

6.	Income Taxes

The Company recognized an income tax benefit of $2.4 million on a $26.7 million loss from continuing operations before income taxes for the three months ended June 27, 2014 and income tax expense of $19.8 million on a $7.9 million loss from continuing operations before income taxes for the three months ended June 28, 2013. The Company recognized an income tax benefit of $6.1 million on $27.7 million of income from continuing operations before income taxes the nine months ended June 27, 2014 and income tax expense of $55.9 million on $82.5 million of income from continuing operations before income taxes for the nine months ended June 28, 2013.

The effective tax rates were impacted by the Cadence Acquisition, Questcor Merger and the Separation. The rates for the three and nine months ended June 27, 2014 are impacted by the inclusion of an $11.2 million and $32.3 million, respectively, tax benefit associated with the Cadence Acquisition, including financing and acquisition costs and amortization of the acquired intangible asset. The rates for the three and nine months ended June 27, 2014 are also impacted by recognizing no tax benefit associated with $16.6 million and $17.5 million, respectively, of Questcor Merger transaction costs. With regard to the Separation, during the three months ended June 27, 2014, the Company received a $0.4 million tax benefit on $1.8 million of separation costs compared with a $1.7 million tax benefit on $44.2 million of separation costs for the three months ended June 28, 2013. During the nine months ended June 27, 2014, the Company received a $1.5 million tax benefit on $6.6 million of separation costs compared with a $3.0 million tax benefit on $70.6 million of separation costs for the nine months ended June 28, 2013. These impacts on the effective tax rate for the three and nine months ended June 27, 2014 were magnified by the level of income (loss) from continuing operations before income taxes. Furthermore, the Company's effective tax rate for the three and nine months ended June 28, 2013 reflected the business as historically managed by Covidien, rather than as an independent, publicly-traded company.

The acquisition of Cadence resulted in a preliminary net deferred tax liability increase of $296.4 million. Significant components of this increase include $499.6 million of deferred tax liability associated with the Ofirmev intangible asset, $196.2 million of deferred tax asset associated with federal and state net operating losses, $5.8 million of deferred tax assets associated with federal and state tax credits, and a $7.3 million valuation allowance related to the uncertainty of the utilization of certain deferred tax assets.

The Company's unrecognized tax benefits, excluding interest, totaled $111.2 million at June 27, 2014 and $100.1 million at September 27, 2013. The net increase of $11.1 million primarily resulted from net increases to prior period tax positions of $20.4 million and current year activity of $0.7 million, partially offset by reductions to unrecognized tax benefits as a result of settlements of $0.2 million and the lapse of the applicable statutes of limitation of $9.8 million. Included within the $111.2 million of total unrecognized tax benefits at June 27, 2014, there are $96.6 million of unrecognized tax benefits which if favorably settled would benefit the effective tax rate. The total amount of accrued interest related to these obligations was $54.8 million at June 27, 2014 and $62.1 million at September 27, 2013. During the three months ending June 27, 2014 the Company made a $35.9 million advanced payment to the Internal Revenue Service ("IRS") in connection with the proposed settlement of certain tax matters for 2005 through 2007. This payment was comprised of $27.3 million of tax and $8.6 million of interest. The Company does not yet consider the unrecognized tax benefits associated with the proposed settlement as being effectively settled.

It is reasonably possible that within the next twelve months, as a result of the resolution of various federal, state and foreign examinations and appeals and the expiration of various statutes of limitation, the unrecognized tax benefits will decrease by up to $56.1 million and the amount of interest and penalties will decrease by up to $24.6 million.