Company: IPGP
Filing Date: 2025-02-20
Form Type: 10-K
Source: 0001111928-25-000023
Chunk: 129

Company: IPG PHOTONICS CORP
Filing Date: 2025-02-20
Form: 10-K
Item: Item 7A
Chunk 129
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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk in the ordinary course of business, which consists primarily of interest rate risk associated with our cash and cash equivalents and foreign exchange rate risk.

Interest rate risk. Certain interest rates are variable and fluctuate with current market conditions. Our investments have limited exposure to market risk. We maintain a portfolio of cash, cash equivalents and short-term investments, consisting primarily of money market funds and term deposits, commercial paper, U.S. government and agency securities, term deposits, and corporate bonds. None of these investments have a maturity date in excess of one year. Because of the short-term nature of these instruments, a sudden change in market interest rates would not be expected to have a material impact on our financial condition or results of operations.

We are also exposed to market risk as a result of increases or decreases in the amount of interest expense we must pay on our borrowings on our bank credit facilities. Although our U.S. revolving line of credit and our Euro credit facilities have variable rates, we do not believe that a 10% change in market interest rates would have a material impact on our financial position or results of operations.

Exchange rates. Due to our international operations, a significant portion of our net sales, cost of sales and operating expenses are denominated in currencies other than the U.S. dollar, principally the Euro and the Chinese yuan. Changes in the exchange rate of the U.S. dollar versus the functional currencies of our subsidiaries affect the translated value and relative level of sales and net income that we report from one period to the next. In addition, our subsidiaries may have assets or liabilities denominated in a currency other than their functional currency which results in foreign exchange transaction gains and losses due to changes in the value of the functional currency versus the currency the assets and liabilities are denominated in. In 2024 we incurred a loss on foreign exchange transactions of $5.5 million as compared to a gain of $1.4 million in 2023. As our Chinese and South Korean subsidiaries have net U.S. dollar denominated liabilities, the depreciation of the Chinese yuan and South Korean won relative to the U.S. dollar contributed to most of the foreign exchange loss in 2024, partially offset by gain 

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on the depreciation of the Euro as our German subsidiary has net U.S. dollar denominated assets. Management attempts to minimize these exposures by partially or fully off