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

and development expenses as a result of additional personnel we hired and our increased research and
development activities in the three months ended December 31, 2006.
Interest income and expense. For the three months ended December 31, 2006, our interest income
remained at approximately $26,000 as compared with the three months ended September 30, 2006 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 December 31, 2006, our interest expense
decreased to $1.0 million from $5.0 million for the three months ended September 30, 2006 as a result of the
decrease in our debt discount amortization over this period. We had $4.4 million of debt discount amortization
for the three months ended September 30, 2006 in connection with the issuance of our exchangeable notes,
which contained beneficial conversion features. These exchangeable notes were issued on July 18, 2006 and
exchanged into our Series A preferred shares at the end of July 2006. As a result, we did not record any further
debt discount amortization for the three months ended December 31, 2006. The $4.4 million charge for debt
discount amortization represented the difference, measured as of the original commitment date for the
issuance of the exchangeable notes, between the exchange price at which the exchangeable notes were
exchangeable into our Series A preferred shares and the fair market value of the underlying Series A preferred
shares.
Foreign currency exchange loss, net. For the three months ended December 31, 2006, our foreign
currency exchange loss, net, decreased by $101,000 to approximately $566,000 from approximately $667,000
for the three months ended September 30, 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 December 31, 2006 on a net basis than we did for the three months ended
September 30, 2006. We recognized an exchange loss with respect to these assets due to the appreciation of
Renminbi. See ""Exchange Rate Information'' in this prospectus for more information on exchange rates
between the U.S. dollar and Renminbi.
Net income. For the three months ended December 31, 2006, our net income increased by $19.4 million
to $24.3 million compared with our net income of $5.0 million for the three months ended September 30,
2006. For the three months ended December 31, 2006, our net margin increased to 39.3% from 15.8% for the
three months ended September 30, 2006. Our PRC subsidiary, Jiangxi LDK Solar, is entitled to exemptions
from the PRC national and local enterprise income tax for at least two and five years, respectively, beginning
with calendar year 2006. Without this tax holiday, our income tax expense would have increased by
approximately $8.4 million and $3.5 million for the three months ended December 31, 2006 and the three
months ended September 30, 2006, respectively, with a corresponding reduction in the amount of our net
income for the periods.
Accretion of Series A, Series B, Series C preferred shares to redemption values. We issued our Series A
preferred shares in July 2006, our Series B preferred shares in September 2006 and our Series C preferred
shares in December 2006. For the three months ended December 31, 2006, we recognized accretion to the
redemption values of our Series A, Series B and Series C preferred shares of approximately $552,000,
$1.5 million and $116,000, respectively. The Series A, Series B, Series C preferred shares are each redeemable
36 months following the issuance date of the Series C preferred shares if a qualified initial public offering has
not occurred. The accretion of the Series A, Series B, Series C preferred shares to their redemption prices was
reflected as a reduction to our net income and represented the difference between our net income and our net
income available to ordinary shareholders.
Net income available to ordinary shareholders. As a result of the foregoing, for the three months ended
December 31, 2006, our net income available to ordinary shareholders was $22.1 million. Our net income
available to ordinary shareholders for the three months ended September 30, 2006 was $2.9 million. Without
the tax holiday as described in ""Ì Net income'' above, our net income available to ordinary shareholders
would have been reduced by approximately $8.4 million and $3.5 million for the three months ended
December 31, 2006 and the three months ended September 30, 2006, respectively.
Net income per ordinary share. For the three months ended December 31, 2006, net income per
ordinary share was $0.30 and $0.28 per share on a basic and diluted basis, respectively. For the three months
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