Edgar Filing: CANON INC

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 ….		October		………………………………………………… ,		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-.………………..

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, 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 THIRD QUARTER AND THE NINE MONTHS ENDED SEPTEMBER 30, 2016

LOGO

CONSOLIDATED RESULTS FOR THE THIRD QUARTER AND

THE NINE MONTHS ENDED SEPTEMBER 30, 2016

October 26, 2016

CONSOLIDATED RESULTS FOR THE THIRD QUARTER

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


		Actual
	Three months ended September 30, 2016		Three months ended September 30, 2015		Change(%)			Three months ended September 30, 2016
Net sales	¥	778,838	¥	925,782		-	15.9	$	7,711,267
Operating profit		40,015		77,259		-	48.2		396,188
Income before income taxes		45,263		73,961		-	38.8		448,149
Net income attributable to Canon Inc.	¥	24,381	¥	49,180		-	50.4	$	241,396


Net income attributable to Canon Inc. stockholders per share:

- Basic	¥	22.33	¥	45.03		-	50.4	$	0.22
- Diluted		22.33		45.03		-	50.4		0.22


CONSOLIDATED RESULTS FOR THE NINE MONTHS

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

		Actual									Projected
	Nine months ended September 30, 2016		Nine months ended September 30, 2015		Change(%)			Nine months ended September 30, 2016		Year ending December 31, 2016		Change(%)

Net sales	¥	2,436,314	¥	2,757,633		-	11.7	$	24,121,921	¥	3,360,000		-	11.6
Operating profit		148,698		248,168		-	40.1		1,472,257		235,000		-	33.8
Income before income taxes		172,016		238,477		-	27.9		1,703,129		262,000		-	24.6
Net income attributable to Canon Inc.	¥	105,820	¥	151,305		-	30.1	$	1,047,723	¥	165,000		-	25.1


Net income attributable to Canon Inc. stockholders per share:

- Basic	¥	96.90	¥	138.56		-	30.1	$	0.96	¥	151.09		-	25.1
- Diluted		96.90		138.55		-	30.1		0.96		-			-


	Actual
	As of September 30, 2016		As of December 31, 2015		Change(%)			As of September 30, 2016

Total assets	¥	4,530,096	¥	4,427,773		+	2.3	$	44,852,436


Canon Inc. stockholders’ equity	¥	2,622,133	¥	2,966,415		-	11.6	$	25,961,713


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 JPY101=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of September 30, 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

- 1 -

I. Operating Results and Financial Conditions

2016 Third Quarter in Review

Looking back at the global economy in the third quarter of 2016, the U.S. economy continued recovering moderately as consumer spending and employment conditions improved. In Europe, although consumer spending and exports grew moderately, particularly in Germany, the outlook for the region’s economy has grown increasingly uncertain due to concerns over the U.K.’s decision to exit the EU. The Chinese economy continued its deceleration trend while the economies of many emerging countries, including Russia and Brazil, remained stagnant. In Japan, although employment conditions continued to improve, corporate capital investment remained weak. Looking at the global economy as a whole, the recovery has been weaker than was expected at the beginning of 2016.

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 demand for laser printers decreased from the previous year due to sluggish economic conditions in emerging countries. As for cameras, the market, which had been facing decreasing demand, primarily for digital compact cameras, suffered from a shortage of components arising from the Kumamoto earthquake earlier in the year. Additionally, demand for consumer inkjet printers continued to decline. Within the Industry and Others sector, however, demand for lithography equipment used in the production of flat panel displays (FPDs) and manufacturing equipment for organic LED (OLED) displays enjoyed strong growth thanks to active capital investment by panel manufacturers.

The average value of the yen during the third quarter was ¥102.33 against the U.S. dollar, a year-on-year appreciation of approximately ¥20, and ¥114.25 against the euro, a year-on-year appreciation of approximately ¥22, which had a negative impact on net sales of ¥103.9 billion and on operating profit of ¥36.4 billion. As for the first nine months of the year, the average value of the yen was ¥108.25 against the U.S. dollar, a year-on-year appreciation of approximately ¥13, and ¥121.13 against the euro, a year-on-year appreciation of approximately ¥14, which had a negative impact on net sales of ¥210.7 billion and on operating profit of ¥79.9 billion.

During the third quarter, although office MFDs enjoyed solid demand, mainly for color models, sales of laser printers declined due to sluggish economic conditions in emerging countries. Looking at interchangeable-lens digital cameras, sales volume for the quarter exceeded that for the same period of the previous year supported by sales of new products and compact-system cameras, while sales volume for digital compact cameras declined in all regions compared with the previous year amid the ongoing contraction of the market. Sales volume for inkjet printers also declined due to the shrinking market for consumer products. In contrast, sales of industrial equipment increased, particularly systems used in the production of OLED displays, boosted by increased capital investment by panel manufacturers. Consequently, along with the negative impact of the appreciation of the yen, third-quarter net sales decreased 15.9% year on year to ¥778.8 billion. Net sales for the nine months ended September 30, 2016 totaled ¥2,436.3 billion, a year-on-year decrease of 11.7%. The gross profit ratio decreased by 2.3 points year on year to 48.4% mainly due to the negative effect of the yen’s appreciation. Despite a reduction in operating expenses of 14.1% year on year thanks to Group-wide efforts to reduce spending, third-quarter operating profit decreased by 48.2% to ¥40.0 billion. Other income (deductions) increased by ¥8.5 billion due to foreign currency exchange gains while income before income taxes decreased by 38.8% year on year to ¥45.3 billion and net income attributable to Canon Inc. decreased by 50.4% to ¥24.4 billion. Operating profit for the first nine months of the year decreased by 40.1% to ¥148.7 billion while income before income taxes decreased by 27.9% to ¥172.0 billion and net income attributable to Canon Inc. over the same period decreased by 30.1% to ¥105.8 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥22.33 for the third quarter, a year-on-year decrease of ¥22.70, and ¥96.90 for the first nine months, a year-on-year decrease of ¥41.66.

- 2 -

Results by Segment

Looking at Canon’s third-quarter performance by business unit, beginning with the Office Business Unit, unit sales of office MFDs overall increased from the same period of the previous year thanks to strong sales of color machines. This growth was supported by steady sales of the A3 (12”x18”)-model imageRUNNER ADVANCE C5500 series, which was released this year, and the small-office/home-office color A3 (12”x18”)-model imageRUNNER ADVANCE C3300 series, which was launched in the previous year, along with expanded sales of the imagePRESS C10000VP series, which targets the production printing market. Among high-speed continuous-feed printers, unit sales of the Océ-produced VarioPrint i300, a high-speed sheet-fed color inkjet press, increased year on year. As for laser printers, although unit sales for the quarter only declined slightly year on year, the impact of sluggish economic conditions led to a significant decrease in sales of consumables that has continued from the second quarter of 2016. These factors, coupled with the negative effect of unfavorable currency exchange rates, resulted in total sales for the business unit of ¥411.2 billion, decreasing 19.5% year on year, while operating profit totaled ¥28.6 billion, a year-on-year decline of 57.5%. Sales for the combined first nine months of the year totaled ¥1,322.0 billion, a year-on-year decrease of 16.2%, while operating profit totaled ¥120.9 billion, a year-on-year decline of 44.6%.

Within the Imaging System Business Unit, sales volume for interchangeable-lens digital cameras grew compared with same period of the previous year owing to healthy demand for the advanced-amateur-model EOS 80D and EOS 5D Mark IV digital SLR cameras, which were launched this year, and an increase in sales volume in Asia, Japan and European markets of the EOS M3 and M10 compact-system cameras, which were released in the previous year. As for digital compact cameras, sales volume declined amid difficulties in procuring components due to the Kumamoto earthquake earlier in the year, along with the ongoing contraction of the market. As for inkjet printers, although sales volume declined compared with the same period of the previous year due to the shrinking market for consumer products, strong demand fueled sales of models equipped with large-capacity ink tanks targeting emerging countries, which were launched in the previous year, and of the new imagePROGRAF PRO-4000, which targets the graphic art market. As a result of these factors, along with the negative effect of unfavorable currency exchange rates, sales for the business unit decreased by 17.9% to ¥248.2 billion while operating profit totaled ¥29.9 billion, a year-on-year decline of 28.4%. Sales for the combined first nine months of the year totaled ¥770.5 billion, a year-on-year decrease of 14.2%, while operating profit totaled ¥92.7 billion, declining 23.6% year on year.

In the Industry and Others Business Unit, unit sales of semiconductor lithography equipment decreased from the same period of the previous year amid the postponement of some capital investments by customers. As for FPD lithography equipment, unit sales of lithography systems employed in the fabrication of mid- and small-size panels increased in response to growing demand for high-definition OLED displays used in mobile devices. Also, sales of manufacturing equipment for OLED displays, which is sold by Canon Tokki, increased amid brisk capital investment by panel manufacturers. In addition, sales of network cameras enjoyed healthy demand thanks to efforts to strengthen the product lineup, such as the launch of new products capable of color image capture over long distances even at night. Consequently, sales for the business unit increased 1.5% year on year to ¥140.9 billion while operating profit grew by ¥3.8 billion to ¥4.4 billion. Sales for the combined first nine months of the year totaled ¥409.0 billion, a year-on-year increase of 14.1%, while operating profit totaled ¥4.3 billion, an improvement of ¥14.6 billion compared with the previous year.

Cash Flow

During the first nine months of 2016, cash flow from operating activities totaled ¥343.4 billion, an increase of ¥12.5 billion compared with the previous year owing to improvements in such working capital as trade receivables. Cash flow from investing activities increased ¥460.4 billion year on year to ¥824.9 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 ¥481.5 billion, a decrease of ¥447.9 billion compared with the corresponding year-ago period.

Cash flow from financing activities recorded proceeds of ¥436.3 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 ¥99.1 billion to ¥534.5 billion from the end of the previous year.

- 3 -

Outlook

As for the outlook in the fourth quarter, the U.S. economy is expected to continue recovering gradually as employment conditions improve. Looking at the European economy, the effects of the U.K.’s decision to leave the EU are slowly being felt as projections for the European economy grow increasingly uncertain. The outlook for the Japanese economy, despite signs of a recovery in employment conditions, indicates prolonged sluggish consumer spending. As for emerging economies, including China, more time will likely be needed before a true recovery takes hold.

In the businesses in which Canon is involved, among office MFDs, demand for color models and light-production models is expected to grow moderately despite the contraction of the market for monochrome and low-end models amid the market slump in emerging countries. Looking at the laser printer market, demand is expected to remain low for the time being owing to prolonged economic sluggishness. As for the interchangeable-lens digital cameras, once the cause of the temporary slump arising from the Kumamoto earthquake has been removed, the market is expected to realize a modest recovery. By contrast, projections for digital compact cameras indicate continued market contraction in all regions, primarily among low-priced models. With regard to inkjet printers, demand for business inkjet printers is projected to grow moderately while demand for consumer models is expected to continue to decline. Looking at industrial equipment, within the semiconductor lithography equipment segment, manufacturers are expected to postpone some capital investment until next year while the outlook for FPD lithography equipment and OLED display manufacturing equipment points to continued active capital investment by panel manufacturers. 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 fourth quarter, on which Canon’s performance outlook is based, Canon anticipates exchange rates of ¥100 to the U.S. dollar and ¥113 to the euro, representing appreciations of approximately ¥15 against both the U.S. dollar and the euro compared with the annual average rates of the previous year.

Upon taking into consideration the prolonged economic slowdown in 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 ¥3,360.0 billion, a year-on-year decrease of 11.6%; operating profit of ¥235.0 billion, a year-on-year decrease of 33.8%; income before income taxes of ¥262.0 billion, a year-on-year decrease of 24.6%; and net income attributable to Canon Inc. of ¥165.0 billion, a year-on-year decrease of 25.1%.

The impact of the acquisition of TMSC has not been included in the Consolidated Outlook for the reason that the clearance process by necessary competition regulatory authorities is still ongoing in some countries and regions outside Japan.

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		3,520,000		3,360,000		(160,000)		3,800,271		-11.6%
Operating profit		265,000		235,000		(30,000)		355,210		-33.8%
Income before income taxes		280,000		262,000		(18,000)		347,438		-24.6%
Net income attributable to Canon Inc.		180,000		165,000		(15,000)		220,209		-25.1%

- 4 -

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

- 5 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

II. Financial Statements

1. CONSOLIDATED BALANCE SHEETS


	Millions of yen
	As of September 30, 2016		As of December 31, 2015		Change
ASSETS
Current assets:
Cash and cash equivalents		534,480		633,613		(99,133)
Short-term investments		7,966		20,651		(12,685)
Trade receivables, net		444,668		588,001		(143,333)
Inventories		494,474		501,895		(7,421)
Prepaid expenses and other current assets		228,059		313,019		(84,960)

Total current assets		1,709,647		2,057,179		(347,532)

Noncurrent receivables		27,290		29,476		(2,186)
Investments		726,950		67,862		659,088
Property, plant and equipment, net		1,140,034		1,219,652		(79,618)
Intangible assets, net		205,372		241,208		(35,836)
Goodwill		411,311		478,943		(67,632)
Other assets		309,492		333,453		(23,961)

Total assets		4,530,096		4,427,773		102,323

LIABILITIES AND EQUITY
Current liabilities:
Short-term loans and current portion of long-term debt		610,567		688		609,879
Trade payables		288,793		278,255		10,538
Accrued income taxes		23,597		47,431		(23,834)
Accrued expenses		282,195		317,653		(35,458)
Other current liabilities		154,516		171,302		(16,786)

Total current liabilities		1,359,668		815,329		544,339
Long-term debt, excluding current installments		685		881		(196)
Accrued pension and severance cost		266,651		296,262		(29,611)
Other noncurrent liabilities		76,104		130,838		(54,734)

Total liabilities		1,703,108		1,243,310		459,798


Equity:
Canon Inc. shareholders’ equity:
Common stock		174,762		174,762		-
Additional paid-in capital		401,385		401,358		27
Legal reserve		66,528		65,289		1,239
Retained earnings		3,305,929		3,365,158		(59,229)
Accumulated other comprehensive income (loss)		(316,053)		(29,742)		(286,311)
Treasury stock, at cost		(1,010,418)		(1,010,410)		(8)

Total Canon Inc. shareholders’ equity		2,622,133		2,966,415		(344,282)

Noncontrolling interests		204,855		218,048		(13,193)

Total equity		2,826,988		3,184,463		(357,475)

Total liabilities and equity		4,530,096		4,427,773		102,323


	Millions of yen
	As of September 30, 2016		As of December 31, 2015
Notes:

1. Allowance for doubtful receivables		10,069		12,077
2. Accumulated depreciation		2,490,138		2,570,806
3. Accumulated other comprehensive income (loss):
Foreign currency translation adjustments		(198,705)		87,038
Net unrealized gains and losses on securities		10,203		14,055
Net gains and losses on derivative instruments		1,757		182
Pension liability adjustments		(129,308)		(131,017)

- 6 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

2. CONSOLIDATED STATEMENTS OF INCOME AND

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


Consolidated statements of income

Results for the third quarter	Millions of yen
	Three months ended September 30, 2016		Three months ended September 30, 2015		Change(%)

Net sales		778,838		925,782	-	15.9
Cost of sales		402,226		456,563

Gross profit		376,612		469,219	-	19.7
Operating expenses:
Selling, general and administrative expenses		263,607		309,687
Research and development expenses		72,990		82,273

		336,597		391,960

Operating profit		40,015		77,259	-	48.2
Other income (deductions):
Interest and dividend income		1,052		1,032
Interest expense		(321)		(150)
Other, net		4,517		(4,180)

		5,248		(3,298)

Income before income taxes		45,263		73,961	-	38.8

Income taxes		18,473		21,661

Consolidated net income		26,790		52,300
Less: Net income attributable to noncontrolling interests		2,409		3,120

Net income attributable to Canon Inc.		24,381		49,180	-	50.4


Results for the nine months	Millions of yen
	Nine months ended September 30, 2016		Nine months ended September 30, 2015		Change(%)

Net sales		2,436,314		2,757,633	-	11.7
Cost of sales		1,222,588		1,346,057

Gross profit		1,213,726		1,411,576	-	14.0
Operating expenses:
Selling, general and administrative expenses		836,604		918,203
Research and development expenses		228,424		245,205

		1,065,028		1,163,408

Operating profit		148,698		248,168	-	40.1
Other income (deductions):
Interest and dividend income		3,584		4,305
Interest expense		(842)		(511)
Other, net		20,576		(13,485)

		23,318		(9,691)

Income before income taxes		172,016		238,477	-	27.9

Income taxes		59,930		80,445

Consolidated net income		112,086		158,032
Less: Net income attributable to noncontrolling interests		6,266		6,727

Net income attributable to Canon Inc.		105,820		151,305	-	30.1

- 7 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

Consolidated statements of comprehensive income

Results for the third quarter

Millions of yen

Three months
ended
September 30, 2016

Three months
ended
September 30, 2015

Change(%)

Consolidated net income

26,790

52,300

48.8

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments

(26,415)

(67,638)

Net unrealized gains and losses on securities

2,147

(5,356)

Net gains and losses on derivative instruments

(806)

1,625

Pension liability adjustments

(233)

(356)

(25,307)

(71,725)

Comprehensive income (loss)

1,483

(19,425)

Less: Comprehensive income (loss) attributable to noncontrolling interests

896

597

Comprehensive income (loss) attributable to Canon Inc.

587

(20,022)

Results for the nine months

Millions of yen

Nine months
ended
September 30, 2016

Nine months
ended
September 30, 2015

Change(%)

Consolidated net income

112,086

158,032

29.1

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments

(296,673)

(51,520)

Net unrealized gains and losses on securities

(4,187)

(769)

Net gains and losses on derivative instruments

1,566

2,850

Pension liability adjustments

2,620

(1,014)

(296,674)

(50,453)

Comprehensive income (loss)

(184,588)

107,579

Less: Comprehensive income (loss) attributable to noncontrolling interests

(3,839)

8,553

Comprehensive income (loss) attributable to Canon Inc.

(180,749)

99,026

- 8 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

3. DETAILS OF SALES


Results for the third quarter	Millions of yen
Sales by business unit	Three months ended September 30, 2016		Three months ended September 30, 2015		Change(%)
Office		411,221		510,724	-	19.5
Imaging System		248,188		302,460	-	17.9
Industry and Others		140,884		138,770	+	1.5
Eliminations		(21,455)		(26,172)		-

Total		778,838		925,782	-	15.9


	Millions of yen
Sales by region	Three months ended September 30, 2016		Three months ended September 30, 2015		Change(%)
Japan		164,807		169,863	-	3.0
Overseas:
Americas		224,757		291,027	-	22.8
Europe		194,540		250,483	-	22.3
Asia and Oceania		194,734		214,409	-	9.2

		614,031		755,919	-	18.8

Total		778,838		925,782	-	15.9


Results for the nine months	Millions of yen
Sales by business unit	Nine months ended September 30, 2016		Nine months ended September 30, 2015		Change(%)
Office		1,321,969		1,576,809	-	16.2
Imaging System		770,547		897,652	-	14.2
Industry and Others		409,026		358,440	+	14.1
Eliminations		(65,228)		(75,268)		-

Total		2,436,314		2,757,633	-	11.7


	Millions of yen
Sales by region	Nine months ended September 30, 2016		Nine months ended September 30, 2015		Change(%)
Japan		501,883		510,543	-	1.7
Overseas:
Americas		696,077		832,826	-	16.4
Europe		651,199		773,639	-	15.8
Asia and Oceania		587,155		640,625	-	8.3

		1,934,431		2,247,090	-	13.9

Total		2,436,314		2,757,633	-	11.7


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

- 9 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

4. CONSOLIDATED STATEMENTS OF CASH FLOWS


	Millions of yen
	Nine months ended September 30, 2016		Nine months ended September 30, 2015
Cash flows from operating activities:
Consolidated net income		112,086		158,032
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization		185,855		201,475
Loss on disposal of fixed assets		4,174		4,582
Deferred income taxes		(5,708)		(6,510)
Decrease in trade receivables		87,122		92,140
Increase in inventories		(50,969)		(76,601)
Increase in trade payables		31,549		9,980
Decrease in accrued income taxes		(21,842)		(21,868)
Decrease in accrued expenses		(4,196)		(3,854)
Increase in accrued (prepaid) pension and severance cost		6,384		5,224
Other, net		(1,092)		(31,768)

Net cash provided by operating activities		343,363		330,832

Cash flows from investing activities:
Purchases of fixed assets		(162,347)		(175,268)
Proceeds from sale of fixed assets		5,022		2,464
Purchases of available-for-sale securities		(84)		(98)
Proceeds from sale and maturity of available-for-sale securities		408		183
Decrease in time deposits, net		10,112		53,052
Acquisitions of businesses, net of cash acquired		(9,239)		(241,386)
Purchases of other investments		(669,962)		(1,103)
Other, net		1,181		(2,309)

Net cash used in investing activities		(824,909)		(364,465)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		410		557
Repayments of long-term debt		(664)		(997)
Increase in short-term loans, net		610,011		18
Purchases of noncontrolling interests		(4,993)		(29,570)
Dividends paid		(163,810)		(174,711)
Repurchases and reissuance of treasury stock		(8)		799
Other, net		(4,607)		(6,054)

Net cash provided by (used in) financing activities		436,339		(209,958)
Effect of exchange rate changes on cash and cash equivalents		(53,926)		(19,742)

Net change in cash and cash equivalents		(99,133)		(263,333)
Cash and cash equivalents at beginning of year		633,613		844,580

Cash and cash equivalents at end of year		534,480		581,247

- 10 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

5. NOTE FOR GOING CONCERN ASSUMPTION

Not applicable.

6. SEGMENT INFORMATION

SEGMENT INFORMATION BY BUSINESS UNIT


Results for the third quarter		Millions of yen
		Three months ended September 30, 2016		Three months ended September 30, 2015		Change(%)
Office
Net sales:
	External customers		410,708		510,099		- 19.5
	Intersegment		513		625		- 17.9
	Total		411,221		510,724		- 19.5
Operating cost and expenses			382,669		443,480		- 13.7
Operating profit			28,552		67,244		- 57.5

Imaging System
Net sales:
	External customers		247,966		302,166		- 17.9
	Intersegment		222		294		- 24.5
	Total		248,188		302,460		- 17.9
Operating cost and expenses			218,318		260,754		- 16.3
Operating profit			29,870		41,706		- 28.4

Industry and Others
Net sales:
	External customers		120,164		113,517		+ 5.9
	Intersegment		20,720		25,253		- 18.0
	Total		140,884		138,770		+ 1.5
Operating cost and expenses			136,475		138,149		- 1.2
Operating profit			4,409		621		+ 610.0

Corporate and Eliminations
Net sales:
	External customers		-		-		-
	Intersegment		(21,455)		(26,172)		-
	Total		(21,455)		(26,172)		-
Operating cost and expenses			1,361		6,140		-
Operating profit			(22,816)		(32,312)		-

Consolidated
Net sales:
	External customers		778,838		925,782		- 15.9
	Intersegment		-		-		-
	Total		778,838		925,782		- 15.9
Operating cost and expenses			738,823		848,523		- 12.9
Operating profit			40,015		77,259		- 48.2

- 11 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED


Results for the nine months		Millions of yen
		Nine months ended September 30, 2016		Nine months ended September 30, 2015		Change(%)
Office
Net sales:
	External customers		1,320,206		1,574,880	-	16.2
	Intersegment		1,763		1,929	-	8.6
	Total		1,321,969		1,576,809	-	16.2
Operating cost and expenses			1,201,108		1,358,466	-	11.6
Operating profit			120,861		218,343	-	44.6

Imaging System
Net sales:
	External customers		769,836		896,723	-	14.2
	Intersegment		711		929	-	23.5
	Total		770,547		897,652	-	14.2
Operating cost and expenses			677,836		776,339	-	12.7
Operating profit			92,711		121,313	-	23.6

Industry and Others
Net sales:
	External customers		346,272		286,030	+	21.1
	Intersegment		62,754		72,410	-	13.3
	Total		409,026		358,440	+	14.1
Operating cost and expenses			404,740		368,735	+	9.8
Operating profit			4,286		(10,295)		-

Corporate and Eliminations
Net sales:
	External customers		-		-		-
	Intersegment		(65,228)		(75,268)		-
	Total		(65,228)		(75,268)		-
Operating cost and expenses			3,932		5,925		-
Operating profit			(69,160)		(81,193)		-

Consolidated
Net sales:
	External customers		2,436,314		2,757,633		-11.7
	Intersegment		-		-		-
	Total		2,436,314		2,757,633		-11.7
Operating cost and expenses			2,287,616		2,509,465		-8.8
Operating profit			148,698		248,168		-40.1

- 12 -

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 9 "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

Number of Group Companies


	September 30, 2016	December 31, 2015	Change
Subsidiaries	324	317	7
Affiliates	5	5	-
Total	329	322	7

Change in Group Entities


Subsidiaries
Addition:		13 companies
Removal:		6 companies

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.

- 13 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

9. NOTE FOR NON-GAAP FINANCIAL MEASURES

We have reported our financial results in accordance with U.S. generally accepted accounting principles (U.S. GAAP). In addition, we have discussed our results using “Free cash flow” which is non-GAAP measure.

We believe this measure is beneficial to an investor’s understanding on Canon’s current liquidity and the alternatives of use in financing activities because it takes into consideration its operating and investing activities.

A reconciliation of this non-GAAP financial measure and the most directly comparable measures calculated and presented in accordance with GAAP are set forth on the following table.


	Billions of yen
	Nine months ended September 30, 2016
Net cash provided by operating activities		343.4
Net cash used in investing activities		(824.9)


Free cash flow		(481.5)

- 14 -

Canon Inc.

Oct. 26, 2016

CONSOLIDATED RESULTS FOR THE THIRD QUARTER

AND NINE MONTHS ENDED SEPTEMBER 30, 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

Canon Inc.


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


		2016									2015									Change year over year
		3rd quarter			YTD			Year (P)			3rd quarter			YTD			Year			3rd quarter		YTD		Year
Japan
	Office		88,993			279,531			-			88,719			280,473			379,277			+0.3%		-0.3%	-
	Imaging System		38,933			116,130			-			45,045			131,781			198,739			-13.6%		-11.9%	-
	Industry and Others		36,881			106,222			-			36,099			98,289			136,264			+2.2%		+8.1%	-
	Total		164,807			501,883			712,800			169,863			510,543			714,280			-3.0%		-1.7%	-0.2%
Overseas
	Office		321,715			1,040,675			-			421,380			1,294,407			1,728,969			-23.7%		-19.6%	-
	Imaging System		209,033			653,706			-			257,121			764,942			1,063,928			-18.7%		-14.5%	-
	Industry and Others		83,283			240,050			-			77,418			187,741			293,094			+7.6%		+27.9%	-
	Total		614,031			1,934,431			2,647,200			755,919			2,247,090			3,085,991			-18.8%		-13.9%	-14.2%
	Americas
	Office		136,758			429,270			-			185,315			537,274			713,197			-26.2%		-20.1%	-
	Imaging System		67,007			206,339			-			80,608			242,077			352,946			-16.9%		-14.8%	-
	Industry and Others		20,992			60,468			-			25,104			53,475			78,279			-16.4%		+13.1%	-
	Total		224,757			696,077			942,900			291,027			832,826			1,144,422			-22.8%		-16.4%	-17.6%
	Europe
	Office		117,393			397,791			-			151,415			494,996			680,619			-22.5%		-19.6%	-
	Imaging System		64,163			209,968			-			82,645			239,719			335,312			-22.4%		-12.4%	-
	Industry and Others		12,984			43,440			-			16,423			38,924			58,435			-20.9%		+11.6%	-
	Total		194,540			651,199			905,500			250,483			773,639			1,074,366			-22.3%		-15.8%	-15.7%
	Asia and Oceania
	Office		67,564			213,614			-			84,650			262,137			335,153			-20.2%		-18.5%	-
	Imaging System		77,863			237,399			-			93,868			283,146			375,670			-17.1%		-16.2%	-
	Industry and Others		49,307			136,142			-			35,891			95,342			156,380			+37.4%		+42.8%	-
	Total		194,734			587,155			798,800			214,409			640,625			867,203			-9.2%		-8.3%	-7.9%
Intersegment
	Office		513			1,763			-			625			1,929			2,570			-17.9%		-8.6%	-
	Imaging System		222			711			-			294			929			1,168			-24.5%		-23.5%	-
	Industry and Others		20,720			62,754			-			25,253			72,410			95,293			-18.0%		-13.3%	-
	Eliminations		(21,455	)		(65,228	)		-			(26,172	)		(75,268	)		(99,031	)		-		-	-
	Total		0			0			0			0			0			0			-		-	-
Total
	Office		411,221			1,321,969			1,795,800			510,724			1,576,809			2,110,816			-19.5%		-16.2%	-14.9%
	Imaging System		248,188			770,547			1,081,000			302,460			897,652			1,263,835			-17.9%		-14.2%	-14.5%
	Industry and Others		140,884			409,026			570,100			138,770			358,440			524,651			+1.5%		+14.1%	+8.7%
	Eliminations		(21,455	)		(65,228	)		(86,900	)		(26,172	)		(75,268	)		(99,031	)		-		-	-
	Total		778,838			2,436,314			3,360,000			925,782			2,757,633			3,800,271			-15.9%		-11.7%	-11.6%

(P)=Projection

- S1 -

Canon Inc.

2. SEGMENT INFORMATION BY BUSINESS UNIT

(Millions of yen)


		2016									2015									Change year over year
			3rd quarter			YTD			Year (P)			3rd quarter			YTD			Year			3rd quarter			YTD		Year
Office
	External customers		410,708			1,320,206			1,792,500			510,099			1,574,880			2,108,246			-19.5%			-16.2%		-15.0%
	Intersegment		513			1,763			3,300			625			1,929			2,570			-17.9%			-8.6%		+28.4%
	Total sales		411,221			1,321,969			1,795,800			510,724			1,576,809			2,110,816			-19.5%			-16.2%		-14.9%
	Operating profit		28,552			120,861			175,600			67,244			218,343			290,586			-57.5%			-44.6%		-39.6%
	% of sales		6.9%			9.1%			9.8%			13.2%			13.8%			13.8%			-			-		-
Imaging System
	External customers		247,966			769,836			1,080,100			302,166			896,723			1,262,667			-17.9%			-14.2%		-14.5%
	Intersegment		222			711			900			294			929			1,168			-24.5%			-23.5%		-22.9%
	Total sales		248,188			770,547			1,081,000			302,460			897,652			1,263,835			-17.9%			-14.2%		-14.5%
	Operating profit		29,870			92,711			142,000			41,706			121,313			183,439			-28.4%			-23.6%		-22.6%
	% of sales		12.0%			12.0%			13.1%			13.8%			13.5%			14.5%			-			-		-
Industry and Others
	External customers		120,164			346,272			487,400			113,517			286,030			429,358			+5.9%			+21.1%		+13.5%
	Intersegment		20,720			62,754			82,700			25,253			72,410			95,293			-18.0%			-13.3%		-13.2%
	Total sales		140,884			409,026			570,100			138,770			358,440			524,651			+1.5%			+14.1%		+8.7%
	Operating profit		4,409			4,286			4,800			621			(10,295	)		(13,079	)		+610.0%			-		-
	% of sales		3.1%			1.0%			0.8%			0.4%			-2.9%			-2.5%			-			-		-
Corporate and Eliminations
	External customers		-			-			-			-			-			-			-			-		-
	Intersegment		(21,455	)		(65,228	)		(86,900	)		(26,172	)		(75,268	)		(99,031	)		-			-		-
	Total sales		(21,455	)		(65,228	)		(86,900	)		(26,172	)		(75,268	)		(99,031	)		-			-		-
	Operating profit		(22,816	)		(69,160	)		(87,400	)		(32,312	)		(81,193	)		(105,736	)		-			-		-
Consolidated
	External customers		778,838			2,436,314			3,360,000			925,782			2,757,633			3,800,271			-15.9%			-11.7%		-11.6%
	Intersegment		-			-			-			-			-			-			-			-		-
	Total sales		778,838			2,436,314			3,360,000			925,782			2,757,633			3,800,271			-15.9%			-11.7%		-11.6%
	Operating profit		40,015			148,698			235,000			77,259			248,168			355,210			-48.2%			-40.1%		-33.8%
	% of sales		5.1%			6.1%			7.0%			8.3%			9.0%			9.3%			-			-		-
																					(P)=Projection

3. OTHER INCOME / DEDUCTIONS																							(Millions of yen)
			2016									2015									Change year over year
		3rd quarter			YTD			Year (P)			3rd quarter			YTD			Year			3rd quarter			YTD			Year
	Interest and dividend, net		731			2,742			2,700			882			3,794			4,917			(151	)		(1,052	)	(2,217)
	Forex gain (loss)		1,938			12,618			14,600			(5,614	)		(21,140	)		(22,149	)		+7,552			+33,758		+36,749
	Equity earnings of affiliated companies		162			673			900			30			337			447			+132			+336		+453
	Other, net		2,417			7,285			8,800			1,404			7,318			9,013			+1,013			(33	)	(213)
	Total		5,248			23,318			27,000			(3,298	)		(9,691	)		(7,772	)		+8,546			+33,009		+34,772
																					(P)=Projection

- S2 -

Canon Inc.


4. BREAKDOWN OF PRODUCT SALES WITHIN BUSINESS UNIT
		2016			2015
		3rd quarter	YTD	Year (P)	3rd quarter	YTD	Year
Office
	Monochrome copiers	16%	16%	16%	16%	15%	16%
	Color copiers	21%	21%	22%	19%	20%	20%
	Printers	37%	37%	36%	41%	42%	41%
	Others	26%	26%	26%	24%	23%	23%
Imaging System
	Cameras	61%	61%	60%	62%	63%	62%
	Inkjet printers	30%	30%	30%	28%	28%	29%
	Others	9%	9%	10%	10%	9%	9%
Industry and Others
	Lithography equipment	18%	21%	21%	25%	22%	24%
	Others	82%	79%	79%	75%	78%	76%
							(P)=Projection

5. SALES GROWTH IN LOCAL CURRENCY (Year over year)
		2016
		3rd quarter	YTD	Year (P)
Office
	Japan	+0.3%	-0.3%	-
	Overseas	-8.9%	-10.1%	-
	Total	-7.3%	-8.4%	-5.7%
Imaging System
	Japan	-13.6%	-11.9%	-
	Overseas	-2.6%	-3.7%	-
	Total	-4.2%	-4.9%	-4.0%
Industry and Others
	Japan	+2.2%	+8.1%	-
	Overseas	+18.0%	+35.9%	-
	Total	+7.4%	+18.3%	+13.6%
Total
	Japan	-3.0%	-1.7%	-0.2%
	Overseas	-4.0%	-4.1%	-2.8%
	Americas	-7.7%	-6.4%	-5.6%
	Europe	-8.0%	-6.6%	-4.8%
	Asia and Oceania	+5.6%	+1.9%	+3.4%
	Total	-3.8%	-3.7%	-2.3%
				(P)=Projection

- S3 -


						Canon Inc.
6. PROFITABILITY
		2016		2015
		YTD	Year (P)	YTD	Year
ROE *1		5.0%	5.8%	6.9%	7.4%
ROA *2		3.2%	3.7%	4.6%	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
		3rd quarter	YTD	4th quarter (P)	Year (P)	3rd quarter	YTD	Year
Yen/US$		102.33	108.25	100.00	106.00	122.12	120.96	121.13
Yen/Euro		114.25	121.13	113.00	118.75	135.93	134.74	134.20
								(P)=Projection

(2) Impact of foreign exchange rates on sales (Year over year)				(Billions of yen)
		2016
		3rd quarter	YTD	Year (P)
	US$	(56.4)	(112.3)	(179.1)
	Euro	(32.3)	(63.2)	(100.9)
	Other currencies	(15.2)	(35.2)	(50.3)
Total		(103.9)	(210.7)	(330.3)
				(P)=Projection

(3) Impact of foreign exchange rates per yen		(Billions of yen)
		2016
		4th quarter (P)
On sales
	US$	3.7
	Euro	1.9
On operating profit
	US$	1.4
	Euro	0.8
		(P)=Projection

8. STATEMENTS OF CASH FLOWS						(Millions of yen)
		2016			2015
		3rd quarter	YTD	Year (P)	3rd quarter	YTD	Year
Net cash provided by operating activities		102,156	343,363	447,000	106,120	330,832	474,724
Net cash used in investing activities		(48,817)	(824,909)	(879,000)	(58,459)	(364,465)	(453,619)
Free cash flow		53,339	(481,546)	(432,000)	47,661	(33,633)	21,105
Net cash used in financing activities		(83,544)	436,339	415,000	(86,393)	(209,958)	(210,202)
Effect of exchange rate changes on cash and cash equivalents		(4,495)	(53,926)	(56,600)	(6,986)	(19,742)	(21,870)
Net change in cash and cash equivalents		(34,700)	(99,133)	(73,600)	(45,718)	(263,333)	(210,967)
Cash and cash equivalents at end of period		534,480	534,480	560,000	581,247	581,247	633,613
						(P)=Projection

- S4 -

Canon Inc.


9. R&D EXPENDITURE							(Millions of yen)
		2016			2015
		3rd quarter	YTD	Year (P)	3rd quarter	YTD	Year
	Office	23,047	73,003	-	25,692	80,310	105,298
	Imaging System	21,184	67,890	-	22,139	67,027	90,236
	Industry and Others	15,125	48,923	-	16,245	46,614	66,585
	Corporate and Eliminations	13,634	38,608	-	18,197	51,254	66,381
	Total	72,990	228,424	305,000	82,273	245,205	328,500
	% of sales	9.4%	9.4%	9.1%	8.9%	8.9%	8.6%
							(P)=Projection

10. INCREASE IN PP&E & DEPRECIATION AND AMORTIZATION							(Millions of yen)
		2016			2015
		3rd quarter	YTD	Year (P)	3rd quarter	YTD	Year
Increase in PP&E		39,452	130,442	185,000	44,295	148,326	195,120
Depreciation and amortization		63,483	185,855	250,000	69,498	201,475	273,327
							(P)=Projection

11. INVENTORIES
(1) Inventories				(Millions of yen)
		2016	2015	Difference
		Sep.30	Dec.31	Difference
	Office	210,960	225,327	(14,367)
	Imaging System	144,375	155,767	(11,392)
	Industry and Others	139,139	120,801	+18,338
	Total	494,474	501,895	(7,421)
(2) Inventories/Sales*				(Days)
		2016	2015	Difference
		Sep.30	Dec.31	Difference
	Office	44	39	+5
	Imaging System	49	43	+6
	Industry and Others	108	86	+22
	Total	55	47	+8
	*Index based on the previous six months sales.

12. DEBT RATIO
		2016	2015	Difference
		Sep.30	Dec.31	Difference
Total debt / Total assets		13.5%	0.0%	+13.5%

13. OVERSEAS PRODUCTION RATIO
		2016	2015
		YTD	Year
	Overseas production ratio	44%	48%

14. NUMBER OF EMPLOYEES
		2016	2015	Difference
		Sep.30	Dec.31	Difference
	Japan	68,019	68,325	(306)
	Overseas	122,974	121,246	+1,728
	Total	190,993	189,571	+1,422

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