##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

xbox   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

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    xbox     No    box

Indicate the number of shares of each of the issuers classes of common stock,
as of the latest practical date:

As of June 30, 2002, there were 8,598,204 shares of Common Stock, $.01 par
value per share, outstanding.





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TABLE OF CONTENTS



|                              |                                                                                               |                                                      |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                                 
|                              |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | CONDENSED CONSOLIDATED INCOME STATEMENTS            
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | Notes to Condensed Consolidated Financial Statements
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Part II. Other Information   
|                              | Item 1.     Legal Proceedings.                                                               
|                              | Item 4.     Submission of Matters to a Vote of Security Holders                              
|                              | Item 6.     Exhibits and Reports on Form 8-K                                                 
|SIGNATURES                   
|Exhibit Index                



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##### Table of Contents



ROCKFORD CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

|           |  |                                                     |  |                                                                                              |    |  |      |  | 
|---------- |  | --------------------------------------------------- |  | -------------------------------------------------------------------------------------------- | -- |  | ---- |  | 
|           |  |                                                     |  |                                                                                              |    |  | Page
|           |  |                                                     |  |                                                                                              |    |  |     
|Part I:    |  | Financial Information                               |  |                                                                                              |    | 
|          
|          
|          
|          
|Item 1.    |  | Financial Statements (Unaudited)                    |  |                                                                                              |    | 
|          
|          
|          
|          
|           |  |                                                     |  | Condensed Consolidated Balance Sheets 
June 30, 2002 and December 31, 2001                  |    |  | 1    | 
|          
|          
|          
|          
|           |  |                                                     |  | Condensed Consolidated Income Statements 
Three and Six Months Ended June 30, 2002 and 2001 |    |  | 2    | 
|          
|          
|          
|          
|           |  |                                                     |  | Condensed Consolidated Statements of Cash Flows 
Six Months Ended June 30, 2002 and 2001    |    |  | 3    | 
|          
|          
|          
|          
|           |  |                                                     |  | Notes to Condensed Consolidated Financial Statements  June 30, 2002                         |    |  | 4    | 
|          
|          
|          
|          
|Item 2.    |  | Managements Discussion and Analysis of Financial   |  |                                                                                              | 7  | 
|          
|          
|          
|          
|           |  |                                                     |  | Condition and Results of Operations                                                          |    |  |      | 
|          
|          
|          
|          
|Part II:   |  | Other Information                                   |  |                                                                                              |    | 
|          
|          
|          
|          
|Item 1.    |  | Legal Proceedings                                   |  |                                                                                              | 14 | 
|          
|          
|          
|          
|Item 4.    |  | Submission of Matters to a Vote of Security Holders |  |                                                                                              | 14 | 
|          
|          
|          
|          
|Item 6.    |  | Exhibits and Reports on Form 8-K                    |  |                                                                                              | 15 | 
|          
|          
|          
|          
|Signatures |  |                                                     |  |                                                                                              |    |  |     





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##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Financial Statements




ROCKFORD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

|                                                       |                                               |                                                                                                                                                     |        |                                  |        |              |        |      |        | 
|------------------------------------------------------ | --------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------- | ------ | -------------------------------- | ------ | ------------ | ------ | ---- | ------ | 
|                                                       |                                               |                                                                                                                                                     |        | June 30,                         |        | December 31,
|                                                       |                                               |                                                                                                                                                     |        | 2002                             |        | 2001        
|                                                       |                                               |                                                                                                                                                     |        |                                  |        |             
|                                                       |                                               |                                                                                                                                                     |        | (Unaudited)                      |        | (Note)      
|                                                       |                                               |                                                                                                                                                     |        | (In thousands except share data)
|Assets                                                 |                                               |                                                                                                                                                     |        |                                  |        |              |        |     
|                                                      
|                                                      
|                                                      
|                                                      
|Current assets:                                        |                                               |                                                                                                                                                     |        |                                  |        |              |        |     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Cash                                                                                                                                                |        | $                                | 706    |              |        | $    | 2,411  | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Accounts receivable, less allowances of $4,093 and $2,613 at
June 30, 2002 and December 31, 2001, respectively                                      |        |                                  | 42,512 |              |        |      | 28,036 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Inventories, net                                                                                                                                    |        |                                  | 28,567 |              |        |      | 28,165 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Deferred income taxes                                                                                                                               |        |                                  | 4,491  |              |        |      | 4,500  | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Income taxes receivable                                                                                                                             |        |                                  |       |              |        |      | 1,874  | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Prepaid expenses and other                                                                                                                          |        |                                  | 3,816  |              |        |      | 3,371  | 
|                                                       |                                               |                                                                                                                                                     |        |                                  |        |              |        |      |        | 
|Total current assets                                   |                                               |                                                                                                                                                     | 80,092 |                                  |        |              | 68,357 |     
|                                                      
|                                                      
|                                                      
|                                                      
|Property and equipment, net                            |                                               |                                                                                                                                                     | 10,550 |                                  |        |              | 9,976  |     
|                                                      
|                                                      
|                                                      
|                                                      
|Deferred income taxes                                  |                                               |                                                                                                                                                     | 394    |                                  |        |              | 394    |     
|                                                      
|                                                      
|                                                      
|                                                      
|Goodwill, net                                          |                                               |                                                                                                                                                     | 6,066  |                                  |        |              | 6,303  |     
|                                                      
|                                                      
|                                                      
|                                                      
|Other assets                                           |                                               |                                                                                                                                                     | 1,786  |                                  |        |              | 924    |     
|                                                       |                                               |                                                                                                                                                     |        |                                  |        |              |        |      |        | 
|Total Assets                                           |                                               | $                                                                                                                                                   | 98,888 |                                  |        | $            | 85,954 |     
|                                                       |                                               |                                                                                                                                                     |        |                                  |        |              |        |      |        | 
|Liabilities and shareholders equity                   |                                               |                                                                                                                                                     |        |                                  |        |              |        |     
|                                                      
|                                                      
|                                                      
|                                                      
|Current liabilities:                                   |                                               |                                                                                                                                                     |        |                                  |        |              |        |     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Accounts payable                                                                                                                                    |        | $                                | 10,851 |              |        | $    | 9,089  | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Accrued salaries and incentives                                                                                                                     |        |                                  | 3,883  |              |        |      | 2,451  | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Accrued warranty                                                                                                                                    |        |                                  | 4,674  |              |        |      | 4,815  | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Other accrued expenses                                                                                                                              |        |                                  | 7,801  |              |        |      | 5,210  | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Income taxes payable                                                                                                                                |        |                                  | 685    |              |        |      |       | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Current portion of notes payable, long-term debt and capital
lease obligations                                                                      |        |                                  | 1,956  |              |        |      | 879    | 
|                                                       |                                               |                                                                                                                                                     |        |                                  |        |              |        |      |        | 
|Total current liabilities                              |                                               |                                                                                                                                                     | 29,850 |                                  |        |              | 22,444 |     
|                                                      
|                                                      
|                                                      
|                                                      
|Notes payable and long-term debt, less current portion |                                               |                                                                                                                                                     | 7,750  |                                  |        |              | 9,720  |     
|                                                      
|                                                      
|                                                      
|                                                      
|Capital lease obligations, less current portion        |                                               |                                                                                                                                                     | 582    |                                  |        |              | 833    |     
|                                                      
|                                                      
|                                                      
|                                                      
|Shareholders equity:                                  |                                               |                                                                                                                                                     |        |                                  |        |              |        |     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Common stock, $.01 par value  Authorized shares - 40,000,000
Issued shares - 8,598,204 shares at June 30, 2002, and
8,196,619 at December 31, 2001 |        |                                  | 86     |              |        |      | 82     | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Additional paid-in capital                                                                                                                          |        |                                  | 31,233 |              |        |      | 30,341 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Retained earnings                                                                                                                                   |        |                                  | 28,683 |              |        |      | 22,918 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Accumulated other comprehensive income (loss) |                                                                                                                                                     |        | 704                              |        |              |        | (384 | )     
|                                                       |                                               |                                                                                                                                                     |        |                                  |        |              |        |      |        | 
|Total shareholders equity                             |                                               |                                                                                                                                                     | 60,706 |                                  |        |              | 52,957 |     
|                                                       |                                               |                                                                                                                                                     |        |                                  |        |              |        |      |        | 
|Total liabilities and shareholders equity             |                                               | $                                                                                                                                                   | 98,888 |                                  |        | $            | 85,954 |     
|                                                       |                                               |                                                                                                                                                     |        |                                  |        |              |        |      |        | 

Note: The balance sheet at December 31, 2001, has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. See notes to condensed
consolidated financial statements.

1



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##### Table of Contents



ROCKFORD CORPORATION AND SUBSIDIARIES




CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)

|                                         |                            |   |                                       |       |                  |   |        |       |      |   |        |        |  |   |        |        | 
|---------------------------------------- | -------------------------- | - | ------------------------------------- | ----- | ---------------- | - | ------ | ----- | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                         |                            |   | Three months ended                    |       | Six months ended
|                                         |                            |   | June 30,                              |       | June 30,        
|                                         |                            |   | 2002                                  |       | 2001             |   | 2002   |       | 2001
|                                         |                            |   |                                       |       |                  |   |        |       |     
|                                         |                            |   | (In thousands, except per share data)
|Revenues                                 |                            | $ | 51,228                                |       |                  | $ | 44,803 |       |      | $ | 94,961 |        |  | $ | 82,166 |       
|                                        
|                                        
|                                        
|                                        
|Cost of goods sold                       |                            |   | 31,199                                |       |                  |   | 29,306 |       |      |   | 58,410 |        |  |   | 53,389 |       
|                                         |                            |   |                                       |       |                  |   |        |       |      |   |        |        |  |   |        |        | 
|Gross profit                             |                            |   | 20,029                                |       |                  |   | 15,497 |       |      |   | 36,551 |        |  |   | 28,777 |       
|                                        
|                                        
|                                        
|                                        
|Operating expenses:                      |                            |   |                                       |       |                  |   |        |       |      |   |        |        |  |   |        |       
|                                        
|                                        
|                                        
|                                        
|                                         | Sales and marketing        |   |                                       | 7,594 |                  |   |        | 6,235 |      |   |        | 14,838 |  |   |        | 12,015 | 
|                                        
|                                        
|                                        
|                                        
|                                         | General and administrative |   |                                       | 5,925 |                  |   |        | 4,326 |      |   |        | 10,576 |  |   |        | 7,700  | 
|                                        
|                                        
|                                        
|                                        
|                                         | Research and development   |   |                                       | 1,148 |                  |   |        | 691   |      |   |        | 2,124  |  |   |        | 1,461  | 
|                                         |                            |   |                                       |       |                  |   |        |       |      |   |        |        |  |   |        |        | 
|Total operating expenses                 |                            |   | 14,667                                |       |                  |   | 11,252 |       |      |   | 27,538 |        |  |   | 21,176 |       
|                                         |                            |   |                                       |       |                  |   |        |       |      |   |        |        |  |   |        |        | 
|Operating income                         |                            |   | 5,362                                 |       |                  |   | 4,245  |       |      |   | 9,013  |        |  |   | 7,601  |       
|                                        
|                                        
|                                        
|                                        
|Interest and other expense (income), net |                            |   | (337                                  | )     |                  |   | 96     |       |      |   | (152   | )      |  |   | 300    |       
|                                         |                            |   |                                       |       |                  |   |        |       |      |   |        |        |  |   |        |        | 
|Income before income tax                 |                            |   | 5,699                                 |       |                  |   | 4,149  |       |      |   | 9,165  |        |  |   | 7,301  |       
|                                        
|                                        
|                                        
|                                        
|Income tax expense                       |                            |   | 2,112                                 |       |                  |   | 1,563  |       |      |   | 3,400  |        |  |   | 2,723  |       
|                                         |                            |   |                                       |       |                  |   |        |       |      |   |        |        |  |   |        |        | 
|Net income                               |                            |   | 3,587                                 |       |                  |   | 2,586  |       |      |   | 5,765  |        |  | $ | 4,578  |       
|                                         |                            |   |                                       |       |                  |   |        |       |      |   |        |        |  |   |        |        | 
|Net income per share:                    |                            |   |                                       |       |                  |   |        |       |      |   |        |        |  |   |        |       
|                                        
|                                        
|                                        
|                                        
|                                         | Basic                      |   | $                                     | 0.42  |                  |   | $      | 0.32  |      |   | $      | 0.69   |  |   | $      | 0.57   | 
|                                         |                            |   |                                       |       |                  |   |        |       |      |   |        |        |  |   |        |        | 
|                                         | Diluted                    |   | $                                     | 0.38  |                  |   | $      | 0.29  |      |   | $      | 0.62   |  |   | $      | 0.51   | 
|                                         |                            |   |                                       |       |                  |   |        |       |      |   |        |        |  |   |        |        | 
|Weighted average shares:                 |                            |   |                                       |       |                  |   |        |       |      |   |        |        |  |   |        |       
|                                        
|                                        
|                                        
|                                        
|                                         | Basic                      |   |                                       | 8,508 |                  |   |        | 8,082 |      |   |        | 8,392  |  |   |        | 8,044  | 
|                                         |                            |   |                                       |       |                  |   |        |       |      |   |        |        |  |   |        |        | 
|                                         | Diluted                    |   |                                       | 9,384 |                  |   |        | 8,925 |      |   |        | 9,303  |  |   |        | 8,903  | 
|                                         |                            |   |                                       |       |                  |   |        |       |      |   |        |        |  |   |        |        | 

See notes to condensed consolidated financial statements.

2



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##### Table of Contents






CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

|                                                                                            |                                    |   |                                                     |         |                           |        |        |        |   |        |  
|------------------------------------------------------------------------------------------- | ---------------------------------- | - | --------------------------------------------------- | ------- | ------------------------- | ------ | ------ | ------ | - | ------ | -
|                                                                                            |                                    |   |                                                     |         | Six months ended June 30,
|                                                                                            |                                    |   |                                                     |         |                          
|                                                                                            |                                    |   |                                                     |         | 2002                      |        | 2001  
|                                                                                            |                                    |   |                                                     |         |                           |        |       
|                                                                                            |                                    |   |                                                     |         | (In thousands)           
|Operating activities                                                                        |                                    |   |                                                     |         |                           |        |        |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Net income                                                                                  |                                    | $ | 5,765                                               |         |                           | $      | 4,578  |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Adjustments to reconcile net income to net cash
provided by (used in) operating activities: |                                    |   |                                                     |         |                           |        |        |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Depreciation and amortization      |   |                                                     | 2,404   |                           |        |        | 1,688  |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Gain on sale of fixed assets       |   |                                                     | (10     | )                         |        |        | (4     | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Provision for doubtful accounts    |   |                                                     | 498     |                           |        |        | 465    |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Provision for inventory allowances |   |                                                     | 704     |                           |        |        | 784    |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Changes in operating assets and liabilities:                                                |                                    |   |                                                     |         |                           |        |        |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Accounts receivable                |   |                                                     | (14,982 | )                         |        |        | (6,875 | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Inventories                        |   |                                                     | (1,143  | )                         |        |        | (5,497 | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Prepaid expenses and other assets  |   |                                                     | 1,430   |                           |        |        | (1,038 | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Accounts payable                   |   |                                                     | 1,762   |                           |        |        | 4,583  |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Accrued salaries and incentives    |   |                                                     | 1,432   |                           |        |        | (507   | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Accrued warranty                   |   |                                                     | (141    | )                         |        |        | 41     |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Income taxes payable (receivable)  |   |                                                     | 685     |                           |        |        | 20     |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Other accrued expenses             |   |                                                     | 2,588   |                           |        |        | 738    |  
|                                                                                            |                                    |   |                                                     |         |                           |        |        |       
|                                                                                            |                                    |   | Net cash provided by (used in)
operating activities |         |                           | 992    |        |        |   | (1,024 | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Investing activities                                                                       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Purchases of property and equipment                                                         |                                    |   | (2,977                                              | )       |                           |        | (2,764 | )     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Proceeds from sale of property and equipment                                                |                                    |   | 10                                                  |         |                           |        | 4      |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Acquisitions of business, net of cash acquired                                              |                                    |   | 55                                                  |         |                           |        |       |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Decrease (increase) in other assets                                                         |                                    |   | (625                                                | )       |                           |        | 170    |       
|                                                                                            |                                    |   |                                                     |         |                           |        |        |       
|                                                                                            |                                    |   | Net cash used in investing activities               |         |                           | (3,537 | )      |        |   | (2,590 | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Financing activities                                                                        |                                    |   |                                                     |         |                           |        |        |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Net proceeds from notes payable, long-term debt                                             |                                    |   | 1,210                                               |         |                           |        | 2,068  |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Payments on notes payable and long-term debt                                                |                                    |   | (1,970                                              | )       |                           |        |       |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Payments on capital lease obligations                                                       |                                    |   | (384                                                | )       |                           |        | (409   | )     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Proceeds from the exercise of stock options and
warrants                                    |                                    |   | 896                                                 |         |                           |        | 437    |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Proceeds from sale of capital stock                                                         |                                    |   |                                                    |         |                           |        | 121    |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Treasury shares purchased                                                                   |                                    |   |                                                    |         |                           |        | (6     | )     
|                                                                                            |                                    |   |                                                     |         |                           |        |        |       
|                                                                                            |                                    |   | Net cash provided by (used in)
financing activities |         |                           | (248   | )      |        |   | 2,211  |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Effect of exchange rate changes on cash                                                     |                                    |   | 1,088                                               |         |                           |        | (236   | )     
|                                                                                            |                                    |   |                                                     |         |                           |        |        |       
|Net decrease in cash and cash equivalents                                                   |                                    |   | (1,705                                              | )       |                           |        | (1,639 | )     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Cash and cash equivalents at beginning of period                                            |                                    |   | 2,411                                               |         |                           |        | 2,750  |       
|                                                                                            |                                    |   |                                                     |         |                           |        |        |       
|Cash and cash equivalents at end of period                                                  |                                    | $ | 706                                                 |         |                           | $      | 1,111  |       
|                                                                                            |                                    |   |                                                     |         |                           |        |        |       

See notes to condensed consolidated financial statements.

3



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##### Table of Contents



Rockford Corporation and Subsidiaries




Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 2002

1. Basis of Presentation

We have prepared our unaudited condensed consolidated financial statements
in accordance with accounting principles generally accepted in the United
States for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, we have made
all adjustments (consisting of normal recurring accruals) necessary for a fair
presentation.

Operating results for the three-month and six-month periods ended June 30,
2002, are not necessarily indicative of the results you may expect for the year
ending December 31, 2002.

For further information, refer to the consolidated financial statements
and footnotes included as part of our Form 10-K for the year ended December 31,
2001, filed with the SEC on March 29, 2002.

2. Inventories

Inventories consist of the following:

|                 |  |                |        |              |  |   |        |  
|---------------- |  | -------------- | ------ | ------------ |  | - | ------ | -
|                 |  | June 30,       |        | December 31,
|                 |  | 2002           |        | 2001        
|                 |  |                |        |             
|                 |  | (In thousands)
|Raw materials    |  | $              | 11,038 |              |  | $ | 9,361  |  
|                
|                
|                
|                
|Work in progress |  |                | 1,065  |              |  |   | 1,424  |  
|                
|                
|                
|                
|Finished goods   |  |                | 19,404 |              |  |   | 20,263 |  
|                 |  |                |        |              |  |   |        |  
|                 |  |                | 31,507 |              |  |   | 31,048 |  
|                
|                
|                
|                
|Less allowances  |  |                | (2,940 | )            |  |   | (2,883 | )
|                 |  |                |        |              |  |   |        |  
|                 |  | $              | 28,567 |              |  | $ | 28,165 |  
|                 |  |                |        |              |  |   |        |  

4



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##### Table of Contents



Rockford Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)(continued)

3. Earnings Per Share

The following table sets forth the computation of basic and diluted net income
per share:

|                                                                               |                                                                                          |                        |       |                                       |     |                  |       |       |     |      |       |       |     |   |       |       |     | 
|------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------- | ---------------------- | ----- | ------------------------------------- | --- | ---------------- | ----- | ----- | --- | ---- | ----- | ----- | --- | - | ----- | ----- | --- | 
|                                                                               |                                                                                          |                        |       | Three months ended                    |     | Six months ended
|                                                                               |                                                                                          |                        |       | June 30,                              |     | June 30,        
|                                                                               |                                                                                          |                        |       | 2002                                  |     | 2001             |       | 2002  |     | 2001
|                                                                               |                                                                                          |                        |       |                                       |     |                  |       |       |     |     
|                                                                               |                                                                                          |                        |       | (In thousands, except per share data)
|Numerator:                                                                     |                                                                                          |                        |       |                                       |     |                  |       |       |     |      |       |       |     |   |       |      
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Numerator for diluted net income per share                                               |                        | $     | 3,587                                 |     |                  | $     | 2,586 |     |      | $     | 5,765 |     |   | $     | 4,578 |    
|                                                                               |                                                                                          |                        |       |                                       |     |                  |       |       |     |      |       |       |     |   |       |       |    
|                                                                               | Denominator for basic net income per
share, weighted                      average shares |                        |       | 8,508                                 |     |                  |       | 8,082 |     |      |       | 8,392 |     |   |       | 8,044 |    
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Effect of dilutive securities:                                                           |                        |       |                                       |     |                  |       |       |     |      |       |       |     |   |       |       |    
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               |                                                                                          | Employee stock options |       |                                       | 869 |                  |       |       | 837 |      |       |       | 904 |   |       |       | 853 | 
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               |                                                                                          | Warrants               |       |                                       | 7   |                  |       |       | 6   |      |       |       | 7   |   |       |       | 6   | 
|                                                                               |                                                                                          |                        |       |                                       |     |                  |       |       |     |      |       |       |     |   |       |       |    
|                                                                               | Dilutive potential common shares                                                         |                        |       | 876                                   |     |                  |       | 843   |     |      |       | 911   |     |   |       | 859   |    
|                                                                               |                                                                                          |                        |       |                                       |     |                  |       |       |     |      |       |       |     |   |       |       |    
|Denominator for diluted net income per
share, adjusted weighted average
shares |                                                                                          |                        | 9,384 |                                       |     |                  | 8,925 |       |     |      | 9,303 |       |     |   | 8,903 |      
|                                                                               |                                                                                          |                        |       |                                       |     |                  |       |       |     |      |       |       |     |   |       |       |    
|Basic net income per share                                                     |                                                                                          | $                      | 0.42  |                                       |     | $                | 0.32  |       |     | $    | 0.69  |       |     | $ | 0.57  |      
|                                                                               |                                                                                          |                        |       |                                       |     |                  |       |       |     |      |       |       |     |   |       |       |    
|Diluted net income per share                                                   |                                                                                          | $                      | 0.38  |                                       |     | $                | 0.29  |       |     | $    | 0.62  |       |     | $ | 0.51  |      
|                                                                               |                                                                                          |                        |       |                                       |     |                  |       |       |     |      |       |       |     |   |       |       |    

4. Adoption of Accounting Standard

On January 1, 2002, we adopted Statement of Financial Accounting Standards
(SFAS) No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. When we account for acquired businesses as purchases, we
allocate purchase prices to the assets and liabilities acquired based on the
estimated fair values on the respective acquisition dates. Based on these
values, any excess purchase price over the fair value of the net assets
acquired is allocated to goodwill.

Prior to January 1, 2002, we amortized goodwill over the useful life of
the underlying asset, not to exceed 15 years. On January 1, 2002, we began
accounting for goodwill under the provisions of SFAS Nos. 141 and 142. As at
June 30, 2002, we had gross goodwill of $6,467,000 and accumulated amortization
of $401,000. We completed two acquisitions in the third quarter of 2001 and
have not recorded any amortization for these acquisitions on amounts
preliminarily allocated to goodwill in accordance with SFAS No. 141.
Application of the non-amortization provisions of SFAS No. 142 is expected to
result in an increase in income from continuing operations before income taxes
of approximately $168,000 in 2002.

In assessing the recoverability of our goodwill and other intangibles, we
must make assumptions about estimated future cash flows and other factors to
determine the fair value of the respective assets. If these estimates or their
related assumptions change in the future, we may be required to record
impairment charges for these assets not previously recorded. Some factors we
consider important which could trigger an impairment review include the
following:



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

5



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##### Table of Contents



Rockford Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)(continued)

We have tested goodwill for impairment using the two-step process prescribed in
SFAS No. 142. The first step is a screen for potential impairment, while the
second step measures the amount of the impairment, if any. We performed the
first of the required impairment tests for goodwill as at June 30, 2002, and
determined that the carrying amount of our goodwill is not impaired. In
addition, we are reviewing our classification of intangible assets between
goodwill and other identifiable intangibles. During the quarter ended June 30,
2002, we did not record any impairment losses related to goodwill and other
intangible assets.

5. Accounting Policies

Revenue Recognition

We recognize revenue and record sales, net of related discounts, when all
of the following criteria are met:



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

These criteria are ordinarily satisfied and, accordingly, we recognize revenue
upon shipment of product since virtually all of our products are sold F.O.B.
our facility.

We also record reductions to revenue for estimated customer returns and
additional sales incentive offerings, such as growth and volume incentive
rebates and prompt pay discounts. We record these reductions based on
historical rates. Should a greater proportion of customers return product or
redeem incentives than our estimates, we may be required to make additional
reductions to revenue.

Property and Equipment

Property and equipment is stated at cost. Depreciation and amortization
are computed principally on the straight-line method for financial reporting
purposes over a two to ten year life. The building acquired in the MB Quart
acquisition, which is located in Obrigheim, Germany, is being depreciated over
a period of 25 years. Leasehold improvements are amortized on the straight-line
method over the shorter period of the lease term or the estimated useful life
of the asset.

Foreign Currency Translation

We have translated the financial statements of our foreign subsidiaries
into U.S. dollars in accordance with SFAS No. 52, Foreign Currency Translation.
All balance sheet accounts have been translated using the current exchange
rates at the balance sheet date. Income statement amounts have been translated
using the average exchange rate for the year. The gains and losses resulting
from the change in exchange rates from year-to-year have been reported
separately as a component of stockholders equity. Due to the recent weakening
of the U.S. dollar, we have experienced foreign currency transaction gains for
the three months ended June 30, 2002.

6



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##### Table of Contents






Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

You should read this discussion and analysis of our financial condition
and results of operations in conjunction with our unaudited condensed
consolidated financial statements and the related disclosures included
elsewhere in this report, and Managements Discussion and Analysis of Financial
Condition and Results of Operations included as part of our Form 10-K for the
year 2001, filed with the SEC on March 29, 2002.

Forward-Looking Statements

We make forward-looking statements in this report including, without
limitation, statements concerning the future of our industry, product
development, business strategy (including the possibility of future
acquisitions), continued acceptance and growth of our products, dependence on
significant customers and suppliers, and the adequacy of our available cash
resources. Our statements may contain projections of results of operations or
of financial condition. You may identify these statements by our 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 our forward-looking statements,
which speak only as at the date on which they are made. Our actual results may
differ materially from those described in our forward-looking statements. We
disclaim any obligation or undertaking to update our 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, in
our Annual Report on Form 10-K for the year 2001, filed with the SEC on March
29, 2002, and in Exhibit 99.1 to our Annual Report, Risk Factors That May
Affect Rockfords Operating Results, Business Prospects and Stock Price. The
risk factors noted throughout this report and our Annual Report, particularly
in the discussion in Exhibit 99.1 to our Annual Report, and other risk factors
that we have not anticipated or discussed, could cause our actual results to
differ significantly from those anticipated in our forward-looking statements.

Overview

Rockford designs, manufactures and distributes high-performance audio
systems for the mobile, professional and home theater markets. Our mobile audio
products are sold primarily in the worldwide mobile audio aftermarket to
consumers who want to improve the audio systems in their cars, trucks, boats
and airplanes. We market our mobile audio products under the Rockford Fosgate,
Lightning Audio, Q-Logic and MB Quart brand names, selling products that
include digital and analog amplifiers, speakers, source units, CD changers and
accessories. Based on dollar sales in 2001 of all our brands, we rank first in
U.S. market share for mobile audio amplifiers and second for mobile audio
speakers. We sell professional audio products under the Hafler and MB Quart
brands. We also sell home theater products under the MB Quart and Fosgate
Audionics brands.

We manufacture amplifiers, signal processors and various accessories at
our facilities in Tempe, Arizona, and mid-range speakers, woofers and
subwoofers at our facility in Grand Rapids, Michigan. We manufacture speaker
enclosure products at our facilities in Stillwater, Oklahoma. We manufacture
speakers, woofers, subwoofers, and headphones at our facility in Obrigheim,
Germany.

7



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##### Table of Contents



We generated over 97% of our sales in the quarter ended June 30, 2002, and
over 98% of our sales in the quarter ended June 30, 2001, from our mobile audio
products.

In the U.S., we sell our mobile audio products using commissioned
independent sales representative firms who are supported by our employee
regional managers. Internationally, we sell products in 68 countries. In Japan
and Germany we sell through wholly owned subsidiaries using commissioned
independent sales representatives. In Canada, Austria and Switzerland we sell
through commissioned independent sales representatives. In other countries, we
sell our products to independent distributors who resell them to retailers.

Sales of our mobile audio products to Best Buy accounted for 15.1% of our
sales for the six months ended June 30, 2002, and 16.6% of our sales for the
six months ended June 30, 2001. Our business plans contemplate that Best Buy
will continue to account for a significant portion of our sales for the
foreseeable future. No other single customer accounts for more than 10% of our
sales.

Results of Operations

The following table shows, for the periods indicated, selected
consolidated statements of operations data expressed as a percentage of net
sales:

|                                           |                            |  |                    |      |                  |  |       |      |      |  |       |      |  |  |       |      | 
|------------------------------------------ | -------------------------- |  | ------------------ | ---- | ---------------- |  | ----- | ---- | ---- |  | ----- | ---- |  |  | ----- | ---- | 
|                                           |                            |  | Three months ended |      | Six months ended
|                                           |                            |  | June 30,           |      | June 30,        
|                                           |                            |  | 2002               |      | 2001             |  | 2002  |      | 2001
|                                           |                            |  |                    |      |                  |  |       |      |     
|Net sales                                  |                            |  | 100.0              | %    |                  |  | 100.0 | %    |      |  | 100.0 | %    |  |  | 100.0 | %   
|                                          
|                                          
|                                          
|                                          
|Cost of goods sold                         |                            |  | 60.9               |      |                  |  | 65.4  |      |      |  | 61.5  |      |  |  | 65.0  |     
|                                           |                            |  |                    |      |                  |  |       |      |      |  |       |      |  |  |       |      | 
|Gross profit                               |                            |  | 39.1               |      |                  |  | 34.6  |      |      |  | 38.5  |      |  |  | 35.0  |     
|                                          
|                                          
|                                          
|                                          
|Operating expenses:                        |                            |  |                    |      |                  |  |       |      |      |  |       |      |  |  |       |     
|                                          
|                                          
|                                          
|                                          
|                                           | Sales and marketing        |  |                    | 14.8 |                  |  |       | 13.9 |      |  |       | 15.6 |  |  |       | 14.6 | 
|                                          
|                                          
|                                          
|                                          
|                                           | General and administrative |  |                    | 11.6 |                  |  |       | 9.7  |      |  |       | 11.2 |  |  |       | 9.3  | 
|                                          
|                                          
|                                          
|                                          
|                                           | Research and development   |  |                    | 2.2  |                  |  |       | 1.5  |      |  |       | 2.2  |  |  |       | 1.8  | 
|                                           |                            |  |                    |      |                  |  |       |      |      |  |       |      |  |  |       |      | 
|Sales, general and administrative expenses |                            |  | 28.6               |      |                  |  | 25.1  |      |      |  | 29.0  |      |  |  | 25.7  |     
|                                           |                            |  |                    |      |                  |  |       |      |      |  |       |      |  |  |       |      | 
|Operating income                           |                            |  | 10.5               |      |                  |  | 9.5   |      |      |  | 9.5   |      |  |  | 9.3   |     
|                                          
|                                          
|                                          
|                                          
|Interest and other expense (income), net   |                            |  | (0.6               | )    |                  |  | 0.2   |      |      |  | (0.2  | )    |  |  | 0.4   |     
|                                           |                            |  |                    |      |                  |  |       |      |      |  |       |      |  |  |       |      | 
|Income before tax                          |                            |  | 11.1               |      |                  |  | 9.3   |      |      |  | 9.7   |      |  |  | 8.9   |     
|                                          
|                                          
|                                          
|                                          
|Income tax expense                         |                            |  | 4.1                |      |                  |  | 3.5   |      |      |  | 3.6   |      |  |  | 3.3   |     
|                                           |                            |  |                    |      |                  |  |       |      |      |  |       |      |  |  |       |      | 
|Net income                                 |                            |  | 7.0                | %    |                  |  | 5.8   | %    |      |  | 6.1   | %    |  |  | 5.6   | %   
|                                           |                            |  |                    |      |                  |  |       |      |      |  |       |      |  |  |       |      | 

Cost of goods sold primarily consists of raw materials, direct labor and
manufacturing costs associated with production of our products as well as
warranty, warehousing and customer service expenses.

Sales and marketing expenses primarily consist of salaries, sales
commissions and costs of advertising, trade shows, distributor and sales
representative conferences and freight.

General and administrative expenses primarily consist of salaries,
facilities and other costs of our accounting, finance, management information
systems, administrative and executive departments, as well as legal, accounting
and other professional fees and expenses associated with our business.

Research and development expenses primarily consist of salaries associated
with our research and development personnel.

8



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##### Table of Contents



Geographic Distribution of Sales

Our sales by geographic region were as follows:

|               |                 |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |        | 
|-------------- | --------------- | - | ------------------ | ------ | ---------------- | - | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|               |                 |   | Three months ended |        | Six months ended
|               |                 |   | June 30,           |        | June 30,        
|               |                 |   | 2002               |        | 2001             |   | 2002   |        | 2001
|               |                 |   |                    |        |                  |   |        |        |     
|               |                 |   | (In thousands)     |        | (In thousands)  
|REGION:        |                 |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |       
|              
|              
|              
|              
|United States  |                 | $ | 42,119             |        |                  | $ | 36,733 |        |      | $ | 78,355 |        |  | $ | 68,168 |       
|              
|              
|              
|              
|Other Americas |                 |   | 1,868              |        |                  |   | 3,304  |        |      |   | 4,863  |        |  |   | 5,190  |       
|              
|              
|              
|              
|Europe         |                 |   | 5,383              |        |                  |   | 2,627  |        |      |   | 8,732  |        |  |   | 4,517  |       
|              
|              
|              
|              
|Asia           |                 |   | 1,858              |        |                  |   | 2,139  |        |      |   | 3,011  |        |  |   | 4,291  |       
|               |                 |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |        | 
|               | Total sales (1) |   | $                  | 51,228 |                  |   | $      | 44,803 |      |   | $      | 94,961 |  |   | $      | 82,166 | 
|               |                 |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |        | 



---

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

Six Months Ended June 30, 2002, Compared to Six Months Ended June 30, 2001

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

Net Sales. Sales increased by $12.8 million, or 15.6%, to $95.0 million
for the six months ended June 30, 2002, from $82.2 million for the six months
ended June 30, 2001. The increase in sales primarily was attributable to the
addition of our acquired MB Quart and Q-Logic brands, strong sales of our
Lightning Audio brand and OEM sales to Nissan. In an effort to build brand
image, we have discontinued shipping to several Rockford Fosgate brand dealers
who were not operating in a manner consistent with our policies. This reduced
sales of our Rockford Fosgate brand for the six months ended June 30, 2002.
These dealers accounted for approximately $7.6 million of sales for the six
months ended June 30, 2002. We elected to forego these sales in order to
improve the quality of our dealer base and, if our efforts are successful,
anticipate increased sales to dealers who comply with our policies will, over
time, offset the foregone sales to these terminated dealers.

U.S. sales increased by $10.2 million, or 14.9%, to $78.4 million for the
six months ended June 30, 2002, from $68.2 million for the six months ended
June 30, 2001. International sales increased by $2.6 million, or 18.6%, to
$16.6 million for the six months ended June 30, 2002, from $14.0 million for
the six months ended June 30, 2001.

Cost of Goods Sold. Cost of goods sold increased by $5.0 million, or
9.4%, to $58.4 million for the six months ended June 30, 2002, from $53.4
million for the six months ended June 30, 2001. Substantially all of the
increase was attributable to sales of our new MB Quart and Q-Logic brands. As a
percent of sales, cost of goods sold decreased to 61.5% for the six months
ended June 30, 2002, from 65.0% for the six months ended June 30, 2001. The
primary reasons for the decrease as a percent of sales included a mix shift
toward higher margined products, cost reductions related to the direct sourcing
of our Connecting Punch accessories product, reduced end-of-life discounting,
operational efficiency and leverage improvements.

Sales and Marketing Expenses. Sales and marketing expenses increased by
$2.8 million, or 23.5%, to

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##### Table of Contents



$14.8 million for the six months ended June 30, 2002, from $12.0 million
for the six months ended June 30, 2001. As a percent of sales, sales and
marketing expenses increased to 15.6% for the six months ended June 30, 2002,
from 14.6% for the six months ended June 30, 2001. The increase as a percent
of sales was primarily due to higher cost structures for our new MB Quart and
Q-Logic brands, including higher freight costs as a percent of sales associated
with shipping Q-Logic boxes.

General and Administrative Expenses. General and administrative expenses
increased by $2.9 million, or 37.3%, to $10.6 million for the six months ended
June 30, 2002, from $7.7 million for the six months ended June 30, 2001. As a
percent of sales, general and administrative expenses increased to 11.1% for
the six months ended June 30, 2002, from 9.4% for the six months ended June 30,
2001. The increase as a percent of sales is primarily due to a return to
normal level of performance-based compensation relating to achieved growth
targets, legal costs and higher cost structures for our new MB Quart and
Q-Logic brands.

Research and Development Expenses. Research and development expenses
increased by $0.6 million, or 45.4%, to $2.1 million for the six months ended
June 30, 2002, from $1.5 million for the six months ended June 30, 2001. As a
percent of sales, these expenses increased to 2.2% for the six months ended
June 30, 2002, from 1.8% for the six months ended June 30, 2001. The increase
is primarily due to increased personnel and product development costs relating
to our new MB Quart and Q-Logic brands.

Operating Income. Operating income increased by $1.4 million, or 18.6%,
to $9.0 million for the six months ended June 30, 2002, from $7.6 million for
the six months ended June 30, 2001. As a percent of sales, operating income
increased to 9.5% for the six months ended June 30, 2002, from 9.3% for the
three months ended June 30, 2001. This increase primarily is attributable to
the mix shift toward higher margined products, cost reductions related to the
direct sourcing of accessories and improvements in manufacturing efficiency and
leverage. This increase was partially offset by normalized performance-based
compensation expense and higher cost structures for our acquired MB Quart and
Q-Logic brands.

Interest and Other Expense, Net. Interest and other expense, net,
primarily consists of interest expense and currency gains and losses. Interest
and other expense, net, decreased by $0.5 million to result in income of $0.2
million for the six months ended June 30, 2002, compared to expense of $0.3
million for the six months ended June 30, 2001. The decrease was primarily due
to foreign currency gains, which were partially offset by increased interest
expense due to the increased balance of our line of credit resulting from the
MB Quart and Q-Logic brand acquisitions.

Income Tax Expense. Income tax expense increased by $0.7 million, or
24.9%, to $3.4 million for the six months ended June 30, 2002, from $2.7
million for the six months ended June 30, 2001. The effective income tax rates
were 37.1% for the six months ended June 30, 2002, and 37.3% for the six months
ended June 30, 2001.

Three Months Ended June 30, 2002, Compared to Three Months Ended June 30, 2001

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

Net Sales. Sales increased by $6.4 million, or 14.3%, to $51.2 million
for the three months ended June 30, 2002, from $44.8 million for the three
months ended June 30, 2001. The increase in sales primarily was attributable
to the addition of our acquired MB Quart and Q-Logic brands, strong sales of
our Lightning Audio brand and OEM sales to Nissan. In an effort to build brand
image, we have discontinued shipping to several Rockford Fosgate brand

10



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##### Table of Contents



dealers who were not operating in a manner consistent with our policies.
This reduced sales of our Rockford Fosgate brand for the three months ended
June 30, 2002. These dealers accounted for approximately $4.9 million of sales
for the three months ended June 30, 2002. We elected to forego these sales in
order to improve the quality of our dealer base and, if our efforts are
successful, anticipate increased sales to dealers who comply with our policies
will, over time, offset the foregone sales to these terminated dealers.

U.S. sales increased by $5.4 million, or 14.7%, to $42.1 million for the
three months ended June 30, 2002, from $36.7 million for the three months ended
June 30, 2001. International sales increased by $1.0 million, or 12.3%, to
$9.1 million for the three months ended June 30, 2002, from $8.1 million for
the three months ended June 30, 2001.

Cost of Goods Sold. Cost of goods sold increased by $1.9 million, or
6.5%, to $31.2 million for the three months ended June 30, 2002, from $29.3
million for the three months ended June 30, 2001. Substantially all of the
increase was attributable to sales of our new MB Quart and Q-Logic brands. As a
percent of sales, cost of goods sold decreased to 60.9% for the three months
ended June 30, 2002, from 65.4% for the three months ended June 30, 2001. The
primary reasons for the decrease as a percent of sales included a mix shift
toward higher margined products, cost reductions related to the direct sourcing
of our Connecting Punch accessories product, operational efficiency and
leverage improvements.

Sales and Marketing Expenses. Sales and marketing expenses increased by
$1.4 million, or 21.8%, to $7.6 million for the three months ended June 30, 2002, from $6.2 million
for the three months ended June 30, 2001. As a percent of sales, sales and
marketing expenses increased to 14.8% for the three months ended June 30, 2002,
from 13.9% for the three months ended June 30, 2001. The increase as a percent
of sales was primarily due to higher cost structures for our new MB Quart and
Q-Logic brands.

General and Administrative Expenses. General and administrative expenses
increased by $1.6 million, or 37.0%, to $5.9 million for the three months ended
June 30, 2002, from $4.3 million for the three months ended June 30, 2001. As a
percent of sales, general and administrative expenses increased to 11.6% for
the three months ended June 30, 2002, from 9.7% for the three months ended June
30, 2001. The increase as a percent of sales is primarily due to a return to
normal level of performance-based compensation relating to achieved growth
targets, legal costs and higher cost structures for our new MB Quart and
Q-Logic brands.

Research and Development Expenses. Research and development expenses
increased by $0.5 million, or 66.1%, to $1.1 million for the three months ended
June 30, 2002, from $0.7 million for the three months ended June 30, 2001. As
a percent of sales, these expenses increased to 2.2% for the three months ended
June 30, 2002, from 1.5% for the three months ended June 30, 2001. The
increase is primarily due to increased personnel and product development costs
relating to our new MB Quart and Q-Logic brands.

Operating Income. Operating income increased by $1.2 million, or 26.3%,
to $5.4 million for the three months ended June 30, 2002, from $4.2 million for
the three months ended June 30, 2001. As a percent of sales, operating income
increased to 10.5% for the three months ended June 30, 2002, from 9.5% for the
three months ended June 30, 2001. This increase primarily is attributable to a
mix shift toward higher margined products, cost reductions related to the
direct sourcing of accessories and improvements in manufacturing efficiency and
leverage. This increase was partially offset by normalized performance-based
compensation expense and higher cost structures for our acquired MB Quart and
Q-Logic brands.

11



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##### Table of Contents



Interest and Other Expense, Net. Interest and other expense, net,
primarily consists of interest expense and currency gains and losses. Interest
and other expense, net, decreased by $0.4 million to result in income of $0.3
million for the three months ended June 30, 2002, compared to expense of $0.1
million for the three months ended June 30, 2001. The decrease was primarily
due to foreign currency gains, which were partially offset by increased
interest expense due to the increased balance of our line of credit resulting
from the MB Quart and Q-Logic brand acquisitions.

Income Tax Expense. Income tax expense increased by $0.5 million, or
35.1%, to $2.1 million for the three months ended June 30, 2002, from $1.6
million for the three months ended June 30, 2001. The effective income tax
rates were 37.1% for the three months ended June 30, 2002, and 37.7% for the
three months ended June 30, 2001.

Liquidity and Capital Resources

We have financed our business primarily using existing working capital,
cash flows from operations and bank borrowings. During the second quarter of
2002 we extended the term of our $30.0 million revolving credit facility with
Bank of America, N.A. and Bank One, Arizona, N.A. to mature on June 28, 2004.
We had working capital of $50.2 million at June 30, 2002, compared to $45.9
million at December 31, 2001. At June 30, 2002, we maintained $0.7 million of
cash and cash equivalent balances.

As at June 30, 2002, we had a balance of $7.5 million on our $30.0 million
bank credit facility, which is collateralized by substantially all of our
assets and consists of a swing line-of-credit and a revolving line of credit.
The swing line of credit has a blended variable interest rate per annum of
Prime. The revolving line of credit has a blended variable interest rate of
LIBOR plus 150 basis points. As at June 30, 2002, the bank credit facility had
a weighted average interest rate of 3.8% per annum. The bank credit facility
contains provisions that, among other things, require that we maintain certain
minimum levels of EBITDA and debt service coverage and also limit the amount of
debt incurred and capital expenditures annually.

During the second quarter of 2002 we also extended our $5.0 million
capital lease credit facility under which we can fund leases until July 1,
2003, at which time the availability to enter into additional leases expires.
We use the capital lease credit facility for the purchase of capital equipment
under agreements structured as three-year capital lease obligations. As at June
30, 2002, the capital lease credit facility had an outstanding balance of $2.2
million with a weighted-average interest rate of 5.64% per annum.

Net cash provided by operating activities was $1.0 million for the six
months ended June 30, 2002, and net cash used in operating activities was $1.0
million for the six months ended June 30, 2001. Cash provided by operating
activities was primarily related to the effect of increasing accounts payable,
accrued salaries and incentives, and other accrued expenses which was partially
offset by an increase in accounts receivable.

Net cash used in investing activities was $3.5 million for the six months
ended June 30, 2002, and $2.6 million for the six months ended June 30, 2001.
Net cash used in investing activities was primarily related to purchases of
property and equipment and an increase in other assets.

Net cash used in financing activities was $0.2 million for the six months
ended June 30, 2002, and net cash provided by financing activities was $2.2
million for the six months ended June 30, 2001. Net cash used in financing
activities was primarily a result of the net repayments of our bank credit
facility, which was partially offset by proceeds from the exercise of stock
options and borrowings from our capital lease credit facility.

12



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##### Table of Contents



We believe our existing resources and anticipated cash flows from
operations, coupled with availability on our credit facility, will be
sufficient to meet our cash needs for the next twelve months. However, should
we pursue an acquisition larger than our existing resources can support, we may
need to seek additional debt or equity resources.

13



---



##### Table of Contents






Part II. Other Information




Item 1.     Legal Proceedings.

Since the date of our Annual Report for the year 2001, filed with the SEC
on March 29, 2002, there have been no additional material developments in
connection with the patent claim described in the Legal Proceedings section of
our Annual Report. This claim is currently in the fact discovery phase of
proceedings. We have incurred substantial costs of defense, which contributed
to our increased general and administrative costs during the quarter.

Our quarterly report for the third Quarter of 2001, ending September 30,
2001, described a lawsuit filed against us relating to our InstallEdge.com
business and alleging that one of our employees had misappropriated the
plaintiffs confidential information. During the quarter ending June 30, 2002
the plaintiff dismissed this lawsuit with prejudice. We did not pay anything
to or for the Plaintiff in settlement of the lawsuit. Our costs in defending
this lawsuit contributed to our increased general and administrative costs
during the quarter. These costs will now cease since the lawsuit was dismissed
with prejudice.

We are and may continue to be a party to various lawsuits and arbitrations
from time to time. As at June 30, 2002, we were not a party to any legal
proceedings that we believe are material.




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

We held our annual meeting of shareholders on Wednesday, May 8, 2002. The
election of all our directors was submitted to our shareholders at the meeting
and the shareholders re-elected all six of our directors. The names of the
directors elected, and the number of votes each received, is as follows:

|                   |  |           |           |               |  |             |   |                  |  |  |       |  |  |  |   | 
|------------------ |  | --------- | --------- | ------------- |  | ----------- | - | ---------------- |  |  | ----- |  |  |  | - | 
|Name               |  | Votes For |           | Votes Against |  | Abstentions |   | Broker Non-Votes
|                   |  |           |           |               |  |             |   |                 
|W. Gary Suttle     |  |           | 7,719,752 |               |  |             | 0 |                  |  |  | 1,800 |  |  |  | 0 | 
|                  
|                  
|                  
|                  
|Nicholas G. Bartol |  |           | 7,719,752 |               |  |             | 0 |                  |  |  | 1,800 |  |  |  | 0 | 
|                  
|                  
|                  
|                  
|Ralph B. Godfrey   |  |           | 7,719,752 |               |  |             | 0 |                  |  |  | 1,800 |  |  |  | 0 | 
|                  
|                  
|                  
|                  
|Jerry E. Goldress  |  |           | 7,719,752 |               |  |             | 0 |                  |  |  | 1,800 |  |  |  | 0 | 
|                  
|                  
|                  
|                  
|Timothy C. Bartol  |  |           | 7,719,752 |               |  |             | 0 |                  |  |  | 1,800 |  |  |  | 0 | 
|                  
|                  
|                  
|                  
|John P. Lloyd      |  |           | 7,719,752 |               |  |             | 0 |                  |  |  | 1,800 |  |  |  | 0 | 

Our shareholders also voted at the annual meeting to approve our 2002
Stock Option Plan, which is described in our proxy statement filed with the SEC
on March 29, 2002. The shareholder vote to approve the stock option plan was
as follows:

|                                   |  |           |           |               |  |             |        |                  |  |  |        |  |  |  |   | 
|---------------------------------- |  | --------- | --------- | ------------- |  | ----------- | ------ | ---------------- |  |  | ------ |  |  |  | - | 
|Proposal                           |  | Votes For |           | Votes Against |  | Abstentions |        | Broker Non-Votes
|                                   |  |           |           |               |  |             |        |                 
|Approve our 2002
Stock Option Plan |  |           | 5,931,411 |               |  |             | 48,275 |                  |  |  | 94,402 |  |  |  | 0 | 

14



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##### Table of Contents








| |  | Item 6.    Exhibits and Reports on Form 8-K
| |  | -------------------------------------------



| | (a) |  | 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     |  | 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.
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                       
|       
|       
|       
|       
|99.1    |  | Risk Factors That May Affect Rockfords Operating Results,
Business Prospects and Stock Price+++                                                                                                                      



|+           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 June 30,              2000.                     
|+++       Previously filed on March 29, 2002, with our Annual Report on Form
10-K for the year ended December                31, 2001.                      



| | (b) |  | Rockford did not file any reports on Form 8-K during the quarter
for which this report is filed.
| | --- |  | ------------------------------------------------------------------------------------------------




SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                      |  |                      |  |                                                                                                                                                   
|--------------------- |  | -------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|                      |  | ROCKFORD CORPORATION
|                     
|                     
|                     
|                     
|                      |  |                      |  |                                                                                                                                                   
|                     
|                     
|                     
|                     
|Date: August 14, 2002 |  | By:                  |  | /s/ James M. Thomson                                                                                                                              
|                      |  |                      |  |                                                                                                                                                   
|                      |  |                      |  | James M. Thomson
Vice President of Finance ,
   Chief Financial Officer and Secretary
(Principal Financial Officer
   and Duly Authorized Officer)

15



---



##### 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     |  | 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.
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                       
|       
|       
|       
|       
|99.1    |  | Risk Factors That May Affect Rockfords Operating Results,
Business Prospects and Stock Price+++                                                                                                                      



|+            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 June 30,               2000.                    
|                                                                                                                                                             
|+++        Previously filed on March 29, 2002, with our Annual Report on Form
10-K for the year ended December               31, 2001.                       

16