EXHIBIT 99.2

              SORC FISCAL 2Q06 EARNINGS CONFERENCE CALL TRANSCRIPT

CORPORATE PARTICIPANTS

TODD ST. ONGE
Brainerd Communications

LESLIE FLEGEL
Source Interlink Company - Chairman & CEO

JIM GILLIS
Source Interlink Company - President & COO

MARC FIERMAN
Source Interlink Company - CFO

CONFERENCE CALL PARTICIPANTS

BOB LABICK
CJS Securities - Analyst

ROBERT SKLOFF
Sidoti & Co. - Analyst

DON MCARTHUR
Stifel Nicolaus - Analyst

DON TROTT
Jefferies & Co. - Analyst

ROBERT ANDRADE
Caxton Associates - Analyst

TIM ALLEN
Jefferies & Co. - Analyst

PRESENTATION

OPERATOR

Good afternoon, ladies and gentlemen, and welcome to the Source Interlink
Company's fiscal 2006 second quarter earnings teleconference call. [OPERATOR
INSTRUCTIONS] At this time I would like to turn the conference over to Todd St.
Onge of Brainerd Communicators to read the forward-looking statements. Please go
ahead, sir.

TODD ST. ONGE  - BRAINERD COMMUNICATIONS

Good afternoon. Thanks for joining us for the Source Interlink Company's
conference call. Before we begin we want to remind you that managements' remarks
today will contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, including statements relating to,
among other things, future business plans, strategies and financial position,
working capital needs and opportunities for growth. When used on this call,
words such as anticipate, may, will, believes, intends, expects and similar
expresses are intended to identify forward-looking statements.

Because such forward-looking statements involve certain risks and uncertainties,
actual results and timing of events could differ on a material basis from those
discussed here in. Factors that could cause and contribute to such differences
include, but are not limited to, the risks and uncertainties as discussed in
reports previously and subsequently filed by us with the Securities and Exchange
Commission, including our annual



report on Form-10K for the Fiscal Year ended January 31, 2005, as filed on April
18, 2005. After short presentations by management, we will take your questions.
With that, may I turn the meeting over to Source Interlink Company's Chairman
and Chief Executive Officer, Leslie Flegel.

LESLIE FLEGEL  - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

Hi, everybody. Source had a solid second quarter, and at the mid-point of our
Fiscal Year, we are on track to meet our guidance of $85 to $90 million in pro
forma EBITDA and approximately $0.75 in pro forma earnings per share for the
full fiscal year. The second quarter will now generally be our slowest of the
year, due primarily to seasonality in Alliance, and was a particularly difficult
quarter this year for retailing in general, as reported in national news
publications, due primarily to rising fuel prices and the difficulty in
customers getting to stores. In addition, we absorbed the costs including
interest associated with the Levy transaction as general expenses in the
quarter, as well as the cost of primary Source and its conversion into the Levy
operation. We now have accomplished that transition and the integration went
smoothly.

Despite the absorption of those expenses, which exceeded $1 million, we're
pleased to report results in line with our original internal expectations for
the quarter, another indication that we are on course to achieve our plan for
the fiscal year. Jim Gillis, our President, will provide a snapshot of our sales
and marketing efforts and Marc Fierman will then review our financial and
operating results for the quarter in more detail. After that we will take your
questions.

The great strength of this Company is its sound strategy of offering diversity
in its products and services. This was reflected in the second quarter, as
results were highlighted by strong profit growth at our Alliance division,
exceeding our internal expectations. Magazine sales were strong, particularly in
our mainstream accounts, due to the successful introduction of a number of new
weekly celebrity publications. This bodes well for future magazine sales in the
mainstream market, where overall sales are driven by weekly checkout titles. The
magazine division performed a bit below earnings expectations, due to reasons
previously stated. In-Store Services performed overall as expected, because of
strong performances from wood manufacturing and rebate and information
management, as our wire fixture business continued to perform below
expectations. But it is expected to improve in the third quarter.

The Company posted pro forma earnings per share for the second quarter of $0.12
on total revenue of $394 million. The Company also posted pro forma EBITDA for
the quarter of $14 million and generated more than $22 million in operating
cash-flow and approximately $18 million in free cash-flow. Pro forma results
assume that the Alliance merger was completed as of February 1, 2005, the
beginning of our fiscal year. The quarter was also the first one including the
Charles Levy Circulating Company acquisition. We had Levy for all but one week
of the quarter. That deal, as part of our overall magazine distribution
operations, is accounted for as of the day of the acquisition.

Alliance's results continue to show strong profit margin improvement, as the
business focuses on its more profitable accounts and continues to achieve merger
synergies. For the second quarter, sales for Alliance were up slightly to $209
million, but pro forma operating mar -- operating margins this quarter increased
substantially to 4% in the second quarter, compared to 2.7% for the prior year
period. This is an outstanding result, as improvement in operating margins has
been an important strategy of this Company.

The team at Alliance, led by Alan Tuchman, is doing a great job, capitalizing on
new revenue opportunities. In the first 90 days after closing this merger,
Alliance added 400 Kmart stores, over 1,000 grocery stores, and in July we
announced an agreement with Walgreens to become the exclusive distributor of
CD's and DVD's at 2,500 Walgreens locations. Revenue growth and the financial
impact of these transactions will be seen beginning in the third and fourth
quarter. Alliance is responsible for the selection, in-store marketing and
merchandising and fulfillment of all CD's and DVD's in this -- in these stores.
These accomplishments demonstrate our ability to pre -- to penetrate major
retail accounts on a national level with a full breadth of home entertainment
fulfillment products and services.

Alliance continues to perform well and we expect an excellent second half to the
year, typically the stronger part of the year based on seasonality. The DVD
segment, in particular, continues to be a great business, and music is holding
its own. Research fo -- firm, Verona Shore, recently released its annual
communications industry study that sees DVD sales doubling by 2009 to $40
billion. Our large retail client base and comprehensive DVD fulfillment
infrastructure positions our Company to achieve a larger share of the
incremental future growth of this category.

Not only are we winning accounts, we are helping customers develop attractive
merchandising solutions. One example is a new 72-pocket DVD spinner rack fixture
that we have deployed in the checkout aisle with a leading grocery chain. The
success of this approach has added to the excitement of placing DVD's in the
checkout area, where this highly impulsive product can receive the greatest
consumer exposure. I am also very pleased to note that the Alliance division was
recently awarded the Large Wholesaler of the Year award from the National
Association of Recording Merchandisers or NARM. This is the first time Alliance
has won this award. It's a commendable achievement for everyone at Alliance and
I congratulate our employers -- employees for their well-deserved industry
recognition.



Our magazine division reported revenue for the second quarter of a $167 million,
compared to $66 million for the prior year period. To give some added context,
the $167 million is about 8% ahead of the combined results of Levy and Sources
magazine businesses in the same period last year. This revenue number did not
include Levy sales that occurred in the first week of the quarter, prior to the
completion of the transaction. While revenues were up in magazine sales,
operating margins de -- decreased, as anticipated, to 2.8% compared to 7% last
year. As I said last quarter, we did not expect immediate profit contribution
from the Levy business. So what you are seeing in the margin result is the
impact of some one-time expenses and the doubling of our base of magazine sales,
with no incremental interim from our ma -- our mainstream magazine distribution
business. We do, however, expect operating margins for the remainder of the year
in the magazine division to improve the 3.5% to 4% and even better than that
next year.

We are very happy with the Charles Levy acquisition. Of course, much of the
incremental contribution in synergies still lie ahead. We have said in the past
that Levy will contribute $17 million or more of annual pre-tax earnings by
fiscal 2008. We feel we are ahead of that schedule, as i -- as it is anticipated
that approximately $10 million in pre-tax profits will add -- from that division
will add to our fiscal 2007 results. Levy is a very strong organization and had
generally been acknowledged as the best run service company in the general
magazine market. We inherited an experienced management team, many of whom have
been incorporated into the overall Source structure. The 1,500-strong Levy field
service organization is outstanding and greatly enhances the Alliance
development in the mainstream market.

One of the elements factored into our positive view on acquisition cost
synergies is a new shipping agreement with UPS. We highlighted last quarter that
this agreement was being developed. UPS is now serving as our primary
third-party distributor and it is a three year agreement. This approach gives
Source more uniform pricing throughout our businesses and also allows us the
ability to convert more routes to third-party shipping. We anticipate these
actions will result in meaningful savings for the Company. In one year, we have
gone from a $300 million revenue company to a multi-billion run-rate revenue
Company, while continuing to generate strong profits and cash-flows.

I believe the results of these two -- first two quarters clearly demonstrate the
sound strategy of bringing Source, Alliance and Levy together. I have been very
pleasantly impressed at how smoothly the meshing of three independently-run
organizations is being accomplished. This really is a great tribute to the
management teams of these three companies, who decided to dispense with much of
the turf war nonsense you often see in these situations and just get it on.

With that, I will turn the call over to Jim Gillis, who will give you some
marketing information.

JIM GILLIS - SOURCE INTERLINK COMPANY - PRESIDENT & COO

Thank you, Leslie. I want to update you this afternoon on some notable sales and
marketing highlights from the second quarter, and then I'll pass the call on to
Marc for the financial review. Overall, the benefits of our recent Alliance and
Levy transactions are very apparent in only one quarter into the cycle. Our
bolstered sales force and expanded products and services have resulted in both
new customer wins and increased sales traction with the existing retail
customers across our business. These successes have come across the full
spectrum of retailers, including book stores, specialty retailers, grocery and
drug chains, as well as convenience stores. We continue to integrate operations
and ramp-up our sales and marketing efforts, and we are well positioned to
benefit from a strong second half selling season.

As Leslie mentioned, Alliance continued building momentum in the second quarter,
highlighted by the Walgreens deal in July. Through this agreement, we added
2,500 Walgreens stores or an estimated $40 million of CD and DVD's on an annual
basis. This is on top of the supermarket and grocery chain business Alliance has
picked up so far this year. We are currently on track for 70, 000 pocket
positions placed by year end. Within that 70, 000 pockets, 22,000 have already
been placed, another 40,000 are sold and in the pipeline, and we have contracts
pending on another 35,000 pockets. Source added another 35 chains to the
Alliance holiday music program, bringing in $1 million in additional revenue.

Turning to our magazine division, we generated meaningful new business across
the country during the second quarter. Starting with 7-Eleven, we picked up 78
new stores in Arizona. We also picked up nine Target stores in the Buffalo area,
expanding our strong relationship with this retail power house and illustrating
the appeal of our expanded magazine operations to the nation's largest
retailers. Our still growing airport direct magazine fulfillment business picked
up two airports during the second quarter, Dulles in Washington, D.C. and BWI in
Baltimore. Finally we resigned magazine fulfillment contracts for both Kroeger
in Cincinnati and Meyers in Grand Rapids, Michigan. In addition to new retail
customers, we also added new publishers to our roster of available magazines.
During the second quarter we added Hemmings Motor News, which sells about 1.6
million units annually, Multimedia International, and Street and Smith, which
collectively distribute around two million units each year.



Although the wire manufacturing business was soft during the first half of the
year, this division is currently operating at full capacity, and we expect a
good turn around this business through to the end of the fiscal year. Right now
we are manufacturing shipping wire displays for many national chains including
Fred Meyer, Kroeger, Lah Blahs (ph), Pathmark, Rite Aid, Food Lion, Nexcom,
Stater Brothers, Stop and Shop, Giant Food and Wrigley. Our wood manufacturing
business made notable progress during second quarter and will continue into the
third quarter, as Borders Books continues to remodel and refurbish current
locations and open new stores nationally. Source manufacture's the vast majority
of display for Borders. Shipments for Huckwood manufacturing are up around 20%
year-to-date.

Finally on the cost side of the business, we've made some important improvements
in our capabilities and have consolidated all the engineering to Bonita Springs,
Florida or Quincy, Illinois. Overall, this business has had a complete
turn-around. Looking at new opportunities for the third quarter and beyond, our
increased lines and more sophisticated marketing resources are enabling us to
expand to retail chains that were traditionally considered outside the box,
Office Depot, Bed, Bath & Beyond and Home Depot, to name a few.

On the international front, Sources successfully completed our first racking
program in the U.K. TM Retails selected Source Interlink International to
manufacture and ship displays to all of its 1,069 locations. This order is
complete and as far as we know, it is the first ever paid placement program in
the European market. As interest in paid placement at retail increases overseas,
our international business will grow. Our continued efforts to secure front-end
management in the international market are ongoing. As an example, Boots, a
1,500 store drug chain, has requested a next steps meeting in the U.K. on
September 22. We've also signed an exclusive distribution agreement with Borders
U.K. for all U.S. magazine products. Shipping and delivering -- delivery start
October 4, 2005.

Alliance has performed beyond expectations thus far, increasing its foot
fingerprint and securing major new accounts. As for Levy, even while integration
efforts are underway, the Company has opened important new doors for Source
Interlink Companys'. We are optimistic firs -- for the second half of the year,
as early holiday orders are strong and we have some exciting new businesses in
the pipeline. I look forward to updating you further as the second half unfolds.

With that, I'll turn the call over to Marc.

MARC FIERMAN - SOURCE INTERLINK COMPANY - CFO

Thank you, Jim, and good afternoon, everyone. Today I will review our second
quarter financials and discuss the operating results of our four core segments,
CD-DVD fulfillment, magazine fulfillment, In-Store Services. and Shared
Services. The latter, our Shared Services segment, consists of overhead
functions not allocated to individual operating segments, such as corporate
executive costs, corporate finance, Sarbanes-Oxley compliance, human resources,
public company costs, and legal and audit. Please note the Chas Levy acquisition
has been integrated into the magazine fulfillment segment.

Also, as previously stated, we are providing financial results on both a pro
forma and GAAP basis. For fiscal 2006, the pro forma view assumes the Alliance
deal closed effectively at the beginning of our fiscal year, February 1, 2005,
while the GAAP view reflects results as of March 1, 2005. For both pro forma and
GAAP, the results of Chas Levy are reported as of the date of acquisition, May
10, 2005. The pro forma view excludes merger-related expenses and non-cash,
non-tax deductible amortization of Alliance's intangible assets, as well as
prior period foreign tax rate adjustments. In addition, the pro forma view will
exclude the amortization of Levy's intangible assets. Our outside specialists
are continuing to quantify the value of the Levy intangibles. We expect that
analysis to be completed shortly.

For prior year periods, we will be comparing to consolidated historical Source,
meaning without Alliance or Levy. Each quarter, we will provide at the segment
level Alliance's historical financial information in the comparable prior year
periods so that you could evaluate performance. We will not be providing similar
information regarding Levy, at is - as it is now part of the magazine
fulfillment operations and will be reported in that segment.

The following are the pro forma consolidated results from continuing operations
for the second quarter and the six-month period. Second quarter net income
totaled 6.1 million, and for the six-month period, net income totaled 12.4
million, calculated on a year-to-date effective tax rate of approximately 38%.
Second quarter revenue was 393.8 million, and for the six months, 701.4 million.
Gross profit for the second quarter was 79 million, a 20.1% margin and for the
six months, 141.4 million, a 20.2% margin. Operating income for the second
quarter was 11 million, a 2.8% margin, and for the six months, 22.5 million, a
3.2% margin. Second quarter pre-tax income was 9.4 million and 19.8 for the six
months. Earnings per share for second quarter are $0.12, computed on 53 million
diluted shares. Earnings before interest, taxes depreciation and amortization,
EBITDA, totaled 14 million for the second quarter and 28 million for the
six-month period.



On a GAAP basis, in the second quarter the Company reported a net income from
continuing operations of 4.1 million or $0.08 per diluted share. GAAP results
for the second quarter last year, not including Alliance or Levy, reported net
income from continuing operations of 4.1 million or $0.16 per diluted share,
computed on an effective tax rate of approximately 32% and 25 million shares.
Revenue from continuing operations was 86.9 million and EBITDA from continuing
operations was 7.3 million. Pro forma segment results are as follows. For the
second quarter the CD and DVD fulfillment segment reported revenue of208.6
million, compared with 207.7 million in the prior-year period, a slight
increase.

Gross profit was 36.5 million, compared to 36.8 million. Gross profit margins
decreased slightly to 17.5% from 17.7%. Operating income for the segment was 8.4
million compared to 5.5 million in the prior-year period, and the resulting
operating margin increased to 4% from 2.7%. For the six-month period, the CD and
DVD fulfillment segment reported revenue of 430.3 million, compared with 433.7
million in the prior-year period. Gross profit was 75.7 million compared to 74.9
million. Gross profit margins increased to 17.6% from 17.3%. Operating income
for the segment was 19.7 million compared to 13.2 million in the prior-year
period, and the resulting operating margin increased to 4.6% from 3%.

In the second quarter, the magazine fulfillment segment, which includes Chas
Levy beginning May 10, 2005, reported revenue from continuing operations of
166.8 million, compared with 65.7 million in the prior-year period, an increase
of 153.9%. Gross profit from continuing operations increased to 36.6 million
from 16.4 million in the prior-year period, an increase of 123.2%. Gross profit
margins from continuing operations decreased to 21.9% from 25%, as a result of
lower margins in the Levy business. Operating income from continuing operations
for the segment was 4.7 million, compared with 4.6 million in the prior period.
The resulting operating margin in the quarter was 2.8% compared to 7% last year.
It should also be noted that the quarter was negatively impacted by duplicate
cost incurred during the preintegration period of primary Source into Levy.

For the six-month period, the magazine fulfillment segment, of which Levy was a
component for most of the second quarter of this year, reported revenue from
continuing operations of 238.4 million, compared with 131.4 million in the
prior-year period, an increase of 81.4%. Gross profit from continuing operations
increased to 55.5 million from 31.8 million in the prior-year period, an
increase of 74.5%. Gross profit margins from continuing operations decreased to
23.3% from 24.2%. Operating income from continuing operations, excluding
prior-year relocation costs for the segment, was unchanged at 8.5 million in the
current and prior-year period. The resulting operation -- operating margin for
the six months was 3.6% compared to 6.5% last year.

In-Store Services revenue totaled 18.4 million in Q2 compared with 21.2 million
in the year-ago quarter, a 13.2 percent decrease. That decrease was driven
almost entirely by lower wire fixture sales. Gross profit in Q2 was 5.9 million
versus 7.3 million a year ago, a 19.2% decline. Gross profit margins decreased
to 32.1% from 34.3% last year. Operating income in the second quarter was 3.6
million versus $5 million a year ago, and operating margins in the quarter were
19.5% versus 23.7% a year ago. For the six-month period, In-Store Services
revenue totaled 32.7 million compared with 37.6 million in the year-ago period,
13.1% decrease also driven by lower wire fix include sales. Gross profit was
10.2 million versus 14 million a year ago, a 27.1% decline. Gross profit margins
decreased to 31.2% from 37.1% last year, and operating income in the period was
5.6 million versus 9.4 million a year ago. And operating margins for the period
were 17.1% versus 25.1% a year ago.

In the second quarter, Shared Services increased to 5.7 million from 3.8
million, and for the six-month period increased to 11.3 million from 7.5
million. This increase reflects the additional costs related to the current size
of the Company. As evidenced in the second quarter, Shared Services decreased as
a percentage offer revenue from continuing operations from 4.3% a year ago to
1.5% this year, and for the six months decreased from 4.4% to 1.6%.

Pro forma cash provided by operating activity during the second quarter was
approximately 22.7 million. Second quarter capex was 3.8 million and
depreciation was 2.4 million. Free cash-flow totaled 18.9 million. For the six
months, pro forma cash provided by operating activities was approximately 22.3
million, with capex of 6.4 million and depreciation of 4.8 million. Free
cash-flow for the six-month totaled 15.9 million. Interest expense during the
second quarter was 1.7 million, of which approximately 750,000 is attributable
to the Levy acquisition.

The following are some balance sheet highlights as of July 31, 2005: Total
assets, 818.3 million; working capital 37.3 million; Revolving bank debt, 74.5
million, which reflects the Levy acquisition purchase price of approximately 30
million in cash and approximately 14 million to pay off some of its debt. In
addition to the levy acquisition, the Company also repaid the balance of an
existing mortgage loan of approximately seven million. Currently accessibility
on our access-based credit facility stands about $90 million.

I will now turn the call back to Leslie for some closing comments.

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO



Thank you, Marc. We've only had these companies together for one reporting
quarter and we have made great strides in consolidation of operations,
marketing, and margin improvement. We're the only company in home entertainment
with capacity to provide retailers with the total solution as their vendor.

Our cash-flow was outstanding in this past quarter and places us on track to
achieve the $40 to $50 million we projected last quarter. Operating profit
margins at Alliance have virtually doubled, as compared to last year. Levy gave
us great strength in the general market, and not just in the magazine business.
Levy does 400 million in magazine sales, and we intend to turn that business
into a substantial profit producer, just like every other business we have
acquired. Not only does Levy provide us with a 400 million top line, it provides
us with a vehicle and an infrastructure to expand sales for all of our product
lines.

We have a great amount of activity taking place in our Company. We are exploring
additional opportunities in sales, acquisitions and operational synergies. We
have a terrific base from which to grow and develop, and we are very financially
sound. Because of this, we can capitalize upon opportunities as they are
presented. Our unique relationship with UPS and, to some degree, FedEx allows us
to get product to any store in any zip code within hours. We do not have to say,
we can't do it, to any customer. It is very rewarding to me to be a part of this
exciting Company.

That concludes our prepared remarks for today. So with that, I will ask the
operator to open the floor to questions and answer.

QUESTION AND ANSWER

OPERATOR

[OPERATOR INSTRUCTIONS]

UNIDENTIFIED

Your first question is coming from Bob Labick of CJS.

BOB LABICK - CJS SECURITIES - ANALYST

Good afternoon.

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

Hi, Bob.

BOB LABICK  - CJS SECURITIES - ANALYST

Hi. Well, I'm glad to hear we're on track for the 85 to 90 million in pro forma
EBITDA for the year. I just have a question regarding Alliance in the quarter.
When we had the last call in early June, I believe, we had discussed the -- the
seasonality of Alliance's business and they reported operating income of a
million -- of 11.3 million in Q1. And you mentioned that Q2 should be equal to
that or higher. It was obviously below that this quarter. I'm wondering if that
is in relation to the timing of some Kmart deals, you know, Kmart rollout,
timing of the Walgreens rollout or what else may have happened? Is it a timing
issue or is it -- was there another change? Because it's obviously below those
expectations despite being ahead of your internal expectations, as you've said
on this call. So maybe you could help us understand seasonality better. And what
would be great is if you could give us an idea of seasonality in the remaining
two quarters as well.

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

Okay. I will answer that question to the best of my ability. In the first place,
you have to understand the first quarter was exceedingly high and much greater
than anybody anticipated. We had orders and shipments that were comparable to
the shipments we were going to have in the first quarter, so we anticipated that
the sales would be comparable. What, in fact, really happened was that,
particularly the book stores which both Barnes & Noble and Borders, although in
this case it affected -- was affected by Barnes & Noble, both chains have
announced during the course



of the first half of this year that their sales were soft and in fact are
affected to some degree by -- they were affected by the fact that there wasn't
any major best seller until Harry Potter hit the streets and also the fact that
energy prices did slow down traffic to some degree. So it is -- was more a
function of just, candidly, the product not selling as we -- through as well
during that period of time.

And then the other factor was that the shipments to Kmart and Walgreens took
place actually, in effect, about 30 days later than we had originally
anticipated they would at the time we set the quarter for a variety of reasons,
although it's completed now. So that's why we stated that the bulk of those
sales will be achieved in the second half of the year. So far as the last two
quarters of the year are concerned, it's pretty up a case of the -- without
wanting to give any predictive sales by quarter, Alliance is scheduled and
historically does much better in the second half of the year, and that's for
several reasons. One is that both music and DVD's are principally holiday
products, and also the great traffic, a big portion of the business that
Alliance does in the course of the year is done in specialty stores and
particularly Barnes & Noble. And their big time of the year is the second half
of the year and their traffic counts are enormous compared to the rest of the
year.

And then also there are some very -- for some reason the movie studios, which
also affected the second quarter, did hold back some major releases in DVD,
which they are expecting a very strong fall and winter season. So it's a balance
thing, really, in effect and probably was a little premature saying that second
quarter would be comparable. And frankly, if it would have been, we -- we would
have had an even stronger showing in the -- in the quarter. But as it is, we did
- -- as you know in the first quarter, we did exceed our internal number and in
the second quarter we were pretty much right on it.

BOB LABICK - CJS SECURITIES - ANALYST

Okay. Thanks. And in regard to wire rack, you mentioned a pickup expected in Q3.
Could you just kind of just, kind of, just update us on that process? Where we
are in the cycle, what gives you confidence in Q3 pickup? Just speak a little
bit about that, please?

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

Yes. I'll turn that question over to Jim Gillis to answer.

JIM GILLIS - SOURCE INTERLINK COMPANY - PRESIDENT & COO

Well, what gives us confidence is that we have been working for the first six
months on most of the chains that I spoke about in the prepared text, and every
single one of those chains arrived on schedule to be re -- to be manufactured in
the accordance with the time that we had slots in the manufacturing plants clear
through to the end of the year.

BOB LABICK - CJS SECURITIES - ANALYST

Okay.

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

So in other words, it's book business is what you're saying.

JIM GILLIS - SOURCE INTERLINK COMPANY - PRESIDENT & COO

Yes, it's book business.

BOB LABICK - CJS SECURITIES - ANALYST

Got it. Thanks. Okay. Book business on track and despite being a little weaker
in Q2 than your expectations, which you said, that was from older business. The
book business is on track and that should hit in Q3 and beyond.



LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

Yes. We're expecting Huck, as an example, the wood manufacturing company, is --
has a very strong third quarter, actually potentially it's strongest in history.
And there's really nothing much that can change that short of some kind of a
catastrophe, God forbid, Because they're building -- they're building the orders
right now. I mean, so it is going to take place.

And in the manufacturing business, the -- that is a fact, I mean, because you
either have the business going into the quarter or you don't have the business
going into the quarter. Because if Jim got an order now or the Company got an
order now for rack business in the third quarter, it could not be fulfilled
because there's a time lapse by the time you order the materials and you can do
the work. So you either have it or you don't have it. And, overall, as we stated
earlier that overall in the year would be fairly comparable to what -- what it
has been for the last couple of years. But that, you know, it's a matter of
timing and that's why it's been very difficult to predict numbers in the wire
manufacturing business because, for whatever reason, retailers have holdups or
they wait for more prototypes or whatever the case is and they throw you into
the next quarter. But once it's booked in the quarter and once you're making it,
then it's a done deal.

BOB LABICK - CJS SECURITIES - ANALYST

Terrific. Thank you very much.

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

Okay.

OPERATOR

Thank you. Our next question is coming from Robert Skloff of Sidoti & Co.

ROBERT SKLOFF - SIDOTI & CO. - ANALYST

Good afternoon. A couple quick question. First is the Alliance revenue was
roughly flat year-over-year, and it doesn't sound like from the previous
question very much in the Kmart and Walgreens and other things, the supermarkets
that you referred to, were included. I just wanted to see if that was in ca --
indeed the case? And also, wanted to see if you can quantify at all any of that
incremental business that you expect for the remainder of the year?

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

You're right. I mean, very little of the Kmart and Walgreens business got
factored into the second quarter. And a very important element, Rob, to remember
is that we had -- we had priorities and a very important development for
Alliance, which is really depicted in their margin improvement was just that. We
had a lot of work to do on synergies and margin improvement and focusing on
profitable accounts. So, while the sales didn't go up in the quarter, to speak
of, the margins and the profits did, which was a very important point.

Now we are shipping those additional -- that additional business in the second
half of the year. We we do expect very strong sales coming from the traditional
accounts that Alliance had because of a very strong lineup of product that's
coming out. And to quantify Walgreens and Kmart and some of the other business
on an annualized basis, I think it's fair to say that that's about $100 million
plus worth of business. It should be, to some degree, a little back-loaded for
the last six months of the year, so it, in theory, should add $50 or $60 million
in business to the year for us that we didn't have last year.

ROBERT SKLOFF - SIDOTI & CO. - ANALYST

Okay. Great. I guess along that same line of thinking, what would we think that
the core Alliance business, not including any of this stuff we're just talking
about, is it -- what is that capable of growing on the top line?



LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

Well, I think -- I think you have to recognize the fact that one of the things
we did, and I think sort of a trademark of Source, has been to recognize
business as profitable and not really spend a lot of time on business that isn't
profitable, and Alliance was well on that track before. So we had a 90-day head
start before we actually closed the transaction with Alliance and a big focus of
ours was to concentrate and get the operation ready to deal with profitable
accounts. So that was really a focus.

And there was additional work that was being done in trying to improve not just
operating margins but gross margins, which we think will have some positive
effect on the second half of the year, as well. So going forward, our focus is
on sales now. You have to remember we've only owned Alliance for five months. We
did have a 90-day head start on it, at least to some degree, in being able to
communicate with the Alliance people prior to that. But the principal focus at
that time was getting more profit out of the existing business that we had
through better efficiencies and gaining some synergies. And obviously we've
accomplished that lot of that, although we're not finished with that, either.
And now the big focus is on sales because we're in a position to go out and do a
good job with it.

ROBERT SKLOFF - SIDOTI & CO. - ANALYST

Okay. Great. Now kind of just switching gears to the Levy side of the business,
you guys gave a number for year operating performance in the second quarter of
last year from magazine fulfillment and I think it was 4.6 million. Marc, do you
ever a number for what pro forma operating profit would have been? I think that
would prove helpful for a lot of people.

MARC FIERMAN - SOURCE INTERLINK COMPANY - CFO

That information -- we have combined Levy into the segment and we have moved the
primary Source division of that segment into it. So it's really -- we're not
going to be really breaking out the business in that way now or in the future.

JIM GILLIS - SOURCE INTERLINK COMPANY - PRESIDENT & COO

And the reason for that, Rob, is because there are so many -- we've blurred the
line so much between those two companies that going forward, we really don't
want to get caught up in breaking out Levy and breaking out the old Source. But
you can kind of come to your own conclusions on that, based on what we ma --
what we said about the additional costs that were incurred in the quarter that
wouldn't have occurred if we didn't do the Levy Transaction.

BOB LABICK - CJS SECURITIES - ANALYST

Right. Okay. And then, I guess the last question, Marc, debt was a little bit
higher than I'd anticipated. What is your thinking on where that should stand by
end of the year? And then what would be a useful or a target interest expense
that you would think for the fiscal year?

MARC FIERMAN - SOURCE INTERLINK COMPANY - CFO

I would say that -- you have to understand that that number is driven, too, by
the fact that you start having a buildup, too, of inventory around this time of
year for the Christmas season typically, in especially in the Alliance business.
And you also have the acquisition of the -- of Levy in there. But I would say
that, you know, towards the end of the year I would say that the number will
probably be -- I'd say probably about 20 do -- 20 million less than it currently
is or what it was at July 31. But understanding that we'll be collecting a lot
of our receivables from sales during that Christmas season during the first
quarter. That's when I think you'll really see it come plummeting down. And
that's been the cycle that we've seen at Alliance and I don't expect that to be
any different this year.

If you recall last year, most of their cash-flow that ge -- all of the cash-flow
that was generated out of Alliance last year was in the fourth quarter, so
that's the real period. The fourth quarter and the first quarter where you're
really collecting that money from the -- from the holiday season and you're
bringing your inventories down. In terms offer what you should estimate for
interest expense, we had $1.7 million for the quarter here. I would say it
probably would be in the neighborhood of about probably five to six million, on
an annualized basis.



BOB LABICK - CJS SECURITIES - ANALYST

Okay. Thank you.

JIM GILLIS - SOURCE INTERLINK COMPANY - PRESIDENT & COO

One other point I want to make, Rob, which would make a big difference is we do
expect Levy to start making money before this year is over. And as I mentioned
earlier in my call, a substantial amount of money next year. And their cash-flow
is good, so that will help as well.

BOB LABICK - CJS SECURITIES - ANALYST

Okay. Thank you very much.

JIM GILLIS - SOURCE INTERLINK COMPANY - PRESIDENT & COO

Okay.

OPERATOR

Thank you. Our next question is coming from Don McArthur of Stifel Nicolaus.

DON MCARTHUR - STIFEL NICOLAUS - ANALYST

Good afternoon, guys.

JIM GILLIS - SOURCE INTERLINK COMPANY - PRESIDENT & COO

Hi.

DON MCARTHUR - STIFEL NICOLAUS - ANALYST

Can you talk about magazine fulfillment costs? It's a little bit higher than
what I was looking for. I believe that's probably just that Levy's operating at
a higher cost. I guess, one, is that true? And then how do you see that -- the
magnitude of that trending going forward with your new deal with UPS and
consolidation of facilities?

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

No question about it. It's about Levy. Listen, one of the reasons that we
acquired Levy -- there were many reasons. Field force, giving us a bigger base
in the magazine business, so on and so forth. But one of the reasons is that we
really did see a gold mine that we could start digging into because Levy has a
very expensive methodology of distribute -- getting magazines to the stores, and
their costs are much greater than ours in that -- in that regard.

Particularly, one of the most important developments of this new deal that we
have with UPS is that we have much more standardized pricing as opposed to
multi-weighting pricing. So that means that our pricing is pretty standard, no
matter where we ship from. So this enables us to aggressively go after the
reduction of the normal way that Levy's been distributing magazines to
conversion to more UPS shipments. Now we -- it's not going to happen in
overnight because there's 650 routes that we have to deal with. But we are
working feverishly on that, as you might imagine. And that's where the principal
cost differences are.



And then there's another difference. Levy's gross margin simply is lower than
Interlink's was, just because of the nature of the business. And we're working
on ways to improve that, as well. So we have a lot of upside where that's
concerned because Levy -- you know, Levy is -- actually did a little better than
we even thought it was going to do in the quarter. And we feel that it's going
to be a really big winner for us, as we go forward here .

DON MCARTHUR - STIFEL NICOLAUS - ANALYST

Okay. What was the loss from discontinued operations in the quarter?

JIM GILLIS - SOURCE INTERLINK COMPANY - PRESIDENT & COO

It was -- Marc?

MARC FIERMAN - SOURCE INTERLINK COMPANY - CFO

Yes. That's related to costs associated with finalize -- we had that Dayco
business that we sold. There was some residual costs that we incurred to totally
close it out, and that's what that represents.

DON MCARTHUR - STIFEL NICOLAUS - ANALYST

Okay. And then, with respect to the Levy intangibles, I guess, what was it this
quarter and what's kind of your -- I know you don't know specifically what it
is, but kind of a range offer what you might expect?

MARC FIERMAN - SOURCE INTERLINK COMPANY - CFO

Well, first of all, my best guess from what I'm hearing, and like I said, this
has not been final finalized is somewhere probably between 150 and 350,000 a
quarter.

DON MCARTHUR - STIFEL NICOLAUS - ANALYST

Okay.

MARC FIERMAN - SOURCE INTERLINK COMPANY - CFO

And --

DON MCARTHUR - STIFEL NICOLAUS - ANALYST

Go ahead.

MARC FIERMAN - SOURCE INTERLINK COMPANY - CFO

And there is nothing in this quarter because it has not yet been -- it has not
yet been determined as to what that amount is.

DON MCARTHUR - STIFEL NICOLAUS - ANALYST

Okay. And then tax rate this quarter, that was high just because of foreign tax
movement or something else in there?



MARC FIERMAN - SOURCE INTERLINK COMPANY - CFO

Actually our tax rate was higher last quarter. We were actually at 40%. So
actually we've done some work here with the states and actually been able to
reduce our effective rate.

DON MCARTHUR - STIFEL NICOLAUS - ANALYST

Okay. Must be missing something there.

MARC FIERMAN - SOURCE INTERLINK COMPANY - CFO

You might be looking at the GAAP rate, which is totally skewed by the
nondeductible amortization of the Alliance intangible.

DON MCARTHUR - STIFEL NICOLAUS - ANALYST

That's probably what it is. And then finally, you've had some good luck with new
business with Borders, Kmart, Walgreens. How does the new business pipeline
look? And do we see more big deals over the next few quarters?

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

Yes. We hope so. Let me tell you essentially what our game plan is where that's
concerned. What -- we feel that the infrastructure that's been built up by
Alliance in terms of securing the largest inventory in the world in music and
DVD's and in our total magazine business now being really truly the only company
national in scope in terms offer being able to take -- we -- there isn't a
retailer who said if they said to us tomorrow, we want you to service every
store in the country that we couldn't accommodate.

So from our perspective, our -- our business plan is to number one, we feel so
far as music and DVD's are concerned, is that it really doesn't make sense for
specialty retailers, particularly who are doing their own direct distribution,
to do that. We think that we can offer them the kind of deal that's good for us
and good for them -- to convince them to convert, if not all, a good portion of
their distribution to us. And we are meeting with a number of chains around the
country, and so far nobody's thrown us out. So we think that's going to be very
encouraging.

In addition to that, and you have to remember that we've only owned Levy now for
- -- officially for one quarter, but a little more than that now that we'ra few
weeks into September. But we -- so far as Levy is concerned, I'll give you a --
I'll give you a typical example and name a chain, but this doesn't mean that
we're got anything going with the chain. This is just in theory. Walgreens, as
an example, has given us 2,500 stores for music and DVD's, and we service about
1,000 of their stores with magazines. It would make a lot of sense for us to go
try to convince them to allow us to do the whole array of products in all 2.500
stores where we already have a service person going to it -- to. And we have the
capacity to do that.

So one of our approaches to to talk to a number of retail chains around the
country about national distribution, our expansion of stores. Because we can
give them more consistent service and more dependable information about what's
selling because, in my opinion at least, we do that better than anyone else. So
it's very, very exciting for us to -- to look at this, because these are big
numbers. I mean, you know, we're going after everyday business and doing the
normal thing we do. But talking about big numbers in these deals. You know, 50
million, 100 million, in some cases a few hundred million dollars worth of
business with the various chains. So we may or may not be successful. But we
believe we will be, at least to some degree, and we really have a good story to
tell.

DON MCARTHUR - STIFEL NICOLAUS - ANALYST

Great. Thank you.

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

Okay.



OPERATOR

Thank you. [OPERATOR INSTRUCTIONS] Our next question comes from Don Trott of
Jefferies & Co..

DON TROTT - JEFFERIES & CO. - ANALYST

Good afternoon.

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

Hi, Don.

DON TROTT - JEFFERIES & CO. - ANALYST

How are you today? As I understand it, Levy to the degree that they still
utilize trucks under the accommodation with the union that they still have some
of the business that's trucks. How are the rising gasoline costs impacting the
Levy operating structure?

JIM GILLIS - SOURCE INTERLINK COMPANY - PRESIDENT & COO

Well, let me make one thing very clear. The vast majority of Levy's distribution
is still done by trucks. We have converted some, but for the most part it's
still done by trucks. And if you're driving trucks and gasoline prices go up,
there's nothing you can do about that, and it is going to increase costs. We --
that is one of the reasons that we're pretty -- I use the word feverishly trying
to convert those routes and as many of those routes as possible. I want to note
that -- that there are only -- Levy is got a broad based operation and there are
two unions, one in Chicago and one in Philadelphia. So it's not -- it's not by
any means in every area that they're in. So it will effect us in a negative
sense, to the degree that gasoline prices go up beyond where they are now. Now
the fact is that the gasoline prices have been high throughout the quarter. So
if it doesn't do much worse then we should be fine. If there's a huge increase
in gasoline prices, it will have a negative effect on Levy until we can convert
it to UPS.

DON TROTT - JEFFERIES & CO. - ANALYST

I would assume, though, even in the recently concluded quarter, gasoline prices
were higher than what you thought they would be going into the quarter. Can you
give us some idea of the magnitude of the deviation from plan that might
possibly have occurred?

JIM GILLIS - SOURCE INTERLINK COMPANY - PRESIDENT & COO

Marc, do you have that information at your finger tips?

MARC FIERMAN - SOURCE INTERLINK COMPANY - CFO

I would say the deviation from plan during the quarter was approximately
$350,000.

DON TROTT - JEFFERIES & CO. - ANALYST

Okay. Thank you. And then, Tim Allen is here with me. Tim has a question.

TIM ALLEN ANALYST

There was a question on the primary Source. Could you go over those integration
costs again and how that impacted the pro forma numbers?



JIM GILLIS - SOURCE INTERLINK COMPANY - PRESIDENT & COO

Well, the primary source integration cost was a factor of several things. And
one of the factors in that cost was having to, you know, the one thing we can't
dare do is not deliver magazines properly. So we had -- and this has happened to
us every time we've had a conversion like that. We've had to run dual
operations. I think the last I saw those costs were in the range of about
three-quarters of a million dollars. Marc, can you confirm that?

MARC FIERMAN - SOURCE INTERLINK COMPANY - CFO

That's approximately what they were.

JIM GILLIS - SOURCE INTERLINK COMPANY - PRESIDENT & COO

Okay.

TIM ALLEN ANALYST

Okay. Thank you very much.

JIM GILLIS - SOURCE INTERLINK COMPANY - PRESIDENT & COO

Okay.

OPERATOR

Thank you. Our last question is coming from Robert Andrade of Caxton Associates.

ROBERT ANDRADE - CAXTON ASSOCIATES - ANALYST

Good afternoon, guys.

JIM GILLIS - SOURCE INTERLINK COMPANY - PRESIDENT & COO

Hi.

ROBERT ANDRADE - CAXTON ASSOCIATES - ANALYST

Just two questions, if I may. The first one is, I notice your confidence in the
cost savings or the profitability of Levy in Fiscal Year 2007. The one thing I
didn't here hear was as far as Alliance and on progress on some of the costs. I
think when we announced acquisition we said we anticipated somewhere in the
realm of 12 million by year two. Just wanted to get a sense if we were on track
for that or how much progress we've made?

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

Absolutely. I think the last summary I saw that calculated in this number for
Alliance is about seven million of the 12 million. And that's clearly reflected
in the operation profits that you're seeing, with about another 4 to 5 million
or mo -- approximately coming next year. Marc, you -- you're on the phone. Am I
right on those numbers?



MARC FIERMAN - SOURCE INTERLINK COMPANY - CFO

You're just -- that's approximately right. That's about right. That's about what
we've got under our belt, and the rest is coming into -- will be in next years'
plan.

ROBERT ANDRADE - CAXTON ASSOCIATES - ANALYST

Got you. And I think you were kind enough to give us a sense of what you thought
the operating margins of the magazine business would do in kind of a normalized
3.5% to 4% rate. Do we have a sense of that, as well, for the CD-DVD business or
the Alliance business?

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

Well, Alliance has made -- they were -- Alliance was 4.6% --

ROBERT ANDRADE - CAXTON ASSOCIATES - ANALYST

Right.

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

For the first six months of the year, which is a terrific improvement. You know,
it's affected to some degree through the mix because, frankly, music has higher
margins than DVD's. So, if the DVD business is much stronger proportionally to
the music, it could drag on the margins a little bit. But having said that, I
can tell you that we're not intending to -- we're doing everything in our power
not to go backwards on those margins. And if anything, we're trying to do deals
and I think we're going to be successful at even improving them.

ROBERT ANDRADE - CAXTON ASSOCIATES - ANALYST

Great. My last question is just more from a -- from a guidance perspective. I
know we have a lot of moving pieces and we're just in the early midst of
integration of the Levy and a little bit later on the Alliance. But, at what
point do you think you'll feel comfortable going out to the investment community
and giving 2007 guidance?

LESLIE FLEGEL  - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

I've been thinking a lot about that, Robert, and I want to hold off on that a
little bit. But because -- and the reason for it is because we have so mu --
many deals pending that could -- that could have a dramatic effect on next year,
in a positive sense, of course. And so I would say that towards -- normally I
like to give the first glimpse of guidance when I announce third quarter
results.

ROBERT ANDRADE - CAXTON ASSOCIATES - ANALYST

Right.

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

Which is the first week in December. And I'll try to do that then, as well. But,
you know, hopefully, we can get some of these things done. And you know, again
as I mentioned earlier, we're not talking about little deals. So if we ca -- if
we are successful and can conclude some of these deals -- and of course it's all
incremental. You're talking -- most of what we're talking about here is organic.
And so it's moving into our existing infrastructures and what have you, so it
has very positive effect on the bottom-line. So, you know, I'm going to hold off
until I have a good sense of that. But at this point, I'm still planning do it
when we announce third quarter results.

ROBERT ANDRADE - CAXTON ASSOCIATES - ANALYST



Great. Thanks so much for responding to that, and I look forward to the future
of the Company. Thanks.

LESLIE FLEGEL - SOURCE INTERLINK COMPANY - CHAIRMAN & CEO

You're welcome. And it is very exciting. I mean, I'm very pleased with the
results that we had this quarter. I think that this is great performance. When
you think about what we've brought together here in the last six months and how
successful we've been in being able to do that and still create the cash-flow
and the profits. And we are, in fact, a tad ahead of our own internal
projections for the year. So really we -- this is a good news announcement, I
believe, and we're very excited about what we have going on for the remainder of
this year and certainly into next year. With that, I will conclude the call and
thank you all very much.

OPERATOR

Thank you. This does conclude today's Source Interlink conference call. Please
disconnect your lines at this time and have a wonderful day.