Celestica Releases Full Year 2018 Financial Results

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Celestica Inc., a leader in design, manufacturing and supply chain solutions for the world's most innovative companies, has released its financial results for the fourth quarter of 2018 (Q4 2018) and the year ended December 31, 2018 (FY 2018).

During the first quarter of 2018, Celestica completed a reorganization of its business into two operating and reportable segments—Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS). Celestica adopted International Financial Reporting Standards (IFRS) 15 (Revenue from Contracts with Customers) effective January 1, 2018, and all prior period comparatives in this press release have been restated to reflect such adoption.

Q4 2018 Highlights

• Revenue: $1.73 billion, compared to our previously provided guidance range of $1.70 to $1.80 billion, increased 10% compared to the fourth quarter of 2017 (Q4 2017); Operating margin (non-IFRS): 3.5%, consistent with the mid-point of our revenue and non-IFRS adjusted EPS guidance ranges for Q4 2018, and compared to 3.2% for Q4 2017.
• ATS segment revenue increased 11% compared to Q4 2017, and represented 33% of total revenue; ATS segment margin was 3.7% compared to 5.2% for Q4 2017
• CCS segment revenue increased 10% compared to Q4 2017, and represented 67% of total revenue; CCS segment margin was 3.3% compared to 2.2% for Q4 2017
• IFRS EPS: $0.44 per share, compared to $0.09 per share for Q4 2017. IFRS EPS for Q4 2018 included a net benefit of $0.36 per share related to the recognition of deferred tax assets (discussed below)
• Recorded restructuring charges of $6.4 million ($0.05 per share negative impact on IFRS EPS), compared to $13.2 million ($0.09 per share negative impact on IFRS EPS) for Q4 2017
• Completed acquisition of Impakt Holdings, LLC (Impakt); financed with borrowings under our revolving credit facility and a new $250 million term loan
• Launched a new normal course issuer bid (NCIB) in December 2018, allowing us to repurchase up to approximately 9.5 million subordinate voting shares through December 2019
• Obtained municipal zoning approval for sale of our Toronto real property; scheduled to close March 7, 2019; expect to receive total proceeds of approximately U.S. $110 million on closing

“Celestica delivered on its Q4 consolidated non-IFRS operating margin target of 3.5%, driven by strong performance in our CCS segment and our aerospace and defense business,” said Rob Mionis, President and CEO, Celestica. “We were particularly pleased that we achieved this key margin metric despite the impact of slower cyclical demand from our capital equipment customers, which had an adverse impact on ATS segment margin for the quarter. Although we remain positive about our positioning and the long-term growth prospects of the capital equipment business, we will focus our efficiency initiatives during the first quarter of 2019 on improving margins and better aligning this business to the current revenue environment.

“We made good progress in 2018 on our long-term revenue diversification and strategic priorities, including delivering sequential margin expansion in every quarter since Q1, and growing our strong leadership positions within the aerospace and defense, and capital equipment markets. As we enter 2019, we will continue to focus on driving better inventory performance as the constrained materials environment modestly improves, completing our efficiency initiatives to drive margin expansion, and continuing the diversification of our revenue and earnings in order to drive sustainable profitable growth.”

For the full year 2018, Celestica has reported revenues of $6.633 billion, up from the previous year’s $6.142 billion.

Completion of Impakt Acquisition

In November 2018, Celestica completed the acquisition of U.S.- based Impakt, a highly-specialized, vertically integrated company providing manufacturing solutions for leading OEMs in the display (including LCD and Organic Light Emitting Diode (OLED)), and semiconductor industries, as well as other markets requiring complex fabrication services, with operations in California and South Korea. The purchase price for Impakt was $325.4 million, net of cash acquired. The purchase price is subject to a net working capital adjustment, which has not yet been finalized. The purchase was funded with borrowings under our revolving credit facility, $245.0 million of which were repaid with proceeds of a new incremental term loan under our credit facility.

About Celestica

Celestica 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, capital equipment, and smart energy 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.