

6.	Income Taxes

The Company recognized an income tax benefit of $9.3 million on income from continuing operations before income taxes of $82.8 million for the three months ended December 26, 2014 and income tax expense of $16.6 million on income from continuing operations before income taxes of $63.0 million for the three months ended December 27, 2013. This resulted in effective tax rates of negative 11.2% and 26.3% for the three months ended December 26, 2014 and December 27, 2013, respectively.

The decrease in the effective tax rate for the three months ended December 26, 2014, as compared with the three months ended December 27, 2013, is predominately attributable to the deferred tax benefit of the amortization of acquired intangible assets and an increase to the rate difference between non-U.S. and U.S. tax jurisdictions following recent acquisitions, which includes the tax impacts of acquisition financing and the integration of the acquired intangible property into the Company's legal entity structure. As a part of the Cadence integration, the Company entered into an internal installment sale transaction during the year ended September 26, 2014. As a part of the Questcor integration, the Company entered into an internal installment sale transaction during the three months ended December 26, 2014. The Questcor internal installment sale transaction resulted in a decrease of $1,488.7 million to the deferred tax liability associated with the Acthar intangible asset, a $1,515.9 million increase to the deferred tax liability associated with an installment sale note receivable, a $25.3 million increase to deferred tax charge and a $1.9 million increase to prepaid taxes.

The Company has refined its acquisition accounting estimate associated with the measurement of its acquired Questcor net deferred tax liabilities, resulting in an increase to the acquired net deferred tax liabilities from $1,900.7 million to $1,914.5 million. The adjustment predominately relates to the ongoing evaluation of the U.S. state taxation of the acquired business.

Income taxes included within prepaid expenses and other current assets have decreased by $54.3 million, predominately due to a reduction to the $60.0 million fiscal year 2014 tax receivable associated with the Questcor Acquisition having been realized through a cash tax refund of $20.0 million, and the remainder having been realized to satisfy operational income tax obligations attributable to the three months ended December 26, 2014. Similarly, current deferred tax assets have decreased by $18.8 million, predominately attributable to the utilization of U.S. net operating losses from the fiscal year ended September 26, 2014.

The Company's unrecognized tax benefits, excluding interest, totaled $83.9 million at December 26, 2014 and $82.0 million at September 26, 2014. The net increase of $1.9 million primarily resulted from increases to prior period tax positions of $0.3 million and current year activity of $3.3 million, partially offset by reductions to unrecognized tax benefits as a result of settlements of $0.9 million and the lapse of the applicable statutes of limitation of $0.8 million. If favorably settled, the $83.9 million of unrecognized tax benefits at December 26, 2014 would benefit the effective tax rate. The total amount of accrued interest related to these obligations was $44.3 million at December 26, 2014 and $45.1 million at September 26, 2014.

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 $29.1 million and the amount of interest and penalties will decrease by up to $17.0 million.