Discontinued Operations

On December 19, 2018, the Company entered into a Share Purchase Agreement with RN C Holding SA, a special purpose holding entity and affiliate of Renaissance Investment Foundation, (“Renaissance”), providing for the sale of 100% of the shares of the Company’s Swiss subsidiary, Maxwell Technologies SA (“Maxwell SA”), and its high voltage capacitor product line to Renaissance. The transaction simultaneously closed with the signing of the Share Purchase Agreement on December 19, 2018. The upfront purchase price was approximately $55.1 million, which after certain reductions and other transaction-related expenses resulted in net upfront cash proceeds of approximately $47.8 million. These reductions and transaction related expenses included a $0.9 million holdback that was placed in a third party escrow account to satisfy potential withholding tax obligations, transaction expenses of $2.1 million and additional adjustments for agreed upon net working capital amounts and other financial related adjustments as agreed upon and set forth in the Share Purchase Agreement.

In addition to the upfront purchase price, per the terms of the agreement, Renaissance will make milestone payments of up to $7.5 million per year based on the achievement of specific revenue targets related to the high voltage capacitor product line in fiscal years 2019 and 2020 resulting in potential aggregate milestone payments of approximately $15 million. Renaissance may set off any damages incurred for indemnification matters covered by the Share Purchase Agreement against any future milestone payments. Additionally, up to $5.0 million may be withheld from any potential milestone payments and funded to a separate escrow account to satisfy certain indemnity obligations as set forth in the Share Purchase Agreement. The Company will account for any potential milestone payments received as gain contingencies in accordance with the provisions of ASC 450, Contingencies; therefore, the Company will not record any gain or recognize any income related to the potential milestone payments until the period in which they are realized.

Following is the reconciliation of purchase price to net proceeds received and to the gain recognized in income from discontinued operations (in thousands):



Purchase price	$	55,055
Adjustments to purchase price	(791		)
Amounts held in escrow	(859		)
Payment of withholding taxes	(3,492		)
Cash proceeds received	49,913
Transaction expenses	(2,099		)
Net cash proceeds received	$	47,814

Net cash proceeds received	$	47,814
Net assets of high voltage product line	(56,718		)
Release of accumulated other comprehensive income from equity	10,120
Release of withholding tax liabilities	890
Release of employee liabilities and cancellation of equity awards	488
Payment of withholding taxes	3,492
Amounts held back in escrow	859
Gain on sale of high voltage product line, before income taxes	6,945
Income tax related to gain on sale	(1,534		)
Gain on sale, net of income taxes	$	5,411

For the years ended December 31, 2018 and 2017, the Company recognized $7.9 million and $10.7 million, respectively, of income net of income taxes from the discontinued operations of the high voltage product line. The major line items constituting the income of the high voltage product line which are reflected in our consolidated statements of operations as discontinued operations are as follows (in thousands):



	Years Ended December 31,
	2018			2017
Revenue	$	22,620		$	42,659
Cost of revenue	13,035			19,462
Gross profit	9,585			23,197
Operating expenses:
Selling, general and administrative	6,886			7,884
Research and development	2,087			2,084
Total operating expenses	8,973			9,968
Income from operations of discontinued operations	612			13,229
Other components of defined benefit plans, net	938			628
Other income and expense, net	(78		)	(26		)
Gain on sale of high voltage product line, net of income taxes	5,411			—
Income tax benefit (provision)	1,011			(3,098		)
Income from discontinued operations, net of income taxes	$	7,894		$	10,733

The assets and liabilities of the high voltage product line that were classified as discontinued operations in the consolidated balance sheet as of December 31, 2017 are as follows (in thousands):



	December 31
	2017
Cash and cash equivalents	$	3,930
Trade and other accounts receivable, net of allowance for doubtful accounts	8,931
Inventories	8,778
Prepaid expenses and other current assets	824
Current assets of discontinued operations	$	22,463

Property and equipment, net	8,084
Goodwill	21,354
Pension asset	11,712
Non-current assets of discontinued operations	$	41,150

Accounts payable and accrued liabilities	5,475
Accrued employee compensation	652
Deferred revenue and other current liabilities	97
Short-term borrowings and current portion of long-term debt	33
Current liabilities of discontinued operations	$	6,257

Deferred tax liability, long-term	3,774
Long-term debt, excluding current portion	82
Other long-term liabilities	127
Non-current liabilities of discontinued operations	$	3,983