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

Three Months Ended Three Months Ended Three Months Ended Three Months Ended
June 30, 2006 September 30, 2006 December 31, 2006 March 31, 2007
(in thousands, (% of net sales) (in thousands, (% of net sales) (in thousands, (% of net sales) (in thousands, (% of net sales)
except per except per except per except per
share and per share and per share and per share and per
ADS data) ADS data) ADS data) ADS data)
Ordinary shares used in computation:
Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 75,000 75,000 75,000 75,000
Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 75,000 75,000 88,004 90,580
Three months ended March 31, 2007 compared with three months ended December 31, 2006
Net sales. For the three months ended March 31, 2007, our net sales were approximately $73.4 million,
representing an increase of $11.5 million from our net sales of $61.9 million for the three months ended
December 31, 2006. This increase was primarily due to our increased sales volume, which was offset in part by
a decline in our average wafer selling price. We sold 29.6 MW of wafers during the three months ended
March 31, 2007 and 26.4 MW of wafers during the three months ended December 31, 2006. To meet growing
demand for our products, we have been increasing our production capacity. We had 61 DSS furnaces and
27 wire saws in operation as of March 31, 2007 compared with 51 DSS furnaces and 21 wire saws in operation
as of December 31, 2006. Our net sales generated from the various geographic regions during the three months
ended March 31, 2007 as a percentage of our net sales has experienced some significant changes as compared
to the year ended December 31, 2006. In line with our strategy to broaden our geographic presence, our net
sales to China during the three months ended March 31, 2007 decreased to 50.0% of our total net sales during
the period as compared to 75.5% during the year ended December 31, 2006. Our net sales to Asia Pacific ex-
China during the three months ended March 31, 2007 increased to 31.8% as compared to 16.3% during the
year ended December 31, 2006. Our net sales to North America during the three months ended March 31,
2007 increased to 8.2% as compared to 5.0% during the year ended December 31, 2006. Our net sales to
Europe during the three months ended March 31, 2007 increased to 10.0% as compared to 3.2% during the
year ended December 31, 2006. For further information on our geographic markets, see ""Ì Net Sales'' above.
Gross profit. Our gross profit increased by $1.8 million to $28.4 million for the three months ended
March 31, 2007 from $26.6 million for the three months ended December 31, 2006. Our gross margin declined
to 38.7% for the three months ended March 31, 2007 from 42.9% for the three months ended December 31,
2006, primarily due to a decrease in our average wafer selling price and an increase in the cost of our raw
materials. The increase in the cost of our raw materials was primarily due to the increase in the cost of our
polysilicon feedstock, which, in turn, was primarily the result of an increase in our purchase of monocrystalline
ingots used in our production and sale of monocrystalline wafers.
Operating expenses. For the three months ended March 31, 2007, our operating expenses were
$2.3 million, an increase of $316,000 from our operating expenses of $1.9 million for the three months ended
December 31, 2006. This increase was primarily due to an increase of approximately $155,000 in our general
and administrative expenses, as a result of the addition of administrative personnel and the corresponding
increases in salaries, benefits and traveling expenses during the three months ended March 31, 2007.
Interest income and expense. For the three months ended March 31, 2007, our interest income was
approximately $25,000, which remained substantially the same as our interest income for the three months
ended December 31, 2006 of approximately $26,000 because our total cash on deposit in interest-bearing
savings accounts and the relevant interest rates both remained approximately the same over this period. For
the three months ended March 31, 2007, our interest expense increased to $1.5 million from $1.0 million for
the three months ended December 31, 2006 as a result of an increase in our borrowings.
Foreign currency exchange loss, net. For the three months ended March 31, 2007, our foreign currency
exchange loss, net, decreased by $50,000 to approximately $516,000 from approximately $566,000 for the
three months ended December 31, 2006 primarily because we held a smaller amount of foreign currency
denominated assets in our current accounts, such as prepayments to our foreign suppliers of polysilicon
feedstock, deposits with our production equipment vendors overseas and trade accounts receivable, for the
three months ended March 31, 2007 on a net basis than we did for the three months ended December 31,
2006. We recognized an exchange loss with respect to these assets due to the appreciation of Renminbi. See
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