Redhook reports loss despite volume gain.

Redhook Ale Brewery, Incorporated (Nasdaq: HOOK) announced that it sold 50,500 barrels in the fourth quarter of 2000, a 2.0% increase compared to 49,600 barrels in the 1999 fourth quarter. While sales increased 1.2% to $8,960,000, gross profit declined 10.4% to $1,947,000 in the 2000 fourth quarter, compared to $2,172,000 in the 1999 fourth quarter. The Company's net loss in the 2000 fourth quarter totaled $(842,000) or $(0.l1) loss per share. The company said that the gross margin was significantly affected by rising raw material costs, a shift in the product mix with increasing sales of 12-packs and increased freight charges. The advertising and promotional campaign continued, resulting in approximately $885,000 of incremental expense being charged to the 2000 fourth quarter. In 1999, the fourth quarter net loss was $(608,000) or $(0.08) loss per share.

CEO Paul Shipman commented, "2000 was a breakthrough year for Redhook. We are pleased that demand for our beers is strong. There is still much to be done to serve the Country's needs for beer diversity, and we will continue to work hard to be at the center of it. The fourth quarter presented challenges to the brewing industry. However, we will forge ahead towards our goal of consumer preference."

Gross profit decreased to 23.7% of net sales in the fourth quarter of 2000, compared to 27.0% in the 1999 fourth quarter. The company said that this decline in gross profit was attributable to a shift in the sales mix towards an increasing proportion of 12-pack sales. The company also said that increased raw material and freight costs also contributed significantly to the pressure on gross margin.

The operating loss totaled $(1,291,000) in the three months ended December 31, 2000, compared to an operating loss of $(804,000) in the comparable 1999 period. The increased operating loss was attributable to the decline in gross profit, the increase in sales and marketing expenses related to the ongoing advertising and promotion campaign in certain major markets, and the decision to add several new sales positions in important geographic markets.

Interest expense totaled $152,000 in the 2000 fourth quarter compared to $142,000 in the 1999 period. Other income increased $98,000 in the 2000 4Q to $162,000 due primarily to interest earned on higher cash balances.

For the year ended December 31, 2000, total barrels sold increased 7.6% to 212,600 from 197,600 in 1999. Sales increased to $37,837,000 in 2000 from $35,459,000 in 1999, an increase of 6.7%.

Gross profit increased 2.6% to $9,831,000 in 2000 from $9,581,000 in 1999, yet declined as a percentage of net sales to 28,6% in 2000 from 29.8% in 1999. This decline is due to the increasing proportion of the more expensive 12-pack sales. Package sales volume in 2000 was 62.0%, compared to 60.7% in 1999. Selling, general and administrative expenses increased $457,000 due, in part, to the decision to add several new sales positions in important geographic markets.

Approximately $2.4 million was invested in the advertising and promotional program in both 2000 and 1999. Interest expense increased to $594,000 in 2000, from $533,000 in 1999, due entirely to higher interest rates as $450,000 in principal was repaid during the year.

Other income of $1,453,000 was the result of the $1.0 million gain on the sale of surplus real estate in Seattle occurring in the third quarter of 2000 and also from higher interest earned on higher cash balances held throughout the year.

The company recorded a net loss of $(728,000) or $(0.10) loss per share in 2000 compared to a 1999 net loss of ($1,523,000) or ($0.20) loss per share. Excluding the gain on the sale of surplus real estate, the Company's 2000 net loss would have been an $(0.18) loss per share.

The Company's cash balance was $7,487,000 at December 31, 2000.

Sales volume in January 2001 increased 15% as compared to January 2000 shipments.