Celestica Inc. (TSX: CLS) (NYSE: CLS), a leader in design,
manufacturing and supply chain solutions for the world's most
innovative companies, today announced financial results for the
quarter ended March 31, 2022 (Q1 2022)†.
"Our strong performance in the first quarter was
a great start to the year. Although the macro environment presented
a number of challenges, we continue to execute well on our key
objectives while advancing our long term strategy," said Rob
Mionis, President and CEO, Celestica.
"Based on our performance to-date and the
assumption that the supply chain environment does not materially
worsen, we are pleased to raise our full year 2022 revenue outlook
to at least $6.5 billion, which, if achieved, would represent at
least 15% year-over-year growth."
Q1 2022 Highlights
- Key measures:
- Revenue: $1.57
billion, increased 27% compared to $1.23 billion for the first
quarter of 2021 (Q1 2021).
- Operating margin
(non-IFRS)*: 4.4%, compared to 3.5% for Q1 2021.
- ATS segment
revenue: increased 31% compared to Q1 2021; ATS segment margin was
5.0%, compared to 4.0% for Q1 2021.
- CCS segment
revenue: increased 24% compared to Q1 2021; CCS segment margin was
3.9%, compared to 3.1% for Q1 2021.
- Adjusted earnings
per share (EPS) (non-IFRS)*: $0.39, compared to $0.22 for Q1
2021.
- Adjusted return on
invested capital (non-IFRS)*: 13.9%, compared to 10.8% for Q1
2021.
- Free cash flow
(non-IFRS)*: $0.5 million, compared to $20.9 million for Q1
2021.
- IFRS financial
measures (directly comparable to non-IFRS measures above):
- Earnings before
income taxes as a percentage of revenue: 2.0%, compared to 1.3% for
Q1 2021.
- EPS: $0.17,
compared to $0.08 per share for Q1 2021.
- Return on invested
capital: 6.2%, compared to 3.9% for Q1 2021.
- Cash provided by
operations: $35.3 million, compared to $48.8 million for Q1
2021.
- Repurchased and
cancelled 0.7 million shares for $7.8 million under our normal
course issuer bid.
† Celestica has two operating and reportable
segments - Advanced Technology Solutions (ATS) and Connectivity
& Cloud Solutions (CCS). Our ATS segment consists of our ATS
end market and is comprised of our Aerospace and Defense (A&D),
Industrial (including PCI Private Limited and energy), HealthTech
and Capital Equipment businesses. Our CCS segment consists of our
Communications and Enterprise (servers and storage) end markets.
Segment performance is evaluated based on segment revenue, segment
income and segment margin (segment income as a percentage of
segment revenue). See note 25 to our 2021 audited consolidated
financial statements, included in our Annual Report on Form 20-F
for the year ended December 31, 2021 (2021 20-F), available at
www.sec.gov and www.sedar.com, for further detail.
* Non-International Financial Reporting
Standards (IFRS) financial measures (including ratios based on
non-IFRS financial measures) do not have any standardized meaning
prescribed by IFRS and therefore may not be comparable to similar
financial measures presented by other public companies that report
under IFRS or U.S. generally accepted accounting principles
(GAAP). See “Non-IFRS Supplementary Information” below for
information on our rationale for the use of non-IFRS financial
measures, and Schedule 1 for, among other items, non-IFRS financial
measures included in this press release, as well as their
definitions, uses, and a reconciliation of historical non-IFRS
financial measures to the most directly comparable IFRS financial
measures. The most directly-comparable IFRS financial measures to
non-IFRS operating margin, non-IFRS adjusted EPS, non-IFRS adjusted
return on invested capital and non-IFRS free cash flow are earnings
before income taxes as a percentage of revenue, EPS, return on
invested capital, and cash provided by operations,
respectively.
Second Quarter of 2022 (Q2 2022)
Guidance
|
Q2 2022 Guidance |
Revenue (in billions) |
$1.575 to $1.725 |
Operating margin
(non-IFRS)* |
4.6% at the mid-point of ourrevenue and non-IFRS adjustedEPS
guidance ranges |
Adjusted SG&A (non-IFRS)*
(in millions) |
$62 to $64 |
Adjusted EPS (non-IFRS)* |
$0.38 to $0.44 |
For Q2 2022, we expect a negative $0.14 to $0.20
per share (pre-tax) aggregate impact on net earnings on an IFRS
basis for employee stock-based compensation (SBC) expense,
amortization of intangible assets (excluding computer software),
and restructuring charges, offset in part by Transition Recoveries
(defined in Schedule 1 below); and a non-IFRS adjusted effective
tax rate* of approximately 20% (which does not account for foreign
exchange impacts or unanticipated tax settlements).
2022 Outlook
Based on our strong execution in Q1 2022, our
current and expected levels of demand, and assuming that supply
chain constraints do not materially worsen, our outlook for 2022
includes:
- raising our revenue
outlook to at least $6.5 billion;
- tightening our
non-IFRS adjusted EPS* target to be between $1.60 and $1.75;
and
- continuing to
anticipate non-IFRS operating margin* of between 4% and 5%.
We continue to expect supply chain constraints
to persist throughout the remainder of 2022. While we have
incorporated these dynamics into our financial guidance and outlook
to the best of our ability, their adverse impact (in terms of
duration and severity) cannot be estimated with certainty, and may
be materially in excess of our expectations.
* See Schedule 1 for the definitions of these
non-IFRS financial measures. We do not provide reconciliations for
forward-looking non-IFRS financial measures, as we are unable to
provide a meaningful or accurate calculation or estimation of
reconciling items and the information is not available without
unreasonable effort. This is due to the inherent difficulty of
forecasting the timing or amount of various events that have not
yet occurred, are out of our control and/or cannot be reasonably
predicted, and that would impact the most directly comparable
forward-looking IFRS financial measure. For these same reasons, we
are unable to address the probable significance of the unavailable
information. Forward-looking non-IFRS financial measures may vary
materially from the corresponding IFRS financial measures.
Summary of Selected Q1 2022
Results
|
Q1 2022 Actual |
|
Q1 2022 Guidance (2) |
Key measures: |
|
|
|
Revenue (in billions) |
$ |
1.57 |
|
|
$1.4 to $1.55 |
Operating margin (non-IFRS)* |
|
4.4% |
|
|
4.2% at the mid-point of ourrevenue and non-IFRS adjustedEPS
guidance ranges |
Adjusted SG&A (non-IFRS)* (in millions) |
$ |
56.7 |
|
|
$57 to $59 |
Adjusted EPS (non-IFRS)* |
$ |
0.39 |
|
|
$0.31 to $0.37 |
|
|
|
|
Directly comparable IFRS financial measures: |
|
|
|
Earnings before income taxes as a % of revenue |
|
2.0% |
|
|
N/A |
SG&A (in millions) |
$ |
65.7 |
|
|
N/A |
EPS (1) |
$ |
0.17 |
|
|
N/A |
* See Schedule 1 for, among other things, the
definitions of, and exclusions used to determine, these non-IFRS
financial measures, and a reconciliation of such financial measures
to the most directly comparable IFRS financial measures for Q1
2022.
(1) IFRS EPS of $0.17 for Q1 2022 included an
aggregate charge of $0.22 (pre-tax) per share for employee SBC
expense, amortization of intangible assets (excluding computer
software), and restructuring charges. See the tables in Schedule 1
and note 10 to our March 31, 2022 unaudited interim condensed
consolidated financial statements (Q1 2022 Interim Financial
Statements) for per-item charges. This aggregate charge was within
our Q1 2022 guidance range of between $0.19 to $0.25 per share for
these items.
IFRS EPS for Q1 2022 included a $0.04 per share
negative impact attributable to other charges (consisting most
significantly of a $0.02 per share negative impact attributable to
restructuring charges and a $0.01 per share negative impact
attributable to Transition Costs (defined in Schedule 1)), and as a
result of supply chain constraints and COVID-19-related workforce
constraints, a $0.03 per share negative impact attributable to
estimated COVID-19 Costs (defined as both direct and indirect
costs, including manufacturing inefficiencies related to lost
revenue due to our inability to secure materials, idled labor
costs, and incremental costs for labor, expedite fees and freight
premiums, cleaning supplies, personal protective equipment, and/or
IT-related services to support our work-from-home arrangements),
all largely offset by a $0.04 favorable tax impact attributable to
the reversal of tax uncertainties in one of our Asian subsidiaries.
See notes 10 and 11 to the Q1 2022 Interim Financial
Statements.
IFRS EPS for Q1 2021 of $0.08 included $0.04 per
share negative impact attributable to restructuring charges and a
$0.01 per share negative impact attributable to COVID-19 Costs, net
of COVID-19-related government subsidies, credits and grants and
customer recoveries.
For information on the estimated impact of
supply chain constraints (including from COVID-19) on our revenue
and costs in Q1 2022 and Q1 2021, see "Segment Updates —
Operational Impacts" of our Q1 2022 Management's Discussion and
Analysis of Financial Condition and Results of Operations, to be
filed today at www.sedar.com and furnished on Form 6-K at
www.sec.gov.
(2) For Q1 2022, our revenue and non-IFRS
adjusted EPS exceeded the high end of our guidance ranges, and our
non-IFRS operating margin exceeded the mid-point of our revenue and
non-IFRS adjusted EPS guidance ranges, driven by strong performance
in both of our segments. Non-IFRS adjusted SG&A for Q1 2022 was
at the low end of our guidance range. Our non-IFRS adjusted
effective tax rate for Q1 2022 was 19%, higher than our anticipated
estimate of approximately 18%, mainly due to jurisdictional profit
mix.
Q1 2022 Webcast and
Annual Shareholders Meeting Webcast
Management will host its Q1 2022 results
conference call on April 28, 2022 at 8:00 a.m. Eastern Daylight
Time (EDT). The webcast can be accessed at www.celestica.com.
Celestica's Annual Meeting of Shareholders (Meeting) will be held
on April 28, 2022 at 9:30 a.m. EDT. As previously announced, the
Meeting will be held virtually via audio-only webcast at
https://meetnow.global/MWZFYUD. Online access to the Meeting will
begin at 9:00 a.m. EDT.
Non-IFRS Supplementary
Information
In addition to disclosing detailed operating
results in accordance with IFRS, Celestica provides supplementary
non-IFRS financial measures to consider in evaluating the company’s
operating performance. Management uses adjusted net earnings and
other non-IFRS financial measures to assess operating performance
and the effective use and allocation of resources; to provide more
meaningful period-to-period comparisons of operating results; to
enhance investors’ understanding of the core operating results of
Celestica’s business; and to set management incentive targets. We
believe investors use both IFRS and non-IFRS financial measures to
assess management's past, current and future decisions associated
with our priorities and our allocation of capital, as well as to
analyze how our business operates in, or responds to, swings in
economic cycles or to other events that impact our core operations.
See Schedule 1 below.
About CelesticaCelestica
enables the world's best brands. Through our recognized
customer-centric approach, we partner with leading companies in
Aerospace and Defense, Communications, Enterprise, HealthTech,
Industrial, and Capital Equipment to deliver solutions for their
most complex challenges. As a leader in design, manufacturing,
hardware platform and supply chain solutions, Celestica brings
global expertise and insight at every stage of product development
- from the drawing board to full-scale production and after-market
services. With talented teams across North America, Europe and
Asia, we imagine, develop and deliver a better future with our
customers. For more information on Celestica, visit
www.celestica.com. Our securities filings can be accessed at
www.sedar.com and www.sec.gov.
Cautionary Note Regarding
Forward-looking Statements
This press release contains forward-looking
statements, including, without limitation, those related to: our
anticipated financial and/or operational results and outlook,
including our anticipated Q2 2022 non-IFRS adjusted effective tax
rate; our credit risk; our liquidity; anticipated charges and
expenses, including restructuring charges; anticipated recoveries;
the potential impact of tax and litigation outcomes; mandatory
prepayments under our credit facility; interest rates; and the
anticipated timing of the sale of a vacated property (land and
building) in Asia. Such forward-looking statements may, without
limitation, be preceded by, followed by, or include words such as
“believes,” “expects,” “anticipates,” “estimates,” “intends,”
“plans,” “continues,” “project,” "target," “potential,” “possible,”
“contemplate,” “seek,” or similar expressions, or may employ such
future or conditional verbs as “may,” “might,” “will,” “could,”
“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, where
applicable, and applicable Canadian securities laws.
Forward-looking statements are provided to
assist readers in understanding management’s current expectations
and plans relating to the future. Readers are cautioned that such
information may not be appropriate for other purposes.
Forward-looking statements are not guarantees of future performance
and are subject to risks that could cause actual results to differ
materially from those expressed or implied in such forward-looking
statements, including, among others, risks related to: customer and
segment concentration; price, margin pressures, and other
competitive factors and adverse market conditions affecting, and
the highly competitive nature of, the electronics manufacturing
services industry in general and our segments in particular
(including the risk that anticipated market improvements do not
materialize); delays in the delivery and availability of
components, services and/or materials, as well as their costs and
quality; challenges of replacing revenue from completed, lost or
non-renewed programs or customer disengagements; our customers'
ability to compete and succeed using our products and services;
changes in our mix of customers and/or the types of products or
services we provide, including negative impacts of higher
concentrations of lower margin programs; managing changes in
customer demand; rapidly evolving and changing technologies, and
changes in our customers' business or outsourcing strategies; the
cyclical and volatile nature of our semiconductor business; the
expansion or consolidation of our operations; the inability to
maintain adequate utilization of our workforce; defects or
deficiencies in our products, services or designs; volatility in
the commercial aerospace industry; integrating and achieving the
anticipated benefits from acquisitions (including our acquisition
of PCI Private Limited (PCI)) and "operate-in-place" arrangements;
compliance with customer-driven policies and standards, and
third-party certification requirements; challenges associated with
new customers or programs, or the provision of new services; the
impact of our restructuring actions and/or productivity
initiatives, including a failure to achieve anticipated benefits
therefrom; negative impacts on our business resulting from
newly-increased third-party indebtedness; the incurrence of future
restructuring charges, impairment charges, other write-downs of
assets or operating losses; managing our business during uncertain
market, political and economic conditions, including among others,
geopolitical and other risks associated with our international
operations, including military actions, protectionism and reactive
countermeasures, economic or other sanctions or trade barriers,
including in relation to the evolving Ukraine/Russia conflict;
disruptions to our operations, or those of our customers, component
suppliers and/or logistics partners, including as a result of
events outside of our control (see "External Factors that May
Impact our Business" in Item 5 of our 2021 20-F); the scope,
duration and impact of the COVID-19 pandemic and material
constraints; changes to our operating model; changing commodity,
materials and component costs as well as labor costs and
conditions; execution and/or quality issues (including our ability
to successfully resolve these challenges); non-performance by
counterparties; maintaining sufficient financial resources to fund
currently anticipated financial actions and obligations and to
pursue desirable business opportunities; negative impacts on our
business resulting from any significant uses of cash (including for
the acquisition of PCI), securities issuances, and/or additional
increases in third-party indebtedness (including as a result of an
inability to sell desired amounts under our uncommitted accounts
receivable sales program or supplier financing programs);
operational impacts that may affect PCI’s ability to achieve
anticipated financial results; foreign currency volatility; our
global operations and supply chain; competitive bid selection
processes; customer relationships with emerging companies;
recruiting or retaining skilled talent; our dependence on
industries affected by rapid technological change; our ability to
adequately protect intellectual property and confidential
information; increasing taxes (including as a result of global tax
reform), tax audits, and challenges of defending our tax positions;
obtaining, renewing or meeting the conditions of tax incentives and
credits; the management of our information technology systems, and
the fact that while we have not been materially impacted by
computer viruses, malware, ransomware, hacking attempts or outages,
we have been (and may continue to be) the target of such events;
the inability to prevent or detect all errors or fraud; the
variability of revenue and operating results; unanticipated
disruptions to our cash flows; compliance with applicable laws and
regulations; our pension and other benefit plan obligations;
changes in accounting judgments, estimates and assumptions; our
ability to maintain compliance with applicable credit facility
covenants; interest rate fluctuations and the discontinuation of
LIBOR; our ability to refinance our indebtedness from time to time;
deterioration in financial markets or the macro-economic
environment; our credit rating; the interest of our controlling
shareholder; current or future litigation, governmental actions,
and/or changes in legislation or accounting standards; negative
publicity; that we will not be permitted to, or do not, repurchase
subordinate voting shares (SVS) under any normal course issuer bid
(NCIB); the impact of climate change; and our ability to achieve
our environmental, social and governance (ESG) initiative goals,
including with respect to diversity and inclusion and climate
change. The foregoing and other material risks and uncertainties
are discussed in our public filings at www.sedar.com and
www.sec.gov, including in our most recent MD&A, our 2021 Annual
Report on Form 20-F filed with, and subsequent reports on Form 6-K
furnished to, the U.S. Securities and Exchange Commission, and as
applicable, the Canadian Securities Administrators.
The forward-looking statements contained in this
press release are based on various assumptions, many of which
involve factors that are beyond our control. Our material
assumptions include: continued growth (and recovery from adverse
impacts due to COVID-19) in the broader economy and our end
markets; growth in manufacturing outsourcing from customers in
diversified end markets; no significant unforeseen negative impacts
to Celestica’s operations; no unforeseen materials price increases,
margin pressures, or other competitive factors affecting the EMS
industry in general or our segments in particular, as well as those
related to the following: the scope and duration of materials
constraints (i.e., that they do not materially worsen) and the
COVID-19 pandemic and their impact on our sites, customers and
suppliers; fluctuation of production schedules from our customers
in terms of volume and mix of products or services; the timing and
execution of, and investments associated with, ramping new
business; the success of our customers’ products; our ability to
retain programs and customers; the stability of general economic
and market conditions and currency exchange rates; supplier
performance and quality, pricing and terms; compliance by third
parties with their contractual obligations; the costs and
availability of components, materials, services, equipment, labor,
energy and transportation; that our customers will retain liability
for product/component tariffs and countermeasures; global tax
legislation changes; our ability to keep pace with rapidly changing
technological developments; the timing, execution and effect of
restructuring actions; the successful resolution of quality issues
that arise from time to time; the components of our leverage ratio
(as defined in our credit facility); our ability to successfully
diversify our customer base and develop new capabilities; the
availability of capital resources for, and the permissibility under
our credit facility of, repurchases of outstanding SVS under NCIBs,
and compliance with applicable laws and regulations pertaining to
NCIBs; compliance with applicable credit facility covenants;
anticipated demand strength in certain of our businesses;
anticipated demand weakness in, and/or the impact of anticipated
adverse market conditions on, certain of our businesses; our
ability to successfully integrate PCI and achieve the expected
benefits from the acquisition; and our maintenance of sufficient
financial resources to fund currently anticipated financial actions
and obligations and to pursue desirable business opportunities.
Although management believes its assumptions to be reasonable under
the current circumstances, they may prove to be inaccurate, which
could cause actual results to differ materially (and adversely)
from those that would have been achieved had such assumptions been
accurate. Forward-looking statements speak only as of the date on
which they are made, and 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, except as
required by applicable law. All forward-looking
statements attributable to us are expressly qualified by these
cautionary statements.
Schedule 1
Supplementary Non-IFRS Financial
Measures
The non-IFRS financial measures (including
ratios based on non-IFRS financial measures) included in this press
release are: adjusted gross profit, adjusted gross margin (adjusted
gross profit as a percentage of revenue), adjusted selling, general
and administrative expenses (SG&A), adjusted SG&A as a
percentage of revenue, operating earnings (or adjusted EBIAT),
operating margin (operating earnings or adjusted EBIAT as a
percentage of revenue), adjusted net earnings, adjusted EPS,
adjusted return on invested capital (adjusted ROIC), free cash
flow, adjusted tax expense and adjusted effective tax rate.
Adjusted EBIAT, adjusted ROIC, free cash flow, adjusted tax expense
and adjusted effective tax rate are further described in the tables
below. In calculating our non-IFRS financial measures, management
excludes the following items (where indicated): employee
stock-based compensation (SBC) expense, amortization of intangible
assets (excluding computer software), Other Charges, net of
recoveries (defined below), and Finance Costs (defined below), all
net of the associated tax adjustments (quantified in the table
below), and non-core tax impacts (tax adjustments related to
acquisitions, and certain other tax costs or recoveries related to
restructuring actions or restructured sites).
We believe the non-IFRS financial measures we
present herein are useful to investors, as they enable investors to
evaluate and compare our results from operations in a more
consistent manner (by excluding specific items that we do not
consider to be reflective of our core operations), to evaluate cash
resources that we generate from our business each period, and to
provide an analysis of operating results using the same measures
our chief operating decision makers use to measure performance. In
addition, management believes that the use of a non-IFRS adjusted
tax expense and a non-IFRS adjusted effective tax rate provide
improved insight into the tax effects of our core operations, and
are useful to management and investors for historical comparisons
and forecasting. These non-IFRS financial measures result largely
from management’s determination that the facts and circumstances
surrounding the excluded charges or recoveries are not indicative
of our core operations.
Non-IFRS financial measures do not have any
standardized meaning prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies that
report under IFRS, or who report under U.S. GAAP and use non-GAAP
financial measures to describe similar financial metrics. Non-IFRS
financial measures are not measures of performance under IFRS and
should not be considered in isolation or as a substitute for any
IFRS financial measure.
The most significant limitation to management’s
use of non-IFRS financial measures is that the charges or credits
excluded from the non-IFRS financial measures are nonetheless
recognized under IFRS and have an economic impact on us. Management
compensates for these limitations primarily by issuing IFRS results
to show a complete picture of our performance, and reconciling
non-IFRS financial measures back to the most directly comparable
IFRS financial measures.
The economic substance of these exclusions
described above (where applicable to the periods presented) and
management’s rationale for excluding them from non-IFRS financial
measures is provided below:
Employee SBC expense, which represents the
estimated fair value of stock options, restricted share units and
performance share units granted to employees, is excluded because
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 employee SBC expense in
assessing operating performance, who may have different granting
patterns and types of equity awards, and who may use different
valuation assumptions than we do.
Amortization charges (excluding computer
software) consist of non-cash charges against intangible assets
that are impacted by the timing and magnitude of acquired
businesses. Amortization of intangible assets varies among our
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 in
assessing operating performance.
Other Charges, net of recoveries, consist of,
when applicable: Restructuring Charges, net of recoveries (defined
below); Transition Costs (Recoveries) (defined below); net
Impairment charges (defined below); consulting, transaction and
integration costs related to potential and completed acquisitions,
and charges or releases related to the subsequent re-measurement of
indemnification assets or the release of indemnification or other
liabilities recorded in connection with acquisitions, when
applicable; legal settlements (recoveries); specified credit
facility-related charges; and post-employment benefit plan losses.
We exclude these charges, net of recoveries, because we believe
that they are not directly related to ongoing operating results and
do not reflect expected future operating expenses after completion
of these activities or incurrence of the relevant costs. Our
competitors may record similar charges at different times, and we
believe these exclusions permit a better comparison of our core
operating results with those of our competitors who also generally
exclude these types of charges, net of recoveries, in assessing
operating performance.
Restructuring Charges, net of recoveries,
consist of costs relating to: employee severance, lease
terminations, site closings and consolidations; write-downs of
owned property and equipment which are no longer used and are
available for sale; and reductions in infrastructure.
Transition Costs consist of costs recorded in
connection with: (i) the relocation of our Toronto manufacturing
operations, and the move of our corporate headquarters into and out
of a temporary location during, and upon completion, of the
construction of space in a new office building at our former
location (all in connection with the 2019 sale of our Toronto real
property), (ii) the transfer of manufacturing lines from closed
sites to other sites within our global network; and (iii)
consistent with the treatment of our Toronto real property sale,
the sale of real properties unrelated to restructuring actions
(Property Dispositions). Transition Costs consist of direct
relocation and duplicate costs (such as rent expense, utility
costs, depreciation charges, and personnel costs) incurred during
the transition periods, as well as cease-use and other costs
incurred in connection with idle or vacated portions of the
relevant premises that we would not have incurred but for these
relocations, transfers and dispositions. Transition Recoveries
consist of any gains recorded in connection with Property
Dispositions. We believe that excluding these costs and recoveries
permits a better comparison of our core operating results from
period-to-period, as these costs or recoveries will not reflect our
ongoing operations once these relocations, manufacturing line
transfers, and dispositions are complete.
Impairment charges, which consist of non-cash
charges against goodwill, intangible assets, property, plant and
equipment, and right-of-use (ROU) assets, result primarily when the
carrying value of these assets exceeds their recoverable
amount.
Finance Costs consist of interest expense and
fees related to our credit facility (including debt issuance and
related amortization costs), our interest rate swap agreements, our
accounts receivable sales program and customers' supplier financing
programs, and interest expense on our lease obligations, net of
interest income earned. We believe that excluding these costs
provides useful insight for assessing the performance of our core
operations.
Non-core tax impacts are excluded, as we believe
that these costs or recoveries do not reflect core operating
performance and vary significantly among those of our competitors
who also generally exclude these costs or recoveries in assessing
operating performance.
The following table (which is unaudited) sets
forth, for the periods indicated, the various non-IFRS financial
measures discussed above, and a reconciliation of non-IFRS
financial measures to the most directly comparable IFRS financial
measures (in millions, except percentages and per
share amounts):
|
Three months ended March 31 |
|
|
2021 |
|
|
|
2022 |
|
|
|
% of revenue |
|
|
% of revenue |
IFRS
revenue |
$ |
1,234.9 |
|
|
|
$ |
1,566.9 |
|
|
|
|
|
|
|
|
IFRS gross
profit |
$ |
101.5 |
|
8.2% |
|
$ |
132.5 |
|
8.5% |
Employee SBC expense |
|
4.9 |
|
|
|
|
5.6 |
|
|
Non-IFRS adjusted
gross profit |
$ |
106.4 |
|
8.6% |
|
$ |
138.1 |
|
8.8% |
|
|
|
|
|
|
IFRS
SG&A |
$ |
58.8 |
|
4.8% |
|
$ |
65.7 |
|
4.2% |
Employee SBC expense |
|
(5.2) |
|
|
|
|
(9.0) |
|
|
Non-IFRS adjusted
SG&A |
$ |
53.6 |
|
4.3% |
|
$ |
56.7 |
|
3.6% |
|
|
|
|
|
|
IFRS earnings before
income taxes |
$ |
15.7 |
|
1.3% |
|
$ |
30.8 |
|
2.0% |
Finance Costs |
|
8.0 |
|
|
|
|
9.8 |
|
|
Employee SBC expense |
|
10.1 |
|
|
|
|
14.6 |
|
|
Amortization of intangible assets (excluding computer
software) |
|
4.9 |
|
|
|
|
9.3 |
|
|
Other Charges |
|
4.6 |
|
|
|
|
4.8 |
|
|
Non-IFRS operating
earnings (adjusted EBIAT) (1) |
$ |
43.3 |
|
3.5% |
|
$ |
69.3 |
|
4.4% |
|
|
|
|
|
|
IFRS net
earnings |
$ |
10.5 |
|
0.9% |
|
$ |
21.8 |
|
1.4% |
Employee SBC expense |
|
10.1 |
|
|
|
|
14.6 |
|
|
Amortization of intangible assets (excluding computer
software) |
|
4.9 |
|
|
|
|
9.3 |
|
|
Other Charges |
|
4.6 |
|
|
|
|
4.8 |
|
|
Adjustments for taxes (2) |
|
(2.3) |
|
|
|
|
(2.3) |
|
|
Non-IFRS adjusted net
earnings |
$ |
27.8 |
|
|
|
$ |
48.2 |
|
|
|
|
|
|
|
|
Diluted
EPS |
|
|
|
|
|
Weighted average # of shares (in millions) |
|
129.0 |
|
|
|
|
124.7 |
|
|
IFRS earnings per share |
$ |
0.08 |
|
|
|
$ |
0.17 |
|
|
Non-IFRS adjusted earnings per share |
$ |
0.22 |
|
|
|
$ |
0.39 |
|
|
# of shares outstanding at period end (in millions) |
|
128.4 |
|
|
|
|
124.1 |
|
|
|
|
|
|
|
|
IFRS cash provided by
operations |
$ |
48.8 |
|
|
|
$ |
35.3 |
|
|
Purchase of property, plant and equipment, net of sales
proceeds |
|
(12.6) |
|
|
|
|
(16.4) |
|
|
Lease payments |
|
(9.6) |
|
|
|
|
(11.2) |
|
|
Finance Costs paid (excluding debt issuance costs paid) |
|
(5.7) |
|
|
|
|
(7.2) |
|
|
Non-IFRS free cash
flow (3) |
$ |
20.9 |
|
|
|
$ |
0.5 |
|
|
|
|
|
|
|
|
IFRS ROIC %
(4) |
|
3.9 |
% |
|
|
|
6.2 |
% |
|
Non-IFRS adjusted ROIC
% (4) |
|
10.8 |
% |
|
|
|
13.9 |
% |
|
(1) Management uses non-IFRS operating earnings
(adjusted EBIAT) as a measure to assess performance related to our
core operations. Non-IFRS adjusted EBIAT is defined as earnings
(loss) before income taxes, Finance Costs (defined above), employee
SBC expense, amortization of intangible assets (excluding computer
software), and Other Charges (recoveries) (defined above). See note
10 to our Q1 2022 Interim Financial Statements for separate
quantification and discussion of the components of Other Charges
(recoveries).
(2) The adjustments for taxes, as applicable,
represent the tax effects of our non-IFRS adjustments and non-core
tax impacts (see below).
The following table sets forth a reconciliation
of our IFRS tax expense and IFRS effective tax rate to our non-IFRS
adjusted tax expense and our non-IFRS adjusted effective tax rate
for the periods indicated, in each case determined by excluding the
tax benefits or costs associated with the listed items (in
millions, except percentages) from our IFRS tax expense for such
periods:
|
Three months ended |
|
March 31 |
|
|
2021 |
Effective tax rate |
|
|
2022 |
Effective tax rate |
|
|
|
|
|
IFRS tax expense and IFRS effective tax rate |
$ |
5.2 |
33% |
|
|
$ |
9.0 |
29% |
|
|
|
|
|
|
|
Tax costs (benefits) of the following items excluded from IFRS tax
expense: |
|
|
|
|
|
Employee SBC expense |
|
0.9 |
|
|
|
1.5 |
|
Amortization of intangible assets (excluding computer
software) |
|
— |
|
|
|
0.8 |
|
Other Charges |
|
0.3 |
|
|
|
— |
|
Non-core tax impact related to restructured sites* |
|
1.1 |
|
|
|
— |
|
Non-IFRS adjusted tax expense and non-IFRS adjusted effective tax
rate |
$ |
7.5 |
21% |
|
|
$ |
11.3 |
19% |
|
- Consists of the
reversals of tax uncertainties related to one of our Asian
subsidiaries that completed its liquidation and dissolution during
Q1 2021.
(3) Management uses non-IFRS free cash flow as a
measure, in addition to IFRS cash provided by (used in) operations,
to assess our operational cash flow performance. We believe
non-IFRS free cash flow provides another level of transparency to
our liquidity. Non-IFRS free cash flow is defined as cash provided
by (used in) operations after the purchase of property, plant and
equipment (net of proceeds from the sale of certain surplus
equipment and property), lease payments and Finance Costs paid
(excluding any debt issuance costs and when applicable, waiver fees
related to our credit facility). We do not consider debt issuance
costs ($0.8 million paid in Q1 2022 and nil paid in Q1 2021) or
such waiver fees (when applicable) to be part of our ongoing
financing expenses. As a result, these costs are excluded from
total Finance Costs paid in our determination of non-IFRS free cash
flow. Note, however, that non-IFRS free cash flow does not
represent residual cash flow available to Celestica for
discretionary expenditures.
(4) Management uses non-IFRS adjusted ROIC as a
measure to assess the effectiveness of the invested capital we use
to build products or provide services to our customers, by
quantifying how well we generate earnings relative to the capital
we have invested in our business. Non-IFRS adjusted ROIC is
calculated by dividing non-IFRS adjusted EBIAT by average net
invested capital. Net invested capital (calculated in the table
below) is derived from IFRS measures, and is defined as total
assets less: cash, ROU assets, accounts payable, accrued and other
current liabilities, provisions, and income taxes payable. We use a
two-point average to calculate average net invested capital for the
quarter. For example, the average net invested capital for Q1 2022
is calculated using the average of the net invested capital as at
December 31, 2021 and March 31, 2022. A comparable measure under
IFRS would be determined by dividing IFRS earnings before income
taxes by average net invested capital.
The following table sets forth, for the periods
indicated, our calculation of IFRS ROIC % and non-IFRS adjusted
ROIC % (in millions, except IFRS ROIC % and non-IFRS adjusted ROIC
%).
|
|
|
Three months ended |
|
|
|
March 31 |
|
|
|
|
2021 |
|
|
|
2022 |
|
|
|
|
|
|
|
IFRS earnings
before income taxes |
|
$ |
15.7 |
|
|
$ |
30.8 |
|
Multiplier to
annualize earnings |
|
|
4 |
|
|
|
4 |
|
Annualized IFRS
earnings before income taxes |
|
$ |
62.8 |
|
|
$ |
123.2 |
|
|
|
|
|
|
|
Average net
invested capital for the period |
|
$ |
1,609.8 |
|
|
$ |
2,000.7 |
|
|
|
|
|
|
|
IFRS ROIC %
(1) |
|
|
3.9 |
% |
|
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31 |
|
|
|
|
2021 |
|
|
|
2022 |
|
|
|
|
|
|
|
Non-IFRS operating
earnings (adjusted EBIAT) |
|
$ |
43.3 |
|
|
$ |
69.3 |
|
Multiplier to
annualize earnings |
|
|
4 |
|
|
|
4 |
|
Annualized
non-IFRS adjusted EBIAT |
|
$ |
173.2 |
|
|
$ |
277.2 |
|
|
|
|
|
|
|
Average net
invested capital for the period |
|
$ |
1,609.8 |
|
|
$ |
2,000.7 |
|
|
|
|
|
|
|
Non-IFRS adjusted
ROIC % (1) |
|
|
10.8 |
% |
|
|
13.9 |
% |
|
|
|
|
|
|
|
|
|
December 312021 |
|
March 312022 |
Net invested
capital consists of: |
|
|
|
|
Total assets |
|
$ |
4,666.9 |
|
|
$ |
4,848.0 |
|
Less: cash |
|
|
394.0 |
|
|
|
346.6 |
|
Less: ROU
assets |
|
|
113.8 |
|
|
|
109.8 |
|
Less: accounts
payable, accrued and other current liabilities, provisions and
income taxes payable |
|
|
2,202.0 |
|
|
|
2,347.4 |
|
Net invested
capital at period end (1) |
|
$ |
1,957.1 |
|
|
$ |
2,044.2 |
|
|
|
|
|
|
|
|
|
|
December 312020 |
|
March 312021 |
Net invested
capital consists of: |
|
|
|
|
Total assets |
|
$ |
3,664.1 |
|
|
$ |
3,553.4 |
|
Less: cash |
|
|
463.8 |
|
|
|
449.4 |
|
Less: ROU
assets |
|
|
101.0 |
|
|
|
98.4 |
|
Less: accounts
payable, accrued and other current liabilities, provisions and
income taxes payable |
|
|
1,478.4 |
|
|
|
1,407.0 |
|
Net invested
capital at period end (1) |
|
$ |
1,620.9 |
|
|
$ |
1,598.6 |
|
(1) See footnote 4 on the previous
page.
CELESTICA INC. CONDENSED
CONSOLIDATED BALANCE SHEET(in millions of
U.S. dollars)(unaudited)
|
Note |
December 312021 |
|
March 312022 |
|
|
|
|
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
394.0 |
|
|
$ |
346.6 |
|
Accounts receivable |
5 |
|
1,260.3 |
|
|
|
1,243.4 |
|
Inventories |
6 |
|
1,697.0 |
|
|
|
1,934.8 |
|
Income taxes receivable |
|
|
8.6 |
|
|
|
8.6 |
|
Assets classified as held for sale |
7 |
|
— |
|
|
|
9.0 |
|
Other current assets |
|
|
75.4 |
|
|
|
88.0 |
|
Total current assets |
|
|
3,435.3 |
|
|
|
3,630.4 |
|
|
|
|
|
|
Property, plant and
equipment |
|
|
338.7 |
|
|
|
326.2 |
|
Right-of-use assets |
|
|
113.8 |
|
|
|
109.8 |
|
Goodwill |
4 |
|
324.2 |
|
|
|
321.9 |
|
Intangible assets |
|
|
382.0 |
|
|
|
375.3 |
|
Deferred income taxes |
|
|
47.7 |
|
|
|
52.7 |
|
Other non-current assets |
|
|
25.2 |
|
|
|
31.7 |
|
Total assets |
|
$ |
4,666.9 |
|
|
$ |
4,848.0 |
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Current portion of borrowings under credit facility and lease
obligations |
8 |
$ |
51.5 |
|
|
$ |
59.6 |
|
Accounts payable |
|
|
1,238.3 |
|
|
|
1,400.2 |
|
Accrued and other current liabilities |
6 |
|
884.3 |
|
|
|
862.5 |
|
Income taxes payable |
|
|
62.3 |
|
|
|
67.0 |
|
Current portion of provisions |
|
|
17.1 |
|
|
|
17.7 |
|
Total current liabilities |
|
|
2,253.5 |
|
|
|
2,407.0 |
|
|
|
|
|
|
Long-term portion of borrowings
under credit facility and lease obligations |
8 |
|
742.9 |
|
|
|
726.1 |
|
Pension and non-pension
post-employment benefit obligations |
|
|
107.5 |
|
|
|
109.0 |
|
Provisions and other non-current
liabilities |
|
|
39.8 |
|
|
|
35.4 |
|
Deferred income taxes |
|
|
60.2 |
|
|
|
61.1 |
|
Total liabilities |
|
|
3,203.9 |
|
|
|
3,338.6 |
|
|
|
|
|
|
Equity: |
|
|
|
|
Capital stock |
9 |
|
1,764.5 |
|
|
|
1,753.9 |
|
Treasury stock |
9 |
|
(48.9 |
) |
|
|
(19.0 |
) |
Contributed surplus |
|
|
1,029.8 |
|
|
|
1,024.4 |
|
Deficit |
|
|
(1,255.6 |
) |
|
|
(1,233.8 |
) |
Accumulated other comprehensive loss |
|
|
(26.8 |
) |
|
|
(16.1 |
) |
Total equity |
|
|
1,463.0 |
|
|
|
1,509.4 |
|
Total liabilities and equity |
|
$ |
4,666.9 |
|
|
$ |
4,848.0 |
|
|
|
|
|
|
Commitments and Contingencies (note 14).
The accompanying notes are an integral part of
these unaudited interim condensed consolidated financial
statements.
CELESTICA INC. CONDENSED
CONSOLIDATED STATEMENT OF
OPERATIONS(in millions of U.S. dollars,
except per share amounts)(unaudited)
|
|
Three months ended |
|
|
March 31 |
|
Note |
|
2021 |
|
|
|
2022 |
|
|
|
|
|
|
Revenue |
3 |
$ |
1,234.9 |
|
|
$ |
1,566.9 |
|
Cost of sales |
6 |
|
1,133.4 |
|
|
|
1,434.4 |
|
Gross profit |
|
|
101.5 |
|
|
|
132.5 |
|
Selling, general and
administrative expenses (SG&A) |
|
|
58.8 |
|
|
|
65.7 |
|
Research and development |
|
|
8.8 |
|
|
|
11.4 |
|
Amortization of intangible
assets |
|
|
5.6 |
|
|
|
10.0 |
|
Other charges |
10 |
|
4.6 |
|
|
|
4.8 |
|
Earnings from operations |
|
|
23.7 |
|
|
|
40.6 |
|
Finance costs |
8 |
|
8.0 |
|
|
|
9.8 |
|
Earnings before income
taxes |
|
|
15.7 |
|
|
|
30.8 |
|
Income tax expense
(recovery) |
11 |
|
|
|
Current |
|
|
10.7 |
|
|
|
13.5 |
|
Deferred |
|
|
(5.5 |
) |
|
|
(4.5 |
) |
|
|
|
5.2 |
|
|
|
9.0 |
|
Net earnings for the
period |
|
$ |
10.5 |
|
|
$ |
21.8 |
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.08 |
|
|
$ |
0.17 |
|
Diluted earnings per
share |
|
$ |
0.08 |
|
|
$ |
0.17 |
|
|
|
|
|
|
Shares used in computing per
share amounts (in millions): |
|
|
|
|
Basic |
|
|
128.9 |
|
|
|
124.6 |
|
Diluted |
|
|
129.0 |
|
|
|
124.7 |
|
The accompanying notes are an integral part of
these unaudited interim condensed consolidated financial
statements.
CELESTICA INC.CONDENSED CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
(LOSS)(in millions of
U.S. dollars)(unaudited)
|
Three months ended |
|
March 31 |
|
|
2021 |
|
|
|
2022 |
|
|
|
|
|
Net earnings for the
period |
$ |
10.5 |
|
|
$ |
21.8 |
|
Other comprehensive income
(loss), net of tax: |
|
|
|
Items that may be reclassified to net earnings: |
|
|
|
Currency translation differences for foreign operations |
|
(4.4 |
) |
|
|
(2.8 |
) |
Changes from currency forward derivative hedges |
|
(9.9 |
) |
|
|
3.0 |
|
Changes from interest rate swap derivative hedges |
|
3.3 |
|
|
|
10.5 |
|
Total comprehensive income
(loss) for the period |
$ |
(0.5 |
) |
|
$ |
32.5 |
|
The accompanying notes are an integral part of
these unaudited interim condensed consolidated financial
statements.
CELESTICA
INC. CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY(in millions of U.S.
dollars)(unaudited)
|
Note |
Capital stock(note 9) |
|
Treasury
stock (note 9) |
|
Contributedsurplus |
|
Deficit |
|
Accumulated other
comprehensiveloss
(a) |
|
Total equity |
Balance -- January 1,
2021 |
|
$ |
1,834.2 |
|
|
$ |
(15.7 |
) |
|
$ |
974.5 |
|
|
$ |
(1,368.8 |
) |
|
$ |
(15.2 |
) |
|
$ |
1,409.0 |
|
Capital
transactions: |
9 |
|
|
|
|
|
|
|
|
|
|
|
Repurchase of capital stock for cancellation(b) |
|
|
(10.1 |
) |
|
|
— |
|
|
|
1.7 |
|
|
|
— |
|
|
|
— |
|
|
|
(8.4 |
) |
Equity-settled stock-based compensation (SBC) |
|
|
— |
|
|
|
13.2 |
|
|
|
(2.7 |
) |
|
|
— |
|
|
|
— |
|
|
|
10.5 |
|
Total comprehensive
income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings for the period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10.5 |
|
|
|
— |
|
|
|
10.5 |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation differences for foreign operations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4.4 |
) |
|
|
(4.4 |
) |
Changes from currency forward derivative hedges |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9.9 |
) |
|
|
(9.9 |
) |
Changes from interest rate swap derivative hedges |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3.3 |
|
|
|
3.3 |
|
Balance -- March 31, 2021 |
|
$ |
1,824.1 |
|
|
$ |
(2.5 |
) |
|
$ |
973.5 |
|
|
$ |
(1,358.3 |
) |
|
$ |
(26.2 |
) |
|
$ |
1,410.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance -- January 1,
2022 |
|
$ |
1,764.5 |
|
|
$ |
(48.9 |
) |
|
$ |
1,029.8 |
|
|
$ |
(1,255.6 |
) |
|
$ |
(26.8 |
) |
|
$ |
1,463.0 |
|
Capital
transactions: |
9 |
|
|
|
|
|
|
|
|
|
|
|
Issuance of capital stock |
|
|
0.2 |
|
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
Repurchase of capital stock for cancellation (c) |
|
|
(10.8 |
) |
|
|
— |
|
|
|
10.5 |
|
|
|
— |
|
|
|
— |
|
|
|
(0.3 |
) |
Purchase of treasury stock for SBC plans (d) |
|
|
— |
|
|
|
(1.0 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1.0 |
) |
Equity-settled SBC |
|
|
— |
|
|
|
30.9 |
|
|
|
(15.8 |
) |
|
|
— |
|
|
|
— |
|
|
|
15.1 |
|
Total comprehensive
income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings for the period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
21.8 |
|
|
|
— |
|
|
|
21.8 |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation differences for foreign operations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2.8 |
) |
|
|
(2.8 |
) |
Changes from currency forward derivative hedges |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3.0 |
|
|
|
3.0 |
|
Changes from interest rate swap derivative hedges |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10.5 |
|
|
|
10.5 |
|
Balance -- March 31, 2022 |
|
$ |
1,753.9 |
|
|
$ |
(19.0 |
) |
|
$ |
1,024.4 |
|
|
$ |
(1,233.8 |
) |
|
$ |
(16.1 |
) |
|
$ |
1,509.4 |
|
(a) Accumulated other comprehensive loss is net
of tax.
(b) Includes $18.1 accrued as of March 31, 2021
for the estimated contractual maximum number of permitted
subordinate voting share (SVS) repurchases for cancellation under
an automatic share purchase plan (ASPP) executed in March 2021 (see
note 9).
(c) We paid $7.8 to repurchase SVS for
cancellation under our normal course issuer bid, substantially
offset by the reversal of the $7.5 accrued as of December 31, 2021
under an ASPP executed in December 2021 for such purpose (see note
9).
(d) We paid $34.8 to repurchase SVS for delivery
obligations under our SBC plans, substantially offset by the
reversal of the $33.8 accrued as of December 31, 2021 under a
separate ASPP executed in December 2021 for such purpose (see note
9).
The accompanying notes are an integral part of
these unaudited interim condensed consolidated financial
statements.
CELESTICA INC.CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS(in millions
of U.S. dollars)(unaudited)
|
|
Three months ended |
|
|
March 31 |
|
Note |
|
2021 |
|
|
|
2022 |
|
|
|
|
|
|
Cash provided by (used
in): |
|
|
|
|
Operating
activities: |
|
|
|
|
Net earnings for the
period |
|
$ |
10.5 |
|
|
$ |
21.8 |
|
Adjustments to net earnings
for items not affecting cash: |
|
|
|
|
Depreciation and amortization |
|
|
30.3 |
|
|
|
35.9 |
|
Equity-settled employee SBC expense |
9 |
|
10.1 |
|
|
|
14.6 |
|
Other charges (recoveries) |
10 |
|
(1.1 |
) |
|
|
0.3 |
|
Finance costs |
|
|
8.0 |
|
|
|
9.8 |
|
Income tax expense |
|
|
5.2 |
|
|
|
9.0 |
|
Other |
|
|
5.6 |
|
|
|
0.7 |
|
Changes in non-cash working
capital items: |
|
|
|
|
Accounts receivable |
|
|
128.4 |
|
|
|
16.9 |
|
Inventories |
|
|
(62.1 |
) |
|
|
(237.8 |
) |
Other current assets |
|
|
(1.7 |
) |
|
|
(10.5 |
) |
Accounts payable, accrued and other current liabilities and
provisions |
|
|
(67.3 |
) |
|
|
183.8 |
|
Non-cash working capital
changes |
|
|
(2.7 |
) |
|
|
(47.6 |
) |
Net income tax paid |
|
|
(17.1 |
) |
|
|
(9.2 |
) |
Net cash provided by operating
activities |
|
|
48.8 |
|
|
|
35.3 |
|
|
|
|
|
|
Investing
activities: |
|
|
|
|
Purchase of computer software
and property, plant and equipment |
|
|
(12.6 |
) |
|
|
(16.4 |
) |
Net cash used in investing
activities |
|
|
(12.6 |
) |
|
|
(16.4 |
) |
|
|
|
|
|
Financing
activities: |
|
|
|
|
Repayments under term
loans |
8 |
|
(30.0 |
) |
|
|
(4.6 |
) |
Lease payments |
|
|
(9.6 |
) |
|
|
(11.2 |
) |
Issuance of capital stock |
|
|
— |
|
|
|
0.1 |
|
Repurchase of capital stock
for cancellation |
9 |
|
(5.3 |
) |
|
|
(7.8 |
) |
Purchase of treasury stock for
stock-based plans |
9 |
|
— |
|
|
|
(34.8 |
) |
Finance costs paid(a) |
8 |
|
(5.7 |
) |
|
|
(8.0 |
) |
Net cash used in financing
activities |
|
|
(50.6 |
) |
|
|
(66.3 |
) |
|
|
|
|
|
Net decrease in cash and cash
equivalents |
|
|
(14.4 |
) |
|
|
(47.4 |
) |
Cash and cash equivalents,
beginning of period |
|
|
463.8 |
|
|
|
394.0 |
|
Cash and cash equivalents, end
of period |
|
$ |
449.4 |
|
|
$ |
346.6 |
|
(a) Finance costs paid include debt issuance
costs paid of $0.8 in the quarter ended March 31, 2022
(quarter ended March 31, 2021 — nil).
The accompanying notes are an integral part of
these unaudited interim condensed consolidated financial
statements.
1. REPORTING ENTITY
Celestica Inc. (Celestica) is incorporated in
Ontario with its corporate headquarters located in Toronto,
Ontario, Canada. Celestica’s subordinate voting shares (SVS) are
listed on the Toronto Stock Exchange (TSX) and the New York Stock
Exchange (NYSE).
2. BASIS OF PREPARATION AND SIGNIFICANT
ACCOUNTING POLICIES
Statement of compliance:
These unaudited interim condensed consolidated
financial statements for the quarter ended March 31, 2022 (Q1
2022 Interim Financial Statements) have been prepared in accordance
with International Accounting Standard (IAS) 34, Interim Financial
Reporting, and the accounting policies we have adopted in
accordance with International Financial Reporting Standards (IFRS),
in each case as issued by the International Accounting Standards
Board (IASB), and reflect all adjustments that are, in the opinion
of management, necessary to present fairly our financial position
as of March 31, 2022 and our financial performance,
comprehensive income and cash flows for the three months ended
March 31, 2022 (referred to herein as Q1 2022). The Q1 2022
Interim Financial Statements should be read in conjunction with our
2021 audited consolidated financial statements (2021 AFS), which
are included in our Annual Report on Form 20-F for the year ended
December 31, 2021. The Q1 2022 Interim Financial Statements are
presented in United States (U.S.) dollars, which is also
Celestica's functional currency. Unless otherwise noted, all
financial information is presented in millions of U.S. dollars
(except percentages and per share amounts).
The Q1 2022 Interim Financial Statements were
authorized for issuance by our board of directors on April 27,
2022.
Use of estimates and
judgments:
The preparation of financial statements in
conformity with IFRS requires management to make judgments,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities,
revenue and expenses, and related disclosures with respect to
contingent assets and liabilities. We base our judgments, estimates
and assumptions on current facts (including, in recent periods, the
prolonged impact of coronavirus disease 2019 and related mutations
(COVID-19) and materials constraints), historical experience and
various other factors that we believe are reasonable under the
circumstances. The economic environment also impacts certain
estimates and discount rates necessary to prepare our consolidated
financial statements, including significant estimates and discount
rates applicable to the determination of the recoverable amounts
used in the impairment testing of our non-financial assets. Our
assessment of these factors forms the basis for our judgments on
the carrying values of our assets and liabilities, and the accrual
of our costs and expenses. Actual results could differ materially
from our estimates and assumptions. We review our estimates and
underlying assumptions on an ongoing basis and make revisions as
determined necessary by management. Revisions are recognized in the
period in which the estimates are revised and may also impact
future periods.
Our review of the estimates, judgments and
assumptions used in the preparation of our financial statements for
Q1 2022 included those relating to, among others: our determination
of the timing of revenue recognition, the determination of whether
indicators of impairment existed for our assets and cash generating
units (CGUs1), our measurement of deferred tax assets and
liabilities, our estimated inventory provisions and expected credit
losses, customer creditworthiness, and the determination of the
fair value of assets acquired and liabilities assumed in connection
with a business combination. Any revisions to estimates, judgments
or assumptions may result in, among other things, write-downs or
impairments to our assets or CGUs, and/or adjustments to the
carrying amount of our accounts receivable (A/R) and/or
inventories, or to the valuation of our deferred tax assets, any of
which could have a material impact on our financial performance and
financial condition.
Accounting policies:
The Q1 2022 Interim Financial Statements are
based on accounting policies consistent with those described in
note 2 to our 2021 AFS.
3. SEGMENT AND
CUSTOMER REPORTING
Segments:
Celestica delivers innovative supply chain
solutions globally to customers in two operating and reportable
segments: Advanced Technology Solutions (ATS) and Connectivity
& Cloud Solutions (CCS). Our ATS segment consists of our ATS
end market and is comprised of our Aerospace and Defense (A&D),
Industrial (including PCI (defined in note 4) and energy),
HealthTech and Capital Equipment businesses. Our CCS segment
consists of our Communications and Enterprise (servers and storage)
end markets. Segment performance is evaluated based on segment
revenue, segment income and segment margin (segment income as a
percentage of segment revenue). See note 25 to our 2021 AFS for a
description of the businesses that comprise our segments, and how
segment revenue, segment income and segment margin are
determined.
Information regarding the performance of our
reportable segments is set forth below:
Revenue by
segment: |
Three months ended March 31 |
|
|
2021 |
|
|
|
2022 |
|
|
|
% of total |
|
|
% of total |
ATS |
$ |
531.3 |
43 |
% |
|
$ |
696.7 |
44 |
% |
CCS |
|
703.6 |
57 |
% |
|
|
870.2 |
56 |
% |
Communications end market revenue as a % of total revenue |
|
40 |
% |
|
|
38 |
% |
Enterprise end market revenue as a % of total revenue |
|
17 |
% |
|
|
18 |
% |
Total |
$ |
1,234.9 |
|
|
$ |
1,566.9 |
|
Segment
income, segment margin, and reconciliation of segment income to
IFRS earnings before income taxes: |
Three months ended March 31 |
|
Note |
|
2021 |
|
|
|
2022 |
|
|
|
|
Segment Margin |
|
|
Segment Margin |
ATS segment income and margin |
|
$ |
21.3 |
4.0 |
% |
|
$ |
35.1 |
5.0 |
% |
CCS segment income and
margin |
|
|
22.0 |
3.1 |
% |
|
|
34.2 |
3.9 |
% |
Total segment income |
|
|
43.3 |
|
|
|
69.3 |
|
Reconciling items: |
|
|
|
|
|
|
Finance costs |
8 |
|
8.0 |
|
|
|
9.8 |
|
Employee stock-based
compensation (SBC) expense |
|
|
10.1 |
|
|
|
14.6 |
|
Amortization of intangible
assets (excluding computer software) |
|
|
4.9 |
|
|
|
9.3 |
|
Other charges |
10 |
|
4.6 |
|
|
|
4.8 |
|
IFRS earnings before income
taxes |
|
$ |
15.7 |
|
|
$ |
30.8 |
|
Customers:
No individual customer represented 10% or more
of total revenue in either Q1 2022 or in the first quarter of 2021
(Q1 2021).
Seasonality:
From time to time, we experience some level of
seasonality in our quarterly revenue patterns across certain of our
businesses. Typically, revenue from our Enterprise end market
decreases in the first quarter of the year compared to the previous
quarter, and then increases in the second quarter, reflecting an
increase in customer demand. We also typically experience our
lowest overall revenue levels during the first quarter of each
year. There can be no assurance that these patterns will continue.
The addition of new customers has also introduced different demand
cycles from our existing customers, creating more volatility and
unpredictability in our revenue patterns. These and other factors
make it difficult to isolate the impact of seasonality on
our business.
4. ACQUISITION
On November 1, 2021, we completed the
acquisition of 100% of the shares of PCI Private Limited (PCI), a
fully integrated design, engineering and manufacturing solutions
provider with five manufacturing and design facilities across Asia.
The final purchase price for PCI was $314.7, net of $11.4 of cash
acquired. In Q1 2022, we finalized the purchase price allocation
for the acquisition. In connection therewith, we made the following
changes to our preliminary purchase price allocation: increased the
carrying value of customer intangible assets by $2.7, increased
deferred income taxes liability by $0.5, and decreased goodwill by
$2.2. The purchase price was funded with a combination of cash and
borrowings under our credit facility (see note 8).
Details of our final purchase price allocation
for the PCI acquisition are as follows:
|
PCI |
Accounts
receivable and other current assets |
$ |
68.9 |
|
Inventories |
|
83.6 |
|
Property, plant
and equipment |
|
22.8 |
|
Customer
intangible assets |
|
176.1 |
|
Other non-current
assets |
|
6.9 |
|
Goodwill |
|
123.8 |
|
Accounts payable
and accrued liabilities |
|
(121.3 |
) |
Other current
liabilities |
|
(8.1 |
) |
Deferred income
taxes and other long-term liabilities |
|
(38.0 |
) |
|
|
|
|
$ |
314.7 |
|
Due to the acquisition, our amortization of
intangible assets will increase by approximately $18 annually.
Goodwill from the acquisition is attributable to our ATS segment
and is not tax deductible.
We engaged third-party consultants to provide
valuations of certain inventory, property, plant and equipment and
intangible assets in connection with our acquisition of PCI. The
fair value of the acquired tangible assets was measured by applying
the market (sales comparison, brokers' quotes), cost or replacement
cost, or the income (discounted cash flow) approach, as deemed
appropriate. The valuation of the intangible assets by the
third-party consultants was primarily based on the income approach
using a discounted cash flow model and forecasts based on
management's subjective estimates and assumptions. Various Level 2
and 3 data inputs of the fair value measurement hierarchy
(described in note 20 to the 2021 AFS) were used in the valuation
of the foregoing assets.
We recorded Acquisition Costs (defined in note
10) of $0.2 during Q1 2022 (Q1 2021 — nil; full year 2021 — $4.8),
in each case related to our acquisition of PCI. See note 10 for a
description of aggregate Acquisition Costs incurred in Q1 2022 and
Q1 2021.
5. ACCOUNTS RECEIVABLE
Accounts receivable (A/R) sales program
and supplier financing programs (SFPs):
We are party to an agreement with a third-party
bank to sell up to $300.0 in A/R on an uncommitted basis, subject
to pre-determined limits by customer. This agreement provides for
automatic annual one-year extensions, and may be terminated at any
time by the bank or by us upon 3 months’ prior notice, or by the
bank upon specified defaults. Under our A/R sales program, we
continue to collect cash from our customers and remit amounts
collected to the bank weekly.
As of March 31, 2022, we participate in
three SFPs, pursuant to which we sell A/R from the relevant
customer to third-party banks on an uncommitted basis. The SFPs
have an indefinite term and may be terminated at any time by the
customer or by us upon specified prior notice. Under our SFPs, the
third-party banks collect the relevant receivables directly from
these customers.
At March 31, 2022, we sold $162.8 of A/R
(December 31, 2021 — $45.8) under our A/R sales program,
and $150.9 of A/R under our SFPs (December 31, 2021 — $98.0).
The A/R sold under each of these programs are de-recognized from
our A/R balance, and the proceeds are reflected as cash provided by
operating activities in our consolidated statement of cash flows.
Upon sale, we assign the rights to the A/R to the banks. A/R are
sold net of discount charges, which are recorded as finance costs
in our consolidated statement of operations.
Contract assets:
At March 31, 2022, our A/R balance included
$246.7 (December 31, 2021 — $253.5) of contract assets
recognized as revenue in accordance with our revenue recognition
accounting policy.
6. INVENTORIES
We record inventory provisions, net of valuation
recoveries, in cost of sales. Inventory provisions reflect
write-downs in the value of our inventory to net realizable value,
and valuation recoveries primarily reflect gains on the disposition
of previously written-down inventory. We recorded net inventory
provisions of $2.5 for Q1 2022 (Q1 2021 — $2.4).
We receive cash deposits from certain of our
customers primarily to help mitigate the impact of higher inventory
levels carried due to the current constrained materials
environment, and to reduce risks related to excess and/or obsolete
inventory. Such deposits as of March 31, 2022 totaled $461.7
(December 31, 2021 — $434.0), and were recorded in accrued and
other current liabilities on our consolidated balance sheet.
7. ASSETS
CLASSIFIED AS HELD FOR SALE
In March 2022, after receipt of the required
government approvals, we reclassified certain vacated property
(land and building) in Asia as assets as held for sale. These
assets (attributable to our CCS segment) were reclassified at the
lower of their carrying values and estimated fair values less costs
of disposal at the time of reclassification. No gain or loss was
recognized in our consolidated statement of operations in
connection with such reclassification. We currently expect the sale
of this property to be completed in the second quarter of 2022.
Specified costs incurred in Q1 2022 in anticipation of the sale
were recorded as Transition Costs (see note 10).
8. CREDIT FACILITIES AND LEASE
OBLIGATIONS
We are party to a credit agreement (Credit
Facility) with Bank of America, N.A., as Administrative Agent, and
the other lenders party thereto, which as of a December 6, 2021
amendment thereto, includes a term loan in the original principal
amount of $350.0 (Initial Term Loan), a new term loan in the
original principal amount of $365.0 (Incremental Term Loan), and a
$600.0 revolving credit facility (Revolver). Prior to such
amendment, the Credit Facility included the Initial Term Loan, a
term loan in the original principal amount of $250.0 (Terminated
Term Loan), the outstanding borrowings under which were fully
repaid on December 6, 2021 with a portion of the proceeds of the
Incremental Term Loan, and commitments of $450.0 under the
Revolver. See note 11 to the 2021 AFS for additional detail
regarding the amendments to our Credit Facility in December 2021.
The Initial Term Loan and the Incremental Term Loan are
collectively referred to as the Term Loans.
The Initial Term Loan matures in June 2025. The
Incremental Term Loan and the Revolver each mature on March 28,
2025, unless either (i) the Initial Term Loan has been prepaid or
refinanced or (ii) commitments under the Revolver are available and
have been reserved to repay the Initial Term Loan in full, in which
case the Incremental Term Loan and Revolver each mature on December
6, 2026.
The Credit Facility has an accordion feature
that allows us to increase the Term Loans and/or commitments under
the Revolver by $150.0 million, plus an unlimited amount to the
extent that a specified leverage ratio on a pro forma basis does
not exceed specified limits, in each case on an uncommitted basis
and subject to the satisfaction of certain terms and
conditions.
Borrowings under the Revolver bear interest,
depending on the currency of the borrowing and our election for
such currency, at LIBOR, Base Rate, Canadian Prime, an Alternative
Currency Daily Rate, or an Alternative Currency Term Rate (each as
defined in the Credit Facility) plus a specified margin. The margin
for borrowings under the Revolver and the Incremental Term Loan
ranges from 1.50% — 2.25% for LIBOR borrowings and Alternative
Currency borrowings, and between 0.50% — 1.25% for Base Rate and
Canadian Prime borrowings, in each case depending on the rate we
select and our consolidated leverage ratio (as defined in the
Credit Facility). Commitment fees range between 0.30% and 0.45%
depending on our consolidated leverage ratio. The Initial Term Loan
currently bears interest at LIBOR plus 2.125%. The Incremental Term
Loan currently bears interest at LIBOR plus 2.0%. See note 12 for a
description of the LIBOR successor provisions under the Credit
Facility. Prior to the amendments to our Credit Facility in
December 2021, the margin for borrowings under the Revolver ranged
from 0.75% to 2.5%, commitment fees ranged between 0.35% and 0.50%,
in each case depending on the rate we selected and our consolidated
leverage ratio, the Initial Term Loan bore interest at LIBOR plus
2.125%, and the Terminated Term Loan bore interest at LIBOR plus
2.5%.
The Incremental Term Loan requires quarterly
principal repayments of $4.5625, and each of the Term Loans
requires a lump sum repayment of the remainder outstanding at
maturity. The Initial Term Loan required quarterly principal
repayments of $0.875, all of which were paid by the first half of
2020. We are also required to make annual prepayments of
outstanding obligations under the Credit Facility (applied first to
the Term Loans, then to the Revolver, in the manner set forth in
the Credit Facility) ranging from 0% — 50% (based on a defined
leverage ratio) of specified excess cash flow for the prior fiscal
year. No prepayments based on 2021 excess cash flow will be
required in 2022. In addition, prepayments of outstanding
obligations under the Credit Facility (applied as described above)
may also be required in the amount of specified net cash proceeds
received above a specified annual threshold (including proceeds
from the disposal of certain assets). No Credit Facility
prepayments based on 2021 net cash proceeds will be required in
2022. Any outstanding amounts under the Revolver are due at
maturity.
Activity under our Credit Facility during 2021
and Q1 2022 is set forth below:
|
Revolver |
|
Term loans |
Outstanding balances as of
December 31, 2020 |
$ |
— |
|
|
$ |
470.4 |
|
Amount repaid in Q1
2021(1) |
|
— |
|
|
|
(30.0 |
) |
Amount borrowed in Q4
2021(2) |
|
220.0 |
|
|
|
365.0 |
|
Amount repaid in Q4
2021(2) |
|
(220.0 |
) |
|
|
(145.0 |
) |
Outstanding balances as of
December 31, 2021 |
$ |
— |
|
|
$ |
660.4 |
|
Amount repaid in Q1
2022(3) |
|
— |
|
|
|
(4.6 |
) |
Outstanding balances as of
March 31, 2022 |
$ |
— |
|
|
$ |
655.8 |
|
(1) Represents a prepayment under the
Terminated Term Loan.
(2) On October 27, 2021, we borrowed $220.0
under the Revolver to fund a portion of the PCI acquisition price
in November 2021 (see note 4). On December 6, 2021, upon receipt of
the net proceeds from the $365.0 Incremental Term Loan, we repaid
all remaining amounts outstanding under the Terminated Term Loan
($145.0), and repaid $215.0 of the $220.0 borrowed under the
Revolver. On December 29, 2021, we repaid the remaining $5.0
outstanding under the Revolver.
(3) Represents the scheduled quarterly
principal repayment under the Incremental Term Loan.
At March 31, 2022 and December 31,
2021, we were in compliance with all restrictive and financial
covenants under the Credit Facility.
The following tables set forth, at the dates
shown: outstanding borrowings under the Credit Facility, excluding
ordinary course letters of credit (L/Cs); notional amounts under
our interest rate swap agreements; and outstanding lease
obligations:
|
Outstanding borrowings |
|
Notional amounts under interest rate swaps (note
12) |
|
December 312021 |
|
March 312022 |
|
December 312021 |
|
March 312022 |
Borrowings under the
Revolver |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
$ |
— |
Borrowings under term
loans: |
|
|
|
|
|
|
|
Initial Term Loan |
$ |
295.4 |
|
|
$ |
295.4 |
|
|
$ |
100.0 |
|
$ |
100.0 |
Incremental Term Loan |
|
365.0 |
|
|
|
360.4 |
|
|
|
100.0 |
|
|
230.0 |
Total |
$ |
660.4 |
|
|
$ |
655.8 |
|
|
$ |
200.0 |
|
$ |
330.0 |
Total borrowings under Credit
Facility |
$ |
660.4 |
|
|
$ |
655.8 |
|
|
|
|
|
Unamortized debt issuance
costs related to our term loans (1) |
|
(4.6 |
) |
|
|
(4.5 |
) |
|
|
|
|
Lease obligations(2) |
|
138.6 |
|
|
|
134.4 |
|
|
|
|
|
|
$ |
794.4 |
|
|
$ |
785.7 |
|
|
|
|
|
Total Credit Facility and
lease obligations: |
|
|
|
|
|
|
|
Current portion |
$ |
51.5 |
|
|
$ |
59.6 |
|
|
|
|
|
Long-term portion |
|
742.9 |
|
|
|
726.1 |
|
|
|
|
|
|
$ |
794.4 |
|
|
$ |
785.7 |
|
|
|
|
|
(1) We incur debt issuance costs upon
execution and amendment of the Credit Facility. Debt issuance costs
incurred in Q1 2022 in connection with our Revolver totaling $0.3
(Q1 2021 — nil) were deferred as other assets on our consolidated
balance sheets and are amortized on a straight line basis over the
term (or remaining term, as applicable) of the Revolver. Debt
issuance costs incurred in Q1 2022 in connection with our Term
Loans totaling $0.3 (Q1 2021 — nil) were deferred as long-term debt
on our consolidated balance sheets and are amortized over their
respective terms using the effective interest rate method.
(2) These lease obligations represent the
present value of unpaid lease payments which have been discounted
using our incremental borrowing rate on the lease commencement
dates. In addition to these lease obligations, we have commitments
under additional real property leases not recognized as liabilities
as of March 31, 2022 or December 31, 2021 because such leases had
not yet commenced. A description of, and minimum lease obligations
under, these leases are disclosed in note 24 to the 2021 AFS.
The following table sets forth, at the dates
shown, information regarding outstanding L/Cs, surety bonds and
overdraft facilities:
|
December 312021 |
|
March 312022 |
|
Outstanding L/Cs under the
Revolver |
$ |
21.0 |
|
$ |
21.0 |
|
Outstanding L/Cs and surety
bonds outside the Revolver |
|
27.1 |
|
|
28.2 |
|
Total |
$ |
48.1 |
|
$ |
49.2 |
|
Available uncommitted bank
overdraft facilities |
$ |
198.5 |
|
$ |
198.5 |
|
Amounts outstanding under
available uncommitted bank overdraft facilities |
$ |
— |
|
$ |
— |
|
|
|
|
|
|
Finance costs consist of interest expense and
fees related to our Credit Facility (including debt issuance and
related amortization costs), our interest rate swap agreements, our
A/R sales program and SFPs, and interest expense on our lease
obligations, net of interest income earned.
9. CAPITAL STOCK
SVS Repurchase Plans:
In recent years, we have repurchased SVS in the
open market, or as otherwise permitted, for cancellation through
normal course issuer bids (NCIBs), which allow us to repurchase a
limited number of SVS during a specified period. The maximum number
of SVS we are permitted to repurchase for cancellation under each
NCIB is reduced by the number of SVS purchased by a broker in the
open market during the term of such NCIB to satisfy delivery
obligations under our SBC plans. We from time-to-time enter into
automatic share purchase plans (ASPPs) with a broker, instructing
the broker to purchase our SVS in the open market on our behalf
(for cancellation under an NCIB or for delivery under our SBC
plans), including during any applicable trading blackout periods
(ASPP Purchases), up to specified daily maximums (subject to
certain conditions) at specified prices through the term of each
ASPP. No ASPPs were entered into in Q1 2022.
On November 19, 2020, the TSX accepted our
notice to launch an NCIB (2020 NCIB), which allowed us to
repurchase, at our discretion, from November 24, 2020 until the
earlier of November 23, 2021 or the completion of purchases
thereunder, up to approximately 9.0 million SVS in the open market,
or as otherwise permitted, subject to the normal terms and
limitations of such bids. At December 31, 2020, we had accrued
$15.0, representing the estimated contractual maximum number of
permitted SVS repurchases (Contractual Maximum) under an ASPP
entered into in December 2020 (2.0 million SVS). This accrual was
reversed in Q1 2021. At March 31, 2021, we recorded an accrual of
$18.1, representing the estimated Contractual Maximum (2.2 million
SVS) under an ASPP entered into in March 2021. This accrual was
reversed in the second quarter of 2021.
On December 2, 2021, the TSX accepted our notice
to launch a new NCIB (2021 NCIB). The 2021 NCIB allows us to
repurchase, at our discretion, from December 6, 2021 until the
earlier of December 5, 2022 or the completion of purchases
thereunder, up to approximately 9.0 million of our SVS in the open
market, or as otherwise permitted, subject to the normal terms and
limitations of such bids. As of March 31, 2022, approximately
4.6 million SVS remain available for repurchase under the 2021 NCIB
either for cancellation or SBC delivery purposes.
In December 2021, we entered into an ASPP (2021
NCIB ASPP) for the repurchase of SVS for cancellation under the
2021 NCIB. We recorded an accrual at December 31, 2021 of $7.5
(NCIB Accrual), representing the estimated Contractual Maximum (0.7
million SVS) under this ASPP. In Q1 2022, the NCIB Accrual was
reversed, and we paid $7.8 (including transaction fees) to
repurchase 0.7 million SVS for cancellation, including 0.2 million
SVS repurchased under the 2021 NCIB ASPP (see chart below).
In December 2021, we entered into an additional
ASPP (SBC ASPP) for delivery obligations under our SBC plans. We
recorded an accrual at December 31, 2021 of $33.8 (SBC Accrual),
representing the estimated Contractual Maximum (3.0 million SVS)
under this ASPP. In Q1 2022, the SBC Accrual was reversed, and we
paid $34.8 (including transaction fees) to repurchase 3.0 million
SVS for SBC plan delivery obligations, all under the SBC ASPP (see
chart below).
SVS repurchases:
Information regarding SVS repurchase activities
for the periods indicated is set forth below:
|
Three months ended March 31 |
|
|
2021 |
|
|
2022 |
Aggregate cost(1) of SVS
repurchased for cancellation (2) |
$ |
5.3 |
|
$ |
7.8 |
Number of SVS repurchased for cancellation (in millions) (3) |
|
0.6 |
|
|
0.7 |
Weighted average price per share for repurchases |
$ |
8.35 |
|
$ |
11.50 |
Aggregate cost(1) of SVS
repurchased for delivery under SBC plans (see below) |
$ |
— |
|
$ |
34.8 |
Number of SVS repurchased for
delivery under SBC plans (in millions) (4) |
|
— |
|
|
3.0 |
(1) Includes transaction fees.
(2) For Q1 2021, excludes an accrual of
$18.1 we recorded at March 31, 2021 for the estimated Contractual
Maximum under the March 2021 ASPP.
(3) For Q1 2021 and Q1 2022, includes 0.01
million and 0.2 million ASPP Purchases of SVS for cancellation,
respectively.
(4) For Q1 2022, represents 3.0 million
ASPP Purchases of SVS for SBC delivery obligations.
SBC:
From time to time, we pay cash to a broker to
purchase SVS in the open market to satisfy delivery requirements
under our SBC plans. At March 31, 2022, the broker held 1.6
million SVS with a value of $19.0 (December 31, 2021 — 1.4
million SVS with a value of $15.1) for this purpose, which we
report as treasury stock on our consolidated balance sheet. We used
2.8 million SVS held by the broker (including additional SVS
purchased during Q1 2022) to settle SBC awards that vested during
Q1 2022.
We grant restricted share units (RSUs) and
performance share units (PSUs), and from time-to-time stock
options, to employees under our SBC plans. The majority of RSUs
vest one-third per year over a three-year period. Stock options
generally vest 25% per year over a four-year period. The number of
outstanding PSUs that will actually vest will vary from 0% to 200%
of a target amount granted based on the level of achievement of a
pre-determined non-market performance measurement in the final year
of a three-year performance period, subject to modification by each
of a separate pre-determined non-market financial target and our
relative Total Shareholder Return (TSR) performance over the
three-year vesting period. The portion of our expense that relates
to non-TSR-based performance is subject to adjustment in any period
to reflect changes in the estimated level of achievement of
pre-determined goals and financial targets. We also grant deferred
share units (DSUs) and RSUs (under specified circumstances) to
directors as compensation under our Directors' Share Compensation
Plan. See note 2(l) to the 2021 AFS for further detail.
Information regarding RSU, PSU, and DSU grants
to employees and directors, as applicable, for the periods
indicated is set forth below (no stock options were granted in
either period):
|
Three months ended March 31 |
|
|
2021 |
|
|
2022 |
RSUs Granted: |
Number of awards (in
millions) |
|
2.4 |
|
|
1.7 |
Weighted average grant date
fair value per unit |
$ |
8.11 |
|
$ |
12.42 |
|
PSUs Granted: |
Number of awards (in millions,
representing 100% of target) |
|
1.8 |
|
|
1.2 |
Weighted average grant date
fair value per unit |
$ |
8.82 |
|
$ |
14.40 |
|
|
|
|
DSUs Granted: |
Number of awards (in
millions) |
|
0.03 |
|
|
0.03 |
Weighted average grant date
fair value per unit |
$ |
8.37 |
|
$ |
11.91 |
Information regarding employee and director SBC
expense for the periods indicated is set forth below:
|
Three months ended March 31 |
|
|
2021 |
|
|
2022 |
Employee SBC expense in cost
of sales |
$ |
4.9 |
|
$ |
5.6 |
Employee SBC expense in
SG&A |
|
5.2 |
|
|
9.0 |
Total |
$ |
10.1 |
|
$ |
14.6 |
Director SBC expense in
SG&A (1) |
$ |
0.5 |
|
$ |
0.6 |
(1) Expense consists of director compensation to
be settled with SVS, or SVS and cash, as elected by each
director.
10. OTHER CHARGES (RECOVERIES)
|
Three months ended March 31 |
|
|
2021 |
|
|
|
2022 |
Restructuring
(a) |
$ |
5.8 |
|
|
$ |
3.1 |
Transition Costs
(b) |
|
0.1 |
|
|
|
1.5 |
Acquisition Costs (Recoveries)
and Other (c) |
|
(1.3 |
) |
|
|
0.2 |
|
$ |
4.6 |
|
|
$ |
4.8 |
(a) Restructuring:
Our restructuring activities for Q1 2022
consisted primarily of actions to adjust our cost base to address
reduced levels of demand in certain of our businesses and
geographies.
In Q1 2022, we recorded cash restructuring
charges of $2.8 and non-cash restructuring charges of $0.3. The
cash charges consisted primarily of employee termination costs, and
the non-cash charges consisted primarily of the write-down of
assets related to disengaging programs. In Q1 2021, we recorded
cash charges of $5.7, primarily for employee termination costs, and
non-cash charges of $0.1, to write-down right-of-use assets in
connection with vacated properties. At March 31, 2022, our
restructuring provision was $6.2 (December 31, 2021 — $6.1),
which we recorded in the current portion of provisions on our
consolidated balance sheet.
(b) Transition
Costs:
Transition Costs consist of costs recorded in
connection with: (i) the relocation of our Toronto manufacturing
operations, and the move of our corporate headquarters into and out
of a temporary location during, and upon completion, of the
construction of space in a new office building at our former
location (all in connection with the 2019 sale of our Toronto real
property); (ii) the transfer of manufacturing lines from closed
sites to other sites within our global network; and (iii)
consistent with the treatment of our Toronto real property sale,
the sale of real properties unrelated to restructuring actions
(Property Dispositions). Transition Costs consist of direct
relocation and duplicate costs (such as rent expense, utility
costs, depreciation charges, and personnel costs) incurred during
the transition periods, as well as cease-use and other costs
incurred in connection with idle or vacated portions of the
relevant premises that we would not have incurred but for these
relocations, transfers and dispositions. Transition Recoveries
consist of any gains recorded in connection with Property
Dispositions. We incurred Transition Costs of $1.5 during Q1 2022
(Q1 2021 — $0.1). Transition Costs in Q1 2022 related primarily to
the anticipated disposal of certain assets reclassified as held for
sale during Q1 2022. Any gain on the disposal of such assets will
be recorded as Transition Recoveries in the period that the sale is
completed. See note 7.
(c) Acquisition
Costs (Recoveries) and Other:
We incur consulting, transaction and integration
costs relating to potential and completed acquisitions. We also
incur charges or releases related to the subsequent re-measurement
of indemnification assets or the release of indemnification or
other liabilities recorded in connection with acquisitions, when
applicable. Collectively, these costs, charges and releases are
referred to as Acquisition Costs (Recoveries).
We recorded Acquisition Costs of $0.2 during Q1
2022 related to the acquisition of PCI (see note 4). In Q1 2021, we
recorded net Acquisition Recoveries of $0.8, consisting of $0.4 in
consulting costs related to potential acquisitions and $1.2 of
releases related to certain indirect tax liabilities previously
recorded in connection with our acquisition of Impakt Holdings,
LLC. Other (which pertains only to Q1 2021) consists of legal
recoveries of $0.5 (for component parts purchased in prior periods)
in connection with the settlement of class action lawsuits in which
we were a plaintiff.
11. INCOME TAXES
Our income tax expense or recovery for each
quarter is determined by multiplying the earnings or losses before
tax for such quarter by management’s best estimate of the
weighted-average annual income tax rate expected for the full year,
taking into account the tax effect of certain items recognized in
the interim period. As a result, the effective income tax rates
used in our interim financial statements may differ from
management’s estimate of the annual effective tax rate for the
annual financial statements. Our estimated annual effective income
tax rate varies as the quarters progress, for various reasons,
including as a result of the mix and volume of business in various
tax jurisdictions within the Americas, Europe and Asia, in
jurisdictions with tax holidays and tax incentives, and in
jurisdictions for which no net deferred income tax assets have been
recognized because management believes it is not probable that
future taxable profit will be available against which tax losses
and deductible temporary differences could be utilized. Our
annual effective income tax rate can also vary due to the impact of
restructuring charges, foreign exchange fluctuations, operating
losses, cash repatriations, and changes in our provisions related
to tax uncertainties.
Our Q1 2022 net income tax expense of $9.0 was
favorably impacted by $4.9 in reversals of tax uncertainties in one
of our Asian subsidiaries. Our Q1 2021 net income tax expense of
$5.2 was favorably impacted by $1.1 in reversals of tax
uncertainties in one of our Asian subsidiaries that completed its
liquidation and dissolution during that quarter. Taxable foreign
exchange impacts were not significant in either Q1 2022 or Q1
2021.
12. FINANCIAL INSTRUMENTS AND RISK
MANAGEMENT
Our financial assets are comprised primarily of
cash and cash equivalents, A/R, and derivatives used for hedging
purposes. Our financial liabilities are comprised primarily of
accounts payable, certain accrued and other liabilities, the Term
Loans, borrowings under the Revolver, lease obligations, and
derivatives.
Interest rate risk:
Borrowings under the Credit Facility expose us
to interest rate risk due to the potential variability of market
interest rates. In order to partially hedge against our exposure to
interest rate variability on our Term Loans, we have entered into
various agreements with third-party banks to swap the variable
interest rate (based on LIBOR plus a margin) with a fixed rate of
interest for a portion of the borrowings under our Term Loans. At
March 31, 2022, we had: (i) interest rate swaps hedging the
interest rate risk associated with $100.0 of our Initial Term Loan
borrowings that expire in August 2023 (Initial Swaps); (ii)
interest rate swaps hedging the interest rate risk associated with
$100.0 of our Initial Term Loan borrowings, for which the cash
flows commence upon the expiration of the Initial Swaps and
continue through June 2024 (First Extended Initial Swaps); (iii)
interest rate swaps (entered into in February 2022) hedging the
interest rate risk associated with $100.0 of our Initial Term Loan
borrowings (and any subsequent term loans replacing the Initial
Term Loan), for which the cash flows commence upon the expiration
of the First Extended Initial Swaps and continue through December
2025 (Second Extended Initial Swaps); (iv) interest rate swaps
hedging the interest rate risk associated with $100.0 of
outstanding borrowings under the Incremental Term Loan that expire
in December 2023 (Incremental Swaps); (v) interest rate swaps
(entered into in February 2022) hedging the interest rate risk
associated with $100.0 of our Incremental Term Loan borrowings, for
which the cash flows commence upon the expiration of the
Incremental Swaps and continue through December 2025 (First
Extended Incremental Swaps); and (vi) interest rate swaps (entered
into in February 2022) hedging the interest rate risk associated
with an additional $130.0 of our Incremental Term Loan borrowings
that expire in December 2025 (Additional Incremental Swaps). We
have an option to cancel up to $50.0 of the notional amount of the
Additional Incremental Swaps from January 2024 through October
2025.
At March 31, 2022, the interest rate risk
related to $325.8 of borrowings under the Credit Facility was
unhedged, consisting of unhedged amounts outstanding under the Term
Loans ($195.4 under the Initial Term Loan and $130.4 under the
Incremental Term Loan), and no amounts outstanding (other than
ordinary course L/Cs) under the Revolver. See note 8.
At March 31, 2022, the fair value of our
interest rate swap agreements was a net unrealized gain of $3.6,
consisting of aggregate unrealized gains of $5.5 for certain of our
swaps, which we recorded in other non-current assets, and aggregate
unrealized losses of $1.9 on the remainder, which we recorded in
other non-current liabilities on our consolidated balance sheet
(December 31, 2021 — net unrealized loss of $6.9, consisting
of aggregate unrealized losses of $7.4, and aggregate unrealized
gains of $0.5). The unrealized portion of the change in fair value
of the swaps is recorded in other comprehensive income (loss)
(OCI). The realized portion of the change in fair value of the
swaps is released from accumulated OCI and recognized under finance
costs in our consolidated statement of operations when the hedged
interest expense is recognized.
Global reform of major interest rate benchmarks
is currently underway, including the anticipated replacement of
some Interbank Offered Rates (including LIBOR) with alternative
nearly risk-free rates. See note 2, "Recently issued accounting
standards and amendments" of the 2021 AFS. We have obligations
under our Credit Facility, certain lease arrangements and
derivative instruments that are indexed to LIBOR (LIBOR
Agreements). The interest rates under these agreements are subject
to change when relevant LIBOR benchmark rates cease to exist. There
remains uncertainty over the timing and methods of transition to
such alternate rates.
Our Credit Facility provides that when the
administrative agent, the majority of lenders or we determine that
LIBOR (or the corresponding rate for any Alternative Currency, as
defined in the Credit Facility), is unavailable or being replaced
(or, in the case of LIBOR borrowings under the Revolver and the
Incremental Term Loan, at our joint election with the
administrative agent), then we and the administrative agent may
amend the underlying credit agreement to reflect a successor rate
as specified therein. Once LIBOR becomes unavailable, if no
successor rate has been established, applicable loans under the
Credit Facility accruing interest at LIBOR will convert to Base
Rate loans. The Credit Facility has not yet been amended to reflect
a successor rate for LIBOR. Certain of our lease arrangements that
include progress payments provide that a successor rate will be
determined by the lessor when LIBOR ceases to be available or is no
longer representative, or if earlier, by mutually-agreed amendments
to the lease agreement to adopt a replacement benchmark, but
successor rates have not yet been implemented. It remains uncertain
when the benchmark transitions will be complete or what replacement
rates will be used.
Our variable rate Term Loans are partially
hedged with interest rate swap agreements (described above). Hedge
ineffectiveness could result due to the cessation of LIBOR, if such
agreements transition using a different benchmark or spread
adjustment as compared to the underlying hedged debt. The Second
Extended Initial Swaps, the First Extended Incremental Swaps and
the Additional Incremental Swaps mirror the LIBOR successor
provisions under the Credit Facility, but have not yet transitioned
to a successor rate. In Q1 2022, we also amended the swap agreement
with one of the two counterparty banks under the Incremental Swaps
(with a notional amount of $50.0) to mirror the LIBOR successor
provisions under the Credit Facility, but such swaps have not yet
transitioned to the successor rate. Our remaining interest rate
swap agreements do not yet have LIBOR successor provisions and will
require future amendment. As a result, we cannot assure that
benchmark transitions under these interest rate swap agreements
will be successful, or if so, what replacement rates will be
used.
Our A/R sales program and three customers SFPs
that were indexed to LIBOR have transitioned to alternative
benchmark rates with predetermined spreads, with no significant
impact on our consolidated financial statements.
While we expect that reasonable alternatives to
LIBOR benchmarks will be implemented in advance of their cessation
dates, we cannot assure that this will be the case. If relevant
LIBOR benchmarks are no longer available and the alternative
reference rate is higher, interest rates under the affected LIBOR
Agreements would increase, which would adversely impact our
interest expense, our financial performance and cash flows. We will
continue to monitor developments with respect to the cessation of
LIBOR, and will evaluate potential impacts on our LIBOR Agreements,
processes, systems, risk management methodology and valuations,
financial reporting, taxes, and financial results. However, we are
currently unable to predict what the future replacement rates or
consequences on our operations or financial results will be.
Currency risk:
The majority of our currency risk is driven by
operational costs, including income tax expense, incurred in local
currencies by our subsidiaries. We cannot predict changes in
currency exchange rates, the impact of exchange rate changes on our
operating results, nor the degree to which we will be able to
manage the impact of currency exchange rate changes. Such changes,
including negative impacts on currency exchange rates related to
the COVID-19 pandemic, could have a material effect on our
business, financial performance and financial condition.
Our major currency exposures at March 31,
2022 are summarized in U.S. dollar equivalents in the following
table. The local currency amounts have been converted to U.S.
dollar equivalents using spot rates at March 31, 2022.
|
Canadian dollar |
|
Euro |
|
Thai baht |
|
Chinese renminbi |
Cash and cash equivalents |
$ |
4.1 |
|
|
$ |
9.5 |
|
|
$ |
1.6 |
|
|
$ |
18.1 |
|
Accounts receivable |
|
8.0 |
|
|
|
44.0 |
|
|
|
— |
|
|
|
19.8 |
|
Income taxes and value-added
taxes receivable |
|
16.7 |
|
|
|
0.2 |
|
|
|
12.7 |
|
|
|
6.3 |
|
Other financial assets |
|
— |
|
|
|
2.7 |
|
|
|
0.4 |
|
|
|
0.6 |
|
Pension and non-pension
post-employment liabilities |
|
(79.7 |
) |
|
|
(0.5 |
) |
|
|
(19.2 |
) |
|
|
(0.8 |
) |
Income taxes and value-added
taxes payable |
|
— |
|
|
|
(0.2 |
) |
|
|
(5.0 |
) |
|
|
(13.4 |
) |
Accounts payable and certain
accrued and other liabilities and provisions |
|
(60.8 |
) |
|
|
(34.1 |
) |
|
|
(35.0 |
) |
|
|
(54.0 |
) |
Net financial assets
(liabilities) |
$ |
(111.7 |
) |
|
$ |
21.6 |
|
|
$ |
(44.5 |
) |
|
$ |
(23.4 |
) |
We enter into foreign currency forward contracts
to hedge our cash flow exposures and foreign currency swaps to
hedge the exposures of our monetary assets and liabilities
denominated in foreign currencies. While these contracts are
intended to reduce the effects of fluctuations in foreign currency
exchange rates, our hedging strategy does not mitigate the
longer-term impacts of changes to foreign exchange rates.
At March 31, 2022, we had foreign currency
forwards and swaps to trade U.S. dollars in exchange for the
following currencies:
Currency |
Contract
amount inU.S. dollars |
|
Weighted averageexchange rate
inU.S. dollars
(1) |
|
Maximumperiod inmonths |
|
Fair valuegain (loss) |
Canadian dollar |
$ |
225.0 |
|
$ |
0.79 |
|
13 |
|
$ |
4.1 |
|
Thai baht |
|
106.4 |
|
|
0.03 |
|
12 |
|
|
(0.5 |
) |
Malaysian ringgit |
|
94.5 |
|
|
0.24 |
|
12 |
|
|
— |
|
Mexican peso |
|
26.6 |
|
|
0.05 |
|
12 |
|
|
1.1 |
|
British pound |
|
0.4 |
|
|
1.33 |
|
4 |
|
|
— |
|
Chinese renminbi |
|
43.9 |
|
|
0.16 |
|
12 |
|
|
0.5 |
|
Euro |
|
28.1 |
|
|
1.12 |
|
7 |
|
|
0.5 |
|
Romanian leu |
|
35.6 |
|
|
0.23 |
|
12 |
|
|
(1.2 |
) |
Singapore dollar |
|
20.8 |
|
|
0.74 |
|
12 |
|
|
(0.1 |
) |
Japanese yen |
|
14.0 |
|
|
0.0084 |
|
4 |
|
|
0.7 |
|
Korean won |
|
5.7 |
|
|
0.0008 |
|
4 |
|
|
0.1 |
|
Total |
$ |
601.0 |
|
|
|
|
|
$ |
5.2 |
|
|
|
|
|
|
|
|
|
Fair values of
outstanding foreign currency forward and swap contracts related to
effective cash flow hedges where we applied hedge accounting |
|
|
1.4 |
|
Fair values of
outstanding foreign currency forward and swap contracts related to
economic hedges where we record the changes in the fair values of
such contracts through our consolidated statement of
operations |
|
|
3.8 |
|
|
|
|
|
|
|
|
$ |
5.2 |
|
(1) Represents the U.S. dollar equivalent
(not in millions) of one unit of the foreign currency, weighted
based on the notional amounts of the underlying foreign currency
forward and swap contracts outstanding as at March 31,
2022.
At March 31, 2022, the aggregate fair value
of our outstanding contracts was a net unrealized gain of $5.2
(December 31, 2021 — net unrealized gain of $1.2), resulting
from fluctuations in foreign exchange rates between the contract
execution and the period-end date. At March 31, 2022, we
recorded $9.5 of derivative assets in other current assets and $4.3
of derivative liabilities in accrued and other current liabilities
(December 31, 2021 — $7.4 of derivative assets in other
current assets and $6.2 of derivative liabilities in accrued and
other current liabilities).
Credit risk:
Credit risk refers to the risk that a
counterparty may default on its contractual obligations resulting
in a financial loss to us. We believe our credit risk of
counterparty non-performance continues to be relatively low. We are
in regular contact with our customers, suppliers and logistics
providers, and have not experienced significant counterparty
credit-related non-performance in 2021 or Q1 2022. However, if a
key supplier (or any company within such supplier's supply chain)
or customer fails to comply with their contractual obligations,
this could result in a significant financial loss to us. We would
also suffer a significant financial loss if an institution from
which we purchased foreign currency exchange contracts and swaps,
interest rate swaps, or annuities for our pension plans defaults on
their contractual obligations. With respect to our financial market
activities, we have adopted a policy of dealing only with
counterparties we deem to be creditworthy. No significant
adjustments were made to our allowance for doubtful accounts during
Q1 2022 or Q1 2021 in connection with our ongoing credit risk
assessments.
Liquidity risk:
Liquidity risk is the risk that we may not have
cash available to satisfy our financial obligations as they come
due. The majority of our financial liabilities recorded in accounts
payable, accrued and other current liabilities and provisions are
due within 90 days. We manage liquidity risk through
maintenance of cash on hand and access to the various financing
arrangements described in notes 5 and 8. We believe that cash flow
from operating activities, together with cash on hand, cash from
accepted sales of A/R, and borrowings available under the Revolver
and potentially available under uncommitted intraday and overnight
bank overdraft facilities, are sufficient to fund our currently
anticipated financial obligations, and will remain available in the
current environment. As our A/R sales program and SFPs are each
uncommitted, however, there can be no assurance that any
participant bank will purchase any of the A/R that we wish to
sell.
13. COVID-19 GOVERNMENT
SUBSIDIES
We determined that we qualified for
COVID-19-related government subsidies, grants and/or credits (COVID
Subsidies) during 2021 from various government authorities, the
most significant of which were provided under the Canadian
Emergency Wage Subsidy (CEWS) first announced by the Government of
Canada in April 2020. We have not applied for further COVID
Subsidies since June 2021.
For Q1 2022, we recorded no COVID Subsidies. For
Q1 2021, we recorded approximately $4 of COVID Subsidies, which we
recognized as a reduction to the related expenses in cost of goods
sold (approximately $3) and SG&A (approximately $1) in our
consolidated statement of operations.
14.
COMMITMENTS AND 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 where required. Although it is not always possible to
estimate the extent of potential costs, if any, we believe that the
ultimate resolution of all such pending matters will not have a
material adverse impact on our financial performance, financial
position or liquidity.
Taxes and Other Matters:
In 2017, the Brazilian Ministry of Science,
Technology, Innovation and Communications (MCTIC) issued
assessments seeking to disqualify certain research and development
expenses for the years 2006 to 2009, which entitled our Brazilian
subsidiary (which ceased operations in 2009) to charge reduced
sales tax levies to its customers. In Q1 2022, the MCTIC accepted
our appeals in respect of 2007 to 2009 (following lower
re-assessments issued for 2007 and 2008 in the first quarter of
2020 in response to our initial appeal). Our appeal in respect of
2006 had been accepted in the fourth quarter of 2021. As a result,
as of March 31, 2022, this matter has been completely resolved with
no adjustment to our original filing positions for any relevant
year.
In the third quarter of 2021 (Q3 2021), the
Romanian tax authorities issued a final assessment in the aggregate
amount of approximately 31 million Romanian leu (approximately
$7 at period-end exchange rates), for additional income and
value-added taxes for one of our Romanian subsidiaries for the 2014
to 2018 tax years. In order to advance our case to the appeals
phase and reduce or eliminate potential interest and penalties, we
paid the Romanian tax authorities the full amount assessed in Q3
2021 (without agreement to all or any portion of such assessment).
We believe that our originally-filed tax return positions are in
compliance with applicable Romanian tax laws and regulations, and
intend to vigorously defend our position through all necessary
appeals or other judicial processes.
The successful pursuit of assertions made by any
government authority, including tax authorities, could result in
our owing significant amounts of tax or other reimbursements,
interest and possibly penalties. We believe we adequately accrue
for any probable potential adverse ruling. However, there can be no
assurance as to the final resolution of any claims and any
resulting proceedings. If any claims and any ensuing proceedings
are determined adversely to us, the amounts we may be required to
pay could be material, and in excess of amounts accrued.
1 CGUs are the smallest identifiable group of
assets that cannot be tested individually and generate cash inflows
that are largely independent of those of other assets or groups of
assets, and can be comprised of a single site, a group of sites, or
a line of business.
Contacts:
Celestica Global Communications
(416) 448-2200
media@celestica.com
Celestica Investor Relations
(416) 448-2211
clsir@celestica.com
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