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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% Public Sector 24% Allied Waste 14% Over $11 Billion in Revenues About the same size as: And larger than: Eli Lilly Marriott Office Depot Whirlpool Williams Schering Plough Toys „R‟ Us Consolidated Edison Oracle Tyson Foods MBNA A Fortune 200 Company Based on 2001 reported revenues 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) % of 2002 revenues Revenues $ 11,142 Operating Expense 6,743 60.5% SG&A 1,529 13.7% D&A 1,222 11.0% Interest Expense 462 4.1% Net Income 822 7.4% Diluted EPS 1.33 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. 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