A Creative Horror Story: Fool by Numbers

On Oct. 30, electronics manufacturer Creative Technology (Nasdaq: CREAF  ) released first-quarter 2007 earnings for the period ended Sept. 30.

• Despite lower SG&A and lower R&D expenses (oh no!), Creative hasn't been able to keep cost control apace with the slower sales. The result is a grim-looking income statement and scary margins.
  
  
• On the bright side, that balance sheet looks pleasant enough. The company should be able to run at a loss for quite some time if that's what it takes to get back to profitability, without resorting to runaway debt or dilutive secondary offerings.
  
  
• Looking for that settlement payment from Apple (Nasdaq: AAPL  ) ? The check was in the proverbial mail when the quarter closed, and Creative received the funds on Oct. 6. The company gets to add $82 million after tax, or $0.98 per share, to this quarter's net income.

(Figures in thousands, except per-share data)

Income Statement Highlights

	Avg. Est.	Q1 2007	Q1 2006	Change
Sales	$269,000	$241,512	$280,173	(13.8%)
Net Profit	--	-$21,008	$691	N/A
EPS	($0.11)	($0.25)	$0.01	N/A
Diluted Shares	--	83322	84690	(1.6%)

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

Margin Checkup

	Q1 2007	Q1 2006	Change*
Gross Margin	14.86%	20.19%	(5.33)
Operating Margin	(23.89%)	(3.08%)	(20.81)
Net Margin	(8.70%)	0.25%	(8.95)

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets	Q1 2007	Q1 2006	Change
Cash + ST Invest.	$189,845	$171,784	10.5%
Accounts Rec.	$167,185	$169,386	(1.3%)
Inventory	$269,368	$365,506	(26.3%)

Liabilities	Q1 2007	Q1 2006	Change
Accounts Payable	$159,799	$126,742	26.1%
Long-Term Debt	$205,585	$193,632	6.2%

Learn the ways of the balance sheet.

Cash Flow Highlights

The company did not provide a cash flow statement. Boo!

Find out why Fools always follow the money.

Related Companies:

• Apple Computer
• SanDisk (Nasdaq: SNDK  )
• Micron (NYSE: MU  )
• Sony (NYSE: SNE  )
• Logitech International (Nasdaq: LOGI  )
• Plantronics (NYSE: PLT  )

Related Foolishness:

• A Volatile Multibagger
• Great Quarter, but What's Next for Apple?

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.

To find out what more than 11,500 fellow investors think about Creative Technology - and add your voice to the mix - check out CAPS , the Fool's new community-intelligence stock-rating tool.

At the time of publication, Fool contributor Anders Bylund had positions in none of these companies. Fool rules are here .