

6.	Income Taxes

The Company recognized an income tax benefit of $39.5 million on a loss from continuing operations before income taxes of $10.6 million for the three months ended March 31, 2017 and an income tax benefit of $63.8 million on income from continuing operations before income taxes of $34.7 million for the three months ended March 25, 2016. This resulted in effective tax rates of 372.6% and negative 183.9% for the three months ended March 31, 2017 and March 25, 2016, respectively. The income tax benefit for the three months ended March 31, 2017 is comprised of $35.9 million of current tax expense and $75.4 million of deferred tax benefit. The net deferred tax benefit of $75.4 million includes $102.6 million of deferred tax benefit which is predominantly related to acquired intangible assets offset by $27.2 million of deferred tax expense related to utilization of tax attributes. The income tax benefit for the three months ended March 25, 2016 is comprised of $46.2 million of current tax expense and $110.0 million of deferred tax benefit which is predominantly related to acquired intangible assets.

The effective tax rate for the three months ended March 31, 2017, as compared with the three months ended March 25, 2016 increased by 556.5 percentage points. Included within this net increase was a 562.1 percentage point increase primarily attributable to diminutive loss from continuing operations before taxes for the three months ended March 31, 2017 as compared with the three months ended March 25, 2016. Also within this increase was a 17.2 percentage point increase related to the divestiture of the Intrathecal Therapy Business, which occurred during the three months ended March 31, 2017. The remaining 22.8 percentage point decrease was attributable to changes in operating income which resulted in more income in lower tax rate jurisdictions and less income in the higher tax rate U.S. jurisdiction.

During the three months ended March 31, 2017, the Company recognized an income tax expense of $5.4 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 early adopted ASU 2016-16 in the first quarter of 2017 utilizing the modified retrospective basis adoption method, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period for $75.0 million with an offsetting decrease of $67.2 million to other assets and a $7.8 million decrease to prepaid expenses on its unaudited condensed consolidated balance sheets. The prior periods were not restated.

The Company adopted ASU 2016-09 in the first quarter of 2017 and recorded an adjustment to retained earnings of $2.9 million to recognize net operating loss carryforwards, net of a valuation allowance, attributable to excess tax benefits on stock compensation that had not been previously recognized to additional paid-in capital.

The Company has refined its acquisition accounting estimate associated with the measurement of its acquired Stratatech net deferred tax liabilities, resulting in a decrease to the acquired net deferred tax liabilities from $24.3 million to $22.1 million.

The divestiture of the Intrathecal Therapy Business was completed on March 17, 2017. This divestiture resulted in a net deferred tax liability increase of $41.2 million. Significant components of this increase include an increase of $56.5 million of deferred tax liability associated with future consideration, a decrease of $5.2 million of deferred tax asset associated with net operating losses, a decrease of $17.9 million of deferred tax liability associated with intangibles, and an increase of $2.6 million of deferred tax asset associated with committed product development.

The Company's unrecognized tax benefits, excluding interest, totaled $120.1 million at March 31, 2017 and $118.7 million at December 30, 2016. The net increase of $1.4 million primarily resulted from a net increase to current year positions of $2.5 million, and net decreases from prior period tax positions of $1.1 million. If favorably settled, $118.3 million of unrecognized tax benefits at March 31, 2017 would favorably impact the effective tax rate. The total amount of accrued interest related to these obligations was $7.6 million at March 31, 2017 and $7.1 million at December 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 and the expiration of various statutes of limitation, that the unrecognized tax benefits will decrease by up to $12.3 million and the amount of related interest and penalties will decrease by up to $5.1 million.