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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 September 30, 2005
 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 þ
 o þ
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INDEX
 Advanced Lighting Technologies, Inc.
 Page No.Part I
    
    Financial InformationItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Balance Sheets  September 30, 2005 and June 30, 2005
    
    
    2Condensed Consolidated Statements of Operations  Three Months Ended September 30, 2005 and 2004
    
    
    4Condensed Consolidated Statement of Shareholders Equity  Three Months Ended September 30, 2005
    
    
    5Condensed Consolidated Statements of Cash Flows  Three Months Ended September 30, 2005 and 2004
    
    
    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
    
    
    17Part II
    
    Other InformationItem 6.
    
    Exhibits and Reports on Form 8-K
    
    
    18Signatures
    
    
    19Exhibit 31.1 Rule 13A-14(A)/15D-14(A) Certification of CEOExhibit 31.2 Rule 13A-14(A)/15D-14(A) Certification of CFOExhibit 32.1 CEO Certification Pursuant to 18 U.S.C. Sect 1350Exhibit 32.2 CFO Certification Pursuant to 18 U.S.C. Sect 1350
  1




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Advanced Lighting Technologies, Inc.
 
 Condensed Consolidated Balance Sheets
 (in thousands, except per share amounts)
 (Unaudited)
    
    
    (Audited)September 30,
    
    
    June 30,2005
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,609
    
    
    $
    2,643Trade receivables, less allowances of $696 and $687
    
    
    31,557
    
    
    
    29,069Inventories:Finished goods
    
    
    23,500
    
    
    
    20,849Raw materials and work-in-process
    
    
    14,282
    
    
    
    13,10837,782
    
    
    
    33,957Prepaid expenses
    
    
    1,749
    
    
    
    1,421Total current assets
    
    
    73,697
    
    
    
    67,090Property, plant and equipment:Land and buildings
    
    
    20,510
    
    
    
    20,466Machinery and equipment
    
    
    31,800
    
    
    
    31,260Furniture and fixtures
    
    
    2,645
    
    
    
    2,59254,955
    
    
    
    54,318Less accumulated depreciation
    
    
    8,095
    
    
    
    6,80846,860
    
    
    
    47,510Receivables from related parties
    
    
    3,043
    
    
    
    2,983Investments
    
    
    6,163
    
    
    
    4,946Other assets
    
    
    3,020
    
    
    
    2,980Intangible assets, net
    
    
    24,146
    
    
    
    24,327Goodwill
    
    
    49,751
    
    
    
    50,001$
    206,680
    
    
    $
    199,837
 See Notes to Condensed Consolidated Financial Statements
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##### Table of Contents



Advanced Lighting Technologies, Inc.
 Condensed Consolidated Balance Sheets
 (in thousands, except per share amounts)
 (Unaudited)
    
    
    (Audited)September 30,
    
    
    June 30,2005
    
    
    2005Liabilities and shareholders equityCurrent liabilities:Short-term debt and current portion of long-term debt
    
    $
    16,861
    
    
    $
    11,984Accounts payable
    
    
    12,038
    
    
    
    11,471Payables to related parties
    
    
    952
    
    
    
    310Employee-related liabilities
    
    
    7,430
    
    
    
    7,568Accrued income and other taxes
    
    
    1,018
    
    
    
    793Other accrued expenses
    
    
    4,519
    
    
    
    8,085Total current liabilities
    
    
    42,818
    
    
    
    40,211Long-term debt
    
    
    123,326
    
    
    
    120,026Deferred tax liabilities
    
    
    812
    
    
    
    826Total liabilities
    
    
    166,956
    
    
    
    161,063Minority interest
    
    
    2,333
    
    
    
    2,155Preferred stock, $.001 par value, 239 shares authorized;
29 shares issued and outstanding
    
    
    29,338
    
    
    
    29,338Common shareholders equityCommon stock, $.001 par value, 80,000 shares authorized;
1 share issued and outstanding
    
    
    1
    
    
    
    1Paid-in-capital
    
    
    1,183
    
    
    
    1,130Accumulated other comprehensive income (loss)
    
    
    (690
    )
    
    
    51Retained earnings
    
    
    7,559
    
    
    
    6,099Total common shareholders equity
    
    
    8,053
    
    
    
    7,281$
    206,680
    
    
    $
    199,837
 See Notes to Condensed Consolidated Financial Statements
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Advanced Lighting Technologies, Inc.
 
 Condensed Consolidated Statements of Operations (Unaudited)
 (In thousands)
 Quarter Ended September 30,2005
    
    
    2004Net sales
    
    $
    37,310
    
    
    $
    38,578Costs and expenses:Cost of sales
    
    
    22,288
    
    
    
    22,604Marketing and selling
    
    
    6,422
    
    
    
    6,229Research and development
    
    
    1,308
    
    
    
    1,542General and administrative
    
    
    3,456
    
    
    
    3,537Amortization of intangible assets
    
    
    261
    
    
    
    241Income from operations
    
    
    3,575
    
    
    
    4,425Other income (expense):Interest expense
    
    
    (3,534
    )
    
    
    (3,423
    )Interest income
    
    
    92
    
    
    
    93Income from investments
    
    
    1,953
    
    
    
    486Income before income taxes and minority interest
    
    
    2,086
    
    
    
    1,581Income tax expense
    
    
    448
    
    
    
    373Income before minority interest
    
    
    1,638
    
    
    
    1,208Minority interest in income of consolidated subsidiary
    
    
    (178
    )
    
    
    (151
    )Net income
    
    $
    1,460
    
    
    $
    1,057
 See Notes to Condensed Consolidated Financial Statements
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Advanced Lighting Technologies, Inc.
 
 Condensed Consolidated Statement of Shareholders Equity (Unaudited)
 Three Months Ended September 30, 2005
 (dollars in thousands)
 AccumulatedOther
    
    
    
    
    
    
    CommonPreferred
    
    
    Common Stock
    
    
    Paid-In
    
    
    Comprehensive
    
    
    Retained
    
    
    ShareholdersStock
    
    
    Shares
    
    
    Par Value
    
    
    Capital
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Equity
    
    
    TotalBalance at June 30,
2005
    
    $
    29,338
    
    
    
    1,131
    
    
    $
    1
    
    
    $
    1,130
    
    
    $
    51
    
    
    $
    6,099
    
    
    $
    7,281
    
    
    $
    36,619Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,460
    
    
    
    1,460
    
    
    
    1,460Unrealized loss on
securities
held as available
for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (737
    )
    
    
    
    
    
    
    (737
    )
    
    
    (737
    )Foreign currency
translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )Stock purchases by
management
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    53Balance at
September 30, 2005
    
    $
    29,338
    
    
    
    1,184
    
    
    $
    1
    
    
    $
    1,183
    
    
    $
    (690
    )
    
    $
    7,559
    
    
    $
    8,053
    
    
    $
    37,391
 See Notes to Condensed Consolidated Financial Statements
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Advanced Lighting Technologies, Inc.
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 (in thousands)
 Quarter Ended September 30,2005
    
    
    2004Operating activitiesNet income
    
    $
    1,460
    
    
    $
    1,057Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation
    
    
    1,456
    
    
    
    1,120Amortization
    
    
    261
    
    
    
    241Provision for doubtful accounts
    
    
    56
    
    
    
    119Income from investments
    
    
    (1,953
    )
    
    
    (486
    )Payment of reorganization expenses
    
    
    
    
    
    
    (1,842
    )Changes in current assets and liabilities and other
    
    
    (8,751
    )
    
    
    (4,826
    )Net cash used in operating activities
    
    
    (7,471
    )
    
    
    (4,617
    )Investing activitiesCapital expenditures
    
    
    (792
    )
    
    
    (1,148
    )Proceeds from sale of investment
    
    
    
    
    
    
    450Net cash used in investing activities
    
    
    (792
    )
    
    
    (698
    )Financing activitiesNet borrowings under revolving credit loan
    
    
    5,024
    
    
    
    5,352Proceeds from long-term debt
    
    
    3,850
    
    
    
    Payments of long-term debt and capital leases
    
    
    (698
    )
    
    
    (706
    )Stock purchases by management
    
    
    53
    
    
    
    Net cash provided by financing activities
    
    
    8,229
    
    
    
    4,646Decrease in cash and cash equivalents
    
    
    (34
    )
    
    
    (669
    )Cash and cash equivalents, beginning of period
    
    
    2,643
    
    
    
    4,701Cash and cash equivalents, end of period
    
    $
    2,609
    
    
    $
    4,032Supplemental cash flow informationInterest paid
    
    $
    6,629
    
    
    $
    6,544Income taxes paid (refunds received), net
    
    
    
    
    
    
    (39
    )
 See Notes to Condensed Consolidated Financial Statements
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Advanced Lighting Technologies, Inc.
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 September 30, 2005
  A. Organization
  B. Basis of Presentation
   Reporting Periods
  Income Taxes
 Accounting for Income Taxes
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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2005
 C. Investment in Fiberstars
  Accounting for Derivative Instruments
and Hedging Activities,
 Accounting for Certain Investments in Debt and Equity Securities
 D. Comprehensive Income
  8




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2005
 E. Financing Facilities
  Balance Sheet Classification of Borrowings Outstanding under
Revolving Credit Agreements that include Both a Subjective Acceleration Clause and a Lock-box
Arrangement
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (Dollars in thousands)
   General
   Results of Operations
 Quarter Ended September 30, 2005 Compared to Quarter Ended September 30, 2004
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Quarter Ended
    
    
    Quarter EndedSeptember 30, 2005
    
    
    September 30, 2004Net sales
    
    $
    37,310
    
    
    
    100.0
    %
    
    $
    38,578
    
    
    
    100.0
    %Costs and expenses:Cost of sales
    
    
    22,288
    
    
    
    59.7
    
    
    
    22,604
    
    
    
    58.6Marketing and selling
    
    
    6,422
    
    
    
    17.2
    
    
    
    6,229
    
    
    
    16.1Research and development
    
    
    1,308
    
    
    
    3.5
    
    
    
    1,542
    
    
    
    4.0General and administrative
    
    
    3,456
    
    
    
    9.3
    
    
    
    3,537
    
    
    
    9.2Amortization of intangible assets
    
    
    261
    
    
    
    0.7
    
    
    
    241
    
    
    
    0.6Income from operations
    
    
    3,575
    
    
    
    9.6
    
    
    
    4,425
    
    
    
    11.5Other income (expense):Interest expense
    
    
    (3,534
    )
    
    
    (9.5
    )
    
    
    (3,423
    )
    
    
    (8.9
    )Interest income
    
    
    92
    
    
    
    0.3
    
    
    
    93
    
    
    
    0.2Income from investments
    
    
    1,953
    
    
    
    5.2
    
    
    
    486
    
    
    
    1.3Income before income taxes and minority interest
    
    
    2,086
    
    
    
    5.6
    
    
    
    1,581
    
    
    
    4.1Income tax expense
    
    
    448
    
    
    
    1.2
    
    
    
    373
    
    
    
    1.0Income before minority interest
    
    
    1,638
    
    
    
    4.4
    
    
    
    1,208
    
    
    
    3.1Minority interest in income of consolidated subsidiary
    
    
    (178
    )
    
    
    (0.5
    )
    
    
    (151
    )
    
    
    (0.4
    )Net income
    
    $
    1,460
    
    
    
    3.9
    %
    
    $
    1,057
    
    
    
    2.7
    %
  Net Sales
   Cost of Sales.
 11




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Marketing and Selling Expenses.
 Research and Development Expenses
 General and Administrative Expenses.
 Amortization of Intangible Assets.
 Income from Operations.
 Interest Expense.
 Income from Investments.
 12




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Accounting for Derivative Instruments
and Hedging Activities,
  Income Tax Expense.
    Liquidity and Capital Resources
   13




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Net Cash Used in Operating Activities.
 Net Cash Used in Investing Activities.
 Net Cash Provided by Financing Activities.
  14




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Critical Accounting Policies
   Valuation of Accounts and Notes Receivable
   Inventory Valuation Reserves
  15




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Valuation of Long-Lived Assets
  Revenue Recognition
  Deferred Tax Assets and Valuation Allowance
  Foreign Currency
  16




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
  17




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Part II. Other Information
  
 Item 6. Exhibits and Reports on Form 8-K
 (a)
    
    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
    
    Amended and Restated Code of Regulations
    
    
    (2
    )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. (b)
    
    Reports on Form 8-KThe Company filed two reports on Form 8-K during the quarter ended September 30, 2005. First,
the Company filed a Report on Form 8-K on August 2, 2005, under Item 1.01, Entry into a
Material Definitive Agreement, in which it reported the adoption of the Companys 2005 Equity
Incentive Plan by the Board of Directors, the granting of awards under this Plan, the entry
into an Amended and Restated Employment Agreement with the Companys Chief Executive Officer,
and the entry into Severance and Noncompetition Agreements with two other executives of the
Company. The Company also reported, under Item 5.05, the approval by the Board of Directors of
a Code of Ethical Conduct for Chief Executive Officer and Executive Officers Including Senior
Financial Officers and the amendment of a portion of the existing Code of Conduct specifying
that disciplinary action, to and including dismissal, could result from violation of the Code
of Conduct. Exhibits pertaining to these
items were filed with the Report on Form 8-K. Second, the Company filed a Report on Form 8-K
on September 12, 2005, announcing the resignation of a director.
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SIGNATURES
  ADVANCED LIGHTING TECHNOLOGIES, INC.Date:  October 28, 2005
    By:
    /s/ Wayne R. HellmanWayne R. HellmanChief Executive Officer Date:  October 28, 2005
    By:
    /s/ Christopher F. ZerullChristopher F. ZerullVice President and Chief Accounting Officer 19




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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
    
    Amended and Restated Code of Regulations
    
    
    (2
    )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.