10-KPeriod: FY2009

CELESTICA INC Annual Report, Year Ended Dec 31, 2009

Filed March 23, 2010For Securities:CLS

Summary

Celestica Inc.'s 2010 10-K filing highlights a challenging year in 2009, marked by a significant 21% decrease in revenue to $6.1 billion, primarily driven by weaker end-market demand and customer-specific program shifts. Despite the revenue decline, the company improved its gross margin to 7.1% and reported a net profit of $55.0 million, a notable rebound from the substantial net loss of $720.5 million in 2008. This turnaround was supported by cost reductions, restructuring actions, and increased productivity. The company also focused on strengthening its financial position by repurchasing a significant portion of its Senior Subordinated Notes. Looking ahead, Celestica aimed to grow revenue organically and through acquisitions, improve financial results, enhance customer relationships, and broaden its service offerings to diversify its revenue base.

Key Highlights

  • 1Revenue decreased by 21% to $6.1 billion in 2009 compared to $7.7 billion in 2008, primarily due to weaker end-market demand and customer program changes.
  • 2Gross profit decreased by 19% year-over-year but gross margin improved to 7.1% in 2009 from 6.9% in 2008, driven by operational improvements and cost reductions.
  • 3Celestica reported a net profit of $55.0 million in 2009, a significant improvement from a net loss of $720.5 million in 2008, which included an $850.5 million goodwill impairment charge.
  • 4Selling, General, and Administrative (SG&A) expenses decreased by 16% in 2009, mainly due to lower foreign exchange losses and cost reduction initiatives.
  • 5The company repurchased $495.8 million in cash of its Senior Subordinated Notes due 2011, resulting in an estimated annual interest expense benefit of $14 million.
  • 6Customer concentration increased in 2009, with the largest customer (Research in Motion) accounting for 17% of total revenue, and the top 10 customers representing 71% of revenue.
  • 7Celestica continued its restructuring efforts, recording $83.1 million in charges in 2009 as part of a program expected to conclude by the end of 2010.

Frequently Asked Questions

In 2009, Celestica experienced a significant revenue decline of 21% to $6.1 billion due to weaker market demand and customer shifts. However, the company achieved a net profit of $55.0 million, a substantial improvement from the $720.5 million net loss in 2008, driven by cost controls, restructuring, and operational efficiencies. The gross margin also improved to 7.1%.

Celestica faces significant risks including intense competition and pricing pressures in the EMS industry, dependence on a limited number of large customers, the impact of economic uncertainties on customer demand, challenges in managing global operations and supply chains, and potential difficulties in integrating acquisitions. Additionally, the company is exposed to risks related to component availability and rapid technological changes in the industries it serves.

In 2009, Celestica actively managed its debt by repurchasing $495.8 million in cash of its Senior Subordinated Notes due 2011. This action is expected to result in an annual interest expense saving of approximately $14 million. The company also announced its intention to redeem its Senior Subordinated Notes due 2013 in early 2010.

Celestica's customer concentration increased in 2009. Its largest customer, Research in Motion, represented 17% of total revenue, and its top 10 customers accounted for 71% of total revenue. The company acknowledges this increased concentration, particularly due to growth in the smartphone market, and aims to diversify its customer base and end markets.