Paul Carpino – Investor Relations Craig H. Muhlhauser – President, Chief Executive Officer & Director Paul Nicoletti – Chief Financial Officer & Executive Vice President

Matthew Sheerin – Thomas Weisel Partners Jim Suva – Citigroup Brian White – Ticonderoga Securities Brian Alexander – Raymond James William Stein – Credit Suisse Shawn Harrison – Longbow Research Louis Miscioscia – Brigantine Advisors, LLC. Gus Papageorgiou – Scotia Capital Todd Coupland – CIBC World Markets Deepak Chopra – Genuity Capital Markets Alex Blanton – Ingalls & Synder [Nazerit Ickbal – Zelman Partners]

Thank you for joining us on Celestica’s third quarter conference call. On our conference call today will be Craig Muhlhauser, President and Chief Executive Officer and Paul Nicoletti, Chief Financial Officer.

Craig and Paul will provide some brief comments on the quarter and then we’ll open up the call for Q&A. Copies of the supporting slides accompanying this webcast can be viewed at Celestica.com during this conference call.

This conference call will last approximately 45 minutes and after the call we can be reached for follow up questions. During the Q&A, please limit yourself to one question and one follow up to ensure everyone on the call who would like to ask a question has the opportunity to do so.

You’re 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 will make forward-looking statements related to our future growth, trends in our industry and our financial and operational results and performance that are based on current expectations, forecasts and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially.

We refer you to the risk factors and uncertainties discussed in the company’s various public filings which contain and identify 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 & Exchange Commission which can be accessed at Edgar.com and SEC.gov.

Please note that we will refer to certain non-GAAP financial measures during this call. The corresponding GAAP information in the reconciliation of the non-GAAP measures is included in our press release which is available at Celestica.com.

I’ll now turn the call over to Craig Muhlhauser.

Celestica continued to deliver improved financial performance in the third quarter. One of our goals during this very challenging economic environment was to continue to improve our ability to deliver on our commitments to our customers while increasing our financial returns.

During the past two years, Celestica has delivered operating performance that was among the best in class results for the EMS industries major peer group. I congratulate and offer my thanks to the Celestica employees for this achievement in such a challenging economic environment.

Let me highlight our performance; although the end market environment has been very challenging, we delivered 11% sequential revenue growth in the third quarter meeting the high end of our guidance. This growth was driven primarily by new wins and seasonality in our consumer segment in the September quarter.

Our diversification efforts over the past several years have enabled the company to offset the revenue volatility that our end markets have experienced during this difficult demand environment. Our guidance for the fourth quarter indicates that we anticipate additional sequential revenue growth of 4%.

Although revenue levels are still recovering, they remain below the levels of 2008, we are encouraged by the new growth opportunities we are pursuing both organic and through acquisitions which we believe have the potential to impact revenue in 2010 and beyond. We’ll continue to be disciplined in our approach to evaluating these opportunities and we’ll strive to achieve the right balance of investing in growth and capabilities while generating our target financial returns.

We continue to strive for innovation, to raise the bar further in our operating performance and every aspect of our company in order to achieve new levels of operational excellence in quality, costs, flexibility and cycle time. We have been aggressive in driving change at all levels of the company by reducing excess capacity, building an industry leading supply chain network, establishing a flexible and effective network and streamlining and simplifying the company.

To date, the results have been encouraging as Celestica’s performance, as measured by our key financial metrics has been excellent during this difficult economic environment. Quarterly gross margins during this downturn have averaged 7.1% despite operating at an average of 50% to 60% utilization during this period.

Our streamlined and simplified supply chain network combined with our relentless commitment to reducing waste and driving efficiency at all levels of the company, has resulted in a very strong and consistent gross margin. In addition, our gross margin performance combined with our continuing focus on reducing SG&A spending has also enabled Celestica to average a 3% quarterly operating margin during this period.

This performance was achieved in an environment where quarterly revenues have declined by as much as 25% from prior year. Working capital performance has also been very strong with our inventory performance leading our peer group during this period.

Our operating model combined with investments in information technology and business analytics has provided the ability to operate with the speed, flexibility and responsiveness to meet the needs of our customers. Our strong working capital performance has resulted in increased free cash flow which continues to strengthen our industry leading net cash position.

Our strong working capital performance combined with consistent operating results has resulted in an ROIC which on a quarterly average basis over this period was in excess of our cost of capital. In summary, Celestica delivered another strong quarter to its growing track record of consistently delivering on its commitments to our customers, our suppliers and our shareholders.

We are well positioned to support the required investment to attract new customers, new programs and make our current customers successful. As our third quarter actual and fourth quarter guidance suggests, we’re beginning to see modest revenue growth as end market demand appears to be stabilizing from the volatility experienced earlier this year.

At the midpoint of our Q4 guidance, we’re anticipating 4% sequential revenue growth and operating margins to continue to be in the 3% plus range. While end market visibility remains limited, we currently have a growing pipeline of new business opportunities.

The opportunities range from new outsourcing opportunities to providing additional services to existing customers that will allow Celestica to broaden the solutions it provides to its customers. We continue to be encouraged with the continued progress at Celestica that we’ve achieved to date and look forward to building on this solid foundation in the future.

Now, let me turn the call over to Paul who will take you through the financial results in more detail.

Revenue for the third quarter was $1.56 billion compared to $2.03 billion in the third quarter last year and $1.40 billion in the second quarter of this year. The year-over-year revenue decline was driven by the challenging economic environment in server, enterprise communications, telecom, and aerospace defense industrial healthcare while consumer and storage were relatively flat.

On a sequential basis consumer had the largest increase up 60% from Q2 primarily due to seasonal strength in the September quarter and the ramping of new program wins. Storage was up sequentially 17%, server was up 14% sequentially and industrial defense, aerospace healthcare was up 5% sequentially.

Telecom was down 31% on a sequential basis as a result of weaker end markets and program transitions while enterprise communications was relatively flat. Looking at our revenue by end markets, the consumer segment was 32% of sales; enterprise communications represented 20% of sales; storage was 13%; the server segment also represented 13%; telecom was 12%; and finally industrial aerospace defense healthcare came in at 10%.

Moving to our customer concentration, our top 10 customers represented 72% of revenue for the quarter and our top five were 48% of revenue. We had one customer with revenue greater than 10% in the quarter.

GAAP loss was $600,000 or $0.00 per share for the third quarter of 2009 compared to GAAP net earnings of $32 million or $0.14 per share for the same period last year. The year-over-year change reflects the impact of $475 million lower revenue primarily driven by weaker end market demand as well as a $44 million charge for restructuring and other charges in Q3 of 2009 compared to a $16 million charge in the third quarter last year.

Adjusted net earnings for the quarter were $40 million or $0.17 per share compared to adjusted net earnings of $54 million or $0.24 per share for the same period last year. Gross margins before option expense continued to perform at the 7% level despite the significantly higher consumer mix in the quarter.

Operating margin for the quarter was 3.4%, the highest operating margin since 2002. We’ve done a very good job in containing SG&A which for the third quarter came in at $53 million before option expense.

SG&A for the third quarter was lower than expected benefitting from overall reduced spending and the reversal of previously established allowance for doubtful accounts. Finally, our pre-tax return on invested capital calculated as [inaudible] over net invested capital was 21.9%, our highest ROIC since Celestica became a public company over 11 years ago.

As Craig highlighted in this remarks, our operating performance during this downturn has been extremely strong. Our performance is indicative of the discipline and focus we have on generating strong returns on capital regardless of the revenue environment.

We believe this type of performance should be the minimum expectation shareholders have of the industry over the entire economic cycle. In terms of a restructuring update as of September 30, 2009 we have reported restructuring charges of $105 million of the $150 to $175 million programs we announced in 2008 and 2009.

Of this amount, $42 million was reported in the quarter. We expect these activities will be completed by the end of 2010 and when completed will drive our utilization above the current range of approximately 50% to 60%.

Moving to working capital, our cash flow and balance sheet metric continue to perform well. Cash flow from operations was $146 million.

We spent $10 million for cap ex in the quarter and generated free cash flow of $139 million. No accounts receivable was sold during the quarter.

Cash cycle for the quarter including accruals was 15 days compared to 21 days in the second quarter. Inventory was $698 million up $63 million from the second quarter as the company ramped new programs and to support increased volume in to the fourth quarter.

Inventory turns improved approximately a full turn to 8.7 turns which we expect will lead or be near the top of our peer group for the eighth consecutive quarter once all companies report. The balance sheet continues to be exceptionally strong and positions Celestica very well for the future.

Cash at September 30th was $1.26 billion, $142 million increase from the second quarter. Total debt was $581 million and overall we enjoyed the strongest net cash position among our peers.

As you saw last month, the company is taking advantage of its strong cash position to redeem all of its outstanding 7 7/8ths senior subordinated notes due 2011 with an aggregate principle amount of $339 million. We will redeem the 2011 notes at a price of 101.969% of the principle amount plus accrued and unpaid interest to the redemption date.

We will use existing cash resources to complete the redemption in the fourth quarter of 2009 and expect to record a gain of approximately $10 million on redemptions through other charges in the fourth quarter. If we pro forma the September 30th balance sheet assuming the completion of the notes redemption, the company’s cash balance would be $906 million and our senior subordinated notes due 2013 remain at $223 million.

In other words, the company has $683 million of cash in excess of its outstanding debt. We estimate that upon redemption of the 2011 notes we will also see a reduction in our 2010 net interest expense of approximately $14 million.

Let me now move to our outlook, for the fourth quarter we expect to see a sequential revenue and EPS improvement. We expect revenue to be in the range of $1.5 billion to $1.7 billion and adjusted earnings per share to be in the range of $0.14 to $0.20.

At the midpoint of the revenue range, the company expects operating margins to be over 3%. We note that SG&A will likely be closer to a more normalized $60 million as we do not expect a benefit from the bad debt reversal to reoccur.

We also expect to generate free cash flow in the December quarter although not at the same levels generated in Q3. Although we are not providing guidance for the first quarter of 2010, we will remind you that both revenue and earnings per share declined in the first quarter of 2010 compared to the fourth quarter of 2009 due to the impact of seasonality.

In summary, the financial position and operational performance of Celestica during this downturn has been exceptional. The financial position of the company is very strong, our operating results have been relatively stable, we are starting to see organic growth and we are in positions to deploy our cash resources to profitably grow our business and services capabilities.

The company has worked extremely hard to earn a leadership position in the industry and we remain fully committed to generating this level of performance in the future. That concludes the review of the financial results.

I will now ask the operator to open up the call for any questions.

Could you just start out by elaborating on the guidance? It sounds like you’re seeing seasonal trends in most of the businesses but could you talk about specifically where you expect to see sequential growth versus weakness and whether that is demand related or customer related?

We don’t provide too much specific color on our forward guidance by segment but you can generally assume all segments are showing some demand growth as well as new program ramps in the quarter.

Obviously your mix is different than it was in the past but normally in some of the businesses you see high single digit growth and in others you don’t. At the midpoint of your guidance it’s kind of mid single digits so I’m trying to just get at where you’re seeing strength versus weakness.

It’s really across all segments we’re seeing some growth.

Then just as a follow up on the backing in to the numbers based on your guidance, it looks like in the guidance on the SG&A it looks like gross margin is basically flattish sequentially so should we assume then consumer will continue to be strong at least relative to percentage of sales which is why it’s not going up sequentially?

Yes, you can assume that.

I have a question more on the outlook, first of all on the outlook I guess I can say I’m a little bit surprised that the outlook for the midpoint isn’t a little bit higher based upon historically it looks like it comes in right in line with normal seasonality and looking at most of your OEMs, many of them are actually calling for an improvement not just seasonal but potentially an improvement so if you can just help us better understand that? Are you just being prudent there or conservative or is that the actual roll up of your clients, of your demand order?

As a follow up question, on the inventory your inventory build is considerably above your in demand outlook in Q4 so what’s the disconnect there?

I think Jim you look at the Q3 sequential revenue growth of 11%, so we’re coming off a significantly higher base than the other comps so that’s the basis for those numbers.

Then what about connecting the thing about since you already shipped that 11% out the door how come inventory came up so much which is above your outlook for Q4?

We’re seeing very strong demand in the beginning of Q4 particularly on the consumer side. As you know, things will fall off in the December months so the inventory turns as you saw it performing very well and so it’s hard to make conclusions based on the full quarter you’ve really got to look at the demand profile for the month of October which obviously you don’t have visibility to but I think that’s the short answer to your question.

I’m wondering if you can talk a little bit more about the telecom markets and the decline that you’ve seen doesn’t seem to jive with what’s out there in the market. Did you lose market share in the quarter in the telecom business?

Well, it was the combination of some weak demand for some products and then we had some of the business that moved back in to an OEM facility.

You talked a little bit about potentially making acquisitions, what areas are you look at for acquisitions?

Well, we’re looking at our traditional customer base so we’re looking at our core competencies in the traditional market so it’s broad based across current markets and we’ve got some identified candidates in some of the emerging markets.

Are you targeting OEM deals or companies specifically?

We’re looking at both.

Just on the restructuring that you announced last quarter can you just tell us how much savings you realized from that this quarter and what’s left to be realized? And, just looking at the op ex sequentially this quarter, even if I adjust for the bad debt reversal it looks like it came down despite a pretty healthy revenue increase and I’m just wondering what else drove that besides the bad debt reversal?

I would have thought that the restructuring savings are primarily on the COGS line so I’m assuming that was a factor?

First, you had a few questions in their I want to make sure I get them all, as far as the restructuring is concerned as I said in my comments, we’re just treating the two programs together here for simplicity. We spent $105 million of the guidance range of between $150 and $175 million.

We’re standing by that range as of right now. Generally speaking, when we take a cash charge you typically start to see the savings a quarter out so we’ll take a charge today, we’ll see the full savings hit us kind of 90 days from today.

That’s generally the way the formula works. Suffice to say, I mean our guidance property margins takes in to account not only the restructuring benefits that we have but continued operating performance improvements that we’re seeing and obviously the impact of mix from a revenue point of view.

That’s kind of the restructuring piece of it. As far as op ex is concerned op ex does move in a range.

Frankly, we’ve been managing expenses here extremely tight. As we look in Q4 there’s some investments that we are making and so that really kind of fills the gap between where we are with the bad debt reversal it’s really investments that we’re making to grow the business.

I think our overview model and our operating margin targets have us with gross margin in the 7% range, op ex being in the 3.5% to 4% range. That’s kind of the way we see the company.

As you know, we’ve been running op ex in the $60 million zone for a couple of quarters. That’s kind of where we see it irrespective of revenue in the short term.

On the gross margin specifically I guess how much of the pressure or the decline you saw sequentially this quarter was driven by the consumer mix versus perhaps some other pressures like rising component prices or competitive pricing?

I would say that was all more driven by the mix. Obviously consumer, as I mentioned, was up 60% sequentially.

It’s good business, it’s got a lower gross margin profile so I would say almost all of it.

First, wondering if you can comment on any customer wins in the quarter? Craig I think you mentioned that was part of the strength, any one that you’re ready to name?

Then as a follow up I’d like you to comment on the cap ex, it looks very low this quarter relative to what it’s been previously. Is that a new level of efficiency you’ve achieved or should we expect that to creep back up?

Let me handle the cap ex and Craig will come back on the bookings. The last couple of quarters I think we talked about it, we put some cap ex in place to support some new program ramps so there was a blip I would say the last couple of quarters.

We continue to believe that cap ex will be around 1% to 1.5% of revenue. It won’t be like that every quarter but the last couple of quarters, as we said, we booked some new programs and we’ve put cap ex in place to support that.

You should be thinking about it being between 1% and 1.5% of revenue on a going forward basis.

With transparency we’ve added new customers, we’ve got new business with existing customers, we mentioned in the script the consumer was very strong. As Paul mentioned on a sequential basis up 60%, a combination of new program ramps and seasonality there.

Server and storage were strong as well on a sequential basis and that was driven by increased demand as well as new wins so we’re seeing selective new wins across all the segments but that’s an indication of where some of the business is coming from.

If I can follow up on that, I think one of the big controversies with your company or with the stock is that you’ve done a good job at narrowing down the field of opportunities that you’re interested in that are better margin and that the question has been when you’re not that selected on the margin it could damage your ability to gain share. It looks like you’re gaining share now, is any of this coming from – or at least you’re ramping new programs right, so is any of that coming from other EMS companies, is it all new outsourcing, is it new OEMs that are new to outsourcing?

Any kind of color on the nature of those new programs would be helpful.

Will, I thought you’d be really excited about our 11% sequential growth and then on top of that another 3% or 4% in the quarter. But, it’s coming from new wins with our core customers, it’s coming from new wins with new customers and then obviously we are winning new programs with those customers as they look to increase their outsourcing.

It’s fairly broad based, it’s across frankly the portfolio of customers that we feel are the right customers and segments we plan to invest in and the encouraging thing is we’re winning, we’re investing in those new programs and investing in inventory and capital to support those new programs and continuing to deliver our gross margin and operating margin performance.

Just as a follow up to Will’s question if you could maybe point to maybe two or three end markets as you look out over the next 12 months where you see the greatest share gain opportunities to just maybe narrow it down a little bit for everybody to focus now on those areas of growth more.

Let’s say it’s going to be broad based. Clearly as I mentioned, the IT enterprise space, obviously selected opportunities in consumer continue to be an opportunity and then we have an opportunity in both the telecommunications space as well as the broad based I’d say high mix low volume markets of industrial aerospace and defense so it’s broad based.

We have a balanced portfolio, we pursue selective opportunities and we do it on a fairly broad basis so it’s difficult to say. We’re seeing demand beginning to increase on a broad basis and we’re seeing opportunities emerge on a broad basis and it’s in line with the strategy and we expect that to be one of the cornerstones of our operating model here.

Then as a follow up, I know you’re not providing specific March quarter guidance but maybe drilling on two items if you could maybe parse how much of the growth in the consumer business sequentially this quarter was seasonal versus new program ramps so we can kind of get an idea of how much that could potentially decline in the March quarter? Then second, in the March quarter will there be a step up maybe in operating expenses to begin the new fiscal year that we should adjust our models for or would the restructuring savings mitigate that?

First, on the consumer growth I mean it’s both is the short answer so we’ve had some customers that are very seasonal that peak in Q3 that start to come off in Q4. Other customers, we won several new programs earlier in the year and they were ramping in Q3 and they will continue to ship volume in Q4 so we’re not going to split it out in any particular way.

I should comment that visibility continues to be limited despite our comments around stability which we feel the visibility is still relatively low so the 90 day window is kind of what we feel comfortable with. Beyond that I still think there is a lot of uncertainty.

As far as op ex Shawn, back to my earlier comment, I think you should think about it as around $60 million a quarter is kind of what we see it. Obviously, we manage ourselves in that zone so I wouldn’t expect any particular impact because the calendar changes.

As I said, we manage expenses and investments and we’ll manage the timing of that but around $60 million is how you should think about it.

Then just maybe to clarify, for the March quarter typical seasonality in terms of the downturn is what you suggested we look to model at a minimum?

Yes Shawn, I’m cautious to say – I’m not sure what typical is anymore.

I’d say the past couple of years has been kind of a mid to high teens type of decline. I don’t know if that’s typical or not?

I’m not debating that because that’s fact historical but as far as going forward I don’t want to beat a dead horse here, visibility is pretty limited but I think that’s a fair call for you to make.

When you’re looking at your pipeline, can you comment as to the size of the deals? Does it seem like there are any decent deals that are of a healthy size let’s say $200, $300, $500 million or are most of the deals that are coming in the pipeline more in the $50 or $100 million kind of range?

Louis, as you would expect it’s a very broad range of opportunities. Fewer opportunities at the very high end which are $250 and above and a multitude of deals below $250 and so it’s difficult to assess but there’s a broad range of opportunities and size of deals.

I know you had mentioned or gave us a comment about how the interest income/expense is going through change, can you sort of give that to us again? And, did you actually give it just for the fourth quarter and maybe you give us one for the fourth quarter can we use that going in to 2010?

We said that based on the current yield curve for 2010 we expect the net savings to be $14 million. As far as Q4 is concerned, it will depend a little bit on exactly the timing of when we take the note out so I would not assume that we see a full quarter of the annualized savings, I think assuming we see half of it is probably a reasonable assumption at this point.

A couple of questions, I don’t know if you’ve done this in the past but any chance you’d be able to tell us who the 10% plus customer was? Then specifically on Craig you mentioned it a couple of times acquisitions and I’ve been covering this company for a long time and the acquisition record hasn’t been stellar so I’m just wondering it sounds to me like you’re probably more advanced in looking at acquisitions than you had been in a while.

Can you give us a little bit more on the details of what are the criteria for an acquisition like what are you looking at specifically and what’s the benefit of making an acquisition versus paying off the other $223 million in notes that you have on your balance sheet that are at an interest rate of 7.6%?

With regard to the question on acquisitions, when I talk acquisitions number one is it’s this management team so we’ll have to access the quality of execution for this team and I think we’ve delivered on what we promised and we will certainly deliver if we choose to make an acquisition. When we talk acquisitions we’re looking at competencies and market position to enhance the strengths that we’ve got and to build on the franchise that we’re building.

I think that’s what you can think. We’re building strong franchises in four or so major markets and with a number of key verticals and we’re going to acquire competencies that we think will continue to I’ll say differentiate us in the most challenging technical areas of those businesses.

That’s a broad statement but that’s the game plan here. It’s just the speed and the opportunities and the timing at which the opportunities materialize that we will evaluate as to whether or not we choose to take advantage of them.

But, they’re aligned with the strategies regarding the segments, the vertical markets, and the customers that we’re targeting.

Just specifically to follow on to Craig on your question on the debt, I mean suffice to say we see opportunities to do something better with the cash than buy back the debt. As Craig mentioned, hopefully you feel that we have a track record of delivering and we’re not going to deploy the capital just for the sake of deploying it unless we see the turns that are complete with our goals and objectives.

Would it be fair to say looking to buy other smaller EMS companies probably is not kind of consistent with building on your core competencies? Is that kind of a fair way to think about it?

That would be fair.

I just want to come back to be clear because I thought you answered it fairly quickly, this whole idea of Celestica underperforming its peer group in terms of growth outlook in the fourth quarter. Was your basic point that you got the pickup in the month of September so your sequential growth in Q3 was higher than the comps and its moderating in Q4 but if you look at it on a six month basis it’s certainly in line?

First, I think just to remind ourselves here that we gave a revenue range so if we come in at the midpoint of the high end of the range you get a different answer to the question. I think what Craig was saying was if you look at some of the comps who have reported so far their sequential growth in the Q3 was not as strong as ours was so we had good strength in the Q3.

Exactly how Q4 unfolds I guess this is dependent on where we land in the range.

The second point, you commented that your inventory build was for the front end of the quarter, should the takeaway be that the guidance you’ve tabled you would have a high degree of confidence in that given the visibility at the front end of the quarter? Can you maybe just talk about that?

Todd, I mean we give a revenue range and as you know there are a lot of moving pieces. Some customers, particularly on the consumer side you would expect would ship earlier in the quarter, other customers more on the enterprise side be it IT or coms are more traditional and ship at the back of the quarter.

Suffice to say we look at everything and take a judgment call and provide a range and that’s what we’ve done here.

I was wondering if you could talk a little bit about the SmartPhone space, are you starting to see that it’s becoming more competitive than it was say even three to six months ago in terms of the competition and also the OEMs pushing hard on pricing?

It’s fair to say that we’ve see competition intensify. Obviously it’s probably one of the more active growth segments of the industry these days so the demand for competitive pricing and service levels continue to challenge the industry and obviously that doesn’t appear to be abating so that’s something we expect to continue.

Would you say it’s more than your other end markets at this point for the foreseeable future?

I mean we see pressure across all end markets. With capacity utilization being what it is we see I’ll say excessive pressure from Chinese entrants that are attempting to move in to the EMS space in some of these segments that don’t have established track records so they are using price as their primary weapon.

Needless to say customers are making the best decision for them and obviously risk comes in to the equation so we feel comfortable that we are well positioned to deal with those threats.

Just in terms of inventory in the channel could you talk a little bit about what you are seeing now? Is it relative to say normal [inaudible] and whatever that means is relatively light at this point?

Do you think your end customers are happy with the amount of inventory they are carrying giving the relative strength of the market? Just some qualitative comments in terms of what you are seeing in terms of the weeks of inventory sitting on hand out there?

We see increased levels of demand. Obviously, we see short cycle demand dropping in to the quarter and we see customers trying to minimize their inventory investments given the fact that the mix of what they require is very difficult for them to forecast.

It doesn’t seem as if there’s a large inventory overhang and customers are pretty much leaning out their inventories and relying on the supply chain partners to provide the flexibility they need to meet the mix requirements.

One last quick question, in terms of free cash flow could you talk about what type of metrics the company uses to benchmark itself in terms of what the free cash flow generation should be? I’m just trying to figure out what that number could look like in terms of Q4 but more importantly 2010 and 2011 timeframe.

Just how should we model that type of number?

We look at the major elements of cash flow obviously the working capital so we look at each individual element, CSO on AP and AR and inventory churns and we benchmark each of those. As you know, those levels are highly influenced by the mix of business we have.

So, the more high mix low volume higher margin business you generally have more working capital to support it and the converse on consumer. As far as looking at the metrics we just look at those will be the three big ones we look at individually.

Could you just tell us a little more about the company that you said moved back in to the house of a telecom company? What was the reason for that?

I think earlier in the year there was some industry conversations around a particular OEM for their own capacity reasons moving some load in house. We’re not going to name that customer but suffice to say their managing their own priorities as far as loading in their facilities.

They made their own decision accordingly. That flow through impact was you saw in our quarter.

I think this was a company that really it was the labor situation that was so difficult for them to lay people off that they couldn’t close their own plant and outsource the whole thing so they had to take it back in house, is that right?

We’re not going to speculate on why they did that but I think the message is they’re still a good customer of Celestica and we still have opportunities.

The second question is this, let’s assume that at some point in the future your business gets back to let’s say an $8 billion annual level which would be 30% above where it is now and back to where it was a year ago. What kind of leverage is there in your operating statement both on the cost of goods sold line and the SG&A line what kind of operating margin might you have at $8 billion in annual sales?

As we talked Alex it’s going to be mix dependent so obviously there will be mix dependency but based on the mix that we target for the business we’re talking about a range of 3.5% to 4%.

What’s the break down there between gross margin and –

No, it would be the operating margin and the gross margin would be somewhere around 7% level.

So it wouldn’t go up at all then?

Well, SG&A at 3.5%.

Right but you wouldn’t have any leverage on the gross margin line at all?

I think you laid out an $8 billion scenario which obviously has got a lot of growth from where we are today, a high mix low volume program. That’s a lot of revenue growth at the higher mix so by definition you’d be looking to get from where we are to $8 billion –

Well wait, didn’t it go down? The high mix low volume went down, wouldn’t it go back up in a recovery or have you lost it permanently?

Alex, we’ll try again to answer your question as best as we can. It’s mixed dependent so that means it depends where – we go from $6 to $8, what is it?

Is it consumer or is it industrial or healthcare. I’m not going to speculate on that so we’re just saying our overall model, as Craig mentioned earlier is to manage the portfolio so we’re actively managing the portfolio to deliver our margin goals the 3.5% to 4% operating margin which kind of breaks down to 7% to 7.5% gross margin and the balance being the op ex.

One of your competitors had said that their initial incremental margin would be somewhere in the mid teens on that kind of volume increase. But as you say, if you’re assuming it’s all consumer I guess that wouldn’t happen.

They must have a lot more idle capacity sitting around. I think our operating margin speaks for itself right now Alex.

Just two questions, it seems Paul that if you go back to your SG&A of about $60 million going forward quarters and you get the EBIT margin of about 3% it would imply some sort of recovery in your GMs. Would that be how we should be looking at it?

I think the gross margin targets as I said, mix dependent again but around 7%, between 7% and 7.5% is what we would expect to see. You saw 7% this quarter which was down slightly from last quarter given the increases that we saw in the consumer business.

But, going back through history, 2008 we were 7.4%, 7.3% ranges, as high as 7.6% in the first quarter again, as consumer came down. So I think you should expect to see us between 7% and 7.5% is the way to think about it.

I guess just my follow up question would be on the working capital the big benefit in the Q3 was the APs up about $200 million. Do you expect some of that to reverse next quarter or the quarter after?

Yes, certainly it has to do with the timing of our inventory purchases and then we have to pay for that inventory and then on the flip side when we convert to revenue. As I said in my prepared comments we certainly do not expect to generate the same cash flow in Q4 as we did in Q3.

I’d like to thank everybody for joining the call, for their interest and support and we look forward to our continued dialog. Thank you very much.