RE:RE:RE:RE:STB's value is largely off booksgoldsternp wrote: 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?
My numbers will probably be a bit off but I believe that they have told us that abt. 20% of the current fleet is leased.
The leased busses are depreciated aggressively over the term of the lease. When the leases expire Student Transportation DOES NOT own the busses. They have the “OPTION” to purchase them for cash. When they purchase them for cash it is at a discount to market value. They will be booked as assets at their market value and then they will run them and depreciate that amount over another 6 years or so. (I am not exactly sure how that depreciation works). At the end of the average 12 – 13 year useful lifespan of a buss some of them will be retired and the better ones will be kept in service for a bit longer or used for spares.
As per the 2014 AIF that can be found on SEDAR the busses that they have Bought New are depreciated over an 11 year period. Denis said on the conference call that the 2015 AIF will be filed on SEDAR at the end of September. For some reason they don’t make the AIFs available on their website.
As Denis mentioned on the conference call due to the different climate conditions etc. the maintenance costs and useful lifespan of a buss varies considerably in different areas of their operations. He compared the NE US to California. He also said that New Jersey was the only State that has a mandatory maximum age for School Buses of 15 years and they adhere to that in New Jersey.
Every year they will retire some busses, acquire some new buses, acquire some busses that they will need to replace by acquiring companies, and some leases will expire and they will probably buy those busses for cash.
I believe that the average age of the current fleet is abt. 6 years or less. (5.8 at June 30 2014 as per the AIF). In any given year the percentage of 12 year and older busses in the fleet will be small. The only way that could change would be for them to stop growing the business.
As Always; Do Your Own Due Diligence; It’s Your Money !! PS; The above is the result of the DD done by someone who was a shareholder from June 2009 – January 2015 that does not according to some understand Student Transportations business model.