Merger-Related Charges. Costs of effecting mergers and subsequently integrating the operations of the various merged companies are recorded as merger-related costs when incurred. The merger-related costs are primarily a result of the merger transactions with ALP, Allegiance and Scherer. 

During the fiscal years presented in the table herein, the Company incurred direct transaction costs related to its merger transactions. These expenses primarily include investment banking, legal, accounting and other pr ofes- sional fees associated with the r espective merger transac- tions. In addition, the Company incur red employee-related costs, which consist primarily of severance and transaction/ stay bonuses as a result of the ALP, Allegiance and Scherer merger transactions. Partially offsetting the transaction and employee-related costs recorded during the fiscal year ended June 30, 2000 was a $10.3 million cr edit to adjust the estimated transaction and employee-r elated costs previously recorded in connection with the Allegiance merger transaction. Actual billings and employee-r elated costs were less than the amounts originally anticipated, resulting in a reduction of the merger-related costs. Exit costs relate primarily to costs associated with lease ter mi- nations and moving expenses as a dir ect result of the merger transactions with ALP, Allegiance and Scherer. Other integration costs include charges related to integrat- ing the operations of previous merger transactions. 

The Company recorded charges of $9.6 million and $26.7 million during the fiscal years ended June 30, 2000 and 1999, respectively, associated with the busi- ness restructuring as a result of the Company’s merger transaction with Scherer. As part of the business restruc- turing, the Company is closing cer tain facilities. In con- nection with such closings, the Company has incur red employee-related costs, asset impairment charges and exit costs related to the termination of contracts and lease agreements. 

Charges of $4.0 million related to the write-down of impaired inventory associated with the merger transac- tion with Owen Healthcare, Inc. (“Owen”) were recorded during the fiscal year ended June 30, 1999. Also, during fiscal 1999, the Company recorded $1.1 million related to severance costs for a r estructuring associated with the change in management that resulted from the merger transaction with Owen. Partially offsetting the total merger- related charges for fiscal 1999 was a cr edit recorded to adjust the estimated transaction and ter mination costs previously recorded in connection with the canceled merger transaction with Bergen Brunswig Corporation (“Bergen”) (see Note 15). The actual billings for ser vices provided by third parties engaged by the Company wer e less than the estimate, resulting in a reduction of the merger-related costs. 

Other Special Items. During fiscal 1998, the Company recorded a special charge of $8.6 million ($5.2 million, net of tax) related to the rationalization of its phar maceu- tical distribution operations. Approximately $6.1 million related to asset impairments and lease exit costs r esulting primarily from the Company’s decision to accelerate the consolidation of a number of distribution facilities and the relocation to more modern facilities for certain others. The remaining amount related to employee severance costs, including approximately $2.0 million incurred in connection with the final settlement of a labor dispute with former employees of the Company’s Boston pharma- ceutical distribution facility, resulting in termination of the union relationship. 

During fiscal 1998, Scherer finalized part of its long- term tax planning strategy by conver ting, with its joint venture partner, the legal ownership structure of Scherer’s 51% owned subsidiary in Germany from a corporation to a partnership. As a result of this change in tax status, the Company’s tax basis in the Ger man subsidiary was adjusted, resulting in a one-time tax r efund of approxi- mately $4.6 million, as well as a r eduction in cash taxes to be paid in the cur rent and future years. Combined, these factors resulted in a one-time reduction of fiscal 1998 income tax expense by appr oximately $11.7 million. 

Pro Forma Impact. Since April 1998, ALP has been organized as an S-Corporation for tax purposes. Accor d- ingly, ALP was not subject to federal income tax fr om April 1998 up to the date of the mer ger transaction. For the fiscal years ended 1999 and 1998, net ear nings would have been reduced by $9.3 million and $4.6 mil - lion, respectively, if ALP had been subject to federal income taxes. 

In fiscal 2000, the net ef fect of various merger-related charges reduced reported net earnings by $49.8 million to $679.7 million and reduced reported diluted earnings per Common Share by $0.18 per share to $2.39 per share. The net of tax ef fect of the various merger-related costs recorded and pro forma adjustments related to ALP taxes during fiscal 1999 was to r educe reported net earn- ings by $108.3 million to $481.0 million and to r educe reported diluted earnings per Common Share by $0.38 per share to $1.68 per share. The fiscal 1998 effect of various merger-related charges and other special items r ecorded and pro forma adjustments related to ALP taxes during fiscal 1998 was to reduce reported net earnings by $19.5 million to $448.5 million and to r educe reported diluted earnings per Common Share by $0.06 per share to $1.58 per share. 

Certain merger-related costs are based upon estimates, and actual amounts paid may ultimately dif fer from these estimates. If additional costs are incurred, such items will be expensed as incurred. 

