Pyramid Breweries Inc. Reports Fourth Quarter and Year End Results

Business Wire, March 10, 2007

SEATTLE -- Pyramid Breweries Inc. ("the Company" or "Pyramid") (NASDAQ:PMID), today announced results for the fourth quarter and year ended December 31, 2006. Gross sales for the quarter were $12.5 million, representing a slight increase over gross sales for the fourth quarter of 2005. Net loss for the quarter was $1.2 million, or $0.14 per diluted share, compared to a loss of $531,000 or $0.06 per diluted share a year ago.

For the year, gross sales were $54.3 million, a 7% increase over the prior year. Net loss for the year was $1.6 million, or $0.18 per diluted share, an increase of $506,000 over the prior year. As more fully explained below, in 2006 the company resolved a claim with the federal Alcohol and Tobacco Tax and Trade Bureau ("TTB") which resulted in a third quarter settlement of $700,000. Adjusting 2006 and 2005 full-year excise taxes to the rates now applicable under the TTB settlement, and excluding the one-time assessment of $700,000 in 2006 and a $415,000 gain on the sale of brewery equipment in 2005, the 2006 pro forma net loss was $1.0 million compared to a pro forma net loss of $2.1 million in 2005.

"Our Pyramid brand family shipment volume increase of 8% for the fourth quarter compared to the fourth quarter a year ago, and our 18% shipment volume growth for all of 2006 versus last year is especially encouraging since we exceeded a very strong sales year in 2005," stated Scott Barnum, CEO. "2006 saw continued rapid growth in the Pyramid brand, as the Company's west coast craft beer market share reached over 8% at the end of the year, an all-time high."

"The Pyramid brand family continues to outperform the strong growth in the craft beer category," Barnum continued. "This is a great combination that should continue to help fuel the company's growth and progress. Importantly, Pyramid is the only major craft brewer to have a leading style in the four fastest growing segments of the craft beer category. With the TTB settlement and the sale of our Thomas Kemper Soda business in January 2007 behind us, we can now fully focus on leveraging momentum behind our award winning beers."

The four fastest growing segments of the craft beer category as measured by Information Resources, Inc. ("IRI"), a leading provider of enterprise market information, and the representative Pyramid brand are:

Segment   <
Pyramid Brand









Seasonal  <
Snow Cap and Curve Ball









Fruit     <
Apricot Weizen









IPA       <
Thunderhead









Wheat     <
Hefe Weizen

Financial Highlights - Fourth Quarter 2006 Compared to Fourth Quarter 2005:

Beverage Division:

-- Gross sales increased 2% to $8.9 million.

-- Gross margin decreased 16% to $2.2 million.

    -- Gross margins as a percentage of net sales for the current
       quarter were 27%, compared to 32% in the prior year period.

-- Shipments for the quarter were relatively flat at 55,700 barrels.

    -- Pyramid brand family shipments were up 8% to 39,900 barrels.

    -- Other non-Pyramid beer brand shipments were down 37% to 5,100
       barrels due primarily to the discontinuation of certain product
       styles in the MacTarnahan's and non-core beer brands.

    -- Soda shipments decreased 2% to 8,300 barrels.

Alehouse Division:

-- Gross sales decreased 4% to $3.6 million.

-- Gross margin loss decreased 94% to $6,000. The Seattle and Berkeley
   alehouses contributed to the gross margin, offset by the Walnut
   Creek, Portland and Sacramento alehouses due to fewer guest visits.

Financial Highlights - Year ended December 31, 2006 Compared to Year ended December 31, 2005:

Beverage Division:

-- Gross sales increased 11% to $39.3 million.

-- Gross margin increased 9% to $10.8 million.

    -- Excluding the effects of higher excise taxes due to the TTB
       settlement in 2006 and in 2005, factoring in higher excise
       taxes at the rate agreed to in the 2006 TTB settlement and the
       exclusion of the gain on the on the sale of brewery equipment,
       gross margins as a percentage of net sales for the current year
       were 32%, compared to 27% in the prior year.

-- Shipments for the year increased 6% to 243,100 barrels.

    -- Pyramid brand family shipments were up 18% to 163,600 barrels.

    -- Other non-Pyramid beer brand shipments were down 27% to 24,400
       barrels due primarily to the discontinuation of certain product
       styles in the MacTarnahan's and non-core beer brands.

    -- Soda shipments were relatively flat at 44,900 barrels.

Alehouse Division:

-- Gross sales decreased 2% to $15.1 million.

-- Gross margin increased 69% to $752,000. The Seattle and Berkeley
   alehouses contributed to the gross margin, offset by the Walnut
   Creek, Portland and Sacramento alehouses due to fewer guest visits.

Cash and cash equivalents and accounts receivable: Cash and cash equivalents and accounts receivable totaled $3.3 million as of December 31, 2006 which remained flat compared to December 31, 2005.

Significant Events:

Thomas Kemper Soda Sale

On January 2, 2007, the Company completed the sale of the Thomas Kemper Soda brand to The Kemper Company, a new company formed by Adventure Funds, a Portland-based equity investment fund. Under terms of the deal, Pyramid received $3.1 million in cash for Thomas Kemper Soda assets including the brand and intellectual property, soda kegs, vehicles and point of sale materials. The transaction includes a 5-year supply agreement under which Pyramid will continue to manufacture Thomas Kemper Soda products for The Kemper Company at its breweries in Portland, Oregon and Berkeley, California. Through this deal, Pyramid is further increasing its strategic focus on its beer business and is making a number of investments in its brewing infrastructure in the coming year. This includes investments in new kegs and fermentation tanks to handle additional growth, and improvements to its packaging processes to enhance production efficiencies.