Advanced Micro Devices Inc (AMD)

[chipguy]

AMD's "One-Time" Charges Are Starting to Add Up

http://www.fool.com/investing/2016/11/10/amds-one-time-charges-are-starting-to-add-up.aspx?source=yahoo-2-news&utm_campaign=article&utm_medium=feed&utm_source=yahoo-2-news

Advanced Micro Devices (NASDAQ:AMD) reported a non-GAAP profit during its latest quarter, a vast improvement over recent quarters. But on a GAAP basis, the company posted a massive $406 million net loss. The discrepancy was mostly due to a $340 million charge that AMD took related to its wafer supply agreement with GlobalFoundries. The GAAP numbers include this charge; the non-GAAP numbers don't.

Companies report non-GAAP figures in an effort to give investors a number that better reflects their true performance. Unfortunately, many companies back out recurring costs like stock-based compensation, a practice which I strongly disagree with. Backing out one-time costs, like the wafer supply agreement charge, is often a reasonable thing to do. But when a pattern of "one-time" costs begins to emerge, investors should think twice about accepting those non-GAAP numbers.

A history of "one-time" costs
That $340 million wafer supply agreement charge was the biggest one-time cost that AMD has reported in the past few years, but it certainly wasn't the only one. Between the beginning of 2014 and the third quarter of this year, AMD has taken 15 different one-time charges, with a whopping total of nearly $1.1 billion.