##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended August 31, 2003
Commission File Number 000-13109

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

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


55 SHUMAN BOULEVARD, SUITE 400
NAPERVILLE, ILLINOIS 60563
(Address of principal executive offices, including zip code)

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

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 par value

Preferred Stock Purchase Rights

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

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes  o   No  x

The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant at February 28, 2003 was $7.2
million (computed by reference to the price at which the common equity
of the registrants predecessor, Laidlaw Inc., was last sold on the
over-the-counter market in the United States as posted on the OTC
Bulletin Board). At November 24, 2003 there were 103,806,110 shares of
the registrants Common Stock issued and outstanding.

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

Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution under a
plan confirmed by a court. Yes  x   No  o

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrants definitive proxy statement for its 2004
annual meeting of stockholders are incorporated by reference into Part
III of this report on Form 10-K.



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TABLE OF CONTENTS



|                                                 |                                                                                               |  |  |  |  |  |  | 
|------------------------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                          
|                                                 | ITEM 1. BUSINESS                                                                             
|                                                 | ITEM 2. PROPERTIES                                                                           
|                                                 | ITEM 3. LEGAL PROCEEDINGS                                                                    
|                                                 | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                                                 | ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT                                                
|PART II                                         
|                                                 | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                
|                                                 | ITEM 6. SELECTED FINANCIAL DATA                                                              
|                                                 | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                 | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|                                                 | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|                                                 | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|                                                 | ITEM 9A. CONTROLS AND PROCEDURES                                                             
|PART III                                        
|                                                 | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|                                                 | ITEM 11. EXECUTIVE COMPENSATION                                                              
|                                                 | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|                                                 | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|                                                 | ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                              
|PART IV                                         
|                                                 | ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                    
|Signatures                                      
|Report of Independent Auditors                  
|CONSOLIDATED BALANCE SHEETS                     
|CONSOLIDATED STATEMENTS OF OPERATIONS           
|CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY 
|CONSOLIDATED STATEMENTS OF CASH FLOWS           
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS      
|Supplemental Executive Retirement Plans         
|Tax Sharing Agreement                           
|Employment Agreement for Kevin E. Benson        
|Change in Control Severance Agreement           
|Employment Agreement for Douglas A. Carty       
|Change in Control Severance Agreement           
|Employment Agreement for William A. Sanger      
|Employment Agreement for Don S. Harvey          
|Subsidiaries of the Registrant                  
|Powers of Attorney                              
|302 Certification of Principal Executive Officer
|302 Certification of Principal Financial Officer
|Section 906 Certification                       



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NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements can be identified by the use of terminology such
as believe, hope, may, anticipate, should, intend, plan, will,
expect, estimate, continue, project, positioned, strategy and
similar expressions. You should be aware that those statements are only our
predictions. The forward-looking statements included in this report are not
guarantees of future performances, and should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results could differ materially from those contemplated by these
forward-looking statements. In the light of these risks and uncertainties,
there can be no assurance that the results and events contemplated by the
forward-looking information contained in this report will in fact transpire.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their dates.

Such risks, uncertainties and contingencies are described in detail in Item 7.
Managements Discussion and Analysis of Financial Condition and Results of
Operations and include, without limitation, the following:



| |  |  | Economic and other conditions in the markets in which
the Company operates;
| | - |  | ---------------------------------------------------------------------------



| |  |  | Greyhounds ability to continue as a going concern;
| | - |  | ---------------------------------------------------



| |  |  | Governmental regulations, the competitive environment,
actual accident claims experience and third-party payor health
care reimbursement rates;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The restrictive covenants contained in the companys
senior secured credit facility;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | The ability to continue to satisfy bonding requirements
for existing or new customers;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | Successful completion of labor negotiations including
those at the companys Greyhound business (see Greyhound Segment
  Employees in Item 1. Business);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Potential pension plan funding requirements;
| | - |  | --------------------------------------------



| |  |  | The ability to realize revenue growth; and
| | - |  | ------------------------------------------



| |  |  | The ability to implement initiatives designed to
increase operating efficiencies and improve results.
| | - |  | -----------------------------------------------------------------------------------------------------

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PART I




ITEM 1.  BUSINESS

Except as expressly indicated or unless the context otherwise requires, the
Company, Laidlaw International, we, our or us means Laidlaw
International, Inc., a Delaware corporation, and its subsidiaries.

We have five reportable segments that provide transportation and
healthcare services:



| |  |  | Our education services segment provides school bus
transportation throughout Canada and the United States;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | Our public transit services segment provides municipal
and paratransit bus transportation within the United States;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | Our Greyhound segment provides inter-city, tourism and
small parcel bus transportation throughout North America;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | Our healthcare transportation services segment provides
healthcare related transportation services in the United States;
and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | Our emergency management services segment provides
emergency department physician services throughout the United
States.
| | - |  | ------------------------------------------------------------------------------------------------------------------------

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and other information with the Securities and Exchange
Commission. The public can obtain copies of these materials by visiting the
Commissions Public Reference Room at 450 Fifth Street, NW, Washington DC
20549, by calling the Commission at 1-800-SEC-0330, or by accessing the SECs
website at http://www.sec.gov. In addition, as soon as reasonably practicable
after such materials are filed with or furnished to the Commission, we make
copies available to the public free of charge on or through our website at
www.laidlaw.com. A copy of our Code of Ethics, as defined under Item 406 of
Regulation S-K, Corporate Governance Guidelines, Director Independence Criteria
and Board Committee Charters can also be accessed on our website. We will
provide, at no cost, a copy of our Code of Ethics upon request by phone or in
writing to our corporate address at 55 Shuman Boulevard, Naperville, Illinois
60563 (telephone number: (630) 848-3000), attention: Investor Relations. The
information on our website is not incorporated into, and is not part of, this
report.

BACKGROUND AND PARENT COMPANY RESTRUCTURING

We are a parent holding company without business operations of our own. We
were originally incorporated under the laws of Ontario, Canada under the name
Laidlaw Investments Ltd. on September 25, 1985. On June 20, 2003, in
connection with our reorganization, we filed a certificate of domestication
with the Secretary of State of the State of Delaware and became a Delaware
corporation and, as part of our domestication, we changed our name to Laidlaw
International, Inc. from Laidlaw Investments Ltd.

On June 28, 2001, we, along with Laidlaw Inc., an Ontario corporation and our
predecessor, and four of our direct and indirect subsidiaries, filed voluntary
petitions for relief under chapter 11 of the U.S. Bankruptcy Code. In
addition, we and Laidlaw Inc. commenced Canadian insolvency proceedings under
the Canadian Companies Creditors Arrangement Act in the Ontario Superior Court
of Justice, or the Canadian Court, in Toronto, Ontario. On February 27,
2003, the U.S. Bankruptcy Court for the Western District of New York, or the
U.S. Bankruptcy Court, entered an order confirming our Third Amended Joint Plan
of Reorganization, or the Plan. On February 28, 2003, the Canadian Court
issued an order recognizing the U.S.

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Bankruptcy Courts confirmation order and implementing it in Canada with
respect to our Canadian insolvency proceeding.

On June 23, 2003, we completed our restructuring when the Plan became
effective. Pursuant to the Plan, more than $3.2 billion of unsecured debt,
$370 million of accrued and unpaid interest and $400 million of various other
liabilities were compromised. The creditor groups received a combination of
$1,185.0 million in cash and 100.0 million shares of newly issued common stock
in Laidlaw International in exchange for the extinguishment of all claims,
liabilities and debt against the predecessor company, Laidlaw Inc. In
addition, we issued approximately 3.8 million shares of common stock to a trust
in connection with a settlement agreement with the United States Pension
Benefit Guaranty Corporation relating to the funding level of certain
subsidiary pension funds.

The equity ownership of the predecessor company, Laidlaw Inc., was cancelled
for no consideration.

None of Laidlaw Internationals operating subsidiaries was a party to the
chapter 11 proceedings. Our subsidiaries were able to meet their obligations
with their own cash flow and credit facilities, and accordingly, continued to
operate normally and without interruption during the chapter 11 proceedings.

For further discussion of the parent company restructuring and factors
affecting Laidlaw Internationals results of operations, liquidity and
financial condition, see Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations and Note 1 of the Notes to
Consolidated Financial Statements included in this report.

In the following description of our business segments, certain revenue
information is presented for the twelve month period ended August 31, 2003. As
explained in Note 2 of the Notes to Consolidated Financial Statements included
in this report, the Company, as a result of the consummation of the Plan,
adopted fresh start accounting and, for financial reporting purposes, the
effective date of the Plan was considered to be June 1, 2003. Due to the
changes in the financial structure of the Company and the application of fresh
start accounting, the results of the Company after June 1, 2003 are not
comparable with the results of the Predecessor Company prior to the Plan
implementation. Reference is made to Note 23 of the Notes to Consolidated
Financial Statements, which shows the results of our business segments for the
three months ended August 31, 2003 and for the nine months ended May 31, 2003.

For each of the years in the three-year period ended August 31, 2003, the
percentages of consolidated revenue from our business segments were as follows:

Year Ended August 31
    
    2003
    
    2002
    
    2001Education Services
    
    
    33
    %
    
    
    33
    %
    
    
    33
    %Healthcare Transportation Services
    
    
    23
    
    
    
    22
    
    
    
    22Greyhound
    
    
    27
    
    
    
    28
    
    
    
    28Emergency Management Services
    
    
    11
    
    
    
    10
    
    
    
    10Public Transit Services
    
    
    6
    
    
    
    7
    
    
    
    7Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %


Financial information concerning the Companys business segments is set forth
in Note 23 of the Notes to Consolidated Financial Statements included in this
report.

Geographic Segments

In the last three fiscal years, the percentage of revenue generated by United
States operations has been 92.1%, 92.3% and 92.2%, respectively. Geographic
information is set forth in Note 23 of the Notes to Consolidated Financial
Statements included in this report. We have no operations outside of the
United States and Canada.

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EDUCATION SERVICES SEGMENT

Our education services business operates school buses and special education
vehicles, primarily under the names Laidlaw Transit and Laidlaw Education
Services in the United States and Canada. We have operations in 37 states and
the District of Columbia in the United States and six provinces in Canada.

At the end of fiscal 2003, the business had contracts with approximately 970
school boards and districts in the United States and more than 60 school boards
and districts in Canada, as well as various other educational institutions,
providing transportation for approximately 2.0 million students each day.

For the twelve months ended August 31, 2003, we had revenue from our education
services segment of $1,499.7 million (U.S. $1,357.1 million, Canada $142.6
million).

Segment Overview

The education services business is composed of four core activities including
home-to-school, extracurricular, charter and transit, and other.



| | (i) |  | Home-to-School:This activity comprises all regularly
scheduled services for the transportation of students to and from
school, covered under a contract. Home-to-school represented
approximately 89% of total revenue during fiscal year 2003.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) |  | Extra-curricular:Extra-curricular revenue is
non-contractual income resulting from transportation service not
associated with regular home-to-school services of students. This
activity contributed approximately 4% of education services revenues
for fiscal year 2003.
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) |  | Charter & Transit:Charter service is generally
non-contractual, non-regularly scheduled transportation service
performed for a customer other than a school or school board.
Transit services are available to the general public or are
contracted through a government agency. Charter and transit
activity accounted for approximately 3% of total revenues during
fiscal year 2003.
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) |  | Other:This is comprised of revenues from transportation
services, primarily regularly scheduled routes, to non-school
customers, from the leasing of transportation equipment or from
other non-transportation services such as logistical support or
maintenance contracts. Other revenues accounted for approximately
4% of total revenues during fiscal year 2003.
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Market Overview

There are an estimated 496,000 school buses operated in the United States and
Canada transporting students to and from school. Nearly 67% of the buses are
owned and operated by local school districts and other public sector entities;
the remaining 33% of the buses are operated under private contract with various
parties, including Laidlaw.

We are the largest school bus operator in the United States and Canada. We
serve over 1,000 school boards. Our fleet consists of approximately 42,000
buses.

Competition

Competition in the privately operated bus market occurs in two forms  from
the school districts themselves or from other private student carriers.
Approximately 67% of school bus services

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are operated by school districts for their own transport needs. In order to
convert publicly operated fleets to private operation, we need to demonstrate
to school boards that we can provide student transportation more efficiently
and safely and at lower cost.

Competition comes from other privately operated school bus operators. There
are a few competitors that operate regionally and are owned by large, multiple
segment transportation companies. The balance of the privately operated bus
services market is served by more than 4,000 companies that are mostly small,
privately held, local bus companies. We compete with other privately operated
school bus services businesses based on price, scale and other operating
attributes.

Contracts

In aggregate, more than 90% of education services revenue is pursuant to
contracts with terms generally of three to five years with options for
extensions. Our school bus contracts are generally with municipalities and
school districts or boards of education. Pricing is generally on a revenue per
bus, per day basis with annual increases per the terms of the agreement.

Seasonality

Our education services business is seasonal with operations following the
school year from September to June. As a result, our education services
business historically experiences a significant decline in revenue and
operating income in the fourth fiscal quarter due to school summer vacations.

Employees

As of August 31, 2003, our education services segment had approximately 46,000
employees with 95% involved directly in operations. Part-time employees
comprise over 90% of all employees. Approximately 42% are represented by 175
collective bargaining agreements. During fiscal 2004, 25% of the collective
bargaining agreements, representing approximately 6,800 employees, are subject
to renegotiation. The existence of many local union contracts limits the
impact of any individual labor disruption on our operations. The workforce is
primarily composed of drivers, mechanics and bus monitors. We believe that our
relations with our employees in our education services business are good.
During the past five years, we have not had any significant labor disruption in
our education services business that had a material adverse effect on our
business, financial condition or results of operations.

Fuel

For fiscal 2003, approximately 60% of our fuel costs were fixed, primarily
through forward purchase contracts. In 2003, fuel expense represented 4.2% of
total revenue. Wherever possible, we incorporate fuel protection measures to
mitigate the effects of price fluctuations. Many of our contracts have two-way
fuel cost adjustments or escalation provisions. We continue to incorporate
such clauses into new contracts and seek amendments in existing agreements to
reduce our exposure to increases in fuel costs.

Vehicle Fleet

Our education services business owns in excess of 39,000 buses and operates
approximately 3,000 customer-owned buses. The average age of the bus fleet is
approximately 6.5 years. In fiscal 2003, the average purchase price of a new
bus was approximately $51,000. Fleet replacements are based on contract
requirements, age and useful life of the vehicle.

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Regulation

Companies operating in the school busing industry are not subject to licensing
requirements in the United States. However, U.S. regulations require all
drivers of school buses to have commercial drivers licenses. In Canada,
licenses to carry passengers are granted by provincial boards upon proof of
public convenience and necessity. The provincial boards exercise control over
the issuance, extension and transfer of licenses and regulate the general
conduct of a licensees business. Various states, provinces and school boards
set standards for insurance, qualification of drivers and safety equipment.

PUBLIC TRANSIT SERVICES SEGMENT

Our public transit services business is conducted by Laidlaw Transit Services,
Inc. Laidlaw Transit Services, Inc. is a leading private provider of municipal
public transportation services, specializing in paratransit and fixed-route
contract services. Laidlaw Transit Services, Inc. also operates under the
names of SuTran (Sioux Falls, SD), VanTran (Tucson, AZ) and SafeRide (Arizona
and New Mexico).

For the twelve months ended August 31, 2003, our public transit business had
revenues of $283.1 million

Segment Overview

We offer three types of transit service:



| | (i) |  | Paratransit:We provide door-to-door transportation for the mobility
challenged. Our service offerings include curb-to-curb and door-to-door
services, group service and individual dial-a-ride, to comply with the
Americans with Disabilities Act, or the ADA. We serve general public and
targeted populations. The paratransit business contributed approximately
67% of the total revenues of the public transit segment for fiscal year
2003.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) |  | Fixed-Route:This is comprised of public municipal transit bus
systems providing fixed-route transportation. We operate municipal
transit bus systems and the recruitment, training and management of
drivers, mechanics and support staff needed to provide such services.
The fixed-route business contributed approximately 30% of public
transits total revenues for fiscal year 2003.
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) |  | Other:We provide shuttle services for corporate campuses and
operate reservation call and dispatch centers as well as transit
information centers. We have six contracts in place to provide these
types of services and they contributed approximately 3% of public
transits total revenues for fiscal year 2003.
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our public transit segment operates from 104 locations in 25 states across the
United States to service 146 contracts and transport more than 82 million
passengers per year. With a fleet of approximately 3,800 vehicles, 65% of
which are owned by our clients, we travel over 156 million miles per year.

Market Overview

The public transit market is estimated to be approximately $13 billion based on
annual revenue, of which 11%, or approximately $1.4 billion, is out-sourced to
private sector providers. The total municipal bus fleet in the United States
and Canada is estimated at roughly 65,000 buses, of which 74% are fixed-route
vehicles and 26% are paratransit vehicles. Paratransit services are
predominately provided by private contractors. We are one of the largest
private providers of municipal public transportation services in the United
States.

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Competition

The transit market in the U.S. is highly fragmented with an estimated 6,000
operators. Public transit authorities are the primary competitors, with
approximately 90% of services are operated in-house. Typically, a contract is
a management contract with the transit authority providing the vehicles and
facilities. Transit authorities can apply for and receive up to 80% of the
capital costs for new buildings and buses from the Federal Transit
Administration (FTA). With low barriers to entry, bidding for contracts can be
very competitive. Additionally, the slow down in the United States economy and
the decline in tax revenues (state and local) have produced shortfalls in
funding to transit authorities that have contributed to downward margin
pressure over the past few years.

Contracts

All of public transits revenues are generated under contracts, generally with
three-year maturities and two-year extension options. Our largest contract
represents 9.4% of our public transit segments revenue in fiscal year 2003.

The FTA, in a policy change in May 2002, rescinded the maximum five-year
limitation in contract length. As a result, FTA approval is no longer required
for contract terms exceeding five years. In addition, municipal and transit
authorities are no longer required to bid out contract renewals.

Operations

We operate dispatch centers, brokerage operations, management contracts and
total turnkey operations for both paratransit and fixed-route services.

Public transits operations are largely conducted on a decentralized basis. We
have two operating regions  East and West. Our support functions are more
centralized and include marketing, information systems, and safety functions.

We have developed proprietary software that assists with dispatching our fleet
and provides route modification of vehicles in service. It matches
reservations and new trip requests with existing routes to maximize shared
trips, improve passenger/vehicle productivity and enhance customer service.

Employees

As of August 31, 2003, our public transit business had approximately 5,400
employees, 32% of which are unionized under 37 union contracts. Approximately
16% of the collective bargaining agreements, representing approximately 600
employees, are subject to renegotiation in fiscal year 2004. Driver
compensation is market-driven and can be determined or specified by a Transit
Authority during the competitive bidding process. We believe that our
relations with our employees in our public transit business are good. During
the past five years, we have not had any significant labor disruption in our
public transit business that had a material adverse effect on our business,
financial condition or results of operations.

Fuel

Fuel price increases, wherever possible, are passed through to our customers or
are subject to escalation clauses. We further mitigate price increases by
requiring our customers to provide the fuel and have been able to either secure
fuel escalation clauses or negotiate with the customer to agree to furnish fuel
in 95% of all contracts bid or renewed in the last two years. Approximately
60% of our fuel purchases are retail pump purchases of fuel while vehicles are
in service. There is no financial hedging instrument for retail pump purchases
currently available to us. In 2003, fuel expense represented 4.6% of total
revenues for the public transit segment.

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Vehicle Fleet

As of August 31, 2003, public transit operated approximately 3,800 vehicles, of
which approximately 1,350, mostly paratransit vehicles, were owned by us and
the remaining units were owned and provided by customers. Our fleet consists
of vans, sedans and body-on-chassis small buses configured to the individual
requirements of each contract. Vehicle life is usually tied to the contract
that the vehicle is providing services for. Vehicles are usually retired and
sold at the end of the revenue contract.

Safety

Public transit operates under very stringent safety standards. In addition to
thorough background checks and testing at the time of hire, we require
mandatory training both in the classroom and behind the wheel. The average
training requirement for our drivers is 100 hours. Public transit is heavily
regulated by customers, states and federal agencies and undergoes both internal
and external compliance audits.

GREYHOUND SEGMENT

Greyhound is the only national provider of scheduled inter-city bus
transportation services in the United States and Canada. Collectively referred
to as Greyhound, we operate in the U.S. as Greyhound Lines, Inc. (Greyhound
U.S.), with headquarters in Dallas, Texas, and in Canada as Greyhound Canada
Transportation Corporation (Greyhound Canada), with headquarters in Calgary,
Alberta. We serve the value-oriented customer by connecting rural and urban
markets throughout the United States and Canada, offering passenger service of
20,000 daily departures to more than 3,700 destinations with a fleet of
approximately 3,700 buses. Additionally, we provide package express service,
charter bus service and, in some of our terminals, food service. We also
provide passenger services under private contract and package tours to major
tourist regions in the United States and Canada.

Our U.S. operations serve more than 2,600 destinations with a fleet of
approximately 3,000 buses. Greyhound Canada travels to more than 1,100
destinations using a fleet of approximately 700 buses.

For the twelve months ended August 31, 2003, our Greyhound services had revenue
of $1,204.2 million (U.S. $991.8 million, Canada $212.4 million).

Segment Overview

Greyhound operates in four major businesses: (i) passenger service, (ii)
package express, (iii) tour and charter and (iv) food service and other.



|(i) |  | Passenger Service. Greyhound provides inter-city bus transportation to
cities and towns in urban and rural areas throughout the U.S. and Canada.
The typical passenger travels to visit friends and relatives and generally
has an annual income below $35,000. Our core customers are short-haul
travelers (traveling 450 miles or less), comprising 78% of total
passengers and 50% of our Greyhound services revenue. Long-haul travel
contributes approximately 22% of the passengers and 50% of our Greyhound
services revenue. Passenger service contributes approximately 77% of
Greyhounds total revenues.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Additionally, we have interline agreements and alliances with other bus
carriers as well as with other providers of transportation such as
airport and rail carriers in selected cities. These alliances allow us
to provide cross-border transportation to and from Mexico and access to
smaller towns in the U.S. and Canada that are complementary to our
existing service schedules. Within Mexico and the southwestern United
States, we operate under the brand names of Crucero, Autobuses Amigos,
Autobuses Americanos
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | and Omnibus Americanos. We sell bus tickets in Mexico through our
Hispanic alliances. Within Canada, we operate in Quebec under the brand
name Voyageur.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) |  | Package Express. Our package express service targets commercial shippers
and delivery companies that require rapid delivery of small parcels,
typically within 400 miles. Our services include standard delivery, which
is the traditional low-value, terminal-to-terminal delivery service, as
well as priority and same day delivery, which is a premium priced product
typically delivered door to door. With our extensive network and multiple
schedules, we are able to provide expedited service, especially to rural
areas. In the U.S., package express revenues represent 4% of total
Greyhound U.S. revenues; in Canada, package express revenues represent 26%
of total Greyhound Canada revenues. Package express service contributes
approximately 8% of Greyhounds total revenues.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iii) |  | Tour and Charter. We offer charter services whereby a group of
individuals can reserve a bus and driver in certain cities for
transportation to and from specific events, such as concerts, sporting
events, casinos and conventions. Additionally we operate meet and greet
services for cruise lines at eight ports in the United States. The meet
and greet service consists of meeting cruise line passengers (usually at
airports) and transferring these passengers and their baggage to and from
cruise ships. Tour and Charter contributes approximately 8% of
Greyhounds total revenues.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iv) |  | Food Service and Other. We offer food service and gift items for
purchase in more than 58 terminal locations. Food service and other
represents approximately 7% of Greyhounds total revenues.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Marketing and Sales

Our marketing and advertising philosophy is geared toward stimulating extra
travel through price awareness, improving the awareness and image of Greyhound
among potential customers and inducing first-time and repeat travel. We use
various means to advertise passenger travel business, including radio,
television and print media (primarily yellow pages). Additionally, we offer
around-the-clock fare and schedule quotations as well as advance discount
ticket purchasing via a toll-free telephone number through our telephone
information centers and through our Internet website: www.greyhound.com.

Travelers can purchase tickets at approximately 150 company-operated bus
terminals and approximately 2,100 agency-operated terminals and sales agencies.
Discounts are offered on tickets purchased seven days in advance of travel.
However, most tickets are purchased and used on the day of departure.

Operations

Maintenance garages are maintained at 30 strategic locations and are
supplemented by company-operated service islands and fueling points. We have
approximately 6,500 drivers based in approximately 105 different locations
across the United States and Canada. Subsidiaries of Greyhound U.S.
independently coordinate and manage their own driver and fleet resources.

Information technology is an integral component of our operations. Our
information systems support, among other things, our website, scheduling and
pricing, dispatch, operations planning, bus maintenance, telephone information
center, customer service, point of sale, payroll and finance functions. We also
use an automated fare and schedule quotation and ticketing system, called
TRIPS, at approximately 440 locations.

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Competition



|(i) |  | Passenger Service. The transportation industry is highly competitive.
Our primary sources of competition for passengers are automobile travel,
low cost air travel from both regional and national airlines and, in some
markets, regional bus companies and trains. Price, destination choices
and convenient schedules are the ways in which we meet this competitive
challenge.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Competition by U.S.-based bus and van operators for the market
represented by Spanish speaking customers in the U.S. is growing. We
believe that changes under the North American Free Trade Agreement
(NAFTA) will increase the volume of bus travel between Mexico and the
U.S. and provide growth opportunities while also increasing competition.
We, through several joint ventures, provide through-bus service at most
major gateways between the United States and Mexico. Additionally, in
some of our terminals, we sell tickets for travel in Mexico on Grupo
Estrella Blanca, or GEB, a Mexico-based bus carrier, and GEB sells
tickets for travel in the U.S. on Greyhound Lines in certain of their
terminals in Mexico.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) |  | Package Express. We face competition in our package delivery service
from local courier services, the U.S. Postal Service and overnight express
and ground carriers. We continue to develop programs to meet this
competition and further develop our package delivery business. These
programs focus on system upgrades to improve service, billing and tracking
for our customers, localized marketing strategies, and local, regional or
national alliances with pick up and delivery carriers.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iii) |  | Tour and Charter. Charter services are provided by several thousand
local operators as well as a few regional carriers. Pricing, type of
equipment and consistency in service are the principal factors both in
obtaining new business and retaining existing customers. We principally
compete based upon price and consistency of service, and continue to
develop diversified product offerings in order to meet customer demands.
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iv) |  | Food Service and Other. Competition is limited due to the captive nature
of the food service operations in our terminals. In some locations,
however, fast food restaurants and convenience stores in close proximity
to our terminals can pose a competitive factor.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Vehicle Fleet

During the twelve months ended August 31, 2003, we took delivery of 219 new
buses, and retired 256 buses, resulting in a fleet of approximately 3,700 buses
as of August 31, 2003, of which approximately 2,000 buses were owned and 1,700
were leased. The average age of our bus fleet was 7.6 years at August 31, 2003.

We have a long-term supply agreement with Motor Coach Industries, Inc (MCI)
that extends through 2007, but may be canceled by either party at the end of
any year upon six months notice. If Greyhound acquires new buses, we must
purchase at least 80% of the new bus requirements from MCI pursuant to the
agreement.

Operating Environment

Our business is affected by changes in economic conditions, consumer
preferences and spending patterns, medical and wage inflation, demographic
trends, consumer perceptions of transportation safety, costs of safety,
security and environmental measures, road congestion and the weather.

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Safety

We have increased our spending for safety and security by approximately $5
million annually as a result of the events of September 11, 2001. Although
Greyhound U.S. and our subsidiaries were recently awarded a federal grant of
$10 million for the twelve month period ending August 19, 2004, the grant is
for spending above current levels and there can be no assurance that funding
will continue in the future. Additionally, it is possible that the
Transportation Security Administration could mandate security procedures that
exceed the level currently provided by us, further increasing costs. Past
terrorist acts and incidents on buses, or perceptions about future attacks,
including changes in the homeland security threat levels, have and could
continue to adversely affect the demand for our services.

Seasonality

Our Greyhound business is seasonal in nature and generally follows the pattern
of the travel industry as a whole, with peaks during the summer months and the
holiday season. As a result, our Greyhound services business cash flows are
also seasonal, with a disproportionate amount of annual cash flows being
generated during the peak travel periods.

Employees

As of August 31, 2003, we employed approximately 16,000 workers, consisting of
approximately 4,400 terminal employees, 6,500 drivers, 1,600 supervisory
personnel, 1,000 mechanics, 600 telephone information agents, and 1,900
clerical workers. Of the total workforce, approximately 13,100 are full-time
employees and approximately 2,900 are part-time employees.

At August 31, 2003, approximately 53% of our Greyhound employees were
represented by collective bargaining agreements. We have agreements with a
number of unions, however, the largest agreement is with the Amalgamated
Transit Union (ATU), Local 1700. It covers approximately 5,300 of our U.S.
employees, mostly drivers and maintenance employees, and expires on January 31,
2004. We have started contract negotiations in an attempt to enter into a new
agreement prior to expiration. As of the date of this report, the parties have
not reached an agreement on a new contract. There is no assurance that
Greyhound will reach an agreement with the ATU. If Greyhounds ATU unionized
employees were to engage in a strike or other work stoppage prior to such
expiration, or if Greyhound were unable to negotiate acceptable extensions of
this agreement resulting in a strike or other work stoppage by the affected
workers, Greyhound could experience a significant disruption of operations,
which could have a material adverse effect on our business, financial condition
and results of operations.

Trademarks

We own the Greyhound name and trademarks and the image of the running dog
trademarks worldwide. The duration of these trademarks are potentially
indefinite, as long as we continue to use them. We believe that this name and
the trademarks have substantial consumer awareness.

Regulation

U.S. Department of Transportation. As a motor carrier engaged in interstate as
well as intrastate transportation of passengers and express shipments,
Greyhound U.S. and Greyhound Canada (for trips into the U.S.) are registered
with the Department of Transportation, or DOT, and are also regulated by its
Surface Transportation Board.

Canada Transportation Act.Greyhound Canada operates under the Canada
Transportation Act, or CTA. The CTA provides for each provinces department of
transportation, through the respective highway traffic boards, to regulate
provincial scheduled service. We are required to

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file tariffs with schedule and rate information for our passenger services.
The CTA does not cover package express or tour and charter operations; these
segments are unregulated.

Other.Greyhound U.S. is subject to regulation under the ADA pursuant to
regulations adopted by the DOT. The regulations require that all new buses
acquired by us for our fixed route operations must be equipped with wheelchair
lifts. Additionally, by October 2006, one-half of the U.S. fleet involved in
fixed route operations will be required to be lift-equipped and, by October
2012, the fleet must be entirely lift-equipped. The regulations do not require
the retrofitting of existing buses with lift equipment or the purchase of
accessible used buses. Instead, the regulations permit the operation to
determine the manner in which it will meet the 50% and 100% mandates. At
August 31, 2003, approximately 18% of our U.S. fleet deployed in fixed route
operations were wheelchair lift-equipped. To meet the 50% requirement by
October 2006, and assuming no change in current fleet size, we must replace 867
of our non-lift-equipped buses with lift-equipped buses over the next three
years.

Under an initiative implemented in the spring of 2000, and continuing until the
fleet is fully equipped, we provide an accessible bus to any disabled passenger
who provides at least 48 hours notice. Currently the added cost of a built-in
lift device in a new bus is approximately $35,000 plus additional maintenance
and employee training costs.

Insurance

The DOT has granted Greyhound U.S. authority to self-insure its automobile
liability exposure up to $5.0 million per incident. To maintain self-insurance
authority, Greyhound U.S. is required to provide periodic financial information
and claims reports, maintain a satisfactory safety rating by the DOT, a
tangible net worth of $10.0 million and a $15.0 million trust fund to provide
security for payment of claims. At December 31, 2002, and continuing to date,
Greyhound U.S.s tangible net worth has fallen below the minimum required. In
July 2003, we received a waiver of this requirement through December 31, 2004.
As a condition for the waiver, Greyhound U.S. was required to increase the
self-insurance trust by $2.7 million. The DOT will also require Greyhound U.S.
to make additional contributions to the trust fund to maintain a level
(measured semi-annually) in excess of self-insured reserves. The loss or
further modifications of self-insurance authority from the DOT could have a
material adverse effect on Greyhound U.S.s liquidity, financial condition, and
results of operations.

HEALTHCARE TRANSPORTATION SERVICES SEGMENT

American Medical Response, Inc., or AMR, is headquartered in Denver, Colorado
and provides pre-hospital medical care through emergency and non-emergency
ambulance response services. We are the United States largest provider of
medical transportation services, operating from locations in 32 states with
approximately 18,500 employees in 263 operating locations.

AMR treated and transported approximately 3.7 million patients during fiscal
year 2003 using a fleet of approximately 2,900 ambulances, 650 wheelchair cars
and 750 other support vehicles.

For the twelve months ended August 31, 2003, AMR had net revenue of $1,015.2
million.

Segment Overview

AMR has contracts with communities and other healthcare providers and third
party payors to provide full-service exclusive and non-exclusive emergency
transport services. Approximately 50% of AMRs net revenues are generated from
providing emergency transport services. Revenues generated from non-emergency
transportation including critical care and wheelchair transport are 39% of
total net revenues. The remaining 11% of AMR net revenues are earned by
providing training and shared operating arrangements with local fire
departments and other

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municipalities, contracted dispatching, comprehensive onsite medical care and
transport services for special events.

Contracts

As of the end of fiscal year 2003, AMR had 149 agreements with municipal or
county public safety agencies to provide contracts for emergency (9-1-1)
response and more than 5,000 client relationships to provide non-emergency,
critical care and wheelchair transports. Approximately 43% of AMRs revenues
are provided under fixed contracts to provide emergency or non-emergency
transport. The remaining 57% is typically collected from third party or
private payors. Our largest contract with a community represents $35 million
in annual net revenues or 3.4% of AMRs total net revenue.

Contracts with communities to provide emergency transport services are
typically three to five years in length and are generally obtained through a
competitive bidding process. In some instances where we are the existing
provider, communities elect to renegotiate existing contracts rather than
initiate new bidding processes.

Revenue from our contracts with communities and healthcare providers is
typically collected from invoices generated by AMR for each patient transport.
In some cases, revenue is based on negotiated fees paid periodically by the
community, whereby patients are then billed directly by the community.

We also market our non-emergency ambulance services to hospitals, health
maintenance organizations, convalescent homes and other health care facilities
that require a stable and reliable source of medical transportation for their
patients. A significant portion of our non-emergency transports is provided to
such facilities and organizations in competitive markets without specific
contracts. Contracts with hospitals and other facilities and organizations for
non-emergency services are typically two years in length.

Market Overview Competition

AMR is the largest provider of emergency and non-emergency ambulance services
in the United States with an 8% share of the estimated $12 billion ambulance
services market. Approximately 60% of the total emergency and non-emergency
market is serviced by private providers like AMR. Based on public filings, our
closest competitor generates less than one-half the net revenue that we
realized in fiscal year 2003. The residual market share is fragmented among
more than 14,000 private, public and non-profit sector providers.

Regulation

Ambulance services are affected by regulations covering licensing, rates,
health, safety, insurance and other matters. Most emergency or 911 contracts
are granted exclusive supplier status through the issuance of a certificate of
need or a public service agreement. Some municipalities divide requirements
into service zones. Exclusive supplier status agreements are linked to service
level measurements regarding response times and performance. Some
municipalities also govern or set rates that may be charged for the ambulance
services.

A substantial majority of our ambulance services revenues are attributable to
payments received from third-party payors including Medicare, Medicaid and
private insurers. We are subject to various regulatory requirements in
connection with our participation in the Medicare and Medicaid programs. The
United States Federal Centers for Medicare and Medicaid Services (formerly
Healthcare Financing Administration) have implemented rules that have revised
the policy on Medicare coverage of ambulance services. A new fee schedule for
Medicare reimbursement of ambulance services became effective on April 1, 2002.

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We, like other Medicare and Medicaid providers, are subject to governmental
audits of our Medicare and Medicaid reimbursement claims. Accordingly,
retroactive revenue adjustments from these programs could occur. We are also
subject to the Medicare and Medicaid fraud and abuse laws that prohibit any
bribe, kick-back or rebate in return for the referral of Medicare or Medicaid
patients. Violations of these prohibitions may result in civil and criminal
penalties and exclusion from participation in the Medicare and Medicaid
programs. See Item 3. Legal Proceedings.

AMR is also subject to other federal, state and local regulations, including
the federally mandated Health Insurance Portability and Accountability Act
(HIPAA) designed to protect the privacy of patients health information handled
by health care providers.

Operations

Dispatch and Communications

We use location and detailed system status plans to position our ambulances and
medical crews within a designated service area in an effort to reduce response
time. Generally, ambulance units are not stationed at fixed sites but are
constantly repositioned through flexible deployment systems. Communication
centers control the deployment and dispatch of ambulances in response to
emergency calls. These centers may be owned and operated by either local
communities or AMR.

Billing and Collections

We, from time to time, establish usual and customary rates for the services we
provide. In certain cases, however, we are required to reduce these rates due
to local ordinances or regulatory restrictions. In locations where we face
rate restrictions and in the case of Medicare and Medicaid billing, we have
negotiated reduced rates with payors to reflect the restrictions. In addition,
we have established reserves to allow for services provided for which we cannot
collect fees. As a result, our reported revenues are equal to our gross
billings based on our usual and customary rates, net of contractual allowances
for restricted rates and allowances for uncompensated care.

The collection process varies by payor. We have a collection staff specially
trained in third-party coverage and reimbursement procedures. An account may
move among several payor sources before final collection or resolution is
reached. We also engage collection agencies to collect delinquent accounts
primarily from private payors.

Payor Mix

We derive a significant percentage of our revenue from reimbursement by
third-party payors including payments under Medicare, Medicaid, private
insurance and contracts/managed care plans. We also collect payments directly
from patients, including payments under deductible and co-insurance provisions.

Ambulance reimbursements have been and will be affected by the new Medicare Fee
Schedule that is to be phased in over five years. The first and second phases
of the new schedule were effective on April 1, 2002 and January 1, 2003. The
additional phases will become effective on January 1 of 2004 and 2005.
Although AMR has been effective in mitigating the impact of the first two
phases through improvements in billing and collection efforts and efficiencies
in providing ambulance services, there is no assurance it will be able to
mitigate the impact of such fee schedule in the future.

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The table below provides detail of the payor mix:

Medicare
    
    
    39
    %Medicaid
    
    
    4
    %Private Insurance/Contract
    
    
    40
    %Private Pay
    
    
    17
    %100
    %


Vehicle Fleet

We operate 4,300 vehicles, of which approximately 2,900 are ambulances, 650 are
wheelchair cars, and 750 are support vehicles as of August 31, 2003.
Ambulances are generally replaced when they are five years old or accumulate
250,000 miles or as provided in specific contracts. The average capital cost
of an ambulance is approximately $55,000. The average age of our existing
fleet is between three and four years.

Safety

AMR is committed to the safety of our employees, patients and the communities
we serve. We have safety programs that are supported by a number of key
initiatives including, but not limited to: driver qualification standards,
physical agility testing, injury and illness prevention policies and
procedures, monthly safety awareness campaign, road safety monitoring devices,
driver training, safety training, management safety incentives and review of
statistics on safety activities. Additionally, all our vehicles are subjected
to inspection before and after each shift including a bumper-to-bumper
checklist. In addition, there are specific inspections and procedures at 5,000
mile intervals and at 15,000 mile intervals.

Employees

Approximately 85% of our 18,600 employees have daily contact with patients and
include approximately 5,100 paramedics, 7,700 emergency medical technicians
(EMTs) and 300 nurses. Approximately 50% of our employees are represented by
49 collective bargaining agreements with 42 different unions. Approximately
22% of these collective bargaining agreements, representing approximately 2,800
employees, are subject to renegotiation during fiscal year 2004. We believe
that our relations with our ambulance services employees are good. During the
past five years, we have not had any significant labor disruption in our
ambulance services business that had a material adverse effect on our business,
financial condition or results of operations.

EMERGENCY MANAGEMENT SERVICES SEGMENT

EmCare, Inc., or EmCare, headquartered in Dallas, Texas, provides outsourced
services to hospitals, primarily through professional corporations managed by
EmCare and its subsidiaries. We recruit and schedule physicians to provide
services in hospital emergency department and inpatient settings. We also
assist our customers in such operational areas as staff coordination, quality
assurance, departmental accreditation, billing, record keeping, third party
payment, and other administrative services. During fiscal year 2003,
physicians affiliated with EmCare provided services in 36 states for more than
4.5 million visits.

EmCare is the largest provider in the emergency management services sector,
with an approximate 6% market share of the hospital emergency departments and
approximately 16% market share of the total outsourced emergency department.

At each customer site, physicians and other medical professionals are recruited
and scheduled by EmCare to treat patients. A physician at each site
coordinates the delivery of services and acts as a liaison with medical staff
and administration of the hospital. EmCare does not practice medicine, as all
clinical decisions are the sole responsibility of the physicians.

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For the twelve months ended August 31, 2003, EmCare had revenues of $480.6
million.

Market Overview

More than 95% of our emergency management services revenues are derived from
providing emergency department management services.

Contracts

We provide emergency management services under 265 contracts with hospitals,
one for each emergency department that we manage. The agreements with the
hospitals are usually three years in length and are awarded on a competitive
basis.

We receive compensation under three different arrangements:



| | (i) |  | We bill patients and third-party payors directly for the
physician fees, with the hospital billing for all non-physician
related services (70 of 265 contracts),
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) |  | We bill patients and third-party payors directly for the
physician fees, with the hospital billing for all non-physician
related services, and with the hospital paying EmCare an additional
pre-arranged fee for our services (119 of 265 contracts), and
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) |  | We bill hospital clients directly for the services of the
physicians, generally on an hourly basis, with the hospital
ultimately responsible for billing and collecting from their
patients (76 of 265 contracts).
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Depending on contractual agreements with clients, EmCare may bill the
hospitals, the third party payors including patients, or a combination of both
for services provided. In all cases, the hospitals are directly responsible
for billing and collecting for all non-physician-related services. Our average
contract life is approximately 5.5 years.

Insurance

Physicians and other medical professionals contracting with EmCare may be
covered by professional liability insurance underwritten by one of our
subsidiary companies for the services provided under their contracts. While
insurance limits are dictated by individual contract terms, limits are
generally $1 million per medical incident, with a $3 million annual aggregate
per medical professional. Although the majority of the professional liability
insurance available for physicians is provided in this manner, the contracted
physicians may obtain their own professional liability insurance directly or
through the contracting hospital with our consent.

Revenue Composition

Commercial insurers, through managed care plans or traditional commercial
coverage are the largest source of revenues from third-party payors,
representing a combined total of 58% of total third party payor net revenue.
Billings to these payors are billed based on specific fee schedules and are
generally discounted based on negotiated rates with the payors. We do not
accept capitation fees for professional emergency services.

Governmental payors comprise a total of 30% of third-party payor net revenue,
most of which comes from the Federal Medicare program and state-based Medicaid
programs. Government reimbursement is based on specific allowed fees for
each professional procedure.

Patients visiting an emergency department must be assessed and provided with
necessary treatment, regardless of the patients ability to pay. Patients
without private insurance or

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government insurance coverage comprise 12% of patient-billed net revenue. In
locations with high rates of uninsured patients, we receive subsidies from the
hospitals.

Competition

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

In the United States, the emergency department market can be categorized into
two major segments: high volume urban and medium to low volume, non-urban,
community based emergency departments. There are approximately 4,700 emergency
departments in the United States. High volume emergency departments, with
15,000 or more annual visits, represent 51% of the U.S. market. The medium to
low volume, non-urban community based hospitals typically see less than 15,000
annual emergency department patient visits and represent the other 49% of the
U.S. hospitals with emergency departments.

Approximately 3,100 hospitals with emergency departments outsource their
emergency departments. EmCare is one of four companies operating nationally to
provide services to approximately 695 hospital emergency departments. The
balance of the outsourced emergency departments receive services from regional
or local service providers.

Employees

We have approximately 1,000 employees working for EmCare, Inc. or one of its
subsidiaries. In addition, there are approximately 4,000 medical professionals
under contract with EmCare and its subsidiaries. We believe that our relations
with our emergency management services employees are good. During the past
five years, we have not had any significant labor disruption in our emergency
management services business that had a material adverse effect on our
business, financial condition or results of operations.

INSURANCE

Because of the size and risk profile of our education services, healthcare
services and Greyhound services businesses, we have a two-tiered insurance
program to cover our insurance risk in these businesses. Our main insurance
program, including primary retention and a purchased umbrella policy, covers
casualties, which include auto liability, workers compensation and general
liability. Our umbrella policy provides for the potential liability for all of
our businesses above the primary retention of each business. Our insurance
program provides that we arrange for primary retention and coverage purchased
from third-party insurance companies to insure for the catastrophic risk under
the umbrella policy, covering claims exceeding $5.0 million with a cap of
$275.0 million per occurrence. Our education and public transit services
businesses use captive insurance companies located primarily in Barbados,
fronted by third party insurance providers. The primary retention for our
education and public transit services businesses provides for the first $5.0
million of risk per occurrence.

Our ambulance services and Greyhound services businesses have arranged for
primary retention utilizing deductible reimbursement programs fronted by a
third party insurance provider. The primary retention for our ambulance
services business provides for the first $2.0 million of auto liability, $0.5
million of workers compensation, $1.0 million of general liability and $5.0
million of professional liability. The primary retention for our Greyhound
services business provides for the first $3.0 million of auto liability,
workers compensation and general liability. Coverage for claims exceeding
these retention levels and up to $5.0 million per occurrence for

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auto liability, workers compensation and general liability and up to $15.0
million per occurrence for professional liability is purchased from third party
providers.

Our emergency management services business has arranged for primary retention
of its professional liability and workers compensation insurance utilizing
programs fronted by a third party provider for the first $0.5 million per
occurrence for professional liability and the first $0.25 million for workers
compensation. Coverage for claims exceeding these retention levels and up to
$1.0 million per occurrence per physician (aggregate annual limit per physician
of $3.0 million) and coverage of $10.0 million for the organization for
professional liability and up to $5.0 million for workers compensation is
purchased through an outside insurance carrier.




ITEM 2.  PROPERTIES

Our corporate headquarters are located in Naperville, Illinois, with some
administrative functions performed from our offices in Burlington, Ontario. It
is our intent to relocate all corporate headquarter functions in Burlington,
Ontario to our Naperville offices during fiscal year 2004. Our executive
offices in Naperville, Illinois occupy approximately 11,000 square feet of
leased office space.

Our education services business operates school buses and special education
vehicles from 494 locations in the United States and 61 in Canada, of which 167
are owned and 388 are leased or operated under contract. To provide these
services, we operate approximately 42,000 school buses and special education
vehicles. Approximately 39,000 of these vehicles are owned by us while the
balance are owned by the city or municipality.

Our public transit business operates from 95 locations in the United States, of
which four are owned and the balance is leased. To provide these services, we
operate approximately 3,800 paratransit vehicles of which approximately 1,350
were owned by us while the remaining units are owned and provided by our
customers.

Our Greyhound business provides services from approximately 2,250 locations
throughout the United States and Canada. The majority of our locations are
owned and operated by independent agents of Greyhound. We own or lease 652
properties. Greyhound owns or leases approximately 3,700 highway coaches.

American Medical Response operates out of 240 locations in the United States,
of which 15 are owned and the balance are leased. We utilize approximately
3,550 ambulances and wheelchair cars and approximately 750 support vehicles.

EmCare manages 265 hospital emergency departments. We lease 22 facilities to
house administrative, billing and other support functions for this business.

We believe our facilities and equipment are adequate to service our present
business needs.

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ITEM 3.  LEGAL PROCEEDINGS

Proceedings Prior to or During Bankruptcy of Laidlaw Inc.

Prior to filing its petitions in bankruptcy, Laidlaw Inc., our predecessor, had
been named as a defendant in the following actions. Litigation against Laidlaw
was stayed during the pendency of the bankruptcy proceedings. As a result of
the confirmation of the Plan, further proceedings against us are enjoined
except as expressly permitted in the Plan. The Plan did not expressly permit
litigation against us with respect to Nos. 1 and 3-7 below, and No. 2 has been
settled. Further, as a result of our emergence from our chapter 11
proceedings, the claims against us that were not settled were extinguished.



|1. |  | Three actions were filed against Laidlaw and were consolidated under the
caption In re Laidlaw Stockholders Litigation in the United States
District Court for the District of South Carolina. Other defendants were
John Grainger, James Bullock and Leslie Haworth, each former officers of
Laidlaw, and Laidlaws auditors, PricewaterhouseCoopers LLP and
PricewaterhouseCoopers LLP (Canada). Plaintiffs sought to represent a
class of purchasers of Laidlaw common stock for the period of October 15,
1997 through March 13, 2000. Causes of action were alleged pursuant to
Sections 10(b) and 20 of the Securities Exchange Act of 1934 and SEC Rule
10b-5. PricewaterhouseCoopers LLP and PricewaterhouseCoopers LLP (Canada)
settled the claims against them with the plaintiff class. As a result of
the Bankruptcy Courts subordination of these claims against Laidlaw as
described below, Laidlaw and Laidlaw International no longer participate
as parties in this case.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2. |  | Several cases against Laidlaw were consolidated under the caption In re
Laidlaw Bondholders Litigation in the United States District Court for the
District of South Carolina. Other defendants were John Grainger, James
Bullock, Ivan Cairns, Leslie Haworth, Peter Widdrington, Wayne Bishop,
William Cooper, Jack Edwards, William Farlinger, Donald Green, Martha
Hesse, Gordon Ritchie, Stella Thompson, PricewaterhouseCoopers LLP,
Goldman Sachs & Co., Bear Stearns & Co., Inc., Salomon Smith Barney,
Merrill Lynch & Co., Bank One. Corp., CIBC Oppenheimer, Banc of America
Securities, LLC, and TD Securities (USA), Inc. Each of the individual
defendants is a current or former officer or director of Laidlaw or us.
Plaintiffs sought to represent a class of all purchasers of certain bonds
issued by Laidlaw during the period September 24, 1997 through May 12,
2000. Causes of action were asserted against Laidlaw pursuant to Sections
11 and 12(a)(2) of the Securities Act of 1933 with respect to various bond
offerings and pursuant to Section 10(b) of the Exchange Act and SEC Rule
10b-5. With court approval the parties engaged in mediation. On
July 24, 2002, the parties entered into an agreement to settle this matter. The
settlement agreement provides for a release of all claims that the
plaintiffs have and may have against Laidlaw and the other defendants.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | On September 19, 2000, Laidlaw was added as a defendant in a consolidated
amended securities fraud class action that had previously been pending in
the United States District Court for the District of South Carolina
against Safety-Kleen Corp., certain current and former officers and
directors of Laidlaw and Safety-Kleen, including John Grainger, James
Bullock and Leslie Haworth, and PricewaterhouseCoopers LLP. This case was
styled In re Safety-Kleen Corp. Securities Litigation. Safety-Kleen,
which was in a chapter 11 reorganization proceeding, was dismissed as a
defendant. Plaintiffs alleged that, during the class period, in violation
of the federal securities laws, defendants disseminated to the investing
public false and misleading financial statements and press releases
concerning the financial statements and results of operations of Laidlaw
Environmental Services and Safety-Kleen. Plaintiffs further alleged that
the proxy statement, prospectus and registration statement pursuant to
which Laidlaw Environmental Services and the predecessor of Safety-Kleen
were merged contained false and misleading financial information.
PricewaterhouseCoopers
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | LLP agreed to a settlement with the plaintiff class. As a result of the
Bankruptcy Courts subordination of these claims against Laidlaw as
described below, Laidlaw and Laidlaw International no longer participate
as parties in this case.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. |  | A consolidated amended class action complaint for violations of federal
securities laws was filed in the United States District Court for the
District of South Carolina against Laidlaw, certain former officers and
directors of Laidlaw and Safety-Kleen and the auditors of Safety-Kleen and
Laidlaw, PricewaterhouseCoopers LLP and PricewaterhouseCoopers LLP
(Canada), and was captioned In re Safety-Kleen Rollins Shareholders
Litigation. In this complaint, the plaintiffs alleged that the defendants
caused to be disseminated a proxy statement that contained
misrepresentations and omissions of a materially false and misleading
nature. On June 7, 2001, the court dismissed the claims against Laidlaw
and some of the defendants. The plaintiffs then filed a motion seeking
leave to file an amended complaint that asserted a common law claim for
negligent misrepresentation against Laidlaw and other defendants. The
court granted the motion after Laidlaws chapter 11 filing, then
subsequently vacated its order granting the motion with respect to
Laidlaw. As a result of the Bankruptcy Courts subordination of these
claims against Laidlaw as described below, Laidlaw and Laidlaw
International no longer participate as parties in this case.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|5. |  | On January 23, 2001, a case was filed against Laidlaw,
PricewaterhouseCoopers LLP, certain underwriters of Safety-Kleen bonds and
former or current officers or directors of Safety-Kleen in the federal
court in South Carolina captioned In re Safety-Kleen Corp. Bondholders
Securities Litigation. This consolidated complaint consolidated the
allegations originally brought by plaintiffs in a South Carolina District
Court action and a Delaware District Court action against Laidlaw, certain
of its current or former officers and directors and others. Plaintiffs
asserted claims under the federal securities laws and alleged that the
defendants controlled the functions of Safety-Kleen, including the content
and dissemination of its financial statements and public filings, which
plaintiffs contend to be false and misleading. Plaintiffs filed motions
for summary judgment against certain defendants on certain claims, and
certain defendants filed motion for summary judgment, all of which are
pending. As a result of the Bankruptcy Courts subordination of these
claims against Laidlaw as described below, Laidlaw and Laidlaw
International no longer participate as parties in this case.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | On August 7, 2000, plaintiffs in the case captioned Raygar Environmental
Systems International, Inc. v. Laidlaw Inc., Laidlaw Investments, Ltd.,
Laidlaw Transportation, Inc., Laidlaw Environmental Services, Inc., LES,
Inc., Laidlaw Environmental Services (US) Inc., Laidlaw Osco Holdings,
Inc., Laidlaw International, Safety-Kleen Corp. filed an amended complaint
in the U.S. District Court for the Southern District of Mississippi
against the above-listed defendants. The complaint alleged causes of
action for breach of contract, tortious breach of contract, breach of
fiduciary duty, breach of duty of good faith and fair dealing, breach of
duty of confidential relations, usurpation of corporate opportunity,
negligent misrepresentation, fraudulent misrepresentation, violation of
federal antitrust statutes, tortious interference with contractual
relations, tortious interference with prospective contractual relations,
tortious interference with prospective business relationships, fraud and
abuse of superior bargaining power. Plaintiff sought damages in the
amount of $450 million in compensatory damages and $900 million in
punitive damages. Discovery occurred prior to Laidlaw filing bankruptcy,
and a motion to dismiss was pending at that time. As a result of the
Safety-Kleen and Laidlaw bankruptcy filings, this case was stayed in its
entirety and, pursuant to an order of the Mississippi federal court, was
dismissed without prejudice because of inactivity. As a result of the
Bankruptcy Courts disallowance of plaintiffs proofs of claims in
Laidlaws bankruptcy case, as described below, plaintiff is barred from
further asserting any claims against us relating to the complaint.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|7. |  | On November 6, 2000, a compliant was filed in the U.S. District Court for
the Southern District of Mississippi and captioned Federated Holdings,
Inc. v. Laidlaw Inc., Laidlaw Investments, Ltd., Laidlaw Transportation,
Inc., Laidlaw Environmental Services, Inc., LES, Inc., Laidlaw
Environmental Services (US) Inc., Laidlaw Osco Holdings, Inc., Safety-
Kleen Corp. The complaint alleged causes of action for breach of
contract, tortious breach of contract, breach of fiduciary duty, breach of
duty of good faith and fair dealing, breach of duty of confidential
relations, negligent misrepresentation, fraudulent misrepresentation,
violation of federal and state antitrust statutes, tortious interference
with prospective business relationships, fraud, and abuse of superior
bargaining power. Plaintiff sought damages in the amount of $200 million
in compensatory damages and $250 million in punitive damages. The
Mississippi federal court consolidated this case with case no. 6 above
(Raygar) for all purposes. As a result of the Safety-Kleen and Laidlaw
bankruptcy filings, this case was stayed in its entirety and, pursuant to
an order of the Mississippi federal court, was dismissed without prejudice
because of inactivity. As a result of the Bankruptcy Courts disallowance
of plaintiffs proofs of claims in Laidlaws bankruptcy case, as described
below, plaintiff is barred from further asserting any claims against us
relating to the complaint.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Treatment in the Bankruptcy Proceedings of the above-listed cases Nos. 1-7

The plaintiff classes in items nos. 1-4 above and the plaintiffs in items nos.
6-7 each have filed claims in Laidlaws bankruptcy case. Pursuant to an order
of the Bankruptcy Court, dated August 30, 2002, proofs of claims relating to
nos. 1, 3, 4 and 5 above were subordinated to the claims of general unsecured
creditors and classified into a class under the Plan that did not receive any
distributions. In addition, pursuant to an order of the Bankruptcy Court dated
December 13, 2002, after a hearing on the merits, proofs of claims relating
nos. 6 and 7 (Raygar and Federated) were disallowed in their entirety. As a
result, Laidlaw and Laidlaw International have no continuing direct exposure in
any of these cases and such cases are considered closed with respect to us,
except as noted below under the Director and Officer Claim Treatment Letter.

Director and Officer Claim Treatment Letter

Pursuant to the Plan, we were authorized and directed to implement the Director
and Officer Claim Treatment Letter, or the D&O Claim Treatment Letter, among
Laidlaw, the informal steering committees of Laidlaws lenders and bondholders
and certain present or former directors of Laidlaw or its subsidiaries or
affiliates, including Safety-Kleen, or the Directors and Officers. The D&O
Claim Treatment Letter set forth an agreement among the parties with respect to
the treatment of indemnification, reimbursement and other claims by the
Directors and Officers (including certain individuals who have been named as
defendants in the lawsuits described above) with respect to acts or omissions
prior to our emergence from bankruptcy. Among other things, pursuant to the
D&O Claim Treatment Letter, the Directors and Officers will have access to
certain directors and officers insurance, or the D&O Insurance, purchased by us
to cover claims, including those arising from the lawsuits described above. In
addition, the Directors and Officers will have access to a $10 million trust
established by us, or the Defense Trust, to cover claims against the Directors
and Officers not covered by the D&O Insurance. We are obligated to contribute
additional funds to maintain a balance in the Defense Trust of $10 million by
contributing additional funds in $1 million increments, subject to a cap of $10
million in additional funding, which cap decreases over time as described
below. At August 31, 2003, there was $9.2 million in that trust, and no
additional funds have yet been contributed by us. The maximum aggregate
amounts available in the trust and from additional contributions by us will be
reduced to $17.5 million on June 23, 2005; $15 million on June 23, 2007; $12.5
million on June 23, 2009; $10 million on June 23, 2011; and $0 on June 23,
2013. The unexpended balance in the Trust, if any, will revert to us on June
23, 2013.

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General Litigation and Other Disputes

During 2002, the Pension Benefit Guaranty Corporation, or the PBGC, a United
States government corporation that administers the mandatory termination
insurance program for defined benefit pension plans under the Employee
Retirement Income Security Act of 1974, as amended, indicated to Laidlaw that
it would object to the Plan if Laidlaw did not agree to take steps to improve
the funded status of certain defined benefit pension plans that it maintained
for its employees. Laidlaw and the PBGC reached an agreement to address the
concerns of the PBGC. We have certain obligations under this agreement. This
agreement was approved by the Bankruptcy Court as part of the confirmation
hearing held on February 27, 2003 with respect to the Plan, and was executed by
the PBGC, us, and certain of our affiliates on June 18, 2003. See Item 7.
Managements Discussion and Analysis of Financial Condition and Results of
Operations  Liquidity  Potential Pension Plan Funding Requirements and Note
11 of Notes to Consolidated Financial Statements for further discussion of this
matter.

We are the sole shareholder of Greyhound Lines, Inc., which in turn is the sole
shareholder of Sistemas Internacional de Transporte de Autobuses, Inc., or
SITA. SITA owns 51% of Gonzalez, Inc., d/b/a Golden State Transportation. On
November 28, 2001, Golden State and numerous individual employees, including
its senior management, were indicted by a federal grand jury for felony
criminal offenses for allegedly transporting and harboring illegal aliens. The
indictment also seeks forfeiture to the government of all the property of
Golden State, which involves Golden State, SITA and Greyhound Lines since they
are claimants to the property. The defendants have been arraigned on the
indictment and entered pleas of not guilty. Trial dates have been set as to
certain defendants. None of Greyhound, SITA or Laidlaw International have been
charged with any crime.

The government filed a civil forfeiture action against certain Golden State
assets based on allegations similar to those described in the indictment of
Golden State. Neither SITA, Greyhound nor we are a defendant in the forfeiture
action; however, Greyhound and SITA are claimants to the property. Golden
State has entered into a settlement agreement with the government regarding the
criminal and civil forfeiture cases brought by the government. On September
19, 2003, SITA and Greyhound also entered stipulations with the government to
settle SITA and Greyhounds claims to the subject property of the forfeiture
action. Pursuant to these stipulations, Greyhound and SITA agreed to forfeit
certain property and cooperate in the governments ongoing criminal
investigations. In return, the government dropped its forfeiture allegations
against the remaining property originally sought for forfeiture and agreed not
to pursue criminal charges against SITA, Greyhound and their employees arising
out of the events described in the criminal indictment. The bankruptcy court
overseeing the Golden State bankruptcy approved the settlement on November 6,
2003.

Our healthcare businesses are subject to the Medicare and Medicaid fraud and
abuse laws, which prohibit, among other things, any bribe, kick-back or rebate
in return for the referral of Medicare and Medicaid patients. Violation of
these prohibitions may result in civil and criminal penalties and exclusion
from participation in the Medicare and Medicaid programs. We have implemented
policies and procedures that management believes will assure that we are in
substantial compliance with these laws. We are currently undergoing
investigations by certain government agencies as described below and in certain
other matters regarding compliance with Medicare fraud and abuse statutes. We
are cooperating with the government agencies conducting these investigations
and are providing requested information to the government agencies. Management
believes that the outcome of any of these investigations would not have a
material adverse effect on us.

From August 1998 until August 2000, AMR received six subpoenas duces tecum from
the Unites States Attorneys Office. These subpoenas related to billing
matters for emergency transports and specialized services. AMR has reached a
tentative settlement with the United States Attorneys Office under which it
has agreed to pay $3.5 million relating to these matters.

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In June 1999, the U.S. Department of Justice began an investigation of the
billing processes of Regional Emergency Services, a subsidiary of AMR, and of
Florida Hospital Waterman. Regional Emergency Services managed the ambulance
services for Florida Hospital Waterman. The U.S. Department of Justice
reviewed the billing processes of the companies from October 1992 to May 2002.
The U.S. Department of Justice alleged violations by the companies of the False
Claims Act based on the absence of certificates of medical necessity and other
non-compliant billing practices. The parties have reached a tentative
settlement for an aggregate of $20 million, of which AMR will contribute $5
million.

On May 9, 2002, AMR received another subpoena duces tecum from the Office of
the Inspector General. The subpoena requested copies of documents for the
period from January 1993 through May 2002. The subpoena required AMR to
produce a broad range of documents relating to Huguley Hospital and Regional
Emergency Services contracts in Texas, Georgia and Colorado. The claims in
Texas have been resolved pursuant to the $20 million tentative settlement
agreement described above. The government investigations in Georgia and
Colorado are continuing.

We are also a defendant in various lawsuits arising in the ordinary course of
business, primarily cases involving personal injury, property damage or
employment related claims. Based on our assessment of known claims and our
historical claims payout pattern, management believes that there is no
proceeding either threatened or pending against us relating to personal injury
and/or property damage claims and/or employment related that would have a
material adverse effect on us.




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

None.




ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information with respect to the
executive officers of Laidlaw International as of November 24, 2003.

Name
    
    Age
    
    PositionKevin E. Benson
    
    
    56
    
    
    Director, President and Chief Executive OfficerDouglas A. Carty
    
    
    47
    
    
    Senior Vice President and Chief Financial OfficerIvan R. Cairns
    
    
    57
    
    
    Senior Vice President and General CounselWayne R. Bishop
    
    
    45
    
    
    Vice President and ControllerD. Geoffrey Mann
    
    
    39
    
    
    Vice President, TreasurerJeffrey W. Sanders
    
    
    41
    
    
    Vice President, Corporate Development


Biographical information relating to each of our officers is set forth below.

Kevin E. Bensonhas been President and Chief Executive Officer and a director
of the Company since June 23, 2003. From September 2002 to June 23, 2003, Mr.
Benson was President and Chief Executive Officer of Laidlaw Inc., the Companys
predecessor. On June 28, 2001, Laidlaw Inc. filed a voluntary petition for
relief under chapter 11 of the U.S. Bankruptcy Code. The Company emerged from
bankruptcy protection on June 23, 2003. Prior to that, Mr. Benson served as
President and Chief Executive Officer of the Insurance Corporation of British
Columbia from December 2001 until September 2002 and as President of The
Pattison Group, a privately owned company and a conglomerate that owns
interests in numerous businesses across a range of industries, in 2000 and
2001. He previously served as President and Chief Executive Officer of
Canadian Airlines from 1996 until 2000. Prior to joining

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Canadian Airlines in 1995, he served in various capacities with Trizec-Hahn, a
Canadian real estate development company with property holdings in the U.S. and
Canada, joining the company in 1977 and becoming Chief Financial Officer in
1983, President in 1986 and Chief Executive Officer in 1987. Mr. Benson also
serves as a director of Manulife Financial.

Douglas A. Cartyhas been Senior Vice President and Chief Financial Officer of
the Company since June 23, 2003. From January 2003 to June 23, 2003, Mr. Carty
was Senior Vice President and Chief Financial Officer of Laidlaw Inc. Prior to
that, Mr. Carty served as Senior Vice President and Chief Financial Officer of
Atlas Air Worldwide Holdings, an aviation transportation company, from July
2001 until December 2002. From 1990 until July 2001, Mr. Carty was employed
with Canadian Airlines, where he served in a variety of positions, including
Senior Vice President and Chief Financial Officer from 1996 until July 2000.
Mr. Carty also serves as a non-executive Chairman of the Board of Points
International Ltd.

Ivan R. Cairnshas been Senior Vice President and General Counsel of the
Company since June 23, 2003. From October 1990 until June 23, 2003, Mr. Cairns
was Senior Vice President and General Counsel of Laidlaw Inc. Prior to that,
he was Vice President, General Counsel and Secretary of Laidlaw Inc. from
November 1981 until October 1990.

Wayne R. Bishophas been Vice President and Controller of the Company since
June 23, 2003. From April 1997 until June 23, 2003, he served as Vice
President of Laidlaw Inc. and from December 1988 until June 23, 2003, as
Controller of Laidlaw Inc. Mr. Bishop joined Laidlaw Inc. in November 1987 as
Assistant Controller.

D. Geoffrey Mannhas been Vice President, Treasurer of the Company since June
23, 2003. From March 1999 until June 23, 2003, he served as Vice President,
Treasurer of Laidlaw Inc. Prior to that, Mr. Mann was Director, Treasury
Operations of Laidlaw Inc. from December 1996 until March 1999. Mr. Mann
joined Laidlaw Inc. in March 1995 as Manager of Planning and Analysis.

Jeffrey W. Sandershas been Vice President, Corporate Development since August
2003. From May 1999 until July 2003 he served as Senior Vice President and
Chief Financial Officer of Greyhound Lines, Inc. Mr. Sanders joined Greyhound
Lines, Inc. in June 1997 as Vice President, Corporate Development.

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##### Table of Contents






PART II




ITEM 5.  MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Pursuant to the Plan, our common stock was issued on the effective date, June
23, 2003, and commenced trading on the Toronto Stock Exchange under the symbol
BUS. Additionally, the common stock is traded on the over-the-counter in the
United States with trades posted on the OTC Bulletin Board under the symbol
LALW. The initial holders of our common stock were the creditors of the
former company, Laidlaw Inc. Under the Plan, the common stock of our
Predecessor Company, Laidlaw Inc., was cancelled for no consideration.

The following table details the high and low sale prices for the common stock
traded on the over the counter as posted on the OTC Bulletin Board.

HIGH
    
    LOW(in U.S. $)YEAR ENDED AUGUST 31, 2003:First Quarter
    
    NA
    
    NASecond Quarter
    
    NA
    
    NAThird Quarter
    
    NA
    
    NAFourth Quarter (from June 23, 2003)
    
    $
    10.52
    
    
    $
    7.449


The following table details the high and low sale prices for the common stock
traded on the Toronto Stock Exchange.

HIGH
    
    LOW(in Canadian $)YEAR ENDED AUGUST 31, 2003:First Quarter
    
    NA
    
    NASecond Quarter
    
    NA
    
    NAThird Quarter
    
    NA
    
    NAFourth Quarter (from June 23, 2003)
    
    CA$14.60
    
    CA$10.00


On November 24, 2003, the last sale price of the common stock as reported by
the OTC Bulletin Board was $13.00 per share and on the Toronto Stock Exchange
was CA$17.00 per share, and there were 57 holders of record of our common
stock.

We have never paid any cash dividends on our common stock, and our Board of
Directors currently intends to retain all earnings for use in our business for
the foreseeable future. Any future payment of dividends will depend upon our
results of operations, financial condition, cash requirements, restrictions
contained in credit and other agreements and other factors deemed relevant by
the Board of Directors. In addition, covenants in the indenture governing our
senior notes and our senior secured credit facility restrict our ability to pay
dividends and may prohibit the payment of dividends and certain other payments.

RECENT SALES OF UNREGISTERED SECURITIES

As of June 23, 2003, in accordance with the Plan, we issued approximately 103.8
million shares of common stock. Approximately 31.1 million of these shares were
issued to holders of Laidlaw bank debt claims, approximately 57.9 million to
holders of Laidlaw bond debt claims and approximately 11.0 million to holders
of general unsecured claims. In addition, approximately 3.8 million shares
were issued to a trust in connection with Laidlaws settlement with the United
States Pension Benefit Guaranty Corporation relating to the funding level of
certain subsidiary pension funds.

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Section 1145(a)(1) of the Bankruptcy Code exempts the offer and sale of
securities under a plan of reorganization from registration under the
Securities Act of 1933 (the Securities Act) and state securities laws if
three principal requirements are satisfied: (a) the securities must be offered
and sold under a plan of reorganization and must be securities of the debtor,
an affiliate participating in a joint plan with the debtor or a successor to
the debtor under the plan; (b) the recipients of the securities must hold a
prepetition or administrative expense claim against the debtor or an interest
in the debtor; and (c) the securities must be issued entirely in exchange for
the recipients claim against or interest in the debtor, or principally in such
exchange and partly for cash or property. According to the confirmation order
of the U.S. Bankruptcy Court approving the Plan, the offer and sale of the
common stock under the Plan were exempt from registration under the Securities
Act and state securities laws pursuant to Section 1145(a)(1) of the Bankruptcy
Code.

In addition, on June 3, 2003, in connection with the Plan, we issued $406.0
million aggregate principal amount of 10.75% senior notes due 2011. The offer
and sale of the senior notes was made in reliance upon an exemption from
registration under the Securities Act pursuant to Section 4(2) thereof. We
received net proceeds from the sale of these senior notes of approximately
$389.0 million. We used these proceeds, together with borrowings under a
senior secured credit facility, to fund a portion of the cash distributions
provided for under the Plan.

SUMMARY OF EQUITY COMPENSATION PLANS

The Companys 2003 Equity and Performance Incentive Plan (the 2003 Incentive
Plan) was approved by the U.S. Bankruptcy Court on February 27, 2003. Because
the 2003 Incentive Plan was approved by the U.S. Bankruptcy Court as part of
the emergence process, the 2003 Incentive Plan does not require subsequent
approval by the shareholders of the Company. The 2003 Incentive Plan provides
for the grant of stock options, stock appreciation rights, restricted shares,
deferred shares, performance shares, and performance units to officers and
employees of the Company and its subsidiaries. The 2003 Incentive Plan also
provides for the grant of option rights and restricted stock to non-employee
directors. There are 5,000,000 shares of common stock available under the 2003
Incentive Plan. No participant may be granted more than 500,000 option rights,
appreciation rights, deferred shares, or restricted shares, or more than
$1,000,000 worth of performance shares or performance units in any calendar
year. No grants were made under the 2003 Incentive Plan as of August 31, 2003.

The 2003 Incentive Plan is administered by the Board of Directors. The Board
of Directors has the authority to select plan participants, grant awards, and
determine the terms and conditions of such awards. Generally, with respect to
awards granted under the 2003 Incentive Plan, (i) option rights, and
corresponding appreciation rights, vest ratably over not less than a three-year
period, (ii) restricted stock grants are subject to a risk of forfeiture for a
period of not less than three years, (iii) deferred shares are subject to a
deferral period of not less than one year, and (iv) performance shares and
performance units are paid to a plan participant upon the achievement of
management objectives specified in the grant measured over a period specified
in the grant of not less than one year. If stated in the award, the exercise
of option rights, appreciation rights, and restricted stock may also be subject
to the achievement of management objectives, as defined in the 2003 Incentive
Plan.

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ITEM 6.  SELECTED FINANCIAL DATA

The following information should be read in conjunction with our consolidated
financial statements, Management Discussion and Analysis of Financial
Condition and Result of Operations and Business included elsewhere in this
filing.

The Companys and Predecessor Companys Consolidated Financial Statements have
been prepared in accordance with accounting principles generally accepted in
the United States.

Predecessor CompanyFor the period
    
    For the periodJune 1, 2003
    
    September 1, 2002
    
    Year ended August 31,through
    
    throughYear Ended August 31 ($ millions except per share amounts)
    
    August 31, 2003
    
    May 31, 2003
    
    2002
    
    2001
    
    2000
    
    1999Statements of Operations DataRevenue
    
    $
    997.1
    
    
    $
    3,485.7
    
    
    $
    4,432.1
    
    
    $
    4,418.3
    
    
    $
    4,273.1
    
    
    $
    3,712.5Income from operating segments before depreciation
and amortization and goodwill impairment losses
    
    
    63.6
    
    
    
    392.8
    
    
    
    421.0
    
    
    
    383.4
    
    
    
    385.9
    
    
    
    525.1Depreciation and amortization
    
    
    52.1
    
    
    
    229.3
    
    
    
    358.8
    
    
    
    350.3
    
    
    
    347.1
    
    
    
    317.3Goodwill impairment losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    260.0Income (loss) from operating segments
    
    
    11.5
    
    
    
    163.5
    
    
    
    62.2
    
    
    
    33.1
    
    
    
    38.8
    
    
    
    (52.2
    )Income
(loss) from continuing operations before cumulative effect of
change in accounting principles
    
    
    (9.9
    )
    
    
    992.6
    
    
    
    14.9
    
    
    
    (246.5
    )
    
    
    (610.3
    )
    
    
    (177.1
    )Cumulative effect of change in accounting principles
    
    
    
    
    
    
    (2,205.4
    )
    
    
    
    
    
    
    
    
    
    
    (27.3
    )
    
    
    Income (loss) from continuing operations
    
    
    (9.9
    )
    
    
    (1,212.8
    )
    
    
    14.9
    
    
    
    (246.5
    )
    
    
    (637.6
    )
    
    
    (177.1
    )Income (loss) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,672.4
    
    
    
    (1,615.5
    )
    
    
    (941.6
    )Net income (loss)
    
    
    (9.9
    )
    
    
    (1,212.8
    )
    
    
    14.9
    
    
    
    1,425.9
    
    
    
    (2,253.1
    )
    
    
    (1,118.7
    )Earnings (loss) per share from continuing operations before cumulative effect of change in accounting
principles
    
    
    (0.10
    )
    
    
    3.05
    
    
    
    0.05
    
    
    
    (0.76
    )
    
    
    (1.87
    )
    
    
    (0.54
    )Earnings (loss) per share from continuing operations
    
    
    (0.10
    )
    
    
    (3.72
    )
    
    
    0.05
    
    
    
    (0.76
    )
    
    
    (1.95
    )
    
    
    (0.54
    )Earnings (loss) per share from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.13
    
    
    
    (4.94
    )
    
    
    (2.85
    )Earnings (loss) per share
    
    
    (0.10
    )
    
    
    (3.72
    )
    
    
    0.05
    
    
    
    4.37
    
    
    
    (6.89
    )
    
    
    (3.39
    )Dividends per Common Share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.095
    
    
    
    0.186Average number of Common Shares (millions)
    
    
    100.0
    
    
    
    325.9
    
    
    
    325.9
    
    
    
    325.9
    
    
    
    327.0
    
    
    
    330.2Balance Sheet Data (at period end)Cash and cash equivalents
    
    
    100.3
    
    
    
    23.4
    *
    
    $
    343.5
    
    
    $
    281.2
    
    
    $
    108.0
    
    
    $
    58.2Working capital (deficiency)
    
    
    253.2
    
    
    
    289.0
    *
    
    
    482.5
    
    
    
    480.6
    
    
    
    (3,169.3
    )
    
    
    392.9Property and equipment
    
    
    1,669.8
    
    
    
    1,628.9
    *
    
    
    1,677.7
    
    
    
    1,680.7
    
    
    
    1,683.1
    
    
    
    1,635.7Total assets
    
    
    3,852.7
    
    
    
    3,895.3
    *
    
    
    6,211.8
    
    
    
    6,219.8
    
    
    
    6,108.6
    
    
    
    6,920.5Total debt
    
    
    1,214.5
    
    
    
    1,239.1
    *
    
    
    224.7
    
    
    
    280.2
    
    
    
    3,627.7
    
    
    
    3,145.2Liabilities subject to compromise
    
    
    
    
    
    
    
    *
    
    
    3,977.1
    
    
    
    3,978.5
    
    
    
    
    
    
    
    Shareholders equity (deficiency)
    
    
    1,290.3
    
    
    
    1,309.3
    *
    
    
    954.1
    
    
    
    1,029.5
    
    
    
    (398.0
    )
    
    
    1,913.1


* June 1, 2003  Fresh Start Balances

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|ITEM 7. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(all dollar amounts are stated in United States dollars)
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------

General

Corporate overview

We are primarily a bus and healthcare transportation provider in the United
States and Canada. We operate in five reportable segments: Education
services, Public Transit services, Greyhound, Healthcare Transportation
services and Emergency Management services.

Education services.Through our Education services segment, we provide school
bus transportation in the United States and Canada. We operate school buses
and special education vehicles, primarily under the Laidlaw Transit name. As
of August 31, 2003, we had contracts with over 1,000 school boards and
districts in the United States and Canada, as well as various other education
institutions, providing transportation for approximately two million students
each school day. We also use our school bus fleet for charter purposes.

Public Transit services.Through our Public Transit services segment, we
provide municipal transit and paratransit bus transportation within the United
States. There are two main businesses within this market: fixed-route
municipal bus services, which principally operate in urban areas, and
paratransit bus services, for riders with disabilities or who are unable to use
scheduled services. As of August 31, 2003, we provided services to fixed-route
and paratransit municipal bus transportation customers through approximately
146 contracts in the United States.

Greyhound.Greyhound provides scheduled inter-city bus transportation services
in the United States and Canada and is the only national provider of this
service in those areas. Greyhound serves customers by offering scheduled
passenger service that connects rural and urban markets throughout the United
States and Canada. Greyhound also provides package delivery service, charter
bus service and, in certain terminals, food service. In addition, Greyhound
provides package tours to major tourist regions in the United States and
Canada.

Healthcare Transportation services.We provide healthcare transportation
services in the United States. We operate in 32 states primarily under the
American Medical Response name. We offer critical care transportation
services, non-emergency ambulance and transfer services and emergency response
services. In fiscal 2003, we provided approximately 3.7 million ambulance
transports. We provide joint training, shared staffing and stationing
arrangements and contracted dispatching. We also provide comprehensive onsite
medical care and transport services for special events.

Emergency Management services.We provide emergency management services in the
United States to hospital-based emergency departments, operating primarily
under the EmCare name. As of August 31, 2003, we had approximately 265
contracts for the management of emergency departments and provided emergency
services in 36 states to approximately 4.5 million patient visits in fiscal
2003.

Voluntary petitions for reorganization and emergence from Chapter 11

On June 28, 2001, the predecessor company, Laidlaw Inc. and five of its direct
and indirect subsidiaries filed voluntary petitions for relief under chapter 11
of the United States Bankruptcy Code, 11 U.S.C. 101-1330, in the United States
Bankruptcy Court for the Western District of New York (the Bankruptcy Court).
In addition, the Predecessor Company and Laidlaw Investments Ltd. (LIL)
commenced Canadian insolvency proceedings under the Canada Companies

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##### Table of Contents



Creditors Arrangement Act (CCAA) in the Canadian Court. None of the
Predecessor Companys operating subsidiaries were included in the filings.

The Predecessor Company reorganized its affairs under the protection of the
Bankruptcy Code and the CCAA and the Plan for itself and the other Debtors. On
February 27, 2003, the Bankruptcy Court entered an order confirming the Plan.
On February 28, 2003, the Canadian Court issued an order recognizing the
Bankruptcy Courts confirmation order and implementing it in Canada with
respect to the Predecessor Companys Canadian insolvency proceeding. The Plan
provided for the satisfaction of claims against and interests in the
Predecessor Company and the other Debtors, including the liabilities subject to
compromise. On June 6, 2003 the Predecessor Company received final financing
commitments and on June 23, 2003, the Company emerged from bankruptcy
protection. In accordance with the terms of the Plan, the Predecessor Company
engaged in an internal restructuring that resulted in the transfer, directly or
indirectly, of all the assets of the Predecessor Company to LIL, which
domesticated into the United States as a Delaware corporation and changed its
name to Laidlaw International, Inc.

Critical Accounting Policies

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

Claims liability and professional liability reserves

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

Revenue recognition in the healthcare services businesses

Revenue is recognized at the time of service and is recorded at amounts
estimated to be recoverable, based upon recent experience, under reimbursement
arrangements with third-party payors, including Medicare, Medicaid, private
insurers, managed care organizations and hospitals or directly from patients.
In 2003, we derived approximately 40% of our collections in the Healthcare
services segments from Medicare and Medicaid, 8% from contracted hospitals, 36%
from private insurers, including prepaid health plans and other sources, and
16% directly from patients.

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

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Income Tax Valuation Allowance

As discussed in Note 17 of the Notes to the Consolidated Financial Statements,
the Company has significant net deferred tax assets resulting from net
operating loss (NOL) and interest deduction carry forwards and other
deductible temporary differences that will reduce taxable income in future
periods. Statement of Financial Accounting Standards No. 109 Accounting for
Income Taxes requires that a valuation allowance be established when it is
more likely than not that all or a portion of net deferred tax assets will
not be realized. A review of all available positive and negative evidence
needs to be considered, including expected reversals of significant deductible
temporary differences, a companys recent financial performance, the market
environment in which a company operates, tax planning strategies and the length
of NOL and interest deduction carryforward period. Furthermore, the weight
given to the potential effect of negative and positive evidence should be
commensurate with the extent to which it can be objectively verified. Due to
the highly leveraged capital structure (and related interest expense) and
uncertain financial condition of the Predecessor Company, management concluded
that it was appropriate to record a full valuation allowance against its net
deferred income tax assets. Pursuant to the Plan, the level of debt carried by
the Company upon emergence from bankruptcy was substantially reduced. As a
result, management concluded that it was more likely than not, that $313.6
million of deferred tax assets would not be realized and, as part of its fresh
start adjustment at June 1, 2003, recorded a valuation allowance for that
amount. Certain future events may result in the reduction of the valuation
allowance. Up to $313.6 million of such reduction would reduce goodwill and
other intangibles in existence at fresh-start and thereafter, would be reported
as an addition to share premium.

Pension

The determination of our obligation and expense for pension benefits is
dependent on the selection of certain assumptions and factors. These include
assumptions about the discount rate, the expected return on plan assets and the
rate of future compensation increase as determined by management. In addition,
our actuarial consultants also use factors to estimate such items as retirement
age and mortality tables. The assumptions and factors we use may differ
materially from actual results due to changing market conditions, earlier or
later retirement ages or longer or shorter life spans of participants. These
differences may result in a significant impact to the amount of pension
obligation or expense recorded by us. During fiscal 2002 and 2003, we
experienced a reduction in interest rates and a deterioration in plan returns.
If this trend continues, we may have to fund amounts to the pension plans in
future years in addition to the funding discussed in Note 11 of the Notes to
the Consolidated Financial Statements, whereby we have committed to make
substantial cash contributions to certain Greyhound U.S. pension plans, in
addition to contributions required under applicable law.

Contingencies

As discussed in Note 22 of the Notes to the Consolidated Financial Statements,
management is unable to make a reasonable estimate of the liabilities that may
result from the final resolution of certain contingencies disclosed. Further
assessments of the potential liability will be made as additional information
becomes available. Management currently does not believe that these matters
will have a material adverse affect on our consolidated financial position. It
is possible, however, that results of operations could be materially affected
by changes in managements assumptions relating to these matters or the actual
final resolution of these proceedings.

Results of Operations

As is more fully discussed in Note 2  Fresh Start Accounting of the Notes
to the Consolidated Financial Statements, we adopted fresh start accounting
pursuant to the guidance provided by the American Institute of Certified Public
Accountants Statement of Position 90-7, Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code. For financial reporting

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##### Table of Contents



purposes, the effective date of the reorganization was June 1, 2003 and our
results of operations and cash flows have been separated as pre-May 31 and
post-May 31, 2003 due to a change in basis of accounting in the underlying
assets and liabilities. For purposes of the following discussion, we refer to
our results prior to May 31, 2003 as results for the Predecessor Company and we
refer to our results after May 31, 2003 as results for the Company. The
Predecessor Company financial data has been compared in the section Comparison
of the Predecessor Company Results of Operations for the Nine Months Ended May
31, 2003 to the Year Ended August 31, 2002 and certain financial data for the
twelve month period ended August 31, 2003 has been combined (the combined year
ended August 31, 2003) and discussed in relation to the year ended August 31,
2002 in the section Year Ended August 31, 2003 Compared with the Year Ended
August 31, 2002. However, for the reasons described in Note 2 and due to
other non-recurring adjustments, the Predecessor Companys financial statements
for the periods prior to our emergence from bankruptcy may not be comparable to
the Companys financial statements for the three months ended August 31, 2003,
and our results of operations prior to emergence from bankruptcy, including the
nine-month period ended May 31, 2003, are not indicative of future results.
Readers should, therefore, review this material with caution and not rely on
the information concerning the Predecessor Company as being indicative of our
future results or providing an accurate comparison of financial performance.

In addition, the combined year ended August 31, 2003 information presented
below does not comply with AICPAs Statement of Position 90-7 Financial
Reporting by Entities in Reorganization under the Bankruptcy Code, which calls
for separate reporting for the Company and the Predecessor Company.

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Three months ended August 31, 2003 and Predecessor Company nine months ended
May 31, 2003 and year ended August 31, 2003, 2002 and 2001 results of
operations

PercentagePercentage of Revenue
    
    Increase (Decrease)Nine MonthsThree Months
    
    Nine Months
    
    
    
    
    
    Year ended
    
    
    
    
    
    ended May 31,ended August 31,
    
    ended May 31,
    
    August 31,
    
    2003
    
    Year 2003
    
    Year 20022003
    
    2003
    
    2003
    
    2002
    
    2001
    
    Over 2002
    
    Over 2002
    
    Over 2001Revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    (21.4
    %)
    
    
    1.1
    %
    
    
    0.3
    %Compensation expenses
    
    
    58.3
    
    
    
    57.4
    
    
    
    57.6
    
    
    
    56.9
    
    
    
    57.3
    
    
    
    (20.7
    )
    
    
    2.4
    
    
    
    (0.4
    )Accident claims expense and
professional liability
    
    
    6.3
    
    
    
    6.9
    
    
    
    6.8
    
    
    
    7.4
    
    
    
    7.8
    
    
    
    (25.9
    )
    
    
    (6.6
    )
    
    
    (4.7
    )Vehicle related costs
    
    
    7.5
    
    
    
    5.8
    
    
    
    6.2
    
    
    
    6.1
    
    
    
    6.1
    
    
    
    (25.7
    )
    
    
    1.7
    
    
    
    1.9Occupancy costs
    
    
    5.2
    
    
    
    4.3
    
    
    
    4.5
    
    
    
    4.6
    
    
    
    4.3
    
    
    
    (25.6
    )
    
    
    (0.2
    )
    
    
    5.9Fuel expense
    
    
    3.7
    
    
    
    3.8
    
    
    
    3.8
    
    
    
    3.7
    
    
    
    4.4
    
    
    
    (18.2
    )
    
    
    4.4
    
    
    
    (16.2
    )Depreciation expense
    
    
    4.8
    
    
    
    6.6
    
    
    
    6.2
    
    
    
    6.1
    
    
    
    5.9
    
    
    
    (15.6
    )
    
    
    2.0
    
    
    
    3.6Amortization expense
    
    
    0.4
    
    
    
    
    
    
    
    0.1
    
    
    
    2.0
    
    
    
    2.0
    
    
    
    (99.0
    )
    
    
    (94.0
    )
    
    
    (1.1
    )Other operating expense
    
    
    12.6
    
    
    
    10.5
    
    
    
    10.9
    
    
    
    11.8
    
    
    
    11.5
    
    
    
    (30.6
    )
    
    
    (6.6
    )
    
    
    3.5Income from operating segments
    
    
    1.2
    
    
    
    4.7
    
    
    
    3.9
    
    
    
    1.4
    
    
    
    0.7
    
    
    
    162.9
    
    
    
    181.4
    
    
    
    87.9Interest expense
    
    
    (3.2
    )
    
    
    (0.6
    )
    
    
    (1.1
    )
    
    
    (0.6
    )
    
    
    (6.1
    )Gain on discharge of debt
    
    
    
    
    
    
    42.5
    
    
    
    33.1
    
    
    
    
    
    
    
    Fresh start accounting adjustments
    
    
    
    
    
    
    (17.5
    )
    
    
    (13.6
    )
    
    
    
    
    
    
    Other financing related expenses
    
    
    
    
    
    
    (1.0
    )
    
    
    (0.8
    )
    
    
    (1.0
    )
    
    
    (1.4
    )Other income
    
    
    
    
    
    
    0.5
    
    
    
    0.3
    
    
    
    0.3
    
    
    
    0.2Income (loss) from continuing
operations before income taxes
and cumulative effect of change
in accounting principle
    
    
    (2.0
    )
    
    
    28.6
    
    
    
    21.8
    
    
    
    0.1
    
    
    
    (6.6
    )Income tax recovery (expense)
    
    
    1.0
    
    
    
    (0.1
    )
    
    
    0.1
    
    
    
    0.2
    
    
    
    1.0Income (loss) from continuing
operations before cumulative
effect of change in accounting
principle
    
    
    (1.0
    )
    
    
    28.5
    
    
    
    21.9
    
    
    
    0.3
    
    
    
    (5.6
    )Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    (63.3
    )
    
    
    (49.2
    )
    
    
    
    
    
    
    Income (loss) from continuing
operations
    
    
    (1.0
    )
    
    
    (34.8
    )
    
    
    (27.3
    )
    
    
    0.3
    
    
    
    (5.6
    )Income from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37.9Net income (loss)
    
    
    (1.0
    )%
    
    
    (34.8
    )%
    
    
    (27.3
    )%
    
    
    0.3
    %
    
    
    32.3
    %


Several expense categories including compensation expense, vehicle related
costs, occupancy costs and other operating expenses historically increase as a
percentage of revenue in the last quarter of the fiscal year. This is a result
of lower revenue in the fourth quarter as our Education services segment
experiences a significant decline in revenue due to school vacations whereas a
majority of the fixed expenses continue to be absorbed. A notable exception is
depreciation, which decreases as a percentage of revenue in the fourth quarter
as Education services depreciation is lower as fewer miles are driven during
the summer period. Accordingly, income from operating segments is historically
lower in the last quarter of the fiscal year.

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##### Table of Contents



Revenue

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

RevenueFor the Three Months EndedAugust 31,2003Education services
    
    $
    184.9
    
    
    
    18.5
    %Public Transit services
    
    
    71.0
    
    
    
    7.1Greyhound
    
    
    356.7
    
    
    
    35.8Healthcare Transportation services
    
    
    255.9
    
    
    
    25.7Emergency Management services
    
    
    128.6
    
    
    
    12.9Total
    
    $
    997.1
    
    
    
    100.0
    %


RevenueFor the
Year Ended August 31,For the Nine Monthsended May 31, 2003
    
    2003
    
    2002
    2001Education services
    
    $
    1,314.8
    
    
    
    37.7
    %
    
    $
    1,499.7
    
    
    
    33.5
    %
    
    $
    1,479.7
    
    
    
    33.4
    %
    
    $
    1,462.1
    
    
    
    33.1
    %Public Transit services
    
    
    212.1
    
    
    
    6.1
    
    
    
    283.1
    
    
    
    6.3
    
    
    
    309.5
    
    
    
    7.0
    
    
    
    312.1
    
    
    
    7.1Greyhound
    
    
    847.5
    
    
    
    24.3
    
    
    
    1,204.2
    
    
    
    26.9
    
    
    
    1,223.7
    
    
    
    27.6
    
    
    
    1,254.8
    
    
    
    28.4Healthcare
Transportation
services
    
    
    759.3
    
    
    
    21.8
    
    
    
    1,015.2
    
    
    
    22.6
    
    
    
    987.9
    
    
    
    22.3
    
    
    
    958.8
    
    
    
    21.7Emergency Management
services
    
    
    352.0
    
    
    
    10.1
    
    
    
    480.6
    
    
    
    10.7
    
    
    
    431.3
    
    
    
    9.7
    
    
    
    430.5
    
    
    
    9.7Total
    
    $
    3,485.7
    
    
    
    100.0
    %
    
    $
    4,482.8
    
    
    
    100.0
    %
    
    $
    4,432.1
    
    
    
    100.0
    %
    
    $
    4,418.3
    
    
    
    100.0
    %


Percentage Increase (Decrease)For the Year EndedNine Months
    
    August 31,ended May31, 2003
    
    Year 2003
    
    Year 2002Over Year 2002
    
    Over 2002
    
    Over 2001Education services
    
    
    (11.1
    %)
    
    
    1.4
    %
    
    
    1.2
    %Public Transit services
    
    
    (31.5
    )
    
    
    (8.5
    )
    
    
    (0.8
    )Greyhound
    
    
    (30.7
    )
    
    
    (1.6
    )
    
    
    (2.5
    )Healthcare
Transportation
services
    
    
    (23.1
    )
    
    
    2.8
    
    
    
    3.0Emergency Management
services
    
    
    (18.4
    )
    
    
    11.4
    
    
    
    0.2Total
    
    
    (21.4
    )
    
    
    1.1
    
    
    
    0.3


Three months ended August 31, 2003

Due to the seasonal nature of the Education services revenue, the corresponding
percentage of total revenue generated from this segment is historically lower
in the last quarter of the fiscal year. The last fiscal quarter is
historically Greyhounds highest revenue quarter due to the summer travel
schedule. Greyhounds percentage of total revenue in the fourth quarter is
therefore correspondingly higher.

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##### Table of Contents



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

RevenueFor the Three Months EndedAugust 31,2003United States
    
    $
    911.9
    
    
    
    91.5
    %Canada
    
    
    85.2
    
    
    
    8.5Total
    
    $
    997.1
    
    
    
    100.0
    %


RevenueFor the Nine MonthsEnded May 31,
    
    For the Year Ended August 31,2003
    
    2003
    
    2002
    
    2001United States
    
    $
    3,215.8
    
    
    
    92.3
    %
    
    $
    4,127.7
    
    
    
    92.1
    %
    
    $
    4,089.9
    
    
    
    92.3
    %
    
    $
    4,073.7
    
    
    
    92.2
    %Canada
    
    
    269.9
    
    
    
    7.7
    
    
    
    355.1
    
    
    
    7.9
    
    
    
    342.2
    
    
    
    7.7
    
    
    
    344.6
    
    
    
    7.8Total
    
    $
    3,485.7
    
    
    
    100.0
    %
    
    $
    4,482.8
    
    
    
    100.0
    %
    
    $
    4,432.1
    
    
    
    100.0
    %
    
    $
    4,418.3
    
    
    
    100.0
    %


Percentage Increase (Decrease)For the Year EndedNine Months
    
    August 31,Ended May 31,2003
    
    Year 2003
    
    Year 2002Over Year 2002
    
    Over 2002
    
    Over 2001United States
    
    
    (21.4
    %)
    
    
    0.9
    %
    
    
    0.4
    %Canada
    
    
    (21.1
    )
    
    
    3.8
    
    
    
    (0.7
    )Total
    
    
    (21.4
    )
    
    
    1.1
    
    
    
    0.3


Revenue is predominantly derived from the United States. Canadian based
revenue for the three months ended August 31, 2003 was higher than historical
levels due to the strengthening of the Canadian currency relative to the U.S.
dollar and not an increase in Canadian activities.

Comparison of the Predecessor Company revenue for the nine months ended May 31,
2003 to the year ended August 31, 2002.

Revenue in the nine months ended May 31, 2003 decreased to $3,485.7 million
from $4,432.1 million in the year ended August 31, 2002 as it reflects an
operating period that is three months shorter than the year ended August 31,
2002.

The Predecessor Company had no results of operations after the effective date
of the plan of reorganization. Accordingly, there are three fewer months in
the period, which prevents a meaningful comparison between the periods.

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Combined year ended August 31, 2003 revenue compared with year ended August 31,
2002

The combined consolidated financial results for the year ended August 31, 2003,
which represents the consolidated financial results for the Predecessor Company
for the nine months ended May 31, 2003 and the consolidated results for Laidlaw
International for the three months ended August 31, 2003 are compared with the
Predecessor Companys results for the year ended August 31, 2002.

The net 1.4% increase in the revenue in the Education services segment is
primarily attributable to price increases which increased revenue approximately
2.4%, new business which increased revenue approximately 2.4%, additional
routes which increased revenue approximately 0.3% and the strengthening of the
Canadian dollar against the U.S. dollar which increased revenue approximately
0.5%. Offsetting these increases was the effect of business not retained by
the Education Services Segment which decreased revenue by 4.2%.

The 8.5% decrease in revenue in the Public Transit services segment was due to
the loss of contracts representing $56.3 in revenues which were only partially
offset by new contracts ($11.0 million) and price and service increases under
certain existing contracts ($18.9 million). Many of the contract losses
resulted from low price bidding from competitors and the segments refusal to
submit marginally profitable bids.

The 1.6% decrease in revenue in the Greyhound segment was primarily due to the
slow recovery of the travel services market and the discontinuation of the
Golden State Transportation (Golden State) operations. The travel services
market continues to be negatively impacted by the general malaise in the U.S.
economy, the lingering effect of the war in Iraq and, in Canada, the effects of
SARS on the Canadian travel industry. Golden State, a 51.4% owned subsidiary,
ceased operations effective August 20, 2002 and filed a voluntary petition for
bankruptcy on September 30, 2002. Revenues from Golden State were $27.6
million in 2002.

The 2.8% increase in revenue in the Healthcare Transportation services segment
is primarily due to improved collection and fee increases resulting in an
increase in the revenue per transport recorded.

The 11.4% increase in revenue in the Emergency Management services segment is
primarily due to an increase in the revenue per visit recorded through a focus
on improved documentation and improved collections. The segment also
experienced an increase in the volume of visits during 2003 because of new
contractual relationships.

Year ended August 31, 2002 revenue compared with year ended August 31, 2001

The 1.2% increased revenue in the Education services segment is primarily
attributable to price and volume growth. Contract price increases and
additional routes more than offset contracts lost. Contracts lost during the
year include contracts in Anchorage, Alaska; Indianapolis, Indiana and the
voluntary exit from the contract in Baltimore, Maryland. The period was also
affected by a weakening of the Canadian dollar against the U.S. dollar.

The slight decrease (less than 1%) in the Public Transit services revenue was
primarily attributable to the loss of contracts, most of which occurred in late
fiscal 2001 and consisted of mainly smaller clients. Additional routes and
services and price increases mitigated the impact of the contract losses.

The 2.5% decrease in revenue in Greyhound segment is primarily attributable to
a decline in passengers, which was partially offset by increases in average
revenue per passenger over the same period in fiscal 2001. The decline in
passengers was due to reduced ridership and travel service cancellations
because of the impact of September 11, 2001, the unrelated October 3, 2001
incident involving a Greyhound passenger, lower fuel costs (resulting in more
people utilizing their automobiles rather than the services of Greyhound) and
the general economic downturn. The

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increase in average revenue per passenger was due to a significant increase in
the average trip length. We believe that the increase in trip length was a
result of some airline passengers preferring to travel by bus rather than
taking an airplane after September 11, 2001. The period was also affected by a
weakening of the Canadian dollar against the U.S. dollar.

The increase in revenue in the Healthcare Transportation services segment is
primarily due to an increase in revenue per transport and the renegotiation of
a significant ambulance service contract. These increases were partially
offset by a reduction in the number of transports provided due to the loss of
retail business to other operators.

The 0.2% increase in the Emergency Management services segment was primarily
due to the sale of previously written off accounts receivables offset by some
contract terminations in early fiscal 2001.

EBITDA

EBITDA is presented solely as a supplemental disclosure with respect to
liquidity because management believes it provides useful information regarding
our ability to service or incur debt. EBITDA is not calculated the same way by
all companies. We define EBITDA as income from continuing operations before
interest, income taxes, depreciation, amortization, other income, gain on
discharge of debt, fresh start accounting adjustments, other financing related
expenses and cumulative effect of change in accounting principles. EBITDA is
not intended to represent cash flow for the period, is not presented as an
alternative to operating income as an indicator of operating performance,
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles (GAAP) and is not indicative of operating income or cash flow from
operations as determined under GAAP.

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The following is a reconciliation of our EBITDA to the net income (loss) and
net cash provided by operating activities, the GAAP measures management
believes to be most directly comparable to EBITDA:

Three months
    
    Nine monthsended
    
    ended
    
    Year endedAugust 31,
    
    May 31,
    
    August 31,2003
    
    2003
    
    2003
    
    2002
    
    2001EBITDA
    
    $
    63.6
    
    
    $
    392.8
    
    
    $
    456.4
    
    
    $
    421.0
    
    
    $
    383.4Depreciation and amortization
    
    
    (52.1
    )
    
    
    (229.3
    )
    
    
    (281.4
    )
    
    
    (358.8
    )
    
    
    (350.3
    )Interest expense
    
    
    (31.5
    )
    
    
    (19.6
    )
    
    
    (51.1
    )
    
    
    (27.7
    )
    
    
    (270.9
    )Gain on discharge of debt
    
    
    
    
    
    
    1,482.8
    
    
    
    1,482.8
    
    
    
    
    
    
    
    Other income
    
    
    0.1
    
    
    
    15.0
    
    
    
    15.1
    
    
    
    15.3
    
    
    
    9.3Fresh start accounting adjustments
    
    
    
    
    
    
    (609.6
    )
    
    
    (609.6
    )
    
    
    
    
    
    
    Other financing related expenses
    
    
    
    
    
    
    (35.0
    )
    
    
    (35.0
    )
    
    
    (44.7
    )
    
    
    (63.8
    )Income tax recovery (expense)
    
    
    10.0
    
    
    
    (4.5
    )
    
    
    5.5
    
    
    
    9.8
    
    
    
    45.8Income (loss) from continuing operations
before cumulative effect of change in
accounting principle
    
    
    (9.9
    )
    
    
    992.6
    
    
    
    982.7
    
    
    
    14.9
    
    
    
    (246.5
    )Cumulative effect of change in accounting
principle
    
    
    
    
    
    
    (2,205.4
    )
    
    
    (2,205.4
    )
    
    
    
    
    
    
    Net income (loss) from continuing operations
    
    
    (9.9
    )
    
    
    (1,212.8
    )
    
    
    (1,222.7
    )
    
    
    14.9
    
    
    
    (246.5
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,672.4Net income (loss)
    
    
    ($9.9
    )
    
    
    ($1,212.8
    )
    
    
    ($1,222.7
    )
    
    $
    14.9
    
    
    $
    1,425.9


Three months
    
    Nine monthsended
    
    ended
    
    Year endedAugust 31,
    
    May 31,
    
    August 31,2003
    
    2003
    
    2003
    
    2002
    
    2001EBITDA
    
    $
    63.6
    
    
    $
    392.8
    
    
    $
    456.4
    
    
    $
    421.0
    
    
    $
    383.4Cash paid for interest
    
    
    (12.3
    )
    
    
    (25.0
    )
    
    
    (37.3
    )
    
    
    (31.9
    )
    
    
    (30.4
    )Cash paid for other financing related expenses
    
    
    (15.2
    )
    
    
    (23.4
    )
    
    
    (38.6
    )
    
    
    (38.7
    )
    
    
    (58.4
    )Other income
    
    
    0.1
    
    
    
    15.0
    
    
    
    15.1
    
    
    
    15.3
    
    
    
    2.7Cash received for income taxes
    
    
    8.3
    
    
    
    4.4
    
    
    
    12.7
    
    
    
    10.4
    
    
    
    51.0Increase in claims liabilities and
professional liability reserves
    
    
    4.7
    
    
    
    56.1
    
    
    
    60.8
    
    
    
    61.6
    
    
    
    126.9Pension contribution per the PBGC Agreement
    
    
    
    
    
    
    (50.0
    )
    
    
    (50.0
    )
    
    
    
    
    
    
    Increase in pension liability
    
    
    0.6
    
    
    
    0.7
    
    
    
    1.3
    
    
    
    
    
    
    
    Cash provided by (used in financing) other
working capital items
    
    
    144.9
    
    
    
    (147.1
    )
    
    
    (2.2
    )
    
    
    46.2
    
    
    
    (43.2
    )Decrease (increase) in restricted cash and
cash equivalents
    
    
    (0.7
    )
    
    
    0.9
    
    
    
    0.2
    
    
    
    (38.6
    )
    
    
    8.2Other
    
    
    (7.0
    )
    
    
    (15.9
    )
    
    
    (22.9
    )
    
    
    (11.5
    )
    
    
    7.5Net cash provided by operating activities
    
    $
    187.0
    
    
    $
    208.5
    
    
    $
    395.5
    
    
    $
    433.8
    
    
    $
    447.7


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EBITDA by segment are as follows ($ in millions):

EBITDAFor the three monthsendedAugust 31, 2003Education services
    
    
    ($21.7
    )
    
    
    (34.1
    %)Public Transit services
    
    
    9.2
    
    
    
    14.5Greyhound
    
    
    61.2
    
    
    
    96.2Healthcare Transportation services
    
    
    7.6
    
    
    
    11.9Emergency Management services
    
    
    7.3
    
    
    
    11.5Total
    
    $
    63.6
    
    
    
    100.0
    %


EBITDAFor theNine monthsended May 31,
    
    For the Year Ended August 31,2003
    
    2003
    
    2002
    
    2001Education services
    
    $
    302.0
    
    
    
    76.9
    %
    
    $
    280.3
    
    
    
    61.4
    %
    
    $
    272.7
    
    
    
    64.8
    %
    
    $
    258.3
    
    
    
    67.4
    %Public Transit services
    
    
    7.3
    
    
    
    1.8
    
    
    
    16.5
    
    
    
    3.6
    
    
    
    (1.7
    )
    
    
    (0.4
    )
    
    
    11.6
    
    
    
    3.0Greyhound
    
    
    5.8
    
    
    
    1.5
    
    
    
    67.0
    
    
    
    14.7
    
    
    
    53.6
    
    
    
    12.7
    
    
    
    85.3
    
    
    
    22.2Healthcare
Transportation
services
    
    
    55.8
    
    
    
    14.2
    
    
    
    63.4
    
    
    
    13.9
    
    
    
    76.0
    
    
    
    18.1
    
    
    
    23.2
    
    
    
    6.1Emergency Management
services
    
    
    21.9
    
    
    
    5.6
    
    
    
    29.2
    
    
    
    6.4
    
    
    
    20.4
    
    
    
    4.8
    
    
    
    5.0
    
    
    
    1.3Total
    
    $
    392.8
    
    
    
    100.0
    %
    
    $
    456.4
    
    
    
    100.0
    %
    
    $
    421.0
    
    
    
    100.0
    %
    
    $
    383.4
    
    
    
    100.0
    %


Percentage Increase (Decrease)For theNine monthsended May 31,
    
    For the Year Ended August 31,2003
    
    Year 2003
    
    Year 2002Over Year 2002
    
    Over 2002
    
    Over 2001Education services
    
    
    10.7
    %
    
    
    2.8
    %
    
    
    5.6
    %Public Transit services
    
    NM
    
    NM
    
    NMGreyhound
    
    
    (89.2
    )
    
    
    25.0
    
    
    
    (37.2
    )Healthcare
Transportation
services
    
    
    (26.6
    )
    
    
    (16.6
    )
    
    
    227.6Emergency Management
services
    
    
    7.4
    
    
    
    43.1
    
    
    
    308.0Total
    
    
    (6.7
    )
    
    
    8.4
    
    
    
    9.8


Income from operations before depreciation and amortization

The following is a discussion of factors affecting the income from operations
before depreciation and amortization, of the Companys business segments for
the reported periods. Note 23 of the Notes to Consolidated Financial
Statements shows income from operations before depreciation and amortization
for each of the Companys business segments.

Three months ended August 31, 2003

Income from operations before depreciation and amortization for the three
months ended August 31, 2003 is historically lower due to the seasonality of
the Education services segment revenue as discussed previously. While revenue
declines significantly, many of the corresponding expenses including general
and administrative salaries, occupancy costs and vehicle related costs are
incurred fairly evenly throughout the year.

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The Public Transit services segments fourth quarter income from operations
before depreciation and amortization benefited from a reduction in the
actuarial estimate of the cost to settle prior year insurance claims and is
unusually high. The Healthcare Transportation services segments fourth
quarter income from operations before depreciation and amortization was lower
due to a increase in the actuarial estimate of the cost to settle prior years
insurance claims.

Greyhounds fourth quarter income from operations before depreciation and
amortization is historically strong due to the seasonality of its revenue as
previously discussed.

Comparison of the Predecessor Company income from operations before
depreciation and amortization for the nine months ended May 31, 2003 to the
year ended August 31, 2002.

Income from operations before depreciation and amortization in the period
September 1, 2002 through May 31, 2003 decreased to $392.8 million from $421.0
million in the year ended August 31, 2002 as it reflects an operating period
that is three months shorter than the year ended August 31, 2002. In addition,
the decrease is partially offset by virtue of the seasonality of the fourth
quarter, which is historically the lowest income from operations before
depreciation and amortization quarter.

Combined year ended August 31, 2003 compared with year ended August 31, 2002

The combined consolidated financial results for the year ended August 31, 2003,
represents the consolidated financial results for the Predecessor Company for
the nine months ended May 31, 2003 and the consolidated results for the Company
for the three months ended August 31, 2003 are compared with the Predecessor
Companys results for the year ended August 31, 2002. As noted above, these
periods are not necessarily comparable.

In the year ended August 31, 2003, the increase of $7.6 million in income from
operations before depreciation and amortization in the Education services
segment over the year ended August 31, 2002 was principally due to lower
recruiting and training expenses of $1.0 million, lower legal and other
administrative expenses of $1.7 million, and other reduced operating expenses
of $4.0 million including the absence of one-time charges incurred in the prior
year relating to the exit of certain contracts in Alaska.

In the year ended August 31, 2003, the income from operations before
depreciation and amortization in the Public Transit services segment increased
$18.2 million over the year ended August 31, 2002. This increase was the
result of a significant decline in accident claims costs of approximately $22.5
million. The segment also experienced an increase in health and welfare
benefit costs ($1.9 million), primarily driven by increased cost of medical
coverage for employees and a reduction in contribution due to the revenue
decline.

In the year ended August 31, 2003, the income from operations before
depreciation and amortization in the Greyhound segment increased $13.4 million
over the year ended August 31, 2002. The increase was primarily due to
unusually high accident claims costs in the prior year. Accident claims costs
declined $38.5 million over the prior year. Offsetting this somewhat was a
reduction in ridership in both the core line haul business and the travel and
charter business as well as increased fuel prices. Fuel costs, which can
normally be passed through to the customer by raising ticket prices, have been
absorbed by the segment because of the continued weakness in the travel
industry.

In the year ended August 31, 2003, the income from operations before
depreciation and amortization in the Healthcare Transportation services segment
decreased $12.6 million from the year ended August 31, 2002. The decrease in
the profit margins is primarily due to increased accident claims costs,
increased wages, and an increase in health and welfare benefits. The increase
in accident claims costs of $31.1 million were primarily a result of an
increase of approximately $17.1 million in the actuarial estimate of the costs
required to settle

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prior years accident claims (predominantly workers compensation). These
expense increases were partially offset by an increase in the revenue per
transport.

In the year ended August 31, 2003, the income from operations before
depreciation and amortization in the Emergency Management services segment was
$8.8 million higher than the year ended August 31, 2002 due primarily to an
increase in revenue per visit. The increase in revenue per visit is offset by
an increase in physician wages and malpractice claims costs.

Year ended August 31, 2002 compared to year ended August 31, 2001

In fiscal 2002, the income from operations before depreciation and amortization
in the Education services segment was $14.4 million higher than 2001. Price
increases, reduced fuel prices and reduced accident claims costs ($5.5 million)
more than offset the increases in wages and benefits experienced throughout the
segment.

In fiscal 2002, the income from operations before depreciation and amortization
in the Public Transit services segment was $13.3 million lower than 2001.
Increases in wage costs associated with driver shortages and benefits,
increased costs of medical coverage for employees of over 20% and higher
accident claims costs ($7.6 million) were the primary reasons for the decline.
Lower fuel prices partially offset the declines.

In fiscal 2002, the income from operations before depreciation and amortization
in the Greyhound segment was $31.7 million lower than 2001. Accident claims
costs increased by $21.4 million primarily due to an increase in actuarial
estimates of costs to settle prior years accident claims. In addition,
reduced ridership, an increase in the proportion of revenue derived from long
haul ticket sales, increased security costs and the write-off of the Golden
State Transportation investment also contributed to the decline. The decrease
in overall ridership is because of the impact of September 11, 2001, the
unrelated October 3, 2001 incident involving a Greyhound passenger, lower fuel
prices and the general economic downturn. The increase in proportion of
revenue derived from long haul ticket sales is the result of some airline
passengers preferring to travel by bus rather than taking an airplane after
September 11, 2001. Security costs have also increased in response to the
September 11 and October 3, 2001 incidents.

In fiscal 2002, the income from operations before depreciation and amortization
in the Healthcare Transportation services segment was $52.8 million higher than
2001. The increase is due to reduced accident claims costs of $35.8 million,
an increase in revenue per transport as a result of an improvement in cash
collections and a reduction in a significant charge taken during fiscal 2001.
In fiscal 2001, a provision of $19.5 million was recorded for the settlement of
government audits of the units Medicare and Medicaid reimbursement claims. In
fiscal 2002, an additional provision of $3.5 million was recorded for
settlement of government audits of the units Medicare and Medicaid
reimbursement claims. These items were partially offset by an increase in
paramedic wages to remain competitive in a labor market experiencing low
unemployment rates.

In fiscal 2002, the income from operations before depreciation and amortization
in the Emergency Management services segment increased $15.4 million from 2001.
The increase was primarily due to a one time benefit of $4 million from the
sale of an old account receivable and a reduction in a significant charge taken
during 2001. In fiscal 2001, a provision of $17 million was recorded for the
estimated exposure at that time on the Predecessor Companys preferential
liability insurance with PHICO. PHICO was placed into liquidation by the
Insurance Commissioner of the Commonwealth of Pennsylvania on February 1, 2002,
leaving the Company exposed for amounts not covered by the insurance guarantee
funds provided by the respective states the professional liability claims
originated. In fiscal 2002, an additional $5 million provision was recorded
for the estimated exposure on the Predecessor Companys professional liability
insurance with PHICO. These items were partially offset by an increase in
physician wages and increased professional liability costs.

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Depreciation expense

Depreciation expense for the three months ended August 31, 2003 was $47.7
million or 4.8% of revenue. Depreciation expense is historically lower in the
last fiscal quarter of the year due to Education services driving fewer miles
during the summer period. The fresh start adjustment to fixed assets (see Note
2 of the Notes to the Consolidated Financial Statements) also resulted in
reduced depreciation expense.

Depreciation expense for the Predecessor Company for the nine months ended May
31, 2003 was $228.4 million, or 6.6% of revenue, compared to $270.6 million, or
6.1% of revenue, for the year ended August 31, 2002 and it reflects an
operating period that is three months shorter than the year ended August 31,
2002.

Depreciation expense for the combined year ended August 31, 2003 was $276.1
million, $5.5 million higher than the year ended August 31, 2002 due to
equipment purchases (mostly vehicles) during the year that were more expensive
than the original cost of the equipment being replaced.

Similarly, depreciation expense for the year ended August 31, 2002 increased
$9.5 million to $270.6 from the year ended August 31, 2001. The increase was
due to equipment purchases, largely vehicles, during fiscal 2002 that were more
expensive than the original cost of the equipment being retired. As a result,
depreciation expense was increased.

Amortization expense

Amortization expense in the three months ended August 31, 2003 was $4.4 million
and was primarily the amortization of contracts and customer relationships
recorded as fresh start adjustments.

Amortization expense for the Predecessor Company for the nine months ended May
31, 2003 was $0.9 million compared to $88.2 million in the year ended August
31, 2002. The decrease is a result of goodwill no longer being amortized.
Instead, it is tested for impairment on at least an annual basis. This change
in policy is due to new accounting rules implemented on September 1, 2002. See
Cumulative effect of change in accounting principle. The amount of
amortization expense relating to goodwill recorded during the year ended August
31, 2002 totaled $87.1 million.

Amortization expense for the combined year ended August 31, 2003 decreased to
$5.3 million from $88.2 million in the year ended August 31, 2002 for the same
reason described above.

Amortization expense for the Predecessor Company for the year ended August 31,
2002 decreased slightly to $88.2 million from $89.2 million in fiscal 2001.

Interest expense

Interest expense for the three months ended August 31, 2003 was $31.5 million
and reflects interest charges on our $825.0 million senior secured credit
facility, the senior notes and the Greyhound facility.

If the senior secured credit facility and the senior notes had been outstanding
for the full three months, additional interest expense of approximately $2.8
million would have been incurred.

Interest expense for the Predecessor Company for the nine months ended May 31,
2003 was $19.6 million compared to $27.7 million for the year ended August 31,
2002 as it reflects an operating period that is three months shorter. The
$27.7 million of interest expense incurred in fiscal 2002 reflected a full year
of interest on the Greyhound Facility and small amounts of interest bearing
debt at the subsidiary level.

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In the combined year ended August 31, 2003, interest expense increased to $51.1
million from $27.7 million in the year ended August 31, 2002. The increase is
primarily due to interest incurred on long-term debt associated with our senior
secured credit facility and the senior notes. No interest expense was incurred
on prepetition debt of the Debtors for the nine months ended May 31, 2003 and
for the year ended August 31, 2002. The total interest on prepetition debt
that was not incurred during fiscal 2003 was approximately $214.1 million,
compared to $274.2 million for fiscal 2002.

In fiscal 2002, interest expense decreased by 89.8% to $27.7 million from
$270.9 million in 2001. No interest expense was accrued on pre-petition debt
of the Predecessor Company and the other Debtors for fiscal 2002 and after June
28, 2001 for fiscal 2001. The total interest on pre-petition debt that was not
accrued during 2002 was approximately $274.2 million, compared to $50.3 million
in fiscal 2001. Including this interest, total interest expense for fiscal
2002 would have been approximately $301.9 million representing a 6.0% decrease
from $321.2 million for the prior period. The majority of this decrease was
due to a decrease in the cost of borrowing as a result of prevailing interest
rates.

Gain on discharge of debt

As is more fully discussed in Note 1 of the Notes to the Consolidated Financial
Statements, as part of the reorganization and emergence from chapter 11,
liabilities subject to compromise of the Predecessor Company in the amount of
$3,977.1 million were discharged. As satisfaction of the liabilities subject
to compromise, the Predecessor Companys creditors received $1,185 million in
cash and 100 million common shares of Laidlaw International common stock with a
value of $1,309.3 million. The resulting $1,482.8 million gain on discharge of
debt has been recorded in the Consolidated Statement of Operations for the
period from September 1, 2002 through May 31, 2003.

Fresh Start accounting adjustments

We applied fresh start accounting pursuant to the guidance provided by the
American Institute of Certified Public Accountants Statement of Position 90-7,
Financial Reporting by Entities in Reorganization under the Bankruptcy Code
(SOP 90-7). For financial reporting purposes, the effective date of the Plan
was considered to be June 1, 2003. In accordance with the principles of fresh
start accounting, we have adjusted our assets and liabilities to their
estimated fair values as of June 1, 2003 with the excess of the our
reorganization value over the fair value of our tangible and identifiable
intangible assets and liabilities reported as goodwill in the Consolidated
Balance Sheets. The net effect of all fresh start accounting adjustments
resulted in a loss of $609.6 million, which is reflected in the Predecessor
Companys results for the period from September 1, 2002 through May 31, 2003.

Other financing related expenses

For the three months ended August 31, 2003 there were no other financing
related expenses as all expenses were incurred prior to the reorganization (see
Note 16 of the Notes to the Consolidated Financial Statements).

Other financing related expenses for the Predecessor Company for the nine
months ended May 31, 2003 were $35.0 million compared to $44.7 million for the
year ended August 31, 2002. Other financing related expenses principally
represent professional fees and other costs incurred by the Predecessor
Company. The professional fees and other costs include financing, accounting,
legal and consulting services incurred during the reorganization process.

During the year ended August 31, 2002, professional fees and other costs
decreased to $44.7 million from $63.8 million in the year ended August 31,
2001. This decrease was a result of higher fees incurred in fiscal 2001
associated with the reorganization.

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Other income

Other income was $0.1 million in the three months ended August 31, 2003.

Other income for the Predecessor Company for the nine months ended May 31, 2003
was $15.0 million compared to $15.3 million for the year ended August 31, 2002.
The amount was proportionately higher because of $12.5 million relating to the
settlement of certain Predecessor Company legal claims partially offset by
lower returns in the Predecessor Companys investment portfolios.

Other income for the combined year ended August 31, 2003 was $15.1 million,
down slightly from $15.3 million in the year ended August 31, 2002.

In fiscal 2002, other income increased to $15.3 million from $9.3 million in
fiscal 2001. Fiscal 2001 included a $6.6 million loss realized on the sale of
certain investments and $9.5 million of refund interest recorded as part of
Irish tax refunds. Excluding these items, the prior year income of $6.4
million increased to $15.3 million because of $4.2 million received for various
notes receivable previously written off and the reversal of $6.0 million in
contingency accruals no longer required. Partially offsetting these amounts
were lower returns experienced on the Predecessor Companys investment
portfolio.

Cumulative effect of change in accounting principle

Effective September 1, 2002, we adopted SFAS 142 and, as a result, we ceased to
amortize goodwill. SFAS 142 requires that goodwill be reviewed for impairment
upon adoption of SFAS 142 and at least annually thereafter. Under SFAS 142,
goodwill impairment is deemed to exist if the carrying value of a reporting
unit exceeds its estimated fair value and the carrying amount of the goodwill
exceeds its estimated fair value. To determine estimated fair value of the
reporting units we utilized independent valuations of the underlying
businesses.

On adoption, the Company completed the transitional impairment assessment as
required by SFAS 142 and determined that the carrying value of certain of its
operations exceeded their fair value. As a result, we recorded a non-cash
charge of $2,205.4 million on September 1, 2002 as a cumulative effect of
change in accounting principle.

Income tax expense

Income tax expense for the three months ended August 31, 2003 was a $10.0
million recovery reflecting a recovery on the net loss before tax incurred.

For the Predecessor Company for the nine months ended May 31, 2003, income tax
expense was $4.5 million compared to a recovery of $9.8 million in the year
ended August 31, 2002. The increase was a result of the Predecessor Company
reducing reserves in 2002 that were previously set up regarding U.S. Internal
Revenue Services (IRS) audits because the IRS filed an amended claim in the
Predecessor Companys restructuring proceedings that was less than the previous
claim filed.

Income tax for the combined year ended August 31, 2003 was a $5.5 million
recovery compared to a recovery of $9.8 million in the fiscal year ended August
31, 2002 for the same reason noted previously.

During fiscal 2001, the Predecessor Company recorded $60.0 million in income
tax refunds previously not recognized relating to its Irish subsidiary. The
refunds are a result of intercompany loan losses taken in that subsidiary.

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See also Note 17 of Notes to the Consolidated Financial Statements for the year
ended August 31, 2003.

Income from discontinued operations

Healthcare Businesses

During fiscal 2001, the Predecessor Company concluded that the previously
announced disposal of the Healthcare Businesses was no longer in the best
interests of its stakeholders. The healthcare businesses were therefore
reinstated as continuing operations in fiscal 2001.

As a result of recontinuing the healthcare businesses in fiscal 2001, the
Predecessor Company reversed the remaining provision for loss on sale of
discontinued operations. This reversal totaled $1,927.6 million ($5.91 per
share) in fiscal 2001.

Safety-Kleen Corp.

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

During fiscal 2001, the Predecessor Company abandoned its investment in
Safety-Kleen. As a result a charge of $255.2 million was recorded in
discontinued operations to reflect the impairment charge and other losses on
the Safety-Kleen investment.

Net income (loss) and earnings (loss) per share

For the three months ended August 31, 2003, the net loss was $9.9 million or
$0.10 per share. The weighted average number of common shares was 100.0
million.

The net loss of the Predecessor Company was $1,212.8 million or $3.72 per share
for the nine months ended May 31, 2003. Net income was $14.9 million or $0.05
per share and $1,425.9 million or $4.37 per share for the years ended August
31, 2002 and 2001, respectively. The weighted average number of common shares
of the Predecessor Company for the periods was 325.9 million.

Financial Condition

As of August 31, 2003 and August 31, 2002, our capital consisted of ($ in
millions):

Predecessor CompanyAugust 31, 2003
    
    August 31, 2002
    
    ChangeLong-term debt
(including the
current portion)
    
    $
    1,214.5
    
    
    
    44.5
    %
    
    $
    224.7
    
    
    
    4.3
    %
    
    $
    989.8Pension liability
    
    
    225.7
    
    
    
    8.3
    
    
    
    64.8
    
    
    
    1.2
    
    
    
    160.9Liabilities subject to compromise
    
    
    
    
    
    
    
    
    
    
    3,977.1
    
    
    
    76.2
    
    
    
    (3,977.1
    )Shareholders equity
    
    
    1,290.3
    
    
    
    47.2
    
    
    
    954.1
    
    
    
    18.3
    
    
    
    336.2$
    2,730.5
    
    
    
    100.0
    %
    
    $
    5,220.7
    
    
    
    100.0
    %
    
    
    ($2,490.2
    )


As a part of our emergence from chapter 11, we entered into a senior secured
credit facility of $825 million and issued senior notes of $406 million.
Approximately $1.0 billion of this financing was used to fund a portion of the
distributions to the Debtors creditors.

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The $989.8 million increase in long-term debt is primarily a result of
borrowings associated with the senior secured credit facility and the senior
notes.

The $160.9 million increase in the pension liability is primarily due to the
increased actuarial deficit in the pension plans.

The decrease in the liabilities subject to compromise is a result of the
discharge of those liabilities by the Bankruptcy Court.

Shareholders equity increased by $336.2 million as a result of the
distribution of new common shares, a reversal of previous deficits, share
capital and accumulated other comprehensive losses, offset by the comprehensive
loss in the year.

Liquidity

For the three months ended August 31, 2003 cash provided from operating
activities was $187.0 million. This is primarily a result of cash provided by
working capital items. Accounts receivable in the Education services segment
typically decline in the fourth quarter due to the seasonality of the revenue
contracts.

Cash provided by operating activities decreased by $38.3 million to $395.5
million, in the combined year ended August 31, 2003 primarily due to the $50.0
million contribution per the PBGC Agreement. In the year ended August 31,
2002, cash provided by continuing operating activities totalled $433.8 million.

Cash and cash equivalents were $100.3 million, $23.4 million and $343.5 million
at August 31, 2003, June 1, 2003 and August 31, 2002 respectively.

Since August 31, 2002, working capital, excluding the current portion of
long-term debt, has decreased by $180.2 million to $322.6 million at August 31,
2003. This decrease is primarily a result of the disbursement of cash of over
$200 million, net of new financing received, associated with the emergence from
chapter 11.

The $81.4 million of the restricted cash and cash equivalents and short-term
deposits and marketable securities are assets of our wholly owned insurance
subsidiaries and are used to support our self-insurance program. If these
amounts are withdrawn from the subsidiaries, they would have to be replaced by
other suitable financial assurances.

Although we will continue to be substantially leveraged, we believe that
borrowings under the revolving credit facility of the senior secured credit
facility, together with existing cash and cash flow from operations, will be
sufficient to fund our anticipated capital expenditures and working capital
requirements for the foreseeable future, including payment obligations under
our indebtedness described above.

Pension Plan Funding Requirements

In connection with our bankruptcy reorganization, we have agreed with the PBGC
to the economic terms relating to claims asserted by them against the Debtors
regarding the funding levels of the Greyhound U.S. Plans. Under an agreement
with the PBGC, the PBGC Agreement, upon the consummation of the Plan on June
23, 2003, we and our subsidiaries contributed $50 million in cash to the
Greyhound U.S. Plans and we issued approximately 3.8 million shares of our
common stock equal in value to $50 million to a trust, or Pension Plan Trust.
Further, we will contribute an additional $50 million in cash to the Greyhound
U.S. Plans in June 2004.

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The trustee of the Pension Plan Trust will sell the common stock at our
direction as soon as practicable, but in no event later than December 31, 2004.
All proceeds from the common stock sales will be contributed directly to the
Greyhound U.S. Plans. If the proceeds from the common stock sales exceed $50
million, the excess amount may be credited against any future required minimum
funding obligations of the Laidlaw group, but will not reduce the June 2004
required contribution under the PBGC Agreement. If the proceeds from the
common stock sales are less than $50 million, we will be required to contribute
the amount of the shortfall in cash to the pension plans in December 2004.
Further, we will contribute an additional $50 million in cash to the pension
plans in June 2004. These contributions and transfers will be in addition to
the minimum funding obligations to the pensions plans, if any, required under
current regulations. The PBGC has a second priority lien on the assets of some
of our operating subsidiaries (other than Greyhound). At August 31, 2003, all
3.8 million shares of our common stock remained in the Pension Plan Trust.
Based upon the closing price of the common stock on the over the counter
market, the shares had an aggregate market value of $45.2 million at November
17, 2003.

The ATU Plan represents approximately 75% of the total plan assets and benefit
obligation as at August 31, 2003. Based upon current regulations and plan
asset values at August 31, 2003, and assuming annual investment returns exceed
3% and that the contributions required under the PBGC Agreement are made along
the timeframe outlined above, we do not anticipate any significant additional
minimum funding requirements for the ATU Plan over the next several years.
However, there is no assurance that the ATU Plan will be able to earn the
assumed rate of return, that new regulations may prescribe changes in actuarial
mortality tables and discount rates, or that there will be market driven
changes in the discount rates, which would result in our being required to make
significant additional minimum funding contributions in the future.

See also Note 11 of Notes to the Consolidated Financial Statements for the year
ended August 31, 2003.

Senior Secured Credit Facility; Senior Notes

Upon emergence from chapter 11, in June 2003, the Company established a new
$825.0 million senior secured credit facility (the Exit Facility). This
facility consists of a $625.0 million Term B facility (the Term B Facility)
due June 2009 ($100.0 million of the proceeds from the Term B Facility is cash
collateral for a $100.0 million letters of credit facility) and a $200.0
million senior secured revolving credit facility (the Revolver) due June
2008. The Term B Facility provides for mandatory $6.25 million quarterly
principal repayments beginning June 2003 through March 2008 followed by four
$125.0 million quarterly installments. Interest paid on the Term B facility
is charged at Base Rate +4% or LIBOR +5%. The Term B Facility and the Revolver
are guaranteed, for the U.S. dollar borrowings, by the Company and all of the
U.S. subsidiaries, except Greyhound and its subsidiaries, Hotard Coaches, Inc.
and Interstate Leasing, Inc. (the Excluded Subsidiaries) and any of the
Companys subsidiaries that are in the business of insurance and for the
Canadian dollar borrowings, by the guarantors of the U.S. dollar borrowings and
the Canadian subsidiaries (except B.C. incorporated subs). The Term B Facility
and the Revolver are secured, on a senior secured basis, by the assets of the
Company and all of its subsidiaries except the Excluded Subsidiaries and any of
the Companys subsidiaries that are in the business of insurance.

The Revolver with a $35.0 million letter of credit sub-facility and a $35
million sub-limit for Canadian dollar borrowings and Canadian dollar letters of
credit for use by the Canadian subsidiaries of the Company was established to
fund the Companys working capital and letter of credit needs. Interest is
charged at Base Rate +3.5% or LIBOR Rate +4.5% for the initial six month period
beginning June 2003 through to December 2003. Thereafter, a percentage per
annum determined by reference to a leverage ratio, as defined in the credit
facility agreement, will be applied. The range of rates is as follows: Base
Rate +3.25% to 3.75%; LIBOR Rate +4.25% to 4.75%; Bankers Acceptance Rate
+4.25% to 4.75%. As at August 31, 2003, $38.0

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million was drawn on the revolver for the issuance of letters of credit and
$92.3 million was reserved for guarantee obligations on Greyhound vehicle
leases, leaving the availability of $69.7 million.

Under the terms of the Exit Facility the Company is required to meet certain
financial covenants including a fixed charge coverage ratio, leverage ratio,
interest coverage ratio, net tangible asset ratio and maximum senior secured
leverage ratio as well as certain non-financial covenants. As of August 31,
2003, the Company was in compliance with all such covenants.

In addition, in connection with emergence from chapter 11, in June 2003 the
Company issued $406.0 million aggregate principal amount of 10.75% Senior Notes
due 2011 at a discount for net proceeds of approximately $389.0 million. The
notes bear interest at a rate of 10.75% payable semi-annually beginning on
December 15, 2003 and are unsecured. The Company may redeem some or all of the
notes at any time after June 15, 2007. The notes are guaranteed by the
Companys subsidiaries other than the Excluded Subsidiaries, the Canadian
subsidiaries and any of the Companys subsidiaries that are in the business of
insurance.

The Greyhound Facility

In October 2000, Greyhound entered into a revolving credit facility to fund
working capital needs and for general corporate purposes. On May 14, 2003,
Greyhound entered into an amended and restated revolving credit facility
superceding the previous facility (the Greyhound Facility). Letters of
credit or borrowings are available under the Greyhound Facility based upon the
total of 80% of the appraised wholesale value of bus collateral, plus 65% of
the quick sale value of certain real property collateral, minus $20 million,
(which at August 31, 2003, aggregated to $113.8 million) subject to a maximum
of $125.0 million, inclusive of a $70.0 million letter of credit sub-facility.
Borrowings under the Greyhound Facility are available at a rate equal to Wells
Fargo Banks prime rate plus 1.5% per annum or LIBOR plus 3.5% per annum as
selected by Greyhound. Letter of Credit fees are 3.5% per annum. Borrowings
under the Greyhound Facility mature on October 24, 2004. The Greyhound
Facility is secured by liens on substantially all of the assets of Greyhound
and the stock and assets of certain of its subsidiaries. The Greyhound
Facility is subject to certain affirmative and negative operating and financial
covenants, including maximum total debt to cash flow ratio; minimum cash flow
to interest expense ratio; minimum cash flow; limitation on non-bus capital
expenditures; limitations on additional liens, indebtedness, guarantees, asset
disposals, advances, investment and loans; and restrictions on the redemption
or retirement of certain subordinated indebtedness of equity interest, payment
of dividends and transactions with affiliates, including Laidlaw International,
Inc. As of August 31, 2003, Greyhound was in compliance with all such
covenants.

Based upon Greyhounds current financial forecast management is unable to
predict with reasonable assurance whether Greyhound will remain in compliance
with the terms of the Greyhound Facility for the remainder of Calendar 2003 and
2004. Management is closely monitoring this situation and intends on
requesting covenant amendments should it appear likely such amendments will be
necessary to remain in compliance with the covenants. In addition, Greyhound
will be seeking an extension of this facility prior to its current maturity.
Although Greyhound has been successful in obtaining necessary amendments and
extensions to the Greyhound Facility in the past, there can be no assurances
that they will obtain additional modifications in the future if needed, or that
the cost of any future modifications or other changes in the terms of the
Greyhound Facility would not have a material effect on Greyhound or Laidlaw
International, Inc. If unsuccessful, this may impact Greyhounds ability to
continue as a going concern.

As of August 31, 2003, Greyhound had $30.1 million cash borrowings under the
Greyhound Facility, and issued letters of $46.7 million and had availability of
$37.0 million.

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Although at the balance sheet dates the maturity of the Greyhound Facility
extended beyond one year, because the agreement provides that a material
adverse change at Greyhound could be considered an event of default, generally
accepted accounting principles requires that the borrowings under this
Greyhound facility be classified as short-term obligations.

Capital expenditures and capital resources

Net expenditures for the purchase of capital assets for normal replacement
requirements and increases in service were $91.6 million (including $4.4
million of purchases of capital assets financed by notes payable, operating
leases and/or capital leases) in the period June 1, 2003 through August 31,
2003. The last fiscal quarter is typically a heavy period of capital asset
expenditures as the Education services segment takes delivery of buses prior to
the new school year.

Net expenditures for the purchase of capital assets for normal replacement
requirements and increases in services, increased to $321.4 million for the
year ended August 31, 2003 (including $25.5 million of purchases of capital
assets financed by notes payable, operating leases and/or capital leases) from
$270.5 million for the year ended August 31, 2002 (including $31.3 million of
purchases of capital assets financed by notes payable, operating leases and/or
capital leases). This increase is primarily a result of curtailed capital
spending in the prior period due to our financial position at that time.

Capital expenditures for the purchase of capital assets during fiscal 2004 are
expected to be approximately $250 million. The expenditures represent normal
replacement and upgrading requirements and purchases of additional capital
assets necessary for planned increases in services. These expenditures will be
primarily financed by our operating cash flows.

Historically, the Greyhound business segment has used operating lease financing
as a method of acquiring vehicles for use. For further information, see Note
22 of the Notes to the Consolidated Financial Statements for the fiscal year
ended August 31, 2003.

Off-balance sheet arrangements

As described in Note 22 of the Notes to the Consolidated Financial Statements,
we have entered into vehicle operating leases that contain residual value
guarantees. The residual value guarantees were included as part of these
operating leases in order to reduce the leasing costs for these leases. Of
those leases that contain these residual value guarantees, the aggregate
residual value at lease expiration is $142.3 million of which we have
guaranteed $104.7 million. To date, we have never incurred any liability as a
result of the residual value guarantee.

Contractual obligations

We have entered into certain contractual obligations that will require various
payments over future periods as follows:

Scheduled payments in fiscal yearsTotal
    
    2004
    
    2005-2006
    
    2007-2008
    
    ThereafterLong-term debt
    
    $
    1,255.1
    
    
    $
    69.9
    
    
    $
    73.0
    
    
    $
    325.9
    
    
    $
    786.3Operating lease obligation
    
    
    453.9
    
    
    
    125.6
    
    
    
    176.1
    
    
    
    89.8
    
    
    
    62.4PBGC Agreement*
    
    
    50.0
    
    
    
    50.0
    
    
    
    
    
    
    
    
    
    
    
    




---

|* |  | An additional contribution will be required should the net proceeds realized
from the sale of the 3.8 million shares held in the Pension Plan Trust average
less than $13.24 per share
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Risk Factors in the Company

We are exposed to a variety of financial, operating and market risks. Some of
these risks are within our control. For controllable risks, we apply specific
risk management strategies to reduce the likelihood of loss. The following are
the risk factors relating to our business.

Accident claims costs

As discussed above under Critical accounting policies, we experience
significant costs surrounding accident and professional liability claims and
use estimates and assumptions when providing for the ultimate costs of these
incidents. The ultimate costs could materially affect our financial condition
and results of operations.
We have in place procedures to manage the risk. The first is the existence of
comprehensive safety programs throughout our company, which has as its goal to
reduce the number of accidents as far as practically possible. Although we
have experienced increases in accident claims costs because of increased
medical costs, ultimate settlement amounts and court awards, and increased
severity of accidents experienced, the accident frequency as a percentage of
revenue has actually declined over the last number of years. Once an accident
has occurred, we have procedures and settlement practices in place to minimize
the ultimate cost to us.

Healthcare revenue

Healthcare, as one of the largest industries in the United States, continues to
attract much legislative interest and public attention. Changes in Medicare,
Medicaid and other programs, hospital cost containment initiatives by public
and private payors, proposals to limit payments and healthcare spending and
industry-wide competitive factors are highly significant to the healthcare
industry. In addition, the healthcare industry is governed by a framework of
federal and state laws, rules and regulations that are extremely complex and
for which the industry has the benefit of little or no regulatory
interpretation. If a determination is made that we were in material violation
of such laws, rules or regulations, our financial condition and results of
operations could be materially adversely affected.

The Balanced Budget Act of 1997 has had the effect of reducing payments to
hospitals and other healthcare providers under the Medicare program. The
reductions in payments and other changes mandated by the Balanced Budget Act of
1997 have had a significant effect on our revenues. In addition, there
continue to be federal and state proposals that would, and actions that do,
impose more limitations on payments to providers such as us and proposals to
increase co-payments and deductibles from patients.

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

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

In January 1999, the Center for Medicare and Medicaid Services, formerly named
the Health Care Financing Administration, announced its intention to form a
negotiated rulemaking committee to create the new fee schedule for Medicare
reimbursement of ambulance services. That committee

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convened in February 1999. The fee schedule and the mandatory acceptance of
assignment were implemented on April 1, 2002. In addition, revisions to the
physician certification requirements for coverage of non-emergency ambulance
services were also implemented.

We have implemented a plan that we believe will mitigate much of the potential
adverse impact from these changes. The plan includes renegotiation of 9-1-1
contracts, adjusting rates and seeking alternative relief from the federal and
local governments.

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

Performance bonds

Our Education services, Public Transit services and Healthcare Transportation
businesses are highly dependent on our ability to obtain performance bond
coverages sufficient to meet bid requirements imposed by potential customers.
Our ability to obtain adequate bonding coverages has been adversely affected in
the past several years by the Predecessor Companys poor financial position and
lack of liquidity. Furthermore, many school boards are requiring higher
dollar-value performance bonds from their service providers. There can be no
assurance that we will continue to obtain access to adequate bonding capacity.
If adequate bonding capacity is not available or if the terms of such bonding
are too onerous, there would be a material adverse effect on our business,
financial condition and results of operations.

Increasing competitive and external pressures

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

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

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

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

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Healthcare Transportation services  We compete with several large companies
and a substantial number of smaller locally owned operators in the healthcare
transportation services industry. Moreover, many municipal, fire and paramedic
departments and hospitals operate their own ambulance systems. In acquiring
new healthcare transportation contracts and maintaining our business, we
experience competition primarily in the areas of pricing and service.

Emergency Management services  This business unit is also subject to vigorous
competition. Competition for these services is generally based upon cost, the
ability to make available physicians capable of providing high quality care and
the reputation of our emergency department business unit among hospitals and
physicians. Competition is also based upon the proper utilization of the
emergency department, as well as the ability to integrate the emergency
department with other hospital departments and to provide value added services.
There can be no assurance that we will be able to compete successfully against
these sources of competition or other competitive or external factors.

Retention of key personnel

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

Fuel price fluctuations

Historically, fuel costs represent approximately 3% to 5% of revenue. Due to
the significance of fuel expenses, particularly diesel fuel, to our operations
and the historical volatility of fuel prices, we have a program to help
minimize the fluctuations in the price of our diesel fuel purchases. The
intent of the program is to mitigate the short-term impact of fuel price
changes on our operating margins and overall profitability by entering into
forward supply contracts (FSCs) with certain vendors. The FSCs generally
stipulate set bulk delivery volumes at prearranged prices for a set period.
The volumes agreed to be purchased by us are well below the forecasted total
bulk fuel needs for the given location. Therefore, the risk of being forced to
purchase fuel through the FSCs that is not required by us is minimal. Also, to
the extent that we enter FSCs for portions of our total fuel needs, we may not
realize the benefit of decreases in fuel prices. Conversely, to the extent
that we do not enter into FSCs for portions of our total fuel needs, we may be
adversely affected by increases in fuel prices.

Given the ticket based revenue stream of the Greyhound segment, fuel price
increases at the U.S. operations of the Greyhound segment, limited by what the
market can bear, can be passed on to the passenger through increased fares.
The majority of the Canadian operations of the Greyhound segment operates in a
regulated market and ticket price increases must be first approved by
government agencies. The other operations that have fuel requirements operate
with a contractual based revenue stream. Fuel price increases take a longer
time to be passed on to the customer, in most cases upon renewal of the
contract.

Greyhound Lines, Inc.  going concern

In the audit report dated March 26, 2003, Greyhound Lines, Inc.s auditors
included an explanatory paragraph that stated that Greyhound Lines, Inc.s
consolidated financial statements had been prepared assuming Greyhound Lines,
Inc. will continue as a going concern. The report stated that the fact that
Greyhound Lines, Inc. may not be in compliance

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with the financial covenants under the Greyhound Facility beginning with the
first quarter of 2003 raised substantial doubt about its ability to continue as
a going concern. In May 2003, Greyhound Lines, Inc. amended the Greyhound
Facility to modify certain covenants under the facility. If Greyhound Lines,
Inc. fails to remain in compliance with the existing covenants, as modified,
Greyhound Lines, Inc. would be required to seek further modifications to the
Greyhound Facility, and such additional modifications or the cost of the
modifications or other further changes to the Greyhound Facility could have a
material adverse effect on Greyhound Lines, Inc. In addition, if such further
modifications are required but are not obtained from the lenders under the
Greyhound Facility, Greyhound Lines, Inc. may be required to seek a replacement
for the Greyhound Facility from other financing sources. If alternate sources
of financing are not then available, then Greyhound Lines, Inc. may not be able
to satisfy its obligations as they become due and may not be able to continue
as a going concern. If the going concern basis on which Greyhound Lines,
Inc.s consolidated financial statements were prepared was not appropriate for
those consolidated financial statements, then significant adjustments would
need to be made to the carrying value of the assets and liabilities, the
reported revenue and expenses and balance sheet classifications used by
Greyhound Lines, Inc. Accordingly, if such changes were made to Greyhound
Lines, Inc.s consolidated financial statements, significant adjustments would
be required to our consolidated financial statements and we may be required to
honor certain Greyhound Lines, Inc. lease commitments and pension obligations.
We believe that this would have no material impact on our financial condition.

Organized strikes or work stoppages by unionized employees

The Company is party to collective bargaining agreements that cover the
majority of its employees. The Companys largest collective bargaining
agreement is between Greyhound Lines, Inc. and the Amalgamated Transit Union,
or the ATU, and expires in January 2004. If the Companys unionized employees
were to engage in a strike or other work stoppage prior to such expiration, or
if the Company is unable to negotiate acceptable extensions of the agreement
resulting in a strike or other work stoppage by the affected workers, the
Company could experience a significant disruption of operations and increased
operating costs as a result of higher wages or benefits paid to union members,
which could have a material adverse effect on our business, financial condition
and results of operations.

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ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about our market risk includes forward-looking
statements that involve risk and uncertainties. Actual results could differ
materially from these projections. We are currently exposed to market risk
from changes in commodity prices for fuel, investment prices, foreign exchange
and interest rates. We do not use derivative instruments for speculative or
trading purposes.

Commodity Prices. We currently have exposure to commodity risk from our fuel
inventory and advance purchase commitments for fuel. We have fuel inventory at
August 31, 2003, at a carrying value of $3.3 million. Additionally, we have
entered into forward purchase contracts for fuel whereby we have agreed to take
delivery of a total of 31.5 million gallons through August 2005 at a fixed
price of $27.1 million. We expect to purchase approximately 150 million
gallons of fuel in fiscal 2004, of which 126.8 million gallons are currently
not covered by forward purchase contracts. A 10% increase or decrease in the
cost of fuel would not have a material effect on this commitment or our results
of operations.

Investment Prices. We currently have exposure in the market price of our
investments. At August 31, 2003, we had approximately $139.7 million held in
cash, $42.0 million in short-term investments and $301.1 million of long term
investments. A 10% decrease in the market price would not have a material
effect on our financial position. As required by generally accepted accounting
principles, we reported these investments at fair value, with any unrecognized
gains or losses excluded from earnings and reported in a separate component of
stockholders equity.

Foreign Exchange. We currently have exposure to foreign currency exchange
rates from our Canadian dollar operations. Canadian based revenues naturally
hedge Canadian based expenses and capital expenditures. Therefore changes in
the Canadian foreign currency exchange rate have no material effect on our
financial position or results from operations. We are not exposed to any other
foreign currency exchange rates other than Canadian dollars.

Interest Rate Sensitivity. We currently have exposure to interest rates from
our long-term debt. At August 31, 2003, we had $648.8 million of floating rate
debt, of which $618.7 million was subject to a 2% LIBOR floor. A 10% increase
or decrease in variable interest rates would still result in a LIBOR rate below
the LIBOR floor. Therefore, a 10% increase or decrease in variable interest
rates would not have a material effect on our results of operations or cash
flows.

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

Long Term Debt(in millions)
    
    2004
    
    2005
    
    2006
    
    2007
    
    2008
    
    Thereafter
    
    Total
    
    Fair ValueFixed Rate Debt
    
    $
    14.8
    
    
    $
    11.9
    
    
    $
    11.1
    
    
    $
    156.2
    
    
    $
    0.9
    
    
    $
    411.3
    
    
    $
    606.2
    
    
    $
    574.3Weighted Average Rate
    
    
    8.3
    %
    
    
    8.6
    %
    
    
    9.3
    %
    
    
    11.4
    %
    
    
    11.4
    %
    
    
    10.7
    %





ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Financial Information on page F-1.




ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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ITEM 9A.  CONTROLS AND PROCEDURES

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

During the most recent fiscal quarter, there have not been any changes in the
Companys internal controls over financial reporting or in other factors that
have materially affected, or are reasonably likely to materially affect, the
Companys internal controls over financial reporting.

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PART III




ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding directors of the Company will be set forth under the
caption Election of Directors in the Companys proxy statement for the
Companys 2004 annual meeting of stockholders (the Proxy Statement) and is
incorporated herein by reference. Information regarding executive officers of
the Company is included in Item 4A of Part I of this Form 10-K as permitted by
Instruction 3 to Item 401(b) of Regulation S-K. Information required by Item
405 of Regulation S-K will be set forth under the caption Section 16(a)
Beneficial Ownership Reporting Compliance in the Proxy Statement and is
incorporated herein by reference.




ITEM 11.  EXECUTIVE COMPENSATION

Information required by this item will be set forth under the caption
Executive Compensation in the Proxy Statement and, except for the information
under the captions Compensation Committee Report on Executive Compensation
and Performance Graph, is incorporated herein by reference.




ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by this item will be set forth under the caption
Beneficial Ownership of Common Stock in the Proxy Statement and is
incorporated herein by reference.




ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding any disclosable relationships and related transactions of
directors and officers will be set forth under the caption Compensation
Committee Interlocks and Insider Participation and Certain Relationships and
Related Transactions in the Proxy Statement and is incorporated herein by
reference.




ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by this item will be set forth under the captions Audit
Fees, Audit-Related Fees, Tax Fees and All Other Fees in the Proxy
Statement and is incorporated herein by reference.

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PART IV




ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K



|(a) |  | See Valuation and Qualifying Accounts on pages S-1 and S-2 and the Index to Financial
Statements on page F-1 and (c) below.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------



|(b) |  | Reports on Form 8-K
|--- |  | -------------------



| |  | Three reports on Form 8-K were filed during the quarter ended August 31, 2003. A report
dated June 23, 2003 was filed on July 7, 2003 relating to the bankruptcy of Laidlaw Inc.
and four of its subsidiaries and the effective date of their plan of reorganization. A
report dated June 23, 2003 was filed on July 9, 2003 relating to the Company becoming the
successor to Laidlaw Inc. as a result of the consummation of the plan of reorganization.
A report dated July 9, 2003 was furnished to the Commission on that date disclosing the
Companys financial results for the fiscal quarter ended May 31, 2003. Other than the
press release filed as an exhibit to the report dated July 9, 2003, no financial
statements were filed with such reports on Form 8-K.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) |  | Exhibits
|--- |  | --------



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



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



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



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



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



| | 4.1 |  | Rights agreement, dated as of June 23, 2003, by and between Laidlaw
International, Inc. and Wells Fargo Bank Minnesota, National
Association, as rights agent (filed as Exhibit 4.3 to the Form 8-K
filed on July 9, 2003 and incorporated herein by reference).
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.2 |  | Indenture dated as of June 3, 2003 between Laidlaw International,
Inc. and Deutsche Bank Trust Company Americas, relating to the 10
3/4% Senior Notes due 2011 (filed as Exhibit 4.1 to the Form 10-Q
for the quarter ended May 31, 2003 and incorporated herein by
reference).
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | 4.3 |  | First Supplemental Indenture, dated as of June 18, 2003 between
Laidlaw International, Inc. and Deutsche Bank Trust Company Americas
(filed as Exhibit 4.2 to the Form 10-Q for the quarter ended May 31,
2003 and incorporated herein by reference).
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.4 |  | Indenture, dated April 16, 1997, by and among Greyhound Lines, Inc.,
the Guarantors and PNC Bank, N.A., as Trustree (filed as an exhibit
to Greyhound Lines, Inc. Registration Statement on Form S-4
regarding the Greyhound 11 1/2% Series B Senior Notes and
incorporated herein by reference).
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.5 |  | First Supplemental Indenture dated as of July 9, 1997 between
Greyhound Lines, Inc. and PNC Bank, N.A. as Trustee (filed as an
exhibit to Greyhound Lines, Inc. Form 10-K for the year ended
December 31, 2002 and incorporated herein by reference).
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.6 |  | Second Supplemental Indenture dated as of August 25, 1997 between
Greyhound Lines, Inc. and PNC Bank, N.A. as Trustee (filed as an
exhibit to Greyhound Lines, Inc. Form 10-K for the year ended
December 31, 2002 and incorporated herein by reference).
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.7 |  | Third Supplemental Indenture dated as of February 1, 1999 between
Greyhound Lines, Inc. and Chase Manhattan Trust Company as Trustee
(filed as an exhibit to Greyhound Lines, Inc. Form 10-Q for the
quarter ended June 30, 1999 and incorporated herein by reference).
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.8 |  | Fourth Supplemental Indenture dated as of May 14, 1999, between
Greyhound Lines, Inc. and Chase Manhattan Trust Company as Trustee
(filed as an exhibit to Greyhound Lines, Inc. Form 10-Q for the
quarter ended June 30, 1999 and incorporated herein by reference).
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.1 |  | Laidlaw International, Inc. Equity Incentive Plan (filed as Exhibit
10.1 to the Form 10-Q for the quarter ended May 31, 2003 and
incorporated herein by reference).*
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.2 |  | Laidlaw International, Inc. Supplemental Executive Retirement Plans.*
| | ---- |  | ---------------------------------------------------------------------



| | 10.3 |  | Credit Agreement dated as of June 19, 2003 among Laidlaw
International, Inc., and others, as Borrowers and the financial
institutions named therein (filed as Exhibit 10.3 to the Form 10-Q
for the quarter ended May 31, 2003 and incorporated herein by
reference).
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.4 |  | Amendment dated as of June 26, 2003 to the credit agreement dated as
of June 19, 2003 (filed as Exhibit 10.4 to the Form 10-Q for the
quarter ended May 31, 2003 and incorporated herein by reference).
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.5 |  | Agreement made as of June 18, 2003 between Laidlaw Inc. and others
and the Pension Benefit Guaranty Corporation (filed as Exhibit 10.5
to the Form 10-Q for the quarter ended May 31, 2003 and incorporated
herein by reference).
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.6 |  | Tax sharing agreement among Laidlaw International, Inc. and its U.S.
subsidiaries entered into as of June 23, 2003.
| | ---- |  | -------------------------------------------------------------------------------------------------------------------



| | 10.7 |  | Employment agreement between Kevin E. Benson and Laidlaw Inc.
effective the 16th day of September, 2002.*
| | ---- |  | ---------------------------------------------------------------------------------------------------------



| | 10.8 |  | Change in Control Severance Agreement between Kevin E. Benson and
Laidlaw Inc.*
| | ---- |  | -------------------------------------------------------------------------------

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| | 10.9 |  | Employment agreement between Douglas A. Carty and Laidlaw Inc.
effective the 9th day of December, 2002.*
| | ---- |  | --------------------------------------------------------------------------------------------------------



| | 10.10 |  | Change in Control Severance Agreement between Douglas A. Carty and
Laidlaw Inc.*
| | ----- |  | --------------------------------------------------------------------------------



| | 10.11 |  | Employment agreement among Laidlaw Inc., American Medical Response,
Inc. and EmCare Holdings, Inc. and William A. Sanger effective
October 1, 2002.
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.12 |  | Employment agreement between EmCare Holdings, Inc. and Don S. Harvey
effective April 1, 2003.
| | ----- |  | ---------------------------------------------------------------------------------------------



| | 10.13 |  | Amended and Restated Loan and Security Agreement among Greyhound
Lines, Inc., as Borrower, the financial institutions named as
lenders, and Foothill Capital Corporation as Agent, dated as of May
14, 2003 (filed by Greyhound Lines, Inc. as a current report on Form
8-K dated May 21, 2003 and incorporated herein by reference).
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 21.1 |  | Subsidiaries of the registrant.
| | ---- |  | -------------------------------



| | 24.1 |  | Powers of Attorney.
| | ---- |  | -------------------



| | 31.1 |  | Principal Executive Officers Certifications Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
| | ---- |  | -------------------------------------------------------------------------------------------------------



| | 31.2 |  | Principal Financial Officers Certifications Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
| | ---- |  | -------------------------------------------------------------------------------------------------------



| | 32.1 |  | Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of
Sarbanes-Oxley Act of 2002)
| | ---- |  | --------------------------------------------------------------------------------------



---

|* |  | Management contract or compensatory plan.
|- |  | -----------------------------------------

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Signatures

Pursuant to the requirements of Section 13 or 15(d) 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 on the 1st day of
December, 2003.

LAIDLAW INTERNATIONAL, INC.By:
    
    /s/ K. E. Benson
Kevin E. Benson
President, Chief Executive Officer and Director


Pursuant to the requirements of the Securities Exchange Act, this report has
been signed below on the 1st day of December, 2003 by the following persons on
behalf of the registrant in the capacities below.

Signature
    
    Title/s/ K.E. Benson
Kevin E. Benson
    
    President, Chief Executive Officer and Director
(Principal Executive Officer)/s/ D.A. Carty
Douglas A. Carty
    
    Senior Vice President and Chief Financial
Officer (Principal Financial Officer)/s/ Wayne Bishop
Wayne R. Bishop
    
    Vice President, Controller (Principal Accounting Officer)John F. Chlebowski*
    
    DirectorJames H. Dickerson, Jr.*
    
    DirectorLawrence M. Nagin*
    
    DirectorVicki A. OMeara*
    
    DirectorRichard R. Randazzo*
    
    DirectorMaria A. Sastre*
    
    DirectorPeter E. Stangl*
    
    DirectorCarroll R. Wetzel, Jr.*
    
    Director


*By
    
    /s/ D.A. Carty
Douglas A. Carty
As Attorney-in-Fact


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##### Table of Contents



INDEX TO FINANCIAL STATEMENTS
LAIDLAW INTERNATIONAL, INC.

Reports of Independent Auditors
    
    
    F-2Consolidated Balance Sheets as of August 31, 2003, June 1, 2003 and
August 31, 2002
    
    
    F-3Consolidated Statements of Operations for the periods June 1, 2003
through August 31, 2003 and September 1, 2002 through May 31, 2003 and
for the years ended August 31, 2002 and 2001
    
    
    F-5Consolidated Statements of Shareholders Equity for the periods June
1, 2003 through August 31, 2003 and September 1, 2002 through May 31,
2003 and for the years ended August 31, 2002 and 2001
    
    
    F-6Consolidated Statements of Cash Flows for the periods June 1, 2003
through August 31, 2003 and September 1, 2002 through May 31, 2003 and
for the years ended August 31, 2002 and 2001
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-9


F-1



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##### Table of Contents






Report of Independent Auditors
To the Shareholders of Laidlaw International, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders equity, and cash flows
present fairly, in all material respects, the financial position of Laidlaw
International, Inc.as at August 31, 2003 and June 1, 2003, and the results of
its operations and its cash flows for the period from June 1, 2003 to August
31, 2003 in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits in
accordance with generally accepted auditing standards in the United States.
Those standards require that we plan and perform the audit to obtain reasonable
assurance whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, the United
States Bankruptcy Court for the Western District of New York confirmed the
Companys reorganization plan (the plan) on February 27, 2003. Confirmation
of the plan resulted in the discharge of all claims against the Company that
arose before June 28, 2001 and terminates all rights and interests of equity
security holders as provided for in the plan. The plan was implemented in June
2003 and the Company emerged from bankruptcy. In connection with its emergence
from bankruptcy, the Company adopted fresh start accounting as of June 1, 2003.

/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chartered Accountants
Mississauga, Ontario
Date: November 18, 2003

Report of Independent Auditors
To the Directors and Shareholders of Laidlaw International, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders equity, and cash flows
present fairly, in all material respects, the financial position of Laidlaw
Inc.as at August 31, 2002 and the results of its operations and its cash flows
for each of the periods from September 1, 2002 to May 31, 2003 and the two
years in the period ended August 31, 2002 in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, the Company
filed a petition on June 28, 2001 with the United States Bankruptcy Court for
the Western District of New York for reorganization under the provisions of
Chapter 11 of the Bankruptcy Code. The Companys reorganization plan was
implemented in June 2003 and the Company emerged from bankruptcy. In
connection with its emergence from bankruptcy, the Company adopted fresh start
accounting.

As described in Note 8 to the consolidated financial statements, on September
1, 2002, Laidlaw Inc. changed its method of accounting for goodwill.

/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chartered Accountants
Mississauga, Ontario
Date: November 18, 2003

F-2



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##### Table of Contents






LAIDLAW INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
($ millions)

Fresh
    
    PredecessorStart
    
    CompanyAugust 31,
    
    June 1,
    
    August 31,2003
    
    2003
    
    2002ASSETSCurrent assetsCash and cash equivalents
    
    $
    100.3
    
    
    $
    23.4
    
    
    $
    343.5Restricted cash and cash equivalents (Note 4)
    
    
    39.4
    
    
    
    44.7
    
    
    
    75.8Short-term deposits and marketable securities (Note 4)
    
    
    42.0
    
    
    
    32.3
    
    
    
    16.1Trade accounts receivable (Note 5)
    
    
    502.2
    
    
    
    630.6
    
    
    
    490.4Other receivables
    
    
    49.6
    
    
    
    49.9
    
    
    
    54.9Income taxes recoverable
    
    
    18.0
    
    
    
    27.4
    
    
    
    29.2Parts and supplies
    
    
    50.2
    
    
    
    50.8
    
    
    
    50.4Deferred income tax assets (Note 17)
    
    
    86.2
    
    
    
    80.9
    
    
    
    Other current assets
    
    
    60.1
    
    
    
    67.8
    
    
    
    56.3Total current assets
    
    
    948.0
    
    
    
    1,007.8
    
    
    
    1,116.6Long-term investments(Note 6)
    
    
    553.5
    
    
    
    580.4
    
    
    
    417.9Property and equipment(Note 7)
    
    
    1,669.8
    
    
    
    1,628.9
    
    
    
    1,677.7Other assetsGoodwill (net of accumulated amortization and
impairments of $776.0 as at August 31, 2002) (Note 8)
    
    
    183.1
    
    
    
    183.1
    
    
    
    2,976.8Contracts and customer relationships
    
    
    216.9
    
    
    
    221.0
    
    
    
    Deferred income tax assets (Note 17)
    
    
    203.2
    
    
    
    195.5
    
    
    
    Pension asset (Note 11)
    
    
    
    
    
    
    
    
    
    
    10.8Deferred charges and other assets
    
    
    78.2
    
    
    
    78.6
    
    
    
    12.0681.4
    
    
    
    678.2
    
    
    
    2,999.6Total assets
    
    $
    3,852.7
    
    
    $
    3,895.3
    
    
    $
    6,211.8


The accompanying notes are an integral part of these statements.

F-3



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##### Table of Contents



LAIDLAW INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
($ millions)

Fresh
    
    PredecessorStart
    
    CompanyAugust 31,
    
    June 1,
    
    August 31,2003
    
    2003
    
    2002LIABILITIESCurrent liabilitiesAccounts payable
    
    $
    119.4
    
    
    $
    106.6
    
    
    $
    109.7Accrued liabilities (Note 9)
    
    
    506.0
    
    
    
    523.2
    
    
    
    504.1Current portion of long-term debt (Note 10)
    
    
    69.4
    
    
    
    89.0
    
    
    
    20.3Total current liabilities
    
    
    694.8
    
    
    
    718.8
    
    
    
    634.1Long-term debt(Note 10)
    
    
    1,145.1
    
    
    
    1,150.1
    
    
    
    204.4Pension liability(Note 11)
    
    
    225.7
    
    
    
    225.1
    
    
    
    64.8Other long-term liabilities(Note 12)
    
    
    496.8
    
    
    
    492.0
    
    
    
    377.3Liabilities subject to compromise(Note 1)
    
    
    
    
    
    
    
    
    
    
    3,977.1Commitments and contingencies(Note 22)Total liabilities
    
    
    2,562.4
    
    
    
    2,586.0
    
    
    
    5,257.7SHAREHOLDERS EQUITYCommon shares; $0.01 par value per share; issued and
outstanding 103,777,422
    
    
    1.0
    
    
    
    1.0
    
    
    
    Share premium
    
    
    1,358.3
    
    
    
    1,358.3
    
    
    
    Common shares held in trust; 3,777,419 issued (Note 11)
    
    
    (50.0
    )
    
    
    (50.0
    )
    
    
    Predecessor Common Shares; 325,927,870 issued and
outstanding
    
    
    
    
    
    
    
    
    
    
    2,222.6Predecessor Preference Shares
    
    
    
    
    
    
    
    
    
    
    7.9Accumulated other comprehensive loss
    
    
    (9.1
    )
    
    
    
    
    
    
    (258.7
    )Deficit
    
    
    (9.9
    )
    
    
    
    
    
    
    (1,017.7
    )Total shareholders equity(Note 13)
    
    
    1,290.3
    
    
    
    1,309.3
    
    
    
    954.1Total liabilities and shareholders equity
    
    $
    3,852.7
    
    
    $
    3,895.3
    
    
    $
    6,211.8


The accompanying notes are an integral part of these statements.

F-4



---



##### Table of Contents






LAIDLAW INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
($ millions except per share amounts)

Predecessor CompanyFor the period
    
    For the periodJune 1, 2003
    
    September 1, 2002
    
    For the year
    
    For the yearthrough
    
    through
    
    ended
    
    endedAugust 31,
    
    May 31,
    
    August 31,
    
    August 31,2003
    
    2003*
    
    2002
    
    2001Revenue
    
    $
    997.1
    
    
    $
    3,485.7
    
    
    $
    4,432.1
    
    
    $
    4,418.3Compensation expense
    
    
    581.7
    
    
    
    2,001.1
    
    
    
    2,523.0
    
    
    
    2,533.1Accident claims and professional liability expenses
    
    
    62.9
    
    
    
    241.4
    
    
    
    325.8
    
    
    
    342.0Vehicle related costs
    
    
    74.8
    
    
    
    202.4
    
    
    
    272.5
    
    
    
    267.3Occupancy costs
    
    
    51.4
    
    
    
    150.4
    
    
    
    202.2
    
    
    
    191.0Fuel
    
    
    36.7
    
    
    
    133.4
    
    
    
    163.0
    
    
    
    194.4Depreciation
    
    
    47.7
    
    
    
    228.4
    
    
    
    270.6
    
    
    
    261.1Amortization
    
    
    4.4
    
    
    
    0.9
    
    
    
    88.2
    
    
    
    89.2Other operating expenses
    
    
    126.0
    
    
    
    364.2
    
    
    
    524.6
    
    
    
    507.1Income from operating segments
    
    
    11.5
    
    
    
    163.5
    
    
    
    62.2
    
    
    
    33.1Interest expense
    
    
    (31.5
    )
    
    
    (19.6
    )
    
    
    (27.7
    )
    
    
    (270.9
    )Gain on discharge of debt (Note 1)
    
    
    
    
    
    
    1,482.8
    
    
    
    
    
    
    
    Fresh start accounting adjustments (Note 2)
    
    
    
    
    
    
    (609.6
    )
    
    
    
    
    
    
    Other financing related expenses (Note 16)
    
    
    
    
    
    
    (35.0
    )
    
    
    (44.7
    )
    
    
    (63.8
    )Other income
    
    
    0.1
    
    
    
    15.0
    
    
    
    15.3
    
    
    
    9.3Income (loss) from continuing operations
before income taxes and cumulative effect of
change in accounting principle
    
    
    (19.9
    )
    
    
    997.1
    
    
    
    5.1
    
    
    
    (292.3
    )Income tax recovery (expense) (Note 17)
    
    
    10.0
    
    
    
    (4.5
    )
    
    
    9.8
    
    
    
    45.8Income (loss) from continuing operations before
cumulative effect of change in accounting principle
    
    
    (9.9
    )
    
    
    992.6
    
    
    
    14.9
    
    
    
    (246.5
    )Cumulative effect of change in accounting principle
(Note 8)
    
    
    
    
    
    
    (2,205.4
    )
    
    
    
    
    
    
    Income (loss) from continuing operations
    
    
    (9.9
    )
    
    
    (1,212.8
    )
    
    
    14.9
    
    
    
    (246.5
    )Income from discontinued operations(Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,672.4Net income (loss)
    
    
    ($9.9
    )
    
    
    ($1,212.8
    )
    
    $
    14.9
    
    
    $
    1,425.9Basic earnings (loss) per share(Note 18)Continuing operations before cumulative effect of
change in accounting principle
    
    
    ($0.10
    )
    
    
    3.05
    
    
    $
    0.05
    
    
    
    ($0.76
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (6.77
    )
    
    
    
    
    
    
    Continuing operations
    
    
    (0.10
    )
    
    
    (3.72
    )
    
    
    0.05
    
    
    
    (0.76
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.13Net income (loss)
    
    
    ($0.10
    )
    
    
    ($3.72
    )
    
    $
    0.05
    
    
    $
    4.37Diluted earnings (loss) per share(Note 18)Continuing operations before cumulative effect of
change in accounting principle
    
    
    ($0.10
    )
    
    $
    3.05
    
    
    $
    0.05
    
    
    
    ($0.76
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (6.77
    )
    
    
    
    
    
    
    Continuing operations
    
    
    (0.10
    )
    
    
    (3.72
    )
    
    
    0.05
    
    
    
    (0.76
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.13Net income (loss)
    
    
    ($0.10
    )
    
    
    ($3.72
    )
    
    $
    0.05
    
    
    $
    4.37


The accompanying notes are an integral part of these statements.



---

|* |  | Adjusted to include fresh-start accounting adjustments and gain on discharge
of debt (Note 2)
|- |  | ---------------------------------------------------------------------------------------------

F-5



---



##### Table of Contents






LAIDLAW INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
($ millions, except share information)

Common Shares
    
    
    
    
    
    Preference Shares
    
    
    
    
    
    Accumulated Other
    
    TotalShare
    
    
    
    
    
    
    
    Comprehensive
    
    ComprehensivePredecessor Company
    
    # of shares
    
    Amount
    
    Premium
    
    # of shares
    
    Amount
    
    Deficit
    
    Loss
    
    Income (loss)Balance at August 31, 2000
    
    
    325,927,870
    
    
    $
    2,222.6
    
    
    $
    
    
    
    
    528,770
    
    
    $
    7.9
    
    
    
    ($2,458.2
    )
    
    
    (170.3
    )Dividends on preference shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,425.9
    
    
    
    
    
    
    $
    1,425.9Other comprehensive income (loss):Unrealized holding gains net of reclassification
adjustments for gains and losses included in net income
(net of NIL taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.2
    
    
    
    6.2Foreign currency translation adjustments (net of NIL taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4.3
    )
    
    
    (4.3
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,427.8Balance at August 31, 2001
    
    
    325,927,870
    
    
    $
    2,222.6
    
    
    $
    
    
    
    
    528,770
    
    
    $
    7.9
    
    
    
    ($1,032.6
    )
    
    
    ($168.4
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14.9
    
    
    
    
    
    
    $
    14.9Other comprehensive income (loss):Unrealized holding gains net of reclassification
adjustments for gains and losses included in net income
(net of $1.0 in taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.7
    
    
    
    3.7Foreign currency translation adjustments (net of NIL taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.1
    )
    
    
    (2.1
    )Minimum pension liability adjustments (net of NIL taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (91.9
    )
    
    
    (91.9
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (75.4
    )Balance at August 31, 2002
    
    
    325,927,870
    
    
    $
    2,222.6
    
    
    $
    
    
    
    
    528,770
    
    
    $
    7.9
    
    
    
    ($1,017.7
    )
    
    
    ($258.7
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,212.8)
    **
    
    
    
    
    
    
    ($1,212.8)
    **Other comprehensive income (loss):Unrealized holding gains net of reclassification
adjustments for gains and losses included in net income
(net of NIL in taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.2
    
    
    
    9.2Foreign currency translation adjustments (net of NIL taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46.2
    
    
    
    46.2Minimum pension liability adjustments (net of NIL taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (176.4
    )
    
    
    (176.4
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ($1,333.8)
    **Balance at May 31, 2003
    
    
    325,927,870
    
    
    $
    2,222.6
    
    
    $
    
    
    
    
    528,770
    
    
    $
    7.9
    
    
    
    ($2,230.5
    )
    
    
    ($379.7
    )Fresh Start adjustments (Note 2)
    
    
    (325,927,870
    )
    
    
    (2,222.6
    )
    
    
    
    
    
    
    (528,770
    )
    
    
    (7.9
    )
    
    
    2,230.5
    
    
    
    379.7Distribution of new common shares (Note 2)
    
    
    100,000,003
    *
    
    
    1.0
    
    
    
    1,308.3
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Laidlaw International, Inc.:Balance, Fresh start June 1, 2003
    
    
    100,000,003
    *
    
    
    1.0
    
    
    
    1,308.3
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9.9
    )
    
    
    
    
    
    
    ($9.9
    )Other comprehensive income (loss):Unrealized holding losses net of reclassification
adjustments for gains and losses included in net income
(net of $3.5 in taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6.5
    )
    
    
    (6.5
    )Foreign currency translation adjustments (net of NIL taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.6
    )
    
    
    (2.6
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ($19.0
    )Balance at August 31, 2003
    
    
    100,000,003
    *
    
    $
    1.0
    
    
    $
    1,308.3
    *
    
    
    
    
    
    $
    
    
    
    
    ($9.9
    )
    
    
    ($9.1
    )




---

|*  |  | Net of 3,777,419 common shares held in trust (Note 11)                                       
|-- |  | ---------------------------------------------------------------------------------------------
|  
|** |  | Adjusted to include Fresh Start accounting adjustments and gain on discharge
of debt (Note 2)

The accompanying notes are an integral part of these statements.

F-6



---



##### Table of Contents






LAIDLAW INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ millions)

Predecessor CompanyFor the period
    
    For the periodJune 1, 2003
    
    September 1, 2002
    
    For the year
    
    For the yearthrough
    
    through
    
    ended
    
    endedAugust 31,
    
    May 31,
    
    August 31,
    
    August 31,2003
    
    2003**
    
    2002
    
    2001Net cash provided by (used in):Operating activities
    
    $
    187.0
    
    
    $
    208.5
    
    
    $
    433.8
    
    
    $
    447.7Investing activities
    
    
    (76.0
    )
    
    
    (364.6
    )
    
    
    (275.7
    )
    
    
    (281.5
    )Financing activities
    
    
    (34.1
    )
    
    
    (164.0
    )
    
    
    (95.8
    )
    
    
    7.076.9
    
    
    
    (320.1
    )
    
    
    62.3
    
    
    
    173.2Cash and cash equivalents*  beginning of period
    
    
    23.4
    
    
    
    343.5
    
    
    
    281.2
    
    
    
    108.0Cash and cash equivalents*  end of period
    
    $
    100.3
    
    
    $
    23.4
    
    
    $
    343.5
    
    
    $
    281.2Operating activitiesNet income (loss) for the period
    
    
    ($9.9
    )
    
    
    ($1,212.8
    )
    
    $
    14.9
    
    
    $
    1,425.9Add (deduct) items not affecting cash:Depreciation and amortization
    
    
    52.1
    
    
    
    229.3
    
    
    
    358.8
    
    
    
    350.3Other financing related expenses (Note 16)
    
    
    
    
    
    
    35.0
    
    
    
    44.7
    
    
    
    63.8Deferred income taxes
    
    
    (10.0
    )
    
    
    
    
    
    
    
    
    
    
    Gain on discharge of debt (Note 1)
    
    
    
    
    
    
    (1,482.8
    )
    
    
    
    
    
    
    Fresh start accounting adjustments (Note 2)
    
    
    
    
    
    
    609.6
    
    
    
    
    
    
    
    Income from discontinued operations (Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,672.4
    )Cumulative effect of change in accounting
principle (Note 8)
    
    
    
    
    
    
    2,205.4
    
    
    
    
    
    
    
    Loss (gain) on sale of assets
    
    
    (0.8
    )
    
    
    (4.3
    )
    
    
    (4.2
    )
    
    
    6.6Other
    
    
    4.8
    
    
    
    (3.8
    )
    
    
    (10.4
    )
    
    
    (6.2
    )Increase in claims liabilities and professional
liability reserves
    
    
    4.7
    
    
    
    56.1
    
    
    
    61.6
    
    
    
    126.9Increase (decrease) in accrued interest
    
    
    16.5
    
    
    
    (4.3
    )
    
    
    (0.5
    )
    
    
    246.2Increase in pension liability
    
    
    0.6
    
    
    
    0.7
    
    
    
    
    
    
    
    Cash provided by (used in financing) other
working capital items (Note 19)
    
    
    144.9
    
    
    
    (147.1
    )
    
    
    46.2
    
    
    
    (43.2
    )Pension contribution per the PBGC Agreement
(Note 11)
    
    
    
    
    
    
    (50.0
    )
    
    
    
    
    
    
    Decrease (increase) in restricted cash and cash
equivalents (Note 4)
    
    
    (0.7
    )
    
    
    0.9
    
    
    
    (38.6
    )
    
    
    8.2Cash portion of other financing related
expenses (Note 16)
    
    
    (15.2
    )
    
    
    (23.4
    )
    
    
    (38.7
    )
    
    
    (58.4
    )Net cash provided by operating activities
    
    $
    187.0
    
    
    $
    208.5
    
    
    $
    433.8
    
    
    $
    447.7




---

|*  |  | Represents the unrestricted cash and cash equivalents  Refer to Note 4                      
|-- |  | ---------------------------------------------------------------------------------------------
|  
|** |  | Adjusted to include Fresh Start accounting adjustments and gain on discharge of debt (Note 2)

The accompanying notes are an integral part of these statements.

F-7



---



##### Table of Contents



LAIDLAW INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
($ millions)

Predecessor CompanyFor the period
    
    For the periodJune 1, 2003
    
    September 1, 2002
    
    For the year
    
    For the yearthrough
    
    through
    
    ended
    
    endedAugust 31,
    
    May 31,
    
    August 31,
    
    August 31,2003
    
    2003**
    
    2002
    
    2001Investing activitiesPurchases of property and equipment
    
    
    ($90.5
    )
    
    
    ($230.1
    )
    
    
    ($283.3
    )
    
    
    ($267.3
    )Proceeds from sale of property and
equipment
    
    
    4.4
    
    
    
    24.6
    
    
    
    45.5
    
    
    
    21.8Purchases of other assets
    
    
    (1.1
    )
    
    
    (3.2
    )
    
    
    (1.4
    )
    
    
    (8.8
    )Expended on acquisitions (Note 21)
    
    
    (0.1
    )
    
    
    (4.6
    )
    
    
    (3.6
    )
    
    
    (2.0
    )Net decrease (increase) in investments
    
    
    11.3
    
    
    
    (151.3
    )
    
    
    (37.1
    )
    
    
    (45.5
    )Proceeds from sale of assets (Note 20)
    
    
    
    
    
    
    
    
    
    
    4.2
    
    
    
    20.3Net cash used in investing activities
    
    
    ($76.0
    )
    
    
    ($364.6
    )
    
    
    ($275.7
    )
    
    
    ($281.5
    )Financing activitiesProceeds from issue of long-term debt
    
    $
    17.3
    
    
    $
    1,207.8
    
    
    $
    172.2
    
    
    $
    342.2Repayments of long-term and other
non-current liabilities
    
    
    (47.6
    )
    
    
    (149.3
    )
    
    
    (268.0
    )
    
    
    (335.2
    )Repayment of liabilities subject to
compromise
    
    
    
    
    
    
    (1,185.0
    )
    
    
    
    
    
    
    Payment of financing fees
    
    
    (3.8
    )
    
    
    (37.5
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    ($34.1
    )
    
    
    ($164.0
    )
    
    
    ($95.8
    )
    
    $
    7.0Supplemental cash flow informationCash paid (received) during the period for:Interest
    
    $
    12.3
    
    
    $
    25.0
    
    
    $
    31.9
    
    
    $
    30.4Income taxes
    
    
    ($8.3
    )
    
    
    ($4.4
    )
    
    
    ($10.4
    )
    
    
    ($51.0
    )


The accompanying notes are an integral part of these statements.

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##### Table of Contents






LAIDLAW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1  Voluntary petition for reorganization and emergence from Chapter 11
and basis of presentation

Voluntary petition for reorganization and emergence from Chapter 11

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

The Predecessor Company reorganized its affairs under the protection of the
Bankruptcy Code and the CCAA and proposed a plan of reorganization (the Plan)
for itself and the other Debtors. On February 27, 2003, the Bankruptcy Court
entered an order confirming the Plan. On February 28, 2003, the Canadian Court
issued an order recognizing the Bankruptcy Courts confirmation order and
implementing it in Canada with respect to the Predecessor Companys Canadian
insolvency proceeding. The Plan provided for the satisfaction of claims
against and interests in the Predecessor Company and the other Debtors,
including the liabilities subject to compromise. On June 6, 2003, the
Predecessor Company received final financing commitments and on June 23, 2003,
the Company (as defined below) emerged from bankruptcy protection. In
accordance with the terms of the Plan, the Predecessor Company engaged in an
internal restructuring that resulted in the transfer, directly or indirectly,
of all the assets of the Predecessor Company to LIL which domesticated into the
United States as a Delaware corporation and changed its name to Laidlaw
International, Inc. (the Company).

As part of the emergence from chapter 11, the Company obtained exit financing
of approximately $1.23 billion, including $200.0 million available under a
revolving line of credit (see Note 10). Approximately $1.0 billion of this
financing was used to fund a portion of the distributions to the Predecessor
Companys creditors. In addition, the Company issued 100.0 million shares of
new common stock for distribution to the Predecessor Companys creditors and
3.8 million shares of new common stock to the Pension Benefit Guaranty
Corporation (See Note 11). Consistent with the Plan, the Predecessor Companys
common and preference stock was cancelled as of June 23, 2003.

As a result of the Plan becoming effective, the following liabilities that were
subject to compromise were discharged by the Bankruptcy Court and Canadian
Court:

Accrued liabilities
    
    $
    11.3Derivative liabilities
    
    
    89.5Safety-Kleen Corp. (Safety-Kleen) related liabilities
    
    
    302.3Accrued interest payable
    
    
    370.7Unsecured debt
    
    
    3,203.3$
    3,977.1


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##### Table of Contents



As satisfaction of the liabilities subject to compromise, the Predecessor
Companys creditors received $1,185.0 million in cash and the 100.0 million
common shares, with a value of $1,309.3 million. The resulting $1,482.8
million gain on discharge of debt has been recorded in the Consolidated
Statement of Operations for the period from September 1, 2002 through May 31,
2003.

Basis of presentation

The consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States
(U.S. GAAP) and all figures are presented in U.S. dollars. Except as
indicated in Note 26, the consolidated financial statements conform, in all
material respects, with accounting principles generally accepted in Canada
(Canadian GAAP).

Note 2  Fresh Start accounting

The Company adopted fresh start accounting pursuant to the guidance provided by
the American Institute of Certified Public Accountants Statement of Position
90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy
Code (SOP 90-7). For financial reporting purposes, the effective date of
the Plan was considered to be June 1, 2003. In accordance with the principles
of fresh start accounting, the Company has adjusted its assets and liabilities
to their estimated fair values as of June 1, 2003 with the excess of the
Companys reorganization value over the fair value of its tangible and
identifiable intangible assets and liabilities reported as goodwill in the
Consolidated Balance Sheets. The net effect of all fresh start accounting
adjustments resulted in a loss of $609.6 million, which is reflected as an
adjustment to the Predecessor Companys results for the period from September
1, 2002 through May 31, 2003.

In accordance with SOP 90-7, management determined the reorganization value of
the Company. The methodology employed involved the estimation of an enterprise
value. With the assistance of independent specialists, management determined
that the enterprise value was within a range of $2.4 billion to $3.2 billion,
with approximately $2.8 billion representing managements best estimate of the
Companys enterprise value. The enterprise value was based on the
consideration of many factors such as the industries in which the Company
operates, the general economic conditions that impact the Company and
application of certain valuation methods, including a discounted cash flow
analysis using projected financial information, an analysis of comparable
publicly traded company multiples and a comparable acquisitions analysis. The
determination of the enterprise value and the allocations to the underlying
assets and liabilities were based on a number of estimates and assumptions,
which are inherently subject to significant uncertainties and contingencies
beyond the control of the Company. The Companys debt, pension obligations and
shareholders equity is equal to the enterprise value.

Due to the changes in the financial structure of the Company and the
application of fresh start accounting as a result of the consummation of the
Plan, the consolidated financial statements of the Company issued subsequent to
the Plan implementation are not comparable with the consolidated financial
statements issued by the Predecessor Company prior to the Plan implementation.
A black line has been drawn on the accompanying Consolidated Financial
Statements to separate and distinguish between the Company and the Predecessor
Company.

F-10



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##### Table of Contents



The effects of the application of fresh start accounting and the debt
restructuring on the Predecessor Companys condensed consolidated balance sheet
are as follows:

PredecessorCompany
    
    Debt
    
    Fresh-Start
    
    Fresh Start($ millions)
    
    May 31, 2003
    
    Restructuring
    
    Adjustments
    
    June 1, 2003AssetsCurrent assetsCash and cash equivalents
    
    $
    390.3
    
    
    
    ($366.9
    )(a)
    
    $
    
    
    
    $
    23.4Restricted cash and cash
equivalents
    
    
    44.7
    
    
    
    
    
    
    
    
    
    
    
    44.7Deferred income tax assets
    
    
    
    
    
    
    
    
    
    
    80.9
    (f)
    
    
    80.9Other current assets
    
    
    856.4
    
    
    
    3.0
    (a)
    
    
    (0.6
    )(b)
    
    
    858.8Total current assets
    
    
    1,291.4
    
    
    
    (363.9
    )
    
    
    80.3
    
    
    
    1,007.8Long-term investments
    
    
    469.0
    
    
    
    114.0
    (a)
    
    
    (2.6
    )(b)
    
    
    580.4Property & equipment
    
    
    1,701.8
    
    
    
    
    
    
    
    (72.9
    )(c)
    
    
    1,628.9Goodwill
    
    
    781.9
    
    
    
    
    
    
    
    (598.8
    )(d)
    
    
    183.1Contracts and customer
relationships
    
    
    
    
    
    
    
    
    
    
    221.0
    (e)
    
    
    221.0Deferred income tax assets
    
    
    
    
    
    
    
    
    
    
    195.5
    (f)
    
    
    195.5Pension asset
    
    
    16.8
    
    
    
    
    
    
    
    (16.8
    )(g)
    
    
    Deferred charges and other assets
    
    
    20.0
    
    
    
    46.9
    (a)
    
    
    11.7
    (b)
    
    
    78.6Total assets
    
    $
    4,280.9
    
    
    
    ($203.0
    )
    
    
    ($182.6
    )
    
    $
    3,895.3LiabilitiesCurrent liabilitiesCurrent portion of long-term debt
    
    $
    65.8
    
    
    $
    25.0
    (a)
    
    
    ($1.8
    )(h)
    
    $
    89.0Other current liabilities
    
    
    632.4
    
    
    
    6.4
    (a)
    
    
    (9.0
    )(b)(j)
    
    
    629.8Total current liabilities
    
    
    698.2
    
    
    
    31.4
    
    
    
    (10.8
    )
    
    
    718.8Long-term debt
    
    
    192.5
    
    
    
    1,000.6
    (a)
    
    
    (43.0
    )(h)
    
    
    1,150.1Pension liability
    
    
    247.6
    
    
    
    (50.0
    )(a)
    
    
    27.5
    (g)
    
    
    225.1Other long-term liabilities
    
    
    418.4
    
    
    
    
    
    
    
    73.6
    (i)(j)
    
    
    492.0Liabilities subject to compromise
    
    
    3,977.1
    
    
    
    (3,977.1
    )(a)
    
    
    
    
    
    
    Total liabilities
    
    
    5,533.8
    
    
    
    (2,995.1
    )
    
    
    47.3
    
    
    
    2,586.0Shareholders equity (deficiency)Common shares and share premium
    
    
    
    
    
    
    1,359.3
    (a)
    
    
    
    
    
    
    1,359.3Common shares held in trust
    
    
    
    
    
    
    (50.0
    )(a)
    
    
    
    
    
    
    (50.0
    )Predecessor common shares
    
    
    2,222.6
    
    
    
    
    
    
    
    (2,222.6
    )(k)
    
    
    Predecessor preference shares
    
    
    7.9
    
    
    
    
    
    
    
    (7.9
    )(k)
    
    
    Accumulated other comprehensive
loss
    
    
    (379.7
    )
    
    
    
    
    
    
    379.7
    (k)
    
    
    Deficit
    
    
    (3,103.7
    )
    
    
    1,482.8
    (a)
    
    
    1,620.9
    (k)
    
    
    Total shareholders equity
(deficiency)
    
    
    (1,252.9
    )
    
    
    2,792.1
    
    
    
    (229.9
    )
    
    
    1,309.3Total liabilities &
shareholders equity
(deficiency)
    
    $
    4,280.9
    
    
    
    ($203.0
    )
    
    
    ($182.6
    )
    
    $
    3,895.3


F-11



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##### Table of Contents





---

|a) |  | Reflects the settlement of liabilities subject to compromise by way of
cash payments and the issuance of common shares, the $50.0 million
contribution to the pension plans of Greyhound Lines, Inc. (Greyhound),
a subsidiary of the Company, as well as, the contributions of common
shares to the Pension Plan Trust (as defined in Note 11). Reflects $14.0
million of additional collateral required by entities insuring the
Companys bid and performance bonds and the $100.0 million of collateral
required for the LOC Facility (as defined in Note 6). Also reflects the
entry into the new senior secured credit facility and issuance of the
notes (see Note 10), net of fees and expenses of $48.5 million.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|b) |  | Adjusts miscellaneous assets and liabilities to their fair values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|c) |  | Adjusts property & equipment to reflect the fair value of the assets
based on independent appraisals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|d) |  | Eliminates the Predecessor Companys historical goodwill and record the
excess of reorganization value over the fair value of the Companys
tangible and identifiable intangible assets (goodwill).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|e) |  | Reflects managements estimate, with the assistance of independent
specialists, of the fair value of the contracts and customer relationships
held at June 1, 2003 based upon existing contract lives and expected
renewal rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|f) |  | Records the net deferred income tax assets of the Company based on the
guidance provided in the Statement of Financial Accounting Standards
(SFAS) No. 109.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|g) |  | Records the excess of the projected benefit obligation over the fair
value of the plans assets based on independent actuarial reports.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|h) |  | Reflects the fair value of the Companys long-term debt based on its
trading value or by discounting non-traded debt at current borrowing
rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|i) |  | Adjusts the Companys accident claims and professional liability reserves
to their fair value by applying a risk premium and discounting at a
risk-free rate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|j) |  | Records the operating leases at their fair value based on independent
valuations and the current borrowing rate of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|k) |  | Reflects the cancellation of the Predecessor Companys common and
preference shares and the elimination of the accumulated other
comprehensive loss and deficit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



|Note 3  |  | Summary of significant accounting policies
|-------- |  | ------------------------------------------

A summary of significant accounting policies followed in the preparation of
these consolidated financial statements is as follows:

Principles of Consolidation

The consolidated financial statements include the accounts of the Company or of
the Predecessor Company and all of their respective subsidiaries. All
significant intercompany transactions and balances have been eliminated.

F-12



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##### Table of Contents



Revenue recognition

Education Services, Public Transit Services and Greyhound

Revenue is recognized at the time services are provided. Revenue collected in
advance on contracts and tickets is deferred and taken into income as the
services are provided.

Healthcare Transportation Services and Emergency Management Services (the
Healthcare Businesses)

Revenue is recognized at the time of service and is recorded at amounts
estimated to be recoverable, based upon recent experience, under reimbursement
arrangements with third-party payors, including Medicare, Medicaid, private
insurers, managed care organizations and hospitals, or directly from patients.
The Company derives approximately 40% of its collections in the Healthcare
Businesses from Medicare and Medicaid, 8% from contracted hospitals, 36% from
private insurers, including prepaid health plans and other sources, and 16%
directly from patients.

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

Cash and cash equivalents

Cash and cash equivalents include short-term investments that are part of the
Companys cash management portfolio. These investments are highly liquid and
have original maturities of three months or less.

Parts and supplies

Parts and supplies are valued at the lower of cost, determined on a first-in,
first-out basis and replacement cost. This approximates fair value.

Long-term investments

In accordance with SFAS No. 115 Accounting for Certain Investments in Debt and
Equity Securities, the Company determines the classification of securities as
held-to-maturity or available-for-sale at the time of purchase and reevaluates
such designation as of each balance sheet date. Securities are classified as
held-to-maturity when the Company has the positive intent and ability to hold
the securities to maturity. Held-to-maturity securities are stated at cost,
adjusted for amortization of premiums and discounts to maturity. Investments
not classified as held-to-maturity are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with unrealized gains
and losses, reported as a separate component of shareholders equity. The cost
of securities sold is based on the specific identification method.

Investments in shares of companies over which the Company has significant
influence are accounted for by the equity method. Equity earnings are recorded
to the extent that any increase in the carrying value is determined to be
realizable. Other long-term investments are carried at cost.

As at June 1, 2003, the Companys long-term investments were recorded at their
fair value.

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##### Table of Contents



Property and equipment

Property and equipment of the Predecessor Company was recorded at cost,
including interest during construction, if any. In accordance with fresh start
accounting, property and equipment were reflected at their fair values as of
June 1, 2003. Additions to property and equipment subsequent to this date are
recorded at cost. Depreciation of property and equipment is recorded on a
straight-line basis over their estimated useful lives, which range from twenty
to forty years for buildings, five to eighteen years for vehicles, and three to
ten years for all other items. Depreciation of education services vehicles
during the year is based on usage. Maintenance costs are expensed as incurred
and renewals and improvements are capitalized.

Goodwill

The Companys goodwill balance at August 31, 2003 and June 1, 2003 represents
the excess of the Companys reorganization value over the aggregate fair value
of the Companys tangible and identifiable intangible net assets upon emergence
from bankruptcy.

The Predecessor Companys goodwill represented the excess of cost over fair
value of identifiable net assets as prescribed by the purchase method for
business acquisitions reduced by amortization and goodwill impairments. For
the years ended August 31, 2002 and August 31, 2001, goodwill was amortized on
a straight-line basis over 40 years.

Effective September 1, 2002, the Predecessor Company adopted SFAS No. 142
Accounting for Goodwill and Other Intangible Assets and as a result, the
Predecessor Company ceased to amortize goodwill. SFAS No.142 requires that
goodwill be reviewed for impairment upon adoption of SFAS No. 142 and at least
annually thereafter. As a result of this review, on September 1, 2002, the
Predecessor Company recorded a non-cash charge in the Statement of Operations
of $2,205.4 million as a cumulative effect of change in accounting principle
(See Note 8).

Contracts and customer relationships

At August 31, 2003, the Companys contracts and customer relationships
represent the amortized fair value of such assets held by the Company at June
1, 2003 (the Fresh Start Contract Assets) and the amortized cost of the
contracts (the Purchased Contract Assets) purchased through acquisition or
otherwise subsequent to June 1, 2003.

The Fresh Start Contract Assets are amortized on a straight-line basis over the
average length of the contracts and the expected contract renewal periods,
which range from ten to fifteen years. The Purchased Contract Assets are
amortized on a straight-line basis over the length of the contracts, generally
ranging from three to five years as the acquisition price is determined based
on the remaining term of the contract.

Deferred charges and other assets

Deferred charges and other assets are primarily comprised of deferred financing
costs, long term deposits and radio frequency licenses. The deferred financing
costs are amortized over the term of the financing to which the costs relate,
which range from five to eight years. The radio frequency licenses, totaling
$12.0 million (June 1, 2003  $12.0 million, Predecessor Company  August 31,
2002  $NIL), are considered to be indefinite lived intangible assets and as
such, are not amortized. The radio frequency licenses will be reviewed for
impairment on an annual basis.

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##### Table of Contents



Impairment of long-lived assets other than goodwill and other indefinite lived
intangibles

Long-lived assets other than goodwill and other indefinite lived intangibles
are assessed for impairment whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. Important factors,
which could trigger impairment review, include significant underperformance
relative to historical or projected future operating results, significant
changes in the use of the acquired assets or the strategy for the overall
business, and significant negative industry or economic trends. If indicators
of impairment are present, management evaluates the carrying value of
long-lived assets other than goodwill and other indefinite lived intangibles in
relation to the projection of future undiscounted cash flows of the underlying
business. Projected cash flows are based on historical results adjusted to
reflect managements best estimate of future market and operating conditions,
which may differ from actual cash flows.

Defined benefit pension plans

The costs of pension benefits are actuarially determined using the projected
benefit method pro-rated on service and managements best estimate of expected
plan investment performance, salary escalation, retirement ages of employees
and mortality tables. For the purpose of calculating the expected return on
plan assets, those assets are valued at a market-related value. The net
actuarial gain or loss in excess of 10 percent of the greater of the benefit
obligation and the market-related value of plan assets is amortized over the
average remaining service period of participating employees for active plans
and average remaining life expectancy of retired participants for frozen plans.
In accordance with fresh start accounting, the pension liabilities were
reflected at their fair values as of June 1, 2003.

Claims liabilities and professional liability reserves

The Company generally retains liability for auto, general and workers
compensation claims for the first $5 million of any one occurrence and
self-insures professional liability claims.

The Predecessor Company established reserves for these claims based upon an
assessment of actual claims and claims incurred but not reported, discounted at
a rate commensurate with the historic rate of return earned on the long-term
investments held to support payment of the claims. The reserves were developed
using actuarial principles and assumptions that considered a number of factors,
including historical claim payment patterns and changes in case reserves and
the assumed rate of inflation in health care costs and property damage repairs.
As described in Note 2, upon the adoption of fresh start accounting, the
pre-emergence claims liabilities and professional liability reserves were
adjusted to their fair value at June 1, 2003, using a risk free discount rate
(4%) and further providing for a risk premium in the reserve. For periods
after June 1, 2003, the Company will continue to evaluate and record the
liability for pre-emergence claims with a risk premium and discounted at 4%.
Claims (other than auto and general liability claims) that arose after June 1,
2003, are discounted as described above for the Predecessor Company. Auto and
general liability claims are not discounted.

Investment income earned on the investments of the wholly owned insurance
subsidiaries has been offset against the costs related to the Companys
self-insurance program and are included as part of accident claims and
professional liability expenses in the Consolidated Statements of Operations.
The accretion of imputed interest from the discounting of the reserves is also
included as part of these expenses.

F-15



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##### Table of Contents



Foreign currency translation

The financial statements of the Companys non United States dollar denominated
subsidiaries and the financial statements of the Predecessor Company and its
non United States dollar denominated subsidiaries have been translated into
U.S. dollars in accordance with the SFAS No. 52, Foreign Currency
Translation. All balance sheet amounts have been translated using the
exchange rates in effect at the applicable period end. Income statement
amounts have been translated using the weighted average exchange rate for the
applicable period. The gains and losses resulting from the changes in exchange
rates from period to period have been reported as a component of Other
comprehensive loss. Currency transaction gains and losses are immaterial for
all periods presented.

Financial instruments

The Companys cash and cash equivalents, restricted cash and cash equivalents,
short-term deposits and marketable securities, accounts receivable, other
receivables, accounts payable, accrued liabilities, liabilities subject to
compromise, other long-term liabilities and long-term debt constitute financial
instruments. Concentration of credit risks in accounts receivable is limited,
due to the large number of customers comprising the Companys customer base
throughout North America. A significant component of the Companys revenue is
derived from Medicare and Medicaid. Given that these are government programs,
the credit risk for these customers is considered low. The Company performs
ongoing credit evaluations of its other customers but does not require
collateral to support customer accounts receivable. The Company establishes an
allowance for doubtful accounts based on the credit risk applicable to
particular customers, historical trends and other relevant information.

The Company may use derivative financial instruments for purposes other than
trading to minimize the risk and costs associated with financing and operating
activities. Contracts that effectively meet risk reduction and correlation
criteria are recorded using hedge accounting. There were no derivative
financial instruments used in any of the periods presented.

Income Taxes

Income taxes are accounted for using the asset and liability method. Under
this method, deferred income tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax basis. A valuation allowance is provided for those
deferred income tax assets for which it is more likely than not that the
related benefits will not be realized.

The utilization of benefits in excess of the amount recorded as deferred income
tax assets at June 1, 2003 would reduce goodwill and other intangibles in
existence at that date until exhausted and thereafter, would be reported as an
addition to share premium.

Use of estimates

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

In addition to the use of estimates in the recording of the Healthcare
Businesses revenue and deferred income tax valuation allowances as described
above, the Company uses third-party

F-16



---



##### Table of Contents



actuaries and assumptions of future events in estimating the claims liability
reserves and future pension obligations. As a result of using assumptions,
there is a reasonable possibility that the recorded Healthcare Businesses
revenue, deferred income tax assets, claims liabilities and pension liability
could change materially.

Recent accounting pronouncements

There are no recent accounting pronouncements that would have a material effect
on the Companys results or financial position if they were presently
applicable.

Note 4  Restricted cash and cash equivalents and short-term investments

Restricted cash and cash equivalents of $39.4 million (June 1, 2003  $44.7
million, Predecessor Company  August 31, 2002  $75.8 million) and short-term
deposits and marketable securities of $42.0 million (June 1, 2003  $32.3
million, Predecessor Company  August 31, 2002  $16.1 million) are assets of
the Companys wholly owned insurance subsidiaries and are used to support the
current portion of claims liabilities under the Companys self-insurance
program. If these amounts are withdrawn from the subsidiaries, they will have
to be replaced by other suitable financial assurances. Given these
restrictions, management has concluded that such cash and cash equivalents and
short-term deposits and marketable securities of the insurance subsidiaries are
restricted.

Note 5  Accounts receivable and revenue

The trade accounts receivable is net of an allowance for doubtful accounts of
$5.6 million (June 1, 2003  $5.4 million, Predecessor Company  August 31,
2002  $ 4.6 million) in the Education services, Public Transit services and
Greyhound businesses and net of $527.9 million (June 1, 2003  $504.9 million,
Predecessor Company  August 31, 2002  $468.6 million) of allowances for
uncompensated care and contractual allowances in the Healthcare Businesses.

Revenue for the Healthcare Businesses are reported net of allowances for
uncompensated care and contractual allowances.

Note 6  Long-term investments

Fresh
    
    PredecessorStart
    
    CompanyAugust 31,
    
    June 1,($ millions)
    
    2003
    
    2003
    
    August 31, 2002Investments of insurance subsidiaries
    
    $
    301.1
    
    
    $
    329.6
    
    
    $
    252.3Letter of credit facility cash collateral
    
    
    100.0
    
    
    
    100.0
    
    
    
    Other restricted investments
    
    
    130.5
    
    
    
    127.6
    
    
    
    142.7Other
    
    
    21.9
    
    
    
    23.2
    
    
    
    22.9$
    553.5
    
    
    $
    580.4
    
    
    $
    417.9


The investments of the insurance subsidiaries are used to support the Companys
self-insurance program. The investments are comprised principally of
government securities and investment grade debt securities. If these amounts
are withdrawn from the subsidiaries, they will have to be replaced by other
suitable financial assurances and are, therefore, considered restricted. Prior
to fiscal 2002, these investments were designated to be held to maturity.
Since

F-17



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##### Table of Contents



then, these investments were designated as available for sale, which resulted
in the recognition of a gain of $4.4 million in other comprehensive income in
fiscal 2002.

Upon emergence from bankruptcy, the Company entered into a $100.0 million
cash-collateralized letter of credit facility expiring in June 2009 (the LOC
Facility) as part of the senior secured credit facility (See Note 10). The
cash collateral must be maintained for the duration of the LOC Facility.

The majority of the other restricted investments relate to collateral required
by the entities insuring the Companys bid and performance bonds.



|Note 7 |  | Property and equipment
|------ | - | ----------------------

Fresh Start
    
    Predecessor Company($ millions)
    
    August 31, 2003
    
    June 1, 2003
    
    August 31, 2002Accumulated
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    
    
    
    AccumulatedCost
    
    Depreciation
    
    Net
    
    Cost
    
    Depreciation
    
    Net
    
    Cost
    
    Depreciation
    
    NetLand
    
    $
    184.3
    
    
    $
    
    
    
    $
    184.3
    
    
    $
    183.8
    
    
    $
    
    
    
    $
    183.8
    
    
    $
    162.2
    
    
    $
    
    
    
    $
    162.2Buildings
    
    
    151.1
    
    
    
    4.2
    
    
    
    146.9
    
    
    
    142.4
    
    
    
    
    
    
    
    142.4
    
    
    
    284.3
    
    
    
    109.5
    
    
    
    174.8Vehicles
    
    
    1,228.4
    
    
    
    31.2
    
    
    
    1,197.2
    
    
    
    1,161.7
    
    
    
    
    
    
    
    1,161.7
    
    
    
    2,128.3
    
    
    
    953.0
    
    
    
    1,175.3Other
    
    
    153.6
    
    
    
    12.2
    
    
    
    141.4
    
    
    
    141.0
    
    
    
    
    
    
    
    141.0
    
    
    
    417.2
    
    
    
    251.8
    
    
    
    165.4$
    1,717.4
    
    
    $
    47.6
    
    
    $
    1,669.8
    
    
    $
    1,628.9
    
    
    $
    
    
    
    $
    1,628.9
    
    
    $
    2,992.0
    
    
    $
    1,314.3
    
    
    $
    1,677.7




|Note 8 |  | Goodwill
|------ | - | --------

Effective September 1, 2002, the Predecessor Company adopted SFAS 142 and, as a
result, the Predecessor Company ceased to amortize goodwill. SFAS 142 requires
that goodwill be reviewed for impairment upon adoption of SFAS 142 and at least
annually thereafter. Under SFAS 142, goodwill impairment is deemed to exist if
the carrying amount of a reporting unit exceeds its estimated fair value and
the carrying amount of the goodwill exceeds its estimated fair value. To
determine estimated fair value of the reporting units, the Predecessor Company
utilized independent valuations of the underlying businesses.

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

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

The changes in the carrying amount of goodwill by segment for the periods from
September 1, 2002 through May 31, 2003 and from June 1, 2003 through August 31,
2003, are as follows:

Public
    
    
    
    
    
    Healthcare
    
    EmergencyEducation
    
    Transit
    
    
    
    
    
    Transportation
    
    Management($ millions)
    
    Services
    
    Services
    
    Greyhound
    
    Services
    
    Services
    
    TotalBalance as of August 31, 2002
    
    $
    557.7
    
    
    $
    99.0
    
    
    $
    482.9
    
    
    $
    1,328.7
    
    
    $
    508.5
    
    
    $
    2,976.8Impairment loss
    
    
    (54.5
    )
    
    
    (99.0
    )
    
    
    (482.9
    )
    
    
    (1,146.0
    )
    
    
    (423.0
    )
    
    
    (2,205.4
    )Other
    
    
    9.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.2
    
    
    
    10.5Fresh start adjustment
    
    
    (329.4
    )
    
    
    
    
    
    
    
    
    
    
    (182.7
    )
    
    
    (86.7
    )
    
    
    (598.8
    )Balance as of June 1, 2003
and August 31, 2003
    
    $
    183.1
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    183.1


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##### Table of Contents



Actual results of operations for the periods from September 1, 2002 through May
31, 2003 and from June 1, 2003 through August 31, 2003 and pro forma results of
operations for the years ended August 31, 2002 and August 31, 2001, had the
goodwill not been amortized in these periods in accordance with the provisions
of SFAS 142, are as follows:

Predecessor CompanyFor the
    
    For theperiod from
    
    period fromJune 1, 2003
    
    September 1, 2002
    
    For the
    
    For thethrough
    
    through
    
    Year ended
    
    year endedAugust 31,
    
    May 31,
    
    August 31,
    
    August 31,($ millions)
    
    2003
    
    2003
    
    2002
    
    2001Reported income (loss) from continuing
operations before cumulative effect of
change in accounting principle
    
    
    ($9.9
    )
    
    $
    992.6
    
    
    $
    14.9
    
    
    
    ($246.5
    )Add: goodwill amortization
    
    
    
    
    
    
    
    
    
    
    87.1
    
    
    
    85.5Adjusted income (loss) from continuing
operations before cumulative effect of
change in accounting principle
    
    
    (9.9
    )
    
    
    992.6
    
    
    
    102.0
    
    
    
    (161.0
    )Cumulative effect of change in accounting
principle
    
    
    
    
    
    
    (2,205.4
    )
    
    
    
    
    
    
    Adjusted income (loss) from continuing
operations
    
    
    (9.9
    )
    
    
    (1,212.8
    )
    
    
    102.0
    
    
    
    (161.0
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,672.4Adjusted net income (loss)
    
    
    ($9.9
    )
    
    
    ($1,212.8
    )
    
    $
    102.0
    
    
    $
    1,511.4


Actual basic and diluted income (loss) per share for the periods from September
1, 2002 through May 31, 2003 and from June 1, 2003 through August 31, 2003 and
pro forma basic and diluted earnings per share for the years ended August 31,
2002 and August 31, 2001, had the goodwill not been amortized in these periods
in accordance with the provision of SFAS 142, are as follows:

Predecessor CompanyFor the
    
    For theperiod from
    
    period fromJune 1, 2003
    
    September 1, 2002
    
    For the
    
    For thethrough
    
    through
    
    Year ended
    
    year endedAugust 31,
    
    May 31,
    
    August 31,
    
    August 31,($ per share)
    
    2003
    
    2003
    
    2002
    
    2001Reported income (loss) from
continuing operations before
cumulative effect of change in
accounting principle
    
    
    ($0.10
    )
    
    $
    3.05
    
    
    $
    0.05
    
    
    
    ($0.76
    )Goodwill amortization
    
    
    
    
    
    
    
    
    
    
    0.26
    
    
    
    0.27Adjusted income (loss) from
continuing operations before
cumulative effect of change in
accounting principle
    
    
    (0.10
    )
    
    
    3.05
    
    
    
    0.31
    
    
    
    (0.49
    )Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    (6.77
    )
    
    
    
    
    
    
    Adjusted income (loss) from
continuing operations
    
    
    (0.10
    )
    
    
    (3.72
    )
    
    
    0.31
    
    
    
    (0.49
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.13Adjusted net income (loss)
    
    
    ($0.10
    )
    
    
    ($3.72
    )
    
    $
    0.31
    
    
    $
    4.64


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|Note 9 |  | Accrued liabilities
|------ | - | -------------------

Fresh
    
    PredecessorStart
    
    CompanyAugust 31,
    
    June 1,
    
    August 31,($ millions)
    
    2003
    
    2003
    
    2002Accrued wages and benefits
    
    $
    121.0
    
    
    $
    122.1
    
    
    $
    112.0Current portion of claims
liabilities and professional liability reserves (Note 12)
    
    
    185.9
    
    
    
    188.2
    
    
    
    188.2Accrued vacation pay
    
    
    44.3
    
    
    
    47.6
    
    
    
    43.9Other
    
    
    154.8
    
    
    
    165.3
    
    
    
    160.0$
    506.0
    
    
    $
    523.2
    
    
    $
    504.1




|Note 10 |  | Long-term debt
|------- | - | --------------

Weighted Average Interest RateFresh
    
    Predecessor
    
    
    
    
    
    Fresh
    
    PredecessorStart
    
    Company
    
    
    
    
    
    Start
    
    CompanyAugust 31,
    
    June 1,
    
    August 31,
    
    August 31,
    
    June 1,
    
    August 31,($ millions)
    
    2003
    
    2003
    
    2002
    
    2003
    
    2003
    
    2002$625 million Term B Facility
    
    
    7.0
    %
    
    
    7.0
    %
    
    
    
    
    
    $
    618.8
    
    
    $
    625.0
    
    
    $
    10.75% Senior Notes
    
    
    11.0
    %
    
    
    11.0
    %
    
    
    
    
    
    
    400.7
    
    
    
    400.6
    
    
    
    Greyhound 11.5% Senior Notes
    
    
    20.8
    %
    
    
    20.8
    %
    
    
    10.9
    %
    
    
    115.7
    
    
    
    113.4
    
    
    
    158.0Greyhound Facility
    
    
    5.0
    %
    
    
    5.0
    %
    
    
    
    
    
    
    30.1
    
    
    
    48.1
    
    
    
    Notes and other
    
    
    9.8
    %
    
    
    10.7
    %
    
    
    8.7
    %
    
    
    49.2
    
    
    
    52.0
    
    
    
    66.7Total debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,214.5
    
    
    $
    1,239.1
    
    
    $
    224.7Less current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69.4
    *
    
    
    89.0
    
    
    
    20.3Long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,145.1
    
    
    $
    1,150.1
    
    
    $
    204.4




---

|* |  | Includes $25.0 million related to the Term B Facility and $30.1 million
related to the Greyhound Facility
|- |  | ---------------------------------------------------------------------------------------------------------

Long-term debt of $1,214.5 million at August 31, 2003 includes $677.8 million
of secured debt and $536.7 million of unsecured debt.

Repayment schedule

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

Year ending August 31,
    2004
    
    $
    69.92005
    
    
    36.92006
    
    
    36.12007
    
    
    181.22008
    
    
    144.7thereafter
    
    
    786.3$
    1,255.1Unamortized discount
    
    
    (40.6
    )Total debt
    
    $
    1,214.5


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##### Table of Contents



Exit Financing

Upon emergence from chapter 11, in June 2003, the Company established a new
$825.0 million senior secured credit facility (the Exit Facility). This
facility consists of a $625.0 million Term B facility (the Term B Facility)
due June 2009, ($100.0 million of the proceeds from the Term B Facility is cash
collateral for a $100.0 million letters of credit facility) and a $200.0
million senior secured revolving credit facility (the Revolver) due June
2008. The Term B Facility provides for a mandatory $6.25 million quarterly
principal repayments beginning June 2003 through March 2008 followed by four
$125.0 million quarterly repayments. Interest paid on the Term B facility is
charged at Base Rate +4% or LIBOR +5%. The Term B Facility and the Revolver
are guaranteed, for the U.S. dollar borrowings, by the Company and all of the
U.S. subsidiaries, except Greyhound and its subsidiaries, Hotard Coaches, Inc.
and Interstate Leasing, Inc. (the Excluded Subsidiaries) and any of the
Companys subsidiaries that are in the business of insurance and for the
Canadian dollar borrowings, by the guarantors of the U.S. dollar borrowings and
the Canadian subsidiaries. The Term B Facility and the Revolver are secured,
on a senior secured basis, by the assets of the Company and all of its
subsidiaries except the Excluded Subsidiaries.

The Revolver, with a $35.0 million letter of credit sub-facility and a $35.0
million sub-limit for Canadian dollar borrowings and Canadian dollar letters of
credit for use by the Canadian subsidiaries of the Company, was established to
fund the Companys working capital and letter of credit needs. Interest is
charged at Base Rate +3.5% or LIBOR Rate +4.5% for the initial six month period
beginning June 2003 through to December 2003. Thereafter, a percentage per
annum determined by reference to a leverage ratio, as defined in the credit
facility agreement, will be applied. The range of rates is as follows: Base
Rate +3.25% to 3.75%; LIBOR Rate +4.25% to 4.75%; Bankers Acceptance Rate
+4.25% to 4.75%. As at August 31, 2003, $38.0 million was drawn on the
Revolver for the issuance of letters of credit and $92.3 million was reserved
for guarantee obligations on Greyhound vehicle leases, leaving availability of
$69.7 million.

Under the terms of the Exit Facility the Company is required to meet certain
financial covenants including a fixed charge coverage ratio, leverage ratio,
interest coverage ratio, net tangible asset ratio and maximum senior secured
leverage ratio as well as certain non-financial covenants. As of August 31,
2003, the Company was in compliance with all such covenants.

Also as a result of emergence from chapter 11, in June 2003 the Company issued
$406.0 million of Senior Notes due 2011 at a discount for net proceeds of
$400.6 million. The notes bear interest at a rate of 10.75% payable
semi-annually beginning on December 15, 2003 and are unsecured. The Company
may redeem some or all of the notes at any time after June 15, 2007. The notes
are guaranteed by the Companys subsidiaries other than the Excluded
Subsidiaries, the Canadian subsidiaries and any of the Companys subsidiaries
that are in the business of insurance.

Greyhound 11 1/2% Senior Notes

The Greyhound 11 1/2% Senior Notes due 2007 (the 11 1/2% Senior Notes)
bear interest at the rate of 11 1/2% per annum, payable each April 15 and
October 15. The 11 1/2% Senior Notes are redeemable at the option of
Greyhound in whole or in part, at any time on or after April 15 of the year
indicated, at redemption prices of 103.834% in calendar 2003, 101.917% in
calendar 2004 and 100% in calendar 2005 and thereafter, plus any accrued but
unpaid interest. The 11 1/2% Senior Note indenture contains certain
covenants that, among other things, limit the ability of Greyhound to incur
additional indebtedness, pay dividends or make other distributions, repurchase
equity interests or subordinated indebtedness, create certain liens, sell
assets or

F-21



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##### Table of Contents



enter into certain mergers or consolidations. As of August 31, 2003, Greyhound
was in compliance with all such covenants. On June 1, 2003, the 11 1/2%
Senior Notes were recorded at the notes estimated fair value of $113.4
million, resulting in a 20.8% effective interest rate.

The Greyhound Facility

In October 2000, Greyhound entered into a revolving credit facility to fund
working capital needs and for general corporate purposes. On May 14, 2003,
Greyhound entered into an amended and restated revolving credit facility
superceding the previous facility (the Greyhound Facility). Letters of
credit or borrowings are available under the Greyhound Facility based upon the
total of 80% of the appraised wholesale value of bus collateral, plus 65% of
the quick sale value of certain real property collateral, minus $20 million,
(which at August 31, 2003, aggregated to $113.8 million) subject to a maximum
of $125.0 million, inclusive of a $70.0 million letter of credit sub-facility.
Borrowings under the Greyhound Facility are available at a rate equal to Wells
Fargo Banks prime rate plus 1.5% per annum or LIBOR plus 3.5% per annum as
selected by Greyhound. Letter of Credit fees are 3.5% per annum. Borrowings
under the Greyhound Facility mature on October 24, 2004. The Greyhound
Facility is secured by liens on substantially all of the assets of Greyhound
and the stock and assets of certain of its subsidiaries. The Greyhound
Facility is subject to certain affirmative and negative operating and financial
covenants, including maximum total debt to cash flow ratio; minimum cash flow
to interest expense ratio; minimum cash flow; limitation on non-bus capital
expenditures; limitations on additional liens, indebtedness, guarantees, asset
disposals, advances, investment and loans; and restrictions on the redemption
or retirement of certain subordinated indebtedness of equity interest, payment
of dividends and transactions with affiliates, including the Company. As of
August 31, 2003, Greyhound was in compliance with all such covenants.

Based upon Greyhounds current financial forecast management is unable to
predict with reasonable assurance whether Greyhound will remain in compliance
with the terms of the Greyhound Facility for the remainder of calendar 2003 and
2004. Management is closely monitoring this situation and intends on
requesting covenant amendments should it appear likely such amendments will be
necessary to remain in compliance with the covenants. In addition, Greyhound
will be seeking an extension of this facility prior to its current maturity.
Although Greyhound has been successful in obtaining necessary amendments and
extensions to the Greyhound Facility in the past, there can be no assurances
that they will obtain additional modifications in the future if needed, or that
the cost of any future modifications or other changes in the terms of the
Greyhound Facility would not have a material effect on Greyhound or the
Company. If unsuccessful, this may impact Greyhounds ability to continue as a
going concern. If the going concern basis on which Greyhound Lines, Inc.s
consolidated financial statements were prepared was not appropriate for those
consolidated financial statements, then significant adjustments would need to
be made to the carrying value of the assets and liabilities, the reported
revenue and expenses and balance sheet classifications used by Greyhound Lines,
Inc. Accordingly, if such changes were made to Greyhound Lines, Inc.s
consolidated financial statements, significant adjustments would be required to
our consolidated financial statements and we may be required to honor certain
Greyhound Lines, Inc. lease commitments and pension obligations. We believe
that this would have no material impact on our financial condition.

As of August 31, 2003, the Company had $30.1 million cash borrowings under the
Greyhound Facility, and issued letters of credit of $46.7 million and had
availability of $37.0 million.

Although at the balance sheet dates the maturity of the Greyhound Facility
extended beyond one year, because the agreement provides that a material
adverse change at Greyhound could

F-22



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##### Table of Contents



be considered an event of default, generally accepted accounting
principles requires that the borrowings under this Greyhound facility be
classified as short-term obligations.

Debtor-in-possession facility

To ensure sufficient liquidity to meet ongoing operating needs, the Predecessor
Company obtained debtor-in-possession financing from General Electric Capital
(the DIP Facility) while in Chapter 11 proceedings. The maximum aggregate
borrowing available under the DIP Facility was $200.0 million and it was
guaranteed by certain of the Predecessor Companys direct and indirect
subsidiaries located in the United States and Canada (other than Greyhound and
its subsidiaries and joint ventures). The term of the DIP Facility expired in
June 2003 upon prepayment in full of all amounts outstanding under the DIP
Facility and the termination of the lenders commitments thereunder. On June
23, 2003, $41.6 million of letters of credit issued under the DIP Facility were
replaced with letters of credit issued under the Exit Facility.

Note 11  Pension plans

Subsidiaries of the Company sponsor 13 (August 31, 2002  13) defined benefit
pension plans. Four plans relate to Greyhound Canada Transportation Corp. and
cover employees represented by The Canadian Auto Workers Union and the
Amalgamated Transit Union (ATU) and all non-unionized employees meeting
certain eligibility requirements. A fifth plan is a multi-employer pension
plan, instituted in 1992, to cover certain union mechanics of Greyhound
represented by the International Association of Machinists and Aerospace
Workers. The remaining eight plans are single employer pension plans
maintained in the United States by Greyhound (the Greyhound U.S. Plans). The
largest of the Greyhound U.S. Plans (the ATU Plan) covers approximately
14,000 current and former Greyhound employees, fewer than 1,000 of whom are
active employees. The ATU Plan was closed to new participants on October 31,
1983, and service and wage accruals were frozen for active employees effective
March 15, 2002. Other Greyhound U.S. Plans include two plans that cover
salaried employees of Greyhound through May 7, 1990, and substantially all
employees at Vermont Transit Company through June 30, 2000, when the plans were
curtailed. The remaining five Greyhound U.S. Plans are active plans that cover
salaried and hourly personnel of other Greyhound subsidiaries. Except as
described below, it is the Companys policy to fund the minimum required
contribution under existing laws.



F-23



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##### Table of Contents



PredecessorCompanyAugust 31,
    
    May 31,
    
    August 31,($ millions)
    
    2003
    
    2003
    
    2002Change in Benefit Obligation:Benefit obligation at beginning of period
    
    $
    954.8
    
    
    $
    805.4
    
    
    $
    828.6Service cost
    
    
    1.4
    
    
    
    4.8
    
    
    
    6.6Interest cost
    
    
    14.2
    
    
    
    41.5
    
    
    
    59.1Plan participants contributions
    
    
    
    
    
    
    0.2
    
    
    
    0.2Plan amendments
    
    
    (1.5
    )
    
    
    
    
    
    
    (8.0
    )Actuarial loss (gain)
    
    
    (11.2
    )
    
    
    172.8
    
    
    
    3.4Benefits paid
    
    
    (1.7
    )
    
    
    (85.6
    )
    
    
    (83.6
    )Foreign exchange
    
    
    1.7
    
    
    
    15.7
    
    
    
    (0.9
    )Benefit obligation at end of period
    
    $
    957.7
    
    
    $
    954.8
    *
    
    $
    805.4Change in Plan Assets:Fair value of plan assets at beginning of periodActual return on plan assets
    
    $
    679.7
    
    
    $
    749.4
    
    
    $
    838.8Employer contributions
    
    
    2.5
    
    
    
    (7.0
    )
    
    
    (10.7
    )Plan participants contributions
    
    
    51.2
    
    
    
    6.0
    
    
    
    4.3Benefits paid
    
    
    0.6
    
    
    
    1.7
    
    
    
    1.7Foreign exchange
    
    
    (1.7
    )
    
    
    (85.6
    )
    
    
    (83.6
    )1.7
    
    
    
    15.2
    
    
    
    (1.1
    )Fair value of plan assets at end of period
    
    $
    734.0
    
    
    $
    679.7
    *
    
    $
    749.4Funded status
    
    
    ($223.7
    )
    
    
    ($275.1
    )
    
    
    ($56.0
    )Unrecognized transition asset
    
    
    
    
    
    
    
    
    
    
    (10.1
    )Unrecognized prior service costs
    
    
    
    
    
    
    
    
    
    
    (8.2
    )Unrecognized net loss (gain)
    
    
    (2.0
    )
    
    
    
    
    
    
    112.2Funding after measurement date
    
    
    
    
    
    
    50.0
    
    
    
    Prepaid benefit cost (accrued benefit liability)
    
    
    ($225.7
    )
    
    
    ($225.1)
    *
    
    $
    37.9


* As adjusted to include fresh start accounting adjustments

Fresh
    
    PredecessorStart
    
    CompanyAugust 31,
    
    June 1,
    
    August 31,($ millions)
    
    2003
    
    2003
    
    2002Allocated on the balance sheet as follows:Pension asset
    
    $
    
    
    
    $
    
    
    
    $
    10.8Pension liability
    
    
    (225.7
    )
    
    
    (225.1
    )
    
    
    (64.8
    )Accumulated other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    91.9($225.7
    )
    
    
    ($225.1
    )
    
    $
    37.9


The Company is required to record an additional minimum pension liability when
the pension plans accumulated benefit obligation exceed the plans assets by
more than the amounts previously accrued for as pension costs. These charges
are recorded as a reduction to shareholders equity, as a component of
accumulated other comprehensive loss. As more fully described in Note 2, upon
the adoption of fresh start accounting all components of accumulated other
comprehensive loss were eliminated as of June 1, 2003 and the pension liability
was recorded at its fair value, which was the same as the funded status of the
plans. Accordingly, the Company reversed as a fresh start adjustment the
accumulated other comprehensive loss of $268.3 million relating to the pension
liability that had been recorded at May 31, 2003 by the Predecessor Company.

F-24



---



##### Table of Contents



The Greyhound U.S. Plans, except for one small plan, have an annual measurement
date of May 31, while the Greyhound Canada Transportation Corp. plans have an
annual measurement date of June 30.

Nine of the Companys pension plans (June 1, 2003  nine, Predecessor Company
 August 31, 2002  nine) have accumulated benefit obligations in excess of
plan assets, for which the projected benefit obligation, accumulated benefit
obligation and fair value of plan assets are $805.5 million, $802.9 million and
$583.9 million, respectively, as of August 31, 2003 (June 1, 2003  $805.1
million, $802.6 million and $533.7 million, respectively, Predecessor Company
 August 31, 2002  $687.3 million, $685.3 million and $618.7 million,
respectively). Twelve of the Companys pension plans (June 1, 2003  twelve,
Predecessor Company  August 31, 2002  nine) have projected benefit
obligations in excess of plan assets, for which the projected benefit
obligation, accumulated benefit obligation and fair value of plan assets are
$949.8 million, $932.0 million and $723.7 million, respectively, as of August
31, 2003 (June 1, 2003  $947.0 million, $929.5 million and $669.6 million,
respectively, Predecessor Company  August 31, 2002  $687.3 million, $685.3
million and $618.7 million, respectively).

Assets of the various plans consist primarily of government-backed securities,
corporate equity securities, guaranteed insurance contracts, annuities and
corporate debt obligations.

F-25



---



##### Table of Contents



In determining the benefit obligations and service costs for the Companys
defined benefit pension plans, the following assumptions were used:

Fresh
    
    PredecessorStart
    
    CompanyAugust 31,
    
    June 1,
    
    August 31,
    
    August 31,($ millions)
    
    2003
    
    2003
    
    2002
    
    2001Weighted-average assumptions for end
of period disclosure:Discount rate
    
    
    5.9
    %
    
    
    5.9
    %
    
    
    7.2
    %
    
    
    7.4
    %Rate of salary progression
    
    
    3.5
    %
    
    
    3.5
    %
    
    
    3.9
    %
    
    
    3.9
    %Expected long-term rate of return on plan
assets
    
    
    7.0
    %
    
    
    7.0
    %
    
    
    7.3
    %
    
    
    7.9
    %


Predecessor CompanyFor the period
    
    For the periodJune 1,
    
    September 1,2003
    
    2002
    
    For the year
    
    For the yearThrough
    
    Through
    
    ended
    
    endedAugust 31,
    
    May 31,
    
    August 31,
    
    August 31,($ millions)
    
    2003
    
    2003
    
    2002
    
    2001Components of net periodic pension
(income) costs:Service cost
    
    $
    1.4
    
    
    $
    4.8
    
    
    $
    6.6
    
    
    $
    8.3Interest cost
    
    
    14.2
    
    
    
    41.5
    
    
    
    59.1
    
    
    
    59.6Expected return on assets
    
    
    (12.7
    )
    
    
    (37.5
    )
    
    
    (58.7
    )
    
    
    (61.9
    )Amortization
    
    
    (1.0
    )
    
    
    0.7
    
    
    
    (0.6
    )
    
    
    (1.5
    )Net periodic pension (income) cost
    
    $
    1.9
    
    
    $
    9.5
    
    
    $
    6.4
    
    
    $
    4.5


PBGC Agreement and Pension Plan Funding Requirements

The Company, collectively with all of its wholly-owned U.S. subsidiaries,
including Greyhound (the Laidlaw Group), are party to an agreement with the
Pension Benefit Guaranty Corporation (PBGC) regarding the funding levels of
the Greyhound U.S. Plans (the PBGC Agreement). Under the PBGC Agreement,
during June 2003 the Laidlaw Group contributed $50 million in cash to the
Greyhound U.S. Plans. Additionally, the Company issued 3.8 million shares of
common stock to a trust formed for the benefit of the Greyhound U.S. Plans (the
Pension Plan Trust). The voting privilege of these shares is at the
discretion of the Companys board of directors. The fair value of the common
stock was estimated to be $50 million based upon third party valuations
provided to the Company in connection with the bankruptcy proceedings. The
trustee of the Pension Plan Trust will sell the stock at the Companys
direction, but in no event later than December 31, 2004. All proceeds from the
stock sales will be contributed directly to the Greyhound U.S. Plans. If the
proceeds from the stock sales exceed $50 million, the excess amount may be
credited against any future required minimum funding obligations. If the
proceeds from the stock sales are less than $50 million, the Laidlaw Group will
be required to contribute the amount of the shortfall in cash to the pension
plans by December 31, 2004. Further, the Laidlaw Group will contribute an
additional $50 million in cash to the pension plans in June 2004. These
contributions and transfers will be in addition to the minimum funding
obligations to the pension plans, if any, required under current regulations.
The PBGC has a second priority lien on the assets of the Companys operating
subsidiaries (other than Greyhound) in the amount of the remaining commitment
under the PBGC Agreement. At August 31, 2003, all 3.8 million shares of

F-26



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##### Table of Contents



common stock of the Company remained in the Pension Plan Trust. Based upon the
closing price of the common stock on the over-the-counter market in the United
States as posted on the OTC Bulletin Board, the shares had an aggregate quoted
market value of $45.2 million at November 17, 2003. The 3.8 million common
shares held in the Pension Plan Trust have been accounted for as treasury
shares at August 31, 2003.

The ATU Plan represents approximately 75% of the total plan assets and benefit
obligation as at August 31, 2003. Based upon current regulations and plan
asset values at August 31, 2003, and assuming annual investment returns exceed
3% and that the contributions required under the PBGC Agreement are made along
the timeframe outlined above, the Company does not anticipate any significant
additional minimum funding requirements for the ATU Plan over the next several
years. However, there is no assurance that the ATU Plan will be able to earn
the assumed rate of return, new regulations will not prescribe changes in
actuarial mortality tables and discount rates, or that there will be market
driven changes in the discount rates, which would result in the Laidlaw Group
being required to make significant additional minimum funding contributions in
the future.

Note 12  Other long-term liabilities

Fresh
    
    PredecessorStart
    
    CompanyAugust 31,
    
    June 1,
    
    August 31,($ millions)
    
    2003
    
    2003
    
    2002Claims liabilities
    
    $
    360.0
    
    
    $
    362.4
    
    
    $
    258.9Professional liability reserves
    
    
    70.3
    
    
    
    62.3
    
    
    
    48.9Other
    
    
    66.5
    
    
    
    67.3
    
    
    
    69.5$
    496.8
    
    
    $
    492.0
    
    
    $
    377.3


Claims liabilities

The Companys $532.7 million (current liabilities of $172.7 million and
non-current liabilities of $360.0 million) of claims liabilities at August 31,
2003 (June 1, 2003,  $535.7 million, Predecessor
Company  August 31, 2002 
$444.1 million) represent reserves for auto, general and workers compensation
claims up to the deductible amount under the Companys insurance programs. The
total claims liabilities represent non-discounted reserves of $547.1 million
(June 1, 2003  $548.4 million, Predecessor Company  August 31, 2002  $508.2
million). At August 31, 2003, the total claims liabilities reflect the
estimated fair value of liabilities for claims incurred prior to June 1, 2003
(based on the methodology as described in Note 3) and the estimated liability
for claims incurred subsequent to June 1, 2003 discounted at 5.5%, except for
auto and general liability claims which have not been discounted. The June 1,
2003 claims liability reflects the estimated fair value of liabilities for
claims incurred prior to June 1, 2003. On June 1, 2003, a fresh start
adjustment of $51.1 million was recorded to increase the liabilities to their
estimated fair value based on the methodology as described in Note 3. The
August 31, 2002 claims liabilities were discounted at 5.5%. Generally, the
Company retains liability for auto, general and workers compensation claims
for the first $5 million of any one occurrence. As a result, the Companys
exposure is generally for the first $5 million of any one occurrence with
third-party insurance to minimize exposure on losses in excess of $5 million.
These insurance arrangements are utilized to limit maximum loss and provide
greater diversification of risk. The current portion of these liabilities
represents the payments expected to be made during the next 12 months.

F-27



---



##### Table of Contents



Professional liability reserves

The Companys $83.5 million (current liabilities of $13.2 million and
non-current liabilities of $70.3 million) of professional liability reserves at
August 31, 2003 (June 1, 2003  $77.2 million, Predecessor Company  August 31,
2002  $51.9 million) represent reserves for professional liability claims,
less expected recoveries related to the Predecessor Companys insurance
programs. The total professional liability reserve represents non-discounted
reserves of $84.3 million (June 1, 2003  $77.2 million, Predecessor Company 
August 31, 2002  $59.1 million). At August 31, 2003, the total professional
liability reserves reflect the estimated fair value of liabilities for claims
incurred prior to June 1, 2003 (based on the methodology as described in Note
3) and the estimated liability for claims incurred subsequent to June 1, 2003
discounted at 5.5%. The June 1, 2003 reserves reflect the estimated fair value
of liabilities for claims incurred prior to June 1, 2003. On June 1, 2003, a
fresh start adjustment of $9.9 million was recorded to increase the reserves to
their estimated fair value based on the methodology as described in Note 3.
The August 31, 2002 reserves were discounted at 5.5%.

Professional liability insurance for up to a limit of $1 million per occurrence
is provided to the majority of physicians who are employed or contracted by
companies under service agreements with the Company. Although the majority of
the professional liability insurance available for physicians is provided in
this manner, the contracted physicians may obtain their own professional
liability insurance directly or through the contracting hospital with the
Companys consent.

Prior to January 1, 2002, the Predecessor Company procured insurance coverage
for professional liability claims on a claims-made basis. A previous insurance
program with PHICO Insurance Company (the PHICO Policies and PHICO), which
expired on January 1, 2001, provided an aggregate self-insurance retention for
the first $27.0 million of claims incurred and reported during the period
October 1, 1997 to January 1, 2001 (which has been fully paid). In December
2000, the Predecessor Company purchased an extended reported policy (ERP)
from PHICO for the PHICO Policies covering claims reported after January 1,
2001, but incurred during the coverage period of the PHICO policies. The ERP
has an aggregate limit of $40.0 million. For calendar 2001, the Company
purchased insurance which provides up to $10.0 million of coverage on a first
year claims-made basis.

Effective January 1, 2002, the Predecessor Company had and the Company now
continues to have self-insured professional liability claims for claims
incurred during calendar 2001 and reported on or after January 1, 2002 and for
claims occurring on or after January 1, 2002.

On February 1, 2002, the Insurance Commissioner of the Commonwealth of
Pennsylvania placed PHICO into liquidation. Those claims arising under the
PHICO Policies will be eligible for coverage under individual state guaranty
funds, subject to various limitations and exclusions based upon net worth of
the insured and the presence of other applicable insurance. The amount of
coverage available under each state guaranty fund will vary according to the
limits and specific provisions of those funds and some state guaranty funds may
deny coverage for any claims under the ERP brought after March 2, 2002.
Included in the professional liability reserve is the estimated cost of claims
incurred under the PHICO Policies and the ERP that may likely exceed or be
excluded from specific state fund guaranty limits or exceed the ERPs $40.0
million aggregate limit and would be borne by the Company.

F-28



---



##### Table of Contents



Note 13  Shareholders equity



|(1) |  | Capital Stock
|--- |  | -------------



|(a) |  | Authorized
|--- |  | ----------



| |  | 500 million Common Shares, par value $0.01 per share, and 50 million Series A
Junior Participating Preferred Shares, par value $0.01 per share.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------



|(b) |  | Shareholder Rights Plan
|--- |  | -----------------------



| |  | In connection with the Plan of Reorganization, the Companys board of
directors adopted a shareholder rights plan pursuant to which each
outstanding share of the Companys common shares is accompanied by one
preferred share purchase right. The rights expire in 2013 unless they
are earlier redeemed, exchanged or amended by the Companys board of
directors.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The rights are not exercisable or transferable apart from the common
shares until ten days after a public announcement that a person or group
has acquired beneficial ownership of 15% or more of the Companys common
shares or ten business days (or a later date as determined by the
Companys board of directors) after a person or group begins a tender or
exchange offer that, if completed, would result in that person or group
acquiring beneficial ownership of 15% or more of the Companys common
shares. Once exercisable, each right would separate from the common
shares and be separately tradeable.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | If a person or group acquires beneficial ownership of 15% or more, with
certain exceptions, of the common shares, or if the Company is acquired
in a merger or other business combination, each right then exercisable
would entitle its holder to purchase, at the exercise price of $75.00 per
right, common shares, or the surviving companys shares if the Company is
not the surviving company, with a market value equal to twice the rights
exercise price.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Company may redeem all (but not less than all) of the rights for a
redemption price of $0.01 per right until the rights become exercisable.
The Company may also exchange each right for one common share or an
equivalent security until an acquiring person or group owns 50% or more
of the outstanding common shares.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) |  | Dividends
|--- |  | ---------



| |  | Under the terms of the Exit Facility, the Company will not be permitted
to declare or pay any cash dividends during the term of the Exit
Facility.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------



|(d) |  | Equity and Performance Incentive Plan
|--- |  | -------------------------------------



| |  | The Companys 2003 Equity and Performance Incentive Plan (the 2003
Plan) was approved by the Bankruptcy Court on February 27, 2003. The
2003 Plan provides for the grant of stock options, stock appreciation
rights, restricted shares, deferred shares, performance shares, and
performance units to officers and employees of the Company. The 2003
Plan also provides for the grant of option rights and restricted stock to
non-employee directors. There are 5,000,000 Common Shares available
under the 2003 Plan. No participant may be granted more than 500,000
option rights, appreciation
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-29



---



##### Table of Contents





| |  | rights, deferred shares or restricted shares, or more than $1.0 million
worth of performance shares or performance units in any calendar year.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  | The 2003 Plan is administered by the Board of Directors. The Board of
Directors has the authority to select plan participants, grant awards,
and determine the terms and conditions of such awards. Generally, with
respect to awards granted under the 2003 Plan, (i) option rights, and
corresponding appreciation rights, vest ratably over not less than a
three-year period, (ii) restricted stock grants are subject to a risk of
forfeiture for a period of not less than three years, (iii) deferred
shares are subject to a deferral period of not less than one year, and
(iv) performance shares and performance units are paid to a plan
participant upon the achievement of management objectives specified in
the grant measured over a period specified in the grant of not less than
one year. If stated in the award, the exercise of option rights,
appreciation rights, and restricted stock may also be subject to the
achievement of management objectives, as defined in the 2003 Plan. At
August 31, 2003, no stock options, stock appreciation rights, restricted
shares, deferred shares, performance shares, or performance units were
issued.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(e) |  | Common and preference shares of the Predecessor Company
|--- |  | -------------------------------------------------------



| |  | Prior to the Predecessor Companys emergence from bankruptcy, there were
approximately 325.9 million common shares and 0.5 million preference
shares outstanding. Under the approved Plan, the common and preference
shares of the Predecessor Company were cancelled.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(f) |  | Stock option and stock purchase plans of the Predecessor Company
|--- |  | ----------------------------------------------------------------



| |  | The Predecessor Company had various employee and directors stock option
plans and employee stock purchase plans that were terminated as a result
of the Chapter 11 and CCAA proceedings and the confirmation of the Plan.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-30



---



##### Table of Contents





|(2) |  | Accumulated other comprehensive loss
|--- |  | ------------------------------------



| |  | Accumulated other comprehensive loss is comprised of the following:
| |  | -------------------------------------------------------------------

DeferredIncomeUnrealized Gain (Loss) on Securities
    
    Foreign Currency Items
    
    Pension Adjustment
    
    TaxesPredecessor Company
    
    
    
    
    
    Predecessor Company
    
    
    
    
    
    Predecessor CompanyFor the
    
    For the
    
    
    
    
    
    
    
    
    
    For the
    
    For the
    
    
    
    
    
    
    
    
    
    For the
    
    For the
    
    
    
    
    
    
    
    
    
    For theperiod
    
    period
    
    
    
    
    
    
    
    
    
    period
    
    period
    
    
    
    
    
    
    
    
    
    period
    
    period
    
    
    
    
    
    
    
    
    
    PeriodJune 1,
    
    Sept. 1,
    
    For the
    
    For the
    
    June 1,
    
    Sept. 1,
    
    For the
    
    For the
    
    June 1,
    
    Sept. 1,
    
    For the
    
    For the
    
    June 1,2003
    
    2002
    
    Year
    
    Year
    
    2003
    
    2002
    
    Year
    
    Year
    
    2003
    
    2002
    
    Year
    
    Year
    
    2003Through
    
    Through
    
    Ended
    
    Ended
    
    Through
    
    Through
    
    Ended
    
    Ended
    
    Through
    
    Through
    
    Ended
    
    Ended
    
    ThroughAugust 31,
    
    May 31,
    
    August 31,
    
    August 31,
    
    August 31,
    
    May 31,
    
    August 31,
    
    August 31,
    
    August 31,
    
    May 31,
    
    August 31,
    
    August 31,
    
    August 31,($ millions)
    
    2003
    
    2003
    
    2002
    
    2001
    
    2003
    
    2003
    
    2002
    
    2001
    
    2003
    
    2003
    
    2002
    
    2001
    
    2003Beginning balance
    
    $
    
    
    
    $
    4.6
    
    
    $
    0.9
    
    
    
    ($5.3
    )
    
    $
    
    
    
    
    ($171.4
    )
    
    
    ($169.3
    )
    
    
    ($165.0
    )
    
    $
    
    
    
    
    ($91.9
    )
    
    $
    
    
    
    $
    
    
    
    $
    Current period
change
    
    
    (10.0
    )
    
    
    9.2
    
    
    
    3.7
    
    
    
    6.2
    
    
    
    (2.6
    )
    
    
    46.2
    
    
    
    (2.1
    )
    
    
    (4.3
    )
    
    
    
    
    
    
    (176.4
    )
    
    
    (91.9
    )
    
    
    
    
    
    
    3.5Fresh start
adjustment
    
    
    
    
    
    
    (13.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    268.3
    
    
    
    
    
    
    
    
    
    
    
    Ending balance
    
    
    ($10.0
    )
    
    $
    
    
    
    $
    4.6
    
    
    $
    0.9
    
    
    
    ($2.6
    )
    
    $
    
    
    
    
    ($171.4
    )
    
    
    ($169.3
    )
    
    $
    
    
    
    $
    
    
    
    
    ($91.9
    )
    
    $
    
    
    
    $
    3.5


TotalAccumulated Other Comprehensive LossPredecessor CompanyFor the
    
    For theperiod
    
    periodJune 1,
    
    Sept. 1,
    
    For the
    
    For the2003
    
    2002
    
    Year
    
    YearThrough
    
    Through
    
    Ended
    
    EndedAugust 31,
    
    May 31,
    
    August 31,
    
    August 31,($ millions)
    
    2003
    
    2003
    
    2002
    
    2001Beginning balance
    
    $
    
    
    
    
    ($258.7
    )
    
    
    ($168.4
    )
    
    
    ($170.3
    )Current period change
    
    
    (9.1
    )
    
    
    (121.0
    )
    
    
    (90.3
    )
    
    
    1.9Fresh start adjustment
    
    
    
    
    
    
    379.7
    
    
    
    
    
    
    
    Ending balance
    
    
    ($9.1
    )
    
    $
    
    
    
    
    ($258.7
    )
    
    
    ($168.4
    )


F-31



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##### Table of Contents



Note 14  Fair value of financial instruments

SFAS No. 107, Disclosures About Fair Value of Financial Instruments, requires
disclosure of the fair value of financial instruments. The following methods
and assumptions were used by the Company in estimating the fair value
disclosures for its financial instruments.

For cash and cash equivalents, accounts receivable, other receivables, income
tax recoverables, accounts payable and accrued liabilities, the carrying
amounts reported in the consolidated balance sheets approximate fair value.
The carrying value of other long-term liabilities (excluding claims liabilities
and professional liability reserves) approximates fair value as these
liabilities are recorded using discounted cash flow analysis. The fair values
of the short-term deposits and marketable securities and long-term investments
are based upon quoted market prices at August 31, 2003, June 1, 2003 and August
31, 2002, where available. For the portion of short-term deposits and
marketable securities and long-term investments where no quoted market price is
available, the carrying amounts approximate fair value. For long-term debt,
the fair values are estimated using discounted cash flow analysis, based upon
the Companys incremental borrowing rates for similar types of borrowing
arrangements, or using quoted market values.

The carrying amounts and fair values of the Companys financial instruments are
as follows:

Fresh Start
    
    Predecessor CompanyAugust 31, 2003
    
    June 1, 2003
    
    August 31, 2002Carrying
    
    Fair
    
    Carrying
    
    Fair
    
    Carrying
    
    Fair($ millions)
    
    Amount
    
    Value
    
    Amount
    
    Value
    
    Amount
    
    ValueShort-term deposits and
marketable securities
    
    $
    42.0
    
    
    $
    42.0
    
    
    $
    32.3
    
    
    $
    32.3
    
    
    $
    16.1
    
    
    $
    16.1Long-term investments
    
    
    553.5
    
    
    
    553.5
    
    
    
    580.4
    
    
    
    580.4
    
    
    
    417.9
    
    
    
    417.9Long-term debt
    
    
    1,214.5
    
    
    
    1,223.2
    
    
    
    1,239.1
    
    
    
    1,239.1
    
    
    
    224.7
    
    
    
    211.1Other long-term liabilities*
    
    
    66.5
    
    
    
    66.5
    
    
    
    67.3
    
    
    
    67.3
    
    
    
    69.5
    
    
    
    69.5Liabilities subject to
compromise
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,977.1
    
    
    
    **




|* |  | Excludes claims liabilities and professional liability reserves.
|- |  | ----------------------------------------------------------------



|** |  | The fair value of liabilities subject to compromise at August 31, 2002 was not practicable to estimate as the fair value
only became known subsequently on the emergence from the voluntary petition for reorganization.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Note 15  Discontinued operations

Healthcare Businesses

During fiscal 2001, the Predecessor Company concluded that the previously
announced disposal of the Healthcare Businesses was no longer in the best
interests of its stakeholders. The Healthcare Businesses were therefore
reinstated as continuing operations in fiscal 2001.

As a result of recontinuing the Healthcare Businesses in fiscal 2001, the
Predecessor Company reversed the remaining provision for loss on sale of
discontinued operations. This reversal totaled $1,927.6 million ($5.91 per
share) in fiscal 2001.

Safety-Kleen Corp.

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

During fiscal 2001, the Predecessor Company determined that its investment in
Safety-Kleen was of no value. As a result a charge of $255.2 million was
recorded in discontinued operations to reflect the impairment charge and other
losses on the Safety-Kleen investment.

Note 16  Other financing related expenses

Other financing related expenses principally represent professional fees and
other costs incurred by the Predecessor Company. The professional fees and
other costs include financing, accounting, legal and consulting services
incurred during the reorganization process.

Note 17  Income Taxes

Income (loss) from continuing operations before income taxes and cumulative
effect of change in accounting principle and the provision for (recovery of)
income taxes by geographic area are as follows:

Predecessor CompanyFor the period
    
    For the period
    
    For the year
    
    For the yearJune 1, 2003
    
    Sept. 1, 2002
    
    ended
    
    endedThrough
    
    through
    
    August 31,
    
    August 31,($ millions)
    
    August 31, 2003
    
    May 31, 2003
    
    2002
    
    2001Income (loss) from continuing operations
before income taxes and cumulative
effect of change in accounting principleUnited States
    
    
    ($33.4
    )
    
    $
    2,608.2
    
    
    
    ($77.9
    )
    
    
    ($352.9
    )Canada
    
    
    2.2
    
    
    
    1,414.3
    
    
    
    41.0
    
    
    
    (212.2
    )Other
    
    
    11.3
    
    
    
    (3,025.4
    )
    
    
    42.0
    
    
    
    272.8($19.9
    )
    
    $
    997.1
    
    
    
    $5.1
    
    
    
    ($292.3
    )


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Predecessor CompanyFor the period
    
    For the period
    
    For the year
    
    For the yearJune 1 2003
    
    Sept. 1, 2002
    
    ended
    
    endedThrough
    
    Through
    
    August 31,
    
    August 31,($ millions)
    
    August 31, 2003
    
    May 31, 2003
    
    2002
    
    2001Provision for (recovery of) current
income taxesUnited States
    
    $
    
    
    
    $
    3.1
    
    
    
    ($11.3
    )
    
    $
    6.7Canada
    
    
    
    
    
    
    1.2
    
    
    
    1.0
    
    
    
    2.5Other
    
    
    
    
    
    
    0.2
    
    
    
    0.5
    
    
    
    (55.0
    )Total
    
    $
    
    
    
    $
    4.5
    
    
    
    ($9.8
    )
    
    
    ($45.8
    )Provision for (recovery of)
deferred income taxesUnited States
    
    
    ($11.0
    )
    
    $
    
    
    
    $
    
    
    
    $
    Canada
    
    
    1.0
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ($10.0
    )
    
    $
    
    
    
    $
    
    
    
    $
    Total provision for (recovery of)
income taxesUnited States
    
    
    ($11.0
    )
    
    $
    3.1
    
    
    
    ($11.3
    )
    
    $
    6.7Canada
    
    
    1.0
    
    
    
    1.2
    
    
    
    1.0
    
    
    
    2.5Other
    
    
    
    
    
    
    0.2
    
    
    
    0.5
    
    
    
    (55.0
    )($10.0
    )
    
    $
    4.5
    
    
    
    ($9.8
    )
    
    
    ($45.8
    )


The Companys and Predecessor Companys effective income tax rates on income
from continuing operations before income taxes and cumulative effect of change
in accounting principle differs from the statutory rates as follows:

Predecessor CompanyFor the period
    
    For the period
    
    For the year
    
    For the yearJune 1, 2003
    
    Sept. 1, 2002
    
    ended
    
    endedThrough
    
    through
    
    August 31,
    
    August 31,($ millions)
    
    August 31, 2003
    
    May 31, 2003
    
    2002
    
    2001Income tax (benefit) at the
statutory effective rate
    
    
    ($7.0
    )
    
    $
    359.0
    
    
    $
    2.0
    
    
    
    ($125.1
    )Decrease (increase) in income
taxes resulting from:Tax rate differentials in other
jurisdictions
    
    
    (3.9
    )
    
    
    (5.3
    )
    
    
    (3.0
    )
    
    
    18.1Non-deductible goodwill and
other amortization
    
    
    
    
    
    
    
    
    
    
    34.1
    
    
    
    30.6Fresh start accounting
adjustments
    
    
    
    
    
    
    (314.4
    )
    
    
    
    
    
    
    Foreign loss carryback realized
    
    
    
    
    
    
    
    
    
    
    (13.2
    )
    
    
    (60.1
    )Change in valuation allowance
    
    
    
    
    
    
    (50.6
    )
    
    
    (34.3
    )
    
    
    91.2Non-deductible restructuring
expenses
    
    
    
    
    
    
    5.4
    
    
    
    3.9
    
    
    
    Other
    
    
    0.9
    
    
    
    10.4
    
    
    
    0.7
    
    
    
    (0.5
    )Income tax expense (recovery)
    
    
    ($10.0
    )
    
    $
    4.5
    
    
    
    ($9.8
    )
    
    
    ($45.8
    )


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The deferred income tax assets and liabilities contain the following temporary
differences:

Fresh
    
    PredecessorStart
    
    CompanyAugust 31,
    
    June 1,
    
    August 31,($ millions)
    
    2003
    
    2003
    
    2002Deferred income tax assets:Net operating loss and credit carryforwards
    
    $
    213.3
    
    
    $
    157.5
    
    
    $
    393.1Trade receivables
    
    
    37.2
    
    
    
    30.1
    
    
    
    51.5Tax over book depreciation/amortization
    
    
    48.5
    
    
    
    48.2
    
    
    
    41.3Interest deduction carryforwards
    
    
    250.7
    
    
    
    261.9
    
    
    
    268.0Claims liabilities
    
    
    86.6
    
    
    
    83.5
    
    
    
    48.6Pension liability
    
    
    85.8
    
    
    
    104.6
    
    
    
    25.7Other accrued liabilities
    
    
    45.0
    
    
    
    43.0
    
    
    
    244.3Deferred income tax assets
    
    $
    767.1
    
    
    $
    728.8
    
    
    $
    1,072.5Deferred income tax liabilities:Book over tax depreciation/amortization
    
    $
    144.6
    
    
    $
    120.7
    
    
    $
    222.7Other
    
    
    19.5
    
    
    
    18.1
    
    
    
    3.6Deferred income tax liabilities
    
    $
    164.1
    
    
    $
    138.8
    
    
    $
    226.3Net deferred income tax assets before valuation allowance
    
    $
    603.0
    
    
    $
    590.0
    
    
    $
    846.2Valuation allowance
    
    
    (313.6
    )
    
    
    (313.6
    )
    
    
    (846.2
    )Total
    
    $
    289.4
    
    
    $
    276.4
    
    
    $
    Allocated on the balance sheet as follows:Current
    
    $
    86.2
    
    
    $
    80.9
    
    
    $
    Non-current
    
    
    203.2
    
    
    
    195.5
    
    
    
    $
    289.4
    
    
    
    276.4
    
    
    $
    


The Company has significant net deferred tax assets resulting from net
operating loss (NOL) and interest deduction carry forwards and other
deductible temporary differences that will reduce taxable income in future
periods. SFAS No. 109 Accounting for Income Taxes requires that a valuation
allowance be established when it is more likely than not that all or a
portion of net deferred tax assets will not be realized. A review of all
available positive and negative evidence needs to be considered, including
expected reversals of significant deductible temporary differences, a companys
recent financial performance, the market environment in which a company
operates, tax planning strategies and the length of NOL and interest deduction
carryforward periods. Furthermore, the weight given to the potential effect of
negative and positive evidence should be commensurate with the extent to which
it can be objectively verified. Due to the highly leveraged capital structure
(and related interest expense) and uncertain financial condition of the
Predecessor Company, management concluded that it was appropriate to record a
full valuation allowance against its net deferred income tax assets. Pursuant
to the plan of reorganization, the level of debt carried by the Company upon
emergence from bankruptcy was substantially reduced. As a result, management
concluded that it was more likely than not that $313.6 million of deferred tax
assets would not be realized and, as part of its fresh start adjustment at June
1, 2003, recorded a valuation allowance for that amount. Certain future events
may result in the reduction of the valuation allowance. Up to $313.6 million
of such reduction would reduce goodwill and other intangibles in existence at
fresh start and thereafter, would be reported as an addition to share premium.

Availability and Amount of NOLs and Other Built in Losses

As a result of the reorganization, the Company underwent an ownership change
within the meaning of Section 382 of the Internal Revenue Code (IRC). As a
result, the Company is subject

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to an annual limitation of approximately $58 million on the amount of NOL and
credit carryforwards and other built in losses, consisting principally of the
interest deduction carryover, pension, claims, and bad debt reserves which the
Company may utilize in the U.S. In addition, due to the ownership change that
occurred upon the Predecessor Companys acquisition of Greyhound, $93.0 million
of the NOLs remain subject to an annual limitation of approximately $22
million.

The Company has NOL carryforwards of $60.5 million in Canada that expire in
varying amounts in the years 2004 to 2010. In the U.S., NOL carryforwards of
$488.0 million expire in varying amounts in the years 2005 to 2023.

A debtor is not required to include gain on discharge of debt in income if the
debt discharge occurs in bankruptcy. However, IRC Section 108 in the U.S. and
Canadian Income Tax Act Section 80 in Canada require that the debtors NOL,
capital and credit carryovers first be reduced and then basis in assets be
reduced. The Predecessor Company in Canada reduced NOL and capital loss
carryovers of $614.5 million and $123.7 million respectively and in the U.S.
$61.7 million and $6.9 million, respectively. As there was a remaining gain in
the U.S., the basis in assets was reduced including basis in subsidiaries.
Deferred income tax assets or liabilities have not been recorded for any basis
difference in the subsidiaries as the amounts are either permanently invested
or can be recovered tax free.

In the U.S., the Company has approximately $700 million of interest deduction
carryforwards, under IRC Section 163(j), which have no expiration date, but are
subject to the annual limitation. In addition, the Company has tax credits of
$8.5 million in the U.S., which expire between 2018 and 2023, subject to the
annual limitation.

The Company has not provided U.S. income or withholding taxes on approximately
$1.9 million of undistributed earnings of its foreign subsidiaries as these
earnings are considered indefinitely reinvested. If such earnings were not
indefinitely invested, deferred U.S. income taxes of $0.7 million and no
withholding taxes would have been provided.

Note 18  Earnings (loss) per share

The earnings (loss) per share figures are calculated using the weighted average
number of shares outstanding during the respective periods. Assumed exercise
of the Predecessor Companys employee and directors stock options for periods
prior to emergence and the sale on the open market of the Companys common
shares held in trust as part of the PBGC Agreement (See Note 11) would not be
dilutive in any of the respective periods.

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Information required to calculate the basic or primary earnings per share is as
follows:

Predecessor CompanyFor the period
    
    For the period
    
    For the year
    
    For the yearJune 1, 2003
    
    Sept. 1, 2002
    
    ended
    
    endedThrough
    
    through
    
    August 31,
    
    August 31,($ millions except per share amounts)
    
    August 31, 2003
    
    May 31, 2003
    
    2002
    
    2001Income (loss) from continuing
operations before cumulative effect
of change in accounting principle
    
    
    ($9.9
    )
    
    $
    992.6
    
    
    $
    14.9
    
    
    
    ($246.5
    )Preference share dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Income (loss) from continuing
operations available to common
shareholders before cumulative
effect of change in accounting
principle
    
    
    (9.9
    )
    
    
    992.6
    
    
    
    14.9
    
    
    
    (246.8
    )Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    (2,205.4
    )
    
    
    
    
    
    
    Income (loss) from discontinued
operations (Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,672.4Net income (loss) available to common
shareholders
    
    
    ($9.9
    )
    
    
    ($1,212.8
    )
    
    $
    14.9
    
    
    $
    1,425.6Weighted average number of shares
outstanding (millions)
    
    
    100.0
    *
    
    
    325.9
    
    
    
    325.9
    
    
    
    325.9Earnings (loss) per shareContinuing operations before
cumulative effect of change in
accounting principle
    
    
    ($0.10
    )
    
    $
    3.05
    
    
    $
    0.05
    
    
    
    ($0.76
    )Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    (6.77
    )
    
    
    
    
    
    
    Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.13Net income (loss)
    
    
    ($0.10
    )
    
    
    ($3.72
    )
    
    $
    0.05
    
    
    $
    4.37


* net of 3.8 million common shares held in trust (Note 11).

Note 19  Statement of cash flows

Predecessor CompanyFor the period
    
    For the periodJune 1, 2003
    
    Sept. 1, 2002
    
    For the year
    
    For the yearThrough
    
    through
    
    Ended
    
    Ended($ millions)
    
    August 31, 2003
    
    May 31, 2003
    
    August 31, 2002
    
    August 31, 2001Cash provided by (used in
financing) other working capital
items comprises:Trade and other accounts receivable
    
    $
    128.7
    
    
    
    ($133.8
    )
    
    $
    31.7
    
    
    $
    22.5Income taxes recoverable
    
    
    9.4
    
    
    
    1.9
    
    
    
    (7.6
    )
    
    
    (3.7
    )Parts and supplies
    
    
    0.8
    
    
    
    (8.8
    )
    
    
    (0.9
    )
    
    
    (1.8
    )Other current assets
    
    
    7.5
    
    
    
    0.1
    
    
    
    21.2
    
    
    
    (15.4
    )Accounts payable and accrued
liabilities
    
    
    (1.5
    )
    
    
    (6.5
    )
    
    
    1.8
    
    
    
    (44.8
    )$
    144.9
    
    
    
    ($147.1
    )
    
    $
    46.2
    
    
    
    ($43.2
    )


During the period June 1, 2003 through August 31, 2003, the Company purchased
$4.4 million of vehicles that were financed by debt (Predecessor Company 
period September 1, 2002 through May 31, 2003  $21.1 million, 2002  $31.3
million, 2001  $24.1 million).

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Note 20  Sale of assets

During fiscal 2002, the Predecessor Company received $4.2 million for various
notes receivable previously written off. These transactions resulted in a
pre-tax gain of $4.2 million, which was included in other income.

During fiscal 2001, the Predecessor Company sold its investment in a food
services business for $18.9 million and sold another investment for $1.4
million. These transactions resulted in a pre-tax loss of $6.6 million, which
was included in other income.

Note 21  Acquisitions

During the period June 1, 2003 through August 31, 2003, the Company purchased
one Education services business.

During the period September 1, 2002 through May 31, 2003, the Predecessor
Company purchased one Education services business and one Emergency Management
services business.

During fiscal 2002, the Predecessor Company purchased seven Education services
businesses.

During fiscal 2001, the Predecessor Company purchased one Education services
business and two Greyhound businesses.

These acquisitions have been accounted for as purchases, and accordingly, these
financial statements include the results of operations of the acquired
businesses from the dates of acquisition.

The expenditures are summarized as follows:

Predecessor CompanyFor the period
    
    For the periodJune 1, 2003
    
    Sept. 1, 2002
    
    For the year
    
    For the yearthrough
    
    Through
    
    ended
    
    ended($ millions)
    
    August 31, 2003
    
    May 31, 2003
    
    August 31, 2002
    
    August 31, 2001Assets acquired, at fair valueProperty and equipment
    
    $
    
    
    
    $
    1.8
    
    
    $
    2.6
    
    
    $
    1.8Goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.5Long-term investments and other
assets
    
    
    0.1
    
    
    
    2.5
    
    
    
    1.4
    
    
    
    (1.7
    )0.1
    
    
    
    4.3
    
    
    
    4.0
    
    
    
    1.6Liabilities assumedOther long-term liabilities
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.2
    )
    
    
    (0.4
    )0.1
    
    
    
    4.2
    
    
    
    3.8
    
    
    
    1.2Working capital
    
    
    
    
    
    
    0.4
    
    
    
    (0.2
    )
    
    
    0.8Cash expended on acquisitions
    
    $
    0.1
    
    
    $
    4.6
    
    
    $
    3.6
    
    
    $
    2.0


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Pro forma data

Condensed pro forma income statement data has not been presented as the
acquisitions during the periods were insignificant and would have had no
material impact on net income (loss) and earnings (loss) per share.

Note 22  Commitments and contingencies

Lease commitments

Rental expense incurred under operating leases was $34.5 million for the period
June 1, 2003 through August 31, 2003 and, $138.2 million, $148.3 million and
$127.6 million, for the period September 1, 2002 through May 31, 2003, fiscal
2002 and fiscal 2001, respectively.

The Company leases certain operating vehicles. The leases generally provide
for the lessee to pay taxes, maintenance, insurance and certain other operating
costs of the leased property. The leases on most of the operating vehicles
contain certain purchase provisions or residual value guarantees and have lease
terms of typically seven years. Of those leases that contain residual value
guarantees, the aggregate residual value at lease expiration is $142.3 million
of which the Company has guaranteed $104.7 million. The table of future
minimum operating lease payments that follows excludes any payment related to
the residual value guarantee, which may be due upon termination of the lease.
The Company has the right to exercise a purchase option with respect to the
leased equipment or the equipment can be sold to a third party. To date, the
Company, nor the Predecessor Company, have never incurred any liability as a
result of the residual value guarantee.

Rentals payable under operating leases for premises and equipment are as
follows ($ millions):

Year ending August 31,
    
    
    2004
    
    
    $
    125.62005
    
    
    
    102.82006
    
    
    
    73.32007
    
    
    
    52.52008
    
    
    
    37.3thereafter
    
    
    62.4$
    453.9


Letters of credit

At August 31, 2003, the Company had $262.1 million (June 1, 2003  $269.8
million, Predecessor Company  August 31, 2002  $124.1 million) in outstanding
letters of credit.

Environmental matters

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

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Income tax matters

The respective tax authorities, in the normal course, audit previous tax
filings. It is not possible at this time to predict the final outcome of these
audits or to establish a reasonable estimate of possible additional taxes
owing, if any.

Legal proceedings

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

Healthcare Businesses Issues

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

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

The Company is currently undergoing investigations by certain government
agencies regarding compliance with Medicare fraud and abuse statutes. The
Company is cooperating with the government agencies conducting these
investigations and is providing requested information to the governmental
agencies. Management believes that the outcome of any of these investigations
would not have a materially adverse effect upon the Company.

Fuel purchase commitments

Historically, fuel costs represent approximately 3% to 5% of revenue. Due to
the significance of fuel expenses, particularly diesel fuel, to the operations
of the Company and the historical volatility of fuel prices, the Company has a
program to help minimize the fluctuations in the price of its diesel fuel
purchases. The intent of the program is to mitigate the short-term impact of
fuel price changes on the Companys operating margins and overall profitability
by entering into forward supply contracts (FSCs) with certain vendors. The
Company enters into FSCs for roughly one third of the Companys total annual
fuel purchases. The FSCs generally stipulate

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set bulk delivery volumes at prearranged prices for a set period. The volumes
agreed to be purchased by the Company are well below the forecasted total bulk
fuel needs for the given location. Therefore, the risk of being forced to
purchase fuel through the FSCs that is not required by the Company is minimal.
Also, to the extent that the Company enters FSCs for portions of its total fuel
needs, it may not realize the benefit of decreases in fuel prices. Conversely,
to the extent that the Company does not enter into FSCs for portions of its
total fuel needs, it may be adversely affected by increases in fuel prices.

Director and Officer Claim Treatment Letter

Pursuant to the terms and conditions of the Director and Officer Claim
Treatment Letter dated June 27, 2001, the Predecessor Company, the informal
steering committees of the lenders and prepetition note-holders and certain
then present or former directors and officers of the Predecessor Company or its
subsidiaries or affiliates agreed to resolve issues with respect to claims for
indemnification and for reimbursement and costs of defense arising out of or
relating to certain litigation involving the Predecessor Company or any of its
subsidiaries or affiliates and the directors and officers, including certain
securities lawsuits relating to ownership in Safety-Kleen. This agreement was
confirmed pursuant to the Plan. These directors and officers continue to have
access to the directors and officers insurance and are required to use
commercially reasonable efforts to cause the insurers to pay claims, including
defense costs. Further, the then existing $10 million trust plus accrued
interest thereon that had previously been established to satisfy claims of the
directors and officers will continue in existence until June 23, 2013 to pay
any claims not covered by the insurance. The terms of the claim treatment
letter require the Company to maintain a balance of $10 million in the trust by
contributing additional funds in $1 million increments up to an aggregate
amount of $10 million. At August 31, 2003, there was $9.2 million in the trust
and no additional funds had been contributed to the trust by the Company. The
maximum aggregate amounts available in the trust and under additional
contributions by the Company is $20.0 million, which will be reduced to $17.5
million on June 23, 2005; $15.0 million on June 23, 2007; $12.5 million on June
23, 2009; $10.0 million on June 23, 2011; and $0 on June 23, 2013. Any funds
remaining in the trust on June 23, 2013 will be returned to the Company.

Contingent bonuses

The Company and two of its subsidiaries, American Medical Response, Inc.
(AMR) and EmCare Holdings, Inc. (EmCare) are parties to an employment
agreement effective October 1, 2002 with William A. Sanger under which Mr.
Sanger serves as President and Chief Executive Officer of AMR and as Chief
Executive Officer of EmCare. Pursuant to the agreement, Mr. Sanger is entitled
to a bonus payment upon a sale, or an initial public offering, of the stock of
AMR and/or EmCare. This bonus is also payable if Mr. Sanger remains employed
on October 1, 2007 and neither a sale nor an initial public offering has
occurred. With respect to AMR, the bonus is equal to 5% of the enterprise
value of AMR in excess of $410 million at the time of the event that entitles
Mr. Sanger to the payment. With respect to EmCare, the bonus is equal to 5% of
the enterprise value of EmCare in excess of $125 million at the time of the
event that entitles Mr. Sanger to the payment.

EmCare Holdings, Inc. is party to an employment agreement effective April 1,
2003 with Don S. Harvey under which Mr. Harvey serves as President and Chief
Operating Officer of EmCare. Pursuant to the agreement, Mr. Harvey is entitled
to a bonus payment upon a sale of, or an initial public offering of, the stock
of EmCare, provided Mr. Harvey remains employed under the agreement upon the
occurrence of such event. The bonus is equal to 2% of the enterprise value of
EmCare in excess of $125 million at the time of the event that entitles Mr.
Harvey to the payment.

F-41



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As the amount of bonuses payable, if any, cannot be reasonably estimated, the
Company has not accrued for an amount in the consolidated financial statements.

Organized strikes or work stoppages by unionized employees

The Company is a party to collective bargaining agreements that cover the
majority of its employees. The Companys largest collective bargaining
agreement is between Greyhound Lines, Inc. and the Amalgamated Transit Union,
or the ATU, and expires in January 2004. If the Companys unionized employees
were to engage in a strike or other work stoppage prior to such expiration, or
if the Company is unable to negotiate acceptable extensions of the agreement
resulting in a strike or other work stoppage by the affected workers, the
Company could experience a significant disruption of operations and increased
operating costs as a result of higher wages or benefits paid to union members,
which could have a material adverse effect on its business, financial condition
and results of operations.

Note 23  Segmented information

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

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

The Company evaluates performance and allocates resources based on income from
operations before depreciation and amortization. The Companys reportable
segments are business units that offer different services and are each managed
separately.



F-42



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Services

Predecessor CompanyFor the period
    
    For the periodJune 1, 2003
    
    Sept. 1, 2002
    
    For the year
    
    For the yearthrough
    
    through
    
    ended
    
    endedAugust 31, 2003
    
    May 31, 2003
    
    August 31, 2002
    
    August 31, 2001Education ServicesRevenue
    
    $
    184.9
    
    
    $
    1,314.8
    
    
    $
    1,479.7
    
    
    $
    1,462.1Income (loss) from operations before
depreciation and amortization
    
    
    (21.7
    )
    
    
    302.0
    
    
    
    272.7
    
    
    
    258.3Total identifiable assets
    
    
    1,309.6
    
    
    
    1,429.4
    *
    
    
    1,768.1
    
    
    
    1,708.1Capital expenditures- sustenance and expansion (net)
    
    
    58.1
    
    
    
    108.8
    
    
    
    151.2
    
    
    
    136.0- acquisitions
    
    
    0.1
    
    
    
    3.2
    
    
    
    3.6
    
    
    
    0.1Public Transit ServicesRevenue
    
    $
    71.0
    
    
    $
    212.1
    
    
    $
    309.5
    
    
    $
    312.1Income (loss) from operations before
depreciation and amortization
    
    
    9.2
    
    
    
    7.3
    
    
    
    (1.7
    )
    
    
    11.6Total identifiable assets
    
    
    97.8
    
    
    
    98.5
    *
    
    
    217.5
    
    
    
    220.6Capital expenditures- sustenance and expansion (net)
    
    
    5.9
    
    
    
    3.4
    
    
    
    1.0
    
    
    
    18.6- acquisitions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    GreyhoundRevenue
    
    $
    356.7
    
    
    $
    847.5
    
    
    $
    1,223.7
    
    
    $
    1,254.8Income from operations before
depreciation and amortization
    
    
    61.2
    
    
    
    5.8
    
    
    
    53.6
    
    
    
    85.3Total identifiable assets
    
    
    871.1
    
    
    
    845.0
    *
    
    
    1,183.8
    
    
    
    1,236.8Capital expenditures- sustenance and expansion (net)
    
    
    9.4
    
    
    
    63.0
    
    
    
    62.6
    
    
    
    85.3- acquisitions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.9Healthcare Transportation ServicesRevenue
    
    $
    255.9
    
    
    $
    759.3
    
    
    $
    987.9
    
    
    $
    958.8Income from operations before
depreciation and amortization
    
    
    7.6
    
    
    
    55.8
    
    
    
    76.0
    
    
    
    23.2Total identifiable assets
    
    
    603.7
    
    
    
    607.4
    *
    
    
    1,813.5
    
    
    
    1,786.3Capital expenditures- sustenance and expansion (net)
    
    
    17.7
    
    
    
    30.5
    
    
    
    51.6
    
    
    
    34.2- acquisitions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Emergency Management ServicesRevenue
    
    $
    128.6
    
    
    $
    352.0
    
    
    $
    431.3
    
    
    $
    430.5Income from operations before
depreciation and amortization
    
    
    7.3
    
    
    
    21.9
    
    
    
    20.4
    
    
    
    5.0Total identifiable assets
    
    
    298.5
    
    
    
    295.8
    *
    
    
    670.2
    
    
    
    674.4Capital expenditures- sustenance and expansion (net)
    
    
    0.5
    
    
    
    6.2
    
    
    
    3.9
    
    
    
    4.2- acquisitions
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    


* Total identifiable assets of the Company on June 1, 2003.



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Geographic

Predecessor CompanyFor the period
    
    For the periodJune 1, 2003
    
    Sept. 1, 2002
    
    For the year
    
    For the yearthrough
    
    through
    
    ended
    
    endedAugust 31,
    
    May 31,
    
    August 31,
    
    August 31,2003
    
    2003
    
    2002
    
    2001United StatesRevenue
    
    $
    911.9
    
    
    $
    3,215.8
    
    
    $
    4,089.9
    
    
    $
    4,073.7Income from operations before
depreciation and amortization
    
    
    54.7
    
    
    
    352.3
    
    
    
    367.7
    
    
    
    326.2Total long-lived assets
    
    
    1,806.2
    
    
    
    1,774.8
    *
    
    
    4,225.8
    
    
    
    4,331.3CanadaRevenue
    
    $
    85.2
    
    
    $
    269.9
    
    
    $
    342.2
    
    
    $
    344.6Income from operations before
depreciation and amortization
    
    
    8.9
    
    
    
    40.5
    
    
    
    53.3
    
    
    
    57.2Total long-lived assets
    
    
    275.5
    
    
    
    270.2
    *
    
    
    428.7
    
    
    
    412.7


* Total long-lived assets of the Company on June 1, 2003

Consolidated

Predecessor CompanyFor the period
    
    For the periodJune 1, 2003
    
    Sept. 1, 2002
    
    For the year
    
    For the yearthrough
    
    through
    
    Ended
    
    endedAugust 31,
    
    May 31,
    
    August 31,
    
    August 31,($ millions)
    
    2003
    
    2003
    
    2002
    
    2001Revenue
    
    $
    997.1
    
    
    $
    3,485.7
    
    
    $
    4,432.1
    
    
    $
    4,418.3Income from operations before
depreciation and amortization
    
    
    63.6
    
    
    
    392.8
    
    
    
    421.0
    
    
    
    383.4Depreciation and amortization
expense
    
    
    (52.1
    )
    
    
    (229.3
    )
    
    
    (358.8
    )
    
    
    (350.3
    )Income from operations
    
    
    11.5
    
    
    
    163.5
    
    
    
    62.2
    
    
    
    33.1Interest expense net of other
income
    
    
    (31.4
    )
    
    
    (4.6
    )
    
    
    (12.4
    )
    
    
    (261.6
    )Gain on discharge of debt
    
    
    
    
    
    
    1,482.8
    
    
    
    
    
    
    
    Fresh start accounting adjustments
    
    
    
    
    
    
    (609.6
    )
    
    
    
    
    
    
    Other financing related expenses
    
    
    
    
    
    
    (35.0
    )
    
    
    (44.7
    )
    
    
    (63.8
    )Income tax recovery (expense)
    
    
    10.0
    
    
    
    (4.5
    )
    
    
    9.8
    
    
    
    45.8Income (loss) from continuing
operations before cumulative
effect of change in accounting
principle
    
    
    ($9.9
    )
    
    $
    992.6
    
    
    $
    14.9
    
    
    
    ($246.5
    )Total identifiable assets of segments
    
    $
    3,180.7
    
    
    $
    3,276.1
    *
    
    $
    5,653.1
    
    
    $
    5,626.2Corporate assets
    
    
    672.0
    
    
    
    619.2
    *
    
    
    558.7
    
    
    
    593.6Total assets
    
    $
    3,852.7
    
    
    $
    3,895.3
    
    
    $
    6,211.8
    
    
    $
    6,219.8Capital expenditures- sustenance and expansion (net)
    
    $
    91.6
    
    
    $
    213.5
    
    
    $
    270.5
    
    
    $
    278.4- acquisitions
    
    
    0.1
    
    
    
    4.6
    
    
    
    3.6
    
    
    
    2.0


* Total identifiable assets of segments and corporate assets of the Company on June 1, 2003.

F-44



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##### Table of Contents



Note 24  Quarterly Financial Information(unaudited)

Predecessor Company2003
    
    2003
    
    2002($ millions except per share amounts)
    
    4th Qtr.
    
    3rd Qtr.*
    
    2nd Qtr.
    
    1st Qtr.
    
    4th Qtr.
    
    3rd Qtr.
    
    2nd Qtr.
    
    1st Qtr.Revenue
    
    $
    997.1
    
    
    $
    1,202.8
    
    
    $
    1,120.7
    
    
    $
    1,162.2
    
    
    $
    977.4
    
    
    $
    1,187.3
    
    
    $
    1,105.6
    
    
    $
    1,161.8Income (loss) from
operating segments
    
    
    11.5
    
    
    
    73.7
    
    
    
    34.1
    
    
    
    55.7
    
    
    
    (80.7
    )
    
    
    62.1
    
    
    
    27.2
    
    
    
    53.6Income (loss) from
operations before
cumulative effect of
change in accounting
principle
    
    
    (9.9
    )
    
    
    62.2
    
    
    
    16.2
    
    
    
    41.0
    
    
    
    (68.2
    )
    
    
    42.8
    
    
    
    7.3
    
    
    
    33.0Cumulative effect of
change in accounting
principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,205.4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    
    ($9.9
    )
    
    $
    62.2
    
    
    $
    16.2
    
    
    
    ($2,164.4
    )
    
    
    ($68.2
    )
    
    $
    42.8
    
    
    $
    7.3
    
    
    $
    33.0Earnings (loss) per
share (Note 18)Earnings (loss)
before cumulative
effect of change
in accounting
principle
    
    
    ($0.10
    )
    
    $
    0.19
    
    
    $
    0.05
    
    
    $
    0.13
    
    
    
    ($0.20
    )
    
    $
    0.13
    
    
    $
    0.02
    
    
    $
    0.10Cumulative effect
of change in
accounting
principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6.77
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net earnings (loss)
    
    
    ($0.10
    )
    
    $
    0.19
    
    
    $
    0.05
    
    
    
    ($6.64
    )
    
    
    ($0.20
    )
    
    $
    0.13
    
    
    $
    0.02
    
    
    $
    0.10


* As previously reported. Does not reflect fresh start accounting adjustments
or the gain on discharge of debt.

During the fourth quarter of fiscal 2002 the Predecessor Company recorded
significant charges relating to claims liability and professional liability
reserves (totaling approximately $65 million) in addition to projected amounts.
The reserves were increased based on the fiscal year end actuarial reports.
These reports differed significantly from the mid-year actuarial reports,
because of changes to a number of the assumptions.

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##### Table of Contents



Note 25  Condensed financial statements of excluded subsidiaries

Pursuant to the terms of the Exit Facility obtained by the Company upon
emergence from bankruptcy, the Company is required to segregate the
consolidated results of operations between the subsidiaries of the Company not
participating in the Exit Facility, the Excluded Subsidiaries, and the Company
and its remaining subsidiaries (Other than Excluded Subsidiaries).

Condensed Consolidated Statement of Operations
For the period June 1, 2003 through August 31, 2003

Other thanExcluded
    
    Excluded
    
    Consolidated($ millions)
    
    Subsidiaries
    
    Subsidiaries
    
    TotalsRevenue
    
    $
    704.8
    
    
    $
    292.3
    
    
    $
    997.1Compensation expense
    
    
    468.7
    
    
    
    113.0
    
    
    
    581.7Accident claims and professional liability expenses
    
    
    45.9
    
    
    
    17.0
    
    
    
    62.9Vehicle related costs
    
    
    39.8
    
    
    
    35.0
    
    
    
    74.8Occupancy costs
    
    
    30.0
    
    
    
    21.4
    
    
    
    51.4Fuel
    
    
    20.5
    
    
    
    16.2
    
    
    
    36.7Depreciation
    
    
    37.1
    
    
    
    10.6
    
    
    
    47.7Amortization
    
    
    4.4
    
    
    
    
    
    
    
    4.4Other operating expenses
    
    
    85.4
    
    
    
    40.6
    
    
    
    126.0Income (loss) from operating segments
    
    
    (27.0
    )
    
    
    38.5
    
    
    
    11.5Interest expense
    
    
    (23.1
    )
    
    
    (8.4
    )
    
    
    (31.5
    )Other income (loss)
    
    
    0.3
    
    
    
    (0.2
    )
    
    
    0.1Income (loss) from operations before income taxes
    
    
    (49.8
    )
    
    
    29.9
    
    
    
    (19.9
    )Income tax recovery (expense)
    
    
    20.0
    
    
    
    (10.0
    )
    
    
    10.0Net income (loss)
    
    
    ($29.8
    )
    
    $
    19.9
    
    
    
    ($9.9
    )


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##### Table of Contents



Condensed Consolidated Balance Sheet
As of August 31, 2003

Other thanExcluded
    
    Excluded
    
    Consolidated($ millions)
    
    Subsidiaries
    
    Subsidiaries
    
    TotalsCurrent assetsCash and cash equivalents
    
    $
    55.1
    
    
    $
    45.2
    
    
    $
    100.3Restricted cash and cash equivalents
    
    
    39.4
    
    
    
    
    
    
    
    39.4Short-term deposits and marketable securities
    
    
    42.0
    
    
    
    
    
    
    
    42.0Trade accounts receivable
    
    
    478.8
    
    
    
    23.4
    
    
    
    502.2Other receivables
    
    
    31.7
    
    
    
    17.9
    
    
    
    49.6Income taxes recoverable
    
    
    18.3
    
    
    
    (0.3
    )
    
    
    18.0Parts and supplies
    
    
    38.2
    
    
    
    12.0
    
    
    
    50.2Deferred income tax assets
    
    
    76.1
    
    
    
    10.1
    
    
    
    86.2Other current assets
    
    
    50.1
    
    
    
    10.0
    
    
    
    60.1Total current assets
    
    
    829.7
    
    
    
    118.3
    
    
    
    948.0Long-term investments
    
    
    514.1
    
    
    
    39.4
    
    
    
    553.5Property and equipment
    
    
    1,291.2
    
    
    
    378.6
    
    
    
    1,669.8Goodwill
    
    
    183.1
    
    
    
    
    
    
    
    183.1Contracts and customer relationships
    
    
    216.9
    
    
    
    
    
    
    
    216.9Deferred income tax assets
    
    
    88.3
    
    
    
    114.9
    
    
    
    203.2Deferred charges and other assets
    
    
    66.9
    
    
    
    11.3
    
    
    
    78.2Total assets
    
    $
    3,190.2
    
    
    $
    662.5
    
    
    $
    3,852.7Current liabilitiesAccounts payable
    
    $
    87.7
    
    
    $
    31.7
    
    
    $
    119.4Accrued liabilities
    
    
    397.3
    
    
    
    108.7
    
    
    
    506.0Current portion of long-term debt
    
    
    35.7
    
    
    
    33.7
    
    
    
    69.4Total current liabilities
    
    
    520.7
    
    
    
    174.1
    
    
    
    694.8Long-term debt
    
    
    1,012.5
    
    
    
    132.6
    
    
    
    1,145.1Pension liability
    
    
    4.9
    
    
    
    220.8
    
    
    
    225.7Other long-term liabilities
    
    
    408.2
    
    
    
    88.6
    
    
    
    496.8Total liabilities
    
    
    1,946.3
    
    
    
    616.1
    
    
    
    2,562.4Shareholders equity
    
    
    1,243.9
    
    
    
    46.4
    
    
    
    1,290.3Total liabilities and shareholders equity
    
    $
    3,190.2
    
    
    $
    662.5
    
    
    $
    3,852.7


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Condensed Consolidated Statement of Cash Flows
For the period June 1, 2003 through August 31, 2003

Other thanExcluded
    
    Excluded
    
    Consolidated($ millions)
    
    Subsidiaries
    
    Subsidiaries
    
    TotalsNet cash provided by operating activities
    
    $
    132.8
    
    
    $
    54.2
    
    
    $
    187.0Cash flows from investing activities:Purchases of property and equipment
    
    
    ($84.9
    )
    
    
    ($5.6
    )
    
    
    ($90.5
    )Proceeds from sale of property and equipment
    
    
    3.8
    
    
    
    0.6
    
    
    
    4.4Purchase of other assets
    
    
    (0.7
    )
    
    
    (0.4
    )
    
    
    (1.1
    )Net decrease (increase) in investments
    
    
    11.9
    
    
    
    (0.6
    )
    
    
    11.3Expended on acquisitions
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.1
    )Net cash used in investing activities
    
    
    ($70.0
    )
    
    
    ($6.0
    )
    
    
    ($76.0
    )Cash flows from financing activities:Proceeds from issues of long-term debt
    
    $
    
    
    
    $
    17.3
    
    
    $
    17.3Repayments of long-term debt and other non-
current liabilities
    
    
    (11.4
    )
    
    
    (36.2
    )
    
    
    (47.6
    )Payment of financing fees
    
    
    (3.8
    )
    
    
    
    
    
    
    (3.8
    )Net cash used in financing activities
    
    
    ($15.2
    )
    
    
    ($18.9
    )
    
    
    ($34.1
    )Net increase in cash and cash equivalents
    
    $
    47.6
    
    
    $
    29.3
    
    
    $
    76.9Cash and cash equivalents at:Beginning of period
    
    
    7.5
    
    
    
    15.9
    
    
    
    23.4End of period
    
    $
    55.1
    
    
    $
    45.2
    
    
    $
    100.3


F-48



---



##### Table of Contents



Predecessor Company
Condensed Consolidated Statement of Operations
For the period September 1, 2002 through May 31, 2003

Other thanExcluded
    
    Excluded
    
    Consolidated($ millions)
    
    Subsidiaries
    
    Subsidiaries
    
    TotalsRevenue
    
    $
    2,786.2
    
    
    $
    699.5
    
    
    $
    3,485.7Compensation expense
    
    
    1,670.0
    
    
    
    331.1
    
    
    $
    2,001.1Accident claims and professional liability expenses
    
    
    190.9
    
    
    
    50.5
    
    
    
    241.4Vehicle related costs
    
    
    103.8
    
    
    
    98.6
    
    
    
    202.4Occupancy costs
    
    
    91.3
    
    
    
    59.1
    
    
    
    150.4Fuel
    
    
    88.8
    
    
    
    44.6
    
    
    
    133.4Depreciation
    
    
    192.4
    
    
    
    36.0
    
    
    
    228.4Amortization
    
    
    0.8
    
    
    
    0.1
    
    
    
    0.9Other operating expenses
    
    
    249.5
    
    
    
    114.7
    
    
    
    364.2Income (loss) from operating segments
    
    
    198.7
    
    
    
    (35.2
    )
    
    
    163.5Interest expense
    
    
    (3.8
    )
    
    
    (15.8
    )
    
    
    (19.6
    )Gain on discharge of debt
    
    
    1,482.8
    
    
    
    
    
    
    
    1,482.8Fresh start accounting adjustments
    
    
    (514.8
    )
    
    
    (94.8
    )
    
    
    (609.6
    )Other financing related expenses
    
    
    (35.0
    )
    
    
    
    
    
    
    (35.0
    )Other income
    
    
    13.5
    
    
    
    1.5
    
    
    
    15.0Income (loss) from operations
before income taxes and cumulative effect of
change in accounting principle
    
    
    1,141.4
    
    
    
    (144.3
    )
    
    
    997.1Income tax expense
    
    
    (3.4
    )
    
    
    (1.1
    )
    
    
    (4.5
    )Income (loss) from operations before cumulative
effect of change in accounting principle
    
    
    1,138.0
    
    
    
    (145.4
    )
    
    
    992.6Cumulative effect of change in accounting principle
    
    
    (1,775.9
    )
    
    
    (429.5
    )
    
    
    (2,205.4
    )Net loss
    
    $
    (637.9
    )
    
    $
    (574.9
    )
    
    $
    (1,212.8
    )


F-49



---



##### Table of Contents



Fresh Start
Condensed Consolidated Balance Sheet
As of June 1, 2003

Other thanExcluded
    
    Excluded
    
    Consolidated($ millions)
    
    Subsidiaries
    
    Subsidiaries
    
    TotalsCurrent assetsCash and cash equivalents
    
    $
    7.5
    
    
    $
    15.9
    
    
    $
    23.4Restricted cash and cash equivalents
    
    
    44.7
    
    
    
    
    
    
    
    44.7Short-term deposits and marketable securities
    
    
    32.3
    
    
    
    
    
    
    
    32.3Trade accounts receivable
    
    
    605.8
    
    
    
    24.8
    
    
    
    630.6Other receivables
    
    
    30.1
    
    
    
    19.8
    
    
    
    49.9Income taxes recoverable
    
    
    28.9
    
    
    
    (1.5
    )
    
    
    27.4Parts and supplies
    
    
    39.0
    
    
    
    11.8
    
    
    
    50.8Deferred income tax assets
    
    
    70.7
    
    
    
    10.2
    
    
    
    80.9Other current assets
    
    
    55.2
    
    
    
    12.6
    
    
    
    67.8Total current assets
    
    
    914.2
    
    
    
    93.6
    
    
    
    1,007.8Long-term investments
    
    
    541.2
    
    
    
    39.2
    
    
    
    580.4Property and equipment
    
    
    1,246.8
    
    
    
    382.1
    
    
    
    1,628.9Goodwill
    
    
    183.1
    
    
    
    
    
    
    
    183.1Contracts and customer relationships
    
    
    221.0
    
    
    
    
    
    
    
    221.0Deferred income tax assets
    
    
    70.7
    
    
    
    124.8
    
    
    
    195.5Deferred charges and other assets
    
    
    67.8
    
    
    
    10.8
    
    
    
    78.6Total assets
    
    $
    3,244.8
    
    
    $
    650.5
    
    
    $
    3,895.3Current liabilitiesAccounts payable
    
    $
    79.0
    
    
    $
    27.6
    
    
    $
    106.6Accrued liabilities
    
    
    421.7
    
    
    
    101.5
    
    
    
    523.2Current portion of long-term debt
    
    
    35.2
    
    
    
    53.8
    
    
    
    89.0Total current liabilities
    
    
    535.9
    
    
    
    182.9
    
    
    
    718.8Long-term debt
    
    
    1,021.6
    
    
    
    128.5
    
    
    
    1,150.1Pension liability
    
    
    4.4
    
    
    
    220.7
    
    
    
    225.1Other long-term liabilities
    
    
    405.5
    
    
    
    86.5
    
    
    
    492.0Total liabilities
    
    
    1,967.4
    
    
    
    618.6
    
    
    
    2,586.0Shareholders equity
    
    
    1,277.4
    
    
    
    31.9
    
    
    
    1,309.3Total liabilities and shareholders equity
    
    $
    3,244.8
    
    
    $
    650.5
    
    
    $
    3,895.3


F-50



---



##### Table of Contents



Predecessor Company
Condensed Consolidated Statement of Cash Flows
For the period September 1, 2002 through May 31, 2003

Other thanExcluded
    
    Excluded
    
    Consolidated($ millions)
    
    Subsidiaries
    
    Subsidiaries
    
    TotalsNet cash provided by (used in) operating activities
    
    $
    263.4
    
    
    $
    (54.9
    )
    
    $
    208.5Cash flows from investing activities:Purchase of property and equipment
    
    $
    (170.0
    )
    
    $
    (60.1
    )
    
    $
    (230.1
    )Proceeds from sale of property and equipment
    
    
    7.9
    
    
    
    16.7
    
    
    
    24.6Purchase of other assets
    
    
    (4.0
    )
    
    
    0.8
    
    
    
    (3.2
    )Expended on acquisitions
    
    
    (4.6
    )
    
    
    
    
    
    
    (4.6
    )Net increase in investments
    
    
    (150.9
    )
    
    
    (0.4
    )
    
    
    (151.3
    )Net cash used in investing activities
    
    $
    (321.6
    )
    
    $
    (43.0
    )
    
    $
    (364.6
    )Cash flows from financing activities:Proceeds from issue of long-term debt
    
    $
    1,025.6
    
    
    $
    182.2
    
    
    $
    1,207.8Repayment of long-term debt and other
non-current liabilities
    
    
    (61.2
    )
    
    
    (88.1
    )
    
    
    (149.3
    )Repayment of liabilities subject to compromise
    
    
    (1,185.0
    )
    
    
    
    
    
    
    (1,185.0
    )Payment of financing fees
    
    
    (37.5
    )
    
    
    
    
    
    
    (37.5
    )Net cash provided by (used in) financing activities
    
    $
    (258.1
    )
    
    $
    94.1
    
    
    $
    (164.0
    )Net decrease in cash and cash equivalents
    
    $
    (316.3
    )
    
    $
    (3.8
    )
    
    $
    (320.1
    )Cash and cash equivalents at:Beginning of period
    
    
    323.8
    
    
    
    19.7
    
    
    
    343.5End of period
    
    $
    7.5
    
    
    $
    15.9
    
    
    $
    23.4


F-51



---



##### Table of Contents



Predecessor Company
Condensed Consolidated Statement of Operations
For the year ended August 31, 2002

Other thanExcluded
    
    Excluded
    
    Consolidated($ millions)
    
    Subsidiaries
    
    Subsidiaries
    
    TotalsRevenue
    
    $
    3,412.2
    
    
    $
    1,019.9
    
    
    $
    4,432.1Compensation expense
    
    
    2,077.2
    
    
    
    445.8
    
    
    
    2,523.0Accident claims and professional liability expenses
    
    
    255.9
    
    
    
    69.9
    
    
    
    325.8Vehicle related costs
    
    
    143.2
    
    
    
    129.3
    
    
    
    272.5Occupancy costs
    
    
    119.4
    
    
    
    82.8
    
    
    
    202.2Fuel
    
    
    107.0
    
    
    
    56.0
    
    
    
    163.0Depreciation
    
    
    224.5
    
    
    
    46.1
    
    
    
    270.6Amortization
    
    
    76.1
    
    
    
    12.1
    
    
    
    88.2Other operating expenses
    
    
    355.3
    
    
    
    169.3
    
    
    
    524.6Income from operating segments
    
    
    53.6
    
    
    
    8.6
    
    
    
    62.2Interest expense
    
    
    (6.1
    )
    
    
    (21.6
    )
    
    
    (27.7
    )Other financing related expenses
    
    
    (42.3
    )
    
    
    (2.4
    )
    
    
    (44.7
    )Other income
    
    
    12.7
    
    
    
    2.6
    
    
    
    15.3Income (loss) from operations before income taxes
    
    
    17.9
    
    
    
    (12.8
    )
    
    
    5.1Income tax recovery
    
    
    9.1
    
    
    
    0.7
    
    
    
    9.8Net income (loss)
    
    $
    27.0
    
    
    $
    (12.1
    )
    
    $
    14.9


F-52



---



##### Table of Contents



Predecessor Company
Condensed Consolidated Balance Sheet
August 31, 2002

Other thanExcluded
    
    Excluded
    
    Consolidated($ millions)
    
    Subsidiaries
    
    Subsidiaries
    
    TotalsCurrent assetsCash and cash equivalents
    
    $
    323.8
    
    
    $
    19.7
    
    
    $
    343.5Restricted cash and cash equivalents
    
    
    75.8
    
    
    
    
    
    
    
    75.8Short-term deposits and marketable
securities
    
    
    16.1
    
    
    
    
    
    
    
    16.1Trade accounts receivable
    
    
    463.3
    
    
    
    27.1
    
    
    
    490.4Other receivables
    
    
    36.7
    
    
    
    18.2
    
    
    
    54.9Income taxes recoverable
    
    
    29.4
    
    
    
    (0.2
    )
    
    
    29.2Parts and supplies
    
    
    38.9
    
    
    
    11.5
    
    
    
    50.4Other current assets
    
    
    47.6
    
    
    
    8.7
    
    
    
    56.3Total current assets
    
    
    1,031.6
    
    
    
    85.0
    
    
    
    1,116.6Long-term investments
    
    
    372.5
    
    
    
    45.4
    
    
    
    417.9Property and equipment
    
    
    1,282.0
    
    
    
    395.7
    
    
    
    1,677.7Goodwill
    
    
    2,547.3
    
    
    
    429.5
    
    
    
    2,976.8Pension asset
    
    
    10.8
    
    
    
    
    
    
    
    10.8Deferred charges
    
    
    9.4
    
    
    
    2.6
    
    
    
    12.0Total assets
    
    $
    5,253.6
    
    
    $
    958.2
    
    
    $
    6,211.8Current liabilitiesAccounts payable
    
    $
    80.3
    
    
    $
    29.4
    
    
    $
    109.7Accrued liabilities
    
    
    392.6
    
    
    
    111.5
    
    
    
    504.1Current portion of long-term debt
    
    
    12.3
    
    
    
    8.0
    
    
    
    20.3Total current liabilities
    
    
    485.2
    
    
    
    148.9
    
    
    
    634.1Long-term debt
    
    
    27.3
    
    
    
    177.1
    
    
    
    204.4Pension liability
    
    
    
    
    
    
    64.8
    
    
    
    64.8Other long-term liabilities
    
    
    305.2
    
    
    
    72.1
    
    
    
    377.3Liabilities subject to compromise
    
    
    3,977.1
    
    
    
    
    
    
    
    3,977.1Total liabilities
    
    
    4,794.8
    
    
    
    462.9
    
    
    
    5,257.7Shareholders equity
    
    
    458.8
    
    
    
    495.3
    
    
    
    954.1Total liabilities and shareholders equity
    
    $
    5,253.6
    
    
    $
    958.2
    
    
    $
    6,211.8


F-53



---



##### Table of Contents



Predecessor Company
Condensed Consolidated Statement of Cash Flows
For the year ended August 31, 2002

Other thanExcluded
    
    Excluded
    
    Consolidated($ millions)
    
    Subsidiaries
    
    Subsidiaries
    
    TotalsNet cash provided by operating activities
    
    $
    317.1
    
    
    $
    116.7
    
    
    $
    433.8Cash flows from investing activities:Purchases of property and equipment
    
    $
    (212.8
    )
    
    $
    (70.5
    )
    
    $
    (283.3
    )Proceeds from sale of property and equipment
    
    
    21.9
    
    
    
    23.6
    
    
    
    45.5Purchase of other assets
    
    
    (0.5
    )
    
    
    (0.9
    )
    
    
    (1.4
    )Expended on acquisitions
    
    
    (3.6
    )
    
    
    
    
    
    
    (3.6
    )Net increase in investments
    
    
    (34.0
    )
    
    
    (3.1
    )
    
    
    (37.1
    )Proceeds from sale of assets
    
    
    4.2
    
    
    
    
    
    
    
    4.2Net cash used in investing activities
    
    $
    (224.8
    )
    
    $
    (50.9
    )
    
    $
    (275.7
    )Cash flows from financing activities:Proceeds from issue of long-term debt
    
    $
    
    
    
    $
    172.2
    
    
    $
    172.2Repayments of long-term debt and other
non-current liabilities
    
    
    (35.3
    )
    
    
    (232.7
    )
    
    
    (268.0
    )Net cash used in financing activities
    
    $
    (35.3
    )
    
    $
    (60.5
    )
    
    $
    (95.8
    )Net increase in cash and cash equivalents
    
    $
    57.0
    
    
    $
    5.3
    
    
    $
    62.3Cash and cash equivalents at:Beginning of year
    
    
    266.8
    
    
    $
    14.4
    
    
    
    281.2End of year
    
    $
    323.8
    
    
    $
    19.7
    
    
    $
    343.5


F-54



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##### Table of Contents



Predecessor Company
Condensed Consolidated Statement of Operations
For the year ended August 31, 2001

Other thanExcluded
    
    Excluded
    
    Consolidated($ millions)
    
    Subsidiaries
    
    Subsidiaries
    
    TotalsRevenue
    
    $
    3,367.8
    
    
    $
    1,050.5
    
    
    $
    4,418.3Compensation expense
    
    
    2,060.6
    
    
    
    472.5
    
    
    
    2,533.1Accident claims and professional liability expenses
    
    
    296.6
    
    
    
    45.4
    
    
    
    342.0Vehicle related costs
    
    
    149.4
    
    
    
    117.9
    
    
    
    267.3Occupancy costs
    
    
    118.5
    
    
    
    72.5
    
    
    
    191.0Fuel
    
    
    126.2
    
    
    
    68.2
    
    
    
    194.4Depreciation
    
    
    220.5
    
    
    
    40.6
    
    
    
    261.1Amortization
    
    
    77.4
    
    
    
    11.8
    
    
    
    89.2Other operating expenses
    
    
    331.0
    
    
    
    176.1
    
    
    
    507.1Income (loss) from operating segments
    
    
    (12.4
    )
    
    
    45.5
    
    
    
    33.1Interest expense
    
    
    (249.8
    )
    
    
    (21.1
    )
    
    
    (270.9
    )Other financing related expenses
    
    
    (60.5
    )
    
    
    (3.3
    )
    
    
    (63.8
    )Other income (loss)
    
    
    10.0
    
    
    
    (0.7
    )
    
    
    9.3Income (loss) from continuing operations
before income taxes
    
    
    (312.7
    )
    
    
    20.4
    
    
    
    (292.3
    )Income tax recovery (expense)
    
    
    47.0
    
    
    
    (1.2
    )
    
    
    45.8Income (loss) from continuing operations
    
    
    (265.7
    )
    
    
    19.2
    
    
    
    (246.5
    )Income from discontinued operations
    
    
    1,672.4
    
    
    
    
    
    
    
    1,672.4Net income
    
    $
    1,406.7
    
    
    $
    19.2
    
    
    $
    1,425.9


F-55



---



##### Table of Contents



Predecessor Company
Condensed Consolidated Statement of Cash Flows
For the year ended August 31, 2001

Other thanExcluded
    
    Excluded
    
    Consolidated($ millions)
    
    Subsidiaries
    
    Subsidiaries
    
    TotalsNet cash provided by operating activities
    
    $
    431.9
    
    
    $
    15.8
    
    
    $
    447.7Cash
flows from investing activities:Purchases of property and equipment
    
    $
    (211.1
    )
    
    $
    (56.2
    )
    
    $
    (267.3
    )Proceeds from sale of property and equipment
    
    
    17.4
    
    
    
    4.4
    
    
    
    21.8Purchase of other assets
    
    
    (5.6
    )
    
    
    (3.2
    )
    
    
    (8.8
    )Expended on acquisitions
    
    
    (0.1
    )
    
    
    (1.9
    )
    
    
    (2.0
    )Net increase in investments
    
    
    (44.0
    )
    
    
    (1.5
    )
    
    
    (45.5
    )Proceeds from sale of assets
    
    
    20.3
    
    
    
    
    
    
    
    20.3Net cash used in investing activities
    
    $
    (223.1
    )
    
    $
    (58.4
    )
    
    $
    (281.5
    )Cash
flows from financing activities:Proceeds from issue of long-term debt
    
    $
    
    
    
    $
    342.2
    
    
    $
    342.2Repayments of long-term debt and other
non-current liabilities
    
    
    (38.3
    )
    
    
    (296.9
    )
    
    
    (335.2
    )Net cash provided by (used in) financing activities
    
    $
    (38.3
    )
    
    $
    45.3
    
    
    $
    7.0Net increase in cash and cash equivalents
    
    $
    170.5
    
    
    $
    2.7
    
    
    $
    173.2Cash and cash equivalents at:Beginning of year
    
    
    96.3
    
    
    
    11.7
    
    
    
    108.0End of year
    
    $
    266.8
    
    
    $
    14.4
    
    
    $
    281.2


F-56



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##### Table of Contents





| |  | Note 26  United States and Canadian accounting principles
| |  | ----------------------------------------------------------

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



|(1) |  | Consolidated Financial Statements
|--- |  | ---------------------------------

Predecessor CompanyFor the period
    
    For the periodJune 1, 2003
    
    Sept. 1, 2002
    
    For the year
    
    For the yearthrough
    
    through
    
    Ended
    
    EndedAugust 31,
    
    May 31,
    
    August 31,
    
    August 31,($ millions)
    
    2003
    
    2003
    
    2002
    
    2001Net income (loss) in accordance with U.S. GAAP
    
    $
    (9.9
    )
    
    $
    (1,212.8
    )
    
    $
    14.9
    
    
    $
    1,425.9Effects of differences in accounting for:Costs of start-up activities (a)
    
    
    
    
    
    
    (9.9
    )
    
    
    (4.1
    )
    
    
    (3.3
    )Impairment charges under Canadian GAAP (b)
    
    
    
    
    
    
    
    
    
    
    (194.7
    )
    
    
    (1,105.1
    )Impairment charges under U.S. GAAP (b)
    
    
    
    
    
    
    2,205.4
    
    
    
    
    
    
    
    Reduced goodwill amortization (b)
    
    
    
    
    
    
    
    
    
    
    59.5
    
    
    
    25.3Reduction in income from discontinued
operations (c)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (941.7
    )Gain on debt discharge (e)
    
    
    
    
    
    
    (1,482.8
    )
    
    
    
    
    
    
    Fresh start accounting adjustments (e)
    
    
    
    
    
    
    609.6
    
    
    
    
    
    
    
    Net income (loss) in accordance with Canadian GAAP
    
    $
    (9.9
    )
    
    $
    109.5
    
    
    $
    (124.4
    )
    
    $
    (598.9
    )Basic and diluted net income (loss) per share
    
    $
    (0.10
    )
    
    $
    0.34
    
    
    $
    (0.38
    )
    
    $
    (1.84
    )


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

PredecessorFresh Start
    
    CompanyAugust 31,
    
    June 1,
    
    August 31,2003
    
    2003
    
    2002U.S.
    
    Canadian
    
    U.S.
    
    Canadian
    
    U.S.
    
    CanadianGAAP
    
    GAAP
    
    GAAP
    
    GAAP
    
    GAAP
    
    GAAPAssets:Other current assets (a)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    56.3
    
    
    $
    64.0Long-term investments (d)
    
    $
    553.5
    
    
    
    563.5
    
    
    
    
    
    
    
    
    
    
    
    417.9
    
    
    
    413.3Goodwill (b) (e)
    
    
    183.1
    
    
    
    
    
    
    
    183.1
    
    
    
    
    
    
    
    2,976.8
    
    
    
    813.1Deferred income tax assets (d)
    
    
    289.4
    
    
    
    285.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pension asset (d)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.8
    
    
    
    43.1Deferred charges (a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12.0
    
    
    
    19.6Liabilities and Shareholders Equity:Other long-term liabilities (d)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    442.1
    
    
    
    382.5Cumulative foreign currency
translation adjustments (d)
    
    
    
    
    
    
    (2.6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (171.4
    )Share premium (e)
    
    
    1,358.3
    
    
    
    1,175.2
    
    
    
    1,358.3
    
    
    
    1,175.2
    
    
    
    
    
    
    
    Deficit (a) (b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,017.7
    )
    
    
    (3,166.1
    )Accumulated other comprehensive loss (d)
    
    
    (9.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (258.7
    )
    
    
    


F-57



---



##### Table of Contents





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

The Predecessor Company applied SOP 98-5 during fiscal 2000. During fiscal
2000, under U.S. GAAP, the Predecessor Company expensed $27.3 million in
unamortized costs of start-up activities as a change in accounting principle.
Under Canadian GAAP, SOP 98-5 is not applicable. As a result, under Canadian
GAAP, the Predecessor Company did not record the $27.3 million change in
accounting principle amount and continued with the policy of deferring start-up
costs and amortizing the deferrals over a reasonable period representing an
overall adjustment to conform to Canadian GAAP of $9.9 million expense, $4.1
million expense and $3.3 million expense during the period September 1, 2002
through May 31, 2003, fiscal 2002 and fiscal 2001, respectively. Fresh Start
accounting eliminated this GAAP difference for periods subsequent to June 1,
2003 because the unamortized deferred start-up costs remaining under Canadian
GAAP were written off on Fresh Start.



|(b) |  | Goodwill impairment
|--- |  | -------------------

Prior to September, 2002, the Predecessor Company had different accounting
policies for determining goodwill impairment for Canadian and U.S. GAAP
reporting. The effect of the difference in policy between U.S. GAAP and
Canadian GAAP was to produce during fiscal 2001 a goodwill impairment charge
under Canadian GAAP and reduce the amount of goodwill for fiscal 2001 by
$1,105.1 million and during fiscal 2002, a goodwill impairment charge under
Canadian GAAP and reduce the amount of goodwill by $194.7 million. Under U.S.
GAAP, the above mentioned impairment charges do not exist. In addition, during
fiscal 1999, the Canadian GAAP policy produced an additional $974.0 million
goodwill impairment charge in addition to the goodwill impairment charge taken
for U.S. GAAP. As a result of the increased goodwill impairment charges,
reduced goodwill amortization totalling $59.5 million (2001  $25.3 million),
was recorded during fiscal 2002.

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



|(c) |  | Income from discontinued operations
|--- |  | -----------------------------------

As discussed in Note 15, the Healthcare Businesses had been classified as
discontinued operations. Any Canadian GAAP adjustments, noted above in (a) and
(b) that directly affected the Healthcare businesses while they have been
classified as discontinued operations, inversely affected the loss from
discontinued operations in the consolidated statement of operations. As a
result, under Canadian GAAP, the income from discontinued operations decreased
by $941.7 million in fiscal 2001.



|(d) |  | Comprehensive income
|--- |  | --------------------

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

F-58



---



##### Table of Contents



No. 87, pension adjustment. These amounts are reported under the caption
Accumulated other comprehensive loss.

Canadian GAAP does not have the concept of comprehensive income (loss). The
cumulative foreign currency translation adjustment is reported in a separate
component of shareholders equity. The SFAS No. 87 pension adjustment
(Predecessor Company  September 1, 2002 through May 31, 2003  $268.3 million
- August 31, 2002  $91.9 million, August 31, 2001  NIL) under U.S. GAAP is
not recorded under Canadian GAAP. In addition, the recording of the
available-for-sale securities at their fair values (June 1, through August 31,
2003  a loss of $10.0 million, Predecessor Company  September 1, 2002 through
May 31, 2003  $13.8 million, August 31, 2002
 $4.6 million, August 31, 2001  $0.9 million) is not recorded under Canadian GAAP.



|(e) |  | Fresh Start accounting adjustments
|--- |  | ----------------------------------

As of June 1, 2003, the Company followed the guidance of SOP 90-7 and similar
guidance under Canadian GAAP. The guidance in both countries required the
Company to adjust its assets and liabilities to their estimated fair values as
of June 1, 2003. However, under Canadian GAAP, when the fair value of the
enterprise as a whole exceeds the revalued net asset value, the difference
(allocated to goodwill under U.S. GAAP) is not recorded. As a result, the
$183.1 million of goodwill recorded under U.S. GAAP is not recorded for
Canadian GAAP. Pursuant to the guidance, the net effect of all fresh start
accounting adjustments and the gain on discharge of debt is to be recorded
directly through the Predecessor Companys deficit account on the consolidated
statement of deficit for Canadian GAAP and recorded through the consolidated
statement of operations for the period September 1, 2002 through May 31, 2003
for U.S. GAAP. On June 1, 2003, under Canadian GAAP, this resulted in positive
adjustment through the Predecessor Companys deficit account totalling $658.9
million. Under U.S. GAAP, this resulted in a fresh start accounting adjustment
of $609.6 million and a gain on discharge of debt of $1,482.8 million.

F-59



---



##### Table of Contents



To the Shareholders of
Laidlaw International, Inc.

We have audited in accordance with generally accepted auditing standards in the
United States, the Laidlaw International, Inc.consolidated balance sheets as
at August 31, 2003 and June 1, 2003 and the related consolidated statement of
operations, shareholders equity and cash flows for the period from June 1,
2003 to August 31, 2003. These financial statements are included in the
Laidlaw International, Inc. and subsidiaries Form 10-K, and we have issued our
report thereon dated November 18, 2003. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The Valuation and
Qualifying Accounts Schedule is the responsibility of the Companys management
and is presented for purposes of complying with the Securities and Exchange
Commissions rules and is not part of the basic financial statements. The
Valuation and Qualifying Accounts Schedule for the period from June 1, 2003 to
August 31, 2003 has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statement taken as a whole.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chartered Accountants
Mississauga, Ontario
Date: November 18, 2003

To the Directors and Shareholders of
Laidlaw International, Inc.

We have audited in accordance with generally accepted auditing standards in the
Unites States, the Laidlaw Inc.consolidated balance sheet as at August 31,
2002 and the related consolidated statement of operations, shareholders equity
and cash flows for the period from September 1, 2002 to May 31, 2003 and the
two years in the period ended August 31, 2002. These financial statements are
included in the Laidlaw International, Inc. and subsidiaries Form 10-K, and we
have issued our report thereon dated November 18, 2003. Our audit was made
for the purpose of forming an opinion on those statements taken as a whole. The
Valuation and Qualifying Accounts Schedule is the responsibility of the
Companys management and is presented for purposes of complying with the
Securities and Exchange Commissions rules and is not part of the basic
financial statements. The Valuation and Qualifying Accounts Schedule for the
period from September 1, 2002 to May 31, 2003 and for the years ended August
31, 2002 and August 31, 2001 has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statement taken as a whole.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chartered Accountants
Mississauga, Ontario
Date: November 18, 2003

S-1



---



##### Table of Contents



Schedule II

LAIDLAW INTERNATIONAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
($ millions)

Additions
    
    
    
    
    
    AmountsBalance at
    
    charged to
    
    Net
    
    written off
    
    
    
    
    
    Balancebeginning
    
    costs and
    
    (disposed)
    
    net of
    
    
    
    
    
    at end ofof Period
    
    expenses
    
    acquired
    
    recoveries
    
    Other (1)
    
    PeriodPredecessor CompanyYear ended August 31, 2001Allowance for doubtful
accounts (2)
    
    $
    509.4
    
    
    
    1,318.5
    
    
    
    
    
    
    
    (1,289.0
    )
    
    
    
    
    
    $
    538.9Deferred income tax asset
valuation reserves
    
    
    703.8
    
    
    
    91.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    795.0Year ended August 31, 2002Allowance for doubtful
accounts (2)
    
    $
    538.9
    
    
    
    1,391.4
    
    
    
    
    
    
    
    (1,457.1
    )
    
    
    
    
    
    $
    473.2Deferred income tax asset
valuation reserves
    
    
    795.0
    
    
    
    (34.3
    )
    
    
    
    
    
    
    85.5
    
    
    
    
    
    
    
    846.2September 1, 2002 through
May 31, 2003Allowance for doubtful
accounts (2)
    
    $
    473.2
    
    
    
    794.0
    
    
    
    
    
    
    
    (757.0
    )
    
    
    0.1
    
    
    $
    510.3
    *Deferred income tax asset
valuation reserves
    
    
    846.2
    
    
    
    (50.6
    )
    
    
    
    
    
    
    (482.0
    )
    
    
    
    
    
    
    313.6
    *Laidlaw International, Inc.June 1, 2003 through
August 31, 2003Allowance for doubtful
accounts (2)
    
    $
    510.3
    
    
    
    454.0
    
    
    
    
    
    
    
    (430.8
    )
    
    
    
    
    
    $
    533.5Deferred income tax asset
valuation reserves
    
    
    313.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    313.6




---

|* |  | June 1, 2003  Fresh Start Balance
|- |  | ----------------------------------

Notes



|(1) |  | Primarily represents the effect of exchange rate changes on asset
balances over the periods indicated.                                        
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes the allowance for uncompensated care and contractual
allowances of the Predecessor Companys and the Companys healthcare
businesses.

S-2



---



##### Table of Contents





| |  | Exhibit Index
| |  | -------------



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



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



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



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



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



| | 4.1 |  | Rights agreement, dated as of June 23, 2003, by and between Laidlaw
International, Inc. and Wells Fargo Bank Minnesota, National
Association, as rights agent (filed as Exhibit 4.3 to the Form 8-K
filed on July 9, 2003 and incorporated herein by reference).
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.2 |  | Indenture dated as of June 3, 2003 between Laidlaw International,
Inc. and Deutsche Bank Trust Company Americas, relating to the 10
3/4% Senior Notes due 2011 (filed as Exhibit 4.1 to the Form 10-Q
for the quarter ended May 31, 2003 and incorporated herein by
reference).
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.3 |  | First Supplemental Indenture, dated as of June 18, 2003 between
Laidlaw International, Inc. and Deutsche Bank Trust Company Americas
(filed as Exhibit 4.2 to the Form 10-Q for the quarter ended May 31,
2003 and incorporated herein by reference).
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.4 |  | Indenture, dated April 16, 1997, by and among Greyhound Lines, Inc.,
the Guarantors and PNC Bank, N.A., as Trustree (filed as an exhibit
to Greyhound Lines, Inc. Registration Statement on Form S-4
regarding the Greyhound 11 1/2% Series B Senior Notes and
incorporated herein by reference).
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.5 |  | First Supplemental Indenture dated as of July 9, 1997 between
Greyhound Lines, Inc. and PNC Bank, N.A. as Trustee (filed as an
exhibit to Greyhound Lines, Inc. Form 10-K for the year ended
December 31, 2002 and incorporated herein by reference).
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.6 |  | Second Supplemental Indenture dated as of August 25, 1997 between
Greyhound Lines, Inc. and PNC Bank, N.A. as Trustee (filed as an
exhibit to Greyhound Lines, Inc. Form 10-K for the year ended
December 31, 2002 and incorporated herein by reference).
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.7 |  | Third Supplemental Indenture dated as of February 1, 1999 between
Greyhound Lines, Inc. and Chase Manhattan Trust Company as Trustee
(filed as an exhibit to Greyhound Lines, Inc. Form 10-Q for the
quarter ended June 30, 1999 and incorporated herein by reference).
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.8 |  | Fourth Supplemental Indenture dated as of May 14, 1999, between
Greyhound Lines, Inc. and Chase Manhattan Trust Company as Trustee
(filed as an exhibit to Greyhound Lines, Inc. Form 10-Q for the
quarter ended June 30, 1999 and incorporated herein by reference).
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.1 |  | Laidlaw International, Inc. Equity Incentive Plan (filed as Exhibit
10.1 to the Form 10-Q for the quarter ended May 31, 2003 and
incorporated herein by reference).*
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.2 |  | Laidlaw International, Inc. Supplemental Executive Retirement Plans.*
| | ---- |  | ---------------------------------------------------------------------



| | 10.3 |  | Credit Agreement dated as of June 19, 2003 among Laidlaw
International, Inc., and others, as Borrowers and the financial
institutions named therein (filed as Exhibit 10.3 to the Form 10-Q
for the quarter ended May 31, 2003 and incorporated herein by
reference).
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.4 |  | Amendment dated as of June 26, 2003 to the credit agreement dated as
of June 19, 2003 (filed as Exhibit 10.4 to the Form 10-Q for the
quarter ended May 31, 2003 and incorporated herein by reference).
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.5 |  | Agreement made as of June 18, 2003 between Laidlaw Inc. and others
and the Pension Benefit Guaranty Corporation (filed as Exhibit 10.5
to the Form 10-Q for the quarter ended May 31, 2003 and incorporated
herein by reference).
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.6 |  | Tax sharing agreement among Laidlaw International, Inc. and its U.S.
subsidiaries entered into as of June 23, 2003.
| | ---- |  | -------------------------------------------------------------------------------------------------------------------



| | 10.7 |  | Employment agreement between Kevin E. Benson and Laidlaw Inc.
effective the 16th day of September, 2002.*
| | ---- |  | ---------------------------------------------------------------------------------------------------------



| | 10.8 |  | Change in Control Severance Agreement between Kevin E. Benson and
Laidlaw Inc.*
| | ---- |  | -------------------------------------------------------------------------------





---



##### Table of Contents





| | 10.9 |  | Employment agreement between Douglas A. Carty and Laidlaw Inc.
effective the 9th day of December, 2002.*
| | ---- |  | --------------------------------------------------------------------------------------------------------



| | 10.10 |  | Change in Control Severance Agreement between Douglas A. Carty and
Laidlaw Inc.*
| | ----- |  | --------------------------------------------------------------------------------



| | 10.11 |  | Employment agreement among Laidlaw Inc., American Medical Response,
Inc. and EmCare Holdings, Inc. and William A. Sanger effective
October 1, 2002.
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.12 |  | Employment agreement between EmCare Holdings, Inc. and Don S. Harvey
effective April 1, 2003.
| | ----- |  | ---------------------------------------------------------------------------------------------



| | 10.13 |  | Amended and Restated Loan and Security Agreement among Greyhound
Lines, Inc., as Borrower, the financial institutions named as
lenders, and Foothill Capital Corporation as Agent, dated as of May
14, 2003 (filed by Greyhound Lines, Inc. as a current report on Form
8-K dated May 21, 2003 and incorporated herein by reference).
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 21.1 |  | Subsidiaries of the registrant.
| | ---- |  | -------------------------------



| | 24.1 |  | Powers of Attorney.
| | ---- |  | -------------------



| | 31.1 |  | Principal Executive Officers Certifications Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
| | ---- |  | -------------------------------------------------------------------------------------------------------



| | 31.2 |  | Principal Financial Officers Certifications Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
| | ---- |  | -------------------------------------------------------------------------------------------------------



| | 32.1 |  | Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of
Sarbanes-Oxley Act of 2002)
| | ---- |  | --------------------------------------------------------------------------------------



---

|* |  | Management contract or compensatory plan.
|- |  | -----------------------------------------