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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 28, 2005 Commission file number 000-13109 LAIDLAW INTERNATIONAL, INC.  DELAWARE
    
    98-0390488(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
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 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 þ NO o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). YES þ NO o 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 þ NO o As of March 31, 2005, there were 100,207,841 shares of common stock, par value $0.01 per
share, outstanding.




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LAIDLAW INTERNATIONAL, INC. Page No.PART I. FINANCIAL INFORMATIONItem 1. Financial Statements:Consolidated Balance Sheets as of February 28, 2005 and August 31, 2004 (Unaudited)
    
    
    2Consolidated Statements of Operations for the Three and Six
Months Ended February 28, 2005 and February 29, 2004
(Unaudited)
    
    
    4Consolidated Statements of Comprehensive Income (Loss) for the
Three and Six Months Ended February 28, 2005 and February 29,
2004 (Unaudited)
    
    
    5Consolidated Statements of Cash Flows for the Six Months Ended
February 28, 2005 and February 29, 2004 (Unaudited)
    
    
    6Notes to Consolidated Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4. Controls and Procedures
    
    
    31PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    32Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of
Equity Securities
    
    
    33Item 4. Submission of Matters to a vote of Security Holders
    
    
    34Item 5. Other Information
    
    
    34Item 6. Exhibits and Reports on Form 8-K
    
    
    35SIGNATURES
    
    
    36Section 302 Certification of Principal Executive OfficerSection 302 Certification of Principal Financial OfficerSection 906 Certification
 1




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##### Table of Contents



PART I.  FINANCIAL INFORMATION 
 Item 1. Financial Statements LAIDLAW INTERNATIONAL, INC. 
 CONSOLIDATED BALANCE SHEETS
 ($ in millions)
 (unaudited)
 February 28,
    
    
    August 31,2005
    
    
    2004ASSETSCurrent assetsCash and cash equivalents
    
    $
    296.4
    
    
    $
    154.2Accounts receivable, less allowance
for doubtful accounts of $5.8 ($4.9
- August 31, 2004)
    
    
    344.8
    
    
    
    194.1Insurance collateral
    
    
    108.7
    
    
    
    98.9Parts and supplies
    
    
    33.2
    
    
    
    32.0Deferred income tax assets
    
    
    37.4
    
    
    
    41.3Other current assets
    
    
    25.0
    
    
    
    22.7Discontinued operations
    
    
    
    
    
    
    488.8Total current assets
    
    
    845.5
    
    
    
    1,032.0Property and equipmentLand
    
    
    185.7
    
    
    
    184.1Buildings
    
    
    164.9
    
    
    
    157.7Vehicles
    
    
    1,361.1
    
    
    
    1,295.9Other
    
    
    105.9
    
    
    
    101.51,817.6
    
    
    
    1,739.2Less: Accumulated depreciation
    
    
    377.5
    
    
    
    246.81,440.1
    
    
    
    1,492.4Other assetsInsurance collateral
    
    
    375.8
    
    
    
    354.5Other long-term investments
    
    
    100.6
    
    
    
    155.2Goodwill
    
    
    
    
    
    
    139.1Contracts and customer relationships
    
    
    79.5
    
    
    
    118.6Deferred income tax assets
    
    
    312.6
    
    
    
    166.4Deferred charges and other assets
    
    
    24.9
    
    
    
    60.9Discontinued operations
    
    
    
    
    
    
    429.3893.4
    
    
    
    1,424.0Total assets
    
    $
    3,179.0
    
    
    $
    3,948.4
 The accompanying notes are an integral part of these statements. 2




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LAIDLAW INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
($ in millions)
(unaudited) February 28,
    
    
    August 31,2005
    
    
    2004LIABILITIESCurrent liabilitiesAccounts payable
    
    $
    69.1
    
    
    $
    76.9Accrued liabilities
    
    
    200.6
    
    
    
    192.9Current portion of insurance reserves
    
    
    171.2
    
    
    
    175.0Current portion of long-term debt
    
    
    4.0
    
    
    
    29.2Discontinued operations
    
    
    
    
    
    
    212.6Total current liabilities
    
    
    444.9
    
    
    
    686.6Long-term debt
    
    
    540.3
    
    
    
    1,105.9Insurance reserves
    
    
    326.6
    
    
    
    325.2Pension liability
    
    
    99.6
    
    
    
    188.3Other long-term liabilities
    
    
    97.1
    
    
    
    84.0Discontinued operations
    
    
    
    
    
    
    181.9Total liabilities
    
    
    1,508.5
    
    
    
    2,571.9SHAREHOLDERS EQUITYCommon shares; $0.01 par value per share;
issued and outstanding 100.2 million
(August 31, 2004  103.8 million)
    
    
    1.0
    
    
    
    1.0Additional paid in capital
    
    
    1,312.6
    
    
    
    1,360.9Common shares held in trust; (August 31,
2004 - 3.8 million shares issued and
outstanding)
    
    
    
    
    
    
    (50.0
    )Accumulated other comprehensive income
    
    
    38.5
    
    
    
    12.8Retained earnings
    
    
    318.4
    
    
    
    51.8Total shareholders equity
    
    
    1,670.5
    
    
    
    1,376.5Total liabilities and shareholders equity
    
    $
    3,179.0
    
    
    $
    3,948.4
 The accompanying notes are an integral part of these statements. 3




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LAIDLAW INTERNATIONAL, INC. 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 ($ in millions except per share amounts)
 (unaudited)
 Three Months Ended
    
    
    Six Months EndedFebruary 28,
    
    
    February 29,
    
    
    February 28,
    
    
    February 29,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenue
    
    $
    763.7
    
    
    $
    761.6
    
    
    $
    1,577.4
    
    
    $
    1,576.5Compensation expense
    
    
    390.1
    
    
    
    397.9
    
    
    
    793.7
    
    
    
    809.8Insurance and accident claim costs
    
    
    34.1
    
    
    
    61.5
    
    
    
    90.2
    
    
    
    126.2Vehicle related costs
    
    
    63.8
    
    
    
    63.7
    
    
    
    127.1
    
    
    
    129.0Occupancy costs
    
    
    39.9
    
    
    
    39.8
    
    
    
    77.1
    
    
    
    78.3Fuel
    
    
    48.0
    
    
    
    41.1
    
    
    
    98.9
    
    
    
    81.1Depreciation and amortization
    
    
    65.0
    
    
    
    60.9
    
    
    
    133.2
    
    
    
    127.9Other operating expenses
    
    
    71.9
    
    
    
    77.2
    
    
    
    147.2
    
    
    
    152.5Operating income
    
    
    50.9
    
    
    
    19.5
    
    
    
    110.0
    
    
    
    71.7Interest expense
    
    
    (19.8
    )
    
    
    (19.4
    )
    
    
    (39.1
    )
    
    
    (38.0
    )Other income (expense), net
    
    
    3.6
    
    
    
    (4.5
    )
    
    
    5.0
    
    
    
    (3.7
    )Income (loss) from continuing
operations before income taxes
    
    
    34.7
    
    
    
    (4.4
    )
    
    
    75.9
    
    
    
    30.0Income tax benefit (expense)
    
    
    (14.0
    )
    
    
    8.2
    
    
    
    (30.4
    )
    
    
    (5.2
    )Income from continuing operations
    
    
    20.7
    
    
    
    3.8
    
    
    
    45.5
    
    
    
    24.8Income from discontinued operations
    
    
    215.5
    
    
    
    3.4
    
    
    
    221.1
    
    
    
    5.0Net income
    
    $
    236.2
    
    
    $
    7.2
    
    
    $
    266.6
    
    
    $
    29.8Basic earnings per shareContinuing operations
    
    $
    0.21
    
    
    $
    0.04
    
    
    $
    0.45
    
    
    $
    0.25Discontinued operations
    
    
    2.15
    
    
    
    0.03
    
    
    
    2.21
    
    
    
    0.05Net income
    
    $
    2.36
    
    
    $
    0.07
    
    
    $
    2.66
    
    
    $
    0.30Diluted earnings per shareContinuing operations
    
    $
    0.20
    
    
    $
    0.04
    
    
    $
    0.44
    
    
    $
    0.24Discontinued operations
    
    
    2.08
    
    
    
    0.03
    
    
    
    2.13
    
    
    
    0.05Net income
    
    $
    2.28
    
    
    $
    0.07
    
    
    $
    2.57
    
    
    $
    0.29
 The accompanying notes are an integral part of these statements. 4




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LAIDLAW INTERNATIONAL, INC. 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 ($ in millions)
 (unaudited)
 Three Months Ended
    
    
    Six Months EndedFebruary 28,
    
    
    February 29,
    
    
    February 28,
    
    
    February 29,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income
    
    $
    236.2
    
    
    $
    7.2
    
    
    $
    266.6
    
    
    $
    29.8Net unrealized gain (loss) on
securities and interest rate swap
    
    
    (0.8
    )
    
    
    2.8
    
    
    
    (0.8
    )
    
    
    4.8Foreign currency translation adjustments
    
    
    (13.4
    )
    
    
    (12.2
    )
    
    
    26.5
    
    
    
    10.9Comprehensive income (loss)
    
    $
    222.0
    
    
    $
    (2.2
    )
    
    $
    292.3
    
    
    $
    45.5
 The accompanying notes are an integral part of these statements. 5




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LAIDLAW INTERNATIONAL, INC. 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 ($ in millions)
 (unaudited)
 Six Months EndedFebruary 28,
    
    
    February 29,2005
    
    
    2004Operating activitiesNet income
    
    $
    266.6
    
    
    $
    29.8Less: income from discontinued operations
    
    
    (221.1
    )
    
    
    (5.0
    )Non-cash adjustments to net incomeDepreciation and amortization
    
    
    133.2
    
    
    
    127.9Deferred income taxes
    
    
    28.8
    
    
    
    3.3Other non-cash items
    
    
    10.1
    
    
    
    6.6Net change in certain operating assets and liabilitiesAccounts receivable
    
    
    (130.0
    )
    
    
    (110.6
    )Insurance collateral
    
    
    (23.7
    )
    
    
    (43.1
    )Accounts payable and accrued liabilities
    
    
    (6.0
    )
    
    
    3.7Insurance reserves
    
    
    (11.7
    )
    
    
    18.5Other assets and liabilities
    
    
    8.0
    
    
    
    16.8Net cash provided by operating activities
    
    $
    54.2
    
    
    $
    47.9Investing activitiesNet capital expenditures
    
    $
    (52.6
    )
    
    $
    (89.4
    )Expended on acquisitions
    
    
    (1.6
    )
    
    
    (1.3
    )Net decrease in investments
    
    
    14.7
    
    
    
    33.7Net proceeds received from sale of businesses
    
    
    789.1
    
    
    
    Net cash provided by (used in) investing activities
    
    $
    749.6
    
    
    $
    (57.0
    )Financing activitiesPay down Term B facility
    
    $
    (593.8
    )
    
    $
    (12.5
    )Net Increase (decrease) in other long-term debt
    
    
    (1.8
    )
    
    
    32.4Decrease in credit facility cash collateral
    
    
    40.0
    
    
    
    PBGC Trust share repurchase
    
    
    (84.5
    )
    
    
    Net cash provided by (used in) financing activities
    
    $
    (640.1
    )
    
    $
    19.9Net cash used by discontinued operations
    
    $
    (21.5
    )
    
    $
    (29.2
    )Net increase (decrease) in cash and cash equivalents
    
    $
    142.2
    
    
    $
    (18.4
    )Cash and cash equivalents  beginning of period
    
    
    154.2
    
    
    
    94.0Cash and cash equivalents  end of period
    
    $
    296.4
    
    
    $
    75.6
 The accompanying notes are an integral part of these statements. 6




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LAIDLAW INTERNATIONAL, INC. 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTH PERIODS ENDED FEBRUARY 28, 2005
 Note 1  Corporate overview and basis of presentation Corporate overview Laidlaw International, Inc. (the Company) operates in three reportable business segments:
education services, public transit services and Greyhound. The education services segment provides
school bus transportation, including scheduled home-to-school, extra-curricular and charter and
transit school bus services, throughout the United States and Canada. The public transit services
segment provides fixed-route municipal bus service and paratransit bus transportation for riders
with disabilities. Greyhound, a national provider of inter-city bus transportation in the United
States and Canada, provides scheduled passenger service, package delivery service, charter bus
service and, in certain terminals, food service. As discussed in Note 2  Discontinued
operations, during the second quarter of fiscal 2005, the healthcare transportation services and
emergency management services segments were sold and are presented as discontinued operations. Basis of presentation The accompanying interim consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States for interim reporting
and accordingly, do not include all of the disclosures required 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 three
and six months ended February 28, 2005 are not necessarily indicative of the results that may be
expected for the full year ending August 31, 2005. For further information, see the Companys
consolidated financial statements, including the accounting policies and notes thereto, included in
the Companys Annual Report on Form 10-K for the fiscal year ended August 31, 2004. Prior period amounts have been reclassified to reflect the discontinuance of the healthcare
businesses and also to conform to the current period presentation. Note 2  Discontinued operations On February 10, 2005 the Company completed the sale of its healthcare transportation services and
emergency management services segments to an affiliate of Onex Corporation for $818.0 million.
After payment of transaction costs, net cash proceeds received by the Company were $789.1 million.
Proceeds from the transaction were used in part to retire all outstanding borrowings under the
Companys Term B senior secured term facility aggregating $574.1 million. 7




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The following table details the components of income from discontinued operations: Three Months Ended
    
    
    Six Months EndedFebruary 28,
    
    
    February 29,
    
    
    February 28,
    
    
    February 29,($ in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Revenue
    
    $
    282.6
    
    
    $
    400.9
    
    
    $
    696.2
    
    
    $
    796.3Pre-tax income from operations
    
    
    8.6
    
    
    
    6.7
    
    
    
    18.5
    
    
    
    10.0Provision for income taxes
    
    
    (3.5
    )
    
    
    (3.3
    )
    
    
    (7.8
    )
    
    
    (5.0
    )Income from operations
    
    
    5.1
    
    
    
    3.4
    
    
    
    10.7
    
    
    
    5.0Pre-tax gain on sale of businesses
    
    
    201.0
    
    
    
    
    
    
    
    201.0
    
    
    
    Income tax benefit
    
    
    9.4
    
    
    
    
    
    
    
    9.4
    
    
    
    Gain on sale after taxes
    
    
    210.4
    
    
    
    
    
    
    
    210.4
    
    
    
    Income from discontinued operations
    
    $
    215.5
    
    
    $
    3.4
    
    
    $
    221.1
    
    
    $
    5.0
 For all periods presented, the Company has allocated interest expense under the Term B and
Revolver to discontinued operations since the Company was required by the creditors to pay off the
debt upon sale of the healthcare businesses. Additionally, $23.6 million of deferred financing
fees related to the Term B and Revolver were written off against the gain on sale in discontinued
operations giving rise to the $9.4 million tax benefit allocated to the gain on sale. While the
remaining amount is a gain for book purposes, for tax purposes the sale generated a substantial
capital loss. As discussed in Note 6  Income Taxes, the Company has provided a full valuation
allowance against the capital loss carryforward. Note 3  Goodwill and other intangible assets On August 31, 2004, as a result of fresh start accounting, the Company had recorded goodwill of
$139.1 million and other intangibles including contract values of $118.6 million. The Company also
had established a valuation reserve against a portion of its deferred tax assets. As discussed in Note 6  Income Taxes, during the second quarter of 2005, the Company reduced its
deferred tax valuation allowance and, as required under fresh start accounting, made a
corresponding reduction to eliminate goodwill and to reduce other intangibles by $44.2 million. The contract values remaining are net of $10.6 million of accumulated amortization at February 28,
2005 and $10.7 million at August 31, 2004. The accumulated amortization at February 28, 2005 is
less than the August 31, 2004 balance due to the reduction in contract values that occurred in the
second quarter of 2005 as discussed above. Note 4  Stock awards and options Pursuant to the Companys Amended and Restated 2003 Equity and Performance Incentive Plan, the
Company issued stock based compensation to various employees and non-employee directors. These
grants to employees represent the long-term incentive portion of the Companys overall compensation
plan for management. The Company accounts for all stock-based compensation based on estimated fair
value at the date of issue and recorded an expense related to these plans of approximately $2.3
million and $0.8 million during the six month periods ended February 28, 2005 and February 29,
2004, respectively. A summary of stock based compensation issued during the current fiscal year is
as follows: 8




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Stock options On December 8, 2004, the Company issued 452,625 non-qualified stock
options to employees and non-employee directors with a strike price of $18.85 per share. The grant
price was equal to the fair market value of the Companys stock at the date of grant. The stock
options have a ten-year life and vest ratably over three years. Restricted Shares On December 8, 2004, the Company issued 25,313 shares of restricted
common stock to non-employee directors. The restricted shares vest at the end of a three-year
period and during the vesting period the participant has the rights of a shareholder with respect
to voting and dividend rights but is restricted from transferring the shares. Deferred Shares Deferred shares are granted to key employees and vest ratably over a
four-year period. On each vesting date the employee receives common stock of the Company equal in
number to the deferred shares that have vested. Upon delivery of the Company common stock an equal
number of deferred shares are terminated. The participant has no voting rights with respect to the
deferred shares. On December 8, 2004, the Company granted an additional 275,000 deferred shares
to key employees. Note 5  Pension plans The Company, collectively with all of its wholly-owned U.S. subsidiaries, is party to an agreement
with the Pension Benefit Guaranty Corporation regarding the funding levels of the Companys pension
plans (the PBGC Agreement). Under the PBGC Agreement, 3.8 million shares of the Companys common
stock were issued to a trust formed for the benefit of the pension plans (the Pension Plan
Trust). In February 2005, the Company purchased all of the shares held in the Pension Plan Trust for $22.37
per share, or aggregate consideration of $84.5 million. The purchase price per share was based
upon the closing price per share on the New York Stock Exchange on the date of purchase. All net
proceeds from the stock sale were contributed directly to the pension plans and the 3.8 million
shares were retired. The components of net periodic benefit cost for the Companys pension plans were as follows: Three Months Ended
    
    
    Six Months EndedFebruary 28,
    
    
    February 29,
    
    
    February 28,
    
    
    February 29,($ in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Components of net pension
benefit costService cost
    
    $
    2.2
    
    
    $
    1.4
    
    
    $
    4.3
    
    
    $
    2.8Interest cost
    
    
    14.4
    
    
    
    13.6
    
    
    
    28.7
    
    
    
    27.2Expected return on plan assets
    
    
    (14.1
    )
    
    
    (12.7
    )
    
    
    (28.5
    )
    
    
    (25.5
    )Net pension benefit cost
    
    $
    2.5
    
    
    $
    2.3
    
    
    $
    4.5
    
    
    $
    4.5
 Note 6  Income taxes At August 31, 2004, the Company had recorded a valuation allowance against its deferred tax
assets of $305 million. During the second quarter of fiscal 2005 the Company wrote-off $127
million of deferred tax assets against the valuation allowance for carryforwards that will be used
as part of a recent settlement with the IRS and for carryforwards which management believes will
not likely be available for use against future income. The remaining $178 million of valuation
allowance was reversed in its entirety as recent historical, and current projected, results reflect
a level of income that supports a conclusion that it is more likely than not that the Company will
fully recover the remaining surviving
carryforwards. The results of the Company considered the sale of the healthcare segments and the
retirement of the Term B debt and reduction in related interest costs. As required under fresh
start accounting rules, the reversal first eliminated all remaining 9




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goodwill established at fresh start, with the balance reducing other intangibles
established in conjunction with fresh start accounting. As discussed in Note 2  Discontinued operations, in the second quarter of fiscal 2005 the
Company sold its healthcare segments for a pre-tax book gain of $201.0 million. For tax purposes
the sale generated a substantial capital loss. As capital losses may only be applied against
capital gains, and the Company does not generate capital gains in the ordinary course, a valuation
allowance has been established for this deferred tax asset since the Company believes it is more
likely than not that the capital loss carryforward will not be realized. Note 7  Material contingencies Legal proceedings Contingent Liabilities Relating to Sale of AMR On February 10, 2005 the Company completed the sale of American Medical Response, Inc. (AMR) to
an affiliate of Onex Corporation in accordance with the Stock Purchase Agreement dated December 6,
2004, as amended (the Stock Purchase Agreement). Pursuant to the terms of the Stock Purchase
Agreement, the Company may be subject to indemnification obligations related to certain
investigations and matters previously disclosed relating to AMR, including potentially those set
forth below. On May 9, 2002, AMR received a subpoena duces tecum from the Office of Inspector General for the
United States Department of Health and Human Services (HHS). The subpoena requested copies of
documents for the period from January 1993 through May 2002. The subpoena required AMR to produce
a broad range of documents including those relating to Regional Emergency Services contracts in
Georgia and Colorado. The government investigations in Georgia and Colorado are continuing. During the first quarter of fiscal 2004, AMR was advised by the U.S. Department of Justice (DOJ),
that it was investigating certain business practices at AMR. The specific practices at issue were
(1) whether ambulance transports involving Medicare eligible patients complied with the medically
necessary requirement imposed by Medicare regulations, (2) whether patient signatures, when
required, were properly obtained from Medicare eligible patients; and (3) whether discounts in
violation of the Federal Anti-Kickback Act were provided by AMR in exchange for referrals involving
Medicare eligible patients. At this juncture, it is not possible to predict the ultimate
conclusion of the investigations described in this and the preceding paragraph, nor is it possible
to calculate any possible financial exposure, if any, to the Company, pursuant to the terms of the
Stock Purchase Agreement. Greyhound Default Judgment On September 20, 2004, the Companys wholly owned subsidiary, Greyhound Lines, Inc. (Greyhound
Lines), responded to proceedings brought in Georgia state court in August 2004 seeking to enforce
a default garnishment judgment on funds in a Greyhound Lines bank account. This action stemmed
from an October 1995 default judgment in the amount of approximately $7 million (1995 Judgment)
against Gary Jones, a former consultant to Greyhound Lines. More than four years later, in October
2000, the plaintiff who obtained the 1995 Judgment (Plaintiff) began garnishment proceedings
against Greyhound Lines in Georgia state court seeking to recover amounts owed to Gary Jones, who
then allegedly owed the Plaintiff the amount of approximately $11 million based on the 1995
Judgment plus post-judgment interest. On May 2, 2001, a default judgment for $11 million was
entered by the Georgia state court against Greyhound Lines. On March 10, 2005, Greyhound Lines
settled this matter for an immaterial amount and the Company has reflected the cost of the
settlement as a 10




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##### Table of Contents



component of other income (expense) in its Consolidated Statements of Operations for the quarter
ended February 28, 2005. Other The Company is also a defendant in various lawsuits arising in the ordinary course of business,
primarily cases involving personal injury, property damage or employment related claims. Some of
these actions are covered to varying degrees by insurance policies. Based on an assessment of
known claims and our historical claims payout pattern, management believes that there is no
proceeding either threatened or pending against us relating to personal injury and/or property
damage claims and/or employment related claims that would have a material adverse effect on the
Company. Greyhound Facility Greyhound Lines is party to a revolving credit facility to fund working capital needs and for
general corporate purposes (the Greyhound Facility) that expires on October 24, 2006. 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 expense
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 Laidlaw International, Inc. Although
Greyhound Lines most recent financial forecast indicates they will remain in compliance with the
financial covenants under the Greyhound Facility, increases in fuel prices, softness in
discretionary travel or other unforeseen events or changes in assumptions may occur and result in
material differences between Greyhound Lines future results and the current financial forecast.
Those differences could result in management concluding in the future that Greyhound Lines may not
be able to remain in compliance with the financial covenants under the Greyhound Facility. As described above in Legal proceedings, Greyhound Lines has settled the matter brought in Georgia
state court seeking to enforce a default garnishment judgment. Prior to the March 10, 2005
settlement, the default judgment could have been deemed to be an event of default under the
Greyhound Facility. Following the settlement, the lenders under the Greyhound Facility have
confirmed to Greyhound Lines that no event of default exists under the Greyhound Facility as a
result of the default judgment. Environmental matters The Companys operations are subject to various federal, state, local and foreign laws and
regulations relating to environmental matters, including those concerning emissions to the air;
waste water discharges; storage, treatment and disposal of waste and remediation of soil and ground
water contamination. We have incurred, and expect to incur, costs for our operations to comply
with these legal requirements, and these costs could increase in the future. In particular, the
Company has been named as a potentially responsible party under the United States Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, at various third-party
sites at which the Companys waste was allegedly disposed. In addition, the Company is
investigating or engaged in remediation of past contamination at other sites used in its
businesses. The Company records liabilities 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. As of
the date of this report, management believes that adequate accruals have been made related to all
known environmental matters, however actual environmental liabilities could differ significantly
from these estimates. 11




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##### Table of Contents



Income tax matters The respective tax authorities, in the normal course, audit previous tax filings. It is not
possible at this time to predict the final outcome of these audits or to establish a reasonable
estimate of possible additional taxes owing, if any. Note 8  Earnings per share The basic earnings per share figures are calculated using the weighted average number of shares
outstanding during the respective periods. The diluted earnings per share for the three and six
month periods ended February 28, 2005 and February 29, 2004 include the dilutive effect of the
Companys stock based compensation and the weighted average shares outstanding of the Companys
common shares held in trust up until February 17, 2005, the date they were re-purchased and retired
by the Company. Three Months Ended
    
    
    Six Months Ended(in millions except per share amounts)
    
    February 28, 2005
    
    
    February 29, 2004
    
    
    February 28, 2005
    
    
    February 29, 2004Earnings
available to common shareholdersFrom continuing operations
    
    $
    20.7
    
    
    $
    3.8
    
    
    $
    45.5
    
    
    $
    24.8From discontinued operations
    
    
    215.5
    
    
    
    3.4
    
    
    
    221.1
    
    
    
    5.0Net income
    
    $
    236.2
    
    
    $
    7.2
    
    
    $
    266.6
    
    
    $
    29.8Weighted average number of common
shares outstandingBasic
    
    
    100.2
    
    
    
    100.0
    
    
    
    100.1
    
    
    
    100.0Shares held in pension plan trust
    
    
    3.3
    
    
    
    3.8
    
    
    
    3.5
    
    
    
    3.8Stock based compensation
    
    
    0.3
    
    
    
    
    
    
    
    0.3
    
    
    
    Diluted
    
    
    103.8
    
    
    
    103.8
    
    
    
    103.9
    
    
    
    103.8Basic earnings per common shareContinuing operations
    
    $
    0.21
    
    
    $
    0.04
    
    
    $
    0.45
    
    
    $
    0.25Discontinued operations
    
    
    2.15
    
    
    
    0.03
    
    
    
    2.21
    
    
    
    0.05Net income
    
    $
    2.36
    
    
    $
    0.07
    
    
    $
    2.66
    
    
    $
    0.30Diluted earnings per common shareContinuing operations
    
    $
    0.20
    
    
    $
    0.04
    
    
    $
    0.44
    
    
    $
    0.24Discontinued operations
    
    
    2.08
    
    
    
    0.03
    
    
    
    2.13
    
    
    
    0.05Net income
    
    $
    2.28
    
    
    $
    0.07
    
    
    $
    2.57
    
    
    $
    0.29
 12




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##### Table of Contents



Note 9  Segment information The Company has three reportable segments: education services, public transit services and
Greyhound. Revenues and EBITDA (operating income before depreciation and amortization) of the
segments for the three and six months ended February 28, 2005 and February 29, 2004 are as follows: Three Months Ended
    
    
    Six Months Ended($ in millions)
    
    February 28, 2005
    
    
    February 29, 2004
    
    
    February 28, 2005
    
    
    February 29, 2004Education servicesRevenue
    
    $
    405.1
    
    
    $
    394.8
    
    
    $
    857.0
    
    
    $
    850.5EBITDA
    
    
    85.9
    
    
    
    73.0
    
    
    
    198.1
    
    
    
    182.0Public transitRevenue
    
    $
    73.9
    
    
    $
    72.5
    
    
    $
    150.9
    
    
    $
    144.6EBITDA
    
    
    4.9
    
    
    
    (4.1
    )
    
    
    8.2
    
    
    
    (4.4
    )GreyhoundRevenue
    
    $
    284.7
    
    
    $
    294.3
    
    
    $
    569.5
    
    
    $
    581.4EBITDA
    
    
    25.1
    
    
    
    11.5
    
    
    
    36.9
    
    
    
    22.0Consolidated TotalRevenue
    
    $
    763.7
    
    
    $
    761.6
    
    
    $
    1,577.4
    
    
    $
    1,576.5EBITDA
    
    
    115.9
    
    
    
    80.4
    
    
    
    243.2
    
    
    
    199.6Depreciation and amortization expense
    
    
    (65.0
    )
    
    
    (60.9
    )
    
    
    (133.2
    )
    
    
    (127.9
    )Operating income
    
    
    50.9
    
    
    
    19.5
    
    
    
    110.0
    
    
    
    71.7Interest expense
    
    
    (19.8
    )
    
    
    (19.4
    )
    
    
    (39.1
    )
    
    
    (38.0
    )Other income (expense), net
    
    
    3.6
    
    
    
    (4.5
    )
    
    
    5.0
    
    
    
    (3.7
    )Income tax benefit (expense)
    
    
    (14.0
    )
    
    
    8.2
    
    
    
    (30.4
    )
    
    
    (5.2
    )Income from discontinued operations
    
    
    215.5
    
    
    
    3.4
    
    
    
    221.1
    
    
    
    5.0Net income
    
    $
    236.2
    
    
    $
    7.2
    
    
    $
    266.6
    
    
    $
    29.8
 Corporate expenses previously allocated to the healthcare transportation services and
emergency management services segments exceeded the amount of direct charges incurred and allocated
to discontinued operations. The previously allocated corporate costs in excess of the direct
charges related to the discontinued segments have been re-allocated to the remaining segments
above. Because of this change in allocation, EBITDA as now reported for the continuing segments
may not agree to amounts previously reported. Total identifiable assets by segment on February 28, 2005 and August 31, 2004 are as follows: February 28,
    
    
    August 31,($ in millions)
    
    2005
    
    
    2004Education services
    
    $
    1,155.2
    
    
    $
    1,222.8Public transit
    
    
    99.6
    
    
    
    104.5Greyhound
    
    
    913.8
    
    
    
    898.0Total identifiable assets of segments
    
    
    2,168.6
    
    
    
    2,225.3Corporate assets
    
    
    1,010.4
    
    
    
    805.0Discontinued operations
    
    
    
    
    
    
    918.1Total assets
    
    $
    3,179.0
    
    
    $
    3,948.4
 13




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##### Table of Contents



Note 10  Condensed financial statements of restricted subsidiaries Pursuant to the terms of the Companys $406.0 million Senior Notes, the Company is required to
segregate the consolidated results of operations between the subsidiaries of the Company that are
not a party to the agreement, which are comprised of the U.S. based businesses in the Greyhound
segment (the Unrestricted Subsidiaries), and the Company and its remaining subsidiaries (the
Restricted Subsidiaries). Condensed Consolidated Statement of Operations
Three Months Ended February 28, 2005 Restricted
    
    
    Unrestricted
    
    
    Consolidated($ millions)
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    TotalsRevenue
    
    $
    545.8
    
    
    $
    217.9
    
    
    $
    763.7Compensation expense
    
    
    299.3
    
    
    
    90.8
    
    
    
    390.1Accident claims and professional liability
expenses
    
    
    23.0
    
    
    
    11.1
    
    
    
    34.1Vehicle related costs
    
    
    33.9
    
    
    
    29.9
    
    
    
    63.8Occupancy costs
    
    
    20.1
    
    
    
    19.8
    
    
    
    39.9Fuel
    
    
    31.0
    
    
    
    17.0
    
    
    
    48.0Depreciation and amortization
    
    
    50.0
    
    
    
    15.0
    
    
    
    65.0Other operating expenses
    
    
    40.3
    
    
    
    31.6
    
    
    
    71.9Operating income
    
    
    48.2
    
    
    
    2.7
    
    
    
    50.9Interest expense
    
    
    (11.0
    )
    
    
    (8.8
    )
    
    
    (19.8
    )Other income, net
    
    
    1.7
    
    
    
    1.9
    
    
    
    3.6Income (loss) from continuing operations
before income taxes
    
    
    38.9
    
    
    
    (4.2
    )
    
    
    34.7Income tax benefit (expense)
    
    
    (15.8
    )
    
    
    1.8
    
    
    
    (14.0
    )Net income (loss) from continuing operations
    
    
    23.1
    
    
    
    (2.4
    )
    
    
    20.7Net income from discontinued operations
    
    
    215.5
    
    
    
    
    
    
    
    215.5Net income (loss)
    
    $
    238.6
    
    
    $
    (2.4
    )
    
    $
    236.2
 Condensed Consolidated Statement of Operations
Six Months Ended February 28, 2005 Restricted
    
    
    Unrestricted
    
    
    Consolidated($ millions)
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    TotalsRevenue
    
    $
    1,136.9
    
    
    $
    440.5
    
    
    $
    1,577.4Compensation expense
    
    
    608.9
    
    
    
    184.8
    
    
    
    793.7Accident claims and professional liability
expenses
    
    
    62.0
    
    
    
    28.2
    
    
    
    90.2Vehicle related costs
    
    
    65.9
    
    
    
    61.2
    
    
    
    127.1Occupancy costs
    
    
    37.8
    
    
    
    39.3
    
    
    
    77.1Fuel
    
    
    63.2
    
    
    
    35.7
    
    
    
    98.9Depreciation and amortization
    
    
    106.1
    
    
    
    27.1
    
    
    
    133.2Other operating expenses
    
    
    80.9
    
    
    
    66.3
    
    
    
    147.2Operating income (loss)
    
    
    112.1
    
    
    
    (2.1
    )
    
    
    110.0Interest expense
    
    
    (21.6
    )
    
    
    (17.5
    )
    
    
    (39.1
    )Other income, net
    
    
    2.9
    
    
    
    2.1
    
    
    
    5.0Income (loss) from continuing operations
before income taxes
    
    
    93.4
    
    
    
    (17.5
    )
    
    
    75.9Income tax benefit (expense)
    
    
    (37.4
    )
    
    
    7.0
    
    
    
    (30.4
    )Net income (loss) from continuing operations
    
    
    56.0
    
    
    
    (10.5
    )
    
    
    45.5Net income from discontinued operations
    
    
    221.1
    
    
    
    
    
    
    
    221.1Net income (loss)
    
    $
    277.1
    
    
    $
    (10.5
    )
    
    $
    266.6
 14




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##### Table of Contents



Condensed Consolidated Statement of Operations
Three Months Ended February 29, 2004 Restricted
    
    
    Unrestricted
    
    
    Consolidated($ millions)
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    TotalsRevenue
    
    $
    528.6
    
    
    $
    233.0
    
    
    $
    761.6Compensation expense
    
    
    294.6
    
    
    
    103.3
    
    
    
    397.9Accident claims and professional liability
expenses
    
    
    42.4
    
    
    
    19.1
    
    
    
    61.5Vehicle related costs
    
    
    30.5
    
    
    
    33.2
    
    
    
    63.7Occupancy costs
    
    
    20.0
    
    
    
    19.8
    
    
    
    39.8Fuel
    
    
    26.5
    
    
    
    14.6
    
    
    
    41.1Depreciation and amortization
    
    
    50.3
    
    
    
    10.6
    
    
    
    60.9Other operating expenses
    
    
    41.1
    
    
    
    36.1
    
    
    
    77.2Operating income (loss)
    
    
    23.2
    
    
    
    (3.7
    )
    
    
    19.5Interest expense
    
    
    (10.6
    )
    
    
    (8.8
    )
    
    
    (19.4
    )Other income (expense), net
    
    
    (4.5
    )
    
    
    
    
    
    
    (4.5
    )Income (loss) from continuing operations
before income taxes
    
    
    8.1
    
    
    
    (12.5
    )
    
    
    (4.4
    )Income tax benefit
    
    
    3.0
    
    
    
    5.2
    
    
    
    8.2Net income (loss) from continuing operations
    
    
    11.1
    
    
    
    (7.3
    )
    
    
    3.8Net income from discontinued operations
    
    
    3.4
    
    
    
    
    
    
    
    3.4Net income (loss)
    
    $
    14.5
    
    
    $
    (7.3
    )
    
    $
    7.2
 Condensed Consolidated Statement of Operations
Six Months Ended February 29, 2004 Restricted
    
    
    Unrestricted
    
    
    Consolidated($ millions)
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    TotalsRevenue
    
    $
    1,113.3
    
    
    $
    463.2
    
    
    $
    1,576.5Compensation expense
    
    
    605.3
    
    
    
    204.5
    
    
    
    809.8Accident claims and professional liability
expenses
    
    
    90.5
    
    
    
    35.7
    
    
    
    126.2Vehicle related costs
    
    
    61.4
    
    
    
    67.6
    
    
    
    129.0Occupancy costs
    
    
    38.7
    
    
    
    39.6
    
    
    
    78.3Fuel
    
    
    53.0
    
    
    
    28.1
    
    
    
    81.1Depreciation and amortization
    
    
    106.8
    
    
    
    21.1
    
    
    
    127.9Other operating expenses
    
    
    80.7
    
    
    
    71.8
    
    
    
    152.5Operating income (loss)
    
    
    76.9
    
    
    
    (5.2
    )
    
    
    71.7Interest expense
    
    
    (22.4
    )
    
    
    (15.6
    )
    
    
    (38.0
    )Other income (expense), net
    
    
    (3.5
    )
    
    
    (0.2
    )
    
    
    (3.7
    )Income (loss) from continuing operations
before income taxes
    
    
    51.0
    
    
    
    (21.0
    )
    
    
    30.0Income tax benefit (expense)
    
    
    (13.9
    )
    
    
    8.7
    
    
    
    (5.2
    )Net income (loss) from continuing operations
    
    
    37.1
    
    
    
    (12.3
    )
    
    
    24.8Net income from discontinued operations
    
    
    5.0
    
    
    
    
    
    
    
    5.0Net income (loss)
    
    $
    42.1
    
    
    $
    (12.3
    )
    
    $
    29.8
 15




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##### Table of Contents



Condensed Consolidated Statement of Cash Flows
Six Months Ended February 28, 2005 Restricted
    
    
    Unrestricted
    
    
    Consolidated($ millions)
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    TotalsNet cash provided by (used in) operating
activities
    
    $
    69.2
    
    
    $
    (15.0
    )
    
    $
    54.2Cash flows from investing activitiesPurchase of property and equipment, net
    
    $
    (36.3
    )
    
    $
    (16.3
    )
    
    $
    (52.6
    )Expended on acquisitions
    
    
    (1.6
    )
    
    
    
    
    
    
    (1.6
    )Net increase in investments
    
    
    14.5
    
    
    
    0.2
    
    
    
    14.7Net proceeds received from sale of business
    
    
    789.1
    
    
    
    
    
    
    
    789.1Net cash provided by (used in) investing
activities
    
    $
    765.7
    
    
    $
    (16.1
    )
    
    $
    749.6Cash flows from financing activitiesPay down Term B facility
    
    $
    (593.8
    )
    
    $
    
    
    
    $
    (593.8
    )Net decrease in other long-term debt
    
    
    (0.8
    )
    
    
    (1.0
    )
    
    
    (1.8
    )Decrease in credit facility cash collateral
    
    
    40.0
    
    
    
    
    
    
    
    40.0PBGC trust share repurchase
    
    
    (84.5
    )
    
    
    
    
    
    
    (84.5
    )Net cash used in financing activities
    
    $
    (639.1
    )
    
    $
    (1.0
    )
    
    $
    (640.1
    )Net cash used by discontinued operations
    
    $
    (21.5
    )
    
    $
    
    
    
    $
    (21.5
    )Net increase (decrease) in cash and cash
equivalents
    
    $
    174.3
    
    
    $
    (32.1
    )
    
    $
    142.2Cash and cash equivalents at:Beginning of period
    
    
    94.2
    
    
    
    60.0
    
    
    
    154.2End of period
    
    $
    268.5
    
    
    $
    27.9
    
    
    $
    296.4
 Condensed Consolidated Statement of Cash Flows
Six Months Ended February 29, 2004 Restricted
    
    
    Unrestricted
    
    
    Consolidated($ millions)
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    TotalsNet cash provided by operating activities
    
    $
    32.1
    
    
    $
    15.8
    
    
    $
    47.9Cash flows from investing activitiesPurchase of property and equipment, net
    
    $
    (74.8
    )
    
    $
    (14.6
    )
    
    $
    (89.4
    )Expended on acquisitions
    
    
    (1.3
    )
    
    
    
    
    
    
    (1.3
    )Net (increase) decrease in investments
    
    
    34.4
    
    
    
    (0.7
    )
    
    
    33.7Net cash used in investing activities
    
    $
    (41.7
    )
    
    $
    (15.3
    )
    
    $
    (57.0
    )Cash flows from financing activitiesPay down Term B facility
    
    $
    (12.5
    )
    
    $
    
    
    
    $
    (12.5
    )Net increase (decrease) in long-term debt
    
    
    58.8
    
    
    
    (26.4
    )
    
    
    32.4Net cash provided by (used in) financing
activities
    
    $
    46.3
    
    
    $
    (26.4
    )
    
    $
    19.9Net cash used by discontinued operations
    
    $
    (29.2
    )
    
    $
    
    
    
    $
    (29.2
    )Net increase (decrease) in cash and cash
equivalents
    
    $
    7.5
    
    
    $
    (25.9
    )
    
    $
    (18.4
    )Cash and cash equivalents at:Beginning of period
    
    
    48.8
    
    
    
    45.2
    
    
    
    94.0End of period
    
    $
    56.3
    
    
    $
    19.3
    
    
    $
    75.6
 16




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##### Table of Contents



Condensed Consolidated Balance Sheet
February 28, 2005 Restricted
    
    
    Unrestricted
    
    
    Consolidated($ millions)
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    TotalsCurrent assetsCash and cash equivalents
    
    $
    268.5
    
    
    $
    27.9
    
    
    $
    296.4Accounts receivable
    
    
    315.7
    
    
    
    29.1
    
    
    
    344.8Insurance collateral
    
    
    108.7
    
    
    
    
    
    
    
    108.7Parts and supplies
    
    
    23.1
    
    
    
    10.1
    
    
    
    33.2Deferred income tax assets
    
    
    17.2
    
    
    
    20.2
    
    
    
    37.4Other current assets
    
    
    11.0
    
    
    
    14.0
    
    
    
    25.0Total current assets
    
    
    744.2
    
    
    
    101.3
    
    
    
    845.5Property and equipment
    
    
    1,102.1
    
    
    
    338.0
    
    
    
    1,440.1Insurance collateral
    
    
    314.1
    
    
    
    61.7
    
    
    
    375.8Other long-term investments
    
    
    86.6
    
    
    
    14.0
    
    
    
    100.6Contracts and customer relationships
    
    
    79.5
    
    
    
    
    
    
    
    79.5Deferred income tax assets
    
    
    144.0
    
    
    
    168.6
    
    
    
    312.6Deferred charges and other assets
    
    
    16.6
    
    
    
    8.3
    
    
    
    24.9Total assets
    
    $
    2,487.1
    
    
    $
    691.9
    
    
    $
    3,179.0Current liabilitiesAccounts payable
    
    $
    45.3
    
    
    $
    23.8
    
    
    $
    69.1Accrued liabilities
    
    
    120.4
    
    
    
    80.2
    
    
    
    200.6Insurance reserves
    
    
    135.4
    
    
    
    35.8
    
    
    
    171.2Current portion of long-term debt
    
    
    1.5
    
    
    
    2.5
    
    
    
    4.0Total current liabilities
    
    
    302.6
    
    
    
    142.3
    
    
    
    444.9Long-term debt
    
    
    401.7
    
    
    
    138.6
    
    
    
    540.3Insurance reserves
    
    
    250.0
    
    
    
    76.6
    
    
    
    326.6Pension liability
    
    
    11.6
    
    
    
    88.0
    
    
    
    99.6Other long-term liabilities
    
    
    69.8
    
    
    
    27.3
    
    
    
    97.1Intercompany payable (receivable)
    
    
    (189.9
    )
    
    
    189.9
    
    
    
    Total liabilities
    
    
    845.8
    
    
    
    662.7
    
    
    
    1,508.5Shareholders equity
    
    
    1,641.3
    
    
    
    29.2
    
    
    
    1,670.5Total liabilities and shareholders equity
    
    $
    2,487.1
    
    
    $
    691.9
    
    
    $
    3,179.0
 17




---



##### Table of Contents



Condensed Consolidated Balance Sheet
August 31, 2004 Restricted
    
    
    Unrestricted
    
    
    Consolidated($ millions)
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    TotalsCurrent assetsCash and cash equivalents
    
    $
    94.2
    
    
    $
    60.0
    
    
    $
    154.2Accounts receivable
    
    
    164.2
    
    
    
    29.9
    
    
    
    194.1Insurance collateral
    
    
    98.9
    
    
    
    
    
    
    
    98.9Parts and supplies
    
    
    22.2
    
    
    
    9.8
    
    
    
    32.0Deferred income tax assets
    
    
    18.4
    
    
    
    22.9
    
    
    
    41.3Other current assets
    
    
    13.0
    
    
    
    9.7
    
    
    
    22.7Discontinued operations
    
    
    488.8
    
    
    
    
    
    
    
    488.8Total current assets
    
    
    899.7
    
    
    
    132.3
    
    
    
    1,032.0Property and equipment
    
    
    1,144.4
    
    
    
    348.0
    
    
    
    1,492.4Insurance collateral
    
    
    303.3
    
    
    
    51.2
    
    
    
    354.5Other long-term investments
    
    
    140.9
    
    
    
    14.3
    
    
    
    155.2Goodwill
    
    
    139.1
    
    
    
    
    
    
    
    139.1Contracts and customer relationships
    
    
    118.6
    
    
    
    
    
    
    
    118.6Deferred income tax assets
    
    
    36.3
    
    
    
    130.1
    
    
    
    166.4Deferred charges and other assets
    
    
    51.9
    
    
    
    9.0
    
    
    
    60.9Discontinued operations
    
    
    429.3
    
    
    
    
    
    
    
    429.3Total assets
    
    $
    3,263.5
    
    
    $
    684.9
    
    
    $
    3,948.4Current liabilitiesAccounts payable
    
    $
    50.4
    
    
    $
    26.5
    
    
    $
    76.9Accrued liabilities
    
    
    103.4
    
    
    
    89.5
    
    
    
    192.9Insurance reserves
    
    
    138.7
    
    
    
    36.3
    
    
    
    175.0Current portion of long-term debt
    
    
    26.8
    
    
    
    2.4
    
    
    
    29.2Current liabilities of discontinued operations
    
    
    212.6
    
    
    
    
    
    
    
    212.6Total current liabilities
    
    
    531.9
    
    
    
    154.7
    
    
    
    686.6Long-term debt
    
    
    970.5
    
    
    
    135.4
    
    
    
    1,105.9Insurance reserves
    
    
    247.3
    
    
    
    77.9
    
    
    
    325.2Pension liability
    
    
    13.8
    
    
    
    174.5
    
    
    
    188.3Other long-term liabilities
    
    
    55.8
    
    
    
    28.2
    
    
    
    84.0Intercompany payable (receivable)
    
    
    (74.5
    )
    
    
    74.5
    
    
    
    Long-term liabilities of discontinued operations
    
    
    181.9
    
    
    
    
    
    
    
    181.9Total liabilities
    
    
    1,926.7
    
    
    
    645.2
    
    
    
    2,571.9Shareholders equity
    
    
    1,336.8
    
    
    
    39.7
    
    
    
    1,376.5Total liabilities and shareholders equity
    
    $
    3,263.5
    
    
    $
    684.9
    
    
    $
    3,948.4
 18




---



##### Table of Contents



Note 11  Guarantors of Senior Notes The Companys $406.0 million Senior Notes are guaranteed by the Companys subsidiaries, except for
the Unrestricted Subsidiaries, the Companys Canadian subsidiaries and any of the Companys
insurance subsidiaries. The condensed consolidated financial statements for the guarantors, the
non-guarantors and the parent company (Laidlaw International, Inc.) are as follows: Condensed Consolidated Statement of Operations
Three months ended February 28, 2005 Parent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consolidated($ millions)
    
    Company
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    TotalsRevenue
    
    $
    
    
    
    $
    428.3
    
    
    $
    335.4
    
    
    $
    
    
    
    $
    763.7Operating, selling, general and
administrative expenses
    
    
    0.1
    
    
    
    358.5
    
    
    
    289.2
    
    
    
    
    
    
    
    647.8Depreciation and amortization expense
    
    
    
    
    
    
    39.7
    
    
    
    25.3
    
    
    
    
    
    
    
    65.0Intercompany management fees (income)
    
    
    
    
    
    
    (3.9
    )
    
    
    3.9
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    (0.1
    )
    
    
    34.0
    
    
    
    17.0
    
    
    
    
    
    
    
    50.9Interest expense
    
    
    (11.9
    )
    
    
    (0.1
    )
    
    
    (7.8
    )
    
    
    
    
    
    
    (19.8
    )Intercompany interest income (expense)
    
    
    0.6
    
    
    
    0.5
    
    
    
    (1.1
    )
    
    
    
    
    
    
    Other income, net
    
    
    1.4
    
    
    
    0.6
    
    
    
    1.6
    
    
    
    
    
    
    
    3.6Equity in earnings (loss) of
intercompany investments
    
    
    243.5
    
    
    
    (2.4
    )
    
    
    
    
    
    
    (241.1
    )
    
    
    Income (loss) from continuing
operations before income taxes
    
    
    233.5
    
    
    
    32.6
    
    
    
    9.7
    
    
    
    (241.1
    )
    
    
    34.7Income tax benefit (expense)
    
    
    2.7
    
    
    
    (13.0
    )
    
    
    (3.7
    )
    
    
    
    
    
    
    (14.0
    )Income (loss) from continuing operations
    
    
    236.2
    
    
    
    19.6
    
    
    
    6.0
    
    
    
    (241.1
    )
    
    
    20.7Income from discontinued operations
    
    
    
    
    
    
    212.6
    
    
    
    2.9
    
    
    
    
    
    
    
    215.5Net income (loss)
    
    $
    236.2
    
    
    $
    232.2
    
    
    $
    8.9
    
    
    $
    (241.1
    )
    
    $
    236.2
 Condensed Consolidated Statement of Operations
Six months ended February 28, 2005 Parent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consolidated($ millions)
    
    Company
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    TotalsRevenue
    
    $
    
    
    
    $
    901.7
    
    
    $
    675.7
    
    
    $
    
    
    
    $
    1,577.4Operating, selling, general and
administrative expenses
    
    
    0.2
    
    
    
    736.8
    
    
    
    597.2
    
    
    
    
    
    
    
    1,334.2Depreciation and amortization expense
    
    
    
    
    
    
    84.9
    
    
    
    48.3
    
    
    
    
    
    
    
    133.2Intercompany management fees (income)
    
    
    
    
    
    
    (6.2
    )
    
    
    6.2
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    (0.2
    )
    
    
    86.2
    
    
    
    24.0
    
    
    
    
    
    
    
    110.0Interest expense
    
    
    (23.3
    )
    
    
    (0.2
    )
    
    
    (15.6
    )
    
    
    
    
    
    
    (39.1
    )Intercompany interest income (expense)
    
    
    (1.1
    )
    
    
    3.2
    
    
    
    (2.1
    )
    
    
    
    
    
    
    Other income, net
    
    
    1.8
    
    
    
    0.6
    
    
    
    2.6
    
    
    
    
    
    
    
    5.0Equity in earnings (loss) of
intercompany investments
    
    
    280.3
    
    
    
    (10.5
    )
    
    
    
    
    
    
    (269.8
    )
    
    
    Income (loss) from continuing
operations before income taxes
    
    
    257.5
    
    
    
    79.3
    
    
    
    8.9
    
    
    
    (269.8
    )
    
    
    75.9Income tax benefit (expense)
    
    
    9.1
    
    
    
    (35.9
    )
    
    
    (3.6
    )
    
    
    
    
    
    
    (30.4
    )Income (loss) from continuing operations
    
    
    266.6
    
    
    
    43.4
    
    
    
    5.3
    
    
    
    (269.8
    )
    
    
    45.5Income from discontinued operations
    
    
    
    
    
    
    218.8
    
    
    
    2.3
    
    
    
    
    
    
    
    221.1Net income (loss)
    
    $
    266.6
    
    
    $
    262.2
    
    
    $
    7.6
    
    
    $
    (269.8
    )
    
    $
    266.6
 19




---



##### Table of Contents



Condensed Consolidated Statement of Operations
Three months ended February 29, 2004 Parent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consolidated($ millions)
    
    Company
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    TotalsRevenue
    
    $
    
    
    
    $
    422.0
    
    
    $
    339.6
    
    
    $
    
    
    
    $
    761.6Operating, selling, general and
administrative expenses
    
    
    0.5
    
    
    
    359.8
    
    
    
    320.9
    
    
    
    
    
    
    
    681.2Depreciation and amortization expense
    
    
    
    
    
    
    42.4
    
    
    
    18.5
    
    
    
    
    
    
    
    60.9Intercompany management fees (income)
    
    
    
    
    
    
    (2.9
    )
    
    
    2.9
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    (0.5
    )
    
    
    22.7
    
    
    
    (2.7
    )
    
    
    
    
    
    
    19.5Interest expense
    
    
    (11.6
    )
    
    
    (0.1
    )
    
    
    (7.7
    )
    
    
    
    
    
    
    (19.4
    )Intercompany interest income (expense)
    
    
    (1.1
    )
    
    
    1.7
    
    
    
    (0.6
    )
    
    
    
    
    
    
    Other income (expense), net
    
    
    (4.2
    )
    
    
    0.3
    
    
    
    (0.6
    )
    
    
    
    
    
    
    (4.5
    )Equity in earnings (loss) of
intercompany investments
    
    
    16.4
    
    
    
    (7.3
    )
    
    
    
    
    
    
    (9.1
    )
    
    
    Income (loss) from continuing
operations before income taxes
    
    
    (1.0
    )
    
    
    17.3
    
    
    
    (11.6
    )
    
    
    (9.1
    )
    
    
    (4.4
    )Income tax benefit (expense)
    
    
    8.2
    
    
    
    (9.2
    )
    
    
    9.2
    
    
    
    
    
    
    
    8.2Income (loss) from continuing operations
    
    
    7.2
    
    
    
    8.1
    
    
    
    (2.4
    )
    
    
    (9.1
    )
    
    
    3.8Income from discontinued operations
    
    
    
    
    
    
    3.4
    
    
    
    
    
    
    
    
    
    
    
    3.4Net income (loss)
    
    $
    7.2
    
    
    $
    11.5
    
    
    $
    (2.4
    )
    
    $
    (9.1
    )
    
    $
    7.2
 Condensed Consolidated Statement of Operations
Six months ended February 29, 2004 Parent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consolidated($ millions)
    
    Company
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    TotalsRevenue
    
    $
    
    
    
    $
    899.1
    
    
    $
    677.4
    
    
    $
    
    
    
    $
    1,576.5Operating, selling, general and
administrative expenses
    
    
    0.5
    
    
    
    738.7
    
    
    
    637.7
    
    
    
    
    
    
    
    1,376.9Depreciation and amortization expense
    
    
    
    
    
    
    88.9
    
    
    
    39.0
    
    
    
    
    
    
    
    127.9Intercompany management fees (income)
    
    
    
    
    
    
    (4.0
    )
    
    
    4.0
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    (0.5
    )
    
    
    75.5
    
    
    
    (3.3
    )
    
    
    
    
    
    
    71.7Interest expense
    
    
    (23.2
    )
    
    
    (0.2
    )
    
    
    (14.6
    )
    
    
    
    
    
    
    (38.0
    )Intercompany interest income (expense)
    
    
    (1.7
    )
    
    
    2.9
    
    
    
    (1.2
    )
    
    
    
    
    
    
    Other income (expense), net
    
    
    (3.9
    )
    
    
    0.5
    
    
    
    (0.3
    )
    
    
    
    
    
    
    (3.7
    )Equity in earnings (loss) of
intercompany investments
    
    
    46.2
    
    
    
    (12.3
    )
    
    
    
    
    
    
    (33.9
    )
    
    
    Income (loss) from continuing
operations before income taxes
    
    
    16.9
    
    
    
    66.4
    
    
    
    (19.4
    )
    
    
    (33.9
    )
    
    
    30.0Income tax benefit (expense)
    
    
    12.9
    
    
    
    (30.6
    )
    
    
    12.5
    
    
    
    
    
    
    
    (5.2
    )Income (loss) from continuing operations
    
    
    29.8
    
    
    
    35.8
    
    
    
    (6.9
    )
    
    
    (33.9
    )
    
    
    24.8Income from discontinued operations
    
    
    
    
    
    
    5.0
    
    
    
    
    
    
    
    
    
    
    
    5.0Net income (loss)
    
    $
    29.8
    
    
    $
    40.8
    
    
    $
    (6.9
    )
    
    $
    (33.9
    )
    
    $
    29.8
 20




---



##### Table of Contents



Condensed Consolidated Statement of Cash Flows
Six months ended February 28, 2005 Parent
    
    
    
    
    
    
    
    
    
    
    Consolidated($ millions)
    
    Company
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    TotalsNet cash provided by (used in) operating activities
    
    $
    (31.7
    )
    
    $
    79.4
    
    
    $
    6.5
    
    
    $
    54.2Cash flows from investing activitiesPurchase of property and equipment, net
    
    $
    
    
    
    $
    (30.1
    )
    
    $
    (22.5
    )
    
    $
    (52.6
    )Expended on acquisitions
    
    
    
    
    
    
    (0.4
    )
    
    
    (1.2
    )
    
    
    (1.6
    )Net (increase) decrease in investments
    
    
    44.9
    
    
    
    (30.0
    )
    
    
    (0.2
    )
    
    
    14.7Net proceeds from sale of businesses
    
    
    
    
    
    
    789.1
    
    
    
    
    
    
    
    789.1Net cash provided by (used in) investing activities
    
    $
    44.9
    
    
    $
    728.6
    
    
    $
    (23.9
    )
    
    $
    749.6Cash flows from financing activitiesPay down Term B facility
    
    $
    (593.8
    )
    
    $
    
    
    
    $
    
    
    
    $
    (593.8
    )Net increase (decrease) in long-term debt
    
    
    
    
    
    
    (0.2
    )
    
    
    (1.6
    )
    
    
    (1.8
    )Decrease in credit facility cash collateral
    
    
    
    
    
    
    40.0
    
    
    
    
    
    
    
    40.0PBGC Trust share repurchase
    
    
    
    
    
    
    
    
    
    
    (84.5
    )
    
    
    (84.5
    )Increase (decrease) in intercompany advances
    
    
    510.3
    
    
    
    (604.9
    )
    
    
    94.6
    
    
    
    Net cash provided by (used in) financing activities
    
    $
    (83.5
    )
    
    $
    (565.1
    )
    
    $
    8.5
    
    
    $
    (640.1
    )Net cash used by discontinued operations
    
    $
    
    
    
    $
    (14.7
    )
    
    $
    (6.8
    )
    
    $
    (21.5
    )Net increase (decrease) in cash and cash equivalents
    
    $
    (70.3
    )
    
    $
    228.2
    
    
    $
    (15.7
    )
    
    $
    142.2Cash and cash equivalents at:Beginning of period
    
    
    71.4
    
    
    
    4.6
    
    
    
    78.2
    
    
    
    154.2End of period
    
    $
    1.1
    
    
    $
    232.8
    
    
    $
    62.5
    
    
    $
    296.4
 Condensed Consolidated Statement of Cash Flows
Six months ended February 29, 2004 Parent
    
    
    
    
    
    
    
    
    
    
    Consolidated($ millions)
    
    Company
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    TotalsNet cash provided by (used in) operating activities
    
    $
    (50.4
    )
    
    $
    51.1
    
    
    $
    47.2
    
    
    $
    47.9Cash flows from investing activitiesPurchase of property and equipment, net
    
    $
    
    
    
    $
    (41.0
    )
    
    $
    (48.4
    )
    
    $
    (89.4
    )Expended on acquisitions
    
    
    
    
    
    
    
    
    
    
    (1.3
    )
    
    
    (1.3
    )Net (increase) decrease in investments
    
    
    0.7
    
    
    
    33.4
    
    
    
    (0.4
    )
    
    
    33.7Net cash provided by (used in) investing activities
    
    $
    0.7
    
    
    $
    (7.6
    )
    
    $
    (50.1
    )
    
    $
    (57.0
    )Cash flows from financing activitiesPay down Term B facility
    
    $
    (12.5
    )
    
    $
    
    
    
    $
    
    
    
    $
    (12.5
    )Net increase (decrease) in long-term debt
    
    
    60.2
    
    
    
    (0.6
    )
    
    
    (27.2
    )
    
    
    32.4Increase (decrease) in intercompany advances
    
    
    
    
    
    
    (7.3
    )
    
    
    7.3
    
    
    
    Net cash provided by (used in) financing activities
    
    $
    47.7
    
    
    $
    (7.9
    )
    
    $
    (19.9
    )
    
    $
    19.9Net cash provided ( used) by discontinued operations
    
    $
    
    
    
    $
    (29.8
    )
    
    $
    0.6
    
    
    $
    (29.2
    )Net increase (decrease) in cash and cash equivalents
    
    $
    (2.0
    )
    
    $
    5.8
    
    
    $
    (22.2
    )
    
    $
    (18.4
    )Cash and cash equivalents at:Beginning of period
    
    
    40.7
    
    
    
    (2.4
    )
    
    
    55.7
    
    
    
    94.0End of period
    
    $
    38.7
    
    
    $
    3.4
    
    
    $
    33.5
    
    
    $
    75.6
 21




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##### Table of Contents



Condensed Consolidated Balance Sheet
As of February 28, 2005 Parent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consolidated($ millions)
    
    Company
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    TotalsCurrent assets of continuing operations
    
    $
    4.4
    
    
    $
    548.4
    
    
    $
    292.7
    
    
    $
    
    
    
    $
    845.5Intercompany receivables (payables)
and investments
    
    
    1,957.9
    
    
    
    855.6
    
    
    
    (252.4
    )
    
    
    (2,561.1
    )
    
    
    Property and equipment
    
    
    
    
    
    
    785.4
    
    
    
    654.7
    
    
    
    
    
    
    
    1,440.1Insurance collateral
    
    
    
    
    
    
    9.6
    
    
    
    366.2
    
    
    
    
    
    
    
    375.8Other long-term investments
    
    
    69.8
    
    
    
    15.3
    
    
    
    15.5
    
    
    
    
    
    
    
    100.6Contracts and customer relationships
    
    
    
    
    
    
    76.6
    
    
    
    2.9
    
    
    
    
    
    
    
    79.5Long-term deferred income tax assets
    
    
    33.9
    
    
    
    19.6
    
    
    
    259.1
    
    
    
    
    
    
    
    312.6Deferred charges and other assets
    
    
    15.9
    
    
    
    0.7
    
    
    
    8.3
    
    
    
    
    
    
    
    24.9$
    2,081.9
    
    
    $
    2,311.2
    
    
    $
    1,347.0
    
    
    $
    (2,561.1
    )
    
    $
    3,179.0Current liabilities
    
    $
    10.0
    
    
    $
    117.3
    
    
    $
    317.6
    
    
    $
    
    
    
    $
    444.9Non-current liabilities
    
    
    401.4
    
    
    
    60.2
    
    
    
    602.0
    
    
    
    
    
    
    
    1,063.6Shareholders equity
    
    
    1,670.5
    
    
    
    2,133.7
    
    
    
    427.4
    
    
    
    (2,561.1
    )
    
    
    1,670.5$
    2,081.9
    
    
    $
    2,311.2
    
    
    $
    1,347.0
    
    
    $
    (2,561.1
    )
    
    $
    3,179.0
 Condensed Consolidated Balance Sheet
As of August 31, 2004 Parent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consolidated($ millions)
    
    Company
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    TotalsCurrent assets
    
    $
    75.1
    
    
    $
    644.4
    
    
    $
    312.5
    
    
    $
    
    
    
    $
    1,032.0Intercompany receivables (payables)
and investments
    
    
    2,144.2
    
    
    
    241.9
    
    
    
    (120.2
    )
    
    
    (2,265.9
    )
    
    
    Property and equipment
    
    
    
    
    
    
    835.7
    
    
    
    656.7
    
    
    
    
    
    
    
    1,492.4Insurance collateral
    
    
    
    
    
    
    
    
    
    
    354.5
    
    
    
    
    
    
    
    354.5Other long-term investments
    
    
    114.7
    
    
    
    25.6
    
    
    
    14.9
    
    
    
    
    
    
    
    155.2Goodwill
    
    
    
    
    
    
    139.1
    
    
    
    
    
    
    
    
    
    
    
    139.1Contracts and customer relationships
    
    
    
    
    
    
    116.4
    
    
    
    2.2
    
    
    
    
    
    
    
    118.6Long-term deferred income tax assets
    
    
    5.9
    
    
    
    
    
    
    
    196.5
    
    
    
    (36.0
    )
    
    
    166.4Deferred charges and other assets
    
    
    42.8
    
    
    
    9.1
    
    
    
    9.0
    
    
    
    
    
    
    
    60.9Long term assets of discontinued
operations
    
    
    
    
    
    
    377.9
    
    
    
    51.4
    
    
    
    
    
    
    
    429.3$
    2,382.7
    
    
    $
    2,390.1
    
    
    $
    1,477.5
    
    
    $
    (2,301.9
    )
    
    $
    3,948.4Current liabilities
    
    $
    35.7
    
    
    $
    315.5
    
    
    $
    335.4
    
    
    $
    
    
    
    $
    686.6Non-current liabilities
    
    
    970.5
    
    
    
    203.1
    
    
    
    747.7
    
    
    
    (36.0
    )
    
    
    1,885.3Shareholders equity
    
    
    1,376.5
    
    
    
    1,871.5
    
    
    
    394.4
    
    
    
    (2,265.9
    )
    
    
    1,376.5$
    2,382.7
    
    
    $
    2,390.1
    
    
    $
    1,477.5
    
    
    $
    (2,301.9
    )
    
    $
    3,948.4
 22




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##### Table of Contents



ITEM 2.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS General Corporate overview The following discussion and analysis presents factors which affected the Companys consolidated
results of operations for the three and six month periods ended February 28, 2005 compared to the
three and six month periods ended February 29, 2004 and the Companys consolidated financial
position at February 28, 2005. The following information should be read in conjunction with the
Consolidated Financial Statements and Notes thereto included in this Form 10-Q and in the Companys
Form 10-K for the year ended August 31, 2004. As used in this Report, all references to the
Company, we, us, our and similar references are to Laidlaw International, Inc. Our continuing operations consist of three reportable segments: education services, public transit
services and Greyhound. See Note 9  Segment Information of Notes to Consolidated Financial
Statements in this Report. As a result of the sale of our healthcare transportation services and
emergency management services segments, prior period amounts have been reclassified to reflect the
discontinuance of these segments. Pursuant to the terms of the Companys $406.0 million Senior Notes, the Company is required to
segregate the consolidated results of operations between the Restricted and Unrestricted
Subsidiaries as defined in Note 10  Condensed financial statements of restricted subsidiaries of
the Notes to the Consolidated Financial Statements included in this Report. Non-GAAP Measures EBITDA is presented solely as a supplemental disclosure with respect to liquidity because
management believes it provides useful information regarding our ability to service or incur debt.
EBITDA is not calculated the same way by all companies. We define EBITDA as operating income plus
depreciation and amortization. EBITDA, as reported here, is the same as reported for each of our
segments in Note 9  Segment information of Notes to Consolidated Financial Statements included
in this Report. 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. 23




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##### Table of Contents



The following is a reconciliation of our EBITDA to income from continuing operations and net cash
used in operating activities, the GAAP measures management believes to be most directly comparable
to EBITDA: Three Months Ended
    
    
    Six Months EndedFebruary 28,
    
    
    February 29,
    
    
    February 28,
    
    
    February 29,($ in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004EBITDA
    
    $
    115.9
    
    
    $
    80.4
    
    
    $
    243.2
    
    
    $
    199.6Depreciation and amortization
    
    
    (65.0
    )
    
    
    (60.9
    )
    
    
    (133.2
    )
    
    
    (127.9
    )Interest expense
    
    
    (19.8
    )
    
    
    (19.4
    )
    
    
    (39.1
    )
    
    
    (38.0
    )Other income (expense), net
    
    
    3.6
    
    
    
    (4.5
    )
    
    
    5.0
    
    
    
    (3.7
    )Income tax benefit (expense)
    
    
    (14.0
    )
    
    
    8.2
    
    
    
    (30.4
    )
    
    
    (5.2
    )Income from continuing operations
    
    $
    20.7
    
    
    $
    3.8
    
    
    $
    45.5
    
    
    $
    24.8
 Three Months Ended
    
    
    Six Months EndedFebruary 28,
    
    
    February 29,
    
    
    February 28,
    
    
    February 29,($ in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004EBITDA
    
    $
    115.9
    
    
    $
    80.4
    
    
    $
    243.2
    
    
    $
    199.6Cash paid for interest
    
    
    (22.4
    )
    
    
    (21.9
    )
    
    
    (31.4
    )
    
    
    (31.4
    )Cash received (paid) for income taxes
    
    
    (0.4
    )
    
    
    12.3
    
    
    
    (1.0
    )
    
    
    11.2Cash provided by (used to fund) accounts
receivable
    
    
    14.1
    
    
    
    31.7
    
    
    
    (127.8
    )
    
    
    (124.1
    )Cash provided by (used to fund) changes
in other assets and liabilities
    
    
    23.5
    
    
    
    15.4
    
    
    
    (30.9
    )
    
    
    (8.6
    )Other items
    
    
    0.3
    
    
    
    (1.9
    )
    
    
    2.1
    
    
    
    1.2Net cash
provided by operating activities
    
    $
    131.0
    
    
    $
    116.0
    
    
    $
    54.2
    
    
    $
    47.9Net cash
provided by (used in) investing activities
    
    $
    761.4
    
    
    $
    (35.1
    )
    
    $
    749.6
    
    
    $
    (57.0
    )Net cash
provided by (used in) financing activities
    
    $
    (654.8
    )
    
    $
    (50.4
    )
    
    $
    (640.1
    )
    
    $
    19.9
 24




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##### Table of Contents



Results of Operations Three and six months ended February 28, 2005, and February 29, 2004 Percentage of revenueThree Months Ended
    
    
    Six Months EndedFebruary 28,
    
    
    February 29,
    
    
    February 28,
    
    
    February 29,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Compensation expense
    
    
    51.0
    
    
    
    52.2
    
    
    
    50.2
    
    
    
    51.4Insurance and accident claim costs
    
    
    4.5
    
    
    
    8.1
    
    
    
    5.7
    
    
    
    8.0Vehicle related costs
    
    
    8.4
    
    
    
    8.4
    
    
    
    8.1
    
    
    
    8.2Occupancy costs
    
    
    5.2
    
    
    
    5.2
    
    
    
    4.9
    
    
    
    5.0Fuel
    
    
    6.3
    
    
    
    5.4
    
    
    
    6.3
    
    
    
    5.1Depreciation and amortization
    
    
    8.5
    
    
    
    8.0
    
    
    
    8.5
    
    
    
    8.1Other operating expenses
    
    
    9.4
    
    
    
    10.1
    
    
    
    9.3
    
    
    
    9.7Operating income
    
    
    6.7
    
    
    
    2.6
    
    
    
    7.0
    
    
    
    4.5Interest expense
    
    
    (2.7
    )
    
    
    (2.5
    )
    
    
    (2.5
    )
    
    
    (2.4
    )Other income (expense), net
    
    
    0.5
    
    
    
    (0.7
    )
    
    
    0.3
    
    
    
    (0.2
    )Income (loss) from continuing
operations before income taxes
    
    
    4.5
    
    
    
    (0.6
    )
    
    
    4.8
    
    
    
    1.9Income tax benefit (expense)
    
    
    (1.8
    )
    
    
    1.2
    
    
    
    (1.9
    )
    
    
    (0.2
    )Income from continuing operations
    
    
    2.7
    
    
    
    0.6
    
    
    
    2.9
    
    
    
    1.7Income from discontinued operations
    
    
    28.2
    
    
    
    0.3
    
    
    
    14.0
    
    
    
    0.2Net income
    
    
    30.9
    %
    
    
    0.9
    %
    
    
    16.9
    %
    
    
    1.9
    %
 Revenue Revenue by business segment and by Restricted Subsidiaries and Unrestricted Subsidiaries are as
follows ($ in millions): RevenueThree Months Ended
    
    
    Six Months EndedFebruary 28,
    
    
    February 29,
    
    
    February 28,
    
    
    February 29,2005
    
    
    2004
    
    
    2005
    
    
    2004Education services
    
    $
    405.1
    
    
    $
    394.8
    
    
    $
    857.0
    
    
    $
    850.5Public Transit services
    
    
    73.9
    
    
    
    72.5
    
    
    
    150.9
    
    
    
    144.6Greyhound
    
    
    284.7
    
    
    
    294.3
    
    
    
    569.5
    
    
    
    581.4Total
    
    $
    763.7
    
    
    $
    761.6
    
    
    $
    1,577.4
    
    
    $
    1,576.5Restricted Subsidiaries
    
    $
    545.8
    
    
    $
    528.6
    
    
    $
    1,136.9
    
    
    $
    1,113.3Unrestricted Subsidiaries
    
    
    217.9
    
    
    
    233.0
    
    
    
    440.5
    
    
    
    463.2Total
    
    $
    763.7
    
    
    $
    761.6
    
    
    $
    1,577.4
    
    
    $
    1,576.5
 25




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##### Table of Contents



EBITDA EBITDA by business segment and by Restricted Subsidiaries and Unrestricted Subsidiaries is as
follows ($ in millions): EBITDAThree Months Ended
    
    
    Six Months EndedFebruary 28, 2005
    
    
    February 29, 2004
    
    
    February 28, 2005
    
    
    February 29, 2004Education services
    
    $
    85.9
    
    
    $
    73.0
    
    
    $
    198.1
    
    
    $
    182.0Public Transit services
    
    
    4.9
    
    
    
    (4.1
    )
    
    
    8.2
    
    
    
    (4.4
    )Greyhound
    
    
    25.1
    
    
    
    11.5
    
    
    
    36.9
    
    
    
    22.0Total
    
    $
    115.9
    
    
    $
    80.4
    
    
    $
    243.2
    
    
    $
    199.6Restricted Subsidiaries
    
    $
    98.2
    
    
    $
    73.5
    
    
    $
    218.2
    
    
    $
    183.7Unrestricted Subsidiaries
    
    
    17.7
    
    
    
    6.9
    
    
    
    25.0
    
    
    
    15.9Total
    
    $
    115.9
    
    
    $
    80.4
    
    
    $
    243.2
    
    
    $
    199.6
 Education services Revenue in the education services segment increased by $10.3 million and $6.5 million for the three
and six months ended February 28, 2005 compared to the same periods in fiscal 2004. More operating
days on existing contracts increased revenue by $4.6 million during the three month period ended
February 28, 2005 compared to the prior year. The increase in days operated was principally due to
lost days as a result of bad weather in the prior year period. Most of the lost operating days in
the second quarter of 2004 were recovered in the third and fourth quarter of fiscal 2004. The
remaining increase in revenue is principally due to a strengthening of the Canadian dollar relative
to the U.S. dollar that had the effect of increasing revenue compared to the corresponding periods
last year by $3.7 million and $7.4 million for the three and six months ended February 28, 2005,
respectively. Revenue from new contracts and rate increases on existing contracts were largely
offset by decreased revenue from lost contracts. In the three and six months ended February 28, 2005, EBITDA in the education services segment
improved $12.9 million and $16.1 million over the three and six months ended February 29, 2005
primarily due to lower accident claim costs as reduced compensation and administrative costs as a
percentage of revenue were largely offset by increased fuel prices. Accident claims costs during
the three and six months ended February 28, 2005 were $8.6 million and $15.2 million, respectively,
lower than the comparable periods in the prior year. Due to favorable trends in accident frequency
and severity not being reflected in actuarial estimates until the fourth quarter of fiscal 2004,
68% of the annual accident claims costs in fiscal 2004 were recognized during the six months ended
February 29, 2004. These favorable trends have continued during the first half of fiscal 2005 thus
resulting in the reduced costs as compared to prior year. Management currently expects that
accident claims costs will be recognized somewhat more evenly during fiscal 2005 and, therefore,
believes that it is likely that accident claims costs during the second half of fiscal 2005 will
exceed the amounts recorded during the second half of fiscal 2004. Public transit Revenue in the public transit services segment increased $1.4 million and $6.3 million for the
three and six months ended February 28, 2005 compared to the same periods in fiscal 2004 primarily
due to volume and price increases on existing contracts. EBITDA in the public transit services segment in the three and six months ended February 28, 2005
improved $9.0 million and $12.6 million, respectively, over the same period in 2004 primarily due
to lower accident claims costs as reduced compensation and administrative costs as a 26




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##### Table of Contents



percentage of revenue were largely offset by increased fuel prices. Accident claims costs during
the three and six months ended February 28, 2005 were $9.0 million and $10.3 million, respectively,
lower than the comparable periods in the prior year. Due to favorable trends in accident frequency
and severity not being reflected in actuarial estimates until the fourth quarter of fiscal 2004,
68% of the annual accident claims costs in fiscal 2004 were recognized during the six months ended
February 29, 2004. These favorable trends have continued during the first half of fiscal 2005 thus
resulting in the reduced costs as compared to prior year. Management currently expects that
accident claims costs will be recognized somewhat more evenly during fiscal 2005 and, therefore,
believes that it is likely that accident claims costs during the second half of fiscal 2005 will
exceed the amounts recorded during the second half of fiscal 2004. Greyhound Revenue in the Greyhound segment during the three and six months ended February 28, 2005 declined
$9.6 million and $11.9 million, respectively, from the three and six months ended February 29,
2004, principally due to a decrease in passenger revenue somewhat offset by an increase in the
Canadian exchange rate. Passenger revenue and miles driven are down due to managements focus on
improving profitability by reducing lower yielding long-distance trips and eliminating
low-performing routes or frequencies. Had there been no change in the exchange rate, revenue would
have decreased by $14.4 million and $20.9 million for the three and six months ended February 28,
2005 compared to the prior year periods. In the three and six months ended February 28, 2005, EBITDA in the Greyhound segment was $13.6
million and $14.9 million higher, respectively, than the three and six months ended February 29,
2004. The improvement in Greyhounds EBITDA is primarily due to managements continued focus on
improving revenue per bus mile and reducing operating costs. These actions reduced compensation
costs and vehicle related costs as a percentage of revenue, however, the improvements were somewhat
offset by an increase in fuel costs. Additionally, Greyhound has had lower accident claims costs
due both to the reduction in miles operated and due to favorable development on prior years claims
recognized during the three months ended February 28, 2005. Restricted Subsidiaries The $17.2 million and $23.6 million increase in the Restricted Subsidiaries revenue during the
three and six months ended February 28, 2005 compared to the prior year is a result of the
increases in revenue in education services, public transit and Greyhound Lines of Canada. A large
portion of the increase was due to the increased strength of the Canadian dollar compared to the
U.S dollar. Had there been no change in the exchange rate, revenue would have increased by $8.7
million and $7.2 million for the three and six months ended February 28, 2005, respectively,
compared to the prior year periods. In the three and six months ended February 28, 2005, EBITDA for the Restricted Subsidiaries
improved $24.7 million and $34.5 million respectively, over the three and six months ended February
29, 2004 primarily due to lower accident claims costs. Unrestricted Subsidiaries The Unrestricted Subsidiaries revenue decreased $15.1 million and $22.7 million during the three
and six months ended February 28, 2005, primarily due to reduced passenger revenue and miles driven
as discussed in the Greyhound segment above. In the three and six months ended February 28, 2005, EBITDA in the Unrestricted Subsidiaries
increased $10.8 million and $9.1 million, respectively, compared to the three and six months ended
February 29, 2004 due to increased revenue per mile and reduced operating costs as discussed in the
Greyhound segment above, somewhat offset by fuel cost increases. 27




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##### Table of Contents



Depreciation and amortization expense Depreciation expense for the three and six months ended February 28, 2005 increased $4.2 million
and $5.3 million over the three and six months ended February 29, 2004. The increase is mostly
attributable to the Unrestricted Subsidiaries and is principally due to a decrease in the estimated
useful lives of Greyhound buses. Amortization expense for the three and six months ended February 28, 2005 was $2.1 million and $4.4
million respectively, virtually unchanged from the same periods in fiscal 2004. Amortization is
primarily related to customer contracts capitalized under fresh start accounting. Virtually all of
the amortization expense was recorded by the Restricted Subsidiaries. Following the reduction of
customer contract intangible assets as a result of the reversal of the tax valuation allowance
established at fresh start, ongoing amortization costs are expected to be reduced by approximately
$2.7 million annually. Interest expense In the three and six months ended February 28, 2005, interest expense was $19.8 million and $39.1
million respectively, compared to $19.4 million and $38.0 million for the three and six months
ended February 29, 2004. The increase is attributable to a slightly higher average debt balance at
Greyhound. Other income (expense), net Other income (expense), net was $3.6 million and $5.0 million, respectively, for the three and six
months ended February 28, 2005. The income was primarily driven by income on investments and
proceeds received by the Company from the finalization of Greyhounds 1990 bankruptcy proceedings,
offset somewhat by certain other non-operating expenses. Other income (expenses), net was ($4.5) million and ($3.7) million in the three and six months
ended February 29, 2004, respectively, and primarily related to legal fees to defend former
directors and officers of the Predecessor Company from shareholder and creditor lawsuits that
originated prior to the Companys emergence from bankruptcy. Discontinued operations Income from discontinued operations includes the operating results of our healthcare transportation
services and emergency management services segments through the date of their sale on February 10,
2005. Income from the operations of our discontinued segments was $5.1 million and $10.7 million
for the three and six months ended February 28, 2005
respectively compared to $3.4 million and $5.0
million for the three and six months ended February 29, 2004. Additionally, during the three
month period ended February 28, 2005, income from discontinued operations includes $210.4 million
related to the gain on sale of these businesses. Income tax expense Income tax expense for continuing operations for the three and six months ended February 28, 2005
was $14.0 million and $30.4 million, respectively, compared to a net benefit of $8.2 million and a
net expense of $5.2 million in the three and six months ended February 29, 2004. During the three
and six month periods ended February 29, 2004, the Company recorded a one-time benefit of $6.6
million due to a change in a Canadian tax rate. The effective tax rate was 40% for the three and
six months of fiscal 2005 compared to 36% and 39% in the three and six months of fiscal 2004
excluding the effect of the one-time rate change. 28




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Of the $14.0 million and $30.4 million provided in the three and six months ended February 28,
2005, $0.8 million and $1.6 million, respectively, represents cash taxes payable and the balance
reflects the utilization of deferred tax assets. Liquidity and capital resources Net cash proceeds received by the Company from the sale of the healthcare businesses during the
three months ended February 28, 2005, totalled $789.1 million of which $574.1 million was used to
retire all outstanding borrowings under the Companys Term B senior secured term facility.
Additionally, following the pay down of the Term B facility, the Company was able to reduce $40
million of the cash collateral under its cash collateralized letter of credit facility. Management
expects to recover the remaining $60 million of cash collateral under this facility before the end
of the fiscal year. During the three months ended February 28, 2005, the Company also purchased,
and retired, all of the shares held in the Pension Plan Trust (as
discussed in Note 5 - Pension Plans) for $84.5 million. For the six months ended February 28, 2005, cash provided by operating activities was $54.2 million
compared to $47.9 million for the six months ended February 29, 2004. Net expenditures for the
purchase of capital assets was $52.6 million for the six months ended February 28, 2005 compared to
$89.4 million for the six months ended February 29, 2004 as the current years capital spend is more
weighted to the second half of the fiscal year. The Company has available a senior secured revolving credit facility (the Revolver) due June 2008
to finance operating needs. Under the Revolver, as of February 28, 2005, there were no cash
borrowings and $15.8 million was outstanding for the issuance of letters of credit, leaving
availability of $184.2 million. Greyhound Lines utilizes its own revolving line of credit (the
Greyhound Facility). As of February 28, 2005, Greyhound Lines had no cash borrowings under the
Greyhound Facility, had issued letters of credit of $61.1 million and had credit availability of
$50.0 million. See Note 7 - Material contingencies for further discussion of the Greyhound
Facility. Under the terms of the Companys various debt agreements 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. Except as discussed in Note 7 - Material contingencies regarding the
Greyhound Facility, as of February 28, 2005, the Company was in compliance with all such covenants. The Company requires significant cash flows to finance capital expenditures and to meet its debt
service and other continuing obligations. We believe that existing cash and cash flow from
operations, together with borrowings under our Revolver as necessary, will be sufficient to fund
our anticipated capital expenditures and working capital requirements for the foreseeable future,
including payment obligations under our debt agreements and other commitments. Commitments and Contingencies Reference is made to Note 21  Commitments and contingencies of Notes to the Consolidated
Financial Statements in the Companys Form 10-K for the year ended August 31, 2004 for a
description of the Companys material commitments. Reference is made to Note 7  Material
contingencies of Notes to Consolidated Financial Statements in this Report for a description of
the Companys material contingencies. 29




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Forward-looking statements Certain statements contained in this report on Form 10-Q, including statements regarding the status
of future operating results and market opportunities and other statements that are not historical
facts, are forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements can be identified by the use of terminology
such as: believe, hope, may, anticipate, should, intend, plan, will, expect, estimate, continue,
project, positioned, strategy and similar expressions. Such statements involve certain risks,
uncertainties and assumptions that include, but are not limited to:  -
    Economic and other market factors, including competitive pressures and changes
in pricing policies;-
    The ability to implement initiatives designed to increase operating
efficiencies or improve results;-
    Greyhound Lines ability to remain in compliance with the financial covenants
under the Greyhound Facility;-
    Control of costs related to accident and other risk management claims;-
    Costs and risks associated with litigation;-
    Changes in interpretations of existing, or the adoption of new legislation,
regulations or other laws;-
    Changes in homeland security or terrorist activity;-
    Significant restrictive covenants in the Companys and its subsidiaries
various credit facilities;-
    Potential changes in the mix of businesses we operate; and-
    Increases in prices of fuel and shortages. Should one or more of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual outcomes may vary materially from those indicated. In the light of these
risks and uncertainties you are cautioned not to place undue reliance on these forward-looking
statements. The Company undertakes no obligation to publicly update forward-looking statements,
whether as a result of new information, future events or otherwise. You are advised, however, to
consult any further disclosures the Company makes on related subjects as may be detailed in the
Companys other filings made from time to time with the Securities and Exchange Commission. 30




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LAIDLAW INTERNATIONAL, INC. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in market risk from the disclosures provided in Item 7A.
Quantitative and Qualitative Disclosures About Market Risk as set forth in the Companys Form 10-K
for the year ended August 31, 2004. 
 Item 4. Controls and Procedures The Company maintains 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. As of the end of the
period covered by this quarterly report, an evaluation was carried out under the supervision and
with the participation of the Companys management, including its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of its disclosure controls and procedures. Based on that
evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that
the Companys disclosure controls and procedures are effective. During the most recent fiscal quarter, there have not been any changes in the Companys internal
controls over financial reporting or in other factors that have materially affected, or are
reasonably likely to materially affect, the Companys internal controls over financial reporting. 31




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LAIDLAW INTERNATIONAL, INC. 
 PART II. OTHER INFORMATION 
 Item 1. Legal Proceedings Contingent Liabilities Relating to Sale of AMR On February 10, 2005 the Company completed the sale of American Medical Response, Inc. (AMR) to
an affiliate of Onex Corporation in accordance with the Stock Purchase Agreement, dated December 6,
2004, as amended (the Stock Purchase Agreement). Pursuant to the terms of the Stock Purchase
Agreement, the Company may be subject to indemnification obligations related to certain
investigations and matters previously disclosed relating to AMR, including potentially those set
forth below. On May 9, 2002, AMR received a subpoena duces tecum from the Office of Inspector General for the
United States Department of Health and Human Services (HHS). The subpoena requested copies of
documents for the period from January 1993 through May 2002. The subpoena required AMR to produce
a broad range of documents including those relating to Regional Emergency Services contracts in
Georgia and Colorado. The government investigations in Georgia and Colorado are continuing. During the first quarter of fiscal 2004, AMR was advised by the U.S. Department of Justice (DOJ),
that it was investigating certain business practices at AMR. The specific practices at issue were
(1) whether ambulance transports involving Medicare eligible patients complied with the medically
necessary requirement imposed by Medicare regulations, (2) whether patient signatures, when
required, were properly obtained from Medicare eligible patients; and (3) whether discounts in
violation of the Federal Anti-Kickback Act were provided by AMR in exchange for referrals involving
Medicare eligible patients. At this juncture, it is not possible to predict the ultimate
conclusion of the investigations described in this and the preceding paragraph, nor is it possible
to calculate any possible financial exposure, if any, to the Company, pursuant to the terms of the
Stock Purchase Agreement. Greyhound Default Judgment On September 20, 2004, the Companys wholly owned subsidiary Greyhound Lines, Inc. (Greyhound
Lines) responded to proceedings brought in Georgia state court in August 2004 seeking to enforce a
default garnishment judgment on funds in a Greyhound Lines bank account. This action stemmed from
an October 1995 default judgment in the amount of approximately $7 million (1995 Judgment)
against Gary Jones, a former consultant to Greyhound Lines. More than four years later, in October
2000, the plaintiff who obtained the 1995 Judgment (Plaintiff) began garnishment proceedings
against Greyhound Lines in Georgia state court seeking to recover amounts owed to Gary Jones, who
then allegedly owed the Plaintiff the amount of approximately $11 million based on the 1995
Judgment plus post-judgment interest. On May 2, 2001, a default judgment for $11 million was
entered by the Georgia state court against Greyhound Lines. On March 10, 2005, Greyhound Lines
settled this matter for an immaterial amount and the Company has reflected the cost of the
settlement as a component of other income (expense) in its Consolidated Statements of Operations
for the quarter ended February 28, 2005. Other The Company is also a defendant in various lawsuits arising in the ordinary course of business,
primarily cases involving personal injury, property damage or employment related claims. Some of 32




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these actions are covered to varying degrees by insurance policies. Based on an assessment of
known claims and our historical claims payout pattern, management believes that there is no
proceeding either threatened or pending against us relating to personal injury and/or property
damage claims and/or employment related claims that would have a material adverse effect on the
Company. Environmental The Companys operations are subject to various federal, state, local and foreign laws and
regulations relating to environmental matters, including those concerning emissions to the air;
waste water discharges; storage, treatment and disposal of waste and remediation of soil and ground
water contamination. We have incurred, and expect to incur, costs for our operations to comply
with these legal requirements, and these costs could increase in the future. In particular, the
Company has been named as a potentially responsible party under the United States Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, at various third-party
sites at which the Companys waste was allegedly disposed. In addition, the Company is
investigating or engaged in remediation of past contamination at other sites used in its
businesses. The Company records liabilities 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. As of
the date of this report, management believes that adequate accruals have been made related to all
known environmental matters, however actual environmental liabilities could differ significantly
from these estimates. 
 Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities On February 17, 2005 the Company purchased 3.8 million shares of its stock held in Trust with the
Pension Benefit Guaranty Corporation on February 17, 2005 for $84.5 million. The purchase price
per share of $22.37 was based upon the closing price of the Companys stock on the New York Stock
Exchange on the purchase date. All proceeds for the stock sale were contributed directly to the
Companys pension plans and the 3.8 million shares were immediately retired. The Company has no
commitments to buy back Company stock at this time. 33




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Item 4. Submission of Matters to a vote of Security Holders The Companys annual stockholders meeting was held on February 8, 2005. At the meeting, the
following proposals were voted on: Proposal 1:Election of two Directors for a term of three years. The following persons were elected to the Companys Board of Directors by the number of votes
shown: Number of VotesAuthorityFor
    
    
    WithheldRichard P. Randazzo
    
    
    87,572,309
    
    
    
    5,975,815Carroll R. Wetzel, Jr.
    
    
    87,568,344
    
    
    
    5,979,780
 The other Directors with continuing terms include Peter E. Stangl, John F. Chlebowski, James H.
Dickerson, Jr., Lawrence M. Nagin, Maria A. Sastre and Kevin E. Benson. Proposal 2:Approval of the Laidlaw International, Inc. Amended and Restated 2003 Equity and
Performance Incentive Plan. The proposal was passed with 71,501,800 votes for the proposal, 6,562,385 votes against the
proposal, 39,713 votes withheld and 15,444,226 broker non-votes. Proposal 3:Approval of the Laidlaw International, Inc. Short-term Incentive Plan The proposal was passed with 86,311,945 votes for the proposal, 7,196,186 votes against the
proposal and 39,993 votes withheld. 
 Item 5. Other Information The following information supplements the biographical information of Kevin E. Benson, the
Companys President, Chief Executive Officer and Douglas A. Carty, the Companys Senior Financial
Officer, included in the Companys Annual Report on Form 10-K for the fiscal year ended August 31,
2004 and in the Companys proxy statement dated December 29, 2004. Prior to March 2000, Kevin E. Benson was President and Chief Executive Officer of Canadian Airlines
International, Ltd. Canadian Airlines International Ltd. Initiated proceedings under the
Companies Creditors Arrangement Act and applicable bankruptcy protection statutes in the United
States on March 24, 2000. Prior to July 2000, Mr. Carty was Senior Vice President and Chief Financial Officer of Canadian
Airlines International, Ltd. Canadian Airlines International Ltd. Initiated proceedings under the
Companies Creditors Arrangement Act and applicable bankruptcy protection statutes in the United
States on March 24, 2000. 34




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Item 6. Exhibits and Reports on Form 8-K  (a)
    Exhibits  31.1
    Principal Executive Officers Certifications Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    Principal Financial Officers Certifications Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act
of 2002)  (b)
    Reports on Form 8-K during the quarter ended February 28, 2005 Current Report on Form 8-K, dated December 6, 2004, filed with the Securities and Exchange
Commission announcing that the Company had entered into stock purchase agreements for the
sale of its healthcare businesses with an affiliate of Onex Partners LP. Current Report on Form 8-K, dated December 13, 2004, filed with the Securities and Exchange
Commission announcing that the Company had granted deferred shares, restricted shares and
options to purchase shares to certain directors and executive officers in accordance with
the Companys Equity and Performance Incentive Plans. Current Report on Form 8-K, dated December 17, 2004, filed with the Securities and Exchange
Commission announcing that the Company had obtained a bank consent letter allowing the
Company to proceed with the disposition of its healthcare businesses provided a portion of
the proceeds from the Sale Transaction are used to repay in full the outstanding principal
amount of the Term B Revolver and any unpaid interest thereon. Current Report on Form 8-K, dated February 14, 2005, filed with the Securities and Exchange
Commission announcing that the Company had entered into the Fourth Amendment to Credit
Agreement dated February 14, 2005, with its lenders. The Form 8-K also announced that the
sale of the healthcare businesses had been finalized. Current Report on Form 8-K, dated February 17, 2005, filed with the Securities and Exchange
Commission announcing the Company purchased 3,777,419 shares of its common stock that had
been held in trust. 35




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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. LAIDLAW INTERNATIONAL, INC.By: /s/ Douglas A. CartyDate:  April 11, 2005
    
    Douglas A. CartySenior Vice President and Chief
Financial OfficerDuly Authorized Officer and Principal FinancialOfficer 36