CVH » Topics » The anticipated benefits of acquiring First Health may not be realized.

This excerpt taken from the CVH 10-K filed Mar 9, 2006.
The anticipated benefits of acquiring First Health may not be realized.

We anticipate our acquisition of First Health will continue to result in various benefits including, among other things, benefits relating to enhanced revenues, a strengthened market position, cross selling opportunities, technology, cost savings and operating efficiencies. Achieving the anticipated benefits of the First Health acquisition is subject to a number of uncertainties, including whether we integrate First Health in an efficient and effective manner, and general competitive factors in the marketplace. Failure to achieve these anticipated benefits could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could materially affect our business, financial condition and operating results.

We may face substantial difficulties, costs and delays in integrating First Health. These factors may include:


potential difficulty in leveraging the value of the separate technologies of the combined company;


perceived adverse changes in product offerings available to customers and customer services standards, whether or not these changes do, in fact, occur;


managing customer and provider overlap and potential pricing conflicts;


costs and delays in implementing common systems and procedures;


potential charges to earnings resulting from the application of purchase accounting to the transaction;


difficulty comparing financial reports due to differing management systems;


diversion of management resources from the business of the combined company;


the retention of existing customers of each company, including, with respect to First Health, the Mail Handlers Benefit Plan (a nationally offered health plan for federal employees);


reduction or loss of customer orders due to the potential for market confusion, hesitation and delay;


a significant reduction or loss of customers may result in the possible impairment of goodwill or other intangible assets associated with the acquisition of First Health;


retaining and integrating management and other key employees of the combined company; and


coordinating infrastructure operations in an effective and efficient manner.

We may seek to combine certain operations and functions using common information and communication systems, operating procedures, financial controls and human resource practices, including training, professional development and benefit programs. We may be unsuccessful in implementing the integration of these systems and processes. While we believe that the companies share certain similar cultural characteristics and philosophies, the differences in size and scope of operations may affect our management processes.

Any one or all of these factors, many of which are outside of our control, may cause increased operating costs, worse than anticipated financial performance or the loss of customers and employees. Many of these factors are also outside our control.

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