Celestica Announces Fourth Quarter and Fiscal Year 2013 Financial Results


Celestica Announces Fourth Quarter and Fiscal Year 2013 Financial Results

January 30, 2014

(All amounts in U.S. dollars.
Per share information based on diluted
shares outstanding unless otherwise noted.)

TORONTO, Jan. 30, 2014 /PRNewswire/ - Celestica Inc. (NYSE, TSX: CLS), a global leader in the delivery of end-to-end product lifecycle solutions, today announced financial results for the fourth quarter and fiscal year ended December 31, 2013.

Fourth Quarter 2013 Highlights

  • Revenue: $1.437 billion, within the range of our guidance of $1.4 to $1.5 billion (announced October 22, 2013), decreased 4% compared to the fourth quarter of 2012

  • IFRS EPS: $0.12 per share, compared to $0.04 per share for the fourth quarter of 2012

  • Adjusted EPS (non-IFRS): $0.24 per share, within the range of our guidance of $0.20 to $0.26 per share (announced October 22, 2013), compared to $0.25 per share for the fourth quarter of 2012

  • Free cash flow (non-IFRS): $23.7 million, compared to $90.2 million for the fourth quarter of 2012

  • Diversified end market: 27% of total revenue, increased from 23% of total revenue for the fourth quarter of 2012

  • Repurchased and cancelled 2.4 million subordinate voting shares under our Normal Course Issuer Bid (NCIB)

Fiscal Year 2013 Highlights

  • Revenue: $5.8 billion, down 11% from 2012

  • Revenue increased 1% on a non-IFRS basis compared to 2012 after excluding revenue from BlackBerry Limited for 2012

  • IFRS EPS: $0.64 per share, compared to $0.56 per share for 2012

  • Adjusted EPS (non-IFRS):  $0.83 per share, compared to $0.98 per share for 2012

  • Free cash flow (non-IFRS):  $98.1 million, compared to $211.4 million for 2012

  • Diversified end market: 25% of total revenue, increased from 20% of total revenue for 2012

  • Repurchased and cancelled 4.1 million subordinate voting shares under our NCIB

"Celestica delivered fourth quarter revenue and operating margin in-line with our guidance," said Craig Muhlhauser, Celestica President and Chief Executive Officer. "We continued to improve profitability throughout 2013, despite a challenging business environment. We also delivered value to our shareholders through share repurchases, while continuing to make the necessary investments in support of our long-term strategy."

"We look forward to building on this positive momentum throughout 2014, with a focus on achieving profitable growth in our target markets and accelerating our time to value for our customers and shareholders."

Fourth Quarter and Fiscal Year 2013 Summary

  Three months ended
December 31
  Year ended
December 31
  2012   2013   2012   2013
Revenue (in millions)............................................ $ 1,496.2     $ 1,436.7     $ 6,507.2     $ 5,796.1  
               
IFRS net earnings (in millions) (i).......................... $ 7.2     $ 22.1     $ 117.7     $ 118.0  
IFRS EPS(i)........................................................... $ 0.04     $ 0.12     $ 0.56     $ 0.64  
               
Adjusted net earnings (non-IFRS) (in millions)(ii)   $ 50.3     $ 44.4     $ 205.8     $ 154.5  
Adjusted EPS (non-IFRS)(i)(ii)............................... $ 0.25     $ 0.24     $ 0.98     $ 0.83  
Non-IFRS return on invested capital (ROIC)(ii)..... 18.4 %   19.2 %   21.5 %   17.9 %
Non-IFRS operating margin(ii)............................... 3.1 %   3.3 %   3.3 %   3.0 %

i.     International Financial Reporting Standards (IFRS) net earnings for the fourth quarter of 2013 included an aggregate charge of $0.14
(pre-tax) per share for stock-based compensation, amortization of intangible assets (excluding computer software) and restructuring
charges. This is slightly higher than the range we provided on October 22, 2013 of an aggregate charge of between $0.06 and $0.13 per
share for these items due to higher than expected restructuring charges in the fourth quarter of 2013 (See the tables in Schedule 1
attached hereto for per-item charges). Included in the fourth quarter of 2013 adjusted EPS (non-IFRS) of $0.24 is a net income tax benefit
of $0.02 per share arising primarily from changes to our tax provisions related to certain tax uncertainties. Included in the fourth quarter
of 2012 adjusted EPS (non-IFRS) of $0.25 was a net income tax benefit of $0.06 per share arising from a corporate tax reorganization
involving certain of our European subsidiaries and changes to our tax provisions related to certain tax uncertainties.
 
ii.     Non-IFRS measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar
measures presented by other companies using IFRS or other generally accepted accounting principles (GAAP). See "Non-IFRS
Supplementary Information" below for information on non-IFRS measures used herein, and Schedule 1 for, among other items, non-IFRS
definitions and a reconciliation of non-IFRS to IFRS measures (where a comparable IFRS measure exists).

End Markets by Quarter as a Percentage of Total Revenue

  2012   2013
  Q1   Q2   Q3   Q4   FY   Q1   Q2   Q3   Q4   FY
Communications..................... 33%   32%   37%   37%   35%   40%   42%   45%   41%   42%
Consumer............................... 23%   21%   15%   9%   18%   7%   7%   6%   6%   6%
Diversified (i)........................... 19%   19%   21%   23%   20%   24%   25%   26%   27%   25%
Servers................................... 15%   16%   14%   17%   15%   16%   14%   9%   11%   13%
Storage.................................. 10%   12%   13%   14%   12%   13%   12%   14%   15%   14%
Revenue (in billions)............... $1.69   $1.74   $1.58   $1.50   $6.51   $1.37   $1.50   $1.49   $1.44   $5.80

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

Restructuring Update

Due to our disengagement from BlackBerry Limited (BlackBerry), formerly Research In Motion Limited, in 2012, and in response to the challenging demand environment, we announced in 2012 restructuring actions throughout our global network intended to reduce our overall cost structure and improve our margin performance. These restructuring actions are now complete. We recorded aggregate restructuring charges of $72.0 million, comprised of $44.0 million in 2012 and $28.0 million in 2013, including $17.5 million recorded in the fourth quarter of 2013 (fourth quarter of 2012 — $16.7 million). We had expected our total restructuring charges to be at the high end of our previously announced range of $55 million to $65 million. However, we exceeded our estimate as we decided to take additional restructuring actions in the fourth quarter of 2013 to further streamline and simplify our business and global operating network in response to the continuing challenging market environment.

Normal Course Issuer Bid (NCIB)

During the fourth quarter of 2013, we paid $24.8 million (full year 2013 — $43.6 million), including transaction fees, to repurchase for cancellation 2.4 million (full year 2013 — 4.1 million) subordinate voting shares under our NCIB, which was accepted by the Toronto Stock Exchange (TSX) in August 2013. The NCIB allows us to repurchase, until the earlier of August 6, 2014 or the completion of purchases under the bid, up to approximately 9.8 million subordinate voting shares (representing approximately 5.3% of our total subordinate voting and multiple voting shares outstanding) in the open market or as otherwise permitted, subject to the normal terms and limitations of such bids. The maximum number of subordinate voting shares we are permitted to repurchase for cancellation under the NCIB is reduced by the number of subordinate voting shares we purchase for equity-based compensation plans.

First Quarter 2014 Outlook

For the first quarter ending March 31, 2014, we anticipate revenue to be in the range of $1.3 billion to $1.4 billion, and non-IFRS adjusted net earnings per share to be in the range of $0.17 to $0.23. We expect a negative $0.05 to $0.09 per share (pre-tax) aggregate impact on net earnings on an IFRS basis for stock-based compensation and amortization of intangible assets (excluding computer software).

Fourth Quarter 2013 Webcast

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

Non-IFRS Supplementary Information

In addition to disclosing detailed results in accordance with IFRS, Celestica provides supplementary non-IFRS measures to consider in evaluating the company's operating performance. Management uses adjusted net earnings and other non-IFRS measures to assess operating performance and the effective use and allocation of resources; to provide more meaningful period-to-period comparisons of operating results; to enhance investors' understanding of the core operating results of Celestica's business; and to set management incentive targets. We believe investors use both IFRS and non-IFRS measures to assess our past, current and future decisions associated with strategy and allocation of capital, as well as to analyze how businesses operate in, or respond to, swings in economic cycles or to other events that impact core operations. See Schedule 1 - Supplementary Non-IFRS Measures for, among other items, non-IFRS definitions and a reconciliation of non-IFRS to IFRS measures (where a comparable IFRS measure exists).

About Celestica

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

Safe Harbor and Fair Disclosure Statement

This news release contains forward-looking statements related to our future growth; trends in the electronics manufacturing services (EMS) industry; our financial or operational results including our quarterly revenue and earnings guidance; the impact of acquisitions and program wins or losses on our financial results and working capital requirements; anticipated expenses, charges, capital expenditures and/or benefits; our expected tax and litigation outcomes; our cash flows, financial targets and priorities; changes in our mix of revenue by end market; our ability to diversify and grow our customer base and develop new capabilities; the effect of the global economic environment on customer demand; and the number of subordinate voting shares and price thereof we repurchase under our NCIB. 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 and applicable Canadian securities laws.

Forward-looking statements are provided for the purpose of assisting 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 conclusions, forecasts or projections expressed in such statements, including, among others, risks related to: our customers' ability to compete and succeed in the marketplace with the products we manufacture; price and other competitive factors generally affecting the EMS industry; managing our operations and our working capital performance during uncertain economic conditions; responding to rapid changes in demand and changes in our customers' outsourcing strategies, including the insourcing of programs; customer concentration and the challenges of diversifying our customer base and replacing revenue from lost programs or customer disengagements; changing commodity, material and component costs, as well as labor costs and conditions; disruptions to our operations, or those of our customers, component suppliers or logistics partners, including as a result of world or local events outside our control; retaining or expanding our business due to execution problems relating to the ramping of new programs; delays in the delivery and availability of components, services and materials; non-performance by counterparties; our financial exposure to foreign currency volatility; our dependence on industries affected by rapid technological change; managing our global operations; increasing income taxes, increased levels and scrutiny of tax audits globally, and defending our tax positions or meeting the conditions of tax incentives and credits; successfully implementing and completing our restructuring plans and integrating our acquisitions; computer viruses, malware, hacking attempts or outages that may disrupt our operations; any U.S. government shutdown or delay in the increase of the U.S. government debt ceiling; and compliance with applicable laws, regulations and social responsibility initiatives. These and other material risks and uncertainties are discussed in our public filings at www.sedar.com and www.sec.gov, including in our MD&A, our Annual Report on Form 20-F and subsequent reports on Form 6-K filed with the U.S. Securities and Exchange Commission, and our Annual Information Form filed with the Canadian Securities Administrators.

Our revenue, earnings and other financial guidance, as contained in this press release, are based on various assumptions many of which involve factors that are beyond our control. The material assumptions include those related to the following: production schedules from our customers, which generally range from 30 to 90 days and can fluctuate significantly in terms of volume and mix of products or services; the timing and execution of, and investments associated with, ramping new business; the success in the marketplace of our customers' products; the stability of general economic and market conditions, currency exchange rates, and interest rates; our pricing, the competitive environment and contract terms and conditions; supplier performance, pricing and terms; compliance by third parties with their contractual obligations, the accuracy of their representations and warranties, and the performance of their covenants; components, materials, services, plant and capital equipment, labor, energy and transportation costs and availability; operational and financial matters including the extent, timing and costs of replacing revenue from lost programs or customer disengagements; technological developments; overall demand improvement in the semiconductor industry, and revenue growth and improved profitability in our semiconductor business; the timing and execution of our restructuring actions; and our ability to diversify our customer base and develop new capabilities. While management believes these assumptions to be reasonable under the current circumstances, they may prove to be inaccurate. Except as required by applicable law, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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 as a percentage of revenue), adjusted net earnings, adjusted net earnings per share, net invested capital, return on invested capital (ROIC), and free cash flow. Adjusted EBIAT, net invested capital, ROIC and free cash flow are further described in the tables below. In calculating these non-IFRS financial measures, management excludes the following items, as applicable: stock-based compensation, amortization of intangible assets (excluding computer software), restructuring and other charges, net of recoveries (most significantly restructuring charges), the write-down of goodwill, intangible assets and property, plant and equipment, and gains or losses related to the repurchase of shares or debt, net of tax adjustments, and significant deferred tax write-offs or recoveries.

We believe the non-IFRS measures we present herein are useful, as they enable investors to evaluate and compare our results from operations and cash resources generated from our business in a more consistent manner (by excluding specific items we do not consider to be reflective of our ongoing operating results) and provide an analysis of operating results using the same measures our chief operating decision makers use to measure performance. The non-IFRS financial measures that can be reconciled to IFRS 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 our ongoing operation of our business.

These non-IFRS measures do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies using IFRS, or our competitors who report under U.S. GAAP and use non-U.S. GAAP measures to describe similar operating metrics. Non-IFRS measures are not measures of performance under IFRS and should not be considered in isolation or as a substitute for any standardized measure under IFRS. The most significant limitation to management's use of non-IFRS financial measures is that the charges or credits excluded from the non-IFRS measures are nonetheless charges or credits that are recognized under IFRS and that have an economic impact on the company. Management compensates for these limitations primarily by issuing IFRS results to show a complete picture of the company's performance, and reconciling non-IFRS results back to IFRS where a comparable IFRS measure exists.

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

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

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.

Restructuring and other charges, net of recoveries, include costs relating to employee severance, lease terminations, facility closings and consolidations, write-downs of owned property and equipment which are no longer used and are available for sale, reductions in infrastructure and acquisition-related transaction costs. We exclude restructuring and other charges, net of recoveries, because they are not directly related to ongoing operating results and do not reflect expected future operating expenses after completion of these activities.  We believe these exclusions permit a better comparison of our core operating results with those of our competitors who also generally exclude these charges, net of recoveries, in assessing operating performance.

Impairment charges, which consist of non-cash charges against goodwill, intangible assets and property, plant and equipment, result primarily when the carrying value of these assets exceeds their fair value. Our competitors may record impairment charges at different times, and 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.

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

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

The following table sets forth, for the periods indicated, various non-IFRS measures, and a reconciliation of IFRS to non-IFRS measures, where a comparable IFRS measure exists (in millions, except percentages and per share amounts):

  Three months ended December 31   Year ended December 31
  2012   2013   2012   2013
    % of
revenue
    % of
revenue
    % of
revenue
    % of
revenue
IFRS Revenue................................................................................... $ 1,496.2       $ 1,436.7       $ 6,507.2       $ 5,796.1    
                       
IFRS gross profit.............................................................................. $ 99.8   6.7%   $ 103.6   7.2%   $ 438.4   6.7%   $ 389.5   6.7%
  Stock-based compensation............................................................... 2.9       3.1       13.4       12.5    
Non-IFRS adjusted gross profit...................................................... $ 102.7   6.9%   $ 106.7   7.4%   $ 451.8   6.9%   $ 402.0   6.9%
                       
IFRS SG&A......................................................................................... $ 54.7   3.7%   $ 56.2   3.9%   $ 237.0   3.6%   $ 222.3   3.8%
  Stock-based compensation............................................................... (4.9 )     (3.5 )     (22.2 )     (16.7 )  
Non-IFRS adjusted SG&A................................................................. $ 49.8   3.3%   $ 52.7   3.7%   $ 214.8   3.3%   $ 205.6   3.5%
                       
IFRS earnings before income taxes.............................................. $ 2.2       $ 20.8       $ 111.9       $ 130.7    
  Finance costs.................................................................................... 1.0       0.8       3.5       2.9    
  Stock-based compensation............................................................... 7.8       6.6       35.6       29.2    
  Amortization of intangible assets (excluding computer software)....... 1.5       1.6       4.1       6.5    
  Restructuring and other charges....................................................... 34.5       17.5       59.5       4.0    
Non-IFRS operating earnings (adjusted EBIAT) (1)...................... $ 47.0   3.1%   $ 47.3   3.3%   $ 214.6   3.3%   $ 173.3   3.0%
                       
IFRS net earnings............................................................................. $ 7.2   0.5%   $ 22.1   1.5%   $ 117.7   1.8%   $ 118.0   2.0%
  Stock-based compensation............................................................... 7.8       6.6       35.6       29.2    
  Amortization of intangible assets (excluding computer software)....... 1.5       1.6       4.1       6.5    
  Restructuring and other charges....................................................... 34.5       17.5       59.5       4.0    
  Adjustments for taxes (2)................................................................... (0.7 )     (3.4 )     (11.1 )     (3.2 )  
Non-IFRS adjusted net earnings.................................................... $ 50.3   3.4%   $ 44.4   3.1%   $ 205.8   3.2%   $ 154.5   2.7%
                       
Diluted EPS                      
  Weighted average # of shares (in millions)........................................ 203.4       184.5       210.5       185.4    
  IFRS earnings per share................................................................... $ 0.04       $ 0.12       $ 0.56       $ 0.64    
  Non-IFRS adjusted net earnings per share....................................... $ 0.25       $ 0.24       $ 0.98       $ 0.83    
# of shares outstanding at period end (in millions).............................. 182.8       181.0       182.8       181.0    
                       
IFRS cash provided by operations................................................. $ 104.6       $ 34.1       $ 312.4       $ 149.4    
  Purchase of property, plant and equipment, net of sales proceeds... (13.4 )     (9.8 )     (97.0 )     (48.6 )  
  Finance costs paid............................................................................ (1.0 )     (0.6 )     (4.0 )     (2.7 )  
Non-IFRS free cash flow (3)............................................................. $ 90.2       $ 23.7       $ 211.4       $ 98.1    
                       
Non-IFRS ROIC % (4)......................................................................... 18.4 %     19.2 %     21.5 %     17.9 %  

(1)    Management uses adjusted EBIAT as a measure to assess our operational performance related to our core operations. Adjusted EBIAT is defined as earnings before
finance costs (consisting of interest and fees related to our credit facilities and accounts receivable sales program), amortization of intangible assets (excluding computer
software) and income taxes.  Adjusted EBIAT also excludes, in periods where such charges have been recorded, stock-based compensation, restructuring and other
charges (net of recoveries), gains or losses related to the repurchase of shares or debt, and impairment charges.
     
(2)    The adjustments for taxes, as applicable, represent the tax effects on the non-IFRS adjustments and significant deferred tax write-offs or recoveries that do not impact
our core operating performance.
     
(3)    Management uses free cash flow as a measure, in addition to cash flow from operations, to assess our operational cash flow performance. We believe free cash flow
provides another level of transparency to our liquidity as it is defined as cash generated from or used in operating activities after the purchase of property, plant and
equipment (net of proceeds from sale of certain surplus equipment and property) and finance costs paid.
     
(4)    Management uses non-IFRS ROIC as a measure to assess the effectiveness of the invested capital we use to build products or provide services to our customers.
Our non-IFRS ROIC measure includes operating margin, working capital management and asset utilization. Non-IFRS ROIC is calculated by dividing non-IFRS adjusted
EBIAT by average non-IFRS net invested capital. Net invested capital (calculated in the table below) is a non-IFRS measure and 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. There is no comparable measure under IFRS.

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

      Three months ended
December 31
  Year ended
December 31
      2012   2013   2012   2013
Non-IFRS operating earnings (adjusted EBIAT)...................................................   $ 47.0     $ 47.3     $ 214.6     $ 173.3  
Multiplier...............................................................................................................   4     4     1     1  
Annualized non-IFRS adjusted EBIAT..................................................................   $ 188.0     $ 189.2     $ 214.6     $ 173.3  
                   
Average non-IFRS net invested capital for the period..........................................   $ 1,021.1     $ 987.8     $ 997.1     $ 968.7  
                   
Non-IFRS ROIC % (1)...........................................................................................   18.4 %   19.2 %   21.5 %   17.9 %
                   
  December 31
2012
  March 31
2013
  June 30
2013
  September 30
2013
  December 31
2013
Non-IFRS net invested capital consists of:                  
Total assets.................................................................................... $ 2,658.8     $ 2,643.4     $ 2,705.5     $ 2,714.4     $ 2,638.9  
Less: cash  550.5     531.3     553.5     546.8     544.3  
Less: accounts payable, accrued and other current liabilities,
  provisions and income taxes payable...........................................
1,143.9     1,145.7     1,214.8     1,177.5     1,109.2  
Non-IFRS net invested capital at period end (1)............................. $ 964.4     $ 966.4     $ 937.2     $ 990.1     $ 985.4  
                   
  December 31
2011
  March 31
2012
  June 30
2012
  September 30
2012
  December 31
2012
Non-IFRS net invested capital consists of:                  
Total assets.................................................................................... $ 2,969.6     $ 2,955.4     $ 2,951.2     $ 2,885.5     $ 2,658.8  
Less: cash...................................................................................... 658.9     646.7     630.6     598.2     550.5  
Less: accounts payable, accrued and other current liabilities,
  provisions and income taxes payable...........................................
1,346.6     1,317.8     1,332.1     1,209.6     1,143.9  
Non-IFRS net invested capital at period end (1)............................. $ 964.1     $ 990.9     $ 988.5     $ 1,077.7     $ 964.4  

(1)    Management uses non-IFRS ROIC as a measure to assess the effectiveness of the invested capital we use to build products or provide services
to our customers. Our non-IFRS ROIC measure includes operating margin, working capital management and asset utilization. Non-IFRS ROIC is
calculated by dividing non-IFRS adjusted EBIAT by average non-IFRS net invested capital. Net invested capital is a non-IFRS measure and
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. There is no comparable measure under IFRS.

GUIDANCE SUMMARY

  Q4 2013 Guidance   Q4 2013 Actual   Q1 2014 Guidance (1)
IFRS revenue (in billions).................................................. $1.4 to $1.5   $1.437   $1.3 to $1.4
Non-IFRS adjusted EPS (diluted)....................................... $0.20 to $0.26   $0.24   $0.17 to $0.23

(1)  We expect a negative $0.05 to $0.09 per share (pre-tax) aggregate impact on net earnings on an IFRS basis for stock-based
compensation and amortization of intangible assets (excluding computer software).
   
   
CELESTICA INC.

CONDENSED CONSOLIDATED BALANCE SHEET
(in millions of U.S. dollars)
(unaudited)
                       
  January 1
2012
  December 31
2012
  December 31
2013
Assets          
Current assets:          
  Cash and cash equivalents (note 12)..................................................................... $ 658.9     $ 550.5     $ 544.3  
  Accounts receivable (note 5).................................................................................. 810.8     700.5     654.1  
  Inventories (note 6)................................................................................................ 880.7     745.7     817.2  
  Income taxes receivable......................................................................................... 9.1     13.8     13.6  
  Assets classified as held-for-sale........................................................................... 32.1     30.8     30.2  
  Other current assets.............................................................................................. 71.0     69.4     61.1  
Total current assets.................................................................................................. 2,462.6     2,110.7     2,120.5  
           
Property, plant and equipment................................................................................. 322.7     337.0     313.6  
Goodwill.................................................................................................................... 48.0     60.3     60.3  
Intangible assets....................................................................................................... 35.5     53.0     44.2  
Deferred income taxes.............................................................................................. 41.4     36.6     45.3  
Other non-current assets......................................................................................... 59.4     61.2     55.0  
Total assets.............................................................................................................. $ 2,969.6     $ 2,658.8     $ 2,638.9  
           
Liabilities and Equity          
Current liabilities:          
  Borrowings under credit facilities (note 7)............................................................... $     $ 55.0     $  
  Accounts payable................................................................................................... 1,002.6     831.6     770.7  
  Accrued and other current liabilities....................................................................... 268.7     243.7     274.5  
  Income taxes payable............................................................................................. 39.0     37.8     30.6  
  Current portion of provisions.................................................................................. 36.3     30.8     33.4  
Total current liabilities............................................................................................... 1,346.6     1,198.9     1,109.2  
           
Pension and non-pension post-employment benefit obligations (notes 2 & 9).......... 113.8     110.2     93.5  
Provisions and other non-current liabilities............................................................... 11.1     13.5     16.3  
Deferred income taxes.............................................................................................. 27.6     13.5     17.9  
Total liabilities........................................................................................................... 1,499.1     1,336.1     1,236.9  
           
Equity:          
  Capital stock (note 8)............................................................................................. 3,348.0     2,774.7     2,712.0  
  Treasury stock (note 8).......................................................................................... (37.9 )   (18.3 )   (12.0 )
  Contributed surplus................................................................................................ 369.5     653.2     681.7  
  Deficit (note 2)........................................................................................................ (2,196.8 )   (2,091.0 )   (1,965.4 )
  Accumulated other comprehensive income (loss)................................................... (12.3 )   4.1     (14.3 )
Total equity............................................................................................................... 1,470.5     1,322.7     1,402.0  
Total liabilities and equity......................................................................................... $ 2,969.6     $ 2,658.8     $ 2,638.9  
                       
Contingencies (note 13)
                       
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
  December 31   December 31
  2012   2013   2012   2013
Revenue............................................................................. $ 1,496.2     $ 1,436.7     $ 6,507.2     $ 5,796.1  
Cost of sales (note 6)......................................................... 1,396.4     1,333.1     6,068.8     5,406.6  
Gross profit........................................................................ 99.8     103.6     438.4     389.5  
Selling, general and administrative expenses (SG&A)........ 54.7     56.2     237.0     222.3  
Research and development............................................... 3.7     5.5     15.2     17.4  
Amortization of intangible assets........................................ 3.7     2.8     11.3     12.2  
Other charges (note 10)..................................................... 34.5     17.5     59.5     4.0  
Earnings from operations................................................... 3.2     21.6     115.4     133.6  
Finance costs..................................................................... 1.0     0.8     3.5     2.9  
Earnings before income taxes............................................ 2.2     20.8     111.9     130.7  
Income tax expense (recovery) (note 11):              
  Current............................................................................ 12.1     (0.6 )   15.5     16.9  
  Deferred.......................................................................... (17.1 )   (0.7 )   (21.3 )   (4.2 )
  (5.0 )   (1.3 )   (5.8 )   12.7  
Net earnings for the period................................................. $ 7.2     $ 22.1     $ 117.7     $ 118.0  
               
Basic earnings per share................................................... $ 0.04     $ 0.12     $ 0.56     $ 0.64  
               
Diluted earnings per share................................................. $ 0.04     $ 0.12     $ 0.56     $ 0.64  
               
Shares used in computing per share amounts (in millions):              
  Basic................................................................................ 201.5     182.0     208.6     183.4  
  Diluted............................................................................. 203.4     184.5     210.5     185.4  
                                 
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
 

CELESTICA INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(in millions of U.S. dollars)
(unaudited)
                               
  Three months ended   Year ended
  December 31   December 31
  2012   2013   2012   2013
Net earnings for the period.............................................................. $ 7.2     $ 22.1     $ 117.7     $ 118.0  
Other comprehensive income (loss), net of tax:              
  Items that will not be reclassified to net earnings:              
  Actuarial gains (losses) on pension and non-pension post-
  employment benefit plans (note 9)...............................................
(11.9 )   7.6     (11.9 )   7.6  
  Items that may be reclassified to net earnings:              
  Currency translation differences for foreign operations................. 0.1     (1.0 )   (0.1 )   (3.3 )
  Changes from derivatives designated as hedges.......................... 0.3     (6.9 )   16.5     (15.1 )
Total comprehensive income (loss) for the period........................... $ (4.3 )   $ 21.8     $ 122.2     $ 107.2  
                               
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
 

CELESTICA INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(in millions of U.S. dollars)
(unaudited)
                                               
  Capital stock
(note 8)
  Treasury
stock (note 8)
  Contributed
surplus
  Deficit (note 2)   Accumulated
other
comprehensive
income (loss)
(a)
  Total equity
Balance -- January 1, 2012, as previously reported.............. $ 3,348.0     $ (37.9 )   $ 369.5     $ (2,203.5 )   $ (12.3 )   $ 1,463.8  
Impact of change in accounting policy (note 2)......................             6.7         6.7  
Restated balance at January 1, 2012.................................... 3,348.0     (37.9 )   369.5     (2,196.8 )   (12.3 )   1,470.5  
Capital transactions (note 8):                      
  Issuance of capital stock...................................................... 18.3         (10.8 )           7.5  
  Repurchase of capital stock for cancellation....................... (591.6 )       302.0             (289.6 )
  Purchase of treasury stock..................................................     (21.7 )               (21.7 )
  Stock-based compensation and other.................................     41.3     (4.1 )           37.2  
  Reclassification of cash-settled stock-based
  compensation to accrued liabilities....................................
        (3.4 )           (3.4 )
Total comprehensive income:                      
  Net earnings for 2012..........................................................             117.7         117.7  
  Other comprehensive income (loss), net of tax:                      
    Actuarial losses on pension and non-pension post-
  employment benefit plans (notes 2 & 9)..........................
            (11.9 )       (11.9 )
    Currency translation differences for foreign operations.....                 (0.1 )   (0.1 )
    Changes from derivatives designated as hedges..............                 16.5     16.5  
Balance -- December 31, 2012.............................................. $ 2,774.7     $ (18.3 )   $ 653.2     $ (2,091.0 )   $ 4.1     $ 1,322.7  
                       
Capital transactions (note 8):                      
  Issuance of capital stock...................................................... 19.9         (12.8 )           7.1  
  Repurchase of capital stock for cancellation....................... (82.6 )       29.2             (53.4 )
  Purchase of treasury stock..................................................     (12.8 )               (12.8 )
  Stock-based compensation and other.................................     19.1     12.1             31.2  
Total comprehensive income:                      
  Net earnings for 2013..........................................................             118.0         118.0  
  Other comprehensive income (loss), net of tax:                      
    Actuarial gains on pension and non-pension post-
  employment benefit plans (notes 2 & 9)..........................
            7.6         7.6  
    Currency translation differences for foreign operations.....                 (3.3 )   (3.3 )
    Changes from derivatives designated as hedges..............                 (15.1 )   (15.1 )
Balance -- December 31, 2013.............................................. $ 2,712.0     $ (12.0 )   $ 681.7     $ (1,965.4 )   $ (14.3 )   $ 1,402.0  
                                                   
(a)  Accumulated other comprehensive income (loss) is net of tax.  
                                                   
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
 

CELESTICA INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions of U.S. dollars)
(unaudited)
                               
  Three months ended   Year ended
  December 31   December 31
  2012   2013   2012   2013
Cash provided by (used in):              
Operating activities:              
Net earnings for the period.......................................................................... $ 7.2     $ 22.1     $ 117.7     $ 118.0  
Adjustments to net earnings for items not affecting cash:              
  Depreciation and amortization................................................................... 20.9     16.9     81.7     71.7  
  Equity-settled stock-based compensation................................................. 7.6     6.6     35.4     29.2  
  Other charges (note 10)............................................................................ 18.9     1.2     30.8     1.9  
  Finance costs............................................................................................ 1.0     0.8     3.5     2.9  
  Income tax expense (recovery).................................................................. (5.0 )   (1.3 )   (5.8 )   12.7  
Other........................................................................................................... (5.7 )   4.1     (11.2 )   3.8  
Changes in non-cash working capital items:              
  Accounts receivable.................................................................................. 77.0     (0.7 )   116.7     46.4  
  Inventories................................................................................................. 61.0     64.6     147.3     (71.5 )
  Other current assets.................................................................................. 1.0     (0.1 )   6.7     3.6  
  Accounts payable, accrued and other current liabilities and provisions..... (73.3 )   (72.9 )   (193.1 )   (47.5 )
Non-cash working capital changes.............................................................. 65.7     (9.1 )   77.6     (69.0 )
Net income taxes paid.................................................................................. (6.0 )   (7.2 )   (17.3 )   (21.8 )
Net cash provided by operating activities.................................................... 104.6     34.1     312.4     149.4  
               
Investing activities:              
Acquisitions, net of cash acquired (note 3).................................................. 0.4         (71.0 )    
Purchase of computer software and property, plant and equipment............ (17.3 )   (11.1 )   (105.9 )   (52.8 )
Proceeds from sale of assets...................................................................... 3.9     1.3     8.9     4.2  
Net cash used in investing activities............................................................ (13.0 )   (9.8 )   (168.0 )   (48.6 )
               
Financing activities:              
Borrowings under credit facilities (note 7).................................................... 55.0         55.0      
Repayments under credit facilities (note 7).................................................             (55.0 )
Issuance of capital stock (note 8)................................................................ 0.4     1.0     7.5     7.1  
Repurchase of capital stock for cancellation (note 8).................................. (175.8 )   (24.8 )   (289.6 )   (43.6 )
Purchase of treasury stock (note 8)............................................................ (17.9 )   (2.4 )   (21.7 )   (12.8 )
Finance costs paid...................................................................................... (1.0 )   (0.6 )   (4.0 )   (2.7 )
Net cash used in financing activities............................................................ (139.3 )   (26.8 )   (252.8 )   (107.0 )
               
Net decrease in cash and cash equivalents................................................ (47.7 )   (2.5 )   (108.4 )   (6.2 )
Cash and cash equivalents, beginning of period......................................... 598.2     546.8     658.9     550.5  
Cash and cash equivalents, end of period.................................................. $ 550.5     $ 544.3     $ 550.5     $ 544.3  
                               
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
 

CELESTICA INC. 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions of U.S. dollars, except percentages and per share amounts)
(unaudited)

1. REPORTING ENTITY 

Celestica Inc. (Celestica) is incorporated in Canada with its corporate headquarters located at 844 Don Mills Road, Toronto, Ontario, M3C 1V7.  Celestica's subordinate voting shares are listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE).  

Celestica delivers innovative supply chain solutions globally to customers in the Communications (comprised of enterprise communications and telecommunications), Consumer, Diversified (comprised of industrial, aerospace and defense, healthcare, solar, green technology, semiconductor equipment and other), and Enterprise Computing (comprised of servers and storage) end markets. Our product lifecycle offerings include a range of services to our customers including design, engineering services, supply chain management, new product introduction, component sourcing, electronics manufacturing, assembly and test, complex mechanical assembly, systems integration, precision machining, order fulfillment, logistics and after-market repair and return services.

2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES 

Statement of compliance: 

These unaudited interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 (Interim Financial Reporting) as issued by the International Accounting Standards Board (IASB) and accounting policies we have adopted in accordance with International Financial Reporting Standards (IFRS). These unaudited interim condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to present fairly our financial position as at December 31, 2013 and our financial performance, comprehensive income and cash flows for the three months and the year ended December 31, 2013. 

The unaudited interim condensed consolidated financial statements were authorized for issuance by our board of directors on January 30, 2014. 

Functional and presentation currency: 

These unaudited interim condensed consolidated financial statements are presented in U.S. dollars, which is also our functional currency. Unless otherwise noted, all financial information is presented in millions of U.S. dollars (except percentages and per share amounts). 

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. Actual results could differ materially from these 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. 

Key sources of estimation uncertainty and judgment: We have applied significant estimates and assumptions in the following areas which we believe could have a significant impact on our reported results and financial position: our valuations of inventory, assets held for sale and income taxes; the amount of our restructuring charges or recoveries;  the measurement of the recoverable amount of our cash generating units (CGUs), which we define as a group of assets that cannot be tested individually and that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets; our valuations of financial assets and liabilities, pension and non-pension post-employment benefit costs, stock-based compensation, provisions and contingencies; and the allocation of our purchase price and other valuations we use in our business acquisitions. The near-term economic environment could also impact certain estimates necessary to prepare our consolidated financial statements, in particular, the recoverable amount 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.

We have also applied significant judgment to the following areas: the determination of our CGUs and whether events or changes in circumstances during the period are indicators that a review for impairment should be conducted; and the timing of the recognition of charges or recoveries associated with our restructuring actions.

These unaudited interim condensed consolidated financial statements are based upon accounting policies and estimates consistent with those used and described in note 2 of our 2012 annual consolidated financial statements, except for the recently adopted accounting pronouncements discussed below. There have been no material changes to our significant accounting estimates and assumptions or the judgments affecting the application of such estimates and assumptions during the fourth quarter of 2013 from those described in the notes to our 2012 annual consolidated financial statements.

Recently adopted accounting pronouncements:

Effective January 1, 2013, we adopted the following new or amended accounting standards as issued by the IASB: IFRS 10 (Consolidated Financial Statements), IFRS 11 (Joint Arrangements), IFRS 12 (Disclosure of Interests in Other Entities) and IFRS 13 (Fair Value Measurement), and the amendments to IAS 1 (Presentation of Financial Statements) and IFRS 7 (Financial Instruments - Disclosures). The adoption of these standards and amendments did not have a material impact on our unaudited interim condensed consolidated financial statements.

Effective January 1, 2013, we adopted the amendment to IAS 19 (Employee Benefits) issued by the IASB, which requires a retroactive restatement of prior periods. As of January 1, 2012, we had $6.7 of unrecognized past service credits that we had been amortizing to operations on a straight-line basis over the vesting period. Upon retroactive adoption of this amendment, we recognized these past service credits on our balance sheet and decreased our post-employment benefit obligations and our deficit by $6.7 as of January 1, 2012 (December 31, 2012$6.0). The impact on our net earnings for 2012 and 2013 was not significant. Under this amendment, we continue to recognize actuarial gains or losses on plan assets or obligations in other comprehensive income and to reclassify the amounts to deficit.

Effective January 1, 2013, we adopted the amendment issued by the IASB to IAS 36 (Impairment of Assets) which clarifies the recoverable amount disclosures for non-financial assets in reporting periods when an impairment loss is recognized or reversed. The adoption of this amendment did not have a material impact on our unaudited interim condensed consolidated financial statements.

3. RECENT ACQUISITION 

We did not complete any acquisitions in 2013.

In September 2012, we completed the acquisition of D&H Manufacturing Company (D&H), a manufacturer of precision machined components and assemblies based in California, U.S.A. D&H provides manufacturing and engineering services, coupled with dedicated capacity and equipment for prototype and quick-turn support, to some of the world's leading semiconductor capital equipment manufacturers. The final purchase price was $71.0, net of cash acquired, which we financed from cash on hand. On