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Celestica Reports Q3 2018 Financial Results
October 25, 2018 | Globe NewswireEstimated reading time: 14 minutes
Non-IFRS adjusted EPS for the third quarter and first nine months of 2018 excluded, among other items noted on Schedule 1 hereto, the impact of other charges, but included the negative Currency Impacts and Mix Impacts (see above) for the applicable periods. Non-IFRS adjusted EPS for the first nine months of 2018 also excluded the Atrenne FVA and the Atrenne DTA (see Schedule 1 for further details), but included the impact of the Mexican Tax Reversal (which pertains to our core operations).
IFRS EPS for the first nine months of 2017 was favorably impacted by a $0.03 per share deferred income tax benefit related to the write-downs and impairments we recorded for our solar assets in the second quarter of 2017 and prior quarters (Solar Benefit). See notes 13 and 14 to our Q3 2018 Interim Financial Statements for further detail. Non-IFRS adjusted EPS for the first nine months of 2017 excluded, among other items noted on Schedule 1 hereto, the impact of the Solar Benefit.
Non-IFRS operating margin for the third quarter of 2018 was negatively impacted primarily by changes in overall mix and pricing pressures, most significantly in our CCS segment, as well as lower utilization in our capital equipment business. In addition to these items, non-IFRS operating margin for the first nine months of 2018 was negatively impacted by the additional inventory provisions we recorded in such period compared to the prior year period.
Non-IFRS measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public companies that use IFRS or other generally accepted accounting principles (GAAP). See “Non-IFRS Supplementary Information” below for information on our rationale for the use of non-IFRS measures, and Schedule 1 for, among other items, non-IFRS measures included in this press release, as well as their definitions, uses, and a reconciliation of non-IFRS measures to the most directly comparable IFRS measures.
Segment Reorganization
During the first quarter of 2018, we completed a reorganization of our reporting structure, including our sales, operations and management systems, into two operating and reportable segments: ATS and CCS. Prior to this reorganization, we operated in one reportable segment (Electronic Manufacturing Services), which was comprised of multiple end markets (ATS, Communications and Enterprise during 2017). Our prior period financial information has been reclassified to reflect the reorganized segment structure. Additional information regarding our reportable segments is included in note 4 to our Q3 2018 Interim Financial Statements.
As part of our strategy to continue to diversify our business and improve shareholder returns, we commenced a comprehensive review of our CCS business in the second half of 2018, with the intention of addressing under-performing programs. As a result of this review, we intend to disengage from certain customer programs that do not meet our strategic objectives. This review is currently expected to result in a decline in our CCS segment revenue of approximately $500 million over the next 12 to 18 months (subject to change based on the growth or contraction of CCS programs not subject to the review). In addition, while we are not providing revenue guidance for 2019, we currently anticipate (if all other factors remain constant), a corresponding overall revenue decline, as a percentage of annual revenue, in the single digit range. This review is intended to improve our CCS segment margin, and contemplates certain restructuring actions (which have been built into our cost efficiency initiative described below), as well as changes to our manufacturing network. Although we expect reduced revenue in our CCS business as a result of this review, we intend to maintain a large portion of our CCS business, and continue to invest in areas we believe are key to the long-term success of our CCS segment, including our JDM offering, to help drive improved CCS financial performance in future periods.
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