On Feb. 27, all-American electronics retailer RadioShack (NYSE:RSH) released fourth-quarter earnings for the 2006 fiscal year ended Dec. 31.

  • Sales fell significantly year over year, on 7.7% lower comps and 10.2% fewer stores. But through the magic of operational efficiency, RadioShack generated a massive earnings boost. It's a combination of heads rolling in the corporate HQ, more efficient labor scheduling in the stores, and less advertising.
  • The balance sheet looks good in all the right places, except for accounts payable. The company's inability to postpone its payments offset some very good inventory management moves, resulting in a weaker cash conversion cycle.
  • RadioShack is currently a pitiful one-star Motley Fool CAPS stock. Some of our players think it's trying too hard to mimic Best Buy (NYSE:BBY) and Circuit City (NYSE:CC). Is this the start of a serious turnaround, or just one step forward and two steps back? Log in to CAPS today and let us know what you think.

(Figures in millions, except per-share data)

Income Statement Highlights

Q4 2006

Q4 2005

Change

Sales

$1,458.1

$1,671.9

(12.8%)

Net Profit

$84.5

$51.2

65.0%

EPS

$0.62

$0.38

63.2%

Diluted Shares

136.5

135.7

0.6%


Get back to basics with a look at the income statement.

Margin Checkup

Q4 2006

Q4 2005

Change*

Gross Margin

45.6%

44.8%

0.8

Operating Margin

10.0%

4.9%

5.1

Net Margin

5.8%

3.1%

2.7
*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets

Q4 2006

Q4 2005

Change

Cash + ST Invest.

$472.0

$224.0

110.7%

Accounts Rec.

$247.9

$309.4

(19.9%)

Inventory

$752.1

$964.9

(22.1%)


Liabilities

Q4 2006

Q4 2005

Change

Accounts Payable

$254.5

$490.9

(48.2%)

Long-Term Debt

$540.7

$535.8

1.0%


Learn the ways of the balance sheet.

Cash Flow Highlights

YTD 2006

YTD 2005

Change

Cash From Ops.

$314.8

$362.9

(13.3%)

Capital Expenditures

$91.0

$170.7

(46.7)

Free Cash Flow

$223.8

$192.2

16.4


Find out why Fools always follow the money.

Related Foolishness:

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At the time of publication, Anders Bylund had no position in any company mentioned. Fool rules are here .