UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 2003 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required) |
For the transition period from to .
Commission file number 0-27116
PYRAMID BREWERIES INC.
| Washington (State or other jurisdiction of incorporation or organization) |
91-1258355 (I.R.S. Employer Identification No.) |
91 South Royal Brougham Way,
Seattle, WA 98134
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (206) 682-8322
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No x
Common stock, par value of $.01 per share: 8,551,707 shares of Common Stock outstanding as of June 30, 2003
1
PYRAMID BREWERIES INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003
TABLE OF CONTENTS
| Page | ||||||||
| PART I | FINANCIAL INFORMATION |
|||||||
| Item 1. | Financial Statements (Unaudited) |
|||||||
Balance Sheets June 30, 2003 and December 31, 2002 |
3 | |||||||
Statements of Operations Three Month and Six Month Periods Ended June 30, 2003 and 2002 |
4 | |||||||
Statements of Cash Flows Six Month Periods Ended June 30, 2003 and 2002 |
5 | |||||||
Notes to Financial Statements |
6 | |||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition
and Results of Operations |
12 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
16 | ||||||
| Item 4. | Controls and Procedures |
16 | ||||||
| PART II | OTHER INFORMATION |
|||||||
| Item 4. | Submission of Matters to a vote of Security Holders |
16 | ||||||
| Item 6. | Exhibits and Reports on Form 8-K |
17 | ||||||
SIGNATURE |
18 | |||||||
2
PART I
Item 1 — FINANCIAL STATEMENTS
PYRAMID BREWERIES INC.
BALANCE SHEETS
(Unaudited)
| June 30, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
CURRENT ASSETS: |
||||||||||
Cash and cash equivalents |
$ | 1,135,000 | $ | 596,000 | ||||||
Short term investments |
850,000 | 2,750,000 | ||||||||
Accounts receivable, net |
2,564,000 | 1,944,000 | ||||||||
Inventories |
1,550,000 | 1,590,000 | ||||||||
Prepaid expenses and other |
363,000 | 626,000 | ||||||||
Total current assets |
6,462,000 | 7,506,000 | ||||||||
Long term investments |
492,000 | 492,000 | ||||||||
Note receivable related party |
88,000 | 94,000 | ||||||||
Fixed assets, net |
21,999,000 | 20,682,000 | ||||||||
Goodwill |
415,000 | 415,000 | ||||||||
Other assets |
93,000 | 106,000 | ||||||||
Total assets |
$ | 29,549,000 | $ | 29,295,000 | ||||||
CURRENT LIABILITIES: |
||||||||||
Accounts payable |
$ | 1,008,000 | $ | 952,000 | ||||||
Accrued expenses |
2,063,000 | 1,747,000 | ||||||||
Refundable deposits |
502,000 | 506,000 | ||||||||
Note
payable — current |
20,000 | 20,000 | ||||||||
Deferred rent — current |
199,000 | 124,000 | ||||||||
Dividends payable |
376,000 | 374,000 | ||||||||
Total current liabilities |
4,168,000 | 3,723,000 | ||||||||
Note payable, net of current |
33,000 | 31,000 | ||||||||
Deferred rent, net of current |
1,668,000 | 1,005,000 | ||||||||
Total liabilities |
5,869,000 | 4,759,000 | ||||||||
COMMITMENTS AND CONTINGENCIES |
||||||||||
STOCKHOLDERS’ EQUITY: |
||||||||||
Preferred stock, 10,000,000 shares authorized, none issued |
— | — | ||||||||
Common stock, $.01 par value; 40,000,000 shares authorized,
8,552,000 and 8,504,000 shares issued and outstanding |
86,000 | 85,000 | ||||||||
Additional paid-in capital |
36,220,000 | 36,041,000 | ||||||||
Note receivable — related party |
(772,000 | ) | (782,000 | ) | ||||||
Deferred stock-based compensation |
(61,000 | ) | (47,000 | ) | ||||||
Accumulated deficit |
(11,793,000 | ) | (10,761,000 | ) | ||||||
Total stockholders’ equity |
23,680,000 | 24,536,000 | ||||||||
Total liabilities and stockholders’ equity |
$ | 29,549,000 | $ | 29,295,000 | ||||||
The accompanying notes are an integral part of these statements.
3
PYRAMID BREWERIES INC.
STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||
Gross sales |
$ | 9,882,000 | $ | 10,177,000 | $ | 16,858,000 | $ | 17,011,000 | ||||||||
Less excise taxes |
481,000 | 472,000 | 833,000 | 814,000 | ||||||||||||
Net sales |
9,401,000 | 9,705,000 | 16,025,000 | 16,197,000 | ||||||||||||
Cost of sales |
6,901,000 | 7,021,000 | 12,369,000 | 12,158,000 | ||||||||||||
Gross margin |
2,500,000 | 2,684,000 | 3,656,000 | 4,039,000 | ||||||||||||
Selling, general and administrative expenses |
2,160,000 | 2,220,000 | 4,083,000 | 4,395,000 | ||||||||||||
Operating income (loss) |
340,000 | 464,000 | (427,000 | ) | (356,000 | ) | ||||||||||
Other income, net |
106,000 | 130,000 | 150,000 | 182,000 | ||||||||||||
Income (loss) before income taxes |
446,000 | 594,000 | (277,000 | ) | (174,000 | ) | ||||||||||
Provision for income taxes |
(1,000 | ) | — | (3,000 | ) | — | ||||||||||
Net income (loss) |
$ | 445,000 | $ | 594,000 | $ | (280,000 | ) | $ | (174,000 | ) | ||||||
Basic and diluted net income (loss) per share |
$ | 0.05 | $ | 0.07 | $ | (0.03 | ) | $ | (0.02 | ) | ||||||
Weighted average basic shares outstanding |
8,443,000 | 8,173,000 | 8,430,000 | 8,143,000 | ||||||||||||
Weighted average diluted shares outstanding |
8,665,000 | 8,242,000 | 8,430,000 | 8,143,000 | ||||||||||||
Cash dividend declared per share |
$ | 0.044 | $ | 0.044 | $ | 0.088 | $ | 0.088 | ||||||||
The accompanying notes are an integral part of these statements.
4
PYRAMID BREWERIES INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months Ended June 30, | ||||||||||
| 2003 | 2002 | |||||||||
OPERATING ACTIVITIES: |
||||||||||
Net loss |
$ | (280,000 | ) | $ | (174,000 | ) | ||||
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities: |
||||||||||
Depreciation and amortization |
1,111,000 | 1,108,000 | ||||||||
Stock-based compensation expense |
63,000 | 46,000 | ||||||||
Interest expense |
2,000 | 3,000 | ||||||||
(Gain) loss on sales of fixed assets |
1,000 | — | ||||||||
Deferred rent |
738,000 | (62,000 | ) | |||||||
Changes in operating assets and liabilities: |
||||||||||
Accounts receivable |
(620,000 | ) | (892,000 | ) | ||||||
Inventories |
40,000 | 33,000 | ||||||||
Prepaid expenses and other |
244,000 | 4,000 | ||||||||
Accounts payable and accrued expenses |
372,000 | 988,000 | ||||||||
Refundable deposits |
6,000 | (80,000 | ) | |||||||
Net cash provided by operating activities |
1,677,000 | 974,000 | ||||||||
INVESTING ACTIVITIES: |
||||||||||
Purchases of short-term investments |
(2,455,000 | ) | (873,000 | ) | ||||||
Proceeds from the sale and maturities of short-term
investments |
4,355,000 | 2,373,000 | ||||||||
Acquisitions of fixed assets |
(2,407,000 | ) | (1,381,000 | ) | ||||||
Proceeds from sales of fixed assets |
— | 11,000 | ||||||||
Net cash (used in) provided by investing activities |
(507,000 | ) | 130,000 | |||||||
FINANCING ACTIVITIES: |
||||||||||
Proceeds from the sale of common stock and option exercises |
103,000 | 162,000 | ||||||||
Note receivable |
16,000 | 6,000 | ||||||||
Cash dividends paid |
(750,000 | ) | (731,000 | ) | ||||||
Net cash used in financing activities |
(631,000 | ) | (563,000 | ) | ||||||
Increase in cash and cash equivalents |
539,000 | 541,000 | ||||||||
Cash and cash equivalents at beginning of period |
596,000 | 425,000 | ||||||||
Cash and cash equivalents at end of period |
$ | 1,135,000 | $ | 966,000 | ||||||
The accompanying notes are an integral part of these statements.
5
PYRAMID BREWERIES INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
| 1. | BASIS OF PRESENTATION: |
Pyramid Breweries Inc. (the “Company”), a Washington corporation, is engaged in the brewing, marketing and selling of craft beers and premium sodas and in restaurant operations. The Company operates breweries in Seattle, Washington, Berkeley, California and Walnut Creek California and recently constructed a fourth alehouse and brewery in Sacramento, California which opened July 3, 2003. The Company sells its beer through a network of selected independent distributors and alehouse locations primarily in Washington, Oregon and California under the Pyramid and, to a lesser extent, the Thomas Kemper brand. Pyramid also manufactures a line of gourmet sodas under the Thomas Kemper Soda Company label. As of June 30, 2003, the Company’s products were distributed in 32 states and Canada. The Company also operates four restaurants adjacent to its breweries under the Pyramid Alehouse brand name.
The accompanying condensed financial statements have been prepared by the Company, without audit, in accordance with accounting principles generally accepted in the United States for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited financial statements contain all material adjustments, consisting only of those of a normal recurring nature, considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows at the dates and for the periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year. For a presentation including all disclosures required by generally accepted accounting principles, these financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2002, included in the Annual Report on Form 10-K.
Stock Based Compensation
At June 30, 2003, the Company has stock-based compensation plans which are described more fully in Note 15 of the 2002 Annual report. The Company accounts for those plans under the recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 123 “Accounting for Stock-Based Compensation.” Accordingly, no compensation cost has been recognized for the fair value of options issued under the Employee and Director Plans (the Plans) except as described in Note 4. Had compensation cost been recognized based on the fair value at the date of grant for options awarded under the Plans, the pro forma amounts of the Company’s net income (loss) and net income (loss) per share for the periods ended June 30, 2003 and 2002, would have been as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||
Net income (loss) as reported |
$ | 445,000 | $ | 594,000 | $ | (280,000 | ) | $ | (174,000 | ) | ||||||
Add: Stock-based compensation cost as reported |
59,000 | 12,000 | 63,000 | 46,000 | ||||||||||||
Less: Stock-based compensation cost determined under the
fair value based method |
(73,000 | ) | (76,000 | ) | (125,000 | ) | (148,000 | ) | ||||||||
Net income (loss) pro forma |
$ | 431,000 | $ | 530,000 | $ | (342,000 | ) | $ | (276,000 | ) | ||||||
Basic and diluted net income (loss) per share as reported |
$ | 0.05 | $ | 0.07 | $ | (0.03 | ) | $ | (0.02 | ) | ||||||
Basic and diluted net income (loss) per share pro forma |
$ | 0.05 | $ | 0.06 | $ | (0.04 | ) | $ | (0.03 | ) | ||||||
The fair value of options granted in the second quarter ended June 30, 2003 was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions: risk-free interest rate of 3.98%; expected option lives of seven years; expected volatility of 51%; and expected future dividends of 5.5%. The fair value of options granted in the second quarter ended June 30, 2002 was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions: risk-free interest rate of 5.09%; expected option lives of seven years; expected volatility of 51%; and expected future dividends of 7.5%.
The fair value of options granted in the six month period ended June 30, 2003 was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions: risk-free interest rates ranging from 3.98% to 5.13%; expected option lives of seven years; expected volatility of 51% to 52%; and expected future dividends.
6
Revenue Recognition
The Company recognizes revenue from the sale of wholesale beer and soda products at the time of shipment, when the title of the Company’s products passes to the customer, in accordance with distributor sales agreements and collectibility is probable. The Company’s revenue from its alehouses are comprised of food, beverage and merchandise, recognized at the time of sale.
| 2. | INVENTORIES: |
| June 30, | December 31, | |||||||
| 2003 | 2002 | |||||||
Raw materials |
$ | 762,000 | $ | 821,000 | ||||
Work in process |
200,000 | 162,000 | ||||||
Finished goods |
588,000 | 607,000 | ||||||
| $ | 1,550,000 | $ | 1,590,000 | |||||
Raw materials primarily include ingredients, flavorings and packaging. Work in process includes beer held in fermentation prior to the filtration and packaging process. Finished goods primarily include product ready for shipment, as well as promotional merchandise held for sale. Inventory levels experience fluctuations in carrying levels and values based on seasonality.
| 3. | FIXED ASSETS: |
| June 30, | December 31, | |||||||
| 2003 | 2002 | |||||||
Brewery and retail equipment |
$ | 15,373,000 | $ | 15,120,000 | ||||
Furniture and fixtures |
894,000 | 916,000 | ||||||
Leasehold improvements |
15,535,000 | 15,525,000 | ||||||
Construction in progress |
2,650,000 | 609,000 | ||||||
| 34,452,000 | 32,170,000 | |||||||
Less: accumulated depreciation |
(12,453,000 | ) | (11,488,000 | ) | ||||
| $ | 21,999,000 | $ | 20,682,000 | |||||
Construction in progress includes leasehold improvements made to the Sacramento Alehouse which opened July-2003.
| 4. | NOTE RECEIVABLE RELATED PARTY |
In June 2001, the Company issued a $787,000 full recourse note to the Company’s Chief Executive Officer (CEO) in exchange for the exercise of options for 387,400 shares of the Company’s common stock. In addition, the Company issued a $115,000 full recourse note to the CEO to fund his payment of taxes on the exercise of the options. The notes are due on the earlier of June 30, 2011 or upon the sale of the stock and bear an annual interest rate of 5.6%. A total of 135,100 of those shares were unrestricted, except for being pledged as collateral for the loans, and the remaining 252,300 shares become unrestricted over the next two years. During the quarter and six month periods ended June 30, 2003, the Company recorded $57,000 and $61,000 in compensation expense, respectively, in connection with this equity arrangement, which is included in selling, general and administrative expenses.
| 5. | ACCRUED EXPENSES |
Accrued expenses consist of the following:
| June 30, | December 31, | |||||||
| 2003 | 2002 | |||||||
Salaries, wages and related accruals |
$ | 642,000 | $ | 963,000 | ||||
Barrel taxes |
386,000 | 118,000 | ||||||
Other accruals |
1,035,000 | 666,000 | ||||||
| $ | 2,063,000 | $ | 1,747,000 | |||||
7
| 6. | OTHER INCOME, NET |
Other income, net consists of interest income and parking fee income, and other insignificant non-operating income and expenses.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||
Interest income |
$ | 13,000 | $ | 24,000 | $ | 37,000 | $ | 55,000 | ||||||||
Interest expense |
(1,000 | ) | (2,000 | ) | (2,000 | ) | (4,000 | ) | ||||||||
Parking income |
83,000 | 96,000 | 92,000 | 109,000 | ||||||||||||
Loss on sale of assets |
(1,000 | ) | (1,000 | ) | (1,000 | ) | — | |||||||||
Other income (expense) |
12,000 | 13,000 | 24,000 | 22,000 | ||||||||||||
Other income, net |
$ | 106,000 | $ | 130,000 | $ | 150,000 | $ | 182,000 | ||||||||
| 7. | EARNINGS PER SHARE |
Basic earnings (loss) per share was computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period, excluding shares subject to repurchase. Diluted earnings per share was computed by dividing net income by the weighted average number of common shares of common stock outstanding plus additional common shares that would be outstanding from in-the-money stock options upon application of the treasury stock method. The effect of stock options has not been included in the calculation of diluted net loss per share as the effect is antidilutive. Options to purchase approximately 183,000 and 263,000 shares of common stock were outstanding as of June 30, 2003 and 2002, respectively, but were not included in the computation of EPS because their effects are antidilutive.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
Earnings: |
||||||||||||||||||
Net income (loss) |
$ | 445,000 | $ | 594,000 | $ | (280,000 | ) | $ | (174,000 | ) | ||||||||
Shares: |
||||||||||||||||||
Weighted average shares outstanding |
8,543,000 | 8,345,000 | 8,530,000 | 8,315,000 | ||||||||||||||
Shares subject to repurchase |
(100,000 | ) | (172,000 | ) | (100,000 | ) | (172,000 | ) | ||||||||||
Weighted average basic shares outstanding |
8,443,000 | 8,173,000 | 8,430,000 | 8,143,000 | ||||||||||||||
Basic earnings per share |
$ | 0.05 | $ | 0.07 | $ | (0.03 | ) | $ | (0.02 | ) | ||||||||
Stock option dilution |
222,000 | 69,000 | — | — | ||||||||||||||
Weighted average diluted shares outstanding |
8,665,000 | 8,242,000 | 8,430,000 | 8,143,000 | ||||||||||||||
Diluted earnings per share |
$ | 0.05 | $ | 0.07 | $ | (0.03 | ) | $ | (0.02 | ) | ||||||||
| 8. | STOCKHOLDERS’ EQUITY |
| Common Stock | Additional | Total | |||||||||||||||||||||||||||
| Paid-In | Note | Deferred | Accumulated | Stockholders' | |||||||||||||||||||||||||
| Shares | Amount | Capital | Receivable | Compensation | Deficit | Equity | |||||||||||||||||||||||
Balance at December 31, 2002 |
8,504,000 | 85,000 | $ | 36,041,000 | $ | (782,000 | ) | $ | (47,000 | ) | $ | (10,761,000 | ) | $ | 24,536,000 | ||||||||||||||
Net loss |
— | — | — | — | — | (280,000 | ) | (280,000 | ) | ||||||||||||||||||||
Shares issued |
48,000 | 1,000 | 102,000 | — | — | — | 103,000 | ||||||||||||||||||||||
Stock compensation including
amortization of stock compensation |
— | — | 77,000 | — | (14,000 | ) | — | 63,000 | |||||||||||||||||||||
Note repayment |
— | — | — | 10,000 | — | — | 10,000 | ||||||||||||||||||||||
Dividends declared |
— | — | — | — | — | (752,000 | ) | (752,000 | ) | ||||||||||||||||||||
Balance at June 30, 2003 |
8,552,000 | 86,000 | $ | 36,220,000 | $ | (772,000 | ) | $ | (61,000 | ) | $ | (11,793,000 | ) | $ | 23,680,000 | ||||||||||||||
| 9. | COMMITMENTS AND CONTINGENCIES: |
The Company is involved from time to time in claims, proceedings and litigation arising in the ordinary course of business. The Company does not believe that any such claim, proceeding or litigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position or results of operations.
8
| 10. | CASH DIVIDEND: |
The Board of Directors announced on May 8, 2003, the declaration of a $0.044 per common share dividend payable on July 11, 2003 to shareholders of record on June 30, 2003. The Board of Directors also announced, on August 8, 2003, the declaration of a $0.044 per common share dividend payable on October 10, 2003 to shareholders of record on September 30, 2003. The cash dividends declared totaled approximately $375,000 for all common stock outstanding as of each record date.
Cash dividends declared per common share:
| Three Months Ended | Six Months Ended | |||||||
| June 30, | June 30, | |||||||
2003 |
$ | 0.044 | $ | 0.088 | ||||
2002 |
$ | 0.044 | $ | 0.088 | ||||
Although the Company has declared and paid a dividend every quarter since the fourth quarter of 1999, continued future declaration of dividends will depend, among other things, on the Company’s results of operations, capital requirements and financial condition, and on such other factors as the Company’s Board of Directors may in its discretion consider relevant and in the best long term interest of the shareholders.
| 11. | SEGMENT INFORMATION: |
The Company follows the provisions of SFAS No. 131 “Disclosures about Segments of an Enterprise and Related Information,” and reports segment information in the same format as reviewed by the Company’s management (the Management Approach), which is organized around differences in products and services.
Products and Services
The Company’s reportable segments include beverage operations and alehouses. Beverage operations include the production and sale of Pyramid ales and lagers, Thomas Kemper beers and Thomas Kemper Soda Company products. The alehouse segment consists of full-service alehouses, which market and sell the full line of the Company’s beer and soda products as well as food and certain merchandise.
Factors used to identify reportable segments
The Company’s reportable segments are strategic business units that offer different products and services. These segments are managed separately because each business requires different production, management and marketing strategies.
Measurement of segment profit and segment assets
The accounting policies of the segments are the same as those described in the summary of critical accounting policies included in the notes to the financial statements included in the Company’s current Form 10-K. The Company evaluates performance based on profit or loss from operations before income taxes not including nonrecurring gains and losses. The Company records intersegment sales at cost.
9
Segment profit and segment assets are as follows:
| Beverage | |||||||||||||||||
| Operations | Alehouse | Other | Total | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
Quarter ended June 30, 2003: |
|||||||||||||||||
Gross revenues from external customers |
$ | 6,981 | $ | 2,901 | $ | — | $ | 9,882 | |||||||||
Net revenues from external customers |
6,500 | 2,901 | — | 9,401 | |||||||||||||
Intersegment revenues |
107 | — | (107 | ) | — | ||||||||||||
Interest income |
— | — | 13 | 13 | |||||||||||||
Depreciation and amortization |
386 | 122 | 49 | 557 | |||||||||||||
Operating (loss) income |
1,171 | 291 | (1,122 | ) | 340 | ||||||||||||
Capital expenditures |
141 | 1,440 | 60 | 1,641 | |||||||||||||
Total assets |
19,251 | 6,596 | 3,702 | 29,549 | |||||||||||||
Quarter ended June 30, 2002: |
|||||||||||||||||
Gross revenues from external customers |
$ | 7,256 | $ | 2,921 | $ | — | $ | 10,177 | |||||||||
Net revenues from external customers |
6,784 | 2,921 | — | 9,705 | |||||||||||||
Intersegment revenues |
107 | — | (107 | ) | — | ||||||||||||
Interest income |
— | — | 24 | 24 | |||||||||||||
Depreciation and amortization |
383 | 109 | 48 | 540 | |||||||||||||
Operating (loss) income |
819 | 333 | (688 | ) | 464 | ||||||||||||
Capital expenditures |
76 | 515 | 129 | 720 | |||||||||||||
Total assets |
15,775 | 4,401 | 9,574 | 29,750 | |||||||||||||
Six months ended June 30, 2003: |
|||||||||||||||||
Gross revenues from external customers |
$ | 11,604 | $ | 5,254 | $ | — | $ | 16,858 | |||||||||
Net revenues from external customers |
10,771 | 5,254 | — | 16,025 | |||||||||||||
Intersegment revenues |
180 | — | (180 | ) | — | ||||||||||||
Interest income |
— | — | 37 | 37 | |||||||||||||
Depreciation and amortization |
774 | 236 | 101 | 1,111 | |||||||||||||
Operating (loss) income |
1,113 | 407 | (1,947 | ) | (427 | ) | |||||||||||
Capital expenditures |
389 | 1,939 | 79 | 2,407 | |||||||||||||
Total assets |
19,251 | 6,596 | 3,702 | 29,549 | |||||||||||||
Six months ended June 30, 2002: |
|||||||||||||||||
Gross revenues from external customers |
$ | 12,238 | $ | 4,773 | $ | — | $ | 17,011 | |||||||||
Net revenues from external customers |
11,424 | 4,773 | — | 16,197 | |||||||||||||
Intersegment revenues |
171 | — | (171 | ) | — | ||||||||||||
Interest income |
— | — | 55 | 55 | |||||||||||||
Depreciation and amortization |
818 | 207 | 83 | 1,108 | |||||||||||||
Operating (loss) income |
673 | 418 | (1,447 | ) | (356 | ) | |||||||||||
Capital expenditures |
151 | 1,083 | 147 | 1,381 | |||||||||||||
Total assets |
15,775 | 4,401 | 9,574 | 29,750 | |||||||||||||
Other
Other consists of interest income, general, administrative and marketing expense, corporate office assets and other reconciling items that are not allocated to segments for internal management reporting purposes. Total assets include all assets except for accounts receivable, inventory, goodwill and fixed assets, which are presented by segment.
Certain 2002 operating income balances have been reclassified to conform to the 2003 presentation.
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| 12. | NEW ACCOUNTING PRONOUNCEMENTS: |
In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The statement is now effective. The adoption of SFAS No. 143 did not have a material impact on the Company’s financial position or results of operations.
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Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain selected unaudited operating data, expressed as a percentage of net sales.
SELECTED UNAUDITED OPERATING DATA
| Three Months Ended June 30, | |||||||||||||||||
| % of | % of | ||||||||||||||||
| 2003 | Net Sales | 2002 | Net Sales | ||||||||||||||
Gross sales |
$ | 9,882,000 | $ | 10,177,000 | |||||||||||||
Less excise taxes |
481,000 | 472,000 | |||||||||||||||
Net sales |
9,401,000 | 100.0 | 9,705,000 | 100.0 | |||||||||||||
Cost of sales |
6,901,000 | 73.4 | 7,021,000 | 72.3 | |||||||||||||
Gross margin |
2,500,000 | 26.6 | 2,684,000 | 27.7 | |||||||||||||
Selling, general and administrative expenses |
2,160,000 | 23.0 | 2,220,000 | 22.9 | |||||||||||||
Operating loss |
340,000 | 3.6 | 464,000 | 4.8 | |||||||||||||
Other income, net |
106,000 | 1.1 | 130,000 | 1.3 | |||||||||||||
Loss before income taxes |
446,000 | 4.7 | 594,000 | 6.1 | |||||||||||||
Benefit for income taxes |
(1,000 | ) | (0.0 | ) | — | — | |||||||||||
Net income |
$ | 445,000 | 4.7 | $ | 594,000 | 6.1 | |||||||||||
Basic and diluted net income per share |
$ | 0.05 | $ | 0.07 | |||||||||||||
Weighted average shares outstanding |
8,443,000 | 8,173,000 | |||||||||||||||
Operating data (in barrels): |
|||||||||||||||||
Beer barrels shipped |
32,000 | 32,000 | |||||||||||||||
Soda barrels shipped |
14,000 | 15,000 | |||||||||||||||
Total barrels shipped |
46,000 | 47,000 | |||||||||||||||
Annual production capacity |
203,000 | 200,000 | |||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||
| % of | % of | ||||||||||||||||
| 2003 | Net Sales | 2002 | Net Sales | ||||||||||||||
Gross sales |
$ | 16,858,000 | $ | 17,011,000 | |||||||||||||
Less excise taxes |
833,000 | 814,000 | |||||||||||||||
Net sales |
16,025,000 | 100.0 | 16,197,000 | 100.0 | |||||||||||||
Cost of sales |
12,369,000 | 77.2 | 12,158,000 | 75.1 | |||||||||||||
Gross margin |
3,656,000 | 22.8 | 4,039,000 | 24.9 | |||||||||||||
Selling, general and administrative expenses |
4,083,000 | 25.5 | 4,395,000 | 27.1 | |||||||||||||
Operating loss |
(427,000 | ) | (2.7 | ) | (356,000 | ) | (2.2 | ) | |||||||||
Other income, net |
150,000 | 0.9 | 182,000 | 1.1 | |||||||||||||
Loss before income taxes |
(277,000 | ) | (1.8 | ) | (174,000 | ) | (1.1 | ) | |||||||||
Benefit for income taxes |
(3,000 | ) | (0.0 | ) | — | — | |||||||||||
Net loss |
$ | (280,000 | ) | (1.8 | ) | $ | (174,000 | ) | (1.1 | ) | |||||||
Basic and diluted net loss per share |
$ | (0.03 | ) | $ | (0.02 | ) | |||||||||||
Weighted average shares outstanding |
8,430,000 | 8,143,000 | |||||||||||||||
Operating data (in barrels): |
|||||||||||||||||
Beer barrels shipped |
55,000 | 55,000 | |||||||||||||||
Soda barrels shipped |
21,000 | 24,000 | |||||||||||||||
Total barrels shipped |
76,000 | 79,000 | |||||||||||||||
Annual production capacity |
203,000 | 200,000 | |||||||||||||||
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QUARTER ENDED JUNE 30, 2003 COMPARED TO QUARTER ENDED JUNE 30, 2002
Gross Sales. Gross sales decreased 2.9% to $9,882,000 in the second quarter ended June 30, 2003 from $10,177,000 in the same quarter of 2002. Wholesale beverage sales decreased 3.8% to $6,982,000 in the second quarter ended June 30, 2003 from $7,256,000 in the same quarter of 2002. Total beverage barrel shipments decreased 2.1% compared to prior year. Pyramid beer brand shipments increased 1.2% to 31,000 barrels, while Thomas Kemper beer continued its planned decline. Total beer shipments, including Thomas Kemper beer, increased by 1.0% to 32,000 barrels. Shipments of Thomas Kemper Soda decreased by 10.1% to 14,000 barrels from 15,000 barrels in the same quarter of the prior year. The reduction in soda volume is the result of softening demand for specialty sodas, as measured by Nielsen supermarket data, specifically in the Northwest which is the Company’s largest market. Alehouse sales decreased 0.7%, to $2,900,000 in the second quarter ended June 30, 2003, from $2,921,000 in the same quarter of 2002. Excluding the Walnut Creek Alehouse, which opened in May 2002, the same store alehouse sales decreased $121,000 or 5.2% largely due to lower traffic at the Berkeley, California and Seattle Washington Alehouse locations.
Excise Taxes. Excise taxes totaled 4.8% and 4.6% of gross sales for the quarters ended June 30, 2003 and 2002, respectively. The increase in excise taxes as a percentage of gross sales was due mainly to a greater portion of beer sales, resulting from the decrease in soda sales which do not bear excise tax.
Gross Margin. Gross margin decreased $184,000 to $2,500,000, down 6.9% in the second quarter ended June 30, 2003. This decrease as a percentage of net sales was due in part to (1) lower net selling prices, higher material costs and lower volumes on the beverage side of the business, (2) increased insurance and benefit costs and (3) $89,000 of pre-opening costs for the Sacramento Alehouse.
| Three Months Ended June 30, | |||||||||||||||||||||||||
| % of Div. | % of Div. | ||||||||||||||||||||||||
| 2003 | Net Sales | 2002 | Net Sales | $ Change | % Change | ||||||||||||||||||||
Gross Margin |
|||||||||||||||||||||||||
Beverage Division |
$ | 2,167,000 | 33.3 | % | $ | 2,310,000 | 34.0 | % | $ | (143,000 | ) | -6.2 | % | ||||||||||||
Alehouse Division |
333,000 | 11.5 | % | 374,000 | 12.8 | % | (41,000 | ) | -11.0 | % | |||||||||||||||
Total |
$ | 2,500,000 | 26.6 | % | $ | 2,684,000 | 27.7 | % | $ | (184,000 | ) | -6.9 | % | ||||||||||||
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased 2.7% to $2,160,000 or 23.0% of net sales for the second quarter ended June 30, 2003 from $2,220,000 or 22.9% of net sales for the same quarter of 2002.
Other Income, net. Other income, net was approximately $106,000 and 1.1% of net sales for the second quarter ended June 30, 2003 compared to $130,000 and 1.3% of net sales in the same quarter of 2002. See footnote #6 – Other Income, Net for greater detail.
Income Taxes. The Company recorded approximately $1,000 of income tax expense in the second quarter related to certain state tax expense. For the most part, however, the Company recorded no income tax for the quarters ended June 30, 2003 and 2002.
Net Income. The Company reported a net income of $445,000 for the second quarter ended June 30, 2003 compared to a net income of $594,000 in the same quarter of 2002.
Other. The Sacramento Alehouse opened its doors to the public on July 3, 2003. The 295 seat restaurant and brewery will occupy approximately 9,500 square feet on the first floor of a historical building. As of June 30, 2003 approximately $2,124,000 has been spent on the build-out of the new alehouse location.
SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002
Gross Sales. Gross sales decreased 0.9% to $16,858,000 for the six month period ended June 30, 2003 from $17,011,000 in the same period of 2002. Wholesale beverage sales decreased 5.2% to $11,604,000 for the six month period ended June 30, 2003 from $12,238,000 in the same period of 2002. Total beverage barrel shipments decreased 4.3% compared to prior year. Pyramid beer brand shipments increased 1.0% to 53,000 barrels, while Thomas Kemper beer declined 19.7% to 1,700 barrels. Shipments of Thomas Kemper Soda decreased by 14.6% to 21,000 barrels from 24,000 barrels in the same six month period of the prior year. Alehouse sales increased 10.1%, to $5,254,000 in the six month period ended June 30, 2003, from $4,773,000 in the same period of 2002. The increase was driven by the Walnut Creek Alehouse, open in May 2002, contributing $1,335,000 in sales. Excluding the Walnut Creek Alehouse, which opened in May 2002, the same store alehouse sales decreased $246,000 or 5.9% largely due to lower traffic at the Berkeley, California and Seattle Washington Alehouse locations.
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Excise Taxes. Excise taxes totaled 4.9% and 4.7% of gross sales for the six month periods ended June 30, 2003 and 2002, respectively. The increase in excise taxes as a percentage of gross sales was due mainly to a greater portion of beer sales, resulting from the decrease in soda sales which do not bear excise tax.
Gross Margin. Gross margin decreased $384,000 to $3,656,000, down 9.5% for the six month period ended June 30, 2003.
| Six Months Ended June 30, | |||||||||||||||||||||||||
| % of Div. | % of Div. | ||||||||||||||||||||||||
| 2003 | Net Sales | 2002 | Net Sales | $ Change | % Change | ||||||||||||||||||||
Gross Margin |
|||||||||||||||||||||||||
Beverage Operations |
$ | 3,154,000 | 29.3 | % | $ | 3,520,000 | 30.8 | % | $ | (366,000 | ) | -10.4 | % | ||||||||||||
Alehouse Operations |
502,000 | 9.6 | % | 519,000 | 10.8 | % | (17,000 | ) | -3.3 | % | |||||||||||||||
Total Operations |
$ | 3,656,000 | 22.8 | % | $ | 4,039,000 | 24.9 | % | $ | (383,000 | ) | -9.5 | % | ||||||||||||
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased 7.5% to $4,083,000 or 25.5% of net sales for the six month period ended June 30, 2003 from $4,395,000 or 27.1% of net sales for the same period of 2002.
Other Income, net. Other income, net was approximately $150,000 and 0.9% of net sales for the six month period ended June 30, 2003 compared to $182,000 and 1.1% of net sales in the same period of 2002. See footnote #6 – Other Income, Net for greater detail.
Income Taxes. The Company recorded approximately $3,000 of income tax expense in the six month period ended June 30, 2003 related to certain state tax expense. For the most part, however, the Company recorded no income tax for the periods ended June 30, 2003 and 2002. As of December 31, 2002, the Company had approximately $6.8 million in deferred tax assets arising from deductible temporary differences and tax loss carryforwards. A valuation allowance was recorded against the deferred tax asset for the benefits of tax losses which may not be realized. Realization of the deferred tax assets is dependent on the Company’s ability to generate future U.S. taxable income. The Company does not believe that its net deferred assets meet the “more likely than not” realization criteria of SFAS No. 109. Accordingly, a full valuation allowance has been established. The Company will continue to evaluate the realizability of the deferred tax assets quarterly by assessing the need for and amount of a valuation allowance.
Net Loss. The Company reported a net loss of $280,000 for the six month period ended June 30, 2003 compared to a net loss of $174,000 in the same period of 2002.
LIQUIDITY AND CAPITAL RESOURCES
The Company had approximately $1,985,000 of cash, cash equivalents and short-term investments at June 30, 2003 compared to $3,346,000 at December 2002. At June 30, 2003, the Company had working capital of $2,294,000 compared to $3,783,000 at December 31, 2002. The $1,489,000 decrease in working capital is a result of the capital spending related to the build-out costs of the Sacramento Alehouse, reflected in an approximate $1,361,000 decrease in cash and short-term investments, and a $620,000 increase in accounts receivable, offset by other various current asset and liability changes.
Net cash provided by operating activities during the six month period ended June 30, 2003 was approximately $1,677,000 compared to $974,000 for the same period of the prior year. The increase in net cash provided by operating activities was due primarily to a tenant improvement credit of $800,000 paid to Pyramid Breweries Inc. by the landlord of the Sacramento Alehouse. The $800,000 cash receipt was recorded as a deferred rent liability and will be amortized over the life of the lease.
Net cash used in investing activities for the six month period ended June 30, 2003 was $507,000 compared to net cash provided by investing activities of $130,000 for the same period of the prior year. The cash used in investing activities in 2003 included approximately $1,752,000 used to build-out the new Sacramento Alehouse which opened in July 2003. The capital expenditures were offset by the sale of $1,900,000 of short-term investments. Short-term investment sales of $1,500,000 were made during the same six month period of 2002.
At June 30, 2003, the Company’s commitment to make future payments under contractual obligations was as follows:
| More Than | ||||||||||||||||
| Total | Within Year | 1 - 3 years | 3 - 5 years | 5 years | ||||||||||||
| Operating leases Note payable (1) |
$9,567,000 60,000 | $ | 688,000 20,000 | $ | 2,271,000 40,000 | $2,217,000 — |
$4,391,000 — | |||||||||
| (1) | - The amounts are payments as stated in the non-interest bearing note. The note payable was recorded using a 10% discount rate on the balance sheet. |
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On December 15, 1999, the Company announced its first regular quarterly cash dividend and has declared and paid a quarterly cash dividend each consecutive quarter since the initial declaration. During the quarter ended June 30, 2003 the Company declared per share dividends of $0.044 and paid out $375,000 in cash dividends. Although the Company has declared and paid a dividend every quarter since the fourth quarter of 1999, continued future declaration of dividends will depend, among other things, on the Company’s results of operations, capital requirements and financial condition, and on such other factors as the Company’s Board of Directors may in its discretion consider relevant and in the best long term interest of the shareholders.
On December 15, 1999, the Company also announced a stock buyback plan to repurchase up to $2,000,000 of the Company’s common stock from time to time on the open market. Stock purchases are at the discretion of management and depend, among other things, on the Company’s results of operations, capital requirements and financial condition, and on such other factors as the Company’s management may consider relevant. As of June 30, 2003, the Company has purchased a total of 457,724 shares at an average price of $1.94 per share for a total of $892,000 since the inception of the program. During the six month period ended June 30, 2003, the Company did not purchase any shares.
Future capital requirements may vary depending on such factors as the cost of acquisition of businesses, brands and real estate costs in the markets selected for future expansion, whether such real estate is leased or purchased and the extent of improvements necessary. Planned projects include the Sacramento Alehouse development which opened in July of 2003 and the upgrading of brewing equipment and alehouse facilities in the Seattle and Berkeley locations. The Company estimates that total Alehouse development costs to be incurred in 2003 will be approximately $2,200,000 before any tenant improvement credits. While there can be no assurance that current expectations will be realized and plans are subject to change upon further review, the Company believes that its cash balances, together with cash from operations, will be sufficient for the Company’s working capital needs.
Critical Accounting Policies
The Company believes that its critical accounting policies include the following:
| • | Long-lived assets impairment | |
| • | Realization of deferred tax assets | |
| • | Stock-based compensation |
Long-Lived Assets Impairment. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company’s evaluation is based on an estimate of the future undiscounted net cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. Long-lived assets to be disposed of are evaluated in relation to the estimated fair value of such assets less the estimated costs to sell. Long-lived assets are written down to their estimated net fair value calculated using a discounted future cash flow analysis in the event of an impairment. Effective in the fiscal year 2002, the Company accounts for long-lived assets in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” If circumstances related to the Company’s long-lived assets change, the Company’s valuation of the long-lived assets could materially change.
Realization of Deferred Tax Assets. The Company evaluates the realizability of its deferred tax assets quarterly by assessing the need for and amount of the valuation allowance. The evaluation of the realizability of the deferred tax assets is based on an assessment of the Company’s ability to generate future U.S. taxable income. Results of operations in recent years are considered in the assessment. The Company records a valuation allowance for the portion of its deferred tax assets that do not meet the recognition criteria of SFAS No. 109 “Accounting for Income Taxes.” If circumstances related to the Company’s ability to generate future U.S. taxable income change, the Company’s evaluation of the realizability of its deferred tax assets could materially change.
Stock-Based Compensation. The Company follows Accounting Principles Board Opinion No. 25 (APB 25), “Accounting for Stock Issued to Employees”, in accounting for its employee stock options using the fair value based method. Under APB 25, because the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized in the Company’s Statements of Operations. The Company is required under SFAS No. 123, “Accounting for Stock-Based Compensation”, to disclose pro forma information regarding option grants made to its employees based on specific valuation techniques that produce estimated compensation charges. The Black-Scholes option pricing model is used by the Company in estimating the fair value of options. If the Company changes the accounting for stock-based compensation, the Company’s results of operations could materially change.
RISK FACTORS AND FORWARD LOOKING STATEMENTS
The Company does not provide forecasts of future financial performance. However, this report contains forward looking statements: discussions of a number of matters and subject areas that are not historical or current facts but that address potential future circumstances, operations, and prospects. These forward-looking statements are subject to the “safe harbor” created by Section 21E of the Securities Exchange Act of 1934, are qualified by the inherent risks and uncertainties surrounding future expectations generally and may differ
15
materially from the Company’s actual future experience as a result of such factors as: the effects of increased competition from regional craft brewers and major breweries, the Company’s ability to gain and continue access to the markets through independent distributors and chain stores, the effects of governmental regulation and the Company’s ability to obtain and maintain necessary permits, licenses and approvals, the Company’s ability to maintain or increase the price of its products without decreasing demand and the Company’s ability to maintain or increase operating margins which may decline as a result of lower sales volumes or selling prices and increased production, transportation and promotions costs. Investors are cautioned that all forward-looking statements involve a high degree of risk and uncertainty. Additional information concerning those and other factors is contained in the Company’s Securities and Exchange Commission filings including its Form 10-K for the year ended December 31, 2002.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
The Company has not and does not currently have any intention to hold any derivative instruments or engage in hedging activities. Also, the Company does not have any outstanding variable rate debt and does not enter into significant transactions denominated in foreign currency. Therefore, the Company’s direct exposure to risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices, and other market changes that affect market risk sensitive instruments is not material.
The Company does maintain an investment portfolio of various holdings, types and maturities. These securities are generally classified as available for sale and, consequently, are recorded on the balance sheets at fair value. At any time, a rise or decrease in interest rates could have a material impact on interest earnings of the investment portfolio. The Company currently does not hedge interest rate exposures.
ITEM 4. Controls and Procedures
Procedures
Evaluation of disclosure controls and procedure
The Company maintains a set of disclosure controls and procedures and internal controls designed to ensure that information required to be disclosed in its filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
Changes in internal controls
There were no changes in the Company’s internal control over financial reporting in connection with this evaluation that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual shareholder meeting was held on May 7, 2003. The following proposals were voted upon by the shareholders with results as follows:
| Proposal 1: Elect two member of the Board of Directors for three year terms |
| Proposal 2: To approve the 2003 Employee Stock Purchase Plan and the reservation of 500,000 shares of Common Stock |
| Proposal 3: To approve a Directors Compensation Plan and the reservation of 125,000 shares of Common Stock |
| Proposal 4: To approve an amendment to the Amended and Restated 1995 Employee Stock Option Plan |
| Proposal 5: To ratify the appointment of KPMG LLP as the Company’s independent auditors for the fiscal year ending 2003. |
16
| Votes | ||||||||||||
| For | Against | Abstain | ||||||||||
Nancy Mootz |
7,898,759 | — | 347,131 | |||||||||
Scott Svenson |
7,898,759 | — | 347,131 | |||||||||
Proposal 2 |
3,343,307 | 65,885 | 1,955 | |||||||||
Proposal 3 |
3,264,709 | 141,030 | 8,408 | |||||||||
Proposal 4 |
2,919,272 | 467,745 | 27,130 | |||||||||
Proposal 5 |
8,320,127 | 9,630 | 7,133 | |||||||||
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
| (A) | EXHIBITS |
The following exhibits are filed as part of this report.
| 3.1* | Amended and Restated Articles of Incorporation | |
| 3.2* | Amended and Restated Bylaws | |
| 31.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002: R. Martin Kelly, President and Chief Executive Officer | |
| 31.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002: Eric G. Peterson, Vice-President and Chief Financial Officer | |
| 31.3 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002: Jason W. Rees, Controller and Chief Accounting Officer | |
| 32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002: R. Martin Kelly, President and Chief Executive Officer | |
| 32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002: Eric G. Peterson, Vice-President and Chief Financial Officer | |
| 32.3 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002: Jason W. Rees, Controller and Chief Accounting Officer |
| * | Incorporated by reference to the exhibits filed as part of the Company’s Registration Statement on Form S-1 (File No. 33-97834). |
| (B) | REPORTS ON FORM 8-K |
A report on Form 8-K was filed during the quarter ended June 30, 2003 on May 1, 2003.
Items 1, 2, 3 and 5 of PART II are not applicable and have been omitted
17
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned; thereunto duly authorized, in the City of Seattle, State of Washington, on August 14, 2003.
| PYRAMID BREWERIES INC. | |||||
| By: | /s/ R. MARTIN KELLY | ||||
| R. Martin Kelly, President and Chief Executive Officer | |||||
| By: | /s/ ERIC G. PETERSON | ||||
| Eric G. Peterson, Vice-President and Chief Financial Officer | |||||
| By: | /s/ JASON W. REES | ||||
| Jason W. Rees, Controller and Chief Accounting Officer | |||||
| DATE: August 14, 2003 | |||||
18