Pyramid Breweries Inc. Reports Continued Sales Growth; Net Income and EBITDA Also Show Improvement

Business Wire, August 2, 2002

Business Editors

SEATTLE--(BUSINESS WIRE)--Aug. 2, 2002

Pyramid Breweries Inc. (Nasdaq:PMID), today reported its fifteenth consecutive quarter of sales growth, with net sales increasing $785,000, or 9%, to $9.7 million for the second quarter ended June 30, 2002. Second quarter sales increase were driven by a 3% increase in Beverage Division revenues and the May opening of Pyramid's new Walnut Creek, California alehouse, which contributed $607,000.

Net income for the second quarter improved by 72% or $249,000, from $345,000 to $594,000, primarily as a result of lower selling, general and administrative expense. Selling, general and administrative expenses for second quarter of 2001 included a non-cash charge of $180,000 relating to an equity arrangement with its chief executive officer. Excluding this non-cash charge net income increased 13%. Gross margin was lower for the second quarter of 2002, reflecting the opening costs of the Walnut Creek Alehouse. EBITDA (earnings before interest expense, taxes, depreciation, amortization, and stock compensation expense) increased 7% for the quarter from $1,060,000 to $1,136,000.

The Beverage Division reported a slight increase in shipments for the second quarter to 46,900 barrels from 46,700 with a 3% increase in revenues to $6.8 million. Pyramid beer shipments were up 3% to 30,900 barrels, reflecting solid core style performance, strong early results from Pyramid's new Coastline Pilsner, and despite the discontinuation of three older styles. Shipments for Coastline amounted to 6% of total Pyramid beer sales for the quarter. Thomas Kemper Soda shipments were flat at 15,000 barrels with Thomas Kemper Beer generating 1,000 barrels, down 700 barrels.

Sales in the Alehouse Division, including the new Walnut Creek Alehouse, were up 26% to $2.9 million for the second quarter ended June 30, 2002. The new Walnut Creek Alehouse contributed $607,000 in the quarter. The margin decreased to $374,000, a 15% decrease, as a result of opening costs associated with the new alehouse location. Sales in the Alehouse Division for the same period, without Walnut Creek, were flat while the margin increased to $453,000, or 3%, as a result of improved product costs and lower overhead.

"We are pleased with the early performance of our Pyramid Alehouse in Walnut Creek California, the overall performance of the Pyramid brand, as well as the early results from our new Pyramid Coastline Pilsner, introduced in the first quarter of 2002. We are also looking forward to the opening of a fourth alehouse in Sacramento, California in 2003," said Martin Kelly, Chairman and CEO.

For the first half of the year, Pyramid's net sales increased 6% to $16.2 million. Total shipments for the Beverage Division increased 1% to 79,400 barrels and sales for the Alehouse Division were up 16% on a year-to-date basis, due in part to the addition of the Walnut Creek Alehouse. Gross margin for the first six months decreased $68,000 to $4.0 million due to the Walnut Creek Alehouse opening costs that more than off set overall margin increases in other businesses.

Net loss for the six month period ended June 30, 2002 improved 59% to $174,000 compared to a net loss of $421,000 for the same period of the prior year. EBITDA for the first half of the year was $984,000 compared to $822,000 for a 20% increase over the prior year. The improvement in both cases was due to contribution from higher sales and reductions in selling, general and administrative expenses that were only partially offset by the Walnut Creek Alehouse opening costs.

The company's fourth Alehouse will be located in Sacramento and is scheduled to open in 2003. This new Alehouse will be located in an historic building at the corner of 11th and K Streets, one block from the state Capital. Plans are currently under review for the 9,800 square foot Alehouse that will feature a 295 seat restaurant and a fully operational 15 barrel brew system. Pyramid plans to tap into the strong economic growth of Sacramento area to boost the education and awareness level of the craft category and the Pyramid brand.

Pyramid Breweries Inc. is a leading brewer of specialty, full-flavored beers and sodas, produced under the Pyramid Ales & Lagers and Thomas Kemper brand names. Pyramid also owns and operates three breweries in Seattle, Washington, and Berkeley and Walnut Creek, California as well as three adjoining restaurants under the Pyramid Alehouse name. For more information, visit www.PyramidBrew.com.

Statements concerning future performance, developments or events, concerning potential sales, restaurant expansion, production capacity, and any other guidance on future periods, constitute forward-looking statements which are subject to a number of risks and uncertainties which are described in the company's filings with the Securities and Exchange Commission, press releases and other communications. Actual events and results may differ materially from stated expectations.