Dear Shareholders,

2010 was an excellent year for Littelfuse. We achieved record sales, earnings and cash flow, initiated a quarterly dividend, continued our stock repurchase program and acquired a well-established company that expands our presence in one of our strategic growth areas. These achievements, along with many others throughout the year, made Littelfuse an even stronger global competitor.

Powerful Performance

From a financial standpoint, 2010 was a tremendous bounce-back from 2009. Sales of $608 million increased 41% from 2009. Diluted earnings per share were $3.52 in 2010, compared to $0.43 for 2009. Cash provided by operating activities increased to $104 million in 2010 from $30 million in 2009. Capital expenditures increased 44% to $22 million. Our balance sheet is stronger than ever.

The major drivers behind our improvement in 2010 were the market rebound and the extensive restructuring project we began four years ago to rationalize our manufacturing footprint and improve our cost structure. With the restructuring program nearing completion and additional capacity on line, we believe we are well positioned for strong growth and higher margins for the foreseeable future. Our shareholders are benefiting from our significantly improved performance through quarterly dividends of $0.15 per share that we initiated in December 2010. We also returned value to our shareholders through the repurchase of 643,777 shares of our stock during the year.

Powerful Improvement

Our 2010 results improved in all three of our businesses.

Electronics sales, which account for 64% of total Littelfuse sales, increased 48% to $390 million. There was strength across all geographies and end markets in 2010, particularly in consumer electronics. We gained market share through numerous successful design wins into end products including LCD TVs, digital eReaders, tablet computers, set-top boxes and smart phones. In addition, we benefited from significantly lower lead times than our competition for most of the year.As a result of our focus on product development, the percentage of electronic sales from new products introduced over the past five years nearly doubled in 2010 from the 2008 level. A number of these new products were developed to meet the needs of consumer product manufacturers who are putting more and more electronics into smaller and smaller spaces. In fact, several of our new circuit protection products are currently the smallest form factor in the industry. We are also benefiting from the investments we made in our silicon wafer fabrication and back-end assembly operations in Wuxi, China. The ability of our semiconductor teams to establish the operation, transfer production from two other facilities and ramp-up volume, all while leading the industry in lead times, enabled us to substantially increase market share for our semiconductor business.

The ongoing consumer demand for the latest electronic products and the increasing circuit protection content required for faster data speeds and higher operating temperatures in a variety of electronic end products are significant growth drivers for this business. We believe we are well positioned in the electronics market, with our extensive circuit protection expertise, the industry's broadest and deepest product portfolio and a number-one position with major electronic distributors.

Automotive sales reached $130 million in 2010, a 32% increase that significantly outperformed the markets 24% growth in global car production. Our higher sales in all geographic regions were driven primarily by new products and design wins for fuses that protect the increasingly more sophisticated electronics and higher-current battery technology in todays vehicles. Asia continues to be a focus for us, especially China which leads the regions growth in vehicle production and sales. We also continue to invest in growing our presence in the off-road, truck and bus (OTB) market.

In December 2010 we acquired Cole Hersee Company, headquartered in Boston, for $50 million in cash. Cole Hersee is a major supplier of electromechanical and solid-state switches and control devices for the heavy duty vehicle OTB market segment. With annual sales of approximately $43 million, Cole Hersee supplies more than 2,000 highly reliable switches and accessories into both the OEM and aftermarket segments of the heavy duty vehicle market. Heavy duty commercial and recreational vehicles have a wide range of electrical protection needs and a significantly higher value of circuit-protection content per vehicle than cars and trucks. The acquisition extends our OTB product portfolio beyond fuses and provides opportunities to leverage the Cole Hersee product line across our global sales and distribution channels.

Electrical sales rose 28% to $88 million in 2010. Sales in our base fuse business increased 11% for the year. The continued decline of the non-residential building segment, which accounts for a significant portion of our electrical sales, was more than offset by a stronger industrial market and new business in the emerging solar and LED lighting markets. The major growth driver for our 2010 electrical sales came from the protection relay and custom products side of the business, which we acquired in 2008. The primary market for both of these products is the global mining industry, where the growing demand for potash, copper, gold and other minerals continues to fuel our sales. We made very good progress on our initiative to expand protection relay sales into new markets and geographies in the mining segment and increased the production output for custom power centers. In response to the increasing demand for our mining industry products, we plan to expand the production capacity of our facility in Saskatoon, Canada, in 2011. We moved into this new location just two years ago. The need for another expansion in such a short time is a strong indicator of our success in this market and its future growth potential for Littelfuse.

Powerful Strategy

We have a powerful strategy that focuses on growth. Our goal is to increase sales by at least 10% each year and leverage our improved cost structure to increase profitability. Our strategy to achieve these results revolves around three key areas:

Organic growth Growth through acquisitions Operational improvements through our global Lean initiative

Our organic growth target is a minimum of 5% each year through 2013. We have a strong core business built around decades of experience, established customer and distributor relationships, high-quality products and technology innovation. The annual growth of our core markets is less than 5%, so to reach our goal we must increase sales in markets that offer greater growth potential. The emerging solar market is an exciting opportunity. Our products protect the solar arrays and inverters that convert energy from the sun into electricity. The high voltage and size limitations of solar products are an excellent fit for our specialized design and testing capabilities. With the increasing global demand for electricity and the widespread support for renewable energy resources, this market offers excellent growth potential.

Additional areas targeted for growth in the electrical business include protection relays and custom electrical products for the mining industry, as well as LED lighting. In the automotive business, our growth strategy for the OTB market focused on acquiring a successful company that would expand our product portfolio and provide a platform for further growth. The acquisition of Cole Hersee achieved this objective and puts us well on our way to significantly increasing our presence in this area.

The market for electric and hybrid electric vehicles is also attractive. Most vehicle manufacturers are developing or have already launched vehicles of this type, which are well known for their fuel efficiency and low emissions. We believe we can be a strong player in this segment because of our well-established expertise in vehicle electrical applications and high-voltage direct-current circuit protection, as well as our extensive knowledge of automobile industry needs and production processes.

We also have attractive growth opportunities in our electronics business. Over the past two years, we expanded our silicon protection array (SPA) product line. This product family was developed by our semiconductor engineering team to protect consumer electronic devices from electrostatic discharge and power surges. One of the first applications for the expanded line was a multi-million dollar opportunity with a large global manufacturer of LCD TVs. Set-top boxes are also an attractive end market for the SPA products.

Another focus area for our electronics business is providing circuit protection for the batteries that power popular consumer products ranging from MP3 players and smart phones to tablet computers and digital cameras. Battery protection is a high-volume market opportunity for our new overcurrent and overtemperature products.

Geographic expansion is another element of our growth strategy. A number of emerging geographic areas, such as China, Brazil and India, are growing at a much faster rate than the overall global market. We are already well established in China and while our presence in Brazil and India is relatively small, it is growing. As larger segments of these economies become purchasers as well as producers, there will be even more opportunities for Littelfuse in areas such as consumer electronic products and vehicles. We also plan to grow through acquisitions. Our goal here is the same as for organic growth increase sales by at least 5% each year through 2013. Since 1999, we've acquired 12 companies with more than $270 million in revenues. Like Cole Hersee, these acquisitions have added new circuit protection technologies, products and customers to our business. We have a solid track record for successfully integrating acquisitions into our existing business, growing sales and increasing profitability. With our strong cash flow and solid balance sheet, we are ready to aggressively pursue acquisition opportunities that will increase revenues and expand our product portfolio into adjacent technologies. In addition to our focus on growth, we have a strong emphasis on continually improving our operations. This initiative revolves around the use of Lean principles to strengthen our competitive position and continue to enhance our customers' experience with us. We began our commitment to Lean a number of years ago in our manufacturing operations. More recently we have begun to implement Lean across the enterprise, from sales to accounting, engineering and customer service. In 2011, we will continue to develop our internal Lean talent pool to facilitate the continued expansion of Lean in both manufacturing and non-manufacturing areas.

Powerful Opportunities

We believe 2011 will be another year of strong performance for Littelfuse. The restructuring of our business has created a solid framework for growth. Our manufacturing is consolidated into six world-class sites. We have significantly improved our financial performance, introduced new innovations in circuit protection and strengthened our position as a global leader in our industry. We have a roadmap for the next three years. The world economy is improving, and while increased commodity and transportation costs are a concern, we have managed through these headwinds in the past and we believe we are well positioned to manage through them again if necessary. I hope you share my excitement about the opportunities for Littelfuse, and for our customers, associates and shareholders. I'm confident about our future and all that we can achieve in the years ahead.

 

Gordon Hunter
Chairman, President and Chief Executive Officer