Pyramid posts loss, but points to sales increase - Pyramid Breweries - Brief Article - Statistical Data Included

Modern Brewery Age, May 13, 2002

Pyramid Breweries has reported its fourteenth consecutive quarter of sales growth, with net revenues increasing 3% to $6.5 million for the first quarter ended March 31, 2002. EBITDA (Earnings before interest; taxes, depreciation and amortization) improved by $86,000 to a loss of $152,000.

The Beverage Division recorded a sales increase of 4% for the quarter, up $161,000 from the first quarter of 2001. This revenue increase reflects a slight increase in total shipments for the first quarter to 32,500 barrels from 32,100 in the same quarter of the prior year. Pyramid beer shipments increased 6% to 22,100 barrels for the first quarter of 2002, while shipments of the Thomas Kemper Soda brand were down 5% to 9,300 barrels. The reduction in soda volume is the result of a shift in the timing of promotional activity from the first quarter of 2001, to the second quarter of 2002. Thomas Kemper beer shipments also decreased 20% in the quarter, as the company continues to rationalize and retrench the brand. Net revenue per barrel for beverages increased by 2% in the quarter, reflecting strategic price increases and changes in product mix. Shipments of all beverages into the state of California, a growth area for the company, increased 17% in the quarter.

The Alehouse Division reported a sales increase of 2% for the first quarter of 2002, with the Seattle Alehouse reporting higher sales due, in part, to increased seating capacity and banquet space over the first quarter of 2001. The company opened the Walnut Creek Alehouse on May 7th and has signed a lease for a Sacramento Alehouse facility to be opened during the first quarter of 2003.

The company's gross margin for the first quarter was $1.4 million, essentially flat to the prior year with the beneficial impact of the favorable mix to beer being offset by increased labor costs in the Alehouses, including start up costs related to Walnut Creek. The gross margin on the Beverage Division was flat at $1.2 million. Sales and marketing expenses were $179,000 lower (12%) than for the same quarter of the prior year primarily due to lower promotional expenses.

The net loss for the first quarter of 2002 was $767,000 compared to a net loss of $766,000 for the same quarter of the prior year. Earnings before interest, taxes, depreciation and amortization (EBITDA) improved by $86,000 to a loss of $152,000 compared to a loss of $238,000 for the first quarter of 2001. The improvement in EBITDA would have been greater without the start up operating expenses of the Walnut Creek Alehouse facility incurred in the first quarter of 2002.

"We are encouraged by the performance of the Pyramid brand, and the overall improvement in our trends. However, we are mindful of the effects of a sluggish economy, particularly in the Northwest. We are also very cognizant of the impact higher energy costs have had on our business, and we have implemented a number of programs to reduce our costs and improve our energy prices this year vs last. In addition, we will monitor our discretionary spending carefully and look for opportunities to reduce expenses. Nonetheless, we remain confident in our ability to strengthen our competitive position within the craft beer and soda categories. We are fully committed to investing in appropriate brand building activities and our Alehouse expansion initiative," said Martin Kelly, Chairman and CEO.