On March 1, 2022, we completed the previously announced separation of our spine and dental businesses through the distribution of 80.3% of the outstanding shares of common stock of ZimVie to our stockholders at the close of business on February 15, 2022 (the “Record Date”). The distribution was made in the amount of one share of ZimVie common stock for every ten shares of our common stock owned by our stockholders at the close of business on the Record Date. Fractional shares of ZimVie common stock were not issued but instead were aggregated and sold in the open market with the proceeds being distributed pro rata in lieu of such fractional shares.

In the fourth quarter of 2021, ZimVie entered into a credit agreement with a financial institution providing for revolving loans of up to $175.0 million and term loan borrowings of up to $595.0 million. On February 28, 2022, prior to separation, ZimVie borrowed the entire $595.0 million available under the term loan. Approximately $540.6 million of this amount was paid by ZimVie to Zimmer Biomet in the form of a dividend at separation which is included in our cash flows from financing activities in the condensed consolidated statements of cash flows. We used proceeds from the dividend, along with cash on hand and proceeds from a draw on our revolving credit facility, to repay our 3.150% Senior Notes due 2022 which had an outstanding principal balance of $750.0 million.

Also, in connection with the spinoff, we entered into definitive agreements with ZimVie that, among other things, set forth the terms and conditions of the separation and distribution. The agreements set forth the principles and actions taken or to be taken in connection with the separation and the distribution and provide a framework for our relationship with ZimVie from and after the separation and the distribution. The agreements include a Separation and Distribution Agreement, a Tax Matters Agreement, an Employee Matters Agreement, a Transition Services Agreement (the “TSA”), an Intellectual Property Matters Agreement, a Stockholder and Registration Rights Agreement, a Transition Manufacturing and Supply Agreement (the “TMA”), a Reverse

Transition Manufacturing and Supply Agreement (the “Reverse TMA”) and a Transitional Trademark License Agreement, each dated as of March 1, 2022.

Pursuant to the TSA, both we and ZimVie agree to provide certain services to each other, on an interim, transitional basis from and after the separation and the distribution. The services include certain regulatory services, commercial services, operational services, tax services, clinical affairs services, information technology services, finance and accounting services and human resource and employee benefits services. The remuneration to be paid for such services is generally intended to allow the company providing the services to recover all of its costs and expenses of providing such services. The TSA will terminate on the expiration of the term of the last service provided thereunder, which will generally be no later than March 31, 2025. However, we expect most TSA services will be completed by the end of 2023.

Pursuant to the TMA and the Reverse TMA, Zimmer Biomet or ZimVie, as the case may be, will manufacture or cause to be manufactured certain products for the other party, on an interim, transitional basis. Pursuant to such agreements, Zimmer Biomet or ZimVie, as the case may be, will be required to purchase certain minimum amounts of products from the other party. Each of the TMA and the Reverse TMA has a two-year term, with a one-year extension possible upon mutual agreement of the parties.

We recognize any gains or losses from the TSA and TMA agreements in the Acquisition, integration, divestiture and related line item in our condensed consolidated statements of earnings. Amounts included in the condensed consolidated statements of earnings related to these agreements for the three and nine-month periods ended September 30, 2022 and 2021 were immaterial. Amounts due to and due from ZimVie were also immaterial as of September 30, 2022.

We retained approximately 5.1 million common shares of ZimVie, representing approximately 19.7 percent of ZimVie's outstanding common shares on the separation date. Given our inability to exert significant influence over ZimVie, we recognize this investment at fair value in prepaid expenses and other current assets on our condensed consolidated balance sheet. We intend to dispose of these shares by the end of the first quarter of 2023. Changes to the fair value of the investment is recognized in non-operating other (expense) income, net.

On August 31, 2022, we borrowed an aggregate principal amount of $83.0 million under a short-term credit agreement (the "Short-Term Term Loan”) with a third-party financial institution, the proceeds of which will be used to repay certain of our existing indebtedness. On September 1, 2022, we entered into a forward exchange agreement and pledge agreement (collectively the “Forward Exchange Agreement”) with the same financial institution to deliver to them our 5.1 million shares of ZimVie common stock in the first quarter of 2023. It is likely that the financial institution has entered into hedging transactions, which may include selling the ZimVie shares in the market, in anticipation of receiving the shares in the first quarter of 2023. We have pledged our 5.1 million shares of ZimVie common stock to the financial institution as collateral for our obligations under the Short-Term Term Loan and the Forward Exchange Agreement.

Upon settlement of the Short-Term Term Loan, which is expected to be in the first quarter of 2023, we will transfer our ZimVie common shares to the financial institution counterparty to settle the Forward Exchange Agreement and we will either receive or pay an amount primarily depending upon the difference between the average of the daily volume-weighted average price of the ZimVie shares over the outstanding term of the Forward Exchange Agreement and the principal amount of $83.0 million.

The Forward Exchange Agreement is accounted for at fair value, with changes in fair value recognized in non-operating other (expense) income, net. The most significant input into the valuation of the Forward Exchange Agreement is the price of ZimVie shares. The fair value of the Forward Exchange Agreement at September 30, 2022 was $3.0 million and is included within prepaid expenses and other current assets on our condensed consolidated balance sheet. For the three and nine-month periods ended September 30, 2022, an unrealized gain of $3.0 million was recorded in non-operating other (expense) income, net in our condensed consolidated statements of earnings.

As discussed in Note 1, Basis of Presentation, the results of our spine and dental businesses have been reflected as discontinued operations in the current year period through the date of the spinoff and in the prior year period. Details of earnings (loss) from discontinued operations included in our condensed consolidated statements of earnings are as follows (in millions):


	Three Months Ended			Nine Months Ended
	September 30,			September 30,
	2021			2022			2021
Net Sales	$	238.5		$	147.8		$	748.1
Cost of products sold, excluding intangible asset amortization		90.1			53.5			255.6
Intangible asset amortization		21.5			14.0			65.0
Research and development		15.0			10.5			43.9
Selling, general and administrative		118.1			89.4			351.7
Restructuring and other cost reduction initiatives		0.9			0.4			2.3
Acquisition, integration, divestiture and related		20.9			40.9			54.9
Other expense, net		0.1			0.3			0.4
Loss from discontinued operations before income taxes		(28.1	)		(61.2	)		(25.7	)
Benefit for income taxes from discontinued operations		(11.5	)		(2.4	)		(11.5	)
Loss from discontinued operations, net of tax	$	(16.6	)	$	(58.8	)	$	(14.2	)

Details of assets and liabilities of discontinued operations are as follows (in millions):


	December 31,
	2021
Cash and cash equivalents	$	100.4
Accounts receivable, less allowance for credit losses		145.3
Inventories		246.5
Prepaid expenses and other current assets		9.4
Total Current Assets of Discontinued Operations	$	501.6
Property, plant and equipment, net	$	179.9
Goodwill		272.8
Intangible assets, net		766.2
Other assets		57.9
Total Noncurrent Assets of Discontinued Operations	$	1,276.8
Accounts payable	$	44.7
Income taxes payable		3.1
Other current liabilities		129.4
Total Current Liabilities of Discontinued Operations	$	177.2
Deferred income taxes, net	$	107.1
Other long-term liabilities		61.3
Total Noncurrent Liabilities of Discontinued Operations	$	168.4

In a pro rata spinoff of consolidated subsidiaries, the distribution of the assets and liabilities are recognized through equity instead of net earnings. Accordingly, we have recognized the distribution of net assets to ZimVie in retained earnings. Additionally, the dividend we received from ZimVie at the separation was also recognized in retained earnings.

During the three-month period ended September 30, 2022, we recorded an out-of-period adjustment related to an accounts receivable balance from ZimVie that we continued to recognize after the separation date for which we should not have expected to receive payment. As a result, our Accounts receivable, less allowance for credit losses and our Retained earnings balances were overstated by $10.4 million in our condensed consolidated balance sheets as of March 31, 2022 and June 30, 2022. This adjustment did not have any effect on our condensed consolidated statements of earnings, condensed consolidated statements of comprehensive income or condensed consolidated statements of cash flows. We concluded this adjustment was not material to the interim condensed consolidated financial statements (unaudited) for either the current or prior periods.