FORM 6-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of July 2002
001-14832
(COMMISSION FILE NUMBER)
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CELESTICA INC.
(Translation of registrant's name into English)
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12 CONCORDE PLACE
TORONTO, ONTARIO
CANADA, M3C 3R8
(416) 448-5800
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
Form 20-F X Form 40-F ______
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Indicate by check mark whether the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1): ____
Indicate by check mark whether the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7): ____
Indicate by check mark whether by furnishing the information contained in
this Form, is the registrant also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes _____ No X
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If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-_________
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CELESTICA INC.
FORM 6-K/A
MONTH OF JULY 2002
Filed with this Form 6-K is the following:
- - Management's Discussion and Analysis of Financial Condition and Results of
Operations Second Quarter 2002, the text of which is attached hereto as Exhibit
99.1 and is incorporated herein by reference, including Celestica Inc.'s first
quarter 2002 consolidated financial information.
EXHIBITS
99.1 - Management's Discussion and Analysis of Financial Condition and Results
of Operations Second Quarter 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CELESTICA INC.
Date: July 29, 2002 BY: /s/ Elizabeth DelBianco
--------------------------------
Elizabeth DelBianco
Vice President & General Counsel
EXHIBIT INDEX
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99.1 - Management's Discussion and Analysis of Financial Condition and
Results of Operations Second Quarter 2002
Exhibit 99.1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER 2002
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE 2001
CONSOLIDATED FINANCIAL STATEMENTS.
CERTAIN STATEMENTS CONTAINED IN THE FOLLOWING MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, INCLUDING,
WITHOUT LIMITATION, STATEMENTS CONTAINING THE WORDS BELIEVES, ANTICIPATES,
ESTIMATES, EXPECTS, AND WORDS OF SIMILAR IMPORT, CONSTITUTE FORWARD-LOOKING
STATEMENTS. FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE
AND INVOLVE RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS. AMONG THE
KEY FACTORS THAT COULD CAUSE SUCH DIFFERENCES ARE: THE LEVEL OF OVERALL GROWTH
IN THE ELECTRONICS MANUFACTURING SERVICES (EMS) INDUSTRY; LOWER-THAN-EXPECTED
CUSTOMER DEMAND; COMPONENT CONSTRAINTS; OUR VARIABILITY OF OPERATING RESULTS
AMONG PERIODS; OUR DEPENDENCE ON THE COMPUTER AND COMMUNICATIONS INDUSTRIES; OUR
DEPENDENCE ON A LIMITED NUMBER OF CUSTOMERS; AND OUR ABILITY TO MANAGE
EXPANSION, CONSOLIDATION AND THE INTEGRATION OF ACQUIRED BUSINESSES. THESE AND
OTHER FACTORS ARE DISCUSSED IN THE COMPANY'S FILINGS WITH SEDAR AND THE U.S.
SECURITIES AND EXCHANGE COMMISSION.
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.
GENERAL
Celestica is a world leader in providing electronics manufacturing
services to OEMs in the information technology and communications industries
with 2001 revenue of $10.0 billion. Celestica provides a wide variety of
products and services to its customers, including the high-volume manufacture of
complex printed circuit board assemblies and the full system assembly of final
products. In addition, the Company is a leading-edge provider of design, repair
and engineering services, supply chain management and power products. Celestica
operates facilities in the Americas, Europe and Asia.
Celestica prepares its financial statements in accordance with
accounting principles which are generally accepted in Canada with a
reconciliation to accounting principles generally accepted in the United States,
as disclosed in note 22 to the 2001 Consolidated Financial Statements.
ACQUISITIONS
A significant portion of Celestica's growth has been generated by
strengthening its customer relationships and increasing the breadth of its
service offerings through asset and business acquisitions.
2001 ASSET ACQUISITIONS:
In February 2001, Celestica acquired certain manufacturing assets in
Dublin, Ireland and Mt. Pleasant, Iowa from Motorola Inc. and signed supply
agreements for two and three years, respectively. This acquisition expanded the
Company's business relationship with Motorola, a leading telecom wireless
customer. In March 2001, Celestica acquired certain assets relating to N.K.
Techno Co. Ltd 's repair business, which expanded the Company's presence in
Japan, and established a greenfield operation in Shanghai. In May 2001,
Celestica acquired certain assets from Avaya Inc. in Little Rock, Arkansas and
Denver, Colorado and in August 2001, acquired certain assets in Saumur, France.
The Company signed a five-year supply agreement with Avaya which positioned
Celestica as Avaya's primary outsourcing partner in the area of printed circuit
board, system assembly, test, repair and supply chain management for a broad
range of its telecommunications products. In August 2001, Celestica acquired
certain assets in Columbus, Ohio and Oklahoma City, Oklahoma from Lucent
Technologies Inc. The Company signed a five-year supply agreement with Lucent,
which positions Celestica as the leading EMS provider for Lucent's North
American switching, access and wireless networking systems products.
The aggregate price for these asset acquisitions in 2001 of $834.1
million was financed with cash.
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2001 BUSINESS COMBINATIONS:
In January 2001, Celestica acquired Excel Electronics, Inc. through a
merger with Celestica (U.S.) Inc., which enhanced the Company's prototype
service offering in the southern region of the United States. In June 2001,
Celestica acquired Sagem CR s.r.o., in the Czech Republic, from Sagem SA, of
France, which enhanced the Company's presence in central Europe and positioned
Celestica as Sagem's primary EMS provider. In August 2001, Celestica acquired
Primetech Electronics Inc. (Primetech), an electronics manufacturer in Canada.
This acquisition provided Celestica with additional high complexity
manufacturing capability and an expanded global customer base. The purchase
price for Primetech was financed primarily with the issuance of 3.4 million
subordinate voting shares and the issuance of options to purchase 0.3 million
subordinate voting shares of the Company.
In October 2001, Celestica acquired Omni Industries Limited (Omni).
Omni is an EMS provider, headquartered in Singapore, with locations in
Singapore, Malaysia, China, Indonesia and Thailand and had approximately 9,000
employees at the date of acquisition. Omni provides printed circuit board
assembly and system assembly services, as well as other related supply chain
services including plastic injection molding and distribution. Omni manufactures
products for industry leading OEMs in the PC, storage and communications
sectors. The acquisition significantly enhanced Celestica's EMS presence in
Asia. The purchase price for Omni of $865.8 million was financed with the
issuance of 9.2 million subordinate voting shares and the issuance of options to
purchase 0.3 million subordinate voting shares of the Company and $479.5 million
in cash. The fair value allocation of the purchase price is subject to
refinement as the Company is obtaining third party valuations, and could result
in adjustments between goodwill and other net assets.
The aggregate purchase price for these business combinations in 2001 was
$1,093.3 million, of which $526.3 million was financed with cash.
2002 ASSET ACQUISITIONS:
On March 31, 2002, the Company acquired certain assets located in
Miyagi and Yamanashi, Japan from NEC Corporation. The Company signed a five-year
supply agreement to provide a complete range of electronics manufacturing
services for a broad range of NEC's optical backbone and broadband access
equipment. The purchase price was financed with cash and was allocated to the
net assets acquired, based on their relative fair values at the date of
acquisition. The fair value allocation of the purchase price is subject to
refinement as the Company is obtaining third party valuations.
Celestica may at any time be engaged in ongoing discussions with
respect to several possible acquisitions of widely varying sizes, including
small single facility acquisitions, significant multiple facility acquisitions
and corporate acquisitions. Celestica has identified several possible
acquisitions that would enhance its global operations, increase its penetration
in several industries and establish strategic relationships with new customers.
There can be no assurance that any of these discussions will result in a
definitive purchase agreement and, if they do, what the terms or timing of any
agreement would be. Celestica expects to continue any current discussions and
actively pursue other acquisition opportunities.
RESULTS OF OPERATIONS
Celestica's revenue and margins can vary from period to period as a
result of the level of business volumes, seasonality of demand, component supply
availability and the timing of acquisitions. There is no certainty that the
historical pace of Celestica's acquisitions will continue in the future.
Celestica's contractual agreements with its key customers generally
provide a framework for its overall relationship with the customer. Celestica
recognizes product revenue upon shipment to the customer as performance has
occurred, all customer specified acceptance criteria have been tested and met,
and the earnings process is considered complete. Actual production volumes are
based on purchase orders for the delivery of products. These orders typically do
not commit to firm production schedules for more than 30 to 90 days in advance.
Celestica minimizes its risk relative to its inventory by ordering materials and
components only to the extent necessary to satisfy existing customer orders.
Celestica is largely protected from the risk of inventory cost fluctuations as
these costs are generally passed through to customers.
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Celestica's annual and quarterly operating results are primarily
affected by the level and timing of customer orders, fluctuations in materials
costs and relative mix of value add products and services. The level and timing
of customers' orders will vary due to customers' attempts to balance their
inventory, changes in their manufacturing strategies, variation in demand for
their products and general economic conditions. Celestica's annual and quarterly
operating results are also affected by capacity utilization and other factors,
including price competition, manufacturing effectiveness and efficiency, the
degree of automation used in the assembly process, the ability to manage
inventory and capital assets effectively, the timing of expenditures in
anticipation of increased sales, the timing of acquisitions and related
integration costs, customer product delivery requirements and shortages of
components or labour. Historically, Celestica has experienced some seasonal
variation in revenue, with revenue typically being highest in the fourth quarter
and lowest in the first quarter. Weak end-market conditions have continued in
the telecommunications and information technology industries which resulted in
customers rescheduling or cancelling orders. This has impacted Celestica's
results of operations.
The table below sets forth certain operating data expressed as a
percentage of revenue for the periods indicated:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
2001 2002 2001 2002
--------- --------- --------- -------
Revenue..................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales............................... 92.8 92.8 92.8 92.9
----- ----- ----- -----
Gross profit................................ 7.2 7.2 7.2 7.1
Selling, general and administrative expenses 3.2 3.6 3.3 3.6
Amortization of goodwill and other intangible
assets...................................... 1.1 1.0 1.1 0.9
Integration costs related to acquisitions... 0.3 0.4 0.2 0.3
Other charges............................... 2.0 - 1.0 -
----- ---- ----- ----
Operating income ........................... 0.6 2.2 1.6 2.3
Interest expense (income), net.............. (0.1) 0.0 (0.1) 0.1
------ ----- ------ -----
Earnings before income taxes................ 0.7 2.2 1.7 2.2
Income taxes ............................... 0.1 0.4 0.4 0.4
----- ----- ----- -----
Net earnings................................ 0.6% 1.8% 1.3% 1.8%
====== ====== ====== ======
ADJUSTED NET EARNINGS
As a result of the significant number of acquisitions made by Celestica
over the past few years, management of Celestica believes adjusted net earnings
is a useful measure of operating performance on an enterprise-wide basis, that
also facilitates reliable period to period comparisons. Adjusted net earnings
exclude the effects of acquisition-related charges (most significantly,
amortization of intangible assets and integration costs related to
acquisitions), other non-recurring charges (most significantly, restructuring
costs and the write-down of goodwill and intangible assets) and the related
income tax effect of these adjustments. Adjusted net earnings do not have any
standardized meaning prescribed by GAAP and are not necessarily comparable to
similar measures presented by other companies. Adjusted net earnings are not a
measure of performance under Canadian GAAP or U.S. GAAP and should not be
considered in isolation or as a substitute for net earnings prepared in
accordance with Canadian GAAP or U.S. GAAP. The following table reconciles net
earnings to adjusted net earnings:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
2001 2002 2001 2002
-------- -------- -------- --------
(in millions) (in millions)
Net earnings ........................................ $ 15.8 $ 40.4 $ 70.6 $ 80.1
Add: Amortization of goodwill and other intangible
assets............................................... 28.1 21.7 57.7 43.7
Add: Integration costs related to acquisitions....... 7.8 10.2 10.1 14.1
Add: Other non-recurring charges..................... 53.2 - 57.0 -
Less: Income tax effect of above..................... (11.8) (2.9) (15.0) (5.1)
-------- -------- -------- --------
Adjusted net earnings................................ $ 93.1 $ 69.4 $ 180.4 $ 132.8
======= ======= ======= =======
As a percentage of revenue........................ 3.5% 3.1% 3.4% 3.0%
======= ======= ======= =======
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REVENUE
Revenue decreased 15%, to $2,249.2 million for the three months ended
June 30, 2002 from $2,660.7 million for the same period in 2001. Revenue for the
six months ended June 30, 2002 decreased 18% to $4,400.7 million from $5,353.3
million for the same period in 2001. For the quarter, base business volumes
declined 41%, offset by a 26% increase in acquisition revenue year-to-year.
Acquisition growth was driven by the Company's acquisitions in the latter half
of 2001 and in 2002, primarily in the U.S. and Asia. Base revenue declined due
to the significant softening of end-markets. The visibility of future end-market
conditions remains limited.
Revenue from the Americas operations decreased 24% to $1,308.8 million
for the three months ended June 30, 2002 compared to the same period in 2001
primarily due to the end-market softening which was partially offset by
acquisitions, and decreased 22% to $2,668.2 million for the six months ended
June 30, 2002 compared to the same period in 2001. Revenue from European
operations decreased 43% to $480.6 million for the three months ended June 30,
2002 compared to the same period in 2001 primarily due to the general industry
downturn, and decreased 45% to $950.9 million for the six months ended June 30,
2002 compared to the same period in 2001. Revenue from Asian operations
increased 171% to $533.4 million for the three months ended June 30, 2002
compared to the same period in 2001 primarily due to acquisitions, and increased
127% to $934.1 million for the six months ended June 30, 2002 compared to the
same period in 2001. Inter-segment revenue for the three and six months ended
June 30, 2002 was $73.6 million and $152.5 million, respectively, compared to
$88.0 million and $210.9 million for the same periods in 2001. Acquisitions
completed in 2001 and 2002 are expected to increase revenue primarily in the
Americas and Asian operations.
Revenue from customers in the communications industry for the three and
six months ended June 30, 2002 was 46% and 46% of revenue, respectively,
compared to 32% and 33% of revenue, respectively, for the same period in 2001.
Revenue in the communications industry benefited from recent acquisitions.
Revenue from customers in the server-related business for the three and six
months ended June 30, 2002 was 27% and 28% of revenue, respectively, compared to
33% and 32% of revenue, respectively, for the same period in 2001.
The following customers represented more than 10% of total revenue for
each of the indicated periods:
THREE AND SIX
MONTHS ENDED
JUNE 30
2001 2002
---- ----
Sun Microsystems.... X X
IBM................. X X
Lucent Technologies X
Celestica's top five customers represented in the aggregate 67% and
69%, respectively, of total revenue for the three and six months ended June 30,
2002 compared to 63% and 65%, respectively, of total revenue for the same period
in 2001. The Company is dependent upon continued revenue from its top customers.
There can be no assurance that revenue from these or any other customers will
not increase or decrease as a percentage of total revenue either individually or
as a group. Any material decrease in revenue from these or other customers could
have a material adverse effect on the Company's results of operations. See notes
17 (concentration of risk) and 19 to the 2001 Consolidated Financial Statements.
GROSS PROFIT
Gross profit decreased 16%, to $162.0 million for the three months
ended June 30, 2002 compared to the same period in 2001. Gross margin was flat
at 7.2% for the three months ended June 30, 2002 and June 20, 2001. Gross profit
decreased 19% to $314.1 million for the six months ended June 30, 2002 compared
to the same period in 2001. Gross margin decreased to 7.1% for the six months
ended June 30, 2002 from 7.2% for the same period in 2001, as a result of a
decrease in volumes, offset by the benefits from the Company's restructuring.
For the foreseeable future, the Company's gross margin is expected to
depend primarily on product mix, production efficiencies, utilization of
manufacturing capacity, start-up activity, new product introductions and pricing
within the electronics industry. Over time, gross margins at individual sites
and for the Company as a whole are expected to fluctuate. Changes in product
mix, additional costs associated with new product introductions and price
erosion within the electronics industry could adversely affect the Company's
gross margin. Also, the
5
availability of raw materials, which are subject to lead time and other
constraints, could possibly limit the Company's revenue growth.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative (SG&A) expenses decreased 7% to
$80.0 million (3.6% of revenue) for the three months ended June 30, 2002 from
$86.4 million (3.2% of revenue) for the same period in 2001. SG&A expenses
decreased 11% for the six months ended June 30, 2002 to $156.7 million (3.6% of
revenue) from $175.5 million (3.3% of revenue) for the same period in 2001. SG&A
as a percentage of revenue has increased generally due to the lower revenue
base. The decrease in expenses, on an absolute basis, is driven by lower volumes
and includes the benefits from the Company's restructuring program.
Research and development (R&D) costs increased to $4.9 million (0.2% of
revenue) for the three months ended June 30, 2002 compared to $2.4 million (0.1%
of revenue) for the same period in 2001. R&D costs for the six months ended June
30, 2002 were $9.4 million, compared to $8.9 million for the same period of
2001.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE ASSETS
Amortization of goodwill and other intangible assets decreased to $21.7
million and $43.7 million, respectively, for the three and six months ended June
30, 2002 from $28.1 million and $57.7 million for the same period in 2001.
Effective January 1, 2002, the Company fully adopted the new accounting
standards for "Business Combinations" and "Goodwill and Other Intangible Assets"
and has discontinued amortization of all goodwill effective January 1, 2002.
Amortization of goodwill for the three and six months ended June 30, 2001 was
$11.4 million and $21.3 million, respectively, and for fiscal 2001 was $39.2
million. See "Recent Accounting Developments." The decrease in amortization is
the result of this change in accounting for goodwill, offset by the amortization
of other intangible assets arising from the 2001 and 2002 acquisitions.
INTEGRATION COSTS RELATED TO ACQUISITIONS
Integration costs related to acquisitions represent one-time costs
incurred within 12 months of the acquisition date, such as the costs of
implementing compatible information technology systems in newly acquired
operations, establishing new processes related to marketing and distribution
processes to accommodate new customers and salaries of personnel directly
involved with integration activities. All of the integration costs incurred
related to newly acquired facilities, and not to the Company's existing
operations.
Integration costs were $10.2 million and $14.1 million, respectively,
for the three and six months ended June 30, 2002 compared to $7.8 million and
$10.1 million for the same period in 2001. The integration costs incurred in
2002 primarily relate to the Lucent, NEC Japan and Omni acquisitions.
Integration costs vary from period to period due to the timing of
acquisitions and related integration activities. Celestica expects to incur
additional integration costs in 2002 as it completes the integration of its 2001
and 2002 acquisitions. Celestica will incur future additional integration costs
as the Company continues to make acquisitions as part of its growth strategy.
OTHER CHARGES
Other charges are non-recurring items or items that are unique in
nature. Celestica did not incur other charges for the three and six months ended
June 30, 2002 compared to $53.2 million and $57.0 million, respectively, for the
same period in 2001. The 2001 charges related to the Company's restructuring.
A further description of other charges is included in note 13 to the
2001 Consolidated Financial Statements.
The Company has and expects to continue to benefit from the
restructuring measures taken in 2001 through margin improvements and reduced
operating costs in the current year. The Company expects to complete the major
components of the restructuring plan by the end of 2002, except for certain
long-term lease contractual obligations. Cash outlays are funded from cash on
hand.
6
INTEREST EXPENSE, NET
Interest expense, net of interest income, for the three and six months
ended June 30, 2002 amounted to $1.4 million and $3.1 million, respectively,
compared to net interest income of $2.4 million and $6.0 million for the same
period in 2001. Interest income decreased for the three and six months ended
June 30, 2002 compared to the same periods in 2001 because the Company earned
lower interest rates on its cash balance. The interest income earned on its cash
balance was offset by the interest expense on the Company's Senior Subordinated
Notes and debt facilities.
INCOME TAXES
Income tax expense for the three months ended June 30, 2002 was $8.3
million compared to $3.3 million for the same period in 2001, both periods
reflecting an effective tax rate of 17%. Income tax expense for the six months
ended June 30, 2002 was $16.4 million, reflecting an effective tax rate of 17%,
compared to $20.6 million and an effective tax rate of 23% for the same period
in 2001.
The Company's effective tax rate decreased from 24% in the first
quarter of 2001 to 17% in the second quarter of 2001 as a result of the mix and
volume of business in lower tax jurisdictions within Europe and Asia. These
lower tax rates include tax holidays and tax incentives that Celestica has
negotiated with the respective tax authorities which expire between 2002 and
2012. The Company's current tax rate of 17% is expected to continue for the
foreseeable future.
Celestica has recognized a net deferred tax asset at June 30, 2002 of
$152.8 million compared to $102.8 million at December 31, 2001. The net asset
increase relates to the recognition of net operating losses and future income
tax deductions available to reduce future years' income for income tax purposes.
Celestica's current projections demonstrate that it will generate sufficient
taxable income in the future to realize the benefit of these deferred income tax
assets in the carry-forward periods. A portion of the net operating losses have
an indefinite carry forward period. The other portion will expire over a 19-year
period commencing in 2005.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended June 30, 2002, operating activities provided
Celestica with $236.7 million in cash compared to $212.2 million for the same
period in 2001. For the six months ended June 30, 2002, operating activities
provided Celestica with $510.6 million in cash compared to the use of cash of
$48.6 million for the same period in 2001. Cash was generated primarily from
earnings and a reduction of inventory, due to improved inventory management. The
Company will continue to focus on improving working capital management.
Investing activities for the three months ended June 30, 2002 included
capital expenditures of $48.9 million and proceeds from the sale-leaseback of
certain machinery and equipment of $20.9 million. Investing activities for the
six months ended June 30, 2002 included capital expenditures of $75.0 million
and $102.9 million for acquisitions. See "Acquisitions." Investing activities
for the six months ended June 30, 2001 included capital expenditures of $136.1
million and $148.1 million for acquisitions.
In May 2001, Celestica issued 12.0 million subordinate voting shares
for gross proceeds of $714.0 million less costs of $10.0 million (pre-tax).
CAPITAL RESOURCES
Celestica has three unsecured, revolving credit facilities totalling
$960.0 million, each provided by a syndicate of lenders and which are available
until July 2003, April and July 2005. The credit facilities permit Celestica and
certain designated subsidiaries to borrow funds directly for general corporate
purposes (including acquisitions) at floating rates. Under the credit
facilities: Celestica is required to maintain certain financial ratios; its
ability and that of certain of its subsidiaries to grant security interests,
dispose of assets, change the nature of its business or enter into business
combinations, is restricted; and a change in control is an event of default. No
borrowings were outstanding under the revolving credit facilities at June 30,
2002.
7
In addition, there is a debt incurrence covenant in effect for
Celestica's Senior Subordinated Notes due 2006. This covenant is based on
Celestica's fixed charge coverage ratio, as defined in the indenture governing
the Senior Subordinated Notes. Celestica was in compliance with its debt
covenants as at June 30, 2002.
Celestica and certain subsidiaries have uncommitted bank facilities
which total $44.5 million that are available for operating requirements.
Celestica believes that cash flow from operating activities, together
with cash on hand and borrowings available under its credit facilities, will be
sufficient to fund currently anticipated working capital, planned capital
spending and debt service requirements for the next 12 months. The Company
expects capital spending for 2002 to be in the range of 1.5% to 2.0% of revenue.
At June 30, 2002, Celestica had committed $29.0 million in capital expenditures.
In addition, Celestica regularly reviews acquisition opportunities, and may
therefore require additional debt or equity financing.
The Company has an arrangement to sell up to $400.0 million in accounts
receivable under a revolving facility which is available until September 2004.
Consistent with previous quarters, the Company has sold $400.0 million in
accounts receivable.
Celestica prices the majority of its products in U.S. dollars, and the
majority of its material costs are also denominated in U.S. dollars. However, a
significant portion of its non-material costs (including payroll, facilities
costs and costs of locally sourced supplies and inventory) are denominated in
various currencies. As a result, Celestica may experience transaction and
translation gains or losses because of currency fluctuations. At June 30, 2002,
Celestica had forward foreign exchange contracts covering various currencies in
an aggregate notional amount of $692.1 million with expiry dates up to September
2003, except for one contract for $13.3 million that expires in January 2006.
The fair value of these contracts at June 30, 2002 was an unrealized gain of
$43.4 million. Celestica's current hedging activity is designed to reduce the
variability of its foreign currency costs and generally involves entering into
contracts to trade U.S. dollars for Canadian dollars, British pounds sterling,
Mexican pesos, euros, Thailand baht, Singapore dollars, Brazilian reais and
Czech koruna at future dates. In general, these contracts extend for periods of
less than 19 months. Celestica may, from time to time, enter into additional
hedging transactions to minimize its exposure to foreign currency and interest
rate risks. There can be no assurance that such hedging transactions, if entered
into, will be successful.
RECENT DEVELOPMENTS
In July 2002, the Company made the following announcements:
The Company announced a plan to redeem the $130 million in Senior Subordinated
Notes due 2006 in accordance with their terms. The cost of the redemption will
be $136.8 million (including a 5.25% redemption premium) and will be financed
from cash on hand;
The Company announced a plan to file a Normal Course Issuer Bid to repurchase,
at its discretion, up to 5% of the Company's Subordinate Voting Shares for
cancellation, over the next 12 months. This plan is subject to the approval of
the Toronto Stock Exchange; and
In response to the current end-market conditions, the Company announced that it
would incur a pre-tax restructuring charge of between $300 - $375 million, to be
recorded in the third and fourth quarters of 2002. The Company expects the cash
cost to be approximately $150 million.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Significant estimates are used in determining the allowance for doubtful
accounts, inventory valuation and the useful lives of intangible assets. Actual
results could differ materially from those estimates and assumptions.
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Celestica records an allowance for doubtful accounts for estimated
credit losses based on customer and industry concentrations and the Company's
knowledge of the financial condition of its customers. A change to these
factors could impact the estimated allowance.
Celestica values its inventory on a first-in, first-out basis at the
lower of cost and replacement cost for production parts and at the lower of
cost and net realizable value for work in progress and finished goods.
Celestica adjusts its inventory valuation based on estimates of net realizable
value and shrinkage. A change to these assumptions could impact the valuation
of inventory.
Celestica's estimate of the useful life of intangible assets reflects
the periods in which the projected future net cash flows will be generated. A
significant change in the projected future net cash flows could impact the
estimated useful life.
RECENT ACCOUNTING DEVELOPMENTS
BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS:
In September 2001, the CICA issued Handbook Sections 1581 "Business
Combinations" and 3062 "Goodwill and Other Intangible Assets". See note 2(a) to
the June 30, 2002 Consolidated Financial Statements.
Effective January 1, 2002, the Company adopted these standards which
requires the completion of a transitional goodwill impairment evaluation within
six months of adoption. The Company has completed the transitional assessment
during the second quarter of 2002 and has determined that no impairment existed
as of the date of adoption.
STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS:
Effective January 1, 2002, the Company adopted the new CICA Handbook
Section 3870. See note 2(b) to the June 30, 2002 Consolidated Financial
Statements.
FOREIGN CURRENCY TRANSLATION AND HEDGING RELATIONSHIPS:
CICA Handbook Section 1650 has been amended to eliminate the deferral
and amortization of foreign currency translation gains and losses on long-lived
monetary items, effective January 1, 2002, with retroactive restatement of prior
periods. The Company is not impacted by this change. The CICA issued Accounting
Guideline AcG-13, which establishes criteria for hedge accounting effective for
the Company's 2003 fiscal year. The Company has complied with the requirements
of AcG-13 and has determined that all of its current hedges will continue to
qualify for hedge accounting when the guideline becomes effective.
IMPAIRMENT OF LONG-LIVED ASSETS:
In October 2001, FASB issued Statement No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets," which retains the fundamental
provisions of SFAS 121 for recognizing and measuring impairment losses of
long-lived assets other than goodwill. Statement 144 also broadens the
definition of discontinued operations to include all distinguishable components
of an entity that will be eliminated from ongoing operations. This Statement is
effective for the Company's fiscal year commencing January 1, 2002, to be
applied prospectively. In August 2001, SFAS 143 "Accounting for Asset Retirement
Obligations" was approved and requires that the fair value of an asset
retirement obligation be recorded as a liability, at fair value, in the period
in which the Company incurs the obligation. SFAS 143 is effective for the
Company's fiscal year commencing January 1, 2003. The Company expects that the
adoption of these standards will have no material impact on its financial
position, results of operations or cash flows.
CELESTICA INC.
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS OF U.S. DOLLARS)
(UNAUDITED)
DECEMBER 31 JUNE 30
2001 2002
-------------- ---------------
ASSETS
Current assets:
Cash and short-term investments.................$ 1,342.8 $ 1,683.7
Accounts receivable ............................ 1,054.1 1,101.5
Inventories .................................... 1,372.7 1,116.9
Prepaid and other assets........................ 177.3 153.7
Deferred income taxes........................... 49.7 57.7
--------------- ---------------
3,996.6 4,113.5
Capital assets ................................... 915.1 929.4
Goodwill on business combinations (note 2)........ 1,128.8 1,137.9
Other intangible assets (note 2).................. 427.2 420.5
Other assets ..................................... 165.2 220.3
--------------- ---------------
$ 6,632.9 $ 6,821.6
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................$ 1,198.3 $ 1,167.6
Accrued liabilities............................. 405.7 487.4
Income taxes payable............................ 21.0 28.3
Deferred income taxes........................... 21.8 22.4
Current portion of long-term debt .............. 10.0 3.1
--------------- ---------------
1,656.8 1,708.8
Long-term debt ................................... 137.4 135.0
Accrued post-retirement benefits ................. 47.3 75.8
Deferred income taxes............................. 41.5 42.8
Other long-term liabilities....................... 4.3 4.0
-------------- --------------
1,887.3 1,966.4
Shareholders' equity:
Convertible debt................................ 886.8 901.0
Capital stock................................... 3,699.0 3,704.6
Retained earnings............................... 162.7 234.2
Foreign currency translation adjustment......... (2.9) 15.4
--------------- --------------
4,745.6 4,855.2
-------------- --------------
$ 6,632.9 $ 6,821.6
=============== ===============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
THESE INTERIM FINANCIAL STATEMENTS SHOULD BE READ IN CONJUNCTION WITH THE
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS.
2
CELESTICA INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
2001 2002 2001 2002
------------ ------------ ---------- --------
Revenue........................................................ $ 2,660.7 $ 2,249.2 $ 5,353.3 $ 4,400.7
Cost of sales.................................................. 2,468.5 2,087.2 4,967.8 4,086.6
------------ ------------ ---------- --------
Gross profit................................................... 192.2 162.0 385.5 314.1
Selling, general and administrative expenses .................. 86.4 80.0 175.5 156.7
Amortization of goodwill and other intangible assets (note 2).. 28.1 21.7 57.7 43.7
Integration costs related to acquisitions ..................... 7.8 10.2 10.1 14.1
Other charges (note 4)......................................... 53.2 - 57.0 -
------------ ------------ ---------- --------
Operating income............................................... 16.7 50.1 85.2 99.6
Interest on long-term debt..................................... 5.1 5.5 9.4 10.9
Interest income, net........................................... (7.5) (4.1) (15.4) (7.8)
------------ ------------ ---------- --------
Earnings before income taxes................................... 19.1 48.7 91.2 96.5
------------ ------------ ---------- --------
Income taxes:
Current ..................................................... 6.3 9.6 19.3 19.0
Deferred (recovery).......................................... (3.0) (1.3) 1.3 (2.6)
------------ ------------ ---------- --------
3.3 8.3 20.6 16.4
------------ ------------ ---------- --------
Net earnings for the period.................................... 15.8 40.4 70.6 80.1
Retained earnings, beginning of period......................... 268.9 198.2 217.5 162.7
Convertible debt accretion, net of tax......................... (3.6) (4.4) (7.0) (8.6)
------------ ------------ ---------- --------
Retained earnings, end of period............................... $ 281.1 $ 234.2 $ 281.1 $ 234.2
============ ============ ========== ==========
Basic earnings per share....................................... $ 0.06 $ 0.16 $ 0.31 $ 0.31
Diluted earnings per share (note 6)............................ $ 0.06 $ 0.15 $ 0.31 $ 0.30
Weighted average number of shares outstanding:
- basic (in millions)....................................... 207.0 230.2 204.7 230.0
- diluted (in millions) (note 6)............................ 225.5 236.0 223.7 236.5
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
THESE INTERIM FINANCIAL STATEMENTS SHOULD BE READ IN CONJUNCTION WITH THE
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS.
3
CELESTICA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS OF U.S. DOLLARS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
2001 2002 2001 2002
------------- ----------- ----------- -----------
CASH PROVIDED BY (USED IN):
OPERATIONS:
Net earnings for the period ........................... $ 15.8 $ 40.4 $ 70.6 $ 80.1
Items not affecting cash:
Depreciation and amortization........................ 71.3 77.5 141.0 156.5
Deferred income taxes................................ (3.0) (1.3) 1.3 (2.6)
Other charges........................................ 16.9 - 17.2 -
Other................................................ (0.5) 1.8 1.3 4.2
------------- ----------- ----------- -----------
Cash from earnings..................................... 100.5 118.4 231.4 238.2
------------- ----------- ----------- -----------
Changes in non-cash working capital items:
Accounts receivable.................................. (128.1) (31.4) 173.8 (19.7)
Inventories.......................................... 208.0 122.0 176.7 280.6
Other assets......................................... 144.6 24.6 91.3 (12.4)
Accounts payable and accrued liabilities............. (108.5) (3.5) (704.5) 16.6
Income taxes payable................................. (4.3) 6.6 (17.3) 7.3
------------- ----------- ----------- -----------
Non-cash working capital changes..................... 111.7 118.3 (280.0) 272.4
------------- ----------- ----------- -----------
Cash provided by (used in) operations................ 212.2 236.7 (48.6) 510.6
------------- ----------- ----------- -----------
INVESTING:
Acquisitions, net of cash acquired................... (82.4) - (148.1) (102.9)
Purchase of capital assets........................... (59.3) (48.9) (136.1) (75.0)
Other................................................ 1.3 20.9 0.9 20.9
------------- ----------- ----------- -----------
Cash used in investing activities.................... (140.4) (28.0) (283.3) (157.0)
------------- ----------- ----------- -----------
FINANCING:
Bank indebtedness.................................... - (0.4) - (1.7)
Decrease in long-term debt........................... (0.4) (9.3) (1.7) (14.9)
Deferred financing costs............................. - (0.2) - (0.6)
Issuance of share capital............................ 717.9 1.4 722.0 4.6
Share issue costs, pre-tax .......................... (10.0) - (10.0) -
Other................................................ (0.9) 0.7 (0.9) (0.1)
------------- ----------- ----------- -----------
Cash provided by (used in) financing activities...... 706.6 (7.8) 709.4 (12.7)
------------- ----------- ----------- -----------
Increase in cash....................................... 778.4 200.9 377.5 340.9
Cash, beginning of period.............................. 482.9 1,482.8 883.8 1,342.8
------------- ----------- ----------- -----------
Cash, end of period.................................... $ 1,261.3 $ 1,683.7 $ 1,261.3 $ 1,683.7
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
Supplemental information:
Paid during the period:
Interest............................................. $ 7.6 $ 9.8 $ 8.2 $ 12.1
Taxes................................................ $ 12.6 $ 6.7 $ 32.1 $ 11.5
Non-cash financing activities:
Convertible debt accretion, net of tax .............. $ 3.6 $ 4.4 $ 7.0 $ 8.6
Shares issued for acquisitions....................... $ 0.5 $ - $ 2.0 $ -
Cash is comprised of cash and short-term investments.
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
THESE INTERIM FINANCIAL STATEMENTS SHOULD BE READ IN CONJUNCTION
WITH THE ANNUAL CONSOLIDATED FINANCIAL STATEMENTS.
4
CELESTICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1. NATURE OF BUSINESS:
The primary operations of the Company consist of providing a full range of
electronics manufacturing services including design, prototyping, assembly,
testing, product assurance, supply chain management, worldwide distribution and
after-sales service to its customers primarily in the computer and
communications industries. The Company has operations in the Americas, Europe
and Asia.
Celestica prepares its financial statements in accordance with accounting
principles which are generally accepted in Canada with a reconciliation to
accounting principles generally accepted in the United States, as disclosed in
note 22 to the 2001 Consolidated Financial Statements.
The Company experiences seasonal variation in revenue, with revenue
typically being highest in the fourth quarter and lowest in the first quarter.
2. SIGNIFICANT ACCOUNTING POLICIES:
The disclosures contained in these unaudited interim consolidated financial
statements do not include all requirements of generally accepted accounting
principles (GAAP) for annual financial statements. The unaudited interim
consolidated financial statements should be read in conjunction with the annual
consolidated financial statements for the year ended December 31, 2001.
The unaudited interim consolidated financial statements reflect all
adjustments, consisting only of normal recurring accruals, which are, in the
opinion of management, necessary to present fairly the financial position of the
Company as of June 30, 2002 and the results of operations and cash flows for the
three and six months ended June 30, 2001 and 2002.
The unaudited interim consolidated financial statements are based upon
accounting principles consistent with those used and described in the annual
consolidated financial statements, except the following:
(a) BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS:
In September 2001, the Canadian Institute of Chartered Accountants (CICA)
issued Handbook Sections 1581 "Business combinations" and 3062 "Goodwill and
other intangible assets". The new standards mandate the purchase method of
accounting for business combinations and require that goodwill no longer be
amortized but instead be tested for impairment at least annually. The standards
also specify criteria that intangible assets must meet to be recognized and
reported apart from goodwill. The standards require that the value of the shares
issued in a business combination be measured using the average share price for a
reasonable period before and after the date the terms of the acquisition are
agreed to and announced. Previously, the consummation date was used to value the
shares issued in a business combination. The new standards are substantially
consistent with U.S. GAAP.
Effective July 1, 2001, goodwill acquired in business combinations
completed after June 30, 2001 was not amortized. In addition, the criteria for
recognition of intangible assets apart from goodwill and the valuation of the
shares issued in a business combination have been applied to business
combinations completed after June 30, 2001.
The Company has adopted these new standards as of January 1, 2002 and has
discontinued amortization of all existing goodwill. The Company has also
evaluated existing intangible assets including estimates of remaining useful
lives and has reclassed $9.1 from intellectual property to goodwill as of
January 1, 2002 to conform with the new criteria.
Section 3062 requires the completion of a transitional goodwill impairment
evaluation within six months of adoption. Impairment is identified by comparing
the carrying amounts of the Company's reporting units with their fair values. To
the extent a reporting unit's carrying amount exceeds its fair value, the
impairment is measured in a manner similar to a purchase price allocation and
must be recorded by December 31, 2002. Any
5
CELESTICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
transitional impairment would be recognized as an effect of a change in
accounting principle and would be charged to opening retained earnings as of
January 1, 2002. The Company has completed the transitional goodwill impairment
assessment during the second quarter of 2002 and has determined that no
impairment existed as of the date of adoption.
Effective January 1, 2002, the Company had unamortized goodwill of $1,137.9
which is no longer being amortized. This change in accounting policy is not
applied retroactively and the amounts presented for prior periods have not been
restated for this change. The impact of this change is as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
2001 2002 2001 2002
--------- --------- --------- ---------
Net earnings............................... $ 15.8 $ 40.4 $ 70.6 $ 80.1
Add back: goodwill amortization............ 11.4 - 21.3 -
--------- --------- --------- ---------
Net earnings before goodwill amortization.. $ 27.2 $ 40.4 $ 91.9 $ 80.1
========= ========= ========= =========
Basic earnings per share:
Net earnings............................... $ 0.06 $ 0.16 $ 0.31 $ 0.31
Net earnings before goodwill amortization.. $ 0.11 $ 0.16 $ 0.41 $ 0.31
Diluted earnings per share:
Net earnings .............................. $ 0.06 $ 0.15 $ 0.31 $ 0.30
Net earnings before goodwill amortization.. $ 0.11 $ 0.15 $ 0.41 $ 0.30
The following table sets forth the Company's goodwill and other intangible
assets as of June 30, 2002:
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
---------- ------------ ----------
Goodwill............................ $ 1,270.2 $ 132.3 $ 1,137.9
========== ========== ==========
Other intangible assets:
Intellectual property............... $ 379.5 $ 175.8 $ 203.7
Other intangible assets............. 255.4 38.6 216.8
---------- ---------- ----------
$ 634.9 $ 214.4 $ 420.5
========== ========== ==========
Intellectual property primarily represents the cost of certain intellectual
property and process technology. Other intangible assets consist primarily of
customer relationship and contracts representing the excess of cost over the
fair value of tangible assets and intellectual property acquired in asset
acquisitions.
The aggregate amortization expense for other intangible assets was $21.7
and $43.7 for the three and six months ended June 30, 2002.
(b) STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS:
Effective January 1, 2002, the Company adopted the new CICA Handbook
Section 3870, which requires that a fair value based method of accounting be
applied to all stock-based payments to non-employees and to direct awards of
stock to employees. However, the new standard permits the Company to continue
its existing policy of recording no compensation cost on the grant of stock
options to employees with the addition of pro forma information. The Company has
applied the pro forma disclosure provisions of the new standard to awards
granted on or after January 1, 2002. The pro forma effect of awards granted
prior to January 1, 2002 has not been included.
The standard requires the disclosure of pro forma net earnings and earnings
per share information as if the Company had accounted for employee stock options
under the fair value method. The fair value of the options issued in the quarter
and six month period were determined using the Black-Scholes option pricing
model. The
6
CELESTICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
following assumptions were used in the quarter: risk-free rate of
5.43%; dividend yield of 0%; a volatility factor of the expected market price of
the Company's shares of 70%; and a weighted-average expected option life of 7.5
years. The weighted-average grant date fair values of options issued during the
quarter was $23.56 per share. For purposes of pro forma disclosures, the
estimated fair value of the options is amortized to income over the vesting
period. For the three months ended June 30, 2002, the Company's pro forma net
earnings is $40.1, basic earnings per share is $0.16 and diluted earnings per
share is $0.15. For the six months ended June 30, 2002, the Company's pro forma
net earnings is $79.6, basic earnings per share is $0.31 and diluted earnings
per share is $0.30. The Company's stock option plans are described in note 11 to
the annual consolidated financial statements.
3. ACQUISITIONS:
ASSET ACQUISITIONS:
On March 31, 2002, the Company acquired certain assets located in Miyagi
and Yamanashi, Japan from NEC Corporation. The purchase price was financed with
cash and was allocated to the net assets acquired, based on their relative fair
values at the date of acquisition. The fair value allocation of the purchase
price is subject to refinement as the Company is in the process of obtaining
third-party valuations.
4. OTHER CHARGES:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
2001 2002 2001 2002
--------- -------- --------- -------
Restructuring.............................. $ 53.2 $ - $ 57.0 $ -
========= ======= ========= =======
In 2001, the Company recorded a restructuring charge that reflected
facility consolidations and a workforce reduction. The following table details
the activity through the accrued restructuring liability for the period ended
June 30, 2002:
LEASE AND
EMPLOYEE OTHER FACILITY
TERMINATION CONTRACTUAL EXIT COSTS
COSTS OBLIGATIONS AND OTHER TOTAL
----------- ----------- ----------- ----------
Balance at March 31, 2002........... $ 25.8 $ 30.8 $ 8.6 $ 65.2
Cash payments....................... (12.1) (3.3) (2.0) (17.4)
----------- ----------- ----------- -----------
Balance at June 30, 2002............ $ 13.7 $ 27.5 $ 6.6 $ 47.8
========== ========== ========== ==========
As of December 31, 2001, 2,330 employee positions remain to be terminated
during 2002. 1,521 employees were terminated during the first half of 2002. The
Company expects to complete the major components of the restructuring plan by
the end of 2002, except for certain long-term lease contractual obligations.
5. SEGMENTED INFORMATION:
The Company's operations fall into one dominant industry segment, the
electronics manufacturing services industry. The Company manages its operations,
and accordingly determines its operating segments, on a geographic basis. The
performance of geographic operating segments is monitored based on EBIAT
(earnings before interest, income taxes, amortization of intangible assets,
other charges and integration costs related to acquisitions). Inter-segment
transactions are reflected at market value. The following is a breakdown by
operating segment.
7
CELESTICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
2001 2002 2001 2002
----------- ----------- ------------ ------------
REVENUE
Americas.................................... $ 1,712.8 $ 1,308.8 $ 3,408.4 $ 2,668.2
Europe...................................... 839.0 480.6 1,743.9 950.9
Asia........................................ 196.9 533.4 411.9 934.1
Elimination of inter-segment revenue........ (88.0) (73.6) (210.9) (152.5)
------------ ------------ ------------- -------------
$ 2,660.7 $ 2,249.2 $ 5,353.3 $ 4,400.7
=========== =========== ============ ============
EBIAT
Americas.................................... $ 55.3 $ 44.1 $ 107.9 $ 84.4
Europe...................................... 40.5 11.8 81.7 27.2
Asia........................................ 10.0 26.1 20.4 45.8
---------- ---------- ------------ ------------
105.8 82.0 210.0 157.4
Interest, net............................... 2.4 (1.4) 6.0 (3.1)
Amortization of goodwill and other intangible
assets...................................... (28.1) (21.7) (57.7) (43.7)
Integration costs related to acquisitions... (7.8) (10.2) (10.1) (14.1)
Other charges............................... (53.2) - (57.0) -
---------- ---------- ------------ ------------
Earnings before income taxes................ $ 19.1 $ 48.7 $ 91.2 $ 96.5
========== ========== ============ ============
AS AT JUNE 30
2001 2002
---------- ------------
TOTAL ASSETS
Americas.................................... $ 3,773.2 $ 3,381.5
Europe...................................... 1,793.2 1,546.7
Asia........................................ 435.1 1,893.4
---------- -----------
$ 6,001.5 $ 6,821.6
========== ============
The following table sets forth the changes in goodwill by operating segment
during the six months ended June 30, 2002:
GOODWILL DECEMBER 31, 2001 ADJUSTMENT JUNE 30, 2002
----------------- -------------- ---------------
Americas.................................... $ 243.2 $ 1.8 $ 245.0
Europe...................................... 68.3 6.2 74.5
Asia........................................ 817.3 1.1 818.4
---------- -------- ----------
$ 1,128.8 $ 9.1 $ 1,137.9
========== ======== ==========
The Company has reclassed from intellectual property $9.1 to goodwill as of
January 1, 2002 to conform with the new goodwill standards.
6. WEIGHTED AVERAGE SHARES OUTSTANDING:
For the three and six months ended June 30, 2002, the weighted average
number of shares outstanding for purposes of the diluted earnings per share
calculation, excludes the effect of convertible securities as they are
anti-dilutive.
7. SUBSEQUENT EVENTS:
In July 2002, the Company made the following announcements:
The Company announced a plan to redeem the $130.0 in Senior Subordinated Notes
due 2006 in accordance with their terms. The cost of the redemption will be
$136.8 (including a 5.25% redemption premium) and will be financed from cash on
hand;
8
CELESTICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
The Company announced a plan to file a Normal Course Issuer Bid to repurchase,
at its discretion, up to 5% of the Company's Subordinate Voting Shares for
cancellation, over the next 12 months. This plan is subject to the approval of
the Toronto Stock Exchange; and
In response to the current end-market conditions, the Company announced that
it would incur a pre-tax restructuring charge of between $300 - $375, to be
recorded in the third and fourth quarters of 2002. The Company expects the cash
cost to be approximately $150.
