##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 Commission File Number 000-30138
 ROCKFORD CORPORATION
 (Exact Name of Registrant as Specified in its Charter)
 ARIZONA
    
    86-0394353(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)600 South Rockford Drive
    
    85281Tempe, Arizona
    
    (Zip Code)(Address of Principal Executive Offices)
 (480) 967-3565
(Registrants Telephone Number, Including Area Code)
 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,
if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files).  Yes o No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
 Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ


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


As of May 1, 2009, there were 8,581,208 shares of Common Stock, $.01 par value per share,
outstanding.










---



##### 



ROCKFORD CORPORATION AND SUBSIDIARIES
 TABLE OF CONTENTS
 Forward Looking Statements
    
    
    3Part I: Financial Information
    
    
    4Item 1. Financial Statements
    
    
    4Condensed Consolidated Balance Sheets December 31, 2008 and March 31, 2009 (Unaudited)
    
    
    4Condensed Consolidated Statements of Operations  Three Months Ended March 31, 2008 and 2009 (Unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows  Three Months Ended March 31, 2008 and 2009 (Unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements  March 31, 2009 (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Continuing Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    16Item 4. Controls and Procedures
    
    
    16Part II: Other Information
    
    
    17Item 1. Legal Proceedings
    
    
    17Item 1A. Risk Factors
    
    
    17Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17Item 6. Exhibits and Reports on Form 8-K
    
    
    18Signatures
    
    
    19EX-31.1EX-31.2EX-32
  2




---



##### Table of Contents



Forward-Looking Statements
    3




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
  
 (In thousands except share data)
 December 31,
    
    
    March 31,2008
    
    
    2009(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    Accounts receivable, less allowances of $1,441 and $998 at December 31, 2008 and
March 31, 2009, respectively
    
    
    12,856
    
    
    
    14,958Inventories
    
    
    13,043
    
    
    
    7,890Prepaid expenses and other current assets
    
    
    551
    
    
    
    347Total current assets
    
    
    26,450
    
    
    
    23,195Property and equipment, net
    
    
    1,743
    
    
    
    1,685Other assets
    
    
    332
    
    
    
    268Total assets
    
    $
    28,525
    
    
    $
    25,148Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    3,980
    
    
    $
    3,574Accrued salaries and incentives
    
    
    1,367
    
    
    
    1,078Accrued warranty and returns
    
    
    700
    
    
    
    642Other accrued expenses
    
    
    1,838
    
    
    
    1,964Current portion of capital lease and other long-term liabilities
    
    
    161
    
    
    
    150Notes payable, less unaccreted discount of $20 and $4 at December 31, 2008 and March
31, 2009, respectively
    
    
    4,980
    
    
    
    2,496Asset-based credit facility
    
    
    7,547
    
    
    
    7,219Total current liabilities
    
    
    20,573
    
    
    
    17,123Notes payable, less unaccreted discount of $10 and $4 at December 31, 2008 and March
31, 2009, respectively
    
    
    2,593
    
    
    
    2,599Long-term portion of capital lease and other long-term liabilities
    
    
    66
    
    
    
    75Total liabilities
    
    
    23,232
    
    
    
    19,797Shareholders equity:Common stock, $.01 par value  Authorized shares  40,000,000 Issued shares
9,395,720 at December 31, 2008 and March 31, 2009
    
    
    94
    
    
    
    94Additional paid-in capital
    
    
    38,554
    
    
    
    38,587Accumulated deficit
    
    
    (32,044
    )
    
    
    (32,019
    )Less: Treasury stock, at cost  814,512 shares at December 31, 2008 and March 31, 2009
    
    
    (1,311
    )
    
    
    (1,311
    )Total shareholders equity
    
    
    5,293
    
    
    
    5,351Total liabilities and shareholders equity
    
    $
    28,525
    
    
    $
    25,148
   4




---



##### Table of Contents



(In thousands, except per share data)
 Three months endedMarch 31,2008
    
    
    2009Net sales
    
    $
    18,445
    
    
    $
    14,466Cost of goods sold
    
    
    12,088
    
    
    
    10,042Gross profit
    
    
    6,357
    
    
    
    4,424Operating expenses:Sales and marketing
    
    
    3,195
    
    
    
    2,257General and administrative
    
    
    2,405
    
    
    
    2,023Research and development
    
    
    641
    
    
    
    483Total operating expenses
    
    
    6,241
    
    
    
    4,763Operating income (loss)
    
    
    116
    
    
    
    (339
    )Interest and other expense (income), net
    
    
    207
    
    
    
    (364
    )Income (loss) before income taxes
    
    
    (91
    )
    
    
    25Income tax expense
    
    
    
    
    
    
    Net income (loss)
    
    $
    (91
    )
    
    $
    25Net income (loss) per common share:Basic
    
    $
    (0.01
    )
    
    $
    0.00Diluted
    
    $
    (0.01
    )
    
    $
    0.00Weighted average shares:Basic
    
    
    8,883
    
    
    
    8,581Diluted
    
    
    8,883
    
    
    
    8,581
  5




---



##### Table of Contents



(In thousands)
 Three months endedMarch 31,2008
    
    
    2009Cash flows from operating activities:Net income (loss)
    
    $
    (91
    )
    
    $
    25Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation and amortization
    
    
    373
    
    
    
    208Net gain on buy back of notes and warrants
    
    
    
    
    
    
    (497
    )Gain on sale of property and equipment
    
    
    (30
    )
    
    
    Share based compensation expense
    
    
    50
    
    
    
    32Provision for doubtful accounts
    
    
    75
    
    
    
    22Provision for inventories
    
    
    190
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (3,060
    )
    
    
    (2,123
    )Inventories
    
    
    2,221
    
    
    
    5,153Prepaid expenses and other
    
    
    62
    
    
    
    204Accounts payable
    
    
    310
    
    
    
    (405
    )Accrued salaries and incentives
    
    
    (93
    )
    
    
    (292
    )Accrued warranty and returns
    
    
    (43
    )
    
    
    (58
    )Other accrued expenses
    
    
    536
    
    
    
    126Net cash provided by operating activities
    
    
    500
    
    
    
    2,395Cash flow from investing activities:Purchases of property and equipment
    
    
    (238
    )
    
    
    (104
    )Proceeds from sale of property and equipment
    
    
    34
    
    
    
    Net proceeds from divestiture of businesses
    
    
    100
    
    
    
    Decrease in other assets
    
    
    34
    
    
    
    33Net cash used in investing activities
    
    
    (70
    )
    
    
    (71
    )Cash flow from financing activities:Proceeds from bank debt
    
    
    16,076
    
    
    
    12,190Payments on bank debt
    
    
    (15,989
    )
    
    
    (12,518
    )Payments on capital lease obligations
    
    
    (12
    )
    
    
    (13
    )Payments on notes payable and other debt
    
    
    (309
    )
    
    
    (1,983
    )Purchase of treasury stock
    
    
    (196
    )
    
    
    Net cash used in financing activities
    
    
    (430
    )
    
    
    (2,324
    )Net increase in cash flow
    
    
    
    
    
    
    Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    
  6




---



##### Table of Contents



Rockford Corporation and Subsidiaries
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 March 31, 2009
 1. Basis of Presentation
 Unaudited Interim Financial Information
    Accounting Policy
 Product Warranty Cost and Service Returns
   Three Months EndedMarch 31,2008
    
    
    2009(In thousands)Balance at the beginning of period
    
    $
    1,267
    
    
    $
    700Provision for warranties and returns
    
    
    1,117
    
    
    
    561Net settlements made during the period
    
    
    (1,160
    )
    
    
    (619
    )Balance at the end of the period
    
    $
    1,224
    
    
    $
    642
 2. Inventories
  December 31,
    
    
    March 31,2008
    
    
    2009(In thousands)Raw materials
    
    $
    501
    
    
    $
    518Work-in-progress
    
    
    49
    
    
    
    98Finished goods
    
    
    12,493
    
    
    
    7,274$
    13,043
    
    
    $
    7,890
 7




---



##### Table of Contents



Rockford Corporation and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (Unaudited)(Continued)
 3. Income (Loss) Per Share
  Three Months Ended March 31,2008
    
    
    2009(In thousands, except per share data)Numerator:Net income (loss)
    
    $
    (91
    )
    
    $
    25Plus:Income impact of assumed conversion of convertible debt
    
    
    
    
    
    
    Net income (loss) available to shareholders
    
    $
    (91
    )
    
    $
    25Denominator:Denominator for basic net income (loss) per share
    
    
    8,883
    
    
    
    8,581Effect of dilutive securities:Employee stock options
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    Dilutive potential common shares
    
    
    
    
    
    
    Denominator for diluted net income (loss) per share
    
    
    8,883
    
    
    
    8,581Income (loss) per common share:Net income (loss)Basic
    
    $
    (0.01
    )
    
    $
    0.00Diluted
    
    $
    (0.01
    )
    
    $
    0.00
    Three Months Ended March 31,2008
    
    2009Outstanding options
    
    
    1,669
    
    
    
    1,495Average exercise price
    
    $
    4.16
    
    
    $
    2.98
 8




---



##### Table of Contents



Rockford Corporation and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (Unaudited)(Continued)
 4. Notes Payable and Long-Term Debt
  Balance Sheet
Classification of Borrowings Outstanding under Revolving Credit Agreements That Include both a
Subjective Acceleration Clause and a Lock-Box Arrangement
    9




---



##### Table of Contents



Rockford Corporation and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (Unaudited)(Continued)
 5. Income Taxes
   6. Special Charges
   Three months endedMarch
31, 2009Liability at
    
    
    
    
    
    
    
    
    
    Liability atDecember 31,
    
    Reserve
    
    
    
    
    
    Adjustments
    
    March 31,2008
    
    Recorded
    
    Payments
    
    To Reserve
    
    2009Post employment costs:
    
    $
    740
    
    
    $
    
    $
    (373
    )
    
    $
    
    $
    367
 7. Stock Purchase Program
  10




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Continuing
Operations
  Overview
       11




---



##### Table of Contents



Results of Operations
  Three months endedMarch 31,2008
    
    2009Net sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    65.5
    
    
    
    69.4Gross profit
    
    
    34.5
    
    
    
    30.6Operating expenses:Sales and marketing
    
    
    17.3
    
    
    
    15.6General and administrative
    
    
    13.1
    
    
    
    14.0Research and development
    
    
    3.5
    
    
    
    3.3Total operating expenses
    
    
    33.9
    
    
    
    32.9Operating income (loss)
    
    
    0.6
    
    
    
    (2.3
    )Interest and other expense (income), net
    
    
    1.1
    
    
    
    (2.5
    )Income (loss) before income tax
    
    
    (0.5
    )
    
    
    0.2Income tax expense
    
    
    
    
    
    
    Net income (loss)
    
    
    (0.5
    )%
    
    
    0.2
    %
     Geographic Distribution of Sales
  Three months endedMarch 31,2008
    
    
    2009(In thousands)Region:(1)United States
    
    $
    15,115
    
    
    $
    12,568Other Americas
    
    
    1,476
    
    
    
    967Europe
    
    
    1,049
    
    
    
    430Asia
    
    
    805
    
    
    
    501Total sales
    
    $
    18,445
    
    
    $
    14,466
 
 (1)
    
    Sales are attributed to geographic regions based on the location of customers. No single
foreign country accounted for greater than 10% of sales. 12




---



##### Table of Contents



In the following discussion, certain increases or decreases may differ due to rounding
 Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008
 Net Sales
  Gross Profit
 Sales and Marketing Expenses.
 General and Administrative Expenses.
 Research and Development Expenses
 Operating Income (Loss)
 Interest and Other Expense (Income), Net
 Income Tax Expense.
 13




---



##### Table of Contents



Liquidity and Capital Resources
         14




---



##### Table of Contents




    
    Rockford had no cash and cash equivalents at March 31, 2009 and December 31, 2008. Due to
the daily sweep of cash by Wachovia Capital, described below, Rockford has reclassified cash
and cash equivalents to net against its current debt balance.
    
    Rockfords net accounts receivable were $15.0 million at March 31, 2009 compared to $12.9
million at December 31, 2008. The increase in accounts receivable balances is primarily due
to increased sales late in the first quarter of 2009.
    
    Rockfords inventory position decreased from $13.0 million at the end of 2008 to $7.9
million at March 31, 2009. This inventory decrease was primarily due to outsourcing,
improved inventory turns, and a reduction in end of life inventory.
    
    Accounts payable decreased $0.4 million, from $4.0 million at December 31, 2008 to $3.6
million at March 31, 2009. This decrease was primarily due to lower inventory purchases
during the first quarter of 2009.
 Balance
Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements That Include both
a Subjective Acceleration Clause and a Lock-Box Arrangement
   Inflation.
 Contractual Obligations
  Critical Accounting Policies and Estimates
  15




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
     
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  Inherent Limitations on Effectiveness of Controls
  16




---



##### Table of Contents



Part II. Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  17




---



##### Table of Contents



Item 6. Exhibits and Reports on Form 8-K
  ExhibitNumber
    
    Description of Document3.1
    
    Articles of Incorporation+3.2
    
    Restated Bylaws as amended through July 27, 2000++3.3
    
    Amendment to Articles of Incorporation filed on January 12, 1988+3.4
    
    Amendment to Articles of Incorporation filed on May 12, 1999+3.5
    
    Amendment to Articles of Incorporation filed on May 17, 1999+3.7
    
    Amendment to Articles of Incorporation filed on July 1, 1999+4.1
    
    Specimen Common Stock Certificate+4.2
    
    Reference is made to the Articles of Incorporation, as amended, and the Restated Bylaws,
as amended, filed as Exhibits 3.1, 3.2, 3.3, 3.4, 3.5 and 3.7 for a description of the
rights of the holders of Common Stock.31.1
    
    Certification pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 for William R. Jackson.31.2
    
    Certification pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 for Richard G. Vasek.32
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
 
 +
    
    Previously filed with our registration statement on Form S-1, which the SEC declared effective on April 19, 2000 and/or
amendments++
    
    Previously filed on August 11, 2000 with our Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.  
    
    January 6, 2009 report disclosing on Item 1.02 that Rockford had repurchased $2.5 million
in aggregate principal amount of its 4.5% convertible senior subordinated secured notes for
$2.0 million cash.
 18




---



##### Table of Contents



SIGNATURES
  ROCKFORD CORPORATIONDate: May 1, 2009
    By:
    /s/ Richard G. VasekRichard G. VasekVice President of Finance,

Chief Financial Officer and Secretary

(Principal Financial Officer and Duly Authorized Officer) 19




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description of Document3.1
    
    Articles of Incorporation+3.2
    
    Restated Bylaws as amended through July 27, 2000++3.3
    
    Amendment to Articles of Incorporation filed on January 12, 1988+3.4
    
    Amendment to Articles of Incorporation filed on May 12, 1999+3.5
    
    Amendment to Articles of Incorporation filed on May 17, 1999+3.7
    
    Amendment to Articles of Incorporation filed on July 1, 1999+4.1
    
    Specimen Common Stock Certificate+4.2
    
    Reference is made to the Articles of Incorporation, as amended, and the Restated Bylaws, as
amended, filed as Exhibits 3.1, 3.2, 3.3, 3.4, 3.5 and 3.7 for a description of the rights
of the holders of Common Stock.31.1
    
    Certification pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 for William R. Jackson.31.2
    
    Certification pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 for Richard G. Vasek.32
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 +
    
    Previously filed with our registration statement on Form S-1, which the SEC declared effective on April 19, 2000 and/or
amendments++
    
    Previously filed on August 11, 2000 with our Quarterly Report on Form 10-Q for the quarter ended June 30, 2000. 20