Guitar Center 8-K Results of Operations and Financial Condition

Exhibit 99.2

GUITAR CENTER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

	December 31, 2006		December 31, 2005
Assets
Current assets:
Cash and cash equivalents	$	15,153	$	14,529
Accounts receivable, net		53,916		40,844
Merchandise inventories		578,082		445,771
Prepaid expenses and other current assets		16,178		15,533
Deferred income taxes		22,739		13,492
Total current assets		686,068		530,169
Property and equipment, net		201,986		149,209
Goodwill		18,507		85,929
Intangible assets, net		7,612		9,142
Other assets, net		13,305		5,741
Total assets	$	927,478	$	780,190
Liabilities and stockholders’ equity
Current liabilities:
Cash overdraft	$	20,243	$	18,482
Accounts payable		93,717		61,015
Accrued expenses and other current liabilities		117,595		106,181
Merchandise advances		26,830		25,127
Borrowings under revolving line of credit		101,144		32,266
Total current liabilities		359,529		243,071
Other long-term liabilities		17,292		11,995
Deferred income taxes		5,165		20,307
Long-term debt		1,416		100,000
Total liabilities		383,402		375,373
Minority interest		1,339		—
Stockholders’ equity:
Preferred stock		—		—
Common stock		295		261
Additional paid-in capital		464,217		326,755
Retained earnings		78,225		77,801
Total stockholders’ equity		542,737		404,817
Total liabilities and stockholders’ equity	$	927,478	$	780,190

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GUITAR CENTER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

	Three months ended December 31
	2006			2005
Net sales	$	628,509		$	562,756
Cost of goods sold, buying and occupancy		435,636			392,684
Gross profit		192,873			170,072
Selling, general and administrative expenses		135,435			113,114
Goodwill impairment		80,160			—
Operating income (loss)		(22,722	)		56,958
Interest expense, net		2,049			2,528
Income (loss) before income taxes		(24,771	)		54,430
Income taxes		15,262			20,956
Net income (loss)	$	(40,033	)	$	33,474
Net income (loss) per share:
Basic	$	(1.36	)	$	1.29
Diluted	$	(1.36	)	$	1.14
Weighted average shares outstanding:
Basic		29,369			26,034
Diluted		29,369			29,876

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GUITAR CENTER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

	Year ended December 31,
	2006		2005
Net sales	$	2,029,966	$	1,782,499
Cost of goods sold, buying and occupancy		1,435,963		1,262,097
Gross profit		594,003		520,402
Selling, general and administrative expenses		466,555		388,380
Goodwill impairment		80,160		—
Operating income		47,288		132,022
Interest expense, net		8,448		7,339
Gain on sale of property		2,115		—
Income before income taxes		40,955		124,683
Income taxes		40,531		48,005
Net income	$	424	$	76,678
Net income per share:
Basic	$	0.02	$	2.96
Diluted	$	0.01	$	2.67
Weighted average shares outstanding:
Basic		27,686		25,873
Diluted		28,402		29,846

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