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An interesting theory I heard for why the circus folded now, rather than at some later date, involves the age of the circus train. Rail cars are 'certified' to

An interesting theory I heard for why the circus folded now, rather than at some later date, involves the age of the circus train. Rail cars are 'certified' to run on Class 1 railroads for 40 years post-build, and once they reach 40 years old they need to be inspected and have their running gear rebuilt. This allegedly costs around $150,000 per car, and only certifies the car for another 10 years. Based on the auction of the circus train, the circus owns/owned 127 cars. So while the circus might have been solvent, if a large number of the train cars were coming up on a rebuild it might have been the straw that broke the camel's back. Here is a reddit thread discussing it a bit: https://www.reddit.com/r/trains/comments/5o3ih1/i_wonder_what_will_happen_to_the_ringling_bros/ https://www.reddit.com/r/trains/comments/5o3ih1/i_wonder_wha...

Naritai 9y ago
This is a great example, though, of why 'EBITDA' is such a terrible metric of profitability. Depreciation (which is the way this rail car certification would likely be accounted for) is a real (if deferred) cost.
- dismantlethesun 9y ago
  It's not a terrible metric. It's only bad for companies who have high debt loads, or companies who have to periodically upgrade costly equipment. These downsides to EBITDA are well known and should weigh on the mind of anyone who looks at the metric. For a company that rents all its equipment, EBITDA is a pretty good metric.
  - dragonwriter 9y ago
    > It's not a terrible metric. It's only bad for companies who have high debt loads, or companies who have to periodically upgrade costly equipment. Right, ignoring depreciation and debt service is only horrible for assessing companies with significant depreciation or debt service. > For a company that rents all its equipment, EBITDA is a pretty good metric. Sure, if you don't have significant depreciation/amortization and debt service, EBITDA is just an approximationation of EBT, which is a perfectly good measure. And EBT's a perfectly good measure even for companies with debt service and depreciating equipment.

Naritai 9y ago

This is a great example, though, of why 'EBITDA' is such a terrible metric of profitability. Depreciation (which is the way this rail car certification would likely be accounted for) is a real (if deferred) cost.

dismantlethesun 9y ago
It's not a terrible metric. It's only bad for companies who have high debt loads, or companies who have to periodically upgrade costly equipment. These downsides to EBITDA are well known and should weigh on the mind of anyone who looks at the metric. For a company that rents all its equipment, EBITDA is a pretty good metric.
- dragonwriter 9y ago
  > It's not a terrible metric. It's only bad for companies who have high debt loads, or companies who have to periodically upgrade costly equipment. Right, ignoring depreciation and debt service is only horrible for assessing companies with significant depreciation or debt service. > For a company that rents all its equipment, EBITDA is a pretty good metric. Sure, if you don't have significant depreciation/amortization and debt service, EBITDA is just an approximationation of EBT, which is a perfectly good measure. And EBT's a perfectly good measure even for companies with debt service and depreciating equipment.