| Guitar Center, Inc. | |||
| Ticker: | GTRC | 5155 Clareton Drive | |
| Exchange: | NASDAQ-National Market | Agoura Hills, CA 91301 | |
| Industry: | Retail (SIC Code 5736) | (818) 735-8800 | |
| Type of Shares: | Common Shares | Filing Date: | 1/31/97 | |
| U.S. Shares: | 5,400,000 | Offer Date: | 3/13/97 | |
| Non-U.S. Shares: | 1,350,000 | Filing Range: | $14.00 - $16.00 | |
| Primary Shares: | 6,750,000 | Offer Price: | $15.00 | |
| Secondary Shares: | 0 | Gross Spread: | $1.05 | |
| Offering Amount: | $101,250,000 | Selling: | $0.57 | |
| Expenses: | $900,000 | Reallowance: | $0.10 | |
| Shares Out After: | 18,316,579 |
| Manager | Tier | Phone |
| Goldman, Sachs & Co. | Lead Manager | (212) 902-5959 |
| Chase Securities, Inc. | Co-manager | (212) 834-4533 |
| Dain Bosworth Incorporated | Co-manager | (612) 371-2818 |
| Donaldson, Lufkin & Jenrette Securities Corp. | Co-manager | (212) 371-0641 |
| Montgomery Securities | Co-manager | (415) 627-2100 |
| Issuer's Law Firm: | Latham & Watkins |
| Bank's Law Firm: | Skadden, Arps, Slate, Meagher & Flom |
| Auditor: | Ernst & Young |
| Registrar/Transfer Agent: | ChaseMellon Shareholder Services, L.L.C. |
Dollar amounts in U.S. millions except for per share data | |||||
| Full Year Audited Income | Latest Unaudited Income | Prior Unaudited Income | Balance Sheet | ||
| 12/31/96 | 12/31/96 | ||||
| Revenue: | $213.29 | Assets: | $74.85 | ||
| Net Income: | -$72.27 | Curr Assets: | |||
| EPS: | -$3.72 | Liabilities: | $143.66 | ||
| Prior EPS: | Curr Liabilities: | ||||
| Cash Flow/Oper: | -$44.90 | Equity: | -$68.81 | ||
| Cash Flow/Fin: | Cash: | ||||
| Cash Flow/Inv: | |||||
| Business Description |
| The company is the nation's leading retailer of guitars, amplifiers, percussion instruments, keyboards and pro audio and recording equipment. The company has 28 stores operating in 14 major U.S. markets as of December 31, 1996, including, among others, areas in or near Los Angeles, San Francisco, Chicago, Miami, Houston, Dallas, Detroit, Boston and Minneapolis. From fiscal 1990 through fiscal 1995, the company's net sales and operating income have grown at compound annual rates of 21.9% and 34.0%, respectively. This growth was principally the result of strong and consistent comparable store sales growth, averaging 13.9% per year over such five-year period, and the opening of seven new stores. The company offers a unique retail concept in the music products industry, combining an interactive, hands-on shopping experience with superior customer service and a broad selection of brand name, high-quality products at guaranteed low prices. The company creates an entertaining and exciting atmosphere in its stores with bold and dramatic merchandise presentations, highlighted by bright, multi-colored lighting, high ceilings, music and videos. |
| Competition |
| The retail market for musical instruments is highly fragmented with the nation's leading five music products retailers accounting for approximately 8.4% of the industry's net sales in 1995. The company's largest competitor, Sam Ash, operates ten stores in the New York City area and two stores in the South Florida area. The company currently has no stores in the New York City area. The company competes with many different types of retail stores, primarily specialty retailers and music product catalogue retailers. The company believes that the ability to compete successfully in its markets is determined by several factors, including breadth and quality of product selection, pricing, effective merchandise presentation, customer service, store location and proprietary atabase marketing programs. Customer satisfaction is paramount to the company's operating strategy and the company believes that providing knowledgeable and friendly customer service gives it a competitive advantage. The store environment is designed to be an entertaining and exciting environment in which to shop. In an effort to exceed customer expectations, the company's stores provide a number of services not generally offered by most competitors, including the ability to hold and use merchandise, product demonstrations and extensive product selection. Certain factors, however, could materially and adversely affect the company's ability to compete successfully in its markets, including, among others, the expansion by the company into new markets in which its competitors are already established, competitors' expansion into markets in which the company is currently operating, the adoption by competitors of innovative store formats and retail sales methods or the entry into the company's markets by competitors with substantial financial or other resources. |
| Business Plan |
| The management's goal is to continue to expand the company's position as the leading music products retailer throughout the United States. The principal elements of the company's business strategy are as follows: (I) Expansion Strategy, (ii) Extensive Selection of Merchandise, (iii) Highly Interactive, Musician-Friendly Store Concept, (iv) Exceptionally Customer Service, (v) Innovative Promotional and Marketing Programs, (vi) Guaranteed Low Prices and (vii) Experienced and Motivated Management Team. |
| Use of Proceeds |
| The proceeds from the proposed offering will be used i) redeem at a premium, and pay all accrued and unpaid interest with respect to, 11% Senior Notes due 2006, ii) redeem at a premium all shares outstanding of the company's 14% Senior Preferred Stock and iii) redeem approximately 1,138,000 shares of Common Stock held by certain executive officers and other employees of the company, and for general corporate purposes. |