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

RE:RE:RE:STB's value is largely off books

[goldsternp]

Could be that you understand the accounting better than I do because I don't understand how leasing can shelter  income.

Lease payments are cash payments of $29 million per year and are  an operating expense. I estimate revenues from the leased buses are $150 million/yr (25% revenue) so there is $120 million left before other operating expenses and with sum luck, a profit. When the lease term ends, the company owns buses which do not appear as equity and they can't be depreciated but they will generate taxable income.

The owned buses have a book value of around $230 million and are being depreciated at $47 million per year, thereby essentially sheltering the $33 million dividend "income" from taxation and p reducing equity  by $14 million.

Way I see it, in 5 years STB could own 13000 buses that will work for another 5 years with no depreciation, no lease payments, no amortization and no interest expenses all of them generating cash and taxable income. Hopefully, the income/cash flow after taxes will be sufficient to maintain the status quo if not better ?

I don't understand your explanation for commenting from the side lines due to the risk. Do you hold investments that are less risky than a school bus company with 5-10 year contracts?