USA: Pyramid Breweries Inc. reporting general growth in the first quarter 2006

Pyramid Breweries Inc. announced on May 04 the results for the first quarter of 2006. Gross sales revenue for the quarter ended March 31, 2006 was $11.5 million, representing overall growth of 10%, or $1.0 million, as compared to the first quarter a year ago. This growth was driven primarily by increased shipment volume of 32% in the core Pyramid Brand Family and contributed to the 65% increase, or $976,000, in gross margin to $2.5 million. Favorable pricing, combined with a decrease in per barrel costs related to consolidating production operations, also contributed to the gross margin increase. Additionally, gross margin as a percentage of sales increased to 23% in the quarter ended March 31, 2006 from 15% in the same period in 2005. Net loss for the quarter improved 55% to $505,000, or ($0.06) per share, compared to a $1.1 million loss or ($0.13) per share a year ago. Company EBITDA for the quarter improved 183% to $255,000 from a loss of $307,000 last year.

"The entire brewing industry performed exceptionally well during the first quarter, with the craft beer category continuing to flourish," said John Lennon, the Company's Chief Executive Officer. "Benefiting from this trend and our renewed focus in sales and marketing resources, the Pyramid Brand is successfully driving sales volume and revenue growth. In particular, we are seeing improving results emerge from our expansion in the Southwestern states," Lennon noted. "All measures of beverage division sales performance were favorable, in part due to new draught accounts and improvements in same store sales."

Beverage segment gross sales of $8.2 million represented an increase of 15%, or $1.0 million, compared to the same period in 2005, driven by an 8% increase in shipments to 51,000 barrels for the quarter. This increase in shipment volume is primarily attributable to the increase in Pyramid Brand Family shipments and more specifically to the increased market acceptance of the Hefeweizen style. As sales volumes for the Pyramid Family have increased, production and selling efficiencies have improved operating margins in the beverage segment.

The strength of the Pyramid brand was offset somewhat by declines in other brands. Thomas Kemper Soda and MacTarnahan's Brand ("Mac's") shipment volumes were down 17% and 26%, respectively, compared to the same period in 2005. The decrease in soda volumes is largely attributed to timing of orders from large retail customers. The Mac's Brand shipment decrease is primarily the result of intense competition in the brand's primary Oregon market coupled with a reduction in the Mac's Brand product portfolio since the first quarter of 2005.

The Company noted favorable trends exhibited in the on-premise environment, where same store draught sales have improved in all major markets. "Investment in sales resources has spurred an up-tick in new draught accounts, which serve as an incubator for new consumers," Lennon stated. The Company's on-premise success has translated into off-premise volume growth as demonstrated by the continued double-digit growth for the Pyramid Brand Family throughout the Western U.S. during the first quarter of 2006. This is based upon recent market research data from Information Resources Inc. ("IRI") Reports, (IRI is a leading provider of enterprise market information.) Sales volume and market share for the Pyramid Brand Family are up in nine out of the ten IRI markets tracked by the Company.

Alehouse segment sales remained flat at $3.4 million for the quarter as compared to the same quarter a year ago. This was primarily due to flat sales in the Company's Seattle and Sacramento locations with single digit sales growth increases in the Berkeley and Walnut Creek locations offset by sales declines in the Portland MacTarnahan's Taproom. The alehouse segment operating loss in the first quarter improved 52% to a loss of $29,000 as compared to a loss of $60,000 in 2005.

"In the alehouse segment," Lennon stated, "close control of costs has resulted in improving operating performance and EBITDA, despite flat revenues. Our California Alehouses were affected by unusually rainy weather, during the first quarter of 2006, which virtually shut down our popular patio dining operations at all three California locations. The MacTarnahan's Taproom in Portland is performing below prior year's levels placing significant pressure on total alehouse division delivery."

In assessing the Company's position, Lennon noted, "The true test will come during the second quarter, where we will be cycling sales volumes against the comparable period in 2005 which inaugurated operating efficiency improvements and significant sales volume and revenue growth."

Financial Position and Operating results for the quarter ended March 31, 2006 included:

Net sales: Net sales for the quarter increased by $956,000, or 10%, to $10.9 million as compared to $9.9 million in the first quarter of 2005.

Volume: Shipments of beer increased 15% to 42,700 barrels for the first quarter 2006 compared to the same quarter in the prior year, and shipments of Thomas Kemper brand soda decreased 17% to 7,900 barrels. The beer shipments increase was comprised primarily of increases in the Pyramid Brand Family of 32% to 35,400 barrels offset by decreases in Mac's of 26% to 3,500 barrels and in the Allied Brands of 22% to 1,700 barrels. The elimination of brands contributed to a total decrease in beer shipments of over 3,500 barrels compared to the first quarter of 2005.

Beverage division net sales: Net sales for the beverage division increased 15% to $7.5 million for the first quarter of 2006 over the same period in 2005, primarily driven by increases in Pyramid Brand Family sales volume and a small increase in pricing to offset increasing energy and transportation costs.

Gross margins: Gross margin for the first quarter of $2.5 million was up $974,000, or 65%, versus the same period a year ago driven by increasing sales volumes, more favorable pricing and improvements in per barrel costs in the beverage division.

Net loss: Net loss for the quarter improved 55% to $505,000, compared to $1.1 million loss a year ago. Contributing to the net loss was an increase in general and administrative expenses of $456,000 to $1.2 million due primarily to legal fees associated with the Portland Brewing Company contract brewing and Portland Taproom management arrangements, as well as increased consultancy costs.

Cash and cash equivalents and accounts receivable: Cash and cash equivalents and account receivable totaled $2.6 million as of March 31, 2006, a decrease of $650,000 from December 31, 2005.

Pyramid Breweries Inc. is a leading brewer of specialty, full-flavored beers and sodas, produced mainly under the Pyramid, MacTarnahan's and Thomas Kemper brand names. The independent company owns two alehouse restaurants adjacent to its full-production breweries under the Pyramid Alehouse and MacTarnahan Taproom brand names in Berkeley, California and Portland, Oregon, respectively, and three alehouse restaurants in Walnut Creek and Sacramento, California and Seattle, Washington.

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