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

RE:CapEx is growth focused

[ffhwatcher3]

Why are you making this so hard and ignoring the obvious.  Read the most recent annual reports and MD&A that goes along with it.  They spend almost $46M on replacement capex this past July and August alone.  At $70k/bus, that is almost 700 new replacement buses just to replace 700 old buses, all on existing routes under existing contracts.

They have about 13,000 buses that last just under 13 years. Going fwd, they will eventually need to replace 1/12 of their fleet annually which is just over 1,000 buses/yr.  At $70k/bus that is about $70M per year of replacement capex.  If they replaced their entire fleet with new buses at $70k per bus, that is about a $900M fleet but let's assume their median age is about half way (aka 6 years old) and worth about half of the original purchase price or $35k/bus which makes the fleet worth $450M or so.  

This is a capital intensive business and 10 years ago they only had 3,000 buses, so their replacement needs 'lag' the current size of the business but make no mistake, the future replacement capex is real and growing and will catch up.  The market and short sellers are concerned that if you pay out the depreciation on assets that are truly depreciating and need to be replaced, and you have no net income to speak of, where are you going to get the $$?  Currently, leasing is the ticket but their annual lease expenses are snowballing, and most recently they decided to purchase vs. lease which is a big change, imo.