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 ….		January		…………………………………………… ,		2017

 

		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.

 

 

Date….		February 1, 2017						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.	RESULTS FOR THE FOURTH QUARTER AND THE FISCAL YEAR ENDED DECEMBER 31, 2016

---

RESULTS FOR THE FOURTH QUARTER

AND THE FISCAL YEAR ENDED DECEMBER 31, 2016

January 31, 2017

CONSOLIDATED RESULTS

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

 

							Actual																Projected
						Year ended December 31, 2016				Year ended December 31, 2015				Change(%)				Year ended December 31, 2016				Year ending December 31, 2017				Change(%)
Net sales						¥	3,401,487			¥	3,800,271			-	10.5			$	29,323,164			¥	4,000,000			+	17.6
Operating profit							228,866				355,210			-	35.6				1,972,983				255,000			+	11.4
Income before income taxes							244,651				347,438			-	29.6				2,109,060				260,000			+	6.3
Net income attributable                      to Canon Inc.						¥	150,650			¥	220,209			-	31.6			$	1,298,707			¥	170,000			+	12.8
Net income attributable to Canon Inc. shareholders per share:
- Basic						¥	137.95			¥	201.65			-	31.6			$	1.19			¥	155.67			+	12.8
- Diluted							137.95				201.65			-	31.6				1.19				-				-
						Actual
						As of December 31, 2016				As of December 31, 2015				Change(%)				As of December 31, 2016
Total assets						¥	5,138,529			¥	4,427,773			+	16.1			$	44,297,664
Canon Inc. shareholders’ equity						¥	2,783,129			¥	2,966,415			-	6.2			$	23,992,491
Notes:		1.		Canon’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.
		2.		U.S. dollar amounts are translated from yen at the rate of JPY 116= U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of December 30, 2016, solely for the convenience of the reader.
NON-CONSOLIDATED RESULTS
(Millions of yen, thousands of U.S. dollars, except per share amounts)
						Actual
						Year ended December 31, 2016				Year ended December 31, 2015				Change(%)				Year ended December 31, 2016
Net sales						¥	1,763,987			¥	2,091,139			-	15.6			$	15,206,784
Operating profit							67,543				169,238			-	60.1				582,267
Ordinary profit							158,359				269,818			-	41.3				1,365,164
Net income						¥	133,055			¥	211,963			-	37.2			$	1,147,026
Net income per share:
- Basic						¥	121.84			¥	194.10			-	37.2			$	1.05
- Diluted							121.84				194.10			-	37.2				1.05
Dividend per share							150.00				150.00				-				1.29
						Actual
						As of December 31, 2016				As of December 31, 2015				Change(%)				As of December 31, 2016
Total assets						¥	3,176,703			¥	2,437,924			+	30.3			$	27,385,371
Net assets						¥	1,452,646			¥	1,484,157			-	2.1			$	12,522,810

 

Notes:		U.S. dollar amounts are translated from yen at the rate of JPY 116= U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of December 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 in Review

Looking back at the global economy in 2016, the trend of recovery in the U.S. economy became stronger as employment conditions and consumer spending progressively improved from the latter half of the year. In Europe, although the economy grew moderately, centered on Germany, the outlook for the region’s economy has grown increasingly uncertain due to concerns over the UK’s decision to exit the EU and the political unrest in Syria. The Chinese economy continued its deceleration trend while the economies of emerging countries such as Russia and Brazil remained stagnant. In Japan, the economy remained weak due to weak consumer spending. Looking at the global economy as a whole, although higher growth than the previous year was expected at the beginning of the year, the global economy overall experienced its lowest level of growth since the financial crisis precipitated by Lehman Brothers’ bankruptcy.

As for the markets in which Canon operates amid these conditions, regarding the demand for office multifunction devices (MFDs) and laser printers, the demand for color models enjoyed strong growth due to the trend of shifting from monochrome to color machines, while the demand for monochrome shrunk due to the continued economic slowdown in emerging countries. As for cameras, along with the ongoing contraction of the market, especially for digital compact cameras, the market suffered from a shortage of components arising from the earthquake in Kumamoto earlier in the year. Additionally, demand for inkjet printers continued to decline. Within the Industry and Other sector, 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 year was ¥108.58 against the U.S. dollar, a year-on-year appreciation of approximately ¥13, and ¥120.25 against the euro, a year-on-year appreciation of approximately ¥14, which had a negative impact of ¥280.4 billion on net sales and of ¥101.8 billion on operating profit.

During 2016, color-model office MFDs achieved higher growth than the market average, making up for the continued decline of monochrome models, which led to the same level of unit sales as the previous year overall. Although the unit sales of laser printers were below level compared with the same period of the previous year until the third quarter, due to the sluggish economic conditions in the emerging countries, signs of bottoming out started to appear in the fourth quarter. Looking at the interchangeable-lens digital cameras, sales volume for the year exceeded that of the previous year, supported by sales of new products, while sales volume for digital compact cameras declined compared with the previous year amid the ongoing contraction of the market. Sales volume for inkjet printers declined for consumer products, while sales volume of wide format inkjet printers for business use exceeded the previous year. In contrast, sales of FPD lithography equipment and OLED panel manufacturing equipment increased, boosted by increased capital investment by panel manufacturers. Consequently, along with the negative impact of the appreciation of the yen, net sales for the year decreased 10.5% year on year to ¥3,401.5 billion. The gross profit ratio decreased by 1.7 points year on year to 49.2% mainly due to the negative effect of yen’s appreciation. Despite a reduction in operating expenses of 8.5% year on year, partly due to Group-wide efforts to reduce spending, operating profit decreased by 35.6% to ¥228.9 billion. Other income (deductions) increased by ¥23.6 billion due to foreign currency exchange gains while income before income taxes decreased by 29.6% year on year to ¥244.7 billion and net income attributable to Canon Inc. decreased by 31.6% to ¥150.7 billion.

In December 2016, all shares of Toshiba Medical Systems Corporation (TMSC) were obtained following the completion of necessary clearance procedures by antitrust authorities, and TMSC joined the Canon Group.

Basic net income attributable to Canon Inc. shareholders per share for the year was ¥137.95, a year-on-year decrease of ¥63.70.

 

- 2 -

---

Results by Segment

Looking at Canon’s full-year performance by business unit, beginning with the Office Business Unit, unit sales of office MFDs increased overall from the previous year thanks to strong sales of color models, even with the continued decrease in sales of monochrome models. This growth was supported by steady sales of the color A3 (12”x18”) imageRUNNER ADVANCE C5500-series models, which were released this year, and the small-office/home-office color A3 (12”x18”) imageRUNNER C3300-series models, which were launched in the previous year, along with expanded sales of imagePRESS C10000VP-series models, which target 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. Although the unit sales of laser printers had been below level against the same period of the previous year until the third quarter, due to the sluggish economic conditions in the emerging countries, unit sales exceeded the same period of the year at fourth quarter along with a smooth transition to new models as planned. These factors, coupled with the negative effect of unfavorable currency exchange rates, resulted in total sales for the business unit of ¥1,807.8 billion, a year-on-year decline of 14.4%, while operating profit totaled ¥169.5 billion, a year-on-year decline of 41.7%.

Within the Imaging System Business Unit, sales volume for interchangeable-lens digital cameras grew compared with the previous year owing to healthy demand for the EOS-1D X mark II and the EOS 5D mark IV, which were launched this year, and the launch of a new addition to the Company’s strengthening compact-system camera lineup, the EOS M5, which features a built-in EVF. As for digital compact cameras, along with the ongoing contraction of the market, sales volume declined amid difficulties in procuring components due to the earthquake in Kumamoto earlier in the year, with much of the profitability generated by sales of high-added-value models that deliver high image quality and zoom capabilities. As for inkjet printers, although sales volume declined compared with the previous year due to a shrinking market for consumer products, sales of models equipped with large-capacity ink tanks that were launched in the fourth quarter of 2015 experienced healthy demand mainly in emerging countries, while demand was high mainly in Japan for newly designed models for home use that were launched in 2016. Additionally, wide format inkjet printers, new imagePROGRAF PRO-series models, which target the professional photo and graphic art market, saw an increase in unit sales. As a result of these factors, along with the negative effect of unfavorable currency exchange rates, sales for the business unit decreased by 13.3% to ¥1,095.3 billion while operating profit totaled ¥144.4 billion, a year-on-year decline of 21.3%.

In the Industry and Other Business Unit, unit sales of semiconductor lithography equipment decreased from 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 camera increased compared with the previous year thanks to efforts to strengthen the product lineup. Consequently, sales for the business unit increased 11.4% year-on-year to ¥584.7 billion while operating profit grew by ¥20.5 billion to ¥7.4 billion.

Cash Flow

During 2016, cash flow from operating activities totaled ¥500.3 billion, an increase of ¥25.6 billion compared with the previous year owing to improvements in working capital. Cash flow from investing activities increased ¥383.5 billion year on year to ¥837.1 billion mainly due to the acquisition of all of the shares of TMSC. Accordingly, free cash flow totaled negative ¥336.8 billion, a decrease of ¥357.9 billion compared with the previous year.

Cash flow from financing activities recorded proceeds of ¥355.7 billion, mainly owing to a bank borrowing related to the acquisition of TMSC.

Owing to these factors, as well as the negative impact from foreign currency translation adjustments, cash and cash equivalents decreased by ¥3.4 billion to ¥630.2 billion from the end of the previous year.

 

- 3 -

---

Non-consolidated Results

Non-consolidated net sales totaled ¥1,764.0 billion, a year-on-year decrease of 15.6%, while ordinary profit decreased by 41.3% to ¥158.4 billion and net income decreased by 37.2% to ¥133.1 billion.

Outlook

As for the outlook in 2017, the U.S. economy is expected to grow thanks to its continued gradual recovery as employment conditions improve and expectations surrounding the financial policy of the new administration. Looking at the European economy, the declining cohesion of the EU resulting from the U.K.’s decision to leave the EU has caused increasing uncertainty for economic growth projections. As for emerging economies, although the outlook indicates signs of recovery for Russia and Brazil whose economies have experienced negative growth so far, the economic slowdown in China is expected to be prolonged.

The outlook for the Japanese economy, despite signs of a recovery in employment conditions, indicates prolonged sluggish consumer spending and the market is expected to remain along a path of moderate growth. Overall, while the U.S. economy performs the role of the driving force of the world economy, the global economy is expected to move toward a moderate recovery.

In the businesses in which Canon is involved, among office MFDs, demand for color models makes up for the market contraction of monochrome models and demand is expected to remain in line with that of the previous year overall. Although demand for laser printers is expected to remain at the same level as that for the previous year, demand for color models and laser multifunction models with high potential consumable sales is expected to increase. As for interchangeable-lens digital cameras, although demand is waning mainly in developed countries, the sluggish demand condition is improving gradually, which is expected to bottom out. Projections for digital compact cameras indicate continued market contraction, centered mainly on low-priced models. With regard to inkjet printers, demand is expected to continue declining mainly for consumer models. Looking at industrial equipment, within the semiconductor lithography equipment segment, the market is expected to remain at the same level as the previous 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 marketing and production site efficiency-enhancing needs, in addition to disaster monitoring and crime prevention functions.

With regard to currency exchange rates for the year, on which the Company’s performance outlook is based, Canon anticipates exchange rates of ¥110 to the U.S. dollar and ¥120 to the euro, representing a depreciation of approximately ¥1 against the U.S. dollar and approximately same level against the euro compared with the annual average rates of the previous year.

Upon taking into consideration the impact of the acquisition of TMSC and the current economic forecast, Canon projects full-year consolidated net sales in 2017 of ¥4,000.0 billion, a year-on-year increase of 17.6%; operating profit of ¥255.0 billion, a year-on-year increase of 11.4%; income before income taxes of ¥260.0 billion, a year-on-year increase of 6.3%; and net income attributable to Canon Inc. of ¥170.0 billion, a year-on-year increase of 12.8%.

Basic Policy Regarding Profit Distribution and Dividends for the Current Fiscal Year

Canon is being more proactive in returning profits to shareholders, mainly in the form of a dividend, taking into consideration medium-term profit forecasts along with planned future investments, cash flow and other factors.

In 2016, Canon undertook such large investments for future growth as the acquisition of TMSC. Thanks, however, to efforts to boost product competitiveness and strengthen the Company’s financial position through a management focus on profitability and cash flow, Canon was able to maintain its strong financial position. Taking this into consideration while seeking to actively provide a stable return to shareholders, Canon has decided to distribute a full-year dividend of ¥150 per share, (interim dividend of ¥75 per share [already distributed] and year-end dividend of ¥75), which is the same as the previous year’s dividend.

 

- 4 -

---

 

- 5 -

---

II. Group Position

(1) Number of group companies

 

		December 31, 2016		December 31, 2015		Change
Subsidiaries		367		317		50
Affiliates		9		5		4
Total		376		322		54

(2) Group structure and major companies

 

 

- 6 -

---

III. Management Policy

(1) Basic Policy

Under the corporate philosophy of kyosei—living and working together for the common good—Canon’s basic management policy is to contribute to the prosperity and well-being of the world while endeavoring to become a truly excellent global corporation targeting continued growth and development.

(2) Management Goals

Based on this basic management policy, Canon launched the Excellent Global Corporation Plan in 1996 and, from Phase I through to Phase IV, has worked to strengthen its management base and improve corporate value. In 2016, under the slogan “Embracing the challenge of new growth through a grand strategic transformation,” Canon embarked on a new five-year initiative: Phase V of the Excellent Global Corporation Plan. Under this plan, Canon aims to facilitate growth through structural transformation by reinforcing existing businesses and taking steps to cultivate and strengthen new businesses.

Regarding new businesses, Canon is particularly focused on areas where market expansion is expected in the future, namely such B2B spheres as commercial printing, network cameras, healthcare and industrial equipment. As part of such efforts, Toshiba Medical Systems Corporation (TMSC), a leading company in the medical equipment industry, was made a Canon subsidiary in December of 2016, the first year of Phase V. Through this acquisition, Canon was able to make significant progress in establishing a foundation for new businesses.

(3) Business Challenges and Countermeasures

Although the IMF is projecting a modest pickup in the global economy in 2017, political and economic circumstances are expected to remain highly uncertain.

2017 marks not only the second year of Phase V of the Excellent Global Corporation Plan, but also Canon’s 80th anniversary. To ensure that 2017 is a year befitting this milestone, Canon is addressing the following key challenges under the theme “Further promoting grand strategic transformation by accelerating reforms.”

 

1.	Thoroughly bolster existing business

In order to successfully transform its business structure, Canon will work to improve profitability by reinforcing the existing businesses that will support this transformation. Specifically, Canon will accelerate the development of “Dantotsu Products,” which are products with unique appeal and strengths that realize high profitability thanks to their difficulty to imitate. At the same time, Canon will advance such initiatives as automation, in-house production, and procurement reform, in order to achieve a cost-of-sales ratio of 45%. Additionally, Canon will expand its business domains, developing new business models in response to the internet of things (IoT) and cloud environments.

 

2.	Strengthen and grow new businesses and create future businesses

For commercial printing, with the aim of becoming a comprehensive printing company, Canon will accelerate product development in order to make a full-scale entry into the fast-growing package printing market. Regarding network cameras, Canon will work to strengthen camera intelligence, by not only improving image quality, but leveraging the image-processing and image-analytics technologies at its disposal in order to create market-specific solutions. As for healthcare, Canon will formulate new growth strategies, built around TMSC, and will exert the Group’s comprehensive strength to provide innovative products and high-quality services on a global scale. For industrial equipment, such as IC lithography equipment that utilizes nanoimprint lithography, Canon will formulate new business strategies to pioneer a “fourth industrial revolution” driven by artificial intelligence and IoT.

 

- 7 -

---

3.	Restructure the global sales network

In the B2B sphere, success or failure is determined by the capacity to devise and implement solutions. In addition to training highly skilled sales engineers with a breadth of technical knowledge spanning both hardware and software, Canon will establish a sales structure with networks that expand to corporations and governments. Additionally, Canon will formulate global sales strategies that take full advantage of the expansion and development of e-commerce.

 

4.	Strengthen R&D through open innovation

Canon will enhance R&D efficiency in existing business fields and be selective in investment in promising new fields. On top of this, aiming to establish and expand service businesses, Canon will train software engineers, develop systems and accelerate the establishment of an external cooperation system.

 

5.	Cultivate global human resources and reinvigorate the Canon spirit

An enterprising spirit and the San-ji (Three Selfs) Spirit of self-motivation, self-management, and self-awareness, have been basic components of Canon’s corporate DNA since its foundation. Canon is now working to re-instill these values as we promote the development of human resources that are able to exert leadership in a global environment.

IV. Basic Concept Regarding the Selection of Accounting Standards

Canon is listed on the New York Stock Exchange and, since registering its American Depositary Receipts on the OTC (over-the-counter) market in 1969, has prepared its consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) over the long term.

Canon has continued to adopt U.S. GAAP in order to maintain the continuity of financial statements from the past and to maintain international comparability.

 

- 8 -

---

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

V. Financial Statements

1. CONSOLIDATED BALANCE SHEETS

 

		Millions of yen
		As of    December 31, 2016				As of    December 31, 2015				Change
ASSETS
Current assets:
Cash and cash equivalents		¥	630,193			¥	633,613			¥	(3,420)
Short-term investments			3,206				20,651				(17,445)
Trade receivables, net			641,458				588,001				53,457
Inventories			560,736				501,895				58,841
Prepaid expenses and other current assets			264,155				313,019				(48,864)
Total current assets			2,099,748				2,057,179				42,569
Noncurrent receivables			29,297				29,476				(179)
Investments			73,680				67,862				5,818
Property, plant and equipment, net			1,194,976				1,219,652				(24,676)
Intangible assets, net			446,268				241,208				205,060
Goodwill			936,424				478,943				457,481
Other assets			358,136				333,453				24,683
Total assets		¥	5,138,529			¥	4,427,773			¥	710,756
LIABILITIES AND EQUITY
Current liabilities:
Short-term loans and current portion of long-term debt		¥	1,850			¥	688			¥	1,162
Trade payables			372,269				278,255				94,014
Accrued income taxes			30,514				47,431				(16,917)
Accrued expenses			304,901				317,653				(12,752)
Other current liabilities			273,835				171,302				102,533
Total current liabilities			983,369				815,329				168,040
Long-term debt, excluding current installments			611,289				881				610,408
Accrued pension and severance cost			407,200				296,262				110,938
Other noncurrent liabilities			142,049				130,838				11,211
Total liabilities			2,143,907				1,243,310				900,597
Equity:
Canon Inc. shareholders’ equity:
Common stock			174,762				174,762				-
Additional paid-in capital			401,385				401,358				27
Legal reserve			66,558				65,289				1,269
Retained earnings			3,350,728				3,365,158				(14,430)
Accumulated other comprehensive income (loss)			(199,881)				(29,742)				(170,139)
Treasury stock, at cost			(1,010,423)				(1,010,410)				(13)
Total Canon Inc. shareholders’ equity			2,783,129				2,966,415				(183,286)
Noncontrolling interests			211,493				218,048				(6,555)
Total equity			2,994,622				3,184,463				(189,841)
Total liabilities and equity		¥	5,138,529			¥	4,427,773			¥	710,756
		Millions of yen
		As of December 31, 2016				As of December 31, 2015
Notes:
1. Allowance for doubtful receivables		¥	11,075			¥	12,077
2. Accumulated depreciation			2,578,342				2,570,806
3. Accumulated other comprehensive income (loss):
Foreign currency translation adjustments			(13,960)				87,038
Net unrealized gains and losses on securities			15,251				14,055
Net gains and losses on derivative instruments			(2,742)				182
Pension liability adjustments			(198,430)				(131,017)

 

 

- 9 -

---

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

2. CONSOLIDATED STATEMENTS OF INCOME AND

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Consolidated statements of income

 

 

- 10 -

---

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

Consolidated statements of comprehensive income

 

 

- 11 -

---

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

3. DETAILS OF SALES

 

Results for the fourth quarter		Millions of yen
Sales by business unit		Three months ended   December 31, 2016				Three months ended   December 31, 2015				Change(%)
Office		¥	485,850			¥	534,007			-			9.0
Imaging System			324,742				366,183			-			11.3
Industry and Others			175,634				166,211			+			5.7
Eliminations			(21,053)				(23,763)						-
Total		¥	965,173			¥	1,042,638			-			7.4
		Millions of yen
Sales by region		Three months ended December 31, 2016				Three months ended December 31, 2015				Change(%)
Japan		¥	205,096			¥	203,737			+			0.7
Overseas:
Americas			267,467				311,596			-			14.2
Europe			262,324				300,727			-			12.8
Asia and Oceania			230,286				226,578			+			1.6
			760,077				838,901			-			9.4
Total		¥	965,173			¥	1,042,638			-			7.4
Results for the fiscal year		Millions of yen
Sales by business unit		Year ended December 31, 2016				Year ended December 31, 2015				Change(%)
Office		¥	1,807,819			¥	2,110,816			-			14.4
Imaging System			1,095,289				1,263,835			-			13.3
Industry and Others			584,660				524,651			+			11.4
Eliminations			(86,281)				(99,031)						-
Total		¥	3,401,487			¥	3,800,271			-			10.5
		Millions of yen
Sales by region		Year ended December 31, 2016				Year ended December 31, 2015				Change(%)
Japan		¥	706,979			¥	714,280			-			1.0
Overseas:
Americas			963,544				1,144,422			-			15.8
Europe			913,523				1,074,366			-			15.0
Asia and Oceania			817,441				867,203			-			5.7
			2,694,508				3,085,991			-			12.7
Total		¥	3,401,487			¥	3,800,271			-			10.5

 

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 / Diagnostic X-ray System / Computed Tomography / Magnetic Resonance Imaging / Diagnostic Ultrasound System / Clinical Chemistry Analyzer / 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

 

- 12 -

---

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

4. CONSOLIDATED STATEMENTS OF EQUITY

Millions of yen

		Common Stock				Additional paid-in capital				Legal reserve				Retained earnings				Accumulated other comprehensive income (loss)				Treasury stock				Total Canon Inc. shareholders’ equity				Noncontrolling interests				Total equity
Balance at December 31, 2014		¥	174,762			¥	401,563			¥	64,599			¥	3,320,392			¥	28,286			¥	(1,011,418	)		¥	2,978,184			¥	162,574			¥    3,140,758
Equity transactions with noncontrolling interests and other							(29	)											73								44				(29,627	)		(29,583)
Dividends to Canon Inc. shareholders															(174,711	)											(174,711	)						(174,711)
Dividends to noncontrolling interests																															(3,958	)		(3,958)
Acquisition of subsidiaries																															77,086			77,086
Transfers to legal reserve											690				(690	)											-							-
Comprehensive income:
Net income															220,209												220,209				11,124			231,333
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments																			(57,592	)							(57,592	)			2,088			(55,504)
Net unrealized gains and losses on securities																			1,509								1,509				501			2,010
Net gains and losses on derivative instruments																			2,785								2,785				-			2,785
Pension liability adjustments																			(4,803	)							(4,803	)			(1,740	)		(6,543)
Total comprehensive income																											162,108				11,973			174,081
Repurchases and reissuance of treasury stock							(176	)							(42	)							1,008				790							790
Balance at December 31, 2015		¥	174,762			¥	401,358			¥	65,289			¥	3,365,158			¥	(29,742	)		¥	(1,010,410	)		¥	2,966,415			¥	218,048			¥    3,184,463
Equity transactions with noncontrolling interests and other							27												258								285				(5,270	)		(4,985)
Dividends to Canon Inc. shareholders															(163,810	)											(163,810	)						(163,810)
Dividends to noncontrolling interests																															(4,077	)		(4,077)
Acquisition of subsidiaries																															1,047			1,047
Transfers to legal reserve											1,269				(1,269	)											-							-
Comprehensive income:
Net income															150,650												150,650				11,320			161,970
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments																			(101,257	)							(101,257	)			(6,409	)		(107,666)
Net unrealized gains and losses on securities																			1,196								1,196				(199	)		997
Net gains and losses on derivative instruments																			(2,924	)							(2,924	)			(24	)		(2,948)
Pension liability adjustments																			(67,412	)							(67,412	)			(2,943	)		(70,355)
Total comprehensive income (loss)																											(19,747	)			1,745			(18,002)
Repurchases and reissuance of treasury stock															(1	)							(13	)			(14	)						(14)
Balance at December 31, 2016		¥	174,762			¥	401,385			¥	66,558			¥	3,350,728			¥	(199,881	)		¥	(1,010,423	)		¥	2,783,129			¥	211,493			¥    2,994,622

 

- 13 -

---

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

5. CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Millions of yen
		Year ended   December 31, 2016				Year ended   December 31, 2015
Cash flows from operating activities:
Consolidated net income		¥	161,970			¥	231,333
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization			250,096				273,327
Loss on disposal of fixed assets			5,203				7,975
Deferred income taxes			7,188				4,672
(Increase) decrease in trade receivables			(4,155)				22,720
Decrease in inventories			6,156				14,249
Increase (decrease) in trade payables			56,844				(17,288)
Decrease in accrued income taxes			(16,456)				(8,731)
Decrease in accrued expenses			(5,256)				(25,529)
Increase in accrued (prepaid) pension and severance cost			5,489				4,622
Other, net			33,204				(32,626)
Net cash provided by operating activities			500,283				474,724
Cash flows from investing activities:
Purchases of fixed assets			(206,971)				(252,948)
Proceeds from sale of fixed assets			6,177				3,824
Purchases of available-for-sale securities			(84)				(98)
Proceeds from sale and maturity of available-for-sale securities			1,181				804
Decrease in time deposits, net			15,414				47,665
Acquisitions of businesses, net of cash acquired			(649,570)				(251,534)
Purchases of other investments			(4,460)				(1,220)
Other, net			1,188				(112)
Net cash used in investing activities			(837,125)				(453,619)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			610,552				717
Repayments of long-term debt			(856)				(1,350)
Decrease in short-term loans, net			(80,580)				-
Purchases of noncontrolling interests			(4,993)				(29,570)
Dividends paid			(163,810)				(174,711)
Repurchases and reissuance of treasury stock			(14)				790
Other, net			(4,607)				(6,078)
Net cash provided by (used in) financing activities			355,692				(210,202)
Effect of exchange rate changes on cash and cash equivalents			(22,270)				(21,870)
Net change in cash and cash equivalents			(3,420)				(210,967)
Cash and cash equivalents at beginning of year			633,613				844,580
Cash and cash equivalents at end of year		¥	630,193			¥	633,613

 

 

- 14 -

---

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

6. NOTE FOR GOING CONCERN ASSUMPTION

Not applicable.

7. SEGMENT INFORMATION

SEGMENT INFORMATION BY BUSINESS UNIT

 

Results for the fourth quarter				Millions of yen
				Three months ended     December 31, 2016				Three months ended     December 31, 2015				Change(%)
Office
Net sales:
		External customers		¥	484,656			¥	533,366				-				9.1
		Intersegment			1,194				641				+				86.3
		Total			485,850				534,007				-				9.0
Operating cost and expenses					437,225				461,764				-				5.3
Operating profit				¥	48,625			¥	72,243				-				32.7
Imaging System
Net sales:
		External customers		¥	324,455			¥	365,944				-				11.3
		Intersegment			287				239				+				20.1
		Total			324,742				366,183				-				11.3
Operating cost and expenses					273,040				304,057				-				10.2
Operating profit				¥	51,702			¥	62,126				-				16.8
Industry and Others
Net sales:
		External customers		¥	156,062			¥	143,328				+				8.9
		Intersegment			19,572				22,883				-				14.5
		Total			175,634				166,211				+				5.7
Operating cost and expenses					172,472				168,995				+				2.1
Operating profit				¥	3,162			¥	(2,784)								-
Corporate and Eliminations
Net sales:
		External customers		¥	-			¥	-								-
		Intersegment			(21,053)				(23,763)								-
		Total			(21,053)				(23,763)								-
Operating cost and expenses					2,268				780								-
Operating profit				¥	(23,321)			¥	(24,543)								-
Consolidated
Net sales:
		External customers		¥	965,173			¥	1,042,638				-				7.4
		Intersegment			-				-								-
		Total			965,173				1,042,638				-				7.4
Operating cost and expenses					885,005				935,596				-				5.4
Operating profit				¥	80,168			¥	107,042				-				25.1

 

 

- 15 -

---

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

 

Results for the fiscal year				Millions of yen
				Year ended     December 31, 2016				Year ended     December 31, 2015				Change(%)
Office
Net sales:
		External customers		¥	1,804,862			¥	2,108,246				-				14.4
		Intersegment			2,957				2,570				+				15.1
		Total			1,807,819				2,110,816				-				14.4
Operating cost and expenses					1,638,333				1,820,230				-				10.0
Operating profit					169,486				290,586				-				41.7
Total assets					961,749				1,020,758				-				5.8
Depreciation and amortization					78,319				86,206				-				9.1
Capital expenditures				¥	72,189			¥	73,819				-				2.2
Imaging System
Net sales:
		External customers		¥	1,094,291			¥	1,262,667				-				13.3
		Intersegment			998				1,168				-				14.6
		Total			1,095,289				1,263,835				-				13.3
Operating cost and expenses					950,876				1,080,396				-				12.0
Operating profit					144,413				183,439				-				21.3
Total assets					391,661				452,283				-				13.4
Depreciation and amortization					47,386				52,070				-				9.0
Capital expenditures				¥	25,564			¥	38,337				-				33.3
Industry and Others
Net sales:
		External customers		¥	502,334			¥	429,358				+				17.0
		Intersegment			82,326				95,293				-				13.6
		Total			584,660				524,651				+				11.4
Operating cost and expenses					577,212				537,730				+				7.3
Operating profit					7,448				(13,079)								-
Total assets					545,210				332,252				+				64.1
Depreciation and amortization					41,053				45,064				-				8.9
Capital expenditures				¥	29,346			¥	24,241				+				21.1
Corporate and Eliminations
Net sales:
		External customers		¥	-			¥	-								-
		Intersegment			(86,281)				(99,031)								-
		Total			(86,281)				(99,031)								-
Operating cost and expenses					6,200				6,705								-
Operating profit					(92,481)				(105,736)								-
Total assets					3,239,909				2,622,480				+				23.5
Depreciation and amortization					83,338				89,987				-				7.4
Capital expenditures				¥	81,280			¥	106,733				-				23.8
Consolidated
Net sales:
		External customers		¥	3,401,487			¥	3,800,271				-				10.5
		Intersegment			-				-								-
		Total			3,401,487				3,800,271				-				10.5
Operating cost and expenses					3,172,621				3,445,061				-				7.9
Operating profit					228,866				355,210				-				35.6
Total assets					5,138,529				4,427,773				+				16.1
Depreciation and amortization					250,096				273,327				-				8.5
Capital expenditures				¥	208,379			¥	243,130				-				14.3

 

- 16 -

---

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

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 12 “3. DETAILS OF SALES in V. Financial Statements”.

8. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

(1) GROUP POSITION

 

1.

Number of Group Companies

 

		December 31, 2016		December 31, 2015		Change
Subsidiaries		367		317		50
Affiliates		9		5		4
Total		376		322		54

 

2.

Change in Group Entities

 

Subsidiaries
Addition:		61 companies
Removal:		11 companies

 

Affiliates (Carried at Equity Basis)
Addition:		4 companies

 

3.

Subsidiaries Listed on Domestic Stock Exchange

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

(2) SIGNIFICANT ACCOUNTING POLICIES

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

Recently Issued Accounting Guidance

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

 

- 17 -

---

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

9. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

(1)	NET INCOME ATTRIBUTABLE TO CANON INC. SHAREHOLDERS PER SHARE

 

Results for the fiscal year		Millions of yen
		Year ended   December 31, 2016				Year ended   December 31, 2015
Net income attributable to Canon Inc.
-Basic		¥	150,650			¥	220,209
-Diluted			150,650				220,209
		Number of shares
Average common shares outstanding
-Basic			1,092,070,680				1,092,017,955
-Diluted			1,092,070,680				1,092,052,886
		Yen
Net income attributable to
Canon Inc. shareholders per share:
-Basic		¥	137.95			¥	201.65
-Diluted			137.95				201.65

 

 

(2)	ACQUISITIONS

As necessary clearance from competition regulatory authorities regarding the acquisition of Toshiba Medical Systems Corporation (TMSC) shares were obtained, Canon exercised the share options acquired for consideration of cash, through a Shares and Other Securities Transfer Agreement concluded with Toshiba Corporation dated March 17, 2016, and acquired all of the shares of TMSC. The acquisition date was December 19, 2016 and the purchase price was ¥665.5 billion.

Under Phase V of the Excellent Global Corporation Plan, a five-year initiative that Canon has been implementing since 2016, “embracing the challenge of new growth through a grand strategic transformation” has been set as a basic policy. With regard to “strengthening and growing new businesses, and creating future businesses,” a particularly important strategy, Canon intends to develop a health care business within the realm of “safety and security,” as a next-generation pillar of growth.

Since the acquisition date of TMSC was near the balance sheet date, the allocation of the purchase price to the assets acquired and liabilities assumed was incomplete and provisionally carried out as of December 31, 2016.

On January 23, 2017, regarding the borrowing that was provisionally raised in March 2016 for this acquisition, a contract was concluded to refinance with an unsecured loan with a repayment due in December 2021. The loan is ¥610 billion as of December 31, 2016, and is included in long-term debt in the consolidated balance sheet.

 

 

(3)	FINANCE RECEIVABLES AND OPERATING LEASES, MARKETABLE SECURITIES, DEFERRED TAX ACCOUNTING, EMPLOYEE RETIREMENT AND SEVERANCE BENEFITS, STOCK OPTIONS, DERIVATIVE CONTRACTS AND OTHERS

The disclosure is omitted as it is not considered significant in this report.

 

 

(4)	SUBSEQUENT EVENT

There is no significant subsequent event.

 

- 18 -

---

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

10. 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.

 

 

- 19 -

---

CANON INC.

NON-CONSOLIDATED

11. NON-CONSOLIDATED BALANCE SHEETS

( Parent company only )

 

				Millions of yen
				As of December 31, 2016								As of December 31, 2015
		ASSETS
		Current assets:
		Cash		¥					85,748			¥					100,836
		Trade receivables							476,744								450,449
		Marketable securities							-								18,070
		Inventories							155,780								148,485
		Prepaid expenses and other current assets							231,636								154,575
		Allowance for doubtful receivables							(1)								(1)
		Total current assets							949,907								872,414
		Fixed assets:
		Net property, plant and equipment							646,975								659,258
		Intangibles							25,264								25,578
		Investments and other fixed assets							1,554,652								880,769
		Allowance for doubtful receivables-noncurrent							(95)								(95)
		Total fixed assets							2,226,796								1,565,510
		Total assets		¥					3,176,703			¥					2,437,924
		LIABILITIES AND NET ASSETS
		Current liabilities:
		Trade payables		¥					314,921			¥					301,792
		Short-term loans							602,326								461,686
		Accrued income taxes							8,868								22,805
		Accrued warranty expenses							2,376								3,920
		Accrued bonuses for employees							4,397								4,606
		Accrued bonuses for directors							60								144
		Other current liabilities							123,758								108,269
		Total current liabilities							1,056,706								903,222
		Noncurrent liabilities:
		Long-term loans							610,000								-
		Accrued pension and severance cost							53,072								45,985
		Reserve for environmental provision							1,389								1,618
		Accrued long service rewards for employees							1,602								1,449
		Other noncurrent liabilities							1,288								1,493
		Total noncurrent liabilities							667,351								50,545
		Total liabilities							1,724,057								953,767
		Net assets:
		Shareholders’ equity							1,443,164								1,473,935
		Valuation and translation adjustments							9,017								9,091
		Subscription rights to shares							465								1,131
		Total net assets							1,452,646								1,484,157
		Total liabilities and net assets		¥					3,176,703			¥					2,437,924

 

- 20 -

---

CANON INC.

NON-CONSOLIDATED

12. NON-CONSOLIDATED STATEMENTS OF INCOME

      ( Parent company only )

 

				Millions of yen
				Year ended December 31, 2016				Year ended December 31, 2015
		Net sales		¥	1,763,987			¥	2,091,139
		Cost of sales			1,279,902				1,461,270
		Gross profit			484,085				629,869
		Selling, general and administrative expenses			416,542				460,631
		Operating profit			67,543				169,238
		Other income (deductions):
		Interest and dividend income			91,406				103,788
		Interest expense			(3,386)				(2,124)
		Other, net			2,796				(1,084)
					90,816				100,580
		Ordinary profit			158,359				269,818
		Non-ordinary gain (loss), net			(1,678)				(2,447)
		Income before income taxes			156,681				267,371
		Income taxes			23,626				55,408
		Net income		¥	133,055			¥	211,963

 

- 21 -

---

CANON INC.

NON-CONSOLIDATED

13. NON-CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

( Parent company only )

 

Year ended December 31, 2016

(Millions of yen)

			Shareholders’ equity																																				Valuation and translation adjustments								Subscription rights to shares				Total net assets
			Common stock				Capital surplus				Retained earnings																				Treasury stock				Total shareholders’ equity				Net unrealized gains (losses) on securities				Net deferred profits (losses) on hedges
							Additional paid-in capital				Legal reserve				Other retained earnings
															Reserve for special depreciation				Reserve for deferral of capital gain on property				Special reserves				Retained earnings brought forward
Balance at the beginning of current period		¥	174,762			¥	306,288			¥	22,114			¥	167			¥	3,727			¥	1,249,928			¥	727,359			¥	(1,010,410	)		¥	1,473,935			¥	8,851			¥	240			¥	1,131			¥	1,484,157
Changes of items during the period
Transfer to reserve for special depreciation															17												(17	)							-																-
Reversal of reserve for special depreciation															(46	)											46								-																-
Transfer to reserve for deferral of capital gain on property																			390								(390	)							-																-
Reversal of reserve for deferral of capital gain on property																			(135	)							135								-																-
Dividends paid																											(163,810	)							(163,810	)															(163,810	)
Net income																											133,055								133,055																133,055
Purchase of treasury stock																															(18	)			(18	)															(18	)
Disposal of treasury stock																											(3	)			5				2																2
Net changes of items other than shareholders’ equity																																			-				1,088				(1,162	)			(666	)			(740	)
Total changes of items during the period			-				-				-				(29	)			255				-				(30,984	)			(13	)			(30,771	)			1,088				(1,162	)			(666	)			(31,511	)
Balance at the end of current period		¥	174,762			¥	306,288			¥	22,114			¥	138			¥	3,982			¥	1,249,928			¥	696,375			¥	(1,010,423	)		¥	1,443,164			¥	9,939			¥	(922	)		¥	465			¥	1,452,646

 

- 22 -

---

CANON INC.

NON-CONSOLIDATED

 

Year ended December 31, 2015

(Millions of yen)

			Shareholders’ equity																																				Valuation and translation   adjustments								Subscription   rights to   shares				Total   net   assets
			Common   stock				Capital   surplus				Retained earnings																				Treasury stock				Total shareholders’ equity				Net unrealized gains (losses) on securities				Net deferred profits (losses) on hedges
							Additional   paid-in   capital				Legal   reserve				Other retained earnings
															Reserve   for    special   depreciation				Reserve for   deferral of    capital gain   on property				Special reserves				Retained   earnings   brought    forward
Balance at the beginning of current period		¥	174,762			¥	306,288			¥	22,114			¥	341			¥	3,693			¥	1,249,928			¥	692,960			¥	(1,011,418)			¥	1,438,668			¥	7,780			¥	(679	)		¥	1,553			¥	1,447,322
Cumulative effects of changes in accounting policies																											(2,951	)							(2,951	)															(2,951	)
Restated balance		¥	174,762			¥	306,288			¥	22,114			¥	341			¥	3,693			¥	1,249,928			¥	690,009			¥	(1,011,418)			¥	1,435,717			¥	7,780			¥	(679	)		¥	1,553			¥	1,444,371
Changes of items during the period
Transfer to reserve for special depreciation																																			-																-
Reversal of reserve for special depreciation															(174	)											174								-																-
Transfer to reserve for deferral of capital gain on property																			157								(157	)							-																-
Reversal of reserve for deferral of capital gain on property																			(123	)							123								-																-
Dividends paid																											(174,711	)							(174,711	)															(174,711	)
Net income																											211,963								211,963																211,963
Purchase of treasury stock																															(39	)			(39	)															(39	)
Disposal of treasury stock																											(42	)			1,047				1,005																1,005
Net changes of items other than shareholders’ equity																																			-				1,071				919				(422	)			1,568
Total changes of items during the period			-				-				-				(174	)			34				-				37,350				1,008				38,218				1,071				919				(422	)			39,786
Balance at the end of current period		¥	174,762			¥	306,288			¥	22,114			¥	167			¥	3,727			¥	1,249,928			¥	727,359			¥	(1,010,410	)		¥	1,473,935			¥	8,851			¥	240			¥	1,131			¥	1,484,157

 

- 23 -

---

CANON INC.

NON-CONSOLIDATED

14. NOTE FOR GOING CONCERN ASSUMPTION

         ( Parent company only )

     Not applicable.

 

- 24 -

---

NON-CONSOLIDATED

(Current Titles are Shown in the Parentheses)

Effective Date: March 30, 2017

Directors

 

(1)	Candidate for new Director to be appointed

 

Toshio Homma		(Executive Vice President, Chief Executive of Office Imaging Products Operations)

 

(2)	Candidate for new Representative Director

 

Representative Director   / Executive Vice President		Toshio Homma		(Executive Vice President, Chief Executive of Office Imaging Products Operations)

 

(3)	Candidate for Director to be promoted

 

Executive Vice President & CTO		Shigeyuki Matsumoto		(Senior Managing Director &CTO, Group Executive of R&D Headquarters)

 

- 25 -

---

NON-CONSOLIDATED

(Current Titles are Shown in the Parentheses)

Executive Officers (1/2)

(1) New Executive Officers to be appointed

Effective date: April 1, 2017

 

(2) Executive Officers to be retired

Effective date: March 30, 2017

 

Effective date: March 31, 2017

 

 

- 26 -

---

NON-CONSOLIDATED

(Current Titles are Shown in the Parentheses)

Executive Officers (2/2)

(3) Candidate for Executive Officers to be promoted

Effective date: April 1, 2017

 

Executive Vice President		Hideki Ozawa		(Senior Managing Executive Officer, President of Canon (CHINA) Co. Ltd)
Senior Managing Executive Officer		Yasuhiro Tani		(Managing Executive Officer, Group Executive of Digital System Technology Development Headquarters)
Senior Managing Executive Officer		Naoji Otsuka		(Managing Executive Officer, Chief Executive of Inkjet Products Operations)
Senior Managing Executive Officer		Toshio Takiguchi		(New appointment, President of Toshiba Medical Systems Corporation)
Managing Executive Officer		Shunsuke Inoue		(Executive Officer, Group Executive of Device Technology Development Headquarters)
Managing Executive Officer		Takayuki Miyamoto		(Executive Officer, Chief Executive of Peripheral Products Operations)
Managing Executive Officer		Katsumi Iijima		(Executive Officer, Group Executive of Information & Communication Systems Headquarters)
Managing Executive Officer		Hiroyuki Takeishi		(Executive Officer, Chief Executive of Optical Products Operations)

 

- 27 -

---

Canon Inc.

January 31, 2017

CONSOLIDATED RESULTS FOR THE FOURTH QUARTER

AND THE FISCAL YEAR ENDED DECEMBER 31, 2016

SUPPLEMENTARY REPORT

TABLE OF CONTENTS

 

				PAGE
1.		SALES BY GEOGRAPHIC AREA AND BUSINESS UNIT (2016)			S    1
2.		SALES BY GEOGRAPHIC AREA AND BUSINESS UNIT (2017/Projection)			S    2
3.		SEGMENT INFORMATION BY BUSINESS UNIT (2016)			S    3
4.		OTHER INCOME / DEDUCTIONS (2016)			S    3
5.		SEGMENT INFORMATION BY BUSINESS UNIT (2017/Projection)			S    4
6.		OTHER INCOME / DEDUCTIONS (2017/Projection)			S    4
7.		BREAKDOWN OF PRODUCT SALES WITHIN BUSINESS UNIT			S    5
8.		SALES GROWTH IN LOCAL CURRENCY			S    5
9.		PROFITABILITY			S    6
10.		IMPACT OF FOREIGN EXCHANGE RATES			S    6
11.		STATEMENTS OF CASH FLOWS			S    6
12.		R&D EXPENDITURE			S    7
13.		INCREASE IN PP&E & DEPRECIATION AND AMORTIZATION			S    7
14.		INVENTORIES			S    7
15.		DEBT RATIO			S    7
16.		OVERSEAS PRODUCTION RATIO			S    7
17.		NUMBER OF EMPLOYEES			S    7

 

---

Canon Inc.

 

1. SALES BY GEOGRAPHIC AREA AND BUSINESS UNIT (2016)

(Millions of yen)

				2016								2015										Change year over year
				4th quarter				Year				4th quarter				Year						4th quarter		Year
Japan
		Office			99,303				378,834				98,804				379,277					+0.5%		-0.1%
		Imaging System			63,174				179,304				66,958				198,739					-5.7%		-9.8%
		Industry and Others			42,619				148,841				37,975				136,264					+12.2%		+9.2%
		Total			205,096				706,979				203,737				714,280					+0.7%		-1.0%
Overseas
		Office			385,353				1,426,028				434,562				1,728,969					-11.3%		-17.5%
		Imaging System			261,281				914,987				298,986				1,063,928					-12.6%		-14.0%
		Industry and Others			113,443				353,493				105,353				293,094					+7.7%		+20.6%
		Total			760,077				2,694,508				838,901				3,085,991					-9.4%		-12.7%
		Americas
		Office			153,027				582,297				175,923				713,197					-13.0%		-18.4%
		Imaging System			91,064				297,403				110,869				352,946					-17.9%		-15.7%
		Industry and Others			23,376				83,844				24,804				78,279					-5.8%		+7.1%
		Total			267,467				963,544				311,596				1,144,422					-14.2%		-15.8%
		Europe
		Office			158,562				556,353				185,623				680,619					-14.6%		-18.3%
		Imaging System			83,926				293,894				95,593				335,312					-12.2%		-12.4%
		Industry and Others			19,836				63,276				19,511				58,435					+1.7%		+8.3%
		Total			262,324				913,523				300,727				1,074,366					-12.8%		-15.0%
		Asia and Oceania
		Office			73,764				287,378				73,016				335,153					+1.0%		-14.3%
		Imaging System			86,291				323,690				92,524				375,670					-6.7%		-13.8%
		Industry and Others			70,231				206,373				61,038				156,380					+15.1%		+32.0%
		Total			230,286				817,441				226,578				867,203					+1.6%		-5.7%
Intersegment
		Office			1,194				2,957				641				2,570					+86.3%		+15.1%
		Imaging System			287				998				239				1,168					+20.1%		-14.6%
		Industry and Others			19,572				82,326				22,883				95,293					-14.5%		-13.6%
		Eliminations			(21,053	)			(86,281	)			(23,763	)			(99,031	)				-		-
		Total			0				0				0				0					-		-
Total
		Office			485,850				1,807,819				534,007				2,110,816					-9.0%		-14.4%
		Imaging System			324,742				1,095,289				366,183				1,263,835					-11.3%		-13.3%
		Industry and Others			175,634				584,660				166,211				524,651					+5.7%		+11.4%
		Eliminations			(21,053	)			(86,281	)			(23,763	)			(99,031	)				-		-
		Total			965,173				3,401,487				1,042,638				3,800,271					-7.4%		-10.5%

 

- S1 -

---

Canon Inc.

2. SALES BY GEOGRAPHIC AREA AND BUSINESS UNIT (2017/Projection)

 

(1) Sales by business unit										(Millions of yen)

				2017 (P)				2016								Change year over year
				Year				Year								Year
		Office				1,828,900				1,807,819								+1.2%
		Imaging System				1,092,000				1,095,289								-0.3%
		Industry and Others				1,158,000				584,660								+98.1%
		Eliminations				(78,900)				(86,281)								-
		Total				4,000,000				3,401,487								+17.6%
																		(P)=Projection
(2) Sales by region																		(Millions of yen)
				2017 (P)				2016								Change year over year
				Year				Year								Year
		Japan				922,000				706,979								+30.4%
		Overseas				3,078,000				2,694,508								+14.2%
		Americas				1,067,800				963,544								+10.8%
		Europe				985,600				913,523								+7.9%
		Asia and Oceania				1,024,600				817,441								+25.3%
		Total				4,000,000				3,401,487								+17.6%
																		(P)=Projection

 

- S2 -

---

Canon Inc.

 

3. SEGMENT INFORMATION BY BUSINESS UNIT (2016)

(Millions of yen)

					2016								2015										Change year over year
					4th quarter				Year				4th quarter				Year						4th quarter			Year
Office
		External customers			484,656				1,804,862				533,366				2,108,246						-9.1%			-14.4%
		Intersegment			1,194				2,957				641				2,570						+86.3%			+15.1%
		Total sales			485,850				1,807,819				534,007				2,110,816						-9.0%			-14.4%
		Operating profit			48,625				169,486				72,243				290,586						-32.7%			-41.7%
		% of sales			10.0%				9.4%				13.5%				13.8%						-			-
Imaging System
		External customers			324,455				1,094,291				365,944				1,262,667						-11.3%			-13.3%
		Intersegment			287				998				239				1,168						+20.1%			-14.6%
		Total sales			324,742				1,095,289				366,183				1,263,835						-11.3%			-13.3%
		Operating profit			51,702				144,413				62,126				183,439						-16.8%			-21.3%
		% of sales			15.9%				13.2%				17.0%				14.5%						-			-
Industry and Others
		External customers			156,062				502,334				143,328				429,358						+8.9%			+17.0%
		Intersegment			19,572				82,326				22,883				95,293						-14.5%			-13.6%
		Total sales			175,634				584,660				166,211				524,651						+5.7%			+11.4%
		Operating profit			3,162				7,448				(2,784	)			(13,079	)					-			-
		% of sales			1.8%				1.3%				-1.7%				-2.5%						-			-
Corporate and Eliminations
		External customers			-				-				-				-						-			-
		Intersegment			(21,053	)			(86,281	)			(23,763	)			(99,031	)					-			-
		Total sales			(21,053	)			(86,281	)			(23,763	)			(99,031	)					-			-
		Operating profit			(23,321	)			(92,481	)			(24,543	)			(105,736	)					-			-
Consolidated
		External customers			965,173				3,401,487				1,042,638				3,800,271						-7.4%			-10.5%
		Intersegment			-				-				-				-						-			-
		Total sales			965,173				3,401,487				1,042,638				3,800,271						-7.4%			-10.5%
		Operating profit			80,168				228,866				107,042				355,210						-25.1%			-35.6%
		% of sales			8.3%				6.7%				10.3%				9.3%						-			-
4. OTHER INCOME / DEDUCTIONS (2016)																							(Millions of yen)
					2016								2015										Change year over year
					4th quarter				Year				4th quarter				Year						4th quarter			Year
		Interest and dividend, net			959				3,701				1,123				4,917						(164	)		(1,216)
		Forex gain (loss)			(12,620	)			(2	)			(1,009	)			(22,149	)					(11,611	)		+22,147
		Equity earnings of affiliated companies			217				890				110				447						+107			+443
		Other, net			3,911				11,196				1,695				9,013						+2,216			+2,183
		Total			(7,533	)			15,785				1,919				(7,772	)					(9,452	)		+23,557

 

- S3 -

---

Canon Inc.

5. SEGMENT INFORMATION BY BUSINESS UNIT (2017/Projection)												(Millions of yen)
				2017 (P)		2016						Change year over year
				Year		Year						Year
Office
		External customers		1,825,000		1,804,862						+1.1%
		Intersegment		3,900		2,957						+31.9%
		Total sales		1,828,900		1,807,819						+1.2%
		Operating profit		177,500		169,486						+4.7%
		% of sales		9.7%		9.4%						-
Imaging System
		External customers		1,086,800		1,094,291						-0.7%
		Intersegment		5,200		998						+421.0%
		Total sales		1,092,000		1,095,289						-0.3%
		Operating profit		154,000		144,413						+6.6%
		% of sales		14.1%		13.2%						-
Industry and Others
		External customers		1,088,200		502,334						+116.6%
		Intersegment		69,800		82,326						-15.2%
		Total sales		1,158,000		584,660						+98.1%
		Operating profit		20,800		7,448						+179.3%
		% of sales		1.8%		1.3%						-
Corporate and Eliminations
		External customers		-		-						-
		Intersegment		(78,900)		(86,281)						-
		Total sales		(78,900)		(86,281)						-
		Operating profit		(97,300)		(92,481)						-
Consolidated
		External customers		4,000,000		3,401,487						+17.6%
		Intersegment		-		-						-
		Total sales		4,000,000		3,401,487						+17.6%
		Operating profit		255,000		228,866						+11.4%
		% of sales		6.4%		6.7%						-
												(P)=Projection
6. OTHER INCOME / DEDUCTIONS (2017/Projection)												(Millions of yen)
				2017 (P)		2016						Change year over year
				Year		Year						Year
		Interest and dividend, net		(500)		3,701						(4,201)
		Forex gain (loss)		(10,200)		(2)						(10,198)
		Equity earnings of affiliated companies		1,300		890						+410
		Other, net		14,400		11,196						+3,204
		Total		5,000		15,785						(10,785)
												(P)=Projection

 

- S4 -

---

Canon Inc.

 

7. BREAKDOWN OF PRODUCT SALES WITHIN BUSINESS UNIT
				2017 (P)				2016								2015
				Year				4th quarter				Year				4th quarter				Year
Office
		Monochrome copiers			16%				15	%			16	%			16	%		16%
		Color copiers			22%				22	%			21	%			21	%		20%
		Printers			36%				38	%			37	%			38	%		41%
		Others			26%				25	%			26	%			25	%		23%
Imaging System
		Cameras			60%				61	%			61	%			60	%		62%
		Inkjet printers			31%				31	%			30	%			31	%		29%
		Others			9%				8	%			9	%			9	%		9%
Industry and Others
		Lithography equipment			16%				20	%			21	%			26	%		24%
		Others			84%				80	%			79	%			74	%		76%
																				(P)=Projection
8. SALES GROWTH IN LOCAL CURRENCY (Year over year)
				2017 (P)				2016
				Year				4th quarter				Year
Office
		Japan			-				+0.5	%			-0.1	%
		Overseas			-				-4.2	%			-9.2	%
		Total			+0.7%				-3.2	%			-7.6	%
Imaging System
		Japan			-				-5.7	%			-9.8	%
		Overseas			-				-1.5	%			-3.1	%
		Total			-0.5%				-2.2	%			-4.1	%
Industry and Others
		Japan			-				+12.2	%			+9.2	%
		Overseas			-				+12.9	%			+27.6	%
		Total			+97.2%				+9.0	%			+15.4	%
Total
		Japan			+30.4%				+0.7	%			-1.0	%
		Overseas			+13.6%				-1.1	%			-3.6	%
		Americas			+9.3%				-4.6	%			-5.9	%
		Europe			+8.0%				-2.5	%			-5.5	%
		Asia and Oceania			+25.1%				+11.2	%			+4.3	%
		Total			+17.1%				-0.7	%			-3.1	%
									(P)=Projection

 

- S5 -

---

Canon Inc.

 

9. PROFITABILITY
				2017 (P)		2016		2015
				Year		Year		Year
		ROE *1		6.1%		5.2%		7.4%
		ROA *2		3.3%		3.1%		5.0%
								(P)=Projection
*1 Return on Equity ; Based on Net Income attributable to Canon Inc. and Total Canon Inc. Shareholders’ Equity
*2 Return on Assets ; Based on Net Income attributable to Canon Inc.
10. IMPACT OF FOREIGN EXCHANGE RATES
(1) Exchange rates												(Yen)
				2017 (P)		2016				2015
				Year		4th quarter		Year		4th quarter		Year
		Yen/US$		110.00		109.48		108.58		121.60		121.13
		Yen/Euro		120.00		118.10		120.25		132.81		134.20
												(P)=Projection
(2) Impact of foreign exchange rates on sales (Year over year)						(Billions of yen)
				2017 (P)		2016
				Year		4th quarter		Year
		US$		+21.8		(31.9)		(144.2)
		Euro		(1.0)		(27.1)		(90.3)
		Other currencies		(4.5)		(10.7)		(45.9)
		Total		+16.3		(69.7)		(280.4)
								(P)=Projection
(3) Impact of foreign exchange rates per yen				(Billions of yen)
				2017 (P)
				Year
		On sales
		US$		13.4
		Euro		6.6
		On operating profit
		US$		4.9
		Euro		2.4
				(P)=Projection
11. STATEMENTS OF CASH FLOWS										(Millions of yen)
				2017 (P)		2016				2015
				Year		4th quarter		Year		4th quarter		Year
		Net cash provided by operating activities		500,000		156,920		500,283		143,892		474,724
		Net cash used in investing activities		(250,000)		(12,216)		(837,125)		(89,154)		(453,619)
		Free cash flow		250,000		144,704		(336,842)		54,738		21,105
		Net cash provided by (used in) financing activities		(267,200)		(80,647)		355,692		(244)		(210,202)
		Effect of exchange rate changes on cash and cash equivalents		(13,000)		31,656		(22,270)		(2,128)		(21,870)
		Net change in cash and cash equivalents		(30,200)		95,713		(3,420)		52,366		(210,967)
		Cash and cash equivalents at end of period		600,000		630,193		630,193		633,613		633,613
												(P)=Projection

 

- S6 -

---

Canon Inc.

12. R&D EXPENDITURE				(Millions of yen)
				2017 (P)		2016		2015
				Year		Year		Year
		Office		-		94,440		105,298
		Imaging System		-		91,752		90,236
		Industry and Others		-		67,887		66,585
		Corporate and Eliminations		-		48,297		66,381
		Total		345,000		302,376		328,500
		% of sales		8.6%		8.9%		8.6%
						(P)=Projection
13. INCREASE IN PP&E & DEPRECIATION AND AMORTIZATION
				(Millions of yen)
				2017 (P)		2016		2015
				Year		Year		Year
		Increase in PP&E
		Office		-		67,675		70,887
		Imaging System		-		23,482		35,634
		Industry and Others		-		26,788		20,683
		Corporate and Eliminations		-		53,652		67,916
		Total		195,000		171,597		195,120
		Depreciation and amortization
		Office		-		78,319		86,206
		Imaging System		-		47,386		52,070
		Industry and Others		-		41,053		45,064
		Corporate and Eliminations		-		83,338		89,987
		Total		270,000		250,096		273,327
						(P)=Projection
14. INVENTORIES
		(1) Inventories		(Millions of yen)
				2016		2015		Difference
				Dec.31		Dec.31
		Office		205,656		225,327		(19,671)
		Imaging System		127,386		155,767		(28,381)
		Industry and Others		227,694		120,801		+106,893
		Total		560,736		501,895		+58,841
		(2) Inventories/Sales*						(Days)
				2016		2015		Difference
				Dec.31		Dec.31
		Office		42		39		+3
		Imaging System		41		43		(2)
		Industry and Others		152		86		+66
		Total		59		47		+12
		*Index based on the previous six months sales.
15. DEBT RATIO
				2016		2015		Difference
				Dec.31		Dec.31
		Total debt / Total assets		11.9%		0.0%		+11.9%
16. OVERSEAS PRODUCTION RATIO
				2016		2015
				Year		Year
		Overseas production ratio		44%		48%
17. NUMBER OF EMPLOYEES
				2016		2015		Difference
				Dec.31		Dec.31
		Japan		72,913		68,325		+4,588
		Overseas		124,760		121,246		+3,514
		Total		197,673		189,571		+8,102
		* The effect of newly consolidated TMSC is included in “Industry and Others,” and appears in both fiscal 2016 results and fiscal 2017 projections.

 

- S7 -