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

STB's value is largely off books

[Capharnaum]

The assets that let them make cash flow are off-books. The value of the shares reflect the revenue streams they get.

How much are worth all the contracts they have that generate cash flow? They're worth 4x-6x the cash flow provided, even if there's no assets directly on the balance sheet.

Off books assets are only a problem when they're not generating free cash flow, which is not the case for STB.

As to the dilution talks, well free cash flow per share has actually grown over time. This imo is the most important measure for this company.

[goldsternp]

Do you mean the fully depreciated buses that are still running ?

[Capharnaum]

What I mean is that when they have a contract that runs on leased buses, they generate cashfow. Let's say the contract is for 10 years with a 90% chance of extending it to 20 years. Including the lease and all costs, the contract will generate earnings of $10M for the first 10 years and then $20M for the next 10 years. In total, over 20 years, the contracts are likely (90%) to generate $30M.

[Capharnaum]

And just to be clear, despite my view on this stock, I don't own shares. Reason I don't own shares is that the stock is too volatile with the high dividend payout and the constant attacks from people that don't understand where the value of STB lies.

[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

[goldsternp]

We are both at the mercy of the spell checker which changed "" to "sum" for me and "defer" to "differ" for you.

[goldsternp]

The spell checker is nuts as it deleted "some" and posted ""

[BlueCollar51]

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

[goldsternp]

25% of the fleet are leased. The leases are operating leases, not capital leases so  the lease payments are expensed but they can't take any depreciation because they haven't capitalized the buses. When the leases are bought out, the buses can be depreciated on the buyout price, not the market value. Maybe the difference between buyout price and market value can go to Goodwill and

[BlueCollar51]

The following is from the 2014 AIF found on SEDAR. It explains the difference between Leasing (expensing) the busses compared to Purchasing (depreciating) busses.   We continue to focus on our managed and leased fleet. As of our most recent fiscal year-end, leased and managed vehicles represented approximately 23% of revenue vehicles. Managed services contracts and leased vehicles require

[Capharnaum]

I haven't ran depreciation numbers, but the only reason it would make sense to lease busses would be if the lease cost is greater than the depreciation. That would mean more expenses per year which can then be reversed when they acquire the busses cheaper. They also don't have to support the capital for leased busses in the meantime (which means less distributions to be paid, which aren

[BlueCollar51]

You said that the FCF per share has been increasing over time which I agree would be positive. I decided to check that out. I may be using the wrong numbers and if so please correct me. I used;   FCF = “Net cash provided by operating activities” from the YE Financials SHARES = “Weighted-average shares outstanding-basic” from the YE Financials   Assuming I am using the correct numbers the

[Capharnaum]

I'm sorry I only looked back to2012 number as base and compared 2015. Looking at 2009, it looks like something happened until 2012 (reduced margins to win contracts?).