On Sept. 20, 2006, Stock Advisor selection and home furnishings retailer Bed Bath & Beyond (NASDAQ:BBBY) released second-quarter earnings for the period ending Aug. 26, 2006. Let's see what we can learn from some of the more important numbers.

  • Accounting to stock expenses this quarter kicked up operating expenses and knocked EPS down by $0.03. A 5.5% reduction is nothing to sneeze at.
  • Increases in investments, both working capital and capital expenditures, reduced free cash flow creation for this quarter. As a rule, quarterly cash flow numbers tend to be lumpy.
  • The company announced a voluntary audit of its stock option grants and procedures. Stay tuned, because the company expects the report to be out in October.

(Figures in millions, except per-share data)

Income Statement Highlights

Avg. Est.

Q2 2006

Q2 2005

Change

Sales

$1,600

$1,607.2

$1,431.2

12.3%

Net Profit

--

$145.5

$141.4

2.9%

EPS

$0.51

$0.51

$0.47

8.5%

Diluted Shares

284.7

301.4

(5.5%)



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

Margin Checkup

Q2 2006

Q2 2005

Change*

Gross Margin

42.20%

42.05%

0.15

Operating Margin

13.66%

15.22%

(1.56)

Net Margin

9.05%

9.88%

(0.83)

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets

Q2 2006

Q2 2005

Change

Cash + ST Invest.

$817.3

$999.9

(18.3%)

Other Current Assets

$143.9

$114.2

26%

Inventory

$1,421.9

$1,238.9

14.8%



Liabilities

Q2 2006

Q2 2005

Change

Accounts Payable

$592.2

$503.1

17.7%

Long-Term Debt

$0

$0

N/A



Learn the ways of the balance sheet.

Cash Flow Highlights

Q2 2006

Q2 2005

Change

Cash From Ops.

$233.7

$246.7

(5.3%)

Capital Expenditures

$135.8

$88.3

53.8%

Free Cash Flow

$97.9

$158.4

(38.2%)



Find out why Fools always follow the money.

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Related Foolishness:

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.

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Bed Bath & Beyond is also an Inside Value selection.

At the time of publication, David Meier did not own shares in any of the companies mentioned. Fool rules for disclosure are here.