Littelfuse (LFUS) Risk Analysis

Our disclosure controls or our internal control over financial reporting may not prevent or detect all errors, including simple errors or mistakes, and all incidents of non-compliance, which may result in misstatements. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met with respect to the preparation and accurate presentation of financial statements. If we fail to maintain the adequacy of our internal controls, including any failure to timely and appropriately implement new, required or improved controls, such failure may result in the loss of investor confidence in our financial reports, and we may incur significant expenses to remediate any resulting internal control deficiencies. Such failure may, ultimately, have an adverse effect on the trading price of our common stock. Further, controls may become inadequate over time because of changes in conditions or the degree of compliance with the policies may deteriorate. The design of a control system must reflect the fact there are resource constraints, and the benefits of controls must be considered relative to their costs. The Company's management has identified the material weaknesses described below. In making this assessment, management has concluded that we did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, at certain of our non-U.S. manufacturing locations, we lacked sufficiently skilled operational and accounting personnel to ensure that internal control responsibilities were performed and aligned with internal control objectives. The material weakness in the control environment contributed to an additional material weakness related to the design and operating effectiveness of control activities over the existence of inventory at these locations. The Company did not maintain effective controls related to inventory cycle counts to validate existence of inventory, and consequently, the completeness and accuracy of the data used in evaluating the appropriateness of the valuation of inventory and related reserves. These material weaknesses resulted in corrections through cumulative out-of-period adjustments as described in notes to the consolidated financial statements as of and for the year ended December 28, 2024. The Company evaluated the impact of the error and out-of-period adjustment and concluded it was not material to any previously issued financial statements and the adjustment was not material to the year ended December 28, 2024. Further, we have incurred additional costs and risks, including costs for accounting and legal fees in connection with the ongoing process of remediating the material weaknesses. We could also be subject to regulatory, stockholder or other actions in connection with the material weaknesses, and such actions would divert management's time and attention. For a description of the material weaknesses identified by management and the remediation efforts being implemented to address the material weaknesses, see "Part II, Item 9A - Controls and Procedures." If the enhanced controls implemented to address the material weaknesses and to strengthen our overall internal control do not operate effectively, if we are unsuccessful in implementing or following these enhanced processes, or if we are otherwise unable to remediate this material weaknesses, such failures may result in delayed or inaccurate reporting of our financial results.

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.

The potential physical impacts of climate change on our business operations are highly uncertain and differ in each geographic region where we operate. These impacts may include changes in weather patterns and increased weather intensity, water shortages, changing sea levels and changing temperatures. The impacts of climate change may materially and adversely impact the cost of production, insurance availability, and financial performance of our operations. Further, any impacts to our business and financial condition as a result of climate change are likely to occur over a sustained period of time and are therefore difficult to quantify with any degree of specificity. For example, extreme weather events may result in adverse physical effects on portions of our or others infrastructure, which could disrupt our supply chain and our customers and ultimately our business operations. In addition, disruption of transportation and distribution systems could result in reduced operational efficiency and customer service interruption. Climate-related events have the potential to disrupt our business, including the business of our suppliers and customers, and may cause us to experience higher attrition, and additional costs to resume operations. 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. 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.