Celestica announces third quarter 2008 financial results



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

                            Third Quarter Summary
                            ---------------------

    -   Revenue of $2,031 million, up 8% sequentially, and compared to
        $2,081 million for the same period last year
    -   GAAP earnings of $0.14 per share compared to $0.22 per share last
        year
    -   Adjusted net earnings of $0.24 per share compared to $0.13 per share
        last year driven primarily by improved operating earnings and a lower
        adjusted tax rate
    -   Operating margin of 3.2% compared to 2.3% last year
    -   Gross margin of 7.4% compared to 5.8% last year
    -   Inventory turnover of 9.1 turns compared to 8.3 turns last year
    -   Return on invested capital including intangibles of 13.9% compared to
        9.1% last year
    -   Third quarter free cash flow of $57 million, cash balance of
        $1.26 billion
    -   Fourth quarter revenue guidance of $1.75 billion - $2.0 billion,
        adjusted net earnings per share of $0.16 - $0.24
    

    TORONTO, Oct. 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 third quarter ended September 30, 2008.
    Revenue was $2,031 million compared to $2,081 million in the third
quarter of 2007. Net earnings on a GAAP basis for the third quarter were
$32.1 million or $0.14 per share, compared to GAAP net earnings of
$51.5 million or $0.22 per share for the same period last year. The
year-over-year decline in GAAP EPS was primarily impacted by lower tax
recoveries and higher restructuring charges, offset partially by improved
operating earnings.
    Adjusted net earnings for the quarter were $54.3 million or $0.24 per
share, compared to adjusted net earnings of $29.3 million or $0.13 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 third quarter,
announced on July 24, 2008, of revenue of $1.9 billion to $2.1 billion and
adjusted net earnings per share of $0.17 to $0.23.
    For the nine months ended September 30, 2008, revenue was $5,743 million
compared to $5,860 million for the same period in 2007. Net earnings on a GAAP
basis were $101.7 million or $0.44 per share compared to GAAP net loss of
($2.0) million or ($0.01) per share for the same period last year. Adjusted
net earnings for the nine months ended September 30, 2008 were $128.6 million
or $0.56 per share compared to adjusted net earnings of $25.1 million or $0.11
per share for the same period in 2007.
    "Celestica delivered strong results in the third quarter driven
predominately by our operating improvements in Mexico and Europe," said Craig
Muhlhauser, President and Chief Executive Officer, Celestica. "In the third
quarter, we continued delivering strong working capital performance and
generated free cash flow for the sixth consecutive quarter. We ended the
quarter with a healthy $1.26 billion cash balance and a strong balance sheet.
    "While we expect end markets to be impacted by the current uncertain
environment, Celestica is well positioned with its customers, who recognize
the benefit of having partnered with a supply chain leader with global
capabilities and significant financial strength."

    
    Outlook
    -------
    For the fourth quarter ending December 31, 2008, the company anticipates
revenue to be in the range of $1.75 billion to $2.0 billion, and adjusted net
earnings per share to range from $0.16 to $0.24.

    Third 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. For those
statements, we claim the protection of the safe harbor for forward-looking
statements contained in the U.S. Private Securities Litigation Reform Act of
1995, and in any applicable Canadian securities legislation. Forward-looking
statements are not guarantees of future performance. You should understand
that the following important factors could affect our future results and could
cause those results to differ materially from those expressed in such
forward-looking statements: the effects of price competition and other
business and competitive factors generally affecting the EMS industry,
including the trend for outsourcing; our dependence on a limited number of
customers; the challenges of effectively managing our operations during
uncertain economic conditions, including significant changes in demand from
our largest customers as a result of the impact of the global credit crisis;
variability of operating results among periods; the challenge of managing our
financial exposures to foreign currency fluctuations; the challenge of
managing volatile energy prices; the challenge of responding to
lower-than-expected customer demand; our inability to retain or grow our
business due to execution problems resulting from significant headcount
reductions, plant closures and product transfers associated with major
restructuring activities; our dependence on industries affected by rapid
technological change; our ability to successfully manage our international
operations; and the delays in the delivery and/or general availability of
various components used in our manufacturing process. These and other risks
and uncertainties, as well as other information related to the company, are
discussed in the Company's various public filings at www.sedar.com and
www.sec.gov, including our Annual Report on Form 20-F and subsequent reports
on Form 6-K filed with the Securities and Exchange Commission and our Annual
Information Form filed with the Canadian Securities Commissions.
Forward-looking statements are provided for the purpose of providing
information about management's current expectations and plans relating to the
future. Readers are cautioned that such information may not be appropriate for
other purposes.
    As of its date, this press release contains any material information
associated with the company's financial results for the third quarter ended
September 30, 2008 and revenue and adjusted net earnings guidance for the
fourth quarter ending December 31, 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             GAAP    Adjust- Adjusted    GAAP    Adjust-   Adjusted
     September 30               ments                       ments
                     --------  ------  --------  --------  --------  --------
    Revenue          $2,080.6  $    -  $2,080.6  $2,030.8  $      -  $2,030.8
    Cost of sales(1)  1,959.4    (1.0)  1,958.4   1,880.8      (0.5)  1,880.3
                     --------  ------  --------  --------  --------  --------
    Gross profit        121.2     1.0     122.2     150.0       0.5     150.5
    SG&A(1)              74.1    (0.3)     73.8      85.9      (0.6)     85.3
    Amortization of
     intangible
     assets               5.1    (5.1)        -       3.4      (3.4)        -
    Other charges         2.2    (2.2)        -      16.4     (16.4)        -
                     --------  ------  --------  --------  --------  --------
    Operating earnings
     - EBIAT             39.8     8.6      48.4      44.3      20.9      65.2
    Interest expense,
     net                 10.0       -      10.0       9.8         -       9.8
                     --------  ------  --------  --------  --------  --------
    Net earnings
     before tax          29.8     8.6      38.4      34.5      20.9      55.4
    Income tax expense
     (recovery)         (21.7)   30.8       9.1       2.4      (1.3)      1.1
                     --------  ------  --------  --------  --------  --------
    Net earnings
     (loss)          $   51.5  $(22.2) $   29.3  $   32.1  $   22.2  $   54.3
                     --------  ------  --------  --------  --------  --------
                     --------  ------  --------  --------  --------  --------

    W.A. No. of
     shares
     (in millions)
     - diluted          229.1             229.1     230.3               230.3
    Earnings per
     share
     - diluted       $   0.22          $   0.13  $   0.14            $   0.24



                                2007                        2008
                    ---------------------------  ----------------------------
    Nine months
     ended             GAAP    Adjust- Adjusted    GAAP    Adjust-   Adjusted
     September 30               ments                       ments
                     --------  ------  --------  --------  --------  --------
    Revenue          $5,859.9  $    -  $5,859.9  $5,742.8  $      -  $5,742.8
    Cost of sales(1)  5,569.5    (2.9)  5,566.6   5,352.3      (2.3)  5,350.0
                     --------  ------  --------  --------  --------  --------
    Gross profit        290.4     2.9     293.3     390.5       2.3     392.8
    SG&A(1)             219.5    (1.4)    218.1     223.8      (2.7)    221.1
    Amortization of
     intangible
     assets              16.2   (16.2)        -      11.8     (11.8)        -
     Integration costs
     relating to
     acquisitions         0.1    (0.1)        -         -         -         -
    Other charges         8.4    (8.4)        -      23.3     (23.3)        -
                     --------  ------  --------  --------  --------  --------
    Operating earnings
     - EBIAT             46.2    29.0      75.2     131.6      40.1     171.7
    Interest expense,
     net                 41.7       -      41.7      28.8         -      28.8
                     --------  ------  --------  --------  --------  --------
    Net earnings
     before tax           4.5    29.0      33.5     102.8      40.1     142.9
    Income tax expense    6.5     1.9       8.4       1.1      13.2      14.3
                     --------  ------  --------  --------  --------  --------
    Net earnings
     (loss)          $   (2.0) $ 27.1  $   25.1  $  101.7  $   26.9  $  128.6
                     --------  ------  --------  --------  --------  --------
                     --------  ------  --------  --------  --------  --------

    W.A. No. of shares
     (in millions)
     - diluted          228.8             229.0     230.0               230.0
     Earnings (loss)
     per share
     - diluted       $  (0.01)         $   0.11  $   0.44            $   0.56

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


    GUIDANCE SUMMARY

                        3Q 08 Guidance    3Q 08 Actual      4Q 08 Guidance(2)
                        --------------    ------------      -----------------
    Revenue              $1.9B - $2.1B        $2.0B          $1.75B - $2.0B
    Adjusted net EPS     $0.17 - $0.23        $0.24          $0.16 - $0.24

    (2) Guidance for the fourth 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  September 30
                                                        2007         2008
                                                    ------------ ------------
    Assets                                                       (unaudited)
    Current assets:
      Cash and cash equivalents....................  $  1,116.7   $  1,258.2
      Accounts receivable..........................       941.2      1,040.1
      Inventories..................................       791.9        843.3
      Prepaid and other assets.....................       126.2         83.7
      Income taxes recoverable.....................        19.8         34.4
      Deferred income taxes........................         3.8          4.5
                                                    ------------ ------------
                                                        2,999.6      3,264.2
    Property, plant and equipment..................       466.0        462.9
    Goodwill from business combinations............       850.5        850.5
    Intangible assets..............................        35.2         23.4
    Other long-term assets.........................       119.2        114.0
                                                    ------------ ------------
                                                     $  4,470.5   $  4,715.0
                                                    ------------ ------------
                                                    ------------ ------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable............................   $  1,029.8   $  1,169.0
      Accrued liabilities.........................        402.6        415.7
      Income taxes payable........................         14.0         20.3
      Deferred income taxes.......................            -          0.1
      Current portion of long-term debt (note 3)..          0.2          1.2
                                                    ------------ ------------
                                                        1,446.6      1,606.3
    Long-term debt (note 3)                               758.3        760.3
    Accrued pension and post-employment benefits..         70.4         72.1
    Deferred income taxes.........................         63.3         55.7
    Other long-term liabilities...................         13.7         12.2
                                                    ------------ ------------
                                                        2,352.3      2,506.6
    Shareholders' equity (note 10):
      Capital stock...............................      3,585.2      3,588.5
      Warrants....................................          3.1            -
      Contributed surplus.........................        190.3        206.3
      Deficit.....................................     (1,716.3)    (1,614.6)
      Accumulated other comprehensive income......         55.9         28.2
                                                    ------------ ------------
                                                        2,118.2      2,208.4
                                                    ------------ ------------
                                                     $  4,470.5   $  4,715.0
                                                    ------------ ------------
                                                    ------------ ------------

                   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       Nine months ended
                                  September 30             September 30
                                2007         2008        2007         2008
                           -----------  -----------  -----------  -----------
    Revenue............... $  2,080.6   $  2,030.8   $  5,859.9   $  5,742.8
    Cost of sales.........    1,959.4      1,880.8      5,569.5      5,352.3
                           -----------  -----------  -----------  -----------
    Gross profit..........      121.2        150.0        290.4        390.5
    Selling, general and
     administrative
     expenses.............       74.1         85.9        219.5        223.8
    Amortization of
     intangible assets....        5.1          3.4         16.2         11.8
    Integration costs
     related to
     acquisitions.........          -            -          0.1            -
    Other charges
     (note 4).............        2.2         16.4          8.4         23.3
    Interest on long-term
     debt.................       14.6         14.1         49.8         42.3
    Interest income,
     net of interest
     expense..............       (4.6)        (4.3)        (8.1)       (13.5)
                           -----------  -----------  -----------  -----------
    Earnings before
     income taxes.........       29.8         34.5          4.5        102.8
    Income tax expense
     (recovery):
      Current.............      (21.2)         6.4         (9.0)         5.1
      Deferred............       (0.5)        (4.0)        15.5         (4.0)
                           -----------  -----------  -----------  -----------
                                (21.7)         2.4          6.5          1.1
                           -----------  -----------  -----------  -----------
    Net earnings (loss)
     for the period....... $     51.5   $     32.1   $     (2.0)  $    101.7
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

    Basic earnings (loss)
     per share............ $     0.22   $     0.14   $    (0.01)  $     0.44

    Diluted earnings
     (loss) per share..... $     0.22   $     0.14   $    (0.01)  $     0.44

    Shares used in
     computing per share
     amounts:
       Basic (in millions)      229.1        229.4        228.8        229.2
       Diluted (in millions)    229.1        230.3        228.8        230.0

         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
                        (in millions of U.S. dollars)
                                 (unaudited)

                               Three months ended       Nine months ended
                                  September 30             September 30
                                2007         2008        2007         2008
                           -----------  -----------  -----------  -----------
    Net earnings (loss)
     for the period....... $     51.5   $     32.1   $     (2.0)  $    101.7
    Other comprehensive
     income (loss), net
     of tax:
      Foreign currency
       translation gain
       (loss).............        6.2         (3.3)         5.1          2.8
      Net gain (loss) on
       derivatives
       designated as cash
       flow hedges........       12.0        (11.4)        28.3         (9.0)
      Net gain on
       derivatives
       designated as cash
       flow hedges
       reclassified to
       operations.........       (4.4)        (2.5)        (6.8)       (21.5)
                           -----------  -----------  -----------  -----------
    Comprehensive income.. $     65.3   $     14.9   $     24.6   $     74.0
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

         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          Nine months ended
                                 September 30               September 30
                               2007         2008         2007         2008
                           -----------  -----------  -----------  -----------

    Cash provided by (used
     in):
    Operations:
    Net earnings (loss)
     for the period....... $     51.5   $     32.1   $     (2.0)  $    101.7
    Items not affecting
     cash:
      Depreciation and
       amortization.......       35.2         27.2         97.1         81.5
      Deferred income
       taxes..............       (0.5)        (4.0)        15.5         (4.0)
      Non-cash charge for
       option issuances...        1.3          1.1          4.3          5.0
      Restructuring
       charges............        3.1          0.2         (1.0)         0.5
      Other charges.......       (0.5)           -         (1.1)           -
    Other.................        7.5          7.5         21.2         19.5
    Changes in non-cash
     working capital
     items:
      Accounts
       receivable.........      (23.7)      (146.8)         9.6        (98.9)
      Inventories.........       28.0        (31.3)       271.0        (51.4)
      Prepaid and other
       assets.............      (23.3)         9.8         (9.0)        25.0
      Income taxes
       recoverable........       (5.6)        (1.5)        (6.7)       (14.6)
      Accounts payable
       and accrued
       liabilities........      168.0        191.2       (205.4)       132.8
      Income taxes
       payable............      (23.2)         2.3        (21.2)         6.3
                           -----------  -----------  -----------  -----------
      Non-cash working
       capital changes....      120.2         23.7         38.3         (0.8)
                           -----------  -----------  -----------  -----------
    Cash provided by
     operations...........      217.8         87.8        172.3        203.4
                           -----------  -----------  -----------  -----------

    Investing:
      Purchase of
       property, plant
       and equipment......      (12.7)       (30.8)       (48.7)       (63.2)
      Proceeds from sale
       of assets..........        0.7          0.4         24.0          4.2
      Other...............       (0.2)        (0.1)        (0.1)        (0.1)
                           -----------  -----------  -----------  -----------
    Cash used in
     investing
     activities...........      (12.2)       (30.5)       (24.8)       (59.1)
                           -----------  -----------  -----------  -----------

    Financing:
      Financing costs.....          -            -         (0.9)           -
      Repayment of
       long-term debt.....       (0.2)           -         (0.5)        (0.2)
      Issuance of share
       capital............        0.1          0.2          3.5          2.1
      Other...............        0.6         (2.3)        (0.2)        (4.7)
                           -----------  -----------  -----------  -----------
    Cash provided by (used
     in) financing
     activities...........        0.5         (2.1)         1.9         (2.8)
                           -----------  -----------  -----------  -----------

    Increase in cash......      206.1         55.2        149.4        141.5
    Cash, beginning of
     period...............      747.0      1,203.0        803.7      1,116.7
                           -----------  -----------  -----------  -----------
    Cash, end of
     period............... $    953.1   $  1,258.2   $    953.1   $  1,258.2
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

                 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
    September 30, 2008 and the results of operations and cash flows for the
    three and nine months ended September 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 third quarter of 2008, we recorded a net inventory provision
    of $3.9 (first nine months of 2008 - $11.5) 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-to-maturity investments       -   available-for-sale financial
                                               assets
    -   financial liabilities held-        -   financial liabilities
        for-trading                            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.

    The impact of these standards on our operations is as follows:

                             Three months ended          Nine months ended
                                 September 30               September 30
                               2007         2008         2007         2008
                           -----------  -----------  -----------  -----------
    Increase (decrease)
     in interest expense
     on long-term debt.... $     (2.1)  $      0.9   $     (0.7)  $      0.2

    (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 started an
    IFRS conversion project to evaluate the impact of implementing the new
    standards. We cannot at this time reasonably estimate the impact of
    adopting IFRS on our consolidated financial statements.

    3.  Long-term debt:

                                                    December 31  September 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)         (5.8)
      Basis adjustments on debt obligation(d)......        6.5           5.7
      Unamortized debt issue costs.................       (9.6)         (8.0)
      Fair value adjustment of 2011 Notes
       attributable to interest rate risks(d)......       17.9          18.4
                                                    -----------   -----------
                                                         758.3         760.3
    Capital lease obligations......................        0.2           1.2
                                                    -----------   -----------
                                                         758.5         761.5
    Less current portion...........................        0.2           1.2
                                                    -----------   -----------
                                                    $    758.3    $    760.3
                                                    -----------   -----------
                                                    -----------   -----------

    (a) We have a revolving credit facility for $300.0 which matures in April
        2009. There were no borrowings outstanding under this facility at
        September 30, 2008. Commitment fees for the third quarter of 2008
        were $0.5 ($1.4 - first nine months 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
        September 30, 2008. Based on the required financial ratios at
        September 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 September 30, 2008. There
        were no borrowings outstanding under these facilities at
        September 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 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 the sale of assets
        and our ability to incur additional debt. We were in compliance with
        all covenants at September 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 5.8%
        and 6.4%, respectively, for the third quarter and first nine months
        of 2008 (8.4% - third quarter and first nine months 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 September 30, 2008, the fair
        value of the embedded derivative asset is $5.8 and is recorded
        against long-term debt. The decrease in the fair value of the
        embedded derivative asset of $0.7 for the first nine months 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 $0.8 for the first nine months 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 loss of $0.5 for the first
        nine months of 2008, which increased interest expense on long-term
        debt.

    4. Other charges:

                              Three months ended         Nine months ended
                                 September 30               September 30
                               2007         2008         2007         2008
                           -----------  -----------  -----------  -----------
    2001 to 2004
     restructuring(a)..... $      0.6   $      0.5   $      1.1   $      1.4
    2005 to 2009
     restructuring(b).....        2.1         16.3         12.1         22.3
                           -----------  -----------  -----------  -----------
    Total restructuring...        2.7         16.8         13.2         23.7
    Other(c)..............       (0.5)        (0.4)        (4.8)        (0.4)
                           -----------  -----------  -----------  -----------
                           $      2.2   $     16.4   $      8.4   $     23.3
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

    (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
    Cash payments..................................       (1.9)            -
    Adjustments....................................        0.5           0.5
                                                    -----------   -----------
    September 30, 2008............................. $     22.8    $      1.4
                                                    -----------   -----------
                                                    -----------   -----------

    (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 September 30, 2008, we have recorded termination costs, incurred
    since 2005, relating to approximately 9,000 employees, primarily
    operations and plant employees. Approximately 8,800 of these employees
    have been terminated as of September 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
    Cash payments......    (9.3)    (1.0)    (0.1)   (10.4)       -        -
    Provisions.........    15.7      0.3      0.1     16.1      0.2     16.3
                        -------- -------- -------- -------- -------- --------
    September 30,
     2008..............  $ 11.1   $  6.2   $  0.3   $ 17.6   $ 59.2   $ 22.3
                        -------- -------- -------- -------- -------- --------
                        -------- -------- -------- -------- -------- --------

    As of September 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.

    (c) Other:

    The amounts in 2007 and 2008 are primarily recoveries relating to certain
    assets previously written off.

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

    We have recorded the following pension expense:

                              Three months ended         Nine months ended
                                 September 30               September 30
                               2007         2008         2007         2008
                           -----------  -----------  -----------  -----------
    Pension plans......... $      4.8   $      4.5   $     15.1   $     14.1
    Other benefit plans...        1.7          1.6          5.1          5.4
                           -----------  -----------  -----------  -----------
    Total expense......... $      6.5   $      6.1   $     20.2   $     19.5
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

    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 ended       Nine months ended
                                   September 30             September 30
                                 2007         2008        2007        2008
                              ----------  -----------  ----------  ----------

    Risk-free rate..........  4.1%-4.4%    2.8%-3.3%   4.1%-4.8%    2.3%-3.3%
    Dividend yield..........       0.0%         0.0%        0.0%         0.0%
    Volatility factor of
     the expected market
     price of our
     shares.................    35%-47%      38%-41%     35%-52%      38%-59%
    Expected option
     life
     (in years).............    4.0-5.5      4.0-5.5     4.0-5.5      4.0-5.5
    Weighted average fair
     value of options
     granted................      $2.81        $2.92       $2.57       $3.23

    Compensation expense relating to the fair value of options granted for
    the three and nine months ended September 30, 2008 was $1.1 and $5.0,
    respectively (three and nine months ended September 30, 2007 was $1.3 and
    $4.3, 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 ended    Nine months ended
                                        September 30           September 30
                                      2007         2008     2007        2008
                                      ----         ----     ----        ----

           Consumer................    24%          28%     20%          25%
           Enterprise
            communications.........    26%          25%     29%          26%
           Servers.................    18%          15%     19%          16%
           Telecommunications......    16%          14%     14%          15%
           Storage.................    10%          10%     11%          10%
           Industrial, aerospace
            and defense............     6%           8%      7%           8%

    (ii)   For the third quarter and first nine months of 2008, no customer
           represented more than 10% of total revenue (third quarter of 2007
           -- one customer; first nine months of 2007 -- two customers).

    8.  Supplemental cash flow information:

                                      Three months ended    Nine months ended
                                        September 30           September 30
        Paid during the period:       2007         2008     2007        2008
                                      ----         ----     ----        ----

        Interest (a)..............  $ 33.7       $ 30.2   $ 74.3      $ 64.1
        Taxes (b).................  $  6.8       $  6.2   $ 18.7      $ 14.1


        (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       September 30
        Cash is comprised of the following:       2007              2008
                                              ------------     -------------

        Cash (i).......................         $ 328.7            $ 296.2
        Short-term investments (i).....           788.0              962.0
                                              ------------     -------------
                                              $ 1,116.7          $ 1,258.2
                                              ------------     -------------
                                              ------------     -------------

        (i)   Our current portfolio consists of certificates of deposit and
              certain money market funds which hold exclusively
              U.S. government securities. The majority of our cash and
              short-term investments are held with financial institutions
              each of which has a Standard and Poor's rating of A-1 or above.

    9.   Derivative financial instruments:

    (i)  We enter into foreign currency contracts to hedge foreign currency
         risks relating to cash flow. At September 30, 2008, we had forward
         exchange contracts covering various currencies in an aggregate
         notional amount of $482.1. All derivative financial instruments are
         recorded at fair value on our consolidated balance sheet. The fair
         value of these contracts at September 30, 2008 was a net unrealized
         loss of $11.5 (December 31, 2007 - net unrealized gain of $20.0). As
         of September 30, 2008, $3.2 of derivative assets are recorded in
         prepaid and other assets and $14.7 of derivative liabilities are
         recorded in accrued liabilities relating to our hedges against
         foreign currency risks. The decrease in the fair value of these
         forward exchange contracts for the first nine months of 2008 is due
         primarily to unrealized losses from the fluctuations in foreign
         exchange rates in the third quarter of 2008 and the settlement of
         certain foreign currency forwards with significant gains during the
         first half of 2008. During the third quarter of 2008, we incurred
         unrealized losses as a result of fluctuations in foreign exchange
         rates between the time the currency forward contracts were entered
         into and the valuation date at quarter end.

    (ii) In connection with the issuance of our 2011 Notes in June 2004, we
         entered into agreements to swap the fixed rate of interest for a
         variable interest rate. The notional amount of the agreements is
         $500.0. The agreements mature in July 2011. See note 3(c). Payments
         or receipts under the swap agreements are recorded in interest
         expense on long-term debt. The fair value of the interest rate swap
         agreements at September 30, 2008 was an unrealized gain of $8.9,
         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 $0.2 for the first nine months 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
         $0.5 for the first nine months 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
         compensation
         costs...............          -           -         5.1           -
        Other................          -           -         0.6           -
        Net loss for 2007....          -           -           -       (13.7)
                              ----------- ----------- ----------- -----------
        Balance -
         December 31, 2007...  $ 3,585.2   $     3.1   $   190.3  $ (1,716.3)
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------


                                Capital               Contributed
                                 stock     Warrants     surplus     Deficit
                              ----------- ----------- ----------- -----------
        Balance -
         December 31, 2007...  $ 3,585.2   $     3.1   $   190.3  $ (1,716.3)
        Shares issued........        3.3           -           -           -
        Warrants cancelled...          -        (3.1)        3.1           -
        Stock-based
         compensation
         costs...............          -           -        12.2           -
        Other................          -           -         0.7           -
        Net earnings for
         the first nine
         months of 2008......          -           -           -       101.7
                              ----------- ----------- ----------- -----------
        Balance -
         September 30, 2008..  $ 3,588.5   $       -   $   206.3  $ (1,614.6)
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------


                                                                 Nine months
                                                     Year ended     ended
        Accumulated other comprehensive             December 31  September 30
          income, 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          2.8
                                                    ------------ ------------
        Closing balance...........................         35.2         38.0

        Opening balance of unrealized net gain
         on cash flow hedges......................   $        -   $     20.7
        Transitional adjustment -
         January 1, 2007..........................         (0.5)           -
        Net gain (loss) on cash flow hedges(1)....         37.5         (9.0)
        Net gain on cash flow hedges
         reclassified to operations(2)............        (16.3)       (21.5)
                                                    ------------ ------------
        Closing balance(3)........................         20.7         (9.8)

                                                    ------------ ------------
        Accumulated other comprehensive income....   $     55.9   $     28.2
                                                    ------------ ------------
                                                    ------------ ------------

    (1) Net of income tax benefit of $0.9 and $0.2, respectively, for the
        three and nine months ended September 30, 2008 ($0.2 income tax
        expense for 2007).
    (2) Net of income tax benefit of $0.2 and $0.8, respectively, for the
        three and nine months ended September 30, 2008 (no income tax for
        2007).
    (3) Net of income tax benefit of $0.8 as of September 30, 2008 ($0.2
        income tax expense as of December 31, 2007).

    We expect that the majority of the losses on cash flow hedges reported in
    accumulated other comprehensive income at September 30, 2008 will be
    reclassified to operations during the next 12 months.

    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 September 30, 2008, these contingent liabilities amounted
    to $68.3 (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 September 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 September 30, 2008.

                                                Chinese   Canadian  Brazilian
                                      Euro     renminbi    dollar     real
                                   ---------  ---------  ---------  ---------
    Cash and cash equivalents...... $   6.0    $  37.9    $  78.6    $   3.0
    Accounts receivable............     1.0       38.9        0.1       34.3
    Other financial assets(i)......   477.2        5.2    7,447.1       30.3
    Accounts payable and accrued
     liabilities...................    (5.8)     (20.1)     (61.2)      (3.7)
    Other financial
     liabilities(i)................  (477.7)      (2.1)  (7,447.1)     (15.3)
                                   ---------  ---------  ---------  ---------
    Net financial assets            $   0.7    $  59.8    $  17.5    $  48.6
                                   ---------  ---------  ---------  ---------
                                   ---------  ---------  ---------  ---------

    (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 September 30, 2008 has the
    following impact:

                                                Chinese   Canadian  Brazilian
                                      Euro     renminbi    dollar     real
                                   ---------  ---------  ---------  ---------
                                               Increase
                                              (decrease)
    1% Strengthening
      Net earnings................. $     -    $   0.6    $   0.2    $   0.5
      Other comprehensive income...    (0.1)         -        1.8          -
    1% Weakening
      Net earnings.................       -       (0.6)      (0.2)      (0.5)
      Other comprehensive income...     0.1          -       (1.8)         -

    (b) Interest rate risk: See note 15(b) to the 2007 annual consolidated
    financial statements. We are exposed to interest rate risks due to
    fluctuations in the LIBOR rate. A one-percentage point increase in the
    LIBOR rate would increase interest expense by $5.0 annually.

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

    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 September 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
    $14.3 at September 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 12 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 nine months 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.

    

    %SEDAR: 00010284E




For further information:

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

Organization Profile

Celestica Inc.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890