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:

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 .