##### 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 December 31, 2006
 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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##### 



INDEX
 Advanced Lighting Technologies, Inc.
 Page No.Part I Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets 
December 31, 2006 and June 30, 2006
    
    
    2Condensed Consolidated Statements of Operations 
Three and Six Months Ended December 31, 2006 and 2005
    
    
    4Condensed Consolidated Statement of Shareholders Equity 
Six Months Ended December 31, 2006
    
    
    5Condensed Consolidated Statements of Cash Flows 
Six Months Ended December 31, 2006 and 2005
    
    
    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
    
    
    18Item 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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Advanced Lighting Technologies, Inc.
 
 Condensed Consolidated Balance Sheets
 (in thousands, except per share amounts)
 (Unaudited)
    
    
    (Audited)December 31,
    
    
    June 30,2006
    
    
    2006AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,440
    
    
    $
    4,290Trade receivables, less allowances of $1,068 and $742
    
    
    41,997
    
    
    
    35,857Inventories:Finished goods
    
    
    26,439
    
    
    
    23,977Raw materials and work-in-process
    
    
    10,381
    
    
    
    11,82536,820
    
    
    
    35,802Prepaid expenses
    
    
    2,881
    
    
    
    2,097Total current assets
    
    
    84,138
    
    
    
    78,046Property, plant and equipment:Land and buildings
    
    
    10,985
    
    
    
    10,341Machinery and equipment
    
    
    29,624
    
    
    
    26,930Furniture and fixtures
    
    
    3,427
    
    
    
    3,01744,036
    
    
    
    40,288Less accumulated depreciation
    
    
    10,383
    
    
    
    7,72933,653
    
    
    
    32,559Receivables from related parties
    
    
    21
    
    
    
    1,829Investments
    
    
    2,174
    
    
    
    2,168Other assets
    
    
    2,388
    
    
    
    3,604Intangible assets, net
    
    
    23,282
    
    
    
    23,623Goodwill
    
    
    48,430
    
    
    
    48,550$
    194,086
    
    
    $
    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)December 31,
    
    
    June 30,2006
    
    
    2006Liabilities and shareholders equityCurrent liabilities:Short-term debt and current portion of long-term debt
    
    $
    6,262
    
    
    $
    6,513Accounts payable
    
    
    11,407
    
    
    
    6,964Payables to related parties
    
    
    191
    
    
    
    862Employee-related liabilities
    
    
    3,676
    
    
    
    6,705Accrued income and other taxes
    
    
    978
    
    
    
    667Other accrued expenses
    
    
    9,585
    
    
    
    9,315Total current liabilities
    
    
    32,099
    
    
    
    31,026Long-term debt
    
    
    120,566
    
    
    
    121,669Deferred tax liabilities
    
    
    630
    
    
    
    341Deferred lease credits
    
    
    3,346
    
    
    
    3,453Total liabilities
    
    
    156,641
    
    
    
    156,489Minority interest
    
    
    3,237
    
    
    
    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
    
    
    1,336
    
    
    
    65Retained earnings
    
    
    2,000
    
    
    
    47Total common shareholders equity
    
    
    4,520
    
    
    
    1,296$
    194,086
    
    
    $
    190,379
 See Notes to Condensed Consolidated Financial Statements
 3




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Advanced Lighting Technologies, Inc.
 
 Condensed Consolidated Statements of Operations (Unaudited)
 (In thousands)
 Quarter Ended December 31,
    
    
    Six Months Ended December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    46,376
    
    
    $
    40,261
    
    
    $
    86,100
    
    
    $
    77,571Costs and expenses:Cost of sales
    
    
    27,947
    
    
    
    22,936
    
    
    
    51,773
    
    
    
    45,242Marketing and selling
    
    
    7,729
    
    
    
    6,843
    
    
    
    14,971
    
    
    
    13,247Research and development
    
    
    1,724
    
    
    
    1,859
    
    
    
    3,373
    
    
    
    3,167General and administrative
    
    
    2,704
    
    
    
    2,573
    
    
    
    5,825
    
    
    
    6,029Amortization of intangible
assets
    
    
    277
    
    
    
    265
    
    
    
    535
    
    
    
    526Income from operations
    
    
    5,995
    
    
    
    5,785
    
    
    
    9,623
    
    
    
    9,360Other income (expense):Interest expense
    
    
    (3,561
    )
    
    
    (3,681
    )
    
    
    (7,039
    )
    
    
    (7,215
    )Interest income
    
    
    36
    
    
    
    78
    
    
    
    121
    
    
    
    170Income (loss) from
investments
    
    
    5
    
    
    
    (1,605
    )
    
    
    281
    
    
    
    348Income before income taxes
and minority interest
    
    
    2,475
    
    
    
    577
    
    
    
    2,986
    
    
    
    2,663Income tax expense
    
    
    429
    
    
    
    (41
    )
    
    
    702
    
    
    
    407Income before minority interest
    
    
    2,046
    
    
    
    618
    
    
    
    2,284
    
    
    
    2,256Minority interest in income
of consolidated subsidiary
    
    
    (165
    )
    
    
    (207
    )
    
    
    (331
    )
    
    
    (385
    )Net income
    
    $
    1,881
    
    
    $
    411
    
    
    $
    1,953
    
    
    $
    1,871
 See Notes to Condensed Consolidated Financial Statements
 4




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Advanced Lighting Technologies, Inc.
 
 Condensed Consolidated Statement of Shareholders Equity (Unaudited)
 Six Months Ended December 31, 2006
 (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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,953
    
    
    
    1,953
    
    
    
    1,953Foreign currency
translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,271
    
    
    
    
    
    
    
    1,271
    
    
    
    1,271Balance at December
31, 2006
    
    $
    29,688
    
    
    
    1,184
    
    
    $
    1
    
    
    $
    1,183
    
    
    $
    1,336
    
    
    $
    2,000
    
    
    $
    4,520
    
    
    $
    34,208
 See Notes to Condensed Consolidated Financial Statements
 5




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Advanced Lighting Technologies, Inc.
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 (in thousands)
 Six Months Ended December 31,2006
    
    
    2005Operating activitiesNet income
    
    $
    1,953
    
    
    $
    1,871Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation
    
    
    2,541
    
    
    
    2,788Amortization
    
    
    535
    
    
    
    526Provision for doubtful accounts
    
    
    188
    
    
    
    93Income from investments
    
    
    (281
    )
    
    
    (348
    )Changes in current assets and liabilities and other
    
    
    (1,885
    )
    
    
    (11,930
    )Net cash
provided by
(used in) operating
activities
    
    
    3,051
    
    
    
    (7,000
    )Investing activitiesCapital expenditures
    
    
    (3,823
    )
    
    
    (2,258
    )Cash distributions from investments
    
    
    275
    
    
    
    Proceeds from sale of investment
    
    
    
    
    
    
    3,154Net cash
provided by
(used in)
investing
activities
    
    
    (3,548
    )
    
    
    896Financing activitiesNet borrowings (payments) under credit facilities
    
    
    (249
    )
    
    
    4,154Proceeds from long-term debt
    
    
    
    
    
    
    3,850Payments of long-term debt
    
    
    (1,104
    )
    
    
    (1,327
    )Issuance of common stock
    
    
    
    
    
    
    53Net cash
provided by
(used in)
financing
activities
    
    
    (1,353
    )
    
    
    6,730Increase (decrease) in cash and cash equivalents
    
    
    (1,850
    )
    
    
    626Cash and cash equivalents, beginning of period
    
    
    4,290
    
    
    
    2,643Cash
and cash equivalents, end of period
    
    $
    2,440
    
    
    $
    3,269Supplemental cash flow informationInterest paid
    
    $
    6,847
    
    
    $
    7,096Income taxes paid (refunds received), net
    
    
    251
    
    
    
    310
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Advanced Lighting Technologies, Inc.
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 December 31, 2006
  A. Organization
  B. Basis of Presentation
   Income Taxes
 Accounting for Income Taxes
 7




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
December 31, 2006
 C. Comprehensive Income
   8




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
December 31, 2006
 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
   9




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (Dollars in thousands)
   General
  ® ®
 10




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Results of Operations
 Quarter Ended December 31, 2006 Compared to Quarter Ended December 31, 2005
  Quarter Ended
    
    
    Quarter EndedDecember 31, 2006
    
    
    December 31, 2005Net sales
    
    $
    46,376
    
    
    
    100.0
    %
    
    $
    40,261
    
    
    
    100.0
    %Costs and expenses:Cost of sales
    
    
    27,947
    
    
    
    60.3
    
    
    
    22,936
    
    
    
    57.0Marketing and selling
    
    
    7,729
    
    
    
    16.7
    
    
    
    6,843
    
    
    
    17.0Research and development
    
    
    1,724
    
    
    
    3.7
    
    
    
    1,859
    
    
    
    4.6General and administrative
    
    
    2,704
    
    
    
    5.8
    
    
    
    2,573
    
    
    
    6.4Amortization of intangible assets
    
    
    277
    
    
    
    0.6
    
    
    
    265
    
    
    
    0.7Income from operations
    
    
    5,995
    
    
    
    12.9
    
    
    
    5,785
    
    
    
    14.4Other income (expense):Interest expense
    
    
    (3,561
    )
    
    
    (7.7
    )
    
    
    (3,681
    )
    
    
    (9.1
    )Interest income
    
    
    36
    
    
    
    0.1
    
    
    
    78
    
    
    
    0.2Income (loss) from investments
    
    
    5
    
    
    
    0.0
    
    
    
    (1,605
    )
    
    
    (4.0
    )Income before income taxes
and minority interest
    
    
    2,475
    
    
    
    5.3
    
    
    
    577
    
    
    
    1.4Income tax expense
    
    
    429
    
    
    
    0.9
    
    
    
    (41
    )
    
    
    (0.1
    )Income before minority interest
    
    
    2,046
    
    
    
    4.4
    
    
    
    618
    
    
    
    1.5Minority interest in income
of consolidated subsidiary
    
    
    (165
    )
    
    
    (0.4
    )
    
    
    (207
    )
    
    
    (0.5
    )Net income
    
    $
    1,881
    
    
    
    4.1
    %
    
    $
    411
    
    
    
    1.0
    %
  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.
 Income Tax Expense.
 12




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Six Months Ended December 31, 2006 Compared to Six Months Ended December 31, 2005
  Six Months Ended
    
    
    Six Months EndedDecember 31, 2006
    
    
    December 31, 2005Net sales
    
    $
    86,100
    
    
    
    100.0
    %
    
    $
    77,571
    
    
    
    100.0
    %Costs and expenses:Cost of sales
    
    
    51,773
    
    
    
    60.1
    
    
    
    45,242
    
    
    
    58.3Marketing and selling
    
    
    14,971
    
    
    
    17.4
    
    
    
    13,247
    
    
    
    17.1Research and development
    
    
    3,373
    
    
    
    3.9
    
    
    
    3,167
    
    
    
    4.1General and administrative
    
    
    5,825
    
    
    
    6.8
    
    
    
    6,029
    
    
    
    7.8Amortization of intangible assets
    
    
    535
    
    
    
    0.6
    
    
    
    526
    
    
    
    0.7Income from operations
    
    
    9,623
    
    
    
    11.2
    
    
    
    9,360
    
    
    
    12.1Other income (expense):Interest expense
    
    
    (7,039
    )
    
    
    (8.2
    )
    
    
    (7,215
    )
    
    
    (9.3
    )Interest income
    
    
    121
    
    
    
    0.1
    
    
    
    170
    
    
    
    0.2Income from investments
    
    
    281
    
    
    
    0.3
    
    
    
    348
    
    
    
    0.4Income before income taxes
and minority interest
    
    
    2,986
    
    
    
    3.5
    
    
    
    2,663
    
    
    
    3.4Income tax expense
    
    
    702
    
    
    
    0.8
    
    
    
    407
    
    
    
    0.5Income before minority interest
    
    
    2,284
    
    
    
    2.7
    
    
    
    2,256
    
    
    
    2.9Minority interest in income
of consolidated subsidiary
    
    
    (331
    )
    
    
    (0.4
    )
    
    
    (385
    )
    
    
    (0.5
    )Net income
    
    $
    1,953
    
    
    
    2.3
    %
    
    $
    1,871
    
    
    
    2.4
    %
  Net Sales
 Cost of Sales.
 Marketing and Selling Expenses.
 13




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Research and Development Expenses
 General and Administrative Expenses.
 Amortization of Intangible Assets.
 Income from Operations.
 Interest Expense.
 Income from Investments.
 Income Tax Expense.
 14




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Liquidity and Capital Resources
     Net Cash Provided by Operating Activities.
 Net Cash Used in Investing Activities.
 Net Cash Used in Financing Activities.
  15




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Critical Accounting Policies
   Valuation of Accounts and Notes Receivable
   Inventory Valuation Reserves
  16




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Valuation of Long-Lived Assets
  Revenue Recognition
  Deferred Tax Assets and Valuation Allowance
  Recently Issued Accounting Pronouncements
  
 17




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Foreign Currency
   
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
  18




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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 datedDecember 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




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SIGNATURES
  ADVANCED LIGHTING TECHNOLOGIES, INC.Date:  February 9, 2007
    By:
    /s/ Wayne R. HellmanWayne R. HellmanChief Executive Officer Date:  February 9, 2007
    By:
    /s/ Wayne J. VespoliWayne J. VespoliChief Financial Officer 20




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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
    
    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 datedDecember 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.