Good afternoon ladies and gentlemen and welcome to the Celestica Earnings Call for the Fourth Quarter of 2016. At this time, all lines are in a listen-only mode. I would now like to turn the meeting over to one of your hosts for today's call, Lisa Headrick Harpell, Senior Director Investor Relations. Please go ahead.

Good afternoon. And thank you for joining us on Celestica's fourth quarter of 2016 earnings conference call. On the call today are Rob Mionis, President and Chief Executive Officer; and Darren Myers, Chief Financial Officer. This conference call will last approximately 45 minutes. Rob and Darren will provide some 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 will make forward-looking statements within the meanings of the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian Securities laws, including those related to our plans for future growth, trends in our industry and end markets, our anticipated financial and operational results and performance and financial guidance. Such forward-looking statements are based on Management's current expectations, forecasts and assumptions which are subject to risks, uncertainties and other factors that could cause actual outcomes and results to differ materially from conclusions, forecasts or projections expressed in such statements. For identification in discussion of such factors and the material assumptions on which such forward-looking statements are based please refer to the company’s various public filings, including our most recent MD&A, Annual report on Form 20-F including the risk factors section therein and reports on Form 6-Ks filed with or furnished to, the U.S. Securities and Exchange Commission and our Annual Information Form filed with the Canadian Securities Administrators. Please also refer to our cautionary statements regarding forward-looking information and such filings in today’s press release. Our public filings can be accessed at sec.gov and sedar.com. During the call, we will also refer to certain non-IFRS financial measures which include adjusted gross margin; adjusted SG&A; adjusted operating earnings or adjusted EBIAT; adjusted operating margins which is adjusted operating earnings as a percentage of revenue; adjusted net earnings and adjusted EPS; inventory turns; cash cycle days; and free cash flow. Other non-IFRS financial measures that we will refer to are return on invested capital or ROIC which for all purposes of this call means adjusted ROIC; and adjusted tax rate which for all purposes of this call means adjusted effective tax rate. These non-IFRS measures do not have any standardized meanings under IFRS and may not be comparable with other non-U.S. GAAP or non-IFRS financial measures presented by other issuers. We refer you to today's press release which is available at www.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. Unless otherwise specified, all references to dollars on this call are to U.S. dollars. I will now turn the call over to Rob Mionis.

Thank you, Lisa and good afternoon everyone. And thank you for joining today’s call. Celestica delivered a solid 2016 with strong growth in revenue and earnings, while generating over $100 million of free cash flow. For the year we delivered 7% revenue growth and grew adjusted operating earnings by 14% to 3.7% of revenue, our highest level of operating margin since 2001. I am very pleased with the progress we have made and setting the foundation for our strategy and delivering on our priorities. I believe that the actions we have taken, we have been implementing are beginning to yield results. And we will set us up to the longer term success. Before we dive into the quarter and the 2016 fiscal results, I would like to acknowledge to the Celestica team for their accomplishments and thank them for their relentless drive and commitment to enabling our customers’ success and helping us to meet our company’s goals. On the call today Darren will review our financial results for the fourth quarter and fiscal year 2016. I will conclude the call with some additional color on 2016 and outlined our key priorities for 2017. Then Darren and I will open the call for questions. Now, I’d like to turn it over to Darren.

Thank you, Rob and good afternoon everyone. Celestica delivered a solid fourth quarter, with year-over-year growth in revenue, earnings per share, adjusted operating margin, and return on invested capital. Fourth quarter revenue of $1.62 billion was above the high-end of our guidance range led by program strength in our communications end market. Fourth quarter adjusted earnings were $0.41 per share and included net positive tax related impacts of $0.07. Excluding this benefit, adjusted earnings per share of $0.34 would have been at the high end of our guidance range. Before discussing the fourth quarter details, I would like to highlight some of our financial results for the full-year. Our full-year revenue of $6 billion was up 7% relative to 2015. We delivered over 10% year-over-year revenue growth in our two largest markets, communications and diversified, resulting from new program revenue and strength in certain sub-markets of communications most notably Optical. Full-year adjusted operating margin of 3.7% was up 20 basis points as compared to 2015. Adjusted operating margin dollars increased 14% year-over-year. IFRS net earnings of $136 million, or $0.95 per share increased $0.53 per share relative to last year. Adjusted earnings per share were $1.40 up $0.48 relative to 2015. Year-to-year, both IFRS and adjusted earnings per share were positively impacted by improved earnings, net tax related benefits and a lower weighted average share count. We achieved full-year ROIC of 20.8%, up 1% from 2015 and we generated $110 million of annual free cash flow. Moving on to the fourth quarter details. Let me begin with revenue from an end-market perspective. Relative to our beginning of quarter expectations, we had stronger than expected performance from our communication and server end-markets. Diversified represented 27% of revenue, decreased 4% sequentially and was relatively flat year-over-year. Relative to the same period last…

Thank you, Darren. 2016 was a strong year for the company with solid financial results. We delivered consistent quarterly year-to-year growth in revenue and earnings per share, and achieved our highest annual operating margin percentage performance in 15 years. We successfully navigated a challenging business environment in 2016 and delivered double-digit growth in our diversified and our communications end-markets. I’m especially pleased with the successful ramps of a number of programs within our diversified markets. We also drove new programs in our traditional markets continue to make progress, with our JDM offerings and offered pockets of market strength including optical programs within the communications end-market, resulting largely from the data center expansion and operates to 100-G. As Darren mentioned, we have decided to narrow our smart energy focus to energy products, an area we believe represents high growth and requires partners that can deliver high complexity solutions. We believe that our experience and expertise in panel manufacturing have enabled Celestica to build a strong power electronics business where we are achieving strong levels of growth. We are winning business with the leaders in this market and plan to expand with a focus on energy conversion, energy controls, storage and monitoring. I would now like to highlight a few key accomplishments that contributed to our successful year and that will help to deliver long-term value. To accelerate growth, we have increased investments in the front-end of the business, including bringing our new leadership to help drive our market and product diversification strategy. 2016 represented a strong bookings year across our business. Although there is more work to be done, I’m pleased with the progress we have made. We have increased our focus on strategy and corporate development with the addition of a Chief Strategy Officer. We’re building out our team and…

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

Hi, good evening. First question from me would be around the comps business. Could you talk about the visibility you have, has anything changed there? How sustainable is the growth you’ve seen recently when you look forward into 2017?

Sure. With respects to comps we have in the near term fair optimism around some of the new programs we won, the trends in optical space driven by datacenter demand and the build-out of the 100-G. So, we’re fairly optimistic in the short-term as indicated by our guidance. Now in the longer term the communications demand remains fairly dynamic, we’ll have to see how that plays out.

So, is it still like a 90-day visibility window or is strengthening, do you see a little more now?

Yes, broadly speaking, the optical world it seems very strong. But we have visibility into the guidance window, so 90 days I think is appropriate. Going out beyond that it gets a little – more, murkier.

Hi Rob, I would just add, certainly communications has legs right now in how long they’ve last. I think it’s hard to say but continuing to grow in the low double-digit or low 20% range is not what you should expect as the year goes on. That will temper somewhat as the year goes on.

Okay, that’s great. And then on the solar panel business, is there any way to sort of to mention how big that is, how much of the impact was in the Q4 and how much might be coming in Q1. And then if you could just talk about how tightly coupled the energy business is to that solar panel business. And then I’ll pass the line.

Hi Rob, I’ll take the first part of that and then Rob can jump in for the second part. From a sizing point of view, the overall business was about 1% of revenue in Q4, it will be about 1% in Q1 as we wind it down, I’d say on a profit point of view, we made a little bit of money in the fourth quarter, and we won’t have a significant impact in the first quarter as the team is doing a good job of winding that down. When I look at the whole 2016 just to give you some perspective it was 3% of revenue for the full-year.

Okay, that’s great.

And Rob, to your second question, it’s not coupled that timely for couple of different reasons, our power products business, products are less commoditized. They’re a little bit more complex. There is more differentiation. We also serve a multitude of markets, it’s not just solar but it’s in wind and turbine. And it’s also a multiple of technologies, so the conversion, monitoring storage and control. So we have a very strong growth pipeline for this products business and this supply demand dynamics that we’ve seen in solar panels aren’t existing right now in our power products business.

Okay, great. Thanks a lot guys.

Thanks Rob.

Your next question comes from the line of Daniel Chan from TD Securities. Your line is open.

Hi guys, thanks for taking my questions.

Hi Dan.

What specifically happened in the solar panels business to make you change your decision? It just seemed to turn sour pretty quickly after you secured some really long-term supplies and leased out some new space for equipments. So, I’m just kind of wondering what happened to catch you off-guard there.

Yes, as we mentioned in previous calls Dan the supply demand dynamics kind of got out of whack with respect to the impact of the fee and tariff programs from China, the change of regulations coming out of the U.S. side, so the sense of urgency on products kind of gotten taken out of the pipeline and trying to kind of overbuild its capacity which drove down pricing and increased a lot of uncertainty. So, when we stepped back from it all and we looked at the new reality both in the short-term, mid-term or the long-term, in terms of what the market might be moving forward, we came to the conclusion that we probably will not be able to make reasonable returns moving forward. And we decided to exit the business and focus in on the higher value power products business I just went over. And for us, solar panels was never an end-state, there was always a means to an end. And we’re very happy with our portfolio that we’ve been able to build. And frankly we’re looking to grow it quite substantially moving forward.

Dan, panel prices have dropped upwards of 50% in the last 12 months, and really over the last six months most of that. So, certainly nobody anticipated that happening.

Okay, great, that’s really helpful. Thanks. Just switching gears a little bit, what are the impacts from some of the things, the new U.S. administration are proposing including the border adjustment tax. How are you thinking about the risk and how does that change the way you’re thinking about your strategy as well as capital deployment as you move forward?

I’ll start off and let Darren finish. But it’s certainly early days Dan and we’re keeping abreast of the policy and we’re in constant contact with our customers. It’s really very difficult to predict how everything will play out. As you know, supply chains more specifically electronic supply chains are very complex, very well entrenched around the world. If and when there are policy changes on trade, I believe frankly that industry and the market will have the opportunity to adapt to the changes as they occur. One thing is that our supply chains are becoming more complex. Our customer supply chains are becoming more complex. And frankly we’re a supply chain solutions company and we’re looking forward to continuing to assist our customers and navigate into these uncertain orders and making sure that they optimize our total cost of ownership moving forward. We have a long history of adapting to changes in the marketplace and we see this one as no different but still early in the game.

Yes, not much I would add to that Dan, I mean, early days and so we’ll need a little bit more and everybody will need a little bit more color on the actual changes. And we’re all speculating until then. So, right now, it’s still business as usual and just helping our customers navigate as we learn more.

Great. Thank you.

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

Hi, good afternoon. Rob, just to clarify with the change in segmentation with servers and storage going into the enterprise unit, is that more of a change from reporting or does it actually reflect a change in go-to-market. And if so, what implication might that have for the business?

Its Darren here Thanos, it’s more a change in reporting.

Okay.

I mean those businesses from the converged point of view we’ve been driving that for quite some time now and we’re working together already. But it’s more for the external reporting.

Okay. Do you have an update on the aerospace business on the back of I guess it’s been over here now with the Honeywell assets and then the most recent tuck-in acquisition. What are you seeing on that part of the business?

Yes, we’re, as you know Thanos we’re leading supplier for aerospace and defense, EMS. Karel I think was a great acquisition which really improves our capability. Within that space we’re getting some nice traction with respect to taking the offering that we’ve established with Honeywell and other customers and taking it to future customers. In the two-box of things that we’re doing is also this operating place that we’ve done with Honeywell. And we expect to be active in 2017 on that front and perhaps others as we move forward.

Great. Now at this stage, would aerospace comprise more than half of diversified?

Not quite half.

Okay. All right. Thanks guys. I’ll pass the line.

Your next question comes from the line of Gus Papageorgiou from Macquarie. Your line is open.

Thanks. Darren, a quick clarification, did you say that diversified you expected this coming quarter to be flat year-over-year, just could you clarify that? And then just, Rob, I know you talked about you’re building up your strategy team and your core development team. You are flushed with cash. If you look at your capital structure, I mean, how comfortable are you taking on net debt position and what would you have to see in order to do that?

The first part, yes, I mentioned the diversified flat year-over-year really from the panel impact we are growing in energy products and we’re growing in semiconductor. As the year goes on we certainly would expect that we’re driving for growth in the diversified markets but starting the year with flat year-over-year.

And Gus, as we mentioned earlier on other calls, we’re looking to be more inquisitive in 2017, probably more likely in the back half of 2017 for the right target and the right opportunity and the right investment thesis. So we are comfortable in levering up the 3 to 3.5 times. But we have been and we’ll always be a very disciplined in our use of cash to make sure that we’re finding the right opportunities, with the right investment thesis and the right value-creation opportunity for us.

So, when you say 3 to 3.5 times, 3.5 times what?

EBITDA so certainly a net debt position, yes.

Great. Thank you very much.

Great, thanks Gus.

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

Yes, good evening everyone. Thanks for taking my questions. I had a couple of questions if I could, on optical, is the demand that you’re seeing mostly in the U.S. or are you benefiting from Chinese upgrading of optical networks as well?

I would say we don’t see exactly in all the end-market, where it goes every time, I would say it’s probably more centric to the U.S. though.

Okay. I mean most views of that 100-G upgrade that is going to stay strong all year. If that’s the case, would you be positively surprised in the comps business?

I think we can have a very strong comps year. But we don’t want to there are many programs within communications. And we’re starting the year very strong as always we’re not giving guidance outside of 90 days because things will change. But I mean, the business is doing quite well today.

Based on the broad trends Todd, datacenter expansion, the upgrade to 100-G, the build-out of infrastructure in Asia, the trends certainly point to broad strength in the use of optical components. And but a third of our communications portfolio is in optical. So the broad trends are in our favor but as Darren mentioned, seeing out that far into the future that’s a little bit murky for us.

Okay. Second question, so in terms of your exposure in Mexico, could you just remind us I don’t know, percent of footprint or percentage of revenue that’s coming from Mexico?

Gus, we have to get that after, I don’t have that exactly in front of me, so I don’t want to misquote on the call, I don’t have the exact number in front, it’s certainly within our filings you can find the square feet there.

Okay. But at this point, customers are not making any request for changes or anything along those lines in terms of supply chain moods to the U.S.?

Correct, there are a lot of customers and people around the world running a bunch of what if analysis. But it’s all desktop work and frankly very speculative at this point.

I mean, you’ve seen a lot of symbolic moves in the automotive space already and I guess it’s reasonable to assume that there are U.S. based companies may at least make similar types of a symbolic moves if not material moves?

We also read a lot of the symbolic moves that have been planned for long period of time and they’re just trying to get off the list if you will to make sure they end up in a bad tree if you know what I mean. So, I can’t really characterize whether these things are as a result of some of the high probably in the market or if they’ve been planned for a long time.

Yes, no, that’s certainly fair. And then just lastly on M&A, so I know you want to be a consolidator in the market, just wanted to know your updated opinion. Do you expect tier 1 EMS consolidation with the type of move you seem to be stepping towards or, is it still tuck-in not necessarily for Celestica but within this sector?

Yes, that’s a good question. Our strategy that we’re pursuing is, will be capability based kind of oriented. So we look at targets that will increase our capabilities and increase our proof points. As you know the EMS industry has probably a tainted history of EMS consolidation destroying value at that level. And for lots of reasons people have not done that. On the foot-side there is certainly, there is a lot of capacity out there at that level. So one would think of your customers are consolidating to the EMS. But our strategy that we’re pursuing is more of a capability based, proof point based strategy moving forward.

That’s great. Thanks for the color. I appreciate it.

Thanks Gus.

I’m showing no further questions at this time. I would now like to turn the conference back to Rob.

Thank you for your continued support. And we look forward to updating you on our progress next quarter.