Acquisitions

The Company accounts for acquisitions using the acquisition method in accordance with ASC

805,

“Business Combinations,” in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition. The operating results of the acquired business are included in the Company’s Consolidated Financial Statements from the date of the acquisition.

IXYS Corporation

January 17, 2018,

the Company acquired IXYS Corporation (“IXYS”), a global pioneer in the power semiconductor and integrated circuit markets with a focus on medium to high voltage power control semiconductors across the industrial, communications, consumer and medical markets. IXYS has a broad customer base, serving more than

3,500

customers through its direct sales force and global distribution partners. The acquisition of IXYS is expected to accelerate the Company’s growth across the power control market driven by IXYS’s extensive power semiconductor portfolio and technology expertise. With IXYS, the Company will be able to diversify and expand its presence within industrial electronics markets, leveraging the strong IXYS industrial OEM customer base. The Company also expects to increase long-term penetration of its power semiconductor portfolio in automotive markets, expanding its global content per vehicle.

Upon completion of the acquisition, at IXYS stockholders’ election and subject to proration, each share of IXYS common stock, par value

$0.01

per share, owned immediately prior to the effective time was cancelled and extinguished and automatically converted into the right to receive: (i)

$23.00

in cash (subject to applicable withholding tax), without interest (referred to as the cash consideration), or (ii)

0.1265

of a share of common stock, par value

$0.01

per share, of Littelfuse (referred to as the stock consideration). IXYS stockholders received cash in lieu of any fractional shares of Littelfuse common stock that the IXYS stockholders would otherwise have been entitled to receive. Additionally, each outstanding option to purchase shares of IXYS common stock granted under an IXYS equity plan were assumed by Littelfuse and converted into an option to acquire (i) a number of shares of Littelfuse common stock equal to the number of shares of IXYS common stock subject to such option immediately prior to the effective time multiplied by

0.1265,

rounded down to the nearest whole share, with (ii) an exercise price per share of Littelfuse common stock equal to the exercise price of such IXYS stock option immediately prior to the effective time divided by

0.1265,

rounded up to the nearest whole cent.

Based on the

$207.5

per share opening price of Littelfuse common stock on

January 17, 2018,

the consideration IXYS stockholders received in exchange of their IXYS common stock in the acquisition had a value of

$814.8

million comprised of

$380.6

million of cash and

$434.2

million of Littelfuse stock. In addition to the consideration transferred related to IXYS common stock, the value of consideration transferred, and included in the purchase price, related to IXYS stock options that were converted to Littelfuse stock options, or cash settled, had a value of

$41.7

million. As a result, total consideration was valued at

$856.5

million.

The total purchase price of

$856.5

million has been allocated, on a preliminary basis, to assets acquired and liabilities assumed, as of the completion of the acquisition, based on preliminary estimated fair values. The purchase price allocation is preliminary because the evaluations necessary to assess the fair values of the net assets acquired are still in process. The primary areas that are

not

yet finalized relate to the completion of the valuations of certain acquired income tax assets and liabilities, including the impact of the adoption of the Tax Act. As a result, these allocations are subject to change during the purchase price allocation period as the valuations are finalized.

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

(in thousands)	Purchase Price Allocation
Total purchase consideration:
Cash, net of cash acquired	$	302,865
Cash settled stock options		3,622
Littelfuse stock		434,192
Converted stock options		38,109
Total purchase consideration	$	778,788
Allocation of consideration to assets acquired and liabilities assumed:
Current assets, net	$	155,959
Property, plant, and equipment		77,442
Intangible assets		212,720
Goodwill		382,317
Other non-current assets		31,570
Other non-current liabilities		(81,220	)
	$	778,788

Included in IXYS’s current assets, net was approximately

$49.1

million of receivables. All IXYS goodwill, other assets and liabilities were recorded in the Electronics segment and primarily reflected in the Americas and European geographic areas. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining IXYS’s products and technology with the Company’s existing electronics product portfolio. Goodwill resulting from the IXYS acquisition is

not

expected to be deductible for tax purposes.

Included in the Company’s Condensed Consolidated Statements of Net Income for the

three

and

six

months ended

June 30, 2018

are net sales of approximately

$100.2

million and

$186.5

million, respectively and a loss before income taxes of

$13.9

million and

$31.7

million, respectively since the

January 17, 2018

acquisition of IXYS. The Company recognized approximately

$1.6

million and

$7.5

million of stock compensation expense related to IXYS stock options converted to Littelfuse stock options during the

three

and

six

months ended

June 30, 2018,

of which

$4.5

million was recognized immediately as it related to prior services periods.

As required by purchase accounting rules, the Company recorded a

$36.9

million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of goods sold during the

first

and

second

quarters of

2018,

as the acquired inventory was sold, and reflected as other non-segment costs. During the

three

and

six

months ended

June 30, 2018,

the Company recognized a charge of

$19.0

million and

$36.9

million, respectively, for the amortization of this fair value inventory step-up.

During the

three

and

six

months ended

June 30, 2018,

the Company incurred approximately

$0.8

million and

$11.0

million, respectively, of legal and professional fees related to this acquisition which were primarily recognized as

selling, general, and administrative expenses

. These costs were reflected as other non-segment costs.

2017

Acquisitions

U.S. Sensor

July 7, 2017,

the Company acquired the assets of U.S. Sensor Corporation (“U.S. Sensor”). The acquisition purchase price of

$24.3

million, net of the finalization of an income tax gross up which was settled in the

fourth

quarter of

2017,

was funded with available cash. The acquired business expands the Company’s existing sensor portfolio in several key electronics and industrial end markets. U.S. Sensor manufactures a variety of high quality negative temperature coefficient thermistors as well as thermistor probes and assemblies. Product lines also include thin film platinum resistance temperature detectors (“RTDs”) and RTD assemblies.

The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the U.S. Sensor acquisition:

(in thousands)	Purchase Price Allocation
Total purchase consideration:
Cash	$	24,340
Allocation of consideration to assets acquired and liabilities assumed:
Current assets, net	$	4,635
Patented and unpatented technologies		1,090
Trademarks and tradenames		200
Non-compete agreement		50
Customer relationships		2,830
Goodwill		16,075
Current liabilities		(540	)
	$	24,340

Included in U.S. Sensor’s current assets, net was approximately

$1.5

million of receivables. All U.S. Sensor goodwill, other assets and liabilities were recorded in the Electronics segment and reflected in the United States geographic area. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining U.S. Sensor’s products and technology with the Company’s existing electronics product portfolio. Goodwill for the above acquisition is expected to be deductible for tax purposes.

As required by purchase accounting rules, the Company recorded a

$1.6

million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of goods sold during the

third

quarter of

2017,

as the acquired inventory was sold, and reflected as other non-segment costs.

Monolith

December 2015,

the Company invested

$3.5

million in the preferred stock of Monolith Semiconductor Inc. (“Monolith”), a U.S. start-up Company developing silicon carbide technology, which represented approximately

12%

of the common stock of Monolith on an as-converted basis. The Company accounted for its investment in Monolith under the cost method with any changes in value recorded in other comprehensive income. The value of the Monolith investment was

$3.5

million at

December 31, 2016.

February 28, 2017,

pursuant to a Securities Purchase Agreement between the Company and the stockholders of Monolith (“Securities Purchase Agreement”) and conditioned on Monolith achieving a product development milestone and other provisions, the Company acquired

62%

of the outstanding common stock of Monolith for

$15

million. The Securities Purchase Agreement includes provisions whereby the Company will acquire the remaining outstanding stock of Monolith (“non-controlling interest”) at a time or times based on Monolith meeting certain technical and sales targets. During the

first

quarter of

2018,

Monolith met the next set of technical and sales targets. As a result, and pursuant to the Securities Purchase Agreement, in

April 2018

the Company acquired an additional

19%

of the outstanding common stock of Monolith for

million, of which

million was paid to the stockholders of Monolith. Consideration for the purchase of the remaining

19%

outstanding common stock will be either

$0.5

million or

million, based on Monolith meeting the remaining technical and sales targets, and will be paid

later than

June 30, 2019.

The additional investment, in the

first

quarter of

2017,

resulted in the Company gaining control of Monolith and was accounted for as a step-acquisition with the fair value of the original investment immediately before the acquisition estimated to be approximately

$3.5

million. As the fair value of the investment immediately prior to the transaction equaled the carrying value, there was

impact on the Company’s Consolidated Statements of Net Income. As the Securities Purchase Agreement includes an obligation of the Company to mandatorily redeem the non-controlling interest for cash, the fair value of the non-controlling interest was recognized as a liability on the Company’s Consolidated Balance Sheets. The original investment of

$3.5

million, additional cash consideration of

$14.2

million (net of cash acquired), and the non-cash consideration of the fair value of the commitment to purchase the non-controlling interest of

$9.0

million resulted in a purchase price of

$26.7

million. Changes in the fair value of the non-controlling interest are recognized in the Company’s Consolidated Statements of Net Income.

Commencing

March 1, 2017,

Monolith was reflected as a consolidated subsidiary within the Company’s Consolidated Financial Statements. Had the acquisition occurred as of

January

2017,

the impact on the Company’s consolidated results of operations would

not

have been material.

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

(in thousands)	Purchase Price Allocation
Total purchase consideration:
Original investment	$	3,500
Cash, net of cash acquired		14,172
Non-cash, fair value of commitment to purchase non-controlling interest		9,000
Total purchase consideration	$	26,672
Allocation of consideration to assets acquired and liabilities assumed:
Current assets, net	$	891
Property, plant, and equipment		789
Patented and unpatented technologies		6,720
Non-compete agreement		140
Goodwill		20,641
Current liabilities		(639	)
Other non-current liabilities		(1,870	)
	$	26,672

Included in Monolith’s current assets, net was approximately

$0.7

million of receivables. All Monolith goodwill, other assets and liabilities were recorded in the Electronics segment and reflected in the United States geographic area. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining Monolith’s products and technology with the Company’s existing electronics product portfolio. Goodwill for the above acquisition is

not

expected to be deductible for tax purposes.

Pro Forma Results

The following table summarizes, on a pro forma basis, the combined results of operations of the Company and IXYS as though the acquisition had occurred as of

January 1, 2017.

The Company has

not

included pro forma results of operations for U.S. Sensor or Monolith as these results were

not

material to the Company. The pro forma amounts presented are

not

necessarily indicative of either the actual consolidated results had the IXYS acquisition occurred as of

January 1, 2017

or of future consolidated operating results.

	For the Three Months Ended
(in thousands, except per share amounts)	July 1 , 2017
Net sales	$	396,897
Income before income taxes		40,312
Net income		37,442
Net income per share — basic		1.50
Net income per share — diluted		1.48

	For the Six Months Ended
(in thousands , except per share amounts )	June 30, 2018		July 1, 2017
Net sales	$	893,709	$	765,710
Income before income taxes		134,227		51,546
Net income		106,247		55,043
Net income — basic		4.26		2.21
Net income — diluted		4.22		2.18

Pro forma results presented above primarily reflect the following adjustments:

	For the Three Months Ended			For the Six Months Ended
(in thousands)	July 1, 2017			June 30, 2018			July 1, 2017
Amortization (a)	$	(6,305	)	$	5,185		$	(12,601	)
Depreciation		139			—			278
Transaction costs (b)		—			9,976			(9,976	)
Amortization of inventory step-up (c)		(14,771	)		36,927			(36,927	)
Stock compensation (d)		(767	)		4,689			(5,780	)
Interest expense (e)		(2,582	)		—			(5,164	)
Income tax impact of above items		7,596			(13,329	)		22,896

(a)

The amortization adjustment for the

six

months ended

June 30, 2018

primarily reflects the reduction of amortization expense in the period related to the Order backlog intangible asset. The Order backlog has a useful life of

twelve

months and will be fully amortized in the fiscal

2017

pro forma results. The amortization adjustment for the

three

and

six

months ended

July 1, 2017

reflects incremental amortization resulting for the measurement of intangibles at their fair values.

(b)

The transaction cost adjustments reflect the reversal of certain bank and attorney fees from the

six

months ended

June 30, 2018

and recognition of those fees during the

six

months ended

July 1, 2017.

(c)

The amortization of inventory step-up adjustment reflects the reversal of the amount recognized during the

six

months ended

June 30, 2018

and the recognition of the full amortization during the

six

months end

July 1, 2017.

The inventory step-up was amortized over

five

months as the inventory is sold.

(d)

The stock compensation adjustment reflects the reversal of the portion of stock compensation for IXYS stock options that were converted to Littelfuse stock options and expensed immediately during the

six

months ended

June 30, 2018.

The adjustment for the

six

months ended

July 1, 2017

reflect the incremental stock compensation for the converted stock options.

(e)

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