Exhibit 13.1

Littelfuse
2006 Annual Report

Management's Discussion and Analysis of Financial Condition and Results of
Operation

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is designed to provide the reader with
information that will assist in understanding our consolidated financial
statements, the changes in certain key items in those financial statements from
year to year, and the primary factors that accounted for those changes, as well
as how certain accounting principles affect our consolidated financial
statements. The discussion also provides information about the financial results
of the various segments of our business to provide a better understanding of how
those segments and their results affect the financial condition and results of
operations of Littelfuse as a whole.

FORWARD LOOKING INFORMATION

This MD&A should be read in conjunction with our accompanying consolidated
financial statements and related notes. See "Cautionary Statement Regarding
Forward-Looking Statements Under the Private Securities Litigation Reform Act of
1995 ("PSLRA")" on page 8 of this report for a description of important factors
that could cause actual results to differ from expected results. See also Item
1, Business, "Risk Factors," in our Annual Report on Form 10-K for the fiscal
year ended December 30, 2006.

The following is a summary of sales by geography and market:



                     FISCAL YEAR*
               ------------------------
                2006     2005     2004
               ------   ------   ------
                        
GEOGRAPHY**
Americas       $216.0   $199.9   $216.5
Europe          111.6     98.3     98.3
Asia Pacific    207.3    168.9    162.0
               ------   ------   ------
   TOTAL       $534.9   $467.1   $476.8
               ======   ======   ======




                2006     2005     2004
               ------   ------   ------
                        
MARKET
Electronics    $365.5   $305.9   $325.6
Automotive      123.6    118.6    113.7
Electrical       45.8     42.6     37.5
               ------   ------   ------
   TOTAL       $534.9   $467.1   $476.8
               ======   ======   ======


*    Amounts exclude Efen Gmbh ('Efen') since the date of the Heinrich
     acquisition.

**   Sales are defined based upon shipped to destination. Segment reporting
     reflects sales based upon origination.

The following discussion provides an analysis of the information contained in
the consolidated financial statements and accompanying notes beginning on page
12 for the three fiscal years ended December 30, 2006, December 31, 2005, and
January 1, 2005.

Results of Operations -- 2006 Compared with 2005

Sales increased 15% to $534.9 million in 2006 from $467.1 million in 2005. The
increase in sales was led by the Asia-Pacific segment with an increase in sales
of 23% to $207.3 million due to increased demand for electronics products.
Europe sales increased 14% to $111.6 million and Americas sales increased 8% to
$216.0 million as both segments experienced increased demand for electronics
products. The increase in sales was due to growth in all geographical regions
driven primarily by strength in the electronics markets. Current year
acquisitions contributed $11.8 million to 2006 sales. Automotive growth outside
of North America and continued steady growth in the electrical business also
contributed to the 2006 sales increase. Electronic sales increased $59.6 million
or 19% to $365.5 million in 2006 compared to $305.9 million in 2005 primarily
due to increased demand in all regions. The electronics sales increase was
driven by increased demand for telecom and consumer electronics products in
Asia. Automotive sales increased $5.0 million or 4% to $123.6 million in 2006
compared to $118.6 million in 2005 primarily due to strong growth in Asia and
increased European sales in the off road, truck and bus market, partially offset
by lower North America sales. Electrical sales increased $3.2 million or 8% to
$45.8 million in 2006 compared to $42.6 million in 2005 due to price increases
and improvements in non-residential construction market. International sales
were $326.8 million or 61.1% of net sales in 2006 compared to $279.3 million or
59.8% of net sales in 2005, with favorable currency effects contributing $1.1
million to sales in 2006.


                                                                               1


Gross profit was $161.3 million or 30.2% of sales in 2006 compared to $144.6
million or 30.9% of sales in 2005. The gross profit margin percentage decline
resulted from $21.3 million of current year net restructuring charges related to
the closure of facilities in Ireland ($17.1 million after a $2.9 million
statutory rebate), Germany ($2.3 million) and Irving, Texas ($1.9 million), an
asset write-down in Germany of $0.8 million and higher commodity prices
partially offset by the progression of cost reduction programs and improved
operating leverage. The Company expects to incur additional restructuring
charges in the future as it further rationalizes its North American operations.
Excluding the 2006 net restructuring charges, gross profit was up from the prior
year primarily due to reduced costs as a result of the progression of cost
reduction programs and improved operating leverage due to higher plant volumes
partially offset by higher commodity prices.

Selling, general and administrative expenses increased $12.0 million to $110.6
million in 2006 from $98.5 million in 2005, primarily due to the recognition of
$5.2 million stock-based compensation expense in 2006, increased bonus expense,
$2.7 million of restructuring expense related to German operations and a $3.6
million charge for the write-down of Heinrich real estate and fixed assets. As a
percentage of sales, selling, general and administrative expenses decreased to
20.7% in 2006 from 21.1% in 2005. Research and development costs increased $2.0
million to $18.7 million due to increased spending on new product development
for the electronics and automotive markets. Total operating expenses, including
intangible amortization, were 24.8% of sales in 2006, compared to 25.2% of sales
in 2005.

Operating income in 2006 increased 7.0% to $28.9 million or 5.4% of sales
compared to $27.0 million or 5.8% of sales in the prior year. The changes in
operating income and operating margin were due to the factors affecting gross
profit margin and operating expenses described above.

Interest expense was $1.6 million in 2006 compared to $2.1 million in 2005 due
to a lower average outstanding debt balance during 2006. Other expense (income),
net, consisting of interest income, royalties, non-operating income and foreign
currency items was income, net, of $2.2 million compared to income, net, of $3.1
million in the prior year. The decrease was primarily due to the recognition of
a $1.4 million gain on the sale of the Company's interest in a wafer fabrication
facility in the U.K. in 2005 partially offset by higher interest income in 2006.

Earnings from continuing operations before minority interest and income taxes
were $29.4 million in 2006 compared to $27.9 million in 2005. Minority interest
income was zero in 2006 and $0.1 million in 2005, as 2005 reflects the minority
share ownership in Heinrich prior to the 2005 acquisition of the remaining
Heinrich shares. Income tax expense was $6.2 million in 2006 compared to $11.4
million in the prior year. The 2006 effective income tax rate was 21.0% in 2006
compared to 41.1% in 2005. The 2006 effective tax rate was favorably affected by
certain adjustments including a $1.4 million benefit resulting from a German tax
law change and recognizing a $1.8 million benefit relating to net operating
losses from an acquired group of companies. The 2005 effective tax rate was
unfavorably affected by the limited tax shield on restructuring charges and
repatriation of earnings from lower tax jurisdictions. Earnings from continuing
operations were $23.2 million in 2006 compared to $16.6 million in 2005.

In the fourth quarter of 2005, the Company entered into a contract to sell the
Efen business acquired as part of the Heinrich acquisition in May 2004.
Therefore, the Efen business is accounted for as a discontinued operation that
reported income, net of taxes, of $0.6 million in 2006 compared to $1.1 million
in 2005. Net income in the current year was $23.8 million, compared to $17.7
million in the prior year.

Results of Operations -- 2005 Compared with 2004

Sales decreased 2.0% to $467.1 million in 2005 from $476.8 million in 2004. The
decrease in sales was primarily in the Americas and Europe, with the decrease in
European sales being largely offset by a full year of sales from the Heinrich
Industrie AG ("Heinrich") acquisition included in 2005 sales. Stronger sales in
Asia partially offset lower sales in the Americas and Europe. Within the
Americas, lower electronic sales, mainly due to lower telecom demand, were
partially offset by increased sales of electrical products. European sales were
also lower than the prior year primarily due to lower demand for electronics
products. Sales in Asia were up from the prior year mainly due to increased
demand for electronics products. Electronic sales decreased $19.7 million or 6%
to $305.9 million in 2005 compared to $325.6 million in 2004 primarily due to
decreased demand in the Americas and Europe for telecom product that was
partially offset by increased demand in Asia. Automotive sales increased $4.9
million or 4% to $118.6 million in 2005 compared to $113.7 million in 2004
primarily due to a full year of sales from the Heinrich acquisition. Electrical
sales increased $5.1 million or 14% to $42.6 million in 2005 compared to $37.5
million in 2004 due to improvements in industrial activity and the commercial
construction market. International sales were $279.3 million or 59.8% of net
sales in 2005 compared to $278.7 million or 58.5% of net sales in 2004, with
sales being increased by $2.9 million of favorable currency effects in 2005.

Gross profit was $144.6 million or 30.9% of sales in 2005 compared to $173.8
million or 36.4% of sales in 2004. The gross profit margin percentage decline
resulted from unfavorable leveraging of plant overhead due to lower production
volumes, higher commodity prices and the recognition of $4.9 million of Ireland
restructuring charges in 2005.

Selling, general and administrative expenses increased $2.4 million to $98.5
million in 2005 from $96.1 million in 2004, primarily due to a full year of
Heinrich expenses that were partially offset by lower administrative costs due
to staff reductions of 83 associates during 2005. As a percentage of sales,
selling, general and administrative expenses increased to 21.1% in 2005 from
20.2% in 2004, primarily due to lower sales. Research and development costs
increased $0.6 million to $16.7 million, representing 3.6% of sales in 2005 as
compared to 3.4% of sales in 2004, reflecting increased investment in new
product development. Total operating expenses, including intangible amortization
and impairments of long-term investments, were 25.2% of sales in 2005, compared
to 24.5% of sales in 2004.

Operating income in 2005 decreased 52.7% to $27.0 million or 5.8% of sales
compared to $57.0 million or 12.0% of sales in the prior year. The decreases in
operating income and operating margin were due to the factors affecting gross
profit margin and


                                                                               2



operating expenses described above.

Interest expense was $2.1 million in 2005 compared to $1.5 million in 2004 due
to a higher weighted average interest rate in 2005. Other expense (income), net,
consisting of interest income, royalties, gains and losses on investments,
non-operating income and foreign currency items was income, net, of $3.1 million
compared to expense, net, of $0.1 million in the prior year, primarily due to
the recognition of a $1.4 million gain on the sale of the Company's interest in
a wafer fabrication facility in the U.K. in 2005 and Heinrich rental income.

Earnings from continuing operations before minority interest and income taxes
were $27.9 million in 2005 compared to $55.5 million in 2004. Minority interest
income was $0.1 million in 2005, reflecting the minority share ownership in
Heinrich. Income tax expense was $11.4 million in 2005 compared to $19.0 million
in the prior year. Earnings from continuing operations were $16.6 million in
2005 compared to $36.4 million in 2004.

In the fourth quarter of 2005, the Company entered into a contract to sell the
Efen business acquired as part of the Heinrich acquisition in May 2004.
Therefore, the Efen business is accounted for as a discontinued operation that
reported income, net of taxes, of $1.1 million in 2005 compared to a loss, net
of taxes, of $0.3 million in 2004. Net income in the current year was $17.7
million, compared to $36.0 million in the prior year.

The Company's effective tax rate increased to 41.1% in 2005 from 34.1% in 2004,
reflecting the limited tax shield on restructuring charges and repatriation of
earnings from lower tax jurisdictions. Diluted earnings per share were $0.78 in
2005 compared to $1.59 in 2004. The decreases in net income and earnings per
share reflect the lower margins and a higher effective tax rate.

Liquidity and Capital Resources

The Company has historically financed capital expenditures through cash flows
from operations. Management expects that cash flows from operations and
available lines of credit will be sufficient to support both its operations and
its debt obligations for the foreseeable future.

The Company has an unsecured domestic financing arrangement consisting of a
credit agreement with banks that provides a $75.0 million revolving credit
facility, with a potential increase of up to $125.0 million upon request of the
Company and agreement with the lenders, that expires on July 21, 2011. At
December 30, 2006, the Company had available $52.5 million of borrowing
capability under the revolving credit facility at an interest rate of LIBOR plus
0.50% (5.95% as of December 30, 2006). The Company also had $6.1 million and
$5.8 million in letters of credit outstanding at December 30, 2006, and December
31, 2005, respectively.

The Company has an unsecured bank line of credit in Japan that provides a Yen
0.9 billion (an equivalent of $7.6 million) revolving credit facility at an
interest rate of TIBOR plus 0.625% (1.12% as of December 30, 2006). The
revolving line of credit balance becomes due on July 21, 2011. At December 30,
2006, the Company had the equivalent of $1.3 million outstanding on the Yen
facility.

The Company has an unsecured bank line of credit that provides a Taiwanese
Dollar 35.0 million (equivalent to $1.1 million) revolving credit facility at an
interest rate of two-years Time Deposit plus 0.145% (2.3% as of December 30,
2006). The revolving line of credit becomes due on August 18, 2009. At December
30, 2006, the Company had the equivalent of $0.9 million outstanding on the
Taiwanese Dollar facility.

The Company has various other foreign fixed rate loans outstanding at December
30, 2006, totaling $1.4 million with maturity dates through August 2013.

The domestic bank credit agreement contains covenants that, among other matters,
impose limitations on the incurrence of additional indebtedness, future mergers,
sales of assets, payment of dividends, and changes in control, as defined. In
addition, the Company is required to satisfy certain financial covenants and
tests relating to, among other matters, interest coverage, working capital,
leverage and net worth. At December 30, 2006, and for the year then ended, the
Company was in compliance with these covenants.

The Company started 2006 with $21.9 million of cash. Net cash provided by
operations was $80.9 million in the year. Cash used in investing activities was
$42.6 million and included $19.6 million in net purchases of property, plant and
equipment and $37.8 million for the acquisition of businesses partially offset
by $14.4 million from the sale of assets including the Efen business ($11.6
million) and a building in Witten, Germany ($2.8 million) and $0.5 million from
the sale of an investment in LC Fab. Cash used in financing activities of $6.4
million included the repurchase of the Company's common stock of $10.3 million
and net payments of long-term debt of $2.3 million partially offset by cash
proceeds from the exercise of stock options of $5.7 million and the excess tax
benefit on share-based compensation of $0.5 million. The effect of exchange rate
changes increased cash by $2.8 million. The net cash provided by operations and
financing activities, less investing activities plus the effect of exchange
rates, resulted in a $34.8 million net increase in cash. This left the Company
with a cash balance of $56.7 million at the end of 2006.

Decreases in net operating assets (including short-term and long-term items)
provided $31.9 million of cash flow in 2006. The major factors contributing to
lower net operating assets were increases in accounts payable and accrued
expenses of $20.0 million, accrued taxes of $6.5 million, decreases in accounts
receivable of $2.8 million, inventories of $1.2 million and prepaid expenses and
other of $1.4 million. Days sales outstanding in accounts receivable decreased
to 60 days at year-end 2006 compared to 63 days at year-end 2005 and 60 days at
year-end 2004. The 2006 improvement in days sales outstanding was due primarily
to a reduction in past-due automotive accounts. Days inventory outstanding was
67 days at year-end 2006 compared to 75 days at year-end 2005


                                                                               3



and 88 days at year-end 2004. The improvement in days inventory outstanding in
2005 and 2006 was the result of lean manufacturing and logistics initiatives and
improved inventory planning.

The ratio of current assets to current liabilities was 2.2 to 1 at year-end 2006
compared to 2.0 to 1 at year-end 2005 and 1.8 to 1 at year-end 2004. The ratio
of long-term debt to equity was 0.1 to 1 at year-end 2006 compared to 0.0 to 1
at year-end 2005 and 0.1 to 1 at year-end 2004.

The Company started 2005 with $28.6 million of cash. Net cash provided by
operations was $38.1 million in the year. Cash used in investing activities
included $27.2 million in net purchases of property, plant and equipment and
$3.7 million for the acquisition of the remaining Heinrich shares partially
offset by $0.6 million from the sale of an investment in LC Fab. Cash provided
by financing activities included net proceeds of notes receivable of $3.5
million and cash proceeds from the exercise of stock options of $3.8 million
partially offset by net payments of long-term debt of $6.8 million and the
repurchase of $12.8 million of the Company's common stock. The effect of
exchange rate changes decreased cash by $2.2 million. The net cash provided by
operations and financing activities, less investing activities plus the effect
of exchange rates, resulted in a $6.6 million net decrease in cash. This left
the Company with a cash balance of $21.9 million at the end of 2005.

Increases in net operating assets consumed $9.7 million of cash flow in 2005.
The major factors contributing to higher net operating assets were an increase
in accounts receivable of $11.2 million, a decrease in accounts payable and
accrued expenses of $1.1 million and accrued taxes of $5.6 million, partially
offset by a decrease in inventory of $6.6 million and prepaid expenses and
other of $1.6 million. Days sales outstanding in accounts receivable increased
to 63 days at year-end 2005 compared to 60 days at year-end 2004 and 50 days at
year-end 2003. The increase was due to longer payment terms for certain
automotive customers, the addition of Heinrich, which has a longer accounts
receivable collection cycle than the base Littelfuse business and the Delphi
bankruptcy in 2005. Days inventory outstanding was 75 days at year-end 2005
compared to 88 days at year-end 2004 and 71 days at year-end 2003. The reduction
in days inventory outstanding in 2005 was due primarily to improved inventory
management.

The ratio of current assets to current liabilities was 2.0 to 1 at year-end 2005
compared to 1.8 to 1 at year-end 2004 and 1.8 to 1 at year-end 2003. The ratio
of long-term debt to equity was 0.0 to 1 at year-end 2005 compared to 0.1 to 1
at year-end 2004 and 0.0 to 1 at year-end 2003.

The Efen business, which is presented as a discontinued operation, did not
contribute significantly to cash from operations in 2006, 2005 or 2004.

The Company's capital expenditures were $19.6 million in 2006, $27.2 million in
2005, and $22.1 million in 2004. The Company expects that capital expenditures
in 2007 will be approximately $25 million. The primary purposes for capital
expenditures in 2007 will be related to new product introductions, capacity
expansion, manufacturing transfers and other cost reduction projects. As in
2006, the Company expects to finance capital expenditures in 2007 through cash
flow from operations.

The Company decreased total debt by $2.3 million in 2006 and $6.8 million in
2005 after increasing debt by $3.8 million in 2004. The Company's Board of
Directors has authorized the Company to repurchase shares of its common stock,
from time to time, depending on market conditions. The Company repurchased
329,000 common shares for $10.3 million in 2006, 458,000 common shares for $12.8
million in 2005, and 168,400 common shares for $5.6 million in 2004.

Off-Balance Sheet Arrangements

In accordance with the definition under SEC rules, the following qualify as
off-balance sheet arrangements:

- -    any obligation under certain guarantees or contracts;

- -    a retained or contingent interest in assets transferred to an
     unconsolidated entity or similar entity or similar arrangement that serves
     as credit, liquidity or market risk support to that entity for such assets;

- -    any obligation under certain derivative instruments; and

- -    any obligation under a material variable interest held by the registrant in
     an unconsolidated entity that provides financing, liquidity, market risk or
     credit risk support to the registrant, or engages in leasing, hedging or
     research and development services with the registrant.

The following discussion addresses each of the above items for the Company.

On December 30, 2006, the Company was not liable for guarantees of indebtedness
owed by third parties.

As of December 30, 2006, the Company was not directly liable for the debt of any
unconsolidated entity, and the Company does not have any retained or contingent
interest in assets as defined above.

As of December 30, 2006, the Company does not hold any derivative financial
instruments, as defined by FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended.


                                                                               4



As part of the Company's ongoing business, the Company does not participate in
transactions that generate relationships with unconsolidated entities or
financial partnerships, such as entities often referred to as structured finance
or special purpose entities ("SPEs"), which would have been established for the
purpose of facilitating off-balance sheet arrangements or other contractually
narrow or limited purposes. As of December 30, 2006 and December 31, 2005, the
Company is not involved in any unconsolidated SPE transactions.

Contractual Obligations

Achieving optimal returns on cash often involves making long-term commitments.
SEC regulations require that the Company present its contractual obligations,
and the Company has done so in the table that follows. However, the Company's
future cash flow prospects cannot reasonably be assessed based on such
obligations, as the most significant factor affecting its future cash flows is
its ability to earn and collect cash from its customers. Future cash outflows,
whether they are contractual obligations or not, will vary based on the
Company's future needs. Further, normal operations involve significant
expenditures that are not based on "commitments." Examples of such expenditures
include amounts paid for income taxes or for salaries and benefits.

The following table summarizes contractual obligations and commitments, as of
December 30, 2006 (in thousands):



                                                            Payment Due By Period
                                         -----------------------------------------------------------
                                                   Less than                               More than
Contractual Obligations                   Total      1 year    1 - 3 years   3 - 5 years    5 years
- -----------------------                  -------   ---------   -----------   -----------   ---------
                                                                            
Long-term debt obligations               $26,113    $24,328       $1,015        $  420       $  350
Interest payments                          1,059        835           86            77           61
Supplemental Executive Retirement Plan     1,952        200           --            --        1,752
Operating lease payments                  16,604      4,553        4,734         3,184        4,133
                                         -------    -------       ------        ------       ------
Total                                    $45,728    $29,916       $5,835        $3,681       $6,296
                                         =======    =======       ======        ======       ======


Recent Accounting Pronouncements

In November 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 151, "Inventory Costs - An
Amendment of Accounting Research Bulletin No. 43, Chapter 4." SFAS 151 clarifies
that abnormal amounts of idle facility expense, freight, handling costs and
spoilage should be expensed as incurred and not included as overhead. SFAS 151
also requires that the allocation of fixed production overhead to conversion
costs be based on normal capacity of the production facilities. SFAS 151 has
been applied prospectively beginning January 1, 2006. The adoption of SFAS 151
did not have a material impact on the Company's consolidated financial
statements.

In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment" ("SFAS
123(R)"). SFAS 123(R) requires public companies to recognize compensation
expense for the cost of awards of equity compensation using a fair value method.
The Company adopted SFAS 123(R) on January 1, 2006 (i.e., the first quarter of
2006) using the modified prospective method. The Company has made the one-time
election to adopt the transition method described in FASB Staff Position (FSP)
No. FAS 123(R)-3, "Transition Election Related to Accounting for the Tax Effect
of Share-Based Payment Awards". Under SFAS 123(R), benefits of tax deductions in
excess of recognized compensation expense are now reported as a financing cash
flow, rather than an operating cash flow as prescribed under the prior
accounting rules. The Company recognized $5.2 million of expense related to
share-based compensation during 2006. The impact of the adoption of SFAS 123(R)
is more fully described in Note 1 of the Notes to Consolidated Financial
Statements.

In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans - an Amendment of FASB
Statements No. 87, 88, 106, and 132(R)". SFAS No. 158 requires the recognition
of the overfunded or underfunded status of a defined benefit postretirement plan
as an asset or a liability in the balance sheet, with changes in the funded
status recorded through comprehensive income in the year in which those changes
occur. The Company adopted FAS158 during 2006. The impact of the adoption of
SFAS No. 158 is more fully described in Note 10.

In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"),
an interpretation of FASB Statement No. 109, "Accounting for Income Taxes." FIN
48 requires that a position taken or expected to be taken in a tax return be
recognized in the financial statements when it is more likely than not (i.e. a
likelihood of more than fifty percent) that the position would be sustained upon
examination by tax authorities. A recognized tax position is then measured at
the largest amount of benefit that is greater than fifty percent likely of being
realized upon ultimate settlement. The effective date for the application of
FIN48 by the Company is January 1, 2007. Upon adoption, the cumulative effect of
applying the recognition and measurement provisions of FIN 48, if any, shall be
reflected as an adjustment to the opening balance of retained earnings. The
adoption of FIN 48 is not expected to have a material impact on the Company's
Consolidated Financial Statements.

In September 2006, FASB Statement 157, "Fair Value Measurements" ("SFAS 157")
was issued. SFAS 157 establishes a framework for measuring fair value by
providing a standard definition of fair value as it applies to assets and
liabilities. SFAS 157, which does not require any new fair value measurements,
clarifies the application of other accounting pronouncements that require or
permit fair value measurements. SFAS 157 must be applied prospectively beginning
January 1, 2008. The Company is evaluating the impact of adopting SFAS 157 on
its Consolidated Financial Statements.


                                                                               5


Critical Accounting Policies

Certain of the accounting policies as discussed below require the application of
significant judgment by management in selecting the appropriate estimates and
assumptions for calculating amounts to record in the financial statements.
Actual results could differ from those estimates and assumptions, impacting the
reported results of operations and financial position. Significant accounting
policies are more fully described in the notes to the consolidated financial
statements included elsewhere in this Annual Report. Certain accounting
policies, however, are considered to be critical in that they are most important
to the depiction of the Company's financial condition and results of operations
and their application requires management's subjective judgment in making
estimates about the effect of matters that are inherently uncertain. The Company
believes the following accounting policies are the most critical to aid in fully
understanding and evaluating its reported financial results, as they require
management's most difficult, subjective or complex judgments, resulting from the
need to make estimates about the effect of matters that are inherently
uncertain. The Company has reviewed these critical accounting policies and
related disclosures with the Audit Committee of its Board of Directors.

Revenue Recognition: The Company recognizes revenue on product sales in the
period the sales process is complete. This generally occurs when our products
are shipped (FOB origin) to the customer in accordance with the terms of the
sale, the risk of loss has been transferred, collectibility is reasonably
assured and the pricing is fixed and determinable. Our distribution channels are
primarily through direct sales, and through independent third party
distributors. There is no retail channel.

Revenue & Billing

We accept orders from customers based on long term purchasing contracts and
written sales agreements. Contract pricing and selling agreement terms are based
on market factors, costs, and competition. Pricing is normally negotiated as an
adjustment (premium or discount) from our published price lists. The customer is
invoiced when our products are shipped to them in accordance with the terms of
the sales agreement.

Returns & Credits

Some of the terms of the Company's sales agreements and normal business
conditions provide the customers (distributors) the ability to receive credit
for products previously shipped and invoiced. This practice is common in the
industry and is referred to as a "ship and debit" program. This program allows
the distributor to debit Littelfuse for the difference between the distributors
contracted price and a lower price for specific transactions. Under certain
circumstances (usually in a competitive situation or large volume opportunity),
a distributor will request authorization to reduce their price to their buyer.
If the Company approves such a reduction, the distributor is authorized to
"debit" their account for the amount of their reduced margin. The Company
establishes reserves for this program based on historic activity and actual
authorizations for the debit. In accordance with the guidance of paragraph 9 of
EITF Issue No. 01-09 "Accounting for Consideration Given by a Vendor to a
Customer" we recognize these debits as a reduction of revenue.

The Company has a return to stock policy whereby a customer with previous
authorization from Littelfuse management, can return previously purchased goods
for full or partial credit. The Company establishes an estimated allowance for
these returns based on historic activity. Sales revenue and cost of sales are
reduced to anticipate estimated returns in accordance with FASB Statement No.
48, Revenue Recognition When Right of Return Exists.

The Company properly meets all of the criteria of FASB Statement No. 48 for
recognizing revenue when the right of return exists under Staff Accounting
Bulletin 104 (Revenue Recognition). Specifically, the Company meets those
requirements because:

     1.   The Company's selling price is fixed or determinable at the date of
          the sale.

     2.   The Company has policies and procedures to accept only credit worthy
          customers with the ability to pay the Company.

     3.   The Company's customers are obligated to pay the Company under the
          contract and the obligation is not contingent on the resale of the
          product. (All "ship and debit" and "returns to stock" require specific
          circumstances and authorization.)

     4.   The risk ownership transfers to the Company's customers upon shipment
          and is not changed in the event of theft, physical destruction or
          damage of the product.

     5.   The Company bills at the ship date and establishes a reserve to reduce
          revenue from the in transit time until the product is delivered for
          F.O.B. destination sales.

     6.   The Company's customers acquiring the product for resale have economic
          substance apart from that provided by Littelfuse. All of our
          distributors are independent of the Company.

     7.   The Company does not have any obligations for future performance to
          bring about resale of the product by its customers.

     8.   The Company can reasonably estimate the amount of future returns.

Allowance for Doubtful Accounts: The Company evaluates the collectibility of its
trade receivables based on a combination of factors. The Company regularly
analyzes its significant customer accounts and, when the Company becomes aware
of a specific customer's inability to meet its financial obligations, the
Company records a specific reserve for bad debt to reduce the related receivable
to the amount the Company reasonably believes is collectible. The Company also
records allowances for all other customers based on a variety of factors
including the length of time the receivables are past due, the financial health
of the customer, macroeconomic considerations and historical experience.
Historically, the allowance for doubtful accounts has been adequate to cover bad
debts. If circumstances related to specific customers change, the estimates of
the recoverability of receivables could be further adjusted. However, due to the
Company's diverse customer base and lack of credit concentration, the Company
does not believe its estimates would be materially impacted by changes in its
assumptions.


                                                                               6



Credit Memos: The Company evaluates sales activity for credits to be issued on
sales recorded prior to the end of the fiscal period. These credits relate to
the return of inventory, pricing adjustments and credits issued to a customer
based upon achieving prearranged sales volumes. Volume based incentives offered
to customers are based upon the estimated cost of the program and are recognized
as a reduction to revenue as products are sold. However, due to the Company's
diverse customer base and lack of customer concentration, the Company does not
believe its estimates would be materially impacted by changes in its
assumptions.

Inventory: The Company performs a detailed assessment of inventory, which
includes a review of, among other factors, demand requirements, product life
cycle and development plans, component cost trends, product pricing and quality
issues. Based on the analysis, the Company records adjustments to inventory for
excessiveness, obsolescence or impairment when appropriate to reflect inventory
at net realizable value. Historically, inventory reserves have been adequate to
reflect inventory at net realizable values. Revisions to inventory adjustments
may be required if actual demand, component costs or product life cycles differ
from estimates. However, due to the Company's diverse product lines and end user
markets, the Company does not believe its estimates would be materially impacted
by changes in its assumptions.

Goodwill and Other Intangibles: The Company annually tests goodwill for
impairment as required by FAS142 or if there is an event or change in
circumstances that indicate the asset may be impaired. The Company determined
the fair value of each of its reporting units by using a guideline company
method to estimate market value. A valuation multiple is derived for each
business segment from transactions involving companies similar to the Company.
That multiple is applied to an EBITDA of each segment to estimate the market
value of that segment. In making these estimates, the Company considered the
markets it was addressing, the competitive environment and its advantages. The
Company determined that the fair value of each of the reporting units exceeded
their carrying amounts and, therefore, no goodwill impairment existed. The
Company will continue to perform a goodwill impairment test as required on an
annual basis and on an interim basis, if certain conditions exist. Factors the
Company considers important, which could result in changes to its estimates,
include underperformance relative to historical or projected future operating
results and declines in acquisition and trading multiples. Due to the diverse
end user base and non-discretionary product demand, the Company does not believe
its future operating results will vary significantly relative to its historical
and projected future operating results.

Long-Lived Assets: The Company evaluates long-lived assets on an ongoing basis.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the related asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the asset to future undiscounted cash flows
expected to be generated by the asset. If the asset is determined to be
impaired, the impairment recognized is measured by the amount by which the
carrying value of the asset exceeds its fair value. The Company's estimates of
future cash flows from such assets could be impacted if it underperforms
relative to historical or projected future operating results. However, due to
the Company's diverse product lines and end user markets, the Company does not
believe its estimates would be materially impacted by changes in its
assumptions.

Pension and Supplemental Executive Retirement Plan: The Company has a number of
defined benefit plans primarily in the North America and European reporting
segments. Historically these plans have been accounted for using FAS87 and
recognized the net unfunded status of the plan on the balance sheet. The Company
has adopted FAS158 effective December 30, 2006, which requires the full unfunded
status of the plan to be recognized. Actuarial gains and losses and prior
service costs and credits are now recognized as a component of accumulated other
comprehensive income. Accounting for pensions requires estimating the future
benefit cost and recognizing the cost over the employee's expected period of
employment with the Company. Certain assumptions are required in the calculation
of pension costs and obligations. These assumptions include the discount rate,
salary scales and the expected long-term rate of return on plan assets. The
discount rate is intended to represent the rate at which pension benefit
obligations could be settled by purchase of an annuity contract. These
assumptions are subject to change based on stock and bond market returns and
other economic factors. Actual results that differ from the Company's
assumptions are accumulated and amortized over future periods and therefore
generally affect its recognized expense and accrued liability in such future
periods. While the Company believes that its assumptions are appropriate given
current economic conditions and its actual experience, significant differences
in results or significant changes in the Company's assumptions may materially
affect its pension obligations and related future expense.

Environmental Liabilities: Environmental liabilities are accrued based on
estimates of the probability of potential future environmental exposure.
Expenses related to on-going maintenance of environmental sites are expensed as
incurred. If actual or estimated probable future losses exceed the Company's
recorded liability for such claims, it would record additional charges as other
expense during the period in which the actual loss or change in estimate
occurred.

Other Contingencies: In the ordinary course of business, the Company is involved
in legal proceedings involving contractual and employment relations, product
liability claims, trademark rights and a variety of other matters. The Company
records contingent liabilities resulting from claims against it when it is
probable that a liability has been incurred and the amount of the loss is
reasonably estimable. The Company discloses contingent liabilities when there is
a reasonable possibility that the ultimate loss will exceed the recorded
liability. Estimating probable losses requires analysis of multiple factors, in
some cases including judgments about the potential actions of third party
claimants and courts. Therefore, actual losses in any future period are
inherently uncertain. Currently, the Company does not believe that any of its
pending legal proceedings or claims will have a material impact on its financial
position or results of operations. However, if actual or estimated probable
future losses exceed the Company's recorded liability for such claims, it would
record additional charges as other expense during the period in which the actual
loss or change in estimate occurred.

Stock-based compensation: Stock-based compensation expense is recorded for
stock-option grants and performance-based restricted stock awards based upon the
fair values of the awards. The fair value of stock option awards is estimated
at the grant date using the Black-Scholes option pricing model, which includes
assumptions for volatility, expected term, risk-free interest rate and dividend
yield.


                                                                               7


Expected volatility is based on implied volatilities from traded options on
Littelfuse stock, historical volatility of Littelfuse stock and other factors.
Historical data is used to estimate employee termination experience and the
expected term of the options. The risk-free interest rate is based on the U.S.
Treasury yield curve in effect at the time of grant. The performance-based
restricted stock awards vest in thirds over a three-year period (following the
three-year performance period), and are paid annually as they vest, one half in
the Company's common stock and one half in cash. The fair value of
performance-based restricted stock awards that are paid in common stock is
measured at the market price on the grant date, and the fair value of the
portion paid in cash is measured at the current market price of a share. The
number of shares issued is based on the Company attaining certain financial
performance goals relating to return on net tangible assets (RONTA) and earnings
before interest, taxes, depreciation and amortization (EBITDA) during the
three-year period after the grant date. Stock-based compensation for
performance-based awards is based on the fair values and the Company's current
estimate of the probable number of shares to be issued (based on the probable
outcome at the end of the performance period). As the Company's estimate of the
probable outcome changes in future periods, stock-based compensation expense is
adjusted accordingly. Total stock-based compensation expense was $5.2 million in
2006. See Note 12 of the Notes to Consolidated Financial Statements.

Market Risk

The Company is exposed to market risk from changes in interest rates, foreign
exchange rates, customer solvency and commodities.

The Company had debt outstanding at December 30, 2006, in the form of a domestic
revolving credit facility and foreign lines of credit at variable rates. While
100% of this debt has variable interest rates, the Company's interest expense is
not materially sensitive to changes in interest rate levels since debt levels
and potential interest expense increases are small relative to earnings.

A portion of the Company's operations consists of manufacturing and sales
activities in foreign countries. The Company has manufacturing facilities in
Mexico, the U.K., Ireland, Germany, China and the Philippines. During 2006,
sales exported from the United States or manufactured abroad accounted for 61.1%
of total sales. Substantially all sales in Europe are denominated in Euro, U.S.
Dollar and British Pound Sterling, and substantially all sales in the
Asia-Pacific region are denominated in U.S. Dollar, Japanese Yen and South
Korean Won.

The Company's identifiable foreign exchange exposures result from the purchase
and sale of products from affiliates, repayment of intercompany trade and loan
amounts and translation of local currency amounts in consolidation of financial
results. As international sales were more than half of total sales, a
significant portion of the resulting accounts receivable are denominated in
foreign currencies. Changes in foreign currency exchange rates or weak economic
conditions in the foreign countries in which it manufactures and distributes
products could affect the Company's sales, accounts receivable values and
financial results. The Company uses netting and offsetting intercompany account
management techniques to reduce known foreign currency exposures where possible
and also, from time to time, utilizes derivative instruments to hedge certain
foreign currency exposures deemed to be material.

The Company uses various metals in the production of its products, including
zinc and copper. The Company's earnings are exposed to fluctuations in the
prices of these commodities. The Company does not currently use derivative
financial instruments to mitigate this commodity price risk. A 10% increase in
the price of zinc and copper would reduce pre-tax profit by approximately $1.0
million and $1.0 million, respectively.

The Company does not believe it has significant exposure to market risk from
changes in interest rates, foreign exchange rates or commodity prices.

Outlook

The Company believes its long-term growth strategy, which emphasizes development
of new circuit protection products, providing customers with solutions and
technical support in all major regions of the world and leveraging low cost
production facilities in Asia and Mexico will drive sales growth and reduce
costs in each of its segments. In addition, the fundamentals for the Company's
major markets appear to be neutral to moderately positive for 2007, although the
Company does expect to be negatively affected by an inventory correction in the
electronics channels in the first half of 2007.

The Company initiated a series of projects in the years 2004, 2005 and 2006 to
reduce costs in its global manufacturing and distribution operations as well as
reduce the cost of purchased materials and transportation. These programs are
expected to generate significant cost savings in 2007. On the other hand, the
Company plans to continue to increase research and development spending on new
electronic and automotive products in 2007.

The Company is working to expand its share of the circuit protection market by
leveraging new products that it has recently acquired or developed as well as
improved solution selling capabilities. In the future, the Company will look for
opportunities to add to its product portfolio and technical expertise so that it
can provide customers with the most complete circuit protection solutions
available in the marketplace.

Cautionary Statement Regarding Forward-Looking Statements Under the Private
Securities Litigation Reform Act of 1995 ("PSLRA").

The statements in this section, the letter to shareholders and in the other
sections of this report and in our Annual Report on Form 10-K, which are not
historical facts are intended to constitute "forward-looking statements"
entitled to the safe-harbor provisions of the PSRLA and that involve risks and
uncertainties, including, but not limited 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 in excess of reserves, failure of an
indemnification for environmental liability, exchange rate fluctuations,
commodity price fluctuations, the effect of the Company's accounting policies,
labor disputes, restructuring costs in excess of expectations, pension plan
asset returns less than assumed, integration of acquisitions and other risks
which may be detailed in the Company's Securities and Exchange Commission
filings.


                                                                               8



MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Littelfuse is responsible for establishing and maintaining
adequate internal control over financial reporting as such term is defined in
Exchange Act Rules 13a-15(f). Littelfuse's internal control system was designed
to provide reasonable assurance to its management and the Board of Directors
regarding the preparation and fair presentation of published financial
statements.

All internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined effective can provide only
reasonable assurance with respect to financial statement preparation and
presentation.

An internal control significant deficiency is a control deficiency, or
combination of control deficiencies, that adversely affects the Company's
ability to initiate, authorize, record, process, or report external financial
data reliably in accordance with generally accepted accounting principles such
that there is more than a remote likelihood that a misstatement of the Company's
annual or interim financial statements that is more than inconsequential will
not be prevented or detected. An internal control material weakness is a
significant deficiency, or combination of significant deficiencies, that results
in more than a remote likelihood that a material misstatement of the annual or
interim financial statements will not be prevented or detected.

Littelfuse's management assessed the effectiveness of the Company's internal
control over financial reporting as of December 30, 2006, based upon the
framework in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based on this
assessment, the Company's management concluded that, as of December 30, 2006,
the Company's internal control over financial reporting is effective.

Littelfuse's independent registered public accounting firm, Ernst & Young LLP,
has audited management's assessment of the Company's internal control over
financial reporting. Their report appears on page 11.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There was no change in the Company's internal control over financial reporting
that occurred during the Company's most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.


                                                                               9



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

THE BOARD OF DIRECTORS AND SHAREHOLDERS OF LITTELFUSE, INC.

We have audited the accompanying consolidated balance sheets of Littelfuse, Inc.
and subsidiaries as of December 30, 2006, and December 31, 2005, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 30, 2006. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Littelfuse, Inc.
and subsidiaries at December 30, 2006, and December 31, 2005, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 30, 2006, in conformity with U.S.
generally accepted accounting principles.

As discussed in Notes 1 and 11 to the consolidated financial statements,
effective January 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123(R), "Share-Based Payment" and, effective for the fiscal year
ended December 30, 2006, the Company adopted certain provisions of Statement of
Financial Accounting Standards No. 158, "Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans".

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Littelfuse,
Inc.'s internal control over financial reporting as of December 30, 2006, based
on criteria established in Internal Control -- Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated February 23, 2007 expressed an unqualified opinion thereon.

Ernst & Young LLP

Chicago, Illinois

February 23, 2007


                                                                              10



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

THE BOARD OF DIRECTORS AND SHAREHOLDERS OF LITTELFUSE, INC.

We have audited management's assessment, included in the accompanying
Management's Report on Internal Control over Financial Reporting, that
Littelfuse, Inc. maintained effective internal control over financial reporting
as of December 30, 2006, based on criteria established in Internal
Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Littelfuse's
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the Company's
internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, management's assessment that Littelfuse, Inc. maintained
effective internal controls over financial reporting as of December 30, 2006, is
fairly stated, in all material respects, based on the COSO control criteria.
Also, in our opinion, Littelfuse, Inc. maintained, in all material respects,
effective internal control over financial reporting as of December 30, 2006,
based on the COSO criteria.

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the 2006 consolidated financial
statements of Littelfuse, Inc. and our report dated February 23, 2007 expressed
an unqualified opinion thereon.

Ernst & Young LLP

Chicago, Illinois

February 23, 2007


                                                                              11


Consolidated Balance Sheets



                                                                              December 30,   December 31,
(In thousands)                                                                    2006           2005
                                                                              ------------   ------------
                                                                                       
ASSETS
Current assets:
   Cash and cash equivalents                                                    $  56,704      $  21,947
   Accounts receivable, less allowances (2006 - $17,503; 2005 - $11,903)           83,901         80,303
   Inventories                                                                     65,961         63,423
   Deferred income taxes                                                           12,382         11,927
   Assets held for sale (Efen)                                                         --         17,633
   Prepaid expenses and other current assets                                        9,821          7,936
                                                                                ---------      ---------
Total current assets                                                              228,769        203,169
Property, plant, and equipment:
   Land                                                                            10,916         13,370
   Buildings                                                                       45,518         48,277
   Equipment                                                                      285,758        254,829
                                                                                ---------      ---------
                                                                                  342,192        316,476
Accumulated depreciation                                                         (216,676)      (190,983)
                                                                                ---------      ---------
Net property, plant and equipment                                                 125,516        125,493

Intangible assets, net of amortization:
   Patents, licenses and software                                                  10,118          2,891
   Distribution network                                                            15,209          6,508
   Trademarks and tradenames                                                        1,321          5,343
   Goodwill                                                                        67,500         54,440
                                                                                ---------      ---------
                                                                                   94,148         69,182
Investments                                                                         5,231          5,590
Deferred income taxes                                                               9,746             --
Other assets                                                                        1,556            497
                                                                                ---------      ---------
Total assets                                                                    $ 464,966      $ 403,931
                                                                                ---------      ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                             $  23,334      $  20,457
   Accrued payroll                                                                 22,468         20,128
   Accrued expenses                                                                12,579          8,141
   Accrued severance                                                               10,670          7,866
   Accrued income taxes                                                            12,657          9,920
   Liabilities held for sale (Efen)                                                    --          6,722
   Current portion of long-term debt                                               24,328         26,682
                                                                                ---------      ---------
Total current liabilities                                                         106,036         99,916
Long-term debt, less current portion                                                1,785             --
Accrued severance                                                                  18,879             --
Deferred income taxes                                                                  --          1,879
Accrued post-retirement benefits                                                   27,971         19,268
Other long-term liabilities                                                         6,487          5,658
Minority Interest                                                                     143            144

Shareholders' equity:
   Preferred stock, par value $0.01 per share: 1,000,000 shares authorized;
      no shares issued and outstanding                                                 --             --
   Common stock, par value $0.01 per share: 34,000,000 shares authorized;
      shares issued and outstanding, 2006 - 22,110,674; 2005 - 22,229,288             221            222
Additional paid-in capital                                                        108,543         99,078
Notes receivable from officers - common stock                                         (10)           (17)
Accumulated other comprehensive income (loss)                                         (11)        (2,426)
Retained earnings                                                                 194,922        180,209
                                                                                ---------      ---------
Total shareholders' equity                                                        303,665        277,066
                                                                                ---------      ---------
Total liabilities and shareholders' equity                                      $ 464,966      $ 403,931
                                                                                =========      =========


See accompanying notes.


                                                                              12



Consolidated Statements of Income



(In thousands, except per share amounts)                     December 30,   December 31,   January 1,
Year Ended                                                       2006            2005         2005
- ----------------------------------------                     ------------   ------------   ----------
                                                                                  
Net sales                                                      $534,859       $467,089      $476,833
Cost of sales                                                   373,596        322,537       303,036
                                                               --------       --------      --------
Gross profit                                                    161,263        144,552       173,797
Selling, general and administrative expenses                    110,581         98,536        96,102
Research and development expenses                                18,708         16,672        16,079
Impairment of long-term investment                                   --             --         2,277
Amortization of intangibles                                       3,116          2,378         2,336
                                                               --------       --------      --------
Operating income                                                 28,858         26,966        57,003
Interest expense                                                  1,626          2,098         1,475
Other expense (income), net                                      (2,174)        (3,068)           47
                                                               --------       --------      --------
Earnings from continuing operations before
   minority interest and income taxes                            29,406         27,936        55,481
Minority interest                                                    --            (86)          143
Income taxes                                                      6,170         11,440        18,977
                                                               --------       --------      --------
Earnings from continuing operations                              23,236         16,582        36,361
Discontinued operations (net of tax expense of $409, $645
   and $252 in 2006, 2005 and 2004, respectively)                   588          1,128          (333)
                                                               --------       --------      --------
Net income                                                     $ 23,824       $ 17,710      $ 36,028
                                                               --------       --------      --------
Net income per share:
Basic:
   Continuing operations                                       $   1.04       $   0.74      $   1.64
   Discontinued operations                                         0.03           0.05         (0.02)
                                                               --------       --------      --------
   Net Income                                                  $   1.07       $   0.79      $   1.62
                                                               ========       ========      ========
Diluted:
   Continuing operations                                       $   1.03       $   0.73      $   1.61
   Discontinued operations                                         0.03           0.05         (0.02)
                                                               --------       --------      --------
   Net Income                                                  $   1.06       $   0.78      $   1.59
                                                               ========       ========      ========
Weighted-average shares and equivalent shares outstanding:
Basic                                                            22,305         22,413        22,239
Diluted                                                          22,434         22,582        22,604


See accompanying notes.


                                                                              13


Consolidated Statements of Cash Flows

(In thousands)



                                                           December 30,   December 31,   January 1,
Year Ended                                                     2006           2005          2005
- ----------                                                 ------------   ------------   ----------
                                                                                
Operating activities
Net income                                                   $ 23,824       $ 17,710      $ 36,028
Adjustments to reconcile net income to net cash provided
   by operating activities:
   Depreciation                                                29,749         28,738        23,859
   Amortization of intangibles                                  3,116          2,495         2,441
   Impairment of long-term investment                              --             --         2,277
   Provision for bad debts                                        127          1,884           802
   Gain on sale of LC Fab                                          --         (1,400)           --
   Stock-based compensation                                     5,187             --            --
   Deferred income taxes                                      (12,952)        (1,564)        3,281
Changes in operating assets and liabilities:
   Accounts receivable                                          2,843        (11,185)       (6,582)
   Inventories                                                  1,240          6,594        (4,277)
   Accounts payable and accrued expenses                       19,969         (1,134)       (7,709)
   Accrued taxes                                                6,461         (5,590)           --
   Prepaid expenses and other                                   1,351          1,594         2,864
                                                             --------       --------      --------
Net cash provided by operating activities                      80,915         38,142        52,984

Investing activities
Purchases of property, plant and equipment                    (19,613)       (27,239)      (22,079)
Purchase of businesses, net of cash acquired                  (37,841)        (3,658)      (41,661)
Sale of business and property, plant and equipment             14,401             --            --
Sale of LC Fab                                                    500            600            --
                                                             --------       --------      --------
Net cash used in investing activities                         (42,553)       (30,297)      (63,740)

Financing activities
Proceeds from debt                                             43,273         48,819        42,200
Payments of debt                                              (45,626)       (55,616)      (38,402)
Proceeds from exercise of stock options                         5,734          3,844        16,520
Notes receivable, common stock                                      7          3,533            --
Purchases of common stock                                     (10,262)       (12,832)       (5,604)
Excess tax benefit on share-based compensation                    468             --            --
                                                             --------       --------      --------
Net cash provided by (used in) financing activities            (6,406)       (12,252)       14,714
Effect of exchange rate changes on cash                         2,801         (2,229)        2,497
                                                             --------       --------      --------
Increase (decrease) in cash and cash equivalents               34,757         (6,636)        6,455
Cash and cash equivalents at beginning of year                 21,947         28,583        22,128
                                                             --------       --------      --------
Cash and cash equivalents at end of year                     $ 56,704       $ 21,947      $ 28,583
                                                             ========       ========      ========


See accompanying notes.


                                                                              14



Consolidated Statements of Shareholders' Equity

(In thousands)



                                                                           Notes       Accumulated
                                                           Additional   Receivable-       Other
                                                  Common     Paid-In      Common      Comprehensive   Retained
                                                  Stock      Capital       Stock      Income (Loss)   Earnings    Total
                                                  ------   ----------   -----------   -------------   --------   --------
                                                                                               
Balance at January 3, 2004                         $220     $ 75,859      $(3,550)       $(3,042)     $142,715   $212,202
Comprehensive income:
   Net income for the year                           --           --           --             --        36,028     36,028
   Change in net unrealized loss on derivatives      --           --           --            824            --        824
   Minimum pension liability adjustment*             --           --           --           (458)           --       (458)
   Unrealized loss on investments*                   --           --           --         (1,095)           --     (1,095)
   Foreign currency translation adjustment           --           --           --          7,444            --      7,444
                                                   ----     --------      -------        -------      --------   --------
Comprehensive income                                                                                               42,743
Payments on notes receivable                         --           --           --             --            --         --
Purchase of 168,400 shares of common stock           (2)        (587)          --             --        (5,015)    (5,604)
Stock options exercised, including tax
   benefit of $3,946                                  7       20,736           --             --            --     20,743
                                                   ----     --------      -------        -------      --------   --------
Balance at January 1, 2005                         $225     $ 96,008      $(3,550)       $ 3,673      $173,728   $270,084
Comprehensive income:
   Net income for the year                           --           --           --             --        17,710     17,710
   Change in net unrealized loss on derivatives      --           --           --            177            --        177
   Minimum pension liability adjustment*             --           --           --         (1,111)           --     (1,111)
   Unrealized gain on investments*                   --           --           --            999            --        999
   Foreign currency translation adjustment           --           --           --         (6,164)           --     (6,164)
                                                   ----     --------      -------        -------      --------   --------
Comprehensive income                                                                                               11,611
Payments on notes receivable                         --           --        3,533             --            --      3,533
Purchase of 458,000 shares of common stock           (5)      (1,598)          --             --       (11,229)   (12,832)
Stock options exercised, including tax
   benefit of $443                                    2        4,668           --             --            --      4,670
                                                   ----     --------      -------        -------      --------   --------
Balance at December 31, 2005                       $222     $ 99,078      $   (17)       $(2,426)     $180,209   $277,066
Comprehensive income:
   Net income for the year                           --           --           --             --        23,824     23,824
   Minimum pension liability adjustment *            --           --           --          1,546            --      1,546
   Unrealized loss on investments*                   --           --           --           (467)           --       (467)
   Foreign currency translation adjustment           --           --           --          9,025            --      9,025
                                                   ----     --------      -------        -------      --------   --------
Comprehensive income                                                                                               33,928
Payments on notes receivable                         --           --            7             --            --          7
Adoption of FAS158*                                  --           --           --         (7,689)           --     (7,689)
Stock-based compensation (FAS123R)                   --        5,187           --             --            --      5,187
Purchase of 329,000 shares of common stock           (3)      (1,148)          --             --        (9,111)   (10,262)
Stock options exercised, including tax
   benefit of $779                                    2        5,426           --             --            --      5,428
                                                   ----     --------      -------        -------      --------   --------
Balance at December 30, 2006                       $221     $108,543      $   (10)       $   (11)     $194,922   $303,665
                                                   ====     ========      =======        =======      ========   ========


*    Including related tax impact.

See accompanying notes.


                                                                              15


Notes to Consolidated Financial Statements
December 30, 2006 and December 31, 2005

1. Summary of Significant Accounting Policies and Other Information

Nature of Operations: Littelfuse, Inc. and its subsidiaries (the Company)
design, manufacture, and sell circuit protection devices for use in the
automotive, electronic and electrical markets throughout the world.

Fiscal Year: The Company's fiscal years ended December 30, 2006, December 31,
2005, and January 1, 2005 and contained 52, 52 and 53 weeks, respectively.

Basis of Presentation: The consolidated financial statements include the
accounts of Littelfuse, Inc. and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated. The consolidated financial
statements of Littelfuse, Inc. and its subsidiaries were prepared in accordance
with generally accepted accounting principles in the United States of America
and include the assets, liabilities, revenues, and expenses of all wholly-owned
subsidiaries and majority-owned subsidiaries over which the Company exercises
control.

Cash Equivalents: All highly liquid investments, with a maturity of three months
or less when purchased, are considered to be cash equivalents.

Investments: The Company has determined that all of its investment securities
are to be classified as available-for-sale. Available-for-sale securities are
carried at fair value with the unrealized gains and losses reported in
"Shareholders' Equity" as a component of "Accumulated Other Comprehensive Income
(Loss)." The amortized cost of debt securities is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization is included
in interest income. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in other
income or expense. The cost of securities sold is based on the specific
identification method. Interest and dividends on securities classified as
available-for-sale are included in interest income.

Fair Value of Financial Instruments: The Company's financial instruments include
cash and cash equivalents, accounts receivable, investments and long-term debt.
The carrying values of such financial instruments approximate their estimated
fair values.

Accounts Receivable: The Company performs credit evaluations of customers'
financial condition and generally does not require collateral. Credit losses are
provided for in the financial statements based upon specific knowledge of a
customer's inability to meet its financial obligations to the Company.
Historically, credit losses have consistently been within management's
expectations and have not been a material amount. The Company also maintains
allowances against accounts receivable for the settlement of rebates and sales
discounts to customers. These allowances are based upon specific customer sales
and sales discounts as well as actual historical experience.

Inventories: Inventories are stated at the lower of cost or market (first in,
first out method), which approximates current replacement cost. The Company
maintains excess and obsolete allowances against inventory to reduce the
carrying value to the expected net realizable value. These allowances are based
upon a combination of factors including historical sales volume, market
conditions, lower of cost or market analysis and expected realizable value of
the inventory.

Property, Plant and Equipment: Land, buildings, and equipment are carried at
cost. Depreciation is calculated using the straight-line method with useful
lives of 21 years for buildings, seven to nine years for equipment, seven years
for furniture and fixtures, five years for tooling and three years for computer
equipment.

Intangible Assets: Trademarks and tradenames are amortized using the
straight-line method over estimated useful lives that have a range of five to
twenty years. Patents and licenses are amortized using the straight-line method
or an accelerated method over estimated useful lives that have a range of four
to nine years. The distribution networks are amortized on either a straight-line
or accelerated basis over estimated useful lives that have a range of nine to
twenty years. Intangible assets are also tested for impairment when there is a
significant event that may cause the asset to be impaired.

Goodwill is subject to an annual impairment test. The Company determined the
fair value of each of its reporting units by using a guideline company method to
estimate market value. A valuation multiple is derived for each business segment
from transactions involving companies similar to the Company. That multiple is
applied to an EBITDA of each segment to estimate the market value of that
segment. In making these estimates, the Company considered the markets it was
addressing, the competitive environment and its advantages. The Company
determined that the fair value of each of the reporting units exceeded their
carrying amounts and, therefore, no goodwill impairment existed. The Company
will continue to perform a goodwill impairment test on an annual basis and on an
interim basis, if certain conditions exist. Factors the Company considers
important, which could result in changes to its estimates, include
underperformance relative to historical or projected future operating results
and declines in acquisition and trading multiples. Due to the diverse end user
base and non-discretionary product demand, the Company does not believe its
future operating results will vary significantly relative to its historical and
projected future operating results.

Pension and Other Post-retirement Benefits: Accounting for pensions requires
estimating the future benefit cost and recognizing the cost over the employee's
expected period of employment with the Company. Certain assumptions are required
in the calculation of pension costs and obligations. These assumptions include
the discount rate, salary scales and the expected long-term rate of return on
plan assets. The discount rate is intended to represent the rate at which
pension benefit obligations could be settled by purchase of an annuity contract.
These assumptions are subject to change based on stock and bond market returns
and other economic factors. Actual results that differ from the Company's
assumptions are accumulated and amortized over future periods


                                                                              16



and therefore generally affect its recognized expense and accrued liability in
such future periods. While the Company believes that its assumptions are
appropriate given current economic conditions and its actual experience,
significant differences in results or significant changes in the Company's
assumptions may materially affect its pension obligations and related future
expense.

In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans - an Amendment of FASB
Statements No. 87, 88, 106, and 132(R)". SFAS No. 158 requires the recognition
of the overfunded or underfunded status of a defined benefit postretirement plan
as an asset or a liability in the balance sheet, with changes in the funded
status recorded through comprehensive income in the year in which those changes
occur. The Company adopted FAS158 on December 30, 2006.

Environmental Liabilities: Environmental liabilities are accrued based on
engineering studies estimating the cost of remediating sites. Expenses related
to on-going maintenance of environmental sites are expensed as incurred. If
actual or estimated probable future losses exceed the Company's recorded
liability for such claims, it would record additional charges as other expense
during the period in which the actual loss or change in estimate occurred.

Revenue Recognition: The Company recognizes revenue on product sales in the
period the sales process is complete. This generally occurs when our products
are shipped (FOB origin) to the customer in accordance with the terms of the
sale, the risk of loss has been transferred, collectibility is reasonably
assured and the pricing is fixed and determinable. Our distribution channels are
primarily through direct sales, and through independent third party
distributors. There is no retail channel.

Revenue & Billing

The Company accepts orders from customers based on long term purchasing
contracts and written sales agreements. Contract pricing and selling agreement
terms are based on market factors, costs, and competition. Pricing is normally
negotiated as an adjustment (premium or discount) from our published price
lists. The customer is invoiced when our products are shipped to them in
accordance with the terms of the sales agreement.

Returns & Credits

Some of the terms of the Company's sales agreements and normal business
conditions provide the customers (distributors) the ability to receive credit
for products previously shipped and invoiced. This practice is common in the
industry and is referred to as a "ship and debit" program. This program allows
the distributor to debit Littelfuse for the difference between the distributors
contracted price and a lower price for specific transactions. Under certain
circumstances (usually in a competitive situation or large volume opportunity),
a distributor will request authorization to reduce their price to their buyer.
If the Company approves, the distributor is authorized to "debit" their
Littelfuse account for the amount of their reduced margin. The Company
establishes reserves for this program based on historic activity and actual
authorizations for the debit. In accordance with the guidance of paragraph 9 of
EITF Issue No. 01-09 "Accounting for Consideration Given by a Vendor to a
Customer" we recognize these debits as a reduction of revenue.

The Company has a return to stock policy whereby a customer with previous
authorization from Littelfuse management, can return previously purchased goods
for full or partial credit. The Company establishes an estimated allowance for
these returns based on historic activity. Sales revenue and cost of sales are
reduced to anticipate estimated returns in accordance with FASB Statement No.
48, Revenue Recognition When Right of Return Exists.

The Company properly meets all of the criteria of FASB Statement No. 48 for
recognizing revenue when the right of return exists under Staff Accounting
Bulletin 104 (Revenue Recognition). Specifically, the Company meets those
requirements because:

     1.   The Company's selling price is fixed or determinable at the date of
          the sale.

     2.   The Company has policies and procedures to accept only credit worthy
          customers with the ability to pay the Company.

     3.   The Company's customers are obligated to pay the Company under the
          contract and the obligation is not contingent on the resale of the
          product. (All "ship and debit" and "returns to stock" require specific
          circumstances and authorization.)

     4.   The risk ownership transfers to the Company's customers upon shipment
          and is not changed in the event of theft, physical destruction or
          damage of the product.

     5.   The Company bills at the ship date and establishes a reserve to reduce
          revenue from the in transit time until the product is delivered for
          F.O.B. destination sales.

     6.   The Company's customers acquiring the product for resale have economic
          substance apart from that provided by Littelfuse. All of our
          distributors are independent of the Company.

     7.   The Company does not have any obligations for future performance to
          bring about resale of the product by its customers.

     8.   The Company can reasonably estimate the amount of future returns.

Advertising Costs: The Company expenses advertising costs as incurred, which
amounted to $1.5 million in 2006, $1.8 million in 2005 and $2.2 million in 2004.

Foreign Currency Translation: The Company's foreign subsidiaries use the local
currency or the U.S. dollar as their functional currency, as appropriate. Assets
and liabilities are translated using exchange rates at the balance sheet date
and revenues and expenses are translated at weighted average rates. The amount
of foreign currency conversion gain recognized in the income statement related
to currency translation was $2.1 million, $1.0 million and $2.4 million in 2006,
2005 and 2004, respectively. Adjustments from the translation process are
recognized in shareholders' equity as a component of other comprehensive income
(loss).


                                                                              17


 Stock-based Compensation: In December 2004, the FASB issued SFAS No. 123(R),
"Share-Based Payment" ("SFAS 123(R)"). SFAS 123(R) requires public companies to
recognize compensation expense for the cost of awards of equity compensation
using a fair value method. The Company adopted SFAS 123(R) on January 1, 2006
(i.e., the first quarter of 2006) using the modified prospective method. The
Company has made the one-time election to adopt the transition method described
in FASB Staff Position (FSP) No. FAS 123(R)-3, "Transition Election Related to
Accounting for the Tax Effect of Share-Based Payment Awards". Under SFAS 123(R),
benefits of tax deductions in excess of recognized compensation expense are now
reported as a financing cash flow, rather than an operating cash flow as
prescribed under the prior accounting rules. Prior to January 1, 2006, the
Company applied Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") to account for its stock-based
compensation plans. Under APB 25, no compensation expense was recognized for
non-qualified stock option awards as long as the exercise price of the awards on
the date of grant was equal to the current market price of the Company's stock.
However, the Company did recognize compensation expense in connection with the
issuance of restricted stock. The table below discloses the Company's proforma
related basic and diluted net income per share for 2005 and 2004, had the fair
value recognition method under SFAS 123(R) been used for the Company's stock
option grants. Further information regarding stock-based compensation is
provided in Note 12 to the Consolidated Financial Statements.

                    (in thousands, except per share amounts)



                                            2005      2004
                                          -------   -------
                                              
Net income as reported                    $17,710   $36,028
Stock option compensation expense under
   fair value method, net of tax           (3,172)   (2,762)
                                          -------   -------
Pro forma net income                      $14,538   $33,266
                                          -------   -------
Basic net income per share:
As reported                               $  0.79   $  1.62
Proforma                                  $  0.65   $  1.50
                                          -------   -------
Diluted net income per share:
As reported                               $  0.78   $  1.59
Proforma                                  $  0.64   $  1.47
                                          -------   -------


On certain occasions, the Company has granted stock options for a fixed number
of shares with an exercise price below that of the underlying stock on the date
of the grant and recognizes compensation expense accordingly. This compensation
expense has not been material. See Note 12 for additional information on
stock-based compensation.

Accounting Pronouncements:

In November 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 151, "Inventory Costs - An
Amendment of Accounting Research Bulletin No. 43, Chapter 4." SFAS 151 clarifies
that abnormal amounts of idle facility expense, freight, handling costs and
spoilage should be expensed as incurred and not included as overhead. SFAS 151
also requires that the allocation of fixed production overhead to conversion
costs be based on normal capacity of the production facilities. SFAS 151 has
been applied prospectively beginning January 1, 2006. The adoption of SFAS 151
did not have a material impact on the Company's consolidated financial
statements.

In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"),
an interpretation of FASB Statement No. 109, "Accounting for Income Taxes." FIN
48 requires that a position taken or expected to be taken in a tax return be
recognized in the financial statements when it is more likely than not (i.e. a
likelihood of more than fifty percent) that the position would be sustained upon
examination by tax authorities. A recognized tax position is then measured at
the largest amount of benefit that is greater than fifty percent likely of being
realized upon ultimate settlement. The effective date for the Company is January
1, 2007. Upon adoption, the cumulative effect of applying the recognition and
measurement provisions of FIN 48, if any, shall be reflected as an adjustment to
the opening balance of retained earnings. The adoption of FIN 48 is not expected
to have a material impact on the Company's Consolidated Financial Statements.

In September 2006, FASB Statement 157, "Fair Value Measurements" ("SFAS 157")
was issued. SFAS 157 establishes a framework for measuring fair value by
providing a standard definition of fair value as it applies to assets and
liabilities. SFAS 157, which does not require any new fair value measurements,
clarifies the application of other accounting pronouncements that require or
permit fair value measurements. SFAS 157 must be applied prospectively beginning
January 1, 2008. The Company is evaluating the impact of adopting SFAS 157 on
its Consolidated Financial Statements.

Use of Estimates: The preparation of financial statements in conformity with
accounting principles generally accepted in the U.S. requires management to make
estimates and assumptions that affect the amounts of assets and liabilities at
the date of the consolidated financial statements, and the reported amounts of
revenues and expenses and the accompanying notes. The Company evaluates and
updates its assumptions and estimates on an ongoing basis and may employ outside
experts to assist in its evaluation, as considered necessary. Actual results
could differ from those estimates.

Shipping and Handling Fees and Costs: Amounts billed to customers in a sales
transaction represent fees earned for the goods and services provided and,
accordingly, amounts billed related to shipping and handling are classified as
revenue. Costs incurred for shipping and handling of $5.7 million, $5.1 million
and $4.6 million in 2006, 2005 and 2004, respectively, are classified in
Selling,


                                                                              18



General, and Administrative expenses.

Restructuring Costs: The Company incurs severance charges and plant closure
expenses as part of the Company's on-going cost reduction efforts. These charges
are included in Cost of Sales or Selling, General and Administrative expense
depending on the personnel being included in the charge.

2. Acquisition of Business

On May 6, 2004, the Company acquired 82% of the common stock of Heinrich
Industrie AG ("Heinrich") for Euro 39.5 million (approximately $47.1 million) in
cash and acquisition costs of approximately $1.8 million. Cash acquired as part
of the Heinrich acquisition was approximately $15.2 million. Subsequent to May
6, 2004, the Company purchased additional shares of Heinrich stock for
approximately $8.7 million, bringing the total ownership to 97.2% as of January
1, 2005. During 2005 the Company acquired the remaining outstanding shares for
approximately $3.7 million, bringing the total ownership to 100% as of December
31, 2005.

During 2006 the Company settled a lawsuit with certain minority shareholders.
The settlement brings to closure the amount of contingent consideration to be
paid subsequent to the original purchase price. The Company paid an additional
amount of $3.9 million in connection with this settlement. This settlement was
recorded as an increase to goodwill in 2006.

Heinrich is the holding company for the Wickmann Group of circuit protection
products, which has three business units: electronic, automotive and electrical.
The Company has operated Heinrich in such business units subsequent to the
acquisition. The Heinrich acquisition expands the Company's product offerings
and strengthens the Company's position in the circuit protection industry.

The acquisition was accounted for using the purchase method and the operations
of Heinrich are included in the Company's operations from the date of
acquisition. The following table sets forth the purchase price allocation for
the acquisition of Heinrich in accordance with the purchase method of accounting
with adjustments to record the acquired assets and liabilities of Heinrich at
their estimated fair market or net realizable values.

Purchase price allocation (in thousands)


                                        
Current assets                             $ 39,824
Property, plant and equipment                35,826
Patents, licenses and software                3,396
Distribution network                          5,135
Trademarks and tradenames                       788
Goodwill                                     19,380
Other assets                                  5,282
Current liabilities                         (30,778)
Purchase accounting liabilities             (11,460)
Other long-term liabilities                 (16,580)
Minority interest                            (1,602)
                                           --------
                                           $ 49,211
                                           --------


All Heinrich goodwill and intangible assets are recorded in the European
segment. Trademarks and tradenames have an average estimated useful life of five
years. The distribution network has an average estimated useful life of nine
years. Patents and licenses have an average estimated useful life of four years.
Software has a useful life of three years. The weighted average estimated useful
life for intangible assets is approximately seven years.

Purchase accounting liabilities in connection with the Heinrich acquisition were
estimated to be $11.5 million and are primarily for redundancy costs to be paid
through 2007 related to manufacturing operations and selling, general and
administrative functions. The Company began formulating its plan to incur these
costs as of the acquisition date. Additions to the Heinrich purchase accounting
liability during 2005 relate to redundancy costs recognized after 100% ownership
was achieved.

A summary of purchase accounting liabilities activity is shown below (in
thousands):



                               Heinrich
                               --------
                            
Balance at May 6, 2004          $ 7,281
Additions                            --
Payments                            (85)
                                -------
Balance at January 1, 2005        7,196
Additions                         4,179
Payments                         (8,685)
                                -------
Balance at December 31, 2005      2,690
Additions                            --
Payments                         (2,690)
                                -------
Balance at December 30, 2006    $    --
                                -------



                                                                              19



Pro forma financial information is not presented due to amounts not being
materially different than actual results.

On February 3, 2006, the Company acquired SurgX Corporation ("SurgX") for $2.5
million. All of the assets of SurgX were classified as patents in the Americas
segment with an average useful life of seven years. The SurgX acquisition
expands the Company's product offering and strengthens the Company's position in
the circuit protection industry. SurgX is included in the Company's financial
statements since the date of acquisition. Pro forma financial information is not
presented due to amounts not being materially different than actual results.

On May 30, 2006, the Company acquired all of the common stock of Concord
Semiconductor ("Concord") for $23.8 million in cash, net of cash acquired of
$1.2 million, and acquisition costs of approximately $0.2 million. The Company
funded the acquisition with $14.0 million in cash and $10.0 million of
borrowings on an existing revolving line of credit.

Littelfuse has continued to operate Concord's electronics business subsequent to
the acquisition. The Concord acquisition expands the Company's product offering
and strengthens the Company's position in the circuit protection industry.

The acquisition was accounted for using the purchase method of accounting and
the operations of Concord are included in the Company's operations from the date
of acquisition. The following table sets forth the purchase price allocation for
the acquisition of Concord in accordance with the purchase method of accounting
with adjustments to record the acquired assets and liabilities of Concord at
their estimated fair market or net realizable values.

Purchase price allocation (in thousands)


                                        
Current assets                             $ 7,548
Property, plant and equipment                7,903
Patents and licenses                         4,477
Distribution network                         6,906
Goodwill                                     6,356
Current liabilities                         (2,975)
Deferred taxes                              (3,593)
Long-term debt                              (2,657)
                                           -------
                                           $23,965
                                           -------


All Concord goodwill and intangible assets are recorded in the Asian segment.
Patents and licenses have an average estimated useful life of approximately four
years. The fair values are estimates and subject to revision as the Company
completes its fair value analysis. Pro forma financial information is not
presented due to amounts not being materially different than actual results.

On June 26, 2006, the Company acquired Catalina Performance Accessories, Inc.
("Catalina") for $4.5 million. The Company acquired $0.4 million of accounts
receivable, $0.5 million of inventory and a $3.6 million distribution network.
The distribution network was reported in the Americas segment with a useful life
of ten years. The Catalina acquisition expands the Company's product offering
and strengthens the Company's position in the circuit protection industry.
Catalina is included in the Company's financial statements since the date of
acquisition. Pro forma financial information is not presented due to amounts not
being materially different than actual results.

On August 1, 2006 the Company acquired the gas discharge tube (GDT) assets of
SRC Devices, Inc. ("SRC"), for $6.0 million in cash, subject to post-closing
purchase price adjustments. The Company acquired $0.3 million of inventory, $0.9
million of fixed assets, and $2.2 million of distribution network, with the
excess purchase price of $2.6 million recorded as goodwill. The distribution
network was reported in the Americas segment with a useful life of nine years.
The fair values are estimates and subject to revision as the Company completes
its fair value analysis. The SRC acquisition expands the Company's product
offering and strengthens the Company's position in the circuit protection
industry. SRC is included in the Company's financial statements since the date
of acquisition. Pro forma financial information is not presented due to amounts
not being materially different than actual results. The Company plans to move
production of the GDT product line from the SRC manufacturing facility in Mexico
to its existing operation in Suzhou, China.

On June 21, 2006, the Company announced that it had signed a definitive
agreement to acquire the assets of Song Long Electronics Co., Ltd. for $5.5
million. This acquisition is expected to close during the second quarter of
2007.

Goodwill for all of the above acquisitions is expected to be deductible for tax
purposes.

3. Inventories

The components of inventories at December 30, 2006, and December 31, 2005 are as
follows (in thousands):



                      2006      2005
                    -------   -------
                        
Raw materials       $15,043   $13,010
Work in process      15,838    18,996
Finished goods       35,080    31,417
                    -------   -------
Total inventories   $65,961   $63,423
                    -------   -------



                                                                              20


4. Intangible Assets

The Company recorded amortization expense of $3.1 million, $2.4 million and $2.3
million in 2006, 2005 and 2004, respectively. The details of intangible assets
and future amortization expense of existing intangible assets at December 30,
2006, and December 31, 2005, are as follows (in thousands):



                                   As of December 30, 2006                 As of December 31, 2005
                            -------------------------------------   -------------------------------------
                              Weighted      Gross                     Weighted      Gross
                              Average     Carrying    Accumulated     Average     Carrying    Accumulated
                            Useful Life     Value    Amortization   Useful Life     Value    Amortization
                            -----------   --------   ------------   -----------   --------   ------------
                                                                           
Patents and licenses            11.6       $33,898      $23,780         9.0        $27,193      $24,302
Distribution network            15.5        28,107       12,898        17.4         17,584       11,076
Trademarks and tradenames       18.4         5,663        4,342        14.7         10,210        4,867
                                           -------      -------                    -------      -------
Total                                      $67,668      $41,020                    $54,987      $40,245


Estimated amortization expense related to intangible assets with definite lives
at December 30, 2006, is as follows
(in thousands):


          
2007         $ 3,194
2008           3,419
2009           3,240
2010           3,122
2011           3,075
Thereafter    10,598
             -------
             $26,648
             =======


The amounts for goodwill and changes in the carrying value by operating segment
are as follows at December 30, 2006, and December 31, 2005 (in thousands):




                   2006     Additions    Adjustments*      2005      Additions     Adjustments*     2004
                 -------    ---------    -----------     -------     ---------     -----------    -------
                                                                             
Americas         $40,810     $ 2,593      $    (407)     $38,624      $ 3,573       $   (407)     $35,458
Europe            20,190       3,360          1,085       15,745          606         (2,175)      17,314
Asia-Pacific       6,500       6,356             73           71           --           (377)         448
                 -------     -------      ---------      -------      -------       ---------     -------
Total goodwill   $67,500     $12,309      $     751      $54,440      $ 4,179       $ (2,959)     $53,220
                 =======     =======      =========      =======      =======       =========     =======
*Adjustments primarily reflect the impact of changes in exchange rates.


5. Investments

Included in investments are shares of Polytronics Technology Corporation Ltd.
("Polytronics"), a Taiwanese company, which was acquired as part of the Heinrich
acquisition. The Company's shares held represent approximately 8.9% of total
Polytronics shares outstanding during 2006 and 2005. The fair value of this
investment is $4.8 million at December 30, 2006 and December 31, 2005. Included
in other comprehensive income (loss) is a cumulative loss of $0.6 million
related to a decrease in the fair market value of Polytronics. As part of other
comprehensive income, an unrealized loss of $0.5 million was recorded in 2006
and an unrealized gain of $1.0 million was recorded in 2005 related to
Polytronics. Subsequent to December 30, 2006, the fair value of the investment
exceeded the cost of the asset.

6. Discontinued Operations

In December 2005, the Company announced its plan to sell the Efen business that
consists of production and sales facilities in Uebigau and Eltville, Germany and
Kaposvar, Hungary. The Company obtained Efen as part of its acquisition of
Heinrich in May 2004. Results of operations for Efen have been reclassified and
presented as discontinued operations for 2006 and 2005. Efen is part of the
European segment for reporting purposes. Due to the Efen sale taking place in
February 2006, the results of Efen were no longer recorded in the Consolidated
Statements of Income after the first quarter of 2006.

Efen's operating results are summarized as follows for the periods ending
December 30, 2006, December 31, 2005 and January 1, 2005 (in thousands):



                                   2006      2005      2004
                                  ------   -------   -------
                                            
Net sales                         $3,789   $32,988   $23,409
Income (loss) before taxes           773     1,773       (81)
Income taxes                         324       645       252
                                  ------   -------   -------
Net income (loss)                 $  449*  $ 1,128   $  (333)
                                  ======   =======   =======



                                                                              21



*    Additionally, for the period ended December 30, 2006, discontinued
     operations in the Consolidated Statements of Income includes a gain on the
     sale of assets of $139 (net of tax of $85).

Efen's significant balance sheet items are summarized as of December 30, 2006,
and December 31, 2005 (in thousands):



                                     2006    2005
                                     ----   ------
                                      
Accounts receivable, net             $ --   $2,867
Inventory                              --    5,780
Property, plant and equipment, net     --    5,577
Other assets                           --    1,084
Goodwill                               --    2,325
Current liabilities                    --    3,407
Long term liabilities                  --    3,315


The Efen product line was sold for Euro 9.5 million (approximately $11.6
million). In connection with the sale, a pretax loss of approximately $0.0
million was recognized, resulting in an after tax gain of $0.1 million after
recognizing a tax benefit on the sale of $0.1 million.

7. Long-term Obligations

The carrying amounts of long-term debt at December 30, 2006, and December 31,
2005 are as follows (in thousands):



                              2006      2005
                            -------   -------
                                
Revolving credit facility   $22,500   $21,000
Other obligations             3,613     5,682
                            -------   -------
                             26,113    26,682
Less: Current maturities     24,328    26,682
                            -------   -------
                            $ 1,785   $    --
                            -------   -------


The Company has an unsecured domestic financing arrangement consisting of a
credit agreement with banks that provides a $75.0 million revolving credit
facility, with a potential increase of up to $125.0 million upon request of the
Company and agreement with the lenders, that expires on July 21, 2011. At
December 30, 2006, the Company had available $52.5 million of borrowing
capability under the revolving credit facility at an interest rate of LIBOR plus
0.50% (5.95% as of December 30, 2006). The Company also had $6.1 million and
$5.8 million in letters of credit outstanding at December 30, 2006, and December
31, 2005, respectively.

The Company has an unsecured bank line of credit in Japan that provides a Yen
0.9 billion (an equivalent of $7.6 million) revolving credit facility at an
interest rate of TIBOR plus 0.625% (1.12% as of December 30, 2006). The
revolving line of credit balance becomes due on July 21, 2011. At December 30,
2006, the Company had the equivalent of $1.3 million outstanding on the Yen
facility.

The Company has an unsecured bank line of credit that provides a Taiwanese
Dollar 35.0 million (equivalent to $1.1 million) revolving credit facility at an
interest rate of two-years Time Deposit plus 0.145% (2.3% as of December 30,
2006). The revolving line of credit becomes due on August 18, 2009. At December
30, 2006, the Company had the equivalent of $0.9 million outstanding on the
Taiwanese Dollar facility.

The Company has various other foreign fixed rate loans outstanding at December
30, 2006, totaling $1.4 million with maturity dates through August 2013.

The domestic bank credit agreement contains covenants that, among other matters,
impose limitations on the incurrence of additional indebtedness, future mergers,
sales of assets, payment of dividends, and changes in control, as defined. In
addition, the Company is required to satisfy certain financial covenants and
tests relating to, among other matters, interest coverage, working capital,
leverage and net worth. At December 30, 2006, and for the year then ended, the
Company was in compliance with these covenants.

Aggregate maturities of long-term obligations at December 30, 2006, are as
follows (in thousands):


                   
2007                  $24,328
2008                      567
2009                      448
2010                      210
2011                      210
2012 and thereafter       350
                      -------
                      $26,113
                      -------



                                                                              22



Interest paid on long-term debt approximated $1.6 million in 2006, $2.0 million
in 2005 and $1.7 million in 2004.

8. Coal Mining Liability

Included in other long-term liabilities is an accrued liability related to a
former coal mining operation at Heinrich for the amounts of $5.5 million and
$5.0 million in 2006 and 2005, respectively. The accrual, which is not
discounted, is based on an engineering study estimating the cost remediating the
dangers (such as a shaft collapse) of abandoned coal mine shafts in Germany.

9. Restructuring

During 2005 the Company announced a downsizing of the European segment's Ireland
operation and outsourcing of more of its varistor manufacturing to lower cost
Asian subcontractors. A liability of $4.9 million was recorded related to
redundancy costs for the manufacturing operation associated with this
downsizing. This restructuring impacts approximately 35 associates in various
production and support related roles. These costs were paid in 2005 and 2006. In
the second quarter of 2006, an additional $17.1 million, consisting of $20.0
million of accrued severance less a statutory rebate of $2.9 million recorded as
a current asset, was recorded as part of cost of sales related to the closure of
the entire facility. This restructuring is part of the Company's strategy to
expand operations in Asian in order to be closer to current and potential
customers and take advantage of lower manufacturing costs. This portion of the
restructuring impacts approximately 131 employees. Restructuring charges are
based upon each associate's current salary and length of service with the
Company. These costs will be paid through 2008.


                                    
Ireland restructuring (in thousands)
Balance at October 1, 2005             $ 4,900
Additions                                   --
Payments                                  (897)
                                       -------
Balance at December 31, 2005             4,003
Additions                               20,019
Payments                                (1,414)
                                       -------
Balance at December 30, 2006           $22,608
                                       =======


During the first quarter of 2006, the Company recorded a $2.1 million charge
related to the downsizing of the European segment's Heinrich operations.
Manufacturing related charges of $0.9 million are recorded as part of cost of
sales and non-manufacturing related charges of $1.2 million are recorded as part
of selling, general and administrative expenses. During the second quarter of
2006 additional expense of $0.5 million was recognized primarily as part of
selling, general and administrative expenses. During the third quarter of 2006,
additional expense of $2.4 million was recorded. Manufacturing related charges
of $1.4 million are recorded as part of cost of sales and non-manufacturing
related charges of $1.0 million are recorded as part of selling, general and
administrative expenses. These charges are primarily for redundancy costs to be
paid through 2007. Employees affected by this downsizing include technical,
production, administrative and support employees. A summary of activity of this
liability is as follows:


                                     
Heinrich restructuring (in thousands)
Balance at December 31, 2005            $   --
Additions                                4,995
Payments                                  (632)
                                        ------
Balance at December 30, 2006            $4,363
                                        ======


During December 2006 the Company announced the closure of its America's
segment's Irving, Texas facility and the transfer of its semiconductor wafer
manufacturing from Irving, Texas to Wuxi, China in a phased transition from 2007
to 2010. A liability of $1.9 million was recorded related to redundancy costs
for the manufacturing operation associated with this downsizing. This charge was
recorded as part of cost of sales. The total cost expected to be incurred
through 2010 is $6.5 million. This restructuring impacts approximately 180
associates in various production and support related roles and will be paid over
the period 2007 to 2010. A summary of activity of this liability is as follows:


                                          
Irving, Texas restructuring (in thousands)
Balance at December 31, 2005                 $   --
Additions                                     1,890
Payments                                         --
                                             ------
Balance at December 30, 2006                 $1,890
                                             ======


10. Asset impairments

During 2006, the Company recorded a $4.4 million charge for the write-down of
Heinrich real estate and fixed assets. $2.7 million of this write-down was
recorded to reduce the carrying value of property located in Witten, Germany,
consisting primarily of land and buildings used for manufacturing and
administrative offices, as a result of entering into agreements to sell the
property. The sale was completed in the fourth quarter of 2006. The


                                       23

remaining $1.7 million charge related to a reduction in the carrying value of
certain long-term assets located at the same facility to record them at fair
value in anticipation of their future sale. $0.8 million of this charge was
recorded within cost of sales and $3.6 million within part of selling, general
and administrative expenses in the European segment of the Company's financial
results.

11. Benefit Plans

The Company has a defined-benefit pension plan covering substantially all of its
North American employees. The amount of the retirement benefit is based on years
of service and final average pay. The plan also provides post-retirement medical
benefits to retirees and their spouses if the retiree has reached age 62 and has
provided at least ten years of service prior to retirement. Such benefits
generally cease once the retiree attains age 65. The Company also has defined
benefit pension plans covering employees in the U.K., Ireland, Germany, Japan,
Taiwan and the Netherlands. The amount of these retirement benefits is based on
years of service and final average pay. Liabilities resulting from the plan that
covers employees in the Netherlands are settled annually through the purchase of
insurance contracts. Separate from the foreign pension data presented below, net
periodic expense for the plan covering Netherlands employees was $0.1 million,
$0.6 million and $0.2 million in 2006, 2005 and 2004, respectively.

In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans - an Amendment of FASB
Statements No. 87, 88, 106, and 132(R)". SFAS No. 158 requires the recognition
of the overfunded or underfunded status of a defined benefit postretirement plan
as an asset or a liability in the balance sheet, with changes in the funded
status recorded through comprehensive income in the year in which those changes
occur. The Company adopted FAS158 on December 30, 2006. The following table is
required as part of adopting SFAS No. 158. See Note 1, Accounting Policies,
Recently Issued Accounting Standards.

Incremental effect of applying FASB Statement No. 158 on individual line items
in the Consolidated Balance Sheet as of December 30, 2006 (in thousands):



                                                Before application      Total      After application
                                                 of Statement 158    adjustments   of Statement 158
                                                ------------------   -----------   -----------------
                                                                          
Prepaid expenses and other current assets            $ 13,205          $(3,384)        $  9,821
Non-current deferred income taxes                       5,034            4,712            9,746
Total assets                                         $463,638          $ 1,328         $464,966
Accrued post-retirement benefits                       18,954            9,017           27,971
Accumulated other comprehensive income (loss)           7,678           (7,689)             (11)
Total shareholders' (deficit) equity                 $311,354          $(7,689)        $303,665


The Company's contributions are made in amounts sufficient to satisfy legal
requirements and ensure funding to at least 90% of the ERISA Current Liability
amount. In 2007, the Company expects to make contributions to defined benefit
pension plans in the range of $3.0 million to $7.0 million.

Changes in actual return on pension plan assets are deferred and recognized over
a period of three years. The deferral of actual gains and losses affects the
calculated value of plan assets and therefore future pension expense.
Differences between total pension expense of $3.7 million, $4.8 million and $4.3
million in 2006, 2005 and 2004, respectively, were not material to the overall
financial performance of the Company. The decreases in pension expense in 2006
and 2005 were primarily due to currency gains and the impact of demographic
changes partially offset by a decrease in the discount rate. Benefit plan
related information, including Efen prior to the sale, is as follows (in
thousands):



                                                               2006                             2005
                                                  ------------------------------   ------------------------------
                                                    U.S.     Foreign      Total      U.S.     Foreign      Total
                                                  --------   --------   --------   --------   --------   --------
                                                                                       
Change in benefit obligation
Benefit obligation at beginning of year           $ 66,425   $ 47,290   $113,715   $ 60,225   $ 45,611   $105,836
Service cost                                         3,192      1,124      4,316      3,259        818      4,077
Interest cost                                        3,799      2,043      5,842      3,664      1,971      5,635
Plan participants' contributions                        --        304        304         --        362        362
Curtailment gain                                        --       (980)      (980)        --         --         --
Net actuarial loss (gain)                           (1,821)      (156)    (1,977)     2,363      6,474      8,837
Benefits paid                                       (3,065)    (2,538)    (5,603)    (3,086)    (1,811)    (4,897)
Business acquisitions                                   --        625        625         --         --         --
Business divestitures                                   --     (1,530)    (1,530)        --         --         --
Effect of exchange rate movements                       --      5,067      5,067         --     (6,135)    (6,135)
                                                  --------   --------   --------   --------   --------   --------
Benefit obligation at end of year                 $ 68,530   $ 51,249   $119,779   $ 66,425   $ 47,290   $113,715
                                                  --------   --------   --------   --------   --------   --------
Change in plan assets at fair value
Fair value of plan assets at beginning of year    $ 50,436   $ 28,787   $ 79,223   $ 47,795   $ 26,586   $ 74,381
Actual return on plan assets                         6,192      2,361      8,553      3,227      4,170      7,397
Employer contributions                               3,000      2,127      5,127      2,500      2,184      4,684
Plan participant contributions                          --        304        304         --        362        362
Benefits paid                                       (3,065)    (1,760)    (4,825)    (3,086)      (906)    (3,992)
Business acquisitions                                   --        326        326         --         --         --
Effect of exchange rate movements                       --      3,353      3,353         --     (3,609)    (3,609)
                                                  --------   --------   --------   --------   --------   --------



                                                                              24



                                                                                                       
Fair value of plan assets at end of year               $ 56,563        $ 35,498    $ 92,061      $ 50,436    $ 28,787    $ 79,223
                                                       --------        --------    --------      --------    --------    --------
Unfunded status                                        $(11,967)       $(15,751)   $(27,718)     $(15,989)   $(18,503)   $(34,492)
Unrecognized prior service cost (benefit)                    --              --          --           105        (112)         (7)
Unrecognized transition asset                                --              --          --            --      (1,269)     (1,269)
Unrecognized net actuarial gain                              --              --          --         8,690       9,887      18,577
                                                       --------        --------    --------      --------    --------    --------
Net amount recognized                                  $(11,967)       $(15,751)   $(27,718)     $ (7,194)   $ (9,997)   $(17,191)
                                                       --------        --------    --------      --------    --------    --------
Amounts recognized in the Consolidated
   Balance Sheet consist of:
Prepaid benefit cost                                   $     --        $    253    $    253      $     --    $  1,554    $  1,554
Accrued benefit liability                               (11,967)        (16,004)    (27,971)       (7,194)    (13,366)    (20,560)
Accumulated other comprehensive
   loss (pre FAS158 adoption)                                --              --          --            --       1,815       1,815
                                                       --------        --------    --------      --------    --------    --------
Net (liability) recognized                             $(11,967)       $(15,751)   $(27,718)     $ (7,194)   $ (9,997)   $(17,191)
                                                       --------        --------    --------      --------    --------    --------
Accumulated other comprehensive
         loss, pre-tax (post FAS158 adoption)          $  4,943        $  7,892    $ 12,835           n/a         n/a         n/a
                                                       --------        --------    --------      --------    --------    --------



Amounts recognized in accumulated other comprehensive loss, pre-tax consist of:



                                            2006
                                 --------------------------
                                  U.S.    Foreign    Total
                                 ------   -------   -------
                                           
Net actuarial loss               $4,943    $7,458   $12,401
Prior service cost                   --       434       434
                                 ------    ------   -------
Net amount recognized, pre-tax   $4,943    $7,892   $12,835
                                 ------    ------   -------


The estimated net actuarial loss which will be amortized from accumulated other
comprehensive loss into benefit cost in 2007 is $0.2 million.

The accumulated benefit obligation for the U.S. defined benefits plans was $57.5
million and $55.4 million at December 30, 2006 and December 31, 2005,
respectively. The accumulated benefit obligation for the foreign plans was $45.6
million and $41.9 million at December 30, 2006 and December 31, 2005,
respectively (in thousands).



                                                       U.S.                        Foreign
                                           ---------------------------   ---------------------------
                                             2006      2005      2004      2006      2005      2004
                                           -------   -------   -------   -------   -------   -------
                                                                           
Components of net periodic benefit cost
Service cost                               $ 3,192   $ 3,259   $ 2,759   $ 1,124   $ 1,210   $ 1,269
Interest cost                                3,799     3,664     3,498     2,043     1,971     1,877
Expected return on plan assets              (4,228)   (3,728)   (3,649)   (2,117)   (1,681)   (1,521)
Amortization of prior service cost              10        10        10       (13)      (13)      (13)
Amortization of transition asset                --        --        --      (113)     (112)      (90)
Amortization of losses                          57       409       158       308       173       206
                                           -------   -------   -------   -------   -------   -------
Total cost of the plan for the year          2,830     3,614     2,776     1,232     1,548     1,728
Expected plan participants' contribution        --        --        --        --      (392)     (203)
                                           -------   -------   -------   -------   -------   -------
Net periodic benefit cost                  $ 2,830   $ 3,614   $ 2,776   $ 1,232   $ 1,156   $ 1,525
                                           -------   -------   -------   -------   -------   -------
Curtailment gain                                --        --        --      (322)       --        --
                                           -------   -------   -------   -------   -------   -------
Total expense for the year                 $ 2,830   $ 3,614   $ 2,776   $   910   $ 1,156   $ 1,525
                                           -------   -------   -------   -------   -------   -------


Weighted average assumptions used to determine benefit obligations at year-end
2006, 2005 and 2004:



                                          U.S.                           Foreign
                             ------------------------------   ------------------------------
                               2006       2005       2004       2006       2005       2004
                             --------   --------   --------   --------   --------   --------
                                                                  
Discount rate                     6.0%       6.0%       6.0%       4.5%       4.3%       4.8%
Compensation increase rate        4.5%       4.5%       4.5%       3.5%       3.2%       3.4%
Measurement dates            12/31/06   12/31/05   12/31/04   12/31/06   12/31/05   12/31/04


Weighted average assumptions used to determine net periodic benefit cost for the
years 2006, 2005 and 2004:



                                             U.S.                        Foreign
                                 ---------------------------   ---------------------------
                                   2006      2005      2004      2006      2005      2004
                                 -------   -------   -------   -------   -------   -------
                                                                 
Discount rate                        6.0%      6.0%      6.5%      4.2%      4.8%      5.5%



                                                             25




                                                                 
Expected return on plan assets       8.5%      8.5%      8.8%      6.7%      6.7%      6.7%
Compensation increase rate           4.5%      4.5%      4.5%      3.2%      3.2%      4.0%
Measurement dates                1/01/06   1/01/05   1/01/04   1/01/06   1/01/05   1/01/04


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



              U.S.    Foreign
            -------   -------
                
2007        $ 2,947   $ 2,275
2008          3,109     2,073
2009          3,171     2,029
2010          3,278     3,746
2011          3,345     2,879
2012-2016    18,919    15,009


Defined Benefit Plan Assets

Based upon analysis of the target asset allocation and historical returns by
type of investment, the Company has assumed that the expected long-term rate of
return will be 8.5% on domestic plan assets and 6.7% on foreign plan assets.
Assets are invested to maximize long-term return taking into consideration
timing of settlement of the retirement liabilities and liquidity needs for
benefits payments. U.S. defined benefit pension assets were invested as follows
and were not materially different from the target asset allocation:



                                                         U.S. Asset Allocation
                                                        ------------------------
                                                            2006         2005
                                                        -----------   ----------
                                                                
Equity securities                                            73%          73%
Debt securities                                              27%          27%
                                                            ---          ---
                                                            100%         100%
                                                            ===          ===




                                                        Foreign Asset Allocation
                                                        ------------------------
                                                            2006         2005
                                                        -----------   ----------
                                                                
Equity securities                                            39%          66%
Debt securities                                              54%          24%
Property                                                      7%           8%
Cash                                                          0%           2%
                                                            ---          ---
                                                            100%         100%
                                                            ===          ===


Defined Contribution Plans

The Company also maintains a 401(k) savings plan covering substantially all U.S.
employees. The Company matches 50% of the employee's annual contributions for
the first 4% of the employee's gross wages. Employees vest in the Company
contributions after two years of service. Company matching contributions
amounted to $0.6 million, $0.6 million and $0.5 million in 2006, 2005 and 2004,
respectively. The Company provides additional retirement benefits for certain
key executives through its unfunded defined contribution Supplemental Executive
Retirement Plan. The charge to expense for this plan amounted to $0.3 million,
$0.3 million and $0.7 million in 2006, 2005 and 2004, respectively.

12. Shareholders' Equity

Equity Plans: The Company has stock option plans authorizing the granting of
both incentive and nonqualified options and other stock rights of up to
5,925,000 shares of common stock to employees and directors. The stock options
granted prior to 2002 vest over a five-year period and are exercisable over a
ten-year period commencing from the date of vesting. The stock options granted
in 2002 through February, 2005 vest over a five-year period and are exercisable
over a ten-year period commencing from the date of the grant. Stock options
granted after February, 2005 vest over a four-year period and are exercisable
over a ten-year period commencing from the date of the grant. The Company also
has a performance share agreement in which a target amount of performance share
awards are granted based on the Company attaining certain financial performance
goals relating to return on net tangible assets and earnings before interest,
taxes, depreciation and amortization over a three-year performance period. The
performance-based restricted stock awards vest in thirds over a three-year
period (following the three-year performance period), and are paid annually as
they vest, one half in the Company's common stock and one half in cash. The fair
value of the performance-based restricted stock awards that are paid in common
stock is measured at the market price on the grant date, and the fair value of
the portion paid in cash is measured at the current market price of a share.



                                                                              26



The following table provides a reconciliation of outstanding stock options for
the twelve month period ending December 30, 2006.



                                                         Weighted
                                                         Average
                                            Weighted    Remaining      Aggregate
                                  Shares     Average   Contractual     Intrinsic
                                  Under     Exercise       Life          Value
                                  Option      Price      (Years)     ($thousands)
                                ---------   --------   -----------   ------------
                                                         
Outstanding December 31, 2005   1,820,010    $27.82
Granted                           392,750     34.06
Exercised                        (193,487)    22.25
Forfeited                         (36,103)    31.33
                                ---------    ------
Outstanding December 30, 2006   1,983,170    $29.54        6.9          $8,155
Exercisable December 30, 2006     988,420    $27.57        6.2          $5,771


The total intrinsic value of options exercised during 2006, 2005, and 2004 was
$2.1 million, $1.4 million, and $10.9 million, respectively.

The following table provides a reconciliation of nonvested performance share
awards (including only awards to be paid in the Company's common stock) for the
twelve month period ending December 30, 2006.


                                        Weighted
                                         Average
                                       Grant-Date
                              Shares   Fair Value
                              ------   ----------
                                 
Nonvested December 31, 2005   45,500     $27.95
Granted                       13,000      34.33
Vested                            --         --
Forfeited                         --         --
Nonvested December 30, 2006   58,500     $29.37


The Company recognizes compensation cost of all share-based awards as an expense
on a straight-line basis over the vesting period of the awards. At December 30,
2006, the unrecognized compensation cost for options and performance shares was
$13.3 million before tax, and will be recognized over a weighted-average period
of 3.1 years. The following table shows total stock-based compensation expense
included in selling, general and administrative expenses in the Consolidated
Statements of Income during 2006. No such compensation expense was recognized
during 2005 and 2004.

                    (in thousands, except per share amounts)



                                          2006
                                        -------
                                     
Pre-tax stock based compensation        $ 5,187
Income tax                               (1,889)
                                        -------
Stock-based compensation expense, net   $ 3,298
Basic earnings per share impact         $  0.15
Diluted earnings per share impact       $  0.15


The Company used the Black-Scholes option valuation model to determine the fair
value of awards granted during 2006, 2005, and 2004. The weighted average fair
value of and related assumptions for options granted were as follows:



                                                    2006       2005      2004
                                                 ---------   -------   -------
                                                              
Weighted average fair value of options granted
   at fair value of underlying stock              $13.90     $13.63    $19.87
Assumptions:
   Risk-free interest rate                          4.89%      4.27%     4.14%
   Expected dividend yield                             0%         0%        0%
   Expected stock price volatility                  39.0%      39.4%     44.0%
   Expected life of options                      4.8 years   7 years   7 years



                                                                              27



Expected volatilities are based on both historical volatility of the company's
stock price and implied volatility of exchange-traded options on the company's
stock. The expected life of options is based on historical data from for options
granted by the company. The risk-free rates are based on yields available at the
time of grant on U.S. Treasury bonds with maturities consistent with the
expected life assumption.

Notes Receivable From Officers - Common Stock: In 1995, the Company established
the Executive Loan Program under which certain management employees could then
obtain interest-free loans from the Company to facilitate their exercise of
stock options and payment of the related income tax liabilities. Such loans,
limited to 90% of the exercise price plus related tax liabilities, have a
five-year maturity, subject to acceleration for termination of employment or
death of the employee. Such loans are classified as a reduction of shareholders'
equity. The Company changed its policy in 2002 such that management employees
may no longer obtain such loans.

Accumulated Other Comprehensive Income (Loss): At the end of the year the
components of accumulated other comprehensive income (loss) were as follows (in
thousands):



                                          December 30,   December 31,
                                              2006           2005
                                          ------------   ------------
                                                   
Minimum pension liability adjustment*       $  (269)       $(1,815)
Adoption of FAS158**                         (7,689)            --
Loss on investments***                         (563)           (96)
Foreign currency translation adjustment       8,510           (515)
                                            -------        -------
   Total                                    $   (11)       $(2,426)
                                            =======        =======


*    net of tax of $165 and $1,112 for 2006 and 2005, respectively.

**   net of tax of $4,712 for 2006.

***  net of tax of $345 and $59 for 2006 and 2005, respectively.

Preferred Stock: The Board of Directors may authorize the issuance from time to
time of preferred stock in one or more series with such designations,
preferences, qualifications, limitations, restrictions, and optional or other
special rights as the Board may fix by resolution.

13. Income Taxes

Domestic and foreign earnings from continuing operations before minority
interest and income taxes is as follows (in thousands):



                                                 2006      2005      2004
                                               -------   -------   -------
                                                          
Domestic                                       $ 2,655   $ 1,484   $28,115
Foreign                                         26,751    26,452    27,366
                                               -------   -------   -------
Earnings from continuing operations
   before minority interest and income taxes   $29,406   $27,936   $55,481
                                               =======   =======   =======


Federal, state, and foreign income tax expense (benefit) consists of the
following (in thousands):



                               2006       2005      2004
                             --------   -------   -------
                                         
Current:
   Federal                   $ 12,925   $ 2,735   $ 6,402
   State                          508        41     1,196
   Foreign                      5,689    10,228     8,098
                             --------   -------   -------
Subtotal                       19,122    13,004    15,696
Deferred:
Federal and state             (11,342)    1,956     3,087
Foreign                        (1,610)   (3,520)      194
                             --------   -------   -------
Subtotal                      (12,952)   (1,564)    3,281
                             --------   -------   -------
Provision for income taxes   $  6,170   $11,440   $18,977
                             ========   =======   =======


A reconciliation between income taxes computed on income before income taxes at
the federal statutory rate and the provision for income taxes is provided below
(in thousands):



                                                         2006      2005      2004
                                                       -------   -------   -------
                                                                  
Tax expense at statutory rate of 35%                   $10,292   $ 9,785   $19,050
State and local taxes, net of federal tax benefit           45        27       777
Foreign income tax rate differential                    (1,374)      (47)   (1,846)
Foreign losses for which no tax benefit is available       203     1,446       759
Valuation allowance                                         --      (753)      753
Tax on unremitted earnings                                (276)      790        91
Utilization of operating loss carryforward              (1,780)       --        --
Other, net                                                (940)      192      (607)
                                                       -------   -------   -------
Provision for income taxes                             $ 6,170   $11,440   $18,977
                                                       =======   =======   =======



                                                                              28



Deferred income taxes are provided for the tax effects of temporary differences
between the financial reporting bases and the tax bases of the Company's assets
and liabilities. Significant components of the Company's deferred tax assets and
liabilities at December 30, 2006, and December 31, 2005, are as follows (in
thousands):



                                                        2006      2005
                                                      -------   -------
                                                          
Deferred tax assets:
Accrued expenses                                       18,686    12,097
Foreign tax credit carryforwards                          769     4,574
AMT credit carryforwards                                1,321     1,318
Accrued Ireland restructuring                           7,414       571
Net operating loss carryforwards                        8,211     2,100
                                                      -------   -------
Gross deferred tax assets                              36,401    20,660
Less: Valuation allowance                                (708)     (766)
Total deferred tax assets                              35,693    19,894
                                                      -------   -------
Deferred tax liabilities:
Tax depreciation and amortization in excess of book   $ 8,636   $ 8,100
Foreign                                                 4,370       407
Other                                                     559     1,339
                                                      -------   -------
Total deferred tax liabilities                         13,565     9,846
                                                      -------   -------
Net deferred tax assets                               $22,128   $10,048
                                                      -------   -------


The deferred tax asset valuation allowance is related to deferred tax assets
from foreign net operating losses. The remaining domestic and foreign net
operating losses either have no expiration date or are expected to be utilized
prior to expiration. A domestic net operating loss benefit of $1.8 million was
recorded during the year relating to net operating losses from an acquired group
of companies. A benefit of approximately $1.4 million was booked due to a change
in German tax legislation which will allow for a German tax credit over the next
10 years. The foreign tax credit carryforwards begin to expire in 2015. The
Company paid income taxes of approximately $10.0 million, $9.5 million and $11.2
million in 2006, 2005 and 2004, respectively. U.S. income taxes were not
provided for on a cumulative total of approximately $23.0 million of
undistributed earnings for certain non-U.S. subsidiaries as of December 30,
2006, and accordingly, no deferred tax liability has been established relative
to these earnings. The determination of the deferred tax liability associated
with the distribution of these earnings is not practicable.

14. Business Segment Information

The Company designs, manufactures and sells circuit protection devices
throughout the world. The Company's reportable segments are consistent with how
it currently manages the business. The Company has three reportable geographic
segments: the Americas, Europe and Asia-Pacific. The segments are defined as
components of the company about which financial information is available and
evaluated regularly by the chief operating decision maker, or decision-making
group, in deciding how to allocate resources to an individual segment and in
assessing performance of the segment. The circuit protection market in these
geographical segments is categorized into three major product areas: electronic,
automotive and electrical. The Company evaluates the performance of each
geographic segment based on its net income or loss. The Company also accounts
for intersegment sales as if the sales were to third parties.

The Company's reportable segments are the business units where the revenue is
earned and expenses are incurred. The Company has subsidiaries in the Americas,
Europe and Asia-Pacific where each region is measured based on its net sales and
earnings (loss) from continuing operations.

Information concerning the operations in these geographic segments for the
fiscal years ended 2006, 2005 and 2004 are as follows (in thousands):



                                                        Asia-    Combined   Eliminations/   Consolidated
                               Americas*    Europe     Pacific     Total     Adjustments        Total
                               ---------   --------   --------   --------   -------------   ------------
                                                                       
Net sales               2006    $213,564   $112,193   $209,102   $534,859    $      --        $534,859
                        2005     195,974    114,943    156,172    467,089           --         467,089
                        2004     234,835    105,728    136,270    476,833           --         476,833

Intersegment revenues   2006     200,390     75,180    115,051    390,621     (390,621)             --



                                                                              29




                                                                       
                        2005     159,036     66,256     70,370    295,662     (295,662)             --
                        2004     137,611     58,376     28,718    224,705     (224,705)             --

Interest expense        2006       1,556         (3)        73      1,626           --           1,626
                        2005       1,978         74         46      2,098           --           2,098
                        2004       1,668       (191)       (2)      1,475           --           1,475

Depreciation and        2006      15,690     11,047      6,128     32,865           --          32,865
amortization            2005      17,648     10,676      2,792     31,116           --          31,116
                        2004      16,749      8,134      1,312     26,195           --          26,195

Other expense           2006     (1,520)        441    (1,095)    (2,174)           --         (2,174)
(income), net           2005     (1,530)     (1,068)     (470)    (3,068)           --         (3,068)
                        2004     (2,106)      1,424        729         47           --              47

Income taxes            2006       2,258     (1,285)     5,197      6,170           --           6,170
                        2005       6,031      1,882      3,527     11,440           --          11,440
                        2004      11,589      2,839      4,549     18,977           --          18,977

Earnings (loss) from    2006      17,425    (17,490)    23,301     23,236           --          23,236
continuing operations   2005       4,193     (5,484)    17,873     16,582           --          16,582
                        2004      21,157       (439)    15,643     36,361           --          36,361

Net income (loss)       2006      17,425    (16,902)    23,301     23,824           --          23,824
                        2005       4,193     (4,356)    17,873     17,710           --          17,710
                        2004      21,157       (772)    15,643     36,028           --          36,028

Identifiable assets     2006     227,322    159,639    148,526    535,487     (169,900)        365,587
                        2005     248,651    146,907     90,233    485,791     (156,632)        329,159
                        2004     279,717    144,176     62,542    486,435     (137,108)        349,327

Capital expenditures    2006      13,953      2,800      2,860     19,613           --          19,613
                        2005      20,371      3,127      3,741     27,239           --          27,239
                        2004      15,766      2,908      3,405     22,079           --          22,079


*    Corporate is included in the Americas. This was reported separately in
     amounts previously presented.

The Company's revenues by product areas for the years ended December 30, 2006,
December 31, 2005 and January 1, 2005, are as follows (in thousands):



Revenues               2006       2005       2004
- --------             --------   --------   --------
                                  
Electronic           $365,418   $305,870   $325,617
Automotive            123,620    118,595    113,690
Electrical             45,821     42,624     37,526
                     --------   --------   --------
Consolidated total   $534,859   $467,089   $476,833
                     ========   ========   ========


Export sales to Hong Kong were 16.1% 13.7% and 10.6% for 2006, 2005 and 2004,
respectively. No other foreign country sales exceeded 10% for 2006, 2005 or
2004. Sales to Arrow Pemco Group were 10.6% in 2006 and were derived 44.6%,
25.1% and 30.3% from the Americas, Europe and Asia-Pacific segments,
respectively. Sales to Arrow Pemco were less than 10% in 2005 and 2004. No other
single customer amounted to 10% or more of the Company's total revenues for
2006, 2005 or 2004.

15. Lease Commitments

The Company leases certain office and warehouse space as well as certain
machinery and equipment under non-cancelable operating leases. Rental expense
under these leases was approximately $5.3 million in 2006, $5.5 million in 2005
and $4.4 million in 2004. Rent expense is recognized on a straight-line basis
over the term of the leases. The difference between straight-line basis rent and
the amount paid has been recorded as accrued lease obligations. The Company also
has leases that have lease renewal provisions. As of December 30, 2006, all
operating leases outstanding were with third parties.

Future minimum payments for all non-cancelable operating leases with initial
terms of one year or more at December 30, 2006, are as follows (in thousands):


                                                                              30




                       
2007                      $ 4,553
2008                        2,803
2009                        1,931
2010                        1,630
2011                        1,554
2012 and thereafter         4,133
                          -------
Total lease commitments   $16,604
                          =======


The Company did not have any capital leases as of December 30, 2006.

16. Earnings per Share

The following table sets forth the computation of basic and diluted earnings per
share:



(In thousands, except
per share amounts)                 2006      2005      2004
- ---------------------            -------   -------   -------
                                            
Numerator:
   Net income                    $23,824   $17,710   $36,028
                                 -------   -------   -------
Denominator:
   Denominator for basic
   earnings per share -
   Weighted-average shares        22,305    22,413    22,239
Effect of dilutive securities:
Employee stock options               129       169       365
                                 -------   -------   -------
Denominator for diluted
   earnings per share -
   Adjusted weighted-
      average shares and
      assumed conversions         22,434    22,582    22,604
Basic earnings per share         $  1.07   $  0.79   $  1.62
                                 -------   -------   -------
Diluted earnings per share       $  1.06   $  0.78   $  1.59
                                 =======   =======   =======


The following potential shares of common stock were excluded from the EPS
calculation because their effect would be anti-dilutive.



                       2006       2005      2004
                    ---------   -------   -------
                                 
Stock Options       1,121,293   712,153   362,500
Restricted Shares          --        --        --
                    ---------   -------   -------
Total               1,121,293   712,153   362,500


Selected Financial Data
(in thousands, except per share data)

Five-Year Summary



                                             2006*      2005*     2004*     2003**      2002
                                           --------   --------   -------   --------   --------
                                                                       
Net sales                                  $534,859   $467,089   476,833   $339,410   $283,267
Gross profit                                161,263    144,552   173,797    104,426     88,623
Operating income                             28,858     26,966    57,003     26,081     15,931
Earnings from continuing operations          23,236     16,582    36,361     15,339      9,620
Net income                                   23,824     17,710    36,028     15,339      9,620
Per share of common stock:
   Net income from continuing operations
      - Basic                                  1.04       0.74      1.64       0.70       0.44
      - Diluted                                1.03       0.73      1.61       0.70       0.44



                                                                              31




                                                                       
Cash and cash equivalents                    56,704     21,947    28,583     22,128     27,750
Total assets                                464,966    403,931   425,769    311,570    277,478
Long-term debt                                1,785         --     1,364     10,201     20,252


*    Results include Heinrich. Refer to the Notes to Consolidated Financial
     Statements for more information. Results reflect Efen as a discontinued
     operation.

**   Results include Teccor. Refer to the Notes to Consolidated Financial
     Statements for more information.

Quarterly Results of Operations (unaudited)



                                            2006*                                       2005*
                          -----------------------------------------   -----------------------------------------
                             4Q        3Q         2Q**        1Q         4Q         3Q         2Q         1Q
                          --------   --------   --------   --------   --------   --------   --------   --------
                                                                               
Net sales                 $127,836   $143,471   $137,941   $125,611   $115,373   $122,266   $115,693   $113,757
Gross profit                38,089     47,085     31,289     44,800     37,905     34,309     35,117     37,221
Operating income (loss)      5,398     12,368     (2,691)    13,783      9,114      4,103      6,899      6,850
Net income                   4,644      9,360        449      9,371      5,243      3,771      4,257      4,439
Net income per share:
   Basic                      0.21       0.42       0.02       0.42       0.23       0.17       0.19       0.20
   Diluted                    0.21       0.42       0.02       0.42       0.23       0.17       0.19       0.20


*    Results reflect Efen as a discontinued operation.

**   In the second quarter of 2006, the Company recorded a $17.1 million net
     restructuring charge (after a $2.9 million statutory rebate) related to the
     closure of its Ireland facility.

Quarterly Stock Prices



                                       2006                            2005
                          -----------------------------   -----------------------------
                            4Q      3Q      2Q      1Q      4Q      3Q      2Q      1Q
                          -----   -----   -----   -----   -----   -----   -----   -----
                                                          
High                      36.66   38.00   37.42   36.65   28.85   30.97   31.16   33.59
Low                       28.14   26.95   30.60   26.42   21.44   26.12   26.35   27.95
Close                     31.88   34.70   34.38   34.13   27.25   28.13   27.82   28.23



                                                                              32