Filed by iXL Enterprises, Inc.
Pursuant to Rule 165 and Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 under the Securities
Exchange Act of 1934
Subject Company: Scient Corporation
Commission File No. 000-25893
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This filing contains forward-looking statements within the meaning of the Safe
Harbor Provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements relate to future events or iXL Enterprises' or Scient
Corporation's future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "could",
"should," "expects," "plans," "anticipates," "believes," "estimates," "projects
", "predicts," "potential" or "continue" or the negative of such terms or other
comparable terminology. These statements include, but are not limited to,
statements regarding: the expected benefits of the merger such as efficiencies,
cost savings, market profile and financial strength, and the competitive ability
and position of the combined company. These statements involve known and unknown
risks, uncertainties and other factors that may cause iXL Enterprises' or Scient
Corporation's or their industry's actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. These statements are only predictions. Actual events
or results may differ materially. In evaluating these statements, you should
specifically consider various factors, including the inability to obtain, or
meet conditions imposed for approvals for the business combination, failure of
the iXL Enterprises or Scient Corporation stockholders to approve the mergers,
the risk that the iXL Enterprises and Scient Corporation's businesses will not
be coordinated and integrated successfully, and disruption from the merger
making it more difficult to maintain relationships with clients, lenders,
employees, suppliers or other constituents. For a detailed discussion of
additional factors that could cause iXL Enterprises' or Scient Corporation's
results to differ materially from those described in the forward-looking
statements, please refer to iXL Enterprises' and Scient Corporation's filings
with the Securities and Exchange Commission, especially the sections titled
"Special Note Regarding Forward-Looking Information" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Risk
Factors" in iXL Enterprises' 2000 Annual Report on Form 10-K and "Special Note
Regarding Forward-Looking Statements" and "Business -- Risk Factors" in Scient
Corporation's 2000 Annual Report on Form 10-K. These factors may cause iXL
Enterprises' or Scient Corporation's actual results to differ materially from
any forward-looking statement.
ADDITIONAL INFORMATION
In connection with these transactions, iXL Enterprises and Scient Corporation
will file a joint proxy statement/prospectus and other relevant documents with
the Securities and Exchange Commission (the "SEC"). Investors are urged to read
the joint proxy statement/prospectus carefully and in its entirety when it
becomes available and any other relevant documents filed with the SEC because
they will contain important information. You will be able to obtain the
documents free of charge at the website maintained by the SEC at www.sec.gov. In
addition, you may obtain documents filed with the SEC by iXL Enterprises free of
charge by requesting them in writing from iXL Enterprises, 1600 Peachtree St.,
NW, Atlanta, GA 30309, Attention: Michael J. Casey, or by telephone at
404-279-1000. You may obtain documents filed with the SEC by Scient Corp. free
of charge by requesting them in writing from Scient Corporation, 860 Broadway,
New York, NY 10003, Attention: Michael Hand, or by telephone at 917-534-8200.
iXL Enterprises and Scient Corporation, and their respective directors and
executive officers, may be deemed to be participants in the solicitation of
proxies from the stockholders of iXL Enterprises and Scient Corporation in
connection with the mergers. Information about the directors and executive
officers of iXL Enterprises and their ownership of iXL Enterprises stock is set
forth in the proxy statement for iXL Enterprises' 2000 annual meeting of
stockholders. Information about the directors and executive officers of Scient
Corporation and their ownership of Scient Corporation stock is set forth in the
proxy statement for Scient Corporation's 2001 annual meeting of stockholders.
Investors may obtain additional information regarding the interests of such
participants by reading the joint proxy statement/prospectus when it becomes
available.
Investors are urged to read the joint proxy statement/prospectus carefully and
in its entirety when it becomes available before making any voting or investment
decisions.
The following script was used by Scient Corporation and iXL Enterprises, Inc.
in their joint conference call:
IXL/SCIENT CONFERENCE CALL
TUESDAY, JULY 31, 2001
THERESA MATACIA: Thank you for joining us. Earlier today, we issued press
releases providing information about Scient's pending merger of equals with iXL
Enterprises, as well as information on each respective company's June quarter
results.
We have with us executives from both iXL Enterprises and Scient.
From iXL, we have Bert Ellis, Chairman; Chris Formant, CEO; and Mike Casey, CFO.
From Scient we have Bob Howe, Chairman and CEO; Steve Mucchetti, COO; and
Michael Hand, Corporate Controller.
Before I begin, I would like to remind you that on today's call we will be
providing forward looking statements...... (SAFE HARBOR STATEMENT)......
I would now like to turn the call over to Bob Howe.
BOB HOWE:
Thank you, Theresa.
Hello, everyone. I am very pleased to announce, per our joint news release, that
iXL Enterprises and Scient have reached a definitive agreement to combine our
two companies. And it is my pleasure to introduce to you the NEW Scient, which
will be our operating name for the newly combined company and includes the red
iXL "i" in the center of our name.
Earlier this morning, the senior management of iXL and Scient each briefed our
teams on the transaction. We were just comparing notes on the response we
received from our colleagues, and in both cases, the response was very positive.
Our colleagues immediately realized what we've known as we've been hammering out
this deal over the past few weeks --- this merger makes real sense from a
FINANCIAL perspective, a STRATEGIC perspective and an OPERATIONAL perspective.
We are bringing together two outstanding firms to move our combined companies
forward as one dynamic, fast-moving entity.
We believe that we can drive efficiencies and become profitable quickly. We
anticipate the merger to close in the December quarter, and will move as quickly
as possible to integrate.
We also believe the synergies between iXL and Scient provide a unique
combination of strategic industry expertise and great, solutions-driven
technology capabilities that combine world-class implementation skills with
access to low-cost offshore resources.
Our new company will have a tightly-aligned management team. Chris Formant will
lead us as CEO and Steve Mucchetti as COO. Mike Casey will become CFO of the
newly combined company, I will serve as Chairman and Bert Ellis will become Vice
chairman.
In a moment, we're going to let Chris and Steve review the strategic positioning
and direction for the new company. They'll also cover our complementary
capabilities and the efficiencies we expect to drive.
While we will talk in greater detail about our individual results for the
quarter and the efficiencies we anticipate, on a combined basis for the quarter
ended June 30, we generated revenue of $44 million and reduced our combined cash
operating expenses from Q1 levels by $45 million.
We anticipate additional cost efficiencies in combining the two companies, which
Mike Casey will address more specifically later. In addition, on a combined
basis, we had over $140 million in cash at the end of the June quarter. So, we
feel the combined company is much better positioned to succeed in today's
economy.
As I said, we have a lot to cover this morning, including a review of our
respective June quarter results.
Michael Hand will cover Scient's numbers and Mike Casey will review iXL's
second quarter results. Then we'll go to Chris and Steve. Before all that,
I'd like to invite Bert Ellis to say a few words. Bert...
BERT ELLIS
Thanks, Bob and I likewise thank you all for joining us on this call.
As Bob said, we're fired up about today's announcement... our employees are
excited... we have strong support from both Boards... and we believe our
shareholders will be supportive, as well.
I'm sure it's apparent to everyone on this call that our industry has
significant overcapacity and consolidation must happen.
As you also know from our previous public announcements, iXL and Scient have
been reducing our workforces, closing offices, subleasing space, cutting costs
where ever we could...
But you can't just keep cutting out infrastructure on your own. There is a
floor.
Together, though, as one entity with substantial size and scale, there is
tremendous opportunity for additional efficiencies in real estate, systems, G&A
and other infrastructure.
We also will have the size and capability to begin growing again. We're moving
as fast as applicable law will permit us in order to begin the integration. We
can do that because this deal is very clean. No outstanding issues. No tie-ups.
The "i"s have been dotted and "t"s have been crossed.
Our new senior management team has collectively resolved key issues. The new
company, for example, will be headquartered in New York, where we have the
largest combined base of employees.
This is a strong business combination; a true merger of equals, all terms have
been worked out.
o Under the terms of the agreement, iXL and Scient will each exchange all of
their outstanding shares of common stock for 50 percent of the
newly-formed company. The new company will be called Scient.
o The transaction will be accounted for as a purchase and is expected to be
tax free to iXL and Scient shareholders. The definitive agreement has been
approved by the Board of Directors of each company and is subject only to
approval of shareholders and subject to customary closing conditions,
including the expiration of customary Hart Scott Rodino Act waiting
periods and SEC clearance. We expect the merger to close during the fourth
quarter.
Both Boards are completely behind this transaction. We have received voting
agreements to support the transaction from Scient and iXL shareholders
representing approximately 34 percent of the shares outstanding of each company.
We anticipate beginning our merger integration plans as soon as the Hart Scott
Rodino waiting period expires.
When we have integrated the two companies, what will emerge is a very fast, very
capable company.
As this is the earnings call, too, we're going to quickly run through both
companies' results and then go to Chris and Steve for the vision of the new
company.
First up is Michael Hand to cover Scient's results, then Mike Casey will go over
iXL's numbers.
Michael Hand...
MICHAEL HAND
Thank you, Bert. As you no doubt saw in our press release, Scient's revenue for
the June quarter totaled $11.3 million - down 58% from the March quarter. In the
quarter, Scient performed work for 26 clients: 16 existing clients and 10 new
ones.
These numbers were impaired by the restructuring, which we announced last
quarter and successfully completed. As you remember, this restructuring called
for us to eliminate up to 850 positions. As of the July 20th announcement, we
have eliminated 854 positions, so we are essentially done with our announced
restructuring.
At the end of June, we had 510 colleagues with 399 billable colleagues and 111
non-billable colleagues. The July 20th actions will reduce this number by 74.
Let me turn to our bottom line. Scient reported a pro forma operating loss of
$14.8 million for the June quarter, excluding restructuring and other non-cash
charges. Pro forma earnings per share for the June quarter, excluding non-cash
and restructuring charges, was a loss of $0.20.
With respect to our restructuring, we recorded a charge in the June quarter of
$50.3 million ($57.5M in March) to provide for severance payments, surplus real
estate and IT and office related assets. In the quarter, the cash portion of the
restructuring charge totaled approximately $40 milllion.
Now turning to the balance sheet, Scient ended the quarter with $115 million in
cash and cash equivalents. This is better than the $100-$110 million range we
had anticipated.
LET ME NOW HAND THE CALL OVER TO MIKE CASEY, IXL'S CFO, WHO WILL DISCUSS IXL'S
SECOND QUARTER RESULTS.
MIKE CASEY
Thank you.
As I hope you saw in our earnings release this morning, iXL reported revenue of
$32.7 million for the second quarter ended June 30, 2001. Pro forma net loss was
$9.8 million for the second quarter ended June 30, 2001. Revenue from our top 10
accounts remained stable from the first quarter. These accounts represented
approximately 62% of our overall revenue for the quarter.
We ended the second quarter with total headcount of approximately 1,025
employees; approximately 780 of which are billable employees.
As part of a larger organizational announcement in May, iXL reduced our
workforce by approximately 300 employees in the quarter, in response to general
softness in the market and a decrease in our revenue. We recorded a
restructuring charge of $24.8 million in the second quarter, primarily related
to costs associated with office space and severance for positions eliminated.
Now let me talk about plans for the combined entity...
Given the current market conditions, our revenue visibility remains low and we
will not be giving specific revenue guidance at this time.
However, while it's too early to tell, we are encouraged by some recent wins,
which may indicate a stabilizing pipeline. We continue to work hard with our
existing clients to increase our opportunities with them as well as pursue new
Global 1000 accounts.
On the expense side, both Scient and iXL collectively have dramatically
right-sized our businesses over the past several quarters, reducing our combined
cash operating expenses from $228 million in the third quarter of 2000, when our
businesses were peaking, to $71 million in the June quarter of 2001.
We made substantial progress in cutting our combined cash needs, and believe we
can go further in this combination. We believe we can reduce our combined SG&A
expense substantially, including significant real-estate savings, which we have
analyzed as a collective team in detail.
We believe the liquidity and cash position of the combined organization will be
more than adequate to achieve positive EBITDA following the implementation of
anticipated synergies. On a combined basis, we began the quarter with over a
$140 million of cash and cash equivalents and short-term investments.
NOW LET ME TURN THE CALL TO CHRIS FORMANT, IXL'S CEO AND STEVE MUCCHETTI,
SCIENT'S COO...
CHRIS FORMANT.
Thanks, Mike.
[STEVE: GOOD MORNING]
We believe the combination of Scient and iXL will create one of the truly great
consulting firms in the world with a unique combination of resources, market
focus and culture, unlike any other.
Our customer experience-driven approaches for B2C, B2B and B2E will bring a set
of solutions and capability that we think no other firm can offer.
Although our market has been soft over the past year, last month IDC predicted
that the pent-up eServices market will re-establish it's growth from $22 billion
last year to $68 billion by 2005 and will be driven by Financial Services,
Manufacturing and Retail industry spends. The new Scient is uniquely positioned
to be a major beneficiary of this market expansion.
We believe this combination will give us a strong competitive advantage over
many of our peers. The market is and will continue to demand a value-priced,
integrated approach to complex needs which deliver measurable results. As a
merged entity, we think we will be uniquely positioned to meet this need.
I also want to emphasize just how quickly and seamlessly our two companies have
come together in our approaches -- both culturally and operationally -- to
resolve all major issues.
Steve and I would like to walk through the four main synergies that make this
merger so compelling: BUSINESS, FINANCIAL, MANAGEMENT and VIABILITY.
First are the BUSINESS synergies, which bring together our complementary
strategies and skills to directly address market needs.
Second are FINANCIAL synergies, which allow for a significantly lower cost
structure, greater revenue growth and a faster path to EBITDA break even and
positive earnings.
Third are the MANAGEMENT synergies where we can mutually leverage our
complementary talent, compatible systems and culture, and
And most importantly, the VIABILITY synergies -- which Steve will discuss --
will enable improved cash flow, the size and scale to reach critical mass for
the combined enterprise, and the resolution of real estate issues.
Let me start first with the BUSINESS synergies. During our negotiations, there
was an immediate recognition of our respective strengths and weaknesses.
Scient has an outstanding strategy capability, which is more developed than
iXL's. Scient's current pipeline is filled with engagements that require the
sophisticated diagnostics that clients need in order to drive results.
Scient has been working to develop solid, competitively-priced implementation
capabilities to match their front-end expertise, and they saw the value of iXL's
existing engineering capabilities in the U.S. and through their cost-effective
off-shore resource partner, HPS.
In addition, iXL's high-quality technical development and implementation through
our leading Alliances program was very attractive to Scient.
Together, we provide what the market wants:
- - Scient's strategy through business/technical architectural design
capabilities...
- - A blending of our firms' engineering and user experience skills, as well as
iXL's deep solutions, such as CXM.
- - Moreover, we can draw upon iXL's on- and off-shore capabilities, as well as
iXL's vendor alliance program.
Next are the FINANCIAL synergies, which are significant. We believe we can
realize approximately $120 million of annualized savings principally from our
combined SG&A costs based on the run rate for the second quarter. We expect the
savings to come primarily from reductions in infrastructure costs such as
systems, rent, G&A and other operating costs.
As Mike said, we also believe that, given the combined backlog of client work
and the expectation of several new business opportunities closing in the third
quarter, our revenue picture is stabilizing. Therefore, we project that we will
achieve positive EBITDA effective with the full implementation of all synergies,
which we will be moving to implement immediately.
For example, had we been combined in the second quarter, the companies would
have shown, on a pro forma basis, positive EBITDA on $44 million of revenue
versus an approximate $27 million loss, which was posted by the respective
companies.
To be sure, our pro forma financial performance would have benefited further
from improved utilization rates and revenue growth. We will need to proceed with
the integration of the companies, of course, and will be in a better position to
come back to you with more formal guidance after the third quarter.
On the MANAGEMENT side, I am even more optimistic. This merger gives Steve and
me a star team which has had a great deal of success leveraging their matrix
organizations and WE WILL CONTINUE TO GO TO MARKET THROUGH FOUR INDUSTRY
VERTICALS - Financial Services, Retail and Consumer Goods, Travel/Transportation
and Enterprise Services, which includes telecom, health care and manufacturing
- -- and we will continue to employ six functional Service Lines.
We have already made decisions on the leadership of those groups and feel very
confident of our enhanced capabilities and experience.
As a combined entity, for example, we will have one of the most sophisticated
Financial Services consulting and integration capabilities in the industry. I'd
put our combined Financial Services client list and experience against anyone in
the world and our strength will continue to grow. Today, we have a number of
leading financial services clients, including J.P. MorganChase, Morgan Stanley
and Lloyd's TSB to name a few.
Also, within each vertical, we will continue to drive world-class solutions,
such as CXM, or Customer Experience Management; Digital Reengineering, B2E,
Digital Video Solutions, Enterprise Web Enablement and User Experience.
Steve, do you want to cover VIABILITY?
STEVE:
Yes, Chris, thank you.
In short, we think this combination takes the viability question off the table.
Each of the partners brings to the merger the financial and managerial strengths
needed for the combined entity to survive and thrive. Again, as Mike Casey
pointed out, the combined companies began the quarter with $140 million in cash.
iXL provides the new Scient with implementation expertise, industry-focused
solutions, revenue and critical mass. Scient provides the new Scient with cost
and mass advantages and intellectual capital, plus the cash needed to fuel
growth. The combination, we believe, will provide cost savings from further
consolidation and leveraging of infrastructure.
One of the outstanding issues for both companies has been real estate
obligations. iXL has managed its way through those difficulties and resolved
many lease-related issues. Together, as we attack Scient's real estate issues
and move to consolidate offices, we will draw on iXL's experience in resolving
these concerns.
As a combined company, we can use some of the space we might have had to
abandon, and then selectively dispose of the space the new Scient can't use.
We have a plan to reduce these obligations significantly through consolidations,
subleases and lease buyouts. We have had this plan independently confirmed, and
together we will have greater flexibility to manage risk in key markets.
So, with Business, Financial, Management and Viability synergies, we believe the
new Scient has the combination of skills, experience and capabilities to deliver
the kind of impact and return on investment clients need. And the model that
this new combination represents, we believe, will be the prototype for others to
follow.
CHRIS:
Together, we're going to hit the market need dead center with deep Industry
expertise; the dynamic integration of strategy, technology and User Experience;
and a focus on specific solutions that deliver real results for clients at a
very competitive price point.
Bob...?
BOB HOWE
Thanks, Chris.
In sum, there are four reasons we are excited about the merger:
1. The fit of the combined entity with market needs
2. Financial strength, which increases our stability
3. Management and cultural fit and how
4. All these combine to make our firm more viable for the long term.
We have the team. We have the plan. And we feel confident that we can execute
going forward.
Thank you and I would now like to open the call for questions.