"Go Greyhound, and leave the driving to us," said busing titan Laidlaw (NYSE:LI).

"Thanks, but we'll drive ourselves, and we'll leave the shares with you instead," replied Mr. Market on Friday, as investors dropped shares of Laidlaw nearly 5% on news of a weaker-than-expected quarter.

In a quarter that CEO Kevin Benson termed "solid," Laidlaw saw revenues increase 1% even as profits collapsed 14%. According to management, there were several factors at work here. For one thing, last year the firm benefited from an increase in passenger use of its Greyhound buses as they fled a Katrina-battered New Orleans -- that element was happily missing from this year's first-quarter results. For another, the firm enjoyed 8% revenue growth in school busing -- growth that failed to produce better profits only because Laidlaw invested substantially in that side of the business, hoping to boost its margins in the future.

Also at work were price increases and "network changes instituted to improve operating efficiencies and profitability" at Greyhound. If I'm reading between the lines correctly here, that translates as: "We hiked prices, and changed routes and schedules, and in the process we scared a lot of riders away."

You go, Greyhound
So it sounds like Laidlaw goofed at Greyhound last quarter, but I'm less concerned about the performance of the firm's school-bus business. Already, the education segment produces three-quarters of Laidlaw's revenues, and is its strongest-margin segment by far (more than twice as profitable as Greyhound, for example). If the firm wants to make investments now in order to boost the profitability of its flagship business even further, I'm all for that.

But I it find most concerning that the firm ran more than twice as much free cash flow-negative ($178 million) in Q1 2007 as in Q1 2006 ($74 million); and capital expenditures, presumably the same ones made to improve the school bus business, were only part of the problem. Before you even get to the capex line on the cash flow statement -- available in the 10-Q filed Friday -- you'll see that Laidlaw burned three times as much in operating cash flow this year ($48 million) as last.

"Solid" as management thinks those numbers may be, in this Fool's view, they're nothing to boast about.

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Fool contributor Rich Smith does not own shares of any company named above.