As kids start heading back to class, at least one school bus company is optimistic about growth in the student transportation industry. Denis Gallagher, founder and CEO of Student Transportation Inc. (STI), discussed the expanding role of school bus contractors on PBS’ “Nightly Business Report” Aug. 15.
Currently about two-thirds of school districts nationwide operate their own bus fleets. Yet, as more districts struggle to increase revenue and close budget holes, an increasing number are moving to outsource their transportation services.
“If school districts want to raise money, they’ve got to raise taxes, so we can look at this from a different perspective. We can go in and make investments into communities,” said Gallagher, who 15 years ago started the company that is now the nation’s third-largest school bus contractor. “We can literally buy the fleet, put teachers back in the classrooms [and] put programs back.”
Today STI operates in 16 states and Canada, transporting roughly 600,000 students a day. Gallagher has grown the company through acquisitions, buying up more than 30 mom-and-pop operations. Three years ago he bought Jordan Transportation in Butler, N.J., which Art Jordan founded in 1957 with four school buses. His son, Mark Jordan, is president and runs the company for STI.
Jordan emphasized that STI brought benefits to the table, including purchasing power and extra logistics, the company did not have before. Another advantage is having newer school buses equipped with the latest technology. While the average American school bus is about 10 years old, STI’s buses tend to be about half that age.
“It really is a beautiful blend between the family-run branding name that happens on the local level [and] a lot of the abilities that come with a larger corporate structure,” said Jordan.
While STI may not always give districts the lowest bid, Gallagher pointed out that their experienced mechanics, dispatchers and bus drivers are important to parents who put their children on the yellow bus every morning. The company also strives to give parents peace of mind by offering new technology such as Safe Stop, a notification system that works through GPS.
“Very importantly, it tells working moms and working dads the bus got to school at 8:02, the bus picked up Johnny from school at 2:10 in the afternoon and the bus dropped Johnny off at the bus stop at 3:05,” Gallagher said.
NBR reporter Ruben Ramirez noted that STI plans to expand into the Carolinas and California, but there is “growing competition” for school bus service contracts from European companies and private equity firms honing in on these contracts, which can run as long as 10 years.
“Retail investors have been big fans of the shares, which typically pay out a 56 cents a share annual dividend,” said Ramirez.
Added Gallagher, “We’re the rare case of being a growth company that pays a dividend.”
The PBS segment is available on the company’s website, where it is offered with a series of videos designed for school administrators, parents and investors.
