LDK Solar Co., Ltd. - Asia Europe Clean Energy (Solar) Advisory Co ...

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LDK SOLAR CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) FOR THE PERIOD FROM JULY 5, 2005 TO DECEMBER 31, 2005 AND THE YEAR ENDED DECEMBER 31, 2006 (Amounts in US$ thousands, except share and per share data) (loss) income per share is calculated by dividing net (loss) income available to ordinary shareholders by the weighted average number of ordinary shares and dilutive ordinary share equivalents outstanding during the period. Ordinary share equivalents consist of the ordinary shares issuable upon the conversion of the convertible preferred shares (using the as-converted method) and ordinary shares issuable upon the exercise of outstanding share options and warrants (using the treasury stock method). Ordinary share equivalents in the diluted net (loss) income per share computation are excluded to the extent that their effect would be antidilutive. (z) Segment reporting The Group uses the management approach in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Group's chief operating decision maker for making operating decisions, allocating resources and assessing performance as the source for determining the Group's reportable segments. Management, including the chief operating decision maker, reviews operating results solely by monthly revenue (but not by sub-product type) and operating results of JXLDK, the operating subsidiary in the PRC. As such, management has determined that JXLDK is the Group's only operating segment, as that term is defined by Statement of Financial Accounting Standard No. 131, ""Disclosure about Segments of an Enterprise and Related Information''. (aa) Start-up costs The Group expensed all costs incurred in connection with start-up activities, including preproduction costs associated with new manufacturing facilities. Preproduction costs including the design, formulation and testing of new products or process alternatives are included in research and development expenses. Preproduction costs including facility and employee costs incurred in connection with constructing new manufacturing plants are included in general and administrative expenses. The Group made first commercial sale on April 28, 2006 and was no longer in the development stage. (ab) Recently issued accounting pronouncement In September 2006, the FASB issued SFAS No. 157, ""Fair Value Measurements''. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 with earlier application encouraged. The Group is currently evaluating the impact, if any, of this statement on the consolidated financial statements. In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (""SAB 108''), to address diversity in practice in quantifying financial statement misstatements. SAB 108 requires that misstatements are to be quantified based on their impact on the financial statements and related disclosures. SAB 108 is effective as of the end of 2006 fiscal year, allowing a one-time transitional cumulative effect adjustment to retained earnings as of January 1, 2006 for errors that were not previously deemed material, but are material under the guidance in SAB 108. The Group does not expect the initial adoption of SAB 108 to affect the Group's consolidated financial condition or results of operations. In June 2006, the FASB issued FIN 48, ""Accounting for Uncertainty in Income Taxes Ì an Interpretation of FASB Statements No. 109'', which clarifies the accounting for uncertainty in tax positions. This interpretation requires that the Group recognizes in the consolidated financial statements the impact of a tax F-16
LDK SOLAR CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) FOR THE PERIOD FROM JULY 5, 2005 TO DECEMBER 31, 2005 AND THE YEAR ENDED DECEMBER 31, 2006 (Amounts in US$ thousands, except share and per share data) position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. FIN 48 will be effective for the first fiscal year beginning after December 15, 2006. The Group does not expect the adoption of this interpretation to have a material effect of the Group's consolidated financial statements. (3) INVENTORIES December 31, December 31, 2005 2006 Inventories consist of the following: Raw materials ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 79,496 Work in progressÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 8,884 Supplies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 1,410 Finished goods ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 5,096 Ì 94,886 At December 31, 2006, the Group had US$2,859 of raw materials consigned to a third party. (4) PREPAYMENTS TO SUPPLIERS In order to secure a stable supply of silicon materials, the Group makes prepayments to certain suppliers. These prepayments are classified as current assets because the Group expects to take delivery of the inventory within the next twelve months. The outstanding balance of the prepayment to suppliers is reduced and reclassified to inventories as the Group purchases silicon materials. Such reclassification of US$144,482 for the year ended December 31, 2006 is not reflected in the Group's consolidated cash flows from operations. (5) DEFERRED EXPENSES Deferred expenses at December 31, 2006 consist of costs incurred in connection with the anticipated IPO of the Company. (6) PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net consist of the following: December 31, December 31, 2005 2006 Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 7,716 Plant and machinery ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 80,549 Furniture, fixtures and office equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12 355 Motor vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 636 Construction in progress ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,480 14,293 10,492 103,549 Less: Accumulated depreciationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1) (2,674) 10,491 100,875 F-17
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PROSPECTUS 17,384,000 American Depo
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We were incorporated in the Cayman
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percentage of light energy from the
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Listing ÏÏÏÏÏÏÏÏÏÏÏÏÏ
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(1) Gross profit for the year ended
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RISK FACTORS Investment in our ADSs
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Reduction or elimination of governm
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capacity or to increase our manufac
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delivery or failure to meet deliver
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specifications or product defects.
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Compliance with environmental regul
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operations or the price of our ADSs
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tax rates and other measures. Forei
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company in connection with any incr
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of approximately $22.05 in the net
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outside the United States. As a res
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The forward-looking statements cont
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CAPITALIZATION The following table
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DILUTION If you invest in our ADSs,
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DIVIDEND POLICY We have never decla
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SELECTED CONSOLIDATED FINANCIAL AND
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MANAGEMENT'S DISCUSSION AND ANALYSI
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polysilicon prices will decline in
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listed public company in the United
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increase. See ""Risk Factors Ì Ris
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subjective. The assumptions used in
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2006 and February 6, 2007. During t
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value of the our business. Under th
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Year Ended December 31, 2006 (in th
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""Exchange Rate Information'' in th
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ended September 30, 2006, net incom
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For additional information relating
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The non-cancelable purchase obligat
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previously deemed material, but are
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module production will increase fro
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The following diagram illustrates t
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Because we are a pure-play solar wa
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Wafering. After passing inspection,
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our revenue and customer base to ta
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‚ Our agreement with E'mei Semi-c
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photovoltaic cell or modules, and w
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A breakdown of our employees by are
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tax treatments to foreign-invested
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On September 21, 2006, the CSRC pub
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Gang Wang is a non-executive direct
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directors on our audit committee wi
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monies of or belonging to us may be
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(10) Vests on July 31, 2007. Brilli
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Securities (USA) LLC, which is a re
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Page 104 and 105: person, by its duly authorized repr
Page 106 and 107: History of Securities Issuances The
Page 108 and 109: persuasive authority in the Cayman
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Page 112 and 113: Reports and Other Communications Wi
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Page 126 and 127: The estimated offering expenses pay
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Page 136 and 137: WHERE YOU CAN FIND ADDITIONAL INFOR
Page 138 and 139: REPORT OF INDEPENDENT REGISTERED PU
Page 140 and 141: LDK SOLAR CO., LTD. AND SUBSIDIARIE
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