What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-16 compared with 2022-02-17 · 474 added, 382 removed, 1108 unchanged (44% of the section changed)

21 unchanged sentences

Segment Information

Selected Quarterly Financial Data (Unaudited)

Related Party Transactions

Subsequent Events

Report of Independent Registered Public Accounting Firm

3 unchanged sentences

We have audited the accompanying consolidated balance sheets of Littelfuse, Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of January 1, 2022 and December 26, 2020, the related consolidated statements of net income , comprehensive income, equity, and cash flows for each of the three years in the period ended January 1, 2022, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 1, 2022 and December 26, 2020, and the results of its operations and its cash flows for each of the three years in the period ended January 1, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of January 1, 2022, 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 17, 2022 expressed an unqualified opinion.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022 and January 1, 2022, the related consolidated statements of net income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and January 1, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, 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 16, 2023, expressed an unqualified opinion.

Basis for opinion

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter 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.

Business Acquisition – Carling Technologies – Valuation of acquired Intangible Assets

As discussed in Note 2, the Company acquired Carling Technologies, Inc., on November 30, 2021 for a total purchase price of approximately $314 million, net of cash acquired.

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.

Business Acquisition – C&K Switches – Valuation of acquired intangible assets

As discussed in Note 2, the Company acquired C&K Switches (“C&K”), on July 19, 2022 for a total purchase price of approximately $523 million, net of cash acquired.

The Company allocated the purchase price, on a preliminary basis, to the assets acquired and liabilities assumed based on their respective fair values, including identified intangible assets of $254.7 million.

We identified the valuation of acquired intangible assets as a critical audit matter.

The principal considerations for our determination that the valuation of acquired intangible assets is a critical audit matter are (i) the significant judgment by management when determining assumptions used in the fair value measurement of acquired intangible assets (ii) the high degree of auditor judgment and subjectivity in performing procedures and evaluating

management’s significant assumptions relating to revenue growth, royalty rates, and customer attrition rates and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

We identified the valuation of acquired C&K intangible assets as a critical accounting matter.

The principal considerations for our determination that the valuation of acquired C&K intangible assets is a critical audit matter are (i) the significant judgment by management when determining assumptions used in the fair value measurement of acquired intangible assets (ii) the high degree of auditor judgment and subjectivity in performing procedures and evaluating management’s significant assumptions relating to the projected forecasted information including revenue growth rate, weighted average cost of capital (WACC), royalty rate, and customer attrition rate and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Our audit procedures related to the valuation of the acquired intangible assets included the following, among others :

we tested the design and operating effectiveness of the controls over the Company’s acquisition and valuation process, including review of the valuation model, significant assumptions used, and the completeness and accuracy of the underlying data used

– we tested the forecasted revenues and cash flows by assessing the reasonableness of management’s forecasts compared to historical results and forecasted industry trends

– with the assistance of our valuation specialists, we assessed the royalty, customer attrition, and revenue growth rates by developing a range of independent estimates and comparing those to the rates selected by management.

we tested the projected financial information including forecasted revenue growth rate by assessing the reasonableness of management’s forecasts compared to historical results and forecasted industry trends

with the assistance of our valuation specialists, we assessed the assumptions and methodologies used in developing the WACC, royalty rates, and customer attrition 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 and methodologies used in valuing the intangible assets.

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We have audited the internal control over financial reporting of Littelfuse, Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of January 1, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 1, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended January 1, 2022, and our report dated February 17, 2022 expressed an unqualified opinion on those financial statements.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2022, and our report dated February 16, 2023 expressed an unqualified opinion on those financial statements.

Basis for opinion

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We believe that our audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of Carling Technologies, Inc., a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 5% and 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended January 1, 2022.

As indicated in Management’s Report, Carling Technologies, Inc.

was acquired during 2021.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of Carling Technologies, Inc.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of C&K Switches, a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 3% and 3%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.

As indicated in Management’s Report, C&K Switches, was acquired during 2022.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of C&K Switches.

Definition and limitations of internal control over financial reporting

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CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data) January 1, 2022 December 26, 2020

(in thousands, except share and per share data) December 31, 2022 January 1, 2022

Current assets:

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Deferred income taxes 14,367 13,127

Right of use assets, net 29,616 17,615

Other assets 24,734 18,021

Right of use lease assets, net 57,382 29,616

Other long-term assets 34,066 24,734

Total assets $ 3,903,734 $ 3,151,704

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Accrued post-retirement benefits 28,037 37,037

Non-current operating lease liabilities 22,305 12,950

Non-current lease liabilities 45,661 22,305

Other long-term liabilities 79,510 71,023

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Fiscal Year Ended

(in thousands, except per share data) January 1, 2022 December 26, 2020 December 28, 2019

(in thousands, except per share data) December 31, 2022 January 1, 2022 December 26, 2020

Net sales $ 2,513,897 $ 2,079,928 $ 1,445,695

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands) January 1, 2022 December 26, 2020 December 28, 2019

(in thousands) December 31, 2022 January 1, 2022 December 26, 2020

Net income $ 373,306 $ 283,806 $ 129,986

1 unchanged sentence

Pension and postemployment adjustments, net of tax 9,735 22,213 ( 16,095 )

Cash flow hedge, net of tax 6,596 — —

Foreign currency translation adjustments ( 38,632 ) ( 4,519 ) 31,761

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) January 1, 2022 December 26, 2020 December 28, 2019

(in thousands) December 31, 2022 January 1, 2022 December 26, 2020

OPERATING ACTIVITIES

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Stock-based compensation 23,626 19,611 18,129

(Gain) loss on investments and other assets ( 8,907 ) ( 4,663 ) 4,854

Loss (gain) on investments and other assets 14,024 ( 8,907 ) ( 4,663 )

Deferred income taxes ( 22,419 ) ( 8,020 ) ( 3,214 )

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FINANCING ACTIVITIES

Proceeds of term loan 300,000 — —

Proceeds from senior notes payable 100,000 — —

Payments of senior notes payable ( 25,000 ) — —

Proceeds of revolving credit facility — — 240,000

Payments of revolving credit facility — ( 30,000 ) ( 110,000 )

Repayments of other debts ( 1,552 ) — —

Payments of term loan and other loans ( 3,750 ) ( 2,619 ) ( 145,000 )

Net proceeds related to stock-based award activities ( 862 ) 13,365 18,744

Debt issuance costs ( 2,723 ) — ( 1,786 )

Cash dividends paid ( 55,911 ) ( 49,730 ) ( 46,839 )

Purchases of common stock — — ( 22,927 )

Debt issuance costs — ( 1,786 ) —

Net cash used in financing activities ( 68,984 ) ( 67,808 ) ( 146,276 )

Net cash provided by (used in) financing activities 310,202 ( 68,984 ) ( 67,808 )

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 11,420 ) ( 9,889 ) 17,596

(Decrease) increase in cash, cash equivalents, and restricted cash ( 204,689 ) 156,386 41,406

Increase (decrease) in cash, cash equivalents, and restricted cash 82,103 ( 204,689 ) 156,386

Cash, cash equivalents, and restricted cash at beginning of period 482,836 687,525 531,139

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Net income — — — — 129,986 — 129,986

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

Other comprehensive income, net of tax — — — 15,666 — — 15,666

Stock-based compensation — 18,129 — — — — 18,129

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Net income — — — — 283,806 — 283,806

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

Other comprehensive income, net of tax — — — 17,694 — — 17,694

Stock-based compensation — 19,611 — — — — 19,611

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Stock options exercised 1 19,119 — — — — 19,120

Repurchases of common stock — — ( 22,927 ) — — — ( 22,927 )

Cash dividends paid ($ 2.02 per share)

— — — — ( 49,730 ) — ( 49,730 )

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

Balance at January 1, 2022 $ 260 $ 946,588 $ ( 248,120 ) $ ( 73,463 ) $ 1,268,124 $ 131 $ 1,893,520

Net income — — — — 373,306 — 373,306

Other comprehensive income (loss), net of tax 17,694 17,694

Other comprehensive (loss), net of tax — — — ( 22,301 ) — — ( 22,301 )

Stock-based compensation — 23,626 — — — — 23,626

Non-controlling interest — — — — ( 53 ) 53 —

Withheld 20,646 shares on restricted share units for withholding taxes

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— — — — ( 55,911 ) — ( 55,911 )

Balance at January 1, 2022 $ 260 $ 946,588 $ ( 248,120 ) $ ( 73,463 ) $ 1,268,124 $ 131 $ 1,893,520

Balance at December 31, 2022 $ 261 $ 974,097 $ ( 252,866 ) $ ( 95,764 ) $ 1,585,466 $ 184 $ 2,211,378

See accompanying Notes to Consolidated Financial Statements.

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Littelfuse, Inc.

and subsidiaries (the “Company”) is an industrial technology manufacturing company empowering a sustainable, connected, and safer world.

and subsidiaries (the “Company”) is a diversified, industrial technology manufacturing company empowering a sustainable, connected, and safer world.

Across more than 20 countries, and with approximately 18,000 global associates, the Company partners with customers to design and deliver innovative, reliable solutions.

Serving over 100,000 end customers, the Company’s products are found in a variety of industrial, transportation and electronics end markets – everywhere, every day.

References herein to “2021”, “fiscal 2021” or “fiscal year 2021” refer to the fiscal year ended January 1, 2022.

References herein to “2022”, “fiscal 2022” or “fiscal year 2022” refer to the fiscal year ended December 31, 2022.

References herein to “2021”, “fiscal 2021” or “fiscal year 2021” refer to the fiscal year ended January 1, 2022.

References herein to “2020”, “fiscal 2020” or “fiscal year 2020” refer to the fiscal year ended December 26, 2020.

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The Company will classify any overdraft balances within accrued expenses and other current liabilities on the Consolidated Balance Sheets.

The following table provides a reconciliation of cash, cash equivalents and restricted cash at January 1, 2022 and December 26, 2020 reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statement of Cash Flows.

The following table provides a reconciliation of cash, cash equivalents and restricted cash at December 31, 2022 and January 1, 2022 reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statement of Cash Flows.

(in millions) 2022 2021

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Total cash, cash equivalents and restricted cash $ 564,939 $ 482,836

Short-Term and Long-Term Investments

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of January 1, 2022, the Company has an investment in Polytronics Technology Corporation Ltd.

Short-Term and Long-Term Investments

As of December 31, 2022, the Company has an investment in Polytronics Technology Corporation Ltd.

(“Polytronics”).

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The Polytronics investment is carried at fair value.

The fair value of the Polytronics investment was € 23 million (approximately $ 26.1 million) at January 1, 2022 and € 15.7 million (approximately $ 19.2 million) at December 26, 2020.

The fair value of the Polytronics investment was € 10 million (approximately $ 10.7 million) at December 31, 2022 and € 23 million (approximately $ 26.1 million) at January 1, 2022.

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 Philippine s that provides assemb ly and test services.

All equity-level investments are less than majority owned.

The Company recognized $ 1.3 million gains from its equity method investment for the fiscal year ended January 1, 2022.

The Company recognized no gains and losses from its equity method investments for the fiscal year ended December 26, 2020.

The balance of these equity method investments was $ 12.4 million and $ 11.4 million as of the fiscal years ended January 1, 2022 and December 26, 2020, respectively.

The Company recognized gains of $ 1.3 million from its equity method investment for both the fiscal years ended December 31, 2022 and January 1, 2022.

The balance of these equity method investments was $ 13.5 million and $ 12.4 million as of the fiscal years ended December 31, 2022 and January 1, 2022, respectively.

See Note 17, Related Party Transactions, for further discussion.

The Company does not have any remaining book value of investments accounted for under the cost method as of January 1, 2022.

As of December 26, 2020, the Company had a net book value of $ 0.5 million.

During the fiscal year ended January 1, 2022, the Company impaired the remaining book value of these investments and recorded an impairment charge of $ 0.5 million, and during the fiscal year ended December 26, 2020, the Company recorded $ 0.1 million in Other expense (income), net in the Consolidated Statements of Net Income.

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

The Company has investments related to its non-qualified Supplemental Retirement and Savings Plan.

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The investment securities are measured at net asset value.

As of January 1, 2022 and December 26, 2020, the investment securities balance was $ 15.0 million and $ 13.2 million, respectively, related to the plan and are included in Other assets on the Consolidated Balance Sheets.

As of December 31, 2022 and January 1, 2022, the investment securities balance was $ 14.1 million and $ 15.0 million, respectively, related to the plan and are included in Other long-term assets on the Consolidated Balance Sheets.

Trade Receivables

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The Company maintains excess and obsolete reserves against inventory to reduce the carrying value to the expected net realizable value.

These reserves are based upon a combination of factors including historical sales volume, market conditions, lower of cost or market analysis and expected realizable value of the inventory.

These reserves are based upon a combination of factors including historical sales volume, market conditions, lower of cost or net realizable value of the inventory.

Property, Plant, and Equipment

Land, buildings, and equipment are carried at cost.

Depreciation is calculated using the straight-line method with useful lives of 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.

Depreciation is calculated using the straight-line method with useful lives of up to 35 years for buildings, three to 20 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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Major overhauls that extend the useful lives of existing assets are capitalized.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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 annual goodwill impairment test as of September 26, 2021 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 26, 2021, the Company noted that the excess of fair value over the carrying value, was 380 %, 104 %, 255 %, 217 %, 95 %, 144 %, and 231 % for its reporting units;

The results of the annual goodwill impairment test as of October 2, 2022 indicated that the estimated fair values for each of the seven reporting units exceeded their respective carrying values.

As of the most recent annual test conducted on October 2, 2022, the Company noted that the excess of fair value over the carrying value, was 151 %, 66 %, 98 %, 42 %, 44 %, 57 %, and 191 % for its reporting units;

Electronics-Passive Products and Sensors, Electronics-Semiconductor, Passenger Car Products, Commercial Vehicle Products, Automotive Sensors, Relays, and Power Fuse, respectively.

1 unchanged sentence

See Note 5, Goodwill and Other Intangible Assets, for additional information.

There were no impairment charges recorded during the fiscal years of 2022 and 2021.

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 Transportation 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 January 1, 2022, the automotive sensors reporting unit had $ 9.2 million of remain ing goodwill.

The Company also performs an interim review for indicators of impairment each quarter to assess whether an interim impairment review is required for any reporting unit.

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In addition, management considers how other key assumptions, including discount rates and expected long-term growth rates, used in the last annual impairment test, could be impacted by changes in market conditions and economic events.

Based on the interim assessments as of January 1, 2022, 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.

Based on the interim assessments as of December 31, 2022, management concluded that no events or changes in circumstances indicated that it was more likely than not that the fair value for any reporting unit had declined below its carrying value.

Long-Lived Assets

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The distribution networks are amortized on either a straight-line or accelerated basis over estimated useful lives that have a range of 4 to 10 years.

Land use rights are amortized using the straight-line method over 50 years which is the term of the land use rights.

Land use rights are amortized using the straight-line method up to 50 years which is the term of the land use rights.

The Company assesses potential impairments to its long-lived assets if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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The Company records annual income and expense amounts relating to its pension and post-retirement benefits plans based on calculations which include various actuarial assumptions including discount rates, expected long-term rates of return and compensation increases.

The Company reviews its actuarial assumptions on an annual basis as of the fiscal year-end balance sheet date (or more frequently if a significant event requiring remeasurement occurs) and modifies the assumption based on

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

current rates and trends when it is appropriate to do so.

The effects of modifications are recognized immediately on the Consolidated Balance Sheets, but are generally amortized into operating earnings over future periods, with the deferred amount recorded in accumulated other comprehensive income (loss).

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Revenue Disaggregation

The following table disaggregates the Company’s revenue by primary business units for the fiscal years ended January 1, 2022 and December 26, 2020:

Fiscal Year Ended January 1, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table disaggregates the Company’s revenue by primary business units for the fiscal years ended December 31, 2022 and January 1, 2022:

Fiscal Year Ended December 31, 2022

(in thousands) Electronics

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Electronics – Passive Products and Sensors 690,538 — — 690,538

Passenger Car Products — 266,020 — 266,020

Commercial Vehicle Products — 374,707 — 374,707

Passenger Car Products — 249,470 — 249,470

Automotive Sensors — 91,963 — 91,963

1 unchanged sentence

Total $ 1,492,819 $ 716,140 $ 304,938 $ 2,513,897

Fiscal Year Ended December 26, 2020

Fiscal Year Ended January 1, 2022

(in thousands) Electronics

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Total $ 1,300,744 $ 528,058 $ 251,126 $ 2,079,928

(1) Formerly known as Automotive segment .

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

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Revenue and Billing

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company generally accepts orders from customers through receipt of purchase orders or electronic data interchange based on written sales agreements and purchasing contracts.

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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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Ship and Debit Program

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When the Company approves such a reduction, the distributor is authorized to “debit” its account for the difference between the contracted price and the lower approved price.

The Company establishes reserves for this program based on historic activity, electronic distributor inventory levels and actual authorizations for the debit and recognizes these debits as a reduction of revenue.

The Company establishes reserves for this program based on historic activity, distributor inventory levels and actual authorizations for the debit and recognizes these debits as a reduction of revenue.

Return to Stock

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The Company estimates the projected amount of rebates that will be achieved by the customer and recognizes this estimated cost as a reduction to revenue as products are sold.

Allowance for Doubtful Accounts

Allowance for Credit Losses

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

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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.

Historically, the allowance for credit losses 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 January 1, 2022 and December 26, 2020, the Company’s allowance for doubtful accounts was $ 1.9 million and $ 1.4 million, respectively.

Additionally, the Company had $ 2.1 million and $ 1.0 million of trade receivables greater than 90 days past due as of January 1, 2022 and December 26, 2020, respectively.

As of December 31, 2022 and January 1, 2022, the Company’s allowance for credit losses was $ 1.6 million and $ 1.9 million, respectively.

Additionally, the Company had $ 4.8 million and $ 2.1 million of trade receivables greater than 90 days past due as of December 31, 2022 and January 1, 2022, respectively.

Advertising Costs

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Shipping and Handling Fees and Costs

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts billed to customers related to shipping and handling are classified as revenue.

Costs incurred for shipping and handling of $ 15.4 million, $ 11.1 million, and $ 11.0 million in f iscal years 2021, 2020, and 2019, respectively, are classified in selling, general, and administrative expenses.

Costs incurred for shipping and handlin g of $ 13.9 million, $ 15.4 million, and $ 11.1 million in fiscal years 2022, 2021, and 2020, respectively, are classified in selling, general, and administrative expenses.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Foreign Currency Translation / Remeasurement

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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 Consolidated Statements of Net Income was a loss of $ 17.2 million in fiscal year 2021, a gain of $ 14.9 million in fiscal year 2020, and a loss of $ 5.2 million in fiscal year 2019.

The amount of foreign currency gain or loss recognized in the Consolidated Statements of Net Income was a loss of $ 24.4 million in fiscal year 2022, a loss of $ 17.2 million in fiscal year 2021, and a gain of $ 14.9 million in fiscal year 2020.

Stock-Based Compensation

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Coal Mining Liability

Included in other long-term liabilities is an accrual related to former coal mining operations at Littelfuse GmbH (formerly known as Heinrich Industries, AG) for the amounts of € 1.9 million ($ 2.1 million) and € 2.3 million ($ 2.9 million) at January 1, 2022 and December 26, 2020, respectively.

Included in other long-term liabilities is an accrual related to former coal mining operations at Littelfuse GmbH (formerly known as Heinrich Industries, AG) for the amounts of € 1.6 million ($ 1.7 million) and € 1.9 million ($ 2.1 million) at December 31, 2022 and January 1, 2022, respectively.

Management, in conjunction with an independent third-party, performs an annual evaluation of the former coal mining operations in order to develop an estimate of the probable future obligations in regard to remediating the dangers (such as a shaft collapse) of abandoned coal mine shafts in the former coal mining operations.

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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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The 2017 Tax Cuts and Jobs Act (the "Tax Act"), among other things, imposed a one-time tax (the “Toll Charge”) on accumulated earnings of certain non-U.S.

subsidiaries and included base broadening provisions commonly referred to as the global intangible low-taxed income provisions ("GILTI").

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 January 1, 2022, totaling $ 17.8 million, is recorded in Other long-term liabilities, and the anticipated 2022 annual installment payment of $ 3.0 million is included in Accrued income taxes , on the Consolidated Balance Sheet as of January 1, 2022.

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 January 1, 2022 , December 26, 2020 and December 28, 2019, 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 expen se.

The long-term portion of this Toll Charge which remains payable as of December 31, 2022, totaling $ 14.8 million, is recorded in Other long-term liabilities, and the anticipated 2023 annual installment payment of $ 5.0 million is included in Accrued income taxes , on the Consolidated Balance Sheet as of December 31, 2022.

In accordance with guidance issued by the Financial Accounting Standards Board ("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 31, 2022 , January 1, 2022 and December 26, 2020, 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 expen se.

Fair Value Measurements

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Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2019-12, "Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes" as part of its initiative to reduce complexity in the accounting standards.

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

The adoption of ASU 2019-12 did not have a material impact on our Consolidated Financial Statements.

Recently Issued Accounting Standards

In October 2021, the FASB issued ASU No.

2021-08, "Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers".

The standard requires an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

The guidance is effective for fiscal years beginning after December 15, 2022 with early adoption permitted.

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

In November 2021, the FASB issued ASU No.

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The guidance is effective for fiscal years beginning after December 15, 2021 with early adoption permitted.

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

The adoption of ASU 2021-10 did not have a material impact on the Company's Consolidated Financial Statements.

In October 2021, the FASB issued ASU No.

2021-08, "Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers".

The standard requires an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

The guidance is effective for fiscal years beginning after December 15, 2022 with early adoption permitted.

The adoption of ASU 2021-08 did not have a material impact on the Company's Consolidated Financial Statements.

Recently Issued Accounting Standards

In December 2022, the FASB issued ASU No.

2022-06, "Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848".

the amendments in this Update defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

The amendments in this Update are effective for all entities upon issuance of this Update.

On June 30, 2022, the Company amended and restated its Credit Agreement, replacing LIBOR-based interest benchmarks with Secured Overnight Financing Rate ("SOFR") based floating-rate loans.

The Company's loans under the available credit facility are SOFR based floating-rate loans.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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The operating results of the acquired business are included in the Company’s Consolidated Financial Statements from the date of the acquisition.

On July 19, 2022, the Company acquired C&K Switches (“C&K”) for $ 540 million in cash.

Founded in 1928, C&K is a leading designer and manufacturer of high-performance electromechanical switches and interconnect solutions with a strong global presence across a broad range of end markets, including industrial, transportation, datacom, and aerospace.

At the time the Company and C&K entered into a definitive agreement, C&K had annualized sales of over $ 200 million.

The business is reported as part of the electronics-passive products and sensors business within the Company's Electronics segment.

The acquisition was funded through a combination of cash on hand and debt.

The total purchase consideration of $ 523.0 million, net of cash acquired, has been allocated, on a preliminary basis, to assets acquired and liabilities assumed, as of the completion of the acquisition, based on preliminary estimated fair values.

The purchase price allocation is preliminary because the evaluations necessary to assess the fair values of the net assets acquired are still in process.

The primary area not yet finalized relates to the completion of the valuation of certain acquired income tax assets and liabilities.

As a result, these allocations are subject to change during the purchase price allocation period as the valuations are finalized.

The following table summarizes the preliminary purchase price allocation of the fair value of assets acquired and liabilities assumed in the C&K acquisition:

(in thousands) Purchase Price

Total purchase consideration:

Cash, net of cash acquired $ 523,014

Allocation of consideration to assets acquired and liabilities assumed:

Trade receivables, net 20,967

Inventories 42,968

Other current assets 2,932

Property, plant, and equipment 32,791

Intangible assets 254,700

Goodwill 270,245

Other non-current assets 14,797

Current liabilities ( 47,734 )

Long-term debt ( 9,626 )

Other non-current liabilities ( 59,026 )

All C&K goodwill, other assets and liabilities were recorded in the Electronics segment and are reflected in the Americas, Europe and Asia-Pacific geographic areas.

The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining C&K’s products and technology with the Company’s existing Electronics products portfolio.

Goodwill resulting from the C&K acquisition is not expected to be deductible for tax purposes.

Included in the Company’s Consolidated Statements of Net Income for the fiscal year ended December 31, 2022 are net sales of $ 81.7 million , and a loss before income taxes of $ 4.2 million, since the July 19, 2022 acquisition of C&K.

As required by purchase accounting rules, the Company recorded a $ 10.8 million step-up of inventory to its fair value as of the acquisition date.

The step-up was amortized as a non-cash charge to cost of sales during the fiscal year ended December 31, 2022, as the acquired inventory was sold, and is reflected as other non-segment costs.

For the fiscal year ended December 31, 2022, the Company incurred $ 9.1 million of legal and professional fees related to the C&K acquisition recognized as Selling, general, and administrative expenses and reflected as other non-segment costs.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On April 12, 2022, the Company acquired Embed Ltd.

Founded in 2005, Embed is a proven provider of embedded software and firmware developed for a broad range of applications serving transportation end markets, primarily including commercial vehicle electronification and eMobility .

The business is included in the commercial vehicle business within the Company's Transportation segment.

The acquisition was funded with the Company’s cash on hand.

The total purchase consideration was $ 9.2 million, net of cash.

Carling Technologies

On November 30, 2021, the Company completed the previously announced acquisition of Carling Technologies, Inc.

On November 30, 2021, the Company acquired Carling Technologies, Inc.

(“Carling”), pursuant to the Stock Purchase Agreement, dated as of October 19, 2021.

Founded in 1920, Carling has a leading position in switching and circuit protection technologies with a strong global presence in commercial vehicle, marine and datacom/telecom infrastructure markets.

Founded in 1920, Carling has a leading position in switching and circuit protection technologies with a strong global presence in commercial vehicle electronification, communications infrastructure and marine markets.

At the time of acquisition, Carling had annualized sales of approximately $ 170 million.

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The acquisition was funded with cash on hand.

The total purchase consideration of $ 313.6 million, net of cash, has been allocated, on a preliminary basis, to assets acquired and liabilities assumed, as of the completion of the acquisition, based on preliminary estimated fair values.

The purchase consideration is subject to change for the final working capital adjustments.

The purchase price allocation is preliminary because the evaluations necessary to assess the fair values of the net assets acquired are still in process.

The primary areas that are not yet finalized relate to the completion of the valuations of certain property, plant and equipment, intangible assets and acquired income tax assets and liabilities.

As a result, these allocations are subject to change during the purchase price allocation period as the valuations are finalized.

The following table summarizes the preliminary purchase price allocation of the fair value of assets acquired and liabilities assumed in the Carling acquisition:

The total purchase consideration of $ 314.1 million, net of cash, has been allocated to assets acquired and liabilities assumed, as of the completion of the acquisition, based on estimated fair values.

The following table summarizes the final purchase price allocation of the fair value of assets acquired and liabilities assumed in the Carling acquisition:

(in thousands) Purchase Price

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Goodwill resulting from the Carling acquisition is not expected to be deductible for tax purposes.

Included in the Company’s Consolidated Statements of Net Income for the fiscal year ended January 1, 2022 are net sales of $ 15.3 million, and a loss before income taxes of $ 1.2 million, since the November 30, 2021 acquisition of Carling.

As required by purchase accounting rules, the Company recorded a $ 6.4 million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation.

The step-up is being amortized as a non-cash charge to cost of goods sold during the fourth quarter of 2021 and first quarter of 2022, as the acquired inventory is sold, and reflected as other non-segment

During the fiscal year ended December 31, 2022, the Company paid $ 0.5 million related to the final working capital adjustment and made measurement period adjustments to reduce the fair value of property, plant and equipment of $ 8.2 million, inventories of $ 1.0 million, and an increase in net accounts receivable of $ 0.7 million, intangible assets attributable to customer relationships of $ 0.5 million, other current assets of $ 0.3 million, other non-current liabilities of $ 0.3 million.

As a result of these adjustments along with a corresponding reduction of deferred tax liabilities of $ 2.5 million, goodwill was increased by $ 6.0 million.

As required by purchase accounting rules, the Company recorded a $ 6.4 million step-up of inventory to its fair value as of the acquisition date.

The step-up was amortized as a non-cash charge to cost of goods sold during the fourth quarter of 2021 and first quarter of 2022, as the acquired inventory was sold, and is reflected as other non-segment costs.

The Company recognized

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recognized a non-cash charge of $ 1.6 million to cost of goods sold during the fiscal year ended January 1, 2022.

a non-cash charge of $ 4.8 million and $ 1.6 million to cost of goods sold during the fiscal years ended December 31, 2022 and January 1, 2022, respectively.

For the fiscal year ended January 1, 2022, the Company incurred approximately $ 4.5 million of legal and professional fees related to the Carling acquisition recognized as Selling, general, and administrative expenses .

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Hartland Controls

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

At the time of acquisition, Hartland had annualized sales of approximately $ 70 million.

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The total purchase consideration of $ 108.5 million, net of cash, cash equivalents, and restricted cash has been allocated to assets acquired and liabilities assumed, as of the completion of the acquisition, based on estimated fair values.

As of January 1, 2022, the Company had restricted cash of $ 1.7 million in an escrow account for general indemnification purposes.

As of December 31, 2022, the Company had restricted cash of $ 0.8 million in an escrow account for general indemnification purposes.

The following table summarizes the final purchase price allocation of the fair value of assets acquired and liabilities assumed in the Hartland acquisition:

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Goodwill resulting from the Hartland acquisition is not expected to be deductible for tax purposes.

Included in the Company’s Consolidated Statements of Net Income for the fiscal year ended January 1, 2022 are net sales of $ 100.5 million and a loss before income taxes of $ 2.8 million since the January 28, 2021 acquisition of Hartland.

The Company recorded a $ 6.8 million step-up of inventory to its fair value as of the acquisition date based on the valuation.

The step-up was fully amortized as a non-cash charge to cost of goods sold during the first and second quarters of 2021, as the acquired inventory was sold, and is reflected as other non-segment costs.

For the fiscal year ended January 1, 2022, the Company recognized a charge of $ 6.8 million for the amortization of this fair value inventory step-up.

For the fiscal year ended January 1, 2022, the Company incurred approximately $ 0.8 million of legal and professional fees related to the Hartland acquisition recognized as Selling, general, and administrative expenses .

The step-up was fully amortized as a $ 6.8 million non-cash charge to cost of goods sold during the first and second quarters of 2021, as the acquired inventory was sold, and is reflected as other non-segment costs.

For the fiscal year ended January 1, 2022, the Company incurred appro ximately $ 0.8 million of legal and professional fees related to the Hartland acquisition recognized as Selling, general, and administrative expenses .

These costs were reflected as other non-segment costs.

Pro Forma Results

The following table summarizes, on an unaudited pro forma basis, the combined results of operations of the Company, C&K as though the acquisition had occurred as of December 27, 2020, and Hartland and Carling as though the acquisitions had occurred as of December 29, 2019.

The Company has not included pro forma results of operations for Embed as its operations were not material to the Company.

The pro forma amounts presented are not necessarily indicative of either the actual consolidated

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes, on an unaudited pro forma basis, the combined results of operations of the Company, Hartland and Carling as though the acquisition had occurred as of December 29, 2019.

The pro forma amounts presented are not necessarily indicative of either the actual consolidated results had the Hartland and Carling acquisitions occurred as of December 29, 2019 or of future consolidated operating results.

results had the C&K acquisition occurred as of December 27, 2020 and had the Hartland and Carling acquisitions occurred as of December 29, 2019 or of future consolidated operating results.

For the Fiscal Year Ended

(in thousands, except per share amounts) January 1,

2022 December 26, 2020

(in thousands, except per share amounts) December 31,

2022 January 1, 2022 December 26, 2020

Net sales $ 2,639,132 $ 2,459,009 $ 1,662,896

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For the Fiscal Year Ended

(in thousands) January 1, 2022 December 26, 2020

(in thousands) December 31,

2022 January 1, 2022 December 26, 2020

Amortization (a) $ ( 4,646 ) $ ( 18,410 ) $ ( 12,669 )

$ ( 8,770 ) $ ( 12,669 )

Depreciation 1,979 2,537 253

Transaction costs (b) 9,108 ( 3,727 ) ( 5,381 )

5,381 ( 5,381 )

Amortization of inventory step-up (c) 15,593 ( 2,426 ) ( 13,156 )

8,398 ( 13,156 )

Interest expense (d) 815 2,624 —

Income tax (expense) benefit of above items ( 5,569 ) 5,065 6,706

(a) The amortization adjustment for the twelve months ended January 1, 2022 and December 26, 2020 primarily reflects incremental amortization resulting from the measurement of intangibles at their fair values.

(b) The transaction cost adjustments reflect the reversal of certain legal and professional fees from the twelve months ended January 1, 2022 and recognition of those fees during the twelve months ended December 26, 2020.

(c) The amortization of inventory step-up adjustment reflects the reversal of the amount recognized during the twelve months ended January 1, 2022 and the recognition of the amortization during the twelve months ended December 26, 2020.

The inventory step-up is amortized over four months for both acquisitions.

For the fiscal year ended January 1, 2022 and December 26, 2020, the Company recorded $ 6.2 million and $ 0.8 million of acquisition-related expenses associated with completed and contemplated acquisitions within Selling, general and administrative expenses in the Consolidated Statements of Net Income.

The components of inventories at January 1, 2022 and December 26, 2020 are as follows:

(a) The amortization adjustment for the twelve months ended December 31, 2022, January 1, 2022, and December 26, 2020, primarily reflects incremental amortization resulting from the measurement of intangibles at their fair values.

(b) The transaction cost adjustments reflect the reversal of certain legal and professional fees from the twelve months ended December 31, 2022 and January 1, 2022, respectively, and recognition of those fees during the twelve months ended January 1, 2022 and December 26, 2020, respectively.

(c) The amortization of inventory step-up adjustment reflects the reversal of the amount recognized during the twelve months ended December 31, 2022 and January 1, 2022, respectively, and the recognition of the amortization during the twelve months ended January 1, 2022 and December 26, 2020, respectively.

The inventory step-up is amortized over four months for all acquisitions, as the inventory was sold.

(d) The interest expense adjustment reflects lower interest expense associated with the financing of the C&K acquisition that replaced higher pre-acquisition debt.

The components of inventories at December 31, 2022 and January 1, 2022 are as follows:

(in thousands) 2022 2021

4 unchanged sentences

Total $ 547,690 $ 445,671

Property, Plant, and Equipment

The components of net property, plant, and equipment at January 1, 2022 and December 26, 2020 are as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, Plant, and Equipment

The components of net property, plant, and equipment at December 31, 2022 and January 1, 2022 are as follows:

(in thousands) 2022 2021

Land $ 23,470 $ 22,851

Building 151,297 123,497

Equipment 779,559 678,220

Land and land improvements $ 22,089 $ 23,470

Building and building improvements 191,733 151,297

Machinery and equipment 812,540 779,559

Accumulated depreciation and amortization ( 545,252 ) ( 516,437 )

Total $ 481,110 $ 437,889

The Company recorded depreciation expense of $ 55.9 million, $ 56.1 million, and $ 52.5 million for the fiscal years ended January 1, 2022, December 26, 2020, and December 28, 2019, respectively.

The Company recorded depreciation expense of $ 65.0 million, $ 55.9 million, and $ 56.1 million for the fiscal years ended December 31, 2022, January 1, 2022, and December 26, 2020, respectively.

Goodwill and Other Intangible Assets

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Gross goodwill as of December 26, 2020

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

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

$ 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

Changes during 2021:

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Gross goodwill as of January 1, 2022

660,245 228,555 86,232 975,032

Accumulated impairment losses as of January 1, 2022

— ( 36,177 ) ( 9,065 ) ( 45,242 )

Net goodwill as of January 1, 2022

(a) The additions primarily resulted from the acquisitions of Carling and Hartland.

$ 660,245 $ 192,378 $ 77,167 $ 929,790

Changes during 2022:

Additions (b)

270,245 14,886 — 285,131

Foreign currency translation adjustments ( 21,323 ) ( 8,648 ) ( 1,343 ) ( 31,314 )

Gross goodwill as of December 31, 2022

909,167 234,793 84,889 1,228,849

Accumulated impairment losses as of December 31, 2022

( 33,401 ) ( 8,526 ) ( 41,927 )

Net goodwill as of December 31, 2022

$ 909,167 $ 201,392 $ 76,363 $ 1,186,922

(a) The additions resulted from the acquisitions of Carling and Hartland.

(b) The additions resulted from the acquisitions of C&K, Embed and Carling.

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.

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

As of January 1, 2022, the automotive sensors reporting unit had $ 9.2 million of remaining goodwill.

The components of intangible assets at January 1, 2022 and December 26, 2020 are as follows:

The components of intangible assets at December 31, 2022 and January 1, 2022 are as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of January 1, 2022

As of December 31, 2022

(in thousands) Gross

4 unchanged sentences

Total $ 942,995 $ 349,025 $ 593,970

As of December 26, 2020

The Company reclassified $ 50.3 million and $ 31.1 million of gross carrying value and accumulated amortization, respectively, from customer relationships, trademarks and tradenames to patents, licenses and software as of December 31, 2022.

This reclassification had no consolidated financial impact on net book value of intangible assets.

As of January 1, 2022

(in thousands) Gross

4 unchanged sentences

Total $ 715,169 $ 308,043 $ 407,126

During the year ended January 1, 2022, the Company recorded additions to other intangible assets of $ 165.6 million, for acquisitions during 2021, the components of which were as follows:

During the year ended December 31, 2022, the Company recorded additions to other intangible assets of $ 254.7 million related to the C&K acquisition, the components of which were as follows:

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

Useful Life (Years) Amount

Land use rights 50 $ 9,590

Patents, developed technology 12.0 $ 55,700

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For intangible assets with definite lives, the Company recorded amortization expense of $ 55.7 million, $ 42.7 million, and $ 40.0 million in 2022, 2021, and 2020, respectively.

Estimated annual amortization expense related to intangible assets with definite lives at January 1, 2022 is as follows:

During the fourth quarter of 2022, the Company recorded a $ 2.9 million non-cash impairment charge for certain acquired technology and patent intangible assets due to a change in use and projected cash flows within the Electronics segment.

Estimated annual amortization expense related to intangible assets with definite lives at December 31, 2022 is as follows:

(in thousands)

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Accrued Liabilities

The components of accrued liabilities at January 1, 2022 and December 26, 2020 are as follows:

The components of accrued liabilities at December 31, 2022 and January 1, 2022 are as follows:

(in thousands) 2022 2021

Employee-related liabilities $ 99,089 $ 92,018

Operating lease liability 9,018 6,811

Interest 4,402 4,517

Professional services 4,299 3,321

Current lease liability 12,841 9,018

Other non-income taxes 10,594 4,280

Professional services 7,160 4,299

Other customer reserves 5,064 702

Interest 4,449 4,402

Deferred revenue 2,593 1,105

Restructuring liability 2,434 2,944

Current benefit liability 1,318 1,248

Deferred revenue 1,105 2,959

Other customer reserves 702 3,858

Other 41,515 39,673

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The Company leases office and production space under various non-cancellable operating leases that expire no later than 2035.

Certain real estate leases include one or more options to renew.

Ce rtain real estate leases include one or more options to renew.

The exercise of lease renewal options is at the Company's sole discretion.

Options to extend the lease are included in the lease term when it is reasonably certain the Company will exercise the option.

The Company also has production equipment, office equipment and vehicles under operating leases.

The Company also has production equipment, office equipment and vehicles under operating leases and finance leases that were acquired through the C&K acquisition.

The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option that is reasonably certain of exercise.

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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 January 1, 2022 and December 26, 2020:

The following table presents the classification of right of use assets and lease liabilities as of December 31, 2022 and January 1, 2022:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands) Consolidated Balance Sheet Classification January 1, 2022 December 26, 2020

Operating ROU assets Right of use assets, net $ 29,616 $ 17,615

Fiscal Year Ended

(in thousands) Consolidated Balance Sheet Classification December 31, 2022 January 1, 2022

Operating Leases

Right of use assets - operating lease Right of use lease assets, net $ 54,901 $ 29,616

Current operating lease liabilities Accrued liabilities 11,694 9,018

Non-current operating lease liabilities Non-current operating lease liabilities 22,305 12,950

Total lease liabilities $ 31,323 $ 19,761

Non-current operating lease liabilities Non-current lease liabilities 44,963 22,305

Total operating lease liabilities $ 56,657 $ 31,323

Finance Leases

Right of use assets - finance lease Right of use lease assets, net $ 2,481 $ —

Current finance lease liabilities Accrued liabilities 1,147 —

Non-current finance lease liabilities Non-current lease liabilities 698 —

Total finance lease liabilities $ 1,845 $ —

The following table represents the lease costs for 2022, 2021, and 2020:

(in thousands) Consolidated Statements of Net Income Classification Fiscal Year Ended January 1, 2022 Fiscal Year Ended December 26, 2020

Fiscal Year Ended

(in thousands) Consolidated Statements of Net Income Classification December 31, 2022 January 1, 2022 December 26, 2020

Operating lease expenses Cost of sales, SG&A expenses $ 14,071 $ 9,929 $ 8,591

Finance lease:

Finance lease expenses Cost of sales 112 — —

Interest on lease liabilities Other expenses 13 — —

Short-term lease expenses Cost of sales, SG&A expenses 1,130 345 512

Variable lease expenses Cost of sales, SG&A expenses 1,091 1,165 1,307

Operating lease rent expenses Cost of sales, SG&A expenses 9,929 8,591

Total operating lease costs Cost of sales, SG&A expenses $ 11,439 $ 10,410

Total lease costs Cost of sales, SG&A expenses $ 16,417 $ 11,439 $ 10,410

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

The Company acquired through the C&K acquisition certain machinery and equipment under finance leases.

Rent expense under these leases was $ 16.4 million , $ 11.4 million , and $ 10.4 million in 2022, 2021, and 2020, respectively.

Maturity of Lease Liabilities as of January 1, 2022

(in thousands) Operating leases

Maturity of Lease Liabilities as of December 31, 2022

(in thousands) Operating leases Finance Leases

2023 $ 13,966 $ 1,166

2024 13,709 425

2025 8,099 283

2028 and thereafter 21,217 —

Total lease payments $ 67,090 $ 1,875

Imputed interest ( 10,433 ) ( 30 )

Present value of lease liabilities $ 56,657 $ 1,845

Operating Lease Term and Discount Rate Fiscal Year Ended January 1, 2022 Fiscal Year Ended December 26, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Year Ended

December 31, 2022 January 1, 2022

Weighted-average remaining lease term (years)

Operating leases 6.84 4.79

Finance leases 1.90 —

Weighted-average discount rate

Cash Flow Information related to Leases

(in thousands) Fiscal Year Ended January 1, 2022

Operating leases 4.84 % 4.27 %

Finance leases 1.43 % —

Fiscal Year Ended

(in thousands) December 31, 2022 January 1, 2022 December 26, 2020

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flow payments for operating leases $ ( 10,150 )

Leased assets obtained in exchange for operating lease liabilities 20,217

Other Information

(in thousands)

Net gain from sale and leaseback transaction ( 4,058 )

Operating cash flow - payments on operating leases $ ( 12,298 ) $ ( 10,150 ) $ ( 8,929 )

Operating cash flow - interest payments on finance leases ( 13 ) — —

Financing cash flow - payments on finance lease obligations ( 719 ) — —

Leased assets obtained in exchange of new lease obligations, including leases acquired:

Operating leases $ 37,760 $ 20,217 $ 2,862

Finance leases 2,502 — —

There were no sale leaseback transactions for the fiscal years ended December 31, 2022, and December 26, 2020.

The net gain recorded from a sale leaseback transaction was $ 4.1 million for the fiscal year ended January 1, 2022.

Restructuring, Impairment and Other Charges

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recorded restructuring, impairment and other charges for fiscal years 2022, 2021, and 2020 as follows:

Fiscal Year Ended January 1, 2022

Fiscal Year Ended December 31, 2022

(in thousands) Electronics Transportation Industrial Total

2 unchanged sentences

Total restructuring charges 3,068 3,770 283 7,121

Impairment 2,856 — — 2,856

Total $ 5,924 $ 3,770 $ 283 $ 9,977

Fiscal Year Ended December 26, 2020

Fiscal Year Ended January 1, 2022

(in thousands) Electronics Transportation Industrial Total

2 unchanged sentences

Total restructuring charges 1,124 687 347 2,158

Impairment — 33,841 2,237 36,078

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

Fiscal Year Ended December 26, 2020

5 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2022, the Company recorded total restructuring charges of $ 7.1 million, primarily for employee termination costs.

These charges primarily related to the reorganization of certain manufacturing, selling and administrative functions within the Transportation segment's passenger car and automotive sensor businesses and the reorganization of selling and administrative functions within the Electronics segment due to the C&K acquisition.

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

For the year ended January 1, 2022, the Company recorded total restructuring charges of $ 2.2 million, primarily for employee termination costs.

4 unchanged sentences

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.

These charges primarily related to the reorganization of operations and selling, general and administrative functions as well as the integration of IXYS within the Electronics segment and the reorganization of operations in the automotive sensors and commercial vehicle products businesses within the Transportation segment.

In April 2019, we announced the closure of a European manufacturing facility in the automotive sensors business within the Transportation segment.

The Company recorded $ 1.7 million of employee termination costs and $ 1.4 million of other restructuring and impairment charges associated with this plant closure.

The restructuring reserves as of January 1, 2022 and December 26, 2020 are $ 2.9 million and $ 4.2 million, respectively.

The restructuring reserves as of December 31, 2022 and January 1, 2022 are $ 2.4 million and $ 2.9 million, respectively.

The restructuring reserves are included within accrued liabilities.

Payments associated with employee terminations reflected in the above table were substantially completed by January 1, 2022.

Payments associated with employee terminations reflected in the above table were substantially completed by December 31, 2022.

The Company anticipates that the remaining payments associated with employee terminations will be completed in fiscal 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The carrying amounts of debt at January 1, 2022 and December 26, 2020 are as follows:

The carrying amounts of debt at December 31, 2022 and January 1, 2022 are as follows:

(in thousands)

Revolving Credit Facility $ 100,000 $ 100,000

Term Loan 296,250 —

Euro Senior Notes, Series A due 2023 124,716 132,444

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

Senior Notes, due 2032 100,000 —

Other 9,113 —

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Total long-term debt $ 866,623 $ 611,897

Interest paid on all Company debt was approximatel y $ 17.4 million, $ 20.1 million, and $ 21.2 million in fiscal year 2021, 2020, and 2019, respectively.

Revolving Credit Facility

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

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 April 3, 2020, the Company amended its existing 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 o ne 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 $ 30.0 million on the amended revolving credit facility during the fiscal year ended January 1, 2022.

The balance under the facility was $ 100.0 million as of January 1, 2022.

Outstanding borrowings under the amended 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.

The Company is 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 natu re.

The effective interest rate on outstanding borrowings under the credit facility was 1.35 % at January 1, 2022.

As of January 1, 2022, the Company had no outstanding in letters of credit and had available $ 600.0 million of borrowing capacity under the revolving credit facility.

At January 1, 2022, the Company was in compliance with all covenants under the credit agreement.

On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and sold € 212 million aggregate principal amount of senior notes in two series.

The funding date for the Euro denominated senior notes occurred on December 8, 2016 for € 117 million in aggregate amount of 1.14 % Senior Notes, Series A, due December 8, 2023 (“Euro Senior Notes, Series A due 2023”), and € 95 million in aggregate amount of 1.83 % Senior Notes, Series B due December

Interest paid on all Company debt was $ 25.4 million, $ 17.4 million, and $ 20.1 million in fiscal year 2022, 2021, and 2020, respectively.

Revolving Credit Facility and Term Loan

On June 30, 2022, the Company amended and restated its Credit Agreement, dated as of April 3, 2020 (as so amended and restated, the “Credit Agreement”) to effect certain changes, including, among other changes:

(i) adding a $ 300 million unsecured term loan credit facility;

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

(iii) replacing LIBOR-based interest rate benchmarks and modifying performance-based interest rate margins;

and (iv) extending the maturity date to June 30, 2027 (the “Maturity Date”).

Pursuant to the Credit Agreement, the Company may, from time to time, increase the size of the revolving credit facility or enter into one or more tranches of term loans in minimum increments of $ 25 million if there is no event of default and the Company is in compliance with certain financial covenants.

Loans made under the available credit facility pursuant to the Credit Agreement ("the Credit Facility") bear interest at the Company’s option, at either SOFR, fixed for interest periods of one, two, three or six-month periods, plus 1.00 % to 1.75 %, plus a SOFR adjustment of 0.10 % or at the bank’s Base Rate, as defined in the Credit Agreement, plus — % to 0.75 %, based upon the Company’s Consolidated Leverage Ratio, as defined in the Credit Agreement.

The Company is also required to pay commitment fees on unused portions of the Credit Facility ranging from 0.10 % to 0.175 %, based on the Consolidated Leverage Ratio, as defined in the Credit Agreement.

The Credit Agreement includes representations, covenants and events of default that are customary for financing transactions of this nature.

Under the Credit Agreement, revolving loans may be borrowed, repaid and reborrowed until the Maturity Date, at which time all amounts borrowed must be repaid.

The Company borrowed $ 300.0 million under a term loan on June 30, 2022.

The principal balance of the term loans must be repaid in quarterly installments on the last day of each calendar quarter in the amount of $ 1.9 million commencing September 30, 2022, through June 30, 2024, and in the amount of $ 3.8 million commencing September 30, 2024, through March 31, 2027, with the remaining outstanding principal balance payable in full on the Maturity Date.

Accrued interest on the loans is payable in arrears on each interest payment date applicable thereto and at such other times as may be specified in the Credit Agreement.

Subject to certain conditions, (i) the Company may terminate or reduce the Aggregate Revolving Commitments, as defined in the Credit Agreement, in whole or in part, and (ii) the Company may prepay the revolving loans or the term loans at any time, without premium or penalty.

During the fiscal year ended December 31, 2022, the Company made term loan payments of $ 3.8 million.

The revolving loan and term loan balance under the Credit Facility was $ 100.0 million and $ 296.3 million, respectively, as of December 31, 2022.

On May 12, 2022, the Company entered into an interest rate swap agreement to manage interest rate risk exposure, effectively converting the interest rate on the Company's SOFR based floating-rate loans to a fixed-rate.

The interest rate swap, with a notional value of $ 200 million, was designated as a cash flow hedge against the variability of cash flows associated with the Company's SOFR based loans scheduled to mature on June 30, 2027.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8, 2028 (“Euro Senior Notes, Series B due 2028”) (together, the “Euro Senior Notes”).

As of December 31, 2022, the effective interest rate on outstanding borrowings under the credit facility was 5.42 %.

As of December 31, 2022, the Company had no outstanding in letters of credit and had available $ 600.0 million of borrowing capacity under the revolving credit facility.

At December 31, 2022, the Company was in compliance with all covenants under the credit agreement.

On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and sold € 212 million aggregate principal amount of senior notes in two series.

Interest on the Euro Senior Notes is payable semiannually on June 8 and December 8, commencing June 8, 2017.

6 unchanged sentences

Senior Notes due 2022 and 2027 is payable semiannually on February 15 and August 15, commencing August 15, 2017.

During the fiscal year ended December 31, 2022, the Company paid off $ 25.0 million of U.S.

Senior Notes, Series A due 2022.

On November 15, 2017, the Company entered into a Note Purchase Agreement pursuant to which the Company issued and sold $ 175 million in aggregate principal amount of senior notes in two series.

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Senior Notes, Series B due 2030”) (together, the “U.S.

Senior Notes due 2025 and 2030” and with the Euro Senior Notes and the U.S.

Senior Notes 2022 and 2027, the “Senior Notes”) were funded.

Senior Notes due 2025 and 2030”) were funded.

Interest on the U.S.

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

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

On May 18, 2022, the above note purchase agreements were amended to, among other things, update certain terms, including financial covenants to be consistent with the terms of the restated Credit Agreement and the 2022 Purchase Agreement, as defined below.

On May 18, 2022, the Company entered into a Note Purchase Agreement (“2022 Purchase Agreement”) pursuant to which the Company issued and funded on July 18, 2022 $ 100 million in aggregate principal amount of 4.33 % Senior Notes, due June 30, 2032 (“U.S.

Senior Notes, due 2032”) (together with the U.S.

Senior Notes due 2025 and 2030, the Euro Senior Notes and the U.S.

Senior Notes due 2022 and 2027, the “Senior Notes”).

Interest on the U.S.

Senior Notes due 2032 is payable semiannually on June 30 and December 30, commencing on December 30, 2032.

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

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In addition, the Company is required to satisfy certain financial covenants and tests relating to, among other matters, interest coverage and leverage.

At January 1, 2022, the Company was in compliance with all covenants under the Senior Notes.

At December 31, 2022, the Company was in compliance with all covenants under the Senior Notes.

The Company may redeem the Senior Notes upon the satisfaction of certain conditions and the payment of a make-whole amount to noteholders, and are required to offer to repurchase the Senior Notes at par following certain events, including a change of control.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Debt Issuance Costs

During fiscal year 2022, the Company paid debt issuance costs of $ 2.7 million in connection with the amended and restated Credit Agreement, dated June 30, 2022 which, along with the remaining balance of debt issuance costs of the previous credit facility noted in below, are being amortized over the life of the amended and restated Credit Agreement.

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.

Debt Maturities

Scheduled maturities of the Company’s long-term debt for each of the five years succeeding January 1, 2022 and thereafter are summarized as follows:

Scheduled maturities of the Company’s long-term debt for each of the five years succeeding December 31, 2022 and thereafter are summarized as follows:

(in thousands)

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Level 3 —Valuations based upon one or more significant unobservable inputs.

There were no transfers in or out of Level 1, Level 2 and Level 3 during the year ended December 31, 2022.

Following is a description of the valuation methodologies used for instruments measured at fair value and their classification in the valuation hierarchy.

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Other Investments

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.

As o fJanuary 1, 2022 and December 26, 2020, the balances of these investments were zero and $ 0.5 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.

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

During the fiscal year ended January 1, 2022, the Company impaired the remaining book value of these investments and recorded an impairment charge of $ 0.5 million in Other expense (income), net in the Consolidated Statements of Net Income.

As of December 31, 2022 and January 1, 2022, the balances of these investments were zero .

Derivatives Designated as Hedging Instruments

The fair value of the interest rate swap was valued using an independent third-party valuation model.

Pursuant to this model, c hanges in fair value of derivatives that are designated as cash flow hedges are deferred in accumulated other comprehensive (loss) income until the underlying transactions are recognized in earnings.

The primary inputs into the valuation of the interest rate swap are interest yield curves, interest rate volatility, credit risk, credit spreads and other market information.

The interest rate swap is classified within Level 2 of the fair value hierarchy, since all significant inputs are corroborated by observable market data.

The use of derivatives creates exposure to credit risk relating to potential losses that could be recognized in the event that the counterparties to these instruments fail to perform their obligations under the contracts.

The Company seeks to minimize this risk by limiting our counterparties to major financial institutions with acceptable credit ratings and monitoring the total value of positions with individual counterparties.

In the event of a default by one of our counterparties, the Company may not receive payments provided for under the terms of our derivatives.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivatives Not Designated as Hedging Instruments

On July 14, 2022, the Company entered into a foreign currency exchange forward contract to mitigate the currency fluctuation risk between the Euro and U.S.

dollar on its Euro denominated Senior Notes, Series A due 2023.

The notional value of the forward contract at July 14, 2022 was € 117.0 million and expires on December 7, 2023.

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

As a result, changes in fair value are reported in Foreign exchange loss (gain) in the Consolidated Statements of Net Income.

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

As of December 31, 2022, the fair values of our derivative financial instrument and their classifications on the Consolidated Balance Sheets were as follows:

(in thousands) Consolidated Balance Sheet Classification Fiscal Year Ended December 31, 2022

Derivatives Designated as Hedging Instruments

Interest rate swap agreement:

Designated as cash flow hedge Prepaid expenses and other current assets $ 3,939

Other long-term assets $ 4,740

Derivatives Not Designated as Hedging Instruments

Foreign exchange forward contract Prepaid expenses and other current assets $ 6,186

The pre-tax gains recognized on derivative financial instruments in the Consolidated Statements of Operations for the fiscal year ended December 31, 2022 were as follows:

(in thousands) Classification of Gain Recognized in the Consolidated Statements of Operations Fiscal Year Ended December 31, 2022

Derivatives designated as cash flow hedges

Interest rate swap agreement Interest expenses, net $ ( 100 )

Derivatives Not Designated as Hedging Instruments

Foreign exchange forward contract Foreign exchange loss (gain) $ ( 6,128 )

The pre-tax gain recognized on derivative financial instruments in the Consolidated Statements of Comprehensive Income for the fiscal year ended December 31, 2022 was as follows:

(in thousands) Fiscal Year Ended December 31, 2022

Derivatives designated as cash flow hedges

Interest rate swap agreement $ ( 8,679 )

A pre-tax gain of $ 3.9 million fr om accumulated other comprehensive income (loss) to earnings is expected to be recognized during the next twelve months.

The Compa ny has a non-qualified Supplemental Retirement and Savings Plan that provides additional retirement benefits for certain management employees and named executive officers by allowing participants to defer a portion of their annual compensation.

The Company maintains investment accounts for participants through which participants make investment elections.

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 and recorded in Other long-term assets on the Consolidated Balance sheet.

There we re no changes during the fiscal year ended December 31, 2022 to the Company’s valuation techniques used to measure asset and liability fair values o n a recurring basis.

As of December 31, 2022 and January 1, 2022, the Company did not hold any non-financial assets or liabilities that are required to be measured at fair value on a recurring basis.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Defined Benefit Plan Assets / Non-qualified Supplemental Retirement and Savings Plan Investments

See Note 11, Benefit Plans, for description of valuation methodologies and investment balances for defined benefit plan assets and investments related to the Company’s Non-Qualified Supplemental Retirement and Savings Plan.

Foreign currency exchange forward contract

There were no changes during 2021 to the Company’s valuation techniques used to measure asset and liability fair values on a recurring basis.

On October 30, 2019, the Company entered a foreign currency exchange forward contract to mitigate the currency fluctuation risk between the Chinese renminbi and U.S dollar.

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

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 expense (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 January 1, 2022 and December 26, 2020, 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 following table presents assets measured at fair value by classification within the fair value hierarchy as of January 1, 2022:

The following table presents assets measured at fair value by classification within the fair value hierarchy as of December 31, 2022:

Fair Value Measurements Using

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$ 328,848 $ — $ — $ 328,848

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

The following table presents assets measured at fair value by classification within the fair value hierarchy as of January 1, 2022:

Fair Value Measurements Using

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Due to their short-term maturity, the carrying amounts of cash and cash equivalents, short-term investments and trade receivables approximate their fair values.

The Company’s revolving and term loan debt facilities’ fair values approximate book value at January 1, 2022 and December 26, 2020, as the rates on these borrowings are variable in nature.

The carrying value and estimated fair values of the Company’s Euro Senior Notes, Series A and Series B and USD Senior Notes, Series A and Series B, as of January 1, 2022 and December 26, 2020 were as follows:

January 1, 2022 December 26, 2020

The Company’s revolving and term loan debt facilities’ fair values approximate book value at December 31, 2022 and January 1, 2022, as the rates on these borrowings are variable in nature.

The carrying value and estimated fair values of the Company’s Euro Senior Notes, Series A and Series B and USD Senior Notes, Series A and Series B, as of December 31, 2022 and January 1, 2022 were as follows:

December 31, 2022 January 1, 2022

(in thousands)

8 unchanged sentences

USD Senior Notes, Series B due 2030 125,000 112,028 125,000 131,837

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.

USD Senior Notes, due 2032 100,000 90,131 — —

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value as of the measurement date, net book value as of the end of the year and related 2020 goodwill impairment for assets measured at fair value on a nonrecurring basis subsequent to initial recognition during the years ended December 26, 2020 were as follows:

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.

During the fourth quarter of 2022, the Company recorded a $ 2.9 million intangible asset impairment charge in Restructuring, impairment, and other charges in the Consolidated Statements of Net Income, f or certain acquired technology and patent intangible assets due to a change in use and projected cash flows within the Electronics segment.

See Note 5, Goodwill and Other Intangible Assets, for further discussion.

Additionally, the Company recorded a non-cash impairment charge of $ 1.7 million for certain machinery and equipment within Electronics segment due to a decision to cease further production of a product line during the fourth quarter of 2022.

The fair value of the patent, technology and machinery and equipment were measured on a nonrecurring basis using Level 3 inputs under the fair value hierarchy.

Benefit Plans

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pension plan participants, or their designated beneficiaries.

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 of 2020.

Additionally, the Company made a cash contribution of $ 10.4 million (£ 8.4 million) under this agreement during the second quarter of 2020.

The Company completed the buy-out of this U.K.

pension plan during the fourth quarter of 2021 and as a result recorded a non-cash pension settlement charge of $ 19.9 million (£ 14.9 million), inclusive of the accelerated recognition of prior service cost of $ 0.5 million (£ 0.4 million).

The purchase of this group annuity contract reduced the Company’s outstanding pension benefit obligation by $ 47.1 million, representing 35 % of the total obligations of the Company’s qualified pension plans.

Benefit plan related information is as follows for the years 2022 and 2021:

4 unchanged sentences

Interest cost 2,529 1,761

Net actuarial (gain) loss ( 11,016 ) 25,306

Net actuarial gain ( 19,327 ) ( 11,016 )

Benefits paid from the plan assets ( 1,474 ) ( 3,121 )

Benefits paid directly by the Company ( 1,853 ) ( 2,692 )

(Settlements) and Curtailments ( 48,927 ) 102

Settlements ( 1,565 ) ( 48,927 )

Acquisitions 3,812 1,797

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Fair value of plan assets at beginning of year $ 48,325 $ 100,478

Actual (loss) return on plan assets ( 2,824 ) 7,053

Actual loss on plan assets ( 9,217 ) ( 2,824 )

Employer contributions 2,288 2,150

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts recognized in the Consolidated Balance Sheets as of January 1, 2022 and December 26, 2020 consist of the following:

Amounts recognized in the Consolidated Balance Sheets as of December 31, 2022 and January 1, 2022 consist of the following:

(in thousands)

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Net liability recognized $ ( 29,093 ) $ ( 38,245 )

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 January 1, 2022 and December 26, 2020 were as following:

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 31, 2022 and January 1, 2022 were as follows:

(in thousands)

Net actuarial loss $ 9,221 $ 37,285

Net actuarial (gain) loss $ ( 631 ) $ 9,221

Prior service cost 1,496 3,340

Total $ 865 $ 12,561

The pre-tax amounts recognized in other comprehensive income (loss) in 2021 were as follows:

The pre-tax amounts recognized in other comprehensive income (loss) in 2022 and 2021 were as follows:

(in thousands)

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Amount arising during the period:

Prior service cost ( 209 )

Net actuarial loss 6,734

Net settlement loss and accelerated prior service costs 19,855

Prior service cost (credit) 1,399 ( 209 )

Net actuarial gain 9,899 6,734

Net settlement (gain) loss ( 820 ) 19,855

Foreign currency adjustments 840 966

1 unchanged sentence

In the fourth quarter of 2021, the Company recorded a non-cash pension settlement charge of $ 19.9 million (£ 14.9 million), inclusive of the accelerated recognition of prior service cost of $ 0.5 million (£ 0.4 million).

In addition, the net actuarial loss and change in benefit obligation arising during 2021 as compared to 2020 were also impacted by higher discount rates in 2021 as compared to 2020.

The components of net periodic benefits costs for the fiscal years 2021, 2020, and 2019 are as follows:

In addition, the net actuarial gain and change in benefit obligation during 2022 as compared to 2021 were also impacted by higher discount rates in 2022 as compared to 2021.

The components of net periodic benefit costs for the fiscal years 2022, 2021, and 2020 are as follows:

(in thousands)

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Net periodic benefit cost 4,472 4,403 3,626

Net settlement loss 19,855 236 260

Net settlement (gain) loss ( 820 ) 19,855 236

Total expense for the year $ 3,652 $ 24,258 $ 3,862

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Compensation increase rate 4.8 % 4.9 % 4.7 %

The accumulated benefit obligation for the plans was $ 75.7 million and $ 137.7 million as of January 1, 2022 and December 26, 2020, 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 January 1, 2022 and December 26, 2020:

The accumulated benefit obligation for the plans was $ 53.9 million and $ 75.7 million as of December 31, 2022 and January 1, 2022, 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 31, 2022 and January 1, 2022:

(in thousands)

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Fair value of plan assets 13,650 47,942

The following table provides a summary of under-funded or unfunded pension benefit plans with accumulated benefit obligations in excess of plan assets as of January 1, 2022 and December 26, 2020:

The following table provides a summary of under-funded or unfunded pension benefit plans with accumulated benefit obligations in excess of plan assets as of December 31, 2022 and January 1, 2022:

(in thousands)

1 unchanged sentence

Fair value of plan assets 4,948 39,060

Weighted average assumptions used to determine benefit obligations as of January 1, 2022, December 26, 2020 and December 28, 2019 are as follows:

Weighted average assumptions used to determine benefit obligations as of December 31, 2022, January 1, 2022 and December 26, 2020 are as follows:

2022 2021 2020

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The Company expects to make approximately $ 2.0 million of contributions to the plans and pay $ 1.9 million of benefits directly in 2023.

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

For the fiscal year ended January 1, 2022, December 26, 2020, and December 28, 2019, the Company recorded $ 2.1 million, $ 2.0 million, $ 1.4 million expense, respectively, in Cost of Sales and Other expense (income), net within the Consolidated Statements of Net Income.

As of January 1, 2022 and December 26, 2020, the Company reported benefit liabilities of $ 4.1 million and $ 3.5 million for these plans, of which $ 1.5 million and $ 1.2 million was recorded in Accrued liabilities and $ 2.6 million and $ 2.3 million was recorded in Other long-term liabilities on the Consolidated Balance Sheets, respectively.

For the fiscal year ended January 1, 2022 and December 26, 2020, the pre-tax amounts recognized in other comprehensive income (loss) for these plans

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

were $ 0.3 million and $ 0.1 million, respectively.

For the fiscal year ended January 1, 2022 and December 26, 2020, the amount reclassified from accumulated other comprehensive income (loss) were $ 0.7 million and $ 0.7 million, respectively.

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

For the fiscal years ended December 31, 2022, January 1, 2022, and December 26, 2020, the Company recorded $ 1.9 million, $ 2.1 million, $ 2.0 million expense, respectively, in Cost of Sales and Other expense (income), net within the Consolidated Statements of Net Income.

As of December 31, 2022 and January 1, 2022, the Company reported benefit liabilities of $ 4.0 million and $ 4.1 million for these plans, of which $ 1.5 million and $ 1.5 million was recorded in Accrued liabilities and $ 2.5 million a nd $ 2.6 million w as recorded in Other long-term liabilities on the Consolidated Balance Sheets, respectively.

For the fiscal years ended December 31, 2022 and January 1, 2022, the pre-tax amounts recognized in other comprehensive income (loss) for these plans were $ 0.5 million and $ 0.3 million, respectively.

For the fiscal year ended December 31, 2022, the expense reclassified from accumulated other comprehensive income (loss) to earnings was $ 1.7 million, including $ 1.3 million net settlement loss.

For the fiscal year ended January 1, 2022, the expense reclassified from accumulated other comprehensive income (loss) to earnings was $ 0.7 million.

Defined Benefit Plan Assets

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Fixed income securities 73 % 66 %

Bulk annuity contract — % 53 %

The Company segregated its plan assets by the following major categories and level for determining their fair value as of January 1, 2022 and December 26, 2020.

The Company segregated its plan assets by the following major categories and level for determining their fair value as of December 31, 2022 and January 1, 2022.

All plan assets that are valued using the net asset value per share (“NAV”) practical expedient have not been included within the fair value hierarchy but are separately disclosed.

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

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.

The Company has no bulk annuity contract pension assets as of January 1, 2022.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The valuation methodologies described above may generate a fair value calculation that may not be indicative of net realizable value or future fair values.

1 unchanged sentence

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

date, as there are no significant restrictions on redemption of these investments or other reasons to indicate that the investment would be redeemed at an amount different than the NAV.

The following table presents the Company’s pension plan assets measured at fair value by classification within the fair value hierarchy as of January 1, 2022:

The Company believes that the NAV is representative of fair value at the reporting date, as there are no significant restrictions on redemption of these investments or other reasons to indicate that the investment would be redeemed at an amount different than the NAV.

The following table presents the Company’s pension plan assets measured at fair value by classification within the fair value hierarchy as of December 31, 2022:

Fair Value Measurements Using

6 unchanged sentences

Total pension plan assets $ 8,949 $ 21,003 $ 328 $ 5,153 $ 35,433

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:

The following table presents the Company’s pension plan assets measured at fair value by classification within the fair value hierarchy as of January 1, 2022:

Fair Value Measurements Using

5 unchanged sentences

Fixed income 5,999 20,280 — 5,607 31,886

Bulk annuity contract 53,093 53,093

Total pension plan assets $ 8,942 $ 33,433 $ 343 $ 5,607 $ 48,325

The fair value measurement of plan assets using significant unobservable inputs (Level 3) changed during 2021 due to the following:

The fair value measurement of plan assets using significant unobservable inputs (Level 3) changed during 2022 and 2021 due to the following:

(in thousands)

6 unchanged sentences

Balance at January 1, 2022 $ 343

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

Employer contribution 2

Actual return on assets 3

Foreign currency adjustments ( 20 )

Balance at December 31, 2022 $ 328

Defined Contribution Plan

1 unchanged sentence

The Company matches 100 % of the employee’s annual contributions for the first 4 % of the employee’s eligible compensation.

The Company may provide an additional discretionary match to participants and made discretionary matches of 2 % of the employee’s eligible compensation for each of the fiscal year ended January 1, 2022, December 26, 2020 and December 28, 2019.

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

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 31, 2022, January 1, 2022 and December 26, 2020.

Employees are immediately

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Company matching contributions amounted to $ 5.5 million, $ 5.0 million, and $ 4.6 million in 2022, 2021, and 2020, respectively.

2 unchanged sentences

The Company maintains accounts for participants through which participants make investment elections.

The investments are subject to the claims of the Company’s creditors and the Company is responsible for the payment of all benefits

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

under the plan from its general assets.

As of January 1, 2022, there was $ 15.0 million of marketable securities related to the plan included in Other assets and $ 15.0 million of accrued compensation benefits included in Other long-term liabilities .

The investments are subject to the claims of the Company’s creditors and the Company is responsible for the payment of all benefits under the plan from its general assets.

As of December 31, 2022, there was $ 14.1 million of marketable securities related to the plan included in Other assets and $ 14.1 million of accrued compensation benefits included in Other long-term liabilities .

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

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The Company has equity-based compensation plans authorizing the granting of stock options, restricted shares, restricted share units, and other stock rights to employees and directors.

As of January 1, 2022, there were 0.8 million shares available for issuance of future awards under the Company’s equity-based compensation plans.

As of December 31, 2022, there were 0.6 million shares available for issuance of future awards under the Company’s equity-based compensation plans.

Stock options generally vest over a three-year period and are exercisable over either a seven or ten-year period commencing from the date of the grant.

1 unchanged sentence

Stock options and restricted share units may have accelerated vesting upon meeting certain qualified conditions.

The following table provides a reconciliation of outstanding stock options for the fiscal year ended January 1, 2022.

The following table provides a reconciliation of outstanding stock options for the fiscal year ended December 31, 2022.

Option Weighted

2 unchanged sentences

(Years) Aggregate

Outstanding December 26, 2020 666,949 $ 148.01

Outstanding January 1, 2022 563,226 $ 165.98

Granted 86,220 231.64

1 unchanged sentence

Forfeited ( 2,237 ) 153.14

Outstanding January 1, 2022 563,226 165.98 4.7 $ 83,749

Exercisable January 1, 2022 240,030 148.66 3.7 39,850

The following table provides a reconciliation of non-vested restricted share and share unit awards ("RSU") for the fiscal year ended January 1, 2022.

Outstanding December 31, 2022 617,856 176.79 4.2 $ 30,555

Exercisable December 31, 2022 292,824 159.93 3.2 18,566

The following table provides a reconciliation of non-vested restricted share and share unit awards ("RSU") for the fiscal year ended December 31, 2022.

Shares Weighted Average

Grant-Date Fair Value

Nonvested December 26, 2020 172,002 $ 152.25

Nonvested January 1, 2022 156,659 $ 192.44

Granted 90,970 228.78

1 unchanged sentence

Forfeited ( 7,521 ) 227.96

Nonvested January 1, 2022 156,659 192.44

Nonvested December 31, 2022 168,286 213.65

The total intrinsic value of options exercised during 2022, 2021, and 2020 was $ 3.7 million, $ 23.8 million, and $ 20.6 million, respectively.

The total fair value of the vested RSU shares was $ 18.9 million, $ 9.5 million, and $ 15.5 million for 2021, 2020, and 2019, respectively.

The total fair value of the vested RSU shares was $ 15.4 million, $ 18.9 million, and $ 9.5 million for 2022, 2021,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and 2020, respectively.

The total amount of share-based liabilities paid was $ 1.1 million, $ 1.3 million and $ 0.5 million for 2022, 2021, and 2020, respectively.

The Company recognizes compensation cost of all share-based awards as an expense on a straight-line basis over the vesting period of the awards.

At January 1, 2022, the unrecognized compensation cost for options and restricted shares was $ 21.9 million before tax, and will be recognized over a weighted average period of 1.8 years.

At December 31, 2022, the unrecognized compensation cost for options and restricted shares was $ 21.1 million before tax, and will be recognized over a weighted average period of 1.8 years.

Compensation cost included as a component of cost of sales, research and development and selling, general, and administrative expenses for all equity compensation plans discussed above was $ 24.6 million, $ 21.4 million, and $ 19.1 million for 2022, 2021, and 2020, respectively.

The total related income tax benefit recognized in the Consolidated Statements of Net Income w as $ 3.3 million , $ 3.1 million and $ 3.3 million for 2021, 2020, and 2019, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The total related income tax benefit recognized in the Consolidated Statements of Net Income was $ 3.5 million, $ 3.3 million and $ 3.1 million for 2022, 2021, and 2020, respectively.

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

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Share Repurchase Program

On April 26, 2019, the Company's Board of Directors authorized 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").

On April 29, 2020, the Company announced that the 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.

On April 28, 2021, the Company announced that the Board of Directors authorized a new three-year program to repurchase up to $ 300 million in the aggregate of shares of the Company’s common stock for the period May 1, 2021 to April 30, 2024 to replace its previous 2020 program.

There are $ 300 million in the aggregate of shares available for purchase under the new program as of January 1, 2022.

During the fiscal year 2021, the Company did not repurchase any shares of its common stock.

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

There are $ 300 million in the aggregate of shares available for purchase under the new program as of December 31, 2022.

During the fiscal years 2022 and 2021 , the Company did not repurchase any shares of its common stock.

During the fiscal year 2020 , the Company repurchased 175,110 shares of its common stock totaling $ 22.9 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

Fiscal Year Ended

January 1, 2022 December 26, 2020 December 28, 2019

December 31, 2022 January 1, 2022 December 26, 2020

(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 $ 11,560 $ ( 1,825 ) $ 9,735 $ 27,481 $ ( 5,268 ) $ 22,213 $ ( 19,513 ) $ 3,418 $ ( 16,095 )

Cash flow hedge 8,679 ( 2,083 ) 6,596 — — — — — —

Foreign currency translation adjustments (1) ( 39,619 ) 987 ( 38,632 ) ( 6,967 ) 2,448 ( 4,519 ) 34,707 ( 2,946 ) 31,761

7 unchanged sentences

(in thousands)

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

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

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

Pension and postretirement liability and reclassification adjustments Cash flow hedge Foreign currency translation adjustments Accumulated other comprehensive income (loss)

Balance at December 28, 2019 $ ( 18,046 ) $ — $ ( 88,777 ) $ ( 106,823 )

3 unchanged sentences

Balance at January 1, 2022 ( 11,928 ) — ( 61,535 ) ( 73,463 )

2022 activity 9,735 6,596 ( 38,632 ) ( 22,301 )

Balance at December 31, 2022 ( 2,193 ) 6,596 ( 100,167 ) ( 95,764 )

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

4 unchanged sentences

Fiscal Year Ended

(in thousands) January 1, 2022 December 26, 2020 December 28, 2019

(in thousands) December 31, 2022 January 1, 2022 December 26, 2020

Pension and postemployment and other plans:

2 unchanged sentences

Total $ 1,262 $ 21,861 $ 1,930

The Company recognizes the amortization of prior service costs and net settlement loss in other expense (income), net within the Consolidated Statements of Net Income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recognizes the amortization of prior service costs and net settlement loss in other expense (income), net within the Consolidated Statements of Net Income.

The 2017 Tax Cuts and Jobs Act (the "Tax Act"), among other things, imposed a one-time tax (the “Toll Charge”) on accumulated earnings of certain non-U.S.

1 unchanged sentence

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

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 January 1, 2022, December 26, 2020 and December 28, 2019, 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 31, 2022, January 1, 2022, and December 26, 2020, 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:

15 unchanged sentences

Provision for income taxes $ 69,738 $ 57,219 $ 31,267

The current federal tax benefit for 2019 includes a benefit of $ 3.3 million from the recognition of previously unrecognized tax benefits (and the reversal of the related accrued interest) due to a lapse in the statute of limitations.

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:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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)

2 unchanged sentences

income tax rate differential ( 41,731 ) ( 31,414 ) ( 19,730 )

losses and expenses with no tax benefit 7,820 2,774 6,570

One-time tax deductions for stock of subsidiaries ( 11,495 ) — —

Tax on unremitted earnings 10,870 7,585 3,955

losses and expenses with no tax benefit 10,660 7,820 2,774

Net impact associated with U.S.

tax on Non-U.S.

income, including GILTI 2,546 ( 238 ) 3,731

Certain changes in unrecognized tax benefits and related accrued interest 1,839 4,263 2,160

Net impact associated with the GILTI tax provisions ( 238 ) 3,731 6,469

State and local taxes, net of federal tax benefit 215 ( 172 ) ( 584 )

2 unchanged sentences

Provision for income taxes $ 69,738 $ 57,219 $ 31,267

For fiscal year ended December 31, 2022, the Company classified certain amounts in “Net impact associated with U.S.

tax on Non-U.S.

income, including GILTI,” that in prior years were classified in “Other, net”.

Deferred income taxes are provided for the tax effects of temporary differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities.

Significant components of the company’s deferred tax assets and liabilities at January 1, 2022 and December 26, 2020, are as follows:

Significant components of the Company’s deferred tax assets and liabilities at December 31, 2022 and January 1, 2022, are as follows:

(in thousands) 2022 2021

1 unchanged sentence

Accrued expenses and reserves $ 49,138 $ 36,168

Domestic and non-U.S.

Net operating loss carryforwards 30,403 27,818

Domestic and non-U.S.

Interest expense carryforwards 33,507 16,089

Excess of tax basis over the book basis for intangible assets and goodwill 5,636 —

Capitalized expenses 11,632 4,878

research and other general business tax credit carryforwards 1,104 3,724

foreign tax credit carryforwards 3,385 980

Other 183 117

Gross deferred tax assets 92,856 75,029

research and other general business tax credit carryforwards 2,076 1,104

Excess of tax basis over the book basis for intangible assets and goodwill 404 5,636

Deferred tax assets 130,545 92,856

Valuation allowance ( 37,001 ) ( 34,869 )

2 unchanged sentences

Excess of book basis over the tax basis for intangible assets and goodwill 143,542 98,046

Excess of book basis over the tax basis for property, plant, and equipment 18,489 12,563

Tax on unremitted earnings 16,282 15,467

Unrealized foreign currency exchange gains 1,094 73

Excess of book basis over the tax basis for property, plant, and equipment 12,563 4,394

Total deferred tax liabilities 179,407 126,149

8 unchanged sentences

The Company paid income taxes of $ 96.8 million, $ 58.2 million, and $ 35.2 million in 2022, 2021, and 2020, respectively, and received income tax refunds of $ 3.2 million, $ 2.6 million, and $ 7.6 million in 2022, 2021, and 2020, respectively.

Deferred income taxes are not provided on the excess of the investment value for financial reporting over the tax basis of investments in those non-U.S.

subsidiaries for which such excess is considered to be permanently reinvested in those operations.

The Company believes the determination of the amount of such deferred income taxes is impractical as it would depend upon income tax laws and circumstances at the time of the hypothetical distributions or dispositions.

As of January 1,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2022, unremitted earnings of the Company’s non-U.S.

subsidiaries were approximately $ 884 million.

Deferred income taxes are not provided on the excess of the investment value for financial reporting over the tax basis of investments in those subsidiaries for which such excess is considered to be permanently reinvested in those operations.

As of December 31, 2022, unremitted earnings of the Company’s non-U.S.

subsidiaries were approximately $ 1.2 billion.

A distribution of such earnings will generally not be subject to U.S.

3 unchanged sentences

foreign tax credits, and $ 0.2 million for U.S.

state taxes) as of January 1, 2022 and $ 14.2 million ($ 13.9 million for non-U.S.

state taxes) as of December 31, 2022 and $ 15.5 million ($ 15.3 million for non-U.S.

taxes net of related U.S.

foreign tax credits, and $ 0.2 million for U.S.

state taxes) as of December 26, 2020, related to taxes on certain non-U.S.

state taxes) as of January 1, 2022, related to taxes on certain non-U.S.

earnings which are not considered to be permanently reinvested.

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

The tax holiday for one of the subsidiaries expires at the end of 2022, and for the other subsidiary the tax holiday will expire at the end of 2023.

The tax holiday for one of the subsidiaries expired at the end of 2022, and for the other subsidiary the tax holiday will expire at the end of 2023.

The Company intends to seek an extension for the expired tax holiday.

Together, the tax holidays contributed $ 10.1 million in tax benefits, or $ 0.40 per diluted share, during 2022.

1 unchanged sentence

There can be no assurance that future extensions will be granted.

A reconciliation of the beginning and ending amount of unrecognized tax benefits as of January 1, 2022, December 26, 2020, and December 28, 2019 is as follows:

A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 31, 2022, January 1, 2022, and December 26, 2020 is as follows:

(in thousands)

1 unchanged sentence

Balance at December 26, 2020 $ 17,437

Additions for tax positions taken in the current year 700

Decreases due to a lapse in the statute of limitations ( 103 )

Balance at December 26, 2020 17,437

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

2 unchanged sentences

Balance at January 1, 2022 23,445

The January 1, 2022 total in the table above 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 2022 based upon the possible lapse in the statute of limitations.

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

Additions for tax positions taken in the current year 2,153

Decreases for tax positions taken in the prior year ( 957 )

Decreases for lapses in statute of limitations ( 758 )

Other ( 235 )

Balance at December 31, 2022 $ 30,374

The December 31, 2022 total in the table above represents the net amount of tax benefits that, if recognized, would favorably affect the effective tax rate in future periods.

Of this amount, approximately $ 1.3 million may be recognized in 2023 based upon the possible lapse in the statute of limitations.

None of the positions included in unrecognized tax benefits are related to tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility.

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

The company recognized such interest expense of $ 1.6 million, $ 1.6 million (net of a $ 0.6 million decrease due to a lapse in the statute of limitations), and $ 1.3 million (net of a $ 0.6 million decrease due to a lapse in the statute of limitations) in 2021, 2020, and 2019, respectively.

Accrued interest for such matters included in Other long-term liabilities within the Consolidated Balance Sheets was $ 10.4 million and $ 8.8 million as of January 1, 2022 and December 26, 2020, respec tively.

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 $ 1.4 million (net of a $ 0.2 million decrease due to a lapse in the statute of limitations), $ 1.6 million (net of a $ 0.6 million decrease due to a lapse in the statute of limitations) and $ 1.6 million (net of a $ 0.6 million decrease due to a lapse in the statute of limitations) in 2022, 2021, and 2020, respectively.

Accrued interest for such matters included in Other long-term liabilities within the Consolidated Balance Sheets was $ 11.8 million and $ 10.4 million as of December 31, 2022 and January 1, 2022, respectively.

federal statute of limitations remains open for the Company for the 2017 tax year (with respect to the Toll Charge) and later years.

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 Korea, the Netherlands, the Philippines, and certain U.S.

Tax examinations occur from time to time, including examinations currently in process in Canada, Germany, the Netherlands, Singapore, the U.S., and certain U.S.

The Company does not expect to recognize a significant amount of additional tax expense as a result of concluding these examinations.

During 2021, the Company received a notice of assessment for approximately $ 3 million from the Canadian tax authorities.

The Company has objected to and appealed the assessment, and does not expect to recognize a significant amount of additional tax expense upon conclusion of such appeal.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12 unchanged sentences

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 87,425 , 20,139 , and 222,526 shares in 2022, 2021, and 2020, respectively.

During the fiscal year 2021, the Company did not repurchase any shares of its common stock.

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

During the fiscal year 2022 and 2021, the Company did not repurchase any shares of its common stock.

During the fiscal year 2020, the Company repurchased 175,110 shares of its common stock totaling $ 22.9 million.

See Note 12 Stock-Based Compensation for further discussion.

14 unchanged sentences

Except as discussed above, the accounting policies for segment reporting are the same as for the Company as a whole.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• Electronics Segment :

Consists of one of the broadest product offerings in the industry, including fuses and fuse accessories, positive temperature coefficient (“PTC”) resettable fuses, polymer electrostatic discharge (“ESD”) suppressors, varistors, reed switch based magnetic sensing, gas discharge tubes;

Consists of one of the broadest product offerings in the industry, including fuses and fuse accessories, positive temperature coefficient (“PTC”) resettable fuses, electromechanical switches and interconnect solutions, 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, silicon and silicon carbide metal-oxide-semiconductor field effect transistors (“MOSFETs”) and 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 and energy storage, building and home automation, appliances, and mobile electronics.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The segment covers a broad range of end markets, including industrial motor drives and power conversion, automotive electronics, electric vehicle and related charging infrastructure, aerospace, power supplies, data centers and telecommunications, medical devices, alternative energy and energy storage, building and home automation, appliances, and mobile electronics.

• Transportation Segment:

1 unchanged sentence

The term “Transportation” represents a more comprehensive description of the Company’s broad range of products, and the applications and end markets it serves.

Consists of a wide range of circuit protection, power control and sensing technologies for global original equipment manufacturers (“OEMs”), Tier-one suppliers and parts and aftermarket distributors in passenger vehicle, heavy duty truck, off-road vehicles, material handling, agricultural, construction and other commercial vehicle end markets.

Consists of a wide range of circuit protection, power control and sensing technologies for global original equipment manufacturers (“OEMs”), Tier-one suppliers and parts and aftermarket distributors in passenger vehicle, heavy-duty truck, off-road vehicle, material handling, agricultural, construction and other commercial vehicle end markets.

Passenger vehicle products are used in internal combustion engine, hybrid and electric vehicles including blade fuses, battery cable protectors, resettable fuses, high-current fuses, high-voltage fuses, and sensor products designed to monitor the occupant’s safety and environment as well as the vehicle’s powertrain.

1 unchanged sentence

• Industrial Segment:

Consists of industrial circuit protection (industrial fuse), industrial controls (protection relay, contactors, transformers) and temperature sensors for use in various applications such as renewable energy and energy storage systems, electric vehicle infrastructure, HVAC systems, industrial safety, non-residential construction, MRO, mining and industrial automation.

Consists of industrial circuit protection (industrial fuses), industrial controls (protection relays, contactors, and transformers) and temperature sensors for use in various applications such as renewable energy and energy storage systems, electric vehicle infrastructure, HVAC systems, industrial safety, non-residential construction, MRO, mining and industrial automation.

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

Segment information is summarized as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

19 unchanged sentences

Income before income taxes $ 443,044 $ 341,025 $ 161,253

(a) Included in “Other” Operating income (loss) for 2021 was $ 8.4 million of purchase accounting inventory step-up charges, $ 7.0 million of legal and professional fees and other integration expenses related to Carling, Hartland and other contemplated acquisitions, and $ 2.2 million of restructuring, impairment and other charges, primarily related to employee termination costs.

(a) Included in “Other” Operating income (loss) for 2022 was $ 17.6 million of legal and professional fees and other integration expenses related to completed and contemplated acquisitions, $ 15.6 million of purchase accounting inventory step-up charges, and $ 10.0 million of restructuring, impairment and other charges, primarily related to employee termination costs and a $ 2.9 million non-cash impairment charge for certain acquired technology and patent intangible assets due to a change in use and projected cash flows within the Electronics segment in the fourth quarter of 2022.

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

Included in “Other” Operating income (loss) for 2021 was $ 8.4 million of purchase accounting inventory step-up charges, $ 7.0 million of legal and professional fees and other integration expenses related to Carling, Hartland and other contemplated acquisitions, and $ 2.2 million of restructuring, impairment and other charges, primarily related to employee termination costs.

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

In addition, there was a gain of $ 5.0 million recorded for the sale of buildings within the Electronics segment.

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 $ 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

associated with the automotive sensors reporting unit within the Transportation 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 manufacturing facility within the Industrial segment and other restructuring charges of $ 0.2 million.

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.

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

The Company’s net sales, long-lived assets and additions to long-lived assets by country for the fiscal years ended 2022, 2021, and 2020 are as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

22 unchanged sentences

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

For the year ended January 1, 2022, approximately 69 % of the Company’s net sales were to customers outside the U.S.

(exports and foreign operations), including approximately 30 % to China.

For the year ended December 31, 2022, approximately 64 % of the Company’s net sales were to customers outside the U.S.

(exports and foreign operations), including approximately 25 % to China.

For the year ended January 1, 2022, approximately 69 % of the Company's net sales were to customers outside the U.S.

(exports and foreign operations), including approximately 30 % to China.

For the year ended December 26, 2020, approximately 73 % of the Company's net sales were to customers outside the U.S.

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Selected Quarterly Financial Data (Unaudited)

The quarterly periods for 2021 are for the 14-weeks ended January 1, 2022, 13-weeks ended September 25, 2021, June 26, 2021, and March 27, 2021, respectively.

The quarterly periods for 2020 are for the 13-weeks ended December 26, 2020, September 26, 2020, June 27, 2020, and March 28, 2020, respectively.

(in thousands, except per share data)

Net sales $ 553,065 $ 539,581 $ 523,488 $ 463,794 $ 400,696 $ 391,566 $ 307,337 $ 346,096

Gross profit 199,492 214,572 197,396 160,466 138,083 138,831 99,902 124,356

Operating income (loss) 92,797 120,107 96,257 76,481 65,014 64,558 ( 11,950 ) 44,750

Net income (loss) 51,944 92,054 82,095 57,713 58,977 55,356 ( 8,991 ) 24,644

Net income (loss) per share

Basic $ 2.11 $ 3.74 $ 3.34 $ 2.35 $ 2.41 $ 2.27 $ ( 0.37 ) $ 1.01

Diluted $ 2.08 $ 3.69 $ 3.30 $ 2.32 $ 2.39 $ 2.25 $ ( 0.37 ) $ 1.00

(a) In the fourth quarter of 2021, the Company recorded non-cash pension settlement charge of 19.9 million, $ 4.1 million gain related to a sale of building, $ 3.6 million in acquisition-related and integration costs, $ 1.6 million for purchase accounting inventory adjustments associated with the acquisition of Carling, $ 0.7 million charge for an asset retirement obligation related to the disposal of a business in 2019, $ 0.2 million in restructuring, impairment and other charges, and $ 0.2 million increase in coal mining reserves.

(b) In the third quarter of 2021, the Company recorded $ 2.0 million in acquisition-related and integration costs, $ 0.8 million in restructuring, impairment and other charges and $ 0.1 million charge for an asset retirement obligation related to the disposal of a business in 2019.

(c) In the second quarter of 2021, the Company recorded $ 3.3 million for purchase accounting inventory adjustments associated with the acquisition of Hartland, and $ 1.0 million loss recorded during the second quarter of 2021 for a total year-to-date gain of $ 0.9 million from the sale of a building within the Electronics segment, $ 0.8 million in employee termination costs and other restructuring charges, $ 0.5 million in acquisition-related and integration costs, and $ 0.5 million of impairment charges on certain other investments.

(d) In the first quarter of 2021, the Company recorded the Company recorded $ 3.5 million for purchase accounting inventory adjustments associated with the acquisition of Hartland, $ 1.9 million gain related to a sale of building, $ 0.8 million in acquisition-related and integration costs, and $ 0.4 million in restructuring, impairment and other charges.

(e) 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 costs.

(f) 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.

(g) 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 Transportation 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.

(h) 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Related Party Transactions

11 unchanged sentences

Fiscal Year Ended

January 1, 2022 December 26, 2020

December 31, 2022 January 1, 2022

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

3 unchanged sentences

Accounts payable balance $ — $ — $ 1.8 $ — $ — $ 1.8

Subsequent Events

On February 3, 2023, the Company acquired Western Automation Research and Development Limited (“Western Automation”) for approximately $ 162 million in cash.

Headquartered in Galway, Ireland, Western Automation is a designer and manufacturer of electrical shock protection devices used across a broad range of high-growth end markets, including e-Mobility off-board charging infrastructure, industrial safety and renewables.

Western Automation has annualized sales of approximately $ 25 million and will be reported within the company’s Industrial segment.

The company does not expect the acquisition to have a material impact to its 2023 financial results.The Company financed the transaction with cash on hand.

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