##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES AND EXCHANGE ACT OF 1934


FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004


Commission File Number 000-30138





ROCKFORD CORPORATION


(Exact name of Registrant as Specified in Its Charter)


|                                                                   |  |                                      
|------------------------------------------------------------------ |  | -------------------------------------
|Arizona                                                            |  | 86-0394353                           
|(State or Other Jurisdiction of
    Incorporation or Organization) |  | (IRS Employer
    Identification No.)

600 South Rockford Drive


Tempe, Arizona 85281


(480) 967-3565


(Address and Telephone Number of Principal Executive
Offices)





Securities Registered Pursuant to Section 12(b) of the
Act:


None


Securities Registered Pursuant to Section 12(g) of the
Act:


Common Stock ($.01 Par Value)


þ o


o


o þ
















---










ROCKFORD CORPORATION


FORM 10-K


DECEMBER 31, 2004


TABLE OF CONTENTS


|                                   |  |                                                                                                                          |    |  |    |  |  | 
|---------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------ | -- |  | -- |  |  | 
|Securities and Exchange Commission |  |                                                                                                                         
|Item Number and Description        |  |                                                                                                                         
|                                   |  |                                                                                                                         
|                                   |  | Page                                                                                                                     |   
|                                   |  |                                                                                                                          |   
|PART I                            
|Item 1.                            |  | Business                                                                                                                 |    |  | 3  | 
|Item 2.                            |  | Properties                                                                                                               |    |  | 10 | 
|Item 3.                            |  | Legal Proceedings                                                                                                        |    |  | 11 | 
|Item 4.                            |  | Submission of Matters to a Vote of Security
    Holders                                                                  |    |  | 12 | 
|PART II                           
|Item 5.                            |  | Market for Registrants Common Equity
    and Related Stockholder Matters, and Issuer Purchases of Equity
    Securities |    |  | 12 | 
|Item 6.                            |  | Selected Financial Data                                                                                                  |    |  | 14 | 
|Item 7.                            |  | Managements Discussion and Analysis
    of Financial Condition and Results of Continuing Operations                     |    |  | 15 | 
|Item 7A                            |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                           |    |  | 26 | 
|Item 8.                            |  | Financial Statements and Supplementary
    Data                                                                          |    |  | 27 | 
|Item 9.                            |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                                 |    |  | 50 | 
|Item 9A.                           |  | Controls and Procedures                                                                                                  |    |  | 50 | 
|PART III                          
|Item 10.                           |  | Directors and Executive Officers of the
    Registrant                                                                   |    |  | 52 | 
|Item 11.                           |  | Executive Compensation                                                                                                   |    |  | 52 | 
|Item 12.                           |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                       |    |  | 52 | 
|Item 13.                           |  | Certain Relationships and Related
    Transactions                                                                       |    |  | 52 | 
|Item 14.                           |  | Principal Accountant Fees and Services                                                                                   |    |  | 52 | 
|PART IV                           
|Item 15.                           |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                                                      |    |  | 53 | 
|Signatures                         |  |                                                                                                                          | 56 | 
|EX-10.62.1                        
|EX-10.62.2                        
|EX-10.63                          
|EX-10.64                          
|EX-10.65                          
|EX-21                             
|EX-23.1                           
|EX-31.1                           
|EX-31.2                           
|EX-32                             
|EX-99.1                           







| |   |                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------
| |  | Rockfords estimate of the number of shares held by
    non-affiliates; and                                                              
|
| |  | $4.50 per share, the price at which Rockfords shares
    were last sold as of June 30, 2004, as reported by The
    NASDAQ Stock Market.



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##### Table of Contents



Forward-Looking Statements And Risk Factors


We make forward-looking statements in this report including,
without limitation, statements concerning the future of our
industry, product development, business strategy, continued
acceptance and growth of our products, dependence on significant
customers and suppliers, and the adequacy of our available cash
resources. Statements may contain projections of results of
operations or of financial condition. These statements may be
identified by the use of forward-looking terminology such as
may, will, believe,
expect, anticipate,
estimate, continue or other similar
words.


Forward-looking statements are subject to many risks and
uncertainties. We caution you not to place undue reliance on
these forward-looking statements, which speak only as at the
date on which they are made. Actual results may differ
materially from those described in these forward-looking
statements. We disclaim any obligation or undertaking to update
these forward-looking statements to reflect changes in our
expectations or changes in events, conditions, or circumstances
on which our expectations are based.


When considering our forward-looking statements, you
should keep in mind the risk factors and other cautionary
statements identified in this report and in Exhibit 99.9,
Risk Factors That May Affect Rockfords Operating
Results, Business Prospects and Stock Price, which is
incorporated in this report by reference. The risk factors noted
throughout this report, particularly in the discussion in
Exhibit 99.9, and other risk factors that Rockford has not
anticipated or discussed, could cause our actual results to
differ significantly from those anticipated in our
forward-looking statements.


2



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##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

Rockford Business








Rockfords Brands






| |             
| | ------------
| | Mobile Audio



| |   |                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Rockford Fosgate. Under the Rockford Fosgate brand,
    Rockford offers distinctive products that produce powerful, high
    quality sound. Rockford Fosgate mobile audio products are
    marketed under three primary product lines:



| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | Punch Series  the line for the majority of
    Rockfords amplifiers, subwoofers, and speakers;      
|
| |  | Power Series  the line for Rockfords higher
    performing amplifiers, subwoofers, and speakers; and
|
| |  | Type RF  the line for Rockfords highest
    performing mobile audio amplifiers.                     





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Lightning Audio. Rockford sells amplifiers, subwoofers,
    speakers, and accessories under the Lightning Audio brand and
    its Bolt, Strike and Storm product lines. Lightning Audio
    products are generally more moderately priced than Rockford
    Fosgate products;                                                                                                                                            
|
| |  | Q-Logic. Under the Q-Logic brand, Rockford develops and
    markets Q-Logic speaker enclosures, Q-Forms kick panels and
    Q-Customs enclosures. Each of these products is designed to hold
    mobile audio speakers, providing an effective and convenient
    method for installing improved speakers in cars, trucks and
    SUVs. These products complement Rockford Fosgate and Lightning
    Audio products since

3



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##### Table of Contents



| |   |                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | many consumers will purchase a Q-Logic product as the
    box to hold Rockford Fosgate or Lightning Audio
    speakers; and                                                                                        
|
| |  | InstallEdge.com. Rockford uses the InstallEdge.com
    business-to business brand to offer installation-shop supplies
    to mobile audio installation shops, custom home audio installers
    and marine outfitters.



| |                                    
| | -----------------------------------
| | Home Theater and Professional Audio



| |   |                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Fosgate Audionics. Rockford distributes home theater
    electronics under the Fosgate Audionics brand through
    conventional retailers and custom installers;                                                                                                                                                
|
| |  | NHT. Rockford designs high quality loudspeakers for the
    home theater, stereo, custom installation and professional audio
    markets under the NHT and NHT Pro brands. NHTs products
    are positioned as affordable high end and are sold
    through specialty audio stores and custom installers; and
|
| |  | Hafler. Rockford designs, manufactures and sells
    reference quality near field monitor loudspeakers and power
    amplifiers to the professional audio industry under the Hafler
    brand.                                                                                                                  

Strategy for Rockfords Brands






| |   |                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Continue to introduce new and technologically innovative mobile
    audio products;                                                                       
|
| |  | Expand Rockfords mobile audio OEM business;                                                                                                              
|
| |  | Broaden Rockfords distribution by entering new
    distribution channels and increasing penetration of
    Rockfords existing distribution channels; and
|
| |  | Capitalize on Rockfords worldwide brand recognition to
    increase sales in international markets.                                                      



Rockford Products




| |                                  
| | ---------------------------------
| | Percent of Sales by Product Class



|               |       |                         |      |       |      |  |      |       |   |  |      |       |  
|-------------- | ----- | ----------------------- | ---- | ----- | ---- |  | ---- | ----- | - |  | ---- | ----- | -
|               |       | Year Ended December 31, |     
|               |       |                         |     
|               |       | 2002                    |      |       | 2003 |  |      | 2004  |  
|               |       |                         |      |       |      |  |      |       |  
|Product Class: |       |                         |      |       |      |  |      |       |   |  |      |      
|Amplifiers     |       |                         | 38.8 | %     |      |  | 39.4 | %     |   |  | 37.8 | %    
|Speakers       |       |                         | 36.1 |       |      |  | 39.6 |       |   |  | 41.6 |      
|Accessories    |       |                         | 14.1 |       |      |  | 11.5 |       |   |  | 10.2 |      
|Others(1)      |       |                         | 11.0 |       |      |  | 9.5  |       |   |  | 10.4 |      
|               |       |                         |      |       |      |  |      |       |  
|               | Total |                         |      | 100.0 | %    |  |      | 100.0 | % |  |      | 100.0 | %
|               |       |                         |      |       |      |  |      |       |  






|    |                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes source units, enclosures, signal processors, digital
    media products, and other products. No single product class in
    this group accounted for more than 10% of Rockfords sales
    in any of these years.



4



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##### Table of Contents





| |             
| | ------------
| | Mobile Audio





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Amplifiers. Power amplifiers increase the voltage and
    current coming from the source unit, providing more power than
    possible from a source unit alone. Power amplifiers are
    essential for a high performance mobile audio system;                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Speakers. Speakers accept a signal from a source unit or
    amplifier and translate it into sound. There are two categories
    of speakers: those eight inches or greater in diameter are
    considered subwoofers and are designed to play lower
    (bass) frequencies; and those less than eight inches in
    diameter are considered speakers and are designed for higher
    frequencies. Aftermarket speakers and subwoofers provide
    dramatically improved sound quality compared to most factory
    installed mobile audio systems and are often the single most
    important improvement consumers can make to their mobile audio
    systems;
|
| |  | Accessories. Accessories are the additional items
    required to install and use mobile audio products. Accessories
    include amplifier wiring kits, fuses, circuit breakers,
    interconnect cables, speaker cables, stiffening capacitors,
    battery clamps, connectors and adaptors, and
    carpet/fabric/surface applications that make Rockfords
    products compatible with factory-installed components and
    improve the performance of a mobile audio system; and                                                                                                                                                                           
|
| |  | Enclosures. Enclosures are used to enhance the bass sound
    of subwoofers and to position higher frequency speakers in
    locations that produce better sound. Enclosures include boxes
    for subwoofers and replacement kick panels for improved speaker
    placement.                                                                                                                                                                                                                                                                                                                                                                                   





|             |  |                                                                                                                                                                                                                                                                                                                                             
|------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Amplifiers:  |  |  Power amplifiers under the Punch Series, Power
    Series and Type RF lines, with rated power from 200 to 3,000
    watts, and minimum advertised prices from $200 to $2,000.
    Rockfords amplifiers include 1, 2 and 4 channel
    alternatives, giving consumers the ability to select an optimum
    configuration for their system;
|            
|Speakers:    |  |  Speakers and subwoofers under Rockfords Punch
    Series and Power Series lines, with minimum advertised prices
    from $60 to $1,800; and                                                                                                                                                                                              
|            
|Accessories: |  |  Accessories under Rockfords Connecting Punch
    line, including amplifier installation kits, interconnect and
    speaker cables, carpet/fabric/surface applications and
    stiffening capacitors.                                                                                                                                     





|             |  |                                                                                                                                                                    
|------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Amplifiers:  |  |  Power amplifier models under the Bolt, Strike and
    Storm lines, with rated power from 60 to 2,000 watts and minimum
    advertised prices from $100 to $1,000;
|            
|Speakers:    |  |  Speakers and subwoofers under Rockfords Bolt,
    Strike and Storm lines, with minimum advertised prices from $30
    to $600; and                              
|            
|Accessories: |  |  Accessories, including interconnect and speaker
    cables, stiffening capacitors, battery clamps and installation
    kits.                                     



5



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| |             
| | ------------
| | OEM Products





| |                                    
| | -----------------------------------
| | Home Theater and Professional Audio





Engineering And Product Development








Sales, Marketing And Distribution








| |   |                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Making regular calls to dealers and providing them with
    demonstration products, point-of-purchase displays and other
    marketing materials; 
|
| |  | Initiating targeted advertising in periodicals read by potential
    consumers;                                                                   
|
| |  | Training dealer sales and installation personnel;                                                                                                 
|
| |  | Regular interaction with industry press editors who are often
    the opinion makers for salespeople at the retail level as well
    as end users;

6



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##### Table of Contents





| |   |                                                                                            
| | - | -------------------------------------------------------------------------------------------
| |  | Participation in professional and consumer trade shows; and                                
|
| |  | Maintaining product and brand information for consumers and
    retailers on its web sites.

www.rockfordcorp.com, www.rockfordfosgate.com, www.lightningaudio.com,
www.installedge.com, www.fosgateaudionics.com, www.qlogic.ws,
www.hafler.com, www.nhtpro.com www.nhthifi.com,




| |                          
| | -------------------------
| | Mobile Audio Distribution

Domestic Distribution.








International Distribution.








| |                                                 
| | ------------------------------------------------
| | Home Theater and Professional Audio Distribution



7



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Competition






Mobile Audio Amplifiers:


Mobile Audio Speakers:


Mobile Audio Accessories:


Professional Audio Amplifiers and Speakers:


Home Theater:




Manufacturing








8



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##### Table of Contents







Intellectual Property




|                                  |  |                    |  |                     
|--------------------------------- |  | ------------------ |  | --------------------
| Rockford Fosgate®               |  |  InstallEdge.com® |  |  NHT®              
| Rockfords Diamond R
    logo |  |                    |  |  Now Hear This®    
| The Punch®                      |  |  Lightning Audio® |  |                     
| Type
    RFtm                   |  |  Striketm         |  |  Fosgate Audionics®
|                                  |  |  Stormtm          |  |                     
| Audio
    Innovationstm         |  |  Bolttm           |  |  Hafler®           
| Q-Logictm                       |  |  Dead
    Skintm  |  |                     

Significant Customer and Seasonality








Product Support






9



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Information Systems




Employees




Environmental Compliance









|        |           
|------- | ----------
|Item 2. | Properties



10



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##### Table of Contents





|                                                                            |       |          |                        |             |                |  |         |                  |  |  |                    |  | 
|--------------------------------------------------------------------------- | ----- | -------- | ---------------------- | ----------- | -------------- |  | ------- | ---------------- |  |  | ------------------ |  | 
|                                                                            |       |          |                        | Approximate |                |  |        
|Function                                                                    |       | Location |                        |             | Square Footage |  |         | Lease Expiration | 
|                                                                            |       |          |                        |             |                |  |         |                  | 
|Corporate headquarters and research and development                         |       |          | Tempe, Arizona         |             |                |  | 30,000  |                  |  |  | September 30, 2009 | 
|Information systems                                                         |       |          | Tempe, Arizona         |             |                |  | 15,000  |                  |  |  | December 31, 2005  | 
|Manufacturing and purchasing                                                |       |          | Tempe, Arizona         |             |                |  | 22,000  |                  |  |  | December 31, 2009  | 
|Warehousing, sales and customer service                                     |       |          | Tempe, Arizona         |             |                |  | 25,000  |                  |  |  | December 31, 2009  | 
|Warehousing                                                                 |       |          | Gilbert, Arizona       |             |                |  | 54,000  |                  |  |  | July 31, 2005      | 
|Manufacturing, research and development, purchasing and
    administration  |       |          | Grand Rapids, Michigan |             |                |  | 163,000 |                  |  |  | March 31, 2009     | 
|Manufacturing, research and development, warehousing and
    administration |       |          | Stillwater, Oklahoma   |             |                |  | 69,000  |                  |  |  | May 31, 2006       | 
|Warehousing                                                                 |       |          | Stillwater, Oklahoma   |             |                |  | 25,000  |                  |  |  | December 31, 2005  | 
|Sales, research and administration                                          |       |          | Benicia, California    |             |                |  | 18,000  |                  |  |  | October 31, 2008   | 
|Warehousing                                                                 |       |          | Singapore              |             |                |  | 21,000  |                  |  |  | January 31, 2006   | 
|Warehousing and sales                                                       |       |          | Bremen, Germany        |             |                |  | 20,000  |                  |  |  | December 31, 2011  | 
|                                                                            |       |          |                        |             |                |  |         |                  | 
|                                                                            | Total |          |                        |             |                |  |         | 462,000          |  |  |                    |  | 
|                                                                            |       |          |                        |             |                |  |         |                  | 






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings







11



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|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders






PART II







|        |                                                                                                                        
|------- | -----------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity and Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities



|                       |                    |      |   |      |     |  |   |      | 
|---------------------- | ------------------ | ---- | - | ---- | --- |  | - | ---- | 
|                       |                    | High |   |      | Low | 
|                       |                    |      |   |      |     | 
|For the quarter ended: |                    |      |   |      |     |  |   |     
|                       | December 31, 2004  |      | $ | 4.10 |     |  | $ | 1.88 | 
|                       | September 30, 2004 |      | $ | 5.00 |     |  | $ | 3.23 | 
|                       | June 30, 2004      |      | $ | 7.00 |     |  | $ | 4.10 | 
|                       | March 31, 2004     |      | $ | 7.06 |     |  | $ | 5.11 | 
|                       | December 31, 2003  |      | $ | 7.40 |     |  | $ | 5.08 | 
|                       | September 30, 2003 |      | $ | 7.72 |     |  | $ | 5.12 | 
|                       | June 30, 2003      |      | $ | 6.40 |     |  | $ | 5.36 | 
|                       | March 31, 2003     |      | $ | 6.28 |     |  | $ | 5.00 | 





Sales of Unregistered Securities






12



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Equity Compensation Plan Information


|                                                           |  |                            |           |  |                      |                      |      |                                     |  |  |        | 
|---------------------------------------------------------- |  | -------------------------- | --------- |  | -------------------- | -------------------- | ---- | ----------------------------------- |  |  | ------ | 
|                                                           |  |                            |           |  |                      | Number of Securities |     
|                                                           |  | Number of Securities to be |           |  | Weighted Average     |                      |      | Remaining Available for             | 
|                                                           |  | Issued Upon Exercise of    |           |  | Exercise Price of    |                      |      | Future Issuance Under Equity        | 
|                                                           |  | Outstanding Options,       |           |  | Outstanding Options, |                      |      | Compensation Plans (Excluding       | 
|                                                           |  | Warrants and Rights        |           |  | Warrants and Rights  |                      |      | Securities Reflected in Column (a)) | 
|Plan Category                                              |  | (a)                        |           |  | (b)                  |                      |      | (c)                                 | 
|                                                           |  |                            |           |  |                      |                      |      |                                     | 
|Equity compensation plans approved by security holders     |  |                            | 1,597,626 |  |                      | $                    | 5.03 |                                     |  |  | 73,973 | 
|Equity compensation plans not approved by security holders |  |                            | 59,073    |  |                      |                      | 3.73 |                                     |  |  |       | 
|                                                           |  |                            |           |  |                      |                      |      |                                     | 
|                                                           |  |                            | 1,656,699 |  |                      | $                    | 4.98 |                                     |  |  | 73,973 | 
|                                                           |  |                            |           |  |                      |                      |      |                                     | 

13



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |         |        |        |        |         |         |        |         |  
|---------------------------------------- | ------------------------------------------------------------ | --------------------------------------- | ----------------- | ------ | ------ | ----- | ------- | ------ | ------ | ----- | ------- | ------ | ------ | ----- | ------- | ------ | ------ | ------ | ------- | ------- | ------ | ------- | -
|                                         |                                                              | Years Ended December 31,                |                  
|                                         |                                                              |                                         |                  
|                                         |                                                              | 2000                                    |                   |        | 2001   |       |         | 2002   |        |       | 2003    |        |        | 2004  |        
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|                                         |                                                              | (In thousands, except per share data)   |                  
|Consolidated Statements of Operations:   |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |         |        |        |        |         |        
|Net sales                                |                                                              | $                                       | 145,571           |        |        | $     | 155,822 |        |        | $     | 162,805 |        |        | $     | 166,786 |        |        | $      | 169,555 |        
|Cost of goods sold                       |                                                              |                                         | 92,533            |        |        |       | 102,398 |        |        |       | 105,079 |        |        |       | 115,345 |        |        |        | 134,462 |        
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|                                         | Gross profit                                                 |                                         |                   | 53,038 |        |       |         | 53,424 |        |       |         | 57,726 |        |       |         | 51,441 |        |        |         | 35,093  |       
|Operating expenses:                      |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |         |        |        |        |         |        
|                                         | Sales and marketing                                          |                                         |                   | 23,640 |        |       |         | 24,393 |        |       |         | 27,268 |        |       |         | 31,330 |        |        |         | 29,844  |       
|                                         | General and administrative                                   |                                         |                   | 13,036 |        |       |         | 15,272 |        |       |         | 15,509 |        |       |         | 17,658 |        |        |         | 25,616  |       
|                                         | Research and development                                     |                                         |                   | 2,831  |        |       |         | 3,168  |        |       |         | 4,735  |        |       |         | 7,205  |        |        |         | 6,986   |       
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|                                         |                                                              | Total operating expenses                |                   |        | 39,507 |       |         |        | 42,833 |       |         |        | 47,512 |       |         |        | 56,193 |        |         |         | 62,446 |        
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|Operating income (loss)                  |                                                              |                                         | 13,531            |        |        |       | 10,591  |        |        |       | 10,214  |        |        |       | (4,752  | )      |        |        | (27,353 | )      
|Interest and other expense, net          |                                                              |                                         | 807               |        |        |       | 599     |        |        |       | 52      |        |        |       | 235     |        |        |        | 4,162   |        
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|                                         | Income (loss) from continuing operations before income taxes |                                         |                   | 12,724 |        |       |         | 9,992  |        |       |         | 10,162 |        |       |         | (4,987 | )      |        |         | (31,515 | )     
|Income tax expense (benefit)             |                                                              |                                         | 4,714             |        |        |       | 3,756   |        |        |       | 3,837   |        |        |       | (2,483  | )      |        |        | 4,597   |        
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|                                         | Income (loss) from continuing operations                     |                                         |                   | 8,010  |        |       |         | 6,236  |        |       |         | 6,325  |        |       |         | (2,504 | )      |        |         | (36,112 | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|Discontinued operations:                 |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |         |        |        |        |         |        
|                                         | Loss from disposal of discontinued operations, net of taxes  |                                         |                   |       |        |       |         |       |        |       |         |       |        |       |         |       |        |        |         | (474    | )     
|                                         | Loss from discontinued operations, net of taxes              |                                         |                   |       |        |       |         | (13    | )      |       |         | (45    | )      |       |         | (3,160 | )      |        |         | (2,269  | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|                                         |                                                              | Total loss from discontinued operations |                   |        |       |       |         |        | (13    | )     |         |        | (45    | )     |         |        | (3,160 | )      |         |         | (2,743 | )      
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|                                         |                                                              |                                         | Net income (loss) |        | $      | 8,010 |         |        | $      | 6,223 |         |        | $      | 6,280 |         |        | $      | (5,664 | )       |         | $      | (38,855 | )
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|Income (loss) per common share:          |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |         |        |        |        |         |        
|Income (loss) from continuing operations |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |         |        |        |        |         |        
|                                         | Basic                                                        |                                         | $                 | 1.17   |        |       | $       | 0.77   |        |       | $       | 0.74   |        |       | $       | (0.28  | )      |        | $       | (3.99   | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|                                         | Diluted                                                      |                                         | $                 | 1.00   |        |       | $       | 0.70   |        |       | $       | 0.68   |        |       | $       | (0.28  | )      |        | $       | (3.99   | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|Loss from discontinued operations        |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |         |        |        |        |         |        
|                                         | Basic                                                        |                                         | $                 | 0.00   |        |       | $       | 0.00   |        |       | $       | 0.00   |        |       | $       | (0.36  | )      |        | $       | (0.30   | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|                                         | Diluted                                                      |                                         | $                 | 0.00   |        |       | $       | 0.00   |        |       | $       | 0.00   |        |       | $       | (0.36  | )      |        | $       | (0.30   | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|Net income (loss):                       |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |         |        |        |        |         |        
|                                         | Basic                                                        |                                         | $                 | 1.17   |        |       | $       | 0.77   |        |       | $       | 0.74   |        |       | $       | (0.64  | )      |        | $       | (4.29   | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|                                         | Diluted                                                      |                                         | $                 | 1.00   |        |       | $       | 0.70   |        |       | $       | 0.68   |        |       | $       | (0.64  | )      |        | $       | (4.29   | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|Weighted average shares:                 |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |         |        |        |        |         |        
|                                         | Basic                                                        |                                         |                   | 6,864  |        |       |         | 8,109  |        |       |         | 8,540  |        |       |         | 8,866  |        |        |         | 9,066   |       
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        
|                                         | Diluted                                                      |                                         |                   | 8,009  |        |       |         | 8,913  |        |       |         | 9,301  |        |       |         | 8,866  |        |        |         | 9,066   |       
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |       |        

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|                                                                |  |                |        |  |      |   |        |      |  |   |         |  |  |      |         |  |  |   |        | 
|--------------------------------------------------------------- |  | -------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------- |  |  | ---- | ------- |  |  | - | ------ | 
|                                                                |  | December 31,   |       
|                                                                |  |                |       
|                                                                |  | 2000           |        |  | 2001 |   |        | 2002 |  |   | 2003    |  |  | 2004 |        
|                                                                |  |                |        |  |      |   |        |      |  |   |         |  |  |      |        
|                                                                |  | (In thousands) |       
|Consolidated Balance Sheet Data:                                |  |                |        |  |      |   |        |      |  |   |         |  |  |      |         |  |  |   |        | 
|Working capital                                                 |  | $              | 37,179 |  |      | $ | 45,913 |      |  | $ | 52,354  |  |  | $    | 38,138  |  |  | $ | 25,262 | 
|Total assets                                                    |  |                | 66,918 |  |      |   | 86,611 |      |  |   | 101,774 |  |  |      | 112,083 |  |  |   | 80,353 | 
|Current portion of long-term debt and capital lease obligations |  |                | 935    |  |      |   | 879    |      |  |   | 1,253   |  |  |      | 24,382  |  |  |   | 18,204 | 
|Long-term debt and capital lease obligations                    |  |                | 434    |  |      |   | 10,553 |      |  |   | 10,027  |  |  |      |        |  |  |   | 11,937 | 
|Total liabilities                                               |  |                | 20,586 |  |      |   | 33,654 |      |  |   | 35,295  |  |  |      | 48,393  |  |  |   | 57,768 | 
|Shareholders equity                                            |  |                | 46,332 |  |      |   | 52,957 |      |  |   | 65,546  |  |  |      | 63,207  |  |  |   | 22,585 | 






|        |                                                                                                     
|------- | ----------------------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Continuing Operations



Results of Operations




| |                      
| | ---------------------
| | Strategic Realignment









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| |         
| | --------
| | Overview







| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | expenses related to Rockfords strategic realignment;                                                 
|
| |  | the relaunch and initial production issues associated with the
    2004 Rockford Fosgate product line;
|
| |  | continuing distribution channel shifts; and                                                           
|
| |  | losses incurred by acquired businesses.                                                               





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|                             |                                                              |                                         |       |      |      |  |       |      |      |   |       |       |      |  
|---------------------------- | ------------------------------------------------------------ | --------------------------------------- | ----- | ---- | ---- |  | ----- | ---- | ---- | - | ----- | ----- | ---- | -
|                             |                                                              | Year Ended December 31                  |      
|                             |                                                              |                                         |      
|                             |                                                              | 2002                                    |       |      | 2003 |  |       | 2004 |     
|                             |                                                              |                                         |       |      |      |  |       |      |     
|Net sales                    |                                                              |                                         | 100.0 | %    |      |  | 100.0 | %    |      |   | 100.0 | %    
|Cost of goods sold           |                                                              |                                         | 64.5  |      |      |  | 69.2  |      |      |   | 79.3  |      
|                             |                                                              |                                         |       |      |      |  |       |      |     
|                             | Gross profit                                                 |                                         |       | 35.5 |      |  |       | 30.8 |      |   |       | 20.7  |     
|Operating expenses:          |                                                              |                                         |       |      |      |  |       |      |      |   |       |      
|                             | Sales and marketing                                          |                                         |       | 16.8 |      |  |       | 18.8 |      |   |       | 17.6  |     
|                             | General and administrative                                   |                                         |       | 9.5  |      |  |       | 10.6 |      |   |       | 15.1  |     
|                             | Research and development                                     |                                         |       | 2.9  |      |  |       | 4.3  |      |   |       | 4.1   |     
|                             |                                                              |                                         |       |      |      |  |       |      |     
|                             |                                                              | Total operating expenses                |       |      | 29.2 |  |       |      | 33.7 |   |       |       | 36.8 |  
|                             |                                                              |                                         |       |      |      |  |       |      |     
|Operating income (loss)      |                                                              |                                         | 6.3   |      |      |  | (2.9  | )    |      |   | (16.1 | )    
|Interest and other expense   |                                                              |                                         |      |      |      |  | 0.1   |      |      |   | 2.5   |      
|                             |                                                              |                                         |       |      |      |  |       |      |     
|                             | Income (loss) from continuing operations before income taxes |                                         |       | 6.3  |      |  |       | (3.0 | )    |   |       | (18.6 | )   
|Income tax expense (benefit) |                                                              |                                         | 2.4   |      |      |  | (1.5  | )    |      |   | 2.7   |      
|                             |                                                              |                                         |       |      |      |  |       |      |     
|                             | Income (loss) from continuing operations                     |                                         |       | 3.9  |      |  |       | (1.5 | )    |   |       | (21.3 | )   
|Discontinued operations:     |                                                              |                                         |       |      |      |  |       |      |      |   |       |      
|                             | Loss from disposal of discontinued operations                |                                         |       |     |      |  |       |     |      |   |       | (0.3  | )   
|                             | Loss from discontinued operations                            |                                         |       |     |      |  |       | (1.9 | )    |   |       | (1.3  | )   
|                             |                                                              |                                         |       |      |      |  |       |      |     
|                             |                                                              | Total loss from discontinued operations |       |      |     |  |       |      | (1.9 | ) |       |       | (1.6 | )
|                             |                                                              |                                         |       |      |      |  |       |      |     
|Net income (loss)            |                                                              |                                         | 3.9   | %    |      |  | (3.4  | )%   |      |   | (22.9 | )%   
|                             |                                                              |                                         |       |      |      |  |       |      |     

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| |                                 
| | --------------------------------
| | Geographic Distribution of Sales



|               |             |                         |         |         |      |   |         |         |  |   |         |         |  |  |      |       |  
|-------------- | ----------- | ----------------------- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- |  |  | ---- | ----- | -
|               |             | Year Ended December 31, |        
|               |             |                         |        
|               |             |                         |         | %       |     
|Region(1)      |             | 2002                    |         |         | 2003 |   |         | 2004    |  |   | 2004    |        
|               |             |                         |         |         |      |   |         |         |  |   |         |        
|               |             | (In thousands)          |        
|United States  |             | $                       | 136,873 |         |      | $ | 138,314 |         |  | $ | 140,764 |         |  |  | 83.0 | %    
|Other Americas |             |                         | 9,658   |         |      |   | 9,340   |         |  |   | 10,891  |         |  |  | 6.4  |      
|Europe         |             |                         | 10,248  |         |      |   | 13,709  |         |  |   | 12,564  |         |  |  | 7.4  |      
|Asia           |             |                         | 6,026   |         |      |   | 5,423   |         |  |   | 5,336   |         |  |  | 3.2  |      
|               |             |                         |         |         |      |   |         |         |  |   |         |        
|               | Total sales |                         | $       | 162,805 |      |   | $       | 166,786 |  |   | $       | 169,555 |  |  |      | 100.0 | %
|               |             |                         |         |         |      |   |         |         |  |   |         |        






|    |                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Sales are attributed to geographic regions based on the location
    of customers. No single foreign country accounted for greater
    than 10% of Rockfords sales.

In the following discussion, certain increases or decreases
may differ due to rounding.


Year Ended December 31, 2004 Compared to Year Ended
December 31, 2003


Net Sales.




Cost of Goods Sold.


Sales and Marketing Expenses.


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General and Administrative Expenses.


Research and Development Expenses.


Operating Loss From Continuing Operations.


Interest and Other Expense (Income), Net.


Income Tax Expense (Benefit).


Year Ended December 31, 2003 Compared to Year Ended
December 31, 2002


Net Sales.




Cost of Goods Sold.


Sales and Marketing Expenses.


General and Administrative Expenses.


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Research and Development Expenses.


Operating Income (Loss).


Interest and Other Expense (Income), Net.


Income Tax (Benefit) Expense.


Quarterly Results of Operations




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Consolidated Statement of Operations Data


|                                           |         |                                       |        |       |          |   |        |          |  |   |          |       |   |          |        |       |          |   |        |           |   |   |         |       |   |   |         |       |   |   |        |      | 
|------------------------------------------ | ------- | ------------------------------------- | ------ | ----- | -------- | - | ------ | -------- |  | - | -------- | ----- | - | -------- | ------ | ----- | -------- | - | ------ | --------- | - | - | ------- | ----- | - | - | ------- | ----- | - | - | ------ | ---- | 
|                                           |         | Three Months Ended                    |       
|                                           |         |                                       |       
|                                           |         | Mar. 31,                              |        |       | Jun. 30, |   |        | Sep. 30, |  |   | Dec. 31, |       |   | Mar. 31, |        |       | June 30, |   |        | Sept. 30, |   |   | Dec. 31 |      
|                                           |         | 2003                                  |        |       | 2003     |   |        | 2003     |  |   | 2003     |       |   | 2004     |        |       | 2004     |   |        | 2004      |   |   | 2004    |      
|                                           |         |                                       |        |       |          |   |        |          |  |   |          |       |   |          |        |       |          |   |        |           |   |   |         |      
|                                           |         | (In thousands, except per share data) |       
|Net sales                                  |         | $                                     | 38,497 |       |          | $ | 54,677 |          |  | $ | 38,534   |       |   | $        | 35,078 |       |          | $ | 38,722 |           |   | $ | 52,754  |       |   | $ | 41,351  |       |   | $ | 36,728 |     
|Gross profit                               |         |                                       | 13,079 |       |          |   | 19,629 |          |  |   | 11,182   |       |   |          | 7,551  |       |          |   | 7,607  |           |   |   | 14,254  |       |   |   | 4,897   |       |   |   | 8,335  |     
|Income (loss) from continuing operations   |         |                                       | 355    |       |          |   | 2,452  |          |  |   | (1,807   | )     |   |          | (3,504 | )     |          |   | (4,466 | )         |   |   | (1,819  | )     |   |   | (24,614 | )     |   |   | (5,213 | )   
|Income (loss) from discontinued operations |         |                                       | (1,302 | )     |          |   | (617   | )        |  |   | (925     | )     |   |          | (316   | )     |          |   | (935   | )         |   |   | (639    | )     |   |   | (6,777  | )     |   |   | 5,608  |     
|Net income (loss)                          |         | $                                     | (947   | )     |          | $ | 1,835  |          |  | $ | (2,732   | )     |   | $        | (3,820 | )     |          | $ | (5,401 | )         |   | $ | (2,458  | )     |   | $ | (31,391 | )     |   | $ | 395    |     
|                                           |         |                                       |        |       |          |   |        |          |  |   |          |       |   |          |        |       |          |   |        |           |   |   |         |      
|Net income (loss)(1)                       |         |                                       |        |       |          |   |        |          |  |   |          |       |   |          |        |       |          |   |        |           |   |   |         |       |   |   |         |       |   |   |        |     
|                                           | Basic   |                                       | $      | (0.11 | )        |   | $      | 0.21     |  |   | $        | (0.31 | ) |          | $      | (0.43 | )        |   | $      | (0.60     | ) |   | $       | (0.27 | ) |   | $       | (3.48 | ) |   | $      | 0.04 | 
|                                           |         |                                       |        |       |          |   |        |          |  |   |          |       |   |          |        |       |          |   |        |           |   |   |         |      
|                                           | Diluted |                                       | $      | (0.11 | )        |   | $      | 0.20     |  |   | $        | (0.31 | ) |          | $      | (0.43 | )        |   | $      | (0.60     | ) |   | $       | (0.27 | ) |   | $       | (3.48 | ) |   | $      | 0.04 | 
|                                           |         |                                       |        |       |          |   |        |          |  |   |          |       |   |          |        |       |          |   |        |           |   |   |         |      






|    |                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The sum of quarterly net income (loss) per common share does not
    equal annual net income (loss) per common share due to changes
    in the weighted average number of common shares outstanding.

Liquidity and Capital Resources










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| |   |                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | There were $0.4 million cash and cash equivalents at
    December 31, 2004 versus $0.5 million as at
    December 31, 2003. Due to the daily sweep of cash by
    Congress, described below, Rockford has reclassified the
    $0.4 million of cash and cash equivalents to net against
    its current debt balance.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Rockfords net accounts receivable were $33.2 million
    or 72 days sales outstanding (DSO) at
    December 31, 2004 compared to $34.0 million or 77.6
    DSO at December 31, 2003. The decrease in accounts
    receivable balances is due to improved DSO from collection
    efforts and offering early pay discounts;                                                                                                                       
|
| |  | Net inventory increased $0.7 million, from
    $33.3 million at December 31, 2003 to
    $34.0 million at December 31, 2004; and                                                                                                                                                                                                                                                                                                                  
|
| |  | Accounts payable increased $6.9 million, from
    $8.7 million at December 31, 2003 to
    $15.6 million at December 31, 2004. This increase was
    primarily due to increased inventory purchases and extended
    vendor payment terms. Rockford has obtained extended terms from
    most of its vendors to compensate for the longer payment terms
    expected of Rockford by its consumer electronics and mass
    merchandising customers.

Balance Sheet Classification of Borrowings
Outstanding under Revolving Credit Agreements That Include both
a Subjective Acceleration Clause and a
Lock-Box Arrangement




Off Balance Sheet Arrangements




Contractual Obligations as of December 31, 2004




|                                  |  |                        |        |           |        |   |       |           |           |   |           |  |  |         |        |  |  |  |   | 
|--------------------------------- |  | ---------------------- | ------ | --------- | ------ | - | ----- | --------- | --------- | - | --------- |  |  | ------- | ------ |  |  |  | - | 
|                                  |  | Payments Due by Period |       
|                                  |  |                        |       
|                                  |  |                        |        | Less Than |        |   |       |           | More Than |  
|Contractual Obligations           |  | Total                  |        |           | 1 Year |   |       | 13 Years |           |   | 35 Years |  |  | 5 Years |       
|                                  |  |                        |        |           |        |   |       |           |           |   |           |  |  |         |       
|                                  |  | (In thousands)         |       
|Current portion of long-term debt |  | $                      | 20,912 |           |        | $ | 3,942 |           |           | $ | 16,970    |  |  |         |       |  |  |  |  | 
|Long-term notes payable           |  | $                      | 15,032 |           |        |   | 563   |           |           |   | 1,688     |  |  | $       | 12,781 |  |  |  |  | 
|Operating leases                  |  | $                      | 7,348  |           |        | $ | 2,547 |           |           | $ | 3,047     |  |  | $       | 1,754  |  |  |  |  | 



Critical Accounting Policies and Estimates




23



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Revenue Recognition. Revenue
Recognition in Financial Statements.




| |   |                                                        
| | - | -------------------------------------------------------
| |  | Persuasive evidence of an arrangement exists;          
|
| |  | Ownership has transferred to the customer;             
|
| |  | The price to the customer is fixed or determinable; and
|
| |  | Collectibility is reasonably assured.                  





Intangible Assets. Business Combinations Goodwill and Other Intangible
Assets.






| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | Significant underperformance relative to expected historical or
    projected future operating results;      
|
| |  | Significant changes in the manner of use of the acquired assets
    or the strategy for the overall business;
|
| |  | Market capitalization relative to net book value; and                                                        
|
| |  | Significant negative industry or economic trends.                                                            



Allowance for Doubtful Accounts.


24



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##### Table of Contents





Inventory.


Warranty.


Income taxes.


Inflation.




| |                         
| | ------------------------
| | New Accounting Standards

Share-Based Payment, Accounting for
Stock Issued to Employees,


Inventory Costs, an amendment of ARB 43, Chapter 4.


Exchanges of
Non-monetary Assets, an amendment of APB No. 29, Accounting
for Non-monetary Transactions.


25



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|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk









26



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##### Table of Contents








|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE


|                                                                                                             |  |  |    | 
|------------------------------------------------------------------------------------------------------------ |  |  | -- | 
|Consolidated Financial Statements of Rockford Corporation and
    Subsidiaries                               |  |  |    | 
|Report of Independent Registered Public
    Accounting Firm                                                  |  |  | 28 | 
|Consolidated Balance Sheets as at
    December 31, 2003 and 2004                                             |  |  | 29 | 
|Consolidated Statements of Operations for
    the years ended December 31, 2002, 2003 and 2004               |  |  | 30 | 
|Consolidated Statements of
    Shareholders Equity for the years ended December 31,
    2002, 2003 and 2004 |  |  | 31 | 
|Consolidated Statements of Cash Flows for
    the years ended December 31, 2002, 2003 and 2004               |  |  | 32 | 
|Notes to Consolidated Financial
    Statements                                                               |  |  | 33 | 
|Financial Statement Schedule:
    Schedule II  Valuation and Qualifying
    Accounts                        |  |  | 53 | 

27



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##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














| |                      
| | ---------------------
| | /s/ Ernst & Young LLP





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ROCKFORD CORPORATION AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS


(In thousands, except share data)


|                                                                         |                                                                                                           |                                                                                                |         |        |      |   |        |         |    | 
|------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------- | ------ | ---- | - | ------ | ------- | -- | 
|                                                                         |                                                                                                           | December 31,                                                                                   |        
|                                                                         |                                                                                                           |                                                                                                |        
|                                                                         |                                                                                                           | 2003                                                                                           |         |        | 2004 |  
|                                                                         |                                                                                                           |                                                                                                |         |        |      |  
|ASSETS                                                                  
|Current assets:                                                          |                                                                                                           |                                                                                                |         |        |      |   |        |        
|                                                                         | Cash and cash equivalents                                                                                 |                                                                                                | $       | 475    |      |   | $      |        |   
|                                                                         | Accounts receivable, less allowances of $2,901 and $3,504 at
    December 31, 2003 and 2004, respectively |                                                                                                |         | 33,970 |      |   |        | 33,195  |   
|                                                                         | Inventories                                                                                               |                                                                                                |         | 33,289 |      |   |        | 34,005  |   
|                                                                         | Deferred income taxes                                                                                     |                                                                                                |         | 5,965  |      |   |        |        |   
|                                                                         | Income taxes receivable                                                                                   |                                                                                                |         | 2,833  |      |   |        | 940     |   
|                                                                         | Prepaid expenses and other                                                                                |                                                                                                |         | 3,711  |      |   |        | 2,953   |   
|                                                                         | Current assets of discontinued operations                                                                 |                                                                                                |         | 6,288  |      |   |        |        |   
|                                                                         |                                                                                                           |                                                                                                |         |        |      |  
|Total current assets                                                     |                                                                                                           |                                                                                                | 86,531  |        |      |   | 71,093 |        
|Property and equipment, net                                              |                                                                                                           |                                                                                                | 9,808   |        |      |   | 6,407  |        
|Goodwill, net                                                            |                                                                                                           |                                                                                                | 5,619   |        |      |   |       |        
|Other assets                                                             |                                                                                                           |                                                                                                | 1,590   |        |      |   | 2,853  |        
|Long term assets of discontinued operations                              |                                                                                                           |                                                                                                | 8,535   |        |      |   |       |        
|                                                                         |                                                                                                           |                                                                                                |         |        |      |  
|Total assets                                                             |                                                                                                           | $                                                                                              | 112,083 |        |      | $ | 80,353 |        
|                                                                         |                                                                                                           |                                                                                                |         |        |      |  
|                                                                        
|LIABILITIES AND SHAREHOLDERS EQUITY                                    
|Current liabilities:                                                     |                                                                                                           |                                                                                                |         |        |      |   |        |        
|                                                                         | Accounts payable                                                                                          |                                                                                                | $       | 8,721  |      |   | $      | 15,594  |   
|                                                                         | Accrued salaries and incentives                                                                           |                                                                                                |         | 1,913  |      |   |        | 1,438   |   
|                                                                         | Accrued warranty                                                                                          |                                                                                                |         | 4,776  |      |   |        | 2,902   |   
|                                                                         | Other accrued expenses                                                                                    |                                                                                                |         | 5,578  |      |   |        | 7,693   |   
|                                                                         | Current portion of long-term debt and capital leases                                                      |                                                                                                |         | 24,382 |      |   |        | 18,204  |   
|                                                                         | Current liabilities of discontinued operations                                                            |                                                                                                |         | 3,023  |      |   |        |        |   
|                                                                         |                                                                                                           |                                                                                                |         |        |      |  
|Total current liabilities                                                |                                                                                                           |                                                                                                | 48,393  |        |      |   | 45,831 |        
|Notes payable, less unaccreted discount of $563 at
    December 31, 2004 |                                                                                                           |                                                                                                |        |        |      |   | 11,937 |        
|                                                                         |                                                                                                           |                                                                                                |         |        |      |  
|Total liabilities                                                        |                                                                                                           |                                                                                                | 48,393  |        |      |   | 57,768 |        
|Minority interest of discontinued operations                             |                                                                                                           |                                                                                                | 483     |        |      |   |       |        
|Shareholders equity                                                     |                                                                                                           |                                                                                                |         |        |      |   |        |        
|                                                                         | Common stock, $.01 par value. Authorized shares 
    40,000,000                                          |                                                                                                |         |        |      |   |        |         |   
|                                                                         |                                                                                                           | Issued shares  9,010,663 and 9,204,992 shares at
    December 31, 2003 and 2004, respectively |         |        | 90   |   |        |         | 92 | 
|                                                                         | Additional paid-in capital                                                                                |                                                                                                |         | 36,228 |      |   |        | 37,329  |   
|                                                                         | Retained earnings (deficit)                                                                               |                                                                                                |         | 23,534 |      |   |        | (15,321 | ) 
|                                                                         | Accumulated other comprehensive income                                                                    |                                                                                                |         | 3,355  |      |   |        | 485     |   
|                                                                         |                                                                                                           |                                                                                                |         |        |      |  
|Total shareholders equity                                               |                                                                                                           |                                                                                                | 63,207  |        |      |   | 22,585 |        
|                                                                         |                                                                                                           |                                                                                                |         |        |      |  
|Total liabilities and shareholders equity                               |                                                                                                           | $                                                                                              | 112,083 |        |      | $ | 80,353 |        
|                                                                         |                                                                                                           |                                                                                                |         |        |      |  



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ROCKFORD CORPORATION AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF OPERATIONS


(In thousands, except per share data)


|                                         |                                                                         |                                         |         |        |      |   |         |        |        |   |         |         |        |  
|---------------------------------------- | ----------------------------------------------------------------------- | --------------------------------------- | ------- | ------ | ---- | - | ------- | ------ | ------ | - | ------- | ------- | ------ | -
|                                         |                                                                         | Year Ended December 31,                 |        
|                                         |                                                                         |                                         |        
|                                         |                                                                         | 2002                                    |         |        | 2003 |   |         | 2004   |       
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|Net sales                                |                                                                         | $                                       | 162,805 |        |      | $ | 166,786 |        |        | $ | 169,555 |        
|Cost of goods sold                       |                                                                         |                                         | 105,079 |        |      |   | 115,345 |        |        |   | 134,462 |        
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|                                         | Gross profit                                                            |                                         |         | 57,726 |      |   |         | 51,441 |        |   |         | 35,093  |       
|Operating expenses:                      |                                                                         |                                         |         |        |      |   |         |        |        |   |         |        
|                                         | Sales and marketing                                                     |                                         |         | 27,268 |      |   |         | 31,330 |        |   |         | 29,844  |       
|                                         | General and administrative                                              |                                         |         | 15,509 |      |   |         | 17,658 |        |   |         | 25,616  |       
|                                         | Research and development                                                |                                         |         | 4,735  |      |   |         | 7,205  |        |   |         | 6,986   |       
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|Total operating expenses                 |                                                                         |                                         | 47,512  |        |      |   | 56,193  |        |        |   | 62,446  |        
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|                                         | Operating income (loss)                                                 |                                         |         | 10,214 |      |   |         | (4,752 | )      |   |         | (27,353 | )     
|Interest expense                         |                                                                         |                                         | 414     |        |      |   | 855     |        |        |   | 2,090   |        
|Other expense (income)                   |                                                                         |                                         | (362    | )      |      |   | (620    | )      |        |   | 2,072   |        
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|                                         | Income (loss) from continuing operations before income taxes            |                                         |         | 10,162 |      |   |         | (4,987 | )      |   |         | (31,515 | )     
|Income tax expense (benefit)             |                                                                         |                                         | 3,837   |        |      |   | (2,483  | )      |        |   | 4,597   |        
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|                                         | Income (loss) from continuing operations                                |                                         |         | 6,325  |      |   |         | (2,504 | )      |   |         | (36,112 | )     
|Discontinued operations:                 |                                                                         |                                         |         |        |      |   |         |        |        |   |         |        
|                                         | Loss from disposal of discontinued operations, net of taxes of
    $596 |                                         |         |       |      |   |         |       |        |   |         | (474    | )     
|                                         | Loss from discontinued operations, net of taxes                         |                                         |         | (45    | )    |   |         | (3,160 | )      |   |         | (2,269  | )     
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|                                         |                                                                         | Total loss from discontinued operations |         |        | (45  | ) |         |        | (3,160 | ) |         |         | (2,743 | )
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|Net income (loss)                        |                                                                         | $                                       | 6,280   |        |      | $ | (5,664  | )      |        | $ | (38,855 | )      
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|Income (loss) per common share:          |                                                                         |                                         |         |        |      |   |         |        |        |   |         |        
|Income (loss) from continuing operations |                                                                         |                                         |         |        |      |   |         |        |        |   |         |        
|                                         | Basic                                                                   |                                         | $       | 0.74   |      |   | $       | (0.28  | )      |   | $       | (3.99   | )     
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|                                         | Diluted                                                                 |                                         | $       | 0.68   |      |   | $       | (0.28  | )      |   | $       | (3.99   | )     
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|Loss from discontinued operations        |                                                                         |                                         |         |        |      |   |         |        |        |   |         |        
|                                         | Basic                                                                   |                                         | $       | 0.00   |      |   | $       | (0.36  | )      |   | $       | (0.30   | )     
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|                                         | Diluted                                                                 |                                         | $       | 0.00   |      |   | $       | (0.36  | )      |   | $       | (0.30   | )     
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|Net income (loss)                        |                                                                         |                                         |         |        |      |   |         |        |        |   |         |        
|                                         | Basic                                                                   |                                         | $       | 0.74   |      |   | $       | (0.64  | )      |   | $       | (4.29   | )     
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|                                         | Diluted                                                                 |                                         | $       | 0.68   |      |   | $       | (0.64  | )      |   | $       | (4.29   | )     
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|Weighted average shares:                 |                                                                         |                                         |         |        |      |   |         |        |        |   |         |        
|                                         | Basic                                                                   |                                         |         | 8,540  |      |   |         | 8,866  |        |   |         | 9,066   |       
|                                         |                                                                         |                                         |         |        |      |   |         |        |       
|                                         | Diluted                                                                 |                                         |         | 9,301  |      |   |         | 8,866  |        |   |         | 9,066   |       
|                                         |                                                                         |                                         |         |        |      |   |         |        |       



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ROCKFORD CORPORATION AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY


(In thousands)


|                             |                                                         |                      |       |     |            |   |    |             |   |   |               |       |   |               |         |         |       |   |       |        |   |   |        |         |         |  
|---------------------------- | ------------------------------------------------------- | -------------------- | ----- | --- | ---------- | - | -- | ----------- | - | - | ------------- | ----- | - | ------------- | ------- | ------- | ----- | - | ----- | ------ | - | - | ------ | ------- | ------- | -
|                             |                                                         |                      |       |     |            |   |    | Accumulated |   |   |              
|                             |                                                         | Common Stock         |       |     | Additional |   |    | Retained    |   |   | Other         |       |   |              
|                             |                                                         |                      |       |     | Paid-In    |   |    | Earnings    |   |   | Comprehensive |       |   |              
|                             |                                                         | Shares               |       |     | Amount     |   |    | Capital     |   |   | (Deficit)     |       |   | Income (Loss) |         |         | Total |  
|                             |                                                         |                      |       |     |            |   |    |             |   |   |               |       |   |               |         |         |       |  
|Balance at December 31, 2001 |                                                         |                      | 8,197 |     |            | $ | 82 |             |   | $ | 30,341        |       |   | $             | 22,918  |         |       | $ | (384  | )      |   | $ | 52,957 |        
|                             | Currency translation                                    |                      |       |    |            |   |    |            |   |   |               |      |   |               |         |        |       |   |       | 1,514  |   |   |        | 1,514   |        
|                             | Net income                                              |                      |       |    |            |   |    |            |   |   |               |      |   |               |         | 6,280   |       |   |       |       |   |   |        | 6,280   |        
|                             |                                                         |                      |       |     |            |   |    |             |   |   |               |       |   |               |         |         |       |  
|                             |                                                         | Comprehensive income |       |     |           |   |    |             |  |   |               |       |  |               |         |         |      |   |       |        |  |   |        |         | 7,794   |  
|                             | Exercise of stock options                               |                      |       | 500 |            |   |    | 5           |   |   |               | 1,039 |   |               |         |        |       |   |       |       |   |   |        | 1,044   |        
|                             | Tax benefit related to non-qualified option exercises   |                      |       |    |            |   |    |            |   |   |               | 3,453 |   |               |         |        |       |   |       |       |   |   |        | 3,453   |        
|                             | Issuance of shares for employee stock purchase plan     |                      |       | 50  |            |   |    |            |   |   |               | 298   |   |               |         |        |       |   |       |       |   |   |        | 298     |        
|                             |                                                         |                      |       |     |            |   |    |             |   |   |               |       |   |               |         |         |       |  
|Balance at December 31, 2002 |                                                         |                      | 8,747 |     |            |   | 87 |             |   |   | 35,131        |       |   |               | 29,198  |         |       |   | 1,130 |        |   |   | 65,546 |        
|                             | Currency translation                                    |                      |       |    |            |   |    |            |   |   |               |      |   |               |         |        |       |   |       | 2,225  |   |   |        | 2,225   |        
|                             | Net loss                                                |                      |       |    |            |   |    |            |   |   |               |      |   |               |         | (5,664  | )     |   |       |       |   |   |        | (5,664  | )      
|                             |                                                         |                      |       |     |            |   |    |             |   |   |               |       |   |               |         |         |       |  
|                             |                                                         | Comprehensive loss   |       |     |           |   |    |             |  |   |               |       |  |               |         |         |      |   |       |        |  |   |        |         | (3,439  | )
|                             | Exercise of stock options                               |                      |       | 174 |            |   |    | 2           |   |   |               | 575   |   |               |         |        |       |   |       |       |   |   |        | 577     |        
|                             | Tax benefit related to non-qualified option exercises   |                      |       |    |            |   |    |            |   |   |               | 126   |   |               |         |        |       |   |       |       |   |   |        | 126     |        
|                             | Issuance of shares for employee stock purchase plan     |                      |       | 90  |            |   |    | 1           |   |   |               | 396   |   |               |         |        |       |   |       |       |   |   |        | 397     |        
|                             |                                                         |                      |       |     |            |   |    |             |   |   |               |       |   |               |         |         |       |  
|Balance at December 31, 2003 |                                                         |                      | 9,011 |     |            |   | 90 |             |   |   | 36,228        |       |   |               | 23,534  |         |       |   | 3,355 |        |   |   | 63,207 |        
|                             | Currency translation                                    |                      |       |    |            |   |    |            |   |   |               |      |   |               |         |        |       |   |       | (2,870 | ) |   |        | (2,870  | )      
|                             | Net loss                                                |                      |       |    |            |   |    |            |   |   |               |      |   |               |         | (38,855 | )     |   |       |       |   |   |        | (38,855 | )      
|                             |                                                         |                      |       |     |            |   |    |             |   |   |               |       |   |               |         |         |       |  
|                             |                                                         | Comprehensive loss   |       |     |           |   |    |             |  |   |               |       |  |               |         |         |      |   |       |        |  |   |        |         | (41,725 | )
|                             | Exercise of stock options, including tax benefit of $16 |                      |       | 151 |            |   |    | 2           |   |   |               | 300   |   |               |         |        |       |   |       |       |   |   |        | 302     |        
|                             | Issuance of shares for employee stock purchase plan     |                      |       | 43  |            |   |    |            |   |   |               | 152   |   |               |         |        |       |   |       |       |   |   |        | 152     |        
|                             | Warrants issued with convertible notes                  |                      |       |    |            |   |    |            |   |   |               | 649   |   |               |         |        |       |   |       |       |   |   |        | 649     |        
|                             |                                                         |                      |       |     |            |   |    |             |   |   |               |       |   |               |         |         |       |  
|Balance at December 31, 2004 |                                                         |                      | 9,205 |     |            | $ | 92 |             |   | $ | 37,329        |       |   | $             | (15,321 | )       |       | $ | 485   |        |   | $ | 22,585 |        
|                             |                                                         |                      |       |     |            |   |    |             |   |   |               |       |   |               |         |         |       |  



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ROCKFORD CORPORATION AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                                                                      |                                               |                                   |                                                                                     |       |        |         |        |        |        |         |         |        |        |        |  
|------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------- | --------------------------------- | ----------------------------------------------------------------------------------- | ----- | ------ | ------- | ------ | ------ | ------ | ------- | ------- | ------ | ------ | ------ | -
|                                                                                                                                      |                                               | Year Ended December 31,           |                                                                                    
|                                                                                                                                      |                                               |                                   |                                                                                    
|                                                                                                                                      |                                               | 2002                              |                                                                                     |       | 2003   |         |        | 2004   |       
|                                                                                                                                      |                                               |                                   |                                                                                     |       |        |         |        |        |       
|                                                                                                                                      |                                               | (In thousands)                    |                                                                                    
|Cash flow from continuing operating activities:                                                                                       |                                               |                                   |                                                                                     |       |        |         |        |        |        |         |         |       
|Net income (loss) from continuing operations                                                                                          |                                               | $                                 | 6,325                                                                               |       |        | $       | (2,504 | )      |        | $       | (36,112 | )     
|Adjustments to reconcile net income (loss) from continuing
    operations to net cash provided by (used in) operating
    activities: |                                               |                                   |                                                                                     |       |        |         |        |        |        |         |         |       
|                                                                                                                                      | Depreciation and amortization                 |                                   |                                                                                     | 4,207 |        |         |        | 4,442  |        |         |         | 4,804  |       
|                                                                                                                                      | Loss from discontinued operations             |                                   |                                                                                     | (45   | )      |         |        | (3,160 | )      |         |         | (2,743 | )     
|                                                                                                                                      | (Gain) loss on sale of property and equipment |                                   |                                                                                     | (10   | )      |         |        | 5      |        |         |         | 1,343  |       
|                                                                                                                                      | Deferred income taxes                         |                                   |                                                                                     | (90   | )      |         |        | (437   | )      |         |         | 7,131  |       
|                                                                                                                                      | Impairment of goodwill                        |                                   |                                                                                     |      |        |         |        |       |        |         |         | 5,619  |       
|                                                                                                                                      | Provision for doubtful accounts               |                                   |                                                                                     | 849   |        |         |        | 697    |        |         |         | 1,846  |       
|                                                                                                                                      | Provision for inventory                       |                                   |                                                                                     | 1,487 |        |         |        | 1,805  |        |         |         | 8,773  |       
|                                                                                                                                      | Changes in operating assets and liabilities:  |                                   |                                                                                     |       |        |         |        |        |        |         |         |        |       
|                                                                                                                                      |                                               | Accounts receivable               |                                                                                     |       | (4,537 | )       |        |        | (3,052 | )       |         |        | (1,118 | )     
|                                                                                                                                      |                                               | Inventories                       |                                                                                     |       | (2,242 | )       |        |        | (7,566 | )       |         |        | (8,868 | )     
|                                                                                                                                      |                                               | Prepaid expenses and other        |                                                                                     |       | 42     |         |        |        | 198    |         |         |        | (108   | )     
|                                                                                                                                      |                                               | Accounts payable                  |                                                                                     |       | 177    |         |        |        | (954   | )       |         |        | 7,686  |       
|                                                                                                                                      |                                               | Accrued salaries and incentives   |                                                                                     |       | (100   | )       |        |        | 131    |         |         |        | (238   | )     
|                                                                                                                                      |                                               | Accrued warranty                  |                                                                                     |       | (279   | )       |        |        | 286    |         |         |        | (1,876 | )     
|                                                                                                                                      |                                               | Income taxes payable (receivable) |                                                                                     |       | 947    |         |        |        | (1,122 | )       |         |        | 2,138  |       
|                                                                                                                                      |                                               | Other accrued expenses            |                                                                                     |       | 554    |         |        |        | (322   | )       |         |        | 5,335  |       
|                                                                                                                                      |                                               |                                   |                                                                                     |       |        |         |        |        |       
|                                                                                                                                      |                                               |                                   | Net cash provided by (used in) operating activities                                 |       |        | 7,285   |        |        |        | (11,553 | )       |        |        | (6,388 | )
|Cash flow from investing activities:                                                                                                  |                                               |                                   |                                                                                     |       |        |         |        |        |        |         |         |       
|Purchases of property and equipment                                                                                                   |                                               |                                   | (5,437                                                                              | )     |        |         | (4,450 | )      |        |         | (2,870  | )     
|Proceeds from sale of property and equipment                                                                                          |                                               |                                   | 10                                                                                  |       |        |         | 18     |        |        |         | 18      |       
|Sale (acquisitions) of business, net of cash acquired                                                                                 |                                               |                                   | (4,076                                                                              | )     |        |         | 357    |        |        |         | 6,418   |       
|Increase in other assets                                                                                                              |                                               |                                   | (640                                                                                | )     |        |         | (2,672 | )      |        |         | (1,603  | )     
|                                                                                                                                      |                                               |                                   |                                                                                     |       |        |         |        |        |       
|                                                                                                                                      |                                               |                                   | Net cash (used in) provided by investing activities                                 |       |        | (10,143 | )      |        |        | (6,747  | )       |        |        | 1,963  |  
|Cash flow from financing activities:                                                                                                  |                                               |                                   |                                                                                     |       |        |         |        |        |        |         |         |       
|Net proceeds from notes payable and long-term debt                                                                                    |                                               |                                   | 1,723                                                                               |       |        |         | 14,172 |        |        |         | 12,500  |       
|Payments on notes payable and long-term debt                                                                                          |                                               |                                   | (1,109                                                                              | )     |        |         | (22    | )      |        |         | (7,396  | )     
|Payments on capital lease obligations                                                                                                 |                                               |                                   | (766                                                                                | )     |        |         | (1,047 | )      |        |         | (1,432  | )     
|Proceeds from employee stock purchase plan                                                                                            |                                               |                                   | 298                                                                                 |       |        |         | 298    |        |        |         | 152     |       
|Proceeds from exercise of stock options                                                                                               |                                               |                                   | 1,044                                                                               |       |        |         | 802    |        |        |         | 302     |       
|                                                                                                                                      |                                               |                                   |                                                                                     |       |        |         |        |        |       
|                                                                                                                                      |                                               |                                   | Net cash provided by financing activities                                           |       |        | 1,190   |        |        |        | 14,203  |         |        |        | 4,126  |  
|Effect of exchange rate changes on cash                                                                                               |                                               |                                   | 350                                                                                 |       |        |         | 1,409  |        |        |         | (2,870  | )     
|                                                                                                                                      |                                               |                                   | Net (decrease) increase in cash and cash equivalents from
    continuing operations |       |        | (1,318  | )      |        |        | (2,688  | )       |        |        | (3,169 | )
|                                                                                                                                      |                                               |                                   | Net increase (decrease) in cash flow from discontinued operations                   |       |        | 45      |        |        |        | 3,008   |         |        |        | 2,694  |  
|Cash and cash equivalents at beginning of year                                                                                        |                                               |                                   | 1,428                                                                               |       |        |         | 155    |        |        |         | 475     |       
|                                                                                                                                      |                                               |                                   |                                                                                     |       |        |         |        |        |       
|Cash and cash equivalents at end of year                                                                                              |                                               | $                                 | 155                                                                                 |       |        | $       | 475    |        |        | $       |        |       
|                                                                                                                                      |                                               |                                   |                                                                                     |       |        |         |        |        |       



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ROCKFORD CORPORATION AND SUBSIDIARIES





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                    
|-- | -------------------
|1. | Accounting Policies



| |                                         
| | ----------------------------------------
| | Organization and Description of Business







| |                      
| | ---------------------
| | Basis of Presentation









| |                            
| | ---------------------------
| | Principles of Consolidation





| |                          
| | -------------------------
| | Cash and Cash Equivalents



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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments





| |                                 
| | --------------------------------
| | Derivative Financial Instruments

Accounting for
Derivative Instruments and Hedging Activities,




| |                    
| | -------------------
| | Revenue Recognition





| |   |                                                        
| | - | -------------------------------------------------------
| |  | Persuasive evidence of an arrangement exists;          
|
| |  | Ownership has transferred to the customer;             
|
| |  | The price to the customer is fixed or determinable; and
|
| |  | Collectibility is reasonably assured.                  





| |                            
| | ---------------------------
| | Shipping and Handling Costs





| |                                                            
| | -----------------------------------------------------------
| | Accounts Receivable and Allowance for Doubtful
    Accounts





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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |            
| | -----------
| | Inventories







| |                       
| | ----------------------
| | Property and Equipment

Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use.




| |                                
| | -------------------------------
| | Impairment of Long-Lived Assets

Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of




| |         
| | --------
| | Goodwill

Goodwill. Business Combinations Goodwill and Other Intangible
Assets.




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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | Significant underperformance relative to expected historical or
    projected future operating results;      
|
| |  | Significant changes in the manner of use of the acquired assets
    or the strategy for the overall business;
|
| |  | Market capitalization relative to net book value; and                                                        
|
| |  | Significant negative industry or economic trends.                                                            





| |            
| | -----------
| | Advertising





| |             
| | ------------
| | Income Taxes

Accounting for Income Taxes.








| |                               
| | ------------------------------
| | Income (Loss) per Common Share

Earnings Per Share.


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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                     
| | --------------------
| | Significant Customer





| |                             
| | ----------------------------
| | Foreign Currency Translation

Foreign Currency Translation.




| |                         
| | ------------------------
| | Stock Based Compensation

Accounting for Stock
Issued to Employees Accounting for Stock-Based
Compensation


Accounting for Stock-Based
Compensation


|                                        |         |                                |       |      |      |   |        |       |   |   |         |       |  
|--------------------------------------- | ------- | ------------------------------ | ----- | ---- | ---- | - | ------ | ----- | - | - | ------- | ----- | -
|                                        |         | Year Ended December 31,        |      
|                                        |         |                                |      
|                                        |         | 2002                           |       |      | 2003 |   |        | 2004  |  
|                                        |         |                                |       |      |      |   |        |       |  
|                                        |         | (In thousands except per share |      
|                                        |         | data)                          |      
|Net income (loss) as reported           |         | $                              | 6,280 |      |      | $ | (5,664 | )     |   | $ | (38,855 | )    
|Proforma SFAS No. 123 expense           |         | $                              | (327  | )    |      | $ | (402   | )     |   | $ | (378    | )    
|                                        |         |                                |       |      |      |   |        |       |  
|Proforma net income (loss)              |         | $                              | 5,953 |      |      | $ | (6,066 | )     |   | $ | (39,233 | )    
|                                        |         |                                |       |      |      |   |        |       |  
|Proforma income (loss) per common share |         |                                |       |      |      |   |        |       |   |   |         |      
|                                        | Basic   |                                | $     | 0.70 |      |   | $      | (0.68 | ) |   | $       | (4.33 | )
|                                        |         |                                |       |      |      |   |        |       |  
|                                        | Diluted |                                | $     | 0.64 |      |   | $      | (0.68 | ) |   | $       | (4.33 | )
|                                        |         |                                |       |      |      |   |        |       |  





| |                 
| | ----------------
| | Use of Estimates



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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                  
| | -----------------
| | Reclassifications





| |                              
| | -----------------------------
| | New Accounting Pronouncements

Share-Based Payment Accounting for Stock Issued to Employees


Inventory Costs, an amendment of ARB 43, Chapter 4.


Exchanges of
Non-monetary Assets, an amendment of APB No. 29, Accounting
for Non-monetary Transactions.




|   |                              
|-- | -----------------------------
|2. | Acquisitions and Divestitures

SimpleDevices, Inc.




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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                         |  |                |      |   |      |   |       |      |  |   |        |  
|---------------------------------------- |  | -------------- | ---- | - | ---- | - | ----- | ---- |  | - | ------ | -
|                                         |  | December 31,   |     
|                                         |  |                |     
|                                         |  | 2002           |      |   | 2003 |   |       | 2004 | 
|                                         |  |                |      |   |      |   |       |      | 
|                                         |  | (In thousands) |     
|Revenues                                 |  | $              | 513  |   |      | $ | 351   |      |  | $ | 322    |  
|Cost of sales                            |  |                | 82   |   |      |   | 465   |      |  |   | 234    |  
|Operating expenses                       |  |                | 595  |   |      |   | 1,113 |      |  |   | 1,459  |  
|Interest and other expense (income), net |  |                |     |   |      |   | (12   | )    |  |   | 39     |  
|Income tax expense                       |  |                |     |   |      |   | 5     |      |  |   |       |  
|Minority interest                        |  |                | (40  | ) |      |   | (450  | )    |  |   | (345   | )
|                                         |  |                |      |   |      |   |       |      | 
|Net loss                                 |  | $              | (124 | ) |      | $ | (770  | )    |  | $ | (1,065 | )
|                                         |  |                |      |   |      |   |       |      | 

MB Quart.




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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                         |  |                |       |   |      |   |        |      |  |   |        |  
|---------------------------------------- |  | -------------- | ----- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                         |  | December 31,   |      
|                                         |  |                |      
|                                         |  | 2002           |       |   | 2003 |   |        | 2004 | 
|                                         |  |                |       |   |      |   |        |      | 
|                                         |  | (In thousands) |      
|Revenues                                 |  | $              | 6,454 |   |      | $ | 5,330  |      |  | $ | 3,985  |  
|Cost of sales                            |  |                | 2,584 |   |      |   | 3,159  |      |  |   | 2,260  |  
|Operating expenses                       |  |                | 3,851 |   |      |   | 5,089  |      |  |   | 2,915  |  
|Interest and other expense (income), net |  |                | (126  | ) |      |   | 44     |      |  |   | 19     |  
|Income tax (benefit) expense             |  |                | 66    |   |      |   | (572   | )    |  |   | (5     | )
|                                         |  |                |       |   |      |   |        |      | 
|Net income (loss)                        |  | $              | 79    |   |      | $ | (2,390 | )    |  | $ | (1,204 | )
|                                         |  |                |       |   |      |   |        |      | 

Now Hear This (NHT).




|   |            
|-- | -----------
|3. | Inventories



|                 |  |                |        |  |      |   |        | 
|---------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                 |  | December 31,   |       
|                 |  |                |       
|                 |  | 2003           |        |  | 2004 |  
|                 |  |                |        |  |      |  
|                 |  | (In thousands) |       
|Raw materials    |  | $              | 4,646  |  |      | $ | 8,269  | 
|Work in progress |  |                | 1,327  |  |      |   | 1,796  | 
|Finished goods   |  |                | 27,316 |  |      |   | 23,940 | 
|                 |  |                |        |  |      |  
|                 |  |                | 33,289 |  |      |   | 34,005 | 
|                 |  |                |        |  |      |  

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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                       
|-- | ----------------------
|4. | Property and Equipment



|                                               |  |                |         |   |      |   |         |  
|---------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                               |  | December 31,   |        
|                                               |  |                |        
|                                               |  | 2003           |         |   | 2004 |  
|                                               |  |                |         |   |      |  
|                                               |  | (In thousands) |        
|Machinery and equipment                        |  | $              | 20,658  |   |      | $ | 20,229  |  
|Tooling equipment                              |  |                | 5,872   |   |      |   | 7,557   |  
|Leasehold improvements                         |  |                | 3,175   |   |      |   | 3,528   |  
|Furniture and fixtures                         |  |                | 1,670   |   |      |   | 1,602   |  
|Computer software                              |  |                | 1,892   |   |      |   | 1,576   |  
|Construction in process                        |  |                | 1,403   |   |      |   | 275     |  
|                                               |  |                |         |   |      |  
|                                               |  |                | 34,670  |   |      |   | 34,767  |  
|Less accumulated depreciation and amortization |  |                | (24,862 | ) |      |   | (28,360 | )
|                                               |  |                |         |   |      |  
|                                               |  | $              | 9,808   |   |      | $ | 6,407   |  
|                                               |  |                |         |   |      |  





|   |                                 
|-- | --------------------------------
|5. | Notes Payable and Long-Term Debt



|                                                                                                                   |  |                |        |  |      |   |        | 
|------------------------------------------------------------------------------------------------------------------ |  | -------------- | ------ |  | ---- | - | ------ | 
|                                                                                                                   |  | December 31,   |       
|                                                                                                                   |  |                |       
|                                                                                                                   |  | 2003           |        |  | 2004 |  
|                                                                                                                   |  |                |        |  |      |  
|                                                                                                                   |  | (In thousands) |       
|$35,000,000 asset based facility                                                                                   |  | $              |       |  |      | $ | 15,516 | 
|4.5% convertible senior subordinated secured notes                                                                 |  |                |       |  |      |   | 12,500 | 
|$30,000,000 collateralized line of credit with interest rates at
    Prime and LIBOR plus 100 and 300 basis points |  |                | 22,746 |  |      |   |       | 
|Other                                                                                                              |  |                | 204    |  |      |   | 2,688  | 
|                                                                                                                   |  |                |        |  |      |  
|                                                                                                                   |  |                | 22,950 |  |      |   | 30,704 | 
|Less debt discount                                                                                                 |  |                |       |  |      |   | 563    | 
|Less current portion                                                                                               |  |                | 22,950 |  |      |   | 18,204 | 
|                                                                                                                   |  |                |        |  |      |  
|                                                                                                                   |  | $              |       |  |      | $ | 11,937 | 
|                                                                                                                   |  |                |        |  |      |  





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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Balance Sheet Classification of Borrowings
Outstanding under Revolving Credit Agreements That Include both
a Subjective Acceleration Clause and a
Lock-Box Arrangement






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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                          |  |                           |        | 
|------------------------- |  | ------------------------- | ------ | 
|                          |  | Years Ending December 31, |       
|                          |  |                           |       
|                          |  | (In thousands)            |       
|2005                      |  | $                         | 2,688  | 
|2006                      |  |                           |       | 
|2007                      |  |                           | 15,516 | 
|2008                      |  |                           |       | 
|2009                      |  |                           | 12,500 | 
|                          |  |                           |       
|                          |  |                           | 30,704 | 
|Less: unaccreted discount |  |                           | 563    | 
|                          |  |                           |       
|                          |  | $                         | 30,141 | 
|                          |  |                           |       

|   |       
|-- | ------
|6. | Leases





|                             |  |                  |       | 
|---------------------------- |  | ---------------- | ----- | 
|                             |  | Operating Leases |      
|                             |  |                  |      
|                             |  | (In thousands)   |      
|2005                         |  | $                | 2,547 | 
|2006                         |  |                  | 1,646 | 
|2007                         |  |                  | 1,401 | 
|2008                         |  |                  | 1,377 | 
|2009                         |  |                  | 377   | 
|Thereafter                   |  |                  |      | 
|                             |  |                  |      
|Total minimum lease payments |  | $                | 7,348 | 
|                             |  |                  |      





|                              |  |                |        |   |      |   |        |  
|----------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                              |  | December 31,   |       
|                              |  |                |       
|                              |  | 2003           |        |   | 2004 |  
|                              |  |                |        |   |      |  
|                              |  | (In thousands) |       
|Equipment                     |  | $              | 7,179  |   |      | $ | 7,179  |  
|Less accumulated amortization |  |                | (6,162 | ) |      |   | (7,179 | )
|                              |  |                |        |   |      |  
|                              |  | $              | 1,017  |   |      | $ |       |  
|                              |  |                |        |   |      |  



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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |             
|-- | ------------
|7. | Income Taxes



|                          |                                        |                |       |       |      |   |         |       | 
|------------------------- | -------------------------------------- | -------------- | ----- | ----- | ---- | - | ------- | ----- | 
|                          |                                        | December 31,   |      
|                          |                                        |                |      
|                          |                                        | 2003           |       |       | 2004 |  
|                          |                                        |                |       |       |      |  
|                          |                                        | (In thousands) |      
|Deferred tax assets       |                                        |                |       |       |      |   |         |      
|                          | Inventory basis                        |                | $     | 1,736 |      |   | $       | 4,408 | 
|                          | Basis in receivables                   |                |       | 1,274 |      |   |         | 1,741 | 
|                          | Book over (under) tax depreciation     |                |       | (210  | )    |   |         | 78    | 
|                          | Accrued warranty                       |                |       | 1,767 |      |   |         | 1,074 | 
|                          | Net operating loss carryforward        |                |       | 1,994 |      |   |         | 5,285 | 
|                          | Federal and state credit carryforwards |                |       |      |      |   |         | 935   | 
|                          | Accrued liabilities and other          |                |       | 504   |      |   |         | 837   | 
|                          |                                        |                |       |       |      |  
|Gross deferred tax assets |                                        |                | 7,065 |       |      |   | 14,358  |      
|Valuation allowance       |                                        |                | (949  | )     |      |   | (14,358 | )    
|                          |                                        |                |       |       |      |  
|Net deferred tax assets   |                                        | $              | 6,116 |       |      | $ |        |      
|                          |                                        |                |       |       |      |  

Accounting for Income Tax.




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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                 |                           |                                |       |       |      |   |        |        |   |   |       |       |  
|-------------------------------- | ------------------------- | ------------------------------ | ----- | ----- | ---- | - | ------ | ------ | - | - | ----- | ----- | -
|                                 |                           | Year Ended December 31,        |      
|                                 |                           |                                |      
|                                 |                           | 2002                           |       |       | 2003 |   |        | 2004   |  
|                                 |                           |                                |       |       |      |   |        |        |  
|                                 |                           | (In thousands except per share |      
|                                 |                           | data)                          |      
|Current:                         |                           |                                |       |       |      |   |        |        |   |   |       |      
|                                 | Federal expense (benefit) |                                | $     | 3,693 |      |   | $      | (2,445 | ) |   | $     | (928  | )
|                                 | State expense (benefit)   |                                |       | 326   |      |   |        | (10    | ) |   |       |      |  
|                                 | Foreign expense           |                                |       | 206   |      |   |        | 69     |   |   |       |      |  
|                                 |                           |                                |       |       |      |   |        |        |  
|Total current expense (benefit)  |                           |                                | 4,225 |       |      |   | (2,386 | )      |   |   | (928  | )    
|Deferred:                        |                           |                                |       |       |      |   |        |        |   |   |       |      
|                                 | Federal expense (benefit) |                                |       | (305  | )    |   |        | 126    |   |   |       | 4,900 |  
|                                 | State expense (benefit)   |                                |       | (17   | )    |   |        | (209   | ) |   |       | 625   |  
|                                 | Foreign expense(benefit)  |                                |       |      |      |   |        | (581   | ) |   |       | 591   |  
|                                 |                           |                                |       |       |      |   |        |        |  
|Total deferred expense (benefit) |                           |                                | (322  | )     |      |   | (664   | )      |   |   | 6,116 |      
|                                 |                           |                                |       |       |      |   |        |        |  
|Income tax expense (benefit)     |                           | $                              | 3,903 |       |      | $ | (3,050 | )      |   | $ | 5,188 |      
|                                 |                           |                                |       |       |      |   |        |        |  



|                                                   |  |                                |       |   |      |   |        |      |  |   |         |  
|-------------------------------------------------- |  | ------------------------------ | ----- | - | ---- | - | ------ | ---- |  | - | ------- | -
|                                                   |  | Year Ended December 31,        |      
|                                                   |  |                                |      
|                                                   |  | 2002                           |       |   | 2003 |   |        | 2004 | 
|                                                   |  |                                |       |   |      |   |        |      | 
|                                                   |  | (In thousands except per share |      
|                                                   |  | data)                          |      
|Federal statutory rate  continuing operations     |  | $                              | 3,455 |   |      | $ | (1,696 | )    |  | $ | (10,715 | )
|Federal statutory rate  discontinued operations   |  |                                | 7     |   |      |   | (1,267 | )    |  |   | (732    | )
|State tax net of federal benefit                   |  |                                | 178   |   |      |   | (206   | )    |  |   | 7       |  
|State tax operating loss carryforward              |  |                                |      |   |      |   |       |      |  |   | (570    | )
|Nondeductible items                                |  |                                | 103   |   |      |   | (25    | )    |  |   | 16      |  
|Nondeductible goodwill                             |  |                                |      |   |      |   |       |      |  |   | 2,420   |  
|Foreign rate differential                          |  |                                | 149   |   |      |   | (137   | )    |  |   |        |  
|Extraterritorial income exclusion benefit          |  |                                | (31   | ) |      |   |       |      |  |   |        |  
|Other, net                                         |  |                                | 42    |   |      |   | (149   | )    |  |   | (205    | )
|Increase in valuation allowance                    |  |                                |      |   |      |   | 575    |      |  |   | 13,409  |  
|Use of previously unbenefited net operating losses |  |                                |      |   |      |   | (457   | )    |  |   |        |  
|Write-off of affiliate deferred tax assets         |  |                                |      |   |      |   |       |      |  |   | 596     |  
|Affiliate unbenefited losses                       |  |                                |      |   |      |   | 312    |      |  |   | 962     |  
|                                                   |  |                                |       |   |      |   |        |      | 
|Income tax expense (benefit)                       |  | $                              | 3,903 |   |      | $ | (3,050 | )    |  | $ | 5,188   |  
|                                                   |  |                                |       |   |      |   |        |      | 





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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                                
|-- | -------------------------------
|8. | Common Stock Grants and Options





|                           |  |                        |                |  |      |  |         |      |  |  |         |  
|-------------------------- |  | ---------------------- | -------------- |  | ---- |  | ------- | ---- |  |  | ------- | -
|                           |  | Year Ended December 31 |               
|                           |  |                        |               
|                           |  | 2002                   |                |  | 2003 |  |         | 2004 | 
|                           |  |                        |                |  |      |  |         |      | 
|Expected life of the award |  |                        | Not applicable |  |      |  | 5 years |      |  |  | 5 years |  
|Dividend yield             |  |                        | Not applicable |  |      |  | 0       | %    |  |  | 0       | %
|Risk-free interest rate    |  |                        | Not applicable |  |      |  | 2.9     | %    |  |  | 3.4     | %
|Expected volatility        |  |                        | Not applicable |  |      |  | 0.73    |      |  |  | 0.46    |  



|                                 |                      |                  |         |                     |        |  |                  |                |   |   |      |      | 
|-------------------------------- | -------------------- | ---------------- | ------- | ------------------- | ------ |  | ---------------- | -------------- | - | - | ---- | ---- | 
|                                 |                      |                  |         | Outstanding Options |       
|                                 |                      |                  |         |                     |       
|                                 |                      | Shares Available |         |                     |        |  | Weighted Average |               
|                                 |                      | Under Option     |         |                     | Shares |  |                  | Exercise Price |  
|                                 |                      |                  |         |                     |        |  |                  |                |  
|Outstanding at December 31, 2001 |                      |                  | 58      |                     |        |  | 1,767,630        |                |   | $ | 4.55 |     
|                                 | Authorized           |                  |         | 600,000             |        |  |                  |               |   |   |      |     | 
|                                 | Exercised            |                  |         |                    |        |  |                  | (285,314       | ) |   |      | 2.52 | 
|                                 | Expired or cancelled |                  |         | 15,925              |        |  |                  | (15,925        | ) |   |      | 5.98 | 
|                                 |                      |                  |         |                     |        |  |                  |                |  
|Outstanding at December 31, 2002 |                      |                  | 615,983 |                     |        |  | 1,466,391        |                |   |   | 4.92 |     
|                                 | Granted              |                  |         | (167,000            | )      |  |                  | 167,000        |   |   |      | 5.70 | 
|                                 | Exercised            |                  |         |                    |        |  |                  | (174,449       | ) |   |      | 3.32 | 
|                                 | Expired              |                  |         | 98,376              |        |  |                  | (98,376        | ) |   |      | 4.83 | 
|                                 |                      |                  |         |                     |        |  |                  |                |  
|Outstanding at December 31, 2003 |                      |                  | 547,359 |                     |        |  | 1,360,566        |                |   |   | 5.21 |     
|                                 | Granted              |                  |         | (482,050            | )      |  |                  | 482,050        |   |   |      | 3.53 | 
|                                 | Exercised            |                  |         |                    |        |  |                  | (151,300       | ) |   |      | 1.89 | 
|                                 | Expired              |                  |         | 8,664               |        |  |                  | (93,690        | ) |   |      | 5.02 | 
|                                 |                      |                  |         |                     |        |  |                  |                |  
|Outstanding at December 31, 2004 |                      |                  | 73,973  |                     |        |  | 1,597,626        |                |   | $ | 5.03 |     
|                                 |                      |                  |         |                     |        |  |                  |                |  





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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                         |  |                     |           |  |                     |  |     |                |  |        |                |  |  |                |           |  |  |   |       | 
|------------------------ |  | ------------------- | --------- |  | ------------------- |  | --- | -------------- |  | ------ | -------------- |  |  | -------------- | --------- |  |  | - | ----- | 
|                         |  | Options Outstanding |           |  | Options Exercisable | 
|                         |  |                     |           |  |                     | 
|                         |  | Number              |           |  | Weighted            |  |     |                |  | Number |                |  | 
|                         |  | Outstanding at      |           |  | Average             |  |     | Weighted       |  |        | Outstanding at |  |  | Weighted       |          
|                         |  | December 31,        |           |  | Remaining           |  |     | Average        |  |        | December 31,   |  |  | Average        |          
|Range of Exercise Prices |  | 2004                |           |  | Contractual Life    |  |     | Exercise Price |  |        | 2004           |  |  | Exercise Price |          
|                         |  |                     |           |  |                     |  |     |                |  |        |                |  |  |                |          
|$2.15 - $ 2.45           |  |                     | 462,800   |  |                     |  | 7.2 |                |  | $      | 2.24           |  |  |                | 220,775   |  |  | $ | 2.33  | 
|$3.45 - $ 4.19           |  |                     | 321,500   |  |                     |  | 2.8 |                |  | $      | 4.04           |  |  |                | 321,500   |  |  | $ | 4.04  | 
|$5.70 - $ 7.68           |  |                     | 743,826   |  |                     |  | 6.5 |                |  | $      | 6.62           |  |  |                | 567,662   |  |  | $ | 6.74  | 
|$11.00                   |  |                     | 69,500    |  |                     |  | 5.3 |                |  | $      | 11.00          |  |  |                | 69,500    |  |  | $ | 11.00 | 
|                         |  |                     |           |  |                     |  |     |                |  |        |                |  |  |                |          
|                         |  |                     | 1,597,626 |  |                     |  |     |                |  |        |                |  |  |                | 1,179,437 |  |  |   |       | 
|                         |  |                     |           |  |                     |  |     |                |  |        |                |  |  |                |          



|   |                        
|-- | -----------------------
|9. | Income (Loss) Per Share

|                                                |                                               |                                 |       |       |      |  |       |        |   |  |       |         |  
|----------------------------------------------- | --------------------------------------------- | ------------------------------- | ----- | ----- | ---- |  | ----- | ------ | - |  | ----- | ------- | -
|                                                |                                               | Year Ended December 31          |      
|                                                |                                               |                                 |      
|                                                |                                               | 2002                            |       |       | 2003 |  |       | 2004   |  
|                                                |                                               |                                 |       |       |      |  |       |        |  
|                                                |                                               | (In thousands, except per share |      
|                                                |                                               | data)                           |      
|Numerator                                       |                                               |                                 |       |       |      |  |       |        |   |  |       |        
|                                                | Income (loss) from continuing operations      |                                 | $     | 6,325 |      |  | $     | (2,504 | ) |  | $     | (36,112 | )
|                                                | Loss from discontinued operations             |                                 |       | (45   | )    |  |       | (3,160 | ) |  |       | (2,743  | )
|                                                |                                               |                                 |       |       |      |  |       |        |  
|                                                | Net income (loss)                             |                                 | $     | 6,280 |      |  | $     | (5,664 | ) |  | $     | (38,855 | )
|                                                |                                               |                                 |       |       |      |  |       |        |  
|Denominator:                                    |                                               |                                 |       |       |      |  |       |        |   |  |       |        
|                                                | Denominator for basic income (loss) per share |                                 |       | 8,540 |      |  |       | 8,866  |   |  |       | 9,066   |  
|                                                | Effect of dilutive securities:                |                                 |       |       |      |  |       |        |   |  |       |         |  
|                                                | Employee stock options                        |                                 |       | 755   |      |  |       |       |   |  |       |        |  
|                                                | Warrants                                      |                                 |       | 6     |      |  |       |       |   |  |       |        |  
|                                                |                                               |                                 |       |       |      |  |       |        |  
|                                                | Dilutive potential common shares              |                                 |       | 761   |      |  |       |       |   |  |       |        |  
|                                                |                                               |                                 |       |       |      |  |       |        |  
|Denominator for diluted income (loss) per share |                                               |                                 | 9,301 |       |      |  | 8,866 |        |   |  | 9,066 |        
|                                                |                                               |                                 |       |       |      |  |       |        |  
|Income (loss) per common share:                 |                                               |                                 |       |       |      |  |       |        |   |  |       |        
|Income (loss) from continuing operations        |                                               |                                 |       |       |      |  |       |        |   |  |       |        
|                                                | Basic                                         |                                 | $     | 0.74  |      |  | $     | (0.28  | ) |  | $     | (3.99   | )
|                                                |                                               |                                 |       |       |      |  |       |        |  
|                                                | Diluted                                       |                                 | $     | 0.68  |      |  | $     | (0.28  | ) |  | $     | (3.99   | )
|                                                |                                               |                                 |       |       |      |  |       |        |  
|Loss from discontinued operations               |                                               |                                 |       |       |      |  |       |        |   |  |       |        
|                                                | Basic                                         |                                 | $     | 0.00  |      |  | $     | (0.36  | ) |  | $     | (0.30   | )
|                                                |                                               |                                 |       |       |      |  |       |        |  
|                                                | Diluted                                       |                                 | $     | 0.00  |      |  | $     | (0.36  | ) |  | $     | (0.30   | )
|                                                |                                               |                                 |       |       |      |  |       |        |  
|Net income (loss)                               |                                               |                                 |       |       |      |  |       |        |   |  |       |        
|                                                | Basic                                         |                                 | $     | 0.74  |      |  | $     | (0.64  | ) |  | $     | (4.29   | )
|                                                |                                               |                                 |       |       |      |  |       |        |  
|                                                | Diluted                                       |                                 | $     | 0.68  |      |  | $     | (0.64  | ) |  | $     | (4.29   | )
|                                                |                                               |                                 |       |       |      |  |       |        |  

47



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##### Table of Contents



ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |              
|--- | -------------
|10. | Contingencies





|    |             
|--- | ------------
|11. | Benefit Plan





|    |                    
|--- | -------------------
|12. | Stock Purchase Plan



48



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##### Table of Contents



ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                    
|--- | -------------------
|13. | Segment Information



|                                  |  |                        |         |  |      |   |         |      |  |   |         | 
|--------------------------------- |  | ---------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                  |  | Year Ended December 31 |        
|                                  |  |                        |        
|Region(1)                         |  | 2002                   |         |  | 2003 |   |         | 2004 | 
|                                  |  |                        |         |  |      |   |         |      | 
|                                  |  | (In thousands)         |        
|United States                     |  | $                      | 136,873 |  |      | $ | 138,314 |      |  | $ | 140,764 | 
|Other Americas                    |  |                        | 9,658   |  |      |   | 9,340   |      |  |   | 10,891  | 
|Europe                            |  |                        | 10,248  |  |      |   | 13,709  |      |  |   | 12,564  | 
|Asia                              |  |                        | 6,026   |  |      |   | 5,423   |      |  |   | 5,336   | 
|                                  |  |                        |         |  |      |   |         |      | 
|Total sales to external customers |  | $                      | 162,805 |  |      | $ | 166,786 |      |  | $ | 169,555 | 
|                                  |  |                        |         |  |      |   |         |      | 






|    |                                                                                      
|--- | -------------------------------------------------------------------------------------
|(1) | Revenues are attributed to geographic regions based on the
    location of customers.





|    |              
|--- | -------------
|14. | Restructuring









49



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##### Table of Contents








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes In and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures



| |                                                 
| | ------------------------------------------------
| | Evaluation of Disclosure Controls and Procedures









| |                                                              
| | -------------------------------------------------------------
| | Material Weaknesses of Disclosure Controls and
    Procedures

Preparation of Annual Report for the Year Ended
December 31, 2004








50



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##### Table of Contents





Accounts Payable Reconciliation for the Year Ended
December 31, 2003












| |                             
| | ----------------------------
| | Changes in Internal Controls



51



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##### Table of Contents






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant










|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



52



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PART IV







|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules and Reports on
    Form 8-K

Consolidated Financial Statements




Financial Statement Schedule





SCHEDULE II  VALUATION AND QUALIFYING
ACCOUNTS


ROCKFORD CORPORATION


|                  |                       |                |   |       |            |  |   |            |  |  |            |       |            |               |   |       |     |  |   |       | 
|----------------- | --------------------- | -------------- | - | ----- | ---------- |  | - | ---------- |  |  | ---------- | ----- | ---------- | ------------- | - | ----- | --- |  | - | ----- | 
|Column A          |                       | Column B       |   |       | Column C   |  |   | Column D   |  |  | Column E   |      
|                  |                       |                |   |       |            |  |   |            |  |  |            |      
|                  |                       | Balance at     |   |       | Charged to |  |   | Charged to |  |  |            |       |           
|                  |                       | Beginning of   |   |       | Costs and  |  |   | Other      |  |  |            |       | Balance at |              
|Description       |                       | Period         |   |       | Expenses   |  |   | Accounts   |  |  | Deductions |       |            | End of Period |  
|                  |                       |                |   |       |            |  |   |            |  |  |            |       |            |               |  
|                  |                       | (In thousands) |  
|December 31, 2004 |                       |                |   |       |            |  |   |            |  |  |            |       |            |               |   |       |     |  |   |      
|                  | Receivable allowances |                | $ | 2,901 |            |  | $ | 1,846      |  |  | $          | 5,153 | (2)        |               | $ | 6,396 | (1) |  | $ | 3,504 | 
|December 31, 2003 |                       |                |   |       |            |  |   |            |  |  |            |       |            |               |   |       |     |  |   |      
|                  | Receivable allowances |                | $ | 2,876 |            |  | $ | 697        |  |  | $          | 5,064 | (2)        |               | $ | 5,736 | (1) |  | $ | 2,901 | 
|December 31, 2002 |                       |                |   |       |            |  |   |            |  |  |            |       |            |               |   |       |     |  |   |      
|                  | Receivable allowances |                | $ | 2,577 |            |  | $ | 849        |  |  | $          | 5,272 | (2)        |               | $ | 5,822 | (1) |  | $ | 2,876 | 






|    |                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------
|(1) | Deductions taken by customers for prompt payment and freight
    discounts. Includes accounts written off net of recoveries.
|   
|(2) | Amounts netted against sales.                                                                                               



Exhibits


|        |   |                         |  |                                                                                                                                                                              
|------- | - | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |                        
|Number  |   | Description of Document
|        |   |                        
|        | 3 | .1                      |  | Articles of Incorporation+                                                                                                                                                   
|        | 3 | .2                      |  | Restated Bylaws as amended through July 27, 2000++                                                                                                                           
|        | 3 | .3                      |  | Amendment to Articles of Incorporation filed on January 12,
    1988+                                                                                                        
|        | 3 | .4                      |  | Amendment to Articles of Incorporation filed on May 12,
    1999+                                                                                                            
|        | 3 | .5                      |  | Amendment to Articles of Incorporation filed on May 17,
    1999+                                                                                                            
|        | 3 | .7                      |  | Amendment to Articles of Incorporation filed on July 1,
    1999+                                                                                                            
|        | 4 | .1                      |  | Conformed Copy of Indenture dated as of June 10, 2004
    between Rockford Corporation and BNY Western Trust Company###                                                      
|        | 4 | .2                      |  | Form of 4.5% Convertible Senior Subordinated Secured
    Note Due 2009###                                                                                                    
|        | 4 | .3                      |  | Form of Warrant to Purchase Common Stock###                                                                                                                                  
|        | 4 | .4                      |  | Conformed Copy of Registration Rights Agreement dated as of
    June 10, 2004 by and among Rockford Corporation, Piper
    Jaffray & Co. and the Buyers as defined therein###
|        | 4 | .5                      |  | Conformed Copy of Warrant Agent Agreement dated as of
    June 10, 2004 between Rockford Corporation and BNY Western
    Trust Company###                                    
|        | 4 | .6                      |  | Conformed Copy of Security Agreement dated as of June 10,
    2004 among Rockford Corporation, Audio Innovations, Inc. and BNY
    Western Trust Company###                  

53



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|        |    |       |                         |                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | -- | ----- | ----------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |       |                        
|Number  |    |       | Description of Document
|        |    |       |                        
|        | 4  | .7    |                         | Conformed Copy of Intercreditor Agreement dated as of
    June 10, 2004 by and among Congress Financial Corporation
    (Western), BNY Western Trust Company, Rockford Corporation and
    Audio Innovations, Inc. ###                                                                                                                                                                                        
|        | 4  | .8    |                         | Conformed Copy of Global Amendment to Notes, Warrants,
    Indenture, Security Agreement, Warrant Agent Agreement and
    Registration Rights Agreement and Waiver of Event of Default
    dated as of November 12, 2004 by and among Rockford
    Corporation, Audio Innovations, Inc., BNY Western Trust Company
    and the persons listed on the Schedule of Holders attached
    thereto as Exhibit A####
|        | 4  | .9    |                         | Conformed Copy of Amendment to Warrants, Warrant Agent Agreement
    and Registration Rights Agreement dated as of November 12,
    2004, by and among Rockford Corporation, BNY Western Trust
    Company and Piper Jaffray & Co####                                                                                                                                                                         
|        | 10 | .1    |                         | 1994 Stock Option Plan*+                                                                                                                                                                                                                                                                                                                                                                                      
|        | 10 | .2    |                         | 1997 Stock Option Plan*+                                                                                                                                                                                                                                                                                                                                                                                      
|        | 10 | .3    |                         | 1999 Employee Stock Purchase Plan as amended and restated*+                                                                                                                                                                                                                                                                                                                                                   
|        | 10 | .8    |                         | Form of Dealership Agreements+                                                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .14   |                         | Employee 401(k) Deferred Compensation Plan and amendments
    thereto*+                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .35   |                         | Form of Indemnification Agreement*+                                                                                                                                                                                                                                                                                                                                                                           
|        | 10 | .35.1 |                         | Schedule for Indemnification Agreement*+                                                                                                                                                                                                                                                                                                                                                                      
|        | 10 | .48   |                         | 2002 Stock Option Plan*+++                                                                                                                                                                                                                                                                                                                                                                                    
|        | 10 | .54   |                         | Lease Agreement between Robert Grooters Development Company and
    Rockford Corporation#                                                                                                                                                                                                                                                                                                                     
|        | 10 | .55   |                         | Warehouse Storage & Logistics Agreement between Titan
    Logistics, Inc. and Audio Innovations, Inc.#                                                                                                                                                                                                                                                                                                        
|        | 10 | .56   |                         | Multi-tenant Industrial Net Lease between Calwest Industrial
    Holdings, LLC and Rockford Corporation, dated July 16, 2003#                                                                                                                                                                                                                                                                                 
|        | 10 | .57   |                         | Supplier Agreement between Wal-Mart Stores, Inc. and Rockford
    Corporation, effective January 23, 2003#                                                                                                                                                                                                                                                                                                    
|        | 10 | .58   |                         | Direct Imports Supplier Agreement between Wal-Mart Stores, Inc.
    and Rockford Corporation, dated March 6, 2003#                                                                                                                                                                                                                                                                                            
|        | 10 | .59   |                         | Commercial Lease Agreements between David and Yvonne Cunningham
    and Rockford Corporation, as amended#                                                                                                                                                                                                                                                                                                     
|        | 10 | .60   |                         | Commercial Lease Agreement between William Basore and Rockford
    Corporation, as amended#                                                                                                                                                                                                                                                                                                                   
|        | 10 | .62   |                         | Loan and Security Agreement among Rockford Corporation, Audio
    Innovations, Inc., Congress Financial Corporation (Western), and
    various Financial Institutions, dated March 29, 2004##                                                                                                                                                                                                                 
|        | 10 | .62.1 |                         | First Amendment to Loan and Security Agreement and Conditional
    Default Waiver among Congress Financial Corporation (Western),
    as a lender and as administrative and collateral agent for the
    lenders party to the Loan Agreement, Rockford Corporation, and
    Audio Innovations, Inc., dated as of June 10, 2004                                                                                
|        | 10 | .62.2 |                         | Second Amendment to Loan and Security Agreement among Congress
    Financial Corporation (Western) as a lender and as
    administrative and collateral agent for the lenders party to the
    Loan Agreement, Rockford Corporation and Audio Innovations,
    Inc., dated as of December 30, 2004                                                                                                            
|        | 10 | .63   |                         | Industrial Lease Agreement between Jerome A. and/or Cathy E.
    Reynolds and Rockford Corporation, dated as of May 1, 2003                                                                                                                                                                                                                                                                                   
|        | 10 | .64   |                         | Stock Purchase Agreement among SimpleDevices, Inc., the
    stockholders of SimpleDevices, Inc. and Universal Electronics
    Inc., dated as of October 1, 2004                                                                                                                                                                                                                                               
|        | 10 | .65   |                         | Agreement among Tobias Wahl, in his capacity as insolvency
    trustee of MB Quart GmbH, Rockford Corporation and Rockford
    Europe Vertriebs GmbH, dated as of March 11, 2005                                                                                                                                                                                                                              
|        | 10 | .66   |                         | Securities Purchase Agreement dated as of June 10, 2004
    between Rockford Corporation and the Buyers as defined
    therein#####                                                                                                                                                                                                                                                                           
|        | 21 |       |                         | List of Subsidiaries of Rockford Corporation                                                                                                                                                                                                                                                                                                                                                                  

54



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##### Table of Contents



|        |    |    |                         |                                                                                                                                                                        
|------- | -- | -- | ----------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |    |                        
|Number  |    |    | Description of Document
|        |    |    |                        
|        | 23 | .1 |                         | Consent of Independent Registered Public Accounting Firm                                                                                                               
|        | 31 | .1 |                         | Certification pursuant to Exchange Act Rules 13a-14(a) and
    15d-14(a), as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002 for W. Gary Suttle  
|        | 31 | .2 |                         | Certification pursuant to Exchange Act Rules 13a-14(a) and
    15d-14(a), as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002 for Richard G. Vasek
|        | 32 |    |                         | Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002                                         
|        | 99 | .1 |                         | Risk Factors That May Affect Rockfords Operating
    Results, Business Prospects and Stock Price                                                                      






|      |  |                                                                                                                               
|----- |  | ------------------------------------------------------------------------------------------------------------------------------
|*     |  | Management contract or compensatory plan or arrangement                                                                       
|     
|+     |  | Previously filed with registration statement effective
    April 19, 2000 and/or amendments.                                  
|     
|++    |  | Previously filed on August 11, 2000 with Rockfords
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2000.
|     
|+++   |  | Previously filed on March 29, 2002 with Rockfords
    Annual Report on Form 10-K for the year ended
    December 30, 2001.   
|     
|#     |  | Previously filed on March 30, 2004 with Rockfords
    Annual Report on Form 10-K for the year ended
    December 30, 2003.   
|     
|##    |  | Previously filed on May 17, 2004 with Rockfords
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2004.  
|     
|###   |  | Previously filed on June 15, 2004 with Rockfords
    Current Report on Form 8-K.                                             
|     
|####  |  | Previously filed on November 15, 2004 with Rockfords
    Current Report on Form 8-K.                                         
|     
|##### |  | Previously filed on June 15, 2004 as Exhibit 10.1 with
    Rockfords Current Report on Form 8-K.                             

55



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##### Table of Contents






SIGNATURES






| |                     
| | --------------------
| | ROCKFORD CORPORATION



| |     |                   
| | --- | ------------------
| | By: | /s/ W. GARY SUTTLE

| |                                      
| | -------------------------------------
| |                                      
| | W. Gary Suttle                       
| | President and Chief Executive Officer



|                                             |  |                                                                                                    |  |               |  | 
|-------------------------------------------- |  | -------------------------------------------------------------------------------------------------- |  | ------------- |  | 
|Name                                         |  | Title                                                                                              |  | Date         
|                                             |  |                                                                                                    |  |              
|                                            
|/s/ W. GARY SUTTLEW.
    Gary Suttle         |  | President, Chief Executive Officer and Director (Principal
    Executive Officer)                  |  | April 1, 2005
|                                            
|/s/ RICHARD G. VASEKRichard
    G. Vasek     |  | Vice President of Finance and Chief Financial Officer, Secretary
    (Principal Financial Officer) |  | April 1, 2005
|                                            
|/s/ JERRY E. GOLDRESSJerry
    E. Goldress   |  | Director                                                                                           |  | April 1, 2005
|                                            
|/s/ TIMOTHY C. BARTOLTimothy
    C. Bartol   |  | Director                                                                                           |  | April 1, 2005
|                                            
|/s/ NICHOLAS G. BARTOLNicholas
    G. Bartol |  | Director                                                                                           |  | April 1, 2005
|                                            
|/s/ RALPH B. GODFREYRalph
    B. Godfrey     |  | Director                                                                                           |  | April 1, 2005
|                                            
|/s/ JOHN P. LLOYDJohn
    P. Lloyd           |  | Director                                                                                           |  | April 1, 2005

56



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##### Table of Contents



EXHIBIT INDEX


|        |    |       |                         |                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | -- | ----- | ----------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |       |                        
|Number  |    |       | Description of Document
|        |    |       |                        
|        | 3  | .1    |                         | Articles of Incorporation+                                                                                                                                                                                                                                                                                                                                                                                    
|        | 3  | .2    |                         | Restated Bylaws as amended through July 27, 2000++                                                                                                                                                                                                                                                                                                                                                            
|        | 3  | .3    |                         | Amendment to Articles of Incorporation filed on January 12,
    1988+                                                                                                                                                                                                                                                                                                                                         
|        | 3  | .4    |                         | Amendment to Articles of Incorporation filed on May 12,
    1999+                                                                                                                                                                                                                                                                                                                                             
|        | 3  | .5    |                         | Amendment to Articles of Incorporation filed on May 17,
    1999+                                                                                                                                                                                                                                                                                                                                             
|        | 3  | .7    |                         | Amendment to Articles of Incorporation filed on July 1,
    1999+                                                                                                                                                                                                                                                                                                                                             
|        | 4  | .1    |                         | Conformed Copy of Indenture dated as of June 10, 2004
    between Rockford Corporation and BNY Western Trust Company###                                                                                                                                                                                                                                                                                       
|        | 4  | .2    |                         | Form of 4.5% Convertible Senior Subordinated Secured
    Note Due 2009###                                                                                                                                                                                                                                                                                                                                     
|        | 4  | .3    |                         | Form of Warrant to Purchase Common Stock###                                                                                                                                                                                                                                                                                                                                                                   
|        | 4  | .4    |                         | Conformed Copy of Registration Rights Agreement dated as of
    June 10, 2004 by and among Rockford Corporation, Piper
    Jaffray & Co. and the Buyers as defined therein###                                                                                                                                                                                                                                 
|        | 4  | .5    |                         | Conformed Copy of Warrant Agent Agreement dated as of
    June 10, 2004 between Rockford Corporation and BNY Western
    Trust Company###                                                                                                                                                                                                                                                                     
|        | 4  | .6    |                         | Conformed Copy of Security Agreement dated as of June 10,
    2004 among Rockford Corporation, Audio Innovations, Inc. and BNY
    Western Trust Company###                                                                                                                                                                                                                                                   
|        | 4  | .7    |                         | Conformed Copy of Intercreditor Agreement dated as of
    June 10, 2004 by and among Congress Financial Corporation
    (Western), BNY Western Trust Company, Rockford Corporation and
    Audio Innovations, Inc. ###                                                                                                                                                                                        
|        | 4  | .8    |                         | Conformed Copy of Global Amendment to Notes, Warrants,
    Indenture, Security Agreement, Warrant Agent Agreement and
    Registration Rights Agreement and Waiver of Event of Default
    dated as of November 12, 2004 by and among Rockford
    Corporation, Audio Innovations, Inc., BNY Western Trust Company
    and the persons listed on the Schedule of Holders attached
    thereto as Exhibit A####
|        | 4  | .9    |                         | Conformed Copy of Amendment to Warrants, Warrant Agent Agreement
    and Registration Rights Agreement dated as of November 12,
    2004, by and among Rockford Corporation, BNY Western Trust
    Company and Piper Jaffray & Co####                                                                                                                                                                         
|        | 10 | .1    |                         | 1994 Stock Option Plan*+                                                                                                                                                                                                                                                                                                                                                                                      
|        | 10 | .2    |                         | 1997 Stock Option Plan*+                                                                                                                                                                                                                                                                                                                                                                                      
|        | 10 | .3    |                         | 1999 Employee Stock Purchase Plan as amended and restated*+                                                                                                                                                                                                                                                                                                                                                   
|        | 10 | .8    |                         | Form of Dealership Agreements+                                                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .14   |                         | Employee 401(k) Deferred Compensation Plan and amendments
    thereto*+                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .35   |                         | Form of Indemnification Agreement*+                                                                                                                                                                                                                                                                                                                                                                           
|        | 10 | .35.1 |                         | Schedule for Indemnification Agreement*+                                                                                                                                                                                                                                                                                                                                                                      
|        | 10 | .48   |                         | 2002 Stock Option Plan*+++                                                                                                                                                                                                                                                                                                                                                                                    
|        | 10 | .54   |                         | Lease Agreement between Robert Grooters Development Company and
    Rockford Corporation#                                                                                                                                                                                                                                                                                                                     
|        | 10 | .55   |                         | Warehouse Storage & Logistics Agreement between Titan
    Logistics, Inc. and Audio Innovations, Inc.#                                                                                                                                                                                                                                                                                                        
|        | 10 | .56   |                         | Multi-tenant Industrial Net Lease between Calwest Industrial
    Holdings, LLC and Rockford Corporation, dated July 16, 2003#                                                                                                                                                                                                                                                                                 
|        | 10 | .57   |                         | Supplier Agreement between Wal-Mart Stores, Inc. and Rockford
    Corporation, effective January 23, 2003#                                                                                                                                                                                                                                                                                                    
|        | 10 | .58   |                         | Direct Imports Supplier Agreement between Wal-Mart Stores, Inc.
    and Rockford Corporation, dated March 6, 2003#                                                                                                                                                                                                                                                                                            
|        | 10 | .59   |                         | Commercial Lease Agreements between David and Yvonne Cunningham
    and Rockford Corporation, as amended#                                                                                                                                                                                                                                                                                                     
|        | 10 | .60   |                         | Commercial Lease Agreement between William Basore and Rockford
    Corporation, as amended#                                                                                                                                                                                                                                                                                                                   



---



##### Table of Contents



|        |    |       |                         |                                                                                                                                                                                                                                                                                                                               
|------- | -- | ----- | ----------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |       |                        
|Number  |    |       | Description of Document
|        |    |       |                        
|        | 10 | .62   |                         | Loan and Security Agreement among Rockford Corporation, Audio
    Innovations, Inc., Congress Financial Corporation (Western), and
    various Financial Institutions, dated March 29, 2004##                                                                                                                                 
|        | 10 | .62.1 |                         | First Amendment to Loan and Security Agreement and Conditional
    Default Waiver among Congress Financial Corporation (Western),
    as a lender and as administrative and collateral agent for the
    lenders party to the Loan Agreement, Rockford Corporation, and
    Audio Innovations, Inc., dated as of June 10, 2004
|        | 10 | .62.2 |                         | Second Amendment to Loan and Security Agreement among Congress
    Financial Corporation (Western) as a lender and as
    administrative and collateral agent for the lenders party to the
    Loan Agreement, Rockford Corporation and Audio Innovations,
    Inc., dated as of December 30, 2004                            
|        | 10 | .63   |                         | Industrial Lease Agreement between Jerome A. and/or Cathy E.
    Reynolds and Rockford Corporation, dated as of May 1, 2003                                                                                                                                                                                                   
|        | 10 | .64   |                         | Stock Purchase Agreement among SimpleDevices, Inc., the
    stockholders of SimpleDevices, Inc. and Universal Electronics
    Inc., dated as of October 1, 2004                                                                                                                                                               
|        | 10 | .65   |                         | Agreement among Tobias Wahl, in his capacity as insolvency
    trustee of MB Quart GmbH, Rockford Corporation and Rockford
    Europe Vertriebs GmbH, dated as of March 11, 2005                                                                                                                                              
|        | 10 | .66   |                         | Securities Purchase Agreement dated as of June 10, 2004
    between Rockford Corporation and the Buyers as defined
    therein#####                                                                                                                                                                                           
|        | 21 |       |                         | List of Subsidiaries of Rockford Corporation                                                                                                                                                                                                                                                                                  
|        | 23 | .1    |                         | Consent of Independent Registered Public Accounting Firm                                                                                                                                                                                                                                                                      
|        | 31 | .1    |                         | Certification pursuant to Exchange Act Rules 13a-14(a) and
    15d-14(a), as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002 for W. Gary Suttle                                                                                                                                                         
|        | 31 | .2    |                         | Certification pursuant to Exchange Act Rules 13a-14(a) and
    15d-14(a), as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002 for Richard G. Vasek                                                                                                                                                       
|        | 32 |       |                         | Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002                                                                                                                                                                                                
|        | 99 | .1    |                         | Risk Factors That May Affect Rockfords Operating
    Results, Business Prospects and Stock Price                                                                                                                                                                                                                             






|      |  |                                                                                                                               
|----- |  | ------------------------------------------------------------------------------------------------------------------------------
|*     |  | Management contract or compensatory plan or arrangement                                                                       
|     
|+     |  | Previously filed with registration statement effective
    April 19, 2000 and/or amendments.                                  
|     
|++    |  | Previously filed on August 11, 2000 with Rockfords
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2000.
|     
|+++   |  | Previously filed on March 29, 2002 with Rockfords
    Annual Report on Form 10-K for the year ended
    December 30, 2001.   
|     
|#     |  | Previously filed on March 30, 2004 with Rockfords
    Annual Report on Form 10-K for the year ended
    December 30, 2003.   
|     
|##    |  | Previously filed on May 17, 2004 with Rockfords
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2004.  
|     
|###   |  | Previously filed on June 15, 2004 with Rockfords
    Current Report on Form 8-K.                                             
|     
|####  |  | Previously filed on November 15, 2004 with Rockfords
    Current Report on Form 8-K.                                         
|     
|##### |  | Previously filed on June 15, 2004 as Exhibit 10.1 with
    Rockfords Current Report on Form 8-K.