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 ….		July		……………………………………………… ,		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-………………..

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Date….		July 27, 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 SECOND QUARTER AND THE FIRST HALF ENDED JUNE 30, 2017

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CONSOLIDATED RESULTS FOR THE SECOND QUARTER AND

THE FIRST HALF ENDED JUNE 30, 2017

July 27, 2017

CONSOLIDATED RESULTS FOR THE SECOND QUARTER

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

 

		Actual
		Three months         ended June 30, 2017				Three months         ended June 30, 2016				Change(%)								Three months         ended June 30, 2017
Net sales		¥	992,473			¥	860,246				+				15.4			$	8,861,366
Operating profit			96,319				68,596				+				40.4				859,991
Income before income taxes			99,556				80,992				+				22.9				888,893
Net income attributable to Canon Inc.		¥	69,180			¥	53,448				+				29.4			$	617,679
Net income attributable to Canon Inc. shareholders per share:
- Basic		¥	63.53			¥	48.94				+				29.8			$	0.57
- Diluted			63.53				48.94				+				29.8				0.57
CONSOLIDATED RESULTS FOR THE FIRST HALF
(Millions of yen, thousands of U.S. dollars, except per share amounts)
		Actual																				Projected
		Six months ended   June 30, 2017				Six months ended June 30, 2016				Change(%)								Six months ended June 30, 2017				Year ending December 31, 2017				Change(%)
Net sales		¥	1,965,234			¥	1,657,476				+				18.6			$	17,546,732			¥	4,050,000				+				19.1
Operating profit			171,984				108,683				+				58.2				1,535,571				330,000				+				44.2
Income before income taxes			177,566				126,753				+				40.1				1,585,411				340,000				+				39.0
Net income attributable to Canon Inc.		¥	124,269			¥	81,439				+				52.6			$	1,109,545			¥	220,000				+				46.0
Net income attributable to Canon Inc. shareholders per share:
- Basic		¥	113.98			¥	74.57				+				52.8			$	1.02			¥	202.68				+				46.9
- Diluted			113.98				74.57				+				52.8				1.02				-								-
		Actual
		As of June 30, 2017				As of December 31, 2016				Change(%)								As of June 30, 2017
Total assets		¥	5,209,750			¥	5,138,529				+				1.4			$	46,515,625
Canon Inc. shareholders’ equity		¥	2,775,142			¥	2,783,129				-				0.3			$	24,778,054

 

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 JPY112=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of June 30, 2017, solely for the convenience of the reader.

 

 

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

 

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I. Operating Results and Financial Conditions

2017 Second Quarter in Review

Looking back at the global economy in the second quarter of 2017, the U.S. economy continued to grow steadily as employment conditions and corporate earnings continued to improve. In Europe, the economy continued to recover moderately, centered on Germany and the U.K. The Chinese economy rallied due to public investments, and the economies of emerging countries realized moderate growth. In Japan, corporate earnings improved and consumer spending showed signs of recovery. As a result, the global economy overall continued to realize moderate growth.

As for the markets in which Canon operates amid these conditions, demand for office multifunction devices (MFDs) remained at around the same level as the previous year, while demand for laser printers continued to recover in emerging countries, centered on China. Demand for cameras shrank moderately while demand for inkjet printers remained at the same level as the previous year. Additionally, there was solid demand for medical equipment, mainly in developed countries. Within the Industry and Others sector, demand for semiconductor lithography equipment and manufacturing equipment for organic LED (OLED) displays enjoyed strong growth.

The average values of the yen during the second quarter and the first half of the year were ¥111.12 and ¥112.27 against the U.S. dollar, respectively, year-on-year depreciations of approximately ¥3 and ¥1, and ¥122.36 and ¥121.72 against the euro, respectively, year-on-year at the same level for the second quarter and a year-on-year appreciation of approximately ¥3 for the first half of the year.

During the second quarter, office MFDs enjoyed solid demand, mainly for color models. The total sales volume of laser printers increased compared with the same period of the previous year amid recovering demand in emerging countries, supported by the increased sales of new models. Although total unit sales of interchangeable-lens digital cameras and compact cameras decreased compared with the same period of the previous year amid the shrinking market, sales of compact-system cameras increased. Looking at inkjet printers, sales volume remained at approximately the same level as the previous year, thanks to such factors as increased sales of refillable ink tank models for emerging countries and new models launched in the previous year. Additionally, sales of semiconductor lithography equipment and manufacturing equipment for OLED displays exceeded those of the previous year, thanks to favorable market conditions. Under these conditions, along with the impact of acquiring Toshiba Medical Systems Corporation (TMSC), second-quarter net sales increased by 15.4% year on year to ¥992.5 billion. Net sales for the first half of the year increased by 18.6% year on year to ¥1,965.2 billion. Although the gross profit ratio dropped by 0.4 points to 49.9% due to the effect of the product mix, gross profit increased by 14.6% year on year to ¥495.6 billion, thanks to such factors as the increase in sales and continuous cost down efforts. Operating expenses increased by 9.7% year on year to ¥399.2 billion mainly due to the impact of acquiring TMSC. As a result, second-quarter operating profit increased by 40.4% to ¥96.3 billion and other income (deductions) decreased by ¥9.2 billion due to foreign currency exchange losses, while income before income taxes increased by 22.9% year on year to ¥99.6 billion and net income attributable to Canon Inc. increased by 29.4% to ¥69.2 billion. Operating profit for the first half of the year increased by 58.2% to ¥172.0 billion while income before income taxes increased by 40.1% to ¥177.6 billion and first-half net income attributable to Canon Inc. increased by 52.6% to ¥124.3 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥63.53 for the second quarter, a year-on-year increase of ¥14.59, and ¥113.98 for the first half, a year-on-year increase of ¥39.41.

 

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Results by Segment

Looking at Canon’s second-quarter performance by business unit, beginning with the Office Business Unit, unit sales of office MFDs increased from the same period of the previous year, supported by steady sales of newly launched small-office/home-office color A3 (12”x18”) imageRUNNER ADVANCE C3500-series models and A3 (12”x18”) imageRUNNER ADVANCE C5500-series models, launched in the previous year. Among high-speed continuous-feed printers, sales of the Océ-produced VarioPrint i300, a high-speed sheet-fed color inkjet press, increased year on year. As for laser printers, sales of both hardware and consumables increased from the same period of the previous year, supported by steady sales of new models which expand the product lineup. These factors resulted in total sales for the business unit of ¥470.7 billion, a year-on-year increase of 3.1%, while operating profit totaled ¥55.9 billion, a year-on-year increase of 17.4%. Sales for the combined first six months of the year totaled ¥928.4 billion, a year-on-year increase of 1.9%, while operating profit totaled ¥111.3 billion, a year-on-year increase of 20.6%.

Within the Imaging System Business Unit, although sales volume of interchangeable-lens digital cameras declined compared with the previous year, owing to the shrinking market, unit sales of compact-system cameras, including the newly launched EOS M6, increased from the same period of previous year, allowing Canon to maintain the top share in major countries in Europe, the U.S. and Japan. As for digital compact cameras, while sales volume declined amid the shrinking market, sales of high-value-added models enjoyed solid demand, supported by healthy demand for the newly launched G9 X Mark II, part of the high-image-quality PowerShot G-series lineup. As for inkjet printers, newly designed home-use models launched in the previous year and refillable ink tank models that target emerging countries enjoyed strong demand, resulting in unit sales remaining at approximately the same level as the corresponding period of the previous year. As a result, sales for the business unit decreased by 1.7% to ¥282.7 billion year on year, while operating profit totaled ¥48.5 billion, a year-on-year increase of 12.2%. Sales for the combined first six months of the year totaled ¥524.7 billion, a year-on-year increase of 0.5%, while operating profit totaled ¥77.7 billion, a year-on-year increase of 23.7%.

Within the Medical System Business Unit, a newly disclosed business unit as of this quarter, TMSC’s computed tomography products maintained the top share in Japanese market and sales of such diagnostic imaging unit products as diagnostic ultrasound systems and magnetic resonance imaging remained firm. As a result, sales for the business unit totaled ¥88.6 billion year on year, while operating profit totaled ¥0.2 billion. Sales for the combined first six months of the year totaled ¥220.4 billion while operating profit totaled ¥10.1 billion.

In the Industry and Others Business Unit, unit sales of semiconductor lithography equipment increased from the same period of the previous year as a result of increasing demand for memory devices used in data centers. Additionally, sales of FPD lithography equipment and manufacturing equipment for OLED panel devices increased in response to growing demand for high-definition OLED displays used in mobile devices. As for network cameras, sales of network cameras increased considerably compared with the previous year thanks to efforts to strengthen the product lineup. Consequently, sales for the business unit increased by 25.0% year on year to ¥172.5 billion, while operating profit grew by ¥12.7 billion from the previous year to ¥13.2 billion. Sales for the combined first six months of the year totaled ¥334.9 billion, a year-on-year increase of 24.9%, while operating profit grew by ¥22.0 billion from the previous year to ¥21.9 billion.

Cash Flow

During the first half of 2017, cash flow from operating activities totaled ¥309.1 billion, an increase of ¥67.9 billion compared with the previous year, mainly owing to improvements in profitability. Cash flow from investing activities decreased by ¥668.3 billion year on year to ¥107.8 billion due to the payment made in the previous year for the right to acquire all of the shares of TMSC. Accordingly, free cash flow totaled ¥201.3 billion, an increase of ¥736.2 billion compared with the corresponding year-ago period.

Cash flow from financing activities recorded an outlay of ¥135.1 billion, mainly owing to the dividend payout and the repurchasing of treasury stock.

Owing to these factors, as well as the impact of foreign currency translation adjustments, cash and cash equivalents increased by ¥63.6 billion to ¥693.8 billion from the end of the previous year.

 

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Outlook

As for the outlook in the third quarter onward, the U.S. economy is expected to continue recovering as employment conditions and consumer spending steadily improve. The European economy is expected to recover slowly due to increasing uncertainty surrounding the U.K.’s decision to leave the EU. Looking at China, the economy is expected to stabilize through changes in fiscal policy, while emerging economies, such as those of Southeast Asia, Russia and Brazil, are expected to recover. With regard to the Japanese economy, the outlook indicates a trend of gradual recovery supported by improved employment conditions and corporate earnings. Overall, the global economy is expected to recover more firmly than the previous year, despite such concerns as increasing geopolitical risks.

In the businesses in which Canon is involved, for office MFDs, demand for color models is expected to grow moderately, despite the contraction of the market for monochrome models. Looking at the laser printer market, demand for printers is expected to improve as the economy recovers. For interchangeable-lens digital cameras, although demand continues to decrease primarily in developed countries, the pace of decline is gradually decelerating. Projections for digital compact cameras, despite solid demand for high-value-added models, indicate continued market contraction, centered mainly on low-priced models. With regard to inkjet printers, the trend of decreasing demand is expected to gradually bottom out. As for the medical equipment market, demand is expected to remain firm in response to replacement demand for medical equipment in developed countries and increasing medical needs associated with population growth in emerging countries.

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 active capital investment by panel manufacturers, which is expected to increase demand. The network camera market is also expected to grow in response to the increasing use of network cameras for diverse applications in such area as marketing support in addition to crime prevention and disaster monitoring.

With regard to currency exchange rates for the third quarter onward, on which Canon’s performance outlook is based, Canon anticipates exchange rates of ¥112 to the U.S. dollar and ¥125 to the euro, representing depreciations of approximately ¥4 against the U.S. dollar and approximately ¥3 against the euro as the annual average rates of the previous year.

Upon taking into consideration the impact of acquiring TMSC and the current economic forecast, Canon projects full-year consolidated net sales in 2017 of ¥4,050.0 billion, a year-on-year increase of 19.1%; operating profit of ¥330.0 billion, a year-on-year increase of 44.2%; income before income taxes of ¥340.0 billion, a year-on-year increase of 39.0%; and net income attributable to Canon Inc. of ¥220.0 billion, a year-on-year increase of 46.0%.

Consolidated Outlook

 

Fiscal year		Millions of yen
		Year ending December 31, 2017								Change				Year ended December 31, 2016				Change (%)
		Previous Outlook (A)				Revised Outlook (B)				(B - A)				Results (C)				(B - C) / C
Net sales			4,020,000				4,050,000				30,000				3,401,487				+19.1%
Operating profit			270,000				330,000				60,000				228,866				+44.2%
Income before income taxes			280,000				340,000				60,000				244,651				+39.0%
Net income attributable to Canon Inc.			180,000				220,000				40,000				150,650				+46.0%

 

 

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Basic Policy Regarding Profit Distribution

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.

Canon Inc. plans to distribute an interim dividend of ¥75.00 per share for the fiscal year 2017, half the amount of the annual dividend paid out in fiscal 2016, to provide a stable return to shareholders. The year-end dividend, however, has yet to be decided.

 

 

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

II. Financial Statements

1. CONSOLIDATED BALANCE SHEETS

 

 

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED      

2. CONSOLIDATED STATEMENTS OF INCOME AND

      CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

Consolidated statements of income
Results for the second quarter		Millions of yen
		Three months ended          June 30, 2017				Three months ended          June 30, 2016				Change(%)
Net sales			992,473				860,246			+		15.4
Cost of sales			496,921				427,878
Gross profit			495,552				432,368			+		14.6
Operating expenses:
Selling, general and administrative expenses			318,741				287,208
Research and development expenses			80,492				76,564
			399,233				363,772
Operating profit			96,319				68,596			+		40.4
Other income (deductions):
Interest and dividend income			1,686				1,425
Interest expense			(105)				(341)
Other, net			1,656				11,312
			3,237				12,396
Income before income taxes			99,556				80,992			+		22.9
Income taxes			27,739				24,912
Consolidated net income			71,817				56,080
Less: Net income attributable to noncontrolling interests			2,637				2,632
Net income attributable to Canon Inc.			69,180				53,448			+		29.4
Results for the first half		Millions of yen
		Six months ended June 30, 2017				Six months ended June 30, 2016				Change(%)
Net sales			1,965,234				1,657,476			+		18.6
Cost of sales			1,001,338				820,362
Gross profit			963,896				837,114			+		15.1
Operating expenses:
Selling, general and administrative expenses			630,159				572,997
Research and development expenses			161,753				155,434
			791,912				728,431
Operating profit			171,984				108,683			+		58.2
Other income (deductions):
Interest and dividend income			2,965				2,532
Interest expense			(353)				(521)
Other, net			2,970				16,059
			5,582				18,070
Income before income taxes			177,566				126,753			+		40.1
Income taxes			48,048				41,457
Consolidated net income			129,518				85,296
Less: Net income attributable to noncontrolling interests			5,249				3,857
Net income attributable to Canon Inc.			124,269				81,439			+		52.6

 

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED      

Consolidated statements of comprehensive income

 

Results for the second quarter		Millions of yen
		Three months     ended June 30, 2017				Three months     ended June 30, 2016				Change(%)
Consolidated net income			71,817				56,080				+				28.1
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments			41,490				(178,795)
Net unrealized gains and losses on securities			(931)				(1,492)
Net gains and losses on derivative instruments			(1,166)				860
Pension liability adjustments			(511)				41
			38,882				(179,386)
Comprehensive income (loss)			110,699				(123,306)								-
Less: Comprehensive income (loss) attributable to noncontrolling interests			4,779				(3,923)
Comprehensive income (loss) attributable to Canon Inc.			105,920				(119,383)								-
Results for the first half		Millions of yen
		Six months     ended June 30, 2017				Six months     ended June 30, 2016				Change(%)
Consolidated net income			129,518				85,296				+				51.8
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments			(2,604)				(270,258)
Net unrealized gains and losses on securities			(591)				(6,334)
Net gains and losses on derivative instruments			1,707				2,372
Pension liability adjustments			20				2,853
			(1,468)				(271,367)
Comprehensive income (loss)			128,050				(186,071)								-
Less: Comprehensive income (loss) attributable to noncontrolling interests			5,964				(4,735)
Comprehensive income (loss) attributable to Canon Inc.			122,086				(181,336)								-

 

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED
3. DETAILS OF SALES
Results for the second quarter		Millions of yen
Sales by business unit		Three months ended     June 30, 2017				Three months ended     June 30, 2016				Change(%)
Office			470,657				456,396				+				3.1
Imaging System			282,688				287,543				-				1.7
Medical System			88,617				-								-
Industry and Others			172,483				137,971				+				25.0
Eliminations			(21,972)				(21,664)								-
Total			992,473				860,246				+				15.4
		Millions of yen
Sales by region		Three months ended     June 30, 2017				Three months ended     June 30, 2016				Change(%)
Japan			210,897				168,535				+				25.1
Overseas:
Americas			274,273				247,072				+				11.0
Europe			253,983				236,774				+				7.3
Asia and Oceania			253,320				207,865				+				21.9
			781,576				691,711				+				13.0
Total			992,473				860,246				+				15.4

*Canon newly established “Medical System” Business Unit effective at the beginning of the second quarter of 2017, and certain businesses included in Industry and Others Business Unit have been reclassified. Net sales for the three months ended June 30, 2016 were not restated since they were not material.

Results for the first half		Millions of yen
Sales by business unit		Six months ended       June 30, 2017				Six months ended       June 30, 2016				Change(%)
Office			928,402				910,748				+				1.9
Imaging System			524,747				522,359				+				0.5
Medical System			220,372				-								-
Industry and Others			334,943				268,142				+				24.9
Eliminations			(43,230)				(43,773)								-
Total			1,965,234				1,657,476				+				18.6
		Millions of yen
Sales by region		Six months ended     June 30, 2017				Six months ended     June 30, 2016				Change(%)
Japan			441,464				337,076				+				31.0
Overseas:
Americas			530,146				471,320				+				12.5
Europe			495,555				456,659				+				8.5
Asia and Oceania			498,069				392,421				+				26.9
			1,523,770				1,320,400				+				15.4
Total			1,965,234				1,657,476				+				18.6

*Canon newly established “Medical System” Business Unit effective at the beginning of the second quarter of 2017, and certain businesses included in Industry and Others Business Unit have been reclassified. Net sales for the six months ended June 30, 2016 were not restated since they were not material.

 

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
Medical System Business Unit :
Digital radiography systems / Diagnostic x-ray systems / Computed tomography / Magnetic resonance imaging / Diagnostic ultrasound systems / Clinical chemistry analyzers / Ophthalmic equipment
Industry and Others Business Unit :
Semiconductor lithography equipment / FPD (Flat panel display) lithography equipment / Vacuum thin-film deposition equipment / Organic LED (OLED) panel manufacturing equipment / Die bonders / Micromotors / Network cameras / Handy terminals / Document scanners

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

 

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED 

4.    CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Millions of yen
		Six months ended     June 30, 2017				Six months ended     June 30, 2016
Cash flows from operating activities:
Consolidated net income			129,518				85,296
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization			126,615				122,372
Loss on disposal of fixed assets			1,670				3,163
Deferred income taxes			(8,150)				(2,982)
Decrease in trade receivables			58,105				67,738
Increase in inventories			(36,543)				(31,050)
Increase in trade payables			20,974				26,305
Increase (decrease) in accrued income taxes			21,164				(12,178)
Decrease in accrued expenses			(22,227)				(24,148)
Increase in accrued (prepaid) pension and severance cost			1,189				3,824
Other, net			16,791				2,867
Net cash provided by operating activities			309,106				241,207
Cash flows from investing activities:
Purchases of fixed assets			(94,835)				(100,700)
Proceeds from sale of fixed assets			3,105				2,095
Purchases of available-for-sale securities			-				(8)
Proceeds from sale and maturity of available-for-sale securities			558				407
Increase in time deposits, net			(13,959)				(4,057)
Acquisitions of businesses, net of cash acquired			(5,598)				(9,226)
Purchases of other investments			(250)				(665,676)
Other, net			3,141				1,073
Net cash used in investing activities			(107,838)				(776,092)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			1,158				238
Repayments of long-term debt			(2,819)				(473)
Increase in short-term loans, net			2,278				610,000
Purchases of noncontrolling interests			-				(4,993)
Dividends paid			(81,905)				(81,905)
Repurchases and reissuance of treasury stock, net			(50,012)				(6)
Other, net			(3,815)				(2,978)
Net cash provided by (used in) financing activities			(135,115)				519,883
Effect of exchange rate changes on cash and cash equivalents			(2,520)				(49,431)
Net change in cash and cash equivalents			63,633				(64,433)
Cash and cash equivalents at beginning of period			630,193				633,613
Cash and cash equivalents at end of period			693,826				569,180

 

 

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

5. NOTE FOR GOING CONCERN ASSUMPTION

      Not applicable.

6. SEGMENT INFORMATION

  SEGMENT INFORMATION BY BUSINESS UNIT

 

Results for the second quarter				Millions of yen
				Three months ended     June 30, 2017		Three months ended     June 30, 2016		Change(%)
Office
Net sales:
		External customers		470,178		455,858		+	3.1
		Intersegment		479		538		-	11.0
		Total		470,657		456,396		+	3.1
Operating cost and expenses				414,784		408,791		+	1.5
Operating profit				55,873		47,605		+	17.4
Imaging System
Net sales:
		External customers		282,568		287,303		-	1.6
		Intersegment		120		240		-	50.0
		Total		282,688		287,543		-	1.7
Operating cost and expenses				234,198		244,320		-	4.1
Operating profit				48,490		43,223		+	12.2
Medical System
Net sales:
		External customers		88,526		-			-
		Intersegment		91		-			-
		Total		88,617		-			-
Operating cost and expenses				88,445		-			-
Operating profit				172		-			-
Industry and Others
Net sales:
		External customers		151,201		117,085		+	29.1
		Intersegment		21,282		20,886		+	1.9
		Total		172,483		137,971		+	25.0
Operating cost and expenses				159,332		137,472		+	15.9
Operating profit				13,151		499			-
Corporate and Eliminations
Net sales:
		External customers		-		-			-
		Intersegment		(21,972)		(21,664)			-
		Total		(21,972)		(21,664)			-
Operating cost and expenses				(605)		1,067			-
Operating profit				(21,367)		(22,731)			-
Consolidated
Net sales:
		External customers		992,473		860,246		+	15.4
		Intersegment		-		-			-
		Total		992,473		860,246		+	15.4
Operating cost and expenses				896,154		791,650		+	13.2
Operating profit				96,319		68,596		+	40.4

*Canon newly established “Medical System” Business Unit effective at the beginning of the second quarter of 2017, and certain businesses included in Industry and Others Business Unit have been reclassified. Operating results for the three months ended June 30, 2016 were not restated since they were not material.

*Operating results pertaining to TMSC, a company acquired in December 2016, are included in “Medical System” for the second quarter of 2017. Amortization costs of identified intangible assets resulting from the purchase price allocation of TMSC are included in “Corporate and Eliminations”.

 

-11-

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

 

Results for the first half				Millions of yen
				Six months ended       June 30, 2017		Six months ended       June 30, 2016		Change(%)
Office
Net sales:
		External customers		927,315		909,498		+	2.0
		Intersegment		1,087		1,250		-	13.0
		Total		928,402		910,748		+	1.9
Operating cost and expenses				817,101		818,439		-	0.2
Operating profit				111,301		92,309		+	20.6
Imaging System
Net sales:
		External customers		524,468		521,870		+	0.5
		Intersegment		279		489		-	42.9
		Total		524,747		522,359		+	0.5
Operating cost and expenses				447,021		459,518		-	2.7
Operating profit				77,726		62,841		+	23.7
Medical System
Net sales:
		External customers		220,150		-			-
		Intersegment		222		-			-
		Total		220,372		-			-
Operating cost and expenses				210,304		-			-
Operating profit				10,068		-			-
Industry and Others
Net sales:
		External customers		293,301		226,108		+	29.7
		Intersegment		41,642		42,034		-	0.9
		Total		334,943		268,142		+	24.9
Operating cost and expenses				313,085		268,265		+	16.7
Operating profit				21,858		(123)			-
Corporate and Eliminations
Net sales:
		External customers		-		-			-
		Intersegment		(43,230)		(43,773)			-
		Total		(43,230)		(43,773)			-
Operating cost and expenses				5,739		2,571			-
Operating profit				(48,969)		(46,344)			-
Consolidated
Net sales:
		External customers		1,965,234		1,657,476		+	18.6
		Intersegment		-		-			-
		Total		1,965,234		1,657,476		+	18.6
Operating cost and expenses				1,793,250		1,548,793		+	15.8
Operating profit				171,984		108,683		+	58.2

*Canon newly established “Medical System” Business Unit effective at the beginning of the second quarter of 2017, and certain businesses included in Industry and Others Business Unit have been reclassified. Operating results for the six months ended June 30, 2016 were not restated since they were not material.

*Operating results pertaining to TMSC, a company acquired in December 2016, are included in “Medical System” for the first half of 2017. Amortization costs of identified intangible assets resulting from the purchase price allocation of TMSC are included in “Corporate and Eliminations”.

 

-12-

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

7. SIGNIFICANT CHANGES IN CANON INC. SHAREHOLDERS’ EQUITY

    None.

8. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

(1) GROUP POSITION

 

1.

Number of Group Companies

 

		June 30, 2017		December 31, 2016		Change
Subsidiaries		373		367			6
Affiliates		7		9			(2	)
Total		380		376			4

 

2.

Change in Group Entities

 

Subsidiaries
Addition:		8 companies
Removal:		2 companies
Affiliates (Carried at Equity Basis)
Removal:		2 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.

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.

 

 

-13-

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Canon Inc.        

July 27, 2017        

 

CONSOLIDATED RESULTS FOR THE SECOND QUARTER

AND THE FIRST HALF ENDED JUNE 30, 2017

SUPPLEMENTARY REPORT

TABLE OF CONTENTS

 

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

 

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Canon Inc.    

 

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

				2017												2016																Change year over year
				2nd quarter				1st half				Year (P)				2nd quarter				1st half				Year								2nd quarter				1st half				Year
Japan
		Office			95,362				189,416				-				96,434				190,538				378,834								-1.1%				-0.6%				-
		Imaging System			41,287				73,898				-				42,252				77,197				179,304								-2.3%				-4.3%				-
		Medical System			40,249				110,390				-				-				-				-								-				-				-
		Industry and Others			33,999				67,760				-				29,849				69,341				148,841								+13.9%				-2.3%				-
		Total			210,897				441,464				879,300				168,535				337,076				706,979								+25.1%				+31.0%				+24.4%
Overseas
		Office			374,816				737,899				-				359,424				718,960				1,426,028								+4.3%				+2.6%				-
		Imaging System			241,281				450,570				-				245,051				444,673				914,987								-1.5%				+1.3%				-
		Medical System			48,277				109,760				-				-				-				-								-				-				-
		Industry and Others			117,202				225,541				-				87,236				156,767				353,493								+34.4%				+43.9%				-
		Total			781,576				1,523,770				3,170,700				691,711				1,320,400				2,694,508								+13.0%				+15.4%				+17.7%
		Americas
		Office			151,391				297,730				-				145,589				292,512				582,297								+4.0%				+1.8%				-
		Imaging System			81,150				147,261				-				80,936				139,332				297,403								+0.3%				+5.7%				-
		Medical System			20,342				44,486				-				-				-				-								-				-				-
		Industry and Others			21,390				40,669				-				20,547				39,476				83,844								+4.1%				+3.0%				-
		Total			274,273				530,146				1,093,800				247,072				471,320				963,544								+11.0%				+12.5%				+13.5%
		Europe
		Office			149,083				290,087				-				141,234				280,398				556,353								+5.6%				+3.5%				-
		Imaging System			74,812				141,368				-				79,444				145,805				293,894								-5.8%				-3.0%				-
		Medical System			15,830				34,119				-				-				-				-								-				-				-
		Industry and Others			14,258				29,981				-				16,096				30,456				63,276								-11.4%				-1.6%				-
		Total			253,983				495,555				1,009,500				236,774				456,659				913,523								+7.3%				+8.5%				+10.5%
		Asia and Oceania
		Office			74,342				150,082				-				72,601				146,050				287,378								+2.4%				+2.8%				-
		Imaging System			85,319				161,941				-				84,671				159,536				323,690								+0.8%				+1.5%				-
		Medical System			12,105				31,155				-				-				-				-								-				-				-
		Industry and Others			81,554				154,891				-				50,593				86,835				206,373								+61.2%				+78.4%				-
		Total			253,320				498,069				1,067,400				207,865				392,421				817,441								+21.9%				+26.9%				+30.6%
Intersegment
		Office			479				1,087				-				538				1,250				2,957								-11.0%				-13.0%				-
		Imaging System			120				279				-				240				489				998								-50.0%				-42.9%				-
		Medical System			91				222				-				-				-				-								-				-				-
		Industry and Others			21,282				41,642				-				20,886				42,034				82,326								+1.9%				-0.9%				-
		Eliminations			(21,972	)			(43,230	)			-				(21,664	)			(43,773	)			(86,281	)							-				-				-
		Total			0				0				0				0				0				0								-				-				-
Total
		Office			470,657				928,402				1,869,200				456,396				910,748				1,807,819								+3.1%				+1.9%				+3.4%
		Imaging System			282,688				524,747				1,119,000				287,543				522,359				1,095,289								-1.7%				+0.5%				+2.2%
		Medical System			88,617				220,372				440,000				-				-				-								-				-				-
		Industry and Others			172,483				334,943				709,600				137,971				268,142				584,660								+25.0%				+24.9%				+21.4%
		Eliminations			(21,972	)			(43,230	)			(87,800	)			(21,664	)			(43,773	)			(86,281	)							-				-				-
		Total			992,473				1,965,234				4,050,000				860,246				1,657,476				3,401,487								+15.4%				+18.6%				+19.1%

(P)=Projection

*Canon newly established “Medical System” Business Unit effective at the beginning of the second quarter of 2017, and certain businesses included in Industry and Others Business Unit have been reclassified. Net sales for the six months ended June 30, 2016 were not restated since they were not material.

 

- S1 -

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Canon Inc.

 

2. SEGMENT INFORMATION BY BUSINESS UNIT

(Millions of yen

)

						2017												2016																Change year over year
							2nd quarter				1st half				Year (P)				2nd quarter				1st half				Year								2nd quarter				1st half			Year
Office
		External customers					470,178				927,315				1,867,500				455,858				909,498				1,804,862								+3.1%				+2.0%			+3.5%
		Intersegment					479				1,087				1,700				538				1,250				2,957								-11.0%				-13.0%			-42.5%
		Total sales					470,657				928,402				1,869,200				456,396				910,748				1,807,819								+3.1%				+1.9%			+3.4%
		Operating profit					55,873				111,301				208,000				47,605				92,309				169,486								+17.4%				+20.6%			+22.7%
		% of sales					11.9%				12.0%				11.1%				10.4%				10.1%				9.4%								-				-			-
Imaging System
		External customers					282,568				524,468				1,118,200				287,303				521,870				1,094,291								-1.6%				+0.5%			+2.2%
		Intersegment					120				279				800				240				489				998								-50.0%				-42.9%			-19.8%
		Total sales					282,688				524,747				1,119,000				287,543				522,359				1,095,289								-1.7%				+0.5%			+2.2%
		Operating profit					48,490				77,726				160,000				43,223				62,841				144,413								+12.2%				+23.7%			+10.8%
		% of sales					17.2%				14.8%				14.3%				15.0%				12.0%				13.2%								-				-			-
Medical System
		External customers					88,526				220,150				439,600				-				-				-								-				-			-
		Intersegment					91				222				400				-				-				-								-				-			-
		Total sales					88,617				220,372				440,000				-				-				-								-				-			-
		Operating profit					172				10,068				20,500				-				-				-								-				-			-
		% of sales					0.2%				4.6%				4.7%				-				-				-								-				-			-
Industry and Others
		External customers					151,201				293,301				624,700				117,085				226,108				502,334								+29.1%				+29.7%			+24.4%
		Intersegment					21,282				41,642				84,900				20,886				42,034				82,326								+1.9%				-0.9%			+3.1%
		Total sales					172,483				334,943				709,600				137,971				268,142				584,660								+25.0%				+24.9%			+21.4%
		Operating profit					13,151				21,858				45,900				499				(123	)			7,448								-				-			+516.3%
		% of sales					7.6%				6.5%				6.5%				0.4%				-0.0%				1.3%								-				-			-
Corporate and Eliminations
		External customers					-				-				-				-				-				-								-				-			-
		Intersegment					(21,972	)			(43,230	)			(87,800	)			(21,664	)			(43,773	)			(86,281	)							-				-			-
		Total sales					(21,972	)			(43,230	)			(87,800	)			(21,664	)			(43,773	)			(86,281	)							-				-			-
		Operating profit					(21,367	)			(48,969	)			(104,400	)			(22,731	)			(46,344	)			(92,481	)							-				-			-
Consolidated
		External customers					992,473				1,965,234				4,050,000				860,246				1,657,476				3,401,487								+15.4%				+18.6%			+19.1%
		Intersegment					-				-				-				-				-				-								-				-			-
		Total sales					992,473				1,965,234				4,050,000				860,246				1,657,476				3,401,487								+15.4%				+18.6%			+19.1%
		Operating profit					96,319				171,984				330,000				68,596				108,683				228,866								+40.4%				+58.2%			+44.2%
		% of sales					9.7%				8.8%				8.1%				8.0%				6.6%				6.7%								-				-			-
																																							(P)=Projection
3. OTHER INCOME / DEDUCTIONS																																										(Millions of yen)
						2017												2016																Change year over year
							2nd quarter				1st half				Year (P)				2nd quarter				1st half				Year								2nd quarter				1st half			Year
		Interest and dividend, net					1,581				2,612				3,000				1,084				2,011				3,701								+497				+601			(701)
		Forex gain (loss)					(2,254	)			(3,465	)			(3,900	)			7,622				10,680				(2	)							(9,876	)			(14,145	)		(3,898)
		Equity earnings of affiliated companies					197				709				1,500				242				511				890								(45	)			+198			+610
		Other, net					3,713				5,726				9,400				3,448				4,868				11,196								+265				+858			(1,796)
		Total					3,237				5,582				10,000				12,396				18,070				15,785								(9,159	)			(12,488	)		(5,785)
																																							(P)=Projection

*Canon newly established “Medical System” Business Unit effective at the beginning of the second quarter of 2017, and certain businesses included in Industry and Others Business Unit have been reclassified. Operating results for the six months ended June 30, 2016 were not restated since they were not material.

*The actual and projected operating results pertaining to TMSC, a company acquired in December 2016, are included in “Medical System” for the second quarter, first half and fiscal year 2017.

Amortization costs of identified intangible assets resulting from the purchase price allocation of TMSC are included in “Corporate and Eliminations.”

 

- S2 -

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Canon Inc.

 

4. BREAKDOWN OF PRODUCT SALES WITHIN BUSINESS UNIT
						2017						2016
						2nd quarter		1st half		Year (P)		2nd quarter		1st half		Year
Office
		Monochrome copiers				16%		15%		16%		17%		16%		16%
		Color copiers				22%		22%		22%		22%		21%		21%
		Printers				38%		39%		37%		36%		37%		37%
		Others				24%		24%		25%		25%		26%		26%
Imaging System
		Cameras				64%		62%		61%		63%		61%		61%
		Inkjet printers				28%		29%		30%		28%		30%		30%
		Others				8%		9%		9%		9%		9%		9%
Industry and Others
		Lithography equipment				25%		25%		28%		20%		23%		21%
		Others				75%		75%		72%		80%		77%		79%
																(P)=Projection
5. SALES GROWTH IN LOCAL CURRENCY (Year over year)
						2017
						2nd quarter		1st half		Year (P)
Office
		Japan				-1.1%		-0.6%		-
		Overseas				+2.4%		+2.4%		-
		Total				+1.6%		+1.8%		+1.3%
Imaging System
		Japan				-2.3%		-4.3%		-
		Overseas				-2.5%		+2.2%		-
		Total				-2.5%		+1.2%		0.0%
Industry and Others
		Japan				+13.9%		-2.3%		-
		Overseas				+33.1%		+43.8%		-
		Total				+24.2%		+24.9%		+20.4%
Total
		Japan				+25.1%		+31.0%		+24.4%
		Overseas				+11.5%		+15.6%		+15.2%
				Americas		+8.3%		+11.5%		+11.0%
				Europe		+6.6%		+9.9%		+7.7%
				Asia and Oceania		+20.9%		+27.1%		+28.4%
		Total				+14.2%		+18.7%		+17.1%
										(P)=Projection

 

- S3 -

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Canon Inc.

6. PROFITABILITY
						2017				2016
						1st half		Year (P)		1st half		Year
ROE *1						8.9%		7.9%		5.7%		5.2%
ROA *2						4.8%		4.3%		3.6%		3.1%
*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)
						2017								2016
						2nd quarter		1st half		2nd half (P)		Year (P)		2nd quarter		1st half		Year
Yen/US$						111.12		112.27		112.00		112.14		108.08		111.28		108.58
Yen/Euro						122.36		121.72		125.00		123.39		121.94		124.33		120.25
																		(P)=Projection
(2) Impact of foreign exchange rates on sales (Year over year)										(Billions of yen)
						2017
						2nd quarter		1st half		Year (P)
US$						+9.4		+7.7		+40.2
Euro						+0.9		(8.2)		+21.8
Other currencies						+0.0		(1.7)		+5.8
Total						+10.3		(2.2)		+67.8
										(P)=Projection
(3) Impact of foreign exchange rates per yen						(Billions of yen)
						2017
						2nd half (P)
On sales
US$						7.2
Euro						3.5
On operating profit
US$						2.3
Euro						1.6
						(P)=Projection
8. STATEMENTS OF CASH FLOWS																(Millions of yen)
						2017						2016
						2nd quarter		1st half		Year (P)		2nd quarter		1st half		Year
Net cash provided by operating activities						141,685		309,106		550,000		126,585		241,207		500,283
Net cash used in investing activities						(57,742)		(107,838)		(255,000)		(55,863)		(776,092)		(837,125)
Free cash flow						83,943		201,268		295,000		70,722		(534,885)		(336,842)
Net cash provided by (used in) financing activities						(51,669)		(135,115)		(318,200)		(50,835)		519,883		355,692
Effect of exchange rate changes on cash and cash equivalents						6,898		(2,520)		(7,000)		(31,661)		(49,431)		(22,270)
Net change in cash and cash equivalents						39,172		63,633		(30,200)		(11,774)		(64,433)		(3,420)
Cash and cash equivalents at end of period						693,826		693,826		600,000		569,180		569,180		630,193
																(P)=Projection

 

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Canon Inc.    

 

9. R&D EXPENDITURE														(Millions of yen)
				2017						2016
				2nd quarter		1st half		Year (P)		2nd quarter		1st half		Year
		Office		22,808		45,056		-		23,987		49,956		94,440
		Imaging System		23,054		44,892		-		23,092		46,706		91,752
		Medical System		7,436		18,612		-		-		-		-
		Industry and Others		15,835		32,012		-		18,065		33,798		67,887
		Corporate and Eliminations		11,359		21,181		-		11,420		24,974		48,297
		Total		80,492		161,753		335,000		76,564		155,434		302,376
% of sales				8.1%		8.2%		8.3%		8.9%		9.4%		8.9%
														(P)=Projection
10. INCREASE IN PP&E & DEPRECIATION AND AMORTIZATION														(Millions of yen)
				2017						2016
				2nd quarter		1st half		Year (P)		2nd quarter		1st half		Year
Increase in PP&E				37,191		68,829		190,000		40,526		90,990		171,597
Depreciation and amortization				64,476		126,615		260,000		62,162		122,372		250,096
														(P)=Projection
11. INVENTORIES
(1) Inventories								(Millions of yen)
				2017		2016		Difference
				Jun.30		Dec.31
		Office		211,469		205,656		+5,813
		Imaging System		148,793		127,386		+21,407
		Medical System		80,477		-		+80,477
		Industry and Others		156,098		227,694		(71,596)
		Total		596,837		560,736		+36,101
(2) Inventories/Sales*								(Days)
				2017		2016		Difference
				Jun.30		Dec.31
		Office		42		42		0
		Imaging System		52		41		+11
		Medical System		67		-		-
		Industry and Others		98		152		(54)
		Total		55		59		(4)
		*Index based on the previous six months sales.
12. DEBT RATIO
				2017		2016		Difference
				Jun.30		Dec.31
		Total debt / Total assets		12.5%		11.9%		+0.6%
13. OVERSEAS PRODUCTION RATIO
				2017		2016
				1st half		Year
		Overseas production ratio		37%		44%
14. NUMBER OF EMPLOYEES
				2017		2016		Difference
				Jun.30		Dec.31
		Japan		74,464		72,913		+1,551
		Overseas		126,709		124,760		+1,949
		Total		201,173		197,673		+3,500

*Canon newly established “Medical System” Business Unit effective at the beginning of the second quarter of 2017, and certain businesses included in Industry and Others Business Unit have been reclassified. Operating results for the six months ended June 30, 2016 were not restated since they were not material.

 

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