Loans Bad Credit Online – SUPER MICRO COMPUTER : Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

This section and other parts of this Quarterly Report contain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") that involve risks and uncertainties. These statements relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology including "would," "could," "may,"
"will," "should," "expect," "intend," "plan," "anticipate," "believe,"
"estimate," "predict," "potential," or "continue," the negative of these terms
or other comparable terminology. In evaluating these statements, you should
specifically consider various factors, including the risks discussed under "Risk
Factors" in Part II, Item 1A of this filing. These factors may cause our actual
results to differ materially from those anticipated or implied in the
forward-looking statements. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise. We cannot guarantee future results, levels of
activity, performance or achievements.

  The following discussion and analysis of the financial condition and results
of our operations should be read in conjunction with our condensed consolidated
financial statements and related footnotes included elsewhere in this Quarterly
Report and included in our Annual Report on Form 10-K for the fiscal year ended
June 30, 2020 (the "2020 10-K"), which includes our condensed consolidated
financial statements for the fiscal years ended June 30, 2020 and 2019.

Overview

  We are a global leader and innovator of application-optimized high performance
and high-efficiency server and storage systems for a variety of markets,
including enterprise data centers, cloud computing, artificial intelligence, 5G
and edge computing. Our solutions include complete servers, storage systems,
modular blade servers, blades, workstations, full racks, networking devices,
server management software, and server sub-systems. We also provide global
support and services to help our customers install, upgrade and maintain their
computing infrastructure.

  We commenced operations in 1993 and have been profitable every year since
inception. Our net income for the three months ended December 31, 2020 increased
to $27.7 million from $23.7 million for the corresponding period in the prior
year. In order to increase our sales and profits, we believe that we must
continue to develop flexible and application optimized server and storage
solutions and be among the first to market with new features and products. We
must also continue to expand our software and customer service and support
offerings, particularly as we increasingly focus on larger enterprise customers.
Additionally, we must focus on development of our sales partners and
distribution channels to further expand our market share. We measure our
financial success based on various indicators, including growth in net sales,
gross profit margin and operating margin. Among the key non-financial indicators
of our success is our ability to rapidly introduce new products and deliver the
latest application-optimized server and storage solutions. In this regard, we
work closely with microprocessor and other key component vendors to take
advantage of new technologies as they are introduced. Historically, our ability
to introduce new products rapidly has allowed us to benefit from technology
transitions such as the introduction of new microprocessors and storage
technologies, and as a result, we monitor the introduction cycles of Nvidia
Corporation, Intel Corporation, Advanced Micro Devices, Inc., Samsung
Electronics Company Limited, Micron Technology, Inc. and others closely and
carefully. This also impacts our research and development expenditures as we
continue to invest more in our current and future product development efforts.

Coronavirus (COVID-19) Pandemic Impact

  The global spread of the coronavirus (COVID-19) and the various attempts to
contain it have created significant volatility, uncertainty and economic
disruption for many businesses worldwide. In an effort to contain COVID-19 or
slow its spread, governments around the world have enacted various measures,
including orders that govern the operations of businesses, require masks be worn
and define shelter in place and social distancing protocols. We are an essential
critical infrastructure (information technology) business under the relevant
federal, state and county regulations. Accordingly, in late March 2020, we
responded to the directives from Santa Clara County and the State of California
regarding instructions to combat the spread of COVID-19. Our first priority is
the safety of our workforce and we have implemented numerous health precautions
and work practices to be in compliance with the law and to operate in a safe
manner.

We quickly transitioned certain of our indirect labor forces to work from home
at the earlier phase of the pandemic and continued to operate our local assembly
in Taiwan and, after an initial period of disruption, in the United States and
Europe. We operate in the critical industry of IT infrastructure and we assessed
our customer base to identify priority customers who operate in critical
industries. We continued to see ongoing demand and do not have significant
direct exposure to industries such as retail, oil and gas and hospitality, which
have been impacted the greatest. As time passes, we may discover greater
indirect exposure to distressed industries through our channel partners and OEM
customers.
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We have actively managed our supply chain for potential shortage risk by first
building inventories of critical components required for our motherboards and
other system printed circuit boards in response to the early outbreak of
COVID-19 in China. Since that time, we have continued to add to our inventories
of key components such as CPUs, memory, SSDs and to a lesser extent GPUs such
that customer orders can be fulfilled as they are received.

Logistics has emerged as a new challenge as globally the transportation industry
restricted the frequency of departures and increased logistics costs. We
experienced increased costs in freight as well as direct labor costs as we
incentivized our employees to continue to work and assist us in serving our
customers, many of whom are in critical industries. We expect this trend to
continue for the duration of the COVID-19 pandemic.

We monitor the credit profile and payment history of our customers to evaluate
risk in specific industries or geographic areas where cash flow may be
disrupted. While we believe that we are adequately capitalized, we actively
manage our liquidity needs. In May 2020, we negotiated an extension of our
credit facility with Bank of America to extend the maturity date to June 2021.
In June 2020, we entered into a ten-year, non-revolving term loan facility with
China Trust and Bank Corp ("CTBC Bank") to obtain financing for use in the
expansion and renovation of the our Bade Manufacturing Facility located in
Taiwan. In December 2020, our Taiwan subsidiary entered into a general credit
agreement with E.SUN Bank in Taiwan. Such general credit agreement provides for
the issuance of loans, advances, acceptances, bills, bank guarantees,
overdrafts, letters of credit, and other types of drawdown instruments up to a
credit limit of $30 million. The term of such general credit agreement is until
September 18, 2021.

Our management team is focused on guiding our company through the ongoing
challenges presented by COVID-19. Currently, we are unable to predict the
ultimate extent to which the global COVID-19 pandemic may further impact our
business operations, financial performance and results of operations within the
next 12 months.


Financial Highlights

The following is a summary of our financial highlights of the second quarter
of fiscal year 2021:

•Net sales decreased by 4.7% in the three months ended December 31, 2020 as
compared to the three months ended December 31, 2019.

•Gross margin increased to 16.4% in the three months ended December 31, 2020
from 15.9% in the three months ended December 31, 2019.

•Operating expenses decreased by 10.7% as compared to the three months ended
December 31, 2019, and were equal to 11.9% and 12.7% of net sales in the three
months ended December 31, 2020 and 2019, respectively.

•Effective tax rate increased from 7.9% in the three months ended December 31,
2019 to 14.9% in the three months ended December 31, 2020.

Critical Accounting Policies and Estimates

  Our discussion and analysis of our financial condition and results of
operations are based upon our condensed consolidated financial statements, which
have been prepared in accordance with generally accepted accounting principles
in the United States. The preparation of these condensed consolidated financial
statements requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, net sales and expenses. We evaluate our
estimates and assumptions on an ongoing basis, and base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for the
judgments we make about the carrying value of assets and liabilities that are
not readily apparent from other sources. Because these estimates can vary
depending on the situation, actual results may differ from these estimates.
Making estimates and judgments about future events is inherently unpredictable
and is subject to significant uncertainties, some of which are beyond our
control. Should any of these estimates and assumptions change or prove to have
been incorrect, it could have a material impact on our results of operations,
financial position and statement of cash flows.

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  There have been no material changes to our critical accounting policies and
estimates as compared to those disclosed in our 2020 10-K. For a description of
our critical accounting policies and estimates, see Part I, Item 1, Note 1,
"Summary of Significant Accounting Policies" in our notes to condensed
consolidated financial statements in this Quarterly Report.

Results of Operations

The following table presents certain items of our condensed consolidated
statements of operations expressed as a percentage of revenue.

                                                                  Three Months Ended                           Six Months Ended
                                                                     December 31,                                December 31,
                                                              2020                   2019                  2020                 2020
Net sales                                                       100.0  %               100.0  %             100.0  %             100.0  %
Cost of sales                                                    83.6  %                84.1  %              83.3  %              83.9  %
Gross profit                                                     16.4  %                15.9  %              16.7  %              16.1  %
Operating expenses:
Research and development                                          6.4  %                 6.4  %               6.8  %               6.3  %
Sales and marketing                                               2.5  %                 2.5  %               2.6  %               2.5  %
General and administrative                                        3.0  %                 3.8  %               3.1  %               3.8  %
Total operating expenses                                         11.9  %                12.7  %              12.4  %              12.5  %
Income from operations                                            4.5  %                 3.2  %               4.3  %               3.6  %
Other (expense) income, net                                      (0.3) %                   -  %              (0.2) %               0.1  %
Interest expense                                                 (0.1) %                (0.1) %              (0.1) %              (0.1) %
Income before income tax provision                                4.1  %                 3.1  %               4.0  %               3.6  %
Income tax provision                                             (0.6) %                (0.2) %              (0.6) %              (0.6) %
Share of (loss) from equity investee, net of taxes               (0.2) %                (0.1) %                 -  %                 -  %
Net income                                                        3.3  %                 2.7  %               3.4  %               3.0  %



Net Sales

Net sales consist of sales of our server and storage solutions, including
systems and related services and subsystems and accessories. The main factors
that impact our net sales of our server and storage systems are the number of
compute nodes sold and the average selling prices per node. The main factors
that impact our net sales of our subsystems and accessories are units shipped
and the average selling price per unit. The prices for our server and storage
systems range widely depending upon the configuration, including the number of
compute nodes in a server system as well as the level of integration of key
components such as SSDs and memory. The prices for our subsystems and
accessories can also vary widely based on whether a customer is purchasing power
supplies, server boards, chassis or other accessories.

A compute node is an independent hardware configuration within a server system
capable of having its own CPU, memory and storage and that is capable of running
its own instance of a non-virtualized operating system. The number of compute
nodes sold, which can vary by product, is an important metric we use to track
our business. Measuring volume using compute nodes enables more consistent
measurement across different server form factors and across different vendors.
As with most electronics-based product life cycles, average selling prices
typically are highest at the time of introduction of new products that utilize
the latest technology and tend to decrease over time as such products mature in
the market and are replaced by next generation products. Additionally, in order
to remain competitive throughout all industry cycles, we actively change our
selling price per unit in response to changes in costs for key components such
as memory and SSDs.

The following table presents net sales by product type for the three and six
months ended December 31, 2020 and 2019 (dollars in millions):

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                                  Three Months Ended December
                                              31,                              Change                      Six Months Ended December 31,                     Change
                                     2020              2019              $                %                   2020                  2019               $                %
Server and storage systems       $  642.7$ 672.7$ (30.0)            (4.5) %       $      1,260.5$ 1,308.7$ (48.2)            (3.7) %
Percentage of total net sales        77.4   %          77.2  %                                                   79.1   %            78.3  %
Subsystems and accessories       $  187.6$ 198.2$ (10.6)            (5.3) %       $        332.1$   362.0$ (29.9)            (8.3) %
Percentage of total net sales        22.6   %          22.8  %                                                   20.9   %            21.7  %
Total net sales                  $  830.3$ 870.9$ (40.6)            (4.7) %       $      1,592.6$ 1,670.7$ (78.1)            (4.7) %



Server and storage systems constitute an assembly and integration of subsystems
and accessories, and related services. Subsystems and accessories are comprised
of server-boards, chassis and accessories.

Comparison of Three Months Ended December 31, 2020 and 2019

The period-over-period decrease in net sales of our server and storage systems
was due to a 17.1% decrease in the number of units of compute nodes sold offset
by 16.0% increase in the average selling price. The decline in the number of
units of compute nodes shipped was primarily due to fewer shipments of multinode
systems compared to the same period last year.

The period-over-period decrease in net sales of our subsystems and accessories
is primarily due to a decrease in the number of units of subsystems sold.

Comparison of Six Months Ended December 31, 2020 and 2019

The period-over-period decrease in net sales of our server and storage systems
was due to a 18.1% decrease in the number of units of compute nodes sold offset
by 17.9% increase in average selling price. The decline in the number of units
of compute nodes shipped was primarily due to fewer shipments of multinode
systems compared to the same period last year.

The period-over-period decrease in net sales of our subsystems and accessories
is primarily due to a decrease in the number of units of subsystems sold.

The following table presents net sales by geographic region for the three and
six months ended December 31, 2020 and 2019 (dollars in millions):

                         Three Months Ended December
                                     31,                      Change            Change               Six Months Ended December 31,             Change            Change
                            2020              2019              $                  %                    2020                  2019               $                  %
United States           $  463.1$ 527.4$ (64.3)              (12.2) %       $        959.2$   996.2$ (37.0)               (3.7) %
Percentage of total net
sales                       55.8   %          60.6  %                                                      60.2   %            59.6  %
Asia                       161.4             165.7             (4.3)               (2.6) %                288.1               327.4            (39.3)              (12.0) %
Percentage of total net
sales                       19.4   %          19.0  %                                                      18.1   %            19.6  %
Europe                     154.8             147.6              7.2                 4.9  %                266.9               275.6             (8.7)               (3.2) %
Percentage of total net
sales                       18.6   %          16.9  %                                                      16.8   %            16.5  %
Others                      51.0              30.2             20.8                68.9  %                 78.4                71.5              6.9                 9.7  %
Percentage of total net
sales                        6.1   %           3.5  %                                                       4.9   %             4.3  %
Total net sales         $  830.3$ 870.9$      1,592.6$ 1,670.7

Comparison of Three Months Ended December 31, 2020 and 2019

  The period-over-period decrease in net sales in the United States for the
three months ended December 30, 2020 and 2019 was primarily due to lower sales
driven by lower unit volume. The period-over-period decrease in net sales in
Asia was due primarily to decreased sales in Taiwan, Singapore and Korea and
partially off-set by increased sales in China and Japan. The increase of net
sales in Europe was primarily due to higher sales in France, Germany, the United
Kingdom, and the Netherlands, partially offset by lower sales in Russia. The
period-over-period increase in net sales in other countries was primarily due to
increased sales in Brazil, Canada, South Africa and Middle East countries,
partially offset by lower sales in Mexico.
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Comparison of Six Months Ended December 31, 2020 and 2019

  The period-over-period decrease in net sales in the United States for the six
months ended December 31, 2020 and 2019 was primarily due to lower sales driven
by lower unit volume. The period-over-period decrease in net sales in Asia was
due primarily to decreased sales in China, Taiwan, Korea, and India and
partially off-set by increased sales in Singapore and Japan. The decrease of net
sales in Europe was primarily due to lower sales in the United Kingdom, Germany,
Russia, and the rest of Europe, partially offset by increased sales in France
and the Netherlands. The period-over-period increase in net sales in other
countries was primarily due to increased sales in Brazil, Canada, South Africa
and Middle East countries, partially offset by lower sales in Mexico and
Australia.

Cost of Sales and Gross Margin

Cost of sales primarily consists of the costs to manufacture our products,
including the costs of materials, contract manufacturing, shipping, personnel
expenses, including salaries, benefits, stock-based compensation and incentive
bonuses, equipment and facility expenses, warranty costs and inventory excess
and obsolescence provisions. The primary factors that impact our cost of sales
are the mix of products sold and cost of materials, which include purchased
parts, shipping costs, salary and benefits and overhead costs related to
production. Cost of sales as a percentage of net sales may increase over time if
decreases in average selling prices are not offset by corresponding decreases in
our costs. Our cost of sales as a percentage of net sales is also impacted by
the extent to which we are able to efficiently utilize our expanding
manufacturing capacity. Because we generally do not have long-term fixed supply
agreements, our cost of sales is subject to change based on the cost of
materials and market conditions. As a result, our cost of sales as a percentage
of net sales in any period can increase due to significant component price
increases resulting from component shortages.

We use several suppliers and contract manufacturers to design and manufacture
subsystems in accordance with our specifications, with final assembly and
testing predominantly performed at our manufacturing facilities in the same
region where our products are sold. We work with Ablecom, one of our key
contract manufacturers and also a related party to optimize modular designs for
our chassis and certain of other components. We also outsource to Compuware,
also a related party, a portion of our design activities and a significant part
of the manufacturing of components, particularly power supplies.

Cost of sales and gross margin for the three and six months ended December 31,
2020 and 2019 are as follows (dollars in millions):

                           Three Months Ended December
                                       31,                              Change                      Six Months Ended December 31,                     Change
                              2020              2019              $                %                   2020                  2019               $                %
Cost of sales             $  694.2$ 732.5$ (38.3)            (5.2) %       $      1,326.5$ 1,401.4$ (74.9)            (5.3) %
Gross profit              $  136.1$ 138.4$  (2.3)            (1.7) %       $        266.0$   269.3$  (3.3)            (1.2) %
Gross margin                  16.4   %          15.9  %                            0.5  %                 16.7   %            16.1  %                            0.6  %

Comparison of Three Months Ended December 31, 2020 and 2019

The period-over-period decrease in cost of sales was primarily attributed to a
decrease of $21.5 million in costs of materials and contract manufacturing
expenses primarily related to the decrease in net sales volume, a decrease of
$13.2 million in overhead costs attributable primarily to a recovery of costs
paid in prior periods, a decrease of excess and obsolete inventory charge of
$3.3 million and a decrease of $1.9 million of warranty and repair costs,
partially offset by service costs and freight charges.

  The period-over-period increase in the gross margin percentage was primarily
due to sales prices declining at a slower rate than the decline in the costs of
components we purchased.

Comparison of Six Months Ended December 31, 2020 and 2019

The period-over-period decrease in cost of sales was primarily attributed to a
decrease of $40.7 million in costs of materials and contract manufacturing
expenses primarily related to the decrease in net sales volume, a decrease of
$23.6 million in overhead costs attributable primarily to a recovery of costs
paid in prior periods and a decrease of excess and obsolete inventory charge of
$12.3 million, partially offset by service costs and freight charges.

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  The period-over-period increase in the gross margin percentage was primarily
due to sales prices declining at a slower rate than the decline in the costs of
components we purchased.

Operating Expenses

Research and development expenses consist of personnel expenses, including
salaries, benefits, stock-based compensation and incentive bonuses, and related
expenses for our research and development personnel, as well as product
development costs such as materials and supplies, consulting services,
third-party testing services and equipment and facility expenses related to our
research and development activities. All research and development costs are
expensed as incurred. We occasionally receive non-recurring engineering funding
from certain suppliers and customers for joint development. Under these
arrangements, we are reimbursed for certain research and development costs that
we incur as part of the joint development efforts with our suppliers and
customers. These amounts offset a portion of the related research and
development expenses and have the effect of reducing our reported research and
development expenses.

Sales and marketing expenses consist primarily of personnel expenses, including
salaries, benefits, stock-based compensation and incentive bonuses, and related
expenses for our sales and marketing personnel, costs for trade-shows,
independent sales representative fees and marketing programs. From time to time,
we receive cooperative marketing funding from certain suppliers. Under these
arrangements, we are reimbursed for certain marketing costs that we incur as
part of the joint promotion of our products and those of our suppliers. These
amounts offset a portion of the related expenses and have the effect of reducing
our reported sales and marketing expenses. The timing, magnitude and estimated
usage of these programs can result in significant variations in reported sales
and marketing expenses from period to period. Spending on cooperative marketing,
reimbursed by our suppliers, typically increases in connection with new product
releases by our suppliers.

General and administrative expenses consist primarily of general corporate
costs, including personnel expenses such as salaries, benefits, stock-based
compensation and incentive bonuses, and related expenses for our general and
administrative personnel, financial reporting, information technology, corporate
governance and compliance, outside legal, audit, tax fees, insurance and bad
debt reserves on accounts receivable.

Operating expenses for the three and six months ended December 31, 2020 and
2019 are as follows (dollars in millions):

                                   Three Months Ended December
                                               31,                               Change                    Six Months Ended December 31,                     Change
                                      2020               2019              $                %                  2020                 2019              $                 %
Research and development          $   52.7$  55.6$  (2.9)            (5.2) %       $       107.5$ 105.1$   2.4               2.3  %
Percentage of total net sales          6.4    %           6.4  %                                                   6.8   %           6.3  %
Sales and marketing               $   20.7$  22.0$  (1.3)            (5.9) %       $        41.0$  42.2$  (1.2)             (2.8) %
Percentage of total net sales          2.5    %           2.5  %                                                   2.6   %           2.5  %
General and administrative        $   25.3$  33.0$  (7.7)           (23.3) %       $        49.6$  61.3$ (11.7)            (19.1) %
Percentage of total net sales          3.0    %           3.9  %                                                   3.1   %           3.7  %
Total operating expenses          $   98.7$ 110.6$ (11.9)           (10.8) %       $       198.2$ 208.7$ (10.5)             (5.0) %
Percentage of total net sales         11.9    %          12.7  %                                                  12.4   %          12.5  %

Comparison of Three Months Ended December 31, 2020 and 2019

Research and development expenses. The period-over-period decrease in research
and development expenses was primarily due to an increase in research and
development credits from certain suppliers and customers towards our development
efforts of $4.3 million, a decrease of $1.9 million in costs mainly related to
materials, supplies and equipment used in product development, and a decrease of
$0.8 million of travel expenses as a result in a change in our operations in
response to the COVID-19 pandemic, partially offset by an increase of $4.0
million in personnel expenses as a result of an increase in the number of
personnel, mainly from the expansion of the Company's Taiwan subsidiary.

Sales and marketing expenses. The period-over-period sales and marketing
expenses decreased primarily due to a $1.4 million decrease in expenses related
to participation in trade shows and business travel as a result in a change in
our operations in response to the COVID-19 pandemic, partially offset by
increase in other sales and marketing expenses.

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General and administrative expenses. The period-over-period decrease in general
and administrative expenses was primarily due to a decrease of $11.4 million in
professional fees incurred to investigate, assess and remediate the causes that
led to the delay in filing our periodic reports with the SEC and the associated
restatement of certain of our previously issued financial statements, a decrease
of $1.1 million in travel expenses as a result in a change in our operations in
response to the COVID-19 pandemic, and a decrease of $0.7 million in sales tax
reserve and audit expense, offset by an increase of $6.5 million in compensation
expense due to increased full time personnel and bonuses.

Comparison of Six Months Ended December 31, 2020 and 2019

Research and development expenses. The period-over-period increase in research
and development expenses was primarily due to an increase of $9.7 million in
personnel expenses as a result of an increase in the number of personnel offset
by an increase of $5.7 million in research and development credits from certain
suppliers and customers towards our development efforts, a decrease of $1.3
million in travel expenses as a result in a change in our operations in response
to the COVID-19 pandemic, and a decrease of $0.7 million in costs mainly related
to materials, supplies and equipment used in product development.

Sales and marketing expenses. The period-over-period sales and marketing
expenses decreased primarily due to a decrease of $2.0 million expenses related
to participation in trade shows and business travel as a result in a change in
our operations in response to the COVID-19 pandemic, partially offset by an
increase of $0.8 million in other sales and marketing expenses.

General and administrative expenses. The period-over-period decrease in general
and administrative expenses was primarily due to a decrease of $18.2 million in
professional fees incurred to investigate, assess and remediate the causes that
led to the delay in filing our periodic reports with the SEC and the associated
restatement of certain of our previously issued financial statements, a decrease
of $2.1 million in travel expenses as a result in a change in our operations in
response to the COVID-19 pandemic, a decrease of $0.8 million in sales tax
reserve and audit expense, and a decrease of $0.5 million in bad debt expenses,
offset by an increase of $10.4 million in compensation expense due to increased
full time personnel and bonuses.

Interest and Other (Expense) Income, Net

Other (expense) income, net consists primarily of interest earned on our
investment and cash balances and foreign exchange gains and losses.

Interest expense represents interest expense on our term loans and lines of
credit.

Interest and other (expense) income, net for the three and six months ended
December 31, 2020 and 2019 are as follows (dollars in millions):

                                    Three Months Ended                                                         Six Months Ended
                                       December 31,                            Change                            December 31,                            Change
                                   2020                2019              $                %                  2020                2019             $                 %
Other (expense) income, net $     (2.5)$ (0.4)$ (2.1)            525.0  %       $     (3.4)$ 1.2$ (4.6)             (383.3) %
Interest expense                  (0.6)                (0.6)              -                 -  %             (1.2)              (1.1)           (0.1)                9.1  %
Interest and other
(expense) income, net       $     (3.1)$ (1.0)$ (2.1)            210.0  %       $     (4.6)$ 0.1$ (4.7)           (4,700.0) %

Comparison of Three Months Ended December 31, 2020 and 2019

The change of $2.1 million in other (expense) income, net was attributable to an
increase of $1.4 million in foreign exchange loss due to unfavorable foreign
currency fluctuations, and a decrease of $0.7 million in interest income on our
interest bearing deposits due primarily to lower yields on investments.

Comparison of Six Months Ended December 31, 2020 and 2019

The change of $4.6 million in other (expense) income, net was attributable to an
increase of $2.9 million in foreign exchange loss due to unfavorable foreign
currency fluctuations, and a decrease of $1.7 million in interest income on our
interest bearing deposits due primarily to lower yields on investments.

Provision for Income Taxes

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  Our income tax provision is based on our taxable income generated in the
jurisdictions in which we operate, which primarily include the United States,
Taiwan, and the Netherlands. Our effective tax rate differs from the statutory
rate primarily due to research and development tax credits, releases from
uncertain tax positions, tax benefits from foreign derived intangible income and
stock based compensation.

Provision for income taxes and effective tax rates for the three and six months
ended December 31, 2020 and 2019 are as follows (dollars in millions):

                                    Three Months Ended                                                    Six Months Ended
                                       December 31,                           Change                        December 31,                         Change
                                 2020                  2019            $                %               2020             2019              $                %

Income tax provision         $    5.1$ 2.1$ 3.0             142.9  %       $   8.8$ 10.7$ (1.9)            (17.8) %
Percentage of total net
sales                             0.6   %              0.2  %                                            0.6   %          0.6  %

Effective tax rate               14.9   %              7.9  %                                           13.9   %         17.6  %



  Comparison of Three Months Ended December 31, 2020 and 2019

The income tax provision and effective tax rate for the three months ended
December 31, 2020 was higher than that for the three months ended December 31,
2019 due to the release of tax reserves after the settlement of a Taiwan tax
audit in 2019.

Comparison of Six Months Ended December 31, 2020 and 2019

The income tax provision and effective tax rate for the six months ended
December 31, 2020 was lower than that for the six months ended December 31,
2019, primarily due to decrease in tax reserves after the settlement of a Taiwan
tax audit and increase in tax benefit from employees’ stock based compensation.

Share of (Loss) from Equity Investee, Net of Taxes

Share of (loss) from equity investee, net of taxes represents the Company’s
share of loss from the Corporate Venture in which the Company has 30% ownership.

Share of (loss) from equity investee, net of taxes for the three and six months
ended December 31, 2020 and 2019 are as follows (dollars in millions):

                                      Three Months Ended                                                       Six Months Ended
                                         December 31,                              Change                        December 31,                          Change
                                     2020              2019              $                 %                  2020              2019             $               %
Share of (loss) from equity
investee, net of taxes           $    (1.5)$ (1.0)$ (0.5)             50.0%           $     (0.1)          $   -          $ (0.1)             -%
Percentage of total net sales         (0.2)  %         (0.1) %                                                    -   %           -  %

Comparison of Three Months Ended December 31, 2020 and 2019

The period-over-period increase of $0.5 million in share of (loss) from equity
investee, net of taxes was primarily due to more net loss recognized by the
Corporate Venture.

Comparison of Six Months Ended December 31, 2020 and 2019

The period-over-period increase of $0.1 million in share of (loss) from equity
investee, net of taxes was primarily due to more net loss recognized by the
Corporate Venture.

Liquidity and Capital Resources

  We have financed our growth primarily with funds generated from operations, in
addition to utilizing borrowing facilities, particularly in relation to the
financing of real property acquisitions as well as working capital. Our cash and
cash equivalents were $315.6 million and $210.5 million as of December 31, 2020
and June 30, 2020, respectively. Our cash in foreign locations was $141.5
million and $98.0 million as of December 31, 2020 and June 30, 2020,
respectively.
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  Amounts held outside of the U.S. are generally utilized to support non-U.S.
liquidity needs. Repatriations generally will not be taxable from a U.S. federal
tax perspective but may be subject to state income or foreign withholding tax.
Where local restrictions prevent an efficient intercompany transfer of funds,
our intent is to keep cash balances outside of the U.S. and to meet liquidity
needs through operating cash flows, external borrowings, or both. We do not
expect restrictions or potential taxes incurred on repatriation of amounts held
outside of the U.S. to have a material effect on our overall liquidity,
financial condition or results of operations.
  We believe that our current cash, cash equivalents, borrowing capacity
available from our credit facilities and internally generated cash flows will be
sufficient to support our operating businesses, continued remediation of the
material weakness in the financial reporting, and maturing debt and interest
payments for the twelve months following the issuance of these condensed
consolidated financial statements. We expect to pay special performance bonuses
of approximately $8.6 million to our CEO and certain members of the Board of
Directors within the next two years when and if specified market and performance
conditions are met. In addition, we made a settlement payment of $17.5 million
to the SEC in connection with the conclusion of the investigations in August
2020.

On August 9, 2020, the Board approved a share repurchase program to repurchase
shares of common stock for up to an aggregate of $30.0 million at market prices.
The program was effective until December 31, 2020 or if earlier, until the
maximum amount of common stock is repurchased. During the three months ended
September 30, 2020, 1,142,294 shares of common stock were repurchased for
$30.0 million and the program ended.

On October 31, 2020, the Board approved a share repurchase program to repurchase
shares of common stock for up to an aggregate of $50.0 million at market prices.
The program is effective until October 31, 2021 or if earlier, until the maximum
amount of common stock is repurchased. During the three months ended December
31, 2020, 1,580,207 shares of common stock were repurchased for $47.0 million.
We repurchased 95,539 shares of our common stock for $3.0 million subsequent to
December 31, 2020 and completed this share repurchase program on January 6,
2021.

On January 29, 2021, a duly authorized subcommittee of the Board approved a
share repurchase program to repurchase shares of common stock for up to an
aggregate of $200.0 million at market price. The program is effective until July
31, 2022 or if earlier, until the maximum amount of common stock is repurchased.

Our key cash flow metrics were as follows (dollars in millions):

                                                                    Six Months Ended
                                                                      December 31,
                                                                  2020              2019            Change
Net cash provided by operating activities                     $   183.8$  87.2$  96.6
Net cash used in investing activities                         $   (25.6)$ (23.3)$  (2.3)
Net cash used in financing activities                         $   (53.7)$  (2.1)$ (51.6)
Net increase in cash, cash equivalents and restricted cash    $   105.1$  61.9$  43.2



Operating Activities

  Net cash provided by operating activities increased by $96.6 million for the
six months ended December 31, 2020 as compared to the six months ended December
31, 2019. The increase was due primarily to a $4.2 million increase in net
income and an increase of cash provided by net working capital of $99.9 million
driven by decreased accounts receivable as a result of increased collections,
utilization of inventories and prepaid expenses and other current assets.
Non-cash charges related to depreciation and amortization expense, stock-based
compensation expense and unrealized losses on our foreign currency-denominated
credit facilities increased $6.6 million. These increases were offset by a
decrease of $12.5 million in the non-cash charges related to excess and obsolete
inventories.

Investing Activities

  Net cash used in investing activities was $25.6 million and $23.3 million for
the six months ended December 31, 2020 and 2019, respectively, as we continued
to invest in expanding our manufacturing capacity and office space, including
the expansion of our Green Computing Park in San Jose and Bade manufacturing
facility in Taiwan.

Financing Activities

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  Net cash used by financing activities for the six months ended December 31,
2020 was $53.7 million while net cash used in financing activities for the six
months ended December 31, 2019 was $2.1 million. The change in cash flows from
financing activities was primarily due to stock repurchases of $74.8 million
offset by the increase in cash received from the exercise of stock options of
$7.9 million net of taxes, $14.7 million of debt proceeds from draws on our CTBC
credit and term loan facilities and $0.5 million decrease in debt repayment.

Other Factors Affecting Liquidity and Capital Resources

2018 Bank of America Credit Facility

In April 2018, we entered into a revolving line of credit with Bank of America
for up to $250.0 million (as amended from time to time, the "2018 Bank of
America Credit Facility"). On May 12, 2020, the 2018 Bank of America Credit
Facility was amended to, among other things, extend the maturity to June 30,
2021, release the real property as a collateral, modify certain payments and
covenants provisions, specify that LIBOR cannot be less than 1% for purposes of
determining interest rates, and increase the unused line fee from 0.25% per
annum to 0.375% per annum. Interest shall accrue at LIBOR plus 2.00% on
outstanding borrowings less than $125.0 million and LIBOR plus 2.25% on
outstanding borrowings in excess of $125.0 million. As of December 31, 2020, we
had no outstanding borrowings and we had a $6.4 million letter of credit
outstanding under this facility. Our available borrowing capacity was $243.6
million, subject to the borrowing base limitation and compliance with other
applicable terms. In the event of default or if outstanding borrowings are in
excess of $220.0 million, we are required to grant the lenders a continuing
security interest in and lien upon all amounts credited to any of our deposit
accounts. 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. Voluntary prepayments are permitted without early repayment fees or
penalties. The 2018 Bank of America Credit Facility is secured by substantially
all of Super Micro Computer's assets, other than real property assets. In
addition, we are not permitted to pay any dividends. Under the terms of the 2018
Bank of America Credit Facility agreement, we are required to maintain a certain
fixed charge ratio and we have been in compliance with all covenants under the
2018 Bank of America Credit Facility.

CTBC Bank

2020 CTBC Credit Facility

In August 2020, we entered into a credit agreement with CTBC Bank in Taiwan that
provides for term loans of up to $50.0 million (the "2020 CTBC Credit Facility")
and expires in August 2021. During the three months ended December 31, 2020, we
have not borrowed or repaid under the revolving line of credit. There were no
outstanding borrowings under the 2020 CTBC Credit Facility revolving line of
credit as of December 31, 2020. The total outstanding borrowings under the 2020
CTBC Credit Facility term loan were denominated in NTD and remeasured into U.S.
dollars of $24.9 million at December 31, 2020. The amount available for future
borrowing was $25.1 million as of December 31, 2020. The interest rate for these
outstanding term loans was 0.73% per annum as of December 31, 2020.Term loans
are secured by certain of our assets, including certain property, plant, and
equipment. There are no financial covenants under the 2020 CTBC Credit Facility.

2020 CTBC Term loan Facility

In May 2020, we entered into a ten-year, non-revolving term loan facility (the
"2020 CTBC Term loan Facility") to obtain up to NTD 1.2 billion ($40.7 million
in U.S. dollar equivalents) in financing for use in the expansion and renovation
of our Bade Manufacturing Facility located in Taiwan. Draw downs on the 2020
CTBC Term loan Facility are based on 80% of balances owed on commercial invoices
from the contractor and are drawn according to the progress of the renovations.
Borrowings under the 2020 CTBC Term loan Facility are available through June
2022. We are 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. The 2020 CTBC Term loan Facility is secured by the
Bade Manufacturing Facility, including any expansion. Fees paid to the lender as
debt issuance costs were immaterial. We borrowed $8.6 million in the three
months ended December 31, 2020 with a rate of 0.45% per annum. As of December
31, 2020, the amount outstanding under the 2020 CTBC Term loan Facility was
$20.6 million and the net book value of the property serving as collateral was
$29.2 million. We have financial covenants requiring our current ratio, debt
service coverage ratio, and financial debt ratio, to be maintained at certain
levels. As of December 31, 2020, we have been in compliance with all financial
covenants under the 2020 CTBC Term loan Facility.

E.SUN Credit Facility

In December 2020, Super Micro Computer Inc, Taiwan, a Taiwan subsidiary of the
Company entered into a General Credit Agreement (the "E.SUN Credit Facility")
with E.SUN Bank in Taiwan. Such Credit Facility provides for the issuance of
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loans, advances, acceptances, bills, bank guarantees, overdrafts, letters of
credit, and other types of drawdown instruments up to a credit limit of $30.0
million. Terms for specific drawdowns are set forth in separate Notification and
Confirmation of Credit Conditions negotiated with E. SUN Bank. The term of the
E.SUN Credit Facility is until September 18, 2021. There are no financial
covenants associated with the E.SUN Credit Facility. A Notification and
Confirmation agreement was entered into on December 2, 2020 for a $30.0 million
import loan (the "Import loan") under the E. SUN Credit facility with a tenor of
120 days and with an interest rate calculated based on LIBOR or TAIFX plus a
fixed margin. As of December 31, 2020, no drawings had been made from the Import
loan.

Refer to Part I, Item 1, Note 6, "Short-term and Long-term Debt," in our notes
to condensed consolidated financial statements in this Quarterly Report on Form
10-Q for further information on our outstanding debt.

Recent Accounting Pronouncements

  For a description of recent accounting pronouncements, including the expected
dates of adoption and estimated effects, if any, on our condensed consolidated
financial statements, see Part I, Item 1, Note 1, "Summary of Significant
Accounting Policies," in our notes to condensed consolidated financial
statements in this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

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