Form 6-K

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 ….  

August

  ……………………………………………………  ,  

 2015

 

 

   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….

  August 6, 2015            By ……/s/…… Shinichi Aoyama………
                                                 (Signature)*

 

 

Shinichi Aoyama

 

Deputy Senior General Manager

 

Group Management Center

 

Canon Inc.

*Print the name and title of the signing officer under his signature.

The following materials are included.

1. Quarterly Report filed with the Japanese government pursuant to the Financial Instruments and Exchange Law of Japan For the second quarter ended June 30, 2015


[English summary with full translation of consolidated financial information]

 

 

 

 

Quarterly Report filed with the Japanese government

pursuant to

the Financial Instruments and Exchange Law of Japan

 

For the second quarter ended

June 30, 2015

 

 

 

CANON INC.

Tokyo, Japan


CONTENTS

 

              Page  

I

  Corporate Information   
  (1)    Consolidated Financial Summary      2   
  (2)    Description of Business      2   

II

  The Business   
  (1)    Risk Factors      3   
  (2)    Significant Business Contracts Entered into in the Second Quarter of Fiscal 2015      3   
  (3)    Operating Results      3   

III

  Company Information   
  (1)    Shares      8   
  (2)    Directors and Executive Officers      10   

IV

  Financial Statements   
  (1)    Consolidated Financial Statements      11   
  (2)    Other Information      43   


Disclaimer Regarding Forward-Looking Statements

This quarterly report includes forward-looking statements (within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934) concerning Canon Inc. (the “Company”) and its subsidiaries (collectively “Canon”). To the extent that statements in this quarterly report do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on the current assumptions and beliefs of Canon in light of the information currently available to them, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause Canon’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Canon undertakes no obligation to publicly update any forward-looking statements after the date of this quarterly report. Investors are advised to consult any further disclosures by Canon in its subsequent filings with the U.S. Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 and its other filings.

The risks, uncertainties and other factors referred to above include, but are not limited to, foreign currency exchange rate fluctuations; the uncertainty of Canon’s ability to implement its plans to localize production and other measures to reduce the impact of foreign currency exchange rate fluctuations; uncertainty as to economic conditions in Canon’s major markets; uncertainty of continued demand for Canon’s high-value-added products; Canon’s ability to continue to develop products and to market products that incorporate new technology on a timely basis, are competitively priced, and achieve market acceptance; the possibility of losses resulting from foreign currency transactions designed to reduce financial risks from changes in foreign currency exchange rates; disasters, outages or similar events; and inventory risk due to disruptions in supply chains and shifts in market demand.

 

1


I.    Corporate Information

(1)    Consolidated Financial Summary

 

     Millions of yen (except per share amounts)  
    

 

Six months

 

ended

 

June 30, 2015  

    

 

Six months

 

ended

 

June 30, 2014  

    

 

Three months

 

ended

 

June 30, 2015  

    

 

Three months

 

ended

 

June 30, 2014  

    

 

Year ended

 

December 31,

 

2014

 

Net sales

     1,831,851         1,795,108         974,406         926,796         3,727,252   

Income before income taxes

     164,516         196,166         103,235         116,975         383,239   

Net income attributable to Canon Inc.

     102,125         128,458         68,195         80,848         254,797   

Comprehensive income

     127,004         94,986         142,900         62,148         373,417   

Canon Inc. shareholders’ equity

     -         -         3,005,227         2,827,052         2,978,184   

Total equity

     -         -         3,221,782         2,985,859         3,140,758   

Total assets

     -         -         4,548,076         4,093,780         4,460,618   

Net income attributable to Canon Inc. shareholders per share:

              

Basic (yen)

     93.52         114.47         62.45         72.61         229.03   

Diluted (yen)

     93.52         114.47         62.44         72.61         229.03   

Canon Inc. shareholders’ equity to total assets (%)

     -         -         66.1         69.1         66.8   

Cash flows from operating activities

     224,712         294,487         -         -         583,927   

Cash flows from investing activities

     (306,006)         (142,067)         -         -         (269,298)   

Cash flows from financing activities

     (123,565)         (176,387)         -         -         (300,886)   

Cash and cash equivalents at end of period

     -         -         626,965         744,684         844,580   

Notes:

  1.

Canon’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.

 

  2.

Consumption tax is excluded from the stated amount of net sales.

 

(2)

Description of Business

Canon prepares quarterly consolidated financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Financial information presented in sections “II. The Business” is also in conformity with U.S.GAAP.

Canon (consisting of the Company, 304 consolidated subsidiaries and 5 affiliates accounted for using the equity method, collectively, the “Group”) is engaged in the development, manufacture, sale and service primarily in the fields of office, imaging system, industry and others. No material change in Canon’s business has occurred during the six months ended June 30, 2015.

No additions or removals of significant group entities have occurred during the six months ended June 30, 2015.

 

2


II.    The Business

 

(1)

Risk Factors

No material changes are recognized pursuant to the risk factors of Canon’s business indicated in the Annual Securities Report (Yukashoken Houkokusho) of the previous fiscal year.

 

(2)

Significant Business Contracts Entered into in the Second Quarter of Fiscal 2015

No material contracts were entered into during the three months ended June 30, 2015.

 

(3)

Operating Results

Looking back at the global economy in the first half of 2015, the U.S. economy continued recovering smoothly as employment conditions and consumer spending steadily improved. In Europe, although the U.K. and Germany showed signs of economic recovery, the Russian economy remained stagnant. The pace of economic expansion in China gradually declined while Southeast Asian countries faced slowdowns owing to local currency depreciation. As for the Japanese economy, improvement was seen in the corporate sector and employment conditions continued to recover. As a result, the global economy overall continued to realize moderate growth.

As for the markets in which Canon operates amid these conditions, demand for office multifunction devices (MFDs) and laser printers maintained steady growth, mainly for color models, while demand for semiconductor lithography equipment also increased, fueled by continued customer investment. As for cameras, demand continued to decline both for interchangeable-lens digital cameras and digital compact cameras. Additionally, demand for inkjet printers also decreased from the previous year due to sluggish market conditions in Southeast Asian countries.

The average values of the yen during the second quarter and first half of the year were ¥121.47 and ¥120.39 against the U.S. dollar, respectively, year-on-year depreciations of approximately ¥19 and ¥18, and ¥134.47 and ¥134.19 against the euro, respectively, year-on-year appreciations of approximately ¥5 and ¥6.

[Second-quarter results]

During the second quarter, despite firm sales in Japan, interchangeable-lens digital cameras continued to face severe conditions in other regions while sales volume for digital compact cameras decreased in most regions compared with the same period of the previous year. By contrast, sales of MFDs were strong and unit sales of semiconductor lithography equipment exceeded those for the same period of the previous year. Consequently, boosted by the positive effect of favorable currency exchange rates, second quarter net sales increased 5.1% year on year to ¥974.4 billion. The gross profit ratio for the second quarter, at 51.7%, remained at a high level thanks to highly profitable new products and ongoing cost-cutting activities, while operating expenses increased 7.0% year on year to ¥399.1 billion owing to such factors as the increase in foreign-currency-denominated operating expenses after conversion into yen due to the depreciation of the yen, along with the increase in R&D expenses related to new business and new products. As a result, second-quarter operating profit decreased by 5.3% to ¥104.7 billion. Other income (deductions) decreased by ¥7.9 billion due to foreign currency exchange losses, leading to a year-on-year decline in income before income taxes of 11.7% to ¥103.2 billion, and a decrease in net income attributable to Canon Inc. of 15.7% to ¥68.2 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥62.45 for the second quarter, a year-on-year decrease of ¥10.16.

 

3


(3)

Operating Results (continued)

[First-half results]

During the first half, interchangeable-lens digital cameras continued to face severe conditions in response to the stagnant market while sales volume for digital compact cameras decreased compared with the corresponding period of the previous year. Conversely, sales of MFDs were strong and unit sales of semiconductor lithography equipment exceeded those for the same period of the previous year. Consequently, boosted by the positive effect of favorable currency exchange rates, first-half net sales increased 2.0% year on year to ¥1,831.9 billion. The gross profit ratio for the first half rose 0.4 points to 51.4% from the year-ago period thanks to highly profitable new products and ongoing cost-cutting activities, while operating expenses increased 6.9% year on year to ¥771.4 billion owing to such factors as the increase in foreign-currency-denominated operating expenses after conversion into yen due to the depreciation of the yen, along with the increase in R&D expenses related to new business and new products. Consequently, operating profit for the first half of the year decreased by 11.5% to ¥170.9 billion. Other income (deductions) decreased by ¥9.4 billion due to foreign currency exchange losses, leading to a year-on-year decline in income before income taxes of 16.1% to ¥164.5 billion, and a decrease in net income attributable to Canon Inc. of 20.5% to ¥102.1 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥93.52 for the first half, a year-on-year decrease of ¥20.95.

Looking at Canon’s first-half performance by business unit, within the Office Business Unit, as for office MFDs, in addition to healthy demand for the color A4 (letter and legal-sized) imageRUNNER ADVANCE C350/C250 lineup and color imagePRESS C800/C700 models for the light production market, sales of new small-office/home-office color A3 (12”x18”) imageRUNNER ADVANCE C3300-series models, which feature high image quality, user-friendliness and productivity, proved popular in markets around the world. Among high-speed continuous-feed printers and wide-format printers, the new Océ-produced VarioPrint i300, Canon’s first high-speed sheet-fed color inkjet press, gained favorable reviews. As for laser printers, unit sales increased from the same period of the previous year owing to such factors as the growth in demand for high-added-value models. As a result, coupled with the positive effect of favorable currency exchange rates, sales for the combined first six months of the year totaled ¥1,066.1 billion, a year-on-year increase of 3.3%, while operating profit totaled ¥151.1 billion, declining 5.9% due to the increase in R&D and other expenses.

 

4


Within the Imaging System Business Unit, although total sales volume of interchangeable-lens digital cameras declined due to market shrinkage, such new models as the EOS 5DS, EOS 5DS R and EOS M3 enjoyed steady growth. As for digital compact cameras, although sales volume declined amid the ongoing contraction of the market due to the effects of the growing popularity of smartphones, profitability improved thanks to the growing ratio of high-added-value models featuring high image quality and high-magnification zoom capabilities, along with a smooth transition from old products to new products. As for inkjet printers, although sales volume in developed countries, such as the U.S. and Western European nations, increased from the same period of the previous year thanks to sales promotions for new products featuring enhanced mobile-device compatibility and MAXIFY business-model inkjet printers, total sales volume declined slightly due to economic stagnation in Southeast Asian countries. As a result, despite the positive effect of favorable currency exchange rates, sales for the first six months totaled ¥595.2 billion, decreasing 4.8% year on year, while operating profit totaled ¥79.6 billion, a decline of 14.4%.

In the Industry and Others Business Unit, within the semiconductor lithography equipment segment, ongoing strong investment by manufacturers led to an increase in first-half unit sales of lithography systems for memory devices, image sensors and power semiconductor devices compared with the same period of the previous year. As for FPD lithography equipment, amid solid market growth, progress was made in orders and shipments. Looking at medical equipment, although sales volume for Canon’s mainstay digital radiography systems decreased from the same period of the previous year owing to fierce market competition, total sales for the segment increased year on year thanks to efforts to boost sales of high-value-added models. Consequently, along with the impact of the acquisition of Axis, which became a consolidated subsidiary in the second quarter, sales for the first half of the year increased 18.7% year on year to ¥219.7 billion, while operating profit recorded a loss of ¥10.9 billion owing to upfront investment into next-generation technologies.

 

5


(3)

Operating Results (continued)

First-half results by major geographic area are summarized as follows:

Japan

Thanks to steady sales of digital compact cameras, net sales in Japan for the first half increased 1.4% from the year-ago period to ¥1,276.2 billion. Operating profit for the first half, however, decreased 21.5% year on year to ¥147.6 billion owing to the increase in R&D and other expenses.

Americas

Net sales for the first half increased 13.8% from the year-ago period to ¥550.0 billion thanks to the positive effects of favorable currency exchange rates along with the consolidation of new businesses. Operating profit for the first half totaled ¥16.6 billion, an increase of 89.1% year on year, owing to efforts to curtail spending.

Europe

Despite the negative effect of the appreciation of the yen, sales of MFDs were strong. As a result, along with the consolidation of new businesses, sales for the first half increased by 0.6% from the same period of the previous year to ¥562.9 billion. Operating profit for the first half totaled ¥6.3 billion, an increase of 17.2% year on year thanks to cost savings.

Asia and Oceania

Laser printers enjoyed solid demand in Asia and Oceania. As a consequence, as well as the positive impact of the depreciation of the yen, net sales for the first half increased 11.9% from the year-ago period to ¥836.1 billion while operating profit for the first half increased 18.6% to ¥39.1 billion.

 

6


(3)

Operating Results (continued)

 

Cash Flows

During the first half of 2015, cash flow from operating activities totaled ¥224.7 billion, declining ¥69.8 billion compared with the same period of the previous year due to the decrease in profit along with an increase in inventory. Cash flow from investing activities increased ¥163.9 billion year on year to ¥306.0 billion, mainly due to the payment for the acquisition of Axis. Accordingly, free cash flow totaled negative ¥81.3 billion, a decrease of ¥233.7 billion compared with the corresponding year-ago period.

Cash flow from financing activities recorded an outlay of ¥123.6 billion, mainly arising from the dividend payout.

Owing to these factors, as well as the negative impact of foreign currency translation adjustments, cash and cash equivalents decreased by ¥217.6 billion to ¥627.0 billion from the end of the previous year.

Management Issues to be Addressed

No material changes or issues with respect to business operations and finances have occurred during the six months ended June 30, 2015.

Research and Development Expenditures

Canon’s research and development expenditures for the six months ended June 30, 2015 totaled ¥162.9 billion.

Property, Plant and Equipment

 

  (1)

Major Property, Plant and Equipment

There were no significant changes to the status of existing major property, plant and equipment during the first half of 2015.

 

  (2)

Prospect of Capital Investment in the First Half of Fiscal 2015

There were no significant new constructions of property, plant and equipment that were in progress as of December 31, 2014 and completed during the first half of 2015.

There were no significant changes in the plans relevant to the retirement of property, plant and equipment during the first half of 2015. Moreover, there were no significant additional plans for new construction or retirement of property, plant and equipment during the first half of 2015.

 

7


III.    Company Information

 

(1)

Shares

Total number of authorized shares is 3,000,000,000 shares. The common stock of Canon is listed on the Tokyo, Nagoya, Fukuoka, Sapporo and New York Stock Exchanges. Total issued shares are as follows:

 

     As of
     June 30, 2015     
 

Total number of issued shares

     1,333,763,464     

Stock Acquisition Rights

Not applicable.

Exercise status of bonds with share subscription rights containing an adjustable exercise price clause

Not applicable.

Rights Plan

Not applicable.

Change in Issued Shares, Common Stock and Additional Paid in Capital

 

    

    Change during this term    

  

    As of June 30, 2015    

Issued Shares (Number of shares)

   -      1,333,763,464  

Common Stock (millions of yen)

   -      174,762  

Additional Paid-in Capital (millions of yen)

   -      306,288  

Major Shareholders

 

     As of June 30, 2015  
       Number of shares owned             Number of shares owned /    
     (Number of shares)           Number of shares issued    

The Master Trust Bank of Japan, Ltd. (Trust Account)

     61,408,700              4.60%     

Japan Trustee Services Bank, Ltd. (Trust Account)

     43,878,900              3.29%     

The Dai-Ichi Life Insurance Company, Limited

     37,416,380              2.81%     

Barclays Capital

     30,000,000              2.25%     

Moxley & Co.

     27,040,327              2.03%     

Mizuho Bank, Ltd.

     22,558,173              1.69%     

Nomura Securities Co., Ltd.

     17,911,802              1.34%     

Sompo Japan Insurance Inc.

     17,439,987              1.31%     

State Street Bank West Client - Treaty

     17,367,234              1.30%     

Obayashi Corporation

     16,527,607              1.24%     
  

 

 

       

 

 

 

Total

     291,549,110              21.86%     
  

 

 

       

 

 

 

Notes:

 

1:

Apart from the above shares, The Dai-Ichi Life Insurance Company, Limited held 6,180,000 shares contributed to a trust fund for its retirement and severance plans.

 

2:

Moxley and Co. is a nominee of JPMorgan Chase Bank, which is the depositary of Canon’s ADRs (American Depositary Receipts).

 

3:

Apart from the above shares, Mizuho Bank, Ltd., held 9,057,000 shares contributed to a trust fund for its retirement and severance plans.

 

4:

Apart from the above shares, the Company owns 241,687,704 shares (18.12% of total issued shares) of treasury stock.

 

8


(1)

Shares (continued)

 

Voting Rights

 

          As of June 30, 2015

Classification

       

Number of shares

(shares)

       

Number of voting

rights (units)

Shares without voting rights

      -         -  

Shares with restricted voting rights (Treasury stock, etc.)

      -         -  

Shares with restricted voting rights (Others)

      -         -  

Shares with full voting rights (Treasury stock, etc.)

      (treasury stock) 241,687,700         -  

Shares with full voting rights (Others)

      1,090,515,600         10,905,156  

Fractional unit shares (Note)

      1,560,164         -  

Total number of issued shares

      1,333,763,464         -  

Total voting rights held by all shareholders

      -         10,905,156  

Note:

In “Fractional unit shares” under “Number of shares,” 4 shares of treasury stock are included.

Treasury Stock, etc.

 

     Number of shares owned            Number of shares owned /  
     (Number of shares)            Number of shares issued  

Canon Inc.

    

 

241,687,700

 

  

 

         

 

18.12

 

 

Total

     241,687,700            18.12

 

9


(2)

Directors and Executive Officers

There were no changes in members of directors between the filing date of the Annual Securities Report (Yukashoken Houkokusho) for the fiscal year ended December 31, 2014 and the end of this quarter.

Change in functions of director is below:

 

Shigeyuki Matsumoto

   (Senior Managing Director: Group Executive of Corporate R&D)

There were no changes in members of executive officers between the filing date of the Annual Securities Report (Yukashoken Houkokusho) for the fiscal year ended December 31, 2014 and the end of this quarter.

Change in functions of executive officer is below:

 

Shunsuke Inoue

   (Executive Officer: Group Executive of Device Technology Development HQ )

 

10


IV.    Financial Statements (Unaudited)

(1)    Consolidated Financial Statements

Index of Consolidated Financial Statements of Canon Inc. and Subsidiaries:

 

     Page  

Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014

     12   

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income for the six months ended June 30, 2015 and 2014

     14   

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income for the three months ended June 30, 2015 and 2014

     15   

Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014

     16   

Notes to Consolidated Financial Statements

     17   

 

11


CANON INC. AND SUBSIDIARIES

Consolidated Balance Sheets

 

 

     Millions of yen  
         June 30, 2015              December 31, 2014      

Assets

     

Current assets:

     

Cash and cash equivalents (Note 15)

     626,965           844,580     

Short-term investments (Note 2)

     18,141           71,863     

Trade receivables, net (Note 3)

     565,561           625,675     

Inventories (Note 4)

     591,483           528,167     

Prepaid expenses and other current assets (Notes 11 and 15)

     328,763           321,648     
  

 

 

    

 

 

 

Total current assets

     2,130,913           2,391,933     

Noncurrent receivables (Note 12)

     30,117           29,785     

Investments (Note 2)

     72,937           65,176     

Property, plant and equipment, net (Note 5)

     1,261,446           1,269,529     

Intangible assets, net

     239,297           177,288     

Goodwill

     489,558           211,336     

Other assets (Note 15)

     323,808           315,571     
  

 

 

    

 

 

 

Total assets

     4,548,076           4,460,618     
  

 

 

    

 

 

 

 

12


CANON INC. AND SUBSIDIARIES

Consolidated Balance Sheets (continued)

 

 

 

     Millions of yen  
         June 30, 2015              December 31, 2014      

Liabilities and equity

     

Current liabilities:

     

Short-term loans and current portion of long-term debt

     804           1,018     

Trade payables (Note 7)

     319,708           310,214     

Accrued income taxes

     49,812           57,212     

Accrued expenses (Note 12)

     323,191           345,237     

Other current liabilities (Note 11)

     216,472           207,698     
  

 

 

    

 

 

 

Total current liabilities

     909,987           921,379     

Long-term debt, excluding current installments

     1,071           1,148     

Accrued pension and severance cost

     283,919           280,928     

Other noncurrent liabilities

     131,317           116,405     
  

 

 

    

 

 

 

Total liabilities

     1,326,294           1,319,860     

Commitments and contingent liabilities (Note 12)

     

Equity:

     

Canon Inc. shareholders’ equity (Note 8):

     

Common stock

     174,762           174,762     

    (Number of authorized shares)

     (3,000,000,000)           (3,000,000,000)     

    (Number of issued shares)

     (1,333,763,464)           (1,333,763,464)     

Additional paid-in capital

     401,386           401,563     

Legal reserve

     65,574           64,599     

Retained earnings

     3,328,695           3,320,392     

Accumulated other comprehensive income (loss) (Note 9)

     45,209           28,286     

Treasury stock, at cost

     (1,010,399)           (1,011,418)     

    (Number of shares)

     (241,687,704)           (241,931,637)     
  

 

 

    

 

 

 

Total Canon Inc. shareholders’ equity

     3,005,227           2,978,184     

Noncontrolling interests (Note 8)

     216,555           162,574     
  

 

 

    

 

 

 

Total equity (Note 8)

     3,221,782           3,140,758     
  

 

 

    

 

 

 

Total liabilities and equity

     4,548,076           4,460,618     
  

 

 

    

 

 

 

 

13


CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

Consolidated Statements of Income

 

                 Millions of yen              
           Six months ended      
June 30, 2015
           Six months ended      
June 30, 2014
 

Net sales

     1,831,851           1,795,108     

Cost of sales

     889,494           880,116     
  

 

 

    

 

 

 

Gross profit

     942,357           914,992     

Operating expenses:

     

Selling, general and administrative expenses (Note 15)

     608,516           570,099     

Research and development expenses

     162,932           151,705     
  

 

 

    

 

 

 
     771,448           721,804     
  

 

 

    

 

 

 

Operating profit

     170,909           193,188     

Other income (deductions):

     

Interest and dividend income

     3,273           3,917     

Interest expense

     (361)           (234)     

Other, net (Notes 11, 14 and 15)

     (9,305)           (705)     
  

 

 

    

 

 

 
     (6,393)           2,978     
  

 

 

    

 

 

 

Income before income taxes

     164,516           196,166     

Income taxes

     58,784           63,180     
  

 

 

    

 

 

 

Consolidated net income

     105,732           132,986     

Less: Net income attributable to noncontrolling interests

     3,607           4,528     
  

 

 

    

 

 

 

Net income attributable to Canon Inc.

                         102,125                               128,458     
  

 

 

    

 

 

 
     Yen         Yen   
  

 

 

    

 

 

 

Net income attributable to Canon Inc. shareholders per share (Note 10):

     

Basic

     93.52           114.47     

Diluted

     93.52           114.47     

Cash dividends per share

     75.00           65.00     

Consolidated Statements of Comprehensive Income

     
     Millions of yen  
     Six months ended
June 30, 2015
     Six months ended
June 30, 2014
 

Consolidated net income

     105,732           132,986     

Other comprehensive income (loss), net of tax (Note 9):

     

Foreign currency translation adjustments

     16,118           (52,990)     

Net unrealized gains and losses on securities

     4,587           (1,388)     

Net gains and losses on derivative instruments

     1,225           3,017     

Pension liability adjustments

     (658)           13,361     
  

 

 

    

 

 

 
     21,272           (38,000)     
  

 

 

    

 

 

 

Comprehensive income (Note 8)

     127,004           94,986     

Less: Comprehensive income attributable to noncontrolling interests

     7,956           4,242     
  

 

 

    

 

 

 

Comprehensive income attributable to Canon Inc.

     119,048           90,744     
  

 

 

    

 

 

 

 

14


CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

 

Consolidated Statements of Income

     
                 Millions of yen              
         Three months ended    
June 30, 2015
         Three months ended    
June 30, 2014
 

Net sales

     974,406           926,796     

Cost of sales

     470,613           443,286     
  

 

 

    

 

 

 

Gross profit

     503,793           483,510     

Operating expenses:

     

Selling, general and administrative expenses (Note 15)

     315,388           296,074     

Research and development expenses

     83,693           76,887     
  

 

 

    

 

 

 
     399,081           372,961     
  

 

 

    

 

 

 

Operating profit

     104,712           110,549     

Other income (deductions):

     

Interest and dividend income

     1,686           2,313     

Interest expense

     (260)           (131)     

Other, net (Notes 11, 14 and 15)

     (2,903)           4,244     
  

 

 

    

 

 

 
     (1,477)           6,426     
  

 

 

    

 

 

 

Income before income taxes

     103,235           116,975     

Income taxes

     32,355           34,567     
  

 

 

    

 

 

 

Consolidated net income

     70,880           82,408     

Less: Net income attributable to noncontrolling interests

     2,685           1,560     
  

 

 

    

 

 

 

Net income attributable to Canon Inc.

                         68,195                               80,848     
  

 

 

    

 

 

 
     Yen         Yen   
  

 

 

    

 

 

 

Net income attributable to Canon Inc. shareholders per share (Note 10):

     

Basic

     62.45           72.61     

Diluted

     62.44           72.61     

Cash dividends per share

     75.00           65.00     

Consolidated Statements of Comprehensive Income

     
     Millions of yen  
     Three months ended
June 30, 2015
     Three months ended
June 30, 2014
 

Consolidated net income

     70,880           82,408     

Other comprehensive income (loss), net of tax (Note 9):

     

Foreign currency translation adjustments

     70,246           (20,254)     

Net unrealized gains and losses on securities

     4,115           (69)     

Net gains and losses on derivative instruments

     (1,988)           639     

Pension liability adjustments

     (353)           (576)     
  

 

 

    

 

 

 
     72,020           (20,260)     
  

 

 

    

 

 

 

Comprehensive income (Note 8)

     142,900           62,148     

Less: Comprehensive income attributable to noncontrolling interests

     7,216           1,509     
  

 

 

    

 

 

 

Comprehensive income attributable to Canon Inc.

     135,684           60,639     
  

 

 

    

 

 

 

 

15


CANON INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

 

                 Millions of yen              
     Six months
ended
    June 30, 2015    
     Six months
ended
    June 30, 2014    
 

Cash flows from operating activities:

     

Consolidated net income

     105,732           132,986     

Adjustments to reconcile consolidated net income to net cash
provided by operating activities:

     

Depreciation and amortization

     131,977           123,515     

Loss on disposal of fixed assets

     2,396           5,442     

Deferred income taxes

     (1,740)           (316)     

Decrease in trade receivables

     60,974           60,413     

(Increase) decrease in inventories

     (56,480)           2,603     

Increase in trade payables

     16,687           11,141     

Increase (decrease) in accrued income taxes

     (7,177)           8,851     

Decrease in accrued expenses

     (28,223)           (23,657)     

Increase (decrease) in accrued (prepaid) pension and

severance cost

     3,690           (6,827)     

Other, net

     (3,124)           (19,664)     
  

 

 

    

 

 

 

Net cash provided by operating activities

     224,712           294,487     
  

 

 

    

 

 

 

Cash flows from investing activities:

     

Purchases of fixed assets (Note 5)

     (117,501)           (112,613)     

Proceeds from sale of fixed assets (Note 5)

     2,103           2,487     

Purchases of available-for-sale securities

     (98)           (226)     

Proceeds from sale and maturity of available-for-sale securities

     183           51     

(Increase) decrease in time deposits, net

     51,936           (31,044)     

Acquisitions of subsidiaries, net of cash acquired (Note 6)

     (241,386)           (11,301)     

Purchases of other investments

     (965)           -     

Other, net

     (278)           10,579     
  

 

 

    

 

 

 

Net cash used in investing activities

     (306,006)           (142,067)     
  

 

 

    

 

 

 

Cash flows from financing activities:

     

Proceeds from issuance of long-term debt

     435           700     

Repayments of long-term debt

     (712)           (1,126)     

Decrease in short-term loans, net

     -           (48)     

Dividends paid

     (92,806)           (73,905)     

Repurchases of treasury stock, net

     803           (100,001)     

Other, net

     (31,285)           (2,007)     
  

 

 

    

 

 

 

Net cash used in financing activities

     (123,565)           (176,387)     
  

 

 

    

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (12,756)           (20,258)     
  

 

 

    

 

 

 

Net change in cash and cash equivalents

     (217,615)           (44,225)     

Cash and cash equivalents at beginning of period

     844,580           788,909     
  

 

 

    

 

 

 

Cash and cash equivalents at end of period

     626,965           744,684     
  

 

 

    

 

 

 

Supplemental disclosure for cash flow information:

     

Cash paid during the period for:

     

Interest

     377           223     

Income taxes

     59,554           57,404     

 

16


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(1)     Basis of Presentation and Significant Accounting Policies

 

  (a)

Basis of Presentation

The Company issued convertible debentures in the United States in May 1969 and established a program in which its American Depositary Receipts (ADRs) were traded in the U.S. over-the-counter market. Since then, under the U.S. Securities Act of 1933 and the U.S. Securities Exchange Act of 1934, the Company has prepared its annual consolidated financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and filed them with the U.S. Securities and Exchange Commission on Form 20-F. The Company’s ADRs were listed on the NYSE in September 2000 after being quoted on NASDAQ from February 1972 to September 2000.

Canon’s quarterly consolidated financial statements are prepared in accordance with the recognition and measurement criteria of accounting principles generally accepted in the United States. Certain disclosures have been omitted.

The number of consolidated subsidiaries and affiliated companies that were accounted for by the equity method basis as of June 30, 2015 and December 31, 2014 are summarized as follows:

 

             June 30, 2015                      December 31, 2014          

Consolidated subsidiaries

     304         261   

Affiliated companies

     5         7   
  

 

 

    

 

 

 

Total

     309         268   

 

  (b)

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its majority owned subsidiaries and those variable interest entities where the Company or its consolidated subsidiaries are the primary beneficiaries. All significant intercompany balances and transactions have been eliminated.

 

  (c)

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard related to revenue from contracts with customers. This standard requires an entity to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard was originally planned to be effective for annual reporting periods beginning after December 15, 2016, however, in April 2015, the FASB proposed a one-year delay in the effective date and the proposition was officially determined in July 2015. Early adoption as of the original effective date is permitted. This standard may be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this standard recognized at the date of initial application. Canon has not selected a transition method and is currently evaluating the adoption date and the effect that the adoption of this standard will have on its consolidated results of operations and financial condition.

 

17


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(2)    Investments

The cost, gross unrealized holding gains, gross unrealized holding losses and fair value for available-for-sale securities included in investments by major security type at June 30, 2015 and December 31, 2014 were as follows:

 

     Millions of yen  
     June 30, 2015  
             Cost              Gross
unrealized
holding
gains
    

Gross

unrealized

holding

losses

     Fair value  

Noncurrent:

           

Government bonds

     310           -           5           305     

Corporate bonds

     6           158           -           164     

Fund trusts

     62           1           -           63     

Equity securities

     20,843           26,560           125           47,278     
  

 

 

    

 

 

    

 

 

    

 

 

 
             21,221                   26,719                       130                   47,810     
  

 

 

    

 

 

    

 

 

    

 

 

 
        
     Millions of yen  
     December 31, 2014  
     Cost      Gross
unrealized
holding
gains
    

Gross

unrealized

holding

losses

     Fair value  

Noncurrent:

           

Government bonds

     331           -           6           325     

Corporate bonds

     512           153           29           636     

Fund trusts

     84           -           -           84     

Equity securities

     20,905           19,765           17           40,653     
  

 

 

    

 

 

    

 

 

    

 

 

 
     21,832           19,918           52           41,698     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

18


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(2)    Investments (continued)

Maturities of available-for-sale debt securities included in investments in the accompanying consolidated balance sheets were as follows at June 30, 2015:

 

     Millions of yen  
             Cost                  Fair value      

Due after five years

     316         469   
  

 

 

    

 

 

 
     316         469   
  

 

 

    

 

 

 

Realized gains and losses are determined using the average cost method and are reflected in earnings. The gross realized gains were ¥133 million and ¥2,328 million for the six months ended June 30, 2015 and 2014, respectively. The gross realized losses, including write-downs for impairments that were other than temporary, were nil and ¥14 million for the six months ended June 30, 2015 and 2014, respectively. The gross realized gains were ¥133 million and ¥2,328 million for the three months ended June 30, 2015 and 2014, respectively. The gross realized losses, including write-downs for impairments that were other than temporary, were nil and ¥14 million for the three months ended June 30, 2015 and 2014, respectively.

At June 30, 2015, substantially all of the available-for-sale securities with unrealized losses had been in a continuous unrealized loss position for less than twelve months.

Time deposits with original maturities of more than three months are ¥18,141 million and ¥71,863 million at June 30, 2015 and December 31, 2014, respectively, and are included in short-term investments in the accompanying consolidated balance sheets.

Aggregate cost of non-marketable equity securities accounted for under the cost method totaled ¥2,468 million and ¥1,164 million at June 30, 2015 and December 31, 2014, respectively. These investments were not evaluated for impairment at June 30, 2015 and December 31, 2014, respectively, because (a) Canon did not estimate the fair value of those investments as it was not practicable to estimate the fair value of the investments and (b) Canon did not identify any events or changes in circumstances that might have had significant adverse effects on the fair value of those investments.

 

19


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(3)

Trade Receivables

Trade receivables are summarized as follows:

 

                                                                               
     Millions of yen  
         June 30, 2015              December 31, 2014      

Notes

     18,071           18,476     

Accounts

     559,364           619,321     

Less allowance for doubtful receivables

     (11,874)           (12,122)     
  

 

 

    

 

 

 
     565,561           625,675     
  

 

 

    

 

 

 

 

(4)

Inventories

Inventories are summarized as follows:

 

                                                                               
     Millions of yen  
         June 30, 2015              December 31, 2014      

Finished goods

     407,591           363,685     

Work in process

     167,340           144,394     

Raw materials

     16,552           20,088     
  

 

 

    

 

 

 
     591,483           528,167     
  

 

 

    

 

 

 

 

(5)

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and are summarized as follows:

 

                                                                               
     Millions of yen  
         June 30, 2015              December 31, 2014      

Land

     285,270           286,336     

Buildings

     1,643,340           1,609,667     

Machinery and equipment

     1,841,514           1,822,026     

Construction in progress

     55,582           70,759     
  

 

 

    

 

 

 
     3,825,706           3,788,788     

Less accumulated depreciation

     (2,564,260)           (2,519,259)     
  

 

 

    

 

 

 
     1,261,446           1,269,529     
  

 

 

    

 

 

 

Fixed assets presented in the consolidated statements of cash flows includes property, plant and equipment and intangible assets.

 

20


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(6)

Acquisition

On April 15, 2015, the Company acquired 76.1% of the issued shares of Axis AB (“Axis”), a Sweden-based company listed on Nasdaq Stockholm, a global leader in the network video solution industry, primarily through a public cash tender offer for consideration of ¥ 244,725 million. In addition, the Company acquired 8.7% of the issued shares of Axis from noncontrolling shareholders primarily through an additional public cash tender offer. As a result, the Company’s aggregate interest represents 84.8% of the issued shares of Axis. The fair value of the 23.9% noncontrolling interest in Axis of ¥ 77,086 million was measured based on Axis’s common stock price on the acquisition date.

The acquisition was accounted for using the acquisition method of accounting. Acquisition-related costs were expensed as incurred and were not material.

The Company views its network surveillance camera business as a promising new business area for Canon. Canon aims to provide advanced and high-performance network solutions to its customers and improve its product competitiveness through the acquisition.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at acquisition date. Although Canon has preliminarily allocated the amount paid for acquisition to the acquired assets and assumed liabilities, such allocation is subject to change within the measurement period.

 

         Millions of yen      

Current assets

     31,365     
  

 

 

 

Intangible assets

     61,080     

Goodwill

     259,795     

Other noncurrent assets

     2,053     
  

 

 

 

Non-current assets

     322,928     
  

 

 

 

Total acquired assets

     354,293     
  

 

 

 

Total assumed liabilities

     32,482     
  

 

 

 

Net assets acquired

     321,811     

Goodwill recorded is attributable primarily to expected synergies from combining operations of Axis and Canon.

The amounts of net sales of Axis since the acquisition date included in the Canon’s consolidated statements of income for the six months ended June 30, 2015 were ¥ 20,245 million. The amounts of net income of Axis included in the Canon’s consolidated statements of income were not material.

Pro forma results of operations were not disclosed because the effect on the Canon’s consolidated statement of income was not material.

 

(7)

Trade Payables

Trade payables are summarized as follows:

 

     Millions of yen  
         June 30, 2015              December 31, 2014      

Notes

     13,904           14,112     

Accounts

     305,804           296,102     
  

 

 

    

 

 

 
     319,708           310,214     
  

 

 

    

 

 

 

 

21


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(8)

Equity

The change in the carrying amount of total equity, equity attributable to Canon Inc. shareholders and equity attributable to noncontrolling interests in the consolidated balance sheets for the six months ended June 30, 2015 and 2014 are as follows:

 

      Millions of yen  
      Canon Inc.
shareholders’
equity
           Noncontrolling
interests
           Total equity  

Balance at December 31, 2014

     2,978,184              162,574              3,140,758   

Dividends to Canon Inc. shareholders

     (92,806)            -              (92,806)   

Dividends to noncontrolling interests

     -              (2,231)            (2,231)   

Acquisition of subsidiaries

     -              77,086            77,086   

Equity transactions with noncontrolling interests and other

     (2)            (28,830)            (28,832)   

Comprehensive income:

              

Net income

     102,125            3,607            105,732   

Other comprehensive income (loss), net of tax

              

Foreign currency translation adjustments

     12,230            3,888            16,118   

Net unrealized gains and losses on securities

     4,117            470            4,587   

Net gains and losses on derivative instruments

     1,223            2            1,225   

Pension liability adjustments

     (647)            (11)            (658)   

Total comprehensive income

     119,048            7,956            127,004   

Repurchase of treasury stock, net

     803              -                803   

Balance at June 30, 2015

     3,005,227              216,555              3,221,782   
                                      

Balance at December 31, 2013

     2,910,262              156,515              3,066,777   

Dividends to Canon Inc. shareholders

     (73,905)            -              (73,905)   

Dividends to noncontrolling interests

     -              (1,572)            (1,572)   

Equity transactions with noncontrolling interests and other

     (48)            (378)            (426)   

Comprehensive income:

              

Net income

     128,458            4,528            132,986   

Other comprehensive income (loss), net of tax

              

Foreign currency translation adjustments

     (52,687)            (303)            (52,990)   

Net unrealized gains and losses on securities

     (1,402)            14            (1,388)   

Net gains and losses on derivative instruments

     3,017            -              3,017   

Pension liability adjustments

     13,358            3            13,361   

Total comprehensive income

     90,744            4,242            94,986   

Repurchase of treasury stock, net

     (100,001)              -                (100,001)   

Balance at June 30, 2014

                 2,827,052                                  158,807                              2,985,859   

 

22


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(9)

Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) for the six months ended June 30, 2015 and 2014 are as follows:

 

     Millions of yen  
     Foreign
currency
translation
adjustments
     Unrealized
gains and
losses on
securities
     Gains and
losses on
derivative
instruments
     Pension
liability
adjustments
     Total  

Balance at December 31, 2014

     144,557           12,546           (2,603)           (126,214)           28,286     

Equity transactions with noncontrolling interests and other

     -           -           -           -           -     

Other comprehensive income (loss) before reclassifications

     12,230           4,203           (345)           (688)           15,400     

Amounts reclassified from accumulated other comprehensive income (loss)

     -           (86)           1,568           41           1,523     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net change during the period

     12,230           4,117           1,223           (647)           16,923     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at June 30, 2015

     156,787           16,663           (1,380)           (126,861)           45,209     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Millions of yen  
     Foreign
currency
translation
adjustments
     Unrealized
gains and
losses on
securities
     Gains and
losses on
derivative
instruments
     Pension
liability
adjustments
     Total  

Balance at December 31, 2013

     1,734           10,242           (2,408)           (90,214)           (80,646)     

Equity transactions with noncontrolling interests and other

     2           1           -           (11)           (8)     

Other comprehensive income (loss) before reclassifications

     (52,687)           105           1,587           1,273           (49,722)     

Amounts reclassified from accumulated other comprehensive income (loss)

     -           (1,507)           1,430           12,085           12,008     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net change during the period

     (52,685)           (1,401)           3,017           13,347           (37,722)     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at June 30, 2014

     (50,951)           8,841           609           (76,867)           (118,368)     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

23


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(9)

Other Comprehensive Income (Loss) (continued)

 

Reclassifications out of accumulated other comprehensive income (loss) for the six months ended June 30, 2015 and 2014 are as follows:

 

     Millions of yen
     Amount reclassified from accumulated other comprehensive income (loss) *1
     Six months
ended
June 30, 2015
     Six months
ended
June 30, 2014
    

Affected line items in consolidated
statements of income

Unrealized gains and losses on securities

     (133)           (2,314)         Other, net
     47           810         Income taxes
  

 

 

    

 

 

    
     (86)           (1,504)         Consolidated net income
     -           (3)        

Net income attributable to
noncontrolling interests

  

 

 

    

 

 

    
     (86)           (1,507)         Net income attributable to Canon Inc.
  

 

 

    

 

 

    

Gains and losses on derivative instruments

     2,144           2,385         Other, net
     (574)           (955)         Income taxes
  

 

 

    

 

 

    
     1,570           1,430         Consolidated net income
     (2)           -        

Net income attributable to
noncontrolling interests

  

 

 

    

 

 

    
     1,568           1,430         Net income attributable to Canon Inc.
  

 

 

    

 

 

    

Pension liability adjustments

     (132)           12,371         *2
     161           (282)         Income taxes
  

 

 

    

 

 

    
     29           12,089         Consolidated net income
     12           (4)        

Net income attributable to
noncontrolling interests

  

 

 

    

 

 

    
     41           12,085         Net income attributable to Canon Inc.
  

 

 

    

 

 

    

Total amount reclassified, net of tax and noncontrolling interests

     1,523           12,008        
  

 

 

    

 

 

    

 

  *1

Amounts in parentheses indicate gains in consolidated statements of income.

 

  *2

This accumulated other comprehensive income (loss) component is included in the computation of net periodic pension cost.

 

24


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(9)

Other Comprehensive Income (Loss) (continued)

 

Reclassifications out of accumulated other comprehensive income (loss) for the three months ended June 30, 2015 and 2014 are as follows:

 

     Millions of yen
     Amount reclassified from accumulated other comprehensive income (loss) *1
     Three months
ended
June 30, 2015
     Three months
ended
June 30, 2014
    

Affected line items in consolidated
statements of income

Unrealized gains and losses on securities

     (133)           (2,314)         Other, net
     47           810         Income taxes
  

 

 

    

 

 

    
     (86)           (1,504)         Consolidated net income
     -           (3)        

Net income attributable to

noncontrolling interests

  

 

 

    

 

 

    
     (86)           (1,507)         Net income attributable to Canon Inc.
  

 

 

    

 

 

    

Gains and losses on derivative instruments

     (840)           (57)         Other, net
     413           (5)         Income taxes
  

 

 

    

 

 

    
     (427)           (62)         Consolidated net income
     (2)           -        

Net income attributable to

noncontrolling interests

  

 

 

    

 

 

    
     (429)           (62)         Net income attributable to Canon Inc.
  

 

 

    

 

 

    

Pension liability adjustments

     (79)           (640)         *2
     84           281         Income taxes
  

 

 

    

 

 

    
     5           (359)         Consolidated net income
     6           (2)        

Net income attributable to

noncontrolling interests

  

 

 

    

 

 

    
     11           (361)         Net income attributable to Canon Inc.
  

 

 

    

 

 

    

Total amount reclassified, net of tax and noncontrolling interests

     (504)           (1,930)        
  

 

 

    

 

 

    

 

  *1

Amounts in parentheses indicate gains in consolidated statements of income.

 

  *2

This accumulated other comprehensive income (loss) component is included in the computation of net periodic pension cost.

 

25


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(10)    Net Income Attributable to Canon Inc. Shareholders per Share

A reconciliation of the numerators and denominators of basic and diluted net income attributable to Canon Inc. shareholders per share computations for the six months ended June 30, 2015 and 2014 is as follows:

 

     Millions of yen  
     Six months ended
June 30, 2015
     Six months ended
June 30, 2014
 

Net income attributable to Canon Inc.

     102,125           128,458     
     Number of shares  
     Six months ended
June 30, 2015
     Six months ended
June 30, 2014
 

Average common shares outstanding

     1,091,969,763           1,122,190,316     

Effect of dilutive securities:

     

Stock options

     69,862           -     
  

 

 

    

 

 

 

Diluted common shares outstanding

               1,092,039,625                     1,122,190,316     
  

 

 

    

 

 

 
     Yen  
     Six months ended
June 30, 2015
     Six months ended
June 30, 2014
 

Net income attributable to Canon Inc. shareholders per share:

     

Basic

     93.52           114.47     

Diluted

     93.52           114.47     

A reconciliation of the numerators and denominators of basic and diluted net income attributable to Canon Inc. shareholders per share computations for the three months ended June 30, 2015 and 2014 is as follows:

 

     Millions of yen  
     Three months ended
June 30, 2015
     Three months ended
June 30, 2014
 

Net income attributable to Canon Inc.

     68,195           80,848     
     Number of shares  
     Three months ended
June 30, 2015
     Three months ended
June 30, 2014
 

Average common shares outstanding

     1,092,042,189           1,113,479,464     

Effect of dilutive securities:

     

Stock options

     78,861           -     
  

 

 

    

 

 

 

Diluted common shares outstanding

               1,092,121,050                     1,113,479,464     
  

 

 

    

 

 

 
     Yen  
     Three months ended
June 30, 2015
     Three months ended
June 30, 2014
 

Net income attributable to Canon Inc. shareholders per share:

     

Basic

     62.45           72.61     

Diluted

     62.44           72.61     

The computation of diluted net income attributable to Canon Inc. shareholders per share for the six and three months ended June 30, 2015 and 2014 excludes certain outstanding stock options because the effect would be anti-dilutive.

 

26


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(11)    Derivatives and Hedging Activities

Risk management policy

Canon operates internationally, exposing it to the risk of changes in foreign currency exchange rates. Derivative financial instruments are comprised principally of foreign exchange contracts utilized by the Company and certain of its subsidiaries to reduce the risk. Canon assesses foreign currency exchange rate risk by continually monitoring changes in the exposures and by evaluating hedging opportunities. Canon does not hold or issue derivative financial instruments for trading purposes. Canon is also exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments, but it is not expected that any counterparties will fail to meet their obligations. Most of the counterparties are internationally recognized financial institutions and selected by Canon taking into account their financial condition, and contracts are diversified across a number of major financial institutions.

Foreign currency exchange rate risk management

Canon’s international operations expose Canon to the risk of changes in foreign currency exchange rates. Canon uses foreign exchange contracts to manage certain foreign currency exchange exposures principally from the exchange of U.S. dollars and euros into Japanese yen. These contracts are primarily used to hedge the foreign currency exposure of forecasted intercompany sales and intercompany trade receivables that are denominated in foreign currencies. In accordance with Canon’s policy, a specific portion of foreign currency exposure resulting from forecasted intercompany sales are hedged using foreign exchange contracts which principally mature within three months.

Cash flow hedge

Changes in the fair value of derivative financial instruments designated as cash flow hedges, including foreign exchange contracts associated with forecasted intercompany sales, are reported in accumulated other comprehensive income (loss). These amounts are subsequently reclassified into earnings through other income (deductions) in the same period as the hedged items affect earnings. Substantially all amounts recorded in accumulated other comprehensive income (loss) as of June 30, 2015 are expected to be recognized in earnings over the next twelve months. Canon excludes the time value component from the assessment of hedge effectiveness. Changes in the fair value of a foreign exchange contract for the period between the date that the forecasted intercompany sales occur and its maturity date are recognized in earnings and not considered hedge ineffectiveness.

Derivatives not designated as hedges

Canon has entered into certain foreign exchange contracts to primarily offset the earnings impact related to fluctuations in foreign currency exchange rates associated with certain assets denominated in foreign currencies. Although these foreign exchange contracts have not been designated as hedges as required in order to apply hedge accounting, the contracts are effective from an economic perspective. The changes in the fair value of these contracts are recorded in earnings immediately.

 

27


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(11)    Derivatives and Hedging Activities (continued)

 

Contract amounts of foreign exchange contracts at June 30, 2015 and December 31, 2014 are set forth below:

 

     Millions of yen  
         June 30, 2015              December 31, 2014      

To sell foreign currencies

     268,979           358,862     

To buy foreign currencies

     37,388           21,365     

Fair value of derivative instruments in the consolidated balance sheets

The following tables present Canon’s derivative instruments measured at gross fair value as reflected in the consolidated balance sheets at June 30, 2015 and December 31, 2014.

Derivatives designated as hedging instruments

 

    

Millions of yen

 
    

    Balance sheet location    

   Fair value  
              June 30, 2015              December 31, 2014      

Assets:

        

    Foreign exchange contracts

  

Prepaid expenses and

other current assets

     58           8     

Liabilities:

        

    Foreign exchange contracts

   Other current liabilities      855           1,597     

Derivatives not designated as hedging instruments

  
    

Millions of yen

 
    

    Balance sheet location    

       Fair value      
              June 30, 2015              December 31, 2014      

Assets:

        

    Foreign exchange contracts

  

Prepaid expenses and

other current assets

     769           257     

Liabilities:

        

    Foreign exchange contracts

   Other current liabilities      781           9,570     

 

28


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(11)    Derivatives and Hedging Activities (continued)

 

Effect of derivative instruments in the consolidated statements of income

The following tables present the effect of Canon’s derivative instruments in the consolidated statements of income for the six and three months ended June 30, 2015 and 2014.

Derivatives in cash flow hedging relationships

 

    Millions of yen  
Six months ended
June 30, 2015
  Gain (loss)
recognized in
    OCI (effective    
portion)
   

Gain (loss) reclassified from
accumulated OCI into income
(effective portion)

    Gain (loss) recognized in income
(ineffective portion and amount
excluded from effectiveness
testing)
 
        Amount        

    Location    

      Amount             Location             Amount      

Foreign exchange contracts

    1,894        Other, net       (2,144)          Other, net          (60)     
    Millions of yen  
Six months ended
June 30, 2014
  Gain (loss)
recognized in
OCI (effective
portion)
   

Gain (loss) reclassified from
accumulated OCI into income
(effective portion)

    Gain (loss) recognized in income
(ineffective portion and amount
excluded from effectiveness
testing)
 
    Amount    

Location

  Amount     Location     Amount  

Foreign exchange contracts

    4,860        Other, net       (2,385)          Other, net          (70)     
    Millions of yen  
Three months ended
June 30, 2015
  Gain (loss)
recognized in
OCI (effective
portion)
   

Gain (loss) reclassified from
accumulated OCI into income
(effective portion)

    Gain (loss) recognized in income
(ineffective portion and amount
excluded from effectiveness
testing)
 
    Amount    

Location

  Amount     Location     Amount  

Foreign exchange contracts

    (3,143)        Other, net       840          Other, net          (31)     
    Millions of yen  
Three months ended
June 30, 2014
  Gain (loss)
recognized in
OCI (effective
portion)
   

Gain (loss) reclassified from
accumulated OCI into income
(effective portion)

    Gain (loss) recognized in income
(ineffective portion and amount
excluded from effectiveness
testing)
 
    Amount    

Location

  Amount     Location     Amount  

Foreign exchange contracts

    1,032        Other, net       58          Other, net          (38)     

 

29


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(11)    Derivatives and Hedging Activities (continued)

 

Effect of derivative instruments in the consolidated statements of income (continued)

 

Derivatives not designated as hedging instruments

 

     Millions of yen  
Six months ended June 30, 2015    Gain (loss) recognized
in income on derivative
 
             Location                      Amount          

Foreign exchange contracts

     Other, net           (3,390)     
     Millions of yen  
Six months ended June 30, 2014    Gain (loss) recognized
in income on derivative
 
     Location      Amount  

Foreign exchange contracts

     Other, net           (10,546)     
     Millions of yen  
Three months ended June 30, 2015    Gain (loss) recognized
in income on derivative
 
     Location      Amount  

Foreign exchange contracts

     Other, net           (11,894)     
     Millions of yen  
Three months ended June 30, 2014    Gain (loss) recognized
in income on derivative
 
     Location      Amount  

Foreign exchange contracts

     Other, net           (4,513)     

 

30


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(12)    Commitments and Contingent Liabilities

Commitments

As of June 30, 2015, commitments outstanding for the purchase of property, plant and equipment approximated ¥34,468 million, and commitments outstanding for the purchase of parts and raw materials approximated ¥84,841 million.

Canon occupies sales offices and other facilities under lease arrangements accounted for as operating leases. Deposits made under such arrangements aggregated ¥13,974 million and ¥13,847 million at June 30, 2015 and December 31, 2014, respectively, and are included in noncurrent receivables in the accompanying consolidated balance sheets.

Future minimum lease payments required under noncancelable operating leases are ¥26,761 million (within one year) and ¥72,463 million (after one year), at June 30, 2015.

Guarantees

Canon provides guarantees for bank loans of its employees, affiliates and other companies. The guarantees for the employees are principally made for their housing loans. The guarantees of loans of its affiliates and other companies are made to ensure that those companies operate with less financial risk.

For each guarantee provided, Canon would have to perform under a guarantee if the borrower defaults on a payment within the contract periods of 1 year to 30 years, in the case of employees with housing loans, and of 1 year to 5 years, in the case of affiliates and other companies. The maximum amount of undiscounted payments Canon would have had to make in the event of default is ¥8,926 million at June 30, 2015. The carrying amounts of the liabilities recognized for Canon’s obligations as a guarantor under those guarantees at June 30, 2015 were not significant.

Canon also issues contractual product warranties under which it generally guarantees the performance of products delivered and services rendered for a certain period or term. Estimated product warranty costs are recorded at the time revenue is recognized and are included in selling, general and administrative expenses. Estimates for accrued product warranty costs are based on historical experience. Changes in accrued product warranty cost for the six months ended June 30, 2015 and 2014 is summarized as follows:

 

Six months ended June 30, 2015   
             Millions of yen          

Balance at December 31, 2014

     11,564   

Additions

     11,420   

Utilization

     (7,144)   

Other

     (2,363)   
  

 

 

 

Balance at June 30, 2015

     13,477   
  

 

 

 
Six months ended June 30, 2014   
     Millions of yen  

Balance at December 31, 2013

     10,890   

Additions

     8,336   

Utilization

     (6,473)   

Other

     (1,974)   
  

 

 

 

Balance at June 30, 2014

     10,779   
  

 

 

 

 

31


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(12)    Commitments and Contingent Liabilities (continued)

 

Legal proceedings

Canon is involved in various claims and legal actions arising in the ordinary course of business. Canon has recorded provisions for liabilities when it is probable that liabilities have been incurred and the amount of loss can be reasonably estimated. Canon reviews these provisions at least quarterly and adjusts these provisions to reflect the impact of the negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Based on its experience, although litigation is inherently unpredictable, Canon believes that any damage amounts claimed in outstanding matters are not a meaningful indicator of Canon’s potential liability. In the opinion of management, any reasonably possible range of losses from outstanding matters would not have a material adverse effect on Canon’s consolidated financial position, results of operations, or cash flows.

 

32


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(13) Disclosures about the Fair Value of Financial Instruments and Concentrations of Credit Risk

Fair value of financial instruments

The estimated fair values of Canon’s financial instruments at June 30, 2015 and December 31, 2014 are set forth below. The following summary excludes cash and cash equivalents, trade receivables, finance receivables, noncurrent receivables, short-term loans, trade payables and accrued expenses for which fair values approximate their carrying amounts. The summary also excludes investments which are disclosed in Note 2.

 

     Millions of yen  
     June 30, 2015      December 31, 2014  
     Carrying
amount
     Estimated
fair value
     Carrying
amount
     Estimated
fair value
 

Long-term debt, including current installments

     (1,868)           (1,855)           (2,163)           (2,146)     

Foreign exchange contracts:

           

Assets

             827                    827                    265                    265      

Liabilities

     (1,636)           (1,636)           (11,167)           (11,167)     

The following methods and assumptions are used to estimate the fair value in the above table.

Long-term debt

Canon’s long-term debt instruments are classified as Level 2 instruments and valued based on the present value of future cash flows associated with each instrument discounted using current market borrowing rates for similar debt instruments of comparable maturity. The levels are more fully described in Note 14.

Foreign exchange contracts

The fair values of foreign exchange contracts are measured using quotes obtained from counterparties or third parties, which are periodically validated by pricing models using observable market inputs, such as foreign currency exchange rates and interest rates, based on market approach.

Limitations of fair value estimates

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Concentrations of credit risk

At June 30, 2015 and December 31, 2014, one customer accounted for approximately 17% and 16% of consolidated trade receivables, respectively. Although Canon does not expect that the customer will fail to meet its obligations, Canon is potentially exposed to concentrations of credit risk if the customer failed to perform according to the terms of the contracts.

 

33


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(14) Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy that prioritizes the inputs used to measure fair value is as follows:

 

Level 1

    -      

Inputs are quoted prices in active markets for identical assets or liabilities.

Level 2

    -      

Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3

    -      

Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable, which reflect the reporting entity’s own assumptions about the assumptions that market participants would use in establishing a price.

Assets and liabilities measured at fair value on a recurring basis

The following tables present Canon’s assets and liabilities that are measured at fair value on a recurring basis consistent with the fair value hierarchy at June 30, 2015 and December 31, 2014.

 

                                                                           
     Millions of yen  
     June 30, 2015  
         Level 1              Level 2              Level 3              Total      

Assets:

           

Cash and cash equivalents

     -         155,433         -         155,433   

Available-for-sale (noncurrent):

           

Government bonds

     305         -         -         305   

Corporate bonds

     -         164         -         164   

Fund trusts

     12         51         -         63   

Equity securities

     47,278         -         -         47,278   

Derivatives

     -         827         -         827   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     47,595         156,475         -         204,070   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivatives

     -         1,636         -         1,636   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     -         1,636         -         1,636   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

34


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(14) Fair Value Measurements (continued)

 

                                                                           
     Millions of yen  
     December 31, 2014  
         Level 1              Level 2              Level 3              Total      

Assets:

           

Cash and cash equivalents

     -         139,240         -         139,240   

Available-for-sale (noncurrent):

           

Government bonds

     325         -         -         325   

Corporate bonds

     -         162         474         636   

Fund trusts

     12         72         -         84   

Equity securities

     40,653         -         -         40,653   

Derivatives

     -         265         -         265   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     40,990         139,739         474         181,203   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivatives

     -         11,167         -         11,167   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     -         11,167         -         11,167   
  

 

 

    

 

 

    

 

 

    

 

 

 

Level 1 investments are comprised principally of Japanese equity securities, which are valued using an unadjusted quoted market price in active markets with sufficient volume and frequency of transactions. Level 2 cash and cash equivalents are valued based on market approach, using quoted prices for identical assets in markets that are not active. Level 3 investments are mainly comprised of corporate bonds, which are valued based on cost approach, using unobservable inputs as the market for the assets was not active at the measurement date.

Derivative financial instruments are comprised of foreign exchange contracts. Level 2 derivatives are valued using quotes obtained from counterparties or third parties, which are periodically validated by pricing models using observable market inputs, such as foreign currency exchange rates and interest rates, based on market approach.

The following table presents the changes in Level 3 assets measured on a recurring basis, consisting primarily of corporate bonds, for the six months ended June 30, 2015 and 2014.

Six months ended June 30, 2015

 

             Millions of yen          

Balance at December 31, 2014

     474   

Total gains or losses (realized or unrealized):

  

Included in earnings

     -   

Included in other comprehensive income (loss)

     22   

Purchases, issuances and settlements

     (496)   
  

 

 

 

Balance at June 30, 2015

     -   
  

 

 

 

 

35


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(14) Fair Value Measurements (continued)

Six months ended June 30, 2014

 

             Millions of yen          

Balance at December 31, 2013

     340   

Total gains or losses (realized or unrealized):

  

Included in earnings

     -   

Included in other comprehensive income (loss)

     (34)   

Purchases, issuances and settlements

     85   
  

 

 

 

Balance at June 30, 2014

     391   
  

 

 

 

The following table presents the changes in Level 3 assets measured on a recurring basis, consisting primarily of corporate bonds, for the three months ended June 30, 2015 and 2014.

Three months ended June 30, 2015

 

             Millions of yen          

Balance at March 31, 2015

     647   

Total gains or losses (realized or unrealized):

  

Included in earnings

     -   

Included in other comprehensive income (loss)

     (151)   

Purchases, issuances and settlements

     (496)   
  

 

 

 

Balance at June 30, 2015

     -   
  

 

 

 

Three months ended June 30, 2014

 

             Millions of yen          

Balance at March 31, 2014

     342   

Total gains or losses (realized or unrealized):

  

Included in earnings

     -   

Included in other comprehensive income (loss)

     (18)   

Purchases, issuances and settlements

     67   
  

 

 

 

Balance at June 30, 2014

     391   
  

 

 

 

Gains and losses included in earnings are mainly related to corporate bonds still held at June 30, 2015 and 2014, and are reported in “Other, net” in the consolidated statements of income.

Assets and liabilities measured at fair value on a nonrecurring basis

During the six and three months ended June 30, 2015 and 2014, there were no circumstances that required any significant assets or liabilities to be measured at fair value on a nonrecurring basis.

 

36


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(15) Supplemental Information

Gains and losses resulting from foreign currency transactions, including foreign exchange contracts, and translation of assets and liabilities denominated in foreign currencies are included in other income (deductions) in the consolidated statements of income. Foreign currency exchange gains and losses were net losses of ¥15,526 million and ¥7,655 million for the six months ended June 30, 2015 and 2014, respectively, and were ¥7,600 million and ¥1,848 million, for the three months ended June 30, 2015 and 2014, respectively.

Advertising costs are expensed as incurred. Advertising expenses were ¥33,180 million and ¥32,834 million for the six months ended June 30, 2015 and 2014, respectively, and were ¥21,230 million and ¥21,546 million for the three months ended June 30, 2015 and 2014, respectively.

Shipping and handling costs totaled ¥26,578 million and ¥23,491 million for the six months ended June 30, 2015 and 2014, respectively, and ¥13,603 million and ¥11,641 million for the three months ended June 30, 2015 and 2014, respectively, and are included in selling, general and administrative expenses in the consolidated statements of income.

Certain debt securities with original maturities of less than three months classified as available-for-sale securities of ¥155,433 million and ¥139,240 million at June 30, 2015 and December 31, 2014, respectively, are included in cash and cash equivalents in the consolidated balance sheets. Fair value for these securities approximates their cost.

 

37


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(15) Supplemental Information (continued)

 

Finance receivables represent financing leases which consist of sales-type leases and direct-financing leases resulting from the sales of Canon’s and complementary third-party products primarily in foreign countries. These receivables typically have terms ranging from 1 year to 6 years. Finance receivables are ¥296,767 million and ¥244,460 million at June 30, 2015 and 2014, respectively. Finance receivables which are individually evaluated for impairment at June 30, 2015 and 2014 are not significant.

The activity in the allowance for credit losses is as follows:

 

    Six months ended June 30, 2015

  
                         Millions of yen                       

Balance at December 31, 2014

     6,276   

Charge-offs

     (656)   

Provision

     29   

Other

     (2,588)   
  

 

 

 

Balance at June 30, 2015

     3,061   
  

 

 

 

 

    Six months ended June 30, 2014

  
                         Millions of yen                       

Balance at December 31, 2013

     7,323   

Charge-offs

     (547)   

Provision

     36   

Other

     (962)   
  

 

 

 

Balance at June 30, 2014

     5,850   
  

 

 

 

Canon has policies in place to ensure that its products are sold to customers with an appropriate credit history, and continuously monitors its customers’ credit quality based on information including length of period in arrears, macroeconomic conditions, initiation of legal proceedings against customers and bankruptcy filings. The allowance for credit losses of finance receivables are evaluated collectively based on historical experience of credit losses. An additional reserve for individual accounts is recorded when Canon becomes aware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings. Finance receivables which are past due at June 30, 2015 and December 31, 2014 are not significant.

 

38


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(16) Segment Information

Canon operates its business in three segments: the Office Business Unit, the Imaging System Business Unit, and the Industry and Others Business Unit, which are based on the organizational structure and information reviewed by Canon’s management to evaluate results and allocate resources.

The primary products included in each segment are as follows:

 

  

Office Business Unit:  Office multifunction devices (MFDs) / Laser multifunction printers /

 Laser printers / Digital production printing systems /

 High speed continuous feed printers / Wide-format printers / Document solutions

 

  

Imaging System Business Unit:  Interchangeable lens digital cameras / Digital compact cameras /

 Digital camcorders / Digital cinema cameras / Interchangeable lenses /

 Compact photo printers / Inkjet printers / Large-format inkjet printers /

 Commercial photo printers / Image scanners / Multimedia projectors /

 Broadcast equipment / Calculators

 

  

Industry and Others Business Unit:  Semiconductor lithography equipment /

 FPD (Flat panel display) lithography equipment /

 Digital radiography systems / Ophthalmic equipment /

 Vacuum thin-film deposition equipment /

 Organic LED (OLED) panel manufacturing equipment / Die bonders /

 Micromotors / Network cameras / Handy terminals / Document scanners

The accounting policies of the segments are substantially the same as the accounting policies used in Canon’s quarterly consolidated financial statements. Canon evaluates performance of, and allocates resources to, each segment based on operating profit.

 

39


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(16)    Segment Information (continued)

 

Information about operating results for each segment for the six months ended June 30, 2015 and 2014 is as follows:

 

         Office          Imaging
  System  
       Industry and  
Others
     Corporate
and
  eliminations  
       Consolidated    
     (Millions of yen)  

2015:

              

Net sales:

              

External customers

         1,064,781                 594,557                 172,513                  –              1,831,851       

Intersegment

     1,304             635             47,157              (49,096)                 –        
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,066,085             595,192             219,670              (49,096)             1,831,851       

Operating cost and expenses

     914,986             515,585             230,586              (215)             1,660,942       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating profit

         151,099                 79,607             (10,916)                 (48,881)                 170,909       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

2014:

  

Net sales:

              

External customers

         1,029,818                 624,885                 140,405              –                  1,795,108       

Intersegment

     1,851             311             44,682              (46,844)             –       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,031,669             625,196             185,087              (46,844)             1,795,108       

Operating cost and expenses

     871,093             532,208             195,195              3,424              1,601,920       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating profit

     160,576                 92,988                 (10,108)                 (50,268)             193,188       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Information about operating results for each segment for the three months ended June 30, 2015 and 2014 is as follows:

  

         Office          Imaging
  System  
       Industry and  
Others
     Corporate
and
  eliminations  
       Consolidated    
     (Millions of yen)  

2015:

              

Net sales:

              

External customers

         536,282                 332,208                 105,916                  –                  974,406       

Intersegment

     672             326             24,451              (25,449)             –       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     536,954             332,534             130,367              (25,449)             974,406       

Operating cost and expenses

     457,571             282,045             133,444              (3,366)             869,694       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating profit

         79,383                 50,489                 (3,077)                 (22,083)                 104,712       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

2014:

  

Net sales:

              

External customers

         521,719                 332,272                 72,805              –                  926,796       

Intersegment

     774             115             22,512              (23,401)             –       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     522,493             332,387             95,317              (23,401)             926,796       

Operating cost and expenses

     434,374             281,425             97,804              2,644              816,247       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating profit

         88,119                 50,962                 (2,487)                 (26,045)                 110,549       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Intersegment sales are recorded at the same prices used in transactions with third parties. Expenses not directly associated with specific segments are allocated based on the most reasonable measures applicable. Corporate expenses include certain corporate research and development expenses.

 

40


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(16)    Segment Information (continued)

 

Information by major geographic area for the six months ended June 30, 2015 and 2014 is as follows:

 

             Japan                  Americas                Europe                Asia and    
Oceania
             Total          
     (Millions of yen)  

2015:

              

Net sales:

     340,680         541,799         523,156         426,216         1,831,851   

2014:

              

Net sales:

     356,267         481,701         534,259         422,881         1,795,108   

Information by major geographic area for the three months ended June 30, 2015 and 2014 is as follows:

  

             Japan                  Americas                Europe                Asia and    
Oceania
             Total          
     (Millions of yen)  

2015:

              

Net sales:

     175,537         292,824         277,197         228,848         974,406   

2014:

              

Net sales:

     164,554         253,170         272,348         236,724         926,796   

Net sales are attributed to areas based on the location where the product is shipped to the customers.

 

41


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(16)    Segment Information (continued)

 

The following information is based on the location of the Company and its subsidiaries. In addition to the disclosure requirements under U.S. GAAP, Canon discloses this information in order to provide financial statements users with useful information.

Information by the location of the Company and its subsidiaries for the six months ended June 30, 2015 and 2014.

 

         Japan              Americas              Europe              Asia and    
Oceania
     Corporate
and
  eliminations  
       Consolidated    
     (Millions of yen)  

2015:

                 

Net sales:

                 

    External customers

     391,661           539,429           524,328           376,433           -           1,831,851     

    Intersegment

     884,560           10,556           38,552           459,656           (1,393,324)           -     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,276,221           549,985           562,880           836,089           (1,393,324)           1,831,851     

Operating cost and
expenses

     1,128,668           533,353           556,550           797,033           (1,354,662)           1,660,942     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating profit

     147,553           16,632           6,330           39,056           (38,662)           170,909     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

2014:

                 

Net sales:

                 

    External customers

     421,194           480,834           533,577           359,503           -           1,795,108     

    Intersegment

     837,577           2,501           25,993           387,922           (1,253,993)           -     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,258,771           483,335           559,570           747,425           (1,253,993)           1,795,108     

Operating cost and
expenses

     1,070,703           474,539           554,170           714,483           (1,211,975)           1,601,920     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating profit

     188,068           8,796           5,400           32,942           (42,018)           193,188     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Information by the location of the Company and its subsidiaries for the three months ended June 30, 2015 and 2014.

  

         Japan              Americas              Europe              Asia and    
Oceania
     Corporate
and
  eliminations  
       Consolidated    
     (Millions of yen)  

2015:

                 

Net sales:

                 

    External customers

     209,224           291,830           277,979           195,373           -           974,406     

    Intersegment

     452,526           6,389           23,901           244,075           (726,891)           -     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     661,750           298,219           301,880           439,448           (726,891)           974,406     

Operating cost and
expenses

     580,320           285,817           295,778           417,377           (709,598)           869,694     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating profit

     81,430           12,402           6,102           22,071           (17,293)           104,712     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

2014:

                 

Net sales:

                 

    External customers

     212,549           252,634           272,004           189,609           -           926,796     

    Intersegment

     430,486           1,808           14,517           196,288           (643,099)           -     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     643,035           254,442           286,521           385,897           (643,099)           926,796     

Operating cost and
expenses

     531,906           250,214           286,152           369,843           (621,868)           816,247     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating profit

     111,129           4,228           369           16,054           (21,231)           110,549     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

42


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(2)

Other Information

The Board of Directors approved an interim cash dividend at the meeting held on July 27, 2015 as below:

1. Total amount of interim cash dividends:

81,906 million yen

2. Amount of an interim cash dividend per share:

75 yen

3. Payment date:

August 26, 2015

Note:

The interim dividend is paid to registered shareholders as of June 30, 2015.

 

43