(All amounts in U.S. dollars.
Per share information based on diluted
shares outstanding unless noted otherwise).
TORONTO, April 23, 2013 /CNW/ - Celestica Inc. (NYSE, TSX: CLS), a
global leader in the delivery of end-to-end product lifecycle
solutions, today announced financial results for the first quarter
ended March 31, 2013.
First Quarter 2013 Highlights
-
Revenue: $1.37 billion, within the range of our guidance of $1.325 to
$1.425 billion (announced January 22, 2013)
-
Revenue decreased 19%, compared to the first quarter of 2012, relatively
flat after excluding revenue from Research In Motion Limited (RIM) for
the first quarter of 2012
-
IFRS EPS: $0.06 per share, compared to $0.20 per share for the first
quarter of 2012
-
Adjusted EPS (non-IFRS): $0.16 per share, within the range of our
guidance of $0.11 to $0.17 per share (announced January 22, 2013)
-
Free cash flow (non-IFRS): $13.5 million, compared to $44.4 million for
the first quarter of 2012
-
Diversified end market: 24% of total revenue, increased from 19% of
total revenue for the first quarter of 2012
"Celestica delivered first quarter revenue consistent with our
expectations, while achieving profitability at the high end of the
guidance range driven through solid execution and disciplined cost
management," said Craig Muhlhauser, Celestica President and Chief
Executive Officer. "With the overall economic outlook expected to
remain challenging, we continue to focus our efforts on delivering
value to our customers through strong operational performance, and on
improving our financial performance through productivity improvements
and effectively managing our costs and resources, while making the
necessary investments to support our longer term objectives."
First Quarter 2013 Summary
|
Three months ended March 31
|
|
2012
|
|
2013
|
Revenue (in millions).....................................
|
$
|
1,690.9
|
|
|
$
|
1,372.4
|
|
|
|
|
|
IFRS net earnings (in millions) (i) ........................
|
$
|
43.2
|
|
|
$
|
10.5
|
|
IFRS EPS(i)................................................................
|
$
|
0.20
|
|
|
$
|
0.06
|
|
|
|
|
|
Adjusted net earnings (non-IFRS) (in millions)(ii)
|
$
|
53.6
|
|
|
$
|
30.0
|
|
Adjusted EPS (non-IFRS)(ii).....................................
|
$
|
0.25
|
|
|
$
|
0.16
|
|
Non-IFRS return on invested capital (ROIC)(ii)
|
23.7
|
%
|
|
14.4
|
%
|
Non-IFRS operating margin(ii)..................................
|
3.4
|
%
|
|
2.5
|
%
|
i. International Financial Reporting Standards (IFRS) net earnings
for the first quarter of 2013 included an aggregate charge of $0.10
(pre-tax) per share for stock-based compensation, amortization of
intangible assets (excluding computer software) and restructuring
charges. This is within the range we provided on January 22, 2013 of a
charge between $0.07 and $0.13 per share.
|
ii. 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 other generally accepted
accounting principles (GAAP). See Schedule 1 for 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
|
Communications...........
|
33
|
%
|
|
32
|
%
|
|
37
|
%
|
|
37
|
%
|
|
35
|
%
|
|
40
|
%
|
Consumer.....................
|
23
|
%
|
|
21
|
%
|
|
15
|
%
|
|
9
|
%
|
|
18
|
%
|
|
7
|
%
|
Diversified (i)........................
|
19
|
%
|
|
19
|
%
|
|
21
|
%
|
|
23
|
%
|
|
20
|
%
|
|
24
|
%
|
Servers.........................
|
15
|
%
|
|
16
|
%
|
|
14
|
%
|
|
17
|
%
|
|
15
|
%
|
|
16
|
%
|
Storage.........................
|
10
|
%
|
|
12
|
%
|
|
13
|
%
|
|
14
|
%
|
|
12
|
%
|
|
13
|
%
|
Revenue (in billions).......
|
$
|
1.69
|
|
|
$
|
1.74
|
|
|
$
|
1.58
|
|
|
$
|
1.50
|
|
|
$
|
6.51
|
|
|
$
|
1.37
|
|
i. Our diversified end market is comprised of industrial, aerospace
and defense, healthcare, solar, green technology, semiconductor
equipment and other.
|
Restructuring Update
We completed our manufacturing services for RIM and the related
transition activities in 2012. Due to the historical significance of
RIM to our operations and in response to the continued challenging
demand environment, in July 2012 we announced restructuring actions
throughout our global network to reduce our overall cost structure and
improve our margin performance. We continue to estimate the total
restructuring charges to complete our planned actions to be in the
range of $55 million to $65 million. Of this estimated amount, we
recorded $44.0 million in 2012 and $7.3 million in the first quarter of
2013. We expect to complete the remaining actions by the end of 2013.
Second Quarter 2013 Outlook
For the second quarter ending June 30, 2013, we anticipate revenue to be
in the range of $1.375 to $1.475 billion, and adjusted net earnings per
share to be in the range of $0.13 to $0.19. We expect a negative $0.05
to $0.10 per share (pre-tax) aggregate impact on an IFRS basis for the
following items: stock-based compensation, amortization of intangible
assets (excluding computer software) and restructuring charges.
First Quarter Webcast and Annual Shareholders Meeting Webcast
Management will host its first quarter results conference call today at
8:00 a.m. Eastern Daylight Time. The company's Annual Meeting of
Shareholders will be held today at 9:00 a.m. Eastern Daylight Time at
the TMX Broadcast Centre, The Exchange Tower, 130 King St. West,
Toronto, Ontario. Both webcasts can be accessed at www.celestica.com.
Supplementary Information
In addition to disclosing detailed results in accordance with IFRS,
Celestica provides supplementary non-IFRS measures to consider in
evaluating the company's operating performance. See Schedule 1.
Management uses adjusted net earnings and other non-IFRS measures to
assess operating performance and the effective use and allocation of
resources; to provide more meaningful period-to-period comparisons of
operating results; to enhance investors' understanding of the core
operating results of Celestica's business; and to set management
incentive targets.
About Celestica
Celestica is dedicated to delivering end-to-end product lifecycle
solutions to drive our customers' success. Through our simplified
global operations network and information technology platform, we are
solid partners who deliver informed, flexible solutions that enable our
customers to succeed in the markets they serve. Committed to providing
a truly differentiated customer experience, our agile and adaptive
employees share a proud history of demonstrated expertise and
creativity that provides our customers with the ability to overcome any
challenge. For further information 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 our 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,
restructuring charges, capital expenditures or benefits; our expected
tax 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; and the effect of the
global economic environment on customer demand. Such forward-looking
statements are predictive in nature and may be based on current
expectations, forecasts or assumptions involving risks and
uncertainties that could cause actual outcomes and results to differ
materially from the forward-looking statements themselves. Such
forward-looking statements may, without limitation, be preceded by,
followed by, or include words such as "believes", "expects",
"anticipates", "estimates", "intends", "plans", "continues", or similar
expressions, or may employ such future or conditional verbs as "may",
"will", "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 in applicable Canadian
provincial and territorial securities legislation. Forward-looking
statements are not guarantees of future performance. Readers should
understand that the following important factors, among others, may
affect our future results and could cause those results to differ
materially from those expressed in such forward-looking statements: our
dependence on a limited number of customers and on our customers'
ability to compete and succeed in the marketplace with the products we
manufacture; the effects of price and other competitive factors
generally affecting the electronics manufacturing services (EMS)
industry; the challenges of effectively managing our operations and our
working capital performance during uncertain economic conditions,
including responding to rapid changes in demand and changes in our
customers' outsourcing strategies, including the insourcing of
programs; the challenges of diversifying our customer base, including
the extent, timing, and costs of replacing revenue from lost programs
or customer disengagements; the challenges of managing 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 our logistics partners, resulting from local
events, including natural disasters, political instability, terrorism,
armed conflict, labor or social unrest, criminal activity, disease or
illness that affects local, national or international economies, and
other risks present in the jurisdictions in which we, our customers and
our suppliers operate; our inability to retain or expand our business
due to execution problems relating to the ramping of new programs;
delays in the delivery and availability of components, services and
materials used in our manufacturing process; the risk of
non-performance by counterparties; the challenges of mitigating our
financial exposure to foreign currency volatility; our dependence on
industries affected by rapid technological change; variability of
operating results; our ability to successfully manage our global
operations and supply chain; increasing income taxes, increased levels
and scrutiny of tax audits globally, and the challenges of successfully
defending our tax positions or meeting the conditions of tax incentives
and credits; our ability to successfully implement and complete our
restructuring plans and integrate our acquisitions in a timely manner;
our ability to define and successfully implement an information
technology strategy and countermeasures to mitigate the risk of
computer viruses, malware, hacking attempts or outages that may disrupt
our operations; and the impact of our compliance with applicable laws,
regulations and social responsibility initiatives. These and other
risks and uncertainties, as well as other information related to
Celestica, are discussed herein and in our various public filings at
www.sedar.com and www.sec.gov, including our Annual Report on Form 20-F
and subsequent reports on Form 6-K filed with the U.S. Securities and
Exchange Commission and our Annual Information Form filed with the
Canadian Securities Administrators. Forward-looking statements are
provided for the purpose of providing information about management's
current expectations and plans relating to the future. Readers are
cautioned that such information may not be appropriate for other
purposes. Except as required by applicable law, we disclaim any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
Our revenue, earnings and other financial guidance, as contained in this
press release, is based on various assumptions which management
believes are reasonable under the current circumstances, but may prove
to be inaccurate, and many of which involve factors that are beyond the
control of the company. The material assumptions may include the
following: 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; general economic and market
conditions; currency exchange rates; pricing, the competitive
environment and contract terms and conditions; supplier performance,
pricing and terms; compliance by all 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; technological developments; the timing and execution of our
restructuring actions; and our ability to diversify our customer base
and develop new capabilities. These assumptions and estimates are based
on management's current views with respect to current plans and events,
and are and will be subject to the risks and uncertainties referred to
above. It is Celestica's policy that our guidance is effective as of
the date given, and, if required to be updated, will be communicated
through a public announcement.
Schedule 1
Supplementary Non-IFRS Measures
Our non-IFRS measures include gross profit, gross margin (gross profit
as a percentage of revenue), selling, general and administrative
expenses (SG&A), SG&A as a percentage of revenue, operating earnings
(EBIAT), operating margin (EBIAT as a percentage of revenue), adjusted
net earnings, adjusted net earnings per share, return on invested
capital (ROIC), free cash flow, cash cycle days and inventory turns. 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.
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 North American 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 intangibles varies among
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 this exclusion permits a better comparison of
our core operating results with those of our competitors who also
generally exclude these charges 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
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, a
reconciliation of IFRS to non-IFRS measures (in millions, except per
share amounts):
|
Three months ended March 31
|
|
2012
|
|
2013
|
|
|
% of
revenue
|
|
|
% of
revenue
|
Revenue ........................................................................................
|
$
|
1,690.9
|
|
|
|
$
|
1,372.4
|
|
|
|
|
|
|
|
|
IFRS gross profit ..........................................................................
|
$
|
112.1
|
|
6.6%
|
|
$
|
86.8
|
|
6.3%
|
|
Stock-based
compensation...........................................................
|
3.3
|
|
|
|
3.1
|
|
|
Non-IFRS gross profit...................................................................
|
$
|
115.4
|
|
6.8%
|
|
$
|
89.9
|
|
6.6%
|
|
|
|
|
|
|
IFRS SG&A .....................................................................................
|
$
|
60.0
|
|
3.5%
|
|
$
|
56.7
|
|
4.1%
|
|
Stock-based
compensation ...........................................................
|
(7.4
|
)
|
|
|
(6.4
|
)
|
|
Non-IFRS SG&A .............................................................................
|
$
|
52.6
|
|
3.1%
|
|
$
|
50.3
|
|
3.7%
|
|
|
|
|
|
|
IFRS earnings before income taxes ...........................................
|
$
|
46.7
|
|
|
|
$
|
15.4
|
|
|
|
Finance
costs ................................................................................
|
0.8
|
|
|
|
0.8
|
|
|
|
Stock-based
compensation ...........................................................
|
10.7
|
|
|
|
9.5
|
|
|
|
Amortization of intangible assets (excluding computer software)....
|
0.8
|
|
|
|
1.7
|
|
|
|
Restructuring and other charges
(recoveries)...............................
|
(1.1
|
)
|
|
|
7.3
|
|
|
Non-IFRS operating earnings (EBIAT) (1) ..................................
|
$
|
57.9
|
|
3.4%
|
|
$
|
34.7
|
|
2.5%
|
|
|
|
|
|
|
IFRS net earnings .........................................................................
|
$
|
43.2
|
|
2.6%
|
|
$
|
10.5
|
|
0.8%
|
|
Stock-based
compensation ...........................................................
|
10.7
|
|
|
|
9.5
|
|
|
|
Amortization of intangible assets (excluding computer software)....
|
0.8
|
|
|
|
1.7
|
|
|
|
Restructuring and other charges
(recoveries) ...............................
|
(1.1
|
)
|
|
|
7.3
|
|
|
|
Adjustments for taxes
(2) ...............................................................
|
—
|
|
|
|
1.0
|
|
|
Non-IFRS adjusted net earnings .................................................
|
$
|
53.6
|
|
3.2%
|
|
$
|
30.0
|
|
2.2%
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
Weighted average # of shares (in
millions) ....................................
|
217.9
|
|
|
|
185.0
|
|
|
|
IFRS earnings per
share ................................................................
|
$
|
0.20
|
|
|
|
$
|
0.06
|
|
|
|
Non-IFRS adjusted net earnings per
share ....................................
|
$
|
0.25
|
|
|
|
$
|
0.16
|
|
|
|
# of shares outstanding (in
millions) ...............................................
|
211.6
|
|
|
|
184.0
|
|
|
|
|
|
|
|
|
IFRS cash provided by operations..............................................
|
$
|
84.1
|
|
|
|
$
|
23.3
|
|
|
|
Purchase of property, plant and equipment, net of sales proceeds.
|
(38.7
|
)
|
|
|
(9.0
|
)
|
|
|
Finance costs
paid .........................................................................
|
(1.0
|
)
|
|
|
(0.8
|
)
|
|
Non-IFRS free cash flow (3) ..........................................................
|
$
|
44.4
|
|
|
|
$
|
13.5
|
|
|
|
|
|
|
|
|
ROIC % (4) ........................................................................................
|
23.7
|
%
|
|
|
14.4
|
%
|
|
(1)
|
EBIAT is defined as earnings before interest, amortization of intangible
assets (excluding computer software) and income taxes. EBIAT also
excludes 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 operational cash flow performance. We
believe free cash flow provides another level of transparency to our
liquidity as it represents 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 ROIC as a measure to assess the effectiveness of the
invested capital we use to build products or provide services to our
customers. Our ROIC measure includes operating margin, working capital
management and asset utilization. ROIC is calculated by dividing EBIAT
by average net invested capital. Net invested capital consists of 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. There is no comparable measure under IFRS.
|
The following table sets forth, for the periods indicated, our
calculation of ROIC % (in millions, except ROIC %):
|
Three months ended March 31
|
|
2012
|
|
2013
|
Non-IFRS operating earnings (EBIAT) .....................
|
$
|
57.9
|
|
|
$
|
34.7
|
|
Multiplier ..................................................................
|
4
|
|
|
4
|
|
Annualized EBIAT ....................................................
|
$
|
231.6
|
|
|
$
|
138.8
|
|
|
|
|
|
Average net invested capital for the period .............
|
$
|
977.5
|
|
|
$
|
965.4
|
|
|
|
|
|
ROIC
% ....................................................................
|
23.7
|
%
|
|
14.4
|
%
|
|
|
|
|
|
December 31
2012
|
|
March 31
2013
|
Net invested capital consists of:
|
|
|
|
Total
assets .............................................................
|
$
|
2,658.8
|
|
|
$
|
2,643.4
|
|
Less:
cash................................................................
|
550.5
|
|
|
531.3
|
|
Less: accounts payable, accrued and other current
liabilities, provisions and income taxes payable .......
|
1,143.9
|
|
|
1,145.7
|
|
Net invested capital by quarter ................................
|
$
|
964.4
|
|
|
$
|
966.4
|
|
|
|
|
|
|
December 31
2011
|
|
March 31
2012
|
Net invested capital consists of:
|
|
|
|
Total
assets .............................................................
|
$
|
2,969.6
|
|
|
$
|
2,955.4
|
|
Less:
cash ...............................................................
|
658.9
|
|
|
646.7
|
|
Less: accounts payable, accrued and other current
liabilities, provisions and income taxes payable .......
|
1,346.6
|
|
|
1,317.8
|
|
Net invested capital by quarter ................................
|
$
|
964.1
|
|
|
$
|
990.9
|
|
GUIDANCE SUMMARY
|
Q1 13 Guidance
|
|
Q1 13 Actual
|
|
Q2 13 Guidance (1)
|
Revenue (in billions) .........
|
$1.325 to $1.425
|
|
$1.37
|
|
$1.375 to $1.475
|
Adjusted EPS (diluted)......
|
$0.11 to $0.17
|
|
$0.16
|
|
$0.13 to $0.19
|
(1)
|
We expect a negative $0.05 to $0.10 per share (diluted) pre-tax
aggregate impact on an IFRS basis for the following recurring items:
stock-based compensation, amortization of intangible assets (excluding
computer software) and restructuring charges.
|
CELESTICA INC.
|
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions of U.S. dollars)
(unaudited)
|
|
January 1
2012
|
|
December 31 2012
|
|
March 31
2013
|
Assets
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents (note
11) .................................................
|
$
|
658.9
|
|
|
$
|
550.5
|
|
|
$
|
531.3
|
|
|
|
Accounts receivable (note
5) ...........................................................
|
810.8
|
|
|
700.5
|
|
|
685.7
|
|
|
|
Inventories
(note 6) .........................................................................
|
880.7
|
|
|
745.7
|
|
|
788.8
|
|
|
|
Income taxes
receivable ..................................................................
|
9.1
|
|
|
13.8
|
|
|
15.1
|
|
|
|
Assets classified as
held-for-sale ....................................................
|
32.1
|
|
|
30.8
|
|
|
29.3
|
|
|
|
Other current
assets .......................................................................
|
71.0
|
|
|
69.4
|
|
|
61.3
|
|
Total current
assets ...............................................................................
|
2,462.6
|
|
|
2,110.7
|
|
|
2,111.5
|
|
|
|
|
|
|
|
Property, plant and
equipment ...............................................................
|
322.7
|
|
|
337.0
|
|
|
327.6
|
|
Goodwill ..................................................................................................
|
48.0
|
|
|
60.3
|
|
|
60.3
|
|
Intangible
assets ....................................................................................
|
35.5
|
|
|
53.0
|
|
|
50.2
|
|
Deferred income
taxes ...........................................................................
|
41.4
|
|
|
36.6
|
|
|
34.9
|
|
Other non-current
assets .......................................................................
|
59.4
|
|
|
61.2
|
|
|
58.9
|
|
Total
assets ...........................................................................................
|
$
|
2,969.6
|
|
|
$
|
2,658.8
|
|
|
$
|
2,643.4
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Borrowings under credit facilities (note
7) ...........................................
|
$
|
—
|
|
|
$
|
55.0
|
|
|
$
|
20.0
|
|
|
Accounts
payable ...............................................................................
|
1,002.6
|
|
|
831.6
|
|
|
868.2
|
|
|
Accrued and other current
liabilities ...................................................
|
268.7
|
|
|
243.7
|
|
|
214.4
|
|
|
Income taxes
payable .........................................................................
|
39.0
|
|
|
37.8
|
|
|
37.3
|
|
|
Current portion of
provisions ..............................................................
|
36.3
|
|
|
30.8
|
|
|
25.8
|
|
Total current
liabilities .............................................................................
|
1,346.6
|
|
|
1,198.9
|
|
|
1,165.7
|
|
|
|
|
|
|
|
Pension and non-pension post-employment benefit obligations (note 2)
|
113.8
|
|
|
110.2
|
|
|
108.8
|
|
Provisions and other non-current
liabilities .............................................
|
11.1
|
|
|
13.5
|
|
|
13.8
|
|
Deferred income
taxes ............................................................................
|
27.6
|
|
|
13.5
|
|
|
10.7
|
|
Total
liabilities .........................................................................................
|
1,499.1
|
|
|
1,336.1
|
|
|
1,299.0
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
Capital stock
(note 8) ..........................................................................
|
3,348.0
|
|
|
2,774.7
|
|
|
2,785.3
|
|
|
Treasury stock
(note 8) .......................................................................
|
(37.9
|
)
|
|
(18.3
|
)
|
|
(2.2
|
)
|
|
Contributed
surplus .............................................................................
|
369.5
|
|
|
653.2
|
|
|
638.9
|
|
|
Deficit (note
2) .....................................................................................
|
(2,196.8
|
)
|
|
(2,091.0
|
)
|
|
(2,080.5
|
)
|
Accumulated other comprehensive income
(loss) ...................................
|
(12.3
|
)
|
|
4.1
|
|
|
2.9
|
|
Total
equity .............................................................................................
|
1,470.5
|
|
|
1,322.7
|
|
|
1,344.4
|
|
Total liabilities and
equity .......................................................................
|
$
|
2,969.6
|
|
|
$
|
2,658.8
|
|
|
$
|
2,643.4
|
|
Contingencies (note 12)
|
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
|
|
March 31
|
|
2012
|
|
2013
|
Revenue .............................................................................
|
$
|
1,690.9
|
|
|
$
|
1,372.4
|
|
Cost of sales (note
6) .........................................................
|
1,578.8
|
|
|
1,285.6
|
|
Gross
profit ........................................................................
|
112.1
|
|
|
86.8
|
|
Selling, general and administrative expenses (SG&A) .......
|
60.0
|
|
|
56.7
|
|
Research and development ...............................................
|
3.2
|
|
|
3.2
|
|
Amortization of intangible
assets ........................................
|
2.5
|
|
|
3.4
|
|
Other charges (recoveries) (note 9) ..................................
|
(1.1
|
)
|
|
7.3
|
|
Earnings from
operations ...................................................
|
47.5
|
|
|
16.2
|
|
Finance
costs .....................................................................
|
0.8
|
|
|
0.8
|
|
Earnings before income
taxes ............................................
|
46.7
|
|
|
15.4
|
|
Income tax expense (recovery) (note 10):...........................
|
|
|
|
|
Current ...........................................................................
|
3.5
|
|
|
6.1
|
|
|
Deferred .........................................................................
|
—
|
|
|
(1.2
|
)
|
|
3.5
|
|
|
4.9
|
|
Net earnings for the
period ................................................
|
$
|
43.2
|
|
|
$
|
10.5
|
|
|
|
|
|
Basic earnings per
share ...................................................
|
$
|
0.20
|
|
|
$
|
0.06
|
|
|
|
|
|
Diluted earnings per
share .................................................
|
$
|
0.20
|
|
|
$
|
0.06
|
|
|
|
|
|
Shares used in computing per share amounts (in millions):
|
|
|
|
|
Basic ...............................................................................
|
215.7
|
|
|
183.4
|
|
|
Diluted .............................................................................
|
217.9
|
|
|
185.0
|
|
The accompanying notes are an integral part of these unaudited interim
condensed consolidated financial statements.
|
CELESTICA INC.
|
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions of U.S. dollars)
(unaudited)
|
|
Three months ended
|
|
March 31
|
|
2012
|
|
2013
|
Net earnings for the
period ...................................................
|
$
|
43.2
|
|
|
$
|
10.5
|
|
Other comprehensive income (loss), net of tax:.....................
|
|
|
|
|
Currency translation differences for foreign operations (a)
|
1.1
|
|
|
(3.2
|
)
|
|
Changes from derivatives designated as hedges (a) .........
|
12.2
|
|
|
2.0
|
|
Total comprehensive income for the period ..........................
|
$
|
56.5
|
|
|
$
|
9.3
|
|
(a) Amounts may be reclassified to net earnings in subsequent periods.
|
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 .......................................
|
11.1
|
|
|
—
|
|
|
(8.3
|
)
|
|
—
|
|
|
—
|
|
|
2.8
|
|
|
Repurchase of capital stock for cancellation .........
|
(99.5
|
)
|
|
—
|
|
|
43.1
|
|
|
—
|
|
|
—
|
|
|
(56.4
|
)
|
|
Purchase of treasury stock....................................
|
—
|
|
|
(3.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.0
|
)
|
|
Stock-based compensation and other ...................
|
—
|
|
|
38.4
|
|
|
(27.0
|
)
|
|
—
|
|
|
—
|
|
|
11.4
|
|
Total comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings for the period ....................................
|
—
|
|
|
—
|
|
|
—
|
|
|
43.2
|
|
|
—
|
|
|
43.2
|
|
|
Other comprehensive income, net of tax:...............
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation differences for foreign
operations .............................................................
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.1
|
|
|
1.1
|
|
|
Changes from derivatives designated as
hedges ..................................................................
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12.2
|
|
|
12.2
|
|
Balance -- March 31, 2012 ......................................
|
$
|
3,259.6
|
|
|
$
|
(2.5
|
)
|
|
$
|
377.3
|
|
|
$
|
(2,153.6
|
)
|
|
$
|
1.0
|
|
|
$
|
1,481.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance -- January 1, 2013, as previously reported
|
$
|
2,774.7
|
|
|
$
|
(18.3
|
)
|
|
$
|
653.2
|
|
|
$
|
(2,097.0
|
)
|
|
$
|
4.1
|
|
|
$
|
1,316.7
|
|
Impact of change in accounting policy (note 2) ........
|
—
|
|
|
—
|
|
|
—
|
|
|
6.0
|
|
|
—
|
|
|
6.0
|
|
Restated balance at January 1, 2013 ......................
|
2,774.7
|
|
|
(18.3
|
)
|
|
653.2
|
|
|
(2,091.0
|
)
|
|
4.1
|
|
|
1,322.7
|
|
Capital transactions (note 8):
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of capital stock .......................................
|
10.6
|
|
|
—
|
|
|
(7.9
|
)
|
|
—
|
|
|
—
|
|
|
2.7
|
|
|
Purchase of treasury stock ....................................
|
—
|
|
|
(0.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
|
Stock-based compensation and other ...................
|
—
|
|
|
16.5
|
|
|
(6.4
|
)
|
|
—
|
|
|
—
|
|
|
10.1
|
|
Total comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings for the period ....................................
|
—
|
|
|
—
|
|
|
—
|
|
|
10.5
|
|
|
—
|
|
|
10.5
|
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation differences for foreign
operations .............................................................
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.2
|
)
|
|
(3.2
|
)
|
|
Changes from derivatives designated as
hedges ..................................................................
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.0
|
|
|
2.0
|
|
Balance -- March 31, 2013 ......................................
|
$
|
2,785.3
|
|
|
$
|
(2.2
|
)
|
|
$
|
638.9
|
|
|
$
|
(2,080.5
|
)
|
|
$
|
2.9
|
|
|
$
|
1,344.4
|
|
(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
|
|
March 31
|
|
2012
|
|
2013
|
Cash provided by (used in):
|
|
|
|
Operating activities:
|
|
|
|
Net earnings for the
period .....................................................................
|
$
|
43.2
|
|
|
$
|
10.5
|
|
Adjustments for items not affecting cash:
|
|
|
|
|
Depreciation and
amortization ..............................................................
|
19.2
|
|
|
18.9
|
|
|
Equity-settled stock-based
compensation ............................................
|
10.7
|
|
|
9.5
|
|
|
Other charges (note
9) .........................................................................
|
1.9
|
|
|
0.3
|
|
|
Finance
costs .......................................................................................
|
0.8
|
|
|
0.8
|
|
|
Income tax
expense ..............................................................................
|
3.5
|
|
|
4.9
|
|
Other ......................................................................................................
|
7.6
|
|
|
(0.6
|
)
|
Changes in non-cash working capital items:
|
|
|
|
|
Accounts
receivable .............................................................................
|
50.6
|
|
|
14.8
|
|
|
Inventories ............................................................................................
|
(32.4
|
)
|
|
(43.1
|
)
|
|
Other current
assets .............................................................................
|
3.4
|
|
|
12.9
|
|
|
Accounts payable, accrued and other current liabilities and provisions
|
(20.0
|
)
|
|
1.3
|
|
Non-cash working capital
changes ..........................................................
|
1.6
|
|
|
(14.1
|
)
|
Net income taxes paid
............................................................................
|
(4.4
|
)
|
|
(6.9
|
)
|
Net cash provided by operating
activities ................................................
|
84.1
|
|
|
23.3
|
|
|
|
|
|
Investing activities:
|
|
|
|
Purchase of computer software and property, plant and equipment ......
|
(38.8
|
)
|
|
(10.6
|
)
|
Proceeds from sale of
assets ..................................................................
|
0.1
|
|
|
1.6
|
|
Net cash used in investing
activities ........................................................
|
(38.7
|
)
|
|
(9.0
|
)
|
|
|
|
|
Financing activities:
|
|
|
|
Repayment under credit facilities (note
7) ...............................................
|
—
|
|
|
(35.0
|
)
|
Issuance of capital stock (note
8) ............................................................
|
2.8
|
|
|
2.7
|
|
Repurchase of capital stock for cancellation (note
8) .............................
|
(56.4
|
)
|
|
—
|
|
Purchase of treasury stock (note
8) ........................................................
|
(3.0
|
)
|
|
(0.4
|
)
|
Finance costs
paid ..................................................................................
|
(1.0
|
)
|
|
(0.8
|
)
|
Net cash used in financing
activities ........................................................
|
(57.6
|
)
|
|
(33.5
|
)
|
|
|
|
|
Net decrease in cash and cash
equivalents ............................................
|
(12.2
|
)
|
|
(19.2
|
)
|
Cash and cash equivalents, beginning of
period ....................................
|
658.9
|
|
|
550.5
|
|
Cash and cash equivalents, end of
period .............................................
|
$
|
646.7
|
|
|
$
|
531.3
|
|
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 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 is a publicly listed company 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 March 31, 2013 and the results of operations,
comprehensive income and cash flows for the three months ended
March 31, 2013.
The unaudited interim condensed consolidated financial statements were
authorized for issuance by our board of directors on April 22, 2013.
Functional and presentation currency:
These unaudited interim condensed consolidated financial statements are
presented in U.S. dollars, which is also our functional currency. All
financial information is presented in millions of U.S. dollars (except
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. 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 restructuring charges or
recoveries; the measurement of the recoverable amount of our cash
generating units (CGU); 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 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 associated with restructuring plans.
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.
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 for the first quarter of
2013 was not significant. Under this amendment, we continue to
recognize actuarial gains or losses on plan assets or obligations
through other comprehensive income and to reclassify the amounts to
deficit.
3. RECENT ACQUISITION
In September 2012, we completed the acquisition of D&H Manufacturing
Company (D&H), a leading 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 the acquisition date, we recorded $26.4 in goodwill and $24.0 in
customer intangible assets. We expensed $0.9 in acquisition-related
transaction costs during 2012 through other charges.
4. SEGMENT AND CUSTOMER REPORTING
End markets:
The following table indicates revenue by end market as a percentage of
total revenue. Our revenue fluctuates from period-to-period depending
on numerous factors, including but not limited to: seasonality of
business, the mix and complexity of the products or services we
provide, the extent, timing and rate of new program wins, follow-on
business or program losses, the phasing in or out of programs, the
success in the marketplace of our customers' products, and changes in
customer demand. We expect that the pace of technological change, the
frequency of customers transferring business among EMS competitors and
the level of outsourcing by customers (including decisions on
insourcing), and the dynamics of the global economy will also continue
to impact our business from period-to-period.
|
Three months ended March 31
|
|
2012
|
|
2013
|
Communications....
|
33%
|
|
40%
|
Consumer .............
|
23%
|
|
7%
|
Diversified.............
|
19%
|
|
24%
|
Servers .................
|
15%
|
|
16%
|
Storage .................
|
10%
|
|
13%
|
Customers:
For the first quarter of 2013, we had two customers that individually
represented more than 10% of total revenue (first quarter of 2012 — one
customer). We completed our manufacturing services for Research In
Motion Limited (RIM) and the related transition activities by the end
of 2012. Our revenue from RIM in the first quarter of 2013 was zero
(first quarter of 2012 — 19% of total revenue; fourth quarter of 2012 —
minimal). For the full year 2012, RIM accounted for 12% of total
revenue.
5. ACCOUNTS RECEIVABLE
We have an agreement to sell up to $375.0 in accounts receivable on an
uncommitted basis (subject to pre-determined limits by customer) to two
third-party banks. Both banks had a Standard and Poor's long-term
rating of A or above and short-term rating of A-1 at March 31, 2013.
This agreement can be terminated at any time by the banks or us. At
March 31, 2013, we had sold $60.0 of accounts receivable under this
facility (December 31, 2012 — $50.0). The accounts receivable sold are
removed from our consolidated balance sheet and reflected as cash
provided by operating activities in our consolidated statement of cash
flows. Upon sale, we assign the rights to the accounts receivable to
the banks. We continue to collect cash from our customers and remit the
cash to the banks when collected. We pay interest and fees which we
record through finance costs in our consolidated statement of
operations.
6. INVENTORIES
We record our inventory provisions and valuation recoveries through cost
of sales. We record inventory provisions to reflect changes in the
value of our inventory to net realizable value, and valuation
recoveries primarily to reflect realized gains on the disposition of
inventory previously written down. We recorded net inventory provisions
of $3.3 for the first quarter of 2013 (first quarter of 2012 — $3.5).
We regularly review our estimates and assumptions used to value our
inventory through analysis of historical performance.
7. CREDIT FACILITIES
We have a $400.0 revolving credit facility that matures in
January 2015. We are required to comply with certain restrictive
covenants including those relating to debt incurrence, the sale of
assets, a change of control and certain financial covenants related to
indebtedness, interest coverage and liquidity. We pledged certain
assets as security for borrowings under this facility. The facility
includes a $25.0 swing line that provides for short-term borrowings up
to a maximum of seven days. The credit facility permits us and certain
designated subsidiaries to borrow funds for general corporate purposes
(including acquisitions).
Borrowings under this facility bear interest at LIBOR or Prime rate for
the period of the draw plus a margin. These borrowings have
historically been outstanding for fewer than 90 days. In December 2012,
we completed a substantial issuer bid (SIB) to repurchase for
cancellation $175.0 of our subordinate voting shares which we funded in
part through this credit facility. See note 8. At March 31, 2013, we
had $20.0 outstanding under this facility (December 31, 2012 — $55.0
outstanding), and we were in compliance with all covenants. Commitment
fees paid in the first quarter of 2013 were $0.5. At March 31, 2013, we
had issued $30.5 (December 31, 2012 — $31.1) in letters of credit under
this facility.
We also have uncommitted bank overdraft facilities available for
intraday and overnight operating requirements which total $70.0 at
March 31, 2013. There were no amounts outstanding under these overdraft
facilities at March 31, 2013 (December 31, 2012— no amounts
outstanding).
The amounts we borrow and repay under these facilities can vary
significantly from month-to-month depending upon our working capital
and other cash requirements.
8. CAPITAL STOCK
In the fourth quarter of 2012, we completed a SIB and repurchased for
cancellation 22.4 million subordinate voting shares for $175.0. We
funded the share repurchases using a combination of cash on hand and
cash drawn from our revolving credit facility. See note 7.
Our Normal Course Issuer Bid (NCIB) that allowed us to repurchase up to
16.2 million subordinate voting shares in the open market expired in
February 2013. During the first quarter of 2013, we did not repurchase
any subordinate voting shares for cancellation under the NCIB. During
the first quarter of 2012, we had paid $56.4 to repurchase for
cancellation 6.0 million subordinate voting shares under this NCIB
(full year 2012 — paid $113.8 for 13.3 million shares).
We grant share unit awards to employees under our equity-based
compensation plans. We have the option to satisfy the delivery of
shares upon vesting of the awards by issuing new subordinate voting
shares from treasury, purchasing subordinate voting shares in the open
market, or by settling in cash. From time-to-time, we pay cash for the
purchase by a trustee of subordinate voting shares in the open market
to satisfy the delivery of shares upon vesting of awards. For
accounting purposes, we classify these shares as treasury stock until
they are delivered pursuant to the plans. In addition to the $17.9 paid
in the fourth quarter of 2012, we paid $0.4 in January 2013 for a
trustee to complete an Automated Share Purchase Plan (ASPP), pursuant
to which 2.2 million subordinate voting shares were purchased in the
open market for delivery under our equity-based compensation plans.
During the first quarter of 2012, we paid $3.0 for the trustee's
purchase of subordinate voting shares in the open market. At March 31,
2013, the trustee held 0.3 million subordinate voting shares with a
value of $2.2. At December 31, 2012, the trustee held 0.8 million
subordinate voting shares with a value of $6.4, and $11.9 in cash,
representing the estimated amount of cash required to complete the
ASPP.
The following table outlines the activities for equity-based awards for
the three months ended March 31, 2013:
Number of awards (in millions)...................................................................
|
|
Options (iii)
|
|
RSUs
|
|
PSUs (i)
|
|
|
|
|
|
|
|
Outstanding at December 31,
2012 ..................................................................
|
|
6.0
|
|
|
3.4
|
|
|
4.8
|
|
Granted
(i) ........................................................................................................
|
|
1.0
|
|
|
2.2
|
|
|
2.1
|
|
Exercised or settled
(ii) .....................................................................................
|
|
(0.5
|
)
|
|
(1.4
|
)
|
|
(1.3
|
)
|
Forfeited/expired ..............................................................................................
|
|
(0.2
|
)
|
|
(0.1
|
)
|
|
(0.1
|
)
|
Outstanding at March 31,
2013 ........................................................................
|
|
6.3
|
|
|
4.1
|
|
|
5.5
|
|
|
|
|
|
|
|
|
Weighted-average grant date fair value of options and share units
granted..
|
|
$
|
3.73
|
|
|
$
|
8.23
|
|
|
$
|
8.74
|
|
(i)
|
During the first quarter of 2013, we granted 2.1 million performance
share units (PSUs), of which 60% vest based on the achievement of a
market performance condition tied to Total Shareholder Return (TSR) and
40% vest based on a non-market performance condition. See note 2(n) of
our 2012 annual consolidated financial statements for a description of
TSR. We estimated the grant date fair value of the TSR-based portion of
PSUs using a Monte Carlo simulation model. The fair value of the
balance of the PSUs is based on the market value of our subordinate
voting shares at the time of grant. We expect to settle these awards
with subordinate voting shares purchased in the open market. The number
of PSUs that will actually vest will vary from 0% to 200% depending on
the achievement of pre-determined performance goals and financial
targets. The number of PSUs above represents the maximum payout at
200%. During the first quarter of 2012, we granted 2.4 million PSUs,
all of which vest based on the achievement of a market performance
condition tied to TSR.
|
(ii)
|
During the first quarter of 2013, we received cash proceeds of $2.7
(first quarter of 2012 — $2.8) relating to the exercise of stock
options.
|
(iii)
|
We estimated the grant date fair value of options using the
Black-Scholes option pricing model. The estimates we use in the pricing
model include the following: expected price volatility of our
subordinate voting shares, weighted average expected life of the
option, expected dividends, and the risk-free interest rate.
|
For the first quarter of 2013, stock-based compensation expense was $9.5
(first quarter of 2012 — $10.7). The amount of our stock-based
compensation expense varies each period. The portion of our expense
that relates to performance-based compensation generally varies
depending on the level of achievement of pre-determined performance
goals and financial targets.
9. OTHER CHARGES (RECOVERIES)
Our other charges (recoveries) are comprised of the following
restructuring charges (recoveries):
|
Three months ended March 31
|
|
2012
|
|
2013
|
Cash charges (recoveries).....
|
$
|
(3.0
|
)
|
|
$
|
7.0
|
|
Non-cash charges..................
|
1.9
|
|
|
0.3
|
|
|
$
|
(1.1
|
)
|
|
$
|
7.3
|
|
We completed our manufacturing services for RIM and the related
transition activities by the end of 2012. Due to the historical
significance of RIM to our operations and in response to the continued
challenging demand environment, we previously announced restructuring
actions throughout our global network to reduce our overall cost
structure and improve our margin performance. We recorded restructuring
charges of $7.3 in the first quarter of 2013 and $44.0 in 2012. In the
first quarter of 2013, we recorded cash charges of $7.0, primarily
related to employee termination costs for actions taken throughout our
global network.
The recognition of our restructuring charges required us to make certain
judgments and estimates regarding the nature, timing and amounts
associated with the restructuring actions. Our major assumptions
included the timing and number of employees to be terminated, the
measurement of termination costs, and the timing of disposition and
estimated fair values used for assets available for sale. We developed
a detailed plan and have recorded termination costs for employees with
whom we have communicated. We engaged independent brokers to determine
the estimated fair values less costs to sell for assets we no longer
used and which were available for sale. We recognized an impairment
loss for assets whose carrying amount exceeded the fair values less
costs to sell as determined by the third-party brokers. We also
recorded adjustments to reflect actual proceeds on disposition of these
assets. At the end of each reporting period, we evaluate the
appropriateness of our restructuring charges and balances. Further
adjustments may be required to reflect actual experience or changes in
estimates.
At March 31, 2013, our restructuring provision was $10.9 (December 31,
2012 — $14.8), comprised primarily of employee termination costs which
we expect to pay by the end of June 2013.
10. INCOME TAXES
Our effective income tax rate can vary significantly quarter-to-quarter
for various reasons, including the mix and volume of business in lower
tax jurisdictions within Europe and Asia, in jurisdictions with tax
holidays and tax incentives, and in jurisdictions for which no deferred
income tax assets have been recognized because management believed it
was not probable that future taxable profit would be available against
which tax losses and deductible temporary differences could be
utilized. Our effective income tax rate can also vary due to the
impact of restructuring charges, foreign exchange fluctuations,
operating losses, and changes in our provisions related to tax
uncertainties.
See note 12 regarding income tax contingencies.
11. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Our financial assets are comprised primarily of cash and cash
equivalents, accounts receivable and derivatives used for hedging
purposes. Our financial liabilities are comprised primarily of accounts
payable, certain accrued and other liabilities and provisions, and
derivatives. We record the majority of our financial liabilities at
amortized cost except for derivative liabilities, which we measure at
fair value. We classify our term deposits as held-to-maturity. We
record our short-term investments in money market funds at fair value,
with changes recognized through our consolidated statement of
operations.
We classify the financial assets and liabilities that we measure at fair
value based on the inputs used to determine fair value at the
measurement date. See note 20 of our 2012 annual consolidated financial
statements for details of the input levels used and our fair value
hierarchy at December 31, 2012. There have been no significant changes
to the source of our inputs since December 31, 2012.
Cash and cash equivalents are comprised of the following:
|
December 31
2012
|
|
March 31 2013
|
Cash ......................
|
$
|
265.3
|
|
|
$
|
311.9
|
|
Cash equivalents...
|
285.2
|
|
|
219.4
|
|
|
$
|
550.5
|
|
|
$
|
531.3
|
|
Our current portfolio consists of bank deposits and certain money market
funds that hold primarily U.S. government securities. The majority of
our cash and cash equivalents is held with financial institutions each
of which had at March 31, 2013 a Standard and Poor's short-term rating
of A-1 or above.
Currency risk:
Due to the global nature of our operations, we are exposed to exchange
rate fluctuations on our financial instruments denominated in various
currencies. The majority of our currency risk is driven by the
operational costs incurred in local currencies by our subsidiaries. We
manage our currency risk through our hedging program using forecasts of
future cash flows and balance sheet exposures denominated in foreign
currencies.
Our major currency exposures at March 31, 2013 are summarized in U.S.
dollar equivalents in the following table. We have included in this
table only those items that we classify as financial assets or
liabilities and which were denominated in non-functional currencies. In
accordance with the financial instruments standard, we have excluded
items such as pension and non-pension post-employment benefits and
income taxes. The local currency amounts have been converted to U.S.
dollar equivalents using the spot rates at March 29, 2013.
|
Malaysian ringgit
|
|
Mexican peso
|
|
Thai
baht
|
Cash and cash
equivalents ...............................................................................
|
$
|
0.9
|
|
|
$
|
1.8
|
|
|
$
|
0.5
|
|
Other financial
assets........................................................................................
|
0.6
|
|
|
0.4
|
|
|
0.4
|
|
Accounts payable and certain accrued and other liabilities and
provisions......
|
(14.7
|
)
|
|
(13.6
|
)
|
|
(18.1
|
)
|
Net financial
liabilities.........................................................................................
|
$
|
(13.2
|
)
|
|
$
|
(11.4
|
)
|
|
$
|
(17.2
|
)
|
Foreign currency risk sensitivity analysis:
At March 31, 2013, the financial impact of a one-percentage point
strengthening or weakening of the following currencies against the U.S.
dollar for our financial instruments denominated in non-functional
currencies is summarized in the following table. The financial
instruments impacted by a change in exchange rates include our
exposures to the above financial assets or liabilities denominated in
non-functional currencies and our foreign exchange forward contracts.
|
Malaysian
ringgit
|
|
Mexican
peso
|
|
Thai baht
|
|
Increase (decrease)
|
1% Strengthening...........................
|
|
|
|
|
|
|
Net earnings ...............................
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Other comprehensive income ....
|
0.8
|
|
|
0.3
|
|
|
1.0
|
|
1% Weakening...............................
|
|
|
|
|
|
|
Net earnings ...............................
|
—
|
|
|
—
|
|
|
—
|
|
|
Other comprehensive income .....
|
(0.8
|
)
|
|
(0.3
|
)
|
|
(1.0
|
)
|
At March 31, 2013, we had forward exchange contracts to trade
U.S. dollars in exchange for the following currencies:
Currency
|
|
Amount of
U.S. dollars
|
|
Weighted
average
exchange rate of
U.S. dollars
|
|
Maximum
period in
months
|
|
Fair value
gain/(loss)
|
Canadian dollar..............
|
|
$
|
244.4
|
|
|
$
|
0.99
|
|
|
6
|
|
$
|
(2.1
|
)
|
Thai baht........................
|
|
117.3
|
|
|
0.03
|
|
|
15
|
|
5.7
|
|
Malaysian ringgit............
|
|
94.4
|
|
|
0.32
|
|
|
15
|
|
0.2
|
|
Mexican peso ................
|
|
49.5
|
|
|
0.08
|
|
|
12
|
|
1.6
|
|
British pound .................
|
|
77.4
|
|
|
1.57
|
|
|
4
|
|
2.4
|
|
Chinese renminbi ...........
|
|
41.8
|
|
|
0.16
|
|
|
12
|
|
0.2
|
|
Euro ...............................
|
|
13.2
|
|
|
1.29
|
|
|
4
|
|
(0.1
|
)
|
Romanian leu..................
|
|
12.2
|
|
|
0.28
|
|
|
12
|
|
0.1
|
|
Japanese yen ................
|
|
16.4
|
|
|
0.01
|
|
|
2
|
|
(0.1
|
)
|
Singapore dollar .............
|
|
10.5
|
|
|
0.81
|
|
|
12
|
|
(0.1
|
)
|
Other ..............................
|
|
9.6
|
|
|
—
|
|
|
3
|
|
—
|
|
Total ...............................
|
|
$
|
686.7
|
|
|
|
|
|
|
$
|
7.8
|
|
At March 31, 2013, the fair value of these contracts was a net
unrealized gain of $7.8 (December 31, 2012 — $4.2). Changes in the fair
value of hedging derivatives to which we apply cash flow hedge
accounting, to the extent effective, are deferred in other
comprehensive income until the expenses or items being hedged are
recognized in our consolidated statement of operations. Any hedge
ineffectiveness, which at March 31, 2013 was not significant, is
recognized immediately in our consolidated statement of operations. At
March 31, 2013, we recorded $11.2 of derivative assets in other current
assets and $3.4 of derivative liabilities in accrued and other current
liabilities. The unrealized gains or losses are a result of
fluctuations in foreign exchange rates between the date the currency
forward contracts were entered into and the valuation date at period
end.
12. CONTINGENCIES
Litigation
In the normal course of our operations, we may be subject to lawsuits,
investigations and other claims, including environmental, labor,
product, customer disputes and other matters. Management believes that
adequate provisions have been recorded in the accounts where required.
Although it is not always possible to estimate the extent of potential
costs, if any, management believes that the ultimate resolution of such
matters will not have a material adverse impact on our results of
operations, financial position or liquidity.
In 2007, securities class action lawsuits were commenced against us and
our former Chief Executive and Chief Financial Officers, in the United
States District Court of the Southern District of New York by certain
individuals, on behalf of themselves and other unnamed purchasers of
our stock, claiming that they were purchasers of our stock during the
period January 27, 2005 through January 30, 2007. The plaintiffs allege
violations of United States federal securities laws and seek
unspecified damages. They allege that during the purported period we
made statements concerning our actual and anticipated future financial
results that failed to disclose certain purportedly material adverse
information with respect to demand and inventory in our Mexican
operations and our information technology and communications divisions.
In an amended complaint, the plaintiffs added one of our directors and
Onex Corporation as defendants. On October 14, 2010, the District Court
granted the defendants' motions to dismiss the consolidated amended
complaint in its entirety. The plaintiffs appealed to the United States
Court of Appeals for the Second Circuit the dismissal of its claims
against us, and our former Chief Executive and Chief Financial
Officers, but not as to the other defendants. In a summary order dated
December 29, 2011, the Court of Appeals reversed the District Court's
dismissal of the consolidated amended complaint and remanded the case
to the District Court for further proceedings. The parties are
currently engaged in the discovery process. Parallel class proceedings,
including a claim issued in October 2011, remain against us and our
former Chief Executive and Chief Financial Officers in the Ontario
Superior Court of Justice. On October 15, 2012, the Ontario Superior
Court of Justice granted limited aspects of the defendants' motion to
strike, which ruling is subject to appeal, but the court has not
granted leave nor certification of any actions. We believe the
allegations in the claims are without merit and we intend to defend
against them vigorously. However, there can be no assurance that the
outcome of the litigation will be favorable to us or that it will not
have a material adverse impact on our financial position or liquidity.
In addition, we may incur substantial litigation expenses in defending
the claims. We have liability insurance coverage that may cover some of
our litigation expenses, and potential judgments or settlement costs.
Income taxes
We are subject to increased scrutiny in tax audits and reviews globally
by various tax authorities of historical information which could result
in additional tax expense in future periods relating to prior results.
Reviews by tax authorities generally focus on, but are not limited to,
the validity of our inter-company transactions, including financing and
transfer pricing policies which generally involve subjective areas of
taxation and a significant degree of judgment. If any of these tax
authorities are successful with their challenges, our income tax
expense may be adversely affected and we could also be subject to
interest and penalty charges.
In connection with ongoing tax audits in Canada, tax authorities have
taken the position that income reported by one of our Canadian
subsidiaries should have been materially higher in 2001 and 2002 and
materially lower in 2003 and 2004 as a result of certain inter-company
transactions, and have proposed limitations on benefits associated with
favorable adjustments arising from inter-company transactions and other
adjustments. If tax authorities are successful with their challenge, we
estimate that the maximum net impact for additional income taxes and
interest charges associated with the proposed limitations of the
favorable adjustments could be approximately $41 million Canadian
dollars (approximately $40.4 at current exchange rates).
Canadian tax authorities have taken the position that certain interest
amounts deducted by one of our Canadian entities in 2002 through 2004
on historical debt instruments should be re-characterized as capital
losses. If tax authorities are successful with their challenge, we
estimate that the maximum net impact for additional income taxes and
interest charges could be approximately $30.7 million Canadian dollars
(approximately $30.2 at current exchange rates). We believe that our
asserted position is appropriate and would be sustained upon full
examination by the tax authorities and, if necessary, upon
consideration by the judicial courts. Our position is supported by our
Canadian legal tax advisors.
Tax authorities in Brazil had taken the position that income reported by
our Brazilian subsidiary in 2004 should have been materially higher as
a result of certain inter-company transactions. In 2011 and 2012, we
received favorable Administrative Court decisions that were largely
consistent with our original filing position. Although we believe it is
unlikely to occur, the Brazilian tax authorities have the right to
present a Special Appeal to challenge the Higher Administrative Court
decision. We did not previously accrue for any potential adverse tax
impact for the 2004 tax audit. Brazilian tax authorities are not
precluded from taking similar positions in future audits with respect
to these types of transactions.
We have and expect to continue to recognize the future benefit of
certain Brazilian tax losses on the basis that these tax losses can and
will be fully utilized in the fiscal period ending on the date of
dissolution of our Brazilian subsidiary. While our ability to do so is
not certain, we believe that our interpretation of applicable Brazilian
law will be sustained upon full examination by the Brazilian tax
authorities and, if necessary, upon consideration by the Brazilian
judicial courts. Our position is supported by our Brazilian legal tax
advisors. A change to the benefit realizable on these Brazilian losses
could increase our net deferred tax liabilities by approximately 50.1
million Brazilian reais (approximately $24.9 at current exchange
rates).
The successful pursuit of the assertions made by any taxing authority
related to the above noted tax audits or others could result in our
owing significant amounts of tax, interest and possibly penalties. We
believe we have substantial defenses to the asserted positions and have
adequately accrued for any probable potential adverse tax impact.
However, there can be no assurance as to the final resolution of these
claims and any resulting proceedings. If these claims and any ensuing
proceedings are determined adversely to us, the amounts we may be
required to pay could be material.
SOURCE: Celestica Inc.