Discontinued Operations

On December 19, 2018, the Company entered into a share purchase agreement (“Share Purchase Agreement” or the “SPA”) 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 SPA 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 SPA. In the fourth quarter of 2018, the Company recognized a gain of $5.4 million, net of income taxes, related to this transaction.

In addition to the upfront purchase price, per the terms of the Share Purchase Agreement, Renaissance will make milestone payments of up to 7.5 million CHF per year if certain specific revenue targets are achieved related to the high voltage capacitor product line in fiscal years 2019 and 2020 resulting in potential aggregate milestone payments of approximately 15 million CHF. 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 CHF may be withheld from any potential milestone payments and funded to a separate escrow account to satisfy certain specific indemnity obligations as set forth in the SPA. 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.

For the three months ended March 31, 2018, the Company recognized $1.3 million 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 the condensed consolidated statements of operations as discontinued operations are as follows (in thousands):



	Three Months Ended March 31,
	2018
Revenue	$	5,414
Cost of revenue	3,051
Gross profit	2,363
Operating expenses:
Selling, general and administrative	1,789
Research and development	624
Total operating expenses	2,413
Income from operations of discontinued operations	(50		)
Other components of defined benefit plans, net	249
Other income and expense, net	(38		)
Income tax benefit	1,148
Income from discontinued operations, net of income taxes	$	1,309