

6.	Income Taxes

The Company recognized an income tax benefit of $121.7 million on a loss from continuing operations before income taxes of $298.5 million for the three months ended December 30, 2016 and an income tax benefit of $37.3 million on income from continuing operations before income taxes of $66.5 million for the three months ended December 25, 2015.This resulted in effective tax rates of 40.8% and negative 56.1% for the three months ended December 30, 2016 and December 25, 2015, respectively.

The effective tax rate for the three months ended December 30, 2016 was impacted by receiving $12.7 million of tax benefit associated with an adjustment to the Company's wholly owned partnership investment, $123.0 million of tax benefit associated with the rate difference between U.K. and non-U.K. jurisdictions, and $75.3 million of permanently non-deductible amounts associated with a goodwill impairment. The effective tax rate for the three months ended December 25, 2015 was impacted by $3.3 million of tax benefit associated with accrued income tax liabilities and uncertain tax positions, $3.6 million of tax benefit associated with U.S. tax credits, and $45.1 million of tax benefit associated with the rate difference between U.K. and non-U.K. jurisdictions.

The rate difference between U.K. and non-U.K jurisdictions increased from $45.1 million of tax benefit for the three months ended December 25, 2015 to an $123.0 million tax benefit for the three months ended December 30, 2016. This increase was predominately related to recent acquisitions, which resulted in more income in lower tax rate jurisdictions and less income in the higher tax rate U.S. jurisdiction relative to income in all jurisdictions. The change in the lower tax rate jurisdictions was primarily attributable to increased operating income. The change in the U.S. jurisdiction was primarily attributable to decreased operating income and the cost of financing recent acquisitions. The $77.9 million increase in the tax benefit included increases of $59.9 million of tax benefit attributed to changes in operating income and $18.0 million of tax benefit related to acquisition and other non-acquisition related items including the settlement with governmental authorities.

Non-current deferred tax liability decreased from $2,581.4 million at September 30, 2016 to $2,398.1 million at December 30, 2016, primarily due to $84.0 million of decreases associated with the payment of internal installment sale obligations, $51.6 million of decreases associated with net operating losses, $36.6 million of decreases related to the settlement with governmental authorities and $13.7 million of decreases associated with the amortization of intangibles partially offset by $2.6 million of increases related to normal operating activity.

At December 30, 2016, the Company had $1,074.7 million of net operating loss carryforwards in certain non-U.K. jurisdictions, of which $954.2 million have no expiration and the remaining $120.5 million will expire in future years through 2036. The Company had $89.6 million of U.K. net operating loss carryforwards at December 30, 2016, which have no expiration date.

The deferred tax asset valuation allowances of $1,398.3 million and $564.9 million at December 30, 2016 and September 30, 2016, respectively, relate principally to the uncertainty of the utilization of certain deferred tax assets, primarily non-U.K. net operating losses and intangible assets. The Company believes that it will generate sufficient future taxable income to realize the tax benefits related to the remaining net deferred tax assets.

The increase in non-U.K. net operating losses and valuation allowances are predominately related to statutory deductions associated with the impairment of the Generics operating segment and internal transactions.

During the three months ended December 30, 2016, the Company recognized an income tax expense of $15.3 million associated with the Nuclear Imaging business, as discussed in Note 3, in discontinued operations within the unaudited condensed consolidated statement of income.

The Company's unrecognized tax benefits, excluding interest, totaled $118.7 million at December 30, 2016 and $114.8 million at September 30, 2016. The net increase of $3.9 million primarily resulted from a net increase to current year positions of $5.0 million, and net decreases from prior period tax positions of $1.1 million. If favorably settled, $116.9 million of unrecognized tax benefits at December 30, 2016 would favorably impact the effective tax rate. The total amount of accrued interest related to these obligations was $7.1 million at December 30, 2016 and $7.2 million at September 30, 2016.

It is reasonably possible that within the next twelve months, as a result of the resolution of various U.K. and non-U.K. examinations, appeals and litigation, additions related to prior period tax positions and the expiration of various statutes of limitation, that the unrecognized tax benefits will decrease by up to $13.5 million and the amount of related interest and penalties will decrease by up to $4.9 million.