14 unchanged sentences
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2020, in conformity with accounting principles generally accepted in the United States of America.
−Removed: We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated December 19, 2019, expressed an adverse opinion on the Company’s internal control over financial reporting because of material weaknesses.
−Removed: Change in Accounting Principle
−Removed: As discussed in Note 1 to the financial statements, effective July 1, 2018, the Company has changed its method of accounting for revenue due to adoption of Accounting Standards Codification Topic 606 (ASU No.
−Removed: 2014-09), Revenue from Contracts with Customers , and all subsequent amendments (collectively, “ASC 606”).
−Removed: The Company adopted ASC 606 using the modified retrospective approach.
+Added: We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated August 28, 2020, expressed an adverse opinion on the Company’s internal control over financial reporting because of a material weakness.
Basis for Opinion
12 unchanged sentences
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
−Removed: Related Party Transactions - Variable Interest Entity Primary Beneficiary Determination - Refer to Note 1 to the financial statements
+Added: Variable Interest Entities and Related Party Transactions - Refer to Notes 1 and 13 to the financial statements
Critical Audit Matter Description
8 unchanged sentences
Therefore, the Company does not consolidate Ablecom and Compuware.
−Removed: The Company considered its explicit arrangements with Ablecom and Compuware, including its supplier arrangements, and as a result of the substantial related party relationships between the Company, Ablecom and Compuware, the Company also considered whether any implicit arrangements exist that would cause the Company to protect those related parties’ interests from suffering losses.
+Added: The Company considered its explicit arrangements with Ablecom and Compuware, including its supplier arrangements, and as a result of the substantial related party relationships between the Company, Ablecom and Compuware, the Company also considered whether any implicit arrangements exist that
+Added: would cause the Company to protect those related parties’ interests from suffering losses.
The Company determined that no material implicit arrangements exist with Ablecom, Compuware, or their shareholders.
−Removed: We identified management’s conclusion that it is not the primary beneficiary as a critical audit matter because of the judgments necessary for management to determine whether any explicit and implicit arrangements exist that would cause the Company to protect those related parties’ interest from absorbing losses, as well as the material weaknesses identified by the Company in all five components of Internal Control - Integrated Framework (2013) issued by COSO.
+Added: We identified management’s conclusion that it is not the primary beneficiary as a critical audit matter because of the judgments necessary for management to determine whether any explicit and implicit arrangements exist that would cause the Company to protect those related parties’ interest from absorbing losses.
This required extensive audit effort due to the complexity and variety of related party relationships with Ablecom and Compuware and required a high degree of auditor judgment when performing audit procedures to audit the Company’s conclusion that it is not the primary beneficiary.
1 unchanged sentence
Our audit procedures related to management’s conclusion that it is not the primary beneficiary included the following, among others:
−Removed: We evaluated and tested whether the arrangements are accurately considered and that arrangements have been included in the consideration by comparing those related parties we had identified during our audit procedures for proper inclusion in the Company’s evaluation and performed inspection of source documents on a sample basis.
−Removed: We tested management’s assertion that it does not have the power to direct the activities that are most significant to, or obligation to absorb the losses of, Ablecom and Compuware by reviewing all agreements and transactions between the parties.
+Added: We evaluated and tested whether the arrangements are accurately considered and that such arrangements have been included in the consideration by comparing those related parties we had identified during our audit procedures for proper inclusion in the Company’s evaluation and performed inspection of source documents on a sample basis.
+Added: We tested management’s assertion that the Company does not direct the operations of, or is required to absorb and record losses incurred by Ablecom and Compuware by analyzing the gross margin for contract manufacturing transactions with Ablecom and Compuware in comparison to unrelated third parties to determine if there is an indication of off-market terms, assessing leasing arrangements by performing independent market data searches to assess if such leases are within the normal range of prices for Ablecom and Compuware and recalculating days sales outstanding as well as days purchases outstanding and compared to other contract manufacturers to assess comparability of payment terms.
We obtained confirmations directly from Ablecom and Compuware regarding the nature of their business relationships with the Company, the extent of power, if any, held by the Company over the most significant activities of Ablecom and Compuware’s businesses, and the existence of any implicit arrangements that may have a bearing on the Company’s ability to have power over Ablecom and Compuware.
−Removed: As a result of the material weaknesses identified by the Company in all five components of Internal Control - Integrated Framework (2013) issued by COSO, we increased the extent of testing around the Company’s procedures for assessing whether the arrangements with Ablecom and Compuware are off market or whether they force Ablecom and Compuware to absorb losses.
−Removed: We also increased the extent of testing to determine if there are any agreements that provide the Company with power to direct the activities that are most significant to Ablecom and Compuware.
Inventories - Excess and Obsolescence Reserve - Refer to Notes 1 and 5 to the financial statements
Critical Audit Matter Description
−Removed: The Company’s inventories are stated at weighted average cost, subject to lower of cost or net realizable value, and as necessary, the Company writes down the valuation of inventories for excess and obsolescence.
+Added: The Company’s inventories are stated at lower of cost, using weighted average cost method, or net realizable value.
+Added: The Company evaluates inventory for lower of cost or net realizable value and excess and obsolescence and, as necessary, writes down the valuation of units based upon inventory aging, forecasted usage and sales, anticipated selling price, product obsolescence and other factors.
The provision for excess and obsolete inventory for the fiscal year ended June 30, 2020, was $22.6 million.
−Removed: We identified the excess and obsolescence reserve as a critical audit matter because of the judgments management makes to estimate the excess and obsolescence reserve, as well as the material weaknesses identified by the Company in all five components of Internal Control - Integrated Framework (2013) issued by COSO.
+Added: We identified the excess and obsolescence reserve as a critical audit matter because of judgments made by management in recording the manual adjustments that management may make to estimate the excess and obsolescence reserve.
This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the methodology and the reasonableness of the excess and obsolescence reserve.
1 unchanged sentence
Our audit procedures related to the Company’s excess and obsolescence reserve included the following procedures, among others:
−Removed: We gained an understanding and evaluated the Company’s methodology for determining inventory that is excess or obsolete and the key assumptions and judgments made as part of the process.
−Removed: We evaluated the assumptions used by the Company to define what is considered aged inventory by assessing historical trends in the Company’s product life cycle as well as evaluating the underlying calculations applied to the aged inventory.
−Removed: We evaluated the inventory valuation utilizing the methodology above to assess the inventory reserve rate applied to different aging buckets.
−Removed: As a result of the Company’s material weaknesses identified by the Company in all five components of Internal Control - Integrated Framework (2013) issued by COSO, we increased the extent of testing on reports derived from the Company’s systems and applications.
−Removed: Revenue - Refer to Note 3 to the financial statements
−Removed: Critical Audit Matter Description
−Removed: The Company recognizes revenue from sales of products as control is transferred to customers, which generally happens at the point of shipment or upon delivery, unless customer acceptance is uncertain.
−Removed: Revenue from distributors is recognized when the distributor obtains control of the product, which generally happens at the point of shipment or upon delivery, unless customer acceptance is uncertain.
−Removed: Net sales for the fiscal year ended June 30, 2019 was $3.5 billion, which principally consist of product sales.
−Removed: We identified the timing of revenue recognition for product sales (i.e., whether the Company recorded product sales in the appropriate fiscal year) as a critical audit matter because of the material weaknesses identified by the Company associated with revenue recognition accounting controls and the material weaknesses in all five components of Internal Control - Integrated Framework (2013) issued by COSO.
−Removed: This made auditing the timing of revenue recognition for product sales more challenging and required an increased extent of audit effort, including the need for us to involve specialists and modify the nature and extent of our audit procedures and the evidence obtained.
−Removed: How the Critical Audit Matter Was Addressed in the Audit
−Removed: Our audit procedures related to the timing of revenue recognition for product sales included the following, among others:
−Removed: We selected a sample of product sales from the period immediately preceding the Company’s fiscal year end and obtained the invoice, purchase order, customer contract or agreement, packing list, bill of lading, proof of delivery, and evidence of cash collection, in order to evaluate whether revenue was recognized in the appropriate fiscal year.
−Removed: We selected a sample of product sales for the year and obtained the related contract to identify whether customer acceptance clauses existed that delayed the timing of revenue recognition.
−Removed: We selected a sample of credit memos from the period immediately subsequent to the Company’s fiscal year end and obtained the credit memo and the related invoice, return merchandise authorization form, and shipping documents, as applicable and among others, to evaluate whether revenue was recognized in the fiscal year ended June 30, 2019 before control was transferred to the customer or customer acceptance was certain.
−Removed: We obtained and evaluated internal certifications provided by the Company’s employees related to sales transactions in order to identify the existence of side agreements that could impact the timing of revenue recognition.
−Removed: We also selected a sample of employees and conducted interviews to corroborate the accuracy and completeness of the information provided in the certifications.
−Removed: We selected a sample of the Company’s top customers and confirmed the terms and conditions of the master sales
−Removed: agreement or purchase orders directly with the customer.
−Removed: As a result of the material weaknesses, among other modifications to the nature and extent of our audit procedures and the evidence obtained, we involved forensic specialists, increased the number of selections we would have otherwise made if the Company’s controls were designed and operating effectively.
−Removed: With the assistance of information technology and data analytics specialists, we also performed data extraction procedures to test the accuracy and completeness of the revenue information generated from the Company’s systems and applications.
+Added: We gained an understanding and evaluated the Company’s methodology for determining inventory that is excess or obsolete and the key assumptions and judgments made as part of the process, including manual adjustments.
+Added: We evaluated management’s estimate by performing corroborative inquiry with the Company’s program managers, sales personnel, and/or buyers, and inspected correspondence and other communications between the Company’s operations team and customers.
+Added: As a result of the Company’s material weakness identified in IT general controls, we increased the extent of testing on reports derived from the Company’s systems and applications.
/s/ Deloitte & Touche LLP
San Jose, California
−Removed: December 19, 2019
+Added: August 28, 2020
We have served as the Company's auditor since fiscal 2003.
19 unchanged sentences
Deferred revenue, non-current
+Added: Long-term debt
Other long-term liabilities (including related party balance of $1,699 and $3,000 at June 30, 2020 and 2019, respectively)
4 unchanged sentences
Authorized shares:
+Added: Outstanding shares:
+Added: 52,408,703 and 49,956,288 at June 30, 2020 and June 30, 2019, respectively
Issued shares:
1 unchanged sentence
Treasury stock (at cost), 1,333,125 shares at June 30, 2020 and 2019
−Removed: Accumulated other comprehensive (loss) income
+Added: Accumulated other comprehensive loss
Retained earnings
17 unchanged sentences
Income from operations
−Removed: Other expense, net
+Added: Other income (expense), net
Interest expense
1 unchanged sentence
Income tax provision
−Removed: Share of loss from equity investee, net of taxes
+Added: Share of income (loss) from equity investee, net of taxes
Net income per common share:
22 unchanged sentences
Balance at June 30, 2017
+Added: Cumulative effect of adjustment from adoption of new accounting standard, net of taxes
Exercise of stock options, net of taxes
1 unchanged sentence
Shares withheld for the withholding tax on vesting of restricted stock units
−Removed: Purchase of treasury stock
Stock-based compensation
−Removed: Tax benefit resulting from stock option and restricted stock unit transactions
Net changes in unrealized loss on investments, net of taxes
3 unchanged sentences
Cumulative effect of adjustment from adoption of new accounting standard, net of taxes
−Removed: Exercise of stock options, net of taxes
Release of common stock shares upon vesting of restricted stock units
1 unchanged sentence
Stock-based compensation
−Removed: Net changes in unrealized loss on investments, net of taxes
−Removed: Foreign currency translation gain
−Removed: Net income (loss)
+Added: Foreign currency translation loss
Balance at June 30, 2019
−Removed: Cumulative effect of adjustment from adoption of new accounting standards, net of taxes
+Added: Exercise of stock options, net of taxes
Release of common stock shares upon vesting of restricted stock units
9 unchanged sentences
OPERATING ACTIVITIES:
−Removed: Reconciliation of net income to net cash provided by (used in) operating activities:
+Added: Reconciliation of net income to net cash (used in) provided by operating activities:
Depreciation and amortization
Stock-based compensation expense
−Removed: Excess tax benefits from stock-based compensation
Allowance (recoveries) for doubtful accounts
1 unchanged sentence
Impairment of investments
−Removed: Share of loss from equity investee
+Added: Share of (income) loss from equity investee
Foreign currency exchange (gain) loss
8 unchanged sentences
Other long-term liabilities (including changes in related party balances of $(1,301), $(500) and $(1,400) in fiscal years 2020, 2019, and 2018, respectively)
−Removed: Net cash provided by (used in) operating activities
+Added: Net cash (used in) provided by operating activities
INVESTING ACTIVITIES:
1 unchanged sentence
Proceeds from redemption of auction rate security
−Removed: Investments in privately held companies
+Added: Proceeds from sale of investment in a privately-held company
Net cash used in investing activities
4 unchanged sentences
Payment of other fees for debt financing
−Removed: Advances under receivables financing arrangement
Proceeds from exercise of stock options
−Removed: Excess tax benefits from stock-based compensation
Payments of obligations under capital leases
Payment of withholding tax on vesting of restricted stock units
−Removed: Payments to acquire treasury stock
−Removed: Net cash (used in) provided by financing activities
+Added: Net cash provided by (used in) financing activities
Effect of exchange rate fluctuations on cash
−Removed: Net increase (decrease) in cash, cash equivalents, and restricted cash
+Added: Net (decrease) increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
4 unchanged sentences
Non-cash investing and financing activities:
−Removed: Equipment purchased under capital leases
Unpaid property, plant and equipment purchases (including due to related parties of $2,223, $1,609 and $654 as of June 30, 2020, 2019, and 2018, respectively)
16 unchanged sentences
Investments in equity securities which do not have readily determinable fair values and for which the Company is not able to exercise significant influence over the investee are accounted for under the measurement alternative which is the cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar securities of the same investee.
−Removed: Prior to July 1, 2018, investments for which the Company was not able to exercise significant influence over the investee were accounted for under the cost method.
−Removed: Certain reclassifications have been made to the amounts for the fiscal year 2017 consolidated statement of operations and consolidated statement of cash flows in order to conform to the current year’s presentation.
Use of Estimates
GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
−Removed: Such estimates include, but are not limited to:
−Removed: allowances for doubtful accounts and sales returns, inventory valuation, useful lives of property, plant and equipment, product warranty accruals, stock-based compensation, impairment of investments and long-lived assets, and income taxes.
+Added: Such estimates include, but are not limited to revenue recognition, allowances for doubtful accounts and sales returns, inventory valuation, useful lives of property, plant and equipment, product warranty accruals, stock-based compensation, impairment of investments and long-lived assets, and income taxes.
The Company’s estimates are evaluated on an ongoing basis and changes in the estimates are recognized prospectively.
Actual results could differ from those estimates.
+Added: The Company considered estimates of the economic implications of the COVID-19 pandemic on its critical and significant accounting estimates, including an assessment of the collectability of each customer contract as part of the revenue recognition process, assessment of the valuation of accounts receivable, assessment of provision for excess and obsolete inventory and an impairment of long-lived assets.
Fair Value of Financial Instruments
8 unchanged sentences
Level 2 - Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly;
+Added: Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
Accounts receivable and accounts payable are carried at cost, which approximates fair value due to the short maturity of these instruments.
−Removed: Cash equivalents, certificates of deposit and investments in auction rate securities are carried at fair value.
−Removed: Short-term debt is carried at amortized cost, which approximates its fair value based on borrowing rates currently available to the Company for loans with similar terms.
+Added: Cash equivalents, certificates of deposit and the investment in an auction rate security are carried at fair value.
+Added: Short-term and long-term debt is carried at amortized cost, which approximates its fair value based on borrowing rates currently available to the Company for loans with similar terms.
Cash and Cash Equivalents
10 unchanged sentences
Unrealized gains and losses on auction rate securities are included as a component of accumulated other comprehensive (loss) income, net of tax.
−Removed: Inventories are stated at weighted average cost, subject to lower of cost or net realizable value.
−Removed: Net realizable value is the estimated selling price of our products in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
+Added: Inventories are stated at lower of cost, using weighted average cost method, or net realizable value.
+Added: Net realizable value is the estimated selling price of the Company's products in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Inventories consist of purchased parts and raw materials (principally electronic components), work in process (principally products being assembled) and finished goods.
−Removed: The Company evaluates inventory on a quarterly basis for lower of cost or net realizable value and excess and obsolescence and, as necessary, writes down the valuation of units based upon the Company's forecasted usage and sales, anticipated selling price, product obsolescence and other factors.
+Added: The Company evaluates inventory on a quarterly basis for excess and obsolescence and lower of cost or net realizable value and, as necessary, writes down the valuation of inventories based upon the Company's inventory aging, forecasted usage and sales, anticipated selling price, product obsolescence and other factors.
Once inventory is written down, its new value is maintained until it is sold or scrapped.
−Removed: Prior to July 1, 2017, inventories were stated at weighted-average cost, subject to lower of cost or market.
The Company receives various rebate incentives from certain suppliers based on its contractual arrangements, including volume-based rebates.
2 unchanged sentences
Property, plant and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets as follows:
−Removed: SUPER MICRO COMPUTER, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Machinery and equipment
5 unchanged sentences
Shorter of lease term or estimated useful life
−Removed: For assets acquired and financed under capital leases, the present value of the future minimum lease payments is recorded at the date of acquisition as property, plant and equipment with the corresponding amount recorded as a capital lease obligation, and the amortization is computed on a straight-line basis over the shorter of the lease term or estimated useful life.
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Long-Lived Assets
3 unchanged sentences
Revenue Recognition
−Removed: The Company’s revenue recognition policy and related disclosures are discussed in Note 3, “Revenue.”
+Added: The Company generates revenues from the sale of server and storage systems, subsystems, accessories, services, server software management solutions, and support services.
+Added: Product sales .
+Added: The Company recognizes revenue from sales of products as control is transferred to customers, which generally happens at the point of shipment or upon delivery, unless customer acceptance is uncertain.
+Added: Products sold by the Company are delivered via shipment from the Company’s facilities or drop shipment directly to its customers from a Company vendor.
+Added: The Company may use distributors to sell products to end customers.
+Added: Revenue from distributors is recognized when the distributor obtains control of the product, which generally happens at the point of shipment or upon delivery.
+Added: The Company applies judgment in determining the transaction price as the Company may be required to estimate variable consideration when determining the amount of revenue to recognize.
+Added: As part of determining the transaction price in contracts with customers, the Company estimates reserves for future sales returns based on a review of its history of actual returns for each major product line.
+Added: Based upon historical experience, a refund liability is recorded at the time of sale for estimated product returns and an asset is recognized for the amount expected to be recorded in inventory upon product return, less the expected recovery costs.
+Added: The Company also reduces revenue for the estimated costs of customer and distributor programs and incentive offerings such as price protection and rebates as well as the estimated costs of cooperative marketing arrangements where the fair value of the benefit derived from the costs cannot be reasonably estimated.
+Added: Any provision for customer and distributor programs and other discounts is recorded as a reduction of revenue at the time of sale based on an evaluation of the contract terms and historical experience.
+Added: Services sales.
+Added: The Company’s sale of services mainly consists of extended warranty and on-site services.
+Added: Revenue related to extended warranty commences upon the expiration of the standard warranty period and is recognized ratably over the contractual period as the Company stands ready to perform any required warranty service.
+Added: Revenue related to on-site services commences upon recognition of the product sale and is recognized ratably over the contractual period as the on-site services are made available to the customer.
+Added: These service contracts are typically one to five years in length.
+Added: Service revenue has been less than 10% of net sales for all periods presented and is not separately disclosed.
+Added: Contracts with multiple promised goods and services.
+Added: Certain of the Company’s contracts contain multiple promised goods and services.
+Added: The Company assesses whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract.
+Added: This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such goods or services are separable from the other aspects of the contractual relationship.
+Added: Performance obligations in a contract are identified based on the promised goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract.
+Added: If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation.
+Added: Revenue allocated to each performance obligation is recognized at the time the related performance obligation is satisfied by transferring control of the promised good or service to a customer.
+Added: If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.
+Added: Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis.
+Added: The Company determines standalone selling prices based on the price at which the performance obligation is sold separately.
+Added: If the standalone selling price is not observable
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
+Added: through past transactions, the Company applies judgment to estimate the standalone selling price taking into account available information, such as internally approved pricing guidelines with respect to geographies, customer type, internal costs, and gross margin objectives, for the related performance obligations.
+Added: When the Company receives consideration from a customer prior to transferring goods or services to the customer, the Company records a contract liability (deferred revenue).
+Added: The Company also recognizes deferred revenue when it has an unconditional right to consideration (i.e., a receivable) before transfer of control of goods or services to a customer.
+Added: The Company considers shipping & handling activities as costs to fulfill the sales of products.
+Added: Shipping revenue is included in net sales when control of the product is transferred to the customer, and the related shipping and handling costs are included in cost of sales.
+Added: Taxes imposed by governmental authorities on the Company's revenue producing activities with customers, such as sales taxes and value added taxes, are excluded from net sales and included in operating expenses.
Allowances for Doubtful Accounts
−Removed: Customers are subjected to a credit review process that evaluates each customer’s financial position and ability to pay.
+Added: Customers are subjected to a credit review process that evaluates each customer’s financial position and ability and intent to pay.
On a quarterly basis, the Company makes estimates of its uncollectible accounts receivable by analyzing the aging of accounts receivable, history of bad debts, customer concentrations, customer-credit-worthiness, and current economic trends to evaluate the adequacy of the allowance for doubtful accounts.
−Removed: The Company's provision for (recovery of) bad debt was $7.1 million , $(0.1) million , and $0.3 million in fiscal years 2019 , 2018 and 2017 , respectively.
+Added: The Company's (recovery of) provision for bad debt was $( 3.1 ) million , $ 7.1 million , and $( 0.1 ) million in fiscal years 2020 , 2019 and 2018 , respectively.
Cost of Sales
1 unchanged sentence
Product Warranties
−Removed: The Company offers product warranties ranging from 15 to 39 months against any defective products.
+Added: The Company offers product warranties typically ranging from 15 to 39 months against any defective products.
These standard warranties are assurance type warranties and the Company does not offer any services beyond the assurance that the product will continue working as specified.
−Removed: Therefore, under recently adopted guidance, Revenue from Contracts with Customers , (“ASC 606”), these warranties are not considered separate performance obligations in the arrangement.
+Added: Therefore, these warranties are not considered separate performance obligations in the arrangement.
Based on historical experience, the Company accrues for estimated returns of defective products at the time revenue is recognized.
The Company monitors warranty obligations and may make revisions to its warranty reserve if actual costs of product repair and replacement are significantly higher or lower than estimated.
−Removed: Accruals for anticipated future warranty costs are charged to cost of sales and included in accrued liabilities and other long-term liabilities.
+Added: Accruals for anticipated future warranty costs are recorded to cost of sales and included in accrued liabilities and other long-term liabilities.
Warranty accruals are based on estimates that are updated on an ongoing basis taking into consideration inputs such as new product introductions, changes in the volume of claims compared with the Company's historical experience, and the changes in the cost of servicing warranty claims.
1 unchanged sentence
The following table presents for the fiscal years ended June 30, 2020 , 2019 and 2018 , the reconciliation of the changes in accrued warranty costs which is included as a component of accrued liabilities and other long-term liabilities (in thousands):
−Removed: SUPER MICRO COMPUTER, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Years Ended June 30,
6 unchanged sentences
Non-current portion
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Research and Development
−Removed: Research and development expenses consist of personnel expenses including:
−Removed: salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our research and development personnel, as well as materials and supplies, consulting services, third-party testing services and equipment and facility expenses related to our research and development activities.
+Added: Research and development expenses consist of personnel expenses including salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for the Company's research and development personnel, as well as materials and supplies, consulting services, third-party testing services and equipment and facility expenses related to the Company's research and development activities.
All research and development costs are expensed as incurred.
1 unchanged sentence
Such amounts are recorded as a reduction of research and development expenses and were $ 2.1 million , $ 2.8 million , and $ 6.1 million for the fiscal years ended June 30, 2020 , 2019 and 2018 , respectively.
+Added: During the fiscal year ended June 30, 2020, the Company also recorded a $ 9.5 million net settlement fee as a reduction in the research and development expenses related to the reimbursement of previously incurred expenses for one canceled joint product development agreement.
Software development costs, including costs to develop software sold, leased, or otherwise marketed, that are incurred subsequent to the establishment of technological feasibility are capitalized if significant.
6 unchanged sentences
Stock-Based Compensation
−Removed: The Company measures and recognizes compensation expense for all share-based awards made to employees and non-employees, including stock options and restricted stock units ("RSUs").
−Removed: The share-based awards granted to non-employees have not been material to date.
−Removed: The Company is required to estimate the fair value of share-based awards on the date of grant.
+Added: The Company measures and recognizes compensation expense for all share-based awards made to employees and non-employees, including stock options, restricted stock units ("RSUs") and performance-based restricted stock units (“PRSUs”).
The Company recognizes the grant date fair value of all share-based awards over the requisite service period and accounts for forfeitures as they occur.
−Removed: Prior to July 1, 2017, the Company estimated forfeitures and expensed the value of awards that were ultimately expected to vest over the requisite service periods.
−Removed: The fair value of RSUs with service conditions or performance conditions is based on the closing market price of the Company's common stock on the date of grant.
−Removed: The fair value for RSUs with service conditions, or time-based RSUs, is amortized on a straight-line basis over the requisite service period.
−Removed: The fair value for RSUs with performance conditions ("PRSUs") is recognized on a ratable basis over the requisite service period when it is probable the performance conditions of the awards will be met.
−Removed: The Company reassesses the probability of vesting at each reporting period and adjusts the total compensation expense of the award based on this probability assessment.
+Added: Stock option and RSU awards are recognized to expense on a straight-line basis over the requisite service period.
+Added: PRSU awards are recognized to expense using an accelerated method only when it is probable that a performance condition is met during the vesting period.
+Added: If it is not probable, no expense is recognized and the previously recognized expense is reversed.
+Added: The Company bases initial accrual of compensation expense on the estimated number of PRSUs that are expected to vest over the requisite service period.
+Added: That estimate is revised if subsequent information indicates that the actual number of PRSUs is likely to differ from previous estimates.
+Added: The cumulative effect on current and prior periods of a change in the estimated number of PRSUs expected to vest is recognized in stock-based compensation expense in the period of the change.
+Added: Previously recognized compensation expense is not reversed if vested stock options, RSUs or PRSUs for which the requisite service has been rendered and the performance condition has been met expire unexercised or are not settled.
+Added: The fair value of RSUs and PRSUs is based on the closing market price of the Company's common stock on the date of grant.
The Company estimates the fair value of stock options granted using a Black-Scholes option pricing model.
1 unchanged sentence
The expected term represents the period that the Company’s stock-based awards are expected to be outstanding and was determined based on the Company's historical experience.
−Removed: The expected volatility is based on the implied and historical volatility of the Company’s common stock.
+Added: The expected volatility is based on the historical volatility of the Company’s common stock.
The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.
+Added: Recognition of leases for periods after the Company’s adoption of the new leasing standard as of July 1, 2019
+Added: The Company has arrangements for the right to use certain of its office, warehouse spaces and other premises, and equipment.
+Added: As of July 1, 2019, the Company determines at inception if an arrangement is or contains a lease.
+Added: When the terms of a lease effectively transfer control of the underlying asset to the Company, it is classified as a finance lease.
+Added: All other leases are classified as operating leases.
SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: Leases are evaluated and recorded as capital leases if one of the following is true at inception:
−Removed: (a) the present value of minimum lease payments meets or exceeds 90% of the fair value of the asset, (b) the lease term is greater than or equal to 75% of the economic life of the asset, (c) the lease arrangement contains a bargain purchase option, or (d) title to the property transfers to the Company at the end of the lease.
−Removed: The Company records an asset and liability for capital leases at present value of the minimum lease payments based on the incremental borrowing rate.
−Removed: Assets are depreciated over the useful life in accordance with the Company’s depreciation policy while rental payments and interest on the liability are accounted for using the effective interest method.
−Removed: Leases that are not classified as capital leases are accounted for as operating leases.
−Removed: Operating lease agreements that have tenant improvement allowances are evaluated for lease incentives.
−Removed: For leases that contain escalating rent payments, the Company recognizes rent expense on a straight-line basis over the lease term, with any lease incentives amortized as a reduction of rent expense over the lease term.
+Added: Operating Leases
+Added: For operating leases with lease terms of more than 12 months, operating lease right-of-use ("ROU") assets are recorded in long-term other assets, and lease liabilities are recorded in accrued liabilities and other long-term liabilities on the consolidated balance sheet.
+Added: The Company's lease term includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option.
+Added: The Company elected to apply the short-term lease recognition exemption and does not recognize ROU asset and lease liabilities for leases with an initial term of 12 months or less and recognizes as expense the payments under such leases on a straight-line basis over the lease term.
+Added: The Company's leases with an initial term of 12 months or less are immaterial.
+Added: Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments over the lease term.
+Added: Operating lease ROU assets and liabilities are recognized at lease commencement based on the present value of the remaining lease payments discounted using the Company’s incremental borrowing rate as the interest rate implicit in the lease arrangements is not readily determinable.
+Added: The incremental borrowing rate is estimated to be the interest rate on a fully collateralized basis with similar terms and payments and in the economic environment where the leased asset is located.
+Added: Operating lease ROU assets also include initial direct costs incurred, prepaid lease payments, minus any lease incentives.
+Added: Operating lease expense is recognized on a straight-line basis over the lease term.
+Added: The Company accounts for fixed payments for lease and non-lease components as a single lease component which increases the amount of ROU assets and liabilities.
+Added: Non-lease components that are variable costs, such as common area maintenance, are expensed as incurred and not included in the ROU assets and lease liabilities.
+Added: Finance Leases
+Added: Assets under finance leases are recorded in property, plant and equipment, net and lease liabilities are included in accrued liabilities and other long-term liabilities on the consolidated balance sheet.
+Added: Finance lease interest expense is recognized based on an effective interest method and depreciation of assets is recorded on a straight-line basis over the shorter of the lease term and useful life of the asset.
+Added: The Company's finance leases are immaterial.
+Added: Recognition of leases for periods prior to the Company’s adoption of the new leasing standard as of July 1, 2019
+Added: Prior to July 1, 2019, leases were evaluated and recorded as capital leases if one of the following was true at inception:
+Added: (a) the present value of minimum lease payments met or exceeded 90% of the fair value of the asset, (b) the lease term was greater than or equal to 75% of the economic life of the asset, (c) the lease arrangement contained a bargain purchase option, or (d) title to the property transferred to the Company at the end of the lease.
+Added: The Company recorded an asset and liability for capital leases at present value of the minimum lease payments based on the incremental borrowing rate.
+Added: Assets were depreciated over the useful life in accordance with the Company’s depreciation policy while rental payments and interest on the liability was accounted for using the effective interest method.
+Added: Leases that were not classified as capital leases were accounted for as operating leases.
+Added: Operating lease agreements that had tenant improvement allowances were evaluated for lease incentives.
+Added: For leases that contained escalating rent payments, the Company recognized rent expense on a straight-line basis over the lease term, with any lease incentives amortized as a reduction of rent expense over the lease term.
The Company accounts for income taxes under an asset and liability approach.
−Removed: Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax reporting purposes, net operating loss carry-forwards and other tax credits measured by applying enacted tax laws related to the financial statement periods.
+Added: Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax reporting purposes, net of operating loss carry-forwards and other tax credits measured by applying enacted tax laws related to the financial statement periods.
Valuation allowances are provided when necessary to reduce deferred tax assets to an amount that is more likely than not to be realized.
1 unchanged sentence
The first step is to determine whether it is more likely than not that each income tax position would be sustained upon audit.
−Removed: The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority.
+Added: The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
+Added: being realized upon ultimate settlement with the tax authority.
Estimating these amounts requires the Company to determine the probability of various possible outcomes.
11 unchanged sentences
(“Ablecom”) and its affiliate, Compuware Technology, Inc.
−Removed: ("Compuware") are VIEs in accordance with applicable accounting standards and guidance;
+Added: ("Compuware"), are VIEs;
however, the Company is not the primary beneficiary as it does not have the power to direct the activities that are most significant to the entities and therefore, the Company does not consolidate these entities.
−Removed: In performing its analysis, the Company considered its explicit arrangements with Ablecom and Compuware, including the supplier arrangements.
−Removed: Also, as a result of the substantial related party relationships between the Company and these entities, the Company considered whether any implicit arrangements exist that would cause the Company to protect those related parties’ interests from suffering losses.
+Added: In performing its analysis, the Company considered its explicit arrangements with Ablecom and Compuware, all contractual arrangements with these entities.
+Added: Also, as a result of the substantial related party relationships between the Company and these entities, the Company considered whether any implicit arrangements exist that would cause the Company to protect these related parties’ interests from suffering losses.
The Company determined it has no material implicit arrangements with Ablecom, Compuware or their shareholders.
1 unchanged sentence
(the "Management Company") in Taiwan to manage the common areas shared by the Company and Ablecom for its separately constructed manufacturing facilities.
−Removed: In fiscal year 2012, each company contributed $0.2 million and owns 50% of the
−Removed: SUPER MICRO COMPUTER, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: Management Company.
+Added: In fiscal year 2012, each party contributed $ 0.2 million for a 50 % ownership interest of the Management Company.
The Company has concluded that the Management Company is a VIE, and the Company is the primary beneficiary as it has the power to direct the activities that are most significant to the Management Company.
−Removed: For the fiscal years ended 2019 , 2018 and 2017 , the accounts of the Management Company have been consolidated with the accounts of Super Micro Computer, and a noncontrolling interest has been recorded for Ablecom's interest in the net assets and operations of the Management Company.
+Added: For the fiscal years ended 2020 , 2019 and 2018 , the accounts of the Management Company were consolidated with the accounts of Super Micro Computer, and a noncontrolling interest was recorded for Ablecom's interest in the net assets and operations of the Management Company.
Net income (loss) attributable to Ablecom's interest was not material for the periods presented and was included in general and administrative expenses in the Company's consolidated statements of operations.
15 unchanged sentences
The effects of foreign currency translation are included in stockholders’ equity as a component of accumulated other comprehensive (loss) income in the accompanying consolidated balance sheets and periodic movements are summarized as a line item in the consolidated statements of comprehensive income.
−Removed: The functional currency of the Company's equity method investee is the local currency.
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
+Added: The Company has an investment in a privately-held company that is accounted for under the equity method (the "Corporate Venture").
+Added: The functional currency of the Corporate Venture is the Chinese Yuan.
Adjustments for the Company's share of the effects of foreign currency translation from local currency to U.S.
3 unchanged sentences
Diluted net income per common share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued.
−Removed: Potentially dilutive securities include outstanding stock options and unvested RSUs.
+Added: Potentially dilutive securities include outstanding stock options and unvested RSUs and PRSUs.
Contingently issuable shares are included in computing basic net income per common share as of the date that all necessary conditions, including service vesting conditions have been satisfied.
Contingently issuable shares are considered for computing diluted net income per common share as of the beginning of the period in which all necessary conditions have been satisfied and the only remaining vesting condition is a service vesting condition.
−Removed: Under the treasury stock method, an increase in the fair market value of the Company's common stock results in a greater dilutive effect from outstanding stock options and RSUs.
+Added: Under the treasury stock method, an increase in the fair market value of the Company's common stock results in a greater dilutive effect from outstanding stock options and RSUs and PRSUs.
Additionally, the exercise of stock options and the vesting of RSUs results in a further dilutive effect on net income per share.
The computation of basic and diluted net income per common share is as follows (in thousands, except per share amounts):
−Removed: SUPER MICRO COMPUTER, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Years Ended June 30,
7 unchanged sentences
Concentration of Supplier Risk
−Removed: Certain materials used by the Company in the manufacture of its products are available from a limited number of suppliers.
+Added: Certain materials used by the Company in the manufacturing of its products are available from a limited number of suppliers.
Shortages could occur in these materials due to an interruption of supply or increased demand in the industry.
One supplier accounted for 26.8 % , 21.8 % , and 26.0 % of total purchases for the fiscal years ended June 30, 2020 , 2019 and 2018 , respectively.
−Removed: Ablecom and Compuware, related parties of the Company as noted in Note 12, "Related Party Transactions", accounted for 9.2% , 9.0% , and 11.1% of total cost of sales for the fiscal years ended June 30, 2019 , 2018 and 2017 , respectively.
+Added: Ablecom and Compuware, related parties of the Company as noted in Note 13, "Related Party Transactions,"
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
+Added: accounted for 10.1 % , 9.2 % , and 9.0 % of total cost of sales for the fiscal years ended June 30, 2020 , 2019 and 2018 , respectively.
Concentration of Credit Risk
3 unchanged sentences
Accounting Pronouncements Recently Adopted
−Removed: In May 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance, ASC 606, that supersedes nearly all U.S.
−Removed: GAAP on revenue recognition and eliminates industry-specific guidance.
−Removed: ASC 606 provides a unified model in determining when and how revenue is recognized with the core principle that revenue should be recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
−Removed: Since its issuance, the FASB has issued several amendments to ASC 606.
−Removed: The Company adopted ASC 606 on July 1, 2018 using the modified retrospective method.
−Removed: In connection with the adoption of ASC 606, the Company recorded a transition adjustment to increase retained earnings by $6.8 million as of July 1, 2018.
−Removed: The comparative information has not been recast and continues to be reported under the accounting standards in effect for those periods.
−Removed: The primary impact of the adoption of ASC 606 was the acceleration of revenue recognition for (i) sales to distributors where the Company previously accounted for such sales on a sell-through basis and (ii) software arrangements.
−Removed: The following tables summarize the impacts of the adoption of ASC 606 on the Company’s consolidated financial statements.
−Removed: The adoption of ASC 606 did not have any impact on the net cash provided by operating activities.
−Removed: Selected Captions from the Consolidated Balance Sheet as of June 30, 2019 (in thousands)
−Removed: SUPER MICRO COMPUTER, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: Balances without adoption of ASC 606
−Removed: Accounts receivable, net of allowances
−Removed: Prepaid expenses and other current assets
−Removed: Deferred income taxes, net
−Removed: LIABILITIES AND STOCKHOLDERS' EQUITY
−Removed: Accrued liabilities
−Removed: Deferred revenue
−Removed: Income taxes payable
−Removed: Deferred revenue, non-current
−Removed: Retained earnings
−Removed: Selected Captions from the Consolidated Statement of Operations for the year ended June 30, 2019 (in thousands)
−Removed: Balances without adoption of ASC 606
−Removed: Cost of sales
−Removed: General and administrative
−Removed: Income before income tax provision
−Removed: Income tax provision
−Removed: In July 2015, the FASB issued an amendment to the accounting guidance, Inventory:
−Removed: Simplifying the Measurement of Inventory .
−Removed: The amendment requires entities to measure inventory at the lower of cost and net realizable value thereby simplifying the existing guidance under which an entity must measure inventory at the lower of cost or market.
−Removed: The Company adopted the accounting guidance on July 1, 2017.
−Removed: The effect of the adoption had no impact on the consolidated financial statements and related disclosures.
−Removed: In January 2016, the FASB issued new guidance, Financial Instruments - Overall:
−Removed: Recognition and Measurement of Financial Assets and Financial Liabilities.
−Removed: This guidance changes the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments.
−Removed: The most significant impact of this accounting standard update is that it requires the remeasurement of equity investments not accounted for under the equity method to be recorded at fair value through the consolidated statement of operations at the end of each reporting period.
−Removed: The Company adopted this accounting standard update as of July 1, 2018.
−Removed: The result of the adoption did not have a material impact on the consolidated financial statements.
−Removed: As a result of the adoption of the new standard, the Company’s equity investments are accounted for as follows:
−Removed: Marketable equity securities that have a readily determinable fair value are measured and recorded at fair value.
−Removed: Non-marketable equity securities that do not have a readily determinable fair value and for which the Company does not control the investee nor is it able to exert significant influence over the investee are measured using a measurement alternative recorded at cost less any impairment, plus or minus changes resulting from qualifying observable price changes.
−Removed: SUPER MICRO COMPUTER, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: Equity method investments are equity securities for which the Company does not control the investee but is able to exert significant influence over the investee.
−Removed: These investments are measured at cost less any impairment, plus or minus the Company's share of equity method investee income or loss.
−Removed: In March 2016, the FASB issued new accounting guidance, Compensation-Stock Compensation:
−Removed: Improvements to Employee Share-Based Payment Accounting on the accounting for certain aspects of share-based payment to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements as well as classification in the statement of cash flows.
−Removed: Early adoption is permitted for any interim or annual periods.
−Removed: The Company adopted the accounting guidance on July 1, 2017 that resulted in the recognition of excess tax benefits in the Company's provision for income taxes rather than paid-in capital, as well as the adjustment in stock-based compensation expense as a result of its change in forfeiture policy.
−Removed: The new guidance eliminated the requirement to delay the recognition of excess tax benefits until it reduces current taxes payable.
−Removed: The new guidance also requires the Company to record, subsequent to the adoption, excess tax benefits and tax deficiencies in the period these arise.
−Removed: As a result of the adoption, the Company recorded a reduction in income tax payable of $0.2 million , an increase in common stock and additional paid-in capital of $0.1 million and an increase in retained earnings of $0.1 million .
−Removed: In March 2016, the FASB issued new accounting guidance Investments - Equity Method and Joint Ventures:
−Removed: Simplifying the Transition to Equity Method of Accounting .
−Removed: The amendments in this update eliminate the requirement that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of increase in ownership interest or degree of influence.
−Removed: In accordance with the amendments, an equity method investor will begin to apply the equity method when the investor obtains significant influence without having to retroactively adjust the investment and record a cumulative catch up for the years when the investment did not qualify for the equity method of accounting.
−Removed: The Company adopted the accounting guidance on July 1, 2017.
−Removed: The result of the adoption had no impact on the consolidated financial statements and related disclosures.
−Removed: In August 2016, the FASB issued an amendment to the accounting guidance, Statement of Cash Flows:
−Removed: Classification of Certain Cash Receipts and Cash Payments.
−Removed: This amendment consists of eight provisions that provide guidance on the classification of certain cash receipts and cash payments.
−Removed: If practicable, this amendment should be applied using a retrospective transition method to each period presented.
−Removed: For the provisions that are impracticable to apply retrospectively, those provisions may be applied prospectively as of the earliest date practicable.
−Removed: The Company adopted the accounting guidance on July 1, 2018.
−Removed: The result of the adoption did not have a material impact on the consolidated statements of cash flows.
−Removed: In October 2016, the FASB issued an amendment to the accounting guidance, Intra-Entity Transfers of Assets Other Than Inventory .
−Removed: This amendment simplifies the accounting for income tax consequences of intra-entity transfers of assets other than inventory by requiring recognition of current and deferred income tax consequences when such transfers occur.
−Removed: The Company adopted the accounting guidance on July 1, 2018.
−Removed: The result of the adoption did not have a material impact on the consolidated financial statements and related disclosures.
−Removed: In November 2016, the FASB issued an amendment to the accounting guidance, Statement of Cash Flows:
−Removed: Restricted Cash.
−Removed: This amendment addresses presentations of total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.
−Removed: Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.
−Removed: The Company adopted the accounting guidance on July 1, 2018 using a retrospective transition method to each period presented.
−Removed: The adoption did not have a material impact on the consolidated statements of cash flows.
−Removed: Presentation of prior period information has been retrospectively adjusted.
−Removed: In February 2017, the FASB issued new accounting guidance, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets:
−Removed: Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.
−Removed: This guidance clarifies the scope and application on the sale or transfer of nonfinancial assets and in substance nonfinancial assets to noncustomers, including partial sales.
+Added: In February 2016, the FASB issued an amendment to the accounting guidance, Leases .
+Added: The new lease accounting guidance supersedes the existing guidance.
+Added: Under the new lease accounting guidance, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provide enhanced disclosures.
+Added: Leases will continue to be classified as either finance or operating.
+Added: The Company adopted the new lease accounting guidance on July 1, 2019 using the modified retrospective approach, and as a result did not restate prior comparative periods.
+Added: The Company elected to apply the “package of practical expedients” under the transition guidance of the new standard, which permits it not to reassess under the new lease accounting guidance its prior conclusions about lease identification, lease classification and initial direct costs, for leases that are in effect as of the date of adoption of the new lease accounting guidance.
+Added: In connection with the adoption of the new lease accounting guidance, the Company recorded a transition adjustment to recognize ROU assets and lease liabilities on the Company’s consolidated balance sheet of $ 14.8 million and $ 15.2 million , respectively, on July 1, 2019, primarily related to real estate leases.
+Added: See Note 12, "Leases," for further details.
+Added: In February 2018, the FASB issued Income Statement - Reporting Comprehensive Income:
+Added: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income , which allows companies to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act ("2017 Tax Reform Act"), from accumulated other comprehensive income to retained earnings.
+Added: The guidance also requires certain new disclosures regardless of the election.
The Company adopted this guidance on July 1, 2019.
−Removed: Prior to adoption, the Company had previously contributed certain technology rights in exchange for 30% ownership in a privately-held company (the “Corporate Venture”) and accounted for the transaction in accordance with the guidance related to exchanges of a nonfinancial asset for a noncontrolling ownership interest in ASC 845 - Nonmonetary Transactions, which has been eliminated by the new guidance.
−Removed: As a result of the adoption of the new guidance, the Company recognized
−Removed: SUPER MICRO COMPUTER, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: $3.0 million increase in the carrying value of the equity-method investment, a $2.1 million increase in deferred gain, and a $0.9 million increase in retained earnings.
−Removed: In August 2018, the Securities and Exchange Commission (“SEC”) adopted amendments to certain disclosure requirements in Securities Act Release No.
−Removed: 33-10532, Disclosure Update and Simplification .
−Removed: The amendments became effective on November 5, 2018.
−Removed: The SEC staff subsequently indicated that it would not object if a filer’s first presentation of changes in stockholders’ equity is included in its Form 10-Q for the quarter that begins after the final rule’s effective date.
−Removed: Among the amendments is the requirement to present the changes in stockholders’ equity in the interim financial statements (either in a separate statement or footnote) in Quarterly Reports on Form 10-Q.
−Removed: The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a consolidated statement of operations is required to be filed.
−Removed: The Company adopted this guidance in the first quarter of fiscal year 2019, and presented the changes in stockholders’ equity in the Company’s Quarterly Reports on Form 10-Q for the first, second, and third quarters of fiscal year 2019.
+Added: The adoption of this guidance did not have a material impact on the Company's consolidated financial statements and related disclosures.
+Added: In June 2018, the FASB issued amended guidance to expand the scope of ASC 718 - Compensation-Stock Compensation , to include share-based payment transactions for acquiring goods and services from non-employees.
+Added: The amendments specify that the guidance applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards.
+Added: The Company adopted this guidance on July 1, 2019.
+Added: The adoption of the guidance did not have an impact on the Company's consolidated financial statements and related disclosures.
Accounting Pronouncements Not Yet Adopted
−Removed: In February 2016, the FASB issued an amendment to the accounting guidance, Leases.
−Removed: The amendment will supersede the existing lease guidance, including on-balance sheet recognition of operating leases for lessees.
−Removed: Since its issuance, the FASB has issued several amendments to the new lease standard.
−Removed: The standard is effective for the Company from July 1, 2019 and the Company will apply this standard using the modified retrospective approach and will not restate prior comparative periods.
−Removed: The Company will elect the “package of practical expedients” under the transition guidance of the new standard, which permits it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs, for leases that are in effect as of the date of adoption of the new lease guidance.
−Removed: While the Company is currently finalizing its implementation of new policies, processes and internal controls to comply with the new rules, it is anticipated that the adoption of the new standard will result in the recognition of right-of-use assets and lease liabilities on the Company’s consolidated balance sheet of $14.8 million and $15.2 million , respectively, as of July 1, 2019, primarily related to real estate leases.
−Removed: The adoption of the new standard will not have a material impact on the Company’s consolidated statement of operations or consolidated statement of cash flows.
In June 2016, the FASB issued authoritative guidance, Financial Instruments-Credit Losses:
2 unchanged sentences
Early adoption is permitted.
−Removed: The Company is currently evaluating the effect the guidance will have on its consolidated financial statement disclosures, results of operations and financial position.
−Removed: In February 2018, the FASB issued Income Statement - Reporting Comprehensive Income:
−Removed: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income , which allows companies to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act ("2017 Tax Reform Act"), from accumulated other comprehensive income to retained earnings.
−Removed: The guidance also requires certain new disclosures regardless of the election and is effective for the Company from July 1, 2019.
−Removed: The adoption of the guidance will not have a material impact on its consolidated financial statements.
−Removed: In June 2018, the FASB issued amended guidance to expand the scope of ASC 718 - Compensation-Stock Compensation , to include share-based payment transactions for acquiring goods and services from non-employees.
−Removed: The amendments specify that the guidance applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards.
−Removed: The new amendment is effective for the Company from July 1, 2019.
−Removed: The adoption of the new standard will not have a material impact on its consolidated financial statements and related disclosures.
+Added: The adoption of the guidance is expected to result in the presentation of allowances for credit losses separately from the amortized cost of financial instruments that are not classified as available-for-sale debt securities.
+Added: The adoption is also expected to change the presentation of the Company’s available-for-sale debt securities to include the amortized cost and the allowance for credit losses parenthetically.
+Added: The adoption will have an immaterial effect on the allowance for credit losses for trade receivables and beginning retained earnings and will have an immaterial effect on the Company’s financial statement disclosures.
In August 2018, the FASB issued amended guidance, Fair Value Measurement:
−Removed: Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, to modify the disclosure requirements on fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits.
+Added: Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, to modify the disclosure requirements on fair value measurements based on the concepts in the FASB Concepts Statements, including the consideration of costs and benefits.
The new standard is effective for the Company from July 1, 2020.
−Removed: The Company is currently evaluating the effect the guidance will have on its consolidated financial statement disclosures.
−Removed: In August 2018, the FASB issued amended guidance to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs
+Added: The adoption of the new guidance will require the Company to present, on a prospective basis, narrative information regarding the uncertainty of the fair value measurements from the use of unobservable
SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license).
+Added: inputs used in recurring fair value measurements categorized in Level 3 of the fair value hierarchy, to disclose the amount of gains and losses recognized in other comprehensive income for the period for financial instruments categorized within Level 3 of the fair value hierarchy, and quantitative information for the significant unobservable inputs used to develop the Level 3 fair value measurements.
+Added: The adoption of the new guidance will also allow the Company to discontinue the presentation of information regarding transfers between Level 1 and Level 2 of the fair value hierarchy.
+Added: As at June 30, 2020 the only financial instrument of the Company for which the recurring fair value measurements are categorized in Level 3 of the fair value hierarchy is its investment in an auction rate security.
+Added: In August 2018, the FASB issued authoritative guidance , Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):
+Added: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license).
The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments.
−Removed: According to the amendments, the entity shall determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense.
−Removed: It requires the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement.
+Added: According to the amendments, an entity shall determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense.
+Added: It requires an entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement.
The new standard is effective for the Company from July 1, 2020.
−Removed: The Company is currently evaluating the effect the guidance will have on its consolidated financial statement disclosures, results of operations and financial position.
+Added: The Company will adopt the new guidance on a prospective basis for any new hosting arrangement entered into after July 1, 2020 and does not expect the adoption of the guidance to have a material impact on its consolidated financial statement disclosures, results of operations and financial position.
+Added: In December 2019, the FASB issued amended guidance, Simplifying the Accounting for Income Taxes , to remove certain exceptions to the general principles from ASC 740 - Income Taxes, and to improve consistent application of U.S.
+Added: GAAP for other areas of ASC 740 by clarifying and amending existing guidance.
+Added: The guidance is effective for the Company from July 1, 2021;
+Added: early adoption is permitted.
+Added: The adoption of the guidance is not anticipated to have a material impact on its consolidated financial statements.
+Added: In March 2020, the FASB issued authoritative guidance, Facilitation of the Effects of Reference Rate Reform on Financial Reporting.
+Added: The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.
+Added: The guidance also establishes (1) a general contract modification principle that entities can apply in other areas that may be affected by reference rate reform and (2) certain elective hedge accounting expedients.
+Added: The amendment is effective for all entities through December 15, 2022.
+Added: LIBOR is used to calculate the interest on borrowings under the Company's 2018 Bank of America Credit Facility.
+Added: As the 2018 Bank of America Credit Facility, as amended, will terminate on June 30, 2021 before the phase out of LIBOR, the Company does not expect the adoption of the guidance to have an impact on its consolidated financial statement disclosures, results of operations and financial position.
Fair Value Disclosure
−Removed: The financial assets of the Company measured at fair value on a recurring basis are included in cash equivalents and other assets.
−Removed: The Company classifies its cash equivalents and other assets, except for its investment in an auction rate security, within Level 1 or Level 2 in the fair value hierarchy because the Company uses quoted prices in active markets or alternative pricing sources and models using market observable inputs to determine their fair value.
+Added: The financial instruments of the Company measured at fair value on a recurring basis are included in cash equivalents, other assets and accrued liabilities.
+Added: The Company classifies its financial instruments, except for its investment in an auction rate security, within Level 1 or Level 2 in the fair value hierarchy because the Company uses quoted prices in active markets or alternative pricing sources and models using market observable inputs to determine their fair value.
The Company’s investment in an auction rate security is classified within Level 3 of the fair value hierarchy as the determination of its fair value was not based on observable inputs as of June 30, 2020 and 2019 .
2 unchanged sentences
The material factors used in preparing the discounted cash flows are (i) the discount rate utilized to present value the cash flows, (ii) the time period until redemption and (iii) the estimated rate of return.
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Financial Assets and Liabilities Measured on a Recurring Basis
−Removed: The following table sets forth the Company’s cash equivalents, certificates of deposit and investment in auction rate security as of June 30, 2019 and 2018 which are measured at fair value on a recurring basis by level within the fair value hierarchy.
+Added: The following table sets forth the Company’s financial instruments as of June 30, 2020 and 2019 , which are measured at fair value on a recurring basis by level within the fair value hierarchy.
These are classified based on the lowest level of input that is significant to the fair value measurement (in thousands):
4 unchanged sentences
Total assets measured at fair value
+Added: Performance awards liability (3)
+Added: Total liabilities measured at fair value
June 30, 2019
4 unchanged sentences
(1) $ 0.4 million and $ 0.4 million in money market funds are included in cash and cash equivalents and $ 0.8 million and $ 0.8 million in money market funds are included in restricted cash, non-current in other assets in the consolidated balance sheets as of June 30, 2020 and 2019 , respectively.
−Removed: (2) $0.2 million and $29.2 million in certificates of deposit are included in cash and cash equivalents and $1.1 million and $1.0 million in certificates of deposit are included in restricted cash, non-current in other assets in the consolidated balance sheets as of June 30, 2019 and 2018 , respectively.
−Removed: The above table excludes $247.6 million and $85.9 million of cash included in cash and cash equivalents, $11.7 million and $2.8 million of restricted cash included in prepaid expenses and other current assets, and $0.4 million and $0.4 million of restricted cash, non-current included in other assets in the consolidated balance sheets as of June 30, 2019 and 2018 , respectively.
−Removed: There were no transfers between Level 1, Level 2 or Level 3 securities in fiscal years 2019 and 2018 .
+Added: (2) $ 0.2 million and $ 0.2 million in certificates of deposit are included in cash and cash equivalents, $ 0.3 million and $ 0 in certificates of deposit are included in prepaid expenses and other assets, and $ 0.3 million and $ 1.1 million in certificates of deposit are included in restricted cash, non-current in other assets in the consolidated balance sheets as of June 30, 2020 and 2019 , respectively.
+Added: (3) As of June 30, 2020, the current portion of the performance awards liability of $ 1.5 million is included in accrued liabilities and the noncurrent portion of $ 0.6 million is included in other long-term liabilities in the consolidated balance sheets.
+Added: There was no such liability outstanding as of June 30, 2019.
+Added: The performance awards liability consists of one-time employee performance bonuses for the Company's Chief Executive Officer and two members of the Board that are payable when specified market and performance conditions are achieved.
+Added: The Company estimated the fair value of these performance awards using the Monte-Carlo simulation model and classified them within Level 2 of the fair value hierarchy as estimates are based on the observable inputs.
+Added: The significant inputs used in estimating the fair value of the awards as of June 30, 2020 are as follows:
+Added: Stock Price as of Period End
+Added: Performance Period
+Added: Risk-free Rate
+Added: Dividend Yield
+Added: 1.25 - 2.00 years
SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: The following table provides a reconciliation of the Company’s financial assets measured at fair value on a recurring basis, consisting of auction rate securities, using significant unobservable inputs (Level 3) for fiscal years 2019 and 2018 (in thousands):
−Removed: Years Ended June 30,
−Removed: Balance as of the beginning of the fiscal year
−Removed: Sales and settlements at par
−Removed: Total unrealized loss included in other comprehensive income
−Removed: Balance as of the end of the fiscal year
+Added: There was no movement in the balances of the Company's financial assets measured at fair value on a recurring basis, consisting of investment in an auction rate security, using significant unobservable inputs (Level 3) for fiscal years 2020 and 2019.
+Added: There were no transfers between Level 1, Level 2 or Level 3 financial instruments in fiscal years 2020 and 2019.
The following is a summary of the Company’s investment in an auction rate security as of June 30, 2020 and 2019 (in thousands):
5 unchanged sentences
The amortized cost of the outstanding debt approximates the fair value.
−Removed: Financial Assets Measured on a Non-recurring Basis
−Removed: The Company's non-marketable equity securities are investments in privately held companies without readily determinable fair values.
−Removed: Prior to July 1, 2018, the Company accounted for its investment in non-marketable equity securities at cost less impairment.
−Removed: Realized gains and losses on non-marketable equity securities sold or impaired were recognized in other income (expense), net.
−Removed: Upon adoption of the new guidance, Financial Instruments - Overall:
−Removed: Recognition and Measurement of Financial Assets and Financial Liabilities, on July 1, 2018, the Company classifies its investment in non-marketable equity instruments as Level 3 as the fair value is determined using significant unobservable inputs.
−Removed: During the fiscal year ended June 30, 2019 the Company did not record any upward or downward adjustments to the carrying values of the non-marketable equity securities.
+Added: Other Financial Assets - Investments into Non-Marketable Equity Securities
+Added: The Company's non-marketable equity securities are investments in privately held companies without readily determinable fair values in the amount of $ 0.1 million and $ 0.9 million as of June 30, 2020 and 2019, respectively.
+Added: The Company accounts for these investments at cost minus impairment, if any, plus or minus changes from observable price changes in orderly transactions for the identical or similar investments by the same issuer.
+Added: During the years ended June 30, 2020 and 2019, the Company did not record any upward or downward adjustments to the carrying values of the non-marketable equity securities related to observable price changes.
+Added: The Company also did not record any impairment to the carrying values of the non-marketable equity securities during fiscal year 2020.
During fiscal year 2019 , the Company recorded impairment charges of $ 2.7 million for its non-marketable equity securities which had an initial cost basis of $ 2.7 million as it was determined the carrying value of the investments were not recoverable.
−Removed: During fiscal years 2018 and 2017 , the Company did not record any other-than-temporary impairments on financial assets required to be measured at fair value on a non-recurring basis.
−Removed: There were no transfers of financial assets measured on a non-recurring basis between Level 1, Level 2 or Level 3 securities in fiscal years 2019 , 2018 and 2017.
−Removed: Revenue recognition for periods after the Company’s adoption of ASC 606 as of July 1, 2018
−Removed: The Company adopted ASC 606 as of July 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption.
−Removed: For contracts that were modified before the effective date, the Company considered the effect of all modifications when identifying performance obligations and allocating transaction price, which did not have a material effect on the adjustment to retained earnings.
−Removed: The Company recognized the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of retained earnings.
−Removed: The comparative information has not been recast and continues to be reported under the accounting standards in effect for those periods.
−Removed: ASC 606 provides a unified model in determining when and how revenue is recognized with the core principle that revenue should be recognized when a customer obtains control of the promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
−Removed: The Company generates revenues from the sale of server and storage systems, subsystems, accessories, services, server software management solutions, and support services.
−Removed: Product sales .
−Removed: The Company recognizes revenue from sales of products as control is transferred to customers, which generally happens at the point of shipment or upon delivery, unless customer acceptance is uncertain.
−Removed: Products sold by the Company are delivered via shipment from the Company’s facilities or drop shipment directly to its customers from a Company vendor.
−Removed: The Company may use distributors to sell products to end customers.
−Removed: Revenue from distributors is recognized when the distributor obtains control of the product, which generally happens at the point of shipment or upon delivery, unless customer acceptance is uncertain, and in the amount of consideration to which the Company expects to be entitled.
−Removed: As part of determining the transaction price in contracts with customers, the Company estimates reserves for future sales returns based on a review of its history of actual returns for each major product line.
−Removed: Based upon historical experience, a refund liability is recorded at the time of sale for estimated product returns and an asset is recognized for the amount expected to be recorded in inventory upon product return, less the expected recovery costs.
−Removed: The Company also reduces revenue for the estimated costs of customer and distributor programs and incentive offerings such as price protection and rebates as well as the estimated costs of cooperative marketing arrangements where the fair value of the benefit derived from the costs cannot be reasonably estimated.
−Removed: Any provision for customer and distributor programs and other discounts is recorded as a reduction of revenue at the time of sale based on an evaluation of the contract terms and historical experience.
−Removed: Services sales.
−Removed: The Company’s sale of services mainly consists of extended warranty and on-site services.
−Removed: Revenue related to extended warranty commences upon the expiration of the standard warranty period and is recognized ratably over the contractual period as the Company stands ready to perform any required warranty service.
−Removed: Revenue related to on-site services commences upon recognition of the product sale and is recognized ratably over the contractual period as the on-site services are made available to the customer.
−Removed: These service contracts are typically one to five years in length.
−Removed: Service revenue has been less than 10% of net sales for all periods presented and is not separately disclosed.
−Removed: Contracts with multiple promised goods and services.
−Removed: Certain of the Company’s contracts contain multiple promised goods and services.
−Removed: Performance obligations in a contract are identified based on the promised goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract.
−Removed: If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation.
−Removed: Revenue allocated to each performance obligation is recognized at the time the related performance obligation is satisfied by transferring control of the promised good or service to a customer.
−Removed: If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.
−Removed: Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis.
−Removed: The Company determines standalone selling prices based on the price at which the performance obligation is sold separately.
−Removed: If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information, such as internally approved pricing guidelines with respect to geographies, customer type, internal costs, and gross margin objectives, for the related performance obligations.
−Removed: When the Company receives consideration from a customer prior to transferring goods or services to the customer, the Company records a contract liability (deferred revenue).
−Removed: The Company also recognizes deferred revenue when it has an unconditional right to consideration (i.e., a receivable) before transfer of control of goods or services to a customer.
−Removed: The Company considers shipping & handling activities as costs to fulfill the sales of products.
−Removed: Shipping revenue is included in net sales when control of the product is transferred to the customer, and the related shipping and handling costs are included in cost of products sold.
−Removed: Taxes imposed by governmental authorities on the Company's revenue producing activities with customers, such as sales taxes and value added taxes, are excluded from net sales.
−Removed: Revenue recognition for periods prior to the Company’s adoption of ASC 606 as of July 1, 2018
−Removed: Product sales.
−Removed: The Company recognizes revenue from sales of products upon meeting all of the following revenue recognition criteria, which is typically met upon shipment or delivery of its products to customers, unless customer acceptance is uncertain or significant obligations to the customer remain:
−Removed: (i) persuasive evidence of an arrangement exists through customer contracts and orders, (ii) the customer takes title and assumes the risks and rewards of ownership, (iii) the sales price charged is fixed or determinable as evidenced by customer contracts and orders and (iv) collectibility is reasonably assured.
−Removed: The Company estimates reserves for future sales returns based on a review of its history of actual returns for each major product line.
−Removed: The Company also reduces revenue for customer and distributor programs and incentive offerings such as price protection and rebates as well as cooperative marketing arrangements where the fair value of the benefit identified from the costs cannot be reasonably estimated.
−Removed: The Company may use distributors to sell products to end customers.
−Removed: Revenue from distributors may be recognized on sell-in or sell-through basis depending on the terms of the arrangement between the Company and the distributor.
−Removed: The Company records costs related to shipping and handling in sales and marketing expenses.
−Removed: Shipping and handling fees billed to customers are included in net sales.
−Removed: Services sales .
−Removed: The Company’s sale of services mainly consists of extended warranty and on-site services.
−Removed: These services are sold at the time of the sale of the underlying products.
−Removed: Revenue related to extended warranty commences upon the expiration of the standard warranty period and is recognized ratably over the contractual period.
−Removed: Revenue related to on-site services commences upon recognition of the product sale and is recognized ratably over the contractual period.
−Removed: These service contracts are typically one to five years in length.
−Removed: Service revenue has been less than 10% of net sales for all periods presented and is not separately disclosed.
−Removed: Multiple-element arrangements.
−Removed: Certain of the Company’s arrangements contain multiple elements, consisting of both the Company’s products and services.
−Removed: Revenue allocated to each element is recognized when all the revenue recognition criteria are met for that element.
−Removed: The Company allocates arrangement consideration at the inception of an arrangement to all deliverables, if they represent a separate unit of accounting, based on their relative estimated stand-alone selling prices.
−Removed: A deliverable qualifies as a separate unit of accounting when the delivered element has stand-alone value to the customer.
−Removed: The guidance establishes the following hierarchy to determine the relative estimated stand-alone selling price to be used for allocating arrangement consideration to deliverables:
−Removed: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”) if VSOE is not available, or (iii) the vendor's best estimated selling price (“BESP”) if neither VSOE nor TPE are available.
−Removed: The Company does not have VSOE for deliverables in its arrangements, and TPE is generally not available because its products are highly differentiated, and the Company is unable to obtain reliable information on the products and pricing practices of the Company’s competitors.
−Removed: BESP reflects the Company’s estimate of what the selling price of a deliverable would be if it were sold regularly on a stand-alone basis.
−Removed: As such, BESP is generally used to allocate the total arrangement consideration at the arrangement inception.
−Removed: The Company determines BESP for a product by considering multiple factors including, but not limited to, geographies, customer types, internal costs, gross margin objectives and pricing practices.
+Added: During fiscal year 2018 , the Company did not record any other-than-temporary impairments on financial assets required to be measured at fair value on a non-recurring basis.
Disaggregation of Revenue
−Removed: The Company disaggregates revenue by type of product, by geographical market, and by products sold to indirect sales channel partners or direct customers and OEMs that depict the nature, amount, and timing of revenue and cash flows.
+Added: The Company disaggregates revenue by type of product, by geographical market, and by products sold to indirect sales channel partners or direct customers and original equipment manufacturers ("OEMs") that depict the nature, amount, and timing of revenue and cash flows.
Service revenues are not a significant component of total revenue and are aggregated within the respective categories.
5 unchanged sentences
Subsystems and accessories are comprised of serverboards, chassis and accessories.
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
International net sales are based on the country and region to which the products were shipped.
2 unchanged sentences
United States
−Removed: The following table presents the percentages of net sales from products sold through the Company's indirect sales channel and to its direct customers and OEMs for fiscal years 2019 , 2018 and 2017 :
+Added: The following table presents the net sales from products sold through the Company's indirect sales channel and to its direct customers and OEMs for fiscal years 2020 , 2019 and 2018 (in thousands):
Years Ended June 30,
−Removed: 2019 over 2018
−Removed: 2018 over 2017
Indirect sales channel
9 unchanged sentences
The Company’s deferred revenue primarily results from customer payments received upfront for extended warranties and on-site services because these performance obligations are satisfied over time.
−Removed: On July 1, 2018, deferred revenue totaled $143.5 million after recognizing the cumulative effect of initially applying ASC 606.
−Removed: Of that amount, $53.9 million was recognized as revenue during the fiscal year ended June 30, 2019.
−Removed: Deferred revenue increased during the fiscal year ended June 30, 2019 because the amounts for service contracts invoiced during the period exceeded the recognition of revenue from contracts entered into in prior periods.
+Added: Revenue recognized during fiscal year 2020, which was included in the opening deferred revenue balance as of June 30, 2019, was $ 91.9 million .
+Added: Deferred revenue decreased during the fiscal year ended June 30, 2020 because the recognition of revenue from contracts entered into in prior periods exceeded the value of the transaction price allocated for service contracts obligations during the current period.
Transaction Price Allocated to the Remaining Performance Obligations
4 unchanged sentences
The Company expects to recognize approximately 52 % of remaining performance obligations as revenue in the next 12 months , and the remainder thereafter.
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Capitalized Contract Acquisition Costs and Fulfillment Cost
3 unchanged sentences
The Company applies the practical expedient to expense incentive bonus costs as incurred if the amortization period would be one year or less, generally upon delivery of the associated server and storage systems or components.
−Removed: Where the amortization period of the contract cost would be more than a year, the Company allocates the incentive bonus cost asset between hardware and service performance obligations and expenses the cost allocated to the hardware performance obligations upon delivery of associated server and storage systems or components and amortizes the cost allocated to service performance obligations over the period the services are expected to be provided.
−Removed: Such contract acquisition costs that are subject to capitalization are insignificant to the Company’s consolidated financial statements.
+Added: Where the amortization period of the contract cost would be more than a year, the Company applies judgment in the allocation of the incentive bonus cost asset between hardware and service performance obligations and expenses the cost allocated to the hardware performance obligations upon delivery of associated server and storage systems or components and amortizes the cost allocated to service performance obligations over the period the services are expected to be provided.
+Added: Such contract acquisition costs allocated to service performance obligations that are subject to capitalization are insignificant to the Company’s consolidated financial statements.
Contract fulfillment costs consist of costs paid in advance for outsourced services provided by third parties to the extent they are not in the scope of other guidance.
5 unchanged sentences
Accounts receivable allowances as of June 30, 2020 , 2019 and 2018 consisted of the following (in thousands):
+Added: Expenses (Recovered), net
Allowance for doubtful accounts:
7 unchanged sentences
Total inventories
+Added: During fiscal years 2020 , 2019 and 2018 , the Company recorded a provision for excess and obsolete inventory to cost of sales totaling $ 22.6 million , $ 28.5 million and $ 9.4 million , respectively, excluding a (recovery) provision for adjusting the cost of certain inventories to net realizable value of $( 4.2 ) million and $ 4.4 million in fiscal years 2020 and 2019, respectively.
+Added: The adjustment for lower of cost or net realizable value and lower of cost or market was not material in fiscal year 2018 .
+Added: The Company classifies subsystems and accessories that may be sold separately or incorporated into systems as finished goods.
SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: During fiscal years 2019 , 2018 and 2017 , the Company recorded a provision for excess and obsolete inventory to cost of sales totaling $28.5 million , $9.4 million and $15.7 million , respectively, excluding a provision for adjusting the cost of certain inventories to net realizable value of $4.4 million in fiscal year 2019 .
−Removed: The adjustment for lower of cost or net realizable value and lower of cost or market was not material in fiscal years 2018 and 2017 .
Property, Plant, and Equipment
7 unchanged sentences
__________________________
−Removed: (1) Primarily relates to the development and construction costs associated with the Company’s Green Computing Park located in San Jose, California.
+Added: (1) Primarily relates to the development and construction costs associated with the Company’s Green Computing Park located in San Jose, California, and, to a lesser extent, in Taiwan.
Prepaid Expenses and Other Assets
1 unchanged sentence
Receivables from vendors (1)
−Removed: Restricted cash
+Added: Prepaid income tax
Prepaid expenses
Deferred service costs
+Added: Restricted cash
Total prepaid expenses and other current assets
1 unchanged sentence
(1) Includes receivables from contract manufacturers based on certain buy-sell arrangements of $ 83.8 million and $ 82.0 million as of June 30, 2020 and 2019 , respectively.
−Removed: Other assets as of June 30, 2019 and 2018 consisted of the following (in thousands):
SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
+Added: Other assets as of June 30, 2020 and 2019 consisted of the following (in thousands):
+Added: Operating lease right-of-use asset
Deferred service costs, non-current
4 unchanged sentences
Total other assets
−Removed: __________________________
−Removed: (1) For the fiscal year ended June 30, 2019 , the balance represents investment in non-marketable equity securities without readily determinable fair values.
−Removed: For the fiscal year ended June 30, 2018 , the balance represents investments in equity securities accounted for under the cost method.
Cash, cash equivalents and restricted cash as of June 30, 2020 and 2019 consisted of the following (in thousands):
4 unchanged sentences
Investment in a Corporate Venture
−Removed: In October 2016, the Company entered into agreements pursuant to which the Company contributed certain technology rights in connection with an investment in a privately-held company (the "Corporate Venture") located in China to expand the Company's presence in China.
+Added: In October 2016, the Company entered into agreements pursuant to which the Company contributed certain technology rights in connection with an investment in the Corporate Venture to expand the Company's presence in China.
The Corporate Venture is 30 % owned by the Company and 70 % owned by another company in China.
1 unchanged sentence
As such, the Corporate Venture is also a related party.
−Removed: As of June 30, 2019 and June 30, 2018 , the Company's equity investment in the Corporate Venture was $1.7 million and $2.4 million , respectively, and was recorded under investment in equity investee on the Company's consolidated balance sheet.
−Removed: The Company's share of losses of the Corporate Venture were $2.7 million , $3.6 million , and $0.3 million for the fiscal years ended June 30, 2019 , June 30, 2018 , and June 30, 2017 , respectively.
The Company recorded a deferred gain related to the contribution of certain technology rights of $ 7.0 million in the third fiscal quarter of 2017.
2 unchanged sentences
As of June 30, 2020 and 2019 , the Company had unamortized deferred gain balance of $ 2.0 million and $ 2.0 million , respectively, in accrued liabilities and $ 1.0 million and $ 3.0 million , respectively, in other long-term liabilities in the Company’s consolidated balance sheets.
−Removed: The Company monitors the investment for events or circumstances indicative of potential other-than-temporary impairment and makes appropriate reductions in carrying values if it determines that an impairment charge is required.
−Removed: No impairment charge was recorded for the fiscal years being presented.
−Removed: Additionally, the Company sold products worth $52.2 million , $21.7 million , $10.9 million to the Corporate Venture in the fiscal years 2019 , 2018 , 2017 , respectively, and the Company's share of intra-entity profits on the products that remained
−Removed: unsold by the Corporate Venture as of June 30, 2019 and June 30, 2018 have been eliminated and have reduced the Company's investment in the Corporate Venture.
+Added: The Company monitors the investment for events or circumstances indicative of potential impairment and makes appropriate reductions in carrying values if it determines that an impairment charge is required.
+Added: In June 2020, the third-party parent company that controls the Corporate Venture was placed on a U.S.
+Added: government export control list, along with several related entities.
+Added: The Company is working with the Corporate Venture management to ensure that any future related parties transactions with the Corporate Venture are in accordance with the new restrictions and does not believe that the equity investment carrying value is impacted as of June 30, 2020.
+Added: The Company did no t recognize any impairment in the years ended June 30, 2020, 2019 and 2018 .
+Added: As of June 30, 2020 and June 30, 2019 , the Company's equity investment in the Corporate Venture was $ 2.7 million and $ 1.7 million , respectively, and was recorded under investment in equity investee on the Company's consolidated balance sheet.
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
+Added: The Company's share of income (losses), net of taxes, of the Corporate Venture net of taxes were $ 2.4 million , $( 2.7 ) million , and $( 3.6 ) million for the fiscal years ended June 30, 2020 , June 30, 2019 , and June 30, 2018 , respectively.
+Added: Additionally, the Company sold products worth $ 61.9 million , $ 52.2 million , $ 21.7 million to the Corporate Venture in the fiscal years 2020 , 2019 , 2018 , respectively, and the Company's share of intra-entity profits on the products that remained unsold by the Corporate Venture in the amounts of $ 3.0 million and $ 1.7 million as of June 30, 2020 and June 30, 2019 have been eliminated and have reduced the carrying value of the Company's investment in the Corporate Venture.
+Added: To the extent that the elimination of intra-entity profits reduces the investment balance below zero, such amounts are recorded within accrued liabilities.
The Company had $ 7.8 million and $ 13.1 million due from the Corporate Venture in accounts receivable, net as of June 30, 2020 and 2019 , respectively, in its consolidated balance sheets.
3 unchanged sentences
Contract manufacturers liability
+Added: Accrued legal liabilities
Accrued professional fees
1 unchanged sentence
Accrued warranty costs
+Added: Operating lease liability
Accrued cooperative marketing expenses
Total accrued liabilities
−Removed: Short-term Debt
−Removed: Short-term debt obligations as of June 30, 2019 and 2018 consisted of the following (in thousands):
+Added: Performance Awards Liability
+Added: In March 2020, the Company’s Board of Directors (the “Board”) approved $ 25.3 million of special performance bonuses to employees, which included $ 8.0 million paid in cash during the fourth quarter of fiscal year 2020 and $ 17.3 million paid in cash upon the occurrence of the average closing price for the Company's common stock equaling or exceeding $ 21.39 for any period of 10 consecutive trading days following March 26, 2020.
+Added: The entire amount of the special performance bonuses to employees was paid in the fourth quarter of fiscal year 2020.
+Added: The Board also approved performance bonuses for the Chief Executive Officer, a senior executive and two members of the Board, which payments will be earned when specified market and performance conditions are achieved.
+Added: The Chief Executive Officer’s aggregate cash bonuses of up to $ 8.1 million are earned in two tranches.
+Added: The first 50 % is payable if the average closing price for the Company’s common stock equals or exceeds $ 31.61 for any period of 20 consecutive trading days following the date of the agreement and ending prior to September 30, 2021 and the Chief Executive Officer remains employed with the Company through the date that such common stock price goal is determined to have been achieved and the date that the payment is made.
+Added: This payment can be reduced at the discretion of the Board to the extent the Company has not made adequate progress in remediating its material weaknesses in its internal control over financial reporting as determined by the Board.
+Added: The second 50 % is payable if the average closing price for the Company’s common stock equals or exceeds $ 32.99 for any period of 20 consecutive trading days following the date of the agreement and ending prior to June 30, 2022 and the Chief Executive Officer remains employed with the Company through the date that such common stock price goal is achieved and the date that the payment is made.
+Added: Performance bonuses for a senior executive and two members of the Board are earned based on achieving a specified target average closing price for the Company’s common stock over the specified period as determined by the Board at the grant
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
+Added: dates and continuous services through the payment dates.
+Added: A senior executive earned an aggregate cash payment of $ 0.1 million when the target average closing price was met in the fourth quarter of fiscal year 2020.
+Added: The two members of the Board can earn aggregate cash payments of $ 0.3 million in two tranches if the target average closing price reaches $ 31.61 for the first tranche and $ 32.99 per share for the second tranche.
+Added: These awards expire in two equal amounts at September 30, 2021 and June 30, 2022 for the two Board members' awards.
+Added: The Company accounts for the outstanding performance bonuses as liabilities and estimates fair value of payable amounts using a Monte-Carlo simulation model.
+Added: The awards are re-measured at each period end with changes in fair value recorded in the Company’s consolidated statement of operations in cost of sales and operating expenses.
+Added: The cumulative recorded expense at each period end is trued-up to the expected payable amount vested through the period end.
+Added: The requisite service periods over which expenses are recognized are derived from the Monte-Carlo model for all performance awards, except for the first 50 % of the Chief Executive Officer’s award that includes a performance condition.
+Added: The Company estimates if it is probable that the performance condition will be met through the expiration date of this award.
+Added: If at the measurement date it is determined to be probable, the Company estimates the requisite period as the longer of the service period derived by the Monte-Carlo model and the implicit service period when the Company expects to make adequate progress in remediating its material weaknesses in its internal control over financial reporting, as reported by the Company's Audit Committee.
+Added: If it is determined to not be probable, then the Company will reverse any previously recognized expense for this award in the period when it is no longer probable that the performance condition will be achieved.
+Added: As of June 30, 2020, the Company's outstanding balance related to performance bonuses was $ 2.1 million of which $ 1.5 million is recorded within accrued liabilities and $ 0.6 million is recorded within other long-term liabilities on the Company's consolidated balance sheet.
+Added: An unrecognized compensation expense of $ 3.3 million will be recorded over the remaining service periods from 0.19 years to 1.18 years .
+Added: The unrecognized expense and remaining service periods will be remeasured each reporting period.
+Added: Short-term and Long-term Debt
+Added: Short-term and long-term debt obligations as of June 30, 2020 and 2019 consisted of the following (in thousands):
Line of credit:
Bank of America
−Removed: Total line of credit
−Removed: Total short-term debt
+Added: CTBC Bank, due August 31, 2020
+Added: CTBC Bank, due June 4, 2030
+Added: Total term loans
+Added: Short-term debt and current portion of long-term debt
+Added: Debt, Non-current
Activities under Revolving Lines of Credit and Term Loans
1 unchanged sentence
2018 Bank of America Credit Facility
−Removed: In June 2016, the Company entered into a credit agreement with Bank of America (the “2016 Bank of America Credit Facility”).
−Removed: Prior to its maturity in April 2018, the Company repaid and terminated the 2016 Bank of America Credit Facility using the proceeds from its 2018 Bank of America Credit Facility (defined below).
−Removed: Immediately prior to its termination, the 2016 Bank of America Credit Facility (giving effect to all amendments since the inception of the 2016 Bank of America Credit Facility), provided for (i) a $85.0 million revolving line of credit including a $5.0 million letter of credit sublimit (ii) a $20.0 million revolving line of credit for the Company's Taiwan and the Netherlands entities, and (iii) a five -year $50.0 million term loan.
−Removed: The 2016 Bank of America Credit Facility term loan was secured by seven buildings located in San Jose, California and the property, plant and equipment and the inventory in those buildings.
−Removed: The principal and interest of the 2016 Bank of America Credit Facility term loan were payable monthly through June 30, 2021 with an interest rate at the LIBOR rate plus 1.25% per annum.
−Removed: The interest rate for the $85.0 million revolving line of credit was at the LIBOR rate plus 1.25% per annum.
−Removed: The interest rate of the $20.0 million revolving line of credit was equal to a minimum of 0.9% per annum plus the lender's cost of funds, as defined in the agreements.
+Added: In April 2018, the Company entered into a revolving line of credit with Bank of America (the "2018 Bank of America Credit Facility"), which replaced the then existing credit facility with Bank of America (the "2016 Bank of America Credit Facility").
+Added: The 2018 Bank of America Credit Facility provides for a revolving credit line and other financial accommodations of up to $ 250.0 million extended by certain lenders, including a $ 5.0 million letter of credit sublimit, which was extended to $ 15.0 million in October 2019.
+Added: The 2018 Bank of America Credit Facility was originally set to expire after 364 days and on
SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: 2018 Bank of America Credit Facility
−Removed: In April 2018, the Company entered into a revolving line of credit with Bank of America (the "2018 Bank of America Credit Facility"), which replaced the 2016 Bank of America Credit Facility.
−Removed: The 2018 Bank of America Credit Facility provides for a revolving credit line and other financial accommodations of up to $250.0 million extended by certain lenders, including a $5.0 million letter of credit sublimit, which was extended to $15.0 million in October 2019.
−Removed: The 2018 Bank of America Credit Facility was originally set to expire after 364 days and has been extended to June 30, 2020 through subsequent amendments.
−Removed: Prior to its maturity, at the Company's option and if certain conditions are satisfied, including the Company being current on all of its delinquent quarterly and annual filings with the SEC, the 2018 Bank of America Credit Facility may convert into a five-year revolving credit facility.
−Removed: If and upon such conversion, the lenders for the 2018 Bank of America Credit Facility shall extend, in aggregate, a principal amount of up to $400.0 million .
−Removed: Prior to the 2018 Bank of America Credit Facility’s conversion to the five -year revolving credit facility, interest shall accrue at the LIBOR rate plus 2.75% per annum.
−Removed: Upon the 2018 Bank of America Credit Facility converting to the five -year revolving credit facility, interest shall accrue at the LIBOR rate plus an amount between 1.50% and 2.00% for loans to both Super Micro Computer and Super Micro Computer B.V.
−Removed: Under the terms of the 2018 Bank of America Credit Facility, the Company is required to grant the lenders a continuing security interest in and lien upon all amounts credited to any of the Company's deposit accounts.
−Removed: Interest accrued on any loans under the 2018 Bank of America Credit Facility is due on the first day of each month, and the loans are due and payable in full on the termination date of the 2018 Bank of America Credit Facility, unless payment is required earlier as determined by the lenders.
−Removed: Voluntary prepayments are permitted without early repayment fees or penalties.
−Removed: The terms of the arrangement require any amounts in the deposit accounts to be applied against the Company's line of credit the next business day.
−Removed: Subject to customary exceptions, the 2018 Bank of America Credit Facility is secured by substantially all of Super Micro Computer’s assets.
−Removed: If converted to the five-year revolving credit facility, Super Micro Computer’s assets, and at the Company's option, Super Micro Computer B.V.'s assets will be used as collateral for the 2018 Bank of America Credit Facility.
−Removed: Under the terms of the 2018 Bank of America Credit Facility, the Company is not permitted to either repurchase its common stock or pay any dividends.
−Removed: In the fourth fiscal quarter of 2018, the Company paid $3.2 million in fees to the lenders and third parties in connection with the 2018 Bank of America Credit Facility.
−Removed: The replacement of the 2016 Bank of America Credit Facility by the 2018 Bank of America Credit Facility is accounted for as a modification of the existing credit facility to the extent the lenders before and after the modification were the same.
−Removed: Any unamortized fees relating to the 2016 Bank of America Credit Facility and the fees paid for the 2018 Bank of America Credit Facility are amortized over the term of the 2018 Bank of America Credit Facility as interest expense in the Company's consolidated statements of operation and any unamortized amounts are classified within prepaid and other current assets in the Company's consolidated balance sheets.
−Removed: On January 31, 2019, the Company paid a fee and entered into an amendment of the 2018 Bank of America Credit Facility that resulted in the extension of the maturity date from April 19, 2019 to June 30, 2019.
+Added: January 31, 2019, the Company paid a fee and entered into an amendment of the 2018 Bank of America Credit Facility that resulted in the extension of the maturity date from April 19, 2019 to June 30, 2019.
On June 27, 2019, the Company entered into a second amendment of the 2018 Bank of America Credit Facility that extended the maturity date from June 30, 2019 to June 30, 2020.
−Removed: As of June 30, 2019 and 2018 the total outstanding borrowings under the 2018 Bank of America Credit facility were $1.1 million and $67.3 million , respectively.
+Added: On May 12, 2020, the Company paid a fee of $ 0.7 million and entered into a third amendment of the 2018 Bank of America Credit Facility that extended the maturity of the credit facility to June 30, 2021 and changed certain terms of the original agreement.
+Added: The amendment was accounted for as a modification and the impact was immaterial to the consolidated financial statements.
+Added: Under the original terms, interest accrued at the LIBOR rate plus 2.75 % per annum, while under the third amendment, interest shall accrue at LIBOR rate plus 2.00 % on outstanding borrowings less than $ 125.0 million and LIBOR rate plus 2.25 % on outstanding borrowings in excess of $ 125.0 million .
+Added: Under the terms of the third amendment of the 2018 Bank of America Credit Facility, in the event of default or if outstanding borrowings are in excess of $ 220.0 million , the Company is required to grant the lenders a continuing security interest in and lien upon all amounts credited to any of the Company's deposit accounts.
+Added: In addition, the third amendment released the real property of Super Micro Computer as a collateral.
+Added: Interest accrued on any loans under the 2018 Bank of America Credit Facility is due on the first day of each month, and the loans are due and payable in full on the termination date of the 2018 Bank of America Credit Facility.
+Added: Voluntary prepayments are permitted without early repayment fees or penalties.
+Added: Subject to customary exceptions, the 2018 Bank of America Credit Facility is secured by substantially all of Super Micro Computer’s assets, other than real property assets.
+Added: Under the terms of the 2018 Bank of America Credit Facility, the Company is not permitted to pay any dividends.
+Added: The Company is required to pay 0.375 % per annum on the 2018 Bank of America Credit Facility for any unused borrowings.
+Added: The 2018 Bank of America Credit Facility contains customary representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries and contains a financial covenant, which requires that the Company maintain a certain Fixed Charge Coverage Ratio, for each twelve-month period while in a Trigger Period, as defined in the agreement, is in effect.
+Added: As of June 30, 2020 , the Company had no outstanding borrowings under the 2018 Bank of America Credit Facility.
+Added: As of June 30, 2019 , the total outstanding borrowings under the 2018 Bank of America Credit facility were $ 1.1 million .
The interest rates under the 2018 Bank of America Credit Facility as of June 30, 2020 and 2019 were 3.0 % per annum and 4.5 % per annum, respectively.
−Removed: As of June 30, 2019, a $3.2 million letter of credit was outstanding under the 2018 Bank of America Credit Facility.
+Added: In October 2018, a $ 3.2 million letter of credit was issued under the 2018 Bank of America Credit Facility.
+Added: and in October 2019, the letter of credit amount was increased to $ 6.4 million .
The balance of debt issuance costs outstanding were $ 0.6 million and $ 0.3 million as of June 30, 2020 and 2019 , respectively.
−Removed: As of June 30, 2019 , the Company's available borrowing capacity under the 2018 Bank of America Credit Facility was $245.7 million , subject to the borrowing base limitation and compliance with other applicable terms.
−Removed: In April 2016, the Company entered into a credit agreement with CTBC Bank Co., Ltd ("CTBC Bank") that provides for (i) a 12 -month NTD $700.0 million ( $21.6 million U.S.
−Removed: dollar equivalent) term loan facility secured by the land and building located in Bade, Taiwan with an interest rate equal to the lender's established NTD interest rate plus 0.25% per annum which was adjusted monthly, the term loan facility also included a 12 -month guarantee of up to NTD $100.0 million ( $3.1 million U.S.
−Removed: dollar equivalent) with an annual fee equal to 0.50% per annum, and (ii) a 12 -month revolving line of credit of up to 80.0% of eligible accounts receivable in an aggregate amount of up to $40.0 million with an interest rate equal to the lender's established USD interest rate plus 0.30% per annum which was adjusted monthly (collectively, the “2016 CTBC Credit Facility”).
−Removed: The total borrowings allowed under the 2016 CTBC Credit Facility was capped at $40.0 million .
−Removed: The Company extended the 2016 CTBC Credit Facility to mature on May 31, 2017.
−Removed: SUPER MICRO COMPUTER, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: In May 2017, the Company renewed the 2016 CTBC Credit Facility, such that it provided for (i) a 12 -month NTD $700.0 million ( $23.0 million U.S.
−Removed: dollar equivalent) term loan facility secured by the land and building located in Bade, Taiwan with an interest rate equal to the lender's established NTD interest rate plus 0.25% per annum, which was adjusted monthly, which term loan facility also included a 12 -month guarantee of up to NTD $100.0 million ( $3.3 million U.S.
−Removed: dollar equivalent) with an annual fee equal to 0.5% per annum, and (ii) a 12 -month revolving line of credit of up to 80.0% of eligible accounts receivable in an aggregate amount of up to $50.0 million with an interest rate equal to the lender's established USD interest rate plus an interest rate ranging from 0.40% to 0.45% per annum which was adjusted monthly.
−Removed: The total borrowings allowed under the renewed 2016 CTBC Credit Facility were capped at $50.0 million .
−Removed: The 2016 CTBC Credit Facility was to mature on April 30, 2018 but prior to the maturity, the Company entered into the 2018 CTBC Credit Facility (defined below) with CTBC Bank in January 2018, which replaced the 2016 CTBC Credit Facility.
−Removed: In January 2018, the Company entered into a credit agreement with CTBC Bank that provided for (i) a 12 -month NTD $700.0 million ( $23.6 million U.S.
+Added: The Company has been in compliance with all the covenants under the 2018 Bank of America Credit Facility, and as of June 30, 2020 , the Company's available borrowing capacity was $ 243.6 million , subject to the borrowing base limitation and compliance with other applicable terms.
+Added: 2019 CTBC Credit Facility
+Added: In January 2018, the Company entered into a credit agreement with China Trust and Bank Corp ("CTBC Bank") that provided for (i) a 12 -month NTD $ 700.0 million ( $ 23.6 million U.S.
dollar equivalent) term loan facility secured by the land and building located in Bade, Taiwan with an interest rate equal to the lender's established NTD interest rate plus 0.25 % per annum, which was adjusted monthly, which term loan facility also included a 12 -month guarantee of up to NTD $ 100.0 million ( $ 3.4 million U.S.
6 unchanged sentences
dollar equivalent) with an annual fee equal to 0.50 % per annum, (ii) a 180 -day NTD $ 1,500.0 million ( $ 48.2 million U.S.
−Removed: dollar equivalent) term loan facility up to 100% of eligible accounts receivable in an aggregate amount with an interest rate equal to the lender's established NTD interest rate ranging from 0.30% to 0.50% per annum which is adjusted monthly, and (ⅲ) a 12 -month revolving line of credit of up to 100% of eligible accounts receivable in an aggregate amount of up to $50.0 million with an interest rate equal to the lender's established USD interest rate plus an interest rate ranging from 0.30% to 0.50% per annum which is adjusted monthly (collectively, the “2019 CTBC Credit Facility”).
+Added: dollar equivalent) term loan facility up to 100 % of eligible accounts receivable in an aggregate amount with an interest rate equal to the lender's established NTD interest rate ranging from 0.30 % to 0.50 % per annum which is adjusted monthly, and (ⅲ) a 12 -month revolving line of credit of up to 100 % of eligible accounts receivable in an aggregate amount of up to $ 50.0 million with
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
+Added: an interest rate equal to the lender's established USD interest rate plus an interest rate ranging from 0.30 % to 0.50 % per annum which is adjusted monthly (collectively, the “2019 CTBC Credit Facility”).
The total borrowings allowed under the 2019 CTBC Credit Facility was capped at $ 50.0 million .
−Removed: The 2019 CTBC Credit Facility is to mature on June 30, 2020.
−Removed: The total outstanding borrowings under the 2019 and 2018 CTBC Credit Facility term loan were denominated in NTD and remeasured into U.S.
+Added: There are no financial covenants associated with the 2019 CTBC Credit Facility.
+Added: On June 30, 2020, the maturity date of the 2019 CTBC credit facility was extended to August 31, 2020.
+Added: On August 24, 2020, the maturity of the 2019 CTBC credit facility was further extended to August 31, 2021.
+Added: The total outstanding borrowings under the 2019 CTBC Credit Facility term loan were denominated in NTD and remeasured into U.S.
dollars of $ 23.7 million and $ 22.5 million at June 30, 2020 and 2019 , respectively.
−Removed: At June 30, 2019 , the Company did not have any outstanding balance under the 2019 CTBC Credit Facility revolving line of credit.
−Removed: As of June 30, 2018 , the total outstanding borrowings under the 2018 CTBC Credit Facility revolving line of credit were $25.9 million in U.S.
+Added: As of June 30, 2020 and 2019 , the Company did no t have any outstanding borrowings under the 2019 CTBC Credit Facility revolving line of credit.
The interest rate for these loans were 0.45 % per annum as of June 30, 2020 and 0.93 % per annum as of June 30, 2019 .
1 unchanged sentence
As of June 30, 2020 , the net book value of land and building located in Bade, Taiwan, collateralizing the 2019 CTBC Credit Facility term loan was $ 25.4 million .
−Removed: Covenant Compliance
−Removed: 2018 Bank of America Credit Facility
−Removed: The credit agreement with Bank of America related to the 2018 Bank of America Credit Facility contains customary representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries.
−Removed: The credit agreement contains a financial covenant, which requires that the Company maintain a Fixed Charge Coverage Ratio, as defined in the agreement of at least 1.00 for each twelve-month period while a Trigger Period, as defined in the agreement, is in effect.
−Removed: The Company has been in compliance with all the covenants under the 2018 Bank of America Credit Facility.
−Removed: On September 7, 2018, Bank of America issued an extension letter to the Company in connection with the 2018 Bank of America Credit Facility, which extended the delivery date of the Company's audited consolidated financial statements, compliance certificates and other material reports for the fiscal year ended June 30, 2018 to January 31, 2019.
−Removed: On January 31,
+Added: 2020 CTBC Term Loan Facility
+Added: In June 2020, the Company entered into a ten-year, non-revolving term loan facility (“2020 CTBC Term Loan Facility”) to obtain up to NTD 1.2 billion ( $ 40.7 million in U.S.
+Added: dollar equivalents) in financing for use in the expansion and renovation of the Company’s Bade Manufacturing Facility located in Taiwan.
+Added: Drawdowns on the 2020 CTBC Term Loan Facility are based on 80 % of balances owed on commercial invoices from the contractor and shall be drawn according to the progress of the renovations.
+Added: Borrowings under the 2020 CTBC Term Loan Facility are available through June 2022.
+Added: The Company is required to pay against total outstanding principal and interest in equal monthly installments starting June 2023 and continuing through the maturity date of June 2030.
+Added: Interest under the 2020 CTBC Term Loan Facility is the two-year term floating rate of postal saving interest rate plus 0.105 % and is established on the date of the drawdown application.
+Added: If no interest rate is agreed upon, interest shall accrue at the annual base rate for CTBC plus 4.00 % .
+Added: The 2020 CTBC Term Loan Facility is secured by the Bade Manufacturing Facility and its expansion.
+Added: Fees paid to the lender as debt issuance costs were immaterial.
+Added: The Company has financial covenants requiring the Company's current ratio, debt service coverage ratio, and financial debt ratio, as defined in the agreement, to be maintained at certain levels under the 2020 CTBC Term Loan Facility.
+Added: The Company borrowed $ 5.7 million in June 2020 with an interest rate of 0.45 % per annum.
+Added: As of June 30, 2020 , the amount outstanding under the 2020 CTBC Term Loan Facility was $ 5.7 million and the net book value of the property serving as collateral was $ 10.1 million .
+Added: As of June 30, 2020 , the Company was in compliance with all financial covenants under the 2020 CTBC Term Loan Facility.
+Added: Principal payments on short-term and long-term debt obligations are due as follows (in thousands):
+Added: Principal Payments
+Added: 2026 and thereafter
+Added: Total short-term and long-term debt
SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: 2019, the Company entered into an amendment of the loan and security agreement with respect to the 2018 Bank of America Credit Facility to, among other matters, (a) extend the delivery date of the Company's audited consolidated financial statements, compliance certificates and other material reports for the fiscal year ended June 30, 2018 to June 30, 2019, and (b) require the delivery, by no later than March 31, 2019 of the Company's audited consolidated financial statements for the fiscal year ended June 30, 2019 .
−Removed: In April 2019, the Company paid a fee to extend the delivery to June 30, 2019 of its audited consolidated financial statements for the fiscal year ended June 30, 2017.
−Removed: In connection with the second amendment of the 2018 Bank of America Credit Facility to extend the maturity of the 2018 Bank of America Credit Facility, the Company is required to deliver its audited consolidated financial statements for the fiscal year ended June 30, 2018 by December 31, 2019, and deliver its audited consolidated financial statements for the fiscal year ended June 30, 2019 by March 31, 2020.
−Removed: If the Company elects to deliver the audited consolidated financial statements for the fiscal years ended June 30, 2019 and 2018 together in a combined filing with the SEC, the Company is required to deliver its audited financial statements by March 31, 2020.
−Removed: There are no financial covenants associated with the 2018 CTBC Credit Facility or the 2019 CTBC Credit Facility.
Other Long-term Liabilities
Other long-term liabilities as of June 30, 2020 and 2019 consisted of the following (in thousands):
+Added: Operating lease liability, non-current
Accrued unrecognized tax benefits including related interest and penalties
1 unchanged sentence
Total other long-term liabilities
+Added: Upon adoption of the new lease accounting guidance, the Company recognized operating lease liabilities of approximately $ 15.2 million based on the present value of the remaining minimum rental payments using an incremental borrowing rate of approximately 4 % .
+Added: The Company also recognized corresponding operating lease ROU assets of approximately $ 14.8 million .
+Added: The difference relates to adjustments made to operating lease ROU assets for prepaid rent and deferred rent that existed as of the date of adoption.
+Added: These operating lease ROU assets relate to offices, warehouses and other premises leased under non-cancelable operating leases expiring through June 2026 and vehicles and certain equipment leased under non-cancelable operating leases expiring through August 2023.
+Added: Operating lease expense recognized and supplemental cash flow information related to operating leases for the years ended June 30, 2020 and 2019 were as follows (in thousands):
+Added: Years Ended June 30,
+Added: Operating lease expense (including expense for lease agreements with related parties of $1,421 and $0 for the years ended June 30, 2020 and 2019, respectively)
+Added: Cash payments for operating leases (including payments to related parties of $1,443 and $0 for the years ended June 30, 2020 and 2019, respectively)
+Added: New operating lease assets obtained in exchange for operating lease liabilities
+Added: During the years ended June 30, 2020 and 2019 , the Company's costs related to short-term lease arrangements for real estate and non-real estate assets were immaterial.
+Added: Non-lease variable payments expensed in the years ended June 30, 2020 , 2019 and 2018 were $ 1.3 million , $ 0.0 million and $ 0.0 million respectively.
+Added: As of June 30, 2020 , the weighted average remaining lease term for operating leases was 4.6 and the weighted average discount rate was 3.5 % .
+Added: Maturities of operating lease liabilities under noncancelable operating lease arrangements as of June 30, 2020 were as follows (in thousands):
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
+Added: Maturities of operating leases
+Added: 2026 and beyond
+Added: Total future lease payments
+Added: Imputed interest
+Added: Present value of operating lease liabilities
+Added: As of June 30, 2019, prior to the adoption of the new lease accounting guidance, future minimum payments under operating leases having initial or remaining non-cancelable lease terms in excess of one year were as follows (in thousands):
+Added: Minimum lease payments
+Added: 2025 and beyond
+Added: Total minimum lease payments
+Added: As of June 30, 2020 , commitments under short-term lease and financing lease arrangements were immaterial.
+Added: As of June 30, 2020 , operating and financing leases that have not yet commenced were immaterial.
+Added: The Company has entered into lease agreements with related parties.
+Added: See Note 13, "Related Party Transactions," for a further discussion.
Related Party Transactions
4 unchanged sentences
Ablecom’s Chief Executive Officer, Steve Liang, is the brother of Charles Liang, the Company’s President, Chief Executive Officer and Chairman of the Board of Directors.
−Removed: Steve Liang owned approximately 0.4% of the Company's common stock as of June 30, 2017, but owned no shares as of June 30, 2018 and thereafter.
−Removed: As of June 30, 2019 , Charles Liang and his spouse, Sara Liu, who is also an officer and director of the Company, collectively owned approximately 10.5% of Ablecom’s capital stock.
+Added: Steve Liang and his family members owned approximately 28.8 % of Ablecom’s stock and Charles Liang and his spouse, Sara Liu, who is also an officer and director of the Company, collectively owned approximately 10.5 % of Ablecom’s capital stock as of June 30, 2020 .
Certain family members of Yih-Shyan (Wally) Liaw, who until January 2018 was the Senior Vice President of International Sales and a director of the Company, owned approximately 11.7 % of Ablecom’s capital stock as of June 30, 2020 .
−Removed: The Company does not own, nor has it ever owned, any of Ablecom’s capital stock.
−Removed: Steve Liang and his family members owned approximately 28.8% of Ablecom’s stock as of June 30, 2019 .
Bill Liang, a brother of both Charles Liang and Steve Liang, is a member of the Board of Directors of Ablecom.
1 unchanged sentence
Steve Liang is also a member of Compuware’s Board of Directors and is an equity holder of Compuware.
−Removed: None of the Company, Charles Liang or Sara Liu own any capital stock of Compuware.
+Added: Charles Liang or Sara Liu do not own any capital stock of Compuware and the Company does not own any of Ablecom or Compuware's capital stock.
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Dealings with Ablecom
3 unchanged sentences
With respect to design activities, Ablecom generally agrees to design certain agreed-upon products according to the Company’s specifications, and further agrees to build the tools needed to manufacture the products.
−Removed: The Company pays Ablecom for the
−Removed: SUPER MICRO COMPUTER, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: design and engineering services, and further agrees to pay Ablecom for the tooling.
+Added: The Company pays Ablecom for the design and engineering services, and further agrees to pay Ablecom for the tooling.
The Company retains full ownership of any intellectual property resulting from the design of these products and tooling.
20 unchanged sentences
The Company sells to Compuware most of the components needed to manufacture the above products.
−Removed: Compuware uses the components to manufacture the products and then sells the products back to the Company at a purchase price equal to the price at which the Company sold the components to Compuware, plus a “manufacturing value added” fee and other miscellaneous material charges and costs.
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
+Added: uses the components to manufacture the products and then sells the products back to the Company at a purchase price equal to the price at which the Company sold the components to Compuware, plus a “manufacturing value added” fee and other miscellaneous material charges and costs.
The Company and Compuware frequently review and negotiate the amount of the “manufacturing value added” fee that will be included in the price of the products the Company purchases from Compuware.
3 unchanged sentences
The Company does not directly or indirectly guarantee any obligations of Compuware, or any losses that the equity holders of Compuware may suffer.
−Removed: SUPER MICRO COMPUTER, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company’s results from transactions with Ablecom and Compuware for each of the fiscal years ended June 30, 2020 , 2019 , and 2018 are as follows (in thousands):
8 unchanged sentences
Accounts payable and accrued liabilities (2)
+Added: Other long-term liabilities (3)
Accounts receivable and other receivables (1)
Accounts payable and accrued liabilities (2)
+Added: Other long-term liabilities (3)
+Added: __________________________
+Added: (1) Other receivables include receivables from vendors.
+Added: (2) Includes current portion of operating lease liabilities.
+Added: (3) Represents non-current portion of operating lease liabilities.
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In October 2016, the Company entered into agreements pursuant to which the Company contributed certain technology rights in connection with an investment in the Corporate Venture, which is accounted for using the equity method.
1 unchanged sentence
Stock-based Compensation and Stockholders’ Equity
−Removed: Share Repurchase Program
−Removed: In July 2016, the Company’s Board of Directors adopted a program to repurchase from time to time at management’s discretion up to $100.0 million of the Company’s common stock in the open market or in private transactions during the following twelve months at prevailing market prices.
−Removed: In fiscal year 2017, the Company purchased 888,097 shares of the Company's common stock in the open market at a weighted average price of $20.79 for $18.5 million .
−Removed: Repurchases were made under the program using the Company’s cash resources.
−Removed: The repurchase program ended in July 2017.
Equity Incentive Plan
−Removed: In January 2016, the Board of Directors approved the 2016 Equity Incentive Plan (the "2016 Plan") and reserved for issuance 4,700,000 shares of common stock for awards of stock options, stock appreciation rights, restricted stock, RSUs and other equity-based awards.
−Removed: The 2016 Plan was approved by the stockholders of the Company and became effective on March 8, 2016.
−Removed: As of the date the 2016 Plan became effective, 8,696,444 shares of common stock were reserved for outstanding awards under the Company's 2006 Equity Incentive Plan (the "2006 Plan").
−Removed: Such awards remained outstanding under the 2006 Plan following the adoption of the 2016 Plan, although no further awards have been or will be granted under the 2006 Plan.
−Removed: SUPER MICRO COMPUTER, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: 2,800,000 shares subject to awards that remained outstanding under the 2006 Plan at the time the 2016 Plan became effective, if those awards were or are forfeited at any time after the 2016 Plan became effective, will become available for use under the 2016 Plan.
−Removed: At the time the 2016 Plan became effective, all remaining ungranted shares under the 2006 Plan were canceled.
−Removed: Under the 2016 Plan, the exercise price per share for incentive stock options granted to employees owning shares representing more than 10% of the Company's outstanding voting stock at the time of grant cannot be less than 110% of the fair value of the underlying shares on the grant date.
+Added: On June 5, 2020, the stockholders of the Company approved the 2020 Equity and Incentive Compensation Plan (the "2020 Plan").
+Added: The maximum number of shares available under the 2020 Plan is 5,000,000 plus 1,045,000 shares of common stock that remained available for future awards under the 2016 Equity Incentive Plan (the “2016 Plan”), at the time of adoption of the 2020 Plan.
+Added: No other awards can be granted under the 2016 Plan and 7,246,000 shares of common stock remain reserved for outstanding awards issued under the 2016 Plan at the time of adoption of the 2020 Plan.
+Added: Under the 2020 Plan, the Company can grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, dividend equivalents, and certain other awards, including those denominated or payable in, or otherwise based on, the Company’s common stock.
+Added: The exercise price per share for incentive stock options granted to employees owning shares representing more than 10 % of the Company's outstanding voting stock at the time of grant cannot be less than 110 % of the fair value of the underlying shares on the grant date.
Nonqualified stock options and incentive stock options granted to all other persons are granted at a price not less than 100 % of the fair value.
2 unchanged sentences
25 % at the end of one year and one sixteenth per quarter thereafter.
−Removed: Under the 2016 Plan, the Company granted PRSUs to its Chief Executive Officer, 50% of which vest based on the achievement of certain performance metrics at the end of the performance period while the remainder vest in equal amounts over the following ten quarters provided he continues to be employed by the Company.
As of June 30, 2020 , the Company had 5,249,198 authorized shares available for future issuance under the 2020 Plan.
9 unchanged sentences
The fair value of stock option grants for the fiscal years ended June 30, 2020 , 2019 and 2018 was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Years Ended June 30,
4 unchanged sentences
Expected term
−Removed: 5.31 - 5.38 years
Dividend yield
4 unchanged sentences
The following table shows total stock-based compensation expense included in the consolidated statements of operations for the fiscal years ended June 30, 2020 , 2019 and 2018 (in thousands):
−Removed: SUPER MICRO COMPUTER, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Years Ended June 30,
6 unchanged sentences
Stock-based compensation expense, net
−Removed: Prior to adoption of ASU 2016-09, Compensation – Stock Compensation (Topic 718):
−Removed: Improvements to Employee Share-Based Payment Accounting, cash flows resulting from the tax benefits for tax deductions resulting from the exercise of stock options and vesting of RSUs and PRSUs in excess of the compensation expense recorded for those options (excess tax benefits) issued or modified since July 1, 2006 are classified as cash from financing activities.
−Removed: Upon adoption of the new guidance on July 1, 2017, the cash flows from excess tax benefits related to such awards are classified as cash from operating activities.
−Removed: Excess tax benefits for stock options issued prior to July 1, 2006 are classified as cash from operating activities.
−Removed: Prior to adoption of ASU 2016-09, Compensation – Stock Compensation (Topic 718):
−Removed: Improvements to Employee Share-Based Payment Accounting, the Company had $1.8 million of excess tax benefits recorded in additional paid-in capital in the fiscal year ended June 30, 2017 and had excess tax benefits classified as cash from financing activities of $2.3 million in the fiscal year ended June 30, 2017 for options issued since July 1, 2006.
−Removed: The Company adopted the accounting guidance on July 1, 2017 and as a result of the adoption, the Company recorded $0.5 million of excess tax benefit in income tax expense in the fiscal year ended June 30, 2018.
−Removed: As of June 30, 2019 , $6.9 million of unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 2.58 years, $31.5 million of unrecognized compensation cost related to unvested RSUs is expected to be recognized over a weighted-average period of 2.77 years and $0.3 million of unrecognized compensation cost related to unvested PRSUs is expected to be recognized over a period of 1.5 years.
+Added: As of June 30, 2020 , $ 5.5 million of unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 2.19 years, $ 31.2 million of unrecognized compensation cost related to unvested RSUs is expected to be recognized over a weighted-average period of 2.52 years and $ 0.5 million of unrecognized compensation cost related to unvested PRSUs is expected to be recognized over a period of 0.90 year.
Stock Option Activity
3 unchanged sentences
(in thousands)
−Removed: Balance as of June 30, 2016 (7,495,131 shares exercisable at weighted average exercise price of $13.35 per share)
+Added: Balance as of June 30, 2017
Forfeited/Cancelled
−Removed: Balance as of June 30, 2017 (7,348,320 shares exercisable at weighted average exercise price of $14.58 per share)
+Added: Balance as of June 30, 2018
Forfeited/Cancelled
−Removed: Balance as of June 30, 2018 (7,563,189 shares exercisable at weighted average exercise price of $15.71 per share)
+Added: Balance as of June 30, 2019
Forfeited/Cancelled
−Removed: Balance as of June 30, 2019 (6,624,009 shares exercisable at weighted average exercise price of $17.65 per share)
+Added: Balance as of June 30, 2020
Options vested and exercisable at June 30, 2020
−Removed: No options were exercised in the fiscal year ended June 30, 2019 .
−Removed: The total pretax intrinsic value of options exercised during the fiscal years ended June 30, 2018 and 2017 was $4.0 million and $14.0 million , respectively.
+Added: The total pretax intrinsic value of options exercised during the fiscal year ended June 30, 2020 , 2019 and 2018 was $ 19.3 million , $ 0 and $ 4.0 million , respectively.
Additional information regarding options outstanding as of June 30, 2020 , is as follows:
15 unchanged sentences
The Company grants RSUs to certain employees as part of its regular employee equity compensation review program as well as to selected new hires.
−Removed: RSUs are share awards that entitle the holder to receive freely tradable shares of the Company's common stock upon vesting.
+Added: RSUs are typically service based share awards that entitle the holder to receive freely tradable shares of the Company's common stock upon vesting.
In August 2017, the Compensation Committee granted two PRSU awards to the Company's Chief Executive Officer, both of which have both performance and service conditions.
−Removed: The first award was a one -year PRSU and the second award was a
+Added: The first award was a one -year PRSU and the second award was a two -year PRSU.
SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: two -year PRSU.
−Removed: The one -year PRSUs would be earned based on the Company’s performance as it relates to a revenue growth metric and a minimum non-GAAP operating margin metric during the fiscal year ended June 30, 2018 with eligibility up to 200% of the targeted number of units based on revenue growth if the minimum non-GAAP operating margin is achieved.
−Removed: If the performance metrics were met, 50% of the PRSUs would vest at June 30, 2018 while the remainder would vest in equal amounts over the following ten quarters if the Company's Chief Executive Officer continued to be employed during those ten quarters.
+Added: The one -year PRSUs were earned based on the Company’s performance as it related to a revenue growth metric and a minimum non-GAAP operating margin metric during the fiscal year ended June 30, 2018 with eligibility up to 200 % of the targeted number of units based on revenue growth if the minimum non-GAAP operating margin was achieved.
+Added: Upon achievement of the performance metrics, 50 % of the PRSUs vested at June 30, 2018 while the remainder vest in equal amounts over the following ten quarters if the Company's Chief Executive Officer continued to be employed during those ten quarters.
In December 2019, the Compensation Committee of the Company's Board of Directors determined that the Company achieved the revenue and non-GAAP operating margin metrics for the fiscal year ended June 30, 2018 at a level that entitled the Chief Executive Officer to 200 % of the originally targeted number of shares subject to the one -year PRSU.
−Removed: 50% of the PRSUs so earned were vested as of June 30, 2018, and an additional 20% of the PRSUs vested during the four quarters ended June 30, 2019, in accordance with the terms of the grant.
−Removed: The two -year PRSUs would be earned based on the Company’s performance for the average non-GAAP operating margin metric for the two fiscal years ended June 30, 2019 with eligibility up to 100% of the targeted number of units.
−Removed: If the performance metrics would have been met, 50% of the PRSUs would have vested at June 30, 2019 while the remainder would have been vested in equal amounts over the following ten quarters if the Chief Executive Officer continued to be employed during those ten quarters.
−Removed: In December 2019, the Compensation Committee of the Company's Board of Directors has determined that the Company did not achieve the required performance metrics for these two -year PRSUs to be earned and, consequently, this PRSU terminated in December 2019.
+Added: 50 % of the PRSUs so earned were vested as of June 30, 2018, and an additional 40 % of the PRSUs vested during the eight quarters ended June 30, 2020, in accordance with the terms of the grant.
+Added: The two -year PRSUs are earned based on the Company’s performance for the average non-GAAP operating margin metric for the two fiscal years ended June 30, 2019 with eligibility up to 100 % of the targeted number of units.
+Added: If the performance metrics were met, 50 % of the PRSUs would have vested at June 30, 2019 while the remainder would have been vested in equal amounts over the following ten quarters if the Chief Executive Officer continued to be employed during those ten quarters.
+Added: In December 2019, the Compensation Committee of the Board determined that the Company did not achieve the required performance metrics for the two -year PRSUs and none of the two -year PRSUs vested.
+Added: In March 2020, the Compensation Committee granted a PRSU award to one of the Company's senior executives.
+Added: The award vests in two tranches and includes service and performance conditions.
+Added: Each tranche has 15,000 RSUs that vest in May 2021 and November 2021 based on service conditions only.
+Added: Additional units can be earned based on revenue growth percentage in fiscal year 2020 compared to fiscal year 2019, which units would vest in May 2021, and based on revenue growth percentage in fiscal year 2021 compared to fiscal year 2020, which units would vest in November 2021.
+Added: No additional units were earned for fiscal year 2020 as revenue decreased from fiscal year 2019.
The following table summarizes RSUs and PRSUs activity during the fiscal years ended June 30, 2020 and 2019 under all plans:
10 unchanged sentences
The number of shares released excludes 172,857 RSUs that were vested but not released in fiscal year 2019.
+Added: The number of vested but not released RSUs for fiscal year 2020 was not material.
The number of shares released also excludes 24,000 and 60,000 PRSUs that were vested but not released in fiscal years 2019 and 2018, respectively.
−Removed: These vested RSUs and PRSUs will be released upon the effectiveness of the Company's registration statement on Form S-8.
−Removed: The total pretax intrinsic value of RSUs and PRSUs vested was $14.3 million , $16.8 million and $11.3 million for the fiscal years ended June 30, 2019 , 2018 and 2017 , respectively.
−Removed: In fiscal years 2019 , 2018 and 2017 , upon vesting and release, 549,886 , 572,789 and 411,739 shares of RSUs were partially net share-settled such that the Company withheld 175,044 , 199,715 and 144,994 shares, respectively, with value equivalent to the employees' minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities.
−Removed: The total shares withheld were based on the value of the RSUs on their respective vesting dates as determined by the Company's closing stock price.
−Removed: Total payments for the employees' tax obligations to tax authorities were $3.1 million , $4.5 million and $3.6 million for
+Added: These vested RSUs and PRSUs were primarily released in fiscal year 2020 and included in fiscal year 2020 number upon the effectiveness of the Company's registration statement on Form S-8.
SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
−Removed: the fiscal years ended June 30, 2019 , 2018 and 2017 , respectively, and are reflected as a financing activity within the consolidated statements of cash flows.
−Removed: These net-share settlements had the effect of share repurchases by the Company as they reduced and retired the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company.
+Added: The total pretax intrinsic value of RSUs and PRSUs vested was $ 18.9 million , $ 14.3 million and $ 16.8 million for the fiscal years ended June 30, 2020 , 2019 and 2018 , respectively.
+Added: In fiscal years 2020 , 2019 and 2018 , the Company withheld 331,648 , 175,044 and 199,715 shares with value equivalent to the employees' minimum statutory obligation for the applicable income and other employment taxes from the vesting and release of 979,274 , 549,886 and 572,789 RSUs and PRSUs, respectively, and remitted the cash to the appropriate taxing authorities.
+Added: The total shares withheld were based on the value of the RSUs on their respective vesting dates as determined by the Company's closing stock price.
+Added: Total payments for the employees' tax obligations to tax authorities were $ 8.2 million , $ 3.1 million and $ 4.5 million for the fiscal years ended June 30, 2020 , 2019 and 2018 , respectively, and are reflected as a financing activity within the consolidated statements of cash flows.
Pursuant to the terms of the 2016 Plan, shares withheld in connection with net-share settlements are returned to the 2016 Plan and are available for future grants under the 2016 Plan.
9 unchanged sentences
The Company’s net deferred tax assets as of June 30, 2020 and 2019 consist of the following (in thousands):
+Added: Research and development credits
Deferred revenue
Inventory valuation
+Added: Capitalized research and development costs
Stock-based compensation
+Added: Lease obligations
Accrued vacation and bonus
+Added: Prepaid and accrued expenses
Warranty accrual
+Added: Bad debt and other reserves
Marketing fund accrual
1 unchanged sentence
Deferred tax liabilities-depreciation and other
+Added: Right of use asset
Valuation allowance
1 unchanged sentence
The Company assesses its deferred tax assets for recoverability on a regular basis, and where applicable, a valuation allowance is recorded to reduce the total deferred tax asset to an amount that will, more likely than not, be realized in the future.
−Removed: As of June 30, 2019 , the Company believes that most of its deferred tax assets are “more-likely-than not” to be realized with the exception of California R&D tax credits that have not met the “more-likely than not” realization threshold criteria.
+Added: As of June 30, 2020 , the Company believes that most of its deferred tax assets are “more-likely-than not” to be realized with the exception state research and development tax credits that have not met the “more-likely than not” realization threshold criteria.
As a result, at June 30, 2020 , the gross excess credits of $ 30.8 million , or net of federal tax benefit of $ 24.3 million , are sub ject to a full valuation allowance.
At June 30, 2019, the gross excess credits of $ 26.4 million , or net of federal tax benefit of $ 20.9 million , are subject to a full valuation allowance.
−Removed: The change in valuation allowance from 2018 to 2019 is $4.7 million .
+Added: The change in valuation allowance is $ 3.9 million and $ 4.7 million for the fiscal years ended June 30, 2020 and 2019, respectively.
The Company will continue to review its deferred tax assets in accordance with the applicable accounting standards.
9 unchanged sentences
federal corporate income tax rate decrease from 35% to 21%, and a one-time transition tax of $ 2.8 million , in its income tax provision for the fiscal year ended June 30, 2018.
−Removed: The Company expects further guidance may be forthcoming from the federal and state tax agencies, which could result in additional impacts.
The 2017 Tax Reform Act also creates a new requirement that Global Intangible Low-Taxed Income (“GILTI”) earned by controlled foreign corporations (“CFCs”) that must be included currently in the gross income of a CFC’s U.S.
stockholder starting in the tax year that begins after 2017.
−Removed: The tax impact from GILTI has been recorded in the Company's income tax provision for the fiscal year ended June 30, 2019, net of foreign tax credit, and is not material to the Company's income tax provision for the fiscal year ended June 30, 2019.
+Added: GILTI does not have material impact on the Company's income tax provision.
GAAP, the Company is allowed to make an accounting policy choice of either (i) treating taxes due on future U.S.
inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (ii) factoring such amounts into a company’s measurement of its deferred taxes.
−Removed: The Company's selection of an accounting policy for the fiscal year ended June 30, 2018 with respect to the GILTI tax rules is to treat GILTI tax as a current period expense under the period cost method.
+Added: The Company's selection of an accounting policy with respect to the GILTI tax rules is to treat GILTI tax as a current period expense under the period cost method.
Under the 2017 Tax Reform Act, starting on July 1, 2018, the Company is no longer subject to federal income tax on earnings remitted from our foreign subsidiaries.
−Removed: The Company previously asserted that all of its foreign undistributed earnings were indefinitely reinvested.
+Added: The Company previously asserted that all of its foreign undistributed earnings
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
+Added: were indefinitely reinvested.
As a result of the 2017 Tax Reform Act, the Company has determined that its foreign undistributed earnings are indefinitely reinvested except for Netherlands.
1 unchanged sentence
The tax impact of such repatriation is estimated to be immaterial.
−Removed: SUPER MICRO COMPUTER, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
+Added: As a result of the 2017 Tax Reform Act, in December 2019, the Company realigned its international business operations and group structure.
+Added: As a part of this restructuring, the Company moved certain intellectual property back to the United States.
+Added: As a result of this restructuring, the Company estimated approximately $ 1.9 million additional tax benefit from foreign derived intangible income in fiscal year 2020 as compared to fiscal year 2019.
+Added: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted.
+Added: The CARES Act provides temporary relief from certain aspects of the 2017 Tax Reform Act that imposed limitations on the utilization of certain losses, interest expense deductions and alternative minimum tax credits and made a technical correction to the 2017 Tax Reform Act related to the depreciable life of qualified improvement property.
+Added: The CARES Act did not have a material impact on the Company.
The following is a reconciliation for the fiscal years ended June 30, 2020 , 2019 and 2018 , of the statutory rate to the Company’s effective federal tax rate:
Years Ended June 30,
−Removed: Tax at statutory rate
−Removed: Uncertain tax positions
−Removed: Stock-based compensation
−Removed: Settlement with tax authority
−Removed: Foreign tax rate differences
+Added: Income tax provision at statutory rate
State income tax, net of federal tax benefit
−Removed: Tax reform related
−Removed: Qualified production activity deduction
−Removed: Foreign withholding tax
−Removed: Federal provision true-up
−Removed: Subpart F income inclusion
+Added: Foreign rate differential
Research and development tax credit
+Added: Uncertain tax positions, net of (settlement) with Tax Authorities
+Added: Foreign derived intangible / Subpart F income inclusion
+Added: Stock-based compensation
+Added: Non deductible penalty on SEC matter
+Added: Provision to return true-up
+Added: Tax reform related charge
+Added: Qualified production activity deduction
Effective tax rate
9 unchanged sentences
Gross decreases:
−Removed: Settlements and releases due to the lapse of statutes of limitations
+Added: Decreases due to a lapse of the statute of limitations
Balance at June 30, 2018
3 unchanged sentences
Gross decreases:
−Removed: Settlements and releases due to the lapse of statutes of limitations
+Added: Decreases due to settlements with taxing authority
+Added: Decreases due to lapse of statute of limitations
Balance at June 30, 2019
3 unchanged sentences
Gross decreases:
−Removed: Settlements and releases due to the lapse of statutes of limitations
+Added: Decreases due to settlements with taxing authority
+Added: Decreases due to lapse of statute of limitations
Balance at June 30, 2020
2 unchanged sentences
The total amount of unrecognized tax benefits that would affect the effective tax rate, if recognized, was $ 13.4 million and $ 18.6 million as of June 30, 2020 and 2019 , respectively.
−Removed: The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for taxes in the consolidated statements of operations.
+Added: The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the income tax provision in the consolidated statements of operations.
As of June 30, 2020 and 2019 , the Company had accrued $ 2.1 million and $ 1.5 million for the payment of interest and penalties relating to unrecognized tax benefits, respectively.
In October 2019, the Taiwan tax authority completed its audit in Taiwan for fiscal year 2018 and proposed a transfer pricing adjustment on the Company which resulted in additional tax liability of $ 1.6 million .
−Removed: The Company accepted the proposed adjustment in October 2019 and intends to pay the $1.6 million tax liability in January 2020.
−Removed: The impact of this adjustment on the income statement will be offset by the release of previously unrecognized tax benefits related to the fiscal year audited in the period in which the proposed adjustment was accepted.
+Added: The Company accepted the proposed adjustment in October 2019 and paid the $ 1.6 million tax liability in February 2020.
+Added: In February 2020, the Taiwan tax authority completed its audit in Taiwan for fiscal year 2019 and proposed a transfer pricing adjustment on the Company which resulted in additional tax liability of $ 1.0 million .
+Added: The Company accepted the proposed adjustment and paid the $ 1.0 million tax liability in February 2020.
+Added: The impact of these adjustments on the income statement was offset by the release of previously unrecognized tax benefits related to the fiscal years audited in the periods in which the proposed adjustments were accepted.
The Company believes that it has adequately provided reserves for all uncertain tax positions;
however, amounts asserted by tax authorities could be greater or less than the Company’s current position.
−Removed: Accordingly, the Company’s provision on federal, state and foreign tax related matters to be recorded in the future may change as revised estimates are made as or the underlying matters are settled or otherwise resolved.
+Added: Accordingly, the Company’s provision on federal, state and foreign tax related matters to be recorded in the future may change as revised estimates are made or as the underlying matters are settled or otherwise resolved.
The federal statute of limitations remains open in general for tax years ended June 30, 2017 through 2020.
1 unchanged sentence
Certain statutes of limitations in major foreign jurisdictions remain open in general for the tax years ended June 30, 2016 through 2020.
−Removed: It is reasonably possible that our gross unrecognized tax benefits will decrease by approximately $4.8 million in the next 12 months, primarily due to the lapse of the statute of limitations.
−Removed: These adjustments, if recognized, would positively impact our effective tax rate, and would be recognized as additional tax benefits.
SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
+Added: reasonably possible that our gross unrecognized tax benefits will decrease by approximately $ 1.2 million , in the next 12 months, due to the lapse of the statute of limitations.
+Added: These adjustments, if recognized, would positively impact our effective tax rate, and would be recognized as additional tax benefits.
Commitments and Contingencies
−Removed: Litigation and Claims — In February 2018, the Company became a party to legal proceedings whereby complainants have alleged that it has violated Section 10(b) of the Securities Exchange Act due to alleged misrepresentations and/or omissions.
−Removed: In July 2019, the Company filed a motion to dismiss which remains pending.
−Removed: See Note 19, "Subsequent Events" for further details.
+Added: Litigation and Claims — On February 8, 2018, two putative class action complaints were filed against the Company, the Company's Chief Executive Officer, and the Company's former Chief Financial Officer in the U.S.
+Added: District Court for the Northern District of California (Hessefort v.
+Added: Super Micro Computer, Inc., et al., No.
+Added: 18-cv-00838 and United Union of Roofers v.
+Added: Super Micro Computer, Inc., et al., No.
+Added: 18-cv-00850).
+Added: The complaints contain similar allegations, claiming that the defendants violated Section 10(b) of the Securities Exchange Act due to alleged misrepresentations and/or omissions in public statements regarding recognition of revenue.
+Added: The court subsequently appointed New York Hotel Trades Council & Hotel Association of New York City, Inc.
+Added: Pension Fund as lead plaintiff.
+Added: The lead plaintiff then filed an amended complaint naming the Company's Senior Vice President of Investor Relations as an additional defendant.
+Added: On June 21, 2019, the lead plaintiff filed a further amended complaint naming the Company's former Senior Vice President of International Sales, Corporate Secretary, and Director as an additional defendant.
+Added: On July 26, 2019, the Company filed a motion to dismiss the complaint.
+Added: On March 23, 2020, the Court granted the Company’s motion to dismiss the complaint, with leave for lead plaintiff to file an amended complaint within 30 days.
+Added: On April 22, 2020, lead plaintiff filed a further amended complaint.
+Added: On June 15, 2020, the Company filed a motion to dismiss the further amended complaint, the hearing for which is calendared for September 23, 2020.
+Added: The Company believes the claims are without merit and intends to vigorously defend against the lawsuit.
+Added: SEC Matter — The Company cooperated with the SEC in its investigation of marketing expenses that contained certain irregularities discovered by Company management, which irregularities were disclosed on August 31, 2015, and the Company cooperated with the SEC in its further investigation of the matters underlying the Company’s inability to timely file its Form 10-K for the fiscal year ended June 30, 2017 and concerning the publication of a false and widely discredited news article in October 2018 concerning the Company’s products.
+Added: On August 25, 2020, to fully resolve all matters under investigation, the Company consented to entry of an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as announced by the SEC.
+Added: The Company admitted the SEC’s jurisdiction over the Company and the subject matter of the proceedings, but otherwise neither admitted nor denied the SEC’s findings, as described in the Order.
+Added: The Company agreed to cease and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and (3) of the Securities Act and Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B), of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder.
+Added: The Company also agreed to pay a civil money penalty of $ 17.5 million .
+Added: In addition, the Company’s Chief Executive Officer concluded a settlement with the SEC on August 25, 2020, as announced by the SEC.
+Added: The Company’s Chief Executive Officer will pay the Company the sum of $ 2,122,000 as reimbursement of profits from certain stock sales during the relevant period, pursuant to Section 304 of the Sarbanes-Oxley Act of 2002.
+Added: As of and for the year ended June 30, 2020, the Company recorded a liability of $ 17.5 million for its SEC settlement which is included in accrued liabilities and general and administrative expenses in the consolidated financial statements.
+Added: The Company’s Chief Executive Officer’s payment of $ 2,122,000 to the Company is a contingent gain and will be recorded when it is realized.
+Added: Other legal proceedings and indemnifications
From time to time, the Company has been involved in various legal proceedings arising from the normal course of business activities.
−Removed: In management’s opinion, the resolution of any matters will not have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity.
+Added: The resolution of any such matters have not had a material impact on the Company’s consolidated financial condition, results of operations or liquidity as of June 30, 2020 and any prior periods.
The Company has entered into indemnification agreements with its current and former directors and executive officers.
2 unchanged sentences
However, the Company maintains directors and officers liability insurance coverage to reduce its exposure to such obligations.
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Purchase Commitments - The Company has agreements to purchase inventory and non-inventory items primarily through the next 12 months.
As of June 30, 2020 , these remaining noncancelable commitments were $ 193.6 million , including $ 68.9 million for related parties.
−Removed: Lease Commitments —The Company leases offices and equipment under noncancelable operating leases which expire at various dates through 2026 .
−Removed: In addition, the Company leases certain of its equipment under capital leases.
−Removed: The future minimum lease commitments under all leases are as follows (in thousands):
−Removed: June 30, 2020
−Removed: June 30, 2021
−Removed: June 30, 2022
−Removed: June 30, 2023
−Removed: June 30, 2024
−Removed: Total minimum lease payments
−Removed: Amounts representing interest
−Removed: Present value of minimum lease payments
−Removed: Long-term portion
−Removed: Current portion
−Removed: Rent expense for the fiscal years ended June 30, 2019 , 2018 and 2017 , was $6.7 million , $5.9 million and $5.0 million , respectively.
−Removed: Standby Letter of Credit - In October 2018, Bank of America issued a standby letter of credit on behalf of the Company to a beneficiary for an initial value of $3.2 million to facilitate the ongoing operations of the Company.
−Removed: The standby letter of credit is automatically extended without amendment for successive one-year periods from the original expiration date of November 1, 2019 and will do so until canceled through written notice from the issuer.
−Removed: In October 2019, upon the Company's request, Bank of America increased the amount under the letter of credit issued to the beneficiary to $6.4 million .
+Added: Standby Letter of Credit - In October 2019, Bank of America increased the value of a previously issued standby letter of credit to a beneficiary from $ 3.2 million to $ 6.4 million to facilitate ongoing operations of the Company.
+Added: The standby letter of credit is cancellable upon written notice from the issuer.
No amounts have been drawn under the standby letter of credit.
+Added: Lease Commitments - See Note 12, "Leases," for a discussion of the Company's operating lease and financing lease commitments.
Retirement Plans
−Removed: SUPER MICRO COMPUTER, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company sponsors a 401(k) savings plan for eligible United States employees and their beneficiaries.
19 unchanged sentences
The Company’s revenue is presented on a disaggregated basis in Note 3, “Revenue” by type of product, by geographical market, and by products sold through its indirect sales channel or to its direct customers and OEMs.
−Removed: Quarterly Financial Information (Unaudited)
+Added: SUPER MICRO COMPUTER, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
+Added: Selected Quarterly Financial Data (Unaudited)
The following table presents the Company's unaudited consolidated quarterly financial data.
1 unchanged sentence
The Company believes that all necessary adjustments, consisting of normal recurring accruals and adjustments, have been included to present fairly the quarterly financial data.
−Removed: The Company's quarterly results of operations for these periods are not necessary indicative of future results of operations.
+Added: The Company's quarterly results of operations for these periods are not necessarily indicative of future results of operations.
Three Months Ended
(In thousands, except per share data)
−Removed: Net income (loss)
−Removed: Net income (loss) per common share:
+Added: Net income per common share:
Subsequent Events
−Removed: On February 8, 2018, two putative class action complaints were filed against us, our CEO, and our former CFO in the U.S.
−Removed: District Court for the Northern District of California (Hessefort v.
−Removed: Super Micro Computer, Inc., et al., No.
−Removed: 18-cv-00838 and United Union of Roofers v.
−Removed: Super Micro Computer, Inc., et al., No.
−Removed: 18-cv-00850).
−Removed: The complaints contain similar allegations, claiming that the defendants violated Section 10(b) of the Securities Exchange Act due to alleged misrepresentations and/or omissions in public statements regarding recognition of revenue.
−Removed: The court subsequently appointed New York Hotel Trades Council & Hotel Association of New York City, Inc.
−Removed: Pension Fund as lead plaintiff and it filed an amended complaint naming our Senior Vice President of Investor Relations as an additional defendant.
−Removed: On June 21, 2019, plaintiff filed a further amended complaint naming our former Senior Vice President of International Sales, Corporate Secretary, and Director as an additional defendant.
−Removed: On July 26, 2019, we filed a motion to dismiss which remains pending.
−Removed: We believe the allegations filed are without merit and intend to vigorously defend against the lawsuit.
−Removed: As a result of the 2017 Tax Reform Act, in December 2019, the Company realigned its international business operations and group structure.
−Removed: As a part of this restructuring, the Company moved certain intellectual property back to the United States.
−Removed: This tax restructuring is not expected to have a material impact on the estimated annual effective tax rate.
+Added: On August 9, 2020, the Company's Board of Directors approved a share repurchase program to repurchase shares of common stock for up to $ 30.0 million at prevailing prices in the open market.
+Added: The share repurchase program is effective until December 31, 2020 or until the maximum amount of common stock is repurchased.
+Added: 385,000 shares of common stock were repurchased through the date these consolidated financial statements were issued.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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.