##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 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(X Box)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 March 31, 2002, there were 8,466,619 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 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                          



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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 
March 31, 2002 and December 31, 2001                 |  | 1   
|          
|          
|          
|          
|           |  |                                                                                              |  |     
|          
|          
|          
|          
|           |  | Condensed Consolidated Income Statements 
Three Months Ended March 31, 2002 and 2001        |  | 2   
|          
|          
|          
|          
|           |  |                                                                                              |  |     
|          
|          
|          
|          
|           |  | Condensed Consolidated Statements of Cash Flows 
Three Months Ended March 31, 2002 and 2001 |  | 3   
|          
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|          
|          
|           |  |                                                                                              |  |     
|          
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|           |  | Notes to Condensed Consolidated Financial Statements  March 31, 2002                        |  | 4   
|          
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|           |  |                                                                                              |  |     
|          
|          
|          
|          
|Item 2.    |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations        |  | 7   
|          
|          
|          
|          
|           |  |                                                                                              |  |     
|          
|          
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|          
|Part II:   |  | Other Information                                                                            |  |     
|          
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|          
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|           |  |                                                                                              |  |     
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|Item 1.    |  | Legal Proceedings                                                                            |  | 12  
|          
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|           |  |                                                                                              |  |     
|          
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|Item 6.    |  | Exhibits and Reports on Form 8-K                                                             |  | 12  
|          
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|          
|           |  |                                                                                              |  |     
|          
|          
|          
|          
|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)

|                                                       |                                               |                                                                                                                 |        |                |        |              |        |      |        | 
|------------------------------------------------------ | --------------------------------------------- | --------------------------------------------------------------------------------------------------------------- | ------ | -------------- | ------ | ------------ | ------ | ---- | ------ | 
|                                                       |                                               |                                                                                                                 |        | March 31,      |        | December 31,
|                                                       |                                               |                                                                                                                 |        | 2002           |        | 2001        
|                                                       |                                               |                                                                                                                 |        |                |        |             
|                                                       |                                               |                                                                                                                 |        | (Unaudited)    |        | (Note)      
|                                                       |                                               |                                                                                                                 |        |                |        |             
|                                                       |                                               |                                                                                                                 |        | (In thousands)
|                                                       |                                               |                                                                                                                 |        |                |        |              |        |     
|                                                      
|                                                      
|                                                      
|                                                      
|Assets                                                 |                                               |                                                                                                                 |        |                |        |              |        |     
|                                                      
|                                                      
|                                                      
|                                                      
|Current assets:                                        |                                               |                                                                                                                 |        |                |        |              |        |     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Cash                                                                                                            |        | $              | 990    |              |        | $    | 2,411  | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Accounts receivable, less allowances of $3,225 and $2,613 at
March 31, 2002 and December 31, 2001, respectively |        |                | 35,829 |              |        |      | 28,036 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Inventories, net                                                                                                |        |                | 29,072 |              |        |      | 28,165 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Deferred income taxes                                                                                           |        |                | 4,489  |              |        |      | 4,500  | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Income taxes receivable                                                                                         |        |                | 586    |              |        |      | 1,874  | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Prepaid expenses and other                                                                                      |        |                | 3,772  |              |        |      | 3,371  | 
|                                                       |                                               |                                                                                                                 |        |                |        |              |        |     
|Total current assets                                   |                                               |                                                                                                                 | 74,738 |                |        |              | 68,357 |     
|                                                      
|                                                      
|                                                      
|                                                      
|Property and equipment, net                            |                                               |                                                                                                                 | 10,275 |                |        |              | 9,976  |     
|                                                      
|                                                      
|                                                      
|                                                      
|Deferred income taxes                                  |                                               |                                                                                                                 | 394    |                |        |              | 394    |     
|                                                      
|                                                      
|                                                      
|                                                      
|Goodwill, net                                          |                                               |                                                                                                                 | 6,077  |                |        |              | 6,303  |     
|                                                      
|                                                      
|                                                      
|                                                      
|Other assets                                           |                                               |                                                                                                                 | 1,579  |                |        |              | 924    |     
|                                                       |                                               |                                                                                                                 |        |                |        |              |        |     
|Total Assets                                           |                                               | $                                                                                                               | 93,063 |                |        | $            | 85,954 |     
|                                                       |                                               |                                                                                                                 |        |                |        |              |        |     
|Liabilities and shareholders equity                   |                                               |                                                                                                                 |        |                |        |              |        |     
|                                                      
|                                                      
|                                                      
|                                                      
|Current liabilities:                                   |                                               |                                                                                                                 |        |                |        |              |        |     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Accounts payable                                                                                                |        | $              | 9,985  |              |        | $    | 9,089  | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Accrued salaries and incentives                                                                                 |        |                | 3,045  |              |        |      | 2,451  | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Accrued warranty                                                                                                |        |                | 4,997  |              |        |      | 4,815  | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Other accrued expenses                                                                                          |        |                | 8,545  |              |        |      | 5,210  | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Current portion of notes payable, long-term debt and capital
lease obligations                                  |        |                | 1,616  |              |        |      | 879    | 
|                                                       |                                               |                                                                                                                 |        |                |        |              |        |     
|Total current liabilities                              |                                               |                                                                                                                 | 28,188 |                |        |              | 22,444 |     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               |                                                                                                                 |        |                |        |              |        |     
|                                                      
|                                                      
|                                                      
|                                                      
|Notes payable and long-term debt, less current portion |                                               |                                                                                                                 | 8,641  |                |        |              | 9,720  |     
|                                                      
|                                                      
|                                                      
|                                                      
|Capital lease obligations, less current portion        |                                               |                                                                                                                 | 712    |                |        |              | 833    |     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               |                                                                                                                 |        |                |        |              |        |     
|                                                      
|                                                      
|                                                      
|                                                      
|Shareholders equity:                                  |                                               |                                                                                                                 |        |                |        |              |        |     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Common
stock, $.01 par value  Authorized shares  40,000,000                                                   |        |                |        |              |        |      |        | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Issued
shares  8,466,619 shares at March 31, 2002, and
8,196,619 at December 31, 2001                          |        |                | 85     |              |        |      | 82     | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Additional paid-in capital                                                                                      |        |                | 30,776 |              |        |      | 30,341 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                               | Retained earnings                                                                                               |        |                | 25,096 |              |        |      | 22,918 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Accumulated other comprehensive income (loss) |                                                                                                                 |        | (435           | )      |              |        | (384 | )     
|                                                       |                                               |                                                                                                                 |        |                |        |              |        |     
|Total shareholders equity                             |                                               |                                                                                                                 | 55,522 |                |        |              | 52,957 |     
|                                                       |                                               |                                                                                                                 |        |                |        |              |        |     
|Total liabilities and shareholders equity             |                                               | $                                                                                                               | 93,063 |                |        | $            | 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 generally accepted accounting principles
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                   
|                                |                            |   | March 31,                            
|                                |                            |   |                                      
|                                |                            |   | 2002                                  |       | 2001
|                                |                            |   |                                       |       |     
|                                |                            |   | (In thousands, except per share data)
|                                |                            |   |                                       |       |      |   |        |      
|                               
|                               
|                               
|                               
|Net sales                       |                            | $ | 43,734                                |       |      | $ | 37,363 |      
|                               
|                               
|                               
|                               
|Cost of goods sold              |                            |   | 27,212                                |       |      |   | 24,083 |      
|                                |                            |   |                                       |       |      |   |        |      
|Gross profit                    |                            |   | 16,522                                |       |      |   | 13,280 |      
|                               
|                               
|                               
|                               
|                                |                            |   |                                       |       |      |   |        |      
|                               
|                               
|                               
|                               
|Operating expenses:             |                            |   |                                       |       |      |   |        |      
|                               
|                               
|                               
|                               
|                                | Sales and marketing        |   |                                       | 7,244 |      |   |        | 5,780 | 
|                               
|                               
|                               
|                               
|                                | General and administrative |   |                                       | 4,651 |      |   |        | 3,374 | 
|                               
|                               
|                               
|                               
|                                | Research and development   |   |                                       | 976   |      |   |        | 770   | 
|                                |                            |   |                                       |       |      |   |        |      
|Total operating expenses        |                            |   | 12,871                                |       |      |   | 9,924  |      
|                                |                            |   |                                       |       |      |   |        |      
|Operating income                |                            |   | 3,651                                 |       |      |   | 3,356  |      
|                               
|                               
|                               
|                               
|Interest and other expense, net |                            |   | 184                                   |       |      |   | 204    |      
|                                |                            |   |                                       |       |      |   |        |      
|Income before income taxes      |                            |   | 3,467                                 |       |      |   | 3,152  |      
|                               
|                               
|                               
|                               
|Income tax expense              |                            |   | 1,289                                 |       |      |   | 1,160  |      
|                                |                            |   |                                       |       |      |   |        |      
|Net income                      |                            | $ | 2,178                                 |       |      | $ | 1,992  |      
|                                |                            |   |                                       |       |      |   |        |      
|                                |                            |   |                                       |       |      |   |        |      
|                               
|                               
|                               
|                               
|Net income per common share:    |                            |   |                                       |       |      |   |        |      
|                               
|                               
|                               
|                               
|                                | Basic                      |   | $                                     | 0.26  |      |   | $      | 0.25  | 
|                                |                            |   |                                       |       |      |   |        |      
|                                | Diluted                    |   | $                                     | 0.24  |      |   | $      | 0.23  | 
|                                |                            |   |                                       |       |      |   |        |      
|                                |                            |   |                                       |       |      |   |        |      
|                               
|                               
|                               
|                               
|Weighted average shares:        |                            |   |                                       |       |      |   |        |      
|                               
|                               
|                               
|                               
|                                | Basic                      |   |                                       | 8,275 |      |   |        | 8,007 | 
|                                |                            |   |                                       |       |      |   |        |      
|                                | Diluted                    |   |                                       | 9,216 |      |   |        | 8,834 | 
|                                |                            |   |                                       |       |      |   |        |      

See notes to condensed consolidated financial statements.

2



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##### Table of Contents






ROCKFORD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

|                                                                                            |                                    |                                           |        |                              |        |      |        |        |        |  
|------------------------------------------------------------------------------------------- | ---------------------------------- | ----------------------------------------- | ------ | ---------------------------- | ------ | ---- | ------ | ------ | ------ | -
|                                                                                            |                                    |                                           |        | Three months ended March 31,
|                                                                                            |                                    |                                           |        |                             
|                                                                                            |                                    |                                           |        | 2002                         |        | 2001
|                                                                                            |                                    |                                           |        |                              |        |     
|                                                                                            |                                    |                                           |        | (In thousands)              
|                                                                                            |                                    |                                           |        |                              |        |      |        |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Operating activities                                                                        |                                    |                                           |        |                              |        |      |        |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Net income                                                                                  |                                    | $                                         | 2,178  |                              |        | $    | 1,992  |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Adjustments to reconcile net income to net cash
provided by (used in) operating activities: |                                    |                                           |        |                              |        |      |        |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Depreciation and amortization      |                                           |        | 1,165                        |        |      |        | 854    |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Gain on sale of fixed assets       |                                           |        | (11                          | )      |      |        | (3     | )     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Provision for doubtful accounts    |                                           |        | 214                          |        |      |        | 146    |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Provision for inventory allowances |                                           |        | 396                          |        |      |        | 309    |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Changes in operating assets and liabilities:                                                |                                    |                                           |        |                              |        |      |        |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Accounts receivable                |                                           |        | (8,007                       | )      |      |        | (4,944 | )     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Inventories                        |                                           |        | (1,340                       | )      |      |        | (182   | )     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Prepaid expenses and other assets  |                                           |        | 1,477                        |        |      |        | (3,650 | )     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Accounts payable                   |                                           |        | 896                          |        |      |        | 3,775  |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Accrued salaries and incentives    |                                           |        | 594                          |        |      |        | (1,310 | )     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Accrued warranty                   |                                           |        | 182                          |        |      |        | 168    |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Income taxes payable (receivable)  |                                           |        | (587                         | )      |      |        | 1,168  |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Other accrued expenses             |                                           |        | 3,313                        |        |      |        | 2,203  |       
|                                                                                            |                                    |                                           |        |                              |        |      |        |       
|                                                                                            |                                    | Net cash provided by operating
activities |        |                              | 470    |      |        |        | 526    |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            |                                    |                                           |        |                              |        |      |        |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Investing activities                                                                        |                                    |                                           |        |                              |        |      |        |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Purchases of property and equipment                                                         |                                    |                                           | (1,463 | )                            |        |      | (1,460 | )     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Proceeds from sale of property and equipment                                                |                                    |                                           | 11     |                              |        |      | 3      |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Acquisitions of business, net of cash acquired                                              |                                    |                                           | 66     |                              |        |      |       |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Decrease (increase) in other assets                                                         |                                    |                                           | (429   | )                            |        |      | 320    |       
|                                                                                            |                                    |                                           |        |                              |        |      |        |       
|                                                                                            |                                    | Net cash used in investing activities     |        |                              | (1,815 | )    |        |        | (1,137 | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            |                                    |                                           |        |                              |        |      |        |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Financing activities                                                                        |                                    |                                           |        |                              |        |      |        |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Net proceeds from notes payable, long-term debt                                             |                                    |                                           | 783    |                              |        |      | (18    | )     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Payments on notes payable and long-term debt                                                |                                    |                                           | (1,079 | )                            |        |      |       |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Payments on capital lease obligations                                                       |                                    |                                           | (167   | )                            |        |      | (200   | )     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Proceeds from the exercise of stock options and
warrants                                    |                                    |                                           | 438    |                              |        |      | 121    |       
|                                                                                            |                                    |                                           |        |                              |        |      |        |       
|                                                                                            |                                    | Net cash used in financing activities     |        |                              | (25    | )    |        |        | (97    | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            |                                    |                                           |        |                              |        |      |        |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Effect of exchange rate changes on cash                                                     |                                    |                                           | (51    | )                            |        |      | (104   | )     
|                                                                                            |                                    |                                           |        |                              |        |      |        |       
|                                                                                            |                                    |                                           |        |                              |        |      |        |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Decrease in cash and cash equivalents                                                       |                                    |                                           | (1,421 | )                            |        |      | (812   | )     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            |                                    |                                           |        |                              |        |      |        |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Cash and cash equivalents at beginning of period                                            |                                    |                                           | 2,411  |                              |        |      | 2,750  |       
|                                                                                            |                                    |                                           |        |                              |        |      |        |       
|Cash and cash equivalents at end of period                                                  |                                    | $                                         | 990    |                              |        | $    | 1,938  |       
|                                                                                            |                                    |                                           |        |                              |        |      |        |       

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)

March 31, 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 period ended March 31, 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:

|                 |  |                |        |              |  |   |        |  
|---------------- |  | -------------- | ------ | ------------ |  | - | ------ | -
|                 |  | March 31,      |        | December 31,
|                 |  | 2002           |        | 2001        
|                 |  |                |        |             
|                 |  | (In thousands)
|                 |  |                |        |              |  |   |        |  
|                
|                
|                
|                
|Raw materials    |  | $              | 10,380 |              |  | $ | 9,361  |  
|                
|                
|                
|                
|Work in progress |  |                | 1,398  |              |  |   | 1,424  |  
|                
|                
|                
|                
|Finished goods   |  |                | 20,141 |              |  |   | 20,263 |  
|                 |  |                |        |              |  |   |        |  
|                 |  |                | 31,919 |              |  |   | 31,048 |  
|                
|                
|                
|                
|Less allowances  |  |                | (2,847 | )            |  |   | (2,883 | )
|                 |  |                |        |              |  |   |        |  
|                 |  | $              | 29,072 |              |  | $ | 28,165 |  
|                 |  |                |        |              |  |   |        |  

4



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##### Table of Contents



3. Earnings Per Share

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

|                                                                                                       |                                                                     |                        |       |                                       |     |      |       |       |     | 
|------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------- | ---------------------- | ----- | ------------------------------------- | --- | ---- | ----- | ----- | --- | 
|                                                                                                       |                                                                     |                        |       | Three months ended March 31,         
|                                                                                                       |                                                                     |                        |       |                                      
|                                                                                                       |                                                                     |                        |       | 2002                                  |     | 2001
|                                                                                                       |                                                                     |                        |       |                                       |     |     
|                                                                                                       |                                                                     |                        |       | (In thousands, except per share date)
|                                                                                                       |                                                                     |                        |       |                                       |     |      |       |      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Numerator:                                                                                             |                                                                     |                        |       |                                       |     |      |       |      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       | Numerator for diluted net income per share                          |                        | $     | 2,178                                 |     |      | $     | 1,992 |    
|                                                                                                       |                                                                     |                        |       |                                       |     |      |       |       |    
|                                                                                                       |                                                                     |                        |       |                                       |     |      |       |      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Denominator:                                                                                           |                                                                     |                        |       |                                       |     |      |       |      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       | Denominator for basic net income per
share, weighted average shares |                        |       | 8,275                                 |     |      |       | 8,007 |    
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       | Effect of dilutive securities:                                      |                        |       |                                       |     |      |       |       |    
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |                                                                     | Employee stock options |       |                                       | 935 |      |       |       | 822 | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |                                                                     | Warrants               |       |                                       | 6   |      |       |       | 5   | 
|                                                                                                       |                                                                     |                        |       |                                       |     |      |       |       |    
|                                                                                                       | Dilutive potential common shares                                    |                        |       | 941                                   |     |      |       | 827   |    
|                                                                                                       |                                                                     |                        |       |                                       |     |      |       |       |    
|Denominator for diluted net income per
share, adjusted weighted average shares and
assumed conversions |                                                                     |                        | 9,216 |                                       |     |      | 8,834 |      
|                                                                                                       |                                                                     |                        |       |                                       |     |      |       |       |    
|Basic net income per share                                                                             |                                                                     | $                      | 0.26  |                                       |     | $    | 0.25  |      
|                                                                                                       |                                                                     |                        |       |                                       |     |      |       |       |    
|Diluted net income per share                                                                           |                                                                     | $                      | 0.24  |                                       |     | $    | 0.23  |      
|                                                                                                       |                                                                     |                        |       |                                       |     |      |       |       |    

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
March 31, 2002, we had gross goodwill of $6,478,000 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:

5



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##### Table of Contents





| |  | 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.                                                            

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 of January 1, 2002, and
determined that the carrying amount of our goodwill is not impaired. In
addition, we will be reviewing our classification of intangible assets between
goodwill and other identifiable intangibles. During the quarter ended March 31,
2002, we did not record any impairment losses related to goodwill and other
intangible assets.







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 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 audio 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 March 31, 2002, and
over 98% of our sales in the quarter ended March 31, 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 59 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 15.8% of our sales
for the three months ended March 31, 2002, and 17.8% of our sales for the three
months ended March 31, 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 March 31,
|                                |                            |                          |       |                             
|                                |                            |                          |       | 2002                         |      | 2001
|                                |                            |                          |       |                              |      |     
|                                |                            |                          |       |                              |      |      |       |     
|                               
|                               
|                               
|                               
|Net sales                       |                            |                          | 100.0 | %                            |      |      | 100.0 | %   
|                               
|                               
|                               
|                               
|Cost of goods sold              |                            |                          | 62.2  |                              |      |      | 64.5  |     
|                                |                            |                          |       |                              |      |      |       |     
|Gross profit                    |                            |                          | 37.8  |                              |      |      | 35.5  |     
|                               
|                               
|                               
|                               
|Operating expenses:             |                            |                          |       |                              |      |      |       |     
|                               
|                               
|                               
|                               
|                                | Sales and marketing        |                          |       | 16.6                         |      |      |       | 15.4 |     
|                               
|                               
|                               
|                               
|                                | General and administrative |                          |       | 10.7                         |      |      |       | 9.0  |     
|                               
|                               
|                               
|                               
|                                | Research and development   |                          |       | 2.2                          |      |      |       | 2.1  |     
|                                |                            |                          |       |                              |      |      |       |     
|                                |                            | Total operating expenses |       |                              | 29.5 |      |       |      | 26.5 | 
|                                |                            |                          |       |                              |      |      |       |     
|Operating income                |                            |                          | 8.3   |                              |      |      | 9.0   |     
|                               
|                               
|                               
|                               
|Interest and other expense, net |                            |                          | 0.4   |                              |      |      | 0.6   |     
|                                |                            |                          |       |                              |      |      |       |     
|Income before tax               |                            |                          | 7.9   |                              |      |      | 8.4   |     
|                               
|                               
|                               
|                               
|Income tax expense              |                            |                          | 2.9   |                              |      |      | 3.1   |     
|                                |                            |                          |       |                              |      |      |       |     
|Net income                      |                            |                          | 5.0   | %                            |      |      | 5.3   | %   
|                                |                            |                          |       |                              |      |      |       |     

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.

8



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##### Table of Contents



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

Geographic Distribution of Sales

Our sales by geographic region were as follows:

|               |             |   |                              |        |      |   |        |        | 
|-------------- | ----------- | - | ---------------------------- | ------ | ---- | - | ------ | ------ | 
|               |             |   | Three months ended March 31,
|               |             |   |                             
|               |             |   | 2002                         |        | 2001
|               |             |   |                              |        |     
|               |             |   | (In thousands)              
|               |             |   |                              |        |      |   |        |       
|              
|              
|              
|              
|Region:(1)     |             |   |                              |        |      |   |        |       
|              
|              
|              
|              
|United States  |             | $ | 36,237                       |        |      | $ | 31,435 |       
|              
|              
|              
|              
|Other Americas |             |   | 2,995                        |        |      |   | 1,885  |       
|              
|              
|              
|              
|Europe         |             |   | 3,349                        |        |      |   | 1,891  |       
|              
|              
|              
|              
|Asia           |             |   | 1,153                        |        |      |   | 2,152  |       
|               |             |   |                              |        |      |   |        |       
|               | Total sales |   | $                            | 43,734 |      |   | $      | 37,363 | 
|               |             |   |                              |        |      |   |        |       



---

|(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.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

Three Months Ended March 31, 2002, Compared to Three Months Ended March 31, 2001

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

Net Sales. Sales increased by $6.3 million, or 16.8%, to $43.7 million for the
three months ended March 31, 2002, from $37.4 million for the three months
ended March 31, 2001. The increase in sales primarily was attributable to the
addition of our new MB Quart and Q-Logic brands and our OEM sales to Nissan.
During the quarter we discontinued shipping to several Rockford Fosgate brand
dealers who were not operating in a manner consistent with our policies and
were eroding our brand image. This reduced sales of our Rockford Fosgate brand
for the three months ended March 31, 2002. These dealers accounted for
approximately $2.7 million of sales on an annualized basis.

U.S. sales increased by $4.8 million, or 15.3%, to $36.2 million for the three
months ended March 31, 2002, from $31.4 million for the three months ended
March 31, 2001. International sales increased by $1.6 million, or 27.1%, to
$7.5 million for the three months ended March 31, 2002, from $5.9 million for
the three months ended March 31, 2001.

Cost of Goods Sold. Cost of goods sold increased by $3.1 million, or 12.9%, to
$27.2 million for the three months ended March 31, 2002, from $24.1 million for
the three months ended March 31, 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 62.2% for the three months ended March
31, 2002, from 64.5% for the three months ended March 31, 2001. The primary
reasons for the decrease as a percent of sales included reduced end-of-life
discounting, a mix shift toward higher margined products and successful cost
reductions in our core business.

9



---



##### Table of Contents



Sales and Marketing Expenses. Sales and marketing expenses increased by $1.4
million, or 24.1%, to
$7.2 million for the three months ended March 31, 2002, from $5.8 million
for the three months ended March 31, 2001. As a percent of sales, sales and
marketing expenses increased to 16.6% for the three months ended March 31,
2002, from 15.4% for the three months ended March 31, 2001. The increase as a
percent of sales is 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 $1.3 million, or 38.2%, to $4.7 million for the three months ended
March 31, 2002, from $3.4 million for the three months ended March 31, 2001. As
a percent of sales, general and administrative expenses increased to 10.7% for
the three months ended March 31, 2002, from 9.0% for the three months ended
March 31, 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 and higher cost structures for our new MB Quart and Q-Logic
brands.

Research and Development Expenses. Research and development expenses increased
by $0.2 million, or 25.0%, to $1.0 million for the three months ended March 31,
2002, from $0.8 million for the three months ended March 31, 2001. As a
percent of sales, these expenses increased to 2.2% for the three months ended
March 31, 2002, from 2.1% for the three months ended March 31, 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 $0.3 million, or 8.8%, to $3.7
million for the three months ended March 31, 2002, from $3.4 million for the
three months ended March 31, 2001. As a percent of sales, operating income
decreased to 8.3% for the three months ended March 31, 2002, from 9.0% for the
three months ended March 31, 2001. This decrease primarily is attributable to a
return to normal level of performance-based compensation and higher cost
structures of our new 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, remained flat at $0.2 million for the three months ended March
31, 2002, and for the three months ended March 31, 2001. An increase in
interest expense due to the increased balance of our line of credit resulting
from our Q-Logic and MB Quart acquisitions, was offset by gains resulting from
foreign currency exchange rate changes on our international sales.

Income Tax Expense. Income tax expense increased by $0.1 million, or 8.3%, to
$1.3 million for the three months ended March 31, 2002, from $1.2 million for
the three months ended March 31, 2001. The effective income tax rates were
37.2% for the three months ended March 31, 2002, and 36.8% for the three months
ended March 31, 2001. The increase in the effective rate was primarily due to
reduced international tax benefits.

Liquidity and Capital Resources

We have financed our business primarily using existing working capital, cash
flows from operations, the proceeds from our initial public offering and bank
borrowings. On June 28, 2001, we entered into a $30.0 million revolving credit
facility with Bank of America, N.A. and Bank One, Arizona, N.A. This credit
facility replaced a $20.0 million line previously maintained with another
financial institution. We had working capital of $46.6 million at March 31,
2002, compared to $45.9 million at December 31, 2001. At March 31, 2002, we
maintained $1.0 million of cash and cash equivalent balances.

10



---



##### Table of Contents



As at March 31, 2002, we had a balance of $8.3 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 plus 25 basis points. The revolving line of credit has a blended
variable interest rate of LIBOR plus 175 basis points . As of March 31, 2002,
the bank credit facility had a weighted average interest rate of 4.6% per
annum. The bank credit facility is scheduled to mature on June 28, 2003. 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.

We also have a $5.0 million capital lease credit facility under which we can
fund leases until July 1, 2002, 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 March 31, 2002, the capital lease credit facility had
an outstanding balance of $2.0 million with a weighted-average interest rate of
5.93% per annum.

Net cash provided by operating activities was $0.5 million for the three months
ended March 31, 2002, and for the three months ended March 31, 2001. Cash
provided by operating activities is less than net income due to the effect of
increasing accounts receivables and inventories, which was offset by a decrease
in prepaid expenses and an increase in other accrued expenses.

Net cash used in investing activities was $1.8 million for the three months
ended March 31, 2002, and $1.1 million for the three months ended March 31,
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 less than $0.1 million for the three
months ended March 31, 2002, and net cash used in financing activities was $0.1
million for the three months ended March 31, 2001. Net cash used in financing
activities was primarily a result of the net repayments of our bank credit
facility and other long-term debt, which was partially offset by proceeds from
the exercise of stock options.

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.

11



---



##### 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.

We are and may continue to be a party to various lawsuits and arbitrations
from time to time. As at March 31, 2002, we were not a party to any legal
proceedings that we believe are material.






|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.
| | --- |  | ------------------------------------------------------------------------------------------------

12



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##### Table of Contents






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: May 14, 2002 |  | By:                  |  | /s/ James M. ThomsonJames M. Thomson
Vice President of Finance,
   Chief Financial Officer and Secretary
(Principal Financial Officer
   and Duly Authorized Officer)







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