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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
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 SEPTEMBER 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO______________.
COMMISSION FILE NUMBER 0-27116
________________
PYRAMID BREWERIES INC.
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1258355
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
91 SO. ROYAL BROUGHAM WAY,
SEATTLE, WA 98134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (206) 682-8322, ext. 214
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 .
--- ---
Common Stock, par value of $.01 per share: 8,214,887 shares of Common Stock
outstanding as of September 30, 1998
Pages 1 of 15 sequentially numbered pages.
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<PAGE>
PYRAMID BREWERIES INC.
FORM 10-Q
FOR THE QUARTERLY AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Balance Sheets
September 30, 1998 and December 31, 1997............................... 3
Statements of Operations
Three Month and Nine Month periods ended September 30, 1998 and 1997... 4
Statements of Cash Flows
Nine Month periods ended September 30, 1998 and 1997................... 5
Notes to Financial Statements............................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... 8
PART II OTHER INFORMATION
Item 5 Other Information 11
Item 6. Exhibits and Reports on Form 8-K........................................... 12
SIGNATURE.................................................................. 13
EXHIBIT INDEX.............................................................. 14
Exhibit 27................................................................. 15
</TABLE>
2
<PAGE>
PART I.
Item 1 -- FINANCIAL STATEMENTS
PYRAMID BREWERIES INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,974,002 $ 5,393,251
Accounts receivable, net 1,310,078 1,291,681
Inventories 1,351,128 1,110,756
Income taxes receivable 380,604 250,071
Current portion of deferred income 351,614 364,662
taxes
Prepaid expenses and other 401,900 562,602
----------------------------------
Total current assets 9,769,326 8,973,023
----------------------------------
Fixed assets, net 27,715,540 28,600,075
Deferred income taxes 390,962 101,449
Other assets 887,292 1,072,613
----------------------------------
Total assets $38,763,120 $38,747,160
==================================
Current Liabilities:
Accounts payable $ 1,171,505 $ 703,926
Accrued expenses 1,447,475 941,303
Refundable deposits 465,861 474,700
Restructuring reserve 37,558 354,148
----------------------------------
Total current liabilities 3,122,399 2,474,077
Deferred rent 721,351 573,589
----------------------------------
Total liabilities 3,843,750 3,047,666
----------------------------------
Preferred stock, 10,000,000 shares authorized,
none issued -- --
Common stock, $.01 par value; 40,000,000 shares authorized,
8,214,887 and 8,207,438 shares issued 82,149 82,074
and outstanding
Additional paid-in capital 35,031,155 35,014,551
Retained (deficit) earnings (193,934) 602,869
-----------------------------------
Total stockholders' equity 34,919,370 35,699,494
-----------------------------------
Total liabilities and stockholders' equity $38,763,120 $38,747,160
===================================
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
PYRAMID BREWERIES INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended NINE MONTHS ENDED
September 30, September 30,
1998 1997 1998 1997
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Gross sales................................... $7,183,862 $8,466,411 $20,903,362 $23,113,912
Less excise taxes............................. 425,799 577,164 1,273,122 1,595,059
---------- ---------- ----------- -----------
Net sales.................................. 6,758,063 7,889,247 19,630,240 21,518,853
Cost of sales................................. 5,190,131 5,946,202 15,130,470 15,947,578
---------- ---------- ----------- -----------
Gross margin.............................. 1,567,932 1,943,045 4,499,770 5,571,275
Selling, general and administrative
expenses.................................... 1,982,401 2,085,668 6,164,441 6,287,467
---------- ---------- ----------- -----------
Operating loss................................ (414,469) (142,623) (1,664,671) (716,192)
Other income (expense), net................... 95,077 (121,226) 503,841 9,809
---------- ---------- ----------- -----------
Loss before income taxes...................... (319,392) (263,849) (1,160,830) (706,383)
Benefit for Income Taxes...................... 84,530 43,253 364,027 191,935
---------- ---------- ----------- -----------
Net loss...................................... $ (234,862) $ (220,596) $ (796,803) $ (514,448)
========== ========== =========== ===========
Basic and diluted net loss per share $(0.03) $(0.03) $(0.10) $(0.06)
========== ========== =========== ===========
Weighted average common shares
outstanding................................. 8,214,029 8,206,147 8,211,447 8,206,221
========== ========== =========== ===========
Beer barrels shipped.......................... 26,900 34,300 79,900 95,800
========== ========== =========== ===========
Soda barrels shipped.......................... 8,600 7,900 21,900 16,400
========== ========== =========== ===========
Total barrels shipped......................... 35,500 42,200 101,800 112,200
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
PYRAMID BREWERIES INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997
---------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $ (796,803) $ (514,448)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization.......................... 2,078,771 2,220,034
Loss on sale of fixed assets........................... 104,814 67,761
Deferred income taxes.................................. (289,513) 240,241
Deferred rent.......................................... 147,762 214,023
Restructuring reserve.................................. (316,590) --
Amortization and realized loss
on investments....................................... -- 286,087
Changes in operating assets and liabilities:
Accounts receivable.................................... (18,397) (100,129)
Inventories............................................ (240,372) (333,665)
Prepaid expenses and other............................. (152,090) (523,812)
Income taxes receivable................................ (117,485) (447,023)
Accounts payable and accrued expenses.................. 973,751 (26,710)
Refundable deposits.................................... (8,839) 5,858
----------- ------------
Net cash provided by operating activities.......... 1,365,009 1,088,217
INVESTING ACTIVITIES:
Acquisition of Thomas Kemper Soda Company................. -- (575,802)
Acquisitions of fixed assets.............................. (1,042,578) (6,080,883)
Proceeds from sales of fixed assets....................... 241,641 557,505
Purchases of investments.................................. -- (11,662,522)
Sales and redemptions of investments...................... -- 18,225,114
----------- ------------
Net cash (used in) provided by investing
activities....................................... (800,937) 463,412
FINANCING ACTIVITIES:
Proceeds from the sale of common stock.................... 16,679 20,693
Principal payments on Thomas Kemper Soda
long-term debt......................................... -- (186,240)
Principal payments on Thomas Kemper Soda
capital leases......................................... -- (196,149)
Repayments to related parties............................. -- (138,148)
----------- ------------
Net cash provided by (used in) financing activities 16,679 (499,844)
----------- ------------
Increase in cash and cash equivalents......................... 580,751 1,051,785
Cash and cash equivalents at beginning of period.............. 5,393,251 300,487
----------- ------------
Cash and cash equivalents at end of period.................... $ 5,974,002 $ 1,352,272
=========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
PYRAMID BREWERIES INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
Pyramid Breweries Inc. (the "Company"), a Washington corporation, was
incorporated in 1984 and 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 and Berkeley, California. The Company
sells its beer through a network of selected independent distributors primarily
in Washington, Oregon and California under the Pyramid and Thomas Kemper brands.
Pyramid manufactures a line of hand-crafted sodas under the Thomas Kemper Soda
Company label which are sold primarily in Washington, Oregon and California. As
of September 30, 1998, the Company's products were distributed in 32 states and
Canada. The Company operates two restaurants adjacent to its breweries under the
Pyramid Brewery & Alehouse brand.
The accompanying condensed financial statements have been prepared by the
Company, without audit, in accordance with generally accepted accounting
principles for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission. With the exception of
the historical information contained herein, the matters described may contain
forward-looking statements that involve risks and uncertainties, including those
described under the caption entitled "Risk Factors and Forward-Looking
Statements" in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, filed with the Securities and Exchange Commission, and
elsewhere in the Company's periodic reports. 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.
2. COMPREHENSIVE INCOME:
The Company has adopted the Statement of Financial Accounting Standard No.
130, "Reporting Comprehensive Income" effective January 1, 1998. There were no
significant items of comprehensive income in the nine month periods ended
September 30, 1998 and 1997.
3. INVENTORIES:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------------ -----------------
<S> <C> <C>
Raw materials........ $ 716,164 $ 558,591
Finished goods....... 634,964 552,165
---------- ----------
$1,351,128 $1,110,756
========== ==========
</TABLE>
Raw materials primarily include ingredients, flavorings and packaging
materials, as well as 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.
4. FIXED ASSETS:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---------------- -----------------
<S> <C> <C>
Brewery and retail equipment....... $17,315,592 $16,528,319
Furniture and fixtures............. 829,822 617,009
Leasehold improvements............. 13,630,946 13,594,538
Assets held for sale............... 190,888 559,690
----------- -----------
31,967,248 31,299,556
Less accumulated depreciation...... (4,251,708) (2,699,481)
----------- -----------
$27,715,540 $28,600,075
=========== ===========
</TABLE>
6
<PAGE>
5. THOMAS KEMPER SODA COMPANY ACQUISITION:
In March 1997, the Company acquired substantially all of the operating
assets and assumed certain liabilities of Thomas Kemper Soda Company, a
manufacturer of premium sodas located in Seattle, Washington. The total purchase
price was $1,700,000. The purchase price was paid with approximately $562,000 in
cash during the first quarter of 1997, approximately $14,000 in cash during the
second quarter of 1997 and the assumption of approximately $1,138,000 of
liabilities at the date of acquisition. The acquisition was accounted for using
the purchase method of accounting. Accordingly, the purchased assets and assumed
liabilities were recorded at their estimated fair value at the date of
acquisition. The excess purchase price over the estimated fair values of the
assets acquired was $802,513 and will be amortized over 10 years. The results of
the acquired business have been included in the statement of income since the
date of acquisition.
6. 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.
7
<PAGE>
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
<TABLE>
<CAPTION>
Three Months Ended September 30,
-------------------------------------------------------------
% OF % OF
1998 NET SALES 1997 NET SALES
--------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Gross sales....................................... $7,183,862 $8,466,411
Less excise taxes................................. 425,799 577,164
---------- ----------
Net sales......................................... 6,758,063 100.0 7,889,247 100.0
Cost of sales..................................... 5,190,131 76.8 5,946,202 75.4
---------- ----- ---------- -----
Gross margin...................................... 1,567,932 23.2 1,943,045 24.6
Selling, general and administrative expenses...... 1,982,401 29.3 2,085,668 26.4
---------- ----- ---------- -----
Operating loss.................................... (414,469) (6.1) (142,623) (1.8)
Other income (expense), net....................... 95,077 1.4 (121,226) (1.5)
---------- ----- ---------- -----
Loss before income taxes.......................... (319,392) (4.7) (263,849) (3.3)
Benefit for income taxes.......................... 84,530 1.2 43,253 0.5
---------- ----- ---------- -----
Net loss.......................................... $ (234,862) (3.5) $ (220,596) (2.8)
========== ===== ========== =====
$ (0.03) $ (0.03)
Basic and diluted net loss per share.............. ========== ==========
Weighted average common shares
outstanding....................................... 8,214,029 8,206,147
========== ==========
OPERATING DATA (IN BARRELS):
Beer barrels shipped.............................. 26,900 34,300
========== ==========
Soda barrels shipped.............................. 8,600 7,900
========== ==========
Total barrels shipped............................. 35,500 42,200
========== ==========
Annual beer production capacity at
period end........................................ 172,000 267,000
========== ==========
Nine Months Ended September 30,
-------------------------------------------------------------
% OF % OF
1998 NET SALES 1997 NET SALES
--------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Gross sales....................................... $20,903,362 $23,113,912
Less excise taxes................................. 1,273,122 1,595,059
----------- -----------
Net sales......................................... 19,630,240 100.0 21,518,853 100.0
Cost of sales..................................... 15,130,470 77.1 15,947,578 74.1
----------- ----- ----------- -----
Gross margin...................................... 4,499,770 22.9 5,571,275 25.9
Selling, general and administrative expenses...... 6,164,441 31.4 6,287,467 29.2
----------- ----- ----------- -----
Operating loss.................................... (1,664,671) (8.5) (716,192) (3.3)
Other income, net................................. 503,841 2.5 9,809 0.0
----------- ----- ----------- -----
Loss before income taxes.......................... (1,160,830) (6.0) (706,383) (3.3)
Benefit for income taxes.......................... 364,027 1.9 191,935 0.9
----------- ----- ----------- -----
Net loss.......................................... $ (796,803) (4.1) $ (514,448) (2.4)
=========== ===== =========== =====
Basic and diluted net loss per share.............. $ (0.10) $ (0.06)
=========== ===========
Weighted average common shares
outstanding....................................... 8,211,447 8,206,221
=========== ===========
OPERATING DATA (IN BARRELS):
Beer barrels shipped.............................. 79,900 95,800
=========== ===========
Soda barrels shipped.............................. 21,900 16,400
=========== ===========
Total barrels shipped............................. 101,800 112,200
=========== ===========
Annual beer production capacity at
172,000 267,000
period end........................................ =========== ===========
</TABLE>
8
<PAGE>
QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1997
Gross Sales. Gross sales decreased by 15.1% to $7,184,000 for the third
quarter ended September 30, 1998 from $8,466,000 in the same quarter of the
prior year. The decrease resulted primarily from a 23.9% decrease in wholesale
craft beer sales to $4,377,000 for the third quarter of 1998 from $5,749,000 in
the same quarter of the prior year due mainly to a 21.6% volume decrease and an
increase in the proportion of draft beer sales. The product mix shifted to a
higher percentage of draft sales (38.8% for the quarter ended September 30, 1998
versus 35.1% for the same quarter of the prior year) which resulted in lower
sales dollars per barrel sold. Depletions by the company's wholesalers were
down less than the decline in shipments in the quarter and management believes
that a significant portion of the decline in shipments is accounted for by
inventory adjustments downstream.
Excise Taxes. Excise taxes decreased to 6.3% of net sales for the third
quarter ended September 30, 1998 from 7.3% of net sales in the same quarter of
the prior year. The decrease in excise taxes as a percentage of net sales was
due to a lower average federal excise tax rate during the quarter ended
September 30, 1998.
Gross Margin. Gross margin decreased to $1,568,000 for the third quarter
ended September 30, 1998 from $1,943,000 in the same quarter of the prior year.
Gross margin as a percentage of net sales declined to 23.2% for the third
quarter ended September 30, 1998 from 24.6% for the same quarter of the prior
year. This decrease as a percentage of net sales was due primarily to the
application of certain fixed and semi-fixed costs to the lower level of sales
volume.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to $1,982,000, or 29.3% of net sales, for the
third quarter ended September 30, 1998 from $2,086,000, or 26.4% of net sales,
for the same quarter of the prior year. This decrease resulted from the
decision, made last year, to refocus marketing resources on the West Coast. The
savings were offset in the current quarter by non-recurring costs related to the
upgrading of the company's computer systems, legal expenses and other expenses.
Other Income (Expense), net. The Company incurred other income (net of
other expense) of $95,000 for the third quarter ended September 30, 1998 as
compared to other expense of $121,000 reported for the third quarter of the
prior year. The increase in other income was due primarily to the elimination of
bond premium amortization expense during 1997.
Net Loss. The Company reported a net loss for the quarter ended September
30, 1998 of $235,000 as compared to a net loss of $221,000 reported for the
third quarter of the prior year. The increase in net loss was primarily the
result of the decrease in gross margin and non-recurring charges including legal
expenses, computer software costs and other one-time adjustments.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997
Gross Sales. Gross sales decreased by 9.6% to $20,903,000 for the nine
month period ended September 30, 1998 from $23,114,000 in the same nine month
period of the prior year. This decrease was partially offset by increased sales
of Thomas Kemper Sodas, acquired in March of 1997, to $2,826,000 from $2,157,000
for the same nine month period of the prior year. Gross wholesale craft beer
sales decreased 17.0% to $13,332,000 from $16,072,000 for the same nine month
period of the prior year due to a 16.6% volume decrease and an increase in the
proportion of draft beer sales. The product mix shifted to a higher percentage
of draft sales (37.8% as of September 30, 1998 versus 36.9% as of September 30,
1997) which resulted in lower sales dollars per barrel sold.
Excise Taxes. Excise taxes decreased to 6.5% of net sales for the nine
month period ended September 30, 1998 from 7.4% of net sales for the same nine
month period of the prior year. The decrease in excise taxes as a percentage of
net sales was due primarily to lower average federal excise tax rate resulting
from lower beer barrels shipped during the nine month period ended September
30, 1998 and a greater proportion of restaurant and soda sales which do not bear
excise tax.
Gross Margin. Gross margin decreased to $4,500,000 for the nine month
period ended September 30, 1998 from $5,571,000 for the same nine month period
of the prior year. Gross margin as a percentage of net sales declined to 22.9%
for the nine month period ended September 30, 1998 from 25.9% for the same nine
month period of the prior year. This decrease as a percentage of net sales was
due primarily to the application of certain fixed and semi-fixed costs to the
lower level of sales volumes.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to $6,164,000, or 31.4% of net sales, for the
nine month period ended September 30, 1998 from $6,287,000, or 29.2% of net
sales, for the same nine month period of the prior year. This decrease resulted
from the decision, made last year, to realign operations and refocus marketing
resources to the West Coast. The savings were offset in the current year by non-
recurring costs related to the upgrading of the company's computer system, legal
expenses and other expenses.
9
<PAGE>
Other Income. Other income increased to $504,00 for the nine month period
ended September 30,1998 from $10,000 for the same nine month period of the prior
year. The increase in other income was due primarily to the successful outcome
of a long-standing securities lawsuit which resulted in the Company's insurers
refunding expenditures on legal costs of $250,000 in the second quarter ended
June 30, 1998 and the elimination of bond premium amortization expense during
1997 of $289,000.
Net Loss. The net loss for the nine month period ended September 30, 1998
was $797,000 as compared to $514,000 reported for the same nine month period of
the prior year. The increase in net loss was primarily the result of a lower
gross margin from wholesale beer sales, computer software costs and other non-
recurring charges.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the nine month period ended
September 30, 1998 was $1,365,000 compared to $1,088,000 for the same nine month
period of the prior year. At September 30, 1998, the Company had working capital
of $6,647,000 compared to $6,499,000 at December 31, 1997.
Net cash used in investing activities for the period ended September 30,
1998 was $801,000 compared to net cash provided by investing activities of
$463,000 for the same period of the prior year. The cash used in investing
activities in 1998 included the purchase of system software and completion of
the installation of soda production equipment at the Berkeley Brewery. Cash
provided by investing activities during 1997 was primarily redemptions and sales
of investments.
The Company has a $15,000,000 line of credit (the Line of Credit) for
short-term operating needs. The Line of Credit revolves through April 30, 1999,
during which time the payments are interest only. At that date, any outstanding
balance will be due in full. Borrowings under the Line of Credit will accrue
interest, at the Company's option, at either the bank's prime rate or at LIBOR
plus 100 basis points. Up to $5,000,000 of the line of credit may be used to
finance acquisitions. Amounts used to finance acquisitions may be converted to a
four-year fully amortizing term loan, with an additional option to fix the rate
of interest at the bank's prime rate plus 125 basis points.
Future capital requirements may vary depending on such factors as the cost
of acquisition of businesses, brands and real estate in the markets selected for
future expansion. Capital expenditures through September 30, 1998 were
approximately $1,043,000 which includes installation of soda equipment in the
Berkeley brewery, upgrading of brewery equipment and facilities in the Seattle
Brewery and the installation of a new computer system. 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 reserves,
together with cash from operations and borrowings under the Line of Credit, will
be sufficient for the Company's working capital needs.
The Company's future cash requirements and cash flow expectations are
closely related to its expansion plans. The Company generally expects to meet
future financing needs through cash on-hand, cash flow from operations and, to
the extent required and available, additional bank borrowings.
YEAR 2000
The year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. If not addressed,
the direct result could be a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process customer transactions or engage in similar normal business
activities.
The Company's Year 2000 Project is proceeding on schedule. Early in 1998,
the Company began a project to improve its information systems by replacing
existing business software. The new system replaces all critical systems and
approximately 90% of all computer systems which the Company's inventory showed
to be affected by the year 2000 issue. The Company's inventory revealed no other
significant problems arising from non-compliant computer chips embedded in other
equipment. The total cost of the Company's Year 2000 Project is in the area of
$600,000, including the cost of installing the business software. Approximately
$320,000 has been incurred as of September 30, 1998 and the project is expected
to be completed by mid-1999.
The Company is dependent upon certain suppliers and its wholesale
customers. There are plans to communicate with these companies to assess their
readiness for the year 2000. Contingency plans will be made where practicable to
cope with interruption of supplies or services and failures by wholesalers to
properly service the Company's markets. However, it should be noted that there
are many cases, such as utility supply and servicing of remote markets, where no
feasible alternatives are available to the Company and the Company is vulnerable
to failures by external third parties.
Although management anticipates that its systems and applications will be
year 2000 compliant on a timely basis, there can be no assurance that the
systems of other companies on which the Company's systems rely will be year 2000
compliant in the same time frame. Any such failure on the part of other
companies with whom the Company transacts business, to be year 2000 compliant on
a timely basis, may have an adverse impact on the operations of the Company.
10
<PAGE>
RISK FACTORS AND FORWARD LOOKING STATEMENTS
Pyramid Breweries Inc. does not provide forecasts of future financial
performance. However this report does contain forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, which are
subject to the "safe harbor" created by that section. There are numerous
important factors that could cause results to differ materially from those
anticipated by some of the statements made by the Company. 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, 1997.
PART II. -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION
A shareholder who intends to present a proposal at the Company's next
annual meeting, other than pursuant to Rule 14a-8 under the Securities Exchange
Act of 1934, must provide the Company notice of such intention by at least April
7, 1999, or management of the Company will have discretionary voting authority
at the 1999 annual meeting with respect to such proposal without any discussion
of the matter in the Company's proxy statement.
11
<PAGE>
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
27 Financial Data Schedule
*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
None filed during the quarter ended September 30, 1998.
ITEMS 1,2,3 AND 4 OF PART II ARE NOT APPLICABLE AND HAVE BEEN OMITTED
12
<PAGE>
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 November 13, 1998.
PYRAMID BREWERIES INC.
By: /s/ RICHARD DENMARK
-------------------
Richard Denmark, Vice President
and Chief Financial Officer
DATE: November 13, 1998
13
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- -------- --------------------
27 Financial Data Schedule
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,974,002
<SECURITIES> 0
<RECEIVABLES> 1,334,818
<ALLOWANCES> 24,740
<INVENTORY> 1,351,128
<CURRENT-ASSETS> 9,769,326
<PP&E> 31,967,248
<DEPRECIATION> 4,251,708
<TOTAL-ASSETS> 38,763,120
<CURRENT-LIABILITIES> 3,122,399
<BONDS> 0
0
0
<COMMON> 82,149
<OTHER-SE> 34,837,221
<TOTAL-LIABILITY-AND-EQUITY> 38,763,120
<SALES> 19,630,240
<TOTAL-REVENUES> 20,903,362
<CGS> 15,130,470
<TOTAL-COSTS> 21,294,911
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 24,740
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,160,830)
<INCOME-TAX> 364,027
<INCOME-CONTINUING> (796,803)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (796,803)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
