| Organization and Summary of Significant Accounting Policies | Organization and Summary of Significant Accounting Policies Organization Super Micro Computer, Inc. (“Super Micro Computer”) was incorporated in 1993. Super Micro Computer is a global leader in server technology and green computing innovation. Super Micro Computer develops and provides high performance server and storage solutions based upon an innovative, modular and open-standard architecture. Super Micro Computer has operations primarily in the United States, the Netherlands, Taiwan, China and Japan. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). The condensed consolidated financial statements of Super Micro Computer include the accounts of Super Micro Computer and entities consolidated under the variable interest model or the voting interest model. Noncontrolling interests are not presented separately in the condensed consolidated statements of operations and condensed consolidated statements of comprehensive income as the amounts are immaterial. All intercompany accounts and transactions of Super Micro Computer and its consolidated entities (collectively, the "Company") have been eliminated in consolidation. For equity investments over which the Company is able to exercise significant influence over the investee but does not control the investee, and is not the primary beneficiary of the investee’s activities are accounted for using the equity method. 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. 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. The unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) and include the accounts of Super Micro Computer and its consolidated subsidiaries. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The unaudited condensed consolidated financial statements included herein reflect all adjustments, including normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position, results of operations and cash flows for the periods presented. The consolidated results of operations for the three months ended September 30, 2018 are not necessarily indicative of the results that may be expected for future quarters or for the fiscal year ending June 30, 2019. Use of Estimates U.S. 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. Such estimates include, but are not limited to: 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. Revenue Recognition The Company’s revenue recognition policy and related disclosures are discussed in Note 2, “Revenue.” Product Warranties The Company offers product warranties 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. Therefore, under recently adopted guidance, Revenue from Contracts with Customers , (“ASC 606”), 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. Accruals for anticipated future warranty costs are charged 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. The Company accounts for the effect of such changes in estimates prospectively. Inventories Inventories are stated at weighted average cost, subject to lower of cost or net realizable value. 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. Inventories consist of purchased parts and raw materials (principally electronic components), work in process (principally products being assembled) and finished goods. 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. Once inventory is written down, its new value is maintained until it is sold or scrapped. The Company receives various rebate incentives from certain suppliers based on its contractual arrangements, including volume-based rebates. The rebates earned are recognized as a reduction of cost of inventories and reduce the cost of sales in the period when the related inventory is sold. Income Taxes The Company accounts for income taxes under an asset and liability approach. 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. Valuation allowances are provided when necessary to reduce deferred tax assets to an amount that is more likely than not to be realized. The Company recognizes tax liabilities for uncertain income tax positions on the income tax return based on the two-step process. The first step is to determine whether it is more likely than not that each income tax position would be sustained upon audit. 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. Estimating these amounts requires the Company to determine the probability of various possible outcomes. The Company evaluates these uncertain tax positions on a quarterly basis. This evaluation is based on the consideration of several factors, including changes in facts or circumstances, changes in applicable tax law, settlement of issues under audit and new exposures. If the Company later determines that its exposure is lower or that the liability is not sufficient to cover its revised expectations, the Company adjusts the liability and effects a related charge in its tax provision during the period in which the Company makes such a determination. Stock-Based Compensation 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"). The share-based awards granted to non-employees have not been material to date. The Company is required to estimate the fair value of share-based awards on the date of grant. 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. 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. The fair value for RSUs with service conditions, or time-based RSUs, is amortized on a straight-line basis over the requisite service period. 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. 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. The Company estimates the fair value of stock options granted using a Black-Scholes option pricing model. This model requires the Company to make estimates and assumptions with respect to the expected term of the option and the expected volatility of the price of the Company's common stock. 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. The expected volatility is based on the implied and 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. Variable Interest Entities The Company determines at the inception of each arrangement whether an entity in which the Company holds an investment or in which the Company has other variable interests is considered a variable interest entity ("VIE"). The Company consolidates VIEs when it is the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Periodically, the Company assesses whether any changes in the interest or relationship with the entity affect the determination of whether the entity is still a VIE and, if so, whether the Company is the primary beneficiary. If the Company is not the primary beneficiary in a VIE, the Company accounts for the investment or other variable interest in accordance with applicable GAAP. The Company has concluded that Ablecom Technology, Inc. (“Ablecom”) and its affiliate, Compuware Technology, Inc. ("Compuware") are VIEs in accordance with applicable accounting standards and guidance; 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. In performing its analysis, the Company considered its explicit arrangements with Ablecom and Compuware, including the supplier arrangements. 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. The Company determined it has no material implicit arrangements with Ablecom, Compuware or their shareholders. The Company and Ablecom jointly established Super Micro Asia Science and Technology Park, Inc. (the "Management Company") in Taiwan to manage the common areas shared by the Company and Ablecom for its separately constructed manufacturing facilities. In fiscal year 2012, each company contributed $0.2 million and owns 50% 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. For the three months ended September 30, 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. 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 condensed consolidated statements of operations. Investment in a Corporate Venture 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. The Corporate Venture is 30% owned by the Company and 70% owned by another company in China. The transaction was closed in the third fiscal quarter of 2017 and the investment has been accounted for using the equity method. As such, the Corporate Venture is also a related party. As of September 30, 2018 and June 30, 2018 , the Company's equity investment in the Corporate Venture was $3.7 million and $2.4 million , respectively, and was recorded under investment in equity investee on the Company's condensed consolidated balance sheet. The Company's share of losses of the Corporate Venture were $1.4 million and $0.6 million for the three months ended September 30, 2018 and 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. The amortization of the deferred gain is being recognized as a credit to research and development expenses in the Company's condensed consolidated statement of operations over a period of five years which represents the estimated period over which the remaining obligations will be fulfilled. As a result of the adoption of new accounting guidance as of the beginning of fiscal year 2019, the Company recorded an increase of $3.0 million to the investment in equity investee for the contribution of those technology rights, and corresponding increases in deferred gain and retained earnings of $2.1 million and $0.9 million , respectively. As of September 30, 2018 and June 30, 2018 , the Company had unamortized deferred gain balance of $2.0 million and $1.4 million , respectively, in accrued liabilities and $4.5 million and $3.5 million , respectively, in other long-term liabilities in the Company’s condensed consolidated balance sheets. 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. No impairment charge was recorded for the three months ended September 30, 2018 and 2017 , respectively. Additionally, the Company sold products worth $9.3 million and $5.1 million to the Corporate Venture in the three months ended September 30, 2018 and 2017 , respectively, and the Company's share of intra-entity profits on the products that remained unsold by the Corporate Venture as of September 30, 2018 and June 30, 2018 have been eliminated and have reduced the Company's investment in the Corporate Venture. The Company had $6.3 million and $2.9 million due from the Corporate Venture in accounts receivable, net as of September 30, 2018 and June 30, 2018 , respectively, in its condensed consolidated balance sheets. Concentration of Supplier Risk Certain materials used by the Company in the manufacture 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 19.7% and 26.6% of total purchases for the three months ended September 30, 2018 and 2017 , respectively. Ablecom and Compuware, related parties of the Company, as noted in Note 8, "Related Party Transactions," accounted for 9.2% and 9.6% of total cost of sales for the three months ended September 30, 2018 and 2017 , respectively. Concentration of Credit Risk Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, investment in an auction rate security and accounts receivable. No single customer accounted for 10% or more of the net sales for the three months ended September 30, 2018 and 2017. No country other than the United States represented greater than 10% of the Company’s total net sales in the three months ended September 30, 2018 , whereas the United States and China represented 57.6% and 12.0% , respectively, of the Company's net sales in the three months ended September 30, 2017 . One customer accounted for 10.0% and 11.6% of accounts receivable, net as of September 30, 2018 and June 30, 2018 , respectively. Accounting Pronouncements Recently Adopted In May 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance, ASC 606, that supersedes nearly all U.S. GAAP on revenue recognition and eliminates industry-specific guidance. 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. Since its issuance, the FASB has issued several amendments to ASC 606. The Company adopted ASC 606 on July 1, 2018 using the modified retrospective method. 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. The comparative information has not been recast and continues to be reported under the accounting standards in effect for those periods. 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. The following tables summarize the impacts of the adoption of ASC 606 on the Company’s condensed consolidated financial statements. The adoption of ASC 606 did not have any impact on the net cash provided by operating activities. Selected Captions from the Condensed Consolidated Balance Sheet as of September 30, 2018 (in thousands) As Reported Adjustments Balances without adoption of ASC 606 ASSETS Accounts receivable, net of allowances $ 451,409 $ (21,104 ) $ 430,305 Inventories 820,973 20,224 841,197 Prepaid expenses and other current assets 117,547 (1,589 ) 115,958 Deferred income taxes, net 28,300 1,558 29,858 LIABILITIES AND STOCKHOLDERS' EQUITY Accrued liabilities $ 112,604 $ 1,789 $ 114,393 Deferred revenue 70,036 522 70,558 Income taxes payable 10,932 189 11,121 Deferred revenue, non-current 97,721 2,310 100,031 Retained earnings 559,327 (5,721 ) 553,606 Selected Captions from the Condensed Consolidated Statement of Operations for the Three Months Ended September 30, 2018 (in thousands) As Reported Adjustments Balances without adoption of ASC 606 Net sales $ 971,118 $ 11,860 $ 982,978 Cost of sales 847,879 10,580 858,459 Gross profit 123,239 1,280 124,519 Income before income tax provision 26,284 1,280 27,564 Income tax provision 5,523 189 5,712 Net income 19,342 1,091 20,433 In January 2016, the FASB issued new guidance, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. This guidance changes the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. 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. The Company adopted this accounting standard update as of July 1, 2018. The result of the adoption did not have a material impact on the consolidated financial statements. As a result of the adoption of the new standard, the Company’s equity investments are accounted for as follows: • Marketable equity securities that have a readily determinable fair value are measured and recorded at fair value. • 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. • 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. These investments are measured at cost less any impairment, plus or minus the Company's share of equity method investee income or loss. In August 2016, the FASB issued an amendment to the accounting guidance, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. This amendment consists of eight provisions that provide guidance on the classification of certain cash receipts and cash payments. If practicable, this amendment should be applied using a retrospective transition method to each period presented. For the provisions that are impracticable to apply retrospectively, those provisions may be applied prospectively as of the earliest date practicable. The Company adopted the accounting guidance on July 1, 2018. The result of the adoption did not have a material impact on the consolidated statements of cash flows. In October 2016, the FASB issued an amendment to the accounting guidance, Intra-Entity Transfers of Assets Other Than Inventory . 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. The Company adopted the accounting guidance on July 1, 2018. The result of the adoption did not have a material impact on the consolidated financial statements and related disclosures. In November 2016, the FASB issued an amendment to the accounting guidance, Statement of Cash Flows: Restricted Cash. This amendment addresses presentations of total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. 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. The Company adopted the accounting guidance on July 1, 2018 using a retrospective transition method to each period presented. The adoption did not have a material impact on the consolidated statements of cash flows. Presentation of prior period information has been retrospectively adjusted. In February 2017, the FASB issued new accounting guidance, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets: Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. 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. The Company adopted this guidance on July 1, 2018. 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. As a result of the adoption of the new guidance, the Company recognized $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. In August 2018, the Securities and Exchange Commission (“SEC”) adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, Disclosure Update and Simplification . The amendments became effective on November 5, 2018. 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. 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. 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. The Company adopted this guidance in the first quarter of fiscal year 2019. Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued an amendment to the accounting guidance, Leases. The amendment will supersede the existing lease guidance, including on-balance sheet recognition of operating leases for lessees. Since its issuance, the FASB has issued several amendments to the new lease standard. 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. 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. 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. 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: Measurement of Credit Losses on Financial Instruments , that amends the impairment model for certain financial assets by requiring the use of an expected loss methodology, which will result in more timely recognition of credit losses. The amendment is effective for the Company from July 1, 2020. Early adoption is permitted. The Company is currently evaluating the effect the guidance will have on its consolidated financial statement disclosures, results of operations and financial position. In February 2018, the FASB issued Income Statement - Reporting Comprehensive Income: 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. The guidance also requires certain new disclosures regardless of the election and is effective for the Company from July 1, 2019. The adoption of the guidance will not have a material impact on its consolidated financial statements. 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. 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. The new amendment is effective for the Company from July 1, 2019. The adoption of the new standard will not have a material impact on its consolidated financial statements and related disclosures. In August 2018, the FASB issued amended guidance, Fair Value Measurement: 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. The new standard is effective for the Company from July 1, 2020. The Company is currently evaluating the effect the guidance will have on its consolidated financial statement disclosures. 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 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. 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. 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. The new standard is effective for the Company from July 1, 2020. The Company is currently evaluating the effect the guidance will have on its consolidated financial statement disclosures, results of operations and financial position. |
