Company: IPGP
Filing Date: 2025-08-05
Form Type: 10-Q
Source: 0001111928-25-000132
Chunk: 60

Company: IPG PHOTONICS CORP
Filing Date: 2025-08-05
Form: 10-Q
Item: Part I, Item 1
Chunk 60
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 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. The loss on foreign exchange transactions totaled $3.1 million for the three months ended June 30, 2025 compared to a loss of $3.2 million for the three months ended June 30, 2024. Management attempts to minimize these exposures by partially or fully off-setting foreign currency denominated assets and liabilities at our subsidiaries that operate in different functional currencies. The effectiveness of this strategy can be limited by the volume of underlying transactions at various subsidiaries and by our ability to accelerate or delay inter-company cash settlements. As a result, we are unable to create a perfect offset of the foreign currency denominated assets and liabilities.

At June 30, 2025, our material foreign currency exposure is net U.S. dollar denominated assets at subsidiaries where the euro is the functional currency and U.S. dollar denominated liabilities where the Chinese yuan is the functional currency. The net U.S. dollar denominated assets are comprised of cash, third party receivables and inter-company receivables offset by third party and inter-company payables denominated in U.S. dollar. The U.S. dollar denominated liabilities are comprised of inter-company payables. A 5% change in the relative exchange rate of the U.S. dollar to the euro as of June 30, 2025 applied to the net U.S. dollar asset balances, would result in a foreign exchange gain of $2.2 million if the U.S. dollar appreciated and a $2.3 million foreign exchange loss if the U.S. dollar depreciated. A 5% change in the relative exchange rate of the U.S. dollar to the Chinese yuan as of June 30, 2025 applied to the net U.S. dollar liabilities balances, would result in a foreign exchange loss of  $1.4 million if the U.S. dollar appreciated and a $1.5 million foreign exchange gain if the U.S. dollar depreci