Celestica Announces Fourth Quarter and Fiscal Year 2016

Celestica Announces Fourth Quarter and Fiscal Year 2016 Financial Results

TORONTO, ON--(Marketwired - January 26, 2017) - Celestica Inc. (NYSE: CLS) (TSX: CLS), a global leader in the delivery of end-to-end product lifecycle solutions, today announced financial results for the fourth quarter and fiscal year ended December 31, 2016.Fourth Quarter 2016 HighlightsRevenue: $1.62 billion, above our previously provided guidance range of $1.5 to $1.6 billion, increased 4% sequentially and 7% compared to the fourth quarter of 2015Revenue dollars from our diversified end market were relatively flat compared to the fourth quarter of 2015, and represented 27% of total revenue for the fourth quarter of 2016, compared to 30% of total revenue for the fourth quarter of 2015 as a result of the overall increase in revenueIFRS EPS: $0.15 per share, compared to $0.08 per share for the fourth quarter of 2015. IFRS EPS for the fourth quarter of 2016 included a net benefit of $0.07 per share related to income taxes, as well as a negative $0.17 per share impact resulting from higher than anticipated restructuring charges (discussed below)Adjusted EPS (non-IFRS): $0.41 per share, above our previously provided guidance range of $0.29 to $0.35 per share, compared to $0.27 per share for the fourth quarter of 2015. Adjusted EPS for the fourth quarter of 2016 would have been $0.34, towards the high end of our guidance range, without the $0.07 per share net benefit related to income taxesOperating margin (non-IFRS): 3.8%, consistent with the mid-point of our expectations, compared to 3.5% for the fourth quarter of 2015. Operating earnings (non-IFRS) increased 16% compared to the fourth quarter of 2015Adjusted ROIC (non-IFRS): 22.7%, compared to 21.4% for the fourth quarter of 2015Free cash flow (non-IFRS): $69.3 million, compared to $76.0 million for the fourth quarter of 2015Recorded restructuring charges of $24.4 million, or $0.17 per share, pertaining primarily to our exit from the solar panel manufacturing business (discussed below)Acquired the business assets of Karel Manufacturing for $14.9 million in November 2016 (see note 4, "Acquisition", to our Interim Financial Statements (defined below))Fiscal Year 2016 Highlights

Revenue: $6.0 billion, increased 7% compared to $5.6 billion for 2015
Revenue from our diversified end market grew 11% to represent 30% of total revenue, compared to 29% of total revenue for 2015
IFRS EPS: $0.95 per share, compared to $0.42 per share for 2015. Both years were impacted by tax-related items (discussed below). IFRS EPS would have been $0.73 per share for 2016, compared to $0.50 per share for 2015 without these tax-related items.
Adjusted EPS (non-IFRS): $1.40 per share, compared to $0.92 per share in 2015. Both years were impacted by tax-related items (discussed below). Adjusted EPS would have been $1.18 per share for 2016, compared to $1.00 per share for 2015 without these tax-related items.
Operating margin (non-IFRS): 3.7%, compared to 3.5% for 2015. Operating earnings (non-IFRS) increased 14% compared to 2015
Adjusted ROIC (non-IFRS): 20.8%, compared to 19.8% for 2015
Free cash flow (non-IFRS): $110.2 million, compared to $113.2 million for 2015
Repurchased and cancelled 3.2 million subordinate voting shares for $34.3 million through a Normal Course Issuer Bid launched in February 2016

"Celestica delivered a strong fourth quarter, with growth in revenue of 7% and growth in operating earnings of 16%, compared to the fourth quarter of 2015," said Rob Mionis, Celestica's President and Chief Executive Officer. "Celestica's strong close to the year helped deliver full-year 2016 revenue growth of 7%, 14% growth in operating earnings and over $100 million of free cash flow. Among the many highlights for 2016, we achieved our highest level of operating margins since 2001 and the highest revenue levels since 2012."

"We are proud of our many accomplishments this year. I am pleased with the progress we have made in setting the foundation for our strategy and delivering on our priorities and I am excited about the momentum we are building as we continue to drive profitable growth and increase shareholder value."

                                                                            
Fourth Quarter and Year-to-Date       Three months ended     Year ended     
 Summary                                  December 31        December 31    
------------------------------------ ------------------- -------------------
                                        2015      2016      2015      2016  
                                     --------- --------- --------- ---------
Revenue (in millions)                $1,514.9  $1,623.7  $5,639.2  $6,016.5 
                                                                            
IFRS net earnings (in millions)(i)   $   12.1  $   20.9  $   66.9  $  136.3 
IFRS EPS(i)                          $   0.08  $   0.15  $   0.42  $   0.95 
                                                                            
Non-IFRS adjusted net earnings (in                                          
 millions) (i) (ii)                  $   38.9  $   59.5  $  145.0  $  200.9 
Non-IFRS adjusted EPS(i) (ii)        $   0.27  $   0.41  $   0.92  $   1.40 
Non-IFRS adjusted return on invested                                        
 capital (adjusted ROIC)(ii)             21.4%     22.7%     19.8%     20.8%
Non-IFRS operating margin(ii)             3.5%      3.8%      3.5%      3.7%

i. International Financial Reporting Standards (IFRS) earnings per share (EPS) for the fourth quarter of 2016 included an aggregate charge of $0.25 (pre-tax) per share for employee stock-based compensation expense, amortization of intangible assets (excluding computer software) and restructuring charges. This aggregate charge is above the range we provided on October 20, 2016 of an aggregate charge of between $0.09 to $0.14 per share for these items (see the tables in Schedule 1 attached hereto for per-item charges), due to higher than anticipated restructuring charges related to our exit from the solar panel manufacturing business (discussed below).

IFRS EPS and adjusted EPS (non-IFRS) for the fourth quarter of 2016 were favorably impacted by a $0.07 per share net benefit related to income taxes, comprised of a $0.10 per share income tax recovery attributable to the resolution of certain previously disputed tax matters in Canada (including related refund interest income) and a $0.03 per share favorable deferred tax recovery, offset in part by a $ 0.06 per share income tax expense related to taxable foreign exchange resulting from the weakening of the Malaysian ringgit and Chinese renminbi relative to the U.S. dollar. See notes 12 and 14 to our December 31, 2016 unaudited interim condensed consolidated financial statements (Interim Financial Statements). The foregoing items arose in the fourth quarter of 2016, and were therefore not factored into our guidance for adjusted EPS (non-IFRS) for that period. Non-IFRS adjusted EPS for the fourth quarter of 2016 would have been towards the high end of our guidance range for the quarter without the net income tax benefits referred to above.

IFRS EPS and adjusted EPS (non-IFRS) for full year 2016 were favorably impacted by an aggregate $0.22 per share net benefit related to income taxes, comprised of a $0.34 per share income tax recovery attributable to the resolution in the second half of 2016 of certain previously disputed tax matters in Canada (including related refund interest income), offset in part by an aggregate $0.07 per share negative impact from current and deferred withholding taxes, as well as a $0.05 per share income tax expense related to taxable foreign exchange impacts similar to those noted above. See notes 12 and 14 to our Interim Financial Statements.

IFRS EPS for the fourth quarter and full year 2015 were negatively impacted by an $0.08 per share non-cash impairment charge (aggregate of $12.2 million) on certain of our property, plant and equipment. IFRS EPS and adjusted EPS (non-IFRS) for the full year 2015 included an $0.08 per share (aggregate of $12.2 million) income tax expense related to taxable foreign exchange impacts similar to those noted above, arising in the third quarter of 2015. See note 12 to our Interim Financial Statements.

Our non-IFRS operating margin of 3.8% for the fourth quarter of 2016 was consistent with the mid-point of our expectations.

In addition, the calculation of our weighted average number of shares (used to determine our IFRS EPS and non-IFRS adjusted EPS) for the full year 2016 reflects the full impact of the reduction in outstanding subordinate voting shares as a result of our share repurchases and cancellations in 2015 pursuant to our $350.0 million substantial issuer bid and our Normal Course Issuer Bid then in effect. Accordingly, the positive effect of the reduced weighted average number of shares on our IFRS EPS and non-IFRS adjusted EPS for the full year 2016 was greater as compared to full year 2015.

ii. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public companies that use IFRS or other generally accepted accounting principles (GAAP). See "Non-IFRS Supplementary Information" below for information on our rationale for the use of non-IFRS measures, and Schedule 1 for, among other items, non-IFRS measures included in this press release, as well as their definitions, uses, and a reconciliation of non-IFRS to IFRS measures.

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