Bonita company reports solid first quarter earnings

The CEO of Source Interlink Cos. Inc. said Thursday fiscal 2007 is off to a “good start,” with reported first quarter earnings almost double last year’s earnings during the same period due to its recent acquisitions.

The Bonita Springs-based home entertainment and marketing services provider had a net income of $3.26 million, or 6 cents per diluted share in the quarter, which ended on April 30. That is a 95 percent increase from the same period last year, which had a net income of $1.67 million, or 4 cents per diluted share. Reported earnings per share exceeded what was projected by analysts by a penny.

The earnings include results from the merger the company had with Alliance Entertainment last May but do not include the company’s purchase of Chas. Levy Circulating Co., which was also completed last May, or Anderson News, which was completed on April 1.

Last quarter, the company fell short of projections due to hurricanes, the rising cost of fuel and the bankruptcy of one of its major retail customers.

In the coming months, the company will “aggressively” seek out the grocery business and hopes to place music departments in grocery stores and drugstores, said CEO Leslie Flegle.

“We go into every one of those stores for books and magazines, so it is a natural move,” Flegle said.

Already the company provides magazines to several Costco warehouses across the nation. Although Source Interlink lost some money in the first quarter, “Costco will be a contributor for the rest of the year,” he said. With $1.4 billion in magazine retail sales, the company is the largest magazine distributor in the nation.

The company will make “seismic changes” in its operations, Flegle said. The company will reduce operating expenses with methods such as consolidating the number of depots it is operating and using company vehicles to make deliveries.

In August, the company will close Levy’s operations in Hampstead, Md., which made $80 million in sales, to the operations in to the larger depot in Lancaster, Penn., which currently makes $140 million in sales.

The company will close its operations in City of Industry in October and move it to Ontario, Calif., which has a larger facility.

The company closed Thursday at $11.43, up 5 cents, on the Nasdaq. It was $11.55 in after-hours trading.