ULTRA CLEAN HOLDINGS, INC. You should read the following discussion of our financial condition and results of operations in conjunction with the Condensed Consolidated Financial Statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K filed with theSEC onMarch 11, 2020 . This Quarterly Report on Form 10-Q contains "forward-looking statements" that involve substantial risks and uncertainties. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, statements regarding our expectations, beliefs, intentions, strategies, future operations, future financial position, future revenue, projected expenses, gross margins and plans and objectives of management. In some cases, you can identify forward-looking statements by terms such as "anticipate," "believe," "estimate," "expect," "intend," "may," "might," "plan," "project," "will," "would," "should," "could," "can," "predict," "potential," "continue," "objective," or the negative of these terms, and similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. These forward-looking statements reflect our current views about future events and involve known risks, uncertainties and other factors that may cause our actual results, performance or achievement to be materially different from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K filed with theSEC onMarch 11, 2020 . Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Overview
Ultra Clean Holdings, Inc. is a leading developer and supplier of critical subsystems, ultra-high purity cleaning and analytical services primarily for the semiconductor industry. We report our results for two segments: Semiconductor Products and Solutions ("SPS") and Semiconductor Services Business ("SSB"). Our SPS business primarily designs, engineers and manufactures production tools, modules and subsystems for the semiconductor and display capital equipment markets. SPS products include chemical delivery modules, frame assemblies, gas delivery systems, fluid delivery systems, precision robotics, process modules as well as other high-level assemblies. Our SSB business provides ultra-high purity outsourced parts cleaning, process tool part recoating, surface encapsulation and high sensitivity micro contamination analysis primarily for the semiconductor device makers and wafer fabrication (WFE) equipment markets. We ship a majority of our products and provide most of our services toU.S. registered customers with locations both in and outside theU.S. In addition toU.S. manufacturing and service operations, we manufacture products and provide parts cleaning and other related services in our Asian and European facilities to support local andU.S. based customers. We conduct our operating activities primarily through our subsidiaries,Ultra Clean Technology Systems and Service, Inc. ,American Integration Technologies, LLC ,Ultra Clean Micro-Electronics Equipment (Shanghai) Co., Ltd. ,Ultra Clean Asia Pacific, Pte, Ltd. ,UCT Thermal Solutions, Inc. , UCT Fluid Delivery Solutions s.r.o. (FDS),Quantum Global Technologies, LLC ("QGT") andDynamic Manufacturing Solutions, LLC ("DMS"). Over the long-term, we believe the semiconductor market we serve will continue to grow based on demand from a broad range of drivers, including applications such as autonomous vehicles, the Internet of Things, high performance computing, artificial intelligence, and technology to support the data sharing economy. We also believe that semiconductor equipment OEMs are increasingly relying on partners like UCT to fulfill their expanding capacity requirements.
Impact of COVID-19 on Our Business
We are subject to risks and uncertainties as a result of the COVID-19 pandemic. Our financial results for the three months endedJune 26, 2020 represent a full quarter of operations during the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict, as the response to the pandemic is in its incipient stages and information is rapidly evolving. Furthermore, the negative impact of the COVID-19 pandemic on capital markets and economies worldwide has been and continues to be severe. - 24 - -------------------------------------------------------------------------------- The severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on our customers, all of which are uncertain and cannot be predicted. Our future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions and uncertain demand, and the impact of any initiatives or programs that we may undertake to address financial and operations challenges faced by our customers. As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact our financial condition, liquidity, or results of operations is uncertain. We will continue to actively monitor the situation and take further actions that may alter our business operations as may be required by federal, state or local authorities or if we determine are in the best interests of our employees, customers, suppliers and shareholders. While we are unable to determine or predict the nature, duration or scope of the overall impact the COVID-19 pandemic will have on our business, results of operations, liquidity or capital resources, we believe that it is important to share where our company stands today, how our response to COVID-19 is progressing and how our operations and financial condition may change as the fight against COVID-19 progresses. For additional details, see the discussion in the Risk Factors section.
Critical Accounting Estimates
Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted inthe United States , which require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure at the date of our Condensed Consolidated Financial Statements. From time to time, we evaluate our estimates and judgments, including those related to sales, inventories, goodwill and intangible assets, stock compensation and income taxes. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis of our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We consider certain accounting policies related to revenue recognition, inventory valuation, accounting for income taxes, business combinations, valuation of intangible assets and goodwill, accounting for pension obligations and equity incentives to employees to be critical policies due to the estimates and judgments involved in each. There have been no significant changes to our critical accounting policies, significant judgments and estimates disclosed in our Annual Report on Form 10-K subsequent toDecember 27, 2019 . For further information on our critical and other significant accounting policies and estimates, see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year endedDecember 27, 2019 , as filed with theSEC . Results of Operations Fiscal Year Our fiscal year is the 52- or 53-week period ending on the Friday nearestDecember 31 . Fiscal year 2020 is the 52-week period endingDecember 25, 2020 , and fiscal year 2019 was the 52-week period endedDecember 27, 2019 . The fiscal quarters endedJune 26, 2020 andJune 28, 2019 were both 13-week periods.
Discussion of Results of Operations for the Three and Six months ended
Revenues
Three Months Ended Six Months Ended
Revenues by Segment June 26, June 28,
Percent
2020 2019 Change 2020 2019 Change
SPS $ 277.9 $ 210.4 32.1 % $ 537.3 $ 410.6 30.9 %
SSB 66.9 55.0 21.6 % 128.4 114.9 11.7 %
Total Revenues $ 344.8 $ 265.4 29.9 %
80.7 % 78.1 %
SSB as a percentage of total revenues 19.4 % 20.7 %
19.3 % 21.9 %
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-------------------------------------------------------------------------------- Total SPS revenues increased in the three and six months endedJune 26, 2020 , compared to the same periods in the prior year, primarily due to an increase in customer demand in the semiconductor industry, in particular, the wafer fabrication equipment industry. Total SSB revenues increased in the three and six months endedJune 26, 2020 , compared to the same periods in the prior year, primarily due to increases in demand across its customer base. Three Months Ended Six Months Ended Revenues by Geography June 26, June 28, Percent June 26, June 28, Percent (Dollars in millions) 2020 2019 Change 2020 2019 Change United States$ 148.4 $ 128.0 15.9 %$ 283.5 $ 257.3 10.2 % International 196.4 137.4 42.9 % 382.2 268.2 42.5 % Total Revenues$ 344.8 $ 265.4
29.9 %
revenues 43.0 % 48.2 % 42.6 % 49.0 %
International as a percentage of
total revenues 57.0 % 51.8 % 57.4 % 51.0 % On a geographic basis, revenues represent products shipped from or services performed in ourU.S. and international locations. For the three and six months endedJune 26, 2020 ,United States revenue increased in absolute terms due primarily to the acquisition of DMS, whose customers are primarily based inthe United States , and to the overall increase in demand in the semiconductor industry. For the six months endedJune 26, 2020 , international revenue increased in absolute terms and as a percentage of total revenue, primarily due to the overall higher semiconductor demand in the region. Cost of Revenues Three Months Ended Six Months Ended Cost of Revenues by Segment June 26, June 28, Percent June 26, June 28, Percent (Dollars in millions) 2020 2019 Change 2020 2019 Change SPS$ 229.3 $ 181.1 26.6 %$ 444.0 $ 355.6 24.9 % SSB 41.6 36.1 15.2 % 82.1 76.9 6.8 % Total Cost of Revenues$ 270.9 $ 217.2 24.7 %$ 526.1 $ 432.5 21.6 % SPS as a percentage of total SPS 82.5 % 86.1 % 82.6 % 86.6 % revenues SSB as a percentage of total SSB 62.2 % 65.6 % 63.9 % 66.9 % revenues Total cost of revenues increased$53.7 million and$93.6 million for the three and six months endedJune 26, 2020 , respectively, due to higher demand for both SPS products and SSB services. SPS cost of revenues consists of purchased materials, direct labor and manufacturing overhead. SPS cost of revenues increased$48.2 million for the three months endedJune 26, 2020 compared to the same period in the prior year, due to higher volume of sales driving increased material costs of$45.0 million , higher freight costs of$4.1 million and higher direct labor spending of$4.1 million , offset by lower overhead costs of$3.8 million related to improved plant efficiencies and government subsidies of$1.2 million received in ourChina andSingapore subsidiaries. SPS cost of revenues increased$88.4 million for the six months endedJune 26, 2020 compared to the same period in the prior year, due to higher volume of sales driving increased material costs of$86.8 million , higher direct labor spending of$6.5 million and higher freight costs of$6.2 million . These increases were offset by lower overhead costs of$10.0 million related to improved plant efficiencies and government subsidies of$1.2 million received in ourChina andSingapore subsidiaries. SSB cost of revenues consists of direct labor, manufacturing overhead and materials (such as chemicals, gases and consumables). SSB cost of revenues increased$5.5 million in the three months endedJune 26, 2020 compared to the same period in the prior year due to an increase in labor costs of$2.6 million (the largest component of SSB's total cost of revenues) driven by higher service orders, and higher depreciation expense of$2.3 million as a result of an increase in capital assets. SSB cost of revenues increased$5.2 million for the six months endedJune 26, 2020 compared to the same period in the prior year due to an increase in labor costs of$2.8 million driven by higher service orders, and higher depreciation expense of$1.6 million as a result of an increase in capital assets. - 26 -
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Gross Margin
Three Months Ended Six Months Ended
Gross Profit by Segment June 26, June 28, Percent June 26, June 28, Percent
(Dollars in millions) 2020 2019 Change 2020 2019 Change
SPS $ 48.6 $ 29.3 65.9 % $ 93.3 $ 55.0 69.6 %
SSB 25.3 18.9 33.9 % 46.3 38.0 21.8 %
Gross profit $ 73.9 $ 48.2 53.3 % $ 139.6 $ 93.0 50.1 %
Gross Margin by Segment
SPS 17.5 % 13.9 % 17.4 % 13.4 %
SSB 37.8 % 34.4 % 36.1 % 33.1 %
Total Company 21.4 % 18.2 % 21.0 % 17.7 %
SPS gross margin increased in the three and six months ended June 26, 2020 ,
compared to the same periods in the prior year, due primarily to higher volume,
the mix of higher margin products and to a lesser extent the government
subsidies received in our China and Singapore subsidiaries during the second
quarter of fiscal 2020. SSB gross margin increased in the three and six months
ended June 26, 2020 , compared to the same periods in the prior year, due to
direct labor and material efficiencies along with lower facility-related costs.
Research and Development
Three Months Ended Six Months Ended
June 26, June 28, Percent June 26, June 28, Percent
(Dollars in millions) 2020 2019 Change 2020 2019 Change
Research and development $ 3.8 $ 3.9 -2.6 % $ 7.2 $ 7.3 -1.4 %
Research and development as a
percentage of total revenues 1.1 % 1.5 % 1.1 % 1.4 %
Research and development expenses remained consistent for the three and six
months ended
Sales and Marketing
Three Months Ended Six Months Ended
June 26 , June 28 ,
Percent
2020 2019 Change 2020 2019 Change
Sales and marketing $ 5.9 $ 5.4 9.3 % $ 11.7 $ 10.8 8.3 %
Sales and marketing as a percentage of
total revenues 1.7 % 2.0 % 1.8 % 2.1 % Sales and marketing expenses increased$0.5 million in the three months endedJune 26, 2020 , compared to the same period in the prior year, primarily due to an increase in personnel-related costs. Sales and marketing expenses increased$0.9 million in the six months endedJune 26, 2020 , compared to the same period in the prior year, primarily due to an increase in personnel-related costs as well as the inclusion of DMS' sales and marketing expenses for the full six months endedJune 26, 2020 . General and Administrative Three Months Ended Six Months Ended June 26, June 28, Percent June 26, June 28, Percent (Dollars in millions) 2020 2019 Change 2020 2019 Change
General and administrative
percentage of total revenues 9.7 % 11.3 % 10.1 % 11.0 % General and administrative expenses increased$3.5 million in the three months endedJune 26, 2020 , compared to the same period in the prior year, due to an increase in certain professional fees, higher personnel-related expenses due primarily to increases in headcount, and restructuring expenses related to the closure of the SSB headquarters inQuakertown, PA. General and administrative expenses increased$9.6 million in the six months endedJune 26, 2020 , compared to the same period in the prior year, due to the - 27 -
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inclusion of DMS' general and administrative expenses for the full six months
ended
Interest and Other Income (Expense), net
Three Months Ended Six Months Ended
June 26, June 28, Percent June 26, June 28, Percent
(Dollars in millions) 2020 2019 Change 2020 2019 Change
Interest income $ 0.2 $ 0.2 0.0 % $ 0.5 $ 0.4 25.0 %
Interest expense $ (3.8 ) $ (6.7 ) -43.3 % $ (9.0 ) $ (13.3 ) -32.3 %
Other income (expense), net $ 0.6 $ - n/m $ (2.1 ) $ 1.1 -290.9 %
n/m - not meaningful
Interest expense decreased in the three and six months ended
Other income (expense), net increased in the three months endedJune 26, 2020 , compared to the same period in the prior year, mainly due to the government subsidies received by the Company's subsidiary inChina in the second quarter of fiscal 2020. Other income (expense), net increased in the six months endedJune 26, 2020 , compared to the same period in the prior year, due to increases in the fair value of the contingent earn-out liability and of the common stock purchase obligation of$3.0 million and$1.2 million , respectively, partially offset by$0.6 million government subsidies received by the Company's subsidiary inChina . Provision for Income Taxes Three Months Ended Six Months Ended June 26, June 28, Percent June 26, June 28, Percent (Dollars in millions) 2020 2019 Change 2020 2019 Change Provision for income taxes$ 5.7 $ 2.8 103.6 %$ 10.2 $ 4.3 137.2 % Effective tax rate 20.5 % 109.8 % 23.8 % 79.8 % The change in respective rates reflects, primarily, changes in the geographic mix of worldwide earnings and financial results in jurisdictions which are taxed at different rates and the impact of losses in jurisdictions with full federal and state valuation allowances.
Company management continuously evaluates the need for a valuation allowance on
its deferred tax assets and, as of
OnMarch 27, 2020 , the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was enacted and signed into law and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date. The CARES Act includes changes to tax provisions that benefit business entities and makes certain technical corrections to the 2017 TCJA. Tax relief measures for businesses include modifications to limitations on the deductibility of net operating losses (NOLs) such as a five-year carryback of NOLs incurred in tax years beginning in 2018, 2019 or 2020, and removal of the 80% of taxable income limitation on NOL deductions for tax years beginning beforeJanuary 1, 2021 . Other tax relief measures include modifications to the limitations on the deductibility of interest for tax years beginning in 2019 and 2020, acceleration of alternative minimum tax credit refunds, payroll tax relief, and a technical correction to the TCJA that would provide accelerated depreciation deductions for qualified improvement property. The CARES Act also provides other non-tax benefits to assist those impacted by the COVID-19 pandemic. The Company has evaluated the impact of the CARES Act and determined that there was no significant impact to the income tax provision for the three and six months endedJune 26, 2020 . The Company also does not expect the provisions of the CARES Act to result in a significant cash benefit. However, the Company continues to monitor and evaluate the regulatory and interpretive guidance related to the CARES Act. - 28 -
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Liquidity and Capital Resources
Cash and cash Equivalents
The following table summarizes our cash and cash equivalents:
June 26, December 27,
(In millions) 2020 2019 Increase
Total cash and cash equivalents $ 214.4 $ 162.5 $ 51.9
Six Months Ended
June 26, June 28,
(In millions) 2020 2019
Net cash flow provided by (used in):
Operating activities $ 33.2 $ 68.0
Investing activities (14.1 ) (36.1 )
Financing activities 33.1 (5.6 )
Effects of exchange rate changes on cash and cash
equivalents (0.3 ) (2.3 )
Net increase in cash and cash equivalents $ 51.9 $ 24.0 Our primary cash inflows and outflows were as follows:
• In the six months ended
activities of
ended
activities was driven by a$75.2 million decrease in the net change from operating assets and liabilities offset by an$8.9 million increase from non-cash items and$31.5 million increase in net income.
• The major contributors to the net change in operating assets and liabilities,
net of effects of acquisition, in the six months ended
follows:
o Accounts receivable increased
collections.
o Inventories increased
outlook in the second half of fiscal year 2020.
o Accounts payable increased
the timing of payments.
• In the six months ended
was
2019. The change is primarily due to the acquisition of DMS in
offset by more purchases of property, plant and equipment.
• In the six months ended
activities was
six months ended
we drew from our revolving credit facility inMarch 2020 . We have required capital to fund our working capital needs, satisfy our debt obligations, maintain our equipment, purchase new capital equipment and make strategic acquisitions from time to time. As ofJune 26, 2020 , we had cash of$214.4 million compared to$162.5 million as ofDecember 27, 2019 . Our cash and cash equivalents, cash generated from operations and amounts available under our revolving line of credit described below were our principal sources of liquidity as ofJune 26, 2020 . - 29 -
-------------------------------------------------------------------------------- We anticipate that our existing cash and cash equivalents balance and operating cash flow will be sufficient to service our indebtedness and meet our working capital requirements and technology development projects for at least the next twelve months. The adequacy of these resources to meet our liquidity needs beyond that period will depend on our growth, the size and number of any acquisitions, the state of the worldwide economy, our ability to meet our financial covenants with our credit facility, the cyclical expansion or contraction of the semiconductor capital equipment industry and the other industries we serve and capital expenditures required to meet possible increased demand for our products. In order to expand our business or acquire additional complementary businesses or technologies, we may need to raise additional funds through equity or debt financings. If required, additional financing may not be available on terms that are favorable to us, if at all. If we raise additional funds through the issuance of equity or convertible debt securities, our stockholders' equity interest will be diluted and these securities might have rights, preferences and privileges senior to those of our current stockholders. We may also require the consent of our new lenders to raise additional funds through equity or debt financings. No assurance can be given that additional financing will be available or that, if available, such financing can be obtained on terms favorable to our stockholders and us. In prior years, we determined that a portion of the current year and future year earnings of one of ourChina subsidiaries may be remitted in the future to one of our foreign subsidiaries outside ofChina and, accordingly, we provided for the related withholding taxes in our Condensed Consolidated Financial Statements. As ofJune 26, 2020 , we had undistributed earnings of foreign subsidiaries that are indefinitely invested outside of theU.S. of approximately$291.0 million . As ofJune 26, 2020 , we have cash of approximately$171.5 million in our foreign subsidiaries.
Borrowing Arrangements
The following table summarizes our borrowings:
June 26, 2020
(Dollars in millions) Amount Interest Rate
U.S. Term Loan $ 297.8 4.7 %
U.S. Revolving Credit Facility 40.0 2.7 %
FDS Revolving Credit Facility 0.6 0.9 %
Cinos Term Loan 0.3 2.4 %
$ 338.7
In August 2018 , we entered into a credit agreement with Barclays Bank that
provided a Term Loan, a Revolving Credit Facility, and a Letter of Credit
Facility (the "Credit Facilities"). We and some of our subsidiaries have agreed
to secure all of their obligations under the Credit Facilities by granting a
first priority lien in substantially all of our respective personal property
assets (subject to certain exceptions and limitations). In August 2018 , we
borrowed $350.0 million under the Term Loan and used the proceeds, together with
cash on hand, to finance the acquisition of QGT (see Note 2) and to refinance
our previous credit facilities.
The Term Loan has a maturity date of August 27, 2025 , with monthly interest
payments in arrears, quarterly principal payments of 0.625% of the original
outstanding principal balance payable beginning January 2019 , with the remaining
principal paid upon maturity. The Term Loan accrues interest daily at a rate
equal to a base LIBOR rate determined by reference to the London interbank
offered rate for dollars, plus 4.5% (subject to certain adjustments quarterly
based upon the Company's consolidated leverage ratio). As of June 26, 2020 , we
had an outstanding amount under the Term Loan of $297.8 million , gross of
unamortized debt issuance costs of $8.9 million .
The Revolving Credit Facility has an initial available commitment of $65.0
million and a maturity date of August 27, 2023 . We pay a quarterly commitment
fee in arrears equal to 0.25% of the average daily available commitment
outstanding. During the first quarter of 2020 we drew $40.0 million under the
Revolving Credit Facility to fund operations, and as of June 26, 2020 , we had
$40.0 million outstanding under the Revolving Credit Facility.
As of June 26, 2020 , interest rates on the outstanding Term Loan and Revolving
Credit facility were 4.7% and 2.7%, respectively. After December 31, 2021 , LIBOR
will officially be phased out. We will work with our bank to determine
alternative risk-free rates.
The Credit Agreement requires that we maintain certain financial covenants
including a consolidated fixed charge coverage ratio (as defined in the New
Credit Agreement) as of the last day of any fiscal quarter of at least 1.25 to
1.00, and a consolidated leverage ratio (as defined in the New Credit Agreement)
as of the last day of any fiscal quarter of no greater than 3.75 to 1.00. We
were in compliance with all covenants for the quarter ended June 26, 2020 .
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The Letter of Credit Facility has an initial available commitment of $50.0
million and a maturity date of August 27, 2023 . We pay quarterly in arrears a
fee equal to 2.5% (subject to certain adjustments as per the Term Loans) of the
dollar equivalent of all outstanding letters of credit, and a fronting fee equal
to 0.125% of the undrawn and unexpired amount of each letter of credit. As of
June 26, 2020 , we had $1.5 million of outstanding letters of credit with
beneficiaries such as landlords of certain facility leases and government
agencies making up the majority of the outstanding balance. The remaining
available commitments are $48.5 million on the Letter of Credit Facility and
$25.0 million on the Revolving Credit Facility.
As of
Cinos China has a bank loan with a carrying amount of
Cinos has Credit Agreements with various banks that provide Revolving Credit Facilities for a total available commitment of1.7 billion Korean Won (approximately$1.4 million ) with annual renewals beginning fromOctober 2020 throughJune 2021 and interest rates ranging from 2.5% - 3.7%. During the six months endedJune 26, 2020 , borrowings under these Revolving Facilities were insignificant and no amounts were outstanding as ofJune 26, 2020 . As ofJune 26, 2020 , our total bank debt was$338.7 million , net of unamortized debt issuance costs of$8.9 million . As ofJune 26, 2020 , we had$25.0 million and7.8 million euros (approximately$8.7 million ) available to borrow on our revolving credit facilities in theU.S. andCzech Republic , respectively. The fair value of our long-term debt was based on Level 2 inputs, and fair value was determined using quoted prices for similar liabilities in inactive markets. The carrying value of our long-term debt approximates fair value.
Capital Expenditures
Capital expenditures were$17.5 million during the six months endedJune 26, 2020 and were primarily attributable to the capital invested in our manufacturing facilities inthe United States ,China andSouth Korea as well as costs associated with the ongoing design and implementation of our new enterprise resource planning system. The Company's anticipated capital expenditures for the remainder of 2020 are expected to be financed primarily from our cash flow generated from operations.
Off-Balance Sheet Arrangements
During the periods presented, we did not have any relations with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Contractual Obligations
Other than operating leases for certain equipment, real estate and purchase order commitments, primarily for inventory, we have no off-balance sheet transactions, unconditional purchase obligations or similar instruments and, other than the arrangements described under "Borrowing Arrangements" above, are not a guarantor of any other entities' debt or other financial obligations. The following table summarizes our future minimum lease payments, principal payments under debt obligations and our purchase obligations for the purchase of inventory as ofJune 26, 2020 : Fiscal Year Fiscal Years Fiscal Years (In millions) Total 2020 2021 - 2022 2023 - 2024 Beyond Operating leases (1)$ 52.7 $ 7.3 $ 22.0 $ 12.1$ 11.3 Borrowing arrangements (2) 338.7 4.4 18.4 57.5 258.4 Common stock purchase obligation (3) 8.0 8.0 - - - Purchase order commitments (4) 185.1 185.1 - - - Total$ 584.5 $ 204.8 $ 40.4 $ 69.6$ 269.7
(1) The Company leases facilities in
under non-cancellable leases that expire on various dates through 2031. The
total balance of
the Company's operating leases, however, the total operating lease
liabilities as disclosed in the condensed consolidated balance sheets are
presented on a discounted present value basis, in accordance with the
provisions of ASC 842, "Leases".
(2) The total borrowing arrangements reflects obligations under our Term loan
totaling
costs,
in South Korea and $0.6 million held by FDS, in the Czech Republic .
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(3) The Company is obligated to purchase the common stock owned by one of Cinos
Co., Ltd shareholders.
(4) Represents our outstanding purchase orders primarily for inventory.
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