Fiscal Year Ended

(in thousands, except per share data)

December 28, 2019

December 29, 2018

December 30, 2017

(in thousands, except per share data) December 26, 2020 December 28, 2019 December 29, 2018

Net sales $ 1,445,695 $ 1,503,873 $ 1,718,468

Cost of sales 944,523 957,578 1,065,053

Gross profit 501,172 546,295 653,415

Selling, general, and administrative expenses 204,507 220,448 276,329

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Amortization of intangibles 40,039 40,026 52,190

Restructuring, impairment, and other charges 41,716 13,033 12,583

Total operating expenses 338,800 353,504 428,366

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Interest expense 21,077 22,266 22,569

Foreign exchange loss (gain)

Foreign exchange (gain) loss ( 14,875 ) 5,224 ( 863 )

Other income, net ( 5,083 ) ( 583 ) ( 1,599 )

Income before income taxes 161,253 165,884 204,942

Income taxes 31,267 26,802 40,377

Net income $ 129,986 $ 139,082 $ 164,565

Income per share:

Basic $ 5.33 $ 5.66 $ 6.62

Diluted $ 5.29 $ 5.60 $ 6.52

Weighted average shares and equivalent shares outstanding:

Basic 24,371 24,576 24,870

Diluted 24,592 24,818 25,235

See accompanying Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

December 28, 2019

December 29, 2018

December 30, 2017

(in thousands) December 26, 2020 December 28, 2019 December 29, 2018

Net income $ 129,986 $ 139,082 $ 164,565

Other comprehensive income (loss):

Pension and postemployment adjustments, net of tax ( 16,095 ) ( 8,087 ) 877

Unrealized loss on investments

Foreign currency translation adjustments 31,761 ( 812 ) ( 25,338 )

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

December 28, 2019

December 29, 2018

December 30, 2017

(in thousands) December 26, 2020 December 28, 2019 December 29, 2018

OPERATING ACTIVITIES

Net income $ 129,986 $ 139,082 $ 164,565

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 56,139 52,477 51,003

Amortization of intangibles 40,039 40,026 52,190

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Stock-based compensation 18,129 19,046 27,431

Loss (gain) on investments and other assets

(Gain) loss on investments and other assets ( 4,663 ) 4,854 ( 670 )

Deferred income taxes ( 3,214 ) ( 1,147 ) ( 4,679 )

Other ( 18,230 ) 6,638 620

Changes in operating assets and liabilities:

Trade receivables ( 25,588 ) 28,497 ( 3,539 )

Inventories ( 12,425 ) 22,094 ( 33,971 )

Accounts payable 28,820 ( 22,574 ) 13,708

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Proceeds from sales and maturities of short-term investments — — 1,407

Decrease in entrusted loan

Purchases of property, plant, and equipment ( 56,191 ) ( 61,895 ) ( 74,753 )

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Proceeds of revolving credit facility 240,000 — 60,000

Payments of revolving credit facility ( 110,000 ) — ( 60,000 )

Proceeds of term loan — — 75,000

Proceeds from senior notes payable

Payments of term loan ( 145,000 ) ( 10,000 ) ( 42,500 )

Payments of revolving credit facility

Net proceeds (payments) related to stock-based award activities

Payments of entrusted loan

Proceeds from senior notes payable — — 175,000

Net proceeds related to stock-based award activities 18,744 7,800 18,857

Cash dividends paid ( 46,839 ) ( 44,689 ) ( 39,993 )

Purchases of common stock ( 22,927 ) ( 99,387 ) ( 63,564 )

Debt issuance costs ( 1,786 ) — ( 903 )

Net cash (used in) provided by financing activities ( 67,808 ) ( 146,276 ) 121,897

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Shareholders’ Equity

(in thousands, except share and per share data)

Paid in Capital

Treasury Stock

Retained Earnings

Non-controlling Interest

(in thousands, except share and per share data) Common Stock Addl.

Paid in Capital Treasury Stock Accum.

(Loss) Retained Earnings Non-controlling Interest Total

Balance at December 30, 2017 $ 229 $ 310,012 $ ( 41,294 ) $ ( 63,668 ) $ 722,140 $ 137 $ 927,556

Net income — — — — 164,565 — 164,565

Other comprehensive income (loss), net of tax ( 24,461 ) ( 24,461 )

Cumulative effect adjustment — — — ( 9,795 ) 9,795 — —

Stock-based compensation — 27,431 — — — — 27,431

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Withheld 36,482 shares on restricted share units for withholding taxes

— — ( 7,252 ) — — — ( 7,252 )

Stock options exercised 4 26,105 — — — — 26,109

Issuance of common stock 21 472,280 — — — — 472,301

Repurchases of common stock — — ( 67,908 ) — — — ( 67,908 )

Cash dividends paid ($ 1.60 per share)

— — — — ( 39,993 ) — ( 39,993 )

Balance at December 29, 2018 $ 254 $ 835,828 $ ( 116,454 ) $ ( 97,924 ) $ 856,507 $ 131 $ 1,478,342

Net income — — — — 139,082 — 139,082

Other comprehensive income (loss), net of tax ( 8,899 ) ( 8,899 )

Cumulative effect adjustment

Stock-based compensation — 19,046 — — — — 19,046

Non-controlling interest

Withheld 25,940 shares on restricted share units for withholding taxes

— — ( 4,957 ) — — — ( 4,957 )

Stock options exercised 2 13,122 — — — — 13,124

Issuance of common stock

Repurchases of common stock — — ( 95,036 ) — — — ( 95,036 )

Cash dividends paid ($ 1.82 per share)

— — — — ( 44,688 ) — ( 44,688 )

Balance at December 28, 2019 $ 256 $ 867,996 $ ( 216,447 ) $ ( 106,823 ) $ 950,901 $ 131 $ 1,496,014

Net income — — — — 129,986 — 129,986

Other comprehensive income (loss), net of tax 15,666 15,666

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Withheld 20,250 shares on restricted share units for withholding taxes

— — ( 2,992 ) — — — ( 2,992 )

Stock options exercised 3 21,733 — — — — 21,736

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Cash dividends paid ($ 1.92 per share)

— — — — ( 46,839 ) — ( 46,839 )

Balance at December 26, 2020 $ 259 $ 907,858 $ ( 242,366 ) $ ( 91,157 ) $ 1,034,048 $ 131 $ 1,608,773

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Actual results could differ from those estimates.

Reclassification

For fiscal year ended December 26, 2020, the Company began presenting restructuring, impairment and other charges as a separate caption in the Consolidated Statements of Net Income.

Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements.

The impact of this reclassification resulted in a decrease in cost of sales, selling, general and administrative expenses, and research and development expenses with the corresponding change reported in restructuring, impairment and other charges.

As a result, costs of sales, selling, general and administrative expenses, and research and development expenses were reduced by $ 4.8 million, $ 7.6 million, and $ 0.5 million, respectively, for fiscal year 2019 and costs of sales and selling, general and administrative expenses were reduced by $ 0.9 million, $ 11.7 million, respectively for fiscal year 2018.

This reclassification had no effect on the previously reported operating income and net income for the fiscal years ended December 28, 2019 and December 29, 2018.

Cash Equivalents

All highly liquid investments, with an original maturity of three months or less when purchased, are considered to be cash equivalents.

The Company maintains a multi-currency notional cash pool for our participating entities with a third-party bank provider.

Actual cash balances are not physically converted and are not commingled between participating legal entities.

The Company will classify any overdraft balances within accrued expenses and other current liabilities on the accompanying consolidated balance sheets.

Short-Term and Long-Term Investments

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(“Polytronics”).

The Company’s Polytronics shares held at the end of fiscal 2019 and 2018 represent approximately 7.2 % of total Polytronics shares outstanding.

The Company’s Polytronics shares held at the end of fiscal 2020 and 2019 represent approximately 7.2 % of total Polytronics shares

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

outstanding, respectively.

The Polytronics investment is carried at fair value.

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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 19 % 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 $ 0.6 million in losses and $ 0.7 million in gains from its equity method investments for the fiscal years ended December 28, 2019 and December 29, 2018, respectively.

The balance of equity method investments was $ 11.1 million and $ 11.6 million as of the fiscal years ended December 28, 2019 and December 29, 2018, respectively.

The Company recognized no gains and losses and $ 0.6 million of losses from its equity method investments for the fiscal years ended December 26, 2020 and December 28, 2019, respectively.

The balance of these equity method investments was $ 11.4 million and $ 11.1 million as of the fiscal years ended December 26, 2020 and December 28, 2019, respectively.

See Note 18, Related Party Transactions, for further discussion.

The balance of the Company's investments accounted for under the cost method was $ 0.5 million and $ 0.4 million for the fiscal years ended December 26, 2020 and December 28, 2019, respectively.

During the twelve months ended December 28, 2019 ,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the Company recorded impairment charges of $ 7.3 million in Other income, net in the Consolidated Statements of Net Income to adjust these certain investments to their estimated fair value of $ 0.4 million .

During the twelve months ended December 26, 2020 and December 28, 2019, the Company recorded impairment charges of $ 0.1 million and $ 7.3 million, respectively, in Other income, net in the Consolidated Statements of Net Income to adjust these certain investments to their estimated fair value.

See Note 10, Fair Value of Assets and Liabilities, for further discussion.

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Land, buildings, and equipment are carried at cost.

Depreciation is calculated using the straight-line method with useful lives of 21 years for buildings, three to ten years for equipment, seven years for furniture and fixtures, five years for tooling and three years for computer equipment.

Depreciation is calculated using the straight-line method with useful lives of up to 21 years for buildings, three 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.

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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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the second quarter of 2020, the Company recorded a non-cash charge of $ 33.8 million to recognize the impairment of goodwill in the automotive sensors reporting unit within the Automotive segment.

The goodwill impairment charge was due to reductions in the estimated fair value for the automotive sensors reporting unit based on lower expectations for future revenue, profitability and cash flows as compared to the expectations of the 2019 annual goodwill impairment test.

These lower future expectations were driven by projected extended declines in end market demand due to the COVID-19 pandemic.

In addition, during the second quarter of 2020, certain customers notified the Company of their decision to delay future programs along with a customer canceling an existing program.

As of December 26, 2020, the automotive sensors reporting unit had $ 9.8 million of remaining goodwill.

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.

The results of the goodwill impairment test as of September 30, 2019 indicated that the estimated fair values for each of the seven reporting units exceeded their respective carrying values.

The results of the annual goodwill impairment test as of September 27, 2020 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 September 27, 2020, the Company noted that the excess of fair value over the carrying value, was 218 %, 44 %, 160 %, 137 %, 59 %, 139 %, and 210 % for its reporting units;

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Based on the interim assessments as of December 26, 2020, 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-Lived Assets

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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 believes that the assumptions utilized in recording

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

its obligations under its plans are reasonable based on its experience, market conditions and input from its actuaries and investment advisors.

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

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Fiscal Year Ended December 26, 2020

(in thousands)

(in thousands) Electronics

Segment Automotive

Segment Industrial

Electronics – Semiconductor $ 522,352 $ — $ — $ 522,352

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Industrial Products — — 112,169 112,169

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total $ 937,762 $ 395,764 $ 112,169 $ 1,445,695

Fiscal Year Ended December 28, 2019

(in thousands)

(in thousands) Electronics

Segment Automotive

Segment Industrial

Electronics – Semiconductor $ 539,820 $ — $ — $ 539,820

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Industrial Products — — 114,260 114,260

Total $ 961,080 $ 428,533 $ 114,260 $ 1,503,873

During the fourth quarter of 2020, the Company transferred a business previously reported within the Electronics-Semiconductor reporting unit to the Electronics-Passive Products and Sensors reporting units.

This transfer aligns with how this business will be managed and is complimentary with existing electronics passive products and sensors and markets into which they sell.

The 2019 disaggregated revenue table has been reclassified to reflect this change.

This transfer had no impact to the Electronics segment results.

See Note 16, Segment Information, for net sales by segment and countries.

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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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue and Billing

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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

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Sales revenue and cost of sales are reduced to anticipate estimated returns.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Volume Rebates

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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.

The Company currently measures the expected credit losses based on our historical credit loss experience.

The Company has not experienced significant recent or historical credit losses and is not forecasting any significant credit losses which would require adjustments to our methodology.

If current conditions and supportable forecasts indicate that our historical loss experience is not reasonable and no longer supportable, the Company may adjust its historical credit loss experience and to reflect these conditions and forecasts.

The Company regularly analyzes its significant customer accounts and, when the Company becomes aware of a 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 analyzes 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 historical collection and loss 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.

As of December 26, 2020 and December 28, 2019, the Company’s allowance for doubtful accounts was $ 1.4 million and $ 1.3 million, respectively.

Additionally, the Company had less than $ 1.0 million of trade receivables greater than 90 days past due as of December 26, 2020 and December 28, 2019, respectively.

Advertising Costs

The Company expenses advertising costs as incurred, which amounted to $ 2.1 million , $ 2.7 million, and $ 2.8 million in fiscal years 2020, 2019 and 2018, respectively, and are included as a component of selling, general, and administrative expenses.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Shipping and Handling Fees and Costs

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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 loss of $ 5.2 million in fiscal year 2019 , a gain of $ 0.9 million in fiscal year 2018 , and a loss of $ 2.4 million in fiscal year 2017 .

Adjustments from the translation process are recognized in “Shareholders’ equity” as a component of “Accumulated other comprehensive income/ (loss).”

Adjustments from the translation process are recognized in “Shareholders’ equity” as a component of “Accumulated other comprehensive income/ (loss).” The amount of foreign currency gain or loss from remeasurement recognized in the income statement was a gain of $ 14.9 million in fiscal year 2020, a loss of $ 5.2 million in fiscal year 2019, and a gain of $ 0.9 million in fiscal year 2018.

Stock-Based Compensation

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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).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company accounts for income taxes using the liability method.

The Company accounts for income taxes using the asset and 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.

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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.

The tax benefits

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Among other things, the Tax Act reduced the U.S.

corporate federal income tax rate from 35% to 21%, added base broadening provisions which limit deductions and address excessive international tax planning, imposed a one-time tax (the “Toll Charge”) on accumulated earnings of certain non-U.S.

subsidiaries and enabled 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 the fourth quarter of 2018, within the measurement period outlined in SEC SAB No.

118, the Company finalized its estimates of the impact of the Tax Act 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 fiscal years ended December 28, 2019 and 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.

The Company has elected to pay the 2017 Littelfuse Toll Charge over the eight-year period prescribed by the Tax Act.

The Company elected to pay the 2017 Littelfuse Toll Charge over the eight-year period prescribed by the Tax Act.

The long-term portion of this Toll Charge which remains payable as of December 26, 2020, totaling $ 20.8 million, is included in Other long-term liabilities, and the anticipated 2021 annual installment payment of $ 3.0 million is included in Accrued income taxes , on the Consolidated Balance Sheet as of December 26, 2020.

The Company did not elect to pay the 2018 IXYS Toll Charge over the eight year period provided by the Tax Act and therefore there is no long-term portion of this Toll Charge which remains payable as of December 28, 2019.

The Company did not elect to pay the 2018 IXYS Toll Charge over the eight year period provided by the Tax Act and therefore there is no 2018 IXYS Toll Charge which remains payable as of December 26, 2020.

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 fiscal years ended December 28, 2019 and December 29, 2018 , deferred taxes were computed

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 incom e tax expense.

Thus, for the fiscal years ended December 26, 2020, December 28, 2019, and 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 .

Fair Value Measurements

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Recently Adopted Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02, "Leases" (Topic 842), ("ASC 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 Company adopted the standard on December 30, 2018 using the alternative modified retrospective transition method provided in ASU No.

2018-11, "Leases (Topic 842):

Target Improvements." Under this method, the Company recorded a cumulative-effect adjustment as of December 30, 2018 and did not record any retrospective adjustments to comparative periods to reflect the adoption of ASC 842.

The new standard provides a number of optional practical expedients in transition.

The Company has elected the ‘package of practical expedients’ which permits us 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.

Adoption of ASC 842 resulted in the recognition of operating lease right-of-use assets ("ROU") net of deferred rent of $ 26.1 million and lease liabilities of $ 29.4 million , as of December 30, 2018 for operating leases on its Consolidated Balance Sheets, with no impact to the Company's Consolidated Statements of Net Income and Consolidated Statements of Cash Flow.

See Note 7, Lease Commitments, for further discussion.

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.

The Company adopted the new standard on December 30, 2018.

The adoption of this guidance did not have a material effect on the Company's Consolidated Financial Statements.

In January 2018, the FASB released guidance on the accounting for the GILTI provisions of the 2017 U.S.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 consolidated Statements of Net 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.

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 fiscal year 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.

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 June 2016, the FASB issued ASU 2016- 13, “Financial Instruments- Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” The standard modifies the measurement approach for credit losses on financial instruments, including trade receivables, from an incurred loss method to a current expected credit loss method (“CECL”).

The standard requires the measurement of expected credit losses to be based on relevant information, including historical experience, current conditions and a forecast that is supportable.

The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years;

early adoption is permitted.

The standard must be adopted by applying a cumulative adjustment to retained earnings.

The Company anticipates adopting the standard in the first quarter of 2020, although it does not expect a material impact to the Company’s 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.

In August 2018, the Financial Accounting Standards Board (“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.

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Additional disclosures include descriptions of significant gains and losses affecting the benefit obligation for the period.

This guidance is effective for financial statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 the Company's Consolidated Financial Statements.

issued for fiscal years ending after December 15, 2020.

The Company adopted the standard as of December 26, 2020.

The adoption of this guidance did not have a material effect on the Company's Consolidated Financial Statements.

In March 2020, the FASB issued Accounting Standards Update (“ASU”) No.

2020-04 Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The objective of this is to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting due to the cessation of the London Interbank Offered Rate (LIBOR).

The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022.

The adoption of this guidance did not have a material effect on the Company's Consolidated Financial Statements.

In August 2018, the FASB issued ASU No.

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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 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.

The Company adopted the new standard on December 29, 2019.

The adoption of ASU 2018-15 did not have a material impact 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 Requirement for Fair Value Measurement." ASU 2018-13 modifies 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 new standard removes certain disclosures, modifies other disclosures and adds additional disclosures related to fair value measurement.

The Company adopted the new standard on December 29, 2019.

The adoption of ASU 2018-13 did not have a material impact on our Consolidated Financial Statements.

In June 2016, the FASB issued ASU No.

2016-13, "Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments." The standard, including subsequently issued amendments (ASU 2019-11 and ASU 2019-04), modifies the measurement approach for credit losses on financial instruments, including trade receivables, from an incurred loss method to a current expected credit loss method ("CECL").

The standard requires the measurement of expected credit losses to be based on relevant information, including historical experiences, current conditions and a forecast that is supportable.

The Company adopted the new standard on December 29, 2019.

The adoption of the standard did not have a material effect on our Consolidated Financial Statements.

Recently Issued Accounting Standards

In December 2019, the FASB issued ASU No.

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The guidance is effective for fiscal years beginning after December 15, 2020 with early adoption permitted.

The Company is currently evaluating this guidance on its Consolidated Financial Statements, The Company does not expect material effect from the adoption of this guidance on the Company's Consolidated Financial Statements.

The Company does not expect material effect from the adoption of this guidance on the Company's Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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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.

IXYS had a broad customer base, serving more than 3,500 customers through its direct sales force and global distribution partners.

The acquisition of IXYS accelerated the Company’s growth across the power control market driven by IXYS’s extensive power semiconductor portfolio and technology expertise.

With IXYS, the Company was able to diversify and expand its presence within industrial electronics markets, leveraging the strong IXYS industrial OEM customer base.

The Company leveraged its power semiconductor portfolio in automotive markets to expand 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:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

Purchase Price

(in thousands) Purchase Price

Total purchase consideration:

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Intangible assets 212,720

Goodwill 382,360

Other non-current assets 28,706

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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.

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These costs were reflected as other non-segment costs.

2017 Acquisitions

On July 7, 2017, the Company acquired the assets of U.S.

Sensor Corporation (“U.S.

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.

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:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

Purchase Price Allocation

Total purchase consideration:

Allocation of consideration to assets acquired and liabilities assumed:

Current assets, net

Patented and unpatented technologies

Trademarks and tradenames

Non-compete agreement

Customer relationships

Current liabilities

Included in U.S.

Sensor’s current assets, net was approximately $ 1.5 million of receivables.

Sensor goodwill, other assets and liabilities were recorded in the Electronics segment and reflected in the U.S.

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.

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 Statements of Net Income would not have been material.

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)

Purchase Price

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

Current liabilities

Other non-current liabilities

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 U.S.

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.

Pro Forma Results

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Year Ended

(in thousands, except per share amounts)

(in thousands, except per share amounts) December 29,

Net sales $ 1,735,181

Income before income taxes 272,724

Net income 215,228

Net income per share — basic 8.61

Net income per share — diluted 8.53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pro forma results presented above primarily reflect the following adjustments:

For the Fiscal Year Ended

(in thousands)

(in thousands) December 29,

Amortization (a)

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Stock compensation (d)

Interest expense (e)

Income tax impact of above items ( 15,446 )

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 is 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.

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 .

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 .

(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 is fully amortized in the fiscal 2017 for pro forma results.

(b) The transaction cost adjustments reflect the reversal of certain bank and attorney fees from the twelve months ended December 29, 2018.

(c) The amortization of inventory step-up adjustment reflects the reversal of the amount recognized during the twelve months ended December 29, 2018.

The inventory step-up was amortized over five months as the inventory was sold.

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.

The interest expense adjustment reflects incremental interest expense related to the financing of the transaction.

For the fiscal year ended December 28, 2019, the Company recorded $ 2.7 million of acquisition-related expenses associated with contemplated acquisitions within Selling, general and administrative expenses in the Consolidated Statements of Net Income.

(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.

For the fiscal year ended December 26, 2020 and December 28, 2019, the Company recorded $ 0.8 million and $ 2.7 million of acquisition-related expenses associated with contemplated acquisitions within Selling, general and administrative expenses in the Consolidated Statements of Net Income.

The components of inventories at December 26, 2020 and December 28, 2019 are as follows:

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Inventory reserves ( 34,816 ) ( 34,174 )

Total $ 258,002 $ 237,507

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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(in thousands) 2020 2019

Land $ 22,851 $ 24,758

Building 123,497 108,501

Equipment 678,220 631,273

Accumulated depreciation and amortization ( 480,390 ) ( 419,915 )

Total $ 344,178 $ 344,617

The Company recorded depreciation expense of $ 56.1 million, $ 52.5 million, and $ 51.0 million for the fiscal years ended December 26, 2020, December 28, 2019, and December 29, 2018, respectively.

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The amounts for goodwill and changes in the carrying value by segment are as follows:

(in thousands)

As of December 30, 2017

Additions (a)

(in thousands) Electronics Automotive Industrial Total

Gross goodwill as of December 29, 2018 $ 656,039 $ 132,332 $ 46,830 $ 835,201

Accumulated impairment losses as of December 29, 2018 — — ( 8,486 ) ( 8,486 )

Net goodwill as of December 29, 2018 $ 656,039 $ 132,332 $ 38,344 $ 826,715

Changes during 2019:

Foreign currency translation adjustments ( 5,243 ) ( 1,011 ) 128 ( 6,126 )

As of December 29, 2018

Gross goodwill as of December 28, 2019 650,796 131,321 47,266 829,383

Accumulated impairment losses as of December 28, 2019 — — ( 8,794 ) ( 8,794 )

Net goodwill as of December 28, 2019 $ 650,796 $ 131,321 $ 38,472 $ 820,589

Changes during 2020:

Impairments — ( 33,841 ) — ( 33,841 )

Foreign currency translation adjustments 25,529 4,451 84 30,064

As of December 28, 2019

(a) The 2018 additions resulted primarily from the acquisition of IXYS.

Gross goodwill as of December 26, 2020 676,325 138,354 47,551 862,230

Accumulated impairment losses as of December 26, 2020 — ( 36,423 ) ( 8,995 ) ( 45,418 )

Net goodwill as of December 26, 2020 $ 676,325 $ 101,931 $ 38,556 $ 816,812

The Company tests its goodwill annually 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.

These lower future expectations were driven by projected extended declines in end market demand due to the COVID-19 pandemic.

In addition, during the second quarter of 2020, certain customers notified the Company of their decision to delay future programs along with a customer canceling their existing program.

The goodwill impairment charge was determined using Level 3 inputs, including discounted cash flow analysis and comparable marketplace fair value data.

As of December 26, 2020, the automotive sensors reporting unit had $ 9.8 million of remaining goodwill.

The components of intangible assets at December 26, 2020 and December 28, 2019 are as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 26, 2020

(in thousands)

(in thousands) Gross

Land use rights $ 10,280 $ 2,007 $ 8,273

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Customer relationships, trademarks, and tradenames 372,064 137,722 234,342

Total $ 563,464 $ 271,577 $ 291,887

As of December 28, 2019

(in thousands)

(in thousands) Gross

Land use rights $ 9,649 $ 1,730 $ 7,919

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Customer relationships, trademarks, and tradenames 360,534 106,618 253,916

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total $ 544,586 $ 223,339 $ 321,247

During the year ended December 29, 2018, the Company recorded additions to other intangible assets of $ 212.7 million, for acquisitions during 2018, the components of which were as follows:

(in thousands, except weighted average useful life)

Weighted Average

Useful Life (Years)

(in thousands, except weighted average useful life) Weighted Average

Useful Life (Years) Amount

Patents, licenses and software 8.0 $ 51,500

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Order backlog 1.0 12,420

Total $ 212,720

For intangible assets with definite lives, the Company recorded amortization expense of $ 40.0 million, $ 40.0 million, and $ 52.2 million in 2020, 2019, and 2018, respectively.

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(in thousands)

2021 $ 38,858

2026 and thereafter 122,089

Total $ 291,887

Accrued Liabilities

The components of accrued liabilities at December 26, 2020 and December 28, 2019 are as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands) 2020 2019

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Operating lease liability 6,811 7,259

Interest 4,517 5,058

Restructuring liability 4,195 2,679

Other customer reserves 3,858 1,143

Professional services 3,321 3,986

Restructuring liabilities

Deferred revenue 2,959 828

Current benefit liability 2,751 1,106

Other non-income taxes 2,126 1,940

Accrued share repurchases

Other 29,251 19,347

Total $ 110,478 $ 84,120

Employee-related liabilities consist primarily of payroll, sales commission, bonus, employee benefit accruals and workers’ compensation.

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Other accrued liabilities include miscellaneous operating accruals and other client-related liabilities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lease Commitments

Under ASC 842, a contract contains a lease if there is an identified asset and the Company has the right to control the asset.

The Company determines whether a contract contains a lease at contract inception.

The Company leases office and production space under various non-cancellable operating leases that expire no later than 2025.

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The lease agreements do not contain any material residual value guarantee or material restrictive covenants.

The Company has elected to use the available practical expedient to account for the lease and non-lease components of its leases as a single component.

As the Company elected not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities.

The Company does not have a published credit rating because it has no publicly traded debt;

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Short-term lease expenses are recognized on a straight-line basis over the lease term.

The following table presents the classification of ROU assets and lease liabilities as of December 28, 2019 :

(in thousands)

Consolidated Balance Sheet Classification

December 28, 2019

Operating ROU assets

Right of use lease assets, net

Current operating lease liabilities

Accrued liabilities

Non-current operating lease liabilities

The following table presents the classification of ROU assets and lease liabilities as of December 26, 2020 and December 28, 2019:

(in thousands) Consolidated Balance Sheet Classification December 26, 2020 December 28, 2019

Operating ROU assets Right of use assets, net $ 17,615 $ 21,918

Current operating lease liabilities Accrued liabilities $ 6,811 $ 7,259

Non-current operating lease liabilities Non-current operating lease liabilities 12,950 17,166

Total lease liabilities $ 19,761 $ 24,425

The following table represents the lease costs for 2019:

(in thousands)

Consolidated Statements of Net Income Classification

Fiscal Year Ended December 28, 2019

Short-term lease expenses

Cost of sales, SG&A expenses

Variable lease expenses

Cost of sales, SG&A expenses

Operating lease rent expenses

Cost of sales, SG&A expenses

Total operating lease costs

Cost of sales, SG&A expenses

The following table represents the lease costs for 2020 and 2019:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands) Consolidated Statements of Net Income Classification Fiscal Year Ended December 26, 2020 Fiscal Year Ended December 28, 2019

Short-term lease expenses Cost of sales, SG&A expenses $ 512 $ 562

Variable lease expenses Cost of sales, SG&A expenses 1,307 916

Operating lease rent expenses Cost of sales, SG&A expenses 8,591 8,664

Total operating lease costs Cost of sales, SG&A expenses $ 10,410 $ 10,142

The Company leases certain office and warehouse space as well as certain machinery and equipment under non-cancellable operating leases.

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Maturity of Lease Liabilities as of December 26, 2020

(in thousands)

Operating leases

(in thousands) Operating leases

2026 and thereafter 302

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Present value of lease liabilities $ 19,761

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating Lease Term and Discount Rate

Fiscal Year Ended December 28, 2019

Operating Lease Term and Discount Rate Fiscal Year Ended December 26, 2020 Fiscal Year Ended December 28, 2019

Weighted-average remaining lease term (years) 3.41 4.05

Weighted-average discount rate 5.06 % 5.11 %

Other Information

(in thousands)

Fiscal Year Ended December 28, 2019

Cash Flow Information related to Leases

(in thousands) Fiscal Year Ended December 26, 2020

Cash paid for amounts included in the measurement of lease liabilities

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Leased assets obtained in exchange for operating lease liabilities 2,862

Under ASC 840, 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)

Fiscal Year Ended

December 29, 2018

2024 and thereafter

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restructuring, Impairment and Other Charges

1 unchanged sentence

Fiscal Year Ended December 26, 2020

(in thousands)

(in thousands) Electronics Automotive Industrial Total

Employee terminations $ 2,540 $ 682 $ 2,231 $ 5,453

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Total restructuring charges 2,540 857 2,241 5,638

Impairment — 33,841 2,237 36,078

Total $ 2,540 $ 34,698 $ 4,478 $ 41,716

Fiscal Year Ended December 28, 2019

(in thousands)

(in thousands) Electronics Automotive Industrial Total

Employee terminations $ 5,313 $ 4,251 $ 795 $ 10,359

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Total restructuring charges 5,501 5,965 1,245 12,711

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment — 322 — 322

Total $ 5,501 $ 6,287 $ 1,245 $ 13,033

Fiscal Year Ended December 29, 2018

(in thousands)

(in thousands) Electronics Automotive Industrial Total

Employee terminations $ 8,742 $ 634 $ 127 $ 9,503

1 unchanged sentence

Total restructuring charges 9,412 826 127 10,365

Impairment — 88 2,130 2,218

Total $ 9,412 $ 914 $ 2,257 $ 12,583

For the year ended December 26, 2020, the Company recorded total restructuring charges of $ 5.6 million, primarily for employee termination costs.

These charges primarily related to the reorganization of certain manufacturing, selling and administrative functions across all segments and the previously announced consolidation of a manufacturing facility within the Industrial segment.

The Company also recognized $ 36.1 million of impairment charges, which included a $ 33.8 million goodwill impairment charge associated with the automotive sensors reporting unit within the Automotive segment in the second quarter of 2020 and a $ 2.2 million impairment charge related to the land and building associated with the Company’s previously announced consolidation of a manufacturing facility within the Industrial segment in the first quarter of 2020.

See Note 5, Goodwill and Other Intangible Assets for further discussion regarding the goodwill impairment charge.

For the year ended December 28, 2019, the Company recorded total restructuring charges of $ 12.7 million for employee termination costs and other restructuring charges.

4 unchanged sentences

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.

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.

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.

The restructuring reserves as of December 26, 2020 and December 28, 2019 are $ 4.2 million and $ 2.7 million, respectively.

4 unchanged sentences

(in thousands)

Revolving Credit Facility $ 130,000 $ —

Term Loan — 145,000

Euro Senior Notes, Series A due 2023 142,679 129,808

4 unchanged sentences

Senior Notes, Series B due 2030 125,000 125,000

Other 2,619 2,619

Unamortized debt issuance costs ( 4,114 ) ( 3,669 )

Total debt 687,034 679,158

Current maturities — ( 10,000 )

Total long-term debt $ 687,034 $ 669,158

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Interest paid on all Company debt was approximately $ 20.1 million, $ 21.2 million, and $ 18.5 million in fiscal year 2020, 2019, and 2018, respectively.

Revolving Credit Facility / Term Loan

6 unchanged sentences

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 quarterly) through maturity, with the remaining balance due on October 13, 2022.

The Company paid $ 10.0 million of principal payments on the Term Loan for the fiscal year ended December 28, 2019 .

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.

For the Term Loan, the Company was required to make quarterly principal payments of 1.25 % of the original term loan ($ 2.5 million quarterly) through maturity, with the remaining balance due on October 13, 2022.

The Company paid $ 5.0 million of principal payments on the term loan before the Company amended the Credit Agreement on April 3, 2020 as discussed below.

On March 25, 2020, the company borrowed $ 100.0 million from the revolving credit facility to preserve financial flexibility and enhance liquidity, given the increasing levels of uncertainty related to COVID-19.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On April 3, 2020, the Company amended the Credit Agreement to effect certain changes, including, among others:

(i) eliminating the $ 200.0 million unsecured term loan credit facility, the remaining outstanding balance ($ 140.0 million) of which was repaid in full on April 3, 2020 through the revolving credit facility;

(ii) making certain financial and non-financial covenants less restrictive on the Company;

(iii) modifying performance-based interest rate margins and undrawn fees;

and (iv) extending the maturity date to April 3, 2025.

The amended Credit Agreement also allows the Company to increase the size of the revolving credit facility or enter into one or more tranches of term loans if there is no event of default and the Company is in compliance with certain financial covenants.

The Company made payments of $ 110.0 million on the amended revolving credit facility during the fiscal year ended December 26, 2020.

The balance under the facility was $ 130.0 million as of December 26, 2020.

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 1.25 % to 2.00 %, or at the bank’s Base Rate, as defined, plus 0.25 % to 1.00 %, based upon the Company’s Consolidated Leverage Ratio, as defined in the agreement.

The Company was also required to pay commitment fees on unused portions of the credit agreement ranging from 0.125 % to 0.20 %, 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.

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Senior Notes due 2025 and 2030 will be payable on February 15 and August 15, commencing on August 15, 2018.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Senior Notes have not been registered under the Securities Act, or applicable state securities laws.

4 unchanged sentences

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.

Interest paid on all Company debt was approximately $21.2 million , $ 18.5 million , and $ 10.6 million in fiscal year ended 2019, 2018, and 2017, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

During fiscal year 2020, the Company paid debt issuance costs of $ 1.8 million in relation to the amended the Credit Agreement on April 3, 2020 which, along with the remaining balance of debt issuance costs of the previous credit facility, are being amortized over the life of the amended Credit Agreement.

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 during fiscal year 2018.

Debt Maturities

2 unchanged sentences

2026 and thereafter 340,850

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Assets and Liabilities

12 unchanged sentences

Such securities are further detailed in Note 1, Summary of Significant Accounting Policies and Other Information .

Other Investments

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has certain convertible debt and convertible preferred stock investments that are accounted for under the cost method reflected in Investments and Other assets in the Consolidated Balance Sheets.

During the fiscal year ended December 28, 2019, the Company recorded impairment charges of $ 7.3 million in Other Expense (income), net in the Consolidated Statements of Net Income to adjust these certain investments to their estimated fair value of $ 0.4 million .

The fair value of these investments are measured on a nonrecurring basis and determined to be Level 3 under the fair value hierarchy.

During the fiscal year ended December 26, 2020 and December 28, 2019, the Company recorded impairment charges of $ 0.1 million and $ 7.3 million, respectively, in Other income, net in the Consolidated Statements of Net Income to adjust these certain investments to their estimated fair value.

As of December 26, 2020 and December 28, 2019, the balances of these investments were $ 0.5 million and $ 0.4 million, respectively.

The fair value of these investments are measured on a nonrecurring basis using Level 3 inputs under the fair value hierarchy.

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.

1 unchanged sentence

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.

Foreign currency exchange forward contract

There were no changes during 2020 to the Company’s valuation techniques used to measure asset and liability fair values on a recurring basis.

1 unchanged sentence

The foreign currency contract was not designated as a hedge instrument and was marked to market on a monthly basis.

The loss of $ 0.2 million associated with the change in fair values of the foreign currency exchange forward contract was recognized in Other income , net in the Consolidated Statements of Net Income along with a $ 0.2 million liability recorded in Accrued Liabilities on the Consolidated Balance Sheets.

The notional value of the forward contracts at December 28, 2019 was $ 16.0 million and expires on May 5, 2020.

The Company does not use derivative financial instruments for trading or speculative purposes.

The fair values of the foreign currency forward contract was determined to be Level 2 under the fair value hierarchy and is valued using market exchange rates.

As of December 29, 2018 , the Company held no non-financial assets or liabilities that are required to be measured at fair value on a recurring basis.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The notional value of the forward contracts at December 28, 2019 was $ 16.0 million and expired on May 5, 2020.

On March 23, 2020, the Company unwound the foreign currency exchange forward contract entered on October 30, 2019 and recognized a gain of $ 0.2 million within Other income, net during the fiscal year 2020.

The fair value of the foreign currency forward contract was valued using market exchange rates and classified as a Level 2 input under the fair value hierarchy.

As of December 26, 2020 and December 28, 2019, 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 26, 2020:

1 unchanged sentence

(in thousands)

Quoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total

Cash Equivalents $ 73,461 $ — $ — $ 73,461

Investments in equity securities 19,186 — — 19,186

Mutual funds 13,249 — — 13,249

$ 105,896 $ — $ — $ 105,896

The following table presents assets measured at fair value by classification within the fair value hierarchy as of December 28, 2019:

1 unchanged sentence

(in thousands)

Quoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total

Cash Equivalents $ 118,999 $ — $ — $ 118,999

Investments in equity securities 12,969 — — 12,969

Mutual funds 10,464 — — 10,464

$ 142,432 $ — $ — $ 142,432

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

3 unchanged sentences

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 26, 2020 and December 28, 2019 were as follows:

December 28, 2019

December 29, 2018

December 26, 2020 December 28, 2019

(in thousands)

Value Estimated

Fair Value Carrying

Value Estimated

Euro Senior Notes, Series A due 2023 $ 142,679 $ 144,323 $ 129,808 $ 131,710

4 unchanged sentences

USD Senior Notes, Series B due 2030 125,000 138,036 125,000 127,701

The Company recognized impairment charges of $ 1.9 million for the land and building and $ 0.3 million for a certain patent as a result of the Company’s announcement to consolidate a manufacturing facility within the Industrial segment during the first quarter of 2020.

See Note 8, Restructuring, Impairment and Other Charges, for further discussion.

The fair value of the land and building was valued using a real estate appraisal and classified as a Level 3 input under the fair value hierarchy.

The second quarter of 2020 goodwill impairment charge was the result of measuring a reporting unit at fair value on a nonrecurring basis as shown below:

Fiscal Year Ended December 26, 2020 December 26, 2020

(in thousands) Impairment Charge Estimated Fair Value Measurement (Level 3) Carrying Value

Goodwill $ 33,841 $ 8,953 $ 9,832

See Note 5, Goodwill and Other Intangible Assets for further discussion regarding goodwill impairment charges.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Benefit Plans

The Company has Company-sponsored defined benefit pension plans covering employees in the United Kingdom ("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.

The Company has Company-sponsored and mandatory defined benefit pension plans covering employees in the United Kingdom ("U.K."), Germany, the Philippines, China, Japan, Mexico, Italy and France.

The amount of the retirement benefits provided under the plans is generally based on years of service and final average pay.

On April 7, 2020, the Company entered into a definitive agreement to purchase a group annuity contract, under which an insurance company will be required to directly pay and administer pension payments to certain of the Company’s U.K.

pension plan participants, or their designated beneficiaries.

The purchase of this group annuity contract will reduce the Company’s outstanding pension benefit obligation by approximately $ 55 million, representing approximately 37 % of the total obligations of the Company’s qualified pension plans, and will be funded with pension plan assets and additional cash on hand.

In connection with this transaction, the Company will record a one-time non-cash settlement charge in the second half of 2021 currently estimated between $ 18 million and $ 22 million, reflecting the accelerated recognition of unamortized actuarial losses in the plan.

The actual settlement charge could differ from this estimate due to final data and plan wind-up expenses.

Due to the signing of the group annuity contract being a significant change in one of the U.K.

pension plans, the liabilities of the plan were remeasured as of April 6, 2020 resulting in an increase of $ 13.4 million (£ 10.9 million) to both the net pension liability to bring the pension benefit obligation to the purchase price of the group annuity contract, and unamortized actuarial loss within other comprehensive income (loss) during the second quarter.

Additionally, the Company made a cash contribution of $ 10.4 million (£ 8.4 million) under this agreement during the second quarter.

Benefit plan related information is as follows for the years 2020 and 2019:

2 unchanged sentences

Benefit obligation at beginning of year $ 116,921 $ 102,833

Service cost 2,462 2,040

Interest cost 2,173 3,169

Net actuarial gain/(loss)

Benefits paid from the trust

Net actuarial loss 25,306 11,286

Benefits paid from the plan assets ( 2,808 ) ( 3,323 )

Benefits paid directly by the Company ( 2,302 ) ( 1,540 )

Curtailments and Settlements 102 ( 1,924 )

Effect of exchange rate movements 7,462 1,735

5 unchanged sentences

Employer contributions 12,918 2,233

Benefits paid

Benefits paid from the plan assets ( 2,808 ) ( 3,323 )

Settlements — ( 1,072 )

Effect of exchange rate movements 4,813 1,766

2 unchanged sentences

Amounts recognized in the Consolidated Balance Sheets as of December 26, 2020 and December 28, 2019 consist of the following:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

5 unchanged sentences

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 periodic benefit costs as of December 26, 2020 and December 28, 2019 were as following:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

1 unchanged sentence

Prior service cost 3,937 4,273

The estimated net actuarial loss and prior service cost which will be amortized from accumulated other comprehensive income (loss) into benefit cost in 2020 is approximately $ 0.4 million and $ 0.2 million , respectively.

Total $ 41,222 $ 19,908

The pre-tax amounts recognized in other comprehensive income (loss) in 2020 as components of net periodic benefit costs were as follows:

6 unchanged sentences

Net actuarial loss ( 19,861 )

Settlement loss

Net settlement loss 236

Foreign currency adjustments ( 1,298 )

Total $ ( 19,636 )

Due to the signing of the group annuity contract being a significant change in this U.K.

pension plan, the liabilities of the plan were remeasured as of April 6, 2020 resulting in an increase of $ 13.4 million to unamortized actuarial loss within other comprehensive income (loss).

In addition, the net actuarial loss and increase in benefit obligation arising during 2020 and 2019 were also impacted by lower discount rates in both 2020 and 2019 compared to previous years and changes in foreign exchange rates.

The components of net periodic benefits costs for the fiscal years 2020, 2019, and 2018 are as follows:

(in thousands)

2020 2019 2018

Components of net periodic benefit cost:

Service cost $ 2,462 $ 2,040 $ 2,266

Interest cost 2,173 3,169 3,104

2 unchanged sentences

Net periodic benefit cost 3,626 2,265 2,439

Settlement loss / curtailment (gain)

Net settlement loss 236 260 238

Total expense for the year $ 3,862 $ 2,525 $ 2,677

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Weighted average assumptions used to determine net periodic benefit cost for the fiscal years 2020, 2019, and 2018 are as follows:

2020 2019 2018

Discount rate 2.3 % 3.1 % 2.8 %

1 unchanged sentence

Compensation increase rate 4.7 % 4.6 % 5.0 %

The accumulated benefit obligation for the foreign plans was $ 111.3 million and $ 99.6 million at December 28, 2019 and December 29, 2018 , respectively.

The accumulated benefit obligation for the plans was $ 137.7 million and $ 111.3 million at December 26, 2020 and December 28, 2019, respectively.

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 26, 2020 and December 28, 2019:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

6 unchanged sentences

Weighted average assumptions used to determine benefit obligations as of December 26, 2020, December 28, 2019 and December 29, 2018 are as follows:

2020 2019 2018

Discount rate 1.2 % 2.3 % 3.1 %

1 unchanged sentence

Expected benefit payments to be paid to participants for the fiscal year ending are as follows:

(in thousands)

Expected Benefit Payments

(in thousands) Expected Benefit Payments

2026-2030 and thereafter 31,164

The Company expects to make approximately $ 2.3 million of contributions to the plans in 2020 .

The Company expects to make approximately $ 2.2 million of contributions to the plans and pay $ 3.8 million of benefits directly in 2021.

The Company also sponsors certain post-employment plans in foreign countries and other statutory benefit plans.

For the fiscal year ended December 28, 2019 , December 29, 2018 , and December 30, 2017 , the Company recorded $ 1.4 million , $ 1.8 million , $ 1.1 million expense, respectively, in Cost of Sales and Other expense (income), net within the Consolidated Statements of Net Income.

For the fiscal year ended December 26, 2020, December 28, 2019, and December 29, 2018, the Company recorded $ 2.0 million, $ 1.4 million, $ 1.8 million expense, respectively, in Cost of Sales and Other income, net within the Consolidated Statements of Net Income.

As of December 26, 2020 and December 28, 2019, the Company reported benefit liabilities of $ 3.5 million and $ 2.8 million for these plans, of which $ 1.2 million and $ 0.9 million was recorded in Accrued liabilities and $ 2.3 million and $ 1.9 million was recorded in Other long-term liabilities on the Consolidated Balance Sheets, respectively.

For fiscal year ended December 28, 2019, the pre-tax amounts recognized in other comprehensive income (loss) as components of net periodic benefit costs for these plans were $ 0.6 million .

For fiscal year ended December 26, 2020 and December 28, 2019, the pre-tax amounts recognized in other comprehensive income (loss) as components of net periodic benefit costs for these plans were $ 0.1 million and $ 0.6 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Defined Benefit Plan Assets

3 unchanged sentences

Asset Allocation

Equity securities

Debt securities

Cash and cash equivalents, and other 7 % 1 %

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Equity securities 9 % 27 %

Fixed income securities 31 % 72 %

Bulk annuity contract 53 % — %

The Company segregated its plan assets by the following major categories and level for determining their fair value as of December 26, 2020 and December 28, 2019.

3 unchanged sentences

The Company also invests in certain short-term investments which are valued using the amortized cost method and at NAV.

Lastly, the Company has certain pooled pension funds that have short-term investments with third party mutual funds that are valued at unit value per share at measurement date.

As such, these assets were classified as Level 2.

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.

The Company has certain pooled pension funds which have mutual funds with underlying investments in certain equity securities that are not quoted on active markets;

therefore, they were classified as Level 2.

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 has certain pooled pension funds which have mutual funds with underlying investments in fixed income securities and funds priced based on a valuation model rather than a last trade basis and are not exchange-traded.

As such, they were classified as Level 2.

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 or traded on an open market.

Insurance Contracts and other – This category includes pooled pension funds which have mutual funds with underlying investments in other assets and liabilities including alternatives priced based on a valuation model and are not exchange-traded.

These were classified as Level 2.

This category includes also insurance contracts that are valued by the re-insurer with the valuation inputs being not highly observable or 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.

Lastly, this category includes other assets and liabilities including futures or swaps valued at NAV.

Bulk Annuity Contract – Bulk annuity contract includes a U.K insurance policy issued by an authorized U.K.

life insurer.

This bulk annuity contract is valued by the re-insurer with the valuation inputs being not highly observable or traded on an open market.

Accordingly, this contract was categorized as Level 3.

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.

1 unchanged sentence

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 invests in 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the Company’s pension plan assets measured at fair value by classification within the fair value hierarchy as of December 26, 2020:

1 unchanged sentence

(in thousands)

Level 1 Level 2 Level 3 NAV Total

Insurance contracts and other $ — $ 1,880 $ 685 $ — $ 2,565

Cash and cash equivalents 654 3,868 — — 4,522

Equities 1,719 6,904 — — 8,623

Fixed income 6,164 19,433 — 6,078 31,675

Bulk annuity contract — — 53,093 — 53,093

Total pension plan assets $ 8,537 $ 32,085 $ 53,778 $ 6,078 $ 100,478

2 unchanged sentences

(in thousands)

Level 1 Level 2 Level 3 NAV Total

Equities $ 1,796 $ — $ — $ 19,139 $ 20,935

Fixed income 4,535 — — 51,711 56,246

Insurance contracts and other — — 609 147 756

1 unchanged sentence

Total pension plan assets $ 6,718 $ — $ 609 $ 71,175 $ 78,502

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value measurement of plan assets using significant unobservable inputs (Level 3) changed during 2020 due to the following:

(in thousands)

Balance at December 28, 2019 $ 609

Level 3 assets transferred in from Level 1 and 2 assets valued at NAV:

Bulk annuity contract added during the year 53,093

Actual return on plan assets 76

Balance at December 26, 2020 $ 53,778

Defined Contribution Plan

2 unchanged sentences

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 fiscal year ended December 26, 2020, December 28, 2019 and December 29, 2018.

Employees are immediately vested in their contributions plus actual earnings thereon, as well as the Company contributions.

Employees are immediately vested in their contributi ons plus actual earnings thereon, as well as the Company contributions.

Company matching contributions amounted to $ 4.6 million , $ 5.6 million, and $ 4.5 million in 2020, 2019, and 2018, respectively.

4 unchanged sentences

As of December 26, 2020, there was $ 13.2 million of marketable securities related to the plan included in Other assets and $ 13.2 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 2019 .

The marketable securities are classified as Level 1 under the fair value hierarchy as they are maintained in mutual funds with readily

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

determinable fair value.

The Company made matching contributions to the plan of $ 0.5 million, $ 0.4 million, and $ 0.4 million in 2020, 2019, and 2018, respectively.

Stock-Based Compensation

9 unchanged sentences

The following table provides a reconciliation of outstanding stock options for the fiscal year ended December 26, 2020.

Option Weighted

Price Weighted

Contract Life

(Years) Aggregate

Outstanding December 28, 2019 600,465 $ 131.32

Granted 297,954 152.86

Exercised ( 209,093 ) 104.18

Forfeited ( 22,377 ) 173.95

Outstanding December 26, 2020 666,949 148.01 5.1 $ 69,126

1 unchanged sentence

The following table provides a reconciliation of non-vested restricted share and share unit awards ("RSU") for the fiscal year ended December 26, 2020.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Weighted Average

Shares Weighted Average

Grant-Date Fair Value

Nonvested December 28, 2019 134,136 $ 185.86

Granted 115,349 130.14

Vested ( 68,550 ) 177.78

Forfeited ( 8,933 ) 175.38

Nonvested December 26, 2020 172,002 152.25

4 unchanged sentences

At December 26, 2020, the unrecognized compensation cost for options and restricted shares was $ 22.6 million before tax, and will be recognized over a weighted average period of 2.0 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 $ 19.9 million , $ 28.2 million , and $ 17.3 million for 2019 , 2018 , and 2017 , respectively.

The total related income tax benefit recognized in the Consolidated Statements of Net Income was $ 3.3 million , $ 6.0 million and $ 6.0 million for 2019 , 2018 , and 2017 , respectively.

Compensation cost included as a component of cost of sales, research and development and selling, general, and administrative expenses for all equity

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

compensation plans discussed above was $ 19.1 million, $ 19.9 million, and $ 28.2 million for 2020, 2019, and 2018, respectively.

The total related income tax benefit recognized in the Consolidated Statements of Net Income w as $ 3.1 million, $ 3.3 million and $ 6.0 million for 2020, 2019, and 2018, respectively.

The Company uses the Black-Scholes option valuation model to determine the fair value of stock option awards granted.

The weighted average fair value of and related assumptions for options granted are as follows:

2020 2019 2018

Weighted average fair value of options granted $ 38.09 $ 47.63 $ 45.19

12 unchanged sentences

Share Repurchase Program

On May 2, 2018, the Company announced that the Company’s Board of Directors had 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 ("2018 program").

On May 1, 2019, the Company announced that the Company's Board of Directors had authorized a new program to repurchase up to 1,000,000 shares of the Company's common stock for the period May 1, 2019 to April 30, 2020 ("2019 program").

During the fiscal year 2019, the Company repurchased 579,916 shares of its common stock totaling $ 95.0 million .

During the fiscal year 2018, the Company repurchased 391,972 shares of its common stock totaling $ 67.9 million .

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 ("2018 program").

On April 26, 2019, the Company's Board of Directors authorized to a program to repurchase up to 1,000,000 shares of the Company's common stock for the period May 1, 2019 to April 30, 2020 ("2019 program") to replace its previous expired 2018 program.

On April 23, 2020, the Company's Board of Directors authorized a new program to repurchase up to 1,000,000 shares of the Company's common stock for the period May 1, 2020 to April 30, 2021 (the "2020 program") to replace its previous expired 2019 program.

There are 1,000,000 shares remaining available for purchase under the 2020 program as of December 26, 2020.

During the fiscal year 2020, 2019, and 2018, the Company repurchased 175,110 , 579,916 , and 391,972 shares of its common stock totaling $ 22.9 million, $ 95.0 million, and $ 67.9 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

Fiscal Year Ended

December 28, 2019

December 29, 2018

December 30, 2017

(in thousands)

December 26, 2020 December 28, 2019 December 29, 2018

(in thousands) Pre-tax Tax Net of tax Pre-tax Tax Net of tax Pre-tax Tax Net of tax

Defined benefit pension plan and other adjustments $ ( 19,513 ) $ 3,418 $ ( 16,095 ) $ ( 9,149 ) $ 1,062 $ ( 8,087 ) $ 924 $ ( 47 ) $ 877

Unrealized loss on investments

Foreign currency translation adjustments (1) 34,707 ( 2,946 ) 31,761 ( 1,476 ) 664 ( 812 ) ( 25,338 ) — ( 25,338 )

Total change in other comprehensive (loss) income $ 15,194 $ 472 $ 15,666 $ ( 10,625 ) $ 1,726 $ ( 8,899 ) $ ( 24,414 ) $ ( 47 ) $ ( 24,461 )

(1) The tax shown above within the foreign currency translation adjustments is the U.S.

tax associated with the foreign currency translation adjustments of earnings of non-U.S.

subsidiaries which have been previously taxed in the U.S.

and are not permanently reinvested.

Accumulated Other Comprehensive Income (Loss) (“AOCI”) :

1 unchanged sentence

(in thousands)

Pension and postretirement liability and reclassification adjustments

Gain (loss) on investments

Foreign currency translation adjustments

Accumulated other comprehensive income (loss)

Pension and postretirement liability and reclassification adjustments Gain (loss) on investments Foreign currency translation adjustments Accumulated other comprehensive income (loss)

Balance at December 30, 2017 $ ( 10,836 ) $ 9,795 $ ( 62,627 ) $ ( 63,668 )

Cumulative effect adjustment (a)

— ( 9,795 ) — ( 9,795 )

2018 activity

877 — ( 25,338 ) ( 24,461 )

Balance at December 29, 2018 ( 9,959 ) — ( 87,965 ) ( 97,924 )

Cumulative effect adjustment (a)

2019 activity ( 8,087 ) — ( 812 ) ( 8,899 )

2 unchanged sentences

Balance at December 26, 2020 ( 34,141 ) — ( 57,016 ) ( 91,157 )

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.

(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.

Due to the signing of the group annuity contract being a significant change in the U.K.

pension plan, the liabilities of the plan were remeasured as of April 6, 2020 resulting in an increase of $ 13.4 million to unamortized actuarial loss within other comprehensive income (loss).

See Note 11, Benefits Plans for further discussion.

Amounts reclassified from accumulated other comprehensive income (loss) to earnings for fiscal years 2020, 2019, and 2018 were as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Year Ended

(in thousands)

December 28, 2019

December 29, 2018

December 30, 2017

(in thousands) December 26, 2020 December 28, 2019 December 29, 2018

Pension and postemployment and other plans:

Amortization of prior service, net actuarial loss, and other $ 1,694 $ 372 $ 291

Settlement loss/curtailment (gain)

Net settlement loss 236 260 238

Total $ 1,930 $ 632 $ 529

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.

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.

Among other things, the Tax Act reduced the U.S.

corporate federal income tax rate from 35% to 21%, added base broadening provisions which limit deductions and address excessive international tax planning, imposed a Toll Charge on accumulated earnings of certain non-U.S.

subsidiaries and enabled 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.

In the fourth quarter of 2018, within the measurement period outlined in SAB No.

In the fourth quarter of 2018, within the measurement period outlined in SEC SAB No.

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 fiscal years ended December 28, 2019 and 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.

The Company has elected to pay the 2017 Littelfuse Toll Charge over the eight-year period prescribed by the Tax Act.

The Company elected to pay the 2017 Littelfuse Toll Charge over the eight-year period prescribed by the Tax Act.

The long-term portion of this Toll Charge which remains payable as of December 26, 2020, totaling $ 20.8 million, is recorded in Other long-term liabilities, and the anticipated 2021 annual installment payment of $ 3.0 million is included in Accrued income taxes , on the Consolidated Balance Sheet as of December 26, 2020.

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 fiscal years ended December 28, 2019 and 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.

Thus, for the fiscal years ended December 26, 2020, December 28, 2019 and 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)

2020 2019 2018

Domestic $ ( 16,732 ) $ ( 11,970 ) $ ( 49,995 )

Foreign 177,985 177,854 254,937

Income before income taxes $ 161,253 $ 165,884 $ 204,942

2 unchanged sentences

(in thousands)

2020 2019 2018

Federal $ 437 $ ( 3,495 ) $ ( 3,193 )

State 203 834 119

Foreign 33,841 30,610 48,130

Subtotal 34,481 27,949 45,056

Federal and State ( 5,354 ) 1,839 ( 3,896 )

Foreign 2,140 ( 2,986 ) ( 783 )

Subtotal ( 3,214 ) ( 1,147 ) ( 4,679 )

Provision for income taxes $ 31,267 $ 26,802 $ 40,377

1 unchanged sentence

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.

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)

2020 2019 2018

Tax expense at statutory rate of 21% $ 33,863 $ 34,836 $ 43,038

income tax rate differential ( 19,730 ) ( 22,457 ) ( 20,472 )

losses and expenses with no tax benefit

Net impact associated with the GILTI tax provisions

Tax impact of non-deductible goodwill impairment charge 5,642 — —

Tax on unremitted earnings 3,955 2,136 4,660

Net impact associated with the GILTI tax provisions 3,731 6,469 5,075

losses and expenses with no tax benefit 2,774 6,570 3,107

Certain changes in unrecognized tax benefits and related accrued interest 2,160 ( 1,468 ) 208

1 unchanged sentence

Nondeductible professional fees 236 195 1,001

2017 Toll Charge (and 2018 adjustment)

Provisional Tax Act impact other than Toll Charge (and 2018 adjustment)

2017 Toll Charge (2018 adjustment) — — 2,278

Provisional Tax Act impact other than Toll Charge (2018 adjustment) — — 966

Other, net ( 780 ) ( 559 ) 1,754

Provision for income taxes $ 31,267 $ 26,802 $ 40,377

11 unchanged sentences

foreign tax credit carryforwards 772 1,320

Other 117 1,261

Gross deferred tax assets 75,029 51,691

2 unchanged sentences

Deferred tax liabilities:

Excess of book basis over the tax basis of assets

Excess of book basis over the tax basis for intangible assets and goodwill 76,472 71,229

Tax on unremitted earnings 14,223 12,968

Unrealized foreign currency exchange gains 5,719 —

Excess of book basis over the tax basis for property, plant, and equipment 4,394 3,231

Total deferred tax liabilities 100,808 87,428

Net deferred tax liabilities $ 38,910 $ 41,694

The deferred tax asset valuation allowance is related to certain net operating loss and non-U.S.

The deferred tax asset valuation allowance is related to certain non-U.S.

net operating loss and non-U.S.

interest expense carryforwards which are not expected to be realized.

The remaining net operating loss and non-U.S.

interest expense carryforwards either have no expiration date or are expected to be utilized prior to expiration (which begin expiring in 2021).

The remaining U.S.

net operating loss and non-U.S.

interest expense carryforwards either have no expiration date or are expected to be utilized prior to expiration.

No deferred tax asset nor valuation allowance has been recorded for certain U.S.

18 unchanged sentences

taxes will provide a U.S.

federal income tax benefit as a foreign tax credit, and the amounts as of December 28, 2019 and December 29, 2018 are net of such benefit (some of which, in respect of the year ended December 29, 2018, was recorded as part of finalizing the provisional reasonable estimate of the impact of the Tax Act).

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.

The tax holiday for two of these subsidiaries expired at the end of 2019 (one will seek an extension and the tax holiday benefits for the other was not material).

The tax holiday for the third subsidiary will expire at the end of 2020 and the Company plans to seek an extension.

federal income tax benefit as a foreign tax credit, and the amounts as of December 26, 2020 and December 28, 2019 are net of such benefit.

The Company has two subsidiaries in China which benefit from lowered income tax rates due to “tax holidays” which apply for three-year periods, subject to extension.

The tax holiday for one of these subsidiaries expired at the end of 2020, and it will seek an extension.

Such tax holidays contributed $ 4.1 million in tax benefits, or $ 0.17 per diluted share, during 2020.

Future year tax benefits will depend upon the Company’s ability to obtain extensions, and the level of income earned by the two applicable subsidiaries.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 26, 2020, December 28, 2019, and December 29, 2018 is as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

2 unchanged sentences

Additions for tax positions taken in the current year 1,305

Additions for tax positions related to the pre-acquisition periods of acquired subsidiaries

Decreases due to a lapse in the statute of limitations ( 2,758 )

4 unchanged sentences

The company recognizes accrued interest and penalties associated with uncertain tax positions as part of income tax expense.

The company recognized such interest expense of $ 1.3 million (net of a $ 0.6 million decrease due to a lapse in the statute of limitations), $ 1.5 million (net of a $ 0.3 million decrease due to a lapse in the statute of limitations), and $ 0.9 million in 2019 , 2018 , and 2017 , respectively.

The company recognized such interest expense of $ 1.6 million, $ 1.3 million (net of a $ 0.6 million decrease due to a lapse in the statute of limitations), and $ 1.5 million (net of a $ 0.3 million decrease due to a lapse in the statute of limitations) in 2020, 2019, and 2018, respectively.

Accrued interest for such matters included in Other long-term liabilities within the Consolidated Balance Sheets was $ 8.8 million and $ 7.2 million as of December 26, 2020 and December 28, 2019, respectively.

The amount of unrecognized tax benefits included in Other long-term liabilities within the Consolidated Balance Sheets was $ 17.4 million and 16.7 million as of December 26, 2020 and December 28, 2019, respectively.

The December 28, 2019 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 $ 0.1 million may be recognized in 2020 based upon the possible lapse in the statute of limitations.

The December 26, 2020 total represents the net amount of tax benefits that, if recognized, would favorably affect the effective tax rate in future periods.

Of this amount, only an insignificant amount may be recognized in 2021 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.

federal statute of limitations remains open for the Company for the 2016 tax year and later years, although the Company has been audited for the 2016 tax year and the audit concluded in 2018 with no significant adjustments.

federal statute of limitations remains open for IXYS pre-acquisition tax periods ending March 31, 2017 and January 17, 2018.

federal statute of limitations remains open for the Company for the 2017 tax year and later years.

federal statute of limitations remains open for the IXYS pre-acquisition tax period ending January 17, 2018.

state statutes of limitations generally range from three to seven years, although certain jurisdictions do not have a statute expiration.

tax examinations occur from time to time, including examinations currently in process in Italy, Canada, and Hong Kong.

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.

The Company has been informed that it will receive a notice of assessment from the Canadian tax authorities as a consequence of concluding their recent audit.

Although the exact amount of the assessment is not known, it is estimated to approximate $ 3 million.

The Company believes the assessment is in error and intends to appeal.

The Company does not expect to recognize a significant amount of additional tax expense upon conclusion of such appeal.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

(in thousands, except per share amounts)

2020 2019 2018

Net income as reported $ 129,986 $ 139,082 $ 164,565

Weighted average shares outstanding

Basic 24,371 24,576 24,870

Effect of dilutive securities 221 242 365

Diluted 24,592 24,818 25,235

Earnings Per Share:

1 unchanged sentence

Diluted earnings per share $ 5.29 $ 5.60 $ 6.52

Potential shares of common stock attributable to stock options excluded from the earnings per share calculation because their effect would be anti-dilutive were 129,658 , 42,305 , and 37,443 shares in 2019 , 2018 , and 2017 , respectively.

Potential shares of common stock attributable to stock options and restricted shares excluded from the earnings per share calculation because their effect would be anti-dilutive were 222,526 , 129,658 , and 42,305 shares in 2020, 2019, and 2018, 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.

During the fiscal year 2019, the Company repurchased 579,916 shares of its common stock totaling $ 95.0 million .

During the fiscal year 2018, the Company repurchased 391,972 shares of its common stock totaling $ 67.9 million .

See Note 12 Stock-Based Compensation for further discussion.

16 unchanged sentences

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 products such as discrete transient voltage suppressor (“TVS”) diodes, TVS diode arrays, protection and switching thyristors, metal-oxide-semiconductor field-effect transistors (“MOSFETs”) and silicon carbide diodes;

and insulated gate bipolar transistors (“IGBT”) technologies.

semiconductor products such as discrete transient voltage suppressor (“TVS”) diodes, TVS diode arrays, protection and switching thyristors, metal-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The segment covers a broad range of end markets, including industrial and automotive electronics, electric vehicle and related infrastructure, data and telecommunications, medical devices, alternative energy, consumer electronics and white goods.

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 motor drives and power conversion, automotive electronics, electric vehicle and related infrastructure, power supplies, data centers and telecommunications, medical devices, alternative energy, building and home automation, appliances, and mobile electronics.

• 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 end markets.

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.

Passenger car fuse products for internal combustion engine, 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 used in applications serving a number of end markets, including heavy truck, construction, agriculture and material handling.

Automotive sensor products include a wide range of automotive and commercial vehicle products designed to monitor the passenger compartment occupant's safety and environment as well as the vehicle’s powertrain.

• 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, electric vehicle infrastructure, non-residential construction, HVAC systems, elevators and other industrial equipment.

Consists of power fuses, protection relays and controls, temperature sensor and other circuit protection products for use in various industrial applications such as oil, gas, mining, renewables and energy storage, electric vehicle infrastructure, non-residential construction, HVAC systems, industrial safety, power conversion, elevators and other industrial equipment.

The Company has provided this segment information for all comparable prior periods.

1 unchanged sentence

(in thousands)

2020 2019 2018

Electronics $ 937,762 $ 961,080 $ 1,124,296

Automotive 395,764 428,533 479,791

Industrial 112,169 114,260 114,381

Total net sales $ 1,445,695 $ 1,503,873 $ 1,718,468

Depreciation and amortization

Electronics $ 62,702 $ 60,345 $ 61,779

Automotive 28,995 27,922 23,333

Industrial 4,481 4,236 5,661

Other — — 12,420

Total depreciation and amortization $ 96,178 $ 92,503 $ 103,193

Operating income (loss)

Electronics $ 152,695 $ 145,594 $ 241,426

Automotive 41,655 46,719 54,982

Industrial 11,996 22,407 17,335

( 43,974 ) ( 21,929 ) ( 88,694 )

Total operating income 162,372 192,791 225,049

4 unchanged sentences

(a) Included in “Other” Operating income (loss) for 2020 is $ 2.3 million of acquisition-related and integration charges related to the IXYS acquisition and other contemplated acquisitions.

In addition, there were $ 13.0 million of restructuring charges primarily related to employee termination costs.

In addition, there were $ 41.7 million of restructuring, impairment and other charges, primarily related to the goodwill impairment charge of $ 33.8 million recorded in the second quarter associated with the automotive sensors reporting unit within the Automotive segment, employee termination costs of $ 5.5 million, $ 2.2 million of impairment charges recorded in the first quarter associated with the announced consolidation of a

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

manufacturing facility within the Industrial segment and other restructuring charges of $ 0.2 million.

See Note 8, Restructuring, Impairment and Other Charges, for further discussion.

Included in “Other” Operating income (loss) for 2019 is $ 8.9 million of acquisition-related and integration charges related to the IXYS acquisition and other contemplated acquisitions.

In addition, there were $ 13.0 million of restructuring charges primarily related to employee termination costs.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and acquisition-related expenses for other contemplated acquisitions which included $ 2.2 million of impairment charges primarily related to the impairment of a building and a trade name associated with the exit of the Custom business within the Industrial segment.

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 administrative expenses (“SG&A”), and charges related to restructuring and production transfers in the Company’s Asia operations ( $ 2.2 million in SG&A).

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 $ 2.2 million of impairment charges primarily related to the impairment of a building and a trade name associated with the exit of the Custom business within the Industrial segment.

The Company’s net sales, long-lived assets and additions to long-lived assets by country for the fiscal years ended 2020, 2019, and 2018 are as follows:

(in thousands)

2020 2019 2018

United States $ 392,544 $ 440,461 $ 511,544

China 438,000 416,385 468,174

Other countries (a)

615,151 647,027 738,750

Total net sales $ 1,445,695 $ 1,503,873 $ 1,718,468

1 unchanged sentence

United States $ 46,132 $ 58,081 $ 58,691

China 85,876 88,306 95,806

Mexico 70,125 73,096 70,495

Germany 37,976 36,025 36,548

Philippines 66,994 51,738 32,459

Other countries 37,075 37,371 45,895

2 unchanged sentences

United States $ 4,170 $ 5,864 $ 5,567

China 10,074 10,400 29,286

Mexico 9,977 13,827 18,723

Germany 5,600 4,017 5,208

Philippines 19,612 22,944 7,605

Other countries 1,775 9,314 8,364

Total additions to long-lived assets $ 51,208 $ 66,366 $ 74,753

Each country included in other countries are less than 10% of net sales.

(a) Each country included in other countries are less than 10% of net sales.

For the year ended December 26, 2020, approximately 73 % of the Company’s net sales were to customers outside the United States (exports and foreign operations), including approximately 30 % to China.

3 unchanged sentences

(exports and foreign operations), including approximately 27 % to China.

Sales to Arrow Electronics, Inc., which were included in the Electronics, Automotive, and Industrial segments, were 10.7 % , 10.7 % , and 10.6 % of consolidated net sales in 2019 , 2018 , and 2017 respectively.

No other single customer accounted for more than 10% of net sales during the last three years.

Sales to Arrow Electronics, Inc., which were included in the Electronics, Automotive, and Industrial segments, were 10.4 %, 10.7 %, and 10.7 %

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of consolidated net sales in 2020, 2019, and 2018 respectively.

No other single customer accounted for more than 10% of net sales during the last three years.

Selected Quarterly Financial Data (Unaudited)

2 unchanged sentences

(in thousands, except per share data)

Net sales $ 400,696 $ 391,566 $ 307,337 $ 346,096 $ 338,523 $ 361,971 $ 397,879 $ 405,500

Gross profit (1) 138,083 138,831 99,902 124,356 113,735 132,708 144,308 155,544

Operating income 65,014 64,558 ( 11,950 ) 44,750 32,317 47,167 52,634 60,673

Net income 58,977 55,356 ( 8,991 ) 24,644 22,654 35,647 43,792 36,989

Net income per share

(a) In the fourth quarter of 2019 , the Company recorded $ 1.9 million in acquisition-related and integration costs and $ 2.1 million in restructuring, impairment and other costs, and $ 4.2 million impairment charges related to certain other investments, partially offset by a $ 3.3 million benefit for previously unrecognized tax benefits in respect of which the statute of limitation has expired.

(b) In the third quarter of 2019 , the Company recorded $ 3.2 million in acquisition-related and integration costs and $ 2.5 million in restructuring and impairment charge

(c) In the second quarter of 2019 , the Company recorded $ 5.7 million in restructuring and impairment charges, $ 1.5 million in acquisition-related and integration costs, and $ 0.4 million costs primarily related to a sale of building and $ 0.2 million impairment charges related to a certain other investment.

(d) In the first quarter of 2019 , the Company recorded $ 2.8 million impairment charges to certain other investments, $ 2.6 million loss on the disposal of a business, $ 2.7 million in restructuring costs, $ 2.4 million in acquisition-related and integration costs, and $ 0.3 million gain primarily related to the final payments for the acquisition of Monolith

(e) In the fourth quarter of 2018 , the Company recorded an estimated one-time tax charge of $ 3.2 million related to the 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.

(f) In the third quarter of 2018 , the Company recorded $ 5.2 million in restructuring and impairment charges, $ 3.1 million in backlog amortization expense from the IXYS acquisition and $ 2.9 million in acquisition-related and integration costs

(g) In the second quarter of 2018 , the Company recorded $ 19.0 million for purchase accounting inventory adjustments 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 $ 2.4 million in acquisition-related and integration costs.

(h) In the first quarter of 2018 , the Company recorded $ 17.9 million for purchase accounting inventory adjustments 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.

Basic $ 2.41 $ 2.27 $ ( 0.37 ) $ 1.01 $ 0.93 $ 1.46 $ 1.77 $ 1.50

Diluted $ 2.39 $ 2.25 $ ( 0.37 ) $ 1.00 $ 0.92 $ 1.44 $ 1.75 $ 1.48

(1) The prior year gross profit amounts have been reclassified to reflect a change in classification of certain costs presented on the Company’s Consolidated Statements of Income.

See Note 1, Summary of Significant Accounting Policies and Other Information for further information and this change had no impact on previously reported operating income and net income amounts.

(a) In the fourth quarter of 2020, the Company recorded $ 0.7 million in acquisition-related and integration costs and $ 0.8 million in restructuring, impairment and other charges.

(b) In the third quarter of 2020, the Company recorded $ 1.3 million in restructuring, impairment and other charges, $ 0.3 million in acquisition-related and integration costs, and $ 0.1 million of impairment charges on certain other investments.

(c) In the second quarter of 2020, the Company recorded a goodwill impairment charge of $ 33.8 million associated with the automotive sensors reporting unit within the Automotive segment, $ 1.8 million in employee termination costs and other restructuring charges, $ 1.8 million increase to coal mining reserve, $ 0.2 million charge for an asset retirement obligation related to the disposal of a business in 2019, and $ 0.1 million in acquisition-related and integration costs.

(d) In the first quarter of 2020, the Company recorded $ 4.0 million in restructuring, impairment and other charges and $ 1.2 million in acquisition-related and integration costs.

(e) In the fourth quarter of 2019, the Company recorded $ 1.9 million in acquisition-related and integration costs and $ 2.1 million in restructuring, impairment and other costs, and $ 4.2 million impairment charges related to certain other investments, partially offset by a $ 3.3 million benefit for previously unrecognized tax benefits in respect of which the statute of limitation has expired.

(f) In the third quarter of 2019, the Company recorded $ 3.2 million in acquisition-related and integration costs and $ 2.5 million in restructuring and impairment charges.

(g) In the second quarter of 2019, the Company recorded $ 5.7 million in restructuring and impairment charges, $ 1.5 million in acquisition-related and integration costs, and $ 0.4 million costs primarily related to a sale of building and $ 0.2 million impairment charges related to a certain other investment.

(h) In the first quarter of 2019, the Company recorded $ 2.8 million impairment charges to certain other investments, $ 2.6 million loss on the disposal of a business, $ 2.7 million in restructuring costs, $ 2.4 million in acquisition-related and integration costs, and $ 0.3 million gain primarily related to the final payments for the acquisition of Monolith.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12 unchanged sentences

Fiscal Year Ended

December 28, 2019

December 29, 2018

(in millions)

December 26, 2020 December 29, 2019

(in millions) Powersem EB Tech ATEC Powersem EB Tech ATEC

Sales to related party $ 1.5 $ — $ — $ 0.6 $ — $ —

Purchase material/service from related party 2.7 — 8.7 3.2 0.4 7.9

Account Receivable balance

Account Payable balance

Accounts receivable balance 0.1 — — — — —

Accounts payable balance $ 0.1 $ — $ 0.2 $ 0.2 $ — $ 0.1

Additionally, the Company has certain cost method investments in VTOOL Ltd.

and Securepush Ltd.

with a total book value of $ 0.4 million as of December 28, 2019 where one member of the Company’s Board of Directors is currently an investor and a director of VTOOL Ltd.

with a total book value of $ 0.5 million as of December 26, 2020 and one member of the Company’s Board of Directors is currently an investor and a director of VTOOL Ltd.

and Securepush Ltd.

On April 26, 2019, the Company sold its subsidiary Microwave Technology, LLC.

(“MWT”) resulting in a loss on disposal of $ 2.6 million reflected in Other income (expense), net in the Consolidated Statements of Net Income.

(“MWT”) resulting in a loss on disposal of $ 2.6 million reflected in Other income, net in the Consolidated Statements of Net Income.

The operations of MWT were included in the Electronics segment.

One member of the Company’s Board of Directors is an owner of a company that purchased MWT.

Subsequent Events

On January 28, 2021, the Company acquired Hartland Controls, a manufacturer and leading supplier of electrical components used primarily in heating, ventilation, air conditioning (HVAC) and other industrial and control systems applications with annualized sales of approximately $ 70 million.

The cash purchase price for Hartland Controls was approximately $ 113 million and the operations of Hartland Controls will be included in the Industrial segment.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data