STUDENT TRANSPORTATION INC 5.25 PCT DEBS T.STB.DB.A

RE:RE:Spreadsheet on 6 yrs leasing + 6 yrs buying out leases

[ffhwatcher3]

A few things.
1/ We are on the same page. 1000 buses newly leased/yr, 1000 coming off lease each year that need to be purchased and 1000 buses need to be retired for minimal $$.
2/ I seperate their existing business with their new business.  For now, we/I will have to assume new business is at least cash flow neutral.  I am just trying to analyze their existing 12,000+ or so buses and look to maintain this fleet and try to see if that is financially sustainable (or if they are underspending here, in which case they will have to cut their dividend eventually).  Hence the 1000 buses get taken off each year and thus 1000 new buses need to get leased each year and in the middle (after year 6), 1000 (existing) buses need to go from being leased/off balance sheet to being purchased (added to balance sheet, balance sheet depreciation starts after year 6 after moving from leasing to owned.
3/ I assumed 1000 new buses are $8.4M/yr. (I took the avg price from the latest financial statements/conference call, calculated the cost per year per bus and multiplied by 1000 but I have also come up with just over $10M, not sure where I am off here but it is close.)
4/ I assumed they purchased 1000 buses at the end of year 6 for $15,000/ea ($15M) and had to finance the entire amt. A $3-4M annual expense amortized over the remaining 6 years is added but the $8.4M lease payment stops (on those 1000 buses, but restarts on 1000 new ones.).
5/ ($8.4-10M x 6yr) + ($4M x 6yr) = $74.4M-84M is the approx. cost to keep a fleet of 12k buses going.  Obviously, maintenance is higher on old buses and less on newer buses but you can avg. it over the entire fleet. That is a current expense.
6/ Each $70k bus costs about $9k-10k/yr to lease and if you buy it out for $15k, that equats to about $3-4k/yr if you amort. it over 6 years.  

Then the question is, if we can ignore growth vehicles for a minute, can STB afford to cash flow $74-84M/yr in vehicles to maintain what they have?  The growth numbers are making it difficult for me to get a sense of this, as they don't have to retire 1000/yr or buy 1000/yr to maintain what they have because 6 and 12 years ago, they didn't have a 12,000 bus fleet.