Celestica Announces Fourth Quarter 2020 Financial Results
(All amounts in U.S. dollars.
Per share information based on diluted
shares outstanding unless otherwise noted.)
TORONTO, Jan. 26, 2021 (GLOBE NEWSWIRE) -- 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 December 31, 2020 (Q4 2020)^†. “Celestica delivered a solid fourth quarter to end the year, with revenue within our guidance range and non-IFRS operating margin* and non-IFRS adjusted EPS* above the mid-point of our guidance ranges. We ended the year with 80% non-IFRS adjusted EPS* growth compared to 2019,” said Rob Mionis, President and CEO, Celestica.“We believe that our strong performance in 2020 against the backdrop of a global pandemic is a testament to our team’s ability to maintain business continuity and meet our commitments to our customers. The work we have done over the past few years aimed at building a more diversified business helped us manage this unprecedented year. As we enter 2021, we remain focused on executing for our customers and driving consistent, profitable growth for our shareholders.”
*Q4 2020 Highlights *
· Revenue: $1.4 billion, decreased 7% compared to $1.5 billion for the fourth quarter of 2019 (Q4 2019).· Operating margin (non-IFRS)*: 3.6%, compared to 2.9% for Q4 2019.· ATS segment revenue: decreased 12% compared to Q4 2019, and represented 37% of total revenue, compared to 39% of total revenue for Q4 2019; ATS segment margin was 3.9%, compared to 3.0% for Q4 2019.· CCS segment revenue: decreased 4% compared to Q4 2019, and represented 63% of total revenue, compared to 61% of total revenue for Q4 2019; CCS segment margin was 3.4%, compared to 2.9% for Q4 2019.· IFRS earnings per share (EPS): $0.16, compared to a $0.05 loss per share for Q4 2019.
· Adjusted EPS (non-IFRS)*: $0.26, compared to $0.18 for Q4 2019.
· Adjusted return on invested capital (non-IFRS)*: 12.4%, compared to 10.6% for Q4 2019.
· Free cash flow (non-IFRS)*: $18.5 million, compared to $43.8 million for Q4 2019.
· Global network operating at normal workforce levels.
· Undrawn $450 million revolver.**
· $464 million in cash/cash equivalents.
· Launched a new normal course issuer bid (NCIB) in November 2020.
^† 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, Energy, HealthTech and Capital Equipment (semiconductor, display, and power & signal distribution equipment) businesses. Our CCS segment consists of our Communications and Enterprise (servers and storage) end markets. Also see Segment Updates below. 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 2019 audited consolidated financial statements for further detail.
^* Non-IFRS (International Financial Reporting Standards) 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 U.S. 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 historical non-IFRS measures to the most directly comparable IFRS measures.
^** excluding ordinary course letters of credit.
*Segment Updates *
ATS Segment:
ATS segment revenue decreased in Q4 2020 compared to Q4 2019, primarily driven by adverse demand impacts related to the coronavirus 2019 disease (COVID-19) pandemic, specifically in our commercial aerospace and Industrial businesses. The decreases were partially offset by revenue growth in our HealthTech and Capital Equipment businesses, driven by new program ramps. The increase in ATS segment margin in Q4 2020 compared to Q4 2019 was primarily due to improvements in our Capital Equipment and HealthTech businesses, driven by improved productivity, the beneficial impact of our cost actions and volume leverage, partly offset by the performance of our A&D business. We are pleased with the improvement in ATS segment margin, and are targeting ATS segment margin to be within our target range of 5% to 6% by the end of 2021.
Demand from our semiconductor Capital Equipment customers improved in Q4 2020 compared to Q4 2019, and we expect demand to remain strong in 2021. We also anticipate demand growth towards the end of 2021 in our display business.
Within A&D, demand in our defense business remained stable in Q4 2020, while we continued to experience demand reductions in our commercial aerospace business as a result of COVID-19. We expect weakness in the commercial aviation industry due to COVID-19 to persist throughout 2021. We will continue to take appropriate cost reduction and productivity actions to improve the overall performance of this business and adjust our cost base to better align with anticipated demand levels. We are encouraged by the bookings momentum in our A&D business, with over half of the incremental bookings in 2020 coming from new customers.
While demand in our Industrial business in Q4 2020 compared to Q4 2019 was adversely impacted by COVID-19, there has been a gradual recovery of demand across our customer base in this business since the second quarter of 2020. Although revenues declined compared to the prior year period, the contribution of this business to our profitability improved from Q4 2019 as a result of our cost reduction initiatives and the ramp of new programs.
Our HealthTech business continued to benefit from demand strength, reflected in new program ramps in Q4 2020, attributable in part to new program wins to support the fight against COVID-19. We anticipate continued strength in demand in this business in 2021.
CCS Segment:
CCS segment revenue decreased in Q4 2020 compared to Q4 2019, primarily as a result of our disengagement from programs with Cisco Systems, Inc. (Cisco Disengagement), which was completed at the end of 2020 as planned. This decline was offset in large part by strong demand from service providers in our Communications end market. Our CCS Joint Design & Manufacturing (JDM) business (which we have renamed "Hardware Platform Solutions" or "HPS," as described below) experienced strong demand, up 53% in Q4 2020 compared to Q4 2019 driven by Hyperscaler demand strength.
As anticipated, our HPS revenue for the full year of 2020 (FY 2020) was $862 million, an increase of 80% compared to the full year of 2019 (FY 2019), and accounted for 15% of FY 2020 revenue. Although we continue to anticipate that total CCS segment revenue will decline for the full year 2021 (FY 2021) compared to FY 2020, we expect continued strength in our HPS business in 2021. We anticipate that FY 2021 HPS revenue will increase compared to the prior year, and we are targeting high single digit percentage growth in HPS revenue for FY 2021 compared to FY 2020.
Our HPS offering has expanded from joint design and manufacturing services to a full suite of hardware platform solutions and aftermarket services. As a result, we believe that the term JDM no longer accurately captures the breadth of our advanced R&D investments in hardware and technology platforms, or the broad end-to-end services we provide throughout the product lifecycle, from design to aftermarket support. Therefore, and as described above, we now refer to JDM as Hardware Platform Solutions, or HPS.
CCS segment margin improved in Q4 2020 compared to Q4 2019, primarily due to the positive impact of our productivity actions and a more favorable mix. CCS segment margin is expected to be firmly within our 2% to 3% target range in 2021.
*COVID-19 Update*
While we continue to make progress on our strategic initiatives, including portfolio reshaping, productivity and cost initiatives, COVID-19 continued to have an adverse impact on our business in Q4 2020. In addition to demand reductions in several of our end markets (noted in "Segment Updates" above), we were adversely impacted by COVID-19-related costs (collectively, COVID-19 Costs) incurred during Q4 2020. COVID-19 Costs consist of 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 IT-related services to support our work-from-home arrangements. During Q4 2020, we qualified for and recognized COVID-19-related government subsidies, credits and grants and customer recoveries (collectively, COVID Recoveries), which helped mitigate the adverse impact of COVID-19 on our results. See footnote (1) to the table below for further detail.
For further information on the impact of COVID-19 on Q4 2020 and its anticipated impact on our business, see "Segment Updates" above. For further information on the potential impact of COVID-19 on our business, see our most recent Management’s Discussion and Analysis of Financial Condition and Results of Operations, filed at www.sedar.com and furnished on Form 6-K at www.sec.gov on October 28, 2020.
*Restructuring Update *
We recorded a total of approximately $26 million in restructuring charges during FY 2020, compared to our previous estimate of $30 million. We recorded approximately $7 million of restructuring charges in Q4 2020, consisting primarily of actions to adjust our cost base to address reduced levels of demand in certain of our businesses, including continued actions to right-size our commercial aerospace facilities, as well as restructuring actions in connection with the Cisco Disengagement.
*Summary of Selected Q4 2020 Results *
* * *Q4 2020 Actual* *Q4 2020 Guidance^ (2)*
IFRS revenue (in billions) $1.4 $1.35 to $1.45
IFRS EPS ^(1) $0.16 N/A
IFRS earnings before income taxes as a % of revenue 1.9% N/A
Non-IFRS operating margin 3.6% 3.5% at the mid-point of our
revenue and non-IFRS adjusted
EPS guidance ranges
IFRS SG&A (in millions) $59.4 N/A
Non-IFRS adjusted SG&A (in millions) $56.5 $56 to $58
Non-IFRS adjusted EPS $0.26 $0.22 to $0.28
^(1) IFRS EPS of $0.16 for Q4 2020 included an aggregate charge of $0.13 (pre-tax) per share for employee stock-based compensation (SBC) expense, amortization of intangible assets (excluding computer software), restructuring charges, and de minimis Internal Relocation Costs (defined in Schedule 1 hereto). See the tables in Schedule 1 and note 10 to our December 31, 2020 unaudited interim condensed consolidated financial statements (Q4 2020 Interim Financial Statements) for per-item charges. This aggregate charge is towards the low end of our Q4 2020 guidance range of between $0.12 and $0.18 per share for these items, primarily due to lower than-expected restructuring charges.
^IFRS EPS for Q4 2020 included a $0.05 per share negative impact attributable to restructuring charges and a $0.06 per share negative impact attributable to estimated $8 million in COVID-19 Costs, offset in large part by a $0.08 per share positive impact attributable to COVID Recoveries (approximately $8 million of government subsidies, grants and credits (COVID Subsidies) and $2 million of customer recoveries (Customer Recoveries) related to COVID-19) and a $0.02 per share positive impact from SBC expense reversals recorded in Q4 2020 to reflect a reduction in the estimated number of certain share-based awards expected to vest at the end of January 2021 (Stock-based Compensation Reversals). IFRS EPS for Q4 2020 also included a number of offsetting tax items including an $11.8 million withholding tax accrual associated with the anticipated repatriation of undistributed earnings from certain of our Chinese and Thai subsidiaries, which was substantially offset by an aggregate of $11.2 million in favorable return-to-provision adjustments, the recognition of previously unrecognized deferred tax assets, and a favorable foreign exchange impact arising primarily from the strengthening of the Chinese renminbi relative to the U.S. dollar (described in note 11 to the Q4 2020 Interim Financial Statements). See Schedule 1 for the exclusions used to determine non-IFRS adjusted EPS for Q4 2020.
^IFRS loss per share of $0.05 for Q4 2019 included an aggregate $0.15 per share negative impact attributable to other charges, consisting primarily of restructuring charges ($0.09 per share negative impact), additional post-employment benefit plan obligations (Post-employment Benefit Plan Losses) arising from changes in labor protection laws in Thailand ($0.03 per share negative impact) and fees (Waiver Fees) incurred in connection with the waiver of certain technical covenant defaults related to our credit agreement ($0.02 per share negative impact). See Schedule 1 for the exclusions used to determine non-IFRS adjusted EPS for Q4 2019, and note 10 to our Q4 2020 Interim Financial Statements for quantification of the components of other charges for Q4 2019.
^(2) For Q4 2020, our revenue, non-IFRS adjusted EPS and non-IFRS adjusted SG&A were within our guidance ranges. Non-IFRS operating margin for Q4 2020 was above the mid-point of our revenue and non-IFRS adjusted EPS guidance ranges. Our non-IFRS adjusted effective tax rate for Q4 2020 was 19% (compared to our anticipated estimate of approximately 20%). For FY 2020, our non-IFRS adjusted effective tax rate was 22%, lower than the mid-twenty-percent range previously anticipated, mainly due to favorable jurisdictional profit mix and tax items described in footnote (1) above.
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 historical non-IFRS measures to the most directly comparable IFRS measures.
*Full Year Results*
IFRS EPS of $0.47 for FY 2020 included a $0.20 per share negative impact attributable to restructuring charges and a $0.29 per share negative impact attributable to approximately $37 million in estimated COVID-19 Costs, offset in part by a $0.29 per share positive impact attributable to COVID Recoveries (approximately $34 million of COVID Subsidies and $3 million in Customer Recoveries), and a $0.07 per share positive impact to reflect aggregate Stock-based Compensation Reversals. See Schedule 1 for the exclusions used to determine non-IFRS adjusted EPS for FY 2020. IFRS EPS for FY 2020 also included $18.3 million of tax expenses relating to current and future withholding taxes associated with repatriations of undistributed earnings from certain of our Chinese and Thai subsidiaries that occurred in FY 2020 or are anticipated to occur in the foreseeable future, which was largely offset by an aggregate of $17.5 million in favorable tax impacts (described in note 11 to the Q4 2020 Interim Financial Statements).
IFRS EPS of $0.53 for FY 2019 included an aggregate $0.38 per share net benefit attributable to other charges (recoveries), resulting from a $0.75 per share gain on the sale of our Toronto real property in the first quarter of 2019, offset in part by restructuring charges ($0.29 per share negative impact) and Transition Costs ($0.05 per share negative impact), as well as the impact of the Post-employment Benefit Plan Losses and Waiver Fees described above ($0.03 and $0.02 per share negative impact, respectively). See Schedule 1 for the definition of Transition Costs and the exclusions used to determine non-IFRS adjusted EPS for FY 2019. See note 10 to our Q4 2020 Interim Financial Statements for quantification of the components of other charges (recoveries) for FY 2019.
*First Quarter 2021 (Q1 2021) Guidance*^(^1)
* * *Q1 2021*
IFRS revenue (in billions) $1.175 to $1.275
Non-IFRS operating margin 3.4% at the mid-point of our revenue and
non-IFRS adjusted EPS guidance ranges
Non-IFRS adjusted SG&A (in millions) $51 to $53
Non-IFRS adjusted EPS $0.18 to $0.24
^(1) For Q1 2021, we expect a negative $0.12 to $0.18 per share (pre-tax) aggregate impact on net earnings on an IFRS basis for employee SBC expense, amortization of intangible assets (excluding computer software), and restructuring charges. Based on the projected geographical mix of our profits in Q1 2021, we currently expect our non-IFRS adjusted effective tax rate to be approximately 20% (this estimate does not account for foreign exchange impacts and any unanticipated tax settlements). We cannot predict changes in currency exchange rates, the impact of such changes on our operating results, or the degree to which we will be able to manage such impacts.
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.
*Q4* *2020 Webcast*
Management will host its Q4 2020 results conference call on January 27, 2021 at 8:00 a.m. Eastern Standard Time (EST). The webcast can be accessed at www.celestica.com.
*Non-IFRS Supplementary Information*
In addition to disclosing detailed operating results in accordance with IFRS, Celestica provides supplementary non-IFRS measures to consider in evaluating the company’s operating performance. Management uses adjusted net earnings and other non-IFRS 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 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 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 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.
For more information, visit www.celestica.com. Our securities filings can also 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 the impact of the COVID-19 pandemic on our business; our priorities, goals and strategies; trends in the electronics manufacturing services (EMS) industry and our segments (including the components thereof), and their anticipated impact; the anticipated impact of specified adverse market conditions in each of our segments (and/or component businesses) and near term expectations (positive and negative); our anticipated financial and/or operational results, and our anticipated Q1 2021 non-IFRS adjusted effective tax rate; our intention to submit claims for COVID Subsidies; our credit risk; our liquidity; anticipated expenses, including restructuring charges; the potential impact of tax and litigation outcomes; mandatory prepayments under our credit facility; and our financial statement estimates and assumptions. 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,” “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: the scope, duration and impact of the COVID-19 pandemic, including its severe, prolonged and continuing adverse impact on the commercial aerospace industry due to quarantines, travel restrictions, business curtailments, resurgences and mutations of the virus and safety concerns; customer and segment concentration; challenges of replacing revenue from completed, lost or non-renewed programs or customer disengagements; our customers' ability to compete and succeed with our products and services; the cyclical nature of our capital equipment business, particularly our semiconductor and display businesses; competitive factors and adverse market conditions affecting the EMS industry in general and our segments in particular (including the risk that anticipated market improvements do not materialize); 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; delays in the delivery and availability of components, services and materials; managing changes in customer demand; the inability to maintain adequate utilization of our workforce; the expansion or consolidation of our operations; defects or deficiencies in our products, services or designs; integrating and achieving the anticipated benefits from acquisitions and "operate-in-place" arrangements; negative impacts on our business resulting from outstanding third-party indebtedness; rapidly evolving and changing technologies, and changes in our customers' business or outsourcing strategies; customer, competitor and/or supplier consolidation; compliance with customer-driven policies and standards, and third party certification requirements, including climate change and other social responsibility initiatives; challenges associated with new customers or programs, or the provision of new services; the impact of restructuring actions and/or productivity initiatives, including a failure to achieve anticipated benefits from actions associated with the review of our CCS segment portfolio (CCS Review), including the Cisco Disengagement; 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; 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, including, among others: Britain's departure from the European Union (Brexit), policies or legislation instituted by the former or new administration in the U.S., uncertainty surrounding the impact of the new administration in the U.S., the potential impact of significant tariffs on items imported into the U.S. and related countermeasures, and/or the impact of (in addition to COVID-19) other widespread illness or disease; changes to our operating model; changing commodity, materials and component costs as well as labor costs and conditions; execution 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, 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; foreign currency volatility; our global operations and supply chain; recruiting or retaining skilled talent; our dependence on industries affected by rapid technological change; our ability to protect intellectual property and confidential information; increasing taxes, tax audits, and challenges of defending our tax positions; obtaining, renewing or meeting the conditions of tax incentives and credits; computer viruses, malware, hacking attempts or outages that may disrupt our operations; the inability to prevent or detect all errors or fraud; the variability of revenue and operating results; unanticipated disruptions to our cash flows; a failure to qualify for and/or collect anticipated COVID Subsidies; compliance with applicable laws, regulations, and government subsidies, grants or credits; the management of our IT systems; 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; deterioration in financial markets or the macro-economic environment; and current or future litigation, governmental actions, and/or changes in legislation or accounting standards. 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 2019 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 those related to the following: fluctuation of production schedules from our customers in terms of volume and mix of products or services; the scope and duration of the COVID-19 pandemic and its impact on our sites, customers and supply chain; our ability to qualify for specified COVID Subsidies; 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, currency exchange rates, and interest rates; supplier performance, pricing and terms; compliance by third parties with their contractual obligations and the accuracy of their representations and warranties; the costs and availability of components, materials, services, equipment, labor, energy and transportation; that our customers will retain liability for recently-imposed 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; our having sufficient financial resources to fund currently anticipated financial actions and obligations and to pursue desirable business opportunities; 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 cash resources for, and the permissibility under our credit facility of, repurchases of outstanding subordinate voting shares under our current NCIB, and compliance with applicable laws and regulations pertaining to NCIBs; the impact of actions associated with the CCS Review (including the Cisco Disengagement) on our business, and that we achieve the anticipated benefits therefrom; anticipated demand strength in certain of our businesses; and anticipated demand weakness in, and/or the impact of anticipated adverse market conditions on, certain of our businesses. 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 Measures*
The non-IFRS 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 (adjusted EBIAT), operating margin (adjusted EBIAT or operating earnings 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 applicable: employee stock-based compensation (SBC) expense, amortization of intangible assets (excluding computer software), Other Charges, net of recoveries (defined below), and acquisition inventory fair value adjustments, all net of the associated tax adjustments (which are set forth 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 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 ongoing operating results), to evaluate cash resources that we generate 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 provides improved insight into the tax effects of our ongoing business operations, and is 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 the ordinary course of the ongoing operation of our business.
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 who report under U.S. GAAP and use non-U.S. GAAP measures to describe similar operating metrics. Non-IFRS measures are not measures of performance under IFRS and should not be considered in isolation or as a substitute for any standardized measure under IFRS.
The most significant limitation to management’s use of non-IFRS financial measures is that the charges or credits excluded from the non-IFRS measures are nonetheless charges or credits that are recognized under IFRS and that have an economic impact on the company. Management compensates for these limitations primarily by issuing IFRS results to show a complete picture of the company’s performance, and reconciling non-IFRS financial measures back to the most directly comparable IFRS financial measures.
The economic substance of the 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: Restructuring Charges, net of recoveries (defined below); Transition Costs (Recoveries) (defined below); net Impairment charges (defined below); acquisition-related consulting, transaction and integration costs, and when applicable, charges related to the subsequent re-measurement of indemnification assets in connection with our acquisition of Impakt Holdings, LLC (collectively, Acquisition Costs); legal settlements (recoveries); credit facility-related waiver fees (Waiver Fees) in Q4 2019; and post-employment benefit plan losses (Q4 2019). 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: (i) costs recorded in connection with 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 sale of our Toronto real property) (collectively, Toronto Transition Costs) and (ii) costs recorded in connection with the transfer of manufacturing lines from closed sites to other sites within our global network (Internal Relocation Costs). We incurred Internal Relocation Costs with respect to the transfer of several capital equipment manufacturing lines from closed sites in 2019. We have determined, however, that Internal Relocation Costs should not be limited to the transfer of capital equipment manufacturing lines from closed sites, as the transfer of any manufacturing lines from closed sites would not be representative of our ongoing operations, and such transfers are expected to be implemented in future periods. 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 costs incurred in connection with idle or vacated portions of the relevant premises that we would not have incurred but for these relocations and transfers. Transition Recoveries consist of the gain we recorded in March 2019 on the sale of our Toronto real property. We believe that excluding these costs and recoveries permits a better comparison of our core operating results from period-to-period, as these costs will not reflect our ongoing operations once these relocations and manufacturing line transfers are complete, and the recovery pertains only to the first quarter of 2019.
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.
Acquisition inventory fair value adjustments relate to the write-up of the inventory acquired in connection with our acquisitions, representing the difference between the cost and fair value of such inventory. We exclude the impact of the recognition of these adjustments, when incurred, because we believe such exclusion permits a better comparison of our core operating results from period-to-period, as their impact is not indicative of our ongoing operating performance.
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 sets forth, for the periods indicated, the various non-IFRS measures discussed above, and a reconciliation of non-IFRS measures to the most directly comparable IFRS measures (in millions, except percentages and per share amounts): *Three months ended December 31* *Year ended December 31* *2019* *2020* *2019* *2020* % of
revenue % of
revenue % of
revenue % of
revenue
*IFRS revenue* $ 1,491.7 $ 1,386.6 $ 5,888.3 $ 5,748.1
*IFRS gross profit* $ 101.8 6.8 % $ 113.8 8.2 % $ 384.7 6.5 % $ 437.6 7.6 %
Employee SBC expense 2.7 2.2 14.6 11.1
*Non-IFRS adjusted gross profit* $ 104.5 7.0 % $ 116.0 8.4 % $ 399.3 6.8 % $ 448.7 7.8 %
*IFRS SG&A* $ 57.1 3.8 % $ 59.4 4.3 % $ 227.3 3.9 % $ 230.7 4.0 %
Employee SBC expense (4.7 ) (2.9 ) (19.5 ) (14.7 )
*Non-IFRS adjusted SG&A* $ 52.4 3.5 % $ 56.5 4.1 % $ 207.8 3.5 % $ 216.0 3.8 %
*IFRS earnings (loss) before income taxes* $ (0.4 ) — % $ 26.4 1.9 % $ 99.8 1.7 % $ 90.2 1.6 %
Finance costs 11.3 9.1 49.5 37.7
Employee SBC expense 7.4 5.1 34.1 25.8
Amortization of intangible assets (excluding computer software) 5.8 4.9 24.6 21.8
Other Charges (recoveries) 19.6 4.5 (49.9 ) 23.5
*Non-IFRS operating earnings (adjusted EBIAT)^ (1)* $ 43.7 2.9 % $ 50.0 3.6 % $ 158.1 2.7 % $ 199.0 3.5 %
*IFRS net earnings (loss)* $ (7.0 ) (0.5 ) % $ 20.1 1.4 % $ 70.3 1.2 % $ 60.6 1.1 %
Employee SBC expense 7.4 5.1 34.1 25.8
Amortization of intangible assets (excluding computer software) 5.8 4.9 24.6 21.8
Other Charges (recoveries) 19.6 4.5 (49.9 ) 23.5
Adjustments for taxes^ (2) (2.1 ) (1.3 ) (7.6 ) (5.1 )
*Non-IFRS adjusted net earnings* $ 23.7 $ 33.3 $ 71.5 $ 126.6
*Diluted EPS*
Weighted average # of shares (in millions) * 128.5 129.1 131.8 129.1
IFRS earnings (loss) per share * $ (0.05 ) $ 0.16 $ 0.53 $ 0.47
Non-IFRS adjusted earnings per share $ 0.18 $ 0.26 $ 0.54 $ 0.98
# of shares outstanding at period end (in millions) 128.8 129.1 128.8 129.1
*IFRS cash provided by operations* $ 76.5 $ 49.7 $ 345.0 $ 239.6
Purchase of property, plant and equipment, net of sales proceeds (14.2 ) (18.8 ) 36.0 (51.0 )
Lease payments ^(3) (8.8 ) (5.8 ) (38.2 ) (33.7 )
Finance costs paid (excluding debt issuance costs and Waiver Fees paid) ^(3) (9.7 ) (6.6 ) (41.6 ) (28.9 )
*Non-IFRS free cash flow ^(3)* $ 43.8 $ 18.5 $ 301.2 $ 126.0
*IFRS ROIC % ^(4)* (0.1 ) % 6.6 % 5.8 % 5.6 %
*Non-IFRS adjusted ROIC % ^(4)* 10.6 % 12.4 % 9.2 % 12.4 %
* IFRS earnings (loss) per diluted share is calculated by dividing IFRS net earnings (loss) by the number of diluted weighted average shares outstanding (DWAS). In order to calculate IFRS loss per diluted share for Q4 2019, we used a DWAS of 128.5 million as at December 31, 2019. Because we reported a net loss on an IFRS basis in Q4 2019, the DWAS for such period-end excluded 0.9 million subordinate voting shares underlying in-the-money stock-based awards, as including these shares would be anti-dilutive. However, we included these shares in the DWAS used to calculate non-IFRS adjusted earnings (per diluted share) for Q4 2019, because such shares were dilutive in relation to this non-IFRS measure.
(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 below), employee SBC expense, amortization of intangible assets (excluding computer software), and Other Charges (recoveries) (defined above). 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. See note 10 to our Q4 2020 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* *Year ended* *December 31* *December 31* *2019* Effective
tax rate *2020* Effective
tax rate *2019* Effective
tax rate *2020* Effective
tax rate
IFRS tax expense and IFRS effective tax rate $ 6.6 (1,650 ) % $ 6.3 24 % $ 29.5 30 % $ 29.6 33 %
Tax costs (benefits) of the following items excluded from IFRS tax expense:
Employee SBC expense 0.4 0.5 1.0 1.7
Other Charges 1.8 0.2 3.2 2.4
Non-core tax impacts related to tax uncertainties* — (1.1 ) 3.9 (0.7 )
Non-core tax impact related to prior acquisition** — 1.7 (1.5 ) 1.7
Non-core tax impact related to restructured sites*** (0.1 ) — 1.0 —
Non-IFRS adjusted tax expense and non-IFRS adjusted effective tax rate $ 8.7 27 % $ 7.6 19 % $ 37.1 34 % $ 34.7 22 %
* Consists of the reversal of certain tax uncertainties related to a prior acquisition that became statute-barred in such periods.
** Consists of deferred tax adjustments attributable to our acquisition of Impakt Holdings, LLC.
*** Consists primarily of tax adjustments related to the liquidation and resolution of certain tax uncertainties of restructured sites in 2019.
(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, including our Toronto real property), lease payments (including under IFRS 16), and finance costs paid (excluding any debt issuance costs and when applicable, Waiver Fees). We do not consider debt issuance costs (nil and $0.6 million paid in Q4 2020 and FY 2020, respectively; $0.5 million and $2.9 million paid in Q4 2019 and FY 2019, respectively) or Waiver Fees ($2.0 million paid in Q4 2019) to be part of our core operating 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 defined as total assets less: cash, ROU assets, accounts payable, accrued and other current liabilities and provisions, and income taxes payable. We use a two-point average to calculate average net invested capital for the quarter and a five-point average to calculate average net invested capital for the year. A comparable measure under IFRS would be determined by dividing IFRS earnings (loss) before income taxes by average net invested capital (which we have set forth in the charts above and below), however, this measure (which we have called IFRS ROIC), is not a measure defined under IFRS.
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* *Year ended* *December 31* *December 31* *2019* *2020* *2019* *2020*
IFRS earnings (loss) before income taxes $ (0.4 ) $ 26.4 $ 99.8 $ 90.2
Multiplier to annualize earnings 4 4 1 1
Annualized IFRS earnings (loss) before income taxes $ (1.6 ) $ 105.6 $ 99.8 $ 90.2
Average net invested capital for the period $ 1,647.0 $ 1,610.0 $ 1,719.7 $ 1,600.1
IFRS ROIC % ^(1) (0.1 ) % 6.6 % 5.8 % 5.6 % *Three months ended* *Year ended* *December 31* *December 31*
* * *2019* *2020* *2019* *2020*
Non-IFRS operating earnings (adjusted EBIAT) $ 43.7 $ 50.0 $ 158.1 $ 199.0
Multiplier to annualize earnings 4 4 1 1
Annualized non-IFRS adjusted EBIAT $ 174.8 $ 200.0 $ 158.1 $ 199.0
Average net invested capital for the period $ 1,647.0 $ 1,610.0 $ 1,719.7 $ 1,600.1
Non-IFRS adjusted ROIC % ^(1) 10.6 % 12.4 % 9.2 % 12.4 % *December 31*
*2019* *March 31*
*2020* *June 30*
*2020* *September 30*
*2020* *December 31*
*2020*
Net invested capital consists of:
Total assets $ 3,560.7 $ 3,537.8 $ 3,788.1 $ 3,789.3 $ 3,664.1
Less: cash 479.5 472.1 435.9 451.4 463.8
Less: ROU assets 104.1 96.9 94.4 101.2 101.0
Less: accounts payable, accrued and other current liabilities, provisions and income taxes payable 1,341.7 1,397.5 1,684.1 1,637.6 1,478.4
Net invested capital at period end ^(1) $ 1,635.4 $ 1,571.3 $ 1,573.7 $ 1,599.1 $ 1,620.9 *December 31*
*2018* *March 31*
*2019* *June 30*
*2019* *September 30*
*2019* *December 31*
*2019*
Net invested capital consists of:
Total assets $ 3,737.7 $ 3,688.1 $ 3,633.7 $ 3,557.6 $ 3,560.7
Less: cash 422.0 457.8 436.5 448.9 479.5
Less: ROU assets — 115.8 116.2 107.8 104.1
Less: accounts payable, accrued and other current liabilities, provisions and income taxes payable 1,512.6 1,344.8 1,349.2 1,342.3 1,341.7
Net invested capital at period end ^(1) $ 1,803.1 $ 1,769.7 $ 1,731.8 $ 1,658.6 $ 1,635.4
^ (1) See footnote 4 of the previous table.
*CELESTICA INC. *
*CONDENSED CONSOLIDATED BALANCE SHEET*
*(in millions of U.S. dollars)*
*(unaudited)* *Note* *December 31*
*2019* *December 31*
*2020*
*Assets*
Current assets:
Cash and cash equivalents $ 479.5 $ 463.8
Accounts receivable 5 1,052.7 1,093.4
Inventories 6 992.2 1,091.5
Income taxes receivable 7.7 6.8
Assets classified as held for sale 0.7 —
Other current assets 59.2 81.7
Total current assets 2,592.0 2,737.2
Property, plant and equipment 355.0 332.5
Right-of-use assets 104.1 101.0
Goodwill 198.3 198.6
Intangible assets 251.3 229.4
Deferred income taxes 33.6 39.9
Other non-current assets 26.4 25.5
Total assets $ 3,560.7 $ 3,664.1
*Liabilities and Equity*
Current liabilities:
Current portion of borrowings under credit facility and lease obligations 8 $ 139.6 $ 99.8
Accounts payable 898.0 854.5
Accrued and other current liabilities 6 370.9 553.1
Income taxes payable 46.7 51.8
Current portion of provisions 26.1 19.0
Total current liabilities 1,481.3 1,578.2
Long-term portion of borrowings under credit facility and lease obligations 8 559.1 486.1
Pension and non-pension post-employment benefit obligations 107.1 117.3
Provisions and other non-current liabilities 28.6 41.2
Deferred income taxes 28.4 32.3
Total liabilities 2,204.5 2,255.1
Equity:
Capital stock 9 1,832.1 1,834.2
Treasury stock 9 (14.8 ) (15.7 )
Contributed surplus 982.6 974.5
Deficit (1,420.1 ) (1,368.8 )
Accumulated other comprehensive loss (23.6 ) (15.2 )
Total equity 1,356.2 1,409.0
Total liabilities and equity $ 3,560.7 $ 3,664.1
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* *Year ended* *December 31* *December 31* *Note* *2019* *2020* *2019* *2020*
Revenue 3 $ 1,491.7 $ 1,386.6 $ 5,888.3 $ 5,748.1
Cost of sales 6 1,389.9 1,272.8 5,503.6 5,310.5
Gross profit 101.8 113.8 384.7 437.6
Selling, general and administrative expenses (SG&A) 57.1 59.4 227.3 230.7
Research and development 7.3 8.4 28.4 29.9
Amortization of intangible assets 6.9 6.0 29.6 25.6
Other charges (recoveries) 10 19.6 4.5 (49.9 ) 23.5
Earnings from operations 10.9 35.5 149.3 127.9
Finance costs 11.3 9.1 49.5 37.7
Earnings (loss) before income taxes (0.4 ) 26.4 99.8 90.2
Income tax expense (recovery) 11
Current. 1.6 3.7 22.8 32.9
Deferred 5.0 2.6 6.7 (3.3 ) 6.6 6.3 29.5 29.6
Net earnings (loss) for the period $ (7.0 ) $ 20.1 $ 70.3 $ 60.6
Basic earnings (loss) per share $ (0.05 ) $ 0.16 $ 0.54 $ 0.47
Diluted earnings (loss) per share $ (0.05 ) $ 0.16 $ 0.53 $ 0.47
Shares used in computing per share amounts (in millions):
Basic 128.5 129.1 131.0 129.1
Diluted 128.5 129.1 131.8 129.1
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* *Year ended* *December 31* *December 31*
* * *Note* *2019* *2020* *2019* *2020*
Net earnings (loss) for the period $ (7.0 ) $ 20.1 $ 70.3 $ 60.6
Other comprehensive income (loss), net of tax:
Items that will not be reclassified to net earnings (loss):
Losses on pension and non-pension post-employment benefit plans 7 (8.7 ) (9.1 ) (8.7 ) (9.3 )
Items that may be reclassified to net earnings (loss):
Currency translation differences for foreign operations 0.7 3.1 (0.2 ) 4.3
Changes from currency forward derivatives designated as hedges 5.0 7.7 10.8 8.5
Changes from interest rate swap derivatives designated as hedges 2.4 2.3 (7.7 ) (4.4 )
Total comprehensive income (loss) for the period $ (7.6 ) $ 24.1 $ 64.5 $ 59.7
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)* *Contributed*
*surplus* *Deficit* *Accumulated*
*other*
*comprehensive*
*loss* *^(a)* *Total
equity*
Balance -- January 1, 2019 $ 1,954.1 $ (20.2 ) $ 906.6 $ (1,481.7 ) $ (26.5 ) $ 1,332.3
*Capital transactions* 9
Issuance of capital stock 10.4 — (10.4 ) — — —
Repurchase of capital stock for cancellation (132.4 ) — 65.1 — — (67.3 )
Purchase of treasury stock for stock-based plans — (9.2 ) — — — (9.2 )
Stock-based compensation (SBC) and other — 14.6 21.3 — — 35.9
*Total comprehensive income (loss):*
Net earnings for the period — — — 70.3 — 70.3
Other comprehensive income (loss), net of tax:
Losses on pension and non-pension post-employment benefit plans 7 — — — (8.7 ) — (8.7 )
Currency translation differences for foreign operations — — — — (0.2 ) (0.2 )
Changes from currency forward derivatives designated as hedges — — — — 10.8 10.8
Changes from interest rate swap derivatives designated as hedges — — — — (7.7 ) (7.7 )
Balance -- December 31, 2019 $ 1,832.1 $ (14.8 ) $ 982.6 $ (1,420.1 ) $ (23.6 ) $ 1,356.2
*Capital transactions* 9
Issuance of capital stock 2.2 — (2.2 ) — — —
Repurchase of capital stock for cancellation^(b) (0.1 ) — (15.0 ) — — (15.1 )
Purchase of treasury stock for SBC plans — (19.1 ) — — — (19.1 )
SBC and other — 18.2 9.1 — — 27.3
*Total comprehensive income (loss):*
Net earnings for the period — — — 60.6 — 60.6
Other comprehensive income (loss), net of tax:
Losses on pension and non-pension post-employment benefit plans 7 — — — (9.3 ) — (9.3 )
Currency translation differences for foreign operations — — — — 4.3 4.3
Changes from currency forward derivatives designated as hedges — — — — 8.5 8.5
Changes from interest rate swap derivatives designated as hedges — — — — (4.4 ) (4.4 )
Balance -- December 31, 2020 $ 1,834.2 $ (15.7 ) $ 974.5 $ (1,368.8 ) $ (15.2 ) $ 1,409.0
^(a) Accumulated other comprehensive loss is net of tax.
^(b) Includes an aggregate of $15.0 for anticipated share repurchases for cancellation under an automatic share purchase plan executed in December 2020 (described in 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* *Year ended* *December 31* *December 31*
* * *Note* *2019* *2020* *2019* *2020*
*Cash provided by (used in):*
*Operating activities:*
Net earnings (loss) for the period $ (7.0 ) $ 20.1 $ 70.3 $ 60.6
Adjustments to net earnings (loss) for items not affecting cash:
Depreciation and amortization 33.4 30.8 135.4 124.7
Equity-settled SBC expense 9 7.4 5.1 34.1 25.8
Other charges (recoveries)^ (a) 10 8.5 0.1 (86.1 ) 2.5
Finance costs 11.3 9.1 49.5 37.7
Income tax expense 6.6 6.3 29.5 29.6
Other 8.0 0.5 24.2 10.0
Changes in non-cash working capital items:
Accounts receivable (38.2 ) 31.6 153.7 (40.7 )
Inventories 41.4 113.7 97.7 (99.3 )
Other current assets 3.5 6.6 16.5 (0.5 )
Accounts payable, accrued and other current liabilities and provisions 8.4 (170.7 ) (158.8 ) 117.0
Non-cash working capital changes 15.1 (18.8 ) 109.1 (23.5 )
Net income tax paid (6.8 ) (3.5 ) (21.0 ) (27.8 )
Net cash provided by operating activities 76.5 49.7 345.0 239.6
*Investing activities:*
Acquisitions, net of cash acquired 4 — — 2.7 —
Purchase of computer software and property, plant and equipment (16.0 ) (19.2 ) (80.5 ) (52.8 )
Proceeds related to the sale of assets 10 1.8 0.4 116.5 1.8
Net cash provided by (used in) investing activities (14.2 ) (18.8 ) 38.7 (51.0 )
*Financing activities:*
Borrowings under credit facility 8 — — 48.0 —
Repayments under credit facility 8 (1.5 ) — (213.0 ) (121.9 )
Payment of lease obligations (8.8 ) (5.8 ) (38.2 ) (33.7 )
Repurchase of capital stock for cancellation 9 — (0.1 ) (67.3 ) (0.1 )
Purchase of treasury stock for stock-based plans 9 (9.2 ) (6.0 ) (9.2 )