Edgar Filing: CANON INC

CANON INC.

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the month of October, 2005

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 þ Form 40-F o

[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 o No þ

[If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-_____

TABLE OF CONTENTS


SIGNATURES
CONSOLIDATED RESULTS FOR THE THIRD QUARTER AND THE NINE MONTHS ENDED SEPTEMBER 30, 2005
Operating Results and Financial Conditions
CONSOLIDATED FINANCIAL RESULTS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2005 SUPPLEMENTARY REPORT

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 October 27, 2005	By	/s/ Hiroshi Kawashimo

		(Signature)*
		Hiroshi Kawashimo
		General Manager, Finance Division
		Canon Inc.


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

The following material is included.

1.Consolidated Results For The Third Quarter And The Nine Months Ended September 30, 2005

CONSOLIDATED RESULTS FOR THE THIRD QUARTER AND
THE NINE MONTHS ENDED SEPTEMBER 30, 2005

October 27, 2005

CONSOLIDATED RESULTS FOR THE THIRD QUARTER

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

Actual

Three months

Three months

Three months

ended

ended

ended

September 30, 2005

September 30, 2004

Change(%)

September 30, 2005

(Unaudited)

(Unaudited)

(Unaudited)

Net sales

878,503

838,304

4.8

7,774,363

Operating profit

143,565

158,299

–

9.3

1,270,487

Income before income taxes and minority interests

155,312

162,629

–

4.5

1,374,442

Net income

100,617

101,780

–

1.1

890,416

Net income per share:

- Basic

113.40

114.79

–

1.2

1.00

- Diluted

113.31

114.62

–

1.1

1.00

CONSOLIDATED RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005

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


	Actual								Projected
	Nine months		Nine months				Nine months		Year ending
	ended		ended				ended		December 31,
	September 30, 2005		September 30, 2004		Change(%)		September 30, 2005		2005		Change(%)
	(Unaudited)		(Unaudited)				(Unaudited)
Net sales	¥	2,634,343	¥	2,486,724	+	5.9	$	23,312,770	¥	3,740,000	+	7.8
Operating profit		413,754		411,675	+	0.5		3,661,540		587,000	+	7.9
Income before income taxes and minority interests		439,045		422,603	+	3.9		3,885,354		614,000	+	11.2
Net income	¥	275,885	¥	262,556	+	5.1	$	2,441,460	¥	384,000	+	11.8


Net income per share:
- Basic	¥	311.01	¥	296.70	+	4.8	$	2.75	¥	432.73	+	11.6
- Diluted		310.69		295.80	+	5.0		2.75		—		—

Actual

As of

As of

As of

September 30, 2005

December 31, 2004

Change(%)

September 30, 2005

(Unaudited)

Total assets

3,805,641

3,587,021

6.1

33,678,239

Stockholders’ equity

2,448,242

2,209,896

10.8

21,665,858


Notes:	1.	Canon’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.

	2.	U.S. dollar amounts are translated from yen at the rate of JPY113=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of September 30, 2005, solely for the convenience of the reader.



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

- 1 -

Operating Results and Financial Conditions

2005 Third Quarter in Review

Looking back at the global economy in the third quarter of 2005, the U.S. economy continued to display growth despite concern over the economic impact of escalating crude oil prices, with private sector capital spending continuing to grow and employment conditions and capacity utilization remaining at stable levels. In Europe, such factors as an improved job market have resulted in a trend toward moderate recovery. As for Asia, while the rate of expansion in consumer spending and capital investment declined somewhat, China continued to achieve high economic growth and other Asian economies also enjoyed generally favorable performances. In Japan, the economy continued to recover gradually thanks to such factors as increased corporate investment and improved employment conditions, fueled by favorable corporate profits, and consumer spending remained robust.

As for the markets in which the Canon Group operates, within the camera segment demand for digital single-lens-reflex (SLR) cameras continued to grow significantly during the term. Sales of digital compact cameras also remained strong to realize healthy overall growth for the segment. Demand for network digital multifunction devices (MFDs) stayed strong as the office market moves toward multifunctionality, speed and color. Although sales of computer peripherals, including printers, grew for both multifunction and color models, the segment suffered amid a shift in demand toward high-performance low-priced machines. Demand for steppers, used in the production of semiconductors, tapered off because investment by chip manufacturers has entered a correction phase. Increased investment by manufacturers of liquid crystal displays (LCDs) fueled growth in the market for projection aligners, which are used in the production of LCD panels. The average value of the yen for the third quarter was ¥111.23 to the U.S. dollar and ¥135.73 to the euro, representing a year-on-year decrease of almost 1% against both currencies.

Amid these conditions, Canon’s consolidated net sales for the third quarter increased by 4.8% from the year-ago period to ¥878.5 billion (U.S.$7,774 million), boosted by a favorable rise in sales of digital cameras and color network MFDs, along with an increase in sales of printers. Net income for the third quarter totaled ¥100.6 billion (U.S.$890 million), a slight decrease of 1.1% year-on-year, mainly caused by such factors from the previous year as the gain realized from the return to the Japanese Government of the substitutional portion of the employees pension funds. With the ongoing production-reform efforts through the integration of manufacturing and development operations during the term and the timely launch of competitive new products amid the rising cost of crude oil and raw materials, Canon’s gross profit ratio for the third quarter was 48.9%, the same level as the year-ago period. Selling, general and administrative expenses for the third quarter increased 13.8% year-on-year, mainly due to such factors as R&D expenditures for the development of future businesses and increased advertising and sales promotion spending, along with such factors as expenses related to Canon Expo 2005, a showcase of the company’s latest products and future technologies that is held every 5 years, and a ¥13.8 billion expense deduction for the gain from the year-ago period realized from the return to the Japanese Government of the substitutional portion of the employees pension funds that the company and certain of its subsidiaries in Japan had operated. Consequently, operating profit in the third quarter totaled ¥143.6 billion (U.S.$1,270 million), a year-on-year decrease of 9.3%. Other income (deductions) improved by ¥7.4 billion (U.S.$66 million), mainly due to an increase in interest revenue and sales on securities. As a result, income before income taxes and minority interests in the third quarter totaled ¥155.3 billion (U.S.$1,374 million), a year-on-year decrease of 4.5%. The effective tax rate during the third quarter was 1.4 points lower compared with the previous year due to such factors as the introduction of the corporation size-based enterprise tax in Japan, which reduced the statutory tax rate from 42% to 40%. Consequently, as stated earlier, net income for the third quarter of 2005 totaled ¥100.6 billion (U.S.$890 million).

Basic net income per share for the third quarter was ¥113.40 (U.S.$1.00), a year-on-year decrease of ¥1.39 (U.S.$0.01).

- 2 -

Results by Product Segment

In the business machine segment, demand for network digital MFDs, which are grouped in the office imaging products sub-segment, indicates a shift from monochrome machines to color models, as well as a trend toward higher-end features. Additionally, amid color network digital MFDs, the iR C3170/2570 and iR C3220/2620 series continued to sell well in both Japan and overseas markets. Among monochrome network digital MFDs, such mid-level models as the iR4570/3570/2870/2270 contributed to the realization of expanded sales. Overall, sales of office imaging products in the third quarter realized a year-on-year increase of 3.7%. In the field of computer peripherals, laser beam printers enjoyed a year-on-year increase in unit sales, with color models increasing more than 30% and monochrome machines also recording healthy growth. Sales in value terms also realized growth despite the effect of the shift in market demand toward lower priced models. Inkjet printers recorded an increase in unit sales of approximately 10%, with the PIXMA iP3000/4000 and, in markets outside of Japan, the PIXMA MP110/130 maintaining brisk sales. Additionally, newly introduced models in overseas market, including the PIXMA iP4200/1600 and high-speed all-in-one models such as the PIXMA MP500/450, contributed to a stronger product lineup, which also led the sales in value term to realize growth. As a result, sales of computer peripherals for the third quarter realized a year-on-year increase of 4.4%. Sales of business information products, however, decreased by 15.4% due to the intentional curtailing of personal computer sales in the Japanese market. Collectively, sales of business machines during the third quarter totaled ¥598.2 billion (U.S.$5,294 million), a year-on-year increase of 3.1%. Despite active efforts to reduce costs and launch new products amid sever price competition, operating profit for the third quarter totaled ¥132.4 billion (U.S.$1,171 million), a year-on-year decrease of 5.2%, mainly due to a delay in the introduction of new inkjet printer products.

Within the camera segment, the continued strong demand for digital SLR cameras has fueled robust growth, with the EOS DIGITAL REBEL XT, launched in the first half, recording particularly strong sales along with continued healthy sales of the EOS 20D, launched in last year. This, in turn, has led to expanded sales of interchangeable lenses for SLR cameras. Sales of compact-model digital cameras also continued to expand apace, with healthy demand for the PowerShot SD400 and PowerShot A520, launched in the first half, as well as the PowerShot SD550 and PowerShot SD450, introduced in the third quarter. As a result, unit sales of digital cameras for the third quarter increased more than 30% from the year-ago period. In the field of digital video camcorders, newly introduced models such as the Optura 600, the Optura S1, and the DC20/10 recorded strong performances. Consequently, camera sales overall continued to enjoy growth of 23.1%, achieving total sales of ¥203.2 billion (U.S.$1,798 million). The operating profit ratio for the camera segment increased 6.0 points influenced by such factors as increased sales, cost reduction efforts, expanded sales of newly introduced models, and sales growth for such high valued-added products as digital SLR cameras. As a result, the operating profit for the period totaled ¥48.8 billion (U.S.$432 million), a year-on-year increase of 63.9%.

In the optical and other products segment, sales of steppers, used for the production of semiconductors, decreased substantially due to a drop in unit sales. While unit sales of aligners used in the production of LCDs decreased, sales in value terms remained at the same level as the previous year due to the rise in selling prices in line with the shift toward next-generation models capable of accommodating larger size LCD panels. As a result, third-quarter sales for the segment totaled ¥77.2 billion (U.S.$683 million), a year-on-year decrease of 17.3%. While efforts were made to reduce costs, operating profit for the segment declined year-on-year by 9.8% to ¥9.2 billion (U.S.$82 million), mainly due to the decrease in sales volume.

Cash Flow

In the nine months ended September 30, 2005, although Canon maintained the growth in sales and increased cash proceeds from sales, combined with an increase in net income, cash flow from operating activities totaled ¥368.7 billion (U.S.$3,263 million), a decrease of ¥18.6 billion (U.S.$165 million) due to an increased corporate tax payment accompanying the increase in profit last year.

Cash flow from investing activities totaled ¥288.4 billion (U.S.$2,552 million), a year-on-year increase of ¥113.3 billion (U.S.$1,002 million), caused by combination of such factors as a ¥271.0 billion (U.S.$2,398 million) in capital expenditure, which was used mainly to expand production capabilities in both Japan and overseas regions as well as to bolster the company’s R&D-related infrastructure, and also an acquisition of the stock of ANELVA Corporation.

Cash flow from financing activities recorded an outlay of ¥75.0 billion (U.S.$664 million), mainly resulting from continued repayment of loans and an increase in the dividend payout.

Consequently, cash and cash equivalents remained at a high level, totaling ¥903.1 billion (U.S.$7,992 million), an increase of ¥15.3 billion (U.S.$136 million), including the impact of currency exchange from the end of the previous year.

- 3 -

Outlook

Regarding the outlook for the global economy in the fourth quarter and thereafter, although prospects remain uncertain due to rising oil prices and the damage caused by catastrophic hurricanes in the United States, which could adversely affect consumer spending and exchange rate trends, the global economy is likely to continue its course toward recovery.

In the businesses in which Canon is involved, demand in the digital-camera market is expected to continue enjoying growth, particularly in overseas markets. As for network digital MFDs and laser beam printers, while stable demand is projected for full-color models, severe price competition and shifting demand toward lower priced models is expected to adversely affect sales. Within the semiconductor-production equipment market, demand for steppers has been tapering off, which is expected to result in sluggish sales. In the market for projection aligners used in the production of LCDs, demand for LCD production equipment is expected to show continued growth.

The company has revised upward its forecasts for the 2005 fiscal year and now anticipates consolidated net sales of ¥3,740.0 billion (U.S.$33,097 million), consolidated income before income taxes and minority interests of ¥614.0 billion (U.S.$5,434 million), and consolidated net income of ¥384.0 billion (U.S.$3,398 million). The company also projects non-consolidated net sales of ¥2,464.0 billion (U.S.$21,805 million), non-consolidated ordinary profit of ¥435.0 billion (U.S.$3,850 million), and non-consolidated net income of ¥286.0 billion (U.S.$2,531 million). Although uncertainty surrounds several factors that could affect currency exchange rates, significant changes in rates are not anticipated. The company’s forecasts for the remainder of 2005 are based on currency exchange assumptions of ¥112.00 to the U.S dollar and ¥135.00 to the euro.

- 4 -

Consolidated Outlook

Fiscal year


	Millions of yen
	Year ending						Year ended
	December 31, 2005				Change		December 31, 2004		Change (%)
	Previous Outlook (A)		Revised Outlook (B)		(B - A)		Results (C)		(B / C)
Net sales	¥	3,680,000	¥	3,740,000	¥	60,000	¥	3,467,853	+	7.8	%
Income before income taxes and minority interests		594,000		614,000		20,000		552,116	+	11.2	%
Net income		367,000		384,000		17,000		343,344	+	11.8	%

Non-consolidated Outlook

Fiscal year


	Millions of yen
	Year ending						Year ended
	December 31, 2005				Change		December 31, 2004		Change (%)
	Previous Outlook (A)		Revised Outlook (B)		(B - A)		Results (C)		(B / C)
Net sales	¥	2,446,000	¥	2,464,000	¥	18,000	¥	2,278,374	+	8.1	%
Ordinary profit		427,000		435,000		8,000		396,250	+	9.8	%
Net income		277,000		286,000		9,000		249,251	+	14.7	%

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

- 5 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

1. CONSOLIDATED STATEMENTS OF INCOME

Results for the third quarter

Thousands of

Millions of yen

U.S. dollars

Three months

Three months

Three months

ended

ended

ended

September 30, 2005

September 30, 2004

Change(%)

September 30, 2005

(Unaudited)

(Unaudited)

(Unaudited)

Net sales

878,503

838,304

4.8

7,774,363

Cost of sales

448,651

428,514

3,970,363

Gross profit

429,852

409,790

4.9

3,804,000

Selling, general and administrative expenses

286,287

251,491

2,533,513

Operating profit

143,565

158,299

–

9.3

1,270,487

Other income (deductions):

Interest and dividend income

3,573

1,690

31,619

Interest expense

(369

)

(538

)

(3,265

)

Other, net

8,543

3,178

75,601

11,747

4,330

103,955

Income before income taxes and minority interests

155,312

162,629

–

4.5

1,374,442

Income taxes

51,276

55,907

453,769

Income before minority interests

104,036

106,722

920,673

Minority interests

3,419

4,942

30,257

Net income

100,617

101,780

–

1.1

890,416


Note:		Canon’s comprehensive income consists of net income, change in foreign currency translation adjustments, change in net unrealized gains (losses) on securities, change in net gains (losses) on derivative financial instruments and change in minimum pension liability adjustments. Comprehensive income for the three months ended September 30, 2005 and 2004 were JPY112,928 million (U.S.$999,363 thousand) and JPY153,874 million, respectively.

Results for the nine months

Thousands of

Millions of yen

U.S. dollars

Nine months

Nine months

Nine months

ended

ended

ended

September 30, 2005

September 30, 2004

Change(%)

September 30, 2005

(Unaudited)

(Unaudited)

(Unaudited)

Net sales

2,634,343

2,486,724

5.9

23,312,770

Cost of sales

1,354,451

1,251,167

11,986,292

Gross profit

1,279,892

1,235,557

3.6

11,326,478

Selling, general and administrative expenses

866,138

823,882

7,664,938

Operating profit

413,754

411,675

0.5

3,661,540

Other income (deductions):

Interest and dividend income

9,543

4,717

84,451

Interest expense

(1,140

)

(1,976

)

(10,088

)

Other, net

16,888

8,187

149,451

25,291

10,928

223,814

Income before income taxes and minority interests

439,045

422,603

3.9

3,885,354

Income taxes

152,544

148,652

1,349,947

Income before minority interests

286,501

273,951

2,535,407

Minority interests

10,616

11,395

93,947

Net income

275,885

262,556

5.1

2,441,460


Note:		Canon’s comprehensive income consists of net income, change in foreign currency translation adjustments, change in net unrealized gains (losses) on securities, change in net gains (losses) on derivative financial instruments and change in minimum pension liability adjustments. Comprehensive income for the nine months ended September 30, 2005 and 2004 were JPY302,021 million (U.S.$2,672,752 thousand) and JPY314,340 million, respectively.

-6-

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

2. DETAILS OF SALES

Results for the third quarter

Thousands of

Millions of yen

U.S. dollars

Three months

Three months

Three months

ended

ended

ended

Sales by product

September 30, 2005

September 30, 2004

Change(%)

September 30, 2005

(Unaudited)

(Unaudited)

(Unaudited)

Business machines:

Office imaging products

275,337

265,590

3.7

2,436,611

Computer peripherals

299,861

287,243

4.4

2,653,637

Business information products

22,987

27,179

–

15.4

203,425

598,185

580,012

3.1

5,293,673

Cameras

203,160

164,991

23.1

1,797,876

Optical and other products

77,158

93,301

–

17.3

682,814

Total

878,503

838,304

4.8

7,774,363

Thousands of

Millions of yen

U.S. dollars

Three months

Three months

Three months

ended

ended

ended

Sales by region

September 30, 2005

September 30, 2004

Change(%)

September 30, 2005

(Unaudited)

(Unaudited)

(Unaudited)

Japan

195,320

196,104

–

0.4

1,728,496

Overseas:

Americas

274,177

254,121

7.9

2,426,345

Europe

270,621

254,844

6.2

2,394,876

Other areas

138,385

133,235

3.9

1,224,646

683,183

642,200

6.4

6,045,867

Total

878,503

838,304

4.8

7,774,363

Results for the nine months

Thousands of

Millions of yen

U.S. dollars

Nine months

Nine months

Nine months

ended

ended

ended

Sales by product

September 30, 2005

September 30, 2004

Change(%)

September 30, 2005

(Unaudited)

(Unaudited)

(Unaudited)

Business machines:

Office imaging products

843,136

819,838

2.8

7,461,381

Computer peripherals

877,598

817,915

7.3

7,766,354

Business information products

74,482

84,520

–

11.9

659,132

1,795,216

1,722,273

4.2

15,886,867

Cameras

582,312

512,324

13.7

5,153,204

Optical and other products

256,815

252,127

1.9

2,272,699

Total

2,634,343

2,486,724

5.9

23,312,770

Thousands of

Millions of yen

U.S. dollars

Nine months

Nine months

Nine months

ended

ended

ended

Sales by region

September 30, 2005

September 30, 2004

Change(%)

September 30, 2005

(Unaudited)

(Unaudited)

(Unaudited)

Japan

611,438

609,866

0.3

5,410,956

Overseas:

Americas

792,303

749,002

5.8

7,011,531

Europe

822,287

770,411

6.7

7,276,876

Other areas

408,315

357,445

14.2

3,613,407

2,022,905

1,876,858

7.8

17,901,814

Total

2,634,343

2,486,724

5.9

23,312,770


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

		Business machines:

		Office imaging products: Office network digital multifunction devices (MFDs) / Color network digital MFDs / Office copying machines / Personal-use copying machines / Full-color copying machines / etc.

		Computer peripherals: Laser beam printers / Single function inkjet printers / Inkjet multifunction peripherals / Image scanners / etc.

		Business information products: Computer information systems / Micrographic equipment / Personal information products / etc.

		Cameras: SLR cameras / Compact cameras / Digital cameras / Digital video camcorders / etc.

		Optical and other products: Semiconductor production equipment / Mirror projection mask aligners for LCD panels / Broadcasting equipment / Medical equipment / Components / etc.

		2. The principal countries and regions included in each regional category are as follows:

		Americas: United States of America, Canada, Latin America / Europe: England, Germany, France, Netherlands / Other Areas: Asian regions, China, Oceania

-7-

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

3. SEGMENT INFORMATION BY PRODUCT

Results for the third quarter


										Thousands of
	Millions of yen									U.S. dollars
	Three months			Three months						Three months
	ended			ended						ended
	September 30, 2005			September 30, 2004			Change(%)			September 30, 2005
	(Unaudited)			(Unaudited)						(Unaudited)
Business machines
Net sales:
Unaffiliated customers	¥	598,185		¥	580,012			+	3.1	$	5,293,673
Intersegment		—			—				—		—

Total		598,185			580,012			+	3.1		5,293,673

Operating cost and expenses		465,806			440,411			+	5.8		4,122,177

Operating profit		132,379			139,601			-	5.2		1,171,496


Cameras
Net sales:
Unaffiliated customers	¥	203,160		¥	164,991			+	23.1	$	1,797,876
Intersegment		—			—				—		—

Total		203,160			164,991			+	23.1		1,797,876

Operating cost and expenses		154,365			135,221			+	14.2		1,366,062

Operating profit		48,795			29,770			+	63.9		431,814


Optical and other products
Net sales:
Unaffiliated customers	¥	77,158		¥	93,301			-	17.3	$	682,814
Intersegment		41,721			36,857			+	13.2		369,213

Total		118,879			130,158			-	8.7		1,052,027

Operating cost and expenses		109,651			119,929			-	8.6		970,363

Operating profit		9,228			10,229			-	9.8		81,664


Corporate and Eliminations
Net sales:
Unaffiliated customers	¥	—		¥	—				—	$	—
Intersegment		(41,721	)		(36,857	)			—		(369,213	)

Total		(41,721	)		(36,857	)			—		(369,213	)

Operating cost and expenses		5,116			(15,556	)			—		45,274

Operating profit		(46,837	)		(21,301	)			—		(414,487	)


Consolidated
Net sales:
Unaffiliated customers	¥	878,503		¥	838,304			+	4.8	$	7,774,363
Intersegment		—			—				—		—

Total		878,503			838,304			+	4.8		7,774,363

Operating cost and expenses		734,938			680,005			+	8.1		6,503,876

Operating profit		143,565			158,299			-	9.3		1,270,487


Note:		General corporate expenses of JPY46,850 million (U.S.$414,602 thousand) and JPY21,301 million in the three months ended September 30, 2005 and 2004, respectively, are included in “Corporate and Eliminations.” For the three months ended September 30, 2004, a gain of JPY13,769 million is also included, which relates to the Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities.

-8-

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

Results for the nine months


										Thousands of
	Millions of yen									U.S. dollars
	Nine months			Nine months						Nine months
	ended			ended						ended
	September 30, 2005			September 30, 2004			Change(%)			September 30, 2005
	(Unaudited)			(Unaudited)						(Unaudited)
Business machines
Net sales:
Unaffiliated customers	¥	1,795,216		¥	1,722,273			+	4.2	$	15,886,867
Intersegment		—			—				—		—

Total		1,795,216			1,722,273			+	4.2		15,886,867

Operating cost and expenses		1,403,384			1,333,911			+	5.2		12,419,327

Operating profit		391,832			388,362			+	0.9		3,467,540


Cameras
Net sales:
Unaffiliated customers	¥	582,312		¥	512,324			+	13.7	$	5,153,204
Intersegment		—			—				—		—

Total		582,312			512,324			+	13.7		5,153,204

Operating cost and expenses		471,663			421,123			+	12.0		4,174,009

Operating profit		110,649			91,201			+	21.3		979,195


Optical and other products
Net sales:
Unaffiliated customers	¥	256,815		¥	252,127			+	1.9	$	2,272,699
Intersegment		113,539			102,413			+	10.9		1,004,770

Total		370,354			354,540			+	4.5		3,277,469

Operating cost and expenses		340,087			329,152			+	3.3		3,009,619

Operating profit		30,267			25,388			+	19.2		267,850


Corporate and Eliminations
Net sales:
Unaffiliated customers	¥	—		¥	—				—	$	—
Intersegment		(113,539	)		(102,413	)			—		(1,004,770	)

Total		(113,539	)		(102,413	)			—		(1,004,770	)

Operating cost and expenses		5,455			(9,137	)			—		48,275

Operating profit		(118,994	)		(93,276	)			—		(1,053,045	)


Consolidated
Net sales:
Unaffiliated customers	¥	2,634,343		¥	2,486,724			+	5.9	$	23,312,770
Intersegment		—			—				—		—

Total		2,634,343			2,486,724			+	5.9		23,312,770

Operating cost and expenses		2,220,589			2,075,049			+	7.0		19,651,230

Operating profit		413,754			411,675			+	0.5		3,661,540


Note:		General corporate expenses of JPY119,010 million (U.S.$1,053,186 thousand) and JPY93,346 million in the nine months ended September 30, 2005 and 2004, respectively, are included in “Corporate and Eliminations.” For the nine months ended September 30, 2004, a gain of JPY13,769 million is also included, which relates to the Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities.

-9-

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

4. CONSOLIDATED BALANCE SHEETS


										Thousands of
	Millions of yen									U.S. dollars
	As of			As of						As of
	September 30,			December 31,						September 30,
	2005			2004			Change			2005
	(Unaudited)									(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	¥	903,106		¥	887,774		¥	15,332		$	7,992,088
Marketable securities		1,274			1,554			(280	)		11,274
Trade receivables, net		571,930			602,790			(30,860	)		5,061,327
Inventories		538,320			489,128			49,192			4,763,894
Prepaid expenses and other current assets		264,696			250,906			13,790			2,342,444

Total current assets		2,279,326			2,232,152			47,174			20,171,027
Noncurrent receivables		14,050			14,567			(517	)		124,336
Investments		98,862			97,461			1,401			874,885
Property, plant and equipment, net		1,107,609			961,714			145,895			9,801,850
Other assets		305,794			281,127			24,667			2,706,141

Total assets	¥	3,805,641		¥	3,587,021		¥	218,620		$	33,678,239


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term loans and current portion of long-term debt	¥	17,639		¥	9,879		¥	7,760		$	156,097
Trade payables		472,334			465,396			6,938			4,179,947
Income taxes		58,500			105,565			(47,065	)		517,699
Accrued expenses		226,987			205,296			21,691			2,008,735
Other current liabilities		186,244			197,029			(10,785	)		1,648,177

Total current liabilities		961,704			983,165			(21,461	)		8,510,655
Long-term debt, excluding current installments		31,797			28,651			3,146			281,389
Accrued pension and severance cost		122,973			132,522			(9,549	)		1,088,257
Other noncurrent liabilities		46,260			45,993			267			409,380

Total liabilities		1,162,734			1,190,331			(27,597	)		10,289,681

Minority interests		194,665			186,794			7,871			1,722,700
Stockholders’ equity:
Common stock		174,274			173,864			410			1,542,248
Additional paid-in capital		402,103			401,773			330			3,558,434
Retained earnings		1,952,409			1,740,834			211,575			17,277,956
Accumulated other comprehensive income (loss)		(75,176	)		(101,312	)		26,136			(665,274	)
Treasury stock		(5,368	)		(5,263	)		(105	)		(47,506	)

Total stockholders’ equity		2,448,242			2,209,896			238,346			21,665,858

Total liabilities and stockholders’ equity	¥	3,805,641		¥	3,587,021		¥	218,620		$	33,678,239


										Thousands of
	Millions of yen									U.S. dollars
	As of			As of						As of
	September 30,			December 31,						September 30,
	2005			2004						2005
	(Unaudited)									(Unaudited)
Allowance for doubtful receivables	¥	11,952		¥	11,657					$	105,770
Accumulated depreciation		1,251,662			1,173,305						11,076,655
Accumulated other comprehensive income (loss):
Foreign currency translation adjustments		(51,181	)		(79,751	)					(452,929	)
Net unrealized gains (losses) on securities		4,645			7,470						41,106
Net gains (losses) on derivative financial instruments		(1,121	)		(693	)					(9,920	)
Minimum pension liability adjustments		(27,519	)		(28,338	)					(243,531	)

- 10 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

5. CONSOLIDATED STATEMENTS OF CASH FLOWS

Results for the nine months


							Thousands of
	Millions of yen						U.S. dollars
	Nine months			Nine months			Nine months
	ended			ended			ended
	September 30, 2005			September 30, 2004			September 30, 2005
	(Unaudited)			(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income	¥	275,885		¥	262,556		$	2,441,460
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		158,620			137,126			1,403,717
Loss on disposal of property, plant and equipment		7,288			7,974			64,496
Deferred income taxes		7,307			13,241			64,664
Decrease in trade receivables		52,001			7,617			460,186
Increase in inventories		(27,332	)		(83,678	)		(241,876	)
Increase (decrease) in trade payables		(10,438	)		92,632			(92,372	)
Decrease in income taxes		(47,186	)		(12,984	)		(417,575	)
Increase in accrued expenses		15,044			9,028			133,132
Decrease in accrued pension and severance cost		(10,496	)		(14,606	)		(92,885	)
Other, net		(52,030	)		(31,614	)		(460,443	)

Net cash provided by operating activities		368,663			387,292			3,262,504

Cash flows from investing activities:
Purchases of property, plant and equipment		(271,014	)		(197,277	)		(2,398,354	)
Proceeds from sale of property, plant and equipment		7,469			4,397			66,097
Purchases of available-for-sale securities		(1,591	)		(98	)		(14,080	)
Proceeds from sale of available-for-sale securities		11,090			9,733			98,142
Purchases of other investments		(16,916	)		(707	)		(149,699	)
Other, net		(17,367	)		8,847			(153,690	)

Net cash used in investing activities		(288,329	)		(175,105	)		(2,551,584	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		964			635			8,531
Repayments of long-term debt		(9,673	)		(32,079	)		(85,602	)
Increase (decrease) in short-term loans		1,501			(1,535	)		13,283
Dividends paid		(64,310	)		(52,950	)		(569,115	)
Other, net		(3,497	)		(4,848	)		(30,947	)

Net cash used in financing activities		(75,015	)		(90,777	)		(663,850	)

Effect of exchange rate changes on cash and cash equivalents		10,013			1,037			88,611

Net increase in cash and cash equivalents		15,332			122,447			135,681

Cash and cash equivalents at beginning of period		887,774			690,298			7,856,407

Cash and cash equivalents at end of period	¥	903,106		¥	812,745		$	7,992,088

- 11 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

6. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

(1) NUMBER OF GROUP COMPANIES


	September 30, 2005		December 31, 2004		Change
Subsidiaries		190		184		6
Affiliates		15		17		(2	)

Total		205		201		4

CHANGES IN GROUP OF ENTITIES


		Subsidiaries
		Addition:		10 Companies
		Removal:		4 Companies

		Affiliates (Carried at Equity Basis)
		Removal:		2 Companies

(2) SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements reflect the adjustments which management believes are necessary to conform them with accounting principles generally accepted in the United States of America, except for the segment information, as required by Statement of Financial Accounting Standards No.131, “Disclosures about Segments of an Enterprise and Related Information.”

7. OTHER

We have engaged Ernst & Young ShinNihon to complete a review of the consolidated statements of income, the consolidated balance sheets and the consolidated statements of cash flows as of and for the three and nine months ended September 30, 2005 based upon Statement of Auditing Standards No.100, “Interim Financial Information,” established by the American Institute of Certified Public Accountants.

- 12 -

Canon Inc.
October 27, 2005

CONSOLIDATED FINANCIAL RESULTS FOR
THE THIRD QUARTER ENDED SEPTEMBER 30, 2005
SUPPLEMENTARY REPORT

TABLE OF CONTENTS


		PAGE
1.	SALES BY REGION AND PRODUCT	S1
2.	SEGMENT INFORMATION BY PRODUCT	S2
3.	OTHER INCOME / DEDUCTIONS	S2
4.	SALES COMPOSITION BY PRODUCT	S3
5.	SALES GROWTH IN LOCAL CURRENCY	S3
6.	P&L SUMMARY (4th Quarter 2005/Projection)	S4
7.	PROFITABILITY	S4
8.	IMPACT OF FOREIGN EXCHANGE RATES	S4
9.	STATEMENTS OF CASH FLOWS	S4
10.	R&D EXPENDITURE	S5
11.	CAPITAL EXPENDITURE & DEPRECIATION AND AMORTIZATION	S5
12.	INVENTORIES	S5
13.	DEBT RATIO	S5
14.	OVERSEAS PRODUCTION RATIO	S5
15.	NUMBER OF EMPLOYEES	S5

Canon Inc.


1.SALES BY REGION AND PRODUCT		(Millions of yen)


	2005						2004						Change year over year
			4th quarter		Year
	3rd quarter		(P)		(P)		3rd quarter		4th quarter		Year		3rd quarter			4th quarter			Year
Japan
Business machines		138,824		188,767		632,100		138,521		172,541		602,772		+0.2	%		+9.4	%		+4.9	%
Office imaging products		87,260		97,796		370,600		82,520		86,863		336,214		+5.7	%		+12.6	%		+10.2	%
Computer peripherals		36,191		68,000		187,100		35,551		61,894		178,783		+1.8	%		+9.9	%		+4.7	%
Business information products		15,373		22,971		74,400		20,450		23,784		87,775		-24.8	%		-3.4	%		-15.2	%
Cameras		33,667		39,234		130,900		29,168		36,389		124,403		+15.4	%		+7.8	%		+5.2	%
Optical and other products		22,829		51,361		127,800		28,415		30,938		122,559		-19.7	%		+66.0	%		+4.3	%

Total		195,320		279,362		890,800		196,104		239,868		849,734		-0.4	%		+16.5	%		+4.8	%

Overseas
Business machines		459,361		534,117		1,886,000		441,491		493,139		1,785,181		+4.0	%		+8.3	%		+5.6	%
Office imaging products		188,077		228,168		798,500		183,070		214,271		784,758		+2.7	%		+6.5	%		+1.8	%
Computer peripherals		263,670		296,402		1,054,900		251,692		270,105		971,131		+4.8	%		+9.7	%		+8.6	%
Business information products		7,614		9,547		32,600		6,729		8,763		29,292		+13.2	%		+8.9	%		+11.3	%
Cameras		169,493		236,554		727,200		135,823		214,366		638,676		+24.8	%		+10.4	%		+13.9	%
Optical and other products		54,329		55,624		236,000		64,886		33,756		194,262		-16.3	%		+64.8	%		+21.5	%

Total		683,183		826,295		2,849,200		642,200		741,261		2,618,119		+6.4	%		+11.5	%		+8.8	%

Americas
Business machines		195,487		218,647		789,100		190,549		206,347		762,592		+2.6	%		+6.0	%		+3.5	%
Office imaging products		88,124		96,107		350,000		85,051		94,355		355,375		+3.6	%		+1.9	%		-1.5	%
Computer peripherals		103,341		117,973		423,100		102,008		107,754		392,800		+1.3	%		+9.5	%		+7.7	%
Business information products		4,022		4,567		16,000		3,490		4,238		14,417		+15.2	%		+7.8	%		+11.0	%
Cameras		68,533		107,702		300,800		53,515		95,181		262,873		+28.1	%		+13.2	%		+14.4	%
Optical and other products		10,157		9,548		38,300		10,057		8,895		33,960		+1.0	%		+7.3	%		+12.8	%

Total		274,177		335,897		1,128,200		254,121		310,423		1,059,425		+7.9	%		+8.2	%		+6.5	%

Europe
Business machines		196,343		245,231		839,600		191,143		227,892		794,601		+2.7	%		+7.6	%		+5.7	%
Office imaging products		77,550		108,278		361,900		77,717		100,790		350,644		-0.2	%		+7.4	%		+3.2	%
Computer peripherals		115,947		132,753		464,100		110,845		123,205		431,742		+4.6	%		+7.7	%		+7.5	%
Business information products		2,846		4,200		13,600		2,581		3,897		12,215		+10.3	%		+7.8	%		+11.3	%
Cameras		68,709		93,358		303,900		58,684		89,461		277,307		+17.1	%		+4.4	%		+9.6	%
Optical and other products		5,569		6,724		24,100		5,017		5,531		21,387		+11.0	%		+21.6	%		+12.7	%

Total		270,621		345,313		1,167,600		254,844		322,884		1,093,295		+6.2	%		+6.9	%		+6.8	%

Other areas
Business machines		67,531		70,239		257,300		59,799		58,900		227,988		+12.9	%		+19.3	%		+12.9	%
Office imaging products		22,403		23,783		86,600		20,302		19,126		78,739		+10.3	%		+24.3	%		+10.0	%
Computer peripherals		44,382		45,676		167,700		38,839		39,146		146,589		+14.3	%		+16.7	%		+14.4	%
Business information products		746		780		3,000		658		628		2,660		+13.4	%		+24.2	%		+12.8	%
Cameras		32,251		35,494		122,500		23,624		29,724		98,496		+36.5	%		+19.4	%		+24.4	%
Optical and other products		38,603		39,352		173,600		49,812		19,330		138,915		-22.5	%		+103.6	%		+25.0	%

Total		138,385		145,085		553,400		133,235		107,954		465,399		+3.9	%		+34.4	%		+18.9	%

Total
Business machines		598,185		722,884		2,518,100		580,012		665,680		2,387,953		+3.1	%		+8.6	%		+5.5	%
Office imaging products		275,337		325,964		1,169,100		265,590		301,134		1,120,972		+3.7	%		+8.2	%		+4.3	%
Computer peripherals		299,861		364,402		1,242,000		287,243		331,999		1,149,914		+4.4	%		+9.8	%		+8.0	%
Business information products		22,987		32,518		107,000		27,179		32,547		117,067		-15.4	%		-0.1	%		-8.6	%
Cameras		203,160		275,788		858,100		164,991		250,755		763,079		+23.1	%		+10.0	%		+12.5	%
Optical and other products		77,158		106,985		363,800		93,301		64,694		316,821		-17.3	%		+65.4	%		+14.8	%

Total		878,503		1,105,657		3,740,000		838,304		981,129		3,467,853		+4.8	%		+12.7	%		+7.8	%

(P)=Projection

-S1-

Canon Inc.


2. SEGMENT INFORMATION BY PRODUCT		(Millions of yen)


	2005									2004									Change year over year
				4th quarter			Year
	3rd quarter			(P)			(P)			3rd quarter			4th quarter			Year			3rd quarter			4th quarter			Year
Business machines
Unaffiliated customers		598,185			722,884			2,518,100			580,012			665,680			2,387,953			+3.1	%		+8.6	%		+5.5	%
Intersegment		—			—			—			—			—			—			—			—			—

Total sales		598,185			722,884			2,518,100			580,012			665,680			2,387,953			+3.1	%		+8.6	%		+5.5	%

Operating profit		132,379			162,168			554,000			139,601			132,722			521,084			-5.2	%		+22.2	%		+6.3	%
% of sales		22.1	%		22.4	%		22.0	%		24.1	%		19.9	%		21.8	%		—			—			—
Cameras
Unaffiliated customers		203,160			275,788			858,100			164,991			250,755			763,079			+23.1	%		+10.0	%		+12.5	%
Intersegment		—			—			—			—			—			—			—			—			—

Total sales		203,160			275,788			858,100			164,991			250,755			763,079			+23.1	%		+10.0	%		+12.5	%

Operating profit		48,795			51,051			161,700			29,770			39,597			130,798			+63.9	%		+28.9	%		+23.6	%
% of sales		24.0	%		18.5	%		18.8	%		18.0	%		15.8	%		17.1	%		—			—			—
Optical and other products
Unaffiliated customers		77,158			106,985			363,800			93,301			64,694			316,821			-17.3	%		+65.4	%		+14.8	%
Intersegment		41,721			38,061			151,600			36,857			36,006			138,419			+13.2	%		+5.7	%		+9.5	%

Total sales		118,879			145,046			515,400			130,158			100,700			455,240			-8.7	%		+44.0	%		+13.2	%

Operating profit		9,228			8,933			39,200			10,229			3,444			28,832			-9.8	%		+159.4	%		+36.0	%
% of sales		7.8	%		6.2	%		7.6	%		7.9	%		3.4	%		6.3	%		—			—			—
Corporate and Eliminations
Unaffiliated customers		—			—			—			—			—			—			—			—			—
Intersegment		-41,721			-38,061			-151,600			-36,857			-36,006			-138,419			—			—			—

Total sales		-41,721			-38,061			-151,600			-36,857			-36,006			-138,419			—			—			—

Operating profit		-46,837			-48,906			-167,900			-21,301			-43,645			-136,921			—			—			—
Consolidated
Unaffiliated customers		878,503			1,105,657			3,740,000			838,304			981,129			3,467,853			+4.8	%		+12.7	%		+7.8	%
Intersegment		—			—			—			—			—			—			—			—			—

Total sales		878,503			1,105,657			3,740,000			838,304			981,129			3,467,853			+4.8	%		+12.7	%		+7.8	%

Operating profit		143,565			173,246			587,000			158,299			132,118			543,793			-9.3	%		+31.1	%		+7.9	%
% of sales		16.3	%		15.7	%		15.7	%		18.9	%		13.5	%		15.7	%		—			—			—

(P)=Projection


3. OTHER INCOME / DEDUCTIONS		(Millions of yen)


	2005						2004						Change year over year
			4th quarter		Year
	3rd quarter		(P)		(P)		3rd quarter		4th quarter		Year		3rd quarter		4th quarter		Year
Interest and dividend, net		3,204		3,197		11,600		1,152		1,621		4,362		+2,052		+1,576		+7,238
Forex gain / loss		-550		-3,452		-4,900		-1,200		-11,440		-17,800		+650		+7,988		+12,900
Equity earnings / loss of affiliated companies		-589		228		1,700		23		1,107		1,921		-612		-879		-221
Other, net		9,682		1,736		18,600		4,355		6,107		19,840		+5,327		-4,371		-1,240

Total		11,747		1,709		27,000		4,330		-2,605		8,323		+7,417		+4,314		+18,677

(P)=Projection

-S2-

Canon Inc.

SALES COMPOSITION BY PRODUCT


	2005									2004
				4th quarter			Year
	3rd quarter			(P)			(P)			3rd quarter			4th quarter			Year
Office imaging products
Monochrome copying machines		56	%		53	%		56	%		61	%		59	%		62	%
Digital*		96	%		—			—			95	%		96	%		95	%
Analog*		4	%		—			—			5	%		4	%		5	%
Color copying machines		29	%		32	%		29	%		25	%		26	%		24	%
Others		15	%		15	%		15	%		14	%		15	%		14	%
Computer peripherals
Laser beam printers		75	%		63	%		70	%		75	%		67	%		71	%
Inkjet printers		24	%		36	%		28	%		23	%		31	%		27	%
(includes inkjet MFPs) Others		1	%		1	%		2	%		2	%		2	%		2	%
Business information products
Personal computers		67	%		72	%		70	%		74	%		71	%		74	%
Others		33	%		28	%		30	%		26	%		29	%		26	%
Cameras
Film cameras / Lenses		18	%		14	%		16	%		16	%		14	%		16	%
Digital cameras		70	%		71	%		71	%		68	%		73	%		69	%
Video cameras		12	%		15	%		13	%		16	%		13	%		15	%
Optical and other products
Semiconductor production equipment		62	%		47	%		60	%		70	%		51	%		63	%
Others		38	%		53	%		40	%		30	%		49	%		37	%


*	Among office-use monochrome copying machines (hardware only)	(P)=Projection

SALES GROWTH IN LOCAL CURRENCY


	2005
				4th quarter			Year
	3rd quarter			(P)			(P)
Business machines
Japan		+0.2	%		+9.4	%		+4.9	%
Overseas		+2.7	%		+5.2	%		+4.7	%

Total		+2.1	%		+6.3	%		+4.8	%

Cameras
Japan		+15.4	%		+7.8	%		+5.2	%
Overseas		+23.3	%		+7.5	%		+12.6	%

Total		+21.9	%		+7.6	%		+11.4	%

Optical and other products
Japan		-19.7	%		+66.0	%		+4.3	%
Overseas		-19.1	%		+61.1	%		+19.4	%

Total		-19.2	%		+63.4	%		+13.5	%

Total
Japan		-0.4	%		+16.5	%		+4.8	%
Overseas		+4.9	%		+8.4	%		+7.8	%
Americas		+6.7	%		+2.3	%		+5.6	%
Europe		+5.1	%		+7.4	%		+5.9	%
Other areas		+1.0	%		+29.1	%		+17.0	%

Total		+3.6	%		+10.4	%		+7.0	%

(P)=Projection

-S3-

Canon Inc.


6. P&L SUMMARY (4th Quarter 2005/Projection)		(Millions of yen)


	2005		2004		Change year
	4th quarter(P)		4th quarter		over year
Net sales		1,105,657		981,129		+12.7	%
Operating profit		173,246		132,118		+31.1	%
Income before income taxes and minority interests		174,955		129,513		+35.1	%
Net income		108,115		80,788		+33.8	%

(P)=Projection

PROFITABILITY


	2005						2004
	3rd quarter			Year(P)			3rd quarter			Year
ROE		16.7	%		16.1	%		19.6	%		16.8	%
ROA		10.8	%		10.1	%		12.0	%		10.1	%

(P)=Projection

IMPACT OF FOREIGN EXCHANGE RATES


		(1) Exchange rates		(Yen)


	2005						2004
	3rd quarter		4th quarter(P)		Year(P)		3rd quarter		4th quarter		Year
Yen/US$		111.23		112.00		109.07		109.97		105.86		108.12
Yen/Euro		135.73		135.00		135.71		134.37		137.14		134.57

(P)=Projection


		(2) Impact of foreign exchange rates on sales (Year over year)		(Billions of yen)

2005

3rd quarter

4th quarter(P)

Year(P)

US$

+5.5

+23.1

+18.5

Euro

+2.2

-4.5

+6.7

Other currencies

+3.0

+1.6

+6.8

Total

+10.7

+20.2

+32.0

(P)=Projection


		(3) Impact of foreign exchange rates per yen		(Billions of yen)


	2005
	4th quarter(P)
On sales
US$		3.8
Euro		2.1
On operating profit
US$		2.1
Euro		1.6

(P)=Projection


9. STATEMENTS OF CASH FLOWS		(Millions of yen)


	2005				2004
	3rd quarter		Year(P)		3rd quarter		Year
Net cash provided by operating activities
Net income		100,617		384,000		101,780		343,344
Depreciation and amortization		60,064		220,000		49,746		192,692
Other, net		-49,979		16,000		-62,061		25,493

Total		110,702		620,000		89,465		561,529

Net cash used in investing activities		-107,273		-430,000		-65,185		-252,967
Free cash flow		3,429		190,000		24,280		308,562
Net cash used in financing activities		-36,606		-90,800		-26,451		-102,268
Effect of exchange rate changes on cash and cash equivalents		362		9,700		3,695		-8,818
Net change in cash and cash equivalents		-32,815		108,900		1,524		197,476
Cash and cash equivalents at end of period		903,106		996,700		812,745		887,774

(P)=Projection

-S4-

Canon Inc.


10. R&D EXPENDITURE		(Millions of yen)


	2005									2004
	3rd quarter			4th quarter(P)			Year(P)			3rd quarter			4th quarter			Year
Business machines		25,359			—			—			25,908			36,964			120,916
Cameras		9,932			—			—			8,458			10,339			35,549
Optical and other products		29,723			—			—			25,054			36,215			118,835

Total		65,014			91,600			293,000			59,420			83,518			275,300

% of sales		7.4	%		8.3	%		7.8	%		7.1	%		8.5	%		7.9	%

(P)=Projection


11. CAPITAL EXPENDITURE & DEPRECIATION AND AMORTIZATION		(Millions of yen)


	2005						2004
	3rd quarter		4th quarter(P)		Year(P)		3rd quarter		4th quarter		Year
Capital expenditure		109,044		118,686		405,000		85,784		99,190		318,730
Depreciation and amortization		60,064		61,380		220,000		49,746		55,566		192,692

(P)=Projection


12. INVENTORIES		(Millions of yen)


		(1) Inventories


	2005		2004
	Sep.30		Dec.31		Difference
Business machines		289,343		244,050		+45,293
Cameras		96,804		90,620		+6,184
Optical and other products		152,173		154,458		-2,285

Total		538,320		489,128		+49,192


		(2) Inventories/Sales*		(Days)


	2005		2004
	Sep.30		Dec.31		Difference
Business machines		44		36		+8
Cameras		42		40		+2
Optical and other products		166		178		-12

Total		55		49		+6


*	Index based on the previous six months sales.

13. DEBT RATIO


	2005			2004
	Sep.30			Dec.31			Difference
Total debt / Total assets		1.3	%		1.1	%		+0.2	%

14. OVERSEAS PRODUCTION RATIO


	2005			2004
	1st-3rd quarter			Year
Overseas production ratio		41	%		42	%

15. NUMBER OF EMPLOYEES


	2005		2004
	Sep.30		Dec.31		Difference
Japan		47,847		46,103		+1,744
Overseas		64,965		62,154		+2,811

Total		112,812		108,257		+4,555

-S5-

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