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Operating Income Gross profit. Gross profit for fiscal 2016 increased $232.1 million, or 14.3%, to $1,855.0 million, compared with $1,622.9 million in fiscal 2015. The increase in gross profit primarily resulted from a shift in the mix of net sales toward the higher-margin Specialty Brands segment, due to the inclusion of Inomax and Therakos immunotherapy. These increases were partially offset by a $148.8 million increase in amortization, primarily associated with Inomax and Therakos immunotherapy intangibles, and a $178.4 million decrease in gross profit from the Specialty Generics segment. During fiscal 2016 and 2015, gross profit included $24.3 million and $44.1 million, respectively, of expense associated with fair value adjustments of acquired inventory. Overall, gross profit margin was 54.9% during fiscal 2016, compared with 55.5% during fiscal 2015. Selling, general and administrative expenses. SG&A expenses for fiscal 2016 were $925.3 million, compared with $1,023.8 million for fiscal 2015, a decrease of $98.5 million, or 9.6%. The decrease was primarily attributable to fiscal 2015 charges of $73.0 million of legal settlements (including Questcor and Synacthen related litigation), $80.6 million of share-based compensation associated with Questcor equity awards that were converted into Mallinckrodt awards at the date of the Questcor Acquisition, that subsequently vested in September 2015, $53.4 million of transaction costs, primarily related to the Ikaria Acquisition, and a $13.3 million environmental charge. Fiscal 2016 included $14.5 million of legal reserve charges. The remaining change resulted from the addition of $65.8 million of SG&A expenses associated with the Ikaria and Therakos acquisitions and higher stock compensation expense. SG&A expenses were 27.4% of net sales for fiscal 2016 and 35.0% of net sales for fiscal 2015. Research and development expenses. R&D expenses increased $58.9 million, or 29.0%, to $262.2 million in fiscal 2016, compared with $203.3 million in fiscal 2015. Current R&D activities focus on performing clinical studies and publishing clinical and non-clinical experiences and evidence that support health economic and patient outcomes. As a percentage of our net sales, R&D expenses were 7.8% and 7.0% in fiscal 2016 and 2015, respectively. Restructuring and related charges, net. During fiscal 2016, we recorded $38.2 million of restructuring and related charges, net, of which $4.9 million related to accelerated depreciation and was included in cost of sales. The remaining $33.3 million primarily related to employee severance and benefits across the Specialty Brands segment and corporate functions. During fiscal 2015, we recorded restructuring and related charges, net, of $45.3 million, of which $0.3 million related to accelerated depreciation and was included in cost of sales. The remaining $45.0 million primarily related to $9.8 million of accelerated share-based compensation associated with Questcor unvested equity awards that were converted into Mallinckrodt awards at the date of the Questcor Acquisition and employee severance and benefits within the Specialty Brands and Specialty Generics segments. Non-restructuring impairment charges. Non-restructuring impairment charges were $16.9 million for fiscal 2016. The impairments related to in-process research and development intangible assets associated with the CNS Therapeutics acquisition in fiscal 2013. The impairments resulted from delays in anticipated FDA approval, higher than expected development costs and lower than previously anticipated commercial opportunities. Non-Operating Items Interest expense and interest income. During fiscal 2016 and fiscal 2015, net interest expense was $383.3 million and $254.6 million, respectively. The increase in net interest expense was primarily related to the issuance of approximately $1.4 billion of debt associated with the Ikaria Acquisition, approximately $1.3 billion of debt associated with the Therakos Acquisition and a $37.3 million increase in interest accrued on deferred tax liabilities associated with outstanding installment notes. Interest expense during fiscal 2016 and 2015 included $26.4 million and $23.4 million, respectively, of non-cash interest expense. Other income, net. During fiscal 2016 and 2015, we recorded other loss of $0.6 million and income of $8.1 million, respectively, which represents miscellaneous items, including gains and losses on foreign currency intercompany financing transactions and related hedging instruments. Provision for (benefit from) income taxes. In fiscal 2016, we recognized an income tax benefit of $255.6 million on income from continuing operations before income taxes of $233.4 million. In fiscal 2015, income tax benefit was $129.3 million on income from continuing operations before income taxes of $107.3 million. Our effective tax rate was negative 109.5% and negative 120.5% for fiscal 2016 and 2015, respectively. Our effective tax rate for fiscal 2016 was impacted by receiving $7.6 million of tax benefit associated with $40.4 million of restructuring costs, $6.2 million of tax benefit associated with $16.9 million of impairments, $31.3 million of tax benefit associated with accrued income tax liabilities and uncertain tax positions, $33.7 million of tax benefit associated with primarily U.K. and U.S. tax credits, and $249.3 million of tax benefit associated with the rate difference between U.K. and non-U.K. jurisdictions. Our effective tax rate for fiscal 2015 was impacted by receiving a $10.4 million tax benefit on $53.4 million of transaction costs, $15.5 million of tax benefit associated with $45.3 million of restructuring costs, $6.7 million of tax benefit associated with accrued income tax liabilities and uncertain tax positions, $8.1 million of tax benefit associated with U.S. credits, and $152.9 million of tax benefit associated with the rate difference between U.K. and nonU.K. jurisdictions. 48 Income (loss) from discontinued operations, net of income taxes. We record