Celestica announces second quarter 2008 financial results



    
                           Second Quarter Summary
                           ----------------------

    -   Revenue of $1,876 million compared to $1,937 million for the same
        period last year
    -   GAAP earnings of $0.17 per share compared to a loss of ($0.08) per
        share last year
    -   Adjusted net earnings of $0.17 per share compared to $0.02 per share
        last year
    -   Operating margin of 3.0%, gross margin of 6.7%
    -   Inventory turnover of 8.7x turns
    -   Return on invested capital including intangibles of 11.8% compared to
        3.8% last year
    -   Second quarter free cash flow of $54 million, cash balance of
        $1.203 billion
    -   Third quarter revenue guidance of $1.9 billion - $2.1 billion,
        adjusted net earnings per share of $0.17 - $0.23
    

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

    TORONTO, July 24 /CNW/ - Celestica Inc. (NYSE, TSX: CLS), a global
provider of electronics manufacturing services (EMS), today announced
financial results for the second quarter ended June 30, 2008.
    Revenue was $1,876 million compared to $1,937 million in the second
quarter of 2007. Net earnings on a GAAP basis for the second quarter were
$39.8 million or $0.17 per share, compared to GAAP net loss of ($19.2) million
or ($0.08) per share for the same period last year.
    Adjusted net earnings for the quarter were $38.9 million or $0.17 per
share, compared to adjusted net earnings of $4.9 million or $0.02 per share
for the same period last year. The term adjusted net earnings is defined as
net earnings before other charges, amortization of intangible assets,
integration costs related to acquisitions, option expense, option exchange
costs 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 results compare with the company's guidance for the second quarter,
announced on April 24, 2008, of revenue of $1.8 billion to $2.0 billion and
adjusted net earnings per share of $0.13 to $0.19.
    For the six months ended June 30, 2008, revenue was $3,712 million
compared to $3,779 million for the same period in 2007. Net earnings on a GAAP
basis were $69.6 million or $0.30 per share compared to GAAP net loss of
($53.5) million or ($0.23) per share for the same period last year. Adjusted
net earnings for the first half of 2008 were $74.3 million or $0.32 per share
compared to adjusted net loss of ($4.2) million or ($0.02) per share for the
same period in 2007.
    "Celestica's second quarter results demonstrate our ability to deliver
further improvements in our financial results despite challenging end
markets," said Craig Muhlhauser, President and Chief Executive Officer,
Celestica. "Operationally, we are executing well for our customers, and we
continue to show improvements in operating margins and return on invested
capital. We are continuing to win new business across all of our key market
segments, and despite limited end-market visibility, we believe we are well
positioned to deliver additional financial improvements throughout the balance
of the year."

    Outlook
    -------
    For the third quarter ending September 30, 2008, the company anticipates
revenue to be in the range of $1.9 billion to $2.1 billion, and adjusted net
earnings per share to range from $0.17 to $0.23.

    Second Quarter Webcast
    ----------------------
    Management will host its quarterly results conference call today at
4:30 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, restructuring costs and the write-down of goodwill and
long-lived assets), acquisition-related charges (amortization of intangible
assets and integration costs related to acquisitions), option expense and
option exchange costs, 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 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 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. The risks and
uncertainties referred to above include, but are not limited to: variability
of operating results among periods; inability to retain or grow our business
due to execution problems resulting from significant headcount reductions,
plant closures and product transfers associated with major restructuring
activities; the effects of price competition and other business and
competitive factors generally affecting the EMS industry, including the trend
for outsourcing; rising energy prices; the challenges of effectively managing
our operations during uncertain economic conditions; our dependence on a
limited number of customers; our dependence on industries affected by rapid
technological change; the challenge of responding to lower-than-expected
customer demand; our ability to successfully manage our international
operations; and 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. Forward-looking statements are provided for the purpose of
providing information about management's current expectations and plans
relating to the future. Readers are cautioned that such information may not be
appropriate for other purposes.
    As of its date, this press release contains any material information
associated with the company's financial results for the second quarter ended
June 30, 2008 and revenue and adjusted net earnings guidance for the third
quarter ending September 30, 2008. Revenue and earnings guidance is reviewed
by the company's board of directors. Our revenue and earnings guidance is
based on various assumptions by management, 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-
     June 30        GAAP      ments   Adjusted    GAAP      ments   Adjusted
                  --------- --------- --------- --------- --------- ---------
    Revenue       $1,937.0  $      -  $1,937.0  $1,876.3  $      -  $1,876.3
    Cost of
     sales(1)      1,846.4      (0.9)  1,845.5   1,750.8      (0.8)  1,750.0
                  --------- --------- --------- --------- --------- ---------
    Gross profit      90.6       0.9      91.5     125.5       0.8     126.3
    SG&A(1)           71.0      (0.5)     70.5      71.6      (1.4)     70.2
    Amortization
     of intangible
     assets            5.1      (5.1)        -       4.2      (4.2)        -
    Other charges     (0.9)      0.9         -       3.6      (3.6)        -
                  --------- --------- --------- --------- --------- ---------
    Operating
     earnings -
     EBIAT            15.4       5.6      21.0      46.1      10.0      56.1
    Interest
     expense, net     15.3         -      15.3      10.3         -      10.3
                  --------- --------- --------- --------- --------- ---------
    Net earnings
     before tax        0.1       5.6       5.7      35.8      10.0      45.8
    Income tax
     expense
     (recovery)       19.3     (18.5)      0.8      (4.0)     10.9       6.9
                  --------- --------- --------- --------- --------- ---------
    Net earnings
     (loss)       $  (19.2) $   24.1  $    4.9  $   39.8  $   (0.9) $   38.9
                  --------- --------- --------- --------- --------- ---------
                  --------- --------- --------- --------- --------- ---------

    W.A. No. of
     shares
     (in millions)
     - diluted       229.0               229.2     230.4               230.4
    Earnings
     (loss) per
     share
     - diluted    $  (0.08)           $   0.02  $   0.17            $   0.17

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


                               2007                          2008
    Six months    ----------------------------- -----------------------------
     ended                   Adjust-                       Adjust-
     June 30        GAAP      ments   Adjusted    GAAP      ments   Adjusted
                  --------- --------- --------- --------- --------- ---------
    Revenue       $3,779.3  $      -  $3,779.3  $3,712.0  $      -  $3,712.0
    Cost of
     sales(1)      3,610.1      (1.9)  3,608.2   3,471.5      (1.8)  3,469.7
                  --------- --------- --------- --------- --------- ---------
    Gross profit     169.2       1.9     171.1     240.5       1.8     242.3
    SG&A(1)          145.4      (1.1)    144.3     137.9      (2.1)    135.8
    Amortization
     of intangible
     assets           11.1     (11.1)        -       8.4      (8.4)        -
    Integration
     costs
     relating to
     acquisitions      0.1      (0.1)        -         -         -         -
    Other charges      6.2      (6.2)        -       6.9      (6.9)        -
                  --------- --------- --------- --------- --------- ---------
    Operating
     earnings -
     EBIAT             6.4      20.4      26.8      87.3      19.2     106.5
    Interest
     expense, net     31.7         -      31.7      19.0         -      19.0
                  --------- --------- --------- --------- --------- ---------
    Net earnings
     (loss)
     before tax      (25.3)     20.4      (4.9)     68.3      19.2      87.5
    Income tax
     expense
     (recovery)       28.2     (28.9)     (0.7)     (1.3)     14.5      13.2
                  --------- --------- --------- --------- --------- ---------
    Net earnings
     (loss)       $  (53.5) $   49.3  $   (4.2) $   69.6  $    4.7  $   74.3
                  --------- --------- --------- --------- --------- ---------
                  --------- --------- --------- --------- --------- ---------

    W.A. No. of
     shares
     (in millions)
     - diluted       228.7               228.7     229.7               229.7
    Earnings (loss)
     per share
     - diluted    $  (0.23)           $  (0.02) $   0.30            $   0.32

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


    GUIDANCE SUMMARY

                        2Q 08 Guidance    2Q 08 Actual      3Q 08 Guidance(2)
                        --------------    ------------      -----------------
    Revenue              $1.8B - $2.0B           $1.9B         $1.9B - $2.1B
    Adjusted net EPS     $0.13 - $0.19           $0.17         $0.17 - $0.23

    (2) Guidance for the third quarter is provided only on an adjusted net
        earnings basis. This is due to the difficulty in forecasting the
        various items impacting GAAP net earnings, such as the amount and
        timing of our restructuring activities.


                               CELESTICA INC.

                         CONSOLIDATED BALANCE SHEETS
                        (in millions of U.S. dollars)


                                                   December 31     June 30
                                                       2007          2008
                                                   ------------  ------------
    Assets                                                        (unaudited)
    Current assets:
      Cash and cash equivalents...................  $  1,116.7    $  1,203.0
      Accounts receivable.........................       941.2         893.3
      Inventories.................................       791.9         812.0
      Prepaid and other assets....................       126.2          99.4
      Income taxes recoverable....................        19.8          32.9
      Deferred income taxes.......................         3.8           4.0
                                                   ------------  ------------
                                                       2,999.6       3,044.6
    Property, plant and equipment.................       466.0         465.1
    Goodwill from business combinations...........       850.5         850.5
    Intangible assets.............................        35.2          26.8
    Other long-term assets........................       119.2         118.6
                                                   ------------  ------------
                                                    $  4,470.5    $  4,505.6
                                                   ------------  ------------
                                                   ------------  ------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable............................  $  1,029.8    $  1,024.1
      Accrued liabilities.........................       402.6         367.6
      Income taxes payable........................        14.0          18.0
      Deferred income taxes.......................           -           0.2
      Current portion of long-term debt (note 3)..         0.2             -
                                                   ------------  ------------
                                                       1,446.6       1,409.9
    Long-term debt (note 3).......................       758.3         758.8
    Accrued pension and post-employment benefits..        70.4          71.5
    Deferred income taxes.........................        63.3          61.8
    Other long-term liabilities...................        13.7          13.3
                                                   ------------  ------------
                                                       2,352.3       2,315.3
    Shareholders' equity (note 10):
      Capital stock...............................     3,585.2       3,587.6
      Warrants....................................         3.1           3.1
      Contributed surplus.........................       190.3         200.9
      Deficit.....................................    (1,716.3)     (1,646.7)
      Accumulated other comprehensive income......        55.9          45.4
                                                   ------------  ------------
                                                       2,118.2       2,190.3
                                                   ------------  ------------
                                                    $  4,470.5    $  4,505.6
                                                   ------------  ------------
                                                   ------------  ------------

                   Guarantees and contingencies (note 11)

         See accompanying notes to 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)
                                 (unaudited)

                              Three months ended          Six months ended
                                    June 30                   June 30
                               2007         2008         2007         2008
                           -----------  -----------  -----------  -----------

    Revenue............... $  1,937.0   $  1,876.3   $  3,779.3   $  3,712.0
    Cost of sales.........    1,846.4      1,750.8      3,610.1      3,471.5
                           -----------  -----------  -----------  -----------
    Gross profit..........       90.6        125.5        169.2        240.5
    Selling, general and
     administrative
     expenses.............       71.0         71.6        145.4        137.9
    Amortization of
     intangible assets....        5.1          4.2         11.1          8.4
    Integration costs
     related to
     acquisitions.........          -            -          0.1            -
    Other charges
     (note 4).............       (0.9)         3.6          6.2          6.9
    Interest on
     long-term debt.......       17.6         13.7         35.2         28.2
    Interest income, net
     of interest expense..       (2.3)        (3.4)        (3.5)        (9.2)
                           -----------  -----------  -----------  -----------
    Earnings (loss) before
     income taxes.........        0.1         35.8        (25.3)        68.3
    Income tax expense
     (recovery):
      Current.............        6.7         (6.5)        12.2         (1.3)
      Deferred............       12.6          2.5         16.0            -
                           -----------  -----------  -----------  -----------
                                 19.3         (4.0)        28.2         (1.3)
                           -----------  -----------  -----------  -----------
    Net earnings (loss)
     for the period....... $    (19.2)  $     39.8   $    (53.5)  $     69.6
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

    Basic earnings (loss)
     per share............ $    (0.08)  $     0.17   $    (0.23)  $     0.30

    Diluted earnings (loss)
     per share............ $    (0.08)  $     0.17   $    (0.23)  $     0.30

    Shares used in
     computing per share
     amounts:
      Basic
       (in millions)......      229.0        229.2        228.7        229.2
      Diluted
       (in millions)......      229.0        230.4        228.7        229.7


         See accompanying notes to 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)
                                 (unaudited)

                              Three months ended          Six months ended
                                    June 30                   June 30
                               2007         2008         2007         2008
                           -----------  -----------  -----------  -----------

    Net earnings (loss)
     for the period....... $    (19.2)  $     39.8   $    (53.5)  $     69.6
    Other comprehensive
     income (loss),
     net of tax:
      Foreign currency
       translation gain
       (loss).............       (1.7)        (3.7)        (1.1)         6.1
      Net gain on
       derivatives
       designated as cash
       flow hedges........       16.8          2.0         16.3          2.4
      Net gain on
       derivatives
       designated as cash
       flow hedges
       reclassified to
       operations.........       (2.1)        (8.3)        (2.4)       (19.0)
                           -----------  -----------  -----------  -----------
    Comprehensive income
     (loss)............... $     (6.2)  $     29.8   $    (40.7)  $     59.1
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

         See accompanying notes to 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)
                                 (unaudited)

                              Three months ended          Six months ended
                                    June 30                   June 30
                               2007         2008         2007         2008
                           -----------  -----------  -----------  -----------
    Cash provided by
     (used in):
    Operations:
    Net earnings (loss)
     for the period....... $    (19.2)  $     39.8   $    (53.5)  $     69.6
    Items not affecting
     cash:
      Depreciation and
       amortization.......       29.9         27.7         61.9         54.3
      Deferred income
       taxes..............       12.6          2.5         16.0            -
      Non-cash charge for
       option issuances...        1.4          2.2          3.0          3.9
      Restructuring
       charges............       (4.1)         0.1         (4.1)         0.3
      Other charges.......          -            -         (0.6)           -
    Other.................        8.1          6.9         13.7         12.0
    Changes in non-cash
     working capital items:
      Accounts
       receivable.........      (98.9)       (53.0)        33.3         47.9
      Inventories.........      125.8         (6.1)       243.0        (20.1)
      Prepaid and other
       assets.............       11.9          5.4         14.3         15.2
      Income taxes
       recoverable........        1.3        (17.7)        (1.1)       (13.1)
      Accounts payable
       and accrued
       liabilities........      (13.6)        58.3       (373.4)       (58.4)
      Income taxes
       payable............        0.6          2.1          2.0          4.0
                           -----------  -----------  -----------  -----------
      Non-cash working
       capital changes....       27.1        (11.0)       (81.9)       (24.5)
                           -----------  -----------  -----------  -----------
    Cash provided by (used
     in) operations.......       55.8         68.2        (45.5)       115.6
                           -----------  -----------  -----------  -----------

    Investing:
      Purchase of property,
       plant and
       equipment..........      (22.7)       (16.5)       (36.0)       (32.4)
      Proceeds from sale
       of assets..........        8.9          2.2         23.3          3.8
      Other...............          -          0.3          0.1            -
                           -----------  -----------  -----------  -----------
    Cash used in investing
     activities...........      (13.8)       (14.0)       (12.6)       (28.6)
                           -----------  -----------  -----------  -----------

    Financing:
      Financing costs.....       (0.9)           -         (0.9)           -
      Repayment of
       long-term debt.....    (0.1)        (0.2)        (0.3)        (0.2)
      Issuance of share
       capital............        2.1          1.9          3.4          1.9
      Other...............       (0.2)        (2.2)        (0.8)        (2.4)
                           -----------  -----------  -----------  -----------
    Cash provided by
     (used in) financing
     activities...........        0.9         (0.5)         1.4         (0.7)
                           -----------  -----------  -----------  -----------

    Increase (decrease)
     in cash..............       42.9         53.7        (56.7)        86.3
    Cash, beginning of
     period...............      704.1      1,149.3        803.7      1,116.7
                           -----------  -----------  -----------  -----------
    Cash, end of period... $    747.0   $  1,203.0   $    747.0   $  1,203.0
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

                 Supplemental cash flow information (note 8)

         See accompanying notes to 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
    June 30, 2008 and the results of operations and cash flows for the three
    and six months ended June 30, 2007 and 2008. 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 second quarter of 2008, we recorded a net inventory provision
    of $2.2 (first quarter of 2008 - $5.4) to write-down the value of our
    inventory to net realizable value. This net inventory provision is
    included in cost of sales. There were no significant reversals of
    previously recorded inventory write-downs during the quarter.

    (ii)   Financial instruments:

    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-for-maturity investments         -   available-for-sale
     -  financial liabilities                     financial 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 8. Most 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 $500.0 Senior Subordinated Notes due 2011 are
    recorded at fair value and are designated as fair value hedges. See
    note 9. 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,
    which are recorded in long-term debt, are classified as financial
    liabilities. See note 3. The carrying values of our Senior Subordinated
    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 12.

    Effective January 1, 2007, we adopted the CICA standards 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". 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.

    (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 13. The adoption of this standard did
    not have a material impact on our consolidated financial statements.

    Recently issued accounting pronouncements:

    Goodwill and intangible assets:

    In February 2008, the CICA issued Handbook Section 3064, "Goodwill and
    intangible assets," which replaces the existing standards. This revised
    standard establishes guidance for the recognition, measurement and
    disclosure of goodwill and intangible assets, including internally
    generated intangible assets. This standard is effective for 2009. We are
    currently evaluating the impact of adopting this standard on our
    consolidated financial statements.

    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 begun to
    develop plans to implement the new standards. We cannot at this time
    reasonably estimate the impact of adopting IFRS on our consolidated
    financial statements.

    3.  Long-term debt:

                                                    December 31     June 30
                                                        2007          2008
                                                    ------------   ----------
    Secured, revolving credit facility due
     2009(a).....................................   $         -    $      -
    Senior Subordinated Notes due 2011
     (2011 Notes)(b)(c)..........................         500.0       500.0
    Senior Subordinated Notes due 2013
     (2013 Notes)(b).............................         250.0       250.0
       Embedded prepayment option at fair
        value(d).................................          (6.5)       (5.6)
       Basis adjustments on debt obligation(d)...           6.5         5.9
       Unamortized debt issue costs(b)...........          (9.6)       (8.5)
       Fair value adjustment of 2011 Notes
        attributable to interest rate
        risks(d).................................          17.9        17.0
                                                    ------------   ----------
                                                          758.3       758.8
    Capital lease obligations....................           0.2           -
                                                    ------------   ----------
                                                          758.5       758.8
    Less current portion.........................           0.2           -
                                                    ------------   ----------
                                                    $     758.3    $  758.8
                                                    ------------   ----------
                                                    ------------   ----------

    (a) We have a revolving credit facility for $300.0 which matures in
        April 2009. There were no borrowings outstanding under this facility
        at June 30, 2008. Commitment fees for the second quarter of 2008 were
        $0.5 ($0.9 - first half of 2008). 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
        June 30, 2008. Based on the required financial ratios at
        June 30, 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 $49.5 at June 30, 2008. There were
        no borrowings outstanding under these facilities at June 30, 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 now
        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 are unsecured and are subordinated in right
        of payment to all our senior debt. The 2011 and 2013 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 debt incurrence, the
        sale of assets and our ability to incur additional debt. We were in
        compliance with all covenants at June 30, 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 5.7%
        and 6.7%, respectively, for the second quarter and first half of 2008
        (8.4% - second quarter and first half of 2007). The fair value of the
        interest rate swap agreements is disclosed in note 9(ii).

    (d) The prepayment options in the 2011 and 2013 Notes qualify as embedded
        derivatives which must be bifurcated for reporting under the
        financial instruments standards. As of June 30, 2008, the fair value
        of the embedded derivative asset is $5.6 and is recorded against
        long-term debt. The decrease in the fair value of the embedded
        derivative asset of $0.9 for the first half of 2008 is recorded as an
        increase in 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
        $0.6 for the first half of 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 gain of $0.9 for the first half of 2008,
        which reduced interest expense on long-term debt.

    4.  Other charges:

                                              Three months      Six months
                                                ended             ended
                                                June 30           June 30
                                             2007     2008     2007    2008
                                            -------  ------   ------  -------

    2001 to 2004 restructuring(a).......     $ 0.9   $ 0.6    $ 0.5   $ 0.9
    2005 to 2009 restructuring(b).......       1.6     3.0     10.0     6.0
                                             -------  ------   ------  ------
    Total restructuring.................       2.5     3.6     10.5     6.9
    Other...............................      (3.4)      -     (4.3)      -
                                             ------  ------   ------  -------
                                             $(0.9)  $ 3.6    $ 6.2   $ 6.9
                                             ------  ------   ------  -------
                                             ------  ------   ------  -------

    (a) 2001 to 2004 restructuring:

    In 2001, we announced a restructuring plan as a result of the
    weak end-markets in the enterprise 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. The
    restructuring liability is recorded in accrued liabilities.

    Details of the lease and other contractual obligations accrual are as
    follows:

                                                  Total
                                                 accrued         2008
                                                liability       charge
                                                -----------   ----------
        December 31, 2007.....................  $    26.8     $      -
        Cash payments.........................       (1.7)           -
        Adjustments...........................        0.3          0.3
                                                -----------   ----------
        March 31, 2008........................       25.4          0.3
        Cash payments.........................       (1.8)           -
        Adjustments...........................        0.6          0.6
                                                -----------   ----------
        June 30, 2008                           $    24.2     $    0.9
                                                -----------   ----------
                                                -----------   ----------

    (b) 2005 to 2009 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. In the fourth quarter of 2006, we identified additional
    restructuring actions. These restructuring actions included additional
    downsizing of the workforce to reflect the volume reductions at certain
    facilities and to reduce overhead costs, which we expected to complete in
    2007.

    In the fourth quarter of 2007, we identified additional restructuring
    actions to drive further operational improvements throughout our
    manufacturing network. These restructuring actions will reduce our
    workforce and will include the closure of certain facilities. We plan to
    consolidate the programs from the facilities we close 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 more cost-effective facilities. As we
    finalize the detailed plans of these restructuring actions, we will
    recognize the related charges. We estimate the additional restructuring
    charges will be in the range of $50 to $75 which will be recorded
    throughout 2008 and 2009. We expect to complete these actions during the
    second half of 2009.

    As of June 30, 2008, we have recorded termination costs, incurred since
    2005, relating to approximately 8,800 employees, primarily operations and
    plant employees. Approximately 8,600 of these employees have been
    terminated as of June 30, 2008. Approximately 60% of the employee
    terminations have been 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. The 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
                         nation   oblig-    and      liab-  Non-cash   2008
                         costs    ations   other     ility   charge   charge
                        -------- -------- -------- -------- -------- --------
    December 31, 2007..  $ 9.0    $ 9.7    $ 0.6    $  19.3  $  58.7  $    -
    Cash payments .....   (7.1)    (1.1)    (0.8)      (9.0)       -       -
    Provisions.........    2.4        -      0.4        2.8      0.2     3.0
                        -------- -------- -------- -------- -------- --------
    March 31, 2008.....    4.3      8.6      0.2       13.1     58.9     3.0
    Cash payments......   (2.8)    (1.0)    (0.3)      (4.1)       -       -
    Provisions.........    3.2     (0.7)     0.4        2.9      0.1     3.0
                        -------- -------- -------- -------- -------- --------
    June 30, 2008......  $ 4.7    $ 6.9    $ 0.3    $  11.9  $  59.0  $  6.0
                        -------- -------- -------- -------- -------- --------
                        -------- -------- -------- -------- -------- --------

    Restructuring summary:

    We expect to incur and record restructuring charges of between $50 and
    $75 throughout 2008 and 2009. During the first half of 2008, we recorded
    restructuring charges of $6.9. We expect to complete these actions during
    the second half of 2009.

    As of June 30, 2008, we have approximately $23 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.

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

    We have recorded the following pension expense:

                                              Three months      Six months
                                                ended             ended
                                                June 30           June 30
                                             2007     2008     2007    2008
                                            -------  ------   ------  -------

        Pension plans...................     $ 5.3   $ 4.6   $ 10.3   $ 9.6
        Other benefit plans.............       1.7     1.9      3.4     3.8
                                             ------- ------  -------  -------
        Total expense...................     $ 7.0   $ 6.5   $ 13.7   $ 13.4
                                             ------- ------  -------  -------
                                             ------- ------  -------  -------

    6.  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         Six months
                                          ended               ended
                                         June 30             June 30
                                      2007      2008      2007      2008
                                    -------  --------- ---------- ----------

    Risk-free rate...................  4.8%  3.0%-3.2%  4.5%-4.8%  2.3%-3.2%
    Dividend yield...................  0.0%     0.0%       0.0%       0.0%
    Volatility factor of the
     expected market price
     of our shares................... 36%-48%  42%-44%    35%-52%    42%-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..............  $2.71    $3.75      $2.55      $3.25


    Compensation expense relating to the fair value of options granted for
    the three and six months ended June 30, 2008 was $2.2 and $3.9,
    respectively (three and six months ended June 30, 2007 was $1.4 and $3.0,
    respectively).

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

    7.  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      Six months
                                                ended             ended
                                                June 30           June 30
                                             2007     2008     2007    2008
                                            -------  ------   ------  -------

        Enterprise communications.......      29%      27%      31%     27%
        Consumer........................      18%      23%      18%     23%
        Servers.........................      20%      17%      19%     17%
        Telecommunications..............      14%      15%      14%     15%
        Storage.........................      11%      10%      11%     10%
        Industrial, aerospace
         and defense....................       8%       8%       7%      8%

    (ii) For the second quarter and first half of 2008, no customer
         represented more than 10% of total revenue (second quarter and first
         half of 2007 -- two customers).

    8.  Supplemental cash flow information:

                                             Three months      Six months
                                                ended             ended
                                                June 30           June 30
        Paid during the period:              2007     2008     2007    2008
                                            -------  ------   ------  -------
        Interest(a)......................   $ 4.9    $ 1.3    $ 40.6  $ 33.9
        Taxes(b).........................   $ 5.1    $ 9.0    $ 11.9  $  7.9

        (a) This includes interest paid on the 2011 and 2013 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    June 30
        Cash is comprised of the following:             2007         2008
                                                   -------------  -----------
        Cash.....................................  $   328.7      $   229.3
        Short-term investments...................      788.0          973.7
                                                   -------------  -----------
                                                   $ 1,116.7      $ 1,203.0
                                                   -------------  -----------
                                                   -------------  -----------

    9.  Derivative financial instruments:

    (i)  We enter into foreign currency contracts to hedge foreign currency
         risks relating to cash flow. At June 30, 2008, we had forward
         exchange contracts covering various currencies in an aggregate
         notional amount of $488.4. All derivative financial instruments are
         recorded at fair value on our consolidated balance sheet. The fair
         value of these contracts at June 30, 2008 was a net unrealized gain
         of $3.4 (December 31, 2007 - net unrealized gain of $20.0). As of
         June 30, 2008, $9.1 of derivative assets are recorded in prepaid and
         other assets, $5.6 of derivative liabilities are recorded in accrued
         liabilities, and $0.1 of derivative liabilities are recorded in
         other long-term liabilities relating to our hedges against foreign
         currency risks. The decrease in the fair value of these forward
         exchange contracts is primarily due to the settlement of certain
         foreign currency forwards, with significant gains, during the first
         half of 2008.

    (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 June 30, 2008 was an unrealized gain of $8.8, 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 $0.1 for the first half of 2008 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 loss of
         $0.4 for the first half of 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.

    10. 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)).......           -           -          -        (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              Contributed
                                stock     Warrants    surplus     Deficit
                             ----------- ----------- ----------- -----------
        Balance -
         December 31, 2007..   $ 3,585.2   $     3.1  $   190.3   $ (1,716.3)
        Shares issued.......         2.4           -          -            -
        Stock-based costs...           -           -       10.1            -
        Other...............           -           -        0.5            -
        Net earnings for the
         first half of 2008.           -           -          -         69.6
                             ----------- ----------- ----------- ------------
        Balance -
         June 30, 2008......   $ 3,587.6   $     3.1  $   200.9   $ (1,646.7)
                             ----------- ----------- ----------- ------------
                             ----------- ----------- ----------- -----------


                                                                  Six months
                                                     Year ended      ended
        Accumulated other comprehensive income,      December 31    June 30
         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            6.1
                                                   -------------  -----------
        Closing balance..........................  $    35.2      $    41.3

        Opening balance of unrealized
         net gain on cash flow hedges............  $       -      $    20.7
        Transitional adjustment -
         January 1, 2007.........................       (0.5)             -
        Net gain on cash flow hedges(1)..........       37.5            2.4
        Net gain on cash flow hedges
         reclassified to operations(2)...........      (16.3)         (19.0)
                                                  -------------  -----------
        Closing balance(3)                         $    20.7      $     4.1

                                                  -------------  -----------
        Accumulated other comprehensive income     $    55.9      $    45.4
                                                  -------------  -----------
                                                  -------------  -----------

    (1) Net of income tax expense of $0.1 and $0.7, respectively, for the
        three and six months ended June 30, 2008 ($0.2 income tax expense for
        2007).
    (2) Net of income tax benefit of $0.3 and $0.6, respectively, for the
        three and six months ended June 30, 2008 (no income tax for 2007).
    (3) Net of income tax expense of $0.3 as of June 30, 2008 ($0.2 income
        tax expense as of December 31, 2007).


    11. Guarantees and contingencies:

    We have contingent liabilities in the form of letters of credit, letters
    of guarantee, and surety and performance bonds which we have provided to
    various third parties. These guarantees cover various payments, including
    customs and excise taxes, utility commitments and certain bank
    guarantees. At June 30, 2008, these contingent liabilities amounted to
    $72.1 (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. 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 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. 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 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.

    12. Financial instruments - financial risks:

    We have exposures to the following financial risks arising from financial
    instruments.

    (a) Currency risk: See note 15(a) to the 2007 annual consolidated
    financial statements. 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 June 30, 2008, are summarized in USD equivalents in the following
    table. The local currency amounts have been converted to USD equivalents
    using the spot rates as of June 30, 2008.

                                                        Chinese   Canadian
                                                 Euro   renminbi    dollar
                                               -------- --------- ---------

    Cash and cash equivalents................. $  5.6   $ 41.3    $    88.2
    Accounts receivable.......................    4.2     25.2          0.1
    Other financial assets(i).................  541.0      5.1      7,421.6
    Accounts payable and accrued liabilities..   (7.4)   (26.5)       (58.2)
    Other financial liabilities(i)............ (521.4)    (1.5)    (7,421.6)
                                               -------- -------- -----------
    Net financial assets...................... $  22.0  $ 43.6    $    30.1
                                                -------- --------- ---------
                                                -------- --------- ---------

     (i) This includes foreign currency denominated inter-company loans.

    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 as of June 30, 2008 has the
    following impact:

                                                        Chinese   Canadian
                                                 Euro   renminbi    dollar
                                               -------- --------- ---------
                                                     Increase (decrease)
    1% Strengthening
       Net earnings...........................  $ 0.2   $  0.4    $     0.3
       Other comprehensive income.............   (0.3)       -          1.9
    1% Weakening
       Net earnings...........................   (0.2)    (0.4)        (0.3)
       Other comprehensive income.............      -        -         (1.8)

    (b) Interest rate risk: See note 15(b) to the 2007 annual consolidated
        financial statements.

    (c) Credit risk: See notes 2(e), 15(c) and 18 to the 2007 annual
    consolidated financial statements. 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
    credit risk. As of June 30, 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 $12.9 at June 30, 2008
    (December 31, 2007 - $21.5).

    (d) Liquidity risk: See note 15(d) to the 2007 annual consolidated
    financial statements. 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. Our foreign
    currency forward contracts generally extend for periods ranging from one
    to 15 months. See note 15 to the 2007 annual consolidated financial
    statements.

    13. 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 available amount of debt that can be
    incurred under the facility. We closely monitor our business performance
    to evaluate compliance with our covenants. Our 2011 and 2013 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
    first half of 2008. We have not distributed, nor do we currently plan to
    distribute, any dividends to our shareholders.

    Our strategy on capital risk management has not changed since year end.
    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.

    





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

Organization Profile

Celestica Inc.

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