Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Charles R who wrote (100072)	3/26/2000 7:54:00 PM
From: tejek	Respond to of 1572507

Charles Companies or individuals typically like accelerating depreciation if they are making a lot of money so that they can reduce tax burden. So, depreciation will improve cash flow due to lower taxes assuming the company is paying taxes. AMD does not pay any taxes right now because of accrued tax credits over the last 3 years. I expect that to change in Q2 or Q3. Depreciation reduces EPS - this is the part I was referring to as being unattractive to management. We are in agreement at least in apart....depreciation offsets revenue and reduces taxes but I don't think that it leads to a reduced EPS...just the opposite; less revenue is going to taxes and therefore can fall to the bottom line or to net income. However not being a CPA, I won't argue the point. <In fact the major reason for delaying production at Dresden is that the agreement (and its been a while since I read it) with the German state of Saxony requires that AMD start repaying Saxony the monies Saxony provided for construction when Dresden gets to a certain level of production....a provision by the way that is not unusual when the government assists in a development. These loan payments have got to be huge(probably many millions per month) because Dresden was a big project. Therefore it makes no sense to start production at Dresden until Fab 25 in Austin is completely maxed out. > You just brought up another reason for pushing out Fab30 production. Loan payments reduce cash flow but have no impact on EPS or taxes. How can this be? By making a loan payment it has become an operating expense and thereby becomes an offset to revenue which in turn, reduces the EPS. What am I missing? ted