Celestica announces fourth quarter and FY2008 financial results



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

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

    -   Revenue of $1,935 million, compared to $2,211 million for the same
        period last year

    -   GAAP loss of ($822.2) million or ($3.58) per share, including an
        ($850.5) million or ($3.71) per share charge resulting from the
        write-off of all goodwill, compared to a loss of ($11.7) million or
        ($0.05) per share last year

    -   Adjusted net earnings of $0.26 per share including a $0.07 per share
        benefit resulting from a lower adjusted tax rate, compared to
        adjusted net earnings of $0.16 per share last year

    -   Operating margin of 3.2% compared to 2.7% last year

    -   Gross margin of 7.3% compared to 6.0% last year

    -   First quarter of 2009 revenue guidance of $1.4 billion -
        $1.6 billion, adjusted net earnings per share of $0.07 - $0.13
    

    TORONTO, Jan. 28 /CNW/ - Celestica Inc. (NYSE, TSX: CLS), a global leader
in the delivery of end-to-end product lifecycle solutions, today announced
financial results for the fourth quarter and fiscal year ended December 31,
2008.
    Revenue was $1,935 million compared to $2,211 million in the fourth
quarter of 2007. Net loss on a GAAP basis for the fourth quarter was ($822.2)
million or ($3.58) per share, compared to a GAAP net loss of ($11.7) million
or ($0.05) per share for the same period last year. The GAAP loss in the
fourth quarter of 2008 was primarily a result of the write-off of the
company's remaining goodwill.
    During the fourth quarter of 2008, the company performed its annual
goodwill impairment test which resulted in the decision to write off the
$850.5 million of goodwill on the company's balance sheet. The goodwill
write-off is non-cash in nature and does not affect liquidity, cash flows from
operating activities, or compliance with debt covenants. The goodwill
write-off is not deductible for income tax purposes and, therefore, the
company has not recorded a corresponding tax benefit in 2008. (Additional
detail on the impairment can be found in note 5(b) of the financial statements
attached to this release).
    Adjusted net earnings for the quarter were $59.1 million or $0.26 per
share, including a $15.5 million or $0.07 per share benefit associated with a
lower adjusted tax rate. These results compared to adjusted net earnings of
$37.2 million or $0.16 per share for the same period last year. Adjusted net
earnings is defined as net earnings before other charges, amortization of
intangible assets, integration costs related to acquisitions, option expense,
and gains or losses on the repurchase of shares and debt, net of tax and
significant deferred tax write-offs or recovery (detailed GAAP financial
statements and supplementary information related to adjusted net earnings
appear at the end of this press release).
    These revenue and adjusted net earnings results compare with the
company's guidance for the fourth quarter, announced on October 23, 2008, of
revenue of $1.75 billion to $2.0 billion and adjusted net earnings per share
of $0.16 to $0.24.
    For 2008, revenue was $7,678 million compared to $8,070 million for 2007.
Net loss on a GAAP basis was ($720.5) million or ($3.14) per share compared to
GAAP net loss of ($13.7) million or ($0.06) per share last year. Adjusted net
earnings for 2008 were $187.7 million or $0.82 per share compared to adjusted
net earnings of $62.3 million or $0.27 per share in 2007.
    "Despite the significant turmoil in the global economic environment,
Celestica delivered strong operating results in the fourth quarter and
throughout the year," said Craig Muhlhauser, President and Chief Executive
Officer, Celestica. "We had four positive quarters and generated full year
gross margins of 7% and had operating margins of 3%. During the year, we
generated free cash flow of $127 million and finished 2008 with a very strong
balance sheet.
    "While our operations performed very well in 2008, the current uncertain
economic backdrop, combined with end-market weakness which accelerated in the
fourth quarter, resulted in our decision to write-off our remaining goodwill.
While end-market volatility is expected to continue throughout 2009, Celestica
will remain focused on pursuing profitable revenue opportunities, while
continuing to improve working capital efficiency, operating margins and free
cash flow."

    
    First Quarter Outlook
    ---------------------

    For the first quarter ending March 31, 2009, the company anticipates
revenue to be in the range of $1.4 billion to $1.6 billion, and adjusted net
earnings per share to range from $0.07 to $0.13.

    First Quarter Webcast
    ---------------------

    Management will host its quarterly results conference call today at 4:15
p.m. Eastern. The webcast 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 restructuring activities, acquisitions made by the
company, fair value accounting for stock options and securities repurchases,
management believes adjusted net earnings are 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. Excluded from adjusted net earnings are the effects of other
charges, most significantly the write-down of goodwill and long-lived assets,
gains or losses on the repurchase of shares or debt and the related income tax
effect of these adjustments, and any significant deferred tax write-offs or
recovery. The company also excludes some recurring charges such as
restructuring costs, option expense, the amortization of intangible assets,
and the related income tax effect of these adjustments. The term adjusted net
earnings does not have any standardized meaning prescribed by GAAP and is not
necessarily comparable to similar measures presented by other companies.
Adjusted net earnings are not a measure of performance under Canadian or U.S.
GAAP and should not be considered in isolation or as a substitute for net
earnings prepared in accordance with Canadian or U.S. GAAP. The company has
provided a reconciliation of adjusted net earnings to Canadian GAAP net
earnings (loss) below.

    
    About Celestica
    ---------------
    

    Celestica is dedicated to delivering end-to-end product lifecycle
solutions to drive our customers' success. Through our simplified global
operations network and information technology platform, we are solid partners
who deliver informed, flexible solutions that enable our customers to succeed
in the markets they serve. Committed to providing a truly differentiated
customer experience, our agile and adaptive employees share a proud history of
demonstrated expertise and creativity that provides our customers with the
ability to overcome any challenge.
    For further information on Celestica, visit its website at
http://www.celestica.com.
    The company's security filings can also be accessed at
http://www.sedar.com and http://www.sec.gov.

    
    Safe Harbour and Fair Disclosure Statement
    ------------------------------------------
    

    This news release contains forward-looking statements related to our
future growth, trends in our industry, our financial and or operational
results, and our financial or operational performance. Such forward-looking
statements are predictive in nature and may be based on current expectations,
forecasts or assumptions involving risks and uncertainties that could cause
actual outcomes and results to differ materially from the forward-looking
statements themselves. Such forward-looking statements may, without
limitation, be preceded by, followed by, or include words such as "believes",
"expects", "anticipates", "estimates", "intends", "plans", or similar
expressions, or may employ such future or conditional verbs as "may", "will",
"should" or "would", or may otherwise be indicated as forward-looking
statements by grammatical construction, phrasing or context. For those
statements, we claim the protection of the safe harbor for forward-looking
statements contained in the U.S. Private Securities Litigation Reform Act of
1995, and in any applicable Canadian securities legislation. Forward-looking
statements are not guarantees of future performance. You should understand
that the following important factors could affect our future results and could
cause those results to differ materially from those expressed in such
forward-looking statements: the effects of price competition and other
business and competitive factors generally affecting the EMS industry,
including changes in the trend for outsourcing; our dependence on a limited
number of customers; the challenges of effectively managing our operations
during uncertain economic conditions, including significant changes in demand
from our largest customers as a result of the impact of the global economic
crisis and capital market weakness; variability of operating results among
periods; the challenge of managing our financial exposures to foreign currency
fluctuations; the challenge of managing volatile energy prices; the challenge
of responding to lower-than-expected customer demand; our inability to retain
or grow our business due to execution problems resulting from significant
headcount reductions, plant closures and product transfers associated with
major restructuring activities; our dependence on industries affected by rapid
technological change; our ability to successfully manage our international
operations; and the delays in the delivery and/or general availability of
various components used in our manufacturing process. These and other risks
and uncertainties, as well as other information related to the company, are
discussed in the Company's various public filings at www.sedar.com and
www.sec.gov, including our Annual Report on Form 20-F and subsequent reports
on Form 6-K filed with the Securities and Exchange Commission and our Annual
Information Form filed with the Canadian Securities Commissions.
Forward-looking statements are provided for the purpose of providing
information about management's current expectations and plans relating to the
future. Readers are cautioned that such information may not be appropriate for
other purposes.
    As of its date, this press release contains any material information
associated with the company's financial results for the fourth quarter ended
December 31, 2008 and revenue and adjusted net earnings guidance for the first
quarter ending March 31, 2009. Revenue and earnings guidance is reviewed by
the company's board of directors. Our revenue and earnings guidance is based
on various assumptions which management believes are reasonable under the
current circumstances, but may prove to be inaccurate, and many of which
involve factors that are beyond the control of the Company. The material
assumptions may include assumptions regarding the following: forecasts from
our customers, which range from 30 to 90 days; timing and investments
associated with ramping new business; general economic and market conditions;
currency exchange rates; pricing and competition; anticipated customer demand;
supplier performance and pricing; commodity, labor, energy and transportation
costs; operational and financial matters; technological developments; and the
timing and execution of our restructuring plan. These assumptions are based on
management's current views with respect to current plans and events, and are
and will be subject to the risks and uncertainties referred to above. It is
Celestica's policy that revenue and earnings guidance is effective on the date
given, and will only be updated through a public announcement.


    
    RECONCILIATION OF GAAP TO
     ADJUSTED NET EARNINGS
    (in millions
     of U.S. dollars)
                               2007                         2008
                 ----------------------------- ------------------------------
    Three months
     ended                  Adjust-                       Adjust-
     December 31    GAAP     ments   Adjusted     GAAP     ments    Adjusted
                 --------- --------- --------- --------- --------- ----------
      Revenue    $ 2,210.5 $       - $ 2,210.5 $ 1,935.4 $       - $ 1,935.4
      Cost of
       sales(1)    2,078.5      (1.7)  2,076.8   1,794.8      (0.6)  1,794.2
                 --------- --------- --------- --------- --------- ----------
      Gross profit   132.0       1.7     133.7     140.6       0.6     141.2
      SG&A(1)         75.6      (1.0)     74.6      80.0      (1.0)     79.0
      Amortization
       of
       intangible
       assets          5.1      (5.1)        -       3.3      (3.3)        -
      Other
       charges        39.2     (39.2)        -     861.9    (861.9)        -
                 --------- --------- --------- --------- --------- ----------
      Operating
       earnings
       (loss) -
       EBIAT          12.1      47.0      59.1    (804.6)    866.8      62.2
      Interest
       expense,
       net             9.5         -       9.5      13.7         -      13.7
                 --------- --------- --------- --------- --------- ----------
      Net earnings
       (loss)
       before tax      2.6      47.0      49.6    (818.3)    866.8      48.5
      Income tax
       expense
       (recovery)     14.3      (1.9)     12.4       3.9     (14.5)    (10.6)
                 --------- --------- --------- --------- --------- ----------
      Net earnings
       (loss)       $(11.7)    $48.9     $37.2   $(822.2)   $881.3     $59.1
                 --------- --------- --------- --------- --------- ----------
                 --------- --------- --------- --------- --------- ----------
      W.A. No.
       of shares
       (in
       millions)
       - diluted     229.1               229.2     229.4               229.4
      Earnings
       (loss) per
       share -
       diluted      $(0.05)              $0.16    $(3.58)              $0.26


                               2007                         2008
                 ----------------------------- ------------------------------

    Year ended              Adjust-                       Adjust-
     December 31    GAAP     ments   Adjusted     GAAP     ments    Adjusted
                 --------- --------- --------- --------- --------- ----------
      Revenue     $8,070.4 $       - $ 8,070.4 $ 7,678.2 $       - $ 7,678.2
      Cost of
       sales(1)    7,648.0      (4.6)  7,643.4   7,147.1      (2.9)  7,144.2
                 --------- --------- --------- --------- --------- ----------
      Gross profit   422.4       4.6     427.0     531.1       2.9     534.0
      SG&A(1)        295.1      (2.4)    292.7     303.8      (3.7)    300.1
      Amortization
       of
       intangible
       assets         21.3     (21.3)        -      15.1     (15.1)        -
      Integration
       costs
       relating to
       acquisitions    0.1      (0.1)        -         -         -         -
      Other charges   47.6     (47.6)        -     885.2    (885.2)        -
                 --------- --------- --------- --------- --------- ----------
      Operating
       earnings
       (loss) -
       EBIAT          58.3      76.0     134.3    (673.0)    906.9     233.9
      Interest
       expense, net   51.2         -      51.2      42.5         -      42.5
                 --------- --------- --------- --------- --------- ----------
      Net earnings
       (loss) before
       tax             7.1      76.0      83.1    (715.5)    906.9     191.4
      Income tax
       expense        20.8         -      20.8       5.0      (1.3)      3.7
                 --------- --------- --------- --------- --------- ----------
      Net earnings
       (loss)       $(13.7)    $76.0     $62.3   $(720.5)   $908.2    $187.7
                 --------- --------- --------- --------- --------- ----------
                 --------- --------- --------- --------- --------- ----------
      W.A. No. of
       shares (in
       millions) -
       diluted       228.9               229.0     229.3               229.6
      Earnings
       (loss) per
       share -
       diluted      $(0.06)              $0.27    $(3.14)              $0.82

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


    GUIDANCE SUMMARY

                        4Q 08                4Q 08                1Q 09
                       Guidance              Actual             Guidance(2)
                    --------------       --------------       --------------
      Revenue       $1.75B - $2.0B          $1.9B              $1.4B - $1.6B
      Adjusted net
       EPS           $0.16 - $0.24          $0.26              $0.07 - $0.13

    (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
                                                          2007          2008
                                                   ------------  ------------
    Assets                                                        (unaudited)
    Current assets:
      Cash and cash equivalents (note 9)..........  $  1,116.7    $  1,201.0
      Accounts receivable (note 13(c))............       941.2       1,074.0
      Inventories (note 2(i)).....................       791.9         787.4
      Prepaid and other assets (note 10(i)).......       126.2          87.1
      Income taxes recoverable....................        19.8          14.1
      Deferred income taxes.......................         3.8           8.2
                                                   ------------  ------------
                                                       2,999.6       3,171.8
    Property, plant and equipment (note 2(b)).....       466.0         467.5
    Goodwill from business combinations
     (note 5(b))..................................       850.5             -
    Intangible assets.............................        35.2          20.1
    Other long-term assets (note 10(ii))..........       119.2         126.8
                                                   ------------  ------------
                                                    $  4,470.5    $  3,786.2
                                                   ------------  ------------
                                                   ------------  ------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable............................  $  1,029.8    $  1,090.6
      Accrued liabilities (notes 5 and 10(i)).....       402.6         463.1
      Income taxes payable........................        14.0          13.5
      Deferred income taxes.......................           -           0.2
      Current portion of long-term debt
       (note 3)...................................         0.2           1.0
                                                   ------------  ------------
                                                       1,446.6       1,568.4
    Long-term debt (note 3).......................       758.3         732.1
    Accrued pension and post-employment
     benefits.....................................        70.4          63.2
    Deferred income taxes.........................        63.3          47.2
    Other long-term liabilities...................        13.7           9.8
                                                   ------------  ------------
                                                       2,352.3       2,420.7
    Shareholders' equity (note 11):
      Capital stock...............................     3,585.2       3,588.5
      Warrants....................................         3.1             -
      Contributed surplus.........................       190.3         204.4
      Deficit.....................................    (1,716.3)     (2,436.8)
      Accumulated other comprehensive income......        55.9           9.4
                                                   ------------  ------------
                                                       2,118.2       1,365.5
                                                   ------------  ------------
                                                    $  4,470.5    $  3,786.2
                                                   ------------  ------------
                                                   ------------  ------------

                   Guarantees and contingencies (note 12)

    See accompanying notes to unaudited consolidated financial statements.
          These unaudited interim consolidated financial statements
                   should be read in conjunction with the
               2007 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
                                 2007        2008        2007        2008
                              ----------- ----------- ----------- -----------
                              (unaudited) (unaudited)             (unaudited)

    Revenue..................  $ 2,210.5   $ 1,935.4   $ 8,070.4   $ 7,678.2
    Cost of sales............    2,078.5     1,794.8     7,648.0     7,147.1
                              ----------- ----------- ----------- -----------
    Gross profit.............      132.0       140.6       422.4       531.1
    Selling, general and
     administrative expenses
     (note 4)................       75.6        80.0       295.1       303.8
    Amortization of
     intangible assets.......        5.1         3.3        21.3        15.1
    Integration costs related
     to acquisitions.........          -           -         0.1           -
    Other charges (note 5)...       39.2       861.9        47.6       885.2
    Interest on long-term
     debt....................       16.6        15.5        66.4        57.8
    Interest income, net of
     interest expense........       (7.1)       (1.8)      (15.2)      (15.3)
                              ----------- ----------- ----------- -----------
    Earnings (loss) before
     income taxes............        2.6      (818.3)        7.1      (715.5)
    Income tax expense
     (recovery):
      Current................       23.4        13.3        14.4        18.4
      Deferred...............       (9.1)       (9.4)        6.4       (13.4)
                              ----------- ----------- ----------- -----------
                                    14.3         3.9        20.8         5.0
                              ----------- ----------- ----------- -----------
    Net loss for the
     period..................  $   (11.7)  $  (822.2)  $   (13.7)  $  (720.5)
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Basic loss per share.....  $   (0.05)  $   (3.58)  $   (0.06)  $   (3.14)

    Diluted loss per share...  $   (0.05)  $   (3.58)  $   (0.06)  $   (3.14)

    Shares used in computing
     per share amounts:
       Basic (in millions)...      229.1       229.4       228.9       229.3
       Diluted (in
        millions)............      229.1       229.4       228.9       229.3

    See accompanying notes to unaudited consolidated financial statements.
          These unaudited interim consolidated financial statements
                   should be read in conjunction with the
               2007 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
                                 2007        2008        2007        2008
                              ----------- ----------- ----------- -----------
                              (unaudited) (unaudited)             (unaudited)

    Net loss for the
     period..................  $   (11.7)  $  (822.2)  $   (13.7)  $  (720.5)
    Other comprehensive
     income (loss), net of
     tax:
      Foreign currency
       translation gain......        3.6         8.7         8.7        11.5
      Net gain (loss) on
       derivatives designated
       as cash flow
       hedges................        9.2       (44.1)       37.5       (53.1)
      Reclass net loss (gain)
       on derivatives
       designated as cash flow
       hedges to
       operations............       (9.5)       16.6       (16.3)       (4.9)
                              ----------- ----------- ----------- -----------
    Comprehensive income
     (loss)..................  $    (8.4)  $  (841.0)   $   16.2   $  (767.0)
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    See accompanying notes to unaudited consolidated financial statements.
          These unaudited interim consolidated financial statements
                   should be read in conjunction with the
               2007 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
                                 2007        2008        2007        2008
                              ----------- ----------- ----------- -----------
                              (unaudited) (unaudited)             (unaudited)
    Cash provided by (used in):
    Operations:
    Net loss for the
     period                    $   (11.7)  $  (822.2)  $   (13.7)  $  (720.5)
    Items not affecting cash:
      Depreciation and
       amortization                 33.7        27.7       130.8       109.2
      Deferred income taxes         (9.1)       (9.4)        6.4       (13.4)
      Non-cash charge for
       option issuances              2.7         1.6         7.0         6.6
      Restructuring
       charges                       6.1         0.6         5.1         1.1
      Other charges
       (note 5)                     15.1       850.3        14.0       850.3
    Other                           (3.2)       (2.9)       18.0        16.6
    Changes in non-cash
     working capital items:
      Accounts receivable           22.4       (33.9)       32.0      (132.8)
      Inventories                  135.0        55.9       406.0         4.5
      Prepaid and other
       assets                        2.2        (2.5)       (6.8)       22.5
      Income taxes
       recoverable                  18.1        20.3        11.4         5.7
      Accounts payable and
       accrued liabilities         (32.2)      (73.9)     (237.6)       58.9
      Income taxes payable             -        (6.8)      (21.2)       (0.5)
                              ----------- ----------- ----------- -----------
      Non-cash working
       capital changes             145.5       (40.9)      183.8       (41.7)
                              ----------- ----------- ----------- -----------
    Cash provided by
     operations                    179.1         4.8       351.4       208.2
                              ----------- ----------- ----------- -----------

    Investing:
      Purchase of property,
       plant and equipment         (15.0)      (25.6)      (63.7)      (88.8)
      Proceeds from sale
       of assets                     3.0         3.5        27.0         7.7
      Other                         (0.1)        0.4        (0.2)        0.3
                              ----------- ----------- ----------- -----------
    Cash used in investing
     activities                    (12.1)      (21.7)      (36.9)      (80.8)
                              ----------- ----------- ----------- -----------

    Financing:
      Repurchase of Notes
       (note 3(d))                     -       (30.4)          -       (30.4)
      Financing costs               (0.5)       (0.5)       (1.4)       (0.5)
      Repayment of long-term
       debt                         (0.1)       (0.2)       (0.6)       (0.4)
      Issuance of share
       capital                         -           -         3.5         2.1
      Other                         (2.8)       (9.2)       (3.0)      (13.9)
                              ----------- ----------- ----------- -----------
    Cash used in financing
     activities                     (3.4)      (40.3)       (1.5)      (43.1)
                              ----------- ----------- ----------- -----------

    Increase (decrease) in
     cash                          163.6       (57.2)      313.0        84.3
    Cash, beginning of
     period                        953.1     1,258.2       803.7     1,116.7
                              ----------- ----------- ----------- -----------
    Cash, end of period        $ 1,116.7   $ 1,201.0   $ 1,116.7   $ 1,201.0
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

                 Supplemental cash flow information (note 9)

    See accompanying notes to unaudited consolidated financial statements.
          These unaudited interim consolidated financial statements
                   should be read in conjunction with the
               2007 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 2007 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 2007 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, 2008 and the results of operations and cash flows for the
    three months and years ended December 31, 2007 and 2008.

    Use of estimates:

    The preparation of financial statements in conformity with GAAP requires
    management to make estimates and assumptions that affect the reported
    amounts of assets and liabilities and related disclosures of contingent
    assets and liabilities at the date of the financial statements, and the
    reported amounts of revenue and expenses during the reporting period. We
    applied significant estimates and assumptions to our valuations against
    accounts receivable, inventory and income taxes, to the amount and timing
    of restructuring charges or recoveries, to the fair values used in
    testing goodwill and long-lived assets, and to valuing our financial
    instruments and pension costs. Actual results could differ materially
    from those estimates and assumptions, especially in light of the current
    economic environment and uncertainties.

    These unaudited interim consolidated financial statements are based upon
    accounting principles consistent with those used and described in the
    2007 annual consolidated financial statements, except for the following:

    Changes in accounting policies:

    (i) Inventories:

    Effective January 1, 2008, we adopted CICA Handbook Section 3031,
    "Inventories," which requires inventory to be measured at the lower of
    cost and net realizable value. This standard provides additional guidance
    on the types of costs that can be capitalized and requires the reversal
    and disclosure of previous inventory write-downs if economic
    circumstances have changed to support higher inventory values. The
    adoption of this standard did not have a material impact on our
    consolidated financial statements.

    During the fourth quarter of 2008, we recorded a net inventory provision
    through cost of sales of $8.1 (year ended December 31, 2008 - $19.6) to
    write-down the value of our inventory to net realizable value.

    (ii) Financial instruments:

    (ii)(a) Effective January 1, 2008, we adopted CICA Handbook 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 adoption of these
    standards did not have a material impact on our consolidated financial
    statements.

    Section 3862 requires us to disclose the classifications of our financial
    instruments into the following specific categories:

    - financial assets held-for-trading     - loans and receivables
    - held-to-maturity investments          - available-for-sale financial
    - financial liabilities                    assets
       held-for-trading                     - financial liabilities measured
                                               at amortized cost

    The classification of our financial instruments is as follows:

    Our cash and cash equivalents are comprised of cash and short-term
    investments. See note 9. The majority of our short-term investments are
    held-to-maturity, except for investments in highly-liquid mutual funds
    which are held-for-trading. We classify accounts receivable under loans
    and receivables. Our derivative assets are included in prepaid and other
    assets and other long-term assets. Our derivative liabilities are
    included in accrued liabilities. The majority of our derivative assets
    and liabilities arise from foreign currency forward contracts and
    interest rate swap agreements. Our foreign currency forward contracts are
    recorded at fair value and the majority of our foreign currency forward
    contracts are designated as cash flow hedges. Our interest rate swap
    agreements related to our Senior Subordinated Notes due 2011 (2011 Notes)
    are recorded at fair value and are designated as fair value hedges. See
    note 10. Accounts payable and the majority of our accrued liabilities,
    excluding derivative liabilities, are classified as financial liabilities
    which are recorded at amortized cost. Our Senior Subordinated Notes
    (Notes), which are recorded in long-term debt, are classified as
    financial liabilities. See note 3. The carrying values of our Notes are
    comprised of elements recorded at fair value and amortized cost. See note
    15 to the 2007 annual consolidated financial statements. We do not
    currently have any financial assets designated as available-for-sale.

    We are exposed to a variety of financial risks that we face in the normal
    course of business. Our financial risk management objectives are
    described in note 15 to the 2007 annual consolidated financial
    statements. The disclosures required by Section 3862 are included in
    note 13.

    (ii)(b) Effective January 1, 2007, we adopted CICA Handbook Section 1530,
    "Comprehensive income," Section 3855, "Financial instruments -
    recognition and measurement," Section 3861, "Financial instruments -
    disclosure and presentation," and Section 3865, "Hedges." These
    disclosures are included in notes 2(s), 7, 10 and 15 to the 2007 annual
    consolidated financial statements. On January 1, 2007, we made certain
    transitional adjustments to our consolidated balance sheet which included
    an adjustment to opening deficit of $6.4.

    As required by these standards, we have marked-to-market the bifurcated
    embedded prepayment options in our debt instruments and have applied the
    fair value hedge accounting to our interest rate swaps and our hedged
    debt obligation (2011 Notes). The changes in the fair values each period
    are recorded in interest expense on long-term debt. The mark-to-market
    adjustment fluctuates each period as it is dependent on market
    conditions, including future interest rates, implied volatility and
    credit spreads. The impact of these adjustments on our results of
    operations is as follows:

                                  Three months ended         Year ended
                                     December 31             December 31
                                    2007       2008        2007        2008
                                 ---------  --------     --------   ---------
    Increase (decrease)
     in interest expense
     on long-term debt.......      $ 0.1      $ 0.8      $ (0.6)      $ 1.0

    (iii) Capital disclosures:

    Effective January 1, 2008, we adopted CICA Handbook Section 1535,
    "Capital disclosures," which provides guidance for disclosing information
    about an entity's capital and how it manages its capital. This standard
    requires the disclosure of the entity's capital management objectives,
    policies and processes. See note 14. The adoption of this standard did
    not have a material impact on our consolidated financial statements.

    Recently issued accounting pronouncements:

    (a) International financial reporting standards (IFRS):

    In February 2008, the Canadian Accounting Standards Board announced the
    adoption of International Financial Reporting Standards for publicly
    accountable enterprises. IFRS will replace Canadian GAAP effective
    January 1, 2011. IFRS is effective for our first quarter of 2011 and will
    require that we restate our 2010 comparative numbers. We have started an
    IFRS conversion project to evaluate the impact of implementing the new
    standards. We cannot at this time reasonably estimate the impact of
    adopting IFRS on our consolidated financial statements.

    (b) Goodwill and intangible assets:

    On January 1, 2009, we adopted CICA Handbook Section 3064, "Goodwill and
    intangible assets." This revised standard establishes guidance for the
    recognition, measurement and disclosure of goodwill and intangible
    assets, including internally generated intangible assets. This standard,
    which is effective for our first quarter of 2009, requires us to
    retroactively reclassify our computer software assets on our consolidated
    balance sheet from property, plant and equipment to intangible assets.
    In addition, the amortization of computer software will be reclassified
    from depreciation expense, included in selling, general and
    administrative expenses to amortization of intangible assets.

    (c) Business combinations:

    In January 2009, the CICA issued Handbook Section 1582,
    "Business combinations," which replaces the existing standards. This
    section establishes the standards for the accounting of business
    combinations, and states that all assets and liabilities of an acquired
    business will be recorded at fair value. Obligations for contingent
    considerations and contingencies will also be recorded at fair value at
    the acquisition date. The standard also states that acquisition-related
    costs will be expensed as incurred and that restructuring charges will be
    expensed in the periods after the acquisition date. This standard is
    equivalent to the International Financial Reporting Standards on business
    combinations. This standard is applied prospectively to business
    combinations with acquisition dates on or after January 1, 2011. Earlier
    adoption is permitted. We are currently evaluating the impact of adopting
    this standard on our consolidated financial statements.

    (d) Non-controlling interests:

    In January 2009, the CICA issued Handbook Section 1602,
    "Non-controlling interests," which establishes standards for the
    accounting of non-controlling interests of a subsidiary in the
    preparation of consolidated financial statements subsequent to a business
    combination. This standard is equivalent to the International Financial
    Reporting Standards on consolidated and separate financial statements.
    This standard is effective for 2011. Earlier adoption is permitted. We
    are currently evaluating the impact of adopting this standard on our
    consolidated financial statements.

    (e) Consolidated financial statements:

    In January 2009, the CICA issued Handbook Section 1601, "Consolidated
    financial statements," which replaces the existing standards. This
    section establishes the standards for preparing consolidated financial
    statements and is effective for 2011. Earlier adoption is permitted. We
    are currently evaluating the impact of adopting this standard on our
    consolidated financial statements.

    3.  Long-term debt:

                                            December 31        December 31
                                                2007               2008
                                             ----------         ----------

    Secured, revolving credit facility due
     2009 (a).............................    $      -           $      -
    Senior Subordinated Notes due 2011
     (2011 Notes) (b)(c)(d)...............       500.0              489.4
    Senior Subordinated Notes due 2013
     (2013 Notes) (b)(d)...................      250.0              223.1
      Embedded prepayment option at fair
       value (e)...........................       (6.5)             (19.2)
      Basis adjustments on debt
       obligation (e)......................        6.5                4.9
      Unamortized debt issue costs.........       (9.6)              (7.0)
      Fair value adjustment of 2011
       Notes attributable to interest
       rate risks (e)......................        17.9              40.9
                                              ----------         ----------
                                                  758.3             732.1
    Capital lease obligations..............         0.2               1.0
                                             ----------         ----------
                                                  758.5             733.1
    Less current portion...................         0.2               1.0
                                             ----------         ----------
                                              $   758.3          $  732.1
                                             ----------         ----------
                                             ----------         ----------

    (a) We have a revolving credit facility for $300.0 which matures in
        April 2009 and have initiated preliminary discussions to extend the
        term of this facility. There were no borrowings outstanding under
        this facility at December 31, 2008. Commitment fees for 2008 were
        $1.9. The facility has restrictive covenants relating to debt
        incurrence and the 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, 2008. Based on
        the required financial ratios at December 31, 2008, we have full
        access to the $300.0 available under this facility.

        We also have uncommitted bank overdraft facilities available for
        operating requirements which total $68.0 at December 31, 2008. There
        were no borrowings outstanding under these facilities at
        December 31, 2008.

    (b) In June 2004, we issued the 2011 Notes with an aggregate principal
        amount of $500.0 and a fixed interest rate of 7.875%. We are entitled
        to redeem the 2011 Notes at various premiums above face value.

        In June 2005, we issued the 2013 Notes with an aggregate principal
        amount of $250.0 and a fixed interest rate of 7.625%. We will be
        entitled to redeem the 2013 Notes on or after July 1, 2009 at various
        premiums above face value.

        The 2011 and 2013 Notes (Notes) are unsecured and are subordinated in
        right of payment to all our senior debt. The Notes have restrictive
        covenants that limit our ability to pay dividends, repurchase our own
        stock or repay debt that is subordinated to these Notes. These
        covenants also place limitations on the sale of assets and our
        ability to incur additional debt. We were in compliance with all
        covenants at December 31, 2008.

    (c) In connection with the 2011 Notes, we entered into agreements to swap
        the fixed interest rate with a variable interest rate based on LIBOR
        plus a margin. The average interest rate on the 2011 Notes was 6.9%
        and 6.5%, respectively, for the fourth quarter of 2008 and year ended
        December 31, 2008 (8.2% and 8.3%, respectively, for the fourth
        quarter of 2007 and year ended December 31, 2007). The fair value of
        the interest rate swap agreements is disclosed in note 10(ii).

    (d) During the fourth quarter of 2008, we paid $30.4, excluding accrued
        interest, to repurchase 2011 Notes with principal amounts at maturity
        of $10.6 and to repurchase 2013 Notes with principal amounts at
        maturity of $26.9. We recognized a gain of $7.6 on the repurchase of
        the Notes which we recorded in other charges. See note 5. The gain on
        the repurchase was measured based on the carrying values of the
        repurchased portion of the Notes on the dates of repurchase.

    (e) The prepayment options in the Notes qualify as embedded derivatives
        which must be bifurcated for reporting under the financial
        instruments standards. As of December 31, 2008, the fair value of the
        embedded derivative asset is $19.2 and is recorded against long-term
        debt. The increase in the fair value of the embedded derivative asset
        of $13.1 for 2008 is recorded as a reduction of interest expense on
        long-term debt. As a result of bifurcating the prepayment option from
        these 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 of $1.1 for 2008 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 $23.8 for 2008, which increased
        interest expense on long-term debt. Also see note 2(ii)(b) which
        summarizes the impact of our mark-to-market adjustments and our fair
        value hedge accounting.

    4.  Foreign exchange:

    The majority of our subsidiaries are foreign integrated operations and
    have a U.S. dollar functional currency. For such subsidiaries, we
    translate monetary assets and liabilities denominated in foreign
    currencies into U.S. dollars at the exchange rate in effect on the
    balance sheet date. We translate non-monetary assets and liabilities
    denominated in foreign currencies at historic rates, and we translate
    revenue and expenses at the average exchange rates prevailing during the
    month of the transaction. Exchange gains or losses also arise on the
    settlement of foreign currency denominated transactions. We record these
    exchange gains or losses in our statement of operations.

    We have recorded the following foreign exchange gains or losses in
    selling, general and administrative expenses:

                                   Three months ended         Year ended
                                      December 31             December 31
                                    2007       2008        2007        2008
                                 ---------  --------     --------   ---------
    Foreign exchange
     loss (gain).............      $ (4.0)    $ 12.6      $ (2.9)     $ 16.4


    5.  Other charges:

                                    Three months ended         Year ended
                                       December 31             December 31
                                    2007       2008        2007        2008
                                 ---------  --------     --------   ---------

    Restructuring (a).........   $   24.1    $  11.6      $ 37.3     $  35.3
    Goodwill impairment (b)...          -      850.5           -       850.5
    Long-lived asset
     impairment (c)...........       15.1        8.8        15.1         8.8
    Gain on repurchase
     of Notes (see 3(d))......          -       (7.6)          -        (7.6)
    Other.....................          -       (1.4)       (4.8)       (1.8)
                                 ---------  --------     --------   ---------
                                 $   39.2    $ 861.9      $ 47.6     $ 885.2
                                 ---------  --------     --------   ---------
                                 ---------  --------     --------   ---------

    (a) Restructuring:

    Between 2001 and 2004, we announced global restructuring plans as a
    result of end market weakness and the shifting of manufacturing capacity
    from higher-cost regions in North America and Europe to lower-cost
    regions in Asia. During 2005 and 2006, we announced further plans to
    improve capacity utilization and accelerate margin improvements,
    primarily in our North America and Europe regions as end-market demand
    and profitability had not recovered to sustainable levels. In January
    2008, we estimated an additional restructuring charge of between $50 to
    $75 which would be recorded throughout 2008 and 2009. As we finalized our
    2009 plan in the fourth quarter of 2008, we estimated that our
    restructuring costs would reach the high end of our previously announced
    range. We will continue to evaluate our operations and may propose
    additional restructuring actions as a result of the uncertain
    environment. During 2008, we recorded $35.3 in restructuring charges. We
    expect to complete the remainder of our restructuring actions by the end
    of 2009. As we complete these restructuring actions, our overall
    utilization and operating efficiency should improve. As we finalize the
    detailed plans of these restructuring actions, we will recognize the
    related charges.

    Our restructuring actions included consolidating facilities and reducing
    our workforce. The majority of the employees terminated were
    manufacturing and plant employees. Approximately 32,900 employees have
    been terminated since 2001. Approximately 70% of these employee
    terminations have been in the Americas, 25% in Europe and 5% in Asia.
    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 are 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 expect our long-term lease and other contractual obligations
    to be paid out over the remaining lease terms through 2015. Our
    restructuring liability is recorded in accrued liabilities.

    Details of the 2008 activity are as follows:


                                    Lease
                                      and
                                    other  Facility
                         Employee   cont-    exit    Total
                          termi-  ractual   costs   accrued   2008
                          nation   oblig-    and     liab-  non-cash   2008
                          costs    ations   other    ility   charge   charge
                        -------- -------- -------- -------- -------- --------
    December 31, 2007..  $ 9.0    $ 36.5    $ 0.6   $ 46.1   $    -   $    -
    Cash payments......   (7.1)     (2.8)    (0.8)   (10.7)       -        -
    Provisions.........    2.4       0.3      0.4      3.1      0.2      3.3
                        -------- -------- -------- -------- -------- --------
    March 31, 2008.....    4.3      34.0      0.2     38.5      0.2      3.3
    Cash payments......   (2.8)     (2.8)    (0.3)    (5.9)       -        -
    Provisions.........    3.2      (0.1)     0.4      3.5      0.1      3.6
                        -------- -------- -------- -------- -------- --------
    June 30, 2008......    4.7      31.1      0.3     36.1      0.3      6.9
    Cash payments......   (9.3)     (2.9)    (0.1)   (12.3)       -        -
    Provisions.........   15.7       0.8      0.1     16.6      0.2     16.8
                        -------- -------- -------- -------- -------- --------
    September 30,
     2008..............   11.1      29.0      0.3     40.4      0.5     23.7
    Cash payments......   (3.0)     (2.7)    (0.1)    (5.8)       -        -
    Provisions.........   10.6       0.4        -     11.0      0.6     11.6
                        -------- -------- -------- -------- -------- --------
    December 31,
     2008.............. $ 18.7    $ 26.7    $ 0.2   $ 45.6    $ 1.1   $ 35.3
                        -------- -------- -------- -------- -------- --------
                        -------- -------- -------- -------- -------- --------

    As of December 31, 2008, we have $22.0 in assets that are
    available-for-sale, primarily land and buildings, as a result of the
    restructuring actions we have implemented. We have programs underway to
    sell these assets.

    (b) Goodwill impairment:

    We are required to evaluate goodwill annually or whenever events or
    changes in circumstances indicate that we may not recover the carrying
    amount. Absent any triggering events during the year, we conduct our
    goodwill assessment in the fourth quarter of the year to correspond with
    our planning cycle. We test impairment, using the two-step method, at the
    reporting unit level by comparing the reporting unit's carrying amount to
    its fair value. To the extent a reporting unit's carrying amount exceeds
    its fair value, we may have an impairment of goodwill. All of our
    goodwill is allocated to our Asia reporting unit.

    During the fourth quarter of 2008, we performed our annual goodwill
    impairment assessment. Our goodwill balance prior to the impairment
    charge was $850.5 and was established primarily as a result of an
    acquisition in 2001. We completed our step one analysis using a
    combination of valuation approaches including a market capitalization
    approach, multiples approach and discounted cash flow. The market
    capitalization approach uses our publicly traded stock price to determine
    fair value. The multiples approach uses comparable market multiples to
    arrive at a fair value and the discounted cash flow method uses revenue
    and expense projections and risk-adjusted discount rates. The process of
    determining fair value is subjective and requires management to exercise
    a significant amount of judgment in determining future growth rates,
    discount and tax rates and other factors. The current economic
    environment has impacted our ability to forecast future demand and has in
    turn resulted in our use of higher discount rates, reflecting the risk
    and uncertainty in current markets. The results of our step one analysis
    indicated potential impairment in our Asia reporting unit, which was
    corroborated by a combination of factors including a significant and
    sustained decline in our market capitalization, which is significantly
    below our book value, and the deteriorating macro environment, which has
    resulted in a decline in expected future demand. We therefore performed
    the second step of the goodwill impairment assessment to quantify the
    amount of impairment. This involved calculating the implied fair value of
    goodwill, determined in a manner similar to a purchase price allocation,
    and comparing the residual amount to the carrying amount of goodwill.
    Based on our analysis incorporating the declining market capitalization
    in 2008, as well as the significant end market deterioration and economic
    uncertainties impacting expected future demand, we concluded that the
    entire goodwill balance of $850.5 was impaired. The goodwill impairment
    charge is non-cash in nature and does not affect our liquidity, cash
    flows from operating activities, or our compliance with debt covenants.
    The goodwill impairment charge is not deductible for income tax purposes
    and, therefore, we have not recorded a corresponding tax benefit in 2008.

    During the fourth quarter of 2007, we performed our annual goodwill
    assessment and determined there was no impairment for 2007 as the
    reporting unit's fair value exceeded carrying value.

    (c) Long-lived asset impairment:

    We conduct our annual impairment assessment of long-lived assets in the
    fourth quarter of each year. We recorded a non-cash charge of $8.8 in
    2008 against property, plant and equipment in the Americas and Europe and
    a non-cash charge of $15.1 in 2007 primarily against property, plant and
    equipment in Europe.

    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
                                    2007       2008        2007        2008
                                 ---------  --------     --------   ---------

    Pension plans.............   $   6.4    $   3.9       $ 21.5     $  18.0
    Other benefit plans.......       1.5        1.1          6.6         6.5
                                 ---------  --------     --------   ---------
    Total expense.............   $   7.9    $   5.0       $ 28.1     $  24.5
                                 ---------  --------     --------   ---------
                                 ---------  --------     --------   ---------

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

    We have granted stock options as part of our long-term incentive plans.
    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
                                2007         2008        2007        2008
                             ----------  -----------  ----------  ----------

    Risk-free rate..........  3.6%-3.9%   1.0%-2.5%    3.6%-4.8%   1.0%-3.3%
    Dividend yield..........       0.0%        0.0%         0.0%        0.0%
    Volatility factor of
     the expected market
     price of our shares....    36%-46%     40%-41%      35%-52%     38%-59%
    Expected option
     life
     (in years).............    4.0-5.5     4.0-5.5      4.0-5.5     4.0-5.5
    Weighted average fair
     value of options
     granted................      $2.56       $2.06        $2.57       $3.12

    Compensation expense relating to the fair value of options granted for
    the three months and year ended December 31, 2008 was $1.6 and $6.6,
    respectively (three months and year ended December 31, 2007 was $2.7 and
    $7.0, respectively).

    Our stock-based compensation plans are described in note 9 to the 2007
    annual consolidated financial statements.

    8.  Segment information:

    The accounting standards establish the criteria for the disclosure of
    certain information in the interim and annual financial statements
    regarding operating segments, products and services and major customers.
    Operating segments are defined as components of an enterprise for which
    separate financial information is available that is regularly evaluated
    by the chief operating decision maker in deciding how to allocate
    resources and in assessing performance.

    Our operating segment is comprised of our electronics manufacturing
    services business. Our chief operating decision maker is our Chief
    Executive Officer.

    (i) The following table indicates revenue by end market as a percentage
        of total revenue. Our revenue fluctuates from period to period
        depending on numerous factors, including but not limited to:
        seasonality of business; the level of business from new, existing and
        disengaging customers; the level of program wins or losses; the
        phasing in or out of programs; and changes in customer demand.


                                    Three months ended      Year ended
                                        December 31         December 31
                                    2007         2008      2007        2008
                                    ----         ----      ----        ----

        Consumer................    26%          30%       22%         26%
        Enterprise
         communications.........    24%          22%       28%         25%
        Servers.................    20%          13%       19%         16%
        Telecommunications......    13%          17%       14%         15%
        Storage.................    11%           9%       10%         10%
        Industrial, aerospace
         and defense............     6%           9%        7%          8%

    (ii) For the fourth quarter of 2008, one customer, Research In Motion
         (RIM), represented more than 10% of total revenue (fourth quarter of
         2007 - one customer, IBM). For the year ended December 31, 2008, no
         customer represented more than 10% of total revenue (2007 - two
         customers, Cisco Systems and Sun Microsystems).

    9.  Supplemental cash flow information:

                                  Three months ended         Year ended
                                     December 31             December 31
    Paid during the period:        2007        2008        2007        2008
                                ---------   ---------   ---------   ---------
    Interest (a)............... $    2.3    $    1.3    $   76.6    $   65.4
    Taxes (b).................. $    4.5    $    2.9    $   23.2    $   17.0

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

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


                                                     December 31  December 31
    Cash is comprised of the following:                  2007         2008
                                                     -----------  -----------
    Cash (i)........................................   $  328.7     $  406.2
    Short-term investments (i)......................      788.0        794.8
                                                     -----------  -----------
                                                       $1,116.7     $1,201.0
                                                     -----------  -----------
                                                     -----------  -----------

    (i)  Our current portfolio consists of certificates of deposit and
         certain money market funds that are secured exclusively by U.S.
         government securities. The majority of our cash and short-term
         investments are held with financial institutions each of which has
         at December 31, 2008 a Standard and Poor's rating of A-2 or above.

    10. Derivative financial instruments:

    (i)  We enter into foreign currency contracts to hedge foreign currency
         risks primarily relating to cash flows. At December 31, 2008, we had
         forward exchange contracts covering various currencies in an
         aggregate notional amount of $587.1. All derivative financial
         instruments are recorded at fair value on our consolidated balance
         sheet. The fair value of our foreign currency contracts at
         December 31, 2008 was a net unrealized loss of $38.9 (December 31,
         2007 - net unrealized gain of $20.0). This is comprised of $4.1 of
         derivative assets recorded in prepaid and other assets and $43.0 of
         derivative liabilities recorded in accrued liabilities. The decrease
         in the fair value of these forward exchange contracts for 2008 is
    	     due primarily to unrealized losses from the fluctuations in foreign
         exchange rates in the second half of 2008 and the settlement of
         certain foreign currency forwards with significant gains during the
         first half of 2008. The unrealized losses are a result of
         fluctuations in foreign exchange rates between the time the currency
         forward contracts were entered into and the valuation date at period
         end.

    (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 3(c). 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, 2008 was an unrealized gain of $17.3,
         which is recorded in other long-term assets (December 31, 2007 -
         unrealized gain of $8.7). The increase in the fair value of the swap
         agreements of $8.6 for 2008 is recorded as a reduction of interest
         expense on long-term debt. Also see note 2(ii)(b) which summarizes
         the impact of our mark-to-market adjustments and our fair value
         hedge accounting.

         Fair value hedge ineffectiveness arises when the change in the fair
         values of our swap agreements, our hedged debt obligation and its
         embedded derivatives, and the amortization of the related basis
         adjustments, 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 loss of $0.9
         for 2008. 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. During the fourth quarter of 2008, we repurchased a
         portion of our 2011 Notes. See note 3(d). Since the portion of the
         2011 Notes that we repurchased in 2008 is considered insignificant,
         our fair value hedge relationship remained effective as of
         December 31, 2008 and we continued to apply fair value hedge
         accounting to our 2011 Notes.

    11. Shareholders' equity:

                                Capital               Contributed
                                 stock      Warrants    surplus     Deficit
                              ----------- ----------- ----------- -----------
    Balance - December 31,
     2006....................  $ 3,576.6   $     8.4   $   179.3   $(1,696.2)
    Change in accounting
     policy (note 2(ii)(b))..          -           -           -        (6.4)
    Shares issued............        8.6           -           -           -
    Warrants cancelled.......          -        (5.3)        5.3           -
    Stock-based compensation
     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)
    Shares issued............        3.3           -           -           -
    Warrants cancelled.......          -        (3.1)        3.1           -
    Stock-based compensation
     costs...................          -           -        10.0           -
    Other....................          -           -         1.0           -
    Net loss for 2008........          -           -           -      (720.5)
                              ----------- ----------- ----------- -----------
    Balance - December 31,
     2008....................  $ 3,588.5   $       -   $   204.4   $(2,436.8)
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------



    Accumulated other comprehensive income,           Year ended December 31
     net of tax:                                          2007        2008
                                                      ----------- -----------
    Opening balance of foreign currency translation
     account.........................................  $       -   $    35.2
    Transitional adjustment - January 1, 2007........       26.5           -
    Foreign currency translation gain................        8.7        11.5
                                                      ----------- -----------
    Closing balance..................................       35.2        46.7

    Opening balance of unrealized net gain on cash
     flow hedges.....................................  $       -   $    20.7
    Transitional adjustment - January 1, 2007........       (0.5)          -
    Net gain (loss) on cash flow hedges (1)..........       37.5       (53.1)
    Net gain on cash flow hedges reclassified to
     operations (2)..................................      (16.3)       (4.9)
                                                      ----------- -----------
    Closing balance(3)...............................       20.7       (37.3)
                                                      ----------- -----------
    Accumulated other comprehensive income...........  $    55.9   $     9.4
                                                      ----------- -----------
                                                      ----------- -----------

    (1)  Net of income tax benefit of $0.6 and $0.8, respectively, for the
         three months and year ended December 31, 2008 ($0.2 income tax
         expense for 2007).
    (2)  Net of income tax expense of $1.0 and $0.2, respectively, for the
         three months and year ended December 31, 2008 (no income tax for
         2007).
    (3)  Net of income tax benefit of $0.4 as of December 31, 2008
         ($0.2 income tax expense as of December 31, 2007).

    We expect that the majority of the losses on cash flow hedges reported in
    accumulated other comprehensive income at December 31, 2008 will be
    reclassified to operations during the next 12 months.

    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 have provided to
    various third parties. These guarantees cover various payments, including
    customs and excise taxes, utility commitments and certain bank
    guarantees. At December 31, 2008, these contingent liabilities amounted
    to $55.4 (December 31, 2007 - $74.4).

    In addition to the above guarantees, we have also provided routine
    indemnifications, the terms of which range in duration and often are not
    explicitly defined. These may include indemnifications against adverse
    impacts due to changes in tax laws and patent infringements by third
    parties. We have also provided indemnifications in connection with the
    sale of certain businesses and real property. The maximum potential
    liability from these indemnifications cannot be reasonably estimated. In
    some cases, we have recourse against other parties to mitigate our risk
    of loss from these indemnifications. Historically, we have not made
    significant payments relating to these types of indemnifications.

    Litigation:

    In the normal course of our operations, we are subject to litigation and
    claims from time to time. We may also be subject to lawsuits,
    investigations and other claims, including environmental, labor, product,
    customer disputes and other matters. Management believes that adequate
    provisions have been recorded in the accounts where required. Although it
    is not possible to estimate the extent of potential costs, if any,
    management believes that the ultimate resolution of such contingencies
    will not have a material adverse impact on our results of operations,
    financial position or liquidity.

    In 2007, securities class action lawsuits were commenced against us and
    our former Chief Executive and Chief Financial Officers, in the United
    States District Court of the Southern District of New York by certain
    individuals, on behalf of themselves and other unnamed purchasers of our
    stock, claiming that they were purchasers of our stock during the period
    January 27, 2005 through January 30, 2007. The plaintiffs allege
    violations of United States federal securities laws and seek unspecified
    damages. They allege that during the purported class period we made
    statements concerning our actual and anticipated future financial results
    that failed to disclose certain purportedly material adverse information
    with respect to demand and inventory in our Mexican operations and our
    information technology and communications divisions. In an amended
    complaint, the plaintiffs have added one of our directors and Onex
    Corporation as defendants. All defendants have filed motions to dismiss
    the amended complaint. These motions are pending. A parallel class
    proceeding has also been issued against us and our former Chief Executive
    and Chief Financial Officers in the Ontario Superior Court of Justice,
    but neither leave nor certification of the action has been granted by
    that court. We believe that the allegations in these claims are without
    merit and we intend to defend against them vigorously. However, there can
    be no assurance that the outcome of the litigation will be favorable to
    us or will not have a material adverse impact on our financial position
    or liquidity. In addition, we may incur substantial litigation expenses
    in defending these claims. We have liability insurance coverage that may
    cover some of our litigation expenses, potential judgments or settlement
    costs.

    Income taxes:

    We are subject to tax audits by local tax authorities. Tax authorities
    could challenge the validity of our inter-company transactions, including
    financing and transfer pricing policies which generally involve
    subjective areas of taxation and a significant degree of judgment. If any
    of these tax authorities are successful in challenging our inter-company
    transactions, our income tax expense may be adversely affected and we
    could also be subject to interest and penalty charges.

    In connection with ongoing tax audits in Canada, tax authorities have
    taken the position that income reported by one of our Canadian
    subsidiaries in 2001 and 2002 should have been materially higher as a
    result of certain inter-company transactions. The successful pursuit of
    that assertion could result in that subsidiary owing significant amounts
    of tax, interest and possibly penalties. We believe we have substantial
    defenses to the asserted position and have adequately accrued for any
    probable potential adverse tax impact. However, there can be no assurance
    as to the final resolution of this claim and any resulting proceedings,
    and if this claim and any ensuing proceedings are determined adversely to
    us, the amounts we may be required to pay could be material.

    13. Financial instruments - financial risks:

    We have exposures to the following financial risks arising from financial
    instruments: market risk, credit risk and liquidity risk. Market risk is
    the risk that results in changes to market prices, such as foreign
    exchange rates and interest rates, that could affect our operations or
    the value of our financial instruments.

    (a) Currency risk: Due to the nature of our international operations, we
    are exposed to exchange rate fluctuations on our financial instruments
    denominated in various foreign currencies. Our major currency exposures,
    as of December 31, 2008, are summarized in U.S. dollar equivalents in the
    following table. For purposes of this table, we have excluded items such
    as pension, post-employment benefits and income taxes, in accordance with
    the financial instruments standards. The local currency amounts have been
    converted to U.S. dollar equivalents using the spot rates as of December
    31, 2008.

                             Chinese  Brazilian  Canadian     Thai  Malaysian
                            renminbi      real    dollar      baht   ringgit
                            --------- --------- --------- --------- ---------
    Cash and cash
     equivalents...........   $ 23.7    $  1.8    $ 40.0    $  0.7    $  5.7
    Accounts receivable....     42.8      13.6       0.1         -       0.1
    Other financial assets.      2.6       7.0         -       1.4       0.4
    Accounts payable and
     accrued liabilities...    (23.1)     (1.7)    (55.7)    (16.9)    (18.5)
    Other financial
     liabilities...........     (5.7)     (2.6)        -         -         -
                            --------- --------- --------- --------- ---------
    Net financial assets
     (liabilities).........   $ 40.3    $ 18.1    $(15.6)   $(14.8)   $(12.3)
                            --------- --------- --------- --------- ---------
                            --------- --------- --------- --------- ---------

    At December 31, 2008, a one-percentage point strengthening or weakening
    of the following currencies against the U.S. dollar for our financial
    instruments denominated in non-functional currencies has the following
    impact:

                             Chinese  Brazilian  Canadian     Thai  Malaysian
                            renminbi      real    dollar      baht   ringgit
                            --------- --------- --------- --------- ---------
                                           Increase (decrease)

    1% Strengthening
        Net earnings.......   $  0.4    $  0.1    $ (0.2)   $ (0.1)   $ (0.1)
        Other comprehensive
         income............        -         -       2.0       0.7       0.6

    1% Weakening
        Net earnings.......     (0.4)     (0.1)      0.2       0.1       0.1
        Other comprehensive
         income............        -         -      (1.9)     (0.7)     (0.6)

    See note 15(a) to the 2007 annual consolidated financial statements.

    (b) Interest rate risk: We have entered into interest rate swaps to hedge
    the fair value of our 2011 Notes by swapping the fixed rate of interest
    for a variable interest rate. We are exposed to interest rate risks due
    to fluctuations in the LIBOR rate. A one-percentage point increase in the
    LIBOR rate would increase interest expense by approximately $5.0
    annually. See note 15(b) to the 2007 annual consolidated financial
    statements.

    (c) Credit risk: Credit risk refers to the risk that a counterparty may
    default on its contractual obligations resulting in a financial loss to
    us. To mitigate the risk of financial loss from defaults, we have entered
    into foreign currency forward contracts and interest rate swap agreements
    with financial institutions each of which has at December 31, 2008 a
    Standard and Poor's rating of A or above. See notes 2(e), 15(c) and 18 to
    the 2007 annual consolidated financial statements.

    We also provide credit to our customers in the normal course of business.
    The carrying amount of financial assets recorded in the financial
    statements, net of any allowances or reserves for losses, represents our
    estimate of maximum exposure to this credit risk. As of December 31,
    2008, less than 1% of our gross accounts receivable are over 90 days past
    due. Accounts receivable are net of an allowance for doubtful accounts of
    $13.7 at December 31, 2008 (December 31, 2007 - $21.5).

    (d) Liquidity risk: Liquidity risk is the risk that we may not have cash
    available to satisfy our financial obligations as they come due. The
    majority of our financial liabilities recorded in accounts payable and
    accrued liabilities are due within 90 days. The repayment schedule of our
    long-term debt obligations is included in note 7 to the 2007 annual
    consolidated financial statements. Management believes that cash flow
    from operations, together with cash on hand and borrowings available
    under our credit facility will be sufficient to support our financial
    obligations. See note 15(d) to the 2007 annual consolidated financial
    statements.

    14. Capital management:

    Our main objectives in managing our capital resources are to ensure
    liquidity and to have funds available for working capital or other
    investments required to grow our business. Our capital resources consist
    of cash, short-term investments, access to credit facilities, senior
    subordinated notes and share capital.

    We manage our capitalization levels and make adjustments, as available,
    for changes in economic conditions. We have full access to a $300.0
    credit facility and we can sell up to $250.0, on a committed basis, under
    an accounts receivable sales program to provide short-term liquidity. Our
    credit facility has restrictive covenants relating to debt incurrence and
    the sale of assets. The facility also contains financial covenants that
    may limit the amount of debt that can be incurred under the facility. We
    closely monitor our business performance to evaluate compliance with our
    covenants. Our Notes also have restrictions on financing activities. We
    continue to monitor and review the most cost-effective methods for
    raising capital, taking into account these restrictions and covenants.

    There were no significant changes to our capital structure during the
    period. We have not distributed, nor do we have any current plans to
    distribute, any dividends to our shareholders.

    Our strategy on capital risk management has not changed from the prior
    year. Other than the restrictive covenants associated with our debt
    obligations noted above, we are not subject to any contractual or
    regulatorily imposed capital requirements. While some of our
    international operations are subject to government restrictions on the
    flow of capital into and out of their jurisdictions, these restrictions
    have not had a material impact on our operations.

    15. Comparative information:

    We have reclassified certain prior period information to conform to the
    current periods' 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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