Pyramid Breweries Inc. Reports Second Quarter 2007 Financial Results

Business Wire, August 10, 2007

SEATTLE -- Pyramid Breweries Inc. (Pyramid) (NASDAQ:PMID), today announced results for the quarter ended June 30, 2007. Pyramid reported net income of $156,000, or $0.02 per diluted share for the quarter, compared to $28,000, or $0.00 per diluted share in the second quarter a year ago. Gross sales for the quarter were $13.8 million, a 6% decrease from gross sales for the second quarter of 2006, primarily attributable to the fact that Pyramid now contract manufactures Thomas Kemper Soda (TK Soda) under a 5-year Supply Agreement, and as an agent, records the revenues and cost of sales, as a net amount in gross sales.

Key Factors for the Second Quarter:

* Our beverage division results were led by strong Pyramid brand family sales volume increases of 16% over the prior year period in the southwest region.

* We sold the TK Soda brand in January this year in order to focus on our core beer business. While we are still manufacturing TK Soda under contract for the new owner, our soda revenue and margins are appreciably lower versus last year. Additionally, soda volume in the quarter was lower than last year.

* We continue investing proceeds from the sale of TK Soda in selling and marketing expense for brand building and expansion efforts to take advantage of the momentum in the craft beer category and to focus on our core Pyramid brand family.

* We are paying higher excise taxes due to the loss of the second small brewer's tax exemption as part of the 2006 settlement with the federal Alcohol and Tobacco Tax and Trade Bureau (TTB).

"We had a profitable quarter, and we continue to grow our beer volume and gain market share in virtually all markets outside of our home state of Washington. Despite a soft craft beer category and intense competition in the Northwest, we improved our market share a combined 3 points to 11%, according to Information Resources, Inc., for the Pyramid brand family and the MacTarnahan's brand in Oregon, the country's most developed craft beer market. Additionally, our Alehouse Division rebounded nicely in the second quarter due to capital investments to enhance the customer experience, and we are seeing improvement in our beer gross margins due to increased capacity utilization, elimination of less profitable products and packages, and enhancements in our facilities," said CEO, Scott Barnum.

Financial Highlights - Second Quarter 2007 Compared to Second Quarter 2006:

Beverage Division:

* Gross sales decreased 12% to $9.3 million primarily attributable to the fact that beginning in 2007, we now contract manufacture Thomas Kemper Soda as an agent, and as such, we record the revenues and cost of sales as a net amount in gross sales. Additionally, we had a 17% decrease in soda shipments from the prior year.

* Gross margin increased 4% to $3.4 million primarily as a result of a shift in our beer product mix to some of our higher margined brands offset by decreases in soda gross margin due to a volume decline and a reduced contracted sales rate on TK Soda products under the Supply Agreement.

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* Although overall shipments for the quarter decreased 2% to 64,400 barrels, beer shipments were up slightly, 2%, to 52,800 and were comprised primarily of the following:

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Alehouse Division:

* Gross sales increased 10% to $4.4 million.

* Operating income increased to $407,000 from $379,000 a year ago. The Seattle, Walnut Creek, and Berkeley alehouses contributed to the operating income, offset by operating losses in the Sacramento and Portland alehouses.

Business Outlook

"We expect that the investments in sales and marketing made in the first half of the year should begin to positively affect our beer business in future quarters. Most importantly, despite having to contend with lower soda margin contribution and higher excise taxes, achieving bottom line profitability for the year continues to be a high priority focus," Barnum added.

About Pyramid Breweries Inc.

Pyramid Breweries Inc. is a leading brewer of specialty, full-flavored beers produced mainly under the Pyramid and MacTarnahan's brand names. Pyramid's family of unfiltered wheat beers continue to be honored by beer drinkers and judges, earning the most craft beer medals in the last decade at the prestigious Great American Beer Festival ("GABF"). Pyramid beers have received a total of 33 medals at the GABF. The brewery has also received a total of 9 medals in international competition at the World Beer Cup.

Pyramid owns two alehouse restaurants adjacent to its full production breweries under the Pyramid Alehouse and MacTarnahan's Taproom brand names in Berkeley, California and Portland, Oregon, respectively, and three alehouse restaurants in Walnut Creek and Sacramento, California and Seattle, Washington. For more information, visit www.PyramidBrew.com.

Forward-Looking Statements

This release contains forward-looking statements that involve a number of risks and uncertainties, the outcome of which could materially and/or adversely affect actual future results.