Celestica Announces Second Quarter Financial Results

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

                         Second Quarter 2010 Summary
                         ---------------------------

    -   Revenue of $1.59 billion, compared to $1.40 billion for the same
        period last year

    -   GAAP net loss of $(6.1) million, or $(0.03) per share, compared to
        GAAP net earnings of $5.3 million, or $0.02 per share, last year

    -   Non-GAAP adjusted net earnings of $0.21 per share, compared to $0.14
        per share for the same period last year

    -   Non-GAAP return on invested capital of 23.9%, compared to 17.9% last
        year

    -   Non-GAAP operating margin of 3.4%, compared to 3.2% last year

    -   Non-GAAP adjusted gross margin of 7.0%, compared to 7.5% last year

    -   Inventory turns of 8.4x, compared to 7.8x turns last year

    -   Celestica to expand healthcare capabilities through acquisition of
        Allied Panels GmbH

    -   Celestica announces share repurchase plan

    -   Third quarter of 2010 guidance: revenue of $1.55 billion - $1.65
        billion, non-GAAP adjusted net earnings per share of $0.20 - $0.24.
    

TORONTO, July 23 /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 second quarter ended June 30, 2010.

    
    Second Quarter and YTD Results
    ------------------------------
    

Revenue for the quarter was $1.59 billion, compared to $1.40 billion in the second quarter of 2009. GAAP net loss was $(6.1) million, or $(0.03) per share, compared to GAAP net earnings of $5.3 million, or $0.02 per share, for the same period last year.

Adjusted net earnings for the quarter were $48.3 million, or $0.21 per share, compared to adjusted net earnings of $31.1 million, or $0.14 per share, for the same period last year. The term adjusted net earnings is a non-GAAP measure defined as net earnings before stock-based compensation, amortization of intangible assets (excluding computer software), restructuring and other charges, and gains or losses related to the repurchase of shares or debt, net of tax adjustment and significant deferred tax write-offs or recoveries. Detailed GAAP financial statements and supplementary information related to adjusted net earnings and other non-GAAP measures appear at the end of this press release.

For the six months ended June 30, 2010, revenue was $3.10 billion, compared to $2.87 billion for the same period in 2009. GAAP net earnings were $19.8 million, or $0.09 per share, compared to $24.5 million, or $0.11 per share, for the same period last year. Adjusted net earnings for the six months ended June 30, 2010 were $91.4 million, or $0.39 per share, compared to $64.7 million, or $0.28 per share, for the same period in 2009.

    
    Second Quarter Results Compared to Guidance
    -------------------------------------------
    

The company's revenue and adjusted net earnings per share for the second quarter of 2010 were within the company's published guidance, announced on April 22, 2010, of revenue of $1.50 billion to $1.60 billion, and adjusted net earnings per share of $0.19 to $0.23.

"Celestica's year-over-year increase in revenue reflects the progress the company is making toward achieving its revenue growth objectives in its targeted end markets," said Craig Muhlhauser, President and Chief Executive Officer. "Recent wins in our consumer, computing, industrial segments, and the after-market services business, are expected to further contribute to our revenue growth in the fourth quarter."

    
    Celestica to expand healthcare capabilities through acquisition of Allied
    -------------------------------------------------------------------------
    Panels Entwicklungs-und Produktions GmbH (Allied Panels)
    --------------------------------------------------------
    

Celestica announced it has signed a definitive agreement to acquire Allied Panels, a medical engineering and manufacturing service provider, offering concept-to-full-production solutions in medical devices, with a core focus on diagnostic imaging products. The acquisition will expand Celestica's capabilities in the healthcare diagnostic and imaging market. Allied Panels' customers include GE Healthcare, Siemens Healthcare, Sonosite and SuperSonic Imagine. Allied Panels' headquarters and main development and production centre is located in Frankenburg, Austria, with an additional engineering and manufacturing services center in Madison, Wisconsin, USA. With annual revenue of approximately 40 million euros, Allied Panels currently employs 130 people. This transaction is expected to close in the third quarter of 2010.

    
    Celestica announces share repurchase plan
    -----------------------------------------
    

Celestica announced its intention to launch a Normal Course Issuer Bid (NCIB), subject to the approval of the Toronto Stock Exchange. If approved, the company expects to be authorized to repurchase, at its discretion during the next 12 months, up to approximately 18 million, or 9%, of its subordinate voting shares on the open market subject to the normal terms and limitations of such bids. The number of subordinate voting shares which may be purchased will be reduced by the number of subordinate voting shares purchased for employee equity-based incentive programs. Any subordinate voting shares purchased by Celestica under the NCIB will be cancelled.

    
    Third Quarter of 2010 Outlook
    -----------------------------
    

For the third quarter ending September 30, 2010, the company anticipates revenue to be in the range of $1.55 billion to $1.65 billion, and adjusted net earnings per share to be in the range of $0.20 to $0.24. The company expects a negative $0.06 to $0.11 per share impact on a GAAP basis for the following items: quarterly stock-based compensation, amortization of intangible assets (excluding computer software) and restructuring charges.

    
    Second Quarter Webcast
    ----------------------
    

Management will host its quarterly results conference call today at 8:00 a.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 provides supplementary non-GAAP measures to consider in evaluating the company's operating performance. See Schedule I.

Management uses adjusted net earnings and other non-GAAP measures to assess operating performance and the effective use and allocation of resources; to provide more meaningful period-to-period comparisons of operating results, both internally and against operating results of competitors; to enhance investors' understanding of the core operating results of our business; and to set management incentive targets.

    
    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 Harbor and Fair Disclosure Statement
    -----------------------------------------
    

This news release contains forward-looking statements related to our future growth, trends in our industry, our financial operational results including quarterly guidance and the impact of recent program wins on our financial results, our financial or operational performance, and our expectations regarding our proposed Normal Course Issuer Bid, including its approval, timing, and permitted number of shares to be repurchased thereunder. 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 electronics manufacturing services (EMS) industry, including changes in the trend for outsourcing; our dependence on a limited number of customers and end markets; variability of operating results among periods; the challenges of effectively managing our operations, including responding to significant changes in demand from our customers; the challenges of managing rising labor costs; our inability to retain or expand our business due to execution problems resulting from significant headcount reductions, plant closures and product transfer activities; the delays in the delivery and/or general availability of various components and materials used in our manufacturing process; our dependence on industries affected by rapid technological change; our ability to successfully manage our international operations; the challenge of managing our financial exposures to foreign currency fluctuations; the risk of potential non-performance by counterparties, including but not limited to financial institutions, customers and suppliers; and the risk of non-approval of our Normal Course Issuer Bid. 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 U.S. Securities and Exchange Commission and our Annual Information Form filed with the Canadian securities regulators. 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. Except as required by applicable law, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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, 2010 and revenue, adjusted net earnings and GAAP net earnings guidance for the third quarter ending September 30, 2010. 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 the following: forecasts from our customers, which range from 30 to 90 days and can fluctuate significantly in terms of volume and mix of products; 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.

    
                                                                  Schedule I

    Supplementary Non-GAAP Measures
    -------------------------------
    

Our non-GAAP measures include gross profit, gross margin (gross profit as a percentage of revenue), selling, general and administrative expenses (SG&A), SG&A as a percentage of revenue, operating earnings (EBIAT), operating margin (EBIAT as a percentage of revenue), adjusted net earnings, adjusted net earnings per share, return on invested capital and free cash flow. In calculating these non-GAAP financial measures, management excludes the following items: stock-based compensation, amortization of intangible assets (excluding amortization of computer software), restructuring and other charges (most significantly restructuring charges), the write-down of goodwill and long-lived assets, and gains or losses related to the repurchase of shares or debt, net of tax adjustment and significant deferred tax write-offs or recoveries.

These non-GAAP measures do not have any standardized meaning prescribed by Canadian or U.S. GAAP and are not necessarily comparable to similar measures presented by other companies. Non-GAAP measures are not measures of performance under Canadian or U.S. GAAP and should not be considered in isolation or as a substitute for any standardized measure under Canadian or U.S. GAAP. The most significant limitation to management's use of non-GAAP financial measures is that the charges and expenses excluded from the non-GAAP measures are nonetheless charges that are recognized under GAAP and that have an economic impact on the company. Management compensates for these limitations primarily by issuing GAAP results to show a complete picture of the company's performance, and reconciling non-GAAP results back to GAAP.

The economic substance of these exclusions and management's rationale for excluding these from non-GAAP financial measures is provided below:

Stock-based compensation, which represents the estimated fair value of stock options and restricted stock units granted to employees, is excluded since grant activities vary significantly from quarter to quarter in both quantity and fair value. In addition, excluding this expense allows us to better compare core operating results with those of our competitors who also generally exclude stock-based compensation from their core operating results, who may have different granting patterns and types of equity awards, and who may use different option valuation assumptions than we do. Prior to the fourth quarter of 2009, the company only excluded stock options from its non-GAAP measures. Comparables for prior periods reflect the exclusion of stock options and restricted stock units.

Amortization charges (excluding computer software) consists of non-cash charges against intangible assets that are impacted by the timing and magnitude of acquired businesses. Amortization of intangibles varies among competitors, and we believe that excluding these charges permits a better comparison of core operating results with those of our competitors who also generally exclude amortization charges.

Restructuring and other charges, which consist primarily of employee severance, lease termination and facility exit costs associated with closing and consolidating manufacturing facilities and reductions in infrastructure, are excluded because such charges are not directly related to ongoing operating results and do not reflect expected future operating expenses after completion of these activities. We believe that excluding these charges permit a better comparison of our core operating results with those of our competitors who also generally exclude these costs in assessing operating performance.

Impairment charges, which consist of non-cash charges against goodwill and long-lived assets, result primarily when the carrying value of these assets exceeds their fair value. These charges are excluded because they are generally non-recurring. In addition, our competitors may record impairment charges at different times and excluding these charges permits a better comparison of our core operating results with those of our competitors who also generally exclude these charges in assessing operating performance.

Gains or losses related to the repurchase of shares or debt are excluded as these gains or losses do not impact core operating performance and vary significantly among our competitors who also generally exclude these charges in assessing operating performance.

Significant deferred tax write-offs or recoveries are excluded as these write-offs or recoveries do not impact core operating performance and vary significantly among our competitors who also generally exclude these charges in assessing operating performance.

The following table sets forth, for the periods indicated, a reconciliation of Canadian GAAP to non-GAAP measures (in millions of U.S. dollars, except per share amounts):

    
                                               Three months ended
                                                     June 30
                                   ------------------------------------------
                                             2009                 2010
                                   ------------------------------------------
                                                 % of                 % of
                                                revenue              revenue
                                   ------------------------------------------
    Revenue                         $  1,402.2            $  1,585.4

    GAAP gross profit               $    101.7    7.3%    $    107.6    6.8%
      Stock-based compensation             3.6                   4.1
                                   ------------          ------------
    Non-GAAP gross profit           $    105.3    7.5%    $    111.7    7.0%
                                   ------------          ------------
                                   ------------          ------------

    GAAP SG&A                       $     61.9    4.4%    $     61.3    3.9%
      Stock-based compensation            (4.7)                 (6.6)
                                   ------------          ------------
    Non-GAAP SG&A                   $     57.2    4.1%    $     54.7    3.5%
                                   ------------          ------------
                                   ------------          ------------

    GAAP earnings before income
     taxes                          $      3.6    0.3%    $     17.9    1.1%
      Net interest expense                10.7                   0.8
      Stock-based compensation             8.3                  10.7
      Amortization of intangible
       assets (excluding computer
       software)                           1.9                   1.3
      Restructuring and other
       charges                            20.7                  23.8
      Gains or losses related
       to the repurchase of
       shares or debt                        -                     -
                                   ------------          ------------
    Non-GAAP operating earnings
     (EBIAT)(1)                     $     45.2    3.2%    $     54.5    3.4%
                                   ------------          ------------
                                   ------------          ------------

    GAAP net earnings (loss)        $      5.3    0.4%    $     (6.1)  -0.4%
      Stock-based compensation             8.3                  10.7
      Amortization of intangible
       assets (excluding computer
       software)                           1.9                   1.3
      Restructuring and other
       charges                            20.7                  23.8
      Gains or losses related to the
       repurchase of shares or debt          -                     -
      Adjustments for taxes(2)            (5.1)                 18.6
                                   ------------          ------------
    Non-GAAP adjusted net earnings  $     31.1    2.2%    $     48.3    3.0%
                                   ------------          ------------
                                   ------------          ------------

    Diluted EPS
      W.A. No. of shares
       (in millions) - GAAP              230.2                 230.3
      GAAP earnings (loss)
        per share                   $     0.02            $    (0.03)
      W.A. No. of shares
       (in millions) - non-GAAP          230.2                 232.8
      Non-GAAP adjusted net
       earnings per share           $     0.14            $     0.21

    ROIC %(3)                            17.9%                 23.9%

    GAAP cash provided by
     (used in) operations           $     54.5            $     (4.3)
      Purchase of property, plant
      and equipment, net of sales
      proceeds                           (13.5)                (10.2)
                                   ------------          ------------
    Non-GAAP free cash flow(4)      $     41.0            $    (14.5)
                                   ------------          ------------
                                   ------------          ------------


                                                Six months ended
                                                     June 30
                                   ------------------------------------------
                                             2009                 2010
                                   ------------------------------------------
                                                 % of                 % of
                                                revenue              revenue
                                   ------------------------------------------
    Revenue                         $  2,871.6            $  3,103.5

    GAAP gross profit               $    212.9    7.4%    $    213.3    6.9%
      Stock-based compensation             6.6                   8.1
                                   ------------          ------------
    Non-GAAP gross profit           $    219.5    7.6%    $    221.4    7.1%
                                   ------------          ------------
                                   ------------          ------------

    GAAP SG&A                       $    129.3    4.5%    $    121.8    3.9%
      Stock-based compensation            (8.1)                (11.6)
                                   ------------          ------------
    Non-GAAP SG&A                   $    121.2    4.2%    $    110.2    3.6%
                                   ------------          ------------
                                   ------------          ------------

    GAAP earnings before income
     taxes                          $     18.9    0.7%    $     41.0    1.3%
      Net interest expense                20.9                   4.7
      Stock-based compensation            14.7                  19.7
      Amortization of intangible
       assets (excluding computer
       software)                           5.0                   2.6
      Restructuring and other
       charges                            26.7                  29.5
      Gains or losses related
       to the repurchase of
       shares or debt                      6.5                   8.8
                                   ------------          ------------
    Non-GAAP operating earnings
     (EBIAT)(1)                     $     92.7    3.2%    $    106.3    3.4%
                                   ------------          ------------
                                   ------------          ------------

    GAAP net earnings (loss)        $     24.5    0.9%    $     19.8    0.6%
      Stock-based compensation            14.7                  19.7
      Amortization of intangible
       assets (excluding computer
       software)                           5.0                   2.6
      Restructuring and other
       charges                            26.7                  29.5
      Gains or losses related to
       the repurchase of shares
       or debt                             6.5                   8.8
      Adjustments for taxes(2)           (12.7)                 11.0
                                   ------------          ------------
    Non-GAAP adjusted net earnings  $     64.7    2.3%    $     91.4    2.9%
                                   ------------          ------------
                                   ------------          ------------

    Diluted EPS
      W.A. No. of shares
       (in millions) - GAAP              229.7                 232.8
      GAAP earnings (loss)
        per share                   $     0.11            $     0.09
      W.A. No. of shares
       (in millions) - non-GAAP          229.7                 232.8
      Non-GAAP adjusted net
       earnings per share           $     0.28            $     0.39

    ROIC %(3)                            18.3%                 23.6%

    GAAP cash provided by
     (used in) operations           $    102.1            $      7.2
      Purchase of property, plant
      and equipment, net of sales
      proceeds                           (45.0)                (12.5)
                                   ------------          ------------
    Non-GAAP free cash flow(4)      $     57.1            $     (5.3)
                                   ------------          ------------
                                   ------------          ------------

    (1) EBIAT is defined as earnings before interest, amortization and income
        taxes. EBIAT also excludes stock-based compensation, restructuring
        and other charges, and gains or losses related to the repurchase of
        shares or debt.

    (2) The adjustment to GAAP taxes is based on the estimated effective
        income tax rate expected to be applicable for the full fiscal period
        taking into account the tax effects on the non-GAAP adjustments.

    (3) Management uses ROIC as a measure to assess the effectiveness of
        the invested capital it uses to build products or provide services to
        its customers. Our ROIC measure includes operating margin, working
        capital management and asset utilization. ROIC is calculated by
        dividing EBIAT by average net invested capital. Net invested capital
        consists of total assets less cash, accounts payable, accrued
        liabilities and income taxes payable. We use a two-point average to
        calculate average net invested capital for the quarter. There is no
        comparable measure under Canadian or U.S. GAAP.

    (4) Management uses free cash flow as a measure, in addition to cash flow
        from operations, to assess operational cash flow performance. We
        believe free cash flow provides another level of transparency of our
        liquidity as it represents cash generated after the purchase of
        capital equipment and property (net of proceeds from sale of surplus
        equipment and property).


    GUIDANCE SUMMARY

                           Q2 10 Guidance    Q2 10 Actual   3Q 10 Guidance(5)
                          ---------------    ------------   ----------------
    Revenue               $1.50B - $1.60B       $1.59B       $1.55B - $1.65B
    Adjusted net EPS       $0.19 - $0.23        $0.21         $0.20 - $0.24

    (5) We expect a negative $0.06 to $0.11 per share impact on a GAAP basis
        for the following items: quarterly stock-based compensation,
        amortization of intangible assets (excluding computer software) and
        restructuring charges.


                               CELESTICA INC.

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

                                                    December 31      June 30
                                                           2009         2010
                                                    ------------ ------------
    Assets
    Current assets:
      Cash and cash equivalents (note 6)...........  $    937.7   $    683.9
      Accounts receivable..........................       828.1        789.0
      Inventories..................................       676.1        676.8
      Prepaid and other assets.....................        74.5         64.6
      Income taxes recoverable.....................        21.2         16.8
      Deferred income taxes........................         5.2          5.5
                                                    ------------ ------------
                                                        2,542.8      2,236.6
    Property, plant and equipment..................       393.8        372.7
    Goodwill from business combinations (note 2)...           -          3.0
    Intangible assets..............................        32.3         30.0
    Other long-term assets.........................       137.2        142.5
                                                    ------------ ------------
                                                     $  3,106.1  $   2,784.8
                                                    ------------ ------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable.............................  $    927.1  $     856.5
      Accrued liabilities (note 4).................       331.9        276.0
      Income taxes payable.........................        38.0         50.3
      Current portion of long-term debt (note 3(b))       222.8            -
                                                    ------------ ------------
                                                        1,519.8      1,182.8
    Accrued pension and post-employment benefits...        75.4         77.1
    Deferred income taxes..........................        28.0         26.7
    Other long-term liabilities....................         7.1          6.5
                                                    ------------ ------------
                                                        1,630.3      1,293.1

    Shareholders' equity:
      Capital stock................................     3,591.2      3,597.0
      Treasury stock...............................        (0.4)       (13.1)
      Contributed surplus..........................       211.0        223.2
      Deficit......................................    (2,381.8)    (2,362.0)
      Accumulated other comprehensive income.......        55.8         46.6
                                                    ------------ ------------
                                                        1,475.8      1,491.7
                                                    ------------ ------------
                                                     $  3,106.1   $  2,784.8
                                                    ------------ ------------
                                                    ------------ ------------

                           Contingencies (note 9).
                         Subsequent events (note 12).

    See accompanying notes to unaudited consolidated financial statements.
          These unaudited interim consolidated financial statements
                   should be read in conjunction with the
               2009 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
                                   2009        2010        2009        2010
                              ----------- ----------- ----------- -----------
    Revenue................... $ 1,402.2   $ 1,585.4   $ 2,871.6   $ 3,103.5
    Cost of sales.............   1,300.5     1,477.8     2,658.7     2,890.2
                              ----------- ----------- ----------- -----------
    Gross profit..............     101.7       107.6       212.9       213.3
    Selling, general and
     administrative expenses..      61.9        61.3       129.3       121.8
    Amortization of
     intangible assets........       4.8         3.8        10.6         7.5
    Other charges (note 4)....      20.7        23.8        33.2        38.3
    Interest on long-term
     debt.....................      10.8         0.8        21.2         4.6
    Other interest expense
     (income).................      (0.1)          -        (0.3)        0.1
                              ----------- ----------- ----------- -----------
    Earnings before income
     taxes....................       3.6        17.9        18.9        41.0
    Income tax expense
     (recovery):
      Current.................       3.4        19.9         6.1        23.0
      Deferred................      (5.1)        4.1       (11.7)       (1.8)
                              ----------- ----------- ----------- -----------
                                    (1.7)       24.0        (5.6)       21.2
                              ----------- ----------- ----------- -----------
    Net earnings (loss) for
     the period............... $     5.3   $    (6.1)  $    24.5   $    19.8
                              ----------- ----------- ----------- -----------

    Basic earnings (loss)
     per share................ $    0.02   $   (0.03)  $    0.11   $    0.09

    Diluted earnings (loss)
     per share................ $    0.02   $   (0.03)  $    0.11   $    0.09

    Shares used in computing
     per share amounts:
      Basic (in millions).....     229.4       230.3       229.4       230.1
      Diluted (in millions)...     230.2       230.3       229.7       232.8


    See accompanying notes to unaudited consolidated financial statements.
          These unaudited interim consolidated financial statements
                   should be read in conjunction with the
               2009 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
                                   2009        2010        2009        2010
                              ----------- ----------- ----------- -----------
    Net earnings (loss) for
     the period............... $     5.3   $    (6.1)  $    24.5   $    19.8
    Other comprehensive
     income (loss),
     net of tax:
      Currency translation
       adjustment.............       4.0        (1.3)       (5.1)       (3.3)
      Change from derivatives
       designated as hedges...      25.5        (9.7)       36.0        (5.9)
                              ----------- ----------- ----------- -----------
    Comprehensive income
     (loss)................... $    34.8   $   (17.1)  $    55.4   $    10.6
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    See accompanying notes to unaudited consolidated financial statements.
          These unaudited interim consolidated financial statements
                   should be read in conjunction with the
               2009 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
                                   2009        2010        2009        2010
                              ----------- ----------- ----------- -----------
    Cash provided by (used in):
    Operations:

    Net earnings (loss) for
     the period..............  $     5.3   $    (6.1)  $    24.5   $    19.8
    Items not affecting cash:
      Depreciation and
       amortization..........       24.3        22.3        50.1        44.8
      Deferred income taxes..       (5.1)        4.1       (11.7)       (1.8)
      Stock-based
       compensation..........        8.3        10.7        14.7        16.4
      Restructuring charges
       (note 4)..............        0.7         0.5         1.3         0.3
      Other charges..........          -           -         6.5         7.7
    Other....................       (1.3)       (0.5)       (9.2)       (1.1)
    Changes in non-cash
     working capital items:
      Accounts receivable....      (77.5)       10.7       265.1        39.6
      Inventories............       60.8        47.5       153.1        (0.2)
      Prepaid and other
       assets................        2.5        (5.2)       22.4         1.5
      Income taxes
       recoverable...........       (1.6)        4.6        (4.6)        4.4
      Accounts payable and
       accrued liabilities...       39.6      (102.7)     (407.3)     (136.5)
      Income taxes payable...       (1.5)        9.8        (2.8)       12.3
                              ----------- ----------- ----------- -----------
      Non-cash working
       capital changes.......       22.3       (35.3)       25.9       (78.9)
                              ----------- ----------- ----------- -----------
    Cash provided by
     (used in) operations....       54.5        (4.3)      102.1         7.2
                              ----------- ----------- ----------- -----------

    Investing:
      Acquisition (note 2)...          -           -           -        (5.0)
      Purchase of computer
       software and property,
       plant and equipment...      (14.0)      (11.9)      (46.4)      (19.5)
      Proceeds from sale
       of assets.............        0.5         1.7         1.4         7.0
      Other..................       (0.3)        0.5         0.5         0.2
                              ----------- ----------- ----------- -----------
    Cash used in investing
     activities..............      (13.8)       (9.7)      (44.5)      (17.3)
                              ----------- ----------- ----------- -----------

    Financing:
      Repurchase of Senior
       Subordinated Notes
       (Notes) (note 3(b))...          -           -      (149.7)     (231.6)
      Proceeds from
       termination of swap
       agreements
       (note 3(b))...........          -           -        14.7           -
      Issuance of share
       capital...............        0.2         0.5         0.2         4.0
      Purchase of treasury
       stock.................       (0.1)      (14.1)       (0.1)      (15.1)
      Financing and other
       costs.................       (2.8)       (0.7)       (4.4)       (1.0)
                              ----------- ----------- ----------- -----------
    Cash used in financing
      activities.............       (2.7)      (14.3)     (139.3)     (243.7)
                              ----------- ----------- ----------- -----------

    Increase (decrease) in
     cash....................       38.0       (28.3)      (81.7)     (253.8)
    Cash and cash
     equivalents, beginning
     of period...............    1,081.3       712.2     1,201.0       937.7
                              ----------- ----------- ----------- -----------
    Cash and cash
     equivalents, end of
     period..................  $ 1,119.3     $ 683.9   $ 1,119.3     $ 683.9
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

                 Supplemental cash flow information (note 6).

      See accompanying notes to unaudited consolidated financial statements.
          These unaudited interim consolidated financial statements
                   should be read in conjunction with the
               2009 annual consolidated financial statements.



                               CELESTICA INC.

               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                        (in millions of U.S. dollars)
                                 (unaudited)

                                                                       Accu-
                                                                     mulated
                                                                       other
                  Number of                                          compre-
                  shares(1)              Cont-                       hensive
                       (in    Capital  ributed  Treasury              income
                  millions)     stock  surplus  stock(2)    Deficit  (note 8)
                  --------  --------- -------- --------- ---------- ---------
    Balance -
     December 31,
     2008..........  229.2  $ 3,588.5  $ 211.6   $ (7.2)  $(2,436.8)  $  9.4
    Shares issued..      -        0.2        -        -           -        -
    Purchase of
     treasury
     stock(2)......      -          -        -     (0.1)          -        -
    Stock-based
     compensation..      -          -      7.1      7.3           -        -
    Other..........      -          -      1.2        -           -        -
    Net earnings
     for the first
     half of 2009..      -          -        -        -        24.5        -
    Currency
     translation
     adjustments...      -          -        -        -           -     (5.1)
    Change from
     derivatives
     designated
     as hedges....       -          -        -        -           -     36.0
                  --------  --------- -------- --------- ---------- ---------
    Balance -
     June 30,
     2009.........   229.2  $ 3,588.7  $ 219.9   $    -   $(2,412.3)  $ 40.3
                  --------  --------- -------- --------- ---------- ---------
                  --------  --------- -------- --------- ---------- ---------

    Balance -
     December 31,
     2009..........  229.5  $ 3,591.2  $ 211.0   $ (0.4)  $(2,381.8)  $ 55.8
    Shares issued..    0.7        5.8        -        -           -        -
    Purchase of
     treasury
     stock(2)......      -          -        -    (15.1)          -        -
    Stock-based
     compensation..      -          -     12.3      2.4           -        -
    Other..........      -          -     (0.1)       -           -        -
    Net earnings
     for the first
     half of 2010..      -          -        -        -        19.8        -
    Currency
     translation
     adjustments..       -          -        -        -           -     (3.3)
    Change from
     derivatives
     designated
     as hedges....       -          -        -        -           -     (5.9)
                  --------  --------- -------- --------- ---------- ---------
    Balance -
     June 30,
     2010.........   230.2  $ 3,597.0  $ 223.2  $ (13.1)  $(2,362.0)  $ 46.6
                  --------  --------- -------- --------- ---------- ---------
                  --------  --------- -------- --------- ---------- ---------

    (1) Includes subordinate voting shares and multiple voting shares.
    (2) From time to time, we pay cash for the purchase of shares in the open
        market by a trustee to satisfy our obligation to deliver shares upon
        vesting of share unit awards under our long-term incentive plans.
        During the first half of 2010, we paid $15.1 for the trustee's
        purchase of approximately 1.6 million shares in connection with these
        plans. At June 30, 2010, the trustee held 1.4 million shares in
        connection with these plans, which we classify for accounting
        purposes as treasury stock with an ascribed value of $13.1. At June
        30, 2009, the trustee did not hold any such shares that were
        classified as treasury stock for accounting purposes.



                               CELESTICA INC.

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (in millions of U.S. dollars, except per share amounts)
                                 (unaudited)

    1.  Basis of presentation and significant accounting policies:

    We prepare our financial statements in accordance with generally accepted
    accounting principles (GAAP) in Canada.

    The disclosures contained in these unaudited interim consolidated
    financial statements do not include all requirements of Canadian GAAP for
    annual financial statements. These unaudited interim consolidated
    financial statements should be read in conjunction with the 2009 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, 2010 and the results of operations, comprehensive income (loss) and
    cash flows for the three and six months ended June 30, 2009 and 2010.

    i) 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
    inventory and income taxes, to the amount and timing of restructuring
    charges or recoveries, to the fair values used in testing long-lived
    assets, and to valuing our pension costs. We evaluate our estimates and
    assumptions on a regular basis, taking into account historical experience
    and other relevant factors. Actual results could differ materially from
    those estimates and assumptions.

    During the second quarter of 2010, we recorded a net inventory valuation
    reversal of $3.0 through cost of sales to reflect increases in the value
    of our inventory, primarily due to changes in estimating net realizable
    values.

    These unaudited interim consolidated financial statements are based upon
    accounting principles consistent with those used and described in the
    2009 annual consolidated financial statements.

    ii) Recently issued accounting pronouncements:

    (a) International financial reporting standards (IFRS):

    In February 2008, the Canadian Accounting Standards Board announced the
    adoption of IFRS for publicly accountable enterprises. IFRS will replace
    Canadian GAAP effective January 1, 2011. IFRS is effective for our first
    quarter of 2011 and will require that we restate our 2010 comparative
    numbers under IFRS. Our preliminary IFRS accounting policy decisions are
    disclosed in our management's discussion and analysis for the period
    ended June 30, 2010.

    (b) Business combinations:

    In January 2009, the CICA issued Handbook Section 1582, "Business
    combinations," which replaces the existing standards. This section
    establishes the standards for the accounting of business combinations,
    and states that all assets and liabilities of an acquired business will
    be recorded at fair value. Obligations for contingent consideration and
    contingencies will also be recorded at fair value at the acquisition
    date. The standard also states that acquisition-related costs and
    restructuring charges will be expensed as incurred. This standard is
    equivalent to the IFRS on business combinations. This standard is applied
    prospectively to business combinations with acquisition dates on or after
    January 1, 2011. We do not expect the adoption of this standard to have a
    material impact on our consolidated financial statements unless we engage
    in a significant acquisition.

    (c) Multiple deliverable revenue arrangements:

    In December 2009, the CICA issued EIC 175, "Multiple deliverable revenue
    arrangements," which replaces the existing standards. This abstract
    provides additional guidance for arrangements involving multiple
    deliverables including how consideration should be measured and allocated
    to the separate units of an arrangement. This abstract is effective for
    2011. We are evaluating the impact of adopting this abstract on our
    consolidated financial statements.

    2. Acquisition:

    In January 2010, we acquired the shares of Scotland-based Invec Solutions
    Limited (Invec) for a cash purchase price of $5.0. Invec provides
    warranty management, repair and parts management services to companies in
    the information technology and consumer electronics markets. The amount
    of goodwill and intangible assets, primarily computer software assets,
    arising from this acquisition was $3.0 and $3.8, respectively. We are in
    the process of finalizing the valuation of certain items. Accordingly,
    our fair value allocation is preliminary and is subject to refinement.

    3. Long-term debt:

    (a) Credit facility:

    We have a revolving $200.0 credit facility with a maturity of April 2011.
    We are required to comply with certain restrictive covenants relating to
    debt incurrence, the sale of assets, a change of control and certain
    financial covenants related to indebtedness, interest coverage and
    liquidity. Commitment fees for the first half of 2010 were $1.1. We were
    in compliance with all covenants at June 30, 2010. Based on the required
    financial ratios at June 30, 2010, we have full access to this facility.

    We also have uncommitted bank overdraft facilities available for intraday
    operating requirements which total $65.0 at June 30, 2010.

    There were no borrowings outstanding under either of these facilities at
    June 30, 2010.

    (b) Senior Subordinated Notes:

    In March 2009, we paid $149.7 to repurchase a portion of our Senior
    Subordinated Notes due 2011 (2011 Notes) and recognized a gain of $9.1 in
    other charges. In March 2010, we paid $231.6 to repurchase the remaining
    Senior Subordinated Notes due 2013 and recognized a loss of $8.8 in other
    charges. At June 30, 2010, we had no outstanding debt.

    During the first quarter of 2009, we terminated the interest rate swap
    agreements related to the 2011 Notes and received a $14.7 cash
    settlement. In connection with the termination of the swap agreements, we
    discontinued fair value hedge accounting and recorded a write-down,
    through other charges, of $15.6 in the carrying value of the embedded
    prepayment option on the 2011 Notes to fair value.

    4. Other charges:

                                 Three months ended        Six months ended
                                       June 30                  June 30
                                   2009        2010        2009        2010
                              ----------- ----------- ----------- -----------

    Restructuring(a).......... $    20.9   $    23.8   $    27.6   $    31.9
    Loss (gain) on repurchase
     of Notes (note 3(b)).....         -           -        (9.1)        8.8
    Write-down of embedded
     prepayment option
     (note 3(b))..............         -           -        15.6           -
    Other(b)..................      (0.2)          -        (0.9)       (2.4)
                              ----------- ----------- ----------- -----------
                               $    20.7   $    23.8   $    33.2   $    38.3
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    (a) Restructuring:

    In January 2008, we estimated that a restructuring charge of between $50
    and $75 would be recorded throughout 2008 and 2009. In July 2009, we
    announced additional restructuring charges of between $75 and $100.
    Combined, we expect to incur total restructuring charges of between $150
    and $175 associated with this program. Since the beginning of 2008, we
    have recorded total restructuring charges of $150.3. Of that amount,
    $23.8 and $31.9 were recorded in the second quarter and first half of
    2010, respectively. We expect to complete these restructuring actions by
    the end of 2010. We recognize the restructuring charges as the detailed
    plans are finalized.

    Our restructuring actions include consolidating facilities and reducing
    our workforce. The majority of the employees terminated under this plan
    were manufacturing and plant employees in the Americas, Europe and the
    Philippines. For leased facilities that we no longer use, the lease costs
    included in the restructuring costs represent future lease payments less
    estimated sublease recoveries. Adjustments are made to lease and other
    contractual obligations to reflect incremental cancellation fees paid for
    terminating certain facility leases and to reflect changes in the
    accruals for other leases due to delays in the timing of sublease
    recoveries, changes in estimated sublease rates, or changes in use,
    relating principally to facilities in the Americas. We expect our long-
    term lease and other contractual obligations to be paid out over the
    remaining lease terms through 2015. Our restructuring liability is
    recorded in accrued liabilities.

    Details of the 2010 activity are as follows:

                                   Lease
                                     and
                                   other  Facility
                       Employee    cont-     exit    Total     2010
                         termi-  ractual    costs  accrued     non-    Total
                         nation  obliga-      and   liabi-     cash     2010
                          costs    tions    other     lity   charge   charge
                        -------- -------- -------- -------- -------- --------
    December 31, 2009... $ 23.7   $ 20.8    $ 0.5   $ 45.0   $    -   $    -
    Cash payments.......  (21.1)    (5.4)    (0.8)   (27.3)       -        -
    Charges/adjustments.    5.9      1.5      0.9      8.3     (0.2)     8.1
                        -------- -------- -------- -------- -------- --------
    March 31, 2010......    8.5     16.9      0.6     26.0     (0.2)     8.1
    Cash payments.......   (8.8)    (3.4)    (0.9)   (13.1)       -        -
    Charges/adjustments.   18.7      3.9      0.7     23.3      0.5     23.8
                        -------- -------- -------- -------- -------- --------
    June 30, 2010....... $ 18.4   $ 17.4    $ 0.4   $ 36.2   $  0.3   $ 31.9
                        -------- -------- -------- -------- -------- --------
                        -------- -------- -------- -------- -------- --------

    As of June 30, 2010, we had approximately $21 in assets that are
    held-for-sale, primarily land and buildings, as a result of the
    restructuring actions we have implemented. We have programs underway to
    sell these assets. We will record gains or losses on disposal through
    restructuring charges.

    (b) Other:

    We realized recoveries on certain assets that were previously written
    down through other charges.

    5. Segment and customer information:

    (a) 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 program wins or losses with
        new, existing or disengaging customers; the phasing in or out of
        programs; and changes in customer demand.

                                   Three months ended       Six months ended
                                          June 30                June 30
                                     2009        2010        2009       2010
                                   ---------  --------    ---------  --------

        Consumer...................   22%         28%         26%        28%
        Enterprise Communications..   23%         22%         22%        22%
        Telecommunications.........   20%         13%         19%        13%
        Storage....................   12%         12%         10%        13%
        Servers....................   12%         14%         12%        13%
        Industrial, Aerospace and
         Defense, and Healthcare...   11%         11%         11%        11%

    (b) For the second quarter and first half of 2010, two customers and one
        customer, respectively, individually represented more than 10% of
        total revenue. For the second quarter and first half of 2009, three
        customers and two customers, respectively, individually represented
        more than 10% of total revenue.

    6. Supplemental cash flow information:

                                   Three months ended       Six months ended
                                         June 30                June 30
        Paid during the period:      2009       2010         2009      2010
                                 ----------  ---------   ---------  ---------

        Interest(a).............   $  3.0     $  0.8       $ 31.9    $ 12.9
        Taxes(b)................   $  9.7     $  4.5       $ 14.8    $  5.5

    (a) This includes interest paid on the Notes. Interest on the Notes was
        payable in January and July of each year until maturity or earlier
        repurchase or redemption. We redeemed all of our outstanding Notes
        prior to March 31, 2010.

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

                                                    December 31      June 30
        Cash and cash equivalents are                      2009         2010
         comprised of the following:                 -----------  -----------

        Cash(i)....................................   $   259.8    $   250.5
        Cash equivalents(i)........................       677.9        433.4
                                                     -----------  -----------
                                                      $   937.7    $   683.9
                                                     -----------  -----------
                                                     -----------  -----------

    (i) Our current portfolio consists of certificates of deposit and certain
        money market funds that are secured exclusively by U.S. government
        securities. The majority of our cash and cash equivalents are held
        with financial institutions each of which had at June 30, 2010 a
        Standard and Poor's rating of A-1 or above.

    7. Derivative financial instruments:

    We enter into foreign currency contracts to hedge foreign currency risks
    primarily relating to cash flows. The fair value of our foreign currency
    contracts at June 30, 2010 was a net unrealized gain of $1.0 (December
    31, 2009 - net unrealized gain of $8.0). This is comprised of $5.7 of
    derivative assets recorded in prepaid and other assets and other
    long-term assets, and $4.7 of derivative liabilities recorded in accrued
    liabilities. The unrealized gains and 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.

    At June 30, 2010, we had forward exchange contracts to trade U.S. dollars
    in exchange for the following currencies:

                                             Weighted
                                              average
                                             exchange    Maximum
                              Amount of       rate of  period in  Fair value
    Currency               U.S. dollars  U.S. dollars     months  gain/(loss)
    ---------------------- ------------ ------------- ---------- ------------
    Canadian dollar........   $   163.9     $    0.94       19     $     2.1
    British pound sterling.        94.5          1.51        4           0.1
    Thai baht..............        78.3          0.03       12           0.6
    Malaysian ringgit......        61.7          0.30       12           1.1
    Mexican peso...........        45.9          0.08       12           0.5
    Euro...................        32.2          1.24        2           0.1
    Singapore dollar.......        23.2          0.71       12             -
    Romanian lei...........        18.7          0.32       10          (2.8)
    Swiss franc............         9.1          0.93        4           0.1
    Czech koruna...........         7.0          0.05        6          (0.7)
    Japanese yen...........         5.0          0.01        1             -
    Brazilian real.........         2.6          0.54        3          (0.1)
                           ------------                          ------------
    Total..................   $   542.1                            $     1.0
                           ------------                          ------------
                           ------------                          ------------

    8. Accumulated other comprehensive income, net of tax:

                                                                  Six months
                                                     Year ended        ended
                                                    December 31      June 30
                                                           2009         2010
                                                    ------------ ------------
        Opening balance of foreign currency
         translation account.......................   $    46.7    $    46.9
        Currency translation adjustment............        (1.6)        (3.3)
        Release of cumulative currency translation
         to other charges..........................         1.8            -
                                                    ------------ ------------
        Closing balance............................        46.9         43.6

        Opening balance of unrealized net gain
         (loss) on cash flow hedges................   $   (37.3)   $     8.9
        Net gain on cash flow hedges(a)............        14.4          3.2
        Net loss (gain) on cash flow hedges
         reclassified to operations(b).............        31.8         (9.1)
                                                    ------------ ------------
        Closing balance(c).........................         8.9          3.0
                                                    ------------ ------------

        Accumulated other comprehensive income.....   $    55.8    $    46.6
                                                    ------------ ------------
                                                    ------------ ------------

    (a) Net of income tax expense of nil and $0.3 for the three and six
        months ended June 30, 2010 ($0.1 income tax benefit for 2009).
    (b) Net of income tax benefit of $0.1 and $0.2 for the three and six
        months ended June 30, 2010 ($0.6 income tax expense for 2009).
    (c) Net of income tax expense of $0.2 as of June 30, 2010 ($0.1 income
        tax expense as of December 31, 2009).

    We expect that the majority of the gains on cash flow hedges reported in
    accumulated other comprehensive income at June 30, 2010 will be
    reclassified to operations during the next 12 months, primarily through
    cost of sales as the underlying expenses that are being hedged are
    included in cost of sales.

    9. Contingencies:

    Litigation:

    In the normal course of our operations, we may 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 always possible to estimate the extent of potential costs, if any,
    management believes that the ultimate resolution of such matters 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 that it 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 and reviews by local tax authorities of
    historical information which could result in additional tax expense in
    future periods relating to prior results. Reviews by tax authorities
    generally focus on, but are not limited to, the validity of our
    inter-company transactions, including financing and transfer pricing
    policies which generally involve subjective areas of taxation and a
    significant degree of judgment. If any of these tax authorities are
    successful with their challenges, our income tax expense may be adversely
    affected and we could also be subject to interest and penalty charges.

    In connection with ongoing tax audits in Canada, tax authorities have
    taken the position that income reported by one of our Canadian
    subsidiaries in 2001 through 2003 should have been materially higher as a
    result of certain inter-company transactions.

    In connection with ongoing tax audits in Hong Kong, tax authorities have
    taken the position that income reported by one of our Hong Kong
    subsidiaries in 1999 through 2008 should have been materially higher as a
    result of certain inter-company transactions. We submitted a proposed
    settlement of this tax audit to the Hong Kong tax authorities in July
    2010; if accepted, the taxes and penalties would total approximately
    129.5 million Hong Kong dollars (approximately $16.6 at current exchange
    rates), including the impact on future periods as a result of the
    reversal of tax attributes. There can be no assurance as to the final
    resolution of these proceedings.

    In connection with a tax audit in Brazil, tax authorities have taken the
    position that income reported by our Brazilian subsidiary in 2004 should
    have been materially higher as a result of certain inter-company
    transactions. If Brazilian tax authorities ultimately prevail in their
    position, our Brazilian subsidiary's tax liability would increase by
    approximately 43.5 million Brazilian reais (approximately $24.2 at
    current exchange rates). In addition, Brazilian tax authorities may make
    similar claims in future audits with respect to these types of
    transactions.

    The successful pursuit of assertions made by taxing authorities related
    to the above noted tax audits or others could result in us owing
    significant amounts of tax, interest and possibly penalties. We believe
    we have substantial defenses to the asserted positions and have
    adequately accrued for any probable potential adverse tax impact.
    However, there can be no assurance as to the final resolution of these
    claims and any resulting proceedings, and if these claims and any ensuing
    proceedings are determined adversely to us, the amounts we may be
    required to pay could be material.

    We have and expect to continue to recognize the future benefit of certain
    Brazilian tax losses on the basis that these tax losses can and will be
    fully utilized in the fiscal period ending on the date of dissolution of
    our Brazilian subsidiary. We regularly review Brazilian laws and assess
    the likelihood of the realization of the future benefit of the tax
    losses. A change to the benefit realizable on these Brazilian losses
    could result in a substantial increase to our net future tax liabilities.

    10. Financial instruments - financial risks:

    Currency risk:

    Due to the nature of our international operations, we are exposed to
    exchange rate fluctuations on our cash receipts, cash payments and
    balance sheet exposures denominated in various foreign currencies. We
    manage our currency risk through our hedging program using forecasts of
    future cash flows and our balance sheet exposures denominated in foreign
    currencies. Our major currency exposures, as of June 30, 2010, are
    summarized in U.S. dollar equivalents in the following table. For
    purposes of this table, we have excluded items such as pension, post-
    employment benefits and income taxes, in accordance with the financial
    instruments standards. The local currency amounts have been converted to
    U.S. dollar equivalents using the spot rates as of June 30, 2010.

                                  Chinese    Canadian  Malaysian     Mexican
                                 renminbi      dollar    ringgit        peso
                               ----------- ----------- ---------- -----------

        Cash and cash
         equivalents..........  $    25.1   $    41.7   $    1.8   $     0.7
        Accounts receivable...       20.0           -        0.1           -
        Other financial
         assets...............        0.4         0.4        0.4           -
        Accounts payable and
         accrued liabilities..      (27.8)      (30.7)     (13.1)      (17.7)
                               ----------- ----------- ---------- -----------
        Net financial assets
         (liabilities)........  $    17.7   $    11.4   $  (10.8)  $   (17.0)
                               ----------- ----------- ---------- -----------
                               ----------- ----------- ---------- -----------

    At June 30, 2010, 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    Canadian  Malaysian     Mexican
                                 renminbi      dollar    ringgit        peso
                               ----------- ----------- ---------- -----------

        1% Strengthening
             Net earnings.....  $     0.2   $     0.3   $   (0.2)  $    (0.2)
             Other
              comprehensive
              income..........          -         1.5        0.5         0.4
        1% Weakening
             Net earnings.....       (0.2)       (0.3)       0.2         0.2
             Other
              comprehensive
              income..........          -        (1.4)      (0.5)       (0.4)

    11. Comparative information:

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

    12. Subsequent events:

    In July 2010, we entered into an agreement to acquire the shares of
    Austrian-based Allied Panels Entwicklungs-und Produktions GmbH, a medical
    engineering and manufacturing service provider focusing on diagnostic
    imaging products. We expect to complete this acquisition during the third
    quarter of 2010.

    In July 2010, we announced our intention to file a Normal Course Issuer
    Bid (NCIB) to repurchase, at our discretion during the next 12 months, up
    to approximately 18 million, or 9%, of our subordinate voting shares on
    the open market, subject to the normal terms and limitations of such
    bids. The number of subordinate voting shares which may be purchased will
    be reduced by the number of subordinate voting shares purchased for
    employee equity-based incentive programs. Any subordinate voting shares
    purchased by us under the NCIB will be cancelled. This plan is subject to
    the approval of the Toronto Stock Exchange.
    

%SEDAR: 00010284E

SOURCE Celestica Inc.

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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