What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-22 compared with 2021-02-22 · 264 added, 352 removed, 955 unchanged (39% of the section changed)

74 unchanged sentences

333-136521 filed with the Securities and Exchange Commission (the "Commission") on August 11, 2006)

3.2 Amended and Restated By laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant's C urrent Report on Form 8-K filed with the Commission on August 24, 2020 )

3.2 Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed with the Commission on November 2, 2021 )

4.1 Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No.

333-136521 filed with the Commission on November 14, 2006)

4.2 Description of the Registrant's Securities Registered under Section 12 of the Exchange Act (incorpo rated by reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-K filed with the Commission on February 24, 2020 )

4.2 Description of the Registrant's Securities Registered under Section 12 of the Exchange Act (incorporated by reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-K filed with the Commission on February 24, 2020)

2006 Incentive Compensation Plan, as amended (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K/A filed with the Commission on February 22, 2017)

2 unchanged sentences

IPG Photonics Corporation 2008 Employee Stock Purchase Plan, as amended and restated effective December 1, 2018 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on June 3, 2019)

Employment Agreement dated May 30, 2019 between the Registrant and Dr.

Gapontsev (incorporated by reference to Exhibit 10 .

5 to the Registrant's Annual Report on Form 10-K filed with the Commission on February 24, 2020)

Secondment Agreement dated May 4, 2021 among the Registrant , IPG Laser GmbH and Dr.

Eugene Scherbakov (incorporated by reference to Exhibit 10.

2 to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on August 4, 2021)

Service Agreement dated May 4, 2021 between IPG Laser GmbH and Dr.

Eugene Scherbakov (incorporated by reference to Exhibit 10.

6 to the Registrant's Annual Report on Form 10-K filed with the Commission on February 24, 2020)

3 to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on August 4, 2021)

Confidentiality, Non-Competition and Confirmatory Assignment Agreement dated May 4, 2021 between the Registrant and Dr.

Eugene Scherbakov (incorporated by reference to Exhibit 10.

4 to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on August 4, 2021)

Form of Employment Agreement dated May 30, 2019 between the Registrant and each of Timothy P.V.

Mammen, Angelo P.

Lopresti and Alexander Ovtchinnikov (incorporated by reference to Exhibit 10.

7 to the Registrant's Annual Report Form 10-K filed with the Commission on February 24, 2020)

Lopresti and Alexander Ovtchinnikov (incorporated by reference to Exhibit 10.7 to the Registrant's Annual Report Form 10-K filed with the Commission on February 24, 2020)

Form of Confidentiality, Non-Competition and Confirmatory Assignment Agreement between the Registrant and each of the named executive officers and certain other executive officers, (incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K filed with the Commission on October 15, 2013)

2 unchanged sentences

10.12 Second Amended and Restated Loan Agreement, between the Registrant and Bank of America, N.A.

dated as of March 25, 2020 (incorporated by reference to Exhibit 10.

1 to the Registrant's Current Report on Form 8-K filed with the Commission on March 26, 2020 )

10.12 Revolving Credit Note, between the Registrant and Bank of America, N.A., dated March 25, 2020 (incorporated by reference to Exhibit 10.

2 to the Registrant's Current Report on Form 8-K filed with the Commission on March 26, 2020 )

10.13 Credit Facility Agreement between IPG Laser GmbH and Deutsche Bank AG, dated July 27, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on August 1, 2017)

dated as of March 25, 2020 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on March 26, 2020)

10.13 Revolving Credit Note, between the Registrant and Bank of America, N.A., dated March 25, 2020 (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed with the Commission on March 26, 2020)

Exhibit Number

10.14 Credit Facility Agreement between IPG Laser GmbH and Deutsche Bank AG, dated July 27, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on August 1, 2017)

10.15 Annex I to Credit Facility Agreement between IPG Laser GmbH and Deutsche Bank AG, dated July 27, 2017 (incorporated by reference to Exhibit 10.2 on Current Report on Form 8-K filed with the Commission on August 1, 2017)

23 unchanged sentences

IPG P HOTONICS C ORPORATION

/s/ Valentin P.

Chief Executive Officer and

Chairman of the Board

/s/ Eugene A.

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature Title

/s/ Valentin P.

Chief Executive Officer, Chairman of the Board and Director (Principal Executive Officer) February 22, 2021

/s/ Eugene A.

Chief Executive Officer and Director

(Principal Executive Officer) February 22, 2022

/s/ Timothy P.V.

9 unchanged sentences

Director February 22, 2022

/s/ Catherine P.

Director February 22, 2021

/s/ Eric Meurice

3 unchanged sentences

Director February 22, 2022

Director February 22, 2021

/s/ Eugene A.

Eugene Scherbakov

Non-Executive Chair of the Board and Director February 22, 2022

/s/ Thomas J.

Director February 22, 2022

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm F- 2

Consolidated Balance Sheets as of December 31, 2020 and 2019 F- 4

Consolidated Statements of Income for the Years Ended December 31, 2020, 2019, and 2018 F- 5

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019, and 2018 F- 6

Consolidated Statements of Equity for the Years Ended December 31, 2020, 2019, and 2018 F- 7

Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019, and 2018 F- 8

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Statements of Income for the Years Ended December 31, 2021, 2020, and 2019

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2021, 2020, and 2019

Consolidated Statements of Equity for the Years Ended December 31, 2021, 2020, and 2019

Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020, and 2019

Notes to Consolidated Financial Statements F- 9

97 unchanged sentences

Impairment of long-lived assets and other restructuring charges — 1,177 7,130

Loss (gain) on foreign exchange ( 12,915 ) 12,827 ( 6,150 )

(Gain) loss on foreign exchange ( 15,120 ) ( 12,915 ) 12,827

Total operating expenses 328,515 340,337 372,416

Operating income 367,883 198,659 233,793

Other income, net:

Interest income, net 6,270 14,238 9,057

Other (expense) income, net:

Interest (expense) income, net ( 1,839 ) 6,270 14,238

Other income, net 437 763 345

Total other income 7,033 14,583 10,990

Total other (expense) income ( 1,402 ) 7,033 14,583

Income before provision for income taxes 366,481 205,692 248,376

1 unchanged sentence

Net income 277,866 160,338 180,261

net income attributable to non-controlling interests 766 27 142

Net income attributable to IPG Photonics Corporation $ 159,572 $ 180,234 $ 404,027

Net income attributable to IPG Photonics Corporation per share:

net (loss) income attributable to non-controlling interests ( 550 ) 766 27

Net income attributable to IPG Photonics Corporation common stockholders $ 278,416 $ 159,572 $ 180,234

Net income attributable to IPG Photonics Corporation per common share:

Basic $ 5.21 $ 3.00 $ 3.40

10 unchanged sentences

Net income $ 277,866 $ 160,338 $ 180,261

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments 1,367 15,997 ( 85,590 )

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments and other ( 44,267 ) 1,367 15,997

Adjustment for net gain realized and included in net income — ( 232 ) —

Unrealized (loss) gain on derivatives ( 472 ) ( 17 ) 15

Effect of adopted accounting standards — — 10

Total other comprehensive income (loss) 663 15,980 ( 85,565 )

Unrealized gain (loss) on derivatives 278 ( 472 ) ( 17 )

Total other comprehensive (loss) income ( 43,989 ) 663 15,980

Comprehensive income 233,877 161,001 196,241

comprehensive income attributable to non-controlling interest 575 30 129

comprehensive (loss) income attributable to non-controlling interest ( 653 ) 575 30

Comprehensive income attributable to IPG Photonics Corporation $ 234,530 $ 160,426 $ 196,211

7 unchanged sentences

Balance, January 1, 2019 52,941,607 $ 5 ( 1,430,094 ) $ ( 224,998 ) $ 744,937 $ 1,848,500 $ ( 162,896 ) $ 687 $ 2,206,235

Exercise of stock options and vesting of RSU's and PSU's 351,795 — — — 9,895 — — — 9,895

Exercise of stock options and vesting of RSU's and PSU's, net of shares withheld for taxes 319,211 — — — 805 — — — 805

Common stock issued under employee stock purchase plan 52,315 — — — 6,531 — — — 6,531

1 unchanged sentence

Stock-based compensation — — — — 33,363 — — — 33,363

Recently adopted accounting standards — — — — — 606 10 — 616

Purchase of non-controlling interest — — — — — — — 558 558

Net income — — — — — 180,234 — 27 180,261

Foreign currency translation adjustments — — — — — — ( 85,577 ) ( 13 ) ( 85,590 )

Unrealized gain on derivatives, net of tax — — — — — — 15 — 15

Foreign currency translation adjustments and other — — — — — — 15,994 3 15,997

Unrealized (loss) on derivatives, net of tax — — — — — — ( 17 ) — ( 17 )

Balance, December 31, 2019 53,010,875 5 ( 1,732,352 ) ( 265,730 ) 785,636 2,028,734 ( 146,919 ) 717 2,402,443

Exercise of stock options and vesting of RSU's and PSU's 319,211 — — — 805 — — — 805

Exercise of stock options and vesting of RSU's and PSU's, net of shares withheld for taxes 677,076 1 — — 27,934 — — — 27,935

Common stock issued under employee stock purchase plan 40,943 — — — 5,259 — — — 5,259

1 unchanged sentence

Stock-based compensation — — — — 35,472 — — — 35,472

Recently adopted accounting standards — — — — — ( 115 ) — — ( 115 )

Net income — — — — — 159,572 — 766 160,338

Foreign currency translation adjustments — — — — — — 15,994 3 15,997

Foreign currency translation adjustments and other — — — — — — 1,558 ( 191 ) 1,367

Unrealized (loss) on derivatives, net of tax — — — — — — ( 472 ) — ( 472 )

Adjustment for net gain realized and included in net income — — — — — — ( 232 ) — ( 232 )

Balance, December 31, 2020 53,427,234 6 ( 2,034,012 ) ( 303,614 ) 854,301 2,188,191 ( 146,065 ) 1,292 2,594,111

Exercise of stock options and vesting of RSU's and PSU's 677,076 1 — — 27,934 — — — 27,935

Exercise of stock options and vesting of RSU's and PSU's, net of shares withheld for taxes 292,849 — — — 10,766 — — — 10,766

Common stock issued under employee stock purchase plan 34,151 — — — 5,492 — — — 5,492

1 unchanged sentence

Stock-based compensation — — — — 37,864 — — — 37,864

Recently adopted accounting standards — — — — — ( 115 ) — — ( 115 )

Net income — — — — — 278,416 — ( 550 ) 277,866

Foreign currency translation adjustments — — — — — — 1,558 ( 191 ) 1,367

Foreign currency translation adjustments and other, net of tax — — — — — — ( 44,164 ) ( 103 ) ( 44,267 )

Unrealized gain on derivatives, net of tax — — — — — — 278 — 278

Adjustment for net gain realized and included in net income — — — — — — ( 232 ) — ( 232 )

Balance, December 31, 2021 53,010,265 $ 6 ( 2,777,981 ) $ ( 438,503 ) $ 908,423 $ 2,466,607 $ ( 189,951 ) $ 639 $ 2,747,221

13 unchanged sentences

Impairment of long-lived assets — 671 5,350

Unrealized losses (gains) on foreign currency transactions ( 19,935 ) 11,004 ( 2,670 )

Unrealized (gain) loss on foreign currency transactions ( 8,560 ) ( 19,935 ) 11,004

Other 8,618 8,642 3,320

12 unchanged sentences

Proceeds from short-term investments 1,647,537 1,099,224 768,078

Purchases of short and long-term investments ( 1,111,555 ) ( 760,300 ) ( 765,310 )

Purchases of short-term investments ( 1,940,605 ) ( 1,111,555 ) ( 760,300 )

Acquisitions of businesses, net of cash acquired — ( 429 ) ( 15,115 )

6 unchanged sentences

Proceeds from issuance of common stock under employee stock option and purchase plans less payments for taxes related to net share settlement of equity awards 16,258 33,194 7,336

Cash contributed by non-controlling interest — — 839

Purchase of treasury stock, at cost ( 134,889 ) ( 37,884 ) ( 40,732 )

2 unchanged sentences

Effect of changes in exchange rates on cash, cash equivalents and restricted cash ( 17,800 ) 19,888 ( 7,853 )

Net increase (decrease) in cash, cash equivalents and restricted cash 195,569 138,626 ( 365,542 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 169,448 ) 195,569 138,626

Cash, cash equivalents and restricted cash — Beginning of year 878,553 682,984 544,358

29 unchanged sentences

Cash and Cash Equivalents and Short-Term Investments — Cash and cash equivalents consist primarily of highly liquid investments, such as bank deposits, mutual funds and marketable securities with maturities of three months or less at the date of purchase with insignificant interest rate risk.

Short-term investments consist primarily of similar highly liquid investments and marketable securities with insignificant interest rate risks.

Short-term investments consist of liquid investments including marketable securities, U.S.

government and government agency notes, certificates of deposit, and foreign government bonds with original maturities of greater than three months but less than one year with insignificant interest rate risks.

Short-term investments are held-to-maturity and accounted for at amortized cost.

The reconciliation of the Company's cash and cash equivalents in the consolidated balance sheets to cash, cash equivalents and restricted cash in the consolidated statement of cash flows is as follows:

3 unchanged sentences

Restricted cash included in prepaid expenses and other current assets — 2,322

Restricted cash included in other assets — 2,914

Cash, cash equivalents and restricted cash $ 709,105 $ 878,553

During the first quarter of 2021, the Company released the restricted cash held back for indemnities provided by the seller related to the Company's acquisition of the submarine networks division (SND) of Padtec SA,

Accounts Receivable and Allowance for Doubtful Accounts — Accounts receivable include $ 39,720 and $ 58,566 of bank acceptance drafts at December 31, 2021 and 2020, respectively.

4 unchanged sentences

The estimate involves an assessment of customer creditworthiness, historical payment experience, an assumption of future expected credit losses, and the age of outstanding receivables.

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Activity related to the allowance for doubtful accounts was as follows:

5 unchanged sentences

Balance at December 31 $ 2,108 $ 2,156 $ 2,399

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Inventories — Inventories are stated at the lower of cost or market on a first-in, first-out basis.

Inventories — Inventories are stated at the lower of cost and net realizable value on a first-in, first-out basis.

Inventories include parts and components that may be specialized in nature and subject to rapid obsolescence.

20 unchanged sentences

When undiscounted expected future cash flows are less than the carrying value, an impairment loss is recorded equal to the amount by which the carrying value exceeds the fair value of assets.

The Company incurred $ 671 and $ 2,498 of non-cash impairment charges related to long-lived assets during the years ended December 31, 2020 and 2019.

There were no impairment charges recognized during the year ended December 31, 2021 .

The Company incurred $ 671 and $ 2,498 of non-cash impairment charges related to long-lived assets during the years ended December 31, 2020 and 2019, respectively.

Included in other long-term assets is certain demonstration equipment.

4 unchanged sentences

There are no shares of preferred stock outstanding as of December 31, 2021.

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Revenue Recognition — Revenue is recognized when transfer of control to the customer occurs in an amount reflecting the consideration that the Company expects to be entitled.

3 unchanged sentences

As part of its consideration of the contract, the Company evaluates certain factors including the customer's ability to pay (or credit risk).

For each contract, the Company considers the promise to transfer products, each of which is distinct as the identified performance obligations.

For each contract, the Company considers the promise to transfer products, each of which is identified as a distinct performance obligation.

In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled.

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

the Company's standard payment terms are less than one year, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component.

As the Company's standard payment terms are less than one year, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component.

The Company allocates the transaction price to each distinct product based on its relative standalone selling price.

2 unchanged sentences

The Company allocates the transaction price of the contract to each delivery based on the product standalone selling price.

The Company invoices for each scheduled delivery upon shipment and recognizes revenues for such delivery at that point, assuming transfer of control has occurred.

The Company invoices for each scheduled delivery upon shipment and recognizes revenues for such delivery at that point, when transfer of control has occurred.

As scheduled delivery dates are generally within one year , under the optional exemption provided by ASC 606-10-50-14 revenues allocated to future shipments of partially completed contracts are not disclosed.

18 unchanged sentences

With the acquisition of Genesis Systems Group, LLC in December 2018, the Company enters into contracts to sell customized robotic systems, for which revenue is generally recognized over time, depending on the terms of the contract.

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Recognizing revenue over time for these contracts is based on the Company’s judgment that the customized robotic system does not have an alternative use and the Company has an enforceable right to payment for performance completed to date.

2 unchanged sentences

Under the cost-to-cost method, the extent of progress towards completion is measured based on the proportion of costs incurred to date to the total estimated costs at completion of the performance obligation.

Customer Deposits and Deferred Revenue — When the Company receives consideration from a customer or such consideration is unconditionally due prior to transferring goods or services under the terms of a sales contract, the Company

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

records customer deposits or deferred revenue, which represent contract liabilities.

The Company recognizes deferred revenue as net sales after control of the goods or services has been transferred to the customer and all revenue recognition criteria are met.

4 unchanged sentences

Stock-Based Compensation — The Company accounts for stock-based compensation expense using the fair value of the awards granted.

The Company estimates the fair value of stock options granted using the Black-Scholes model, it values restricted stock units ("RSUs") and certain performance stock units with operating cash flow targets ("OCF PSUs") using the intrinsic value method, and it uses a Monte Carlo simulation model to estimate the fair value of certain performance stock units with total stockholder return targets ("TSR PSUs").

The Company estimates the fair value of stock options granted using the Black-Scholes model, it values restricted stock units ("RSUs") and certain performance stock units with operating cash flow targets ("OCF PSUs") using the grant date market price of the stock, and it uses a Monte Carlo simulation model to estimate the fair value of certain performance stock units with total stockholder return targets ("TSR PSUs").

The Company accounts for forfeitures as they occur.

17 unchanged sentences

The reserves are based on a determination of whether and how much of a tax benefit taken in its tax filings or positions is more likely than not to be realized following resolution of uncertainties related to the tax benefit, assuming that the matter in question will be raised by the tax authorities.

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Concentration of Credit Risk — Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable.

2 unchanged sentences

Such losses historically have been within management's expectations.

One customer comprised 8 %, 9 % and 12 % of net sales during the years ended December 31, 2020, 2019 and 2018 respectively.

The same customer accounted for 21 % and 24 % of our net accounts receivable as of December 31, 2020 and 2019, respectively.

The Company has historically depended on a few customers for a significant percentage of its annual net

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Our largest customer accounted for 22 % and 21 % of our net accounts receivable as of December 31, 2021 and 2020, respectively.

The Company has historically depended on a few customers for a significant percentage of its annual net sales.

The composition of this group can change from year to year.

1 unchanged sentence

Comprehensive Income — Comprehensive income includes charges and credits to equity that are not the result of transactions with stockholders.

Included within comprehensive income is the cumulative foreign currency translation adjustment, change in carrying value of auction rate securities, unrealized gains or losses on derivatives and unrealized gains or losses on available-for-sale investments.

Included within comprehensive income is the cumulative foreign currency translation adjustment, unrealized gains or losses on derivatives and unrealized gains or losses on available-for-sale securities.

These adjustments are accumulated within the consolidated statements of comprehensive income.

Total components of accumulated other comprehensive loss were as follows:

Foreign currency translation adjustments $ ( 145,603 ) $ ( 147,161 )

Unrealized gain on auction rate securities — 232

Unrealized (loss) gain on derivatives, net of tax benefit of $ 141 and tax of $ 3 , respectively

Accumulated other comprehensive loss $ ( 146,065 ) $ ( 146,919 )

Foreign currency translation adjustments Unrealized (loss) gain on derivatives, net of tax Unrealized gain (loss) on available-for-sale securities Total

Balance, January 1, 2019 $ ( 163,155 ) $ 27 $ 232 $ ( 162,896 )

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments and other 15,994 15,994

Unrealized (loss) on derivatives, net of tax benefit of $ 1

( 17 ) ( 17 )

Total other comprehensive (loss) income 15,994 ( 17 ) — 15,977

Balance, December 31, 2019 ( 147,161 ) 10 232 ( 146,919 )

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments and other 1,558 1,558

Unrealized (loss) on derivatives, net of tax benefit of $ 144

( 472 ) ( 472 )

Adjustment for net gain realized and included in net income ( 232 ) ( 232 )

Total other comprehensive (loss) income 1,558 ( 472 ) ( 232 ) 854

Balance, December 31, 2020 ( 145,603 ) ( 462 ) — ( 146,065 )

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments and other, net of tax benefit of $ 246

( 44,164 ) ( 44,164 )

Unrealized gain on derivatives, net of tax of $ 83

Total other comprehensive (loss) income ( 44,164 ) 278 — ( 43,886 )

Balance, December 31, 2021 $ ( 189,767 ) $ ( 184 ) $ — $ ( 189,951 )

Derivative Instruments — The Company's primary market exposures are to interest rates and foreign exchange rates.

6 unchanged sentences

The chief operating decision maker, who is the Company's chief executive officer, measures financial performance as a single enterprise, and not on geography, legal entity, or end market basis.

Throughout the year, the chief operating decision maker allocates capital resources on a project-by-project basis across the Company's entire asset base to maximize profitability without regard to geography, legal entity, or end market basis.

Throughout the year, the chief

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

operating decision maker allocates capital resources on a project-by-project basis across the Company's entire asset base to maximize profitability without regard to geography, legal entity, or end market basis.

The Company operates in a number of countries throughout the world in a variety of product lines.

Information regarding product lines and geographic financial information is provided in Note 2, "Revenue from Contracts with Customers" and Note 8, "Property, Plant and Equipment."

Earnings Per Share — Basic net income per share is computed by dividing net income attributable to shareholders of the Company by the weighted-average number of common shares outstanding during the reporting period.

Diluted net income per share is computed similarly to basic net income per share, except that it includes the potential dilution that could occur if dilutive securities were exercised.

Earnings Per Share — Basic net income per common share is computed by dividing net income attributable to common shareholders of the Company by the weighted-average number of common shares outstanding during the reporting period.

Diluted net income per common share is computed similarly to basic net income per common share, except that it includes the potential dilution that could occur if dilutive securities were exercised.

Information about potentially dilutive and antidilutive shares for the reporting period is provided in Note 18, "Net Income Attributable to IPG Photonics Corporation Per Share."

9 unchanged sentences

The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component.

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Recent Accounting Pronouncements

Adopted Pronouncements — In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which adds an impairment model (known as the current expected credit loss ("CECL") model) that is based on expected losses rather than incurred losses.

Under the new guidance, an entity recognizes as an allowance for its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses.

The ASU is also intended to reduce the complexity by decreasing the number of credit impairment models that entities use to account for debt instruments.

The Company adopted ASU 2016-03, along with its subsequent clarifications, as of January 1, 2020.

The cumulative effect of the changes made to the Company's consolidated January 1, 2020 balance sheet for the adoption of ASU 2016-13 was as follows:

Balance at Adoption of Balance at

December 31, 2019 ASU 2016-13 January 1, 2020

Balance Sheet

Accounts receivable, net $ 238,479 $ ( 148 ) $ 238,331

Deferred income taxes, net 31,395 33 31,428

Retained earnings 2,028,734 ( 115 ) 2,028,619

In February 2016, the Financial Accounting Standards Board (“FASB”) issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of ROU assets and lease liabilities on the balance sheet.

Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases.

The Company adopted ASC 842, as of January 1, 2019, using the modified retrospective approach as of the date of adoption.

Under this approach, comparative periods have not been restated.

In addition, IPG elected the package of three practical expedients permitted under the transition guidance within the new standard, which among other things, allowed for the carry forward of the historical lease classification.

Subsequent Events — The Company has considered the impact of subsequent events through the filing date of these financial statements.

There were no events through the filing date of these financial statements required to be disclosed.

Adopted Pronouncements — In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2019-12, "Simplifying the Accounting for Income Taxes" ("ASU 2019-12"), which modifies ASC 740 to simplify the accounting for income taxes.

The Company adopted ASU 2019-12 as of January 1, 2021.

The impact from adopting this standard was immaterial.

REVENUE FROM CONTRACTS WITH CUSTOMERS

Sales are derived from products for different applications:

fiber lasers, diode lasers, systems and accessories for materials processing, fiber lasers, amplifiers an diodes for advanced applications, fiber amplifiers and transceivers for communications applications, and fiber lasers, systems and fibers for medical applications.

fiber lasers, diode lasers, systems and accessories for materials processing, fiber lasers, amplifiers and diodes for advanced applications, fiber amplifiers and transceivers for communications applications, and fiber lasers, systems and fibers for medical applications.

The following tables represent a disaggregation of revenue from contracts with customers for the years ended December 31, 2021, 2020 and 2019:

5 unchanged sentences

Total $ 1,460,860 $ 1,200,724 $ 1,314,581

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Year Ended December 31,

2020 2019 2018

Sales by Product

6 unchanged sentences

Total $ 1,460,860 $ 1,200,724 $ 1,314,581

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Sales by Geography

23 unchanged sentences

Contract liabilities are included within accrued expenses and other current liabilities on the consolidated balance sheets.

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The following table reflects the changes in the Company's contract assets and liabilities for the years ended December 31, 2021 and 2020:

7 unchanged sentences

During the year ended December 31, 2021 and 2020, the Company recognized revenue of $ 64,364 and $ 48,738 , respectively, that was included in the contract liabilities at the beginning of the period.

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The Company has elected the practical expedient in ASC 606-10-50-14, whereby the performance obligations for contracts with an original expected duration of one year or less are not disclosed.

6 unchanged sentences

FAIR VALUE MEASUREMENTS

The Company's financial instruments consist of cash equivalents, short-term and long-term investments, accounts receivable, auction rate securities, accounts payable, drawings on revolving lines of credit, long-term debt, interest rate swaps and contingent purchase consideration.

The Company's financial instruments consist of cash equivalents, short-term investments, accounts receivable, accounts payable, drawings on revolving lines of credit, long-term debt, interest rate swaps and contingent purchase consideration.

The valuation techniques used to measure fair value are based upon observable and unobservable inputs.

6 unchanged sentences

The carrying amounts of money market fund deposits, term deposits, accounts receivable, accounts payable and drawings on revolving lines of credit are considered reasonable estimates of their fair market value due to the short maturity of most of these instruments or as a result of the competitive market interest rates, which have been negotiated.

The fair value of the Company's bond securities is based upon quoted prices for instruments with identical terms in active markets.

The Company's commercial paper securities reported at fair value are based upon model-driven valuations in which all significant inputs are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset or liability, and are therefore classified as Level 2.

The fair value of the bond securities is based upon quoted prices for instruments with identical terms in active markets.

The commercial paper securities reported at fair value are based upon model-driven valuations in which all significant inputs are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset or liability, and are therefore classified as Level 2.

IPG PHOTONICS CORPORATION

1 unchanged sentence

(In thousands, except share and per share data)

The following table presents fair value information related to the Company's assets and liabilities measured at amortized cost on the consolidated balance sheets with the exception of the interest rate swap, which is measured at fair value:

Fair Value Measurements at December 31, 2021

2 unchanged sentences

Money market fund deposits and term deposits $ 279,066 $ 279,066 $ — $ —

Treasury and agency obligations 6,999 — 6,999 —

Municipal bonds 3,220 — 3,220 —

Commercial paper 117,663 — 117,663 —

5 unchanged sentences

Commercial paper 557,955 — 557,955 —

Certificate of deposit 3,000 — 3,000 —

Foreign government bonds 2,015 — 2,015 —

Total assets $ 1,216,658 $ 279,066 $ 937,592 $ —

Long-term notes $ 38,402 $ — $ 38,402 $ —

Term notes $ 34,226 $ — $ 34,226 $ —

Contingent purchase consideration 1,371 — — 1,371

5 unchanged sentences

Money market fund deposits and term deposits $ 218,984 $ 218,984 $ — $ —

$ 155,080 $ 155,080 $ — $ —

Treasury and agency obligations 6,999 — 6,999 —

Commercial paper 162,749 — 162,749 —

54,712 — 54,712 —

Corporate bonds 29,010 — 29,010 —

Short-term investments:

Treasury and agency obligations 49,996 — 49,996 —

Corporate bonds 7,997 — 7,997 —

259,422 259,422 — —

Commercial paper 88,171 — 88,171 —

236,752 — 236,752 —

Certificate of deposit 368,665 — 368,665 —

Long-term investments and other assets:

Auction rate securities

Interest rate swap

$ 713,072 $ 421,003 $ 291,477 $ 592

Long-term notes

$ 42,004 $ — $ 42,004 $ —

Total assets $ 932,571 $ 218,984 $ 713,587 $ —

Term notes $ 38,402 $ — $ 38,402 $ —

Contingent purchase consideration 1,963 — — 1,963

Interest rate swaps 603 — 603 —

Total liabilities $ 40,968 $ — $ 39,005 $ 1,963

$ 42,277 $ — $ 42,004 $ 273

Short-term investments consist of liquid investments including U.S.

government and government agency notes, corporate bonds, commercial paper and certificates of deposit with original maturities of greater than three months but less than one year and are recorded at amortized cost.

There were no impairments for the investments considered held-to-maturity at December 31, 2021 and December 31, 2020.

17 unchanged sentences

Auction rate securities

Balance, January 1 $ 592 $ 847 $ 1,016

Balance at January 1 $ — $ 592 $ 847

Redemptions — ( 596 ) ( 264 )

Change in fair value — 4 9

Balance, December 31 $ — $ 592 $ 847

Balance at December 31 $ — $ — $ 592

Contingent purchase consideration

Balance, January 1 $ 273 $ 898 $ 902

Balance at January 1 $ 1,963 $ 273 $ 898

Period transactions — 1,963 —

2 unchanged sentences

Foreign exchange adjustment ( 126 ) ( 1 ) 36

Balance, December 31 $ 1,963 $ 273 $ 898

Balance at December 31 $ 1,371 $ 1,963 $ 273

The auction rate securities were called during the year ended December 31, 2020.

The net gain previously included in accumulated other comprehensive income was released and included in net income, in the amount of $ 232 .

The net gain previously included in accumulated other comprehensive income was released and included in net income, in the amount of $ 232 for the year ended December 31, 2020.

IPG PHOTONICS CORPORATION

13 unchanged sentences

The acquisition price was $ 2,717 , of which $ 906 was paid at closing and the remainder of which may be earned over three years based on reaching certain financial targets.

Any excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed is allocated to goodwill, which amounted to $ 3,211 .

The goodwill arising from this acquisition will not be deductible for tax purposes.

The purchase price allocations related to the PiTec acquisition included in the Company's consolidated financial statements are not complete.

They represent the preliminary fair value estimates as of December 31, 2020 and are subject to subsequent adjustment as the Company obtains additional information during the measurement period and finalizes its fair value estimates.

Any subsequent adjustments to these fair value estimates occurring during the measurement period will result in changes to the amounts and allocations recorded.

During the first quarter of 2019, the Company acquired the submarine networks division (SND) of Padtec SA, a communications equipment company based in Brazil.

SND is a provider of submarine networking technology and systems.

The Company paid $ 19,560 to acquire SND, which represents the fair value on that date.

Of the purchase price, $ 2,322 at December 31, 2020 ($ 2,914 at December 31, 2019) was held back in a restricted bank account for potential post-closing adjustments related to indemnities provided by the seller.

The restricted cash balance is recorded in the consolidated balance sheets as presented in Note 1.

The liability related to the amount due to the seller if the indemnities are satisfied is included within accrued expenses and other current liabilities as of December 31, 2020 on the consolidated balance sheets.

Any excess of the purchase price was allocated to goodwill.

During the fourth quarter of 2018, the Company acquired 100 % of the membership units of Genesis System Group, LLC (“Genesis Systems”).

Genesis Systems is based in Davenport, Iowa, and has production facilities in the United States, Mexico, and Japan.

Genesis Systems develops innovative robotic system solutions for applications that include welding, non-destructive inspection, machine vision, materials handling, removal and dispensing.

The Company paid $ 107,987 to acquire Genesis Systems, which represents the fair value on that date.

The purchase price includes $ 448 , which was paid for the working capital adjustment finalized in the first quarter of 2019.

As a result of the acquisition, the Company recorded intangible assets of $ 32,350 related to customer relationships with a weighted-average estimated useful life of 11 years and $ 11,350 related to technology, trademark and tradename with a weighted-average estimated useful life of 6 years.

Any excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed is allocated to goodwill, which amounted to $ 45,684 , most of which will be deductible for tax purposes.

During the second quarter of 2018, the Company acquired 100 % of the shares of robot concept GmbH (“RC”).

RC is located near Munich, Germany, designs and manufactures customized laser systems.

The purchase price was $ 4,453 , which represents the fair value on that date.

As a result of the acquisition, the Company recorded intangible assets of $ 111 related to customer relationships with a weighted-average estimated useful life of 1 year and $ 594 related to technology, trademark and tradename with a weighted-average estimated useful life of 10 years.

Any excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed is allocated to goodwill, which amounted to $ 4,072 .

The goodwill arising from this acquisition will not be deductible for tax purposes.

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The fair values of net tangible assets and intangible assets acquired were based upon the Company's estimates and assumptions at the acquisition dates.

The following table summarizes the allocation of the assets acquired and liabilities assumed at the acquisition dates for the year ended December 31, 2018:

Genesis Systems RC Total

Cash and cash equivalents $ 2,847 $ 30 $ 2,877

Assets acquired excluding cash and cash equivalents and deferred tax assets 39,262 2,151 41,413

Liabilities assumed excluding deferred tax liabilities ( 23,506 ) ( 1,932 ) ( 25,438 )

Deferred tax liabilities, net — ( 573 ) ( 573 )

Intangible assets 43,700 705 44,405

Total identifiable net assets

62,303 381 62,684

Goodwill 45,684 4,072 49,756

Total purchase price

$ 107,987 $ 4,453 $ 112,440

The operating results of Genesis Systems and RC are included in the consolidated results of operations from the date of acquisition.

The impact of earnings from Genesis Systems and RC from January 1, 2018 to the date of acquisition were not material to the Company.

If the Genesis Systems acquisition had occurred on January 1, 2018, the unaudited consolidated pro forma net sales would have been $ 1,551,373 for the year ended December 31, 2018.

The goodwill arising from this acquisition is not deductible for tax purposes.

RESTRUCTURING

In the second half of 2019, the Company implemented restructuring programs globally, which were primarily focused on workforce reduction, facility consolidation and ceasing investment in the submarine telecommunications industry.

There was no restructuring related activity in 2021.

Activity related to the restructuring accrual was as follows:

8 unchanged sentences

Balance at December 31, 2020 $ — $ — $ —

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

GOODWILL AND INTANGIBLE ASSETS

6 unchanged sentences

Balance at December 31 $ 38,609 $ 41,366

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

During the first quarter of 2021, the Company finalized the purchase price allocations related to the PiTec acquisition, which resulted in adjustments to goodwill of $ 2,205 .

The Company tests its reporting units for goodwill impairment annually as of the first day of the fourth quarter, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

For certain reporting units, the Company performed a quantitative assessment using the discounted cash flow method under the income approach to estimate the fair value.

The Company performed the 2021 annual impairment test as of October 1, 2021, and no impairments were recorded as a result of this test.

The carrying balance of goodwill at December 31, 2021 was net of accumulated impairments of $ 81,709 .

During the third quarter of 2020, the Company concluded that declines in revenue and order flow for the Genesis custom systems business caused by pandemic-related decreases in capital spending in the aerospace and transportation industries were a triggering event requiring a goodwill impairment evaluation.

6 unchanged sentences

The analysis considered lower than forecasted sales and profitability, as well as the impact of delays in new product launches.

Additionally, in 2019 the Company decided that it would not make further investments required to obtain the necessary market share in the submarine telecommunications industry and commenced efforts to sell the submarine networks reporting unit.

As a result that decision, the Company recognized a non-cash impairment loss of $ 17,795 , which decreased the net assets to the estimated net realizable value as of December 31, 2019.

The Company sold the submarine networks reporting unit in the third quarter of 2020.

As a result that decision, the Company recognized a non-cash impairment loss of $ 17,795 , which decreased the net assets to the estimated net

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

realizable value as of December 31, 2019.

The Company sold SND in the third quarter of 2020.

The carrying balance of goodwill at December 31, 2019 was net of accumulated impairments of $ 37,120 .

18 unchanged sentences

$ 11,408 $ 10,503 $ 8,047 $ 6,502 $ 4,733 $ 11,485 $ 52,678

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

PROPERTY, PLANT AND EQUIPMENT

9 unchanged sentences

The Company recorded depreciation expense of $ 78,563 , $ 78,414 and $ 78,959 for the years ended December 31, 2021, 2020 and 2019, respectively.

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Long-lived assets include property, plant and equipment, related deposits on such assets and demonstration equipment.

15 unchanged sentences

Total $ 230,826 $ 176,740

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

PRODUCT WARRANTIES

4 unchanged sentences

Warranty claims ( 26,568 ) ( 30,002 ) ( 24,826 )

Foreign currency translation and other 2,250 ( 343 ) ( 2,121 )

Foreign currency translation ( 2,526 ) 2,250 ( 343 )

Balance at December 31 $ 49,864 $ 45,669 $ 48,866

Accrued warranty reported in the accompanying consolidated financial statements as of December 31, 2021 and December 31, 2020 consists of $ 26,204 and $ 24,345 in accrued expenses and other liabilities and $ 23,660 and $ 21,324 in other long-term liabilities, respectively.

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

FINANCING ARRANGEMENTS

The Company's borrowings under existing financing arrangements consist of the following:

Total notes payable $ 37,967 $ 41,708

Total debt $ 34,157 $ 37,967

current portion ( 18,126 ) ( 3,810 )

Total long-term debt $ 34,157 $ 37,968

Long-term debt, net of current portion $ 16,031 $ 34,157

Long-Term Notes — At December 31, 2021, the outstanding principal balance on the long-term notes was $ 34,157 of which $ 18,126 is the current portion.

2 unchanged sentences

The unsecured long-term note matures in May 2023, at which time the outstanding principal balance will be $ 15,438 .

The Company has another note that is secured by the corporate aircraft with an outstanding principal balance of $ 19,561 of which $ 2,623 is the current portion.

The interest on this collateralized long-term note is fixed at 2.74 % per annum.

The collateralized long-term note matures in July 2022, at which time the outstanding principal balance will be $ 15,375 .

The Company has another note that is secured by the corporate aircraft with an outstanding principal balance of $ 16,938 , all of which is current.

The interest on this collateralized note is fixed at 2.74 % per annum.

The collateralized note matures in July 2022, at which time the outstanding principal balance will be $ 15,375 .

The future principal payments for the Company’s notes as of December 31, 2021 are as follows:

2022 $ 18,126

Total $ 34,157

9 unchanged sentences

The interest coverage covenant requires that the Company maintains a trailing twelve-month ratio of EBITDA to interest on all obligations that is at least 3.0 :1.0.

The funded debt to EBITDA covenant requires that the sum of all indebtedness for borrowed money on a consolidated basis be less than three

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

times its trailing twelve months EBITDA.

The funded debt to EBITDA covenant requires that the sum of all indebtedness for borrowed money on a consolidated basis be less than three times its trailing twelve months EBITDA.

Funded debt is decreased by its cash and available marketable securities not classified as long-term investments in the U.S.

5 unchanged sentences

At December 31, 2021, the remaining availability under this line was $ 54,549 .

Other European Facilities — The Company maintains two Euro credit lines in Italy with aggregate available principal of € 2,000 ($ 2,453 as of December 31, 2020), with no expiration date, which bear interest at market rates that reset at the beginning of each quarter.

At December 31, 2020, there were no outstanding drawings and the aggregate remaining availability under these lines was $ 2,453 .

These facilities are collateralized by a common pool of the assets of the Company's Italian subsidiary.

Other European Facilities — The Company maintains one Euro credit line in Italy with an available principal of € 1,500 ($ 1,701 as of December 31, 2021), with no expiration date, which bear interest at market rates that reset at the beginning of each quarter.

At December 31, 2021, there were no outstanding drawings and the aggregate remaining availability under this line was $ 1,701 .

This facility is collateralized by a common pool of the assets of the Company's Italian subsidiary.

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

DERIVATIVE INSTRUMENTS

3 unchanged sentences

$ 17,219 $ 18,406

Other assets — 13

Deferred income taxes and other long-term liabilities 242 603

17 unchanged sentences

Total lease liabilities $ 23,975 $ 24,226

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The table below presents the maturities of operating lease liabilities as of December 31, 2021:

3 unchanged sentences

Present value of lease liabilities $ 23,975

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Other information relevant to the Company's operating leases consist of the following as of December 31, 2021 and 2020:

8 unchanged sentences

Obligations under these agreements were $ 19,880 and $ 51,730 as of December 31, 2021 and 2020, respectively.

Legal proceedings — From time to time, the Company may be involved in disputes and legal proceedings in the ordinary course of its business.

These proceedings may include allegations of infringement of intellectual property, commercial disputes and employment matters.

As of December 31, 2020 and through the date of the Company's subsequent review period of February 22, 2021, the Company has no legal proceedings ongoing that management estimates could have a material effect on the Company's Consolidated Financial Statements.

Legal proceedings — From time to time, the Company may be involved in legal disputes and other proceedings in the ordinary course of its business.

These matters may include allegations of infringement of intellectual property, commercial disputes and employment matters.

As of December 31, 2021 and through the date of the Company's subsequent review period of February 22, 2022, the Company is aware of no ongoing legal proceedings that management estimates could have a material effect on the Company's Consolidated Financial Statements.

We have submitted a number of voluntary self-disclosures regarding compliance with export control laws and regulations and the U.S.

Department of Justice is conducting an investigation into certain shipments of equipment.

At this time, we are not able to estimate the amount or probability of any monetary penalties or other expenses that we may incur as a result of this investigation.

STOCK-BASED COMPENSATION

9 unchanged sentences

Net stock-based compensation $ 29,910 $ 28,160 $ 28,464

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except share and per share data)

Incentive Plans — In February 2006, the Company's board of directors adopted the 2006 Incentive Compensation Plan (the "2006 Plan"), which provides for the issuance of stock options, performance stock units ("PSUs"), restricted stock units ("RSUs"), other equity-based awards and cash awards to the Company's directors, employees, consultants and advisors.

4 unchanged sentences

Equity awards generally vest over periods of one to four years and generally expire ten years after the date of the grant.

The vesting of awards under the 2006 Plan accelerate following the occurrence of certain change of control events, if the participant's employment is terminated within two years without cause or if the successor entity does not agree to assume existing awards or replace with equivalent value awards.

The vesting of awards under the 2006 Plan accelerate following the occurrence of certain

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except share and per share data)

change of control events, if the participant's employment is terminated within two years without cause or if the successor entity does not agree to assume existing awards or replace with equivalent value awards.

Awards granted to non-employee directors automatically become exercisable upon a change of control.

3 unchanged sentences

PSU agreements provide for the award of PSUs with each unit representing the right to receive one share of the Company's common stock to be issued after the applicable award vesting period.

The final number of units awarded, if any, for these performance grants will be determined as of the vesting dates, based upon (i) in the case of TSR PSUs granted in 2020, the Company's total shareholder return over the performance period compared to the S&P 1500 Composite / Electronic Equipment Instruments & Components Index, and (ii) in the case of OCF PSUs, the ratios of the Company's operating cash flow to adjusted net income during three years in the performance period.

The final number of units awarded, if any, for these performance grants will be determined as of the vesting dates, based upon (i) in the case of TSR PSUs granted in 2021, the Company's total shareholder return over the performance period compared to the S&P 1500 Composite / Electronic Equipment Instruments & Components Index, and (ii) in the case of OCF PSUs, the ratio of the Company's operating cash flow to adjusted net income compared to target ratios of operating cash flow to adjusted net income average over the three-year performance period.

The final number of units awarded under each of the TSR PSUs and OCF PSUs could range from between 0 % and 200 % of the amount of the target award.

During the year ended December 31, 2020, the Company did not grant stock options to employees, replacing them with a grant of RSUs.

The assumptions used in the Black-Scholes model for the calculation of the options were as follows for the years ended December 31:

Subsequent to the year ended December 31, 2019, the Company replaced stock option grants with RSU grants.

The assumptions used in the Black-Scholes model for the calculation of the options were as follows for the year ended December 31:

Expected term 4.3 - 5.1 years

4.1 - 4.9 years

Volatility 37 % - 38 %

Risk-free rate of return 1.66 % - 2.55 %

2.54 % - 3.01 %

Dividend yield 0.25 %

Forfeiture rate — %

The following table summarizes the option activity for the years ended December 31:

The following table summarizes the option activity for the year ended December 31, 2021:

Number of Options

2 unchanged sentences

Aggregate Intrinsic Value

(In years) (In thousands)

Outstanding — January 1, 2021 1,272,623 $ 127.74

Granted 257,111 232.26

Exercised ( 214,465 ) 89.50

1 unchanged sentence

Outstanding — December 31, 2021 1,039,372 $ 134.56 4.78 $ 52,354

Granted 334,740 153.78

Exercised ( 192,533 ) 56.58

Forfeited ( 46,839 ) 149.64

Outstanding — December 31, 2019 1,842,442 112.03 5.73 $ 85,110

Exercised ( 533,716 ) 70.17

Forfeited ( 36,103 ) 179.85

Outstanding — December 31, 2020 1,272,623 $ 127.74 5.47 $ 125,550

Unvested — December 31, 2021 188,447 $ 176.30 6.88 $ 2,434

Exercisable — December 31, 2021 850,831 $ 125.31 4.32 $ 49,918

There were no options granted for the years ended December 31, 2021 and 2020.

The weighted average grant-date fair value of options granted during the year ended December 31, 2019 was $ 153.78 .

The intrinsic value of the options exercised during the years ended December 31, 2021, 2020 and 2019, was $ 28,353 , $ 52,868 and $ 17,891 , respectively.

The total compensation cost related to non-vested option awards not yet recorded at December 31, 2021 was $ 5,055 which is expected to be recognized over a weighted-average of 1.1 years.

Cash received from option exercises during the year ended December 31, 2021 was $ 19,195 .

Tax benefit received from option exercises during the year ended December 31, 2021 was $ 6,385 .

IPG PHOTONICS CORPORATION

1 unchanged sentence

(In thousands, except share and per share data)

The intrinsic value of the options exercised during the years ended December 31, 2020, 2019 and 2018, was $ 52,868 , $ 17,891 and $ 51,266 , respectively.

There were no options granted for the year ended December 31, 2020.

The total compensation cost related to non-vested option awards not yet recorded at December 31, 2020 was $ 13,522 which is expected to be recognized over a weighted-average of 1.9 years.

The following table summarizes the RSUs activity for the years ended December 31:

The following table summarizes the RSUs activity for the year ended December 31, 2021:

Number of Shares

Weighted-Average Grant-Date Fair Value Weighted-Average Remaining Contractual Life

Aggregate Intrinsic Value

(In years) (In thousands)

Weighted-Average Grant-Date Fair Value

Outstanding — January 1, 2021 320,686 $ 154.29

3 unchanged sentences

Outstanding — December 31, 2021 334,107 $ 185.37

Granted 120,090 151.94

Vested ( 147,606 ) 120.58

Canceled ( 16,667 ) 139.73

Outstanding — December 31, 2019 306,838 139.09 2.57 $ 44,467

Granted 198,606 145.10

Vested ( 168,733 ) 115.77

Canceled ( 16,025 ) 157.36

Outstanding — December 31, 2020 320,686 $ 154.29 1.33 $ 71,766

The fair value of each restricted stock unit is the market price of Company stock on the date of grant.

The weighted average grant date fair value of restricted stock units granted during the years ended December 31, 2021, 2020 and 2019 was $ 229.13 , $ 145.10 and $ 151.94 , respectively.

The intrinsic value of the RSUs that vested during the years ended December 31, 2021, 2020 and 2019, was $ 26,036 , $ 22,252 and $ 22,638 , respectively.

The total compensation cost related to non-vested RSU awards not yet recorded at December 31, 2021 was $ 43,414 which is expected to be recognized over a weighted-average of 2.7 years.

The aggregate fair value of awards vested during the year ended December 31, 2020 was $ 19,535 .

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except share and per share data)

The weighted-average fair value of TSR PSUs was determined using the Monte Carlo simulation model incorporating the following weighted-average assumptions:

The aggregate fair value of awards vested during the years ended December 31, 2021, 2020 and 2019 was $ 18,042 , $ 19,535 , $ 17,799 , respectively.

The fair value of TSR PSUs was determined using the Monte Carlo simulation model incorporating the following assumptions:

2021 2020 2019

2 unchanged sentences

Risk-free rate of return 0.23 % - 0.26 %

1.39 % 2.48 %

Dividend yield — % — % — %

Weighted-average fair value per share $ 169.28 $ 192.46 $ 284.78

The following table summarizes TSR PSUs activity for the years ended December 31:

Fair value per share $ 248.49 - $ 165.15

$ 169.28 $ 192.46

The following table summarizes TSR PSUs activity for the year ended December 31, 2021:

Number of Shares

Weighted-Average Grant-Date Fair Value Weighted-Average Remaining Contractual Life

Aggregate Intrinsic Value

(In years) (In thousands)

Weighted-Average Grant-Date Fair Value

Outstanding — January 1, 2021 67,825 $ 206.21

Granted 17,809 236.11

Outstanding — December 31, 2018 109,655 146.96 1.77 $ 12,423

Granted 34,989 190.83

Vested ( 43,594 ) 128.54

Canceled ( 19,050 ) 186.22

Outstanding — December 31, 2021 66,584 $ 195.15

Granted 18,411 170.42

Vested ( 48,659 ) 106.03

Canceled ( 1,769 ) 204.01

Outstanding — December 31, 2020 67,825 $ 206.21 1.28 $ 15,179

For the years ended December 31, 2021, 2020 and 2019, the weighted average grant date fair value for new grants was $ 236.11 , $ 170.42 and $ 190.83 , respectively.

TSR PSUs are included at 100 % of target goal.

The intrinsic value of the TSR PSUs vested during the year ended December 31, 2020 was $ 6,211 .

The TSR PSUs granted in 2018 did not achieve the performance target, thus no shares became eligible to vest.

The intrinsic value of the TSR PSUs vested during the years ended December 31, 2021, 2020 and 2019 was nil , $ 6,211 , $ 6,830 .

The aggregate fair value of awards vested during the years ended December 31, 2021, 2020 and 2019 was nil , $ 5,159 , and $ 5,604 , respectively.

The total compensation cost related to nonvested awards not yet recorded at December 31, 2021 was $ 4,784 which is expected to be recognized over a weighted average of 1.8 years.

The aggregate fair value of awards vested during the year ended December 31, 2020 was $ 5,159 .

The weighted-average fair value of the OCF PSUs was determined using the Black-Scholes model incorporating the following assumptions:

Performance term 3.0 years

Volatility — %

Risk-free rate of return 1.39 %

Dividend yield 0.10 %

Weighted-average fair value per share $ 143.51

IPG PHOTONICS CORPORATION

3 unchanged sentences

Number of Shares

Weighted-Average Grant-Date Fair Value Weighted-Average Remaining Contractual Life

Aggregate Intrinsic Value

(In years) (In thousands)

Weighted-Average Grant-Date Fair Value

Outstanding — January 1, 2021 24,101 $ 143.51

2 unchanged sentences

Outstanding — December 31, 2021 40,580 $ 179.60

The fair value of each OCF PSU is the market price of Company stock on the date of grant.

For the years ended December 31, 2021 and 2020, the weighted average grant date fair value for new grants was $ 228.62 and $ 143.51 .

OCF PSUs are included at 100 % of target goal.

3 unchanged sentences

employees, as well as plans at certain foreign and domestic subsidiaries.

The Company makes matching contributions to each plan, which amounted to approximately $ 6,253 , $ 6,005 and $ 4,261 , respectively for years ended December 31, 2020, 2019 and 2018.

The Company makes matching contributions to each plan, which amounted to approximately $ 6,081 , $ 6,253 and $ 6,005 , respectively, for the years ended December 31, 2021, 2020 and 2019.

The Company has an employee stock purchase plan offered to its U.S.

2 unchanged sentences

Payroll deductions may not exceed 10 % of the employee's compensation and are subject to other limitations.

The Company uses the Black-Scholes model to calculate the purchase date fair value of the shares issued under the employee stock purchase plan and recognize expense related to shares purchased ratably over the offering period.

Compensation expense related to the employee stock purchase plan was $ 1,861 , $ 2,033 and $ 2,254 for the years ended December 31, 2021, 2020 and 2019, respectively.

During the years ended December 31, 2021, 2020 and 2019, 34,151 , 40,943 and 52,315 shares, respectively, were issued at an average price of $ 160.81 , $ 128.46 and $ 124.84 , respectively, under the employee stock purchase plan.

As of December 31, 2021, there were 260,393 shares available for issuance under the employee stock purchase plan.

4 unchanged sentences

Total $ 366,481 $ 205,692 $ 248,376

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except share and per share data)

The Company's provision for income taxes for the years ended December 31 consisted of the following:

9 unchanged sentences

Provision for income taxes $ 88,615 $ 45,354 $ 68,115

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except share and per share data)

A reconciliation of income tax expense at the U.S.

9 unchanged sentences

Goodwill impairment — — 10,009

Effect of 2017 U.S.

Tax Cuts and Jobs Act — — ( 4,747 )

Withholding tax on intercompany dividend 2,883 2,193 3,122

Effect of changes in enacted tax rates on deferred tax assets and liabilities ( 23 ) ( 639 ) 8,007

Federal and state tax credits ( 7,482 ) ( 6,762 ) ( 12,173 )

4 unchanged sentences

Provision for income taxes $ 88,615 $ 45,354 $ 68,115

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except share and per share data)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, were as follows:

4 unchanged sentences

Net operating loss carryforwards 11,544 11,594

Property, plant and equipment ( 7,401 ) ( 18,607 )

Property, plant, equipment and intangible assets ( 5,187 ) ( 7,401 )

Withholding tax on intercompany dividend ( 1,098 ) ( 2,774 )

2 unchanged sentences

The Company has recorded $ 1,098 and $ 2,774 as a deferred tax liability on December 31, 2021 and 2020, respectively, for certain withholding and dividend taxes related to possible future distributions from subsidiaries to their respective parent companies.

The Company paid a dividend from its German subsidiary in 2020 of $ 166,055 and continues to plan for future dividends to the extent the entity’s cash exceeds its operational and investment needs.

The Company paid dividends from its German subsidiary in 2021 of $ 288,666 and continues to plan for future dividends to the extent the entity’s cash exceeds its operational and investment needs.

Since there is no federal or withholding tax on such distributions from Germany to the U.S., the Company has accrued only a state tax on future dividends from Germany.

Also, t he Company’s subsidiary in Russia paid a dividend of $ 50,000 to its parent company in Germany in 2019 and paid a 5 % withholding tax on that dividend.

Also, t he Company’s subsidiary in Russia paid a dividend of $ 50,000 to its parent companies in Germany and the U.S.

in 2021 and paid a 5 % withholding tax on that dividend.

In addition, the Company accrues taxes to the extent that foreign subsidiaries have cash in excess of their operational needs.

5 unchanged sentences

In determining the Company’s 2021 and 2020 tax provisions, the Company calculated the deferred tax assets and liabilities for each separate tax entity.

The Company then considered a number of factors including the positive and negative

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except share and per share data)

evidence regarding the realization of deferred tax assets to determine whether a valuation allowance should be recognized with respect to the deferred tax assets.

The Company then considered a number of factors including the positive and negative evidence regarding the realization of deferred tax assets to determine whether a valuation allowance should be recognized with respect to the deferred tax assets.

As of December 31, 2021 and 2020, the Company had state tax credit carryforwards (net of federal tax benefit) of $ 16,836 and $ 15,571 , respectively.

The state tax credit carryforwards begin expiring in 2022.

The Company has determined that it is not more likely than not that some of the state credits will be used before the expiration date and has accrued a valuation allowance of $ 12,414 and $ 10,632 as of December 31, 2020 and 2019, respectively.

The Company has determined that it is not more likely than not that some of the state credits will be used before the expiration date and recorded a valuation allowance of $ 13,884 and $ 12,414 as of December 31, 2021 and 2020, respectively.

The Company has tax loss carryforwards in foreign jurisdictions totaling $ 38,070 and $ 36,318 as of December 31, 2021 and 2020, respectively.

5 unchanged sentences

The Company provides reserves for potential payments of tax to various tax authorities related to uncertain tax positions and other issues.

Reserves recorded are based on a determination of whether and how much of a tax benefit taken by the Company in the Company's tax filings or positions is "more likely than not" to be realized following resolution of any potential contingencies present related to the tax benefit, assuming that the matter in question will be raised by the tax authorities.

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except share and per share data)

contingencies present related to the tax benefit, assuming that the matter in question will be raised by the tax authorities.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:

2021 2020 2019

Balance at January 1 $ 14,706 $ 11,416 $ 11,206

4 unchanged sentences

Balance at December 31 $ 19,209 $ 14,706 $ 11,416

The liability for uncertain tax benefits is included in deferred income taxes and other long-term liabilities at December 31, 2021 and 2020.

Substantially all of the liability for uncertain tax benefits related to various federal, state and foreign income tax matters, would benefit the Company's effective tax rate, if recognized.

Estimated penalties and interest related to the underpayment of income taxes were $ 305 , $ 543 and $ 631 for the years ended December 31, 2020, 2019 and 2018, respectively, and are included within the provision for income taxes.

Estimated penalties and interest related to the underpayment of income taxes were a net benefit of $ 359 for the year ended December 31, 2021, and expense of $ 305 and $ 543 for the years ended December 31, 2020 and 2019, respectively, and are included within the provision for income taxes.

Total accrued penalties and interest related to the underpayment of income taxes were $ 1,641 and $ 1,977 at December 31, 2021 and 2020, respectively.

The Company's uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities.

The Company is currently under a tax audit in the U.S.

for the years 2017 to 2018.

The Company is currently under a tax audit in both the U.S.

and Germany for the years 2017 to 2020.

Open tax years by major jurisdictions are:

2 unchanged sentences

Russia 2017 - 2021

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except share and per share data)

NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE

2 unchanged sentences

2021 2020 2019

Net income attributable to IPG Photonics Corporation $ 159,572 $ 180,234 $ 404,027

Net income attributable to common stockholders 159,572 180,234 404,027

Basic weighted average shares 53,186 53,061 53,522

Net income attributable to IPG Photonics Corporation common stockholders $ 278,416 $ 159,572 $ 180,234

Basic weighted average common shares 53,409,673 53,185,733 53,060,931

Dilutive effect of common stock equivalents 520,554 599,145 778,492

Diluted weighted average common shares 53,930,227 53,784,878 53,839,423

Basic net income attributable to IPG Photonics Corporation per share $ 3.00 $ 3.40 $ 7.55

Basic net income attributable to common stockholders $ 3.00 $ 3.40 $ 7.55

Diluted net income attributable to IPG Photonics Corporation per share $ 2.97 $ 3.35 $ 7.38

Diluted net income attributable to common stockholders $ 2.97 $ 3.35 $ 7.38

The computation of diluted weighted average common shares excludes certain common stock equivalents, including non-qualified stock options, PSUs, RSUs and the employee stock purchase plan because the effect of including them would be anti-dilutive.

Basic net income attributable to IPG Photonics Corporation per common share $ 5.21 $ 3.00 $ 3.40

Diluted net income attributable to IPG Photonics Corporation per common share $ 5.16 $ 2.97 $ 3.35

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except share and per share data)

The weighted average anti-dilutive shares outstanding for the years ended December 31, 2021, 2020 and 2019, respectively, were as follows:

6 unchanged sentences

On May 5, 2020, the Company announced that its Board of Directors authorized the purchase of up to $ 200,000 of IPG common stock.

This new authorization is separate from, and in addition to, the Company's $ 125,000 stock repurchase program authorized in February 2019.

Under the two share purchase authorizations, IPG may repurchase shares of common stock (a) in an amount not to exceed the lesser of the number of shares issued to employees and directors under the Company's various employee and director equity compensation and employee stock purchase plans in 2019 and 2020 or $ 125,000 plus (b) $ 200,000 , in both cases exclusive of any fees, commissions or other expenses.

This authorization is separate from, and in addition to, the Company's $ 125,000 stock repurchase program authorized in February 2019.

Under the February 2019 authorization, IPG may repurchase shares of common stock in an amount not to exceed the lesser of the number of shares issued to employees and directors under the Company's various employee and director equity compensation and employee stock purchase plans from January 1, 2019 through December 31, 2020 or $ 125,000 .

Under the 2020 authorization, the Company may purchase shares up to $ 200,000 .

In both purchase authorizations, share limits are exclusive of fees, commissions or other expenses.

Share repurchases may be made periodically in open-market transactions using the Company's working capital and are subject to market conditions, legal requirements and other factors.

1 unchanged sentence

For the years ended December 31, 2021, 2020 and 2019, respectively, the Company repurchased 743,969 shares, 301,660 shares, and 301,262 shares of its common stock with an average price of $ 181.28 , $ 125.58 and $ 135.21 per share in the open market, respectively.

As of December 31, 2020 the remaining amount authorized under the programs is up to $ 246,000 , but may be less depending upon the equity compensation and employee stock purchase plan dilution during the programs.

The February 2019 authorization to repurchase common stock was completed in 2021.

As of December 31, 2021 the remaining amount authorized under the May 2020 was up to $ 111,495 , but may be less depending upon the equity compensation and employee stock purchase plan dilution during the programs.

The impact on the reduction of weighted average shares for years ended December 31, 2021, 2020 and 2019 was 244,451 shares, 201,953 shares and 97,054 shares, respectively.

RELATED-PARTY TRANSACTIONS

The Company's Chief Executive Officer ("CEO") leases the annual right to use 25 % of the Company's corporate aircraft under a lease signed in July 2017.

The late founder of the Company, Dr.

Gapontsev, leased the annual right to use 25 % of the Company's corporate aircraft under a lease signed in July 2017.

The lease expires July 2022.

The annual lease rate is $ 925 and future rent payments are adjusted annually.

The Company invoiced the CEO $ 937 , $ 924 and $ 925 in 2020, 2019, and 2018, respectively, under the aircraft leases.

There was $ 154 due to the Company at December 31, 2020, and there were no amounts due at December 31, 2019.

The CEO directly pays an unrelated flight management firm for the operating costs of his private use including pilot fees, fuel and other costs.

IPG PHOTONICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except share and per share data)

In 2020, 2019 and 2018, the Company purchased various equipment, parts and services from a company for which one of the Company's independent directors was chairman of its board of directors.

The payments for 2020, 2019 and 2018 totaled $ 760 , $ 51 and $ 947 , respectively.

There was $ 566 due to this company at December 31, 2020, and there were no amounts due at December 31, 2019.

The Company sold various equipment and parts to a different company for which one of the Company's independent directors is also an independent director.

The sales totaled $ 675 for 2020, and there were no sales for 2019 and 2018.

There was $ 334 due to the Company at December 31, 2020, and there were no amounts due at December 31, 2019.

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

2020 First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Net sales $ 249,242 $ 296,411 $ 318,441 $ 336,630

Gross profit 102,876 136,449 152,792 146,879

Net income attributable to IPG Photonics Corporation 36,403 38,226 35,604 49,339

Net income per share, basic 0.69 0.72 0.67 0.92

Net income per share, diluted 0.68 0.71 0.66 0.92

Net income attributable to IPG Photonics Corporation as well as the basic and diluted income per share in the third quarter of the year ended December 31, 2020 were impacted by goodwill impairment discussed in Note 7.

2019 First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Net sales $ 315,047 $ 363,769 $ 329,138 $ 306,627

Gross profit 148,911 180,237 152,858 124,203

Net income (loss) attributable to IPG Photonics Corporation 55,159 72,272 57,253 ( 4,450 )

Net income (loss) per share, basic 1.04 1.36 1.08 ( 0.08 )

Net income (loss) per share, diluted 1.02 1.34 1.07 ( 0.08 )

Net income attributable to IPG Photonics Corporation as well as the basic and diluted loss per share in the fourth quarter of the year ended December 31, 2019 were impacted by goodwill impairment, impairment of long-lived assets and other restructuring charges discussed in Notes 6 and 7.

The Company invoiced Dr.

Gapontsev $ 924 , $ 937 and $ 924 in 2021, 2020, and 2019, respectively, under the aircraft leases.

There was $ 77 due to the Company at December 31, 2021, and there were $ 154 due at December 31, 2020.

Gapontsev directly paid an unrelated flight management firm for the operating costs of his private use including pilot fees, fuel and other costs.

The Company sold various equipment and parts to a company for which one of the Company's former independent directors is also an independent director.

The sales totaled $ 348 and $ 675 for 2021 and 2020, respectively, and there were no sales for 2019.

There was $ 3 due to the Company at December 31, 2021, and there were $ 334 due at December 31, 2020.

SUBSEQUENT EVENTS

On February 15, 2022, the Company announced that its Board of Directors has authorized the purchase of up to $ 200 million of IPG common stock.

This new authorization is in addition to the Company's existing stock repurchase program authorized in May 2020.

Share repurchases may be made periodically in open-market transactions, and are subject to market conditions, legal requirements and other factors.

The share repurchase program authorization does not obligate the Company to repurchase any dollar amount or number of its shares, and repurchases may be commenced or suspended from time to time without prior notice.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures