Celestica Announces First Quarter 2019 Financial Results
Q1 2019 Highlights
- Revenue:
$1.43 billion , compared to our Q1 2019 guidance range of$1.45 to$1.55 billion , decreased 4% compared to$1.50 billion for the first quarter of 2018 (Q1 2018); Operating margin (non-IFRS)*: 2.4%, compared to our guidance range of 2.6% at the midpoint of our revenue and non-IFRS adjusted EPS guidance ranges, and 3.0% for Q1 2018 Advanced Technology Solutions (ATS) segment revenue** increased 9% compared to Q1 2018, and represented 40% of total revenue as compared to 36% for Q1 2018; ATS segment margin** was 2.6% down from 5.2% for Q1 2018, driven primarily by losses in the current quarter within our capital equipment business (see segment updates below)- Connectivity & Cloud Solutions (CCS) segment revenue** decreased 12% compared to Q1 2018, and represented 60% of total revenue as compared to 64% for Q1 2018; CCS segment margin** was 2.3% compared to 1.7% for Q1 2018
- IFRS EPS:
$0.66 per share, compared to$0.10 per share for Q1 2018. IFRS EPS for Q1 2019 included a gain of$0.75 per share related to the sale of ourToronto real property (discussed below) - Adjusted EPS (non-IFRS)*:
$0.12 per share, compared to our Q1 2019 guidance range of$0.12 to$0.18 per share, and$0.24 per share for Q1 2018 - Adjusted ROIC (non-IFRS)*: 7.9%, compared to 14.4% for Q1 2018
- Free cash flow (non-IFRS)*: positive
$144.7 million , compared to negative$34.1 million for Q1 2018. Non-IFRS free cash flow for Q1 2019 included$113 million in proceeds from the sale of ourToronto real property (see below) - Repurchased and cancelled 5.1 million subordinate voting shares for
$44.5 million under our normal course issuer bid
"
"We remain committed to our transformation strategy which we believe will drive more consistent, diversified and sustainable results in the future. Our CCS portfolio review is mostly complete and we are encouraged by the related benefits. As we continue to drive improvement in both of our segments, we intend to maintain our balanced approach to capital allocation, supported by a strong balance sheet."
*Non-IFRS measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public companies that use IFRS or other generally accepted accounting principles (GAAP). See “Non-IFRS Supplementary Information” below for information on our rationale for the use of non-IFRS measures, and Schedule 1 for, among other items, non-IFRS measures included in this press release, as well as their definitions, uses, and a reconciliation of non-IFRS measures to the most directly comparable IFRS measures. As described in footnotes (3) and (4) to the reconciliation table in Schedule 1, our calculation of each of non-IFRS free cash flow and non-IFRS adjusted ROIC has been modified commencing Q1 2019.
** Our ATS segment consists of our ATS end market, and is comprised of our aerospace and defense (A&D), industrial, smart energy, healthtech, and capital equipment businesses (consisting of semiconductor, display, and power & signal distribution equipment). Our CCS segment consists of our Communications and Enterprise end markets, and is comprised of our enterprise communications, telecommunications, servers and storage businesses. Segment performance is evaluated based on segment revenue, segment income and segment margin (segment income as a percentage of segment revenue). See note 25 to our 2018 audited consolidated financial statements for further detail.
Segment Updates
In the capital equipment component of our ATS segment, revenue from our semiconductor capital equipment customers has been adversely impacted by cyclical decreases in demand that started in the second half of 2018. As expected, our capital equipment business operated at a loss in Q1 2019, within our anticipated range. Additionally, within our display business, some programs that we had anticipated to ramp in the second half of 2019 have been delayed and are currently expected to ramp in 2020. We expect demand softness in our capital equipment business to continue throughout 2019. Our focus continues to be on aligning this business to the current demand environment and to improve its profitability. The industrial and healthtech businesses within our ATS segment were adversely impacted in Q1 2019 by costs associated with the ramping of multiple new programs. As the ramping of these programs progresses, we anticipate an increased level of profitability from these businesses. In addition, our A&D business was adversely impacted by materials shortages in Q1 2019, resulting in a backlog of orders and reduced profitability. We expect this backlog to gradually improve as we move through 2019.
In our CCS segment, we continue to progress with the comprehensive review of our CCS revenue portfolio (CCS Review). We commenced this review in the second half of 2018 to address under-performing programs that no longer align with our strategic objectives. The CCS Review is currently expected to result in a decline in our CCS segment revenue of approximately
The decrease in CCS segment revenue in Q1 2019 as compared to the prior year period was primarily due to planned program disengagements in our Enterprise end market resulting from our CCS Review, as well as late quarter demand softness from certain Communications customers. We saw a reduction in orders from several Communications customers, as they consumed their inventory buffers previously built up to manage materials constraints. Additionally, reduced demand for some programs resulted from the impact of next generation program transitions. We expect these adverse market dynamics in our Communications end market to continue into the second quarter of 2019.
If demand softness in our Communications end market persists into the second half of 2019, total company revenue for 2019 could decrease year over year at the high end of the single digit percentage range previously anticipated to result from the CCS Review alone.
Restructuring Update
We have recorded approximately
Consummation of Toronto Real Property Sale
On
Adoption of IFRS 16
Guidance Summary and Q2 2019 Outlook
| Q1 2019 Guidance (1) | Q1 2019 Actual (1) | Q2 2019 Guidance (2) | |||||
| IFRS revenue (in billions) | $ | 1.43 | |||||
| Non-IFRS operating margin | 2.6% at the mid-point of our revenue and non-IFRS adjusted EPS guidance ranges | 2.4 | % | 2.4% at the mid-point of our revenue and non-IFRS adjusted EPS guidance ranges | |||
| Non-IFRS adjusted SG&A (in millions) | $ | 50.9 | |||||
| Non-IFRS adjusted EPS | $ | 0.12 | |||||
(1) For Q1 2019, our revenue was below our guidance range as a result of weaker than expected demand in our CCS segment, primarily late quarter demand softness from certain Communications customers. Non-IFRS operating margin for Q1 2019 was below the mid-point of our revenue and non-IFRS adjusted EPS guidance ranges as a result of the lower revenue, unfavorable changes in mix, and higher than expected costs associated with ramping multiple new programs, in particular within our ATS segment. Non-IFRS adjusted SG&A was just below our guidance range and non-IFRS adjusted EPS was at the low end of our guidance range. Our non-IFRS adjusted effective tax rate for Q1 2019 was 27%, higher than our annual estimated range of between 19% to 21%, driven primarily by unfavorable profit mix in different geographies, offset in part by taxable foreign exchange benefits.
IFRS earnings per share (EPS) of
IFRS EPS for Q1 2019 included an aggregate
(2) For the second quarter of 2019 (Q2 2019), we expect a negative
See “Non-IFRS Supplementary Information” below for information on our rationale for the use of non-IFRS measures, and Schedule 1 for, among other items, non-IFRS measures included in this press release, as well as their definitions, uses, and a reconciliation of non-IFRS measures to the most directly comparable IFRS measures.
We do not provide reconciliations for forward-looking non-IFRS financial measures, as we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing or amount of various events that have not yet occurred, are out of our control and/or cannot be reasonably predicted, and that would impact the most directly comparable forward-looking IFRS financial measure. For these same reasons, we are unable to address the probable significance of the unavailable information. Forward-looking non-IFRS financial measures may vary materially from the corresponding IFRS financial measures.
Q12019 Webcast and Annual Shareholders Meeting Webcast
Management will host its Q1 2019 results conference call today at
Non-IFRS Supplementary Information
In addition to disclosing detailed operating results in accordance with IFRS,
See Schedule 1 - Supplementary Non-IFRS Measures for, among other items, non-IFRS measures provided herein, non-IFRS definitions, and a reconciliation of non-IFRS measures to the most directly comparable IFRS measures. As described in footnotes (3) and (4) to the reconciliation table in Schedule 1, our calculation of each of non-IFRS free cash flow and non-IFRS adjusted ROIC has been modified commencing Q1 2019.
About
For more information, visit www.celestica.com. Our securities filings can also be accessed at www.sedar.com and www.sec.gov.
Cautionary Note Regarding Forward-looking Statements
This news release contains forward-looking statements, including, without limitation, those related to our priorities and goals; trends in the electronics manufacturing services (EMS) industry in general and in our segments, and their anticipated impact on our business; our anticipated financial and/or operational results, and our anticipated Q2 2019 and annual non-IFRS adjusted effective tax rates; the range and timing of our cost efficiency initiative; the anticipated impact of our CCS Review; the timing of our temporary corporate office relocation; the timing of the commencement of, and amount of payments under, a lease for our new corporate headquarters; anticipated costs and expenses; amortization of certain intangible assets (including anticipated increases as a result of recent acquisitions); the timing and amounts of restructuring actions and charges; and the impact of tax and litigation outcomes. Such forward-looking statements may, without limitation, be preceded by, followed by, or include words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “continues,” “project,” “potential,” “possible,” “contemplate,” “seek,” or similar expressions, or may employ such future or conditional verbs as “may,” “might,” “will,” “could,” “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, where applicable, and applicable Canadian securities laws.
Forward-looking statements are provided to assist readers in understanding management’s current expectations and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. Forward-looking statements are not guarantees of future performance and are subject to risks that could cause actual results to differ materially from those expressed or implied in such forward-looking statements, including, among others, risks related to: our customers’ ability to compete and succeed with our products and services; customer and segment concentration; challenges of replacing revenue from completed or lost programs or customer disengagements; changes in our mix of customers and/or the types of products or services we provide; the impact on gross profit of higher concentrations of lower margin programs; competitive factors affecting the EMS industry in general and our CCS segment in particular; the cyclical nature of our capital equipment business, in particular our semiconductor business; delays in the delivery and availability of components, services and materials; the expansion or consolidation of our operations; defects or deficiencies in our products, services or designs; integrating acquisitions and "operate-in-place" arrangements, and achieving the anticipated benefits therefrom; negative impacts on our business resulting from recent increases in third-party indebtedness; our response to changes in demand, and rapidly evolving and changing technologies; challenges associated with new customers or programs, or the provision of new services; the incurrence of future restructuring charges, impairment charges or other write-downs of assets; managing our operations, growth initiatives, and our working capital performance during uncertain market and economic conditions; disruptions to our operations, or those of our customers, component suppliers and/or logistics partners, including as a result of global or local events outside our/their control and the impact of significant tariffs on items imported into the
Our revenue, earnings and other financial guidance contained in this press release is based on various assumptions, many of which involve factors that are beyond our control. Our material assumptions include those related to the following: fluctuation of production schedules from our customers in terms of volume and mix of products or services; the timing and execution of, and investments associated with, ramping new business; the successful pursuit, completion and integration of acquisitions; the success of our customers’ products; our ability to retain programs and customers; the stability of general economic and market conditions, currency exchange rates, and interest rates; supplier performance, pricing and terms; compliance by third parties with their contractual obligations and the accuracy of their representations and warranties; the costs and availability of components, materials, services, equipment, labor, energy and transportation; that our customers will retain liability for recently-imposed tariffs and countermeasures; our ability to keep pace with rapidly changing technological developments; the timing, execution and effect of restructuring actions; the successful resolution of quality issues that arise from time to time; our having sufficient financial resources and working capital to fund currently anticipated financial obligations and to pursue desirable business opportunities; our ability to successfully diversify our customer base and develop new capabilities; the availability of cash resources for repurchases of outstanding subordinate voting shares; that we achieve the expected benefits from our recent acquisitions; and the impact of the CCS Review on our business. Although management believes its assumptions to be reasonable under the current circumstances, they may prove to be inaccurate, which could cause actual results to differ materially (and adversely) from those that would have been achieved had such assumptions been accurate. Forward-looking statements speak only as of the date on which they are made, and 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, except as required by applicable law.
All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
Schedule 1
Supplementary Non-IFRS Measures
Our non-IFRS measures herein include adjusted gross profit, adjusted gross margin (adjusted gross profit as a percentage of revenue), adjusted selling, general and administrative expenses (SG&A), adjusted SG&A as a percentage of revenue, operating earnings (adjusted EBIAT), operating margin (adjusted EBIAT or operating earnings as a percentage of revenue), adjusted net earnings, adjusted earnings per share, adjusted return on invested capital (adjusted ROIC), free cash flow, adjusted tax expense and adjusted effective tax rate. Adjusted EBIAT, adjusted ROIC, free cash flow (including a description of modifications to our calculation of adjusted ROIC and free cash flow commencing in Q1 2019), adjusted tax expense and adjusted effective tax rate are further described in the tables below. In calculating these non-IFRS financial measures, management excludes the following items, where applicable: employee stock-based compensation expense, amortization of intangible assets (excluding computer software), restructuring and other charges, net of recoveries (as defined below), impairment charges, and acquisition inventory fair value adjustments, all net of the associated tax adjustments (which are set forth in the table below), and non-core tax impacts (tax adjustments related to acquisitions, and certain other tax costs or recoveries related to restructuring actions or restructured sites).
We believe the non-IFRS measures we present herein are useful to investors, as they enable investors to evaluate and compare our results from operations in a more consistent manner (by excluding specific items that we do not consider to be reflective of our ongoing operating results), to evaluate cash resources that we generate each period, and to provide an analysis of operating results using the same measures our chief operating decision makers use to measure performance. In addition, management believes that the use of a non-IFRS adjusted tax expense and a non-IFRS adjusted effective tax rate provides improved insight into the tax effects of our ongoing business operations, and is useful to management and investors for historical comparisons and forecasting. These non-IFRS financial measures result largely from management’s determination that the facts and circumstances surrounding the excluded charges or recoveries are not indicative of the ordinary course of the ongoing operation of our business.
Non-IFRS measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public companies that use IFRS, or who report under
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 financial measures back to the most directly comparable IFRS financial measures.
The economic substance of the exclusions described above and management’s rationale for excluding them from non-IFRS financial measures is provided below:
Employee stock-based compensation expense, 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 employee stock-based compensation expense in assessing operating performance, who may have different granting patterns and types of equity awards, and who may use different valuation assumptions than we do, including those competitors who report under
Amortization charges (excluding computer software) consist of non-cash charges against intangible assets that are impacted by the timing and magnitude of acquired businesses. Amortization of intangible assets varies among our competitors, and we believe that excluding these charges permits a better comparison of core operating results with those of our competitors who also generally exclude amortization charges in assessing operating performance.
Restructuring and other charges, net of recoveries, consist of costs relating to employee severance, lease terminations, site closings and consolidations, write-downs of owned property and equipment which are no longer used and are available for sale, reductions in infrastructure,
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 recoverable amount. Our competitors may record impairment charges at different times, and we believe that 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.
Acquisition inventory fair value adjustments relate to the write-up of the inventory acquired in connection with our acquisitions, representing the difference between the cost and fair value of such inventory. We exclude the impact of the recognition of these adjustments, when incurred, because we believe such exclusion permits a better comparison of our core operating results from period-to-period, as their impact is not indicative of our ongoing operating performance.
Non-core tax impacts are excluded, as we believe that these costs or recoveries do not reflect core operating performance and vary significantly among those of our competitors who also generally exclude these costs or recoveries in assessing operating performance.
The following table sets forth, for the periods indicated, the various non-IFRS measures discussed above, and a reconciliation of non-IFRS measures to the most directly comparable IFRS measures (in millions, except percentages and per share amounts):
| Three months ended |
|||||||||||
| 2018 | 2019 | ||||||||||
| % of revenue | % of revenue | ||||||||||
| IFRS revenue | $ | 1,499.7 | $ | 1,433.1 | |||||||
| IFRS gross profit | $ | 93.5 | 6.2 | % | $ | 87.4 | 6.1 | % | |||
| Employee stock-based compensation expense | 5.1 | 6.6 | |||||||||
| Non-IFRS adjusted gross profit | $ | 98.6 | 6.6 | % | $ | 94.0 | 6.6 | % | |||
| IFRS SG&A | $ | 52.3 | 3.5 | % | $ | 56.1 | 3.9 | % | |||
| Employee stock-based compensation expense | (5.3 | ) | (5.2 | ) | |||||||
| Non-IFRS adjusted SG&A | $ | 47.0 | 3.1 | % | $ | 50.9 | 3.6 | % | |||
| IFRS earnings before income taxes | $ | 19.4 | 1.3 | % | $ | 94.8 | 6.6 | % | |||
| Finance costs | 3.3 | 13.6 | |||||||||
| Employee stock-based compensation expense | 10.4 | 11.8 | |||||||||
| Amortization of intangible assets (excluding computer software) | 1.1 | 6.4 | |||||||||
| Net restructuring, impairment and other charges (recoveries) (1) | 10.5 | (91.5 | ) | ||||||||
| Non-IFRS operating earnings (adjusted EBIAT) (1) | $ | 44.7 | 3.0 | % | $ | 35.1 | 2.4 | % | |||
| IFRS net earnings | $ | 14.1 | 0.9 | % | $ | 90.3 | 6.3 | % | |||
| Employee stock-based compensation expense | 10.4 | 11.8 | |||||||||
| Amortization of intangible assets (excluding computer software) | 1.1 | 6.4 | |||||||||
| Net restructuring, impairment and other charges (recoveries) (1) | 10.5 | (91.5 | ) | ||||||||
| Adjustments for taxes (2) | (2.2 | ) | (1.2 | ) | |||||||
| Non-IFRS adjusted net earnings | $ | 33.9 | $ | 15.8 | |||||||
| Diluted EPS | |||||||||||
| Weighted average # of shares (in millions) | 143.5 | 136.6 | |||||||||
| IFRS earnings per share | $ | 0.10 | $ | 0.66 | |||||||
| Non-IFRS adjusted earnings per share | $ | 0.24 | $ | 0.12 | |||||||
| # of shares outstanding at period end (in millions) | 139.6 | 131.6 | |||||||||
| IFRS cash provided by (used in) operations | $ | (5.4 | ) | $ | 71.3 | ||||||
| Purchase of property, plant and equipment, net of sales proceeds | (13.7 | ) | 93.3 | ||||||||
| Lease payments (3) | (11.8 | ) | (9.3 | ) | |||||||
| Finance costs paid (excluding debt issuance costs paid) (3) | (3.2 | ) | (10.6 | ) | |||||||
| Non-IFRS free cash flow (3) | $ | (34.1 | ) | $ | 144.7 | ||||||
| IFRS ROIC % (4) | 6.3 | % | 21.2 | % | |||||||
| Non-IFRS adjusted ROIC % (4) | 14.4 | % | 7.9 | % | |||||||
(1) Management uses non-IFRS operating earnings (adjusted EBIAT) as a measure to assess performance related to our core operations. Non-IFRS adjusted EBIAT is defined as earnings before income taxes, finance costs (defined below), amortization of intangible assets (excluding computer software) and in applicable periods, employee stock-based compensation expense, net restructuring and other charges (recoveries) (defined above), impairment charges (recoveries), and acquisition inventory fair value adjustments. Finance costs consist of interest expense and fees related to our credit facility (including debt issuance costs and the amortization thereof), our interest rate swap agreements, our accounts receivable sales program and a customer's supplier financing program, and, beginning Q1 2019, interest expense on our lease obligations under IFRS 16. See note 10 to our Q1 2019 Interim Financial Statements for separate quantification and discussion of impairment charges, if any, and the components of net restructuring and other charges (recoveries).
(2) The adjustments for taxes, as applicable, represent the tax effects of our non-IFRS adjustments and non-core tax impacts (described in the table below).
(3) Management uses non-IFRS free cash flow as a measure, in addition to IFRS cash provided by (used in) operations, to assess our operational cash flow performance. We believe non-IFRS free cash flow provides another level of transparency to our liquidity. Non-IFRS free cash flow is defined as cash provided by (used in) operations after the purchase of property, plant and equipment (net of proceeds from the sale of certain surplus equipment and property), lease payments (including
(4) Management uses non-IFRS adjusted ROIC as a measure to assess the effectiveness of the invested capital we use to build products or provide services to our customers, by quantifying how well we generate earnings relative to the capital we have invested in our business. Non-IFRS adjusted ROIC is calculated by dividing non-IFRS adjusted EBIAT by average net invested capital. Net invested capital (calculated in the table below) is defined as total assets less: cash, ROU assets (described below), accounts payable, accrued and other current liabilities and provisions, and income taxes payable. We use a two-point average to calculate average net invested capital for the quarter. A comparable measure under IFRS would be determined by dividing IFRS earnings before income taxes by net invested capital (which we have set forth in the charts above and below), however, this measure (which we have called IFRS ROIC), is not a measure defined under IFRS. In connection with our adoption of IFRS 16 as of
The following table sets forth a reconciliation of our IFRS tax expense and IFRS effective tax rate to our non-IFRS adjusted tax expense and our non-IFRS adjusted effective tax rate for the periods indicated, in each case determined by excluding the tax benefits or costs associated with the listed items (in millions, except percentages) from our IFRS tax expense for such periods:
| Three months ended | |||||||||||
| 2018 | Effective tax rate | 2019 | Effective tax rate | ||||||||
| IFRS tax expense and IFRS effective tax rate | $ | 5.3 | 27 | % | $ | 4.5 | 5 | % | |||
| Tax costs (benefits) of the following items excluded from IFRS tax expense: | |||||||||||
| Employee stock-based compensation expense | 0.4 | 0.4 | |||||||||
| Net restructuring, impairment and other charges | (0.1 | ) | 0.2 | ||||||||
| Non-core tax impact related to acquisitions | — | 0.6 | |||||||||
| Non-core tax impacts related to restructured sites | 1.9 | — | |||||||||
| Non-IFRS adjusted tax expense and non-IFRS adjusted effective tax rate | $ | 7.5 | 18 | % | $ | 5.7 | 27 | % | |||
The following table sets forth, for the periods indicated, our calculation of IFRS ROIC % and non-IFRS adjusted ROIC % (in millions, except IFRS ROIC % and non-IFRS adjusted ROIC %).
| Three months ended | |||||||
| 2018 | 2019 | ||||||
| IFRS earnings before income taxes | $ | 19.4 | $ | 94.8 | |||
| Multiplier to annualize earnings | 4 | 4 | |||||
| Annualized IFRS earnings before income taxes | $ | 77.6 | $ | 379.2 | |||
| Average net invested capital for the period | $ | 1,241.3 | $ | 1,786.4 | |||
| IFRS ROIC % (1) | 6.3 | % | 21.2 | % | |||
| Three months ended | |||||||
| 2018 | 2019 | ||||||
| Non-IFRS operating earnings (adjusted EBIAT) | $ | 44.7 | $ | 35.1 | |||
| Multiplier to annualize earnings | 4 | 4 | |||||
| Annualized non-IFRS adjusted EBIAT | $ | 178.8 | $ | 140.4 | |||
| Average net invested capital for the period | $ | 1,241.3 | $ | 1,786.4 | |||
| Non-IFRS adjusted ROIC % (1) | 14.4 | % | 7.9 | % | |||
2018 |
2019 |
||||||
| Net invested capital consists of: | |||||||
| Total assets | $ | 3,737.7 | $ | 3,688.1 | |||
| Less: cash | 422.0 | 457.8 | |||||
| Less: right-of-use assets | — | 115.8 | |||||
| Less: accounts payable, accrued and other current liabilities, provisions and income taxes payable | 1,512.6 | 1,344.8 | |||||
| Net invested capital at period end (1) | $ | 1,803.1 | $ | 1,769.7 | |||
2017 |
2018 |
||||||
| Net invested capital consists of: | |||||||
| Total assets | $ | 2,964.2 | $ | 2,976.0 | |||
| Less: cash | 515.2 | 435.7 | |||||
| Less: accounts payable, accrued and other current liabilities, provisions and income taxes payable | 1,228.6 | 1,278.1 | |||||
| Net invested capital at period end (1) | $ | 1,220.4 | $ | 1,262.2 | |||
(1) See footnote 4 of the previous table.
CELESTICA INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions of U.S. dollars)
(unaudited)
| Note | 2018 |
2019 |
||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 422.0 | $ | 457.8 | ||||
| Accounts receivable | 5 | 1,206.6 | 1,035.9 | |||||
| Inventories | 6 | 1,089.9 | 1,078.2 | |||||
| Income taxes receivable | 5.0 | 7.0 | ||||||
| Assets classified as held for sale | 7 | 27.4 | 12.9 | |||||
| Other current assets | 72.6 | 83.6 | ||||||
| Total current assets | 2,823.5 | 2,675.4 | ||||||
| Property, plant and equipment | 365.3 | 357.5 | ||||||
| Right-of-use assets | 2 | — | 115.8 | |||||
| 4 | 198.4 | 202.8 | ||||||
| Intangible assets | 4 | 283.6 | 273.1 | |||||
| Deferred income taxes | 36.7 | 36.4 | ||||||
| Other non-current assets | 30.2 | 27.1 | ||||||
| Total assets | $ | 3,737.7 | $ | 3,688.1 | ||||
| Liabilities and Equity | ||||||||
| Current liabilities: | ||||||||
| Current portion of borrowings under credit facility and lease obligations | 8 | $ | 107.7 | $ | 133.1 | |||
| Accounts payable | 1,126.7 | 943.2 | ||||||
| Accrued and other current liabilities | 6 | 320.4 | 335.3 | |||||
| Income taxes payable | 42.3 | 45.9 | ||||||
| Current portion of provisions | 23.2 | 20.4 | ||||||
| Total current liabilities | 1,620.3 | 1,477.9 | ||||||
| Long-term portion of borrowings under credit facility and lease obligations | 8 | 650.2 | 679.8 | |||||
| Pension and non-pension post-employment benefit obligations | 88.8 | 90.7 | ||||||
| Provisions and other non-current liabilities | 20.6 | 23.0 | ||||||
| Deferred income taxes | 25.5 | 24.5 | ||||||
| Total liabilities | 2,405.4 | 2,295.9 | ||||||
| Equity: | ||||||||
| Capital stock | 9 | 1,954.1 | 1,878.9 | |||||
| 9 | (20.2 | ) | (6.6 | ) | ||||
| Contributed surplus | 906.6 | 935.9 | ||||||
| Deficit | (1,481.7 | ) | (1,391.4 | ) | ||||
| Accumulated other comprehensive loss | (26.5 | ) | (24.6 | ) | ||||
| Total equity | 1,332.3 | 1,392.2 | ||||||
| Total liabilities and equity | $ | 3,737.7 | $ | 3,688.1 | ||||
Commitments and Contingencies (note 13), Transitional adjustment related to adoption of IFRS 16 (note 2).
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
CELESTICA INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions of U.S. dollars, except per share amounts)
(unaudited)
| Three months ended | ||||||||
| Note | 2018 | 2019 | ||||||
| Revenue | 3 | $ | 1,499.7 | $ | 1,433.1 | |||
| Cost of sales | 6 | 1,406.2 | 1,345.7 | |||||
| Gross profit | 93.5 | 87.4 | ||||||
| Selling, general and administrative expenses (SG&A) | 52.3 | 56.1 | ||||||
| Research and development | 6.0 | 6.6 | ||||||
| Amortization of intangible assets | 2.0 | 7.8 | ||||||
| Other charges (recoveries) | 10 | 10.5 | (91.5 | ) | ||||
| Earnings from operations | 22.7 | 108.4 | ||||||
| Finance costs | 3.3 | 13.6 | ||||||
| Earnings before income taxes | 19.4 | 94.8 | ||||||
| Income tax expense (recovery) | 11 | |||||||
| Current | 13.8 | 5.7 | ||||||
| Deferred | (8.5 | ) | (1.2 | ) | ||||
| 5.3 | 4.5 | |||||||
| Net earnings for the period | $ | 14.1 | $ | 90.3 | ||||
| Basic earnings per share | $ | 0.10 | $ | 0.67 | ||||
| Diluted earnings per share | $ | 0.10 | $ | 0.66 | ||||
| Shares used in computing per share amounts (in millions): | ||||||||
| Basic | 142.2 | 135.7 | ||||||
| Diluted | 143.5 | 136.6 | ||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
CELESTICA INC.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions of U.S. dollars)
(unaudited)
| Three months ended | ||||||||
| Note | 2018 | 2019 | ||||||
| Net earnings for the period | $ | 14.1 | $ | 90.3 | ||||
| Other comprehensive income, net of tax: | ||||||||
| Items that may be reclassified to net earnings: | ||||||||
| Currency translation differences for foreign operations | 1.3 | (0.2 | ) | |||||
| Changes from currency forward derivatives designated as hedges | 12 | (1.5 | ) | 5.6 | ||||
| Changes from interest rate swap derivatives designated as hedges | 12 | — | (3.5 | ) | ||||
| Total comprehensive income for the period | $ | 13.9 | $ | 92.2 | ||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(in millions of
(unaudited)
| Note | Capital stock (note 9) |
(note 9) |
Contributed surplus |
Deficit | Accumulated other comprehensive loss(a) |
Total equity | ||||||||||||||||||
| Balance -- January 1, 2018 | $ | 2,048.3 | $ | (8.7 | ) | $ | 863.0 | $ | (1,525.7 | ) | $ | (6.7 | ) | $ | 1,370.2 | |||||||||
| Capital transactions | 9 | |||||||||||||||||||||||
| Issuance of capital stock | 12.3 | — | (12.1 | ) | — | — | 0.2 | |||||||||||||||||
| Repurchase of capital stock for cancellation | (52.9 | ) | — | 17.8 | — | — | (35.1 | ) | ||||||||||||||||
| Purchase of treasury stock for stock-based plans | — | (4.3 | ) | — | — | — | (4.3 | ) | ||||||||||||||||
| Stock-based compensation and other | — | 6.3 | 4.5 | — | — | 10.8 | ||||||||||||||||||
| Total comprehensive income (loss): | ||||||||||||||||||||||||
| Net earnings for the period | — | — | — | 14.1 | — | 14.1 | ||||||||||||||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||||||||||||||
| Currency translation differences for foreign operations | — | — | — | — | 1.3 | 1.3 | ||||||||||||||||||
| Changes from currency forward derivatives designated as hedges | — | — | — | — | (1.5 | ) | (1.5 | ) | ||||||||||||||||
| Balance -- March 31, 2018 | $ | 2,007.7 | $ | (6.7 | ) | $ | 873.2 | $ | (1,511.6 | ) | $ | (6.9 | ) | $ | 1,355.7 | |||||||||
| Balance -- January 1, 2019 | $ | 1,954.1 | $ | (20.2 | ) | $ | 906.6 | $ | (1,481.7 | ) | $ | (26.5 | ) | $ | 1,332.3 | |||||||||
| Capital transactions | 9 | |||||||||||||||||||||||
| Issuance of capital stock | 6.0 | — | (6.0 | ) | — | — | — | |||||||||||||||||
| Repurchase of capital stock for cancellation | (81.2 | ) | — | 36.7 | — | — | (44.5 | ) | ||||||||||||||||
| Stock-based compensation and other | — | 13.6 | (1.4 | ) | — | — | 12.2 | |||||||||||||||||
| Total comprehensive income (loss): | ||||||||||||||||||||||||
| Net earnings for the period | — | — | — | 90.3 | — | 90.3 | ||||||||||||||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||||||||||||||
| Currency translation differences for foreign operations | — | — | — | — | (0.2 | ) | (0.2 | ) | ||||||||||||||||
| Changes from currency forward derivatives designated as hedges | — | — | — | — | 5.6 | 5.6 | ||||||||||||||||||
| Changes from interest rate swap derivatives designated as hedges | — | — | — | — | (3.5 | ) | (3.5 | ) | ||||||||||||||||
| Balance -- March 31, 2019 | $ | 1,878.9 | $ | (6.6 | ) | $ | 935.9 | $ | (1,391.4 | ) | $ | (24.6 | ) | $ | 1,392.2 | |||||||||
(a) Accumulated other comprehensive loss is net of tax.
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions of
(unaudited)
| Three months ended | ||||||||
| Note | 2018 | 2019 | ||||||
| Cash provided by (used in): | ||||||||
| Operating activities: | ||||||||
| Net earnings for the period | $ | 14.1 | $ | 90.3 | ||||
| Adjustments to net earnings for items not affecting cash: | ||||||||
| Depreciation and amortization | 21.3 | 34.5 | ||||||
| Equity-settled stock-based compensation | 9 | 10.4 | 11.8 | |||||
| Other charges (recoveries) | 0.3 | (101.3 | ) | |||||
| Finance costs | 3.3 | 13.6 | ||||||
| Income tax expense | 5.3 | 4.5 | ||||||
| Other | (3.0 | ) | 9.9 | |||||
| Changes in non-cash working capital items: | ||||||||
| Accounts receivable | 18.4 | 170.5 | ||||||
| Inventories | (104.8 | ) | 11.7 | |||||
| Other current assets | (3.4 | ) | (5.3 | ) | ||||
| Accounts payable, accrued and other current liabilities and provisions | 45.2 | (164.4 | ) | |||||
| Non-cash working capital changes | (44.6 | ) | 12.5 | |||||
| Net income tax paid | (12.5 | ) | (4.5 | ) | ||||
| Net cash provided by (used in) operating activities | (5.4 | ) | 71.3 | |||||
| Investing activities: | ||||||||
| Purchase of computer software and property, plant and equipment(a) | (17.2 | ) | (19.7 | ) | ||||
| Proceeds related to the sale of assets | 10 | 3.5 | 113.0 | |||||
| Net cash provided by (used in) investing activities | (13.7 | ) | 93.3 | |||||
| Financing activities: | ||||||||
| Repayments under prior credit facility | 8 | (6.2 | ) | — | ||||
| Borrowings under new credit facility | 8 | — | 48.0 | |||||
| Repayments under new credit facility | 8 | — | (111.5 | ) | ||||
| Payment of lease obligations | (11.8 | ) | (9.3 | ) | ||||
| Issuance of capital stock | 0.2 | — | ||||||
| Repurchase of capital stock for cancellation | 9 | (35.1 | ) | (44.5 | ) | |||
| Purchase of treasury stock for stock-based plans | 9 | (4.3 | ) | — | ||||
| Finance costs paid (b) | 8 | (3.2 | ) | (11.5 | ) | |||
| Net cash used in financing activities | (60.4 | ) | (128.8 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | (79.5 | ) | 35.8 | |||||
| Cash and cash equivalents, beginning of period | 515.2 | 422.0 | ||||||
| Cash and cash equivalents, end of period | $ | 435.7 | $ | 457.8 | ||||
(a) Additional equipment of
(b) Includes debt issuance costs paid of
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions of
(unaudited)
1. REPORTING ENTITY
2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance:
These unaudited interim condensed consolidated financial statements for the quarter ended
The Q1 2019 Interim Financial Statements were authorized for issuance by our board of directors on
Use of estimates and judgments:
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, revenue and expenses, and the related disclosures of contingent assets and liabilities. We base our judgments, estimates and assumptions on current facts, historical experience and various other factors that we believe are reasonable under the circumstances. The economic environment could also impact certain estimates necessary to prepare our consolidated financial statements, including estimates related to the recoverable amounts used in our impairment testing of our non-financial assets, the discount rates applied to our net pension and non-pension post-employment benefit assets or liabilities, and the discount rates applied to our right-of-use (ROU) assets and related lease obligations. Our assessment of these factors forms the basis for our judgments on the carrying values of assets and liabilities and the accrual of our costs and expenses. Actual results could differ materially from our estimates and assumptions. We review our estimates and underlying assumptions on an ongoing basis and make revisions as determined necessary by management. Revisions are recognized in the period in which the estimates are revised and may impact future periods as well. There have been no significant changes to our assumptions or the judgments affecting the application of our estimates and assumptions during Q1 2019 from those described in the notes to our 2018 AFS. However, see “Accounting policies” below for a discussion of recently adopted accounting standards.
Accounting policies:
The Q1 2019 Interim Financial Statements are based upon accounting policies consistent with those used and described in note 2 of our 2018 AFS, except for the recently adopted accounting standard discussed below. As a result, the following should be read as a modification to notes 2(j) and (x) to our 2018 AFS.
Recently adopted accounting standard:
IFRS 16, Leases:
We adopted IFRS 16 effective
The following table sets forth the adjustments to our operating lease commitments at
| Operating lease commitments at December 31, 2018 | $ | 107.4 | |
| Discounted using our incremental borrowing rate at January 1, 2019 | (13.2 | ) | |
| Recognition exemption for short-term and low-value leases | (1.9 | ) | |
| Extension options reasonably certain to be exercised | 19.7 | ||
| Lease obligations recognized at |
112.0 | ||
| Lease obligations previously classified as finance leases under IAS 17 | 10.4 | ||
| Total lease obligations at January 1, 2019 | $ | 122.4 | |
We are the lessee of property, plant and equipment, primarily buildings and machinery. At the inception of a contract, we assess whether the arrangement is, or contains, a lease in accordance with IFRS 16. If we determine that it does, we recognize an ROU asset and a related lease obligation on the applicable lease commencement date. An ROU asset is initially measured based on the initial amount of the lease obligation, subject to certain adjustments, if any, and then subsequently measured at such cost less accumulated depreciation and any accumulated impairment. Depreciation expense on an ROU asset is recorded using the straight-line method over the lease term in cost of sales or SG&A in our consolidated statement of operations, primarily based on the nature and use of the asset. The lease obligation is initially measured at the present value of the unpaid lease payments on the commencement date, discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, we use our incremental borrowing rate (taking country-specific risks into consideration), based on information available on the lease commencement date. We generally use our incremental borrowing rate as the discount rate. The interest expense on the lease obligations is recognized as finance costs in our consolidated statement of operations. The lease obligation is remeasured when there are adjustments to future lease payments arising from a change in applicable indices or rates, changes in the estimated amount expected to be payable under a residual value guarantee, or if we change our assessment of whether we will exercise an applicable purchase, extension or termination option. Upon any such remeasurement, a corresponding adjustment is made to the carrying amount of the related ROU asset, or is recorded in our consolidated statement of operations if the carrying amount of such ROU asset has been impaired.
3. SEGMENT AND CUSTOMER REPORTING
Segments:
Information regarding the results of each reportable segment is set forth below:
| Revenue by segment: | Three months ended |
||||||||||||
| 2018 | 2019 | ||||||||||||
| % of total | % of total | ||||||||||||
| ATS | $ | 532.8 | 36 | % | $ | 578.2 | 40 | % | |||||
| CCS | 966.9 | 64 | % | 854.9 | 60 | % | |||||||
| Communications end market revenue as a % of total revenue | 39 | % | 39 | % | |||||||||
| Enterprise end market revenue as a % of total revenue | 25 | % | 21 | % | |||||||||
| Total | $ | 1,499.7 | $ | 1,433.1 | |||||||||
| Segment income, segment margin, and reconciliation of segment income to IFRS earnings before income taxes: | Three months ended |
|||||||||||
| Note | 2018 | 2019 | ||||||||||
| Segment Margin | Segment Margin | |||||||||||
| ATS segment income and margin | $ | 27.9 | 5.2 | % | $ | 15.1 | 2.6 | % | ||||
| CCS segment income and margin | 16.8 | 1.7 | % | 20.0 | 2.3 | % | ||||||
| Total segment income | 44.7 | 35.1 | ||||||||||
| Reconciling items: | ||||||||||||
| Finance costs | 3.3 | 13.6 | ||||||||||
| Employee stock-based compensation expense | 10.4 | 11.8 | ||||||||||
| Amortization of intangible assets (excluding computer software) | 1.1 | 6.4 | ||||||||||
| Net restructuring, impairment and other charges (recoveries) | 10 | 10.5 | (91.5 | ) | ||||||||
| IFRS earnings before income taxes | $ | 19.4 | $ | 94.8 | ||||||||
Customers:
For Q1 2019, we had two customers (one from each of our segments) that individually represented more than 10% of total revenue (first quarter of 2018 (Q1 2018) — two customers from our CCS segment).
Seasonality:
From time to time, we experience some level of seasonality in our quarterly revenue patterns across some of our businesses. In recent periods, revenue from the storage component of our CCS segment has increased in the fourth quarter of the year compared to the third quarter, and then decreased in the first quarter of the following year, reflecting the increase in customer demand we typically experience in this business in the fourth quarter of each year. In addition, we typically experience our lowest overall revenue levels during the first quarter of each year. There is no assurance that these patterns will continue. The addition of new customers may also introduce different demand cycles than our existing businesses, creating more volatility and unpredictability in our revenue patterns as we adjust to this shift. These and other factors make it difficult to isolate the impact of seasonality on our business.
4. ACQUISITIONS
In
Details of our final purchase price allocation for the Atrenne acquisition are as follows:
| Atrenne | |||
| Current assets, net of |
$ | 31.5 | |
| Property, plant and equipment | 7.8 | ||
| Customer intangible assets and computer software assets | 51.0 | ||
| Goodwill | 62.6 | ||
| Current liabilities | (8.5 | ) | |
| Deferred income taxes and other long-term liabilities | (4.1 | ) | |
| $ | 140.3 | ||
In connection with our purchase of Atrenne, we recorded a
In
Details of our preliminary purchase price allocation for the Impakt acquisition are as follows:
| Impakt | |||
| Current assets, net of |
$ | 46.3 | |
| Property, plant and equipment and other long-term assets | 20.6 | ||
| Customer intangible assets and computer software assets | 220.0 | ||
| 117.0 | |||
| Current liabilities | (25.9 | ) | |
| Deferred income taxes | (52.6 | ) | |
| $ | 325.4 | ||
During Q1 2019, we updated the fair value assessment for certain Impakt assets and liabilities, resulting in a
We engaged third-party consultants to provide valuations of certain inventory, property, plant and equipment and intangible assets in connection with our purchases of Atrenne and Impakt. The fair value of the acquired tangible assets was measured based on their value in-use, by applying the market (sales comparison, brokers' quotes), cost or replacement cost, or the income (discounted cash flow) approach, as deemed appropriate. The valuation of the intangible assets by the third-party consultants was primarily based on the income approach using a discounted cash flow model and forecasts based on management's subjective estimates and assumptions. Various Level 2 and 3 data inputs of the fair value measurement hierarchy were used in the valuation of the above-mentioned assets.
We incur consulting, transaction and integration costs (Acquisition Costs) relating to potential and completed acquisitions, including for our Atrenne and Impakt acquisitions. During Q1 2019, we recorded Acquisition Costs of
5. ACCOUNTS RECEIVABLE
Accounts receivable (A/R) sales program and supplier financing program (SFP):
We have an agreement to sell up to
Contract assets:
At
6. INVENTORIES
We record inventory provisions, net of valuation recoveries, in cost of sales. Inventory provisions reflect write-downs in the value of our inventory to net realizable value, and valuation recoveries primarily reflect realized gains on the disposition of previously written-down inventory. We recorded net inventory provisions of
Certain of our contracts provide for customer cash deposits to cover our risk of excess and obsolete inventory and/or for working capital requirements. Such deposits as of
7. ASSETS CLASSIFIED AS HELD FOR SALE
At
8. CREDIT FACILITIES AND LONG-TERM DEBT
In
As of
During Q1 2019, we borrowed
At
The following table sets forth our borrowings under the New Credit Facility, and our lease obligations, at the dates shown:
2018 |
2019 |
||||||
| Borrowings under the New Revolver (1) | $ | 159.0 | $ | 97.0 | |||
| Borrowings under the New Term Loans (1) | 598.3 | 596.8 | |||||
| Total borrowings under New Credit Facility | 757.3 | 693.8 | |||||
| Less: unamortized debt issuance costs related to our New Term Loans(1) | (9.8 | ) | (10.3 | ) | |||
| Lease obligations (including lease obligations under IFRS 16 (note 2) | 10.4 | 129.4 | |||||
| $ | 757.9 | $ | 812.9 | ||||
| Comprised of: | |||||||
| Current portion of borrowings under New Credit Facility and lease obligations | $ | 107.7 | $ | 133.1 | |||
| Long-term portion of borrowings under New Credit Facility and lease obligations | 650.2 | 679.8 | |||||
| $ | 757.9 | $ | 812.9 | ||||
(1) Debt issuance costs incurred in connection with our New Revolver totaling
Commitment fees paid under our relevant credit facilities in Q1 2019 were
At
9. CAPITAL STOCK
Share repurchase plans:
In
Stock-based compensation:
During Q1 2019, we did not purchase subordinate voting shares in the open market to satisfy delivery requirements under our stock-based compensation plans. During Q1 2018, we paid
During Q1 2019, we granted 2.5 million restricted share units (RSUs) (Q1 2018 — 1.7 million), the majority of which vest one-third per year over a three-year period. During Q1 2019, we granted 2.1 million performance share units (PSUs) (Q1 2018 — 1.5 million), representing 100% of target. The number of PSUs granted in 2019 and 2018 that will actually vest will vary from 0 to 200% of the target amount granted based on the level of achievement of a pre-determined non-market performance measurement in the final year of the three-year performance period, subject to modification by a separate pre-determined non-market financial target and our relative Total Shareholder Return (TSR) performance over the 3-year vesting period. The weighted average grant date fair value of RSUs and PSUs granted in Q1 2019 was
For Q1 2019, we recorded aggregate employee stock-based compensation expense (excluding deferred share unit (DSU) expense) through cost of sales and SG&A of
At
10. OTHER CHARGES (RECOVERIES)
| Three months ended |
|||||||
| 2018 | 2019 | ||||||
| Restructuring (a) | $ | 6.9 | $ | 7.1 | |||
| 1.7 | (98.8 | ) | |||||
| Acquisition costs and other (c) | 1.9 | 0.2 | |||||
| $ | 10.5 | $ | (91.5 | ) | |||
(a) Restructuring:
We are currently implementing restructuring actions under a cost efficiency initiative (CEI), including actions related to our previously-disclosed CCS segment portfolio review and our capital equipment business. See note 16(a) of our 2018 AFS for further detail. During Q1 2019, we recorded cash charges of
(b)
In
In connection with the then-anticipated sale, we entered into a long-term lease in
(c) Acquisition costs and other:
During Q1 2019, we recorded
11. INCOME TAXES
Our effective income tax rate can vary significantly period-to-period for various reasons, including as a result of the mix and volume of business in various tax jurisdictions within the
No net tax impact was recorded on the gain from the sale of the
12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Our financial assets are comprised primarily of cash and cash equivalents, accounts receivable, and derivatives used for hedging purposes. Our financial liabilities are comprised primarily of accounts payable, certain accrued and other liabilities and provisions, the New Term Loans, borrowings under the New Revolver, lease obligations, and derivatives.
Currency risk:
The majority of our currency risk is driven by operational costs, including income tax expense, incurred in local currencies by our subsidiaries. Our major currency exposures at
| Canadian dollar | Romanian Leu | Euro | Thai baht | Chinese renminbi | |||||||||||||||
| Cash and cash equivalents | $ | 5.3 | $ | 0.1 | $ | 9.9 | $ | 2.5 | $ | 18.7 | |||||||||
| Accounts receivable | 1.7 | 0.6 | 53.4 | 1.0 | 18.1 | ||||||||||||||
| Income taxes and value-added taxes receivable | 22.9 | 1.3 | 16.3 | 1.3 | 14.5 | ||||||||||||||
| Other financial assets | — | 1.0 | 2.3 | 0.4 | 0.6 | ||||||||||||||
| Pension and non-pension post-employment liabilities | (68.3 | ) | (0.1 | ) | (0.5 | ) | (13.6 | ) | (0.8 | ) | |||||||||
| Income taxes and value-added taxes payable | — | — | (0.4 | ) | (2.3 | ) | — | ||||||||||||
| Accounts payable and certain accrued and other liabilities and provisions | (53.6 | ) | (12.5 | ) | (52.0 | ) | (28.6 | ) | (25.4 | ) | |||||||||
| Net financial assets (liabilities) | $ | (92.0 | ) | $ | (9.6 | ) | $ | 29.0 | $ | (39.3 | ) | $ | 25.7 | ||||||
We enter into foreign exchange forward contracts to hedge our cash flow exposures and foreign currency swaps to hedge our balance sheet exposures, generally for periods of up to 12 months. While these contracts are intended to reduce the effects of fluctuations in foreign currency exchange rates, our hedging strategy does not mitigate the longer-term impacts of changes to foreign exchange rates. At
| Currency | Contract amount in U.S. dollars |
Weighted average exchange rate in U.S. dollars |
Maximum period in months |
Fair value gain (loss) |
|||||||||
| Canadian dollar | $ | 239.2 | $ | 0.76 | 13 | $ | (0.8 | ) | |||||
| Thai baht | 92.2 | 0.03 | 12 | 0.8 | |||||||||
| Malaysian ringgit | 49.8 | 0.24 | 12 | 0.2 | |||||||||
| Mexican peso | 24.8 | 0.05 | 12 | 0.5 | |||||||||
| British pound | 1.6 | 1.29 | 12 | 0.1 | |||||||||
| Chinese renminbi | 63.7 | 0.15 | 12 | 0.1 | |||||||||
| Euro | 17.9 | 1.15 | 12 | 0.3 | |||||||||
| Romanian leu | 36.7 | 0.24 | 12 | (1.5 | ) | ||||||||
| 23.4 | 0.74 | 12 | — | ||||||||||
| Other | 6.0 | 2 | — | ||||||||||
| Total | $ | 555.3 | $ | (0.3 | ) | ||||||||
At
Interest rate risk:
Borrowings under the New Credit Facility expose us to interest rate risk due to the potential variability of market interest rates. In order to partially hedge against our exposure to interest rate variability on the New Term Loans, we entered into 5-year agreements with a syndicate of third-party banks in August and
At
13. COMMITMENTS AND CONTINGENCIES
Litigation:
In the normal course of our operations, we may be subject to lawsuits, investigations and other claims, including environmental, labor, product, customer disputes, and other matters. Management believes that adequate provisions have been recorded where required. Although it is not always possible to estimate the extent of potential costs, if any, management believes that the ultimate resolution of all such pending matters will not have a material adverse impact on our financial performance, financial position or liquidity.
Other Matters:
In 2017, the
In
Contacts: Celestica Communications (416) 448-2200 media@celestica.com Celestica Investor Relations (416) 448-2211 clsir@celestica.com
Source: Celestica International Inc