Celestica Announces Fourth Quarter & Full Year 2018 Financial Results
Q4 2018 Highlights
- Revenue:
$1.73 billion , compared to our previously provided guidance range of$1.70 to$1.80 billion , increased 10% compared to the fourth quarter of 2017 (Q4 2017); Operating margin (non-IFRS)**: 3.5%, consistent with the mid-point of our revenue and non-IFRS adjusted EPS guidance ranges for Q4 2018, and compared to 3.2% for Q4 2017
- ATS segment revenue increased 11% compared to Q4 2017, and represented 33% of total revenue; ATS segment margin*** was 3.7% compared to 5.2% for Q4 2017
- CCS segment revenue increased 10% compared to Q4 2017, and represented 67% of total revenue; CCS segment margin*** was 3.3% compared to 2.2% for Q4 2017
- IFRS EPS:
$0.44 per share, compared to$0.09 per share for Q4 2017. IFRS EPS for Q4 2018 included a net benefit of$0.36 per share related to the recognition of deferred tax assets (discussed below)
- Adjusted EPS (non-IFRS)**:
$0.29 per share, compared to our previously provided guidance range of$0.27 to$0.33 per share, and$0.27 per share for Q4 2017
- Adjusted ROIC (non-IFRS)**: 15.0%, compared to 16.4% for Q4 2017
- Free cash flow (non-IFRS)**: negative
$35.9 million , compared to positive$18.8 million for Q4 2017
- Recorded restructuring charges of
$6.4 million ($0.05 per share negative impact on IFRS EPS), compared to$13.2 million ($0.09 per share negative impact on IFRS EPS) for Q4 2017
- Completed acquisition of
Impakt Holdings, LLC (Impakt); financed with borrowings under our revolving credit facility and a new$250 million term loan
- Launched a new normal course issuer bid (NCIB) in
December 2018 , allowing us to repurchase up to approximately 9.5 million subordinate voting shares throughDecember 2019
- Obtained municipal zoning approval for sale of our
Toronto real property; scheduled to closeMarch 7, 2019 ; expect to receive total proceeds of approximatelyU.S. $110 million on closing (discussed below)
*Our ATS segment consists of our ATS end market, and is comprised of our aerospace and defense, industrial, smart energy, healthtech, and capital equipment businesses. Our capital equipment business consists of our semiconductor, display and power equipment businesses. Our CCS segment consists of our Communications and Enterprise end markets, and is comprised of our enterprise communications, telecommunications, servers and storage businesses. Prior period financial information has been reclassified to reflect this reorganized segment structure.
** 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.
*** Segment performance is evaluated based on segment revenue, segment income and segment margin (segment income as a percentage of segment revenue). See note 4 to our
“Celestica delivered on its Q4 consolidated non-IFRS operating margin target of 3.5%, driven by strong performance in our CCS segment and our aerospace and defense business,” said
“We made good progress in 2018 on our long-term revenue diversification and strategic priorities, including delivering sequential margin expansion in every quarter since Q1, and growing our strong leadership positions within the aerospace and defense, and capital equipment markets. As we enter 2019, we will continue to focus on driving better inventory performance as the constrained materials environment modestly improves, completing our efficiency initiatives to drive margin expansion, and continuing the diversification of our revenue and earnings in order to drive sustainable profitable growth.”
Fourth Quarter and Full Year Summary
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2017 | 2018 | 2017 | 2018 | ||||||||||||||||||
(restated) | (restated) | ||||||||||||||||||||
Revenue (in millions) | $ | 1,570.2 | $ | 1,727.0 | $ | 6,142.7 | $ | 6,633.2 | |||||||||||||
ATS segment revenue as a % of total revenue | 33 | % | 33 | % | 32 | % | 33 | % | |||||||||||||
CCS segment revenue as a % of total revenue | 67 | % | 67 | % | 68 | % | 67 | % | |||||||||||||
Communications | 40 | % | 39 | % | 43 | % | 41 | % | |||||||||||||
Enterprise | 27 | % | 28 | % | 25 | % | 26 | % | |||||||||||||
IFRS net earnings (in millions) | $ | 13.6 | $ | 60.1 | $ | 105.5 | $ | 98.9 | |||||||||||||
IFRS EPS | $ | 0.09 | $ | 0.44 | $ | 0.73 | $ | 0.70 | |||||||||||||
Non-IFRS adjusted net earnings* (in millions) | $ | 39.1 | $ | 39.7 | $ | 173.0 | $ | 149.8 | |||||||||||||
Non-IFRS adjusted EPS* | $ | 0.27 | $ | 0.29 | $ | 1.19 | $ | 1.07 | |||||||||||||
Non-IFRS operating margin* | 3.2 | % | 3.5 | % | 3.5 | % | 3.2 | % | |||||||||||||
Non-IFRS adjusted ROIC* | 16.4 | % | 15.0 | % | 18.8 | % | 15.1 | % | |||||||||||||
Non-IFRS free cash flow* | $ | 18.8 | $ | (35.9 | ) | $ | 21.0 | $ | (98.4 | ) | |||||||||||
* See “Non-IFRS Supplementary Information” below |
Segment Income (in millions) and Margin | Three months ended |
Year ended |
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2017 | 2018 | 2017 | 2018 | ||||||||||||||||||||
(restated) | (restated) | ||||||||||||||||||||||
Segment Margin |
Segment Margin |
Segment Margin |
Segment Margin |
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ATS | $ | 26.7 | 5.2 | % | $ | 20.9 | 3.7 | % | $ | 96.8 | 4.9 | % | $ | 102.5 | 4.6 | % | |||||||
CCS | 23.2 | 2.2 | % | 38.8 | 3.3 | % | 120.4 | 2.9 | % | 111.4 | 2.5 | % |
Notes regarding EPS, non-IFRS adjusted EPS* and non-IFRS operating margin*
IFRS earnings per share (EPS) for Q4 2018 included an aggregate charge of
IFRS EPS for Q4 2018 included a
Non-IFRS adjusted EPS* for FY 2018 included the negative Currency Impacts and Mix Impacts noted above, as well as the impact of the Mexican Tax Reversal, all of which pertain to our core operations. See Schedule 1 for the exclusions used to determine non-IFRS adjusted EPS* for Q4 2018 and FY 2018 (which include, among other items, other charges and the Atrenne and Impakt deferred tax asset benefits noted above).
IFRS EPS for Q4 2017 included a
Non-IFRS operating margin* for Q4 2018 of 3.5% reflects improved performance from our CCS segment, offset in part by weaker than expected demand in our capital equipment business, resulting in lower utilization during the quarter. As compared to FY 2017, non-IFRS operating margin for FY 2018 was negatively impacted by such lower utilization, changes in overall mix and pricing pressures, most significantly in our CCS segment, as well as
* 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.
CCS Portfolio Review
As part of our strategy to continue to diversify our business and improve shareholder returns, we commenced a comprehensive review of our CCS revenue portfolio (CCS Review) in the second half of 2018, with the intention of addressing under-performing programs and disengaging from customer programs that do not meet our strategic objectives. The review of our CCS business, which generated
Capital Equipment Business Update
Within our capital equipment business, revenue from our semiconductor capital equipment customers has been adversely impacted by cyclical decreases in demand primarily in the second half of 2018, which resulted in losses in this business (in the mid-single digit million dollar range) in the fourth quarter of 2018. In response to this demand softness, which we expect to continue throughout 2019, we are undertaking actions to align this business to the current demand environment and to improve profitability.
Restructuring Update
We have recorded
Toronto Real Property and Related Transactions Update
The agreement governing the sale of our
Completion of Impakt Acquisition
In
Board Member Addition
Guidance Summary and First Quarter 2019 Outlook
Q4 2018 Guidance (1) | Q4 2018 Actual (1) | Q1 2019 Guidance (2) | ||||
IFRS revenue (in billions) | ||||||
Non-IFRS operating margin | 3.5% at the mid-point of our revenue and non IFRS adjusted EPS guidance ranges | 3.5% | 2.6% at the mid-point of our revenue and IFRS adjusted EPS guidance ranges | |||
Non-IFRS adjusted SG&A (in millions) | ||||||
Non-IFRS adjusted EPS |
(1) For Q4 2018, our revenue was within our guidance range, but slightly below our guidance mid-point as lower demand in our Communications end market and demand softness from our capital equipment business, were partially offset by stronger than expected demand in our Enterprise end market. Non-IFRS operating margin for Q4 2018 met our guidance. Non-IFRS adjusted SG&A for Q4 2018 was higher than our guidance range primarily due to higher than expected variable expenses and SG&A costs related to Impakt. Our non-IFRS adjusted EPS results for Q4 2018 were within our guidance range.
(2) For the first quarter of 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.
Q4 2018 Webcast
Management will host its Q4 2018 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.
About
For more information, visit http://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 our capital equipment business in particular, including our expectations for a continued constrained EMS materials environment and muted capital equipment revenue environment, and our intended strategies in response thereto; our anticipated financial and/or operational results, and our anticipated non-IFRS adjusted effective tax rate; the range and timing of our cost efficiency initiative; the anticipated impact of our CCS Review; the timing and quantity of purchases of subordinate voting shares under our NCIB; the timing of the valuation of certain recently-acquired assets and finalization of the related purchase price allocations; our growth and diversification plans; anticipated costs and expenses, amortization of certain intangible assets (including anticipated increases as a result of recent acquisitions), and restructuring actions and charges; the anticipated impact of acquisitions and program wins, transfers, losses or disengagements on our business; the impact of tax and litigation outcomes; the timing and terms of the sale of our real property in
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; price, margin pressures and other competitive factors affecting, and the highly competitive nature of, the EMS industry in general and our CCS segment in particular; the cyclical nature of our capital equipment business; our response to changes in demand, rapidly evolving and changing technologies, and changes in our customers' business and outsourcing strategies; customer, competitor and/or supplier consolidation; integrating acquisitions and “operate-in-place” arrangements, and achieving the anticipated benefits therefrom; retaining or expanding our business due to execution and quality issues (including our ability to successfully resolve these challenges); maintaining sufficient financial resources and working capital to fund currently anticipated financial obligations and to pursue desirable business opportunities; negative impacts on our business resulting from recent increases in third-party indebtedness, or significant uses of cash, securities issuances, and/or additional increases in third-party indebtedness for additional acquisitions or to otherwise fund our operations; delays in the delivery and availability of components, services and materials; the impact of our restructuring actions; the incurrence of future 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 of 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 impact of the recent
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 acquisitions of Atrenne and Impakt; and that the sale of our
All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
Supplementary Non- IRS Measures Schedule 1
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, 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, other solar charges (as defined below), 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, 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.
Other solar charges, consisting of non-cash charges to further write down the carrying value of our then-remaining solar panel inventory and the write-down of solar accounts receivable (A/R) (primarily as a result of a solar customer's bankruptcy) to estimated recoverable amounts, were recorded in the second quarter of 2017 through cost of sales and SG&A expenses, respectively. These impairment charges, which were identified during the wind-down of our solar operations, were excluded as they pertained to a business we had exited, and therefore were no longer directly related to our ongoing core operating results. Although we recorded significant impairment charges to write down our solar panel inventory in the third quarter of 2016, those charges were not excluded in the determination of our non-IFRS financial measures for such period, as we were then still engaged in the solar panel manufacturing business. In connection with this wind-down, we also recorded net non-cash impairment charges to write down the carrying value of our solar panel manufacturing equipment held for sale to its estimated sales value less costs of disposal, which we recorded through other charges during 2017.
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. Acquired assets and liabilities are recorded on our balance sheet at their fair values as of the date of acquisition. Fair value adjustments are recognized through cost of sales in the period during which the acquired inventory is sold. We recognized the full
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). 2017 financial information has been restated to reflect the adoption, effective
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2017 | 2018 | 2017 | 2018 | ||||||||||||||||||||
(restated) | % of revenue | % of revenue | (restated) | % of revenue | % of revenue | ||||||||||||||||||
IFRS revenue | $ | 1,570.2 | $ | 1,727.0 | $ | 6,142.7 | $ | 6,633.2 | |||||||||||||||
IFRS gross profit | $ | 101.6 | 6.5 | % | $ | 120.0 | 6.9 | % | $ | 418.5 | 6.8 | % | $ | 430.5 | 6.5 | % | |||||||
Employee stock-based compensation expense | 3.2 | 3.8 | 14.6 | 14.7 | |||||||||||||||||||
Other solar charges (inventory write-down) | — | — | 0.9 | — | |||||||||||||||||||
Acquisition inventory fair value adjustment | — | — | — | 1.6 | |||||||||||||||||||
Non-IFRS adjusted gross profit | $ | 104.8 | 6.7 | % | $ | 123.8 | 7.2 | % | $ | 434.0 | 7.1 | % | $ | 446.8 | 6.7 | % | |||||||
IFRS SG&A | $ | 51.1 | 3.3 | % | $ | 59.6 | 3.5 | % | $ | 203.2 | 3.3 | % | $ | 219.0 | 3.3 | % | |||||||
Employee stock-based compensation expense | (4.2 | ) | (4.6 | ) | (15.5 | ) | (18.7 | ) | |||||||||||||||
Other solar charges (A/R write-down) | — | — | (0.5 | ) | — | ||||||||||||||||||
Non-IFRS adjusted SG&A | $ | 46.9 | 3.0 | % | $ | 55.0 | 3.2 | % | $ | 187.2 | 3.0 | % | $ | 200.3 | 3.0 | % | |||||||
IFRS earnings before income taxes | $ | 21.3 | 1.4 | % | $ | 20.1 | 1.2 | % | $ | 133.1 | 2.2 | % | $ | 81.9 | 1.2 | % | |||||||
Finance costs | 2.6 | 9.2 | 10.1 | 24.4 | |||||||||||||||||||
Employee stock-based compensation expense | 7.4 | 8.4 | 30.1 | 33.4 | |||||||||||||||||||
Amortization of intangible assets (excluding computer software) | 1.1 | 5.1 | 5.5 | 11.6 | |||||||||||||||||||
Net restructuring, impairment and other charges (1) | 17.5 | 16.9 | 37.0 | 61.0 | |||||||||||||||||||
Other solar charges (inventory and A/R write-down) | — | — | 1.4 | — | |||||||||||||||||||
Acquisition inventory fair value adjustment | — | — | — | 1.6 | |||||||||||||||||||
Non-IFRS operating earnings (adjusted EBIAT) (1) | $ | 49.9 | 3.2 | % | $ | 59.7 | 3.5 | % | $ | 217.2 | 3.5 | % | $ | 213.9 | 3.2 | % | |||||||
IFRS net earnings | $ | 13.6 | 0.9 | % | $ | 60.1 | 3.5 | % | $ | 105.5 | 1.7 | % | $ | 98.9 | 1.5 | % | |||||||
Employee stock-based compensation expense | 7.4 | 8.4 | 30.1 | 33.4 | |||||||||||||||||||
Amortization of intangible assets (excluding computer software) | 1.1 | 5.1 | 5.5 | 11.6 | |||||||||||||||||||
Net restructuring, impairment and other charges (recoveries) (1) | 17.5 | 16.9 | 37.0 | 61.0 | |||||||||||||||||||
Other solar charges (inventory and A/R write-down) | — | — | 1.4 | — | |||||||||||||||||||
Acquisition inventory fair value adjustment | — | — | — | 1.6 | |||||||||||||||||||
Adjustments for taxes (2) | (0.5 | ) | (50.8 | ) | (6.5 | ) | (56.7 | ) | |||||||||||||||
Non-IFRS adjusted net earnings | $ | 39.1 | $ | 39.7 | $ | 173.0 | $ | 149.8 | |||||||||||||||
Diluted EPS | |||||||||||||||||||||||
Weighted average # of shares (in millions) | 145.5 | 138.0 | 145.2 | 140.6 | |||||||||||||||||||
IFRS earnings per share | $ | 0.09 | $ | 0.44 | $ | 0.73 | $ | 0.70 | |||||||||||||||
Non-IFRS adjusted earnings per share | $ | 0.27 | $ | 0.29 | $ | 1.19 | $ | 1.07 | |||||||||||||||
# of shares outstanding at period end (in millions) | 141.8 | 136.3 | 141.8 | 136.3 | |||||||||||||||||||
IFRS cash provided by (used in) operations | $ | 43.7 | $ | (1.9 | ) | $ | 127.0 | $ | 33.1 | ||||||||||||||
Purchase of property, plant and equipment, net of sales proceeds | (20.6 | ) | (18.8 | ) | (101.8 | ) | (78.5 | ) | |||||||||||||||
Finance lease payments | (1.7 | ) | (0.9 | ) | (6.5 | ) | (17.0 | ) | |||||||||||||||
Repayments from former solar supplier | — | — | 12.5 | — | |||||||||||||||||||
Finance costs paid | (2.6 | ) | (14.3 | ) | (10.2 | ) | (36.0 | ) | |||||||||||||||
Non-IFRS free cash flow (3) | $ | 18.8 | $ | (35.9 | ) | $ | 21.0 | $ | (98.4 | ) | |||||||||||||
IFRS ROIC % (4) | 7.0 | % | 5.0 | % | 11.5 | % | 5.8 | % | |||||||||||||||
Non-IFRS adjusted ROIC % (4) | 16.4 | % | 15.0 | % | 18.8 | % | 15.1 | % |
(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 (consisting of interest and fees related to our credit facility, our accounts receivable sales program and a customer's supplier financing program), amortization of intangible assets (excluding computer software) and in applicable periods, employee stock-based compensation expense, net restructuring and other charges (recoveries) (consisting of restructuring charges (recoveries), Acquisition Costs, legal settlements (recoveries),
(2) The adjustments for taxes, as applicable, represent the tax effects of our non-IFRS adjustments and non-core tax impacts (described below).
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:
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2017 | Effective tax rate | 2018 | Effective tax rate | 2017 | Effective tax rate | 2018 | Effective tax rate |
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(restated) | (restated) | ||||||||||||||||||||||
IFRS tax expense and IFRS effective tax rate | $ | 7.7 | 36 | % | $ | (40.0 | ) | (199 | )% | $ | 27.6 | 21 | % | $ | (17.0 | ) | (21 | )% | |||||
Tax costs (benefits) of the following items excluded from IFRS tax expense: | |||||||||||||||||||||||
Employee stock-based compensation | 0.9 | 1.1 | 1.7 | 2.3 | |||||||||||||||||||
Amortization of intangible assets (excluding computer software) | — | — | — | — | |||||||||||||||||||
Net restructuring, impairment and other charges | (0.4 | ) | 0.7 | 1.0 | 1.4 | ||||||||||||||||||
Other solar charges (inventory and A/R write-down) | — | — | 0.4 | — | |||||||||||||||||||
Non-core tax impact related to fair value adjustment on acquisitions * | — | 49.6 | — | 53.3 | |||||||||||||||||||
Non-core tax impacts related to restructured sites ** | — | (0.6 | ) | 3.4 | (0.3 | ) | |||||||||||||||||
Non-IFRS adjusted tax expense and Non-IFRS adjusted effective tax rate | $ | 8.2 | 17 | % | $ | 10.8 | 21 | % | $ | 34.1 | 16 | % | $ | 39.7 | 21 | % |
* Consists of deferred tax assets attributable to our acquisitions of Atrenne (recorded in the second quarter of 2018) and Impakt (recorded in the fourth quarter of 2018).
** Includes the Solar Benefit recorded in the second quarter of 2017.
(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), finance lease payments, repayments from a former solar supplier, and finance costs paid. As a measure of liquidity, we intend to include any amounts we receive from the sale of our
(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. Our non-IFRS adjusted ROIC measure reflects non-IFRS operating earnings, working capital management and asset utilization. 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) consists of the following IFRS measures: total assets less cash, 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 and a five-point average to calculate average net invested capital for the year. 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.
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 %). 2017 financial information has been restated to reflect the adoption, effective
Three months ended | Year ended | ||||||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||||||
(restated) | (restated) | ||||||||||||||||||
IFRS earnings before income taxes | $ | 21.3 | $ | 20.1 | $ | 133.1 | $ | 81.9 | |||||||||||
Multiplier to annualize earnings | 4 | 4 | 1 | 1 | |||||||||||||||
Annualized IFRS earnings before income taxes | $ | 85.2 | $ | 80.4 | $ | 133.1 | $ | 81.9 | |||||||||||
Average net invested capital for the period | $ | 1,216.5 | $ | 1,594.1 | $ | 1,152.9 | $ | 1,413.6 | |||||||||||
IFRS ROIC % (1) | 7.0 | % | 5.0 | % | 11.5 | % | 5.8 | % | |||||||||||
Three months ended | Year ended | ||||||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||||||
(restated) | (restated) | ||||||||||||||||||
Non-IFRS operating earnings (adjusted EBIAT) | $ | 49.9 | $ | 59.7 | $ | 217.2 | $ | 213.9 | |||||||||||
Multiplier to annualize earnings | 4 | 4 | 1 | 1 | |||||||||||||||
Annualized non-IFRS adjusted EBIAT | $ | 199.6 | $ | 238.8 | $ | 217.2 | $ | 213.9 | |||||||||||
Average net invested capital for the period | $ | 1,216.5 | $ | 1,594.1 | $ | 1,152.9 | $ | 1,413.6 | |||||||||||
Non-IFRS adjusted ROIC % (1) | 16.4 | % | 15.0 | % | 18.8 | % | 15.1 | % | |||||||||||
2017 |
2018 |
2018 |
2018 |
2018 |
|||||||||||||||
(restated) | |||||||||||||||||||
Net invested capital consists of: | |||||||||||||||||||
Total assets | $ | 2,964.2 | $ | 2,976.0 | $ | 3,212.2 | $ | 3,316.1 | $ | 3,737.7 | |||||||||
Less: cash | 515.2 | 435.7 | 401.4 | 457.7 | 422.0 | ||||||||||||||
Less: accounts payable, accrued and other current liabilities, provisions and income taxes payable | 1,228.6 | 1,278.1 | 1,413.8 | 1,473.3 | 1,512.6 | ||||||||||||||
Net invested capital at period end (1) | $ | 1,220.4 | $ | 1,262.2 | $ | 1,397.0 | $ | 1,385.1 | $ | 1,803.1 | |||||||||
2016 |
2017 |
2017 |
2017 |
2017 |
|||||||||||||||
(restated) | (restated) | (restated) | (restated) | (restated) | |||||||||||||||
Net invested capital consists of: | |||||||||||||||||||
Total assets | $ | 2,841.9 | $ | 2,833.5 | $ | 2,876.7 | $ | 2,892.0 | $ | 2,964.2 | |||||||||
Less: cash | 557.2 | 558.0 | 582.7 | 527.0 | 515.2 | ||||||||||||||
Less: accounts payable, accrued and other current liabilities, provisions and income taxes payable | 1,189.7 | 1,165.2 | 1,167.9 | 1,152.4 | 1,228.6 | ||||||||||||||
Net invested capital at period end (1) | $ | 1,095.0 | $ | 1,110.3 | $ | 1,126.1 | $ | 1,212.6 | $ | 1,220.4 |
(1) See footnote 4 of the previous table.
CELESTICA INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions of U.S. dollars)
(unaudited)
2017 |
2017 |
2018 |
|||||||||
(restated)* | (restated)* | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 557.2 | $ | 515.2 | $ | 422.0 | |||||
Accounts receivable (notes 3 & 7) | 1,017.4 | 1,023.7 | 1,206.6 | ||||||||
Inventories (notes 3 & 8) | 684.4 | 824.0 | 1,089.9 | ||||||||
Income taxes receivable | 5.4 | 1.6 | 5.0 | ||||||||
Assets classified as held for sale (note 9) | 28.9 | 30.1 | 27.4 | ||||||||
Other current assets | 73.9 | 82.0 | 72.6 | ||||||||
Total current assets | 2,367.2 | 2,476.6 | 2,823.5 | ||||||||
Property, plant and equipment | 302.7 | 323.9 | 365.3 | ||||||||
23.2 | 23.2 | 198.4 | |||||||||
Intangible assets (note 5) | 25.5 | 21.6 | 283.6 | ||||||||
Deferred income taxes | 35.3 | 37.6 | 36.7 | ||||||||
Other non-current assets (note 10) | 88.0 | 81.3 | 30.2 | ||||||||
Total assets | $ | 2,841.9 | $ | 2,964.2 | $ | 3,737.7 | |||||
Liabilities and Equity | |||||||||||
Current liabilities: | |||||||||||
Current portion of borrowings under credit facility and finance lease obligations (note 11) | $ | 56.0 | $ | 37.9 | $ | 107.7 | |||||
Accounts payable | 876.9 | 931.1 | 1,126.7 | ||||||||
Accrued and other current liabilities | 261.7 | 233.2 | 320.4 | ||||||||
Income taxes payable | 32.4 | 37.7 | 42.3 | ||||||||
Current portion of provisions | 18.7 | 26.6 | 23.2 | ||||||||
Total current liabilities | 1,245.7 | 1,266.5 | 1,620.3 | ||||||||
Long-term portion of borrowings under credit facility and finance lease obligations (note 11) | 188.7 | 166.5 | 650.2 | ||||||||
Pension and non-pension post-employment benefit obligations (note 10) | 86.0 | 97.8 | 88.8 | ||||||||
Provisions and other non-current liabilities | 28.3 | 35.4 | 20.6 | ||||||||
Deferred income taxes | 35.4 | 27.8 | 25.5 | ||||||||
Total liabilities | 1,584.1 | 1,594.0 | 2,405.4 | ||||||||
Equity: | |||||||||||
Capital stock (note 12) | 2,048.2 | 2,048.3 | 1,954.1 | ||||||||
(15.3 | ) | (8.7 | ) | (20.2 | ) | ||||||
Contributed surplus | 862.6 | 863.0 | 906.6 | ||||||||
Deficit | (1,613.0 | ) | (1,525.7 | ) | (1,481.7 | ) | |||||
Accumulated other comprehensive loss | (24.7 | ) | (6.7 | ) | (26.5 | ) | |||||
Total equity | 1,257.8 | 1,370.2 | 1,332.3 | ||||||||
Total liabilities and equity | $ | 2,841.9 | $ | 2,964.2 | $ | 3,737.7 |
Contingencies (note 16), Subsequent event (note 13(b))
* Certain prior period figures have been restated to reflect the adoption of IFRS 15 (see notes 2 and 3).
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 | Year ended | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
(restated)* | (restated)* | ||||||||||||||
Revenue | $ | 1,570.2 | $ | 1,727.0 | $ | 6,142.7 | $ | 6,633.2 | |||||||
Cost of sales (note 8) | 1,468.6 | 1,607.0 | 5,724.2 | 6,202.7 | |||||||||||
Gross profit | 101.6 | 120.0 | 418.5 | 430.5 | |||||||||||
Selling, general and administrative expenses (SG&A) | 51.1 | 59.6 | 203.2 | 219.0 | |||||||||||
Research and development | 6.9 | 8.1 | 26.2 | 28.8 | |||||||||||
Amortization of intangible assets | 2.2 | 6.1 | 8.9 | 15.4 | |||||||||||
Other charges (note 13) | 17.5 | 16.9 | 37.0 | 61.0 | |||||||||||
Earnings from operations | 23.9 | 29.3 | 143.2 | 106.3 | |||||||||||
Finance costs | 2.6 | 9.2 | 10.1 | 24.4 | |||||||||||
Earnings before income taxes | 21.3 | 20.1 | 133.1 | 81.9 | |||||||||||
Income tax expense (recovery) (note 14): | |||||||||||||||
Current | 3.5 | 6.8 | 39.1 | 39.7 | |||||||||||
Deferred | 4.2 | (46.8 | ) | (11.5 | ) | (56.7 | ) | ||||||||
7.7 | (40.0 | ) | 27.6 | (17.0 | ) | ||||||||||
Net earnings for the period | $ | 13.6 | $ | 60.1 | $ | 105.5 | $ | 98.9 | |||||||
Basic earnings per share | $ | 0.09 | $ | 0.44 | $ | 0.74 | $ | 0.71 | |||||||
Diluted earnings per share | $ | 0.09 | $ | 0.44 | $ | 0.73 | $ | 0.70 | |||||||
Shares used in computing per share amounts (in millions): | |||||||||||||||
Basic | 143.3 | 136.8 | 143.1 | 139.4 | |||||||||||
Diluted | 145.5 | 138.0 | 145.2 | 140.6 |
* Certain prior period figures have been restated to reflect the adoption of IFRS 15 (see notes 2 and 3).
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 | Year ended | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
(restated)* | (restated)* | ||||||||||||||
Net earnings for the period | $ | 13.6 | $ | 60.1 | $ | 105.5 | $ | 98.9 | |||||||
Other comprehensive income, net of tax: | |||||||||||||||
Items that will not be reclassified to net earnings: | |||||||||||||||
Gains (losses) on pension and non-pension post-employment benefit plans (note 10) | (1.2 | ) | 8.4 | (18.2 | ) | (54.9 | ) | ||||||||
Items that may be reclassified to net earnings: | |||||||||||||||
Currency translation differences for foreign operations | — | 0.5 | 0.7 | 0.1 | |||||||||||
Changes from currency forward derivatives designated as hedges | (3.3 | ) | (2.9 | ) | 17.3 | (15.5 | ) | ||||||||
Changes from interest rate swap derivatives designated as hedges (note 15) | — | (4.8 | ) | — | (4.4 | ) | |||||||||
Total comprehensive income for the period | $ | 9.1 | $ | 61.3 | $ | 105.3 | $ | 24.2 |
* Certain prior period figures have been restated to reflect the adoption of IFRS 15 (see notes 2 and 3).
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)
Capital stock (note 12) |
(note 12) |
Contributed surplus |
Deficit | Accumulated other comprehensive loss(a) |
Total equity | ||||||||||||||||||
Balance -- |
$ | 2,048.2 | $ | (15.3 | ) | $ | 862.6 | $ | (1,632.0 | ) | $ | (24.7 | ) | $ | 1,238.8 | ||||||||
Impact of change in accounting policies (notes 2 and 3) | — | — | — | 19.0 | — | 19.0 | |||||||||||||||||
Restated balance at |
2,048.2 | (15.3 | ) | 862.6 | (1,613.0 | ) | (24.7 | ) | 1,257.8 | ||||||||||||||
Capital transactions (note 12): | |||||||||||||||||||||||
Issuance of capital stock | 30.4 | — | (16.8 | ) | — | — | 13.6 | ||||||||||||||||
Repurchase of capital stock for cancellation | (30.3 | ) | — | 10.4 | — | — | (19.9 | ) | |||||||||||||||
Purchase of treasury stock for stock-based plans | — | (16.7 | ) | — | — | — | (16.7 | ) | |||||||||||||||
Stock-based compensation and other | — | 23.3 | 6.8 | — | — | 30.1 | |||||||||||||||||
Total comprehensive income (loss): | |||||||||||||||||||||||
Net earnings for the period | — | — | — | 105.5 | — | 105.5 | |||||||||||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
Losses on pension and non-pension post-employment benefit plans (note 10) | — | — | — | (18.2 | ) | — | (18.2 | ) | |||||||||||||||
Currency translation differences for foreign operations | — | — | — | — | 0.7 | 0.7 | |||||||||||||||||
Changes from currency forward derivatives designated as hedges | — | — | — | — | 17.3 | 17.3 | |||||||||||||||||
Balance -- |
$ | 2,048.3 | $ | (8.7 | ) | $ | 863.0 | $ | (1,525.7 | ) | $ | (6.7 | ) | $ | 1,370.2 | ||||||||
Capital transactions (note 12): | |||||||||||||||||||||||
Issuance of capital stock | 14.9 | — | (14.5 | ) | — | — | 0.4 | ||||||||||||||||
Repurchase of capital stock for cancellation | (109.1 | ) | — | 33.6 | — | — | (75.5 | ) | |||||||||||||||
Purchase of treasury stock for stock-based plans | — | (22.4 | ) | — | — | — | (22.4 | ) | |||||||||||||||
Stock-based compensation and other | — | 10.9 | 24.5 | — | — | 35.4 | |||||||||||||||||
Total comprehensive income (loss): | |||||||||||||||||||||||
Net earnings for the period | — | — | — | 98.9 | — | 98.9 | |||||||||||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
Losses on pension and non-pension post-employment benefit plans (note 10) | — | — | — | (54.9 | ) | — | (54.9 | ) | |||||||||||||||
Currency translation differences for foreign operations | — | — | — | — | 0.1 | 0.1 | |||||||||||||||||
Changes from currency forward derivatives designated as hedges | — | — | — | — | (15.5 | ) | (15.5 | ) | |||||||||||||||
Changes from interest rate swap derivatives designated as hedges | — | — | — | — | (4.4 | ) | (4.4 | ) | |||||||||||||||
Balance -- |
$ | 1,954.1 | $ | (20.2 | ) | $ | 906.6 | $ | (1,481.7 | ) | $ | (26.5 | ) | $ | 1,332.3 |
(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 | Year ended | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
(restated)* | (restated)* | ||||||||||||||
Cash provided by (used in): | |||||||||||||||
Operating activities: | |||||||||||||||
Net earnings for the period | $ | 13.6 | $ | 60.1 | $ | 105.5 | $ | 98.9 | |||||||
Adjustments to net earnings for items not affecting cash: | |||||||||||||||
Depreciation and amortization | 19.6 | 25.0 | 76.5 | 89.1 | |||||||||||
Equity-settled stock-based compensation | 7.4 | 8.4 | 30.1 | 33.4 | |||||||||||
Other charges | (1.4 | ) | — | 5.7 | 1.4 | ||||||||||
Finance costs | 2.6 | 9.2 | 10.1 | 24.4 | |||||||||||
Income tax expense (recovery) | 7.7 | (40.0 | ) | 27.6 | (17.0 | ) | |||||||||
Other | 2.3 | 1.6 | (1.6 | ) | (7.5 | ) | |||||||||
Changes in non-cash working capital items: | |||||||||||||||
Accounts receivable | (48.8 | ) | (60.4 | ) | (6.3 | ) | (155.4 | ) | |||||||
Inventories | (21.0 | ) | 1.6 | (139.6 | ) | (224.0 | ) | ||||||||
Other current assets | (7.5 | ) | (2.7 | ) | (2.0 | ) | 7.6 | ||||||||
Accounts payable, accrued and other current liabilities and provisions | 75.6 | 5.2 | 51.8 | 227.0 | |||||||||||
Non-cash working capital changes | (1.7 | ) | (56.3 | ) | (96.1 | ) | (144.8 | ) | |||||||
Net income tax paid | (6.4 | ) | (9.9 | ) | (30.8 | ) | (44.8 | ) | |||||||
Net cash provided by (used in) operating activities | 43.7 | (1.9 | ) | 127.0 | 33.1 | ||||||||||
Investing activities: | |||||||||||||||
Acquisition, net of cash acquired (note 5) | — | (325.4 | ) | — | (467.1 | ) | |||||||||
Purchase of computer software and property, plant and equipment(a) | (20.8 | ) | (18.8 | ) | (102.6 | ) | (82.2 | ) | |||||||
Proceeds/deposits related to the sale of assets | 0.2 | — | 0.8 | 3.7 | |||||||||||
Repayment of advances from solar supplier (note 6) | — | — | 12.5 | — | |||||||||||
Net cash used in investing activities | (20.6 | ) | (344.2 | ) | (89.3 | ) | (545.6 | ) | |||||||
Financing activities: | |||||||||||||||
Borrowings under prior credit facility (note 11) | — | — | — | 163.0 | |||||||||||
Repayments under prior credit facility (note 11) | (6.3 | ) | — | (40.0 | ) | (350.5 | ) | ||||||||
Borrowings under new credit facility (note 11) | — | 354.0 | — | 759.0 | |||||||||||
Repayments under new credit facility (note 11) | — | (1.7 | ) | — | (1.7 | ) | |||||||||
Finance lease payments (note 11) | (1.7 | ) | (0.9 | ) | (6.5 | ) | (17.0 | ) | |||||||
Issuance of capital stock (note 12) | 0.1 | — | 13.6 | 0.4 | |||||||||||
Repurchase of capital stock for cancellation (note 12) | (19.9 | ) | (13.9 | ) | (19.9 | ) | (75.5 | ) | |||||||
Purchase of treasury stock for stock-based plans (note 12) | (4.5 | ) | (12.8 | ) | (16.7 | ) | (22.4 | ) | |||||||
Finance costs paid | (2.6 | ) | (14.3 | ) | (10.2 | ) | (36.0 | ) | |||||||
Net cash provided by (used in) financing activities | (34.9 | ) | 310.4 | (79.7 | ) | 419.3 | |||||||||
Net decrease in cash and cash equivalents | (11.8 | ) | (35.7 | ) | (42.0 | ) | (93.2 | ) | |||||||
Cash and cash equivalents, beginning of period | 527.0 | 457.7 | 557.2 | 515.2 | |||||||||||
Cash and cash equivalents, end of period | $ | 515.2 | $ | 422.0 | $ | 515.2 | $ | 422.0 |
(a) Additional equipment of nil and
* Certain prior period figures have been restated to reflect the adoption of IFRS 15 (see notes 2 and 3).
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
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 Q4 2018 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, and the discount rates applied to our net pension and non-pension post-employment benefit assets or liabilities. 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 material changes to our assumptions or the judgments affecting the application of our estimates and assumptions during Q4 2018 or FY 2018 from those described in the notes to our 2017 AFS. However, see “Accounting policies” below for a discussion of recently adopted accounting standards and recently issued accounting pronouncements.
Accounting policies:
The Q4 2018 Interim Financial Statements are based upon accounting policies consistent with those used and described in note 2 of our 2017 AFS, except for the recently adopted accounting standards discussed below.
Recently adopted accounting standards:
IFRS 15, Revenue from Contracts with Customers:
Effective
IFRS 9, Financial Instruments:
Effective
Under IFRS 9, financial assets are classified as either: measured at amortized cost, fair value through other comprehensive income (FVOCI), or fair value through profit or loss (FVTPL). This classification is generally based on the business model in which the financial asset is managed and its contractual cash flow characteristics. IFRS 9 eliminated the held-to-maturity, loans and receivables, and available-for-sale categories previously allowed under IAS 39. Trade and non-customer receivables, that were previously classified as loans and receivables under IAS 39, are measured at amortized cost under IFRS 9. Although the classification of such assets changed, measurement of these assets continues to be at amortized cost, and no changes to their carrying amounts were required upon adopting IFRS 9. For financial liabilities, IFRS 9 largely retains the existing IAS 39 classifications, with the exception of those designated at FVTPL. We do not currently hold any liabilities designated as FVTPL. We do not currently hold any financial assets or liabilities under FVOCI.
See “Changes in accounting policies” below for a description of accounting policy changes in connection with our adoption of IFRS 9 and IFRS 15, and note 3 for the transitional impacts of adopting IFRS 15.
Recently issued accounting pronouncements:
IFRS 16, Leases:
In
Changes in accounting policies:
The following section should be read as a modification to the significant accounting policies in notes 2 (q), (r), (s) and (t) of our 2017 AFS and reflects accounting policy changes in connection with our adoption of IFRS 9 and IFRS 15.
(a) Financial assets and financial liabilities:
We recognize financial assets and financial liabilities initially at fair value and subsequently measure these at either fair value or amortized cost based on their classification as described below.
Fair value through profit or loss (FVTPL):
Financial assets and any financial liabilities that we purchase or incur, respectively, with the intention of generating earnings in the near term, and derivatives other than cash flow hedges, are classified as FVTPL. This category includes short-term investments in money market funds (if applicable) that we group with cash equivalents, and derivative assets and derivative liabilities that do not qualify for hedge accounting. See Derivatives and hedge accounting in paragraph (c) below for derivative contracts that qualify for hedge accounting. For investments that we classify as FVTPL, we initially recognize such financial assets on our consolidated balance sheet at fair value and recognize subsequent changes in our consolidated statement of operations. We expense transaction costs as incurred in our consolidated statement of operations. We do not currently hold any liabilities designated as FVTPL.
Amortized cost:
Financial assets that we hold with the intention of collecting the contractual cash flows (in the form of payment of principal and related interest) at amortized cost, and includes our trade receivables, term deposits and non-customer receivables. We initially recognize the carrying amount of such assets on our consolidated balance sheet at fair value plus directly attributable transaction costs, and subsequently measure these at amortized cost using the effective interest rate method, less any impairment losses.
Other financial liabilities:
This category is for our financial liabilities that are not classified as FVTPL, and includes our accounts payable, the majority of our accrued liabilities and certain other provisions, as well as borrowings under our credit facility, including our term loans. We record these financial liabilities at amortized cost on our consolidated balance sheet.
(b) Impairment of financial assets:
We used a forward-looking ECL model in determining our allowance for doubtful accounts as it relates to trade receivables, contract assets (under IFRS 15), and other financial assets. Our allowance is based on historical experience, and includes consideration of the aging of the balances, the customer's creditworthiness, current economic conditions, expectation of bankruptcies, and political and economic volatility in the markets or location of our customers, among other factors. A financial asset is written off or written down to its net realizable value as soon as it is known to be impaired. We will adjust previous write-downs to reflect changes in estimates or actual experience.
(c) Derivatives and hedge accounting:
We measure foreign exchange forward and interest swap contracts that we designate as cash flow hedges and qualify for hedge accounting at fair value on our consolidated balance sheet. We defer changes in the fair value of the hedging derivative, to the extent effective, in other comprehensive income (OCI) until we recognize the asset, liability or forecasted transaction being hedged in our consolidated statement of operations. Any cash flow hedge ineffectiveness is recognized in operations immediately. For hedges that we discontinue before the end of the original hedge term, we amortize the unrealized hedge gain or loss in our consolidated statement of operations over the remaining term of the hedge. If the hedged item ceases to exist before the end of the original hedge term, we recognize the unrealized hedge gain or loss immediately in our consolidated statement of operations.
(d) Revenue:
We derive the majority of our revenue from the sale of electronic products and services that we manufacture and provide to customer specifications. We recognize revenue from the sale of products and services rendered when our performance obligation has been satisfied or when the associated control over the products has passed to the customer and no material uncertainties remain as to the collection of our receivables. Under IFRS 15, which we adopted
3. TRANSITION TO IFRS 15, REVENUE FROM CONTRACTS WITH CUSTOMERS
We adopted IFRS 15 as of
(a) Transitional impacts:
For a significant portion of our business, the timing of our revenue recognition has changed under the new standard from a point-in-time to over time, resulting in earlier recognition of revenue than under the previous recognition rules (which was generally upon delivery of final products to our end customer). The most significant financial impacts of adopting IFRS 15 on the comparative periods in our Q4 2018 Interim Financial Statements are summarized as follows:
Three months ended |
Year ended |
||||||||||||
2016 |
2017 |
2017 |
2017 |
||||||||||
Increase (decrease) | |||||||||||||
Contract assets (included in accounts receivable) | $ | 226.9 | — | — | $ | 258.9 | |||||||
Inventories | (206.2 | ) | — | — | (237.8 | ) | |||||||
Deferred taxes | (1.7 | ) | — | — | (1.9 | ) | |||||||
Accrued and other current liabilities | — | — | — | (0.3 | ) | ||||||||
Deficit | (19.0 | ) | — | — | (19.5 | ) | |||||||
Revenue | — | $ | 16.3 | $ | 32.2 | — | |||||||
Cost of sales | — | 17.1 | 31.5 | — | |||||||||
Income tax expense | — | — | 0.2 | — | |||||||||
Net earnings | — | (0.8 | ) | 0.5 | — | ||||||||
Diluted earnings per share | — | $ | (0.01 | ) | $ | 0.01 | — |
(b) Contract assets and liabilities:
Our contract assets consist of unbilled amounts recognized as revenue under IFRS 15 and deferred investment costs incurred to obtain or fulfill a contract. As of
4. SEGMENT AND CUSTOMER REPORTING
Segment Reorganization:
Operating segments are defined as components of an enterprise that engage in business activities from which they may earn revenue and incur expenses; for which discrete financial information is available; and whose operating results are regularly reviewed by the chief operating decision maker in deciding how to allocate resources and to assess performance. No operating segments have been aggregated to determine our reportable segments.
During the first quarter of 2018, we completed a reorganization of our reporting structure, including our sales, operations and management systems, into two operating and reportable segments: ATS and CCS. Prior to this reorganization, we operated in one reportable segment (Electronic Manufacturing Services), which was comprised of multiple end markets (ATS, Communications and Enterprise during 2017). The change in operating and reportable segments was a result of modifications to our organizational and internal management structure which were initiated in 2017 to streamline business operations and improve profitability and competitiveness, and were completed in early 2018. As a result of these modifications, and commencing in the first quarter of 2018, our Chief Executive Officer (CEO), who is our chief operating decision maker, reviews segment revenue, segment income and segment margin (described below) to assess performance and make decisions about resource allocation. Our prior period financial information has been reclassified to reflect the reorganized segment structure and to conform to the current presentation. The foregoing changes had no impact on our historical consolidated financial position, results of operations or cash flows as previously reported.
Factors considered in determining the two reportable segments included the nature of applicable business activities, management structure, market strategy and margin profiles. Our ATS segment consists of our ATS end market, and is comprised of our aerospace and defense, industrial, smart energy, healthtech, and capital equipment (including semiconductor, display and power equipment) businesses. Products and services in this segment are extensive and are often more regulated than in our CCS segment, and can include the following: government-certified and highly-specialized manufacturing, electronic and enclosure-related services for aerospace and defense-related customers; high-precision equipment and integrated subsystems used in the manufacture of semiconductors and displays; a wide range of industrial automation, controls, test and measurement devices; advanced solutions for surgical instruments, diagnostic imaging and patient monitoring; and efficiency products to help manage and monitor the energy and power industries. Our ATS segment businesses typically have a higher margin profile and longer product life cycles than the businesses in our CCS segment. Our CCS segment consists of our Communications and Enterprise end markets, and is comprised of our enterprise communications, telecommunications, servers and storage businesses. Products and services in this segment consist predominantly of enterprise-level data communications and information processing infrastructure products, and can include routers, switches, servers and storage-related products used by a wide range of businesses and cloud-based service providers to manage digital connectivity, commerce and social media applications. Our CCS segment businesses typically have a lower margin profile and higher volumes than the businesses in our ATS segment, and have been impacted in recent periods (and continue to be impacted) by aggressive pricing, rapid shifts in technology, model obsolescence and the commoditization of certain products.
Segment performance is evaluated based on segment revenue, segment income and segment margin (segment income as a percentage of segment revenue). Revenue is attributed to the segment in which the product is manufactured or the service is performed. Segment income is defined as a segment’s net revenue less its cost of sales and its allocable portion of selling, general and administrative expenses and research and development expenses (collectively, Segment Costs). Identifiable Segment Costs are allocated directly to the applicable segment while other Segment Costs, including indirect costs and certain corporate charges, are allocated to our segments based on an analysis of the relative usage or benefit derived by each segment from such costs. Segment income excludes finance costs (net of refund interest, when applicable), amortization of intangible assets (excluding computer software), employee stock-based compensation expense, net restructuring, impairment and other charges (recoveries), other solar charges, and recognized fair value adjustments for inventory acquired in connection with acquisitions (see note 5), as these costs and charges are managed and reviewed by the CEO at the company level. Net restructuring, impairment and other charges (recoveries) include, in applicable periods, restructuring charges (recoveries), impairment charges (recoveries), acquisition-related consulting, transaction and integration costs, legal settlements (recoveries),
Information regarding the results of each reportable segment is set forth below:
Revenue by segment: | Three months ended |
Year ended |
|||||||||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||||||||||
% of total | % of total | % of total | % of total | ||||||||||||||||||||
ATS | $ | 513.0 | 33 | % | $ | 567.4 | 33 | % | $ | 1,958.6 | 32 | % | $ | 2,209.7 | 33 | % | |||||||
CCS | 1,057.2 | 67 | % | 1,159.6 | 67 | % | 4,184.1 | 68 | % | 4,423.5 | 67 | % | |||||||||||
Total | $ | 1,570.2 | $ | 1,727.0 | $ | 6,142.7 | $ | 6,633.2 |
Segment income, segment margin, and reconciliation of segment income to IFRS earnings before income taxes: | Three months ended |
Year ended |
|||||||||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||||||||||
Segment Margin | Segment Margin | Segment Margin | Segment Margin | ||||||||||||||||||||
ATS segment income and margin | $ | 26.7 | 5.2 | % | $ | 20.9 | 3.7 | % | $ | 96.8 | 4.9 | % | $ | 102.5 | 4.6 | % | |||||||
CCS segment income and margin | 23.2 | 2.2 | % | 38.8 | 3.3 | % | 120.4 | 2.9 | % | 111.4 | 2.5 | % | |||||||||||
Total segment income | 49.9 | 59.7 | 217.2 | 213.9 | |||||||||||||||||||
Reconciling items: | |||||||||||||||||||||||
Finance costs | 2.6 | 9.2 | 10.1 | 24.4 | |||||||||||||||||||
Employee stock-based compensation expense | 7.4 | 8.4 | 30.1 | 33.4 | |||||||||||||||||||
Amortization of intangible assets (excluding computer software) | 1.1 | 5.1 | 5.5 | 11.6 | |||||||||||||||||||
Net restructuring, impairment and other charges (see note 13) | 17.5 | 16.9 | 37.0 | 61.0 | |||||||||||||||||||
Other solar charges (inventory and A/R write-down) | — | — | 1.4 | — | |||||||||||||||||||
Inventory fair value adjustment (see note 5) | — | — | — | 1.6 | |||||||||||||||||||
IFRS earnings before income taxes | $ | 21.3 | $ | 20.1 | $ | 133.1 | $ | 81.9 | |||||||||||||||
Customers:
For Q4 2018 and FY 2018, we had three and two customers, respectively (in each case from our CCS segment), that represented more than 10% of total revenue (Q4 2017 and FY 2017 — three and two customers, respectively).
Seasonality:
From time to time, we experience some level of seasonality in our quarterly revenue patterns across some of our businesses. However, numerous factors affecting our period-to-period results make it difficult to isolate the impact of seasonality and other external factors on our business. In the past, 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. 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.
5. ACQUISITIONS
In
Details of our preliminary purchase price allocation in the year of 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 | ||
64.0 | |||
Current liabilities | (8.5 | ) | |
Deferred income taxes and other-long-term liabilities | (4.1 | ) | |
$ | 141.7 |
Acquired assets and liabilities are recorded on our consolidated balance sheet at their fair values as of the date of acquisition. In connection with our purchase of Atrenne, we recorded a
The purchase price for Atrenne includes a customary post-closing net working capital adjustment. We expect to finalize our purchase price allocation by the end of the first quarter of 2019, once such net working capital adjustment has been finalized.
Annual amortization of intangible assets will increase by approximately
In
Details of our preliminary purchase price allocation in the year of acquisition are as follows:
Impakt | |||
Current assets, net of |
$ | 46.7 | |
Property, plant and equipment and other long-term assets | 20.9 | ||
Customer intangible assets and computer software assets | 223.0 | ||
111.2 | |||
Current liabilities | (23.8 | ) | |
Deferred income taxes | (52.6 | ) | |
$ | 325.4 |
The determination of the fair value of certain assets in the table above, including customer intangible assets, working capital assets and deferred income taxes, has not been finalized. We expect to complete the valuation of these assets and to finalize the purchase price allocation for Impakt in the first half of 2019.
We expect annual amortization of intangible assets to increase by approximately
Pro forma disclosure: Consolidated revenue and net earnings for Q4 2018 and FY 2018 would not have been materially different had either (or both of) the Atrenne and Impakt acquisitions occurred at the beginning of 2018.
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. During Q4 2018 and FY 2018, we recorded Acquisition Costs of
6. SOLAR PANEL MANUFACTURING BUSINESS
During the fourth quarter of 2016, we made the decision to exit the solar panel manufacturing business, and terminated a supply agreement pursuant to which we made specific cash advances to a solar cell supplier (Solar Supplier). The remaining
7. ACCOUNTS RECEIVABLE
Accounts receivable sales and financing programs:
We have an agreement to sell up to
Contract assets:
At
8. INVENTORIES
We record our inventory provisions, net of valuation recoveries, in cost of sales. We record inventory provisions to reflect write-downs in the value of our inventory to net realizable value, and valuation recoveries primarily to reflect realized gains on the disposition of inventory previously written-down to net realizable value. We recorded net inventory recoveries of
9. ASSETS CLASSIFIED AS HELD FOR SALE
At
10. PENSION AND NON-PENSION POST-EMPLOYMENT BENEFIT PLANS
We provide pension and non-pension post-employment defined benefit plans for our employees. Such plans include defined benefit pension plans for our employees in the
In
In
In
Our pension and post-employment defined benefit plan obligations are determined based on actuarial valuations. We recognize actuarial gains or losses arising from pension and non-pension post-employment defined benefit plans in OCI and we subsequently reclassify the amounts to deficit. During Q4 2018 and FY 2018, we recognized
11. CREDIT FACILITIES AND LONG-TERM DEBT
In
As of
During the second quarter of 2018, we borrowed a total of
The June Term Loan requires quarterly principal repayments of
We are required to comply with certain restrictive covenants under the New Credit Facility, and certain financial covenants relating to a defined interest coverage ratio and leverage ratio that are tested on a quarterly basis. At
The following table sets forth our borrowings under our credit facilities, and our finance lease obligations, as of
2017 |
2018 |
||||||
Borrowings under the Prior Revolver/New Revolver (1) | $ | — | $ | 159.0 | |||
Borrowings under the Prior Term Loan/New Term Loans | 187.5 | 598.3 | |||||
Total borrowings under applicable credit facility | 187.5 | 757.3 | |||||
Less: unamortized debt issuance costs (2) | (0.8 | ) | (9.8 | ) | |||
Finance lease obligations (see note 6) (3) | 17.7 | 10.4 | |||||
$ | 204.4 | $ | 757.9 | ||||
Comprised of: | |||||||
Current portion of borrowings under applicable credit facility and finance lease obligations (3) | $ | 37.9 | $ | 107.7 | |||
Long-term portion of borrowings under applicable credit facility and finance lease obligations | 166.5 | 650.2 | |||||
$ | 204.4 | $ | 757.9 |
(1) Debt issuance costs were incurred in connection with our Prior Revolver in 2014 (
(2) Debt issuance costs were incurred in connection with our Prior Term Loan in 2015 (
(3) In connection with the anticipated disposition of our solar manufacturing equipment, we terminated and settled the related lease obligations in full in
We entered into 5-year interest rate swap agreements with a syndicate of third-party banks in
Commitment fees paid under our relevant credit facilities in Q4 2018 and FY 2018 were
At
The amounts we borrow and repay under these facilities can vary significantly from month-to-month depending upon our working capital and other cash requirements.
12. CAPITAL STOCK
Share repurchase plans:
In
In
Stock-based compensation:
We grant share unit awards to employees under our stock-based compensation plans. From time-to-time, we pay cash for the purchase by a broker of subordinate voting shares in the open market to satisfy delivery requirements upon vesting of such awards. For accounting purposes, we classify these shares as treasury stock until they are delivered pursuant to the stock-based compensation plans. During Q4 2018 and FY 2018, we paid
During Q4 2018 and FY 2018, we granted 0.6 million and 2.6 million restricted share units (RSUs), respectively (Q4 2017 and FY 2017 — 0.3 million and 1.9 million RSUs, respectively), the majority of which vest one-third per year over a three-year period. During FY 2018, we granted 1.6 million performance share units (PSUs) (FY 2017 — 0.9 million PSUs), substantially all of which were granted in the first quarter of each year, representing 100% of target. Employees are granted a target number of PSUs. The number of PSUs granted during 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, as modified by a separate pre-determined non-market financial target, as well as our relative Total Shareholder Return (TSR) performance over the 3-year vesting period. The weighted average grant date fair value of RSUs granted in Q4 2018 and FY 2018 was
During Q4 2018 and FY 2018, we received cash proceeds of nil and
For Q4 2018 and FY 2018, we recorded aggregate employee stock-based compensation expense (excluding deferred share unit (DSU) expense) through cost of sales and SG&A of
At
13. OTHER CHARGES
Three months ended |
Year ended |
||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Restructuring (a) | $ | 13.2 | $ | 6.4 | $ | 28.9 | $ | 35.4 | |||||||
Loss on pension annuity purchase (see note 10) | — | — | 1.9 | — | |||||||||||
1.6 | 4.9 | 1.6 | 13.2 | ||||||||||||
Accelerated amortization of unamortized deferred financing costs (c) | — | — | — | 1.2 | |||||||||||
Other (d) | 2.7 | 5.6 | 4.6 | 11.2 | |||||||||||
$ | 17.5 | $ | 16.9 | $ | 37.0 | $ | 61.0 |
(a) Restructuring:
We perform ongoing evaluations of our business, operational efficiency and cost structure, and implement restructuring actions as we deem necessary. In connection therewith, we are currently implementing restructuring actions under a cost efficiency initiative (CEI), including actions related to our previously-disclosed CCS segment portfolio review and anticipated continued demand softness in our capital equipment business. This initiative includes reductions to our workforce, as well as the potential consolidation of certain sites to better align capacity and infrastructure with current and anticipated customer demand, related transfers of customer programs and production, re-alignment of business processes, management reorganizations, and other associated activities.
We recorded restructuring charges of
Annual impairment assessment:
During Q4 2018, we performed our annual impairment assessment of goodwill, intangible assets and property, plant and equipment (Annual Impairment Assessment) and determined that there was no impairment, as the recoverable amount of our assets and cash generating units (CGUs) exceeded their respective carrying values. During Q4 2017, we performed our Annual Impairment Assessment and determined that, other than the write-down of our solar panel manufacturing equipment in 2017 discussed in note 6 and recorded through restructuring charges, there was no impairment, as the recoverable amount of our assets and CGUs exceeded their respective carrying values.
(b)
In connection with the anticipated sale of our
Property Sale Agreement:
In
Approximately 27% of the OP is held by a privately-held partnership in which Mr.
(c) Accelerated amortization of unamortized deferred financing costs:
During the second quarter of 2018, we recorded a
(d) Other:
During Q4 2018 and FY 2018, we recorded
14. 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
Our net income tax recovery of
Our net income tax recovery of
Our net income tax expense of
Our net income tax expense of
In connection with our exit from the solar panel manufacturing business, we withdrew one of our tax incentives in
We are subject to tax audits of historical information by tax authorities in various jurisdictions, which could result in additional tax expense in future periods relating to prior results. Reviews by tax authorities generally focus on, but are not limited to, the validity of our inter-company transactions, including financing and transfer pricing policies which generally involve subjective areas of taxation and a significant degree of judgment. If any of these tax authorities are successful with their challenges, our income tax expense may be adversely affected and we could also be subject to interest and penalty charges.
The successful pursuit of assertions made by any taxing authority could result in our owing significant amounts of tax, interest and possibly penalties. We believe we adequately accrue for any probable potential adverse tax ruling. However, there can be no assurance as to the final resolution of any claims and any resulting proceedings. If any claims and any ensuing proceedings are determined adversely to us, the amounts we may be required to pay could be material, and could be in excess of amounts accrued.
15. 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, and derivatives. See note 2 for changes to the classification of our financial assets and liabilities since
Currency risk:
The majority of our currency risk is driven by operational costs, including income tax expense, incurred in local currencies by our subsidiaries. As part of our risk management program, we attempt to mitigate currency risk through a hedging program using forecasts of our anticipated future cash flows and balance sheet exposures denominated in foreign currencies. We enter into foreign exchange forward contracts and swaps, generally for periods up to 12 months, to lock in the exchange rates for future foreign currency transactions, which is intended to reduce the variability of our operating costs and future cash flows denominated in local currencies. 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.
Our major currency exposures at
Canadian dollar | Romanian Leu | Euro | Thai baht | Chinese renminbi | |||||||||||||||
Cash and cash equivalents | $ | 4.1 | $ | 0.4 | $ | 8.2 | $ | 2.3 | $ | 16.3 | |||||||||
Accounts receivable | 1.6 | — | 42.5 | 1.7 | 12.4 | ||||||||||||||
Income taxes and value-added taxes receivable | 16.5 | 0.8 | 13.4 | 3.3 | 12.3 | ||||||||||||||
Other financial assets | — | 0.8 | 1.7 | 0.5 | 0.8 | ||||||||||||||
Pension and non-pension post-employment liabilities | (70.6 | ) | — | (0.5 | ) | (13.6 | ) | (1.0 | ) | ||||||||||
Income taxes and value-added taxes payable | (0.1 | ) | — | (0.3 | ) | (1.2 | ) | — | |||||||||||
Accounts payable and certain accrued and other liabilities and provisions | (52.4 | ) | (12.9 | ) | (45.8 | ) | (18.9 | ) | (27.0 | ) | |||||||||
Net financial assets (liabilities) | $ | (100.9 | ) | $ | (10.9 | ) | $ | 19.2 | $ | (25.9 | ) | $ | 13.8 |
We enter into foreign exchange forward contracts to hedge our cash flow exposures and foreign currency swaps to hedge our balance sheet exposures. 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 | $ | 210.2 | $ | 0.76 | 12 | $ | (10.3 | ) | |||||
Thai baht | 81.1 | 0.03 | 12 | (0.7 | ) | ||||||||
Malaysian ringgit | 53.4 | 0.24 | 12 | (0.8 | ) | ||||||||
Mexican peso | 25.6 | 0.05 | 12 | 0.2 | |||||||||
British pound | 5.3 | 1.27 | 4 | — | |||||||||
Chinese renminbi | 66.8 | 0.15 | 12 | (1.6 | ) | ||||||||
Euro | 35.8 | 1.17 | 12 | 0.3 | |||||||||
Romanian leu | 40.4 | 0.25 | 12 | (0.9 | ) | ||||||||
22.1 | 0.74 | 12 | (0.3 | ) | |||||||||
Other | 3.5 | 0.01 | 1 | (0.1 | ) | ||||||||
Total | $ | 544.2 | $ | (14.2 | ) |
At
Interest rate risk:
Borrowings under the New Credit Facility bear interest at specified rates, plus specified margins. See note 11. Such borrowings expose us to interest rate risk due to the potential variability in market interest rates.
As part of our risk management program, we attempt to mitigate interest rate risk through interest rate swaps. In order to partially hedge against our exposure to interest rate variability on the June Term Loan, we entered into a 5-year agreement with a syndicate of third-party banks in
We obtain third-party valuations of the swaps under the interest rate swap agreements. At
16. 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
Contacts:Celestica Communications (416) 448-2200 media@celestica.com Celestica Investor Relations (416) 448-2211 clsir@celestica.com
Source: Celestica International Inc