##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
 For the quarterly period ended March 31, 2007
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File Number: 0-27202
 ADVANCED LIGHTING TECHNOLOGIES, INC.
 
 Ohio
    
    34-1803229(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)32000 Aurora Road, Solon, Ohio
    
    44139(Address of principal executive offices)
    
    (Zip Code)
 440 / 519-0500
 
 þ o
  o o þ
  þ o
 
 o þ




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##### Table of Contents



INDEX
 Advanced Lighting Technologies, Inc.
 Page No.Part I
    
    Financial InformationItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Balance Sheets 
March 31, 2007 and June 30, 2006
    
    2Condensed Consolidated Statements of Operations 
Three and Nine Months Ended March 31, 2007 and 2006
    
    4Condensed Consolidated Statement of Shareholders Equity 
Nine Months Ended March 31, 2007
    
    5Condensed Consolidated Statements of Cash Flows 
Nine Months Ended March 31, 2007 and 2006
    
    6Notes to Condensed Consolidated Financial Statements
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    10Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    17Item 4.
    
    Controls and Procedures
    
    18Part II
    
    Other InformationItem 6.
    
    Exhibits
    
    19Signatures
    
    20EX-31.1EX-31.2EX-32.1EX-32.2
 1




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##### Table of Contents



Advanced Lighting Technologies, Inc.
Condensed Consolidated Balance Sheets  (in thousands, except per share amounts)
 (Unaudited)
    
    
    (Audited)March 31,
    
    
    June 30,2007
    
    
    2006AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,451
    
    
    $
    4,290Trade receivables, less allowances of $1,168 and $742
    
    
    42,871
    
    
    
    35,857Inventories:Finished goods
    
    
    29,376
    
    
    
    23,977Raw materials and work-in-process
    
    
    8,773
    
    
    
    11,82538,149
    
    
    
    35,802Prepaid expenses
    
    
    2,894
    
    
    
    2,097Total current assets
    
    
    86,365
    
    
    
    78,046Property, plant and equipment:Land and buildings
    
    
    10,696
    
    
    
    10,341Machinery and equipment
    
    
    31,015
    
    
    
    26,930Furniture and fixtures
    
    
    3,704
    
    
    
    3,01745,415
    
    
    
    40,288Less accumulated depreciation
    
    
    11,742
    
    
    
    7,72933,673
    
    
    
    32,559Receivables from related parties
    
    
    659
    
    
    
    1,829Investments
    
    
    2,239
    
    
    
    2,168Other assets
    
    
    2,377
    
    
    
    3,604Intangible assets, net
    
    
    23,104
    
    
    
    23,623Goodwill
    
    
    48,430
    
    
    
    48,550$
    196,847
    
    
    $
    190,379
 See Notes to Condensed Consolidated Financial Statements
 2




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##### Table of Contents



Advanced Lighting Technologies, Inc.
Condensed Consolidated Balance Sheets  (in thousands, except per share amounts)
 (Unaudited)
    
    
    (Audited)March 31,
    
    
    June 30,2007
    
    
    2006Liabilities and shareholders equityCurrent liabilities:Short-term debt and current portion of long-term debt
    
    $
    13,088
    
    
    $
    6,513Accounts payable
    
    
    9,428
    
    
    
    6,964Payables to related parties
    
    
    575
    
    
    
    862Employee-related liabilities
    
    
    3,728
    
    
    
    6,705Accrued income and other taxes
    
    
    905
    
    
    
    667Other accrued expenses
    
    
    6,884
    
    
    
    9,315Total current liabilities
    
    
    34,608
    
    
    
    31,026Long-term debt
    
    
    119,900
    
    
    
    121,669Deferred tax liabilities
    
    
    937
    
    
    
    341Deferred lease credits
    
    
    3,291
    
    
    
    3,453Total liabilities
    
    
    158,736
    
    
    
    156,489Minority interest
    
    
    
    
    
    
    2,906Preferred stock,Series A and B
    
    
    29,688
    
    
    
    29,688Common shareholders equityCommon stock, $.001 par value, 80,000 shares authorized;
1 share issued and outstanding
    
    
    1
    
    
    
    1Paid-in-capital
    
    
    1,183
    
    
    
    1,183Accumulated other comprehensive income
    
    
    1,587
    
    
    
    65Retained earnings
    
    
    5,652
    
    
    
    47Total common shareholders equity
    
    
    8,423
    
    
    
    1,296$
    196,847
    
    
    $
    190,379
 See Notes to Condensed Consolidated Financial Statements 3
    Table of Contents   
 Advanced Lighting Technologies, Inc.
Condensed Consolidated Statements of Operations (Unaudited)  (In thousands)
 Quarter Ended March 31,
    
    
    Nine Months Ended March 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    47,982
    
    
    $
    42,079
    
    
    $
    134,082
    
    
    $
    119,650Costs and expenses:Cost of sales
    
    
    27,955
    
    
    
    24,428
    
    
    
    79,728
    
    
    
    69,670Marketing and selling
    
    
    7,563
    
    
    
    7,320
    
    
    
    22,534
    
    
    
    20,567Research and development
    
    
    1,743
    
    
    
    1,585
    
    
    
    5,116
    
    
    
    4,752General and administrative
    
    
    2,805
    
    
    
    2,851
    
    
    
    8,630
    
    
    
    8,880Amortization of intangible assets
    
    
    307
    
    
    
    259
    
    
    
    842
    
    
    
    785Special charges and asset impairment
    
    
    
    
    
    
    4,093
    
    
    
    
    
    
    
    4,093Income from operations
    
    
    7,609
    
    
    
    1,543
    
    
    
    17,232
    
    
    
    10,903Other income (expense):Interest expense
    
    
    (3,453
    )
    
    
    (3,651
    )
    
    
    (10,492
    )
    
    
    (10,866
    )Interest income
    
    
    42
    
    
    
    75
    
    
    
    163
    
    
    
    245Income from investments
    
    
    96
    
    
    
    3
    
    
    
    377
    
    
    
    351Income (loss) before income taxes
and minority interest
    
    
    4,294
    
    
    
    (2,030
    )
    
    
    7,280
    
    
    
    633Income tax expense
    
    
    483
    
    
    
    345
    
    
    
    1,185
    
    
    
    752Income (loss) before minority interest
    
    
    3,811
    
    
    
    (2,375
    )
    
    
    6,095
    
    
    
    (119
    )Minority interest in income
of consolidated subsidiary
    
    
    (159
    )
    
    
    (229
    )
    
    
    (490
    )
    
    
    (614
    )Net income (loss)
    
    $
    3,652
    
    
    $
    (2,604
    )
    
    $
    5,605
    
    
    $
    (733
    )
 See Notes to Condensed Consolidated Financial Statements 4
    Table of Contents   
 Advanced Lighting Technologies, Inc.
Condensed Consolidated Statement of Shareholders Equity (Unaudited)
Nine Months Ended March 31, 2007  (dollars in thousands)
 AccumulatedOther
    
    
    
    
    
    
    CommonPreferred
    
    
    Common Stock
    
    
    Paid-In
    
    
    Comprehensive
    
    
    Retained
    
    
    ShareholdersStock
    
    
    Shares
    
    
    Par Value
    
    
    Capital
    
    
    Income
    
    
    Earnings
    
    
    Equity
    
    
    TotalBalance at June 30, 2006
    
    $
    29,688
    
    
    
    1,184
    
    
    $
    1
    
    
    $
    1,183
    
    
    $
    65
    
    
    $
    47
    
    
    $
    1,296
    
    
    $
    30,984Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,605
    
    
    
    5,605
    
    
    
    5,605Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,522
    
    
    
    
    
    
    
    1,522
    
    
    
    1,522Balance at March 31, 2007
    
    $
    29,688
    
    
    
    1,184
    
    
    $
    1
    
    
    $
    1,183
    
    
    $
    1,587
    
    
    $
    5,652
    
    
    $
    8,423
    
    
    $
    38,111
 See Notes to Condensed Consolidated Financial Statements 5
    Table of Contents   
 Advanced Lighting Technologies, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)  (in thousands)
 Nine Months Ended March 31,2007
    
    
    2006Operating activitiesNet income
    
    $
    5,605
    
    
    $
    (733
    )Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation
    
    
    3,883
    
    
    
    4,248Amortization
    
    
    842
    
    
    
    785Provision for doubtful accounts
    
    
    289
    
    
    
    150Income from investments
    
    
    (377
    )
    
    
    (351
    )Special charges and asset impairment
    
    
    
    
    
    
    4,093Changes in current assets and liabilities and other
    
    
    (8,248
    )
    
    
    (20,587
    )Net cash provided by (used in) operating activities
    
    
    1,994
    
    
    
    (12,395
    )Investing activitiesCapital expenditures
    
    
    (5,678
    )
    
    
    (3,483
    )Proceeds from sale of investment
    
    
    
    
    
    
    3,154Cash distributions from investments
    
    
    328
    
    
    
    Purchase of minority interest in conrolled subsidiary
    
    
    (3,289
    )
    
    
    Proceeds from sale-leaseback
    
    
    
    
    
    
    3,841Net cash provided by (used in) investing activities
    
    
    (8,639
    )
    
    
    3,512Financing activitiesNet borrowings under credit facilities
    
    
    6,575
    
    
    
    5,894Proceeds from long-term debt
    
    
    
    
    
    
    3,850Payments of long-term debt
    
    
    (1,769
    )
    
    
    (1,909
    )Issuance of preferred stock
    
    
    
    
    
    
    350Issuance of common stock
    
    
    
    
    
    
    53Net cash provided by financing activities
    
    
    4,806
    
    
    
    8,238Decrease in cash and cash equivalents
    
    
    (1,839
    )
    
    
    (645
    )Cash and cash equivalents, beginning of period
    
    
    4,290
    
    
    
    2,643Cash and cash equivalents, end of period
    
    $
    2,451
    
    
    $
    1,998Supplemental cash flow informationInterest paid
    
    $
    13,427
    
    
    $
    13,855Income taxes paid
    
    
    440
    
    
    
    554
 6    Table of Contents  Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2007
 A. Organization
  B. Basis of Presentation
   Income Taxes
 Accounting for Income Taxes
 7
    Table of Contents  Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2007
 C. Comprehensive Income
   8
    Table of Contents  Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2007
 D. Financing Facilities
 Balance
Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements that include Both
a Subjective Acceleration Clause and a Lock-box Arrangement
   E. Subsequent Event
  F. Minority Interest
 9
    Table of Contents  Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (Dollars in thousands)
   General
  ® ®
 10
    Table of Contents  Results of Operations
 Quarter Ended March 31, 2007 Compared to Quarter Ended March 31, 2006
  Quarter Ended
    
    
    Quarter EndedMarch 31, 2007
    
    
    March 31, 2006Net sales
    
    $
    47,982
    
    
    
    100.0
    %
    
    $
    42,079
    
    
    
    100.0
    %Costs and expenses:Cost of sales
    
    
    27,955
    
    
    
    58.3
    
    
    
    24,428
    
    
    
    58.1Marketing and selling
    
    
    7,563
    
    
    
    15.8
    
    
    
    7,320
    
    
    
    17.4Research and development
    
    
    1,743
    
    
    
    3.6
    
    
    
    1,585
    
    
    
    3.8General and administrative
    
    
    2,805
    
    
    
    5.8
    
    
    
    2,851
    
    
    
    6.8Amortization of intangible assets
    
    
    307
    
    
    
    0.6
    
    
    
    259
    
    
    
    0.6Special charges and asset impairment
    
    
    
    
    
    
    
    
    
    
    4,093
    
    
    
    9.7Income from operations
    
    
    7,609
    
    
    
    15.9
    
    
    
    1,543
    
    
    
    3.7Other income (expense):Interest expense
    
    
    (3,453
    )
    
    
    (7.2
    )
    
    
    (3,651
    )
    
    
    (8.7
    )Interest income
    
    
    42
    
    
    
    0.1
    
    
    
    75
    
    
    
    0.2Income (loss) from investments
    
    
    96
    
    
    
    0.2
    
    
    
    3
    
    
    
    0.0Income before income taxes
and minority interest
    
    
    4,294
    
    
    
    8.9
    
    
    
    (2,030
    )
    
    
    (4.8
    )Income tax expense
    
    
    483
    
    
    
    1.0
    
    
    
    345
    
    
    
    0.8Income before minority interest
    
    
    3,811
    
    
    
    7.9
    
    
    
    (2,375
    )
    
    
    (5.6
    )Minority interest in income
of consolidated subsidiary
    
    
    (159
    )
    
    
    (0.3
    )
    
    
    (229
    )
    
    
    (0.5
    )Net income
    
    $
    3,652
    
    
    
    7.6
    %
    
    $
    (2,604
    )
    
    
    -6.2
    %
  Net Sales
 Cost of Sales.
 11
    Table of Contents  Marketing and Selling Expenses.
 Research and Development Expenses
 General and Administrative Expenses.
 Amortization of Intangible Assets.
 Special Charges and Asset Impairment.
 Income from Operations.
 Interest Expense.
 Income from Investments.
 Income Tax Expense.
 12
    Table of Contents  Nine Months Ended March 31, 2007 Compared to Nine Months Ended March 31, 2006
  Nine Months Ended
    
    
    Nine Months EndedMarch 31, 2007
    
    
    March 31, 2006Net sales
    
    $
    134,082
    
    
    
    100.0
    %
    
    $
    119,650
    
    
    
    100.0
    %Costs and expenses:Cost of sales
    
    
    79,728
    
    
    
    59.5
    
    
    
    69,670
    
    
    
    58.2Marketing and selling
    
    
    22,534
    
    
    
    16.8
    
    
    
    20,567
    
    
    
    17.2Research and development
    
    
    5,116
    
    
    
    3.8
    
    
    
    4,752
    
    
    
    4.0General and administrative
    
    
    8,630
    
    
    
    6.4
    
    
    
    8,880
    
    
    
    7.4Amortization of intangible assets
    
    
    842
    
    
    
    0.6
    
    
    
    785
    
    
    
    0.7Special charges and asset impairment
    
    
    
    
    
    
    
    
    
    
    4,093
    
    
    
    3.4Income from operations
    
    
    17,232
    
    
    
    12.9
    
    
    
    10,903
    
    
    
    9.1Other income (expense):Interest expense
    
    
    (10,492
    )
    
    
    (7.8
    )
    
    
    (10,866
    )
    
    
    (9.1
    )Interest income
    
    
    163
    
    
    
    0.1
    
    
    
    245
    
    
    
    0.2Income from investments
    
    
    377
    
    
    
    0.3
    
    
    
    351
    
    
    
    0.3Income before income taxes
and minority interest
    
    
    7,280
    
    
    
    5.4
    
    
    
    633
    
    
    
    0.5Income tax expense
    
    
    1,185
    
    
    
    0.9
    
    
    
    752
    
    
    
    0.6Income before minority interest
    
    
    6,095
    
    
    
    4.5
    
    
    
    (119
    )
    
    
    (0.1
    )Minority interest in income
of consolidated subsidiary
    
    
    (490
    )
    
    
    (0.4
    )
    
    
    (614
    )
    
    
    (0.5
    )Net income
    
    $
    5,605
    
    
    
    4.2
    %
    
    $
    (733
    )
    
    
    -0.6
    %
  Net Sales
 Cost of Sales.
 Marketing and Selling Expenses.
 13
    Table of Contents  Research and Development Expenses
 General and Administrative Expenses.
 Amortization of Intangible Assets.
 Special Charges and Asset Impairment.
 Income from Operations.
 Interest Expense.
 Income from Investments.
 Income Tax Expense.
 Liquidity and Capital Resources
  14
    Table of Contents  Net Cash Provided by Operating Activities.
 Net Cash Used in Investing Activities.
 Net Cash Used in Financing Activities.
  Critical Accounting Policies
  15
    Table of Contents  Valuation of Accounts and Notes Receivable
   Inventory Valuation Reserves
  Valuation of Long-Lived Assets
  16
    Table of Contents  Revenue Recognition
  Deferred Tax Assets and Valuation Allowance
  Recently Issued Accounting Pronouncements
  
 Foreign Currency
   
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
 17
    Table of Contents  Item 4. Controls and Procedures
  18
    Table of Contents  Part II. Other Information
  
 Item 6. Exhibits
 Exhibit
    
    
    
    IncorporatedNumber
    
    Title
    
    by Reference2.1
    
    Venture Lighting International, Inc. et al. Fourth Amended Chapter 11
Plan of Reorganization confirmed December 8, 2003 effective
December 10, 2003
    
    
    (1
    )3.1
    
    Third Amended and Restated Articles of Incorporation filed
November 12, 2004
    
    
    (2
    )3.2
    
    Certificate of Amendment by Directors or Incorporators to Articles
of Advanced Lighting Technologies, Inc.
    
    
    (3
    )3.3
    
    Amended and Restated Code of Regulations
    
    
    (4
    )4.1
    
    Reference is made to Exhibit 2.131.1
    
    Rule 13a-14(a)/15d-14(a) Certification31.2
    
    Rule 13a-14(a)/15d-14(a) Certification32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Incorporated by reference to Exhibit of same number in Companys Current Report on Form 8-K
dated December 8, 2003, filed December 23, 2003.(2)
    
    Incorporated by reference to Exhibit of same number in Companys Quarterly Report on Form
10-Q for the period ended September 30, 2004, filed November 12, 2004.(3)
    
    Incorporated by reference to Exhibit 3.1 in Companys Current Report on Form 8-K dated
December 29, 2005, filed January 5, 2006.(4)
    
    Incorporated by reference to Exhibit 3.2 in Companys Quarterly Report on Form 10-Q for the
period ended September 30, 2004, filed November 12, 2004. 19
    Table of Contents  SIGNATURES
  ADVANCED LIGHTING TECHNOLOGIES, INC.Date: May 15, 2007
    By:
    /s/ Wayne R. HellmanWayne R. HellmanChief Executive OfficerDate:  May 15, 2007
    By:
    /s/ Wayne J. VespoliWayne J. VespoliChief Financial Officer 20
    Table of Contents  EXHIBIT INDEX
 Exhibit
    
    
    
    IncorporatedNumber
    
    Title
    
    by Reference2.1
    
    Venture Lighting International, Inc. et al. Fourth Amended Chapter 11
Plan of Reorganization confirmed December 8, 2003 effective
December 10, 2003
    
    
    (1
    )3.1
    
    Third Amended and Restated Articles of Incorporation filed
November 12, 2004
    
    
    (2
    )3.2
    
    Certificate of Amendment by Directors or Incorporators to Articles
of Advanced Lighting Technologies, Inc.
    
    
    (3
    )3.3
    
    Amended and Restated Code of Regulations
    
    
    (4
    )4.1
    
    Reference is made to Exhibit 2.131.1
    
    Rule 13a-14(a)/15d-14(a) Certification31.2
    
    Rule 13a-14(a)/15d-14(a) Certification32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Incorporated by reference to Exhibit of same number in Companys Current Report on Form 8-K
dated December 8, 2003, filed December 23, 2003.(2)
    
    Incorporated by reference to Exhibit of same number in Companys Quarterly Report on Form
10-Q for the period ended September 30, 2004, filed November 12, 2004.(3)
    
    Incorporated by reference to Exhibit 3.1 in Companys Current Report on Form 8-K dated
December 29, 2005, filed January 5, 2006.(4)
    
    Incorporated by reference to Exhibit 3.2 in Companys Quarterly Report on Form 10-Q for the
period ended September 30, 2004, filed November 12, 2004.