Commitments and Contingencies

9 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

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. District Court for the Northern District of California (Hessefort v. Super Micro Computer, Inc., et al., No. 18-cv-00838 and United Union of Roofers v. Super Micro Computer, Inc., et al., No. 18-cv-00850). 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. The court subsequently appointed New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund as lead plaintiff. The lead plaintiff then filed an amended complaint naming the Company's Senior Vice President of Investor Relations as an additional defendant. 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. On July 26, 2019, the Company filed a motion to dismiss the complaint. 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. On April 22, 2020, lead plaintiff filed a further amended complaint. The Company believes the claims are without merit and intends to vigorously defend against the lawsuit.

SEC Matter— The Company has cooperated with the SEC in its investigation of marketing expenses that contained certain irregularities discovered by the Company’s management, which irregularities were disclosed on August 31, 2015. In addition, the Company received subpoenas from the SEC in connection with the matters underlying its inability to timely file the Company's Form 10-K for the fiscal year ended June 30, 2017. The Company also received a subpoena from the SEC following the publication of a false and widely discredited news article in October 2018 concerning its products. The Company has cooperated fully to comply with these government requests. The Company has reached an agreement in principle regarding a proposed settlement of these matters with the staff of the SEC, subject to final approval by the Commissioners of the SEC. Under the terms of the proposed resolution, the Company will pay a penalty of $17.5 million. In addition, the Company’s Chief Executive Officer has reached an agreement in principle regarding a proposed settlement of these matters with the staff of the SEC, subject to final approval by the Commissioners of the SEC. Under the terms of the proposed resolution, the 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. As of March 31, 2020, the Company recorded a liability of $17.5 million for the Company’s potential SEC settlement included in general and administrative expenses and accrued liabilities in the condensed consolidated financial statements. The Chief Executive Officer’s potential payment of $2,122,000 to the Company is a contingent gain and will be recorded if and when it is realized. The Company and the Chief Executive Officer have not reached final resolutions of these matters with the SEC and the Company cannot predict when settlements, if finally agreed, would become final, nor whether any of the proposed terms may change in connection with final resolutions.

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. 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 March 31, 2020 and any prior periods.

The Company has entered into indemnification agreements with its current and former directors and executive officers. Under these agreements, the Company has agreed to indemnify such individuals to the fullest extent permitted by law against liabilities that arise by reason of their status as directors or officers and to advance expenses incurred by such individuals in connection with related legal proceedings. It is not possible to determine the maximum potential amount of payments the Company could be required to make under these agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each claim. However, the Company maintains directors and officers liability insurance coverage to reduce its exposure to such obligations.

Purchase Commitments— The Company has agreements to purchase inventory and non-inventory items primarily through the next 12 months. As of March 31, 2020, these remaining noncancelable commitments were $381.1 million, including $122.2 million for related parties.

Standby Letter of Credit— In October 2019, Bank of America increased the value of a previously issued standby letter of credit from $3.2 million to $6.4 million to facilitate ongoing operations of the Company. The standby letter of credit is cancellable upon written notice from the issuer. No amounts have been drawn under the standby letter of credit.