Text 1. Micky McDonald Ran Westbeach For Five Years. Then It Went Bankrupt

I. Read the following text and be ready to summarise the main idea.

USEFUL LANGUAGE

languish	уменьшаться, ослабевать
insolvent	неплатежеспособный
liquidation	ликвидация
bankrupt	банкрот, обанкротившийся
liability	ответственность, обязательство
henchman	прихвостень; приспешник
bust	обанкротившийся
incumbent	возложенный (об обязанности и т. п.)
receiver	ликвидатор
viable	жизнеспособный
blue chips	голубые фишки
receivership	управление ликвидатором имуществом
to retrench	экономить, урезать
to defer	отложить на более позднее время
security	залог, обеспечение; ценное имущество
remittance: payment	платеж
to put assets up for sale	предлагать активы к продаже
to get the debt down	снижать задолженность
investment holding company	инвестиционная холдинговая компания
to back out of buying	отказаться от приобретения
sail in	принять решительные меры, вмешаться

reading

Micky McDonald figured that the little snowboard clothing company he had been running for the previous five years was history. His boss, the owner of Vancouver-based Westbeach Sports, had decided not to invest any more dollars in a business that had lost $1.4 million in 2005 and was looking at additional red ink in 2006. The company filed for bankruptcy in May and McDonald agreed to stay on, helping the trustee look for buyers for the Westbeach brand.

There were a few nibbles, but all of the buyers were dragging out their due diligence and McDonald just assumed he would soon be out of a job; he already was getting calls from headhunters. If creditors didn't doom the company, McDonald figured, the marketplace would probably do the job. If the company canceled its orders for the following season, its jackets and pants would be out of stores for at least a full year. By then, Westbeach would be of little interest to anyone. But before the trustee found a bidder, McDonald received an intriguing phone call from Frankie Hon, owner of Westbeach's Hong Kong manufacturer, Charterlink, which was on the hook for the fabric required in filling those orders.

What if the production run were made on Charterlink's dime? And what if the company were reorganized, with McDonald, Charterlink, and a third partner as the new owners? "The clock was ticking and we had to get a deal done in order to get these goods to market," McDonald says. It would be a big risk.

Snowboard apparel, once a cottage industry made up of several hundred tiny companies, is now a $137 million business in the U.S. alone and includes major players such as Burton, Quiksilver, and Billabong. Their combined marketing and merchandising muscle dwarfs anything coming out of Westbeach, which has 10 employees, $7.3 million in revenue, and little or no presence in the United States (Canada and Europe are its main markets). And yet, McDonald felt a connection to Westbeach, where he had weathered three ownership changes over nine years.

The company had been part of snowboarding culture since the 1980s, around the time he was introduced to the sport in the Austrian Alps. Maybe it was worth a chance. McDonald had been a sportswear sales and marketing manager in the United Kingdom when he came across Westbeach during a vacation in British Columbia. In those days, snowboarding was still the province of young daredevils looking for thrills that went beyond skiing down a sculpted hill.

Commercially, no one paid much attention and snowboard apparel was typically an extension of the tight-fitting bright-colored jackets and pants found in alpine skiing.

But Westbeach and its looser-fitting clothes stood out.

"They were almost indestructible, very waterproof, and very rugged," McDonald remembers. In 1990, he became a Westbeach distributor in the U.K., and several years later he opened a subsidiary in Innsbruck, Austria.

By the mid. '90s, the sport's popularity was skyrocketing. Yet the industry lacked experienced businesspeople. Inventory levels and marketing costs ballooned under the assumption that the sport would keep growing at stupendous rates. When that didn't happen, Westbeach and others began to struggle. Oregon-based Morrow Snowboards, which was looking to get into apparel, wound up buying Westbeach in 1997, but that company soon stumbled and was forced into bankruptcy. In 1999, the snowboard side of Morrow's business was sold to K-2, with Westbeach eventually taken over by a partnership. Two years later, one of the partners bought out the others, and McDonald was sent back to Canada to be president.

His marching orders: Expand the business without losing money.

One of his first steps was pulling out of the U.S. market. The company had been spending 80 percent of its marketing budget on advertising in American publications - even though just 5 percent of total revenue was coming from U.S. buyers. On the production side, he moved manufacturing from China to Vietnam, where costs were lower and import duties and quotas more favorable. That boosted margins without raising retail prices. The company lost $600,000 in 2002, broke even in 2003, and made a little money in 2004. But there was no room for missteps, and in 2005 a six-week dock strike in Vancouver proved disastrous.

"When you're in a season-sensitive and time-sensitive business and you don't make deliveries on time to your customers, they start to ask for discounts," McDonald says. Westbeach lost $700,000 after retailers and suppliers canceled orders. There were other problems, such as overspending on marketing efforts in an attempt to compete with the bigger sports and apparel companies. Smaller names got squeezed out; at a major trade show last year, there were just 95 snowboard brands, compared with 360 in 1995. But McDonald knew that the Westbeach brand had proved popular and resilient, despite his employer's refusal to invest in it.

Perhaps the company did have a future. To be sure, he was concerned about taking on the responsibility - and financial risk - of co-owning a business. As president, McDonald often found himself making mistakes and learning on the fly. "I took my eye off the ball on really fundamental things," he admits. A more seasoned chief executive might have kept the company out of bankruptcy.

But the more McDonald thought about it, the more Frankie Hon's suggestion to buy the company made sense. In June 2006, just a few weeks after the bankruptcy filing, McDonald, Hon, and Khanh To, another Westbeach contractor, bid $450,000 on the company's assets. Three days later, their offer was approved and Westbeach Apparel Canada Ltd. was formed, with the three men as equal partners.

The trio now runs a super-lean operation, with one-person departments for design, marketing, accounts payable, customer service, finance, logistics, and PR. McDonald, who holds the title of president and heads up marketing efforts, is focusing on the places where Westbeach does best--Quebec, British Columbia, Ontario, and portions of Europe. "What I'm acutely aware of is the resources I have and the resources my partners have," McDonald says. The partnership's five-year business plan has Westbeach reaching $50 million in revenue by 2011. It's an ambitious target, but McDonald points to a number of strengths, including a well-established brand - one that goes back to the sport's early days - and sustained loyalty among smaller, nonchain retailers in Canada and Europe. And it's not just outerwear; Westbeach relies heavily on high-margin T-shirts and sweatshirts that can generate big money during the off-season and attract nonsnowboarders who want to be identified with the sport.

Weaknesses? McDonald points to customer service, inexperienced management, a checkered financial history, and the presence of so many global competitors that can leverage their surfing, skateboarding, and snowboarding divisions into a single "action sports" category. That's why McDonald is reluctant to reenter the U.S. market, which he says is too expensive. "On paper, you would think that a Vancouver-based company would look at the U.S. and say that's a no-brainer because it's just across the border," he says. "But it could just as well be a million miles away." Westbeach's "less is more" argument centers on developing innovative merchandise, such as a camouflage-patterned polyurethane-coated snowboard jacket called the Phenom. Priced at $485, it's made with light-absorbing crystals that glow in the dark and features inside pockets for goggles, an MP3 player, and ski passes. Westbeach has the exclusive rights to the technology used in making the fabric through the 2006-07 season, but after that it's available to everyone.

That's the problem with trying to be innovative in snowboarding: The competition catches up quickly. Then again, Westbeach is used to making midflight adjustments. "These chances don't come along very often in life," McDonald says of the decision to bid on the company. "I've taken a gamble and I'm very, very glad. Now all I have to do is work very hard."

II. Choose the best variant:

1. The reason why the owner of Westbeach Sports in Vancouver didn’t invest in the company is

a) the company filed for bankruptcy

b) it was time for it to become history

c) it was useless and unreasonable because of all losses.

2. McDonald was sure he would be out of job because

a) he was getting calls from headhunters

b) he figured that either the creditors or the marketplace would doom the company

c) buyers’ actions and the current situation were signalling that.

3. The risk factor for the company to be reorganized was

a) small number of emploees

b) lack of promotion and advertising in US market

c) high competitiveness of the sport’s market.

4. What was the feature of the sport’s market in the mid ‘90s?

a) big companies were ending up bankrupt

b) it was attracting new investments

c) the field was in need of experienced businesspeople.

5. Why were participants of the trade show reduced in number?

a) companies couldn’t face season-sensitiveness and time - sensitiveness of business they were involved into

b) orders on goods were cancelled

c) they failed in their attempt to compete with bigger companies.

6. Development of Westbeach trade is based on:

a) location

b) age category

c) apparel innovations.

7. Why is McDonald reluctant to reenter the U.S. market?

a) the list of weak points is too long

b) it is too expensive

c) the country is miles away.

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