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Celestica Announces First Quarter Financial Results

TORONTO April 24, 2012 March 31, 2012

Craig Muhlhauser

First Quarter Summary

            Thre e m onths en d ed
Marc h 31
            2 011     201 2
Revenue (in millions)…………………………………………………….           $1,800.1     $1,690.9
                   
IFRS net earnings (in millions)………………………………………..           $30.0     $43.2
(i)           $0.14     $0.20
                   
(ii)           $54.7     $53.6
(ii)           $0.25     $0.25
(ii)           27.0%     23.7%
(ii)           3.3%     3.4%
i.     
   

First Quarter 2012 Highlights

  • $1.69 billion $1.60 to $1.70 billion January 26, 2012
  • $0.20
  • $0.25 $0.18 to $0.24 January 26, 2012
  • $44.4 million $(51.8) million
  • Diversified end markets: 19% of total revenue, up from 11% of total revenue for the same period last year
  • Repurchased 6.0 million subordinate voting shares for cancellation as part of our Normal Course Issuer Bid (NCIB)

End Markets by Quarter

            2 1 1     20 1 2
            Q1     Q 2     Q 3     Q 4     F Y     Q 1
(i)           36%     34%     34%     33%     35%     33%
Consumer…………………………………..           26%     25%     25%     26%     25%     23%
(ii)           11%     13%     16%     18%     14%     19%
Servers………………………………………           15%     17%     14%     13%     15%     15%
Storage………………………………………           12%     11%     11%     10%     11%     10%
Revenue (in billions)…………………….           $1.80     $1.83     $1.83     $1.75     $7.21     $1.69
i.     
ii.     

Celestica Share Repurchase Plan
$56.4 million February 2012 February 8, 2013 March 31, 2012

Second Quarter 2012 Outlook
June 30, 2012 $1.65 billion to $1.75 billion $0.20 to $0.26 $0.04 to $0.06

First Quarter Webcast and Annual Shareholders Meeting Webcast
8:00 a.m. Eastern Daylight Time 9:00 a.m. Eastern Daylight Time St. West Toronto, Ontario www.celestica.com

Supplementary Information

Management uses adjusted net earnings and other non-IFRS measures to assess operating performance and the effective use and allocation of resources; to provide more meaningful period-to-period comparisons of operating results; to enhance investors’ understanding of the core operating results of Celestica’s business; and to set management incentive targets.

About Celestica

http://www.celestica.com http://www.sedar.com http://www.sec.gov

Safe Harbor and Fair Disclosure Statement

This news release contains forward-looking statements related to our future growth, trends in our industry, our financial or operational results including our quarterly earnings and revenue guidance, the impact of program wins or losses and acquisitions on our financial results and working capital requirements, anticipated expenses, capital expenditures, benefits or payments, our financial or operational performance, our expected tax outcomes, our cash flows and financial targets, our priorities, and the effect of the global economic environment on customer demand. Such forward-looking statements are predictive in nature and may be based on current expectations, forecasts or assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially from the forward-looking statements themselves.  Such forward-looking statements may, without limitation, be preceded by, followed by, or include words such as "believes", "expects", "anticipates", "estimates", "intends", "plans", "continues", or similar expressions, or may employ such future or conditional verbs as "may", "will", "should" or "would", or may otherwise be indicated as forward-looking statements by grammatical construction, phrasing or context.  For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995, and in applicable Canadian securities legislation. Forward-looking statements are not guarantees of future performance. Readers should understand that the following important factors could affect our future results and could cause those results to differ materially from those expressed in such forward-looking statements: our dependence on a limited number of customers and on our customers’ ability to compete and succeed in their marketplace for the products we manufacture; the effects of price competition and other business and competitive factors generally affecting the electronics manufacturing services (EMS) industry; the challenges of effectively managing our operations and our working capital performance during uncertain economic conditions, including responding to significant changes in demand from our customers; the challenges of managing changing commodity costs as well as labor costs and conditions; disruptions to our operations, or those of our customers, component suppliers, or our logistics partners, resulting from local events including natural disasters, political instability, local labor conditions and social unrest, criminal activity and other risks present in the jurisdictions in which we operate; our inability to retain or expand our business due to execution problems relating to the ramping of new programs; the delays in the delivery and/or general availability of various components and materials used in our manufacturing process; the challenge of managing our financial exposure to foreign currency volatility; our dependence on industries affected by rapid technological change; variability of operating results among periods; our ability to successfully manage our international operations; increasing income taxes and our ability to successfully defend tax audits or meet the conditions of tax incentives; the completion of our restructuring activities or integration of our acquisitions; and the risk of potential non-performance by counterparties, including but not limited to financial institutions, customers and suppliers. These and other risks and uncertainties, as well as other information related to the company, are discussed in the company’s various public filings at www.sedar.com and www.sec.gov , including our Annual Report on Form 20-F and subsequent reports on Form 6-K filed with the U.S. Securities and Exchange Commission and our Annual Information Form filed with the Canadian securities regulators. Forward-looking statements are provided for the purpose of providing information about management’s current expectations and plans relating to the future.  Readers are cautioned that such information may not be appropriate for other purposes. Except as required by applicable law, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Our revenue and earnings guidance, as contained in this press release, is based on various assumptions which management believes are reasonable under the current circumstances, but may prove to be inaccurate, and many of which involve factors that are beyond the control of the company. The material assumptions may include the following: forecasts from our customers, which range from 30 to 90 days and can fluctuate significantly in terms of volume and mix of products or services; the timing and execution of, and investments associated with ramping new business; the success in the marketplace of our customers’ products, general economic and market conditions; currency exchange rates; pricing and competition; anticipated customer demand; supplier performance and pricing; commodity, labor, energy and transportation costs; operational and financial matters; and technological developments. These assumptions and estimates are based on management’s current views with respect to current plans and events, and are and will be subject to the risks and uncertainties referred to above.  It is Celestica’s policy that revenue and earnings guidance is effective on the date given, and will only be updated through a public announcement.

Supplementary Non-IFRS Measures

These non-IFRS measures do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other companies using IFRS, or our North American competitors who report under U.S. GAAP and use non-U.S. GAAP measures to describe similar operating metrics. Non-IFRS measures are not measures of performance under IFRS and should not be considered in isolation or as a substitute for any standardized measure under IFRS.  The most significant limitation to management’s use of non-IFRS financial measures is that the charges or credits excluded from the non-IFRS measures are nonetheless charges or credits that are recognized under IFRS and that have an economic impact on the company.  Management compensates for these limitations primarily by issuing IFRS results to show a complete picture of the company’s performance, and reconciling non-IFRS results back to IFRS, unless there are no comparable IFRS measures.

The economic substance of these exclusions and management’s rationale for excluding these from non-IFRS financial measures is provided below:

Stock-based compensation, which represents the estimated fair value of stock options, restricted share units and performance share units granted to employees, is excluded because grant activities vary significantly from quarter-to-quarter in both quantity and fair value.  In addition, excluding this expense allows us to better compare core operating results with those of our competitors who also generally exclude stock-based compensation from their core operating results, who may have different granting patterns and types of equity awards, and who may use different option valuation assumptions than we do, including those competitors who use U.S. GAAP and non-U.S. GAAP measures to present similar metrics.

Restructuring and other charges or recoveries, which consist primarily of employee severance, lease termination and facility exit costs associated with closing and consolidating manufacturing facilities, reductions in infrastructure and acquisition-related transaction costs, are excluded because such charges or recoveries are not directly related to ongoing operating results and do not reflect expected future operating expenses after completion of these activities.  We believe that excluding these charges or recoveries permits a better comparison of our core operating results with those of our competitors who also generally exclude these charges or recoveries in assessing operating performance.

Impairment charges, which consist of non-cash charges against goodwill, intangible assets and property, plant and equipment, result primarily when the carrying value of these assets exceeds their fair value.  Our competitors may record impairment charges at different times and excluding these charges permits a better comparison of our core operating results with those of our competitors who also generally exclude these charges in assessing operating performance.

Gains or losses related to the repurchase of shares or debt are excluded as these gains or losses do not impact core operating performance and vary significantly among our competitors who also generally exclude these charges or recoveries in assessing operating performance.

Significant deferred tax write-offs or recoveries are excluded as these write-offs or recoveries do not impact core operating performance and vary significantly among our competitors who also generally exclude these charges or recoveries in assessing operating performance.

The following table sets forth, for the periods indicated, a reconciliation of IFRS to non-IFRS measures (in millions, except per share amounts):

        Thre e mon ths e n ded
March 31
        20 11   20 1 2
                     
                         
Revenue      $ 1,800.1          $ 1,690.9      
                         
IFRS gross profit      $ 116.9     6.5%    $ 112.1     6.6%
  Stock-based compensation     4.0         3.3      
Non-IFRS gross profit       $ 120.9     6.7%    $ 115.4     6.8%
                         
IFRS SG&A      $ 70.3     3.9%    $ 60.0     3.5%
  Stock-based compensation     (13.0)         (7.4)      
Non-IFRS SG&A       $ 57.3     3.2%    $ 52.6     3.1%
                         
IFRS earnings before income taxes      $ 33.3          $ 46.7      
  Finance costs     1.4         0.8      
  Stock-based compensation     17.0         10.7      
  Amortization of intangible assets (excluding computer software)     1.8         0.8      
  Restructuring and other charges (recoveries)     5.9         (1.1)      
Non-IFRS operating earnings (EBIAT) (1)      $ 59.4     3.3%    $ 57.9     3.4%
                         
IFRS net earnings       $ 30.0     1.7%    $ 43.2     2.6%
  Stock-based compensation     17.0         10.7      
  Amortization of intangible assets (excluding computer software)     1.8         0.8      
  Restructuring and other charges (recoveries)     5.9         (1.1)      
  Adjustments for taxes (2)                  
Non-IFRS adjusted net earnings      $ 54.7     3.0%    $ 53.6     3.2%
                         
Diluted EPS                      
  Weighted average # of shares (in millions)     219.2         217.9      
  IFRS earnings per share      $ 0.14          $ 0.20      
  Non-IFRS adjusted net earnings per share      $ 0.25          $ 0.25      
  # of shares outstanding (in millions)     216.3         211.6      
                         
IFRS cash provided by (used in) operations      $ (30.2)          $ 84.1      
  Purchase of property, plant and equipment, net of sales proceeds     (18.2)         (38.7)      
  Finance costs paid     (3.4)         (1.0)      
Non-IFRS free cash flow (3)      $ (51.8)          $ 44.4      
                         
ROIC % (4)     27.0%         23.7%  
(1)   
(2)   
(3)   

(4)   

The following table sets forth, for the periods indicated, our calculation of ROIC % (in millions, except ROIC %):

      Three mo nths ended
March 31
        2011   2 1 2
                     
Non-IFRS operating earnings (EBIAT)          $ 59.4        $ 57.9
Multiplier         4       4
Annualized EBIAT          $ 237.6        $ 231.6
                     
Average net invested capital for the period          $ 879.4        $ 977.5
                     
ROIC %         27.0%       23.7%
                     
            De cember 31   Mar c h 3 1
            2011   20 1 2
                     
Net invested capital consists of:                  
Total assets          $ 2,969.6        $ 2,955.4
Less: cash         658.9       646.7
Less: accounts payable, accrued and other current                  
  liabilities, provisions and income taxes payable         1,346.6       1,317.8
Net invested capital by quarter          $ 964.1        $ 990.9
           

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