Magnachip Semiconductor (MX) 8-K MagnaChip Completes Sale of Foundry Services Group and Fab 4

Exhibit 99.2

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

Sale of Foundry Services Group and Fab 4

On September 1, 2020 (the “Closing Date”), MagnaChip Semiconductor S.A., a Luxembourg société anonyme (“LuxCo”), and MagnaChip Semiconductor, Ltd., a Korean limited liability company (“MSK”), wholly owned subsidiaries of MagnaChip Semiconductor Corporation (the “Company”), completed the previously announced sale of the Company’s Foundry Services Group business and the fabrication facility located in Cheongju known as “Fab 4” (the “Business”) to Key Foundry Co., Ltd. (the “Buyer”), a Korean limited liability company and wholly owned subsidiary of Magnus Semiconductor, LLC, a Korean limited liability company (“Magnus”), in exchange for a purchase price equal to approximately $350.6 million, which included a positive working capital adjustment of approximately $5.9 million, pursuant to the terms of a business transfer agreement dated March 31, 2020 by and among LuxCo, MSK and Magnus (the “Business Transfer Agreement”). The purchase price was paid in a combination of U.S. Dollars in the amount of $46.5 million and Korean Won in the amount of approximately KRW 360.6 billion. In addition to the purchase price, the Buyer assumed all severance liabilities relating to the transferred employees, which have a value of approximately $100 million. The Buyer is a wholly owned subsidiary of Magnus, which was established by Alchemist Capital Partners Korea Co., Ltd. and Credian Partners, Inc. On April 20, 2020, Magnus assigned, and the Buyer assumed, all rights and obligations of Magnus under the Business Transfer Agreement.

The Company intends to use approximately $227.4 million of the net proceeds to fully redeem all of its outstanding 6.625% Senior Notes due 2021 (the “2021 Notes”), of which $224.25 million principal amount was outstanding as of August 31, 2020.

Unaudited Pro Forma Consolidated Financial Information

The Disposition constitutes a significant disposition for purposes of Item 2.01 of Form 8-K. As a result, the following unaudited pro forma consolidated statement of operations for the six months ended June 30, 2020 and unaudited pro forma consolidated statements of operations for the year ended December 31, 2019 are presented as if the Disposition and use of proceeds therefrom had occurred immediately prior to January 1, 2019. The unaudited pro forma consolidated statements of operations for the years ended December 31, 2018 and 2017 are presented as if the Disposition had occurred immediately prior to January 1, 2017. The following unaudited pro forma consolidated balance sheet as of June 30, 2020 is presented as if the Disposition and use of proceeds therefrom had occurred on June 30, 2020. The Disposition represents a strategic shift that will have a major effect on the Company’s operations and financial results. Accordingly, the Company accounted for the Business as discontinued operations beginning in its Quarterly Report on Form 10-Q from the quarter ended March 31, 2020.

The unaudited pro forma consolidated financial statements have been derived from historical financial statements prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) and are presented based on assumptions, adjustments, and currently available information described in the accompanying notes. They are intended for informational purposes only and are not intended to represent the Company’s financial position or results of operations had the Disposition occurred on the dates indicated, or to project the Company’s financial performance for any future period. Pro forma adjustments have been made for events that are directly attributable to the Disposition, factually supportable and, with respect to the unaudited pro forma consolidated statements of operations, expected to have a continuing impact on the Company’s consolidated operating results.

The unaudited pro forma consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and should be read in conjunction with the following: (i) the accompanying notes to the unaudited pro forma consolidated financial statements; (ii) the Company’s audited consolidated financial statements for the years ended December 31, 2019, 2018 and 2017 and related notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 21, 2020; and (iii) the Company’s unaudited condensed consolidated financial statements as of and for the six month period ended June 30, 2020 and related notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 7, 2020.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

As of June 30, 2020

(In thousands of US dollars, except share data)

	As Reported			Pro Forma Adjustments			Notes	Pro Forma
Assets
Current assets
Cash and cash equivalents	$	192,824		$	109,902		(a)	$	302,726
Accounts receivable, net		48,548			—				48,548
Inventories, net		45,511			—				45,511
Other receivables		10,406			—				10,406
Prepaid expenses		8,598			—				8,598
Hedge collateral		11,740			—				11,740
Other current assets		7,405							7,405
Current assets held for sale		205,086			(205,086	)	(b)		—
Total current assets		530,118			(95,184	)			434,934
Property, plant and equipment, net		69,110			—				69,110
Operating lease right-of-use assets		1,182			—				1,182
Intangible assets, net		2,590			—				2,590
Long-term prepaid expenses		2,936			—				2,936
Other non-current assets		9,212			—				9,212
Total assets	$	615,148		$	(95,184	)		$	519,964
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	42,366		$	—			$	42,366
Other accounts payable		4,049			—				4,049
Accrued expenses		45,735			(6,809	)	(a)		38,926
Operating lease liabilities		1,053			—				1,053
Current portion of long-term borrowings, net		82,706			—				82,706
Other current liabilities		5,481			—				5,481
Current liabilities held for sale		146,569			(146,569	)	(b)		—
Total current liabilities		327,959			(153,378	)			174,581
Long-term borrowings, net		223,242			(223,242	)	(a)		—
Accrued severance benefits, net		49,927			—				49,927
Other non-current liabilities		7,845			—				7,845
Total liabilities		608,973			(376,620	)			232,353
Commitments and contingencies
Stockholders’ equity
Common stock, $0.01 par value, 150,000,000 shares authorized, 44,248,706 shares issued and 35,143,033 outstanding at June 30, 2020		443			—				443
Additional paid-in capital		155,591			—				155,591
Retained earnings (deficit)		(52,709	)		281,436		(c)		228,727
Treasury stock, 9,105,673 shares at June 30, 2020		(107,649	)		—				(107,649	)
Accumulated other comprehensive income		10,499			—				10,499
Total stockholders’ equity		6,175			281,436				287,611
Total liabilities and stockholders’ equity	$	615,148		$	(95,184	)		$	519,964

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2020

(In thousands of US dollars, except share data)

	As Reported			Pro Forma Adjustments			Notes	Pro Forma
Revenues
Net sales – standard products business	$	219,691		$	—			$	219,691
Net sales – transitional Fab 3 foundry services		19,610			(19,610	)	(d)		—
Total revenues		239,301			(19,610	)			219,691
Cost of sales
Cost of sales – standard products business		158,423			—				158,423
Cost of sales – transitional Fab 3 foundry services		19,610			(19,610	)	(d)		—
Total cost of sales		178,033			(19,610	)			158,423
Gross profit		61,268			—				61,268
Operating expenses
Selling, general and administrative expenses		24,510			—				24,510
Research and development expenses		21,617			—				21,617
Other charges		554			—				554
Total operating expenses		46,681			—				46,681
Operating income		14,587			—				14,587
Interest expense		(11,037	)		7,887		(e)		(3,150	)
Foreign currency loss, net		(22,502	)		8,190		(f)		(14,312	)
Other income, net		1,629			—				1,629
Income (loss) from continuing operations before income tax expense		(17,323	)		16,077				(1,246	)
Income tax expense		1,981			—		(g)		1,981
Loss from continuing operations		(19,304	)		16,077				(3,227	)
Income from discontinued operations, net of tax		24,726			(24,726	)	(h)		—
Net income (loss)	$	5,422		$	(8,649	)		$	(3,227	)
Basic earnings (loss) per common share—
Continuing operations	$	(0.55	)					$	(0.09	)
Discontinued operations		0.71							—
Total	$	0.16						$	(0.09	)
Diluted earnings (loss) per common share—
Continuing operations	$	(0.55	)					$	(0.09	)
Discontinued operations		0.71							—
Total	$	0.16						$	(0.09	)
Weighted average number of shares—
Basic		34,992,734							34,992,734
Diluted		34,992,734							34,992,734

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2019

(In thousands of US dollars, except share data)

	As Reported			Pro Forma Adjustments			Notes	Pro Forma
Net sales	$	792,195		$	(307,348	)	(i)	$	484,847
Cost of sales		611,584			(243,134	)	(i)		368,450
Gross profit		180,611			(64,214	)			116,397
Operating expenses
Selling, general and administrative expenses		71,637			(24,042	)	(i)		47,595
Research and development expenses		75,356			(30,332	)	(i)		45,024
Restructuring and other charges		9,195			(9,142	)	(i)		53
Total operating expenses		156,188			(63,516	)			92,672
Operating income		24,423			(698	)			23,725
Interest expense		(22,627	)		16,200		(e) (i)		(6,427	)
Foreign currency loss, net		(21,813	)		6,966		(f) (i)		(14,847	)
Loss on early extinguishment of long-term borrowings, net		(42	)		(21	)	(j)		(63	)
Other income, net		2,980			(403	)	(i)		2,577
Income (loss) before income tax expense		(17,079	)		22,044				4,965
Income tax expense		4,747			(573	)	(g) (i)		4,174
Net income (loss) from continuing operations	$	(21,826	)	$	22,617			$	791
Earnings (loss) per common share—
Basic	$	(0.64	)					$	0.02
Diluted	$	(0.64	)					$	0.02
Weighted average number of shares—
Basic		34,321,888							34,321,888
Diluted		34,321,888							35,405,077

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2018

(In thousands of US dollars, except share data)

	As Reported			Pro Forma Adjustments			Notes	Pro Forma
Net sales	$	750,898		$	(325,408	)	(i)	$	425,490
Cost of sales		552,802			(242,960	)	(i)		309,842
Gross profit		198,096			(82,448	)			115,648
Operating expenses
Selling, general and administrative expenses		72,639			(24,713	)	(i)		47,926
Research and development expenses		78,039			(31,863	)	(i)		46,176
Total operating expenses		150,678			(56,576	)			94,102
Operating income		47,418			(25,872	)			21,546
Interest expense		(22,282	)		276		(i)		(22,006	)
Foreign currency loss, net		(24,445	)		(1,862	)	(i)		(26,307	)
Loss on early extinguishment of long-term borrowings, net		(206	)		—				(206	)
Other income (expense), net		264			(493	)	(i)		(229	)
Income (loss) before income tax expense		749			(27,951	)			(27,202	)
Income tax expense		4,649			(1,222	)	(i)		3,427
Net loss from continuing operations	$	(3,900	)	$	(26,729	)		$	(30,629	)
Loss per common share—
Basic	$	(0.11	)					$	(0.89	)
Diluted	$	(0.11	)					$	(0.89	)
Weighted average number of shares—
Basic		34,469,921							34,469,921
Diluted		34,469,921							34,469,921

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2017

(In thousands of US dollars, except share data)

	As Reported			Pro Forma Adjustments			Notes	Pro Forma
Net sales	$	679,672		$	(350,572	)	(i)	$	329,100
Cost of sales		491,779			(248,616	)	(i)		243,163
Gross profit		187,893			(101,956	)			85,937
Operating expenses
Selling, general and administrative expenses		81,775			(25,786	)	(i)		55,989
Research and development expenses		70,523			(28,830	)	(i)		41,693
Restructuring and other gain		(17,010	)		—				(17,010	)
Early termination charges		13,369			(7,103	)	(i)		6,266
Total operating expenses		148,657			(61,719	)			86,938
Operating income (loss)		39,236			(40,237	)			(1,001	)
Interest expense		(21,559	)		202		(i)		(21,357	)
Foreign currency gain, net		65,516			4,731		(i)		70,247
Other income, net		2,898			(1,257	)	(i)		1,641
Income before income tax expense		86,091			(36,561	)			49,530
Income tax expense		1,155			735		(i)		1,890
Net income from continuing operations	$	84,936		$	(37,296	)		$	47,640
Earnings per common share—
Basic	$	2.50						$	1.40
Diluted	$	2.02						$	1.18
Weighted average number of shares—
Basic		33,943,264							33,943,264
Diluted		44,755,137							44,755,137

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The following adjustments have been reflected in the unaudited pro forma consolidated financial statements:

(a) Adjustment reflects estimated net cash proceeds of $340.0 million, representing the gross sales price of $350.6 million less estimated transaction expenses of $10.6 million outstanding at the closing of the Disposition and reflects the pro forma assumption that the Company fully redeems the $224.3 million aggregate outstanding principal amount of the 2021 Notes, plus accrued and unpaid interest on the 2021 Notes of $6.8 million as of June 30, 2020, using proceeds from the Disposition. The 2021 Notes are carried on the Company’s books at June 30, 2020 at $223.2 million, which is net of $1.0 million of unamortized discount and debt issuance costs.

(b) Adjustment reflects the elimination of assets and liabilities related to the Business that were previously classified as held for sale and corresponding equity balances.

(c) Adjustment reflects the estimated gain of approximately $281.4 million arising from the Disposition. This estimated gain has not been reflected in the pro forma consolidated statement of operations as it is considered to be nonrecurring in nature. The actual net gain on the Disposition will be recorded in the Company’s financial statements for the third quarter of 2020 and may differ from the current estimate.

(d) Adjustment reflects the elimination of transitional foundry services that the Company will provide to the Buyer for Foundry products manufactured in its fabrication facility located in Gumi (“Transitional Fab 3 Foundry Services”) for a period of up to three years following the consummation of the Disposition. The Transitional Fab 3 Foundry Services are not expected to have a continuing impact on the Company’s operations due to the Company’s obligation to provide them for a limited period of time.

(e) Adjustment reflects the reduction of actual interest expense, and amortized discount and debt issuance costs in connection with the 2021 Notes as a result of the pro forma assumption that the Company will use a portion of proceeds from the Disposition to fully redeem the 2021 Notes. For the year ended December 31, 2019, this reduction was $15.7 million.

(f) Adjustment reflects the elimination of net foreign currency translation gain or loss associated with a portion of the intercompany long-term loans, including accrued interest, to the Company’s Korean subsidiary by its Dutch subsidiary that are assumed to have been repaid using proceeds from the Disposition, with the Dutch subsidiary using the consideration from such repayments to fully redeem the 2021 Notes. For the year ended December 31, 2019, this reduction was $7.8 million.

(g) Due to the Company’s history of net operating losses, the pro forma adjustments relating to the Company’s redemption of the 2021 Notes are not expected to have a material effect on the income tax expense and, therefore, such effect has not been reflected in the pro forma consolidated statement of operations.

(h) Adjustment reflects the elimination of income from discontinued operations, net of tax, which represents the operating results of the Business.

(i) Adjustment reflects the elimination of net sales, cost of sales, operating expenses, other income (expense), net and income tax expense which are specific to the operations of the Business.

(j) Adjustment reflects the elimination of a net gain on early extinguishment of the 2021 Notes as a result of the pro forma assumption that the Company will use a portion of proceeds from the Disposition to fully redeem the 2021 Notes.