LFUS 10-K & 10-Q changes, risk factors and insider trading

The Company operates in markets that are highly competitive. The Company competes on the basis of price, product performance and quality, service, innovation, and or brand name across the industries and markets it serves. Competitive pressures could affect the prices the Company is able to charge its customers or demand for its products.

The Company may not always be able to compete on price, particularly when compared to manufacturers with lower cost structures. Some of the Company’s competitors have substantially greater sales, financial and manufacturing resources and may have greater access to capital than the Company. As other companiescompetitors enter itsthe Company's markets or develop new products, competition may further intensify. The Company’s failure to compete effectively could materially adversely affect its business, financial condition, and results of operations.

An acquired business, technology, service or product could under-perform relative to the Company’s expectations and the price paid for it, or not perform in accordance with the Company’s anticipated timetable. This could cause the Company’s financial results to differ from expectations in any given fiscal period, or over the long term. The success of these transactions also depends on the Company’s ability to integrate the assets, operations, and personnel associated with these acquisitions. The Company may also be unable to retain key personnel from the acquisitions, and disruption from an acquisition may adversely affect the Company’s relationship with its customers, suppliers or employees. Further, the Company may encounter difficulties in integrating acquisitions with the Company’s operations and may not realize the degree or timing of the benefits that are anticipated from an acquisition.

The Company sources materials and sells products through various global networks. A disruption could occur within the Company’s manufacturing, distribution or supply chain network. This could include damage or destruction due to various causes including natural disasters or political instability which wouldmay cause one or more of these networks to become non-operational. This could adversely affect the Company’s ability to manufacture or deliver its products in a timely manner, impair its ability to meet customer demand for products and result in lost sales or damage to its reputation. Such a disruption could have a material adverse effect on the Company’s business, financial condition and results of operations.

The end markets for the Company’s products are characterized by technological change, frequent new product introductions and enhancements, changes in customer requirements and emerging industry standards. The introduction of products embodying new technologies and the emergence of new industry standards could render itsthe Company's existing products obsolete and unmarketable before it can recover any or all of its research, development, and commercialization expenses on capital investments. Furthermore, the life cycles of its products may change as result of developments in technology or otherwise and accordingly are difficult to estimate.

The Company’s future success will depend upon its ability to manufacture and deliver products in a manner that is responsive to its customers’ needs. The Company works with customers at the design stage to create products and solutions to meet their needs, but if the customer abandons or changes its plans, or if its new products and designs are not accepted by the market, the Company may not realize a return on its investment in developing the new products. The Company will need to develop and introduce new products and product enhancements on a timely basis that keep pace with technological developments and emerging industry standards and address increasingly sophisticated requirements of its customers. The Company invests heavily in research and development without knowing if it will recover these costs. The Company’s competitors may develop products or technologies that will render its products non-competitive or obsolete. If it cannot develop and market new products or product enhancements in a timely and cost-effective manner, its business, financial condition and results of operations could be materially adversely affected.

A work stoppage could occur at certain Company facilities, most likely as a result of disputes under collective bargaining agreements or in connection with negotiations of new collective bargaining agreements. Further, our reliance on international supply chain systems exposes us to potential interruptions and delays cause by transportation labor shortages, including dock worker stoppages and freight carrier disruptions. In addition, the Company may experience a shortage of supplies for various reasons, such as financial distress, work stoppages, port disruptions, natural disasters, or production difficulties that may affect one of its suppliers. A significant work stoppage, or an interruption or shortage of supplies for any reason, if protracted, could substantially adversely affect the Company’s business, financial condition and results of operations.

The Company’s success in its existing and acquired businesses depends on the Company’s ability to attract, retain, and motivate a highly-skilled and diverse management team and workforce. Failure to ensure that the Company has the depth and breadth of personnel with the necessary skill set and experience could impede its ability to deliver growth objectives and execute the Company’s strategy. We have had, and could have additional, changes in senior management, which could be disruptive to the Company’s operations and may have an adverse effect on our business, financial condition and results of operations. Competition for qualified employees among companies that rely heavily upon engineering and technology is at times intense, the labor market in the United States and abroad is competitive, and the loss of qualified employees could hinder the Company’s ability to conduct research activities successfully and develop marketable products. Due to the competitive labor market, competition for qualified personnel could require us to pay high wages or incur higher costs for retaining and incentivizing our personnel.

Increased government or governmental bodies contemplating legislative and regulatory changes in response to the potential impact of climate change could impose significant costs on us and our suppliers and customers, including increased cost of materials and natural resources, sources and supply of energy, capital equipment, environmental monitoring and reporting, or other costs to comply with such regulations. Potential regulations or standards could mandate more restrictive manufacturing requirements, such as stricter limits on greenhouse gas emissions and material used in production. Some jurisdictions have already passed such laws. For example, California enacted legislation in 2023 requiring disclosure of certain companies' greenhouse gas ("GHG") emissions, climate-related financial risks, voluntary carbon offsets ("VCOs"), and certain climate-related emission claims. Any future climate change regulations could also adversely impact our ability to compete with companies not subject to such regulations. In addition, the European Union ("EU") enacted the Corporate Sustainability Reporting Directive ("CSRD") and Corporate Sustainability Due Diligence ("CS3D") in 2023 and 2024, respectively.respectively, and published proposed revisions to both the CSRD and CS3D through omnibus legislation in 2025. We are further assessing our compliance and reporting strategies under CSRD and CS3D, but our obligations under these and other EU climate directives may incur substantial effort in the future. Shifts in environmental regulation have created increased legal, regulatory and operational uncertainty for the Company.

In the past several years, the U.S. government adopted a new approach to trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements. It also imposed tariffs on certain foreign goods and products. These measures may materially increase costs for goods imported into the U.S. Further, the global trade policies and tensions could create additional complexities. Our international presence subjects us to risks associated with international trade conflicts between the United States and its trade partners, including, without limitation, China, Mexico and Canada, and various European countries, particularly with regard to tariffs and import/export controls. These factors in turn could require us to materially increase prices to our customers which may reduce demand, or, if we do not or are unable to increase prices, could result in lower margins on products sold. Changes in U.S. trade policy have resulted in, and could result in more, U.S. trading partners adopting responsive trade policies making it more difficult or costly for us to export our products to those countries. It may also be time and resource-consuming for us to adapt our business strategies to adverse, changing trade policies. Compliance with rapidly changing tariffs and trade restrictions may require significant time and resources, and in turn increase our cost of doing business, and could result in reputational harm, fines, penalties or plant shutdowns if we are found to not be in compliance Additionally, continued geopolitical issues may result in customers outside the U.S. seeking to source products from local suppliers, which could result in lower sales or lost customers. Increased restrictions on international trade may have a material adverse effect on our business, financial condition, and results of operations. Export controls and impediments could impact our competitive position compared to local competitors and other companies not subject to the same restrictions. As such, we could lose market position and our business, operating results, and financial condition would be adversely impacted.

Economic conditions in China have been, and may continue to be, volatile and uncertain. In addition, the legal and regulatory system in China continues to evolve and is subject to change. There also continues to be significant uncertainty about the relationship between the U.S. and other countries, including China, with respect to geopolitics, trade policies, treaties, government regulations, and tariffs. The resultcurrent political climate has intensified concerns about trade tensions between the U.S. and China in connection with each country’s recent or proposed tariffs on the other country’s products. Accordingly, our operations and transactions with customers in China could be adversely affected by changes to market conditions, changes to the regulatory environment, increased trade barriers, tariffs, or restrictions, or interpretation of theChinese recent U.S. elections may compound this uncertainty.law. Further deterioration of economic conditions or outlook, such as lower economic growth, recession or fears of recession in other countries may adversely affect the demand for or profitability of our products and services.

Any of these factors could have a material adverse effect on the Company’s consolidated results of operations, financial position and cash flows. In addition, the effects on the global economy of geopolitical tensions, such as the Russia-Ukraine and Israel-Hamas wars,wars as well as developments in Venezuela, particularly if they escalate, areremain uncertain.

The Company is subject to taxes in the U.S. and numerous non-U.S. jurisdictions. Therefore, it is subject to changes in tax laws in each of these jurisdictions, including changes discussed in the paragraphs below. Further, the results of the recent U.S. elections could create additional complexities in the U.S.'s and other countries' tax policies. The outcome of these and other legislative developments, including changes to interpretations of recently enacted legislation, could have a material adverse effect on the Company’s future effective tax rate and cash flows.

The Organization for Economic Cooperation and Development (“"OECD”") has been working with a group of more than 100 countries to significantly change the tax treatment of multinational businesses, subjecting them to tax in additional jurisdictions, modifying the methods by which they allocate profits among jurisdictions, and subjecting them to a minimum level of tax of 15%, on a country-by-country-basis. As part of this effort, in December of 2021, the OECD published model rules to assist with implementation of the minimum tax regime.regime, or its Pillar Two framework ("Pillar 2"). Through the end of 2025, a number of the countries involved have enacted portions, or all, of Pillar 2 into their local laws. For 2025, Pillar 2 did not have a material impact for the Company.

The Company has two subsidiaries in China which benefit from lower tax rates due to “tax holidays” which apply for three-year periods. The tax holiday for one of the subsidiaries expired at the end of 2023 but was later extended for an additional three years, retroactively to include all of 2024, as well as 2025 and 2026; and for the other subsidiary, the tax holiday will expireexpired at the end of 2025. The Company intends to seek an extension for the expired tax holiday. Future year tax benefits will depend upon the Company’s ability to obtain extensions, after the three-year periods expire. There can be no assurance that future extensions will be granted.

As a resource-intensive manufacturing operation, the Company is exposed to a variety of market and asset risks, including the effects of changes in commodity prices, foreign currency exchange rates, and interest rates. The Company has multiple sources of supply for the majority of its commodity requirements. The Company monitors and manages exposures in changes in commodity prices, foreign currency exchange rates, and interest rates as an integral part of its overall risk management program, which recognizes the unpredictability of markets and seeks to reduce the potentially adverse effects on its results. Nevertheless, changes in currency exchange rates, commodity prices and interest rates cannot always be predicted. In addition, because of intense price competition and the Company’s high level of fixed costs, it may not be able to address such changes even if they are foreseeable. Substantial changes in these rates and prices could have a material adverse effect on the Company’s results of operations and financial condition. In addition, significant portions of its revenues and earnings are exposed to changes in foreign currency rates. As it operates in multiple foreign currencies, changes in those currencies relative to the U.S. dollar will impact its revenues and expenses. The impact of possible currency devaluation in countries experiencing high inflation rates or significant exchange fluctuations can impact the Company’s results and financial guidance. For additional discussion of interest rate, currency or commodity price risk, see Item 7A, Quantitative and Qualitative Disclosures about Market Risk.

As a result of the 2025 annual goodwill impairment test, the Company recorded a non-cash charge of $301.2 million to reflect the impairment of goodwill for the Semiconductor reporting unit within the Electronics segment. As a result of the 2024 annual goodwill impairment test, the Company recorded non-cash charges of $36.1 million and $8.6 million to reflect the impairment of goodwill for the Industrial controlsControls and sensorsSensors reporting unit within the Industrial segment and the Automotive sensorsSensors reporting unit within the Transportation segment, respectively. There werewas no impairment chargescharge recorded during the fiscal yearsyear of 2023 and 2022.2023.

We have identified a material weaknesses in our internal control over financial reporting, and ineffectiveIneffective internal controls could impact the accuracy and timely reporting of our business and financial results.

The Company relies on its information technology systems and networks in connection with many of its business activities. Some of these networks and systems are managed directly by the Company, while others are managed by third-party service providers and are not under the Company’s direct control. The Company’s operations routinely involve receiving, storing, processing and transmitting sensitive information pertaining to its business, customers, dealers, suppliers, employees, and other sensitive matters. As with most companies, the Company has experienced cyber-attacks, attempts to breach its systems, and other similar incidents, none of which have been material. Any future cyber incidents could, however, materially disrupt operational systems; result in loss of trade secrets or other proprietary or competitively sensitive information; compromise personally identifiable information regarding employees or customers or other third parties; and jeopardize the security of the Company’s facilities. A cyber incident could be caused by malicious outsiders using sophisticated methods to circumvent firewalls, encryption, and other security defenses. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, the Company may be unable to anticipate these techniques or to implement adequate preventative measures. Information technology security threats, including security breaches, computer malware, and other cyber-attacks are increasing in both frequency and sophistication and could create financial liability, subject the Company to legal or regulatory sanctions or damage the Company’s reputation with customers, dealers, suppliers, and other stakeholders. In addition, the widespread availability, adoption and rapid evolution of artificial intelligence technologies may increase our cybersecurity risk, including the use of generative artificial intelligence to augment existing or to create new malware.malware, and additional vulnerabilities may be introduced from the use of artificial intelligence by our customers or third parties. The Company continuously seeks to maintain a robust program of information security and controls, but the impact of a material information technology event could have a material adverse effect on the Company’s competitive position, reputation, results of operations, financial position and cash flows.

Net cash provided by operating activities was $367.6$433.8 million forin the fiscal year 2024,2025, aan decreaseincrease of $89.8$66.1 million, compared to $457.4$367.6 million duringin the fiscal year 2023.2024. The decreaseincrease in net cash provided by operating activities was primarily due to lowerhigher cash earnings.earnings compared to prior year.

On December 31, 2024, the Company completed the acquisition of a 200mm wafer fab located in Dortmund, Germany ("“Dortmund Fab"”) from Elmos Semiconductor SE. The total purchase price for the Dortmund Fab was approximately €94 million Euro,million, of which a €37.2 million Euro down payment (approximately $40.5 million) was madepaid in the third quarter of 2023 and recorded in Prepaid expenses and other current assets in the Consolidated Balance Sheets after regulatory approvals.approvals, Theand payment of €56.7 million Euro(approximately $58.8 million) was paid at closing in the beginning of the fiscal year 2025.closing. The transactionbusiness did not have any impact on the Company's 2024 financial results andis reported in the Electronics-Semiconductor business within the Company’s Electronics segment.

As a result of the 2024 annual goodwill impairment test, the Company recorded non-cash charges of $36.1 million and $8.6 million to reflect the impairment of goodwill for the Industrial Controls and Sensors reporting unit within the Industrial segment and the Automotive Sensors reporting unit within the Transportation segment, respectively. The goodwill impairment charge for the Industrial controlsControls and sensorsSensors reporting unit was due to a reduction in the estimated fair value of the reporting unit based on lower expectations for future revenue, profitability and cash flows as compared to the expectations of the 2023 annual goodwill impairment test. These lower expectations were driven by lower-than-expected demand in the electric vehicle end market as well as reduced government funding to support charging infrastructures for electric vehicles, primarily in Europe.

For the sevensix reporting units with goodwill, the Company compares the estimated fair value of each reporting unit to its carrying value. There was no goodwill remaining within the Automotive Sensors reporting unit. If the carrying value of a reporting unit exceeds the estimated fair value, the difference between the estimated fair value and carrying value is recorded as the amount of the goodwill impairment charge. The results of the goodwill impairment test as of September 29, 2024 indicated that the estimated fair values for the Industrial controls and sensors and Automotive sensors reporting units were below their respective carrying values. Accordingly, the Company recorded non-cash charges of $36.1 million and $8.6 million, respectively, to reflect the impairment of goodwill for the Industrial controls and sensors reporting unit within the Industrial segment and the Automotive sensors reporting unit within the Transportation segment. As a result of the impairment charge,charge described above, the Industrial controls and sensorsElectronics-Semiconductor reporting unit had $115.2$238.5 million of goodwill as of December 28,27, 2024. There was no goodwill remaining within the Automotive sensors reporting unit as of December 28, 2024.2025. For the remainder of the Company's reporting units with goodwill: Electronics-Passive Products and Sensors, Electronics-Semiconductor, Passenger Car Products, Commercial Vehicle Products, Industrial Controls and Sensors, and Industrial Circuit Protection, the results of the goodwill impairment test as of September 29,28, 20242025 indicated that their estimated fair values exceeded their respective carrying values.

One measure of the sensitivity of the amount of goodwill impairment charges to key assumptions is the amount by which each reporting unit “passed” (fair value exceeds the carrying value) the goodwill impairment test. With the exception of the IndustrialElectronics-Semiconductor controlsreporting andunit sensors andwithin the AutomotiveElectronics sensors reporting units,segment, the other five reporting units with goodwill passed the goodwill impairment test, with estimated fair values that exceeded the carrying values between 44%22% and 409%.303%. As of the most recent annual test conducted on September 29,28, 2024,2025, the Company noted that the excess of fair value over the carrying value was 108%,87%, 82%,153%, 96%,99%, 44%,22% and 409%303% for its reporting units: Electronics-Passive Products and Sensors, Electronics-Semiconductor, Passenger Car Products, Commercial Vehicle Products, Industrial Controls and Sensors, and Industrial Circuit Protection, respectively. Relatively small changes in the Company’s key assumptions would not have resulted in any reporting units failing the goodwill impairment test.

Generally, changes in estimates of expected future cash flows would have a similar effect on the estimated fair value of the reporting unit. That is, a 1.0% decrease in estimated annual future cash flows would decrease the estimated fair value of the reporting unit by approximately 1.0%. The estimated long-term net sales growth rate can have a significant impact on the estimated future cash flows, and therefore, the fair value of each reporting unit. A 1.0% decrease in the long-term net sales growth rate would have resulted in no additional reporting units failing the goodwill impairment test. Of the other key assumptions that impact the estimated fair values, most reporting units have the greatest sensitivity to changes in the estimated discount rate. The estimated discount rate was 10.6%12.0% for the Electronics-Passive Products and Sensors, Electronics-Semiconductor, and Industrial Circuit ProtectionSensors reporting units,unit, 11.5%12.5% for the Electronics-Semiconductor reporting unit, 11.0% for the Passenger Car Products and Commercial Vehicle Products reporting units, 12.3% for the Automotive Sensors reporting unit, and 14.9%14.0% for the Industrial Controls and Sensors reporting unit, and 13.0% for Industrial Circuit Protection reporting unit. A 1.0% increase in the estimated discount rates would have resulted in no reporting units failing the annual goodwill impairment test. The Company believes that its estimates of future cash flows and discount rates are reasonable, but future changes in the underlying assumptions could differ due to the inherent uncertainty in making such estimates. Additionally, price deterioration or lower volume could have a significant impact on the fair values of the reporting units.

The Company evaluates the recoverability of other long-lived assets, including property, plant and equipment and certain identifiable intangible assets, whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. Factors which could trigger an impairment review include significant underperformance relative to historical or projected operating results, significant changes in the manner of use of the assets or the strategy for the overall business, and a significant decrease in the market value of the assets or significant negative industry or economic trends. When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the indicators, the assets are assessed for impairment based on the estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the carrying value of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying value over its fair value. For the fiscal year ended December 28, 2024, the Company recorded non-cash impairment charges of $47.8 million for the impairment of intangible assets, including $47.6 million related to the impairment of certain acquired customer relationships, developed technology, and tradename intangible assets in the Industrial controls and sensors reporting unit within the Industrial segment. The impairment of the intangible assets resulted from lower expectations of future revenue and cash flows driven by lower-than-expected demand in the electrical vehicle end market as well as reduced government funding to support charging infrastructures for electric vehicles, primarily in Europe. The remaining impairment charges included $0.2 million for patents and customer relationships related to the exit of a small business in China within the Industrial segment. In addition, during the first quarter of 2024, the Company recognized a $0.9 million impairment related to certain machinery and equipment in the commercial vehicle business within the Transportation segment. For the fiscal year ended December 30, 2023, the Company recognized a $3.9 million impairment charge related to the land and building of a property in the commercial vehicle business within the Transportation segment that the Company made the decision to donate, a $0.9 million impairment charge substantially related to certain patents in a business within the Industrial segment, and a $0.1 million impairment on certain machinery and equipment in the semiconductor business within the Electronics segment.

For the firstsecond quarter of 2026, the Company recognized net sales of $657.0$738.8 million, an increase of $102.7$125.4 million, or 18.5%20.4% as compared to $554.3$613.4 million in the firstsecond quarter of 2025 including $33.2$35.8 million, or 6.0%5.8% of incremental net sales, from the Basler acquisition within the Industrial segment and $17.5$4.1 million, or 3.2%0.7% of favorable changes in foreign exchange rates. The remaining increase in net sales was primarily due to higher volume in the Electronics segment. The Company recognized net income of $75.1$89.4 million, or $2.96$3.49 per diluted share, in the firstsecond quarter of 2026 compared to $43.6$57.3 million, or $1.75$2.30 per diluted share, in the firstsecond quarter of 2025. The increase in net income was primarily due to higher operating income of $23.5$37.1 million from the Electronics segment driven by increases inhigher net sales and volume leverage.

Net cash provided by operating activities was $80.3$226.5 million for the threesix months ended MarchJune 28,27, 2026 compared to $65.8$148.2 million for the threesix months ended MarchJune 29,28, 2025. The increase in net cash provided by operating activities of $14.5$78.2 million was primarily due to higher cash earnings, partially offset by increases in working capital primarily resulting from higher annual incentive bonus payments made in 2026 as compared to 2025.earnings.

The following table summarizes the Company’s unaudited condensed consolidated results of operations for the periods presented. The firstsecond quarter of 2026 included $7.4$6.9 million ($14.3 million year-to-date) of restructuring charges primarily related to employee termination costs. During the second quarter of 2026, the Company recognized fixed asset impairment charges of $13.1 million, primarily related to the announced closure and/or disposition of two manufacturing sites for the semiconductor business within the Electronics segment. See Note 7, Restructuring, Impairment, and Other Charges, for further discussion. In addition, during the firstsecond quarter of 2026, the Company recognized $1.2$0.4 million ($1.5 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions. During the first quarter of 2026, the Company recognized a $5.4 million of purchase accounting inventory step-up adjustment related to the Basler acquisition.

The firstsecond quarter of 2025 included $8.9$2.5 million ($11.4 million year-to-date) of restructuring charges primarily related to employee termination costs,costs. andDuring the first quarter of 2025, the Company recognized a $0.1 million impairment charge related to certain machinery and equipment within the Electronics segment. See Note 7, Restructuring, Impairment, and Other Charges, for further discussion. DuringIn addition, during the firstsecond quarter of 2025, the Company recognized $0.5$1.5 million of purchase accounting inventory step-down adjustment related to the Dortmund acquisition, and $0.1($1.6 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions. During the first quarter of 2025, the Company recognized a $0.5 million of purchase accounting inventory step-down adjustment related to the Dortmund Fab acquisition.

Net sales increased $102.7$125.4 million, or 18.5%,20.4%, for the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 including $33.2$35.8 millionmillion, or 6.0%5.8% of incremental net sales from the Basler acquisition within the Industrial segment and $17.5$4.1 millionmillion, or 3.2%0.7% of favorable changes in foreign exchange rates. The remaining increase in net sales was primarily due to higher volume of $38.2$44.7 million and $17.4$26.1 million in the electronics products and semiconductor businesses within the Electronics segment, respectively, driven by higher end market demand and favorable price.price, and higher volume from the industrial circuit protection products within the Industrial segment.

Cost of sales was $402.8$432.7 million, or 61.3%58.6% of net sales, in the firstsecond quarter of 2026 compared to $347.1$381.4 million, or 62.6%62.2% of net sales, in the firstsecond quarter of 2025. The increase of $55.8$51.4 million included $25.1$20.8 million of incremental cost of sales from the Basler acquisition within the Industrial segment. The remaining increase was due to higher volume acrossin allthe segments.Electronics segment. As a percent of net sales, cost of sales decreased 1.3%3.6% primarily due to improved margin from the electronics products business within the Electronics segment,segment and the industrial circuit protection products business within the Industrial segment, and the passenger car products business within the Transportation segment driven by volume leverageleverage, operational execution, and favorable product mix. The improved margin was also favorably impacted by higher gross margin from the Basler acquisition, partially offset by purchase accounting inventory charges of $5.4 million or 0.8%.acquisition.

Gross profit was $254.1$306.1 million, or 38.7%41.4% of net sales, in the firstsecond quarter of 2026 compared to $207.3$232.1 million, or 37.4%37.8% of net sales, in the firstsecond quarter of 2025. The increase of $46.9$74.0 million in gross profit and the improved gross margin of 3.6% were primarily due to higher volume and favorable priceprice, operational execution, and favorable product mix from the electronics products business within the Electronics segment and the industrial circuit protection business within the Industrial segment. Additionally, gross margin was higher due to the passenger car products business within the Transportation segment and higher gross margin from the Basler acquisition, partially offset by the purchase accounting inventory charges of $5.4 million or 0.8%.acquisition.

Operating expenses were $153.0$186.3 million, or 23.3%25.2% of net sales, for the firstsecond quarter of 2026 compared to $137.1$139.3 million, or 24.7%22.7% of net sales, for the firstsecond quarter of 2025. The increase in operating expenses of $15.9$47.1 million was primarily drivendue byto higher selling, general, and administrative expenses of $25.1 million due to higher annual incentive expenses and incremental operating expenses of $11.8$11.7 million from the Basler acquisition.acquisition, and higher restructuring, impairment, and other charges of $17.5 million, which included $13.1 million of fixed asset impairment charges primarily related to the announced closure and/or disposition of two manufacturing sites for the semiconductor business within the Electronics segment.

Operating income was $101.2$119.7 million, representing an increase of $31.0$26.9 million, or 44.2%,29.0%, for the firstsecond quarter of 2026 compared to $70.2$92.8 million for the firstsecond quarter of 2025. The increase in operating income was due to higher gross profit from the electronics products business within the Electronics segment,segment and the industrial circuit protection products business within the Industrial segment, and the passenger car products business within the Transportation segment, partially offset by higher operating expenses mainly driven by the Basler acquisition noted above. Operating margins increased from 12.7%15.1% in the firstsecond quarter of 2025 to 15.4%16.2% in the firstsecond quarter of 2026 drivendue byto improved gross margin from the electronics products business within the Electronics segment,segment and the industrial circuit protection products business within the Industrial segment, and the passenger car products business within the Transportation segment driven by volume leverageleverage, operational execution, and favorable price and product mix.mix and incremental operating income from the Basler acquisition, partially offset by higher selling, general, and administrative expenses and restructuring, impairment, and other charges noted above.

Income before income taxes was $96.7$117.1 million, or 14.7%15.8% of net sales, for the firstsecond quarter of 2026 compared to $59.9$78.2 million, or 10.8%12.8% of net sales, for the firstsecond quarter of 2025. In addition to the factors impacting comparative results for operating income discussed above, income before income taxes was primarily benefited by foreign exchange gains of $2.4$0.2 million in the firstsecond quarter of 2026 compared to foreign exchange losses of $4.8$10.4 million in the firstsecond quarter of 2025, and lower unrealized losses of $1.5 million in the first quarter of 2026 compared to the first quarter of 2025 related to the Company's equity investment.2025.

The effective tax rate for the three and six months ended MarchJune 28,27, 2026 was 22.3%23.6% and 23.0%, respectively, compared to the effective tax rate for the three and six months ended MarchJune 29,28, 2025 of 27.3%.26.7% and 27.0%, respectively. The effective tax rate for 2026 was lower than the effective tax rate for the comparable 2025 periodperiods primarily due to lapses in the statute of limitations for previously unrecognized tax benefits and excess tax benefits for share based compensation recognized in the2026, firstas quarterwell ofas 2026.foreign exchange losses in non-U.S. jurisdictions with no related tax benefit recognized in 2025.

The effective tax rate for the three and six months ended MarchJune 28,27, 2026 was higher than the statutory tax rate primarily due to losses in non-U.S. jurisdictions with no related tax benefit, partially offset by lapses in the statute of limitations for previously unrecognized tax benefits recognizedas inwell theas firstexcess quarter.tax benefits for share based compensation. The effective tax rate for the three and six months ended MarchJune 29,28, 2025 was higher than the statutory tax rate primarily due to foreign exchange losses and losses in non-USnon-U.S. jurisdictions with no related tax benefit.

(a) Included in “"Other”" Operating income for the firstsecond quarter of 2026 was $7.4$6.9 million ($14.3 million year-to-date) of restructuring charges primarily related to employee termination costs. During the second quarter of 2026, the Company recognized fixed asset impairment charges of $13.1 million, primarily related to the announced closure and/or disposition of two manufacturing sites for the semiconductor business within the Electronics segment. See Note 7, Restructuring, Impairment, and Other Charges, for further discussion. In addition, during the firstsecond quarter of 2026, the Company recognized $1.2$0.4 million ($1.5 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions. During the first quarter of 2026, the Company recognized a $5.4 million of purchase accounting inventory step-up adjustment related to the Basler acquisition.

Included in “"Other”" Operating income for the firstsecond quarter of 2025 was $8.9$2.5 million ($11.4 million year-to-date) of restructuring charges primarily related to employee termination costs,costs. andDuring the first quarter of 2025, the Company recognized a $0.1 million impairment charge related to certain machinery and equipment within the Electronics segment. See Note 7, Restructuring, Impairment, and Other Charges, for further discussion. DuringIn addition, during the firstsecond quarter of 2025, the Company recognized $0.5$1.5 million of purchase accounting inventory step-down adjustment related to the Dortmund acquisition, and $0.1($1.6 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions. During the first quarter of 2025, the Company recognized a $0.5 million of purchase accounting inventory step-down adjustment related to the Dortmund Fab acquisition.

Net sales increased $55.5$70.8 million, or 18.1%,21.1%, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 and included favorable changes in foreign exchange rates of $10.5$2.6 millionmillion, or 3.4%.0.8%. The net sales increase was primarily due to higher volume of $38.2$44.7 million and $17.4$26.1 million in the electronics products and semiconductor businesses, respectively, driven by higher end market demand and favorable price.

Operating income was $70.3$86.9 million, representing an increase of $23.5$37.1 million, or 50.3%,74.3%, for the firstsecond quarter of 2026 compared to $46.8$49.9 million for the firstsecond quarter of 2025. The increase in operating income was primarily from the electronics products business due to volume leverage andleverage, favorable product mix.mix, and operational execution. Operating margins increased from 15.2%14.9% in the firstsecond quarter of 2025 to 19.4%21.4% in the firstsecond quarter of 2026 primarily due to volume leverageleverage, operational execution and favorable price and product mix from the electronics products business.and the semiconductor businesses.

Net sales increased $8.5$3.0 million, or 5.3%,1.7%, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 and included favorable changes in foreign exchange rates of $6.2$1.7 millionmillion, or 3.8%.1.0%. The remaining net sales increase was due to higher volume in the passengercommercial carvehicle productsbusiness within the Asia region, partially offset by lower volume from the automotive sensors business driven by higherthe marketstrategic demandexit withof vehiclecertain contentlower growth.margin products.

Operating income was $24.1$25.7 million, representing ana increasedecrease of $5.2$2.4 million, or 27.4%,8.5%, for the firstsecond quarter of 2026 compared to $18.9$28.1 million for the firstsecond quarter of 2025. The increasedecrease in operating income was primarily due to higherlower gross margin from the passengercommercial car productsvehicles business drivenimpacted by volumecost leverageinflation and operationalunfavorable execution.product mix. Operating margins increaseddecreased from 11.7%15.6% in the firstsecond quarter of 2025 to 14.1% in the firstsecond quarter of 2026.2026 due to lower gross margin from the commercial vehicle business.

Net sales increased $38.6$51.6 million, or 45.3%,52.5%, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 including $33.2$35.8 millionmillion, or 36.4% of incremental net sales from the Basler acquisition and favorableunfavorable changes in foreign exchange rates of $0.8$0.2 millionmillion, or 1.0%.0.2%. The remaining net sales increase was due to higher net sales from the industrial circuit protection products driven by higher volume, partially offset by lower volume from industrial control and sensor products.volume.

Operating income was $20.8$27.5 million, representing an increase of $7.7$8.6 million, or 58.8%,45.7%, for the firstsecond quarter of 2026 compared to $13.1$18.9 million for the firstsecond quarter of 2025. The increase in operating income was due to higher gross margin from the industrial circuit protection products driven by volume leverage, operational efficiencies, favorable product mix and the incremental increaseincreases from the Basler acquisition. Operating margins increaseddecreased from 15.3%19.2% in the firstsecond quarter of 2025 to 16.8%18.3% in the firstsecond quarter of 2026 due to higher amortization expenses of $2.9 million, or 2.0% related to the Basler acquisition noted previously, partially offset by improved gross margin in the industrial circuit protection products and the Basler acquisition noted previously, partially offset by lower margin from industrial control and sensor products and higher amortization expenses of $2.9 million related to the Basler acquisition.products.

Net sales increased $37.2$57.5 million, or 16.5%,23.1%, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 and included favorable changes in foreign exchange rates of $0.8 million.2025. The increase in net sales was primarily due to incremental net sales of $29.9$31.6 millionmillion, or 12.7% from the Basler acquisition within the Industrial segment, and higher volume from theall electronics products businessbusinesses within the Electronics segment, partially offset by lower volume from the commercial vehicle business within the Transportation segment and the industrial controlcircuit and sensorprotection products within the Industrial segment.

Net sales increased $43.0$61.7 million, or 20.9%,27.6%, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 and included favorable changes in foreign exchange rates of $2.3$0.6 million.million and incremental net sales of $2.2 million from the Basler acquisition within the Industrial segment. The remaining increase in net sales was primarily due to higher volume from all businesses within the Electronics segment andsegment, the industrial circuit protection products within the Industrial segment, and incremental net sales of $1.8 million from the Baslercommercial acquisitionvehicles business within the IndustrialTransportation segment.

Net sales increased $22.5$6.1 million, or 18.1%,4.4%, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 and included favorable changes in foreign exchange rates of $14.4$3.5 million.million, or 2.5%. The remaining increase in net sales was primarily due to higher volume from the electronics products business within the Electronics segment and across all businesses within the Transportation segment and incremental net sales of $1.5$2.0 million from the Basler acquisition within the Industrial segment, partially offset by lower volume from the passenger car products business within the Transportation segment and the semiconductor business within the Electronics segment.

Cash and cash equivalents were $481.7$628.2 million as of MarchJune 28,27, 2026, aan decreaseincrease of $81.7$64.8 million, as compared to December 27, 2025. As of MarchJune 28,27, 2026, $67.6$139.3 million of the Company's $481.7$628.2 million cash and cash equivalents was held by U.S. subsidiaries.

The principal balance of the revolving credit facility is due on the Maturity Date. The revolving loan balances under the Credit Facility were $200.0 million as of MarchJune 28,27, 2026. Prior to entering into the Credit Agreement, the Company paid off $100.0 million of the revolving loan and $3.8 million of the term loan under the Existing Credit Agreement during the first quarter of 2026.

As of MarchJune 28,27, 2026, the effective interest rate on the outstanding borrowings under the Credit Facility was 3.88% onwith the hedged portion.hedge.

As of MarchJune 28,27, 2026, the Company had $1.2$0.1 million outstanding letters of credit and had $598.8$599.9 million of borrowing capacity available under the revolving credit facility. As of MarchJune 28,27, 2026, the Company was in compliance with all covenants under the Credit Agreement.

On November 15, 2017, the Company entered into a Note Purchase Agreement pursuant to which the Company issued and sold $175 million in aggregate principal amount of senior notes in two series. On January 16, 2018, $50 million aggregate principal amount of 3.48% Senior Notes, Series A, due February 15, 2025 (“U.S. Senior Notes, Series A due 2025”) and $125 million in aggregate principal amount of 3.78% Senior Notes, Series B, due February 15, 2030 (“U.S. Senior Notes, Series B due 2030”) (together, the “U.S. Senior Notes due 2025 and 2030”) were funded. During the first fiscal quarter of 2025, the Company paid off $50 million of U.S. Senior Notes, Series A, due 2025. Interest on the U.S. Senior Notes, Series B due 2030 is payable semiannually on February 15 and August 15, commencing on August 15, 2018.

The Company was in compliance with all covenants under the Credit Agreement and Senior Notes as of MarchJune 28,27, 2026 and currently expects to remain in compliance based on management’s estimates of operating and financial results for 2025.2026. As of MarchJune 28,27, 2026, the Company met all the conditions required to borrow under the Credit Agreement and management expects the Company to continue to meet the applicable borrowing conditions.

On December 11, 2025, the Company completed the acquisition of Basler.Basler Electric Company ("Basler"). Basler is a leading designer and manufacturer of innovative electrical control and protection solutions for high-growth industrial markets including grid and utility infrastructure, power generation and data center. At the time of acquisition, Basler had annualized sales of approximately $130 million. The business is reported within the Company’s Industrial segment. The total purchase consideration of $352.8$353.1 million, net of cash acquired, subject to a working capital adjustment. The acquisition was funded with the Company's cash on hand.

During the firstsecond quarter of 2026, the Company paid quarterly dividends of $18.8$19.0 million to its shareholders. On MayJuly 6,29, 2026, the Company announced the declaration of a quarterly cash dividend of $0.75$0.80 per shareshare, a 7% increase from the first quarter, payable on JuneSeptember 4,3, 2026 to stockholders of record as of MayAugust 21,20, 2026.

Net cash provided by operating activities was $80.3$226.5 million for the threesix months ended MarchJune 28,27, 2026 compared to $65.8$148.2 million for the threesix months ended MarchJune 29,28, 2025. The increase in net cash provided by operating activities of $14.5$78.2 million was primarily due to higher cash earnings, partially offset by increases in working capital primarily resulting from higher annual incentive bonus payments made in 2026 as compared to 2025.earnings.

Net cash used in investing activities was $16.6$26.7 million for the threesix months ended MarchJune 28,27, 2026 compared to $80.5$89.7 million during the threesix months ended MarchJune 29,28, 2025. Capital expenditures for the six months ended June 27, 2026 were $33.0 million compared to $33.0 million for the six months ended June 28, 2025. The Company made a payment of $2.5$2.8 million for the Basler acquisition during the threesix months ended MarchJune 28,27, 2026. Net cash paid for the Dortmund Fab acquisition was $57.4 million during the threesix months ended MarchJune 29,28, 2025. CapitalIn expendituresaddition, the Company received proceeds of $7.4 million from the sale of the investment in Polytronics Technology Corporation Ltd. (“Polytronics”) and $1.7 million from an asset held for sale from the threeBasler acquisition during the six months ended MarchJune 28,27, 2026 were $14.1 million, representing a decrease of $9.0 million, compared to the three months ended March 29, 2025.2026.

Net cash used in financing activities was $142.7$131.9 million for the threesix months ended MarchJune 28,27, 2026 compared to $97.0$120.5 million for the threesix months ended MarchJune 29,28, 2025. On March 12, 2026, the Company entered into the Credit Agreement to amend and restate and effect certain changes to its existing credit agreement, dated as of June 30, 2022. As a result of entering into the Credit Agreement, the Company paid off $62.5 million of the term loan and replaced $200 million of the term loan under the existing credit agreement with $200 million borrowing under the revolving credit facility under the Credit Agreement. Prior to the amendment on March 12, 2026, the Company paid off $100.0 million of the revolving credit facility and $3.8 million of the term loan under the prior Credit Agreement during the first quarter of 2026. During the threesix months ended MarchJune 29,28, 2025, the Company paid off $50.0 million of U.S. Senior Notes, Series A, due February 15, 2025 and made payments of $3.8$7.5 million on the term loan. The Company received $45.2$75.6 million of net proceeds related to stock-based award activities during the threesix months ended MarchJune 28,27, 2026 compared to $2.1$0.6 million for the threesix months ended MarchJune 29,28, 2025. In addition, the Company paid dividends of $18.8$37.9 million and $17.3$34.7 million in the threesix months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025, respectively. During the threesix months ended MarchJune 29,28, 2025, the Company repurchased 120,689 shares of its common stock totaling $27.4 million.

On April 25, 2024, the Company's Board of Directors authorized a three-year program to repurchase up to $300.0 million in the aggregate of shares of the Company's stock for the period from May 1, 2024 to April 30, 2027 ("2024 program"). The Company did not repurchase any shares of its common stock for the three monthsand ended March 28, 2026. During the threesix months ended MarchJune 29,27, 2025,2026. theThe Company repurchased 120,689 shares of its common stock totaling $27.4 million pursuant to the 2024 program.program during the first quarter of 2025. The Company did not repurchase any shares of its common stock for the three months ended June 28, 2025.

As of MarchJune 28,27, 2026, the Company did not have any off-balance sheet arrangements, as defined under SEC rules. Specifically, the Company was not liable for guarantees of indebtedness owed by third parties, the Company was not directly liable for the debt of any unconsolidated entity and the Company did not have any retained or contingent interest in assets. 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.

The significant accounting policies and critical accounting estimates are consistent with those discussed in Note 1, Summary of Significant Accounting Policies and Other Information, to the consolidated financial statements and the MD&A section of the Company’s Annual Report on Form 10-K for the year ended December 27, 2025. During the threesix months ended MarchJune 28,27, 2026, there were no significant changes in the application of critical accounting policies and estimates.