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 onFebruary 23, 2021 . 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 onFebruary 23, 2021 , as updated in our Current Report on Form 8-K filed with theSEC onApril 5, 2021 . 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. , ("UCT", the "Company" or "We") is a leading developer and supplier of critical subsystems, components and parts, and ultra-high purity cleaning and analytical services primarily for the semiconductor industry. UCT offers its customers an integrated outsourced solution for major subassemblies, improved design-to-delivery cycle times, design for manufacturability, prototyping and part and component manufacturing, as well as tool chamber parts cleaning and coating, and micro-contamination analytical services. We operate and report results for two operating segments: Products and Services (formerly known as "SPS" and "SSB", respectively). Our Products business primarily designs, engineers and manufactures production tools, components and parts, and modules and subsystems for the semiconductor and display capital equipment markets. 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 Services business provides ultra-high purity parts cleaning, process tool part recoating, surface encapsulation and high sensitivity micro contamination analysis primarily for the semiconductor device makers and wafer fabrication equipment (WFE) markets. We sell 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. Over the long-term, we believe the semiconductor market we serve will continue to grow due to multi-year industry demand from a broad range of drivers including mobile demand driven by 5G, new CPU architectures which are enabling higher performance servers, and cloud, AI and Machine Learning. We also believe that semiconductor original equipment manufacturers ("OEM") are increasingly relying on partners like UCT to fulfill their expanding capacity requirements. Additionally, our Services division is benefiting as device manufacturers rely on precision cleaning, coating and analytics to advance ever more complex devices. OnMarch 31, 2021 , we completed the acquisition ofHam-Let (Israel-Canada) Ltd. ("Ham-Let"), a public company organized under the laws of theState of Israel (not aU.S. registrant), pursuant to an Agreement and Plan of Merger (the "Merger Agreement"), for approximately$362.9 million , which included$273.5 million of equity value plus$91.3 million of net debt offset by the settlement of existing relationship of$1.9 million . Ham-Let engages in the development, manufacturing and marketing of innovative control valves, fittings, and hoses for the control and monitoring of industrial systems in a variety of markets, including the Semiconductor market. These products are primarily used in ultra clean gas transportation systems for the transmission of liquids and gases. The Company's primary reason for this acquisition was to broaden UCT's relevance to the semiconductor equipment market and to provide access to a new set of customers in the semiconductor fab infrastructure market. OnApril 13, 2021 , we completed an underwritten public offering of 3,181,818 shares of our common stock, in which we received net proceeds of approximately$167.6 million , after deducting the underwriting discounts and offering expenses. OnApril 29, 2021 , the Underwriters exercised the option to purchase an additional 477,272 shares of our common stock for approximately$25.2 million in cash. We intend to use the net proceeds from this offering for general corporate purposes, which may include working capital, sales and marketing activities, product development, general and administrative matters, and capital expenditures. We may use a portion of the net proceeds to acquire complementary businesses, products, services, or technologies, although we have no agreements, commitments, or plans for any specific acquisitions at this time. - 28 -
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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. On an on-going basis, we evaluate our estimates and judgments, including those related to inventories, income taxes, business combinations and goodwill, intangible assets and long-lived assets. 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 inventory valuation, accounting for income taxes, business combinations, valuation of goodwill, intangible assets and long-lived assets 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 25, 2020 . 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 25, 2020 , 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 2021 is the 53-week period endingDecember 31, 2021 , and fiscal year 2020 was the 52-week period endedDecember 25, 2020 . The fiscal quarters endedJune 25, 2021 andJune 26, 2020 were both 13-week periods.
Discussion of Results of Operations for the Three and Six months ended
The results of operations for the Company for the three and six months endedJune 25, 2021 include operating activities for Ham-Let since its acquisition date ofMarch 31, 2021 . Revenues Three Months Ended Six Months Ended Revenues by Segment June 25, June 26, Percent June 25, June 26, Percent (Dollars in millions) 2021 2020 Change 2021 2020 Change Products$ 442.5 $ 277.9 59.2 %$ 788.1 $ 537.3 46.7 % Services 72.7 66.9 8.7 % 144.7 128.4 12.7 % Total Revenues$ 515.2 $ 344.8 49.4 %$ 932.8 $ 665.7 40.1 % Products as a percentage of total revenues 85.9 % 80.6 % 84.5 % 80.7 % Services as a percentage of total revenues 14.1 % 19.4 % 15.5 % 19.3 % Total Products revenues increased in the three and six months endedJune 25, 2021 , compared to the same period in the prior year, primarily due to an increase in customer demand in the semiconductor industry, in particular, the wafer fabrication equipment industry and in part due to the inclusion of Ham-Let. Total Services revenues increased in the three and six months endedJune 25, 2021 , compared to the same period in the prior year, primarily due to increases in demand across our customer base. Three Months Ended Six Months Ended Revenues by Geography June 25, June 26, Percent June 25, June 26, Percent (Dollars in millions) 2021 2020 Change 2021 2020 Change United States$ 163.0 $ 148.4 9.8 %$ 307.7 $ 283.5 8.5 % International 352.2 196.4 79.3 % 625.1 382.2 63.6 % Total Revenues$ 515.2 $ 344.8 49.4 %$ 932.8 $ 665.7 40.1 %United States as a percentage of total revenues 31.6 % 43.0 % 33.0 % 42.6 % International as a percentage of total revenues 68.4 % 57.0 % 67.0 % 57.4 % On a geographic basis, revenues represent products shipped from or services performed at ourU.S. and international locations. For the three and six months endedJune 25, 2021 , bothU.S. and international revenues increased due to an overall global increase in semiconductor capital equipment and general industry demand. - 29 -
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Cost of Revenues
Three Months Ended Six Months Ended
Cost of Revenues by Segment June 25, June 26, Percent June 25, June 26, Percent
(Dollars in millions) 2021 2020 Change 2021 2020 Change
Products $ 367.9 $ 229.3 60.4 % $ 651.5 $ 444.0 46.7 %
Services 47.4 41.6 13.9 % 94.5 82.1 15.1 %
Total Cost of Revenues $ 415.3 $ 270.9 53.3 % $ 746.0 $ 526.1 41.8 %
Products as a percentage of total 83.1 % 82.5 % 82.7 % 82.6 %
Products revenues
Services as a percentage of total 65.2 % 62.2 % 65.3 % 63.9 %
Services revenues
Total cost of revenues increased $144.4 million and $219.9 for the three and six
months ended June 25, 2021 due to higher demand for both Products and Services
and in part by the inclusion of Ham-Let operations.
Cost of Products revenues consists of purchased materials, direct labor and
manufacturing overhead. Cost of Products revenues increased $138.6 million for
the three months ended June 25, 2021 compared to the same period in the prior
year, due to the inclusion of Ham-Let, higher volume of sales driving increased
material costs of $110.0 million (including $7.2 million of materials costs
resulting from the step-up in value of Ham-Let's inventories at the
acquisition/valuation date that were sold through during the quarter ended June
25, 2021 ), higher direct labor spending of $20.3 million and higher overhead
costs of $8.3 million (including $0.7 million of intangible amortization
resulting from the acquisition of Ham-Let). Cost of Products increased $207.5
million for the six months ended June 25, 2021 compared to the same period in
the prior year, due to higher volume of sales driving increased material costs
of $169.4 million , higher direct labor spending of $22.8 million and higher
overhead costs of $15.3 million .
Cost of Services revenues consists of direct labor, manufacturing overhead and
materials (such as chemicals, gases and consumables). Cost of Services revenues
increased $5.8 million in the three months ended June 25, 2021 compared to the
same period in the prior year driven by higher volumes of service orders,
resulting in an increase in labor costs of $2.1 million (the largest component
of Cost of Services), higher material costs of $0.6 million and higher overhead
costs of $3.1 million driven by higher service orders. Cost of Services
increased $12.4 million for the six months ended June 25, 2021 compared to the
same period in the prior year due to an increase in labor costs of $4.4 million ,
higher material costs of $2.6 million and higher overhead costs of $5.4 million
driven by higher service orders.
Gross Margin
Three Months Ended Six Months Ended
Gross Profit by Segment June 25, June 26, Percent June 25, June 26, Percent
(Dollars in millions) 2021 2020 Change 2021 2020 Change
Products $ 74.6 $ 48.6 53.5 % $ 136.6 $ 93.3 46.4 %
Services 25.3 25.3 0.0 % 50.2 46.3 8.4 %
Gross profit $ 99.9 $ 73.9 35.2 % $ 186.8 $ 139.6 33.8 %
Gross Margin by Segment
Products 16.9 % 17.5 % 17.3 % 17.4 %
Services 34.8 % 37.8 % 34.7 % 36.1 %
Total Company 19.4 % 21.4 % 20.0 % 21.0 %
Products gross margin decreased in the three and six months ended June 25, 2021 ,
compared to the same period in the prior year, due primarily to $7.2 million of
materials costs resulting from the step-up in value of Ham-Let's inventories at
the acquisition/valuation date that were sold through during the quarter ended
June 25, 2021 as well as $0.7 million of intangible amortization resulting from
the acquisition of Ham-Let, partially offset by higher volume and favorable mix
of higher margin products. Services gross margin decreased in the three and six
months ended June 25, 2021 , compared to the same period in the prior year, due
to increases in cleaning and production materials and subcontract services to
support growth in the business.
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Research and Development
Three Months Ended Six Months Ended
June 25, June 26, Percent June 25, June 26, Percent
(Dollars in millions) 2021 2020 Change 2021 2020 Change
Research and development $ 6.1 $ 3.8 60.5 % $ 10.3 $ 7.2 43.1 %
Research and development as a
percentage of total revenues 1.2 % 1.1 % 1.1 % 1.1 %
Research and development expenses increased 2.3 million and $3.1 million in the
three and six months ended June 25, 2021 compared to the same periods in the
prior year, primarily due to the inclusion of Ham-Let's research and development
activities in the second quarter of 2021 and to an increase in personnel-related
expenses associated with an increase in headcount.
Sales and Marketing
Three Months Ended Six Months Ended
June 25, June 26, Percent June 25, June 26, Percent
(Dollars in millions) 2021 2020 Change 2021 2020 Change
Sales and marketing $ 12.7 $ 5.9 115.3 % $ 20.3 $ 11.7 73.5 %
Sales and marketing as a
percentage of total revenues 2.5 % 1.7 % 2.2 % 1.8 %
Sales and marketing expenses increased $6.8 million in the three months ended
June 25, 2021 compared to the same period in the prior year primarily due to the
inclusion of Ham-Let's sales and marketing activities in the second quarter of
2021 and an increase of $1.0 million in personnel-related expenses in the
Products business. Sales and marketing expenses increased $8.6 million in the
six months ended June 25, 2021 with the comparable period in the prior year due
to the inclusion of Ham-Let's sales and marketing activities in the second
quarter of 2021 and an increase of $2.3 million in personnel-related expenses
driven by higher headcount and bonuses.
General and Administrative
Three Months Ended Six Months Ended
June 25, June 26, Percent June 25, June 26, Percent
(Dollars in millions) 2021 2020 Change 2021 2020 Change
General and administrative $ 49.2 $ 33.4 47.3 % $ 83.9 $ 67.3 24.7 %
General and administrative as a
percentage of total revenues 9.5 % 9.7 % 9.0 % 10.1 %
General and administrative expenses increased $15.8 million in the three months
ended June 25, 2021 , compared to the same period in the prior year, due to $8.1
million of costs related to the acquisition of Ham-Let and to the inclusion of
Ham-Let's general and administrative activities in the second quarter of 2021.
General and administrative expenses increased $16.6 million in the six months
ended June 25, 2021 , compared to the same period in the prior year, due to $9.4
million of expenses related to the acquisition of Ham-Let and the inclusion of
Ham-Let's general and administrative activities in the second quarter of 2021.
Interest and Other Income (Expense), net
Three Months Ended Six Months Ended
June 25, June 26, Percent June 25, June 26, Percent
(Dollars in millions) 2021 2020 Change 2021 2020 Change
Interest income $ 0.1 $ 0.2 -50.0 % $ 0.2 $ 0.5 -60.0 %
Interest expense $ (7.1 ) $ (3.8 ) 86.8 % $ (10.7 ) $ (9.0 ) 18.9 %
Other income (expense), net $ (0.7 ) $ 0.6 -216.7 % $ (5.0 ) $ (2.1 ) 138.1 %
Interest expense increased in the three and six months ended
Other income (expense), net increased$1.3 million in the three months endedJune 25, 2021 , compared to the same period in the prior year, due to increases in the fair value of the common stock purchase obligation and foreign exchange losses of$0.4 million and$0.3 million , respectively, and due to a decrease of$0.6 million in grants income. - 31 - -------------------------------------------------------------------------------- Other income (expense), net increased$2.9 million in the six months endedJune 25, 2021 , compared to the same period in the prior year, due to an increase of$11.6 million in the fair value of forward hedge contracts related to the non-U.S. dollar-denominated acquisition price of Ham-Let, a$0.8 million increase in foreign exchange losses and a decrease of$0.6 million in government grants income. These increases were partially offset by insurance proceeds of$7.3 million received for the reimbursement of our losses in the Cinos Korea fire and by the absence of$3.0 million loss from the change in fair value of contingent the earn-out in fiscal 2021.
Provision for Income Taxes
Three Months Ended Six Months Ended
June 25, June 26, Percent June 25, June 26, Percent
(Dollars in millions) 2021 2020 Change 2021 2020 Change
Provision for income taxes $ 6.2 $ 5.7 8.8 % $ 13.2 $ 10.2 29.4 %
Effective tax rate 25.6 % 20.5 %
23.2 % 23.8 %
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
Liquidity and Capital Resources
Cash and cash Equivalents
The following table summarizes our cash and cash equivalents:
June 25, December 25,
(In millions) 2021 2020 Increase
Total cash and cash equivalents $ 451.4 $ 200.3 $ 251.1
Six Months Ended
June 25, June 26,
(In millions) 2021 2020
Net cash flow provided by (used in):
Operating activities $ 116.7 $ 33.2
Investing activities (370.5 ) (14.1 )
Financing activities 505.2 33.1
Effects of exchange rate changes on cash and cash
equivalents (0.3 ) (0.3 )
Net increase in cash and cash equivalents $ 251.1 $ 51.9 Our primary cash inflows and outflows were as follows:
• For the six months ended
activities of
activities was driven by a
operating assets and liabilities, an
items and an
• 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
in revenues in fiscal 2021 and the timing of collections.
o Inventories increased
outlook in 2021.
o Accounts payable increased
benefits decreased
million and other liabilities increased
timing of payments.
• In the six months ended
was
2020. The change is primarily due to the
the acquisition of Ham-let and by
plant and equipment offset by insurance proceeds of
the first quarter of fiscal 2021.
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• In the six months ended
activities was
ended
to the existing term loan facility and
equity offering, offset by principal payments on bank borrowings and of debt
issuance costs of$43.4 million and$8.9 million , respectively. 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 25, 2021 , we had cash of$451.4 million compared to$200.3 million as ofDecember 25, 2020 . 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 25, 2021 . 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 25, 2021 , we had undistributed earnings of foreign subsidiaries that are indefinitely invested outside of theU.S. of approximately$317.3 million . As ofJune 25, 2021 , we have cash of approximately$269.0 million in our foreign subsidiaries.
Borrowing Arrangements
The following table summarizes our borrowings:
June 25, 2021
Weighted-
Average
(Dollars in millions) Amount Interest Rate
U.S. Term Loan $ 598.9 4.24%
Ham-Let Credit Facilities 8.4 1.78% - 4.59%
Cinos China Credit Facilities 2.7 2.05% - 4.10%
Debt issuance costs (15.3 )
$ 594.7
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 Facility"). We and some of our subsidiaries have agreed to
secure all of their obligations under the Credit Facility 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 and to refinance our previous credit
facilities.
On March 31, 2021 , we entered into the Second Amendment (the "Second Amendment")
to the Credit Facility to, among other things, (i) refinance and reprice its
approximately $272.8 million of existing term B borrowings that will remain
outstanding (the "Repricing") and (ii) obtain a $355.0 million senior secured
incremental term loan B facility (the "Incremental Term Loan") with Barclays
Bank, which increased the amount of term loan indebtedness outstanding under the
Credit Facility.
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-------------------------------------------------------------------------------- The Term Loan has a maturity date ofAugust 27, 2025 , with monthly interest payments in arrears, quarterly principal payments of 0.625% of the outstanding principal balance thereof as ofMarch 31, 2021 , with the remaining principal paid upon maturity. Under the Credit Agreement, the we may elect that the term loans bear interest at a rate per annum equal to either (a) "ABR" (as defined in the Credit Agreement), plus the applicable margin or (b) the "Eurodollar Rate" (as defined in the Credit Agreement), based on LIBOR, plus the applicable margin. The applicable margin for the term loans under the Credit Agreement is equal to a rate per annum equal to either (i) at any time that our corporate family rating is Ba3 (with a stable outlook) or higher from Moody's and BB- (with a stable outlook) or higher from S&P, (x) 3.50% for such Eurodollar term loans and (y) 2.50% for such ABR term loans or (ii) at all other times, (x) 3.75% for such Eurodollar term loans and (y) 2.75% for such ABR term loans. Interest on the term loans is payable on (1) in the case of such ABR term loans the last day of each calendar quarter and (2) in the case of such Eurodollar term loans, the last day of each relevant interest period and, in the case of any interest period longer than three months, on each successive date three months after the first day of such interest period. OnMarch 29, 2021 , we elected that the term loans outstanding as ofMarch 31, 2021 accrue interest based on the "Eurodollar Rate" for an initial interest period of one month. As ofMarch 31, 2021 , the applicable margin with respect to the term loan facility was 3.75%. Pursuant to the Second Amendment to the Credit Agreement made effective onMarch 31, 2021 , the Credit Agreement contains customary LIBOR replacement provisions in the event LIBOR is discontinued. AtJune 25, 2021 , we had an outstanding amount under the Term Loan of$598.9 million , gross of unamortized debt issuance costs of$15.3 million . As ofJune 25, 2021 , the interest rate on the outstanding Term Loan was 3.84%. OnDecember 31, 2021 , LIBOR will officially be phased out. The Company will work with its bank to determine alternative risk-free rates.
The Revolving Credit Facility has an initial available commitment of
The Credit Agreement requires that we maintain certain financial covenants including a consolidated fixed charge coverage ratio (as defined in the 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 endedJune 25, 2021 . The Letter of Credit Facility has an initial available commitment of$50.0 million and a maturity date ofAugust 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 ofJune 25, 2021 , we had$2.4 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$47.6 million on the Letter of Credit Facility and$65.0 million on the Revolving Credit Facility. In 2020, Cinos China amended its existing Credit Agreement and entered into two additional Credit Agreements with a local bank that provide Revolving Credit Facilities for a total available commitment of$3.5 million with various maturity dates throughSeptember 23, 2022 and interest rates ranging from 2.0% to 4.1%. As ofJune 25, 2021 , Cinos China had outstanding debt of$2.7 million with an average interest rate of 3.1% under these Credit Agreements. Cinos Korea has a Credit Agreement that provides a Revolving Credit Facility for a total available commitment of0.6 billion Korean Won (approximately$0.5 million ) with annual renewals beginningJune 2022 with an interest rate of 2.9%. During the six months endedJune 26, 2020 , borrowings under the Revolving Credit Facility were insignificant and no debt was outstanding as ofJune 25, 2021 .
UCT Fluid Delivery Solutions s.r.o. has a credit agreement with a local bank in
the
Ham-Let has credit facilities and other loan agreements with various financial institutions. As ofJune 25, 2021 , Ham-Let had$8.4 million of outstanding debt with interest rates ranging from 1.8% to 4.6%. As ofJune 25, 2021 , our total bank debt was$594.7 million , net of unamortized debt issuance costs of$15.3 million . As ofJune 25, 2021 , we had unused revolving credit facilities of$65.0 million ,$9.8 million and$0.8 million inthe United States ,Czech Republic andChina , 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. - 34 -
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Capital Expenditures
Capital expenditures were$22.8 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 2021 are expected to be financed primarily from our cash flow generated from operations.
Off-Balance Sheet Arrangements
During the periods presented, we do not have 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. In conjunction with the sale of our products in the ordinary course of business, we provide standard indemnification against certain liabilities to our customers, which may include claims of losses by their own customers resulting out of property damages, bodily injuries or deaths, or infringement of intellectual property rights by our products. Our potential liability arising out of intellectual property infringement claims by any third party is generally uncapped. As ofJune 25, 2021 , we have not incurred any significant costs to defend lawsuits or settle claims related to these indemnification arrangements. As a result, we believe the estimated fair value of these arrangements is minimal.
Contractual Obligations
Other than operating leases for certain equipment and real estate and purchase order commitments primarily for inventory, we have no off-balance sheet transactions or similar instruments and, other than the arrangements described under "Borrowing Arrangements" above and our common stock purchase obligations resulting from the acquisition of QGT, 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 25, 2021 : Fiscal Year Fiscal Years Fiscal Years (In millions) Total 2021 2022 - 2023 2024 - 2025 Beyond Operating leases (1)$ 101.7 $ 10.2 $ 36.1$ 23.4 $ 32.0 Borrowing arrangements (2) 610.0 21.4 29.0 559.6 - Common stock purchase obligation (3) 14.0 - 14.0 - - Purchase order commitments (4) 405.1 405.1 - - - Total$ 1,130.8 $ 436.7 $ 79.1$ 583.0 $ 32.0
(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 and excludes lease agreements
with commencement date after
of ASC 842, "Leases".
(2) The total borrowing arrangements reflects obligations gross of
of unamortized debt issuance costs.
(3) The Company is obligated to purchase the common stock owned by one of
with the Cinos Korea shareholder to eliminate the obligation to purchase
certain amount of the common stock owned by the shareholder. As a result,
noncontrolling interest in Cinos Korea would increase by 35.0% beginning in
the third quarter of fiscal 2021.
(4) Represents our outstanding purchase orders primarily for inventory.
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