EXHIBIT 99.2
Source Interlink Announces Fiscal 2008 Second Quarter Results
— Acquisition of Enthusiast Media Provides Engine for Growth —
BONITA SPRINGS, FL, September 10, 2007 — Source Interlink Companies, Inc. (Nasdaq: SORC), one of the largest publishers of magazines and online content for enthusiast audiences and a leading distributor of DVDs, CDs, magazines, games and books today announced financial results for the fiscal 2008 second quarter ending July 31, 2007.
| | GAAP Results ($ in millions) | | Adjusted Results* ($ in millions) | |
| | 2Q08 | | 2Q07 | | % Change | | 2Q08 | | 2Q07 | | % Change | |
| | | | | | | | | | | | | |
Revenue | | $ | 434.1 | | $ | 433.3 | | 0.2 | % | $ | 434.1 | | $ | 433.3 | | 0.2 | % |
Magazine Fulfillment | | 228.5 | | 223.2 | | 2.4 | % | 228.5 | | 223.2 | | 2.4 | % |
CD/DVD Fulfillment | | 195.2 | | 198.2 | | (1.5 | )% | 195.2 | | 198.2 | | (1.5 | )% |
In-Store Services | | 10.5 | | 11.9 | | (12.0 | )% | 10.5 | | 11.9 | | (12.0 | )% |
| | | | | | | | | | | | | |
Operating Income | | $ | 6.6 | | $ | 8.2 | | (19.5 | )% | $ | 10.4 | | $ | 11.8 | | (11.9 | )% |
Income from continuing operations | | $ | 2.4 | | $ | 3.2 | | (25.0 | )% | $ | 4.7 | | $ | 5.4 | | (13.7 | )% |
EPS - Diluted | | $ | 0.04 | | $ | 0.06 | | (33.3 | )% | $ | 0.09 | | $ | 0.10 | | (10.0 | )% |
| | GAAP Results ($ in millions) | | Adjusted Results* ($ in millions) | |
| | 1H08 | | 1H07 | | % Change | | 1H08 | | 1H07 | | % Change | |
| | | | | | | | | | | | | |
Revenue | | $ | 909.6 | | $ | 881.2 | | 3.2 | % | $ | 909.6 | | $ | 881.2 | | 3.2 | % |
Magazine Fulfillment | | 462.4 | | 418.2 | | 10.6 | % | 462.4 | | 418.2 | | 10.6 | % |
CD/DVD Fulfillment | | 426.0 | | 438.9 | | (2.9 | )% | 426.0 | | 438.9 | | (2.9 | )% |
In-Store Services | | 21.1 | | 24.1 | | (12.4 | )% | 21.1 | | 24.1 | | (12.4 | )% |
| | | | | | | | | | | | | |
Operating Income | | $ | 15.4 | | $ | 14.9 | | 3.7 | % | $ | 22.5 | | $ | 22.2 | | 1.4 | % |
Income from continuing operations | | $ | 5.7 | | $ | 6.1 | | (7.3 | )% | $ | 9.9 | | $ | 10.3 | | (4.2 | )% |
EPS - Diluted | | $ | 0.11 | | $ | 0.12 | | (8.3 | )% | $ | 0.19 | | $ | 0.19 | | 0.0 | % |
* Please see “Financial Highlights” section of this press release for definition and reconciliation of non-GAAP financial measures.
“First-half fiscal 2008 financial performance remains on track with the Company’s plan for the year,” said Michael R. Duckworth, Chairman of Source Interlink. “Our magazine and DVD/CD segments are showing the benefits of scale, executing on acquisition synergies, expanding customer relationships, adding new retailers and entering partnerships that boost Source’s market share and product offerings.”
“Meanwhile, our August 1 acquisition of Enthusiast Media lays the foundation for expanded revenue and future growth, as the Company is transformed into a leading special interest publisher and content provider,” he added. “We’ve diversified our revenue stream, while leveraging the distribution platform we have built over the last several years. We have a clear vision of where we are headed and a strategy that positions us ideally to benefit from advances in content delivery both digitally and in print.”
Financial Highlights
Adjusted income from continuing operations for the fiscal 2008 second quarter totaled $4.7 million, or $0.09 per diluted share. GAAP revenue totaled $434.1 million. Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) for the quarter totaled $13.8 million, which was a 9.1% decrease over the same period last year. Adjusted operating income for the second quarter totaled $10.4 million, a decrease of 12.5% over the prior year quarter. Operating margins decreased to 2.4% from 2.7%.
GAAP income from continuing operations for the fiscal 2008 second quarter totaled $2.4 million, or $0.04 per diluted share, compared to fiscal 2007 second quarter income from continuing operations of $3.2 million, or $0.06 per diluted share.
Adjusted income from continuing operations for the six month period ending July 31, 2007 totaled $9.9 million, or $0.19 per diluted share, on total revenue of $909.6 million. Adjusted EBITDA for the six month period totaled $29.9 million, a 4.2% increase over last year. GAAP income from continuing operations for the six month period ended July 31, 2007 decreased $0.4 million or 7.3% to $5.7 million or $0.11 per diluted share as compared to $6.1 million or $0.12 per diluted share for the same period last year. GAAP revenue in the current six month period increased $28.4 million or 3.2% to $909.6 million compared to prior year first half total revenue of $881.2 million.
The Company uses both Generally Accepted Accounting Principles (GAAP), and non-GAAP or adjusted financial measures, to evaluate and report the results of its business. A reconciliation of the non-GAAP financial measures to the comparable GAAP financial measure is available on the Company’s home page at www.sourceinterlink.com by selecting “Reconciliation of Non-GAAP Financial Measures.”
The Company provides non-GAAP or adjusted financial information in order to provide meaningful supplemental information regarding its operational performance and to enhance investors’ overall understanding of the Company’s current financial performance and prospects for the future. The Company believes that investors benefit from seeing its results “through the eyes” of management in addition to the GAAP presentation. Management measures segment and enterprise performance using measures such as those disclosed in this release. This information facilitates management’s internal comparisons to the Company’s historical operating results.
Non-GAAP or adjusted information allows for greater transparency to supplemental information used by management in its financial and operational decision making. This information is not in accordance with, or an alternative for, GAAP in the United States. It excludes items, such as amortization of acquired intangible assets, charges incurred to consolidate and integrate distribution facilities of recently acquired businesses and non-cash stock-based compensation that may have a material effect on the Company’s net income and net income per share calculated in accordance with GAAP. Management monitors these items to ensure that expenses are in line with expectations and that its GAAP results are correctly stated but does not use them to measure the ongoing operating performance of the Company. The non-GAAP or adjusted information
provided by the Company may be different from the non-GAAP or adjusted information provided by other companies.
GAAP earnings per share in the fiscal 2007 second quarter were calculated on 53.3 million diluted shares outstanding, compared with 52.4 million diluted shares outstanding in fiscal 2008 second quarter.
See table below for reconciliation of GAAP financial results to adjusted amounts. Adjusted Incomes from Continuing Operations were calculated utilizing a tax rate of 40 percent.
Q2 2008
| | Operating Income | | Income from | |
| | Magazine | | CD and DVD | | In-Store | | Shared | | | | Continuing | |
(in thousands) | | Fulfillment | | Fulfillment | | Services | | Services | | Consolidated | | Operations | |
| | | | | | | | | | | | | |
GAAP | | $ | 4,501 | | $ | 3,860 | | $ | 2,378 | | $ | (4,145 | ) | $ | 6,594 | | $ | 2,439 | |
Adjustments: | | | | | | | | | | | | | |
Amortization of acquired intangibles | | 1,277 | | 2,555 | | 104 | | — | | 3,936 | | 2,362 | |
Gain on sale of assets | | — | | — | | (173 | ) | — | | (173 | ) | (104 | ) |
| | | | | | | | | | | | | |
Adjusted | | $ | 5,778 | | $ | 6,415 | | $ | 2,309 | | $ | (4,145 | ) | $ | 10,357 | | $ | 4,697 | |
| | Magazine | | CD and DVD | | In-Store | | Shared | | | | | |
(in thousands) | | Fulfillment | | Fulfillment | | Services | | Services | | Consolidated | | | |
| | | | | | | | | | | | | |
Adjusted operating income | | $ | 5,778 | | $ | 6,415 | | $ | 2,309 | | $ | (4,145 | ) | $ | 10,357 | | | |
Depreciation and other amortization | | 1,006 | | 1,627 | | 90 | | 546 | | 3,269 | | | |
Other income | | 131 | | — | | 3 | | (7 | ) | 127 | | | |
| | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 6,915 | | $ | 8,042 | | $ | 2,402 | | $ | (3,606 | ) | $ | 13,753 | | | |
Q2 2007
| | Operating Income | | Income from | |
| | Magazine | | CD and DVD | | In-Store | | Shared | | | | Continuing | |
(in thousands) | | Fulfillment | | Fulfillment | | Services | | Services | | Consolidated | | Operations | |
| | | | | | | | | | | | | |
GAAP | | $ | 4,555 | | $ | 6,971 | | $ | 3,178 | | $ | (6,487 | ) | $ | 8,217 | | $ | 3,238 | |
Adjustments: | | | | | | | | | | | | | |
Amortization of acquired intangibles | | 1,030 | | 1,878 | | — | | — | | 2,908 | | 1,745 | |
Allocation changes | | (1,040 | ) | 1 | | (215 | ) | 1,254 | | — | | — | |
Relocation, integration and consolidation expenses | | 547 | | — | | — | | 168 | | 715 | | 429 | |
Difference in GAAP and adjusted tax rate | | — | | — | | — | | — | | — | | 32 | |
| | | | | | | | | | | | | |
Adjusted | | $ | 5,092 | | $ | 8,850 | | $ | 2,963 | | $ | (5,065 | ) | $ | 11,840 | | $ | 5,444 | |
| | Magazine | | CD and DVD | | In-Store | | Shared | | | | | |
(in thousands) | | Fulfillment | | Fulfillment | | Services | | Services | | Consolidated | | | |
| | | | | | | | | | | | | |
Adjusted operating income | | $ | 5,092 | | $ | 8,850 | | $ | 2,963 | | $ | (5,065 | ) | $ | 11,840 | | | |
Depreciation and other amortization | | 697 | | 1,738 | | 283 | | 524 | | 3,242 | | | |
Other income | | (33 | ) | — | | 62 | | 27 | | 56 | | | |
| | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 5,756 | | $ | 10,588 | | $ | 3,308 | | $ | (4,514 | ) | $ | 15,138 | | | |
6 Months 2008
| | Operating Income | | Income from | |
| | Magazine | | CD and DVD | | In-Store | | Shared | | | | Continuing | |
(in thousands) | | Fulfillment | | Fulfillment | | Services | | Services | | Consolidated | | Operations | |
| | | | | | | | | | | | | |
GAAP | | $ | 9,098 | | $ | 10,452 | | $ | 4,761 | | $ | (8,905 | ) | $ | 15,406 | | $ | 5,653 | |
Adjustments: | | | | | | | | | | | | | |
Amortization of acquired intangibles | | 2,561 | | 4,433 | | 104 | | — | | 7,098 | | 4,259 | |
Gain on sale of assets | | — | | — | | (173 | ) | — | | (173 | ) | (104 | ) |
Stock compensation expense | | — | | — | | — | | 179 | | 179 | | 107 | |
| | | | | | | | | | | | | |
Adjusted | | $ | 11,659 | | $ | 14,885 | | $ | 4,692 | | $ | (8,726 | ) | $ | 22,510 | | $ | 9,915 | |
| | Magazine | | CD and DVD | | In-Store | | Shared | | | | | |
(in thousands) | | Fulfillment | | Fulfillment | | Services | | Services | | Consolidated | | | |
| | | | | | | | | | | | | |
Adjusted operating income | | $ | 11,659 | | $ | 14,885 | | $ | 4,692 | | $ | (8,726 | ) | $ | 22,510 | | | |
Depreciation and other amortization | | 1,972 | | 3,784 | | 281 | | 1,123 | | 7,160 | | | |
Other income | | 311 | | — | | (132 | ) | 20 | | 199 | | | |
| | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 13,942 | | $ | 18,669 | | $ | 4,841 | | $ | (7,583 | ) | $ | 29,869 | | | |
6 Months 2007
| | Operating Income | | Income from | |
| | Magazine | | CD and DVD | | In-Store | | Shared | | | | Continuing | |
(in thousands) | | Fulfillment | | Fulfillment | | Services | | Services | | Consolidated | | Operations | |
| | | | | | | | | | | | | |
GAAP | | $ | 8,461 | | $ | 14,150 | | $ | 5,979 | | $ | (13,739 | ) | $ | 14,851 | | $ | 6,100 | |
Adjustments: | | | | | | | | | | | | | |
Amortization of acquired intangibles | | 1,941 | | 3,756 | | — | | — | | 5,697 | | 3,418 | |
Impairment charge | | — | | — | | — | | 529 | | 529 | | 317 | |
Allocation changes | | (2,782 | ) | 154 | | (181 | ) | 2,809 | | — | | — | |
Relocation, integration and consolidation expenses | | 547 | | — | | — | | 168 | | 715 | | 429 | |
Stock compensation expense | | — | | — | | — | | 400 | | 400 | | 240 | |
Difference in GAAP and adjusted tax rate | | — | | — | | — | | — | | — | | (159 | ) |
| | | | | | | | | | | | | |
Adjusted | | $ | 8,167 | | $ | 18,060 | | $ | 5,798 | | $ | (9,833 | ) | $ | 22,192 | | $ | 10,346 | |
| | Magazine | | CD and DVD | | In-Store | | Shared | | | | | |
(in thousands) | | Fulfillment | | Fulfillment | | Services | | Services | | Consolidated | | | |
| | | | | | | | | | | | | |
Adjusted operating income | | $ | 8,167 | | $ | 18,060 | | $ | 5,798 | | $ | (9,833 | ) | $ | 22,192 | | | |
Depreciation and other amortization | | 1,437 | | 3,317 | | 583 | | 1,073 | | 6,410 | | | |
Other income | | 32 | | — | | 9 | | 33 | | 74 | | | |
| | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 9,636 | | $ | 21,377 | | $ | 6,390 | | $ | (8,727 | ) | $ | 28,676 | | | |
Free Cash Flow
| | Three Months ended July 31, | | Six Months ended July 31, | | | | | |
| | 2007 | | 2006 | | 2007 | | 2006 | | | | | |
| | | | | | | | | | | | | |
Cash provided by (used in) operating activities | | $ | 2,625 | | $ | 14,935 | | $ | 9,512 | | $ | (41,993 | ) | | | | |
Purchase of claims | | (23,831 | ) | (30,639 | ) | (47,587 | ) | (58,541 | ) | | | | |
Payments received on purchased claims | | 31,460 | | 30,185 | | 59,531 | | 57,840 | | | | | |
Capital expenditures | | (5,409 | ) | (4,505 | ) | (9,436 | ) | (6,460 | ) | | | | |
| | | | | | | | | | | | | |
Free cash flow | | $ | 4,845 | | $ | 9,976 | | $ | 12,020 | | $ | (49,154 | ) | | | | |
As stated on the Company’s first quarter earning conference call, effective with the current fiscal year, the Company has modified the allocation of certain shared service expenses to the operating segments to correspond with a change in management’s view of each segments operating structure. This change has no effect on consolidated results. Also, note that for comparative purposes, adjusted segment results presented for last year have been restated to reflect this change. Please see the Company’s Q1 earnings release or the Company’s Web site for the impact on each segment by quarter for the prior year.
Segment Results
Media Segment — Source will begin reporting financial results for this segment beginning in the third quarter fiscal 2008.
Magazine Fulfillment Segment — The Company’s Magazine Fulfillment segment reported GAAP revenue of $228.5 million compared with $223.2 million in the prior year second quarter, an increase of approximately 2.3%. GAAP gross profit margins increased from 22.9% in the prior year period to 23.1% in the current period. Adjusted operating income increased 13.4% to $5.8 million in the fiscal 2008 second quarter due to margin improvement on higher sales and realization of synergies and cost savings from previous acquisitions.
For the six month period ended July 31, 2007, the Magazine Fulfillment segment, which includes the distribution service areas in Southern California and Washington D.C./Baltimore acquired as of March 30, 2006 reported GAAP revenue of $462.4 million, compared with $418.2 million in the prior year period, an increase of 10.6%. Gross margin increased from 22.5% in the prior year period to 23.3% in the current period. Adjusted operating income was $11.7 million, compared with $8.2 million in the prior year period. Adjusted operating margins increased from 2.0% in the prior year period to 2.5% in the current period.
DVD and CD Fulfillment Segment — The CD and DVD Fulfillment segment reported GAAP revenue of $195.2 million, gross margin of 18.7% and adjusted operating income of $6.4 million for the second quarter. Net revenue for the fiscal 2008 second quarter decreased 1.5% compared to $198.2 million in the fiscal 2007 second quarter. Sales of DVDs increased 16.3% to $88.7 million, offsetting a CD revenue decline of 12.1% to $100.8 million. Adjusted operating margins decreased from 4.5% in the prior year second quarter to 3.3% in the current year period. The decrease in operating income and margin was due primarily to lower revenue, lower margin product mix and higher servicing costs related to a greater volume of VMI accounts. Gross profit margins for the second quarter decreased to 18.7% from 19.0%.
For the six month period ended July 31, 2007, the DVD and CD Fulfillment segment reported GAAP revenue of $426.0 million, operating income of $10.5 million, and gross margin of 18.0%. For comparative purposes, revenue for the first half of last year was $438.9 million, operating income was $14.2 million, and gross margin was 18.0%. Adjusted operating income for the six month period decreased 17.6% to $14.9 million. Adjusted operating margins for the six month period decreased from 4.1% in the comparative prior year period to 3.5% in the current year period.
In-Store Services Segment — The In-Store Services segment recorded GAAP revenue of $10.5 million in the fiscal 2008 second quarter, compared with $11.9 million in the year-ago quarter, primarily due to lower claiming and information revenue. Adjusted operating income for the fiscal 2008 second quarter was $2.3 million compared to $3.0 million in the prior year period. Adjusted operating margins decreased to 22.1% from 24.9%
For the six month period ended July 31, 2007, In-Store Services segment reported GAAP revenue of $21.1 million, compared with $24.1 million in the prior year period. Adjusted operating income for the six month period ended July 31, 2007, was $4.7 million, versus $5.8 million in the prior year period.
Results have been adjusted to reflect the sale during the first quarter fiscal 2008 of the Company’s wood-manufacturing business, formerly a division of the In-Store services segment and currently reported as a discontinued operation.
Shared Services Segment — The Shared Services segment consists of corporate and shared overhead functions associated with the individual operating segments. Shared Services decreased 20.1% to $3.6 million in the second quarter and decreased 13.1% to $7.6 million for the six month period on an EBITDA basis. Shared services expenditures as a percentage of GAAP revenue decreased from 1.0% in the prior year period to 0.8% in the current year period.
For the six month period ended July 31, 2007, shared services as a percentage of revenue decreased from 1.4% to 0.9% as compared to the prior year six month period.
Fiscal 2008 Second Quarter Conference Call
Source Interlink Companies, Inc. will host a teleconference to discuss its fiscal 2008 second quarter on Monday, September 10, 2007 at 4:30 p.m. Eastern Time. To access the teleconference, please dial 888-694-4641 (U.S. callers) and 973-582-2734 (Int’l callers), passcode 9121421, ten minutes prior to the start time. The teleconference will also be available via live webcast on the Company’s Web site at www.sourceinterlink.com. A slide presentation that corresponds with management’s second quarter report has been posted on the Company’s homepage. The slide presentation may be downloaded by using the link provided on the Web site and is also available on the webcast. A replay of the conference call will be available through Monday, September 17, 2007. It can be accessed by dialing 877-519-4471 (U.S. callers) or 973-341-3080 (Int’l callers), passcode 9121421. The webcast will also be archived on www.sourceinterlink.com for 30 days.
About Source Interlink Companies, Inc.
Source Interlink Companies, Inc. (NASDAQ: SORC), a media and marketing services company, is one of the largest publishers of magazines and online content for enthusiast audiences and is also a leading distributor of home entertainment products, including DVDs, music CDs, magazines, games, books, and related items. With annual ”run-rate” revenue in excess of $2.5 billion, Source Interlink serves approximately 110,000 retail store locations throughout North America. Supply chain relationships include consumer goods advertisers, subscribers, movie studios, record labels, magazine and newspaper publishers, confectionary companies and manufacturers of general merchandise.
The Company’s fully integrated businesses and activities include:
· Publishing and providing enthusiast media content including 70 magazines, over 65 events, two television shows, a radio program, 90 related Web sites and 400 branded products for automobile, marine, equine, outdoor sports, home tech and daytime television
· Distribution and fulfillment of entertainment products to major retail chains throughout North America and directly to consumers of entertainment products ordered through the Internet
· Import and export of periodicals to more than 100 markets worldwide
· Managing product selection and placement of impulse items at checkout counters
· Processing and collection of rebate claims and management of point-of-purchase sales data
· Design, manufacture and installation of wire fixtures and displays in major retail chains
· Licensing of children’s and family-friendly home entertainment products
For more information, please visit the Company’s Web site at http://www.sourceinterlink.com.
This press release contains certain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995, including statements relating to, among other things, future business plans, strategies and financial position, working capital and capital expenditure needs, growth opportunities, and any statements of belief and any statements of assumptions underlying any of the foregoing.
These forward-looking statements reflect Source Interlink’s current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause future events, achievements or results to differ materially from those expressed by the forward-looking statements. Factors that could cause actual results to differ include: (i) adverse trends in advertising spending; (ii) interest rate volatility and the consequences of significantly increased debt obligations (iii) price volatility in fuel, paper and other raw materials used in our businesses; (iv) market acceptance of and continuing retail demand for physical copies of magazines, books, DVDs, CDs and other home entertainment products; (v) our ability to realize additional operating efficiencies, cost savings and other benefits from recent acquisitions, (iii) an evolving market for entertainment media, (vi) the ability to obtain product in sufficient quantities; (vii) adverse changes in general economic or market conditions; (viii) the ability to attract and retain employees; (ix) intense competition in the marketplace and (x) other events and other important factors disclosed previously and from time to time in Source Interlink’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 25, 2007.
Source Interlink does not intend to, and disclaims any duty or obligation to, update or revise any forward-looking statements or industry information set forth in this press release to reflect new information, future events or otherwise.
Contacts:
Investors: | | Media: |
Dean Heine | Denise Roche | Nancy Zakhary |
Investor Relations | Brainerd Communicators | Brainerd Communicators |
Source Interlink Companies, Inc. | 212-986-6667 | 212-986-6667 |
239-949-4450 | roche@braincomm.com | nancy@braincomm.com |
dheine@sourceinterlink.com | | |
SOURCE INTERLINK COMPANIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
| | Three months ended July 31, | | Six months ended July 31, | |
| | 2007 | | 2006 | | 2007 | | 2006 | |
| | | | | | | | | |
Revenues | | $ | 434,147 | | $ | 433,308 | | $ | 909,552 | | $ | 881,202 | |
Cost of revenues (including depreciation of $218, $139, $435, and $294, respectively) | | 340,658 | | 339,199 | | 716,569 | | 698,123 | |
| | | | | | | | | |
Gross profit | | 93,489 | | 94,109 | | 192,983 | | 183,079 | |
| | | | | | | | | |
Selling, general and administrative expense | | 55,266 | | 54,074 | | 113,357 | | 108,142 | |
Fulfillment freight | | 24,493 | | 25,092 | | 50,248 | | 47,027 | |
Depreciation and amortization | | 6,985 | | 6,011 | | 13,821 | | 11,815 | |
Merger and acquisition charges | | — | | — | | — | | — | |
Relocation expense | | 324 | | 715 | | 324 | | 715 | |
Gain on sales of assets | | (173 | ) | | | (173 | ) | — | |
Impairment of land and building held for sale | | — | | — | | — | | 529 | |
| | | | | | | | | |
Operating income | | 6,594 | | 8,217 | | 15,406 | | 14,851 | |
| | | | | | | | | |
Other income (expense): | | | | | | | | | |
Interest expense (including amortization of deferred financing fees of $150, $168, $300, and $300, respectively) | | (2,894 | ) | (2,868 | ) | (6,461 | ) | (5,135 | ) |
Interest income | | 238 | | 44 | | 279 | | 112 | |
Other | | 128 | | 56 | | 199 | | 75 | |
| | | | | | | | | |
Total other expense | | (2,528 | ) | (2,768 | ) | (5,983 | ) | (4,948 | ) |
| | | | | | | | | |
Income from continuing operations, before income taxes | | 4,066 | | 5,449 | | 9,423 | | 9,903 | |
Income tax expense | | 1,627 | | 2,211 | | 3,770 | | 3,803 | |
| | | | | | | | | |
Income from continuing operations | | 2,439 | | 3,238 | | 5,653 | | 6,100 | |
Loss from discontinued operations, net of tax | | (222 | ) | 856 | | (1,608 | ) | 1,253 | |
| | | | | | | | | |
Net income | | $ | 2,217 | | $ | 4,094 | | $ | 4,045 | | $ | 7,353 | |
| | | | | | | | | |
Earnings per share — basic: | | | | | | | | | |
Continuing operations | | $ | 0.04 | | $ | 0.06 | | $ | 0.11 | | $ | 0.12 | |
Discontinued operations | | — | | 0.02 | | (0.03 | ) | 0.02 | |
| | | | | | | | | |
Total | | $ | 0.04 | | $ | 0.08 | | $ | 0.08 | | $ | 0.14 | |
| | | | | | | | | |
Earnings per share — diluted: | | | | | | | | | |
Continuing operations | | $ | 0.04 | | $ | 0.06 | | $ | 0.11 | | $ | 0.12 | |
Discontinued operations | | — | | 0.02 | | (0.03 | ) | 0.02 | |
| | | | | | | | | |
Total | | $ | 0.04 | | $ | 0.08 | | $ | 0.08 | | $ | 0.14 | |
| | | | | | | | | |
Weighted average common shares outstanding - basic | | 52,304 | | 51,811 | | 52,230 | | 51,760 | |
Weighted average common shares outstanding - diluted | | 52,441 | | 53,291 | | 52,538 | | 53,223 | |
SOURCE INTERLINK COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
| | July 31, | | | |
| | 2007 | | January 31, | |
| | (unaudited) | | 2007 | |
Assets | | | | | |
Current assets | | | | | |
Cash | | $ | 10,490 | | $ | — | |
Trade receivables, net | | 61,366 | | 102,658 | |
Purchased claims receivable | | 5,040 | | 16,983 | |
Inventories | | 249,715 | | 248,941 | |
Income tax receivable | | — | | 9,932 | |
Deferred tax asset | | 29,820 | | 29,531 | |
Other | | 8,784 | | 5,440 | |
| | | | | |
Total current assets | | 365,215 | | 413,485 | |
| | | | | |
Property, plants and equipment | | 98,838 | | 98,812 | |
Less accumulated depreciation and amortization | | (32,239 | ) | (30,897 | ) |
| | | | | |
Net property, plants and equipment | | 66,599 | | 67,915 | |
| | | | | |
Other assets | | | | | |
Goodwill, net | | 396,041 | | 395,902 | |
Intangibles, net | | 112,555 | | 118,971 | |
Other | | 19,680 | | 13,758 | |
| | | | | |
Total other assets | | 528,276 | | 528,631 | |
| | | | | |
Total assets | | $ | 960,090 | | $ | 1,010,031 | |
SOURCE INTERLINK COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS (CONCLUDED)
(in thousands, except per share amounts)
| | July 31, | | | |
| | 2007 | | January 31, | |
| | (unaudited) | | 2007 | |
Liabilities and Stockholders’ Equity | | | | | |
Current liabilities | | | | | |
Checks issued against future advances on revolving credit facility | | $ | — | | $ | 1,465 | |
Accounts payable and accrued expenses (net of allowance for returns of $141,654 and $164,069 at July 31, 2007 and January 31, 2007, respectively) | | 266,764 | | 308,184 | |
Accrued expenses | | 58,128 | | 62,838 | |
Deferred revenue | | 1,894 | | 2,630 | |
Current portion of obligations under capital leases | | 1,343 | | 995 | |
Current maturities of debt | | 8,157 | | 7,850 | |
Income tax payable | | 1,884 | | — | |
| | | | | |
Total current liabilities | | 338,170 | | 383,962 | |
Deferred tax liability | | 32,451 | | 32,500 | |
Obligations under capital leases | | 1,046 | | 1,069 | |
Debt, less current maturities | | 137,322 | | 146,534 | |
Other | | 5,267 | | 6,519 | |
| | | | | |
Total liabilities | | 514,256 | | 570,584 | |
| | | | | |
Total stockholders’ equity | | 445,834 | | 439,447 | |
| | | | | |
Total liabilities and stockholders’ equity | | $ | 960,090 | | $ | 1,010,031 | |
