Good afternoon. My name is Kurt and I will be your conference operator today. At this time, I would like to welcome everyone to the Celestica Third Quarter Results Conference Call. [Operator Instructions] Mr. Manny Panesar, Director of Investor Relations, you may begin your conference.

Thank you, Kurt. Good afternoon, everyone. And thank you for joining us on Celestica's Third Quarter 2013 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 up the call for Q&A. During the Q&A session, please limit yourself to one question and a brief follow-up. Copies of the supporting slides accompanying this webcast can be viewed at celestica.com. 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 cash to our shareholders, our financial and operational results and performance and financial guidance 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 you to the company's various public filings, which contain identified 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 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 margin or adjusted EBIAT, adjusted net earnings, adjusted EPS, return on invested capital or ROIC, inventory turns, cash cycle days and free cash flow. 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 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 and 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 are to U.S. dollars. I will now turn the call over to Darren Myers.

Thank you, Manny. And good afternoon, everybody. Celestica delivered a solid third quarter, with revenue and adjusted earnings per share above the midpoint of our guidance range, driven by strong demand in our communications and storage end markets. Third quarter revenue of approximately $1.5 billion was essentially flat relative to the second quarter of this year and was down 5% compared with the third quarter of 2012, primarily as a result of the BlackBerry disengagement. After excluding revenue from BlackBerry, third quarter revenue grew 5% compared with the third quarter of 2012. Some additional highlights for the third quarter include: Non-IFRS adjusted earnings per share of $0.22 came in above the midpoint of our guidance range of $0.17 to $0.23 per share; non-IFRS operating margin of 3.2% was sequentially up 30 basis points. We delivered strong IFRS net earnings of $57.4 million or $0.31 per share and we generated approximately $10 million of free cash flow and return on invested capital of 19.8%. From an end market perspective, our diversified end market comprised 26 of our -- 26% of our total revenue, up from 21% in the third quarter of 2012. Third quarter revenue from our diversified end market was up 6% compared with the second quarter. Compared with the third quarter of 2012, diversified revenue grew 16%, with double-digit percentage growth in our industrial and aerospace and defense end markets, driven primarily by new programs. Revenue from our communications end market, contributing 45% of total revenue for the third quarter, increased 7% compared with the second quarter. On a year-over-year basis, communications grew 16%, primarily from new programs and higher demand across some customers. Storage end market revenue, representing 14% of total revenue in the third quarter, increased 10% compared with the second quarter, driven by higher demand across…

Thank you, Darren, and good afternoon to everyone on the call and thank you for joining us. Celestica delivered another solid quarter with sequential growth in operating margin and return on invested capital despite a challenging demand environment. We continue to deliver strong operational execution to our customers, while driving productivity improvements across our network. Overall, we're pleased with our year-to-date performance and our ability to effectively manage the impact of the disengagement with BlackBerry. Despite an overall soft demand environment and headwinds in parts of our business, including challenges in our servers end market, we have invested in our business and achieved continued improvements in operating performance throughout 2013 with 2.5% operating margin in the first quarter, 2.9% in the second quarter, 3.2% in the third quarter and are targeting 3.3% at the midpoint of our fourth quarter guidance. While a part of the improvement has been the result of effectively managing our portfolio, a significant portion has been driven through our team's relentless focus on quality and continuous improvement. We are continuing to harness technology through investments in systems, processes, application software, new tools and talent to drive further operational improvements with higher quality, lower costs and higher velocity throughout our supply chain network. We had a strong bookings performance across the business in the third quarter and we continue to win new business with the industry leaders in our target markets. Now let me address some of the dynamics in the end markets and our near-term outlook. For the third quarter, while the overall revenue performance was within our expectations, the mix was slightly different than our beginning-of-quarter forecast due to the variability in customer demand. Relative to our expectations at the beginning of the quarter, we experienced stronger demand in our communications and storage end markets,…

[Operator Instructions] And first question comes from the line of Jim Suva from Citi.

This is Nick Jones on for Jim Suva. I was hoping you could talk about -- looks like in December, sales are going to be pretty below normal seasonality. Is this due to the BlackBerry disengagement? Or is there a new way we should think about seasonality?

Well, I mean for the first [ph] Quarter, based on the demand dynamics, we're guiding somewhat cautiously. I mean, I think it does reflect the changing mix of our business. So obviously, we're moving in a direction to emphasize communications, diversified and the storage business, as well as the server business. But I think in general, the overall, I would say, predictability or the volatility of the Celestica seasonality is becoming more damped. We expect communications to decline slightly due to the strong third quarter. Diversified is down slightly, as I mentioned, as the growth in semiconductor is offset by the solar demand, as a major customer program was completed. And we are seeing signs of demand improvement in semi and the server and the A&D and healthcare business continue to be steady. Servers have been impacted, not only by the insourcing, but overall weak demand and we expect that to continue, although the quarter-over-quarter improvements are expected. Not providing guidance for the first quarter at this time, we say it would sequentially be down from the fourth quarter. The emphasis here is we expect our business in the communications segment, diversified segments, storage segments and a seasonality impact coming through for servers for the fourth quarter.

Okay. And one follow-up question. I heard you say you had 2 customers over 10%. Is there anything you're doing to try to reduce your reliance on the top 10 customers?

Well, we're diversifying our business, so we're growing business. I mean, it's down from 67% the prior quarter to 65%. Obviously, we have continued objectives to continue to grow our diversified space. And obviously, we expect that to reduce the impact of the top 10 customers that we have today. And I would say, create less consolidation among our top 10 customers, which are primarily in the core of our business today.

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

Two questions from my side. One, I guess, on the comm equipment side. Could you just talk about -- when I think of the 7% sequential growth, it looks to me that a big majority of that may be the new program ramp, and x that you guys probably grew 1% or 2% sequentially. Could you maybe talk about how much is organic versus inorganic? And then when you look at December being down mid- to high-single digits, I hear you on Q3 is the peak, but this seems to be down a whole lot more severe than normal seasonality. So maybe if you can dig in and tell me what exactly are you seeing in the comm equipment side that makes you cautious?

Amit, it's Darren here. I mean, we had a -- we certainly had a strong quarter in comms and 2 strong quarters in a row, so we've seen a lot of upside across the customers. So we're not breaking out the composition between the transfers of programs, but it's been both transfers of programs and base business and wins that we've had in that area. When you look over our history, we have had seasonality into the fourth quarter, usually comms is down. And so we're seeing that as well as just really strong third quarter. And I just echo Craig's comments before, that we expect strong year-over-year growth in comms, in the communications segment, in the low double digits. So we're performing very well in comms and pleased with our performance there.

All right. And then if you just maybe talk about the buyback program. It looks like you guys bought back 1.7 million shares in the quarter. It seems to be a bit below what I would have at least expected. Maybe you could just outline the buyback thought process going forward from here for us?

Sure, Amit. We bought back the 1.7 million. This was approved in August, so we didn't get a full quarter and I mean you should expect to see us -- we can buy up to 5%, approximately 10 million shares, so you should expect to see us do that over the period. Think about it at least for your models in an even way.

Got it. It should be done by, I think, basically middle of Q3 2014, right? That's the roadmap?

That's right. Based on that speed, yes.

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

I wanted to dig into the operating margin improvement a little bit. You guided to 3.3% up a little bit in the fourth quarter and you had a -- you did a great job on operating margins. In the third quarter, it seems like mix is helping you, but you also mentioned the actions that you've taken. Can you give us a sense of what the split is between how much mix is helping versus how much the restructurings that you've done have helped?

It's Darren here. Yes, in turn -- I mean, we're very pleased with our operating margin improvement. I mean, 50 basis points on ROIC and generating 3.2% EBIAT, 20% ROIC in the third quarter. So I mean, what we've seen there is really a few things: One, it's mix of the programs, as well as the portfolio management and cost discipline. As we've mentioned in the prepared remarks, we've really focused on our portfolio. Consumer is an area where we've seen certainly margin improvement by being very specific and particular on the programs that we're going after. So you're seeing that benefit in the margin. The midpoint of our guidance is that 3.3% so we continue to see that benefit as we go forward. And in the past, we have talked about at what point are you at the 3.5%, I mean, we're very pleased to say we see that at a much lower level now. And depending on a number of factors, certainly, we'd see that on the low 1,500s based on where we are today and today's mix and that continued focus on cost.

Okay, that's helpful. And then just on the comms business, I know you guys are benefiting from a customer moving to you. But can you give us a sense of any sort of specific areas of comms that are doing well for you, LTE? Any of that detail would be helpful.

Well, I mean, what I can comment, Sherri, and -- it's Craig. Basically, it's improved demand from a number of customers. It's a number of new programs we're launching with existing customers. It's the competitive take away, and it is partially offset by weaker demand from some other customers. So it's pretty broad-based and across the portfolio of products that we have, both the products in the infrastructure space as well as the optical space.

Your next question comes from the line of Brian Alexander from Raymond James. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: So just on the storage business, I think your performance was stronger than you expected in the third quarter and it looks like you're guiding for double-digit growth year-over-year sequentially in the fourth quarter. Yet 2 of your larger storage customers have reported relatively disappointing results thus far this earnings season. So I know you don't want to talk about customers specifically, but can you just give us a sense for what's driving the strength and how uniform that is across your customer base? And maybe just help us reconcile how you're doing so well in the storage market when the overall market isn't growing?

Brian, it's Craig. Really, I would talk about it's a -- the third quarter, I mean, obviously, we've had good demand from a number of our key customers. As I mentioned, we're serving the market leaders -- or a number of the market leaders, so it was across a number of customers in the third quarter. As we look to the fourth quarter, we've got improved demand. We've got some seasonality, obviously. And then frankly, Brian, what's really helping us in this business is we are not only expanding our engagements based on the operational performance we're delivering to companies like EMC, but we're also very, very successful in this segment in what we call the joint design and manufacturing space. So we're actually adding value to those customers beyond just the contract manufacturing of their products. And as result of that, that's creating higher content for us. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Okay. And then just a follow-up. I think you guys had said in the past that you wanted your diversified segment to get to 25% to 30% by 2014. I don't know if you've updated that since, but you're basically there. And I'm just wondering, what is kind of the longer-term plans for that business? And have you thought at all about maybe breaking out the diversified segment into some of the individual components since it's obviously pretty diversified within that group and maybe a little bit more transparency on the underlying revenue would be helpful.

Brian, it's Darren here. In terms of our goals, I mean, this is a business that frankly we want to keep growing and we don't have a formal objective out there, but it's certainly in the 40% range for the company. And as we continue to grow this, we'll take your feedback and we've been trying to provide more and more transparency on our calls, but we certainly will take your feedback and consider the right time to break out the group as it gets a little bit bigger than it is today.

Your next question comes from the line of Joe Wittine from Longbow Research.

The tone regarding semi cap sounded like you are winning the business, but with an asterisk that it's coming at a measured pace. I wanted to see if I'm interpreting that right, especially in light of third-party forecast for semi cap equipment for 2014 -- depending on the third party, they're ranging between the mid-teens to the mid-20s. So I'm wondering if you would caution us from modeling that type of growth for 2014 based on where we stand today.

Well, I think, Joe, your insight is right on, frankly. I mean, we are winning business. We are implementing a very, very aggressive investment campaign across the network to build out a global supply chain for complex mechanical. I think if you're familiar with the industry, the quality of requirements of the industry are very, very tight, as are the customer qualification processes. So that's dating the business right now just in terms of the resources available on both sides, on the customer side and our side, to affect the transfer plans. So obviously, we're reading the same industry reports that you referenced. We expect 2014 to be a year that's significantly stronger. There are reports indicating double-digit growth. But how that translates into revenue for us will be gated by the transfer plans and the programs that we have with the customers that we have today and are winning business from as well. So early days. And obviously, as this develops, it will become a more and more important segment of the business. And as I mentioned, just based on the sheer balancing between execution and the -- getting the business and the capabilities in place, we are being very deliberate in making sure we do this right. So a lot of confluence of factors. But suffice it to say, it's -- we're anticipating a stronger year in 2014 from a volume standpoint and we have significant opportunities to improve on that.

That's really helpful. And then as -- just as my really quick follow-up, were both 10% customers in the communications business this quarter or was one in storage?

Joe, I like your follow-up question, but we're not going to disclose the -- where or who the customers are, but thank you.

The next question comes from the line of Thanos Moschopoulos from BMO Capital.

Craig, I just wanted to drill in a bit further on your comments regarding the demand environment. Sounds like visibility is still challenging, but relative to this point of the quarter, last quarter, are things any more visible or less visible than it was three months ago?

I would say -- I mean, they're not more visible, I mean, they're consistent with the visibility we had last quarter. I think what's different this quarter is we've got a major build-out in solar running off, in terms of quarter-on-quarter impact. And overall, the other segments are performing in line with expectations. And the demand environment at best is, as you see, just the volatility in demand, the mix is changing. And as we look at the end of the quarter, frankly, the seasonality's going to be impacted by the buying behavior of customers given the economic uncertainty. So just a lot of moving pieces, but I wouldn't say there's anything material other than the solar impact to our overall demand outlook. Our customers are still driving considerably opportunities that they believe will materialize, but we're being cautious in the outlook in terms of our forecast here, our guidance here.

Thanos, the only thing I would add to that is just that the -- it's not about the outlook per se, I guess. It's that the water level has dropped in terms of the server business and the volumes, obviously, now you have a lower point where we're getting some sequential growth on. But that's a -- for us, that's a lower margin business. So hence the ability to maintain and grow our margins here. So that one's impacting us as we go forward as well.

And so just a follow-up on the server business specifically. So at this point, have we seen all of that impact from the insourcing? Or is there any of that left?

No, we've seen all that impact from the insourcing, so the answer is no.

Your next question comes from the line of Matt Sheerin from Stifel, Nicolaus. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: So a question regarding your comments on the inventory. You mentioned a couple of issues there, one, you're having to do with program transitions, whether that's related to the communications customer or the -- or basically the spinning out of the business back to your server customer, whether it's related to that. You also talked about some customer demand issues. How do we read into that? Could you be more elaborate, particularly on the second issue, in terms of the customer demand?

Matt, I mean, what it is really, is, I mean, it's a few things. It's the transfers as you've estimated there or you've guessed in terms of our competitive takeaway. That one certainly has impacted us. But it's also, as you've seen in companies' results, a lot of revenue challenges, so people are not wanting to leave revenue on the table. They're ordering. We're seeing a lot of dynamics right to the end of the quarter where the exact composition of the finished goods that we're going to be shipping is unknown. And nobody wants to be leaving things, I mean, it's -- in tech, it has been a tough market. You've seen that in the -- our customers' results. And so that, as a result of that, we're seeing the churn as well. I don't have an exact breakdown, I'm not going to provide an exact breakdown of how much is transfer, how much is that. And that's what we're working through and we're working with our customers and don't see any issues there, it's just we have to work through that with them. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And just as a follow-on on the inventory. It appears that lead times on most semis and other components are still relatively short. So it doesn't look like -- it looks like you'd be in a position perhaps to cut inventory unless you thought that the pipeline going into next year, as you talked about, Craig, about some optimism on some new programs, whether or not you want to be better prepared going into Q1, or would this be an opportunity to maybe generate more cash in the quarter?

Yes, we've seen an -- Matt, we see it as an opportunity to improve. I mean -- and we see improvement as we look forward to the business becoming, I'll say, more mature in terms of the mix of the business that we've got. And then obviously, it's also affected by the timing and the magnitude of a number of ramps that we've got underway. So -- but we look forward to continuing to improve on our inventory. And obviously, we have the opportunity to generate additional cash this quarter.

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

Just if I could drill on the server segment, you talked about the insourcing being I think -- the impact being completed. Q4, is, I guess, unusually weak, I guess, and based on like what I would be looking for, for a seasonal uptick, I guess most of the weakness could be attributed to the servers. Craig, do you think that in terms of the weakness, maybe at a specific customer or just the general environment, this could be like a quarter or 2 or 3 kind of phenomenon? Or do you think by Q1, you expect a return to normalcy?

Well, as you know, Naser, I mean, we've obviously had the insourcing of a major program, as we mentioned just in the past question, which has been completed. So the water level for servers for our business is substantially lower than it was. We are part of the new programs that are the follow-on programs to the existing production, the systems of which are transferred back in-house. So that will, depending on the take-up rates there, and then obviously, the impact of customer demand overall in the fourth quarter -- I mean, we're positioned in the proprietary segment of the market. Obviously, we have a very strong position with the leading suppliers in those segments of the market. They're investing in the future. But the market is going through a transition. And it's difficult to say what is the new normal. Obviously, we're managing it within the overall mix of the business. We're participating in joint design and development programs for new server products but all targeted to maintain our margin profile and make sure we're participating with profitable growth.

And I guess that's where I would be really like in terms of -- Craig, you talked about the -- your Q2, that you expected the new program ramps and all these business wins to, I guess, be meaningful. In terms of do you think that post the Q4 that given the program ramps and the wins you've had that Q1 could be -- we get past this, maybe a lull, do you think?

I mean, at this point, Naser, we're not giving guidance for Q1. Obviously, the nature of the volatility, I mean, the message is we're booking business. We're managing our portfolio. We're going through new program transitions. And we're, in general, I mean, we're high-single-digit percentage improvements for the fourth quarter in servers. So I mean, you can use that as kind of a baseline from which we're going to build.

And Naser as we...

And then just my follow-up question, Craig, would be like you talked about, I guess, before the BlackBerry, but a while ago that based on new program ramps and business takeaways from the competitors that, I guess, your target at one point was a 6% to 8% revenue growth, I think you moderated that to 3% to 5%. Your operating margins are, I think, blowing away all of us on the upside. But in terms of -- for 2014, just given where you see more market share gains on the business program ramps, like what do you think is a realistic target in terms of the growth range for '14?

Naser, we're not going to give guidance for 2014. I mean, it's a very difficult environment. I think we want to show you that we're managing a portfolio to achieve a balance between the growth of the company, I would say, above market performance on our gross margin and profitability and return on invested capital in excess of 20%. And hitting those metrics, growing profitably, delivering the returns, delivering the ROIC, generating cash flow, buying back stock and making investments in the company, we -- we're on a long-term deployment of a strategy to do that and we're just -- another proof point on the table is this quarter. Obviously, I understand the need to grow. We're building a backlog. We're winning business, it's across all segments. But when that materializes, there's just so many variables today it's very tough to predict. And right now our visibility is limited to 90 days. So the best we can do is try to give you a realistic guidance as to what we think we can accomplish in the quarter. But we believe the business model that we've got is the best model in the industry.

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

Craig, I understand you don't want to give guidance for '14. Do you feel it's appropriate to make a comment that your business can grow in '14 with the bookings you have been able to achieve thus far if the ground stays stable? Like have you put enough in your pocket where you actually could grow the business if the ground is stable?

Well, I mean, the short answer is yes, if the ground is stable.

Okay. My follow-up question is, so you continue to build cash on the balance sheet and your buyback is certainly using some of that cash, but not very much even if you exercise a full buyback. What's your thoughts on that as you enter 2014 in terms of capital allocation, just give us an update on your views on that.

It's Darren here. As we've talked in previous calls, it really hasn't changed from the third quarter, we went through a little bit more detail on that. It's really that the 50%, as a way to think about it, it's 50% invest in the business, 50% through returning cash to shareholders. So we look to continue that and we're looking at where we can invest in the business and to continue to build the strong franchise here.

And just from my standpoint. Just -- I mean, Q3 without BlackBerry was 5% growth. So I mean, it's not all problems here in terms of growth. I mean, we're showing growth for the company. The question is we're showing margin improvement, cash flow generation, and return on invested capital, and that's the model here. It's going to be a model that's built on a solid foundation and we're taking the time to do it.

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

Wanted to continue a previous question on margin strength. You mentioned mix and some cost discipline. I wanted to see if you could talk about the benefits from the restructuring. I know that takes a little while to work through. Is there a benefit that you're seeing now, and is there going to be more benefit from this continued restructuring you're going to see before the end of the year?

Sure. Darren here. Yes, absolutely. I mean, part of the reason we're delivering at the 3.3% range is the benefits of our restructuring. So we've done a very good job of taking the costs out and the continued cost discipline. I would say, that most of what we've taken already is hitting our numbers. But we have $10 million remaining to go -- it's generally a year [ph] payback. So as we move forward, and there's, obviously, many, many variables, but as we move forward, we would expect to get back into that 3.5% range. I'm calling it today, from today's mix at around 1,500, in the low 1,500s. So we've certainly brought the water level down, ability to achieve the 3.5%, the over 20% ROIC at a much lower level. So we're very pleased with that.

Okay. And then my follow-up is just on the semi cap. The merger with Applied Materials and Tokyo Electron, do you see any impact, positive or negative, from that or too early to tell? What do you think?

Craig here. I mean, I think AMAT is a great customer of ours, and we have a great relationship with AMAT, and obviously, we're not going to comment on their merger.

Kurt, we'll take one more question, please.

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

Okay. I'd like to just thank everybody for their interest and support and for calling in today. And we look forward to our continuing conversation next quarter. Thank you very much.

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