Segment Information (Tables)

6 Months Ended

Jun. 30, 2013

Segment Information

Schedule of financial information for Holdings' and Guitar Center's reportable segments

The following tables summarize financial information for Holdings’ and Guitar Center’s reportable segments (in thousands):

	Three months ended June 30, 2013
	Guitar Center		Music & Arts		Direct Response			Corporate			Total
Net sales	$	379,135	$	60,714	$	64,989		$	—		$	504,838
Gross profit	103,443		24,765		18,096			—			146,304
Selling, general and administrative expenses	90,424		20,833		18,962			6,420			136,639
Impairment of intangible assets	—		—		2,300			—			2,300
Operating income (loss)	13,019		3,932		(3,166		)	(6,420		)	7,365
Depreciation and amortization	14,995		1,168		3,984			1,327			21,474
Adjusted EBITDA	29,914		5,325		3,056			(3,001		)	35,294
Capital expenditures	6,989		1,987		1,167			3,000			13,143

	Three months ended June 30, 2012
	Guitar Center		Music & Arts		Direct Response			Corporate			Total
Net sales	$	365,331	$	54,305	$	66,962		$	—		$	486,598
Gross profit	103,937		22,663		19,757			103			146,460
Selling, general and administrative expenses	87,024		20,321		21,250			4,973			133,568
Operating income (loss)	16,913		2,342		(1,493		)	(4,870		)	12,892
Depreciation and amortization	16,095		1,250		3,833			914			22,092
Adjusted EBITDA	34,124		4,134		2,550			(1,738		)	39,070
Capital expenditures	12,432		2,048		2,618			3,503			20,601

	Six months ended June 30, 2013
	Guitar Center		Music & Arts		Direct Response			Corporate			Total
Net sales	$	779,633	$	119,079	$	137,959		$	—		$	1,036,671
Gross profit	215,911		50,899		37,034			—			303,844
Selling, general and administrative expenses	182,087		40,886		41,267			13,005			277,245
Impairment of intangible assets	—		—		2,300			—			2,300
Operating income (loss)	33,824		10,013		(6,533		)	(13,005		)	24,299
Depreciation and amortization	30,371		2,420		8,026			2,205			43,022
Adjusted EBITDA	67,914		13,171		5,807			(5,816		)	81,076
Capital expenditures	16,035		3,494		2,097			5,636			27,262
Total assets
Holdings	1,406,664		135,751		153,511			80,015			1,775,941
Guitar Center	1,406,664		135,751		153,511			112,336			1,808,262

	Six months ended June 30, 2012
	Guitar Center		Music & Arts		Direct Response			Corporate			Total
Net sales	$	759,036	$	109,374	$	146,340		$	—		$	1,014,750
Gross profit	221,006		47,686		41,688			(343		)	310,037
Selling, general and administrative expenses	176,707		39,487		44,176			11,250			271,620
Operating income (loss)	44,299		8,199		(2,488		)	(11,593		)	38,417
Depreciation and amortization	32,739		2,430		7,827			1,741			44,737
Adjusted EBITDA	79,795		11,182		6,042			(4,720		)	92,299
Capital expenditures	18,751		2,894		4,137			6,683			32,465
Total assets
Holdings	1,442,926		124,163		175,188			83,290			1,825,567
Guitar Center	1,442,926		124,163		175,188			104,825			1,847,102

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

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

Holdings

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Adjusted EBITDA
Guitar Center	$	29,914		$	34,124		$	67,914		$	79,795
Music & Arts	5,325			4,134			13,171			11,182
Direct response	3,056			2,550			5,807			6,042
Corporate	(3,001		)	(1,738		)	(5,816		)	(4,720		)
	35,294			39,070			81,076			92,299
Depreciation and amortization expense	21,474			22,092			43,022			44,737
Interest expense, net	38,676			41,345			80,034			82,519
Non-cash charges	(78		)	794			253			1,690
Impairment charges	3,102			—			3,102			—
Other adjustments	3,431			3,292			10,400			7,455
Consolidated loss before income taxes	$	(31,311	)	$	(28,453	)	$	(55,735	)	$	(44,102	)

Guitar Center

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Adjusted EBITDA
Guitar Center	$	29,914		$	34,124		$	67,914		$	79,795
Music & Arts	5,325			4,134			13,171			11,182
Direct response	3,056			2,550			5,807			6,042
Corporate	(3,001		)	(1,738		)	(5,816		)	(4,720		)
	35,294			39,070			81,076			92,299
Depreciation and amortization expense	21,474			22,092			43,022			44,737
Interest expense, net	22,492			21,351			43,857			42,532
Non-cash charges	(78		)	794			253			1,690
Impairment charges	3,102			—			3,102			—
Other adjustments	3,431			3,292			10,400			7,455
Consolidated loss before income taxes	$	(15,127	)	$	(8,459	)	$	(19,558	)	$	(4,115	)