RE:RE:RE:RE:RE:RE:RE:Dennis on BNNThey issued equity and raised $69.1M and paid down $70M in debt. <br /> They hardly, if any, used any cash from operations.<br /> Denis said they paid down debt but he didn't say they did it with free cash flow.<br /> They bought back about $900,000 worth of shares. Not very significant but it is something.<br /> <br /> What was interesting and what helped me understand the company even more, is understanding that the company plans to spend about $50M on maintenance capex on buses. They don't have the cash so they using operating leases. This $50M liability does not show up on the balance sheet as it is an off-balance sheet transaction. At $60,000/bus, it represents approx. 833 new buses to replace buses that are 12-15 years old that they dispose of. <br /> <br /> As STB matures, with their current fleet of about 12,500 buses, that last about 12-13 years, they will need to replace about 1,000 buses/year ($60M in new bus purchases) just for maintenance capex. At $60M, this equates to about $8M/yr in payments. The leases last 6 years, so each year they will have a new $8M payment x 6 years ($48M/yr by the end of the 6th year).<br /> At the end of the 6th year, they buy out the lease (at a favourable price by the sounds of things at about 25% of the original purchase price which was about $60k. That is $15k per bus x 1000 buses which equals a $15M cheque. This past year it was $1M, next year it is going to be $3M and it will ramp up until 2021 when it should be $15M. This is just starting to flow their financial statements and bus as they really started to ramp up their leasing 6 years ago but they were a much smaller company then with 6,300 buses. <br /> So their annual lease payments are starting to crest soon. They should crest at around $48M and I think they will be about $37M for 2016. <br /> Be prepared for escalating annual lease payments as well as escalating lease buyout payments, which I assume they will have to use debt for the latter.<br /> Remember, each year to replace 1000 buses, that will cost almost $60M and the leases last for 6 years. 6 years of $60M purchases = $360M...none of it on the balance sheet. <br /> Last year STB also saved cash flow of $8.5M due to the DRIP program but they issued shares instead and at a 10%+ yield, that is $850,000 in new annual dividend payments on those shares. It is a virtuous cycle and they are cutting it pretty close by all measures that I see. <br /> Without the price of oil going down and without a 20% participation rate in their DRIP, their payout ratio would be 85-90% and then add in that they need to get $6-8M in new lease payments/year just to maintain their fleet, their cash flow is quite tight. <br /> <br /> Razor thin from what I can see (hopefully my numbers are off) but good on them for sticking to their dividend policy. <br /> Based on the low share price, what about cutting their $40M dividend in half and issue a $20M cash dividend and use the other $20M to buy back shares annually? Does that make sense?<br /> <br /> <br /> <br />