FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer

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

the Securities Exchange Act of 1934

 

For the month of ….		October		……………………………………………… ,		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….		October 24, 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 THIRD QUARTER AND THE NINE MONTHS ENDED SEPTEMBER 30, 2017

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CONSOLIDATED RESULTS FOR THE THIRD QUARTER AND

THE NINE MONTHS ENDED SEPTEMBER 30, 2017

October 24, 2017

CONSOLIDATED RESULTS FOR THE THIRD QUARTER

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

 

			Actual
		Three months     ended     September  30, 2017				Three months ended September 30, 2016				Change(%)								Three months ended September 30, 2017
Net sales		¥	994,490			¥	778,838				+				27.7			$	8,800,796
Operating profit			80,459				40,015				+				101.1				712,027
Income before income taxes			87,801				45,263				+				94.0				777,000
Net income attributable                          to Canon Inc.		¥	63,051			¥	24,381				+				158.6			$	557,973
Net income attributable to Canon Inc. shareholders per share:
- Basic		¥	58.39			¥	22.33				+				161.5			$	0.52
- Diluted			58.39				22.33				+				161.5				0.52
CONSOLIDATED RESULTS FOR THE NINE MONTHS
							(Millions of yen, thousands of U.S. dollars, except per share amounts)
			Actual																				Projected
		Nine months ended September 30, 2017				Nine months ended September 30, 2016				Change(%)								Nine months ended September 30, 2017				Year ending December 31, 2017				Change(%)
Net sales		¥	2,959,724			¥	2,436,314				+				21.5			$	26,192,248			¥	4,080,000				+				19.9
Operating profit			252,443				148,698				+				69.8				2,234,009				350,000				+				52.9
Income before income taxes			265,367				172,016				+				54.3				2,348,381				365,000				+				49.2
Net income attributable                          to Canon Inc.		¥	187,320			¥	105,820				+				77.0			$	1,657,699			¥	245,000				+				62.6
Net income attributable to Canon Inc. shareholders per share:
- Basic		¥	172.30			¥	96.90				+				77.8			$	1.52			¥	225.71				+				63.6
- Diluted			172.30				96.90				+				77.8				1.52				-								-
		Actual
		As of September 30, 2017				As of December 31, 2016				Change(%)								As of September 30, 2017
Total assets		¥	5,185,937			¥	5,138,529				+				0.9			$	45,893,248
Canon Inc. shareholders’ equity		¥	2,792,601			¥	2,783,129				+				0.3			$	24,713,283

 

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 JPY113=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of September 29, 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 Third Quarter in Review

Looking back at the global economy in the third quarter of 2017, the U.S. economy continued to grow steadily as employment conditions continued to improve and consumer spending was stable. In Europe, unemployment rate decreased and capital investment showed signs of recovery mainly in such developed countries as Germany. The Chinese economy rallied due to public investments and the economies of emerging countries continued to realize moderate growth due to strong exports. 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) overall remained at around the same level as the previous year amid the increase in demand for color models, while demand for laser printers continued to recover in emerging countries, centered on China, as the economy recovered. 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 flat panel display (FPD) lithography equipment and manufacturing equipment for organic LED (OLED) displays enjoyed strong growth.

The average value of the yen during the third quarter was ¥110.93 against the U.S. dollar, a year-on-year depreciation of approximately ¥9, and ¥130.42 against the euro, a year-on-year depreciation of approximately ¥16. As for the first nine months of the year, the average value of the yen was ¥111.82 against the U.S. dollar, a year-on-year depreciation of approximately ¥4, and ¥124.39 against the euro, a year-on-year depreciation of approximately ¥3.

During the third quarter, unit sales of office MFDs increased compared with the same period of the previous year due to the expanded sales of color models. The sales of laser printers increased compared with the same period of the previous year, supported by the steady sales of high-end models and consumables. While unit sales of interchangeable-lens digital cameras decreased compared with the same period of the previous year, unit sales of digital compact cameras increased, owing to increased sales of high-value-added models and shortages resulting from the Kumamoto earthquake being resolved. Looking at inkjet printers, unit sales increased compared with the same period of the previous year, thanks to such factors as strong sales of newly launched home-use models and refillable ink tank models for emerging countries. Additionally, sales of FPD lithography equipment and manufacturing equipment for OLED displays significantly exceeded those of the previous year, thanks to favorable market conditions, and sales of network cameras increased steadily. Under these conditions, along with the impact of acquiring Toshiba Medical Systems Corporation (TMSC), third-quarter net sales increased by 27.7% year on year to ¥994.5 billion. Net sales for the nine months ended September 30, 2017 increased by 21.5% year on year to ¥2,959.7 billion. The gross profit ratio increased by 0.1 points to 48.5%, and gross profit increased by 28.0% year on year to ¥482.2 billion, thanks to such factors as the increase in sales and continuous cost down efforts. Operating expenses increased by 19.4% year on year to ¥401.8 billion mainly due to the impact of acquiring TMSC. As a result, third-quarter operating profit increased by 101.1% to ¥80.5 billion. Other income (deductions) increased by ¥2.1 billion mainly due to gain on securities contributed to retirement benefit trust and foreign currency exchange losses while income before income taxes increased by 94.0% year on year to ¥87.8 billion and net income attributable to Canon Inc. increased by 158.6% to ¥63.1 billion. Operating profit for the first nine months of the year increased by 69.8% to ¥252.4 billion while income before income taxes increased by 54.3% to ¥265.4 billion and net income attributable to Canon Inc. for the first nine months increased by 77.0% to ¥187.3 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥58.39 for the third quarter, a year-on-year increase of ¥36.06, and ¥172.30 for the first nine months, a year-on-year increase of ¥75.40.

 

- 2 -

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Results by Segment

Looking at Canon’s third-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 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 increased from the same period of the previous year, supported by steady sales of high-end models and significant sales growth in consumables. These factors resulted in total sales for the business unit of ¥444.3 billion, a year-on-year increase of 8.1%, while operating profit totaled ¥42.1 billion, a year-on-year increase of 47.3%. Sales for the combined first nine months of the year totaled ¥1,372.7 billion, a year-on-year increase of 3.8%, while operating profit totaled ¥153.4 billion, a year-on-year increase of 26.9%.

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 such newly launched models as EOS 6D Mark II enjoyed solid demand, allowing Canon to maintain the top share in the U.S., Japan, and major countries in Europe. As for digital compact cameras, 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, leading to an increase in unit sales from the same period of the previous year. Additionally, the decline in sales in the previous year due to shortages resulting from the Kumamoto earthquake contributed to the increase in unit sales for this year. As for inkjet printers, the newly designed home-use TS-series and refillable ink tank models that target emerging countries enjoyed strong demand, resulting in unit sales increasing from the same period of the previous year. As a result, sales for the business unit increased by 9.0% to ¥270.5 billion year on year, while operating profit totaled ¥39.2 billion, a year-on-year increase of 31.1%. Sales for the combined first nine months of the year totaled ¥795.3 billion, a year-on-year increase of 3.2%, while operating profit totaled ¥116.9 billion, a year-on-year increase of 26.1%.

Within the Medical System Business Unit, TMSC’s computed tomography products maintained the top share in the Japanese market. As for diagnostic ultrasound systems, sales remained firm for the Aplio i-series, which delivers high-resolution imaging. As a result, sales for the business unit totaled ¥112.1 billion, while operating profit totaled ¥7.5 billion. Sales for the combined first nine months of the year totaled ¥332.5 billion while operating profit totaled ¥17.6 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 displays increased significantly in response to continued growing demand for high-definition OLED displays used in mobile devices. As for network cameras, amid the increasing market demand, sales increased considerably compared with the previous year thanks to efforts to strengthen the product lineup. Consequently, sales for the business unit increased by 35.9% year on year to ¥191.5 billion, while operating profit grew by ¥14.4 billion from the previous year to ¥18.8 billion. Sales for the combined first nine months of the year totaled ¥526.4 billion, a year-on-year increase of 28.7%, while operating profit grew by ¥36.4 billion from the previous year to ¥40.7 billion.

Cash Flow

During the first nine months of 2017, cash flow from operating activities totaled ¥414.5 billion, an increase of ¥71.1 billion compared with the previous year, mainly owing to improvements in profitability. Cash flow from investing activities decreased by ¥692.8 billion year on year to ¥132.2 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 ¥282.4 billion, an increase of ¥763.9 billion compared with the corresponding year-ago period.

Cash flow from financing activities recorded an outlay of ¥269.8 billion, mainly owing to the dividend payout, the repurchasing of treasury stock, and the repayment of long-term debt.

Owing to these factors, as well as the impact of foreign currency translation adjustments, cash and cash equivalents increased by ¥16.6 billion to ¥646.8 billion from the end of the previous year.

 

- 3 -

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Outlook

As for the outlook in the fourth quarter, the U.S. economy is expected to continue to recover as employment conditions and corporate earnings 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 along with the rising price of natural resources. With regard to the Japanese economy, the outlook indicates a trend of gradual recovery supported by improved employment conditions. Overall, the pace of recovery of the global economy is expected to grow stronger, 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, leading to the same level of demand overall compared with the previous year. Looking at the laser printer market, demand for printers is expected to continue to improve in emerging countries 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 indicate continued market contraction, centered mainly on low-priced models, despite solid demand for high-value-added models. With regard to inkjet printers, the contracting market showed signs of bottoming out, with demand leveling off to remain in line with that of the previous year. 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 continued 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 areas as marketing support in addition to increasing security needs.

With regard to currency exchange rates for the fourth quarter, on which Canon’s performance outlook is based, Canon anticipates exchange rates of ¥112 to the U.S. dollar and ¥132 to the euro, representing depreciations of approximately ¥3 against the U.S. dollar and approximately ¥6 against the euro compared with 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 ¥4,080.0 billion, a year-on-year increase of 19.9%; operating profit of ¥350.0 billion, a year-on-year increase of 52.9%; income before income taxes of ¥365.0 billion, a year-on-year increase of 49.2%; and net income attributable to Canon Inc. of ¥245.0 billion, a year-on-year increase of 62.6%.

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			4,050,000				4,080,000				30,000				3,401,487				+19.9%
Operating profit			330,000				350,000				20,000				228,866				+52.9%
Income before income taxes			340,000				365,000				25,000				244,651				+49.2%
Net income attributable to Canon Inc.			220,000				245,000				25,000				150,650				+62.6%

 

- 4 -

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- 5 -

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

II. Financial Statements

1. CONSOLIDATED BALANCE SHEETS

 

		Millions of yen
		As of September 30, 2017				As of December 31, 2016				Change
ASSETS
Current assets:
Cash and cash equivalents			646,841				630,193				16,648
Short-term investments			14,960				3,206				11,754
Trade receivables, net			591,036				641,458				(50,422)
Inventories			620,999				560,736				60,263
Prepaid expenses and other current assets			280,028				264,155				15,873
Total current assets			2,153,864				2,099,748				54,116
Noncurrent receivables			35,039				29,297				5,742
Investments			61,353				73,680				(12,327)
Property, plant and equipment, net			1,132,865				1,194,976				(62,111)
Intangible assets, net			430,528				446,268				(15,740)
Goodwill			974,135				936,424				37,711
Other assets			398,153				358,136				40,017
Total assets			5,185,937				5,138,529				47,408
LIABILITIES AND EQUITY
Current liabilities:
Short-term loans and current portion of long-term debt			38,280				1,850				36,430
Trade payables			382,576				372,269				10,307
Accrued income taxes			50,899				30,514				20,385
Accrued expenses			325,534				304,901				20,633
Other current liabilities			263,945				273,835				(9,890)
Total current liabilities			1,061,234				983,369				77,865
Long-term debt, excluding current installments			564,463				611,289				(46,826)
Accrued pension and severance cost			409,263				407,200				2,063
Other noncurrent liabilities			139,585				142,049				(2,464)
Total liabilities			2,174,545				2,143,907				30,638
Equity:
Canon Inc. shareholders’ equity:
Common stock			174,762				174,762				-
Additional paid-in capital			401,379				401,385				(6)
Legal reserve			66,876				66,558				318
Retained earnings			3,374,712				3,350,728				23,984
Accumulated other comprehensive income (loss)			(166,661)				(199,881)				33,220
Treasury stock, at cost			(1,058,467)				(1,010,423)				(48,044)
Total Canon Inc. shareholders’ equity			2,792,601				2,783,129				9,472
Noncontrolling interests			218,791				211,493				7,298
Total equity			3,011,392				2,994,622				16,770
Total liabilities and equity			5,185,937				5,138,529				47,408
		Millions of yen
		As of September 30, 2017				As of December 31, 2016
Notes:
1. Allowance for doubtful receivables			12,886				11,075
2. Accumulated depreciation			2,629,612				2,578,342
3. Accumulated other comprehensive income (loss):
Foreign currency translation adjustments			21,809				(13,960)
Net unrealized gains and losses on securities			10,628				15,251
Net gains and losses on derivative instruments			(1,089)				(2,742)
Pension liability adjustments			(198,009)				(198,430)

 

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

2. CONSOLIDATED STATEMENTS OF INCOME AND

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

 

 

- 8 -

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

3. DETAILS OF SALES

 

 

 

- 9 -

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

4. CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Millions of yen
		Nine months ended     September 30, 2017				Nine months ended     September 30, 2016
Cash flows from operating activities:
Consolidated net income			196,119				112,086
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization			194,280				185,855
Loss on disposal of fixed assets			4,211				4,174
Gain on securities contributed to retirement benefit trust			(7,655)				-
Deferred income taxes			(9,308)				(5,708)
Decrease in trade receivables			59,997				87,122
Increase in inventories			(51,633)				(50,969)
Increase in trade payables			9,796				31,549
Increase (decrease) in accrued income taxes			19,806				(21,842)
Increase (decrease) in accrued expenses			15,918				(4,196)
Increase (decrease) in accrued (prepaid) pension and severance cost			(934)				6,384
Other, net			(16,091)				(1,092)
Net cash provided by operating activities			414,506				343,363
Cash flows from investing activities:
Purchases of fixed assets			(140,679)				(162,347)
Proceeds from sale of fixed assets			23,082				5,022
Purchases of available-for-sale securities			(345)				(84)
Proceeds from sale and maturity of available-for-sale securities			705				408
(Increase) decrease in time deposits, net			(10,774)				10,112
Acquisitions of businesses, net of cash acquired			(6,557)				(9,239)
Purchases of other investments			(836)				(669,962)
Other, net			3,252				1,181
Net cash used in investing activities			(132,152)				(824,909)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			1,255				410
Repayments of long-term debt			(54,787)				(664)
Increase in short-term loans, net			3,784				610,011
Purchases of noncontrolling interests			-				(4,993)
Dividends paid			(162,887)				(163,810)
Repurchases and reissuance of treasury stock			(50,020)				(8)
Other, net			(7,188)				(4,607)
Net cash provided by (used in) financing activities			(269,843)				436,339
Effect of exchange rate changes on cash and cash equivalents			4,137				(53,926)
Net change in cash and cash equivalents			16,648				(99,133)
Cash and cash equivalents at beginning of period			630,193				633,613
Cash and cash equivalents at end of period			646,841				534,480

 

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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

 

*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 September 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 third quarter of 2017. Amortization costs of identified intangible assets resulting from the purchase price allocation of TMSC are included in “Corporate and Eliminations”.

 

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

 

*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 nine months ended September 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 the nine months ended September 30, 2017. Amortization costs of identified intangible assets resulting from the purchase price allocation of TMSC are included in “Corporate and Eliminations”.

 

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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

 

		September 30, 2017		December 31, 2016		Change
Subsidiaries		376		367		9
Affiliates		7		9		(2)
Total		383		376		7

 

2.

Change in Group Entities

 

Subsidiaries
Addition:		15 companies
Removal:		6 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.

 

Billions of yen

Nine months ended       September 30, 2017

Net cash provided by operating activities

414.5

Net cash used in investing activities

(132.2)

Free cash flow

282.4

 

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Canon Inc.

October 24, 2017

 

CONSOLIDATED RESULTS FOR THE THIRD QUARTER

AND NINE MONTHS ENDED SEPTEMBER 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
				3rd quarter				YTD				Year (P)				3rd quarter				YTD				Year								3rd quarter				YTD				Year
Japan
		Office			88,460				277,876				-				88,993				279,531				378,834								-0.6%				-0.6%			-
		Imaging System			40,708				114,606				-				38,933				116,130				179,304								+4.6%				-1.3%			-
		Medical System			40,222				150,612				-				-				-				-								-				-			-
		Industry and Others			31,282				99,042				-				36,881				106,222				148,841								-15.2%				-6.8%			-
		Total			200,672				642,136				886,200				164,807				501,883				706,979								+21.8%				+27.9%			+25.4%
Overseas
		Office			355,319				1,093,218				-				321,715				1,040,675				1,426,028								+10.4%				+5.0%			-
		Imaging System			229,670				680,240				-				209,033				653,706				914,987								+9.9%				+4.1%			-
		Medical System			71,105				180,865				-				-				-				-								-				-			-
		Industry and Others			137,724				363,265				-				83,283				240,050				353,493								+65.4%				+51.3%			-
		Total			793,818				2,317,588				3,193,800				614,031				1,934,431				2,694,508								+29.3%				+19.8%			+18.5%
		Americas
		Office			147,997				445,727				-				136,758				429,270				582,297								+8.2%				+3.8%			-
		Imaging System			72,185				219,446				-				67,007				206,339				297,403								+7.7%				+6.4%			-
		Medical System			31,419				75,905				-				-				-				-								-				-			-
		Industry and Others			22,491				63,160				-				20,992				60,468				83,844								+7.1%				+4.5%			-
		Total			274,092				804,238				1,102,900				224,757				696,077				963,544								+22.0%				+15.5%			+14.5%
		Europe
		Office			135,861				425,948				-				117,393				397,791				556,353								+15.7%				+7.1%			-
		Imaging System			68,940				210,308				-				64,163				209,968				293,894								+7.4%				+0.2%			-
		Medical System			23,293				57,412				-				-				-				-								-				-			-
		Industry and Others			15,662				45,643				-				12,984				43,440				63,276								+20.6%				+5.1%			-
		Total			243,756				739,311				1,032,700				194,540				651,199				913,523								+25.3%				+13.5%			+13.0%
		Asia and Oceania
		Office			71,461				221,543				-				67,564				213,614				287,378								+5.8%				+3.7%			-
		Imaging System			88,545				250,486				-				77,863				237,399				323,690								+13.7%				+5.5%			-
		Medical System			16,393				47,548				-				-				-				-								-				-			-
		Industry and Others			99,571				254,462				-				49,307				136,142				206,373								+101.9%				+86.9%			-
		Total			275,970				774,039				1,058,200				194,734				587,155				817,441								+41.7%				+31.8%			+29.5%
Intersegment
		Office			548				1,635				-				513				1,763				2,957								+6.8%				-7.3%			-
		Imaging System			143				422				-				222				711				998								-35.6%				-40.6%			-
		Medical System			806				1,028				-				-				-				-								-				-			-
		Industry and Others			22,471				64,113				-				20,720				62,754				82,326								+8.5%				+2.2%			-
		Eliminations			(23,968)				(67,198)				-				(21,455)				(65,228)				(86,281)								-				-			-
		Total			0				0				0				0				0				0								-				-			-
Total
		Office			444,327				1,372,729				1,867,100				411,221				1,321,969				1,807,819								+8.1%				+3.8%			+3.3%
		Imaging System			270,521				795,268				1,133,000				248,188				770,547				1,095,289								+9.0%				+3.2%			+3.4%
		Medical System			112,133				332,505				439,000				-				-				-								-				-			-
		Industry and Others			191,477				526,420				730,000				140,884				409,026				584,660								+35.9%				+28.7%			+24.9%
		Eliminations			(23,968)				(67,198)				(89,100)				(21,455	)			(65,228)				(86,281)								-				-			-
		Total			994,490				2,959,724				4,080,000				778,838				2,436,314				3,401,487								+27.7%				+21.5%			+19.9%
																																								(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 2016 were not restated since they were not material.

 

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Canon Inc.            

 

2. SEGMENT INFORMATION BY BUSINESS UNIT			(Millions of yen)

				2017												2016																Change year over year
					3rd quarter				YTD				Year (P)				3rd quarter				YTD				Year								3rd quarter				YTD			Year
Office
		External customers			443,779				1,371,094				1,865,000				410,708				1,320,206				1,804,862								+8.1%				+3.9%			+3.3%
		Intersegment			548				1,635				2,100				513				1,763				2,957								+6.8%				-7.3%			-29.0%
		Total sales			444,327				1,372,729				1,867,100				411,221				1,321,969				1,807,819								+8.1%				+3.8%			+3.3%
		Operating profit			42,057				153,358				210,500				28,552				120,861				169,486								+47.3%				+26.9%			+24.2%
		% of sales			9.5%				11.2%				11.3%				6.9%				9.1%				9.4%								-				-			-
Imaging System
		External customers			270,378				794,846				1,132,300				247,966				769,836				1,094,291								+9.0%				+3.2%			+3.5%
		Intersegment			143				422				700				222				711				998								-35.6%				-40.6%			-29.9%
		Total sales			270,521				795,268				1,133,000				248,188				770,547				1,095,289								+9.0%				+3.2%			+3.4%
		Operating profit			39,166				116,892				172,000				29,870				92,711				144,413								+31.1%				+26.1%			+19.1%
		% of sales			14.5%				14.7%				15.2%				12.0%				12.0%				13.2%								-				-			-
Medical System
		External customers			111,327				331,477				437,900				-				-				-								-				-			-
		Intersegment			806				1,028				1,100				-				-				-								-				-			-
		Total sales			112,133				332,505				439,000				-				-				-								-				-			-
		Operating profit			7,497				17,565				21,500				-				-				-								-				-			-
		% of sales			6.7%				5.3%				4.9%				-				-				-								-				-			-
Industry and Others
		External customers			169,006				462,307				644,800				120,164				346,272				502,334								+40.6%				+33.5%			+28.4%
		Intersegment			22,471				64,113				85,200				20,720				62,754				82,326								+8.5%				+2.2%			+3.5%
		Total sales			191,477				526,420				730,000				140,884				409,026				584,660								+35.9%				+28.7%			+24.9%
		Operating profit			18,829				40,687				54,000				4,409				4,286				7,448								+327.1%				+849.3%			+625.0%
		% of sales			9.8%				7.7%				7.4%				3.1%				1.0%				1.3%								-				-			-
Corporate and Eliminations
		External customers			-				-				-				-				-				-								-				-			-
		Intersegment			(23,968	)			(67,198	)			(89,100	)			(21,455	)			(65,228	)			(86,281	)							-				-			-
		Total sales			(23,968	)			(67,198	)			(89,100	)			(21,455	)			(65,228	)			(86,281	)							-				-			-
		Operating profit			(27,090	)			(76,059	)			(108,000	)			(22,816	)			(69,160	)			(92,481	)							-				-			-
Consolidated
		External customers			994,490				2,959,724				4,080,000				778,838				2,436,314				3,401,487								+27.7%				+21.5%			+19.9%
		Intersegment			-				-				-				-				-				-								-				-			-
		Total sales			994,490				2,959,724				4,080,000				778,838				2,436,314				3,401,487								+27.7%				+21.5%			+19.9%
		Operating profit			80,459				252,443				350,000				40,015				148,698				228,866								+101.1%				+69.8%			+52.9%
		% of sales			8.1%				8.5%				8.6%				5.1%				6.1%				6.7%								-				-			-
																																	(P)=Projection
3. OTHER INCOME / DEDUCTIONS																																				(Millions of yen)
					2017												2016																Change year over year
				3rd quarter				YTD				Year (P)				3rd quarter				YTD				Year								3rd quarter				YTD				Year
		Interest and dividend, net			1,340				3,952				4,000				731				2,742				3,701								+609				+1,210			+299
		Forex gain (loss)			(2,894	)			(6,359	)			(6,500	)			1,938				12,618				(2	)							(4,832	)			(18,977	)		(6,498)
		Equity earnings of affiliated companies			206				915				1,200				162				673				890								+44				+242			+310
		Other, net			8,690				14,416				16,300				2,417				7,285				11,196								+6,273				+7,131			+5,104
		Total			7,342				12,924				15,000				5,248				23,318				15,785								+2,094				(10,394	)		(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 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 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
				3rd quarter		YTD		Year (P)		3rd quarter		YTD		Year
Office
		Monochrome copiers		16%		15%		16%		16%		16%		16%
		Color copiers		21%		21%		22%		21%		21%		21%
		Printers		38%		39%		37%		37%		37%		37%
		Others		25%		25%		25%		26%		26%		26%
Imaging System
		Cameras		62%		62%		62%		61%		61%		61%
		Inkjet printers		29%		29%		30%		30%		30%		30%
		Others		9%		9%		8%		9%		9%		9%
Industry and Others
		Lithography equipment		28%		26%		27%		18%		21%		21%
		Others		72%		74%		73%		82%		79%		79%
														(P)=Projection
5. SALES GROWTH IN LOCAL CURRENCY (Year over year)
				2017
				3rd quarter		YTD		Year (P)
Office
		Japan		-0.6%		-0.6%		-
		Overseas		+0.8%		+1.9%		-
		Total		+0.5%		+1.4%		+0.6%
Imaging System
		Japan		+4.6%		-1.3%		-
		Overseas		-0.3%		+1.4%		-
		Total		+0.4%		+1.0%		+0.4%
Industry and Others
		Japan		-15.2%		-6.8%		-
		Overseas		+59.9%		+49.4%		-
		Total		+32.7%		+27.5%		+23.6%
Total
		Japan		+21.8%		+27.9%		+25.4%
		Overseas		+19.9%		+17.0%		+15.2%
		Americas		+13.8%		+12.2%		+11.9%
		Europe		+12.7%		+10.8%		+8.2%
		Asia and Oceania		+34.3%		+29.5%		+27.0%
		Total		+20.3%		+19.2%		+17.3%
								(P)=Projection

 

- S3 -

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														Canon Inc.
6. PROFITABILITY
						2017				2016
						YTD		Year (P)		YTD		Year
ROE *1						9.0%		8.8%		5.0%		5.2%
ROA *2						4.8%		4.8%		3.2%		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
						3rd quarter		YTD		4th quarter (P)		Year (P)		3rd quarter		YTD		Year
Yen/US$						110.93		111.82		112.00		111.88		102.33		108.25		108.58
Yen/Euro						130.42		124.39		132.00		126.49		114.25		121.13		120.25
																		(P)=Projection
(2) Impact of foreign exchange rates on sales (Year over year)										(Billions of yen)
						2017
						3rd quarter		YTD		Year (P)
US$						+26.1		+33.9		+38.6
Euro						+24.1		+15.9		+41.7
Other currencies						+7.1		+5.3		+9.5
		______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________     Total				+57.3		+55.1		+89.8
										(P)=Projection
(3) Impact of foreign exchange rates per yen						(Billions of yen)
						2017
						4th quarter (P)
On sales
		US$				3.8
		Euro				1.9
On operating profit
		US$				1.3
		Euro				1.0
						(P)=Projection
8. STATEMENTS OF CASH FLOWS														(Millions of yen)
								2017						2016
						3rd quarter		YTD		Year (P)		3rd quarter		YTD		Year
Net cash provided by operating activities						105,400		414,506		550,000		102,156		343,363		500,283
Net cash used in investing activities						(24,314)		(132,152)		(220,000)		(48,817)		(824,909)		(837,125)
Free cash flow						81,086		282,354		330,000		53,339		(481,546)		(336,842)
Net cash provided by (used in) financing activities						(134,728)		(269,843)		(320,000)		(83,544)		436,339		355,692
Effect of exchange rate changes on cash and cash equivalents						6,657		4,137		(200)		(4,495)		(53,926)		(22,270)
Net change in cash and cash equivalents						(46,985)		16,648		9,800		(34,700)		(99,133)		(3,420)
Cash and cash equivalents at end of period						646,841		646,841		640,000		534,480		534,480		630,193
																(P)=Projection

 

- S4 -

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Canon Inc.

 

9. R&D EXPENDITURE														(Millions of yen)
				2017						2016
				3rd quarter		YTD		Year (P)		3rd quarter		YTD		Year
		Office		22,210		67,266		-		23,047		73,003		94,440
		Imaging System		23,577		68,469		-		21,184		67,890		91,752
		Medical System		9,204		27,816		-		-		-		-
		Industry and Others		15,895		47,907		-		15,125		48,923		67,887
		Corporate and Eliminations		10,605		31,786		-		13,634		38,608		48,297
		Total		81,491		243,244		330,000		72,990		228,424		302,376
% of sales				8.2%		8.2%		8.1%		9.4%		9.4%		8.9%
														(P)=Projection
10. INCREASE IN PP&E & DEPRECIATION AND AMORTIZATION														(Millions of yen)
				2017						2016
				3rd quarter		YTD		Year (P)		3rd quarter		YTD		Year
Increase in PP&E				35,712		104,541		175,000		39,452		130,442		171,597
Depreciation and amortization				67,665		194,280		255,000		63,483		185,855		250,096
														(P)=Projection
11. INVENTORIES
(1) Inventories								(Millions of yen)
				2017		2016		Difference
				Sep.30		Dec.31
		Office		222,714		205,656		+17,058
		Imaging System		163,646		127,386		+36,260
		Medical System		76,608		-		+76,608
		Industry and Others		158,031		227,694		(69,663)
		Total		620,999		560,736		+60,263
(2) Inventories/Sales*								(Days)
				2017		2016		Difference
				Sep.30		Dec.31
		Office		44		42		+2
		Imaging System		54		41		+13
		Medical System		70		-		-
		Industry and Others		90		152		(62)
		Total		57		59		(2)
		*Index based on the previous six months sales.
12. DEBT RATIO
				2017		2016		Difference
				Sep.30		Dec.31
		Total debt / Total assets		11.6%		11.9%		-0.3%
13. OVERSEAS PRODUCTION RATIO
				2017		2016
				YTD		Year
		Overseas production ratio		38%		44%
14. NUMBER OF EMPLOYEES
				2017		2016		Difference
				Sep.30		Dec.31
		Japan		73,957		72,913		+1,044
		Overseas		125,073		124,760		+313
		Total		199,030		197,673		+1,357

*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 2016 were not restated since they were not material.

 

- S5 -