##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 Commission File Number 000-30138
 ROCKFORD CORPORATION
 (Exact Name of Registrant as Specified in its Charter)
 ARIZONA
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    86-0394353
(I.R.S. Employer
Identification No.)600 South Rockford Drive 
Tempe, Arizona
(Address of Principal Executive Offices)
    
    85281
(Zip Code)
 (480) 967-3565
(Registrants Telephone Number, Including Area Code)
 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
 Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer (as defined in Exchange Act Rule 12b-2). (Check one)
 Large accelerated filer o Accelerated filer o Non-accelerated filer þ
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
 Indicate the number of shares of each of the issuers classes of common stock, as of the
latest practical date:
 As of November 9, 2006, there were 9,390,720 shares of Common Stock, $.01 par value per share,
outstanding, which is the only class of common stock of the Company registered under Section 12(g)
of the Securities Act of 1933.




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##### Table of Contents



ROCKFORD CORPORATION AND SUBSIDIARIES
 TABLE OF CONTENTS
 Forward Looking StatementsPart I: Financial InformationItem 1. Financial StatementsCondensed Consolidated Balance Sheets  September 30, 2006 (Unaudited) and December 31, 2005Condensed Consolidated Statements of Operations  Three and Nine Months Ended September 30, 2006 and 2005
(Unaudited)Condensed Consolidated Statements of Cash Flows  Nine Months Ended September 30, 2006 and 2005 (Unaudited)Notes to Condensed Consolidated Financial Statements  September 30, 2006 (Unaudited)Item 2. Managements Discussion and Analysis of Financial Condition and Results of Continuing OperationsItem 3. Quantitative and Qualitative Disclosures about Market RiskItem 4. Controls and ProceduresPart II: Other InformationItem 1. Legal ProceedingsItem 1A. Rick FactorsItem 6. Exhibits and Reports on Form 8-KSignaturesCertificationsEX-10.74EX-31.1EX-31.2EX-32
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Forward-Looking Statements
    - 3 -




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
  
  (In thousands except per share data)
 September 30,
    
    
    December 31,2006
    
    
    2005(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    Accounts receivable, less allowances of $1,025 and $2,307 at
September 30, 2006 and December 31, 2005, respectively
    
    
    19,451
    
    
    
    24,721Inventories
    
    
    22,704
    
    
    
    18,618Income taxes receivable
    
    
    45
    
    
    
    168Prepaid expenses and other current assets
    
    
    3,618
    
    
    
    3,901Current assets of discontinued operations
    
    
    
    
    
    
    289Total current assets
    
    
    45,818
    
    
    
    47,697Property and equipment, net
    
    
    2,846
    
    
    
    3,104Other assets
    
    
    1,382
    
    
    
    1,497Total assets
    
    $
    50,046
    
    
    $
    52,298Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    7,540
    
    
    $
    10,182Accrued salaries and incentives
    
    
    1,976
    
    
    
    1,317Accrued warranty
    
    
    1,850
    
    
    
    1,982Other accrued expenses
    
    
    3,454
    
    
    
    4,890Current portion of capital lease and other long-term liabilities
    
    
    42
    
    
    
    Asset-based credit facility
    
    
    11,050
    
    
    
    6,109Total current liabilities
    
    
    25,912
    
    
    
    24,480Notes payable, less unaccreted discount of $245 and $313 at
September 30, 2006 and December 31, 2005, respectively
    
    
    9,255
    
    
    
    9,187Long-term portion of capital lease and other long-term liabilities
    
    
    111
    
    
    
    Total liabilities
    
    
    35,278
    
    
    
    33,667Shareholders equity:Common stock, $.01 par value  Authorized shares  40,000; Issued
shares  9,390 shares at September 30, 2006 and 9,384 shares at
December 31, 2005
    
    
    94
    
    
    
    94Additional paid-in capital
    
    
    37,778
    
    
    
    37,548Retained deficit
    
    
    (23,515
    )
    
    
    (19,408
    )Accumulated other comprehensive income
    
    
    411
    
    
    
    397Total shareholders equity
    
    
    14,768
    
    
    
    18,631Total liabilities and shareholders equity
    
    $
    50,046
    
    
    $
    52,298
   - 4 -




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(In thousands except per share data)
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    21,217
    
    
    $
    30,213
    
    
    $
    82,813
    
    
    $
    107,746Cost of goods sold
    
    
    15,201
    
    
    
    20,886
    
    
    
    58,567
    
    
    
    75,367Gross profit
    
    
    6,016
    
    
    
    9,327
    
    
    
    24,246
    
    
    
    32,379Operating expenses:Sales and marketing
    
    
    3,517
    
    
    
    5,006
    
    
    
    13,006
    
    
    
    17,150General and administrative
    
    
    4,297
    
    
    
    3,181
    
    
    
    11,427
    
    
    
    11,589Research and development
    
    
    899
    
    
    
    804
    
    
    
    2,867
    
    
    
    2,437Total operating expenses
    
    
    8,713
    
    
    
    8,991
    
    
    
    27,300
    
    
    
    31,176Operating income (loss)
    
    
    (2,697
    )
    
    
    336
    
    
    
    (3,054
    )
    
    
    1,203Interest and other expense (income), net
    
    
    222
    
    
    
    (336
    )
    
    
    898
    
    
    
    1,280Income (loss) from continuing operations before income taxes
    
    
    (2,919
    )
    
    
    672
    
    
    
    (3,952
    )
    
    
    (77
    )Income tax expense (benefit)
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    4Income (loss) from continuing operations
    
    
    (2,919
    )
    
    
    687
    
    
    
    (3,952
    )
    
    
    (81
    )Discontinued Operations:Loss from disposal of discontinued operations, net of taxes
    
    
    
    
    
    
    (936
    )
    
    
    
    
    
    
    (936
    )Loss from discontinued operations, net of taxes
    
    
    (47
    )
    
    
    (169
    )
    
    
    (155
    )
    
    
    (312
    )Total Loss from discontinued operations
    
    
    (47
    )
    
    
    (1,105
    )
    
    
    (155
    )
    
    
    (1,248
    )Net loss
    
    $
    (2,966
    )
    
    $
    (418
    )
    
    $
    (4,107
    )
    
    $
    (1,329
    )Net loss per common share:Income (loss) from continuing operations:Basic
    
    $
    (0.31
    )
    
    $
    0.07
    
    
    $
    (0.42
    )
    
    $
    (0.01
    )Diluted
    
    $
    (0.31
    )
    
    $
    0.07
    
    
    $
    (0.42
    )
    
    $
    (0.01
    )Loss from discontinued operations:Basic
    
    $
    (0.01
    )
    
    $
    (0.12
    )
    
    $
    (0.02
    )
    
    $
    (0.13
    )Diluted
    
    $
    (0.01
    )
    
    $
    (0.12
    )
    
    $
    (0.02
    )
    
    $
    (0.13
    )Net loss:Basic
    
    $
    (0.32
    )
    
    $
    (0.05
    )
    
    $
    (0.44
    )
    
    $
    (0.14
    )Diluted
    
    $
    (0.32
    )
    
    $
    (0.04
    )
    
    $
    (0.44
    )
    
    $
    (0.14
    )Weighted average shares:Basic
    
    
    9,388
    
    
    
    9,264
    
    
    
    9,386
    
    
    
    9,243Diluted
    
    
    9,388
    
    
    
    9,416
    
    
    
    9,386
    
    
    
    9,243
  - 5 -




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(In thousands)
 Nine months endedSeptember 30,2006
    
    
    2005Cash flow from continuing operating activities:Net loss from continuing operations
    
    $
    (3,952
    )
    
    $
    (81
    )Adjustments to reconcile net loss from continuing operations
to net cash (used in) provided by operating activities:Depreciation and amortization
    
    
    1,822
    
    
    
    3,157Gain on divestiture of business
    
    
    (142
    )
    
    
    Loss on exit of European leases
    
    
    814
    
    
    
    Loss on sale of property and equipment
    
    
    76
    
    
    
    24Share based compensation expense
    
    
    214
    
    
    
    Provision for doubtful accounts
    
    
    483
    
    
    
    462Provision for inventory
    
    
    527
    
    
    
    519Changes in operating assets and liabilities:Accounts receivable
    
    
    3,331
    
    
    
    6,463Inventories
    
    
    (5,414
    )
    
    
    10,526Prepaid expenses and other current assets
    
    
    644
    
    
    
    (1,315
    )Accounts payable
    
    
    (2,088
    )
    
    
    (8,506
    )Accrued salaries and incentives
    
    
    659
    
    
    
    195Accrued warranty
    
    
    (117
    )
    
    
    (278
    )Income taxes payable (receivable)
    
    
    122
    
    
    
    10Other accrued expenses and liabilities
    
    
    (1,185
    )
    
    
    (3,300
    )Net cash (used in) provided by operating activities
    
    
    (4,206
    )
    
    
    7,876Cash flow from investing activities:Purchases of property and equipment
    
    
    (1,137
    )
    
    
    (604
    )Proceeds from sale of property and equipment
    
    
    83
    
    
    
    125Net proceeds from divestiture of businesses
    
    
    855
    
    
    
    Decrease (increase) in other assets
    
    
    243
    
    
    
    (322
    )Net cash provided by (used in) investing activities
    
    
    44
    
    
    
    (801
    )Cash flow from financing activities:Net proceeds from (payments on) bank debt and short term notes
    
    
    4,161
    
    
    
    (7,044
    )Payments on capital lease obligations
    
    
    (29
    )
    
    
    Proceeds from employee stock purchase plan
    
    
    
    
    
    
    70Proceeds from exercise of stock options
    
    
    16
    
    
    
    Net cash provided by (used in) financing activities
    
    
    4,148
    
    
    
    (6,974
    )Effect of exchange rate changes on cash
    
    
    14
    
    
    
    (101
    )Net cash flow from continuing operations
    
    
    
    
    
    
    Net cash flow from discontinued operations
    
    
    
    
    
    
    Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    Cash flow from discontinued operations:Cash flow provided by operating activities
    
    
    35
    
    
    
    18Cash flow used in investing activities
    
    
    
    
    
    
    (18
    )Cash flow used in financing activities
    
    
    (35
    )
    
    
    Net cash flow from discontinued operations
    
    $
    
    
    
    $
    
  - 6 -




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1. Basis of Presentation
 Unaudited Interim Financial Information
    Comprehensive Loss
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands)
    
    
    (In thousands)Net loss
    
    $
    (2,966
    )
    
    $
    (418
    )
    
    $
    (4,107
    )
    
    $
    (1,329
    )Foreign currency translation adjustments
    
    
    1
    
    
    
    (13
    )
    
    
    14
    
    
    
    (101
    )Total comprehensive loss
    
    $
    (2,965
    )
    
    $
    (431
    )
    
    $
    (4,093
    )
    
    $
    (1,430
    )
 2. Share-based Compensation
   - 7 -




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WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateNumber of
    
    Exercise
    
    Contractual
    
    IntrinsicShares
    
    Price
    
    Term
    
    ValueBalance at December 31, 2005
    
    
    1,582,264
    
    
    $
    4.70Granted
    
    
    150,000
    
    
    $
    3.50Exercised
    
    
    (6,500
    )
    
    $
    2.55Terminated/expired
    
    
    (53,450
    )
    
    $
    4.20Balance at September 30, 2006
    
    
    1,672,314
    
    
    $
    4.61
    
    
    6.3 years
    
    $
    620,000
   Nine months endedSeptember 30,2006
    
    2005Expected dividend yield
    
    
    0
    %
    
    
    0
    %Expected stock price volatility
    
    
    .46
    
    
    
    .46Risk-free interest rate
    
    
    4.7
    %
    
    
    3.4
    %Expected life of options
    
    5 years
    
    5 years
   - 8 -




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Three months
    
    
    Nine monthsended
    
    
    endedSeptember 30,
    
    
    September 30,2005
    
    
    2005(In thousands,
    
    
    (In thousands,except per
    
    
    except pershare data)
    
    
    share data)Net loss as reported
    
    $
    (418
    )
    
    $
    (1,329
    )Proforma SFAS No. 123 expense
    
    
    (50
    )
    
    
    (174
    )Proforma net loss
    
    $
    (468
    )
    
    $
    (1,503
    )Proforma loss per common share:Basic
    
    $
    (0.05
    )
    
    $
    (0.16
    )Diluted
    
    $
    (0.05
    )
    
    $
    (0.16
    )
  3. Discontinued Operations
 Rockford Home Group.
    Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands)
    
    
    (In thousands)Revenues
    
    $
    16
    
    
    $
    1,496
    
    
    $
    46
    
    
    $
    5,153Cost of sales
    
    
    63
    
    
    
    887
    
    
    
    201
    
    
    
    3,113Operating expenses
    
    
    
    
    
    
    717
    
    
    
    
    
    
    
    2,288Interest and other (income) expense, net
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    1Net loss
    
    $
    (47
    )
    
    $
    (106
    )
    
    $
    (155
    )
    
    $
    (249
    )
 MB Quart
 - 9 -




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Three months ended
    
    
    Nine months endedSeptember 30, 2005
    
    
    September 30, 2005(In thousands)Revenues
    
    $
    
    
    
    $
    Cost of sales
    
    
    
    
    
    
    Operating expenses
    
    
    63
    
    
    
    63Interest and other expense, net
    
    
    
    
    
    
    Income tax (benefit) expense
    
    
    
    
    
    
    Net loss
    
    $
    (63
    )
    
    $
    (63
    )
 4. Inventories
  September 30,
    
    
    December 31,2006
    
    
    2005(In thousands)Raw materials
    
    $
    6,222
    
    
    $
    6,126Work-in-progress
    
    
    615
    
    
    
    1,494Finished goods
    
    
    15,867
    
    
    
    10,998$
    22,704
    
    
    $
    18,618
 5. Income (Loss) Per Share
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands, except per
    
    
    (In thousands, except pershare data)
    
    
    share data)Numerator:Loss income from continuing operations
    
    $
    (2,919
    )
    
    $
    687
    
    
    $
    (3,952
    )
    
    $
    (81
    )Loss from discontinued operations
    
    
    (47
    )
    
    
    (1,105
    )
    
    
    (155
    )
    
    
    (1,248
    )Net loss
    
    $
    (2,966
    )
    
    $
    (418
    )
    
    $
    (4,107
    )
    
    $
    (1,329
    )Denominator:Denominator for basic net (loss) income per share
    
    
    9,388
    
    
    
    9,264
    
    
    
    9,386
    
    
    
    9,243Effect of dilutive securities:Employee stock options
    
    
    
    
    
    
    152
    
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dilutive potential common shares
    
    
    
    
    
    
    152
    
    
    
    
    
    
    
    Denominator for diluted net (loss) income per share
    
    
    9,388
    
    
    
    9,416
    
    
    
    9,386
    
    
    
    9,243Loss income per common share:Loss income from continuing operationsBasic
    
    $
    (0.31
    )
    
    $
    0.07
    
    
    $
    (0.42
    )
    
    $
    (0.01
    )Diluted
    
    $
    (0.31
    )
    
    $
    0.07
    
    
    $
    (0.42
    )
    
    $
    (0.01
    )Loss from discontinued operationsBasic
    
    $
    (0.01
    )
    
    $
    (0.12
    )
    
    $
    (0.02
    )
    
    $
    (0.13
    )Diluted
    
    $
    (0.01
    )
    
    $
    (0.12
    )
    
    $
    (0.02
    )
    
    $
    (0.13
    )Net lossBasic
    
    $
    (0.32
    )
    
    $
    (0.05
    )
    
    $
    (0.44
    )
    
    $
    (0.14
    )Diluted
    
    $
    (0.32
    )
    
    $
    (0.04
    )
    
    $
    (0.44
    )
    
    $
    (0.14
    )
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6. Notes Payable and Long-Term Debt
  Balance Sheet
Classification of Borrowings Outstanding under Revolving Credit Agreements That Include both a
Subjective Acceleration Clause and a Lock-Box Arrangement
  7. Disposal Of Assets
 Q-Logic.
 MB Quart.
 8. Restructuring
  - 11 -




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- 12 -




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Continuing
Operations
  Overview
       - 13 -




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Adoption of SFAS No. 123R
  Results of Operations
  Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    71.6
    
    
    
    69.1
    
    
    
    70.7
    
    
    
    70.0Gross profit
    
    
    28.4
    
    
    
    30.9
    
    
    
    29.3
    
    
    
    30.0Operating expenses:Sales and marketing
    
    
    16.6
    
    
    
    16.6
    
    
    
    15.7
    
    
    
    15.9General and administrative
    
    
    20.3
    
    
    
    10.5
    
    
    
    13.8
    
    
    
    10.7Research and development
    
    
    4.2
    
    
    
    2.7
    
    
    
    3.5
    
    
    
    2.3Total operating expenses
    
    
    41.1
    
    
    
    29.8
    
    
    
    33.0
    
    
    
    28.9Operating income (loss)
    
    
    (12.7
    )
    
    
    1.1
    
    
    
    (3.7
    )
    
    
    1.1Interest and other expense, net
    
    
    1.1
    
    
    
    (1.1
    )
    
    
    1.1
    
    
    
    1.2Income (loss) from continuing
operations before income tax
    
    
    (13.8
    )
    
    
    2.2
    
    
    
    (4.8
    )
    
    
    (0.1
    )Income tax expense (benefit)
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    Income (loss) from continuing operations
    
    
    (13.8
    )
    
    
    2.3
    
    
    
    (4.8
    )
    
    
    (0.1
    )Loss from discontinued operations
    
    
    (0.2
    )
    
    
    (3.7
    )
    
    
    (0.2
    )
    
    
    (1.1
    )Net loss
    
    
    (14.0
    )%
    
    
    (1.4
    )%
    
    
    (5.0
    )%
    
    
    (1.2
    )%
     - 14 -




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Geographic Distribution of Sales
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands)
    
    
    (In thousands)Region:(1)United States
    
    $
    17,319
    
    
    $
    24,670
    
    
    $
    69,362
    
    
    $
    89,170Other Americas
    
    
    2,320
    
    
    
    2,301
    
    
    
    6,649
    
    
    
    7,747Europe
    
    
    913
    
    
    
    2,095
    
    
    
    4,267
    
    
    
    7,353Asia
    
    
    665
    
    
    
    1,147
    
    
    
    2,535
    
    
    
    3,476Total sales
    
    $
    21,217
    
    
    $
    30,213
    
    
    $
    82,813
    
    
    $
    107,746
 
 (1)
    
    Sales are attributed to geographic regions based on the location of customers. No single
foreign country accounted for greater than 10% of sales. In the following discussion, certain increases or decreases may differ due to rounding
 Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005
 Net Sales
  Gross Profit
 Sales and Marketing Expenses.
 General and Administrative Expenses.
 Research and Development Expenses
 - 15 -




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##### Table of Contents



Operating Income (loss)
 Interest and Other Expense (Income), Net
 Income Tax Expense (Benefit).
 Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005
 Net Sales
  Gross Profit
 Sales and Marketing Expenses.
 General and Administrative Expenses.
 Research and Development Expenses
 - 16 -




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##### Table of Contents



Operating Income (loss)
 Interest and Other Expense (Income), Net
 Income Tax Expense (Benefit).
 Liquidity and Capital Resources
      - 17 -




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##### Table of Contents




    
    Rockford had no cash and cash equivalents at September 30, 2006 and December 31, 2005.
Due to the daily sweep of cash by Wachovia Capital, described below, Rockford has
reclassified cash and cash equivalents against its asset-based line of credit balance.
    
    Rockfords net accounts receivable were $19.5 million at September 30, 2006 compared to
$24.7 million at December 31, 2005. The decrease in the accounts receivable balance is
primarily due to the decrease in net sales in the third quarter of 2006 compared to the
fourth quarter of 2005 partially offset by the reduction of trade receivables related to the
divestiture of Rockfords Q-Logic enclosure business.
    
    Rockfords inventory position increased from $18.6 million at the end of 2005 to $22.7
million at September 30, 2006. This inventory increase was primarily due to a higher level
of finished goods because sales were less than expected in the third quarter and because
Rockford built out some existing products prior to planned 2007 product introductions,
partially offset by the divestiture of the Q-Logic enclosure business.
    
    Accounts payable decreased $2.6 million, from $10.2 million at December 31, 2005 to $7.5
million at September 30, 2006. This decrease was primarily due to reduced purchases
resulting from lower sales and the build out of products using existing raw materials
inventory.
 Balance Sheet
Classification of Borrowings Outstanding under Revolving Credit Agreements That Include both a
Subjective Acceleration Clause and a Lock-Box Arrangement
   - 18 -




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##### Table of Contents



Contractual Obligations as of September 30, 2006
  Payments due by periodLess than
    
    More thanContractual Obligations
    
    Total
    
    1 year
    
    1-3 years
    
    3-5 years
    
    5 yearsAsset-based credit facility
    
    $
    12,328
    
    
    $
    1,022
    
    
    $
    11,306
    
    
    
    
    
    
    
    Notes payable
    
    $
    10,676
    
    
    $
    428
    
    
    $
    428
    
    
    $
    9,820
    
    
    
    Capital leases and other long-term liabilities
    
    $
    153
    
    
    $
    42
    
    
    $
    97
    
    
    $
    14
    
    
    
    Operating Leases
    
    $
    4,458
    
    
    $
    1,981
    
    
    $
    2,337
    
    
    $
    140
    
    
    
    
   Critical Accounting Policies and Estimates
  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
   Share-Based Compensation.
 - 19 -




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##### Table of Contents



Intangible Assets. Business
Combinations Goodwill and Other Intangible Assets.
 Allowance for Doubtful Accounts.
 Inventory.
 Warranty.
 Income Taxes.
 Inflation
  New Accounting Standards
 Accounting for Servicing of Financial Assets Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities
 Accounting Changes and Error Corrections Accounting Changes Reporting
Accounting Changes in Interim Financial Statements
 - 20 -




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##### Table of Contents



Accounting for Certain Hybrid Financial
Instruments  An Amendment of FASB Statement No. 133 and 140
 Accounting for Uncertainty in
Income Taxes Accounting for Income
Taxes.
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
     - 21 -




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##### Table of Contents



Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
    Material Weaknesses of Disclosure Controls and Procedures
  
 Part II. Other Information
 
 Item 1. Legal Proceedings
 th st
  
 Item 1A. Risk Factors
  - 22 -




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##### Table of Contents



Item 6. Exhibits and Reports on Form 8-K
  ExhibitNumber
    
    Description of Document3.1
    
    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
    
    Specimen Common Stock Certificate+4.2
    
    Reference is made to the Articles of Incorporation, as amended, and the Restated Bylaws,
as amended, filed as Exhibits 3.1, 3.2, 3.3, 3.4, 3.5 and 3.7 for a description of the
rights of the holders of Common Stock.10.74
    
    Fifth amendment to Loan and Security Agreement and Consent, dated August 31, 2006, among
Rockford, Rockfords wholly owned subsidiary Audio Innovations, Inc. (AII), and Wachovia
Capital Finance Corporation (Western).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.
 
 +
    
    Previously filed with our registration statement on Form S-1, which the SEC declared effective on April 19, 2000 and/or
amendments++
    
    Previously filed on August 11, 2000 with our Quarterly Report on Form 10-Q for the quarter ended September 30, 2000. (b)
    
    During the period from July 1, 2006, through September 30, 2006, Rockford filed the following
reports on Form 8-K.
 
    
    August 7, 2006 report disclosing on Item 9 that Rockford had issued a news release
regarding Rockfords results of operations for the quarter ended June 30, 2006. This report
furnished a copy of the press release under Item 9 of Form 8-K.
    
    August 18, 2006 report disclosing on Item 9 that Rockford had issued a news release
regarding Rockfords appointment of William R. Jackson to President and Michael Chass as
Vice President  Sales. This report furnished a copy of the press release under Item 9 of
Form 8-K.
    
    August 21, 2006 report disclosing on Item 2 that Rockford committed itself to further
streamlining of its operations resulting in significant staff reductions.
    
    September 8, 2006 report disclosing on Item 9 that Rockford had entered into a fifth
amendment to loan and security agreement, dated August 31, 2006 among Rockford, Rockfords
wholly owned subsidiary Audio Innovations, Inc. and Wachovia Capital Finance Corporation.
 - 23 -




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##### Table of Contents



SIGNATURES
  ROCKFORD CORPORATIONDate: November 9, 2006
    By:
    /s/ Richard G. VasekRichard G. VasekVice President of Finance,
Chief Financial Officer and Secretary
(Principal Financial Officer and Duly Authorized Officer) - 24 -




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description of Document3.1
    
    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
    
    Specimen Common Stock Certificate+4.2
    
    Reference is made to the Articles of Incorporation, as amended, and the Restated
Bylaws, as amended, filed as Exhibits 3.1, 3.2, 3.3, 3.4, 3.5 and 3.7 for a
description of the rights of the holders of Common Stock.10.74
    
    Fifth amendment to Loan and Security Agreement and Consent, dated August 31, 2006,
among Rockford, Rockfords wholly owned subsidiary Audio Innovations, Inc. (AII),
and Wachovia Capital Finance Corporation (Western).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.
 
 +
    
    Previously filed with our registration statement on Form S-1, which the SEC declared effective on April 19, 2000 and/or
amendments++
    
    Previously filed on August 11, 2000 with our Quarterly Report on Form 10-Q for the quarter ended September 30, 2000. - 25 -