##### Table of Contents



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, 2006
 Commission file number 000-10657
 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
 o þ
 
 15(d) þ o




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LAIDLAW INTERNATIONAL, INC.
 Page No.PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Consolidated Balance Sheets as of November 30, 2006
(Unaudited) and August 31, 2006
    
    
    2Consolidated Statements of Operations for the Three Months
Ended November 30, 2006 and 2005 (Unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Three Months
Ended November 30, 2006 and 2005 (Unaudited)
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    10Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    15Item 4.
    
    Controls and Procedures
    
    
    15PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    16Item 1A.
    
    Risk Factors
    
    
    16Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    16Item 6.
    
    Exhibits
    
    
    16SIGNATURES
    
    
    17302 Certification of Principal Executive Officer302 Certification of Principal Financial OfficerSection 906 Certification
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PART I.  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 LAIDLAW INTERNATIONAL, INC.
 
 CONSOLIDATED BALANCE SHEETS
 ($ in millions)
 November 30,
    
    
    August 31,2006
    
    
    2006(unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    95.9
    
    
    $
    318.7Accounts receivable
    
    
    369.8
    
    
    
    210.5Insurance collateral
    
    
    62.8
    
    
    
    106.4Parts and supplies
    
    
    35.9
    
    
    
    40.7Deferred income tax assets
    
    
    42.5
    
    
    
    39.6Other current assets
    
    
    27.5
    
    
    
    24.8Total current assets
    
    
    634.4
    
    
    
    740.7Property and equipmentLand
    
    
    163.2
    
    
    
    164.6Buildings
    
    
    192.2
    
    
    
    191.0Vehicles
    
    
    1,784.3
    
    
    
    1,753.4Other
    
    
    142.9
    
    
    
    137.12,282.6
    
    
    
    2,246.1Less: Accumulated depreciation
    
    
    (685.1
    )
    
    
    (648.2
    )1,597.5
    
    
    
    1,597.9Other assetsInsurance collateral
    
    
    350.4
    
    
    
    303.4Other long-term investments
    
    
    26.0
    
    
    
    29.3Contracts and customer relationships
    
    
    66.7
    
    
    
    68.5Deferred income tax assets
    
    
    239.2
    
    
    
    267.4Deferred charges and other assets
    
    
    34.0
    
    
    
    31.5716.3
    
    
    
    700.1Total assets
    
    $
    2,948.2
    
    
    $
    3,038.7
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LAIDLAW INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
($ in millions)
 November 30,
    
    
    August 31,2006
    
    
    2006(unaudited)LIABILITIESCurrent liabilitiesAccounts payable
    
    $
    86.6
    
    
    $
    140.3Accrued employee compensation
    
    
    108.7
    
    
    
    112.7Other accrued liabilities
    
    
    104.1
    
    
    
    95.8Current portion of insurance reserves
    
    
    140.5
    
    
    
    147.8Current portion of long-term debt
    
    
    34.7
    
    
    
    34.7Total current liabilities
    
    
    474.6
    
    
    
    531.3Long-term debt
    
    
    777.2
    
    
    
    772.6Insurance reserves
    
    
    349.3
    
    
    
    339.7Pension liability
    
    
    105.3
    
    
    
    104.5Other long-term liabilities
    
    
    80.3
    
    
    
    82.7Total liabilities
    
    
    1,786.7
    
    
    
    1,830.8SHAREHOLDERS EQUITYCommon shares; $0.01 par value per share;
issued and outstanding 79.3 million
(August 31, 2006  81.6 million)
    
    
    0.8
    
    
    
    0.8Additional paid in capital
    
    
    745.5
    
    
    
    814.5Accumulated other comprehensive income
    
    
    73.8
    
    
    
    77.8Retained earnings
    
    
    341.4
    
    
    
    314.8Total shareholders equity
    
    
    1,161.5
    
    
    
    1,207.9Total liabilities and shareholders equity
    
    $
    2,948.2
    
    
    $
    3,038.7
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LAIDLAW INTERNATIONAL, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 ($ in millions except per share amounts)
 (unaudited)
 Three Months EndedNovember 30,2006
    
    
    2005Revenue
    
    $
    858.1
    
    
    $
    846.8Compensation expense
    
    
    421.3
    
    
    
    406.7Vehicle related costs
    
    
    59.6
    
    
    
    63.1Fuel
    
    
    69.9
    
    
    
    65.3Insurance and accident claim costs
    
    
    43.8
    
    
    
    47.1Occupancy costs
    
    
    38.4
    
    
    
    38.7Depreciation and amortization
    
    
    62.0
    
    
    
    58.6Other operating expenses
    
    
    83.3
    
    
    
    70.6Operating income
    
    
    79.8
    
    
    
    96.7Interest expense
    
    
    (14.9
    )
    
    
    (5.5
    )Other income (expense), net
    
    
    (1.9
    )
    
    
    1.8Income from continuing operations before income taxes
    
    
    63.0
    
    
    
    93.0Income tax expense
    
    
    (22.9
    )
    
    
    (35.0
    )Income from continuing operations
    
    
    40.1
    
    
    
    58.0Income from discontinued operations
    
    
    
    
    
    
    0.3Net income
    
    $
    40.1
    
    
    $
    58.3Basic earnings per shareContinuing operations
    
    $
    0.50
    
    
    $
    0.58Discontinued operations
    
    
    
    
    
    
    Net income
    
    $
    0.50
    
    
    $
    0.58Diluted earnings per shareContinuing operations
    
    $
    0.50
    
    
    $
    0.58Discontinued operations
    
    
    
    
    
    
    Net income
    
    $
    0.50
    
    
    $
    0.58Dividends per share
    
    $
    0.17
    
    
    $
    0.15Average shares outstanding
    
    
    79.9
    
    
    
    100.2Effect of dilutive securities
    
    
    0.6
    
    
    
    0.4Average shares outstanding assuming dilution
    
    
    80.5
    
    
    
    100.6
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LAIDLAW INTERNATIONAL, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 ($ in millions)
 (unaudited)
 Three Months Ended November 30,2006
    
    
    2005Operating activitiesNet income
    
    $
    40.1
    
    
    $
    58.3Income from discontinued operations
    
    
    
    
    
    
    (0.3
    )Non-cash adjustments to net incomeDepreciation and amortization
    
    
    62.0
    
    
    
    58.6Deferred income taxes
    
    
    22.0
    
    
    
    34.2Other non-cash items
    
    
    3.5
    
    
    
    3.2Net change in certain operating assets and liabilitiesAccounts receivable
    
    
    (176.6
    )
    
    
    (162.1
    )Insurance collateral
    
    
    2.7
    
    
    
    (4.8
    )Accounts payable and accrued liabilities
    
    
    (0.5
    )
    
    
    1.7Insurance reserves
    
    
    2.9
    
    
    
    12.1Other assets and liabilities
    
    
    (4.3
    )
    
    
    (16.8
    )Net cash used by operating activities
    
    $
    (48.2
    )
    
    $
    (15.9
    )Investing activitiesPurchase of property and equipment
    
    $
    (129.5
    )
    
    $
    (57.9
    )Proceeds from sale of property and equipment
    
    
    19.2
    
    
    
    3.4Net decrease in performance bond collateral
    
    
    4.2
    
    
    
    0.6Net decrease in other investments
    
    
    
    
    
    
    0.1Net cash used by investing activities
    
    $
    (106.1
    )
    
    $
    (53.8
    )Financing activitiesRepurchase of common stock
    
    $
    (74.3
    )
    
    $
    Proceeds from issuance of long term debt
    
    
    13.4
    
    
    
    Principal payment on Term A debt
    
    
    (7.5
    )
    
    
    Net decrease in other long-term debt
    
    
    (0.2
    )
    
    
    (1.2
    )Other financing activities
    
    
    0.1
    
    
    
    Net cash used by financing activities
    
    $
    (68.5
    )
    
    $
    (1.2
    )Discontinued operationsOperating cash flows from discontinued operations
    
    $
    
    
    
    $
    0.5Net cash provided by discontinued operations
    
    $
    
    
    
    $
    0.5Net decrease in cash and cash equivalents
    
    $
    (222.8
    )
    
    $
    (70.4
    )Cash and cash equivalents  beginning of period
    
    
    318.7
    
    
    
    217.3Cash and cash equivalents  end of period
    
    $
    95.9
    
    
    $
    146.9
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LAIDLAW INTERNATIONAL, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE THREE MONTH PERIOD ENDED November 30, 2006
 (Unaudited)
 Note 1  Corporate overview and basis of presentation
 Corporate overview
  Basis of presentation
  Note 2  Comprehensive income
  Three Months Ended November 30,2006
    
    
    2005Net income
    
    $
    40.1
    
    
    $
    58.3Net unrealized gain (loss) on securities
    
    
    4.6
    
    
    
    (4.8
    )Net (loss) gain on interest rate swaps
    
    
    (0.9
    )
    
    
    1.4Net loss on fuel hedge
    
    
    (0.8
    )
    
    
    Foreign currency translation adjustments
    
    
    (6.9
    )
    
    
    7.2Total comprehensive income
    
    $
    36.1
    
    
    $
    62.1
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Note 3  Stock awards and options
  Stock options
 Restricted Shares
 Deferred Shares
 Note 4  Pension plans
  Three Months Ended November 30,2006
    
    
    2005Components of net pension costService cost
    
    $
    2.7
    
    
    $
    2.2Interest cost
    
    
    13.5
    
    
    
    12.2Expected return on plan assets
    
    
    (14.2
    )
    
    
    (12.6
    )Net pension cost
    
    $
    2.0
    
    
    $
    1.8
 Note 5  Material contingencies
 Legal proceedings
  7




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Environmental matters
  Income tax matters
  Note 6  Repurchase of common stock
  Note 7  Statement of cash flows
  8




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Note 8  Segment information
   Three Months Ended November 30,2006
    
    
    2005RevenueEducation services
    
    $
    501.7
    
    
    $
    463.7Greyhound
    
    
    279.5
    
    
    
    304.6Public transit
    
    
    76.9
    
    
    
    78.5Consolidated
    
    $
    858.1
    
    
    $
    846.8EBITDAEducation services
    
    $
    111.9
    
    
    $
    115.4Greyhound
    
    
    25.6
    
    
    
    34.9Public transit
    
    
    4.3
    
    
    
    5.0Consolidated
    
    
    141.8
    
    
    
    155.3Depreciation and amortization
    
    
    (62.0
    )
    
    
    (58.6
    )Operating income
    
    
    79.8
    
    
    
    96.7Interest expense, net
    
    
    (14.9
    )
    
    
    (5.5
    )Other income (expense), net
    
    
    (1.9
    )
    
    
    1.8Income tax expense
    
    
    (22.9
    )
    
    
    (35.0
    )Income from continuing operations
    
    
    40.1
    
    
    
    58.0Income from discontinued operations
    
    
    
    
    
    
    0.3Net income
    
    $
    40.1
    
    
    $
    58.3
  Note 9  Business interruption settlement
  9




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 General
 Corporate overview
  Results of Operations
 Three months ended November 30, 2006, and 2005
 Percentage of RevenueThree Months ended November 30,2006
    
    2005Revenue
    
    
    100.0
    %
    
    
    100.0
    %Compensation expense
    
    
    49.2
    
    
    
    48.0Vehicle related costs
    
    
    6.9
    
    
    
    7.5Fuel
    
    
    8.1
    
    
    
    7.7Insurance and accident claim costs
    
    
    5.1
    
    
    
    5.6Occupancy costs
    
    
    4.5
    
    
    
    4.6Depreciation and amortization
    
    
    7.2
    
    
    
    6.9Other operating expenses
    
    
    9.7
    
    
    
    8.3Operating income
    
    
    9.3
    
    
    
    11.4Interest expense
    
    
    (1.8
    )
    
    
    (0.6
    )Other income (expense), net
    
    
    (0.2
    )
    
    
    0.2Income before income taxes
    
    
    7.3
    
    
    
    11.0Income tax expense
    
    
    (2.6
    )
    
    
    (4.2
    )Income from continuing operations
    
    
    4.7
    
    
    
    6.8Income from discontinued operations
    
    
    
    
    
    
    0.1Net income
    
    
    4.7
    %
    
    
    6.9
    %
 10




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Education services
 EBITDARevenue
    
    EBITDA
    
    MarginThree months endedNovember 30, 2006
    
    $
    501.7
    
    
    $
    111.9
    
    
    
    22.3
    %November 30, 2005
    
    
    463.7
    
    
    
    115.4
    
    
    
    24.9Percentage increase (decrease)
    
    
    8.2
    %
    
    
    (3.0
    )%
    
    (260
    ) BP*
 
 *
    
    Decrease in EBITDA margin is expressed in basis points   Greyhound
 EBITDARevenue
    
    EBITDA
    
    MarginThree months endedNovember 30, 2006
    
    $
    279.5
    
    
    $
    25.6
    
    
    
    9.2
    %November 30, 2005
    
    
    304.6
    
    
    
    34.9
    
    
    
    11.5Percentage decrease
    
    
    (8.2
    )%
    
    
    (26.6
    )%
    
    (230
    ) BP*
 
 *
    
    Decrease in EBITDA margin is expressed in basis points   11




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Public transit
 EBITDARevenue
    
    EBITDA
    
    MarginThree months endedNovember 30, 2006
    
    $
    76.9
    
    
    $
    4.3
    
    
    
    5.6
    %November 30, 2005
    
    
    78.5
    
    
    
    5.0
    
    
    
    6.4Percentage decrease
    
    
    (2.0
    )%
    
    
    (14.0
    )%
    
    (80
    ) BP*
 
 *
    
    Decrease in EBITDA margin is expressed in basis points   Depreciation and amortization expense
  2006
    
    
    2005Education services
    
    $
    43.2
    
    
    $
    37.9Greyhound
    
    
    16.5
    
    
    
    18.2Public transit
    
    
    2.3
    
    
    
    2.5Consolidated
    
    $
    62.0
    
    
    $
    58.6
  Interest expense
  12




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Other income (expense), net
  Income tax expense
  Liquidity and capital resources
     Commitments and contingencies
  13




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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 and indemnification obligations;
    
    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 pay dividends;
    
    Potential changes in the mix of businesses we operate; and
    
    The inability to earn sufficient returns on pension plan assets thus requiring
increased funding.
  14




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LAIDLAW INTERNATIONAL, INC.
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
     
 Item 4. Controls and Procedures
   15




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LAIDLAW INTERNATIONAL, INC.
 
 PART II. OTHER INFORMATION
 
 Item 1. Legal proceedings
  
 Item 1A. Risk factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (c) Purchases of Equity Securities by the Issuer
  Total number
    
    Approximateof shares
    
    dollar value ofpurchased as
    
    shares thatpart of a
    
    may yet beTotal number
    
    
    
    
    
    publicly
    
    purchasedof shares
    
    Average price
    
    announced
    
    under thepurchased
    
    paid per share
    
    program
    
    program(millions)Repurchase periodSeptember 1  September 30
    
    
    1,194,400
    
    
    $
    27.26
    
    
    
    1,194,400
    
    
    $
    36.3October 1  October 31
    
    
    1,272,750
    
    
    
    28.53
    
    
    
    1,272,750
    
    
    
    November 1  November 30
    
    
    
    
    
    NA
    
    
    
    
    
    
    Total
    
    
    2,467,150
    
    
    
    27.92
    
    
    
    2,467,150
    
    
    
    
  Dividend restrictions
 
 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)
 16




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SIGNATURES
  LAIDLAW INTERNATIONAL, INC.By: /s/ Jeffrey W. SandersDate: January 5, 2007
    
    Jeffrey W. SandersVice President, Chief Financial OfficerDuly Authorized Officer and Principal Financial Officer
 17