Celestica Announces Fourth Quarter and 2007 Financial Results



    
                           Fourth Quarter Summary
                           ----------------------

    -   Revenue of $2,211 million, down 2% year-over-year, up 6% sequentially
    -   GAAP loss of ($0.05) per share compared to a loss of ($0.27) per
        share last year
    -   Adjusted net earnings of $0.16 per share compared to $0.03 per share
        a year ago
    -   Operating margin of 2.7%, gross margin of 6.0%
    -   Inventory turns of 9.7x, highest in company's history
    -   Return on invested capital of 11.9%, highest quarterly return since
        2001
    -   Fourth quarter free cash flow of $167 million
    -   Cash increases $164 million to $1.117 billion
    -   Q1/08 revenue guidance $1.7 - $1.9 billion, adjusted net earnings per
        share of $0.06 - $0.11

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

    TORONTO, Jan. 31 /CNW/ - Celestica Inc. (NYSE, TSX: CLS), a global
provider of electronics manufacturing services (EMS), today announced
financial results for the fourth quarter and year ended December 31, 2007.
    Revenue was $2,211 million, down 2% from $2,262 million in the fourth
quarter of 2006. Net loss on a GAAP basis for the fourth quarter was
($11.7) million or ($0.05) per share, compared to GAAP net loss of ($60.8)
million or ($0.27) per share for the same period last year. Restructuring
charges in the quarter were $24 million compared to $59 million for the same
period last year. GAAP net loss for the quarter also included a non-cash
write-down of long-lived assets of $15 million.
    Adjusted net earnings for the quarter were $37.2 million or $0.16 per
share compared to $6.5 million or $0.03 per share for the same period last
year. Adjusted net earnings (loss) 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 fourth quarter,
announced on October 25, 2007 of revenue of $2.0 to $2.15 billion and adjusted
net earnings per share of $0.10 to $0.16.
    For 2007, revenue was $8,070 down 8%, compared to $8,812 million for
2006. Net loss on a GAAP basis was ($13.7) million or ($0.06) per share
compared to GAAP net loss of ($150.6) million or ($0.66) per share for last
year. Adjusted net earnings for 2007 were $62.3 million or $0.27 per share
compared to adjusted net earnings of $93.5 million or $0.41 per share for
2006.
    "We are pleased with the strong results our company delivered in the
fourth quarter," said Craig Muhlhauser, President and Chief Executive Officer,
Celestica. "Since implementing our turnaround plans 12 months ago, we have
undergone a major transformation which has resulted in our best ever and
industry leading inventory turns, strong margin recovery and an improving
trend in returns on invested capital.
    We are executing well and our financial position is strong. We know we
have more work to do in order to deliver continued improvements in our future
performance, but we are encouraged with our financial and operational position
as we enter 2008."

    Outlook
    -------

    For the first quarter ending March 31, 2008, the company anticipates
revenue to be in the range of $1.7 billion to $1.9 billion, and adjusted net
earnings per share to range from $0.06 to $0.11. The topline and bottom line
guidance reflects the seasonal impacts in the March quarter for the company's
communications, information technology and consumer business.
    The company has also determined it will expand its restructuring program
by $50 million to $75 million during 2008 in order to further reduce fixed
costs and overhead expenses.

    Fourth Quarter Results Webcasts
    -------------------------------

    Management will host its quarterly results conference call today at 4:30
p.m. Eastern which can be accessed at www.celestica.com.

    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 for the company as well as its investors to facilitate
period-to-period operating comparisons and allow the comparison of 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 or recovery. 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: the effects
of price competition and other business and competitive factors generally
affecting the EMS industry; our dependence on a limited number of customers;
the challenges of effectively managing our operations during uncertain
economic conditions; variability of operating results among periods; the
challenge of responding to lower-than-expected customer demand; 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 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.

    

    RECONCILIATION OF GAAP TO
    ADJUSTED NET EARNINGS
    (in millions of
    U.S. dollars)               2006                        2007
                    ---------------------------  ----------------------------
    Three months
    ended             GAAP    Adjust- Adjusted    GAAP    Adjust-   Adjusted
    December 31                ments                       ments
                    --------  ------  --------  --------  --------  --------
    Revenue         $2,261.8  $    -  $2,261.8  $2,210.5  $      -  $2,210.5
    Cost of
     sales(1)        2,174.7    (0.6)  2,174.1   2,078.5      (1.7)  2,076.8
                    --------  ------  --------  --------  --------  --------
    Gross profit        87.1     0.6      87.7     132.0       1.7     133.7
    SG&A(1)             64.2    (0.2)     64.0      75.6      (1.0)     74.6
    Amortization of
     intangible
     assets              6.5    (6.5)        -       5.1      (5.1)        -
    Integration
     costs relating
     to acquisitions       -       -         -         -         -         -
    Other charges       59.9   (59.9)        -      39.2     (39.2)        -
                    --------  ------  --------  --------  --------  --------
    Operating earnings
     (loss) - EBIAT    (43.5)   67.2      23.7      12.1      47.0      59.1
    Interest
     expense, net       16.2       -      16.2       9.5         -       9.5
                    --------  ------  --------  --------  --------  --------
    Net earnings
     (loss) before
     tax               (59.7)   67.2       7.5       2.6      47.0      49.6
    Income tax
     expense
     (recovery)          1.1    (0.1)      1.0      14.3      (1.9)     12.4
                    --------  ------  --------  --------  --------  --------
    Net earnings
     (loss)         $  (60.8) $ 67.3  $    6.5  $  (11.7) $   48.9  $   37.2
                    --------  ------  --------  --------  --------  --------
                    --------  ------  --------  --------  --------  --------

    W.A.  No.  of
     shares (in
     millions) -
     diluted           227.6             228.3     229.1               229.2
    Earnings (loss)
     per share -
     diluted        $  (0.27)         $   0.03  $  (0.05)           $   0.16



                                2006                        2007
                    ---------------------------  ----------------------------
    Twelve months
    ended             GAAP    Adjust- Adjusted    GAAP    Adjust-   Adjusted
    December 31                ments                       ments
                    --------  ------  --------  --------  --------  --------
    Revenue         $8,811.7  $    -  $8,811.7  $8,070.4  $      -  $8,070.4
    Cost of
     sales(1)        8,359.9    (3.3)  8,356.6   7,648.0      (4.6)  7,643.4
                    --------  ------  --------  --------  --------  --------
    Gross profit       451.8     3.3     455.1     422.4       4.6     427.0
    SG&A(1)            285.6    (1.8)    283.8     295.1      (2.4)    292.7
    Amortization of
     intangible
     assets             27.0   (27.0)        -      21.3     (21.3)        -
    Integration
     costs relating
     to acquisitions     0.9    (0.9)        -       0.1      (0.1)        -
    Other charges      211.8  (211.8)        -      47.6     (47.6)        -
                    --------  ------  --------  --------  --------  --------
    Operating
     earnings (loss)
     - EBIAT           (73.5)  244.8     171.3      58.3      76.0     134.3
    Interest
     expense, net       62.6       -      62.6      51.2         -      51.2
                    --------  ------  --------  --------  --------  --------
    Net earnings
     (loss) before
     tax              (136.1)  244.8     108.7       7.1      76.0      83.1
    Income tax
     expense            14.5     0.7      15.2      20.8         -      20.8
                    --------  ------  --------  --------  --------  --------
    Net earnings
     (loss)         $ (150.6) $244.1  $   93.5  $  (13.7) $   76.0  $   62.3
                    --------  ------  --------  --------  --------  --------
                    --------  ------  --------  --------  --------  --------

    W.A. No. of
     shares (in
     millions) -
     diluted           227.2             228.0     228.9               229.0
    Earnings (loss)
     per share -
     diluted        $  (0.66)         $   0.41  $  (0.06)           $   0.27

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


    GUIDANCE SUMMARY

                          4Q 07 Guidance    4Q 07 Actual   1Q 08 Guidance(2)
                          ---------------   -------------  ------------------
    Revenue                $2.0B - $2.15B         $2.21B       $1.7B - $1.9B
    Adjusted net EPS       $0.10 - $0.16           $0.16       $0.06 - $0.11

    (2) Guidance for the first 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    December 31
                                                         2006           2007
                                                  ------------   ------------
    Assets                                                        (unaudited)
    Current assets:
      Cash and cash equivalents..................  $    803.7     $  1,116.7
      Accounts receivable........................       973.2          941.2
      Inventories................................     1,197.9          791.9
      Prepaid and other assets...................       111.0          126.2
      Income taxes recoverable...................        31.2           19.8
      Deferred income taxes......................         3.8            3.8
                                                  ------------   ------------
                                                      3,120.8        2,999.6
    Capital assets...............................       553.6          466.0
    Goodwill from business combinations..........       854.8          850.5
    Intangible assets............................        60.1           35.2
    Other assets.................................        97.0          119.2
                                                  ------------   ------------
                                                   $  4,686.3     $  4,470.5
                                                  ------------   ------------
                                                  ------------   ------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable...........................  $  1,193.6     $  1,029.8
      Accrued liabilities........................       487.9          402.6
      Income taxes payable.......................        42.7           14.0
      Deferred income taxes......................         1.1              -
      Current portion of long-term debt
       (note 4)..................................         0.6            0.2
                                                  ------------   ------------
                                                      1,725.9        1,446.6
    Long-term debt (note 4)......................       750.2          758.3
    Accrued pension and post-employment
     benefits....................................        54.9           70.4
    Deferred income taxes........................        47.5           63.3
    Other long-term liabilities..................        13.2           13.7
                                                  ------------   ------------
                                                      2,591.7        2,352.3
    Shareholders' equity (note 11):
      Capital stock..............................     3,576.6        3,585.2
      Warrants...................................         8.4            3.1
      Contributed surplus........................       179.3          190.3
      Deficit....................................    (1,696.2)      (1,716.3)
      Accumulated other comprehensive income.....        26.5           55.9
                                                  ------------   ------------
                                                      2,094.6        2,118.2
                                                  ------------   ------------
                                                   $  4,686.3     $  4,470.5
                                                  ------------   ------------
                                                  ------------   ------------

                   Guarantees and contingencies (note 12)

         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
           (in millions of U.S. dollars, except per share amounts)

                                 Three months ended          Year ended
                                     December 31             December 31
                                  2006        2007        2006        2007
                              ----------- ----------- ----------- -----------
                              (unaudited) (unaudited)             (unaudited)

    Revenue..................  $ 2,261.8   $ 2,210.5   $ 8,811.7   $ 8,070.4
    Cost of sales............    2,174.7     2,078.5     8,359.9     7,648.0
                              ----------- ----------- ----------- -----------
    Gross profit.............       87.1       132.0       451.8       422.4
    Selling, general and admin-
     istrative expenses......       64.2        75.6       285.6       295.1
    Amortization of
     intangible assets.......        6.5         5.1        27.0        21.3
    Integration costs
     related to
     acquisitions............          -           -         0.9         0.1
    Other charges (note 5)...       59.9        39.2       211.8        47.6
    Interest on long-term
     debt....................       17.4        16.6        67.1        66.4
    Interest income, net.....
     of interest expense.....       (1.2)       (7.1)       (4.5)      (15.2)
                              ----------- ----------- ----------- -----------
    Earnings (loss) before
     income taxes............      (59.7)        2.6      (136.1)        7.1
    Income tax expense
     (recovery):
      Current................      (52.7)       23.4       (40.7)       14.4
      Deferred...............       53.8        (9.1)       55.2         6.4
                              ----------- ----------- ----------- -----------
                                     1.1        14.3        14.5        20.8
                              ----------- ----------- ----------- -----------
    Net loss for the period..  $   (60.8)  $   (11.7)  $  (150.6)  $   (13.7)
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Basic loss per share.....  $   (0.27)  $   (0.05)  $   (0.66)  $   (0.06)

    Diluted loss per share...  $   (0.27)  $   (0.05)  $   (0.66)  $   (0.06)

    Shares used in computing
     per share amounts:
      Basic (in millions)....      227.6       229.1       227.2       228.9
      Diluted (in millions)..      227.6       229.1       227.2       228.9

         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.

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

                                Three months ended          Year ended
                                     December 31             December 31
                                  2006        2007        2006        2007
                              ----------- ----------- ----------- -----------
                              (unaudited) (unaudited)             (unaudited)

    Net loss for the period..  $   (60.8)  $   (11.7)  $  (150.6)  $   (13.7)
    Other comprehensive
     income (loss), net of tax:
      Foreign currency
       translation gain......        1.9         3.6         7.1         8.7
      Net gain on
       derivatives desig-
       nated as cash flow
       hedges................          -         9.2           -        37.5
      Net gain on derivatives
       designated as cash
       flow hedges reclassified
       to operations.........          -        (9.5)          -       (16.3)
                              ----------- ----------- ----------- -----------
    Comprehensive income
     (loss)..................  $   (58.9)  $    (8.4)  $  (143.5)  $    16.2
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

         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)

                                Three months ended          Year ended
                                     December 31             December 31
                                  2006        2007        2006        2007
                              ----------- ----------- ----------- -----------
                              (unaudited) (unaudited)             (unaudited)
    Cash provided by (used in):
    Operations:
    Net loss for the period..  $   (60.8)  $   (11.7)  $  (150.6)  $   (13.7)
    Items not affecting cash:
      Depreciation and
       amortization..........       36.1        33.7       134.2       130.8
      Deferred income taxes..       53.8        (9.1)       55.2         6.4
      Non-cash charge for
       option issuances......        0.8         2.7         5.1         7.0
      Restructuring charges..        7.1         6.1        47.9         5.1
      Other charges..........        1.4        15.1        34.6        14.0
    Other....................      (10.1)       (3.2)        1.9        18.0
    Changes in non-cash
     working capital items:
      Accounts receivable....       85.6        22.4       (24.8)       32.0
      Inventories............      115.1       135.0      (172.0)      406.0
      Prepaid and other
       assets................        6.9         2.2         2.7        (6.8)
      Income taxes
       recoverable...........        3.7        18.1        72.1        11.4
      Accounts payable and
       accrued liabilities...     (132.5)      (32.2)      108.0      (237.6)
      Income taxes payable...      (59.4)          -       (75.1)      (21.2)
                              ----------- ----------- ----------- -----------
      Non-cash working
       capital changes.......       19.4       145.5       (89.1)      183.8
                              ----------- ----------- ----------- -----------
    Cash provided by
     operations..............       47.7       179.1        39.2       351.4
                              ----------- ----------- ----------- -----------

    Investing:
      Acquisitions, net of
       cash acquired
       (note 3)..............          -           -       (19.1)          -
      Purchase of capital
       assets................      (27.2)      (15.0)     (189.1)      (63.7)
      Proceeds, net of cash
       divested from sale
       of operations or
       assets................        2.7         3.0         1.0        27.0
      Other..................       (1.4)       (0.1)       (0.7)       (0.2)
                              ----------- ----------- ----------- -----------
    Cash used in investing
     activities..............      (25.9)      (12.1)     (207.9)      (36.9)
                              ----------- ----------- ----------- -----------

    Financing:
      Financing costs........          -        (0.5)          -        (1.4)
      Repayment of
       long-term debt........       (0.1)       (0.1)       (0.6)       (0.6)
      Issuance of share
       capital...............        3.5           -         5.3         3.5
      Other..................       (0.3)       (2.8)       (1.3)       (3.0)
                              ----------- ----------- ----------- -----------
    Cash provided by
     (used in) financing
     activities..............        3.1        (3.4)        3.4        (1.5)
                              ----------- ----------- ----------- -----------

    Increase (decrease) in
     cash....................       24.9       163.6      (165.3)      313.0
    Cash, beginning of
     period..................      778.8       953.1       969.0       803.7
                              ----------- ----------- ----------- -----------
    Cash, end of period......  $   803.7   $ 1,116.7   $   803.7   $ 1,116.7
                              ----------- ----------- ----------- -----------

                 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 which are, in the opinion of
    management, necessary to present fairly our financial position as at
    December 31, 2007 and the results of operations and cash flows for the
    three months and year ended December 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,"
    were effective for our first quarter of 2007. We were 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 2007 is as follows:

                                             Three months ended    Year ended
                                                    December 31   December 31
                                             --------------------------------
    Increase (decrease) in interest expense
     on long-term debt......................           $    0.1     $   (0.6)

    See notes 4(d) and 10(ii) regarding interest expense on long-term debt.

    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. We do not
    currently have any financial assets designated as available-for-sale.

    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) (OCI) until the asset or liability being hedged is recognized in
    operations. Any cash flow 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 OCI 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 OCI 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 relating to the hedged risk of the asset, liability or cash flows
    being hedged. Any fair value hedge ineffectiveness is recognized in
    operations immediately.

    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 similar to 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 elected
    January 1, 2003 as our transition date for identifying contracts with
    embedded derivatives. Currently 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 statement
    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 OCI 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
           (excluding 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 because the prior hedge
           relationship was not 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. On
           January 1, 2007, we redesignated a new hedging relationship which
           qualified for fair value hedge accounting in accordance with
           Section 3865.

     (iii) 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 the opening deficit. Any
           subsequent change in the fair value of the embedded derivatives
           will be recorded in operations.

    (iv)   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 from inception. This resulted in a
           $1.2 increase in unamortized debt issue 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 be made only if the changes result in financial statements that
    provide more reliable and more relevant information. It also requires
    that prior period errors be corrected retrospectively. The adoption of
    this standard did not impact our consolidated financial statements.

    Recently issued accounting pronouncements:

    (i)    Inventories:

    In June 2007, the CICA issued Section 3031, "Inventories," which requires
    inventory to be measured at the lower of cost and net realizable value.
    The standard provides guidance on the types of costs that can be
    capitalized and requires the reversal of previous inventory write-downs
    if economic circumstances have changed to support higher inventory
    values. The standard is effective for 2008. Commencing in the first
    quarter of 2008, we are required to disclose the amount of inventory
    write-downs or reversals each quarter. We do not expect the adoption of
    this standard will have a material impact on our consolidated financial
    statements.

    (ii)   Financial instruments and capital disclosure:

    In December 2006, the CICA issued Section 3862, "Financial instruments -
    disclosures," and Section 3863, "Financial instruments - presentation."
    These standards provide additional guidance on disclosing risks related
    to recognized and unrecognized financial instruments and how those risks
    are managed. The CICA also issued Section 1535, "Capital disclosures,"
    which provides guidance for disclosing information about an entity's
    capital and how it manages its capital. These standards are effective for
    2008. We are currently evaluating the impact of adopting these standards
    on our consolidated financial statements.

    3.  Acquisitions and divestitures:

    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  December 31
                                                            2006         2007
                                                     -----------  -----------

    Secured, revolving credit facility due 2009 (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)..          -         (6.5)
      Basis adjustments on debt obligation (d)......          -          6.5
      Unamortized debt issue costs (b)(c)...........          -         (9.6)
      Fair value adjustment of 2011 Notes
       attributable to interest rate risks (d)......          -         17.9
                                                     -----------  -----------
                                                          750.0        758.3
    Capital lease obligations.......................        0.8          0.2
                                                     -----------  -----------
                                                          750.8        758.5
    Less current portion............................        0.6          0.2
                                                     -----------  -----------
                                                       $  750.2     $  758.3
                                                     -----------  -----------
                                                     -----------  -----------

    (a) In April 2007, we renegotiated the terms of our revolving credit
        facility and reduced the amount available 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, including the
        shares of certain North American subsidiaries, as security.

        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 2007 were $2.3.

        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 December 31, 2007. Based on the required financial
        ratios at December 31, 2007, we have approximately $240 of available
        debt incurrence.

        We also have uncommitted bank overdraft facilities available for
        operating requirements which total $49.5 at December 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 8.2% for the fourth quarter of 2007 and 8.3% for 2007
        (8.4% - fourth quarter of 2006; 8.2% - 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 financial
        instruments standards. As of December 31, 2007, the fair value of the
        embedded derivative asset is $6.5 and is recorded with long-term
        debt. The increase in the fair value of the embedded derivative asset
        of $0.9 for 2007 is recorded as a reduction of interest expense on
        long-term debt. As a result of bifurcating the prepayment option from
        the Notes, a basis adjustment is 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 for 2007 of $1.0 is recorded as a reduction of
        interest expense on long-term debt. The change in the fair value of
        the debt obligation attributable to movement in the benchmark
        interest rates, resulted in a loss of $17.9 for 2007, which increased
        interest expense on long-term debt.

    5.  Other charges:

                                      Three months ended       Year ended
                                          December 31          December 31
                                         2006      2007      2006      2007
                                      --------- --------- --------- ---------

    2001 to 2004 restructuring (a)... $    1.6  $    3.5  $    3.6  $    4.6
    2005 to 2008 restructuring (b)...     56.9      20.6     174.5      32.7
                                      --------- --------- --------- ---------
    Total restructuring..............     58.5      24.1     178.1      37.3
    Long-lived asset impairment (c)        1.4      15.1       1.4      15.1
    Other (d)........................        -         -      (0.9)     (4.8)
    Loss on sale of operations
     (note 3)........................        -         -      33.2         -
                                      --------- --------- --------- ---------
    Total other charges.............. $   59.9  $   39.2  $  211.8  $   47.6
                                      --------- --------- --------- ---------
                                      --------- --------- --------- ---------

    (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 2007 activity are as follows:

                                 Lease
                                   and
                                  other   Facility
                        Employee  cont-     exit    Total
                         termi-  ractual   costs   accrued
                         nation   oblig-    and     liab-   Non-cash    2007
                         costs    ations   other    ility    charge   charge
                        -------- -------- -------- -------- -------- --------

    December 31, 2006.. $   0.4  $  29.3  $   1.0  $  30.7  $ 328.7  $     -
    Cash payments......    (0.2)    (2.7)       -     (2.9)       -        -
    Adjustments........    (0.2)     0.8     (1.0)    (0.4)       -     (0.4)
                        -------- -------- -------- -------- -------- --------
    March 31, 2007.....       -     27.4        -     27.4    328.7     (0.4)
    Cash payments......       -     (1.9)       -     (1.9)       -        -
    Adjustments........       -      0.9        -      0.9        -      0.9
                        -------- -------- -------- -------- -------- --------
    June 30, 2007......       -     26.4        -     26.4    328.7      0.5
    Cash payments......       -     (1.9)       -     (1.9)       -        -
    Adjustments........       -      0.6        -      0.6        -      0.6
                        -------- -------- -------- -------- -------- --------
    September 30,
     2007..............       -     25.1        -     25.1    328.7      1.1
    Cash payments......       -     (1.8)       -     (1.8)       -        -
    Adjustments........       -      3.5        -      3.5        -      3.5
                        -------- -------- -------- -------- -------- --------
    December 31, 2007   $     -  $  26.8  $     -  $  26.8  $ 328.7  $   4.6
                        -------- -------- -------- -------- -------- --------
                        -------- -------- -------- -------- -------- --------

    (b) 2005 to 2008 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. These restructuring actions included
    additional downsizing of workforces to reflect the volume reductions at
    certain facilities and to reduce overhead costs, which we expected to
    complete in 2007.

    As of December 31, 2007, we have recorded aggregate termination costs,
    incurred since 2005, relating to approximately 8,200 employees, primarily
    operations and plant employees. Approximately 7,600 of these employees
    have been terminated as of December 31, 2007 with the balance of the
    terminations to occur by the end of 2008. Approximately 60% of employee
    terminations are in the Americas, 30% in Europe and 10% in Asia. Our
    lease and other contractual obligations will be paid out over the
    remaining lease terms through 2010.

    In the course of preparing our 2008 plan in the fourth quarter of 2007,
    we determined that in order to drive further operational improvements
    throughout our manufacturing network, that additional restructuring
    actions would be undertaken. These restructuring actions will reduce our
    workforce and will include the closure of certain facilities. We plan to
    consolidate the programs from these closed facilities into our other
    facilities. As we complete these restructuring actions, our overall
    utilization and operating efficiency should improve, allowing us to
    service our customers through fewer and more cost-effective facilities.
    When the detailed plans of these restructuring actions are finalized in
    early to mid-2008, we will recognize the related liability. We estimate
    the additional restructuring charges will be in the range of $50 and $75
    which will be recorded in 2008. We expect to complete these actions by
    mid-2009.

    Details of the 2007 activity are as follows:

                                 Lease
                                   and
                                  other   Facility
                        Employee  cont-     exit    Total
                         termi-  ractual   costs   accrued
                         nation   oblig-    and     liab-   Non-cash    2007
                         costs    ations   other    ility    charge   charge
                        -------- -------- -------- -------- -------- --------

    December 31, 2006.. $  52.5  $  12.1  $   0.5  $  65.1  $  53.6  $     -
    Cash payments......   (28.3)    (2.3)    (1.7)   (32.3)       -        -
    Provisions.........     6.1      0.7      1.6      8.4        -      8.4
                        -------- -------- -------- -------- -------- --------
    March 31, 2007.....    30.3     10.5      0.4     41.2     53.6      8.4
    Cash payments......   (14.4)    (0.8)    (0.8)   (16.0)       -        -
    Provisions.........     4.8      0.1      0.8      5.7     (4.1)     1.6
                        -------- -------- -------- -------- -------- --------
    June 30, 2007......    20.7      9.8      0.4     30.9     49.5     10.0
    Cash payments......   (10.3)    (0.5)    (0.5)   (11.3)       -        -
    Provisions.........    (1.9)     0.5      0.4     (1.0)     3.1      2.1
                        -------- -------- -------- -------- -------- --------
    September 30,
     2007..............     8.5      9.8      0.3     18.6     52.6     12.1
    Cash payments......   (11.4)    (1.6)    (0.8)   (13.8)       -        -
    Provisions.........    11.9      1.5      1.1     14.5      6.1     20.6
                        -------- -------- -------- -------- -------- --------
    December 31, 2007.. $   9.0  $   9.7  $   0.6  $  19.3  $  58.7  $  32.7
                        -------- -------- -------- -------- -------- --------
                        -------- -------- -------- -------- -------- --------

    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. We received the final post-closing cash
    in the first quarter of 2007 and we repaid $4.0 to the purchaser which we
    were holding in escrow.

    Restructuring summary:

    We expected to incur restructuring charges of between $20 and $40 for
    2007. In 2007, we recorded restructuring charges of $37.3. We expect to
    incur restructuring charges of between $50 and $75 in 2008 to complete
    our planned restructuring actions. We expect to complete these
    restructuring actions by mid-2009.

    As of December 31, 2007, we have approximately $25 in assets that are
    available-for-sale, primarily land and buildings, as a result of the
    restructuring actions we implemented. We have programs underway to sell
    these assets.

    (c) Long-lived asset impairment:

    We conduct our annual impairment assessment in the fourth quarter of each
    year. We recorded a non-cash charge of $15.1 in 2007 primarily against
    capital assets in the Americas and Europe and a non-cash charge of $1.4
    in 2006 against capital assets in the Americas.

    (d) Other:

    In 2004, we recorded a write-down in other charges to reduce the net
    realizable value of certain assets for one customer which ceased
    operations in 2005. The 2007 amounts are primarily due to additional
    recoveries realized.

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

    We have recorded the following pension expense:


                                      Three months ended       Year ended
                                          December 31          December 31
                                         2006      2007      2006      2007
                                      --------- --------- --------- ---------

    Pension plans.................... $   10.3  $    6.4  $   35.7  $   21.5
    Other benefit plans..............      2.4       1.5       8.9       6.6
                                      --------- --------- --------- ---------
    Total expense.................... $   12.7  $    7.9  $   44.6  $   28.1
                                      --------- --------- --------- ---------
                                      --------- --------- --------- ---------

    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.

    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       Year ended
                                          December 31          December 31
                                         2006      2007      2006      2007
                                      --------- --------- --------- ---------

    Risk-free rate................... 4.5%-4.6% 3.6%-3.9% 4.5%-5.0% 3.6%-4.8%
    Dividend yield...................      0.0%      0.0%      0.0%      0.0%
    Volatility factor of the expected
     market price of our shares......   34%-35%   36%-46%   34%-65%   35%-52%
    Expected option life (in years)..      3.5   4.0-5.5   3.5-5.5   4.0-5.5
    Weighted average fair value of
     options granted................. $   2.99  $   2.56  $   5.55  $   2.57

    Compensation expense for the three months and year ended December 31,
    2007 was $2.7 and $7.0, respectively (three months and year ended
    December 31, 2006 was $0.8 and $5.1, respectively), relating to the fair
    value of options granted after January 1, 2003.

    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
    regarding 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 manage our operations more effectively. 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 our global
    services segment does not meet the qualitative threshold 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,
           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       Year ended
                                          December 31          December 31
                                         2006      2007      2006      2007
                                      --------- --------- --------- ---------

    Enterprise communications........      28%       24%       28%       28%
    Consumer.........................      19%       26%       18%       22%
    Servers..........................      19%       20%       17%       19%
    Telecommunications...............      15%       13%       18%       14%
    Storage..........................      11%       11%       10%       10%
    Industrial, aerospace and
     defense.........................       8%        6%        9%        7%

    (ii)   The number of customers that individually exceeded 10% of total
           revenue for the indicated periods are as follows:

                                      Three months ended       Year ended
                                          December 31          December 31
                                         2006      2007      2006      2007
                                      --------- --------- --------- ---------
    Number of customers..............        1         1         2         2


    9.  Supplemental cash flow information:

                                      Three months ended        Year ended
    Paid (recovered) during the           December 31          December 31
    period:                              2006      2007      2006      2007
                                      --------- --------- --------- ---------
    Taxes (a)........................ $    4.7  $    4.5  $  (36.5) $   23.2
    Interest (b)..................... $    4.2  $    2.3  $   70.5  $   76.6

    (a) Cash taxes paid is net of any income taxes recovered.

    (b) 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.

                                                               December 31
    Cash is comprised of the following:                      2006      2007
                                                          --------- ---------

    Cash................................................. $  160.0  $  328.7
    Short-term investments...............................    643.7     788.0
                                                          --------- ---------
                                                          $  803.7  $1,116.7
                                                          --------- ---------
                                                          --------- ---------


    10. Derivative financial instruments:

    (i)    We enter into foreign currency contracts to hedge foreign currency
           risks relating to cash flow. At December 31, 2007, we had forward
           exchange contracts covering various currencies in an aggregate
           notional amount of $446.7. All derivative financial instruments
           are recorded at fair value on our consolidated balance sheet. The
           fair value of these contracts at December 31, 2007 was a net
           unrealized gain of $20.0. As of December 31, 2007, $20.7 of
           derivative assets are recorded in prepaid and other assets,
           $0.1 of derivative assets are recorded in other long-term assets
           and $0.8 of derivative liabilities are recorded in accrued
           liabilities relating to our hedges against foreign currency risks.

    (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 is
           $500.0. The agreements mature in 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 December 31, 2007 was an unrealized gain
           of $8.7 which is recorded in other long-term assets (December 31,
           2006 - unrealized loss of $7.9). The increase in the fair value of
           the swap agreements of $16.6 for 2007 is recorded as a reduction
           of interest expense on long-term debt. Fair value hedge
           ineffectiveness arises when the change in the fair values of our
           swap agreements, hedged debt obligation and its embedded
           derivatives, and the amortization of the related basis
           adjustments, do not offset each other during a reporting period.
           The fair value hedge ineffectiveness for our 2011 Notes is
           recorded in interest expense on long-term debt and amounted to a
           gain of $2.4 for 2007. This fair value hedge ineffectiveness is
           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.

    11. Shareholders' equity:

                                 Capital    Warrants  Contributed
                                  stock                 surplus     Deficit
                               ----------  ----------  ----------  ----------

    Balance - December 31,
     2006..................... $ 3,576.6   $     8.4   $   179.3   $(1,696.2)
    Change in accounting
     policy (note 2)..........         -           -           -        (6.4)
    Shares issued.............       8.6           -           -           -
    Warrants cancelled........         -        (5.3)        5.3           -
    Stock-based costs.........         -           -         5.1           -
    Other.....................         -           -         0.6           -
    Net loss for 2007.........         -           -           -       (13.7)
                               ----------  ----------  ----------  ----------
    Balance - December 31,
     2007..................... $ 3,585.2   $     3.1   $   190.3   $(1,716.3)
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------




                                 Capital    Warrants  Contributed
                                  stock                 surplus     Deficit
                               ----------  ----------  ----------  ----------
    Balance - December 31,
     2005..................... $ 3,562.3   $     8.4   $   169.9   $(1,545.6)
    Shares issued.............      14.3           -           -           -
    Stock-based costs.........         -           -         8.8           -
    Other.....................         -           -         0.6           -
    Net loss for 2006.........         -           -           -      (150.6)
                               ----------  ----------  ----------  ----------
    Balance - December 31,
     2006..................... $ 3,576.6   $     8.4   $   179.3   $(1,696.2)
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------





                                                   Three months
                                                          ended   Year ended
     Accumulated other comprehensive income,        December 31  December 31
      net of tax:                                          2007         2007
                                                    ------------ ------------
    Opening balance of foreign currency
     translation account...........................   $    31.6    $       -
    Transitional adjustment - January 1, 2007......           -         26.5
    Foreign currency translation gain..............         3.6          8.7
                                                    ------------ ------------
    Closing balance................................   $    35.2    $    35.2

    Opening balance of unrealized net gain
     on cash flow hedges...........................   $    21.0    $       -
    Transitional adjustment - January 1, 2007......           -         (0.5)
    Net gain on cash flow hedges (1)...............         9.2         37.5
    Net gain on cash flow hedges reclassified to
     operations (2)................................        (9.5)       (16.3)
                                                    ------------ ------------
    Closing balance(3).............................   $    20.7    $    20.7
                                                    ------------ ------------

    Accumulated other comprehensive income.........   $    55.9    $    55.9
                                                    ------------ ------------
                                                    ------------ ------------

    (1) Net of income tax expense of $0.3 and $0.2, respectively, for the
        three months and year ended December 31, 2007.
    (2) Net of income tax benefit of $0.1 and Nil, respectively, for the
        three months and year ended December 31, 2007.
    (3) Net of income tax expense of $0.2 as of December 31, 2007.


    We expect that $20.7 of net pre-tax gains ($20.5 after tax) on cash flow
    hedges, that are reported in 2007 in accumulated other comprehensive
    income, will be reclassified to operations during 2008.

    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 December 31, 2007, these contingent liabilities amounted
    to $74.4 (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.

    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 individuals
    who claim they were purchasers of our stock, on behalf of themselves and
    other 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 adverse information with respect to demand and
    inventory in our Mexican operations and our information technology and
    communications divisions. In an amended complaint, the plaintiffs added
    one of our directors and Onex Corporation as defendants. A parallel class
    proceeding has also been commenced 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 the expense of defending these
    cases, as well as potential judgments or settlement costs.

    Income taxes:

    We are subject to tax audits by local tax 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 Canada, tax authorities have
    taken the position that income reported by one of our Canadian
    subsidiaries in 2001 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
    likely potential adverse 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 may be material.

    In connection with tax audits in the United States, taxing authorities
    asserted that our United States subsidiaries owed significant amounts of
    tax, interest and penalties arising from inter-company transactions. A
    significant portion of these asserted deficiencies were resolved in our
    favour in the fourth quarter of 2006, which resulted in a reduction to
    our current income tax liabilities in 2006. In the third quarter of 2007,
    we resolved the remaining deficiencies in our favour which resulted in a
    reduction to current income tax liabilities for the third quarter of
    2007. The tax audit resolution also resulted in a small reduction in the
    amount of our U.S. tax loss carryforwards.

    13. Comparative information:

    We have reclassified certain prior period information to conform to the
    current year's presentation.

    

    %SEDAR: 00010284E




For further information:

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

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Celestica Inc.

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