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)

	September 30, 2005				December 31, 2004
Assets
Current assets:
Cash and cash equivalents	$			7,768	$	60,453
Investments in marketable securities	—				3,810
Accounts receivable, net	28,326				27,627
Merchandise inventories	456,384				314,961
Prepaid expenses and deposits	18,747				13,367
Deferred income taxes	5,137				5,552
Total current assets	516,362				425,770
Property and equipment, net	140,471				97,349
Investments in marketable securities	—				16,997
Goodwill	76,138				26,474
Deposits and other assets, net	11,960				8,003
	$		744,931		$	574,593
Liabilities and Stockholders’ equity
Current liabilities:
Accounts payable	$	98,259			$		49,771
Accrued expenses and other current liabilities	67,305				83,606
Merchandise advances	18,543				22,534
Revolving line of credit	74,004				—
Total current liabilities	258,111				155,911
Other long-term liabilities	11,220				6,943
Deferred income taxes	7,411				5,057
Long-term debt	100,000				100,000
Total liabilities	376,742				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  25,992 at September 30, 2005 and 25,359 at  December 31, 2004	260				254
Additional paid in capital	323,602				305,305
Retained earnings	44,327				1,123
Stockholders’ equity	368,189				306,682
	$	744,931			$		574,593

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Guitar Center, Inc. and subsidiaries

Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

	Three months ended September 30,
	2005			2004
Net sales	$	421,061		$	354,909
Cost of goods sold, buying and occupancy	297,243			256,968
Gross profit	123,818			97,941
Selling, general and administrative expenses	98,366			76,628
Operating income	25,452			21,313
Interest expense, net	2,021			1,294
Income before income taxes	23,431			20,019
Income taxes	9,022			7,608
Net income	$		14,409	$	12,411
Net income per share
Basic	$		0.55	$	0.49
Diluted	$		0.51	$	0.45
Weighted average shares outstanding
Basic	25,975			25,211
Diluted	29,946			29,235

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Guitar Center, Inc. and subsidiaries

Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

	Nine months ended September 30,
	2005		2004
Net sales	$	1,219,743	$	1,044,234
Cost of goods sold, buying and occupancy	869,413		757,397
Gross profit	350,330		286,837
Selling, general and administrative expenses	275,266		224,146
Operating income	75,064		62,691
Interest expense, net	4,811		4,082
Income before income taxes	70,253		58,609
Income taxes	27,049		22,274
Net income	$	43,204	$	36,335
Net income per share
Basic	$	1.67	$	1.47
Diluted	$	1.52	$	1.43
Weighted average shares outstanding
Basic	25,819		24,698
Diluted	29,836		26,905

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Guitar Center, Inc. and subsidiaries

Supplemental Financial Data

(In thousands, except per share data)

	Three months ended September 30, 2005		Three months ended September 30, 2004(c)
	(in thousands, except per share amounts)
Calculation of diluted earnings per share
Net income	$	14,409	$	12,411
Add back interest, net of tax, on 4% Senior Convertible Notes (a)	727		733
Net income excluding interest expense on 4% Senior Convertible Notes	15,136		13,144
Basic weighted average shares outstanding	25,975		25,211
Dilutive effect of stock options outstanding	1,079		1,132
Incremental shares on assumed conversion of 4% Senior Convertible Note (b)	2,892		2,892
Diluted weighted average shares outstanding	29,946		29,235
Diluted net income per share	$	0.51	$	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 September 30, 2004 has been restated to conform to EITF 04-08 issued in November 2004.

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