##### 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, 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 o þ
 Yes   þ
  
          No
   o
 Yes   o
          
  No
   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, 2005 and June 30, 2005
    
    
    2Condensed Consolidated Statements of Operations 
Three and Six Months Ended December 31, 2005 and 2004
    
    
    4Condensed Consolidated Statement of Shareholders Equity 
Six Months Ended December 31, 2005
    
    
    5Condensed Consolidated Statements of Cash Flows 
Six Months Ended December 31, 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
    
    
    19Item 4.Controls and Procedures
    
    
    19Part IIOther InformationItem 6.Exhibits and Reports on Form 8-K
    
    
    20Signatures
    
    
    21EX-31.1 302 CertificationEX-31.2 302 CertificationEX-32.1 906 CertificationEX-32.2 906 Certification
  1




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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 30,2005
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    3,269
    
    
    $
    2,643Trade receivables, less allowances of $723 and $687
    
    
    31,214
    
    
    
    29,069Inventories:Finished goods
    
    
    25,222
    
    
    
    20,849Raw materials and work-in-process
    
    
    14,775
    
    
    
    13,10839,997
    
    
    
    33,957Prepaid expenses
    
    
    2,575
    
    
    
    1,421Total current assets
    
    
    77,055
    
    
    
    67,090Property, plant and equipment:Land and buildings
    
    
    20,515
    
    
    
    20,466Machinery and equipment
    
    
    32,273
    
    
    
    31,260Furniture and fixtures
    
    
    3,171
    
    
    
    2,59255,959
    
    
    
    54,318Less accumulated depreciation
    
    
    9,182
    
    
    
    6,80846,777
    
    
    
    47,510Receivables from related parties
    
    
    1,751
    
    
    
    2,983Investments
    
    
    2,141
    
    
    
    4,946Other assets
    
    
    2,928
    
    
    
    2,980Intangible assets, net
    
    
    23,919
    
    
    
    24,327Goodwill
    
    
    49,891
    
    
    
    50,001$
    204,462
    
    
    $
    199,837
 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 30,2005
    
    
    2005Liabilities and shareholders equityCurrent liabilities:Short-term debt and current portion of long-term debt
    
    $
    15,911
    
    
    $
    11,984Accounts payable
    
    
    10,171
    
    
    
    11,471Payables to related parties
    
    
    796
    
    
    
    310Employee-related liabilities
    
    
    3,876
    
    
    
    7,568Accrued income and other taxes
    
    
    1,189
    
    
    
    793Other accrued expenses
    
    
    8,399
    
    
    
    8,085Total current liabilities
    
    
    40,342
    
    
    
    40,211Long-term debt
    
    
    122,776
    
    
    
    120,026Deferred tax liabilities
    
    
    728
    
    
    
    826Total liabilities
    
    
    163,846
    
    
    
    161,063Minority interest
    
    
    2,540
    
    
    
    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
    
    
    (416
    )
    
    
    51Retained earnings
    
    
    7,970
    
    
    
    6,099Total common shareholders equity
    
    
    8,738
    
    
    
    7,281$
    204,462
    
    
    $
    199,837
 See Notes
to Condensed Consolidated Financial Statements
 3




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##### Table of Contents



Advanced Lighting Technologies, Inc.
 
 Condensed Consolidated Statements of Operations (Unaudited)
 (In thousands)
 Quarter Ended December 31,
    
    
    Six Months Ended December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Net sales
    
    $
    40,261
    
    
    $
    41,122
    
    
    $
    77,571
    
    
    $
    79,700Costs and expenses:Cost of sales
    
    
    22,936
    
    
    
    24,339
    
    
    
    45,242
    
    
    
    46,943Marketing and selling
    
    
    6,843
    
    
    
    6,394
    
    
    
    13,247
    
    
    
    12,623Research and development
    
    
    1,859
    
    
    
    1,570
    
    
    
    3,167
    
    
    
    3,112General and administrative
    
    
    2,573
    
    
    
    3,156
    
    
    
    6,029
    
    
    
    6,693Amortization of intangible assets
    
    
    265
    
    
    
    248
    
    
    
    526
    
    
    
    489Income from operations
    
    
    5,785
    
    
    
    5,415
    
    
    
    9,360
    
    
    
    9,840Other income (expense):Interest expense
    
    
    (3,681
    )
    
    
    (3,469
    )
    
    
    (7,215
    )
    
    
    (6,892
    )Interest income
    
    
    78
    
    
    
    104
    
    
    
    170
    
    
    
    197Income (loss) from investments
    
    
    (1,605
    )
    
    
    3
    
    
    
    348
    
    
    
    489Income before income taxes
and minority interest
    
    
    577
    
    
    
    2,053
    
    
    
    2,663
    
    
    
    3,634Income tax expense
    
    
    (41
    )
    
    
    259
    
    
    
    407
    
    
    
    632Income before minority interest
    
    
    618
    
    
    
    1,794
    
    
    
    2,256
    
    
    
    3,002Minority interest in income
of consolidated subsidiary
    
    
    (207
    )
    
    
    (188
    )
    
    
    (385
    )
    
    
    (339
    )Net income
    
    $
    411
    
    
    $
    1,606
    
    
    $
    1,871
    
    
    $
    2,663
 See
Notes to Condensed Consolidated Financial Statements
 4




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##### Table of Contents



Advanced Lighting Technologies, Inc.
 
 Condensed Consolidated Statement of Shareholders Equity (Unaudited)
Six Months Ended December 31, 2005
 (dollars in thousands)
 Accumulated OtherPreferred
    
    
    Common Stock
    
    
    Paid-in
    
    
    Comprehensive Income
    
    
    Retained
    
    
    CommonStock
    
    
    Shares
    
    
    Par Value
    
    
    Capital
    
    
    (Loss)
    
    
    Earnings
    
    

Shareholders Equity
    
    
    TotalBalance at June 30, 2005
    
    $
    29,338
    
    
    
    1,131
    
    
    $
    1
    
    
    $
    1,130
    
    
    $
    51
    
    
    $
    6,099
    
    
    $
    7,281
    
    
    $
    36,619Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,871
    
    
    
    1,871
    
    
    
    1,871Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (467
    )
    
    
    
    
    
    
    (467
    )
    
    
    (467
    )Stock purchases by
management
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    53Balance
at December 31, 2005
    
    $
    29,338
    
    
    
    1,184
    
    
    $
    1
    
    
    $
    1,183
    
    
    $
    (416
    )
    
    $
    7,970
    
    
    $
    8,738
    
    
    $
    38,076
 See
Notes to Condensed Consolidated Financial Statements
 5




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##### Table of Contents



Advanced Lighting Technologies, Inc.
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 (in thousands)
 Six Months Ended December 31,2005
    
    
    2004Operating activitiesNet income
    
    $
    1,871
    
    
    $
    2,663Adjustments
to reconcile net income to net cash provided by (used in) operating activities:Depreciation
    
    
    2,788
    
    
    
    2,210Amortization
    
    
    526
    
    
    
    489Provision for doubtful accounts
    
    
    93
    
    
    
    166Income from investments
    
    
    (348
    )
    
    
    (489
    )Payment of reorganization expenses
    
    
    
    
    
    
    (1,842
    )Changes in current assets and liabilities and other
    
    
    (11,930
    )
    
    
    (1,753
    )Net cash provided by (used in) operating
activities
    
    
    (7,000
    )
    
    
    1,444Investing activitiesCapital expenditures
    
    
    (2,258
    )
    
    
    (2,063
    )Proceeds from sale of investment
    
    
    3,154
    
    
    
    450Net cash provided by (used in) investing activities
    
    
    896
    
    
    
    (1,613
    )Financing activitiesNet borrowings under revolving credit loan
    
    
    4,154
    
    
    
    642Proceeds from long-term debt
    
    
    3,850
    
    
    
    Payments of long-term debt and capital leases
    
    
    (1,327
    )
    
    
    (2,878
    )Stock purchases by management
    
    
    53
    
    
    
    Net cash provided by (used in) financing activities
    
    
    6,730
    
    
    
    (2,236
    )Increase (decrease) in cash and cash equivalents
    
    
    626
    
    
    
    (2,405
    )Cash and cash equivalents, beginning of period
    
    
    2,643
    
    
    
    4,701Cash and cash equivalents, end of period
    
    $
    3,269
    
    
    $
    2,296Supplemental cash flow informationInterest paid
    
    $
    7,096
    
    
    $
    7,034Income taxes paid
    
    
    310
    
    
    
    188
 See
Notes to Condensed Consolidated Financial Statements
 6




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##### Table of Contents



Advanced Lighting Technologies, Inc.
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
December 31, 2005
 (Dollars in thousands except for per share amounts)
 A. Organization
  B. Basis of Presentation
   Reporting
Periods
  Income
Taxes
 Accounting for Income Taxes,
 7




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
December 31, 2005  (Dollars in thousands except for per share amounts)
 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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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
December 31, 2005  (Dollars in thousands except for per share amounts)
 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.
   9




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
December 31, 2005  (Dollars in thousands except for per share amounts)
 F. Subsequent Event
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 (Dollars in thousands)
   General
   10




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® ®
 11




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##### Table of Contents



Results of Operations
 Quarter Ended December 31, 2005 Compared to Quarter Ended December 31, 2004
  Quarter Ended
    
    
    Quarter EndedDecember 31, 2005
    
    
    December 31,2004Net sales
    
    $
    40,261
    
    
    
    100.0
    %
    
    $
    41,122
    
    
    
    100.0
    %Costs and expenses:Cost of sales
    
    
    22,936
    
    
    
    57.0
    
    
    
    24,339
    
    
    
    59.2Marketing and selling
    
    
    6,843
    
    
    
    17.0
    
    
    
    6,394
    
    
    
    15.5Research and development
    
    
    1,859
    
    
    
    4.6
    
    
    
    1,570
    
    
    
    3.8General and administrative
    
    
    2,573
    
    
    
    6.4
    
    
    
    3,156
    
    
    
    7.7Amortization of intangible assets
    
    
    265
    
    
    
    0.7
    
    
    
    248
    
    
    
    0.6Income from operations
    
    
    5,785
    
    
    
    14.4
    
    
    
    5,415
    
    
    
    13.2Other income (expense):Interest expense
    
    
    (3,681
    )
    
    
    (9.1
    )
    
    
    (3,469
    )
    
    
    (8.4
    )Interest income
    
    
    78
    
    
    
    0.2
    
    
    
    104
    
    
    
    0.2Income (loss) from investments
    
    
    (1,605
    )
    
    
    (4.0
    )
    
    
    3
    
    
    
    0.0Income before income taxes
and minority interest
    
    
    577
    
    
    
    1.4
    
    
    
    2,053
    
    
    
    5.0Income tax expense
    
    
    (41
    )
    
    
    (0.1
    )
    
    
    259
    
    
    
    0.6Income before minority interest
    
    
    618
    
    
    
    1.5
    
    
    
    1,794
    
    
    
    4.4Minority interest in income
of consolidated subsidiary
    
    
    (207
    )
    
    
    (0.5
    )
    
    
    (188
    )
    
    
    (0.5
    )Net income
    
    $
    411
    
    
    
    1.0
    %
    
    $
    1,606
    
    
    
    3.9
    %
  Net Sales
   12




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##### Table of Contents



Cost of Sales.
 Marketing and Selling Expenses.
 Research and Development Expenses ®
 General and Administrative Expenses.
 Amortization of Intangible Assets.
 Income from Operations.
 Interest Expense.
 13




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##### Table of Contents



Income (Loss) from Investments.
 Income Tax Expense.
 Six Months Ended December 31, 2005 Compared to Six Months Ended December 31, 2004
   Six Months Ended
    
    
    Six Months EndedDecember 31, 2005
    
    
    December 31, 2004Net sales
    
    $
    77,571
    
    
    
    100.0
    %
    
    $
    79,700
    
    
    
    100.0
    %Costs and expenses:Cost of sales
    
    
    45,242
    
    
    
    58.3
    
    
    
    46,943
    
    
    
    58.9Marketing and selling
    
    
    13,247
    
    
    
    17.1
    
    
    
    12,623
    
    
    
    15.8Research and development
    
    
    3,167
    
    
    
    4.1
    
    
    
    3,112
    
    
    
    3.9General and administrative
    
    
    6,029
    
    
    
    7.8
    
    
    
    6,693
    
    
    
    8.4Amortization of intangible assets
    
    
    526
    
    
    
    0.7
    
    
    
    489
    
    
    
    0.6Income from operations
    
    
    9,360
    
    
    
    12.1
    
    
    
    9,840
    
    
    
    12.4Other income (expense):Interest expense
    
    
    (7,215
    )
    
    
    (9.3
    )
    
    
    (6,892
    )
    
    
    (8.6
    )Interest income
    
    
    170
    
    
    
    0.2
    
    
    
    197
    
    
    
    0.2Income from investments
    
    
    348
    
    
    
    0.4
    
    
    
    489
    
    
    
    0.6Income before income taxes
and minority interest
    
    
    2,663
    
    
    
    3.4
    
    
    
    3,634
    
    
    
    4.6Income tax expense
    
    
    407
    
    
    
    0.5
    
    
    
    632
    
    
    
    0.8Income before minority interest
    
    
    2,256
    
    
    
    2.9
    
    
    
    3,002
    
    
    
    3.8Minority interest in income
of consolidated subsidiary
    
    
    (385
    )
    
    
    (0.5
    )
    
    
    (339
    )
    
    
    (0.5
    )Net income
    
    $
    1,871
    
    
    
    2.4
    %
    
    $
    2,663
    
    
    
    3.3
    %
  14




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##### Table of Contents



Net Sales
   Cost of Sales.
 Marketing and Selling Expenses.
 Research and Development Expenses ®
 15




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##### Table of Contents



General and Administrative Expenses.
 Amortization of Intangible Assets.
 Income from Operations.
 Interest Expense.
 Income from Investments.
 Accounting for Derivative Instruments
and Hedging Activities,
   Income Tax Expense.
  16




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##### Table of Contents



Liquidity and Capital Resources
     17




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##### Table of Contents



Net Cash Used in Operating Activities.
 Net Cash Provided by Investing Activities.
 Net Cash Provided by Financing Activities.
 .
 Critical Accounting Policies
   18




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##### Table of Contents



Valuation of Accounts and Notes Receivable
   Inventory Valuation Reserves
  Valuation of Long-Lived Assets
  Revenue Recognition
  19




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##### Table of Contents



Deferred Tax Assets and Valuation Allowance
  Foreign Currency
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
  20




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##### Table of Contents



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
    
    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. (b) Reports on Form 8-K
  21




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##### Table of Contents



SIGNATURES
  ADVANCED LIGHTING TECHNOLOGIES, INC.Date:
January 25, 2006
    
    
    
    By:
    
    /s/ Wayne R. HellmanWayne R. HellmanChief Executive OfficerDate:
January 25, 2006
    
    
    
    By:
    
    /s/ Wayne J. VespoliWayne J. VespoliChief Financial Officer
 22




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##### 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.