The document summarizes: 1) Federal officials said that Santa Barbara County was not well equipped to handle a disaster like the Refugio oil spill in 2015, but authorities have since increased regional response resources. 2) The U.S. Coast Guard said Santa Barbara County was not a high priority previously, but they have now added new staff in Santa Barbara following the spill. 3) Governor Brown signed new bills to strengthen oil spill response and prevention in the region, and Plains All American Pipeline has indefinitely shut down the faulty pipeline involved in the 2015 spill.

1. Feb. 19-25, 2016 Proudly serving Santa Barbara, Ventura and San Luis Obispo counties Vol. 16, No. 51
By Alex Kacik
Staff Writer
SantaBarbaraCountywasnotwellequipped
tohandleacatastropheliketheRefugiooilspill,
federal officials said, but authorities have since
scaled up the region’s resources.
ThecountywasnothighupontheU.S.Coast
Guard’s priority list, according to U.S. Coast
Oil spill sparks resource reshuffling
Striding confidently across the tar-
mac at the Palm Springs International
Airport on Feb. 16, President Barack
Obama was leaving what has become
his favorite winter getaway spot with a
bit of swagger.
He had just come from a press con-
ferencewherehearguedthathe,notthe
GOP-controlledSenate,heldtheconsti-
tutionalhighgroundinthecomingfight
overnominatingasuccessortoSupreme
Court Justice Antonin Scalia, who died
overtheweekend.Andhemadeitclear
thathedoesn’tthinkDonaldTrumpwill
be elected president.
While the sharp-elbowed tactics of
Americanpoliticssoakedupmuchofthepress
conference, it is a much more strategic vision
thatoccupiedmostofthepresident’sperhapsfi-
nal trip to the Coachella Valley, his sixth in the
past three years.
The U.S.-ASEAN Summit, as the meeting of
MindBody
aiming for
profitability
By Philip Joens
Staff Writer
When San Luis Obispo-based MindBody,
which sells merchant processing software to
yoga and fitness centers worldwide, reported
fourth quarter and 2015 earnings Feb. 10, the
results were predictably mixed.
Fourth quarter revenues increased 40 per-
centto$28.27millionandbeatanalystrevenue
estimatesof$27.5million.Subscribersgrew27
percent during the quarter to 51,481.
MindBody’s quarterly loss of 17 cents per
share beat analyst estimates of losses of 20
centspershare.Yearlyrevenuesalsogrewsub-
stantially from $70 million in 2014 to $101.37
million in 2015.
AsMindBodycontinuedtoexpanditsglob-
al infrastructure, the company continued its
long history of losing money. Net losses grew
from $24.6 million in 2014 to $36.08 million in
2015. MindBody has an accumulated deficit of
$154 million.
Founded in 1998, MindBody took the tri-
county tech scene by storm in 2015 and had
an initial public offering in June. Founder and
Obama’sAsiantradestrategycouldkeepChinaincheck
Neil Peart of Rush is one of many musicians using drums made by Oxnard’s Drum Workshop.
Music makers
Oxnard’sDrumWorkshopsoundscompetitivenote
By Marissa Nall
Staff Writer
From shelves stacked high with hard
rockmapleandotherexoticwoods,aDrum
Workshop employee picked several sheets
1/36th of an inch thick and cut them for a
floor tom.
The sheets were glued together and ar-
rangedastheymovedthroughthetempera-
ture-andhumidity-controlledfactoryinOx-
nard.
“We have a very short window to work
withbecausewoodisanaturalproductand
itwantstorollintoitsnaturalshape,”Opera-
tions Manager Beto Benitez said.
ShellshopleadJoseCamposfitthesheets
into a press, which applied 2,600 pounds
of pressure per square inch and heated the
wood and glue to almost 200 degrees. The
processwasrepeated,thistimetoletitcool.
“It’shotandcoldforeverysingleshellwe
make,” Campos said. “It’s like people tem-
per metals — we temper our shells.”
The 50,000-square-foot factory off Del
Norte Boulevard makes 150-200 drums
DRUMWORKSHOPCOURTESYPHOTO
see MUSIC on page 19A
see OIL SPILL on page 18A
see MINDBODY on page 18A
see DUBROFF on page 17A
henry
dubroff
Editor
$1.50
Santa Barbara’s Lull
sells mattresses online
See page 3A
Central Coast
New hotels going up
See page 7A
THE INDEX
THE LIST: Office parks. . . . . . . . ...14A
Commentary. . . . . . . . . . . . . . 16A
Leads. . . . . . . . . . . . . . . . . . . . . . 12A
Newsmakers. . . . . . . . . . . . . . . . 5A
REAL ESTATE . . . . . . . . . 4A
SLO building height debated
WINE. . . . . . . . . . . . . . . . . 6A
Artisan winemakers featured
Inside
•Venoco misses interest payment. Page 9A
Guard Cmdr. Rom Matthews. Most federal re-
sourcesareconcentratedintheLosAngelesand
Long Beach region at some of the most active
ports in the world.
In response to May’s Refugio oil spill, the
Coast Guard is adding a new staff position in
Santa Barbara, Gov. Jerry Brown has signed
new bills to bolster response and prevention
measures, and Plains All American Pipeline has
indefinitely shut down the faulty Line 901.
“Post-Refugio we have learned of some
vulnerabilities that are at risk in the tri-county

2. 18A Pacific Coast Business Times Feb. 19-25, 2016 Feb. 19-25, 2016 Pacific Coast Business Times 19A
MINDBODY
Continued from page 1A
OIL SPILL
Continued from page 1A
MUSIC
Continued from page 1A
LULL
Continued from page 3A
TECH PARK
Continued from page 3A
CEO Rick Stollmeyer talked with the Busi-
ness Times before and after MindBody
released earnings Feb. 10. During both in-
terviews,Stollmeyerdefendedthecompany
and said it should become profitable soon.
Question:Howdoyoufeel2015wentaf-
ter going public?
Answer: I’m thankful we went public
when we did. We’re sitting here with $90
million. Where we’re sitting is well posi-
tioned for the future.
Q: What have funds from the IPO been
used for?
A: We really haven’t used any of it yet. It
givesusthereservestocontinueourgrowth
strategy.Whatareweinvestingin?Product,
the capabilities of our products onto mo-
biledevices.We’vegototherprojectsinthe
works.
Q:Youexpecttobeprofitablebythethird
quarter of 2017 using the (Earnings before
interest, taxes, depreciation and amortiza-
tion)metric.Whendoyouexpecttobeprof-
itable when measured by net income?
A: Well it would be some point soon
after that. The reason we use EBITDA is
becauseforaguywhostartedabusinessin
his garage, it’s the easiest one to wrap your
head around. Before interest we don’t pay
anything. We don’t have any debt. For us,
EBITDA is the closest to that moment when
a company is moving from cash burning to
a cash generating engine and is the easiest
metricforbusinessoperatorstounderstand.
Q: Just looking at the financial state-
ments, for the year depreciation and amor-
tization costs were about $6.5 million, so it
seemslikeitwouldbealittlewaysoffusing
net income.
A: What’s happening is, we have a lot
of recent (capital expenditures). We built a
MindBody founder and CEO Rick Stollmeyer is shown in his office in San Luis Obispo.
FILEPHOTO
big campus which has plenty of additional
capacity.Thereisn’tmuchofaneedtobuild
large facilities for several years. We have
enough room at our headquarters in San
Luis Obispo. Beyond that we’ll use more of
a satellite office strategy. So (capital expen-
ditures) as a percentage of revenue will be
going down.
Q: In 2015, 86 percent of revenue came
from the U.S. and 16 percent was interna-
tional. Since your software is available in
134 countries, is that concerning?
A: Of the 16 percent of revenue that’s
coming from 133 countries, the majority of
it is Canada, the United Kingdom, Australia
and New Zealand. For us, it’s more of a city
strategythanacountrystrategy.Whenyou
getaconcentrationofbusinessesinmetro-
politanareas,thatcreatesbusinessandcon-
sumer adoption. It’s not about France, it’s
about Paris; Amsterdam; Berlin; Frankfort,
Germany; London; Sydney; Melbourne,
Australia. We have a list of cities we’re go-
ingafter.Overthelonghaul,youcanexpect
to see revenue from international sources
increase.
Q:Couldthedevelopingworldbeanop-
portunity down the line?
A: Absolutely. Every developing country
hasatleastonecitythat’srelativelyaffluent.
We have clients in Nigeria and the Middle
East right now.
Q: What are some of the challenges of
running and expanding a (Software as a
Service) business?
A: SaaS businesses tend to burn cash as
they’regrowingfastbecauseyouhaveaone-
timecostofacquisitionmeasuredagainsta
recurringrevenuestream.Werancashflow
positive in 2002, 2003 and 2004 until we
launched our MindBody Online, which was
our SaaS solution.
The laws of accounting don’t allow soft-
warecompaniestocapitalizethoseexpens-
es. You have to realize all the expense up
frontandyoucanonlycounttherevenueas
you’re collecting it.
Q: What are differences between run-
ningacompanywithrecurringrevenueand
non-recurring revenue streams?
A: One of the reasons our IPO didn’t
pricehigherwasbecausewewereanet-op-
eratinglossbusiness.Thereweresomeother
businesses that went out at the same time
that were very profitable and I remember
thinking “People have forgotten the differ-
encebetweenrecurringandnon-recurring
revenue.” In a non-recurring business, they
start the next quarter with $0. We start the
nextquarterwith98percentofourrevenue
alreadycomingin.It’saverydifferentmod-
el,andit’smucheasiertorunacompanythat
has recurring revenue like this.
Q: So do you have a rough idea of what
your revenues will be at the start of every
quarter?
A: A couple quarters in advance. Our
revenues are very stable and fairly easy for
ustomodel.Wedon’thavedramatryingto
hitquarterlynumbersthatotherbusinesses
have.Thisisabusinessthatcanpredictitself
going forward with a high degree of prom-
ise.
Q: MindBody built its reputation as a
yoga business. When entering new areas
like acupuncture or children’s activity cen-
ters, how do you convey what you do?
A: You can’t assume it’s the same as the
market you’re already in. When we went
after the salon market, we hired a bunch
of salon insiders. Then you need to show
up at their conferences and trade shows so
theycantouchyouandseewhatyoudoand
hearyourcommitment.Youcan’tjustthrow
some marketing out there and expect the
new market to adopt.
Q: In December, you released a new
MindBody app for consumers. Your core
business is for businesses, but how big a
part of your business could consumers on
the app become?
A: It could become a very significant
part.Ourjobistoconnectthemtobusiness-
esonoursystem. There’snodirectrevenue
fromtheappotherthantheapphelpsfoster
some payment processing growth.
every day but it can take several weeks for a set and two to
three months for a custom kit.
Drum Workshop began by making hardware like ped-
als,attachmentsandcasesoutofthesmalldrumschoolthat
founder and President Don Lombardi had in Santa Monica.
The company moved to Oxnard in 2000.
It now employs roughly 215 people across the U.S., after
anacquisitionthatbroughtwithitawholenewrangeofin-
struments.
“It was actually a bit unintentional,” said Scott Donnell,
vice president of marketing.
WhenFenderdecidedtosellitsdistributionarm,DWbe-
gannegotiatingacontracttotakeonsomeofitspercussion
brands. But Fender wanted DW to take over its entire KMC
Music subsidiary.
“We’re talking about a phone book of musical products
acrossallcategoriestoeverymom-and-popstoreinthena-
tion,” Donnell said.
NegotiationswinnowedthebrandsdowntoGretschDrums,
KAT Percussion, Gibraltar Hardware and a few others.
“(CEO) Chris Lombardi looked at that acquisition and
felt very strongly that he wanted Ovation Guitars and that
we could really do something with it,” Promotion Manager
ElizabethLangsaid.“Thedealwasprettymuchfinishedbut
he really wanted Ovation so we had to renegotiate. It was a
lot more expensive.”
Ovation, a family-owned guitar company based in New
Hartford, Conn., sold to Fender in 2007, which closed Ova-
tion’s U.S. factory in 2014.
“Oncewehadownershipofthesebrands,werealizedthey
weresortofneglected,”Donnellsaid.“Ovationwasdefinitely
ontheshelfand(LatinPercussion),theyhadn’tdoneasmuch
with product development as we would have.”
DWreopenedtheNewHartfordoperationandannounced
theopeningofashowroomforGretschDrumsinNewYork,
where it was founded. A small facility in South Carolina still
makesthedrumsandLatinPercussioncongasanddjembes
are made in Garfield, N.J.
“The exciting thing is the U.S. connection because we
have manufacturing actually here in Oxnard,” Donnell said.
“We felt like we had this really nice place in between the
really big guys and the little guys that are boutique in their
garages.”
AllthebrandsremainedundertheirownnamesandDW
hastriedtostaytruetowhatmusicianshavecometoexpect
from the instruments, Donnell said.
Someoftheexpensive,exoticwoodsboughtinlargequan-
titiesfordrummakinghavemadetheirwayintotheguitars.
Opinions from developers of similar products or makers of
differentinstrumentsaltogetherhavebeenbeneficial,hesaid.
“We’re doing it in a very thoughtful way where we don’t
influencethewaytheymakedrums,”Donnellsaid.“Wewant
that product to be what it is.”
Benitezsaidthecompanyhasalotofin-housedrummers
that provide product ideas.
“Itgetstothepointwhenyouthinkdrummerscan’tneed
anythingelsebuteveryyearitseemsliketheR&Dteamfinds
something that drummers need,” Benitez said.
Components are designed to fit beginner, intermediate
andprofessionalsetsandcanbeupgradedasneeded.Hard-
waredesignedatthefactoryismadeinTaiwanandshipped
back for assembly.
• Drum set, Drum Workshop, Oxnard
• Guitars, RKS Design, Thousand Oaks
• Guitar, Fletcher Brock, Carpinteria
• Requintos, David Salais, Ventura
• Harps, Tony Maraza, Ventura
• Guitar, David Eichelbaum, Ojai
• Violins, James Wimmer, Santa Barbara
• Flutes, Eilam Byle, Ojai
• Guitar & mandolin, Jean & Matt Larrivee, Oxnard
• Guitar, Peter Boles, Ojai
• Guitar, Joe Till, Westlake Village
• Guitar, Tom Anderson, Newbury Park
COURTESYPHOTO
Instruments on display
Violins by James Wimmer of Santa Barbara.
The Museum of Ventura County’s “Duets: Art
andArtisansinHarmony”exhibitionpresentsmusi-
calinstrumentscraftedbylocalartisanspairedwith
art from the museum’s collection. It ends March 20.
Since the beginning of the recession, the company has
worked to create a lower entry point for the brand.
“The climate of the industry these days, you really have
tohaveallthesepricepointstoremaincompetitive,”Donnell
said.“Thethingthatexcitesusiswecomeupwithsomething
just amazing for pro drummers, this awesome technology
thatmoredrummersshouldhave,andwetrytofindwaysto
trickle that down to our more affordable instruments.”
Beforetheacquisition,DWhadaround350dealers,from
big box chains like Guitar Center and Sam Ash to indepen-
dent stores.
“With the acquisition, it exploded. I can’t even tell you
what our dealer base is,” Benitez said, adding that Internet
distributors have become a big trend.
Usedtoincrementalgrowth,thecompanyisstillfiguring
outhowtoright-sizethebusinesswiththerapidexpansion.It
has hired employees for all its U.S. locations, grown its sales
and distribution arms, tested new software and sniffed out
redundancies.
“We’re learning some of those things as we go,” Donnell
said.“Fenderdidn’tgiveusaninstructionmanualwhenthey
sold us all these businesses, so we’re learning every day.”
The corroded sections of Line 901 have been replaced.
COURTESYPHOTO
region, especially with its aging infrastructure and the po-
tential of increased crude-by-rail traffic with Phillips 66 in
San Luis Obispo,” Matthews said. “Our resources and first
responders are a little thinner further up the coast.”
Matthewswaspartofarecentpaneldiscussioncoordinat-
edbySantaBarbaraChannelkeeper’s“AftertheSpill”series
at the Santa Barbara Museum of Natural History.
The150deepdraftcontainershipsthattravelthroughthe
Santa Barbara Channel every year are what keep Matthews
upatnight,hesaid.Hisnextbiggestconcernsareoilbarges,
offshore rigs, crude trucks and rail transportation.
“We didn’t really think of an onshore pipeline as high-
risk,” Matthews said at the meeting. “Low and behold, we
do now.”
The U.S. Coast Guard will hire an oil rig safety enforce-
mentandpollutionpreventionofficerinthesummerwhowill
bestationedattheSantaBarbaraHarbor.Untilthen,some-
onehastotravelfromLosAngelestoattendoilsafetymeet-
ings in the Tri-Counties.
The Coast Guard is also concerned with some of the off-
shorerigsownedbyExxonMobil,VenocoandFreeportMc-
MoRan that have been shut-in since the shutdown of Line
901 and Line 903. As they layoff staff, workers have more
responsibility and may cut corners, Matthews said.
“Vulnerabilitiesexistwiththeaginginfrastructureasthe
rigssitdormantinthesaltwater,”hesaid.“It’sincumbenton
theindustrytomaintainitsproficiencyandexpertiseasthe
rigs slow down and lay off people.”
Santa Barbara finds itself in a similar position. In 1969,
the worst offshore oil spill of its time led to Earth Day, new
stateandfederalregulationsandaheightenedenvironmental
consciousness.
Yet, the Refugio oil spill stemmed from a corroded on-
shorepipelinethatleakedanestimated143,000gallons.Re-
sponders had to “think in reverse,” Matthews said.
The federal Pipeline Hazardous Materials Safety Admin-
istrationpublisheditspreliminaryreportonFeb.17thatre-
vealed Plains operators allowed Line 901 to run 35 minutes
after the spill occurred. Results from Plains’ in-line inspec-
tiononMay6,just13daysbeforethespill,revealedtwocriti-
calpartsofthepipelinethatwereupto86percentcorroded.
The PHMSA report said that the May 6 inspection did not
accurately convey the amount of external corrosion in the
area of the release.
Assemblyman Das Williams, D-Santa Barbara, and Sen.
Hannah-Beth Jackson, D-Santa Barbara, crafted legislation
thatseekstomakeoilspillresponsefasterandmoreeffective,
enforceannuallineinspectionsratherthaneverytwoormore
years,andrequirethatpipelinesusebest-practicestechnol-
ogy like automatic shut-off valves.
Buttheselawsfallshortwhenitcomestointerstatepipes,
whichfallunderfederal—notstateandcounty—oversight,
Williams said at the meeting.
While the pipelines do not cross state lines, they
qualify for interstate classification because the oil is trans-
portedoutsideofthestateviaconnectionthroughanother
pipeline, barge, truck or rail, the Federal Energy Regulatory
Commission told the Business Times.
Line 901 and Line 903 are the only lines in Santa Barbara
County regulated by the federal government. The county
sought local jurisdiction over Plains’ pipelines, but the oil
company successfully fought it in court. Thus, the pipelines
are the only ones in the county that do not have automatic
shut-off valves.
“Do you want to be regulated by the person who never
checks your work unless something goes wrong, or do you
wanttoberegulatedbytheStateFireMarshalthatrequires
you to regularly submit safety information,” Williams said.
PlainssubmittedafilingonFeb.12toFERCtocancelthe
tariff allowing interstate trading of its oil in Line 901, which
has been idle since May. Plains plans to cancel the tariff for
Line 903 after it is completely purged, likely in March.
Still, the fate of the pipelines is uncertain. Canceling tar-
iffs occurs frequently, a FERC spokeswoman said, and com-
panies often reinstate the tariffs.
ThecorrodedsectionsofLine901havebeenreplacedand
fitted with a plastic shrink tube to guard against moisture,
which caused the insulation in the original pipes to crack.
Plains All American Pipeline has 146 million reasons,
and counting, to rethink its oil spill prevention tactics, or
lackthereof.Cleanuphasbeena$146milliontasksofar,the
county said.
Thereisstillworkbeingdonearoundthescene,albeitfar
lessthanthepeakthatemployedabout1,625dailyworkers.
Officialsaretestingtheareatodeterminethedamageto
the habitat, which will be added to Plains’ bill.
So far, Plains has paid Santa Barbara County $1.73 mil-
lion in three claims filed in May, June and July of last year.
parkhasbeentocreatemorehightech
companies,sotheunderlyingmessage
was the community support.”
Ten companies currently work
out of the tech park. Dunning said
most are well-established, profitable
businesses. Buellton-based supple-
ment maker Platinum Performance
conductsresearchatthetechparkfor
itshorse,human,dogandcatsupple-
ments.
Applied Biotechnology Institute,
a San Luis Obispo-based company
headquartered at the tech park, con-
ducts research on animal and plant
proteins for pharmaceutical uses.
Mentor eData, a startup, is devel-
opinganappthatgivesusersanidea
ofhowwelltheydrivebytrackingthe
movement of users’ cell phones.
Justin Couto has been at the tech
park since the beginning.
Couto ran Couto Solutions, which
createdsocialcommunitiesonlinefor
brands, until the end of 2014. In early
2015, Couto rebooted his business as
SoCreate and switched its focus to
creating an app that will make it easy
for anyone to write a screenplay.
He said the tech park helps him
becausehecanreachengineersbefore
they leave Cal Poly. He’s also excited
about an expansion.
“Ipositionedusinthetechparkso
we’d be close to talent,” Couto said.
“Hopefully, they can attract some
large players.”
infrastructurethataddstremendouscosttothemattress.”
Todothis,Lullworkedwithmanufacturerstodesign
onlyonefoam-basedmattress.Availableinsixsizes,the
mattresscompressesintoaboxlessthan2feetwideand
4 feet tall.
“Wejustbundleitallin—howmuchitcoststoman-
ufacturethemattress,what’sareasonableprofitmargin
ultimatelythatwewanttomakeonthemattressandthen
theshippingcost—they’reallbundledintothatbusiness
model,” Klein said.
Traditional stores have very little variation in mat-
tresses, Lull Product Manager Robert Vaughn said.
Eightyto95percentofcustomerswillpickoutthesame
general mattress, he said, and, unlike other products,
pricecomparisonsinthemattressworldcanbedifficult.
It’sstillastretchtogetacustomertotrybuyingamat-
tress online, Klein said. Each one goes for $500 to $900
depending on size.
“Trust becomes a big part of that,” Vaughn said.
“This isn’t a T-shirt. It’s very intimate purchase, a big
purchase.”
Although about 95 percent of people have kept the
mattressestheyorderedsofar,customerserviceisapri-
ority for the fledgling company.
“Ifitdoesn’tworkout,youhavetomakesurethebusi-
ness is there and will take care of the customer,” Klein
said. “You can’t be 100 percent perfect for all people so
we’rereallytryingtofindtherightmiddlegroundtosat-
isfy the largest percentage of people.”
ReviewshavealsohelpedLulldevelopmattresstop-
perstomakethemattressessofterandaprototypefora
second-generationmattressbuttoomanyoptionswould
be detrimental to their business, Klein said.
The mattress also doesn’t go back in the box. If con-
sumersdon’tlikeit,thecompanypicksitupfordonation
to a charitable organization like the Salvation Army or
local churches and extras get recycled.
Cutting out the middleman not only increases effi-
ciencybutalsoreducesthecarbonfootprintofmattress
buying,Vaughnsaid.Ratherthanshippingtowholesal-
ersandretailers,themattressgoesdirectlyfromfactory
to consumer.
Lull sources and manufactures in the U.S. to keep an
eye on supply chain and quality. More and more, Klein
said, consumers are concerned about the origins of the
product.
“Especially while we’re growing so quickly, we want
to make sure our supply chain is robust,” he said. “We
trulyfeel,atthispointintime,thathavinganAmerican-
madeproductreallyresonateswithourcustomerbase.”
Withmanufacturingdonebyoutsidecompanies,Lull
employsabout45peopleformarketing,weboperations,
finance and customer support. Klein leverages the op-
erationsofmarketingcompanyScalableCommerce,for
which he is also CEO, from his office on the top floor of
3944 State St.
“It’s really taking off quite nicely,” he said of Lull.
“We’re surprising ourselves right now with how well
things have gone so quickly. The mattress industry as a
whole, the old way of doing business, is flawed. Espe-
ciallyyoungpeople,oncethey’vepurchasedonlineonce,
I don’t think they’re ever going back to retail.”
The Cal Poly Technology Park is planning an expansion.
COURTESYOFJ.B.ENTERPRISES