United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-K

Commission file number 0-20388

LITTELFUSE, INC.

(Exact name of registrant as specified in its charter)

773-628-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [  ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

(Cover continued from previous page)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ X ][X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  X]]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act (Check one): Large accelerated filer [X] Accelerated filer [  ] Non-accelerated filer [  ] Smaller reporting company [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

The aggregate market value of 22,318,71522,368,817 shares of voting stock held by non-affiliates of the registrant was approximately $2,080,104,238$2,607,309,310 based on the last reported sale price of the registrant’s Common Stock as reported on the NASDAQ Global Select Market^SM on June 28, 2014.July 2, 2016.

As of February 13, 2015,16, 2017, the registrant had outstanding 22, 593,24822,632,855 shares of Common Stock.Stock, net of Treasury Shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Littelfuse, Inc. Proxy Statement for the 20152017 Annual Meeting of Stockholders (the “Proxy Statement”) are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Annual Report on Form 10-K that are not historical facts are intended to constitute “forward-looking statements” entitled to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995 (“PSRLA”). These statements may involve risks and uncertainties, including, but not limited to, risks relating to product demand and market acceptance, economic conditions, the impact of competitive products and pricing, product quality problems or product recalls, capacity and supply difficulties or constraints, coal mining exposures reserves, failure of an indemnification for environmental liability, exchange rate fluctuations, commodity price fluctuations, the effect of the company’s accounting policies, labor disputes, restructuring costs in excess of expectations, pension plan asset returns being less than assumed, integration of acquisitions, uncertainties related to political and regulatory changes and other risks that may be detailed in “Item 1A. Risk Factors” below and in the company’s other Securities and Exchange Commission filings.

AVAILABLE INFORMATION

We are subject to the reporting and information requirements of the Securities Exchange Act of 1934, as amended and as a result, are obligated to file annual, quarterly, and current reports, proxy statements, and other information with the United States Securities and Exchange Commission (“SEC”). We make these filings available free of charge on our website (http://www.littelfuse.com) as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. Information on our website does not constitute part of this Annual Report on Form 10-K. In addition, the SEC maintains a website (http://www.sec.gov) that contains our annual, quarterly, and current reports, proxy and information statements, and other information we electronically file with, or furnish to, the SEC. Any materials we file with, or furnish to, the SEC may also be read and/or copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Our website address is included in this report for informational purposes only. Our website and the information contained therein or connected thereto are not incorporated into this Annual Report on Form 10-K.

PART I

ITEM 1. BUSINESS.BUSINESS.

GENERAL

Littelfuse, Inc., was incorporated under the laws of the State of Delaware in 1991. References herein to the “company,” “we,” “our” or “Littelfuse” refer to Littelfuse, Inc. and its subsidiaries (the “company”subsidiaries. References herein to “2016”, “fiscal 2016” or “Littelfuse”“fiscal year 2016” refer to the fiscal year ended December 31, 2016. References herein to “2015”, “fiscal 2015” or “we”“fiscal year 2015” refer to the fiscal year ended January 2, 2016. References herein to “2014”, “fiscal 2014” or “our”) is“fiscal year 2014” refer to the fiscal year ended December 27, 2014. The company operates on a 52-53 week fiscal year (4-4-5 basis) ending on the Saturday closest to December 31. Therefore, the financial results of certain fiscal years and the associated 14 week quarters will not be exactly comparable to the prior and subsequent 52 week fiscal years and the associated quarters having only 13 weeks. As a result of using this convention, each of fiscal 2016 and fiscal 2014 contained 52 weeks whereas fiscal 2015 contained 53 weeks.

OVERVIEW

We are one of the world’s leading suppliersuppliers of circuit protection products for the electronics, automotive, and electrical industries.industrial markets, with expanding platforms in sensors and power control components and modules. In addition to the broadest and deepest portfolio of circuit protection products and solutions, the company offers electronic reed switches and sensors, automotive sensors for comfort and safety systems and a comprehensive line of highly reliable electromechanical and electronic switch and control devices for commercial and specialty vehicles, and sensors for automobile safety systems, as well as protection relays and power distribution centers for the safe control and distribution of electricity. The company has a network of global engineering centers and labs that develop new products and product enhancements, provide customer application support and test products for safety, reliability, and regulatory compliance. The company’s devices protect products in virtually every market that uses electrical energy, from consumer electronics to automobiles to industrial equipment.

In the electronics market, the company supplies leading manufacturers such as Alcatel-Lucent, Cisco, Celestica, Delta, Flextronics, Foxconn, Hewlett-Packard, HTC, Huawei, IBM, Intel, Jabil, LG, Motorola, Nokia, Panasonic, Quanta, Samsung, Sanmina-SCI, Seagate, Siemens and Sony. The company is also the leading provider of circuit protection for the automotive industry and the third largest producer of electrical fuses in North America. In the automotive market, the company’s end customers include original equipment manufacturers (“OEM”) in North America, Europe and Asia such as BMW, Caterpillar, Chrysler, Daimler Trucks NA, Ford Motor Company, General Motors, Hyundai Group and Volkswagen. The company also supplies wiring harness manufacturers and auto parts suppliers worldwide, including Advance Auto Parts, Continental, Delphi, Lear, Leoni, O’Reilly Auto Parts, Pep Boys, Sumitomo, Valeo and Yazaki. In the electrical market, the company supplies representative customers such as Abbott, Acuity Brands, Dow Chemical, DuPont, GE, General Motors, Heinz, International Paper, John Deere, SMA, First Solar, Samsung, Merck, Poland Springs, Procter & Gamble, Rockwell, United Technologies and 3M. Through the company’s Electrical business, the company supplies industrial ground fault protection in mining and other large industrial operations to customers such as Potash Corporation, Mosaic, Agrium and Cameco.See “Business Environment: Circuit Protection Market.”Segments

The company reportsconducts its operationsbusiness through three reportable segments which are defined by three segments:markets and consist of: Electronics, Automotive, and Electrical.Industrial. For segment and geographical information and consolidated net sales and operating earningsincome see “Item 7. Item 7,Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations and Note 1514,Segment Information, of the Notes to Consolidated Financial Statements included in this report.Annual Report.

On January 3, 2014, the company acquired 100% of SymCom, Inc. (“SymCom”) for $52.8 million (net of cash acquired). Located in Rapid City, South Dakota, SymCom provides overload relays and pump controllers primarily to the industrial market. The acquisition allows the company to strengthen its position in the relay products market by adding new products and new customers within its Electrical business unit segment. The company funded the acquisition with available cash and proceeds from credit facilities.Strategy

On May 31, 2013,In December 2016, we announced a new five-year strategic plan. Building upon our achievements from our previous five-year plan and leveraging our position in global mega trends such as safety, connectivity, and energy efficiency, we are targeting accelerated annual organic growth of 5-7% and annual growth from strategic acquisitions of 5-7%. Our strategic goals include the company acquired 100%continued growth of Hamlin, Inc. (“Hamlin”) from Key Safety Systems, for $144.4 million (netour circuit protection business, accelerated growth in our power control business and the doubling of cash acquired). Hamlin is a manufacturer ofthe sensor technology providing standard productsplatform revenue over the next five years. We expect to do this through content and custom solutions for leading global manufacturers in the automotiveshare gains, targeting underpenetrated geographies and electronic industries. The acquisition allows the companymarkets, and innovation while continuing to expand its automotiveacquire and electronicsintegrate businesses that fit our strategic focus areas.

Recent Acquisitions

In 2016, 2015, and 2014, we completed several acquisitions that have broadened our product offerings in the global sensor market in both the Automotive and Electronics business segments. Hamlin has manufacturing, engineering and sales offices in the U.S., Mexico, Europe and Asia. The company funded the acquisition with available cash raised from borrowings on the company’s new credit arrangement (See Note 7 of the Notescontributed to Consolidated Statements included in this report).our growth.

Net sales by business unit segment for the periods indicated are as follows (in thousands):

●

ON Portfolio:On August 29, 2016, the company acquired certain assets of select businesses (the “ON Portfolio”) of ON Semiconductor Corporation for $104.0 million. The acquired business, which is included in the Electronics segment, consists of a product portfolio that includes transient voltage suppression (“TVS”) diodes, switching thyristors, and IGBTs for automotive ignition applications. The acquisition expands the company’s offerings in power semiconductor applications as well as increases its presence in the automotive electronics market. The ON Portfolio products have strong synergies with the company’s existing circuit protection business, will strengthen its channel partnerships and customer engagement, and expand its power semiconductor portfolio.

Sales and Operations

The company operates in three geographic regions: the Americas, Europe, and Asia-Pacific. The company manufactures products and sells to customers in all three regions.

Net sales by segment for the periods indicated are as follows:

Net sales in the company’s three geographic regions, based upon the shipped-to destination, are as follows (in thousands):follows:

The company’s products are sold worldwide through distributors, a direct sales force and manufacturers’ representatives. For the fiscal year ended December 27, 2014,2016, approximately 63%66% of the company’s net sales were to customers outside the United States (“U.S.”), including approximately 22%25% to China.

The company manufactures many of its products on fully integrated manufacturing and assembly equipment. The company maintains product quality through a Global Quality Management System with most manufacturing sites certified under ISO 9001:2000. In addition, several of the Littelfuse manufacturing sites are also certified under TS 16949 and ISO 14001.

References herein to “2014” or “fiscal 2014” refer toAdditional information regarding the fiscal year ended December 27, 2014. References herein to “2013” or “fiscal 2013” refer to the fiscal year ended December 28, 2013. References herein to “2012” or “fiscal 2012” refer to the fiscal year ended December 29, 2012.

The company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-Ksales by geographic area and all amendments to those reports are available free of charge through the “Investor Relations” sectionlong-lived assets in different geographic areas is in Note 14,Segment Information, of the company’s Internet website (http://www.littelfuse.com), as soon as practicable after such material is electronically filed with, or furnishedNotes to the Securities and Exchange Commission (the “SEC”), accessible via a link to the website maintained by the SEC. Except as otherwise provided herein, such information is not incorporated by reference intoConsolidated Financial Statements included in this Annual Report on Form 10-K.

BUSINESS ENVIRONMENT: CIRCUIT PROTECTION MARKETReport.

BUSINESS ENVIRONMENT

Electronic ProductsElectronics Segment

Electronic circuit protection, sensing, and control products are used to protect circuits in a multitude of electronic systems. The company’s product offering includes a complete line of overcurrent and overvoltage solutions as well as sensors, including (i) fuses and protectors, (ii) positive temperature coefficient (“PTC”)PTC resettable fuses, (iii) varistors, (iv) polymer electrostatic discharge (“ESD”)ESD suppressors, (v) discrete transient voltage suppression (“TVS”)TVS diodes, TVS diode arrays, protection and protectionswitching thyristors, (vi) gas discharge tubes, (vii) power switching components, (viii) fuseholders, and (ix) reed switch and sensor assemblies, (x) IGBT blocks, and (xi) related accessories.

Electronic fuses and protectors are devices that contain an element that melts in an overcurrent condition. Electronic miniature and subminiature fuses are designed to provide circuit protection in the limited space requirements of electronic equipment. The company’s fuses are used in a wide variety of electronic products, including mobile phones, flat-screen TVs, computers, and telecommunications equipment. The company markets these products under trademarked brand names including PICO® II and NANO2® SMF.

Resettable fuses are PTC polymer devices that limit the current when an overcurrent condition exists and then reset themselves once the overcurrent condition has cleared. The company’s product line offers both radial leaded and surface mount products. Varistors are ceramic-based, high-energy absorption devices that provide transient overvoltage and surge suppression for automotive, telecommunication, consumer electronics, and industrial applications. The company’s product line offers both radial leaded and multilayer surface mount products.

Polymer ESD suppressors are polymer-based devices that protect an electronic system from failure due to rapid transfer of electrostatic charge to the circuit. The company’s PulseGuard®PULSE-GUARD® line of ESD suppressors is used in PC and PC peripherals, digital consumer electronics, and wireless applications.

Discrete diodes, diode arrays, and protection thyristors are fast switching silicon semiconductor structures. Discrete diodes protect a wide variety of applications from overvoltage transients such as ESD, inductive load switching or lightning, while diode arrays are used primarily as ESD suppressors. Protection thyristors are commonly used to protect telecommunications circuits from overvoltage transients such as those resulting from lightning. Applications include telephones, modems, data transmission lines, and alarm systems. The company markets these products under trademarked brand names including TECCOR®, SIDACtor®, Battrax®, and SPA®.

Gas discharge tubes are very low capacitance devices designed to suppress any transient voltage event that is greater than the breakover voltage of the device. These devices are primarily used in telecommunication interface and conversion equipment applications as protection from overvoltage transients such as lightning.

Power switching components, such as switching thyristors and IGBTs, are used to regulate energy to various types of loads most commonly found in industrial and home applications. These components are easily activated from simple control circuits or interfaced to computers for more complex load control. Typical applications include heating, cooling, battery chargers and lighting.

Magnetic sensing products are used to monitor, sense, and measure magnetic fields in a number of applications.  The company’s product offerings include a line of reed switches, reed based sensors, and hall effect sensors. Reed switches are non-contact magnetically operated devices that provide an output based on the electrical load during the presence of magnetic field. They are used in a wide variety of applications including security, medical, fluid monitoring, telephones, fitness equipment, metering, toys, white goods, and consumer and industrial controls. Reed switch sensors utilize reed switch technology in various packaging configurations with custom enclosures, terminations, and connectors to provide an application specific product as a final assembly.  Key applications include fluid level monitoring, position sensing, fluid flow, and proximity sensing. Hall effect sensors utilize hall chip technology to sense magnetic fields to provide ratio metric output based on magnetic fields.  Key applications include motor speed sensing, directional sensing, rotation, and linear sensing.

In addition to the above products, the company is also a supplier of fuse holders, fuse blocks (including OMNI-BLOK®), and fuse clips primarily to customers that purchase circuit protection devices from the company.

Automotive ProductsSegment

Fuses are extensively used in automobiles, trucks, buses, and off-road equipment to protect electrical circuits and the wires that supply electrical power to operate lights, heating, air conditioning, radios, windows, and other controls. Currently, a typical automobile contains 30 to 100 fuses, depending upon the options installed. The fuse content per vehicle is expected to continue to grow as more electronic features are included in automobiles. Theautomobiles and as a result of vehicle electrification such as 48 volt, hybrid, and battery electric vehicles, for which the company also supplies fuses for the protection of electric and hybrid vehicles.supplies.

The company is a primary supplier of automotive fuses to United States, Asianworldwide automotive OEMs, through automotive fuse sales made to Tier One suppliers, main-fuse box, and European automotive OEM’s,wire harness manufacturers that incorporate the fuses into their products, as well as automotive component parts manufacturers, and automotive parts distributors. The company also sells its fuses in the replacement parts market, with its products being sold through merchandisers, discount stores, and service stations, as well as under private label by national firms.

The company invented and owns U.S. and foreign patents related to blade-type fuses, which is the standard and most commonly used fuse in the automotive industry. The company’s automotive fuse products are marketed under trademarked brand names, including ATO®, MINI®, MIDI®, MEGA®, Masterfuse^TMMasterfuse®, JCASE®, and CablePro®CABLE PRO®.

Products sold into the market include speed, position, and direction sensors, occupant safety sensors, solar sensors, fluid level, and quality sensors, fuel heating systems, rotary sensors for comfort applications, and water in fuel sensors. A majority of the company’s automotive fusesensor sales are made to main-fuse boxTier One suppliers and wire harness manufacturers that incorporate the fuses into their products. The remaining automotive fuse sales are made directly to automotive manufacturers, retailers who sell automotive parts and accessories, and distributors who in turn sell most of their products to wholesalers, service stations and non-automotive OEMs.distributors.

The company has expanded the Automotive Business Segmentsegment into the commercial vehicle market with various acquisitions, also expanding the acquisitionscompany’s portfolio of Cole Hersee and Terra Power.power control products. Additional products in this market include:  power distribution modules, low current switches, high current switches, solenoids and relays, electronic switches, battery management products, and ignition key switches.switches, and trailer connectors. Custom and market products are sold directly to a mix of OEMs, Tier One suppliers, aftermarket channels, as well as through general distribution. The company owns U.S. and foreign patents related to high current switching, power distribution modules, and switching.

The company has expanded into the automotive sensor market with the acquisitions of Accel AB and Hamlin. Additional products in this market include advanced electromechanical sensors and switches.Industrial Segment

Electrical Products

The company entered the electrical market in 1983 and manufactures and sells a broad range of low-voltage and medium-voltage circuit protection products to electrical distributors and their customers in the construction, OEM and industrial maintenance, repair and operating supplies (“MRO”) markets. The company also designs and manufactures portable custom electrical equipment for the mining and utility industry in Canada as well as protection relays for the global mining, oil and gas, industrial and marinegeneral industrial markets.

Power fuses are used to protect circuits in various types of industrial equipment and in industrial and commercial buildings. They are rated and listed under one of many Underwriters Laboratories’ fuse classifications. Major applications for power fuses include protection from overload and short-circuit currents in solar, motor branch circuits, heating and cooling systems, control systems, lighting circuits, solar and electrical distribution networks.

The company’s POWR-GARD® product line features the Indicator® series power fuse used in both the OEM and MRO markets. The Indicator® technology provides visual blown-fuse indication at a glance, reducing maintenance and downtime on production equipment. The Indicator® product offering is widely used in motor protection and industrial control panel applications.

Protection relays are used to protect personnel and equipment in mining, oil &and gas, and industrial environments from excessive currents, over voltages, and electrical shock hazards called ground faults. Major applications for protection relays include protection of motor, transformer, and power-line distribution circuits. Ground-fault relays are used to protect personnel and equipment in wet environments such as underground mining or water treatment applications where there is a greater risk for electricity to come in contact with water and create a shock hazard.

CustomLittelfuse custom-engineered electrical equipment is useddesigned and built for use in harsh or demanding environments such as underground mining where standard industrial electrical gear will not meet customer needs for reliability and durability.  Portable power substations are used throughout mines to transform voltage from distribution to utilization levels and distribute electrical power to mobileprovide local protection and control for equipment such as mining cutting machines, pumps, fans, conveyors, and other electrical machinery. Miner control units provideCustom-built switchgear is used in mining, oil and gas, and power management for critical electrically operated underground production equipment.generation where rugged designs, quick turnaround, unique footprints, or arc-resistant equipment is required.

PRODUCT DESIGN AND DEVELOPMENT

The company employs scientific, engineering, and other personnel to continually improve its existing product lines and to develop new products at its research, product design, and development (“R&D”) and engineering facilities in Champaign and Mt. Prospect, Illinois, Boston, Massachusetts,Fremont, California, Rapid City, South Dakota, Canada, China, Germany,Japan, Italy, the Philippines, Taiwan, Lithuania, Germany, and Mexico. The Product & Development Technology departments maintain a staff of engineers, chemists, material scientists and technicians whose primary responsibility is to design and develop new products.

Proposals for the development of new products are initiated primarily by sales, marketing, and marketingproduct management personnel with input from customers. The entire product development process usually ranges from a few months to 18 months based on the complexity of development, with continuous efforts to reduce the development cycle. During fiscal years 2014, 20132016, 2015, and 2012,2014, the company expended $31.1$42.2 million, $24.4$30.8 million, and $21.2$31.1 million, respectively, on R&D.

PATENTS, TRADEMARKS, AND OTHER INTELLECTUAL PROPERTY

The company generally relies on patents, trademarks, licenses, and nondisclosure agreements to protect its intellectual property and proprietary products. In cases where it is deemed necessary by management, key employees are required to sign an agreement that they will maintain the confidentiality of the company’s proprietary information and trade secrets.

As of December 27, 2014, the company owned 262 patents in North America, 113 patents in the European Union and 109 patents in other foreign countries. The company also has registered trademark protection for certainowns a large portfolio of its brand namespatents worldwide and logos. The 262 North American patents are in the following product categories: 141 electronics, 59 automotive and 62 electrical. Patents and licenses are amortized over a period of 7-50 years, with a weighted average life of 11.7 years. Distribution networks are amortized over a period of 3-20 years, with a weighted average life of 12.4 years. Trademarks and tradenames are amortized over a period of 5-20 years, with a weighted average life of 13.2 years. The company recorded amortization expense of $12.5 million, $9.3 million and $6.1 million in 2014, 2013 and 2012, respectively, related to amortizable intangible assets.

Newnew products are continually being developed to replace older products. The company regularly applies for patent protection on such new products. Although, in the aggregate, the company’s patents are important in the operation of its businesses, the company believes that the loss by expiration or otherwise of any one patent or group of patents would not materially affect its business.

License royalties amounted to $0.5 million, $0.6 million and $0.7 million for fiscal 2014, 2013 and 2012, respectively, and are included in other expense (income), net on the Consolidated Statements of Net Income.

MANUFACTURING

The company performs the majority of its own fabrication, stamps some of the metal components used in its fuses, holders and switches from raw metal stock and makes its own contacts and springs. In addition, the company fabricates silicon wafers for certain applications and performs its own plating (silver, nickel, zinc, tin, and oxides). All thermoplasticThermoplastic molded component requirements used for such products as the ATO® and MINI® fuse product lines are met through the company’s in-house molding capabilities. After components are stamped, molded, plated, and readied for assembly, final assembly is accomplished on fully automatic and semi-automatic assembly machines. Quality assurance and operations personnel, using techniques such as statistical process control, perform tests, checks and measurements during the production process to maintain the highest levels of product quality and customer satisfaction.

The principal raw materials for the company’s products include copper and copper alloys, heat-resistant plastics, zinc, melamine, glass, silver, gold, raw silicon, solder, and various gases. The company uses a solesingle source for several heat-resistant plastics and for zinc, but believes that suitable alternative heat-resistant plastics and zinc are available from other sources at comparable prices. All other raw materials are purchased from a number of readily available outside sources.

A computer-aided design and manufacturing system (CAD/CAM) expedites product development and machine design and the company’s laboratories test new products, prototype concepts and production run samples. The company participates in “just-in-time” delivery programs with many of its major suppliers and actively promotes the building of strong cooperative relationships with its suppliers by utilizing early supplier involvement techniques and engaging them in pre-engineering product and process development.

MARKETING

The company’s domestic sales and marketing staff of over 100 people maintains relationships with major OEMs and global distributors. The company’s sales, marketing and engineering personnel also interact directly with OEM engineers to ensure appropriate sensor design, circuit protection and reliability within the parameters of the OEM’s circuit design. Internationally, the company maintains a sales and marketing staff of over 100people with sales offices in the U.K., Germany, Spain, Brazil, Singapore, Taiwan, Japan, Hong Kong, Korea, China and India.parameters. The company also markets its products indirectly through a worldwide organization of over 60 manufacturers’ representatives and distributes through an extensive network of electronics, automotive and electrical distributors.

Electronics Segment

The company uses manufacturers’ representatives to sell its electronics products domestically and to call on major domestic and international OEMs and distributors. The company sells approximately 15%a majority of its domesticElectronics segment products directly to OEMs,through distribution, including global distributors such as Arrow Electronics, Future Electronics and TTI, Inc, with most of the remainder sold through distributors nationwide.

In the Asia-Pacific region, the company maintains a direct sales staff and utilizes distributors in Japan, Singapore, Korea, Taiwan, China, Malaysia, Hong Kong, India and the Philippines.directly to OEMs. In the Americas, the company maintains a direct sales staff and utilizes manufacturers’ representatives to sell its electronics products in the U.S. and Brazilto call on major U.S. and international OEMs and distributors. In Canada, the company utilizes manufacturers’ representatives and distributors in Canada.distributors. In Europe and Asia-Pacific regions, the company also maintains a direct sales forcestaff and utilizes manufacturers’ representatives and distributors to support a wide array of customers.distributors.

Automotive Segment

The company maintains a direct sales force to service all the major automotive and commercial vehicle OEMs, and system suppliers, domestically. Over 20and Tier One suppliers in the U.S. The company also has manufacturers’ representatives that sell the company’s products to aftermarket fuse retailers such as O’Reilly Auto Parts and Pep Boys. The company also uses about 15 manufacturers’ representatives to sell to the commercial vehicle aftermarket.product OEMs.

In Europe, the company uses both a direct sales force and manufacturers’ representatives to distributeservice its products to OEMs, major system suppliers and aftermarket distributors.distribution customers. In the Asia-Pacific region, the company uses both a direct sales force and distributors to supply to major OEMsOEM system suppliers and systemTier One suppliers.

ElectricalIndustrial Segment

The company markets and sells its power fuses and protection relays through over 55 manufacturers’ representatives across North America. These representatives sell power fuse products through an electrical and industrial distribution network comprised of approximately 2,000over 2,500 distributor buying locations. These distributors have customers that include electrical contractors, municipalities, utilities and factories (including both MRO and OEM).

The company’s field sales force (including regional sales managers and application engineers) and manufacturers’ representatives call on both distributors and end-users (consulting engineers, municipalities, utilities, and OEMs) in an effort to educate these customers on the capabilities and characteristics of the company’s products.

CUSTOMERS

The company sells to over 5,2006,000 customers and distributors worldwide. No single customer accounted for more than 10% of net sales during any of the last three years. During fiscal 2014, 20132016, 2015, and 2012,2014, net sales to customers outside the United StatesU.S. accounted for approximately 63%66%, 64%60%, and 67%63%, respectively, of the company’s total net sales.

COMPETITION

The company’s products compete with similar products of other manufacturers, some of which may have substantially greater financial resources than the company. In the electronics market, the company’s competitors include Cooper Industries (a subsidiary of Eaton Corporation, plc), Bel Fuse Inc., Bourns Inc., EPCOS, OnON Semiconductor Corporation, STMicroelectronics NV, Semtech Corporation, and Vishay Intertechnology Inc, and TE Connectivity Ltd.Inc. In the automotive market, the company’s competitors include Cooper Industries,Amphenol Corporation, Eaton Corporation, Pacific Engineering, (a private company in Japan), MTA, (a private company in Italy), D&R Technologies (a subsidiary of CTS Corporation) andCorporation, Amphenol, Sensata Technologies Holding NV.NV, and TE Connectivity Ltd. In the electricalindustrial market, the company’s major competitors include Cooper IndustriesEaton Corporation, GE Multilin, and Mersen. The company believes that it competes on the basis of innovative products, the breadth of its product line, the quality and design of its products, and the responsiveness of its customer service, in addition to price.

BACKLOG

The backlog of unfilled orders at December 27, 201431, 2016 was approximately $92.9$110.3 million, compared to $83.2$96.4 million at December 28, 2013.January 2, 2016. Substantially all of the orders currently in backlog are scheduled for delivery in 2015.2017.

EMPLOYEES

As of December 27, 2014,31, 2016, the company employed approximately 7,90010,300 employees worldwide.Approximately 1,6001,900 employees in Mexico are covered by collective bargaining agreements. In Mexico the company has two separate collective bargaining agreements, one for 1,0401,200 employees in Piedras Negras, expiring January 31, 20162018 and the second for 600720 employees in Matamoros, expiring January 1, 2016.2018. Approximately 21%18% of the company's total workforce was employed under collective bargaining agreements at December 27, 2014.  The company has no employees covered by a collective bargaining agreement that will expire within one year of December 27, 2014. The Germany collective bargaining agreement, which had covered three employees in Essen, expired at December 31, 2014 and negotiations are currently being conducted for a 2015 agreement.

2016. Overall, the company has historically maintained satisfactory employee relations and considers employee relations to be good.

ENVIRONMENTAL REGULATION

The company is subject to numerous foreign, federal, state, and local regulations relating to air and water quality, the disposal of hazardous waste materials, safety and health. Compliance with applicable environmental regulations has not significantly changed the company’s competitive position, capital spending or earnings in the past and the company does not presently anticipate that compliance with such regulations will change its competitive position, capital spending or earnings for the foreseeable future.

The company employs a chemical engineer to monitor regulatory matters and believes that it is currently in compliance in all material respects with applicable environmental laws and regulations.

Littelfuse GmbH, which was acquired by the company in May 2004, is responsible for maintaining closed coal mines from legacy operations. The company is compliant with German regulations pertaining to the maintenance of the mines and has an accrual related to certain of these coal mine shafts based on an engineering study estimating the cost of remediating the dangers (such as a shaft collapse) of certain of these closed coal mine shafts in Germany. The accrual is reviewed annually and calculated based upon the cost of remediating the shafts. Further information regarding the coal mine liability accrual is provided in Note 101,Summary of Significant Accounting Policies and Other Information, of the Notes to Consolidated Financial Statements included in this report.Annual Report.

ITEM 1A. RISK FACTORS.FACTORS.

Our business, financial condition, and results of operations are subject to various risks and uncertainties, including the risk factors we have identified below. Any of the following risk factors could materially and adversely affect our business, financial condition, or results of operations. These factors are not necessarily listed in order of importance. We may amend or supplement the risk factors from time to time by other reports that we file with the SEC in the future.

Ourindustry industry issubject subject tointensecompetitivepressures. intense competitive pressures.

We operate in markets that are highly competitive. We compete on the basis of price, quality, service, and/and / or brand name across the industries and markets we serve. Competitive pressures could affect the prices we are able to charge our customers or the demand for our products.

We may not always be able to compete on price, particularly when compared to manufacturers with lower cost structures. Some of our competitors have substantially greater sales, financial and manufacturing resources and may have greater access to capital than Littelfuse. As other companies enter our markets or develop new products, competition may further intensify. Our failure to compete effectively could materially adversely affect our business, financial condition, and results of operations.

Wemay may beunable unable tomanufacture manufacture anddeliverproducts deliver products in amanner manner that isresponsive responsive toourcustomers’needs. our customers’ needs.

The end markets for our products are characterized by technological change, frequent new product introductions and enhancements, changes in customer requirements and emerging industry standards. The introduction of products embodying new technologies and the emergence of new industry standards could render our existing products obsolete and unmarketable before we can recover any or all of our research, development, and commercialization expenses on capital investments. Furthermore, the life cycles of our products may change and are difficult to estimate.

Our future success will depend upon our ability to manufacture and deliver products in a manner that is responsive to our customers’ needs. We will need to develop and introduce new products and product enhancements on a timely basis that keep pace with technological developments and emerging industry standards and address increasingly sophisticated requirements of our customers. We invest heavily in research and development without knowing that we will recover these costs. Our competitors may develop products or technologies that will render our products non-competitive or obsolete. If we cannot develop and market new products or product enhancements in a timely and cost-effective manner, our business, financial condition, and results of operations could be materially adversely affected.

Ourbusinessmay business may beinterrupted interrupted bylabordisputes labor disputes orotherinterruptions other interruptions ofsupplies. supplies.

A work stoppage could occur at certain of our facilities, most likely as a result of disputes under collective bargaining agreements or in connection with negotiations of new collective bargaining agreements. In addition, we may experience a shortage of supplies for various reasons, such as financial distress, work stoppages, natural disasters or production difficulties that may affect one of our suppliers. A significant work stoppage, or an interruption or shortage of supplies for any reason, if protracted, could substantially adversely affect our business, financial condition, and results of operations. The transfer of our manufacturing operations and changes in our distribution model could disrupt operations for a limited time.

OurrevenuesmayvarysignificantlyOur revenues may vary significantly fromperiod period toperiod. period.

Our revenues may vary significantly from one accounting period to another due to a variety of factors including:

Thebankruptcy bankruptcy orinsolvency insolvency of amajorcustomercouldadverselyaffectus. major customer could adversely affect us.

The bankruptcy or insolvency of a major customer could result in lower sales revenue and cause a material adverse effect on our business, financial condition, and results of operations. In addition, the bankruptcy or insolvency of a major U.S. auto manufacturer or significant supplier likely could lead to substantial disruptions in the automotive supply base, resulting in lower demand for our products, which likely would cause a decrease in sales revenue and have a substantial adverse impact on our business, financial condition and results of operations.

Ourability ability tomanagecurrency manage currency orcommoditypricefluctuations commodity price fluctuations orshortages supply shortages islimited. limited.

As a resource-intensive manufacturing operation, we are exposed to a variety of market and asset risks, including the effects of changes in commodity prices, foreign currency exchange rates, commodity prices and interest rates. We have multiple sources of supply for the majority of our commodity requirements. However, significant shortages that disrupt the supply of raw materials or result in price increases could affect prices we charge our customers, our product costs, and the competitive position of our products and services. We monitor and manage these exposures as an integral part of our overall risk management program, which recognizes the unpredictability of markets and seeks to reduce the potentially adverse effects on our results. Nevertheless, changes in currency exchange rates, commodity prices and interest rates cannot always be predicted. In addition, because of intense price competition and our high level of fixed costs, we may not be able to address such changes even if they are foreseeable. Substantial changes in these rates and prices could have a material adverse effect on our results of operations and financial condition. In addition, significant portions of our revenues and earnings are exposed to changes in foreign currency rates. As we operate in multiple foreign currencies, changes in those currencies relative to the U.S. dollar will impact our revenues and expenses. The impact of possible currency devaluation in countries experiencing high inflation rates or significant exchange fluctuations can impact our results and financial guidance. For additional discussion of interest rate, currency or commodity price risk, see "Item 7A. Item 7A,Quantitative and Qualitative Disclosures about Market Risks.”Risks.

A significant fluctuation between the U.S. dollar and other currencies could adversely impact the Company's revenue and earnings.

Although the company's financial results are reported in U.S. dollars, the majority of the company’s operations consist of manufacturing and sales activities in foreign countries. The company’s most significant net long exposure is to the euro. The company’s most significant net short exposures are to the Chinese renminbi, Mexican peso, and Philippine peso. Changes in foreign exchange rates and in particular, an increase in the value of the U.S. dollar against foreign currencies, could have an adverse effect on profitability and financial condition.

OperationsWe are exposed to political, economic, and supply sources located outside the United States, particularly in emerging markets, are subject to greater risks.other risks that arise from operating a multinational business.

OurWe have significant operating activities outsidein numerous countries around the United Statesglobe that contribute significantly to our revenues and earnings. Serving a global customer base and remaining competitive in the global marketplace requires the company to place our production in countries outside the United States,U.S., including emerging markets, to capitalize on market opportunities and maintain a cost-efficient structure. In addition, we source a significant amount of raw materials and other components from third-party suppliers in low-cost countries. Our international operating activities are subject to a number of risks generally associated with internationalmulti-national operations, including risks relating to the following:

Any of these factors could have a material adverse effect on our business, financial condition and results of operations.

Weengage engage inacquisitions strategic acquisitions andmayencounterdifficulties may not realize the anticipated benefits of the acquisitions and / or may encounter difficulties inintegratingthesebusinesses. integrating these businesses.

We are a company that from time to time, seeks to grow through strategic acquisitions. We have in the past acquired a number of businesses or companies and additional product lines and assets. We intend to continue to expand and diversify our operations with additional future acquisitions.

An acquired business, technology, service or product could under-perform relative to our expectations and the price paid for it, or not perform in accordance with our anticipated timetable. This could cause our financial results to differ from expectations in any given fiscal period, or over the long term. The success of these transactions also depends on our ability to integrate the assets and personnel acquired in these acquisitions. We may encounter difficulties in integrating acquisitions with our operations material weaknesses in the acquired company's internal control environment and may not realize the degree or timing of the benefits that we anticipated from an acquisition.

We may also discover liabilities or deficiencies associated with the companies or assets we acquire that were not identified in advance, which may result in significant unanticipated costs. The effectiveness of our due diligence review and our ability to evaluate the results of such due diligence are dependent upon the accuracy and completeness of statements and disclosures made or actions taken by the companies we acquire or their representatives, as well as the limited amount of time in which acquisitions are executed. In addition, we may fail to accurately forecast the financial impact of an acquisition transaction, including tax and accounting charges. Acquisitions may also result in our recording of significant additional expenses to our results of operations and recording of substantial finite-lived intangible assets on our balance sheet upon closing. Any of these factors may adversely affect our financial condition or results of operations.

Reorganization activities may lead to additional costs and material adverse effects.effects.

We are a company that, from timeIn the past we have taken actions to time, seeks torestructure and optimize itsour production and manufacturing capabilities and efficiencies through relocations, consolidations, plant closings or asset sales. WeIn the future we may make further specific determinations to consolidate, closetake additional restructuring actions including the consolidating, closing or sellselling of additional facilities. Possible adverse consequences related to suchThese actions may includecould result in impairment charges and various charges for such items as idle capacity, disposition costs and severance costs, in addition to normal or attendant risks and uncertainties. We may be unsuccessful in any of our current or future efforts to restructure or consolidate our business. Our plans to minimize or eliminate any loss of revenues during restructuring or consolidation may not be achieved. These activities may have a material adverse effect upon our business, financial condition or results of operations.

Environmental liabilities could adversely impact our financial position.

Foreign, federal, state and local laws and regulations impose various restrictions and controls on the discharge of materials, chemicals and gases used in our manufacturing processes or in our finished goods. These environmental regulations have required us to expend a portion of our resources and capital on relevant compliance programs. Under these laws and regulations, we could be held financially responsible for remedial measures if our current or former properties are contaminated or if we send waste to a landfill or recycling facility that becomes contaminated, even if we did not cause the contamination. We may be subject to additional common law claims if we release substances that damage or harm third parties. In addition, future changes in environmental laws or regulations may require additional investments in capital equipment or the implementation of additional compliance programs. Any failure to comply with new or existing environmental laws or regulations could subject us to significant liabilities and could have a material adverse effect on our business, financial condition or results of operations.

In the conduct of our manufacturing operations, we have handled and do handle materials that are considered hazardous, toxic or volatile under federal, state, and local laws. The risk of accidental release of such materials cannot be completely eliminated. In addition, we operate or own facilities located on or near real property that was formerly owned and operated by others. Certain of these properties were used in ways that involved hazardous materials. Contaminants may migrate from, within or through these properties. These releases or migrations may give rise to claims. Where third parties are responsible for contamination, the third parties may not have funds, or not make funds available when needed, to pay remediation costs imposed upon us under environmental laws and regulations.

The company is responsible for the maintenance of discontinued coal mining operations in Germany. The risk of environmental remediation exists and the company is in the process of remediating the mines considered to be the most at risk.

Disruptions in ourmanufacturing,supply or distribution chain could result in an adverse impact on resultsresults of operations.

We source materials and sell product through various international network channels. A disruption could occur within our manufacturing, distribution or supply chain network. This could include damage or destruction due to various causes including natural disasters or political instability which would cause one or more of these network channels to become non-operational. This could adversely affect our ability to manufacture or deliver our products in a timely manner, impair our ability to meet customer demand for products and result in lost sales or damage to our reputation. Such a disruption could have a material adverse effect upon our business, financial condition or results of operations.

Wederive derive asubstantialportion substantial portion ofourrevenues our revenues fromcustomers customers in theautomotive,consumer electronics automotive industry andcommunicationsindustries, we are susceptible to trends andwe aresusceptible totrends factors affecting this industry including industry cyclicality, andfactorsaffectingthoseindustries including unexpected product recalls aswell well as thesuccess success ofourcustomers’products. our customers’ products.

Net sales to the automotive consumer electronics and communications industriesindustry represent a substantial portion of our revenues. Factors negatively affecting these industriesthis industry and the demand for products also negatively affect our business, financial condition or results of operations. Any adverse occurrence, including industry slowdown, recession, political instability, costly or constraining regulations, tax policies and regulations, armed hostilities, terrorism, excessive inflation, prolonged disruptions in one or more of our customers’ production schedules, unexpected product recalls or labor disturbances, that results in significant decline in the volume of sales in these industries, or in an overall downturn in the business and operations of our customers in these industries, could materially adversely affect our business, financial condition or results of operations. For example, the automotive industry as well as the consumer electronics market is highly cyclical in nature and sensitive to changes in general economic conditions, consumer preferences and interest rates. In addition, the global automotive and electronic industries have overall manufacturing capacity far exceeding demand. To the extent that demand for certain of our customers’ products declines, the demand for our products may decline. Reduced demand relating to general economic conditions, consumer preferences, or interest rates or industry over-capacity may have a material adverse effect upon our business, financial condition or results of operations.

The inability to maintain access to capital markets may adversely affect our business and financial results.

Our ability to invest in our businesses, make strategic acquisitions, and refinance maturing debt obligations may require access to the capital markets and sufficient bank credit lines to support short-term borrowings. If we are unable to access the capital markets or bank credit facilities, we could experience a material adverse affecteffect on our business, financial condition, and results of operations.

Fixedcostsmayreduceoperatingresults costs may reduce operating results ifoursalesfallbelowexpectations. our sales fall below expectations.

Our expense levels are based, in part, on our expectations for future sales. Many of our expenses, particularly those relating to capital equipment and manufacturing overhead, are relatively fixed. We might be unable to reduce spending quickly enough to compensate for reductions in sales. Accordingly, shortfalls in sales could materially and adversely affect our operating results.

Thevolatility ofourstockpricecouldaffect thevalue volatility of our stock price could affect the value of aninvestment investment inourstock our stock andourfuturefinancialposition. our future financial position.

The market price of our stock has fluctuatedcan fluctuate widely. Between December 28, 2013January 2, 2016 and December 27, 2014,31, 2016, the closing sale price of our common stock ranged between a low of $78.68$90.61 and a high of $100.82, experiencing greater volatility over that time than the broader markets.$156.54. The volatility of our stock price may be related to any number of factors, such as volatility in the financial markets, general economicmacroeconomic conditions, industry conditions, analysts’ expectations concerning our results of operations, or the volatility of our revenues as discussed above under “Our Revenues May Vary Significantly from Period to Period.” The historic market price of our common stock may not be indicative of future market prices. We may not be able to sustain or increase the value of our common stock. Declines in the market price of our stock could adversely affect our ability to retain personnel with stock incentives, to acquire businesses or assets in exchange for stock and/or to conduct future financing activities with or involving our common stock.

Customer demands and new regulations related to conflict-free minerals may force us to incur additional expenses.

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires disclosure of use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries and efforts to prevent the use of such minerals. In the semiconductor industry, these minerals are most commonly found in metals. As there may be only a limited number of suppliers offering “conflict free” metals, we cannot be surecertain that we will be able to obtain necessary metals in sufficient quantities or at competitive prices. Also, we may face challenges with our customers and suppliers if we are unable to sufficiently verify that the metals used in our products are “conflict free.”

Our Information Technology (“IT”)We are exposed to, and may be adversely affected by, potential security breaches or other disruptions to our information technology systems could be breached.and data security.

We face certainrely on our information technology systems and networks in connection with many of our business activities. Some of these networks and systems are managed by third-party service providers and are not under our direct control. Our operations routinely involve receiving, storing, processing and transmitting sensitive information pertaining to our business, customers, dealers, suppliers, employees, and other sensitive matters. As with most companies, we have experienced cyber-attacks, attempts to breach our systems, and other similar incidents, none of which have been material. Any future cyber incidents could, however, materially disrupt operational systems; result in loss of trade secrets or other proprietary or competitively sensitive information; compromise personally identifiable information regarding customers or employees; and jeopardize the security of our facilities. A cyber incident could be caused by malicious outsiders using sophisticated methods to circumvent firewalls, encryption, and other security defenses. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Information technology security threats, relating to the confidentiality and integrity of our IT systems. Despite implementation ofincluding security measures, our IT systems may be vulnerable to damage frombreaches, computer viruses, cyber attacksmalware, and other unauthorized accesscyber-attacks are increasing in both frequency and these security breachessophistication and could result in a disruptioncreate financial liability, subject us to our operations. A material network breach of our IT systems could involve the theft of intellectual propertylegal or customer data which may be used by competitors. To the extent that any security breach results in a lossregulatory sanctions or damage to data, or inappropriate disclosure of confidential or proprietary information, it could cause damage to our reputation affect our customer relations, leadwith customers, dealers, suppliers, and other stakeholders. We continuously seek to claims against us, increase our costs to protect against future damagemaintain a robust program of information security and controls, but the impact of a material information technology event could result inhave a material adverse effect on our businesscompetitive position, reputation, results of operations, financial condition, and financial position.cash flows.

Lapses in disclosure controls and procedures or internal control over financial reporting could materially and adversely affect our operations, profitability or reputation.

We are committed to maintaining high standards of internal control over financial reporting and disclosure controls and procedures. Nevertheless, lapses or deficiencies in disclosure controls and procedures or in our internal control over financial reporting may occur from time to time.

On February 4, 2014, management determined that a material weakness existed in its internal control over financial reporting. This determination relates to a material weakness in internal control over financial reporting relating to our evaluation of the income tax considerations, including deferred tax valuation allowances, relating to the write-off of our investment in Shocking Technologies, Inc. during the first quarter of 2013. As a result of the material weakness, management also concluded that both our internal control over financial reporting and disclosure controls and procedures were not effective at March 30, 2013 and December 28, 2013.

In accordance with our internal control over financial reporting compliance program, we successfully implemented additional controls over tax accounting. The controls were in effect for all quarterly reporting periods during 2014 and at December 27, 2014. Management has concluded that the material weakness in internal control over financial reporting related to taxes, as described above, has been effectively remediated.

There can be no assurance that our disclosure controls and procedures will be effective in the future or that a material weakness or significant deficiency in internal control over financial reporting will not again exist. Any such lapses or deficiencies may materially and adversely affect our business and results of operations or financial condition, restrict our ability to access the capital markets, require us to expend significant resources to correct the lapses or deficiencies, expose us to regulatory or legal proceedings, subject us to fines, penalties, judgments or losses not covered by insurance, harm our reputation, or otherwise cause a decline in investor confidence.

Thecompany’s effective tax rate could materially increase as a consequence of various factors, including U.S. and/or international tax legislation, mix of thecompany’s earnings by jurisdiction, and U.S. and foreign jurisdictional tax audits.

The company is subject to taxes in the U.S. and numerous foreign jurisdictions. Therefore, it is subject to changes in tax laws in each of these jurisdictions and such changes could have a material adverse affect on the company’s effective tax rate and cash flows. As a U.S. company with significant non-U.S. operations (generally taxed at rates that are lower than the U.S. statutory rate), it is particularly susceptible to changes in U.S. tax rules. Various U.S. corporate tax legislative proposals are under consideration, some of which may have a material adverse effect on the company’s effective tax rate and cash flows. In addition, certain foreign jurisdictions are considering tax legislation based upon recommendations made by the Organisation for Economic Co-operation and Development in connection with itsBase Erosion and Profit Shifting study. The outcome of these legislative developments could have a material adverse effect on the company’s effective tax rate and cash flows.    

The tax rates applicable in the jurisdictions within which the company operates vary widely. Therefore, the company’s effective tax rate may be adversely affected by changes in the mix of its earnings by jurisdiction.

The company is also subject to examination of its tax returns by the U.S. Internal Revenue Service and other tax authorities and governmental bodies. The company regularly assesses the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of its provision for income taxes. However, there can be no assurance as to the outcome of these examinations.

Failure to attract and retain qualified personnel could affect our business results.

Our success, both generally and in connection with mergers and acquisitions, depends on our ability to attract, retain, and motivate a highly-skilled and diverse management team and workforce. Failure to ensure that we have the depth and breadth of personnel with the necessary skill set and experience could impede our ability to deliver our growth objectives and execute our strategy. Competition for qualified employees among companies that rely heavily upon engineering and technology is at times intense, and the loss of qualified employees could hinder our ability to conduct research activities successfully and develop marketable products.

We may not besuccessful protecting our patents and trademarks.

We consider our intellectual property, including patents, trade names, and trademarks, to be of significant value to our business as a whole. Our products are manufactured, marketed, and sold under a portfolio of patents, trademarks, licenses, and other forms of intellectual property, some of which expire or are allowed to lapse at various dates in the future. We develop and acquire new intellectual property on an ongoing basis and consider all of our intellectual property to be valuable. The company's policy is to file applications and obtain patents for the great majority of its novel and innovative new products including product modifications and improvements. Based on the broad scope of our product lines, management believes that the loss or expiration of any single intellectual property right would not have a material adverse effect upon our business, financial condition or results of operations; however, multiple losses or expirations could have a material adverse effect upon our business, financial condition or results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS.COMMENTS.

None.

ITEM 2. PROPERTIES.

LITTELFUSE FACILITIESPROPERTIES.

The company’s operations are located in 4651 owned or leased facilities worldwide, totaling approximately 2.12.8 million square feet. The company’s corporate headquarters is located in the U.S. in Chicago, Illinois. The company has North American manufacturing facilities in Saskatoon, Canada, Piedras Negras, Mexico, Melchor Muzquiz, Mexico, Matamoros, Mexico, Lake Mills, Wisconsin and Rapid City, South Dakota. The company has European manufacturing facilities in Roskilde, DenmarkKaunas, Lithuania, and Kaunas, Lithuania.Legnago and Ozegna, Italy. Asia-Pacific operations include sales and distribution centers located in Singapore, Taiwan, Japan, China, and Korea, with manufacturing plants located in China and the Philippines.

In November, 2014, the company announced its plans to close its Lake Mills, Wisconsin manufacturing facility and transfer production to the Philippines, Japan, and various cities in 2016.China.

The company does not believe that it will encounter any difficulty in renewing its existing leases upon the expiration of their current terms. Management believes that the company’s facilities are adequate to meet its requirements for the foreseeable future.

The following table provides certain information concerning the company’s facilities at December 27, 2014,31, 2016, and the use of these facilities during fiscal year 2014:2016:

Properties with lease expirations in 2015 renew2017 may be renewed at various times throughout the year. The company does not anticipate any material impact as a result of such expirations.

ITEM 3. LEGAL PROCEEDINGS.PROCEEDINGS.

The company is not a party to any material legal proceedings, other than routine litigation incidental to our business.

ITEM 4.MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIESSECURITIES..

Market Information

Shares of the company’s common stock are traded under the symbol “LFUS” on the NASDAQ Global Select Market^SM.

The table below provides information with respect to the company’s quarterly stock prices and cash dividends declared and paid for each quarter during fiscal 2016 and 2015:

Number of Holders

As of February 13, 2015,16, 2017, there were 8576 holders of record of the company’s common stock.

Dividend Policy

The company expects that its practice of paying quarterly dividends on its common stock will continue although future dividend policy will be determined by the Board of Directors based upon its evaluation of earnings, cash availability, and general business prospects. Currently, there are restrictions on the payment of dividends contained in the company’s credit agreements that relate to the maintenance of certain financial ratios. However, the company expects to continue paying cash dividends on a quarterly basis for the foreseeable future.

Recent Sales of Unregistered Securities

There were no sales of unregistered securities by us or affiliates during the three months ended December 31, 2016.

Purchases of Equity Securities

The company’s Board of Directors authorized the repurchase of up to 1,000,000 shares of the company’s common stock under a program for the period May 1, 2016 to April 30, 2017. The company did not repurchase any shares of its common stock during fiscal 2016 and 1,000,000 shares may yet be purchased under the program as of December 31, 2016.

The table below presents shares of the company’s common stock which were acquired by the company during the three months ended December 31, 2016:

Stock Performance Graph

The following stock performance graph and related information shall not be deemed “soliciting material” or “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the company specifically incorporates it by reference into such filing. 

The following stock performance graph comparesthe five-year cumulative total return on Littelfuse common stock to the five-year cumulative total returns on the Russell 2000 Index and the Dow Jones Electrical Components and Equipment Industry Group Index. The company believes that the Russell 2000 Index and the Dow Jones Electrical Components and Equipment Industry Group Index represent a broad market index and peer industry group for total return performance comparison. The stock performance shown on the graph below represents historical stock performance and is not necessarily indicative of future stock price performance.

The Dow Jones Electrical Components and Equipment Industry Group Index includes the common stock of A. O. Smith Corp.; AAON, Inc.; American Superconductor Corp.; AMETEK, Inc.; Amphenol Corp.; Arrow Electronics, Inc.; Avnet, Inc.; AVX Corp.; Benchmark Electronics, Inc.; Capstone Turbine Corp.; CTS Corp.; General Cable Corp.; Hubbell Inc. Class B; Jabil Circuit, Inc.; KEMET Corp.; Littelfuse, Inc.; Methode Electronics, Inc.; Park Electrochemical Corp.; Plexus Corp.; Powerwave Technologies, Inc.; Regal-Beloit Corp.; Sanmina Corp.; Valence Technology, Inc.; Vicor Corp.; and Vishay Intertechnology, Inc.

In the case of the Russell 2000 Index and the Dow Jones Electrical Components and Equipment Industry Group Index, a $100 investment made on December 31, 2009,2011 and reinvestment of all dividends is assumed. In the case of the company, a $100 investment made on December 31, 2009,2011 is assumed. Returns for the company’s fiscal years presented above are as of the last day of the respective fiscal year which was, January 1, 2011, December 31, 2011, December 29, 2012, December 28, 2013, and December 27, 2014, January 2, 2016, and December 31, 2016 for the fiscal years 2010, 2011, 2012, 2013, 2014, 2015, and 2014,2016, respectively.

The company expects that its practice of paying quarterly dividends on its common stock will continue although future dividend policy will be determined by the Board of Directors based upon its evaluation of earnings, cash availability and general business prospects. Currently, there are restrictions on the payment of dividends contained in the company’s credit agreements that relate to the maintenance of a minimum net worth and certain financial ratios. However, the company expects to continue paying cash dividends on a quarterly basis for the foreseeable future.

The Board of Directors authorized the repurchase of up to 1,000,000 shares of the company’s common stock under a program for the period May 1, 2014 to April 30, 2015. The company repurchased 161,751 shares of its common stock during the second quarter of 2014 and 838,249 shares remain available for purchase under the program as of December 27, 2014.

The company withheld 19,634 shares of stock in lieu of withholding taxes on behalf of employees who became vested in restricted share units during fiscal 2014 during the period April 27, 2014 to December 27, 2014. Shares withheld are classified as Treasury stock on the Consolidated Balance Sheet.

The table below provides information with respect to the company’s quarterly stock prices and cash dividends declared and paid for each quarter during fiscal 2014 and 2013:

ITEM 6. SELECTED FINANCIAL DATA.

The information presented below provides selected financial data of the company during the past five fiscal years and should be read in conjunction with Item 7,Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Consolidated Item 8,Financial Statements and Notes to Consolidated Financial Statements set forth in Item 7 and Item 8, respectively,Supplementary Data, for the respective years presented (amounts in thousands, except per share data):presented:

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.OPERATIONS.

Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide information that is supplemental to, and should be read together with, our consolidated financial statements and the accompanying notes. Information in MD&A is intended to assist the reader in obtaining an understanding of (i) our consolidated financial statements, (ii) the changes in certain key items within those financial statements from year-to-year, (iii) the primary factors that contributed to those changes, and (iv) any changes in known trends or uncertainties that we are aware of and that may have a material effect on our future performance. In addition, MD&A provides information about our segments and how the results of those segments impact our results of operations and financial condition as a whole.

LittelfuseExecutive Overview

Introduction

Littelfuse Inc. and its subsidiaries (the “company” or “Littelfuse” or “we” or “our”) is one of the worldwide leader in circuit protection offering the industry's broadest and deepest portfolioworld’s leading suppliers of circuit protection products for the electronics, automotive, and solutions.industrial markets, with expanding platforms in sensor and power control components and modules. In addition to circuit protection products and solutions, the company offers electronic reed switches and sensors, automotive sensors for comfort and safety systems and a comprehensive line of highly reliable electromechanical and electronic switch and control devices for commercial and specialty vehicles, as well as protection relays and power distribution centers for the safe control and distribution of electricity. The company has a network of global engineering centers and labs that develop new products and product enhancements, provides customer application support and test products for safety, reliability, and regulatory compliance. The company’s devices protect products in virtually every market that uses electrical energy, from consumer electronicsvarious electronic devices to automobiles to industrial equipment.

The company conducts its business through three reportable segments, which are defined by markets and consist of Electronics, Automotive, and Electrical.Industrial. The company’s customer base includes original equipment manufacturers, tier oneOEMs, Tier One automotive suppliers, and distributors.

In additionExecutive Summary

We experienced strong performance improvements in 2016 including crossing the milestone of $1 billion in revenue and recognizing record earnings and cash flow. We made substantial progress in growth from our strategic 2016 acquisitions which contributed approximately $250 million in annualized revenue. We are well positioned for success with our updated strategy, which focuses on accelerated organic growth, while continuing to protecting and growing itsadd acquisitions aligned to our core circuit protection, business, Littelfuse has been investing insensor, and power control and sensing technologies. These newer platforms, combined with the company’s strong balance sheet and operating cash flow, provide opportunities for increased organic and acquisition growth. In 2012, the company set a five-year strategic target plan to grow annual sales at 15% per year; 5% organically and 10% through acquisitions. As of December 27, 2014, two years into the five-year plan, the company has achieved an annual sales growth of 13%; 5% organically and 8% through acquisitions. The company remains focused on only those acquisitions that will add shareholder value. Overall, the company believes its strategy is sound, the fundamentals of its business have not changed, and its long-term goals are achievable.platforms.

To maximize shareholder value,For 2016, we recognized net sales of $1,056.2 million, a 22% increase versus the company’s primary strategic goals are to:prior year period. Acquisitions contributed significantly to the growth in revenue. Organic growth was due to growth in most end markets across our electronics segment as well as our automotive fuses and sensor business. This was partially offset by declines in our industrial segment and our commercial vehicle products business within our automotive segment.

Business Outlook and Key Trends & Events

We continually look for ways to improve the efficiency and performance of our operations. Certain trends have affected our results of operations for 2016 compared to 2015 and 2014. These trends, as well as the key trends that we expect will impact our future results of operations, are as follows.

Resultsof Operations — 2016 compared with 2015

The company serves markets that are directly impacted by global economic trends with significant exposuresfollowing table summarizes the company’s consolidated results of operations for periods presented. The fiscal year 2016 includes approximately $50.0 million of non-segment charges.  These included $14.8 million of charges related to the consumer electronics, automotive, industrialimpairment of the custom products reporting unit, $21.4 million of acquisition and miningintegration costs associated with the company’s 2016 acquisitions, primarily PolySwitch, $7.8 million of non-cash fair value step-up inventory charges relating to the company’s 2016 acquisitions, primarily PolySwitch, as described in Note 3, Acquisitions, of the Notes to Consolidated Financial Statements included in this Annual Report, $1.9 million in charges related to the closure of the company’s manufacturing facility in Denmark, $1.6 million related to the company’s transfer of its reed sensor manufacturing operations from the U.S. and China to the Philippines, and $2.5 million related to restructuring costs. 

Fiscal year 2015 includes approximately $45.2 million of other non-segment charges.  These included $5.2 million related to the company’s transfer of its reed sensor manufacturing operations from the U.S. and China to the Philippines, $3.6 million related to restructuring, $4.6 million related to acquisition costs and $31.9 million of expense related to the planned termination of the U.S. pension as described in Note 10,Benefit Plans, of the Notes to Consolidated Financial Statements included in this Annual Report.

Fiscal year 2016 also included approximately $0.5 million in foreign currency expenses primarily attributable to changes in the value of the euro, Philippine peso and Chinese renminbi against the U.S. dollar,while fiscal year 2015 also included $1.5 million in foreign currency gains primarily attributable to changes in the value of both the euro and Philippine peso against the U.S. dollar.

Sales

Net sales for 2016 of $1,056.2 million increased $188.3 million, or 22%, compared to the prior year, reflecting $170.2 million of incremental revenues from businesses acquired over the previous two years as well as organic growth in the Electronics and Automotive segments, partially offset by lower sales from the Industrial segment due to weaker end markets. The company’s results will be impacted positivelycompany also experienced $7.3 million in unfavorable foreign currency effects in 2016 compared to 2015 primarily resulting from sales denominated in Chinese renminbi.

The increase in sales in 2016 reflects a $75.2 million, or negatively22%, increase in Automotive segment sales and a $129.7 million, or 32%, increase in Electronics segment sales, partially offset by changesa $16.6 million, or 14%, decrease in these end markets.Industrial segment sales.

Gross Profit

Gross profit was $413.1 million, or 39.1% of sales, in 2016, compared to $330.5 million, or 38.1% of sales, in 2015. Gross profit for 2016 was negatively impacted by $10.8 million of charges primarily related to the inventory step-up from the acquisition of PolySwitch and to a lesser extent the ON Portfolio and Menber’s acquisitions.Gross profit for 2015 was negatively impacted by $5.2 million of charges related to the transfer of the company’s reed switch production from the U.S. and China to the Philippines.

Operating Expenses

Total operating expense was $282.5 million, or 26.7% of net sales, for 2016 compared to $226.3 million, or 26.1% of net sales, for 2015. Operating expense in 2016 included $39.1 million of charges primarily consisting of acquisition and integration costs of $21.4 million and $14.8 million of charges related to the impairment of the custom products reporting unit. Operating expense in 2015 included $39.9 million of charges, primarily related to the U.S. pension settlement of $31.9 million and restructuring and acquisition costs of $8.0 million.

Operating Income

Operating income was $130.6 million, or 12.4% of net sales, in 2016 compared to $104.2 million, or 12.0% of net sales, in the prior year.The increase in operating income in the current year was due primarily to higher revenue as well as the factors affecting operating expenses discussed above.

Interest expense was $8.6 million in 2016 compared to $4.1 million in 2015 and is primarily related to the company’s increased borrowing to fund acquisitions.

Foreign exchange (gain) loss was $0.5 million of loss in 2016 compared to $1.5 million of gain in 2015. The fluctuation in foreign exchange was primarily attributable to changes in the value of the euro, Philippine peso and Chinese renminbi against the U.S. dollar in 2016 and 2015.

Other Expense (Income), Net

Other expense (income), net, consisting of interest income, royalties and non-operating income was $1.7 million of income in 2016 compared to $5.4 million of income in 2015. The year-over-year decrease in income primarily reflects lower interest income in 2016.

Income Taxes

Income tax expense was $18.8 million with an effective tax rate of 15.2% in 2016 compared to income tax expense of $26.1 million with an effective tax rate of 24.4% in 2015. The effective tax rates for these periods are lower than the U.S. statutory tax rate primarily due to income earned in lower tax jurisdictions and, with respect to the 2016 period, a one-time deduction with respect to the stock of one of the company’s affiliates partially offset by the impact of the impairment of goodwill for which no tax benefit was recorded and taxes on unremitted earnings, and, with respect to the 2015 period, the impact of a pension settlement partially offset by the impact from the restructuring of the legal ownership of the company’s Mexican manufacturing operations.

Segment Information

The company reports its operations by the following segments: Electronics, Automotive and Industrial. Segment information is described more fully in Note 14,Segment Information, of the Notes to Consolidated Financial Statements included in this Annual Report.

 The following table is a summary of the company’s net sales by segment:

Electronics Segment Overview

The Electronics segment, which accountsaccounted for 48%approximately 51% of total sales in 2016, has produced solidmodest organic revenue growth and substantial margin improvement over the last few years. In 2014,2016, sales increased 12% (7% excluding acquisitions) and operating margin increased$129.7 million, or 32%, compared to the prior year, reflecting $110.0 million of sales from 19.0% to 21.2% reflectingbusinesses acquired in 2016as well as organic growth in all regions. The company believe this issensor products and to a lesser extent passive and semiconductor products. Operating margins also improved in 2016 compared to 2015 due to better leverage from the result of a stable electronics market combined with ongoing design winshigher sales, as well as favorable product and market share gains for Littelfuse.

The electronics business is affected by seasonality. Sales are typically weaker in the first and fourth quarters and stronger in the second quarter and third quarters. This reflects the production ramp up for consumer electronics in advance of the year-end holidays and other factors.regional mix.

Fourth quarter 20142016 sales for Electronics were consistentunseasonably strong due to higher demand in some markets including electric vehicle, mobile phone charging and base stations, along with normal seasonality as channel inventories remain at appropriate levels.an earlier than usual Chinese New Year. The book-to-bill ratio of 1.06 (1.0 excluding sensors)1.05 at the end of the fourth quarter is also consistent withprimarily due to stronger than normal seasonal trends.

Automotive Segment Overview

The Automotive segment, which accountsaccounted for 38%approximately 39% of total sales in 2016, has been the company’s fastest growing business over the last few years. In 2014, Automotive2016, sales increased $75.2 million, or 22% (14% excluding acquisitions) resulting from strong performance across all product categories and all regions

Passenger car fuse sales continue to outperform global car production due primarily, compared to the successprior year, reflecting $60.2 million of incremental sales from businesses acquired in 2016 and the company’s new high current fuses which are drivingfourth quarter of 2015as well as organic growth related to sensor and passenger car products. These increases in content per vehicle. Commercialsales were partially offset by lower sales of legacy commercial vehicle products, had their best year ever with double-digit sales growth and improved operating margin driven by strengthreflecting weakness in the North American heavy duty truck, marketconstruction, and integration-related cost savings. Automotive sensors also had their second consecutive yearagricultural end markets.

The segment realized growth in fuse content which was driven by more sophisticated electronics in vehicles and sales of double-digitour high-current products, especially the Masterfuse® line. Also contributing to segment performance was our automotive sensor business which experienced strong growth in sales growth primarily reflecting ramp-up of new solar sensor and speed and position sensor platforms. In summary, sales increaseda significant improvement in all three major areas ofmargins. Sales in China were strong due to the Automotive business, and while the company is currently experiencing headwinds from the weaker euro, it anticipates continuedChinese government’s tax incentives for smaller cars driving higher growth in the year ahead.China car industry.

ElectricalIndustrial Segment Overview

The ElectricalIndustrial segment, which accountsaccounted for about 14%approximately 10% of total sales in 2016, experienced a sales decrease of 14% over the prior year with declines across all businesses. The company also divested certain non-core product lines during 2016. See Note 4,Divestitures, for additional information. The company’s power fuse business has beenbenefited from a strong U.S. solar market in recent years; however, this market slowed in the company’s most challenging segmentsecond half of 2016. Sales in the protection relay business continued to be impacted by weakness in the heavy industrial and oil and gas markets, as those customers have restricted their capital spending. In the custom products business, the company continued to see a decline in the potash market, which has resulted in the aforementioned impairment charge in the third quarter of 2016. It is possible that we could recognize impairment charges for the past two years. In 2014, Electrical sales declined 6% (22% excludingrelays reporting unit if we have declines in profitability or projected future operating results due to changes in volume, market pricing, cost, or the acquisition of SymCom) reflecting the depressed global mining market, a difficult year for solar sales and continued weakness in non-residential construction.

Toward the end of 2014, the company began seeing signs of improvement in two of its most important end markets: potash mining and non-residential construction. While these positive trends did not significantly impact 2014, the company expects these trends to contribute to growth in 2015. In addition, the company expects improved performance for SymCom in 2015 reflecting new product introductions and progress on integration activities.business environment.

Business Acquisitions

On January 3, 2014, the company acquired 100% of SymCom, Inc. (“SymCom”) for $52.8 million (net of cash acquired). Located in Rapid City, South Dakota, SymCom provides overload relays and pump controllers primarily to the industrial market. The acquisition allows the company to strengthen its position in the relay products market by adding new products and new customers within its Electrical business unit segment.

On May 31, 2013, the company acquired 100% of Hamlin, Inc. (“Hamlin”) from Key Safety Systems, for $144.4 million (net of cash acquired). Hamlin is a manufacturer of sensor technology providing standard products and custom solutions for leading global manufacturers in the automotive and electronic industries. The acquisition allows the company to expand its automotive and electronics product offerings in the global sensor market in both the Automotive and Electronics business segments.

Business SegmentGeographic Sales Information

U.S.Generally Accepted Accounting Principles (“GAAP”) dictates annual and interim reporting standards for an enterprise's operating segments and related disclosures about its products, services, geographic areas and major customers. Within U.S. GAAP, an operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, and about which separate financial information is regularly evaluatedSales by the Chief Operating Decision Maker (“CODM”) in deciding howgeography represent sales to allocate resources.The CODM is the company’s President and Chief Executive Officer.customer or distributor locations. The following table is a summary of the company’s business unit segments’ net sales by business unit and geography (in millions):geography:

(a) Sales by geography represent sales to customer or distributor locations.

(b) 2014 and 2013 includes incremental Hamlin net sales of $36.5 million and $24.1 million, respectively.

(c) 2014 and 2013 includes incremental Hamlin net sales of $20.2 million and $26.9 million, respectively.

(d) 2013 includes incremental Accel and Terra Power net sales of $9.2 million and $5.7 million, respectively.

(e) 2014 and 2013 include incremental Hamlin net sales of $16.7 million and $23.0 million, respectively.

(f) 2014 and 2013 include incremental Hamlin net sales of $9.3 million and $11.6 million, respectively.

(g) 2014 and 2013 include incremental Hamlin net sales of $10.4 million and $16.4 million, respectively.

(h) 2014 includes incremental SymCom net sales of $19.6 million.

Business unit segment information is described more fully in Note 15 of the Notes to Consolidated Financial Statements. The following discussion provides an analysis of the information contained in the Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements at December 27, 2014 and December 28, 2013, and for the three fiscal years ended December 27, 2014, December 28, 2013 and December 29, 2012.

Americas

Sales in the Americas increased $9.9 million, or 2%, in 2016 compared to 2015, primarily due to acquisitions and increased demand for Electronics products, partially offset by lower Industrial sales. Electronics sales increased $23.3 million, or 20%, primarily due to acquisitions as well as increased sales for passive and sensor products. Industrial sales decreased $14.0 million, or 13%, resulting from decreases in demand for power fuses, custom products, and relay products.

Europe

European sales increased $47.6 million, or 31%, in 2016 compared to 2015 primarily due to acquisitions and increased demand for Automotive and Electronics products, partially offset by lower Industrial sales. Automotive sales increased $26.8 million, or 27%, in 2016 primarily due to acquisitions and increased sales for sensor products. Electronics sales increased $22.4 million, or 46%, primarily due to acquisitions as well as increased sales for the passive and sensor products. Industrial sales decreased $1.5 million, or 24%, in 2016 primarily from lower sales of fuse and relay products.

Asia-Pacific

Asia-Pacific sales increased $130.8 million, or 42%, in 2016 compared to 2015, primarily due to acquisitions and increased demand for Automotive and Electronics products offset by lower Industrial sales. Excluding currency effects, Asia-Pacific sales increased $136.2 million, or 43%. Electronics sales increased $84.0 million, or 35%, primarily due to acquisitions as well as increased sales for passive and sensor products. Excluding currency effects, Electronics sales increased $86.3 million, or 36%. Automotive sales increased $47.8 million, or 72%, primarily due to acquisitions as well as increased sales for passenger car and sensor products, partially offset by net unfavorable currency effects. Excluding currency effects, Automotive sales increased $51.1 million, or 77%. Industrial sales decreased $1.2 million, or 13%.

Results of Operations — 2014compared2015 compared with 20132014

The following table summarizes the company’s consolidated results of operations for the periods presented. The results include incremental activity from the company’s business acquisitions as described, where applicable, in the below analysis. There were also additional expenses and accounting adjustments during 2014.fiscal year 2015 includes approximately $45.2 million of other non-segment charges.  These include a $2.8 million inventory adjustment in 2014 related to the SymCom acquisition as described in Note 2, $0.4included $4.6 million in acquisition-related costs $3.2primarily related to the transaction and integration planning costs for the PolySwitch acquisition, $5.2 million in severance charges related to the transfer of the company’s reed switch manufacturing operations from its Lake Mills, Wisconsin and Matamoros, MexicoSuzhou, China locations $2.2to the Philippines, $3.6 million in internal legal restructuring costs that will enableimprove the up-streaming of cash to the U.S.,company’s worldwide legal structure and $0.3$31.9 million in asset impairments.U.S. pension settlement and wind-up costs.

Fiscal year 20142015 also included $3.9$1.5 million in foreign currency lossesgains primarily attributable to changes in the value of both the euro and Philippine peso against the U.S. dollar while fiscal year 20132014 included $3.3$3.9 million in foreign currency gainslosses primarily related to the value of the Philippine peso against the U.S. dollar.

Sales

Net sales increased $94.1$15.9 million, or 12%2%, to $867.9 million for 2015 compared to $852.0 million for fiscal yearin 2014 compared to $757.9 million in fiscal year 2013 due primarily to an incremental $56.1 million from business acquisitions andstrong growth in electronicthe Automotive segment and automotive products,improvement in the Industrial segment partially offset by lower electrical sales.sales in the Electronics segment. The company also experienced $0.4$38.9 million in unfavorable foreign currency effects in 2014 as2015 compared to 20132014 primarily resulting from sales denominated in Canadian dollars and Japanese yen. During the fourth quarter of 2014, sales were negatively impacted by the steep decline in the euro. Excluding acquisitions and currency effects, net sales increased $38.5$54.7 million, or 5% year over year. The Automotive business segment sales increased $58.2 million or 22%6%, in 2015 compared to $325.4 million. The Electronics business segment sales increased $43.0 million or 12% to $410.1 million, and the Electrical business segment sales decreased $7.1 million or 6% to $116.5 million. Sales levels in 2014, excluding acquisitions and currency effects, were positively impacted by increased demand for the company’s automotive and electronic products partially offset by slowing demand for the company’s electrical products.2014.

The increase in Automotive sales was primarily due to strong organic growth in all product categories and an incremental $20.2 million in sales from Hamlin. Currency effects increased sales by $0.6 million for the full year 2014 compared to 2013. Excluding incremental sales from Hamlin and currency effects, Automotive sales increased $37.32015 reflects a $14.5 million, or 14% year over year due primarily to increases in content per vehicle and strength in the heavy truck market.

The4%, increase in ElectronicsAutomotive segment sales reflected solid growth for both semiconductor and passive components and incremental sales from Hamlin of $16.3 million. In addition, sales were positively impacted by net favorable currency effects of $0.2 million for the full year 2014. Excluding acquisitions and currency effects, Electronics sales increased $26.5a $5.9 million, or 7% year over year.

The decrease5%, increase in Electrical sales was primarily from declines in custom and relay sales into the mining market and power fuses into the solar market. These declines more than offset incremental sales of $19.6 million from the SymCom acquisition in 2014. The ElectricalIndustrial segment experienced net unfavorable currency effects of $1.3 million primarily from sales denominated in Canadian dollars. Excluding incremental sales and currency effects, Electrical sales decreased $25.4 million or 21% year over year.

On a geographic basis, sales in the Americas increased $35.3 million or 10% in 2014 as compared to 2013 due primarily to incremental sales from business acquisitions of $36.3 million offset by $1.4 million in unfavorable currency effects resulting from sales denominated in Canadian dollars. Excluding acquisitions and currency effects, Americas’ sales increased $0.4 million or less than 1%. Increases in the company’s Automotive and Electronics sales were mostly offset by a decline in Electrical sales. Automotive sales increased $33.4 million or 26% primarily reflecting incremental sales from acquisitions of $12.5 million, strong growth in the passenger vehicle market and growth in the commercial vehicle market. Electronics sales increased $9.6 million or 9% primarily reflecting higher demand and incremental sales from Hamlin of $4.3 million. Electrical sales decreased $7.7 million or 7% resulting from decreases in demand for protection relays and custom products due to continued weakness in the mining segment. This decrease more than offset $19.6 million in incremental sales from SymCom in 2014.

European sales increased $27.1 million or 20% in 2014 compared to 2013 primarily due to strong demand for electronics and automotive products, incremental sales from Hamlin of $9.4 million and $1.0 million in favorable currency effects from sales denominated in euros. Excluding acquisitions and currency effects, European sales increased $16.8 million or 12%. This resulted from increases in the company’s Electronics and Automotive sales, partially offset by a $4.6 million, or 1%, decrease in ElectricalElectronics segment sales. Automotive sales increased $18.2 million or 21% in 2014 primarily reflecting incremental sales from Hamlin sensors of $6.2 million and higher sales in the passenger vehicle markets driven primarily by increased content. Excluding the impact of incremental sales from Hamlin and favorable currency effects, Automotive sales increased $11.5 million or 13%. Electronics sales increased $9.2 million or 22% reflecting incremental sales from Hamlin of $3.2 million and higher demand in 2014. Electrical sales decreased $0.3 million or 4% in 2014 primarily from decreased demand in the marine market for relays.

Asia-Pacific sales increased $31.7 million or 11% in 2014 compared to 2013 primarily due to increased demand across all product categories and incremental sales from Hamlin of $10.4 million. Currency effects amounted to less than $0.1 million. Excluding acquisitions and currency effects, Asia-Pacific sales increased $21.3 million or 8%. Electronics sales increased $24.2 million or 11% reflecting incremental sales from Hamlin of $8.9 million and increased sales in China offset by weakness in the Taiwan, Japan and Korea markets. Automotive sales increased $6.6 million or 12% reflecting incremental sales from acquisitions of $1.5 million and continued increased demand for passenger vehicles in China as well as gains in market share.Gross Profit

Gross profit was $330.5 million, or 38.1% of sales, in 2015, compared to $324.4 million, or 38.1% of sales, in 2014, compared to $296.2 million or 39.1% of sales in 2013.2014. Gross profit in both 2014 and 2013 werefor 2015 was negatively impacted by purchase$5.3 million of charges related to costs incurred to transfer of the company’s reed switch production from the U.S. and China to the Philippines. Gross profit for 2014 was negatively impacted by $2.8 million for accounting adjustments in cost of sales of$2.8 million and $1.5 million, respectively. These charges wererelated to the additional cost of goods sold for SymCom and Hamlin inventoriesinventory which had been stepped up to fair value at the acquisition datesdate as required by purchase accounting rules. Additionally, 2014 gross profit was negatively impacted by $2.7 million in severance charges. These severance charges primarily related to post-Hamlin acquisition reorganization changes. Excluding the impact of these charges, gross profit was $335.8 million, or 38.7% of sales, in 2015 compared to $329.9 million, or 38.7% of sales, as compared to $297.8 million or 39.3% of sales in 2013. The decrease in gross margin was primarily attributable to higher sales of sensors in 2014 which carry lower margins than the company’s core products.2014.

Operating Expenses

Total operating expense was $226.3 million, or 26.1% of net sales, for 2015 compared to $190.6 million, or 22.4% of net sales, for 2014. Operating expense in 2015 included $39.9 million of charges that primarily related to U.S. pension settlement and wind-up costs of $31.9 million and restructuring and acquisition costs of $8.0 million. Operating expense in 2014 compared to $166.4 million or 22.0% of net sales for 2013. The increase in operating expenses primarily reflects incremental operating expenses of $14.2 million from business acquisitions andincluded $3.5 million in restructuring, acquisition, and impairment costs, $2.2 million of which was to effect changes in the company’s legal structurestructure. Excluding these charges, total operating expense was $186.4 million, or 21.5% of net sales, for 2015 compared to allow tax-efficient repatriation$187.1 million, or 22.0% of approximately $90.0 million of cashnet sales, in the fourth quarter of 2014.

Operating Income

Operating income was $104.2 million, or 12.0% of net sales, in 2015 compared to $133.8 million, or 15.7% of net sales, in 2014 compared to $129.9 million or 17.1% of net sales in the prior year.The increasedecrease in operating income and decrease in operating margin in the current year was due primarily to the factors affecting gross profit and operating expenses discussed above.

Interest expense was $4.1 million in 2015 compared to $4.9 million in 2014 as compared to $2.9 million in 2013 and is primarily related to the company’s increased borrowingborrowings to fund acquisitions.

Impairment and equity The lower interest expense in net loss of unconsolidated affiliate was $10.7 million in 2013. During2015 resulted from lower average debt balances compared to the first quarter of 2013, the company fully impaired its investment in and loan receivable from Shocking Technologies, Inc. (“Shocking”) as described in Note 6 of the Notes to Consolidated Financial Statements included in this report.prior year.

Foreign exchange (gain) loss was $1.5 million of gain in 2015 compared to $3.9 million of loss in 2014 compared to $3.3 million of gain in 2013.2014. The fluctuation in foreign exchange was primarily attributable to changes in the value of both the euro and the Philippine peso against the U.S. dollar in 20142015 and the Philippine peso against the dollar in 2013.2014.

Other Expense (Income), Net

Other expense (income), net, consisting of interest income, royalties, and non-operating income was $5.4 million of income in 2015 compared to $6.6 million of income in 2014 compared to $4.6 million of income in 2013.2014. The year-over-year increasedecrease in income primarily reflects higherlower interest income in 2014.2015.

Income before income taxes was $131.6 million in 2014 compared to $124.2 million in 2013. Taxes

Income tax expense was $32.2$26.1 million in 20142015 compared to $35.5$33.5 million in 2013.2014. The 20142015 effective income tax rate was 24.5%24.4% compared to 28.5%25.5% in 2013.2014. The lower effective tax rate in 20142015 is primarily related to the $6.1 million Shocking tax adjustment bookedmore income earned in 2013. Thelower-tax jurisdictions in 2015 compared to 2014 and 2013 effective tax rates are lower than the U.S. statutory tax rate primarilyimpact of a pension settlement, partially offset by the result ofincome earned in low-tax jurisdictions.

Resultsimpact from the restructuring of Operations — 2013compared with 2012

The following table summarizesthe legal ownership of the company’s consolidated results of operations for the periods presented. The results include incremental activity from the company’s business acquisitions as described, where applicable, in the below analysis. There were also additional expenses and accounting adjustments during 2013. These include a $1.5 million inventory adjustment in 2013 as described in Note 2, and $1.7 million in acquisition related operating expenses in 2013 both related to the Hamlin acquisition. Fiscal year 2013 included $3.3 million in foreign currency gains while fiscal year 2012 included $3.2 million in foreign currency losses, both primarily related to U.S. dollar gains or losses against the Philippine peso.Mexican manufacturing operations.

Segment Information