Rite Aid Corp. (RAD) reported a second-quarter profit of $9.8 million on Thursday, citing better cash flows and a reduction in inventory expenses.

For the three months ending Aug. 28, the nation's third-largest drug store chain earned less than a penny per share — slightly higher than the forecasts of analysts surveyed by Thomson First Call, who predicted a loss of 1 cent.

In the same period a year ago, the company reported a loss of $10.6 million, or 4 cents per share.

Rite Aid shares were down 6 cents, or 1.6 percent, at $3.70 on the New York Stock Exchange (search).

Rite Aid's president and chief executive Mary Sammons said the improvement was in line with expectations.

"We remain very focused on our initiatives to further grow our business the second half of the year," Sammons said.

Revenues increased 1.8 percent to $4.12 billion, from $4.05 billion a year ago, the company said.

The company also announced the completion of a refinancing that it said reduced its debt by $634 million to about $3.2 billion, and would cut borrowing costs by $27 million a year. The refinancing will result in a $16 million charge, Rite Aid said.

Since late 1999, the company has been rebuilding after accounting irregularities led to the resignation of the management and forced Rite Aid to revise earnings downward by $1.6 billion for fiscal years 1998 and 1999.

In the second quarter, the company opened one new store, acquired two stores, remodeled 57 stores, relocated two stores and closed seven stores. Stores in operation at the end of the quarter totaled 3,370.