##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
 For the quarterly period ended September 30, 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
 (Registrants telephone number, including area code)
 þ o
 
 o o þ
 þ o
 o þ




---



##### 



INDEX
 Advanced Lighting Technologies, Inc.
 Page No.Part I
    
    Financial InformationItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Balance Sheets 
September 30, 2006 and June 30, 2006
    
    
    2Condensed Consolidated Statements of Operations 
Three Months Ended September 30, 2006 and 2005
    
    
    4Condensed Consolidated Statement of Shareholders Equity 
Three Months Ended September 30, 2006
    
    
    5Condensed Consolidated Statements of Cash Flows 
Three Months Ended September 30, 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
    
    
    16Item 4.
    
    Controls and Procedures
    
    
    16Part II
    
    Other InformationItem 6.
    
    Exhibits
    
    
    17Signatures
    
    
    19EX-31.1EX-31.2EX-32.1EX-32.2
  1




---



##### Table of Contents



Advanced Lighting Technologies, Inc.
 
 Condensed Consolidated Balance Sheets
 (in thousands, except per share amounts)
 (Unaudited)
    
    
    (Audited)September 30,
    
    
    June 30,2006
    
    
    2006AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,484
    
    
    $
    4,290Trade receivables, less allowances of $890 and $742
    
    
    35,365
    
    
    
    35,857Inventories:Finished goods
    
    
    23,793
    
    
    
    23,977Raw materials and work-in-process
    
    
    11,896
    
    
    
    11,82535,689
    
    
    
    35,802Prepaid expenses
    
    
    3,084
    
    
    
    2,097Total current assets
    
    
    76,622
    
    
    
    78,046Property, plant and equipment:Land and buildings
    
    
    10,606
    
    
    
    10,341Machinery and equipment
    
    
    28,955
    
    
    
    26,930Furniture and fixtures
    
    
    3,236
    
    
    
    3,01742,797
    
    
    
    40,288Less accumulated depreciation
    
    
    8,912
    
    
    
    7,72933,885
    
    
    
    32,559Receivables from related parties
    
    
    28
    
    
    
    1,829Investments
    
    
    2,176
    
    
    
    2,168Other assets
    
    
    2,368
    
    
    
    3,604Intangible assets, net
    
    
    23,448
    
    
    
    23,623Goodwill
    
    
    48,430
    
    
    
    48,550$
    186,957
    
    
    $
    190,379
 See Notes to Condensed Consolidated Financial Statements
 2




---



##### Table of Contents



Advanced Lighting Technologies, Inc.
 Condensed Consolidated Balance Sheets
 (in thousands, except per share amounts)
 (Unaudited)
    
    
    (Audited)September 30,
    
    
    June 30,2006
    
    
    2006Liabilities and shareholders equityCurrent liabilities:Short-term debt and current portion of long-term debt
    
    $
    9,917
    
    
    $
    6,513Accounts payable
    
    
    6,770
    
    
    
    6,964Payables to related parties
    
    
    495
    
    
    
    862Employee-related liabilities
    
    
    3,325
    
    
    
    6,705Accrued income and other taxes
    
    
    843
    
    
    
    667Other accrued expenses
    
    
    6,029
    
    
    
    9,315Total current liabilities
    
    
    27,379
    
    
    
    31,026Long-term debt
    
    
    121,117
    
    
    
    121,669Deferred tax liabilities
    
    
    347
    
    
    
    341Deferred lease credits
    
    
    3,404
    
    
    
    3,453Total liabilities
    
    
    152,247
    
    
    
    156,489Minority interest
    
    
    3,072
    
    
    
    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 (loss)
    
    
    647
    
    
    
    65Retained earnings
    
    
    119
    
    
    
    47Total common shareholders equity
    
    
    1,950
    
    
    
    1,296$
    186,957
    
    
    $
    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 September 30,2006
    
    
    2005Net sales
    
    $
    39,724
    
    
    $
    37,310Costs and expenses:Cost of sales
    
    
    23,826
    
    
    
    22,288Marketing and selling
    
    
    7,242
    
    
    
    6,422Research and development
    
    
    1,649
    
    
    
    1,308General and administrative
    
    
    3,121
    
    
    
    3,456Amortization of intangible assets
    
    
    258
    
    
    
    261Income from operations
    
    
    3,628
    
    
    
    3,575Other income (expense):Interest expense
    
    
    (3,478
    )
    
    
    (3,534
    )Interest income
    
    
    85
    
    
    
    92Income from investments
    
    
    276
    
    
    
    1,953Income before income taxes and minority interest
    
    
    511
    
    
    
    2,086Income tax expense
    
    
    273
    
    
    
    448Income before minority interest
    
    
    238
    
    
    
    1,638Minority interest in income of consolidated subsidiary
    
    
    (166
    )
    
    
    (178
    )Net income
    
    $
    72
    
    
    $
    1,460
 See Notes to Condensed Consolidated Financial Statements
 4




---



##### Table of Contents



Advanced Lighting Technologies, Inc.
 
 Condensed Consolidated Statement of Shareholders Equity (Unaudited)
 Three Months Ended September 30, 2006
 (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, 2006
    
    $
    29,688
    
    
    
    1,184
    
    
    $
    1
    
    
    $
    1,183
    
    
    $
    65
    
    
    $
    47
    
    
    $
    1,296
    
    
    $
    30,984Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    72
    
    
    
    72Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    582
    
    
    
    
    
    
    
    582
    
    
    
    582Balance at September 30, 2006
    
    $
    29,688
    
    
    
    1,184
    
    
    $
    1
    
    
    $
    1,183
    
    
    $
    647
    
    
    $
    119
    
    
    $
    1,950
    
    
    $
    31,638
 See Notes to Condensed Consolidated Financial Statements
 5




---



##### Table of Contents



Advanced Lighting Technologies, Inc.
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 (in thousands)
 Quarter Ended September 30,2006
    
    
    2005Operating activitiesNet income
    
    $
    72
    
    
    $
    1,460Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation
    
    
    1,218
    
    
    
    1,456Amortization
    
    
    258
    
    
    
    261Provision for doubtful accounts
    
    
    56
    
    
    
    56Income from investments
    
    
    (276
    )
    
    
    (1,953
    )Changes in current assets and liabilities and other
    
    
    (3,530
    )
    
    
    (8,751
    )Net cash used in operating activities
    
    
    (2,202
    )
    
    
    (7,471
    )Investing activitiesCapital expenditures
    
    
    (2,724
    )
    
    
    (792
    )Cash distributions from investments
    
    
    268
    
    
    
    Net cash used in investing activities
    
    
    (2,456
    )
    
    
    (792
    )Financing activitiesNet borrowings under credit facilities
    
    
    3,404
    
    
    
    5,024Proceeds from long-term debt
    
    
    
    
    
    
    3,850Payments of long-term debt
    
    
    (552
    )
    
    
    (698
    )Issuance of common stock
    
    
    
    
    
    
    53Net cash provided by financing activities
    
    
    2,852
    
    
    
    8,229Decrease in cash and cash equivalents
    
    
    (1,806
    )
    
    
    (34
    )Cash and cash equivalents, beginning of period
    
    
    4,290
    
    
    
    2,643Cash and cash equivalents, end of period
    
    $
    2,484
    
    
    $
    2,609Supplemental cash flow informationInterest paid
    
    $
    6,620
    
    
    $
    6,629Income taxes paid (refunds received), net
    
    
    
    
    
    
    
 6




---



##### Table of Contents



Advanced Lighting Technologies, Inc.
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 September 30, 2006
  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)
September 30, 2006
 C. Comprehensive Income
  8




---



##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 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




---



##### 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 September 30, 2006 Compared to Quarter Ended September 30, 2005
  Quarter Ended
    
    
    Quarter EndedSeptember 30, 2006
    
    
    September 30, 2005Net sales
    
    $
    39,724
    
    
    
    100.0
    %
    
    $
    37,310
    
    
    
    100.0
    %Costs and expenses:Cost of sales
    
    
    23,826
    
    
    
    60.0
    
    
    
    22,288
    
    
    
    59.7Marketing and selling
    
    
    7,242
    
    
    
    18.2
    
    
    
    6,422
    
    
    
    17.2Research and development
    
    
    1,649
    
    
    
    4.2
    
    
    
    1,308
    
    
    
    3.5General and administrative
    
    
    3,121
    
    
    
    7.9
    
    
    
    3,456
    
    
    
    9.3Amortization of intangible assets
    
    
    258
    
    
    
    0.6
    
    
    
    261
    
    
    
    0.7Income from operations
    
    
    3,628
    
    
    
    9.1
    
    
    
    3,575
    
    
    
    9.6Other income (expense):Interest expense
    
    
    (3,478
    )
    
    
    (8.8
    )
    
    
    (3,534
    )
    
    
    (9.5
    )Interest income
    
    
    85
    
    
    
    0.2
    
    
    
    92
    
    
    
    0.2Income from investments
    
    
    276
    
    
    
    0.7
    
    
    
    1,953
    
    
    
    5.2Income before income taxes and minority interest
    
    
    511
    
    
    
    1.3
    
    
    
    2,086
    
    
    
    5.6Income tax expense
    
    
    273
    
    
    
    0.7
    
    
    
    448
    
    
    
    1.2Income before minority interest
    
    
    238
    
    
    
    0.6
    
    
    
    1,638
    
    
    
    4.4Minority interest in income of consolidated subsidiary
    
    
    (166
    )
    
    
    (0.4
    )
    
    
    (178
    )
    
    
    (0.5
    )Net income
    
    $
    72
    
    
    
    0.2
    %
    
    $
    1,460
    
    
    
    3.9
    %
  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.
 Income from Operations.
 Interest Expense.
 Income from Investments.
 Income Tax Expense.
 12




---



##### Table of Contents



Liquidity and Capital Resources
     Net Cash Used in Operating Activities.
 Net Cash Provided by Investing Activities.
 Net Cash Provided by Financing Activities.
  13




---



##### Table of Contents



Critical Accounting Policies
   Valuation of Accounts and Notes Receivable
   Inventory Valuation Reserves
  14




---



##### Table of Contents



Valuation of Long-Lived Assets
  Revenue Recognition
  Deferred Tax Assets and Valuation Allowance
  Recently Issued Accounting Pronouncements
  15




---



##### Table of Contents



Foreign Currency
   
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
  16




---



##### 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 2.110.1
    
    Lease Agreement dated February 28, 2006 between Deposition Sciences, Inc.
and First Industrial Development Services, Inc.
    
    (5)10.1.8
    
    Sixth Amendment to Loan Agreement, Security Promissory Note and Security
Agreement between Wayne R. Hellman and Advanced lighting Technologies, Inc.,
dated September 8, 2006.
    
    (6)10.1.9
    
    Amendment to Amended and Restated Employment Agreement between
Wayne R. Hellman and Advanced Lighting Technologies, Inc.,
dated September 8, 2006.
    
    (6)31.1
    
    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 17




---



##### Table of Contents



ended September 30, 2004, filed November 12, 2004.(5)
    
    Incorporated by reference to referenced Exhibit in Companys Quarterly Report on Form 10-Q
for the Quarterly Period ended March 31, 2006, filed May 10, 2006.(6)
    
    Incorporated by reference to Exhibit of same number in Companys Annual Report on Form 10-K
for the Annual Period ended June 30, 2006, filed September 27, 2006. 18




---



##### Table of Contents



SIGNATURES
  ADVANCED LIGHTING TECHNOLOGIES, INC.Date: October 26, 2006
    
    By:
    
    /s/ Wayne R. HellmanWayne R. HellmanChief Executive OfficerDate: October 26, 2006
    
    By:
    
    /s/ Wayne J. VespoliWayne J. VespoliChief Financial Officer
 19




---



##### 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 2.110.1
    
    Lease Agreement dated February 28, 2006 between Deposition Sciences, Inc.
and First Industrial Development Services, Inc.
    
    (5)10.1.8
    
    Sixth Amendment to Loan Agreement, Security Promissory Note and Security
Agreement between Wayne R. Hellman and Advanced lighting Technologies, Inc.,
dated September 8, 2006.
    
    (6)10.1.9
    
    Amendment to Amended and Restated Employment Agreement between
Wayne R. Hellman and Advanced Lighting Technologies, Inc.,
dated September 8, 2006.
    
    (6)31.1
    
    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.(5)
    
    Incorporated by reference to referenced Exhibit in Companys Quarterly Report on Form 10-Q
for the Quarterly Period ended March 31, 2006, filed May 10, 2006.(6)
    
    Incorporated by reference to Exhibit of same number in Companys Annual Report on Form 10-K
for the Annual Period ended June 30, 2006, filed September 27, 2006.