Celestica announces third quarter financial results

Celestica Inc., a world leader in electronics manufacturing services (EMS), today
announced financial results for the third quarter ended September 30, 2005.
Revenue was $1,994 million, compared to $2,176 million in the third quarter of 2004. Net loss on a GAAP basis for the third quarter was ($19.6) million or ($0.09) per share, compared to a GAAP net loss for the third quarter of 2004 of ($24.4) million or ($0.11) per share. Included in GAAP net loss for the quarter are charges of $40.9 million associated with previously announced restructuring plans, and a $6.8 million charge associated with the company's previously announced option exchange program approved by shareholders in April of this year.
Adjusted net earnings for the quarter were $27.1 million or $0.12 per share compared to $25.3 million or $0.11 per share for the same period last year. Adjusted net earnings is defined as net earnings before amortization of intangible assets, gains or losses on the repurchase of shares and debt, integration costs related to acquisitions, option expense and option exchange costs, other charges net of tax (detailed GAAP financial statements and
supplementary information related to adjusted net earnings appear at the end of this press release). These results compare with the company's guidance for the third quarter, announced on July 21, 2005, of revenue of $1.9 - $2.2 billion and adjusted net earnings per share of $0.09 to $0.19.
For the nine months ended September 30, 2005, revenue decreased two percent to $6,396 million compared to $6,507 million for the same period in 2004. Net loss on a GAAP basis was ($18.6) million or ($0.08) per share compared to a net loss of ($44.4) million or ($0.20) per share last year. Adjusted net earnings for the first nine months were $100.2 million or $0.44
per share compared to adjusted net earnings of $52.6 million or $0.24 per share in 2004.
"This quarter's results reflect the continued weakness we had previously highlighted from our largest communications and information technology end markets," said Steve Delaney, CEO, Celestica. "Though our outlook for the December quarter is more moderate than what we would typically expect, I am very pleased with our new program wins, the customers we have added and the opportunities ahead of us. We expect these wins to improve our end-market
diversification and to translate into revenue growth in 2006. As these new programs ramp, we will focus on completing our restructuring activities and aggressively managing our costs to ensure margins are maintained and improved in the coming quarters. We will also remain highly focused on our global Lean implementation, which we believe can translate into the most competitive and robust supply chains for our customers."

Outlook
-------
For the fourth quarter ending December 31, 2005, the company anticipates revenue to be in the range of $1.9 billion to $2.1 billion, and adjusted earnings per share ranging from $0.10 to $0.18.
Management will be hosting its regular quarterly results conference call today at 4:30 p.m. EST which can be accessed at http://www.celestica.com.

Supplementary Information
-------------------------
In addition to disclosing detailed results in accordance with Canadian generally accepted accounting principles (GAAP), Celestica also provides supplementary non-GAAP measures as a method to evaluate the company's operating performance.
Management uses adjusted net earnings as a measure of enterprise-wide performance. As a result of acquisitions made by the company, restructuring activities, securities repurchases and the adoption of fair value accounting for stock options, management believes adjusted net earnings is a useful measure that facilitates period-to-period operating comparisons and allows the company to compare its operating results with its competitors in the U.S. and
Asia. Adjusted net earnings excludes the effects of acquisition-related charges (most significantly, amortization of intangible assets and integration costs related to acquisitions), other charges (most significantly, restructuring costs and the write-down of goodwill and long-lived assets), gains or losses on the repurchase of shares or debt, option expense and option exchange costs, and the related income tax effect of these adjustments and any significant deferred tax write-offs. Adjusted net earnings does not have any standardized meaning prescribed by GAAP and is not necessarily comparable to similar measures presented by other companies. Adjusted net earnings is not a measure of performance under Canadian or U.S. GAAP and should not be considered in isolation or as a substitute for net earnings (loss) prepared in accordance with Canadian or U.S. GAAP. The company has provided a reconciliation of adjusted net earnings to Canadian GAAP net earnings (loss) below.

About Celestica
---------------
Celestica is a world leader in the delivery of innovative electronics manufacturing services (EMS). Celestica operates a highly sophisticated global manufacturing network with operations in Asia, Europe and the Americas, providing a broad range of integrated services and solutions to leading OEMs (original equipment manufacturers). Celestica's expertise in quality, technology and supply chain management, and leadership in the global deployment of Lean principles, enables the company to provide competitive advantage to its customers by improving time-to-market, scalability and manufacturing efficiency.
For further information on Celestica, visit its website at http://www.celestica.com.
The company's security filings can also be accessed at http://www.sedar.com and http://www.sec.gov.

Safe Harbour and Fair Disclosure Statement
------------------------------------------
This news release contains forward-looking statements related to our future growth, trends in our industry and our financial and operational results and performance that are based on current expectations, forecasts and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include, but are not limited to: variability of operating results among periods; inability to retain or grow our business due to execution problems resulting from significant headcount reductions, plant closures and product transfer associated with major restructuring activities; the effects of price competition and other business and competitive factors generally affecting the EMS industry; the challenges of effectively managing our operations during uncertain economic conditions; our dependence on a limited number of customers; our dependence on industries affected by rapid technological change; the challenge of responding to lower-than-expected customer demand; our ability to successfully manage our international operations; component
constraints; our ability to manage our restructuring and the shift of production to lower cost geographies. These and other risks and uncertainties and factors are discussed in the Company's various public filings at http://www.sedar.com and http://www.sec.gov, including our Form 20-F and subsequent reports on Form 6-K filed with the Securities and Exchange Commission.
As of its date, this press release contains any material information associated with the company's financial results for the third quarter ended September 30, 2005 and revenue and adjusted net earnings guidance for the fourth quarter ending December 31, 2005. Earnings guidance is reviewed by the company's board of directors. It is Celestica's policy that earnings guidance is effective on the date given, and will only be updated through a public
announcement.



Financial Summary
-----------------

-------------------------------------------------------------------------
GAAP Financial Summary

Three months ended September 30 2004 2005 Change
------------------------------- ---- ---- ------
Revenue $ 2,176 M $ 1,994 M $ (182) M
Net loss(x) $ (24) M $ (20) M $ 4 M
Net loss per share(x) $ (0.11) $ (0.09) $ 0.02

Cash provided by (used in)
Operations $ 131 M $ (17) M $ (148) M
Cash Position at September 30 $ 975 M $ 896 M $ (79) M

Nine months ended September 30 2004 2005 Change
------------------------------ ---- ---- ------
Revenue $ 6,507 M $ 6,396 M $ (111) M
Net loss(x) $ (44) M $ (19) M 25 M
Net loss per share(x) $ (0.20) $ (0.08) $ 0.12

Cash provided by (used in)
Operations $ (133) M $ 118 M $ 251 M
-------------------------------------------------------------------------


-------------------------------------------------------------------------
Adjusted Net Earnings Summary

Three months ended September 30 2004 2005 Change
------------------------------- ---- ---- ------
Adjusted net earnings(x) $ 25 M $ 27 M $ 2 M
Adjusted net EPS(1) $ 0.11 $ 0.12 $ 0.01

Nine months ended September 30 2004 2005 Change
------------------------------ ---- ---- ------
Adjusted net earnings(x) $ 53 M $ 100 M $ 47 M
Adjusted net EPS(1) $ 0.24 $ 0.44 $ 0.20


Adjusted Net Earnings Calculation

Three Months Nine Months
------------ -----------
2004 2005 2004 2005
---- ---- ---- ----
GAAP net loss(x) $ (24) M $ (20) M $ (44) M $ (19) M
Add: option expense 2 M 2 M 6 M 7 M
Add: option exchange
costs - M 7 M - M 7 M
Add: amortization of
intangibles 8 M 7 M 23 M 21 M
Add: acquisition
integration costs 1 M - M 2 M - M
Add: other charges(x) 48 M 27 M 77 M 74 M
Tax impact of above(x) (10) M 4 M (11) M 10 M
----------- ----------- ----------- -----------
Adjusted net earnings(x) $ 25 M $ 27 M $ 53 M $ 100 M
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

(1) For purposes of the diluted per share calculation for the three and
nine months ended September 30, 2004, the weighted average number of
shares outstanding was 226.2 million and 222.8 million, respectively.
For purposes of the diluted per share calculation for the three and
nine months ended September 30, 2005, the weighted average number of
shares outstanding was 227.4 million and 228.1 million, respectively.
-------------------------------------------------------------------------


-------------------------------------------------------------------------
Guidance Summary

3Q versus actuals 3Q 05 Guidance 3Q 05 Actual
----------------- -------------- ------------
Revenue $1.9B - $2.2B $2.0B
Adjusted net EPS $0.09 - $0.19 $0.12

Forward Guidance(1) 4Q 05 Guidance
------------------- --------------
Revenue $1.9B - $2.1B
Adjusted net EPS $0.10 - $0.18

(1) Guidance for the fourth quarter is provided only on an adjusted net
earnings basis. This is due to the difficulty in forecasting the
various items impacting GAAP net earnings, such as the amount and
timing of our restructuring activities.
-------------------------------------------------------------------------
(x) reflects retroactive restatement for LYONs accounting change



CELESTICA INC.

CONSOLIDATED BALANCE SHEETS
(in millions of U.S. dollars)
(unaudited)

December 31 September 30
2004 2005
------------ ------------
Assets
Current assets:
Cash and short-term investments.............. $ 968.8 $ 895.5
Accounts receivable.......................... 1,023.3 856.6
Inventories.................................. 1,062.9 1,094.9
Prepaid and other assets..................... 127.4 147.8
Income taxes recoverable..................... 89.1 84.4
Deferred income taxes........................ 1.8 -
------------ ------------
3,273.3 3,079.2
Capital assets................................. 569.3 545.3
Goodwill from business combinations............ 872.9 874.5
Intangible assets.............................. 104.5 84.7
Other assets................................... 119.8 109.0
------------ ------------
$ 4,939.8 $ 4,692.7
------------ ------------
------------ ------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable............................. $ 1,107.9 $ 1,057.8
Accrued liabilities.......................... 486.6 416.1
Income taxes payable......................... 93.2 92.8
Deferred income taxes........................ 0.6 8.9
Current portion of long-term debt (note 4)... 2.6 0.2
Convertible debt (notes 2(i) and 5).......... 124.1 -
------------ ------------
1,815.0 1,575.8
Long-term debt (note 4)........................ 500.8 750.2
Accrued pension and post-employment benefits... 81.0 78.6
Deferred income taxes.......................... 23.4 19.6
Other long-term liabilities.................... 30.8 30.3
------------ ------------
2,451.0 2,454.5
Shareholders' equity:
Capital stock................................ 3,559.1 3,564.6
Warrants (note 6)............................ 8.9 8.4
Contributed surplus.......................... 142.9 158.8
Option component of convertible debt
(notes 2(i) and 5).......................... 210.2 -
Deficit...................................... (1,473.6) (1,517.4)
Foreign currency translation adjustment...... 41.3 23.8
------------ ------------
2,488.8 2,238.2
------------ ------------
$ 4,939.8 $ 4,692.7
------------ ------------
------------ ------------
Accounting policy change (note 2(i))
Guarantees and contingencies (note 14)

See accompanying notes to consolidated financial statements.
These unaudited interim consolidated financial statements should be
read in conjunction with the 2004 annual consolidated
financial statements.



CELESTICA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(in millions of U.S. dollars, except per share amounts)
(unaudited)

Three months ended Nine months ended
September 30 September 30
2004 2005 2004 2005
----------- ----------- ----------- -----------
Revenue.................. $ 2,176.0 $ 1,994.4 $ 6,507.1 $ 6,395.7
Cost of sales............ 2,072.9 1,886.1 6,193.6 6,033.5
----------- ----------- ----------- -----------
Gross profit............. 103.1 108.3 313.5 362.2
Selling, general and
administrative expenses
(SG&A).................. 82.2 72.3 251.9 223.3
Amortization of intangible
assets.................. 7.7 6.8 22.6 21.0
Integration costs related
to acquisitions......... 1.2 - 1.6 0.3
Other charges (note 7)... 31.1 27.0 60.6 74.0
Accretion of convertible
debt (notes 2(i) and 5) 3.1 1.1 14.2 7.6
Interest on long-term debt 7.3 14.4 10.4 32.7
Interest expense (income),
net..................... 0.5 (2.0) 1.2 (4.0)
----------- ----------- ----------- -----------
Earnings (loss) before
income taxes............ (30.0) (11.3) (49.0) 7.3
----------- ----------- ----------- -----------
Income taxes expense
(recovery):
Current................ 1.2 7.4 15.8 24.4
Deferred............... (6.8) 0.9 (20.4) 1.5
----------- ----------- ----------- -----------
(5.6) 8.3 (4.6) 25.9
----------- ----------- ----------- -----------
Net loss for the period.. $ (24.4) $ (19.6) $ (44.4) $ (18.6)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Deficit, beginning of
period.................. $ (639.5) $(1,472.6) $ (581.0) $(1,473.6)
Change in accounting
policy (note 2(i))...... - - (1.9) -
----------- ----------- ----------- -----------
Deficit as restated,
beginning of period..... (639.5) (1,472.6) (582.9) (1,473.6)
Loss on repurchase of
convertible debt (note 5) - (25.2) (36.6) (25.2)
Net loss for the period.. (24.4) (19.6) (44.4) (18.6)
----------- ----------- ----------- -----------
Deficit, end of period... $ (663.9) $(1,517.4) $ (663.9) $(1,517.4)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic loss per share
(note 11)............... $ (0.11) $ (0.09) $ (0.20) $ (0.08)

Diluted loss per share
(note 11)............... $ (0.11) $ (0.09) $ (0.20) $ (0.08)

Weighted average number of
shares outstanding
(in millions) (note 11):
Basic................. 225.1 225.8 221.0 226.2
Diluted............... 225.1 225.8 221.0 226.2

See accompanying notes to consolidated financial statements.
These unaudited interim consolidated financial statements should be
read in conjunction with the 2004 annual consolidated
financial statements.



CELESTICA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of U.S. dollars)
(unaudited)

Three months ended Nine months ended
September 30 September 30
2004 2005 2004 2005
----------- ----------- ----------- -----------
Cash provided by (used in):
Operations:
Net loss for the period.. $ (24.4) $ (19.6) $ (44.4) $ (18.6)
Items not affecting cash:
Depreciation and
amortization.......... 53.1 38.2 156.1 120.7
Deferred income taxes.. (6.8) 0.9 (20.4) 1.5
Accretion of convertible
debt.................. 3.1 1.1 14.2 7.6
Non-cash charge for
option issuances...... 2.1 2.2 5.8 7.2
Restructuring charges
(note 7).............. 2.4 0.6 5.5 7.6
Other charges (note 7) (13.4) - (15.4) (16.9)
Gain on settlement of
principal component
of convertible debt
(note 5).............. - (13.9) (32.9) (13.9)
Inventory write-down
related to restructuring
(note 7)................ 16.6 - 16.6 -
Other.................... (4.2) 8.6 2.2 6.4
Changes in non-cash working
capital items:
Accounts receivable.... 89.4 54.4 (62.5) 167.3
Inventories............ 5.5 (1.2) (18.7) (36.9)
Prepaid and other assets 6.9 16.8 (13.6) 0.4
Income taxes recoverable (0.4) 1.2 (1.1) 4.7
Accounts payable and
accrued liabilities... 2.2 (111.8) (132.9) (120.7)
Income taxes payable... (0.8) 6.0 8.5 2.0
----------- ----------- ----------- -----------
Non-cash working capital
changes............... 102.8 (34.6) (220.3) 16.8
----------- ----------- ----------- -----------
Cash provided by (used in)
operations.............. 131.3 (16.5) (133.0) 118.4
----------- ----------- ----------- -----------
Investing:
Acquisitions, including
cash/indebtedness
acquired.............. 2.7 (2.2) (39.6) (2.2)
Purchase of capital assets (17.3) (42.5) (114.3) (111.8)
Proceeds from sale
of assets............. 52.6 9.6 74.2 31.1
Other.................. 0.5 0.4 1.5 0.9
----------- ----------- ----------- -----------
Cash provided by (used in)
investing activities.... 38.5 (34.7) (78.2) (82.0)
----------- ----------- ----------- -----------
Financing:
Increase in long-term
debt (note 4)......... - - 500.0 250.0
Long-term debt issue costs - - (12.0) (4.2)
Deferred financing costs (0.2) - (4.0) -
Repurchase of convertible
debt (note 5)......... - (352.0) (299.7) (352.0)
Repayment of long-term
debt.................. (1.1) (0.3) (40.2) (3.3)
Issuance of share capital 3.5 2.1 11.5 5.5
Other.................. (0.3) (1.6) 1.3 (5.7)
----------- ----------- ----------- -----------
Cash provided by (used in)
financing activities.... 1.9 (351.8) 156.9 (109.7)
----------- ----------- ----------- -----------
Increasce (decrease) in cash 171.7 (403.0) (54.3) (73.3)
Cash, beginning of period 802.8 1,298.5 1,028.8 968.8
----------- ----------- ----------- -----------
Cash, end of period...... $ 974.5 $ 895.5 $ 974.5 $ 895.5
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Cash is comprised of cash and short-term investments.
Supplemental cash flow information (note 12)

See accompanying notes to consolidated financial statements.
These unaudited interim consolidated financial statements should be
read in conjunction with the 2004 annual consolidated
financial statements.


CELESTICA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of U.S. dollars, except per share amounts)
(unaudited)

1. Nature of business:

Our primary operations consist of providing a broad range of services
including manufacturing, design, new product introduction, engineering
services, supply chain management, printed circuit assembly, system
assembly, fulfillment, logistics and after market services and support to
our customers primarily in the computing and telecommunications
industries and increasingly in the aerospace and defense, automotive,
consumer electronics and industrial end markets. We have operations in
the Americas, Asia and Europe.

We prepare our financial statements in accordance with generally accepted
accounting principles (GAAP) in Canada with a reconciliation to
accounting principles generally accepted in the United States, disclosed
in note 20 to the 2004 annual consolidated financial statements.

2. Significant accounting policies:

The disclosures contained in these unaudited interim consolidated
financial statements do not include all requirements of Canadian GAAP for
annual financial statements. These unaudited interim consolidated
financial statements should be read in conjunction with the 2004 annual
consolidated financial statements.

These unaudited interim consolidated financial statements reflect all
adjustments, consisting only of normal recurring accruals, which are, in
the opinion of management, necessary to present fairly our financial
position as of September 30, 2005 and the results of operations and cash
flows for the three and nine months ended September 30, 2004 and 2005.

These unaudited interim consolidated financial statements are based upon
accounting principles consistent with those used and described in the
2004 annual consolidated financial statements, except for the following:

(i) Liabilities and equity:

Effective December 31, 2004, we early adopted the amendment to CICA
Handbook Section 3860, "Financial Instruments - Presentation and
Disclosure." The revised standard requires obligations of a fixed amount
that may be settled, at the issuer's option, by a variable number of the
issuer's own equity instruments to be presented as liabilities. The
standard is effective on a retroactive basis with restatement of prior
periods. As a result of adopting this standard, we reclassified the
principal component of our convertible debt (LYONs) as a debt instrument
and recorded all accretion charges, amortization of deferred financing
costs, gains and losses on repurchases relating to the principal
component and related tax effects as charges to the statement of
operations. The option component of the LYONs continued to be accounted
for as an equity instrument.

Upon adoption of this standard, we:

(a) reclassified $124.1 of LYONs from equity to debt at December 31,
2004;

(b) reclassified $1.3 of deferred financing costs from equity to other
assets at December 31, 2004;

(c) reduced deferred tax assets and equity by $1.9 at December 31, 2004;

(d) recorded a charge of $1.9 to opening deficit at January 1, 2004
representing the cumulative amount of amortization of deferred
financing costs, net of tax;

(e) recorded accretion charges, amortization of deferred financing costs
and the related tax effects in the statement of operations in the
amounts of $2.1 and $9.6, respectively, for the three and nine months
ended September 30, 2004; and

(f) reclassified the gain on the repurchase of LYONs and related tax
effect from equity to other charges and tax expense in the amount of
nil and $21.4 for the three and nine months ended September 30, 2004.

There was no impact to basic or diluted loss per share for any period as
a result of adopting this change retroactively.

During the third quarter of 2005, we repurchased the remaining
outstanding LYONs. See note 5.

3. Acquisitions and divestitures:

2004 activities:

On March 12, 2004, we acquired Manufacturers' Services Limited (MSL), a
full-service global electronics manufacturing and supply chain services
company, headquartered in the United States. This acquisition provided us
with an expanded customer base and service offerings, and supported our
strategy of diversifying our end-markets.

The purchase price of $321.2 was financed with the issuance of
14.1 million subordinate voting shares, the issuance of options to
purchase 2.1 million subordinate voting shares, the issuance of warrants
to purchase 1.1 million subordinate voting shares, and $51.6 in cash.

As part of the purchase price of MSL, we recorded a liability for
consolidating some of the acquired MSL facilities, including a workforce
reduction. The planned actions include employee termination and lease
exit costs in all geographies. The employee terminations will be
completed in early 2006. The long-term lease and contractual obligations
will be paid out over the remaining lease terms through 2010. Cash
outlays are funded from cash on hand.

The following table details the activity through the MSL restructuring
liability:


Lease and
Employee other Facility Total
termination contractual exit costs accrued
costs obligations and other liability
----------- ----------- ----------- -----------
Accrued on acquisition $ 28.0 $ 6.9 $ 1.2 $ 36.1
Cash payments......... (14.7) (0.6) (0.2) (15.5)
----------- ----------- ----------- -----------
December 31, 2004..... 13.3 6.3 1.0 20.6
Cash payments......... - (0.3) - (0.3)
----------- ----------- ----------- -----------
March 31, 2005........ 13.3 6.0 1.0 20.3
Cash payments......... - (3.0) (0.3) (3.3)
----------- ----------- ----------- -----------
June 30, 2005......... 13.3 3.0 0.7 17.0
Adjustments........... (0.7) - 0.7 -
Cash payments......... - (0.4) (1.0) (1.4)
----------- ----------- ----------- -----------
September 30, 2005.... $ 12.6 $ 2.6 $ 0.4 $ 15.6
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

In April 2004, we acquired certain assets located in the Philippines from
NEC Corporation.

In September 2004, we sold certain assets relating to our power
operations and signed a multi-year agreement to supply manufacturing
services to the purchaser.

2005 activities:

In the third quarter of 2005, we completed the acquisitions of CoreSim
Inc. and Ramnish Electronics Private Limited. The total cash purchase
price was $2.2, including indebtedness acquired. Goodwill arising from
these acquisitions was $1.6.

4. Long-term debt:

December 31 September 30
2004 2005
------------ ------------
Unsecured, revolving credit facility due
2007(a)....................................... $ - $ -
Senior Subordinated Notes due 2011(b).......... 500.0 500.0
Senior Subordinated Notes due 2013(c).......... - 250.0
Capital lease obligations...................... 3.4 0.4
------------ ------------
503.4 750.4
Less current portion........................... 2.6 0.2
------------ ------------
$ 500.8 $ 750.2
------------ ------------
------------ ------------

(a) We have a 364-day credit facility for $600.0 which matures June 2007.
The facility includes a $25.0 swing-line facility that provides for
short-term borrowings up to a maximum of seven days. The credit
facility permits us and certain designated subsidiaries to borrow
funds for general corporate purposes (including acquisitions).
Borrowings under the facility bear interest at LIBOR plus a margin
except that borrowings under the swing-line facility bear interest at
a base rate plus a margin. There are no borrowings outstanding under
this facility. Commitment fees for the nine months ended
September 30, 2005 were $1.8.

The facility has restrictive covenants relating to debt incurrence
and sale of assets and also contains financial covenants that require
us to maintain certain financial ratios. A change of control is an
event of default. Based on the required minimum financial ratios, at
September 30, 2005, we are limited to approximately $340 of available
debt incurrence. The available debt incurrence under the facility has
been reduced by the two subordinated debt issuances below and
outstanding letters of credit and guarantees totaling $79.8. We were
in compliance with all covenants as at September 30, 2005.

(b) In June 2004, we issued Senior Subordinated Notes due 2011 with an
aggregate principal amount of $500.0, and a fixed interest rate of
7.875%. We incurred $12.0 in pre-tax underwriting commissions and
expenses which we deferred and are amortizing over the term of the
debt. The Notes are unsecured and are subordinated in right of
payment to all our senior debt. The Notes may be redeemed on July 1,
2008 or later at various premiums above face value.

In connection with the Notes offering, we entered into agreements
which swap the fixed interest rate on the Notes with a variable
interest rate based on LIBOR plus a margin. The average interest rate
on the Notes was 5.6%, 6.1% and 6.5% for the first, second and third
quarters of 2005.

(c) In June 2005, we issued Senior Subordinated Notes due 2013 with an
aggregate principal amount of $250.0, and a fixed interest rate of
7.625%. We incurred $4.2 in underwriting commissions and expenses
which we deferred and are amortizing over the term of the debt. The
Notes are unsecured and are subordinated in right of payment to all
our senior debt. The Notes may be redeemed on July 1, 2009 or later
at various premiums above face value.

5. Convertible debt:

Pursuant to Canadian GAAP, the LYONs are bifurcated into a principal
component and an option component. The principal component is
recorded as debt and the option component is recorded as equity. See
note 2(i).

During the third quarter of 2005, we repurchased the remaining
outstanding LYONs for a total of $352.0 in cash. We realized an
accounting loss of approximately $11.3 on the repurchase, which was
apportioned between the principal and option components, based on
their relative fair values compared to their carrying values. We
recognized a gain on the principal component which was recorded in
other charges and a loss on the option component which was recorded
in deficit.

6. Warrants:

In connection with the MSL acquisition, we issued Series A and
Series B warrants to replace the outstanding MSL warrants.

7. Other charges:

Three months ended Nine months ended
September 30 September 30
2004 2005 2004 2005
----------- ----------- ----------- -----------
2001 and 2002
restructuring(a)..... $ - $ 0.6 $ 4.9 $ 1.6
2003 restructuring(b). 0.1 0.1 1.9 (1.9)
2004 restructuring(c). 44.4 10.6 102.1 19.3
2005 restructuring(d). - 29.6 - 85.8
----------- ----------- ----------- -----------
Total restructuring... 44.5 40.9 108.9 104.8
Deferred financing
costs................ - - 1.6 -
Gain on repurchase of.
convertible debt.....
(note 5)............. - (13.9) (32.9) (13.9)
Gain on sale of
surplus land and
building............. (1.4) - (5.0) (3.1)
Gain on sale of
assets(e)............ (12.0) - (12.0) -
Other(f).............. - - - (13.8)
----------- ----------- ----------- -----------
Other charges......... $ 31.1 $ 27.0 $ 60.6 $ 74.0
Inventory write-down
recorded in cost
of sales(g).......... 16.6 - 16.6 -
----------- ----------- ----------- -----------
Total................. $ 47.7 $ 27.0 $ 77.2 $ 74.0
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

(a) 2001 and 2002 restructuring:

In 2001, we announced a restructuring plan in response to the weak end-
markets in the computing and communications industries. In response to
the prolonged difficult end-market conditions, particularly in the
computing and communications industries, a second restructuring plan was
announced in July 2002. The weak demand for our manufacturing services
resulted in an accelerated move to lower-cost geographies and additional
restructuring in the Americas and Europe.

These restructuring actions were focused on consolidating facilities,
reducing the workforce, and transferring programs to lower-cost
geographies. The majority of the employees terminated were manufacturing
and plant employees. For leased facilities that were no longer used, the
lease costs included in the restructuring costs represent future lease
payments less estimated sublease recoveries. Adjustments were made to
lease and other contractual obligations to reflect incremental
cancellation fees paid for terminating certain facility leases and to
reflect higher accruals for other leases due to delays in the timing of
sublease recoveries and changes in estimated sublease rates, relating
principally to facilities in the Americas.

We have completed the major components of our 2001 and 2002 restructuring
plans, except for certain long-term lease and other contractual
obligations, which will be paid out over the remaining lease terms
through 2015. Cash outlays are funded from cash on hand.

The following table details the activity through the accrued
restructuring liability and the non-cash charge:

Lease
and
other Facility
Employee contr- exit
termi- actual costs Total
nation obliga- and accrued Non-cash Total
costs tions other liability charge charge
--------- --------- --------- --------- --------- ---------
January 1,
2001........ $ - $ - $ - $ - $ - $ -
Provision
re: 2001.... 90.7 35.3 12.4 138.4 98.6 237.0
Cash payments (51.2) (1.6) (2.9) (55.7) - -
--------- --------- --------- --------- --------- ---------
December 31,
2001........ 39.5 33.7 9.5 82.7 98.6 237.0
Provision
re: 2002.... 128.8 51.7 8.5 189.0 194.5 383.5
Cash payments (77.1) (14.7) (7.5) (99.3) - -
Adjustments.. (4.1) 11.4 (2.7) 4.6 (2.7) 1.9
--------- --------- --------- --------- --------- ---------
December 31,
2002........ 87.1 82.1 7.8 177.0 290.4 622.4
Cash payments (83.4) (44.1) (7.8) (135.3) - -
Adjustments.. 7.4 24.1 2.9 34.4 (10.8) 23.6
--------- --------- --------- --------- --------- ---------
December 31,
2003........ 11.1 62.1 2.9 76.1 279.6 646.0
Cash payments (11.8) (27.5) (3.2) (42.5) - -
Adjustments.. 0.7 2.2 0.3 3.2 1.4 4.6
--------- --------- --------- --------- --------- ---------
December 31,
2004........ $ - $ 36.8 $ - $ 36.8 $ 281.0 $ 650.6
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------

The following table details the 2005 activity by quarter:

Lease
and
other Facility
Employee contr- exit
termi- actual costs Total
nation obliga- and accrued Non-cash Total
costs tions other liability charge charge
--------- --------- --------- --------- --------- ---------
December 31,
2004........ $ - $ 36.8 $ - $ 36.8 $ 281.0 $ -
Cash payments - (2.6) - (2.6) - -
Adjustments.. - 1.1 - 1.1 - 1.1
--------- --------- --------- --------- --------- ---------
March 31,
2005........ - 35.3 - 35.3 281.0 1.1
Cash payments - (2.6) - (2.6) - -
Adjustments.. - 0.3 - 0.3 (0.4) (0.1)
--------- --------- --------- --------- --------- ---------
June 30,
2005........ - 33.0 - 33.0 280.6 1.0
Cash payments - (2.4) (2.4) - -
Adjustments.. - 0.6 - 0.6 - 0.6
--------- --------- --------- --------- --------- ---------
September 30,
2005........ $ - $ 31.2 $ - $ 31.2 $ 280.6 $ 1.6
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------

The accrued restructuring liability is recorded in Accrued Liabilities in
the accompanying consolidated balance sheet.

(b) 2003 restructuring:

In January 2003, we announced that we would further reduce our
manufacturing capacity. These restructuring actions were focused on
workforce reductions and facility consolidations in Europe. Termination
announcements were made in 2003 to approximately 480 employees, primarily
manufacturing and plant employees. All employees were terminated as of
March 31, 2005. In March 2005, we sold to a third party the production
facility we closed in 2003 at a loss of $2.4. The purchaser also agreed
to employ certain employees, which reduced our remaining contractual
severance obligations. We adjusted our accrued liability to reflect the
reduced severance costs. We recorded a net recovery of $2.0 relating to
this transaction. The remaining accrued liability includes payments to
regulatory agencies, in accordance with local labour legislation, which
we expect to pay out through 2008. Cash outlays are funded from cash on
hand.

The following table details the activity through the accrued
restructuring liability and the non-cash charge:

Lease
and
other Facility
Employee contr- exit
termi- actual costs Total
nation obliga- and accrued Non-cash Total
costs tions other liability charge charge
--------- --------- --------- --------- --------- ---------
January 1,
2003........ $ - $ - $ - $ - $ - $ -
Provision.... 61.4 0.3 1.1 62.8 8.5 71.3
Cash payments (28.6) (0.3) (1.1) (30.0) - -
--------- --------- --------- --------- --------- ---------
December 31,
2003........ $ 32.8 $ - $ - $ 32.8 $ 8.5 $ 71.3
Cash payments (19.0) - - (19.0) - -
Adjustments.. 2.0 - - 2.0 - 2.0
--------- --------- --------- --------- --------- ---------
December 31,
2004........ $ 15.8 $ - $ - $ 15.8 $ 8.5 $ 73.3
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------

The following table details the 2005 activity by quarter:

Lease
and
other Facility
Employee contr- exit
termi- actual costs Total
nation obliga- and accrued Non-cash Total
costs tions other liability charge charge
--------- --------- --------- --------- --------- ---------
December 31,
2004........ $ 15.8 $ - $ - $ 15.8 $ 8.5 $ -
Cash payments (1.3) (0.4) - (1.7) - -
Adjustments.. (4.8) 0.4 - (4.4) 2.4 (2.0)
--------- --------- --------- --------- --------- ---------
March 31,
2005........ 9.7 - - 9.7 10.9 (2.0)
Cash payments (0.4) - - (0.4) - -
--------- --------- --------- --------- --------- ---------
June 30,
2005........ 9.3 - - 9.3 10.9 (2.0)
Cash payments (0.3) - - (0.3) - -
Adjustments.. (0.2) - - (0.2) 0.3 0.1
--------- --------- --------- --------- --------- ---------
September 30,
2005........ $ 8.8 $ - $ - $ 8.8 $ 11.2 $ (1.9)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------

$6.8 of the accrued termination costs is classified in Other Long-term
Liabilities. The remaining accrued restructuring liability is recorded in
Accrued Liabilities in the accompanying consolidated balance sheet.

(c) 2004 restructuring:

In January and April 2004, we announced plans to further restructure our
operations to better align capacity with customers' requirements. These
restructuring actions were focused on workforce reductions and facility
consolidations in all regions. Termination announcements were made to
approximately 5,000 employees, consisting of executive, manufacturing and
plant employees. Approximately 50 employees remain to be terminated as of
September 30, 2005. Approximately 60% of the employee terminations were
in the Americas, 30% in Asia and 10% in Europe.

In 2004, we recorded a non-cash charge of $33.9 to write-down certain
long-lived assets primarily in Asia (55%) and the Americas (40%) which
became impaired due to facility consolidations. In addition to buildings,
leasehold improvements and machinery and equipment, the asset impairments
also included an intellectual property write-down in the Americas. In May
2005, we sold one of our restructured facilities in Asia and incurred an
additional loss of $6.7. In the third quarter of 2005, we recorded an
additional charge of $10.6 primarily for termination and other related
employee costs, which were recorded as incurred.

We expect to complete these restructuring actions by the end of 2005,
except for certain long-term lease and other contractual obligations,
which will be paid out over the remaining lease terms through 2011. Cash
outlays are funded from cash on hand.

The following table details the activity through the accrued
restructuring liability and the non-cash charge:

Lease
and
other Facility
Employee contr- exit
termi- actual costs Total
nation obliga- and accrued Non-cash Total
costs tions other liability charge charge
--------- --------- --------- --------- --------- ---------
January 1,
2004........ $ - $ - $ - $ - $ - $ -
Provision.... 98.6 8.7 5.9 113.2 33.9 147.1
Cash payments (79.8) (4.5) (0.9) (85.2) - -
--------- --------- --------- --------- --------- ---------
December 31,
2004........ $ 18.8 $ 4.2 $ 5.0 $ 28.0 $ 33.9 $ 147.1
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------

The following table details the 2005 activity by quarter:

Lease
and
other Facility
Employee contr- exit
termi- actual costs Total
nation obliga- and accrued Non-cash Total
costs tions other liability charge charge
--------- --------- --------- --------- --------- ---------
December 31,
2004........ $ 18.8 $ 4.2 $ 5.0 $ 28.0 $ 33.9 $ -
Cash payments (13.4) (0.2) (1.0) (14.6) - -
Adjustments.. 3.3 0.1 - 3.4 (1.5) 1.9
--------- --------- --------- --------- --------- ---------
March 31,
2005........ 8.7 4.1 4.0 16.8 32.4 1.9
Cash payments (5.7) (0.3) (2.5) (8.5) - -
Adjustments.. 0.8 - (0.7) 0.1 6.7 6.8
--------- --------- --------- --------- --------- ---------
June 30,
2005........ 3.8 3.8 0.8 8.4 39.1 8.7
Cash payments (8.7) (0.2) (0.4) (9.3) - -
Adjustments.. 9.5 0.1 1.0 10.6 - 10.6
--------- --------- --------- --------- --------- ---------
September 30,
2005........ $ 4.6 $ 3.7 $ 1.4 $ 9.7 $ 39.1 $ 19.3
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------

The accrued restructuring liability is recorded in Accrued Liabilities in
the accompanying consolidated balance sheet.

(d) 2005 restructuring:

In January 2005, we announced plans to further improve capacity
utilization and accelerate margin improvements. These restructuring
actions will include facility closures and a reduction in workforce,
primarily targeting our higher-cost geographies where end-market demand
has not recovered to the levels management requires to achieve
sustainable profitability.

As of September 30, 2005, we have recorded termination costs related to
approximately 2,400 employees, primarily manufacturing and plant
employees. Approximately 700 of these employees have been terminated as
of September 30, 2005 with the balance of the terminations to occur
throughout 2005 and into 2006. Approximately 80% of employee terminations
are in the Americas and 20% in Europe.

Lease
and
other Facility
Employee contr- exit
termi- actual costs Total
nation obliga- and accrued Non-cash Total
costs tions other liability charge charge
--------- --------- --------- --------- --------- ---------
January 1,
2005........ $ - $ - $ - $ - $ - $ -
Provision.... 31.5 0.1 0.4 32.0 - 32.0
Cash payments (2.6) (0.1) (0.4) (3.1) - -
--------- --------- --------- --------- --------- ---------
March 31,
2005........ 28.9 - - 28.9 - 32.0
Provision.... 19.2 3.9 1.3 24.4 (0.2) 24.2
Cash payments (7.2) (0.2) (1.2) (8.6) - -
--------- --------- --------- --------- --------- ---------
June 30,
2005........ 40.9 3.7 0.1 44.7 (0.2) 56.2
Provision.... 19.7 7.9 1.7 29.3 0.3 29.6
Cash payments (31.1) 0.1 (1.5) (32.5) - -
--------- --------- --------- --------- --------- ---------
September 30,
2005........ $ 29.5 $ 11.7 $ 0.3 $ 41.5 $ 0.1 $ 85.8
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------

We expect to complete these restructuring actions throughout 2005 and
into 2006. Cash outlays are and will be funded from cash on hand.

The accrued restructuring liability is recorded in Accrued Liabilities in
the accompanying consolidated balance sheet.

Restructuring summary:

We expect to incur restructuring charges of between $225.0 and $275.0 to
be recorded throughout 2005 and 2006. As of September 30, 2005, we have
recorded restructuring charges totaling $104.8.

As of September 30, 2005, assets included $7.0 representing assets
available-for-sale, primarily land and buildings in the Americas, as a
result of the restructuring actions we implemented. We have programs
underway to sell these assets.

(e) Gain on sale of assets:

In September 2004, we sold certain assets relating to our power
operations.

(f) Other:

In the fourth quarter of 2004, we recorded charges totaling $116.8 to
reduce the net realizable value of notes and accounts receivables related
to one of our customers, whose financial condition had significantly
deteriorated. In the second quarter of 2005, this customer ceased
operations and sold certain assets. We recorded a recovery of $13.8 to
reflect the estimated amounts recoverable from that customer.

(g) Inventory write-down recorded in cost of sales:

During the third quarter of 2004, we decided to restructure and exit
certain service offerings resulting in a write-down of the related
inventory.

8. Pension and non-pension post-employment benefit plans:

We have recorded the following pension expense:

Three months ended Nine months ended
September 30 September 30
2004 2005 2004 2005
----------- ----------- ----------- -----------
Pension plans......... $ 10.1 $ 7.3 $ 24.5 $ 23.3
Other benefit plans... 4.4 2.9 12.5 8.9
----------- ----------- ----------- -----------
Total expense......... $ 14.5 $ 10.2 $ 37.0 $ 32.2
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

9. Stock-based compensation and other stock-based payments:

Effective January 1, 2003, we adopted the revised CICA Handbook Section
3870, "Stock-Based Compensation," which requires that a fair value method
of accounting be applied to all stock-based compensation payments for
both employees and non-employees. In accordance with the transitional
provisions of Section 3870, we have prospectively applied the fair value
method of accounting for stock option awards granted after January 1,
2003 and, accordingly, have recorded compensation expense. Prior to
January 1, 2003, we accounted for our employee stock options using the
settlement method and no compensation expense was recognized. For awards
granted in 2002, the standard requires the disclosure of pro forma
earnings and per share information as if we had accounted for employee
stock options under the fair value method. The pro forma effect of awards
granted prior to January 1, 2002 has not been included in the pro forma
earnings and per share information.

The estimated fair value of the options is amortized to expense over the
vesting period, on a straight-line basis, and was determined using the
Black Scholes option pricing model with the following weighted average
assumptions:

Three months ended Nine months ended
September 30 September 30
2004 2005 2004 2005
----------- ----------- ----------- -----------
Risk-free rate........ 3.5% 4.0% - 4.1% 3.1% 3.5% - 4.1%
Dividend yield........ 0.0% 0.0% 0.0% 0.0%
Volatility factor of
the expected market
price of the Company's
shares............... 70% 52% - 66% 70% 48% - 68%
Expected option life
(in years)........... 5.5 3.5 - 5.5 4.4 3.5 - 5.5
Weighted average grant
date fair values of
options issued....... $9.82 $6.15 $9.85 $7.09

Compensation expense for the three and nine months ended September 30,
2005 was $2.2 and $7.2 (three and nine months ended September 30, 2004 -
$2.1 and $5.8, respectively) relating to the fair value of options
granted after January 1, 2003.

The pro forma disclosure relating to options granted in 2002 is as
follows:

Three months ended Nine months ended
September 30 September 30
2004 2005 2004 2005
----------- ----------- ----------- -----------
Net loss as reported.. $ (24.4) $ (19.6) $ (44.4) $ (18.6)

Deduct: Stock-based
compensation costs
using fair value
method............... (2.0) (2.2) (6.2) (5.3)
----------- ----------- ----------- -----------
Pro forma net loss.... $ (26.4) $ (21.8) $ (50.6) $ (23.9)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Loss per share:
Basic - as reported $ (0.11) $ (0.09) $ (0.20) $ (0.08)
Basic - pro forma... $ (0.12) $ (0.10) $ (0.23) $ (0.11)

Diluted - as
reported........... $ (0.11) $ (0.09) $ (0.20) $ (0.08)
Diluted - pro forma $ (0.12) $ (0.10) $ (0.23) $ (0.11)

Our stock plans are described in note 9 to the 2004 annual consolidated
financial statements.

(i) Option exchange costs recorded in cost of sales and SG&A:

During the third quarter of 2005, we cancelled 6.8 million options for an
aggregate cost of $6.8 as part of an option exchange program under our
long-term incentive and certain other stock option plans. Eligible
employees forfeited certain out-of-the-money options for $1.00 in cash
for each option surrendered. This program has reduced our number of
options outstanding at September 30, 2005 to approximately 16 million
which represents approximately 7% of our total outstanding shares. We
paid $5.6 in cash during the quarter. The balance has been accrued and
will be paid out at the end of three years, in accordance with the plan.
Of the $6.8 aggregate cost, we recorded $3.9 in cost of sales and $2.9 in
SG&A.

10. Segmented information:

Our operations fall into one dominant industry segment, the electronics
manufacturing services industry. We manage our operations, and
accordingly determine our operating segments, on a geographic basis. The
performance of geographic operating segments is monitored based on EBIAT
(earnings/loss before interest and accretion on convertible debt,
amortization of intangible assets, integration costs related to
acquisitions, other charges, option expense, option exchange costs and
income taxes). Inter segment transactions are reflected at market value.
The following is a breakdown by reporting segment:

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