1021113--3/1/2007--GUITAR_CENTER

related topics

{system, service, information}

{acquisition, growth, future}

{product, market, service}

{condition, economic, financial}

{customer, product, revenue}

{regulation, government, change}

{personnel, key, retain}

{regulation, change, law}

{control, financial, internal}

{financial, litigation, operation}

{debt, indebtedness, cash}

{loan, real, estate}

{loss, insurance, financial}

{stock, price, share}

{competitive, industry, competition}

We may be unable to meet our retail store growth strategy, which could adversely affect our results of operations. If we do not respond to rapid technological changes, our direct response and other e-commerce services could become obsolete and we could lose customers and our business could suffer. Our business could be adversely affected if we are unable to address unique competitive and merchandising challenges in connection with our plans to open additional Guitar Center and Music Arts Center retail stores in new markets. Our Guitar Center retail store expansion strategy, including our strategy of clustering retail stores, may adversely impact our comparable store sales. Our failure to maintain and expand our direct response distribution center could adversely impact our business. Our inability to address the special risks associated with acquisitions could adversely impact our business. Our failure to develop and implement critical new systems for our business could adversely impact our business. We must efficiently manage the expansion of our direct response business in order to service our customers properly, otherwise our business could be adversely affected. We depend on a relatively small number of manufacturers, suppliers and common carriers, and their inability to supply our requirements could adversely impact our business. Significant existing and new competition in our industry could continue to adversely affect our retail business. We must successfully implement our business strategy for our Music Arts Center business in order to reach profitability and earn an acceptable return on that business. Our Music Arts Center business is dependent on state and local funding of primary and secondary schools, and decreases in funding could adversely affect our Music Arts Center business. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results, and as a result, current and potential stockholders could lose confidence in our financial reporting, which could have a negative market reaction. Our retail operations are concentrated in California, which ties our financial performance to events in that state. We may be adversely impacted if our security measures fail. We depend on key personnel including our senior management who are important to the success of our business. Economic conditions or changing consumer preferences could adversely impact us. If our products contain defects, our business could be harmed significantly. We may need to change the manner in which we conduct our business if government regulation or taxation imposes additional costs and adversely affects our financial results. We face risks created by litigation, governmental proceedings, labor disputes or environmental matters. Our hardware and software systems are vital to the efficient operation of our retail stores and direct response business, and damage to these systems could harm our business. Any failure by us to maintain compliance with credit facility covenants could have a material adverse impact on our business. The volatility of our stock price could affect the value of an investment in our common stock. Our actual operating results may differ significantly from our projections.

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1021113--3/1/2007--GUITAR_CENTER_INC