Celestica Reports Fourth Quarter 2023 Financial Results

Fourth Quarter 2023 Highlights

• Key actions:

• Most directly comparable IFRS financial measures to non-IFRS measures above:

• Repurchased 0.4 million subordinate voting shares (SVS) for cancellation for $10.0 million.

Forecast for the first quarter of 2024 (Q1 2024)‡

For the first quarter of 2024, we expect an overall negative effect of $0. 26 to $0. 32 consistent with the percentage (before tax) in the IFRS net revenue source for share-based payment expense (SBC), amortization of intangible assets. (excluding PC software) and restructuring of charges.

For the first quarter of 2024, we also expect a non-IFRS adjusted effective tax rate* of approximately 20% (which excludes foreign exchange effects or unforeseen tax settlements), assuming our revenue source will be subject to global Pillar II. minimum tax, as the law that has been introduced in Canada would possibly be applicable before the end of the first quarter of 2024 with retroactive effect to January 1, 2024‡. If this law is not substantially enacted in the first quarter of 2024, we will expect our non-IFRS* adjusted effective tax rate for the quarter to be approximately 15%.

2024 Annual Outlook Update‡

* See Appendix 1 for recent definitions and amendments to some of these non-IFRS monetary measures. We do not provide reconciliations for forward-looking non-IFRS monetary measures because we are unable to provide a meaningful or accurate calculation or estimate of the reconciliation. parts and data are not fully available. This is due to the inherent difficulty in predicting the timing or number of various occasions that have not yet occurred, are beyond our control and/or cannot be predicted, and that would be the maximum directly comparable future-oriented monetary measure under IFRS. For the same reasons, we are not in a position to deal with the likely maximum importance of unavailable data. Forward-looking monetary measures other than IFRS would possibly differ materially from the corresponding forward-looking monetary measures under IFRS. measurement.

‡ Our guidance for the first quarter of 2024 and our outlook for full year 2024 assume: (i) accelerated applicability of the Pillar II global minimum tax law to the 2024 reporting periods instead of 2025 (see Note 2 to the interim monetary statements for the fourth quarter of 2023); and (ii) planned operational adjustments, adding tax savings. However, the timing of the entry into force of the global minimum tax law and its impact on our tax burden cannot currently be estimated with certainty and could particularly differ from our expectations. Furthermore, while we have more productively incorporated the expected effect of weak demand in our capital goods business into our first quarter 2024 monetary guidance and our full-year 2024 outlook, its negative effect (in terms of duration and severity) cannot be estimated with certainty and may also substantially exceed our expectations.

Summary of Selected Fourth Quarter 2023 Results

*See Appendix 1 for, among other things, recent definitions and amendments to those non-IFRS monetary measures, as well as a reconciliation of those non-IFRS monetary measures to the comparable maximum IFRS monetary measures for the fourth quarter of 2023.

IFRS EPS for the fourth quarter of 2023 included: a positive effect of $0. 10 consistent with a consistent percentage attributable to a reasonably priced gain on our OEE (OEE gain), which was substantially offset by: (i) a negative tax having an effect of $0. 04 consistent with the percentage resulting from the repatriation of retained earnings, net of the reversal of past source of income tax expense identified after the then-planned repatriations, at some of our Asian subsidiaries; (ii) a negative effect of $0. 04 per percentage resulting from tax uncertainties similar to those of one of our Asian subsidiaries (tax uncertainties); and (iii) a negative effect of $0. 01 consistent with the percentage corresponding to restructuring charges. See Notes 8, 9 and 10 of the interim financial statements for the fourth quarter of 2023.

IFRS EPS of $0.35 for Q4 2022 included a $0.03 per share negative impact arising from taxable temporary differences associated with the anticipated repatriation of undistributed earnings from certain of our Chinese subsidiaries (Repatriation Expense), a $0.02 per share negative impact attributable to restructuring charges, and a $0.01 per share negative taxable foreign exchange impact arising from the fluctuation of the Chinese renminbi relative to the U.S. dollar (Currency Impact). See notes 9 and 10 to the Q4 2023 Interim Financial Statements.

(2) For Q4 2023, our revenue was towards the high end of our guidance range; our non-IFRS adjusted EPS exceeded the high end of our guidance range, and our non-IFRS operating margin exceeded the mid-point of our revenue and non-IFRS adjusted EPS guidance ranges, driven by unanticipated volume leverage and production efficiencies in our CCS segment. Our non-IFRS adjusted SG&A for Q4 2023 exceeded the high end of our guidance range as a result of an audit settlement of certain historical value-added tax filings for one of our subsidiaries in Asia. Our IFRS effective tax rate for Q4 2023 was 19%. As anticipated, our non-IFRS adjusted effective tax rate for Q4 2023 was 20%.

Summary of Selected Full Year 2023 Results

* Please refer to Appendix 1 for, among other things, the definitions and exclusions used for those non-IFRS monetary measures, as well as a reconciliation of those non-IFRS monetary measures to the maximum directly comparable IFRS monetary measures for 2023 and 2022. Appendix 1 also includes a description of adjustments in the calculation of non-IFRS safe monetary measures due to: (x) a recently applicable exclusion similar to our OEE; and (y) the recent addition of secure pricing to other charges, which substantially all consist of incremental transition pricing and secondary bid pricing (each as explained herein).

(1) IFRS EPS of $2. 03 for 2023 included: (i) a TRS profit of $0. 38 consistent with the consistent percentage and (ii) a favorable tax impact of $0. 05 attributable to the reversal of tax uncertainties identified in the past in one of our Asian subsidiaries; Partially offset through: (x) a negative effect of $0. 12 consistent with the percentage attributable to other net charges (primarily composed of a negative effect of $0. 10 consistent with the percentage attributable to restructuring costs, a negative effect of 0. 03 $ per percent attributable to transition pricing, a $0. 01 per percent negative effect attributable to acquisition prices, and a $0. 01 per percent negative effect, much of which was attributable to Secondary Offer Pricing (each as explained in Exhibit 1), offset in the component by a positive effect of $0. 02 per percentage attributable to legal recoveries and a positive effect of $0. 01 per percentage attributable to similar recoveries. and (y) a negative tax effect of $0. 09 consistent with the percentage resulting from the repatriation of retained earnings and the relevant taxable transitory differences with the expected repatriation of retained earnings of certain of our Asian subsidiaries, and a negative impact an effect of $0. 04 consistent with the percentage due to tax insecurities. See Notes 8, 9 and 10 to the interim monetary statements for the fourth quarter of 2023.

IFRS EPS of $1. 18 for 2022 included: (i) a negative effect of $0. 05 consistent with the percentage attributable to other net rates (primarily comprising a negative effect of $0. 07 consistent with the percentage attributable to restructuring fees and a negative impact an effect of $0. 01 consistent with the percentage attributable to transition prices, partially offset by a positive effect of $0. 03 consistent with the percentage attributable to transition recoveries (each as explained in Exhibit 1 ); (ii) a negative effect of $0. 03 consistent with a percentage consistent with attributable to the estimated restriction prices (explained as direct and oblique prices, adding production inefficiencies similar to the loss of profits due to our inability to unload materials, unused hard work prices and additional hard work prices, shipping and transportation fees). premiums, cleaning products, private protective equipment and/or IT facilities to help our work organize at home due to limitations of the supply chain, or consequently with yodic lockdowns or hard work limitations such as COVID-19); (iii) a negative exchange rate effect of $0. 03 per percentage; and (iv) a negative repatriation rate of $0. 03 consistent with the percentage, all partially offset through a favorable tax effect of $0. 04 consistent with the percentage, attributable to the resumption of past tax uncertainties recorded in one of our Asian subsidiaries . See Notes nine and 10 to the interim monetary statements for the fourth quarter of 2023.

Acceptance of Normal Course Issuer Bid (NCIB)

Q42023 Webcast

Management will hold its fourth quarter 2023 earnings conference call on January 30, 2024 at 8:00 a. m. m. , Eastern Standard Time (EST). The webcast can be viewed on www. celestica. com.

Non-IFRS Supplementary Information

In addition to disclosing detailed operating results in accordance with IFRS, Celestica provides supplementary non-IFRS financial measures to consider in evaluating the company’s operating performance. Management uses adjusted net earnings and other non-IFRS financial 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 financial 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.

Celestica enables the world’s most productive brands to grow. With our customer-centric approach, we collaborate with leading corporations in aerospace and defense, communications, enterprise, fitness technology, industrial, and capital goods to find answers to their most complex challenges. A leader in design, manufacturing, hardware platform, and supply chain responses, Celestica brings global experience and expertise to each and every level of product progression, from the drawing board to full-scale production and after-sales services. With talented groups in North America, Europe and Asia, we envision, expand and deliver a greater future for our clients. For more information about Celestica, visit www. celestica. com. Our securities depositories are available on www. sedarplus. com and www. sec. gov.

Caution Regarding Forward-Looking Statements

This press release comprises forward-looking statements, including, among others, those related to: our expected monetary and/or operating results, forecasts and outlook, adding statements under the headings “Guidance for the first quarter of 2024 (first quarter of 2024)” and “Annual Outlook 2024 Update”; our credit risk; our liquidity; expected fees and expenses, including restructuring fees; the possible impact on tax results and litigation; advance payments required under our line of credits; expected sublease recoveries; and expected insurance recoveries for tangible losses similar to the June 2022 fire at our Batam Indonesia site (Batam Fire). These forward-looking statements may, among other things, be preceded, followed or accompanied by words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “continues,” “projects,” ” objective”, “perspectives”, “objective”, “orientation”, “prospective”, “possible”, “contemplate”, “seek” or similar expressions, or possibly use long-term verbs or conditional statements such as “possibly”, “could”, “will”, “could”, “should” or “would”, or possibly otherwise be indicated as forward-looking statements through grammatical construction, wording or context. statements, we claim safe harbor coverage for forward-looking statements contained in the United States Private Securities Litigation Reform Act of 1995, where applicable, and for forward-looking data under 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: customer and segment concentration; challenges of replacing revenue from completed, lost or non-renewed programs or customer disengagements; managing our business during uncertain market, political and economic conditions, including among others, global inflation and/or recession, and geopolitical and other risks associated with our international operations, including military actions/wars, protectionism and reactive countermeasures, economic or other sanctions or trade barriers, including in relation to the Russia/Ukraine conflict and/or conflicts in the Middle East, including the Israel/Hamas conflict and those related to Houthi attacks in the Red Sea; shipping delays and increased shipping costs (including as a result of shipping disruptions in the Red Sea); managing changes in customer demand; our customers’ ability to compete and succeed using our products and services; delays in the delivery and availability of components, services and/or materials, as well as their costs and quality; our inventory levels and practices; the cyclical and volatile nature of our semiconductor business; 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; price, margin pressures, and other competitive factors and adverse market conditions affecting, and the highly competitive nature of, the electronic manufacturing services (EMS) and original design manufacturer (ODM) industries in general and our segments in particular (including the risk that anticipated market conditions do not materialize); challenges associated with new customers or programs, or the provision of new services; interest rate fluctuations; rising commodity, materials and component costs as well as rising labor costs and changing labor conditions; changes in U.S. policies or legislation; customer relationships with emerging companies; recruiting or retaining skilled talent; our ability to adequately protect intellectual property and confidential information; the variability of revenue and operating results; unanticipated disruptions to our cash flows; deterioration in financial markets or the macro-economic environment, including as a result of global inflation and/or recession; maintaining sufficient financial resources to fund currently anticipated financial actions and obligations and to pursue desirable business opportunities; the expansion or consolidation of our operations; the inability to maintain adequate utilization of our workforce; integrating and achieving the anticipated benefits from acquisitions and “operate-in-place” arrangements; execution and/or quality issues (including our ability to successfully resolve these challenges); non-performance by counterparties; 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 or supplier financing programs); 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 those described in “External factors that may impact our business” in our most recent Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)); defects or deficiencies in our products, services or designs; volatility in the commercial aerospace industry; compliance with customer-driven policies and standards, and third-party certification requirements; negative impacts on our business resulting from our third-party indebtedness; the scope, duration and impact of materials constraints; coronavirus disease 2019 (COVID-19) mutations or resurgences; declines in U.S. and other government budgets, changes in government spending or budgetary priorities, or delays in contract awards; changes to our operating model; foreign currency volatility; our global operations and supply chain; competitive bid selection processes; our dependence on industries affected by rapid technological change; rapidly evolving and changing technologies, and changes in our customers’ business or outsourcing strategies; increasing taxes (including as a result of global tax reform) and potential ineffectiveness of related operational adjustments; tax audits, and challenges of defending our tax positions; obtaining, renewing or meeting the conditions of tax incentives and credits; the management of our information technology systems, and the fact that while we have not been materially impacted by computer viruses, malware, ransomware, hacking incidents or outages, we have been (and may in the future be) the target of such events; the impact of our restructuring actions and/or productivity initiatives, including a failure to achieve anticipated benefits therefrom; the incurrence of future restructuring charges, impairment charges, other unrecovered write-downs of assets (including inventory) or operating losses; the inability to prevent or detect all errors or fraud; compliance with applicable laws and regulations; our pension and other benefit plan obligations; changes in accounting judgments, estimates and assumptions; our ability to maintain compliance with applicable credit facility covenants; our total return swap agreement; our ability to refinance our indebtedness from time to time; our credit rating; our eligibility for foreign private issuer status; activist shareholders; current or future litigation, governmental actions, and/or changes in legislation or accounting standards; volatility in our SVS price; the impermissibility of SVS repurchases, or a determination not to repurchase SVS, under any NCIB; potential unenforceability of judgments; negative publicity; the impact of climate change; our ability to achieve our environmental, social and governance targets and goals, including with respect to climate change and greenhouse gas emissions reduction; and our potential vulnerability to take-over or tender offer. The foregoing and other material risks and uncertainties are discussed in our public filings at www.sedarplus.com and www.sec.gov, including in our most recent MD&A, our 2022 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.

All forward-looking statements attributable to us are expressly qualified by those cautionary statements.

Appendix 1 Non-IFRS Additional Financial Measures

The non-IFRS monetary measures (including non-IFRS monetary measures indices) included in this press release are: adjusted gross margin, adjusted gross margin (adjusted gross margin as a percentage of sales), adjusted SG&A expenses

In Q4 2022, we entered into a total return swap (TRS) agreement (TRS Agreement). Similar to employee stock-based compensation (SBC) expense, quarterly fair value adjustments of our TRS (TRS FVAs) are classified in cost of sales and SG&A expenses in our consolidated statement of operations. Commencing in Q1 2023, TRS FVAs are excluded in our determination of the following non-IFRS financial measures included herein: adjusted gross profit, adjusted gross margin, adjusted SG&A, adjusted SG&A as a percentage of revenue, non-IFRS operating earnings, non-IFRS operating margin, adjusted net earnings and adjusted EPS (for the reasons described below). TRS FVAs also impact the determination of our non-IFRS adjusted tax expense and non-IFRS adjusted effective tax rate. However, as the impact of TRS FVAs on our Q4 2022 Interim Financial Statements was de minimis, no such exclusion was applicable to such non-IFRS financial measures in either Q4 2022 or the full year 2022.

Non-IFRS monetary measures do not have a standardized meaning prescribed through IFRS and, therefore, would not possibly be comparable to similar measures presented through other corporations that report effects in accordance with IFRS, or that report effects in accordance with US GAAP and use non-GAAP. Monetary measures to describe similar monetary measures. Non-IFRS monetary measures are not IFRS measures of functionality and should not be considered in isolation or as a replacement for any monetary measures under IFRS.

The most significant limitation to management’s use of non-IFRS monetary measures is that expenses or credits excluded from non-IFRS monetary measures are still accounted for in accordance with IFRS and have an economic effect on us. Management compensates for these limitations primarily by issuing IFRS bills to provide a complete picture of our functionality and by reconciling non-IFRS monetary measures with the maximum directly comparable monetary measures that we have decided in accordance with IFRS.

In the calculation of the following non-IFRS monetary measures: Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Selling and General Expenses, Adjusted Selling and General Expenses as a Percentage of Sales, Non-IFRS Operating Income, Non-IFRS Operating Margin, Adjusted Net Income, Adjusted EPS and Adjusted Profit. Income tax expense, control excludes the following (if applicable): SBC employee expenses, FVA OEE, amortization of intangible assets (excluding computer software) and other expenses (recoveries) (defined below), all net of relevant tax changes (quantified in the table below), as well as potential non-material tax effects (tax changes similar to acquisitions and other safe tax prices or recoveries similar to restructuring moves or restructured sites). The economic substance of those exclusions (if applicable in the periods presented) and the reasons for control to exclude them from non-IFRS monetary measures are discussed below. The determination of our non-IFRS adjusted effective tax rate, adjusted loose money, and adjusted ROIC are described in footnotes 2, 3. and four in the table below, respectively.

Employee SBC spend, which represents the estimated fair price of inventory options, limited inventory sets, and functionality inventory sets allocated to workers, is excluded because allocation activities vary particularly from quarter to quarter, either in quantity and fair price. In addition, the exclusion of this expense allows us to better compare core operating effects with those of our competitors, who also exclude SBC expenses from workers in the operational functionality assessment, who may have other attribution models and types of inventory allocations, and who may use other valuations. assumptions. than us.

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 fees (recoveries) include, where applicable: restructuring prices, net of recoveries (defined below); Transition Costs (Recoveries) (defined below); Net impairment charges (defined below); advisory, transaction and integration fees similar to prospective and completed acquisitions, as well as fees or reversals similar to the upcoming evaluation of refunding assets or the release of refunds or other liabilities recorded in connection with the acquisitions; legal settlements (recoveries); specific fees related to lines of credit; losses in post-employment benefits; in the second quarter of 2023 and the third quarter of 2023, the secondary offering prices (defined below) and, beginning in the second quarter of 2023, the same costs related to certain accounting considerations. We exclude those fees and recoveries because they are not directly similar to existing operating effects and do not reflect the long-term operating expenses expected after the final touch of those activities or the incursion of relevant prices or recoveries. Our competition would likely record similar fees and recoveries at other times, and those exclusions provide further comparison of our number one operating effects with those of our competition, which also sometimes excludes those types of fees and recoveries when evaluating operating performance. Additionally, other fees (recoveries) for the fourth quarter of 2022 and full year 2022 included 0 and approximately $95 million, respectively, of equivalent fees and recoveries resulting from the Batam Fire. See Note thirteen of the interim monetary statements for the fourth quarter of 2023.

Restructuring charges, net of recoveries, come with prices similar to: indemnity prices, lease terminations, site closures and consolidations, accelerated amortization of maintained property, plant and appliance that are no longer in use and will be held for sale, and infrastructure reductions. .

Transition pricing comes with prices recorded in connection with: (i) the move of production lines from closed sites to other sites in our global network; (ii) the sale of real estate not related to restructuring movements (Property Dispositions); and (iii) for all of 2023, the Buyer Rental Rate (defined below). In connection with our Toronto real estate sale in March 2019, we treated the related relocation and doubling prices as transition prices. In connection with this sale, we entered into a 10-year lease agreement with the purchaser of these assets for our then-planned corporate headquarters, which will be constructed by such purchaser on the site of our former location (Buyer’s Lease). However, as noted above, we were informed that due to structural issues, the buyer’s lease start date will be delayed beyond the original target of May 2023. As a result, in November 2022, we have extended (in a long-term lease for our head office rental. We were subsequently informed that the buyer’s lease would begin in June 2024. In the third quarter of 2023, we entered into a sublease for a portion of the area covered by the buyer’s lease. Consistent with our previous resolution of duplicate pricing incurred following our 2019 Toronto real estate sale, we recorded transition pricing of $3. 9 million (genuine buyer fees) for all of fiscal 2023, representing excess genuine expenses under the buyer’s lease (with respect to the subleased area) on the expected rental charges under the subleaseArray Transition prices come with direct relocation prices and duplicate prices (such as rental charges, application prices, charges depreciation and employee prices) incurred during times of transition, as well as the cessation of use prices and other prices incurred in connection with unused or unoccupied portions of the applicable facilities that we would not have yet incurred for such moves. , removals and dispositions. Transition recoveries come with all gains recorded on asset disposals. We believe that the exclusion of those prices and recoveries allows greater comparison of our number one effects of operations from one era to another because those prices or recoveries do not reflect our ongoing operations after those specified occasions have ended.

The secondary offering prices come with prices related to the conversion and sale of our shares through Onex Corporation (Onex). Onex, our majority shareholder at the time, completed underwriting secondary public offerings in June 2023 and August 2023. No secondary offer prices were incurred in the fourth quarter of 2023 and a total of approximately 1. 6 million of those prices were incurred in all of fiscal year 2023. . Excluding secondary supply prices allows for further comparison of our fundamental operating effects from one era to the next because they do not reflect our ongoing operations and are no longer applicable once those conversions and sales have occurred.

Non-essential tax effects are excluded, as we believe that such prices or recoveries do not reflect core operating functionality and vary particularly among our competitors, who sometimes also exclude those prices or recoveries when evaluating operational functionality.

The following table (which is unaudited) sets forth, for the periods indicated, the various non-IFRS financial measures discussed above, and a reconciliation of non-IFRS financial measures to the most directly comparable financial measures determined under IFRS (in millions, except percentages and per share amounts):

(1) Management uses an operating source of non-IFRS (Adjusted EBITDA) revenue as a measure to compare functionality similar to that of our core businesses. The non-IFRS operating source of revenue is explained as the operating source of revenue before employee SBC expenses, FVA OEE (explained above), amortization of intangible assets (excluding PC software), and other expenses (recoveries) (explained above). Please refer to Note Nine of our fourth quarter 2023 interim monetary statements for a separate quantification and discussion of the portions of other fees (recoveries). ). Non-IFRS operating margin is explained as an operating source of non-IFRS revenue as a percentage of revenue.

The following table provides a reconciliation of our non-IFRS adjusted tax expense and non-IFRS adjusted effective tax rate with our IFRS tax expense and IFRS effective tax rate, respectively, for the periods indicated. Array made a decision in each case excluding taxes. the benefits or prices related to indexed parts (in millions, unless percentages) of our IFRS tax expense for those periods. Our effective IFRS tax rate is decided by dividing (i) IFRS tax expense by (ii) operating source of revenue minus monetary expenses (defined in footnote (3) below). -below); Our adjusted non-IFRS effective tax rate is decided by dividing (i) the non-IFRS adjusted tax expense by (ii) the operating source of non-IFRS revenue minus currency charges.

(3) Management uses non-IFRS adjusted 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 adjusted free cash flow provides another level of transparency to our liquidity. Non-IFRS adjusted 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), lease payments, and Finance Costs (defined below) paid (excluding any debt issuance costs and when applicable, credit facility waiver fees paid). 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 TRS Agreement, our accounts receivable sales program and customers’ supplier financing programs, and interest expense on our lease obligations, net of interest income earned. We do not consider debt issuance costs paid (nil and $0.4 million in Q4 2023 and full year 2023, respectively; nil and $0.8 million in Q4 2022 and full year 2022, respectively) or such waiver fees (when applicable) to be part of our ongoing financing expenses. As a result, these costs are excluded from total Finance Costs paid in our determination of non-IFRS adjusted free cash flow. We believe that excluding Finance Costs paid (other than debt issuance costs and credit-agreement-related waiver fees paid) from cash provided by operations in the determination of non-IFRS adjusted free cash flow provides useful insight for assessing the performance of our core operations. Note, however, that non-IFRS adjusted 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 annualized non-IFRS adjusted EBIAT by average net invested capital for the period. Net invested capital (calculated in the tables below) is derived from IFRS financial measures, and is defined as total assets less: cash, ROU assets, accounts payable, accrued and other current liabilities, 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. Average net invested capital for Q4 2023 is the average of net invested capital as at September 30, 2023 and December 31, 2023, and average net invested capital for the full year 2023 is the average of net invested capital at December 31, 2022, March 31, 2023, June 30, 2023, September 30 2023 and December 31, 2023. A comparable financial measure to non-IFRS adjusted ROIC determined using IFRS measures would be calculated by dividing annualized IFRS earnings from operations by average net invested capital for the period.

The table below presents, for the periods indicated, our calculation of % IFRS ROIC and % Non-IFRS Adjusted ROIC (in millions, % IFRS ROIC and % Adjusted Non-IFRS ROIC).

(1) See footnote 4 on the previous page.

Commitments and contingencies (Note 12). Later (note 11).

The accompanying notes are an integral part of these unaudited interim condensed consolidated monetary statements.

The accompanying notes form an integral component of such unaudited interim condensed consolidated monetary statements.

The accompanying notes form an integral component of such unaudited interim condensed consolidated monetary statements.

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

(a) Financial expenses paid in the fourth quarter and year ended December 31, 2023 include $zero and $0. 4 of debt issuance costs, respectively (fourth quarter and year ended December 31, 2022: zero and $0. 8, respectively).

The accompanying notes form an integral component of such unaudited interim condensed consolidated monetary statements.

Celestica Inc. (Celestica, the Company, we or our) is incorporated in Ontario and is headquartered in Toronto, Ontario, Canada. Celestica’s subordinate voting shares (SVS) are indexed on the Toronto Stock Exchange (TSX). and the New York Stock Exchange (NYSE).

2. PREPARATION BASES AND MATERIAL ACCOUNTING POLICIES

Declaration of conformity:

These unaudited interim condensed consolidated monetary statements for the consistent period ended December 31, 2023 (Interim Financial Statements Fourth Quarter 2023) have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, and the accounting policies we have followed in accordance with International Financial Reporting Standards (IFRS), in each case issued through the International Accounting Standards Board (IASB), and reflect any changes that, in the opinion of management, are mandatory to provide our monetary position as of December 31. , 2023 and our consistent monetary compliance, comprehensive source of income and cash flows for the 3 months and fiscal year ended December 31, 2023 (referred to herein as the fourth quarter of 2023 and fiscal year 2023, respectively) . The interim monetary statements for the fourth quarter of 2023 are worth reading in conjunction with our 2022 Audited Consolidated Financial Statements (AFS 2022), which are included in our Annual Report on Form 20-F for the year ended December 31, 2022. The monetary statements for the fourth quarter 2023 interim effects are provided in United States dollars (U. S. ), which is also the functional currency of Celestica. Unless otherwise indicated, all monetary data is provided in millions of US dollars (except those consistent with percentages and those consistent with percentage amounts).

Use of estimates and judgments:

The preparation of monetary statements in accordance with IFRS requires control to make judgments, estimates and assumptions that have effects on the application of accounting policies, the reported amounts of assets, liabilities, income and expenses, and similar disclosures. related to contingent assets and liabilities. We base our judgments, estimates and assumptions on existing facts (adding, in recent times, the widespread impact of global supply chain restrictions), past experiences and other points that we take into consideration depending on the circumstances. Economic situations also have an effect on the safe estimates and reduction rates required for the preparation of our consolidated monetary statements, adding significant estimates and reduction rates applicable to determining recoverable amounts used in impairment testing of our non-monetary assets. . Our evaluation of those bureaucratic points is the basis of our judgments about the wear values ​​of our assets and liabilities, as well as the accounting of our prices and expenses. Actual effects may also differ materially from our estimates and assumptions. We review our estimates and underlying assumptions and make revisions that are deemed mandatory by monitoring. Revisions are identified in the era in which the estimates are revised and would possibly also have an effect on long-term eras.

Our review of the estimates, judgments and assumptions used in the preparation of the Q4 2023 Interim Financial Statements included those relating to, among others: our determination of the timing of revenue recognition, the determination of whether indicators of impairment existed for our assets and cash generating units (CGUs1), our measurement of deferred tax assets and liabilities, our estimated inventory write-downs and expected credit losses, and customer creditworthiness. Any revisions to estimates, judgments or assumptions may result in, among other things, write-downs, accelerated depreciation or amortization, or impairments to our assets or CGUs, and/or adjustments to the carrying amount of our accounts receivable and/or inventories, or to the valuation of our deferred tax assets, any of which could have a material impact on our financial performance and financial condition.

1 CGUs are the smallest identifiable asset organization that cannot be tested separately and generate money inflows that are largely independent of those of other assets or groups of assets and would possibly consist of a single site, site organization, or line of business.

With the exception of: (i) Amendments to IAS 1 and the Statement of Practice IFRS 2, IAS 8 and IAS 12, followed on January 1, 2023; and (ii) IFRS 17, followed on January 1, 2023, as described below, the interim monetary statements for the fourth quarter of 2023 are based on accounting policies consistent with those described in Note 2 of our AFS 2022. In addition , followed the amendments to IAS 1 on January 1, 2024, as described below.

Accounting criteria and modifications followed recently:

Making Materiality Judgements (Amendments to IAS 1 and IFRS Practice Statement 2)

In February 2021, the IASB issued amendments to IAS 1 and IFRS Notice of Practice 2 “Making Materiality Judgments”, which provide guidance and examples to assist entities in making decisions about the coverage of accounting policy disclosures. The amendments are intended to help entities provide more useful disclosure of accounting policies by replacing the requirement for entities to disclose their “significant” accounting policies with a requirement to disclose their significant accounting policies and adding guidance on how entities should apply the concept of draperyity when making decisions related to accounting policy disclosures. These amendments are applicable for tax years beginning on or after January 1, 2023. These amendments, which we followed on that date, had no effect on our 2023 annual consolidated monetary statements and will be reflected in them.

In February 2021, the IASB issued Definition of accounting estimates (Amendments to IAS 8) to clarify the distinction between accounting policies and accounting estimates. The amendments are effective for reporting periods beginning on or after January 1, 2023. We adopted this standard as of January 1, 2023. The adoption of this standard had no material impact on our consolidated financial statements.

Deferred Taxes on Assets and Liabilities Arising from a Single Transaction (Amendments to IAS 12 Income Taxes)

In May 2021, the IASB published Deferred Taxes on Assets and Liabilities Arising from a Single Transaction (Amendments to IAS 12 Income Taxes) to explain how to account for deferred taxes on transactions such as rentals and decommissioning obligations. Adjustments are effective for reporting periods. On or after January 1, 2023. We followed this popular one on January 1, 2023. The adoption of this popular did not have any significant effect on our consolidated financial statements.

International Tax Reform – Model Rules for the Second Pillar (amendments to IAS 12, Income Taxes)

Pillar II law has been followed or substantially followed in some jurisdictions where we operate, while the law in other applicable jurisdictions has yet to be finalized. Based on the recently enacted law, we hope that the Pillar II law will have an effect on our reporting. periods beginning January 1, 2025. However, the enactment of Pillar II law in other applicable jurisdictions may result in its applicability for our reporting periods beginning January 1, 2024. He estimates that once such a law goes into effect, we will have an additional source of income taxes. of approximately $6 in the first quarter of 2024.

We will continue to monitor the effect of the source of Pillar II income taxes as the Pillar II Model Rules are followed in the jurisdictions in which we operate.

IFRS 17 Insurance Contracts

In May 2017, the IASB issued IFRS 17 Insurance Contracts. IFRS 17 replaces IFRS 4 and sets out the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of IFRS 17. This popular is effective for reporting periods beginning on or after January 1, 2023. We follow this popular one as of January 1, 2023. January 1, 2023. The adoption of this popular did not have any significant effect on our consolidated financial statements.

In January 2020, the IASB issued Classification of liabilities as current or non-current (Amendments to IAS 1) to clarify how to classify debt and other liabilities as current or non-current. The amendments are effective for reporting periods beginning on or after January 1, 2024. We adopted this standard as of January 1, 2024. We do not anticipate that the adoption of this standard will have a material impact on our consolidated financial statements.

3. SEGMENTAL AND CUSTOMER REPORTS

Segments:

Celestica delivers cutting-edge source chain answers on a global scale to its consumers in two operational and displayable segments: Advanced Technology Solutions (ATS) and Cloud and Connectivity Solutions (CCS). Our ATS segment includes our ATS finishing market and includes our aerospace and defense sector. (TO

Clients:

One visitor (in our CCS segment) separately accounted for 10% or more of overall earnings in the fourth quarter of 2023 (29%) and fiscal year 2023 (22%). Two consumers (in our CCS segment) separately accounted for 10% or more of overall profit in the fourth quarter of 2022 (fourth quarter of 2022) (13% and 11%) and in the year ended December 31, 2022 (fiscal 2022) (11% for visitors).

4. ACCOUNTS RECEIVABLE

We are party to an A/R sales program agreement with a third-party bank to sell up to $450.0 (increased in March 2023 from the prior limit of $405.0) in A/R on an uncommitted, revolving basis, subject to pre-determined limits by customer. This agreement provides for automatic annual one-year extensions, and may be terminated at any time by the bank or by us upon 3 months’ prior notice, or by the bank upon specified defaults. Under our A/R sales program, we continue to collect cash from our customers and remit amounts collected to the bank weekly.

As of December 31, 2023, we are participating in 3 consumer SFPs, under which we sell the corresponding visitor’s visitor accounts to third-party banks on a no-obligation basis. SFPs have an indefinite term and may be terminated at any time through the Client. or through us upon specified notice. As a component of our SFPs, third-party banks collect applicable visitor accounts directly from those visitors.

As of December 31, 2023, we have not sold any accounts receivable (December 31, 2022: $245. 6) under our accounts receivable sales program, and $18. 6 each of the accounts receivable (December 31, 2022: $105. 6) under GFS. Each of these systems is derecognized from the balance of our accounts receivable at the time of sale, and the proceeds are reflected as money from operating activities in our Consolidated Statement of Cash Flows. At the time of sale, we transfer the rights back to the banks. Accounts receivable are sold net of abatement fees, which are recorded as finance fees in our Consolidated Statement of Operations.

Contract assets:

5. INVENTORIES

We recorded inventory impairments, net of price recoveries, charged to sales. Inventories are valued at the decrease in charge and net realizable price. Inventory write-downs reflect the depreciation of shares at their net realizable price. Impairment recoveries primarily reflect gains from the disposal of impaired inventory in the past and recoveries reflecting existing and planned use. We recorded net inventory impairments of $17. 2 and $57. 6 for the fourth quarter of 2023 and full year 2023, respectively (fourth quarter 2022: $13. 9; fiscal year 2022: $30. 5). of the stock destroyed in a fire in June 2022 is described in Note 13.

We receive cash deposits from certain of our customers primarily to help mitigate the impact of high inventory levels carried due to the current constrained materials environment, and to reduce risks related to excess and/or obsolete inventory. Such deposits as of December 31, 2023 totaled $904.8 (December 31, 2022 — $825.6), and were recorded in accrued and other current liabilities on our consolidated balance sheet.

6. PENSION PLANS AND POST-EMPLOYMENT BENEFITS

7. CREDIT FACILITIES AND LEASE OBLIGATIONS

We are party to a credit agreement (Credit Facility) with Bank of America, N.A., as Administrative Agent, and the other lenders party thereto, which includes a term loan in the original principal amount of $350.0 (Initial Term Loan), a term loan in the original principal amount of $365.0 (Incremental Term Loan), and a $600.0 revolving credit facility (Revolver). The Initial Term Loan and the Incremental Term Loan are collectively referred to as the Term Loans. In June 2023 (effective for all new interest periods for existing borrowings and all new subsequent borrowings), we amended our Credit Facility (June 2023 Amendments) to replace LIBOR with the term Secured Overnight Financing Rate (SOFR) plus 0.1% (Adjusted Term SOFR). The June 2023 Amendments did not have a significant impact on our Q4 2023 Interim Financial Statements.

The Initial Term Loan matures in June 2025. The Incremental Term Loan and the Revolver each mature in March 2025, unless either (i) the Initial Term Loan has been prepaid or refinanced or (ii) commitments under the Revolver are available and have been reserved to repay the Initial Term Loan in full, in which case the Incremental Term Loan and Revolver each mature in December 2026.

The Line of Credit includes an accordion feature that allows us to accrue term loans and/or commitments under the Revolver up to $150. 0, plus an unlimited amount to the extent that a leverage ratio specified on a pro forma basis does not exceed the specified limits, in the case on a non-committed basis and subject to the satisfaction of certain terms and conditions.

The Incremental Term Loan requires quarterly principal repayments of $4.5625, and each of the Term Loans requires a lump sum repayment of the remainder outstanding at maturity. The Initial Term Loan required quarterly principal repayments of $0.875, all of which were paid in prior years. We are also required to make annual prepayments of outstanding obligations under the Credit Facility (applied first to the Term Loans, then to the Revolver, in the manner set forth in the Credit Facility) ranging from 0% — 50% (based on a defined leverage ratio) of specified excess cash flow for the prior fiscal year. No prepayments based on excess cash flow were required in 2023, or will be required in 2024. In addition, prepayments of outstanding obligations under the Credit Facility (applied as described above) may also be required in the amount of specified net cash proceeds received above a specified annual threshold (including proceeds from the disposal of certain assets). No Credit Facility prepayments based on net cash proceeds were required in 2023, or will be required in 2024. Any outstanding amounts under the Revolver are due at maturity.

Activity under our Credit Facility during FY 2022 and FY 2023 is set forth below:

(1) In addition to the business described in this table, we have used the Revolver for short-term loans from time to time during the periods indicated above and have repaid such loans in full during the quarter borrowed, without having any effect on the amounts remaining due at the end of the corresponding quarter. These intra-quarterly loans and repayments are excluded from this table.

(2) Represents the expected quarterly principal payment of the Additional Term Loan.

As of December 31, 2023 and December 31, 2022, we complied with all the monetary covenants and covenants of the credit line.

The following tables show, as of the dates indicated: notable loans under the Line of Credit, excluding letters of credit (L/C); notional amounts under our interest rate change agreements; and existing rental obligations:

(1) We incur debt issuance costs upon execution of, subsequent security arrangements under, and amendments to the Credit Facility. Debt issuance costs incurred in Q4 2023 and FY 2023 in connection with our Revolver totaling nil and $0.2 respectively (Q4 2022 and FY 2022 — nil and $0.3 respectively) were deferred as other assets on our consolidated balance sheet and are amortized on a straight line basis over the remaining term of the Revolver. Debt issuance costs incurred in Q4 2023 and FY 2023 in connection with our Term Loans totaling nil and $0.2 respectively (Q4 2022 and FY 2022 — nil and $0.3 respectively) were deferred as long-term debt on our consolidated balance sheet and are amortized over their respective terms using the effective interest rate method.

(2) These lease liabilities constitute the provision price for the outstanding lease payment obligations recorded as liabilities as of December 31, 2022 and December 31, 2023, respectively, which have been discounted from our differential debt ratio at the lease start dates. lease liabilities, we have real estate lease liabilities in Richardson, Texas and Toronto, Canada, that are not recorded as liabilities as of December 31, 2023, as those leases had not yet commenced as of that date. A description of those rents and the minimum obligations under them are set forth in Note 24 to the 2022 SFA. In the third quarter of 2023 (Q3 2023), we subleased a portion of the area under the Toronto lease. See note 9(b) below.

Finance fees include interest expense and fees similar to our credit facility (including debt issuance fees and relevant amortization fees), interest rate change agreements, TRS agreement, accounts receivable sales program and GFS, as well as interest expense on our lease obligations. of interest earned income.

8. SHARE CAPITAL AND OPERATIONS WITH RELATED PARTIES

Onex Corporation (Onex) Secondary Offerings:

In connection with two secondary public offerings underwritten through Onex, our majority shareholder at the time, finalized in June 2023 (June Secondary Offering) and August 2023 (August Secondary Offering, and together with the June Secondary Offering, the Secondary Offerings), we issued a total of approximately 18. 6 million SVS, upon conversion of an equivalent number of our Multiple Voting Rights (MVS) percentages. Secondary offerings had no effect on the total amount of our equity percentage.

Prior to the completion of the August Secondary Offering, Onex beneficially owned, controlled, or directed, directly or indirectly, all of our issued and outstanding MVS. Accordingly, Onex had the ability to exercise significant influence over our business and affairs and generally had the power to determine all matters submitted to a vote of our shareholders where the SVS and MVS vote together as a single class. Mr. Gerald Schwartz, the Chairman of the Board of Onex, indirectly owns shares representing the majority of the voting rights of the shares of Onex. However, upon completion of the August Secondary Offering, we have no MVS outstanding and Onex is no longer our controlling shareholder.

Prior to September 3, 2023, we were part of a service agreement (Service Agreement) with Onex for M services. Tawfiq Popatia, an official of Onex, as a director of Celestica, according to which Onex got an annual reimbursement of $0. 235. (payable in Deferred Stock Units (DSUs)) in quarterly equivalent bills due for such services. Popatia resigned from our Board of Directors and the Service Agreement terminated in accordance with its terms on September 3, 2023. In accordance with the terms of the Service Agreement, we paid Onex approximately $9. 2 in cash in October 2023 to settle Onex’s notable DSUs.

SVS Redemption Plans:

In recent years, we have repurchased SVS on the open market, or where otherwise permitted, for cancellation through General Course Issuer Offerings (NCIBs), which allow us to repurchase a limited amount of SVS for a specified period. The maximum amount of SVS that we may re-acquire for cancellation under each special offer is reduced through the amount of SVS that we cause to be purchased through any non-independent broker-dealer on the open market during the term of such Special Offer to satisfy obligations. Delivery under our SBC. planes. De from time to time we enter into Automatic Inventory Acquisition Plans (ASPPs) with a broker, directing the broker to purchase our SVS on the open market on our behalf, either for cancellation under an NCIB (NCIB ASPP) or for delivery obligations under our SBC Plans (SBC ASPP), adding any applicable trade restriction periods, up to specific maximums (and subject to certain costs and other conditions) the duration of each of the ASPPs.

On December 8, 2022, the TSX accepted our graduation completion of some other issuer offering (the 2022 Issuer Offering), allowing us to repurchase, at our discretion, from December 13, 2022 through December 12, 2023 or until the purchases are completed. up to approximately 8. 8 million of our SVS on the open market, or as otherwise permitted, subject to the general conditions and limitations of such offerings. We entered into several ASPPs NCIBs and ASPP SBCs (each with independent broker-dealers) during the 2022 OPRCNA term, all but one of which expired prior to December 31, 2023 (see below for the ASPP provisions we recorded as of December 31, 2023). ). Array There was no regularization as of December 31, 2022 under an ASPP NCIB or an ASPP SBC.

On December 12, 2023, the TSX agreed to our graduation of a new issuer offering (the 2023 Issuer Offering), which allows us to acquire, at our option, from December 14, 2023 through December 13, 2024, or until the acquisitions are completed on that date, whichever occurs first, up to approximately 11. 8 million of our OASIs on the open market, or otherwise permitted, subject to the general terms and limitations of such offerings. As of December 31, 2023, approximately 11. 8 million SVS remained available for purchase under the 2023 NCIB, either for cancellation or for SBC delivery. As of December 31, 2023, we have recorded a provision of: (i) $2. 7, which represents the estimated maximum contracted amount (0. 1 million SVS) under an ASPP NCIB that we entered into in December 2023 (the 2023 NCIB provision); and (ii) $7. 5, which represents the estimated maximum contracted amount (0. 3 million SVS) under an ASPP SBC we entered into in September 2023 (2023 SBC rollover).

SVS repurchased in Q4 2023, FY 2023 and the respective prior year periods for cancellation and for SBC plan delivery obligations (including under ASPPs) are set forth in the chart below.

SVS Buybacks:

SBC:

From time to time, we pay cash to a broker to purchase SVS in the open market to satisfy delivery requirements under our SBC plans. At December 31, 2023, the broker held 3.3 million SVS with a value of $72.6 (December 31, 2022 — 1.5 million SVS with a value of $16.7) for this purpose, which we report as treasury stock on our consolidated balance sheet. We used 1.9 million SVS held by the broker (including additional SVS purchased during FY 2023) to settle SBC awards during FY 2023.

We grant limited inventory sets (RSUs) and functionality consistent with percentage sets (PSUs), and sometimes inventory features, to workers under our SBC plans. Most RSUs vest at a rate of one-third per year over a 3-year period. Stock features generally vest at 25% per year over a four-year period. The number of notable PSUs that will actually be awarded varies from 0% to 200% of an allocated target amount. For PSUs awarded in 2020, 2021 and 2022, the number of PSUs vested (or vested) is based on the point of achievement of a predetermined non-market functionality measure in the last year of functionality consistent with an applicable 3-year period . modification through each of a separate predetermined monetary objective outside the market, and our general relative consistent with the percentage holder return (TSR), a condition of market functionality, in relation to a predefined organization of companies, in each case in the 3 consistent periods in question. One-year functionality consistent with the period. For PSUs awarded in 2023, the number of PSUs to be awarded is based on the point of fulfillment of another predetermined non-market functionality measure, subject to replacement in our relative TSR compared to a predefined organization of companies, in each of them. A case. on the applicable functionality of 3 years consistent with the period. We also grant DSUs and RSUs (in specific circumstances) to directors as reimbursement under our fair director pay plan. See Note 2(l) of the 2022 AFS for additional details.

Information regarding MSW, PSU, and DSU awards to workers and directors, if any, for the periods indicated is shown below (no inventory characteristics were granted in the periods below):

In December 2022, we entered into the TRS Agreement to manage cash flow requirements and our exposure to fluctuations in the share price of our SVS in connection with the settlement of certain outstanding equity awards under our SBC plans. In September 2023, we terminated a portion of the TRS Agreement by reducing the notional amount thereunder by 0.5 million SVS. See note 11 for further detail.

Below is the information regarding the expenses of SBC and FVA OEE workers and directors for the periods indicated:

(1) Expenses shall form part of the directors’ remuneration and shall be paid in OASI, or in SVS and in cash, at the director’s option.

9. OTHER CHARGES, NET OF RECOVERIES

We review the carrying amount of goodwill, intangible assets, property, plant and equipment, and right-of-use (ROU) assets for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount of such assets, or the related CGU or CGUs, may not be recoverable. If any such indication exists, we test the carrying amount of such assets or CGUs for impairment. No triggering events occurred during FY 2023 or FY 2022 (however, refer to paragraph (a) below for a description of write-downs of specified assets during such periods in connection with our restructuring activities). Also see note 13. In addition to an assessment of triggering events during the year, we conduct an annual impairment assessment of CGUs with goodwill in the fourth quarter of each year to correspond with our annual planning cycle (Annual Impairment Assessment). During each of Q4 2023 and Q4 2022, we performed our Annual Impairment Assessment of CGUs with goodwill and determined that there was no impairment, as the recoverable amount of such CGUs exceeded their respective carrying values.

(a) Restructuring:

Our restructuring activities for the fourth quarter of 2023 and full year 2023 consisted of moves to adjust our charge base to meet reduced levels of demand across some of our businesses and geographies.

We recorded currency restructuring fees of $1. 7 and $9. 6 in the fourth quarter of 2023 and fiscal year 2023, respectively, primarily for termination costs. We recorded 0 non-cash restructuring fees in the fourth quarter of 2023 and non-cash restructuring fees of $2. 9 in FY 2023, consisting primarily of accelerated depreciation of appliances, construction innovations, and assets with ROUs similar to divestment systems, and vacant properties. In the fourth quarter of 2023, we recorded non-cash restructuring recoveries of $0. 3, similar to gains from the sale of surplus appliances. During fiscal year 2023, we recorded non-cash restructuring recoveries of $1. 3, as a result of gains from the sale of surplus appliances and recoveries from secure subleases that exceed the use price of similar leases. As of December 31, 2023, our restructuring provision was $3. 6 (December 31, 2022: $5. 8), which we recorded in the existing provisions portion of our consolidated balance sheet.

(b) Transition Costs (Recoveries):

Transition prices come with prices recorded in connection with: (i) moving production lines from closed sites to other sites in our global network; (ii) the sale of real estate not similar to restructuring movements (disposals of real estate) and (iii) with respect to the 2023 monetary year, the buyer’s lease prices (defined below). Transition prices come with direct relocation prices and duplicate prices (such as rent, utilities, depreciation and amortization prices, and worker body prices) incurred in transition periods, as well as termination prices and other prices incurred in connection with unused or unoccupied quantities of the applicable facilities that we would not have incurred without such moves, Transfers and disposals. Transitory recoveries come with all gains recorded on asset disposals.

In connection with our Toronto real estate sale in March 2019, we treated the related relocation and doubling prices as transition prices. In connection with this sale, we entered into a 10-year lease agreement with the purchaser of these assets for our then-planned corporate headquarters, which will be constructed by such purchaser on the site of our former location (Buyer’s Lease). However, as noted above, we were informed that due to structural issues, the buyer’s lease start date will be delayed beyond the original target of May 2023. As a result, in November 2022, we have extended (in a long-term lease for our head office rental. We were subsequently informed that the buyer’s lease would begin in June 2024. In the third quarter of 2023, we entered into a sublease for a portion of the area covered by the buyer’s lease. Consistent with our previous resolution of duplicate pricing incurred following our 2019 Toronto real estate sale, we recorded transition pricing of $3. 9 (genuine buyer fee) in fiscal 2023, representing excess hygienic expenses under the buyer’s lease agreement (in relation to the subleased area). ) on the expected rental charges under the sublease. See Note 24 of the 2022 AFS for a description of our genuine obligations under the Buyer Lease.

We experienced transition recoveries in the fourth quarter of 2023 or fiscal 2023. We did not incur transition prices in the fourth quarter of 2022 and $1. 5 of transition prices in fiscal 2022, primarily similar to the disposition of assets reclassified as held for sale in the first quarter of 2022. We recorded no transition recoveries in the fourth quarter of 2022 and $3. 6 of transition recoveries in fiscal 2022, reflecting the gain from the disposal of assets held for sale.

We incur advisory, transaction, and integration pricing similar to prospective and completed acquisitions. We also incur fees or reversals similar to the next revaluation of indemnification assets or indemnities or other liabilities recorded in connection with acquisitions, if any. Collectively, those prices, expenses, and s are referred to as acquisition prices (recoveries).

We recorded acquisition prices of $0. 1 in the fourth quarter of 2023 and $1. 0 in FY 2023, similar to potential acquisitions (Q4 2022: zero; FY 2022: $0. 4, similar to the acquisition of PCI Private Limited in November 2021). We have recorded any acquisitions recoveries in previous periods.

(d) Other Cost Recoveries:

Other recoveries, net of prices in fiscal year 2023, included court recoveries of $2. 7 in the elegance action settlement (for pieces purchased in prior periods) in which we were plaintiffs, offset through a total of $1. 8 in prices, almost all of which consisted of fees and expenses similar to secondary donations (see note 8). We did not record other prices (recoveries) in the fourth quarter of 2023, the fourth quarter of 2022, or in fiscal year 2022.

Our tax expense or recovery for each quarter is decided by multiplying the pre-tax profit or loss for that quarter through the most productive estimate of the control of the expected weighted average annual tax rate for the entire year, based on taking into account the effect fiscal. of safe elements. identified in the intervening period. As a result, the effective tax rates used in our interim monetary statements would likely differ from the control estimate of the annual effective tax rate for the annual monetary statements. Our estimated annual effective tax rate varies from quarter to quarter for a variety of reasons, including the mix and volume of business in various tax jurisdictions in the Americas, Europe and Asia, in jurisdictions with tax exemptions and incentives, and in jurisdictions for which we do not there is net income. The deferred tax asset has been identified because control believes that it is unlikely that a long-term tax benefit will be realized from which tax losses and deductible temporary differences can also be allocated. Our annual effective tax rate could also vary due to the effect of restructuring fees, exchange rate fluctuations, operating losses, repatriations of money and adjustments to our provisions, such as tax uncertainties.

Our net tax expense of $19. 9 for the fourth quarter of 2023 included a tax expense of $4. 8 for tax uncertainties similar to one of our Asian subsidiaries (tax uncertainties) and a tax expense of $4. 5 resulting from the repatriation of earnings not distributed, net of reversal. of the tax in the past recognized. expenses related to the then planned repatriations by our Asian subsidiaries. Our net tax expense of $62. 0 for fiscal 2023 included a tax expense of $11. 3 arising from the repatriation of retained earnings and relevant taxable transitory differences with the expected repatriation of retained earnings from our Asian subsidiaries, as well as fiscal insecurities of $4. 8. partially compensated. through the favorable effect of $5. 5 of reversals of fiscal uncertainties recorded in the past in some of our Asian subsidiaries. The withholding tax of $5. 8 corresponding to the repatriation of undistributed earnings of certain of our Asian subsidiaries during fiscal 2023 (realized as taxes payable) was fully offset by the reversal of deferred taxes accrued in the past during the then planned repatriation of those retained earnings. Taxable currencies have an effect on those that were not written off in the fourth quarter of 2023 or during the 2023 monetary year.

Our net source of income tax expense of $19. 9 for the fourth quarter of 2022 included an unfavorable taxable foreign exchange effect of $1. 3 resulting from the fluctuation of the Chinese renminbi against the U. S. dollar, our functional currency (the currency effect going forward), and a rate of $3. 3 resulting from transitory taxable differences related to the currency effect. Anticipated Repatriation of Retained Earnings of Certain of Our Chinese Subsidiaries (Repatriation Costs). Our net source of income tax expense of $58. 1 for fiscal year 2022 was favorable. A $4. 9 effect of reversals of past tax insecurities recorded in one of our Asian subsidiaries, which were more than offset through an unfavorable currency effect of $3. 5 and repatriation prices of $3. 3. The withholding tax of $10. 3 related to the repatriation of retained earnings of some of our Chinese subsidiaries in fiscal year 2022 (realized as existing taxes) was fully offset by the reversal of deferred taxes accrued in the past on the then-scheduled repatriation of such retained earnings.

11. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Stock Price Risk:

In December 2022, we entered into the TRS agreement with a third-party bank relating to a notional amount of 3. 0 million of our SVS (notional amount) to manage our monetary needs and our exposure to fluctuations in the value of our SVS in relation to with the agreement of notable and secure equity awards according to our SBC plans. The counter-component under the TRS Agreement is obliged to make payment to us upon termination (in whole or component) or expiration (agreement) based on the accrual (if applicable) in the cost of the TRS (as explained in the TRS agreement) . ). ) during the term of the contract, replacing the consistent periodic invoices that we issue based on the acquisition costs of the SVS of the counter component and the SOFR plus a specific margin. Similarly, if the cost of the TRS (as explained in the TRS Contract) is minimized during the term of the TRS Contract, we must pay the counterparty the amount of this minimum at the time of Settlement. The replacement cost of the TRS is determined by comparing the average amount acquired through the contracomponent in the sale of the SVS acquired with the average amount paid for those SVS. At the end of the first quarter of 2023, the counter component had acquired the full initial notional volume at a weighted average value of $12. 73 per share. The TRS Agreement provides for automatic one-year annual extensions (subject to specific conditions) and may be terminated (in whole or in part) by any of the components at any time. In September 2023, we terminated part of the TRS agreement by reducing the nominal amount to 0. 5 million SVS. We earned $5. 0 of attention in this regard, which was recorded as money provided through financing activities in our consolidated cash flows. TRS is not eligible for hedge accounting. As of December 31, 2023, the fair cost of the TRS agreement was an unlearned gain of $40. 6 (December 31, 2022 – de minimis), which we recorded in other existing assets on our consolidated balance sheet. TRS FVA (representing the fair cost replacement of TRS) is identified in our consolidated consistent transactions each quarter. See Note 8 for TRS FVA in the fourth quarter of 2023 and for fiscal year 2023.

Interest Risk:

Borrowings under the Credit Facility expose us to interest rate risk due to the potential variability of market interest rates (see note 7). In order to partially hedge against our exposure to interest rate variability on our Term Loans, we have entered into various agreements with third-party banks to swap the variable interest rate with a fixed rate of interest for a portion of the borrowings under our Term Loans. At December 31, 2023, we had: (i) interest rate swaps hedging the interest rate risk associated with $100.0 of our Initial Term Loan borrowings that expire in June 2024 (Initial Swaps); (ii) interest rate swaps hedging the interest rate risk associated with $100.0 of our Initial Term Loan borrowings (and any subsequent term loans replacing the Initial Term Loan), for which the cash flows commence upon the expiration of the Initial Swaps and continue through December 2025; (iii) interest rate swaps hedging the interest rate risk associated with $100.0 of outstanding borrowings under the Incremental Term Loan that expire in December 2025 (Incremental Swaps); and (iv) interest rate swaps hedging the interest rate risk associated with an additional $130.0 of our Incremental Term Loan borrowings that expire in December 2025 (Additional Incremental Swaps). The option to cancel up to $50.0 of the notional amount of the Additional Incremental Swaps from January 2024 through October 2025 was terminated in January 2024.

As of December 31, 2023, the fair price of our interest rate swaps represented a non-learned gain of $13. 2 (December 31, 2022: a non-learned gain of $18. 7), which we recorded in other existing assets and other non-existing assets in our consolidated account. Accounts. Balance Sheet. The unlearned portion of the replacement in the fair price of swaps is identified in another integral source of income. The learned portion of the fair price replacement of swaps is released from another accrued comprehensive source of income and is identified as a financial expense in our consolidated operations when hedged interest expense is identified.

We amended our Credit Facility in June 2023 to replace LIBOR with Adjusted Term SOFR. See note 7. In June 2023, all of our interest rate swap agreements were similarly amended. None of these amendments (individually or in the aggregate) had a significant impact on our Q4 2023 Interim Financial Statements. We continue to apply hedge accounting to our interest rate swaps.

Currency risk:

The majority of our currency risk is driven by operational costs, including income tax expense, incurred in local currencies by our subsidiaries. We cannot predict changes in currency exchange rates, the impact of exchange rate changes on our operating results, nor the degree to which we will be able to manage the impact of currency exchange rate changes. Such changes could have a material effect on our business, financial performance and financial condition.

We enter into currency futures contracts to hedge our money flow risks and currency swaps to hedge risks similar to our financial assets and liabilities denominated in foreign currencies. While these contracts are intended to lessen the effects of exchange rate fluctuations, our hedging strategy does not mitigate the long-term effect of exchange rate fluctuations.

At December 31, 2023, we had foreign currency forwards and swaps to trade U.S. dollars in exchange for the following currencies:

(1) Represents the U. S. dollar (not millions) of a unit of foreign currency, weighted through the notional amounts of the underlying forward foreign exchange and notable foreign exchange contracts as of December 31, 2023.

As of December 31, 2023, the general fair of our featured contracts represented a net unrealized gain of $6. 5 (December 31, 2022: net unrealized gain of $5. 2), resulting from exchange rate fluctuations between contract execution and the end of the period. . date. As of December 31, 2023, we recorded $15. 8 of derivative assets in other existing assets and $9. 3 of derivative liabilities in accrued liabilities and other existing liabilities (December 31, 2022: $18. 9 of derivative assets in other existing assets and $13. 7 of derivative liabilities in existing liabilities and liabilities (existing liabilities).

Credit threat refers to the threat that a counterparty may possibly default on its contractual obligations, resulting in monetary loss to us. We believe that the threat to our credits, similar to the default of counter-components, remains relatively low. We are in normal contact with our visitors, suppliers and logistics providers, and have not experienced any significant defaults similar to that of the counter-component credits in 2022 or 2023. However, if a key supplier (or any company within the chain of that provider) ) or a visitor fails to fulfill his or her contractual obligations, this may also result in significant monetary loss for us. We would also suffer a significant monetary loss if a facility from which we purchased currency contracts and swaps, interest rate swaps or annuities for our retirement plans, or the counterparty to our TRS agreement, defaulted on its contractual obligations. With respect to our activities in the money markets, we have followed a policy of dealing only with counter-components that we consider creditworthy. No changes were made to our reserve for doubtful accounts during the fourth quarter of 2023 or fiscal 2023 as part of our ongoing credit threat assessments.

Liquidity risk:

The liquidity threat is the threat that we will not have the liquidity to meet our monetary obligations when they come due. Most of our monetary liabilities recorded in accounts payable, accrued liabilities and other existing liabilities and provisions are due within 90 days. We manage the liquidity threat by maintaining our liquidity and accessing the various investment terms described in Notes Four and 7. We believe that money flowing from operating activities, combined with the money on hand, money from accepted sales of accounts receivable and loans to be obtained under the Revolver and potentially available under uncommitted intraday and overnight bank overdraft lines, are sufficient to fund our currently expected monetary obligations and will continue to be available in the current environment. However, since our accounts receivable and SFP program are not compromised, there is no guarantee that a contracted bank will acquire any of the accounts receivable we wish to sell.

12. COMMITMENTS AND CONTINGENCIES

In the general course of business, we may be subject to lawsuits, investigations, and other claims, in addition to those related to the environment, labor, products, customers, and other matters. Management believes that good enough provisions have been taken when needed. While it is not always possible to estimate the magnitude of potential costs, if any, we believe that the final solution to all of these important problems will not have an adverse effect on our financial performance, financial condition, or liquidity.

Taxes & Issues:

In 2021, the Romanian tax authorities issued a final assessment in the aggregate amount of approximately 31 million Romanian leu (approximately $7 at Q4 2023 period-end exchange rates), for additional income and value-added taxes for one of our Romanian subsidiaries for the 2014 to 2018 tax years. In order to advance our case to the appeals phase and reduce or eliminate potential interest and penalties, we paid the Romanian tax authorities the full amount assessed in 2021 (without agreement to all or any portion of such assessment). We believe that our originally-filed tax return positions are in compliance with applicable Romanian tax laws and regulations, and intend to vigorously defend our position through all necessary appeals or other judicial processes.

The successful pursuit of assertions made by any government authority, including tax authorities, could result in our owing significant amounts of tax or other reimbursements, interest and possibly penalties. We believe we adequately accrue for any probable potential adverse ruling. However, there can be no assurance as to the final resolution of any claims and any resulting proceedings. If any claims and any ensuing proceedings are determined adversely to us, the amounts we may be required to pay could be material, and in excess of amounts accrued.

In June 2022, a chimney was produced in our factory in Batam, Indonesia. The fire destroyed stock and destroyed a structure and equipment located on the site. Our production operations at the site were temporarily suspended, but resumed in June 2022. In 2022, we wrote off destroyed stock (approximately $94) as well as a broken structure and equipment (approximately $1) around the smokestack. We expect to fully recover our tangible losses in accordance with the terms and conditions of our insurance policies. In 2022 and 2023, we recovered approximately $31 and $23 of our stock losses through insurance proceeds, respectively. As of December 31, 2023, we recorded an estimated account receivable of approximately $41 similar to the expected remaining insurance proceeds on other existing assets on our consolidated balance sheet. Amortizations and compensation insurance receivables (in equivalent amounts) were recorded in other expenses in 2022, which had no net effect on 2022 net income. We have determined that this occasion did not constitute a verification occasion. impairment for the CGU in question, and no impairment of our intangible assets or goodwill has been identified in this regard in 2022 or 2023.