<PAGE>
       S E C U R I T I E S  A N D  E X C H A N G E  C O M M I S S I O N
                             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 May 31, 2003
                        Commission file number 000-13109


                           LAIDLAW INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)

              DELAWARE                                          98-0390488
   (State or other jurisdiction                              (I.R.S. Employer
 of incorporation or organization)                          Identification No.)

                         55 Shuman Boulevard, Suite 400
                           Naperville, Illinois, 60563
                    (Address of principal executive offices)

        Registrant's telephone number, including area code (630) 848-3000

                                  Laidlaw Inc.
                             3221 North Service Road
                          Burlington, Ontario, L7R 3Y8
                        (Former name and former address)

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X]  NO [ ]

      Indicate by check mark whether the  registrant is an  accelerated  filer
(as defined in Rule 12b-2 of the Exchange Act). YES [ ]  NO [X]

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

      Indicate by check mark whether the  registrant  has filed all  documents
and  reports  required  to be  filed  by  Sections  12,  13 or  15(d)  of  the
Securities  Exchange Act of 1934 subsequent to the  distribution of securities
under a plan confirmed by a court. YES [X]  NO [ ]

      As of July 7, 2003, there were 103,777,419 shares of common stock, par
value $0.01 per share, outstanding.
<PAGE>
                           LAIDLAW INTERNATIONAL, INC.


<TABLE>
<CAPTION>
                                                                                              PAGE NO.
                                                                                             -----------
<S>                                                                                         <C>
PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements:

           Consolidated Balance Sheets as of May 31, 2003 (Unaudited) and
             August 31, 2002.............................................................          1
           Consolidated Statements of Operations for the Three Months and Nine
             Months Ended May 31, 2003 and 2002 (Unaudited)..............................          3
           Consolidated Statements of Comprehensive Loss for the Three Months and Nine
              Months Ended May 31, 2003 and 2002 ........................................          4
           Consolidated Statements of Cash Flows for the Three Months and Nine
              Months Ended May 31, 2003 and 2002 (Unaudited).............................          5
           Notes to Consolidated Financial Statements (Unaudited)........................          6

Item 2.    Management's Discussion and Analysis of Financial
              Condition and Results of Operations........................................         37

Item 3.    Quantitative  and  Qualitative  Disclosures  About  Market Risk...............         59

Item 4.    Controls and Procedures.......................................................         60


PART II.   OTHER INFORMATION

Item 5.    Legal Proceedings.............................................................         61

Item 6.    Exhibits and Reports on Form 8-K..............................................         66



SIGNATURES...............................................................................         67
</TABLE>

<PAGE>
                           LAIDLAW INTERNATIONAL, INC.

PART I. FINANCIAL INFORMATION

                           LAIDLAW INTERNATIONAL, INC.
               (DEBTOR-IN-POSSESSION AS OF JUNE 28, 2001 - NOTE 1)
                           CONSOLIDATED BALANCE SHEETS
                              (U.S. $ IN MILLIONS)

<TABLE>
<CAPTION>
                                                                                      MAY 31,              August 31,
                                                                                       2003                   2002
                                                                                     --------               --------
                                                                                   (UNAUDITED)
<S>                                                                                <C>                     <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents                                                            $  390.3               $  343.5
Restricted cash and cash equivalents (Note 2)                                            44.7                   75.8
Short-term deposits and marketable securities (Note 2)                                   31.7                   16.1
Trade accounts receivable (Note 3)                                                      630.6                  490.4
Other receivables                                                                        49.9                   54.9
Income taxes recoverable                                                                 27.4                   29.2
Parts and supplies                                                                       53.1                   50.4
Other current assets                                                                     63.7                   56.3
                                                                                     --------               --------
TOTAL CURRENT ASSETS                                                                  1,291.4                1,116.6
                                                                                     --------               --------
LONG-TERM INVESTMENTS                                                                   469.0                  417.9
                                                                                     --------               --------
PROPERTY AND EQUIPMENT
Land                                                                                    164.4                  162.2
Buildings                                                                               294.7                  284.3
Vehicles                                                                              2,282.8                2,128.3
Other                                                                                   402.1                  417.2
                                                                                     --------               --------
                                                                                      3,144.0                2,992.0
   Less:  Accumulated depreciation                                                    1,442.2                1,314.3
                                                                                     --------               --------
                                                                                      1,701.8                1,677.7
                                                                                     --------               --------
OTHER ASSETS
Goodwill (net of accumulated amortization and impairments of $2,977.8;
   August 31, 2002 - $776.0) (Note 4)                                                   781.9                2,976.8
Pension asset                                                                            16.8                   10.8
Deferred charges and other assets                                                        20.0                   12.0
                                                                                     --------               --------
                                                                                        818.7                2,999.6
                                                                                     --------               --------
TOTAL ASSETS                                                                         $4,280.9               $6,211.8
                                                                                     ========               ========
</TABLE>

        The accompanying notes are an integral part of these statements.
<PAGE>
                           LAIDLAW INTERNATIONAL, INC.
               (DEBTOR-IN-POSSESSION AS OF JUNE 28, 2001 - NOTE 1)
                           CONSOLIDATED BALANCE SHEETS
                              (U.S. $ IN MILLIONS)
<TABLE>
<CAPTION>
                                                                  MAY 31,           August 31,
                                                                   2003               2002
                                                                 --------           --------
                                                                (UNAUDITED)
<S>                                                              <C>                <C>
LIABILITIES
LIABILITIES NOT SUBJECT TO COMPROMISE
   CURRENT LIABILITIES
   Accounts payable                                              $  107.5           $  109.7
   Accrued liabilities                                              524.9              504.1
   Current portion of long-term debt                                 17.7               20.3
                                                                 --------           --------
   TOTAL CURRENT LIABILITIES                                        650.1              634.1
   LONG-TERM DEBT (Note 5)                                          240.6              204.4
   OTHER LONG-TERM LIABILITIES                                      666.0              442.1
LIABILITIES SUBJECT TO COMPROMISE (Note 6)                        3,977.1            3,977.1
COMMITMENTS AND CONTINGENCIES (Notes 7 and 13)
                                                                 --------           --------
TOTAL LIABILITIES                                                 5,533.8            5,257.7
                                                                 --------           --------
SHAREHOLDERS' EQUITY (DEFICIENCY)
Preference Shares (Note 8)                                            7.9                7.9
Common Shares; issued and outstanding
   325,927,870 (August 31, 2002 - 325,927,870) (Note 8)           2,222.6            2,222.6
Accumulated other comprehensive loss (Note 8)                      (379.7)            (258.7)
Deficit                                                          (3,103.7)          (1,017.7)
                                                                 --------           --------
TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY)                          (1,252.9)             954.1
                                                                 --------           --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)          $4,280.9           $6,211.8
                                                                 ========           ========
</TABLE>

        The accompanying notes are an integral part of these statements.


                                       2
<PAGE>
                           LAIDLAW INTERNATIONAL, INC.
               (DEBTOR-IN-POSSESSION AS OF JUNE 28, 2001 - NOTE 1)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (U.S. $ IN MILLIONS EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED                   NINE MONTHS ENDED
                                                                         MAY 31,                              MAY 31,
                                                               ---------------------------         ---------------------------
                                                                  2003             2002              2003              2002
                                                               ---------         ---------         ---------         ---------
<S>                                                            <C>               <C>               <C>               <C>
REVENUE
Education services                                             $   457.9         $   451.0         $ 1,314.8         $ 1,299.4
Public transit services                                             72.8              81.0             212.1             233.9
Greyhound                                                          291.4             297.5             847.5             863.2
Healthcare transportation services (Note 3)                        259.8             251.1             759.3             737.3
Emergency management services (Note 3)                             120.9             106.7             352.0             320.9
                                                               ---------         ---------         ---------         ---------
TOTAL REVENUE                                                    1,202.8           1,187.3           3,485.7           3,454.7
Operating expenses                                                 929.8             909.7           2,742.8           2,680.4
Selling, general and administrative expenses                       122.1             115.9             350.1             337.7
Depreciation expense                                                76.8              76.9             228.4             225.5
Amortization expense (Note 4)                                        0.4              22.7               0.9              68.2
                                                               ---------         ---------         ---------         ---------
INCOME FROM OPERATING SEGMENTS                                      73.7              62.1             163.5             142.9
Interest expense (Note 6)                                           (6.6)             (6.6)            (19.6)            (21.5)
Other financing related expenses (Note 9)                           (3.9)            (13.1)            (35.0)            (42.6)
Other income                                                         0.5               1.9              15.0               9.0
                                                               ---------         ---------         ---------         ---------
INCOME BEFORE INCOME TAXES                                          63.7              44.3             123.9              87.8
Income tax expense                                                  (1.5)             (1.5)             (4.5)             (4.7)
                                                               ---------         ---------         ---------         ---------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
   PRINCIPLE                                                        62.2              42.8             119.4              83.1
Cumulative effect of change in accounting
   principle (Note 4)                                                 --                --          (2,205.4)               --
                                                               ---------         ---------         ---------         ---------
NET INCOME (LOSS)                                              $    62.2         $    42.8         ($2,086.0)        $    83.1
                                                               =========         =========         =========         =========
BASIC EARNINGS (LOSS) PER SHARE
Income before cumulative effect of change in accounting
   principle                                                   $    0.19         $    0.13         $    0.37         $    0.25
Cumulative effect of change in accounting principle                   --                --             (6.77)               --
                                                               ---------         ---------         ---------         ---------
Net income (loss)                                              $    0.19         $    0.13         ($   6.40)        $    0.25
                                                               =========         =========         =========         =========
DILUTED EARNINGS (LOSS) PER SHARE
Income before cumulative effect of change in accounting
   principle                                                   $    0.19         $    0.13         $    0.37         $    0.25
Cumulative effect of change in accounting principle                   --                --             (6.77)               --
                                                               ---------         ---------         ---------         ---------
Net income (loss)                                              $    0.19         $    0.13         ($   6.40)        $    0.25
                                                               =========         =========         =========         =========
</TABLE>

        The accompanying notes are an integral part of these statements.


                                       3
<PAGE>
                           LAIDLAW INTERNATIONAL, INC.
               (DEBTOR-IN-POSSESSION AS OF JUNE 28, 2001 - NOTE 1)
                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                              (U.S. $ IN MILLIONS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                       MAY 31,                          MAY 31,
                                                              ------------------------         -------------------------
                                                                2003             2002            2003             2002
                                                              --------        --------         --------         --------
<S>                                                           <C>             <C>             <C>               <C>


NET INCOME (LOSS)                                             $   62.2        $   42.8        ($2,086.0)        $   83.1
Unrealized gains (losses) on securities net of
   reclassification adjustments for losses included in
   net income (net of NIL taxes)                                   5.7            (4.4)             9.2              2.1
Foreign currency translation adjustments
   arising during the period (net of NIL taxes)                   29.7            17.8             46.2              4.9
Minimum pension liability adjustments
   (net of NIL taxes)                                               --              --           (176.4)           (72.8)

                                                              --------        --------         --------         --------
COMPREHENSIVE INCOME (LOSS)                                   $   97.6        $   56.2        ($2,207.0)        $   17.3
                                                              ========        ========         ========         ========
</TABLE>

        The accompanying notes are an integral part of these statements.


                                       4
<PAGE>
                           LAIDLAW INTERNATIONAL, INC.
               (DEBTOR-IN-POSSESSION AS OF JUNE 28, 2001 - NOTE 1)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (U.S. $ IN MILLIONS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                            MAY 31,                           MAY 31,
                                                                   -------------------------         -------------------------
                                                                     2003             2002             2003             2002
                                                                   --------         --------         --------         --------
<S>                                                                <C>              <C>             <C>               <C>
OPERATING ACTIVITIES
Net income (loss) for the period                                   $   62.2         $   42.8        ($2,086.0)        $   83.1
Items not affecting cash:
  Depreciation and amortization                                        77.2             99.6            229.3            293.7
  Other financing related expenses                                      3.9             13.1             35.0             42.6
  Cumulative effect of change in accounting principle                    --               --          2,205.4               --
  Other items                                                          (1.1)            (1.9)            (8.1)           (10.8)
Increase (decrease) in claims liability and
  professional liability insurance accruals                             7.4             11.9             56.1             (4.9)
Decrease in accrued interest                                           (4.4)            (4.4)            (4.3)            (4.9)
Cash provided by (used in financing)
  other working capital items                                          24.9             (7.8)          (141.1)          (102.6)
Cash portion of other financing related expenses                       (4.3)            (4.5)           (23.4)           (23.2)
Decrease (increase) in restricted cash and cash equivalents
                                                                       33.9             (7.4)             0.9            (21.3)
                                                                   --------         --------         --------         --------
NET CASH PROVIDED BY OPERATING ACTIVITIES                          $  199.7         $  141.4        $  263.8          $  251.7
                                                                   --------         --------         --------         --------
INVESTING ACTIVITIES
Purchase of property, equipment and other assets,
  net of proceeds from sale                                        ($ 104.2)        ($  75.6)       ($ 208.7)         ($ 153.7)
Expended on acquisitions                                               (1.4)            (1.4)            (4.6)            (1.9)
Net increase in investments                                            (3.0)           (10.2)           (37.3)           (19.4)
Proceeds from sale of assets                                             --               --               --              4.2
                                                                   --------         --------         --------         --------
NET CASH USED IN INVESTING ACTIVITIES                              ($ 108.6)        ($  87.2)       ($ 250.6)         ($ 170.8)
                                                                   --------         --------         --------         --------
FINANCING ACTIVITIES
Net increase (decrease) in long-term debt
  and other long-term liabilities                                  $   18.6         ($  15.7)       $   33.6          ($  29.6)
                                                                   --------         --------         --------         --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                $   18.6         ($  15.7)       $   33.6          ($  29.6)
                                                                   --------         --------         --------         --------
NET INCREASE IN CASH AND CASH EQUIVALENTS                          $  109.7         $   38.5        $   46.8          $   51.3
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD*                      280.6            294.0            343.5            281.2
                                                                   --------         --------         --------         --------
CASH AND CASH EQUIVALENTS - END OF PERIOD*                         $  390.3         $  332.5        $  390.3          $  332.5
                                                                   ========         ========         ========         ========
</TABLE>

   *These amounts represent the unrestricted cash and cash equivalents of the
                           Company - Refer to Note 2.

        The accompanying notes are an integral part of these statements.


                                       5
<PAGE>
                           LAIDLAW INTERNATIONAL, INC.
                   (DEBTOR-IN-POSSESSION AS OF JUNE 28, 2001)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE NINE MONTHS ENDED MAY 31, 2003

NOTE 1 - VOLUNTARY PETITIONS FOR REORGANIZATION AND BASIS OF PRESENTATION

Voluntary petitions for reorganization

On June 28, 2001, Laidlaw Inc. (the "Company") and five of its direct and
indirect subsidiaries (collectively, the "Debtors") filed voluntary petitions
for relief under chapter 11 of the United States Bankruptcy Code, 11 U.S.C.
101-1330 (the "Bankruptcy Code"), in the United States Bankruptcy Court for the
Western District of New York (the "Bankruptcy Court"). The other Debtors
include: Laidlaw USA, Inc. ("Laidlaw USA"), Laidlaw Investments Ltd. ("LIL"),
Laidlaw International Finance Corporation ("LIFC"), Laidlaw One, Inc. ("Laidlaw
One") and Laidlaw Transportation, Inc. ("LTI"). In addition, the Company and LIL
commenced Canadian insolvency proceedings under the Canada Companies' Creditors
Arrangement Act ("CCAA") in the Ontario Superior Court of Justice in Toronto,
Ontario (the "Canadian Court"). None of the Company's operating subsidiaries was
included in the filings.

At May 31, 2003, the Debtors remained in possession of their respective
properties and were managing their businesses as debtors-in-possession. Pursuant
to the Bankruptcy Code and the CCAA, however, the Debtors could not engage in
transactions outside the ordinary course of business without the approval of the
Bankruptcy Court and the Canadian Court.

The Company reorganized its affairs under the protection of the Bankruptcy Code
and the CCAA and proposed a plan of reorganization (the "Plan") for itself and
the other Debtors. On February 27, 2003, the Bankruptcy Court entered an order
confirming the Plan. On February 28, 2003, the Canadian Court issued an order
recognizing the Bankruptcy Court's confirmation order and implementing it in
Canada with respect to the Company's Canadian insolvency proceeding. The Plan
provides for the satisfaction of claims against and interests in the Company and
the other Debtors, including the liabilities subject to compromise (See Note 6).
On June 23, 2003, the Plan became effective. In accordance with the terms of the
Plan, the Company engaged in an internal restructuring that resulted in the
transfer, directly or indirectly, of all the assets of the Company to LIL which
domesticated into the United States as a Delaware corporation and changed its
name to Laidlaw International, Inc. fka LIL ("LII"). The consolidated financial
statements of LII for periods prior to the effective date of the Plan consist of
the consolidated financial statements of Laidlaw Inc.

Basis of presentation

The accompanying interim consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
("U.S. GAAP") for interim reporting, which conform, in all material respects
(except as indicated in Note 12), with accounting principles generally accepted
in Canada ("Canadian GAAP"). Accordingly, these financial statements do not
include all of the disclosures required by generally accepted accounting
principles for annual financial statements. In the opinion of management, all
adjustments considered necessary for fair presentation have been included. All
such adjustments are of a normal, recurring nature. Operating results for the
nine months ended May 31, 2003 are not necessarily indicative of the results
that may be expected for the full year


                                       6
<PAGE>
ending August 31, 2003. For further information, see the Company's consolidated
financial statements, including the accounting policies and notes thereto, for
the fiscal year ended August 31, 2002.

The preparation of financial statements in accordance with generally accepted
accounting principles requires the Company to make estimates and assumptions
that affect reported amounts of assets, liabilities, revenue and expenses, and
disclosure of contingencies. Future events could alter such estimates in the
near term.

The Company uses significant estimates and assumptions of future events
surrounding the settling of the claims liability reserves. While the reserves
are actuarially determined, the process of determining the reserves involves
predicting such factors as future medical costs, the ultimate settlement amounts
and court awards. As a result, there is a reasonable possibility that the
recorded claims liabilities could change materially.

Since the Company successfully completed the reorganization described above, the
Company will be required to adopt "fresh start" accounting effective June 1,
2003, as at which date all significant conditions relating to the Plan were
satisfied. This accounting will require that assets and liabilities be recorded
at fair value, based on values determined in connection with the restructuring.
Certain reported asset and liability balances do not yet give effect to the
adjustments that will result from the adoption of "fresh-start" accounting and
as a result, will change materially.

Goodwill impairment

Effective September 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142 ("SFAS 142") "Accounting for Goodwill and Other
Intangible Assets" and as a result, the Company ceased to amortize goodwill. In
lieu of amortization, SFAS 142 requires that goodwill be reviewed for impairment
upon adoption of SFAS 142 and at least annually thereafter. As a result, on
September 1, 2002, the Company recorded a non-cash charge of $2,205.4 million as
a cumulative effect of change in accounting principle (see Note 4).


                                       7
<PAGE>
NOTE 2 - RESTRICTED CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash and cash equivalents of $44.7 million (August 31, 2002 - $75.8 million) and
short-term deposits and marketable securities of $31.7 million (August 31, 2002
- $16.1 million) are assets of the Company's wholly owned insurance subsidiaries
and are used to support the current portion of claims liabilities under the
Company's self-insurance program. If these amounts are withdrawn from the
subsidiaries, they will have to be replaced by other suitable financial
assurances. Given the recent financial position of the Company, management has
concluded that such cash and cash equivalents and short-term deposits and
marketable securities of the insurance subsidiaries are restricted.

NOTE 3 - ACCOUNTS RECEIVABLE AND REVENUE

Trade accounts receivable are net of an allowance for doubtful accounts of $5.4
million (August 31, 2002 - $ 4.6 million) in the education services, public
transit services and Greyhound businesses and net of $504.9 million (August 31,
2002 - $468.6 million) of allowances for uncompensated care and contractual
allowances in the healthcare transportation services and emergency management
services businesses.

Revenue for the healthcare transportation services and emergency management
services businesses is reported net of allowances for uncompensated care and
contractual allowances.

NOTE 4 - GOODWILL AND OTHER INTANGIBLE ASSETS

Effective September 1, 2002, the Company adopted SFAS 142 and, as a result, the
Company ceased to amortize goodwill. In lieu of amortization, SFAS 142 requires
that goodwill be reviewed for impairment upon adoption of SFAS 142 and at least
annually thereafter. Under SFAS 142, goodwill impairment is deemed to exist if
the carrying amount of a reporting unit exceeds its estimated fair value and the
carrying amount of the goodwill exceeds its estimated fair value. To determine
estimated fair value of the reporting units the Company utilized independent
valuations of the underlying businesses. This methodology differs from the
Company's previous accounting policy, which used undiscounted cash flows to
determine possible impairment.

During the three months ended November 30, 2002, the Company completed the
impairment assessment as required by SFAS 142 and determined that a significant
portion of its goodwill was impaired as at September 1, 2002. As a result, the
Company recorded a non-cash charge of $2,205.4 million as a cumulative effect of
change in accounting principle.

In connection with adopting SFAS 142, the Company reassessed the useful lives
and classifications of its identifiable intangible assets other than goodwill
and determined that the useful lives and classifications continue to be
appropriate.


                                       8
<PAGE>
The changes in the carrying amount of goodwill by segment for the nine months
ended May 31, 2003 are as follows: ($ millions)

<TABLE>
<CAPTION>
                                                       PUBLIC                          HEALTHCARE       EMERGENCY
                                     EDUCATION        TRANSIT                        TRANSPORTATION     MANAGEMENT
                                     SERVICES         SERVICES         GREYHOUND        SERVICES         SERVICES          TOTAL
                                     --------         --------         --------         --------         --------         --------
<S>                                  <C>              <C>              <C>           <C>                <C>               <C>
Balance as of August 31, 2002        $  557.7         $   99.0         $  482.9         $1,328.7         $  508.5         $2,976.8
                                     --------         --------         --------         --------         --------         --------
Impairment loss                         (54.5)           (99.0)          (482.9)        (1,146.0)          (423.0)        (2,205.4)
Other                                     9.3               --               --               --              1.2             10.5
                                     --------         --------         --------         --------         --------         --------
Balance as of May 31, 2003           $  512.5         $     --         $     --         $  182.7         $   86.7         $  781.9
                                     ========         ========         ========         ========         ========         ========
</TABLE>

Actual results of operations for the nine months ended May 31, 2003 and pro
forma results of operations for the nine months ended May 31, 2002, had the
goodwill not been amortized in that period in accordance with the provisions of
SFAS 142, are as follows: ($ millions)

<TABLE>
<CAPTION>
                                                                            NINE MONTHS ENDED
                                                                                 MAY 31,
                                                                        -------------------------
                                                                          2003             2002
                                                                        --------         --------
<S>                                                                    <C>              <C>
Reported income before cumulative effect of change in accounting
   principle                                                            $  119.4         $   83.1
Add:  goodwill amortization                                                   --             67.7
                                                                        --------         --------
Adjusted income before cumulative effect of change in accounting
   principle                                                               119.4            150.8
Cumulative effect of change in accounting principle                     (2,205.4)              --
                                                                        --------         --------
Adjusted net income (loss)                                             ($2,086.0)       $  150.8
                                                                        ========         ========
</TABLE>

Actual basic and diluted loss per share for the nine months ended May 31, 2003
and pro forma basic and diluted earnings per share for the Nine months ended May
31, 2002, had the goodwill not been amortized in that period in accordance with
the provision of SFAS 142, are as follows: ($ per share)

<TABLE>
<CAPTION>
                                                                          NINE MONTHS ENDED
                                                                               MAY 31,
                                                                        -------------------
                                                                        2003          2002
                                                                        -----         -----
<S>                                                                    <C>            <C>
Reported income before cumulative effect of change in accounting
   principle                                                            $0.37         $0.25
Goodwill amortization                                                      --          0.21
                                                                        -----         -----
Adjusted income before cumulative effect of change in accounting
   principle                                                            $0.37          0.46
Cumulative effect of change in accounting principle                     (6.77)           --
                                                                        -----         -----
Adjusted net income (loss)                                             ($6.40)        $0.46
                                                                        =====         =====
</TABLE>


                                       9
<PAGE>
NOTE 5 - LONG-TERM DEBT

In October 2000, Greyhound Lines, Inc. ("Greyhound") entered into a revolving
credit facility, with Foothill Capital Corporation to fund working capital needs
and for general corporate purposes. Under the terms of this revolving credit
facility, Greyhound was required to meet certain financial covenants, including
a minimum cash flow to interest expense ratio, a maximum debt to cash flow ratio
and a minimum level of net worth. Because management was unable to determine
with reasonable assurance whether Greyhound would remain in compliance with
these covenants in the future, Greyhound initiated discussions with the agent
bank in an effort to obtain modifications to the agreement. On May 14, 2003,
Greyhound entered into an amended and restated revolving credit facility (the
"Greyhound Facility") superceding the previous revolving credit facility.
Changes to the agreement include, among other things, a lower advance rate on
buses, the addition of all remaining unpledged buses to the collateral base, a
modified advance rate on real estate collateral, increased rates of interest on
borrowings and letter of credit fees, an increase in the letter of credit
sub-facility, a lower minimum cash flow to interest expense ratio and a higher
maximum debt to cash flow ratio for the balance of 2003, elimination of the
minimum net worth covenant, the addition of a minimum cash flow covenant and a
waiver of any defaults arising under the previous revolving credit facility with
respect to the financial covenants for the period ended March 31, 2003.

Letters of credit or borrowings are available under the Greyhound Facility based
upon the total of 80% of the appraised wholesale value of bus collateral, plus
65% of the quick sale value of certain real property collateral, minus $20
million, subject to a maximum of $125 million, with a $70 million letter of
credit sub-facility. Borrowings under the Greyhound Facility are available to
Greyhound at a rate equal to Wells Fargo Bank's prime rate plus 1.5% per annum
or LIBOR plus 3.5% per annum as selected by Greyhound. Letter of credit fees are
3.5% per annum. Borrowings under the Greyhound Facility mature on October
24,2004. The Greyhound Facility is secured by liens on substantially all of the
assets of Greyhound and the stock and assets of certain of its subsidiaries. The
Greyhound Facility is subject to certain affirmative and negative operating and
financial covenants, including maximum total debt to cash flow ratio; minimum
cash flow to interest ratio; minimum cash flow; limitation on non-bus capital
expenditures; limitations on additional liens, indebtedness, guarantees, asset
disposals, advances, investments and loans; and restrictions on the redemption
or retirement of certain subordinated indebtedness or equity interests, payment
of dividends and transactions with affiliates, including the Company. As of
March 31, 2003, Greyhound was in compliance with all such covenants.

The financial covenants established for 2003 remain tight because they were set
at levels slightly below (in the case of the minimum cash flow to interest
expense ratio and minimum cash flow) or slightly above (in the case of the
maximum debt to cash flow ratio) the levels indicated in Greyhound's current
financial forecast. The Greyhound Facility further provides that Greyhound will
deliver to the agent bank its financial forecast for 2004 by no later than
September 2003, and Greyhound and the agent bank will negotiate in good faith to
determine new financial covenants for 2004. Although Greyhound has been
successful in obtaining necessary amendments to the Greyhound Facility in the
past, there can be no assurances that Greyhound will obtain additional
modifications in the future if needed, or that the cost of any future
modifications or other changes in the terms of the Greyhound Facility would not
have a material effect on Greyhound.

As of May 31, 2003, the Company had outstanding borrowings under the Greyhound
Facility of $48.1 million, issued letters of credit of $46.2 million and had
availability of $30.7 million.


                                       10



<PAGE>

NOTE 6 - LIABILITIES SUBJECT TO COMPROMISE

The principal categories of claims classified as liabilities subject to
compromise under reorganization proceedings are identified below. All amounts
below may be subject to future adjustment depending on Bankruptcy Court action,
further developments with respect to disputed claims, or other events, including
the reconciliation of claims filed with the Bankruptcy Court to amounts included
in the Company's records. Additional prepetition claims may arise from the
rejection of additional executory contracts or unexpired leases by the Company.
Under a confirmed plan or plans of reorganization, all prepetition claims may be
paid and discharged at amounts substantially less than their allowed amounts.

On a consolidated basis, recorded liabilities subject to compromise under the
reorganization proceedings consisted of the following: $ (in millions)

<TABLE>
<CAPTION>
                                                     MAY 31,     August 31,
                                                      2003          2002
                                                      ----          ----
<S>                                                 <C>          <C>
Accrued liabilities                                 $   11.3      $   11.3
Safety-Kleen Corp. ("Safety-Kleen") Guarantees          77.3          77.3
Derivative liabilities                                  89.5          89.5
Safety-Kleen settlement (Note 13)                      225.0         225.0
Accrued interest payable                               370.7         370.7
Facility (as defined in Note 9)                      1,163.3       1,163.3
Debentures (as defined in Note 9)                    2,040.0       2,040.0
                                                    --------      --------
                                                    $3,977.1      $3,977.1
                                                    ========      ========
</TABLE>

As a result of the Debtor's chapter 11 filing, principal and interest payments
may not be made on prepetition debt of the Debtors without Bankruptcy Court
approval or until a reorganization plan or plans defining the repayment terms,
has been confirmed and the Company has emerged. The total interest on
prepetition debt that was not paid or accrued during the nine months ended May
31, 2003 was $214.1 million (nine months ended May 31, 2002 - $205.0 million)
and $73.2 million during the three months ended May 31, 2003 (three months ended
May 31, 2002 - $68.2 million). Since June 29, 2001, the total interest on this
debt that was not paid or accrued was $538.6 million. The Bankruptcy Code
generally disallows the payment of interest that accrues post-petition with
respect to unsecured or under-secured claims.

The Debtors are parties to litigation matters and claims that are incurred in
the normal course of its operations. Generally, litigation related to "claims",
as defined by the Bankruptcy Code, is stayed. The outcome of the bankruptcy
process on these matters cannot be predicted with certainty.

Pursuant to the plan of reorganization, the amount of claims under the Facility,
including prepetition interest, in Class 4 was fixed at $1,305.4 million and the
amount of claims under the Debentures, including prepetition interest, in
Classes 5A and 5B was fixed at $2,159.3 million and $93.4 million, respectively.
In addition, pursuant to an order of the Bankruptcy Court dated February 27,
2003, the aggregate amount of general unsecured claims in Class 6 was estimated
at $430.7 million for purposes of determining the allocation of distributions
among the holders of claims in Classes 4, 5A and 6. The Company continues to
review the proofs of claim and has filed or will file appropriate objections to
Class 6 claims in the Bankruptcy Court. To the extent the actual aggregate
allowed amount of claims in Class 6 differs from the estimated amount, the pro
rata distributions to holders of claims in Class 6 will be adjusted accordingly
pursuant to the procedures set forth in the plan of reorganization.


                                       11
<PAGE>
NOTE 7 - COMMITMENTS AND CONTINGENCIES

Letters of credit

At May 31, 2003, the Company had $156.8 million (August 31, 2002 - $124.1
million) in outstanding letters of credit.

Environmental matters

The Company's operations are subject to numerous environmental laws, regulations
and guidelines adopted by various governmental authorities in the jurisdictions
in which the Company operates. Liabilities are recorded when environmental
liabilities are either known or considered probable and can be reasonably
estimated. On an ongoing basis, management assesses and evaluates environmental
risk and, when necessary, conducts appropriate corrective measures. The Company
provides for environmental liabilities using its best estimates. Actual
environmental liabilities could differ significantly from these estimates.

Income tax matters

The respective tax authorities, in the normal course, audit the Company's tax
filings of previous fiscal years. Management believes that there is no tax audit
either threatened or pending against the Company that, if resolved against the
Company, would have a materially adverse effect upon the Company's consolidated
financial position or results of operations.

Legal proceedings

The Company is a defendant in various lawsuits arising in the ordinary course of
business, primarily cases involving personal injury, property damage or
employment related claims. Based on the Company's assessment of known claims and
its historical claims payout pattern and discussion with internal and outside
legal counsel and risk management personnel, management believes that there is
no proceeding either threatened or pending against the Company relating to such
personal injury and/or property damage claims arising out of the ordinary course
of business that, if resolved against the Company, would have a materially
adverse effect upon the Company's consolidated financial position or results of
operations.

As described in Note 1, the Debtors filed a voluntary petition for
reorganization under the Bankruptcy Code on June 28, 2001, a plan of
reorganization was confirmed by the Bankruptcy Court and Canadian Court on
February 27, 2003 and February 28, 2003, respectively, and became effective on
June 23, 2003. As a result of the Company's voluntary petitions for relief under
the protection of the Bankruptcy Code and the CCAA, the actions described below
were stayed with respect of the Debtors. In addition, certain of these
proceedings have been settled as described below. Upon emergence from the
Company's chapter 11 proceedings, the claims against the Debtors discussed below
that had not been settled were extinguished.

The Company was a party to securities litigation commenced by shareholders of
the Company and of Safety-Kleen and by bondholders of the Company and
Safety-Kleen. As a result of the Company's voluntary petitions for relief under
the protection of the Bankruptcy Code and the CCAA, these actions were stayed
with respect to the Company. A settlement of securities


                                       12
<PAGE>
litigation commenced by bondholders of the Company has been approved by the
Bankruptcy Court, the Canadian Court and the federal court in South Carolina.
After the settlement being fully implemented on the current terms, the plaintiff
bondholder classes would be paid $42.875 million and the estate of the Company
would receive $12.5 million (of which the estate has already received $11.5
million prior to May 31, 2003 with the remainder being received in June 2003).
Pursuant to an order of the Bankruptcy Court, the other securities claims were
subordinated and received no distributions under the plan of reorganization. See
Note 13 for additional details with respect to the various securities litigation
cases.

Healthcare Services issues

A substantial majority of the Company's healthcare services revenue is
attributable to payments received from third-party payors including Medicare,
Medicaid and private insurers. The Company is subject to various regulatory
requirements in connection with its participation in the Medicare and Medicaid
programs. The Center for Medicare and Medicaid Services has enacted rules that
will revise the policy on Medicare coverage of ambulance services focusing on
the medical necessity for the particular ambulance services. Rule changes in
this area will impact the business of the Company. The Company has implemented a
plan, which it believes will mitigate potential adverse effects of rule changes
on its business.

The Company, like other Medicare and Medicaid providers, is subject to
government audits of its Medicare and Medicaid reimbursement claims.
Accordingly, retroactive revenue adjustments from these programs could occur.
The Company is also subject to the Medicare and Medicaid fraud and abuse laws,
which prohibit any bribe, kick-back or rebate in return for the referral of
Medicare or Medicaid patients. Violations of these prohibitions may result in
civil and criminal penalties and exclusion from participation in the Medicare
and Medicaid programs. The Company has implemented policies and procedures that
it believes will assure that it is in substantial compliance with these laws and
has accrued provisions, as appropriate, for settlement of prior claims.

The Company is currently undergoing investigations by certain government
agencies regarding compliance with Medicare fraud and abuse statutes. The
Company is cooperating with the government agencies conducting these
investigations and is providing requested information to the governmental
agencies. These reviews are covering periods prior to the Company's acquisition
of the operations of certain businesses, as well as for periods after
acquisition. Management believes that the remedies existing under specific
purchase agreements and accruals established in the consolidated financial
statements are sufficient.

Fuel purchase commitments

Historically, fuel costs represent approximately 3% to 6% of revenue. Due to the
significance of fuel expenses, particularly diesel fuel, to the operations of
the Company and the historical volatility of fuel prices, the Company has
initiated a program to minimize the fluctuations in the price of its diesel fuel
purchases. The intent of the program is to mitigate the impact of fuel price
changes on the Company's operating margins and overall profitability by entering
into forward supply contracts ("FSCs") with certain vendors. The FSCs generally
stipulate set bulk delivery volumes at prearranged prices for a set period. The
volumes agreed to be purchased by the Company are well below the forecasted
total bulk fuel needs for the given location. Therefore, the risk of being
forced to purchase fuel through the FSCs that is not required by the Company is
minimal. Also, to the extent that the Company enters FSCs for portions of its
total


                                       13
<PAGE>
fuel needs, it may not realize the benefit of decreases in fuel prices.
Conversely, to the extent that the Company does not enter into FSCs for portions
of its total fuel needs, it may be adversely affected by increases in fuel
prices.

Potential Pension Plan funding requirements

Greyhound and certain of its subsidiaries sponsor the following U.S. deferred
benefit pension plans (the "Greyhound U.S. Plans"):

      -     Greyhound Lines, Inc. Salaried Employees Defined Benefit Plan
            ("Greyhound Salaried Plan");

      -     Greyhound Lines, Inc. Amalgamated Transit Union Local 1700 Council
            Retirement & Disability Plan ("ATU Plan");

      -     Texas, New Mexico and Oklahoma Coaches, Inc. Employees Retirement
            Plan;

      -     Vermont Transit Co. Inc. Employees Defined Benefit Pension Plan
            ("Vermont Transit Plan");

      -     Carolina Coach Company Pension Plan;

      -     Carolina Coach Company International Association of Machinist
            Pension Plan; and

      -     Carolina Coach Company Amalgamated Transit Union Pension Plan.

The ATU Plan covers approximately 14,000 current and former employees hired
before November 1, 1983 by Greyhound, fewer than 1,000 of whom are active
employees. The ATU Plan provides retirement benefits to the covered employees
based upon a percentage of average final earnings, reduced pro rata for service
of less than 15 years. Under the terms of the collective bargaining agreement,
participants in this plan accrue benefits as long as no contributions are due
from the Company. During fiscal 2002, the ATU Plan actuary advised the Company
and the union that the decline in the financial markets had made it likely that
contributions to the ATU Plan would be required for the plan in calendar 2002.
The Company and union met and agreed to freeze service and wage accruals
effective March 15, 2002. The Greyhound Salaried Plan covered salaried employees
of Greyhound through May 7, 1990, when the plan was curtailed. The Vermont
Transit Plan covered substantially all employees at Vermont Transit Company
through June 30, 2000, when the plan was curtailed. The other Greyhound U.S.
Plans cover salaried and hourly personnel of other Greyhound subsidiaries.
Except as described below, it is the Company's policy to fund the minimum
required contribution under existing laws.

As of December 31, 2002, the Greyhound U.S. Plans had a combined projected
benefit obligation ("PBO"), discounted at 6.5%, of $768.0 million. The ATU Plan
represents approximately 90% of the PBO. Over the last two calendar years, the
PBO has increased $69.5 million as interest accretion on the obligation and the
effect of a decrease in the discount rate of 1.3% have more that offset
reductions due to benefit payments. In addition, plan assets have declined
$216.1 million over the last two calendar years due to benefit payments and
losses on plan assets. As a result, although plan assets exceeded the PBO by
$41.6 million at December 31, 2000, the PBO now exceeds plan assets resulting in
the plans being underfunded by $244.0 million at December 31, 2002.

Further, in connection with its bankruptcy reorganization, the Company and the
United States Pension Benefit Guaranty Corporation ("PBGC"), a United States
government agency that administers the mandatory termination insurance program
for defined benefit pension plans under the Employee Retirement Income Security
Act ("ERISA"), have agreed to the economic terms relating to claims asserted by
the PBGC against the Debtors regarding the funding levels of the Greyhound U.S.
Plans (the "PBGC Agreement"). Under the PBGC Agreement, upon the consummation of
the Plan on June 23, 2003, the Company and its subsidiaries contributed $50
million in cash to the Greyhound U.S. Plans and LII issued 3,777,419 shares of
its common stock


                                       14
<PAGE>
equal in value to $50 million to a trust (the "Pension Plan Trust"). Further,
LII will contribute an additional $50 million in cash to the Greyhound U.S.
Plans in June 2004.

The PBGC Agreement provides that the PBGC will be granted a first priority lien
on the common stock held in the Pension Plan Trust. The trustee of the Pension
Plan Trust will sell the common stock as soon as practicable, but in no event
later than the end of 2004. All proceeds from sales of this stock will be
contributed directly to the Greyhound U.S. Plans. If the proceeds from the sales
of common stock exceed $50 million, the excess amount may be credited against
the next-due minimum funding obligations of the Company and its subsidiaries,
but will not reduce the June 2004 required contribution under the PBGC
Agreement. If the proceeds from the sales of common stock do not aggregate $50
million, the Company and its subsidiaries will be required to contribute the
amount of the shortfall in cash to the Greyhound U.S. Plans at the end of
calendar 2004.

These contributions and transfers will be in addition to the contributions to
the Greyhound U.S. Plans, if any, required under the minimum funding
requirements of ERISA. The PBGC also will receive a second priority lien on the
assets of the Company's operating subsidiaries (other than Greyhound and its
subsidiaries).

Based upon current regulations and plan asset values at April 30, 2003, and
assuming annual investment returns exceed 3% and that the contributions required
under the PBGC Agreement are made consistent with the terms of the PBGC
Agreement, the Company does not anticipate any significant additional minimum
funding requirements for the ATU Plan over the next several years. However,
there is no assurance that the ATU Plan will be able to earn the assumed rate of
return, that new regulations may result in changes in prescribed actuarial
mortality tables or discount rates, or that there will be market driven changes
in the discount rates, which would result in the Company being required to make
significant additional minimum funding contributions in the future.

NOTE 8- SHAREHOLDERS' EQUITY (DEFICIENCY)

(1) CAPITAL STOCK

On June 23, 2003, the effective date of the Plan (See Note 1), all outstanding
Common Shares, options to acquire Common Shares and Preference Shares were
cancelled.

(2) ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss is comprised of the following: $ (in
millions)

<TABLE>
<CAPTION>
                               UNREALIZED
                                GAIN ON                FOREIGN CURRENCY                PENSION                 ACCUMULATED OTHER
                               SECURITIES                   ITEMS                     ADJUSTMENT               COMPREHENSIVE LOSS
                               ----------                   -----                     ----------               ------------------
Nine months ended
May 31,                     2003         2002         2003          2002          2003          2002          2003          2002
-------                     ----         ----         ----          ----          ----          ----          ----          ----
<S>                       <C>          <C>          <C>           <C>           <C>           <C>           <C>           <C>
Beginning balance         $    4.6     $    0.9     $ (171.4)     $ (169.3)     $  (91.9)     $     --      $ (258.7)     $ (168.4)
Current period change          9.2          2.1         46.2           4.9        (176.4)        (72.8)       (121.0)        (65.8)
                          --------     --------     --------      --------      --------      --------      --------      --------
Ending balance            $   13.8     $    3.0     $ (125.2)     $ (164.4)     $ (268.3)     $  (72.8)     $ (379.7)     $ (234.2)
                          ========     ========     ========      ========      ========      ========      ========      ========
</TABLE>


                                       15
<PAGE>
The Company is required to record an additional minimum pension liability when
the pension plans' accumulated benefit obligation exceeds the plans' assets by
more than the amounts previously accrued for as pension costs. These charges are
recorded as an increase to shareholders' deficiency, as a component of
accumulated other comprehensive loss. During the nine months ended May 31, 2003,
after obtaining the most recent actuarial valuation, the Company recorded an
increase in the minimum liability of $176.4 million (May 31, 2002 - $72.8
million).

NOTE 9 - OTHER FINANCING RELATED EXPENSES

During the nine months ended May 31, 2003, the Company incurred $35.0 million
(May 31, 2002 - $42.6 million) in professional fees and other costs as a result
of (i) events of default under the Company's $1.425 billion syndicated bank
facility (the "Facility"), (ii) events of default on certain Company debentures
totalling $2.04 billion (the "Debentures") and (iii) the voluntary petition for
reorganization as described in Note 1. Professional fees and other costs include
financing, accounting, legal and consulting services incurred by the Company
during the negotiations with the Facility members and Debenture holders and
related to the voluntary petition for reorganization.

Upon completion of the reorganization, the Company will pay completion fees,
which have been estimated to be $15 million. The Company accrued for these fees
during the three months ended February 28, 2003 as "other financing related
expenses".

NOTE 10 - SEGMENTED INFORMATION

The Company has five reportable segments: Education services, Public Transit
services, Greyhound, Healthcare Transportation services and Emergency Management
services. The Education services segment provides school bus transportation
throughout Canada and the United States. Public Transit services provide
municipal and paratransit bus transportation within the United States. The
Greyhound segment provides inter-city and tourism bus transportation throughout
North America. Healthcare Transportation services provides services in the
United States. The Emergency Management services segment provides services in
the United States.

The Company has changed the reportable segments as compared to prior periods.
The former Contract Bus services segment, which consisted of the school bus
transportation operations and the municipal and paratransit bus transportation
operations, has been split into two distinct segments: the Education services
segment and the Public Transit segment. The former Healthcare services segment,
which formerly consisted of the Healthcare Transportation operations and the
Emergency Management operations, has been also split into two distinct segments:
the Healthcare Transportation services segment and the Emergency Management
services segment.

The Company evaluates performance and allocates resources based on income from
operations before depreciation and amortization. The accounting policies of the
reportable segments are the same as those described in Note 2 of Notes to the
Consolidated Financial Statements as at August 31, 2002. The Company's
reportable segments are business units that offer different services and are
each managed separately.


                                       16
<PAGE>
SERVICES

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED         NINE MONTHS ENDED
                                                                       MAY 31,                   MAY 31,
                                                                       -------                   -------
$ (in millions)                                                   2003         2002         2003         2002
---------------                                                   ----         ----         ----         ----
<S>                                                             <C>          <C>          <C>          <C>
EDUCATION SERVICES
Revenue                                                         $  457.9     $  451.0     $1,314.8     $1,299.4
Income from operations before
  depreciation and amortization                                    116.1        116.0        302.0        321.8
                                                                --------     --------     --------     --------
PUBLIC TRANSIT SERVICES
Revenue                                                         $   72.8     $   81.0     $  212.1     $  233.9
Income from operations before
  depreciation and amortization                                      5.6          2.7          7.3          4.0
                                                                --------     --------     --------     --------
GREYHOUND
Revenue                                                         $  291.4     $  297.5     $  847.5     $  863.2
Income from operations before
  depreciation and Amortization                                      3.4         14.5          5.8         32.8
                                                                --------     --------     --------     --------
HEALTHCARE TRANSPORTATION SERVICES
Revenue                                                         $  259.8     $  251.1     $  759.3     $  737.3
Income from operations before
  depreciation and amortization                                     18.6         22.8         55.8         57.9
                                                                --------     --------     --------     --------
EMERGENCY MANAGEMENT SERVICES
Revenue                                                         $  120.9     $  106.7     $  352.0     $  320.9
Income from operations before
  depreciation and amortization                                      7.2          5.7         21.9         20.1
                                                                --------     --------     --------     --------
</TABLE>


CONSOLIDATED

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED          NINE MONTHS ENDED
                                                           MAY 31,                    MAY 31,
                                                           -------                    -------
$ (in millions)                                      2003          2002          2003          2002
---------------                                      ----          ----          ----          ----
<S>                                                <C>           <C>           <C>           <C>
Revenue                                            $1,202.8      $1,187.3      $3,485.7      $3,454.7
                                                   --------      --------      --------      --------
Income from operations before
  depreciation and amortization                       150.9         161.7         392.8         436.6
Depreciation and amortization expense                 (77.2)        (99.6)       (229.3)       (293.7)
                                                   --------      --------      --------      --------
Income from operating segments                         73.7          62.1         163.5         142.9
Interest expense                                       (6.6)         (6.6)        (19.6)        (21.5)
Other financing related expenses                       (3.9)        (13.1)        (35.0)        (42.6)
Other income                                            0.5           1.9          15.0           9.0
Income tax expense                                     (1.5)         (1.5)         (4.5)         (4.7)
Income for the period before cumulative effect     --------      --------      --------      --------
  of change in accounting principle                $   62.2      $   42.8      $  119.4      $   83.1
                                                   ========      ========      ========      ========
</TABLE>


                                       17
<PAGE>
NOTE 11 - CONDENSED COMBINED FINANCIAL STATEMENTS OF ENTITIES IN REORGANIZATION
PROCEEDINGS

             CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
                         THREE MONTHS ENDED MAY 31, 2003

<TABLE>
<CAPTION>
                                                              ENTITIES IN       ENTITIES NOT IN
                                                             REORGANIZATION     REORGANIZATION                     CONSOLIDATED
$ (in millions)                                               PROCEEDINGS        PROCEEDINGS        ELIMINATIONS      TOTALS
---------------                                               -----------        -----------        ------------      ------
<S>                                                          <C>                <C>                 <C>            <C>
Revenue                                                         $      --          $ 1,202.8          $      --        1,202.8
Operating, selling, general and
  administrative expenses                                             2.1            1,049.8                 --        1,051.9
Depreciation and amortization expense                                  --               77.2                 --           77.2
Intercompany management fees (income)                                 5.5               (5.5)                --             --
                                                                ---------          ---------          ---------      ---------
Income (loss) from operating segments                                (7.6)              81.3                 --           73.7
Interest income (expense), net of other income                       (1.2)              (4.9)                --           (6.1)
Intercompany interest income (expense)                                3.0               (3.0)                --             --
Other financing related expenses                                     (2.6)              (1.3)                --           (3.9)
Equity in earnings of intercompany investments                       70.7                 --              (70.7)            --
                                                                ---------          ---------          ---------      ---------
Income (loss) before income taxes                                    62.3               72.1              (70.7)          63.7
Income tax expense                                                   (0.1)              (1.4)                --           (1.5)
                                                                ---------          ---------          ---------      ---------
Net income (loss)                                               $    62.2          $    70.7          $   (70.7)     $    62.2
                                                                =========          =========          =========      =========
</TABLE>

             CONDENSED COMBINED CONSOLIDATED STATEMENT OF CASH FLOWS
                         THREE MONTHS ENDED MAY 31, 2003

<TABLE>
<CAPTION>
                                                      ENTITIES IN     ENTITIES NOT IN
                                                     REORGANIZATION    REORGANIZATION    CONSOLIDATED
$ (in millions)                                       PROCEEDINGS       PROCEEDINGS         TOTALS
---------------                                       -----------       -----------         ------
<S>                                                  <C>              <C>                <C>
Net cash provided by operating activities                $    5.9          $  193.8          $  199.7
                                                         --------          --------          --------
Cash flows from investing activities:
Purchase of property and equipment and
  other assets, net of proceeds from sale                $   (1.4)         $ (102.8)         $ (104.2)
Expended on acquisition                                        --              (1.4)             (1.4)
Net increase (decrease) in long-term Investments              0.1              (3.1)             (3.0)
                                                         --------          --------          --------
Net cash used in investing activities                    $   (1.3)         $ (107.3)         $ (108.6)
                                                         --------          --------          --------
Cash flows from financing activities:
Net increase in long-term debt and
  other non-current liabilities                          $     --          $   18.6          $   18.6
                                                         --------          --------          --------
Net cash provided by financing activities                $     --          $   18.6          $   18.6
                                                         --------          --------          --------
Net increase in cash and cash equivalents                $    4.6          $  105.1          $  109.7
Cash and cash equivalents at:
  Beginning of period                                        73.1             207.5             280.6
                                                         --------          --------          --------
  End of period                                          $   77.7          $  312.6          $  390.3
                                                         ========          ========          ========
</TABLE>


                                       18
<PAGE>
             CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
                         NINE MONTHS ENDED MAY 31, 2003

<TABLE>
<CAPTION>
                                                         ENTITIES IN       ENTITIES NOT IN
                                                        REORGANIZATION      REORGANIZATION                           CONSOLIDATED
$ (in millions)                                          PROCEEDINGS          PROCEEDINGS        ELIMINATIONS           TOTALS
---------------                                          -----------          -----------        ------------           ------
<S>                                                     <C>                <C>                  <C>                 <C>
Revenue                                                     $       --          $  3,485.7          $       --          $  3,485.7
Operating, selling, general and
  administrative expenses                                          8.9             3,084.0                  --             3,092.9
Depreciation and amortization expense                              0.1               229.2                  --               229.3
Intercompany management fees (income)                            (27.2)               27.2                  --                  --
                                                            ----------          ----------          ----------          ----------
Income from operating segments                                    18.2               145.3                  --               163.5
Interest income (expense),
  net of other income (loss)                                      10.1               (14.7)                 --                (4.6)
Intercompany interest income (expense)                             9.4                (9.4)                 --                  --
Other financing related expenses                                 (28.2)               (6.8)                 --               (35.0)
Equity in earnings of intercompany investments                   110.9                  --              (110.9)                 --
                                                            ----------          ----------          ----------          ----------
Income (loss) before income taxes                                120.4               114.4              (110.9)              123.9
Income tax expense                                                (1.0)               (3.5)                 --                (4.5)
                                                            ----------          ----------          ----------          ----------
Net income (loss) before cumulative effect of
  change in accounting principle                                 119.4               110.9              (110.9)              119.4
Cumulative effect of change in accounting principle                 --            (2,205.4)                 --            (2,205.4)
Equity in loss from the cumulative effect of
  change in accounting principle of
  intercompany investments                                    (2,205.4)                 --             2,205.4                  --
                                                            ----------          ----------          ----------          ----------
Net income (loss)                                           $ (2,086.0)         $ (2,094.5)         $  2,094.5          $ (2,086.0)
                                                            ==========          ==========          ==========          ==========
</TABLE>

             CONDENSED COMBINED CONSOLIDATED STATEMENT OF CASH FLOWS
                         NINE MONTHS ENDED MAY 31, 2003

<TABLE>
<CAPTION>
                                                     ENTITIES IN     ENTITIES NOT IN
                                                    REORGANIZATION    REORGANIZATION     CONSOLIDATED
$ (in millions)                                      PROCEEDINGS       PROCEEDINGS          TOTALS
                                                     -----------       -----------          ------
<S>                                                  <C>               <C>               <C>
Net cash provided by operating activities            $       25.8      $      238.0      $      263.8
                                                     ------------      ------------      ------------
Cash flows from investing activities:
Purchase of property and equipment and
  other assets, net of proceeds from sale            $       (1.4)     $     (207.3)     $     (208.7)
  Expended on acquisition                                      --              (4.6)             (4.6)
Net decrease (increase) in long-term Investments              0.8             (38.1)            (37.3)
Proceeds from sale of assets                                   --                --                --
                                                     ------------      ------------      ------------
Net cash used in investing activities                $       (0.6)     $     (250.0)     $     (250.6)
                                                     ------------      ------------      ------------
Cash flows from financing activities:
Net increase in long-term debt and
  other non-current liabilities                      $         --      $       33.6      $       33.6
                                                     ------------      ------------      ------------
Net cash provided by financing activities            $         --      $       33.6      $       33.6
                                                     ------------      ------------      ------------
Net increase in cash and cash equivalents            $       25.2      $       21.6      $       46.8
Cash and cash equivalents at:
  Beginning of period                                        52.5             291.0             343.5
                                                     ------------      ------------      ------------
  End of period                                      $       77.7      $      312.6      $      390.3
                                                     ============      ============      ============
</TABLE>


                                       19
<PAGE>
                  CONDENSED COMBINED CONSOLIDATED BALANCE SHEET
                               AS OF MAY 31, 2003

<TABLE>
<CAPTION>
                                       ENTITIES IN     ENTITIES NOT IN
                                     REORGANIZATION    REORGANIZATION                       CONSOLIDATED
$ (in millions)                        PROCEEDINGS       PROCEEDINGS      ELIMINATIONS         TOTALS
---------------                        -----------       -----------      ------------         ------
<S>                                  <C>               <C>                <C>               <C>
Current assets                          $     95.6        $  1,195.8        $       --        $  1,291.4
Intercompany receivables
  and investments                          2,618.9                --          (2,618.9)               --
Long-term investments                         11.0             458.0                --             469.0
Property and equipment                         1.2           1,700.6                --           1,701.8
Goodwill                                        --             781.9                --             781.9
Other assets                                  36.4              35.2             (34.8)             36.8
                                        ----------        ----------        --------          ----------
                                        $  2,763.1        $  4,171.5        $ (2,653.7)       $  4,280.9
                                        ----------        ----------        --------          ----------
Current liabilities                     $     27.0        $    623.1        $       --        $    650.1
Intercompany payables                           --           1,005.1          (1,005.1)               --
Non-current liabilities                       11.9             929.5             (34.8)            906.6
Liabilities subject to compromise          3,977.1                --                --           3,977.1
Shareholders' deficiency                  (1,252.9)          1,613.8          (1,613.8)         (1,252.9)
                                        ----------        ----------        --------          ----------
                                        $  2,763.1        $  4,171.5        $ (2,653.7)       $  4,280.9
                                        ==========        ==========        ==========        ==========
</TABLE>


                                       20
<PAGE>
             CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
                         THREE MONTHS ENDED MAY 31, 2002

<TABLE>
<CAPTION>
                                                   ENTITIES IN      ENTITIES NOT IN
                                                  REORGANIZATION    REORGANIZATION                       CONSOLIDATED
$ (in millions)                                     PROCEEDINGS       PROCEEDINGS      ELIMINATIONS         TOTALS
---------------                                     -----------       -----------      ------------         ------
<S>                                               <C>               <C>                <C>               <C>
Revenue                                                $     --         $ 1,187.3          $     --         $ 1,187.3
Operating, selling, general and
  administrative expenses                                   2.9           1,022.7                --           1,025.6
Depreciation and amortization expense                       0.1              99.5                --              99.6
Intercompany management fees (income)                     (22.8)             22.8                --                --
                                                       --------         ---------          --------         ---------
Income from operating segments                             19.8              42.3                --              62.1
Interest expense, net of other income                      (0.3)             (4.4)               --              (4.7)
Intercompany interest income (expense)                     29.7             (29.7)               --                --
Other financing related expenses                          (10.0)             (3.1)               --             (13.1)
Equity in earnings of intercompany investments            128.1                --            (128.1)               --
                                                       --------         ---------          --------         ---------
Income (loss) before income taxes                         167.3               5.1            (128.1)             44.3
Income tax expense                                         (0.4)             (1.1)               --              (1.5)
Intercompany transfer of income tax losses               (124.1)            124.1                --                --
                                                       --------         ---------          --------         ---------
Net income (loss)                                      $   42.8         $   128.1          $ (128.1)        $    42.8
                                                       ========         =========          ========         =========
</TABLE>

            CONDENSED COMBINED CONSOLIDATING STATEMENT OF CASH FLOWS
                         THREE MONTHS ENDED MAY 31, 2002

<TABLE>
<CAPTION>
                                               ENTITIES IN    ENTITIES NOT IN
                                             REORGANIZATION   REORGANIZATION    CONSOLIDATED
$ (in millions)                                PROCEEDINGS      PROCEEDINGS        TOTALS
---------------                                -----------      -----------        ------
<S>                                          <C>              <C>               <C>
Net cash provided by operating activities     $       10.9     $      130.5      $      141.4
                                              ------------     ------------      ------------
Cash flows from investing activities:
Purchase of property and equipment and
  other assets, net of proceeds from sale     $         --     $      (75.6)     $      (75.6)
Expended on acquisitions                                --             (1.4)             (1.4)
Net increase in long-term investments                   --            (10.2)            (10.2)
                                              ------------     ------------      ------------
Net cash used in investing activities         $         --     $      (87.2)     $      (87.2)
                                              ------------     ------------      ------------
Cash flows from financing activities:
Net decrease in long-term debt and
  other long-term liabilities                 $         --     $      (15.7)     $      (15.7)
                                              ------------     ------------      ------------
Net cash used in financing activities         $         --     $      (15.7)     $      (15.7)
                                              ------------     ------------      ------------
Net increase in cash and cash equivalents     $       10.9     $       27.6      $       38.5
Cash and cash equivalents at:
  Beginning of period                                 77.4            216.6             294.0
                                              ------------     ------------      ------------
  End of period                               $       88.3     $      244.2      $      332.5
                                              ============     ============      ============
</TABLE>


                                       21
<PAGE>
             CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
                         NINE MONTHS ENDED MAY 31, 2002

<TABLE>
<CAPTION>
                                                   ENTITIES IN      ENTITIES NOT IN
                                                  REORGANIZATION    REORGANIZATION                       CONSOLIDATED
$ (in millions)                                    PROCEEDINGS       PROCEEDINGS       ELIMINATIONS        TOTALS
---------------                                    -----------       -----------       ------------        ------
<S>                                               <C>               <C>               <C>                <C>
Revenue                                                $     --         $ 3,454.7          $     --         $ 3,454.7
Operating, selling, general and
  administrative expenses                                   8.4           3,009.7                --           3,018.1
Depreciation and amortization expense                       0.2             293.5                --             293.7
Intercompany management fees (income)                     (52.8)             52.8                --                --
                                                       --------         ---------          --------         ---------
Income from operating segments                             44.2              98.7                --             142.9
Interest expense, net of other income                      (2.3)            (10.2)               --             (12.5)
Intercompany interest income (expense)                    195.7            (195.7)               --                --
Other financing related expenses                          (31.6)            (11.0)               --             (42.6)
Equity in earnings of intercompany investments              2.3                --              (2.3)               --
                                                       --------         ---------          --------         ---------
Income (loss) before income taxes                         208.3            (118.2)             (2.3)             87.8
Income tax expense                                         (1.1)             (3.6)               --              (4.7)
Intercompany transfer of income tax losses               (124.1)            124.1                --                --
                                                       --------         ---------          --------         ---------
Net income (loss)                                      $   83.1         $     2.3          $   (2.3)        $    83.1
                                                       ========         =========          ========         =========
</TABLE>

            CONDENSED COMBINED CONSOLIDATING STATEMENT OF CASH FLOWS
                         NINE MONTHS ENDED MAY 31, 2002

<TABLE>
<CAPTION>
                                                        ENTITIES IN     ENTITIES NOT IN
                                                       REORGANIZATION   REORGANIZATION     CONSOLIDATED
$ (in millions)                                         PROCEEDINGS      PROCEEDINGS          TOTALS
---------------                                         -----------      -----------          ------
<S>                                                    <C>              <C>                <C>
Net cash provided by operating activities                   $   45.2         $  206.5          $  251.7
                                                            --------         --------          --------
Cash flows from investing activities:
Purchase of property and equipment and
  other assets, net of proceeds from sale                   $     --         $ (153.7)         $ (153.7)
Net increase in long-term investments                             --            (19.4)            (19.4)
Expended on acquisitions                                          --             (1.9)             (1.9)
Proceeds from sale of assets                                     1.2              3.0               4.2
                                                            --------         --------          --------
Net cash provided by (used in) investing activities         $    1.2         $ (172.0)         $ (170.8)
                                                            --------         --------          --------
Cash flows from financing activities:
Net decrease in long-term debt and other
  long-term liabilities                                     $     --         $  (29.6)         $  (29.6)
                                                            --------         --------          --------
Net cash used in financing activities                       $     --         $  (29.6)         $  (29.6)
                                                            --------         --------          --------
Net increase in cash and cash equivalents                   $   46.4         $    4.9          $   51.3
Cash and cash equivalents at:
  Beginning of period                                           41.9            239.3             281.2
                                                            --------         --------          --------
  End of period                                             $   88.3         $  244.2          $  332.5
                                                            ========         ========          ========
</TABLE>


                                       22
<PAGE>
NOTE 12 - UNITED STATES AND CANADIAN ACCOUNTING PRINCIPLES

These consolidated financial statements have been prepared in accordance with
U.S. GAAP and conform in all material respects with Canadian GAAP, except as
follows:

<TABLE>
<CAPTION>
Nine months ended May 31, $ (millions)                   2003            2002
--------------------------------------                   ----            ----
<S>                                                    <C>            <C>
Net income (loss) in accordance with U.S. GAAP         $(2,086.0)     $    83.1
Effects of differences in accounting for:
     Costs of start-up activities (a)                       (9.9)         (10.5)
     Impairment charges under Canadian GAAP (b)               --         (194.7)
     Impairment charges under U.S. GAAP (b)              2,205.4             --
     Reduced goodwill amortization (b)                        --           44.0
                                                       ---------      ---------
Net income (loss) in accordance with Canadian GAAP     $   109.5      $   (78.1)
                                                       ---------      ---------
Basic and diluted net income (loss) per share          $    0.34      $   (0.24)
                                                       =========      =========
</TABLE>

The amounts in the consolidated balance sheets that materially differ from those
reported under U.S. GAAP are as follows: $ (in millions)

<TABLE>
<CAPTION>
                                          MAY 31, 2003             August 31, 2002*
                                          ------------             ----------------
                                      U.S.        CANADIAN        U.S.        Canadian
                                      GAAP          GAAP          GAAP          GAAP
                                      ----          ----          ----          ----
<S>                                 <C>           <C>           <C>           <C>
ASSETS:
Other current assets (a)            $   63.7      $   64.5      $   56.3      $   64.0
Long-term investments (c)              469.0         455.2         417.9         413.3
Goodwill (b)                           781.9         807.6       2,976.8         813.1
Pension asset (c)                       16.8          49.1          10.8          43.1
Deferred charges (a)                    20.0          24.7          12.0          19.6

LIABILITIES AND SHAREHOLDERS'
  DEFICIENCY:

Other long-term liabilities (c)        666.0         430.0         442.1         382.5
Cumulative foreign currency
  translation adjustments (c)             --        (125.2)           --        (171.4)
Deficit (a and b)                   (3,103.7)     (3,072.5)     (1,017.7)     (3,166.1)
Accumulated other comprehensive
  loss (c)                            (379.7)           --        (258.7)           --
                                    --------      --------      --------      --------
</TABLE>

*     Refer to Note 28 of the Notes to the Consolidated Financial Statements as
      of August 31, 2002.

(a)   Reporting on the costs of start-up activities

During fiscal 2000, the Company applied SOP 98-5. As a result, during fiscal
2000, the Company expensed $27.3 million in unamortized costs of start-up
activities as a cumulative effect of a change in accounting principle under U.S.
GAAP. Under Canadian GAAP, SOP 98-5 is not applicable. As a result, under
Canadian GAAP, the Company did not record the $27.3 million change in accounting
principle amount and continued with the policy of deferring start-up costs and
amortizing the deferrals over a reasonable period representing an overall
adjustment to conform to Canadian GAAP of $9.9


                                       23
<PAGE>
million expense and $10.5 million expense during the nine months ended May 31,
2003 and the nine months ended May 31, 2002, respectively.

(b)   Goodwill impairment

Prior to fiscal 2003, the Company had different accounting policies for
determining goodwill impairment for Canadian and U.S. GAAP reporting. This
difference in accounting policy resulted in additional goodwill impairment
losses under Canadian GAAP totalling $2,273.8 million for the years ended August
31, 1999 through and including August 31, 2002 (during the nine months ended May
31, 2002, the Company recorded a goodwill impairment loss totalling $194.7
million under Canadian GAAP). As a result of the reduced goodwill impairment
charges under U.S. GAAP, additional goodwill amortization totalling $44.0
million was recorded for the nine months ended May 31, 2002.

As of September 1, 2002, the Company followed the guidelines of SFAS No. 142,
"Goodwill and Other Intangible Assets" and similar guidance under Canadian GAAP.
The guidance in both countries discontinue the amortization of intangible assets
with indefinite useful lives. In addition, the Company was required to test
goodwill and intangible assets with an indefinite life for impairment in
accordance with the provisions of SFAS 142 and Canadian GAAP. Pursuant to the
guidance, any impairment loss is to be recorded directly through the deficit
account on the consolidated statement of deficit for Canadian GAAP and recorded
as a cumulative effect of change in accounting principle on the consolidated
statement of operations for U.S. GAAP. On September 1, 2002, under Canadian
GAAP, this resulted in an impairment charge totalling $16.0 million. Under U.S.
GAAP, this resulted in an impairment loss totalling $2,205.4 million, recorded
as a cumulative effect of change in accounting principle.

(c)   Comprehensive income

U.S. GAAP requires that a comprehensive income statement be prepared. Under U.S.
GAAP, SFAS No. 87, "Employers Accounting for Pensions", required the Company to
record an increase in the additional minimum pension liability. Also, under U.S.
GAAP, available-for-sale securities are to be reported at their fair values,
with unrealized gains or losses reported in a separate component of
shareholders' equity along with the cumulative foreign currency translation
adjustments and the SFAS No. 87, pension adjustment. These amounts are reported
under the balance sheet caption "Accumulated other comprehensive loss".

Canadian GAAP does not have the concept of comprehensive income (loss). The
cumulative foreign currency translation adjustment is reported in a separate
component of shareholders' equity. The cumulative SFAS No. 87 pension adjustment
(May 31, 2003 - $268.3 million, August 31, 2002 - $91.9 million) under U.S. GAAP
is not recorded under Canadian GAAP. In addition, the recording of the
available-for-sale securities at their fair values (May 31, 2003 - $13.8
million, August 31, 2002 - $4.6 million) is not recorded under Canadian GAAP.


                                       24
<PAGE>
NOTE 13 - FURTHER INFORMATION ON LITIGATION

Safety-Kleen settlement

The Company owns 44% of the common shares of Safety-Kleen. On June 9, 2000,
Safety-Kleen announced that it and 73 of its U.S. subsidiaries filed voluntary
petitions for chapter 11 relief in the United States Bankruptcy Court for the
District of Delaware.

Following Safety-Kleen's filing for petition for chapter 11 relief, the Debtors
asserted various claims against Safety-Kleen, and Safety-Kleen and various
Safety-Kleen constituencies, including certain current directors of Safety-Kleen
(the "Safety-Kleen Directors") and Toronto Dominion (Texas), Inc. ("TD-Texas"),
as administrative agent for the secured lenders of Safety-Kleen, asserted
various claims against the Debtors. In November 2001, the bankruptcy court
hearing Safety-Kleen's chapter 11 proceedings and the Bankruptcy Court held a
joint conference and determined that mediation would occur for the claims
between the Debtors and the various Safety-Kleen constituencies. Certain claims
asserted by the former corporate secretary and general counsel (Mr. Taylor) of
Safety-Kleen and certain of its predecessors and by the former chief financial
officer (Mr. Humphreys) of Safety-Kleen were not included in the mediation.

The mediation proceedings were held in April 2002 and, on July 18, 2002, the
parties to the mediation announced that they had reached a settlement. Pursuant
to the settlement, the Company agreed to withdraw with prejudice its claim of up
to $6.5 billion in Safety-Kleen's bankruptcy proceedings, the Company allowed a
claim of $225.0 million as a general unsecured claim in Class 6 under its plan
of reorganization in favor of Safety-Kleen and other claims asserted against the
Company by Safety-Kleen, the Safety-Kleen Directors and the Safety-Kleen secured
lender group, including claims of TD-Texas, are deemed withdrawn with prejudice.
In addition, as part of this compromise and settlement, claims against
Safety-Kleen by certain current and former Company officers and directors for
indemnity and contribution will be deemed withdrawn with prejudice. Also, the
Company agreed to allow a claim of $71.4 million as a general unsecured claim
under its plan of reorganization in favor of TD-Texas as claimant under a $60.0
million promissory note issued by Safety-Kleen and guaranteed by the Company
that was assigned to TD-Texas.

On August 16, 2002, the bankruptcy court hearing Safety-Kleen's chapter 11
proceeding approved the settlement. On August 30, 2002, the Bankruptcy Court
approved the settlement. On September 11, 2002, the Canadian Court approved the
settlement. As part of the compromise and settlement, the Company will be
released from its indemnification obligations relating to certain environmental
matters and Safety-Kleen will cause the claim of the South Carolina Department
of Health and Environmental Control ("DHEC") against the Company be withdrawn
with prejudice. Safety-Kleen announced a settlement with DHEC in mid-October
2002. Releases satisfactory to the parties will be exchanged, and there will be
no admission of liability by any party to the agreement or any person providing
releases under the agreement. The settlement is conditioned upon, among other
things, the consummation of the settlement agreement between Safety-Kleen and
DHEC, which is conditioned upon the confirmation and effectiveness of a plan of
reorganization of Safety-Kleen. As a result, the Company provided $225.0 million
in fiscal 2001 to reflect this settlement and the claim allowed to Safety-Kleen
and for the termination of the Company's claims for indemnification,
contribution or subrogation from Safety-Kleen and the Safety-Kleen Directors, as
well as the termination of claims against the Company by Safety-Kleen, the
Safety-Kleen Directors and the Safety-Kleen secured lender group, including the
claims brought by TD-Texas.


                                       25
<PAGE>
Securities Litigation - Shareholder actions

As a result of the Company's voluntary petitions for relief under the protection
of the Bankruptcy Code and the CCAA, the actions described below were stayed
with respect to the Debtors. In addition, certain of these proceedings have been
settled as described below. Upon emergence from the Company's chapter 11
proceedings, the claims against the Debtors discussed below that had not been
settled were be extinguished. Any remaining claims against current or former
directors and officers will continue to remain outstanding.

Three actions, filed against the Company and others, are pending in the United
States District Court for the District of South Carolina. These cases have been
consolidated. Plaintiffs assert claims under the federal securities laws that
the Company's financial statements had accounting irregularities based on the
Company's incorporation and/or consolidation of the financial results of
Safety-Kleen in the reported consolidated financial results of the Company.
PricewaterhouseCoopers LLP and PricewaterhouseCoopers LLP (Canada) have agreed
to a settlement with the plaintiff class.

On September 18, 2000, the Company was added as a defendant in a consolidated
amended securities fraud class action complaint that had previously been pending
in the United States District Court for the District of South Carolina against
Safety-Kleen and others. Safety-Kleen, which is in a chapter 11 reorganization
proceeding, was dismissed as a defendant. In the currently active complaint,
plaintiffs allege that, during the class period, in violation of the federal
securities laws, the defendants disseminated to the investing public false and
misleading financial statements and press releases concerning the financial
statements and results of operations of LESI and Safety-Kleen. Plaintiffs
further allege that the proxy statement, prospectus and registration statement
pursuant to which LESI and Old Safety-Kleen were merged contained false and
misleading financial information. PricewaterhouseCoopers LLP has agreed to a
settlement with the plaintiff class.

A consolidated amended class action complaint for violations of federal
securities laws was filed in the United States District Court for the District
of South Carolina against the Company and other parties. In this complaint, the
plaintiffs alleged that the defendants caused to be disseminated a proxy
statement that contained misrepresentations and omissions of a materially false
and misleading nature. On June 7, 2001, the court dismissed the claims against
the Company and some of the defendants. The plaintiffs then filed a motion
seeking leave to file an amended complaint that asserts a common law claim for
negligent misrepresentation against the Company and other defendants. The court
granted the motion after the Company's chapter 11 filing, then subsequently
vacated its order granting the motion with respect to the Company.

Certain of the defendants in the above referenced actions asserted claims for
indemnification against the Company. As a result of the Safety-Kleen settlement
described above, claims of the seven Safety-Kleen Directors will be withdrawn
with prejudice. The Safety-Kleen settlement would not affect the claims of
Messrs. Humphreys and Taylor.

Securities Litigation - Bondholder actions

As a result of the Company's voluntary petitions for relief under the protection
of the Bankruptcy Code and the CCAA, the actions described below were stayed
with respect to the Company. In addition, certain of these proceedings have been
settled as described below. As a result of the emergence, the claims against the
Company and the other Debtors discussed below that had not


                                       26
<PAGE>
been settled were extinguished. Any remaining claims against current or former
directors and officers will continue to remain outstanding.

On July 24, 2002, the parties entered into an agreement to settle the securities
litigation described below (the "Bondholder Settlement Agreement"). The
Bondholder Settlement Agreement provides for a release of all claims that the
plaintiffs have and may have against the Company and the other defendants,
including some of the Company's current or former officers and directors, the
underwriter defendants, PricewaterhouseCoopers LLP and PricewaterhouseCoopers
LLP (Canada). The other defendants, including the Company, will also release or
have already released various claims against each other. The Bondholder
Settlement Agreement was approved by the Bankruptcy Court and the Canadian Court
on August 30, 2002 and September 11, 2002, respectively, and by the federal
court in South Carolina on December 17, 2002. Subject to the Bondholder
Settlement Agreement being fully implemented on the current terms, the plaintiff
bondholder classes would be paid $42.875 million, and the estate of the Company
would receive $12.5 million. The Bondholder Settlement Agreement provides for
two different effective dates. The settlement between PricewaterhouseCoopers LLP
and PricewaterhouseCoopers LLP (Canada) and all other parties has already become
effective, and the estate of the Company has received $11.5 million of the
settlement proceeds. The remaining $1.0 million was received upon the Company's
emergence from bankruptcy. The Bondholder Settlement Agreement encompasses the
following cases:

-     John Hancock Life Insurance Company, New York Life Insurance Company, Aid
      Association for Lutherans, American General Annuity Insurance Company and
      the Variable Annuity Life Insurance Company filed a securities fraud class
      action in the United States District Court for the Southern District of
      New York against the Company, certain of the Company's current or former
      officers and directors, various underwriters in the Company's sale of
      certain notes (the "Prepetition Notes"), and its auditors,
      PricewaterhouseCoopers LLP and PricewaterhouseCoopers LLP (Canada).
      Plaintiffs assert claims under the federal securities laws and the common
      law of South Carolina, alleging that the registration statement and
      prospectus for the Prepetition Notes contained misleading statements with
      respect to the Company's financial condition and the relative priority of
      the Prepetition Notes. This action was transferred to the District of
      South Carolina.

-     Barbara Meltzer filed a securities fraud class action complaint in the
      United States District Court for the District of South Carolina against
      the Company and certain of its current or former officers and directors.
      Plaintiff asserts claims under the federal securities laws that, during
      the class period, defendants disseminated to the investing public false
      and misleading financial statements and press releases concerning the
      relative priority of the Company's Prepetition Notes and the Company's
      publicly reported financial condition and future prospects. This action
      and the Hancock action discussed above were consolidated by order of the
      South Carolina federal court dated June 20, 2001, and the caption of the
      case was changed to In re Laidlaw Bondholders Litigation.

-     The Bondholder Settlement Agreement also includes the settlement of a
      class action brought by certain Company bondholders against Citibank,
      N.A., the indenture trustee for the Prepetition Notes.

-     Westdeutsche Landesbank Girozentrale, New York Branch, filed a securities
      fraud class action complaint against the Company in the United States
      District Court for the Southern District of New York. Other defendants in
      the proceeding include certain of the Company's current or former officers
      and directors, various underwriters in the Company's


                                       27
<PAGE>
      sale of the Prepetition Notes, PricewaterhouseCoopers LLP and
      PricewaterhouseCoopers LLP (Canada). Plaintiff alleges that defendants
      disseminated to the investing public false and misleading financial
      statements and press releases concerning the Company's obligations with
      respect to prepetition indentures entered into in 1992 and 1997 and the
      Company's prepetition credit facility.

In addition to the claims resolved under the Bondholder Settlement Agreement,
the Company is party to the following securities litigation:

-     Pending before the federal court in South Carolina is the In re
      Safety-Kleen Corp. Bondholders Securities Litigation filed on January 23,
      2001. This consolidated complaint consolidates the allegations originally
      brought by plaintiffs in a South Carolina District Court action and a
      Delaware District Court action against the Company, certain of its current
      or former officers and directors and others. Plaintiffs assert claims
      under the federal securities laws and allege that the defendants
      controlled the functions of Safety-Kleen, including the content and
      dissemination of its financial statements and public filings, which
      plaintiffs contend to be false and misleading.

-     A complaint for violation of California Corporate Securities Law of 1968
      and for common law fraud and negligent misrepresentation was filed on
      March 5, 2001 in the Superior Court of the State of California, County of
      Sacramento against the Company, certain of its current or former officers
      and directors and certain former officers and directors of Safety-Kleen.
      The plaintiffs in this case (Eaton Vance Distributors, Inc.; T. Rowe Price
      Associates, Inc.; Delaware Investment Advisors; John Hancock Funds, Inc;
      and Putnam Investments, Inc.) are purchasers or acquirers of specified
      bonds issued by the California Pollution Control Financing Authority on
      July 1, 1997 and secured by an indenture with Laidlaw Environmental
      Services and its successor Safety-Kleen. The action alleges that
      defendants made written or oral communications containing false statements
      or omissions about Laidlaw Environmental Services' and Safety-Kleen's
      business, finances and future prospects in connection with the offer for
      sale of those bonds, and that plaintiffs bought and retained the bonds in
      reliance on said statements and were injured thereby. After the Company's
      filing for bankruptcy, the California court dismissed the action as to
      some other defendants on the grounds that the court lacked personal
      jurisdiction over them. This dismissal was affirmed by the California
      intermediate appellate court.


                                       28
<PAGE>
NOTE 14 - SUBSEQUENT EVENT

As a part of its emergence from chapter 11 described in Note 1, LII obtained
exit financing of approximately $1.225 billion. Approximately $1.0 billion of
this financing was used to fund a portion of the distributions to the Company's
creditors.

Pursuant to the Plan, LII domesticated into the United States as a Delaware
corporation. In conjunction with the emergence from chapter 11, LII issued 100.0
million shares of new common stock for distribution to the Company's creditors.
Approximately 31.1 million of these shares were issued to holders of Laidlaw
bank debt claims (Class 4 under the Plan); approximately 57.9 million to holders
of Laidlaw bond debt claims (Classes 5 and 5 A under the Plan) and approximately
11.0 million will be available for distribution to holders of general unsecured
claims (Class 6 under the Plan). In addition, approximately 3.8 million shares
were issued to a trust in connection with the Company's settlement with the PBGC
relating to the funding level of certain subsidiary pension funds (See Note 7).
Consistent with the Plan, the Company's common and preference stock was
cancelled as of June 23, 2003.

Pursuant to the terms of the exit financing, including the senior secured credit
facility (the "LII Facility") obtained by LII upon emergence from bankruptcy,
LII is required to segregate the consolidated results of operations between the
subsidiaries of LII not participating in the LII Facility (the "Excluded
Subsidiaries") and LII and its remaining subsidiaries ("Other than Excluded
Subsidiaries"). The Excluded Subsidiaries are comprised of Greyhound Lines, Inc.
and its subsidiaries, Hotard Coaches, Inc. and Interstate Leasing Inc.

                      CONSOLIDATED STATEMENT OF OPERATIONS
                         THREE MONTHS ENDED MAY 31, 2003
<TABLE>
<CAPTION>
                                                              OTHER THAN
                                                               EXCLUDED            EXCLUDED          CONSOLIDATED
($ millions)                                                 SUBSIDIARIES        SUBSIDIARIES           TOTALS
------------                                                 ------------        ------------           ------
<S>                                                          <C>                 <C>                 <C>
Revenue                                                          $961.6             $241.2              $1,202.8
Operating expenses                                                747.1              182.7                 929.8
Selling, general and administration expenses                       61.6               60.5                 122.1
Depreciation expense                                               64.7               12.1                  76.8
Amortization expense                                                0.3                0.1                   0.4
                                                                 ------             ------              --------
Income (loss) from operating segments                              87.9              (14.2)                 73.7
Interest expense                                                   (1.1)              (5.5)                 (6.6)
Other financing related expenses                                   (3.9)                --                  (3.9)
Other income                                                         --                0.5                   0.5
                                                                 ------             ------              --------
Income (loss) before income taxes                                  82.9              (19.2)                 63.7
Income tax expense                                                 (1.1)              (0.4)                 (1.5)
                                                                 ------             ------              --------
Net income (loss)                                                 $81.8             ($19.6)                $62.2
                                                                 ------             ------              --------

</TABLE>


                                       29
<PAGE>

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                         THREE MONTHS ENDED MAY 31, 2003
<TABLE>
<CAPTION>
                                                                        OTHER THAN
                                                                         EXCLUDED            EXCLUDED          CONSOLIDATED
($ millions)                                                           SUBSIDIARIES        SUBSIDIARIES           TOTALS
------------                                                           ------------        ------------           ------
<S>                                                                    <C>                 <C>                 <C>
Cash flows from operating activities:

Net income (loss)                                                      $ 81.8                  ($19.6)            $ 62.2
Add (deduct) items not affecting cash:

   Depreciation and amortization                                         65.0                    12.2               77.2
   Other financing related expenses                                       3.9                      --                3.9
   Other items                                                           (0.3)                   (0.8)              (1.1)
Increase (decrease) in claims liability and professional liability
   insurance accruals                                                    (1.9)                    9.3                7.4
Decrease in accrued interest                                             (0.1)                   (4.3)              (4.4)
Cash provided by (used in financing) other working capital items
Cash portion of other financing related expenses                         31.4                    (6.5)              24.9
Decrease in restricted cash and cash equivalents                         (4.3)                     --               (4.3)
                                                                         33.9                      --               33.9
                                                                       ------                  ------             ------
Net cash provided by (used in) operating activities                    $209.4                  ($ 9.7)            $199.7

Cash flows from investing activities:

Purchase of property, equipment and other assets, net of proceeds      ($92.3)                 ($11.9)            ($104.2)
   from sale
Expended on acquisitions                                                 (1.4)                     --               (1.4)
Net increase in investments                                              (3.4)                    0.4               (3.0)
                                                                       ------                  ------             ------
Net cash used in investing activities                                  ($97.1)                 ($11.5)            ($108.6)
                                                                       ------                  ------             ------

Cash flows from financing activities:

Net increase (decrease) in long-term debt and other non-current
   liabilities                                                         ($ 4.7)                 $ 23.3             $ 18.6
                                                                       ------                  ------             ------
Net cash provided by (used in) financing activities                    ($ 4.7)                 $ 23.3             $ 18.6
                                                                       ------                  ------             ------

Net increase in cash and cash equivalents                              $107.6                  $  2.1             $109.7
Cash and cash equivalents at:

   Beginning of period                                                  266.8                    13.8              280.6
                                                                       ------                  ------             ------
   End of period                                                       $374.4                  $ 15.9             $390.3
                                                                       ------                  ------             ------
</TABLE>

                                       30
<PAGE>

                      CONSOLIDATED STATEMENT OF OPERATIONS
                         NINE MONTHS ENDED MAY 31, 2003
<TABLE>
<CAPTION>
                                                                                    OTHER THAN
                                                                                     EXCLUDED        EXCLUDED       CONSOLIDATED
($ millions)                                                                       SUBSIDIARIES    SUBSIDIARIES        TOTALS
------------                                                                       ------------    ------------        ------
<S>                                                                                <C>             <C>             <C>
Revenue                                                                              $2,786.2        $  699.5        $3,485.7
Operating expenses                                                                    2,214.5           528.3         2,742.8
Selling, general and administration expenses                                            179.8           170.3           350.1
Depreciation expense                                                                    192.4            36.0           228.4
Amortization expense                                                                      0.8             0.1             0.9
                                                                                     --------        --------        --------
Income (loss) from operating segments                                                   198.7           (35.2)          163.5
Interest expense                                                                         (3.8)          (15.8)          (19.6)
Other financing related expenses                                                        (35.0)             --           (35.0)
Other income                                                                             15.0              --            15.0
                                                                                     --------        --------        --------
Income (loss) before income taxes                                                       174.9           (51.0)          123.9
Income tax expense                                                                       (3.4)           (1.1)           (4.5)
                                                                                     --------        --------        --------
Income (loss) before cumulative effect of change in accounting principle                171.5           (52.1)          119.4
Cumulative effect of change in accounting principle                                  (1,775.9)         (429.5)       (2,205.4)
                                                                                     --------        --------        --------
Net loss                                                                            ($1,604.4)       ($ 481.6)      ($2,086.0)
                                                                                     --------        --------        --------
</TABLE>





                      CONSOLIDATED STATEMENT OF CASH FLOWS
                         NINE MONTHS ENDED MAY 31, 2003
<TABLE>
<CAPTION>
                                                                                 OTHER THAN
                                                                                   EXCLUDED          EXCLUDED        CONSOLIDATED
($ millions)                                                                    SUBSIDIARIES       SUBSIDIARIES         TOTALS
------------                                                                    ------------       ------------         ------
<S>                                                                             <C>                <C>               <C>
Cash flows from operating activities:

Net income (loss)                                                              ($1,604.4)             ($ 481.6)        ($2,086.0)
Add (deduct) items not affecting cash:

   Depreciation and amortization                                                   193.2                  36.1             229.3
   Other financing related expenses                                                 35.0                    --              35.0
   Cumulative effect of change in accounting principle                           1,775.9                 429.5           2,205.4
   Other items                                                                      (6.6)                 (1.5)             (8.1)
Increase in claims liability and professional liability insurance accruals          34.0                  22.1              56.1
Increase (decrease) in accrued interest                                              1.3                  (5.6)             (4.3)
Cash used in financing other working capital items                                (136.5)                 (4.6)           (141.1)
Cash portion of other financing related expenses                                   (23.4)                   --             (23.4)
Decrease in restricted cash and cash equivalents                                     0.9                    --               0.9
                                                                                ---------             --------          ---------
Net cash provided by (used in) operating activities                             $  269.4              ($   5.6)         $  263.8

Cash flows from investing activities:

Purchase of property, equipment and other assets, net of proceeds from sale
Expended on acquisitions                                                        ($ 166.1)             ($  42.6)         ($ 208.7)
Net increase in investments                                                         (4.6)                   --              (4.6)
                                                                                   (36.9)                 (0.4)            (37.3)
                                                                                ---------             --------          ---------
Net cash used in investing activities                                           ($ 207.6)             ($  43.0)         ($ 250.6)
                                                                                ---------             --------          ---------

Cash flows from financing activities:
Net increase (decrease) in long-term debt and other non-current liabilities     ($  11.2)             $   44.8          $   33.6
                                                                                ---------             --------          ---------
Net cash provided by (used in) financing activities                             ($  11.2)             $   44.8          $   33.6
                                                                                ---------             --------          ---------

Net increase (decrease) in cash and cash equivalents                            $   50.6              ($   3.8)         $   46.8
Cash and cash equivalents at:
   Beginning of period                                                             323.8                  19.7             343.5
                                                                                ---------             --------          ---------
   End of period                                                                $  374.4              $   15.9          $  390.3
                                                                                ---------             --------          ---------
</TABLE>



                                       31
<PAGE>

                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  MAY 31, 2003
<TABLE>
<CAPTION>
                                                    OTHER THAN
                                                     EXCLUDED       EXCLUDED     CONSOLIDATED
($ millions)                                       SUBSIDIARIES   SUBSIDIARIES      TOTALS
------------                                       ------------   ------------      ------
<S>                                                <C>            <C>            <C>
CURRENT ASSETS

Cash and cash equivalents                          $  374.4         $   15.9      $  390.3
Restricted cash and cash equivalents                   44.7               --          44.7
Short-term deposits and marketable securities          31.7               --          31.7
Trade accounts receivable                             605.8             24.8         630.6
Other receivables                                      30.1             19.8          49.9
Income taxes recoverable                               29.0             (1.6)         27.4
Parts and supplies                                     41.3             11.8          53.1
Other current assets                                   53.0             10.7          63.7
                                                   --------         --------      --------
TOTAL CURRENT ASSETS                                1,210.0             81.4       1,291.4

Long-term investments                                 427.8             41.2         469.0
Property and equipment                              1,297.2            404.6       1,701.8
Goodwill                                              781.9               --         781.9
Pension asset                                          16.8               --          16.8
Deferred charges                                       13.2              6.8          20.0
                                                   --------         --------      --------
TOTAL ASSETS                                       $3,746.9         $  534.0      $4,280.9


CURRENT LIABILITIES

Accounts payable                                   $   79.9         $   27.6      $  107.5
Accrued liabilities                                   421.9            103.0         524.9
Current portion of long-term debt                      10.2              7.5          17.7
                                                   --------         --------      --------
TOTAL CURRENT LIABILITIES                             512.0            138.1         650.1

Long-term debt                                         21.0            219.6         240.6
Other long-term liabilities                           335.0            331.0         666.0
Liabilities subject to compromise                   3,977.1               --       3,977.1
                                                   --------         --------      --------
TOTAL LIABILITIES                                   4,845.1            688.7       5,533.8

SHAREHOLDERS' DEFICIENCY                           (1,098.2)          (154.7)     (1,252.9)
                                                   --------         --------      --------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY     $3,746.9         $  534.0      $4,280.9
                                                   --------         --------      --------
</TABLE>





                                       32




<PAGE>

                      CONSOLIDATED STATEMENT OF OPERATIONS
                         THREE MONTHS ENDED MAY 31, 2002

<TABLE>
<CAPTION>
                                          OTHER THAN
                                           EXCLUDED            EXCLUDED          CONSOLIDATED
($ millions)                             SUBSIDIARIES        SUBSIDIARIES           TOTALS
------------                             ------------        ------------           ------
<S>                                      <C>                 <C>                 <C>
Revenue                                      $936.5             $250.8              $1,187.3
Compensation expense                          555.5              110.3                 665.8
Accident claims expense                        65.7               16.9                  82.6
Fuel expense                                   31.1               10.3                  41.4
Depreciation expense                           65.0               11.9                  76.9
Amortization expense                           19.8                2.9                  22.7
Other operating expense                       136.5               99.3                 235.8
                                             ------             ------              --------
Income (loss) from operating segments          62.9               (0.8)                 62.1
Interest expense                               (1.0)              (5.6)                 (6.6)
Other financing related expenses              (12.7)              (0.4)                (13.1)
Other income                                    1.8                0.1                   1.9
                                             ------             ------              --------
Income (loss) before income taxes              51.0               (6.7)                 44.3
Income tax expense                             (1.1)              (0.4)                 (1.5)
                                             ------             ------              --------
Net income (loss)                             $49.9              ($7.1)                $42.8
                                             ------             ------              --------

</TABLE>




                                       33
<PAGE>

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                         THREE MONTHS ENDED MAY 31, 2002
<TABLE>
<CAPTION>
                                                                        OTHER THAN
                                                                         EXCLUDED          EXCLUDED       CONSOLIDATED
($ millions)                                                           SUBSIDIARIES      SUBSIDIARIES        TOTALS
------------                                                           ------------      ------------        ------
<S>                                                                      <C>             <C>               <C>
Cash flows from operating activities:

Net income (loss)                                                        $ 49.9            ($ 7.1)           $ 42.8
Add (deduct) items not affecting cash:

   Depreciation and amortization                                           84.8              14.8              99.6
   Other financing related expenses                                        12.7               0.4              13.1
   Other assets                                                            (1.6)             (0.3)             (1.9)
Increase in claims liability and professional liability insurance
   accruals                                                                11.0               0.9              11.9
Decrease in accrued interest                                               (0.1)             (4.3)             (4.4)
Cash provided by (used in financing) other working capital items
Cash portion of other financing related expenses                          (24.1)             16.3              (7.8)
Increase in restricted cash and cash equivalents                           (4.0)             (0.5)             (4.5)
                                                                           (7.4)               --              (7.4)
                                                                         ------            ------            ------
Net cash provided by operating activities                                $121.2            $ 20.2            $141.4

Cash flows from investing activities:

Purchase of property, equipment and other assets, net of proceeds
   from sale                                                             ($64.8)           ($10.8)           ($75.6)
Expended on acquisitions                                                   (1.4)               --              (1.4)
Net increase (decrease) in investments                                    (11.6)              1.4             (10.2)
                                                                         ------            ------            ------
Net cash used in investing activities                                    ($77.8)           ($ 9.4)           ($87.2)
                                                                         ------            ------            ------

Cash flows from financing activities:

Decrease in long-term debt and other non-current liabilities
                                                                         ($ 7.4)           ($ 8.3)           ($15.7)
                                                                         ------            ------            ------
Net cash used in financing activities                                    ($ 7.4)           ($ 8.3)           ($15.7)
                                                                         ------            ------            ------
Net increase in cash and cash equivalents                                $ 36.0            $  2.5            $ 38.5
Cash and cash equivalents at:

   Beginning of period                                                    270.4              23.6             294.0
                                                                         ------            ------            ------
   End of period                                                         $306.4            $ 26.1            $332.5
                                                                         ------            ------            ------

</TABLE>

                                       34
<PAGE>
                      CONSOLIDATED STATEMENT OF OPERATIONS
                         NINE MONTHS ENDED MAY 31, 2002

<TABLE>
<CAPTION>
                                               OTHER THAN
                                                EXCLUDED          EXCLUDED         CONSOLIDATED
($ millions)                                  SUBSIDIARIES      SUBSIDIARIES          TOTALS
------------                                  ------------      ------------          ------
<S>                                            <C>              <C>                <C>
Revenue                                         $2,733.5            $721.2           $3,454.7
Compensation expense                             1,586.5             329.0            1,915.5
Accident claims expense                            175.8              47.4              223.2
Fuel expense                                        88.8              29.7              118.5
Depreciation expense                               190.9              34.6              225.5
Amortization expense                                59.3               8.9               68.2
Other operating expense                            474.5             286.4              760.9
                                                --------            ------           --------
Income (loss) from operating segments              157.7             (14.8)             142.9
Interest expense                                    (5.6)            (15.9)             (21.5)
Other financing related expenses                   (41.1)             (1.5)             (42.6)
Other income                                         8.7               0.3                9.0
                                                --------            ------           --------
Income (loss) before income taxes                  119.7             (31.9)              87.8
Income tax expense                                  (3.4)             (1.3)              (4.7)
                                                --------            ------           --------
Net income (loss)                                 $116.3            ($33.2)             $83.1
                                                --------            ------           --------
</TABLE>


                      CONSOLIDATED STATEMENT OF CASH FLOWS
                         NINE MONTHS ENDED MAY 31, 2002
<TABLE>
<CAPTION>
                                                                              OTHER THAN
                                                                               EXCLUDED         EXCLUDED         CONSOLIDATED
($ millions)                                                                 SUBSIDIARIES     SUBSIDIARIES          TOTALS
------------                                                                 ------------     ------------          ------
<S>                                                                          <C>             <C>                <C>
Cash flows from operating activities:

Net income (loss)                                                                $116.3         ($33.2)              $ 83.1
Add (deduct) items not affecting cash:

   Depreciation and amortization                                                  250.2           43.5                293.7
   Other financing related expenses                                                41.1            1.5                 42.6
   Other items                                                                     (8.4)          (2.4)               (10.8)
Increase (decrease) in claims liability and professional liability
   insurance accruals                                                             (24.2)          19.3                 (4.9)
Decrease in accrued interest                                                       (0.4)          (4.5)                (4.9)
Cash provided by (used in financing) other working capital items                 (111.3)           8.7               (102.6)
Cash portion of other financing related expenses                                  (22.7)          (0.5)               (23.2)
Increase in restricted cash and cash equivalents                                  (21.3)            --                (21.3)
                                                                                 ------         ------               ------
Net cash provided by operating activities                                        $219.3         $ 32.4               $251.7

Cash flows from investing activities:

Purchase of property, equipment and other assets, net of proceeds from
   sale                                                                         ($126.3)        ($27.4)             ($153.7)
Expended on acquisitions                                                           (1.9)            --                 (1.9)
Net increase in investments                                                       (32.9)          13.5                (19.4)
Proceeds from sale of assets                                                        4.2             --                  4.2
                                                                                 ------         ------               ------
Net cash used in investing activities                                           ($156.9)        ($13.9)             ($170.8)
                                                                                 ------         ------               ------

Cash flows from financing activities:

Net decrease in long-term debt and other non-current liabilities                 ($22.8)        ($ 6.8)              ($29.6)
                                                                                 ------         ------               ------
Net cash used in financing activities                                            ($22.8)        ($ 6.8)              ($29.6)
                                                                                 ------         ------               ------

Net increase in cash and cash equivalents                                        $ 39.6         $ 11.7               $ 51.3
Cash and cash equivalents at:

   Beginning of period                                                            266.8           14.4                281.2
                                                                                 ------         ------               ------
   End of period                                                                 $306.4         $ 26.1               $332.5
                                                                                 ------         ------               ------
</TABLE>


                                       35





<PAGE>
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                 AUGUST 31, 2002

<TABLE>
<CAPTION>
                                                        OTHER THAN
                                                         EXCLUDED            EXCLUDED         CONSOLIDATED
($ millions)                                           SUBSIDIARIES        SUBSIDIARIES          TOTALS
------------                                           ------------        ------------          ------
<S>                                                    <C>                 <C>                <C>
CURRENT ASSETS
Cash and cash equivalents                                $  323.8            $   19.7           $  343.5
Restricted cash and cash equivalents                         75.8                  --               75.8
Short-term deposits and marketable securities                16.1                  --               16.1
Trade accounts receivable                                   463.3                27.1              490.4
Other receivables                                            36.7                18.2               54.9
Income taxes recoverable                                     29.4                (0.2)              29.2
Parts and supplies                                           38.9                11.5               50.4
Other current assets                                         47.6                 8.7               56.3
                                                         --------            --------           --------
TOTAL CURRENT ASSETS                                      1,031.6                85.0            1,116.6

Long-term investments                                       372.5                45.4              417.9
Property and equipment                                    1,282.0               395.7            1,677.7
Goodwill                                                  2,547.3               429.5            2,976.8
Pension asset                                                10.8                  --               10.8
Deferred charges                                              9.4                 2.6               12.0
                                                         --------            --------           --------
TOTAL ASSETS                                             $5,253.6            $  958.2           $6,211.8

CURRENT LIABILITIES
Accounts payable                                         $   80.3            $   29.4           $  109.7
Accrued liabilities                                         392.6               111.5              504.1
Current portion of long-term debt                            12.3                 8.0               20.3
                                                         --------            --------           --------
TOTAL CURRENT LIABILITIES                                   485.2               148.9              634.1

Long-term debt                                               27.3               177.1              204.4
Other long-term liabilities                                 305.2               136.9              442.1
Liabilities subject to compromise                         3,977.1                  --            3,977.1
                                                         --------            --------           --------
TOTAL LIABILITIES                                         4,794.8               462.9            5,257.7

SHAREHOLDERS' EQUITY                                        458.8               495.3              954.1
                                                         --------            --------           --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY               $5,253.6            $  958.2           $6,211.8
                                                         ========            ========           ========
</TABLE>


                                       36
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS
            (ALL DOLLAR AMOUNTS ARE STATED IN UNITED STATES DOLLARS)


GENERAL

Corporate overview

The Company is primarily a bus and healthcare transportation provider in North
America. The Company operates in five reportable segments: education services,
public transit services, Greyhound, healthcare transportation services and
emergency management services.

Education services. The education services segment is the largest school bus
transportation provider in North America. The segment operates over 42,000
school buses and special education vehicles, primarily under the Laidlaw Transit
name, in the United States and Canada. The United States school bus market
provides bus services transporting approximately 23.5 million students to and
from school daily utilizing approximately 450,000 buses. In 2001, the U.S.
school bus market generated annual revenue of approximately $15.0 billion. The
business is seasonal, operating during the school year, typically from September
until June. There are over 16,000 school districts in the United States, and
each school district is responsible for the operation of its own school bus
transportation services. The district may either operate the service internally
or outsource the operations to a private sector provider. In 2001, approximately
31% of school bus operations were outsourced. The school bus market is a highly
regulated market with respect to equipment and operating conditions and
requirements.

The Company is the largest school bus transportation provider in the private
sector. As of August 31, 2002, the segment had contracts with over 1,100 school
boards and districts in the United States and Canada, as well as various other
education institutions, providing transportation for approximately two million
students each school day. The segment also uses its school bus fleet for charter
purposes.

Public transit services. The public transit services segment provides municipal
transit and paratransit bus transportation within the United States. This market
was estimated to be approximately $12.3 billion in 2000 based on annual revenue,
of which approximately 11.0%, or $1.3 billion, was outsourced to private sector
providers. There are two main businesses within this market: fixed-route
municipal bus services, which principally operate in urban areas, and
paratransit bus services, for riders with disabilities or who are unable to use
scheduled services. The total municipal bus fleet in North America was comprised
of approximately 65,000 buses in 2000, of which approximately 75% were
fixed-route vehicles and 25% were paratransit vehicles. Private sector
contractors dominated the paratransit segment, supplying an estimated 62.2% of
transit services. The segment provides access to transportation for
mobility-impaired individuals. As of August 31, 2002, the segment provided
services to fixed-route and paratransit municipal bus transportation customers
through approximately 170 contracts in the United States.

Greyhound. Greyhound is the leading provider of scheduled inter-city bus
transportation services in the United States and Canada and is the only national
provider of this service in those areas. Greyhound serves the value-oriented
customer by offering scheduled passenger service that connects rural and urban
markets throughout the United States and Canada.


                                       37
<PAGE>
Greyhound also provides package delivery service, charter bus service and, in
certain terminals, food service. In addition, Greyhound provides package tours
to major tourist regions in the United States and Canada.

Healthcare transportation services. The healthcare transportation services
segment is the leading provider of healthcare transportation services in the
United States. The segment operates in 37 states primarily under the American
Medical Response name. The segment offers critical care transportation services,
non-emergency ambulance and transfer services and emergency response services.
In fiscal 2002, the segment provided approximately 3.7 million ambulance
transports. The segment provides joint training, shared staffing and stationing
arrangements and contracted dispatching. The segment also provides comprehensive
onsite medical care and transport services for special events.

Emergency management services. The emergency management services segment is a
leading provider of emergency management services in the United States to
hospital-based emergency departments, operating primarily under the EmCare name.
The segment recruits physicians, as well as specially trained physician
extenders, evaluates their credentials and arranges contracts and schedules for
their services to hospital-based emergency departments and free-standing
treatment centers. The segment also assists in operational areas, including
staff coordination, quality assurance, departmental accreditation, billing,
recordkeeping, third-party payment, risk management services and other
administrative services. As of August 31, 2002, the segment had approximately
250 contracts for the management of emergency departments and provided emergency
services in 36 states to approximately 4.1 million patient visits in fiscal
2002.

Voluntary petitions for reorganization

On June 28, 2001, Laidlaw Inc. (the "Company") and five of its direct and
indirect subsidiaries (collectively, the "Debtors") filed voluntary petitions
for relief under chapter 11 of the United States Bankruptcy Code, 11 U.S.C.
101-1330 (the "Bankruptcy Code"), in the United States Bankruptcy Court for the
Western District of New York (the "Bankruptcy Court"). The other Debtors
include: Laidlaw USA, Inc. ("Laidlaw USA"), Laidlaw Investments Ltd. ("LIL")
Laidlaw International Finance Corporation ("LIFC"), Laidlaw One, Inc. ("Laidlaw
One") and Laidlaw Transportation, Inc. ("LTI"). In addition, the Company and LIL
have commenced Canadian insolvency proceedings under the Canada Companies'
Creditors Arrangement Act ("CCAA") in the Ontario Superior Court of Justice in
Toronto, Ontario (the "Canadian Court"). None of the Company's operating
subsidiaries was included in the filings.

At May 31, 2003, the Debtors remained in possession of their respective
properties and were managing their businesses as debtors-in-possession. Pursuant
to the Bankruptcy Code and the CCAA, however, the Debtors could not engage in
transactions outside the ordinary course of business without the approval of the
Bankruptcy Court and the Canadian Court.

The Company reorganized its affairs under the protection of the Bankruptcy Code
and the CCAA and proposed a plan of reorganization (the "Plan") for itself and
the other Debtors. On February 27, 2003, the Bankruptcy Court entered an order
confirming the Plan. On February 28, 2003, the Canadian Court issued an order
recognizing the Bankruptcy Court's confirmation order and implementing it in
Canada with respect to the Company's Canadian insolvency proceeding. The Plan
provides for the satisfaction of claims against and interests in the Company and
the other Debtors, including the liabilities subject to compromise. On June 23,
2003, the Plan became


                                       38
<PAGE>
effective. In accordance with the terms of the Plan, the Company engaged in an
internal restructuring that resulted in the transfer, directly or indirectly, of
all the assets of the Company to LIL which domesticated into the United States
as a Delaware corporation and changed its name to Laidlaw International, Inc.
fka LIL ("LII").

Since the Company successfully completed the reorganization described above, the
Company will be required to adopt "fresh start" accounting effective June 1,
2003. This accounting will require that assets and liabilities be recorded at
fair value, based on values determined in connection with the restructuring. As
a result, the reported amounts in the consolidated financial statements will
materially change, because they do not give effect to the adjustments to the
carrying values of assets and liabilities that will ultimately result from the
adoption of "fresh start" accounting.

Goodwill impairment

Effective September 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142 ("SFAS 142") "Accounting for Goodwill and Other
Intangible Assets" and as a result, the Company ceased to amortize goodwill. In
lieu of amortization, SFAS 142 requires that goodwill be reviewed for impairment
upon adoption of SFAS 142 and at least annually thereafter. As a result, on
September 1, 2002, the Company recorded a non-cash charge of $2,205.4 million as
a cumulative effect of change in accounting principle.


                                       39
<PAGE>
THREE AND NINE MONTHS ENDED MAY 31, 2003 AND 2002 RESULTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                       PERCENTAGE                                    PERCENTAGE
                                                PERCENTAGE OF           INCREASE             PERCENTAGE OF             INCREASE
                                                   REVENUE              (DECREASE)              REVENUE               (DECREASE)
                                             ---------------------     -----------       ----------------------      -----------
                                                THREE MONTHS                                  NINE MONTHS
                                                ENDED MAY 31,                                ENDED MAY 31,
                                             ---------------------                       ---------------------
                                              2003           2002                         2003           2002
                                             ------         ------                       ------         ------
<S>                                          <C>            <C>            <C>           <C>            <C>             <C>
Revenue                                      100.0%         100.0%           1.3%         100.0%         100.0%           0.9%
                                             -----          -----                         -----          -----
Operating expenses                            77.3           76.6            2.2           78.7           77.6            2.3
Selling, general and administrative
expenses                                      10.2            9.8            5.3           10.0            9.8            3.7
Depreciation expense                           6.4            6.5           (0.1)           6.6            6.5            1.3
Amortization expense                            --            1.9          (98.2)            --            2.0          (98.7)
                                             -----          -----                         -----          -----
Income from operating segments                 6.1            5.2           18.7            4.7            4.1           14.4
Interest expense                              (0.5)          (0.6)          --             (0.6)          (0.6)          (8.8)
Other financing related expenses              (0.3)          (1.1)         (70.2)          (1.0)          (1.2)         (17.8)
Other income                                    --            0.2          (73.7)           0.4            0.2           66.7
                                             -----          -----                         -----          -----
Income before income taxes and
    cumulative effect of change in
    accounting principle                       5.3            3.7           43.8            3.5            2.5           41.1
Income tax expense                             0.1            0.1             --            0.1            0.1           (4.3)
                                             -----          -----                         -----          -----
Income before cumulative effect of
   change in accounting principle              5.2            3.6           45.3            3.4            2.4           43.7
Cumulative effect of change in
   accounting principle                         --             --             --          (63.2)            --             --
                                             -----          -----                         -----          -----
Net income (loss)                              5.2            3.6           45.3          (59.8)           2.4             --
                                             =====          =====                         =====          =====
</TABLE>


                                       40
<PAGE>
Revenue

The sources of revenue and changes by business segment are as follows ($ in
millions):

<TABLE>
<CAPTION>
                                                     REVENUE                               PERCENTAGE INCREASE (DECREASE)
                                           FOR THE THREE MONTHS ENDED                        FOR THE THREE MONTHS ENDED
                                                     MAY 31,                                          MAY 31,
                                -------------------------------------------------       -----------------------------------
                                        2003                         2002               2003 OVER 2002       2002 Over 2001
                                --------------------         --------------------       --------------       --------------
<S>                             <C>             <C>          <C>           <C>          <C>                  <C>
Education services              $  457.9        38.1%        $  451.0       38.0%              1.5%                 1.0%
Public Transit services             72.8         6.1             81.0        6.8             (10.1)                (1.1)
Greyhound                          291.4        24.2            297.5       25.1              (2.1)                (3.1)
Healthcare Transportation
   services                        259.8        21.6            251.1       21.1               3.5                  1.3
Emergency Management services      120.9        10.0            106.7        9.0              13.3                  2.0
                                --------       -----         --------      -----
                                $1,202.8       100.0%        $1,187.3      100.0%              1.3                 (0.1)
                                ========       =====         ========      =====
</TABLE>


<TABLE>
<CAPTION>
                                                     REVENUE                                PERCENTAGE INCREASE (DECREASE)
                                            FOR THE NINE MONTHS ENDED                         FOR THE NINE MONTHS ENDED
                                                     MAY 31,                                           MAY 31,
                                -------------------------------------------------       -----------------------------------
                                        2003                         2002                2003 OVER 2002       2002 Over 2001
                                --------------------         --------------------       --------------       --------------
<S>                             <C>             <C>          <C>           <C>          <C>                  <C>
Education services              $1,314.8        37.7%        $1,299.4       37.6%              1.2%                 1.5%
Public Transit services            212.1         6.1            233.9        6.8              (9.3)                (0.1)
Greyhound                          847.5        24.3            863.2       25.0              (1.8)                (3.1)
Healthcare Transportation
   services                        759.3        21.8            737.3       21.3               3.0                  0.5
Emergency Management services      352.0        10.1            320.9        9.3               9.7                 (0.8)
                                --------       -----         --------      -----
                                $3,485.7       100.0%        $3,454.7      100.0%              0.9                 (0.2)
                                ========       =====         ========      =====
</TABLE>

The increase in the revenue in the Education services segment is primarily
attributable to price increases and the strengthening of the Canadian dollar
against the U.S. dollar. In addition, for the nine months ended May 31, 2003,
weather related school cancellations negatively impacted revenue of the
education services business. A portion of this revenue is expected to be
recovered in the Company's fourth quarter.

The decrease in revenue in the Public Transit services segment was due to
contract losses and reduction in service in certain contracts. The most
significant contract lost during the period was the Foothill contract in Los
Angeles. The Foothill contract generated approximately $5.4 in revenue in the
three months ended May 31, 2002 and $12.7 million in revenue in the nine months
ended May 31, 2002. Partially offsetting these contract losses and reduction in
services were a number of new contracts.

The decrease in revenue in the Greyhound segment was primarily due the slow
recovery of the travel services market and the discontinuation of the Golden
State Transportation ("Golden State") operations. The travel services market
continues to be negatively impacted by the general downturn in the U.S. economy,
the lingering effect of the war in Iraq and, in Canada, the effects of SARS on
the Canadian travel industry. Golden State, a 51.4% owned subsidiary,


                                       41
<PAGE>
ceased operations effective August 30, 2002 and filed a voluntary petition for
bankruptcy on September 30, 2002. These revenue decreases were partially offset
by the strengthening of the Canadian dollar against the U.S. dollar.

The increase in revenue in the Healthcare Transportation services segment is
primarily due to an increase in the revenue per transport recorded.

The increase in revenue in the Emergency Management services segment is
primarily due to an increase in both the revenue per visit recorded and an
increase in the volume of visits during the period because of the existence of
new contractual relationships.

For each of the periods described below, revenue and changes in revenue from
geographic components are as follows ($ in millions):

<TABLE>
<CAPTION>
                                           REVENUE                                  PERCENTAGE INCREASE (DECREASE)
                                 FOR THE THREE MONTHS ENDED                           FOR THE THREE MONTHS ENDED
                                           MAY 31,                                             MAY 31,
                     --------------------------------------------------          --------------------------------------
                              2003                          2002                 2003 OVER 2002          2002 Over 2001
                     --------------------          --------------------          --------------          --------------
<S>                  <C>           <C>             <C>           <C>             <C>                     <C>
United States        $1,110.0       92.3           $1,100.1        92.7%               0.9%                   (0.2%)
Canada                   92.8        7.7               87.2         7.3                6.4                     1.9
                     --------      -----           --------       -----
                     $1,202.8      100.0%          $1,187.3       100.0%               1.3                    (0.1)
                     ========      =====           ========       =====
</TABLE>


<TABLE>
<CAPTION>
                                           REVENUE                                  PERCENTAGE INCREASE (DECREASE)
                                  FOR THE NINE MONTHS ENDED                           FOR THE NINE MONTHS ENDED
                                           MAY 31,                                             MAY 31,
                     --------------------------------------------------          --------------------------------------
                             2003                          2002                 2003 OVER 2002          2002 Over 2001
                     --------------------          --------------------         --------------          --------------
<S>                  <C>           <C>             <C>           <C>            <C>                     <C>
United States        $3,215.8       92.3%          $3,193.4        92.4%              0.7%                   (0.2%)
Canada                  269.9        7.7              261.3         7.6               3.3                    (0.8)
                     --------      -----           --------       -----
                     $3,485.7      100.0%          $3,454.7       100.0%              0.9                    (0.2)
                     ========      =====           ========       =====
</TABLE>


                                       42
<PAGE>
EARNINGS FROM OPERATIONS BEFORE DEPRECIATION AND AMORTIZATION EXPENSES
("EBITDA"), AND THE COST OF OPERATIONS AND OPERATING PROFIT MARGINS BEFORE
DEPRECIATION AND AMORTIZATION EXPENSES

EBITDA is presented solely as a supplemental disclosure because management
believes it provides useful information regarding the Company's ability to
service or incur debt. EBITDA is not calculated the same way by all companies.
The Company defines EBITDA as earnings from continuing operations before
interest, income taxes, depreciation, amortization, other income (loss), other
financing related expenses and cumulative effect of change in accounting
principles. EBITDA is not intended to represent cash flow for the period, is not
presented as an alternative to operating income as an indicator of operating
performance, should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles ("GAAP") and is not indicative of operating income or cash
flow from operations as determined under GAAP. The following is a reconciliation
of the Company's EBITDA to the net earnings (loss) and the Company's net cash
provided by operating activities:

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                                      MAY 31,                            MAY 31,
                                                               2003              2002           2003               2002
                                                              ------            ------         ------             ------
<S>                                                           <C>               <C>          <C>                  <C>
EBITDA, as reported                                           $150.9            $161.7       $   392.8            $436.6
Depreciation and amortization                                  (77.2)            (99.6)         (229.3)           (293.7)
Interest expense                                                (6.6)             (6.6)          (19.6)            (21.5)
Other income (loss)                                              0.5               1.9            15.0               9.0
Other financing related expenses                                (3.9)            (13.1)          (35.0)            (42.6)
Income taxes                                                    (1.5)             (1.5)           (4.5)             (4.7)
                                                              ------            ------          ------            ------
   Earnings (loss) from continuing operations before
   cumulative effect of change in accounting principle          62.2              42.8           119.4              83.1
Cumulative effect of change in
   accounting principle                                           --                --        (2,205.4)               --
                                                              ------            ------       ---------            ------
Net earnings (loss)                                           $ 62.2            $ 42.8       ($2,086.0)           $ 83.1
                                                              ======            ======       =========            ======
</TABLE>


<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                                      MAY 31,                            MAY 31,
                                                               2003              2002           2003               2002
                                                              ------            ------         ------             ------
<S>                                                           <C>               <C>          <C>                  <C>
EBITDA, as reported                                          $150.9            $161.7            $392.8          $436.6
Cash paid for interest                                        (11.7)            (11.6)            (25.0)          (28.1)
Cash paid for other financing related
   expenses                                                     0.4              (8.6)            (11.6)          (19.4)
Other income (loss)                                             0.5               1.9              15.0             9.0
Cash received (paid) for income taxes                           6.0               2.4               4.4             8.4
Increase (decrease) in claims
   liability and professional liability
   insurance accruals                                           7.4              11.9              56.1            (4.9)
Cash provided by (used in financing)
   other working capital items                                 24.9              (7.8)           (141.1)         (102.6)
Decrease (increase) in restricted
   cash and cash equivalents                                   33.9              (7.4)              0.9           (21.3)
Other                                                         (12.6)             (1.1)            (27.7)          (26.0)
                                                             ------            ------            ------          ------
Net cash provided by operating activities                    $199.7            $141.4            $263.8          $251.7
                                                             ======            ======            ======          ======
</TABLE>


                                       43
<PAGE>
EBITDA and changes by segment are as follows ($ in millions):

<TABLE>
<CAPTION>
                                                     EBITDA                                PERCENTAGE INCREASE (DECREASE)
                                           FOR THE THREE MONTHS ENDED                        FOR THE THREE MONTHS ENDED
                                                     MAY 31,                                          MAY 31,
                                   -----------------------------------------          --------------------------------------
                                           2003                   2002                 2003 OVER 2002          2002 Over 2001
                                   -----------------       -----------------          --------------          --------------
<S>                                <C>         <C>         <C>        <C>             <C>                     <C>
Education services                 $116.1      76.9%       $116.0      71.7%                  --%                   7.0%
Public Transit services               5.6       3.7           2.7       1.7                107.4                    (58.5)
Greyhound                             3.4       2.3          14.5       9.0                (76.6)                   (31.9)
Healthcare Transportation
   services                          18.6      12.3          22.8      14.1                (18.4)                   (14.9)
Emergency Management services         7.2       4.8           5.7       3.5                 26.3                     72.7
                                   ------     -----        ------     -----
                                   $150.9     100.0%       $161.7     100.0%                (6.7)                    (2.8)
                                   ======     =====        ======     =====
</TABLE>


<TABLE>
<CAPTION>

                                                     EBITDA                           PERCENTAGE INCREASE (DECREASE)
                                            FOR THE NINE MONTHS ENDED                   FOR THE NINE MONTHS ENDED
                                                     MAY 31,                                     MAY 31,
                                   -----------------------------------------          --------------------------------------
                                           2003                   2002                 2003 OVER 2002          2002 Over 2001
                                   -----------------       -----------------          --------------          --------------
<S>                                <C>         <C>         <C>        <C>             <C>                     <C>
Education services                 $302.0      76.9%        $321.8       73.7%              (6.2%)                    8.2%
Public Transit services               7.3       1.8            4.0        0.9               82.5                    (79.1)
Greyhound                             5.8       1.5           32.8        7.5              (82.3)                   (31.4)
Healthcare Transportation
   services                          55.8      14.2           57.9       13.3               (3.6)                   (29.7)
Emergency Management services        21.9       5.6           20.1        4.6                9.0                     57.0
                                   ------     -----         ------     -----
                                   $392.8     100.0%        $436.6     100.0%              (10.0)                    (5.0)
                                   ======     =====         ======     =====
</TABLE>


                                       44
<PAGE>
For each of the periods described below, the operating profit margins before
depreciation and amortization expenses of the individual segments and
consolidated margins are as follows:

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED MAY 31,           NINE MONTHS ENDED MAY 31,
                                                   2003              2002               2003              2002
                                                   ----              ----               ----              ----
<S>                                               <C>               <C>                <C>               <C>
Education services                                 25.4%             25.7%              23.0%             24.8%
Public transit services                             7.7               3.3                3.4               1.7
Greyhound                                           1.2               4.9                0.7               3.8
Healthcare transportation services                  7.2               9.1                7.3               7.9
Emergency management services                       6.0               5.3                6.2               6.3
Consolidated                                       12.5              13.6               11.3              12.6
</TABLE>

For the three months ended May 31, 2003, the operating profit margin before
depreciation and amortization expenses in the Education services segment was
consistent with the three months ended May 31, 2002. The quarter experienced
increases in accident claims costs, health and welfare benefits and wages which
was offset by reduced legal, travel, meetings costs and other administration
expenses. For the nine months ended May 31, 2003, the operating profit margin
before depreciation and amortization expenses was slightly below the nine months
ended May 31, 2002. The decrease in margin for the nine month period was due to
increased accident claims costs and increases in health and welfare benefits and
wages. The increase in health and welfare benefits was primarily driven by
increased medical costs.

In the three months ended May 31, 2003, the operating profit margin before
depreciation and amortization expenses in the Public transit services segment
increased to 7.7% from 3.3% in the three months ended May 31, 2002 and increased
to 3.4% in the nine months ended May 31,2003 from 1.7% in the nine months ended
May 31, 2002. The segment realized a significant decline in accident claims
costs as well as reduced administration and maintenance costs. The segment did
experience an increase in health and welfare benefits, primarily driven by
increased medical costs.

In the three months ended May 31, 2003, the operating profit margin before
depreciation and amortization expenses in the Greyhound segment was 1.2%
compared to 4.9% for the three months ended May 31, 2002 and in the nine months
ended May 31, 2003, 0.7% compared to 3.8% in the nine months ended May 31, 2002.
The decrease in the operating margin in the three months ended May 31, 2003 was
due to reduced ridership in both the core line haul business and the travel and
charter business, increased fuel prices and a severance amount recorded for the
former chief executive officer of the segment. In addition to the factors
impacting the three month period discussed above, the current nine month period
was also negatively affected by increased accident claims costs. Fuel costs,
which can normally be passed through to the customer by raising ticket prices,
have been absorbed by the segment because of the continued weakness in the
travel industry.

In the three months ended May 31, 2003, the operating profit margin before
depreciation and amortization expenses in the Healthcare transportation services
segment was 7.2% compared to 9.1% in the three months ended May 31, 2002. In the
nine months ended May 31, 2003, the operating profit margin before depreciation
and amortization expenses was 7.3% compared to 7.9% in the prior period. The
decreases in the profit margins are primarily due to increased wages, increased
accident claims costs and an increase in health and welfare benefits. These
expense increases were partially offset by an increase in the revenue per
transport.

In the three months ended May 31, 2003, the operating profit margin before
depreciation and amortization expenses in the Emergency management services
segment was 6.0% compared to 5.3% in the three months ended May 31, 2002. In the
nine months ended May 31, 2003, the


                                       45
<PAGE>
operating profit margin before depreciation and amortization expenses was 6.2%
compared to 6.3% in the prior period. The increase in operating profit was the
result of an increase in revenue per visit offset by an increase in physician
wages and malpractice claims costs.

DEPRECIATION EXPENSE

Depreciation expense for the three months ended May 31, 2003 decreased slightly
to $76.8 million from $76.9 million in the prior period. Depreciation expense
for the nine months ended May 31, 2003 increased slightly to $228.4 million from
$225.5 million in the prior period.

AMORTIZATION EXPENSE

Amortization expense for the three months ended May 31, 2003 decreased to $0.4
million from $22.7 million in the prior period and for the nine months ended May
31, 2003 decreased to $0.9 million from $68.2 million in the prior period. The
decrease is a result of goodwill no longer being amortized. Instead, it is
tested for impairment at least on an annual basis. This change in policy is due
to new accounting rules implemented by the Company on September 1, 2002. See
"Cumulative effect of change in accounting principle". The amount of
amortization expense relating to goodwill recorded during the three months ended
May 31, 2002 totaled $22.6 million. The amount of amortization expense relating
to goodwill during the nine months ended May 31, 2002 totaling $67.7 million.

INTEREST EXPENSE

In the three months ended May 31, 2003, interest expense remained unchanged at
$6.6 million. No interest expense was incurred on prepetition debt of the
Debtors for the three months ended May 31, 2003 and for the three and nine
months ended May 31, 2002. The total interest on prepetition debt that was not
incurred during the quarter was approximately $73.2 million (May 31, 2002 -
$68.2 million).

In the nine months ended May 31, 2003, interest expense decreased by 9% to $19.6
million from $21.5 million in 2002. The majority of this decrease was due to a
reduction in the average borrowings level. The total interest on prepetition
debt that was not incurred during the nine months ended May 31, 2003 was
approximately $214.1 million (May 31, 2002 - $205.0 million).

OTHER FINANCING RELATED EXPENSES

During the three months ended May 31, 2003, the Company incurred $3.9 million
(May 31, 2002 - $13.1 million) ($35.0 million and $42.6 million during the nine
months ended May 31, 2003 and May 31, 2002, respectively) in professional fees
and other costs as a result of (i) events of default under the Company's $1.425
billion syndicated bank facility (the "Facility"), (ii) events of default on
certain Company debentures totalling $2.04 billion (the "Debentures") and (iii)
the voluntary petition for reorganization as described in Note 1 of Notes to the
Consolidated Financial Statements for the nine months ended May 31, 2003.
Professional fees and other costs include financing, accounting, legal and
consulting services, including provisions for completion fees, incurred by the
Company in connection with the ongoing negotiations with the Facility members
and Debenture holders and related to the voluntary petition for reorganization.


                                       46
<PAGE>

OTHER INCOME

Other income decreased by $1.4 million to $0.5 million in the quarter ended May
31, 2003. Other income increased by $6.0 million to $15.0 million during the
nine months ended May 31, 2003. The primary reason for the increase during the
nine months ended May 31, 2003 is because of the $12.5 million related to the
settlement of the bondholder actions as described in Note 7 of Notes to the
Consolidated Financial Statements. Partially offsetting the bondholder
settlement was lower returns experienced in the Company's investment portfolio.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

Effective September 1, 2002, the Company adopted SFAS 142 and, as a result, the
Company ceased to amortize goodwill. In lieu of amortization, SFAS 142 requires
that goodwill be reviewed for impairment upon adoption of SFAS 142 and at least
annually thereafter. Under SFAS 142, goodwill impairment is deemed to exist if
the carrying value of a reporting unit exceeds its estimated fair value. To
determine estimated fair value of the reporting units the Company utilized
independent valuations of the underlying businesses. This methodology differs
from the Company's previous accounting policy, which used undiscounted cash
flows to determine possible impairment.

On adoption, the Company completed the impairment assessment as required by SFAS
142 and determined that the carrying value of certain of its operations exceeded
their fair value. As a result, the Company recorded a non-cash charge of
$2,205.4 million as a cumulative effect of change in accounting principle.

INCOME TAX EXPENSE

During the three months ended May 31, 2003, the Company incurred an income tax
expense totaling $1.5 million (May 31, 2002 - $1.5 million). During the nine
months ended May 31, 2003, the Company incurred an income tax expense totalling
$4.5 million (May 31, 2002 - $4.7 million). The amounts represent the Company's
estimate of the cash taxes owing for the respective periods.

NET INCOME AND INCOME PER SHARE

Income from operations before other financing related expenses for the quarter
ended May 31, 2003 increased to $66.1 million or $0.20 per share compared with
$55.9 million or $0.17 per share for the quarter ended May 31, 2002. This
increase is due primarily to the factors discussed previously.

Income from operations before other financing related expenses and the
cumulative effect of change in accounting principle for the nine months ended
May 31, 2003 increased to $154.4 million or $0.47 per share compared with $125.7
million or $0.39 per share for the nine months ended May 31, 2002. This increase
is due primarily to the factors discussed previously.

Other financing related expenses during the three months ended May 31, 2003
totalling $3.9 million ($0.01 per share)(May 31, 2002 - $13.1 million, or $0.04
per share) (nine months ended May 31, 2003 - $35.0 million, or $0.10 per share;
nine months ended May 31, 2002 - $42.6 million, or $0.14 per share) were
incurred during the periods as a result of (i) events of default under the
Facility, (ii) events of default on the Debentures and (iii) the voluntary
petition for reorganization.

                                       47
<PAGE>
On September 1, 2002, $2,205.4 million or $6.77 per share was recorded as a
cumulative effect of accounting principle. The charge relates to the adoption of
a new policy for determining impairments in goodwill and other intangible
assets.

In total, the net income was $62.2 million or $0.19 per share in the quarter
compared with income $42.8 million or $0.13 per share for the quarter ended May
31, 2002. For the nine months ended May 31, 2003, the net income (loss) was a
loss of $2,086.0 million or $6.40 per share compared with income of $83.1
million or $0.25 per share for the nine months ended May 31, 2003.

The weighted average number of Common Shares outstanding during the periods
remained unchanged at 325.9 million.


FINANCIAL CONDITION

As of May 31, 2003 and August 31, 2002, the Company's capital consisted of ($ in
millions):

<TABLE>
<CAPTION>
                                   MAY 31, 2003                August 31, 2002          Change
                                   ------------                ---------------          ------
<S>                          <C>                <C>       <C>              <C>       <C>
Long-term debt
  (including the current
  portion)                   $   258.3            7.1%    $  224.7           4.0%    $     33.6
Other long-term
  liabilities                    666.0           18.3        442.1           7.9          223.9
Liabilities subject to
  compromise                   3,977.1          109.0      3,977.1          71.0             --
Shareholders' equity
  (deficiency)                (1,252.9)         (34.4)       954.1          17.1       (2,207.0)
                             ---------          -----     --------         -----      ---------
                             $ 3,648.5          100.0%    $5,598.0         100.0%     ($1,949.5)
                             =========          =====     ========         =====      =========
</TABLE>

Voluntary petitions for reorganization

On June 28, 2001, the Debtors filed voluntary petitions for relief under chapter
11 of the Bankruptcy Code in the Bankruptcy Court. The Debtors include the
Company and five of its direct and indirect subsidiaries: Laidlaw USA, LIL,
LIFC, Laidlaw One, and LTI. In addition, the Company and LIL have commenced
Canadian insolvency proceedings under the CCAA in the Canadian Court. None of
the Company's operating subsidiaries was included in the filings.

At May 31, 2003, the Debtors remained in possession of their respective
properties and were managing their businesses as debtors-in-possession. Pursuant
to the Bankruptcy Code and the CCAA, however, the Debtors would not engage in
transactions outside the ordinary course of business without the approval of the
Bankruptcy Court and the Canadian Court.

The Company reorganized its affairs under the protection of the Bankruptcy Code
and the CCAA and proposed a plan of reorganization for itself and the other
Debtors. On February 27, 2003, the Bankruptcy Court entered an order confirming
the Company's Plan. On February 28, 2003, the Canadian Court issued an order
recognizing the Bankruptcy Court's confirmation order and implementing it in
Canada with respect to The Company's Canadian insolvency proceeding. The Plan
provides for the satisfaction of claims against and interests in the Company and
the other Debtors, including the liabilities subject to compromise. On June 23,
2003, the Plan became effective. In accordance with the terms of the Plan, the
Company engaged in an internal restructuring that resulted in the transfer,
directly or indirectly, of all the assets of the Company

                                       48
<PAGE>
to LIL which domesticated into the United States as a Delaware corporation and
changed its name to Laidlaw International, Inc. fka LIL ("LII").

As a part of its emergence from chapter 11, LII obtained exit financing of
approximately $1.225 billion. Approximately $1.0 billion of this financing was
used to fund a portion of the distributions to the Company's creditors.

Pursuant to the Plan, LII domesticated into the United States as a Delaware
corporation. In conjunction with the emergence from chapter 11, LII issued 100.0
million shares of new common stock for distribution to the Company's creditors.
Approximately 31.1 million of these shares were issued to holders of Laidlaw
bank debt claims (Class 4 under the Plan); approximately 57.9 million to holders
of Laidlaw bond debt claims (Classes 5 and 5 A under the Plan) and approximately
11.0 million will be available for distribution to holders of general unsecured
claims (Class 6 under the Plan). In addition, approximately 3.8 million shares
were issued to a trust in connection with the Company's settlement with the PBGC
relating to the funding level of certain subsidiary pension funds. Consistent
with the Plan, the Company's common stock was cancelled as of June 23, 2003.

The $33.6 million increase in long-term debt is primarily a result of borrowings
under the Greyhound Lines, Inc. ("Greyhound") facility to satisfy cash funding
requirements.

The $223.9 million increase in other long-term liabilities is primarily due to
the increase in the pension liability and the increase in claims liabilities as
a result of increased accident claims costs being experienced.

Shareholders' equity decreased by $2,207.0 million as a result of the
comprehensive loss during the period.

LIQUIDITY

Cash provided by operating activities increased by $12.1 million to $263.8
million, in the nine months ended May 31, 2003. In the nine months ended May 31,
2002, cash provided by continuing operating activities totalled $251.7 million.

Since August 31, 2002, working capital, excluding the current portion of
long-term debt, has increased by $156.2 million to $659.0 million at May 31,
2003. This increase is primarily a result of working capital associated with the
start-up of the new school year.

Approximately $76.4 million of the cash and equivalents and short-term deposits
and marketable securities are assets of the Company's wholly owned insurance
subsidiaries and are used to support the Company's self-insurance program. If
these amounts are withdrawn from the subsidiaries, they would have to be
replaced by other suitable financial assurances.

                                       49
<PAGE>
Potential Pension Plan Funding Requirements

Greyhound and certain of its subsidiaries sponsor the following U.S. deferred
Pension Plans (the "Greyhound U.S. Plans"):

      -     Greyhound Lines, Inc. Salaried Employees Defined Benefit Plan
            ("Greyhound Salaried Plan");

      -     Greyhound Lines, Inc. Amalgamated Transit Union Local 1700 Council
            Retirement & Disability Plan ("ATU Plan");

      -     Texas, New Mexico and Oklahoma Coaches, Inc. Employees Retirement
            Plan;

      -     Vermont Transit Co. Inc. Employees Defined Benefit Pension Plan
            ("Vermont Transit Plan");

      -     Carolina Coach Company Pension Plan;

      -     Carolina Coach Company International Association of Machinist
            Pension Plan; and

      -     Carolina Coach Company Amalgamated Transit Union Pension Plan.

The ATU Plan covers approximately 14,000 current and former employees hired
before November 1, 1983 by Greyhound, fewer than 1,000 of whom are active
employees. The ATU Plan provides retirement benefits to the covered employees
based upon a percentage of average final earnings, reduced pro rata for service
of less than 15 years. Under the terms of the collective bargaining agreement,
participants in this plan accrue benefits as long as no contributions are due
from the Company. During fiscal 2002, the ATU Plan actuary advised the Company
and the union that the decline in the financial markets had made it likely that
contributions to the ATU Plan would be required for the plan in calendar 2002.
The Company and union met and agreed to freeze service and wage accruals
effective March 15, 2002. The Greyhound Salaried Plan covered salaried employees
of Greyhound through May 7, 1990, when the plan was curtailed. The Vermont
Transit Plan covered substantially all employees at Vermont Transit Company
through June 30, 2000, when the plan was curtailed. The other Greyhound U.S.
Plans cover salaried and hourly personnel of other Greyhound subsidiaries.
Except as described below, it is the Company's policy to fund the minimum
required contribution under existing laws.

As of December 31, 2002, the Greyhound U.S. Plans had a combined projected
benefit obligation ("PBO"), discounted at 6.5%, of $768.0 million. The ATU Plan
represents approximately 90% of the PBO. Over the last two calendar years, the
PBO has increased $69.5 million as interest accretion on the obligation and the
effect of a decrease in the discount rate of 1.3% have more that offset
reductions due to benefit payments. In addition, plan assets have declined
$216.1 million over the last two calendar years due to benefit payments and
losses on plan assets. As a result, although plan assets exceeded the PBO by
$41.6 million at December 31, 2000, the PBO now exceeds plan assets resulting in
the plans being underfunded by $244.0 million at December 31, 2002.

Further, in connection with its bankruptcy reorganization, the Company and the
United States Pension Benefit Guaranty Corporation ("PBGC"), a United States
government agency that administers the mandatory termination insurance program
for defined benefit pension plans under the Employee Retirement Income Security
Act ("ERISA"), have agreed to the economic terms relating to claims asserted by
the PBGC against the Debtors regarding the funding levels of the Greyhound U.S.
Plans (the "PBGC Agreement"). Under the PBGC Agreement, upon the consummation of
the Plan on June 23, 2003, the Company and its subsidiaries contributed $50
million in cash to the Greyhound U.S. Plans and the Company issued 3,777,419
shares of LII common stock equal in value to $50 million to a trust (the
"Pension Plan Trust"). Further, LII will contribute an additional $50 million in
cash to the Greyhound U.S. Plans in June 2004.

The PBGC Agreement provides that the PBGC will be granted a first priority lien
on the common stock held in the Pension Plan Trust. The trustee of the Pension
Plan Trust will sell the common stock as soon as practicable, but in no event
later than the end of calendar 2004. All proceeds from sales of this stock will
be contributed directly to the Greyhound U.S. Plans. If the proceeds

                                       50
<PAGE>
from the sales of common stock exceed $50 million, the excess amount may be
credited against the next-due minimum funding obligations of the Company and its
subsidiaries, but will not reduce the June 2004 required contribution under the
PBGC Agreement. If the proceeds from the sales of common stock do not aggregate
$50 million, LII and its subsidiaries will be required to contribute the amount
of the shortfall in cash to the Greyhound U.S. Plans at the end of 2004.

These contributions and transfers will be in addition to the contributions to
the Greyhound U.S. Plans, if any, required under the minimum funding
requirements of ERISA. The PBGC also will receive a second priority lien on the
assets of the Company's U.S. operating subsidiaries (other than Greyhound and
its subsidiaries).

Based upon current regulations and plan asset values at December 31, 2002, and
assuming annual investment returns exceed 3% and that the contributions required
under the PBGC Agreement are made consistent with the terms of the PBGC
Agreement, the Company does not anticipate any significant additional minimum
funding requirements for the ATU Plan over the next several years. However,
there is no assurance that the ATU Plan will be able to earn the assumed rate of
return, that new regulations may result in changes in prescribed actuarial
mortality tables or discount rates, or that there will be market driven changes
in the discount rates, which would result in the Company being required to make
significant additional minimum funding contributions in the future.

Debtor-in-possession facility

To ensure sufficient liquidity to meet ongoing operating needs, the Company
obtained a $200.0 million debtor-in-possession ("DIP") financing from General
Electric Capital (the "DIP Facility"). The DIP Facility was guaranteed by
certain of the Company's direct and indirect subsidiaries located in the United
States and Canada (other than Greyhound and its subsidiaries and joint
ventures). The DIP Facility expired on June 23, 2003, the effective date of the
approved plan of reorganization.

As of May 31, 2003 the Company had no borrowings under the DIP Facility, but
issued letters of credit of $41.5 million and had $158.5 million of
availability. On June 23, 2003, the letters of credit issued under the DIP
Facility were replaced by letters of credit issued under the Company's new
revolving credit facility (as described below).

The Greyhound Facility

In October 2000, Greyhound Lines, Inc. ("Greyhound") entered into a revolving
credit facility, with Foothill Capital Corporation to fund working capital needs
and for general corporate purposes. Under the terms of this revolving credit
facility, Greyhound was required to meet certain financial covenants, including
a minimum cash flow to interest expense ratio, a maximum debt to cash flow ratio
and a minimum level of net worth. Because management was unable to determine
with reasonable assurance whether Greyhound would remain in compliance with
these covenants in the future, Greyhound initiated discussions with the agent
bank in an effort to obtain modifications to the agreement. On May 14, 2003,
Greyhound entered into an amended and restated revolving credit facility (the
"Greyhound Facility") superceding the previous revolving credit facility.
Changes to the agreement include, among other things, a lower advance rate on
buses, the addition of all remaining unpledged buses to the collateral base, a
modified advance rate on real estate collateral, increased rates of interest on
borrowings and letter of credit fees, an increase in the letter of credit
sub-facility, a lower minimum cash flow to interest expense ratio and a higher
maximum debt to cash flow ratio for

                                       51
<PAGE>
the balance of 2003, elimination of the minimum net worth covenant, the addition
of a minimum cash flow covenant and a waiver of any defaults arising under the
previous revolving credit facility with respect to the financial covenants for
the period ended March 31, 2003.

Letters of credit or borrowings are available under the Greyhound Facility based
upon the total of 80% of the appraised wholesale value of bus collateral, plus
65% of the quick sale value of certain real property collateral, minus $20
million, subject to a maximum of $125 million, with a $70 million letter of
credit sub-facility. Borrowings under the Greyhound Facility are available to
Greyhound at a rate equal to Wells Fargo Bank's prime rate plus 1.5% per annum
or LIBOR plus 3.5% per annum as selected by Greyhound. Letter of credit fees are
3.5% per annum. Borrowings under the Greyhound Facility mature on October 24,
2004. The Greyhound Facility is secured by liens on substantially all of the
assets of Greyhound and the stock and assets of certain of its subsidiaries. The
Greyhound Facility is subject to certain affirmative and negative operating and
financial covenants, including maximum total debt to cash flow ratio; minimum
cash flow to interest ratio; minimum cash flow; limitation on non-bus capital
expenditures; limitations on additional liens, indebtedness, guarantees, asset
disposals, advances, investments and loans; and restrictions on the redemption
or retirement of certain subordinated indebtedness or equity interests, payment
of dividends and transactions with affiliates, including the Company. As of
March 31, 2003, Greyhound was in compliance with all such covenants.

The financial covenants established for 2003 remain tight because they were set
at levels slightly below (in the case of the minimum cash flow to interest
expense ratio and minimum cash flow) or slightly above (in the case of the
maximum debt to cash flow ratio) the levels indicated in Greyhound's current
financial forecast. The Greyhound Facility further provides that Greyhound will
deliver to the agent bank its financial forecast for 2004 by no later than
September 2003, and Greyhound and the agent bank will negotiate in good faith to
determine new financial covenants for 2004. Although Greyhound has been
successful in obtaining necessary amendments to the Greyhound Facility in the
past, there can be no assurances that Greyhound will obtain additional
modifications in the future if needed, or that the cost of any future
modifications or other changes in the terms of the Greyhound Facility would not
have a material effect on Greyhound.

As of May 31, 2003, the Company had outstanding borrowings under the Greyhound
Facility of $48.1 million, issued letters of credit of $46.2 million and had
availability of $30.7 million.


Exit Financing

As a result of emergence from chapter 11, in June 2003, LII established a new
$825.0 million senior secured credit facility. The new facility consists of a
$625.0 million Term B loan due June 2009 and a $200.0 million senior secured
revolving credit facility due June 2008. The Term B facility provides for a
mandatory 1% principal repayment to be paid quarterly beginning June 2003
through to March 2008 followed by four $125.0 million quarterly installments.
Interest paid on the Term B facility will be charged at Base Rate +4% or
Eurodollar +5%. As at June 23, 2003, the entire Term B facility was drawn.

The $200.0 million revolving credit facility was established to fund LII's
letters of credit and working capital needs. Interest will be charged at Base
Rate +3.5% or Eurodollar Rate +4.5% for the initial six month period beginning
June 2003 through to December 2003. Thereafter, a percentage per annum
determined by reference to a leverage ratio, as defined in the credit facility
agreement, will be applied. The range of rates is as follows: Base Rate +3.25% -
3.75%; Eurodollar Rate +4.25% - 4.75%; Bankers Acceptance Rate +4.25% - 4.75%.
As at June 30, 2003, $13.0 million was drawn on the facility for the issuance of
letters of credit.

                                       52
<PAGE>
Under the terms of the new $825.0 million senior secured Credit Facility the
Company is required to meet certain financial covenants including a fixed
charge, coverage ratio, leverage ratio, interest coverage ratio, net tangible
asset ratio and maximum senior secured leverage ratio as well as certain
non-financial covenants.

Also as a result of emergence from chapter 11, in June 2003 the Company issued
$406.0 million of Senior Notes due 2011. The notes bear interest at a rate of
10.75% payable semi-annually beginning on December 15, 2003. LII may redeem some
or all of the notes at any time after June 15, 2007.

CAPITAL EXPENDITURES AND CAPITAL RESOURCES

Net expenditures for the purchase of capital assets for normal replacement
requirements and increases in services, increased to $229.8 million for the nine
months ended May 31, 2003 (including $21.1 million of purchases of capital
assets financed by notes payable, operating leases and/or capital leases) from
$203.1 million for the nine months ended May 31, 2002 (including $49.4 million
of purchases of capital assets financed by notes payable, operating leases
and/or capital leases). This increase is primarily a result of the Company
curtailing capital spending in the prior period due to the Company's financial
position at that time.

Expenditures on the acquisitions of businesses (including long-term debt
assumed) were $4.7 million for the nine months ended May 31, 2003 (May 31, 2002
- $2.0 million).

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements requires management to make estimates
and assumptions relating to the reporting of results of operations, financial
condition and related disclosure of contingent assets and liabilities at the
date of the financial statements. Actual results may differ from those estimates
under different assumptions or conditions. The following are the Company's most
critical accounting policies, which are those that require management's most
difficult, subjective and complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain and may
change in subsequent periods.

Claims liability and professional liability reserves

The Company establishes reserves for automobile liability, general liability,
professional liability and worker's compensation claims that have been reported
but not paid and claims that have been incurred but not reported. These reserves
are developed using actuarial principles and assumptions which consider a number
of factors, including historical claim payment patterns and changes in case
reserves, the assumed rate of increase in healthcare costs and property damage
repairs, ultimate court awards and the discount rate. The amount of these
reserves could differ from the Company's ultimate liability related to these
claims due to changes in the Company's accident reporting, claims payment and
settlement practices or claims reserve practices, as well as differences between
assumed and future cost increases and discount rates.

                                       53
<PAGE>
Revenue recognition in the Healthcare services segment

Revenue is recognized at the time of service and is recorded at amounts
estimated to be recoverable, based upon recent experience, under reimbursement
arrangements with third-party payors, including Medicare, Medicaid, private
insurers, managed care organizations and hospitals or directly from patients.
The Company derives approximately 39% of its collections in the healthcare
services segment from Medicare and Medicaid, 7% from contracted hospitals, 44%
from private insurers, including prepaid health plans and other sources, and 10%
directly from patients.

Healthcare reimbursement is complex and may involve lengthy delays. Third-party
payors are continuing their efforts to control expenditures for healthcare and
may disallow, in whole or in part, claims for reimbursement based on
determinations that they are not reimbursable under plan coverage, they were for
services provided that were not medically necessary, or insufficient supporting
information was provided.

As a result, there is a reasonable possibility that recorded estimates could
change materially and that retroactive adjustments may change the amounts
realized from third-party payors. Such adjustments are recorded in future
periods as adjustments become known.

Pension

The determination of the Company's obligation and expense for pension benefits
is dependent on the selection of certain assumptions and factors. These include
assumptions about the discount rate, the expected return on plan assets and the
rate of future compensation increase as determined by management. In addition,
the Company's actuarial consultants also use factors to estimate such items as
retirement age and mortality tables. The assumptions and factors used by the
Company may differ materially from actual results due to changing market
conditions, earlier or later retirement ages or longer or shorter life spans of
participants. These differences may result in a significant impact to the amount
of pension obligation or expense recorded by the Company. During fiscal 2002 and
the first nine months of this fiscal period, the Company has experienced a
reduction in interest rates and a deterioration in plan returns. If this trend
continues, the Company may have to fund amounts to the pension plans in future
years in addition to the funding discussed above under "Liquidity - Potential
Pension Plan Funding Requirements", whereby the Company agreed with the PBGC to
the economic terms relating to claims asserted by the PBCG against the Debtors
regarding the funding levels of the Greyhound U.S. Plans. Under the PBGC
Agreement, the Company has committed to make substantial cash contributions to
the Greyhound U.S. Plans, in addition to contributions required under applicable
law.

Contingencies

As discussed in Notes 7 and 13 of the Notes to the Consolidated Financial
Statements, management is unable to make a reasonable estimate of the
liabilities that may result from the final resolution of certain litigation
matters disclosed. Further assessments of the potential liability will be made
as additional information becomes available. Management currently does not
believe that these proceedings will have a material adverse affect on the
Company's consolidated financial position. It is possible, however, that results
of operations could be materially affected by changes in management's
assumptions relating to these proceedings or the actual final resolution of
these proceedings.

                                       54
<PAGE>
RISK FACTORS IN THE COMPANY

The Company is exposed to a variety of financial, operating and market risks.
Some of these risks are within the Company's control; others are not. The
following are the risk factors in the Company not already disclosed elsewhere in
this report.

Accident claims costs

As discussed above under the "Critical accounting policies", the Company
experiences significant costs surrounding accident and professional liability
claims and uses estimates and assumptions when providing for the ultimate costs
of these incidents. The ultimate costs could materially affect the Company's
financial condition and results of operations.

The Company has in place procedures to manage the risk. The first is a
comprehensive safety program throughout the Company, which has as its goal to
reduce the number of accidents as far as practically possible. Although recent
accident claims cost increases experienced because of increased medical costs,
ultimate settlement amounts and court awards, and increased severity of
accidents experienced, the accident frequency as a percentage of revenue has
actually declined over the last number of years. Once an accident has occurred,
the Company has procedures and settlement practices in place to minimize the
ultimate cost to the Company.

Healthcare revenue

In August 1997, the U.S. Federal Government passed the Balanced Budget Act of
1997 (the "Act"), which provides for certain changes to the Medicare
reimbursement system. These changes include, among other things, the requirement
for the development and implementation of a prospective fee schedule for
reimbursement of ambulance services. Prior to these changes, ambulance services
were reimbursed from Medicare on a reasonable charge basis.

The Act mandates that this fee schedule be developed through a negotiated
rulemaking process and must consider (i) data from the industry and other
organizations involved in the delivery of ambulance services, (ii) mechanisms to
control increases in expenditures for ambulance services, (iii) appropriate
regional and operational differences, (iv) adjustments to payment rates to
account for inflation and other relevant factors, and (v) the phase-in of
payment rates under the fee schedule in an efficient and fair manner.

The Act also required that beginning January 1, 2001, ambulance service
providers accept assignment whereby the Company receives payment directly from
Medicare and accepts such amount along with the co-pay and deductible paid by
the patient as payment in full. Further, the Act stipulates that third-parties
may elect to no longer provide payments for cost sharing for co-insurance, or
co-payments, for dual qualified (Medicare and Medicaid) beneficiaries.

In January 1999, the Center for Medicare and Medicaid Services, formerly named
the Health Care Financing Administration, announced its intention to form a
negotiated rulemaking committee to create the new fee schedule for Medicare
reimbursement of ambulance services. That committee convened in February 1999.
The fee schedule and the mandatory acceptance of assignment was implemented on
April 1, 2002. In addition, revisions to the physician certification
requirements for coverage of non-emergency ambulance services were also
implemented.

                                       55
<PAGE>
The Company has implemented a plan that it believes will mitigate the potential
adverse impact from these changes. The plan includes renegotiation of "9-1-1"
contracts, adjusting rates and seeking alternative relief from the federal and
local governments.

As a result, estimating the revenue from healthcare services is subject to
significant uncertainties and subsequent adjustments to the recorded revenue
could be material.

Performance bonds

The Company's Education services business is highly dependent on the Company's
ability to obtain performance bond coverages sufficient to meet bid requirements
imposed by potential customers. The Company's ability to obtain adequate bonding
coverages has been adversely affected by the Company's poor financial position
and lack of liquidity. Furthermore, many school boards are requiring higher
dollar-value performance bonds from their service providers. There can be no
assurance that, going forward, the Company will obtain access to adequate
bonding capacity. If adequate bonding capacity is not available or if the terms
of such bonding are too onerous, there would be a material adverse effect on the
Company.

Increasing competitive and external pressures

Education services - The segment competes with several large companies and a
substantial number of smaller locally owned operations in the Education services
business segment. Moreover, most school districts operate their own school bus
systems. In acquiring new school bus contracts and maintaining existing
business, competition primarily exists in the areas of pricing and service.

Public Transit services - As with the Education services segment, this business
competes with several large companies and a number of smaller locally owned
operations. Most municipalities operate their own fixed route municipal bus
services, however, the majority of the paratransit bus routes are operated by
private entities. In acquiring contracts and maintaining existing business,
competition primarily exists in the areas of pricing and service.

Greyhound - The inter-city transportation industry is highly competitive.
Greyhound's primary sources of competition for passengers are automobile travel,
low cost air travel from both regional and national airlines, and, in certain
markets, regional bus companies and trains. Airlines have increased their
penetration in intermediate-haul markets (450 to 1,000 miles), which has
resulted in the bus industry, in general, reducing prices in these markets in
order to compete. Additionally, airline discount programs have attracted certain
long-haul passengers away from Greyhound. However, these lower airline fares
usually contain restrictions and require advance purchase. Typically,
Greyhound's customers decide to travel only a short time before their trip and
purchase their tickets on the day of travel. Greyhound's everyday low pricing
strategy results in "walk-up" fares substantially below comparable airline
fares. In instances where Greyhound's fares exceed an airline discount fare,
Greyhound believes the airline fares typically are more restrictive and less
readily available than travel provided by Greyhound. However, Greyhound has also
instituted numerous advance purchase programs, in order to attract the price
sensitive customer. Price, destination choices and convenient schedules are the
ways in which Greyhound meets this competitive challenge.

The automobile is the most significant form of competition to Greyhound. The
out-of-pocket costs of operating an automobile are generally less expensive than
bus travel, particularly for multiple persons traveling in a single car.

                                       56
<PAGE>
Healthcare Transportation services - The Company competes with several large
companies and a substantial number of smaller locally owned operators in the
healthcare transportation services industry. Moreover, many municipal, fire and
paramedic departments and hospitals operate their own ambulance systems. In
acquiring new healthcare transportation contracts and maintaining its business,
the Company experiences competition primarily in the areas of pricing and
service.

Emergency Management services - This business unit is also subject to vigorous
competition. Competition for these services is generally based upon cost, the
ability to make available physicians capable of providing high quality care and
the reputation of the Company's emergency department business unit among
hospitals and physicians. Competition is also based upon the proper utilization
of the emergency department, as well as the ability to integrate the emergency
department with other hospital departments and to provide value added services.

There can be no assurance that the Company will be able to compete successfully
against these sources of competition or other competitive or external factors.

Retention of key personnel

The Company's success depends upon its ability to recruit and retain key
personnel. The Company could experience difficulty in retaining its current key
personnel or in attracting and retaining necessary additional key personnel. Low
unemployment in certain market areas can make the recruiting, training, and
retention of full-time and part-time personnel more difficult and costly,
including the cost of overtime wages. The Company's internal growth will further
increase the demand on its resources and require the addition of new personnel.
The Company has entered into employment agreements with certain of its executive
officers and certain other key personnel. However, failure to retain or replace
key personnel may have an adverse effect on the Company's business.

Fuel price fluctuations

Historically, fuel costs represent approximately 3% to 6% of revenue. Due to the
significance of fuel expenses, particularly diesel fuel, to the operations of
the Company and the historical volatility of fuel prices, the Company has
initiated a program to minimize the fluctuations in the price of its diesel fuel
purchases. The intent of the program is to mitigate the impact of fuel price
changes on the Company's operating margins and overall profitability by entering
into forward supply contracts ("FSCs") with certain vendors. The FSCs generally
stipulate set bulk delivery volumes at prearranged prices for a set period. The
volumes agreed to be purchased by the Company are well below the forecasted
total bulk fuel needs for the given location. Therefore, the risk of being
forced to purchase fuel through the FSCs that is not required by the Company is
minimal. Also, to the extent that the Company enters FSCs for portions of its
total fuel needs, it may not realize the benefit of decreases in fuel prices.
Conversely, to the extent that the Company does not enter into FSCs for portions
of its total fuel needs, it may be adversely affected by increases in fuel
prices.

Given the ticket based revenue stream of the Greyhound segment, fuel price
increases at the U.S. operations of the Greyhound segment, limited by what the
market can bear, can be passed on to the passenger through increased fares. The
majority of the Canadian operations of the Greyhound segment operates in a
regulated market and ticket price increases must be

                                       57
<PAGE>
first approved by government agencies. The other operations that have fuel
requirements, operate with a contractual based revenue stream. Fuel price
increases take a longer time to be passed on to the customer, in most cases upon
renewal of the contract.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Certain statements contained in this report, including statements regarding the
status of future operating results and market opportunities, possible asset
dispositions and other statements, that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements involve certain risks,
uncertainties and assumptions that include, but are not limited to; Greyhound's
ability to continue as a going concern; market factors, including competitive
pressures and changes in pricing policies; changes in interpretations of
existing legislation or the adoption of new legislation; loss of major
customers; the significant restrictive covenants in the senior secured credit
facility; the ability to continue to satisfy bonding requirements for existing
or new customers; volatility in energy costs; the costs and risks associated
with litigation; costs related to accident and other claims; potential pension
plan funding requirements; and general economic conditions. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual outcomes may vary materially from those indicated.

                                       58
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

            The following discussion about the Company's market risk includes
"forward-looking statements" that involve risk and uncertainties. Actual results
could differ materially from these projections. The Company is currently exposed
to market risk from changes in commodity prices for fuel, investment prices,
foreign exchange and interest rates. The Company does not use derivative
instruments for speculative or trading purposes.

            COMMODITY PRICES. The Company currently has exposure to commodity
risk from its fuel inventory and its advance purchase commitments for fuel. The
Company has fuel inventory at May 31, 2003, at a carrying value of 2.8 million.
The Company's fuel inventory is used in operations before a change in the market
price of fuel could have a material effect on the Company's results of
operations. Additionally, the Company has entered into advanced purchase
commitments for fuel whereby the Company has agreed to take delivery of a total
of 6.7 million gallons through August 2003 at a fixed price of 7.4 million. A
10% increase or decrease in the cost of fuel would not have a material effect on
this commitment or the Company's results of operations.

            INVESTMENT PRICES. The Company currently has exposure in the market
price of investments. At May 31, 2003, the Company has approximately $435
million held in cash and $482 million in investments. A 10% decrease in the
market price would not have a material effect on the Company's financial
position. As required by generally accepted accounting principles, the Company
has reported these investments at fair value, with any unrecognized gains or
losses excluded from earnings and reported in a separate component of
stockholders' equity.

            FOREIGN EXCHANGE. The Company currently has exposure to foreign
currency exchange rates from its Canadian dollar operations. However these
companies maintain a natural hedge and therefore changes in foreign currency
exchange rate have no material effect on the Company's financial position.

            INTEREST RATE SENSITIVITY. The Company currently has exposure to
interest rates from its long-term debt as it relates to the Laidlaw subordinated
debt. A 10% increase or decrease in variable interest rates would not have a
material effect on the Company's results of operations or cash flows.

            The table below presents principal cash flows and related weighted
average interest rates by contractual maturity dates for fixed rate debt as of
May 31, 2003.

LONG TERM DEBT

<TABLE>
<CAPTION>
                              2003     2004      2005     2006       2007    THEREAFTER    TOTAL    FAIR VALUE
                              ----     ----      ----     ----       ----    ----------    -----    ----------
<S>                          <C>      <C>       <C>       <C>       <C>      <C>           <C>      <C>
Fixed Rate Debt
(in millions)                17.7     54.6      13.0      12.6      157.7        2.7       258.3       222.3
Average Interest Rate         9.3%    10.8%      9.2%      9.8%      11.2%      11.0%       10.8%         --
                             ----     ----      ----      ----      -----       ----       -----       -----
</TABLE>


                                       59
<PAGE>
                           LAIDLAW INTERNATIONAL, INC.

PART I.     FINANCIAL INFORMATION

Item 4.     Controls and Procedures

            We maintain a set of disclosure controls and procedures designed to
ensure that information required to be disclosed by the Company in reports that
it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. Within the 90-day period
prior to the filing of this report, an evaluation was carried out under the
supervision and with the participation of the Company's management, including
the Chief Executive Officer and Chief Financial Officer, of the effectiveness of
our disclosure controls and procedures. Based on that evaluation, the CEO and
CFO have concluded that the Company's disclosure controls and procedures are
effective.

            Subsequent to the date of their evaluation, there have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect these controls.






                                       60
<PAGE>
                         LAIDLAW INTERNATIONAL, INC.

PART II.    OTHER INFORMATION

Item 5.     Legal Proceedings

(In this Item 5, the Company  refers to Laidlaw  International,  Inc.  and its
subsidiaries and Laidlaw refers to Laidlaw Inc.)

            The Company is a defendant in various lawsuits arising in the
ordinary course of business, primarily cases involving personal injury, property
damage or employment related claims. Based on the Company's assessment of known
claims and its historical claims payout pattern and discussion with internal and
outside legal counsel and risk management personnel, management believes that
there is no proceeding either threatened or pending against the Company relating
to such personal injury and/or property damage claims arising out of the
ordinary course of business that, if resolved against the Company, would have a
materially adverse effect upon the Company's consolidated financial position or
results of operations.

            The Debtors, as defined in the Notes to the consolidated Financial
Statements, filed a voluntary petition for reorganization under the Bankruptcy
Code on June 28, 2001. A Plan of Reorganization was confirmed by the Bankruptcy
Court and Canadian Court on February 27, 2003 and February 28, 2003,
respectively, and became effective on June 23, 2003. As a result of the
Company's voluntary petitions for relief under the protection of the Bankruptcy
Code and the CCAA, the actions described below were stayed with respect to the
Company. In addition, certain of these proceedings have been settled as
described below. Upon emergence from the Company's chapter 11 proceedings, the
claims against the Company and the other Debtors discussed below that had not
been settled were extinguished. Any remaining claims against current or former
directors and officers continue to remain outstanding.

Safety-Kleen settlement

            The Company owns 44% of the common shares of Safety-Kleen Corp.
("Safety-Kleen"). On June 9, 2000, Safety-Kleen announced that it and 73 of its
U.S. subsidiaries filed voluntary petitions for chapter 11 relief in the United
States Bankruptcy Court for the District of Delaware.

            Following Safety-Kleen's filing for petition for chapter 11 relief,
the Debtors asserted various claims against Safety-Kleen, and Safety-Kleen and
various Safety-Kleen constituencies, including certain current directors of
Safety-Kleen (the "Safety-Kleen Directors") and Toronto Dominion (Texas), Inc.
("TD-Texas"), as administrative agent for the secured lenders of Safety-Kleen,
asserted various claims against the Debtors. In November 2001, the bankruptcy
court hearing Safety-Kleen's chapter 11 proceedings and the Bankruptcy Court
held a joint conference and determined that mediation would occur for the claims
between the Debtors and the various Safety-Kleen constituencies. Certain claims
asserted by the former corporate secretary and general counsel (Mr. Taylor) of
Safety-Kleen and certain of its predecessors and by the former chief financial
officer (Mr. Humphreys) of Safety-Kleen were not included in the mediation.

            The mediation proceedings were held in April 2002 and, on July 18,
2002, the parties to the mediation announced that they had reached a settlement.
Pursuant to





                                       61
<PAGE>
the settlement, Laidlaw agreed to withdraw with prejudice its claim of up to
$6.5 billion in Safety-Kleen's bankruptcy proceedings, Laidlaw allowed a claim
of $225.0 million as a general unsecured claim in Class 6 under its plan of
reorganization in favor of Safety-Kleen and other claims asserted against
Laidlaw by Safety-Kleen, the Safety-Kleen Directors and the Safety-Kleen secured
lender group, including claims of TD-Texas, are deemed withdrawn with prejudice.
In addition, as part of this compromise and settlement, claims against
Safety-Kleen by certain current and former Laidlaw officers and directors for
indemnity and contribution will be deemed withdrawn with prejudice. Also, the
Laidlaw agreed to allow a claim of $71.4 million as a general unsecured claim
under its plan of reorganization in favor of TD-Texas as claimant under a $60.0
million promissory note issued by Safety-Kleen and guaranteed by Laidlaw that
was assigned to TD-Texas.

            On August 16, 2002, the bankruptcy court hearing Safety-Kleen's
chapter 11 proceeding approved the settlement. On August 30, 2002, the
Bankruptcy Court approved the settlement. On September 11, 2002, the Canadian
Court approved the settlement. As part of the compromise and settlement, Laidlaw
will be released from its indemnification obligations relating to certain
environmental matters and Safety-Kleen will cause the claim of the South
Carolina Department of Health and Environmental Control ("DHEC") against the
Company to be withdrawn with prejudice. Safety-Kleen announced a settlement with
DHEC in mid October 2002. Releases satisfactory to the parties will be
exchanged, and there will be no admission of liability by any party to the
agreement or any person providing releases under the agreement. The settlement
is conditioned upon, among other things, the consummation of the settlement
agreement between Safety-Kleen and DHEC, which is conditioned upon the
confirmation and effectiveness of a plan of reorganization of Safety-Kleen. As a
result, Laidlaw provided $225.0 million in fiscal 2001 to reflect this
settlement and the claim allowed to Safety-Kleen and for the termination of the
Laidlaw's claims for indemnification, contribution or subrogation from
Safety-Kleen and the Safety-Kleen Directors, as well as the termination of
claims against the Company by Safety-Kleen, the Safety-Kleen Directors and the
Safety-Kleen secured lender group, including the claims brought by TD-Texas.

Securities Litigation - Shareholder actions

            Three actions, filed against Laidlaw and others, are pending in the
United States District Court for the District of South Carolina. These cases
have been consolidated. Plaintiffs assert claims under the federal securities
laws that Laidlaw's consolidated financial statements had accounting
irregularities based on Laidlaw's incorporation and/or consolidation of the
financial results of Safety-Kleen in the reported consolidated financial results
of Laidlaw. PricewaterhouseCoopers LLP and PricewaterhouseCoopers LLP (Canada)
have agreed to a settlement with the plaintiff class.

            On September 18, 2000, Laidlaw was added as a defendant in a
consolidated amended securities fraud class action complaint that had previously
been pending in the United States District Court for the District of South
Carolina against Safety-Kleen and others. Safety-Kleen, which is in a chapter 11
reorganization proceeding, was dismissed as a defendant. In the currently active
complaint, plaintiffs allege that, during the class period, in violation of the
federal securities laws, the defendants disseminated to the investing public
false and misleading financial statements and press releases concerning the
financial statements and results of operations of LESI and Safety-Kleen.
Plaintiffs further allege that the proxy statement, prospectus and registration
statement pursuant to which LESI and Old Safety-Kleen





                                       62
<PAGE>
were merged contained false and misleading financial information.
PricewaterhouseCoopers LLP has agreed to a settlement with the plaintiff class.

            A consolidated amended class action complaint for violations of
federal securities laws was filed in the United States District Court for the
District of South Carolina against Laidlaw and other parties. In this complaint,
the plaintiffs alleged that the defendants caused to be disseminated a proxy
statement that contained misrepresentations and omissions of a materially false
and misleading nature. On June 7, 2001, the court dismissed the claims against
Laidlaw and some of the defendants. The plaintiffs then filed a motion seeking
leave to file an amended complaint that asserts a common law claim for negligent
misrepresentation against Laidlaw and other defendants. The court granted the
motion after Laidlaw's chapter 11 filing, then subsequently vacated its order
granting the motion with respect to Laidlaw.

            Certain of the defendants in the above referenced actions asserted
claims for indemnification against Laidlaw. As a result of the Safety-Kleen
settlement described above, claims of the seven Safety-Kleen Directors will be
withdrawn with prejudice. The Safety-Kleen settlement would not affect the
claims of Messrs. Humphreys and Taylor.

Securities Litigation - Bondholder actions

            As a result of Laidlaw's voluntary petitions for relief under the
protection of the Bankruptcy Code and the CCAA, the actions described below were
stayed with respect to Laidlaw. In addition, certain of these proceedings have
been settled as described below. Upon emergence from the chapter 11 proceedings,
the claims against Laidlaw and the other Debtors discussed below that have not
been settled were extinguished. Any remaining claims against current or former
directors and officers continue to remain outstanding.

            On July 24, 2002, the parties entered into an agreement to settle
the securities litigation described below (the "Bondholder Settlement
Agreement"). The Bondholder Settlement Agreement provides for a release of all
claims that the plaintiffs have and may have against Laidlaw and the other
defendants, including some of Laidlaw's former officers and directors, the
underwriter defendants, PricewaterhouseCoopers LLP and PricewaterhouseCoopers
LLP (Canada). The other defendants, including Laidlaw, will also release or have
already released various claims against each other. The Bondholder Settlement
Agreement was approved by the Bankruptcy Court and the Canadian Court on August
30, 2002 and September 11, 2002, respectively, and by the federal court in South
Carolina on December 17, 2002. The Bondholder Settlement Agreement provides for
the payment of $42.875 million to the plaintiff bondholder classes and $12.5
million to the Laidlaw estate. The Bondholder Settlement Agreement encompasses
the following cases:

-  John Hancock Life Insurance Company, New York Life Insurance Company, Aid
   Association for Lutherans, American General Annuity Insurance Company and the
   Variable Annuity Life Insurance Company filed a securities fraud class action
   in the United States District Court for the Southern District of New York
   against Laidlaw, certain of Laidlaw's then current or former officers and
   directors, various underwriters in the Company's sale of certain notes (the
   "Prepetition Notes"), and its auditors, PricewaterhouseCoopers LLP and
   PricewaterhouseCoopers LLP (Canada). Plaintiffs assert claims under the
   federal securities laws and the common law of South Carolina, alleging that
   the registration statement and prospectus for the Prepetition Notes contained
   misleading statements with respect







                                       63
<PAGE>
   to Laidlaw's financial condition and the relative priority of the Prepetition
   Notes. This action was transferred to the District of South Carolina.

-  Barbara Meltzer filed a securities fraud class action complaint in the United
   States District Court for the District of South Carolina against Laidlaw and
   certain of its then current or former officers and directors. Plaintiff
   asserts claims under the federal securities laws that, during the class
   period, defendants disseminated to the investing public false and misleading
   financial statements and press releases concerning the relative priority of
   Laidlaw's Prepetition Notes and Laidlaw's publicly reported financial
   condition and future prospects. This action and the Hancock action discussed
   above were consolidated by order of the South Carolina federal court dated
   June 20, 2001, and the caption of the case was changed to In re Laidlaw
   Bondholders Litigation.

-  The Bondholder Settlement Agreement also includes the settlement of a class
   action brought by certain Laidlaw bondholders against Citibank, N.A., the
   indenture trustee for the Prepetition Notes.

-  Westdeutsche Landesbank Girozentrale, New York Branch, filed a securities
   fraud class action complaint against Laidlaw in the United States District
   Court for the Southern District of New York. Other defendants in the
   proceeding include certain of Laidlaw's then current or former officers and
   directors, various underwriters in the Company's sale of the Prepetition
   Notes, PricewaterhouseCoopers LLP and PricewaterhouseCoopers LLP (Canada).
   Plaintiff alleges that defendants disseminated to the investing public false
   and misleading financial statements and press releases concerning Laidlaw's
   obligations with respect to prepetition indentures entered into in 1992 and
   1997 and Laidlaw's prepetition credit facility.

            In addition to the claims resolved under the Bondholder Settlement
Agreement, Laidlaw is party to the following securities litigation:

-  Pending before the federal court in South Carolina is the In re Safety-Kleen
   Corp. Bondholders Securities Litigation filed on January 23, 2001. This
   consolidated complaint consolidates the allegations originally brought by
   plaintiffs in a South Carolina District Court action and a Delaware District
   Court action against Laidlaw, certain of its then current or former officers
   and directors and others. Plaintiffs assert claims under the federal
   securities laws and allege that the defendants controlled the functions of
   Safety-Kleen, including the content and dissemination of its financial
   statements and public filings, which plaintiffs contend to be false and
   misleading.

-  A complaint for violation of California Corporate Securities Law of 1968 and
   for common law fraud and negligent misrepresentation was filed on March 5,
   2001 in the Superior Court of the State of California, County of Sacramento
   against Laidlaw, certain of its then current or former officers and directors
   and certain former officers and directors of Safety-Kleen. The plaintiffs in
   this case (Eaton Vance Distributors, Inc.; T. Rowe Price Associates, Inc.;
   Delaware Investment Advisors; John Hancock Funds, Inc; and Putnam
   Investments, Inc.) are purchasers or acquirers of specified bonds issued by
   the California Pollution Control Financing Authority on July 1, 1997 and
   secured by an indenture with Laidlaw Environmental Services and its successor
   Safety-Kleen. The action alleges that defendants made written or oral
   communications containing false statements or omissions about Laidlaw
   Environmental Services' and Safety-Kleen's business, finances and future







                                       64
<PAGE>
   prospects in connection with the offer for sale of those bonds, and that
   plaintiffs bought and retained the bonds in reliance on said statements and
   were injured thereby. After Laidlaw's filing for bankruptcy, the California
   court dismissed the action as to some other defendants on the grounds that
   the court lacked personal jurisdiction over them. This dismissal was affirmed
   by the California intermediate appellate court.














                                       65
<PAGE>
                         LAIDLAW INTERNATIONAL, INC.

PART II.    OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K

(a)   Exhibits

2.1         Third Amended Joint Plan of Reorganization of Laidlaw USA, Inc. and
            its Debtor Affiliates dated January 23, 2003 (filed as Exhibit 2.1
            to the Form 8-K filed on July 7, 2003 and incorporated herein by
            reference).

2.2         Modifications to the Third Amended Joint Plan of Reorganization
            (filed as Exhibit 2.2 to the Form 8-K filed on July 7, 2003 and
            incorporated herein by reference).

2.3         Second modifications to the Third Amended Joint Plan of
            Reorganization (filed as Exhibit 2.3 to the Form 8-K filed on July
            7, 2003 and incorporated herein by reference).

3.1         Certificate of Incorporation of Laidlaw International, Inc. (filed
            as Exhibit 4.1 to the Form 8-K filed on July 9, 2003 and
            incorporated herein by reference).

3.2         By-laws of Laidlaw International, Inc. (filed as Exhibit 4.2 to the
            Form 8-K filed on July 9, 2003 and incorporated herein by
            reference).

3.3         Rights agreement, dated as of June 23, 2003, by and between Laidlaw
            International, Inc. and Wells Fargo Bank Minnesota, National
            Association, as rights agent (filed as Exhibit 4.3 to the Form 8-K
            filed on July 9, 2003 and incorporated herein by reference).

4.1         Indenture dated as of June 3, 2003 between Laidlaw International,
            Inc. and Deutsche Bank Trust Company Americas, relating to the 10
            3/4% Senior Notes due 2011.

4.2         First Supplemental Indenture, dated as of June 18, 2003 between
            Laidlaw International, Inc. and Deutsche Bank Trust Company
            Americas.

10.1        Laidlaw International, Inc. Equity Incentive Plan

10.2        Laidlaw International, Inc. Supplemental Executive Retirement Plans

10.3        Credit Agreement dated as of June 19, 2003 among Laidlaw
            International, Inc., and others, as Borrowers and the financial
            institutions named therein

10.4        Amendment dated as of June 26, 2003 to the credit agreement dated as
            of June 19, 2003

10.5        Agreement made as of June 18, 2003 between Laidlaw Inc. and others
            and the Pension Benefit Guaranty Corporation.

99.1        Certification in accordance with Section 906 of the Sarbanes-Oxley
            Act of 2002.

(b)   Reports on Form 8-K

      No reports on Form 8-K were filed during the quarter ended May 31, 2003.


                                       66
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date: July 15, 2003                      Laidlaw International, Inc.


                              By:   /s/ Kevin E. Benson
                                    -----------------------------------------
                                    Kevin E. Benson
                                    President and Chief Executive Officer



                                    /s/ Douglas A. Carty
                                    -----------------------------------------
                                    Douglas A. Carty
                                    Senior  Vice-President and
                                    Chief Financial Officer





                                       67
<PAGE>
                                 CERTIFICATIONS

I, Kevin E. Benson, certify that:

1.    I  have  reviewed  this  quarterly   report  on  Form  10-Q  of  Laidlaw
      International, Inc.;

2.    Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      (a)   designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this
            quarterly report is being prepared;

      (b)   evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and

      (c)   presented in this quarterly report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent functions):

      (a)   all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      (b)   any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officers and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

Date:  July 15, 2003                      /s/ Kevin E. Benson
                                          --------------------------------------
                                          Kevin E. Benson
                                          President and Chief Executive Officer
<PAGE>
                                CERTIFICATIONS

I, Douglas A. Carty, certify that:

7.    I  have  reviewed  this  quarterly   report  on  Form  10-Q  of  Laidlaw
      International, Inc.;

8.    Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;

9.    Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;

10.   The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      (a)   designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this
            quarterly report is being prepared;

      (b)   evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and

      (c)   presented in this quarterly report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

11.   The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent functions):

      (a)   all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      (b)   any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

12.   The registrant's other certifying officers and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

Date:  July 15, 2003               /s/ Douglas A. Carty
                                   --------------------------------------------
                                   Douglas A. Carty
                                   Senior  Vice-President  and Chief Financial
                                   Officer