Segment Information (Tables)

12 Months Ended

Dec. 31, 2012

Segment Information

Schedule of financial information for reporting segments

The following tables summarize financial information for Holdings’ reporting segments (in thousands):

	Year ended December 31, 2012
	GuitarCenter		Music & Arts		Direct  Response		Corporate			Total
Net sales	$	1,596,094	$	189,766	$	353,331	$	—		$	2,139,191
Gross profit	459,680		86,043		97,668		—			643,391
Selling, general and administrative expenses	356,832		69,791		95,196		25,905			547,724
Operating income (loss)	102,848		16,252		2,472		(25,905		)	95,667
Depreciation and amortization	66,457		4,414		15,801		4,233			90,905
Adjusted EBITDA	173,153		21,041		19,159		(13,349		)	200,004
Capital expenditures	39,041		7,051		7,858		13,518			67,468
Total assets
Holdings	1,410,303		113,119		166,496		126,640			1,816,558
Guitar Center	1,410,303		113,119		166,496		155,891			1,845,809

	Year ended December 31, 2011
	GuitarCenter		Music & Arts		Direct Response			Corporate			Total
Net sales	$	1,530,133	$	178,443	$	374,001		$	—		$	2,082,577
Gross profit	448,543		83,307		103,293			—			635,143
Selling, general and administrative expenses	355,879		68,373		116,798			38,176			579,226
Impairment of intangible assets	—		—		45,961			—			45,961
Impairment of goodwill	—		—		107,026			—			107,026
Operating income (loss)	92,664		14,934		(166,492		)	(38,176		)	(97,070		)
Depreciation and amortization	74,719		4,380		24,264			2,834			106,197
Adjusted EBITDA	174,554		19,607		19,034			(16,285		)	196,910
Capital expenditures	29,269		3,535		8,881			15,639			57,324
Total assets
Holdings	1,480,701		105,170		171,639			101,556			1,859,066
Guitar Center	1,480,701		105,170		171,639			126,239			1,883,749

	Year ended December 31, 2010
	GuitarCenter		Music & Arts		Direct Response		Corporate			Total
Net sales	$	1,444,829	$	175,659	$	390,407	$	—		$	2,010,895
Gross profit	416,212		80,125		109,514		—			605,851
Selling, general and administrative expenses	343,407		68,595		105,974		28,159			546,135
Operating income (loss)	72,805		11,530		3,540		(28,159		)	59,716
Depreciation and amortization	80,574		4,317		17,961		1,994			104,846
Adjusted EBITDA	160,479		16,458		22,216		(14,846		)	184,307
Capital expenditures	19,659		2,685		13,346		12,197			47,887
Total assets
Holdings	1,471,302		101,280		331,737		216,399			2,120,718
Guitar Center	1,471,302		101,280		331,737		211,296			2,115,615

Schedule of reconciliation of adjusted EBITDA to consolidated income (loss) before income taxes

The following tables present a reconciliation of Adjusted EBITDA to consolidated income or loss before income taxes (in thousands):

Holdings

	Year ended December 31,
	2012			2011			2010
Adjusted EBITDA
Guitar Center	$	173,153		$	174,554		$	160,479
Music & Arts	21,041			19,607			16,458
Direct Response	19,159			19,034			22,216
Corporate	(13,349		)	(16,285		)	(14,846		)
	200,004			196,910			184,307
Depreciation and amortization expense	90,905			106,197			104,846
Interest expense, net	165,344			161,036			145,233
Non-cash charges	2,265			3,382			5,157
Non-recurring charges	—			5,257			—
Impairment charges	559			154,281			884
Other adjustments	10,608			24,863			13,704
Consolidated loss before income taxes	$	(69,677	)	$	(258,106	)	$	(85,517	)

Guitar Center

	Year ended December 31,
	2012			2011			2010
Adjusted EBITDA
Guitar Center	$	173,153		$	174,554		$	160,479
Music & Arts	21,041			19,607			16,458
Direct Response	19,159			19,034			22,216
Corporate	(13,349		)	(16,285		)	(14,846		)
	200,004			196,910			184,307
Depreciation and amortization expense	90,905			106,197			104,846
Interest expense, net	85,369			81,063			70,842
Non-cash charges	2,265			3,382			5,157
Non-recurring charges	—			5,257			—
Impairment charges	559			154,281			884
Other adjustments	10,608			24,585			13,704
Consolidated income (loss) before income taxes	$	10,298		$	(177,855	)	$	(11,126	)

Adjustments in the calculation of Adjusted EBITDA include the following:

· Non-cash charges include stock-based compensation expense and the non-cash portion of rent expense.

· Non-recurring charges in 2011consist of the loss recognized on the sale of our corporate aircraft.

· Other adjustments include restructuring charges, severance payments, bonuses under our long-term management incentive plan, various debt and financing costs, gains and losses on disposal of assets, special charges and management fees paid to Bain Capital as discussed in Note 13.