Express Scripts 2011 Annual Report Download - page 31

Express Scripts 2011 Annual Report 29
Our indebtedness following the completion of the merger with Medco will be substantial and will effectively reduce the
amount of funds available for other business purposes.
We currently expect to incur up to $14.0 billion of indebtedness to finance all or a portion of the cash component
of the merger consideration. Interest costs related to this debt or other debt we may incur in connection with the merger will
be substantial. Our new indebtedness may contain negative or financial covenants that would limit our operational
flexibility. Our increased level of indebtedness could reduce funds available for additional acquisitions or other business
purposes, restrict our financial and operating flexibility or create competitive disadvantages compared to other companies
with lower debt levels. This in turn may reduce our flexibility in responding to changes in our businesses and in our
industry.
The anticipated benefits of the merger with Medco may not be realized fully and may take longer to realize than expected.
The success of the merger will depend, in part, on the combined company’s ability to successfully combine the
businesses of Express Scripts and Medco, which currently operate as independent public companies, and realize the
anticipated benefits, including synergies, cost savings, innovation and operational efficiencies, from the combination. If we
are unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be
realized fully or at all, or may take longer to realize than expected and the value of the combined company’s common stock
may be harmed.
The merger involves the integration of Medco’s businesses with our existing business, which is a complex, costly
and time-consuming process. We have not previously completed a transaction comparable in size or scope to the proposed
merger. The integration of two companies may result in material challenges, including, without limitation:
the diversion of management’s attention from ongoing business concerns and performance shortfalls at one or both
of the companies as a result of the devotion of management’s attention to the merger
managing a larger combined company
maintaining employee morale and retaining key management and other employees
integrating two unique corporate cultures, which may prove to be incompatible
the possibility of faulty assumptions underlying expectations regarding the integration process
retaining existing clients and attracting new clients
consolidating corporate and administrative infrastructures and eliminating duplicative operations
coordinating geographically separate organizations
unanticipated issues in integrating information technology, communications and other systems
unanticipated changes in applicable laws and regulations
managing tax costs or inefficiencies associated with integrating the operations of the combined company
unforeseen expenses or delays associated with the merger
making any necessary modifications to internal financial control standards to comply with the Sarbanes-Oxley Act
of 2002 and the rules and regulations promulgated thereunder
Some of these factors will be outside of our control and any one of them could result in increased costs, decreases
in the amount of expected revenues and diversion of management’s time and energy, which could materially impact our
business, financial condition and results of operations.
Due to legal restrictions, we and Medco have been able to conduct only limited planning regarding the integration
of the two companies following the merger and have not yet determined the exact nature of how the businesses and
operations of the two companies will be combined after the merger. The actual integration may result in additional and
unforeseen expenses, and the anticipated benefits of the integration plan may not be realized.
Delays encountered in the integration process could have a material adverse effect on the revenues, expenses,
operating results and financial condition of the combined company. Although we expect significant benefits, such as
synergies, cost savings, innovation and operational efficiencies, to result from the merger, there can be no assurance that the
combined company will realize any of these anticipated benefits.