Source Interlink Companies 10K/A 2008 Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

R	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 31, 2008

£	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________to______________

Commission file number 001-13437

SOURCE INTERLINK COMPANIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-2428299
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

27500 Riverview Center Blvd.,
Suite 400, Bonita Springs, Florida	34134
(Address of principal executive offices)	(Zip Code)
incorporation or organization)

(239) 949-4450
(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:
Title of each class	Name of exchange on which registered
COMMON STOCK $0.01 PAR VALUE	Nasdaq Global Select Market

Securities registered pursuant to section 12(g) of the Act:

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

£ Yes R No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

£ Yes R No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

R Yes £ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer, large accelerated filer, and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

£ Large accelerated filer

R Accelerated filer

£ Smaller reporting company

£ Non-accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

£ Yes R No

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of July 31, 2007 was approximately $78.0 million computed by reference to the price at which the common equity was sold on July 31, 2007, the last day of the registrant’s most recently completed second fiscal quarter, as reported by The Nasdaq National Market.

At May 27, 2008 the Company had 52,321,837 shares of common stock $0.01 par value outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (this “Amendment”) amends our Annual Report on Form 10-K for the fiscal year ended January 31, 2008, originally filed on April 15, 2008 (the “Original Filing”). We are filing this Amendment to include the information required by Part III and not included in the Original Filing as we will not file our definitive proxy statement within 120 days of the end of our fiscal year ended January 31, 2008 (“Fiscal 2008”).

In addition, this Amendment replaces Part I in its entirety to include certain revised disclosures.

Except as described above, no other changes have been made to the Original Filing. The Original Filing continues to speak as of the date of the Original Filing, and we have not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Filing.

Table of Contents

	PAGE
PART I
ITEM 1.BUSINESS.	2
ITEM 1A.RISK FACTORS.	7
ITEM 1B.UNRESOLVED STAFF COMMENTS.	15
ITEM 2.PROPERTIES.	15
ITEM 3.LEGAL PROCEEDINGS.	15
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.	15
PART III
ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.	16
ITEM 11.EXECUTIVE COMPENSATION.	19
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.	26
ITEM 13.CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.	28
ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES.	29
PART IV
ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.	30
SIGNATURES	31

PART I

ITEM 1. BUSINESS.

We are a premier publishing, marketing, merchandising and fulfillment company of entertainment products including magazines, DVDs, music CDs, books and related items, serving more than 100,000 retail locations throughout North America. We produce print and digital content for consumers in North America through our enthusiast media division, Source Interlink Media (“SIM”), which was acquired on August 1, 2007. We also sell and distribute entertainment products to leading mass merchandise retailers, grocery stores, bookstore chains, music stores, drug stores and other specialty retailers, as well as e-commerce retailers. We offer customers an array of value-added content and services including enthusiast media publications and online content, category management, product procurement, fulfillment services, claims submission, information services and in-store display fixturing.

We directly produce and deliver magazine, Internet and home entertainment content to consumers. With the addition of SIM, we transformed from a leading home entertainment distributor into a significant content owner. This array of products and services, in combination with our value added services and geographic reach, positions us to service the needs of America’s leading retailers and to capitalize on the rapidly changing distribution and fulfillment landscape.

We are one of the largest independent wholesalers of DVDs and CDs in North America. We effectively operate as an extension of our customers’ operations. Between our fulfillment, category management and e-commerce solutions, we provide our customers with a complete solution to maximize the sales and profitability of their home entertainment content products.

We are a dynamic organization composed of three synergistic operating divisions. Together they form a leading integrated media company with distinguished content and a national distribution and merchandising platform.

Our Divisions

Source Interlink Media. Our SIM division is one of the largest providers of enthusiast print and digital content in North America. SIM sells print advertising space in its publications, sells publications through newsstands and subscriptions, sells online advertising and lead generation services, and sells sponsorships and tickets for events. Its properties consist of 80 publications, 94 websites and over 100 events. Well known print titles include Motor Trend, Hot Rod, Lowrider, Power & Motoryacht, Surfer, Home Theater, Motorcyclist, 4 Wheel & Offroad, and Soap Opera Digest. SIM’s web properties include automotive.com, motortrend.com and equine.com. SIM’s magazines have a combined circulation of approximately 9.0 million print copies per month, and its websites reach a total of over 19 million unique users who generate over 145 million page views per month. The estimated total reach of our audience is over 75 million consumers each month. Additionally, the reader base of our automotive portfolio is approximately 90% male, and approximately 81% are between 18 and 54 years old.

SIM is the dominant provider of content to enthusiast communities interested in automotive, action sports, marine, equine and home technology. SIM has the largest portfolio of magazines in the automotive category, including six of the top ten titles by paid circulation. These print publications are supplemented by branded websites, consumer events, and licensed products. Automotive.com has proven expertise in car sales lead generation, search engine marketing and search engine optimization. This expertise coupled with a technology platform that is increasing traffic can be monetized through advertising and lead generation. As automakers divert marketing dollars to the Internet and as auto dealers seek increased car sale leads, the combination of Automotive.com and our portfolio of branded Internet sites provides a platform for strong growth in online advertising and lead generation revenues.

SIM’s strategy of differentiated, specialized and authoritative content has effectively positioned it to take advantage of the industry shift towards more targeted advertising. SIM is an important source of information for readers on their avocations. Given its niche content, SIM is less exposed to the pressures faced by sports, news and other general interest magazines. SIM’s readers tend to spend a significant amount of time and money on their avocations, which results in titles that are less reliant on rate base guarantees than general interest publications. Only six of SIM’s 80 titles have rate base guarantees. SIM’s 15,000+ endemic advertisers rely on its titles as virtual storefronts to directly connect with buyers and generate sales. Endemic sources comprise approximately 85% of SIM’s print advertising revenue and provide a highly desirable and, historically, a relatively less volatile revenue stream that differentiates it from other content providers.

Periodical Fulfillment Services. Our Periodical Fulfillment Services division provides an array of value-added services including category management, product procurement, fulfillment and returns processing services to approximately 18,600 mainstream retail locations and 3,100 specialty retail locations. Its customers include most of the nation’s leading magazine retailers including Barnes & Noble, Borders, Wal-Mart, Target, Kroger, Safeway, Costco, Walgreens and Rite Aid, many of which have been customers for over 10 years. The division has approximately 30% share of the single-copy magazine distribution market and is the leading distributor in five of the nation’s top ten advertising markets. The division also imports and exports periodicals sold in more than 100 markets worldwide.

The related In-Store Services group designs and implements display fixture programs, manages rebates and other incentive payments and accumulates data from more than 100,000 retail locations. These services are critical to both mainstream and specialty retailers alike as they enable clients to make more informed decisions regarding product placement and marketing strategies.

DVD / CD Distribution. Our DVD / CD Distribution division is the leading independent distributor of DVDs and CDs in the home entertainment products marketplace, offering the most extensive selection of products in the United States. It provides category management (vendor managed inventory), procurement, fulfillment and e-commerce services to leading DVD and CD retailers and Internet retailers, including Barnes & Noble, Amazon.com, Meijer, K Mart, Toys “R” Us, Circuit City and Walgreens. The DVD / CD Distribution division utilizes its industry leading Stock Keeping Unit (“SKU”) availability of approximately 360,000 CD titles and approximately 100,000 DVD titles, approximately two-thirds of which are physically in stock in our warehouses, as well as video games and other related products to supply a tailored merchandise offering for its customers. Through its Consumer Direct Fulfillment segment, the division also provides fulfillment for the majority of domestic e-commerce sites that sell music or videos.

Competitive Strengths

Our key competitive strengths include:

Vertically Integrated Platform. Our acquisition of SIM established us as one of the largest vertically integrated publishing and distribution companies in the country. The addition of SIM allows us to participate throughout the value chain. The combination better leverages our distribution platform, driving efficiencies and enabling us to capture a greater share of the value chain profits. Additionally, our market knowledge, derived from our nationwide retail point-of-sale data system, enables us to optimize SIM’s draw and merchandising by maximizing product placement through our strong retail network. Our strong existing relationships with retailers are enhanced by our ability to offer content through this channel. While SIM has transformed us from a leading home entertainment distributor to a significant content owner, it has also helped us establish a leverageable platform to participate in the ongoing consolidation of content.

Diverse Revenue and Earnings Streams. Our acquisition of SIM significantly diversified our revenue and earnings streams and provides an opportunity for growth while leveraging our stable distribution platform. SIM’s portfolio of niche content and endemic advertising base historically provides a more stable source of revenues versus a general interest publisher. SIM is also diversified across an array of revenue streams including print advertising, subscription, newsstand, online advertising and other non-print revenue streams. Between our Periodical Fulfillment Services and DVD / CD Distribution divisions, we are able to generate stable revenue streams by leveraging our scale, vast catalog and servicing capability. For example, our scale in distribution markets allows us to achieve highly competitive third-party shipping rates. In an industry where scale drives margin, our critical mass provides a significant competitive advantage.

Strong and Stable Cash Flow Generation. We generate significant cash flow as a result of historically strong earnings, low capital expenditures, modest working capital requirements and favorable tax attributes. Our capital expenditures over the same period averaged less than 2% of total pro forma revenue. Our disciplined working capital management effectively reduces the impact of working capital needs throughout the year. While we maintain significant inventory in order to readily meet the extensive catalog needs of many of our clients, we carry minimal inventory risk since virtually all of our products are fully returnable. Additionally, the structure of the acquisition of SIM allowed the parties to make a Section 338(h)(10) election. The incremental depreciation impact of this election enables us to significantly reduce our cash income tax expense over the next several years.

Longstanding Retailer Relationships. We maintain longstanding relationships with many of the nation’s leading mass-merchant and specialty retailers. Our products and services touch almost 1,000 retail chains representing over 100,000 storefronts. These customers rely on us to manage highly profitable categories and trafficked sections within their stores. We provide our services on an exclusive basis for many of these retailers. These relationships, built upon years of quality service, create significant barriers to entry. Approximately 57% of distribution revenues are generated by retailers who have been our customer for over 10 years.

Highly Desirable Content Targets Niche Audiences. SIM’s content provides focused, authoritative editorial content to the targeted niche reader. SIM’s readers are passionate and knowledgeable about their avocations. These readers rely on SIM’s content as their primary source of information, making this content a highly effective means of connecting enthusiasts with marketers. SIM’s niche audience attracts an endemic advertising base, comprising approximately 85% of its advertising revenues. Endemic advertisers rely heavily on SIM’s reader base in order to generate sales, thereby providing a relatively more stable revenue stream versus general interest magazines. Due to its niche focus, SIM is well-positioned to benefit as advertisers shift expenditures towards more targeted audiences. Additionally, these characteristics translate well to online opportunities.

Market Share Leader in Publishing & Distribution. We boast strong market share in each of our operating divisions. Through our position in the value chain, we serve as the critical link between the entertainment content producers and retailers. Our SIM division is one of the largest providers of print and digital content to the enthusiast community in North America. SIM’s leading portfolio of magazines includes six of the top ten automotive titles. Our Periodical Fulfillment Services division has an approximately 30% share of the single-copy magazine distribution market and is the leading distributor in five of the top ten advertising markets in the country (Baltimore / Washington D.C., Chicago, Detroit, Los Angeles and Philadelphia). The division is also the largest importer of international titles into the U.S. mass market and exporter of domestic titles to over 100 international markets. Our DVD / CD Distribution division has the largest DVD and CD catalog in the industry serving over 5,000 retail locations.

Experienced Management Team with Significant Industry Knowledge. Our dedicated and experienced management team has grown the Company through vision and leadership. Our top seven executives have a combined 100 years of experience in the industry. Senior management is supported by a strong group of divisional leaders who also have long histories with the Company. Our team has built the industry’s largest and fastest growing player. We have successfully acquired and integrated approximately 20 companies since 1995. In an industry in which consolidation continues to drive growth and profitability, this experience positions us to capitalize on future opportunities, many of which have already been identified. Our track record of innovation and growth is unmatched in the home entertainment fulfillment industry.

Business Strategy

We intend to enhance our position as a leading integrated media, publishing, merchandising and distribution company by continuing to apply the following strategies:

Drive Efficiencies Across the Distribution Channel. Historically, the magazine distribution system has been very inefficient and highly fragmented. We have been able to assist in driving consolidation from approximately 350 wholesalers several years ago to today where approximately 90% of the nation’s single copy magazines are handled by four major wholesalers, including us, who work with four national distributors. The national distributors do not handle physical product, but instead provide marketing, administrative, and financial services to the publishers and coordinate with the wholesalers. Given this dynamic, we believe that the existing magazine distribution channel can be further optimized, and opportunities exist to make it more efficient. Our acquisition of SIM allows us to participate in every piece of the value chain and drive efficiencies. As a significant print distributor, we have unique insight into what sells and where. By owning our own content, we are able to continue to drive efficiencies in the distribution channel as well as within our own titles. The point-of-sale data that we gather allows us to improve SIM’s sell-through and optimize our draw, enabling us to take considerable dollars out of the system, improve our operating margins and generate significant free cash flow for debt service.

Build and Strengthen Long-standing Retail Relationships. A critical component of our success lies in the proprietary data that we continually accumulate on home entertainment buying habits of consumers. We optimize merchandise purchases and placement for all types of retailers using data from over 100,000 storefronts and the Internet sites we service on every magazine, DVD and CD we sell. We sort this data by zip code and overlay it with demographic, seasonal and other information to facilitate critical merchandising decisions. We plan to enhance existing client relationships by leveraging cross-selling opportunities, expanding services and capitalizing on licensing opportunities. We also intend to grow by obtaining new clients through expanding services into adjacent geographies and entering into exclusive relationships with retailers and entertainment content producers increasingly seeking greater assistance in managing the volatility inherent in these categories.

Grow Source Interlink Media’s Core Print Business. SIM is a unique set of assets with a stable and loyal readership. The audiences of the specific SIM publications and products are passionate about their avocations. This engagement makes them very attractive to advertisers. We believe SIM is positioned to take advantage of the current trends among advertisers towards more targeted audiences. We plan to drive newsstand sales, subscription renewal rates, advertising revenues and support future price increases through a combination of product redesigns, new title launches and frequency increases. Our existing infrastructure allows us to launch new titles in the niche enthusiast sector with very modest investment.

Expand Source Interlink Media Beyond Print. We believe SIM is well positioned in the shift towards increased digital consumption of media. Its strong brands and differentiated content create new opportunities to extend these brands beyond print into online, television, events and licensing. We expect to see significant growth from SIM’s online platform. SIM’s Automotive.com business provides a solid foundation and has facilitated the expansion of SIM’s digital strategy. In fiscal year 2008, SIM redesigned and relaunched over 50 of its enthusiast websites and in fiscal year 2009 will redesign the remaining enthusiast websites as well as its “in-market” sites which include automotive.com, motortrend.com and intellichoice.com. As a result of the redesign, we have seen growth from lead generation, transactional capabilities and online advertising.

Expand Content Ownership. We intend to leverage our platform and industry knowledge by acquiring complementary businesses and proprietary content. Our acquisition of SIM was the first significant step in this strategy. While we have historically had a wholesaler relationship with SIM, our interests became more effectively aligned as a consolidated content owner and distributor. SIM’s targeted portfolio of over 80 magazine titles and related websites provides a strong stable of content. Numerous growth opportunities exist for these well-known brands. The combination has enabled us to diversify our revenue streams, enter new markets and enhance our existing retail relationships. It affords us a greater piece of the value chain and substantial cost savings and efficiencies. Going forward, we intend for content ownership to become a more meaningful part of our business. SIM’s infrastructure will serve as a platform to which we can add additional content in order to profitably grow our business.

Realize Significant Cost Savings. We constantly seek to eliminate costs in all of our divisions. Since 1995, we have successfully acquired and integrated approximately 20 companies. We have a proven track record of identifying and achieving synergies on plan. In the past three years, we have completed four significant acquisitions. For the Alliance, Levy and Anderson acquisitions, we announced prospective synergies totaling $38.9 million of which we have achieved $30.0 million, which is ahead of plan. In connection with the acquisition of SIM, we expect to realize $18.1 million in run-rate synergies within the first 12 months of closing. Thus far we have implemented actions to capture approximately $14 million of these cost savings. We have also taken steps to reduce costs and improve efficiency in our Periodical Fulfillment Services division by consolidating our magazine distribution infrastructure. We recently opened a state-of-the-art distribution center in McCook, Illinois which replaced older facilities in Chicago, Illinois and Brainard, Minnesota. We expect to continue our focus on identifying and realizing cost savings in our existing business.

Overview of Source Interlink Media (Enthusiast Media) Acquisition

On August 1, 2007, we completed the acquisition of Primedia Enthusiast Media, Inc. (subsequently renamed Source Interlink Media, LLC and hereinafter referred to as “SIM”), a wholly owned subsidiary of Primedia Inc., for a purchase price of approximately $1.2 billion in an all cash transaction. The transaction combined SIM’s industry-leading magazine content portfolio with our premier magazine distribution and merchandising platform, creating a leading vertically integrated publishing and distribution company.

Over the last 10 years, we have completed approximately 20 acquisitions to position us as the premier marketer, merchandiser and fulfillment company for home entertainment content products in North America. While these acquisitions have extended our geographical reach and increased our market share, we believe that further growth opportunities exist to leverage our distribution platform and capture a greater portion of the value chain. The acquisition of SIM was the first significant step toward that end. This acquisition transformed us from a leading home entertainment distributor into a vertically integrated content owner.

Industry Overview

Home Entertainment Content. According to industry sources, including the Motion Picture Association, the Recording Industry Association of America, Harrington Associates, LLC, and the American Booksellers Association, the total retail market in calendar year 2006 for DVDs, prerecorded music, single-copy magazines and books was approximately $59.4 billion.

The structure of the distribution channel for single-copy magazines is that publishers each generally engage a single national distributor, which acts as its representative to regional and local wholesalers and furnishes billing, collecting and marketing services throughout the United States or other territories. These national distributors typically rely on the regional or local wholesalers to secure distribution to retailers. The wholesalers maintain direct vendor relationships with the retailers. Retailers in the mainstream retail market, which consists primarily of grocery stores, drug stores and mass merchandise retailers require these wholesalers to provide extensive in-store services including, for traditional trading terms accounts, receiving and verifying shipments, and for scan-based and traditional trading terms accounts, stocking new issues and removing out-of-date issues. However, this structure is not economically viable in the specialty retail market, which consists of bookstore chains, music stores and other specialty retailers. Thus, wholesalers servicing the specialty retail market typically do not provide these in-store services.

In contrast, the distribution channel for prerecorded video and music products is dominated by the major motion picture studios and record labels, which through their respective distribution units periodically compete with intermediaries by seeking to establish direct trading relationships with high volume retailers. This disintermediation strategy has limited appeal to retailers that demand a variety of value-added services, including e-commerce support, inventory management, return logistics, advertising and marketing assistance, information services, and in store merchandising services to manage these increasingly volatile categories. Some retailers have sought to maintain a dual supply chain by establishing a direct trading relationship with the major studios and record labels for high volume product, primarily newly released titles, and a more expansive procurement and service relationship with intermediaries to secure lower volume, higher margin product and value-added services.

In-Store Services. The retail sale of single-copy magazines is largely an impulse purchase decision by the consumer, and the retail sale of other home entertainment content is becoming increasingly so. As a result, motion picture studios, record labels, publishers and manufacturers of other impulse merchandise such as confections and general merchandise (i.e., razor blades, film, batteries, etc.) consider it important for their products to be on prominent display in those areas of a store where they will be seen by the largest number of shoppers in order to increase the likelihood that their products will be sold. Retailers typically display DVDs, CDs, magazines, confections and general merchandise in specific aisles, or the “mainline,” and the checkout area, or the “front-end.” Product visibility is highest in the front-end because every shopper making a purchase must pass through this area.

Due to the higher visibility and resulting perception of increased sales potential, vendors compete vigorously for favorable display space in the front-end. To secure the desired display space, vendors offer rebates and other incentive payments to retailers, such as:

· Initial fees to rearrange front-end display fixtures to ensure the desired placement of their products;

· Periodic placement fees based on the location and size of their products’ display; and

· Cash rebates based on the total sales volume of their products.

Due to the high volume of sales transactions and great variety of incentive programs offered, there is a significant administrative burden associated with front-end management. As a result, most retailers have historically outsourced the information gathering and administration of rebate claims collection to third parties such as our company. This relieves retailers of the administrative burdens, such as monitoring thousands of titles with numerous distinct incentive arrangements.

Enthusiast Publications. Enthusiast publications comprise a sizeable segment of the magazine publishing industry that is based upon serving the specific interests and needs of individuals with particular interests, hobbies and avocations. Readers value enthusiast publications for their targeted editorial content and also rely on them as primary sources of information in the relevant topic areas. This aspect makes enthusiast publications an important media outlet for advertisers seeking to reach the consumers who are likely the most interested in related products and services.

Like the magazine publishing industry, the structure of the enthusiast publications business is based largely on selling print advertising space in publications and selling printed copies through newsstands and subscriptions. In addition, the enthusiast publications business encompasses selling online advertising and lead generation services as well as sponsorships and tickets for events, branded

websites and licensed products. The enthusiast niches in which we primarily participate are automotive, action sports, marine, equine and home technology.

Strategic Alternatives Process

In 2006, our Board of Directors, in consultation with its strategic advisor, Yucaipa, hired Deutsche Bank Securities Inc. to act as its exclusive financial advisor in its process of evaluating strategic alternatives to enhance stockholder value, including but not limited to, a recapitalization, strategic acquisitions, and the combination, sale or merger of the Company with another entity.

Yucaipa is an affiliate of AEC Associates, LLC, our largest shareholder.

On May 13, 2007, the Company acted on its evaluation of strategic alternatives by announcing the execution of an agreement for the acquisition of SIM. As a result, the Company paid Yucaipa $12.7 million in connection with its advisory services.

Customers

Our customers in the retail market consist of bookstore chains, music stores and other retailers, as well as, grocery stores, drug stores and mass merchandise retailers. One customer accounts for a large percentage of our total revenues. Barnes & Noble, Inc. accounted for 21.6%, 19.6% and 27.5% in the fiscal years ended January 31, 2008, 2007 and 2006 respectively. In the aggregate our top three customers accounted for approximately 28.5% of our total revenues.

Marketing and Sales

Our target market includes advertisers, magazine publishers, motion picture studios, record labels, magazine distributors and retailers. We specialize in providing nationwide home entertainment product distribution to retailers with a national or regional scope. We believe that our distribution centers differentiate us from our national competitors and are a key element in our marketing program. Our distribution centers focus on our just-in-time replenishment and our ability to deliver product, particularly magazines published on a weekly basis, overnight to virtually any location within the United States and Puerto Rico.

While we frequently attend trade shows and advertise in trade publications, we emphasize personal interaction between our sales force and customers so that our customers are encouraged to rely on our dependability and responsiveness. To enhance the frequency of contact between our sales force and our customers, we have organized our direct sales force into a unified marketing group responsible for soliciting sales of all products and services available from each of our operating groups. We believe this combined marketing approach will enhance cross-selling opportunities and lower the cost of customer acquisition.

Seasonality and Inflation

Our DVD and CD Fulfillment segment is highly seasonal. The fiscal fourth quarter is typically the largest revenue producing quarter due to increased distribution of pre-recorded music, videos, and video games during the year end holiday shopping season.

Our Magazine Fulfillment segment is generally not impacted by a significant amount of seasonality. The fiscal third quarter is typically the largest revenue quarter due to increased distribution of certain monthly titles, such as fashion titles and sports titles, and various quarterly, semi-annual and annual titles that are only produced and distributed in the third quarter to be in retail stores during the year end holiday shopping season.

Our In-Store Services segment is also highly seasonal. Historically, the largest revenue producing fiscal quarter for this segment is the third. This is primarily due to the fact that most retailers for which we design, manufacture and deliver product want their goods in their retail stores prior to the year end holiday shopping season, which is our fourth quarter.

Our SIM division has a small degree of seasonality. Historically, the largest revenue producing fiscal quarters for this segment are the second and third, while the weakest fiscal quarter is the fourth. This coincides with the seasonality experienced by both our largely endemic advertising base and our enthusiast consumers who participate most actively in their avocations in the spring and summer months than in winter.

Generally, during the last three years personnel and supplies costs have increased at a moderate rate of inflation. However, the retail price of magazines and DVDs and CDs has remained static or declined. As such we have experience declining profit margins due to these macro-economic factors.

Competition

Each of our business units faces significant competition.

Our Media group competes for advertising on the basis of circulation and the niche markets they serve. Each of the Company’s enthusiast publications faces competition in its subject area from a variety of publishers and competes for readers on the basis of the high quality of its targeted editorial content, which is provided by in-house and freelance writers. In the high-end and new car markets, our publications compete primarily against Car and Driver and Road and Track, both owned by Hachette Filipacchi Media U.S. Inc. The Company also competes in individual enthusiast markets with a number of smaller, privately-owned or regionally-based magazine publishers.

Our Fulfillment groups distribute home entertainment product in competition with a number of national and regional companies, including Anderson News LLC, Anderson Merchandisers, L.P., Hudson News Company, The News Group, Ingram Book Group, Inc., Ingram Entertainment, Inc., Handleman Company, and Baker & Taylor, Inc. Major record labels and motion picture studios compete with us by establishing direct trading relationships with the larger retail chains.

Our In-Store Services group has a very limited number of direct competitors for its claims submission program, and it competes in a highly fragmented industry with other manufacturers for wire display fixture business. In addition, some of this group’s information and management services may be performed directly by publishers and other vendors, retailers or distributors.

The principal competitive factors faced by each of our business units are price, financial stability, breadth of products and services, and reputation.

Management Information Systems

The efficiency of our business units are supported by our information systems that combine traditional outbound product counts with real-time checkout register activity. Our ability to access real-time checkout register data enables us to quickly adjust individual store merchandise allocations in response to variation in consumer demand. This increases the probability that any particular merchandise allotment will be sold rather than returned for credit. In addition, we have developed sophisticated database management systems designed to track various on-sale and off-sale dates for the numerous issues and regional versions of the magazine titles that we distribute.

Our primary operating systems are built on an open architecture platform and provide the high level of scalability and performance required to manage our large and complex business operations. We acquired certain of these systems in connection with our acquisition of Alliance, including proprietary, real-time, fully integrated enterprise planning, warehouse management and retail inventory management systems.

We also deploy a variety of additional hardware and software to manage our business, including a complete suite of electronic data interchange tools that enable us to take client orders, transmit advanced shipping notifications and place orders with our manufacturing trading partners. We also use an automated e-mail response system and automated call distribution system to manage our call center and conduct customer care services.

Software used in connection with our claims submission program and in connection with our subscriber information website was developed specifically for our use by a combination of in-house software engineers and outside consultants. We believe that certain elements of these software systems are proprietary to us. Other portions of these systems are licensed from a third party that assisted in the design of the system. We also receive systems service and upgrades under the license. We believe that we have obtained all necessary licenses to support our information systems.

We employ various security measures and backup systems designed to protect against unauthorized use or failure of our information systems. Access to our information systems is controlled through firewalls and passwords and we utilize additional security measures to safeguard sensitive information. Additionally, we have backup power sources for blackouts and other emergency situations.

Although we have never experienced any material failures or downtime with respect to any management information systems operations, any systems failure or material downtime could prevent us from taking orders and/or shipping product.

We have made strategic investments in material handling automation. Such investments include computer-controlled order selection systems that provide labor efficiencies and increase productivity and handling efficiencies. We have also invested in specialized equipment for our rapidly growing e-commerce accounts. We believe that in order to remain competitive, it will be necessary to invest in and upgrade from time to time all of our information systems.

Employees

As of March 31, 2008, we had approximately 8,500 employees, of whom approximately 4,400 were full-time employees. Approximately 550 of our employees are covered by collective bargaining agreements that expire at various times through August 31, 2009. We believe our relations with our employees are good.

RECENT DEVELOPMENTS

Included below is a summary of event(s) occurring after the end of the most recently complete fiscal year, but prior to the filing of our Form 10-K:

On April 11, 2008, the Company entered into an interest rate swap agreement with Wachovia Bank, N.A. The interest rate swap is intended to hedge the Company’s exposure to fluctuations in LIBOR on $210.0 million of 1-month LIBOR based debt through April 29, 2011. The Company expects that this swap agreement will qualify for hedge accounting treatment in accordance with SFAS 133.

ITEM 1A. RISK FACTORS.

Set forth below and elsewhere in our Annual Report on Form 10-K and in other documents we file with the SEC are risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward looking statements contained in this Annual Report on Form 10-K.

We derive a significant percentage of our revenue and profits from advertising revenue.

Our advertising revenues are subject to risks arising from possible shifting of advertising spending amongst media and declines in general economic and business activity. We have recently suffered significant declines in our advertising revenues. For each of the fiscal quarters ended October 31, 2007 and January 31, 2008, our print advertising revenues were $67.5 million and $55.3 million respectively, which represented a decrease of (5.9)% and (9.8)%, respectively, with respect to the applicable prior-year quarterly periods. A significant portion of this decrease is attributable to shifting of advertising spending among different media and an overall decline in print advertising revenue reflect a shift to online advertising by some of our customers. A significant portion of the overall decrease in advertising spending is attributable to declines in the level of business activity of certain of our advertisers, particularly U.S. and non-U.S. automobile manufacturers. Continued deterioration in our advertising revenues could have a material adverse effect on our revenues, profit margins.

Increases in commodity prices may have an adverse impact on our future financial results.

The prices of paper, ink and fuel are significant expenses relating to our print products and distribution business respectively. Worldwide demand, strikes, extraordinary weather conditions and other factors could result in higher prices in fiscal 2009. In addition, we use the U.S. Postal Service for distribution of many of our products and marketing materials, and our results are accordingly impacted by postage rate increases. Paper, ink and fuel cost increases, as well as postage cost increases, may have an adverse effect on our future results. We may not be able to pass these cost increases through to our customers.

We participate in highly competitive industries and competitive pressures may result in a decrease in our revenues and profitability.

Each of our business units faces significant competition.

Our Media group competes for advertising on the basis of circulation and the niche markets they serve. Each of the Company’s

enthusiast publications faces competition in its subject area from a variety of publishers and competes for readers on the basis of the quality of its targeted editorial content, which is provided by in-house and freelance writers. In the high-end and new car markets, our publications compete primarily against Car and Driver and Road and Track, both owned by Hachette Filipacchi Media U.S. Inc. The Company also competes in individual enthusiast markets with a number of smaller, privately-owned or regionally-based magazine publishers.

Our Peridical Fulfillment Services group is comprised of our Fulfillment group and our In-Store Services group. Our Fulfillment group distributes home entertainment product in competition with a number of national and regional companies, including Anderson News Company, Anderson Merchandisers, L.P., Hudson News Company, News Group, Ingram Book Group, Inc., Ingram Entertainment, Inc., Handleman Company, and Baker & Taylor, Inc. We also compete with several of the major record labels’ and movie studios’ independent distribution arms. From time to time, several of our retail chain customers have elected to buy a substantial volume of their inventory directly from the major labels and studios that they had previously been purchasing from us. Direct purchasing from the major motion picture studios and record labels currently accounts for a significant portion of the overall media fulfillment market in North America. To the extent our customers increase their direct purchasing from the major labels and studios or the independent distribution companies, our financial results could be adversely affected.

Our In-Store Services group competes in a highly fragmented industry with other manufacturers for wire display fixture business. In addition, some of this group’s information and management services may be performed directly by publishers and other vendors, retailers or distributors. Other information service providers, including A.C. Nielsen Company, Information Resources and Audit Bureau of Circulations, also collect sales data from retail stores. If these service providers were to compete with us, given their expertise in collecting information and their industry reputations, they could be formidable competitors.

Some of our existing and potential competitors have substantially greater resources and greater name recognition than we do with respect to the market or market segments they serve.

Because of each of these competitive factors, we may not be able to compete successfully in these markets with existing or new competitors. Competitive pressures may result in a decrease in the number of customers we serve, a decrease in revenues, a decrease in operating profits.

Sales of our products depend, in part, on factors affecting consumer spending that are out of our control.

The sales of magazines, videos and music products depend to a significant extent on numerous factors affecting discretionary consumer spending, including general economic conditions, disposable consumer income, fuel prices, recession and fears of recession, war and fears of war, inclement weather, consumer debt, interest rates, sales tax rates and rate increases, consumer confidence in future economic conditions and political conditions, and consumer perceptions of personal well-being and security. In addition, spending on these items is affected significantly by the timing, pricing and success of new releases, all of which are not within our control. Adverse changes in factors affecting discretionary spending could reduce consumer demand for the products we sell, thus negatively impacting our business and operating results.

Our revenue from the sales of DVDs and CDs has suffered due to a shift in consumer demand away from physical media and toward digital downloading and other delivery methods.

Our total revenues from the sales of physical CDs have declined from approximately 59.2% of our total revenue for the fiscal year ended January 31, 2005 to approximately 50.0% for the fiscal year ended January 31, 2008 due, in large part, to the fact that consumers are more frequently buying music digitally from many providers such as Apple Computer (through iTunes), Music Match, Rhapsody, Microsoft (through MSN) and others. The sale of digital music has grown significantly in the past few years, and the recording industry saw sales revenue for CDs decline significantly from calendar years 2001 to 2007. As digital distribution of music and video content continues to increase in popularity and gain more broadly based consumer acceptance, it will adversely impact our sales and profitability. The recording industry also continues to face difficulties as a result of illegal online file-sharing and downloading. While industry associations and manufacturers have successfully launched legal action against illegitimate downloaders and file-sharers to curtail these practices, there can be no assurance of the effect of these lawsuits. File sharing and downloading, both legitimate and illegal, could continue to exert pressure on the demand for CDs. Additionally, as other forms of media become available for digital download, our revenues and profitability attributable to CDs and DVDs may be adversely affected.

Recent advances in the technologies to deliver movies to viewers may adversely affect public demand for DVDs distributed by us. For example, some digital cable providers and internet companies offer movies “on demand” with interactive capabilities such as start,

stop and rewind. Direct broadcast satellite and digital cable providers have been able to enhance their on-demand offerings as a result of their ability to transmit over numerous channels. Although not as broadly-based as the digital distribution of music, Apple Computer (through iTunes), NetFlix and others have begun to offer video content digitally. Apart from on-demand technology, the recent development and enhancement of personal video recorder technology with “time-shifting” technology (such as that used by TiVo and certain cable companies) has given viewers greater interactive control over broadcasted movies and other program types. Also, companies such as Blockbuster Entertainment and NetFlix are now offering subscription services which provide consumers the ability to rent VHS cassettes and DVDs for indefinite periods of time without being subject to late fees.

As these methods of consuming recorded music and filmed entertainment increase in popularity and gain more broadly based consumer acceptance, they will adversely impact our revenues and profits.

Our DVD and CD distribution businesses depend, in part, on current advertising allowances, volume discounts and other sales incentive programs, and our results of operations could be adversely affected if these programs were discontinued or materially modified.

Under terms of purchase prevailing in its industry, the profitability of our DVD and CD distribution businesses are supported, in part, by advertising allowances, volume discounts and other sales incentive programs offered by record labels and motion picture studios. Such content providers are not under long-term contractual obligations to continue these programs, and in 2003 one major record label eliminated advertising allowances and volume discounts on a limited number of stock keeping units (“SKUs”). If record labels or motion picture studios, or both, decide to discontinue these programs, our business would be adversely impacted.

A substantial majority of our sales are made on a “Sale or Return” basis and higher than expected returns could cause us to overstate revenue for the period affected.

As is customary in the home entertainment content product industry, a substantial majority of our sales are made on a “sale or return” basis. During the year ended January 31, 2008, approximately 60% of all of the magazines, 22% of all DVDs and 20% of all CDs distributed domestically by us were returned as unsold by our customers for credit. Revenues from the sale of merchandise that we distribute are recognized at the time of delivery, less a reserve for estimated returns, and the amount of the return reserve is estimated based on our experience of historical sell-through rates. If sell-through rates in any period are significantly less than historical averages, this return reserve could be inadequate. If the return reserve proved inadequate, it would indicate that actual revenue in prior periods was less than reported revenue for such periods. This would require an increase in the amount of the return reserve for subsequent periods which may result in a reduction in operating income for such periods, negatively affecting our revenues, operating profits and cash flows.

We have a concentrated customer base and our revenues could be adversely affected if we lose any of our largest customers or these customers are unable to pay amounts due to us.

If any of our largest customers were to stop or reduce their purchasing from us, our financial results would be seriously damaged. During the fiscal year ended January 31, 2008, our top three customers accounted for approximately 28.5% of our revenues, with one customer, Barnes & Noble and BarnesandNoble.com, accounting for approximately 21.6% of our revenues.

We expect to continue to be dependent on a small number of customers for a substantial portion of our revenues. If any of these customers were to terminate their relationship with us, significantly reduce their purchases from us or experience problems in paying amounts due to us, it would result in a material reduction in our revenues, operating profits and cash flows.

Our reliance on a few key suppliers in our DVD and CD distribution business makes us vulnerable to not being able obtain the products required by our customers.

The major labels and studios produce most of the music and video product that we distribute. Our success depends upon our ability to obtain product in sufficient quantities on competitive terms and conditions from each of the major labels and studios as well as from thousands of smaller suppliers. If our suppliers do not provide us with sufficient quantities of the products we sell, our sales and profitability will suffer. Our dependence on our principal suppliers involves risk, and if there is a disruption in supply from a principal manufacturer or publisher, we may be unable to obtain the merchandise we desire to sell. If the discounts we receive from our suppliers were discontinued or reduced, our sales could be adversely affected. Finally, some of the products we distribute are available from only a single supplier and if that supplier refused to provide us with the product, our sales could decrease.

If we were unable to receive our DVD and CD products from our top suppliers, our revenue and profitability could be adversely affected.

A substantial portion of the DVD and CD products distributed by us are supplied by 5 motion picture studios and 4 record labels. These products are proprietary to individual suppliers and may not be obtained from any alternative source. Our success depends upon our ability to obtain product in sufficient quantities on competitive terms and conditions from each of these major home entertainment labels and studios. If our supply of products were interrupted or discontinued, then customer service could be adversely affected and customers may reduce or cease doing business with us causing our sales and profitability to decline.

Substantially all of the magazines distributed by us are purchased from four suppliers and our revenues could be adversely affected if we are unable to receive magazine allotments from these suppliers.

Substantially all of the magazines distributed in the United States are supplied by or through one of four national distributors, Comag Marketing Group, LLC, Curtis Circulation Company, Kable Distribution Services, Inc. and Time Warner Retail Sales and Marketing, Inc. Each title is generally supplied by one of these national distributors to us and generally cannot be purchased from any alternative source. Our success is largely dependent on our ability to obtain product in sufficient quantities on competitive terms and conditions from each of the national distributors. In order to qualify to receive copy allotments, we are required to comply with certain operating conditions, which differ between the specialty retail market and the mainstream market. Our ability to economically satisfy these conditions may be affected by events beyond our control, including the cooperation and assistance of our customers. A failure to satisfy these conditions could result in a breach of our purchase arrangements with our suppliers and entitle our suppliers to reduce our copy allotment or discontinue our right to receive product for distribution to our customers. If our supply of magazines were reduced, interrupted or discontinued, customer service would be disrupted and existing customers may reduce or cease doing business with us altogether, thereby causing our revenue and operating income to decline and result in failure to meet expectations.

Inventory risk due to an inability to return product is a constant risk to our business.

We bear inventory risk associated with the financial viability of our suppliers. If a publisher, label or studio cannot provide refunds in cash for the inventory we desire to return, we may be forced to expense such inventory costs. Further, we often experience higher return rates for products of financially troubled labels and studios. If we fail to manage our inventory to avoid accumulating substantial product that cannot be returned, it would result in a material reduction in our revenues, operating profits and cash flows.

We have substantial indebtedness, which will consume a significant portion of the cash flow that we generate.

We have now, and will continue to have, a significant amount of debt. Our ability to make scheduled payments of principal and interest on and refinance debt and fund our operations and planned capital expenditure projects, depends on our cash flow. We do not have complete control over our future performance since it is subject to economic, financial, competitive, regulatory and other factors affecting our operations and the distribution and media industries generally. We may not generate sufficient cash flow from our operations to service our debt, , and to make planned capital expenditures. Since we have a significant amount of debt, we may not be able to obtain other financing which we may need to maintain our desired liquidity. If new debt is added to our current debt levels, the related risks that we now face could increase.

We depend on access to credit.

We have significant working capital requirements principally to finance inventory, accounts receivable and new acquisitions. We are currently a party to two Senior Secured Credit Facilities: a $300.0 million asset-based revolving credit facility (the “Revolving Credit Facility”) and a $880.0 million term loan B facility (the “Term Loan Facility”, and together with the Revolving Credit Facility, the “Senior Credit Facilities”) and a $465.0 million bridge loan facility (the “Bridge Loan”), all of which were entered into in connection with our acquisition of SIM. The Senior Credit Facilities are secured by substantially all of the assets of the Company and its subsidiaries. In addition, we are extended significant amounts of trade credit by our suppliers.

Our business depends on the availability of our credit facilities and the continued extension of trade credit by our suppliers to support our working capital requirements. To maintain the right to borrow under the Revolving Credit Facility and avoid a default under the Senior Credit Facilities and the Bridge Loan, we are required to comply with various financial and operating covenants and maintain sufficient eligible assets to support such borrowings pursuant to a specified borrowing base calculation in the Revolving Credit Facility. Our ability to comply with these covenants or maintain sufficient eligible assets may be affected by events beyond our control, including prevailing economic, financial and industry conditions, and we may be unable to comply with these covenants or

maintain sufficient eligible assets in the future. A breach of any of these covenants or the failure to maintain sufficient eligible assets could result in a default under the Senior Credit Facilities and the Bridge Loan. If we default, our lenders will no longer be obligated to extend revolving loans to us and could declare all amounts outstanding under the Senior Credit Facilities and the Bridge Loan, together with accrued interest, to be immediately due and payable. If we were unable to repay those amounts, our lenders could proceed against the collateral interest granted to them to secure that indebtedness. The results of such actions would have a significant negative impact on our results of operations and financial condition.

A disruption in the operations of our key shipper or sharply higher shipping costs could cause a decline in our revenues or a reduction in our earnings.

We are dependent on commercial freight carriers, primarily UPS, to deliver our products. If the operations of these carriers are disrupted for any reason, we may be unable to deliver our products to our customers on a timely basis. If we cannot deliver our products in an efficient and timely manner, our customers may reduce their orders from us and our revenues and operating profits could materially decline.

For the year ended January 31, 2008, our freight cost represented approximately 5.6% of our revenue. If freight costs were to materially increase and we were unable to pass that increase along to our customers for any reason, our financial results could materially suffer. Furthermore, our cash flows are exposed to market risk in the form of commodity-price risk arising from fluctuations in the market price of fuel. In a rising fuel cost environment, our freight costs will increase. If we are unable to pass the increased costs along to our customers, our results of operation may materially decline.

Our strategy includes making additional acquisitions that may present risks to the business.

Making additional strategic acquisitions is part of our strategy. The ability to make acquisitions will depend upon identifying attractive acquisition candidates and, if necessary, obtaining financing on satisfactory terms. Acquisitions, including those that we have already made, may pose certain risks to us. These include the following:

· We may be entering markets in which we have limited experience;

· The acquisitions may be potential distractions to management and may divert company resources and managerial time;

· It may be difficult or costly to integrate an acquired business’ financial, computer, payroll and other systems into our own;

· We may have difficulty implementing additional controls and information systems appropriate for a growing company;

· Some of the acquired businesses may not achieve anticipated revenues, earnings or cash flow;

· We may not achieve the expected benefits of the transactions including increased market opportunities, revenue synergies and cost savings from operating efficiencies;

· Difficulties in integrating the acquired businesses could disrupt client service and cause us to lose customers;

· We may have unanticipated liabilities or contingencies from an acquired business;

· We may assume indebtedness of the acquired company that may leave the Company more leveraged;

· We may be required to invest a significant amount into working capital of the acquired company;

· We may have reduced earnings due to amortization expenses, goodwill or intangible asset impairment charges, increased interest costs and costs related to the acquisition and its integration;

· We may finance future acquisitions by issuing common stock for some or all of the purchase price which could dilute the ownership interests of the existing stockholders;

· Acquired companies will have to become, within one year of their acquisition, compliant with SEC rules relating to internal control over financial reporting adopted pursuant to the Sarbanes-Oxley Act of 2002;

· We may be unable to retain management and other key personnel of an acquired company; and

· We may impair relationships with an acquired company’s, or our own, employees, suppliers or customers by changing management.

If we are unsuccessful in meeting the challenges arising out of our acquisitions, our business, financial condition and future results could be materially harmed.

The integration of our recent acquisition of the SIM division which accounts for a substantial portion of the total value of the Company, is still underway, thus heightening each of the foregoing risks. If we fail to successfully integrate SIM, our business, financial condition and future results could be materially harmed.

We conduct a growing portion of our business internationally, which presents additional risks to us over and above those associated with our domestic operations.

Approximately 6.1% of our total revenues from magazine distribution for the year ended January 31, 2008 were derived from the export of U.S. publications to overseas markets, primarily to the United Kingdom and Australia. In addition, approximately 4.7% of our gross domestic distribution of magazines for the year ended January 31, 2008, consisted of the domestic distribution of foreign publications imported for sale to U.S. markets.

The conduct of business internationally presents additional inherent risks including:

· Unexpected changes in regulatory requirements;

· Import and export restrictions;

· Tariffs and other trade barriers;

· Differing technology standards;

· Resistance from retailers to our business practices;

· Employment laws and practices in foreign countries;

· Political instability;

· Fluctuations in currency exchange rates;

· Imposition of currency exchange controls; and

· Potentially adverse tax consequences.

Any of these risks could adversely affect revenue and operating profits of our international operations.

Certain suppliers have adopted policies restricting the export of DVDs and CDs by domestic distributors. However, consistent with industry practice, we distribute our merchandise internationally. Our business would be adversely affected if a substantial portion of our suppliers enforced any restriction on our ability to sell our home entertainment content products outside the United States.

Sales of DVDs and CDs are highly seasonal and our financial results could be negatively impacted if the fourth quarter sales of DVDs and CDs are weak.

Our DVD and CD Fulfillment segment generated 32.7% of its total net revenues in the fourth quarter of fiscal 2008 coinciding with the year end holiday shopping season. Factors that could adversely affect sales and profitability in the fourth quarter include:

· Unavailability of, and low customer demand for, particular products;

· Unfavorable economic and geopolitical conditions;

· Inability to hire adequate temporary personnel;

· Weather conditions;

· Inability to anticipate consumer trends;

· Weak new release schedules;

· Inability to obtain favorable trade credit terms; and

· Inability to maintain adequate inventory levels.

If fourth quarter sales are low, our overall results of operations would be negatively impacted.

We depend on the efforts of certain key personnel, the loss of whose services could adversely affect our business.

We depend upon the services of our interim co-chief executive officers and their relationships with customers and other third parties. The loss of these services or relationships could adversely affect our business and the implementation of our growth strategy. This in turn could materially harm our financial condition and future results of operations. Although we have employment agreements with each of our interim co-chief executive officers, the services of these individuals may not continue to be available to us.

Our management and internal systems might be inadequate to handle our potential growth.

To manage future growth, our management must continue to improve operational and financial systems and expand, train, retain and manage our employee base. We must manage an increasing number of relationships with various customers and other parties. Our management may not be able to manage the Company’s growth effectively. If our systems, procedures and controls are inadequate to support our operations, our expansion could be halted and we could lose opportunities to gain significant market share. Any inability to manage growth effectively may harm our business.

Our operations could be disrupted if our information systems fail, causing increased expenses and loss of revenues.

Our business depends on the efficient and uninterrupted operation of our computer and communications software and hardware systems, including our replenishment and order regulation systems, and other information technology. If such systems were to fail for any reason or if we were to experience any unscheduled down times, even for only a short period, our operations and financial results could be adversely affected. We have in the past experienced performance problems and unscheduled down times, and these problems could recur. Our systems could be damaged or interrupted by fire, flood, hurricanes, earthquakes, power loss, telecommunications failure, break-ins or similar events. We have formal disaster recovery plans in place. However, these plans may not be entirely successful in preventing delays or other complications that could arise from information systems failure, and, if they are not successful, our business interruption insurance may not adequately compensate for losses that may occur.

We depend on the Internet to deliver some of our services, and the use of the internet may expose us to increased risks.

Many of our operations and services, including replenishment and order regulation systems, customer direct fulfillment and other information technology, involve the transmission of information over the Internet. Our business therefore will be subject to any factors that adversely affect Internet usage including the reliability of Internet service providers, which from time to time have operational problems and experience service outages.

In addition, one of the requirements of the continued growth over the Internet is the secure transmission of confidential information over public networks. Failure to prevent security breaches of our networks or those of our customers or well-publicized security breaches affecting the Internet in general could significantly harm our growth and revenue. Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in a compromise or breach of the algorithms we use to protect content and transactions or our customers’ proprietary information in its databases. Anyone who is able to circumvent our security measures could misappropriate proprietary and confidential information or could cause interruptions in our operations. We may be required to expend significant capital and other resources to protect against such security breaches or to address problems

caused by security breaches.

If our accounting controls and procedures are circumvented or otherwise fail to achieve their intended purposes, our business could be seriously harmed.

Although we evaluate our internal control over financial reporting and disclosure controls and procedures as of the end of each fiscal quarter, we may not be able to prevent all instances of accounting errors or fraud in the future. Controls and procedures do not provide absolute assurance that all deficiencies in design or operation of these control systems, or all instances of errors or fraud, will be prevented or detected. These control systems are designed to provide reasonable assurance of achieving the goals of these systems in light of legal requirements, company resources and the nature of our business operations. These control systems remain subject to risks of human error and the risk that controls can be circumvented for wrongful purposes by one or more individuals in management or non-management positions. Our business could be seriously harmed by any material failure of these control systems.

Our debt instruments limit our business flexibility by imposing operating and financial restrictions on our operations.

The agreements governing our indebtedness impose specific operating and financial restrictions on us. These restrictions impose conditions or limitations on our ability to, among other things:

· Change the nature of our business;

· Incur additional indebtedness;

· Create liens on our assets;

· Sell assets;

· Issue stock;

· Engage in mergers, consolidations or transactions with our affiliates; and

· Make investments.

Our failure to comply with the terms and covenants in our indebtedness could lead to a default under the terms of those agreements, which would entitle the lenders to accelerate the indebtedness and declare all amounts owed due and payable.

We have a significant stockholder whose interests may conflict with those of the other stockholders.

Our largest stockholder, AEC Associates, L.L.C. (“AEC Associates”), an affiliate of Yucaipa, beneficially owned approximately 34% of our outstanding common stock as of May 19, 2008. In addition, the chairman of our board of directors Michael R. Duckworth is a partner of Yucaipa. As a result, AEC Associates will have the ability through its ownership of our common stock and its representation on our board to exercise significant influence over our major decisions. AEC Associates and Yucaipa may have interests that conflict materially with those of the other stockholders.

We face ongoing litigation risks which could result in material harm to our business.

We are subject to a steady amount of routine legal disputes which occasionally result in litigation. Moreover, we are a large company operating in multiple jurisdictions, with thousands of employees, public shareholders and business partners. Accordingly, although we believe we have made adequate provisions in our budgets for all current and threatened legal disputes, we may in the future become involved in legal disputes arising from our relationships with our employees, shareholders, business partners and creditors, or from other sources. Such legal disputes could result in large settlements and/or judgments which could materially impair our financial condition. In addition, the defense of such proceedings could result in significant expense and the diversion of our management’s time and attention from the operation of our business, which could impede our ability to achieve our business objectives. Some or all of the amount we may be required to pay to defend or to satisfy a judgment or settlement of any or all of these proceedings may not be covered by insurance.

Our business could be materially harmed or disrupted by natural disasters and public disturbances.

The occurrence of natural disasters and public disturbances such as earthquakes, floods, wildfires, tornadoes, hurricanes, power outages, terrorism, war, civil unrest and similar events could materially harm and disrupt our business. In addition, such events could adversely impact the market for our goods and services in many of the geographic areas in which we operate. The losses from such events and the harm to our business caused thereby could materially impair our financial position. Some or all of the amount of such losses (including losses attributable to the disruption of our business) may not be covered by insurance.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

The information required by this item has been omitted because the required information was filed with our Original Filing.

ITEM 2. PROPERTIES.

The information required by this item has been omitted because the required information was filed with our Original Filing.

ITEM 3. LEGAL PROCEEDINGS.

The information required by this item has been omitted because the required information was filed with our Original Filing.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The information required by this item has been omitted because the required information was filed with our Original Filing.

PART III.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

INFORMATION ABOUT THE BOARD OF DIRECTORS

Our board of directors is divided into three classes of directors with the classes to be nearly equal in number as possible. One class of directors is elected each year at our annual meeting to serve for a three-year term. The terms of the Class I directors, Class II directors and Class III directors expire at the 2008 annual meeting, the 2009 annual meeting and the 2010 annual meeting, respectively. Our amended and restated bylaws, as amended, provide that the board shall consist of not less than three and not more than 11 members. The board currently consists of nine individuals.

Class I Directors Serving Until Our 2008 Annual Meeting Of Stockholders:

David R. Jessick, 54. Mr. Jessick has served as one of our directors since February 2005 and is a member of our Board’s Audit Committee and our Board’s Nominating and Corporate Governance Committee. He served as a consultant to the Chief Executive and Senior Financial Staff at Rite Aid Corporation where he previously served as a Senior Executive Vice President and Chief Administrative Officer from July 2002 to February 2005. Mr. Jessick served as Rite Aid’s Senior Executive Vice President and Chief Administrative Officer from December 1999 to June 2002. Prior to that, from February 1997 to June 1999, Mr. Jessick was the Chief Financial Officer and Executive Vice President of Finance and Investor Relations for Fred Meyer, Inc. From 1979 to 1996, he was Executive Vice President and Chief Financial Officer at Thrifty Payless Holdings, Inc. Mr. Jessick began his career as a Certified Public Accountant for Peat, Marwick, Mitchell & Co. He is currently a director of Big 5 Sporting Goods, Inc. (member of the Audit Committee), a director of WKI Holding Company, Inc. (chairman of the Audit and the Compensation Committees), and Dollar Financial Corp. (chairman of the Audit Committee).

Gregory Mays, 61. Mr. Mays has served as one of our directors since February 2005 and is the Chairman of our Board’s Compensation Committee and a member of our Board’s Audit Committee. He has been a consultant and private investor from February 1999 to present. Throughout his career, Mr. Mays has held numerous executive and financial positions primarily in the supermarket industry, most recently, from 2006 to 2007, as Chairman and CEO of Wild Oat Inc. Prior to that, from 1995 to 1999, as Executive Vice President of Ralph’s Grocery. Prior to that, from 1992 to 1995, he was Executive Vice President of Food4Less Inc. From 1990 to 1992, Mr. Mays was Chief Executive Officer and President of Almacs Supermarkets. Mr. Mays is currently a director of Simon Worldwide Inc. and a Director of the Great Atlantic and Pacific Tea Company Inc.

George A. Schnug, 63. Mr. Schnug has served as one of our directors since February 2005. He is the Chief Executive Officer of Americold Realty Trust. Prior to that, Mr. Schnug had been affiliated with The Yucaipa Companies, an entity affiliated with AEC Associates, for more than 12 years. Mr. Schnug served as Executive Vice President of Corporate Operations at Fred Meyer from 1997 to 1998. From 1995 to 1997, he was at Ralph’s Grocery Company and oversaw post-merger integrations for both the Ralphs-Food4Less acquisition in 1995 and the Fred Meyer-Ralph’s merger in 1997. He also served as Senior Vice President of Administration at Food4Less from 1990 to 1995. Prior to that, Mr. Schnug was the Managing Partner for Sage Worldwide, a wholly owned subsidiary of advertising giant, Ogilvy & Mather. Mr. Schnug is a director of Digital On-Demand, Inc. He is a former director of Alliance.

Class II Directors Serving Until Our 2009 Annual Meeting Of Stockholders:

James R. Gillis, 55. Mr. Gillis became our President in December 1998, was appointed as a member of our Board in March 2000 and became our Chief Operating Officer in August 2000. In November 2006, he was also appointed as an Interim Co-Chief Executive Officer. Prior to his service with our Company, he served as the President and Chief Executive Officer of Brand Manufacturing Corp., which we acquired in January 1999. Mr. Gillis is also a director of Park City Group, a software development company.

Gray Davis, 65. Mr. Davis has served as one of our directors since February 2005 and is a member of our Board’s Nominating and Corporate Governance Committee. Mr. Davis is Of Counsel in the Los Angeles office of Loeb & Loeb LLP, a multi-service national law firm. Before joining Loeb & Loeb, Mr. Davis served as Governor of California (1998-2003), Lieutenant Governor of California

(1995-1999), California State Controller (1987-1995), California State Assembly Representative for Los Angeles County (1983-1987) and Chief of Staff to California Governor Edmund G. Brown, Jr. (1975-1981).

Allan R. Lyons, 67. Mr. Lyons has served as one of our directors since March 2003. He is currently chairman of our Board’s Audit Committee and a member of our Board’s Compensation Committee. From January 2000 to the present, he has been the managing member of 21st Century Strategic Investment Planning, LLC, a money management firm with more than $30.0 million under management. He is a director and is currently chairman of the Audit Committee of Franklin Credit Management Corp., a specialty consumer finance and asset management company based in New York, NY. In late 1999, Mr. Lyons retired from Piaker & Lyons, a diversified certified public accounting firm where he specialized in taxes, estate and financial planning. Before becoming Chairman and Chief Executive Officer of Piaker & Lyons in 1994, Mr. Lyons had been a partner of the firm since 1968.

Class III Directors Serving Until Our 2010 Annual Meeting Of Stockholders:

Michael R. Duckworth, 47. Mr. Duckworth has served as the Chairman of our Board since November 2006 and as one of our directors since February 2005. He is a partner of The Yucaipa Companies LLC, a Los Angeles-based private investment firm specializing in acquiring and operating companies in the retail, distribution and logistics areas. From 2000-2003, Mr. Duckworth was head of West Coast Financial Sponsor Coverage for Merrill Lynch & Co. where he managed client relationships with private equity firms throughout the western region. He was responsible for all client activity including idea generation, public and private debt, equity and merger and acquisition origination, and private equity fund raising. From 1988-2000, Mr. Duckworth served as Managing Director at Bankers Trust/Deutsche Bank where he maintained a similar emphasis on working with Financial Sponsors and on Leveraged Finance.

Ariel Z. Emanuel, 47. Mr. Emanuel has served as one of our directors since November 2004. At present, he is a member of The Endeavor Agency LLC, a California-based talent agency which he founded in 1995. Mr. Emanuel is active in P.S. Arts, an entertainment industry sponsored organization working to bring arts education to public schools in Southern California and served as co-chair of the 2002 Earth to LA biennial fund-raising event for the Natural Resources Defense Council. Mr. Emanuel is a director of Live Nation, Inc., a promoter of live music events and entertainment venue management company.

Terrence Wallock, 64. Mr. Wallock has served as one of our directors since February 2007. He currently serves as Chairman of our Nominating and Corporate Governance Committee and as a member of our Compensation Committee. Previous thereto, Mr. Wallock served as a senior executive officer and general counsel to a number of large grocery and foodservice chains, including Ralph’s Grocery Company, the Vons Companies, and Denny’s, Inc. Most recently, Mr. Wallock has been engaged providing legal and consulting services in connection with merger, acquisition and restructuring situations, as well as advising companies that provide services to the retail grocery business.

INFORMATION ABOUT EXECUTIVE OFFICERS

The following is a summary of information about our executive officers that do not serve as members of our Board of Directors.

Steven R. Parr, 48. Mr. Parr, President, Source Interlink Media, joined our executive team upon our acquisition of Primedia Enthusiast Media, Inc, in August 2007. Prior to joining Source Interlink, he served the publishing world in both books and magazines for over twenty years in three countries. Mr. Parr held the positions of President of Penguin Books Canada Ltd., Executive Vice President of Penguin Books in the U.S., and CEO of Pearson PLC’s Business Services division in London. Mr. Parr joined EMAP USA in 1999, where he held various posts, culminating in his role as President. After the sale of EMAP, Mr. Parr departed to become President and CEO of book publisher, Harry N. Abrams, Inc. but returned as President of EMAP’s ultimate parent, Primedia Enthusiast Media, Inc, in 2004.

Douglas J. Bates, 50. Mr. Bates has served as our Senior Vice President and General Counsel since 2003. In 2004, he was named Secretary of the Company. Prior thereto, he provided legal advice to emerging and mid-cap companies primarily with in connection with acquisition transactions and securities compliance, and co-founded a boutique investment banking firm arranging late stage financing for emerging technology concerns.

Marc Fierman, 47. Mr. Fierman has served as our Chief Financial Officer since November 2002. Prior thereto, he served as Vice President of Finance (July 2001 to November 2002) and Vice President of Finance—Display Division (March 1999 to June 2001).

From April 1997 to February 1999, Mr. Fierman served as the chief financial officer of Brand Manufacturing Corp., which we acquired in January 1999.

William D. Bailey, 61. Mr. Bailey was named Chief Administrative Officer of Source Interlink on October 11, 2007. Mr. Bailey leads the Human Resources, Corporate Purchasing and Facilities Management functions for the Company. He joined Source Interlink after a series of assignments on behalf of The Yucaipa Companies at its portfolio companies. Prior to joining The Yucaipa Companies, he was President of the Food Employers Council in Southern California. Earlier in his career he was Vice President, Labor and Employment for the Vons Grocery Company in Arcadia, California, and, before that, Group Vice President, Human Resources and Labor Relations with Acme Markets in Malvern, Pennsylvania.

Alan Tuchman, 49. Mr. Tuchman became one of our Executive Vice Presidents in February 2005 upon our acquisition of Alliance Entertainment Corp. and was also appointed an Interim Co-Chief Executive Officer of our Company in November 2006. Prior to his service with our Company, he had served as President and Chief Operating Officer of Alliance since 2003. Mr. Tuchman joined Alliance in 1991 and was Vice President from that time until 1996, when he became Senior Vice President of Strategic Planning. Mr. Tuchman held this position until 1997 when he became President of Alliance.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our directors and certain of our officers, as well as other persons who own more than ten percent of a registered class of our equity securities, to file with the SEC and The Nasdaq Stock Market reports of ownership of our securities and changes in reported ownership. Officers, directors and greater than ten percent stockholders are required by SEC rules to furnish us with copies of all Section 16(a) reports they file.

Based solely on a review of the reports furnished to us, or written representations from reporting persons that all reportable transactions were reported, we believe that during the 2008 fiscal year, our officers, directors and greater than ten percent owners timely filed all reports they were required to file under Section 16(a), except:

Each of Messrs. Davis, Emanuel, Jessick, Lyons, Mays, Schnug and Wallock failed to timely file a Statement of Changes in Beneficial ownership of Securities to reflect the issuance of 10,000 options to purchase shares of common stock received as compensation for service as a director. These omissions were corrected by filing a Form 4 for each of these individuals in February 2007.

CODES OF ETHICS

We have a long-standing commitment to conduct our business in accordance with the highest ethical principles. Our Code of Business Conduct and Ethics is applicable to all representatives of our enterprise, including our executive officers and all other employees and agents of our company and our subsidiary companies, as well as to our directors. A copy of our Code of Business Conduct and Ethics is available in the Corporate Governance section of the Investor Relations page of our website. In addition, our board has adopted a Code of Ethics for the Chief Executive Officer and Financial Executives and a Code of Conduct for Directors and Executive Officers which supplement our Code of Business Conduct and Ethics. A copy of each of these codes is available on the Corporate Governance section of the Investor Relations page of our website. We will disclose any amendments to, or waivers from, our Codes of Ethics on our website at www.sourceinterlink.com.

CHANGES TO NOMINATING COMMITTEE PROCEDURE

During the fiscal year ended January 31, 2008, there were no changes to the procedure by which stockholders may nominate candidates for election to our Board of Directors.

AUDIT COMMITTEE

Our Board of Directors has a standing Audit Committee. The current members of the Audit Committee are Allan R. Lyons (chairman), David R. Jessick and Gregory Mays, each of whom is “independent” as defined in rules adopted by The Nasdaq Stock Market, as well as under Rule 10A-3 promulgated under the Exchange Act. The Board of Directors has determined that all members of the Audit Committee, Messrs. Lyons, Jessick and Mays, qualify as audit committee financial experts under the standards issued by the SEC.

The Audit Committee appoints, evaluates, retains, terminates, compensates and oversees the work of any public accounting firm engaged by us to audit our financial statements or performing other audit, review or attest services for us. The Audit Committee also supervises and monitors the establishment and implementation of a system of financial control processes and internal controls and procedures designed to provide reasonable assurance of the reliability of our financial reports.

ITEM 11. EXECUTIVE COMPENSATION.

COMPENSATION DISCUSSION AND ANALYSIS

Overview

The Compensation Committee, composed entirely of independent directors, is responsible to our Board of Directors, and indirectly to our stockholders, for formulating our compensation philosophies and monitoring and implementing our executive compensation program. The duties, responsibilities and authority of the Compensation Committee are prescribed in a Compensation Committee Charter adopted by our Board of Directors. Pursuant to its Charter, the Compensation Committee reviews and recommends executive compensation levels and cash and equity incentives for our executive officers.

In fulfilling its duties, the Compensation Committee may retain outside advisors or consultants or other experts to provide the Committee with the information, advice or expertise as the Committee may deem necessary. In connection with our acquisitions of Alliance Entertainment Corp. and Chas. Levy Circulating Co., LLC in 2005, the Compensation Committee engaged Pearl Meyer & Partners, a Clark Consulting practice, to conduct a review and analysis of our executive compensation program. During its engagement, Pearl Meyer compared the competitiveness of our total reward package and the provisions and design of current executive contracts by comparison to a group of public and private companies of comparable complexity and size with particular focus on comparable companies within the various industries in which we compete. Based on Pearl Meyer’s research and report, the Compensation Committee revised our approach to executive compensation to include sufficient retention incentives for our executive officers that reward long-term growth more than short-term results.

In making compensation determinations, the Compensation Committee may also utilize certain resources, references and industry benchmarks to determine competitive market ranges and reasonable levels of compensation. In addition, the Compensation Committee may consult or rely on the recommendations of our principal executive officer with respect to all of our executive officers (other than the principal executive officer himself), particularly with regard to the assessment of the individual performance of each of our other executive officers.

Our Executive Compensation Philosophy

The Compensation Committee believes that our executive compensation program should be designed to provide a competitive compensation program that will enable us to attract, motivate, reward and retain executives who have the skills, education, experience and capabilities required to discharge their duties in a competent and efficient manner. In addition, the Compensation Committee believes that executive compensation should be driven primarily by the long-term interests of the Company and its stockholders.

The Compensation Committee believes that the quality of executive leadership significantly affects long-term performance and that it is in the best interest of the stockholders to fairly compensate executive leadership for achievements that meet or exceed the high standards set by the Compensation Committee, so long as there is corresponding risk when performance falls short of such standards.

The Compensation Committee’s general executive compensation philosophy is based on the following three principles:

Compensation Should Relate to Performance. Executive compensation should reward performance and be competitive with pay for positions of similar responsibility at other companies of comparable complexity and size, or comparable companies within the various industries in which we compete.

Incentive Compensation Should Be a Greater Part of Total Direct Compensation For More Senior Positions. As employees assume greater responsibilities and have the opportunity to create more stockholder value, an increasing share of their total compensation package will be derived from variable incentive compensation (both of a long and short-term nature) generated by achievement of objectives producing long-term improvement in corporate performance.

Employee Interests Should Be Aligned with Stockholders. Executive compensation should reward contribution to long-term stockholder value.

Elements of Compensation

Our executive compensation program consists of the following general elements: base salary; discretionary cash incentive bonuses; long-term stock-based incentives; and performance-based cash incentives.

Base Salary

The base annual salary for our executive officers is based upon the level and scope of the responsibility of the executive officer, pay levels of similarly positioned executive officers among companies competing for the services of such executives and a consideration of the level of experience and performance profile of the particular executive officer. Based upon its review and evaluation, the Compensation Committee establishes the base salary to be paid to each executive officer. Historically, it has been our practice to enter into multi-year employment agreements with each of our named executive officers that include pre-determined annual increases in base salary.

Discretionary Cash Incentive Bonuses

The Compensation Committee has the discretion and authority to make individual cash bonus awards to executive officers for meritorious service to our long-term interests that in some cases may include the individual executive’s performance objectives. At the conclusion of each fiscal year, the Compensation Committee reviews the individual executive’s performance and, when deemed appropriate, authorizes payment for achievement.

Long-Term Stock-Based Incentive Compensation

The Compensation Committee for many years used stock options as long-term incentives for executives and other key employees. Stock options were historically used because they directly related the amounts earned by executives and other key employees to the amount of appreciation realized by our stockholders over comparable periods. Recent changes in the accounting treatment of stock options, however, have caused the Compensation Committee to deemphasize the use of stock options as a long-term incentive mechanism. In lieu of stock options, the Compensation Committee has established cash-based incentive programs, including a supplemental executive retirement plan and a challenge grant plan (each as discussed below), and intends to explore additional plans and programs designed to reward contributions to increase long-term stockholder value.

Performance-Based Cash Incentives

On February 28, 2005, the Compensation Committee approved the Source Interlink Companies, Inc. Challenge Grant Program, effective as of March 1, 2005 (the “Challenge Grant Program”). The Challenge Grant Program expired at January 31, 2008. No payout was made under the Challenge Grant Program.

Other Benefits

General Benefits and Perquisites

Our executives are eligible to participate in all of our employee benefit plans that are generally available to all of our employees, including our 401(k) retirement savings plan, medical, dental, vision, long and short-term disability and group term life insurance. In addition, we have historically provided certain perquisites to our executive officers. During the 2008 fiscal year, these perquisites included:

supplemental medical expense reimbursement;

personal use of company-leased motor vehicles;

special commuting and housing benefits for Mr. Duckworth; and

reimbursement of country club dues.

2008 Named Executive Officer Base Salary and Incentive Compensation Determinations

Principal Executive Officer

On November 10, 2006, we entered into that certain Separation, Consulting and General Release Agreement (the “Separation Agreement”) with S. Leslie Flegel that provided for Mr. Flegel’s immediate resignation as Chairman of the Board, Chief Executive Officer and director of the Company. The Separation Agreement provided that Mr. Flegel receive $900,000 for his fiscal 2007 bonus and a lump sum severance of $4.6 million, in lieu of any claim to benefits or compensation under his employment agreement with the Company. In addition, the Separation Agreement contemplates the provision of certain consulting services by Mr. Flegel over a three-year period, for which services Mr. Flegel will receive an annual payment of $1 million and aggregate bonuses of up to $4 million upon the occurrence of any of the following events: (i) if prior to May 10, 2008 we enter into a definitive agreement with certain parties, Mr. Flegel shall receive a payment of $1,000,000; (ii) if prior to November 10, 2007 we enter into certain definitive agreements in connection with our magazine division, then Mr. Flegel shall receive a payment of $1,000,000; and (iii) if within a pre-determined period we enter into certain definitive agreements in connection with our music division, then Mr. Flegel shall receive a payment of $2,000,000. Mr. Flegel received a payment of $1,000,000 on May 25, 2007 in connection with (i) above.

In connection with Mr. Flegel’s resignation, Mr. Duckworth was appointed as our Chairman of the Board by the Board of Directors and was granted the power as our principal executive officer to exercise direct general supervision, direction and control over the business and affairs of the Company and our officers. The Compensation Committee, at a meeting held on March 22, 2007, retroactively determined effective as of November 1, 2006 that Mr. Duckworth be paid a base salary of $75,000 per month in consideration of his service as our principal executive officer. Such salary will be paid until Mr. Duckworth’s successor is identified and elected. The Compensation Committee also determined that Mr. Duckworth will not participate in any of our employee benefit plans however, he will continue to receive his compensation for services as a director. At the Compensation Committee’s discretion, Mr. Duckworth may be awarded cash bonuses. During the fiscal year ended January 31, 2008, Mr. Duckworth was paid a bonus of $175,000.

Other Named Executive Officers

Concurrent with Mr. Duckworth’s appointment, the Board of Directors appointed Mr. Gillis and Mr. Tuchman as Interim Co-Chief Executive Officers to oversee Company operations until a new Chief Executive Officer is identified and elected. The Compensation Committee determined that as each of Messrs. Gillis and Tuchman are party to an employment agreement with the Company that provides for his compensation, no additional compensation for service as an Interim Co-Chief Executive Officer was warranted.

We are party to employment agreements with each of the other executive officers named in the Summary Compensation Table, which employment agreements provide for the base salaries of such named executive officers through 2009.

Discretionary Cash Incentive Bonuses

As an award for meritorious service for the 2008 fiscal year, the Compensation Committee determined that each of our named executive officers receive a cash bonus in such amount that the executive’s total base salary and cash bonus paid (not earned) in fiscal 2009 would equal the amount of such executive’s total base salary and cash incentive paid (not earned) in fiscal 2008.

Tax and Accounting Implications

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), disallows any federal income tax deductions by us for compensation paid to our executive officers in excess of $1 million each in any taxable year. Compensation above $1,000,000 may be deducted if it meets certain technical requirements to be classified as “performance-based compensation.” The Compensation Committee believes that it is in the best interests of our company and its stockholders to pay compensation to its executive officers that is deductible by the company for federal income tax purposes. Our stock option plans have been structured to permit grants of stock options to be eligible for this performance-based exception (so that compensation upon exercise of such options or receipt of such awards, as the case may be, should be deductible under the Code). The Compensation Committee has taken and intends to continue to take whatever actions are necessary to minimize our non-deductible compensation expense, while maintaining, to the extent possible, the flexibility which the Compensation Committee believes to be an important element of our executive compensation program.

SUMMARY COMPENSATION

The following table summarizes the total compensation paid or earned by the Company’s Principal Executive Officer, Principal Financial Officer and each of the three other most highly compensated executive officers, whose 2008 total compensation exceeded $100,000 in each instance, as well as the Company’s former Chief Executive Officer (together the “named executive officers”), for the fiscal years ended January 31, 2008 and 2007.

Name and Principal Position	Fiscal Year		Salary			Bonus			Stock Awards (1)			Option Awards (2)		Non-Equity Incentive Plan Compensation			Change in Pension Value and Deferred Compensation Earnings			All Other Compensation(5)(6)			Total

Michael R. Duckworth (3) Chairman of Board and Principal Executive Officer	2008 2007		$ $	963,000 225,000		$ $	175,000 —		$ $	— —		$ $	20,428 —	$ $	— —		$ $	— —		$ $	66,058 12,361		$ $	1,224,486 237,361

Steven R. Parr(7) President	2008	$	305,231		$	—		$	—		$	128,189		—		$	65,477		$	125		$	499,022

James R. Gillis President, Chief Operating Officer and Interim Co-Chief Executive Officer	2008 2007		$ $	599,135 524,616		$ $	377,500 372,500		$ $	— —		$ $	66,095 —	$ $	— —		$ $	200,806 176,813		$ $	122,690 41,967		$ $	1,364,226 1,115,896

Alan Tuchman Executive Vice President and Interim Co-Chief Executive Officer	2008 2007		$ $	534,375 500,000		$ $	340,000 356,250		$ $	— —		$ $	64,095 —	$ $	— —		$ $	146,158 128,584		$ $	2,497 3,806		$ $	1,087,125 988,640

Jason S. Flegel(8) Executive Vice President	2008 2007		$ $	383,366 449,617		$ $	285,000 300,000		$ $	— —		$ $	— —	$ $	— —		$ $	(134,375 64,327	)	$ $	7,128 30,931		$ $	541,119 844,875

Marc Fierman Executive Vice President and Chief Financial Officer	2008 2007		$ $	374,712 349,809		$ $	180,000 162,500		$ $	— —		$ $	— —	$ $	— —		$ $	84,720 74,591		$ $	23,786 16,029		$ $	663,218 602,929

S. Leslie Flegel (4) Former Chairman of the Board and Chief Executive Officer	2007		$	721,443		$	5,500,000		$	—		$	1,296,183	$	—		$	—		$	28,211		$	7,545,837

(1) This column represents the dollar amount recognized for financial statement reporting purposes with respect to the fair value of shares of restricted stock for the 2008 fiscal year, in accordance with SFAS No. 123R. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The fair value is calculated using the fair market value on the date of grant, taken ratably over the stated vesting period. These amounts reflect the Company’s accounting expense for these awards, and do not necessarily correspond to the actual value that will be realized by the Named Executive Officers. See Note 13 of the Company’s Annual Report on Form 10-K for additional discussion on SFAS No. 123R valuation methodology.

(2) This column represents the dollar amount recognized for financial statement reporting purposes with respect to the fair value of stock options for the 2008 fiscal year, in accordance with SFAS No. 123R. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The fair value is calculated using the fair market value on the date of grant, taken ratably over the stated vesting period. These amounts reflect the Company’s accounting expense for these awards, and do not necessarily correspond to the actual value that will be realized by the Named Executive Officers. See Note 13 of the Company’s Annual Report on Form 10-K for additional discussion on SFAS No. 123R valuation methodology.

(3) Mr. Duckworth became Chairman of the Board and Principal Executive Officer on November 10, 2006. Prior to that date, he was a director of the Company. Compensation paid to Mr. Duckworth prior to November 10, 2006 is presented in the Director Compensation table below. Mr. Duckworth did not receive a salary and bonus during fiscal 2007. As discussed above, the Compensation Committee of the Board of Directors approved compensation for Mr. Duckworth’s service as Chairman of the Board subsequent to the end of fiscal 2007. The amount reported for fiscal 2007 sets forth amounts earned pursuant to this approval, but paid in fiscal 2008.

(4) Mr. Flegel resigned his position as Chairman of the Board and Chief Executive Officer on November 10, 2006. Compensation presented in this table includes only compensation paid between February 1, 2006 and November 10, 2006. The Company

modified certain fully vested and outstanding stock options on November 10, 2006 to extend the expiration date for three and one-half months. As a result of this modification, the Company recorded stock compensation expense of $1.3 million, as presented above. In addition, the Company agreed to pay Mr. Flegel a bonus of $0.9 million related to service in fiscal 2007 and a $4.6 million severance payment, which are set forth in the bonus column above.

(5) All other compensation includes the following for fiscal year 2008:

For Mr. Duckworth, special commuting and housing benefits of $66,058.

For Mr. Parr, supplemental medical expense reimbursement.

For Mr. Gillis, company-leased automobile lease payments of $30,213, reimbursement of country-club dues of $86,109 and supplemental medical expense reimbursement.

For Mr. Tuchman, supplemental medical expense reimbursement.

For Mr. J. Flegel, supplemental medical expense reimbursement.

For Mr. Fierman, company-leased automobile lease payments and supplemental medical expense reimbursement.

(6)

During fiscal 2007, the Company leased an aircraft. All flights were for primarily business purposes. However, companions of the Named Executive Officers did, from time to time, accompany the Named Executive Officers. The Company has determined that there is no incremental cost of permitting Named Executive Officers to bring companions on business flights. Therefore, the Company has attributed no value to this perquisite.

(7)	Mr. Parr was appointed President on August 1, 2007 in connection with the Company’s acquisition of Primedia Enthusiast Media, Inc. Only compensation paid after this date is presented in the table.

(8)	Mr. Flegel resigned his position with the Company effective October 31, 2007. Only compensation paid prior to this date is presented in the table.

GRANTS OF PLAN-BASED AWARDS

On December 7, 2007, Mr. Parr received a grant of 150,000 stock options expiring on December 7, 2012 with an exercise price of $2.54. These options vest 33% on the first anniversary of grant, 33% on the second anniversary and 34% on the third anniversary. Also on December 7, 2007, each of Messrs. Gillis and Tuchman received grants of 75,000 stock options expiring on December 7, 2012 with exercise prices of $2.54. These options vest 33% on the first anniversary of grant, 33% on the second anniversary and 34% on the third anniversary. All of these stock options were granted pursuant to the 2007 Omnibus Long Term Incentive Plan.

DISCUSSION OF SUMMARY COMPENSATION AND PLAN-BASED AWARDS TABLES

Steven R. Parr. Our current employment agreement with Mr. Parr was entered into on June 27, 2007. Pursuant to this agreement, Mr. Parr serves as our President, Source Interlink Media for a three-year term that commenced on August 1, 2007. Mr. Parr has the usual and customary duties, responsibilities and authority of president and performs such other and additional duties and responsibilities as are consistent with that position and as our board of directors may reasonably require. In accordance with his agreement, Mr. Parr will receive a base annual salary of (i) $620,000 during the year ending June 30, 2008, (ii) $640,000 during the year ending June 30, 2009, and (iii) $660,000 during the year ending June 30, 2010. In addition, Mr. Parr is entitled to receive a bonus each year during his employment (subject to calculation in accordance with the Governing Plan). The target for such bonus is equal to 75% of his base annual salary. For the year ended December 31, 2007, the Governing Plan was the Primedia Enthusiast Media Short Term Executive Incentive Compensation Plan. For all subsequent fiscal years, the Governing Plan shall be any cash bonus plan that the Company shall enact from time to time. Mr. Parr is entitled to an additional bonus not to exceed 15% of his annual base salary pursuant to completion of certain mutually agreed-upon business objectives. Mr. Parr is also entitled to participate in any equity-based incentive, healthcare, retirement, life insurance, disability income and other benefits plans offered by us with respect to our executive officers generally.

James R. Gillis. Our current employment agreement with Mr. Gillis was entered into on February 28, 2005. Pursuant to this agreement, Mr. Gillis serves as our president and chief operating officer for a five-year term that commenced on February 28, 2005. Mr. Gillis was also appointed as an Interim Co-Chief Executive Officer on November 10, 2006. Mr. Gillis has the usual and customary duties, responsibilities and authority of president and chief operating officer and performs such other and additional duties and responsibilities as are consistent with that position and as our board of directors may reasonably require, including the oversight of

Company operations until a new Chief Executive Officer is identified and elected. In accordance with his agreement, Mr. Gillis received a base salary of $525,000 during fiscal year 2007and a base salary of $600,000 during fiscal year 2008, and will receive a base salary of (i) $624,000 during fiscal year 2009 and (ii) $649,000 from the beginning of fiscal year 2010 through the expiration of the employment agreement. In addition, Mr. Gillis is entitled to receive a guaranteed bonus each year during his employment with us in an amount equal to the greater of 50% of his base salary in effect in a given year (payable in equal quarterly installments), or such other amount as the Compensation Committee may approve in its sole discretion. Mr. Gillis is also entitled to participate in any equity-based incentive, healthcare, retirement, life insurance, disability income and other benefits plans offered by us with respect to our executive officers generally.

Marc Fierman. Our current employment agreement with Mr. Fierman was entered into on February 28, 2005. Pursuant to this agreement, Mr. Fierman serves as our executive vice president and chief financial officer for a five-year term that commenced February 28, 2005. Mr. Fierman has the usual and customary duties, responsibilities and authority of executive vice president and chief financial officer and performs such other and additional duties and responsibilities as are consistent with that position and as our board of directors may reasonably require. In accordance with his agreement, Mr. Fierman received a base salary of $350,000 during fiscal year 2007 and $375,000 during fiscal year 2008, and will receive a base salary of (i) $400,000 during fiscal year 2009 and (ii) $425,000 from the beginning of fiscal year 2010 through the expiration of the employment agreement. In addition, Mr. Fierman may be awarded an annual bonus in an amount not to exceed 50% of Mr. Fierman’s base salary in effect in a given year, as determined by the Compensation Committee in its sole discretion. Mr. Fierman is also entitled to participate in any equity-based incentive, healthcare, retirement, life insurance, disability income and other benefits plans offered by us with respect to our executive officers generally.

Alan E. Tuchman. On February 28, 2005, we entered into an employment agreement with Mr. Tuchman. Pursuant to his agreement, Mr. Tuchman serves as our executive vice president for a five-year term that commenced February 28, 2005. Mr. Tuchman has the usual and customary duties, responsibilities and authority of an executive vice president and performs such other and additional duties and responsibilities as are consistent with that position and as our board of directors may reasonably require. In accordance with his agreement, Mr. Tuchman received a base salary of $500,000 during fiscal year 2007 and $520,000 during fiscal year 2008, and will receive a base salary of (i) $540,800 during fiscal year 2009 and (ii) $562,432 from the beginning of fiscal year 2010 through the expiration of the employment agreement. In addition, Mr. Tuchman may be awarded an annual bonus in an amount not to exceed 75% of Mr. Tuchman’s base salary in effect in a given year, as determined by the Compensation Committee in its sole discretion. Mr. Tuchman is also entitled to participate in any equity-based incentive, healthcare, retirement, life insurance, disability income and other benefits plans offered by us with respect to our executive officers generally.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table provides information on unexercised stock options granted to the named executive officers that were outstanding as of January 31, 2008:

Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#)

Michael R. Duckworth	10,000	—	—	$	11.00	2/28/2015	—	—	—	—
	4,575	—	—	$	11.15	2/1/2016	—	—	—	—
	5,425	—	—	$	8.97	11/29/2016	—	—	—	—
	10,000	—	—	$	6.61	3/22/2017	—	—	—	—
Stephen Parr	—	150,000	—	$	2.54	12/7/2012	—	—	—	—
James R. Gillis	134,667	—	—	$	7.81	12/14/2008	—	—	—	—
	200,000	—	—	$	7.84	8/4/2010	—	—	—	—
	40,000	—	—	$	5.00	2/7/2011	—	—	—	—
	50,000	—	—	$	4.56	2/1/2013	—	—	—	—
	—	75,000	—	$	2.54	12/7/2012	—	—	—	—
Alan Tuchman	14,175	—	—	$	2.30	5/19/2009	—	—	—	—
	98,871	—	—	$	9.21	12/8/2009	—	—	—	—
	150,000	—	—	$	11.00	2/28/2015	—	—	—	—
	—	75,000	—	$	2.54	12/7/2012	—	—	—	—
Marc Fierman	20,000	—	—	$	7.84	8/4/2010	—	—	—	—
	5,356	—	—	$	5.00	2/7/2011	—	—	—	—
	5,000	—	—	$	5.02	3/27/2012	—	—	—	—
	30,000	—	—	$	4.48	5/20/2012	—	—	—	—
	25,000	—	—	$	4.56	2/1/2013	—	—	—	—
S. Leslie Flegel	360,000	—	—	$	5.13	2/3/2008	—	—	—	—

OPTION EXERCISES AND STOCK VESTED

None of the Company’s Named Executive Officers exercised stock options or had restricted stock units vest during fiscal 2008.

PENSION BENEFITS

Supplemental Executive Retirement Plan

On February 28, 2005, the Compensation Committee of the board of directors approved the Source Interlink Companies, Inc. Supplemental Executive Retirement Plan, effective as of March 1, 2005 (the “SERP”). The SERP is a nonqualified defined benefit plan. The SERP provides that certain members of our management and other highly compensated employees (within the meaning of the Employment Retirement Income Security Act of 1974, as amended) (“ELIGIBLE SERP PARTICIPANTS”) are entitled to be selected to receive certain retirement benefits from us pursuant to an executive participation agreement entered into in connection with the SERP. Under the SERP, an Eligible SERP Participant who terminates employment with us and retires will be eligible to receive retirement benefits as follows:

1. Upon the Termination for Cause (as defined in the SERP) of the Eligible SERP Participant by us, the participant will not be entitled to receive any retirement benefits;

2. If the Eligible SERP Participant resigns, the participant will be entitled to receive a retirement benefit commencing at the age of 65; provided, that the participant has served with us for a period of more than five years from the effective date of the executive participation agreement and is at least 55 years old at the time of resignation;

3. If we terminate the employment of the Eligible SERP Participant for Disability (as defined in the SERP), the participant will be entitled to receive a retirement benefit commencing at the age of 65;

4. If the Eligible SERP Participant terminates employment with us and retires at or after the age of 65, the participant will be entitled to receive a Normal Retirement Benefit (as defined in the SERP) commencing at the age of retirement;

5. If the Eligible SERP Participant terminates employment with us and retires at or after the age of 55, but before the age of 65, the participant will be entitled to receive an Early Retirement Benefit (as defined in the SERP) commencing at the age of early retirement; and

6. If we terminate the employment of the Eligible SERP Participant prior to the age of 55 without cause for reasons other than death or Disability (as defined in the SERP), the participant will be entitled to receive a retirement benefit commencing at the age of 65.

If the Eligible SERP Participant is entitled to receive retirement benefits from us, the amount of retirement benefits will be calculated in accordance with such participant’s executive participation agreement. The Eligible SERP Participant’s retirement benefits will be offset by retirement benefits payable under any defined benefit plans (as defined under the Employee Retirement Income Security Act of 1974, as amended) sponsored by us.

Benefits under the SERP are to be paid monthly for the Eligible SERP Participant’s lifetime, but for not less than 60 months. If an Eligible SERP Participant dies before the end of such 60-month period, monthly payments will continue for the remainder of such 60-month period to the participant’s surviving spouse or estate, as applicable. In the event of a change of control while the SERP is in effect, there will be no acceleration of any benefits under the SERP or any other additional benefits.

Executive Participation Agreements With Named Executive Officers

On March 1, 2005, in connection with participation in the SERP, we entered into executive participation agreements with the following named executive officers, other than Mr. Gillis, selected as Eligible SERP Participants: Mr. Tuchman, Mr. Flegel and Mr. Fierman. Pursuant to the executive participation agreements, upon an Eligible SERP Participant’s retirement at the age of 65, we will pay to the Eligible SERP Participant a monthly Normal Retirement Benefit of: (i) 25% of the average of the three highest annual base salaries during the five year period preceding the retirement of the Eligible SERP Participant (the “SERP BASE AMOUNT”) after five years of service with us; (ii) 50% of the SERP Base Amount after ten years of service with us; or (iii) 75% of the SERP Base Amount after 15 years of service with us. The maximum payout to an Eligible SERP Participant under the executive participation agreement is 75% of the SERP Base Amount. If an Eligible SERP Participant elects to delay receipt of retirement benefit payments until after the age of 65, we will pay the Eligible SERP Participant a monthly retirement benefit for his or her lifetime calculated on a present value basis as actuarially discounted at 6.25% or the then current One Year Treasury Rate, whichever is higher.

At any time after an Eligible SERP Participant reaches age 55 and has been eligible to participate for a minimum of five full years, the Eligible SERP Participant may retire or resign and choose to either (i) delay payments until age 65, at which time the Eligible SERP Participant would receive the full current benefit amount at the time of resignation as calculated payable for the remainder of his or her life from age 65 or (ii) begin receiving Early Retirement Benefits immediately at the time of retirement, which amounts would be actuarially discounted on a present value basis as actuarially discounted at 6.25% or the then current One Year Treasury Rate, whichever is higher.

Upon Termination for Cause (as defined in the SERP), no benefit is payable to the Eligible SERP Participant. Upon termination for other than cause, death or Disability (as defined in the SERP), we will pay to the Eligible SERP Participant, commencing at age 65, a the Normal Retirement Benefit described above but with the following adjustments: (i) 5% of the SERP Base Amount payable at age 65 after one year of service; (ii) 10% of the SERP Base Amount payable at age 65 after two years of service; (iii)15% of the SERP Base Amount payable at age 65 after three years of service; or (iv) 20% of the SERP Base Amount payable at age 65 after four years of service.

Executive Participation Agreement with James R. Gillis

Name	Plan Name	Number of Years Credited Service		Present Value of Accumulated Benefit		Payments During Last Fiscal Year
Steven R. Parr	SERP		0.5	$	65,477	$	-
James R. Gillis	SERP		2.8	$	532,718	$	-
Marc Fierman	SERP		2.8	$	224,753	$	-
Alan Tuchman	SERP		2.8	$	362,017	$	-

NON-QUALIFIED DEFERRED COMPENSATION

None.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL

Each of the employment agreements with our named executive officers require certain payments if such executive if terminated by the Company without cause or upon the determination of disability or if the executive terminates his agreement for good reason. Each of such employment agreements are subject to earlier termination by: (i) the Company at its election with or without cause; (ii) upon the Company’s determination of the disability of the executive; (iii) upon the death of the executive; or (iv) the executive voluntarily upon 30 days’ advance written notice, with or without good reason.

Upon a termination prior to the expiration of the employment period by the Company without proper cause or by the executive upon a change in control or for other good reason, the executive shall receive his annual base compensation for the remainder of the employment period and shall retain medical insurance coverage for the same period. In addition, Mr. Gillis shall receive a guaranteed annual bonus equal to 12.5% of his annual base compensation and Mr. Parr shall receive a guaranteed annual bonus equal to the target bonus that would otherwise be paid. In each case, if the employment agreement is terminated early by the Company with cause, upon the executive’s death or by the executive without good reason, the Company shall be released of all of its obligations for payment of any compensation or benefits under the agreement. If, however, the Company terminates the agreement upon the determination of the disability of the executive, the executive shall receive a disability income benefit, payable in monthly installments, equal to 50% of his base compensation for the first 24 months after the early termination and then shall receive a supplemental disability income of $12,000 per month. The supplemental disability income shall cease upon the earlier of the executive’s death or January 4, 2018 in the case of Mr. Gillis; September 30, 2030 in the case of Mr. Fierman; and March 24, 2024 in the case of Mr. Tuchman. Such disability income does not apply to Mr. Parr.

In addition, certain of our named executive officers may receive payments under our Supplemental Executive Retirement Plan, as described above. In no event, however, are payments under the Supplemental Executive Retirement Plan accelerated. Therefore, payments under the Supplemental Executive Retirement Plan have been excluded from the below table.

The following table indicates the potential payments that would have been received by our Named Executive Officers upon the occurrence of one of the above-referenced events as of January 31, 2008:

Name	Benefit	Termination by Company Without Cause		Termination by Company With Cause		Termination by Company Upon Disability of Executive (1)		Termination Upon Death of Executive		Termination by Executive Upon Change of Control or Other Good Reason		Termination by Executive Without Good Reason
Steven R. Parr	Severance	$	2,533,333	$	0	$	0	$	0	$	0	$	0
James R. Gillis	Severance	$	1,492,969	$	0	$	1,778,242	$	0	$	1,492,969	$	0
Marc Fierman	Severance	$	860,417	$	0	$	3,389,552	$	0	$	860,417	$	0
Alan Tuchman	Severance	$	1,150,101	$	0	$	2,589,315	$	0	$	1,150,101	$	0

(1) Assumes payment for entire supplemental disability income period and no earlier death of executive.

COMPENSATION OF DIRECTORS

Each of our directors who was not also one of our employees received (i) an annual retainer of $35,000, (ii) an additional $3,000 for each quarterly Board meeting attended in person, (iii) an additional $1,000 for each committee meeting attended either in person or via telephone, and (iv) an additional $1,000 for each Board meeting attended via telephone. Chairmen of committees received an additional retainer ranging from $10,000 to $25,000 per year depending on the committee chaired. Each committee member, other than the chairman, received an additional $5,000 per year for each committee on which he served. All director fees are payable in cash. Directors are also entitled to be reimbursed for expenses incurred by them in attending meetings of the Board and its committees.

On August 27, 2007, the Compensation Committee revised our Director compensation policy. Under the revised policy which was effective September 1, 2007, each of our directors who is not also one of our employees will receive (i) an annual retainer of $50,000, and (ii) a meeting fee of $3,000 for each board meeting attended in person and $1,000 for each board or committee meeting attended by telephone. Chairmen of committees will receive an additional retainer ranging from $20,000 to $25,000 per year depending on the committee chaired. Each committee member, other than the chairman, will receive an additional retainer ranging from $5,000 to $10,000 per year depending on the committee(s) on which the director serves. Directors are also entitled to be reimbursed for expenses incurred by them in attending meetings of the Board and its committees. On the first trading day of each fiscal year, our directors will also receive an annual award of restricted stock. The number of shares awarded will be equal to $70,000 divided by the last reported sale price on the last day of the then most recently concluded fiscal year. The shares of restricted stock will be subject to vesting over a period of three years, subject to acceleration of the vesting schedule upon the occurrence of certain events such as a change in control of our company.

Name	Fees Earned or Paid in Cash ($)		Option Awards ($)		Total ($)

David R. Jessick	$	127,083	$	22,750	$	149,833
Gregory Mays	$	98,083	$	22,750	$	120,833
George A. Schnug	$	62,500	$	22,750	$	85,250
James R. Gillis	$	—	$	—	$	—
Gray Davis	$	121,500	$	22,750	$	144,250
Allan R. Lyons (4)	$	105,500	$	22,750	$	128,250
Michael R. Duckworth (1)	$	—	$	—	$	—
Ariel Z. Emanuel	$	53,500	$	22,750	$	22,750
Terrence Wallock	$	73,500	$	22,447	$	95,947
A. Clinton Allen (2)	$	18,500	$	—	$	18,500
Aron Katzman (3)	$	67,250	$	—	$	67,250

(1) Mr. Duckworth was elected our Chairman of the Board of Directors and Principal Executive Officer on November 10, 2007. Compensation paid after that date is presented in the Summary Compensation Table, above.

(2) Mr. Allen resigned from our Board of Directors on November 29, 2006.

(3) Mr. Katzman resigned from our Board of Directors on February 14, 2007.

(4) Mr. Lyons elected to have all of his fees that would otherwise have been paid in cash during fiscal 2008 deferred in the Company’s deferred compensation plan. Compensation presented includes only compensation that would have been paid if he had not made this election.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None.

COMPENSATION COMMITTEE REPORT

We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Source Interlink Companies, Inc. Annual Report on Form 10-K, as amended, for the year ended January 31, 2008.

Respectfully submitted,

THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF SOURCE INTERLINK COMPANIES, INC.

Gregory Mays, Chairman

Allan Lyons, Member

Terrence Wallock, Member

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The information required by this item is included in Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of our annual report on Form 10-K filed with the Securities and Exchange Commission on April 25, 2007.

SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS, AND PRINCIPAL STOCKHOLDERS

The following table sets forth as of May 19, 2008 certain information concerning the ownership of our common stock by:

each person who is known to us to own beneficially 5% or more of our outstanding common stock;

each of our directors, our chief executive officer and our four other most highly paid executive officers in fiscal year 2008; and

all directors and executive officers as a group.

The information presented below is based on information supplied by our officers and directors and Schedules 13D and 13G filed with the SEC. Unless otherwise indicated, the persons named below have sole voting and investment power with respect to all shares shown as beneficially owned by them, except to the extent authority is shared by spouses under applicable community property laws.

Name of Beneficial Owner	Number of Shares Beneficially Owned		Percent of Shares Beneficially Owned

AEC Associates, L.L.C. (1)		17,685,568		33.8	%
Scopia Management, Inc. (3)		5,507,276		10.5	%
Steinberg Asset Management, LLC (4)		3,282,650		6.3	%
Dimensional Fund Advisors, L.P. (2)		3,877,093		7.4	%
Prentice Capital Management, LP (5)		3,040,358		5.8	%
James R. Gillis (7)		708,418		1.4	%
Steven R. Parr		162,500		*
Jason S. Flegel (7)		170,360		*
Alan E. Tuchman (7)		338,046		*
Marc Fierman (7)		91,356		*
Michael R. Duckworth (7)		30,000		*
Allan R. Lyons (7)(6)		298,461		*
Aron S. Katzman (7)(8)		319,467		*
George A. Schnug (7)		61,434		*
Gray Davis		60,434		*
Ariel Z. Emanuel (7)		60,434		*
David R. Jessick (7)		47,934		*
Gregory Mays (7)		65,434		*
Terrence J. Wallock (7)		60,434		*

All Directors and named executive officers, as a group (as of May 19, 2008, 17 persons)		2,185,679		4.2	%

(1) The business address for AEC Associates, L.L.C. is: c/o The Yucaipa Companies, 9130 West Sunset Boulevard, Los Angeles, California 90069.

(2) The business address for Dimensional Fund Advisors, L.P. is 1299 Ocean Avenue, Santa Monica, CA 90401.

(3) The business address for Scopia Management, Inc. is 450 Seventh Avenue, 43rd Floor, New York, NY 10123.

(4) The business address for Steinberg Asset Management, LLC is 12 East 49th Street, Suite 1202, New York, NY 10017.

(5) The business address for Prentice Capital Management, LP is 623 Fifth Avenue, 32nd Floor, New York, NY 10022.

(6) Of the reported shares, 116,010 shares are held by Mr. Lyons’ spouse. Mr. Lyons disclaims beneficial ownership of these securities, and this statement shall not be deemed an admission that he is the beneficial owner of the securities for any purpose.

(7) The business address of our officers and directors is c/o Source Interlink Companies, Inc., 27500 Riverview Center Boulevard, Suite 400, Bonita Springs, FL 34134.

(8) Mr. Katzman resigned from the Company’s Board of Directors on February 14, 2007.

(9) Mr. Allen resigned from the Company’s Board of Directors on November 29, 2006.

Included in the shares reported above are the following shares to be issued upon exercise of options to purchase the Company’s common stock:

Name of Beneficial Owner	Number of Options Exercisable Within 60 Days

James R. Gillis		424,667
Alan E. Tuchman		263,046
Marc Fierman		85,356
Michael R. Duckworth		30,000
Allan R. Lyons		50,000
Gray Davis		30,000
Aron S. Katzman		20,000
George A. Schnug		30,000
Ariel Z. Emanuel		30,000
David R. Jessick		30,000
Gregory Mays		30,000
Terrence J. Wallock		10,000

Beneficial ownership of shares has been determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended, under which a person is deemed to be the beneficial owner of securities if he or she has or shares voting or investment power with respect to such securities or has the right to acquire ownership thereof within 60 days. Shares of common stock subject to options that are currently exercisable within 60 days of the date of this report are treated as outstanding for the purpose of computing the percentage ownership of the subject individual. These shares, however, are not considered outstanding when computing the percentage ownership of any other person.

As of May 19, 2008, there were 52,321,837 shares of our common stock outstanding.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

In connection with the merger with Alliance, we and The Yucaipa Companies, an entity affiliated with AEC Associates, entered into a consulting agreement. Pursuant to the consulting agreement and subject to certain conditions specified therein, Yucaipa agreed to provide the Registrant, upon request, with consulting and financial services for an annual fee of $1 million, plus out-of-pocket expenses, however, no additional services are required. The term of the consulting agreement is for a period of five years. Either party may terminate the consulting agreement at any time; however, if we terminate the consulting agreement then we will be required to pay Yucaipa a cash termination payment equal to the remaining unpaid portion of the fees owed for the term in which the termination occurs plus $1 million. Yucaipa agrees, during the term of the consulting agreement and for one year thereafter, not to solicit any employees or consultants of ours or Alliance. In February 2006, in accordance with the terms of the agreement, we engaged Yucaipa to perform certain special services related to our strategic alternatives process. With the acquisition of Primedia Enthusiast Media, Inc., we concluded our strategic alternatives process. In connection with this transaction, we paid $12.7 million to Yucaipa.

AEC Associates is the majority stockholder of Digital On-Demand, Inc. In connection with the spin-off of certain assets by Alliance to Digital On-Demand, Inc. which occurred prior to the merger, Alliance and Digital On-Demand, Inc. entered into a number of agreements including a distribution and separation agreement, licensing and co-marketing agreement, transition/shared services agreement and tax-sharing and indemnification agreement. We assumed the rights and obligations of Alliance under these agreements upon consummation of our merger with Alliance.

Carol Kloster, one of our executive officers who resigned in October 2006, is a director of Chas. Levy Company, LLC, formerly the sole member of Chas. Levy Circulating Co. LLC. Concurrent with our acquisition of Chas. Levy Circulating Co. LLC, we entered into an agreement with Levy Home Entertainment, LLC, a wholly owned subsidiary of Chas. Levy Company, LLC to purchase book product for distribution to our customers. During the fiscal year ended January 31, 2007, we purchased $39.5 million in book product from Levy Home Entertainment, net of returns.

DIRECTOR INDEPENDENCE

Our board has determined that Messrs. Davis, Schnug, Jessick, Lyons, Wallock and Mays are “independent” within the meaning of the rules of The Nasdaq Stock Market, based on its application of the standards set forth in the Corporate Governance Guidelines. Each member of the board’s audit, compensation, nominating and corporate governance and capital markets committees is independent within the meaning of those rules and standards.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The following table summarizes fees billed to us by our principal accounting firm and independent registered public accounting firm BDO Seidman, LLP for professional services rendered as of and for the years ended January 31, 2008, 2007 and 2006:

	Year ended January 31,
(in thousands)	2008		2007		2006

Audit fees	$	1,821	$	1,500	$	1,357
Audit related fees		29		69		23
Tax fees		36		76		39
All other fees		—		—		—

Total fees	$	1,886	$	1,645	$	1,419

Audit Fees

These fees comprise professional services rendered in connection with the audit of our consolidated financial statements on Form 10-K and the review of our quarterly consolidated financial statements on Forms 10-Q that are customary under auditing standards generally accepted in the United States of America. Audit fees also include consultations regarding accounting issues and consents for other SEC filings.

Audit Related Fees

These fees result from assurance and related services that are reasonably related to the performance of the audits and reviews of our financial statements and are not included under “Audit Fees” in the foregoing table. In 2008, these fees related primarily to the Company’s 401(k) plan audits and certain SAS 70 reports.

Tax Fees

These fees comprise professional services relating to tax compliance, tax planning and tax advice.

All Other Fees

These fees comprise all other services other than those reported above. Our intent is to minimize services in this category.

Policy Regarding Audit Committee Pre-Approval And Permitted Non-Audit Services Of Independent Registered Public Accounting Firm

The audit committee has adopted a policy for pre-approval of audit and permitted non-audit services by our independent registered public accounting firm. The full audit committee approves annually projected services and fee estimates for these services and establishes budgets for major categories of services. The audit committee chairman has been designated by the audit committee to approve any services arising during the year that were not pre-approved by the audit committee and services that were pre-approved but for which the associated fees will materially exceed the budget established for the type of service at issue. Services approved by the chairman are communicated to the full audit committee at its next regular meeting. For each proposed service, the independent registered public accounting firm is required to provide back-up documentation detailing said service. The audit committee will regularly review summary reports detailing all services being provided to us by our independent registered public accounting firm. During our 2008 fiscal year, all services performed by the independent registered public accounting firm were pre-approved.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(A) 1. FINANCIAL STATEMENTS:

The Financial Statements have been omitted because the required information was filed with our Original Filing.

2. FINANCIAL STATEMENT SCHEDULES

The Financial Statement Schedule has been omitted because the required information was filed with our Original Filing

3. EXHIBITS

EXHIBIT NO.	DESCRIPTION &# 160;
2.1	Agreement and Plan of Merger, dated November 18, 2004, by and among Source Interlink Companies, Inc., Alliance Entertainment Corp. and Alligator Acquisition, LLC , incorporated by reference to Current Report on Form 8-K, as filed with the SEC on November 24, 2004 (File No. 001-13437).
2.2	Agreement and Plan of Merger dated February 28, 2005, between Source Interlink Companies, Inc., a Missouri corporation and Source Interlink Companies, Inc., a Delaware corporation, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
2.3	Unit Purchase Agreement dated May 10, 2005 between the Registrant and Chas. Levy Company LLC, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on May 16, 2005 (File No. 001-13437).
2.4	Unit Purchase Agreement dated March 30, 2006 between the Registrant and Anderson News, LLC, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on April 5, 2006 (File No. 001-13437).
2.5	Unit Purchase Agreement dated March 30, 2006 between the Registrant and Anderson News, LLC, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on April 5, 2006 (File No. 001-13437).
3.9	Certificate of Incorporation of Source Interlink Companies, Inc., a Delaware corporation, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
3.10	Amended and Restated Bylaws of Source Interlink Companies, Inc., a Delaware corporation, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
4.1	Form of Common Stock Certificate of Source Interlink Companies, Inc., a Delaware corporation, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
4.2	Form of Warrant issued pursuant to a Loan Agreement dated as of October 30, 2003, by and between Source Interlink Companies, Inc., its subsidiaries and Hilco Capital, LP, as agent, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on November 5, 2003. (File No. 001-13437).
4.3	Form of Warrant Agreement issued pursuant to a Loan Agreement dated as of October 30, 2003, by and between Source Interlink Companies, Inc., its subsidiaries and Hilco Capital, LP, as agent, as amended and restated, incorporated by reference to Registration Statement on Form S-3, as filed with the SEC on August 30, 2004 (File No. 333-118655).
4.4	Warrantholders Rights Agreement dated as of October 30, 2003 by and between Source Interlink Companies, Inc. and Hilco Capital LP, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on November 5, 2003 (File No. 001-13437).
4.5	Stockholder’s Agreement dated February 28, 2005, between the Registrant and AEC Associates, LLC, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
10.3**	The Source Information Management Company Amended and Restated 1995 Incentive Stock Option Plan, incorporated by reference to Annual Report on Form 10-K, as filed with the SEC on May 1, 2001 (File No. 001-13437).
10.6**	Employment Agreement dated February 28, 2005 between the Registrant and James R. Gillis, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
10.20**	The Source Information Management Company Amended and Restated 1998 Omnibus Plan, incorporated by reference to Annual Report on Form 10-K, as filed with the SEC on May 1, 2001 (File No. 001-13437).
10.22**	Employment Agreement dated February 28, 2005 between the Registrant and Jason S. Flegel, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
10.31	Lease Agreement by and between Riverview Associates Limited Partnership and Source Interlink Companies, Inc. dated August 9, 2001, incorporated by reference to Annual Report on Form 10-K, as filed with the SEC on May 16, 2002 (File No. 001-13437).
10.31.1	Lease Amendment by and between Riverview Associates Limited Partnership and Source Interlink Companies, Inc. dated August 27, 2003, incorporated by reference to Quarterly Report on Form 10-Q, as filed with the SEC on September 15, 2003 (File No. 001-13437).
10.31.2	Second Lease Amendment dated April 20, 2005 between Riverview Associates Limited Partnership and Source Interlink Companies, Inc. incorporated by reference to Quarterly Report on Form 8-K, as filed with the SEC on April 21, 2005 (File No. 001-13437).
10.32	Industrial Lease between Broadway Properties LTD and Innovative Metal Fixtures, Inc. dated for reference June 1, 2001, and Assignment and Assumption Agreement between Innovative Metal Fixtures, Inc., Aaron Wire & Metal Products LTD and Broadway Properties LTD dated May 3, 2002, incorporated by reference to Annual Report on Form 10-K, as filed with the SEC on May 1, 2003 (File No. 001-13437).
10.33	Net Lease between Conewago Contractors, Inc. and Pennsylvania International Distribution Services, Inc. dated as of May 1, 2000, incorporated by reference to Annual Report on Form 10-K, as filed with the SEC on May 1, 2003 (File No. 001-13437).
10.33.1	First Amendment to Net Lease between Conewago Contractors, Inc. and International Periodical Distributors, Inc. effective September 1, 2003, incorporated by reference to Quarterly Report on Form 10-Q, as filed with the SEC on December 15, 2003 (File No. 001-13437).
10.33.2	Second Amendment to Net Lease between Conewago Contractors, Inc. and International Periodical Distributors, Inc. effective December 1, 2004, incorporated by reference to Quarterly Report on Form 10-Q, as filed with the SEC on December 10, 2004 (File No. 001-13437).
10.34	Lease Agreement between Regal Business Center, Inc and Publisher Distribution Services, Inc. dated as of September 1, 1998, as amended by First Modification and Ratification of Lease Agreement dated as of October __, 1998 and Second Modification and Ratification of Lease Agreement dated as of October __, 2001 (dates omitted in original), incorporated by reference to Annual Report on Form 10-K, as filed with the SEC on May 1, 2003 (File No. 001-13437).
10.36	Commercial Lease Agreement between NCSC Properties LLC and Huck Store Fixture Company of North Carolina dated July 1, 2002, incorporated by reference to Annual Report on Form 10-K, as filed with the SEC on May 1, 2003 (File No. 001-13437).
10.37	Agreement between Louis Nathan Wank, Irving Wank, Murray Wank, Sylvia Goshen, Anna Godel, Sylvia Thorne and/or Wank Brothers and Brand Manufacturing Corp. dated June 1, 1989, as amended by Extension of Lease dated October 22, 1999, incorporated by reference to Annual Report on Form 10-K, as filed with the SEC on May 1, 2003 (File No. 001-13437).
10.38	Agreement between Louis Nathan Wank, Irving Wank, Murray Wank, Sylvia Goshen, Steven Godel, Sylvia Thorne and/or Wank Brothers and Brand Manufacturing Corporation dated November 1, 1995, as amended by Extension of Lease dated October 22, 1999, incorporated by reference to Annual Report on Form 10-K, as filed with the SEC on May 1, 2003 (File No. 001-13437).
10.39	Agreement between Louis Nathan Wank, Irving Wank, Murray Wank, Sylvia Goshen, Anna Godel, Sylvia Thorne and/or Wank Brothers and Brand Manufacturing Corp. dated September 1, 1984, as amended by Extension of Lease dated October 22, 1999, incorporated by reference to Annual Report on Form 10-K, as filed with the SEC on May 1, 2003 (File No. 001-13437).
10.41**	Employment Agreement dated February 28, 2005 between the Registrant and Marc Fierman, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
10.44	Amended and Restated Loan Agreement dated February 28, 2005 by and among the Registrant, its subsidiaries, and Wells Fargo Foothill, Inc., as arranger and administrative agent, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
10.44.1	First Amendment to Amended and Restated Loan Agreement dated April 18, 2005 by and among Source Interlink Companies, Inc., its subsidiaries, Wells Fargo Foothill, Inc., as arranger, administrative agent and collateral agent, and Wachovia Bank, N.A., as documentation agent, incorporated by reference to Quarterly Report on Form 8-K, as filed with the SEC on April 21, 2005 (File No. 001-13437).
10.48+	Retail Magazine Supply Agreement between Barnes & Noble, Inc. and International Periodical Distributors, Inc. dated as of August 6, 2004, incorporated by reference to Quarterly Report on Form 10-Q, as filed with the SEC on December 10, 2004 (File No. 001-13437).
10.48.1+	First Amendment to Retail Magazine Supply Agreement effective as of April 1, 2006 between Barnes & Noble, Inc. and International Periodical Distributors, Inc. , incorporated by reference to Current Report on Form 8-K, as filed with the SEC on February 14, 2006 (File No. 001-13437).
10.49**	Employment Agreement dated February 28, 2005 between the Registrant and Alan Tuchman, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
10.50**	The 1999 Equity Participation Plan of Alliance Entertainment Corp., incorporated by reference to Exhibit 10.2 to Amendment No. 1 to Registration Statement on Form S-4, as filed with the SEC on January 18, 2005 (File No. 333-121656).
10.51**	The 1999 Employee Equity Participation and Incentive Plan of Alliance Entertainment Corp., incorporated by reference to Exhibit 10.3 to Amendment No. 1 to Registration Statement on Form S-4, as filed with the SEC on January 18, 2005 (File No. 333-121656).
10.52**	Amended and Restated Digital On-Demand, Inc. 1998 Executive Stock Incentive Plan, incorporated by reference to Exhibit 10.4 to Amendment No. 1 to Registration Statement on Form S-4, as filed with the SEC on January 18, 2005 (File No. 333-121656).
10.53**	Amended and Restated Digital On-Demand, Inc. 1998 General Stock Incentive Plan, incorporated by reference to Exhibit 10.5 to Amendment No. 1 to Registration Statement on Form S-4, as filed with the SEC on January 18, 2005 (File No. 333-121656).
10.54	Multi-Tenant Industrial Triple Net Lease, dated as of September 5, 2003, between Catellus Development Corporation and AEC One Stop Group, Inc., incorporated by reference to Exhibit 10.6 to Amendment No. 1 to Registration Statement on Form S-4, as filed with the SEC on January 18, 2005 (File No. 333-121656).
10.55**	Source Interlink Companies, Inc. Supplemental Executive Retirement Plan, effective as of March 1, 2005, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
10.56**	Source Interlink Companies, Inc. Challenge Grant Program, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
10.57**	Executive Participation Agreement dated February 28, 2005 between the Registrant and James R. Gillis, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
10.58**	Form of Executive Participation Agreement, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
10.59**	Form of Split-Dollar Insurance Agreement, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
10.60	Consulting Agreement dated February 28, 2005 between the Registrant and The Yucaipa Companies, LLC, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
10.61+	Product Fulfillment Services Agreement dated as of March 17, 2004 between Barnes & Noble, Inc. and AEC One Stop Group, Inc., incorporated by reference to Annual Report on Form 10-K, as filed with the SEC on April 18, 2005 (File No. 001-13437)
10.62+	Distribution and Supply Agreement dated May 10, 2005 between the Registrant and Levy Home Entertainment LLC, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on May 16, 2005 (File No. 001-13437)
10.63	Lease Agreement dated May 10, 2005 between Chas. Levy Company LLC and Chas. Levy Circulating Co. LLC concerning real estate located at 1140 North Branch Street, Chicago, Illinois, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on May 16, 2005 (File No. 001-13437)
10.65	Lease Agreement dated May 10, 2005 between Chas. Levy Company LLC and Chas. Levy Circulating Co. LLC concerning real estate located at 1006 Wright Street, Brainerd, Minnesota
10.66	Lease Agreement dated March 15, 2000 between High Properties and the Chas. Levy Circulating Company, LLC relating to 1850 Colonial Village Lane, Lancaster, Pennsylvania
10.66.1	Amendment #1 to the Lease dated December 3, 2003
10.67	Industrial Real Estate Lease dated March 22, 1999 between MICO Archibald Partners, L.L.C. and Anderson News, LLC relating to 2590 East Lindsay Privado, Ontario, California.
10.48.2+	Second Amendment to Retail Magazine Supply Agreement made and entered into as of April 6, 2007 by and between Barnes & Noble, Inc. and International Periodical Distributors, Inc.
10.68	Letter dated May 13, 2007 from The Yucaipa Companies, LLC addressed to Source Interlink Companies, Inc.
10.69	Letter of Intent dated May 14, 2007 between The Yucaipa Companies, LLC and Source Interlink Companies, Inc.
10.70	Revolving Credit Agreement, dated as of August 1, 2007, by and among Source Interlink Companies, Inc., certain subsidiaries of Source Interlink Companies, Inc. as guarantors, Citicorp North America, Inc. as administrative agent and collateral agent, JP Morgan Chase Bank, N.A. as syndication agent, and the lenders from time to time party thereto.
10.71	Senior Subordinated Bridge Loan Agreement, dated as of August 1, 2007, by and among Source Interlink Companies, Inc., certain subsidiaries of Source Interlink Companies, Inc. as guarantors, Citicorp North America, Inc. as administrative agent and collateral agent, JP Morgan Chase Bank, N.A. as syndication agent, and the lenders from time to time party thereto.
10.72	Term Loan Agreement, dated as of August 1, 2007, by and among Source Interlink Companies, Inc., certain subsidiaries of Source Interlink Companies, Inc. as guarantors, Citicorp North America, Inc. as administrative agent and collateral agent, JP Morgan Chase Bank, N.A. as syndication agent, and the lenders from time to time party thereto.
10.73	Employment Agreement by and between Steven R. Parr and Source Interlink Companies, Inc., dated as of June 27, 2007
10.74	Automotive.com, Inc. Stockholders Agreement, dated November 15, 2005, by and among PRIMEDIA Inc., Automotive.com, Inc. and certain holders of common stock and options of Automotive.com, Inc.
14.1	Code of Business Conduct and Ethics of Source Interlink Companies, Inc., a Delaware corporation, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
14.2	Code of Ethics for Chief Executive Officer and Financial Executives of Source Interlink Companies, Inc., a Delaware corporation, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
14.3	Code of Conduct for Directors and Executive Officers of Source Interlink Companies, Inc., a Delaware corporation, incorporated by reference to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).
31.1*	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.
31.2*	Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.
32.1*	Section 1350 Certification of Principal Executive Officer and Principal Financial Officer.

*	Filed herewith

**	Indicates management contract or compensatory plan, contract or arrangement

+	Certain material has been omitted pursuant a request for confidential treatment and such material has been filed separately with the SEC.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SOURCE INTERLINK COMPANIES, INC.

May 30, 2008	By:	/s/ Marc Fierman
		Marc Fierman
		Chief Financial Officer
		(principal financial officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

May 30, 2008		/s/ Michael R. Duckworth
		Michael R. Duckworth
		Chairman of the Board of Directors
		(principal executive officer)

May 30, 2008		/s/ James R. Gillis
		James R. Gillis
		Interim Co-Chief Executive Officer and Director

May 30, 2008		/s/ Gray Davis
		Gray Davis
		Director

May __, 2008
		Ariel Z. Emanuel
		Director

May 30, 2008		/s/ David R. Jessick
		David R. Jessick
		Director

May 30, 2008		/s/ Allan R. Lyons
		Allan R. Lyons
		Director

May 30, 2008		/s/ Gregory Mays
		Gregory Mays
		Director

May 30, 2008		/s/ George A. Schnug
		George A. Schnug
		Director

May 30, 2008		/s/ Terrence J. Wallock
		Terrence J. Wallock
		Director

Source Interlink Companies (SORC) Inactive 10-K/A2008 FY Annual report (amended)