Celestica Inc (CLS) 2011 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, my name is Martina, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Celestica's fourth quarter results conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions) Thank you.

I would now like to turn the call over to Manny Panesar, Director of Investor Relations.

You may begin your conference.

Thank you, Martina.

Good afternoon, everyone.

Thank you for joining us in Celestica's fourth quarter 2011 earnings conference call.

On the call today are Craig Muhlhauser, President and Chief Executive Officer and Paul Nicoletti, Executive Vice President and Chief Financial Officer.

This conference call will last approximately 45 minutes.

Craig and Paul will provide some brief comments on the quarter and full year, and then we will open up the call for Q&A.

We can also be reached for follow-up questions after this call.

Copies of the supporting slides accompanying this webcast can be viewed at www.celestica.com.

During the Q&A session, please limit yourself to one question and one follow up to ensure everyone on the call has an opportunity to do so.

You are welcome to get back in the queue after you ask your question.

Before we begin, I would like to remind everyone that during this call, we make forward-looking statements related to our future growth, trends in our industry, our financial and operational results and performance and financial targets that are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially.

We refer you to our cautionary statements regarding forward looking information in the Company's various public filings, including the Safe Harbor Statement in today's press release.

We refer are refer you to the assumptions, risk factors and uncertainties discussed in the Company's various public filing which contain identified factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.

These filings include our Form 20F and subsequent reports on Form 6K filed with the Securities and Exchange Commission which can be accessed at sedar.com and sec.gov.

Please note that starting in 2011, our financial results are reported under international financial reporting standards, or IFRS.

Comparative results reflect this change.

During this call we will refer to certain non-IFRS financial measures which include adjusted gross margin, adjusted SG&A, adjusted operating margin, or EBIAT, ROIC and free cash flow.

These non-IFRS measures do not have any standard meaning under IFRS, and are not necessarily comparable with similar non-GAAP financial measures presented by other companies, including our major North American competitors.

We refer you to our press release which is available at celestica.com for more information about these non-IFRS measures, including a reconciliation of the non-IFRS measures to the corresponding IFRS measures at appropriate.

I will now turn the call over Craig Muhlhauser.

Thank you, Manny, and good afternoon, everyone.

Celestica delivered a solid fourth quarter performance with strong margin, cash flow and return on invested capital, despite the volatility in customer demand.

For the fourth quarter, revenue of $1.75 billion came in slightly lower than the mid-point of our guidance range as we continued to experience end market softness.

For the fourth quarter, IFRS net earnings of $69 million increased [80%] year over year.

Non-IFRS operating margin of 3.8% was up 30 basis points from the same period a year earlier.

We continue to generate a strong ROIC of 27.5% with $89 million of free cash flow for the quarter.

In the fourth quarter, we continued to make progress with respect to the targeted mix of our portfolio.

Our diversified end market reached 18% of total revenue, up from 16% in the third quarter and up from 11% at the end of the fourth quarter of 2010.

Turning to the full year, I am pleased to report that Celestica completed fiscal year 2011 with strong revenue and earnings growth.

We also achieved our Company goals for operating margin, ROIC and free cash flow, and we made excellent progress in our diversification strategy.

For fiscal 2011, we achieved year-over-year improvements for our key financial metrics.

Revenue at $7.2 billion grew 11%.

IFRS net earnings of $195 million increased 93% year over year.

Adjusted earnings per share of $1.11 grew 29%.

Non-IFRS operating margin of 3.6% of revenue was up 20 basis points from 2010.

ROIC for the full year came in a strong at 27.5%, and we generated $144 million of free cash flow for the year.

For the full year, we made significant gains in our diversified end market as revenue increased year over year by approximately 40%, reaching the $1 billion level for 2011.

Our financial position remains strong.

Celestica continues to have the best net cash position among industry peers, and we are confident that we will continue to generate free cash flow.

On the strength of our balance sheet and expected cash flow, we are announcing plans to commence a new share repurchase program, and Paul will take you through the details in a few minutes.

Overall, our 2011 financial results are the outcome of a successful execution of our strategy, our relentless focus on our customers and operational excellence.

In 2011, we committed to increasing investments in design and development, capital expenditures to support our organic growth initiatives and targeting acquisitions that strengthen our service offerings or accelerate our growth in specific end markets.

On the design and development front, we invested in areas such as joint design and manufacturing, enabling us to collaborate with our customers and accelerate their ability to get products to market faster and to meet their cost, quality and volume targets at launch.

In response to specific customer demands and their growth initiatives, we invested in capital expenditures throughout our global network, particularly to support our diversified end market.

As an example, we expanded our aerospace and defense centers of excellence, which strengthened our customer relationships, resulting in continued market share gains.

Celestica continues to maintain its leadership position in aerospace and defense with the largest market share among our North American competitors.

To add to our capabilities, we acquired Brooks Automations contract manufacturing division, which gave us access to complex electro mechanical capabilities that we can leverage across a number of end markets.

With this acquisition, we have added several new market leading semiconductor customers, further accelerating our diversification efforts.

Across the board, we continue to enjoy strong and loyal customer relationships.

We are committed to being their trusted partner, enabling their success by helping them anticipate and prepare for unexpected challenges.

Looking forward, we remain committed to our strategy of achieving industry leadership, which we define as being the best performing company for our customers while delivering industry-leading financial returns.

Overall for the fourth quarter and full year, I am very pleased with the Company's performance, the progress being made toward our strategic objectives, while delivering strong operational and financial performance despite the continuing economic uncertainty and volatility impacting customer demand.

In the near term, volatility in customer demand is expected to continue.

Visibility is improving, however, it is still limited, so the outlook for 2012 is difficult to predict.

Nonetheless, we do expect revenue and margin improvements as the year progresses based on new program ramps and end market recovery in the second half.

We are confident that we have the right strategy in place and we remain committed to balancing short-term profitability with our long-term objectives while continuing to invest in the business to enable our future success.

In closing, 2011 was a rewarding year for Celestica, and we are entering 2012 with a high performing operating network and a strong financial position.

As we look to the coming year and despite the challenging environment, we are excited by the opportunities we see to create additional value for our customers and our shareholders.

We look forward to building upon the successes and momentum of 2011 to deliver an outstanding 2012.

The entire Celestica team is committed to supporting our customers' success, delivering on our commitments, while ensuring appropriate returns for our shareholders.

Thank you for your continued interest and support, and I would now like to turn the call over to Paul Nicoletti.

Thank you, Craig, and good afternoon, everyone.

Craig provided some highlights on the quarter and full year.

I will add some specific commentary on our end markets, profitability, returns, balance sheet and fourth quarter guidance.

For the fourth quarter, while revenue declined year over year across a number of our end markets, consumer revenue remained relatively flat and we experienced strong growth within our diversified end market.

On a year-over-year basis, the diversified end market grew 45% in the quarter.

Excluding revenue from acquisitions in the year, revenue grew 27% with double digit growth across all areas, namely aerospace and defense, health care, industrial and green tech.

The diversified end market now represents 18% of our total revenue, up from 11% in the first quarter -- pardon me, in the fourth quarter of 2011 (sic - see Press Release).

Our consumer end market which represents 26% of revenue declined 2% sequentially, and was relatively flat year over year.

Enterprise communications was 25% of the total, declining 10% sequentially, primarily due to demand softness across a number of customers and in part due to a specific build out at one customer in the third quarter.

Enterprise communications revenue was down 3% year over year.

The server end market was 13% of total revenue in the quarter.

Server revenue was sequentially lower by 4% and 26% lower on a year-over-year basis as a result of weak end market demand and year-over-year demand declines for one of our largest customers in this end market.

Storage was 10% of total revenue, down 11% sequentially, primarily due to an inventory correction with one customer and some end market weakness across our portfolio, including an impact from the Thailand floods.

On a year-over-year basis, storage was down 23%, in part due to demand softness across a number of customers and our decision to discontinue a lower margin program with one customer.

And finally, telecommunications came in at 8% of revenue for the quarter, down 5% from the third quarter and down 32% year over year due to demand softness from our customer mix.

As this end market now represents less than 10% of our revenues, we will be consolidating the enterprise communications and telecom end markets in 2012.

Our top ten customers represented 71% of revenue for the quarter, down from 74% for the same period last year, and our top five represented 54% of revenue, relatively consistent with the same period last year.

We had two customers with revenue greater than 10% in the quarter with our largest customer representing 20% of revenue.

For the full year, we had two customers with revenue greater than 10% each with our largest customer representing 19% of total revenue.

The Company posted fourth quarter IFRS net earnings of $69.2 million, or $0.32 per share compared to IFRS net earnings of $38.4 million, or $0.17 per share for the same period last year.

We recorded pretax other charges of $1 million compared to $13.7 million in the fourth quarter of 2010.

Tax expense for the quarter was a recovery of $15 million compared to a recovery of $3.3 million in the fourth quarter of 2010.

The recovery was driven predominantly by two items.

First, we recorded a tax recovery of approximately $10 million relating to a previously restructured facility.

And second, we recorded another $10 million recovery as a result of settling historical tax audits for a current operation.

We excluded the benefit of the tax recovery relating to the previously restructured site from the calculation of adjusted net earnings.

Adjusted net earnings for the quarter were $71.1 million, or $0.33 per share compared to adjusted net earnings of $61.3 million, or $0.27 per share for the same period last year.

Included in the fourth quarter adjusted net earnings of $0.33 per share was a $0.05 per share benefit arising from the settlement of historical tax audits previously mentioned.

Without this one-time benefit, adjusted earnings per share would have been $0.28.

Adjusted SG&A expense for the quarter was $52.6 million, or 3% of revenue, which was lower than the third quarter, primarily due to lower variable compensation and bad debt recoveries.

Adjusted operating margin was 3.8% for the quarter, 10 basis points higher than the third quarter and 30 basis points higher than a year ago.

Finally, pretax return on invested capital was a strong 27.5%.

Moving to working capital performance, our inventory position decreased by $59 million compared to the third quarter, and we generated free cash flow of $89 million during the quarter.

Once again this quarter, we negotiated with one customer to fund higher inventory levels that we were holding for them and received $120 million short-term cash deposit that is reflected in our cash and accounts payable balances for the quarter.

We expect to repay this deposit during March of 2012.

Capital expenditures for the quarter were $15 million, representing slightly less than 1% of fourth quarter revenue.

Cash cycle was 36 days, unchanged from the third quarter.

Moving to the balance sheet, the Company's financial position continues to be very strong.

Cash balance at December 31 was $659 million, up $73 million from the third quarter.

Our credit facility remains undrawn.

As Craig mentioned earlier, capitalizing on our strong net cash position, our board of directors have authorized us to commence a new share repurchase program for up to 10% of the public float of our subordinate voting shares.

The repurchases are expected to occur over the next 12 months, and the program will be funded using existing cash resources and our credit facility if required.

All repurchased shares under this program will be canceled.

We expect the repurchases -- the repurchased shares -- to repurchase shares through a normal course issuer bid, which is subject to the approval of the Toronto Stock Exchange.

Let me now turn to our first quarter guidance, which as Craig noticed, reflects an environment of volatility and softer demand.

For the first quarter, we anticipate revenue to be in the range of $1.6 billion to $1.7 billion, which represents a sequential decline of approximately 6% at the mid-point.

From an end market perspective, we expect consumer to decline sequentially, approximately 15%, due to program transition and demand weakness with one of our largest customers.

We expect continued growth in diversified market segments with all other end markets showing flat to slight sequential declines.

For our adjusted earnings per share, we anticipate a range of $0.18 to $0.24 per share.

At the mid-point of this guidance, operating margins would be approximately 3.3%.

SG&A expense is expected to be in the $56 million to $58 million range, and we anticipate negative free cash flow as a result of the timing of our annual variable compensation payouts and an increase in capital expenditures for the first quarter of 2012 supporting expected growth.

Finally, our tax rate is expected to revert to the 10% to 12% range for the March quarter.

That concludes our formal comments, and I'd now like to open up the call for questions.

(Operator Instructions) We'll pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Amit Daryanani from RBC Capital Markets.

Your line is open.

Thanks a lot, good afternoon, guys.

Just a question maybe on OpEx going forward.

I think you said $56 million to $58 million for the quarter.

Given continued investment in the diversified segment, how do you think we should think of modeling that trending over the next, I guess, through 2012?

Amit, it's Paul.

I think you should think about OpEx between $55 million and $60 million per quarter for the balance of -- for 2012.

And then on the consumer side, I think you mentioned down 15% in Q1 due to transitions with a customer.

Is that a competitive loss, are you just walking away from some business because it's not profitable, and how much is that magnitude?

So Amit, certainly, as you know, we have a heavy concentration in consumer, so -- where we support them across multiple programs as well as multiple geographies.

So, what we're seeing is two things; the mix of the program that we have currently, certainly demand is not as robust as we would have liked, and certainly, I think that's been, you know, well chronicled, you know, in the last few weeks in the press.

That being said, we are in the midst of supporting them for one of their significant product launches, which we're in the midst of preparing for during the first quarter and we expect to shift revenues during the second quarter.

So, we're seeing, again, a bit of transition here.

I think a little bit of weakness on some of the legacy programs, which we expect to be offset by strength in the future programs.

That's helpful.

Just finally for me, on the buyback, have you built any into the model for Q1 at all in the EPS assumption, and did you discuss doing a dividend while you're planning for a 10% buyback?

And I'm curious, why go with a buyback versus a dividend?

Sure.

So Amit, forgive me, I should have noted, I don't think I answered your complete question earlier.

So, with regards to share, we are not losing any programs with that customer and certainly are maintaining our share with that customer.

With regard to the stock buyback, you know, we have talked about dividends, you know, before.

I think our view here is that, you know, certainly our objective is to put the capital to work to grow the business.

So, that continues to be a priority for us.

You saw us complete an acquisition in 2011.

Suffice it to say that, you know, we continue to look for ways to put that capital to work to grow the business, and that remains our priority.

That said, given the strong cash flow generation, we've launched the share repurchase and we're picking that method versus the dividend in that.

That is obviously one that we can meter, accelerate or decelerate based on the business opportunities that we're seeing.

Fair enough.

Thanks a lot for your time.

Thank you.

Your next question comes from the line of Wamsi Mohan from Banc of America, Merrill Lynch.

Your line is open.

Yes, thank you.

Good afternoon.

Paul, you took on incremental restructuring charges relative to what you thought going into the quarter.

Can you be more specific when in the quarter it seemed like you needed to do the incremental restructuring?

And was this driven by weakness from any one particular end market or more broad based?

And I have one for Craig after that.

Sure.

So, on the -- good afternoon.

So, I think, you know, when we entered the quarter, we would have expected restructuring closer to $4 million.

We ended up booking $8 million in total.

Nothing in particular from an end market perspective, just when we looked across the network, a couple of additional actions that we decided to take.

As you saw, you know, from our total charges, we had some offsets to the positive offsetting the impact.

But again, when we looked across the network, we just decided to take a few incremental actions, given the overall end market weakness, not relating to any particular end market.

Okay.

Thanks.

Thanks, Paul.

And, Craig, this is sort of a little bit of a follow-on to the last question, but into your largest customer, there's some sense that some of your competitors are actively managing growth down where some of it could be just walking away from some of the programs that they feel are less attractive or some naturally lower growth rates.

But is your expectation that this business will grow faster for you and you will ultimately take share, or will you also be managing this business to the return characteristics that you kind of typically kept to and keep away from potentially lower margin incremental business?

Well, Wamsi, we will manage the business consistent with the way we've managed it in the past.

We're executing at an extremely high level for this customer, we're targeting key programs that represent what we think to be the greatest opportunity for both margin and for revenue realization, and we intend to continue to support and at the same time, at the same level of share that we've had over the past three years.

Okay.

Thank you.

Thanks, Craig.

Wamsi, it's Paul.

It's probably worth adding that, and we've talked about this before, that we also look at this and manage our own concentration.

So certainly, we're not uncomfortable with where we are, with the 20% concentration, but certainly mindful of the risks and rewards of concentration.

So, that's something that we're looking to also manage at the same time.

Okay.

Very helpful.

Thanks, Paul.

Thank you.

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

Your line is open.

Yes.

Thank you.

So, Craig, you talked about a pipeline being fairly robust looking toward the second half of the year, and you've talked about pipeline for the last few quarters.

Of course, some of that has been offset by weakness and end demand.

But could you be specific about where you see that coming and when you see those programs ramping?

We -- Matt, it's -- thanks.

We see strength across all of our end markets in particular, as Paul mentioned, and as we both mentioned the diversified space as relative growth rates over the course of the year.

Based on our bookings performance, based on full year realization and the improvements we're getting from the Brooks Automation acquisition.

So, we see the broad-based most significant impact in the diversified space as we look at the full year and then obviously, we are defending the communications and enterprise space.

So, we'd anticipate lower growth rates there and on an overall basis as we look at the full year.

As we said, we expect revenue and margin improvements as the year progresses.

So, pipeline of the book and bill for most of the year is in the bag and basically, although we expect some in the first half, the majority of the execution is in the bag.

The important thing is revenue realization this year as those programs begin to ramp.

Okay.

And it looks like you're starting in the hole a bit, revenue down year over year on the guidance.

As the programs ramp, do you expect revenue to grow for the year, year over year?

Yes, on an overall basis, we expect revenue growth over the year.

Okay.

All right.

Thanks a lot.

Yes.

Your next question comes from the line of Sherri Scribner from Deutsche Bank.

Your line is open.

Hi.

Thank you.

I wanted to do a little more detail on the server and storage markets.

It sounds from some of your competitors and some of the customers that demand softened at the end of the year.

I wanted to get a sense of the linearity of the quarter, and did it seem like orders didn't get booked at the end of the quarter?

Hey, Sherri, it's -- good afternoon, it's Paul.

I think perhaps a little bit of a different answer on each of those segments.

So, on server, as you know, you know, we certainly have a reliance on one customer in that segment, so while we serve many, one customer makes up a good proportion of that.

And I think, you know, overall, that customer has been, you know, not fairing as well from a market share point of view.

So, while we haven't lost any share in that we have the entire program, the demand on that has just been weaker.

I wouldn't say it was incrementally weaker overall than we expected, kind of that one as going into the quarter has unfolded as we thought.

On the storage side, I will say that we saw more, you know, reduction as the quarter unfolded, so towards the latter half of the quarter.

Again, I wouldn't particularly -- I wouldn't point out any particular customer there, but we did see some softness as the quarter unfolds.

And I think we mentioned this in our comments.

You know, I think that particularly when the floods occurred, you know, we're not exactly -- I think some people may have been taking some positions on inventory and as things subsided, you know, released some of that inventory which obviously amplifies what they need from us.

Okay.

So, it sounds like potentially there's some impact from Thailand in the storage business and it was a bit softer at the end of the quarter?

Yes.

Okay.

That's helpful.

And then thinking about your diversified piece of business, you do expect growth this quarter sequentially.

That's been a strength for you.

Are you continuing to see good opportunities in that segment of the business?

I know there's a lot of competition with all of your peers really trying to go after that kind of diversified manufacturing business.

Are you seeing opportunities?

Do you have a good pipeline and how do you feel you're competitively positioned?

Hi, Sherri, it's Craig.

Yes, we continue to see good opportunities, especially with the advent of our complex mechanical capability with the acquisition of Brooks Automation.

We see strength in the first half, frankly, in the semiconductor equipment space.

We see companies looking to consolidate their supply base and with that capability, we've been able to leverage that against -- across some of the other verticals.

We mentioned we're investing in our centers of excellence in aerospace and defense, and we're seeing opportunities there.

And then on the alternative energy front, we continue to see selective opportunities as we continue to pursue that market.

So by and large, it's still a very strong pipeline of opportunities.

Primarily related to our execution and then the benefits of the capabilities that we acquired late last year through Brooks and what's happening in the semiconductor equipment space.

It's pretty exciting.

Okay.

Great.

Thank you.

Yes.

Your next question comes from the line of Lou Miscioscia from Collins Stewart.

Your line is open.

Okay, thanks.

When I look at first quarter guidance, it looks like it's better than normal seasonality.

Was it mainly because of the diversified section being up quarter to quarter, or is there anything else that's going on that's helping first quarter from a top line standpoint?

Hi, Lou, it's Paul.

So, putting trends on consumer off to the side for a moment, which I think is more of a customer-specific situation, I'd say that it's more about fourth quarter not being as strong as we otherwise would have seen historically.

So, on the back of that, you're not seeing decline in the first quarter.

I think that's the bulk of it.

So, as I said earlier, when we look at what's going on underneath the covers, while we expect consumer to decline at 15% diversify to grow, the rest of the market's, again, relatively flat, some slightly down, which, as you know, is not typical, but I think it has more to do with the weakness in fourth quarter.

Okay.

Great.

And then maybe relate that back to, I guess, the EPS guidance, the suggestion was a bit below what the expectation we had.

We haven't modeled the whole thing out, but what was causing that to have a, I guess a wider range on the low side?

Well, I mean, certainly the revenues are lower than what we would have originally expected, Lou.

So, you know, clearly, as revenue goes down, there is an impact on, you know, just the fixed cost absorption of the Company.

As you know, we've done a good job of managing costs and certainly, you know, have endeavored to put in the most variable cost structure that we can.

That said, you know, as the revenue goes down, it becomes harder and harder to do.

And that, along with, you know, I think our view here is that we want to continue to invest.

So certainly, the easy thing to do would be to cut back on some of the investments relating to our design efforts, relating to further capabilities in our services or diversified markets, but we're choosing not to do that.

As Craig commented in his prepared comments, you know, we really think that the strategy we're on is the right one.

Obviously, we're disappointed that the short-term demand is not what we want it to be, but we believe where we're going, and we're not going to compromise the long term at this point.

That's helpful.

And then last one quickly on the buyback, how quickly can you start it, and can you give us any idea as to whether you look to execute it very quickly, let's say all in the first quarter, or just throughout the year?

Thank you.

Lou, I think the typical approval period with the TSX would be no more than, you know, ten days, call it, most likely be a little bit faster than that.

As far as there are limits as to the amounts that can be purchased every day based on daily volumes, so there are limits as to what we could do.

Last time around, you may recall that we hit the gas pretty hard and completed it pretty quickly.

I expect this one to, you know, I think we'll taper this one out somewhat a bit longer.

But we'll see how the market unfolds and make decisions, again, based on what opportunities we're seeing in the marketplace.

Good luck on the new year.

Thanks, Lou.

Thanks, Lou.

Your next question comes from the line of Shawn Harrison from Longbow Research.

Your line is open.

Hi, good evening.

Just getting back to the commentary on the stronger back half and the program when it's booked, is there any way to size the potential annual opportunity of those wins just to get a sense of, you know, how revenues could potentially ramp into the back half of the year?

That's not something that we've typically done, just too much uncertainty, so we're not going to start with that.

I'll try and dimension 2012 for you.

You know, as Craig mentioned earlier, we do expect 2012 to grow overall, certainly to be modest growth.

If we had to look at it here today, you know, probably in the 3% to 5% range is kind of how we would see it.

Again, it's underpinned by the assumption of a bit more economic stability and recovery in the second half, but based on the forecast we have today, that's probably a way to dimension it.

I'll leave it to you, based on, again, starting at a 16.50 mid-point for Q1 to make your assumptions from there.

We're not going to guide by quarter at this point in time, but again, based on our forecast today, that's what we'd see.

Very helpful.

I guess with that growth that you expect in the back half of the year, maybe some incremental capital required to support that growth, both on equipment and just inventory.

Would you expect to be free cash flow positive for the year or maybe just closer to neutral?

No, we would expect to be free cash flow positive.

We will be -- as I commented in my remarks, we will be increment spending some CapEx.

CapEx will go up in Q1 as we are expanding capacity to support some of our new customers, particularly in the industrial and semiconductor space.

Beyond that, I would expect, you know, revenue for -- CapEx for Celestica has run in the 1% to 1.5% range historically.

The last few years has been at the lower end of that.

I don't expect that trend to change for the year.

And given the modest top-line growth, which, as you know, will limit the amount of working capital investment, I think that the Company would -- will be able to achieve the goals we've laid -- we laid out there vis-a-vis the cash flow.

Thanks so much, and the clarity was very helpful.

Thank you.

Your next question comes from the line of Jim Suva from Citi.

Your line is open.

Thank you and happy new year's to everyone there at Celestica.

Happy new year, Jim.

I have a question, first of all, for Paul, and then my second question is probably better suited -- I'm sorry, for Craig, second question is probably better suited for Paul.

Craig, when you think about you mentioned you're going to be investing in Q1 to spur growth in 2011 -- I'm sorry, in 2012.

When we look back at 2011, your growth was kind of low double digits, and it was helped by the Brooks acquisition.

Can you just help us quantify what type of growth you're looking for quantitatively for 2012?

Is it kind of in the 6% to 8% range as what a lot of people are kind of viewing as GDP plus more for EMS, or is that too aggressive?

Or you mentioned you're planning for it, you might as well let us know what the plan is.

So I think, Jim, to -- we do -- as we mentioned, we expect revenue and margin improvement as the year progresses.

Two factors, improving economic environment and new program ramps, and the outlook based on the current plan and forecast that we have for the full year, as Paul mentioned, is in the area of 3% to 5% overall.

How you split that by quarter, we'll leave that to you.

Okay.

But that's, in terms of our current plan, our current outlook in the current assumptions we're making, based on those two factors, new program ramps and then market recovery, 3% to 5% is in the range of what you could expect this year.

Great.

Thank you very much.

And then a clarification that probably is better for Paul, whatever.

When you talk about your EPS that was $0.33 for the adjusted EPS, and you mentioned some things that were going on with the tax items, you had mentioned two specific things, were they both excluded in that adjusted EPS or was just one of them excluded?

I'm just trying to figure out exactly apples to apples.

Yes, hi, Jim.

One of them was excluded.

So again, one of them related to a restructured facility/country, so that's not impacting adjusted earnings.

The one that is in relation to an existing facility is part of adjusted earnings, so it's there's a $0.05 benefit in that $0.33 relating to, again, a positive settlement of a historical tax audit.

So, if you put that aside, EPS for the quarter would have been $0.28.

Great.

Thank you very much for the clarification, and looking forward to 2012.

Thanks, Jim.

Your next question comes from the line of Brian Alexander with Raymond James.

Your line is open.

Thanks.

Craig, I think earlier you said something about defending your position in communications and enterprise, or maybe I didn't hear you correctly in response to Matt's question about the pipeline and sales momentum.

So, just curious what that implies about the pricing environment, your pricing strategy or what you have meant by that comment if I heard it right?

Hi, Brian.

What I meant by that comment, it goes back to the investments that Paul mentioned we're making, which is part of our operating plan, which is we've adopted a joint design and manufacturing strategy where we've developed solution accelerators based on industry standards.

We're pursuing a strategy to invest in the design of solution accelerators which offer our customers the ability to take our platforms, customize those platforms to their specific requirements.

We call that joint design and manufacturing.

It's not ODM.

We have alliances with major technology enablers.

It gives us the ability to offer the Celestica solution platform, if you will.

It's customized.

In doing that, we're pursuing higher margin opportunities because we're taking the risk of investment.

And as a result of providing some of the design value added, you get a larger content from our customers and the engagements.

And then frankly, we end up working with them to tie that to the ongoing production contract.

So, we're actually working at defending our base business through productivity and performance, and we're looking at enhancing the value added and defending that core and frankly, transforming that core in communications and enterprise primarily in the infrastructure space by becoming the preeminent Company in this new and emerging JDM segment, which we think we're pioneering.

So, that's what I meant by that statement.

So in pioneering, I should assume that that's not something your competitors are doing?

Well, I think everybody -- you know, it's emerging, and certainly we feel we have got a bit of a lead here, but certainly our competitors are obviously involved in the competition for the segment.

And then in terms of the growth, the 3% to 5%, should we assume all of that will come from your diversified business, or do you think you'll start to see growth in the communications and enterprise computing spaces?

It sounds like you've got some programs in the pipeline, but just to clarify, do you think you'll see growth in those segments at some point this year?

Yes, I do.

Okay, all right.

Thanks, good luck.

You bet, thank you.

Your next question comes from the line of Gus Papageorgiou from Scotia Bank -- Sciotia Capital.

Your line is open.

Thanks.

Just a couple of questions.

I just wanted to clarify.

On the share buyback, you plan to cancel any shares you buy, you're not going to use any of them for stock-based compensation.

I think you said that, but I want to clarify that.

And then just on the diversified industrials, Craig, I think at a conference you suggested that might grow as much as 50% this year.

Is that accurate, and is that the kind of growth we should be expecting from that segment?

Hey, Gus, it's Paul.

Just -- we'll deal with the first part of that question.

The answer is yes, so whatever shares we buy, we will cancel as part of that program.

And, Gus, regarding the comment on the diversified space, current outlook is that the diversified space would grow on the order of 40% to 50%.

Great.

Thank you very much.

You bet.

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

Your line is open.

Great.

Good evening, everyone.

A couple of points of clarification and then a question.

So, Paul, on the $0.28, that would be untaxed, I guess, right?

No, there's normal course tax in there, Todd.

So, all we tried to do is, essentially it's a $10 million one-time pickup from a tax audit.

There is other tax expense that's in there, so at the end of the day, $28 million is -- there's tax expense -- $0.28, pardon me, there is tax expense in that number.

So, that $0.28 reflects tax expense, so, you know, the pretax number would have been higher.

But then in addition to that, there was this $0.05 pickup.

Okay.

Got it.

Didn't want to double count there.

Yes.

And then just one other point of clarification.

So the hundred -- I think you said $120 million deposit is in your cash.

Yes.

So, would that effectively disappear in the March quarter?

So, Todd, just to step back.

So, that was -- we've had a short-term arrangement with that customer for, I guess, over one year.

And I think it's been about five quarters and just the structure of those arrangements is that they time out.

We have been successful, I guess for the past five quarters, in renewing those agreements, so there's obviously always some risk to that.

So, we wanted to highlight that to you.

Our plan going forward is that the number will be smaller, but it will be smaller because the inventory will also be smaller.

So clearly, it's not our objective to run -- neither company's objective to run with that much excess inventory offset by this cash deposit.

So, our expectation is that as we go through time, is that the number will go down and that the inventory will go down with it.

Okay.

So, should the net effect be neutral then on cash?

Hopefully?

That's the goal, Todd.

I mean --

Okay.

Again, we've been renewing this thing for five quarters, so there's nothing for us to believe that it would not get renewed.

But again, I wanted to highlight to you that it is a short-term arrangement.

Question on the business, if I could.

So, beyond the new program at RIM and the diversified new programs, what other areas do you have in your pocket that you care to highlight for the second half?

What segments of the business would you see those new programs coming in?

Thank you.

Primarily the enterprise communication space.

We've had a very good year in establishing ourselves as a material supplier in that space.

We've won a number of new programs, so that's the other one I would like to highlight.

And those are scheduled for the second half?

Yes.

Todd, it's -- forgive me, it's Paul, for jumping in here.

We'd expect to see revenue growth in that segment in each quarter, so, you know, clearly you see more of the girth come in the back half, but we'd expect to see increments each quarter.

Great.

Thanks very much, guys.

You bet.

Your next question comes from the line of Naser Iqbal from Salman Partners.

Your line is open.

Thanks, and congratulations on the quarter in a difficult environment.

Just, I guess my first question would be how much quantitatively was there an impact of Thailand in Q4, and how much do you think that's going to affect Q1?

Hey, Naser, good afternoon, it's Paul.

I think the impact would have been in the $10 million zone, as far as an impact is concerned.

You know, looking forward into Q1, difficult to predict.

I think the worst is behind it -- behind us.

But, you know, I'd say no more than that same number.

Okay.

And just, you know, is thinking about the growth for the year, I think you talked about 3% to 5%.

Is that -- would that be 3% to 5% revenue growth for the whole Company for the year, and so that -- you know, it's a more modest expectation than the 6% to 8%?

Is that just the way we should be understanding that?

Yes.

Naser, I mean, we laid out a goal, as you know, a couple of years ago to over a three-year period grow the Company a 6% to 8% compounded.

So, we're in the last year of that, so from what we see right now, as Craig mentioned earlier, 3% to 5%, I think if you actually go back and do that math, you would be within that 6% to 8% goal overall, if we achieve that 3 to 5.

But right now, based on the forecast we see -- and again, with some assumptions on recovery in the back half, we see that 3% to 5%.

Okay, okay.

And just a point of clarification, Paul, would the -- for the OpEx, the $56 million to $58 million a quarter, that's including stock comps.

So, is it that if we exclude the -- whatever $5 million, $4 million or 5 million in stock comp, the ex -- you know, the excluding figure is lower than that, like you did in this fourth quarter?

Naser, that number does not include stock comp, so the equivalent would be, you know, this quarter, I think it's $52.6 million.

Right.

And I mentioned in my comments that we did have some one-timers relating to the release of some variable comp and some bad debt recoveries.

So, that was -- that helped us in the quarter, in the fourth quarter.

Those obviously will not repeat themselves.

So, as we look into first quarter, we see between $56 million and $58 million right now.

Okay.

Okay.

Thank you for the clarification.

No problem.

And good luck.

Thank you, Naser.

Thank you.

Martina, we'll take one more question.

Certainly.

Your final question comes from the line of Robert Young from Canaccord Genuity, your line is open.

Good evening.

With the 3% to 5% range on the top line, I was wondering if you could share where you expect the operating margin profiles to sit through the year?

Are you still looking at 3.5% to 4%, or should we look at something lower?

Yes, hey Rob, it's Paul.

Thanks for the question.

We laid out a target between 3.5% and 4%.

Based on what we see here today, you know, we feel very confident with that 3.5% to 4%.

Clearly, as I mentioned at the mid-point of our guidance, it's slightly below the low end of that range, a similar phenomena to what we saw last year.

Suffice it to say, you know, we're working aggressively to get it -- to keep it at that 3.5% right now on a balanced basis.

That's what we see.

But on a full-year basis, just given the benefits of additional volume, you know, we are pretty comfortable with that 3.5% to 4%.

Okay.

Great.

And then second question, you'd said that you were going to collapse the telecom into enterprise communications, and I wonder if that -- does that imply that you don't expect that segment to get above 10% again?

And if so, what implication does that have on margins?

I understand that has been one of the higher margin segments below diversified.

Yes, so Rob, while we continue to pursue opportunities in tele -- with telecom customers, you know, our portfolio has been, you know, with those who have not been faring as well in the marketplace, at least to date.

As you know, a lot of the growth in that area has come from the Asian players.

So, it's really -- you know, that's kind of why we're looking -- the number has been reducing.

As far as the impact to margins, I wouldn't read into it in any particular way.

It has been -- certainly, when you look at the end market distribution, you know, every piece of business has a different margin profile, but I would not spike out telecom dramatically different from enterprise com, as an example, for having a different margin profile.

So, we don't see any impact from that.

Okay.

Thanks, and good luck in 2012.

Thank you.

So, I'd just like to extend my thanks to all of you for joining us this afternoon and look forward to our continuing dialogue throughout 2012.

Thank you very much.

Thank you.

This concludes today's conference call.

You may now disconnect.