The following management's discussion and analysis of financial condition and results of operations describes the principal factors affecting the results of our operations, financial condition, and changes in financial condition for the three and nine month periods ended
September 30, 2013. This discussion should be read in conjunction with the accompanying unaudited financial statements, our Annual Report on Form 10-K for the year ended December 31, 2012, which includes additional information about our critical accounting policies and practices and risk factors, and Note 1 of Part I of this Quarterly Report and Part II, Item 1A of this Quarterly Report. On June 19, 2013, we entered into a definitive agreement with MicroPort Scientific Corporation (MicroPort) under which we will sell our OrthoRecon business. The OrthoRecon business consists of hip and knee implant products. We determined that this agreement meets the criteria for classification as discontinued operations. As such, the financial results of our OrthoRecon business have been reflected within discontinued operations for all periods presented and the discussion below is on a continuing operations basis. Executive Overview Company Description. We are a global orthopaedic company that provides solutions that enable clinicians to alleviate pain and restore their patients' lifestyles. We are a recognized leader of surgical solutions for the foot and ankle market and market our products in over 60 countries worldwide. Our business includes products that are used primarily in foot and ankle repair, upper extremity products, and biologics products, which are used to replace damaged or diseased bone, to stimulate bone growth and to provide other biological solutions for surgeons and their patients. Extremity hardware includes implants and other devices to replace or reconstruct injured or diseased joints and bones of the foot, ankle, hand, wrist, elbow and shoulder, which we generally refer to as either foot and ankle or upper extremity products. Our extensive foot and ankle product portfolio, our approximately 200 specialized foot and ankle sales representatives, and our increasing level of training of foot and ankle surgeons has resulted in us being a recognized leader in the foot and ankle market. Our corporate headquarters and U.S. operations are currently located in Arlington, Tennessee, where we conduct research and development, sales and marketing administration, manufacturing, warehousing and administrative activities. Following the closing of the sale of our OrthoRecon business, we intend to move our corporate headquarters to Memphis, Tennessee. Outside the U.S., we have distribution and administrative facilities in Amsterdam, the Netherlands, and sales and distribution offices in Canada, Japanand throughout Europe. Principal Products. We specialize in extremity and biologic products used by extremity focused surgeon specialists for the reconstruction, trauma, and arthroscopy markets. Our biologics sales encompass a broad portfolio of products designed to stimulate and augment the natural regenerative capabilities of the human body. Significant Quarterly Business Developments. On August 7, 2013, we received a not approvable letter from the Food & Drug Administration(FDA) in response to our Pre-Market Approval (PMA) application for AugmentŪ Bone Graft for use as an alternative to autograft in hindfoot and ankle fusion procedures. We have filed an appeal with the FDAregarding its decision. On October 31, 2013the FDAnotified us it has elected to convene a Dispute Resolution Panelto consider the scientific issues in dispute before making a decision on our appeal. While we believe our appeal has strong merits, we were required to evaluate assets associated with the BioMimetic acquisition for impairment. As a result, we recorded charges totaling $207.2 millionof impairment and other charges related to assets acquired from BioMimetic, including $1.0 millionof charges recorded within Cost of Sales to write down inventory to its estimated net realizable value. In addition, due to the significant decline in market value of the Contingent Value Rights (CVRs) issued as contingent consideration for the acquired business, we have recognized an unrealized gain of $66.1 millionfrom the decreased value of the CVRs that are recorded as a liability. See Note 1, Note 9 and Note 12 to our condensed consolidated financial statements for further discussion of these charges. On October 16, 2013, we entered into a definitive agreement to acquire Biotech International(Biotech), a leading privately held French orthopaedic extremities company. The transaction will significantly expand our direct sales channel in Franceand international distribution network, and add Biotech's complementary extremity product portfolio to further accelerate global growth opportunities in our Extremities business. We will acquire 100% of Biotech's outstanding equity on a fully diluted basis at a total offer price of up to $80 million, comprised of upfront payments of approximately $55 millionin cash, subject to certain adjustment set forth in the definitive agreement, and the issuance of common stock having a value of $20 million, and up to an additional $5 millionin cash contingent upon the achievement of certain revenue milestones in 2014 and 2015. We expect the transaction to close in the fourth quarter of 2013.