On June 28, drugstore chain Rite Aid (NYSE:RAD) released first-quarter 2008 earnings for the period ended June 2.

  • Revenue growth of 2.8% is barely enough to keep up with inflation, but Rite Aid did turn that modest improvement into serious profit gains. The difference is $8.5 million less in store-closing charges and $3.4 million extra juice from asset sales.
  • That preferred stock is pretty sweet, with its high-priority dividend payments and 18 votes per share. Too bad you pretty much have to be a company executive to own any of it.
  • The new debt is financing for Rite Aid's recent acquisition of the Brooks Eckerd chain of pharmacy and convenience outlets from Canadian pharmacy giant Jean Coutu (Pink Sheets: JCOUF.PK). That deal cost $2.55 billion in a cash-and-stock combination, but closed after the end of the just-reported quarter.

(Figures in millions, except per-share data)

Income Statement Highlights

Q1 2008

Q1 2007

Change

Sales

$4,458

$4,337

2.8%

Net Profit*

$19.5

$3.2

516.6%

EPS

$0.04

$0.01

300.0%

Diluted Shares

550.3

533.3

3.2%
*Attributable to common stockholders, after preferred dividends of $8 million in 2007 and $7.8 million in 2006.

Get back to basics with the income statement.

Margin Checkup

Q1 2008

Q1 2007

Change*

Gross Margin

27.4%

27.3%

0.1

Operating Margin

2.1%

2.3%

(0.2)

Net Margin

0.4%

0.1%

0.3
*Expressed in percentage points

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q1 2008

Q1 2007

Change

Cash + ST Invest.

$112

$111

0.5%

Accounts Rec.

$377

$387

(2.4%)

Inventory

$2,317

$2,293

1.1%

Liabilities

Q1 2008

Q1 2007

Change

Accounts Payable

$947

$842

12.5%

Long-Term Debt

$4,072

$2,275

79.0%

The balance sheet reflects the company's health.

Cash Flow Highlights

Q1 2008

Q1 2007

Change

Cash From Ops.

$186

$122

52.9%

Capital Expenditures

$118

$71

66.6%

Free Cash Flow

$69

$51

34.1%

Owner Earnings

($15)

$11

N/A

Free cash flow is a Fool's best friend.

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.

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