<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


( X )    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the quarterly period ended September 30, 1999

(    )   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

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

 DELAWARE                                                   95-4600862
 ------------------------------------------------------------------------------
 (State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                       Identification Number)

 5155 CLARETON DRIVE
 AGOURA HILLS, CALIFORNIA                                        91301
 ------------------------------------------------------------------------------
 (Address of principal executive offices)                      (Zip Code)

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


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 9, 1999, 22,072,590 shares of our Common Stock, $.01 par
value, were outstanding.


                                      1
<PAGE>

                       GUITAR CENTER, INC. AND SUBSIDIARY

                                      INDEX
                                      -----



Part I.  Financial Information
<TABLE>
<S>                                                                                                 <C>
         ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

         Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998 ..........3

         Condensed Consolidated Statements of Income - Three months ended
         September 30, 1999 and 1998................................................................4

         Condensed Consolidated Statements of  Income - Nine months ended
         September 30, 1999 and 1998................................................................5

         Condensed Consolidated Statements of Cash Flows - Nine months ended
         September 30, 1999 and 1998 ...............................................................6

         Notes to Condensed Consolidated Financial Statements  .....................................7

         ITEM 2   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                  RESULTS OF OPERATIONS ...........................................................11

         ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ......................17



Part II. Other Information

         Item 1.  Not Applicable

         Item 2.  Not Applicable

         Item 3.  Not Applicable

         Item 4.  Not Applicable

         Item 5.  Not Applicable

         Item 6.  Exhibits and Reports on Form 8-K  ...............................................17
</TABLE>


                                      2
<PAGE>

                       GUITAR CENTER, INC. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                  (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                    SEPTEMBER 30,            DECEMBER 31,
                                                                        1999                     1998
                                                                 -------------------     --------------------
<S>                                                               <C>                     <C>
ASSETS
Current assets:
   Cash and cash equivalents                                      $          400          $           472
   Inventories, net of reserves                                          147,769                  126,957
   Accounts receivable, net of reserves                                   14,729                   13,614
   Prepaid expenses and deposits                                           3,678                    3,324
   Pre-opening costs and other current assets                                  -                    2,850
                                                                      --------------          ---------------
Total current assets                                                     166,576                  147,217

Property and equipment, net                                               53,002                   42,410
Goodwill, net                                                              4,495                    4,618
Deferred tax assets                                                       10,431                   10,431
Deposits and other assets, non-current                                     6,082                    3,382
                                                                      --------------          ---------------
                                                                  $      240,586          $       208,058
                                                                      ==============          ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                               $       29,318          $        35,152
   Accrued expenses and other current liabilities                         17,352                   15,934
   Merchandise advances                                                    6,506                    7,147
   Line of credit                                                         51,514                   20,850
   Current portion of long term debt                                         251                      527
                                                                      --------------          ---------------
Total current liabilities                                                104,941                   79,610

Rent equalization                                                          1,876                    1,570
Long term debt                                                            67,909                   80,663
                                                                      --------------          ---------------
Total liabilities                                                         174,726                 161,843

Stockholders' equity
   Common stock, $0.01 par value, authorized
      55,000,000 shares, issued and outstanding
      22,072,590 at September 30, 1999 and
      20,092,943 at December 31, 1998, respectively                          221                      201
   Additional paid in capital                                            244,003                  228,195
   Accumulated deficit                                                  (178,364)                (182,181)
                                                                      --------------          ---------------
Total stockholders' equity                                                65,860                   46,215
                                                                      --------------          ---------------

                                                                  $      240,586          $       208,058
                                                                      ==============          ===============
</TABLE>
     See accompanying notes to condensed consolidated financial statements.


                                      3
<PAGE>

                       GUITAR CENTER, INC. AND SUBSIDIARY
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                      (In thousands, except per share data)
<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED
                                              SEPTEMBER 30, 1999            SEPTEMBER 30, 1998
                                            ------------------------      ------------------------
<S>                                         <C>                           <C>
Net sales                                              $152,523               $118,009
Cost of goods sold, buying and occupancy                113,539                 85,907
                                                       --------               --------
Gross profit                                             38,984                 32,102

Selling, general and administrative                      32,200                 27,230
Transaction and conversion costs                            543                      -
                                                       --------               --------
Operating income                                          6,241                  4,872

Interest expense, net                                     2,848                  2,586
Interest expense to related parties                           -                    303

Income before income taxes                                3,393                  1,983

Income taxes                                                  -                    261
                                                       --------               --------
Net income                                             $  3,393               $  1,722
                                                       ========               ========

Net income per share
     Basic                                             $   0.15               $   0.08
                                                       ========               ========
     Diluted                                           $   0.15               $   0.07
                                                       ========               ========

Weighted average shares outstanding
     Basic                                               22,072                 22,036
                                                       ========               ========
     Diluted                                             22,072                 23,003
                                                       ========               ========
</TABLE>
     See accompanying notes to condensed consolidated financial statements.


                                      4
<PAGE>

                       GUITAR CENTER, INC. AND SUBSIDIARY
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                      (In thousands, except per share data)
<TABLE>
<CAPTION>
                                                                            NINE MONTHS ENDED
                                                             SEPTEMBER 30, 1999            SEPTEMBER 30, 1998
                                                         ------------------------      ------------------------
<S>                                                      <C>                           <C>
Net sales                                                         $ 427,140                $ 340,256
Cost of goods sold, buying and occupancy                            316,080                  247,744
                                                                  ---------                ---------
Gross profit                                                        111,060                   92,512

Selling, general and administrative                                  91,522                   78,472
Transaction and conversion costs                                      4,170                        -
                                                                  ---------                ---------
Operating income                                                     15,368                   14,040

Interest expense, net                                                 7,877                    7,075
Interest expense to related parties                                     501                      890
Other                                                                     -                     (324)
                                                                  ---------                ---------

Income before income taxes and cumulative effect
   of a change in accounting principle                                6,990                    6,399

Income taxes                                                          2,099                      564
                                                                  ---------                ---------

Income before cumulative effect of a change in
   accounting principle                                               4,891                    5,835

Cumulative effect of changing accounting principle
   to write-off pre-opening costs, net of tax                         1,074                        -
                                                                  ---------                ---------
Net income                                                        $   3,817                $   5,835
                                                                  =========                =========

Net income per share
     Basic
        Income before cumulative effect of a change
           in accounting principle                                $    0.22                $    0.27
       Cumulative effect of changing accounting
           principle to write-off pre-opening costs                   (0.05)                       -
                                                                  ---------                ---------
              Net income                                          $    0.17                $    0.27
                                                                  =========                =========
     Diluted
        Income before cumulative effect of a change
           in accounting principle                                $    0.22                $    0.26
       Cumulative effect of changing accounting
           principle to write-off pre-opening costs                   (0.05)                       -
                                                                  ---------                ---------
              Net income                                          $    0.17                $    0.26
                                                                  =========                =========

Weighted average shares outstanding
     Basic                                                           22,069                   21,618
                                                                  =========                =========
     Diluted                                                         22,462                   22,853
                                                                  =========                =========
</TABLE>
     See accompanying notes to condensed consolidated financial statements.


                                      5
<PAGE>

                       GUITAR CENTER, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                         NINE MONTHS ENDED SEPTEMBER 30,
                                                               -----------------------------------------------
                                                                       1999                      1998
                                                               ---------------------     ---------------------
<S>                                                            <C>                       <C>
OPERATING ACTIVITIES
Net income                                                               $  3,817                $  5,835
Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
    Depreciation and amortization                                           5,866                   3,492
    Amortization of deferred financing fees                                   180                     180
    Gain on sale of property                                                    -                    (324)
    Cumulative effect of change in accounting principle to
      write-off pre-opening costs                                           1,652                       -
    Changes in operating assets and liabilities:
       Accounts receivable                                                 (1,115)                  4,065
       Merchandise inventories                                            (20,812)                (24,499)
       Prepaid expenses                                                      (354)                 (1,914)
       Other assets                                                        (1,696)                   (124)
       Accounts payable                                                    (5,834)                 (8,065)
       Accrued expenses and other current liabilities                       1,418                  (6,490)
       Other long term liabilities                                            306                     418
       Merchandise advances                                                  (641)                  1,121
                                                                         --------                --------
Net cash provided by (used in) operating activities                       (17,213)                (26,305)

INVESTING ACTIVITIES
Proceeds from sale of property                                                  -                     733
Purchase of property and equipment                                        (13,681)                (15,780)
Payment for purchase of Rhythm City, Inc., net of cash
  acquired                                                                      -                  (1,058)
                                                                         --------                --------
Net cash used in investing activities                                     (13,681)                (16,105)

FINANCING ACTIVITIES
Net change in revolving debt facility                                      30,664                  31,949
Proceeds from exercise of stock options                                       208                     757
Warrant underwriting                                                            -                     (98)
Payments under capital lease                                                  (50)                      -
Borrowings under related party debt                                             -                   3,183
                                                                         --------                --------
Net cash provided by financing activities                                  30,822                  35,791

Net increase (decrease) in cash and cash equivalents                          (72)                 (6,619)
Cash and cash equivalents at beginning of year                                472                   8,370
                                                                         --------                --------
Cash and cash equivalents at end of period                               $    400                $  1,751
                                                                         ========                ========

NON CASH INVESTING ACTIVITIES
Contribution of land and building                                           1,750                       -
Borrowings under capital lease                                                890                       -
Related party debt converted to common stock                               13,870                       -
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                      6

<PAGE>



                       GUITAR CENTER, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.       General

         In the opinion of management, the accompanying unaudited condensed
         consolidated financial statements contain all adjustments necessary to
         present fairly the financial position of Guitar Center, Inc., a
         Delaware corporation ("Guitar Center" or the "Company"), as of
         September 30, 1999, and the results of operations and cash flows for
         the nine months ended September 30, 1999 and 1998. The accompanying
         financial statements should be read in conjunction with the audited
         financial statements and notes thereto contained in our Annual Report
         on Form 10-K for the year ended December 31, 1998 and the Musician's
         Friend audited financial statements and notes thereto for the year
         ended December 31, 1998 contained in the Form 8-K/A filed August 11,
         1999.

         The results of operations for the nine months ended September 30, 1999
         are not necessarily indicative of the results to be expected for the
         full year.

2.       Merger

         On May 28, 1999, we acquired all of the stock of Musician's Friend,
         Inc., a Delaware corporation ("Musician's Friend"), pursuant to a
         merger agreement. Each share of Musician's Friend common stock was
         converted into approximately 10.02 shares of Guitar Center common
         stock. In total, 1,959,970 shares of common stock were issued and stock
         options to purchase 250,505 shares of common stock were assumed. The
         assumed stock options have exercise prices of $19.96 to $21.96 per
         share, with a weighted average exercise price of $20.31.

         Under the terms of the merger agreement, 30% of the total shares issued
         were placed in escrow for general indemnification purposes and for
         indemnification against damages related to specific tax issues.

         The merger was accounted for under the pooling of interests method.
         Accordingly, the financial statements of Guitar Center have been
         restated for all periods to include the results of Musician's Friend.

         The following reflects net sales and net income (loss) of the
         previously separate companies for the period before the combination was
         consummated and for the period ending September 30, 1998, which are
         included in the current combined net sales and net income (loss) (in
         thousands):

<TABLE>
<CAPTION>

                                                             Five Months Ended
                                                               May 28, 1999
                                                Guitar Center                Musician's Friend
                                                    1999                            1999
                                            ---------------------------------------------------
                      <S>                    <C>                                 <C>
                      Net sales                    $185,403                        43,411
                      Net income (loss)            $  5,241                        (3,044)


</TABLE>

<TABLE>
<CAPTION>

                                       Three Months Ended                          Nine Months Ended
                                       September 30, 1998                          September 30, 1998
                              Guitar Center       Musician's Friend       Guitar Center       Musician's Friend
                                   1998                 1998                  1998                   1998
                           ----------------------------------------------------------------------------------------
       <S>                     <C>                   <C>                  <C>                    <C>
       Net sales                   $96,197              21,812                $272,673                67,583
       Net income (loss)           $ 4,714              (2,992)               $ 13,790                (7,955)

</TABLE>


         Due to the seasonal nature of these business segments, especially
         retail operations, the above net revenue and operating results for the
         third quarter and the nine months ended September 30, 1998 are not
         necessarily indicative of the results to be expected for the full year.

                                     7
<PAGE>




3.       Accounting Policies

         REVENUE RECOGNITION

         Retail sales are recognized at the time of sale, net of a provision for
         estimated returns. Mail order and Internet sales are recognized when
         the related products are shipped to customers, net of a provision for
         estimated returns. Previously, we entered into numerous installment
         transactions in our catalog and Internet business. Such programs were
         substantially terminated in the fourth quarter of 1998.

         ADVERTISING

         We expense retail advertising as incurred. Mail order catalog costs are
         capitalized on a catalog by catalog basis and are amortized over the
         expected period of future benefits, not to exceed five months, under
         the provisions of SOP 93-7.

4.       Income Taxes

         As a result of the $72.4 million loss incurred in connection with the
         recapitalization completed in fiscal 1996, Guitar Center, Inc. had a
         net operating loss carryforward for federal income taxes of
         approximately $41.8 million as of December 31, 1998. A provision for
         income taxes of $2.1 million has been made in the condensed
         consolidated statement of operations for the nine months ended
         September 30, 1999.

         Income taxes for the nine months ended September 30, 1999 include
         income taxes provided on the income of Guitar Center prior to the
         merger with Musician's Friend. The losses incurred by Musician's Friend
         prior to the merger have not been utilized to offset income from Guitar
         Center, nor has a deferred tax benefit been recorded due to uncertainty
         concerning the realizability of such benefit.

         From 1994 through 1997, the Musician's Friend business was operated by
         Musician's Friend Trust, an Oregon business trust (the "Trust"), which,
         as a trust, claimed it was not subject to federal and state income
         taxes. Accordingly, Musician's Friend has not recorded provisions for
         income taxes during this period since the Trust's income or loss was
         attributable to the individual beneficiaries of the Trust and its
         related trusts.

         During 1998, the Internal Revenue Service ("IRS") took the position
         that the Trust was an association which is taxable as a corporation and
         not as a trust. Accordingly, the IRS asserted that the Trust was
         required to file its tax returns and pay income taxes at corporate
         rates in effect. Alternatively, the IRS contended that the Trust and
         related beneficiary were formed to avoid federal income taxes which
         were legally owed by the Trust and the individuals involved. As a
         result, the IRS issued reports to the Trust claiming taxes due of
         $4,443,000 for the years 1994 - 1996, with penalties aggregating
         $1,286,000 and related interest. No claims relating to 1997 have been
         quantified to date in the IRS reports. The Musician's Friend business
         was operated as an S corporation for years prior to 1994. Accordingly,
         Musician's Friend's taxable income for 1994 and prior years had been
         attributed to the owners. Effective January 1, 1998, the Trust
         contributed the Musician's Friend business to a Delaware corporation
         taxable as a C corporation. By the express terms of the contribution
         agreement, that corporation did not assume any liability of the Trust
         or its beneficiaries for prior period taxes.

         The Trust is contesting the positions of the IRS. Guitar Center has not
         provided for income tax expense related to this matter in its
         consolidated financial statements because its subsidiary, Musician's
         Friend, Inc., did not assume any liabilities related to this dispute
         when it was formed in January 1998 and therefore Guitar Center believes
         the liability related to any resolution of this matter properly resides
         with the Trust and its beneficiaries. As with any form of litigation,
         however, there is uncertainty regarding the ultimate outcome of this
         matter. Accordingly,

                                     8

<PAGE>

         pursuant to the merger agreement, 20% of the shares otherwise issuable
         to the former stockholders of Musician's Friend have been placed in
         escrow pending resolution of this matter.

5.       Line of Credit

         In July 1999, we terminated our prior credit facility and entered into
         a new $60 million secured revolving line of credit (the "1999
         Facility") with Wells Fargo Bank which is available through July 1,
         2004. This increased availability had been made available from and
         after June 1, 1999 as an amendment to the prior facility. The 1999
         Facility provides for revolving credit or term loan borrowings up to
         $60 million in the aggregate. The 1999 Facility is secured by specified
         inventory, receivables and intellectual property rights. A fee of 0.25%
         is assessed on the unused portion of the 1999 Facility.

         Under the terms of the 1999 Facility, we are subject to various
         financial and other covenants. We were in compliance with such
         covenants at September 30, 1999. Borrowings under the 1999 Facility
         bear interest at either the prime rate or at LIBOR plus 1.5%, at our
         option, with interest due monthly. At September 30, 1999, we had $51.5
         million outstanding under our 1999 Facility.

6.       Transaction and Conversion Costs

         Transaction and store conversion costs totaled $4.2 million during the
         nine months ended September 30, 1999. These costs relate to the merger
         with Musician's Friend during the second quarter of 1999 and
         principally include financial advisory fees, legal and accounting fees,
         a severance accrual for a former Musician's Friend executive, and
         certain costs associated with the conversion of Musician's Friend
         stores to the Guitar Center format.

7.       Change in Accounting for Store Pre-Opening Costs

         Effective January 1, 1999, we adopted AICPA Statement of Position 98-5,
         "Reporting on the Costs of Start-up Activities" (SOP 98-5), which
         requires all store pre-opening costs to be expensed as incurred. As
         result of this adoption, we recorded a charge for the cumulative effect
         of this change in accounting principle of $1,074,000 (net of taxes of
         $578,000), in the Statement of Operations for the nine months ending
         September 30, 1999 relative to the adoption of SOP 98-5.

         The following illustrates the pro forma amounts assuming the new
         accounting policy for pre-opening costs was applied retroactively ($ in
         000's, except per share data):

<TABLE>
<CAPTION>

                                                         Nine Months Ended
                                                           September 30,
                                                        1999            1998
                                                    -------------   ------------
              <S>                                   <C>             <C>
              Net income                                  $4,891         $6,685
              Net income per share:
                 Basic                                   $  0.22         $ 0.31
                 Diluted                                 $  0.22         $ 0.29

</TABLE>

                                     9

<PAGE>




8.       Segment Information

         In accordance with the requirements of SFAS 131, "Disclosures about
         Segments of and Enterprise and Related Information," our reportable
         businesses segments are retail (stores) and direct response (catalog
         and Internet). Management evaluates segment performance based primarily
         on revenue and income before income taxes.

         Sales, income before income taxes and cumulative effect, and total
         assets are summarized as follows for the third quarter and nine months
         ended September 30, 1999 and September 30, 1998 (in thousands):

<TABLE>
<CAPTION>


                              THREE MONTHS ENDED SEPTEMBER 30                  NINE MONTHS ENDED SEPTEMBER 30
                              -------------------------------                  ------------------------------
                          RETAIL       DIRECT RESPONSE                      RETAIL       DIRECT RESPONSE
                           1999              1999             TOTAL          1999             1999           TOTAL
                     -------------------------------------------------------------------------------------------------
<S>                   <C>                 <C>               <C>            <C>              <C>             <C>
Sales                      $132,590           19,933           152,523       $373,082            54,058      427,140
Income before income
   taxes and cumulative
   effect                     4,028             (635)            3,393         11,434            (4,444)       6,990
Total Assets               $220,810           19,776           240,586        220,810            19,776      240,586

</TABLE>


<TABLE>
<CAPTION>
                              THREE MONTHS ENDED SEPTEMBER 30                  NINE MONTHS ENDED SEPTEMBER 30
                              -------------------------------                  ------------------------------
                          RETAIL       DIRECT RESPONSE                      RETAIL       DIRECT RESPONSE
                           1998              1998           TOTAL            1998             1998           TOTAL
                     -------------------------------------------------------------------------------------------------
<S>                   <C>                 <C>               <C>            <C>              <C>             <C>
Sales                      $100,697           17,312           118,009       $284,929            55,327        340,256
Income before income
   taxes and cumulative
   effect                     3,982           (1,999)            1,983         12,819            (6,420)         6,399
Total Assets               $167,994           21,623           189,617       $167,994            21,623        189,617


</TABLE>

                                     10

<PAGE>

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

OVERVIEW

         We operated 64 retail locations in 33 major markets and three stores in
secondary markets as of September 30, 1999, and with the acquisition of
Musician's Friend, we now operate the largest direct response channel (catalog
and Internet) in the musical instruments industry in the United States. From
1994 to 1998, our net sales grew at an annual compound rate of 32.3%,
principally due to the comparable store sales growth of our Guitar Center stores
averaging 15.2% per year, the opening of new stores, and a 26% increase in the
direct response channel. Our management believes 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 and Musician's Friend brand names. We do not
expect comparable store sales to continue to increase at historical rates.

         We opened twelve Guitar Center stores in 1998 and, as of September 30,
1999, had opened ten additional Guitar Center stores this year. Presently, we
expect to open an additional two Guitar Center stores during the remainder of
1999. We opened four stores in 1998 under the Musician's Friend brand and opened
one additional Musician's Friend store in January of 1999. Of the nine
Musician's Friend retail locations acquired, we have rebranded seven of the nine
stores to the Guitar Center name and format. This conversion process took four
months and encompassed three stages: back room infrastructure, store remodeling,
and remerchandising. As of September 30, 1999, we had completed stage one of the
conversion for six retail locations. The two small format Musician's Friend
locations will likely continue to operate under the Musician's Friend brand.
However, all retail locations are being integrated with the existing Guitar
Center stores infrastructure. In preparation for these additional stores,
management had dedicated a substantial amount of resources over the past several
years to building the infrastructure necessary to support a large, national
chain. We believe the infrastructure is in place to support our needs for the
immediate foreseeable future, including our present expansion plans. 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, management expects that we will initially incur higher
administrative and promotional costs per store than is currently experienced in
established markets. We also expect competition to continue to increase over
time as other music products retailers attempt to execute national growth
strategies.

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

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED               NINE MONTHS ENDED
                                                             SEPTEMBER 30,                    SEPTEMBER 30,
                                                          1999           1998            1999              1998
                                                       ------------   ------------    ------------     -------------
<S>                                                    <C>            <C>             <C>              <C>
Net sales                                                    100.0%        100.0%          100.0%           100.0%
Gross profit                                                  25.6          27.2            26.0             27.2
Selling, general, and administrative expenses                 21.1          23.1            21.4             23.1
Transaction and conversion costs                               0.4            --             1.0               --
                                                       ------------   ------------    ------------     -------------
Operating income                                               4.1           4.1             3.6              4.1
Interest expense, net                                          1.9           2.2             1.8              2.1
Interest expense to related parties                             --           0.3             0.1              0.3
Other                                                           --            --              --             (0.1)
Income before income taxes and cumulative
   effect of a change in accounting principle                  2.2           1.7             1.6              1.9
Income taxes                                                    --           0.2             0.5              0.2
                                                       ------------   ------------    ------------     -------------
Income before cumulative effect of a
   change in accounting principle                              2.2           1.5             1.1              1.7
Cumulative effect of a change in accounting
   principle to write-off pre-opening costs, net of tax         --            --             0.2               --
                                                       ------------   ------------    ------------     -------------
Net income                                                     2.2           1.5             0.9              1.7
                                                       ------------   ------------    ------------     -------------
</TABLE>

                                     11
<PAGE>

RESULTS OF OPERATIONS

         THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1998.

         Net sales increased to $152.5 million for the three months ended
September 30, 1999, from $118.0 million for the comparable prior period, a 29.2%
increase. Net sales from retail stores totaled $132.6 million, an increase of
$31.9 million, or 31.7%. Sales from new stores contributed $21.2 million, or
66.1% of the increase. Comparable store sales increased 11%. The increase in
comparable store sales was due to aggressive pricing on certain elements of
inventory, particularly at former Musician's Friend stores and store sales
performance due to the effect of successful promotions. Our management is
presently anticipating comparable store sales growth of 5 to 7 percent for the
immediate future. The foregoing guidance is subject to the qualifications set
forth below under "Forward Looking Statements; Business Risks." Net sales from
the catalog and Internet channel totaled $19.9 million, a $2.6 million increase
from the third quarter of 1998. The increase was due to a 381% increase in
Internet sales, partially offset by a 4% decline in catalog sales. Catalog sales
were adversely effected by an average order approximately one-third smaller than
in 1998, when Musician's Friend offered its in-house installment credit program.
The program was discontinued in the fourth quarter of 1998, and the division's
new third-party non-recourse credit card did not become available until October
1999.

         Gross profit dollars for the three months ended September 30, 1999
compared to 1998 increased 21.4% to $39.0 million from $32.1 million. Gross
profit as a percentage of net sales for the three months ended September 30,
1999 compared to 1998 decreased to 25.6% from 27.2%. Gross profit margin
percentage for the retail stores after buying and occupancy costs was 25.3%
compared to 27.4% in the third quarter of 1998. The reduction in gross profit
margin quarter over quarter is due to increased occupancy costs due to the
number of stores less than two years old (29 stores out of 67 stores),
actions taken to clear out merchandise at former Musician's Friend locations,
increased freight expense as more stores are opened on the East Coast, and a
change in assortment and aggressive pricing on inventory that we wanted to
move. The gross profit margin for the catalog / Internet division was 27.5%
for the quarter compared to 25.8% in the third quarter of 1998. In 1998
significant markdowns were required to clear excess catalog and Internet
inventories. Markdowns of the same magnitude have not been required to date
in 1999. Additionally, during 1998 higher than average shrink occurred in the
Musicians's Friend distribution facilities.

         Selling, general and administrative expenses for the three months ended
September 30, 1999 compared to 1998 increased 18.3% to $32.2 million from $27.2
million. Selling, general and administrative expenses for the three months ended
September 30, 1999 compared to 1998 decreased to 21.1%, as a percentage of
sales, from 23.1%. 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 20.1% as a percentage of sales compared
to 21.2% in last year's third quarter. These results reflect the leveraging of
corporate expenses, partially offset by higher store level selling, general and
administrative expense due to the number of stores that are less than two years
old. Selling, general and administrative expenses for the catalog / Internet
division were 28.1% as a percentage of sales in the third quarter compared to
33.7 % in the same period last year. In 1998 Musician's Friend incurred
substantial bad debt expense related to its in-house installment credit program.
This program was substantially terminated in the fourth quarter of 1998.

         Transaction and store conversion costs totaled $0.5 million, or 0.4% of
sales, during the three months ended September 30, 1999. These costs relate to
the acquisition of Musician's Friend during the second quarter of 1999 and
principally include costs associated with the conversion of Musician's Friend
stores to Guitar Center stores.

         Operating income for the three months ended September 30, 1999 was $6.2
million compared to $4.9 million for the same three months of 1998, an increase
of 28.1%. The increase is principally the result of the increase in sales and
leveraging of corporate expenses. In addition, in 1998 Musician's Friend
incurred substantial bad debt expense related to its in-house installment credit
program. This program was substantially terminated in the fourth quarter of
1998. As a percentage of sales, operating income was 4.1% in the three months
ended September 30, 1999 and 1998.

                                     12
<PAGE>

         Interest expense, net for the three months ended September 30, 1999
decreased to $2.8 million from $2.9 million in the same period of 1998.

         In the nine months ended September 30, 1999, $2.1 million provision for
income taxes was recorded. As the majority of the tax benefits related to the
net operating loss carryforward had been recognized as of December 31, 1998, the
Company's effective tax rate for the three months ended September 30 represents
the combined federal and state rates expected to be realized for the full year,
offset partially by the recognition of the remaining NOL.

         Net income for the three months ended September 30, 1999 was $3.4
million, compared to net income of $1.7 million in the third quarter of 1998,
principally as a result of leveraging of corporate expenses. In addition, in
1998 Musician's Friend incurred substantial bad debt expense related to its
in-house installment credit program. This program was substantially terminated
in the fourth quarter of 1998.

         NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS ENDED
         SEPTEMBER 30, 1998.

         Net sales increased to $427.1 million for the nine months ended
September 30, 1999, from $340.3 million for the comparable prior period, a 25.5%
increase. Net sales from retail stores totaled $373.1 million, an increase of
$88.2 million, or 30.9%. Sales from new stores contributed $63.0 million, or
71.0% of the increase. Comparable store sales increased 9% due to aggressive
pricing on certain elements of inventory, particularly at former Musician's
Friend stores and store sales performance due to the effect of successful
promotions. Net sales from the catalog and Internet channel totaled $54.1
million, a $1.3 million decrease from the nine months ended September 30, 1998.
The reduction in sales was primarily due to the substantial termination of the
in-house installment credit program in the fourth quarter of 1998 and its impact
on the average order size of catalog transactions. This reduction was partially
offset by a 413.4% increase in Internet sales in the nine months ended September
30, 1999 compared to the same period in 1998.

         Gross profit dollars for the nine months ended September 30, 1999
compared to 1998 increased 20.0% to $111.1 million from $92.5 million. Gross
profit as a percentage of net sales for the nine months ended September 30, 1999
compared to 1998 decreased to 26.0% from 27.2%. Gross profit margin percentage
for the retail stores after buying and occupancy costs was 25.7% compared to
27.6% in the nine months ended September 30, 1998. The reduction in gross profit
margin quarter over quarter is due to increased occupancy costs due to the
number of stores less than two years old (29 stores out of 67 stores), increased
freight expense as more stores are opened on the East Coast, and a general
increase in the cost of certain products. The gross profit margin for the
catalog / Internet division was 28.4% for the nine months ended September 30,
1999 compared to 25.3% in the nine months ended September 30, 1998. In 1998
significant markdowns were required to clear excess catalog and Internet
inventories. Markdowns of the same magnitude have not been required to date in
1999. Additionally, during 1998 higher than average shrink occurred in the
unit's distribution facilities.

         Selling, general and administrative expenses for the nine months ended
September 30, 1999 compared to 1998 increased 16.6% to $91.5 million from $78.5
million. Selling, general and administrative expenses for the nine months ended
September 30, 1999 compared to 1998 decreased to 21.4%, as a percentage of
sales, from 23.1%. 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 20.0% as a percentage of sales compared
to 20.9% in the nine months ended September 30, 1998. These results reflect the
leveraging of corporate expenses, partially offset by higher store level
selling, general and administrative expense due to the number of stores that are
less than two years old. Selling, general and administrative expenses for the
catalog / Internet division were 31.2% in the nine months ended September 30,
1999 compared to 34.0% in the same period last year. In 1998 Musician's Friend
incurred substantial bad debt expense related to its in-house installment credit
program. This program was substantially terminated in the fourth quarter of
1998.

         Transaction and store conversion costs totaled $4.2 million, or 1.0% of
sales, during the nine months ended September 30, 1999. These costs relate to
the acquisition of Musician's Friend during the

                                     13
<PAGE>

second quarter of 1999 and principally include financial advisory fees, legal
and accounting fees and severance costs for a former Musician's Friend
executive.

         Operating income for the nine months ended September 30, 1999 was
$15.4 million compared to $14.0 million for the same nine months of 1998. The
increase is principally the result of leveraging corporate expenses. In
addition, in 1998 Musician's Friend incurred substantial bad debt expense
related to its in-house installment credit program. This program was
substantially terminated in the fourth quarter of 1998. As a percentage of
sales, operating income was 3.6% and 4.1% in the nine months ended September
30, 1999 and 1998, respectively.

         Interest expense, net for the nine months ended September 30, 1999
increased to $8.4 million from $8.0 million in the same period of 1998. Interest
expense includes interest to related parties of $0.5 million and $0.9 million
for the nine months ended September 30, 1999 and 1998, respectively.

         In the nine months ended September 30, 1999, $2.1 million provision for
income taxes was recorded. As the majority of the tax benefits related to the
net operating loss carryforward had been recognized as of December 31, 1998, the
Company's effective tax rate for the nine months ended September 30 represents
the combined federal and state rates expected to be realized for the full year,
offset partially by the recognition of the remaining NOL.

         Net income for the nine months ended September 30, 1999 was $3.8
million, compared to $5.8 million in the same period of 1998, principally as a
result of the effect of the transaction and conversion costs as discussed above,
and income taxes.

LIQUIDITY AND CAPITAL RESOURCES

         On May 13, 1999, we completed the merger with Musician's Friend ("MF").
Each outstanding share of MF common stock was converted into the right to
receive approximately 10.02 shares of Guitar Center common stock. In connection
with the merger we issued an aggregate of 1,959,970 shares of common stock and
assumed options (from Musician's Friend) to purchase 250,505 shares of common
stock. In addition, we refinanced MF's outstanding obligations under its secured
credit facility in the aggregate amount of approximately $17.3 million and
incurred transaction and conversion expenses of approximately $4.2 million. The
source of funds was borrowings under our credit facility. In July 1999, we
terminated our prior credit facility (1997 Credit Facility) and entered into the
1999 Credit Facility which allows for borrowings up to $60 million and expires
on July 1, 2004. This increased availability had been made available from and
after June 1, 1999 as an amendment to the prior facility. The 1999 Facility is
secured by specified inventory, receivables and intellectual property rights. A
fee of 0.25% is assessed on the unused portion of the 1999 Facility. The
agreement underlying the 1999 Credit Facility includes certain restrictive
covenants, which among other things, require us to maintain certain financial
ratios. We were in compliance with respect to such requirements as of September
30, 1999. We have outstanding capital leases of approximately $1.1 million
related to computer equipment financings which will remain in place.

         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 are seeking to obtain additional borrowing capacity
under a revolving credit facility which will allow us to borrow significantly
in excess of the amount available under the 1999 Credit Facility. A new
credit facility has not yet been entered into, although we have received a
preliminary commitment from an institutional lender. 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, 1999, we had $51.5
million outstanding under our credit facility with Wells Fargo Bank,
excluding $100,000 outstanding on standby letters of credit, and had
available borrowings of approximately $8.5 million.

         For the nine months ended September 30, 1999, cash used by operating
activities was $17.2 million, most of which represented additions to inventory.
Cash used in investing activities totaled $13.7 million, which principally
consisted of capital expenditures under our store expansion program. Cash

                                     14
<PAGE>

provided by financing activities totaled $30.8 million, which principally
consisted of borrowings under the 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
1999, we opened eleven new stores of which one was operated by Musician's
Friend. Each new Guitar Center store typically has required approximately $1.8
million for gross inventory. Historically, our cost of capital improvements for
an average Guitar Center new store has been approximately $850,000, consisting
of leasehold improvements, fixtures and equipment. We are currently evaluating
the costs of remodeling the large format Musician's Friend store locations that
will be rebranded to the Guitar Center name. Inventory requirements for these
locations should not significantly change. The costs to provide the additional
information technology resources to bring the nine Musician's Friend stores in
line with Guitar Center standards will approximate $85,000 per store. We are
also currently evaluating additional capital and strategic requirements related
to improving the technology for the Internet business. Such costs could 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 16 stores in 1998 and 11 stores in 1997, of which two were
purchased, and currently anticipate opening approximately two additional
stores in 1999 and approximately 14 to 16 stores in 2000. In preparation for
this expansion, we have dedicated a substantial amount of our resources over
the past several years to building the infrastructure necessary to support a
large national chain. We also believe there may be attractive opportunities
to expand by selectively acquiring existing music products retailers.
However, in the music industry there are only a small number of companies
that would strategically and financially be a beneficial opportunity for us
to acquire. Our "average" store is 15,000 square feet, carrying 7,000 SKUs
and generating first year sales of $6.4 million whereas the "average"
industry store is 4,900 square feet, carrying 2,500 SKUs and generating sales
of $1.2 million.

         Management is seeking to obtain additional borrowing under a
revolving credit facility in order to maintain adequate capital resources and
liquidity to meet its borrowing obligations, fund all required capital
expenditures and pursue its business strategy for at least the next twelve
months, including our present plans for expansion as described elsewhere in
this Report. Our capital resources and liquidity are expected to be provided
by net cash flow from operations and the additional borrowings under the 1999
Credit Facility or a successor facility. Depending upon market conditions, we
may also incur additional indebtedness or issue equity securities. There can
be no assurance that such additional capital, if and when required, will be
available on terms acceptable to us, if at all.

SEASONALITY

         Our operating results are not highly seasonal, although, as with most
retailers, sales in the fourth quarter are typically higher than any other
quarter.

YEAR 2000

         The Year 2000 issue is primarily the result of computer programs using
a two-digit format, as opposed to four digits, to indicate the year. Computer
programs that are date dependent are found in the software that operates many IT
systems as well as in the computer based devices which control many types of
electronic equipment. Computer programs that are not Year 2000 compliant will be
unable to interpret dates beyond the year 1999, which could cause a system
failure or other computer errors, leading to a disruption in the operation of
the related IT systems or electronic equipment.

         In 1997, we established a project plan to investigate the Year 2000
compliance of our internal and third party computer system applications and
hardware. The objective was to verify third party compliance and complete
internal compliance prior to year end 1999. All work has been substantially
completed including a major software project related to our inventory management
system implemented in April of 1999. As of the date of this Report, we believe
that all of our significant IT systems will be Year 2000 compliant by the end of
1999. We currently do not have a contingency plan with regard to the Year 2000.
During the fourth quarter of 1999, we will continue to evaluate whether and to
what extent contingency arrangements should be implemented.

                                     15
<PAGE>

         We have also endeavored to assess the Year 2000 compliance of the
outside parties upon which we are most dependent, including large vendors of the
products resold by us. While we are not aware of any material compliance
difficulties expected by any such supplier, our ability to obtain accurate
information is necessarily limited. A number of our vendors manufacture their
products overseas, also making accurate information difficult to obtain. Those
vendors, as well as ourselves, are also dependent upon the continued normal
functioning of surface and air transportation, electric utility and voice and
data transmission infrastructure, and the electronic payments systems and other
activities of large financial institutions. Many of these companies have very
significant Year 2000 compliance programs underway because they tend to be
dependent on large, proprietary "legacy" computing systems that are particularly
susceptible to Year 2000 problems. The success of these compliance programs will
prove important to us and our business.

         Based on the assessment efforts to date, however, we do not believe
that the Year 2000 issue will have a material adverse effect on our financial
condition or results of operations. Our beliefs and expectations, however, are
based on assumptions and expectations that ultimately may prove to be
inaccurate. We believe that by the end of 1999, we will be able to fully
determine its most reasonably likely worst case scenarios. Potential sources of
risk include:

     -   the inability of principal suppliers to be Year 2000 ready, which could
         result in delays in product deliveries from such suppliers;

     -   disruption of the distribution channel, including ports, and
         transportation vendors, as a result of a general failure of systems and
         necessary infrastructure such as electric power supply, voice and data
         communications and financial payment systems; and

     -   unexpected failures of systems or devices that are misidentified as
         being Year 2000 compliant or which prove unexpectedly to contain
         non-compliant, date-dependent computer code.

         As of the date of this Report, we do not expect the future costs
associated with our Year 2000 efforts to be substantial. To date, we have spent
minimal resources on the Year 2000 issue, as such, primarily due to an already
established, long term plan to upgrade and modernize our systems which we have
been implementing since 1995. The Year 2000 issues have been addressed as part
of the overall global system strategies. Our statements concerning future costs
do not include time and costs that may be incurred by us as a result of the
failure of any third parties, including suppliers, to become Year 2000
compliant, or costs to implement any contingency plans.

         The information above contains forward-looking statements which reflect
the current views of our company with respect to Year 2000 compliance and the
related costs and possible impact on its financial performance. As indicated
above, these assessments may prove to be inaccurate. The Year 2000 problem is
novel. Neither Guitar Center nor any of our suppliers is experienced at
identifying and remediating a problem of this sort which represents a systemic
defect that, if not corrected, will cause the failure of computer systems and
computer-controlled devices that are pervasive in the infrastructure of business
and government.

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; BUSINESS RISKS

         This Report contains forward-looking statements relating to, among
other things, future results of operations, growth plans, sales, gross margin
and expense trends, capital requirements, liquidity requirements and general
industry and business conditions applicable to Guitar Center. These
forward-looking statements are based largely on our current expectations and are
subject to risks and uncertainties. Actual results could differ materially from
these forward-looking statements. Important factors to consider in evaluating
any of these forward-looking statements include changes in external competitive
market

                                     16
<PAGE>

factors, the effectiveness of our promotion and merchandising strategies,
changes in our business strategy or any inability to execute our business
strategy due to unanticipated changes in the music products industry or the
economy in general, the emergence of new or growing specialty retailers of
music products and various competitive factors that may prevent us from
competing successfully in existing or future markets. We are also dependent
on our continuing access to the credit markets to fund our working capital
and growth capital requirements. These matters and other business risks to
which Guitar Center is subject are discussed in our periodic reports and
registration statements filed from time to time with the Securities and
Exchange Commission. In particular, a discussion of some of the business
risks that we face is contained under the caption "Item 1., Business Risks
Related to the Business" on pages 11 through 13 of our 1998 Annual Report on
Form 10-K. We do not presently intend to update any of these forward looking
statements.

ITEM 3.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Guitar Center does not have any assets or liabilities which in its view
impose upon it significant market risk except that it has 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 6.  Exhibits

         (a)      Exhibit 10.33     Employee Assistance Loan Program Agreement
                                    between Guitar Center, Inc. and Bruce Ross,
                                    along with related Full Recourse Promissory
                                    Note

                  Exhibit 11.       Income per share.

                  Exhibit 27.       Financial Data Schedule.

         (b)      Reports of Form 8-K. The Registrant filed a current Report
                  on Form 8-K on June 4, 1999, reporting under Item 2
                  (Acquisition and Disposition of Assets), the Merger with
                  Musician's Friend, Inc. effective May 28, 1999. The
                  Registrant filed an amendment to Form 8-K on August 11,
                  1999, to include the audited financial statements of
                  Musician's Friend, Inc. as of and for the three years ended
                  December 31, 1998, and unaudited proforma condensed
                  consolidated financial statements of the Registrant and its
                  Subsidiaries as of and for the three year period ended
                  December 31, 1998.

                                     17

<PAGE>





         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 11th day of November 1999.

                               Guitar Center, Inc.

                               /s/  Bruce L. Ross
                               ---------------------------------------
                               Bruce L. Ross, Executive Vice President,
                               Chief Financial Officer and Secretary

                               (Duly Authorized Officer and Principal Financial
                               and Accounting Officer)


                                     18

<PAGE>



Exhibit Index

EXHIBIT NO.      DESCRIPTION

10.33            Employee Assistance Loan Program Agreement between Guitar
                 Center, Inc. and Bruce Ross, along with related Full Recourse
                 Promissory Note

11               Income per share.

27               Financial Data Schedule.




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