Pyramid Breweries Inc. Reports Improved Sales and Margins in First Quarter Results, Declares a Reduced Dividend and Re-affirms its Dividend Policy

Business Wire,  April 27, 2004  

Tags: dividend, Pyramid Breweries Inc., sales

• E-mail
• Print
• Link

Business Editors

SEATTLE--(BUSINESS WIRE)--April 27, 2004

Pyramid Breweries Inc. (Nasdaq:PMID) today reported net sales of $7.9 million and $1.4 million in gross margin during the first quarter of 2004. These results represent sales and gross margin improvements over the prior year of 19% and 20%, respectively. The Company also announced a dividend of $.022 per share, a 50% reduction and re-affirmed its policy on the payment of dividends.

First quarter ended March 31, 2004 sales were $7.9 million, an increase of $1.3 million over the same quarter of the prior year. Beverage division net revenues increased 13.6%, or $583,000, versus the same period in 2003 driven by a 14.2% increase in shipments to 35,000 barrels. Beer shipments increased 15.4% to 27,000 barrels while soda increased 10.7% to 8,000 barrels. All five sales regions increased shipment volumes over the first quarter of 2003 with the Northwest and Southwest regions, the Company's two largest, leading the way with 16.2% and 14.0% volume increases respectively. Alehouse division sales increased 29%, or $675,000, over prior year to $3.0 million for the quarter driven by $724,000 in sales at the new Sacramento Alehouse, which opened in July of 2003. Same store sales, (Seattle, Berkeley, Walnut Creek), were down 2.1%, $49,000 to $2.3 million.

Gross margin increased 20.0% or $232,000 to $1.4 million resulting from a combination of increased Beverage division sales and improved beverage margins. Beverage division cost of goods sold as a percentage of sales decreased from 76.9% in 2003 to 73.3% in 2004 while Beverage division gross margins improved 31.4%, or $310,000, to $1.3 million. The improved beverage margins reflected greater efficiencies obtained in the breweries. The total Alehouse margin decreased to $90,000 compared to $169,000 in 2003 as a result of lower same store sales. A significant portion of the sales reduction can be attributed to the re-scheduling of traffic driving events at the Exhibition Center near the Seattle Alehouse.

Net loss for the first quarter of 2004 was $996,000, compared to a net loss of $725,000 during the same quarter of the prior year. The $271,000 additional loss was entirely attributed to non-recurring increases in selling, general and administration costs related to the resignation of the Company CEO and a $99,000 state and local tax refund recorded in 2003 as an expense reduction. On a normalized operating basis, adjusting for these non-recurring events, the Company achieved a net operating loss of $685,000 compared to a prior year loss of $867,000 for a $182,000 or 21.0% improvement in operating income.

"Our first quarter results included some positive signs which we hope to build upon in coming quarters. Additionally, we are looking forward to the closings of the Portland Brewing Company asset purchase and the agreement to acquire the Berkeley Brewery and Alehouse property. Although market conditions remain challenging and cost inflation continues to have an impact, the Company has made a solid and encouraging start to the year," said George Hancock, Chairman and Interim CEO.

On March 25, 2004 the Company announced it had entered into an agreement to purchase the Berkeley Brewery and Alehouse facility located at 901 Gilman Street, Berkeley, California (the "Property"). Per the purchase agreement, the Company will acquire the Property for $7,000,000, payable at the close of escrow within 120 days. The Company expects to finance the entire purchase price of the Property by obtaining a secured loan on the Property at competitive market rates. The annual benefit will be dependent upon the prevailing market rates and terms for mortgage financing that the Company is able to secure.

The Company announced on January 26, 2004 an agreement to acquire substantially all the assets of Portland Brewery Company in exchange for cash, the assumption of certain liabilities, and at Pyramid's sole option, common stock. The Company will refinance a portion of the assumed liabilities with a working capital line of credit. The transaction, which is subject to regulatory review and other customary conditions, is expected to be finalized in the first half of 2004.

The Company also announced today its Board of Directors has declared a quarterly cash dividend of $.022 per common share, payable on July 16, 2004 to shareholders of record on June 30, 2004. This represents the eighteenth consecutive quarter of dividend declarations made by the Company. The current dividend declaration represents a decision by the Board of Directors to reduce the dividend by 50%. The Board believes that dividends are an important part of the return for Company's shareholders. Additionally, the Board re-affirms its intention to pay out in dividends a portion of its free cash flow from operations which is in excess of the Company's expected requirements. However, the Board remains committed to evaluating other opportunities for investment that may provide a more optimal use for such cash flow. At this time, the Board believes such opportunities are provided by the upcoming purchase of Portland Brewing Company's assets and growth in existing core businesses.