SEC Presentation: 10-K & S-3 Waste Management, Inc.

By: Brandon Miller, Brianne Miller, Sara Shirk, & Jered Rogers

WMI Profile
 International provider of comprehensive waste management services  WM is now organized into 66 Market Areas
• 58 in the U.S. • 8 in Canada

 Operations include collection, disposal, and recycling  Headquarters: Houston, TX

WMI Statistics
Serves 25 million residential customers Serves 2 million commercial customers 30,000 Collection Vehicles 57,000 Employees Fiscal Year Ends: December 31

Today‟s $40 Billion Market
Privately Held Cos 24%
WMI 28%

Other Public Cos 4% Republic Svs 6% Allied Waste 14% Public Sector 24%

Over $11 Billion in Revenues
 About the same size as:  Eli Lilly  Office Depot  Williams  Toys „R‟ Us  Oracle  Tyson Foods
A Fortune 200 Company
Based on 2001 reported revenues

And larger than: Marriott Whirlpool Schering Plough Consolidated Edison MBNA

Stock Information

Fraud Revealed
March of 2002 the SEC announced it had filed suit against the founder and five other top officers. The officers were charged with perpetrating a massive financial fraud for the years 1992-1997

The SEC noted Waste Management:
 Avoided depreciation expense by assigning inflated salvage values and extending useful lives.  Failed to record expenses for decreases in the value of landfills  Established inflated environmental reserves  Improperly capitalized a variety of expenses  Failed to establish reserves for income taxes

WMI Restatement
 On January 28, 1998 Waste Management issued a report that it would restate earnings for the years in question.  The cumulative effect of this restatement was 2.9 Billion After tax  The SEC eventually settled charges with Arthur Andersen of 7 million dollars

Filing Requirements for 10-K
 Must be filed annually  Must be filed with the SEC within 90 days after the end of the company's fiscal year  Requires Basic Information Package (BIC)

The BIC should describe the following:
 The general development of the business  The location and general character of the principal plants, mines and other materially important physical properties  Any material pending legal proceedings  Submission of Matters to a Vote of Security Holders  The principal United States market or markets in which each class of the registrant's common equity is being traded

Filing Requirements for 10-K Continued
 The principal market or markets in which stock is traded  All securities sold by the registrant within the past three years  Selected financial data for each of the last five fiscal years  Financial condition, changes in financial condition and results of operations  Quantitative information about market risk as of the end of the latest fiscal year  Financial Statements and Supplementary Data

Filing Requirements for 10-K Continued
 All securities of the registrant sold by the registrant within the past three years  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  Directors and Executive Officers of the Registrant  Executive Compensation  Certain Relationships and Related Transactions  Evaluation of disclosure controls and procedures, changes in internal controls, asset-Backed Issuers

10-K Conclusion
Waste Management followed the filing requirements mandated by the SEC.

2002 Financial Results
($ in Millions, except EPS) 2002 Revenues Operating Expense SG&A D&A Interest Expense Net Income Diluted EPS $ 11,142 6,743 1,529 1,222 462 822 1.33 60.5% 13.7% 11.0% 4.1% 7.4% % of revenues

Key Finance Accomplishments
 Increased EBIT by $95 million in 2002  Issued $500 million 30-year notes in May and $400 million 10-year notes in November  Changed external auditor to Ernst & Young, LLP  Accelerated earnings reporting schedule & SEC filings by one full week  Moody‟s recently announced that they are reviewing WM for a rating upgrade.

2003 Guidance
 Revenue approximately $11.6 billion, growth expected to primarily come from acquisitions  SG&A projected to be reduced 11% to 11.5% by year end  Acquisition capital of up to $375 million  Share repurchases between $600 million to $1 billion

Why file an S-3?
 1933 Securities Act regulates the original distribution of securities in order to assure that investors have sufficient information in order to make an informed investment decision  The Act requires filing of a registration statement with the SEC each time new securities are offered for sale

S-3 Requirements
 A company may file an S-3 if: • the company has filed reports on a timely basis with the SEC for at least one year • the company must not have defaulted on any obligations • the company must have at least $75 million of voting stock outstanding  There are two parts to an S-3: • Part I: Prospectus consists of information thought to be important to reach an informed investment decision • Part II: Supplementary and SEC procedural data

S-3 Part I: Information Required in Prospectus
 Summary Information, Risk Factors, and Ratio of Earnings to Fixed Charges  Use of Proceeds Determination of Offering Price Dilution Selling Security Holders  Plan of Distribution  Description of Securities to Be Registered  Interests of Named Experts and Counsel Material Changes Incorporation of Certain Information by Reference Disclosure of Commission Position on Indemnification for Securities Act Liabilities

S-3 Part II: Information Not Required in Prospectus
 Other Expenses of Issuance and Distribution  Indemnification of Directors and Officers  Exhibits  Undertakings

Additional Information
 Securities to be registered by S-3: $1,868,070,886  Waste Management added a risk statement in an amendment to their initial S-3: “You may not be able to sell the debt securities- There will be no active trading market for the debt securities we issue and a market may never develop.”

Our Conclusion
Waste Management followed the filing requirements mandated by the Securities Act of 1933.

Any Questions or Comments?

Thanks for listening

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