Student Transportation Reports Third Quarter Results

Highlights:

• Revenue for the quarter was up 27.0% from same period last year to US $39.9 million
• EBITDA* increased 24.5% to US $9.0 million
• During the quarter expanded Canadian operations with a third acquisition in Ontario, increasing Canadian dollar cash flow
• Subsequent to quarter-end, Student Transportation completed two accretive acquisitions, including a platform in the U.S. Midwest

Toronto, ON, May 8, 2006 – Student Transportation of America Ltd. (TSX: STB.UN) today reported the financial results for its third quarter of fiscal year 2006, ended March 31, 2006. All financial results are reported in U.S. dollars, except as otherwise noted.

“This was a very good quarter for us resulting in double-digit growth compared to the same quarter last year. It was a result of a combination of accretive acquisitions and organic growth,” said Denis J. Gallagher, Chairman and Chief Executive Officer. “We continue to concentrate on acquisitions and bids that include fuel protection, lowering our exposure to higher fuel prices. During the quarter, we also expanded our Student Transportation of Canada subsidiary with an acquisition in Ontario, increasing our presence and our Canadian cash flows. We continue to pursue growth in targeted markets with a disciplined focus.”

For the third quarter, revenue totalled $39.9 million, up $8.5 million from $31.4 million in the same period last year. EBITDA* for the three-month period rose to $9.0 million from $7.3 million in the same period in fiscal year 2006, with margins remaining relatively consistent.

“Our business model is based on delivering steady growth and predictable cash flows. We have grown our business in both Canada and the U.S., increased cash available for distributions through accretive acquisitions, lowered our pay-out ratio on an annualized run-rate basis, lowered our interest cost and absorbed an increase in fuel costs of over 40 per cent through favourable fuel mitigation clauses in our contracts all while maintaining relatively consistent margins for the quarter of 22.6 per cent,” Mr. Gallagher said. “I believe investors will see this as a stable and resilient business that can grow.”

Student Transportation’s reported net loss for the three month period ended March 31, 2006 amounted to $0.4 million or $0.03 per unit, which includes $1.8 million of interest on the subordinated notes portion of the IPS units. For the quarter, the company generated cash available for distributions* of Cdn $8.9 million and paid out distributions of Cdn $4.2 million. As stated previously, due to the seasonality of the business and schools not operating in the majority of the first quarter, the Company views distributable cash on an annualized basis. The excess cash for the third quarter after distributions of Cdn $4.7 million will be used in subsequent periods.

Mr. Gallagher also commented on the Canadian government’s proposed budget changes for more favourable tax treatment on dividends. “With our unit distribution being nearly 50 per cent allocated to equity dividends, that implies a higher yield for our investors than most similar business trusts. During the quarter, we also amended our existing senior credit facility to increase capacity and lower interest cost. We have an interest rate hedge in place that effectively gives us a 6.7 per cent rate on most of our senior debt and have maintained the five year currency hedge put in place at the time of our IPO for distributions.”

On March 8, 2006 Student Transportation of Canada closed the acquisition of certain assets of Liftlock Coach Lines Ltd. group of companies in Peterborough, Ontario increasing it’s Canadian operations and generating additional Canadian revenue and cash flow.

Subsequent to quarter-end, Student Transportation announced two acquisitions including the acquisition of Positive Connections Inc., which will add approximately US $18 million in annual revenues and 400 vehicles in Illinois and Minnesota. The acquisition establishes a new platform for operations and growth in the Midwest and is Student Transportation’s largest since its IPO in December 2004. The acquisition is immediately accretive. It is expected to add approximately Cdn $0.10 to cash available for distributions on an annualized basis and to lower the pay-out ratio.

Student Transportation’s interim financial statements, notes to financial statements and management’s discussion and analysis are available at www.sedar.com or at the Company’s investor web site www.sta-ips.com.

Conference Call & Webcast

Management will host a conference call and live audio webcast to discuss Student Transportation’s performance for the third quarter fiscal year 2006 at 10:00 a.m. (ET) on May 9, 2006. The call may be accessed at: 1-800-814-4890. There will also be a webcast and subsequently archived at www.sta-ips.com. A taped rebroadcast will be available until May 16, 2006 at midnight. To access the rebroadcast, please dial 416-640-1917 or 1-877-289-8525 and quote the passcode 21187991#.

Profile

Student Transportation is the fifth-largest provider of school bus transportation services in North America, conducting operations through local operating subsidiaries. Student Transportation has become a leading school transportation and management company by aggregating operations through the consolidation of existing providers and conversion of in-house operations and currently operates more than 4,000 school vehicles in North America. For more information, please visit www.sta-ips.com.

* Non-GAAP Measures

EBITDA is a non-GAAP financial measure, but management believes it is useful in measuring STA’s performance. Readers are cautioned that this measure should not be construed as an alternative to net income or loss or other comparable measures determined in accordance with GAAP as an indicator of the Company’s performance or as a measure of its liquidity and cash flow. The Company’s method of calculating non-GAAP measures may differ from the methods used by other issuers and accordingly, the Company’s non-GAAP measures may not be comparable to similarly titled measures used by other issuers.

Cash available for distributions is a non-GAAP measure, and is not intended to be representative of cash flow or results of operations determined in accordance with GAAP. Investors are cautioned that cash available for distribution, as calculated by the Company, is unlikely to be comparable to similar measures used by other issuers.

Forward-Looking Statements

This news release contains “forward-looking statements” within the meaning of applicable securities laws, which reflects the expectations of management regarding the Issuer’s and Company’s results of operations, expense levels, seasonality, cash flows, performance, liquidity, borrowing availability, financial ratios, ability to execute the Company’s growth strategy and cash distributions. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “track”, “targeted”, “estimate”, “anticipate”, “believe”, “should”, “plans” or “continue” or similar expressions suggesting future outcomes or events. These forward looking statements reflect the Company’s current expectations regarding anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward looking statements involve significant risks and uncertainties, and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not or the times at which or by the performance or results will be achieved. A number of factors could cause our actual results to differ materially from the results discussed, expressed or implied in any forward-looking statement made by us or on our behalf, including, but not limited to, the factors discussed under “Risk Factors” in our Annual Information Form. These forward looking statements are made as of the date of this news release and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

For more information contact:

Denis J. Gallagher
Chairman and Chief Executive Officer
Phone: (732) 280-4200
Fax: (732) 280-4213

Patrick J. Walker
Chief Financial Officer
Phone (732) 280-4200
Fax: (732) 280-4213

Keith P. Engelbert
Director of Investor Relations
Phone: (732) 280-4200
Fax: (732) 280-4213

[email protected]