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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-Q

(Mark One)

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2001

or

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File No. 000-22207

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GUITAR CENTER, INC.(Exact Name of Registrant as Specified in its Charter)

DELAWARE(State or other jurisdiction of incorporation or organization)

95-4600862(I.R.S. Employer Identification Number)5795 LINDERO CANYON ROAD
WESTLAKE VILLAGE, CALIFORNIA(Address of principal executive offices)

91362(Zip Code)


(818) 735-8800Registrant's telephone number, including area code

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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 / /

As
of November 12, 2001, 22,295,055 shares of our Common Stock, $.01 par value, were outstanding.

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INDEX

|Part I.  |  | Financial Information                                                                         |  |   
|-------- |  | --------------------------------------------------------------------------------------------- |  | --
|         |  | Item 1. Consolidated Financial Statements (Unaudited)                                         |  |   
|         |  | Consolidated Balance SheetsSeptember 30, 2001 and December 31, 2000                          |  | 3 
|         |  | Consolidated Statements of IncomeThree months ended September 30, 2001 and 2000              |  | 4 
|         |  | Consolidated Statements of IncomeNine months ended September 30, 2001 and 2000               |  | 5 
|         |  | Consolidated Statements of Cash FlowsNine months ended September 30, 2001 and 2000           |  | 6 
|         |  | Notes to Consolidated Financial Statements                                                    |  | 7 
|         |  | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 9 
|         |  | Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |  | 21
|Part II. |  | Other Information                                                                             |  |   
|         |  | Item 5. Other Information                                                                     |  | 21
|         |  | Item 6. Exhibits                                                                              |  | 21

2

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Guitar Center, Inc. and subsidiaries  Consolidated Balance Sheets  (in thousands except per share data)

|                                       |                                                                                                                                                            | September 30,
2001 |         | December 31, 2000 |  
|-------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ------- | ----------------- | -
|Assets                                 |                                                                                                                                                            |                    |         |                   |  
|Current assets:                        |                                                                                                                                                            |                    |         |                   |  
|                                       | Cash and cash equivalents                                                                                                                                  |                    | $       | 5,725             |  
|                                       | Accounts receivable, net                                                                                                                                   |                    |         | 22,824            |  
|                                       | Merchandise inventory, net                                                                                                                                 |                    |         | 252,120           |  
|                                       | Prepaid expenses and deposits                                                                                                                              |                    |         | 6,770             |  
|                                       | Deferred income tax                                                                                                                                        |                    |         | 5,931             |  
|                                       |                                                                                                                                                            |                    |         |                   |  
|Total current assets                   |                                                                                                                                                            |                    | 293,370 |                   |  
|Property and equipment, net            |                                                                                                                                                            |                    | 78,784  |                   |  
|Goodwill, net                          |                                                                                                                                                            |                    | 21,249  |                   |  
|Deposits and other assets, non-current |                                                                                                                                                            |                    | 8,761   |                   |  
|                                       |                                                                                                                                                            |                    |         |                   |  
|                                       |                                                                                                                                                            | $                  | 402,164 |                   | $
|                                       |                                                                                                                                                            |                    |         |                   |  
|Liabilities and stockholders' equity   |                                                                                                                                                            |                    |         |                   |  
|Current liabilities:                   |                                                                                                                                                            |                    |         |                   |  
|                                       | Accounts payable                                                                                                                                           |                    | $       | 80,213            |  
|                                       | Accrued expenses and other current liabilities                                                                                                             |                    |         | 26,995            |  
|                                       | Merchandise advances                                                                                                                                       |                    |         | 10,279            |  
|                                       | Revolving line of credit                                                                                                                                   |                    |         | 94,199            |  
|                                       | Current portion of long-term debt                                                                                                                          |                    |         | 690               |  
|                                       |                                                                                                                                                            |                    |         |                   |  
|Total current liabilities              |                                                                                                                                                            |                    | 212,376 |                   |  
|Other long-term liabilities            |                                                                                                                                                            |                    | 3,542   |                   |  
|Deferred tax liability                 |                                                                                                                                                            |                    | 2,160   |                   |  
|Long-term debt                         |                                                                                                                                                            |                    | 67,040  |                   |  
|                                       |                                                                                                                                                            |                    |         |                   |  
|Total liabilities                      |                                                                                                                                                            |                    | 285,118 |                   |  
|Stockholders' equity:                  |                                                                                                                                                            |                    |         |                   |  
|                                       | Preferred Stock; authorized 5,000 shares at September 30, 2001 and December 31, 2000, none issued and outstanding                                          |                    |         |                  |  
|                                       | Common stock, $0.01 par value, authorized 55,000 shares, issued and outstanding 22,293 at September 30, 2001 and 22,087 at December 31, 2000, respectively |                    |         | 223               |  
|                                       | Additional paid in capital                                                                                                                                 |                    |         | 247,821           |  
|                                       | Accumulated deficit                                                                                                                                        |                    |         | (130,998          | )
|                                       |                                                                                                                                                            |                    |         |                   |  
|Total stockholders' equity             |                                                                                                                                                            |                    | 117,046 |                   |  
|                                       |                                                                                                                                                            |                    |         |                   |  
|                                       |                                                                                                                                                            | $                  | 402,164 |                   | $
|                                       |                                                                                                                                                            |                    |         |                   |  

See
accompanying notes to consolidated financial statements.

3

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Guitar Center, Inc. and subsidiaries  Consolidated Statements of Income  (in thousands, except per share data)

|                                             |         | Three months ended September 30,
|-------------------------------------------- | ------- | --------------------------------
|
|Net sales                                    |         | $                               
|Cost of goods sold, buying and occupancy     |         |                                 
|                                             |         |                                 
|Gross profit                                 |         |                                 
|Selling, general and administrative expenses |         |                                 
|                                             |         |                                 
|Operating income                             |         |                                 
|Interest expense, net                        |         |                                 
|                                             |         |                                 
|Income before income taxes                   |         |                                 
|Income taxes                                 |         |                                 
|                                             |         |                                 
|Net income                                   |         | $                               
|                                             |         |                                 
|Net income per share                         |         |                                 
|                                             | Basic   |                                 
|                                             |         |                                 
|                                             | Diluted |                                 
|                                             |         |                                 
|Weighted average shares outstanding          |         |                                 
|                                             | Basic   |                                 
|                                             |         |                                 
|                                             | Diluted |                                 
|                                             |         |                                 

See
accompanying notes to consolidated financial statements.

4

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Guitar Center, Inc. and subsidiaries  Consolidated Statements of Income  (in thousands, except per share data)

|                                             |         | Nine months ended September 30,
|-------------------------------------------- | ------- | -------------------------------
|
|Net sales                                    |         | $                              
|Cost of goods sold, buying and occupancy     |         |                                
|                                             |         |                                
|Gross profit                                 |         |                                
|Selling, general and administrative expenses |         |                                
|                                             |         |                                
|Operating income                             |         |                                
|Interest expense, net                        |         |                                
|                                             |         |                                
|Income before income taxes                   |         |                                
|Income taxes                                 |         |                                
|                                             |         |                                
|Net income                                   |         | $                              
|                                             |         |                                
|Net income per share                         |         |                                
|                                             | Basic   |                                
|                                             |         |                                
|                                             | Diluted |                                
|                                             |         |                                
|Weighted average shares outstanding          |         |                                
|                                             | Basic   |                                
|                                             |         |                                
|                                             | Diluted |                                
|                                             |         |                                

See
accompanying notes to consolidated financial statements.

5

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Guitar Center, Inc. and subsidiaries  Consolidated Statements of Cash Flows  (in thousands)

|                                                                                                                                                                                    |                                              | Nine months ended September 30,                |        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ---------------------------------------------- | -------
|
|Operating activities                                                                                                                                                                |                                              |                                                |        
|Net income                                                                                                                                                                          |                                              | $                                              | 10,453 
|Adjustments to reconcile net income to net cash provided by (used in) provided by operating activities:                                                                             |                                              |                                                |        
|                                                                                                                                                                                    | Depreciation and amortization                |                                                |        
|                                                                                                                                                                                    | Amortization of deferred financing fees      |                                                |        
|                                                                                                                                                                                    | Loss on sale of assets                       |                                                |        
|                                                                                                                                                                                    | Changes in operating assets and liabilities: |                                                |        
|                                                                                                                                                                                    |                                              | Accounts receivable                            |        
|                                                                                                                                                                                    |                                              | Merchandise inventories                        |        
|                                                                                                                                                                                    |                                              | Prepaid expenses                               |        
|                                                                                                                                                                                    |                                              | Other assets                                   |        
|                                                                                                                                                                                    |                                              | Accounts payable                               |        
|                                                                                                                                                                                    |                                              | Accrued expenses and other current liabilities |        
|                                                                                                                                                                                    |                                              | Other long term liabilities                    |        
|                                                                                                                                                                                    |                                              | Merchandise advances                           |        
|                                                                                                                                                                                    |                                              |                                                |        
|Net cash (used in) provided by operating activities                                                                                                                                 |                                              |                                                | (18,923
|Investing activities                                                                                                                                                                |                                              |                                                |        
|Purchase of property and equipment                                                                                                                                                  |                                              |                                                | (18,243
|Investment in non-consolidated entity                                                                                                                                               |                                              |                                                | (150   
|Purchase of American Music Group, net of cash acquired                                                                                                                              |                                              |                                                | (28,482
|Proceeds from sale of assets                                                                                                                                                        |                                              |                                                | 16     
|                                                                                                                                                                                    |                                              |                                                |        
|Net cash used in investing activities                                                                                                                                               |                                              |                                                | (46,859
|Financing activities                                                                                                                                                                |                                              |                                                |        
|Net change in revolving debt facility                                                                                                                                               |                                              |                                                | 58,331 
|Proceeds from exercise of stock options                                                                                                                                             |                                              |                                                | 1,038  
|Payments under capital lease                                                                                                                                                        |                                              |                                                | (796   
|                                                                                                                                                                                    |                                              |                                                |        
|Net cash provided by financing activities                                                                                                                                           |                                              |                                                | 58,573 
|Net (decrease) increase in cash and cash equivalents                                                                                                                                |                                              |                                                | (7,209 
|Cash and cash equivalents at beginning of year                                                                                                                                      |                                              |                                                | 12,934 
|                                                                                                                                                                                    |                                              |                                                |        
|Cash and cash equivalents at end of period                                                                                                                                          |                                              | $                                              | 5,725  
|                                                                                                                                                                                    |                                              |                                                |        
|Non-cash activities                                                                                                                                                                 |                                              |                                                |        
|Guitar Center purchased all of the assets of American Music Group (2001) and Veneman Music Group (2000). In conjunction with the acquisitions, liabilities were assumed as follows: |                                              |                                                |        
|Fair value of assets acquired                                                                                                                                                       |                                              |                                                | 22,628 
|Liabilities assumed                                                                                                                                                                 |                                              |                                                | (8,511 
|Goodwill                                                                                                                                                                            |                                              |                                                | 16,457 
|Common stock issued                                                                                                                                                                 |                                              |                                                | (2,092 
|                                                                                                                                                                                    |                                              |                                                |        
|Net cash paid for acquisitions                                                                                                                                                      |                                              |                                                | 28,482 
|Cash acquired in acquisitions                                                                                                                                                       |                                              |                                                | 278    
|                                                                                                                                                                                    |                                              |                                                |        
|Cash paid for acquisitions                                                                                                                                                          |                                              |                                                | 28,760 
|                                                                                                                                                                                    |                                              |                                                |        
|Borrowings under capital leases                                                                                                                                                     |                                              |                                                | 473    
|                                                                                                                                                                                    |                                              |                                                |        

See
accompanying notes to consolidated financial statements.

6

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Guitar Center, Inc. and subsidiaries  Notes to Consolidated Financial Statements

1. General

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial
position of Guitar Center, Inc. and subsidiaries ("Guitar Center," the "Company," "we," "us," or "our") as of September 30, 2001 and December 31, 2000, and the results of operations and cash flows for
the three and nine months ended September 30, 2001 and 2000. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and
notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2000.

The
results of operations for the three and nine months ended September 30, 2001 are not necessarily indicative of the results to be expected for the full year.

2. Acquisitions

On April 16, 2001, we acquired the assets of American Music Group, Ltd. and related companies, a New York-based musical instrument retailer specializing in the
sale and rental of band instruments and accessories (the "American Music Group"). In consideration of the purchase, we paid $28.5 million in net cash and issued 115,358 shares of Guitar Center stock
amounting to $2.1 million. We also assumed or repaid liabilities of $8.5 million. As part of the terms of the purchase agreement, there is a $2.5 million hold back on the transaction, pending the
American Music Group business meeting certain operating objectives in 2001. The acquisition was accounted for using the purchase method.

The
results of operations for American Music Group were not material to Guitar Center's previous presented consolidated financial statements and, as such, pro-forma financial
information is not presented. The results of American Music Group are included in the consolidated financial statements of the Company from the date of the acquisition.

In
May 2000, we acquired the stock of Veneman Music Company, Inc., a musical instrument retailer based in Rockville, Maryland. The acquisition was accounted for using the purchase
method. All of the debt and other liabilities of Veneman's were either repaid or assumed by us in connection with the closing. The results of operations have been included in the consolidated
financial statements from the date of acquisition.

Goodwill
was recorded on the American Music Group and Veneman Music Company, Inc. acquisitions for any consideration paid in excess of fair value. We presently amortize goodwill over
twenty years. On July 20, 2001, the Financial Accounting Standards Board issued Statement No. 141,Business Combinations (SFAS No. 141),and Statement
No. 142,Goodwill and Other Intangible Assets (SFAS No. 142). These new pronouncements significantly change the permissible accounting methods for
business combinations and the treatment of goodwill and other intangible assets. Prior to the adoption of these new standards, goodwill and similar intangible assets were generally amortized into
income on a stated periodic basis. This treatment will be replaced by an alternative system, which will not require goodwill amortization on a stated basis but rather will require periodic testing of
the goodwill for impairment, with no charge to income except to the extent of any such impairment. We presently intend to adopt the new rules effective January 1, 2002, at which time we will cease to
record periodic goodwill charges absent an impairment charge. As of September 30, 2001, goodwill was $21.2 million, the majority of which relates to the American Music Group acquisition. Amortization
expense included in the consolidated statement of income for the nine months ended September 30, 2001 was $559,000.

7

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3. Segment Information

Our reportable business segments are retail (Guitar Center and American Music Group stores) and direct response (Musician's Friend catalog and Internet).
Management evaluates segment performance based primarily on net sales and income before income taxes.

Net
sales, income before income taxes and total assets are summarized as follows for the quarterly and nine month periods ended September 30, 2001 and September 30, 2000 (in
thousands):

|                           |  | Three Months Ended
September 30, 2001 |         | Nine Months Ended
September 30, 2001
|-------------------------- |  | ------------------------------------- | ------- | ------------------------------------
|
|Net Sales                  |  | $                                     | 189,569 |                                     
|Income before income taxes |  |                                       | 1,945   |                                     
|Total Assets               |  |                                       | 362,498 |                                     

|                           |  | Three Months Ended
September 30, 2000 |         | Nine Months Ended
September 30, 2000
|-------------------------- |  | ------------------------------------- | ------- | ------------------------------------
|
|Net Sales                  |  | $                                     | 159,862 |                                     
|Income before income taxes |  |                                       | 5,510   |                                     
|Total Assets               |  |                                       | 288,125 |                                     

4. Debt

Our credit facility with Foothill Capital Corporation provides for borrowings of up to $150 million, subject to borrowing base limitations tied to inventory
and accounts receivable, less a limitation of $17 million. In the fourth quarter of 2001, the credit facility was amended to reduce the $17 million limitation to $10 million until December 15, 2001,
at which time the limitation will be set to $20 million. The facility expires in 2004, and is subject to certain financial covenants. The facility is secured by certain assets of the Company and its
subsidiaries.

8

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

We operated 88 Guitar Center retail locations in 35 major markets and seven Guitar Center stores in secondary markets as of September 30, 2001. We also operate
the largest direct response channel (Musician's Friend catalog and Internet) in the musical instruments industry in the United States. In addition, we acquired the assets of American Music Group and
related companies (AMG) in the second quarter of 2001. American Music Group is a leading provider of band instruments and accessories, and primarily focuses on school band and orchestra sales and
rentals. We are operating the AMG business as a division of our Guitar Center retail business. The acquisition of the American Music Group business offers us a strong point of entry into the band
instrument market. We believe that this acquisition is complementary to our existing Guitar Center stores and direct response business, and that it further enhances our leadership position in the
overall musical instrument industry.

From
1996 to 2000, our net sales grew at an annual compound rate of 31.9%, principally due to the comparable store sales growth of our Guitar Center stores averaging 10% per year, the
opening of new stores, and a 31% per year increase in the direct response channel. We believe such volume increases are the result of the continued success of the implementation of our business
strategy, continued growth in the music products industry and increasing consumer awareness of the Guitar Center, Musician's Friend and American Music Group brand names. We do not expect comparable
store sales to continue to increase at historical rates.

We
opened 14 Guitar Center stores in 2000, one of which was acquired from Veneman Music in May 2000. As of September 30, 2001, we had opened 12 additional Guitar Center stores out of
our plan to open 13 stores during the current year. That additional store, a smaller format Guitar Center store located in Modesto, California, opened on October 25, 2001. We will continue to pursue
our strategy of clustering stores in major markets to take advantage of operating and advertising efficiencies and to build awareness of the Guitar Center name in new markets. In some markets this
clustering strategy results in some transfer of sales from existing stores to new locations.

As
we enter new markets, we expect that we will initially incur higher administrative and promotional costs per store than is currently experienced in established markets. We expect
competition to continue to increase as other music products retailers attempt to execute national growth strategies. Our
business strategy will also emphasize opportunities to continue to grow each of our businesses, including through further acquisitions if attractive candidates can be located for reasonable prices.

The
following table sets forth historical income statement data as a percentage of net sales:

|                                              |  | Three Months Ended
September 30, |   | Nine Months Ended
September 30, |  
|--------------------------------------------- |  | -------------------------------- | - | ------------------------------- | -
|
|Net sales                                     |  | 100.0                            | % | 100.0                           | %
|Gross profit                                  |  | 25.6                             |   | 25.2                            |  
|Selling, general, and administrative expenses |  | 23.1                             |   | 19.9                            |  
|                                              |  |                                  |   |                                 |  
|Operating income                              |  | 2.5                              |   | 5.3                             |  
|Interest expense, net                         |  | 1.5                              |   | 1.7                             |  
|                                              |  |                                  |   |                                 |  
|Income before income taxes                    |  | 1.0                              |   | 3.6                             |  
|Income taxes                                  |  | 0.4                              |   | 1.4                             |  
|                                              |  |                                  |   |                                 |  
|Net income                                    |  | 0.6                              |   | 2.2                             |  
|                                              |  |                                  |   |                                 |  

9

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Results Of Operations



Net sales increased to $225.3 million for the three months ended September 30, 2001, from $191.0 million for the comparable prior period, a 17.9% increase. Net
sales from retail stores totaled $189.6 million, an increase of $29.7 million, or 18.6%. Sales from new stores, including $9.3 million contributed by the newly acquired American Music Group stores,
represented $24.6 million, or 82.9% of the increase. Comparable store sales increased 3%. Our management is presently anticipating comparable store sales growth of 1 to 3 percent for the immediate
future, although fluctuations will undoubtedly take place from period to period. The foregoing statement is a forward-looking statement and is subject to the qualifications set forth below under
"Forward Looking Statements." Net sales from the direct response channel totaled $35.7 million, a $4.6 million, or 14.6%, increase from the third quarter of 2000. Internet sales increased 33.9% to
$15.4 million from $11.5 for the same period last year. Catalog sales for the three months ended September 30, 2001 compared to 2000 increased 3.6% to $20.3 million from $19.6 million. The trend in
favor of Internet sales over catalog sales is expected to continue. Revenues in the retail and direct response division were adversely affected by the recent slowdown of the retail sector as well as
the decline in the overall U.S. economy. The events of September 11, 2001 resulted in a temporary reduction in retail store traffic as well as reduced order volume and some shipping difficulties for
the direct response unit.

Gross
profit dollars for the three months ended September 30, 2001 compared to 2000 increased 19.5% to $57.6 million from $48.2 million. Gross profit as a percentage of net sales for
the three months ended September 30, 2001 compared to 2000 increased to 25.6% from 25.2%. Gross profit margin percentage for the retail stores after buying and occupancy costs was 25.0% compared to
24.5% in the third quarter of 2000. The combined results for the retail stores reflect the higher gross margin of the American Music Group, as well as improved inventory pricing on certain product
categories within the Guitar Center retail business. The gross profit margin for the direct response division was 28.5% for the quarter which is relatively consistent with the gross profit margin of
28.7% in the third quarter of 2000.

Selling,
general and administrative expenses for the three months ended September 30, 2001 compared to 2000 increased 36.6% to $52.0 million from $38.1 million. As a percentage of
sales, selling, general and administrative expenses for the three months ended September 30, 2001 compared to 2000 increased to 23.1% from 19.9%. Selling, general and administrative expenses for the
retail stores in the third quarter, inclusive of pre-opening costs and corporate general and administrative expenses, was 22.4% as a percentage of sales compared to 19.4% in last year's third quarter.
The increase as a percentage of sales was due primarily to lower than expected growth in our sales base for the quarter,
and the higher level of expense for the American Music Group business as compared to the Guitar Center retail business. Selling, general and administrative expenses for the direct response division
were 26.8% as a percentage of sales in the second quarter compared to 22.6% in the same period last year. The increase primarily reflects negative leveraging from lower than forecast sales and
additional freight costs from split shipments.

Operating
income, for the reasons stated above, decreased from $10.1 million to $5.6 million, or 44.6%, for the three months ended September 30, 2001 as compared to 2000.

Interest
expense, net for the three months ended September 30, 2001 increased to $3.4 million from $3.2 million in the same period of 2000. The increase reflects increased borrowings
under our credit facility, offset by a reduction in interest rates applicable to those borrowings.

10

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In the three months ended September 30, 2001, an $839,000 provision for income taxes was recorded compared to $2.6 million for the same period last year, both based on an annualized
tax rate of 38%.

Net
income for the three months ended September 30, 2001 was $1.4 million, compared to $4.3 million in the same period of 2000.



Net sales increased to $651.8 million for the nine months ended September 30, 2001, from $545.4 million for the comparable prior period, a 19.5% increase. Net
sales from retail stores totaled $543.9 million, an increase of $89.1 million, or 19.6%. Sales from new stores, including $15.3 million contributed by the newly acquired American Music Group stores,
represented $66.0 million, or 74.1% of the increase. Comparable store sales increased 5%. Our management is presently anticipating comparable store sales growth of 1 to 3 percent for the immediate
future, although fluctuations will undoubtedly take place from period to period. The foregoing statement is a forward-looking statement and is subject to the qualifications set forth below under
"Forward Looking Statements." Net sales from the direct response channel totaled $107.9 million, a $17.3 million, or 19.1%, increase from the nine months ended September 30, 2000. The growth in direct
response sales has been driven by continued increases in Internet sales offset by declining catalog sales. Internet sales increased 72.1% to $48.7 million from $28.3 for the same period last year.
Catalog sales for the nine months ended September 30, 2001 compared to 2000 decreased 5.0% to $59.2 million from $62.3 million. The trend in favor of Internet sales over catalog sales is expected to
continue. We believe that revenues in the
direct response division were adversely affected by weak economic conditions that are affecting the hobbyist customer base of this unit. Total sales have been adversely affected by the recent slow
down in the overall U.S. economy and the events of September 11, 2001.

Gross
profit dollars for the nine months ended September 30, 2001 compared to 2000 increased 20.8% to $168.5 million from $139.5 million. Gross profit as a percentage of net sales for
the nine months ended September 30, 2001 compared to 2000 increased to 25.9% from 25.6%. Gross profit margin percentage for the retail stores after buying and occupancy costs was 25.1% compared to
25.0% for the nine months ended September 30, 2000. Retail gross margins improved due to the higher gross margins for the American Music Group business compared to the Guitar Center business, offset
by reduced gross margins in the Guitar Center business. During the first six months of 2001, aggressive pricing was set on certain inventory categories in the Guitar Center business, particularly
guitars and accessories which helped narrow our merchandise assortment while decreasing gross margins. For the quarter ended September 30, 2001, margins in these categories improved. The gross profit
margin for the direct response division was 29.9% for the nine months ended September 30, 2001 compared to 28.5% for the nine months ended September 30, 2000. The increase in the direct response gross
profit is primarily due to a higher priced assortment offered during the period and effective targeted marketing of certain products through the Kansas City retail outlet which was opened during
October 2000.

Selling,
general and administrative expenses for the nine months ended September 30, 2001 compared to 2000 increased 28.7% to $141.9 million from $110.2 million. As a percentage of
sales, selling, general and administrative expenses for the nine months ended September 30, 2001 compared to 2000 increased to 21.8% from 20.2%. Selling, general and administrative expenses for the
retail stores in the third quarter, inclusive of pre-opening costs and corporate general and administrative expenses, was 21.2% as a percentage of sales in the nine months ended September 30, 2001
compared to 19.8% in 2000. The increase as a percentage of sales reflects increased rent and related relocation expenses for the new corporate office occupied in April 2001, as well as the higher
level of expense for the American Music Group business as compared to the Guitar Center retail business. Selling, general

11

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and administrative expenses for the direct response division were 24.9% in the nine months ended September 30, 2001 compared to 22.4% in the same period last year. The increase primarily reflects
costs associated with the closing of our Medford and Knoxville fulfillment centers, consolidation of operations to Kansas City, and lower than expected response rates of our catalog mailings resulting
in lower than forecast direct response sales.

Operating
income, for the reasons stated above, decreased from $29.3 million to $26.6 million, or 9.1%, for the nine months ended September 30, 2001 as compared to 2000.

Interest
expense, net for the nine months ended September 30, 2001 increased to $9.8 million from $9.2 million in the same period of 2000. The increase reflects increased borrowings
under our credit facility, partially offset by a reduction in interest rates applicable to those borrowings.

In
the nine months ended September 30, 2001, a $6.4 million provision for income taxes was recorded compared to $7.6 million for the same period last year, both based on an annualized
tax rate of 38%.

Net
income for the nine months ended September 30, 2001 was $12.4 million, compared to $10.5 million in the same period of 2000.

Liquidity and Capital Resources

Our need for liquidity will arise primarily from interest payable on indebtedness and the funding of capital expenditures and working capital requirements, as
well as possible acquisitions. We have historically financed our operations through internally generated funds and borrowings under our credit facilities. We have no mandatory payments of principal on
the $66.7 million of Senior Notes outstanding prior to their final maturity in 2006. As of September 30, 2001, we had $94.2 million outstanding under the 2001 Credit Facility, excluding $1.2 million
outstanding on standby letters of credit.

Our
credit facility with Foothill Capital Corporation provides for borrowings of up to $150 million, subject to borrowing base limitations tied to inventory and accounts receivable,
less a limitation of $17 million. In the fourth quarter of 2001, the credit facility was amended to reduce the $17 million limitation to $10 million until December 15, 2001, at which time the
limitation will be set to $20 million. As of September 30, 2001, we had available borrowings of $5.1 million under the credit facility, although the actual availability was equivalent to $12.1 million
after giving effect to this amendment. In addition, an increase in availability is expected in the first quarter of 2002 upon the transition of the AMG inventories to an automated system and other
changes expected to permit AMG's new product inventory to be included in the borrowing base. The facility expires in 2004, and is subject to certain financial covenants. The facility is secured by
certain assets of the Company and its subsidiaries.

For
the nine months ended September 30, 2001, cash used by operating activities was $18.9 million, which principally consisted of purchases of inventory. Cash used in investing
activities totaled $46.9 million, which principally consisted of capital expenditures under our store expansion program ($18.2 million) and the acquisition of the American Music Group business ($28.5
million). Cash provided by financing activities totaled $58.6 million, which principally consisted of borrowings under the 2001 Credit Facility.

We
intend to pursue an aggressive growth strategy by opening additional stores in new and existing markets. During the nine months ended September 30 2001, we opened 12 new stores.
Each new large format Guitar Center store typically has required approximately $1.6 to $1.8 million for gross inventory. Historically, our cost of capital improvements for a large format Guitar Center
new store has been approximately $850,000, consisting of leasehold improvements, fixtures and equipment. We incur higher
costs in some geographic areas, particularly the Northeast. We have developed smaller Guitar Center stores to build in secondary markets or sites that we do not believe will support our large format
units.

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The first of these units was opened in late 2000 and five more had been opened as of September 30, 2001. Our small format stores will incur approximately $400,000 to $450,000 in capital expenditures
and require approximately $600,000 to $800,000 in inventory.

We
are also evaluating additional capital and strategic requirements related to improving our fulfillment facilities and technology and pursuing new opportunities in the e-commerce
activities of Guitar Center and Musician's Friend, and related businesses. We leased a new distribution facility for Musician's Friend in Kansas City, which is now fully operational. In the second
quarter of 2001, we closed our existing distribution facilities in Medford, Oregon and Knoxville, Tennessee and consolidated all direct response fulfillment in Kansas City.

During
2001 we began construction of a central distribution center in the Indianapolis, Indiana area for our retail store operations with a view towards the facility commencing
operation in the second half of 2002. Migration from our present "drop-ship" model to a centralized distribution model is an important development in our operating strategy and will require
significant financial and managerial resources for the next several quarters.

We
also continue to make significant investments in information technology across our businesses and to incur costs and make investments designed to expand the reach of the Guitar
Center and Musician's Friend brands on the Internet. The costs of these initiatives and other investments related to our businesses will continue to be significant.

Our
expansion strategy is to continue to increase our market share in existing markets and to penetrate strategically selected new markets. We opened a total of 14 stores in 2000 and
13 stores in 1999. As of September 30, 2001, we had opened 12 additional Guitar Center stores out of our plan to open 13 stores during the current year. That additional store, a smaller format
Guitar Center store located in Modesto, California, opened on October 25, 2001. In 2002, we anticipate opening approximately 11 to 13 Guitar Center stores, some of these stores will be new
smaller format units designed for secondary markets. In addition, we plan to open three to four American Music Group stores during 2002.

We
may also consider acquisitions which are complimentary to other parts of our business, such as our direct response division, if attractive opportunities can be identified. While we
cannot provide assurance that we will complete any further acquisition transactions, in the ordinary course of our business we investigate and engage in negotiations regarding such opportunities.
Acquisitions will be financed with drawings under our existing credit facilities, expansion of our credit facilities, issuance of debt or equity
securities, or a combination, depending upon transaction size and market conditions, among other things.

Separate
and apart from our acquisition strategy, we may elect or be required to raise additional capital in the form of common or preferred equity, debt or convertible securities for
the purpose of providing additional capital to fund working capital needs or continued growth of our existing business, or to refinance existing obligations. Any such financing activity will be
dependent upon many factors, including our liquidity needs, market conditions and prevailing market terms, and we can not assure you that future external financing for Guitar Center will be available
on attractive terms or at all.

New Accounting Pronouncements

On July 20, 2001, the Financial Accounting Standards Board issued Statement No. 141,Business Combinations (SFAS No.
141),and Statement No. 142,Goodwill and Other Intangible Assets (SFAS No. 142). These new pronouncements significantly change
the permissible accounting methods for business combinations and the treatment of goodwill and other intangible assets. Prior to the adoption of these new standards, goodwill and similar intangible
assets were generally amortized into income on a stated periodic basis. This treatment will be replaced by an alternative system, which will not require goodwill

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amortization on a stated basis but rather will require periodic testing of the goodwill for impairment, with no charge to income except to the extent of any such impairment. We presently intend to
adopt the new rules effective January 1, 2002, at which time we will cease to record periodic goodwill charges absent an impairment charge. As of September 30, 2001, goodwill was $21.2 million, the
majority of which relates to the American Music Group acquisition. Amortization expense included in the consolidated statement of income for the nine months ended September 30, 2001 was $559,000.

In
August 2001, the Financial Accounting Standards Board issued Statement No. 143,Accounting for Asset Retirement Obligations (SFAS No.
143).This new pronouncement establishes financial accounting and reporting standards for obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The provisions of SFAS No. 143 apply to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction,
development and/or the normal operation of a long-lived asset, except for certain obligations of lessees. The standard is effective for financial statements issued for fiscal years beginning after
June 15, 2002.

In
October 2001, the Financial Accounting Standards Board issued Statement No. 144,Accounting for the Impairment or Disposal of Long-Lived
AssetsThis pronouncement provides new guidance on the recognition of impairment losses on long-lived assets to be held and used or to be disposed of and also broadens the
definition of what constitutes a discontinued operation and how the results of a
discontinued operation are to be measured and presented. The provisions of SFAS No. 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001.

We
presently intend to adopt SFAS No. 143 and SFAS No. 144 effective January 1, 2003 and January 2002, respectively. We do not expect adoption of these standards to have a material
effect on our consolidated financial statements.

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Seasonality

Our operating results are not highly seasonal, except for the effect of the holiday selling season in November and December. Sales in the fourth quarter are
typically significantly higher on a per store basis and through the direct response unit than in any other quarter.

Inflation

We believe that the relatively moderate rates of inflation experienced in recent years have not had a significant impact on our net sales or profitability.

Forward Looking Statements

This report contains forward-looking statements relating to, among other things, future results of operations, growth and investment plans, sales, trends in
gross margin, growth in the Internet business and other factors affecting growth in sales and earnings. Specific forward-looking statements are provided regarding our management's current views
regarding comparable store sales and new store openings. Statements regarding new store openings are based largely on our current expectations and are necessarily subject to associated business risks
related to, among other things, the timely construction, staffing and merchandising of those stores and other matters, some of which are outside of our control. Comparative store sales growth is
highly dependent upon the effectiveness of our sales and promotion strategies and the effect of competition, including other national operators of music products stores attempting to implement
national growth strategies. The American Music Group business was only recently acquired by us and may be subject to significant fluctuations as we integrate these activities with the other Guitar
Center businesses.

Sales
and earnings trends are also affected by many other factors including, among others, world and national political events, general economic conditions, which recently have been
weak, particularly in terms of consumer demand and general retail sales, the effectiveness of our merchandising strategies, changes in the music products industry, retail sales trends and the
emergence of new or growing specialty retailers of music products. In light of these risks, there can be no assurance that the forward-looking statements contained in this report will in fact be
realized. The statements made by us in this report represent our views as of the date of this report, and it should not be assumed that the statements made herein remain accurate as of any future
date. We do not presently intend to update
these statements and undertake no duty to any person to affect any such update under any circumstances.

For
further discussion of risks associated with our business, please see the discussion under the caption "Risks Related to the Business".

Risks Related to the Business

An investment in our securities involves a high degree of risk. Described below are some of the risks and uncertainties facing our
company. There may be additional risks that we do not presently know of or that we currently consider immaterial. Any of these risks could adversely affect our business, results of operations,
liquidity and financial position

We may be unable to meet our retail store growth strategy, which could result in financial performance below that planned for internally or expected by the
investment community.

Our
retail store growth strategy includes opening new stores and increasing sales at existing locations. We intend to pursue an aggressive expansion strategy by opening additional
stores in new and existing markets. As of September 30, 2001, we operated 95 Guitar Center stores. We opened 13 Guitar Center stores in 2001, 14 stores in 2000 and 13 stores in 1999. As of
September 30, 2001, we had opened 12 additional Guitar Center stores out of our plan to open 13 stores during the current

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year. That additional store, a smaller format Guitar Center store located in Modesto, California, opened on October 25, 2001. In 2002, we anticipate opening approximately 11 to 13 Guitar Center
stores, some of these stores will be new smaller format units designed for secondary markets. In addition, we plan to open three to four American Music Group stores during 2002. Our expansion plan
depends on a number of factors, including:



We
cannot assure that we will achieve our store expansion goals or that our new stores will achieve sales or profitability levels similar to our existing stores. Our expansion
strategy includes clustering stores in existing markets. This has in the past and may in the future result in the transfer of sales to the new store and a reduction in the profitability of an existing
store. In addition to the factors noted above, expansion to new markets may present unique competitive and merchandising challenges, including:



Historically,
we have achieved significant sales growth in existing stores. Our quarterly comparable stores sales results have fluctuated significantly in the past. Sales growth for
comparable periods, excluding net sales attributable to stores not open for 14 months, was as follows:

2000

1999

1998Quarter 1

8
%
10
%
18
%Quarter 2

7

7

14Quarter 3

6

11

10Quarter 4

7

11

11Full Year

7
%
10
%
13
%


A
variety of factors affect our comparable store sales results, including:



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Our
management is presently planning for comparable store sales growth of 1% to 3% for the immediate future, although fluctuations will undoubtedly take place from period to period. A
shortfall in comparative sales growth in any period will likely cause a shortfall in earnings.

Any
shortfall in the growth plan for new stores or our existing stores would likely result in financial performance below that for which we have planned or the investment community
expects.

The results of operations of our Direct Response Division could be materially adversely affected should the distribution of catalogs and other direct mail become more costly or
less effective

Our Direct Response Division, Musicians Friend, relies on the United States Postal Service to distribute its catalogs and other direct mail communications to
consumers. The events of September 11, 2001 disrupted mail delivery. Further, should the United States Postal Service significantly tighten security guidelines or impose additional processes on mail
to detect or respond to contamination, the expected result would be increased costs to shippers and lengthened delivery times, each of which will impose greater costs on us. There is also concern, not
yet documented, that some consumers are disposing of direct mail pieces, such as catalogs, out of fear of contamination in the mail system. Any trend of this sort would reduce the number of catalogs
in circulation, reduce response rates, raise costs and decrease margins.

Our growth plans could be accelerated by acquisitions although such transactions involve special risks.

We believe that our expansion may be accelerated by the acquisition of existing music product retailers. For example, in April 2001 we acquired the business of
American Music Group, a New York-based retailer of band instruments, a business we were not previously in. In the ordinary course of our business, we regularly consider, evaluate and enter into
negotiations related to potential acquisition opportunities. We may pay for these acquisitions in cash or securities, including equity securities, or a combination of both. We cannot assure that
attractive acquisition targets will be available at reasonable
prices or that we will be successful in any such transaction. Acquisitions involve a number of special risks, including:



We depend on suppliers who may not be able to or desire to supply our requirements.

We depend significantly on our suppliers for both our existing stores and the direct response unit as well as our expansion goals for each of these units. We
do not have any long-term contracts with our suppliers, which we believe is customary in our industry. If we failed to maintain our relationships with our key brand name vendors, we believe this could
have a material adverse effect on our business. We believe we currently have adequate supply sources; however, we cannot assure sufficient quantities or the appropriate mix of products will be
available in the future to supply our existing stores and expansion plans. This risk is especially prevalent in new markets where our vendors have existing agreements with other dealers and thereby
may be unwilling or unable to meet our requirements. Also, our growth presents a challenge to some of our vendors as it requires significant production increases by them which at times results in
extended lead times and shortages of desirable products.

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We face significant competition particularly from those retailers also trying to execute national expansion strategies.

Our industry is fragmented and highly competitive. We compete with many different types of retailers, including conventional retailers, as well as other
catalog and e-commerce retailers, who sell many or most of the items we sell. We anticipate increased competition in our existing markets and planned new markets as other large format music product
retailers, including Sam Ash Music and Mars Music, execute growth plans in their retail and e-commerce businesses. Additionally, our expansion to new markets will be inhibited by established
competitors in those markets. If our competitors adopt a new, innovative store format or retail selling method, or if a new competitor with substantial financial or other resources enters the market
place, then we may fail to achieve market position gains or may lose market share.

We depend on key personnel including our senior management who are important to the success of our business.

Our success depends to a significant extent on the services of Larry Thomas, our Chairman and Co-CEO, Marty Albertson, our President and Co-CEO, and Robert
Eastman, the CEO of our wholly-owned subsidiary Musician's Friend, Inc., as well as our ability to attract and retain additional key personnel with the skills necessary to manage our existing business
and growth plans. The loss of one or more of these individuals or other key personnel could have a material adverse effect on our business, results of operations, liquidity and financial position. In
June 1996, we entered into a five-year employment contract with each of Mr. Thomas and Mr. Albertson, which have expired. We are negotiating definitive extension agreements which we expect to be
completed in the near future. Additionally, we carry key man insurance on the lives of Mr. Thomas and Mr. Albertson in the amounts of $5.0 million and $3.5 million, respectively. Historically, we have
promoted employees from within our organization to fill senior operations, sales and store management positions. In order to achieve our growth plans, we will depend upon our ability to retain and
promote existing personnel to senior management, and we must attract and retain new personnel with the skills and expertise to manage our business. If we cannot hire, retain and promote qualified
personnel, our business, results of operations, financial condition and prospects could be adversely affected.

Our retail operations are concentrated in California, which ties our financial performance to events in that state.

As of September 30, 2001, 20 of our 95 stores were located in California and stores located in that state generated 29.0% and 30.7% of our retail sales for
2000 and 1999, respectively. Although we have opened and acquired stores in other areas of the United States, a significant percentage of our net sales and results of operations will likely remain
concentrated in California for the foreseeable future. As a result, our results of operations and financial condition are heavily dependent upon general consumer trends and other general economic
conditions in California and are subject to other regional risks, including earthquakes. We do maintain certain earthquake insurance, but such policies carry significant deductibles and other
restrictions.

Economic conditions or changing consumer preferences could also adversely impact us.

Our business is sensitive to consumer spending patterns, which can be affected by prevailing economic conditions. A downturn in economic conditions in one or
more of our markets could have a material adverse effect on our results of operations, financial condition, business and prospects. For example, our business has been adversely affected by recent weak
economic conditions and the events of September 11, 2001. Although we attempt to stay informed of consumer preferences for musical products and accessories typically offered for sale in our stores,
any sustained failure on our part to

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identify and respond to trends would have a material adverse effect on our results of operations, financial condition, business and prospects.

We must manage efficiently the expansion of our direct response business, including the musiciansfriend.com website, our systems that process orders in our direct response
business, and our fulfillment resources in order to service our customers properly.

Our direct response business, particularly our e-commerce business, will require significant investments to respond to anticipated growth and competitive
pressures. If we fail to rapidly upgrade our website in order to accommodate increased traffic, we may lose customers, which would reduce our net sales. Furthermore, if we fail to expand the computer
systems that we use to process and ship customer orders and process payment and the fulfillment facilities we use to manage and ship our inventory, we may not be able to successfully distribute
customer orders. As a result, we could lose customers and our net sales could be reduced. We may experience difficulty in improving and maintaining such systems if our employees or contractors that
develop or maintain our key systems become unavailable to us. We have experienced periodic service disruptions and interruptions, which we believe will continue to occur, while enhancing and expanding
these systems.

We intend to implement a new distribution center for the retail stores, which presents operational risks and will require a significant investment.

During 2001 we began construction of a central warehouse/distribution center in the Indianapolis, Indiana area for our retail store operations with a view
towards the facility commencing operations in 2002. Migration from our present "drop-ship" model to a centralized distribution model is an important development in our operating strategy and will
require significant financial and managerial resources for the next several quarters. This program involves financial and operating risks that could include the need to expend greater funds than
presently budgeted or disruptions in retail store operations if inventory is not timely provided in the required quantities.

We must efficiently integrate the American Music Group and grow its band instrument business in order to earn an acceptable return on that investment.

In April 2001 we completed our acquisition of American Music Group, a New York-based retailer of band instruments. We have not previously participated in the
band instruments segment of the music products business and have no experience in this distribution channel. We intend to integrate this business into our retail stores division as a separate business
unit and use the acquired business as a platform to grow this segment. Thus, we face the normal challenges of any acquisition, such as integration of personnel and systems as well as the need to
learn, understand and further develop this
business. Failure to execute on these requirements could result in a poor or no return on our investment and a distraction of the efforts of our management team.

Net sales of our e-commerce business could decrease if our online security measures fail.

Our relationships with our e-commerce customers may be adversely affected if the security measures that we use to protect their personal information, such as
credit card numbers, are ineffective. If, as a result, we lose many customers, our net sales could decrease. We rely on security and authentication technology that we license from third parties. With
this technology, we perform real-time credit card authorization and verification with our bank. We cannot predict whether events or developments will result in a compromise or breach of the technology
we use to protect a customer's personal information. Furthermore, our servers may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions. We may need to expend
significant additional capital and other resources to protect against a security breach or to alleviate problems caused by any breaches. We cannot assure that we can prevent all security breaches.

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If we do not respond to rapid technological changes, our services could become obsolete and we could lose customers.

If we face material delays in introducing new services, products and enhancements, our e-commerce customers may forego the use of our services and use those of
our competitors. To remain competitive, we must continue to enhance and improve the functionality and features of our online store. The Internet and the online commerce industry are rapidly changing.
If competitors introduce new products and services embodying new technologies, or if new industry standards and practices emerge, our existing website and proprietary technology and systems may become
obsolete. To develop our website and other proprietary technology entails significant technical and business risks. We may use new technologies ineffectively or we may fail to adapt our website, our
transaction processing systems and our computer network to meet customer requirements or emerging industry standards. In addition, the success of e-commerce may result in greater efficiency and lower
prices, which could have an adverse effect on selling prices and margins in our retail store business and in our catalog business and generally constrain profitability in the specialty retail
business.

We may need to change the manner in which we conduct our business if government regulation increases which could impose additional costs and adversely affect our financial
results.

The adoption or modification of laws or regulations relating to the Internet could adversely affect the manner in which we currently conduct our e-commerce
business. For example, laws related to the
taxation of online commercial activity remain in flux. In addition, the growth and development of the market for online commerce may lead to more stringent consumer protection laws, both in the United
States and abroad, that may impose additional burdens on us. Laws and regulations directly applicable to communications or commerce over the Internet are becoming more prevalent. The law of the
Internet, however, remains largely unsettled, even in areas where there has been some legislative action. It may take years to determine whether and how existing laws such as those governing
intellectual property, consumer privacy, taxation of e-commerce transactions and the like are interpreted and enforced. Any adverse change in any of these laws or in the interpretation or scope of
existing laws could have a material adverse effect on our results of operations, financial condition or prospects.

We have an investment in an Internet community company that could result in future charges to our financial statements if the venture is not successful.

We have a minority investment of approximately $3.5 million in the equity of the operator of musician.com and guitar.com, Internet community sites oriented
towards musicians. We are carrying this investment at cost, and this value was recently validated by a third party financing completed with several venture capital firms. Nonetheless, success of this
venture is not assured. If in the future we determine that the fair market value of these shares has been permanently reduced to less than our cost, we would be required under generally accepted
accounting principles to recognize a charge to our financial statements.

We have a limited history of trading on the Nasdaq National Market, and our stock price could be volatile.

We began trading on the Nasdaq National Market on March 14, 1997. The market price of our shares of common stock has been subject to significant fluctuations
in response to our operating results and other factors, including announcements by our competitors, and those fluctuations will likely continue in the future. In addition, the stock market in recent
years has experienced significant price and volume fluctuations that often have been unrelated or disproportionate to the operating performance of particular companies. These fluctuations, as well as
a shortfall in sales or earnings compared to public market analysts' expectations, changes in analysts' recommendations or projections, and general economic and market conditions, may adversely affect
the market price of our common stock.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We do not have any assets or liabilities which, in our view, impose upon us significant market risk except that for our outstanding $66.7 million in aggregate
principal amount of 11% Senior Notes due
2006. These senior notes constitute long-term, fixed interest rate obligations for which market quotations are available.

Part II. Other Information

Item 5. Other Information

Effective August 1, 2001, the Compensation Committee of the Board of Directors approved stock option grants to employees of Guitar Center and its subsidiaries
to purchase an aggregate of approximately 900,000 shares of common stock at an exercise price of $15.30 per share. These options are subject to vesting and were issued under our 1997 Equity
Participation Plan, as amended.

Effective
October 25, 2001 Steven W. Burge resigned from our Board of Directors.

Item 6. Exhibits and Reports on Form 8-K



| |  | 3.3   |  | Amendment to the Amended and Restated Bylaws of Guitar Center, Inc.                                                                                                                                               
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 10.42 |  | Amendment to 1997 Equity Participation Plan approved July 26, 2001.                                                                                                                                               
| |  | 10.43 |  | Letter Agreement dated October 10, 2001 by and among, Guitar Center, Inc. and certain affiliated companies and the lenders under the Amended and Restated Loan and Security Agreement, dated as of April 16, 2001.
| |  | 10.44 |  | Second Amendment to Amended and Restated Memorandum of Understanding, effective as of September 5, 2001.                                                                                                          





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Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized as of the 12th day of November 2001.

| |  | GUITAR CENTER, INC.
| |  | -------------------
| |  | By:                

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Exhibit Index

|Exhibit No. |  | Description                                                                                                                                                                                                       
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.3         |  | Amendment to the Amended and Restated Bylaws of Guitar Center, Inc.                                                                                                                                               
|10.42       |  | Amendment to 1997 Equity Participation Plan approved July 26, 2001.                                                                                                                                               
|10.43       |  | Letter Agreement dated October 10, 2001 by and among, Guitar Center, Inc. and certain affiliated companies and the lenders under the Amended and Restated Loan and Security Agreement, dated as of April 16, 2001.
|10.44       |  | Second Amendment to Amended and Restated Memorandum of Understanding, effective as of September 5, 2001.                                                                                                          

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