Good afternoon. My name is Kirk, and I will be your conference operator today. At this time, I would like to welcome everyone to the Celestica Inc. Fourth Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question-and-answer session. [Operator Instructions]. Thank you. Manny Panesar, Director of Investor Relations, you may begin your conference.

Thank you, Kirk. Good afternoon and thank you for joining us on Celestica's Fourth Quarter 2014 Earnings Conference Call. On the call today are Craig Muhlhauser, President and Chief Executive Officer and Darren Myers, Chief Financial Officer. This conference call will last approximately 45 minutes. Darren and Craig will provide some brief comments on the quarter, and then we will open the call for questions. During the Q&A session please limit yourself to one question and a brief follow-up. We will be available after the conference call for additional follow-up. Please visit www.celestica.com to view the supporting slides accompanying this webcast. As a reminder, during this call, we make forward-looking statements related to our future growth, trends in our industry, our intentions concerning the return of capital to our shareholders, our financial and operational results and performance, and financial guidance that are based on management's current expectations, forecasts and assumptions that are subject to risks and uncertainties that could cause actual outcomes and results to differ materially. Please refer to our cautionary statements regarding forward-looking information in the company's various public filings, including the cautionary note regarding forward-looking information in today's press release. We also refer you to the company's various public filings which contain and identify material factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements and which discuss material factors and assumptions on which such forward-looking statements are based. These filings include our annual report on Form 20-F and subsequent reports on Form 6-K filed with or furnished too with the Securities and Exchange Commission. And our annual information form filed with the Canadian Securities Administrators, which can be accessed, respectively, at sec.gov and sedar.com. During this call, we will refer to certain non-IFRS financial measures, which include adjusted gross margin, adjusted SG&A, operating profit or adjusted EBIAT, operating margin, adjusted net earnings, adjusted EPS, return on invested capital or ROIC, inventory turns, cash cycle days, free cash flow, and adjusted tax rate. These non-IFRS measures do not have any standardized meaning under IFRS and may not be comparable with other non-GAAP or non-IFRS financial measures presented by other public companies, including our major competitors. We refer you to today's press release, which is available at celestica.com for more information about these and certain other non-IFRS measures, including a reconciliation of the historical non-IFRS measures to the corresponding IFRS measures, where a comparable IFRS measure exists. Unless otherwise specified, all reference to dollars in this call is to U.S. dollars. I will now turn the call over to Darren Myers.

Thank you Manny and good afternoon everyone. Celestica continue to deliver solid operating margin and free cash flow performance in the fourth quarter while continuing to return capital to shareholders. Fourth quarter revenue of $1.424 billion was in line with the midpoint of our guidance range as strength in our storage business offset demand softness in telecom and solar. Revenue in the quarter was relatively flat compared to the third quarter of 2014 and decreased 1% compared with the fourth quarter of 2013. Let me start with a few highlights for the fourth quarter. The non-IFRS operating margin of 3.6% increased 30 basis points compared with the fourth quarter of 2013. IFRS net loss of $4.4 million or $0.03 per share includes a non-cash goodwill impairment charge of $41 million or $0.23 per share. Adjusted earnings per share of $0.23 was $0.01 below the midpoint of our guidance range and included a negative impact of $0.02 per share related to higher income tax expense resulting from certain foreign exchange fluctuations. We generated $60 million of free cash flow and we achieved ROIC of approximately 21%. Before discussing the fourth quarter details I’d like to highlight some of the financial results for the full year. In 2014, our revenue mix continued to improve with growth in our strategic areas of storage and diversified offset by reductions in the lower margin areas of server and consumer while we continue to experience lower demand in our telecom end market. Full year 2014 revenue of approximately $5.6 billion decreased 3% compared to 2013. 2014 IFRS net earnings were $108 million or $0.60 per share compared with $118 million or $0.64 per share in 2013. Adjusted operating profit or adjusted EBIAT grew 15% year-over-year. Full year 2014 adjusted operating margin of 3.5% increased 50 basis…

Thank you Darren, and good afternoon to everyone on the call, and thank you for joining us today. Overall Celestica continued to deliver solid operational performance in the fourth quarter and throughout 2014, despite a challenging business environment. In 2014 we successfully improved our business portfolio and drove productivity across the business delivering year-over-year growth in adjusted operating profit, return on invested capital, and free cash flow. And we increased our investments to accelerate the diversification of our company while returning more capital to shareholders through share repurchases. While we are very disappointed with the partial goodwill impairment in our semiconductor business in the fourth quarter, we remain committed to this market and have continued to win new business. While our progress in this area has been slower than expected, we reduced our quarterly losses through 2014 and continued to improve our quality and delivery performance while ramping current and new customer programs. We are forecasting continued operational and financial improvements in our semiconductor business for the first quarter as we work closely with our customers to accelerate our progress throughout 2015. Notwithstanding our semiconductor business our overall operational performance remains strong as evidenced by solid operating results for the fourth quarter and for 2014 with year-over-year improvements in adjusted operating margin, adjusted earnings per share, and return on invested capital. For the full year we also had very strong free cash flow performance generating $177 million of free cash flow, an increase of $79 million from 2013. Returned $91 million of capital to shareholders through share repurchases which was more than twice the amount we returned to shareholders in 2013. Turning to our near-term outlook in our end markets, while we had the typical seasonal impact from the fourth quarter to the first quarter we are projecting modest year-over-year…

[Operator Instructions]. Your first question comes from the line of Daniel Chan from Scotiabank, your line is open.

Good afternoon. Thanks for taking my question. I just had a question about the semi cap space, semi cap space seem to be pretty strong last year. Can you elaborate exactly what specifically you are seeing that’s causing weakness in that space for you guys?

Well we are actually seeing demand strength, so in the first quarter of the year we are expecting double-digit growth in semiconductor and we are seeing demand strength and we expect that to continue at least through the first half of 2015.

Okay, so I guess my follow-up then is 2015 seems to be a pretty strong quarter for semi cap. Samsung is going to be billing on you, and your factory was seeing pretty strong forecast from some of the semi cap vendors. Do you believe you are going to be able to capture a lot of that growth this year and if you can give us an update on progress on kind of fixing up that semi cap business you have?

Well we believe that the demand growth we’re seeing is in relation to those kinds of programs and projects and it will be -- we have a forecast and we have commitments from our customers to capture a share of that demand. And obviously it will be tied to continuing the improvements in our operational performance.

And Daniel, it is Darren here. I would just add to that and we talked a lot about the losses at the gross margin level last year. We are seeing improvements. As Craig mentioned in his prepared remarks we expect to be positive gross profit in the first quarter. So making progress we grew the overall business by 18% last year albeit from a slower starting point but making progress.

Thank you.

Thank you.

Your next question comes from the line of Jim Suva from Citi, your line is open.

Hi, this is Tim Yang on behalf of Jim Suva. Thanks for taking my questions. Can you give us an update on JDM project, what’s the portion of the JDM related revenue as a percentage of total sales for the past quarter? Thank you.

Well, we don’t strike out JDM as a separate segment in the business. Obviously the bulk of our JDM opportunities today are coming from our storage segments so you can see the market share growth we are seeing which is beyond the industry growth in the JDM space. Obviously that’s expanding into the server space, into the communication space, and then as we see convert systems becoming an important part of the future strategy of many of the cloud providers it will be expanding into that space. So it will become a growing in more material part of the company but today we are starting from a relatively small base limited to the storage segment primarily with limited participation in the server space.

Meaning it’s less than 10% of total revenue?

That’s true, yes.

Got you, thanks. Just one more question on the communication segment, do you think the weakness more from top customers or is it more of an industry wide under performance, thanks?

I think what we are seeing at least in the case of customers that we are serving we are seeing its coming from an industry in North America. It is coming from the carrier spending being cut due to both short term refocus on whether or not the infrastructure is going to look different as they look to the future and certainly we see a major impact for what’s happening with NTT Docomo in Japan where they have pretty much cut back on most of their spending as they reassess their capital requirements going into the future. So I’d say it’s more of an industry phenomenon then a customer specific phenomenon right now. But it’s certainly affecting us in that space.

Got you, thanks.

Your next question comes from the line of Thanos Moschopoulos from BMO Capital Markets your line is open.

Hi, just to follow on the semi business, can you just clarify the timing of why you are taking the restructuring charge or the impairment charge now, did your outlook change it off from last quarter or is it more just that the year-end process forced you to reevaluate the goodwill you were carrying?

Hi, Thanos. No, its more of the later as part of our annual impairment testing looking at the future cash flows of the business unit. They just could not sustain the -- based on our projection sustain the goodwill that we have on the books. And there is further disclosures on that in the statements and in the MD&A that I would refer you too.

Okay, so our takeaway should be that relative to last quarter the outlook hasn’t deteriorated if anything might be improving a little?

I would say that it hasn’t deteriorated since last quarter and we are showing signs of improvement here as we go.

Okay and then just very quickly on the enterprise networking portion of the communication segment, it sounds like you are seeing good demand there?

We’re seeing good demand there. I mean obviously in the fourth quarter and it is being offset by significantly reduced demand in the Telco space however.

Okay, thanks for that one.

Your next question comes from the line of Brian Alexander from Raymond James, your line is open.

Good evening. Maybe a question on the overall demand environment, I just want to make sure I am capturing your comments correctly Craig. It sounds relatively seasonal from everything you’ve said with maybe the exception of the carrier business, I am just curious if you’ve seen any change in tone from customers order patterns more broadly and any impacts from currency with a lot of volatility in currency lately, has that affected demand or timing from any of your customers beyond the tax rate issue that you called out?

No, I think Brian your assessment is totally correct. I mean what we are seeing is more of a seasonal impact here. We are seeing the implications for Celestica being driven largely by new program ramp timing. And then obviously as we heard on the semi space some of the markets are actually firming up so we are not seeing any sort of negative signals on the overall demand environment other than the carrier space. And that I think is really a reassessment of infrastructure requirements for many of those large scale carriers.

Right, okay that makes sense. And then just back on the goodwill right now, how much of that was related to the semi equipment assembly business versus the precision machining. I know you had two separate acquisitions during that time frame and when you said you had $1 million loss was that gross profit or operating profit Darren and then just finally related to that what is your latest timing on getting that business up to corporate average profitability? That’s it thanks.

That’s it and one question Brian. In terms of the break down between the two, we look at it as a total business but certainly I’d say that the machining was more capital intensive in longer time to qualify is more of a challenge then on the assembly side. So that would have driven most of it. In terms of the improvement, we are not giving a specific time. We are taking it one quarter at a time but we will be looking to improve the performance every quarter and operating margin of that business. And your last clarification that was gross margin that we were referring to.

Great, okay. Thanks for remembering all those.

Alright, thanks Brian.

Your next question comes from the line of Sherri Scribner from Deutsche Bank, your line is open.

Hi, this is Larry Zhong calling on behalf of Sherri Scribner. Your storage segment had seen strength growing double-digits over the past four quarters. I am just wondering what’s driving this growth and how much longer do you expect this to continue?

Well primarily new programs and market share gains through either new customers or existing customers that are either resourcing or getting awarded new program. So we expect the growth to continue certainly maybe not to the extent that we’ve seen in the most recent quarter but obviously we expect that growth to continue throughout 2015.

Okay, great. And just following up on that, the diversified segment has performed well. Do you see this growth continuing forward as well and do you expect like mix in this segment to increase?

Well obviously we are rebounding to 7% growth here in the guidance in the first quarter of the year and we expect that to continue to improve as we go through 2015.

Okay, great. Thank you.

Your next question comes from the line of Nick Stevenson [ph] from RBC Capital Markets, your line is open.

Hey guys, thanks for taking my question. Just quick one on the store side as well, looks like you guys are guiding for a double-digit decline here so is that because there is a significant demand uptick in December or if you guys are seeing softness in March?

I mean it’s really the strong quarter we had this quarter. I mean as Craig mentioned we are seeing good strong year-over-year growth in Q1. It is just we had a very strong Q4 seasonality.

Okay and then going forward it looks like you guys going down at 3.2% on the operating margin side, so at what level do you guys think you guys can get back to that 4% kind of target range?

Well we are still comfortable at the 1400s to be in the 3.5% to 4% starting at the 3.5% and you are seeing the margins were up quarter-to-quarter just based on the leverage of the revenue. So still comfortable at 3.5% at 1.4 billion.

Okay, thank you.

Thank you.

Your next question comes from the line of Todd Coupland from CIBC, your line is open.

Good evening everyone. I just wanted a clarification on the semi cap loss. So in prior quarters I think you talked about losing 2 million a quarter, so the 1 million that you lost at the gross profit level would that be comparable to the prior comments?

Yes.

Okay and so -- and then you are projecting that essentially in two quarters has gone from 2 million loss to breakeven in the first quarter?

That’s right Todd.

My second question has to do with the tax rate and its volatility. Should we, I know you have guided up a couple points for the year but given the strength of the U.S. dollar and like who knows what’s going to happen to FX, could we see a volatile tax rate throughout the year, could you just give us a little color on that, thanks?

Todd we are always dealing with quarterly volatility in tax rate and that’s why we guide to an annual number. Certainly this quarter we saw 7% change in the Malaysian ringgit against the U.S. dollar so that created a taxable foreign exchange. So it’s more the magnitude of the change in the quarter. I certainly don’t expect, I am not predicting where foreign exchange rates will go but that type of movement we have not seen before. And all in all you saw at the midpoint of our tax range 1% increase in the tax rate. So relatively close to this year’s rate.

Okay, great. Thanks a lot.

Thanks Todd.

The next question comes from the line of Naser Iqbal from Salman Partners, your line is open.

Thanks for taking my question. I am just following up on the semi cap, its improving but what do you think given that it’s an issue with a specific plant, what do you think will it take, is it a combination of a demand improvement or do you needs more program wins and how much of the demand environments of an improvement do you need to bring that to where you think it could be a contributor to earnings on a net basis?

Naser, good afternoon, it is Craig here. Basically it’s not a demand issue it’s a supply opportunity and its operational improvements and quality delivery cycle times that meet the demand, the tack times of our customer requirement so. Its execution, we have got a team in place that has that really in hand. We’ve got a program in place to make sure we are de-bottle necking those, that facility specific facility you mentioned. And we, as Darren mentioned, we had a very deliberate quarter-by-quarter improvement plan. Obviously there is no quick fix. It’s a measured improvement overtime. But it’s -- we have a very good demand outlook in the current backlog of opportunity and its all around the execution side of the business, so that’s where we are.

Okay, I think that helps that it isn’t execution issue.

For that particular facility we are also undergoing some changes in the network design to get our capacity utilization up in the various locations that we are going to be operating.

Right, and I think on the prior call you talked about that once you get it to where your target is that it could add about 50 basis points in the operating margin, does that still hold?

Yes, I would say it does from the Q4 position as we improve that, that amount will diminish. But from where we’re in Q4 the target would be 50 basis points.

Okay.

So lot of leverage there.

Right and I just for my follow up question, as it relates to the demand environment I guess we are seeing lot of different moving parts between Europe and China but just from your owned, what you can control how much of your top line growth is dependent on the macro and I think Craig you talked about a lot of program ramps coming in 2015 and in 2016. So growth for this year do you think it’s a 50:50, you need 50% from the demand environment and 50 from program ramps or do you think program ramps could more than offset what’s happening on the global macro?

It’s very difficult to forecast sort of that far in advance for 2015. Take up rates is the key assumption, revenue realization is the real operative variable that determines where we end up. So its revenue realization from the existing programs and the programs we ramp. And it is really the take up rates for those programs and products those customers are developing. And we think we picked the winners but it is very difficult for us to pick the end market choices that are made today. But we are bullish on the prospects, we design our strategy to target the winners, leaders in outsourcing, and you see even from the customers that Darren mentioned we are serving the market leaders and with the right programs and with JDM offerings and we think we have the best balance of risk to manage that revenue risk as we can get and continue to improve. But it is just difficult for me to give you an absolute rock solid sort of percentage and stuff, how much is new, how much is existing, and how much revenue you are going to deliver this year.

No, at least that helps us I think frame our outlook so appreciate that. Thank you very much.

Thank you again Naser.

[Operator Instructions]. Your next question comes from the line of Robert Young from Canaccord Genuity, your line is open.

Hi, good evening.

Hi Rob.

You had said you are comfortable with 3.5% operating margin at $1.4 billion and it looks like we may be moving into growth in 2015 just based on Q1 and a previous -- at 50 basis points is out there to win in the I guess if semi cap gets back to or gets to a good level. So are there any bracket or an envelope around operating margin if we start to see revenue get past $1.4 billion on a quarterly basis, are there anything you can help with modeling there?

Rob, I would say at this point, I mean I am not going to give you color on the higher end, there is just too many variables at play from a mix perspective from volume where it happens. Just a number of factors as well as investments we are making in sales and R&D. But 3.5% to 4% continues to be the range that we are looking to operate in and as semiconductor improves then we get some volume and leverage on our SG&A. You will see the operating margin improve. It is really all I could provide you today, I think Rob.

Okay, are there any other big categories of operating margin improvement beyond those, are there any other pieces to be won out there?

Well there is continually ramping in business that we have and revenue realization for those and then it depends how the current programs do in the mix of those programs. And we are of course always looking for productivity and where we can further benefit our cost structure. So, I mean we are looking at a number of areas to keep pushing our margin forward.

Okay, and then follow-up would be couple of spots you mentioned solar as an impact. I have never thought about as a large impact on the revenue, could you maybe give an update on why that was a factor this quarter, is it a meaningful impact? And then maybe one last little bit, just an update on the replacement for Craig, I didn’t see an update there so I assumed there isn’t one but if there is could you share it?

Okay, well in terms of solar, solar is more of a project business. As you know we developed an investment here in Toronto to serve the Ontario Fit program. We are leveraging that facility and supplying programs and modules to other companies today. It is in the double-digits on the revenue base in the overall scheme of things, but relative to diversified it has an impact in terms of the quarter-on-quarter and year-on-year revenue growth. So, in terms of the succession here as we have publicly stated there is a search committee that has been formed by the Board and it is my intention to stay in this role with the company through the end of 2015. So, that's about the latest and best update I can give you. And hopefully there is news on that but when it comes it will be publicly made.

And Rob just to further dimension the solar comment, I mean it is less than 3% of our business just to put in perspective for you. It just happened as Craig mentioned to be a big swing this quarter.

Okay, great. Thanks guys.

Thank you.

Thank you.

Your next question comes from the line of Matt Sheerin from Stifel. Your line is open.

Yes, thanks and good afternoon. Just a couple of quick ones from me, first is you mentioned that the three 10% plus core customers for the year were they the same three 10% customers for the quarter or was that different?

We only provide for the full year but I mean they have been top customers through the year.

Okay, and in terms of your EPS guidance could you give us a share count approximation for that, what that is based on, because we know you have a buyback?

About -- use 177 for your model.

Okay, and then just lastly Craig, as you look and you sound optimistic in terms of some of the program ramps and some of the momentum in semi and some of other businesses, do you have any outlook that you can provide for the year in terms of growth prospects, do you think you can grow revenue for the year because one thing is that when you get to the June quarter you are going to have tough year-over-year accounts because I know you had some pretty big program ramps last June?

Yes, I mean I think the message is we are taking it one quarter at a time and we are off to a good start. And as I mentioned I think you can hear in the tone we got good programs in place and obviously it is the timing of those ramps, the take up of those products, but nonetheless we are remixing the portfolio and I think we are building a stronger base to continue to build confidence as we go through the year but I am cautiously optimistic and I want to reserve judgment until we get to that 90-day window when I can be much more clear with where we think we are.

Okay, fair enough, thanks a lot.

Thank you.

Thanks Matt.

Kirk we will take one more question please.

[Operator Instructions]. We appear to have no further questions at this time. I will hand the call back over to the presenters.

Okay Kirk, well thank you very much everybody for calling in today. We appreciate your interest in Celestica and we look forward to talking with you again in April. Thank you.

Thank you.

This concludes today's conference call. You may now disconnect.