<PAGE>

                                  UNTIED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549



                                  FORM 10-Q/A



                                Amendment No. 1



         (Mark One)

         [X] Quarterly report under Section 13 or 15(d) of the Securities
         Exchange Act of 1934

         For the quarterly period ended July 31, 2003

         [ ] 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   1-13437
                               -------------------------------------------------

                        SOURCE INTERLINK COMPANIES, INC.
             (Exact Name of Registrant as Specified in Its Charter)

                MISSOURI                                 43-1710906
--------------------------------------------------------------------------------
    (State or Other Jurisdiction of                   (I.R.S. Employer
     Incorporation or Organization)                  Identification No.)

   27500 RIVERVIEW CENTER BLVD., SUITE 400
   BONITA SPRINGS, FLORIDA                                  34134
-------------------------------------------    ---------------------------------
  (Address of Principal Executive Offices)                (Zip Code)

                                 (239) 949-4450
--------------------------------------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)


--------------------------------------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

         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. Yes [X] No [ ]

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

         Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.

               Class                        Outstanding on September 9, 2003
               -----                        --------------------------------
     Common Stock, $.01 Par Value                      18,470,722





<PAGE>

                                EXPLANATORY NOTE

This report has been amended for the purpose of (i) making certain technical
corrections to the text of the certifications of our chief executive financial
officer and chief financial officer so that they conform to the exact form
mandated by the applicable rules and regulations promulgated under the
Securities Exchange Act of 1934, as amended, as required by the Sarbanes-Oxley
Act of 2002, (ii) correcting a typographical error in the second table on page
16 and (iii) supplementing the discussion under Item 4 Controls and Procedures
to address the conclusions stated therein in light of such adjustments.


<PAGE>

                        SOURCE INTERLINK COMPANIES, INC.

                                      INDEX

                         PART I - FINANCIAL INFORMATION

<Table>
<Caption>
                                                                          Page
                                                                          ----
<S>       <C>                                                           <C>

ITEM  1.  FINANCIAL STATEMENTS

          Consolidated Balance Sheets as of
          July 31, 2003 and January 31, 2003                                 1

          Consolidated Statements of Income for the three months
          and six months ended July 31, 2003 and 2002                        3

          Consolidated Statement of Stockholders'
          Equity for the six months ended July 31, 2003                      4

          Consolidated Statements of Cash Flows for the
          six months ended July 31, 2003 and 2002                            5

          Notes to Consolidated Financial Statements                      6-14

ITEM  2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS                                         15

ITEM  3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK         26

ITEM  4.  CONTROLS AND PROCEDURES                                           27


                   PART II - OTHER INFORMATION

ITEM  1.  LEGAL PROCEEDINGS                                                 28

ITEM  2.  CHANGES IN SECURITIES AND USE OF PROCEEDS                         28

ITEM  3.  DEFAULTS UPON SENIOR SECURITIES                                   28

ITEM  4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               28

ITEM  5.  OTHER INFORMATION                                                 28

ITEM  6.  EXHIBITS AND REPORTS ON FORM 8-K                                  28
</Table>


<PAGE>

                                                SOURCE INTERLINK COMPANIES, INC.

                                                     CONSOLIDATED BALANCE SHEETS

                                                                  (in thousands)

<Table>
<Caption>
                                                       (unaudited)
                                                         July 31,       January 31,
                                                           2003            2003
                                                       ------------    ------------
<S>                                                    <C>             <C>

ASSETS
CURRENT
       Cash                                            $      8,410    $      5,570
       Trade receivables (Note 2)                            67,561          51,869
       Inventories (Note 2)                                  16,692          15,912
       Income taxes receivable                                2,557           6,883
       Deferred tax asset                                     3,745           1,471
       Other current assets                                   3,189           2,051
                                                       ------------    ------------
TOTAL CURRENT ASSETS                                        102,154          83,756
                                                       ============    ============

Property, Plants and Equipment                               28,245          27,671
Less accumulated depreciation and amortization               (8,996)         (7,532)
                                                       ------------    ------------
NET PROPERTY, PLANTS AND EQUIPMENT                           19,249          20,139
                                                       ============    ============

OTHER ASSETS
       Intangibles, net                                      53,432          46,797
       Deferred tax asset                                       918             947
       Other                                                  4,731           4,729
                                                       ------------    ------------
TOTAL OTHER ASSETS                                           59,081          52,473
                                                       ============    ============
                                                       $    180,484    $    156,368
                                                       ============    ============
</Table>


                                       1               See accompanying notes to
                                               Consolidated Financial Statements

<PAGE>

                                                SOURCE INTERLINK COMPANIES, INC.

                                                     CONSOLIDATED BALANCE SHEETS

                                                (in thousands, except par value)

<Table>
<Caption>
                                                        (unaudited)
                                                          July 31,      January 31,
                                                            2003            2003
                                                        ------------    ------------
<S>                                                     <C>             <C>

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
        Checks issued against future advances on
        revolving credit facility                       $      3,103    $      6,611
        Accounts payable and accrued expenses, net of
        allowance for returns of $50,281 and $31,543
        at July 31 and January 31, 2003 respectively          61,431          50,119
        Current maturities of long-term debt (Note 3)         36,625          29,215
        Other current liabilities                                140              24
                                                        ------------    ------------

TOTAL CURRENT LIABILITIES                                    101,299          85,969
Debt, less current maturities (Note 3)                        21,486          17,026
Other long-term liabilities                                      576           1,148
                                                        ------------    ------------
TOTAL LIABILITIES                                            123,361         104,143
                                                        ============    ============

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Contributed Capital:
        Preferred Stock, $.01 par (2,000 shares
        authorized; none issued)                                  --              --
        Common Stock, $.01 par  (40,000 shares
        authorized; 18,484 shares issued)                        185             184
        Additional paid-in-capital                            98,014          97,338
                                                        ------------    ------------
        Total contributed capital                             98,199          97,522
Accumulated deficit                                          (41,022)        (44,520)
Accumulated other comprehensive income (loss):
              Foreign currency translation                       513            (210)
                                                        ------------    ------------
                                                              57,690          52,792
Less: Treasury Stock (100 at cost)                              (567)           (567)
                                                        ------------    ------------
TOTAL STOCKHOLDERS' EQUITY                                    57,123          52,225
                                                        ============    ============
                                                        $    180,484    $    156,368
                                                        ============    ============
</Table>


                                       2               See accompanying notes to
                                               Consolidated Financial Statements
<PAGE>

                                                SOURCE INTERLINK COMPANIES, INC.

                                               CONSOLIDATED STATEMENTS OF INCOME
                                                                     (unaudited)
                                           (in thousands, except per share data)

<Table>
<Caption>
                                                             Three Months Ended July 31,      Six Months Ended July 31,
                                                                 2003            2002            2003            2002
                                                            ------------    ------------    ------------    ------------
<S>                                                         <C>             <C>             <C>             <C>

Revenues                                                    $     85,155    $     73,854    $    166,170    $    140,609
Costs of Revenues                                                 62,375          56,116         122,609         104,187
                                                            ------------    ------------    ------------    ------------
Gross Profit                                                      22,780          17,738          43,561          36,422
Selling, General and Administrative Expense                       13,852          10,745          26,734          21,944
Fulfillment Freight                                                3,948           3,318           8,480           6,993
Relocation Expenses                                                   --             696           1,730             992
                                                            ------------    ------------    ------------    ------------
Operating Income                                                   4,980           2,979           6,617           6,493
                                                            ------------    ------------    ------------    ------------
Other Income (Expense)
            Interest expense, net                                 (1,061)           (747)         (1,967)         (1,553)
            Other                                                     37            (309)            188            (231)
                                                            ------------    ------------    ------------    ------------
Total Other Income (Expense)                                      (1,024)         (1,056)         (1,779)         (1,784)
                                                            ------------    ------------    ------------    ------------
Income Before Income Taxes                                         3,956           1,923           4,838           4,709
Income Tax Expense                                                 1,099             858           1,340           2,046
                                                            ------------    ------------    ------------    ------------
Net Income                                                  $      2,857    $      1,065    $      3,498    $      2,663
                                                            ============    ============    ============    ============

Earnings per Share - Basic                                  $       0.16    $       0.06    $       0.19    $       0.15
Weighted Average of Shares Outstanding - Basic (Note 5)           18,323          18,193          18,292          18,224
Earnings per Share - Diluted                                $       0.15    $       0.06    $       0.18    $       0.14
Weighted Average of Shares Outstanding - Diluted (Note 5)         19,679          18,389          19,074          18,410
                                                            ============    ============    ============    ============
</Table>



                                       3               See accompanying notes to
                                               Consolidated Financial Statements
<PAGE>

                                                SOURCE INTERLINK COMPANIES, INC.

                                  CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                                                                     (unaudited)
                                                                  (in thousands)

<Table>
<Caption>
                                                                                    Other
                                    Common Stock       Additional               Comprehensive      Treasury Stock         Total
                               ---------------------    Paid-in    Accumulated      Income      --------------------  Stockholders'
                               Shares       Amount      Capital       Deficit       (Loss)       Shares      Amount       Equity
                               --------   ----------   ----------  -----------  -------------   --------    --------  -------------
<S>                            <C>        <C>          <C>         <C>          <C>             <C>         <C>       <C>
Balance, January 31, 2003        18,363   $      184   $   97,338   $  (44,520)   $     (210)       (100)   $   (567)   $   52,225

Net income                           --           --           --        3,498            --          --          --         3,498
Foreign currency translation         --           --           --           --           723          --          --           723
                                                                                                                        ==========
Comprehensive income                                                                                                         4,221
                                                                                                                        ----------
Exercise of stock options           121            1          549           --            --          --          --           550
Other                                --           --          127           --            --                                   127
                               --------   ----------   ----------   ----------    ----------    --------    --------    ----------
Balance, July 31, 2003           18,484   $      185   $   98,014   $  (41,022)   $      513        (100)   $   (567)   $   57,123
                               ========   ==========   ==========   ==========    ==========    ========    ========    ==========
</Table>



                                       4               See accompanying notes to
                                               Consolidated Financial Statements
<PAGE>


                                                SOURCE INTERLINK COMPANIES, INC.

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                     (unaudited)
                                                                  (in thousands)

<Table>
<Caption>
Six months ended July 31,                                                              2003            2002
--------------------------------------------------------------                     ------------    ------------
<S>                                                                                <C>             <C>

OPERATING ACTIVITIES
       Net income                                                                  $      3,498    $      2,663
       Adjustments to reconcile net income to net cash
       provided by operating activities:
            Depreciation and amortization                                                 2,013           1,465
            Provision for losses on accounts receivable                                   1,082             264
            Deferred income taxes                                                        (2,246)            749
            Other                                                                           606              73
            Changes in assets and liabilities (excluding business acquisitions):
                (Increase) decrease in accounts receivable                              (16,773)         10,243
                (Increase) in inventories                                                  (781)           (260)
                Decrease (increase) in other assets                                       3,186            (932)
                Increase (decrease) in accounts payable and accrued expenses             10,855          (9,383)
                                                                                   ------------    ------------
CASH PROVIDED BY OPERATING ACTIVITIES                                                     1,440           4,882
                                                                                   ============    ============

INVESTMENT ACTIVITIES
       Capital expenditures                                                                (915)         (2,787)
       Payments under export agreement                                                   (1,400)             --
       Acquisition of Innovative Metal Fixtures, Inc.                                        --          (2,014)
       Payments under import agreement                                                   (1,000)         (2,000)
       Other                                                                                 --              85
                                                                                   ------------    ------------
CASH USED IN INVESTING ACTIVITIES                                                        (3,315)         (6,716)
                                                                                   ============    ============

FINANCING ACTIVITIES
       (Increase) decrease in checks issued against revolving credit facilities          (3,508)          3,561
       Borrowings under credit facilities                                                 8,305           1,381
       Issuance of common stock upon the exercise of stock options                          551              --
       Payments of notes payable                                                           (633)            (58)
                                                                                   ------------    ------------
CASH PROVIDED BY FINANCING ACTIVITIES                                                     4,715           4,884
                                                                                   ============    ============

INCREASE IN CASH                                                                          2,840           3,050

CASH, beginning of period                                                                 5,570           2,943
                                                                                   ------------    ------------
CASH, end of period                                                                $      8,410    $      5,993
                                                                                   ============    ============
</Table>




                                       5               See accompanying notes to
                                               Consolidated Financial Statements

<PAGE>


                                                SOURCE INTERLINK COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

1. BASIS OF PRESENTATION

The consolidated financial statements as of July 31, 2003 and 2002, include, in
the opinion of management, all adjustments (consisting of normal recurring
adjustments and reclassifications) necessary to present fairly the financial
position, results of operations and cash flows at July 31, 2003 and for all
periods presented.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
financial statements be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Form 10-K for the year
ended January 31, 2003. The results of operations for the six month period ended
July 31, 2003 are not necessarily indicative of the operating results to be
expected for the full year.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Certain prior year amounts have been reclassified to conform to the current year
presentation.

2. BALANCE SHEET ACCOUNTS

Accounts receivable consist of the following (in thousands):

<Table>
<Caption>
                                               July 31, 2003   January 31, 2003
                                               -------------   ----------------
<S>                                            <C>             <C>

Accounts Receivable                             $    128,161     $     96,083
Allowance:
     Sales returns and other                          55,065           38,289
     Doubtful accounts                                 5,535            5,925
                                                ------------     ------------
                                                      60,600           44,214
                                                ------------     ------------
                                                $     67,561     $     51,869
                                                ============     ============
</Table>

Inventories consist of the following (in thousands):

<Table>
<Caption>
                                               July 31, 2003   January 31, 2003
                                               -------------   ----------------
<S>                                            <C>             <C>

Raw materials                                   $      1,864      $      2,413
Work-in-process                                        2,753             1,752
Finished goods:
  Fixtures                                             1,740             1,174
  Magazine                                            10,335            10,573
                                                ------------      ------------

                                                $     16,692      $     15,912
                                                ============      ============
</Table>

The Company receives full-credit from the publisher for all undistributed and
returned magazines.


                                       6
<PAGE>

                                                SOURCE INTERLINK COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

3. DEBT AND REVOLVING CREDIT FACILITY

Debt consists of (in thousands):

<Table>
<Caption>
                                                                                    July 31,      January 31,
                                                                                      2003           2003
                                                                                  ------------   ------------
<S>                                                                               <C>            <C>

Revolving Credit Facility - Bank of America                                       $     33,587   $     26,611

Revolving Credit Facilities - Congress Financial Corporation                            14,187         12,857

Guaranteed payments under magazine export agreement (Note 4)                             4,200             --

Industrial Revenue Bonds                                                                 4,000          4,000

Notes payable to former owners of acquired company,
currently being disputed by Company                                                      1,886          1,886

Note payable to former owner of acquired company                                            --            200

Other                                                                                      251            687
                                                                                  ------------   ------------
Total Long-term Debt                                                                    58,111         46,241

Less current maturities                                                                 36,625         29,215
                                                                                  ------------   ------------

Long-term Debt                                                                    $     21,486   $     17,026
                                                                                  ============   ============
</Table>

Bank of America Credit Facility

On December 22, 1999, the Company entered into a credit agreement with Bank of
America, N.A., which was amended on August 30, 2002 to extend the termination
date to August 1, 2003 and to grant Bank of America, N.A. a first-priority
perfected security interest in all real and personal property of the Company
excluding the capital stock and assets of The Interlink Companies, Inc.,
International Periodical Distributors, Inc. and David E. Young, Inc. The
agreement was further amended on May 1, 2003 to waive and amend certain
financial covenants and provide the Company with two options to extend the
agreement (if both options were exercised) through February 1, 2004. In August
2003, the Company elected to extend the agreement through November 1, 2003.

The credit agreement enables the Company to borrow up to $40.0 million under a
revolving credit facility. Borrowings under the credit facility bear interest at
a rate equal to the 90-day LIBOR rate (1.14% at July 31, 2003) plus 5.35% and
carries a facility fee of 1/4% per annum on the difference between $25 million
and the average principal amount outstanding under the loan (if less than $25
million) plus 3/8% per annum of the difference between the maximum amount of the
loan and the greater of (i) $25 million or (ii) the average principal amount
outstanding under this loan.

Under the credit agreement, the Company is limited in its ability to declare
dividends or other distributions on capital stock or make payments in connection
with the purchase, redemption, retirement or acquisition of capital stock. There
are


                                       7
<PAGE>

                                                SOURCE INTERLINK COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

also limitations on capital expenditures and the Company is required to maintain
certain financial ratios. The Company was in compliance with such ratios at July
31, 2003.

Availability under the facility is limited by the Company's borrowing base
calculation, as defined in the agreement. The calculation resulted in excess
availability of $6.1 million at July 31, 2003.

Congress Financial Credit Facilities

In connection with the acquisition of Interlink, the Company assumed IPD and
Deyco's secured credit facilities with Congress Financial Corporation
("Congress"). On February 22, 2001, IPD and Deyco entered into the credit
facility with Congress which expires on February 21, 2005.

The agreements provide for maximum combined borrowings of $25 million subject to
limits set by periodic borrowing base calculations. Borrowings under the
revolving credit portion of the facility bear interest at a rate equal to 0.75%
in excess of the prime rate (4.00% at July 31, 2003). The credit facility is
secured by IPD and Deyco's accounts receivable and limited cross guarantees
between the two divisions. Under the credit agreement, IPD and Deyco are
required to maintain certain financial ratios. IPD and Deyco were in compliance
with all such ratios at July 31, 2003.

Availability under the facility is limited by the Company's borrowing base
calculation, as defined in the agreement. The calculation resulted in excess
availability of $2.6 million at July 31, 2003.

In connection with the acquisition of Interlink, the Company assumed debt to the
former owners of IPD. The Company is currently disputing the remaining amounts
owed and has commenced legal action requesting the court release the Company of
any further obligation under these arrangements.

4. BUSINESS COMBINATIONS

Innovative Metal Fixtures, Inc.

In May, 2002, the Company, through its Source Canada, Inc. (f/k/a Aaron Wire and
Metal Products, Ltd.) subsidiary, acquired all of the assets of Innovative Metal
Fixtures, Inc. for $2.6 million ($2.0 million in cash and $0.6 million in a note
payable to the former owner). Innovative Metal Fixtures, Inc. manufactures wire
and metal fixture displays from manufacturing facilities in Vancouver, British
Columbia.

This transaction has been accounted for as a purchase, and accordingly, the
assets and liabilities have been recorded at fair market value. Results of
operations have been included as of the effective date of the transaction. The
purchase price exceeded the fair value of the assets acquired by approximately
$2.0 million. The fair value of the assets acquired was allocated primarily to
goodwill. Pro-forma results have not been shown due to the insignificance of the
acquisition.

Magazine Import Agreement

In May, 2002, the Company entered into an agreement giving the Company the right
to distribute domestically a group of foreign magazine titles. The agreement
calls for an initial payment of $2.0 million and additional contingent payments
up to $3.5 million spread over the next three years based on the overall gross
profit generated from the sale of these titles. Payments under this agreement
are included in intangible assets and are being amortized over ten years.

Magazine Export Agreement

In March, 2003, the Company entered into an agreement with a leading exporter of
domestic titles. The agreement calls for an initial payment of $1.4 million,
guaranteed payments totaling $4.2 million spread over the next four fiscal


                                       8
<PAGE>


                                                SOURCE INTERLINK COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

years, and additional contingent payments up to $5.6 million based on the
overall gross profit generated from sales to these customers. Guaranteed
payments under this agreement were capitalized at inception and are included in
intangible assets and are being amortized over fifteen years, the term of the
agreement. The portion of the guaranteed payments not previously paid are
included in Notes Payable.




                                       9
<PAGE>

                                                SOURCE INTERLINK COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

5. EARNINGS PER SHARE

A reconciliation of the denominators of the basic and diluted earnings per share
computations are as follows (in thousands):

<Table>
<Caption>
                                                                   Three Months Ended             Six Months Ended
                                                                        July 31,                     July 31,
                                                                   2003           2002           2003           2002
                                                               ------------   ------------   ------------   ------------
<S>                                                            <C>            <C>            <C>            <C>

Basic weighted average number of common shares outstanding           18,323         18,193         18,292         18,224

Effect of dilutive securities:
   Stock options and warrants                                         1,356            196            782            186
                                                               ------------   ------------   ------------   ------------

Diluted weighted average number of common shares outstanding         19,679         18,389         19,074         18,410
                                                               ============   ============   ============   ============
</Table>

For the quarter ended July 31, 2003, stock options to purchase 1,490 shares and
warrants convertible into 26 shares were excluded from the calculation of
diluted income per share because their exercise/conversion price exceeded the
average market price of the common shares during the period.

6. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental information on interest and income taxes paid is as follows (in
thousands):

<Table>
<Caption>
Six Months Ended July 31,                                2003            2002
                                                     ------------    ------------
<S>                                                  <C>             <C>

Interest                                             $      1,861    $      1,536

Income Taxes                                         $     (1,691)   $        512
                                                     ============    ============
</Table>

In connection with the magazine export agreement, discussed in Note 4, a
liability of $4.2 million was recognized for guaranteed payments owed under the
agreement.

7. STOCK OPTION PLANS

FAS No. 123, "Accounting for Stock-Based Compensation" defined a fair value
method of accounting for stock options and other equity instruments. Under the
fair value method, compensation cost is measured at the grant date based on the
fair value of the award and is recognized over the service period, which is
usually the vesting period. As provided in FAS No. 123, the Company elected to
apply Accounting Principles Board ("APB") Opinion No. 25 and related
interpretations in accounting for its stock-based compensation plans. No stock
based compensation was reflected in the period ended July 31, 2003 and 2002 as
all options granted in those years had an exercise price equal to or greater
than the market value of the underlying stock on the date of grant.


                                       10
<PAGE>

                                                SOURCE INTERLINK COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

The following is a reconciliation of net income per weighted average share had
the Company adopted FAS No. 123 (table in thousands except per share amounts):

<Table>
<Caption>
                                                Three Months Ended               Six Months Ended
                                                     July 31,                        July 31,
                                               2003            2002            2003            2002
                                           ------------    ------------    ------------    ------------
<S>                                        <C>             <C>             <C>             <C>

Net income                                 $      2,857    $      1,065    $      3,498    $      2,663
Stock compensation costs, net of tax               (320)           (548)           (640)         (1,096)
                                           ------------    ------------    ------------    ------------
Adjusted net income                        $      2,537    $        517    $      2,858    $      1,567
                                           ------------    ------------    ------------    ------------

Weighted average shares, basic                   18,323          18,193          18,292          18,224
Weighted average shares, diluted                 19,679          18,389          19,074          18,410

Basic earnings per share - as reported     $       0.16    $       0.06    $       0.19    $       0.15
Diluted earnings per share - as reported   $       0.15    $       0.06    $       0.18    $       0.14

Basic earnings per share - pro-forma       $       0.14    $       0.03    $       0.16    $       0.09
Diluted earnings per share - pro-forma     $       0.13    $       0.03    $       0.15    $       0.09
                                           ============    ============    ============    ============
</Table>

The fair value of each option grant is estimated on the grant date using the
Black-Scholes option pricing model with the following assumptions:

<Table>
<Caption>
         January 31,                          2003         2002
         ----------------------------       --------   ------------
<S>                                         <C>        <C>
         Dividend yield                           0%              0%
         Expected volatility                    0.50           0.60
         Risk-free interest rate               2.16%   3.27% - 4.78%
</Table>

8. SEGMENT FINANCIAL INFORMATION

The Company's segment reporting is based on the reporting of senior management
to the Chief Executive Officer. This reporting combines the Company's business
units in a logical way that identifies business concentrations and synergies.
Presentation has been modified from the prior year from pre-tax income to
operating income to conform to how financial results are presented to the Chief
Executive Officer.

The reportable segments of the Company are Magazine Distribution, In-Store
Services, Wood Manufacturing and Shared Services.

The Magazine Distribution segment derives revenues from (1) selling and
distributing magazines to major specialty retail book chains, independent
retailers, and secondary wholesalers throughout North America, (2) the export of
domestic titles internationally to foreign wholesalers or through domestic
brokers (3) serving as a secondary national distributor, (4) providing return
processing services for major specialty retail book chains and (5) providing
fulfillment services to other wholesalers, confectioneries and publishers.

The In-Store Services segment derives revenues from (1) providing information
and management services relating to retail magazine sales to U.S. and Canadian
retailers and magazine publishers, (2) providing claim filing services related
to rebates owed retailers from publishers or their designated agent, (3)
designing, manufacturing, and invoicing participants in front-end fixture
programs, and (4) shipping, installation and removal of front-end fixtures.


                                       11
<PAGE>

                                                SOURCE INTERLINK COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

The Wood Manufacturing segment derives revenues from designing, manufacturing
and installing high-end wood store fixtures.

Shared Services consists of overhead functions not allocated to individual
operating segments. Previously, the majority of these expenses were included in
the In-Store Services segment. Comparable information is not available and not
presented for the prior fiscal year.

Segment results follow (in thousands):

<Table>
<Caption>
                                           Magazine       In-Store         Wood             Other
                                         Distribution     Services    Manufacturing   (Shared Services)   Consolidated
Three Months Ended July 31, 2003         ------------   ------------  -------------   -----------------   ------------
<S>                                      <C>            <C>           <C>             <C>                 <C>
Revenue                                  $     65,584   $     15,557   $      4,014      $         --     $     85,155
Cost of Revenue                                49,760          9,069          3,546                --           62,375
                                         ------------   ------------   ------------      ------------     ------------
Gross Profit                                   15,824          6,488            468                --           22,780
Selling, General & Administrative               7,679          2,073            371             3,729           13,852
Freight Distribution                            3,948             --             --                --            3,948
                                         ------------   ------------   ------------      ------------     ------------
Operating Income                         $      4,197   $      4,415             97      $     (3,729)    $      4,980
                                         ============   ============   ============      ============     ============

Total Assets                             $     55,975   $     85,926         16,246      $     22,337     $    180,484
                                         ============   ============   ============      ============     ============
</Table>

<Table>
<Caption>
                                           Magazine       In-Store         Wood             Other
                                         Distribution     Services    Manufacturing   (Shared Services)   Consolidated
Six Months Ended July 31, 2003           ------------   ------------  -------------   -----------------   ------------
<S>                                      <C>            <C>           <C>             <C>                 <C>
Revenue                                  $    129,650   $     28,649   $      7,871      $         --     $    166,170
Cost of Revenue                                99,260         16,502          6,847                --          122,609
                                         ------------   ------------   ------------      ------------     ------------
Gross Profit                                   30,390         12,147          1,024                --           43,561
Selling, General & Administrative              14,357          4,343            752             7,282           26,734
Freight Distribution                            8,480             --             --                --            8,480
Relocation Expense                              1,654             --             --                76            1,730
                                         ------------   ------------   ------------      ------------     ------------
Operating Income                         $      5,899   $      7,804            272      $     (7,358)    $      6,617
                                         ============   ============   ============      ============     ============
</Table>


                                       12
<PAGE>
                                                SOURCE INTERLINK COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

Segment results reported comparable to the prior presentation:

<Table>
<Caption>
                                        Magazine       In-Store         Wood
Three Months Ended July 31, 2003      Distribution     Services    Manufacturing   Consolidated
--------------------------------      ------------   ------------  -------------   ------------
<S>                                   <C>            <C>           <C>             <C>
Revenue                               $     65,584   $     15,557   $      4,014   $     85,155
Cost of Revenue                             49,760          9,069          3,546         62,375
                                      ------------   ------------   ------------   ------------
Gross Profit                                15,824          6,488            468         22,780
Selling, General & Administrative            7,679          5,802            371         13,852
Freight Distribution                         3,948             --             --          3,948
                                      ------------   ------------   ------------   ------------
Operating Income                      $      4,197   $        686   $         97   $      4,980
                                      ============   ============   ============   ============

Total Assets                          $     55,975   $    108,263         16,246   $    180,484
                                      ============   ============   ============   ============
</Table>

<Table>
<Caption>
                                        Magazine       In-Store         Wood
Three Months Ended July 31, 2002      Distribution     Services    Manufacturing   Consolidated
--------------------------------      ------------   ------------  -------------   ------------
<S>                                   <C>            <C>           <C>             <C>

Revenue                               $     56,058   $     13,706   $      4,090   $     73,854
Cost of Revenue                             44,611          7,979          3,526         56,116
                                      ------------   ------------   ------------   ------------
Gross Profit                                11,447          5,727            564         17,738
Selling, General & Administrative            5,735          4,634            376         10,745
Freight Distribution                         3,318             --             --          3,318
Relocation Expense                              --            696             --            696
                                      ------------   ------------   ------------   ------------
Operating Income                      $      2,394   $        397   $        188   $      2,979
                                      ============   ============   ============   ============
Total Assets                          $     34,047   $    110,218         19,282   $    163,547
                                      ============   ============   ============   ============
</Table>

<Table>
<Caption>
                                        Magazine       In-Store         Wood
Six Months Ended July 31, 2003        Distribution     Services    Manufacturing   Consolidated
--------------------------------      ------------   ------------  -------------   ------------
<S>                                   <C>            <C>           <C>             <C>
Revenue                               $    129,650   $     28,649   $      7,871   $    166,170
Cost of Revenue                             99,260         16,502          6,847        122,609
                                      ------------   ------------   ------------   ------------
Gross Profit                                30,390         12,147          1,024         43,561
Selling, General & Administrative           14,357         11,625            752         26,734
Freight Distribution                         8,480             --             --          8,480
Relocation Expense                           1,654             76             --          1,730
                                      ------------   ------------   ------------   ------------
Operating Income                      $      5,899   $        446   $        272   $      6,617
                                      ============   ============   ============   ============
</Table>

<Table>
<Caption>
                                        Magazine       In-Store         Wood
Six Months Ended July 31, 2002        Distribution     Services    Manufacturing   Consolidated
--------------------------------      ------------   ------------  -------------   ------------
<S>                                   <C>            <C>           <C>             <C>
Revenue                               $    103,602   $     27,070   $      9,937   $    140,609
Cost of Revenue                             81,816         14,496          7,875        104,187
                                      ------------   ------------   ------------   ------------
Gross Profit                                21,786         12,574          2,062         36,422
Selling, General & Administrative           11,688          9,395            861         21,944
Freight Distribution                         6,993             --             --          6,993
Relocation Expense                              --            992             --            992
                                      ------------   ------------   ------------   ------------
Operating Income                      $      3,105   $      2,187   $      1,201   $      6,493
                                      ============   ============   ============   ============

</Table>


                                       13
<PAGE>


9. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS 150
establishes standards for how entities classify and measure in their statement
of financial position certain financial instruments with characteristics of both
liabilities and equity. The provisions of SFAS 150 are effective for financial
instruments entered into or modified after May 31, 2003, and otherwise shall be
effective at the beginning of the first fiscal interim period beginning after
June 15, 2003. The Company does not expect adoption of this statement will have
a material impact on its results of operations or financial position.



                                       14
<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

SOME OF THE INFORMATION CONTAINED IN THIS FORM 10-Q CONTAINS FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE FEDERAL SECURITIES LAWS. WHEN USED IN THIS
REPORT, THE WORDS "MAY," "WILL," "BELIEVES," "ANTICIPATES," "INTENDS,"
"EXPECTS," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. BECAUSE SUCH FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND
UNCERTAINTIES, OUR ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE
TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO: (i) OUR DEPENDENCE ON THE
MARKETING AND DISTRIBUTION STRATEGIES OF PUBLISHERS AND OTHER VENDORS; (ii) OUR
ABILITY TO ACCESS CHECKOUT AREA INFORMATION; (iii) RISKS ASSOCIATED WITH OUR
ADVANCE PAY PROGRAM, INCLUDING PROBLEMS COLLECTING INCENTIVE PAYMENTS FROM
PUBLISHERS; (iv) DEMAND FOR OUR DISPLAY RACKS AND STORE FIXTURES; (v) OUR
ABILITY TO SUCCESSFULLY IMPLEMENT OUR GROWTH STRATEGY; (vi) COMPETITION; (vii)
OUR ABILITY TO EFFECTIVELY MANAGE OUR EXPANSION; (viii) GENERAL ECONOMIC AND
BUSINESS CONDITIONS NATIONALLY, IN OUR MARKETS AND IN OUR INDUSTRY; (ix) OUR
ABILITY TO MAINTAIN ADEQUATE FINANCING ON ACCEPTABLE TERMS SUFFICIENT TO ACHIEVE
OUR BUSINESS PLANS (x) OUR ABILITY TO SUCCESSFULLY INTEGRATE ACQUIRED COMPANIES
WITH AND INTO OUR CORPORATE ORGANIZATION, AND (xi) OUR ABILITY TO ATTRACT AND/OR
RETAIN SKILLED MANAGEMENT. INVESTORS ARE ALSO DIRECTED TO CONSIDER OTHER RISKS
AND UNCERTAINTIES DISCUSSED IN OTHER REPORTS PREVIOUSLY AND SUBSEQUENTLY FILED
BY US WITH THE SECURITIES AND EXCHANGE COMMISSION. READERS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE
DATE HEREOF. WE UNDERTAKE NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY
REVISIONS TO THESE FORWARD-LOOKING STATEMENTS, WHICH MAY BE MADE TO REFLECT
EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.

OVERVIEW

Our company is a leading provider of marketing services to producers,
distributors and retailers of magazines, confections and general merchandise
sold at the front-end of retail stores. We are the largest direct-to-retail
magazine distributor in North America servicing primarily specialty retailers.
We are the leading importer and exporter of magazines in North America.

Our business has been built on three complementary operating units: Magazine
Distribution, In-Store Services, and Wood Manufacturing.

The Magazine Distribution group distributes magazines to specialty retailers via
common carrier utilizing proprietary information systems to assist retailers
with magazine selection and procurement. The group imports foreign magazines for
sale to our retail customers as well as other wholesale outlets. The group
serves as the exclusive exporter of many domestic titles overseas primarily in
English speaking countries and Western Europe. In addition, we provide
fulfillment services to third parties for a fee. Our fulfillment services
consist of us providing shipping and handling services to other companies for
either a per-unit or per-pound fee.

Our In-Store Service group combines display fixture design and production
capabilities, supported by standard-setting information services, to offer our
clients, both retailers and vendors, more efficient, profitable merchandising.
In addition, we provide critical sales information on more than 10,000 magazine
titles to assist our clients in making strategic marketing, distribution and
advertising decisions affecting some of the most valuable space in any retail
store, its checkout area. In-Store Services also assists retailers in claiming
rebates earned on the placement and sale of magazines.

Our Wood Manufacturing group designs and manufactures custom wood displays and
store fixtures to complement the wire and metal displays and store fixtures
offered by our In-Store Services group.

Our segment reporting is structured based on the reporting of senior management
to the Chief Executive Officer.

Our reportable segments are Magazine Distribution, In-Store Services, Wood
Manufacturing and Shared Services. Shared Services consists of corporate
administrative expenses such as Corporate Finance, Human Resources, MIS and
Executive Offices that are not allocated to the operating divisions. Previously,
these expenses were included under In-Store Services segment.


                                       15
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth, for the periods presented, information relating
to our operations expressed by segment (all discussion of results is in
thousands):


<Table>
<Caption>
QUARTER ENDED JULY 31,                                           2003            2002
                                                             ------------    ------------
<S>                                                          <C>             <C>

Revenues                                                     $     85,155     $     73,854
Cost of Revenues                                                   62,375           56,116
                                                             ------------     ------------
     Gross Profit                                                  22,780           17,738
Selling, General and Administrative Expense                        13,852           10,745
Fulfillment Freight                                                 3,948            3,318
Relocation Expenses                                                    --              696
                                                             ------------     ------------
     Operating Income                                               4,980            2,979
Interest Expense                                                   (1,061)            (747)
Other Income (Expense)                                                 37             (309)
                                                             ------------     ------------
      Income Before Taxes                                           3,956            1,923
Income Tax Expense (Benefit)                                        1,099              858
                                                             ------------     ------------
      Net Income                                             $      2,857     $      1,065
                                                             ============     ============
Gross Profit Margin                                                  26.8%            24.0%
Selling, General and Administrative Expense
 (% of Revenue)                                                      16.3%            14.5%
Operating Profit Margin                                               5.8%             4.0%
                                                             ============     ============
</Table>

<Table>
<Caption>
SIX MONTHS ENDED JULY 31,                                        2003             2002
                                                             ------------     ------------
<S>                                                          <C>              <C>

Revenues                                                     $    166,170     $    140,609
Cost of Revenues                                                  122,609          104,187
                                                             ------------     ------------
     Gross Profit                                                  43,561           36,422
Selling, General and Administrative Expense                        26,734           21,944
Fulfillment Freight                                                 8,480            6,993
Relocation Expenses                                                 1,730              992
                                                             ------------     ------------
     Operating Income                                               6,617            6,493
Interest Expense                                                   (1,967)          (1,553)
Other Income (Expense)                                                188             (231)
                                                             ------------     ------------
      Income Before Taxes                                           4,838            4,709
Income Tax Expense (Benefit)                                        1,340            2,046
                                                             ------------     ------------
      Net Income                                             $      3,498     $      2,663
                                                             ============     ============
Gross Profit Margin                                                  26.2%            25.9%
Selling, General and Administrative Expense (% of Revenue)           16.1%            15.6%
Operating Profit Margin                                               4.0%             4.6%
                                                             ============     ============
</Table>


                                       16
<PAGE>


Revenues

<Table>
<Caption>
                  2003           2002         CHANGE            %
----------   ------------   ------------   ------------   ------------
<S>          <C>            <C>            <C>            <C>
    Quarter        85,155         73,854         11,301           15.3%
 Six Months       166,170        140,609         25,561           18.2%
</Table>

Revenues for the quarter increased over the comparable quarter of the prior year
due to both increases in revenue in our In-Store Services segment and increases
in revenue in our Magazine Distribution segment.

Revenues in our Magazine Distribution segment increased $9,526 (17.0%) due to
increases in revenues from our magazine export group, an increase in
distribution of foreign titles, an increase in the number of publishers (i.e.,
titles) we distribute to our specialty retail customers, and an increase in the
number of customers and customer stores, we service. These increases were
partially off-set by weakness in sell-through in domestic titles, which we
believe is attributable to a lack of event driven reporting in the period.

Revenues in our In-Store Services segment increased $1,851 (13.5%) primarily due
to a significant increase in our wire manufacturing group. The increase resulted
primarily from the addition of a new customer resulting in a significant fixture
order a portion of which was realized in the second quarter.

Revenues in our Wood Manufacturing segment did not change significantly from the
prior year.

Revenues for the six month period increased over the comparable period of the
prior year due to increases in revenue in our Magazine Distribution segment and
In-Store Services segment. Theses increases were partially offset by a decrease
in our Wood Manufacturing segment.

Revenues in our Magazine Distribution segment increased $26,048 (25.1%) due to
increases in revenues from our magazine export group, an increase in
distribution of foreign titles, an increase in the number of publishers (i.e.,
titles) we distribute to our specialty retail customers, and an increase in the
number of customers and customer stores we service. This increase was partially
off-set by a slight weakness in sell-through in domestic titles at retail,
primarily weeklies, which we believe is attributable to a lack of event driven
reporting in the period.

Revenues in our In-Store Services segment increased $1,579 (5.8%) primarily due
to an increase in our wire manufacturing group. The increase resulted primarily
from the addition of a new customer resulting in a significant fixture order a
portion of which was realized in the second quarter.

Revenues in our Wood Manufacturing segment decreased $2,066 (20.8%) due to a
decrease in the number of store openings and remodeling performed by our
customers. This decrease was almost entirely attributable to the first quarter
of the six-month period as our customers have begun to implement a more
aggressive store opening schedule in the second quarter. In addition, we have
added a number of significant new customers to replace customers lost in the
fourth quarter of the prior fiscal year.



                                       17
<PAGE>

Gross Profit

<Table>
<Caption>
                  2003           2002         CHANGE            %
----------   ------------   ------------   ------------   ------------
<S>          <C>            <C>            <C>            <C>
   Quarter         22,780         17,738          5,042           28.4%
Six Months         43,561         36,422          7,139           19.6%
</Table>

Cost of revenues consist primarily of the cost of magazines we distribute, the
cost of raw materials, labor, and plant overheads at our wire and wood
manufacturing plants, and the labor needed to compile the retailers' rebate
claims. The cost of magazines, raw materials and labor fluctuates based on
revenues. Plant overhead and the labor needed to compile the retailers' rebate
claims are essentially fixed in the short-term.

Gross profit for the quarter increased over the comparable quarter of the prior
year due to both increases in gross profit in our Magazine Distribution segment
and In-Store Services segment.

Gross-profit margins increased 2.7% in the current quarter over the comparable
period of the prior year. The increase is attributable to improved margins in
our Magazine Distribution segment (3.7%) partially offset by a decline in
margins in our Wood Manufacturing segment (2.1%).

Gross profit in our Magazine Distribution segment increased due to both the
increase in revenue described above as well as improving gross-profit margins.
The increase in margins in our Magazine Distribution segment resulted from a
shift in product mix from low-margin domestic titles to higher margin foreign
titles.

Gross profit in our In-Store Service segment increased due to the increase in
revenue described above.

The gross profit and the gross profit margin in our Wood Manufacturing segment
did not change significantly from the prior year.

Gross profit for the six month period increased over the comparable period of
the prior year due to an increase in gross profit in our Magazine Distribution
segment. The increase was partially offset by decreases in our In-Store Services
segment and in our Wood Manufacturing segment.

Gross-profit margins increased 0.3% in the current six month period over the
comparable period of the prior year. The increase is attributable to improved
margins in our Magazine Distribution segment (2.4%) partially offset by a
decline in margins in our In-Store Services segment (4.1%) and our Wood
Manufacturing segment (7.7%).

Gross profit in our Magazine Distribution segment increased due to both the
increase in revenue described above as well as improving gross-profit margins.
The increase in margins in our Magazine Distribution segment resulted from a
shift in product mix from low-margin domestic titles to higher margin foreign
titles.

The decrease in margins in our In-Store Service segment resulted from a greater
portion of revenue attributable to our wire manufacturing group, which generally
achieves lower margins than our claim filing and information services groups.

The decrease in margins in our Wood Manufacturing segment resulted from the
lower capacity utilization consistent with the decrease in revenues.



                                       18
<PAGE>


Selling, General and Administrative Expense ("SG&A")

<Table>
<Caption>
                  2003           2002         CHANGE            %
----------   ------------   ------------   ------------   ------------
<S>          <C>            <C>            <C>            <C>
   Quarter         13,852         10,745          3,107           28.9%
Six Months         26,734         21,944          4,790           21.8%
</Table>

Selling, general and administrative expenses consist of non-production labor and
overhead. Significant overhead include rent and office overhead, insurance,
professional fees, and computer related expenses.

Selling, general and administrative expenses increased compared to the
comparable quarter of the prior year due to growth in our Magazine Distribution
segment and the expenses that now make up our Shared Services.

The increase in our Magazine Distribution segment relate primarily to the
inception of our magazine export business, which occurred in March 2003, and an
overall increase in our back office operation to support our increase in
distribution.

The increase in our Shared Services resulted from the overall growth in our
businesses.

Selling, general and administrative expenses increased compared to the
comparable six month period of the prior year due to increases in our Magazine
Distribution segment and the expenses that now make up our Shared Services.

The increase in our Magazine Distribution segment relate primarily to the
inception of our magazine export business, which occurred in March 2003.

The increase in our Shared Services resulted from the overall increase in our
businesses.


Fulfillment Freight

<Table>
<Caption>
                  2003           2002         CHANGE            %
----------   ------------   ------------   ------------   ------------
<S>          <C>            <C>            <C>            <C>
   Quarter          3,948          3,318            630           19.0%
Six Months          8,480          6,993          1,487           21.3%
</Table>

Fulfillment freight consists of our direct costs of distributing magazines via
third party carrier. Freight rates are driven by the weight of the copies being
shipped and the distance between origination and the destination.

Freight attributable to our Magazine Distribution group increased in the both
the current quarter and six-month period as compared to the comparable periods
of the prior fiscal year. The increase is attributable to an increase in the
number of magazine copies distributed in the quarter.



                                       19
<PAGE>


Relocation Expense

Relocation expenses consist of the cost of transferring existing employees and
offices from their existing locations in High Point, North Carolina, St. Louis,
Missouri and San Diego, California to our new offices in Bonita Springs,
Florida. This relocation program began in fiscal 2003 and was completed in
fiscal 2004.

During 2003, we relocated our claim submission and fixture billing center in
High Point, North Carolina and our Corporate Headquarters in St. Louis, Missouri
to our new offices in Bonita Springs, Florida. This relocation was completed in
the fourth quarter of 2003.

In the first quarter of 2004, we completed the relocation of the administrative
operations of our Magazine Distribution business from San Diego, California to
our new offices in Bonita Springs, Florida.

Operating Income

<Table>
<Caption>
                  2003           2002         CHANGE            %
----------   ------------   ------------   ------------   ------------
<S>          <C>            <C>            <C>            <C>
   Quarter          4,980          2,979          2,001           67.2%
Six Months          6,617          6,493            124            1.9%
</Table>

Operating Income in the quarter increased compared to the prior year due to the
factors described above.

Operating profit margins improved 1.8% in the current quarter compared to the
comparable quarter of the prior year. The increase was due to the improvement in
our gross profit margins and the non-recurring relocation expenses in the second
quarter of the prior year, partially offset by the increase in our selling,
general, and administrative expenses as a percent of revenues.

Operating Income for the six month period increased compared to the comparable
six month period of the prior year due the factors described above.

Operating profit margins decreased .6% in the current six month period compared
to the comparable six month period of the prior year. The decrease was due to
the increase in selling, general and administrative expenses as a percent of
revenues.

Interest Expense

Interest and related expenses relate primarily to our significant debt
instruments, which consist of our revolving line-of-credit with Bank of America,
our credit facilities with Congress Financial, our IRB related to our Rockford,
IL manufacturing facility and debt to prior owners of Interlink.

Interest expense increased from the prior year due to higher average borrowings
consistent with the overall growth of the Company.

Other Expense (Income)

Other expense (income) consists of items outside of the normal course of
operations. Due to its nature, comparability between periods is not generally
meaningful. Neither reported period included a significant other expense
(income) item.



                                       20
<PAGE>


Income Tax Expense

The effective income tax rates were 27.8% and 44.6% for the quarter ended July
31, 2003 and 2002, respectively.

The effective income tax rates were 27.6% and 43.4% for the six-month period
ended July 31, 2003 and 2002, respectively.

The difference between the effective tax rates relates primarily to the
realization of a portion of the NOL acquired with our acquisition of Interlink
that was reserved at the end of fiscal 2003.



                                       21
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

Our primary cash requirements for the Magazine Distribution segment are the cost
of magazines and the cost of freight, labor and overhead associated with our
distribution centers.

Our primary cash requirements for the In-Store Services segment are the cost of
raw materials, labor, and factory overhead incurred in the production of
front-end displays, the cost of labor incurred in providing our claiming, design
and information services and cash advances funding our Advance Pay program. Our
Advance Pay program allows retailers to receive a cash advance on future
collections of their rebate claims, which is repaid when those claims are paid
by publishers.

Our primary cash requirements for the Wood Manufacturing segment are for
purchasing materials, the cost of labor, and factory overhead incurred in the
manufacturing process.

Historically, we have financed our business activities through cash flows from
operations, borrowings under available lines of credit and through the issuance
of equity securities.

Net cash provided by operating activities was $1,440 and $4,882 for the six
month periods ended July 31, 2003 and 2002, respectively.

Operating cash flows in the first six months of fiscal year 2004 were primarily
from net income $3,498, adding back non-cash charges such as depreciation and
amortization $2,013, provisions for losses on accounts receivable $1,082, and a
significant increase in accounts payable $10,855. These cash providing
activities were offset by a significant increase in accounts receivable $16,773.

The increase in accounts receivable and accounts payable related primarily to
the magazine export agreement and the inception of that business. The magazine
export agreement allowed us to become a leading exporter of domestic titles to
wholesalers overseas. Product is purchased directly from domestic publishers and
sold on extended terms to foreign distribution agents who distribute the
magazines to retailers in the geographic territories. The inception of this
business resulted in an increase in accounts receivable and an increase in
accounts payable. The first six months of the year includes five months of
operations from this business and only two months of cash collections due to
standard payment terms of 90 days, which is typical for this segment of the
industry.

Operating cash flows in the first six months of fiscal year 2003 were primarily
from net income $2,663, adding back non-cash charges such as depreciation and
amortization $1,465, provisions for losses on accounts receivable $264, and a
significant decrease in accounts receivable $10,243. These cash providing
activities were offset by a significant decrease in accounts payable $9,383.

The decrease in accounts receivable during the first six months of fiscal 2003
related primarily to an unusually high level of accounts receivable as of the
beginning of the fiscal year returning to more normal levels. Improved cash
collections allowed us to significantly reduce payables.

Net cash used in investing activities was $3,315 and $6,716 for the six month
period ended July 31, 2003 and 2002, respectively.

Investing activities in the first six months of fiscal year 2004 consisted
primarily of the initial payment under the magazine export agreement and a
contingent payment under the magazine import agreement.


                                       22
<PAGE>


Investing activities in the first six months of fiscal year 2003 consisted of
capital expenditures, our acquisition of a wire manufacturing company in
Vancouver, British Columbia and our acquisition of a customer list of foreign
magazine publishers.

Our borrowing agreements limit the amount we can expend on capital expenditures
in any fiscal year.

Net cash provided by financing activities were $4,715 and $4,884 for the
quarter-ended July 31, 2003 and 2002, respectively.

Financing activities in the first six months of fiscal year 2004 consisted
primarily of borrowings on our credit facilities to fund our investing
activities described above as well as an increase in cash balances.

Financing activities in the first six months of fiscal year 2003 consisted
primarily of borrowing against our credit facilities to fund our investing
activities described above as well as an increase in cash balances.

Outstanding balances on our credit facility fluctuate partially due to the
timing of check clearing. Due to the nature of our Advance Pay program and the
concentration of payables in our Magazine Distribution business in a few large
national distributors, it is not uncommon to have a number of large checks
issued that have not cleared against our credit facility at the end of our
fiscal quarters.

At July 31, 2003, our total debt obligations were $58,111, excluding outstanding
letters of credit. Debt consists of our revolving credit facility with Bank of
America that we use to fund our In-Store Services and Wood Manufacturing
segments, our revolving credit facilities with Congress Financial Corporation
that we use to fund our Magazine Distribution segment, an Industrial Revenue
Bond connected to our manufacturing facility in Illinois, amounts owed related
to the magazine export agreement, and a note payable to the former owners of an
acquired company.

On December 22, 1999, the Company entered into a credit agreement with Bank of
America, N.A., which was amended on August 30, 2002 to extend the termination
date to August 1, 2003 and to grant Bank of America, N.A. a first-priority
perfected security interest in all real and personal property of the Company
excluding the capital stock and assets of The Interlink Companies, Inc.,
International Periodical Distributors, Inc. and David E. Young, Inc. The
agreement was further amended on May 1, 2003 to waive and amend certain
financial covenants and provide the Company with two options to extend the
agreement (if both options were exercised) through February 1, 2004. The Company
elected to extend the agreement through November 2003 as we finalized
negotiations with a replacement lender. The Company anticipates finalizing these
negotiations before November 2003.

The credit agreement enables the Company to borrow up to $40.0 million under a
revolving credit facility. Borrowings under the credit facility bear interest at
a rate equal to the 90-day LIBOR rate (1.26% at July 31, 2003) plus 5.35% and
carries a facility fee of 1/4 % per annum on the difference between $25 million
and the average principal amount outstanding under the loan (if less than $25
million) plus 3/8% per annum of the difference between the maximum amount of the
loan and the greater of (i) $25 million or (ii) the average principal amount
outstanding under this loan.

Under the credit agreement, the Company is limited in its ability to declare
dividends or other distributions on capital stock or make payments in connection
with the purchase, redemption, retirement or acquisition of capital stock. There
are also limitations on capital expenditures and the Company is required to
maintain certain financial ratios. The Company was in compliance with such
ratios at July 31, 2003.

Availability under the facility is limited by the Company's borrowing base
calculation as defined in the agreement. This calculation resulted in excess
availability of $12.3 million at July 31, 2003.


                                       23
<PAGE>


In connection with the acquisition of Interlink, the Company assumed IPD and
Deyco's secured credit facilities with Congress Financial Corporation
("Congress"). On February 22, 2001, IPD and Deyco entered into the credit
facility with Congress which expires on February 21, 2005.

The agreements provide for maximum combined borrowings of $25 million subject to
limits set by periodic borrowing base calculations. Borrowings under the
revolving credit portion of the facility bear interest at a rate equal 0.75% in
excess of the prime rate (4.0% at July 31, 2003). The credit facility is secured
by IPD and Deyco's accounts receivable and limited cross guarantees between the
two divisions. Under the credit agreement, IPD and Deyco are required to
maintain certain financial ratios. IPD and Deyco were in compliance with all
such ratios at July 31, 2003.

Availability under the facility is limited by the Company's borrowing base
calculation as defined in the agreement. This calculation resulted in excess
availability of $2.7 million at July 31, 2003.

On January 30, 1995, the City of Rockford, Illinois issued $4,000 of its
Industrial Project Revenue Bonds, Series 1995, and the proceeds were deposited
with the Amalgamated Bank of Chicago, as trustee. The proceeds of the issuance
were utilized to construct our manufacturing facility in Rockford, Illinois.
Bank of America ("the Bank") has issued an unsecured letter of credit for $4,100
in connection with the IRB. The bonds are secured by the trustee's indenture and
the letter of credit. The bonds bear interest at a variable weekly rate
(approximately 80% of the Treasury Rate) not to exceed 15% per annum. The bonds
mature on January 1, 2030. Fees related to the letter of credit are .75% per
annum of the outstanding bond principal plus accrued interest.

Amounts owed related to the magazine export agreement consist of 12 quarterly
payments of $350 beginning in January 2004.

The note payable in the amount of $1.9 million to the previous owner of an
acquired company is past due and is being disputed under the conditions of the
acquisition agreement.

We believe that our cash flow from operations together with our revolving credit
facilities will be sufficient to fund our working capital needs and capital
expenditures for the foreseeable future. We have identified and executed a term
sheet with a lender to replace the Bank of America credit facility. The lender
is currently in the process of finalizing due diligence related to this new
facility. We anticipate this new agreement will be sufficient to fund our
working capital needs for the foreseeable future and should be finalized before
the existing facility expires on November 1, 2003. If necessary, we can avail
ourselves of the offer to extend our existing facility for an additional three
month period.


                                       24
<PAGE>


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's Discussion and Analysis of Financial Condition and Results of
Operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires management
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent
liabilities. Management bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Senior Management has discussed the development, selection and
disclosure of these estimates with the Audit Committee of the Board of
Directors. Actual results may differ from these estimates under different
assumptions and conditions.

Management believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.

Revenue Recognition

The Company records a reduction in revenue for estimated magazine sales returns
and a reduction in cost of sales for estimated magazine purchase returns.
Estimated sales returns are based on historical sales returns and daily point-of
sale data from significant customers. The purchase return estimate is calculated
from the sales return reserve based on historical gross profit. If the
historical data the Company uses to calculate these estimates does not properly
reflect future results, revenue and/or cost of sales may be misstated.

Allowance for Doubtful Accounts

The Company provides for potential uncollectible accounts receivable based on
customer-specific information and historical collection experience. If market
conditions decline, actual collection experience may not meet expectations and
may result in increased bad debt expenses.

Taxes on Earnings

The carrying value of the Company's net deferred tax assets assumes that the
Company will be able to generate sufficient future taxable income in certain tax
jurisdictions, based on estimates and assumptions. If these estimates and
assumptions change in the future, the Company may be required to increase or
decrease valuation allowances against its deferred tax assets resulting in
additional income tax expenses or benefits.

Valuation of Long-Lived Assets Including Goodwill and Purchased Intangible
Assets

We review property, plant and equipment, goodwill and purchased intangible
assets for impairment whenever events or changes in circumstances indicate the
carrying value of an asset may not be recoverable. Our asset impairment review
assesses the fair value of the assets based on the future cash flows the assets
are expected to generate. An impairment loss is recognized when estimated
discounted future cash flows expected to result from the use of the asset plus
net proceeds expected from the disposition of the asset (if any) are less than
the carrying value of the asset. This approach uses our estimates of future
market growth, forecasted revenue and costs, expected periods the asset will be
utilized and appropriate discount rates. Such evaluations of impairment of
long-lived assets including goodwill and purchased intangible assets are an
integral part of, but not limited to, our strategic reviews of our business and
operations. Deterioration of our business overall or within a business segment
in the future could also lead to impairment adjustments as such issues are
identified.


                                       25
<PAGE>


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risks include fluctuations in interest rates and exchange
rate variability.

Our debt relates primarily to credit facilities with Bank of America, N.A. and
credit facilities with Congress Financial Corporation.

The credit facility with Bank of America has an outstanding principal balance of
approximately $33.6 million as of July 31, 2003. Interest on the outstanding
balance is charged based on a variable interest rate related to LIBOR plus a
margin specified in the credit agreement.

In order to minimize our exposure to interest rate risk, our lender required us
to enter into an interest rate swap agreement. The swap agreement, with a
notional amount of $15.0 million converts the floating interest rate on the Bank
of America credit facility to a fixed rate. At July 31, 2003, the fair value of
the swap is recorded in accrued expenses. The change in the fair value of the
swap is recorded in other income (expense). The swap expires on February 1,
2004.

The two credit facilities with Congress are secured by IPD and Deyco's accounts
receivable, inventories, equipment and other intangibles. The revolving credit
facilities had a combined outstanding principal balance of approximately $14.2
million at July 31, 2003. Borrowings under the revolving credit portion of the
facility bear interest at a rate equal to 0.25% in excess of the prime rate.
Interest on the outstanding balances is subject to market risk in the form of
fluctuations in interest rates.

We do not perform any interest rate hedging activities related to these two
facilities.

We have exposure to foreign currency fluctuations through our operations in
Canada. These operations accounted for approximately $1.2 million or 1.4% of our
second quarter revenues. In addition, we generally pay operating expenses in the
corresponding local currency and will be subject to increased risk for exchange
rate fluctuations between such local currency and the dollar.

Additionally, we have exposure to foreign currency fluctuation through our
purchase of magazines from foreign publishers and sale of domestic magazine
titles to foreign wholesalers. Foreign magazines are purchased in foreign
currency (primarily Euros) and sold domestically in US$. Domestic magazines are
purchased in US$ and in some instances sold internationally in local currency. A
significant change in the relative strength of the US$ could have a significant
impact on the sales of these magazines at retail.

We do not conduct any significant hedging activities related to foreign
currency.


                                       26
<PAGE>


ITEM 4.  CONTROLS AND PROCEDURES



Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures as of the date of this report (the "Evaluation Date").
Based on this evaluation, our principal executive officer and principal
financial officer concluded as of the Evaluation Date that our disclosure
controls and procedures were effective such that the material information
required to be included in our Securities and Exchange Commission ("SEC")
reports is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms relating to our company, including our
consolidated subsidiaries, and was made known to them by others within those
entities, particularly during the period when this report was being prepared.



In addition, there were no changes in our internal controls over financial
reporting that occurred during our most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.  In addition, we have not identified any
significant deficiencies or material weaknesses in the design or operation of
internal controls over financial reporting which are reasonably likely to
adversely affect our ability to record, process, summarize and report financial
information.



We have restated our financial statements to reflect certain adjustments
resulting from the revision of our accounting treatment of revenues derived from
our rebate claim filing services and cash flows associated with our Advance Pay
Program. In light of this restatement, we conducted a new evaluation of the
effectiveness of our disclosure controls and procedures as of the date of the
filing of this amended report. Based on this evaluation, our principal executive
officer and principal financial officer concluded that (a) the prior conclusion
was correct and our disclosure controls and procedures were effective and (b)
the disclosure controls and procedures were not intended to elicit the type of
information that resulted in the restatement.


                                       27
<PAGE>


PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Company is a party to routine legal proceedings arising out of the normal
course of business. Although it is not possible to predict with certainty the
outcome of these unresolved legal actions or the range of possible loss, the
Company believes that none of these actions, individually or in the aggregate,
will have a material adverse affect on the financial condition or results of
operations of the Company.

ITEM 2. CHANGES IN SECURITIES

         Not Applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

         Not Applicable.

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

         (a)      The Annual Meeting of the Shareholders of the Company was held
                  on July 22, 2003. Of the 18,282,231 shares entitled to vote at
                  such meeting, 13,638,610 shares were present at the meeting in
                  person or by proxy.

         (b)      Each of the management nominees for election as Class II
                  directors was duly elected to serve an additional term of
                  three years expiring in 2006. These individuals joined the
                  directors Aron Katzman, Randall S. Minix, James R. Gillis, S.
                  Leslie Flegel and Robert O. Aders , whose terms of office
                  continued after the Company's 2003 Annual Meeting of
                  Shareholders. The number of shares voted for and withheld were
                  as follows:

<Table>
<Caption>
                                                         For         Withheld
                                                     ----------     ----------
<S>                                                  <C>            <C>

                     Harry L. "Terry" Franc, III     13,414,481       224,129
                     Kenneth F. Teasdale             12,816,665       821,945
                     Allan R. Lyons                  13,423,305       215,305
</Table>


ITEM 5.  OTHER INFORMATION

            Not Applicable.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)   Exhibits.

               See Exhibit Index

         (b)   Reports on Form 8-K.

               On June 18, 2003, the Company filed a Current Report on Form 8-K
               under Item 9 thereof disclosing the Company's public announcement
               of the results of operation for the fiscal quarter ended April
               30, 2003.


                                       28
<PAGE>


                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                         SOURCE INTERLINK COMPANIES, INC.



Date: March 2, 2004                                     /s/ MARC FIERMAN
                                                        -----------------------
                                                        Marc Fierman
                                                        Chief Financial Officer




                                       29
<PAGE>

                                  EXHIBIT INDEX



<Table>
<Caption>
Exhibit
Number                              Description
-------                             -----------
<S>               <C>
31.1              CEO Certification

31.2              CFO Certification

32.1              Section 1350 Certifications
</Table>


                                       30