(2.) DISCONTINUED OPERATIONS AND DIVESTITURES

Discontinued Operations and Divestiture of AS&O Product Line

On May 3, 2018, the Company entered into a definitive agreement to sell its AS&O Product Line to Viant, and on July 2, 2018, completed the sale, collecting cash proceeds of approximately $581 million, which is net of transaction costs and adjustments set forth in the definitive purchase agreement. In connection with the sale, the parties executed a transition services agreement whereby the Company will provide certain corporate services (including accounting, payroll, and information technology services) to Viant for a period of up to one year from the date of the closing to facilitate an orderly transfer of business operations. Viant will pay Integer for these services, with such payments varying in amount and length of time as specified in the transition services agreement. The Company recognized $3.6 million of income under the transition services agreement for the performance of services during 2018, of which $0.2 million is within Cost of Sales and $3.4 million is within Selling, General and Administrative expenses in the Consolidated Statement of Operations for the year ended December 28, 2018. In addition, the parties executed long-term supply agreements under which the Company and Viant have agreed to supply the other with certain products at prices specified in the agreements for a term of three years.

In connection with the closing of the transaction, the Company recognized a pre-tax gain on sale of discontinued operations of $195.0 million. The Company is in the process of finalizing the net working capital adjustment with Viant as provided for in the definitive purchase agreement. The final net working capital adjustment, as determined through the established process outlined in the definitive purchase agreement, may be different from the Company’s estimates. The impact of any changes in the net working capital adjustment will be recorded as an adjustment to the gain on sale from discontinued operations in the period such change occurs. Additionally, the income taxes associated with the gain will be impacted by the final allocation of the sales price, which must be agreed to with Viant as required in the definitive purchase agreement and may be materially different from the Company’s estimates. The impact of any changes in estimated income taxes will be recorded as an adjustment to discontinued operations in the period such change in estimate occurs.

As the AS&O Product Line was a portion of the Medical goodwill reporting unit, and management determined it met the definition of a business, goodwill was allocated to the AS&O Product Line on a relative fair value basis. The fair value of the AS&O Product Line assets was based primarily on the purchase price of $600 million prior to closing adjustments.

The carrying amounts of the AS&O Product Line assets and liabilities that were classified as assets and liabilities of discontinued operations held for sale were as follows (in thousands):



	December 29, 2017
Cash and cash equivalents	$	6,755
Accounts receivable, net of allowance for doubtful accounts of $0.3 million	47,611
Inventories	50,796
Prepaid expenses and other current assets	1,584
Current assets of discontinued operations held for sale	106,746
Property, plant and equipment, net	135,195
Goodwill	150,368
Other intangible assets, net	57,520
Other noncurrent assets	1,551
Noncurrent assets of discontinued operations held for sale	344,634
Total assets	451,380
Accounts payable and other current liabilities held for sale	47,703
Deferred taxes and other long-term liabilities held for sale	14,966
Total liabilities	62,669
Net assets	$	388,711

(2.) DISCONTINUED OPERATIONS AND DIVESTITURES (Continued)

Income (loss) from discontinued operations, net of taxes, for fiscal years 2018, 2017 and 2016 were as follows (in thousands):



	2018			2017			2016
Sales	$	178,020		$	325,841		$	311,276
Cost of sales	148,357			286,300			270,656
Gross profit	29,663			39,541			40,620
Selling, general and administrative expenses	8,905			18,500			16,847
Research, development and engineering costs	2,352			6,397			7,102
Other operating expenses	1,805			854			1,324
Interest expense	22,833			42,488			42,939
Gain on sale of discontinued operations	(194,965		)	—			—
Other (income) loss, net	420			(1,266		)	(612		)
Income (loss) from discontinued operations before taxes	188,313			(27,432		)	(26,980		)
Provision (benefit) for income taxes	67,382			(7,024		)	(8,063		)
Income (loss) from discontinued operations	$	120,931		$	(20,408	)	$	(18,917	)

Interest expense included in discontinued operations reflects an estimate of interest expense related to the debt that was required to be repaid with the proceeds from the sale of the AS&O Product Line.

Cash flow information from discontinued operations for fiscal years 2018, 2017 and 2016 was as follows (in thousands):



	2018			2017			2016
Cash used in operating activities	$	(12,498	)	$	3,167		$	3,596
Cash provided by (used in) investing activities	577,833			(16,771		)	(17,367		)

Depreciation and amortization	$	7,450		$	21,613		$	17,656
Capital expenditures	3,610			16,844			17,656

Spin-off of Nuvectra Corporation

On March 14, 2016, Integer completed the spin-off of a portion of its former QiG segment through a tax-free distribution of all of the shares of its former QiG Group, LLC subsidiary to the stockholders of Integer on a pro rata basis. Immediately prior to completion of the Spin-off, QiG Group, LLC was converted into a corporation organized under the laws of Delaware and changed its name to Nuvectra Corporation (“Nuvectra”). On March 14, 2016, each of the Company’s stockholders of record as of the close of business on March 7, 2016 (the “Record Date”) received one share of Nuvectra common stock for every three shares of Integer common stock held as of the Record Date. Upon completion of the Spin-off, Nuvectra became an independent publicly traded company whose common stock is listed on the Nasdaq stock exchange under the symbol “NVTR.”

The portion of the former QiG segment spun-off consisted of QiG Group, LLC and its subsidiaries: (i) Algostim, LLC (“Algostim”), (ii) PelviStim LLC (“PelviStim”), and (iii) the Company’s NeuroNexus Technologies (“NeuroNexus”) subsidiary. The operations of Centro de Construcción de Cardioestimuladores del Uruguay (“CCC”) and certain other existing QiG research and development capabilities were retained by the Company and not included as part of the Spin-off. As the Company continues to focus on the design and development of complete medical device systems and components, and more specifically on medical device systems and components in the neuromodulation market, the Spin-off was not considered a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, the Spin-off is not presented as a discontinued operation in the Company’s Consolidated Financial Statements. The results of Nuvectra are included in the Consolidated Statements of Operations through the date of the Spin-off.

In connection with the Spin-off, during the first quarter of 2016, the Company made a cash capital contribution of $75 million to Nuvectra and divested assets of $130.8 million and liabilities of $2.1 million. Nuvectra contributed a pre-tax loss of $5.2 million to the Company’s results of operations for the fiscal year ended December 30, 2016.