Guitar Center 8-K Results of Operations and Financial Condition

Exhibit 99.2

Guitar Center, Inc. and subsidiaries

Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

	June 30, 2005 (a)		December 31, 2004
Assets
Current assets:
Cash and cash equivalents	$	9,977	$	60,453
Investments in marketable securities	—		3,810
Accounts receivable, net	23,905		27,627
Merchandise inventories	416,566		314,961
Prepaid expenses and deposits	17,151		13,367
Deferred income taxes	5,137		5,552
Total current assets	472,736		425,770
Property and equipment, net	124,176		97,349
Investments in marketable securities	—		16,997
Goodwill	78,412		26,474
Deposits and other assets, net	13,217		8,003
	$	688,541	$	574,593
Liabilities and Stockholders’ equity
Current liabilities:
Accounts payable	$	94,930	$	49,771
Accrued expenses and other current liabilities	65,550		83,606
Merchandise advances	19,792		22,534
Revolving line of credit	38,092		—
Total current liabilities	218,364		155,911
Other long-term liabilities	10,206		6,943
Deferred income taxes	7,411		5,057
Long-term debt	100,000		100,000
Total liabilities	335,981		267,911
Stockholders’ equity:
Preferred stock; 5,000 authorized, none issued and outstanding	—		—
Common Stock, $0.01 par value, authorized 55,000 shares, issued and outstanding 25,944 at June 30, 2005 and 25,359 at  December 31, 2004	260		254
Additional paid in capital	322,382		305,305
Retained earnings	29,918		1,123
Stockholders’ equity	352,560		306,682
	$	688,541	$	574,593

(a) Purchase price accounting related to the Music & Arts Center, Inc. acquisition completed April 15, 2005 is being finalized and, as a result, there may be a subsequent reclassification of certain items presented on the balance sheet as of June 30, 2005.

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Guitar Center, Inc. and subsidiaries

Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

	Three months ended June 30,
	2005		2004
Net sales	$	402,296	$	339,622
Cost of goods sold, buying and occupancy	286,956		245,409
Gross profit	115,340		94,213
Selling, general and administrative expenses	92,429		73,200
Operating income	22,911		21,013
Interest expense, net	1,915		1,425
Income before income taxes	20,996		19,588
Income taxes	8,085		7,444
Net income	$	12,911	$	12,144
Net income per share
Basic	$	0.50	$	0.49
Diluted	$	0.46	$	0.45
Weighted average shares outstanding
Basic	25,885		24,676
Diluted	29,836		28,859

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Guitar Center, Inc. and subsidiaries

Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

	Six months ended June 30,
	2005		2004
Net sales	$	798,682	$	689,325
Cost of goods sold, buying and occupancy	572,170		500,429
Gross profit	226,512		188,896
Selling, general and administrative expenses	176,900		147,518
Operating income	49,612		41,378
Interest expense, net	2,790		2,788
Income before income taxes	46,822		38,590
Income taxes	18,027		14,666
Net income	$	28,795	$	23,924
Net income per share
Basic	$	1.12	$	0.98
Diluted	$	1.02	$	0.89
Weighted average shares outstanding
Basic	25,740		24,432
Diluted	29,780		28,636

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Guitar Center, Inc. and subsidiaries

Supplemental Financial Data

(In thousands, except per share data)

	Three months ended June 30, 2005		Three months ended June 30, 2004(c)
	(in thousands, except per share amounts)
Calculation of diluted earnings per share
Net income	$	12,911	$	12,144
Add back interest, net of tax, on 4% Senior Convertible Notes (a)	727		733
Net income excluding interest expense on 4% Senior Convertible Notes	13,638		12,877
Basic weighted average shares outstanding	25,885		24,676
Dilutive effect of stock options outstanding	1,059		1,291
Incremental shares on assumed conversion of 4% Senior Convertible Notes (b)	2,892		2,892
Diluted weighted average shares outstanding	29,836		28,859
Diluted net income per share	$	0.46	$	0.45

(a) Represents the interest expense, including amortization of deferred financing costs, on the 4% Senior Convertible Notes, net of tax, using an effective tax rate for 2005 of 38.5% and for 2004 of 38.0%.

(b) Represents the number of incremental common shares resulting from the conversion of the 4% Senior Convertible Notes.

(c) Financial data for the three months ended June 30, 2004 has been restated to conform to EITF 04-08 issued in November 2004.

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