A Little Drama at Movie Gallery: Fool by Numbers

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On May 11, Movie Gallery (Nasdaq: MOVI) released earnings for the first quarter ended April 1.

• Total revenue fell by 6.7% to $647.7 million, as same-store sales declined 5.9% during the quarter.
• The operating margin deteriorated by 450 basis points because of expenses primarily related to "digital content and online delivery efforts, higher professional fees, and real estate optimization initiatives."
• The company plans to increase the availability of gaming products in an additional 500 Hollywood Video and Movie Gallery stores.
• The movie-rental business has been in the middle of a big change after Netflix (Nasdaq: NFLX) came out with a new distribution model. Which one does the Motley Fool CAPS community think will come out on top? It's tough to say, because Movie Gallery and Blockbuster (NYSE: BBI) have one-star ratings, while Netflix has only a two-star rating.

(Figures in millions, except per-share data.)

Income Statement Highlights

	Q1 2007	Q1 2006	Change
Sales	$647.7	$694.4	(6.7%)
Net Profit	($14.9)	$40.3	N/A
EPS	($0.47)	$1.27	N/A
Diluted Shares	31.8	31.8	0.3%

Get back to basics with the income statement.

Margin Checkup

	Q1 2007	Q1 2006	Change*
Gross Margin	60.1%	61.5%	(1.4)
Operating Margin	5.2%	9.7%	(4.5)
Net Margin	(2.3%)	5.8%	(8.1)

*Expressed in percentage points

Margins are the earnings engine.

Balance Sheet Highlights

Assets	Q1 2007	Q1 2006	Change
Cash + ST Invest.	$27.3	$34.5	(20.7%)
Inventory	$483.0	$485.0	0.0%

Liabilities	Q1 2007	Q1 2006	Change
Accounts Payable	$77.8	$133.0	(41.5%)
Total Obligations	$1,100.0	$1,095.5	0.0%

The balance sheet reflects the company's health.

Cash Flow Highlights

	Q1 2007	Q1 2006	Change
Cash From Ops.	$16.8	($20.6)	N/A
Capital Expenditures	$9.0	$1.1	717.4%
Free Cash Flow	$7.8	($21.7)	N/A

Free cash flow is a Fool's best friend.

Related Foolishness:

• Movie Gallery Is on the Move
• Foolish Forecast: Movie Gallery's Kick in the Can
• Before the Call: Blockbuster Premieres

Netflix is a Motley Fool Stock Advisor recommendation. Come join the community free for 30 days to find out why this newsletter handily outperforms the market.

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean. This data has been provided by Netscribes. To provide feedback on this article, please click on the "feedback" button below.