(All amounts in U.S. dollars. Per share information based on
diluted shares outstanding unless noted otherwise). TORONTO, July
23 /PRNewswire-FirstCall/ -- Celestica Inc. (NYSE, TSX: CLS), a
global leader in the delivery of end-to-end product lifecycle
solutions, today announced financial results for the second quarter
ended June 30, 2009. Revenue for the quarter was $1,402 million,
compared to $1,876 million in the second quarter of 2008. GAAP net
earnings were $5.3 million, or $0.02 per share, compared to GAAP
net earnings of $39.8 million, or $0.17 per share, for the same
period last year. The year-over-year change reflects the impact of
weaker end-market demand, as well as higher restructuring costs in
2009 associated with the company's restructuring program announced
at the beginning of 2008. Adjusted net earnings for the quarter
were $25 million, or $0.11 per share, compared to adjusted net
earnings of $38.9 million, or $0.17 per share, for the same period
last year. The term adjusted net earnings is defined as net
earnings before other charges, amortization of intangible assets
(excluding amortization of computer software), option expense,
gains or losses related to the repurchase of shares and debt, net
of tax and significant deferred tax write-offs or recoveries.
Detailed GAAP financial statements and supplementary information
related to adjusted net earnings appears at the end of this press
release. The company's revenue and adjusted net earnings for the
second quarter of 2009 were within the company's published
guidance, announced on April 23, 2009, of revenue of $1.30 billion
to $1.45 billion and adjusted net earnings per share of $0.07 to
$0.13. For the six months ended June 30, 2009, revenue was $2,872
million, compared to $3,712 million for the same period in 2008.
GAAP net earnings were $24.5 million, or $0.11 per share, compared
to $69.6 million, or $0.30 per share, for the same period last
year. Adjusted net earnings for the six months ended June 30, 2009
were $54.3 million, or $0.24 per share, compared to $74.3 million,
or $0.32 per share, for the same period in 2008. "Celestica's
second quarter financial results reflect our continued success at
driving quality and efficiency throughout the company while
delivering value for our customers, despite the challenging
economic environment," said Craig Muhlhauser, President and Chief
Executive Officer, Celestica. "The combination of our financial
strength, operational excellence and the speed and flexibility of
Celestica's global supply chain network creates a unique advantage
to support our future growth and profitability as markets begin to
improve." Third Quarter Outlook --------------------- For the third
quarter ending September 30, 2009, the company anticipates revenue
to be in the range of $1.425 billion to $1.575 billion, and
adjusted net earnings per share to range from $0.11 to $0.17. The
company also announced plans to further reduce fixed costs and
overhead expenses and to eliminate excess capacity through a $75 -
$100 million restructuring program. Second Quarter Webcast
---------------------- Management will host its quarterly results
conference call today at 8:00 a.m. Eastern. The webcast can be
accessed at http://www.celestica.com/. Supplementary Information
------------------------- In addition to disclosing detailed
results in accordance with Canadian generally accepted accounting
principles (GAAP), Celestica provides supplementary non-GAAP
measures as a method to evaluate the company's operating
performance. See table below. Management uses adjusted net earnings
as a measure of enterprise-wide performance. Management believes
adjusted net earnings is a useful measure for management, as well
as investors, to facilitate period-to-period operating comparisons.
Adjusted net earnings do not include the effects of other charges,
most significantly the write-down of goodwill and long-lived
assets, gains or losses on the repurchase of shares or debt and the
related income tax effect of these adjustments, and any significant
deferred tax write-offs or recoveries. The company also excludes
the following recurring charges: restructuring costs, option
expense, the amortization of intangible assets (except amortization
of computer software), and the related income tax effect of these
adjustments. The term adjusted net earnings does not have any
standardized meaning prescribed by GAAP and is not necessarily
comparable to similar measures presented by other companies.
Adjusted net earnings is not a measure of performance under
Canadian or U.S. GAAP and should not be considered in isolation or
as a substitute for net earnings prepared in accordance with
Canadian or U.S. GAAP. The company has provided a reconciliation of
adjusted net earnings to Canadian GAAP net earnings below. 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 on Celestica, visit its
website at http://www.celestica.com/. The company's security
filings can also be accessed at http://www.sedar.com/ and
http://www.sec.gov/. Safe Harbour and Fair Disclosure Statement
------------------------------------------ This news release
contains forward-looking statements related to our future growth,
trends in our industry, our financial and/or operational results
including anticipated expenses, and our financial or operational
performance. 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", or similar expressions, or may
employ such future or conditional verbs as "may", "will", "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 any applicable Canadian
securities legislation. Forward-looking statements are not
guarantees of future performance. You should understand that the
following important factors could affect our future results and
could cause those results to differ materially from those expressed
in such forward-looking statements: the challenges of effectively
managing our operations during uncertain economic conditions,
including significant changes in demand from our customers as a
result of the impact of the global economic crisis and capital
markets weakness; the risk of potential non-performance by
counterparties, including but not limited to financial
institutions, customers and suppliers, during uncertain economic
conditions; the effects of price competition and other business and
competitive factors generally affecting the EMS industry, including
changes in the trend for outsourcing; our dependence on a limited
number of customers; variability of operating results among
periods; the challenge of managing our financial exposures to
foreign currency fluctuations; the challenge of responding to
lower-than-expected customer demand; our inability to retain or
grow our business due to execution problems resulting from
significant headcount reductions, plant closures and product
transfers associated with major restructuring activities; our
dependence on industries affected by rapid technological change;
our ability to successfully manage our international operations;
and the delays in the delivery and/or general availability of
various components used in our manufacturing process. These and
other risks and uncertainties, as well as other information related
to the company, are discussed in the Company's various public
filings at http://www.sedar.com/ and http://www.sec.gov/, including
our Annual Report on Form 20-F and subsequent reports on Form 6-K
filed with the Securities and Exchange Commission and our Annual
Information Form filed with the Canadian Securities Commissions.
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. As of its
date, this press release contains any material information
associated with the Company's financial results for the second
quarter ended June 30, 2009 and revenue and adjusted net earnings
guidance for the third quarter ending September 30, 2009. Revenue
and earnings guidance is reviewed by the Company's board of
directors. Our revenue and earnings guidance 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 assumptions regarding the
following: forecasts from our customers, which range from 30 to 90
days; timing and investments associated with ramping new business;
general economic and market conditions; currency exchange rates;
pricing and competition; anticipated customer demand; supplier
performance and pricing; commodity, labor, energy and
transportation costs; operational and financial matters;
technological developments; and the timing and execution of our
restructuring plan. These assumptions 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 revenue and earnings guidance is
effective on the date given, and will only be updated through a
public announcement. The following table sets forth, for the
periods indicated, a reconciliation of Canadian GAAP net earnings
to adjusted net earnings and other non-GAAP information (in
millions of U.S. dollars, except per share amounts): 2008 2009
Three months -----------------------------
----------------------------- ended Adjust- Adjust- June 30 GAAP
ments Adjusted GAAP ments Adjusted --------- --------- ---------
--------- --------- --------- Revenue $1,876.3 $ - $1,876.3
$1,402.2 $ - $1,402.2 Cost of sales(1) 1,750.8 (0.8) 1,750.0
1,300.5 (0.6) 1,299.9 --------- --------- --------- ---------
--------- --------- Gross profit 125.5 0.8 126.3 101.7 0.6 102.3
SG&A(1)(2) 68.8 (1.4) 67.4 61.9 (1.0) 60.9 Amortization of
intangible assets(2) 7.0 (4.2) 2.8 4.8 (1.9) 2.9 Other charges 3.6
(3.6) - 20.7 (20.7) - --------- --------- --------- ---------
--------- --------- Operating earnings - EBIAT(3) 46.1 10.0 56.1
14.3 24.2 38.5 Interest expense, net 10.3 - 10.3 10.7 - 10.7
--------- --------- --------- --------- --------- --------- Net
earnings before tax 35.8 10.0 45.8 3.6 24.2 27.8 Income tax expense
(recovery) (4.0) 10.9 6.9 (1.7) 4.5 2.8 --------- ---------
--------- --------- --------- --------- Net earnings $ 39.8 $ (0.9)
$ 38.9 $ 5.3 $ 19.7 $ 25.0 --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
--------- --------- W.A. no. of shares (in millions) - diluted
230.4 230.4 230.2 230.2 Earnings per share - diluted $ 0.17 $ 0.17
$ 0.02 $ 0.11 ROIC(4) 11.8% 15.3% Free cash flow(5) $ 53.9 $ 41.0
2008 2009 Six months -----------------------------
----------------------------- ended Adjust- Adjust- June 30 GAAP
ments Adjusted GAAP ments Adjusted --------- --------- ---------
--------- --------- --------- Revenue $3,712.0 $ - $3,712.0
$2,871.6 $ - $2,871.6 Cost of sales(1) 3,471.5 (1.8) 3,469.7
2,658.7 (1.3) 2,657.4 --------- --------- --------- ---------
--------- --------- Gross profit 240.5 1.8 242.3 212.9 1.3 214.2
SG&A(1)(2) 132.1 (2.1) 130.0 129.3 (2.0) 127.3 Amortization of
intangible assets(2) 14.2 (8.4) 5.8 10.6 (5.0) 5.6 Other charges
6.9 (6.9) - 33.2 (33.2) - --------- --------- --------- ---------
--------- --------- Operating earnings - EBIAT(3) 87.3 19.2 106.5
39.8 41.5 81.3 Interest expense, net 19.0 - 19.0 20.9 - 20.9
--------- --------- --------- --------- --------- --------- Net
earnings before tax 68.3 19.2 87.5 18.9 41.5 60.4 Income tax
expense (recovery) (1.3) 14.5 13.2 (5.6) 11.7 6.1 ---------
--------- --------- --------- --------- --------- Net earnings $
69.6 $ 4.7 $ 74.3 $ 24.5 $ 29.8 $ 54.3 --------- ---------
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- W.A. no. of shares (in
millions) - diluted 229.7 229.7 229.7 229.7 Earnings per share -
diluted $ 0.30 $ 0.32 $ 0.11 $ 0.24 ROIC(4) 11.2% 16.1% Free cash
flow(5) $ 87.0 $ 57.1 (1) Non-cash option expense included in cost
of sales and SG&A is added back for adjusted net earnings. (2)
Certain 2008 GAAP numbers have been restated to reflect the change
in accounting for computer software effective January 1, 2009 as
required under Canadian GAAP. For the second quarter of 2008, $2.8
million in amortization of computer software has been reclassified
from SG&A expenses to amortization of intangible assets (first
half of 2008 - $5.8 million). Amortization of computer software is
not added back for EBIAT and adjusted net earnings. There is no
impact to our current or previously reported EBIAT, adjusted net
earnings or net earnings. (3) Management uses EBIAT as a measure to
assess operating performance. Excluded from EBIAT are the effects
of other charges, most significantly the write-down of goodwill and
long-lived assets, gains or losses on the repurchase of shares or
debt, the related income tax effect of these adjustments, and any
significant deferred tax write-offs or recoveries. We also exclude
the following recurring charges: restructuring costs, option
expense, amortization of intangible assets (except amortization of
computer software), interest expense or income, and the related
income tax effect of these adjustments. Management believes EBIAT,
which isolates operating activities before interest and taxes, is
an appropriate measure for management, as well as investors, to
compare the company's operating performance from period-to-period.
The term EBIAT does not have any standardized meaning prescribed by
Canadian or U.S. GAAP and is therefore unlikely to be comparable to
similar measures presented by other companies. EBIAT is not a
measure of performance under Canadian or U.S. GAAP and should not
be considered in isolation or as a substitute for net earnings
prepared in accordance with Canadian or U.S. GAAP. (4) Management
uses ROIC as a measure to assess the effectiveness of the invested
capital it uses to build products or provide services to its
customers. A ROIC metric encompasses 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 liabilities and income taxes payable. The term ROIC does
not have any standardized meaning prescribed by Canadian or U.S.
GAAP and is therefore unlikely to be comparable to similar measures
presented by other companies. ROIC is not a measure of performance
under Canadian or U.S. GAAP and should not be considered in
isolation or as a substitute for any standardized measure. (5)
Management uses free cash flow as a measure to assess cash flow
performance. Free cash flow is calculated as cash generated from
operations less capital expenditures (net of proceeds from the sale
of surplus property and equipment). The term free cash flow does
not have any standardized meaning prescribed by Canadian or U.S.
GAAP and is therefore unlikely to be comparable to similar measures
presented by other companies. Free cash flow is not a measure of
performance under Canadian or U.S. GAAP and should not be
considered in isolation or as a substitute for any standardized
measure. GUIDANCE SUMMARY 2Q 09 Guidance 2Q 09 Actual 3Q 09
Guidance(6) -------------- ------------ ----------------- Revenue
$1.3B - $1.45B $1.4B $1.425B - $1.575B Adjusted net EPS $0.07 -
$0.13 $0.11 $0.11 - $0.17 (6) Guidance for the third quarter is
provided only on an adjusted net earnings basis. This is due to the
difficulty in forecasting the various items impacting GAAP net
earnings, such as the amount and timing of our restructuring
activities. CELESTICA INC. CONSOLIDATED BALANCE SHEETS (in millions
of U.S. dollars) December 31 June 30 2008 2009 ------------
----------- Assets (unaudited) Current assets: Cash and cash
equivalents (note 6)............. $ 1,201.0 $ 1,119.3 Accounts
receivable (note 10(c))............... 1,074.0 808.9 Inventories
(note 2)........................... 787.4 634.3 Prepaid and other
assets (note 7(i))........... 87.1 67.1 Income taxes
recoverable....................... 14.1 18.7 Deferred income
taxes.......................... 8.2 6.1 ----------- -----------
3,171.8 2,654.4 Property, plant and equipment (note 1(i))........
433.5 422.4 Intangible assets (note 1(i)).................... 54.1
44.9 Other long-term assets (note 7(ii)).............. 126.8 123.7
----------- ----------- $ 3,786.2 $ 3,245.4 ----------- -----------
----------- ----------- Liabilities and Shareholders' Equity
Current liabilities: Accounts
payable............................... $ 1,090.6 $ 790.5 Accrued
liabilities (notes 4 and 7(i))......... 463.1 312.5 Income taxes
payable........................... 13.5 10.7 Deferred income
taxes.......................... 0.2 0.2 Current portion of
long-term debt (note 3)..... 1.0 0.1 ----------- -----------
1,568.4 1,114.0 Long-term debt (note 3)..........................
732.1 583.2 Accrued pension and post-employment benefits..... 63.2
66.9 Deferred income taxes............................ 47.2 35.6
Other long-term liabilities...................... 9.8 9.1
----------- ----------- 2,420.7 1,808.8 Shareholders' equity (note
8): Capital stock.................................. 3,588.5 3,588.7
Contributed surplus............................ 204.4 219.9
Deficit........................................ (2,436.8) (2,412.3)
Accumulated other comprehensive income......... 9.4 40.3
----------- ----------- 1,365.5 1,436.6 ----------- ----------- $
3,786.2 $ 3,245.4 ----------- ----------- ----------- -----------
Guarantees and contingencies (note 9) See accompanying notes to
unaudited consolidated financial statements. These unaudited
interim consolidated financial statements should be read in
conjunction with the 2008 annual consolidated financial statements.
CELESTICA INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions
of U.S. dollars, except per share amounts) Three months ended Six
months ended June 30 June 30 2008 2009 2008 2009 -----------
----------- ----------- ----------- (unaudited) (unaudited)
(unaudited) (unaudited) Revenue.................. $ 1,876.3 $
1,402.2 $ 3,712.0 $ 2,871.6 Cost of sales............ 1,750.8
1,300.5 3,471.5 2,658.7 ----------- ----------- -----------
----------- Gross profit............. 125.5 101.7 240.5 212.9
Selling, general and administrative expenses (note
1(i))............. 68.8 61.9 132.1 129.3 Amortization of intangible
assets (note 1(i))............. 7.0 4.8 14.2 10.6 Other charges
(note 4)... 3.6 20.7 6.9 33.2 Interest on long-term
debt.................... 13.7 10.8 28.2 21.2 Interest income, net
of interest expense........ (3.4) (0.1) (9.2) (0.3) -----------
----------- ----------- ----------- Earnings before income
taxes................... 35.8 3.6 68.3 18.9 Income tax expense
(recovery): Current................ (6.5) 3.4 (1.3) 6.1
Deferred............... 2.5 (5.1) - (11.7) ----------- -----------
----------- ----------- (4.0) (1.7) (1.3) (5.6) -----------
----------- ----------- ----------- Net earnings for the
period.............. $ 39.8 $ 5.3 $ 69.6 $ 24.5 -----------
----------- ----------- ----------- ----------- -----------
----------- ----------- Basic earnings per share.. $ 0.17 $ 0.02 $
0.30 $ 0.11 Diluted earnings per share................... $ 0.17 $
0.02 $ 0.30 $ 0.11 Shares used in computing per share amounts:
Basic (in millions).... 229.2 229.4 229.2 229.4 Diluted (in
millions).. 230.4 230.2 229.7 229.7 See accompanying notes to
unaudited consolidated financial statements. These unaudited
interim consolidated financial statements should be read in
conjunction with the 2008 annual consolidated financial statements.
CELESTICA INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in
millions of U.S. dollars) Three months ended Six months ended June
30 June 30 2008 2009 2008 2009 ----------- ----------- -----------
----------- (unaudited) (unaudited) (unaudited) (unaudited) Net
earnings for the period.............. $ 39.8 $ 5.3 $ 69.6 $ 24.5
Other comprehensive income, net of tax: Foreign currency
translation gain (loss)................ (3.7) 4.0 6.1 (5.1) Net
gain on derivatives designated as cash flow hedges........... 2.0
14.3 2.4 1.6 Reclass net loss (gain) on derivatives designated as
cash flow hedges to operations............ (8.3) 11.2 (19.0) 34.4
----------- ----------- ----------- ----------- Comprehensive
income..... $ 29.8 $ 34.8 $ 59.1 $ 55.4 ----------- -----------
----------- ----------- ----------- ----------- -----------
----------- See accompanying notes to unaudited consolidated
financial statements. These unaudited interim consolidated
financial statements should be read in conjunction with the 2008
annual consolidated financial statements. CELESTICA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions of U.S. dollars)
Three months ended Six months ended June 30 June 30 2008 2009 2008
2009 ----------- ----------- ----------- ----------- (unaudited)
(unaudited) (unaudited) (unaudited) Cash provided by (used in):
Operations: Net earnings for the period.............. $ 39.8 $ 5.3
$ 69.6 $ 24.5 Items not affecting cash: Depreciation and
amortization.......... 27.7 24.3 54.3 50.1 Deferred income taxes..
2.5 (5.1) - (11.7) Non-cash charge for option issuances...... 2.2
1.6 3.9 3.3 Restructuring charges (note 4).............. 0.1 0.7
0.3 1.3 Other charges (note 4).............. - - - 6.5
Other.................... 6.9 5.4 12.0 2.2 Changes in non-cash
working capital items: Accounts receivable.... (53.0) (77.5) 47.9
265.1 Inventories............ (6.1) 60.8 (20.1) 153.1 Prepaid and
other assets.......... 5.4 2.5 15.2 22.4 Income taxes
recoverable........... (17.7) (1.6) (13.1) (4.6) Accounts payable
and accrued liabilities... 58.3 39.6 (58.4) (407.3) Income taxes
payable... 2.1 (1.5) 4.0 (2.8) ----------- ----------- -----------
----------- Non-cash working capital changes....... (11.0) 22.3
(24.5) 25.9 ----------- ----------- ----------- ----------- Cash
provided by operations.............. 68.2 54.5 115.6 102.1
----------- ----------- ----------- ----------- Investing: Purchase
of property, plant and equipment... (16.5) (14.0) (32.4) (46.4)
Proceeds from sale of assets............. 2.2 0.5 3.8 1.4
Other.................. 0.3 (0.3) - 0.5 ----------- -----------
----------- ----------- Cash used in investing
activities.............. (14.0) (13.8) (28.6) (44.5) -----------
----------- ----------- ----------- Financing: Repurchase of Senior
Subordinated Notes (Notes) (note 3(d))... - - - (149.7) Proceeds
from termination of swap agreements (note 3(d))........... - - -
14.7 Financing costs........ - (2.3) - (2.3) Repayment of long-term
debt........ (0.2) (0.3) (0.2) (0.9) Issuance of share
capital............... 1.9 0.2 1.9 0.2 Other..................
(2.2) (0.3) (2.4) (1.3) ----------- ----------- -----------
----------- Cash used in financing activities.............. (0.5)
(2.7) (0.7) (139.3) ----------- ----------- ----------- -----------
Increase (decrease) in cash................. 53.7 38.0 86.3 (81.7)
Cash and cash equivalents, beginning of period..... 1,149.3 1,081.3
1,116.7 1,201.0 ----------- ----------- ----------- -----------
Cash and cash equivalents, end of period........... $ 1,203.0 $
1,119.3 $ 1,203.0 $ 1,119.3 ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Supplemental cash flow information (note 6) See accompanying notes
to unaudited consolidated financial statements. These unaudited
interim consolidated financial statements should be read in
conjunction with the 2008 annual consolidated financial statements.
CELESTICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in
millions of U.S. dollars, except per share amounts) (unaudited) 1.
Basis of presentation and significant accounting policies: We
prepare our financial statements in accordance with generally
accepted accounting principles (GAAP) in Canada. The disclosures
contained in these unaudited interim consolidated financial
statements do not include all requirements of Canadian GAAP for
annual financial statements. These unaudited interim consolidated
financial statements should be read in conjunction with the 2008
annual consolidated financial statements. These unaudited interim
consolidated financial statements reflect all adjustments which
are, in the opinion of management, necessary to present fairly our
financial position as at June 30, 2009 and the results of
operations, comprehensive income, and cash flows for the three
months and six months ended June 30, 2008 and 2009. Use of
estimates: The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
related 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. We applied
significant estimates and assumptions to our valuations against
accounts receivable, inventory and income taxes, to the amount and
timing of restructuring charges or recoveries, to the fair values
used in testing long-lived assets, and to valuing our financial
instruments and pension costs. Actual results could differ
materially from those estimates and assumptions, especially in
light of the current economic environment and uncertainties. These
unaudited interim consolidated financial statements are based upon
accounting principles consistent with those used and described in
the 2008 annual consolidated financial statements, except for the
following: Changes in accounting policies: (i) Goodwill and
intangible assets: On January 1, 2009, we adopted CICA Handbook
Section 3064, "Goodwill and intangible assets." This revised
standard establishes guidance for the recognition, measurement and
disclosure of goodwill and intangible assets, including internally
generated intangible assets. As required by this standard, we have
retroactively reclassified computer software assets on our
consolidated balance sheet from property, plant and equipment to
intangible assets. We have also reclassified computer software
amortization on our consolidated statement of operations from
depreciation expense, included in selling, general and
administrative expenses, to amortization of intangible assets.
There is no impact on previously reported net earnings or loss.
Intangible assets: December 31 June 30 2008 2009 -----------
----------- Intellectual property............................ $ 0.6
$ - Other intangible assets.......................... 19.5 14.5
Computer software assets......................... 34.0 30.4
----------- ----------- $ 54.1 $ 44.9 ----------- -----------
----------- ----------- Amortization expense is as follows: Three
months ended Six months ended June 30 June 30 2008 2009 2008 2009
----------- ----------- ----------- ----------- Amortization of
intellectual property... $ 0.3 $ - $ 0.6 $ 0.2 Amortization of
other intangible assets....... 3.9 1.9 7.8 4.8 Amortization of
computer software assets......... 2.8 2.9 5.8 5.6 -----------
----------- ----------- ----------- $ 7.0 $ 4.8 $ 14.2 $ 10.6
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- Recently issued accounting
pronouncements: (a) International financial reporting standards
(IFRS): In February 2008, the Canadian Accounting Standards Board
announced the adoption of IFRS for publicly accountable
enterprises. IFRS will replace Canadian GAAP effective January 1,
2011. IFRS is effective for our first quarter of 2011 and will
require that we restate our 2010 comparative numbers. We have
started an IFRS conversion project to evaluate the impact of
implementing the new standards. We cannot at this time reasonably
estimate the impact of adopting IFRS on our consolidated financial
statements. (b) Business combinations: In January 2009, the CICA
issued Handbook Section 1582, "Business combinations," which
replaces the existing standards. This section establishes the
standards for the accounting of business combinations, and states
that all assets and liabilities of an acquired business will be
recorded at fair value. Obligations for contingent considerations
and contingencies will also be recorded at fair value at the
acquisition date. The standard also states that acquisition-related
costs will be expensed as incurred and that restructuring charges
will be expensed in the periods after the acquisition date. This
standard is equivalent to the IFRS on business combinations. This
standard is applied prospectively to business combinations with
acquisition dates on or after January 1, 2011. Earlier adoption is
permitted. We will consider the impact of adopting this standard on
our consolidated financial statements if we have a business
combination. (c) Consolidated financial statements: In January
2009, the CICA issued Handbook Section 1601, "Consolidated
financial statements," which replaces the existing standards. This
section establishes the standards for preparing consolidated
financial statements and is effective for 2011. Earlier adoption is
permitted. We will consider the impact of adopting this standard on
our consolidated financial statements if we have a business
combination. (d) Financial instruments - disclosures: In June 2009,
the CICA issued amendments to Handbook Section 3862, "Financial
instruments - disclosures," which requires enhanced disclosures on
liquidity risk of financial instruments and new disclosures on fair
value measurements of financial instruments. These requirements
correspond to the IFRS on financial instruments disclosures. This
amendment is effective for our 2009 annual consolidated financial
statements. We are currently evaluating the impact of adopting this
amendment on our consolidated financial statements. 2. Inventories:
During the second quarter of 2009, we recorded a net inventory
provision through cost of sales of $0.9 (first half of 2009 - $3.0)
to write down the value of our inventory to net realizable value.
3. Long-term debt: December 31 June 30 2008 2009 -----------
----------- Secured, revolving credit facility due 2009(a)... $ - $
- Senior Subordinated Notes due 2011 (2011
Notes)(b)(c)(d)........................... 489.4 339.4 Senior
Subordinated Notes due 2013 (2013
Notes)(b)................................. 223.1 223.1 Embedded
prepayment option at fair value(d)(e)... (19.2) (1.1) Basis
adjustments on debt obligation(e).......... 4.9 4.1 Unamortized
debt issue costs..................... (7.0) (4.8) Fair value
adjustment of 2011 Notes attributable to interest rate
risks(d)(e).................... 40.9 22.5 ----------- -----------
732.1 583.2 Capital lease obligations........................ 1.0
0.1 ----------- ----------- 733.1 583.3 Less current
portion............................. 1.0 0.1 -----------
----------- $ 732.1 $ 583.2 ----------- ----------- -----------
----------- (a) In April 2009, we renewed our revolving credit
facility and reduced the size from $300.0 to $200.0, on generally
similar terms and conditions, with a maturity of April 2011. Under
the terms of the renewed facility, borrowings bear a higher
interest rate than under the previous terms and we are required to
comply with certain restrictive covenants relating to debt
incurrence and the sale of assets and certain financial covenants
related to indebtedness, interest coverage and liquidity. There
were no borrowings outstanding under the facility at June 30, 2009.
Commitment fees for the first half of 2009 were $1.0. We were in
compliance with all covenants at June 30, 2009. Based on the
required financial ratios at June 30, 2009, we have full access to
this facility. We also have uncommitted bank overdraft facilities
available for operating requirements which total $65.0 at June 30,
2009. There were no borrowings outstanding under these facilities
at June 30, 2009. (b) Our 2011 Notes bear a fixed interest rate of
7.875%. Our 2013 Notes bear a fixed interest rate of 7.625%. We are
entitled to redeem our Notes at various premiums above face value.
The Notes are unsecured and subordinated in right of payment to all
our senior debt. The Notes have restrictive covenants that limit
our ability to pay dividends, repurchase our own stock or repay
debt that is subordinated to these Notes. These covenants also
place limitations on the sale of assets and our ability to incur
additional debt. We were in compliance with all covenants at June
30, 2009. (c) In connection with the 2011 Notes, we entered into
agreements to swap the fixed interest rate with a variable interest
rate based on LIBOR plus a margin. In February 2009, we terminated
our interest rate swap agreements. See note 3(d). Interest costs on
the 2011 Notes were based on a fixed rate of 7.875% for the second
quarter of 2009 and the average interest rate was 6.6% for the
first half of 2009 (5.7% and 6.7%, respectively, for the second
quarter and first half of 2008). (d) In March 2009, we paid $149.7,
excluding accrued interest, to repurchase 2011 Notes with a
principal amount at maturity of $150.0. During the first quarter of
2009, we recognized a gain of $9.1 on the repurchase of the 2011
Notes which we recorded in other charges. See note 4. The gain on
the repurchase was measured based on the carrying value of the
repurchased portion of the 2011 Notes on the date of repurchase. We
also terminated our interest rate swap agreements in the amount of
$500.0 related to the 2011 Notes and received $14.7 in cash,
excluding accrued interest, as settlement of these agreements. In
connection with the termination of the swap agreements, we
discontinued fair value hedge accounting on the 2011 Notes and will
amortize the historical fair value adjustment on the 2011 Notes as
a reduction to interest expense on long-term debt, over the
remaining term of the 2011 Notes, using the effective interest rate
method. As a result of discontinuing fair value hedge accounting in
the first quarter of 2009, we recorded a write-down of $15.6 in the
carrying value of the embedded prepayment options on the 2011 Notes
to reflect the change in fair value upon hedge de-designation,
which we recorded in other charges. See note 4. (e) The prepayment
options in the Notes qualify as embedded derivatives which must be
bifurcated for reporting under the financial instruments standards.
As of June 30, 2009, the fair value of the embedded derivative
asset is $1.1 and is recorded against long-term debt. The decrease
in the fair value of the embedded derivative asset from December
31, 2008 primarily reflects the write-down related to the hedge
de-designation and debt repurchase described in note 3(d). As a
result of bifurcating the prepayment option from these Notes, a
basis adjustment was added to the cost of the long-term debt. This
basis adjustment is amortized over the term of the debt using the
effective interest rate method. The amortization of the basis
adjustment is recorded as a reduction of interest expense on
long-term debt. As of June 30, 2009, the fair value adjustment to
the 2011 Notes attributable to the movement in the benchmark
interest rates is $22.5. The decrease in this fair value adjustment
from December 31, 2008 primarily reflects the debt repurchase and
hedge de-designation described in note 3(d). After the hedge
de-designation, this fair value adjustment is being amortized to
interest expense on long-term debt, over the remaining term of the
2011 Notes. We applied fair value hedge accounting to our interest
rate swaps and our hedged debt obligation (2011 Notes) until
February 2009. We have also marked-to-market the bifurcated
embedded prepayment options in our debt instruments. The changes in
the fair values each period are recorded in interest expense on
long-term debt. The mark-to-market adjustment fluctuates each
period as it is dependent on market conditions, including future
interest rates, implied volatility and credit spreads. The impact
on our results of operations is as follows: Three months ended Six
months ended June 30 June 30 2008 2009 2008 2009 -----------
----------- ----------- ----------- Increase (decrease) in interest
expense on long-term debt... $ 0.4 $ (1.5) $ (0.7) $ (3.3) 4. Other
charges: Three months ended Six months ended June 30 June 30 2008
2009 2008 2009 ----------- ----------- ----------- -----------
Restructuring(a)......... $ 3.6 $ 20.9 $ 6.9 $ 27.6 Gain on
repurchase of Notes (see note 3(d))... - - - (9.1) Write-down of
embedded prepayment option (see note 3(d))......... - - - 15.6
Other.................... - (0.2) - (0.9) ----------- -----------
----------- ----------- $ 3.6 $ 20.7 $ 6.9 $ 33.2 -----------
----------- ----------- ----------- ----------- -----------
----------- ----------- (a) Restructuring: In January 2008, we
estimated that a restructuring charge of between $50 to $75 would
be recorded throughout 2008 and 2009. During 2008 and through the
second quarter of 2009, we recorded a total of $62.9 in
restructuring charges. Of that amount, $20.9 was recorded in the
second quarter of 2009. In light of the continuing uncertain
economic environment, we determined that further restructuring
actions are required to maintain our operational leverage and
improve our overall utilization. In July 2009, we announced further
restructuring charges, in addition to those announced in January
2008, of between $75 and $100. We expect to complete these
restructuring actions by the end of 2010. We recognize the
restructuring charges as the detailed plans are finalized. Our
restructuring actions include consolidating facilities and reducing
our workforce. The majority of the employees terminated are
manufacturing and plant employees in the Americas and Europe. For
leased facilities that we no longer use, the lease costs included
in the restructuring costs represent future lease payments less
estimated sublease recoveries. Adjustments are made to lease and
other contractual obligations to reflect incremental cancellation
fees paid for terminating certain facility leases and to reflect
changes in the accruals for other leases due to delays in the
timing of sublease recoveries, changes in estimated sublease rates,
or changes in use, relating principally to facilities in the
Americas. We expect our long-term lease and other contractual
obligations to be paid out over the remaining lease terms through
2015. Our restructuring liability is recorded in accrued
liabilities. Details of the 2009 activity are as follows: Lease and
other Facility Employee contrac- exit termin- tual costs Total 2009
ation oblig- and accrued non-cash 2009 costs ations other liability
charge charge --------- -------- ------- --------- ---------
------- December 31, 2008.............. $ 18.7 $ 26.7 $ 0.2 $ 45.6
$ - $ - Cash payments...... (14.6) (2.2) (0.1) (16.9) - - Charges/
adjustments....... 10.4 (4.5) 0.2 6.1 0.6 6.7 -------- --------
-------- -------- -------- -------- March 31, 2009..... 14.5 20.0
0.3 34.8 0.6 6.7 Cash payments...... (14.9) (2.6) (0.3) (17.8) - -
Charges/ adjustments....... 16.2 3.7 0.3 20.2 0.7 20.9 --------
-------- -------- -------- -------- -------- June 30, 2009...... $
15.8 $ 21.1 $ 0.3 $ 37.2 $ 1.3 $ 27.6 -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
-------- -------- As of June 30, 2009, we have approximately $25 in
assets that are held-for-sale, primarily land and buildings, as a
result of the restructuring actions we have implemented. We have
programs underway to sell these assets. 5. Segment information: The
accounting standards establish the criteria for the disclosure of
certain information in the interim and annual financial statements
regarding operating segments, products and services and major
customers. Operating segments are defined as components of an
enterprise for which separate financial information is available
that is regularly evaluated by the chief operating decision maker
in deciding how to allocate resources and in assessing performance.
Our operating segment is comprised of our electronics manufacturing
services business. Our chief operating decision maker is our Chief
Executive Officer. (i) 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 level of business from
new, existing and disengaging customers; the level of program wins
or losses; the phasing in or out of programs; and changes in
customer demand. Three months ended Six months ended June 30 June
30 2008 2009 2008 2009 ----------- ----------- -----------
----------- Enterprise communications..... 27% 23% 27% 22%
Consumer............ 21% 22% 20% 26% Telecommunications.. 15% 20%
15% 19% Servers............. 17% 12% 17% 12% Storage.............
10% 12% 11% 10% Industrial, aerospace and defense, and
other.............. 10% 11% 10% 11% (ii) For the second quarter and
first half of 2009, three customers and two customers,
respectively, individually represented more than 10% of total
revenue (second quarter and first half of 2008 - no customer
represented more than 10% of total revenue). 6. Supplemental cash
flow information: Three months ended Six months ended June 30 June
30 Paid during the period: 2008 2009 2008 2009 -----------
----------- ----------- ----------- Interest(a).............. $ 1.3
$ 3.0 $ 33.9 $ 31.9 Taxes(b)................. $ 9.0 $ 9.7 $ 7.9 $
14.8 (a) This includes interest paid on the Notes. Interest on
these Notes is payable in January and July of each year until
maturity. See notes 3(b) and (c). (b) Cash taxes paid is net of any
income taxes recovered. Cash and cash equivalents are December 31
June 30 comprised of the following: 2008 2009 -----------
----------- Cash(i).......................................... $
406.2 $ 241.0 Cash equivalents(i)..............................
794.8 878.3 ----------- ----------- $ 1,201.0 $ 1,119.3 -----------
----------- ----------- ----------- (i) Our current portfolio
consists of certificates of deposit and certain money market funds
that are secured exclusively by U.S. government securities. The
majority of our cash and cash equivalents are held with financial
institutions each of which had at June 30, 2009 a Standard and
Poor's rating of A-1 or above. 7. Derivative financial instruments:
(i) We enter into foreign currency contracts to hedge foreign
currency risks primarily relating to cash flows. At June 30, 2009,
we had forward exchange contracts covering various currencies in an
aggregate notional amount of $332.2. All derivative financial
instruments are recorded at fair value on our consolidated balance
sheet. The fair value of our foreign currency contracts at June 30,
2009 was a net unrealized loss of $4.7 (December 31, 2008 - net
unrealized loss of $38.9). This is comprised of $6.5 of derivative
assets recorded in prepaid and other assets and $11.2 of derivative
liabilities recorded in accrued liabilities. The unrealized losses
are a result of fluctuations in foreign exchange rates between the
time the currency forward contracts were entered into and the
valuation date at period end. The decrease in the net unrealized
loss of our foreign currency contracts during the first half of
2009 is due primarily to the favourable movement in the exchange
rates for the currencies that we hedge and the settlement of
contracts with significant losses. At June 30, 2009, we had forward
exchange contracts to trade U.S. dollars in exchange for the
following currencies: Weighted average exchange Amount rate Maximum
of U.S. of U.S. period Fair value Currency dollars dollars in
months gain/(loss) ------------------------- -----------
----------- ----------- ----------- Canadian dollar.......... $
116.6 $ 0.86 9 $ 0.5 British pound sterling... 75.4 1.54 4 (5.7)
Mexican peso............. 63.3 0.07 6 1.2 Thai baht................
26.0 0.03 6 0.2 Malaysian ringgit........ 25.6 0.29 6 (0.5)
Singapore dollar......... 9.3 0.66 6 (0.1)
Euro..................... 7.0 1.37 6 (0.2) Brazilian
real........... 7.0 0.50 3 - Czech koruna............. 2.0 0.06 1
(0.1) ----------- ----------- Total $ 332.2 $ (4.7) -----------
----------- ----------- ----------- (ii) In connection with the
issuance of our 2011 Notes in June 2004, we entered into agreements
to swap the fixed rate of interest for a variable interest rate.
The notional amount of the agreements was $500.0. The fair value of
the interest rate swap agreements at December 31, 2008 was an
unrealized gain of $17.3, which we recorded in other long-term
assets. In connection with the debt repurchase (see notes 3(c) and
(d)), we terminated our swap agreements. We received $14.7 in
February 2009 representing the fair value of the swap agreements,
excluding accrued interest, prior to termination. Notes 3(d) and
(e) summarize the impact of our mark-to-market adjustments and our
fair value hedge accounting. Fair value hedge ineffectiveness arose
when the change in the fair values of our swap agreements, our
hedged debt obligation and its embedded derivatives, and the
amortization of the related basis adjustments did not offset each
other during a reporting period. The fair value hedge
ineffectiveness loss of $1.4 for our 2011 Notes was recorded in
interest expense on long-term debt for the first half of 2009 (loss
of $0.4 for the first half of 2008). This fair value hedge
ineffectiveness was driven primarily by the difference in the
credit risk used to value our hedged debt obligation as compared to
the credit risk used to value our interest rate swaps. As a result
of discontinuing our fair value hedge on our 2011 Notes in February
2009, no further fair value hedge ineffectiveness will occur in
subsequent quarters with respect to the 2011 Notes. 8.
Shareholders' equity: Capital Contributed stock Warrants surplus
Deficit ----------- ---------- ------------ ----------- Balance -
December 31, 2007.................... $ 3,585.2 $ 3.1 $ 190.3
$(1,716.3) Shares issued............ 2.4 - - - Stock-based
compensation costs...... - - 10.1 - Other.................... - -
0.5 - Net earnings for the first half of 2008...... - - - 69.6
----------- ----------- ----------- ----------- Balance - June 30,
2008.. $ 3,587.6 $ 3.1 $ 200.9 $(1,646.7) ----------- -----------
----------- ----------- ----------- ----------- -----------
----------- Balance - December 31, 2008.................... $
3,588.5 $ - $ 204.4 $(2,436.8) Shares issued............ 0.2 - - -
Stock-based compensation costs...... - - 14.4 -
Other.................... - - 1.1 - Net earnings for the first half
of 2009...... - - - 24.5 ----------- ----------- -----------
----------- Balance - June 30, 2009.. $ 3,588.7 $ - $ 219.9
$(2,412.3) ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- Six months Year
ended ended Accumulated other comprehensive income, December 31
June 30 net of tax: 2008 2009 ----------- ----------- Opening
balance of foreign currency translation
account............................. $ 35.2 $ 46.7 Foreign currency
translation gain (loss)......... 11.5 (5.1) ----------- -----------
Closing balance.................................. 46.7 41.6 Opening
balance of unrealized net gain (loss) on cash flow
hedges...................... $ 20.7 $ (37.3) Net (loss) gain on
cash flow hedges(1)........... (53.1) 1.6 Net (gain) loss on cash
flow hedges reclassified to operations(2)................... (4.9)
34.4 ----------- ----------- Closing
balance(3)............................... (37.3) (1.3) -----------
----------- Accumulated other comprehensive income........... $ 9.4
$ 40.3 ----------- ----------- ----------- ----------- (1) Net of
income tax expense (benefit) of $0.1 and $(0.2) for the three and
six months ended June 30, 2009 ($0.8 income tax benefit for 2008).
(2) Net of income tax expense of $0.2 and $0.5 for the three and
six months ended June 30, 2009 ($0.2 income tax expense for 2008).
(3) Net of income tax benefit of $0.1 as of June 30, 2009 ($0.4
income tax benefit as of December 31, 2008). We expect that all the
losses on cash flow hedges reported in accumulated other
comprehensive income at June 30, 2009 will be reclassified to
operations during the next 12 months. 9. Guarantees and
contingencies: We have contingent liabilities in the form of
letters of credit, letters of guarantee, and surety and performance
bonds which we have provided to various third parties. These
guarantees cover various payments, including customs and excise
taxes, utility commitments and certain bank guarantees. At June 30,
2009, these contingent liabilities amounted to $50.3 (December 31,
2008 - $55.4). In addition to the above guarantees, we have also
provided routine indemnifications, the terms of which range in
duration and often are not explicitly defined. These may include
indemnifications against adverse impacts due to changes in tax laws
and patent infringements by third parties. We have also provided
indemnifications in connection with the sale of certain businesses
and real property. The maximum potential liability from these
indemnifications cannot be reasonably estimated. In some cases, we
have recourse against other parties to mitigate our risk of loss
from these indemnifications. Historically, we have not made
significant payments relating to these types of indemnifications.
Litigation: In the normal course of our operations, we are subject
to litigation and claims from time to time. We may also 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 possible to
estimate the extent of potential costs, if any, management believes
that the ultimate resolution of such contingencies 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 class 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
have added one of our directors and Onex Corporation as defendants.
All defendants have filed motions to dismiss the amended complaint.
These motions are pending. A parallel class proceeding has also
been issued against us and our former Chief Executive and Chief
Financial Officers in the Ontario Superior Court of Justice, but
neither leave nor certification of the action has been granted by
that court. We believe that the allegations in these 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 will not have a material
adverse impact on our financial position or liquidity. In addition,
we may incur substantial litigation expenses in defending these
claims. We have liability insurance coverage that may cover some of
our litigation expenses, potential judgments or settlement costs.
Income taxes: We are subject to tax audits by local tax authorities
of historical information which could result in additional tax
expense in future periods relating to prior results. In addition,
tax authorities could challenge 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 in 2001 and 2002 should have been
materially higher as a result of certain inter-company
transactions. The successful pursuit of that assertion could result
in that subsidiary owing significant amounts of tax, interest and
possibly penalties. We believe we have substantial defenses to the
asserted position and have adequately accrued for any probable
potential adverse tax impact. However, there can be no assurance as
to the final resolution of this claim and any resulting
proceedings, and if this claim and any ensuing proceedings are
determined adversely to us, the amounts we may be required to pay
could be material. 10. Financial instruments - financial risks: We
have exposures to the following financial risks arising from
financial instruments: market risk, credit risk and liquidity risk.
Market risk is the risk that results in changes to market prices,
such as foreign exchange rates and interest rates, that could
affect our operations or the value of our financial instruments.
(a) Currency risk: Due to the nature of our international
operations, we are exposed to exchange rate fluctuations on our
financial instruments denominated in various foreign currencies. We
manage our currency risk through our cash flow hedging program. Our
major currency exposures, as of June 30, 2009, are summarized in
U.S. dollar equivalents in the following table. For purposes of
this table, we have excluded items such as pension, post-employment
benefits and income taxes, in accordance with the financial
instruments standards. The local currency amounts have been
converted to U.S. dollar equivalents using the spot rates as of
June 30, 2009. Chinese Brazilian Canadian Mexican renminbi real
dollar peso ----------- ----------- ----------- ----------- Cash
and cash equivalents............. $ 21.1 $ 3.4 $ 42.4 $ 1.3
Accounts receivable...... 17.7 12.2 - - Other financial assets...
0.5 9.4 - 0.2 Accounts payable and accrued liabilities..... (17.1)
(4.4) (32.2) (11.8) ----------- ----------- ----------- -----------
Net financial assets (liabilities)........... $ 22.2 $ 20.6 $ 10.2
$ (10.3) ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- At June 30, 2009, 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 has the following impact:
Chinese Brazilian Canadian Mexican renminbi real dollar peso
----------- ----------- ----------- ----------- Increase (decrease)
1% Strengthening Net earnings............ $ 0.2 $ 0.1 $ 0.1 $ 0.1
Other comprehensive income................. - - 1.0 0.1 1%
Weakening Net earnings............ (0.2) (0.1) (0.1) (0.1) Other
comprehensive income................. - - (1.0) (0.1) (b) Interest
rate risk: We are exposed to interest rate risks as we have
significant cash balances invested at floating rates. Borrowings
under our revolving credit facility bear interest at LIBOR plus a
margin. If we borrow under this facility, we will be exposed to
interest rate risks due to fluctuations in the LIBOR rate. (c)
Credit risk: Credit risk refers to the risk that a counterparty may
default on its contractual obligations resulting in a financial
loss to us. To mitigate the risk of financial loss from defaults
under our foreign currency forward contracts, these counterparty
financial institutions each had a Standard and Poor's rating of A
or above at June 30, 2009. The financial institution with which we
have an accounts receivable sales program had a Standard and Poor's
rating of A+ at June 30, 2009. See notes 14(c) and 18 to the 2008
annual consolidated financial statements. We also provide credit to
our customers in the normal course of business. The carrying amount
of financial assets recorded in the financial statements, net of
any allowances or reserves for losses, represents our estimate of
maximum exposure to this credit risk. As of June 30, 2009, less
than 1% of our gross accounts receivable are over 90 days past due.
Accounts receivable are net of an allowance for doubtful accounts
of $14.6 at June 30, 2009 (December 31, 2008 - $13.7). (d)
Liquidity risk: Liquidity risk is the risk that we may not have
cash available to satisfy our financial obligations as they come
due. The majority of our financial liabilities recorded in accounts
payable and accrued liabilities are due within 90 days. The
repayment schedule of our long-term debt obligations is in 2011 and
2013. Management believes that cash flow from operations, together
with cash on hand, cash from the sale of accounts receivable, and
borrowings available under our credit facility and bank overdraft
facilities will be sufficient to support our financial obligations.
See note 14(d) to the 2008 annual consolidated financial
statements. 11. Comparative information: We have reclassified
certain prior period information to conform to the current period's
presentation. DATASOURCE: Celestica Inc. CONTACT: Laurie Flanagan,
Celestica Global Communications, (416) 448-2200, ; Paul Carpino,
Celestica Investor Relations, (416) 448-2211,
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