We present Adjusted EBITDA and Adjusted Net Income as supplemental measures of our performance. We define Adjusted EBITDA for the periods indicated as EBITDA (as defined below), adjusted to exclude (i) Equity-based compensation expense, (ii) Foreign currency loss (gain), net, (iii) Derivative valuation loss (gain), net, (iv) Loss on early extinguishment of borrowings, net, (v) Inventory reserve related to Huawei impact of downstream trade restrictions, (vi) Expenses related to Fab 3 power outage, (vii) Merger-related costs (income), net and (viii) Early termination and other charges, net.

EBITDA for the periods indicated is defined as Income from continuing operations before interest expense, net, income tax expense (benefit) and depreciation and amortization. We prepare Adjusted Net Income by adjusting income from continuing operations to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Net Income is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We define Adjusted Net Income for the periods as income from continuing operations, adjusted to exclude (i) Equity-based compensation expense, (ii) Foreign currency loss (gain), net, (iii) Derivative valuation loss (gain), net, (iv) Loss on early extinguishment of borrowings, net, (v) Inventory reserve related to Huawei impact of downstream trade restrictions, (vi) Expenses related to Fab 3 power outage, (vii) Merger-related costs (income), net, (viii) Early termination and other charges, net, (ix) GAAP and cash tax expense difference and (x) Income tax effect on non-GAAP adjustments.

For the year ended December 31, 2021, we recorded in our consolidated statement of operations net gain of $35,527 thousand that represented income of $70,200 thousand from the recognition of a reverse termination fee, net of professional service fees and expenses of $34,673 thousand incurred in connection with the contemplated merger transaction of the Company that was terminated in December 2021. For the same period, we also recorded $3,430 thousand of non-recurring professional service fees and expenses incurred in connection with the regulatory requests, partially offset by $1,419 thousand gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi (which was closed during the year ended December 31, 2018 and $727 thousand legal settlement gain related to certain expenses incurred in prior periods in connection with our legacy Fab 4 (which was sold during the year ended December 31, 2020) and awarded in the third quarter of 2021.

For the year ended December 31, 2020, we recorded in our consolidated statement of operations $4,422 thousand of early termination and other charges, net in connection with the headcount reduction program offered and paid to the employees during the fourth quarter of 2020. During the same period, we also recorded $554 thousand of non-recurring professional service fees and expenses incurred in connection with certain treasury and finance initiatives.

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SOURCE Magnachip Semiconductor Corporation