CANON INC.
 

FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of ....        April............................    , 2008..
CANON INC.
 
(Translation of registrant’s name into English)
30-2, Shimomaruko 3-Chome, Ohta-ku, Tokyo 146-8501, Japan
 
(Address of principal executive offices)
     [Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F          X         Form 40-F                   
     [Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes                 No        X        
     [If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-                     

 


 

SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
                                CANON INC.                        
     (Registrant) 
 
     
Date....  April 24, 2008....  By   ....../s/...... Hiroshi    Kawashimo.    
         (Signature)*   
 
         Hiroshi    Kawashimo
     Deputy Senior General Manager
     Global Finance Center
     Canon Inc. 
 
 
*Print the name and title of the signing officer under his signature.
The following materials are included.
1.   CONSOLIDATED RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2008

 


 

(CANON LOGO)
CONSOLIDATED RESULTS FOR
THE FIRST QUARTER ENDED MARCH 31, 2008
April 24, 2008
CONSOLIDATED RESULTS
(Millions of yen, thousands of U.S. dollars, except per share amounts)
                                                 
    Actual     Projected  
    Three months     Three months             Three months     Year ending        
    ended     ended     Change(%)     Ended     December 31,     Change(%)  
    March 31, 2008     March 31, 2007           March 31, 2008     2008        
    (Unaudited)     (Unaudited)             (Unaudited)                  
 
                                               
Net sales
  ¥ 1,007,538     ¥ 1,039,793       -     3.1     $ 10,075,380     ¥ 4,570,000       + 2.0  
Operating profit
    170,830       207,403       -   17.6       1,708,300       770,000       +1.8  
Income before income taxes and minority interests
    166,642       207,844       -   19.8       1,666,420       785,000       +2.2  
Net income
  ¥ 106,644     ¥ 131,250       -   18.7     $ 1,066,440     ¥ 500,000       +2.4  
 
                                   
 
                                               
 
                                               
Net income per share:
                                               
- Basic
  ¥ 84.57     ¥ 99.28       -   14.8     $ 0.85     ¥ 396.50       +5.0  
- Diluted
    84.56       99.25       -   14.8       0.85              
 
                                   
                                                 
    Actual                  
    As of     As of             As of                  
    March 31,     December 31,     Change(%)     March 31,                  
    2008     2007           2008                  
    (Unaudited)                     (Unaudited)                  
 
                                               
Total assets
  ¥ 4,211,258     ¥ 4,512,625       -    6.7     $ 42,112,580  
 
                                       
 
                                               
 
                                               
Stockholders’ equity
  ¥ 2,846,767     ¥ 2,922,336       -    2.6     $ 28,467,670                  
 
                                       
             
Notes:
    1.     Canon’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.
 
    2.     U.S. dollar amounts are translated from yen at the rate of JPY100 = U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of March 31, 2008, solely for the convenience of the reader.
     
 
   
 
Canon Inc.
  30-2, Shimomaruko 3-chome, Ohta-ku,
Headquarter office
  Tokyo 146-8501, Japan
 
  Phone: +81-3-3758-2111

- 1 -


 

I. Operating Results and Financial Conditions
2008 First Quarter in Review
Looking back at the global economy in the first quarter of 2008, an economic slowdown among developed countries has clearly taken hold as a result of increasing worldwide financial insecurity triggered by the subprime loan crisis in the United States along with the impact of the escalating price of crude oil and other resources. The U.S. economy remained stagnant during the period due to slack consumer spending, in addition to a drop in housing investment. In Europe, in addition to sluggish consumer spending due to the high rate of inflation, indications pointed to dwindling capital investment amid an increasing sense that the economy was gradually losing momentum. Within Asia, while the negative impact on exports accompanying the U.S. economic slowdown was reason for concern, the Chinese economy maintained a high rate of growth while other economies in the region also enjoyed generally favorable conditions and economic expansion. In Japan, export growth was limited due to the impact of the U.S. economy and the rapid appreciation of the yen against the U.S. dollar, while consumer spending remained at a low level, losing strength amid uncertainty over the future.
As for the markets in which the Canon Group operates, within the digital camera segment, demand for digital single-lens reflex (SLR) cameras and digital compact cameras sustained healthy growth during the term despite intensifying price competition. Within the office imaging product market, demand for network digital multifunction devices (MFDs) remained solid amid the shift toward color models and advanced functionality. As for computer peripherals, including printers, demand for laser beam printers continued to display growth for color models. For inkjet printers, demand continued to shift from single-function to multifunction models as competition within the market remained fierce, mainly with regard to pricing. In the optical equipment segment, while demand for steppers, utilized in the production of semiconductors, dropped, the market for aligners, used to produce liquid crystal display (LCD) panels, expanded moderately thanks to signs of a recovery in capital spending by LCD panel manufacturers. While the average value of the yen for the quarter was ¥104.78 to the U.S. dollar, a year-on-year appreciation of about 12%, it remained relatively unchanged from last year’s average against the euro at ¥157.59.
Amid these conditions, sales volumes of digital cameras, color network MFDs and other products showed robust growth, recording increases in overall sales on a local-currency basis in all overseas regions. The effect, however, of the sharp appreciation of the yen against the U.S. dollar negatively affected Canon’s consolidated net sales for the first quarter, resulting in a drop of 3.1% year on year to ¥1,007.5 billion (U.S.$10,075 million). Despite the continued launch of new products and ongoing cost-reduction efforts, the gross profit ratio for the quarter was 49.6%, a year-on-year decline of 1.7 points due to such factors as the appreciation of the yen against the U.S. dollar, an increase in depreciation costs due to the change in the accounting method used to calculate depreciation of fixed assets which was introduced in April 2007, and escalating resource and materials costs. As such, first-quarter gross profit declined by 6.3% to ¥499.9 billion (U.S.$4,999 million) from the year-ago period. While first-quarter R&D expenditures grew by 9.1% compared with the same period for the previous year, increases in other expenses were restrained, resulting in a slight rise in operating expenses of just 0.8% year on year. Consequently, operating profit in the first quarter totaled ¥170.8 billion (U.S.$1,708 million), a year-on-year decrease of 17.6%. Other income (deductions) fell by ¥4.6 billion (U.S.$46 million) year on year mainly due to a decrease in interest income and drop in earnings on investments in equity method affiliates. As a result, while income before income taxes and minority interests totaled ¥166.6 billion (U.S.$1,666 million), a year-on-year decline of 19.8%, and first-quarter net income also recorded a decrease of 18.7% compared with last year to ¥106.6 billion (U.S.$1,066 million), the net income ratio remained at a double-digit level, recording a rate of 10.6%.
Basic net income per share for the quarter was ¥84.57 (U.S.$0.85), a year-on-year decline of ¥14.71 (U.S.$0.15).

- 2 -


 

Results by Product Segment
Reviewing the consolidated results for the quarter by business sector, within the business machine segment, while demand for color network digital MFDs continued to expand, fueled by strong sales of the competitively priced iR C2880 series, sales declined 5.9% due to the deterioration of the economic environment, which led to a slowdown in sales overall in the U.S. market. In the field of computer peripherals, despite a steady year-on-year increase in sales on a local-currency basis for laser beam printers, the significant impact of the yen’s appreciation against the U.S. dollar resulted in a decline in sales of 3.0% year on year. With regard to inkjet printers, however, despite an intensely competitive market, Canon’s diverse product range, from home-use multifunction models such as the PIXMA MP610 to business-use MFDs equipped with a facsimile function, achieved expanded sales which, in addition to favorable sales growth for consumables, contributed to 6.1% growth. As a result, sales of computer peripherals overall for the quarter were approximately the same as for the previous year. Sales of business information products decreased by 7.4% year on year due to a drop in personal computer sales within the Japanese domestic market. Collectively, sales of business machines overall during the term totaled ¥691.8 billion (U.S.$6,918 million), dropping 3.3% from the year-ago period. Operating profit for the segment totaled ¥163.2 billion (U.S.$1,632 million), a year-on-year decrease of 7.6%, also as a result of such factors as the lower gross profit due to the drop in sales.
Within the digital camera segment, the compact and lightweight EOS DIGITAL REBEL XTi and the advanced-amateur model EOS 40D contributed to strong sales while also boosting sales of interchangeable lenses. Sales of digital compact cameras also achieved steady growth as the market expanded in emerging markets such as Asia and Russia. As a result, year-on-year sales volume for digital cameras rose by 18%, however, due to the appreciation of the yen against the dollar, overall camera sales for the first quarter decreased by 1.6% from the year-ago period to ¥219.0 billion (U.S.$2,190 million). Operating profit for the camera segment decreased by 24.5% year on year to ¥45.7 billion (U.S.$457 million) due to the decline of the gross profit ratio, negatively affected by the rapid appreciation of the yen along with intensifying price competition amid growing inventories of competitors within the camera market.
In the optical and other products segment, while sales of aligners, used to produce LCD panels, gained momentum owing to a recovery in demand by LCD panel manufacturers, sales of steppers, used in the production of semiconductors, remained stagnant throughout the period due to market shrinkage. As a result, sales for the segment totaled ¥96.7 billion (U.S.$967 million), a year-on-year decrease of 5.1%, while operating profit for the segment fell by 70.4% year on year to ¥5.3 billion (U.S.$53 million).
Cash Flow
In the first quarter of 2008, Canon generated cash flow from operating activities of ¥107.5 billion (U.S.$1,075 million), a decrease of ¥45.3 billion (U.S.$453 million) compared with last year, reflecting both the decreases in sales and net income, and increased payment of corporate taxes. Cash flow from investing activities totaled ¥189.5 billion (U.S.$1,895 million), increasing by ¥65.3 billion (U.S.$653 million) year-on-year, due to such factors as active facility investment to reinforce production capabilities and the payment of ¥43.2 billion (U.S.$432 million) to acquire shares of Hitachi Displays, Ltd. toward the launch of Canon’s display business. As a result, free cash flow totaled negative ¥82.0 billion (U.S.$820 million), deteriorating by ¥110.6 billion (U.S.$1,106 million) from positive ¥28.6 billion (U.S.$286 million) for the year-ago period.
Cash flow from financing activities recorded an outlay of ¥84.9 billion (U.S.$849 million), mainly resulting from the dividend payout of ¥75.7 billion (U.S.$757 million) in accordance with basic policy regarding profit distribution. Consequently, cash and cash equivalents decreased by ¥236.8 billion (U.S.$2,368 million) to ¥707.7 billion (U.S.$7,077 million) from the previous year, including the negative effect of currency translation of ¥69.9 billion (U.S.$699 million) in total, which stemmed from the appreciation of the yen against the U.S. dollar and euro.

- 3 -


 

Outlook
As for the outlook for the global economy in the second quarter and thereafter, uncertainty over the future continues to rise as the risk of an economic slowdown looms in the face of the financial credit crunch triggered by the subprime loan crisis along with escalating prices of crude oil and other natural resources. Amid this environment, while economic growth will likely continue to slow in developed countries for the time being, from the latter half of this year, these economies are expected to be on a path toward recovery as the effects of financial policies and economic stimulus measures in the U.S. and other countries begin to materialize. As for emerging-market economies such as Asia and Russia, although fallout from the lackluster performance of developed countries will have an impact, these regions are expected to continue enjoying high rates of growth.
In the businesses in which the Canon Group is involved, the market for digital SLR and digital compact cameras is projected to continue achieving healthy expansion. Demand for color network digital MFDs and color laser beam printers is also expected to remain solid amid continued price competition and shifting market demand toward lower-priced models. While the market for steppers will likely shrink over the near term, the market for aligners is expected to stage a healthy recovery owing to large-scale facility investment by LCD panel manufacturers.
As for currency exchange rates from the second quarter onward, on which Canon’s performance outlook for the full year is based, while uncertainty over future interest rate policies and political developments with regard to major countries is likely to continue, Canon anticipates exchange rates of ¥100 to the U.S. dollar and ¥157 to the euro, representing year-on-year appreciation of approximately 15% against the U.S. dollar, and about 4% against the euro. Upon taking into consideration first-quarter business results as well as the expected business climate based on these foreign exchange rates, the company now anticipates consolidated net sales of ¥4,570.0 billion (U.S.$45,700 million), operating profit of ¥770.0 billion (U.S.$7,700 million), income before income taxes and minority interests of ¥785.0 billion (U.S.$7,850 million), and net income of ¥500.0 billion (U.S.$5,000 million), representing slight downward revisions for each item.

- 4 -


 

Consolidated Outlook
                                         
Semi-Annual   Millions of yen        
    Six months ending     Change     Six months ended     Change (%)  
    June 30, 2008         June 30, 2007      
    Previous Outlook (A)     Revised Outlook (B)     (B - A)     Results (C)     (B - C) / C  
 
                                       
Net sales
  ¥ 2,230,000     ¥ 2,120,000     ¥ (110,000 )   ¥ 2,166,724       -   2.2 %
Operating profit
    390,000       324,000       (66,000 )     388,876       - 16.7 %
Income before income taxes and minority interests
    408,000       328,000       (80,000 )     406,141       - 19.2 %
Net income
    256,000       209,000       (47,000 )     255,183       - 18.1 %
         
                                         
Fiscal year   Millions of yen        
    Year ending     Change     Year ended     Change (%)  
    December 31, 2008         December 31, 2007      
    Previous Outlook (A)     Revised Outlook (B)     (B - A)     Results (C)     (B - C) / C  
 
                                       
Net sales
  ¥ 4,720,000     ¥ 4,570,000     ¥ (150,000 )   ¥ 4,481,346       + 2.0 %
Operating profit
    800,000       770,000       (30,000 )     756,673       + 1.8 %
Income before income taxes and minority interests
    820,000       785,000       (35,000 )     768,388       + 2.2 %
Net income
    520,000       500,000       (20,000 )     488,332       + 2.4 %
         

This document contains forward-looking statements with respect to future results, performance and achievements that are subject to risk and uncertainties and reflect management’s views and assumptions formed by available information. All statements other than statements of historical fact are statements that could be considered forward-looking statements. When used in this document, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project” or “should” and similar expressions, as they relate to Canon, are intended to identify forward-looking statements. Many factors could cause the actual results, performance or achievements of Canon to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products by other companies, lack of acceptance of new products or services by Canon’s targeted customers, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, both referenced and not referenced in this document. A detailed description of these and other risk factors is included in Canon’s annual report on Form 20-F, which is on file with the United States Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. Canon does not intend or assume any obligation to update these forward-looking statements.

- 5 -


 

CANON INC. AND SUBSIDIARIES
CONSOLIDATED
II. Financial Statements
1.  CONSOLIDATED STATEMENTS OF INCOME
                                 
                            Thousands of  
    Millions of yen             U.S. dollars  
    Three months     Three months             Three months  
    ended     ended     Change(%)     ended  
    March 31, 2008     March 31, 2007           March 31, 2008  
    (Unaudited)     (Unaudited)           (Unaudited)  
Net sales
  ¥ 1,007,538     ¥ 1,039,793       -     3.1     $ 10,075,380  
Cost of sales
    507,673       506,116               5,076,730  
 
                       
Gross profit
    499,865       533,677       -     6.3       4,998,650  
Operating expenses:
                               
Selling, general and administrative expenses
    249,480       253,344               2,494,800  
Research and development expenses
    79,555       72,930               795,550  
 
                         
 
    329,035       326,274               3,290,350  
 
                         
Operating profit
    170,830       207,403       -    17.6       1,708,300  
Other income (deductions):
                               
Interest and dividend income
    6,193       8,255               61,930  
Interest expense
    (412 )     (393 )             (4,120 )
Other, net
    (9,969 )     (7,421 )             (99,690 )
 
                         
 
    (4,188 )     441               (41,880 )
 
                         
Income before income taxes and minority interests
    166,642       207,844       -    19.8       1,666,420  
Income taxes
    56,034       72,547               560,340  
 
                         
Income before minority interests
    110,608       135,297               1,106,080  
Minority interests
    3,964       4,047               39,640  
 
                         
Net income
  ¥ 106,644     ¥ 131,250       -    18.7     $ 1,066,440  
 
                         
     
Note:
  Comprehensive income for the three months ended March 31, 2008 and 2007 was JPY409 million
 
  (U.S.$4,090 thousand) and JPY184,096 million, respectively.
2.  DETAILS OF SALES
                                 
                            Thousands of  
Sales by product   Millions of yen             U.S. dollars  
    Three months     Three months             Three months  
    ended     ended     Change(%)     ended  
    March 31, 2008     March 31, 2007           March 31, 2008  
    (Unaudited)     (Unaudited)             (Unaudited)  
Business machines:
                               
Office imaging products
  ¥ 287,524     ¥ 305,562       -5.9     $ 2,875,240  
Computer peripherals
    379,509       383,097       -0.9       3,795,090  
Business information products
    24,753       26,732       -7.4       247,530  
 
                       
 
    691,786       715,391       -3.3       6,917,860  
Cameras
    218,995       222,443       -1.6       2,189,950  
Optical and other products
    96,757       101,959       -5.1       967,570  
 
                       
Total
  ¥ 1,007,538     ¥ 1,039,793       -3.1     $ 10,075,380  
 
                       
                                 
                            Thousands of  
Sales by region   Millions of yen             U.S. dollars  
    Three months     Three months             Three months  
    ended     ended     Change(%)     ended  
    March 31, 2008     March 31, 2007           March 31, 2008  
    (Unaudited)     (Unaudited)             (Unaudited)  
Japan
  ¥ 227,781     ¥ 232,459       - 2.0     $ 2,277,810  
Overseas:
                               
Americas
    270,664       306,624       -11.7       2,706,640  
Europe
    337,116       337,791       -0.2       3,371,160  
Other areas
    171,977       162,919       +5.6       1,719,770  
 
                       
 
    779,757       807,334       -3.4       7,797,570  
 
                       
Total
  ¥ 1,007,538     ¥ 1,039,793       -3.1     $ 10,075,380  
 
                       
             
Notes:
    1.     The primary products included in each of the product segments are as follows:
 
          Business machines:
 
             Office imaging products : Office network digital multifunction devices (MFDs) / Color network digital MFDs /
 
         
Office copying machines / Personal-use copying machines / Full-color copying machines
 
             Computer peripherals : Laser beam printers / Inkjet multifunction peripherals / Single function inkjet printers / Image scanners
 
             Business information products : Computer information systems / Document scanners / Personal information products
 
          Cameras : Digital SLR cameras / Digital compact cameras / Interchangeable lenses / Digital video camcorders
 
          Optical and other products : Semiconductor production equipment / Mirror projection mask aligners for LCD panels /
 
         
Broadcasting equipment / Medical equipment / Large format printers / Components
 
           
 
    2.     The principal countries and regions included in each regional category are as follows:
 
          Americas: United States of America, Canada, Latin America / Europe: England, Germany, France, Netherlands /
 
          Other Areas: Asian regions, China, Oceania

- 6 -


 

CANON INC. AND SUBSIDIARIES
CONSOLIDATED
3.  SEGMENT INFORMATION BY PRODUCT
                                 
                            Thousands of  
    Millions of yen             U.S. dollars  
    Three months     Three months             Three months  
    ended     ended     Change(%)     ended  
    March 31, 2008     March 31, 2007           March 31, 2008  
    (Unaudited)     (Unaudited)             (Unaudited)  
Business Machines
                               
Net sales:
                               
Unaffiliated customers
  ¥ 691,786     ¥ 715,391       -3.3     $ 6,917,860  
Intersegment
                       
 
                       
Total
    691,786       715,391       -3.3       6,917,860  
 
                       
Operating cost and expenses
    528,607       538,880       -1.9       5,286,070  
 
                       
Operating profit
    163,179       176,511       -7.6       1,631,790  
 
                       
 
                               
Cameras
                               
Net sales:
                               
Unaffiliated customers
  ¥ 218,995     ¥ 222,443       -1.6     $ 2,189,950  
Intersegment
                       
 
                       
Total
    218,995       222,443       -1.6       2,189,950  
 
                       
Operating cost and expenses
    173,269       161,913       +7.0       1,732,690  
 
                       
Operating profit
    45,726       60,530       -24.5       457,260  
 
                       
 
                               
Optical and other products
                               
Net sales:
                               
Unaffiliated customers
  ¥ 96,757     ¥ 101,959       -5.1     $ 967,570  
Intersegment
    56,215       51,659       +8.8       562,150  
 
                       
Total
    152,972       153,618       -0.4       1,529,720  
 
                       
Operating cost and expenses
    147,642       135,626       +8.9       1,476,420  
 
                       
Operating profit
    5,330       17,992       -70.4       53,300  
 
                       
 
                               
Corporate and Eliminations
                               
Net sales:
                               
Unaffiliated customers
  ¥     ¥           $  
Intersegment
    (56,215 )     (51,659 )           (562,150 )
 
                       
Total
    (56,215 )     (51,659 )           (562,150 )
 
                       
Operating cost and expenses
    (12,810 )     (4,029 )           (128,100 )
 
                       
Operating profit
    (43,405 )     (47,630 )           (434,050 )
 
                       
 
                               
Consolidated
                               
Net sales:
                               
Unaffiliated customers
  ¥ 1,007,538     ¥ 1,039,793       -3.1     $ 10,075,380  
Intersegment
                       
 
                       
Total
    1,007,538       1,039,793       -3.1       10,075,380  
 
                       
Operating cost and expenses
    836,708       832,390       +0.5       8,367,080  
 
                       
Operating profit
    170,830       207,403       -17.6       1,708,300  
 
                       
     
Note:
  General corporate expenses of JPY43,295 million (U.S.$432,950 thousand) and JPY47,630 million in the three months ended March 31, 2008 and 2007, respectively, are included in “Corporate and Eliminations.”

- 7 -


 

CANON INC. AND SUBSIDIARIES
CONSOLIDATED
4.  CONSOLIDATED BALANCE SHEETS
                                 
                            Thousands of  
    Millions of yen     U.S. dollars  
    As of     As of             As of  
    March 31,     December 31,     Change     March 31,  
    2008     2007           2008  
    (Unaudited)                     (Unaudited)  
ASSETS
                               
Current assets:
                               
Cash and cash equivalents
  ¥ 707,669     ¥ 944,463     ¥ (236,794 )   $ 7,076,690  
Short-term investments
    20,865       20,499       366       208,650  
Trade receivables, net
    679,630       794,240       (114,610 )     6,796,300  
Inventories
    581,769       563,474       18,295       5,817,690  
Prepaid expenses and other current assets
    282,661       286,111       (3,450 )     2,826,610  
 
                       
 
                               
Total current assets
    2,272,594       2,608,787       (336,193 )     22,725,940  
 
                               
Noncurrent receivables
    14,648       15,239       (591 )     146,480  
Investments
    124,023       90,086       33,937       1,240,230  
Property, plant and equipment, net
    1,367,973       1,364,702       3,271       13,679,730  
Other assets
    432,020       433,811       (1,791 )     4,320,200  
 
                       
 
                               
Total assets
  ¥ 4,211,258     ¥ 4,512,625     ¥ (301,367 )   $ 42,112,580  
 
                               
 
                       
 
                               
LIABILITIES AND STOCKHOLDERS’ EQUITY
                               
Current liabilities:
                               
Short-term loans and current portion of long-term debt
  ¥ 16,517     ¥ 18,317     ¥ (1,800 )   $ 165,170  
Trade payables
    496,656       514,226       (17,570 )     4,966,560  
Accrued income taxes
    70,850       150,726       (79,876 )     708,500  
Accrued expenses
    303,209       357,525       (54,316 )     3,032,090  
Other current liabilities
    166,872       215,911       (49,039 )     1,668,720  
 
                       
Total current liabilities
    1,054,104       1,256,705       (202,601 )     10,541,040  
Long-term debt, excluding current installments
    10,368       8,680       1,688       103,680  
Accrued pension and severance cost
    41,901       44,710       (2,809 )     419,010  
Other noncurrent liabilities
    50,757       57,324       (6,567 )     507,570  
 
                       
 
                               
Total liabilities
    1,157,130       1,367,419       (210,289 )     11,571,300  
 
                               
 
                       
 
                               
Minority interests
    207,361       222,870       (15,509 )     2,073,610  
 
                               
Stockholders’ equity:
                               
Common stock
    174,698       174,698             1,746,980  
Additional paid-in capital
    402,675       402,991       (316 )     4,026,750  
Legal reserve
    51,941       46,017       5,924       519,410  
Retained earnings
    2,745,203       2,720,146       25,057       27,452,030  
Accumulated other comprehensive income (loss)
    (71,565 )     34,670       (106,235 )     (715,650 )
Treasury stock
    (456,185 )     (456,186 )     1       (4,561,850 )
 
                       
 
                               
Total stockholders’ equity
    2,846,767       2,922,336       (75,569 )     28,467,670  
 
                               
 
                       
 
                               
Total liabilities and stockholders’ equity
  ¥ 4,211,258     ¥ 4,512,625     ¥ (301,367 )   $ 42,112,580  
 
                               
 
                       
                                 
                          Thousands of  
    Millions of yen           U.S. dollars  
    As of     As of           As of  
    March 31,     December 31,           March 31,  
    2008     2007           2008  
Notes:   (Unaudited)                   (Unaudited)  
 
                               
1. Allowance for doubtful receivables
  ¥ 12,938     ¥ 14,547             $ 129,380  
2. Accumulated depreciation
    1,617,247       1,594,374               16,172,470  
3. Accumulated other comprehensive income (loss):
                               
Foreign currency translation adjustments
    (83,670 )     22,796               (836,700 )
Net unrealized gains and losses on securities
    4,090       6,287               40,900  
Net gains and losses on derivative instruments
    2,434       (849 )             24,340  
Pension liability adjustments
    5,581       6,436               55,810  
     
4.
  Time deposits and Marketable securities, which had been previously disclosed separately in the consolidated balance sheets, have been reclassified to Short-term investments to conform to the current year presentation.

- 8 -


 

CANON INC. AND SUBSIDIARIES
CONSOLIDATED
5.  CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
                                                                           
  Millions of yen    
                                        Accumulated                    
        Common       Additional       Legal reserve       Retained       other       Treasury       Total    
        Stock       paid-in capital               earnings       comprehensive       stock       stockholders'    
                                        income (loss)               equity    
                                               
 
Balance at December 31, 2007
    ¥ 174,698       ¥ 402,991       ¥ 46,017       ¥ 2,720,146       ¥ 34,670       ¥ (456,186 )     ¥ 2,922,336    
                                               
 
 
                                                                       
 
Capital transaction by consolidated subsidiaries
                (312 )                                               (312 )  
 
Cash dividends
                                    (75,663 )                           (75,663 )  
 
Transfers to legal reserve
                          5,924         (5,924 )                              
 
 
                                                                       
 
Comprehensive income:
                                                                       
 
Net income
                                    106,644                             106,644    
 
Other comprehensive income (loss), net of tax
                                                                       
 
Foreign currency translation adjustments
                                              (106,466 )                 (106,466 )  
 
Net unrealized gains and losses on securities
                                              (2,197 )                 (2,197 )  
 
Net gains and losses on derivative instruments
                                              3,283                   3,283    
 
Pension liablity adjustments
                                              (855 )                 (855 )  
 
 
                                                                     
 
Total comprehensive income
                                                                  409    
 
 
                                                                     
 
 
                                                                       
 
Repurchase of treasury stock, net
                (4 )                                     1         (3 )  
 
 
                                                                       
                                               
 
Balance at March 31, 2008 (Unaudited)
    ¥ 174,698       ¥ 402,675       ¥ 51,941       ¥ 2,745,203       ¥ (71,565 )     ¥ (456,185 )     ¥ 2,846,767    
                                               
 
Balance at December 31, 2006
    ¥ 174,603       ¥ 403,510       ¥ 43,600       ¥ 2,368,047       ¥ 2,718       ¥ (5,872 )     ¥ 2,986,606    
                                               
 
 
                                                                       
 
Cumulative effect of a change in accounting principle — adoption of EITF 06-2, net of tax
                                    (2,204 )                           (2,204 )  
 
 
                                                                       
 
Capital transaction by consolidated subsidiaries
                (4 )                                               (4 )  
 
Cash dividends
                                    (66,582 )                           (66,582 )  
 
Transfers to legal reserve
                          1,680         (1,680 )                              
 
 
                                                                       
 
Comprehensive income:
                                                                       
 
Net income
                                    131,250                             131,250    
 
Other comprehensive income (loss), net of tax
                                                                       
 
Foreign currency translation adjustments
                                              (127 )                 (127 )  
 
Net unrealized gains and losses on securities
                                              (2,209 )                 (2,209 )  
 
Net gains and losses on derivative instruments
                                              2,274                   2,274    
 
Pension liablity adjustments
                                              52,908                   52,908    
 
 
                                                                     
 
Total comprehensive income
                                                                  184,096    
 
 
                                                                     
 
 
                                                                       
 
Repurchase of treasury stock, net
                3                                       (200,104 )       (200,101 )  
 
 
                                                                       
                                               
 
Balance at March 31, 2007 (Unaudited)
    ¥ 174,603       ¥ 403,509       ¥ 45,280       ¥ 2,428,831       ¥ 55,564       ¥ (205,976 )     ¥ 2,901,811    
                                               
  Thousands of U.S. dollars  
                                               
 
Balance at December 31, 2007
    $ 1,746,980       $ 4,029,910       $ 460,170       $ 27,201,460       $ 346,700       $ (4,561,860 )     $ 29,223,360    
                                               
 
 
                                                                       
 
Capital transaction by consolidated subsidiaries
                (3,120 )                                               (3,120 )  
 
Cash dividends
                                    (756,630 )                           (756,630 )  
 
Transfers to legal reserve
                          59,240         (59,240 )                              
 
 
                                                                       
 
Comprehensive income:
                                                                       
 
Net income
                                    1,066,440                             1,066,440    
 
Other comprehensive income (loss), net of tax
                                                                       
 
Foreign currency translation adjustments
                                              (1,064,660 )                 (1,064,660 )  
 
Net unrealized gains and losses on securities
                                              (21,970 )                 (21,970 )  
 
Net gains and losses on derivative instruments
                                              32,830                   32,830    
 
Pension liablity adjustments
                                              (8,550 )                 (8,550 )  
 
 
                                                                     
 
Total comprehensive income
                                                                  4,090    
 
 
                                                                     
 
 
                                                                       
 
Repurchase of treasury stock, net
                (40 )                                     10         (30 )  
 
 
                                                                       
                                               
 
Balance at March 31, 2008 (Unaudited)
    $ 1,746,980       $ 4,026,750       $ 519,410       $ 27,452,030       $ (715,650 )     $ (4,561,850 )     $ 28,467,670    
                                               

- 9 -


 

CANON INC. AND SUBSIDIARIES
CONSOLIDATED
6.  CONSOLIDATED STATEMENTS OF CASH FLOWS
                         
                    Thousands of  
    Millions of yen     U.S. dollars  
    Three months     Three months     Three months  
    ended     ended     ended  
    March 31, 2008     March 31, 2007     March 31, 2008  
 
  (Unaudited)   (Unaudited)   (Unaudited)
Cash flows from operating activities:
                       
Net income
  ¥ 106,644     ¥ 131,250     $ 1,066,440  
Adjustments to reconcile net income to net cash provided by operating activities:
                       
Depreciation and amortization
    82,201       64,433       822,010  
Loss on disposal of property, plant and equipment
    3,685       1,338       36,850  
Deferred income taxes
    (7,591 )     (528 )     (75,910 )
Decrease in trade receivables
    71,298       82,451       712,980  
Increase in inventories
    (24,585 )     (29,776 )     (245,850 )
Increase (decrease) in trade payables
    4,732       (2,999 )     47,320  
Decrease in accrued income taxes
    (78,470 )     (54,284 )     (784,700 )
Decrease in accrued expenses
    (36,112 )     (18,579 )     (361,120 )
Decrease in accrued (prepaid) pension and severance cost
    (2,783 )     (4,209 )     (27,830 )
Other, net
    (11,530 )     (16,287 )     (115,300 )
 
                 
Net cash provided by operating activities
    107,489       152,810       1,074,890  
 
                       
Cash flows from investing activities:
                       
Purchases of fixed assets
    (136,165 )     (118,912 )     (1,361,650 )
Proceeds from sale of fixed assets
    710       1,546       7,100  
Purchases of available-for-sale securities
    (3,833 )     (1,744 )     (38,330 )
Proceeds from sale of available-for-sale securities
    4,011       1,069       40,110  
Increase in time deposits
    (204 )     (2,241 )     (2,040 )
Acquisitions of subsidiaries, net of cash acquired
    (209 )     (3,082 )     (2,090 )
Purchases of other investments
    (44,111 )     (1,474 )     (441,110 )
Other, net
    (9,682 )     645       (96,820 )
 
                 
Net cash used in investing activities
    (189,483 )     (124,193 )     (1,894,830 )
 
                       
Cash flows from financing activities:
                       
Proceeds from issuance of long-term debt
    3,400       742       34,000  
Repayments of long-term debt
    (1,175 )     (1,462 )     (11,750 )
Increase (decrease) in short-term loans
    (2,632 )     86       (26,320 )
Dividends paid
    (75,663 )     (66,582 )     (756,630 )
Purchases of treasury stock, net
    (3 )     (200,101 )     (30 )
Other, net
    (8,804 )     (2,277 )     (88,040 )
 
                 
Net cash used in financing activities
    (84,877 )     (269,594 )     (848,770 )
 
                       
Effect of exchange rate changes on cash and cash equivalents
    (69,923 )     323       (699,230 )
 
                 
Net decrease in cash and cash equivalents
    (236,794 )     (240,654 )     (2,367,940 )
 
                       
Cash and cash equivalents at beginning of period
    944,463       1,155,626       9,444,630  
 
                 
Cash and cash equivalents at end of period
  ¥ 707,669     ¥ 914,972     $ 7,076,690  
 
                 

- 10 -


 

CANON INC. AND SUBSIDIARIES
CONSOLIDATED
7.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
(1) GROUP POSITION
  1.   Number of Group Companies
                                   
                       
        March 31, 2008       December 31, 2007       Change    
                       
 
Subsidiaries
      240         239         1    
 
Affiliates
      17         15         2    
                       
 
Total
      257         254         3    
                       
  2.   Change in Group of Entities
         
Subsidiaries    
 
  Addition:   6 companies
 
  Removal:   5 companies
 
       
Affiliates (Carried at Equity Basis )
 
  Addition:   2 companies
  3.   Subsidiaries listed on domestic stock exchange
 
      Tokyo Stock Exchange (1st section): Canon Marketing Japan Inc., Canon Electronics Inc., Canon Finetech Inc.
Tokyo Stock Exchange (2nd section): Canon Software Inc.
Osaka Stock Exchange (2nd section): Canon Machinery Inc.
JASDAQ: Nisca Corporation, Tokki Corporation
Osaka Stock Exchange (Hercules): e-System Corporation
(2) SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements reflect the adjustments which management believes are necessary to conform them with U.S. generally accepted accounting principles, except for the segment information, as required by Statement of Financial Accounting Standards No.131, “Disclosures about Segments of an Enterprise and Related Information.”
8.  OTHER
We have engaged Ernst & Young ShinNihon to perform a review of the consolidated statements of income, the consolidated balance sheets, the consolidated statements of stockholders’ equity and the consolidated statements of cash flows as of and for the three months ended March 31, 2008. This review engagement was performed in accordance with certain provisions of Statement of Auditing Standards No.100, “Interim Financial Information” (“SAS 100”), established by the American Institute of Certified Public Accountants. Additionally the consolidated interim financial information does not include certain disclosures, such as notes to financial statements, that are required under U.S. generally accepted accounting principles and by the United States Securities and Exchange Commission.

- 11 -


 

Canon Inc.
April 24,2008
CONSOLIDATED FINANCIAL RESULTS FOR
THE FIRST QUARTER ENDED MARCH 31, 2008
SUPPLEMENTARY REPORT
TABLE OF CONTENTS
             
        PAGE  
  SALES BY REGION AND PRODUCT     S   1  
  SEGMENT INFORMATION BY PRODUCT     S   2  
  OTHER INCOME / DEDUCTIONS     S   2  
  SALES COMPOSITION BY PRODUCT     S   3  
  SALES GROWTH IN LOCAL CURRENCY (Year over year)     S   3  
  PROFITABILITY     S   4  
  IMPACT OF FOREIGN EXCHANGE RATES     S   4  
  STATEMENTS OF CASH FLOWS     S   4  
  R&D EXPENDITURE     S   5  
  CAPITAL EXPENDITURE & DEPRECIATION AND AMORTIZATION     S   5  
  INVENTORIES     S   5  
  DEBT RATIO     S   5  
  OVERSEAS PRODUCTION RATIO     S   5  
  NUMBER OF EMPLOYEES     S   5  

This document contains forward-looking statements with respect to future results, performance and achievements that are subject to risk and uncertainties and reflect management’s views and assumptions formed by available information. All statements other than statements of historical fact are statements that could be considered forward-looking statements. When used in this document, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project” or “should” and similar expressions, as they relate to Canon, are intended to identify forward-looking statements. Many factors could cause the actual results, performance or achievements of Canon to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products by other companies, lack of acceptance of new products or services by Canon’s targeted customers, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, both referenced and not referenced in this document. A detailed description of these and other risk factors is included in Canon’s annual report on Form 20-F, which is on file with the United States Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. Canon does not intend or assume any obligation to update these forward-looking statements.


 

     
1. SALES BY REGION AND PRODUCT   Canon Inc. (Millions of yen)
                                                                                                         
                                                                     
        2008       2007               Change year over year    
        1st quarter       1st half (P)       Year (P)       1st quarter       1st half       Year                 1st quarter       1st half       Year    
                                                                     
 
Japan
                                                                                                     
 
Business machines
      155,500                         146,863         302,719         636,534                   +5.9 %                  
 
 
                                                                 
 
Office imaging products
      98,403                         90,647         183,500         384,546                   +8.6 %                  
 
Computer peripherals
      41,410                         39,002         86,009         186,214                   +6.2 %                  
 
Business information products
      15,687                         17,214         33,210         65,774                   -8.9 %                  
 
 
                                                                 
 
Cameras
      33,348                         39,644         72,887         149,892                   -15.9 %                  
 
 
                                                                 
 
Optical and other products
      38,933                         45,952         82,696         161,161                   -15.3 %                  
 
 
                                                                 
 
Total
      227,781         468,300         989,400         232,459         458,302         947,587                   -2.0 %       +2.2 %       +4.4 %  
                                                                     
 
Overseas
                                                                                                     
 
Business machines
      536,286                         568,528         1,143,868         2,299,008                   -5.7 %                  
 
 
                                                                 
 
Office imaging products
      189,121                         214,915         448,928         906,242                   -12.0 %                  
 
Computer peripherals
      338,099                         344,095         674,678         1,351,297                   -1.7 %                  
 
Business information products
      9,066                         9,518         20,262         41,469                   -4.7 %                  
 
 
                                                                 
 
Cameras
      185,647                         182,799         446,687         1,002,771                   +1.6 %                  
 
 
                                                                 
 
Optical and other products
      57,824                         56,007         117,867         231,980                   +3.2 %                  
 
 
                                                                 
 
Total
      779,757         1,651,700         3,580,600         807,334         1,708,422         3,533,759                   -3.4 %       -3.3 %       +1.3 %  
                                                                     
 
Americas
                                                                                                     
 
Business machines
      193,781                         227,770         447,382         888,189                   -14.9 %                  
 
 
                                                                 
 
Office imaging products
      70,879                         91,115         186,908         373,093                   -22.2 %                  
 
Computer peripherals
      118,685                         132,255         250,765         495,676                   -10.3 %                  
 
Business information products
      4,217                         4,400         9,709         19,420                   -4.2 %                  
 
 
                                                                 
 
Cameras
      64,266                         64,143         165,340         390,768                   +0.2 %                  
 
 
                                                                 
 
Optical and other products
      12,617                         14,711         29,227         57,211                   -14.2 %                  
 
 
                                                                 
 
Total
      270,664         570,500         1,239,200         306,624         641,949         1,336,168                   -11.7 %       -11.1 %       -7.3 %  
                                                                     
 
Europe
                                                                                                     
 
Business machines
      257,765                         256,823         524,656         1,067,998                   +0.4 %                  
 
 
                                                                 
 
Office imaging products
      94,415                         98,957         208,054         423,925                   -4.6 %                  
 
Computer peripherals
      159,236                         153,593         308,183         626,236                   +3.7 %                  
 
Business information products
      4,114                         4,273         8,419         17,837                   -3.7 %                  
 
 
                                                                 
 
Cameras
      69,091                         70,992         176,795         388,651                   -2.7 %                  
 
 
                                                                 
 
Optical and other products
      10,260                         9,976         20,928         42,637                   +2.8 %                  
 
 
                                                                 
 
Total
      337,116         725,900         1,557,800         337,791         722,379         1,499,286                   -0.2 %       +0.5 %       +3.9 %  
                                                                     
 
Other areas
                                                                                                     
 
Business machines
      84,740                         83,935         171,830         342,821                   +1.0 %                  
 
 
                                                                 
 
Office imaging products
      23,827                         24,843         53,966         109,224                   -4.1 %                  
 
Computer peripherals
      60,178                         58,247         115,730         229,385                   +3.3 %                  
 
Business information products
      735                         845         2,134         4,212                   -13.0 %                  
 
 
                                                                 
 
Cameras
      52,290                         47,664         104,552         223,352                   +9.7 %                  
 
 
                                                                 
 
Optical and other products
      34,947                         31,320         67,712         132,132                   +11.6 %                  
 
 
                                                                 
 
Total
      171,977         355,300         783,600         162,919         344,094         698,305                   +5.6 %       +3.3 %       +12.2 %  
                                                                     
 
Total
                                                                                                     
 
Business machines
      691,786         1,397,800         2,933,500         715,391         1,446,587         2,935,542                   -3.3 %       -3.4 %       -0.1 %  
 
 
                                                                 
 
Office imaging products
      287,524         617,900         1,290,000         305,562         632,428         1,290,788                   -5.9 %       -2.3 %       -0.1 %  
 
Computer peripherals
      379,509         729,900         1,543,700         383,097         760,687         1,537,511                   -0.9 %       -4.0 %       +0.4 %  
 
Business information products
      24,753         50,000         99,800         26,732         53,472         107,243                   -7.4 %       -6.5 %       -6.9 %  
 
 
                                                                 
 
Cameras
      218,995         523,000         1,179,300         222,443         519,574         1,152,663                   -1.6 %       +0.7 %       +2.3 %  
 
 
                                                                 
 
Optical and other products
      96,757         199,200         457,200         101,959         200,563         393,141                   -5.1 %       -0.7 %       +16.3 %  
 
 
                                                                 
 
Total
      1,007,538         2,120,000         4,570,000         1,039,793         2,166,724         4,481,346                   -3.1 %       -2.2 %       +2.0 %  
                                                                     
(P)=Projection

- S1 -


 

     
2. SEGMENT INFORMATION BY PRODUCT   Canon Inc.
(Millions of yen)
                                                                                                     
                                                                 
        2008       2007             Change year over year    
        1st quarter       1st half (P)       Year (P)       1st quarter       1st half       Year             1st quarter       1st half       Year    
                                                                 
 
Business machines
                                                                                                 
 
Unaffiliated customers
      691,786         1,397,800         2,933,500         715,391         1,446,587         2,935,542               -3.3 %       -3.4 %       -0.1 %  
 
Intersegment
                                                                               
 
 
                                                             
 
Total sales
      691,786         1,397,800         2,933,500         715,391         1,446,587         2,935,542               -3.3 %       -3.4 %       -0.1 %  
 
 
                                                             
 
Operating profit
      163,179         309,400         659,200         176,511         335,471         650,261               -7.6 %       -7.8 %       +1.4 %  
 
% of sales
      23.6 %       22.1 %       22.5 %       24.7 %       23.2 %       22.2 %                                
                                                                 
 
Cameras
                                                                                                 
 
Unaffiliated customers
      218,995         523,000         1,179,300         222,443         519,574         1,152,663               -1.6 %       +0.7 %       +2.3 %  
 
Intersegment
                                                                               
 
 
                                                             
 
Total sales
      218,995         523,000         1,179,300         222,443         519,574         1,152,663               -1.6 %       +0.7 %       +2.3 %  
 
 
                                                             
 
Operating profit
      45,726         113,300         308,100         60,530         137,303         307,426               -24.5 %       -17.5 %       +0.2 %  
 
% of sales
      20.9 %       21.7 %       26.1 %       27.2 %       26.4 %       26.7 %                                
                                                                 
 
Optical and other products
                                                                                                 
 
Unaffiliated customers
      96,757         199,200         457,200         101,959         200,563         393,141               -5.1 %       -0.7 %       +16.3 %  
 
Intersegment
      56,215         114,500         271,100         51,659         107,917         238,659               +8.8 %       +6.1 %       +13.6 %  
 
 
                                                             
 
Total sales
      152,972         313,700         728,300         153,618         308,480         631,800               -0.4 %       +1.7 %       +15.3 %  
 
 
                                                             
 
Operating profit
      5,330         11,900         45,800         17,992         21,385         21,080               -70.4 %       -44.4 %       +117.3 %  
 
% of sales
      3.5 %       3.8 %       6.3 %       11.7 %       6.9 %       3.3 %                                
                                                                 
 
Corporate and Eliminations
                                                                                                 
 
Unaffiliated customers
                                                                               
 
Intersegment
      (56,215 )       (114,500 )       (271,100 )       (51,659 )       (107,917 )       (238,659 )                                
 
 
                                                             
 
Total sales
      (56,215 )       (114,500 )       (271,100 )       (51,659 )       (107,917 )       (238,659 )                                
 
 
                                                             
 
Operating profit
      (43,405 )       (110,600 )       (243,100 )       (47,630 )       (105,283 )       (222,094 )                                
                                                                 
 
Consolidated
                                                                                                 
 
Unaffiliated customers
      1,007,538         2,120,000         4,570,000         1,039,793         2,166,724         4,481,346               -3.1 %       -2.2 %       +2.0 %  
 
Intersegment
                                                                               
 
 
                                                             
 
Total sales
      1,007,538         2,120,000         4,570,000         1,039,793         2,166,724         4,481,346               -3.1 %       -2.2 %       +2.0 %  
 
 
                                                             
 
Operating profit
      170,830         324,000         770,000         207,403         388,876         756,673               -17.6 %       -16.7 %       +1.8 %  
 
% of sales
      17.0 %       15.3 %       16.8 %       19.9 %       17.9 %       16.9 %                                
                                                                 
(P)=Projection
     
3. OTHER INCOME / DEDUCTIONS   (Millions of yen)
                                                                                                     
                                                                 
        2008       2007             Change year over year    
        1st quarter       1st half (P)       Year (P)       1st quarter       1st half       Year             1st quarter       1st half       Year    
                                                                 
 
Interest and dividend, net
      5,781         9,200         16,500         7,862         16,572         31,348               (2,081 )       (7,372 )       (14,848 )  
 
Forex gain / loss
             (10,576 )                  (9,000 )             (15,400 )             (10,917 )             (10,520 )             (31,943 )                       +341          +1,520          +16,543    
 
Equity earnings / loss of affiliated companies
      164         (100 )       1,000         2,654         5,285         5,634               (2,490 )       (5,385 )       (4,634 )  
 
Other, net
      443         3,900         12,900         842         5,928         6,676               (399 )       (2,028 )       +6,224    
                                                                 
 
Total
      (4,188 )       4,000         15,000         441         17,265         11,715               (4,629 )       (13,265 )       +3,285    
                                                                 
(P)=Projection

- S2 -


 

     
4. SALES COMPOSITION BY PRODUCT   Canon Inc.
                                                               
                                             
        2008       2007    
        1st quarter       1st half (P)       Year (P)       1st quarter       1st half          Year    
                                               
 
Office imaging products
                                                           
 
Monochrome copying machines
      42 %       41 %       41 %       46 %       46 %     45 %  
 
Color copying machines
      36 %       37 %       37 %       35 %       35 %     35 %  
 
Others
      22 %       22 %       22 %       19 %       19 %     20 %  
                                               
 
Computer peripherals
                                                           
 
Laser beam printers
      75 %       74 %       73 %       77 %       75 %     73 %  
 
Inkjet printers
      24 %       25 %       26 %       22 %       24 %     26 %  
 
Others
      1 %       1 %       1 %       1 %       1 %     1 %  
                                               
 
Business information products
                                                           
 
Personal computers
      63 %       62 %       61 %       63 %       62 %     62 %  
 
Others
      37 %       38 %       39 %       37 %       38 %     38 %  
                                               
 
Cameras
                                                           
 
Digital cameras
      75 %       76 %       77 %       75 %       76 %     76 %  
 
Video cameras
      7 %       8 %       8 %       8 %       8 %     8 %  
 
Interchangeable lenses and others
      18 %       16 %       15 %       17 %       16 %     16 %  
                                               
 
Optical and other products
                                                           
 
Semiconductor production equipment
      46 %       47 %       49 %       51 %       50 %     46 %  
 
Others
      54 %       53 %       51 %       49 %       50 %     54 %  
                                   
(P)=Projection
  *   Figures related to analog personal copying machines, which were included in “Monochrome copying machines” of “Office imaging products,” are now included in “Others” of “Office imaging products.” Past figures have been reclassified to conform with the new presentation.  
 
  *   The segment previously named “Film cameras / Lenses” is now named “Interchangeable lenses and others.”  
5. SALES GROWTH IN LOCAL CURRENCY (Year over year)
                                   
                       
        2008    
        1st quarter       1st half (P)       Year (P)    
                       
 
Business machines
                               
 
Japan
                +5.9 %                     —                    —    
 
Overseas
      +2.1 %                  
                       
 
Total
      +2.9 %       +4.8 %       +8.2 %  
                       
 
Cameras
                               
                       
 
Japan
      -15.9 %                  
 
Overseas
      +9.2 %                  
                       
 
Total
      +4.7 %       +9.5 %       +11.1 %  
                       
 
Optical and other products
                               
 
Japan
      -15.3 %                  
 
Overseas
      +8.8 %                  
                       
 
Total
      -2.0 %       +2.7 %       +19.8 %  
                       
 
Total
                               
 
Japan
      -2.0 %       +2.2 %       +4.4 %  
 
Overseas
      +4.2 %       +6.7 %       +11.5 %  
 
Americas
      +0.5 %       +4.3 %       +7.6 %  
 
Europe
      +2.2 %       +5.1 %       +9.3 %  
 
Other areas
      +15.4 %       +14.7 %       +23.6 %  
                       
 
Total
      +2.8 %       +5.7 %       +10.0 %  
                       
(P)=Projection

- S3 -


 

     
6. PROFITABILITY   Canon Inc.
                                                       
 
        2008       2007    
         1st quarter    Year (P)         1st quarter       Year    
 
ROE
      14.8    %           16.4 %       17.8 %          16.5 %  
 
ROA
      9.8 %       10.8 %       11.9 %       10.8 %  
 
(P)=Projection
     
7. IMPACT OF FOREIGN EXCHANGE RATES
     (1) Exchange rates
  (Yen)
                                                       
                                   
        2008       2007    
            1st quarter         2nd-4th quarter (P)     Year (P)          1st quarter       Year    
                                   
 
Yen/US$
      104.78         100.00         101.05         119.33         117.50    
 
Yen/Euro
      157.59         157.00         157.13         156.45         161.41    
                                   
(P)=Projection
     
     (2) Impact of foreign exchange rates on sales (Year over year)   (Billions of yen)
                                                       
                 
        2008    
            1st quarter           Year (P)    
                 
 
US$ 
        (57.3 )            (291.1 )  
 
Euro
      +1.2         (31.4 )  
 
Other currencies
      (0.3 )       (2.3 )  
 
 
             
 
Total
      (56.4 )       (324.8 )  
                 
(P)=Projection
     
     (3) Impact of foreign exchange rates per yen   (Billions of yen)
                                                       
           
        2008    
        2nd-4th quarter (P)    
           
 
On sales
       
 
US$
    13.8    
 
Euro
      6.0    
 
 
       
 
On operating profit
       
 
US$
    7.9    
 
Euro
      4.4    
           
(P)=Projection
8. STATEMENTS OF CASH FLOWS   (Millions of yen)
                                                       
                             
        2008       2007    
            1st quarter            Year (P)       1st quarter       Year    
                             
 
Net cash provided by operating activities Net income
            106,644           500,000         131,250         488,332    
 
Depreciation and amortization
      82,201         370,000         64,433         341,694    
 
Other, net
      (81,356 )       (125,000 )       (42,873 )       9,243    
 
 
                         
 
Total
      107,489         745,000         152,810         839,269    
                             
 
Net cash used in investing activities
      (189,483 )       (490,000 )       (124,193 )       (432,485 )  
                             
 
Free cash flow
      (81,994 )       255,000         28,617         406,784    
                             
 
Net cash used in financing activities
      (84,877 )       (169,500 )       (269,594 )       (604,383 )  
                             
 
Effect of exchange rate changes on cash and cash equivalents
      (69,923 )       (70,000 )       323         (13,564 )  
                             
 
Net change in cash and cash equivalents
      (236,794 )       15,500         (240,654 )       (211,163 )  
                             
 
Cash and cash equivalents at end of period
      707,669         960,000         914,972         944,463    
                             
(P)=Projection

- S4 -


 

Canon Inc.
                                             
  9. R&D EXPENSES       (Millions of yen)    
                             
        2008       2007    
        1st quarter       Year (P)       1st quarter       Year    
                             
 
Business machines
      25,884                 24,136         122,570    
 
Cameras
      11,904                 11,260         44,304    
 
Optical and other products
      41,767                 37,534         201,387    
 
 
                         
 
Total
      79,555         387,000         72,930         368,261    
                             
 
% of sales
      7.9 %       8.5 %       7.0 %       8.2 %  
                             
(P)=Projection
10. CAPITAL EXPENDITURE & DEPRECIATION AND AMORTIZATION
                                             
        (Millions of yen)    
                             
        2008       2007    
        1st quarter       Year (P)       1st quarter       Year    
                             
 
Capital expenditure
      89,435         435,000         93,652         428,549    
 
 
                                     
 
Depreciation and amortization
      82,201         370,000         64,433         341,694    
                             
(P)=Projection
11. INVENTORIES
                                   
  (1) Inventories               (Millions of yen)    
                       
        2008       2007       Difference    
        Mar.31       Dec.31          
                       
 
Business machines
      277,874         277,444         +430    
 
Cameras
          121,474             107,406           +14,068    
 
Optical and other products
      182,421         178,624         +3,797    
 
 
                   
 
Total
      581,769         563,474         +18,295    
                       
                                   
  (2) Inventories/Sales*               (Days)    
                       
        2008       2007         Difference      
            Mar.31              Dec.31             
                       
 
Business machines
      34         34         0    
 
Cameras
      38         31         +7    
 
Optical and other products
      173         169         +4    
 
 
                   
 
Total
      47         44         +3    
                       
     *Index based on the previous six months sales.
12. DEBT RATIO
                                   
                       
        2008       2007         Difference      
            Mar.31              Dec.31             
                       
 
Total debt / Total assets
      0.6 %       0.6 %       0.0 %  
                       
13. OVERSEAS PRODUCTION RATIO
                         
 
 
                 
        2008       2007    
        1st quarter       Year    
 
 
                 
 
Overseas production ratio
                   41 %                40 %  
 
 
                 
14. NUMBER OF EMPLOYEES
                                   
                       
        2008       2007         Difference      
            Mar.31              Dec.31             
                       
 
Japan
      55,641         55,227         +414    
 
Overseas
      76,543         76,125         +418    
 
 
                   
 
Total
      132,184         131,352         +832    
                       

- S5 -