10/23/2012 | Press release

Celestica Announces Third Quarter Financial Results & Intention To Commence $175 Million Substantial Issuer Bid

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Celestica Announces Third Quarter Financial Results & Intention To Commence $175 Million Substantial Issuer Bid

October 23, 2012

TORONTO, Canada - Celestica Inc. (NYSE, TSX: CLS), a global leader in the delivery of end-to-end product lifecycle solutions, today announced financial results for the third quarter ended September 30, 2012.

"Celestica delivered consistent profitability, solid returns and strong free cash flow in the third quarter, despite the challenging environment." said Craig Muhlhauser, Celestica President and Chief Executive Officer. "While we are taking the appropriate cost reduction actions to respond to the challenging economic environment, we continue to invest for our future and focus on delivering innovative solutions and operational excellence that creates value for our customers."

"As a result of our strong balance sheet, our board of directors has authorized a substantial issuer bid to repurchase for cancellation up to $175 million of our subordinate voting shares. Today's issuer bid announcement, together with the share repurchases we have already completed this year, demonstrate Celestica's commitment to generating shareholder value."

Third Quarter and First Nine Months Summary

i. International Financial Reporting Standards (IFRS) net earnings for the third quarter of 2012 included an aggregate charge of $0.10 (pre-tax) per share for stock-based compensation, amortization of intangible assets (excluding computer software) and restructuring charges. This is within the range we provided on July 27, 2012 of a charge between $0.08 and $0.14 per share. Included in the third quarter of 2012 adjusted net EPS (non-IFRS) of $0.26 is an income tax benefit of $0.05 per share arising from changes to our provisions related to certain tax uncertainties.

ii. 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 other generally accepted accounting principles (GAAP). See Schedule 1 for non-IFRS definitions and a reconciliation of non-IFRS to IFRS measures.

Third Quarter 2012 Highlights

• Revenue:  $1.58 billion, slightly lower than our guidance of $1.60 to $1.70 billion (announced July 27, 2012)
• IFRS EPS:  $0.21 per share, compared to $0.23 per share for the same period last year
• Adjusted net EPS (non-IFRS):  $0.26 per share, above our guidance of $0.17 to $0.23 per share (announced July 27, 2012) and includes a $0.05 per share tax recovery benefit
• Free cash flow (non-IFRS):  $59.9 million, compared to $16.9 million for the second quarter of 2012
• Diversified end markets: 21% of total revenue
• Repurchased 2.7 million subordinate voting shares for cancellation as part of our Normal Course Issuer Bid
• Recorded $8.3 million of restructuring charges
• Spent $71 million to complete the acquisition of D&H Manufacturing Company

End Markets by Quarter as a Percentage of Total Revenue

i.    We combined enterprise communications and telecommunications for reporting purposes effective the first quarter of 2012. Prior period percentages were also combined.

ii.  Our diversified end market is comprised of industrial, aerospace and defense, healthcare, green technology, semiconductor equipment and other.

Wind Down of Manufacturing Services for RIM and Restructuring Update

In June 2012, we announced that we would wind down our manufacturing services for RIM.  We completed substantially all of our manufacturing services for RIM by September 30, 2012. For the third quarter of 2012, RIM represented just under 10% of total revenue (second quarter of 2012 - 17% ; full year 2011 - 19%).

Due to the impact of the wind down of our RIM manufacturing and in order to improve our margin performance, we previously announced restructuring actions throughout our global network to reduce our overall cost structure. We estimated total restructuring charges of between $40 million and $50 million which we expect to complete by the first half of 2013. Of this amount, we recorded $8.3 million in the third quarter of 2012 and $27.3 million in the first nine months of 2012, the majority of which related to the wind down of our manufacturing services for RIM.

Celestica to Repurchase up to $175 million of its Subordinate Voting Shares Through a Substantial Issuer Bid

Our board of directors has authorized a substantial issuer bid to repurchase for cancellation up to $175 million of our subordinate voting shares (Offer).  We expect to launch and complete the Offer during the fourth quarter of 2012.  At the commencement of the Offer, we will establish the maximum and minimum price that shareholders may select under the Offer. We will fund the share repurchases using a combination of available cash on hand and cash from our existing revolving credit facility.

Normal Course Issuer Bid

During the third quarter of 2012, we paid $21.2 million to repurchase for cancellation 2.7 million subordinate voting shares under our NCIB that expires in February 2013. At September 30, 2012, we can repurchase up to an additional 2.5 million subordinate voting shares under the NCIB.

Fourth Quarter 2012 Outlook

For the fourth quarter ending December 31, 2012, we anticipate revenue to be in the range of $1.425 to $1.525 billion, and adjusted net earnings per share to be in the range of $0.15 to $0.21.  We expect a negative $0.08 to $0.14 per share (pre-tax) aggregate impact on an IFRS basis for the following items: stock-based compensation, amortization of intangible assets (excluding computer software) and restructuring charges.

Third Quarter Webcast

Management will host its third quarter results conference call today at 4:30 p.m. Eastern Daylight Time. The webcast can be accessed at www.celestica.com.

Supplementary Information

In addition to disclosing detailed results in accordance with IFRS, Celestica provides supplementary non-IFRS measures to consider in evaluating the company's operating performance. See Schedule 1. 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

Celestica is dedicated to delivering end-to-end product lifecycle solutions to drive our customers' success. Through our simplified global operations network and information technology platform, we are solid partners who deliver informed, flexible solutions that enable our customers to succeed in the markets they serve. Committed to providing a truly differentiated customer experience, our agile and adaptive employees share a proud history of demonstrated expertise and creativity that provides our customers with the ability to overcome any challenge. For further information on Celestica, visit its website at www.celestica.com. The company's security filings can also be accessed at www.sedar.com and www.sec.gov.

Safe Harbour 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 the transition activities of our manufacturing services for RIM on our financial targets and results and working capital requirements, and our anticipated expenses and restructuring charges related to such transition and other actions; the impact of acquisitions and program wins or losses on our financial results and working capital requirements; anticipated expenses, capital expenditures or benefits; our expected tax outcomes; our cash flows, financial targets and priorities; our ability to diversify and grow our customer base and develop new capabilities; the effect of the global economic environment on customer demand; and our intention to undertake the substantial issuer bid (SIB) and the terms thereof, including the number of subordinate voting shares we may purchase in the SIB and the price range.  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, among others, could affect our future results and could cause those results to differ materially from those expressed in such forward-looking statements: the challenges of effectively managing the transition activities of our manufacturing services for RIM; the extent of the restructuring charges associated with the RIM wind down and other actions; 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 and changes in the outsourcing strategies of our customers, including the insourcing of programs by them; 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 all our restructuring activities or integration of our acquisitions; the risk of potential non-performance by counterparties, including but not limited to financial institutions, customers and suppliers; risks relating to the SIB not occurring as intended, including: our expectation that we will fund any purchases of subordinate voting shares pursuant to the SIB from a combination of available cash on hand and cash drawn from our existing revolving credit facility; our ability to obtain regulatory approvals; our continuing to have sufficient financial resources and working capital and the SIB not precluding us from pursuing foreseeable business opportunities for the future growth of our business; and the market for our subordinate voting shares at the completion of the SIB not being materially less liquid than the market that exists at the time we commence it. These and other risks and uncertainties, as well as other information related to Celestica, are discussed herein and in our 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, earnings and other financial 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: our ability to effectively manage the RIM transition activities; 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; technological developments; the timing and execution of our restructuring actions; and our ability to diversify our customer base and develop new capabilities. 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 our guidance is effective on the date given, and will only be updated through a public announcement. 

The tender offer referred to in this press release has not yet commenced.  This press release is neither an offer to purchase nor a solicitation of an offer to sell any subordinate voting shares of Celestica.  The solicitation and the offer to buy subordinate voting shares of Celestica will be made pursuant to an offer to purchase, letter of transmittal and related materials that Celestica will file with the U.S. Securities and Exchange Commission (SEC) and will distribute to its shareholders; copies will be available free from Celestica or the SEC's website at www.sec.gov.  These documents will contain important information about the tender offer and shareholders of Celestica are urged to read them carefully when they become available.

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