Sleeman Breweries Ltd.

Sleeman Breweries Ltd.

March 10, 2005 08:00 ET

Sleeman Reports Fourth Quarter and Fiscal 2004 and Senior Management Addition


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: SLEEMAN BREWERIES LTD.

TSX SYMBOL: ALE

MARCH 10, 2005 - 08:00 ET

Sleeman Reports Fourth Quarter and Fiscal 2004 and
Senior Management Addition

GUELPH, ONTARIO--(CCNMatthews - March 10, 2005) - Sleeman Breweries Ltd.
(TSX:ALE) -

Annual revenue up 15%, net income up 18%, core volumes up 8%
year-over-year

Sleeman Breweries Ltd. (TSX:ALE) today announced the appointment of
Murray P. Mateyk as Chief Financial Officer and released its financial
results for the fourth quarter and the 2004 fiscal year.

Senior Management Addition

Effective April 4th, 2005, Murray P. Mateyk will be Chief Financial
Officer, Sleeman Breweries Ltd. In this capacity, Mr. Mateyk will report
directly to Rick Knudson, President & Chief Operating Officer

Mr. Mateyk is a Chartered Accountant who comes to Sleeman with an
extensive financial background and over 12 years in the brewing industry
having worked for Molson Breweries. "I am delighted to welcome Mr.
Mateyk to the management team," said Rick Knudson, President & Chief
Operating Officer. "He has a passion for the brewing business that will
support the enthusiasm and drive in the leadership of our company. His
experience at eliminating costs out of the system, while at Molson, will
be invaluable to Sleeman as we compete in an increasingly volatile
market place."

John Sleeman, Chairman & Chief Executive Officer added, "Murray has the
desired background in corporate finance that will assist Sleeman with
its continuing efforts to meet the increasing regulatory requirements
imposed on public companies. Further, he has the investor relations
experience that will foster improved relations with the investment
community. We are looking forward to working with Murray and benefiting
from his expertise in implementing strategic solutions to financial and
operational issues."

Fourth Quarter Financial Highlights

- Net revenue for the fourth quarter of 2004 increased 14% to $55.6
million compared with $48.7 million for the same period last year. This
increase was the result of core volume growth of 1% and a favourable
change in product mix. Premium brand volume increased by 18% with
Unibroue volume contributing half of this growth in the quarter.

- Reported net income of $3.9 million was unchanged from the fourth
quarter of 2003.

- Diluted earnings per share were $0.23 compared to $0.24 in the prior
year's fourth quarter.

Twelve Month Financial Review

- The Company's produced and sold volumes rose 8% to 1,225,000
hectolitres from 1,134,000 hectolitres the previous year. Core volumes
increased by 5% from 2003. In comparison, total industry volumes
declined 0.3% for the year.

- Net revenue increased 15% to $213.4 million from $185.0 million in the
previous year.

- Selling, general and administrative (SG&A) expenses increased in 2004
to $71.2 million. Excluding the effect of the Unibroue acquisition and
its impact on SG&A expenses in the year and certain non-recurring Quebec
integration costs incurred in the third quarter, SG&A expenses were $55
per hectolitre, which was consistent with the Company's target for the
year.

- Net income rose 18% to $14.4 million, or $0.87 per share on a diluted
basis, compared with $12.3 million, or $0.76 per share on a diluted
basis in 2003.

- EBITDA was $35.9 million compared with $33.4 million in 2003,
representing an 8% increase.

"We are pleased with our progress in achieving our strategic and
financial goals this year. Our premium brands continue to generate
increased sales and margins and we delivered strong growth in revenue,
net income and core volume," said John Sleeman, Chairman & CEO. "The
Unibroue integration was completed in the quarter as planned. The
integration has provided a positive impact on our operations and our
relationships with our customers. We are confident that the integration
of that business into our premium portfolio will generate increased
revenue and positive returns."

Recent Operational Highlights

- The Company launched the "John Sleeman Presents" line of limited
supply, seasonal brews across Canada. The program's first offering was
Sleeman Fine Porter. Consumers responded with enthusiasm and sales were
strong.

- The Company successfully completed the integration of Unibroue and
Sleeman information, delivery and sales systems in Quebec. The
integration was seamless and Unibroue's refermented beer volumes
continue to show strong growth after the integration. Immediately
subsequent to year-end, Sleeman completed the integration of all
remaining operational functions in the Company's new distribution and
administrative centre located in Lachine, Quebec, with Sleeman Unibroue
Inc. providing a solid platform for growth in the province of Quebec.

- The Company is now producing Sleeman Silver Creek at its Chambly
facility.

- Sleeman is in the process of completing two major initiatives at the
Guelph brewery that we expect will generate approximately $1.5 million
in savings on an annual basis starting in the second quarter of 2005.
The Company will install a wastewater treatment plant, which it expects
to both generate cost savings and environmental benefits. A new carbon
dioxide recovery system is also expected to reduce costs and the
environmental impacts of operations.

- In the Vernon facility, the Company recently installed a new bottom
saw and is in the process of installing two new tanks. Both of these
measures will allow the Company to improve its efficiencies and capacity
at this brewery.

Mr. Sleeman continued, "Operating conditions tested our mettle in the
last half of 2004, but we proved our ability to meet new challenges,
growing core volume by 1% and delivering record revenue in the fourth
quarter. We sold the most beer in our history in the face of severe
price discounting in the Ontario market in the last three months of the
year."

Management's Discussion and Analysis of Results of Operations and
Financial Position:

The following discussion and analysis should be read in conjunction with
the financial statements for the fourth quarter of fiscal 2004 and 2003;
with the MD&A in the fiscal 2003 annual report, including the section on
risks and uncertainties; and with the notes to the financial statements
for the fourth quarter of fiscal 2004 and in the fiscal 2003 annual
report. All amounts are in Canadian dollars unless otherwise stated.

Operating Results

Quarterly Comparison

The following chart sets out the per hectolitre results(1) for the
fourth quarter based on the number of hectolitres produced and sold by
the Company:



---------------------------------------------------------------------
3 months ended 3 months ended
January 1, 2005 December 27, 2003
---------------------------------------------------------------------
Net Revenue $179 $169
---------------------------------------------------------------------
Cost of Goods Sold 84 83
---------------------------------------------------------------------
Gross Margin 95 86
---------------------------------------------------------------------
SG&A Expenses 64 46
---------------------------------------------------------------------
Income before Undernoted 31 40
---------------------------------------------------------------------
Gain on Settlement of Obligation 0 2
---------------------------------------------------------------------
EBITDA(2) 31 42
---------------------------------------------------------------------
Depreciation and Amortization 6 5
---------------------------------------------------------------------
Earnings before interest and taxes 25 37
---------------------------------------------------------------------
Interest 6 6
---------------------------------------------------------------------
Income before Taxes 19 31
---------------------------------------------------------------------
Provision for Taxes 6 17
---------------------------------------------------------------------
Net Income $ 13 $ 14
---------------------------------------------------------------------


(1) Per hectolitre results are non-GAAP earnings measures,
therefore, they do not have any standardized meaning prescribed
by Canadian generally accepted accounting principles and may not
be similar to measures presented by other companies. Management
evaluates business trends on a per hectolitre basis as this is a
measurement commonly used by breweries to benchmark revenue and
costs.

(2) EBITDA is a non-GAAP earnings measure, therefore, it does not
have any standardized meaning prescribed by Canadian generally
accepted accounting principles and may not be similar to measures
presented by other companies. EBITDA represents earnings before
interest, income taxes, depreciation and amortization.
Management uses this measurement to evaluate the operating
results of each of the Company's segments and the Company as a
whole. Further, this measure is important to management since it
is used by the Company's lenders to evaluate the ongoing cash
generating capability of the Company and thus the amounts those
lenders are willing to lend to the Company.

NET REVENUE

Net revenue grew to $55.6 million in the fourth quarter of 2004 from
$48.7 million in the prior year. This represented a 14% increase
resulting from higher core and Sapporo volumes and a $10 per hectolitre
increase in average net revenues per hectolitre. The per hectolitre
increase is a result of the growth in the proportion of the Company's
sales volumes of premium brands in the period.

Core volumes increased 1% and Sapporo volumes were up 69% to 49,000
hectolitres. Unibroue volume included in this quarter's core volume was
11,000 hectolitres. Core volume in the prior year included 11,000
hectolitres of low margin private label contract volume for a contract
with a Quebec customer which expired at June 30, 2004. Industry volumes
decreased by 1% in the period.

In Eastern Canada, net revenue increased by 17% over the preceding
year's fourth quarter as a result of the inclusion of premium priced
Unibroue products, double digit growth in Sleeman premium products in
Quebec, and increased Sapporo volumes. These more than offset the impact
on revenue of a decline in value volumes and margins in Ontario (due to
price discounting by competitors) and value volume declines in Quebec
(due to the loss of the private label contract in June 2004).

In Western Canada, net revenue increased by 9% over the same period in
2003 reflecting core western volume increases of 8% and the positive
effect of the continuing shift in mix from value brands to higher priced
premium brands in Alberta and British Columbia.

COST OF GOODS SOLD

Cost of goods sold increased by $2 million or 8% over the comparable
period last year as a result of an 8% increase in hectolitres produced.
Costs of goods sold per hectolitre moved up marginally by $1 per
hectolitre. Excluding the impact of the higher cost Unibroue products,
costs of goods sold calculated on a proforma basis would have been $80
per hectolitre, or $3 per hectolitre less than in the same period of
last year.

Cost of goods sold in Eastern Canada were consistent at $80 per
hectolitre. The inclusion of Unibroue and general cost inflation were
offset by production cost savings at the Guelph production facility.

In Western Canada, cost of goods sold increased by $1 per hectolitre to
$91 per hectolitre. This increase arose from general cost inflation.

OTHER OPERATING ITEMS

Selling, general and administrative (SG&A) expenses increased in the
quarter by $6.5 million. $1.8 million of this increase related to the
Unibroue business in 2004. The prior year's SG&A expense benefited from
a $0.8 million reduction related to the tank insurance claim. The
remaining $3.9 million increase related principally to increased
marketing activities in the current period as the Company continued with
its plan to invest in the marketing of its premium brands. The increased
investments in premium brand marketing the Company made throughout 2004
resulted in an 8% increase in premium brand volumes in the quarter
compared to the previous year's fourth quarter.

SG&A expenses in Eastern Canada increased to $68 per hectolitre from $46
per hectolitre in the prior year's fourth quarter. Excluding Unibroue
SG&A, Eastern SG&A was $63 per hectolitre calculated on a proforma basis
as the Company continued to support its core premium brands in the key
Ontario and Quebec markets with significant sales and marketing
activities.

In Western Canada, SG&A expenses per hectolitre increased by $6 to $53
per hectolitre primarily as spending levels increased to support the
growth of the premium brands.

EBITDA for the quarter was $9.7 million compared to $12 million in the
previous year. The previous year's quarter benefited from a gain on the
settlement of a debt in the period of $0.6 million and the contribution
from the Quebec private label business of $0.3 million. Removing the
impact of these items, there was a net $1.4 million decrease in the
current period that resulted from the fact that the Company's SG&A cost
increase in the period exceeded the $4.9 million increase in gross
margin in the current period.

Depreciation and amortization expense increased by $0.4 million as a
result of the Unibroue acquisition and capital expenditures in Guelph.

Interest expense increased by $0.3 million in the fourth quarter due to
the increase in net borrowings to finance the Unibroue acquisition. The
impact of the increase in net borrowings was partially offset by lower
interest rates in 2004.

The provision for income taxes decreased by $2.9 million from the fourth
quarter of 2003. In 2003, the provincial government repealed previously
enacted future income tax rate reductions in the fourth quarter. This
resulted in a non-cash non-recurring charge in that quarter of 2003 of
$1.5 million. The effective tax rate for the current quarter was 32% as
a result of year end adjustments to the annual tax expense in the period.

Year to Date Comparison

The 2004 fiscal year ended on January 1, 2005. The 2004 fiscal year had
53 weeks while the 2003 fiscal year had 52 weeks.

The following chart sets out the per hectolitre results for the period
based on the number of hectolitres produced and sold by the Company:



---------------------------------------------------------------------
12 months ended 12 months ended
January 1, 2005 December 27, 2003
---------------------------------------------------------------------
Net Revenue $174 $163
---------------------------------------------------------------------
Cost of Goods Sold 87 85
---------------------------------------------------------------------
Gross Margin 87 78
---------------------------------------------------------------------
SG&A Expenses 58 49
---------------------------------------------------------------------
Income before Undernoted 29 29
---------------------------------------------------------------------
Gain on Settlement of Obligation 0 1
---------------------------------------------------------------------
EBITDA(3) 29 30
---------------------------------------------------------------------
Depreciation and Amortization 6 6
---------------------------------------------------------------------
Earnings before interest and taxes 23 24
---------------------------------------------------------------------
Interest 5 5
---------------------------------------------------------------------
Income before Taxes 18 19
---------------------------------------------------------------------
Provision for Taxes 6 8
---------------------------------------------------------------------
Net Income $ 12 $ 11
---------------------------------------------------------------------


(3) EBITDA is a non-GAAP earnings measure, therefore, it does not
have any standardized meaning prescribed by Canadian generally
accepted accounting principles and may not be similar to measures
presented by other companies. EBITDA represents earnings before
interest, income taxes, depreciation and amortization.
Management uses this measurement to evaluate the operating
results of each of the Company's segments and the Company as a
whole. Further, this measure is important to management since it
is used by the Company's lenders to evaluate the ongoing cash
generating capability of the Company and thus the amounts those
lenders are willing to lend to the Company.

Net revenue of $213.4 million for the year was up 15% over net revenue
of $185.0 million in fiscal 2003. The increase resulted from 5% core
volume growth, a 35% increase in Sapporo hectolitre sales and a mix
shift to higher priced premium product sales in the period.

Cost of goods sold were $106.2 million for the period, up 10% from $96.7
million in 2003 as a result of an 8% increase in total volumes produced
combined with a $2 per hectolitre increase in average costs of goods
sold.

Selling, general and administrative (SG&A) expenses increased in 2004 by
$15.7 million to $71.2 million. Excluding the effect of the Unibroue
business and certain non-recurring costs related to the Unibroue
acquisition and integration, SG&A expenses were $55 per hectolitre
consistent with the Company's target for these expenses for the year.

For the year, EBITDA for the Eastern segment decreased by $0.8 million.
Removing the impact of the debt settlement in the prior year, the loss
of the Quebec private label business and the Unibroue integration costs,
EBITDA for this segment would have increased by $1.1 million in the
year. EBITDA for the Western segment grew by $3.4 million as a result of
strong premium brand growth and the impact of the strike by Brewers
Distributors Limited (BDL) in May 2004.

The Company's depreciation and amortization expense increased by 14% as
a result of the significant capital expenditures made by the Company in
the current year and the impact of the Unibroue acquisition.

Interest expense increased by 9% as a result of higher debt levels
incurred to finance the Unibroue acquisition. The increase in interest
expense resulting from the debt assumed as part of the Unibroue
acquisition was partially offset by lower prevailing interest rates in
2004.

The Company's effective tax rate decreased to 35% in the current year
compared to 42% last year. The Company recorded a one time adjustment of
$1.1 million resulting from the change in substantially enacted income
tax rates in Ontario in the prior year. Excluding the impact of that
adjustment, that prior year's effective tax rate was 37%. The Company's
income tax rate was lower in 2004 than this adjusted rate in the prior
year as a result of corporate restructurings in the current year.

Diluted earnings per share for the year increased by 15% from $0.76 in
2003 to $0.87 in 2004. Normalized earnings per share as summarized in
the Company's 2003 Annual Report MD&A were $0.81 per share. Normalized
earnings per share for 2004 were $0.90 calculated as the reported
earnings per share for the year of $0.87 increased by $0.03 related to
the tax effected one-time integration costs incurred by the Company in
the third quarter of 2004. Normalized earnings per share increased by
11% consistent with the Company's commitment to deliver 10% to 15%
growth in normalized earnings per share in the year.

Financial Position

The Company's short term bank indebtedness increased to $9.6 million at
January 1, 2005 from $0.6 million as at December 27, 2003 largely to
fund higher working capital requirements in the period.

Accounts receivable increased by $11 million due to the higher core
volume and Sapporo sales in the fourth quarter of 2004 and due to the
impact of the inclusion of Unibroue accounts receivable in the fiscal
2004 year end balance. Inventories increased by $8.1 due to the
inclusion of raw materials for the Sapporo Silver Can contract and
Unibroue inventories both for the first time in the fiscal 2004 year end
balance.

Property, plant and equipment at January 1, 2005 increased by $26.1
million from the level reported at December 27, 2003 due to the
combination of the consolidation of Unibroue capital assets of $15.7
million and capital expenditures in other Sleeman facilities, most
notably new brewing, packaging and waste water equipment added at the
Guelph brewery to increase capacity.

The $18.4 million increase in intangible assets reflects the effects of
the Unibroue acquisition net of amortization expense in 2004.

Accounts payable increased marginally by $0.8 million from December 27,
2003.

The Company increased its long-term debt obligations by $30.4 million to
finance the Unibroue transaction.

The increase of $3.3 million in share capital was related to the
exercise of employee stock options during the period.

Cash Flow

Quarterly Comparison

There was a decrease in the Company's net working capital in the fourth
quarter of 2004 of $0.6 million compared with an increase of $1.8
million in 2003's fourth quarter. This change in working capital
accounted for a significant portion of the $3.5 increase in operating
cash flow in the quarter.

Investing activity outflows increased over the comparable period in 2003
by $1.5 million principally due to the higher capital spending in the
fourth quarter of 2004.

Non-operating bank loan financing outflows increased by $2.5 million as
the Company repaid more long term debt in the fourth quarter compared to
same period in 2003.

As a result of the changes in operating, investing and financing
activities, there was a net cash outflow for the period of $3 million
compared to a net outflow of $2.5 million in last year's fourth quarter.
Both periods' net cash outflow was financed with the Company's operating
bank loan.

Year to Date Comparison

Operating cash flow for the year decreased by $0.5 million to $13.2
million. The $2.5 million increased cash flow from earnings was offset
by a $3 million increase in working capital funding requirements in 2004.

Net investing activity cash outflows increased by $44 million as the
Company invested $40.2 million in the Unibroue assets and increased its
net capital and intangible asset purchases by $5 million. The 2004
increased outflows were partially offset by a net $1.2 million increase
in executive loan repayments in the year.

Non-operating bank facility financing activities provided $26.2 million
of additional funding in 2004 compared with the prior year. The Company
added $24.2 million net long-term debt in 2004 compared to 2003 and the
Company received $1.9 million more in proceeds from employee stock
options in 2004.

As a result of the above changes in operating, investing and financing
activities, there was a net cash outflow in 2004 of $8.4 million
compared to a net inflow of $9.9 million last year. The net cash outflow
for 2004 was funded from the Company's operating bank loan.

Outlook for 2005

Management expects that the Canadian beer market will remain very
competitive in 2005. Sleeman will continue to succeed by introducing
innovative new products and executing distinctive sales and marketing
programs.

In addition, Sleeman will continue to lower its cost of production and
distribution operations in 2005 as the Company realizes the benefits
from recent capital expenditures and the successful integration of the
Sleeman and Unibroue operations. By focusing on its costs, the Company
is prepared for continued value price discounting by competitors for an
extended period of time in 2005 in Ontario.

Consistent with the strategy implemented in 2004, sales and marketing
activities focused on the Company's premium brands will be carried out
throughout the full year in 2005. This strategy should allow the Company
to generate sustained consumer interest in the Company's brands.
Executing this strategy will result in more evenly distributed sales and
marketing expense charges over the four fiscal quarters in 2005.

The brewing industry continues to consolidate, and Sleeman continues to
look at acquisition opportunities which meet strict operational,
financial and strategic criteria. The Company has the financial and
management capacity to make further acquisitions that meet these
criteria.

The Company generated normalized earnings per share of $0.90 in 2004.
Assuming current market and production conditions and average weather
conditions for the year, the Company expects that its 2005 earnings per
share will increase by at least 10% over this normalized 2004 figure.

Eastern Segment

In 2005, the Company will continue to focus on selling more high margin
premium products in an effort to reduce the impact of competitor value
brand price discounting tendencies. This shift in focus will likely
produce increasing net revenues and gross margins per hectolitre sold.

In Quebec, the combined Sleeman Unibroue Inc. team will focus on
integrating the production of Sleeman products into the Chambly brewery
and efficiently distributing all of the Company's products from the new
warehouse facility in Lachine, Quebec. In addition, the sales and
marketing team will take advantage of the Company's position as the
second largest seller of premium products in the province of Quebec to
gain new listings and improved sales of the Company's premium Sleeman
and Unibroue products.

The Company expects to repeat double-digit growth in volume in both the
Maritimes and U.S. regions in 2005. Both the Sleeman and Unibroue brands
will contribute to the U.S. region's growth in 2005.

Western Segment

In Western Canada, the Company anticipates continued strong growth in
its premium portfolio in all Western provinces. Ongoing challenges are
expected for Sleeman's Alberta value beer portfolio arising from
continued deep discounting by small brewery competitors who have been
supported by the Alberta beer taxation change introduced in 2002.
Proportionately more sales in the premium segment are expected to
continue.

The Company continues to review various alternatives for sourcing its
expected long-term production needs in Western Canada.

Summary of Quarterly Information for the Last Eight Quarters



The following chart summarizes the quarterly results for the Company
for the last eight fiscal quarters:

---------------------------------------------------------------------
Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004
---------------------------------------------------------------------
Net
Rev-
enue $33,313 $49,892 $53,091 $48,740 $38,280 $58,712 $60,727 $55,635
---------------------------------------------------------------------
S,G&A
Ex-
penses $8,383 $16,792 $16,985 $13,364 $11,492 $19,134 $20,705 $19,873
---------------------------------------------------------------------
EBITDA $5,551 $6,367 $9,530 $11,952 $6,425 $9,033 $10,777 $9,708
---------------------------------------------------------------------
Net
Income $1,906 $2,049 $4,359 $3,940 $2,217 $3,842 $4,463 $3,904
---------------------------------------------------------------------
EPS
(Basic) $0.12 $0.13 $0.27 $0.25 $0.14 $0.24 $0.27 $0.24
---------------------------------------------------------------------
EPS
(Dilu-
ted) $0.12 $0.13 $0.27 $0.24 $0.14 $0.23 $0.27 $0.23
---------------------------------------------------------------------


Quarterly Conference Call Notification

Please note the Company's conference call with analysts and media will
be webcast live at 11:00 am ET, March 10, 2005 at www.cdn-news.com and
on the investor section of the Sleeman website at www.sleeman.com.
Participants will require Windows Media Player™, which can be
downloaded prior to accessing the call. The number to call to
participate in the teleconference is 416-405-9328 or 800-387-6216. To
ensure your participation, please call in about five minutes before the
start of the call. For those unable to participate, a taped rebroadcast
will be available, upon completion of the meeting, until March 17, 2005.
To access the rebroadcast, please dial 416-695-5800 or 800-408-3053. The
reservation number is 3142511. All shareholders and other interested
parties are invited to monitor this webcast, which is being offered on a
listen-only basis.

Sleeman Breweries Ltd. is the leading brewer and distributor of premium
beer in Canada and the third largest brewing company nation-wide. The
Company has supplemented its core Sleeman brands, which are available in
every province, with a family of exceptional regional brands. These
include Okanagan Spring and Shaftebury in British Columbia and Alberta,
Upper Canada in Ontario, Unibroue in Quebec and Maritime Beer in
Atlantic Canada. Sleeman entered the rapidly growing value price
category in 1999 by acquiring the Stroh portfolio of brands in Canada.
The company markets and/or distributes world-class imported products
such as Guinness, Grolsch, Samuel Adams, Scottish & Newcastle (including
Bulmers Strongbow English Cider), Sapporo and Pilsner Urquell, and
provides contract production for Japan's Sapporo Breweries' products.
The Company's products are also available in selected U.S., British and
European markets. Please visit our website at www.sleeman.com.

Forward Looking Statements

All statements in this press release that do not directly and
exclusively relate to historical facts constitute forward-looking
statements. These statements represent Sleeman Breweries Ltd.'s
intentions, plans, expectations, and beliefs, and are subject to risks,
uncertainties, and other factors, of which many are beyond the control
of the Company. These factors could cause actual results to differ
materially from such forward-looking statements. Sleeman Breweries Ltd.
disclaims any intention or obligation to update or revise any
forward-looking statements as a result of new information, future events
or otherwise.



Consolidated Statement of Earnings-unaudited
for the three months ended January 1, 2005
(all amounts in '000s except per share and per hectolitre amounts)

3 months ended 3 months ended %
January 1, 2005 December 27, 2003 Change

Net Revenue $55,635 $48,740 14

Cost of Goods Sold 26,054 24,015 8
-----------------------------------------

Gross Margin 29,581 24,725 20

SG&A Expenses 19,873 13,364 49
-----------------------------------------

Income before Undernoted 9,708 11,361 (15)
-----------------------------------------

Gain on Settlement of Obligation - 591 (100)
-----------------------------------------

EBITDA 9,708 11,952 (19)

Depreciation & Amortization. 2,019 1,570 29
-----------------------------------------

Income before Interest and Taxes 7,689 10,382 (26)

Interest 1,968 1,672 18
-----------------------------------------

Income before Taxes 5,721 8,710 (34)

Provision for Taxes 1,817 4,770 (62)
-----------------------------------------

Net Income $3,904 $3,940 (1)
-----------------------------------------
-----------------------------------------

Total Proforma HLs 340,000 312,000

EPS - Basic $0.24 $0.25
EPS - Diluted $0.23 $0.24
Weighted average common shares
during the period
-basic 16,437,499 16,006,174
-diluted 16,836,847 16,258,886


See accompanying notes to the consolidated financial statements.
These financial statements should be read in conjunction with the
audited annual financial statements.
Certain prior year amounts have been reclassified to conform to the
current year's presentation format.




Consolidated Statement of Earnings-unaudited
for the twelve months ended January 1, 2005
(all amounts in '000s except per share and per hectolitre amounts)

12 months ended 12 months ended %
January 1, 2005 December 27, 2003 Change


Net Revenue $213,354 $185,036 15

Cost of Goods Sold 106,207 96,703 10
-----------------------------------------

Gross Margin 107,147 88,333 21

SG&A Expenses 71,204 55,523 28
-----------------------------------------

Income before Undernoted 35,943 32,810 10
-----------------------------------------

Gain on Settlement of Obligation - 591 (100)
-----------------------------------------

EBITDA 35,943 33,401 8

Depreciation & Amortization. 7,172 6,301 14
-----------------------------------------

Income before Interest and Taxes 28,771 27,100 6

Interest 6,643 6,097 9
-----------------------------------------

Income before Taxes 22,128 21,003 5

Provision for Taxes 7,702 8,750 (12)
-----------------------------------------

Net Income $14,426 $12,253 18
-----------------------------------------
-----------------------------------------

Total Proforma HLs 1,350,000 1,255,000

EPS - Basic $0.89 $0.77
EPS - Diluted $0.87 $0.76
Weighted average common shares
during the period
-basic 16,259,645 15,971,050
-diluted 16,630,069 16,219,330


See accompanying notes to the consolidated financial statements.
These financial statements should be read in conjunction with the
audited annual financial statements.
Certain prior year amounts have been reclassified to conform to the
current year's presentation format.




Consolidated Balance Sheet-unaudited
as at January 1, 2005
(all amounts in 000s)

January 1, December 27,
2005 2003
---------- ------------
Assets (audited)

Current
Accounts receivable $48,842 $37,878
Inventories 39,147 31,054
Prepaid expenses 6,589 5,379
-----------------------
94,578 74,311

Property, plant and equipment 100,748 74,691
Long-term note receivable 1,083 2,166
Long-term investments 3,311 6,337
Intangible assets 104,852 86,443
-----------------------
$304,572 $243,948
-----------------------
-----------------------
Liabilities
Current
Bank indebtedness $9,634 $555
Accounts payable & accrued liabilities 43,566 42,776
Current portion of long-term obligations 12,043 13,374
-----------------------
65,243 56,705

Long-term obligations 103,616 71,916
Future income taxes 13,929 11,527
-----------------------
182,788 140,148
-----------------------
-----------------------

Shareholders Equity
Share capital 48,353 45,075
Contributed surplus 308 28
Retained earnings 73,123 58,697
-----------------------
121,784 103,800
-----------------------
$304,572 $243,948
-----------------------
-----------------------


Consolidated Statement of Retained Earnings-unaudited
for the twelve months ended January 1, 2005
(all amounts in 000s)

12 months 12 months
ended ended
January 1, December 27,
2005 2003
---------- ------------
Retained Earnings, Beginning of the Period $58,697 $46,444

Net Earnings for the Period 14,426 12,253
---------- ------------

Retained Earnings, End of the Period $73,123 $58,697
---------- ------------
---------- ------------


See accompanying notes to the consolidated financial statements.
These financial statements should be read in conjunction with the
audited annual financial statements.




Consolidated Statements of Cash Flows-unaudited
for the period ended January 1, 2005
(all amounts in '000s)

3 Months Ended 12 Months Ended
January December January December
1, 2005 27, 2003 1, 2005 27, 2003
Net inflow (outflow) of cash
related to the following activities:

OPERATING
Net earnings $3,899 $3,940 $14,426 $12,253
Items not affecting cash
Depreciation & amortization 2,019 1,570 7,172 6,301
Future income taxes 966 1,062 2,184 3,221
Gain on settlement of obligation - (591) - (591)
Non-cash charges in income (net) (180) (291) (314) (90)
Stock-based compensation expense 70 28 280 28
Loss (gain) on disposal of equipment (5) - (5) 4
----------------------------------
6,769 5,718 23,743 21,126

Changes in non-cash operating
working capital items 664 (1,812) (10,544) (7,533)
----------------------------------
7,433 3,906 13,199 13,593
----------------------------------

INVESTING
Business acquisitions - - (40,265) -
Proceeds from sale of agency agreement - - 1,176 980
Additions to property, plant
& equipment (6,104) (3,042) (15,735) (8,652)
Additions to intangible assets (223) (1,091) (859) (2,105)
Proceeds from executive loans - - 1,499 249
Proceeds from disposal of property,
plant & equipment 630 - 630 19
----------------------------------
(5,697) (4,133) (53,554) (9,509)
----------------------------------

FINANCING
Net increase in bank operating loans 3,021 2,525 8,388 (9,906)
Stock options exercised 203 132 3,274 1,322
Long-term debts - proceeds - - 41,193 90,000
Long-term debts - principal
repayments (4,960) (2,430) (12,500) (85,500)
----------------------------------
(1,736) 227 40,355 (4,084)
----------------------------------

NET CASH FLOW AND CASH BALANCE,
END OF PERIOD $- $- $- $-
----------------------------------
----------------------------------

Supplemental disclosures of
cash flows:
Interest paid $2,628 $1,672 $7,433 $6,121
Net income taxes paid $637 $(189) $7,434 $3,332


See accompanying notes to the consolidated financial statements.
These financial statements should be read in conjunction with the
audited annual financial statements.

Notes to the Consolidated Financial Statements - unaudited
(in thousands of dollars, except per share amounts)

1. DESCRIPTION OF BUSINESS

The Company develops, produces, imports, markets and distributes beer
for sale to provincial liquor distribution organizations and entities
engaged in the food and beverage industries within Canada.

The Company prepares its financial statements in accordance with
accounting principles generally accepted in Canada.

The Company experiences seasonal variations in sales with revenue
typically being highest in the second and third quarters and lowest in
the first quarter of the fiscal year.

2. SIGNIFICANT ACCOUNTING POLICIES

The disclosures contained in these unaudited consolidated financial
statements do not include all requirements of Canadian generally
accepted accounting principles for annual financial statements. These
unaudited consolidated financial statements should be read in
conjunction with the annual consolidated financial statements for the
year ended December 27, 2003.

These unaudited consolidated financial statements are based upon
accounting principles consistent with those used and described in the
annual consolidated financial statements.

Stock-Based Compensation

Effective December 29, 2002, the Company adopted the provisions of the
2003 amendments to Section 3870 in respect of the fair value method of
accounting for all its employee stock-based compensation on a
prospective basis. Accordingly, all stock or stock options issued to
employees during fiscal 2003 and beyond are fair valued at the time of
grant and result in a compensation expense on a prospective basis over
the expected vesting period.

The Company maintains two discretionary employee stock option plans.
Stock options generally have a term of five to ten years and each grant
typically vests one-third per year over the following three years.
195,000 options were granted by the Company during the current year at
an exercise price of $11.56. During the prior year, the Company granted
150,000 stock options, with 35,000 granted at an exercise price of $9.76
and 115,000 granted at an exercise price of $10.00.

During the current quarter, the compensation cost that has been charged
against income for the stock options was $70 ($280 has been charged to
income on a year-to-date basis). The fair value of each 2004 option
grant was estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions used for
grants during the period: dividend yield of 0%; expected volatility of
24%; risk-free interest rate of 3.5%; and an expected life of 4 years
(2003 - dividend yield of 0%; expected volatility of 25%; risk-free
interest rate of 3.5%; and an expected life of 4 years).

The Company did not recognize any compensation cost for the stock
options issued prior to December 28, 2002. If the Company had determined
compensation expense related to its stock option plan based on the fair
value at the grant dates for awards granted in fiscal 2002, the
Company's current period and prior year comparative period net income
and earnings per share would have been reduced to the pro forma amounts
indicated below:



--------------------------------------------------------------------
(Dollars in '000s, 3 months 3 months 12 months 12 months
except per share ended Jan. ended Dec. ended Jan. ended Dec.
amounts) 1, 2005 27, 2003 1, 2005 27, 2003
--------------------------------------------------------------------
Net earnings as reported $3,904 $3,940 $14,426 $12,253
--------------------------------------------------------------------
Net earnings - pro forma 3,900 3,932 14,413 12,221
--------------------------------------------------------------------
--------------------------------------------------------------------
Net earnings per share
as reported $0.24 $0.25 $0.89 $0.77
--------------------------------------------------------------------
Basic earnings per
share - pro forma 0.24 0.25 0.89 0.77
--------------------------------------------------------------------
--------------------------------------------------------------------
Diluted earnings per
share as reported $0.23 $0.24 $0.87 $0.76
--------------------------------------------------------------------
Diluted earnings per
share - pro forma 0.23 0.24 0.87 0.75
--------------------------------------------------------------------


The fair value of each 2002 option grant was estimated on the date of
grant using the Black-Scholes option pricing model with the following
weighted average assumptions used for grants during the period: dividend
yield of 0%; expected volatility of 27%; risk-free interest rate of 5%;
and an expected life of 4 years.

Goodwill and Other Intangibles

Goodwill and all intangible assets with an indefinite life are not
amortized, but these assets are carried at the lower of carrying value
and fair value. Goodwill is tested for impairment on an annual basis.

Hedge Accounting

Effective December 28, 2003, the Company adopted the provisions of the
CICA Handbook Accounting Guideline ACG-13 "Hedging Relationships". The
guideline establishes the conditions that need to be satisfied to
qualify for hedge accounting. Hedge accounting ensures that
counterbalancing gains, losses, revenues and expenses on transactions
and related derivative instruments are recognized in income in the same
period or periods.

Other Pronouncements

Effective December 28, 2003 the Company prospectively adopted the CICA
Handbook's new standards, 3063 "Impairment of long-lived assets" and
3110 "Asset retirement obligations". The Company does not expect these
new standards to have a material impact on the reported results in the
current year or in the future.

3. OUTSTANDING SHARES

As at January 1, 2005, the Company had outstanding 16,452,359 common
shares and 1,007,615 options to acquire common shares under the
Company's employee stock option plans.

4. SEGMENTED INFORMATION

Sleeman Breweries Ltd. is the largest premium brewery in Canada,
producing and marketing several unique brands of beer. The Company
operates breweries in Guelph, Ontario; Chambly, Quebec; Calgary,
Alberta; Dartmouth, Nova Scotia; Vernon, British Columbia; and LaCrosse,
Wisconsin. The Company's reportable segments represent the aggregation
of strategic business units that produce and sell beer in distinct
geographic markets. They are managed separately because each business
operates in different market environments in terms of regulatory
regimes, customer preferences and sales and distribution channels.

The Company has two reportable segments: Eastern Canadian operations and
Western Canadian operations. The accounting policies of the segments are
the same as those described in the summary of significant accounting
policies. The Company accounts for inter-segment sales and transfers at
the transferring segment's cost. Segment performance is evaluated based
on earnings before interest, income taxes, depreciation and amortization
("EBITDA").



The following table sets forth information about segment profit or
loss and segment assets:

---------------------------------------------------------------------
---------------------------------------------------------------------
Eastern Western Eastern Western
Canada Canada Totals Canada Canada Totals
---------------------------------------------------------------------
---------------------------------------------------------------------
Quarter Ended Year Ended
January 1, 2005 January 1, 2005
---------------------------------------------------------------------
Revenues from
external
customers $39,370 $16,265 $55,635 $142,606 $70,748 $213,354
---------------------------------------------------------------------
Inter-segment
revenue 1,253 - 1,253 8,811 - 8,811
---------------------------------------------------------------------
EBITDA 6,557 3,151 9,708 21,503 14,440 35,943
---------------------------------------------------------------------
Depreciation and
amortization 1,414 605 2,019 5,126 2,046 7,712
---------------------------------------------------------------------
Segment assets 227,833 76,739 304,572 227,833 76,739 304,572
---------------------------------------------------------------------
Expenditures for
capital assets 4,585 1,519 6,104 27,898 3,500 31,398
---------------------------------------------------------------------
---------------------------------------------------------------------
Quarter Ended Year Ended
December 27, 2003 December 27, 2003
---------------------------------------------------------------------
Revenues from
external
customers $33,785 $14,995 $48,740 $125,826 $59,210 $185,036
---------------------------------------------------------------------
Inter-segment
revenue 1,865 - 1,865 7,531 - 7,531
---------------------------------------------------------------------
EBITDA 8,377 3,575 11,952 22,355 11,046 33,401
---------------------------------------------------------------------
Depreciation and
amortization 1,181 389 1,570 4,676 1,625 6,301
---------------------------------------------------------------------
Segment assets 168,733 72,831 241,564 168,733 72,831 241,564
---------------------------------------------------------------------
Expenditures for
capital assets 2,808 234 3,042 6,319 2,310 8,629
---------------------------------------------------------------------
---------------------------------------------------------------------


5. BUSINESS ACQUISITION

Effective June 30, 2004, the Company took up and paid for 4,143,254
multiple voting shares ("MVS") of Unibroue Inc. ("Unibroue") and
1,587,140 subordinate voting shares ("SVS") of Unibroue, representing
100% of the outstanding MVS and 91.2% of the SVS. Subsequently, the
Company exercised its statutory right under the Canada Business
Corporations Act ("CBCA") to acquire the remaining SVS not deposited
under its Offer. The price paid per share for all shares was $5.25 cash
consistent with the announcement by the Company on April 20, 2004.

The net assets acquired, using the purchase method of accounting, were
as follows:



Cash consideration and acquisition costs $ 40,265
--------------------------------------------------------------------

Assigned to the fair value of net assets acquired:
Current assets 7,221
Property, plant and equipment 15,663
Intangible assets 19,966
Current liabilities (2,367)
Future income tax liabilities (218)
--------------------------------------------------------------------

$ 40,265
--------------------------------------------------------------------
--------------------------------------------------------------------


6. COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform to the
financial statement presentation adopted in the current period.


-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Sleeman Breweries Ltd., Investor/Media Relations
    John Sleeman
    Chairman & CEO
    (519) 822-1834
    (519) 822-0221 (FAX)
    or
    Sleeman Breweries Ltd.
    Dan Rogozynski
    VP Finance & Administration
    (519) 826-5494
    (519) 822-2850 (FAX)
    http://www.sleeman.com