Celestica announces first quarter 2007 financial results



    
                            First Quarter Summary
                            ---------------------

    -   Revenue of $1,842 million, down 5% year-over-year
    -   GAAP loss of ($0.15) per share compared to a loss of ($0.08) per
        share last year
    -   Adjusted net loss of ($0.04) per share compared to adjusted net
        earnings of $0.08 a year ago
    -   Q2 2007 revenue guidance of $1.85 - $2.05 billion, adjusted net
        earnings (loss) per share of $(0.03) - $0.05


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

    TORONTO, April 25 /CNW/ - Celestica Inc. (NYSE and TSX: CLS), a world
leader in electronics manufacturing services (EMS), today announced financial
results for the first quarter ended March 31, 2007.
    Revenue was $1,842 million, down 5% from $1,934 million in the first
quarter of 2006. Net loss on a GAAP basis for the first quarter was
($34.3) million or ($0.15) per share, compared to GAAP net loss of ($17.4)
million or ($0.08) per share for the same period last year. Included in GAAP
net loss for the quarter is $8 million for restructuring charges. For the same
period in 2006, restructuring charges of $17 million were incurred. As
previously disclosed, we expect to incur restructuring charges in the range of
$20 to $40 million in 2007.
    Adjusted net earnings for the quarter was a loss of ($9.1) million or a
loss of ($0.04) per share compared to adjusted net earnings of $17.4 million
or $0.08 per share for the same period last year. Adjusted net earnings is
defined as net earnings before amortization of intangible assets, gains or
losses on the repurchase of shares and debt, integration costs related to
acquisitions, option expense, option exchange costs and other charges, net of
tax and significant deferred tax write-offs (detailed GAAP financial
statements and supplementary information related to adjusted net earnings
appear at the end of this press release). These results compare with the
company's guidance for the first quarter, announced on January 30, 2007, of
revenue in the range of $1.7 billion to $1.9 billion and adjusted net loss per
share in the range of ($0.15) to ($0.04).
    "I am encouraged that our aggressive game plan for 2007 is having a
positive impact on our business performance. We are committed to building on
the momentum of our first quarter results and driving further improvements."
said Craig Muhlhauser, President and Chief Executive Officer, Celestica. Over
the past two quarters our customer satisfaction rating has improved
significantly - a strong indicator that our customers are regaining confidence
in our ability to deliver informed, flexible solutions to enable their
success."

    Credit Facility Update
    ----------------------
    In April 2007, we renegotiated the terms of our credit facility and
reduced its size from $600 million to $300 million. The term has been extended
to April 2009. Under the new terms, Celestica presently has access to the full
borrowing capacity available under the facility.

    Outlook
    -------
    We continue to see demand softness in certain end markets going forward. 
For the second quarter ending June 30, 2007, the company expects revenue will
be in the range of $1.85 billion to $2.05 billion, and adjusted net
earnings(loss) per share to range from $(0.03) to $0.05.

    First Quarter and Annual Shareholders Meeting Webcasts
    ------------------------------------------------------
    Management will host its quarterly results conference call today at
approximately 4:30 p.m. Eastern Time which can be accessed at
www.celestica.com.
    The company's Annual Shareholders Meeting is being held on April 26, 2007
in Toronto and will commence at 10:00 a.m. Eastern Time in the Vanity Fair
Ballroom of the Le Royal Meridien King Edward Hotel, 37 King Street East,
Toronto, Ontario. A live webcast of management's presentation will be
available at www.celestica.com at approximately 10:10 a.m. Eastern Time.

    Supplementary Information
    -------------------------
    In addition to disclosing detailed results in accordance with Canadian
generally accepted accounting principles (GAAP), Celestica also provides
supplementary non-GAAP measures as a method to evaluate the company's
operating performance.

    Management uses adjusted net earnings as a measure of enterprise-wide
performance. As a result of acquisitions made by the company, restructuring
activities, securities repurchases and the adoption of fair value accounting
for stock options, management believes adjusted net earnings is a useful
measure that facilitates period-to-period operating comparisons and allows the
company to compare its operating results with its competitors in the U.S. and
Asia. Adjusted net earnings excludes the effects of acquisition-related
charges (most significantly, amortization of intangible assets and integration
costs related to acquisitions), other charges (most significantly,
restructuring costs and the write-down of goodwill and long-lived assets),
gains or losses on the repurchase of shares or debt, option expense and option
exchange costs, and the related income tax effect of these adjustments and any
significant deferred tax write-offs. 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 (loss) prepared in
accordance with Canadian or U.S. GAAP. The company has provided a
reconciliation of adjusted net earnings (loss) to Canadian GAAP net earnings
(loss) below.

    About Celestica
    ---------------
    Celestica is dedicated to providing innovative electronics manufacturing
services that accelerate our customers' success. Through our efficient global
manufacturing and supply chain network, we deliver competitive advantage to
companies in the computing, communications, consumer, industrial, and
aerospace and defense end markets. Our employees share a proud history of
proven expertise and creativity that provides our customers with the
flexibility 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, 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. The risks and
uncertainties referred to above include, but are not limited to: variability
of operating results among periods; inability to retain or grow our business
due to execution problems resulting from significant headcount reductions,
plant closures and product transfer associated with major restructuring
activities; the effects of price competition and other business and
competitive factors generally affecting the EMS industry; the challenges of
effectively managing our operations during uncertain economic conditions; our
dependence on a limited number of customers; our dependence on industries
affected by rapid technological change; the challenge of responding to
lower-than-expected customer demand; our ability to successfully manage our
international operations; and delays in the delivery and/or general
availability of various components used in the manufacturing process. These
and other risks and uncertainties and factors are discussed in the Company's
various public filings at www.sedar.com and www.sec.gov, including our Form
20-F and subsequent reports on Form 6-K filed with the Securities and Exchange
Commission.
    As of its date, this press release contains any material information
associated with the company's financial results for the first quarter ended 
March 31, 2007 and revenue and adjusted net earnings guidance for the second
quarter ending June 30, 2007. Earnings guidance is reviewed by the company's
board of directors. It is Celestica's policy that earnings guidance is
effective on the date given, and will only be updated through a public
announcement.

    

    RECONCILIATION OF GAAP TO
    ADJUSTED NET EARNINGS
    (in millions of
     U.S. dollars)           1Q 2006                       1Q 2007
    Three months  ----------------------------- -----------------------------
     ended                   Adjust-                       Adjust-
     March 31       GAAP      ments   Adjusted    GAAP      ments   Adjusted
                  --------- --------- --------- --------- --------- ---------
    Revenue       $1,934.0  $      -  $1,934.0  $1,842.3  $      -  $1,842.3
    Cost of
     sales(1)      1,828.2      (1.5)  1,826.7   1,763.7      (1.0)  1,762.7
                  --------- --------- --------- --------- --------- ---------
    Gross profit     105.8       1.5     107.3      78.6       1.0      79.6
    SG&A(1)           74.5      (1.3)     73.2      74.4      (0.6)     73.8
    Amortization
     of intangible
     assets            6.6      (6.6)        -       6.0      (6.0)        -
    Integration
     costs relating
     to acquisitions   0.5      (0.5)        -       0.1      (0.1)        -
    Other charges     17.0     (17.0)        -       7.1      (7.1)        -
                  --------- --------- --------- --------- --------- ---------
    Operating
     earnings (loss)
     - EBIAT           7.2      26.9      34.1      (9.0)     14.8       5.8
    Interest
     expense, net     13.9         -      13.9      16.4         -      16.4
                  --------- --------- --------- --------- --------- ---------
    Net earnings
     (loss) before
     tax              (6.7)     26.9      20.2     (25.4)     14.8     (10.6)
    Income tax
     expense
     (recovery)       10.7      (7.9)      2.8       8.9     (10.4)     (1.5)
                  --------- --------- --------- --------- --------- ---------
    Net earnings
     (loss)       $  (17.4) $   34.8  $   17.4  $  (34.3) $   25.2  $   (9.1)
                  --------- --------- --------- --------- --------- ---------
                  --------- --------- --------- --------- --------- ---------

    W.A. No. of
     shares (in
     millions)
     - diluted       226.7               227.9     228.4               228.4
    Earnings (loss)
     per share
     - diluted    $  (0.08)           $   0.08  $  (0.15)           $  (0.04)

    (1) Non-cash option expense included in cost of sales and SG&A is added
        back for adjusted net earnings


    GUIDANCE SUMMARY

                         1Q 07 Guidance      1Q 07 Actual   2Q 07 Guidance(2)
                         --------------      ------------   -----------------
    Revenue              $1.70B - $1.90B        $1.84B       $1.85B - $2.05B
    Adjusted net EPS    $(0.15) - $(0.04)       $(0.04)      $(0.03) - $0.05

    (2) Guidance for the second 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     March 31
                                                       2006          2007
                                                   ------------  ------------
    Assets                                                        (unaudited)
    Current assets:
      Cash and short-term investments ...........   $    803.7    $    704.1
      Accounts receivable .......................        973.2         841.0
      Inventories ...............................      1,197.9       1,080.7
      Prepaid and other assets ..................        111.0          96.5
      Income taxes recoverable ..................         31.2          33.6
      Deferred income taxes .....................          3.8           4.1
                                                   ------------  ------------
                                                       3,120.8       2,760.0
    Capital assets ..............................        567.1         541.0
    Goodwill from business combinations .........        854.8         854.8
    Intangible assets ...........................         60.1          54.1
    Other assets ................................         83.5          71.9
                                                   ------------  ------------
                                                    $  4,686.3    $  4,281.8
                                                   ------------  ------------
                                                   ------------  ------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable ..........................   $  1,193.6    $    957.9
      Accrued liabilities .......................        487.9         351.6
      Income taxes payable ......................         42.7          44.1
      Deferred income taxes .....................          1.1           1.2
      Current portion of long-term debt
       (note 4) .................................          0.6           0.6
                                                   ------------  ------------
                                                       1,725.9       1,355.4
    Long-term debt (note 4) .....................        750.2         744.1
    Accrued pension and post-employment
     benefits ...................................         54.9          57.5
    Deferred income taxes .......................         47.5          49.0
    Other long-term liabilities .................         13.2          18.4
                                                   ------------  ------------
                                                       2,591.7       2,224.4
    Shareholders' equity:
      Capital stock .............................      3,576.6       3,582.5
      Warrants ..................................          8.4           3.1
      Contributed surplus .......................        179.3         182.9
      Deficit ...................................     (1,696.2)     (1,736.9)
      Foreign currency translation adjustment ...         26.5             -
      Accumulated other comprehensive income
       (note 11) ................................            -          25.8
                                                   ------------  ------------
                                                       2,094.6       2,057.4
                                                   ------------  ------------
                                                    $  4,686.3    $  4,281.8
                                                   ------------  ------------
                                                   ------------  ------------

                   Guarantees and contingencies (note 12)
                      Subsequent event (notes 4 and 13)

        See accompanying notes to consolidated financial statements.
      These unaudited interim consolidated financial statements should
                 be read in conjunction with the 2006 annual
                     consolidated financial statements.



                               CELESTICA INC.

              CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
           (in millions of U.S. dollars, except per share amounts)
                                 (unaudited)


                                                        Three months ended
                                                             March 31
                                                        2006          2007
                                                   ------------  ------------

    Revenue .....................................   $  1,934.0    $  1,842.3
    Cost of sales ...............................      1,828.2       1,763.7
                                                   ------------  ------------
    Gross profit ................................        105.8          78.6
    Selling, general and administrative
     expenses ...................................         74.5          74.4
    Amortization of intangible assets ...........          6.6           6.0
    Integration costs related to acquisitions ...          0.5           0.1
    Other charges (note 5) ......................         17.0           7.1
    Interest on long-term debt ..................         15.9          17.6
    Interest income, net ........................         (2.0)         (1.2)
                                                   ------------  ------------
    Loss before income taxes ....................         (6.7)        (25.4)
    Income taxes expense:
      Current ...................................          8.9           5.5
      Deferred ..................................          1.8           3.4
                                                   ------------  ------------
                                                          10.7           8.9
                                                   ------------  ------------
    Net loss for the period .....................   $    (17.4)   $    (34.3)
                                                   ------------  ------------
                                                   ------------  ------------

    Deficit, beginning of period ................   $ (1,545.6)   $ (1,696.2)
    Change in accounting policy (note 2) ........            -          (6.4)
    Net loss for the period .....................        (17.4)        (34.3)
                                                   ------------  ------------
    Deficit, end of period ......................   $ (1,563.0)   $ (1,736.9)
                                                   ------------  ------------
                                                   ------------  ------------

    Basic loss per share ........................   $    (0.08)   $    (0.15)

    Diluted loss per share ......................   $    (0.08)   $    (0.15)

    Shares used in computing per share amounts:
      Basic (in millions) .......................        226.7         228.4
      Diluted (in millions) .....................        226.7         228.4


        See accompanying notes to consolidated financial statements.
      These unaudited interim consolidated financial statements should
                 be read in conjunction with the 2006 annual
                     consolidated financial statements.



                               CELESTICA INC.

                CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                        (in millions of U.S. dollars)
                                 (unaudited)


                                                        Three months ended
                                                             March 31
                                                        2006          2007
                                                   ------------  ------------

    Net loss for the period .....................   $    (17.4)   $    (34.3)
    Other comprehensive income (loss),
     net of tax:
      Foreign currency translation gain .........          1.2           0.6
      Net loss on derivatives designated as
       cash flow hedges (net of income tax
       benefit of $0.1) .........................            -          (0.5)
      Net gain on derivatives designated as cash
       flow hedges reclassified to operations
       (net of income tax expense of nil) .......            -          (0.3)
                                                   ------------  ------------
    Comprehensive loss ..........................   $    (16.2)   $    (34.5)
                                                   ------------  ------------
                                                   ------------  ------------
                                                   ------------  ------------

        See accompanying notes to consolidated financial statements.
      These unaudited interim consolidated financial statements should
                 be read in conjunction with the 2006 annual
                     consolidated financial statements.



                               CELESTICA INC.

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (in millions of U.S. dollars)
                                 (unaudited)


                                                        Three months ended
                                                             March 31
                                                        2006          2007
                                                   ------------  ------------
    Cash provided by (used in):
    Operations:
    Net loss for the period .....................   $    (17.4)   $    (34.3)
    Items not affecting cash:
      Depreciation and amortization .............         31.5          32.0
      Deferred income taxes .....................          1.8           3.4
      Non-cash charge for option issuances ......          2.8           1.6
      Other charges .............................            -          (0.6)
    Other .......................................          3.8           5.6
    Changes in non-cash working capital items:
      Accounts receivable .......................         (3.0)        132.2
      Inventories ...............................        (92.5)        117.2
      Prepaid and other assets ..................         (9.0)          2.4
      Income taxes recoverable ..................         21.7          (2.4)
      Accounts payable and accrued liabilities ..        (40.3)       (359.8)
      Income taxes payable ......................        (17.2)          1.4
                                                   ------------  ------------
      Non-cash working capital changes ..........       (140.3)       (109.0)
                                                   ------------  ------------
    Cash used in operations .....................       (117.8)       (101.3)
                                                   ------------  ------------

    Investing:
      Acquisitions, net of cash acquired
       (note 3) .................................        (19.1)            -
      Purchase of capital assets ................        (55.1)        (13.3)
      Proceeds from sale of assets ..............            -          14.4
      Other .....................................          0.9           0.1
                                                   ------------  ------------
    Cash provided by (used in) investing
     activities .................................        (73.3)          1.2
                                                   ------------  ------------

    Financing:
      Repayment of long-term debt ...............         (0.3)         (0.2)
      Issuance of share capital .................          0.5           1.3
      Other .....................................         (2.1)         (0.6)
                                                   ------------  ------------
    Cash provided by (used in) financing
     activities .................................         (1.9)          0.5
                                                   ------------  ------------

    Decrease in cash ............................       (193.0)        (99.6)
    Cash, beginning of period ...................        969.0         803.7
                                                   ------------  ------------
    Cash, end of period .........................   $    776.0    $    704.1
                                                   ------------  ------------
                                                   ------------  ------------

            Cash is comprised of cash and short-term investments.
                 Supplemental cash flow information (note 9)

        See accompanying notes to consolidated financial statements.
      These unaudited interim consolidated financial statements should
                 be read in conjunction with the 2006 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:

    We prepare our financial statements in accordance with generally accepted
    accounting principles (GAAP) in Canada with a reconciliation to
    accounting principles generally accepted in the United States, disclosed
    in note 20 to the 2006 annual consolidated financial statements.

    2.  Significant accounting policies:

    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 2006 annual
    consolidated financial statements. These unaudited interim consolidated
    financial statements reflect all adjustments, consisting only of normal
    recurring accruals, which are, in the opinion of management, necessary to
    present fairly our financial position as at March 31, 2007 and the
    results of operations and cash flows for the three months ended
    March 31, 2006 and 2007. These unaudited interim consolidated financial
    statements are based upon accounting principles consistent with those
    used and described in the 2006 annual consolidated financial statements,
    except for the following:

    Change in accounting policies:

    (a)    Financial instruments:

    Effective January 1, 2007, we adopted the new standards issued by the
    CICA on financial instruments, hedges and comprehensive income. Section
    1530, "Comprehensive income," Section 3855, "Financial instruments -
    recognition and measurement," Section 3861, "Financial instruments -
    disclosure and presentation," and Section 3865, "Hedges," became
    effective for our first quarter of 2007. We are not required to restate
    prior results.

    On January 1, 2007, we made the following transitional adjustments to our
    consolidated balance sheet to adopt the new standards:

                                                                    Increase
                                                                   (decrease)
                                                                  -----------
        Prepaid and other assets.................................  $     5.5
        Other assets.............................................      (10.3)
        Accrued liabilities......................................        5.8
        Long-term debt - embedded option and debt obligation.....        1.9
        Long-term debt - unamortized debt issue costs............      (11.5)
        Other long-term liabilities..............................        8.1
        Long-term deferred income taxes liability................       (2.2)
        Opening deficit..........................................        6.4
        Accumulated other comprehensive loss - cash flow hedges..        0.5


    The details of the transitional adjustments are noted below.

    The impact of the new standards on our operations for the first quarter
    of 2007 is as follows:

                                                                    Increase
                                                                  -----------
        Interest on long-term debt...............................  $     0.8
        Amortization of deferred debt issue costs................        0.5


    The new standards require all financial assets and liabilities to be
    carried at fair value in our consolidated balance sheet, except for loans
    and receivables, held-to-maturity investments and non-trading financial
    liabilities, which are carried at their amortized cost.

    All derivatives, including embedded derivatives that must be separately
    accounted for, are measured at fair value in our consolidated balance
    sheet. The types of hedging relationships that qualify for hedge
    accounting have not changed under the new standards. We will continue to
    designate our hedges as either cash flow hedges or fair value hedges. In
    a cash flow hedge, changes in the fair value of the hedging derivative,
    to the extent effective, are recorded in other comprehensive income/loss
    until the asset or liability being hedged is recognized in operations.
    Any hedge ineffectiveness is recognized in operations immediately. For
    hedges that are discontinued before the end of the original hedge term,
    the unrealized hedge gain/loss in other comprehensive income/loss is
    amortized to operations over the remaining term of the original hedge.
    If the hedged item ceases to exist before the end of the original hedge
    term, the unrealized hedge gain/loss in other comprehensive income/loss
    is recognized in operations immediately. In a fair value hedge, changes
    in the fair value of the hedging derivative are offset in operations by
    the changes in the fair value of the asset, liability or cash flows being
    hedged.

    Derivatives may be embedded in financial instruments (the "host
    instrument"). Under the new standards, embedded derivatives are treated
    as separate derivatives when their economic characteristics and risks are
    not closely related to those of the host instrument, the terms of the
    embedded derivative are the same as those of a stand-alone derivative,
    and the combined contract is not held for trading or designated at fair
    value. These embedded derivatives are measured at fair value with
    subsequent changes recognized in operations. We have prepayment options
    that are embedded in our Senior Subordinated Notes which meet the
    criteria for bifurcation. The impact of the prepayment options on our
    consolidated financial statements is described under the transitional
    adjustments below and in note 4(d).

    The new standards require that we present a new "consolidated statements
    of comprehensive income/loss" as part of our consolidated financial
    statements. Comprehensive income/loss is comprised of net income/loss,
    changes in the fair value of derivative instruments designated as cash
    flow hedges and the net unrealized foreign currency translation gain/loss
    arising from self-sustaining foreign operations, which was previously
    classified as a separate component of shareholders' equity. Subsequent
    releases from other comprehensive income/loss to operations is dependent
    on when the hedged items designated under cash flow hedges are recognized
    in operations, or upon de-recognition of the net investment in a
    self-sustaining foreign operation.

    In determining the fair value of our financial instruments, we used a
    variety of methods and assumptions that are based on market conditions
    and risks existing on each reporting date. Broker quotes and standard
    market conventions and techniques, such as discounted cash flow analysis
    and option pricing models, are used to determine the fair value of our
    financial instruments, including derivatives and hedged debt obligations.
    All methods of fair value measurement result in a general approximation
    of value and such value may never actually be realized.

    The transitional impact of recording our derivatives as at
    January 1, 2007 at fair value on our consolidated financial statements is
    as follows:

    (i)    Cash flow hedges:

           As at January 1, 2007, we recorded derivative assets of $5.8 and
           derivative liabilities of $6.0 at fair value on our consolidated
           balance sheet in relation to our cash flow hedges, with a
           corresponding balance of $0.2 recorded in the opening accumulated
           other comprehensive loss. In addition, we reclassified $0.3 of net
           deferred foreign exchange losses to opening accumulated other
           comprehensive loss. The ineffective portion of cash flow hedges as
           of December 31, 2006 was insignificant and, therefore, did not
           impact the opening deficit.

    (ii)   Fair value hedges:

           In connection with the issuance of our $500.0 Senior Subordinated
           Notes ("2011 Notes") in June 2004, we entered into agreements to
           swap the fixed interest rate for a variable interest rate. We have
           designated the swap agreements as fair value hedges. As at
           January 1, 2007, we recorded a derivative liability of $7.9 (net
           of an interest accrual of $2.0) for the swap agreements in other
           long-term liabilities. A corresponding fair value adjustment was
           not recorded against the 2011 Notes since the prior hedge
           relationship was not considered a qualified type under
           Section 3865 after bifurcation of the embedded prepayment option
           in accordance with Section 3855. We decreased the deferred income
           tax liability by $2.6 and recorded a loss of $5.3 to opening
           deficit. A new hedge relationship was redesignated on
           January 1, 2007 which qualified for fair value hedge accounting in
           accordance with Section 3865.

    (iii)  Economic hedges:

           We have entered into foreign currency forwards which are used as
           economic hedges against currency risks. As of December 31, 2006,
           we had accrued an unrealized foreign exchange loss of $0.2. We
           reclassified these forwards as derivative financial instruments
           with the change in fair value recorded in operations.

    (iv)   Embedded derivatives:

           The prepayment options embedded in our Senior Subordinated Notes
           qualify as embedded derivatives which must be bifurcated for
           reporting in accordance with the new standards. As at
           January 1, 2007, we bifurcated the fair value of the embedded
           derivative asset of $9.3 from the Notes. As a result of recording
           this asset, the amortized cost of long-term debt increased. We
           also recorded a cumulative adjustment of $1.9 against opening
           deficit. Any subsequent change in the fair value of the embedded
           derivatives will be recorded in operations.

    (v)    Effective interest method:

           We incurred underwriting commissions and expenses relating to our
           Senior Subordinated Notes offerings. Previously, these costs were
           deferred in other assets and amortized on a straight line basis
           over the term of the debt. The new standards require us to
           reclassify these costs as a reduction of the cost of the debt and
           to use the effective interest rate method to amortize the costs to
           operations. As at January 1, 2007, we reclassified $10.3 of
           unamortized costs from other assets to long-term debt and recorded
           an adjustment to reflect the balance had we used the effective
           interest rate method since inception. This resulted in a
           $1.2 increase in the unamortized costs, a decrease of $0.8 in
           opening deficit and an increase of $0.4 in deferred income tax
           liability.

    (b)    Accounting changes:

    In January 2007, we adopted CICA Handbook Section 1506,
    "Accounting changes," which requires that voluntary changes in accounting
    policy are made only if the changes result in financial statements that
    provide more reliable and more relevant information. It also requires
    prior period errors to be corrected retrospectively. The adoption of this
    standard did not impact our consolidated financial statements.

    3.  Acquisitions and divestitures:

    As part of the acquisition of Manufacturers' Services Limited (MSL) in
    2004, we recorded liabilities for consolidating some of the acquired MSL
    sites. We have completed the major components of these restructuring
    plans except for certain long-term lease and contractual obligations
    which will be paid out over the remaining lease terms through 2010. Cash
    outlays are funded from cash on hand. We record the restructuring
    liability in accrued liabilities.

    Details of the first quarter activity through the MSL restructuring
    liability are as follows:

                                                                   Lease and
                                                                     other
                                                                  contractual
                                                                  obligations
                                                                  -----------
        December 31, 2006........................................  $     1.5
        Cash payments............................................       (0.2)
                                                                  -----------
        March 31, 2007...........................................  $     1.3
                                                                  -----------
                                                                  -----------

    2006 acquisition activity:

    In March 2006, we acquired certain assets located in the Philippines from
    Powerwave Technologies, Inc. for a cash purchase price of $19.1.
    Amortizable intangible assets arising from this acquisition were
    $7.6, primarily for customer relationships and contract intangibles.

    2006 divestiture:

    In June 2006, we sold our plastics business for net cash proceeds of
    $18.5. Our plastics business was located primarily in Asia. During the
    second quarter of 2006, we reported a loss on sale of $33.2 which we
    recorded as other charges. This loss included $20.0 in goodwill allocated
    to the plastics business. As part of the sale agreement, we provided
    routine indemnities to the purchaser which management believes will not
    have a material adverse impact on our results of operations, financial
    position or liquidity.

    4.  Long-term debt:
                                                      December 31   March 31
                                                          2006        2007
                                                      ----------- -----------
        Unsecured, revolving credit facility due
         2007(a).....................................  $       -   $       -

        Senior Subordinated Notes due 2011(b)........      500.0       500.0
        Senior Subordinated Notes due 2013(c)........      250.0       250.0
          Embedded prepayment option at fair
           value(d)..................................          -        (4.1)
          Basis adjustments on debt obligation(d)....          -         7.2
          Unamortized debt issue costs(b)(c).........          -       (11.0)
          Fair value adjustment of 2011 Notes
           attributable to interest rate risks(d)....          -         2.0
                                                      ----------- -----------
                                                           750.0       744.1
        Capital lease obligations....................        0.8         0.6
                                                      ----------- -----------
                                                           750.8       744.7
        Less current portion.........................        0.6         0.6
                                                      ----------- -----------
                                                       $   750.2   $   744.1
                                                      ----------- -----------
                                                      ----------- -----------

    (a)    Our existing revolving credit facility for $600.0 matures in
           June 2007. The facility includes a $25.0 swing-line facility that
           provides for short-term borrowings up to a maximum of seven days.
           Borrowings under the facility bear interest at LIBOR plus a
           margin, except that borrowings under the swing-line facility bear
           interest at a base rate plus a margin. There were no borrowings
           outstanding under this facility. Commitment fees for the first
           quarter of 2007 were $0.8.

           The facility has restrictive covenants relating to debt incurrence
           and sale of assets and also contains financial covenants that
           require us to maintain certain financial ratios. We were in
           compliance with all covenants at March 31, 2007.

           In April 2007, we renegotiated the terms of our revolving credit
           facility and reduced the size from $600.0 to $300.0. We also
           extended the maturity from June 2007 to April 2009. Under the
           terms of the extension, we have pledged certain assets and shares
           of certain North American subsidiaries, as security. The extension
           includes improved financial covenants and, as a result, we
           currently have access to $300.0 of available debt incurrence.

           We also have uncommitted bank overdraft facilities available for
           operating requirements which total $47.5 at March 31, 2007. There
           were no borrowings outstanding under these facilities.

    (b)    In June 2004, we issued Senior Subordinated Notes due 2011 with an
           aggregate principal amount of $500.0 and a fixed interest rate of
           7.875%. We incurred $12.0 in underwriting commissions and expenses
           which we deferred and are amortizing over the term of the debt
           using the effective interest rate method. The 2011 Notes are
           unsecured and are subordinated in right of payment to all our
           senior debt. We may redeem the 2011 Notes on July 1, 2008 or later
           at various premiums above face value.

           In connection with the 2011 Notes offering, we entered into
           agreements to swap the fixed interest rate with a variable
           interest rate based on LIBOR plus a margin. The average interest
           rate on the 2011 Notes was 8.4% for the first quarter of 2007
           (7.5% - first quarter of 2006).

    (c)    In June 2005, we issued Senior Subordinated Notes due 2013 with an
           aggregate principal amount of $250.0 and a fixed interest rate of
           7.625%. We incurred $4.2 in underwriting commissions and expenses
           which we deferred and are amortizing over the term of the debt
           using the effective interest rate method. The 2013 Notes are
           unsecured and are subordinated in right of payment to all our
           senior debt. We may redeem the 2013 Notes on July 1, 2009 or later
           at various premiums above face value.

    (d)    The prepayment options in the Notes qualify as embedded
           derivatives which must be bifurcated for reporting under the new
           standards. As of March 31, 2007, the fair value of the embedded
           derivative asset is $4.1 and is recorded with long-term debt. The
           decrease in the fair value of $1.5 for the first quarter of 2007
           is recorded in long-term interest expense. As a result of
           bifurcating the prepayment option from the Notes, a basis
           adjustment is added to the amortized cost of the long-term debt.
           This basis adjustment is amortized over the term of the debt using
           the effective interest rate method. This, combined with the change
           in the fair value of the debt obligation attributable to movement
           in the benchmark interest rates, totaled $1.7 for the first
           quarter of 2007, which is recorded in long-term interest expense.

    5.  Other charges:

                                                         Three months ended
                                                               March 31
                                                          2006        2007
                                                      ----------- -----------
        2001 to 2004 restructuring(a)................  $     0.5   $    (0.4)
        2005 to 2007 restructuring(b)................       16.5         8.4
                                                      ----------- -----------
        Total restructuring..........................       17.0         8.0
        Other........................................          -        (0.9)
                                                      ----------- -----------
        Total other charges..........................  $    17.0   $     7.1
                                                      ----------- -----------
                                                      ----------- -----------

    (a)    2001 to 2004 restructuring:

    In 2001, we announced a restructuring plan in response to the weak
    end-markets in the computing and telecommunications industries. In
    response to the prolonged difficult end-market conditions, we announced a
    second restructuring plan in July 2002. The weak demand for our
    manufacturing services resulted in an accelerated move to lower-cost
    geographies and additional restructuring in the Americas and Europe. In
    January 2003, we announced further reductions to our manufacturing
    capacity in Europe. In 2004, we announced plans to further restructure
    our operations to better align capacity with customers' requirements.

    These restructuring actions were focused on consolidating facilities,
    reducing the workforce, and transferring programs to lower-cost
    geographies. The majority of the employees terminated were manufacturing
    and plant employees. For leased facilities that were no longer used, the
    lease costs included in the restructuring costs represent future lease
    payments less estimated sublease recoveries. Adjustments were made to
    lease and other contractual obligations to reflect incremental
    cancellation fees paid for terminating certain facility leases and to
    reflect higher accruals for other leases due to delays in the timing of
    sublease recoveries and changes in estimated sublease rates, relating
    principally to facilities in the Americas.

    We have completed the major components of these restructuring plans,
    except for certain long-term lease and other contractual obligations,
    which will be paid out over the remaining lease terms through 2015.
    Cash outlays are funded from cash on hand. The restructuring liability is
    recorded in accrued liabilities.

    Details of the first quarter activity are as follows:

                                         Lease and    Facility
                             Employee      other        exit         Total
                           termination  contractual     costs       accrued
                              costs     obligations   and other    liability
                           -----------  -----------  -----------  -----------
        December 31,
         2006.............. $     0.4    $    29.3    $     1.0    $    30.7
        Cash payments......      (0.2)        (2.7)           -         (2.9)
        Adjustments........      (0.2)         0.8         (1.0)        (0.4)
                           -----------  -----------  -----------  -----------
        March 31, 2007..... $       -    $    27.4    $       -    $    27.4
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------



                             Non-cash       2007
                              charge       charge
                           -----------  -----------
        December 31,
         2006.............  $   328.7    $       -
        Cash payments.....          -            -
        Adjustments.......          -         (0.4)
                           -----------  -----------
        March 31, 2007....  $   328.7    $    (0.4)
                           -----------  -----------
                           -----------  -----------


    (b)    2005 to 2007 restructuring:

    In January 2005, we announced plans to further improve capacity
    utilization and accelerate margin improvements. These restructuring
    actions included facility closures and a reduction in workforce,
    primarily targeting our higher-cost geographies where end-market demand
    had not recovered to the levels required to achieve sustainable
    profitability. We expected to complete these restructuring actions by the
    end of 2006. However, in light of our operating results in 2006 and in
    the course of preparing our 2007 plan in the fourth quarter of 2006, we
    identified additional restructuring actions to improve our profitability.
    These restructuring actions include additional downsizing of workforces
    to reflect the volume reductions at certain facilities and reducing
    overhead costs. We expect to complete these restructuring actions by the
    end of 2007.

    As of March 31, 2007, we have recorded termination costs related to
    approximately 7,200 employees, primarily operations and plant employees.
    Approximately 5,300 of these employees have been terminated as of
    March 31, 2007 with the balance of the terminations to occur by the end
    of 2007. Approximately 65% of employee terminations are in the Americas
    and 35% in Europe.

    Details of the first quarter activity are as follows:

                           Lease and    Facility
                             Employee      other        exit         Total
                           termination  contractual     costs       accrued
                              costs     obligations   and other    liability
                           -----------  -----------  -----------  -----------
        December 31,
         2006.............  $    52.5    $    12.1    $     0.5    $    65.1
        Cash payments.....      (28.3)        (2.3)        (1.7)       (32.3)
        Provisions........        6.1          0.7          1.6          8.4
                           -----------  -----------  -----------  -----------
        March 31, 2007....  $    30.3    $    10.5    $     0.4    $    41.2
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------


                             Non-cash       2007
                              charge       charge
                           -----------  -----------
        December 31,
         2006.............  $    53.6    $       -
        Cash payments.....          -            -
        Provisions........          -          8.4
                           -----------  -----------
        March 31, 2007....  $    53.6    $     8.4
                           -----------  -----------
                           -----------  -----------


    Cash outlays are and will be funded from cash on hand. The restructuring
    liability is recorded in accrued liabilities.

    In September 2006, we sold one of our production facilities in Europe to
    a third party as part of our restructuring program. In connection with
    the sale, we provided indemnities to the purchaser which management
    believes will not have a material adverse impact on our operations,
    financial position or liquidity. The final post-closing cash was received
    in the first quarter of 2007. We also repaid $4.0 to the purchaser which
    we were previously holding in escrow.

    Restructuring summary:

    We expect to incur restructuring charges of between $20 and $40 in 2007
    to complete these restructuring actions. We recorded restructuring
    charges of $8.0 in the first quarter of 2007.

    As of March 31, 2007, we have $4.9 in assets that are available-for-sale,
    primarily land and buildings in all geographies as a result of the
    restructuring actions we implemented. We have programs underway to sell
    these assets.

    6.  Pension and non-pension post-employment benefit plans:

    We have recorded the following pension expense:

                                                          Three months ended
                                                              March 31
                                                          2006        2007
                                                      ----------- -----------

        Pension plans................................  $     8.7   $     5.0
        Other benefit plans..........................        2.2         1.7
                                                      ----------- -----------
        Total expense................................  $    10.9   $     6.7
                                                      ----------- -----------
                                                      ----------- -----------


    7.  Stock-based compensation and other stock-based payments:

    We have granted stock options and performance options as part of our
    long-term incentive plans. We have applied the fair-value method of
    accounting for stock option awards granted after January 1, 2003 and,
    accordingly, have recorded compensation expense. For awards granted in
    2002, we have disclosed the pro forma earnings and per share information
    as if we had accounted for employee stock options under the fair-value
    method. We are not required to apply the pro forma impact of awards
    granted prior to January 1, 2002.

    The estimated fair value of options is amortized to expense over the
    vesting period, on a straight-line basis, and was determined using the
    Black-Scholes option pricing model with the following weighted average
    assumptions:

                                                         Three months ended
                                                              March 31
                                                          2006        2007
                                                      ----------- -----------

        Risk-free rate...............................   4.5%-4.6%   4.5%-4.8%
        Dividend yield...............................        0.0%        0.0%
        Volatility factor of the expected market
         price of our shares.........................     48%-65%     35%-52%
        Expected option life (in years)..............    3.5-5.5     4.0-5.5
        Weighted average fair value of options
         granted.....................................  $    5.60   $    2.54

    Compensation expense for the three months ended March 31, 2007 was $1.6
    (three months ended March 31, 2006 was $2.8) relating to the fair value
    of options granted after January 1, 2003.

    The pro forma disclosure relating to options granted in 2002 is as
    follows:

                                                         Three months ended
                                                              March 31
                                                          2006        2007
                                                      ----------- -----------

        Net loss as reported.........................  $   (17.4)  $   (34.3)
        Deduct: Stock-based compensation
         (fair value)................................       (1.8)          -
                                                      ----------- -----------
        Pro forma net loss...........................  $   (19.2)  $   (34.3)
                                                      ----------- -----------
                                                      ----------- -----------

        Loss per share:
          Basic - as reported........................  $   (0.08)  $   (0.15)
          Basic - pro forma..........................  $   (0.08)  $   (0.15)

          Diluted - as reported......................  $   (0.08)  $   (0.15)
          Diluted - pro forma........................  $   (0.08)  $   (0.15)

    All of the 2002 option grants were fully vested by the end of 2006 and,
    therefore, do not impact our 2007 pro forma disclosure.

    Our stock plans are described in note 9 to the 2006 annual consolidated
    financial statements.

    8.  Segment and geographic information:

    The accounting standards establish the criteria for the disclosure of
    certain information in the interim and annual financial statements about
    operating segments, products and services, geographic areas 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.

    In 2006, we had three reportable operating segments: Asia, Americas and
    Europe. Beginning in the first quarter of 2007, we realigned our
    organizational structure to more effectively manage our operations. We
    evaluate financial information for purposes of making decisions and
    assessing financial performance based on the types of services we offer.
    Our operating segments include electronics manufacturing and global
    services, which we combined for reporting purposes because global
    services does not meet the quantitative thresholds for separate segment
    disclosure.

    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 and
           existing customers and disengagement of customers, the level of
           new program wins or losses, the phasing in or out of programs, and
           changes in customer demand.

                                                         Three months ended
                                                              March 31
                                                          2006        2007
                                                      ----------- -----------

        Enterprise communications....................         30%         32%
        Telecommunications...........................         19%         13%
        Servers......................................         17%         18%
        Storage......................................         10%         11%
        Industrial...................................         11%          8%
        Consumer.....................................         13%         18%

    (ii)   During the first quarter of 2007, two customers individually
           exceeded 10% of total revenue.

    9.  Supplemental cash flow information:

                                                         Three months ended
                                                              March 31
        Paid during the period:                           2006        2007
                                                      ----------- -----------

        Taxes........................................  $     4.8   $     6.8
        Interest(a)..................................  $    31.0   $    35.7

    (a)    This includes interest paid on the 2011 and 2013 Senior
           Subordinated Notes. Interest on the Notes is payable in January
           and July of each year until maturity. See notes 4 (b) and (c).
           The interest paid on the 2011 Notes reflect the amounts received
           or paid relating to the interest rate swap agreements.

    10. Derivative financial instruments:

    We enter into foreign currency contracts to hedge foreign currency risks
    relating to cash flow. At March 31, 2007, we had forward exchange
    contracts covering various currencies in an aggregate notional amount of
    $448.8. All derivative financial instruments are recorded at fair value
    on our consolidated balance sheet. As of March 31, 2007, $4.5 of
    derivative assets are recorded under prepaid and other assets, and
    $5.8 of derivative liabilities are recorded under accrued liabilities
    relating to our hedges against foreign currency risks.

    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 is $500.0. The
    agreements mature July 2011. See note 4(b). Payments or receipts under
    the swap agreements are recorded in interest expense on long-term debt.
    The fair value of the interest rate swap agreements at March 31, 2007 was
    an unrealized loss of $5.5 which is recorded in other long-term
    liabilities (December 31, 2006 - unrealized loss of $7.9). The change in
    the fair value of the swap agreements of $2.4 for the first quarter of
    2007 is recorded in long-term interest expense.

    11. Accumulated other comprehensive income, net of tax:
                                                                    March 31
                                                                      2007
                                                                  -----------
        Opening balance of foreign currency translation
         account.................................................  $    26.5
        Foreign currency translation gain........................        0.6
                                                                  -----------
        Closing balance..........................................  $    27.1

        Opening balance of unrealized net loss on cash
         flow hedges(1)..........................................  $    (0.5)
        Net loss on cash flow hedges(2)..........................       (0.5)
        Net gain on cash flow hedges reclassified
         to operations(3)........................................       (0.3)
                                                                  -----------
        Closing balance..........................................  $    (1.3)
                                                                  -----------

        Accumulated other comprehensive income...................  $    25.8
                                                                  -----------
                                                                  -----------
    (1) Net of income tax benefit of nil
    (2) Net of income tax benefit of $0.1
    (3) Net of income tax expense of nil

    12. Guarantees and contingencies:

    We have contingent liabilities in the form of letters of credit, letters
    of guarantee, and surety and performance bonds which we provided to
    various third parties. These guarantees cover various payments, including
    customs and excise taxes, utility commitments and certain bank
    guarantees. At March 31, 2007, these contingent liabilities amounted to
    $84.7 (December 31, 2006 - $84.9).

    In addition to the above guarantees, we have also provided routine
    indemnifications, whose terms 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.

    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 litigations were commenced against us,
    our former Chief Executive Officer and our former Chief Financial
    Officer, in the United States District Court of the Southern District of
    New York by individuals who claim they are purchasers of our stock, on
    behalf of themselves and other purchasers of our stock, during a
    specified time period. 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 adverse information with respect to demand and
    inventory in our Mexican operations and our information technology and
    communications divisions. We believe that the allegations 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 the expense of defending these cases, as well as potential
    judgments or settlement costs.

    Income taxes:

    We are subject to tax audits by local taxing authorities. International
    taxation authorities could challenge the validity of our inter-company
    financing and transfer pricing policies which generally involve
    subjective areas of taxation and a significant degree of judgment. If any
    of these taxation authorities is successful in challenging our financing
    or transfer pricing policies, our income tax expense may be adversely
    affected and we could also be subjected to interest and penalty charges.
    In connection with ongoing tax audits in the United States, taxing
    authorities have asserted that our United States subsidiaries owe
    significant amounts of tax, interest and penalties arising from
    inter-company transactions. A significant portion of these asserted
    deficiencies were resolved in favour of the company in the fourth quarter
    of 2006. We believe we have substantial defenses to the remaining
    asserted deficiencies and have adequately accrued for any likely
    potential losses. However, there can be no assurance as to the final
    resolution of these remaining asserted deficiencies and any resulting
    proceedings and if these remaining asserted deficiencies and proceedings
    are determined adversely to us, the amounts we may be required to pay may
    be material.

    13. Subsequent event:

    We renegotiated our credit facilities in April 2007.  See note 4(a).
    

    %SEDAR: 00010284E




For further information:

For further information: Laurie Flanagan, Celestica Global
Communications, (416) 448-2200, media@celestica.com; Donna Singh, Celestica
Investor Relations, (416) 448-2211, clsir@celestica.com

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Celestica Inc.

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