FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

 

For the month of ….		April		……………………………………………… ,		2016

 

		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-………………..

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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.

 

 

Date….		April 27, 2016						By ……/s/…………… Eiji Shimizu ………
								(Signature)*
								Eiji Shimizu                            General Manager                            Consolidated Accounting Div.                            Canon Inc.

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

The following materials are included.

1. CONSOLIDATED RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2016

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CONSOLIDATED RESULTS FOR

THE FIRST QUARTER ENDED MARCH 31, 2016

April 26, 2016

CONSOLIDATED RESULTS

(Millions of yen, thousands of U.S. dollars, except per share amounts)    

 

			Actual																				Projection
		Three months ended March 31, 2016				Three months ended March  31, 2015				Change(%)								Three months ended March 31, 2016				Year ending December 31, 2016				Change(%)
Net sales		¥	797,230			¥	857,445				-				7.0			$	7,055,133			¥	3,600,000				-				5.3
Operating profit			40,087				66,197				-				39.4				354,752				300,000				-				15.5
Income before income taxes			45,761				61,281				-				25.3				404,965				310,000				-				10.8
Net income attributable                    to Canon Inc.		¥	27,991			¥	33,930				-				17.5			$	247,708			¥	200,000				-				9.2
Net income attributable to Canon Inc. shareholders per share:
- Basic		¥	25.63			¥	31.07				-				17.5			$	0.23			¥	183.14				-				9.2
- Diluted			25.63				31.07				-				17.5				0.23				-								-
		Actual
		As of March 31, 2016				As of December 31, 2015				Change(%)								As of March 31, 2016
Total assets		¥	4,839,157			¥	4,427,773				+				9.3			$	42,824,398
Canon Inc. shareholders’ equity		¥	2,822,828			¥	2,966,415				-				4.8			$	24,980,779

 

Notes:		1.		Canon’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.
		2.		U.S. dollar amounts are translated from yen at the rate of JPY 113 = U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of March 31, 2016, solely for the convenience of the reader.

 

Canon Inc.		30-2, Shimomaruko 3-chome, Ohta-ku,
Headquarter office		Tokyo 146-8501, Japan
		Phone: +81-3-3758-2111

 

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I. Operating Results and Financial Conditions

2016 First Quarter in Review

Looking back at the global economy in the first quarter of 2016, the U.S. economy continued recovering smoothly as consumer spending and employment conditions improved. In Europe, the economy recovered moderately amid decreases in unemployment rates in Germany and the U.K. In contrast, the Chinese economy continued its deceleration and the economies of emerging countries, including those of Southeast Asia and Russia, remained stagnant owing to further declines in oil prices. In Japan, although weaknesses were seen in consumer spending, corporate earnings and employment conditions continued to improve. 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) remained at around the same level as for the previous year, while the market for laser printers shrunk due to the sluggish market in emerging countries. As for cameras, although demand for interchangeable-lens digital cameras continued to recover in developed countries, demand across Asia continued to decline compared with last year. Likewise, sales volumes of digital compact cameras declined in all regions. Additionally, demand for inkjet printers continued to decline, mainly in emerging countries in Asia. Within the Industry and Others sector, however, demand for lithography equipment used in the production of semiconductor devices and flat panel displays (FPDs) enjoyed strong growth thanks to active capital investment by memory device and panel manufacturers.

The average value of the yen during the quarter was ¥114.91 against the U.S. dollar, a year-on-year appreciation of approximately ¥4, and ¥127.01 against the euro, a year-on-year appreciation of approximately ¥7, which had a negative impact on net sales of ¥31.0 billion and operating profit of ¥13.3 billion.

During the first quarter, although office MFDs enjoyed solid demand, mainly for color models, total sales volume of laser printers declined due to the contraction of the market. Although harsh conditions for interchangeable-lens digital cameras in Asia remained the same as during the previous year, demand remained firm in developed countries with unit sales remaining essentially unchanged from the same period of the previous year. As for digital compact cameras, unit sales declined in all regions compared with the previous year. Looking at inkjet printers, despite the shrinking market, sales volume remained at approximately the same level as for the previous year thanks to such factors as expanded sales of new products in developed countries. Also, sales of semiconductor lithography equipment and FPD lithography equipment exceeded those for the previous year thanks to favorable market conditions. Consequently, along with the negative effect of currency exchange rates, first-quarter net sales decreased 7.0% year on year to ¥797.2 billion. Despite the appreciation of the yen, the gross profit ratio decreased by only 0.3 points year on year to 50.8% owing to ongoing cost-cutting activities and efforts aimed at controlling price reductions. Operating expenses decreased 2.1% year on year to ¥364.7 billion thanks to Group-wide efforts to thoroughly reduce spending. As a result, first-quarter operating profit decreased by 39.4% to ¥40.1 billion. Other income (deductions) increased by ¥10.6 billion due to foreign currency exchange gains while income before income taxes decreased by 25.3% year on year to ¥45.8 billion and net income attributable to Canon Inc. decreased by 17.5% to ¥28.0 billion.

Basic net income attributable to Canon Inc. shareholders per share for the quarter was ¥25.63, a year-on-year decrease of ¥5.44.

 

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Results by Segment

Looking at Canon’s first-quarter performance by business unit, beginning with the Office Business Unit, unit sales for office MFDs overall increased from the same period of the previous year, including monochrome models, which had been facing decreasing demand. This was thanks to strong sales of color models, led by small-office/home-office color A3 (12”x18”) imageRUNNER ADVANCE C3300-series models launched in the previous year, and the imagePRESS C10000VP-series, which targets the production market. Among high-speed continuous-feed printers and wide-format printers, the Océ-produced VarioPrint i300 series has been steadily receiving orders. As for laser printers, amid continued sluggishness in the market, unit sales volume declined from the corresponding period of the previous year as a result of a shift in sales strategy away from selling low-end models with low profitability in favor of efforts aimed at ensuring profitability through the proactive sales promotion of high-added-value models, which will lead to consumables sales. These factors, coupled with the negative effect of unfavorable currency exchange rates, resulted in total sales for the business unit of ¥454.4 billion, a year on year decrease of 14.1%, while operating profit totaled ¥44.7 billion, a year-on-year decrease of 37.7%.

Within the Imaging System Business Unit, sales volume of interchangeable-lens digital cameras remained at around the same level as the previous year owing to healthy demand for the advanced-amateur-model EOS 80D, launched this year, and the EOS M3 and M10, which were released the previous year, in Japan and other Asian markets. As for digital compact cameras, while sales volume declined amid the ongoing contraction of the market, PowerShot G-series cameras, the lineup of which grew to five models in the previous year, enjoyed solid demand. As for inkjet printers, sales promotions for new products contributed to growth in unit sales in developed markets, such as those in Europe, the U.S. and Japan, while models launched in the previous year equipped with large-capacity ink tanks enjoyed strong demand in Asia, a region in which market conditions have remained sluggish. Consequently, unit sales for the segment remained at approximately the same level as for the corresponding period of the previous year. As a result, along with the negative effect of unfavorable currency exchange rates, sales for the business unit decreased by 10.6% to ¥234.8 billion year on year, while operating profit totaled ¥19.6 billion, a year-on-year decline of 32.6%.

In the Industry and Others Business Unit, within the semiconductor lithography equipment segment, unit sales increased from the same period of the previous year, boosted by active capital investment in response to the growing variety of semiconductor-equipped products associated with the prevalence of the IoT (Internet of Things). Unit sales of FPD lithography equipment also increased, supported by favorable market conditions. As for network cameras, sales by Axis, which was consolidated in the second quarter last year, contributed significantly to robust sales growth, along with increased sales of Canon-brand products. In addition, Canon Tokki, which sells manufacturing equipment for organic LED (OLED) panel devices, posted an increase in sales amid brisk capital investment by panel manufacturers. Consequently, sales for the business unit totaled ¥130.2 billion, an increase of 45.8% year on year. As for operating profit, despite an improvement of ¥7.2 billion compared with the previous year, the business unit was in the red by ¥0.6 billion owing to upfront investment in next-generation technologies and new businesses.

Cash Flow

During the first quarter of 2016, cash flow from operating activities totaled ¥114.6 billion, an increase of ¥15.2 billion compared with the previous year owing to improvements in working capital, such as trade receivables. Cash flow from investing activities increased ¥686.5 billion year on year to ¥720.2 billion due to the payment for the right to acquire all of the ordinary shares of Toshiba Medical Systems Corporation (TMSC). Accordingly, free cash flow totaled negative ¥605.6 billion, a decrease of ¥671.3 billion compared with the corresponding year-ago period.

Cash flow from financing activities recorded proceeds of ¥570.7 billion, mainly owing to a provisional bank borrowing related to TMSC.

Owing to these factors, as well as the negative impact from foreign currency translation adjustments, cash and cash equivalents decreased by ¥52.7 billion to ¥581.0 billion from the end of the previous year.

 

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Outlook

As for the outlook in the second quarter onward, the U.S. and European economies are expected to grow moderately thanks to expanding domestic demand as employment conditions continue to improve. With regard to the Japanese economy, the outlook indicates a recovery trend supported by improved corporate earnings, mainly in the non-manufacturing sector, and employment conditions. Looking at China, sluggish capital investment and other factors are expected to result in a continuation of the gradual economic slowdown. As for emerging economies, such as those of Southeast Asia, Brazil and Russia, despite signs of recovery that were mainly driven by domestic demand, the outlook indicates the need for more time before a true recovery takes hold owing to declines in oil prices and volatility in the financial and capital markets. Looking at the global economy as a whole, while a gradual recovery is expected heading into the latter half of the year, the degree of the recovery will likely be weaker than originally assumed.

In the businesses in which Canon is involved, demand for office MFDs is projected to expand moderately, mainly for color models, while demand in the laser printer market is expected to remain low for the time being. As for interchangeable-lens digital cameras, despite the moderate recovery in developed countries, demand in Asian markets is expected to shrink. Likewise, projections for digital compact cameras indicate continued market contraction in all regions, centered mainly on low-priced models. With regard to inkjet printers, amid the recession in Southeast Asian and other emerging countries, demand is expected to decline. Within the market for semiconductor lithography equipment, manufacturers are expected to postpone some capital investment due to a slowdown in the smartphone market, while forecasts for the FPD lithography equipment market point to further expansion thanks to the growing demand for high-definition OLED panels used in mobile devices. The network camera market is also expected to grow in response to increasing global safety and security needs.

With regard to currency exchange rates for the second quarter onward, on which Canon’s performance outlook is based, Canon anticipates exchange rates of ¥110 to the U.S. dollar and ¥125 to the euro, representing appreciations of approximately ¥10 against the U.S. dollar and approximately ¥9 against the euro compared with the annual average rates of the previous year.

Upon taking into consideration the prolonged economic slowdown in China and developing countries, along with the negative impact of the revised foreign exchange rate assumptions on sales and gross profit, Canon projects full-year consolidated net sales in 2016 of ¥3,600.0 billion, a year-on-year decrease of 5.3%; operating profit of ¥300.0 billion, a year-on-year decrease of 15.5%; income before income taxes of ¥310.0 billion, a year on year decrease of 10.8%; and net income attributable to Canon Inc. of ¥200.0 billion, a year-on-year decrease of 9.2%.

The impact of the acquisition of TMSC has not been included in the Consolidated Outlook by reason that the clearance process by necessary competition regulatory authorities is still ongoing and the timing of consolidation has yet to be determined.

Consolidated Outlook

 

Fiscal year		Millions of yen
		Year ending December 31, 2016								Change				Year ended December 31, 2015				Change (%)
		Previous Outlook (A)				Revised Outlook (B)				(B - A)				Results (C)				(B - C) / C
Net sales			3,850,000				3,600,000				(250,000	)			3,800,271				-5.3%
Operating profit			360,000				300,000				(60,000	)			355,210				-15.5%
Income before income taxes			360,000				310,000				(50,000	)			347,438				-10.8%
Net income attributable to Canon Inc.			230,000				200,000				(30,000	)			220,209				-9.2%

 

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

 

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

II. Financial Statements

1. CONSOLIDATED BALANCE SHEETS

 

		Millions of yen
		As of March 31, 2016				As of December 31, 2015				Change
ASSETS
Current assets:
Cash and cash equivalents			580,954				633,613				(52,659)
Short-term investments			21,271				20,651				620
Trade receivables, net			498,186				588,001				(89,815)
Inventories			521,404				501,895				19,509
Prepaid expenses and other current assets			243,598				313,019				(69,421)
Total current assets			1,865,413				2,057,179				(191,766)
Noncurrent receivables			28,551				29,476				(925)
Investments			724,006				67,862				656,144
Property, plant and equipment, net			1,201,530				1,219,652				(18,122)
Intangible assets, net			229,653				241,208				(11,555)
Goodwill			465,069				478,943				(13,874)
Other assets			324,935				333,453				(8,518)
Total assets			4,839,157				4,427,773				411,384
LIABILITIES AND EQUITY
Current liabilities:
Short-term loans and current portion of long-term debt			660,625				688				659,937
Trade payables			283,698				278,255				5,443
Accrued income taxes			22,367				47,431				(25,064)
Accrued expenses			302,658				317,653				(14,995)
Other current liabilities			169,812				171,302				(1,490)
Total current liabilities			1,439,160				815,329				623,831
Long-term debt, excluding current installments			794				881				(87)
Accrued pension and severance cost			278,303				296,262				(17,959)
Other noncurrent liabilities			88,226				130,838				(42,612)
Total liabilities			1,806,483				1,243,310				563,173
Equity:
Canon Inc. shareholders’ equity:
Common stock			174,762				174,762				-
Additional paid-in capital			401,374				401,358				16
Legal reserve			65,603				65,289				314
Retained earnings			3,310,930				3,365,158				(54,228)
Accumulated other comprehensive income (loss)			(119,428)				(29,742)				(89,686)
Treasury stock, at cost			(1,010,413)				(1,010,410)				(3)
Total Canon Inc. shareholders’ equity			2,822,828				2,966,415				(143,587)
Noncontrolling interests			209,846				218,048				(8,202)
Total equity			3,032,674				3,184,463				(151,789)
Total liabilities and equity			4,839,157				4,427,773				411,384
		Millions of yen
		As of March 31, 2016				As of December 31, 2015
Notes:
1. Allowance for doubtful receivables			11,686				12,077
2. Accumulated depreciation			2,551,616				2,570,806
3. Accumulated other comprehensive income (loss):
Foreign currency translation adjustments			(1,447)				87,038
Net unrealized gains and losses on securities			9,424				14,055
Net gains and losses on derivative instruments			1,701				182
Pension liability adjustments			(129,106)				(131,017)

 

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

2. CONSOLIDATED STATEMENTS OF INCOME AND

        CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

Consolidated statements of income
		Millions of yen
		Three months ended March 31, 2016				Three months ended March 31, 2015				Change(%)
Net sales			797,230				857,445				-				7.0
Cost of sales			392,484				418,881
Gross profit			404,746				438,564				-				7.7
Operating expenses:
Selling, general and administrative expenses			285,789				293,128
Research and development expenses			78,870				79,239
			364,659				372,367
Operating profit			40,087				66,197				-				39.4
Other income (deductions):
Interest and dividend income			1,107				1,587
Interest expense			(180)				(101)
Other, net			4,747				(6,402)
			5,674				(4,916)
Income before income taxes			45,761				61,281				-				25.3
Income taxes			16,545				26,429
Consolidated net income			29,216				34,852
Less: Net income attributable to noncontrolling interests			1,225				922
Net income attributable to Canon Inc.			27,991				33,930				-				17.5
Consolidated statements of comprehensive income
		Millions of yen
		Three months ended March 31, 2016				Three months ended March 31, 2015				Change(%)
Consolidated net income			29,216				34,852				-				16.2
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments			(91,463)				(54,128)
Net unrealized gains and losses on securities			(4,842)				472
Net gains and losses on derivative instruments			1,512				3,213
Pension liability adjustments			2,812				(305)
			(91,981)				(50,748)
Comprehensive income (loss)			(62,765)				(15,896)								-
Less: Comprehensive income (loss) attributable to
noncontrolling interests			(812)				740
Comprehensive income (loss) attributable to Canon Inc.			(61,953)				(16,636)								-

 

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

3. DETAILS OF SALES

 

		Millions of yen
Sales by business unit		Three months ended March 31, 2016				Three months ended March 31, 2015				Change(%)
Office			454,352				529,131				-				14.1
Imaging System			234,816				262,658				-				10.6
Industry and Others			130,171				89,303				+				45.8
Eliminations			(22,109)				(23,647)								-
Total			797,230				857,445				-				7.0
		Millions of yen
Sales by region		Three months ended March 31, 2016				Three months ended March 31, 2015				Change(%)
Japan			168,541				165,143				+				2.1
Overseas:
Americas			224,248				248,975				-				9.9
Europe			219,885				245,959				-				10.6
Asia and Oceania			184,556				197,368				-				6.5
			628,689				692,302				-				9.2
Total			797,230				857,445				-				7.0

Notes 1. The primary products included in each of the segments are as follows:

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

 

2. The principal countries and regions included in each regional category are as follows:
Americas: United States of America, Canada, Latin America
Europe: United Kingdom, Germany, France, Netherlands, European countries, Middle East and Africa
Asia and Oceania: China, Asian countries, Australia

 

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

4. CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Millions of yen
		Three months ended March 31, 2016				Three months ended March 31, 2015
Cash flows from operating activities:
Consolidated net income			29,216				34,852
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization			60,210				64,416
Loss on disposal of fixed assets			2,522				916
Deferred income taxes			(1,340)				(713)
Decrease in trade receivables			71,427				67,368
Increase in inventories			(38,385)				(52,604)
Increase in trade payables			11,461				27,012
Decrease in accrued income taxes			(24,484)				(23,650)
Decrease in accrued expenses			(5,375)				(8,053)
Increase in accrued (prepaid) pension and severance cost			2,045				1,202
Other, net			7,325				(11,294)
Net cash provided by operating activities			114,622				99,452
Cash flows from investing activities:
Purchases of fixed assets			(52,214)				(56,344)
Proceeds from sale of fixed assets			138				495
Purchases of available-for-sale securities			-				(73)
Proceeds from sale and maturity of available-for-sale securities			407				-
(Increase) decrease in time deposits, net			(1,061)				27,808
Acquisitions of businesses, net of cash acquired			(2,870)				(4,351)
Purchases of other investments			(665,561)				(963)
Other, net			932				(293)
Net cash used in investing activities			(720,229)				(33,721)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			120				248
Repayments of long-term debt			(273)				(358)
Increase in short-term loans, net			660,000				-
Purchases of noncontrolling interests			(4,750)				-
Dividends paid			(81,905)				(92,806)
Repurchases and reissuance of treasury stock, net			(3)				364
Other, net			(2,471)				(2,051)
Net cash used in financing activities			570,718				(94,603)
Effect of exchange rate changes on cash and cash equivalents			(17,770)				(22,007)
Net change in cash and cash equivalents			(52,659)				(50,879)
Cash and cash equivalents at beginning of period			633,613				844,580
Cash and cash equivalents at end of period			580,954				793,701

 

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

5. NOTE FOR GOING CONCERN ASSUMPTION

      Not applicable.

6. SEGMENT INFORMATION

SEGMENT INFORMATION BY BUSINESS UNIT

 

				Millions of yen
				Three months ended March 31, 2016				Three months ended March 31, 2015				Change(%)
Office
Net sales:
		External customers			453,640				528,499			-	14.2
		Intersegment			712				632			+	12.7
		Total			454,352				529,131			-	14.1
Operating cost and expenses					409,648				457,415			-	10.4
Operating profit					44,704				71,716			-	37.7
Imaging System
Net sales:
		External customers			234,567				262,349			-	10.6
		Intersegment			249				309			-	19.4
		Total			234,816				262,658			-	10.6
Operating cost and expenses					215,198				233,540			-	7.9
Operating profit					19,618				29,118			-	32.6
Industry and Others
Net sales:
		External customers			109,023				66,597			+	63.7
		Intersegment			21,148				22,706			-	6.9
		Total			130,171				89,303			+	45.8
Operating cost and expenses					130,793				97,142			+	34.6
Operating profit					(622)				(7,839)				-
Corporate and Eliminations
Net sales:
		External customers			-				-				-
		Intersegment			(22,109)				(23,647)				-
		Total			(22,109)				(23,647)				-
Operating cost and expenses					1,504				3,151				-
Operating profit					(23,613)				(26,798)				-
Consolidated
Net sales:
		External customers			797,230				857,445			-	7.0
		Intersegment			-				-				-
		Total			797,230				857,445			-	7.0
Operating cost and expenses					757,143				791,248			-	4.3
Operating profit					40,087				66,197			-	39.4

 

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

Discontinue disclosure of “SEGMENT INFORMATION BY GEOGRAPHIC AREA”

In addition to the disclosure requirements under Topic 280, Canon has disclosed the segment information, “SEGMENT INFORMATION BY GEOGRAPHIC AREA”, which is based on the location of Canon Inc. and its subsidiaries. Results from a survey of a representative sample of financial statement users, however, indicated that they consider the latter to be less useful than sales information based on the location where the product is shipped to customers, which is disclosed separately. For this reason, Canon decided to discontinue the disclosure of geographical segment information based on the location of Canon Inc. and its subsidiaries from this year, in order to avoid the risk of confusing users due to disclosing two similar types of geographical information and make disclosure more concise and transparent. Sales information based on the location where the products is shipped to customers is available on page 8 “3. DETAILS OF SALES in II. Financial Statements”.

7.  SIGNIFICANT CHANGES IN CANON INC. SHAREHOLDERS’ EQUITY

       None.

8.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

(1)  GROUP POSITION

 

1.

Number of Group Companies

 

		March 31, 2016		December 31, 2015		Change
Subsidiaries		325		317		8
Affiliates		5		5		-
Total		330		322		8

 

2.

Change in Group Entities

 

Subsidiaries
Addition:		8 companies

 

3.

Subsidiaries Listed on Domestic Stock Exchange

Tokyo Stock Exchange (1st section): Canon Marketing Japan Inc., Canon Electronics Inc.

 

(2)  SIGNIFICANT

ACCOUNTING POLICIES

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

Recently Issued Accounting Guidance

In November 2015, the Financial Accounting Standards Board issued an amendment which requires deferred tax assets and liabilities be classified as noncurrent in the consolidated balance sheets. Canon early adopted this amended guidance from the quarter beginning January 1, 2016, on a prospective basis, and prior periods were not retrospectively adjusted. Canon’s current deferred tax assets were ¥55,108 million and current deferred tax liabilities were ¥2,682 million as of December 31, 2015.

 

-11-

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Canon Inc.

April 26, 2016

CONSOLIDATED RESULTS FOR

THE FIRST QUARTER ENDED MARCH 31, 2016

SUPPLEMENTARY REPORT

TABLE OF CONTENTS

 

				PAGE
1.		SALES BY GEOGRAPHIC AREA AND BUSINESS UNIT			S    1
2.		SEGMENT INFORMATION BY BUSINESS UNIT			S    2
3.		OTHER INCOME / DEDUCTIONS			S    2
4.		BREAKDOWN OF PRODUCT SALES WITHIN BUSINESS UNIT			S    3
5.		SALES GROWTH IN LOCAL CURRENCY (Year over year)			S    3
6.		PROFITABILITY			S    4
7.		IMPACT OF FOREIGN EXCHANGE RATES			S    4
8.		STATEMENTS OF CASH FLOWS			S    4
9.		R&D EXPENDITURE			S    5
10.		INCREASE IN PP&E & DEPRECIATION AND AMORTIZATION			S    5
11.		INVENTORIES			S    5
12.		DEBT RATIO			S    5
13.		OVERSEAS PRODUCTION RATIO			S    5
14.		NUMBER OF EMPLOYEES			S    5

 

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Canon Inc.

 

1. SALES BY GEOGRAPHIC AREA AND BUSINESS UNIT		(Millions of yen)

				2016								2015										Change year over year
				1st quarter				Year (P)				1st quarter				Year						1st quarter				Year
Japan
		Office			94,104				-				95,160				379,277						-1.1	%			-
		Imaging System			34,945				-				38,154				198,739						-8.4	%			-
		Industry and Others			39,492				-				31,829				136,264						+24.1	%			-
		Total			168,541				738,000				165,143				714,280						+2.1	%			+3.3	%
Overseas
		Office			359,536				-				433,339				1,728,969						-17.0	%			-
		Imaging System			199,622				-				224,195				1,063,928						-11.0	%			-
		Industry and Others			69,531				-				34,768				293,094						+100.0	%			-
		Total			628,689				2,862,000				692,302				3,085,991						-9.2	%			-7.3	%
		Americas
		Office			146,923				-				176,828				713,197						-16.9	%			-
		Imaging System			58,396				-				63,980				352,946						-8.7	%			-
		Industry and Others			18,929				-				8,167				78,279						+131.8	%			-
		Total			224,248				1,044,400				248,975				1,144,422						-9.9	%			-8.7	%
		Europe
		Office			139,164				-				167,503				680,619						-16.9	%			-
		Imaging System			66,361				-				71,048				335,312						-6.6	%			-
		Industry and Others			14,360				-				7,408				58,435						+93.8	%			-
		Total			219,885				982,500				245,959				1,074,366						-10.6	%			-8.6	%
		Asia and Oceania
		Office			73,449				-				89,008				335,153						-17.5	%			-
		Imaging System			74,865				-				89,167				375,670						-16.0	%			-
		Industry and Others			36,242				-				19,193				156,380						+88.8	%			-
		Total			184,556				835,100				197,368				867,203						-6.5	%			-3.7	%
Intersegment
		Office			712				-				632				2,570						+12.7	%			-
		Imaging System			249				-				309				1,168						-19.4	%			-
		Industry and Others			21,148				-				22,706				95,293						-6.9	%			-
		Eliminations			(22,109	)			-				(23,647	)			(99,031	)					-				-
		Total			0				0				0				0						-				-
Total
		Office			454,352				1,946,400				529,131				2,110,816						-14.1	%			-7.8	%
		Imaging System			234,816				1,135,000				262,658				1,263,835						-10.6	%			-10.2	%
		Industry and Others			130,171				606,100				89,303				524,651						+45.8	%			+15.5	%
		Eliminations			(22,109	)			(87,500	)			(23,647	)			(99,031	)					-				-
		Total			797,230				3,600,000				857,445				3,800,271						-7.0	%			-5.3	%

(P)=Projection

 

- S1 -

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Canon Inc.

 

2. SEGEMENT INFORMATION BY BUSINESS UNIT

(Millions of yen

)

				2016								2015										Change year  over year
					1st quarter				Year (P)				1st quarter				Year						1st quarter			Year
Office
		External customers			453,640				1,944,000				528,499				2,108,246						-14.2%			-7.8%
		Intersegment			712				2,400				632				2,570						+12.7%			-6.6%
		Total sales			454,352				1,946,400				529,131				2,110,816						-14.1%			-7.8%
		Operating profit			44,704				234,200				71,716				290,586						-37.7%			-19.4%
		% of sales			9.8%				12.0%				13.6%				13.8%						-			-
Imaging System
		External customers			234,567				1,133,900				262,349				1,262,667						-10.6%			-10.2%
		Intersegment			249				1,100				309				1,168						-19.4%			-5.8%
		Total sales			234,816				1,135,000				262,658				1,263,835						-10.6%			-10.2%
		Operating profit			19,618				149,500				29,118				183,439						-32.6%			-18.5%
		% of sales			8.4%				13.2%				11.1%				14.5%						-			-
Industry and Others
		External customers			109,023				522,100				66,597				429,358						+63.7%			+21.6%
		Intersegment			21,148				84,000				22,706				95,293						-6.9%			-11.9%
		Total sales			130,171				606,100				89,303				524,651						+45.8%			+15.5%
		Operating profit			(622	)			9,300				(7,839	)			(13,079	)					-			-
		% of sales			-0.5%				1.5%				-8.8%				-2.5%						-			-
Corporate and Eliminations
		External customers			-				-				-				-						-			-
		Intersegment			(22,109	)			(87,500	)			(23,647	)			(99,031	)					-			-
		Total sales			(22,109	)			(87,500	)			(23,647	)			(99,031	)					-			-
		Operating profit			(23,613	)			(93,000	)			(26,798	)			(105,736	)					-			-
Consolidated
		External customers			797,230				3,600,000				857,445				3,800,271						-7.0%			-5.3%
		Intersegment			-				-				-				-						-			-
		Total sales			797,230				3,600,000				857,445				3,800,271						-7.0%			-5.3%
		Operating profit			40,087				300,000				66,197				355,210						-39.4%			-15.5%
		% of sales			5.0%				8.3%				7.7%				9.3%						-			-
																				(P)=Projection
3. OTHER INCOME / DEDUCTIONS																										(Millions of yen)
					2016								2015										Change year  over year
				1st quarter				Year (P)				1st quarter				Year						1st quarter				Year
		Interest and dividend, net			927				900				1,486				4,917						(559	)		(4,017)
		Forex gain (loss)			3,058				4,000				(7,926	)			(22,149	)					+10,984			+26,149
		Equity earnings of affiliated companies			269				900				301				447						(32	)		+453
		Other, net			1,420				4,200				1,223				9,013						+197			(4,813)
		Total			5,674				10,000				(4,916	)			(7,772	)					+10,590			+17,772
																				(P)=Projection

 

- S2 -

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Canon Inc.

 

4. BREAKDOWN OF PRODUCT SALES WITHIN BUSINESS UNIT
						2016				2015
						1st quarter		Year (P)		1st quarter		Year
Office
				Monochrome copiers		16%		16%		15%		16%
				Color copiers		21%		21%		19%		20%
				Printers		37%		37%		43%		41%
				Others		26%		26%		23%		23%
Imaging System
				Cameras		57%		60%		59%		62%
				Inkjet printers		32%		31%		31%		29%
				Others		11%		9%		10%		9%
Industry and Others
				Lithography equipment		25%		22%		18%		24%
				Others		75%		78%		82%		76%
												(P)=Projection
5. SALES GROWTH IN LOCAL CURRENCY (Year over year)
						2016
						1st quarter		Year(P)
Office
				Japan		-1.1%		-
				Overseas		-13.1%		-
				Total		-10.9%		-1.5%
Imaging System
				Japan		-8.4%		-
				Overseas		-6.0%		-
				Total		-6.3%		-3.4%
Industry and Others
				Japan		+24.1%		-
				Overseas		+103.6%		-
				Total		+47.2%		+18.6%
Total
				Japan		+2.1%		+3.3%
				Overseas		-5.0%		+0.3%
				Americas		-6.5%		-0.3%
				Europe		-6.1%		-1.9%
				Asia and Oceania		-1.6%		+3.8%
				Total		-3.6%		+0.9%
								(P)=Projection

 

- S3 -

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Canon Inc.

6. PROFITABILITY
				2016				2015
				1st quarter		Year (P)		1st quarter				Year
ROE *1				3.9%		6.8%			4.6	%		7.4%
ROA *2				2.4%		4.2%			3.1	%		5.0%
*1 Return on Equity ; Based on Net Income attributable to Canon Inc. and Total Canon Inc. Shareholders’ Equity												(P)=Projection
*2 Return on Assets ; Based on Net Income attributable to Canon Inc.   7. IMPACT OF FOREIGN EXCHANGE RATES
		(1) Exchange rates												(Yen)
				2016								2015
				1st quarter		2nd-4th quarter (P)		Year (P)				1st quarter		Year
		Yen/US$		114.91		110.00			111.05			119.25		121.13
		Yen/Euro		127.01		125.00			125.44			133.89		134.20
														(P)=Projection
		(2) Impact of foreign exchange rates on sales (Year over year)
						(Billions of yen)
				2016
				1st quarter		Year (P)
		US$		(14.2)		(119.6)
		Euro		(10.1)		(57.7)
		Other currencies		(6.7)		(40.0)
		Total		(31.0)		(217.3)
						(P)=Projection
		(3) Impact of foreign exchange rates per yen		(Billions of yen)
				2016
				2nd-4th quarter (P)
On sales
		US$		11.1
		Euro		5.3
On operating profit
		US$		3.9
		Euro		2.3
				(P)=Projection
8. STATEMENTS OF CASH FLOWS												(Millions of yen)
				2016				2015
				1st quarter		Year (P)		1st quarter				Year
Net cash provided by operating activities				114,622		510,000			99,452			474,724
Net cash used in investing activities				(720,229)		(930,000)			(33,721	)		(453,619)
Free cash flow				(605,607)		(420,000)			65,731			21,105
Net cash used in financing activities				570,718		490,000			(94,603	)		(210,202)
Effect of exchange rate changes on cash and cash equivalents				(17,770)		(13,600)			(22,007	)		(21,870)
Net change in cash and cash equivalents				(52,659)		56,400			(50,879	)		(210,967)
Cash and cash equivalents at end of period				580,954		690,000			793,701			633,613
												(P)=Projection

 

- S4 -

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Canon Inc.

 

9. R&D EXPENDITURE														(Millions of yen)
				2016								2015
				1st quarter				Year (P)				1st quarter		Year
		Office			25,969				-			27,372		105,298
		Imaging System			23,614				-			21,439		90,236
		Industry and Others			15,733				-			12,284		66,585
		Corporate and Eliminations			13,554				-			18,144		66,381
		Total			78,870				310,000			79,239		328,500
% of sales					9.9%				8.6%			9.2%		8.6%
														(P)=Projection
10. INCREASE IN PP&E & DEPRECIATION AND AMORTIZATION														(Millions of yen)
				2016								2015
				1st quarter				Year (P)				1st quarter		Year
Increase in PP&E					50,464				210,000			45,202		195,120
Depreciation and amortization					60,210				265,000			64,416		273,327
														(P)=Projection
11. INVENTORIES
(1) Inventories												(Millions of yen)
				2016				2015				Difference
				Mar.31				Dec.31
		Office			227,116				225,327			+1,789
		Imaging System			168,159				155,767			+12,392
		Industry and Others			126,129				120,801			+5,328
		Total			521,404				501,895			+19,509
		(2) Inventories/Sales*										(Days)
				2016				2015				Difference
				Mar.31				Dec.31
		Office			42				39			+3
		Imaging System			51				43			+8
		Industry and Others			92				86			+6
		Total			52				47			+5
*Index based on the previous six months sales.
12. DEBT RATIO
				2016				2015				Difference
				Mar.31				Dec.31
		Total debt / Total assets			13.7%				0.0%			+13.7%
13. OVERSEAS PRODUCTION RATIO
				2016				2015
				1st quarter				Year
		Overseas production ratio			44%				48%
		*From the 2nd quarter of 2015, the method used to calculate the overseas production ratio has changed. The distinctions between domestic and overseas of parts supplied overseas from Japan as well as other adjustments have been made to more accurately reflect the underlying reality.
14. NUMBER OF EMPLOYEES
				2016				2015				Difference
				Mar.31				Dec.31
		Japan			67,773				68,325			(552)
		Overseas			119,731				121,246			(1,515)
		Total			187,504				189,571			(2,067)

 

- S5 -