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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION    FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
  or [  ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
 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 
  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [  ] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [  ] No [X] There were 1,131 shares of the Registrants Common Stock, $.001 par value per
share, outstanding as of
October 31, 2004.




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INDEX Advanced Lighting Technologies, Inc.  
 Page No.Part I Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets  Reorganized Company as of September 30 and June 30, 2004
    
    
    2Condensed Consolidated Statements of Operations 
Reorganized Company for the Three Months Ended September 30, 2004
    
    
    4Predecessor Company for the Three Months Ended September 30, 2003
    
    
    4Condensed Consolidated Statement of Shareholders Equity 
Reorganized Company for the Three Months Ended September 30, 2004
    
    
    5Condensed Consolidated Statements of Cash Flows 
Reorganized Company for the Three Months Ended September 30, 2004
    
    
    6Predecessor Company for the Three Months Ended September 30, 2003
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20Part II Other InformationItem 5. Other Events
    
    
    21Item 6. Exhibits and Reports on Form 8-K
    
    
    21Signatures
    
    
    23Exhibit 3.1 Third Amended and Restated Articles of IncorporationExhibit 3.2 Amended and Restated Code of RegulationsExhibit 10.1 Amended Agreement as of Sept. 15, 2004Exhibit 10.2 Amended Agreement as of Oct. 15, 2004Exhibit 10.3 Amendment to Employment AgreementExhibit 12 Computation of Ratio of Earnings to Fixed ChargesExhibit 31.1 302 Certification of Chief Executive OfficerExhibit 31.2 302 Certification of Chief Accounting OfficerExhibit 32.1 906 Certification of Chief Executive OfficerExhibit 32.2 906 Certification of Chief Accounting Officer
  1




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Advanced Lighting Technologies, Inc. 
 Condensed Consolidated Balance Sheets of Reorganized Company
 (in thousands, except per share amounts)
 (Unaudited)
    
    (Audited)September 30,
    
    June 30,2004
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,032
    
    
    $
    4,701Trade receivables, less allowances of $860 and $706
    
    
    28,875
    
    
    
    29,787Inventories:Finished goods
    
    
    16,940
    
    
    
    16,105Raw materials and work-in-process
    
    
    10,025
    
    
    
    9,07326,965
    
    
    
    25,178Prepaid expenses
    
    
    1,806
    
    
    
    1,552Total current assets
    
    
    61,678
    
    
    
    61,218Property, plant and equipment:Land and buildings
    
    
    18,370
    
    
    
    18,165Machinery and equipment
    
    
    29,910
    
    
    
    29,100Furniture and fixtures
    
    
    2,058
    
    
    
    1,88050,338
    
    
    
    49,145Less accumulated depreciation
    
    
    3,245
    
    
    
    2,11847,093
    
    
    
    47,027Receivables from related parties
    
    
    4,259
    
    
    
    4,282Investments in affiliates
    
    
    2,396
    
    
    
    2,360Other assets
    
    
    3,865
    
    
    
    3,849Intangible assets, net
    
    
    24,646
    
    
    
    24,810Goodwill
    
    
    51,011
    
    
    
    51,011$
    194,948
    
    
    $
    194,557
 See Notes to Condensed Consolidated Financial Statements, including
Basis of Presentation describing the Reorganized Company. 2




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Advanced Lighting Technologies, Inc.
Condensed Consolidated Balance Sheets of Reorganized Company(in thousands, except per share amounts) (Unaudited)
    
    (Audited)September 30,
    
    June 30,2004
    
    2004Liabilities and shareholders equityCurrent liabilities:Short-term debt and current portion of long-term debt
    
    $
    9,988
    
    
    $
    4,634Accounts payable
    
    
    9,968
    
    
    
    10,755Payables to related parties
    
    
    840
    
    
    
    2,973Employee-related liabilities
    
    
    5,516
    
    
    
    6,197Accrued income and other taxes
    
    
    1,182
    
    
    
    1,414Other accrued expenses
    
    
    7,185
    
    
    
    9,216Total current liabilities
    
    
    34,679
    
    
    
    35,189Long-term debt
    
    
    125,971
    
    
    
    126,679Deferred tax liabilities
    
    
    766
    
    
    
    700Total liabilities
    
    
    161,416
    
    
    
    162,568Minority interest
    
    
    1,628
    
    
    
    1,477Preferred 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
    
    
    1,130
    
    
    
    1,130Accumulated other comprehensive income (loss)
    
    
    119
    
    
    
    (216
    )Retained earnings
    
    
    1,316
    
    
    
    259Total common shareholders equity
    
    
    2,566
    
    
    
    1,174$
    194,948
    
    
    $
    194,557
 See Notes to Condensed Consolidated Financial Statements, including
Basis of Presentation describing the Reorganized Company. 3




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##### Table of Contents



Advanced Lighting Technologies, Inc. 
 Condensed Consolidated Statements of Operations (Unaudited)
 (In thousands)
 Reorganized

    
    PredecessorCompany

    
    CompanyQuarter

    
    QuarterEnded

    
    EndedSeptember 30,

    
    September 30,2004

    
    2003Net sales
    
    $
    38,578
    

    
    $
    32,832Costs and expenses:Cost of sales
    
    
    22,604
    

    
    
    20,179Marketing and selling
    
    
    5,895
    

    
    
    5,301Research and development
    
    
    1,542
    

    
    
    1,386General and administrative
    
    
    3,871
    

    
    
    3,089Amortization of intangible assets
    
    
    241
    

    
    
    88Income from operations
    
    
    4,425
    

    
    
    2,789Other income (expense):Interest expense
    
    
    (3,423
    )

    
    
    (3,420
    )Interest income
    
    
    93
    

    
    
    83Income from investments
    
    
    486
    

    
    
    16Reorganization expenses
    
    
    
    

    
    
    (5,623
    )Income (loss) before income taxes and minority interest
    
    
    1,581
    

    
    
    (6,155
    )Income tax expense
    
    
    373
    

    
    
    88Income (loss) before minority interest
    
    
    1,208
    

    
    
    (6,243
    )Minority interest in income of consolidated subsidiary
    
    
    (151
    )

    
    
    (129
    )Net income (loss)
    
    $
    1,057
    

    
    $
    (6,372
    )
 See Notes to Condensed Consolidated Financial Statements, including Basis of
Presentation describing the Reorganized Company and Predecessor Company. 4




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Advanced Lighting Technologies, Inc. 
 Condensed Consolidated Statement of Shareholders Equity (Unaudited)
Three Months Ended September 30, 2004  (in thousands)
 AccumulatedCommon Stock
    
    
    
    
    
    Other
    
    
    
    
    
    CommonPreferred
    
    
    
    Paid-In
    
    Comprehensive
    
    Retained
    
    ShareholdersStock
    
    Shares
    
    Par Value
    
    Capital
    
    Income (Loss)
    
    Earnings
    
    Equity
    
    TotalBalance at June 30, 2004
    
    $
    29,338
    
    
    
    1
    
    
    $
    1
    
    
    $
    1,130
    
    
    $
    (216
    )
    
    $
    259
    
    
    $
    1,174
    
    
    $
    30,512Net income -
reorganized company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,057
    
    
    
    1,057
    
    
    
    1,057Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    335
    
    
    
    
    
    
    
    335
    
    
    
    335Balance at September 30, 2004
    
    $
    29,338
    
    
    
    1
    
    
    $
    1
    
    
    $
    1,130
    
    
    $
    119
    
    
    $
    1,316
    
    
    $
    2,566
    
    
    $
    31,904
 See Notes to Condensed Consolidated Financial Statements, including
Basis of Presentation describing the Reorganized Company. 5




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Advanced Lighting Technologies, Inc. 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 (in thousands)
 Reorganized

    
    PredecessorCompany

    
    CompanyQuarter

    
    QuarterEnded

    
    EndedSeptember 30,

    
    September 30,2004

    
    2003Operating activitiesNet income (loss)
    
    $
    1,057
    

    
    $
    (6,372
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation
    
    
    1,120
    

    
    
    1,687Amortization
    
    
    241
    

    
    
    88Provision for doubtful accounts
    
    
    119
    

    
    
    70Loss (income) from investments
    
    
    (486
    )

    
    
    (16
    )Reorganization expenses in excess of (less than)
cash payments of reorganization expenses
    
    
    (1,842
    )

    
    
    1,723Old Senior Note interest accrued but not paid
    
    
    
    

    
    
    2,000Changes in current assets and liabilities and other
    
    
    (4,826
    )

    
    
    1,620Net cash provided by (used in) operating activities
    
    
    (4,617
    )

    
    
    800Investing activitiesCapital expenditures
    
    
    (1,148
    )

    
    
    (988
    )Proceeds from sale of investment
    
    
    450
    

    
    
    Net cash used in investing activities
    
    
    (698
    )

    
    
    (988
    )Financing activitiesNet borrowings under revolving credit loan
    
    
    5,352
    

    
    
    Net borrowings under debtor in possession facility
    
    
    
    

    
    
    1,057Payments of long-term debt and capital leases
    
    
    (706
    )

    
    
    (1,035
    )Net cash provided by financing activities
    
    
    4,646
    

    
    
    22Increase (decrease) in cash and cash equivalents
    
    
    (669
    )

    
    
    (166
    )Cash and cash equivalents, beginning of period
    
    
    4,701
    

    
    
    4,167Cash and cash equivalents, end of period
    
    $
    4,032
    

    
    $
    4,001Supplemental cash flow informationInterest paid
    
    $
    6,544
    

    
    $
    518Income taxes paid (refunds received), net
    
    
    (39
    )

    
    
    66Capitalized interest
    
    
    6
    

    
    
    18
 See Notes to Condensed Consolidated Financial Statements, including Basis of
Presentation describing the Reorganized Company and Predecessor Company. 6




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Advanced Lighting Technologies, Inc. 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 September 30, 2004
  A. Organization Advanced Lighting Technologies, Inc. (the Company or ADLT) is an
innovation-driven designer, manufacturer and marketer focused on metal halide
lighting products, including materials, system components, systems and
equipment. B. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have
been prepared in conformity with accounting principles generally accepted in
the United States of America for interim financial information and with the
instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all the information and disclosures required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, the financial statements include all material
adjustments necessary for a fair presentation, including adjustments of a
normal and recurring nature as well as adjustments related to the Companys
emergence from bankruptcy. For further information, refer to the consolidated
financial statements and notes thereto included in the Companys Annual Report
on Form 10-K for the year ended June 30, 2004. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect reported amounts and
related disclosures. Actual results could differ from those estimates. On December 10, 2003, Advanced Lighting Technologies, Inc. and six of its
United States subsidiaries, (collectively, the Debtors), completed their
previously announced financial restructuring when their Fourth Amended Chapter
11 Plan of Reorganization (the Final Plan) under the U.S. Bankruptcy Code
(the Bankruptcy Code) became effective and was substantially consummated.
ADLTs non-U.S. operating subsidiaries and Deposition Sciences, Inc., a U.S.
subsidiary, were not a part of the proceedings under the Bankruptcy Code. The
Companys emergence from Chapter 11 bankruptcy proceedings resulted in a new
reporting entity and the adoption of fresh start accounting in accordance with
Statement of Position No. 90-7, Financial Reporting by Entities in
Reorganization under the Bankruptcy Code. Also, as encouraged under SEC Staff
Accounting Bulletin No. 54, Push Down Basis of Accounting Required in Certain
Limited Circumstances, the Company has reflected an additional adjustment to
establish a new basis for its assets and liabilities based on the amount paid
by Saratoga Lighting Holdings, LLC (Saratoga) for its ownership. For
financial reporting purposes, the Company used an effective date of December
31, 2003. References in these financial statements to Predecessor Company
refer to the Company prior to December 31, 2003. References to Reorganized
Company refer to the Company on and after December 31, 2003, after giving
effect to the issuance of new securities in exchange for the previously
outstanding securities in accordance with the Final Plan, the additional
investment in the Company by Saratoga, and the implementation of fresh start
and push down accounting. 7




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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2004
(Dollars in thousands) B. Basis of Presentation (continued) Reporting Periods The Companys subsidiaries have fiscal years that end on the Sunday closest to
June 30 and fiscal quarters that end on the Sunday closest to the respective
calendar quarter end. As a result, the first quarter of fiscal 2005 consisted
of 14 weeks as compared to the first quarter of fiscal 2004 that consisted of
13 weeks. Income Taxes Actual income tax expense for the three month interim periods differ from the
amounts computed by applying the U.S. Federal income tax rate of 35% to the
income (loss) before income taxes because under FAS No. 109, Accounting for
Income Taxes, the tax benefit related to the U.S. loss for these interim
periods was required to be reserved in a valuation allowance due to the
uncertainty regarding the ultimate realization of the tax benefit of such
losses. The income tax expense recognized for the interim periods relates to
income taxes on certain foreign subsidiaries income. Earnings Per Share Due to the Companys emergence from bankruptcy and the implementation of Fresh
Start Reporting, the presentation of earnings per share is not meaningful for
the periods presented in the accompanying condensed consolidated financial
statements. C. Comprehensive Income (Loss) For the quarters ended September 30, 2004 and 2003, the Companys comprehensive
income (loss) was $1,392 and $(6,146), respectively. These amounts include the
periods net income (loss) and the Companys other component of comprehensive
income, foreign currency translation adjustments. 8




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2004
(Dollars in thousands) D. Financing Facilities Effective December 10, 2003, the Companys Debtor-in-Possesion Facility was
amended and restated to provide financing for the company following emergence
from bankruptcy (the amended facility is referred to as the Bank Credit
Facility). The Bank Credit Facility is a $30,000 facility that consists of a
term loan that requires monthly principal payments of $183 ($9,350 outstanding
at September 30, 2004) with a revolving credit loan, subject to availability,
making up the remainder of the facility. Availability of borrowings under the
revolving credit loan is determined by the Companys eligible account
receivables and inventories. The amount outstanding under the revolving credit
loan was $5,352 at September 30, 2004. Interest rates on the revolving credit
loan are based on Libor plus 2.75% or Prime plus .75% (5.50% at September 30,
2004). Interest rates on the term loan are based on Libor plus 3.50% or Prime
plus 1.50% (6.25% at September 30, 2004). The final maturity of the Bank
Credit Facility is December 10, 2008. The revolving credit loan amount at
September 30, 2004 has been classified as a current liability in accordance
with the provisions of Emerging Issues Task Force Issue No. 95-22, Balance
Sheet Classification of Borrowings Outstanding under Revolving Credit
Agreements that include Both a Subjective Acceleration Clause and a Lock-box
Arrangement. The Bank Credit Facility includes affirmative and negative covenants customary
for this type of agreement, prohibits cash dividends and includes financial
covenants relating to Minimum Adjusted EBITDA and Capital Expenditures. The
principal security for the Bank Credit Facility is substantially all of the
personal property of the Company and each of its North American and United
Kingdom subsidiaries. The term loan is secured by substantially all of the
Companys machinery and equipment in North America and the United Kingdom and
the Companys facility in Urbana, Illinois, and is cross-collateralized and
secured with the revolving credit loan. On December 10, 2003, in connection with the Companys emergence from
bankruptcy proceedings, the Companys Old 8% Senior Notes were cancelled and,
in exchange for such Old Senior Notes, the Company issued $114,400 of 11%
Senior Notes due March 2009 (New Notes). The aggregate principal amount of
the New Notes is equal to the aggregate principal amount of the Companys Old
Senior Notes, plus interest which would have accrued and been unpaid through
December 31, 2003. The New Notes are redeemable at the Companys option, in
whole or in part, at any time at a redemption price equal to the principal
amount of the New Notes plus accrued interest. Interest on the New Notes is
payable semi-annually on March 31 and September 30. The Indenture for the New Notes contains covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries (as defined
therein) to incur indebtedness, pay dividends, prepay subordinated
indebtedness, repurchase capital stock, make investments, create liens, engage
in transactions with stockholders and affiliates, sell assets and, with respect
to the Company, engage in mergers and consolidations. There are no sinking fund
requirements. 9




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2004
(Dollars in thousands) E. Saratoga Investment Saratoga received, in exchange for cancellation of its holdings of the
Predecessor Companys Common Stock and Old Preferred Stock, and an $18,000 cash
investment, new redeemable preferred stock (the New Series A Preferred) of
the Reorganized Company, with an initial liquidation preference of $29,000, and
approximately 91% of the common stock of the Reorganized Company (on a diluted
basis, assuming issuance of common stock of the Reorganized Company to its
senior management pursuant to the new management incentive plan). Under the
management incentive plan, shares equal to approximately 9% of the common stock
of the Reorganized Company have been issued. The New Series A Preferred has a liquidation preference of $1 per share, plus
dividends at the rate of 8% per annum, when and if declared. The cumulative
undeclared dividends were $1,898 as of September 30, 2004. The initial
carrying amount of the New Series A Preferred was set at $29,000, the estimated
fair value at the date of issuance. The Holder of the New Series A Preferred
may, by notice, require the Company to redeem the outstanding New Series A
Preferred within 21 days following the occurrence of certain corporate events.
The Company may redeem the New Series A Preferred in whole, but not in part, at
any time. The redemption price for the New Series A Preferred is equal to the
liquidation preference amount for such shares. The New Series A Preferred
shares are each entitled to one vote on each matter presented to shareholders
of the Company, as well as one vote on each matter required to be voted upon by
the New Series A Preferred as a class. As a consequence, the New Series A
Preferred represents approximately 96.3% of the voting power of the Company at
September 30, 2004. As of September 30, 2004, Saratoga held 98.5% of the
voting power of the Company. F. Subsequent Event / Related Party Transaction The Company has a loan and interest receivable of $4,145 from the Chief
Executive Officer. As part of the reorganization, the officer loan documents
were modified to reduce the amount of the outstanding indebtedness owed by the
officer to $4,024 (the Designated Amount) that represented the difference
between (1) the fair market value of the CEOs personal assets and (2) the
amounts owing to other secured creditors of the CEO that hold mortgages, liens
and/or security interests upon or in property of the CEO, on a priority senior
to the liens and security interests securing the CEOs loan from the Company,
to the extent of the fair market value of such property. On
November 12, 2004, the Company modified the terms of its employment agreement
with the CEO. The modification
reduced the portion of retention bonuses to be applied to the CEOs
outstanding loan to an amount equal to the after-tax proceeds to the
CEO.
The loan agreement also requires that an amount equal to the after-tax proceeds
of each bonus be applied to the loan. The effect of this amendment is that the
payment of each retention bonus is expected to result in a $1,144 reduction of
the CEOs loan. The terms of the original employment agreement provided
that each retention bonus payment would reduce the loan by $1,350. 10




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (Dollars in thousands) This report on Form 10-Q may contain forward-looking statements that involve
risks and uncertainties. On February 5, 2003, the Company and six of its
United States subsidiaries (the Debtors), filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code.
Effective December 10, 2003, the Debtors emerged from bankruptcy protection
pursuant to the Bankruptcy Courts confirmation of the Debtors Fourth Amended
Chapter 11 Plan of Reorganization (the Plan). The operation of the Company
and its subsidiaries following emergence from bankruptcy court protection
involves risks and uncertainties, including the strength of the recovery of the
U.S. economy, trends affecting the Companys financial condition or results of
operations, continued growth of the metal halide lighting market, the Companys
operating strategy and growth strategy, potential acquisitions or joint
ventures by the Company, litigation affecting the Company, the timely
development and market acceptance of new products, the ability to provide
adequate incentives to retain and attract key employees, the impact of
competitive products and pricing, and other risks which are detailed in the
Companys Form 10-K for the fiscal year ended June 30, 2004. For this purpose,
any statement contained herein that is not a statement of historical fact may
be deemed to be a forward-looking statement. Without limiting the foregoing,
the words believes, anticipates, plans, expects, and similar
expressions are intended to identify forward-looking statements. The Companys
actual results may differ materially from those indicated by such
forward-looking statements based on the factors outlined above. The following is managements discussion and analysis of certain significant
factors which have affected the results of operations and should be read in
conjunction with the accompanying unaudited Condensed Consolidated Financial
Statements and notes thereto. General The Company is an innovation-driven designer, manufacturer and marketer focused
on metal halide lighting products, including materials, system components,
systems and equipment. Metal halide lighting is currently used primarily in
commercial and industrial applications such as factories and distribution
centers, outdoor site and landscape lighting, sports facilities and large
retail spaces such as superstores. Systems, components and materials revenue is
recognized when products are shipped, and equipment revenue is recognized under
the percentage of completion method. Consistent with the Companys strategy for new product introductions, the
Company invests substantial resources in research and development to engineer
materials and system components to be included in customers specialized
systems. Such expenditures have enabled the Company to develop new applications
for metal halide lighting, improve the quality of its materials, and introduce
new specialized products, such as the Uni-Form® pulse start products.
Uni-Form® pulse start products are a new generation of metal halide components
and systems which permit (a) increased light output with lower power
utilization, (b) faster starting, (c) a quicker restart of lamps which have
been recently turned off, and (d) better color uniformity. The Company expects
to continue to make substantial expenditures on research and development to
enhance its position as the leading innovator in the metal halide lighting
industry. 11




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##### Table of Contents



Results of Operations The Companys emergence from Chapter 11 bankruptcy proceedings resulted in a
new reporting entity and adoption of fresh start accounting in accordance with
Statement of Position No. 90-7, Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code. For financial reporting purposes,
the Company used an effective date of December 31, 2003. References to
Predecessor Company refer to the Company prior to December 31, 2003.
References to Reorganized Company refer to the Company on and after December
31, 2003. A black line has been drawn between the results of operations noted
below to distinguish between the Reorganized Company and the Predecessor
Company. The results of operations for the Reorganized Company and Predecessor
Company are not considered comparable in all respects. The Companys subsidiaries have fiscal years that end on the Sunday closest to
June 30 and fiscal quarters that end on the Sunday closest to the respective
calendar quarter end. The first quarter of fiscal 2005 consisted of 14 weeks
as compared to the first quarter of fiscal 2004 that consisted of 13 weeks. As
a result, an increase of approximately 8% in sales and costs and expenses
resulted from the additional week in the first quarter of fiscal 2005 compared
to the first quarter of fiscal 2004. The following table sets forth, as a percentage of net sales, certain items in
the Companys Condensed Consolidated Statements of Operations for the indicated
periods: Reorganized Company

    
    Predecessor CompanyThree Months Ended

    
    Three Months EndedSeptember 30, 2004

    
    September 30, 2003Net sales
    
    $
    38,578
    
    
    
    100.0
    %

    
    $
    32,832
    
    
    
    100.0
    %Costs and expenses:Cost of sales
    
    
    22,604
    
    
    
    58.6
    

    
    
    20,179
    
    
    
    61.5Marketing and selling
    
    
    5,895
    
    
    
    15.3
    

    
    
    5,301
    
    
    
    16.1Research and development
    
    
    1,542
    
    
    
    4.0
    

    
    
    1,386
    
    
    
    4.2General and administrative
    
    
    3,871
    
    
    
    10.0
    

    
    
    3,089
    
    
    
    9.4Amortization of intangible assets
    
    
    241
    
    
    
    0.6
    

    
    
    88
    
    
    
    0.3Income from operations
    
    
    4,425
    
    
    
    11.5
    

    
    
    2,789
    
    
    
    8.5Other income (expense):Interest expense
    
    
    (3,423
    )
    
    
    (8.9
    )

    
    
    (3,420
    )
    
    
    (10.4
    )Interest income
    
    
    93
    
    
    
    0.2
    

    
    
    83
    
    
    
    0.3Income from investments
    
    
    486
    
    
    
    1.3
    

    
    
    16
    
    
    
    Reorganization expenses
    
    
    
    
    
    
    
    

    
    
    (5,623
    )
    
    
    (17.1
    )Income (loss) before income taxes and minority interest
    
    
    1,581
    
    
    
    4.1
    

    
    
    (6,155
    )
    
    
    (18.7
    )Income tax expense
    
    
    373
    
    
    
    1.0
    

    
    
    88
    
    
    
    0.3Income (loss) before minority interest
    
    
    1,208
    
    
    
    3.1
    

    
    
    (6,243
    )
    
    
    (19.0
    )Minority interest in income of consolidated subsidiary
    
    
    (151
    )
    
    
    (0.4
    )

    
    
    (129
    )
    
    
    (0.4
    )Net income (loss)
    
    $
    1,057
    
    
    
    2.7
    %

    
    $
    (6,372
    )
    
    
    (19.4
    %)
 Factors that have affected the results of operations for the first quarter of
fiscal 2005 as compared to the first quarter fiscal 2004 are discussed below. 12




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Quarter Ended September 30, 2004 Compared with Quarter Ended September 30, 2003 Net Sales. Net sales increased 17.5% to $38,578 in the first quarter of fiscal
2005 from $32,832 in the first quarter of fiscal 2004. Approximately half of
this increase was due to the Companys subsidiaries having an additional week
in the first quarter of fiscal 2005 as compared to the first quarter of fiscal
2004. First quarter metal halide sales increased 21% to $30,567 compared with
$25,162 in the same period last year. This increase in metal halide product
sales is partly due to the additional week in the quarter, but was primarily
the result of an increase in lamp and material sales. Sales of APL materials
increased 14% over the same quarter a year ago, the majority of which was due
to the additional week. Geographically, these materials sales increased 4% in
the U.S. and 19% outside the U.S. Non-metal halide lighting product sales
decreased 18% over the year ago period due primarily to a decrease in power
supply sales. Total lighting product sales inside the U.S. increased 17% in the first quarter
of fiscal 2005 as compared to the same period a year ago due to the additional
week and to an increase in lamp and material sales. Total lighting product
sales outside the U.S. increased 14% as compared to the year ago period due to
the additional week and to increases in lamp and material sales. Pricing in the metal halide lighting business is competitive, and prices for
the Companys products have remained flat or declined slightly. The
introduction of new products has helped to stabilize the Companys product
pricing. Cost of Sales.Cost of sales increased 12.0% to $22,604 in the first quarter
of fiscal 2005 from $20,179 in the first quarter of fiscal 2004, due in part to
the additional week during the fiscal 2005 quarter. As a percentage of net
sales, cost of sales decreased to 58.6% in the first quarter of fiscal 2005
from 61.5% in the first quarter of fiscal 2004. The reduction in cost of sales
as a percentage of sales is due to the transfer of lamp and power supply
production to India, improvements in cost management, an improvement in the
product mix (more lamp and material sales and less power supply sales), and a
reduction in depreciation expense of $567 related primarily to the effects of
the application of fresh-start accounting principles. Marketing and Selling Expenses.Marketing and selling expenses increased 11.2%
to $5,895 in the first quarter of fiscal 2005 from $5,301 in the first quarter
of fiscal 2004, due in part to the additional week during the fiscal 2005
quarter. As a percentage of net sales, marketing and selling expenses decreased
to 15.3% in the first quarter of fiscal 2005 from 16.1% in the first quarter of
fiscal 2004. The increase in sales exceeded the increase in marketing and
selling expenses and resulted in a lower percentage of marketing and sales
expenses to net sales. Research and Development Expenses. Research and development expenses increased
11.3% in the first quarter of fiscal 2005 to $1,542 from $1,386 in the first
quarter of fiscal 2004, due in part to the additional week during the fiscal
2005 quarter. Research and development expenses incurred related to: (i)
expansion of the product line and continued improvement in lamp technology
including the line of Uni-Form® pulse start lamps (with improved energy
efficiency, quicker starting and restarting and a more compact arc source,
which improves the light and reduces material costs) intended to replace many
first generation metal halide lamps in industrial and commercial applications;
(ii) continual development of new materials for the worlds major lighting
manufacturers; (iii) development and testing of electronic and electromagnetic
power supply systems; and, (iv) improving the coating process of optical
thin-films to broaden the applications, developing new thin-film materials, and
using coatings to develop improvements to lighting and telecommunications
technologies. As a percentage of net sales, research and development expenses
decreased to 4.0% in the first quarter of fiscal 2005 from 4.2% in the first 13




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##### Table of Contents



quarter of fiscal 2004. The Company expects to continue to make substantial
expenditures on research and development to enhance its position as the leading
innovator in the metal halide lighting industry. General and Administrative Expenses.General and administrative expenses
increased 25.3% to $3,871 in the first quarter of fiscal 2005 from $3,089 in
the first quarter of fiscal 2004. The increase in general and administrative
expenses was primarily due to the accrual of $967 of bonuses, including $507
for the CEO retention bonus. The after-tax amount of this bonus accrual,
approximately $286, is scheduled to be applied against the Companys receivable
from the CEO in July 2005. Amortization of Intangible Assets.Amortization expense increased to $241 in
the first quarter of fiscal 2005 from $88 in the first quarter of fiscal 2004.
The increase was due to the amortization of identifiable intangibles
established in accordance with the provisions of fresh-start accounting. Income from Operations.As a result of the items noted above, the Company
realized income from operations in the first quarter of fiscal 2005 of $4,425
as compared to income from operations of $2,789 in the year ago period. Interest Expense.Interest expense increased to $3,423 in the first quarter of
fiscal 2005 from $3,420 in the first quarter of fiscal 2004. The increase in
interest expense is primarily due to the increase in the interest rate on the
Companys New Senior Notes to 11% from 8% for the Old Senior Notes, offset by a
reduction in amortization of deferred loan costs of $651 related to the
Companys Debtor-in-Possession Facility and Old Senior Notes. Income from Investments.The income from investments in the first quarter of
fiscal 2005 of $166 represents the equity income from the Companys 40%
ownership of Aldrich-APL LLC, a manufacturer and distributor of ultra-pure
inorganics and metals for high-technology applications and the gain on the sale
of an investment of $320. The income from investments in the first quarter of
fiscal 2004 of $16 represents the equity income from the Companys investment
in Fiberstars, Inc., a marketer and distributor of fiber optic lighting
products. The Final Plan provided that the holders of the Predecessor
Companys Common Stock (other than Saratoga Lighting and the Predecessor
Companys CEO) receive the benefit of certain equity investments held by the
Predecessor in Fiberstars. As a result, no further equity income or loss
related to this investment has been recorded subsequent to December 31, 2003. Reorganization Expenses.Reorganization expenses, totaling $5,623 in the first
quarter of fiscal 2004, reflected the cost of consultants, investment bankers
and attorneys related to the Companys efforts to reorganize under Chapter 11
Bankruptcy. Income (Loss) before Income Taxes and Minority Interest.The Company had
income before income taxes and minority interest of $1,581 in the first quarter
of fiscal 2005 as compared to a loss before income taxes and minority interest
of $(6,155) in the first quarter of fiscal 2004. Income Tax Expense.Income tax expense was $373 for the first quarter of
fiscal 2005 as compared to $88 in the first quarter of fiscal 2004. The income
tax expense in both quarters related to certain of the Companys foreign
operations. At June 30, 2004, the Company had net operating loss carryforwards of $130,833
available to reduce future United States federal taxable income, which expire
2008 through 2024. On August 15, 2003, Saratoga purchased the preferred and
common shares owned by GE. This transaction caused an ownership change greater
than 50% which will limit the annual net operating loss the Company can use 14




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##### Table of Contents



to
offset any future taxable income pursuant to Section 382 of the Internal
Revenue Code. This
limitation is effective with the fiscal year ended June 30, 2004. The Company
also has a capital loss carryforward of $40,117 available to reduce future
capital gains. The usage of this carryforward will also be limited as a result
of the ownership change. This carryforward expires in 2007. The Company also had research and development credit carryforwards of
approximately $3,818 available at June 30, 2004, which expire 2008 through
2020. Additionally, in conjunction with the Alternative Minimum Tax (AMT)
rules, the Company had available AMT credit carryforwards for tax purposes of
approximately $98, which may be used indefinitely to reduce regular federal
income taxes. The usage of these credits will also be limited as a result of
the ownership change. Also, at June 30, 2004, the Company had foreign net operating loss
carryforwards for tax purposes totaling $1,163 that expire 2006 to 2007 and
$9,395 that have no expiration dates. Due to the uncertainty of the ultimate realization of the deferred tax asset,
valuation allowances of $10,379 were recorded by the Company as of June 30,
2004. The Company has net operating losses which, in accordance with the
principles of fresh start accounting, were not recorded. These net operating
losses are available to be utilized, and, to the extent the net operating
losses are utilized, goodwill will be reduced accordingly for the benefit
received. Liquidity and Capital Resources The Companys sources of liquidity include cash and cash equivalents, cash flow
from operations and amounts available under its Bank Credit Facility. The
Company believes these sources of liquidity are sufficient for at least the
next several years. As a result of the exchange of the $100,000 8% Senior
Notes due March 2008 for $114,400 11% Senior Notes due March 2009, the Company
has extended the maturity of most of its debt until 2009. The Company believes
that its cash flow from operations will be more than adequate to service the
debt, prior to the maturity of the 11% Senior Notes. The Bank Credit Facility is a $30,000 facility that consists of a term loan
that requires monthly principal payments of $183 ($9,350 outstanding at
September 30, 2004) with a revolving credit loan, subject to availability,
making up the remainder of the facility. The amount outstanding under the
revolving credit loan was $5,352 at September 30, 2004. Interest rates on the
revolving credit loan are based on Libor plus 2.75% or Prime plus .75% (5.50%
at September 30, 2004). Interest rates on the term loan are based on Libor
plus 3.50% or Prime plus 1.50% (6.25% at September 30, 2004). The final
maturity of the revolving credit facility and the term loan is December 10,
2008. The Bank Credit Facility contains certain affirmative and negative covenants
customary for this type of agreement, prohibits cash dividends, and includes
financial covenants related to Minimum Adjusted EBITDA and Capital
Expenditures. At September 30, 2004, the Company was in compliance with the
terms of the Bank Credit Facility. The principal security for the Bank Credit
Facility is substantially all of the personal property of the Company and each
of its North American and United Kingdom subsidiaries. The term loan is
secured by substantially all of the Companys machinery and equipment in North
America and the United Kingdom as well as the Companys facility in Urbana,
Illinois, and is cross-collateralized and secured with the revolving credit
loan. 15




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##### Table of Contents



Cash decreased $669 during the three months ended September 30, 2004. Cash used
in operating activities totaled $4,617, cash used in investing activities
totaled $698, and cash provided by financing activities totaled $4,646. Net Cash Used in Operating Activities.Net cash used in operating activities
totaled $4,617 for the three months ended September 30, 2004. This included
payments of reorganization expenses totaling $1,842 related to the Companys
emergence from Chapter 11 Bankruptcy. Net Cash Used in Investing Activities.In the three months ended September 30,
2004, net cash used in investing activities totaled $698, including $1,148
related to capital expenditures for plant and equipment, primarily machinery
and equipment. The Companys capital expenditure program is expected to
approximate between $5,000 and $6,000 in fiscal 2005. Future capital
expenditures beyond this level will be discretionary, as the Company presently
has sufficient operating capacities to support several years of sales growth at
its historical rates. Net Cash Provided by Financing Activities.In the three months ended September
30, 2004, net cash provided by financing activities was $4,646 resulting from
an increase in borrowings on the Companys revolving credit loan of $5,352, net
of $706 of scheduled payments of long-term debt. The interest-bearing obligations of the Company totaled $135,959 as of
September 30, 2004, and consisted of: $14,702 outstanding under the Bank Credit
Facility; $114,400 of 11% Senior Notes; mortgages of $4,429; a promissory note
of $1,970; and obligations of foreign subsidiaries and other debt of $458. Critical Accounting Policies The discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements
requires us to make estimates and judgments that effect the reported amounts of
our assets, liabilities, revenues and costs and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, we
evaluate our estimates, including those related to: valuation of accounts and
notes receivable and loan receivable from officer, valuation of investments,
valuation of long-lived assets, valuation of inventory valuation reserves,
revenue recognition, and deferred tax assets. We base our estimates on
historical experience and on various other assumptions that we believe
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We have identified the following policies as critical to our business
operations and the understanding of our results of operations. For a detailed
discussion on the application of these and other accounting policies, see Note
C of the Notes to Consolidated Financial Statements in the Annual Report on
Form 10-K for the Period Ended June 30, 2004. New Reporting Entity and Adoption of Fresh Start Accounting The Companys emergence from Chapter 11 bankruptcy proceedings resulted in a
new reporting entity and adoption of fresh start reporting in accordance with
Statement of Position (SOP) No. 90-7, 16




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##### Table of Contents



Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code. The consolidated financial
statements as of and for the six months ended December 31, 2003 reflect
reorganization adjustments for the discharge of debt and adoption of fresh
start reporting. The reorganization value of the assets of the consolidated
group of $170,000 prior to the investment by Saratoga, which served as the
basis for the Final Plan approved by the bankruptcy court, was used to
determine the value allocated to the assets and liabilities of the Reorganized Company in proportion to their
relative fair values in conformity with Statement of Financial Accounting
Standards No. 141, Business Combinations. The reorganization value of the Company was determined after negotiations
between Saratoga and the Creditors Committee, and in consideration of several
factors and by reliance on various valuation methods, including discounting
cash flow and price/earnings and other applicable calculations. The factors
considered by the parties to the bankruptcy included forecasted operating and
cash flow results, discounted residual values at the end of the forecast period
based on capitalized cash flows for the last year of that period, market share
and position, competition and general economic considerations, projected sales
growth, and potential profitability. Reorganization adjustments recorded as of December 31, 2003 resulted primarily from the following:  
    
    Exchange of $100,000 of 8% Senior Notes and accrued interest through December
31, 2003 of $14,400 for $114,400 of 11% Senior Notes;
    
    Issuance to Saratoga of 29,000 shares of the Companys New Series A Preferred
Shares and 1,000 of its New Common Shares in exchange for $18,000 and all of
the equity interests of Saratoga in the Company purchased from GE for
$12,000, including the 761,250 shares of the Companys Old Preferred Stock
and 1,429,590 shares of the Companys Old Common Stock, and push-down of
Saratogas investment;
    
    Cancellation of the existing common stock in exchange for two investments of
the company with a net book value of $7,192 as of the effective date of the
Plan; and,
    
    Increase in the receivable from officer of $1,169 resulting from a
court-approved settlement and reclassification of the receivable to related
party receivables from the equity section of the condensed consolidated
balance sheet. Fresh start adjustments recorded as of December 31, 2003 resulted primarily from the following:  
    
    Reduction of property, plant and equipment carrying values, including
reduction of the Companys real estate by $11,644 and personal property by
$28,790;
    
    Adjustment of the identifiable intangible assets to $24,675 including
customer contracts and relationships of $10,000, trademarks and tradenames of
$8,635, and technology of $6,040;
    
    Reduction in the value of inventory of $1,997 related to inventory being
disposed of by June 30, 2004; and,
    
    Increase in the value of inventory of $1,500 related to an adjustment in
accordance with FAS No. 141, which requires that inventory be recorded at
fair value on the reorganized companys balance sheet. The increase in
inventory of $1,500 above manufacturing cost reduced reported gross margin
and net profit in the third quarter of fiscal 2004 as the inventory was sold. These preliminary adjustments were based upon the work of outside appraisers,
as well as internal valuation estimates using discounted cash flow analyses, to
determine the relative fair values of the Companys assets and liabilities and
are not expected to differ materially. As encouraged under SEC Staff Accounting Bulletin No. 54, Push Down Basis of
Accounting Required in Certain Limited Circumstances, the Company has reflected
an additional adjustment to establish a new 17




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##### Table of Contents



basis for its assets and
liabilities based on the amount paid by Saratoga for its ownership at December
31, 2003. Valuation of Accounts and Notes Receivable and Loan Receivable from Officer Management evaluates and makes estimates of the collectibility of the Companys
accounts and notes receivable, including unbilled accounts receivable related
to long-term equipment contracts, based on a combination of factors.
Management analyzes historical bad debts, customer credit-worthiness, and
current economic trends in evaluating the adequacy of the allowance for
doubtful accounts and whether there is any impairment in its notes receivable.
In circumstances where the Company is aware of a certain customers inability
to meet its financial obligation, a specific reserve is recorded to reduce the
receivable to the amount the Company believes will be collected. Material
changes in the allowance for doubtful accounts may occur if the results of
managements evaluation change or if a different method is used to estimate
possible losses. The accounts receivable balance was $28,875, net of an
allowance of $860, as of September 30, 2004. The Company has notes receivable plus accrued interest from the Ruud Lighting,
Inc. shareholders in the aggregate amount of $3,243. These notes are due
December 1, 2006, but rebates earned on purchases by Ruud Lighting, Inc.
pursuant to its current agreement with the Debtors will be credited toward
prepayment of the principal and interest on the notes. The Company believes
the total receivable amount will be realized in accordance with the terms of
the notes. The Company also has a loan and interest receivable of $4,145 from the Chief
Executive Officer. Management periodically evaluates the adequacy of the
underlying assets to repay this loan. As part of the reorganization, the
officer loan documents were modified to reduce the amount of the outstanding
indebtedness owed by the officer to an amount (the Designated Amount) equal
to the difference between (1) the fair market value of the CEOs personal
assets and (2) the amounts owing to other secured creditors of the CEO that
hold mortgages, liens and/or security interests upon or in property of the CEO,
on a priority senior to the liens and security interests securing the CEOs
loan from the Company, to the extent of the fair market value of such property.
The Designated Amount was set at $4,024. The Company believes the loan
receivable amount will be realized in accordance with the terms of loan
documents. Inventory Valuation Reserves The Company values its inventory for accounting purposes at the lower of cost
(first-in, first-out method) or market. In circumstances where the Company is
aware of a problem in the valuation of a certain item, a specific reserve is
recorded to reduce the item to its net realizable value. For all other
inventory, the Company records a reserve based on a combination of factors,
including actual usage in recent history and projected usage in the future. If
expected circumstances should change due to general economic or product
obsolescence issues resulting in lower-than-expected usage, managements
estimate of the net realizable value could be reduced by a material amount. Valuation of Long-Lived Assets The Companys emergence from Chapter 11 bankruptcy proceedings resulted in a
new reporting entity and adoption of fresh start reporting in accordance with
SOP No. 90-7, Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code. The Companys tangible assets were adjusted in accordance
with SOP 90-7 which resulted in a decrease in the Companys real estate of
$11,644 and a 18




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##### Table of Contents



decrease in personal property (machinery and equipment and
furniture and fixtures) of $28,790. The Companys identifiable intangible
assets were adjusted to $24,675 representing customer contracts and
relationships of $10,000, trademarks and tradenames of $8,635, and technology
of $6,040. In addition to the above, the application of SOP 90-7 and SEC Staff Accounting
Bulletin No. 54, Push Down Basis of Accounting Required in Certain Limited
Circumstances, resulted in the elimination of the
existing goodwill and the establishment of a new amount of goodwill of $51,011,
that represents the reorganization value in excess of amounts allocable to
identifiable assets. In accordance with the provisions of Statement of
Financial Accounting Standards (FAS) No. 142, Goodwill and Other Intangible
Assets, no amortization of goodwill was recorded in fiscal 2003 or fiscal 2004.
Additionally, the newly-established goodwill will not be amortized. Rather,
the Company will evaluate this asset for impairment at least annually and
whenever there is an impairment indicator using the fair value guidelines of
FAS No. 142. The Company evaluates the carrying value of its investment in other long-lived
assets for impairment such as property, plant and equipment whenever there is
an impairment indicator, generally using an undiscounted cash flow methodology. Revenue Recognition The Company has entered into certain contracts with customers for the
construction of lighting and thin-film coating equipment. Revenue is
recognized on these contracts as work on the contract progresses using the
percentage of completion method of accounting, which relies on estimates of
total expected contract revenues and costs. Under this method reasonable
estimates of the costs applicable to the various stages of a contract are made,
thus, impacting the level of recognized revenue. Since the financial reporting
of these contracts depends on estimates, which are assessed continually during
the term of the contract, recognized revenues and profit are subject to
revisions as the contract progresses toward completion. Revisions in profit
estimates are reflected in the period in which the facts that give rise to the
revision become known. Should estimates indicate a loss is expected to be
incurred under a contract, cost of sales is charged with a provision for such
loss. Deferred Tax Assets and Valuation Allowance The Company had approximately $10,379 of net deferred tax assets related
principally to certain unused tax credits and loss carryforwards as of June 30,
2004. The realization of these assets is based upon the Company generating
future taxable income. Due to the Companys historical results it is uncertain
as to when it will realize taxable income that will allow it to utilize its tax
credits and loss carryforwards and, accordingly, has recorded a valuation
allowance of approximately $10,379. Additionally, on August 15, 2003, Saratoga
purchased the preferred and common shares owned by GE. This transaction caused
an ownership change greater than 50% which will limit the annual net operating
loss and tax credit carryforwards the Company can use to offset any future
taxable income pursuant to Section 382 of the Internal Revenue Code. This
limitation is effective with the fiscal year ended June 30, 2004. The Company
has net operating losses which, in accordance with the principles of fresh
start accounting, were not recorded. These net operating losses are available
to be utilized, and, to the extent the net operating losses are utilized,
goodwill will be reduced accordingly for the benefit received. Management will
continue to evaluate the realization of these deferred tax assets that are
subject to the Companys future operations. The Companys future operations
will be influenced by the general business environment, which is difficult to
predict and beyond the control of the Company. 19




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##### Table of Contents



Foreign Currency Approximately 31% of the Companys net sales in fiscal 2004 were denominated in
currencies other than U.S. dollars, principally pounds sterling, Australian
dollars, Canadian dollars, Euros and Japanese yen. A significant weakening of
such currencies versus the U.S. dollar could have a material adverse effect on
the Company. 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk During the three months ended September 30, 2004, there have been no material
changes in the reported market risks presented in the Companys Annual Report
on Form 10-K for the year ended June 30, 2004. 
 Item 4. Controls and Procedures The Company evaluated the design and operation of its disclosure controls and
procedures as of September 30, 2004, to determine whether they are effective in
ensuring that the disclosure of required information is timely made in
accordance with the Exchange Act and the rules and forms of the Securities and
Exchange Commission. This evaluation was made under the supervision and with
the participation of management, including the Companys principal executive
officer and chief accounting officer. The principal executive officer and chief
accounting officer have concluded, based on their review, that the Companys
disclosure controls and procedures, as defined at Exchange Act Rules 13a-14(c)
and 15d-14(c), are effective to ensure that information required to be
disclosed by the Company in reports that it files under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms. No significant changes
were made to the Companys internal controls or other factors that could
significantly affect these controls subsequent to the date of their evaluation. 20




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##### Table of Contents



Part II. Other Information Except as noted below, the items in Part II are inapplicable or, if applicable,
would be answered in the negative. These items have been omitted and no other
reference is made thereto. 
 Item 5. Other Events On
November 12, 2004, the Company modified the terms of its employment agreement
with Wayne Hellman, the Companys Chief Executive Officer. The modification
reduced the portion of retention bonuses to be applied to Mr. Hellmans
outstanding loan to an amount equal to the after-tax proceeds to Mr. Hellman.
The loan agreement also requires that an amount equal to the after-tax proceeds
of each bonus be applied to the loan. The effect of this amendment is that the
payment of each retention bonus is expected to result in a $1,144,000 reduction
of Mr. Hellmans loan. The terms of the original employment agreement provided
that each retention bonus payment would reduce the loan by $1,350,000. On November 12, 2004, the shareholders of the Company unanimously approved
amendments to the Companys Articles of Incorporation and Code of Regulations,
the basic corporate documents of the Company. The Articles of Incorporation
were amended to remove the provisions for a classified board of directors. All
directors of the Company will be elected annually for one year terms. The Code
of Regulations was amended to remove references to cumulative voting, which is
not permitted under the Articles of Incorporation, pursuant to an amendment
previously adopted. 
 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, 20043.2
    
    Amended and Restated Code of Regulations4.1
    
    Reference is made to Exhibit 2.110.1
    
    Amendment to the Amended and Restated Loan and Security Agreement
by and among Advanced Lighting Technologies, Inc. and certain of its
subsidiaries, and Wells Fargo Foothill, Inc. dated September 15, 200410.2
    
    Amendment to the Amended and Restated Loan and Security Agreement
by and among Advanced Lighting Technologies, Inc. and certain of its
subsidiaries, and Wells Fargo Foothill, Inc. dated October 25, 200410.3
    
    Amendment to Employment Agreement between Wayne R. Hellman
and Advanced Lighting Technologies, Inc. dated November 12, 2004
 21




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##### Table of Contents



(a) Exhibits (continued) Exhibit
    
    
    
    IncorporatedNumber
    
    Title
    
    by Reference12
    
    Statement Re: Computation of Ratio of Earnings to Fixed Charges31.1
    
    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.(b)
    
    Reports on Form 8-KNo reports on Form 8-K were filed during the quarter ended September 30,
2004. 22




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized. ADVANCED LIGHTING TECHNOLOGIES, INC.Date: November 12, 2004
    
    By:
    
    /s/ Wayne R. HellmanWayne R. HellmanChief Executive OfficerDate: November 12, 2004
    
    By:
    
    /s/ Christopher F. ZerullChristopher F. ZerullVice President and Chief Accounting Officer
 23




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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, 20043.2
    
    Amended and Restated Code of Regulations4.1
    
    Reference is made to Exhibit 2.110.1
    
    Amendment to the Amended and Restated Loan and Security Agreement
by and among Advanced Lighting Technologies, Inc. and certain of its
subsidiaries, and Wells Fargo Foothill, Inc. dated September 15, 200410.2
    
    Amendment to the Amended and Restated Loan and Security Agreement
by and among Advanced Lighting Technologies, Inc. and certain of its
subsidiaries, and Wells Fargo Foothill, Inc. dated October 25, 200410.3
    
    Amendment to Employment Agreement between Wayne R. Hellman
and Advanced Lighting Technologies, Inc. dated November 12, 200412
    
    Statement Re: Computation of Ratio of Earnings to Fixed Charges31.1
    
    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.