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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended November 30, 2005
 Commission file number 000-13109
 LAIDLAW INTERNATIONAL, INC.
  DELAWARE
    
    98-0390488(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 55 Shuman Boulevard, Suite 400
Naperville, Illinois, 60563
 (630) 848-3000
 þ o
  þ o
  o þ
 
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LAIDLAW INTERNATIONAL, INC.
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Financial Statements:Consolidated Balance Sheets as of November 30, 2005 (Unaudited)
and August 31, 2005
    
    
    2Consolidated Statements of Operations for the Three Months
Ended November 30, 2005 and 2004 (Unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows for the Three
Months Ended November 30, 2005 and 2004 (Unaudited)
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4. Controls and Procedures
    
    
    17PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    18Item 1A. Risk Factors
    
    
    18Item 6. Exhibits
    
    
    18SIGNATURES
    
    
    19CertificationCertificationCertification
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PART I.  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 LAIDLAW INTERNATIONAL, INC.
 
 CONSOLIDATED BALANCE SHEETS
 ($ in millions)
 November 30,
    
    
    August 31,2005
    
    
    2005(unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    146.9
    
    
    $
    217.3Accounts receivable
    
    
    363.5
    
    
    
    202.6Insurance collateral
    
    
    74.9
    
    
    
    81.9Parts and supplies
    
    
    33.3
    
    
    
    32.5Deferred income tax assets
    
    
    45.0
    
    
    
    42.4Other current assets
    
    
    28.2
    
    
    
    29.2Total current assets
    
    
    691.8
    
    
    
    605.9Property and equipmentLand
    
    
    167.3
    
    
    
    166.9Buildings
    
    
    179.0
    
    
    
    176.1Vehicles
    
    
    1,528.9
    
    
    
    1,447.2Other
    
    
    118.3
    
    
    
    116.41,993.5
    
    
    
    1,906.6Less: Accumulated depreciation
    
    
    (535.6
    )
    
    
    (471.5
    )1,457.9
    
    
    
    1,435.1Other assetsInsurance collateral
    
    
    396.9
    
    
    
    392.2Other long-term investments
    
    
    39.2
    
    
    
    40.3Contracts and customer relationships
    
    
    71.8
    
    
    
    73.4Deferred income tax assets
    
    
    316.4
    
    
    
    350.3Deferred charges and other assets
    
    
    10.7
    
    
    
    11.5835.0
    
    
    
    867.7Total assets
    
    $
    2,984.7
    
    
    $
    2,908.7
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LAIDLAW INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
($ in millions)
 November 30,
    
    
    August 31,2005
    
    
    2005(unaudited)LIABILITIESCurrent liabilitiesAccounts payable
    
    $
    102.1
    
    
    $
    86.4Accrued liabilities
    
    
    215.7
    
    
    
    192.6Current portion of insurance reserves
    
    
    146.8
    
    
    
    141.6Current portion of long-term debt
    
    
    34.7
    
    
    
    27.8Total current liabilities
    
    
    499.3
    
    
    
    448.4Long-term debt
    
    
    278.5
    
    
    
    286.6Insurance reserves
    
    
    351.3
    
    
    
    344.4Pension liability
    
    
    127.4
    
    
    
    128.4Other long-term liabilities
    
    
    80.4
    
    
    
    100.7Total liabilities
    
    
    1,336.9
    
    
    
    1,308.5SHAREHOLDERS EQUITYCommon shares; $0.01 par value per share;
issued and outstanding 100.4 million
(August 31, 2005  100.2 million)
    
    
    1.0
    
    
    
    1.0Additional paid in capital
    
    
    1,316.5
    
    
    
    1,315.9Accumulated other comprehensive income
    
    
    37.9
    
    
    
    34.1Retained earnings
    
    
    292.4
    
    
    
    249.2Total shareholders equity
    
    
    1,647.8
    
    
    
    1,600.2Total liabilities and shareholders equity
    
    $
    2,984.7
    
    
    $
    2,908.7
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LAIDLAW INTERNATIONAL, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 ($ in millions except per share amounts)
 (unaudited)
 Three Months Ended November 30,2005
    
    
    2004Revenue
    
    $
    846.8
    
    
    $
    813.7Compensation expense
    
    
    406.7
    
    
    
    403.6Vehicle related costs
    
    
    63.1
    
    
    
    63.3Fuel
    
    
    65.3
    
    
    
    50.9Insurance and accident claim costs
    
    
    47.1
    
    
    
    56.1Occupancy costs
    
    
    38.7
    
    
    
    37.2Depreciation and amortization
    
    
    58.6
    
    
    
    68.2Other operating expenses
    
    
    70.6
    
    
    
    75.3Operating income
    
    
    96.7
    
    
    
    59.1Interest expense
    
    
    (5.5
    )
    
    
    (19.3
    )Other income, net
    
    
    1.8
    
    
    
    1.4Income from continuing operations before income taxes
    
    
    93.0
    
    
    
    41.2Income tax expense
    
    
    (35.0
    )
    
    
    (16.4
    )Income from continuing operations
    
    
    58.0
    
    
    
    24.8Income from discontinued operations
    
    
    0.3
    
    
    
    5.6Net income
    
    $
    58.3
    
    
    $
    30.4Basic earnings per shareContinuing operations
    
    $
    0.58
    
    
    $
    0.25Discontinued operations
    
    
    
    
    
    
    0.05Net income
    
    $
    0.58
    
    
    $
    0.30Diluted earnings per shareContinuing operations
    
    $
    0.58
    
    
    $
    0.24Discontinued operations
    
    
    
    
    
    
    0.05Net income
    
    $
    0.58
    
    
    $
    0.29Dividends per share
    
    $
    0.15
    
    
    $
    Average shares outstanding
    
    
    100.2
    
    
    
    100.0Effect of dilutive securities
    
    
    0.4
    
    
    
    4.1Average shares outstanding assuming dilution
    
    
    100.6
    
    
    
    104.1
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LAIDLAW INTERNATIONAL, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 ($ in millions)
 (unaudited)
 Three Months Ended November 30,2005
    
    
    2004Operating activitiesNet income
    
    $
    58.3
    
    
    $
    30.4Less: income from discontinued operations
    
    
    (0.3
    )
    
    
    (5.6
    )Non-cash adjustments to net incomeDepreciation and amortization
    
    
    58.6
    
    
    
    68.2Deferred income taxes
    
    
    34.2
    
    
    
    15.7Other non-cash items
    
    
    3.2
    
    
    
    7.6Net change in certain operating assets and liabilitiesAccounts receivable
    
    
    (162.1
    )
    
    
    (142.7
    )Insurance collateral
    
    
    (4.8
    )
    
    
    (9.3
    )Accounts payable and accrued liabilities
    
    
    1.7
    
    
    
    (9.5
    )Insurance reserves
    
    
    12.1
    
    
    
    2.4Other assets and liabilities
    
    
    (16.8
    )
    
    
    0.5Net cash used by operating activities
    
    $
    (15.9
    )
    
    $
    (42.3
    )Investing activitiesNet capital expenditures
    
    $
    (54.5
    )
    
    $
    (20.0
    )Net decrease in performance bond collateral
    
    
    0.6
    
    
    
    4.3Net decrease in other investments
    
    
    0.1
    
    
    
    0.2Net cash used by investing activities
    
    $
    (53.8
    )
    
    $
    (15.5
    )Financing activitiesNet (decrease) increase in long-term debt
    
    $
    (1.2
    )
    
    $
    14.7Net cash (used) provided by financing activities
    
    $
    (1.2
    )
    
    $
    14.7Net cash provided (used) by discontinued operations
    
    $
    0.5
    
    
    $
    (12.1
    )Net decrease in cash and cash equivalents
    
    $
    (70.4
    )
    
    $
    (55.2
    )Cash and cash equivalents  beginning of period
    
    
    217.3
    
    
    
    154.2Cash and cash equivalents  end of period
    
    $
    146.9
    
    
    $
    99.0
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LAIDLAW INTERNATIONAL, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE THREE MONTH PERIOD ENDED NOVEMBER 30, 2005
 Note 1  Corporate overview and basis of presentation
 Corporate overview
  Basis of presentation
   Note 2  Comprehensive income
  Three Months Ended November 30,2005
    
    
    2004Net income
    
    $
    58.3
    
    
    $
    30.4Net unrealized loss on securities
    
    
    (4.8
    )
    
    
    (0.7
    )Net gain on interest rate swaps
    
    
    1.4
    
    
    
    0.7Foreign currency translation adjustments
    
    
    7.2
    
    
    
    39.9Total comprehensive income
    
    $
    62.1
    
    
    $
    70.3
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Note 3  Discontinued operations
   Three Months Ended November 30,2005
    
    
    2004Revenue
    
    $
    
    
    
    $
    413.6Pre-tax income from operations
    
    
    0.4
    
    
    
    9.9Provision for income taxes
    
    
    (0.1
    )
    
    
    (4.3
    )Income from discontinued operations
    
    $
    0.3
    
    
    $
    5.6
  Note 4  Stock awards and options
  Stock options
 Restricted Shares
 Deferred Shares
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Note 5  Pension plans
  Three Months Ended November 30,($ in millions)
    
    2005
    
    
    2004Components of net pension benefit costService cost
    
    $
    2.2
    
    
    $
    2.1Interest cost
    
    
    12.2
    
    
    
    14.3Expected return on plan assets
    
    
    (12.6
    )
    
    
    (14.4
    )Net pension benefit cost
    
    $
    1.8
    
    
    $
    2.0
 Note 6  Material contingencies
 Legal proceedings
 Contingent Liabilities Relating to Sale of AMR
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Other
  Environmental matters
  Income tax matters
  Note 7  Business interruption settlement
  9




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Note 8  Segment information
  Three Months Ended November 30,($ in millions)
    
    2005
    
    
    2004Education servicesRevenue
    
    $
    463.7
    
    
    $
    451.9EBITDA
    
    
    115.4
    
    
    
    112.2GreyhoundRevenue
    
    $
    304.6
    
    
    $
    284.8EBITDA
    
    
    34.9
    
    
    
    11.8Public transitRevenue
    
    $
    78.5
    
    
    $
    77.0EBITDA
    
    
    5.0
    
    
    
    3.3Consolidated TotalRevenue
    
    $
    846.8
    
    
    $
    813.7EBITDA
    
    
    155.3
    
    
    
    127.3Depreciation and amortization expense
    
    
    (58.6
    )
    
    
    (68.2
    )Operating income
    
    
    96.7
    
    
    
    59.1Interest expense
    
    
    (5.5
    )
    
    
    (19.3
    )Other income, net
    
    
    1.8
    
    
    
    1.4Income tax expense
    
    
    (35.0
    )
    
    
    (16.4
    )Income from discontinued operations
    
    
    0.3
    
    
    
    5.6Net income
    
    $
    58.3
    
    
    $
    30.4
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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 General
 Corporate overview
  Non-GAAP Measure
   Three Months ended November 30,2005
    
    
    2004EBITDA
    
    $
    155.3
    
    
    $
    127.3Depreciation and amortization
    
    
    (58.6
    )
    
    
    (68.2
    )Interest expense
    
    
    (5.5
    )
    
    
    (19.3
    )Other income, net
    
    
    1.8
    
    
    
    1.4Income tax expense
    
    
    (35.0
    )
    
    
    (16.4
    )Income from continuing operations
    
    $
    58.0
    
    
    $
    24.8
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Results of Operations
 Three months ended November 30, 2005, and 2004
 Percentage of RevenueThree Months ended November 30,2005
    
    
    2004Revenue
    
    
    100.0
    %
    
    
    100.0
    %Compensation expense
    
    
    48.0
    
    
    
    49.5Vehicle related costs
    
    
    7.5
    
    
    
    7.8Fuel
    
    
    7.7
    
    
    
    6.3Insurance and accident claim costs
    
    
    5.6
    
    
    
    6.9Occupancy costs
    
    
    4.6
    
    
    
    4.6Depreciation and amortization
    
    
    6.9
    
    
    
    8.3Other operating expenses
    
    
    8.3
    
    
    
    9.3Operating income
    
    
    11.4
    
    
    
    7.3Interest expense
    
    
    (0.6
    )
    
    
    (2.4
    )Other income, net
    
    
    0.2
    
    
    
    0.2Income before income taxes
    
    
    11.0
    
    
    
    5.1Income tax expense
    
    
    (4.2
    )
    
    
    (2.1
    )Income from continuing operations
    
    
    6.8
    
    
    
    3.0Income from discontinued operations
    
    
    0.1
    
    
    
    0.7Net income
    
    
    6.9
    %
    
    
    3.7
    %
 Revenue and EBITDA by business segment are as follows ($ in millions):
 Three Months ended November 30,2005
    
    
    2004RevenueEducation services
    
    $
    463.7
    
    
    $
    451.9Greyhound
    
    
    304.6
    
    
    
    284.8Public transit
    
    
    78.5
    
    
    
    77.0Total
    
    $
    846.8
    
    
    $
    813.7EBITDAEducation services
    
    $
    115.4
    
    
    $
    112.2Greyhound
    
    
    34.9
    
    
    
    11.8Public transit
    
    
    5.0
    
    
    
    3.3Total
    
    $
    155.3
    
    
    $
    127.3
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Education services
   Greyhound
   Public transit
   13




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Depreciation and amortization expense
  Three Months ended November 30,2005
    
    
    2004Education services
    
    $
    37.9
    
    
    $
    50.4Greyhound
    
    
    18.2
    
    
    
    15.2Public transit
    
    
    2.5
    
    
    
    2.6Consolidated
    
    $
    58.6
    
    
    $
    68.2
  Interest expense
  Other income, net
  Income tax expense
  Discontinued operations
  14




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Liquidity and capital resources
     Commitments and Contingencies
  15




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Forward-looking statements
  -
    
    Economic and other market factors, including competitive pressures and changes
in pricing policies;-
    
    The ability to implement initiatives designed to increase operating
efficiencies or improve results;-
    
    Costs and risks associated with litigation;-
    
    Changes in interpretations of existing, or the adoption of new, legislation,
regulations or other laws;-
    
    The potential for rising labor costs and actions taken by organized labor unions;-
    
    Continued increases in prices of fuel and potential shortages;-
    
    Control of costs related to accident and other risk management claims;-
    
    Terrorism and other acts of violence;-
    
    The ability to produce sufficient future taxable income to allow us to recover
our deferred tax assets;-
    
    The ability to repurchase the Companys common stock;-
    
    Potential changes in the mix of businesses we operate; and-
    
    The inability to earn sufficient returns on pension plan assets thus requiring
increased funding.
  16




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LAIDLAW INTERNATIONAL, INC.
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4. Controls and Procedures
   17




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LAIDLAW INTERNATIONAL, INC.
 
 PART II. OTHER INFORMATION
 
 Item 1. Legal proceedings
  
 Item 1A. Risk factors
  
 Item 6. Exhibits
 31.1
    
    Principal Executive Officers Certifications Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Principal Financial Officers Certifications Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act
of 2002)
 18




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SIGNATURES
  LAIDLAW INTERNATIONAL, INC.By: /s/ Douglas A. CartyDate: January 6, 2006
    
    Douglas A. CartyExecutive Vice President and Chief Financial
OfficerDuly Authorized Officer and Principal Financial
Officer
 19