<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -------
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1998
------------------
or
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.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 34-1803229
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) 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)
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
------ ------
There were 20,214,663 shares of the Registrant's Common Stock, $.001 par value
per share, outstanding as of October 31, 1998.
<PAGE> 2
INDEX
ADVANCED LIGHTING TECHNOLOGIES, INC.
<TABLE>
<CAPTION>
PAGE NO.
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - September 30, 1998
and June 30, 1998.............................................. 2
Condensed Consolidated Statements of Income -- Three months
ended September 30, 1998 and 1997 ............................. 3
Condensed Statement of Consolidated Shareholders' Equity --
Three months ended September 30, 1998.......................... 4
Condensed Consolidated Statements of Cash Flows -- Three
months ended September 30, 1998 and 1997....................... 5
Notes to Condensed Consolidated Financial Statements................ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................... 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk.............. 18
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds............................... 19
Item 5. Other Information....................................................... 19
Item 6. Exhibits and Reports on Form 8-K........................................ 21
SIGNATURES................................................................................ 23
EXHIBIT INDEX............................................................................. 24
</TABLE>
<PAGE> 3
ADVANCED LIGHTING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
SEPTEMBER 30, JUNE 30,
1998 1998
--------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 22,738 $ 21,917
Short-term investments 350 350
Trade receivables, less allowances of $442 and $397 46,852 40,779
Receivables from related parties 1,620 1,034
Inventories:
Finished goods 32,322 29,556
Raw materials and work-in-process 18,679 15,184
--------------- --------------
51,001 44,740
Prepaid expenses 3,586 3,200
Deferred taxes 2,192 2,192
--------------- --------------
Total current assets 128,339 114,212
Property, plant and equipment:
Land and buildings 35,048 31,429
Machinery and equipment 57,827 52,235
Furniture and fixtures 19,512 18,316
--------------- --------------
112,387 101,980
Less accumulated depreciation 13,421 11,952
--------------- --------------
98,966 90,028
Deferred taxes 4,332 2,892
Receivables from related parties 4,276 3,157
Net assets associated with discontinued operations 3,724 5,193
Investments in affiliates 25,250 20,591
Other assets 8,242 8,878
Intangible assets 34,162 34,377
Excess of cost over net assets of businesses acquired, net 34,453 32,524
--------------- --------------
$ 341,744 $ 311,852
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $ 1,998 $ 1,960
Accounts payable 14,187 14,967
Payables to related parties 369 618
Employee-related liabilities 3,693 3,259
Accrued income and other taxes 914 2,729
Other accrued expenses 9,808 13,042
--------------- --------------
Total current liabilities 30,969 36,575
Long-term debt 152,045 117,332
Other liabilities 507 766
Deferred taxes 3,213 3,059
Shareholders' equity
Preferred stock, $.001 par value, 1,000 shares authorized, no shares issued - -
Common stock, $.001 par value, 80,000 shares authorized, 20,210 shares
issued and outstanding as of September 30, 1998 and 20,189 shares issued
and outstanding as of June 30, 1998 20 20
Paid-in-capital 173,236 172,900
Accumulated other comprehensive income 266 -
Retained earnings (deficit) (18,512) (18,800)
--------------- --------------
155,010 154,120
--------------- --------------
$ 341,744 $ 311,852
=============== ==============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE> 4
ADVANCED LIGHTING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DOLLAR AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1998 1997
------------- --------------
<S> <C> <C>
Net sales $ 50,358 $ 29,937
Costs and expenses:
Cost of sales 29,636 17,326
Marketing and selling 8,859 4,416
Research and development 3,748 1,399
General and administrative 4,321 2,214
Fiber optic joint venture formation costs - 212
Amortization of intangible assets 559 214
------------- --------------
Income from operations 3,235 4,156
Other income (expense):
Interest expense (2,727) (327)
Interest income 238 527
Loss from equity investments (189) -
------------- --------------
Income from continuing operations before income taxes 557 4,356
Income taxes 269 1,568
------------- --------------
Income from continuing operations 288 2,788
Loss from discontinued operations, net of income tax benefits - (298)
------------- --------------
Net income $ 288 $ 2,490
============= ==============
Earnings per share -- Basic:
Income from continuing operations $ .01 $ .17
Loss from discontinued operations - (.02)
------------- --------------
Earnings per share -- Basic $ .01 $ .15
============= ==============
Earnings per share -- Diluted:
Income from continuing operations $ .01 $ .17
Loss from discontinued operations - (.02)
------------- --------------
Earnings per share -- Diluted $ .01 $ .15
============= ==============
Weighted average shares outstanding:
Basic 20,205 16,260
============= ==============
Diluted 20,573 16,625
============= ==============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE> 5
ADVANCED LIGHTING TECHNOLOGIES, INC.
CONDENSED STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1998
----------------------------------------------------------------------------------------
ACCUMULATED
COMMON STOCK OTHER
--------------------------- PAID-IN COMPREHENSIVE RETAINED
SHARES PAR VALUE CAPITAL INCOME EARNINGS TOTAL
------------ ------------- ------------ ---------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1998 20,189 $ 20 $ 172,900 $ - $ (18,800) $ 154,120
Net income - - - - 288 288
Foreign currency
translation adjustment - - - 266 - 266
Stock options exercised 18 - 279 - - 279
Stock purchases by employees 3 - 57 - - 57
------------ ------------- ------------ ---------------- ------------- ------------
BALANCE AT SEPTEMBER 30, 1998 20,210 $ 20 $173,236 $ 266 $ (18,512) $155,010
============ ============= ============ ================ ============= ============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE> 6
ADVANCED LIGHTING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------------------
1998 1997
-------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 288 $ 2,490
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation 1,469 649
Amortization 559 214
Deferred income taxes - 443
Changes in operating assets and liabilities:
Trade receivables (6,060) (3,743)
Inventories (4,492) (3,343)
Prepaids and other assets (171) (1,100)
Net assets associated with discontinued operations (1,970) -
Accounts payable and accrued expenses (5,369) (3,994)
Other 160 (378)
-------------- -------------
Net cash used in operating activities (15,586) (8,762)
INVESTING ACTIVITIES
Capital expenditures (9,066) -
Purchases of businesses (3,257) -
Investments in affiliates (4,659) (671)
Use of net proceeds from public offering:
Capital expenditures - (5,095)
Acquisition of minority interest in Fiberstars, Inc. - (2,835)
-------------- -------------
Net cash used in investing activities (16,982) (8,601)
FINANCING ACTIVITIES
Proceeds from revolving credit facility 88,306 17,457
Payments of revolving credit facility (54,681) (15,107)
Proceeds from long-term debt 868 1,387
Payments of long-term debt and capital leases (1,440) (882)
Issuance of common stock 336 314
Net proceeds from public offering - 69,335
Use of net proceeds from public offering:
Payment of long-term debt and revolving credit facility - (35,500)
-------------- -------------
Net cash provided by financing activities 33,389 37,004
-------------- -------------
Increase in cash and cash equivalents 821 19,641
Cash and cash equivalents, beginning of period 21,917 4,198
-------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 22,738 $ 23,839
============== =============
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 4,510 $ 362
Income taxes paid 60 213
Capitalized interest 209 126
Equipment acquired through capital leases - 376
Detail of acquisitions:
Assets acquired $ 7,078 -
Liabilities assumed (3,756) -
-------------- -------------
Cash paid 3,322 -
Less cash acquired (65) -
-------------- -------------
Net cash paid for acquisition $ 3,257 -
============== =============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE> 7
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
(Dollar amounts in thousands)
A. ORGANIZATION
Advanced Lighting Technologies, Inc. (the "Company" or "ADLT") is an innovation-
driven designer, manufacturer and marketer of metal halide lighting products,
including materials, system components, systems, and production equipment.
B. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles 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 to the
accrual for special charges described in Note F. 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, 1998. Operating
results for the three months ended September 30, 1998 are not necessarily
indicative of the results that may be expected for the full-year ending June 30,
1999.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts and related disclosures. Actual results could differ
from those estimates.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 provides authoritative guidance on accounting for and
financial reporting of start-up costs and organization costs. The Company is
required to adopt the SOP on July 1, 1999 and, upon adoption, expense all
previously capitalized start-up costs and organization costs as a cumulative
effect of a change in accounting principle. Management is reviewing its
capitalization policies and determining the impact that the adoption of this SOP
is expected to have on its consolidated results of operations and financial
position. At September 30, 1998, the Company estimates that it had approximately
$2,650 of start-up costs included in its consolidated balance sheet.
C. COMPREHENSIVE INCOME
During the first quarter of fiscal 1999, the Company adopted Statement of
Financial Accounting Standards (FAS) No. 130, "Reporting Comprehensive Income,"
which requires disclosure of comprehensive income and its components. FAS No.
130 requires companies to report, in addition to net income, other components of
comprehensive income, which for the Company includes foreign currency
translation adjustments.
6
<PAGE> 8
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
(Dollar amounts in thousands)
C. COMPREHENSIVE INCOME (CONT.)
For the three months ended September 30, 1998 and 1997, the Company's
comprehensive income was $554 and $2,490 , respectively. The Company's adoption
of FAS No. 130 had no effect on the Company's reported results of operations or
financial position.
D. REVOLVING BANK CREDIT FACILITY
On October 19, 1998, the Company voluntarily reduced the maximum committed
availability under its revolving credit facility provided by several North
American financial institutions ("Credit Facility") to $65,000 from $85,000.
Based on the terms of the Credit Facility, the Company had $12,600 in available
borrowings as of September 30, 1998.
The Credit Facility has a three-year term expiring in December 2000, extendable
annually for a three-year term. Interest rates on loans outstanding are based,
at the Company's option, on LIBOR (plus 1.0% to 2.25%) or the agent bank's prime
rate. The Company is also obligated to pay commitment fees of between .20% and
.375% on the unused portion of the facility. The facility contains certain
affirmative and negative covenants customary for this type of agreement,
prohibits cash dividends, and includes financial covenants with respect to
interest coverage, cash flow and tangible net worth. The principal security for
the facility is substantially all of the personal property of the Company and
each of its North American subsidiaries and a pledge of stock of each of the
Company's principal subsidiaries.
E. SENIOR NOTES OFFERING
On March 13, 1998, the Company sold $100,000 of Senior Notes due March 15, 2008,
resulting in net proceeds of approximately $96,150. The Notes have an annual
coupon rate of 8% and are redeemable at the Company's option, in whole or in
part, on or after March 15, 2003 at certain preset redemption prices. In
addition, at any time prior to March 15, 2001, the Company may redeem up to 35%
of the aggregate principal amount of the Notes at 108% of par with the proceeds
of one or more public equity offerings. Interest on the Senior Notes is payable
semiannually on March 15 and September 15 of each year beginning on September
15, 1998. There are no sinking fund requirements.
From September 14, 1998 until completion of a registered exchange offer to
existing noteholders, the Senior Notes bear interest at 8.5%. The offer is
expected to be completed within 45 days following the effectiveness of the
Company's related registration statement.
The Indenture 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.
7
<PAGE> 9
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
(Dollar amounts in thousands)
F. SPECIAL CHARGES
During the fiscal year ended June 30, 1998, the Company recorded special charges
related to an assessment of the Company's global power supply operations. The
special charges of $17,984 principally relate to the Company's decision to
refocus and restructure its recently acquired global power supply operations to
concentrate exclusively on opportunities in metal halide. With the January 1998
acquisition of Ruud Lighting, Inc., the Company accelerated the rationalization
of its existing power supply manufacturing operations and distribution
activities in order to capitalize on new opportunities not previously available.
This assessment resulted in (a) the discontinuance of certain power supply
products at the Company's power supply facilities and (b) the write-down of
certain intangible and fixed assets and (c) a $2,066 write-down of inventory
which was classified in cost of sales.
The special charges were determined in accordance with formal plans developed by
the Company's management using the best information available to it at the time
and, subsequently, approved by the Company's Board of Directors. The amounts the
Company may ultimately incur may change as the plans are executed.
Actions required by the plans are expected to be completed by June 30, 1999.
Cash outlays to complete the balance of the Company's initiative to rationalize
the Company's global power supply operations are estimated to be approximately
$700.
The activity impacting the accrual related to these charges during the first
quarter of fiscal 1999 is summarized below:
<TABLE>
<CAPTION>
Balance at Charges Balance at
June 30, 1998 Utilized Sept. 30, 1998
------------- -------- --------------
<S> <C> <C> <C>
Inventories $ 1,908 $ 268 $1,640
Property, plant, and equipment 84 59 25
Other accrued expenses 713 529 184
------------- -------- --------------
$ 2,705 $ 856 $1,849
============= ======== ==============
</TABLE>
8
<PAGE> 10
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
(Dollar amounts in thousands)
G. DISCONTINUED OPERATIONS, MICROSUN BUSINESS
In March 1998, the Company approved a plan to distribute to its shareholders, as
a tax-free spin-off transaction estimated to be completed by December 31, 1998,
all of the ownership of Microsun Technologies, Inc., the subsidiary primarily
responsible for development, design, assembly and marketing of metal halide
portable fixtures for residential and hospitality uses. As a result, the
consolidated financial statements of ADLT were reclassified to reflect the
results of operations of Microsun as a discontinued operation in accordance with
generally accepted accounting principles.
Because of the deterioration of the capital markets subsequent to June 30, 1998
and the inability to raise capital necessary to spin-off the Microsun business,
management is presently re-evaluating the manner of disposal of the Microsun
business, with the objective of minimizing near-term costs and cash outflow. The
re-evaluation is intended to be all-inclusive and modifications to the plan of
disposal, expected to be completed by December 31, 1998, will consider
winding-down or liquidating the Microsun operations.
Summary operating information for Microsun for the three month periods ended
September 30, 1998 and 1997, is presented below for informational purposes only
and does not necessarily reflect what the results of operations would have been
had Microsun operated as a stand-alone entity.
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Sales $ 929 $ 305
Costs and expenses 2,225 771
-------- --------
Loss before income taxes 1,296 466
Income tax benefit 443 168
-------- --------
Net loss $ 853 $ 298
======== ========
</TABLE>
Operating losses from the measurement date (March 31, 1998) through the intended
date of disposal (December 31, 1998) follow:
<TABLE>
<CAPTION>
Before
Income Income
Taxes Taxes Net
-------- -------- -------
<S> <C> <C> <C>
Operating losses for the six
months ended September 30, 1998 $ 8,373 $ 2,837 $ 5,536
Estimated operating losses from
October 1 to December 31, 1998 727 249 478
-------- -------- -------
Operating losses through disposal $ 9,100 $ 3,086 $ 6,014
======== ======== =======
</TABLE>
9
<PAGE> 11
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
(Dollar amounts in thousands)
H. RELATED PARTY TRANSACTION
Pursuant to a loan agreement dated October 8, 1998, between the Company and its
Chairman and Chief Executive Officer ("the CEO"), the Company has loaned $9,000
to its CEO for a one-year term at an interest rate of 8%. The loan was made
following approval by the Company's Board of Directors. The proceeds of the loan
were used by the Company's CEO to reduce the outstanding principal balance of a
margin account loan, which is secured by 2,053,070 shares of the Company's
Common Stock owned by the CEO and a related entity. In connection with the loan,
the Company's Board of Directors asked for and received the CEO's agreement to
extend the term of his employment agreement to December 31, 2003. The loan
agreement prohibits the CEO from encumbering his shares of the Company's Common
Stock in any manner except pursuant to the existing agreements governing the
CEO's margin account, without the consent of the Company's Board of Directors.
The loan is partially secured by certain real estate owned by the CEO.
I. SUBSEQUENT EVENTS
On November 11, 1998, the Company announced actions to implement a plan to
modify its Pacific Rim expansion strategy, including an evaluation of existing
equipment contracts with affiliated companies in the Pacific Rim; revise its
global lamp manufacturing strategy; consolidate several lamp manufacturing
facilities; consolidate marketing operations in North America and in Europe;
exit noncore product lines; reduce corporate overhead, including a reduction of
its workforce; reduce capital equipment expansion plans; and defer facilities
expansion.
The Company anticipates recording pretax charges of between $10,000 to $21,000
as a result of implementing these changes.
10
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
(DOLLAR AMOUNTS IN THOUSANDS)
This report on Form 10-Q may contain forward-looking statements. 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. There are a
number of factors that could cause the Company's actual results to differ
materially from those indicated by such forward-looking statements. Such factors
are detailed in the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1998 filed with the Securities and Exchange Commission.
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 designs, manufactures and markets metal halide lighting products,
including materials, systems and components and production equipment. Metal
halide lighting is currently used primarily in commercial and industrial
applications such as factories and warehouses, outdoor site and landscape
lighting, sports facilities and large retail spaces such as superstores. Systems
and components and materials revenue is recognized when products are shipped,
and production 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
lighting systems. Over the last three fiscal years, the Company has spent an
aggregate of $17,310 on research and development, representing 5.7% of aggregate
net sales from continuing operations over that period. Such expenditures have
enabled the Company to introduce new specialized products, develop new
applications for metal halide lighting and improve the quality of its materials.
The Company has spent additional amounts for manufacturing process and
efficiency enhancements, which were charged to cost of goods sold when incurred.
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.
The Company also has invested substantial resources in acquisitions and
strategic investments. In January 1998, the Company acquired Ruud Lighting, Inc.
and Deposition Sciences, Inc. From January 1997 through March 1998, the
Company's investment in notable acquisitions and strategic investments
aggregated approximately 3.6 million shares of Common Stock and approximately
$74,700 in cash, plus certain additional contingent amounts and shares.
DISCONTINUED OPERATIONS, MICROSUN BUSINESS
In March 1998, the Company approved a plan to distribute to its shareholders, as
a tax-free spin-off transaction estimated to be completed by December 31, 1998,
all of the ownership of Microsun
11
<PAGE> 13
Technologies, Inc., the subsidiary primarily responsible for development,
design, assembly and marketing of metal halide portable fixtures for residential
and hospitality uses. As a result, the consolidated financial statements of ADLT
were reclassified to reflect the results of operations of Microsun as a
discontinued operation in accordance with generally accepted accounting
principles.
Because of the deterioration of the capital markets subsequent to June 30, 1998
and the inability to raise capital necessary to spin-off the Microsun business,
management is presently re-evaluating the manner of disposal for the Microsun
business, with the objective of minimizing near-term costs and cash outflow. The
re-evaluation is intended to be all-inclusive and modifications to the plan of
disposal, expected to be completed by December 31, 1998, will consider
winding-down or liquidating the operations.
FUTURE STRATEGIC DIRECTION
On November 11, 1998, the Company announced actions to implement a plan to
modify its Pacific Rim expansion strategy, including an evaluation of existing
equipment contracts with affiliated companies in the Pacific Rim; revise its
global lamp manufacturing strategy; consolidate several lamp manufacturing
facilities; consolidate marketing operations in North America and in Europe;
exit noncore product lines; reduce corporate overhead, including a reduction of
its workforce; reduce capital equipment expansion plans; and defer facilities
expansion.
The Company anticipates recording pretax charges of between $10,000 to $21,000
as a result of implementing these changes.
12
<PAGE> 14
RESULTS OF OPERATIONS - SELECTED ITEMS AS A PERCENTAGE OF NET SALES
The following table sets forth, as a percentage of net sales, certain items in
the Company's Condensed Consolidated Statements of Income for the indicated
periods:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net sales 100% 100%
Costs and expenses:
Cost of sales 58.9 57.9
Marketing and selling 17.6 14.7
Research and development 7.4 4.7
General and administrative 8.6 7.4
Fiber optic joint venture formation costs - 0.7
Amortization of intangible assets 1.1 0.7
------------ ------------
Income from operations 6.4 13.9
Other income (expense):
Interest expense (5.4) (1.1)
Interest income 0.5 1.8
Loss from equity investment (0.4) -
------------ ------------
Income from continuing operations before income taxes 1.1 14.6
Income taxes 0.5 5.3
------------ ------------
Income from continuing operations 0.6 9.3
Loss from discontinued operations, net of income tax benefits - (1.0)
------------ ------------
Net income 0.6% 8.3%
============ ============
</TABLE>
Factors which have affected the results of operations for the first quarter of
fiscal 1999 as compared to the first quarter of fiscal 1998 are discussed below.
QUARTER ENDED SEPTEMBER 30, 1998 COMPARED WITH QUARTER ENDED SEPTEMBER 30, 1997
NET SALES. Net sales increased 68.2% to $50,358 for the first quarter of fiscal
1999 from $29,937 for the first quarter of fiscal 1998. The increase in system
components, materials, and systems ($19,966) was primarily attributable to
increased unit volume, including $17,450 from the Company's Ruud Lighting
subsidiary, which was acquired on January 2, 1998. The increase in equipment
sales ($456) was primarily attributable to the acquisition of Deposition
Sciences, Inc., which was acquired on January 28, 1998.
Fiscal 1999 first quarter sales reflect continued growth in the sales and
earnings of the Company's core U.S. metal halide operations, which was offset by
reductions in overseas sales and in non-metal halide products. The Company
attributes the soft overseas market to the current international economic
environment. Sales of non-metal halide products, an area where the Company has
been strategically reducing its presence, also declined at a faster rate than
originally anticipated.
13
<PAGE> 15
COST OF SALES. Cost of sales increased 71.0% to $29,636 in the first quarter of
fiscal 1999 from $17,326 in the first quarter of fiscal 1998. The increase was
primarily attributable to increased unit volume. As a percentage of net sales,
cost of sales increased to 58.9% in the first quarter of fiscal 1999 from 57.9%
in the first quarter of fiscal 1998.
MARKETING AND SELLING EXPENSES. Marketing and selling expenses increased 100.6%
to $8,859 in the first quarter of fiscal 1999 from $4,416 in the first quarter
of fiscal 1998. Marketing and selling expenses, as a percentage of net sales,
increased to 17.6% in the first quarter of fiscal 1999 from 14.7% in the first
quarter of fiscal 1998. This increase is primarily a result of increased
expenses incurred in connection with the launch of the Company's Pulse Start(TM)
products.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased
167.9% to $3,748 in the first quarter of fiscal 1999 from $1,399 in the first
quarter of fiscal 1998. This increase arose from increased spending for the: (i)
expansion of the new line of Pulse Start(TM) 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)
development and testing of electronic power supply systems; and (iii)
development of new materials for the world's major lighting manufacturers. As a
percentage of net sales, research and development expenses increased to 7.4% in
the first quarter of fiscal 1999 from 4.7% in the first quarter of fiscal 1998.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 95.2% to $4,321 in the first quarter of fiscal 1999 from $2,214 in the
first quarter of fiscal 1998. As a percentage of net sales, general and
administrative expenses increased to 8.6% in the first quarter of fiscal 1999
from 7.4% in the first quarter of fiscal 1998. The increase as a percentage of
net sales was primarily a result of the inability to cut back expenses quickly
enough in light of the slower than expected growth in sales experienced in the
first quarter.
INCOME FROM OPERATIONS. Income from operations in the first quarter of fiscal
1999 decreased to $3,235 from $4,156 in the first quarter of fiscal 1998. As a
percentage of net sales, income from operations decreased to 6.4% in the first
quarter of fiscal 1999 from 13.9% in the first quarter of fiscal 1998.
INTEREST EXPENSE. Interest expense increased to $2,727 in the first quarter of
fiscal from $327 in the first quarter of fiscal 1998. This increase resulted
primarily from the higher average debt outstanding during the first quarter of
fiscal 1999 as compared to the first quarter of fiscal 1998.
INTEREST INCOME. Interest income decreased to $238 in the first quarter of
fiscal 1999 from $527 earned in the first quarter of fiscal 1998. This decrease
is attributable to lower average cash equivalents and short-term investments in
the first quarter of fiscal 1999 as compared to the first quarter of fiscal
1998.
LOSS FROM EQUITY INVESTMENT. The loss from equity investments represents $53 of
earnings from the Company's investment in Fiberstars, Inc., a marketer and
distributor of fiber optic lighting products, offset by a $242 loss from the
Company's investment in Venture Lighting Japan, a manufacturer and marketer of
metal halide lamps in Japan.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES. Income from continuing
operations during the first quarter of fiscal 1999 decreased to $557 from $4,356
during the first quarter of fiscal 1998. As a percentage of net sales, income
from continuing operations decreased to 1.1% during the first quarter of fiscal
1999 from 14.6% during the first quarter of fiscal 1998.
14
<PAGE> 16
INCOME TAXES. Income tax expense decreased to $269 in the first quarter of
fiscal 1999 from $1,568 in the first quarter of fiscal 1998. The decrease was
caused by reduced profitability in the first quarter of fiscal 1999. Excluding
the loss from equity investments, the effective income tax rate was 36% in the
first quarters of both fiscal 1999 and fiscal 1998.
LOSS FROM DISCONTINUED OPERATIONS. In March 1998, the Company approved a plan to
distribute to its shareholders, as a tax-free spin-off transaction estimated to
be completed by December 31, 1998, all of the ownership of Microsun
Technologies, Inc., the subsidiary primarily responsible for development,
design, assembly and marketing of metal halide portable fixtures for residential
and hospitality uses. The loss from discontinued operations of $298 in the first
quarter of fiscal 1998 represents the total of Microsun's loss from operations,
net of tax benefits, in the first quarter of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal financial requirements are for developing manufacturing
equipment, market development activities, research and development efforts,
investments in business acquisitions, joint ventures and working capital. These
requirements have been, and the Company expects they will continue to be,
financed through a combination of cash flow from operations, borrowings under
various credit facilities and the sale of Common Stock.
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES. Net cash used in operating
activities totaled $15,586 in the first quarter of fiscal 1999 as compared to
$8,762 in the first quarter of fiscal 1998.
Trade receivables increased $6,060 and inventories increased $4,492, excluding
those acquired through the purchase of businesses. The increase in receivables
includes an increase of approximately $2,345 in accounts receivable related to
production equipment contracts. Production equipment contracts affect cash flow
because production equipment revenues are recognized under the percentage of
completion method of accounting while cash payments are received in accordance
with contract terms. The remaining increase in receivables resulted from an
increase in days sales outstanding as compared to the fourth quarter of fiscal
1998.
Inventory also increased as a result of the Company's efforts to introduce new
products which are accepted slowly into the marketplace, but must be initially
stocked. Inventory levels across the Company increased as a result of the
Company's efforts to improve customer service levels, e.g., minimizing
out-of-stock items. Efforts were concentrated at units abroad where shipping
time to distribution centers causes longer delays in the shipping process.
NET CASH USED IN INVESTMENT ACTIVITIES. Capital expenditures, primarily for
production equipment and leasehold and facility improvements, totaled $9,066 in
the first quarter of fiscal 1999 as compared to $5,095 in the first quarter of
fiscal 1998. Capital expenditures in fiscal 1999 related to additional machinery
and equipment to improve production processes, resulting in increased
productivity and capacity in the production of lamps, power supplies and other
lighting system products.
The Company has modified its current growth and capital expansion plans due to
the changes in the business environment. Specifically, the Company intends to
limit its capital expenditures for at least the next twelve months. As a result,
the Company has postponed certain capital equipment and facilities expenditures
until economic conditions and the market for metal halide products significantly
improves.
15
<PAGE> 17
To expand the Company's ability to develop and market new metal halide products
and systems, the Company has made a number of acquisitions and strategic
investments, the most notable of which, completed in fiscal 1998, are described
below.
On January 28, 1998, the Company completed the acquisition of Deposition
Sciences, Inc. ("DSI"), of Santa Rosa, California. DSI is a leader in the
development of sophisticated thin film deposition systems and coatings for
lighting applications, with particular emphasis on coatings for metal halide
lighting systems, and other applications, including aerospace, defense and
automotive applications. The stock of DSI was acquired in a privately-negotiated
transaction. The purchase price consisted of 599,717 shares of the Company's
Common Stock and approximately $14.5 million in cash.
On January 2, 1998, the Company acquired all of the capital stock outstanding of
Ruud Lighting (the "Ruud Stock"), located in Racine, Wisconsin. Ruud Lighting
manufactures and directly markets HID lighting systems, principally focusing on
metal halide installations for commercial, industrial and outdoor lighting
applications. The Ruud Stock was acquired from the five shareholders of Ruud
Lighting in a privately negotiated purchase transaction. The purchase price for
the Ruud Stock consisted of three million shares of the Company's Common Stock
and approximately $35.5 million in cash.
NET CASH USED IN FINANCING ACTIVITIES. On January 2, 1998, the Company replaced
the Loan Agreement and other borrowings in North America with the Credit
Facility. Proceeds from this facility were used to finance the $35,500 cash
portion of the Ruud Lighting acquisition and the $14,500 cash portion of the
Deposition Sciences acquisition. Proceeds were also used to repay $19,200 of
existing and outstanding North American bank borrowings of ADLT, Ruud Lighting
and DSI. As a growth company, the Company may need to amend or replace the
Credit Facility prior to its maturity on December 31, 2000.
On March 13, 1998, the Company sold $100,000 of 8% Senior Notes due March 15,
2008, resulting in net proceeds of $96,150. Approximately $76,300 of the net
proceeds of the Senior Notes were used to repay amounts outstanding under the
Credit Facility, thereby lengthening the average term of the Company's debt,
most of which had been incurred to finance the acquisitions of Ruud Lighting and
DSI. From September 14, 1998 until completion of a registered exchange offer to
existing noteholders, the Senior Notes bear interest at 8.5%. The offer is
expected to be completed within 45 days following effectiveness of the Company's
related registration statement.
ABILITY TO ADVANCE FUTURE OPERATIONS. The Company's working capital (current
assets less current liabilities) at September 30, 1998 was $97,370, resulting in
a working capital ratio of current assets to current liabilities of 4.1 to 1.0,
as compared to $77,637 or 3.1 to 1.0 at June 30, 1998. As of September 30, 1998,
the Company had approximately $23,000 in cash and cash equivalents and
short-term investments and had $12,600 available to it under its Bank Credit
Facility.
The Company believes that the acquisition of Ruud Lighting will favorably impact
its cash flow from operations, as Ruud Lighting has historically achieved
significant positive cash flows from its operations. In addition, the Company
intends to implement a number of cost reduction and cash flow enhancement
initiatives including consolidation of equipment and lamp-making operations,
reductions in facilities expenditures, consolidation of international
operations, reduction of corporate expenses, and workforce reductions.
The Company believes that the combination of its anticipated cash flows from
Ruud Lighting's operations, available cash, current borrowing facilities and the
initiatives outlined above
16
<PAGE> 18
will enable the Company to fund its operations for at least the next 12 months.
However, it is the Company's intention to avail itself of appropriate financing
alternatives to ensure that growth opportunities, including those arising from
acquisitions and additional investments in existing relationships, are realized.
If the Company engages in significant acquisition or strategic investment
activity in the near to medium term, it may need to obtain additional capital.
The Company is re-evaluating its international joint ventures and the related
equipment sales due to the serious economic difficulties facing the Pacific Rim
region. As a result, the Company may divert this manufacturing equipment to the
Company's Solon, Ohio factory, thereby increasing productivity and delaying the
need for substantial capital expenditures for approximately three years.
Although total capital expenditures for the remainder of fiscal 1999 are
estimated to be $12,000, the Company estimates its maintenance level for capital
expenditures will approximate $7,500 over the next twelve months. Future capital
expenditures beyond this level will be discretionary, as the Company presently
has sufficient capacities to support several years of sales growth at its
historical rates.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued FAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". The
statement requires a "management" approach to reporting financial and
descriptive information about a Company's operating segments. The Company must
adopt this statement in the annual financial statements for fiscal 1999, however
FAS No. 131 need not be applied to interim financial statements in the initial
year of application. Management is currently studying the potential effect of
adopting this statement.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 provides authoritative guidance on accounting for and
financial reporting of start-up costs and organization costs. The Company is
required to adopt the SOP on July 1, 1999 and, upon adoption, expense all
previously capitalized start-up costs and organization costs as a cumulative
effect of a change in accounting principle. Management is reviewing its
capitalization policies and determining the impact that the adoption of this SOP
is expected to have on its consolidated results of operations and financial
position. At September 30, 1998, the Company estimates that it had approximately
$2,650 of start-up costs included in its consolidated balance sheet.
YEAR 2000 COMPLIANCE
STATE OF READINESS. During the past two fiscal years, the Company has been
actively involved in finding and correcting Year 2000 problems within its
information technology structure. The information system correction process is
essentially complete. The Company maintains its critical information technology
systems in close cooperation with its suppliers. The Company is not currently
operating any legacy systems which are no longer being supported by the original
supplier.
The most critical non-information technology systems, such as robots and other
numerically controlled equipment, are relatively new and are being upgraded and
maintained with the help of the Company's various suppliers. To date, the
Company's investigation of these systems has not revealed any Year 2000
problems; however, investigation in this area continues.
17
<PAGE> 19
Each operating unit's purchasing and production control departments are in the
process of analyzing the unit's key third-party dependencies and working with
each of these key suppliers to determine the suppliers' Year 2000 status. Since
the Company's key suppliers are in the process of conducting similar
investigations with their key suppliers, and so on, the Company has had limited
success in obtaining reliable Year 2000 compliance certifications.
COSTS. The Company has had only limited expenditures related to Year 2000
issues, consisting principally of personnel costs incurred in the scope of
normal operations. In addition, software replacements and upgrades in the
ordinary course of business have enhanced the Company's Year 2000 readiness
without incremental costs. The Company does not anticipate that the future Year
2000 costs related to information technology that are beyond the scope of normal
operations will be significant.
The Company is in the process of developing contingency plans to protect it from
Year 2000 failures. These plans will likely result in some expenditures,
primarily increased inventory costs to assure adequate supplies, the exact
amount of which is not known at this time.
RISKS. In the early weeks of 2000, the Company may experience some random supply
chain disruptions that may affect its ability to produce and distribute key
products. These disruptions will be material if the U.S. experiences significant
interruptions in basic services, such as the electric power grid, telephone
service or the banking system.
CONTINGENCY PLANS. The Company, through its various purchasing and production
control departments, is in the early stages of developing contingency plans at
each of its worldwide operations. These plans will be particularly focused on
preparing the operation for the inability of key third-party suppliers to
perform their normal functions. Of critical importance will be the development
of alternative suppliers, the enhancements of on-hand materials and the
augmentation of the most critical finished goods.
COMPLETION. Based on management's assessment of current progress, the Company
believes it will complete necessary Year 2000 modifications and contingency
plans by mid-1999. The Company can give no assurance that the Company's Year
2000 preparations will prevent disruptions in its business resulting from Year
2000 problems of the Company, its suppliers or its customers or that the costs
to the Company of its preparations or any disruptions will not be material.
FOREIGN CURRENCY
Approximately 28% of the Company's net sales in fiscal 1998, on a pro forma
basis adjusted for the acquisition of Ruud Lighting, were denominated in
currencies other than U.S. dollars, principally Pounds Sterling, Australian
dollars and Canadian dollars. A weakening of such currencies versus the U.S.
dollar could have a material adverse effect on the Company. The Company
currently does not hedge its foreign currency exposure.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the three months ended September 30, 1998, 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, 1998.
18
<PAGE> 20
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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) On December 23, 1996, a newly-organized subsidiary of the Company, Advanced
Cable Lite Corporation, acquired all of the assets (and assumed certain
liabilities) of Cable Lite Corporation (the "Seller"). A portion of the
consideration for the assets was the contingent obligation to issue additional
shares of Common Stock to the Seller's shareholders pursuant to a formula fixed
at the time of the original acquisition agreement. Pursuant to this formula, the
Company issued 5,933 shares of Common Stock to the Seller's former shareholders
on July 8, 1998. The Common Stock was issued to former shareholders of Cable
Lite Corporation in a negotiated purchase of assets. Cable Lite and its four
shareholders signed an investment representation and agreed to transfer
restrictions. The certificates representing the shares bear a restrictive
legend. The sale of the shares was exempt pursuant to Sections 4(1) and 4(2) of
the Securities Act.
ITEM 5. OTHER INFORMATION
(a) As previously reported in the Company's Proxy Statement, pursuant to a loan
agreement dated October 8, 1998, between the Company and Mr. Hellman, its
Chairman and Chief Executive Officer (the "Hellman Loan Agreement"), the Company
has loaned $9,000,000 to Mr. Hellman for a one-year term at the rate of 8%. The
loan was made following approval by the Company's Board of Directors (Messrs.
Hellman and Fisi, Executive Vice President and a director of the Company, did
not participate in the deliberations). The proceeds of the loan were used to
reduce the outstanding principal balance of a loan from Prudential Securities
Incorporated ("PSI"), which is secured by 2,053,070 shares of the Company Common
Stock owned by Mr. Hellman and Hellman Ltd. (the "Hellman Personal Shares"). In
connection with the loan, the Board asked for and received Mr. Hellman's
agreement to extend the term of his employment agreement to December 31, 2003.
The Hellman Loan Agreement prohibits Mr. Hellman from encumbering the Hellman
Personal Shares in any manner except pursuant to existing agreements governing
Mr. Hellman's margin account at PSI, without consent of the Board's
representative. The loan is partially secured by certain real estate owned by
Mr. Hellman.
(b) The Company entered into a Consolidated Amendment No. 1 (the "Consolidated
Amendment"), dated as of September 10, 1998, to its Credit Agreement, dated as
of January 2, 1998, with the original lenders and National City Bank, as
administrative agent. The purpose of the Consolidated Amendment was to
consolidate prior amendments and to amend the pricing provisions and financial
covenants in the Credit Agreement. The Company is currently discussing an
additional amendment to the Credit Agreement with the lenders and the
administrative agent.
(c) On November 11, 1998, the Company issued a press release concerning the
results of the first quarter of its 1999 fiscal year and certain cost reduction
and cash flow enhancement initiatives to be taken by the Company. The Company's
press release, dated November 11, 1998, is attached hereto as Exhibit 99.
19
<PAGE> 21
(d) The following Earnings Statement (Unaudited) for the twelve month period
ended September 30, 1998 covers a period of twelve months beginning 85 days
after the effective date of the Company's Registration Statement (File No.
333-05953) for its July 1997 public offering, and is hereby made available to
security holders pursuant to Rule 158 of the Securities Act of 1933, as amended.
ADVANCED LIGHTING TECHNOLOGIES, INC.
Earnings Statement (Unaudited)
Twelve month period ended September 30, 1998 (In
thousands, except per share dollar amounts)
<TABLE>
<CAPTION>
<S> <C>
Net sales $ 184,314
Costs and expenses:
Cost of sales 107,651
Marketing and selling 30,189
Research and development 11,668
General and administrative 12,958
Fiber optic joint venture formation costs -
Purchased research and development 18,220
Special charges 15,918
Amortization of intangible assets 1,799
-------------
Income (loss) from operations (14,089)
Other income (expense):
Interest expense (6,201)
Interest income 1,147
Loss from equity investments (690)
-------------
Income (loss) from continuing operations before income taxes and extraordinary charge (19,833)
Income taxes 503
-------------
Income (loss) from continuing operations before extraordinary charge (20,336)
Loss from discontinued operations, net of income tax benefits (6,994)
-------------
Income (loss) before extraordinary charge (27,330)
Extraordinary charge from early extinguishment of debt, net of income tax benefits (604)
-------------
Net income (loss) $ (27,934)
=============
Earnings per share -- Basic:
Income (loss) from continuing operations $ (1.06)
Loss from discontinued operations (.37)
Extraordinary charge (.03)
-------------
Earnings (loss) per share -- Basic: $ (1.46)
=============
Earnings per share -- Diluted:
Income (loss) from continuing operations $ (1.06)
Loss from discontinued operations (.37)
Extraordinary charge (.03)
-------------
Earnings (loss) per share -- Diluted: $ (1.46)
=============
Weighted average shares outstanding:
Basic 19,189
=============
Diluted 19,189
=============
</TABLE>
20
<PAGE> 22
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
SEQUENTIAL
PAGE NUMBER/
EXHIBIT INCORPORATED
NUMBER TITLE BY REFERENCE
- ------- -------
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation. *
3.2 Code of Regulations. **
4.1 First Supplemental Indenture dated September 25, 1998 between
Advanced Lighting Technologies, Inc. and The Bank of New York
amending the Indenture dated March 18, 1998. ___
10.1 Consolidated Amendment No. 1 to Credit Agreement dated
September 10, 1998 among Advanced Lighting Technologies, Inc.,
National City Bank, and other financial institutions amending the
Credit Agreement dated January 2, 1998. ___
11 Statement Re: Computation of Earnings Per Share ___
12 Statement Re: Computation of Ratio of Earnings to Fixed Charges ___
27 Financial Data Schedule ___
99 Press Release of Advanced Lighting Technologies, Inc., dated
November 11, 1998 ___
* Incorporated by reference to Exhibit of same number in Company's
Quarterly Report on Form 10-Q for the Quarterly Period ended December 31,
1996.
** Incorporated by reference to Company's Registration Statement on Form S-1,
Registration No. 33-97902, effective December 11, 1995.
</TABLE>
21
<PAGE> 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONT.)
(B) REPORTS ON FORM 8-K.
During the quarter ended September 30, 1998, the Company filed one report on
Form 8-K. The Report on Form 8-K was filed on July 7, 1998, reporting under Item
5 certain financial and other information which was included in the Company's
registration statement on Form S-4 (Registration No. 333-58609) relating the
Company's proposed exchange offer of 8% Senior Notes due 2008. The Form 8-K
included the following financial statements:
Consolidated Balance Sheets as of June 30, 1997 and 1996.
Consolidated Statements of Operations for the years ended June 30,
1997, 1996 and 1995.
Statements of Consolidated Shareholders' Equity for the years ended
June 30, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the years ended June 30,
1997, 1996 and 1995.
Pro Forma Condensed Combined Statements of Operations for the Company
and Ruud Lighting, Inc. for the year ended June 30, 1997 and for the
nine months ended March 31, 1998.
Selected Financial Data for the years ended June 30, 1997, 1996, 1995,
1994 and 1993, and for the nine months ended March 31, 1998 and 1997.
22
<PAGE> 24
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 thereunto duly authorized.
Date: November 16, 1998 ADVANCED LIGHTING TECHNOLOGIES, INC.
By: /s/ Wayne R. Hellman
----------------------
Wayne R. Hellman
Chief Executive Officer
By: /s/ Nicholas R. Sucic
----------------------
Nicholas R. Sucic
Chief Financial Officer
23
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE NO.
- ------- ----------------------- --------
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation. *
3.2 Code of Regulations. **
4.1 First Supplemental Indenture dated September 25, 1998 between
Advanced Lighting Technologies, Inc. and The Bank of New York
Amending the Indenture dated March 18, 1998. ___
10.1 Consolidated Amendment No. 1 to Credit Agreement dated
September 10, 1998 among Advanced Lighting Technologies, Inc.,
National City Bank, and other financial institutions amending the
Credit Agreement dated January 2, 1998. ___
11 Statement Re: Computation of Earnings Per Share ___
12 Statement Re: Computation of Ratio of Earnings to Fixed Charges ___
27 Financial Data Schedule ___
99 Press Release of Advanced Lighting Technologies, Inc., dated
November 11, 1998. ___
* Incorporated by reference to Exhibit of same number in Company's
Quarterly Report on Form 10-Q for the Quarterly Period ended December 31,
1996.
** Incorporated by reference to Company's Registration Statement on Form S-1,
Registration No. 33-97902, effective December 11, 1995.
</TABLE>
24
<PAGE> 1
Exhibit 4.1
ADVANCED LIGHTING TECHNOLOGIES, INC.
Issuer
and
THE BANK OF NEW YORK,
Trustee
-------------------------------
First Supplemental Indenture
Dated as of September 25, 1998
-------------------------------
Supplemental to Indenture
Dated as of March 18, 1998
8% Senior Notes due 2008
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE
This FIRST SUPPLEMENTAL INDENTURE, dated as of September 25, 1998 is
between ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation (the
"Company"), and THE BANK OF NEW YORK, a New York banking corporation (the
"Trustee").
RECITALS
The Company has issued $100,000,000 aggregate principal amount of its
8% Senior Notes due 2008 (the "Notes") pursuant to the Indenture dated as of
March 18, 1998 (the "Indenture") between the Company and the Trustee.
Section 9.01 of the Indenture provides, inter alia, that the Company,
when authorized by a resolution of its Board of Directors, and the Trustee may
amend or supplement the Indenture without notice to or the consent of any Holder
either to cure any ambiguity, defect or inconsistency in the Indenture, provided
that such amendments or supplements shall not, in the good faith opinion of the
Board of Directors, adversely affect the interests of the Holders in any
material respect, or to make any change that, in the good faith opinion of the
Board of Directors as evidenced by a Board Resolution, does not materially and
adversely affect the rights of any Holder. This First Supplemental Indenture is
entered into pursuant to Section 9.01(1) and 9.01(5).
The Company has duly authorized the execution and delivery of this
First Supplemental Indenture, the conditions set forth in the Indenture for the
execution and delivery of this First Supplement Indenture have been complied
with and all things necessary to make this First Supplemental Indenture a valid
amendment of, and supplement to, the Indenture have been done by the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein, the Company agrees with the Trustee that the Indenture is
supplemental and amended, solely to the extent and for the purposes expressed
herein, for the equal and proportionate benefit of all Holders, as follows:
<PAGE> 3
ARTICLE I
DEFINITIONS
SECTION 1.01. Unless the context otherwise requires, the terms defined
in the Indenture shall, for all purposes of this First Supplemental Indenture,
have the meanings therein defined.
SECTION 1.02. Unless the context otherwise requires, the terms defined
in this First Supplemental Indenture (including the preamble hereof) shall, for
all purposes of the Indenture as supplemented and amended by this First
Supplemental Indenture, have the meanings herein defined.
ARTICLE II
AMENDMENT TO INDENTURE
SECTION 2.01. Section 4.17 of the Indenture is amended in its entirety
and shall read as follows:
SECTION 4.17. COMPLIANCE CERTIFICATES. (a) The Company shall deliver to
the Trustee, within 90 days after the end of each fiscal quarter (120 days after
the end of the last fiscal quarter of each year), an Officers' Certificate
stating whether or not the signers know of any Default or Event of Default that
occurred during such fiscal quarter. In the case of the Officers' Certificate
delivered within 120 days after the end of the Company's fiscal year, such
certificate shall contain a certification from the principal executive officer,
principal financial officer or principal accounting officer of the Company that
a review has been conducted of the activities of the Company and its Restricted
Subsidiaries and the Company's and its Restricted Subsidiaries' performance
under this Indenture and that the Company has complied with all conditions and
covenants under this Indenture. For purposes of this Section 4.17, such
compliance shall be determined without regard to any period of grace or
requirement of notice provided under this Indenture. If any of the officers of
the Company signing such certificate has knowledge of such a Default or Event of
Default, the certificate shall describe any such Default or Event of Default and
its status. The first certificate to be delivered pursuant to this Section
4.17(a) shall be for the first fiscal quarter beginning after the execution of
this Indenture.
(b) The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year, beginning with the fiscal year in which this Indenture
was executed, a certificate signed by the Company's independent certified public
accountants stating (i) that their audit examination has included a review of
the terms of this Indenture and the Notes as they relate to accounting matters,
(ii) that they have read the most recent Officers' Certificate delivered to the
Trustee pursuant to paragraph (a) of this Section 4.17 and (iii) whether, in
connection with their audit examination, anything came to their attention that
caused them to believe that the Company was not in compliance with any of the
terms, covenants, provisions or conditions of Article Four
3
<PAGE> 4
and Section 5.01 of this Indenture as they pertain to accounting
matters and, if any Default or Event of Default has come to their attention,
specifying the nature and period of existence thereof; provided that such
independent certified public accountants shall not be liable in respect of such
statement by reason of any failure to obtain knowledge of any such Default or
Event of Default that would not be disclosed in the course of an audit
examination conducted in accordance with generally accepted auditing standards
in effect at the date of such examination.
ARTICLE III
NOTICES
SECTION 3.01. The Company hereby designates the following as its
address for notices pursuant to Section 10.02 of the Indenture, replacing the
address set forth therein:
Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
Telecopier No.: (440) 542-4325
Attention: Chief Financial Officer
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.01. Nothing in this First Supplemental Indenture, express or
implied, is intended or shall be construed to confer upon, or to give to, any
person or corporation, other than the parties hereto, their successors and
assigns, and the Holders, any right, remedy or claim under or by reason of this
First Supplemental Indenture or any provision hereof; and the provisions of this
First Supplemental Indenture are for the exclusive benefit of the parties
hereto, their successors and assigns, and the Holders.
SECTION 4.02. This First Supplemental Indenture shall be governed by
the laws of the State of New York excluding (to the greatest extent permissible
by law) any rule of law that would cause the application of the laws of any
jurisdiction other than the State of New York.
In case any provision in this First Supplemental Indenture shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
If any provision of this First Supplemental Indenture limits, qualifies
or conflicts with any other provision required to be included in this First
Supplemental Indenture or the Indenture by the Trust Indenture Act, such other
provision which is so required to be included shall control.
4
<PAGE> 5
SECTION 4.03. The recitals contained herein shall be taken as the
statements of the Company and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this First Supplemental Indenture.
SECTION 4.04. The descriptive headings of the several Articles of this
First Supplemental Indenture are inserted for convenience only and shall not
affect the construction hereof.
SECTION 4.05. This First Supplemental Indenture may be simultaneously
executed in any number of counterparts, each of which when so executed and
delivered shall be an original; but such counterparts shall together constitute
but one and the same instrument.
SECTION 4.06. The Company represents and warrants that it is duly
authorized under all applicable laws to execute and deliver this First
Supplemental Indenture and that all corporate action on its part required for
the execution and delivery of this first Supplemental Indenture has been duly
and effectively taken.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year first above
written.
ADVANCED LIGHTING TECHNOLOGIES, INC.
By: /s/ Louis S. Fisi
------------------------------------------
Title: Executive Vice President and Secretary
THE BANK OF NEW YORK,
as Trustee
By: /s/ Mary Jane Schmalzel
-------------------------
Mary Jane Schmalzel
Title: Vice President
6
<PAGE> 1
Exhibit 10.1
================================================================================
================================================================================
ADVANCED LIGHTING TECHNOLOGIES, INC.
as the Borrower
And
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as Lenders
And
NATIONAL CITY BANK
as Administrative Agent
---------------------
CONSOLIDATED AMENDMENT NO. 1
dated as of
September 10, 1998
to
CREDIT AGREEMENT
dated as of
January 2, 1998
---------------------
================================================================================
================================================================================
<PAGE> 2
CONSOLIDATED AMENDMENT NO. 1 TO CREDIT AGREEMENT
THIS CONSOLIDATED AMENDMENT NO. 1 TO CREDIT AGREEMENT, dated as of
September 10, 1998 ("this Amendment"), among:
(i) ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation
(herein, together with its successors and assigns, the "Borrower");
(ii) the financial institutions listed on the signature pages
hereof (the "Lenders"); and
(iii) NATIONAL CITY BANK, a national banking association, as
Administrative Agent (the "Administrative Agent") for the Lenders under
the Credit Agreement:
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders named therein, and the Administrative
Agent entered into the Credit Agreement, dated as of January 2, 1998, as amended
by Amendment No. 1 thereto ("Amendment No. 1"), dated as of February 26, 1998,
and Amendment No. 2 thereto ("Amendment No. 2"), dated as of May 13, 1998 (as so
amended, the "Credit Agreement"; with the terms defined therein, or the
definitions of which are incorporated therein, being used herein as so defined).
(2) The Borrower has requested the Lenders and the Administrative Agent
to modify certain of the provisions of the Credit Agreement, and the Lenders and
the Administrative Agent are willing to so modify the provisions of the Credit
Agreement, all as more fully set forth below.
(3) This Amendment also consolidates the provisions of Amendment No. 1
and Amendment No. 2 which are of continuing effect.
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1. AMENDMENTS.
1.1. Pricing Changes. The Pricing Grid Table which appears in section
2.7(g) of the Credit Agreement is replaced with the following:
PRICING GRID TABLE
(Expressed in Basis Points)
<TABLE>
<CAPTION>
- --------------------------------------------- ---------------------- ---------------------- ------------------------
Applicable Applicable Applicable
Total Indebtedness/EBITDA Ratio Eurocurrency Prime Rate Commitment
Margin Margin Fee Rate
- --------------------------------------------- ---------------------- ---------------------- ------------------------
<S> <C> <C> <C>
Less than
2.00 to 1.00 100 -0- 20
- --------------------------------------------- ---------------------- ---------------------- ------------------------
Greater than or equal to
2.00 to 1.00 and less than 2.75 to 1.00 125 -0- 22.50
- --------------------------------------------- ---------------------- ---------------------- ------------------------
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
- --------------------------------------------- ---------------------- ---------------------- ------------------------
Applicable Applicable Applicable
Total Indebtedness/EBITDA Ratio Eurocurrency Prime Rate Commitment
Margin Margin Fee Rate
- --------------------------------------------- ---------------------- ---------------------- ------------------------
<S> <C> <C> <C>
Greater than or equal to
2.75 to 1.00 and less than 3.50 to 1.00 162.50 -0- 30
- --------------------------------------------- ---------------------- ---------------------- ------------------------
Greater than or equal to
3.50 to 1.00 and less than 4.25 to 1.00 187.50 -0- 32.50
- --------------------------------------------- ---------------------- ---------------------- ------------------------
Greater than or equal to
4.25 to 1.00 and less than 5.00 to 1.00 200 -0- 35
- --------------------------------------------- ---------------------- ---------------------- ------------------------
Greater than or equal to
5.00 to 1.00 225 25 37.50
- --------------------------------------------- ---------------------- ---------------------- ------------------------
</TABLE>
1.2. EFFECTIVENESS OF PRICING CHANGES. Notwithstanding anything to the
contrary contained in sections 2.7(g) or 4.1(a) of the Credit Agreement:
(a) the Applicable Eurocurrency Margin applicable to all
Eurocurrency Loans shall be 162.50 basis points per annum, effective as
of September 1, 1998, as to all such Eurocurrency Loans then or
thereafter outstanding, until changed in accordance with the provisions
of section 2.7(g) of the Credit Agreement on the basis of the
Borrower's ratio of Total Indebtedness to EBITDA, determined on the
basis of the Borrower's consolidated financial statements for the
fiscal quarter ended on or nearest to September 30, 1998; and
(b) the Applicable Commitment Fee Rate shall be 30 basis
points per annum, effective as of September 1, 1998, until changed in
accordance with the provisions of section 4.1(a) of the Credit
Agreement on the basis of the Borrower's ratio of Total Indebtedness to
EBITDA, determined on the basis of the Borrower's consolidated
financial statements for the fiscal quarter ended on or nearest to
September 30, 1998.
1.3. FINANCIAL COVENANTS. Section 9.7 of the Credit Agreement is
amended to read in its entirety as follows:
9.7. CERTAIN RATIOS. (a) Total Indebtedness/EBITDA Ratio. The
Borrower will not at any time permit the ratio of (i) the amount of
Total Indebtedness at such time to (ii) EBITDA for any Testing Period,
to exceed 5.50 to 1.00.
(b) TOTAL ADJUSTED SENIOR SECURED INDEBTEDNESS/EBITDA RATIO.
The Borrower will not at any time permit the ratio of (i) the amount of
Total Adjusted Senior Secured Indebtedness at such time to (ii) EBITDA
for any Testing Period, to exceed 2.50 to 1.00.
For purposes of this covenant, the term "Total Adjusted Senior
Secured Indebtedness" means the sum, on a consolidated basis, of the
following:
2
<PAGE> 4
(1) the aggregate outstanding principal amount of the Loans;
(2) the aggregate outstanding principal amount of Indebtedness
of Foreign Subsidiaries supported by any Letter of Credit;
(3) any additional amount of the Letter of Credit Outstandings
not reflected in the preceding clause (2);
(4) the aggregate amount of any outstanding Capitalized Lease
Obligations which were incurred on or after September 1, 1998; and
(5) the aggregate principal amount of any other outstanding
Indebtedness which (x) was incurred on or after September 1, 1998 by
the Borrower or any of its Subsidiaries, and is secured, in whole or in
part, by any security provided by the Borrower or any of its
Subsidiaries; or (y) was outstanding prior to September 1, 1998 and
first became secured on or after September 1, 1998, in whole or in
part, by any security provided by the Borrower or any of its
Subsidiaries.
1.4. INCORPORATION OF PRIOR AMENDMENTS. (a) Amendment No. 1. For the
convenience of the parties to the Credit Agreement and the avoidance of doubt,
the parties confirm that pursuant to Amendment No. 1:
(i) the Lenders consented to the incurrence by the Borrower of
additional Indebtedness consisting of up to $100,000,000 aggregate
principal amount of its Senior Notes due 2008 offered and sold as
contemplated by the Company's offering memorandum relating thereto, as
furnished by the Company to the Lenders prior to the execution and
delivery of Amendment No. 1 by any Lender; and
(ii) in order to give full effect to the foregoing consent,
Annex III to the Credit Agreement was amended by adding thereto a
reference to such aggregate principal amount of the Company's Senior
Notes due 2008.
The parties also confirm that the pricing changes provided in Amendment No. 1
have, as provided in this Amendment, been superseded by the pricing changes
effected pursuant to this Amendment.
(b) AMENDMENT NO. 2. For the convenience of the parties to the Credit
Agreement and the avoidance of doubt, the parties confirm that pursuant to
Amendment No. 2:
(i) DEFINITIONS: The following defined terms contained in
section 1.1 of the Credit Agreement were amended and restated to read
in their entirety as follows:
"EBIT" shall mean, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii)
if such period includes the fiscal quarter ended March 31,
1998, the noncash losses and noncash charges taken during such
quarter in the aggregate amount of $35,020,000, (iii)
provisions for taxes based on income, and (iv) Total Interest
Expense, all as determined for the Borrower and its
Subsidiaries on a consolidated basis in accordance with GAAP;
provided that, notwithstanding anything to the contrary
contained herein, the Borrower's EBIT for any Testing Period
shall (x) include the
3
<PAGE> 5
appropriate financial items for any person or business unit
which has been acquired by the Borrower on a going concern
basis, for any portion of such Testing Period prior to the
date of acquisition, and (y) exclude the appropriate
financial items for any person or business unit which has
been disposed of by the Borrower, for the portion of such
Testing Period prior to the date of disposition.
"EBITDA" shall mean, for any period, (A) the sum of
the amounts for such period of (i) EBIT, and (ii) depreciation
and amortization, less (B) gains on sales of assets (excluding
sales in the ordinary course of business) and extraordinary
gains, all as determined for the Borrower and its Subsidiaries
on a consolidated basis in accordance with GAAP; provided
that, notwithstanding anything to the contrary contained
herein, the Borrower's EBITDA for any Testing Period shall (x)
include the appropriate financial items for any person or
business unit which has been acquired by the Borrower on a
going concern basis, for any portion of such Testing Period
prior to the date of acquisition, and (y) exclude the
appropriate financial items for any person or business unit
which has been disposed of by the Borrower, for the portion of
such Testing Period prior to the date of disposition.
"Interest Coverage Ratio" shall mean, for any Testing
Period, the ratio of (i) the sum of EBIT and amortization, to
(ii) Total Interest Expense, in each case on a consolidated
basis for the Borrower and its Subsidiaries for such Testing
Period in accordance with GAAP; provided that, notwithstanding
anything to the contrary contained herein, the calculation of
the Borrower's Interest Coverage Ratio for any Testing Period
shall (x) include the appropriate financial items for any
person or business unit which has been acquired by the
Borrower on a going concern basis, for any portion of such
Testing Period prior to the date of acquisition, and (y)
exclude the appropriate financial items for any person or
business unit which has been disposed of by the Borrower, for
the portion of such Testing Period prior to the date of
disposition.
(ii) Minimum Consolidated Tangible Net Worth: The dollar
amount $100,800,000 which appeared in section 9.11 of the Credit
Agreement was changed to $78,000,000.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants as follows:
2.1. AUTHORIZATION, VALIDITY AND BINDING EFFECT. This Amendment has
been duly authorized by all necessary corporate action on the part of the
Borrower, has been duly executed and delivered by a duly authorized officer or
officers of the Borrower, and constitutes the valid and binding agreement of the
Borrower, enforceable against the Borrower in accordance with its terms.
2.2. REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The
representations and warranties of the Borrower contained in the Credit
Agreement, as amended hereby, are true and correct on and as of the date hereof
as though made on and as of the date hereof, except to the extent that such
representations and warranties expressly relate to a specified date, in which
case such representations and warranties are hereby reaffirmed as true and
correct when made.
4
<PAGE> 6
2.3. NO EVENT OF DEFAULT, ETC. No condition or event has occurred or
exists which constitutes or which, after notice or lapse of time or both, would
constitute an Event of Default.
2.4. COMPLIANCE. The Borrower is in full compliance with all covenants
and agreements contained in the Credit Agreement, as amended hereby.
SECTION 3. EFFECTIVENESS.
This Amendment shall become effective on and as of the date (the
"Effective Date"), on or before September 17, 1998, on which the following
conditions are satisfied:
(a) this Amendment shall have been executed by the Borrower
and the Administrative Agent, and counterparts hereof as so executed
shall have been delivered to the Administrative Agent;
(b) the Acknowledgment and Consent appended hereto shall have
been executed by the Credit Parties named therein, and counterparts
hereof as so executed shall have been delivered to the Administrative
Agent; and
(c) the Administrative Agent shall have been notified by all
of the Lenders that such Lenders have executed this Amendment (which
notification may be by facsimile or other written confirmation of such
execution).
The Administrative Agent shall notify the Borrower and each Lender in writing
of the effectiveness hereof.
SECTION 4. RATIFICATIONS.
The terms and provisions set forth in this Amendment shall modify and
supersede all inconsistent terms and provisions set forth in the Credit
Agreement, and except as expressly modified and superseded by this Amendment,
the terms and provisions of the Credit Agreement are ratified and confirmed and
shall continue in full force and effect.
SECTION 5. MISCELLANEOUS.
5.1. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and
inure to the benefit of the Borrower, each Lender and the Administrative Agent
and their respective permitted successors and assigns.
5.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made in this Amendment shall survive the execution and delivery
of this Amendment, and no investigation by the Administrative Agent or any
Lender or any subsequent Loan or issuance of a Letter of Credit shall affect the
representations and warranties or the right of the Administrative Agent or any
Lender to rely upon them.
5.3. REFERENCE TO CREDIT AGREEMENT. The Credit Agreement and any and
all other agreements, instruments or documentation now or hereafter executed and
delivered pursuant to the terms
5
<PAGE> 7
of the Credit Agreement as amended hereby, are hereby amended so that any
reference therein to the Credit Agreement shall mean a reference to the Credit
Agreement as amended hereby.
5.4. EXPENSES. As provided in the Credit Agreement, but without
limiting any terms or provisions thereof, the Borrower agrees to pay on demand
all costs and expenses incurred by the Administrative Agent in connection with
the preparation, negotiation, and execution of this Amendment, including without
limitation the costs and fees of the Administrative Agent's special legal
counsel, regardless of whether this Amendment becomes effective in accordance
with the terms hereof, and all costs and expenses incurred by the Administrative
Agent or any Lender in connection with the enforcement or preservation of any
rights under the Credit Agreement, as amended hereby.
5.5. SEVERABILITY. Any term or provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the term or provision so held to be invalid or unenforceable.
5.6. APPLICABLE LAW. This Amendment shall be governed by and construed
in accordance with the laws of the State of Ohio.
5.7. HEADINGS. The headings, captions and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
5.8. ENTIRE AGREEMENT. This Amendment is specifically limited to the
matters expressly set forth herein. This Amendment and all other instruments,
agreements and documentation executed and delivered in connection with this
Amendment embody the final, entire agreement among the parties hereto with
respect to the subject matter hereof and supersede any and all prior
commitments, agreements, representations and understandings, whether written or
oral, relating to the matters covered by this Amendment, and may not be
contradicted or varied by evidence of prior, contemporaneous or subsequent oral
agreements or discussions of the parties hereto. There are no oral agreements
among the parties hereto relating to the subject matter hereof or any other
subject matter relating to the Credit Agreement.
5.9. COUNTERPARTS. This Amendment may be executed by the parties hereto
separately in one or more counterparts, each of which when so executed shall be
deemed to be an original, but all of which when taken together shall constitute
one and the same agreement.
6
<PAGE> 8
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
as of the date first above written.
ADVANCED LIGHTING TECHNOLOGIES, INC.
By: /s/
---------------------------------------
Chief Financial Officer & Treasurer
NATIONAL CITY BANK,
individually and as Administrative Agent
By: /s/
---------------------------------------
Senior Vice President
NBD BANK
By: /s/
---------------------------------------
First Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/
---------------------------------------
Vice President
NATIONAL BANK OF CANADA,
a Canadian Chartered Bank,
Cleveland Representative Office
By: /s/
---------------------------------------
Assistant Vice President
7
<PAGE> 9
ACKNOWLEDGMENT AND CONSENT
For the avoidance of doubt, and without limitation of the intent and
effect of sections 6 and 10 of the Subsidiary Guaranty (as such term is defined
in the Credit Agreement referred to in the Consolidated Amendment No. 1 to
Credit Agreement (the "AMENDMENT"), to which this Acknowledgment and Consent is
appended), each of the undersigned hereby unconditionally and irrevocably (i)
acknowledges receipt of a copy of the Credit Agreement and the Amendment, and
(ii) consents to all of the terms and provisions of the Credit Agreement as
amended by the Amendment.
Capitalized terms which are used herein without definition shall have
the respective meanings ascribed thereto in the Credit Agreement referred to
herein. This Acknowledgment and Consent is for the benefit of the Lenders and
the Administrative Agent, any other person who is a third party beneficiary of
the Subsidiary Guaranty, and their respective successors and assigns. No term or
provision of this Acknowledgment and Consent may be modified or otherwise
changed without the prior written consent of the Administrative Agent, given as
provided in the Credit Agreement. This Acknowledgment and Consent shall be
binding upon the successors and assigns of each of the undersigned. This
Acknowledgment and Consent may be executed by any of the undersigned in separate
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, each of the undersigned has duly executed and
delivered this Acknowledgment and Consent as of the date of the Amendment
referred to herein.
<TABLE>
- ----------------------------------------------------------- --------------------------------------------------------
<S> <C>
APL ENGINEERED MATERIALS, INC. LIGHTING RESOURCES INTERNATIONAL, INC.
VENTURE LIGHTING INTERNATIONAL, INC. BALLASTRONIX (DELAWARE), INC.
SPECIALTY DISCHARGE LIGHTING, INC. ADVANCED LIGHTING SYSTEMS, INC.
METAL HALIDE TECHNOLOGIES, INC.
THE LIGHT SOURCE, INC.
ENERGY-WISE LIGHTING, INC. By: /s/ Louis S. Fisi
HID DIRECT, INC. -----------------------------------------------
BRIGHT IDEAS ADVERTISING AND DESIGN, INC. Louis S. Fisi, Secretary,
METAL HALIDE CONTROLS, INC. on behalf of each of the above corporations
a/k/a Current Industries, Inc.
HID RECYCLING, INC.
MICROSUN TECHNOLOGIES, INC.
ENERGY EFFICIENT PRODUCTS, INC. RUUD LIGHTING, INC.
BIO LIGHT, INC.
ADLT SERVICES, INC.
ADVANCED ACQUISITIONS, INC. By: /s/ Alan J. Ruud
-----------------------------------------------
Alan J. Ruud, President
By: /s/ Nicholas R. Sucic
--------------------------------------
Nicholas R. Sucic, Vice President,
on behalf of each of the above corporations
</TABLE>
<PAGE> 1
ADVANCED LIGHTING TECHNOLOGIES, INC.
EXHIBIT 11 -- STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DOLLAR AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Income from continuing operations
attributable to common shareholders $ 288 $ 2,788
=============== ===============
Net income attributable to common
shareholders $ 288 $ 2,490
=============== ===============
Weighted average shares -- Basic:
Outstanding at beginning of period 20,189 13,435
Issued pursuant to public offering - 2,772
Issued for exercise of stock options 14 18
Issued pursuant to employee stock purchase plan 2 -
Issuable in connection with an acquisition - 35
--------------- ---------------
Weighted average shares -- Basic 20,205 16,260
=============== ===============
Weighted average shares -- Diluted:
Basic from above 20,205 16,260
Effect of stock options 368 365
--------------- ---------------
Weighted average shares -- Diluted 20,573 16,625
=============== ===============
Earnings (loss) per share -- Basic
Income from continuing operations $ .01 $ .17
Loss from discontinued operations -- (.02)
--------------- ---------------
Earnings per share -- Basic $ .01 $ .15
=============== ===============
Earnings (loss) per share -- Diluted
Income from continuing operations $ .01 $ .17
Loss from discontinued operations -- (.02)
--------------- ---------------
Earnings per share -- Diluted $ .01 $ .15
=============== ===============
</TABLE>
<PAGE> 1
ADVANCED LIGHTING TECHNOLOGIES, INC.
EXHIBIT 12 -- STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------------
1998 1997
--------------- --------------
<S> <C> <C>
Consolidated pretax income from continuing operations $ 557 $ 4,356
Interest expense 2,727 327
Interest portion of rent expense 136 168
--------------- --------------
EARNINGS $ 3,420 $ 4,851
=============== ==============
Interest expense $ 2,727 $ 327
Interest capitalized 209 126
Interest portion of rent expense 136 168
--------------- --------------
FIXED CHARGES $ 3,072 $ 621
=============== ==============
RATIO OF EARNINGS TO FIXED CHARGES 1.1 7.8
=============== ==============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 22,738
<SECURITIES> 350
<RECEIVABLES> 53,190
<ALLOWANCES> 442
<INVENTORY> 51,001
<CURRENT-ASSETS> 128,339
<PP&E> 112,387
<DEPRECIATION> 13,421
<TOTAL-ASSETS> 341,744
<CURRENT-LIABILITIES> 30,969
<BONDS> 152,045
0
0
<COMMON> 20
<OTHER-SE> 154,990
<TOTAL-LIABILITY-AND-EQUITY> 341,744
<SALES> 50,358
<TOTAL-REVENUES> 50,358
<CGS> 29,636
<TOTAL-COSTS> 47,123
<OTHER-EXPENSES> 17,487
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,727
<INCOME-PRETAX> 557
<INCOME-TAX> 269
<INCOME-CONTINUING> 288
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 288
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
<PAGE> 1
EXHIBIT 99
ADVANCED LIGHTING TECHNOLOGIES REPORTS FISCAL 1999
FIRST QUARTER RESULTS
DETAILS EXPENSE REDUCTION, CASH FLOW ENHANCEMENT INITIATIVES
WILL STREAMLINE MANUFACTURING AND INTERNATIONAL OPERATIONS,
SIGNIFICANTLY REDUCE CORPORATE OVERHEAD
UNIFORM PULSE START(TM) SALES ACCELERATING
SOLON, OH, NOVEMBER 11, 1998 - ADVANCED LIGHTING TECHNOLOGIES, INC. (Nasdaq:
ADLT), a leading developer, manufacturer, and marketer of metal halide lighting
systems, today reported financial results for the first quarter of fiscal 1999
ended September 30, 1998.
Sales for the first quarter totaled $50.4 million, an increase of 68% over the
fiscal 1998 first quarter. Income from operations totaled $3.2 million, down
from $4.2 million for the corresponding year-ago period. Net income for the
fiscal 1999 first quarter was $0.3 million, or $0.01 per share, compared to $2.5
million or $0.15 per share. Weighted average shares outstanding totaled
20,573,000 in the 1999 first quarter compared to 16,625,000 in the year-ago
period, reflecting additional shares issued in conjunction with the Ruud and
Deposition Sciences acquisitions completed in January 1998.
As previously reported, fiscal 1999 first quarter results reflect continued
growth in the sales and earnings of ADLT's core U.S. metal halide operations,
which was offset by soft sales overseas and in non-metal halide products. While
sales for the quarter were in line with revised expectations, bottom-line
results reflect higher than anticipated expenses for the quarter and decreased
profitability of international operations and non-metal halide products.
As previously disclosed, ADLT's international operations have been negatively
impacted by their current economic environments, with the largest purchasers of
materials adjusting inventory levels. Sales of non-metal halide products, an
area where ADLT has been strategically reducing its presence, also declined at a
faster rate than originally anticipated. Additionally, first quarter results
include approximately $2 million in product introduction costs for ADLT's next
generation Uniform Pulse Start(TM) line of metal halide lighting systems.
Wayne R. Hellman, Chairman and Chief Executive Officer, stated, "Although sales
are trending in line with our revised expectations, the first quarter's results
of operations were below prior expectations. Our actions to deal in this new
environment has produced a new company discipline that postpones all
opportunities that are not in ADLT's core business. Core programs like Pulse
Start will roll-out this year as scheduled. The first quarter earnings'
shortfall was caused by the inability to cut back expenses quickly enough in our
<PAGE> 2
other operations and particularly at the corporate level once this postponing
policy was adopted."
"Under this policy our actions are expected to reduce quarterly cash operating
expenses by approximately $4.5 million through the elimination of approximately
220 positions and a 60% reduction in corporate overhead. These actions are
expected to help produce positive cash flow in the last half of the fiscal year
without impeding our ability to meet demand."
"We believe our core metal halide operations continue to gain market share in
the U.S.--the world's largest market for metal halide lighting. Our core U.S.
metal halide operations generated 16% internal sales growth in the first
quarter, including 34% growth in lamp sales. We are pleased to report that sales
of our revolutionary Uniform Pulse Start line have accelerated since its
introduction late in the fourth quarter. Pulse Start LAMP sales totaled 20,000
units in the first quarter and are on a 30,000 unit run rate in the second
quarter. The latter figure would indicate a 1.5% market penetration on an
annualized basis. Pulse Start FIXTURE sales, meanwhile, are expected to begin to
accelerate in the second quarter."
COST REDUCTION AND CASH FLOW ENHANCEMENT INITIATIVES
The company's planned performance enhancing initiatives fall into five areas:
- - CONSOLIDATION OF EQUIPMENT AND LAMP-MAKING OPERATIONS. ADLT plans to
consolidate its metal halide lamp-making operations into its primary
facility in Solon, Ohio. As part of this effort the company will close its
Bellevue, Ohio facility, which manufactures both specialty metal halide
lamps and equipment to manufacture metal halide lamps. Additionally, ADLT
is re-evaluating its joint venture/equipment sales. The Pacific Rim is
currently facing serious economic difficulties, so the company is
considering diverting this same equipment to ADLT's own Solon lamp factory,
thereby increasing productivity and delaying the need for substantial
capital expenditures for approximately three years.
- - REDUCED FACILITIES EXPENDITURES. ADLT will put on hold approximately
$15-20 million in planned facilities expenditures. These expenditures
included headquarters build-out and the completion of certain facilities
designed to highlight and promote metal halide lighting. Additionally, the
company will postpone for approximately nine months the outfitting of its
recently expanded metal halide materials production operations. ADLT
believes it has adequate existing capacity to meet near-term materials
demand.
- - CONSOLIDATION OF INTERNATIONAL OPERATIONS. ADLT will exit its Canadian
lamp distribution operations, a business acquired as part of a previous
acquisition. These Canadian operations generated approximately $8 million
in annual sales but were too focused on non-metal halide products and
became unprofitable. ADLT's Canadian power supply operations will remain
intact. ADLT anticipates significant growth for
<PAGE> 3
this operation based on the need to supply new products for the
accelerating roll-out of Uniform Pulse Start systems. Secondly, ADLT
reported that it will significantly reduce expenditures for its branch
operations on the European continent, which are performing below
expectations. ADLT's UK operations continue to perform well and will be
unaffected by these actions.
- - CORPORATE EXPENSE REDUCTIONS. ADLT plans to achieve corporate overhead
expense reductions of approximately 60%, or $3 million annually. The
company will eliminate approximately 50 mid- and senior-level management
positions.
- - MICROSUN. The company is in the process of scaling back its MicroSun
residential metal halide lighting operation in order to minimize its
immediate costs. Given the deterioration of the capital markets and the
inability to raise the funds necessary to spin-off the MicroSun business,
management is presently re-evaluating the manner in which the MicroSun
business will be disposed. This re-evaluation is intended to be
all-inclusive, and modifications to the plan of disposal to be considered
include winding-down or liquidating the operations.
All aspects of these initiatives will be examined during the second quarter,
which may require the company to take pretax restructuring charges ranging from
$10 to $21 million.
FIRST QUARTER DISCUSSION
First quarter performance was led by the company's core US metal halide lighting
operations. Sales of these products increased 16% over the year-ago period on an
internal growth basis, following a 14% quarter-over-quarter increase in the
fiscal 1998 fourth quarter. Lamp sales increased 34% in the first quarter,
following a 24% increase in the fourth quarter. Sales of non-metal halide
lighting products decreased 36% in the first quarter. US sales of metal halide
materials decreased 7% in the first quarter.
International sales decreased 1% in the first quarter, following a 43% increase
in the fourth quarter. Sales of non-metal halide lamps decreased 38% in the
first quarter, following an 11% increase in the fourth quarter. The company
attributed decreased sales of metal halide products to the international
economic environment. International sales of metal halide materials decreased
11% in the first quarter.
Except for historical information contained herein, the matters discussed in
this news release are forward-looking statements that involve risks and
uncertainties, including the timely development and market acceptance of new
products, the timely and successful implementation of the cost reduction and
cash flow initiatives, the impact of the initiatives on relationships with
customers, suppliers and employees, the ability to provide adequate incentives
to retain and attract key employees, the integration of acquired operations, the
impact of competitive products and pricing, and other risks detailed from time
to time in the Company's EDGAR filings with the Securities and Exchange
Commission. In particular, see "Risk Factors"' in the Company's Form 10-K for
the fiscal year ended June
<PAGE> 4
30, 1998. The Company's actual results could differ materially from those
anticipated in these forward-looking statements.
Advanced Lighting Technologies, Inc. is an innovation-driven designer,
manufacturer, and marketer of metal halide lighting products, including
materials, system components, systems, and production equipment with operations
and affiliates in North America, Europe, the Pacific Rim, and Australia.
For further information, contact:
Rick Barone
Director of Investor Relations
Advanced Lighting Technologies, Inc.
440-836-7111
ADLT: Fiscal 1999 Update
<PAGE> 5
ADVANCED LIGHTING TECHNOLOGIES, INC.
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share dollar amounts)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Net sales $ 50,358 $ 29,937
Costs and expenses:
Cost of sales 29,636 17,326
Marketing and selling 8,859 4,416
Research and development 3,748 1,399
General and administrative 4,321 2,214
Fiber optic joint venture formation costs - 212
Amortization of intangible assets 559 214
-------- --------
Income from operations 3,235 4,156
Other income (expense):
Interest expense (2,727) (327)
Interest income 238 527
Loss from equity investments (189) -
-------- --------
Income from continuing operations before income taxes 557 4,356
Income taxes 269 1,568
-------- --------
Income from continuing operations 288 2,788
Loss from discontinued operations, net of income tax benefits - (298)
-------- --------
Net income $ 288 $ 2,490
======== ========
Earnings per share -- Basic
Income from continuing operations $ .01 $ .17
Loss from discontinued operations - (.02)
-------- --------
Earnings per share -- Basic $ .01 $ .15
======== ========
Earnings per share -- Diluted:
Income from continuing operations $ .01 $ .17
Loss from discontinued operations - (.02)
-------- --------
Earnings per share -- Diluted $ .01 $ .15
======== ========
Weighted average shares outstanding:
Basic 20,205 16,260
======== ========
Diluted 20,573 16,625
======== ========
</TABLE>
