Granite City Food & Brewery Ltd. Reports 30% Increase in Third Quarter Revenues

Granite City Food & Brewery Ltd. (Nasdaq:GCFB) a Modern American upscale casual restaurant chain, today reported results for the third quarter ended September 25, 2007. Highlights for the third quarter compared to the same quarter last year were as follows: Total revenues increased 30.3% to $19.6 million Comparable restaurant sales increased 2.7% General and administrative expenses declined by 40 bps to 10.5% of sales from 10.9% of sales Opened one new restaurant in Rockford, Illinois Third Quarter 2007 Financial Results Total revenues for the third quarter 2007 rose by 30.3% to $19.6 million compared to $15.0 million for the third quarter of 2006. Comparable restaurant sales increased 2.7% during the third quarter of 2007 compared to 3.4 % increase in comparable restaurant sales for the third quarter of 2006. This is the seventh consecutive quarter of increases in comparable restaurant sales. The Company instituted a price increase of 4% on September 17, 2007 which had little impact on the increase in comparable restaurant sales since the price increase was taken so late in the quarter. For all the restaurants, the restaurant-level EBITDA margin was 12.8% for the third quarter of 2007. The restaurant-level EBITDA margin for the comparable restaurants was 15.1% for the third quarter of 2007. The overall restaurant-level EBITDA margin was negatively impacted by the newer restaurants. This impact was primarily the result of restaurants that opened during the last four months of 2006. New restaurants typically take six to twelve months to improve their operating efficiencies as staff members become more experienced in our disciplined production and staffing methods thereby generating less waste and more productivity. We believe that as our newer restaurants mature and gain efficiencies, our overall blended margins will increase towards our targeted restaurant-level EBITDA margin of 18 to 20%. With our comparable restaurants already close to that level, our concentration will continue to be on the improvement of our newer stores EBITDA margin. General and administrative expenses fell to 10.5% of sales for the third quarter of 2007 compared to 10.9% for the third quarter of 2006. This decline represented continued progress in leveraging corporate G&A expense across a greater number of restaurants. The net loss for the third quarter of 2007 was $2.3 million or $(0.14) per share. Year-to-Date 2007 Financial Results Revenue increased 36.0% to $56.2 million for the thirty-nine weeks ended September 25, 2007 compared to $41.3 million for the same period of 2006, aided by the four new restaurants added since October 2006 and the 2.5% increase in year-to-date comparable restaurant sales. For all the restaurants, the restaurant-level EBITDA margin was 14.0% for the thirty-nine weeks ended September 25, 2007. The restaurant-level EBITDA margin for the comparable restaurants was 16.3% for this same period. Similar to the third quarter, the overall restaurant-level EBITDA margin was negatively impacted by the newer restaurants that have been open for less than one year. General and administrative expenses decreased to 10.1% of sales for the thirty-nine weeks ended September 25, 2007 compared to 11.4% for the same period of 2006. Similar to the third quarter, this decrease as a percentage of sales represented the continued improvement in leveraging G&A expense. The net loss for the thirty-nine weeks ended September 25, 2007 was $5.1 million or $(0.33) per share compared to a net loss of $3.8 million or $(0.28) per share for the same period of 2006. "Our concept continues to perform extremely well in this difficult economy as evidenced by seven straight quarters of positive comparable restaurant sales,” commented Steve Wagenheim, Granite City’s CEO and President. "Our emphasis will continue to be on expanding our concept with new restaurants as well as a significant emphasis on operations and improving restaurant-level profitability. We have specific operations initiatives to address our prime costs and to improve our operating margins,” continued Wagenheim. "As we grow into the next stage of our evolution we believe we need to focus on four key pipelines for long-term success. We believe that the four "core rivets” that ensures balanced growth and shareholder value are: product, people, development and funding. Our product has always been our anchor and the reason we are approaching an annual run-rate of $100 million in sales. We have lined up several outstanding sites for potential future development and with our current size we are attracting quality highly skilled people to the Company. Our desire is to balance these success pipelines with a long-term debt financing platform that gives us seamless year-over-year growth, limits dilution of our loyal shareholders and provides a path to profitability. We are working to obtain a predictable, long-term source of debt financing for our restaurant expansion. By doing so, we hope to avoid the need to pursue sporadic equity financings and to enable management to focus primarily on operating activities rather than financing activities,” continued Wagenheim. New Restaurant Openings The Company opened one new restaurant in Rockford, Illinois on July 3, 2007. On October 16, 2007, the Company opened in Rogers, Arkansas, its second restaurant for 2007. Today the Company announced the opening of its third restaurant for 2007, located in East Peoria, Illinois. Investor Conference Call and Webcast A conference call to review the results of the third quarter of fiscal 2007 will be held on Wednesday, October 31, 2007 at 10:00 a.m. Central Time and may be accessed by dialing (866) 550-6338 and referencing code #6456539. An archive of the presentation will be available for 30 days following the call. About Granite City Granite City Food & Brewery Ltd. is a Modern American upscale casual restaurant chain that operates 21 restaurants in ten states. The menu features affordable yet high quality family favorite menu items prepared from made-from-scratch recipes and served in generous portions. The sophisticated yet unpretentious restaurants, proprietary food and beverage products, attractive price points and high service standards combine for a great dining experience. Granite City opened its first restaurant in St. Cloud, Minnesota in 1999. Forward-Looking Statements and Non-GAAP Financial Measurements, and Comparable Restaurant Data Certain statements made in this press release of a non-historical nature constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. Such factors include, but are not limited to, changes in economic conditions, changes in consumer preferences or discretionary consumer spending, a significant change in the performance of any existing restaurants, the ability to obtain financing for, and complete construction of, additional restaurants at acceptable costs, and the risks and uncertainties described in our Current Report on Form 8-K filed with the Securities and Exchange Commission on May 4, 2007. Additionally, this press release contains certain non-GAAP financial measures, including references to restaurant-level EBITDA. As compared to the nearest GAAP measurement for our company, restaurant-level EBITDA represents net loss with the add-back of net interest expense, income tax expense, depreciation and amortization, general and administrative expenses, and pre-opening costs. Alternatively, restaurant-level EBITDA can be calculated as restaurant revenues less all restaurant-level cost of sales, excluding depreciation and amortization. We use restaurant-level EBITDA and restaurant-level EBITDA as a percentage of revenue as internal measurements of restaurant-level operating performance. Restaurant-level EBITDA as we define it may not be comparable to similar measurements used by other companies and is not a measure of performance or liquidity presented in accordance with GAAP. The Company believes that restaurant-level EBITDA is an important component of its financial results because it is a widely used measurement within the restaurant industry to evaluate restaurant-level productivity, efficiency, and performance. The Company uses restaurant-level EBITDA as a means of evaluating its restaurants’ financial performance compared with its competitors. This non-GAAP measurement should not be used as a substitute for net loss, net cash provided by or used in operations or other financial data prepared in accordance with GAAP. A reconciliation of restaurant-level EBITDA to net loss, as well as company-wide EBITDA, for the third quarter ended September 25, 2007 is provided herein. Finally, in order to provide supplemental results of operations information, we have included certain adjusted financial measures. In particular, we have presented various financial metrics for comparable restaurants, which are those restaurants that have been open for 18 months or more, and our new restaurants which are those restaurants that have been open for 18 months or less. The contributions of these groups of restaurants to company-wide performance are set forth herein. Granite City Food & Brewery Ltd. Condensed Consolidated Financial Statements   Thirteen Weeks Ended Thirty-nine Weeks Ended September 25,   September 26, September 25,   September 26, 2007 2006 2007 2006   Restaurant revenues $ 19,584,040 $ 15,028,065 $ 56,220,186 $ 41,337,502   Cost of sales: Food, beverage and retail 5,969,977 4,522,565 16,889,600 12,295,648 Labor 7,046,219 5,404,636 20,197,394 14,662,268 Direct restaurant operating 2,845,705 1,856,222 7,779,859 5,103,711 Occupancy   1,210,115   850,788   3,485,007   2,328,316 Total cost of sales   17,072,016   12,634,211   48,351,860   34,389,943   Pre-opening 732,679 866,193 1,244,861 1,940,567 General and administrative 2,050,251 1,640,752 5,689,249 4,711,686 Depreciation and amortization   1,159,885   877,988   3,402,613   2,444,933   Operating loss   (1,430,791)   (991,079)   (2,468,397)   (2,149,627)   Interest: Income 87,131 16,803 189,616 72,967 Expense   (910,637)   (607,890)   (2,813,915)   (1,669,567) Net interest expense   (823,506)   (591,087)   (2,624,299)   (1,596,600)   Loss before income tax (2,254,297) (1,582,166) (5,092,696) (3,746,227) Income tax provision   (5,157)   (10,110)   (10,105)   (10,610) Net loss $ (2,259,454) $ (1,592,276) $ (5,102,801) $ (3,756,837)   Loss per common share, basic and diluted $ (0.14) $ (0.12) $ (0.33) $ (0.28)   Weighted average shares outstanding, basic and diluted   16,038,302   13,242,173   15,329,517   13,231,742 Selected Balance Sheet Information   September 25, December 26, 2007 2006 Cash $ 6,483,988 $ 7,671,750 Current assets including cash $ 7,533,826 $ 8,576,699 Total assets $ 69,896,048 $ 63,858,510 Current liabilities $ 10,514,357 $ 9,683,419 Total liabilities $ 48,350,946 $ 50,793,567 Shareholders' equity $ 21,545,102 $ 13,064,943 Non-GAAP Reconciliations 2007 Q3 Results           ComparableRestaurants % ofSales NewRestaurants % ofSales Total forAllRestaurantsAs Reported % ofSales         Restaurant revenues $ 11,970,533 100% $ 7,613,507 100% $ 19,584,040 100%   Cost of sales: Food, beverage and retail 3,595,698 30.0% 2,374,279 31.2% 5,969,977 30.5% Labor 4,120,939 34.4% 2,925,280 38.4% 7,046,219 36.0% Direct Restaurant Operating Expenses 1,781,000 14.9% 1,064,705 14.0% 2,845,705 14.5% Occupancy   669,603 5.6%   540,512 7.1%   1,210,115 6.2% Total cost of sales   10,167,240 84.9%   6,904,776 90.7% 17,072,016 87.2% Restaurant-level EBITDA(a) $ 1,803,293 15.1% $ 708,731 9.3% $ 2,512,024 12.8%   Pre-opening 732,679 3.7% General and administrative   2,050,251 10.5%   Company-wide EBITDA (270,906)   Depreciation and amortization   1,159,885   Operating Loss (1,430,791)   Interest: Income (87,131) Expense   910,637 Net other expense   823,506   Loss before income taxes (2,254,297) Income tax provision (5,157) Net loss as reported under GAAP $ (2,259,454)   (a) See accompanying disclosure regarding use of non-GAAP financial measures. Non-GAAP Reconciliations 2007 Q3 Year-To-Date Results           ComparableRestaurants % ofSales NewRestaurants % ofSales Total forAllRestaurantsAs Reported % ofSales         Restaurant revenues $ 31,513,963 100% $ 24,706,223 100% $ 56,220,186 100%   Cost of sales: Food, beverage and retail 9,328,798 29.6% 7,560,802 30.6% 16,889,600 30.0% Labor 10,827,856 34.4% 9,369,538 37.9% 20,197,394 35.9% Direct Restaurant Operating Expenses 4,477,734 14.2% 3,302,125 13.4% 7,779,859 13.8% Occupancy   1,735,295 5.5%   1,749,712 7.1%   3,485,007 6.2% Total cost of sales   26,369,683 83.7%   21,982,177 89.0% 48,351,860 86.0% Restaurant-level EBITDA(a) $ 5,144,280 16.3% $ 2,724,046 11.0% $ 7,868,326 14.0%   Pre-opening 1,244,861 2.2% General and administrative   5,689,249 10.1%   Company-wide EBITDA 934,216   Depreciation and amortization   3,402,613   Operating Loss (2,468,397)   Interest: Income (189,616) Expense   2,813,915 Net other expense   2,624,299   Loss before income taxes (5,092,696) Income tax provision (10,105) Net loss as reported under GAAP $ (5,102,801)   (a) See accompanying disclosure regarding use of non-GAAP financial measures. Non-GAAP Reconciliations 2006 Q3 Results           ComparableRestaurants % ofSales NewRestaurants % ofSales Total forAllRestaurantsAs Reported % ofSales         Restaurant revenues $ 8,933,339 100% $ 6,094,726 100% $ 15,028,065 100%   Cost of sales: Food, beverage and retail 2,638,047 29.5% 1,884,518 30.9% 4,522,565 30.1% Labor 3,089,720 34.6% 2,314,916 38.0% 5,404,636 36.0% Direct Restaurant Operating Expenses 1,072,490 12.0% 783,732 12.9% 1,856,222 12.4% Occupancy   478,957 5.4%   371,831 6.1%   850,788 5.7% Total cost of sales   7,279,214 81.5%   5,354,997 87.9% 12,634,211 84.1% Restaurant-level EBITDA(a) $ 1,654,125 18.5% $ 739,729 12.1% $ 2,393,854 15.9%   Pre-opening 866,193 5.8% General and administrative   1,640,752 10.9%   Company-wide EBITDA (113,091)   Depreciation and amortization   877,988   Operating Loss (991,079)   Interest: Income (16,803) Expense   607,890 Net other expense   591,087   Loss before income taxes (1,582,166) Income tax provision (10,110) Net loss as reported under GAAP $ (1,592,276)   (a) See accompanying disclosure regarding use of non-GAAP financial measures Non-GAAP Reconciliations 2006 Q3 Year-To-Date Results             ComparableRestaurants % ofSales NewRestaurants % ofSales Total forAllRestaurantsAs Reported % ofSales         Restaurant revenues $ 26,200,638 100% $ 15,136,864 100% $ 41,337,502 100%   Cost of sales: Food, beverage and retail 7,667,710 29.3% 4,627,938 30.6% 12,295,648 29.7% Labor 9,003,515 34.4% 5,658,753 37.4% 14,662,268 35.5% Direct Restaurant Operating Expenses 3,206,430 12.2% 1,897,281 12.5% 5,103,711 12.3% Occupancy   1,414,084 5.4%   914,232 6.0%   2,328,316 5.6% Total cost of sales   21,291,739 81.3%   13,098,204 86.5% 34,389,943 83.2% Restaurant-level EBITDA(a) $ 4,908,899 18.7% $ 2,038,660 13.5% $ 6,947,559 16.8%   Pre-opening 1,940,567 4.7% General and administrative   4,722,296 11.4%   Company-wide EBITDA 284,696   Depreciation and amortization   2,444,933   Operating Loss (2,160,237)   Interest: Income (72,967) Expense   1,669,567 Net other expense   1,596,600   Loss before income taxes (3,756,837) Income tax provision (10,610) Net loss as reported under GAAP $ (3,756,837)   (a) See accompanying disclosure regarding use of non-GAAP financial measures.