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

LDK SOLAR CO., LTD. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2006 AND 2007
(Amounts in US$ thousands, except share and per share data)
changes in PRC tax laws or their interpretation or their application will not subject the Group's PRC entities
to substantial PRC taxes in the future.
(6) COMMITMENTS AND CONTINGENCIES
(a) Capital commitments
Capital commitments outstanding at December 31, 2006 and March 31, 2007 not provided for in the
financial statements were as follows:
December 31, March 31,
2006 2007
Production line construction projects ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 212,317 197,908
(b) Purchase commitments
The Group has entered into several purchase agreements with certain suppliers whereby the Group is
committed to purchase a minimum amount of raw materials to be used in the manufacture of its products:
December 31, March 31,
2006 2007
Future minimum purchases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 847,790 896,694
Included in the above purchase commitments was an amount of US$726.6 million that related to a longterm
supply contract to procure an agreed quantity of raw materials at an agreed price during 2006 to 2011.
Pursuant to that contract, the contract price is to be renegotiated every six months. The purchase commitment
of US$726.6 million included above was determined based on the agreed quantities and the effective contract
price as at March 31, 2007.
(7) REDEEMABLE CONVERTIBLE PREFERRED SHARES
The holders of Series A, Series B and Series C preferred shares have the right to convert all or any
portion of their holdings into ordinary shares of the Company at the then applicable conversion ratio (the
""Conversion ratio'') at any time after the dates of issuance to the closing of a Qualified IPO.
The terms of the Series A preferred shares provide that the Conversion ratio is subject to adjustment
based on the 2007 net earnings. As the contingency relating to the 2007 audited net earnings was not resolved
as of March 31, 2007, management has not considered the 2007 conversion ratio adjustment when preparing
the unaudited condensed interim consolidated financial statements for the three-month period ended
March 31, 2007.
The terms of the Series B and Series C preferred shares provide that the respective Conversion ratios are
subject to adjustment based on the 2006/2007 net earnings and the 2007 net earnings respectively. In March
2007, the Company verbally agreed with each of the holders of Series B and Series C preferred shares that, if
the Company's public filing for an Qualified IPO takes place on or before April 30, 2007, the 2006/2007 net
earnings and the 2007 net earnings, based on which the respective Conversion ratio adjustment are
determined, would be adjusted on a pro-rata basis based on the net earnings for the eight months ended
February 28, 2007 and the net earnings for the two months ended February 28, 2007 respectively.
As of April 4, 2007, all the holders of Series B and Series C preferred shares have confirmed in writing
that no adjustment to the initial Conversion ratio need to be made.
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