Income Taxes:

The components of our provision (benefit) for income taxes on income from continuing operations for the years ended December 31, 2014 (Successor) and December 31, 2013 (Successor), the successor period from September 29, 2012 through December 31, 2012, the predecessor period from January 1, 2012 through September 28, 2012 are as follows ($ amounts in thousands):



	For the Year Ended			For the Year Ended			For the period
	December 31, 2014			December 31, 2013			September 29, 2012 to December 31, 2012			January 1, 2012 to September 28, 2012
	(Successor)			(Successor)			(Successor)			(Predecessor)
Current income tax provision (benefit):
Federal		$53,532			$20,200			$3,531			$21,878
State	917			187			176			(5,284		)
Foreign	1,300			973			230			833
	55,749			21,360			3,937			17,427
Deferred income tax (benefit) provision:
Federal	(127,160		)	(80,691		)	(20,660		)	12,982
State	(1,582		)	(1,851		)	(930		)	(829		)
Foreign	—			—			—			(50		)
	(128,742		)	(82,542		)	(21,590		)	12,103
		($72,993	)		($61,182	)		($17,653	)		$29,530

Deferred tax assets and (liabilities) as of December 31, 2014, and 2013 are as follows ($ amounts in thousands):



	December 31, 2014			December 31, 2013
	(Successor)			(Successor)
Deferred tax assets:
Accounts receivable		$61,580			$35,298
Inventories	15,945			12,670
Litigation settlements and contingencies	—			12,241
Accrued and prepaid expenses	8,506			8,219
Net operating losses and other carryforwards	19,475			15,015
Stock options and restricted shares	7,221			4,097
Other	3,782			4,790
	116,509			92,330
Less valuation allowance	(19,381		)	(12,322		)
Total deferred tax assets	97,128			80,008

Deferred tax liabilities:
Fixed assets	(21,358		)	(20,621		)
Deferred financing cost	(13,823		)	(20,842		)
Intangible assets	(240,675		)	(275,399		)
Other	(1,527		)	(1,376		)
Total deferred tax liabilities	(277,383		)	(318,238		)

Net deferred tax liability		($180,255	)		($238,230	)

Management believes it is more likely than not that $97.1 million of the deferred tax asset balance of $116.5 million as of December 31, 2014 will be realized.

We have gross net operating loss (“NOL”) carryforwards at December 31, 2014 of approximately $242.7 million for state income tax purposes. State NOL carryforwards will begin expiring in 2015. A gross valuation allowance on the deferred tax assets at December 31, 2014, primarily relates to certain state NOL’s and credit and capital loss carryforwards of approximately $252.0 million which represents $19.4 million of net valuation allowance. This valuation allowance has been established due to the uncertainty of realizing those deferred tax assets in the future. This valuation allowance increased in 2014 by $7.1 million, primarily due to an increase of certain state NOL’s principally driven by our debt service and acquisition costs.

The table below provides reconciliation between the statutory federal income tax rate and the effective rate of income tax expense for each of the periods shown as follows. For periods with a loss before benefit for income taxes, favorable tax items result in an increase in the effective tax rate, while unfavorable tax items result in a decrease in the effective tax rate. For periods with income before provision for income taxes, favorable tax items result in an decrease in the effective tax rate, while, unfavorable tax items result in a increase in the effective tax rate.



	For the Year Ended	For the Year Ended	For the period
	December 31, 2014	December 31, 2013	September 29, 2012 to December 31, 2012	January 1, 2012 to September 28, 2012
	(Successor)	(Successor)	(Successor)	(Predecessor)
Federal statutory tax rate	35%	35%	35%	35%
State tax – net of federal benefit	1	1	1	2
Domestic manufacturing deduction	3	—	—	—
Tax contingencies	—	—	(1)	(6)
Non-deductible legal settlements	1	—	—	17
Non-deductible annual pharmaceutical manufacturers' fee	(1)	(2)	—	—
Non-deductible transaction costs	—	—	—	8
R&D Credit	2	2	—	—
Other	—	1	—	2
Effective tax rate	41%	37%	35%	58%

Tax Contingencies

Significant judgment is required in evaluating our tax positions and determining its provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the outcome of tax audits. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate. Accruals for tax contingencies are provided for in accordance with the requirements of ASC 740-10. We reflect interest and penalties attributable to income taxes, to the extent they arise, as a component of its income tax provision or benefit.

At December 31, 2014, the amount of gross unrecognized tax benefits (excluding the federal benefit received from state positions) was $14.5 million. The total amount of accrued interest and penalties resulting from such unrecognized tax benefits was $2.1 million at December 31, 2014 and $2.5 million at December 31, 2013. During the year ended December 31, 2014, the year ended December 31, 2013, the period from September 29, 2012 to December 31, 2012 (Successor), and the period from January 1, 2012 to September 28, 2012 (Predecessor), we recognized approximately $0.6 million, $0.5 million, $0.04 million, and $0.4 million, respectively, in interest and penalties.

The total amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate was $13.6 million and $13.3 million at December 31, 2014 and 2013, respectively.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for the years ended December 31, 2014 (Successor) and December 31, 2013 (Successor), the successor period from September 29, 2012 through December 31, 2012, the predecessor period from January 1, 2012 through September 28, 2012 are as follows ($ amounts in thousands):



	For the Year Ended			For the Year Ended			For the period
	December 31, 2014			December 31, 2013			September 29, 2012 to December 31, 2012		January 1, 2012 to September 28, 2012
	(Successor)			(Successor)			(Successor)		(Predecessor)
Balance at the beginning of period		$17,981			$12,538			$12,119		$14,409
Additions based on tax positions related to the current year	2,786			2,577			419		2,337
Additions for tax positions of prior years	1,070			3,708			—		634
Reductions for tax positions of prior years	(6,484		)	(842		)	—		(5,261		)
Reductions due to lapse of applicable statute of limitations	—			—			—		—
Settlements paid	(858		)	—			—		—
Balance at the end of the period		$14,495			$17,981			$12,538		$12,119

We believe it is reasonably possible that approximately $2.2 million of our current unrecognized tax positions may be recognized within the next twelve months as a result of settlements or a lapse of the statute of limitations.

For periods prior to 2012, the Company is no longer subject to IRS audit. We are currently under audit in several state jurisdictions for the years 2005 through 2013. In most other state jurisdictions, we are no longer subject to examination by tax authorities for years prior to 2009.