<PAGE>   1


                                  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 May 31, 1997
                                                  ------------

                          Commission File Number 1-8368
                                                 ------


                      LAIDLAW ENVIRONMENTAL SERVICES, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)



             DELAWARE                                   51-0228924      
--------------------------------------------------------------------------------
 (State or other jurisdiction of                    (I.R.S. Employer
  incorporation or organization)                   Identification No.)


1301 Gervais Street Columbia, South Carolina                  29201   
--------------------------------------------------------------------------------
  (Address of principal executive offices)                  (Zip Code)

                                 (803) 933-4210
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                      Rollins Environmental Services, Inc.
              One Rollins Plaza, Wilmington, Delaware, September 30
--------------------------------------------------------------------------------
  (Former name, address and former fiscal year, if changed since last report)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                            Yes   X     No 
                                -----      -----

         The number of shares of the issuer's common stock outstanding as of
June 27, 1997 was 180,375,811.


                                   Page 1

                          Exhibit Index on Page 29


<PAGE>   2


                      LAIDLAW ENVIRONMENTAL SERVICES, INC.


                                      INDEX


PART 1     FINANCIAL INFORMATION

Item 1     Financial Statements

           Consolidated Balance Sheets as of May 31, 1997 and
           August 31, 1996                                                3

           Consolidated Statements of Operations for the Three and
           Nine Month Periods Ended May 31, 1997 and 1996                 4

           Consolidated Statements of Cash Flows for the Nine Month
           Periods Ended May 31, 1997 and 1996                            5

           Pro Forma Combined Statements of Operations for the Nine
           Month Periods Ended May 31, 1997 and 1996                      6

           Notes to Consolidated Financial Statements                     7

Item 2     Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                     15


PART II    OTHER INFORMATION

Item 1     Legal Proceedings                                             21

Item 2     Changes in Securities                                         23

Item 4     Submission of Matters to a Vote of Security Holders           25

Item 5     Other Information                                             25

Item 6     Exhibits and Reports on Form 8-K                              25


Signatures                                                               28



                                 Page 2

<PAGE>   3



                  LAIDLAW ENVIRONMENTAL SERVICES, INC. (Note 1)
                           CONSOLIDATED BALANCE SHEETS
                                ($ in Thousands)

<TABLE>
<CAPTION>
                                                            May 31,             August 31,
                                                             1997                  1996
                                                            -------             ----------
                                                          (Unaudited)            (Note 2)
<S>                                                        <C>                   <C>
ASSETS
Current assets                                             
     Cash and cash equivalents                             $   15,393            $        0
     Trade and other accounts receivable, net                 198,617               184,626
     Inventories                                                7,461                 7,956
     Income taxes recoverable                                     356                 5,017
     Other current assets                                       7,617                 5,871
                                                           ----------            ----------
          Total current assets                                229,444               203,470
Long-term investments                                          31,049                37,093
Property, plant and equipment, net                          1,237,379             1,112,728
Net assets of discontinued operations (Note 9)                      0                55,827
Goodwill                                                       71,101                81,579
Deferred charges                                               18,811                 1,467
                                                           ----------            ----------
  Total assets                                             $1,587,784            $1,492,164
                                                           ==========            ==========


LIABILITIES
Current liabilities
     Bank indebtedness                                     $        0            $   16,094 
     Accounts payable                                          62,740                72,712
     Accrued liabilities                                      106,801                66,705
     Current portion of long-term debt (Note 4)                10,125                 7,282
                                                           ----------            ----------
          Total current liabilities                           179,666               162,793
Deferred items
  Income taxes                                                 24,231                86,985
  Other                                                       183,763                98,183
Long-term debt (Note 4)                                       525,050                49,426
Subordinated convertible debenture (Note 5)                   350,000                     0
                                                           ----------            ----------
     Total liabilities                                      1,262,710               397,387

Commitments and contingencies (Note 6)

STOCKHOLDERS' EQUITY AND NET INVESTMENT
     BY LAIDLAW (Note 7)
     Common stock                                             180,376               120,000
     Additional paid-in capital                               390,027             1,028,309
     Accumulated deficit                                     (245,329)              (53,532)
                                                           ----------            ----------
          Total stockholders' equity                          325,074             1,094,777
                                                           ----------            ----------
  Total liabilities and stockholders' equity               $1,587,784            $1,492,164
                                                           ==========            ==========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                     Page 3


<PAGE>   4



                      LAIDLAW ENVIRONMENTAL SERVICES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   ($ in Thousands, Except Per Share Amounts)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                           Three Months Ended        Nine Months Ended
                                                                 May 31,                   May 31,
                                                       -----------------------     -----------------------
                                                          1997          1996          1997          1996
                                                       ---------     ---------     ---------     ---------
<S>                                                    <C>           <C>           <C>           <C>      
Revenues                                               $ 155,330     $ 153,139     $ 468,522     $ 483,294

Expenses:
       Operating                                         112,699       110,076       338,343       345,144
       Depreciation and amortization                       9,597        11,704        39,134        36,625
       Selling, general and administrative                18,097        18,142        52,040        57,686
       Restructuring charge (Note 8)                     331,697             0       331,697             0
                                                       ---------     ---------     ---------     ---------
                                                         472,090       139,922       761,214       439,455
                                                       ---------     ---------     ---------     ---------
Operating income (loss)                                 (316,760)       13,217      (292,692)       43,839
Allocated interest expense (Note 2)                        7,749         6,498        24,030        29,146
Interest expense                                           3,544         2,739         5,892         4,349
Other income                                                 217           316         2,129         1,030
                                                       ---------     ---------     ---------     ---------
Income (loss) from continuing operations
       before income tax                                (327,836)        4,296      (320,485)       11,374
Income tax expense (benefit)                            (130,491)          451      (128,934)        1,898
                                                       ---------     ---------     ---------     ---------
Income (loss) from continuing operations
       before minority interest                         (197,345)        3,845      (191,551)        9,476
Minority interest                                            190          (859)         (266)       (2,335)
                                                       ---------     ---------     ---------     ---------
Income (loss) from continuing operations                (197,155)        2,986      (191,817)        7,141
Income from discontinued
       operations (Note 9)                                   234           710            20           912
                                                       ---------     ---------     ---------     ---------
       Net income (loss)                               $(196,921)    $   3,696     $(191,797)    $   8,053
                                                       =========     =========     =========     =========

Net income (loss) per share                            $  (1.501)    $   0.031     $  (1.550)    $   0.067

Weighted average common and common
       equivalent shares outstanding (000's)             131,156       120,000       123,760       120,000
</TABLE>

   The accompanying notes are an integral part of these financial statements.



                                     Page 4


<PAGE>   5



                   LAIDLAW ENVIRONMENTAL SERVICES, INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                            ($ in Thousands)
                               (Unaudited)

<TABLE>
<CAPTION>
                                                                              Nine Months Ended
                                                                                    May 31,
                                                                          -------------------------
                                                                             1997            1996
                                                                          ---------        --------
<S>                                                                       <C>              <C>     
Cash flow from operating activities:
Net Income (loss)                                                         $(191,797)       $  8,053
       Adjustments to reconcile net income (loss) to net cash
              provided by (used in) continuing operations:
       Income from discontinued operations                                      (20)           (912)
       Restructuring charge, net of applicable income taxes (Note 8)        200,000               0
       Depreciation and amortization                                         39,134          36,625
       Deferred income taxes                                                  2,763           4,319
       Change in accounts receivable                                          4,146          11,064
       Change in accounts payable and accrued liabilities                   (54,380)        (28,699)
       Change in other, net                                                   9,141         (31,327)
                                                                          ---------        --------
Net cash provided by (used in) continuing operations                          8,987            (877)
Net cash provided by (used in) discontinued operations                         (357)            857
                                                                          ---------        --------
              Net cash provided by (used in) operating activities             8,630             (20)
                                                                          ---------        --------

Cash flow from investing activities:
       Cash acquired (expended) on acquisition of business                   15,451          (8,000)
       Purchase of property and equipment                                   (29,719)        (65,959)
       Increase in long-term investments                                     (1,977)         (2,511)
       Proceeds from sales of equipment                                       3,601           2,660
                                                                          ---------        --------
Net cash used in continuing operations                                      (12,644)        (73,810)
Net cash used in discontinued operations                                     (1,887)         (2,925)
                                                                          ---------        --------
              Net cash used in investing activities                         (14,531)        (76,735)

Cash flows from financing activities:
       Issuance of debt under Bank Credit Facility (Note 4)                 375,000               0
       Bank financing fees and expenses                                     (17,813)              0
       Repayment of long-term debt                                           (9,162)         (4,832)
       Payment to Laidlaw Inc. (Note 1)                                    (349,116)              0
       Advances from Laidlaw Inc. (Note 2)                                   22,385          81,587
                                                                          ---------        --------
              Net cash provided by financing activities                      21,294          76,755
                                                                          ---------        --------
Net increase in cash and cash equivalents                                    15,393               0
Cash and cash equivalents at:
       Beginning of period                                                        0               0
                                                                          ---------        --------
       End of period                                                      $  15,393        $      0
                                                                          =========        ========

NONCASH INVESTING AND FINANCING ACTIVITIES:
       Acquisition of Rollins (Note 1)
              Fair value of assets acquired                               $ 475,168        $      0
              Fair value of liabilities assumed                             309,134               0
                                                                          ---------        --------
              Fair value of stock issued (Note 7)                         $ 166,034        $      0
                                                                          =========        ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.



                                     Page 5


<PAGE>   6

                      LAIDLAW ENVIRONMENTAL SERVICES, INC.
             PRO FORMA COMBINED STATEMENTS OF OPERATIONS (NOTE 10)
                        For the Nine Months Ended May 31
                   ($ in Thousands, Except Per Share Amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                          Pro Forma       
                                                                                         Adjustments      
                                                   Accounting                      -----------------------   Pro Forma
                                                    Acquirer       Rollins             Dr           Cr       Combined
                                                  ------------   ------------      ---------     ---------   ---------
                                                                                   1997
                                                   -------------------------------------------------------------------
<S>                                                <C>            <C>              <C>            <C>        <C>
Revenues                                           $ 468,522      $150,985         $ 4,099  (a)   $     0    $ 615,408
Expenses:
       Operating                                     338,343       149,791                  (a)     4,099      484,035
       Depreciation and amortization                  39,134        22,606                  (b)     6,345       55,395
       Selling and administrative                     52,040        22,371                                      74,411
       Restructuring charge (Note 8)                 331,697             0                                     331,697
                                                    ---------      --------         -------        -------    ---------
                                                     761,214       194,768           4,099         10,444      945,538
                                                    ---------      --------         -------        -------    ---------
Operating loss                                      (292,692)      (43,783)          4,099         10,444     (330,130)
Allocated interest expense (Note 2)                   24,030             0                                      24,030
Interest expense                                       5,892         5,856           9,625  (c)                 21,373
Other income                                           2,129                                                     2,129
                                                    ---------      --------         -------        -------    ---------
Loss from continuing operations
       before income tax                            (320,485)      (49,639)         13,724         10,444     (373,404)
Income tax benefits                                 (128,934)      (17,460)          3,251  (d)               (143,143)
                                                    ---------      --------         -------        -------    ---------
Loss from continuing operations
       before minority interest                     (191,551)      (32,179)         16,975         10,444     (230,261)
Minority interest                                       (266)            0                                        (266)
                                                    ---------      --------         -------        -------    ---------
Loss from continuing operations                     (191,817)      (32,179)         16,975         10,444     (230,527)
Income from discontinued
       operations (Note 9)                                20             0                                          20
                                                    ---------      --------         -------        -------    ---------
Net loss                                            (191,797)      (32,179)         16,975         10,444     (230,507)
                                                    =========      ========         =======        =======    =========
Net loss per share                                                                                           $   (1.26)
Weighted average common and
       common equivalent shares
       outstanding (000's)                                                                                     182,847


<CAPTION>
                                                                                   1996
                                                    -------------------------------------------------------------------
<S>                                                <C>            <C>              <C>            <C>        <C>
Revenues                                           $ 483,294      $181,749         $ 4,258  (a)   $     0    $ 660,785
Expenses:
       Operating                                     345,144       159,248                  (a)     4,258      500,134
       Depreciation and amortization                  36,625        25,067                  (b)     6,345       55,347
       Selling and administrative                     57,686        25,519                                      83,205
                                                    ---------      --------         -------        -------    ---------
                                                     439,455       209,834           4,258         10,603      638,686
                                                    ---------      --------         -------        -------    ---------
Operating income (loss)                               43,839       (28,085)          4,258         10,603       22,099
Allocated interest expense (Note 2)                   29,146             0                                      29,146
Interest expense                                       4,349         6,836           6,509  (c)                 17,694
Other income                                           1,030                                                     1,030
                                                    ---------      --------         -------        -------    ---------
Income (loss) from continuing operations
       before income tax                              11,374       (34,921)         10,767         10,603      (23,711)
Income tax expense (benefits)                          1,898       (12,480)          3,786  (d)                 (6,796)
                                                    ---------      --------         -------        -------    ---------
Income (loss) from continuing operations
       before minority interest                        9,476       (22,441)         14,553         10,603      (16,915)
Minority interest                                     (2,335)            0                                      (2,335)
                                                    ---------      --------         -------        -------    ---------
Income (loss) from continuing operations               7,141       (22,441)         14,553         10,603      (19,250)
Income from discontinued
       operations (Note 9)                               912             0                                         912
                                                    ---------      --------         -------        -------    ---------
       Net income (loss)                           $   8,053      $(22,441)        $14,553        $10,603    $ (18,338)
                                                    =========      ========         =======        =======    =========
Net income (loss) per share                                                                                  $  (0.100)
Weighted average common and
       common equivalent shares
       outstanding (000's)                                                                                     182,847
</TABLE>


                                     Page 6


<PAGE>   7


                      LAIDLAW ENVIRONMENTAL SERVICES, INC.

                   Notes to Consolidated Financial Statements
                     For the Nine Months Ended May 31, 1997

NOTE 1 - BUSINESS COMBINATION

     On May 15, 1997, pursuant to a February 6, 1997, stock purchase agreement
(the "Stock Purchase Agreement") between Rollins Environmental Services,
Inc.("Rollins") and Laidlaw Inc. ("Laidlaw"), Rollins acquired the hazardous and
industrial waste operations of Laidlaw ("Old LESI")(the "Transaction"). The
business combination was accounted for as a reverse acquisition using the
purchase method of accounting. Rollins issued 120 million common shares and a
$350 million 5% subordinated convertible debenture, and paid $349.1 million in
cash ($400 million, less debt of $50.9 million assumed), to Laidlaw to
consummate the Transaction. Coincident with the closing of the Transaction, the
continuing legal entity changed its name from Rollins Environmental Services,
Inc. to Laidlaw Environmental Services, Inc. (the "Registrant" or "Company"). As
a result of the Transaction, Laidlaw owns 67% of the issued common shares of the
Company. As a result of the business combination being accounted for as a
reverse acquisition, or the acquisition of Rollins by Old LESI (the "Accounting
Acquirer"), the Company accordingly adopted the Accounting Acquirer's fiscal
year-end of August 31.

     The reverse acquisition purchase price is the fair market value of the
Rollins common shares outstanding prior to completion of the Transaction. As the
only remaining conditions to close the Transaction after signing the Stock
Purchase Agreement involved stockholder and regulatory approvals, the date of
signing is the appropriate determination date for the market price of the
Rollins common shares. The average closing market price per share on the NYSE -
Composite Transactions for the five trading days before and after February 6,
1997, was $2.75. Applying this price per share to the 60,375,811 common shares
outstanding on February 6, 1997, resulted in a deemed purchase price of
approximately $166.0 million.


NOTE 2 - HISTORICAL FINANCIAL INFORMATION

     As a result of the Transaction described in Note 1, the historical
financial information included in these consolidated financial statements is
that of the Accounting Acquirer, the hazardous and industrial waste operations
of Laidlaw. The results of operations of Rollins have been included from the
date of acquisition, May 15, 1997.

         Prior to May 15, 1997, Laidlaw provided the majority of the financing
for the Company's operating and investing activities through a combination of
intercompany equity and debt investments. The total investment in the Company by
Laidlaw is included in stockholders' equity prior to May 15, 1997. Interest
expense associated with this intercompany financing has been allocated to the
Company based on its share of Laidlaw's consolidated net assets.


                                     Page 7


<PAGE>   8

NOTE 3 - BASIS OF PRESENTATION

     The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X and, therefore, do not include all of the disclosures required by
generally accepted accounting principles for annual financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the interim period results have been included; all such
adjustments are of a normal recurring nature. Operating results for the three
and nine month periods ended May 31, 1997 are not necessarily indicative of the
results that may be expected for the full fiscal year ending August 31, 1997.
These statements should be read in conjunction with the combined financial
statements, including the accounting policies, and notes thereto included in the
Registrant's Definitive Proxy on Form DEF 14A, filed with the Securities and
Exchange Commission on May 1, 1997. Certain prior year amounts in the
accompanying consolidated financial statements have been reclassified to conform
to current year classifications. These reclassifications had no effect on net
earnings or stockholders' equity.


NOTE 4 - LONG-TERM DEBT


     The Company financed the cash consideration portion of the Transaction and
certain fees related thereto with proceeds of a bank credit facility (the "Bank
Credit Facility") arranged with Toronto-Dominion Bank (the "Agent"), pursuant to
a credit agreement (the "Credit Agreement") between the Company and a syndicate
of banks and other financial institutions (collectively, the "Lenders"). The
Bank Credit Facility consists of five parts: (i) a $275 million six-year senior
secured revolving credit facility with a $200 million letter of credit sublimit
("Revolving Credit Facility"), (ii) a $165 million six-year senior secured
amortizing term loan, (iii) a $60 million six-year senior secured amortizing
Canadian term loan, (iv) a $75 million minimally amortizing seven-year senior
secured term loan and (v) a $75 million minimally amortizing eight-year senior
secured term loan. Clauses (ii), (iii), (iv) and (v) are collectively referred
to herein as the "Term Loans".

     The Term Loans were drawn upon in full May 15, 1997, the closing date of
the Transaction (the "Closing Date"). The Revolving Credit Facility has $200
million available for letters of credit and $100 million available for loans,
subject to the aggregate limit of $275 million.

     Interest per annum on the Bank Credit Facility varies depending on the
particular facility and whether the Company chooses to borrow under Eurodollar
or non-Eurodollar loans.

     The Bank Credit Facility also contains negative, affirmative and financial
covenants customarily found in credit agreements for financings similar to the
financing provided under the Bank Credit Facility, including covenants
(i)requiring compliance with laws and performance of obligations, (ii)
restricting transactions with affiliates, (iii) requiring satisfactory levels of
cash interest coverage and fixed charge coverage and ratios of 

                                     Page 8

<PAGE>   9


long-term debt to operating cash flow and total contingent obligations to
operating cash flow, (iv) limiting annual capital expenditures, (v) requiring
periodic reporting of financing information and (vi) restricting debt,
guarantees, liens, mergers and consolidations, sales of assets, changes in the
nature of the business and changes in charter documents and other material
contracts.

     The Company's long-term debt as of May 31, 1997 and August 31, 1996, is as
follows:

<TABLE>
<CAPTION>
                                                       May 31,      August 31,
                                                         1997          1996
                                                       --------       -------
                                                          ($ in Thousands)
<S>                                                    <C>            <C>    
Bank Credit Facility:
     Term loans, with interest rates
        from 6.13% to 9.50%                            $375,360       $  --
     Revolving Credit Facility                             --            --
Notes due at various dates from 1997 to 2020
    with interest rates from 5% to 10%                  159,099       $55,474
Capital leases payable, due in 2000
    with interest rate of 8.5%                              716         1,234
                                                       --------       -------
                                                       $535,175       $56,708
Less: current portion                                    10,125         7,282
                                                       --------       -------
      Total long-term debt                             $525,050       $49,426
                                                       ========       =======
</TABLE>

     The aggregate amount of minimum payments required on long-term debt in each
of the years indicated is as follows:

<TABLE>
<CAPTION>
                                                       ($ in Thousands)
<S>                                                         <C>     
     Year ending May 31, 1998                               $ 10,125
                         1999                                 23,877
                         2000                                 34,873
                         2001                                 51,011
                         2002                                 62,750
                         Thereafter                          352,539
                                                            --------
                                                            $535,175
                                                            ========
</TABLE>

NOTE 5 - SUBORDINATED CONVERTIBLE DEBENTURE

     Pursuant to the Transaction described in Note 1, the Company issued a $350
million 5% Subordinated Convertible, Pay-In-Kind Debenture("PIK") due May 15,
2009 to Laidlaw.

     Interest on the PIK is payable semiannually, on November 15 and May 15
until maturity. Beginning on May 15, 2002, and continuing until maturity, the
PIK is convertible, at the option of the holder into common shares of the
Company based on a conversion price per share of $3.75 (the "Conversion Price").
Beginning on May 15, 2002, and continuing until maturity, the Company has the
option to redeem the PIK in cash if the common shares are trading at a market
price greater than or equal to 120% of the Conversion Price. The PIK ranks
junior in right of payment (principal and interest) to all other long-term
indebtedness, including the Bank Credit Facility.



                                     Page 9


<PAGE>   10

     Interest payments due during the first two years after issuance of the PIK
are required to be satisfied by the issuance of the Company's common shares,
based on the market price of the common shares at the time the interest
payments are due. At the Company's option, any other interest or principal
payments (other than optional early redemption) may be satisfied by issuing
common shares, based on the market price at the time such payments are due.


NOTE 6 - COMMITMENTS AND CONTINGENCIES

     The business of the Company's hazardous and industrial waste services is
continuously regulated by federal, state, provincial and local provisions that
have been enacted or adopted, regulating the discharge of materials into the
environment or primarily for the purpose of protecting the environment. The
nature of the Company's businesses results in its frequently becoming a party to
judicial or administrative proceedings involving all levels of governmental
authorities and other interested parties. The issues that are involved generally
relate to applications for permits and licenses by the Company and their
conformity with legal requirements and alleged technical violations of existing
permits and licenses. The Company does not believe that these matters will be
material to its operations or financial condition.

         In the United States, The Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") imposes financial liability on
persons who are responsible for the release of hazardous substances into the
environment. Present and past owners and operators of sites, which release
hazardous substances, as well as generators and transporters of the waste
material, are jointly and severally liable for remediation costs and
environmental damage. At May 31, 1997, the Company had been notified that it was
potentially a responsible party in connection with 21 locations in its hazardous
waste management and other businesses. The Company continually reviews its
status with respect to each location, taking into account its alleged connection
to the location and the extent of its alleged contribution to the volume of
waste at the location, the available evidence connecting the Company to that
location and the numbers and financial soundness of other potentially
responsible parties at the location. Based upon presently available information,
the Company does not believe that potential liabilities arising from its
involvement with these locations will be material to the Company's operations or
financial condition.

         The consolidated federal income tax returns of Laidlaw Transportation,
Inc. and its U.S. subsidiaries (which until May 15, 1997, included certain of
the subsidiaries of the Company) for the fiscal years ended August 31, 1986,
1987 and 1988, have been under audit by the Internal Revenue Service. In March
1994, the subsidiaries received a statutory notice of deficiency proposing that
the subsidiaries pay additional taxes relating to disallowed deductions in those
income tax returns. The principal issue involved relates to the timing and the
deductibility for tax purposes of interest attributable to loans owing to
related foreign persons. The subsidiaries have petitioned the United States Tax
Court (captioned as Laidlaw Transportation, Inc. & Subsidiaries et al v.
Commissioner of Internal

                                     Page 10

<PAGE>   11


Revenue, Docket Nos. 9361-94 and 9362-94) for a redetermination of claimed
deficiencies of approximately $49.6 million (plus interest of approximately
$76.5 million as of May 31, 1997).

         In May 1997, the subsidiaries received revenue agents' reports
proposing that the subsidiaries pay additional taxes of approximately $160.7
million (plus interest of approximately $127.4 million as of May 31, 1997)
relating to disallowed deductions in federal income tax returns for
the fiscal years ended August 31, 1989, 1990 and 1991, based on the same
issues. The subsidiaries intend to vigorously contest these claimed
deficiencies. The Company anticipates that the Internal Revenue Service will
propose adjustments for the same issue in subsequent taxation years.

         Pursuant to the Stock Purchase Agreement, Laidlaw and Laidlaw
Transportation, Inc. agreed to be responsible for any tax liabilities, including
the costs to defend the subsidiaries, resulting from these matters. Although the
final outcome cannot be predicted with certainty, the Company, based upon a
thorough review of the facts and advice of counsel, believes that the ultimate
disposition of these issues will not have a materially adverse effect upon the
Company's consolidated financial position or results of operations.


NOTE 7 - STOCKHOLDERS' EQUITY AND NET INVESTMENT BY LAIDLAW

         Prior to May 15, 1997, the Company's total stockholders' equity was
composed of the intercompany investment by Laidlaw. The 120 million shares of
common stock received by Laidlaw to consummate the Transaction described in Note
1, are deemed, for accounting purposes, to have been issued and outstanding in
all prior periods presented in these consolidated financial statements.

         Changes in the components of stockholders' equity since September 1,
1996, are deemed, for accounting purposes, to have been as follows:

<TABLE>
<CAPTION>
                                                           Paid-in Capital                                  Total
                                             Common         in Excess of            Accumulated         Stockholders'
                                              Stock              Par                   Deficit             Equity
                                             ------        ---------------          -----------         -------------
                                                                      ($ in Thousands)
<S>                                         <C>               <C>                    <C>                 <C>       
Balance at September 1, 1996                $120,000          $1,028,309             $  (53,532)         $1,094,777
Net loss for period                                                                    (191,797)           (191,797)
Issuance of PIK to Laidlaw                                      (350,000)                                  (350,000)
Cash paid to Laidlaw                                            (349,116)                                  (349,116)
Issuance of additional shares                 60,376             105,658                                    166,034
Transfer of JTM Industries, Inc.
  to Laidlaw (Note 9)                                            (57,309)                                   (57,309)
Net additional Investment by Laidlaw                              12,485                                     12,485
                                            --------            --------             ----------          ----------
Balance at May 31, 1997                     $180,376            $390,027             $ (245,329)         $  325,074
                                            ========            ========             ==========          ==========
</TABLE>

                                     Page 11



<PAGE>   12

Authorized and issued capital stock:

     Since the former Rollins is the continuing legal entity, its authorized and
issued capital stock constitutes that of the Company.

     The Company is authorized to issue 350 million shares of its $1 par value
common stock and one million shares of its $1 par value preferred stock. The
terms and conditions of each issue of preferred stock are determined by the
Board of Directors.

     At May 31, 1997 the Company had issued and outstanding 180,375,811 shares
of its $1 par value common stock. For accounting purposes, 120 million of these
shares were deemed outstanding in all prior periods and 60,375,811 were deemed
to have been issued on May 15, 1997, at $2.75 per share, as consideration
($166,034,000) for the acquisition of the former Rollins by the Company.

     No preferred stock has been issued.

     Each share of common stock outstanding includes one common stock purchase
right (a "Right") which is non-detachable and non-exercisable until certain
defined events occur, including certain tender offers or the acquisition by a
person or group of affiliated or associated persons of 15% of the Company's
common stock. Upon the occurrence of certain defined events, the Right entitles
the holder to purchase additional stock of the Company or stock of an acquiring
company at a 50% discount. The Right expires on June 30, 1999, unless earlier
redeemed by the Company at a price of $.01 per Right.

Stock option plans:

     All outstanding employee stock options granted by the former Rollins, were
fully vested on May 15, 1997, in accordance with the terms of the Stock Purchase
Agreement referred to in Note 1. At May 31, 1997, 1,153,655 options were
outstanding under the former Rollins employee stock option plans at exercise
prices ranging from $2.25 to $12.25.


NOTE 8 - RESTRUCTURING CHARGE

     The Company's integration related to the Transaction described in Note 1,
calls for the closure and consolidation of certain operations formerly owned by
Rollins or by Old LESI. Such actions are expected to produce substantial cost
savings.

      With respect to the Old LESI operations, the Company recorded a one-time
charge of $331.7 million ($200 million after tax) against earnings in the
quarter ended May 31, 1997, to reflect the closing of certain of the operating
facilities that have become redundant, and an impairment in the carrying value
of certain operating facilities due to lower expected future cash flows, as a
result of the closing of the Transaction.




                                     Page 12


<PAGE>   13

NOTE 9 - DISCONTINUED OPERATIONS

     On May 1, 1997, in contemplation of the Transaction described in Note 1,
the Company transferred, in a non-cash transaction, JTM Industries, Inc., its
coal combustion by-products management operations to Laidlaw. These operations
were retained by Laidlaw and are not part of the Company's ongoing operations.

     The Company has classified these operations as discontinued. Historically
those operations have been included in Laidlaw's Hazardous Waste Services
segment for financial reporting purposes.

     Revenue for the discontinued operations for the nine month periods ended
May 31, 1997 and 1996, was $41.5 million and $45.9 million, respectively.


NOTE 10 - PRO FORMA COMBINED FINANCIAL STATEMENTS

     The accompanying unaudited pro forma combined statements of operations for
the nine months ended May 31, 1997 and 1996, assumes that the Transaction
discussed in Note 1 herein, took place as of the beginning of each fiscal year,
and combines therefrom the Accounting Acquirer's statement of operations through
May 31, 1997 and 1996, with that of Rollins' through May 15, 1997 and May 31,
1996, respectively.

     The accompanying pro forma combined financial statements should be read in
conjunction with the historical financial statements and related notes thereto
included in the Registrant's Definitive Proxy on Form DEF 14A, which is
incorporated by reference as Exhibit 99 (a) to this Quarterly Report.

     The following adjustments to the unaudited pro forma combined statements of
operations have been made to reflect the acquisition of Rollins:

(a)  To eliminate transactions between combined companies.

(b)  To adjust depreciation to reflect the fair value adjustment of property and
     equipment and to reflect the effects of the Transaction upon goodwill
     amortization.

(c)  To adjust expense to reflect financing costs associated with the
     Transaction.

(d)  To adjust income taxes (benefits) to record the pro forma income taxes
     (benefits) as computed under Statement of Financial Accounting Standard No.
     109 on pro forma pre-tax income (loss).


NOTE 11 - SUBSEQUENT EVENTS

     Effective July 9, 1997, the directors of the Company set aside six million
shares of its $1 par value common stock for issuance under a 1997

                                     Page 13


<PAGE>   14

employee stock option plan. All options under this plan are for a term of ten
years from the date of grant and become exercisable with respect to 20% of the
total number of shares subject to the option, one year after the date, and with
respect to an additional 20% at the end of each twelve month period thereafter
on a cumulative basis during the succeeding four years. The plan provides for
the granting of stock options to certain senior employees and officers of the
Company at the discretion of the Board of Directors. The plan will be submitted
to the Company's stockholders for approval at the next annual meeting. All
options are subject to certain conditions of service.

     Effective July 9, 1997, the directors of the Company set aside 540,000
shares of its $1 par value common stock for issuance under the directors' stock
option plan. All options under this plan are for a term of ten years from the
date of the grant and become exercisable with respect to 20% of the total number
of shares subject to the option on each of the five successive anniversaries of
the date of the grant. All options are subject to stockholder approval of the
plan and certain conditions of service.

     Subject to stockholder approval of the plans, the Board of Directors
granted 1,097,500 shares to employees, and 90,000 shares to directors at an
exercise price of $3.188.

NOTE 12 - RECENT ACCOUNTING DEVELOPMENTS

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128 "Earnings Per Share" ("FAS 128"). This
standard is effective for financial statements issued for periods ending after
December 15, 1997, and will be implemented in the Company's Annual Report on
Form 10-K for the year ended August 31, 1998. The Company does not expect that
FAS 128 will have a material impact on the earnings per share computation.



                                     Page 14


<PAGE>   15

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.


Results of Operations: Three Months Ended May 31, 1997 compared with
                       Three Months Ended May 31, 1996

Operating results, before the restructuring charge, are as follows:

<TABLE>
<CAPTION>
                                                                  Three Months Ended May 31,
                                                       ------------------------------------------------
                                                         1997      1996         1997          1996
                                                       -------   -------       ------        ------
                                                          ($ in Millions)
<S>                                                    <C>        <C>           <C>          <C>   
Revenue                                                $155.3     $153.1        100.0%       100.0%
Operating expense                                       112.7      110.1         72.5%        71.7%
Depreciation & amortization                               9.6       11.7          6.2%         7.6%
Selling, general & administrative                        18.1       18.1         11.7%        12.3%
                                                        -----      -----       ------        -----
Operating results                                      $ 14.9     $ 13.2          9.6%         8.4%
                                                       ======     ======       ======        =====
</TABLE>


Revenues

Components of Revenue:

<TABLE>
<CAPTION>
                                                        Three Months Ended May 31,
                                        --------------------------------------------------------
                                                    1997                            1996
                                                    ----                            ----
                                                             ($ in Millions)
<S>                                     <C>                <C>             <C>              <C> 
Service Center                          $ 73.6              40%            $ 73.3            41%
Landfill                                  45.1              25%              44.4            25%
Incinerator                               14.9               8%               7.7             4%
Transportation                            23.2              13%              21.1            12%
Other                                     26.5              14%              32.5            18%
                                        ------             ----            ------           ----
                                        $183.3             100%            $179.0           100%
                                        ------             ====            ------           ====
Less: Intercompany eliminations           28.0                               25.9
                                        ------                             ------
     Total revenue                      $155.3                             $153.1
                                        ======                             ======
</TABLE>

         Revenues increased $2.2 million, or 1.4%, during the three months ended
May 31, 1997, compared to the three months ended May 31, 1996, supported
primarily by the increase in the incinerator line of business. Revenue for
incinerators increased 94.0% to $14.9 million from $7.7 million during the three
months ended May 31, 1997 and 1996, respectively, reflecting the acquisition of
the Rollins facilities. Transportation revenue of $23.2 million was $2.1
million, or 9.7%, better than the prior year period. Other revenue components
declined $6.1 million, or 18.7%. Processing of intercompany streams during the
current quarter increased $2.1 million, or 8.2%, over the prior year quarter.



                                     Page 15


<PAGE>   16

     Management's estimates of the components of changes in the Company's
consolidated revenue are as follows:


<TABLE>
<CAPTION>
                                                          Percentage Increase (Decrease)
                                                            Three Months Ended May 31,
                                                            --------------------------
                                                         1997 over 1996    1996 over 1995
                                                         --------------    --------------

<S>                                                         <C>               <C>  
Expansion of customer base by acquisition                    7.3 %             1.7 %
Other, primarily through volume and price changes           (5.7)%            (7.5)%
Foreign exchange rate changes                                (.2)%              .1 %
                                                            ----              ----
     Total                                                   1.4 %            (5.7)%
                                                            ====              ====
</TABLE>

     Growth in revenue in the quarter ended May 31, 1997, was primarily
attributable to the acquisition of Rollins as described in Note 1 of the Notes
to Consolidated Financial Statements in Item 1 (approximately 6.5%). Revenue
from existing operations was lower, primarily due to the event projects having
been completed by the Company's industrial landfill in Utah and by the
Texas/Louisiana Gulf Coast remedial locations in the prior year.

Operating Expenses

         Operating expenses increased $2.6 million, or 2.4%, during the three
months ended May 31, 1997, compared to the three months ended May 31, 1996. The
increase was primarily attributable to additional business obtained as part of
the acquisition of Rollins. As a percentage of revenue, operating expense
increased to 72.5% from 71.7% in the comparable prior year period, primarily due
to downward pricing pressure on revenue experienced since the same period last
year.

Depreciation and Amortization Expense

         Depreciation and amortization expense decreased $2.1 million, or 17.9%,
during the quarter ended May 31, 1997, compared to the prior year quarter. The
decrease was most directly associated with reduced landfill cell space
consumption rates at the Sarnia, Ontario facility where the approval of
permitted site expansion allowed for a greater overall site life. As a
percentage of revenue, depreciation and amortization expense decreased to 6.2%
from 7.6% in the prior year also due to the decline in landfill cell
amortization rates.


Selling, General and Administrative Expenses

         Selling, general and administrative expenses at $18.1 million, remained
level during the three months ended May 31, 1997, versus the prior year quarter.
As a percentage of revenue, selling, general and administrative expenses
decreased to 11.7% from 12.3% in the prior year quarter due to cost reduction
measures.





                                     Page 16


<PAGE>   17

Restructuring Charge

     The Company's integration related to the Transaction described in Note 1 of
the Notes to Consolidated Financial Statements in Item I, calls for the closure
and consolidation of certain operations formerly owned by Rollins or by Old
LESI. Management expects such actions to produce approximately $72 million of
operating cash savings.

     With respect to the Old LESI operations, the Company recorded a one-time
charge of $331.7 million ($200 million after tax) against earnings in the
quarter ended May 31, 1997, to reflect the closing of certain of the operating
facilities that have become redundant, and an impairment in the carrying value
of certain operating facilities due to lower expected future cash flows, as a
result of the closing of the Transaction.


Interest Expense

     Interest expense increased $2.1 million, or 22.3% during the three months
ended May 31, 1997, over the prior year period primarily related to the
Transaction. Prior to May 15, 1997, interest expense was allocated to Old LESI
from the parent corporation, Laidlaw. Effective May 15, 1997, interest expense
includes financing costs associated with the Bank Credit Facility, other
long-term debt, and the PIK, as described in Note 4 and Note 5, respectively, of
the Notes to Consolidated Financial Statements in Item 1.

Income Tax Expense (Benefit)

     Prior to May 15, 1997, income tax expense was allocated to Old LESI from
the parent corporation. Effective May 15, 1997, the Company is subject to full
federal and state income tax effects.

Earnings Per Share

     Net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares deemed outstanding for
each period presented. Shares of stock issuable pursuant to stock options and
upon conversion of the Subordinated Convertible Pay-In-Kind Debenture, or common
stock equivalents, have not been considered as their effect is immaterial or
antidilutive. Excluding the after-tax restructuring charge of approximately $200
million, or $1.52 per share, earnings per share are $0.024 and $0.031 for the
three months ended May 31, 1997 and 1996, respectively.



                                     Page 17


<PAGE>   18

Results of Operations: Nine Months Ended May 31, 1997 compared with
                       Nine Months Ended May 31, 1996

Operating results, before the restructuring charge, are as follows:

<TABLE>
<CAPTION>
                                                                      Nine Months Ended May 31,
                                                     ------------------------------------------------------
                                                        1997                1996         1997          1996
                                                        ----                ----         ----          ----
                                                          ($ in Millions)
<S>                                                  <C>                 <C>           <C>           <C>   
Revenue                                              $ 468.5             $ 483.3       100.0%        100.0%
Operating expense                                      338.4               345.2        72.2%         71.2%
Depreciation & amortization                             39.1                36.6         8.4%          7.6%
Selling, general & administrative                       52.0                57.7        11.1%         12.4%
                                                     -------             -------       ------        ------
Operating income                                     $  39.0             $  43.8         8.3%          8.8%
                                                     =======             =======       ======        ======
</TABLE>

Revenues

Components of Revenue:

<TABLE>
<CAPTION>
                                                                    Nine Months Ended May 31,
                                                 ----------------------------------------------------------
                                                             1997                               1996
                                                             ----                               ----
                                                                      ($ in Millions)
<S>                                              <C>                  <C>            <C>                <C>
Service Center                                   $213.6               39%            $217.0             39%
Landfill                                          135.1               24%             145.9             26%
Incinerator                                        42.0                8%              23.0              4%
Transportation                                     69.8               13%              67.9             12%
Other                                              91.4               16%             105.1             19%
                                                 ------              ----            ------            ----
                                                 $551.9              100%            $558.9            100%
                                                                     ====                              ====
Less: Intercompany eliminations                    83.4                                75.6
                                                 ------                              ------
     Total revenue                               $468.5                              $483.3
                                                 ======                              ======
</TABLE>

         Revenues decreased by $14.8 million, or 3.1% during the nine months
ended May 31, 1997, compared to the nine months ended May 31, 1996. Landfill
revenue decreased by $10.8 million, or 7.4%, and other revenue was $13.7 million
lower during the nine months ended May 31, 1997, versus the comparable prior
year period. These decreases were offset by positive variances in incinerator
revenue, up $19.0 million, or 82.6%, and transportation revenue, up $1.9
million, or 2.8%, in the respective periods. Revenue from processing
intercompany streams increased $7.7 million, or 10.2%, over the prior nine month
fiscal period.

     Management's estimates of the components of changes in the Company's
consolidated revenue are as follows:

<TABLE>
<CAPTION>
                                                                            Percentage Increase (Decrease)
                                                                               Nine Months Ended May 31,
                                                                      ------------------------------------------
                                                                      1997 over 1996              1996 over 1995
                                                                      --------------              --------------
<S>                                                                       <C>                          <C>
Expansion of customer base by acquisition                                  3.2 %                       23.0 %
Other, primarily through volume and price changes                         (6.2)%                       (9.5)%
Foreign exchange rate changes                                             (0.1)%                        0.2 %
                                                                          ------                       ------
     Total                                                                (3.1)%                       13.7 %
                                                                          ======                       ======
</TABLE>

     The comparative decline in revenue for the nine months ended May 31, 1997,
was primarily due to non-recurring event projects performed in the prior year
period by the Company's industrial landfill in Utah, the most significant of
which included management and disposal activities related to

                                     Page 18


<PAGE>   19

dredging in the New York/New Jersey harbor area. Revenue contributions from
acquired operations including the acquisition of Rollins and from Greenfield
Services Corporation as of April 1, 1996, provided approximately $15.7 million,
or 3.2%, in additional revenue from the comparable prior year.


Operating Expenses

         Operating expenses for the nine months ended May 31, 1997, decreased
$6.8, or 2.0%, from the nine months ended May 31, 1996. The decrease was
primarily attributable to the aforementioned prior year non-recurring activity.
This decrease was somewhat offset by costs incurred at the Clive, Utah
incineration facility as of September 1, 1996. Operating expense, as a
percentage of revenue, increased to 72.2% from 71.2% in the prior year, also due
to relatively lower revenue and the inclusion of expense at the Clive facility.


Depreciation and Amortization Expense

         Depreciation and amortization expense increased $2.5 million, or 6.8%,
during the nine months ended May 31, 1997, compared to the nine months ended May
31, 1996. The increase was associated with increased landfill cell consumption
and related amortization during the period as well as the inclusion of the
Clive, Utah incineration facility's depreciation expense as of September 1,
1996. As a percentage of revenue, depreciation and amortization expense
increased to 8.4% from 7.6% during the prior year period due in part to the
higher landfill disposal as a proportion of total revenue and the inclusion of
the Clive facility.


Selling, General and Administrative Expenses

         Selling, general and administrative expenses decreased $5.6 million, or
9.8%, during the nine months ended May 31, 1997 versus the comparable prior year
period. The decrease was attributable to a number of cost reduction initiatives
implemented and completed during the current period. As a percentage of revenue,
selling, general and administrative expenses decreased to 11.1% from 12.4% in
the prior year, due to the cost reduction measures.


Restructuring Charge

     A one-time restructuring charge of $331.7 million ($200 million after tax)
impacted the earnings in the nine months ended May 31, 1997. The charge
reflected the closing of certain of the operating facilities that have become
redundant, and an impairment in the carrying value of certain operating
facilities due to lower expected future cash flows as a result of the
Transaction.


Interest Expense

     Interest expense increased by $3.6 million, or 10.7% from the prior nine
month period primarily as a result of recapitalization related to the Rollins
acquisition.


                                     Page 19


<PAGE>   20

Income Tax Expense (Benefit)

     Prior to May 15, 1997, income tax expense was allocated to Old LESI from
the parent corporation. Effective May 15, 1997, the Company is subject to full
federal and state income tax effects.

FACTORS THAT MAY AFFECT FUTURE RESULTS

     This report contains various forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, including financial,
operating and other projections. These statements are based on current plans and
expectations of the Company and involve risks and uncertainties that could cause
actual future activities and results of operations to be materially different
from those set forth in the forward-looking statements.

     Important factors that could cause actual results to differ include, among
others, risks associated with acquisitions, fluctuations in operating results
because of acquisitions and variations in stock prices, changes in applicable
government regulations, competition, and risks associated with the operations
and growth of the newly acquired business of Rollins. As a result of these
factors, the Company's revenue and income could vary significantly from quarter
to quarter, and past financial performance should not be considered a reliable
indicator of future performance.

LIQUIDITY AND CAPITAL RESOURCES

     The cash provided by continuing operations during the first nine months of
fiscal 1997 was $9.0 million.

     During the first nine months of fiscal 1997, expenditures for property,
plant and equipment were $29.7 million.

     The Company's projected capital expenditures for the remainder of fiscal
1997 are approximately $10 million, and are expected to be financed from
available cash resources.

     As a direct result of the personnel reductions and facility closures, the
Company anticipates incurring cash severance and closure costs. With respect to
the former Rollins operations, approximately $17 million of severance costs and
$40 million of closure costs related to dismantling, decontamination and
regulatory approval are expected to be incurred. With respect to the Old LESI
operations, approximately $25 million of costs are expected to be incurred. Of
such costs, management expects to incur between $20 million and $25 million
within 12 months of the Transaction.

     The Company believes it has adequate liquidity for its ongoing operations
and planned capital needs. For the remainder of fiscal year 1997, the Company
anticipates lower operating cash requirements as it realizes the benefits of
cost reductions and a lower capital spending. The Company's primary sources of
liquidity are cash flows from operations combined with the funding sources
described in Note 4 and Note 5 of the Notes to Consolidated Financial Statements
in Item 1.

                                     Page 20


<PAGE>   21

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         The business of the Company's hazardous and industrial waste services
is continuously regulated by federal, state, provincial and local provisions
that have been enacted or adopted, regulating the discharge of materials into
the environment or primarily for the purpose of protecting the environment. The
nature of the Company's businesses results in its frequently becoming a party to
judicial or administrative proceedings involving all levels of governmental
authorities and other interested parties. The issues that are involved generally
relate to applications for permits and licenses by the Company and their
conformity with legal requirements and alleged technical violations of existing
permits and licenses. The Company does not believe that these issues will be
material to the Company's operations or financial condition. At May 31, 1997,
subsidiaries of the Company were involved in three proceedings of the latter
type relating primarily to activities at waste treatment, storage and disposal
facilities where the Company believes sanctions involved in each instance may
exceed $100,000.

         In the United States, The Comprehensive Environmental Response
Compensation and Liability Act of 1980 ("CERCLA") imposes financial liability on
persons who are responsible for the release of hazardous substances into the
environment. Present and past owners and operators of sites which release
hazardous substances, as well as generators and transporters of the waste
material, are jointly and severally liable for remediation costs and
environmental damage. At May 31, 1997, the Company had been notified that it was
potentially a responsible party in connection with 21 locations in its hazardous
waste management and other businesses. The Company continually reviews its
status with respect to each location, taking into account its alleged connection
to the location and the extent of its alleged contribution to the volume of
waste at the location, the available evidence connecting the Company to that
location and the numbers and financial soundness of other potentially
responsible parties at the location. Based upon presently available information,
the Company does not believe that potential liabilities arising from its
involvement with these locations will be material to the Company's operations or
financial condition.

         A subsidiary of Company, Laidlaw Environmental Services of South
Carolina, Inc. ("LESSC"), owns and operates a hazardous waste landfill near the
Town of Pinewood in Sumter County, South Carolina. South Carolina law requires
that hazardous waste facilities provide evidence of financial assurance for
potential environmental cleanup and restoration in form and amount to be
determined by the South Carolina Department of Health and Environmental Control
("DHEC").

         In its order dated May 19, 1994, the Board of DHEC (the "Board")
decided that over a ten year period LESSC must establish a cash funded trust in
the amount of $133 million adjusted for inflation as financial assurance for
potential environmental cleanup and restoration. In August 1994, LESSC paid
approximately $14 million cash into the trust fund as a first installment. The
cash funded trust now stands at approximately $17 million. LESSC appealed to the
South Carolina Circuit Court contesting the legality of the Board's
determination.

                                     Page 21



<PAGE>   22

         In June 1995, DHEC promulgated, and the South Carolina legislature
approved, regulations governing financial assurance for environmental cleanup
and restoration giving owner/operators of hazardous waste facilities the right
to choose from among six options for providing financial assurance. The options
include insurance, a bond, a letter of credit, a cash trust fund and a corporate
guaranty with a financial test.

         In June 1995 under authority of the new regulations, the LESSC
submitted financial assurance for potential environmental cleanup and
restoration composed of a combination of the existing State Permitted Sites Fund
(this is a state of South Carolina fund created by statute and funded by
hazardous waste disposal taxes) in the amount of approximately $8 million and
the balance of a total package of $135 million by way of a corporate guarantee
by Laidlaw Inc. ("Laidlaw") in the amount of approximately $127 million. LESSC
also left in place the existing cash trust fund in the present amount of
approximately $17 million. DHEC accepted LESSC's financial submittal. On
September 15, 1995, DHEC issued a declaratory ruling finding the new regulations
applicable to financial assurance requirements for LESSC. A group of parties
opposed to the ruling appealed the declaratory ruling to the South Carolina
Circuit Court. The opposing parties include Citizens Asking for a Safe
Environment, Energy Research Foundation, County of Sumter, Sierra Club, County
of Clarendon, The Sumter County Legislative Delegation, the South Carolina
Department of Natural Resources and the South Carolina Public Service Authority.
In June 1996, LESSC submitted and DHEC accepted a similar financial assurance
package for the state fiscal year ended June 30, 1997.

         LESSC's appeal of the May 19, 1994 DHEC order and the opposing parties'
appeal of the September 15, 1995, DHEC declaratory ruling have been consolidated
and are presently pending a decision of the South Carolina Circuit Court in the
case captioned Laidlaw Environmental Services of South Carolina, Inc., et. al.,
Petitioners vs. South Carolina Department of Health and Environmental Control
and South Carolina Board of Health and Environmental Control, Respondents -
Energy Research Foundation, et. al., Intervenors, Docket Numbers C/A
94-CP-43-175, 94-CP-43-178, 94-CP-40-1412 and 94-CP-40-1859. A decision adverse
to the Company could result in the reinstatement of the May 19, 1994 DHEC order.
The Company believes that the regulations promulgated in June 1995 are legally
valid and applicable to financial assurance requirements for the Pinewood
landfill. Pursuant to the Stock Purchase Agreement, Laidlaw agreed to maintain,
solely at its expense, until the tenth anniversary of the Transaction, as
described in Item I, Note 1 to this report, the required financial assurance for
the Pinewood facility.

         While the financial resolution of any of the above described matters
may have an impact on the Company's consolidated financial results for a
particular reporting period, management believes that the ultimate disposition
of these matters will not have a materially adverse effect upon the consolidated
financial position of the Company.

         The consolidated federal income tax returns of Laidlaw Transportation,
Inc. and its U.S. subsidiaries (which until May 15, 1997, included certain of
the subsidiaries of the Company) for the fiscal years ended August 31, 1986,
1987 and 1988, have been under audit by the Internal Revenue Service.

                                     Page 22


<PAGE>   23

In March 1994, the subsidiaries received a statutory notice of deficiency
proposing that the subsidiaries pay additional taxes relating to disallowed
deductions in those income tax returns. The principal issue involved relates to
the timing and the deductibility for tax purposes of interest attributable to
loans owing to related foreign persons. The subsidiaries have petitioned the
United States Tax Court (captioned as Laidlaw Transportation, Inc. &
Subsidiaries et al v. Commissioner of Internal Revenue, Docket Nos. 9361-94 and
9362-94) for a redetermination of claimed deficiencies of approximately $49.6
million(plus interest of approximately $76.5 million as of May 31, 1997).

         In May 1997, the subsidiaries received revenue agents' reports
proposing that the subsidiaries pay additional taxes of approximately $160.7
million (plus interest of approximately $127.4 million as of May 31, 1997)
relating to disallowed deductions in federal income tax returns for the fiscal
years ended August 31, 1989, 1990 and 1991, based on the same issues. The
subsidiaries intend to vigorously contest these claimed deficiencies. The
Company anticipates that the Internal Revenue Service will propose adjustments
for the same issue in subsequent taxation years. Pursuant to the Stock Purchase
Agreement, Laidlaw and Laidlaw Transportation, Inc. agreed to be responsible for
any tax liabilities resulting from these matters. Although the final outcome
cannot be predicted with certainty, the Company, based upon a thorough review of
the facts and advice of counsel, believes that the ultimate disposition of these
issues will not have a materially adverse effect upon the Company's consolidated
financial position or results of operations.

         Other than as herein reported there have been no additional significant
legal proceedings nor any material changes in the legal proceedings reported on
pages 4 and 5 of the Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1996 and the Definitive Proxy Statement on Form DEF 14A as
referenced in Exhibit 99(a).

ITEM 2.  CHANGES IN SECURITIES.

(a) At a Special Meeting held on May 13, 1997 the Registrant's stockholders
approved amendments to the Registrant's certificate of incorporation that (i)
increased the number of authorized shares of common stock, par value $1.00 per
share, from 120,000,000 to 350,000,000; (ii) changed the name of Registrant to
Laidlaw Environmental Services, Inc. as of the closing of the Stock Purchase
Agreement dated February 6, 1997 ("SPA") among the Registrant, Laidlaw, and
Laidlaw Transportation, Inc. and (iii) increased the size of the Registrant's
Board of Directors from eight to ten members.

(B) In connection with obtaining the financing necessary to complete the
transaction contemplated by the SPA, certain subsidiaries of the Registrant
entered into a credit agreement (the "Credit Agreement") which restricts the
payment of dividends by the subsidiaries to the Registrant (unless lenders
holding 66 2/3 % of (i) the total outstanding under the Term Loans (as defined
in Note 4 to the Notes to the Consolidated Financial Statements contained in
Item 1 of Part I of this report) and (ii) the total commitments under the
Revolving Credit Facilities (as defined in Note 4 to the Notes to the
Consolidated Financial Statements contained in Item 1 of Part I of this report).

                                     Page 23


<PAGE>   24

         The Credit Agreement also contains negative, affirmative and financial
covenants customarily found in credit agreements for financings similar to the
financing provided under the Credit Agreement, including covenants (i)requiring
compliance with laws and performance of obligations, (ii) restricting
transactions with affiliates, (iii) requiring satisfactory levels of interest
coverage and fixed charge coverage and ratios of total funded debt to operating
cash flow and total contingent obligations to operating cash flow, (iv) limiting
annual capital expenditures, (v) requiring periodic reporting of financing
information and (vi) restricting debt, guarantees, liens, mergers and
consolidations, sales of assets, changes in the nature of the business and
changes in charter documents and other material contracts.

         Among the financial covenants contained in the Credit Agreement are the
following (capitalized terms used hereafter are defined in the Credit
Agreement): (i)the Consolidated Total Leverage Ratio at the end of each fiscal
quarter may not exceed a ratio of 3.50:1.00 in fiscal 1997 and 1998, reducing to
2.00:1.00 by fiscal 2004 and 2005; (ii) the Fixed Charge Coverage Ratio at the
end of each fiscal quarter may not be less than 1.25:1.00 in fiscal 1997-1999,
increasing to 1.50:1.00 in fiscal 2000-2005; (iii)the Interest Coverage Ratio
for any period of four consecutive fiscal quarters shall be not less than
2.00:1.00 for fiscal 1997 and 1998, increasing to 3.00:1.00 for fiscal
2002-2005; (iv) the ratio of Consolidated Contingent Obligations at the end of
any fiscal quarter to Consolidated Operating Cash Flow for the four preceding
fiscal quarters shall not be less than 1.50:1.00 in fiscal 1997-1999, reducing
to 1.20:1.00 for fiscal 2000-2005; and (v) except for specified permitted
indebtedness, including certain working capital lines of credit, the Company may
not incur more than $5,000,000 of new indebtedness.

(c)      i) On May 15, 1997, the Registrant issued 120 million shares ("Laidlaw
Stock") of its common stock, par value $1.00 per share, to Laidlaw. In addition
on May 15, 1997, the Registrant issued to Laidlaw a $350,000,000 5% Subordinated
Convertible Pay-In-Kind Debenture (the "Debenture").

         ii) These securities were issued in connection with the Transaction
described in Note 1 of the Notes to the Consolidated Financial Statements
included in Item 1 of Part I of this report which is hereby incorporated by
reference in partial response to this question.

         iii) The Laidlaw Stock and the Debenture were issued without
registration under the Securities Act of 1933, as amended (the "Act"), pursuant
to the exemption provided by Section (4)(2) of the Act. In determining to issue
the Laidlaw Stock and the Debenture without registration under the Act
management considered the fact that the offering was being made to a single
offeree in connection with the offeree's in substance acquisition of the
Registrant and that the offeree, Laidlaw, had access to all material information
with respect to the Registrant as a result of its extensive due diligence
investigation of the Registrant. In addition in the SPA, Laidlaw represented to
the Registrant that it was acquiring the Laidlaw Stock and the shares of common
stock issuable upon conversion of the Debenture for investment and not with a
view to, or for resale in connection with, any distribution of the Laidlaw Stock
or the shares of common stock issuable upon conversion of the Debenture.

                                     Page 24


<PAGE>   25

         (iv) The terms of conversion of the Debenture are described in Note 5
of the Notes to the Consolidated Financial Statements included in Item 1 of Part
I of this report which is hereby incorporated by reference in partial response
to this question.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     A special meeting of the stockholders of the Registrant was held on May 13,
1997. The results of the vote of security holders at that meeting previously
reported in Item I of the Current Report on Form 8-K filed with the Securities
and Exchange Commission on May 30, 1997.


ITEM 5.  OTHER INFORMATION.

     On July 9, 1997, in furtherance of the Registrant's reverse acquisition and
change in control previously disclosed in the Registrant's Current Report on
Form 8-K filed with the Securities and Exchange Commission on May 30, 1997,
Grover C. Wrenn was appointed Director by the Registrant's Board of Directors,
increasing the number of directors to ten. Mr. Wrenn, whose term expires at the
1998 annual meeting, is Chairman and CEO of Better Health Network, Inc.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


(a) Exhibits

 (3)(a)  Restated Certificate of Incorporation of the Company dated May 13, 1997
         and Amendment to Certificate of Incorporation dated May 15, 1997.

 (3)(b)  Bylaws of the Company (filed as Exhibit 3(ii) to the Form 10-Q of the
         Company for the Quarter ended March 31, 1997 and incorporated herein by
         reference).

 (4)(a)  Rights Agreement dated as of June 14, 1989 between Rollins
         Environmental Services, Inc. and Registrar and Transfer Company, as
         Rights Agent (filed as an Exhibit to Form 8-K filed by the Registrant
         on June 13, 1995 and incorporated herein by reference).

 (4)(b)  Amendment No. 1 dated as of March 31, 1995 to Rights Agreement between
         Rollins Environmental Services, Inc. and Registrar and Transfer
         Company, as Rights Agent (filed as an Exhibit to Form 8-K filed by the
         Registrant on June 13, 1995 and incorporated herein by reference).

 (4)(c)  Credit Agreement among Laidlaw Chem-Waste, Inc., Laidlaw Environmental
         Services (Canada) Ltd., Toronto Dominion (Texas) Inc., The
         Toronto-Dominion Bank, TD Securities (USA) Inc., the Bank of Nova
         Scotia, Nationsbank, N.A. and The First National Bank of Chicago and
         Nationsbank, N.A. as syndication Agent dated as of May 9, 1997.



                                     Page 25


<PAGE>   26

 (4)(d)  $350,000,000 5% Subordinated Convertible Pay-In-Kind Debenture due 2009
         issued by Registrant on May 15, 1997 to Laidlaw Inc. the form of which
         was included as an appendix to the Definitive Proxy Statement on Form
         DEF 14A, filed with the Securities and Exchange Commission on May 1,
         1997 and incorporated herein by reference.

 (4)(e)  Registration Rights Agreement dated May 15, 1997 between Registrant,
         Laidlaw Transportation, Inc. and Laidlaw Inc. included as an appendix
         to the Definitive Proxy Statement on Form DEF 14A, the form of which
         was filed with the Securities and Exchange Commission on May 1, 1997
         and incorporated herein by reference.

 (4)(f)  Indenture dated as of May 1, 1993 between the Industrial Development
         Board of the Metropolitan Government of Nashville and Davidson County
         (Tennessee) and NationsBank of Tennessee, N.A.

 (4)(g)  Indenture of Trust dated as of February 1, 1995 between Carbon County,
         Utah and West One Bank, Utah, now known as U.S. Bank, as Trustee.

 (4)(h)  Indenture of Trust dated as of August, 1995 between Tooele County, Utah
         and West One Bank, Utah, now known as U.S. Bank, as Trustee.

 (4)(i)  Indenture of Trust dated as of July 1, 1997 between Carbon County, Utah
         and U.S. Bank, a national banking association, as Trustee.

 (4)(j)  Indenture of Trust dated as of July 1, 1997 between Tooele County, Utah
         and U.S. Bank, a national banking association, as Trustee.

 (4)(k)  Indenture of Trust dated as of July 1, 1997 between California
         Pollution Control Financing Authority and U.S. Bank, a national banking
         association, as Trustee.

 (4)(l)  Stock Purchase Agreement between Westinghouse Electric Corporation
         (Seller) and Rollins Environmental Services, Inc. (Buyer) for National
         Electric, Inc. dated March 7, 1995 (filed as an Exhibit to Form 8-K
         filed by the Registrant on June 13, 1995 and incorporated herein by
         reference).

 (4)(m)  Second Amendment to Stock Purchase Agreement (as referenced in Exhibit
         (4)(l) above) dated May 15, 1997 among Westinghouse Electric
         Corporation, Rollins Environmental Services, Inc. and Laidlaw Inc.

 (4)(n)  Promissory Note dated May 15, 1997 for $60,000,000 from Laidlaw
         Environmental Services, Inc. to Westinghouse Electric Corporation.

 (4)(o)  Guaranty Agreement dated May 15, 1997 by Laidlaw Inc. to Westinghouse
         Electric Corporation guaranteeing Promissory Note dated May 15, 1997
         (as referenced in Exhibit (4)(n)) from Laidlaw Environmental Services,
         Inc. to Westinghouse Electric Corporation.

(10)(a)  Rollins Environmental Services, Inc. 1982 Incentive Stock Option Plan
         (filed with Amendment No. 1 to the Company's Registration Statement No.
         2-84139 on Form S-1 dated June 24, 1983 and incorporated herein by
         reference).


                                     Page 26


<PAGE>   27

(10)(b)  Rollins Environmental Services, Inc. 1993 Stock Option Plan (filed with
         the Company's Proxy Statement for the Annual Meeting of Shareholders
         held January 28, 1994 and incorporated herein by reference).

(10)(c)  Stock Purchase Agreement dated February 6, 1997 among the Registrant,
         Laidlaw Inc., and Laidlaw Transportation, Inc. included as an appendix
         to the Definitive Proxy Statement on Form DEF 14A, filed with the
         Securities and Exchange Commission on May 1, 1997 and incorporated
         herein by reference.

(10)(e)  Management Incentive Plan for fiscal year 1996

(27)     Financial Data Schedule

(99)(a)  Definitive Proxy Statement on Form DEF 14A, filed with the Securities
         and Exchange Commission on May 1, 1997 and incorporated herein by
         reference.

(b) Reports on Form 8-K.

          The Company filed a Current Report on Form 8-K, dated May 30, 1997,
which contained Items 1, 2, 5, 7 and 8 related to the reverse acquisition which
was completed on May 15, 1997.




                                     Page 27

<PAGE>   28

                                   SIGNATURES

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



   DATE: July 14, 1997           LAIDLAW ENVIRONMENTAL SERVICES, INC.
         --------------          ------------------------------------
                                            (Registrant)



                                     /s/ Kenneth W. Winger
                                 ------------------------------------
                                         Kenneth W. Winger
                               President and Chief Executive Officer



                                     /s/ Paul R. Humphreys
                                 ------------------------------------
                                         Paul R. Humphreys
                                  Senior Vice President-Finance and
                                       Chief Financial Officer
                                    (Principal Financial Officer)




                                     Page 28



<PAGE>   29


                                INDEX TO EXHIBITS


 (3)(a)  Restated Certificate of Incorporation of the Company dated May 13, 1997
         and Amendment to Certificate of Incorporation dated May 15, 1997.

 (3)(b)  Bylaws of the Company (filed as Exhibit 3(ii) to the Form 10-Q of the
         Company for the Quarter ended March 31, 1997 and incorporated herein by
         reference).

 (4)(a)  Rights Agreement dated as of June 14, 1989 between Rollins
         Environmental Services, Inc. and Registrar and Transfer Company, as
         Rights Agent (filed as an Exhibit to Form 8-K filed by the Registrant
         on June 13, 1995 and incorporated herein by reference).

 (4)(b)  Amendment No. 1 dated as of March 31, 1995 to Rights Agreement between
         Rollins Environmental Services, Inc. and Registrar and Transfer
         Company, as Rights Agent (filed as an Exhibit to Form 8-K filed by the
         Registrant on June 13, 1995 and incorporated herein by reference).

 (4)(c)  Credit Agreement among Laidlaw Chem-Waste, Inc., Laidlaw Environmental
         Services (Canada) Ltd., Toronto Dominion (Texas) Inc., The
         Toronto-Dominion Bank, TD Securities (USA) Inc., the Bank of Nova
         Scotia, Nationsbank, N.A. and The First National Bank of Chicago and
         Nationsbank, N.A. as syndication Agent dated as of May 9, 1997.

 (4)(d)  $350,000,000 5% Subordinated Convertible Pay-In-Kind Debenture due 2009
         issued by Registrant on May 15, 1997 to Laidlaw Inc. the form of which
         was included as an appendix to the Definitive Proxy Statement on Form
         DEF 14A, filed with the Securities and Exchange Commission on May 1,
         1997 and incorporated herein by reference.

 (4)(e)  Registration Rights Agreement dated May 15, 1997 between Registrant,
         Laidlaw Transportation, Inc. and Laidlaw Inc. included as an appendix
         to the Definitive Proxy Statement on Form DEF 14A, the form of which
         was filed with the Securities and Exchange Commission on May 1, 1997
         and incorporated herein by reference.

 (4)(f)  Indenture dated as of May 1, 1993 between the Industrial Development
         Board of the Metropolitan Government of Nashville and Davidson County
         (Tennessee) and NationsBank of Tennessee, N.A.

 (4)(g)  Indenture of Trust dated as of February 1, 1995 between Carbon County,
         Utah and West One Bank, Utah, now known as U.S. Bank, as Trustee.

 (4)(h)  Indenture of Trust dated as of August, 1995 between Tooele County, Utah
         and West One Bank, Utah, now known as U.S. Bank, as Trustee.

 (4)(i)  Indenture of Trust dated as of July 1, 1997 between Carbon County, Utah
         and U.S. Bank, a national banking association, as Trustee.

 (4)(j)  Indenture of Trust dated as of July 1, 1997 between Tooele County, Utah
         and U.S. Bank, a national banking association, as Trustee.



                                     Page 29


<PAGE>   30


 (4)(k)  Indenture of Trust dated as of July 1, 1997 between California
         Pollution Control Financing Authority and U.S. Bank, a national banking
         association, as Trustee.

 (4)(l)  Stock Purchase Agreement between Westinghouse Electric Corporation
         (Seller) and Rollins Environmental Services, Inc. (Buyer) for National
         Electric, Inc. dated March 7, 1995 (filed as an Exhibit to Form 8-K
         filed by the Registrant on June 13, 1995 and incorporated herein by
         reference).

 (4)(m)  Second Amendment to Stock Purchase Agreement (as referenced in Exhibit
         (4)(l) above) dated May 15, 1997 among Westinghouse Electric
         Corporation, Rollins Environmental Services, Inc. and Laidlaw Inc.

 (4)(n)  Promissory Note dated May 15, 1997 for $60,000,000 from Laidlaw
         Environmental Services, Inc. to Westinghouse Electric Corporation.

 (4)(o)  Guaranty Agreement dated May 15, 1997 by Laidlaw Inc. to Westinghouse
         Electric Corporation guaranteeing Promissory Note dated May 15, 1997
         (as referenced in Exhibit (4)(n)) from Laidlaw Environmental Services,
         Inc. to Westinghouse Electric Corporation.

(10)(a)  Rollins Environmental Services, Inc. 1982 Incentive Stock Option Plan
         (filed with Amendment No. 1 to the Company's Registration Statement No.
         2-84139 on Form S-1 dated June 24, 1983 and incorporated herein by
         reference).

(10)(b)  Rollins Environmental Services, Inc. 1993 Stock Option Plan (filed with
         the Company's Proxy Statement for the Annual Meeting of Shareholders
         held January 28, 1994 and incorporated herein by reference).

(10)(c)  Stock Purchase Agreement dated February 6, 1997 among the Registrant,
         Laidlaw Inc., and Laidlaw Transportation, Inc. included as an appendix
         to the Definitive Proxy Statement on Form DEF 14A, filed with the
         Securities and Exchange Commission on May 1, 1997 and incorporated
         herein by reference.

(10)(e)  Management Incentive Plan for fiscal year 1996

(27)     Financial Data Schedule

(99)(a)  Definitive Proxy Statement on Form DEF 14A, filed with the Securities
         and Exchange Commission on May 1, 1997 and incorporated herein by
         reference.


                                     Page 30