Laidlaw Inc Case Study Discussion For a successful case write up, you will need the following: Case papers should address the key issues that pertain to t

Laidlaw Inc Case Study Discussion For a successful case write up, you will need the following:

Case papers should address the key issues that pertain to the financial strategy and then make clear recommendations with as much support as possible.
Papers should beno more than three double-spaced pages (not including exhibits) and include a cover page with your name, the date, the course number, and the title of the assignment (case name).
Papers should be organized into specific sections. For example, Background, Key Issues, Recommendations with support. Keep the Introduction short and don’t be so quick to jump to the recommendation. If the issues are wrong, the recommendation can’t be correct.
Late Papers will not be accepted.
Your grade will depend on how well you identify the issues and argue your recommendation.
All Footnotes and References Must use the APA Format.
The answer is not on the internet. You may use the internet for additional background and information, but I don’t care what the company actually did. All that really matters is in the case.

Remember that you only have three double-spaced pages for text. If you wish to use charts or financial analysis to support your recommendation, use an exhibit. Don’t waste space and put it in the text. Case study
Reference no 201-006-1
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This case was written by John D Sullivan,Boston University.It is intended to be
used as the basis for class discussion rather than to illustrate either effective or
ineffective handling of a management situation.The case was compiled from
published sources and generalised experience.
© 2000,JD Sullivan,Boston University.Revised 2004.
No part of this publication may be copied,stored,transmitted,reproduced
or distributed in any form or medium whatsoever without the permission
of the copyright owner.
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Laidlaw,Inc
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Laidlaw, Inc.
Founded in 1924, Laidlaw had run solid for almost 75 years. But in 1999, the
atmosphere changed for the Canadian corporation. Under an aggressive acquisition
strategy that consumed the 1990s, along with growth in revenue came a heavy burden of
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long-term debt surpassing $3.1 billion.
What had once been a profitable company
reporting Net Income of $346 million in 1998 had experienced a reversal of fortune. For
fiscal year ending August of 1999, Laidlaw’s Net Income plunged to ($1.1) billion and
for the nine months ending May of 2000, Net Income fell further to ($1.9) billion.1
As a short-term measure, management negotiated with bondholders to receive
sufficient consents to permit certain subsidiaries to enter into secured banking
agreements. The financing arrangements would provide a revolving line of credit in an
amount up to $150 million with a letter of credit in amount up to $50 million from a
group of financial institutions led by Canadian Imperial Bank of Commerce. In addition,
a revolving line of credit would be available up to $125 million with a credit sub-facility
in an amount up to $25 million for Greyhound Lines, Inc. from Foothill Capital
Corporation, a wholly owned subsidiary of Wells Fargo.
?copyright 2000 – John D. Sullivan
This case was written to stimulate class discussion and analysis and is not a critique of an effective or
ineffective management situation.
1
Laidlaw – Investor Relations. www.laidlaw.com/laidlaw/investors/hls_three.html
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Background
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The consent agreement, announced on October 25, 2000 in Dallas, Texas, only
provides Laidlaw and Greyhound with a short-term solution to their financial problems.
For the company to survive, it will need to implement a solid restructuring plan.
The Company
Laidlaw Inc. serves as a holding company and through operating its subsidiaries,
throughout North America. Founded in 1924 by Robert Laidlaw, the company had built
a reputation for waste management. But by the early 1990’s, through an acquisition and
divestiture strategy (exhibit 1), the company became recognized for the yellow school
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buses that hold its name. Under the leadership of James Bullock, the company sold off
non-core holdings and diversified into health care with the acquisition of American
Medical Response for approximately $1.1 billion in 1997. That same year, Laidlaw
added to its health care portfolio with the purchase of EmCare, an emergency room
manager, for $400 million. Adding to the company’s investment in waste management,
Laidlaw purchased Safety-Kleen, a company specializing in hazardous waste
management, in 1998 for $2 billion.
Under the umbrella of its core transportation business, Greyhound Canada was
acquired in 1997. To compliment this merger, Laidlaw followed with the purchase of
Greyhound Lines Inc., in 1999 for $800 million. Greyhound is the only nationwide
provider of scheduled inter-city bus transportation services in the United States.
In the last three fiscal years, the percentage of revenue generated by the United
States Operations has been 87.2%, 83.2% and 86.0%, respectively. The company intends
to continue to expand throughout North America in each of its core businesses.2
2
Laidlaw Inc., Securities and Exchange Form 10K. August 1999.
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provides essential and specialized services dedicated to the transportation of people
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Education Services
Laidlaw operates school buses and special education vehicles, primarily under the
names Laidlaw Transit, Mayflower Contract Services, and National School Bus Services
in the United States. In Canada, Laidlaw operates school buses under Laidlaw Transit
and Charterways. Although Laidlaw purchased seven education service businesses in
1999, revenue growth was primarily attributable to price and volume growth including
Laidlaw currently operates under 1,072 school boards in the United States and 61
in Canada providing transportation for approximately 2.3 million students each day.
Contracts in the United States are generally three to five year agreements with options by
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the school board to extend the contracts or solicit new bids. In Canada, most contracts
are one-year agreements and negotiated or renewed annually.
Rates are usually
established on a per-diem basis and vary with the number of buses and students and
length of each route. In addition to the transportation of students, the school bus fleet is
also utilized for charters.
Education
services
employs
approximately
46,500
people
to
provide
transportation services of which 2,800 provide executive, supervisory, clerical, and sales
functions. Nearly 41,200 are considered part-time employees and approximately 47%
are members of collective bargaining groups. The management of this division believes
that management and work force have an excellent working relationship.
Transit and Tour Services
Laidlaw had acquired Greyhound Lines, Inc. during fiscal 1999 and had
previously acquired Greyhound Canada Transportation Corp. in October 1997.
Greyhound serves the “value-oriented” customer by offering scheduled passenger service
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route additions and higher pricing on under performing contracts.
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that connects rural and urban markets throughout the United States and Canada with
3,700 destinations, 20,000 daily departures, and a fleet of approximately 2,500 buses.
Greyhound also provides package express service, charter bus service, and in many
terminals, food service.
The company also provides services to municipal transit
customers through 225 contracts in the United States and Canada. Additional services
include para-transit services providing access to transportation for mobility impaired
tourist regions of the United States and Canada.
Approximately 24,800 people are employed to provide transit and tour services.
Of these employees, 3,400 persons serve executive, supervisory, clerical, and sales
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functions. Nearly 5,400 employees are considered part-time and 9,900 are members of
collective bargaining agreements. The Amalgamated Transit Union or ATU, represents
5,000 of Greyhound’s employees. The largest ATU agreement, which covers drivers and
mechanics, expires on January 31, 2004.3
Greyhound’s business is seasonal in nature and tends to peak during the summer
months and major holidays. As a result, cash flows experienced by the company also
tend to be seasonal.
Major Competitors in Education and Transit Services
Although Laidlaw is the largest school bus company and special education
transport operator in North America, it competes directly with other large companies and
a substantial number of small local operators including school districts and other
municipalities that operate their own education transit system. When contracts with
3
Laidlaw Inc., Securities and Exchange Form 10K. August 1999.
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individuals, scheduled services under private contracts, and package tours to major
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school boards expire, competition for extensions or new contracts is most prevalent in the
areas of pricing and service.
The transportation industry is highly competitive and includes individual
automobile usage, low cost air travel, regional bus companies, and the train system.
Greyhound competes in this industry based on cost and convenience.
The largest bus charter service and the second largest bus company in the United
States, Coach USA is operating under the restructuring plan of its United Kingdom
parent Stagecoach Holdings. Coach USA provides airport ground transportation and
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daily routes to special destinations for commuters. The company’s fleet consists of 9,500
buses, taxicabs, mini-coaches, and shuttle buses. Like Laidlaw, the company has fueled
its rapid expansion through acquisitions and now operates in 35 states in the United
States and throughout Canada.
First Group Plc.
First Group Plc., smaller than both Coach USA and Laidlaw, has taken advantage
of Britain’s deregulation of the bus, coach, train, and airport industries. The company
operates several rail lines in the UK and owns a 51% stake in the Bristol International
Airport. As with Coach USA and Laidlaw, much of the company’s growth has been
achieved through acquisitions. One acquisition in particular, Ryder’s bus division, has
brought the company to the United States.
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Coach USA Inc.
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National Railroad Passenger Corporation (Amtrak)
National Railroad Passenger Corporation, or Amtrak, carries approximately 21
million passengers each year and operates 22,000 miles through 45 states in the US. A
large “for-profit” company that has rarely been profitable receives subsidies through the
United States federal government to ensure its operation. To lure passengers away from
the lucrative shuttle flights on the East Coast, Amtrak has constructed a high-speed rail to
Southwest Airlines
Southwest Airlines has expanded its low cost, no frills, and no reserved seats
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approach to air travel to serve more than 55 cities and 29 states in the US. To curb
maintenance and training expenditures, the airline uses only Boeing 737s and currently
uses approximately 320 planes. To trim back office expenditures, Southwest offers
ticketless travel and operates its own reservation system.
As part of the airlines
expansion plans, Southwest has increased its routes throughout the East Coast and
continues to thrive with its highly participative corporate culture and 27 years of
profitability.
Emergency Health Care Services
Laidlaw provides healthcare transportation services, primarily under the name
American Medical Response, and emergency room management services under the name
EmCare. In 1999, the company had announced plans to divest both of these operations.
The company provides health care transportation services from locations in 36
states in the United States and also operates in Ontario, Canada. These services consist
of critical care transportation services, non-emergency ambulance and transfer services,
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open in 2000.
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and emergency response services. Annually, the company provides approximately five
million ambulance responses and has more than 200 agreements with municipal or
country public safety agencies to provide performance-based contracts for 911 responses.
The company also provides comprehensive on-site medical care and transport services
for all types of special events.
Laidlaw also offers physician practice management services to hospital based
and arranges contracts and schedules for their services. The company also assists in such
operational areas as staff coordination, quality assurance, departmental accreditation,
billing, record keeping, third party payment, and other administrative services.
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Currently, Laidlaw has approximately 300 contracts for the management of emergency
room departments and provides emergency services in 36 states to more than 5 million
patients.
As a result of poor financial performance, Laidlaw announced in March 1999 that
approximately 2,200 positions or 10% of this division’s workforce would be eliminated.
Under the restructuring plan, under performing locations would be closed or sold.
As of fiscal year end 1998, Laidlaw employed approximately 24,500 employees
in the health care division.
Of these, 5,200 employees are executive, clerical,
supervisory, and sales. 5,900 employees are considered part-time and approximately
53% are members of collective bargaining agreements.
Major Competitors in Health Care Services
Laidlaw is the largest provider of health care transportation services in the United
States and competes both with large companies and a substantial number of smaller
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emergency departments. The company recruits physicians, evaluates their credentials,
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operators. The primary competition with the renewal or extension of contracts is based
on price and service performed.
Emergency physician practice management is also emerged in heavy competition.
Competition for these contracts is usually based on cost and the ability to make
physicians available as needed. In addition, competition is also based on maintaining the
proper utilization and communication between the emergency room and other
American Medical Alert Corp.
American Medical Alert offers medical dispensing devices and fire burglar alarm
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monitoring. Nearly 95% of the company’s sales come from monthly fees for leasing and
monitoring its emergency response systems and other equipment. Primary customers for
the service include individuals, hospitals, retirement homes, and the City of New York’s
Homecare Service Program.
Community Medical Transport, Inc.
Community Medical Transport provides medical transportation offering
ambulance services for patients that require basic medical care or supervision during
transport to or from hospitals, nursing homes in the New York metro area.
Rural Metro Corporation
Rural Metro provides ambulance, fire protection, and other safety related services
to municipal, residential, commercial, and industrial customers in the United States. The
large health care ambulance provider, second only to American Medical Response,
responds to emergence calls and offers non-emergency transport between health care
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departments within the hospital.
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facilities. Fees collected for ambulance services account for more than 80% of sales.
The company also provides municipal and commercial fire fighting services and provides
training for fire fighters for industrial manufacturing facilities. Rural Metro operates in
more than 450 communities in 26 states, Canada, and South America.
Med-Emerg International, Inc.
industry. The company is divided into three primary divisions: Physician and Nurse
Recruitment Services, Physician Management Services, and HealthyConnect.com, an
online health care network. Med-Emerg International, Inc. owns clinics offering services
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such as family practice, emergency care, chiropractic care, massage therapy, Chinese
medicine, and family counseling. The company also provides short-term physician and
nurse staffing and administrative support to emergency room departments and hospitals.
The company’s web site is designed to link patients, physicians, and service providers.
PhyAmerica Physician Group, Inc.
PhyAmerica Physician Group, Inc. provides contract physicians primarily to
emergency rooms to approximately 270 hospitals, government agencies, the military, the
Veterans Administration, and correctional facilities. The company has refocused its
attention to its main core contract business divesting businesses such as its HMO.
Other Business Segments
As of August 1999, Laidlaw owned approximately 44% of the shares of common
stock of Safety-Kleen Corp. Safety-Kleen provides industrial waste services designed to
collect, process, recycle and dispose of hazardous and industrial waste to more than
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Med-Emerg International, Inc. is emerging as a player in Canada’s medical
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400,000 companies through over 200 locations. These services include collection and
recovery services, provided to industrial, commercial and institutional customers and
treatment and disposal services, defined by the technologies employed such as thermal
treatment, landfill, and specialty services. On September 13, 1999, Laidlaw announced
its plan to actively seek a buyer for its interest in Safety-Kleen.
In addition to financial under performance, Safety-Kleen has received several
irregularities and may have misled investors. Following the suits, the company hired
Lazard Freres & Co LLC for financial advice. In the meantime, three top executives
were suspended in May 2000 as a result of the accounting irregularities and n…
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