6-K 1 d540087d6k.htm FORM 6-K Form 6-K

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer

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

the Securities Exchange Act of 1934

 

For the month of ….   

November

  ……………………………………………… ,   

2023

 

 

   CANON INC.   
   (Translation of registrant’s name into English)   
   30-2, Shimomaruko 3-Chome, Ohta-ku, Tokyo 146-8501, Japan   
   (Address of principal executive offices)   

[Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F   X   Form 40-F     

[Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes        No   X

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


SIGNATURES

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

 

CANON INC.

 
   (Registrant)  

 

Date…

  November 10, 2023            By....../s/.......... Sachiho Tanino.............
                     (Signature)*
        
        
        
        
        

      Sachiho Tanino

      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.

Quarterly Report filed with the Japanese government pursuant to the Financial Instruments and Exchange Law of Japan for the third quarter ended September 30, 2023


[English summary with full translation of consolidated financial information]

Quarterly Report filed with the Japanese government

pursuant to

the Financial Instruments and Exchange Law of Japan

For the third quarter ended

September 30, 2023

 

 

CANON INC.

Tokyo, Japan


CONTENTS

 

          Page  

I

   Corporate Information   
  

(1)   Consolidated Financial Summary

     2  
  

(2)   Description of Business

     2  

II

   The Business   
  

(1)   Risk Factors

     3  
  

(2)   Operating Results and Financial Conditions

     3  
  

(3)   Significant Business Contracts Entered into in the Third Quarter of Fiscal 2023

     11  

III

   Company Information   
  

(1)   Shares

     12  
  

(2)   Directors and Executive Officers

     14  

IV

   Financial Statements   
  

(1)   Consolidated Financial Statements

     15  
  

(2)   Other Information

     54  

 


Disclaimer Regarding Forward-Looking Statements

This quarterly report includes forward-looking statements (within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934) concerning Canon Inc. (the “Company”) and its subsidiaries (collectively “Canon”). To the extent that statements in this quarterly report do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on the current assumptions and beliefs of Canon in light of the information currently available to them, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause Canon’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Canon undertakes no obligation to publicly update any forward-looking statements after the date of this quarterly report. Investors are advised to consult any further disclosures by Canon in its subsequent filings with the U.S. Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 and its other filings.

The risks, uncertainties and other factors referred to above include, but are not limited to, foreign currency exchange rate fluctuations; the uncertainty of Canon’s ability to implement its plans to localize production and other measures to reduce the impact of foreign currency exchange rate fluctuations; uncertainty as to economic conditions in Canon’s major markets; uncertainty of continued demand for Canon’s high-value-added products; Canon’s ability to continue to develop products and to market products that incorporate new technology on a timely basis, are competitively priced, and achieve market acceptance; the possibility of losses resulting from foreign currency transactions designed to reduce financial risks from changes in foreign currency exchange rates; disasters, outages or similar events; and inventory risk due to disruptions in supply chains and shifts in market demand.

 

1


I.

Corporate Information

 

(1)

Consolidated Financial Summary

 

     Millions of yen (except per share amounts)  
     Nine months ended
September 30, 2023
    Nine months ended
September 30, 2022
    Three months ended
September 30, 2023
     Three months ended
September 30, 2022
     Year ended
December 31, 2022
 

Net sales

     3,017,254       2,874,239       1,025,247        996,090        4,031,414  

Income before income taxes

     275,982       231,969       87,320        79,076        352,440  

Net income attributable to Canon Inc.

     183,947       159,118       62,134        54,118        243,961  

Comprehensive income (loss)

     424,798       480,656       106,056        105,086        476,959  

Canon Inc. shareholders’ equity

     —        —        3,291,205        3,122,629        3,113,105  

Total equity

     —        —        3,535,504        3,354,224        3,349,030  

Total assets

     —        —        5,619,004        5,301,056        5,095,530  

Net income attributable to Canon Inc. shareholders per share:

            

Basic (yen)

     182.98       153.70       62.65        52.90        236.71  

Diluted (yen)

     182.91       153.65       62.62        52.88        236.63  

Canon Inc. shareholders’ equity to total assets (%)

     —        —        58.6        58.9        61.1  

Net cash provided by operating activities

     269,885       188,481       —         —         262,603  

Net cash used in investing activities

     (204,021     (132,350     —         —         (180,820

Net cash provided by (used in) financing activities

     65,080       (29,582     —         —         (146,844

Cash and cash equivalents at end of period

     —        —        520,745        465,298        362,101  

Notes:

1.

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

2.

Consumption tax is excluded from the stated amount of net sales.

 

(2)

Description of Business

Canon prepares quarterly consolidated financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Financial information presented in sections “II. The Business” is also in conformity with U.S. GAAP.

The Canon Group (consisting of the Company, 334 consolidated subsidiaries, and 11 affiliates accounted for using the equity method, as of September 30, 2023, collectively, the “Group”) is engaged in development, manufacturing, sales, and servicing activities in areas such as printing, imaging, medical, industrial, and others and corporate. No material change in Canon’s business has occurred during the nine months ended September 30, 2023.

No additions or removals of significant group entities have occurred during the nine months ended September 30, 2023.

 

2


II.

The Business

 

(1)

Risk Factors

No new material risks have been identified during the nine months ended September 30, 2023. No material changes have been identified pursuant to the risk factors of Canon’s business indicated in the Annual Securities Report (Yukashoken Houkokusho) of the previous fiscal year.

 

(2)

Operating Results and Financial Conditions

Looking back at the third quarter of 2023, although the economic situation varied from one region to another, the global economy recovered modestly. In the United States, thanks to the strong employment situation, consumer spending remained solid. In Europe, however, the economy remained stagnant with strong uninterrupted downward pressure on the economy due to the continuation of tight monetary policy. In China, the economy slowed down due to sluggish real estate market. In other emerging countries, the economy remained solid, mostly centering around consumer spending and the service industry. In Japan, the economy recovered moderately, with consumer spending showing signs of picking up on the back of improvement in the employment and personal income environment.

In the markets in which Canon operates, demand was impacted by the sluggish Chinese economy. On a product basis, despite stagnant market conditions in China, demand for office multifunction devices (MFDs) remained firm thanks to solid demand for printing equipment offering high productivity in other countries. For inkjet printers, while the demand from customers working from home slowed, sales of refillable ink tank printers remained firm. For laser printers, demand slowed due to the curbing of corporate investments. For cameras, demand remained solid due to a recovery in travel and leisure. The market of network cameras continued to grow as well. For medical equipment, demand remained firm, particularly in Japan and Europe. For semiconductor lithography equipment, although demand for memory devices remained weak, investment remained at a high level, particularly for power devices, analog devices, and sensors. For FPD (Flat Panel Display) lithography equipment, the market continued to shrink due to restrained investment by panel manufacturers.

The average value of the yen against the U.S. dollar in the third quarter and for the first nine months of the year was ¥144.76, a year-on-year depreciation of approximately ¥6, and ¥138.27, a year-on-year depreciation of approximately ¥10, respectively. Correspondingly, against the euro, ¥157.32 a year-on-year depreciation of approximately ¥18, and ¥149.59, a year-on-year depreciation of approximately ¥14.

 

3


(2)

Operating Results and Financial Conditions (continued)

 

[Third quarter results]

Summarized results of the consolidated statements of income for the three months ended September 30, 2023 and September 30, 2022 are as follows:

 

     Millions of yen (except per share amounts and percentage data)  
     Three months ended
September 30, 2023
    Change     Three months ended
September 30, 2022
 

Net sales

        1,025,247          +2.9        996,090     

Gross profit

     482,050       +6.9       451,033  

Operating expenses

     399,426       +8.1          369,593  

Operating profit

     82,624       +1.5       81,440  

Other income (deductions)

     4,696               —         (2,364

Income before income taxes

     87,320       +10.4       79,076  

Net income attributable to Canon Inc.

     62,134       +14.8       54,118  

Net income attributable to Canon Inc. shareholders per share:

      

Basic

     62.65       +18.4       52.90  

Diluted

     62.62       +18.4       52.88  

As for the third quarter, net sales increased by 2.9% year-on-year to ¥1,025.2 billion due to solid demand for network cameras and other new businesses, and the favorable effects of depreciation of the yen. Net sales for the third quarter exceeded ¥1,000 billion for the first time in sixteen years since 2007. Gross profit as a percentage of net sales increased by 1.7 points year-on-year to 47.0% due to an improvement in costs, resulting from easing of component shortages and logistics disruptions, and the favorable effects of depreciation of the yen. Gross profit for the third quarter increased by 6.9% year-on-year to ¥482.1 billion. Operating expenses increased by 8.1% year-on-year to ¥399.4 billion due to an increase in sales-related expenses with the normalization of sales activity. In addition, operating expenses denominated in foreign currencies increased due to depreciation of the yen. As a result, operating profit increased by 1.5% year-on-year to ¥82.6 billion. Other income (deductions) increased by ¥7.1 billion year-on-year to ¥4.7 billion due to a decrease of currency exchange losses, which were substantially incurred last year. As a result, income before income taxes increased by 10.4% year-on-year to ¥87.3 billion and net income attributable to Canon Inc. increased by 14.8% year-on-year to ¥62.1 billion. Consequently, operating profit, income before income taxes and net income attributable to Canon Inc. for the third quarter exceeded last year.

Basic net income attributable to Canon Inc. shareholders per share was ¥62.65 for the third quarter, a year-on-year increase of ¥9.75.

 

4


(2)

Operating Results and Financial Conditions (continued)

 

[Nine-month results]

Summarized results of the consolidated statements of income for the nine months ended September 30, 2023 and September 30, 2022 are as follows:

 

     Millions of yen (except per share amounts and percentage data)  
     Nine months ended
September 30, 2023
    Change     Nine months ended
September 30, 2022
 

Net sales

       3,017,254         +5.0       2,874,239    

Gross profit

     1,420,831       +8.5       1,309,463  

Operating expenses

     1,161,458       +10.3         1,053,408  

Operating profit

     259,373       +1.3       256,055  

Other income (deductions)

     16,609            —        (24,086

Income before income taxes

     275,982       +19.0       231,969  

Net income attributable to Canon Inc.

     183,947       +15.6       159,118  

Net income attributable to Canon Inc. shareholders per share:

      

Basic

     182.98       +19.1       153.70  

Diluted

     182.91       +19.0       153.65  

As for the first nine months, net sales increased by 5.0% year-on-year to ¥3,017.3 billion due to a recovery of supply following a shortage of components and logistical disruptions, which had constrained business and solid demand for new businesses such as network cameras, as well as the favorable effects of depreciation of the yen. Gross profit as a percentage of net sales increased by 1.5 points year-on-year to 47.1% due to improvement of product costs, resulting from easing of component shortages and logistics disruptions, and depreciation of the yen. Gross profit increased by 8.5% year-on-year to ¥1,420.8 billion. Operating expenses increased by 10.3% year-on-year to ¥1,161.5 billion due to an increase in sales-related expenses with the normalization of sales activity. In addition, operating expenses denominated in foreign currencies increased due to depreciation of the yen. As a result, operating profit increased by 1.3% year-on-year to ¥259.4 billion. Other income (deductions) increased by ¥40.7 billion year-on-year to ¥16.6 billion due to a decrease of currency exchange losses, which were substantially incurred last year. As a result, income before income taxes increased by 19.0% to ¥276.0 billion and first nine months net income attributable to Canon Inc. increased by 15.6% to ¥183.9 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥182.98 for the first nine months, a year-on-year increase of ¥29.28.

 

5


(2)

Operating Results and Financial Conditions (continued)

 

Operating results by segment (“business unit”) for the nine months ended September 30, 2023 and September 30, 2022 are as follows:

 

Printing Business Unit    Millions of yen (except percentage data)  
     Nine months ended
September 30, 2023
      Change       Nine months ended
September 30, 2022
 

Net sales:

      

Office

         716,782         +12.6         636,591    

Prosumer

     699,764       -5.1         737,454  

Production

     282,074       +11.0       254,096  
  

 

 

   

 

 

   

 

 

 

External customers total

     1,698,620       +4.3       1,628,141  

Intersegment

     4,824       +12.1       4,302  
  

 

 

   

 

 

   

 

 

 

Total

     1,703,444       +4.3       1,632,443  

Operating cost and expenses

     1,547,489       +5.1       1,471,916  
  

 

 

   

 

 

   

 

 

 

Operating Profit

     155,955       -2.8       160,527  

Income before income taxes

     161,533       -5.1       170,231  

As for the Printing Business Unit, MFDs for offices continued to sell well, exceeding unit sales of the same period of the previous year, as the product supply shortage was abated, while demand for products including the imageRUNNER ADVANCE DX C5800 mid-speed color MFD series were solid. As for inkjet printers, unit sales decreased compared with the same period of the previous year as the surge in working from home demand subsided. As for laser printers, unit sales decreased compared with the same period of the previous year due to the curbing of corporate investments. Regarding equipment for the production printing market, unit sales increased compared with the same period of the previous year, thanks to enhancing its product lineup by adding the imagePRESS V1350. These factors resulted in total sales for the business unit of ¥1,703.4 billion, a year-on-year increase of 4.3%, while income before income taxes totaled ¥161.5 billion, a year-on-year decrease of 5.1% due to such effects as weak sales of consumables in the first half of the year.

 

Imaging Business Unit    Millions of yen (except percentage data)  
     Nine months ended
September 30, 2023
      Change       Nine months ended
September 30, 2022
 

Net sales:

      

Cameras

         390,428         +8.4     360,334  

Network cameras and Others

     241,745       +20.7       200,362  
  

 

 

   

 

 

   

 

 

 

External customers total

     632,173       +12.7           560,696    

Intersegment

     174       -48.1       335  
  

 

 

   

 

 

   

 

 

 

Total

     632,347       +12.7         561,031  

Operating cost and expenses

     520,456       +8.7       478,688  
  

 

 

   

 

 

   

 

 

 

Operating Profit

     111,891       +35.9       82,343  

Income before income taxes

     113,025       +35.5       83,414  

As for the Imaging Business Unit, sales of the interchangeable-lens digital cameras, in particular mirrorless cameras like the EOS R6 Mark II, a full-frame mirrorless camera released last year, and the new entry-level EOS R50 and EOS R100 mirrorless cameras launched in the first half of this year, remained solid. Sales of RF-series interchangeable-lenses remained solid as well. Sales of network cameras increased thanks to solid demand and enhanced sales activity against the background of diversifying applications. These factors resulted in a total of ¥632.3 billion, a year-on-year increase of 12.7%, while income before income taxes totaled ¥113.0 billion, a year-on-year increase of 35.5% due to the steady sales of network cameras as well as other highly competitive products and non-recurring expenses incurred to close a certain production facility in the previous year.

 

 

6


(2)

Operating Results and Financial Conditions (continued)

 

Medical Business Unit    Millions of yen (except percentage data)  
     Nine months ended
September 30, 2023
      Change       Nine months ended
September 30, 2022
 

Net sales:

      

External customers total

        388,672         +7.3         362,240  

Intersegment

     904       +243.7       263  
  

 

 

   

 

 

   

 

 

 

Total

     389,576       +7.5         362,503    

Operating cost and expenses

     371,641       +8.8       341,449  
  

 

 

   

 

 

   

 

 

 

Operating Profit

     17,935       -14.8       21,054  

Income before income taxes

     17,927       -17.1       21,621  

As for the Medical Business Unit, sales remained firm mainly in Japan and Europe. As a result, sales of the Medical Business Unit increased by 7.5% compared with the same period of the previous year to ¥389.6 billion. Income before income taxes decreased by 17.1% compared with the same period of the previous year to ¥17.9 billion mainly due to active investment to augment its workforce in order to enhance its sales capacity.

 

Industrial Business Unit    Millions of yen (except percentage data)  
     Nine months ended
September 30, 2023
      Change       Nine months ended
September 30, 2022
 

Net sales:

      

Optical equipment

     143,676       -12.8     164,813  

Industrial equipment

     63,724       +1.1       63,019  
  

 

 

   

 

 

   

 

 

 

External customers total

         207,400         -9.0             227,832    

Intersegment

     8,365       +40.7       5,947  
  

 

 

   

 

 

   

 

 

 

Total

     215,765       -7.7       233,779  

Operating cost and expenses

     180,495       -4.6       189,126  
  

 

 

   

 

 

   

 

 

 

Operating Profit

     35,270       -21.0       44,653  

Income before income taxes

     35,678       -21.9       45,700  

As for the Industrial Business Unit, sales of semiconductor lithography equipment remained strong, particularly for those used in the production of power devices. As a result, unit sales were on par with the same period of the previous year, which saw a significant increase in unit sales. For FPD lithography equipment, unit sales decreased compared with the previous year due to reduced investments by panel manufacturers as the panel market worsened. As a result, net sales of the Industrial Business Unit decreased by 7.7% compared with the same period of the previous year to ¥215.8 billion, and income before income taxes decreased by 21.9% compared with the same period of the previous year to ¥35.7 billion.

 

7


(2)

Operating Results and Financial Conditions (continued)

 

Financial Conditions

 

     Millions of yen (except percentage data)  
      September 30, 2023      Change       December 31, 2022   

Total assets

     5,619,004       +523,474        5,095,530  

Total liabilities

     2,083,500       +337,000        1,746,500  

Canon Inc. shareholders’ equity

     3,291,205       +178,100        3,113,105  

Noncontrolling interests

     244,299       +8,374        235,925  

Total equity

     3,535,504       +186,474        3,349,030  

Total liabilities and equity

     5,619,004       +523,474        5,095,530  

Canon Inc. shareholders’ equity as a percentage of total assets

     58.6     -2.5        61.1

Total assets increased by ¥523.5 billion to ¥5,619.0 billion at September 30, 2023 compared to the end of the previous year, mainly due to the increase of cash and cash equivalents and inventories, combined with the impact of the depreciation of the yen. Inventories increased due to customer’s requests for delayed delivery and preparations for sales expansion in the next quarter. Total liabilities increased by ¥337.0 billion to ¥2,083.5 billion at September 30, 2023 compared to the end of the previous year, mainly due to the increase of short-term loans. The balance of total equity increased by ¥186.5 billion to ¥3,535.5 billion at September 30, 2023 compared to the end of the previous year, mainly due to the accumulation of net income attributable to Canon Inc. and the increase of accumulated other comprehensive income resulting from the depreciation of the yen although the payment of dividends to Canon Inc. shareholders and the repurchases of treasury stock decreased total equity. As a result, Canon Inc. shareholders’ equity as a percentage of total assets declined by 2.5 points to 58.6% compared to the end of the previous year. However, Canon continuously has achieved its goal of developing a solid financial base, measured as equity as a percentage of total assets.

Cash Flows

 

     Millions of yen  
     Nine months ended
 September 30, 2023 
    Change      Nine months ended
 September 30, 2022 
 

Net cash provided by operating activities

     269,885        +81,404        188,481  

Net cash used in investing activities

     (204,021     -71,671        (132,350

Free cash flow

     65,864       +9,733        56,131  

Net cash provided by (used in) financial activities

     65,080       +94,662        (29,582 )  

Effect of exchange rate changes on cash and cash equivalents

     27,700       -9,654        37,354  

Net change in cash and cash equivalents

       158,644       +94,741        63,903  

Cash and cash equivalents at beginning of period

     362,101       -39,294        401,395  

Cash and cash equivalents at end of period

     520,745       +55,447        465,298  

During the first nine months of 2023, cash flow from operating activities increased by ¥81.4 billion year-on-year to ¥269.9 billion, mainly due to an increase in profit and efforts to limit the rise in inventory. Cash flow used in investing activities increased by ¥71.7 billion to ¥204.0 billion from the same period of the previous year due to an acquisition of Minaris Medical Co., Ltd., which has in vitro diagnostics medicine and automated analyzer business, as well as continued capital investments to improve efficiency and productivity. Canon defines “free cash flows” as cash flows from operating activities less cash flows from investing activities. Free cash flow increased by ¥9.7 billion compared with the previous year to ¥65.9 billion.

 

8


(2)

Operating Results and Financial Conditions (continued)

 

Cash flow from financing activities increased by ¥94.7 billion year-on-year to ¥65.1 billion due to an increase in proceeds received from short-term loans despite dividends paid increased by ¥11.5 billion from the same period of last year due to an increase in last year’s year-end dividend and this year’s interim dividend, as well as repurchases of ¥100.0 billion of treasury stock.

Owing to these factors, as well as the impact from foreign currency exchange adjustments, cash and cash equivalents increased by ¥158.6 billion to ¥520.7 billion from the end of the previous year.

 

9


(2)

Operating Results and Financial Conditions (continued)

 

Non-GAAP Financial Measures

Canon has reported its financial results in accordance with U.S. GAAP. In addition, Canon has discussed its results using “free cash flow,” which is a non-GAAP measure.

Canon believes this measure, which takes into consideration its operating and investing activities, is beneficial to an investor’s understanding of its current liquidity and the alternative uses in financing activities.

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

 

     Billions of yen  
     Nine months ended
September 30, 2023
 

Net cash provided by operating activities

     269.9  

Net cash used in investing activities

     (204.0
  

 

 

 

Free cash flow

     65.9  
  

 

 

 

 

10


(2)

Operating Results and Financial Conditions (continued)

 

Accounting Estimates and Assumptions

No material changes with respect to accounting estimates and assumptions have occurred during the nine months ended September 30, 2023.

Prioritized Management Issues to be Addressed

No material changes or issues with respect to prioritized business operations and finances have occurred during the nine months ended September 30, 2023.

Research and Development Expenses

Canon’s research and development expenses for the nine months ended September 30, 2023 totaled ¥246.8 billion.

Property, Plant and Equipment

 

  (1)

Major Property, Plant and Equipment

There were no significant changes to the status of existing major property, plant and equipment during the nine months ended September 30, 2023.

 

  (2)

Prospect of Capital Investment in the first nine months of Fiscal 2023

The new construction of property, plant and equipment, which had been in progress as of December 31, 2022 and was completed during the nine months ended of 2023, is as follows:

 

Name and location

  

Principal activities and products manufactured

  

Date of
completion

Canon Inc.,

Hiratsuka Plant

Kanagawa, Japan

  

New production base (Others and Corporate)

  

February

2023

There were no significant plans relevant to the retirement of property, plant and equipment.

 

(3)

Significant Business Contracts Entered into in the Third Quarter of Fiscal 2023

No material contracts were entered into during the three months ended September 30, 2023.

 

11


III.

Company Information

 

(1)

Shares

Total number of authorized shares is 3,000,000,000 shares. The common stock of Canon is listed on the Tokyo, Nagoya, Fukuoka, and Sapporo Stock Exchanges. Total issued shares are as follows:

 

     As of
September 30, 2023
 

Total number of issued shares

     1,333,763,464  

Stock Acquisition Rights

 

(1)

Stock options

Not applicable.

(2) Other stock acquisition rights

Not applicable.

Exercise status of bonds with share subscription rights containing an adjustable exercise price clause

Not applicable.

Change in Issued Shares, Common Stock and Additional Paid in Capital

 

                                                                                   
     Change during this quarter      As of September 30, 2023  

Issued Shares (Number of shares)

     —         1,333,763,464  

Common Stock (Millions of yen)

     —         174,762  

Additional Paid-in Capital (Millions of yen)

     —         306,288  

Major Shareholders

Not applicable.

 

12


(1)

Shares (continued)

 

Voting Rights

The information provided below is based on the latest register of shareholders as of June 30, 2023.

 

     As of June 30, 2023  

Classification

   Number of shares
(shares)
     Number of voting
rights (units)
 

Shares without voting rights

     —         —   

Shares with restricted voting rights (Treasury stock, etc.)

     —         —   

Shares with restricted voting rights (Others)

     —         —   

Shares with full voting rights (Treasury stock, etc.)

     334,635,400        —   

Shares with full voting rights (Others)

     997,785,500        9,977,855  

Fractional unit shares (Note)

     1,342,564        —   

Total number of issued shares

     1,333,763,464        —   

Total voting rights held by all shareholders

     —         9,977,855  

Note:

In “Fractional unit shares” under “Number of shares,” 75 shares of treasury stock are included.

Treasury Stock, etc.

 

     Number of shares owned
(Number of shares)
     Number of shares owned /
Number of shares issued
 

Canon Inc.

     334,635,400        25.09
  

 

 

    

 

 

 

Total

     334,635,400        25.09

 

13


(2)

Directors and Executive Officers

There were no changes in Directors and Audit & Supervisory Board Members between the filing date of the Annual Securities Report (Yukashoken Houkokusho) for the fiscal year ended December 31, 2022 and the end of this quarter.

Changes in functions of director are below:

 

Toshizo Tanaka    (Executive Vice President & CFO: Group Executive of Public Affairs Headquarters, Group Executive of Facilities Management Headquarters, Senior General Manager of Corporate Governance Center)

There were no changes in members of executive officers between the filing date of the Annual Securities Report (Yukashoken Houkokusho) for the fiscal year ended December 31, 2022 and the end of this quarter.

Changes in functions of executive officers are below:

 

Takashi Takeya    (Managing Executive Officer: Senior General Manager of Global Logistics Management Center, Senior General Manager of Economic Security Office)
Hideki Sanatake    (Executive Officer: Group Executive of Corporate Intellectual Property and Legal Headquarters)
Katsuhito Sakurai    (Executive Officer: Unit Executive of Device Development Unit)

The Number of Directors and Executive Officers by Gender

Males: 48, Females: 2 (Females account for 4.0% of the total.)

The total number consisted of 10 Directors or Corporate Auditors and 40 Executive Officers as of September 30, 2023.

 

14


IV.

Financial Statements (Unaudited)

 

(1)

Consolidated Financial Statements

Index of Consolidated Financial Statements of Canon Inc. and Subsidiaries:

 

     Page  

Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

     16  

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income for the nine months ended September 30, 2023 and 2022

     18  

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income for the three months ended September 30, 2023 and 2022

     20  

Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

     22  

Notes to Consolidated Financial Statements

     23  

 

15


CANON INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

 

     Millions of yen  
     September 30, 2023     December 31, 2022  

Assets

    

Current assets:

    

Cash and cash equivalents (Notes 1, 18 and 19)

     520,745       362,101  

Short-term investments (Notes 2 and 18)

     4,321       10,905  

Trade receivables (Note 3)

     622,081       636,803  

Inventories (Note 4)

     913,872       808,312  

Current lease receivables (Note 6)

     159,947       137,038  

Prepaid expenses and other current assets (Notes 12, 14 and 18)

     256,424       215,990  

Allowance for credit losses (Notes 3 and 6)

     (16,044     (15,235
  

 

 

   

 

 

 

Total current assets

            2,461,346               2,155,914   
  

 

 

   

 

 

 

Noncurrent receivables (Note 16)

     12,291       12,996  

Investments (Notes 2 and 18)

     74,264       65,128  

Property, plant and equipment, net (Note 5)

     1,101,574       1,035,065  

Operating lease right-of-use assets (Note 15)

     123,751       117,843  

Intangible assets, net

     271,331       280,995  

Goodwill (Note 7)

     1,040,689       972,626  

Noncurrent lease receivables (Note 6)

     323,198       279,332  

Other assets

     214,443       179,297  

Allowance for credit losses (Note 6)

     (3,883     (3,666
  

 

 

   

 

 

 

Total assets

     5,619,004       5,095,530  
  

 

 

   

 

 

 

 

16


CANON INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited) (continued)

 

     Millions of yen  
     September 30, 2023     December 31, 2022  

Liabilities and equity

    

Current liabilities:

    

Short-term loans and current portion of long-term debt (Notes 9 and 17)

     607,573       296,384  

Short-term loans related to financial services

     40,200       41,200  

Other short-term loans and current portion of long-term debt

     567,373       255,184  

Trade payables (Note 8)

     344,065       355,930  

Accrued income taxes

     45,251       48,414  

Accrued expenses (Note 16)

     393,784       365,847  

Current operating lease liabilities (Note 15)

     36,489       33,281  

Other current liabilities (Notes 12, 14 and 18)

     298,154       265,497  
  

 

 

   

 

 

 

Total current liabilities

            1,725,316               1,365,353   

Long-term debt, excluding current portion of long-term debt (Note 17)

     2,920       2,417  

Accrued pension and severance cost

     169,745       189,215  

Noncurrent operating lease liabilities (Note 15)

     88,899       85,331  

Other noncurrent liabilities (Note 12)

     96,620       104,184  
  

 

 

   

 

 

 

Total liabilities

     2,083,500       1,746,500  

Equity:

    

Canon Inc. shareholders’ equity (Note 10):

    

Common stock

     174,762       174,762  

(Number of authorized shares)

     (3,000,000,000     (3,000,000,000

(Number of issued shares)

     (1,333,763,464     (1,333,763,464

Additional paid-in capital

     404,934       404,838  

Legal reserve

     61,554       64,509  

Retained earnings

     3,720,726       3,664,735  

Accumulated other comprehensive income (loss) (Note 11)

     287,503       62,623  

Treasury stock, at cost

     (1,358,274     (1,258,362

(Number of shares)

     (345,963,587     (318,250,096
  

 

 

   

 

 

 

Total Canon Inc. shareholders’ equity

     3,291,205       3,113,105  

Noncontrolling interests (Note 10)

     244,299       235,925  
  

 

 

   

 

 

 

Total equity (Note 10)

     3,535,504       3,349,030  
  

 

 

   

 

 

 

Total liabilities and equity

     5,619,004       5,095,530  
  

 

 

   

 

 

 

 

17


CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

Consolidated Statements of Income

 

     Millions of yen  
     Nine months ended
September 30, 2023
    Nine months ended
September 30, 2022
 

Net sales (Notes 6, 11, 12 and 14):

    

Products and Equipment

     2,382,158       2,290,449  

Services

              635,096                583,790  
  

 

 

   

 

 

 
     3,017,254       2,874,239  

Cost of sales (Notes 15 and 19):

    

Products and Equipment

     1,292,731       1,290,688  

Services

     303,692       274,088  
  

 

 

   

 

 

 
     1,596,423       1,564,776  
  

 

 

   

 

 

 

Gross profit

     1,420,831       1,309,463  

Operating expenses:

    

Selling, general and administrative expenses (Notes 11, 15 and 19)

     914,628       832,335  

Research and development expenses

     246,830       221,073  
  

 

 

   

 

 

 
     1,161,458       1,053,408  
  

 

 

   

 

 

 

Operating profit

     259,373       256,055  

Other income (deductions):

    

Interest and dividend income

     9,103       3,167  

Interest expense

     (1,474     (737

Other, net (Notes 2, 11, 14 and 19)

     8,980       (26,516
  

 

 

   

 

 

 
     16,609       (24,086
  

 

 

   

 

 

 

Income before income taxes

     275,982       231,969  

Income taxes

     77,951       61,962  
  

 

 

   

 

 

 

Consolidated net income

     198,031       170,007  

Less: Net income attributable to noncontrolling interests

     14,084       10,889  
  

 

 

   

 

 

 

Net income attributable to Canon Inc.

     183,947       159,118  
  

 

 

   

 

 

 
     Yen     Yen  

Net income attributable to Canon Inc. shareholders per share (Note 13):

    

Basic

     182.98       153.70  

Diluted

     182.91       153.65  

 

18


CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (continued)

 

Consolidated Statements of Comprehensive Income

 

     Millions of yen  
     Nine months ended
September 30, 2023
    Nine months ended
September 30, 2022
 

Consolidated net income

              198,031                170,007  

Other comprehensive income (loss), net of tax (Note 11):

    

Foreign currency translation adjustments

     223,928       309,018  

Net unrealized gains and losses on securities

     60       (21

Net gains and losses on derivative instruments

     (1,214     (1,867

Pension liability adjustments

     3,993       3,519  
  

 

 

   

 

 

 
     226,767       310,649  
  

 

 

   

 

 

 

Comprehensive income (loss) (Note 10)

     424,798       480,656  

Less: Comprehensive income attributable to noncontrolling interests

     15,971       12,757  
  

 

 

   

 

 

 

Comprehensive income (loss) attributable to Canon Inc.

     408,827       467,899  
  

 

 

   

 

 

 

 

19


CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (continued)

 

Consolidated Statements of Income

 

     Millions of yen  
     Three months ended
September 30, 2023
    Three months ended
September 30, 2022
 

Net sales (Notes 6, 11 12 and 14):

    

Products and Equipment

              807,581                793,367  

Services

     217,666       202,723  
  

 

 

   

 

 

 
     1,025,247       996,090  

Cost of sales (Notes 15 and 19):

    

Products and Equipment

     437,241       450,569  

Services

     105,956       94,488  
  

 

 

   

 

 

 
     543,197       545,057  
  

 

 

   

 

 

 

Gross profit

     482,050       451,033  

Operating expenses:

    

Selling, general and administrative expenses (Notes 11, 15 and 19)

     315,099       294,576  

Research and development expenses

     84,327       75,017  
  

 

 

   

 

 

 
     399,426       369,593  
  

 

 

   

 

 

 

Operating profit

     82,624       81,440  

Other income (deductions):

    

Interest and dividend income

     3,550       1,542  

Interest expense

     (659     (207

Other, net (Notes 2, 11, 14 and 19)

     1,805       (3,699
  

 

 

   

 

 

 
     4,696       (2,364
  

 

 

   

 

 

 

Income before income taxes

     87,320       79,076  

Income taxes

     21,379       21,827  
  

 

 

   

 

 

 

Consolidated net income

     65,941       57,249  

Less: Net income attributable to noncontrolling interests

     3,807       3,131  
  

 

 

   

 

 

 

Net income attributable to Canon Inc.

     62,134       54,118  
  

 

 

   

 

 

 
     Yen     Yen  

Net income attributable to Canon Inc. shareholders per share (Note 13):

    

Basic

     62.65       52.90  

Diluted

     62.62       52.88  

 

20


CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (continued)

 

Consolidated Statements of Comprehensive Income

 

     Millions of yen  
     Three months ended
September 30, 2023
    Three months ended
September 30, 2022
 

Consolidated net income

               65,941                 57,249  

Other comprehensive income (loss), net of tax (Note 11):

    

Foreign currency translation adjustments

     40,004       42,987  

Net unrealized gains and losses on securities

     21       (21

Net gains and losses on derivative instruments

     (752     617  

Pension liability adjustments

     842       4,254  
  

 

 

   

 

 

 
     40,115       47,837  
  

 

 

   

 

 

 

Comprehensive income (loss) (Note 10)

     106,056       105,086  

Less: Comprehensive income attributable to noncontrolling interests

     4,248       3,965  
  

 

 

   

 

 

 

Comprehensive income (loss) attributable to Canon Inc.

     101,808       101,121  
  

 

 

   

 

 

 

 

21


CANON INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

 

     Millions of yen  
     Nine months ended
September 30, 2023
    Nine months ended
September 30, 2022
 
Cash flows from operating activities:     

Consolidated net income

              198,031                170,007  

Adjustments to reconcile consolidated net income to net cash provided by operating activities:

    

Depreciation and amortization

     174,112       166,225  

Loss (gain) on disposal of fixed assets

     3,059       (9,549

Deferred income taxes

     (10,060     (6,081

Decrease in trade receivables

     61,379       8,399  

Increase in inventories

     (41,126     (153,886

Increase in lease receivables (Note 6)

     (19,082     (11,070

(Decrease) increase in trade payables

     (26,576     75,275  

Decrease in accrued income taxes

     (4,964     (12,740

Increase in accrued expenses

     1,072       20,144  

Decrease in accrued pension and severance cost

     (22,926     (29,442

Contribution of cash to retirement benefit trust

     (18,000     —   

Other, net (Note 15)

     (25,034     (28,801
  

 

 

   

 

 

 

Net cash provided by operating activities

     269,885       188,481  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of fixed assets (Note 5)

     (156,948     (132,251

Proceeds from sale of fixed assets (Note 5)

     2,533       14,316  

Proceeds from maturity of held to maturity securities

     —        2,151  

Purchases of securities

     (6,685     (20,053

Proceeds from sale and maturity of securities

     13,181       6,518  

Acquisitions of businesses, net of cash acquired (Notes 7 and 19)

     (56,219     (5,890

Other, net

     117       2,859  
  

 

 

   

 

 

 

Net cash used in investing activities

     (204,021     (132,350
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Repayments of long-term debt

     (1,456     (1,546

Decrease in short-term loans related to financial services, net (Note 9)

     (1,000     (800

Increase in other short-term loans, net (Note 9)

     306,280       197,840  

Dividends paid

     (130,870     (119,326

Repurchases and reissuance of treasury stock, net

     (100,014     (100,012

Other, net

     (7,860     (5,738
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     65,080       (29,582
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     27,700       37,354  
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     158,644       63,903  
Cash and cash equivalents at beginning of period      362,101       401,395  
  

 

 

   

 

 

 
Cash and cash equivalents at end of period      520,745       465,298  
  

 

 

   

 

 

 
Supplemental disclosure for cash flow information:     
Cash paid during the period for:     

Interest

     1,435       657  

Income taxes

     97,792       91,607  

 

22


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

 

(1)

Basis of Presentation and Significant Accounting Policies

 

  (a)

Basis of Presentation

The Company issued convertible debentures in the United States in May 1969 and established a program in which its American Depositary Receipts (ADRs) are traded in the U.S. over-the-counter market. Since then, under the U.S. Securities Act of 1933 and the U.S. Securities Exchange Act of 1934, as amended, the Company has prepared its annual consolidated financial statements in accordance with U.S. GAAP and filed them with the U.S. Securities and Exchange Commission on Form 20-F. The Company’s ADRs were listed on the NYSE in September 2000 after being quoted on NASDAQ from February 1972 to September 2000. On February 24, 2023, the Company filed Form 25 with the SEC in connection with the delisting from the NYSE. The delisting became effective on March 6, 2023. In the future, the Company plans to file an application for the termination of registration of its ADRs with the SEC when the requirements have been met.

Canon’s quarterly consolidated financial statements are prepared in accordance with the recognition and measurement criteria of U.S. GAAP. Certain footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

Canon has reclassified certain items in the consolidated statements of cash flows for the nine months ended September 30, 2022 to conform to the current year’s presentation.

The number of consolidated subsidiaries and affiliated companies that were accounted for by the equity method as of September 30, 2023 and December 31, 2022 are summarized as follows:

 

     September 30, 2023      December 31, 2022  

Consolidated subsidiaries

     334        330  

Affiliated companies

     11        10  
  

 

 

    

 

 

 

Total

     345        340  

 

  (b)

Principles of Consolidation

The quarterly consolidated financial statements include the accounts of the Company, its majority owned subsidiaries and those variable interest entities where the Company or its consolidated subsidiaries are the primary beneficiaries. All intercompany balances and transactions have been eliminated.

 

  (c)

Recent Accounting Guidance

Recently adopted accounting guidance

In October 2021, ASU No. 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”-ASC 805 (“Business Combinations”), was issued by the Financial Accounting Standards Board (“FASB”). The standard requires us to apply ASC 606 “Revenue from Contracts with Customers” to recognize and measure contract assets and contract liabilities acquired in a business combination. Canon adopted the standard from interim and annual reporting periods beginning January 1, 2023. The adoption of this standard did not have a material impact on its consolidated results of operations and financial condition.

In March 2022, ASU No. 2022-02, “Troubled Debt Restructurings and Vintage Disclosures”-ASC 326 (“Credit Losses”), was issued by FASB. The standard requires us to expand disclosures for certain loan re-financings and restructurings, and requires current-period gross write-offs by year of origination for financing receivables and net investments in leases. Canon adopted the standard from interim and annual reporting periods beginning January 1, 2023. The adoption of this standard did not have a material impact on its consolidated results of operations and financial condition.

 

23


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

In September 2022, ASU No. 2022-04, “Disclosure of Supplier Finance Program Obligations”-ASC 405-50 (“Liabilities—Supplier Finance Programs”), was issued by FASB. The standard requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about obligations outstanding at the end of the reporting period, including a rollforward of those obligations. Canon adopted the standard, which requires disclosure of the key terms of the programs and information about obligations outstanding, from interim and annual reporting periods beginning January 1, 2023. The standard’s requirement to disclose a rollforward of obligations outstanding is effective for annual reporting periods beginning after December 15, 2023. The adoption of this standard did not have a material impact on its consolidated results of operations and financial condition. For further information, please refer to Note 8.

 

24


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(2)

Investments

The cost, gross unrealized holding gains, gross unrealized holding losses and fair value for available-for-sale debt securities included in short-term investments and investments by major security type at September 30, 2023 and December 31, 2022 as follows:

 

     Millions of yen  
     September 30, 2023  
     Cost      Gross
unrealized
holding
gains
     Gross
unrealized
holding
losses
     Fair value  

Current:

           

Corporate bonds

     1,353        3        —         1,356  
  

 

 

    

 

 

    

 

 

    

 

 

 

Noncurrent:

           

Corporate bonds

     5,427        37        4        5,460  
  

 

 

    

 

 

    

 

 

    

 

 

 
     6,780        40        4        6,816  
  

 

 

    

 

 

    

 

 

    

 

 

 
     Millions of yen  
     December 31, 2022  
     Cost      Gross
unrealized
holding
gains
     Gross
unrealized
holding
losses
     Fair value  

Current:

           

Corporate bonds

     9,277        35        11        9,301  
  

 

 

    

 

 

    

 

 

    

 

 

 

Noncurrent:

           

Corporate bonds

     4,850        —         65        4,785  
  

 

 

    

 

 

    

 

 

    

 

 

 
     14,127        35        76        14,086  
  

 

 

    

 

 

    

 

 

    

 

 

 

Maturities of available-for-sale debt securities included in short-term investments and investments in the accompanying consolidated balance sheets at September 30, 2023 are as follows:

 

     Millions of yen  
     Fair value  

Due within one year

     1,356  

Due after one year through five years

     5,460  
  

 

 

 

Total

     6,816  
  

 

 

 

 

25


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(2)

Investments (continued)

 

The unrealized and realized gains and losses related to equity securities for the nine months and three months ended September 30, 2023 and 2022 are as follows:

 

    Millions of yen  
    Nine months ended
September 30, 2023
    Nine months ended
September 30, 2022
 

Net gains (losses) recognized during the period on equity securities

    6,331              (6,451

Less: Net gains (losses) recognized during the period on equity securities sold during the period

    152       61  
 

 

 

   

 

 

 

Unrealized gains (losses) recognized during the period on equity securities still held at September 30

    6,179       (6,512
 

 

 

   

 

 

 
    Millions of yen  
    Three months ended
September 30, 2023
    Three months ended
September 30, 2022
 

Net gains (losses) recognized during the period on equity securities

    (2,024     (1,219

Less: Net gains (losses) recognized during the period on equity securities sold during the period

    128       83  
 

 

 

   

 

 

 

Unrealized gains (losses) recognized during the period on equity securities still held at September 30

    (2,152     (1,302
 

 

 

   

 

 

 

The carrying amount of non-marketable equity securities without readily determinable fair value totaled ¥10,437 million and ¥6,808 million at September 30, 2023 and December 31, 2022, respectively. The impairment or other adjustments resulting from observable price changes recorded during the nine months ended September 30, 2023 and 2022 were not material.

Time deposits with original maturities of more than three months are ¥2,965 million and ¥1,604 million at September 30, 2023 and December 31, 2022, respectively, and are included in short-term investments in the accompanying consolidated balance sheets.

 

26


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(3)

Trade Receivables

Trade receivables are summarized as follows:

 

     Millions of yen  
     September 30, 2023      December 31, 2022  

Notes

     34,899        30,535  

Accounts

              587,182                 606,268  
  

 

 

    

 

 

 

Trade receivables

     622,081        636,803  

Allowance for credit losses

     (13,991      (13,305
  

 

 

    

 

 

 
     608,090        623,498  
  

 

 

    

 

 

 

 

(4)

Inventories

Inventories are summarized as follows:

 

     Millions of yen  
     September 30, 2023      December 31, 2022  

Finished goods

     555,974        486,826  

Work in process

              279,689                  253,026   

Raw materials

     78,209        68,460  
  

 

 

    

 

 

 
     913,872        808,312  
  

 

 

    

 

 

 

 

(5)

Property, Plant and Equipment, net

Property, plant and equipment are stated at cost less accumulated depreciation and are summarized as follows:

 

     Millions of yen  
     September 30, 2023      December 31, 2022  

Land

              284,116                 275,261  

Buildings

     1,856,128        1,760,058  

Machinery and equipment

     2,007,527        1,893,745  

Construction in progress

     53,292        60,914  

Finance lease right-of-use assets

     8,495        7,315  
  

 

 

    

 

 

 

Cost

     4,209,558        3,997,293  

Less: accumulated depreciation

     (3,107,984      (2,962,228
  

 

 

    

 

 

 

Property, plant and equipment, net

     1,101,574        1,035,065  
  

 

 

    

 

 

 

Fixed assets presented in the consolidated statements of cash flows includes property, plant and equipment and intangible assets.

 

27


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(6)

Lessor Accounting

Lease income is included in products and equipment sales in the accompanying consolidated statements of income. Supplemental income statement information is as follows:

 

     Millions of yen  
     Nine months ended
September 30, 2023
     Nine months ended
September 30, 2022
 

Lease income – sales-type and direct financing leases

     

Revenue at lease commencement

     112,468        81,902  

Interest income on lease receivables

     19,240        15,222  
  

 

 

    

 

 

 

Sales-type and direct financing leases income total

     131,708        97,124  
  

 

 

    

 

 

 

Lease income – operating leases

     29,802        25,199  

Variable lease income

                4,196                    3,861   
  

 

 

    

 

 

 

Total lease income

     165,706        126,184  
  

 

 

    

 

 

 
     Millions of yen  
     Three months ended
September 30, 2023
     Three months ended
September 30, 2022
 

Lease income – sales-type and direct financing leases

     

Revenue at lease commencement

     36,895        30,932  

Interest income on lease receivables

     7,226        5,493  
  

 

 

    

 

 

 

Sales-type and direct financing leases income total

     44,121        36,425  
  

 

 

    

 

 

 

Lease income – operating leases

     10,331        9,740  

Variable lease income

     1,574        1,558  
  

 

 

    

 

 

 

Total lease income

     56,026        47,723  
  

 

 

    

 

 

 

Allowance for Credit Losses

Lease receivables represent financing leases, which consist of sales-type leases and direct financing leases. These receivables typically have terms ranging from 1 year to 8 years. Lease receivables are ¥483,145 million and ¥416,370 million at September 30, 2023 and December 31, 2022, respectively.

The activities in the allowance for credit losses are as follows:

 

     Millions of yen  
     Nine months ended
September 30, 2023
     Nine months ended
September 30, 2022
 

Balance at beginning of period

               5,596                  3,791  

Write-offs

     (1,660      (1,689

Provision

     887        1,518  

Translation adjustments and other

     1,113        1,430  
  

 

 

    

 

 

 

Balance at end of period

     5,936        5,050  
  

 

 

    

 

 

 

 

28


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(6)

Lessor Accounting (continued)

 

Canon has policies in place to ensure that its products are sold to customers with an appropriate credit history, and continuously monitors its customers’ credit quality based on information including length of period in arrears, macroeconomic conditions, initiation of legal proceedings against customers and bankruptcy filings. The allowance for credit losses of lease receivables is evaluated collectively based on historical experiences of credit losses and reasonable and supportable forecasts. An additional reserve for individual accounts is recorded when Canon becomes aware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings. Lease receivables which are past due or individually evaluated for impairment at September 30, 2023 and December 31, 2022 are not significant.

Information about transferring lease receivables

Canon has syndication arrangements to sell its entire interests in lease receivables to the third-party financial institutions. The transactions under the arrangements are accounted for as sales in accordance with ASC 860 “Transfers and Servicing.” There were no significant transfers of lease receivables for the nine months ended September 30, 2022 while the transfers of lease receivables were ¥23,435 million for the nine months ended September 30, 2023. The amount that remained uncollected was ¥32,052 million and ¥13,077 million at September 30, 2023 and December 31, 2022, respectively. Cash proceeds from the transactions are included in increase in lease receivables under the cash flow from operating activities in the consolidated statement of cash flows. Canon continues to provide collection and administrative services for the financial institutions. The amount associated with the servicing liability measured at fair value was not significant at September 30, 2023 and December 31, 2022. Canon also retains limited recourse obligations which cover credit defaults. The recourse obligations were not significant at September 30, 2023 and December 31, 2022.

 

(7)

Acquisitions

On July 3, 2023, Canon Medical Systems Corporation, a subsidiary of the Company, acquired 100% of the issued shares of Minaris Medical Co., Ltd. and Minaris Medical America, Inc., (hereinafter referred to collectively as “Minaris Medical”) from Resonac Corporation for cash consideration of ¥28,968 million.

Acquisitions of businesses, net of cash acquired presented in the consolidated statements of cash flows includes the subrogation payment of the loan of ¥4,450 million of Minaris Medical to Resonac Corporation which was made by Canon Medical Systems Corporation in addition to the above cash consideration.

The acquisition was accounted for using the acquisition method of accounting. Acquisition-related costs were expensed as incurred and were not material.

In the medical business, Canon is working to strengthen its core business of diagnostic imaging systems, while also working to expand into areas such as healthcare IT and in vitro diagnostics. This acquisition will allow synergy between Minaris Medical’s diverse solutions in the in-vitro diagnostics business, and Canon’s technologies in the fields of automated biochemical analyzers, diagnostic imaging, and healthcare IT. By leveraging this synergy, Canon will be able to provide added value to meet the demands of the market.

Canon has not completed the process of allocating the amount paid for the acquisition to the assets acquired and liabilities assumed, and the provisional allocation is based on the information available as of the issuance date of the consolidated financial statements. The provisional amount of goodwill was ¥24,330 million which may be revised during the measurement period. The estimated fair values of the assets acquired and liabilities assumed at the acquisition date in the consolidated balance sheets were not material excluding those pertaining to goodwill.

The operating results with the assumption the financial statements of Minaris Medical had been included in Canon’s consolidated financial statements for the year ended December 31, 2022 and the year beginning on January 1, 2023 were not disclosed because the impact was not material.

 

29


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(8)

Trade Payables

Trade payables are summarized as follows:

 

     Millions of yen  
     September 30, 2023      December 31, 2022  

Notes

     79,802        82,702  

Accounts

              264,263                  273,228   
  

 

 

    

 

 

 
     344,065        355,930  
  

 

 

    

 

 

 

Canon has supplier finance programs with particular third-party financial institutions where Canon agrees to pay the financial institutions after 90 to 180 days based on the contracts agreed to with the suppliers. The financial institutions offer earlier payment of the invoices at the sole discretion of the supplier for a discounted amount. Canon does not provide assets pledged as security or any other forms of guarantees under the arrangements. Canon is not a party to any arrangement between its suppliers and the financial institutions. The amount of liabilities under these programs, which is included in the above trade payables, as of September 30, 2023 and December 31, 2022 were ¥96,344 million and ¥95,389 million, respectively.

 

(9)

Short-Term Loans and Long-Term Debt

Short-term loans related to financial services are external loans held by Canon’s lease subsidiaries for the purpose of financing its customers through loans. Short-term loans related to financial services consisting of bank borrowings at September 30, 2023 and December 31, 2022 were ¥40,200 million and ¥41,200 million, and other short-term loans consisting of bank borrowings were ¥512,079 million and ¥200,012 million, respectively.

Canon has revolving credit facilities expiring in December 2023. The outstanding loans under the credit facilities are ¥54,000 million at a floating interest of 0.22% and Canon has no unused credit facilities as of September 30, 2023.

 

30


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(10)

Equity

The changes in the carrying amounts of total equity, equity attributable to Canon Inc. shareholders and equity attributable to noncontrolling interests in the consolidated balance sheets for the nine months ended September 30, 2023 and 2022 are as follows:

 

    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
    Non-
controlling
interests
    Total
equity
 

Balance at December 31, 2022

    174,762       404,838       64,509       3,664,735       62,623       (1,258,362     3,113,105       235,925       3,349,030  

Equity transactions with noncontrolling interests and other

      157       (3,534     3,534           157       (102     55  

Dividends to Canon Inc. shareholders (130.00 yen per share)

          (130,870         (130,870       (130,870

Dividends to noncontrolling interests

                  (7,495     (7,495

Transfer to legal reserve

        579       (579         —          —   

Comprehensive income:

                 

Net income

          183,947           183,947       14,084       198,031  

Other comprehensive income (loss), net of tax

                 

Foreign currency translation adjustments

            221,915         221,915       2,013       223,928  

Net unrealized gains and losses on securities

            60         60         60  

Net gains and losses on derivative instruments

            (1,276       (1,276     62       (1,214

Pension liability adjustments

            4,181         4,181       (188     3,993  
             

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

                408,827       15,971       424,798  
             

 

 

   

 

 

   

 

 

 

Repurchases and reissuance of treasury stock

      (61       (41       (99,912     (100,014       (100,014
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2023

    174,762       404,934       61,554       3,720,726       287,503       (1,358,274     3,291,205       244,299       3,535,504  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    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
    Non-
controlling
interests
    Total
equity
 

Balance at December 31, 2021

    174,762       403,119       68,015       3,538,037       (151,794     (1,158,366     2,873,773       224,656       3,098,429  

Equity transactions with noncontrolling interests and other

      298       (4,538     4,535           295       320       615  

Dividends to Canon Inc. shareholders (115.00 yen per share)

          (119,326         (119,326       (119,326

Dividends to noncontrolling interests

                  (6,138     (6,138

Transfer to legal reserve

      1,432       1,014       (2,446         —          —   

Comprehensive income:

                 

Net income

          159,118           159,118       10,889       170,007  

Other comprehensive income (loss), net of tax

                 

Foreign currency translation adjustments

            307,209         307,209       1,809       309,018  

Net unrealized gains and losses on securities

            (21       (21       (21

Net gains and losses on derivative instruments

            (1,902       (1,902     35       (1,867

Pension liability adjustments

            3,495         3,495       24       3,519  
             

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

                467,899       12,757       480,656  
             

 

 

   

 

 

   

 

 

 

Repurchases and reissuance of treasury stock

      (11       (8       (99,993     (100,012       (100,012
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2022

    174,762       404,838       64,491       3,579,910       156,987       (1,258,359     3,122,629       231,595       3,354,224  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

31


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(10)

Equity (continued)

 

The changes in the carrying amounts of total equity, equity attributable to Canon Inc. shareholders and equity attributable to noncontrolling interests in the consolidated balance sheets for the three months ended September 30, 2023 and 2022 are as follows:

 

    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
    Non-
controlling
interests
    Total
equity
 

Balance at June 30, 2023

    174,762       405,036       65,088       3,724,997       247,829       (1,316,360     3,301,352       243,707       3,545,059  

Equity transactions with noncontrolling interests and other

      (102     (3,534     3,534           (102     (144     (246

Dividends to Canon Inc. shareholders (70.00 yen per share)

          (69,939         (69,939       (69,939

Dividends to noncontrolling interests

                  (3,512     (3,512

Comprehensive income:

                 

Net income

          62,134           62,134       3,807       65,941  

Other comprehensive income (loss), net of tax

                 

Foreign currency translation adjustments

            39,608         39,608       396       40,004  

Net unrealized gains and losses on securities

            21         21         21  

Net gains and losses on derivative instruments

            (764       (764     12       (752

Pension liability adjustments

            809         809       33       842  
             

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

                101,808       4,248       106,056  
             

 

 

   

 

 

   

 

 

 

Repurchases and reissuance of treasury stock

              (41,914     (41,914       (41,914
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2023

    174,762       404,934       61,554       3,720,726       287,503       (1,358,274     3,291,205       244,299       3,535,504  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    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
    Non-
controlling
interests
    Total
equity
 

Balance at June 30, 2022

    174,762       404,843       69,004       3,583,088       109,984       (1,208,355     3,133,326       230,425       3,363,751  

Equity transactions with noncontrolling interests and other

      (5     (4,538     4,538           (5     14       9  

Dividends to Canon Inc. shareholders (60.00 yen per share)

          (61,809         (61,809       (61,809

Dividends to noncontrolling interests

                  (2,809     (2,809

Transfer to legal reserve

        25       (25         —          —   

Comprehensive income:

                 

Net income

          54,118           54,118       3,131       57,249  

Other comprehensive income (loss), net of tax

                 

Foreign currency translation adjustments

            42,166         42,166       821       42,987  

Net unrealized gains and losses on securities

            (21       (21       (21

Net gains and losses on derivative instruments

            612         612       5       617  

Pension liability adjustments

            4,246         4,246       8       4,254  
             

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

                101,121       3,965       105,086  
             

 

 

   

 

 

   

 

 

 

Repurchases and reissuance of treasury stock

              (50,004     (50,004       (50,004
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2022

    174,762       404,838       64,491       3,579,910       156,987       (1,258,359     3,122,629       231,595       3,354,224  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

32


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(11)

Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) for the nine months ended September 30, 2023 and 2022 are as follows:

 

     Millions of yen  
     Foreign
currency
translation
adjustments
     Net
unrealized
gains and
losses on
securities
     Gains and
losses on
derivative
instruments
     Pension
liability
adjustments
     Total  

Balance at December 31, 2022

     191,287        (34      (428      (128,202      62,623  

Other comprehensive income (loss) before reclassifications

     221,928        89        (2,490      3,047        222,574  

Amounts reclassified from accumulated other comprehensive income (loss)

     (13      (29      1,214        1,134        2,306  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net change during the period

     221,915        60        (1,276      4,181        224,880  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at September 30, 2023

     413,202        26        (1,704      (124,021      287,503  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Millions of yen  
     Foreign
currency
translation
adjustments
     Net
unrealized
gains and
losses on
securities
     Gains and
losses on
derivative
instruments
     Pension
liability
adjustments
     Total  

Balance at December 31, 2021

     5,519        —         (894      (156,419      (151,794

Other comprehensive income (loss) before reclassifications

     311,268        (28      (7,055      1,864        306,049  

Amounts reclassified from accumulated other comprehensive income (loss)

     (4,059      7        5,153        1,631        2,732  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net change during the period

     307,209        (21      (1,902      3,495        308,781  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at September 30, 2022

     312,728        (21      (2,796      (152,924      156,987  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

33


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(11)

Other Comprehensive Income (Loss) (continued)

 

Reclassifications out of accumulated other comprehensive income (loss) for the nine months ended September 30, 2023 and 2022 are as follows:

 

     Millions of yen
     Amount reclassified from accumulated other comprehensive income (loss) *
     Nine months ended
 September 30, 2023 
    Nine months ended
 September 30, 2022 
   

Affected line items in consolidated statements of income

Foreign currency translation adjustments

      
     (32     (5,883   Selling, general and administrative expenses
     10       1,824     Income taxes
  

 

 

   

 

 

   
     (22     (4,059   Consolidated net income
     9       —      Net income attributable to noncontrolling interests
     (13     (4,059   Net income attributable to Canon Inc.
  

 

 

   

 

 

   

Net unrealized gains and losses on securities

     (37     9     Other, net
     8       (2   Income taxes
  

 

 

   

 

 

   
     (29     7     Consolidated net income
     —        —      Net income attributable to noncontrolling interests
     (29     7     Net income attributable to Canon Inc.
  

 

 

   

 

 

   

Gains and losses on derivative instruments

     1,661       7,060     Net sales
     (474     (1,963   Income taxes
  

 

 

   

 

 

   
     1,187       5,097     Consolidated net income
     27       56     Net income attributable to noncontrolling interests
     1,214       5,153     Net income attributable to Canon Inc.
  

 

 

   

 

 

   

Pension liability adjustments

     961       2,460     Other, net
     (46     (451   Income taxes
  

 

 

   

 

 

   
     915       2,009     Consolidated net income
     219       (378   Net income attributable to noncontrolling interests
     1,134       1,631     Net income attributable to Canon Inc.
  

 

 

   

 

 

   

Total amount reclassified, net of tax and noncontrolling interests

     2,306       2,732    
  

 

 

   

 

 

   

 

*

Increase (decrease) of amounts indicate losses (gains) in consolidated statements of income.

 

34


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(11)

Other Comprehensive Income (Loss) (continued)

 

Reclassifications out of accumulated other comprehensive income (loss) for the three months ended September 30, 2023 and 2022 are as follows:

 

     Millions of yen
     Amount reclassified from accumulated other comprehensive income (loss) *
     Three months ended
 September 30, 2023 
    Three months ended
 September 30, 2022 
   

Affected line items in consolidated statements of income

Foreign currency translation adjustments

      
     —        (5,883   Selling, general and administrative expenses
     —        1,824     Income taxes
  

 

 

   

 

 

   
     —        (4,059   Consolidated net income
     —        —      Net income attributable to noncontrolling interests
     —        (4,059   Net income attributable to Canon Inc.
  

 

 

   

 

 

   

Net unrealized gains and losses on securities

     1       9     Other, net
     (0     (2   Income taxes
  

 

 

   

 

 

   
     1       7     Consolidated net income
     —        —      Net income attributable to noncontrolling interests
  

 

 

   

 

 

   
     1       7     Net income attributable to Canon Inc.
  

 

 

   

 

 

   

Gains and losses on derivative instruments

     534       3,787     Net sales
     (158     (1,049   Income taxes
  

 

 

   

 

 

   
     376       2,738     Consolidated net income
     45       40     Net income attributable to noncontrolling interests
  

 

 

   

 

 

   
     421       2,778     Net income attributable to Canon Inc.
  

 

 

   

 

 

   

Pension liability adjustments

     390       820     Other, net
     (32     (150   Income taxes
  

 

 

   

 

 

   
     358       670     Consolidated net income
     73       (125   Net income attributable to noncontrolling interests
  

 

 

   

 

 

   
     431       545     Net income attributable to Canon Inc.
  

 

 

   

 

 

   

Total amount reclassified, net of tax and noncontrolling interests

     853       (729  
  

 

 

   

 

 

   

* Increase (decrease) of amounts indicate losses (gains) in consolidated statements of income.

 

35


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(12)

Revenue

Canon recognizes contract assets primarily for unbilled receivables mainly arising from services contracts for the products of the Printing Business Unit. Contract assets are reclassified to trade receivables when they are billed under the terms of the contract. The difference between the opening and closing balances of contract assets primarily results from the timing difference of Canon’s performance and billing to customers. Contract assets at September 30, 2023 and December 31, 2022 were ¥48,392 million and ¥39,251 million respectively, and are included in prepaid expenses and other current assets in the consolidated balance sheets.

Canon typically bills to the customer when the performance obligation is satisfied and collects the payment in relatively short term except for certain maintenance service of the products of the Printing Business Unit and the Medical Business Unit and certain industrial equipment for which Canon occasionally receives the payment in advance from customers. The amount received in excess of revenue recognized is recorded as deferred revenue until the performance obligation for distinct goods or services are satisfied. Deferred revenue at September 30, 2023 and December 31, 2022 was ¥163,095 million and ¥141,840 million, respectively, and are included in other current liabilities and other non-current liabilities in the accompanying consolidated balance sheets. Revenue recognized for the nine months ended September 30, 2023, which had been included in the deferred revenue balance at December 31, 2022, was ¥98,771 million.

Remaining performance obligations for products and equipment at September 30, 2023 primarily arise from the sales of certain industrial equipment, amounting to ¥210,604 million, 66% of which is expected to be recognized as revenue within one year, 32% is within two years and the remaining 2% is within three years. Disclosure of remaining performance obligations is not required for the majority of service since the related revenue is recognized on an as billed basis applying the right to invoice practical expedient or is generated from the contracts with original expected duration of less than one year. Service revenue recognized from the fixed maintenance service contracts for the products of the Printing Business Unit and the Medical Business Unit with original expected duration of more than one year is ¥59,724 million for the nine months ended September 30, 2023 and the average remaining period for these fixed contracts at September 30, 2023 is about two years.

Disaggregated revenues by business unit, product and geographic area are described in Note 20.

 

36


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(13) Net Income Attributable to Canon Inc. Shareholders per Share

Reconciliations of the numerators and denominators of basic and diluted net income attributable to Canon Inc. shareholders per share computations for the nine months ended September 30, 2023 and 2022 are as follows:

 

     Millions of yen  
      Nine months ended 
September 30, 2023
      Nine months ended 
September 30, 2022
 

Net income attributable to Canon Inc.

              183,947                 159,118  

Diluted net income attributable to Canon Inc.

     183,943        159,115  

 

     Number of shares  
      Nine months ended 
September 30, 2023
      Nine months ended 
September 30, 2022
 

The weighted-average number of common shares outstanding

        1,005,262,399           1,035,225,840  

Effect of dilutive securities:

     

Stock options

     399,434        329,670  
  

 

 

    

 

 

 

Diluted common shares outstanding

     1,005,661,833        1,035,555,510  
  

 

 

    

 

 

 

 

     Yen  
      Nine months ended 
September 30, 2023
      Nine months ended 
September 30, 2022
 

Net income attributable to Canon Inc. shareholders per share:

     

Basic

               182.98                  153.70  

Diluted

     182.91        153.65  

Reconciliations of the numerators and denominators of basic and diluted net income attributable to Canon Inc. shareholders per share computations for the three months ended September 30, 2023 and 2022 are as follows:

 

     Millions of yen  
     Three months ended
September 30, 2023
     Three months ended
September 30, 2022
 

Net income attributable to Canon Inc.

               62,134                  54,118  

Diluted net income attributable to Canon Inc.

     62,133        54,117  
     Number of shares  
     Three months ended
September 30, 2023
     Three months ended
September 30, 2022
 

The weighted-average number of common shares outstanding

     991,796,369        1,023,041,561  

Effect of dilutive securities:

     

Stock options

     418,086        350,492  
  

 

 

    

 

 

 

Diluted common shares outstanding

     992,214,455        1,023,392,053  
  

 

 

    

 

 

 

 

     Yen  
     Three months ended
September 30, 2023
     Three months ended
September 30, 2022
 

Net income attributable to Canon Inc. shareholders per share:

     

Basic

                62.65                   52.90  

Diluted

     62.62        52.88  

During the nine and three months ended September 30, 2023 and 2022, there were dilutive effects from the stock options granted by the Company.

 

37


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(14)

Derivatives and Hedging Activities

Risk management policy

Canon operates internationally, exposing it to the risk of changes in foreign currency exchange rates. Derivative financial instruments are comprised principally of foreign exchange contracts utilized by the Company and certain of its subsidiaries to reduce the risk. Canon assesses foreign currency exchange rate risk by continually monitoring changes in the exposures and by evaluating hedging opportunities. Canon does not hold or issue derivative financial instruments for speculative purposes. Canon is also exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments, but it is not expected that any counterparties will fail to meet their obligations. Most of the counterparties are internationally recognized financial institutions and selected by Canon taking into account their financial condition, and contracts are diversified across a number of major financial institutions.

Foreign currency exchange rate risk management

Canon’s international operations expose Canon to the risk of changes in foreign currency exchange rates. Canon uses foreign exchange contracts to manage certain foreign currency exchange exposures principally from the exchange of U.S. dollars and euros into yen. These contracts are primarily used to hedge the foreign currency exposure of forecasted intercompany sales and intercompany trade receivables that are denominated in foreign currencies. In accordance with Canon’s policy, a specific portion of foreign currency exposure resulting from forecasted intercompany sales is hedged using foreign exchange contracts which principally mature within three months.

Cash flow hedge

Changes in the fair value of derivative financial instruments designated as cash flow hedges, including foreign exchange contracts associated with forecasted intercompany sales, are reported in accumulated other comprehensive income (loss). These amounts are subsequently reclassified into earnings in the same period as the hedged items affect earnings. All amounts recorded in accumulated other comprehensive income (loss) as of September 30, 2023 are expected to be recognized in net sales over the next twelve months. Changes in the fair value of a foreign exchange contract for the period between the date that the forecasted intercompany sales occur and its maturity date are recognized in earnings.

Derivatives not designated as hedges

Canon has entered into certain foreign exchange contracts to primarily offset the earnings impact related to fluctuations in foreign currency exchange rates associated with certain assets denominated in foreign currencies. Although these foreign exchange contracts have not been designated as hedges as required in order to apply hedge accounting, the contracts are effective from an economic perspective. The changes in the fair value of these contracts are recorded in earnings immediately.

 

38


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(14)

Derivatives and Hedging Activities (continued)

 

Contract amounts of foreign exchange contracts at September 30, 2023 and December 31, 2022 are set forth below:

 

     Millions of yen  
     September 30, 2023      December 31, 2022  

To sell foreign currencies

     305,823        149,080  

To buy foreign currencies

     33,378        26,224  

Fair value of derivative instruments in the consolidated balance sheets

The following tables present Canon’s derivative instruments measured at gross fair value as reflected in the consolidated balance sheets at September 30, 2023 and December 31, 2022.

Derivatives designated as hedging instruments

 

   

Millions of yen

 
   

Balance sheet location

   Fair value  
         September 30, 2023      December 31, 2022  

Assets:

       

Foreign exchange contracts

  Prepaid expenses and other current assets           234               176  

Liabilities:

       

Foreign exchange contracts

  Other current liabilities      1,729        416  

Derivatives not designated as hedging instruments

 

   

Millions of yen

 
   

Balance sheet location

   Fair value  
         September 30, 2023      December 31, 2022  

Assets:

       

Foreign exchange contracts

  Prepaid expenses and other current assets           272             2,539  

Liabilities:

       

Foreign exchange contracts

  Other current liabilities      2,213        846  

 

39


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(14)

Derivatives and Hedging Activities (continued)

 

Effect of derivative instruments in the consolidated statements of income

The following tables present the effect of Canon’s derivative instruments in the consolidated statements of income for the nine and three months ended September 30, 2023 and 2022.

Derivatives in cash flow hedging relationships

 

     Millions of yen  

Nine months ended September 30, 2023

   Gain (loss)
recognized in
OCI
     Gain (loss) reclassified from
accumulated OCI into income
 
   Amount      Location      Amount  

Foreign exchange contracts

     (3,373      Net sales        (1,661
     Millions of yen  

Nine months ended September 30, 2022

   Gain (loss)
recognized in
OCI
     Gain (loss) reclassified from
accumulated OCI into income
 
   Amount      Location      Amount  

Foreign exchange contracts

     (9,543      Net sales        (7,060
     Millions of yen  

Three months ended September 30, 2023

   Gain (loss)
recognized in
OCI
     Gain (loss) reclassified from
accumulated OCI into income
 
   Amount      Location      Amount  

Foreign exchange contracts

     (1,548      Net sales        (534
     Millions of yen  

Three months ended September 30, 2022

   Gain (loss)
recognized in
OCI
     Gain (loss) reclassified from
accumulated OCI into income
 
   Amount      Location      Amount  

Foreign exchange contracts

     (2,785      Net sales        (3,787

 

40


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(14)

Derivatives and Hedging Activities (continued)

Effect of derivative instruments in the consolidated statements of income (continued)

 

Derivatives not designated as hedging instruments

 

         Millions of yen  

Nine months ended September 30, 2023

       Gain (loss) recognized
in income on derivative
 
   Location      Amount  

Foreign exchange contracts

       Other, net        (14,737
         Millions of yen  

Nine months ended September 30, 2022

       Gain (loss) recognized
in income on derivative
 
   Location      Amount  

Foreign exchange contracts

       Other, net        (15,526
         Millions of yen  

Three months ended September 30, 2023

       Gain (loss) recognized
in income on derivative
 
   Location      Amount  

Foreign exchange contracts

       Other, net        (1,728
         Millions of yen  

Three months ended September 30, 2022

       Gain (loss) recognized
in income on derivative
 
   Location      Amount  

Foreign exchange contracts

       Other, net        (1,843

 

41


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(15)

Lessee Accounting

Lease costs are included in cost of sales or selling general and administrative expenses in the accompanying consolidated statements of income. Supplemental income statement information is as follows:

 

     Millions of yen  
     Nine months ended
 September 30, 2023 
     Nine months ended
 September 30, 2022 
 

Operating lease cost

     35,638        33,837  

Short-term lease cost

     12,036        11,261  

Other lease cost

     232        159  
  

 

 

    

 

 

 

Total

     47,906        45,257  
  

 

 

    

 

 

 
     Millions of yen  
     Three months ended
 September 30, 2023 
     Three months ended
 September 30, 2022 
 

Operating lease cost

     12,249        11,363  

Short-term lease cost

     3,928        4,234  

Other lease cost

     74        102  
  

 

 

    

 

 

 

Total

     16,251        15,699  
  

 

 

    

 

 

 

Operating lease cash flow

Supplemental cash flow information is as follows.

 

     Millions of yen  
     Nine months ended
 September 30, 2023 
     Nine months ended
 September 30, 2022 
 

Cash paid for amount included in the measurement of lease liabilities

     

Operating cash flows from operating leases

     33,777        33,819  
  

 

 

    

 

 

 

Noncash activity - Rights of use assets obtained in exchange for lease liabilities

     

Operating leases

     30,010        35,644  
  

 

 

    

 

 

 

Maturity Analysis

The following is a schedule by year of the future minimum lease payments under operating leases at September 30, 2023.

 

     Millions of yen  

Within one year

     38,848  

Two years

     29,129  

Three years

     22,820  

Four years

     15,657  

Five years

     9,490  

Thereafter

     16,722  
  

 

 

 

Total future minimum lease payments

     132,666  

Less Imputed Interest

     (7,278
  

 

 

 

Total

     125,388  
  

 

 

 

 

42


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(16)

Commitments and Contingent Liabilities

Commitments

As of September 30, 2023, commitments outstanding for the purchase of property, plant and equipment approximated ¥65,292 million, and commitments outstanding for the purchase of parts and raw materials approximated ¥234,246 million.

Guarantees

Canon occupies sales offices and other facilities under lease arrangements accounted for as operating leases. Deposits mainly for restoration made under such arrangements aggregated ¥10,745 million and ¥10,086 million at September 30, 2023 and December 31, 2022, respectively, and are included in noncurrent receivables in the accompanying consolidated balance sheets.

Canon provides guarantees for its employees, affiliates and other companies. The guarantees for the employees are principally made for their housing loans. The guarantees for affiliates and other companies are made for their lease obligations and bank loans to facilitate financing.

Canon would have to perform under a guarantee if the borrower defaults on a payment within the contract terms. The contract terms are 1 year to 11 years in case of employees with housing loans, and 1 year to 6 years in case of affiliates and other companies with lease obligations and bank loans. The maximum amount of undiscounted payments Canon would have had to make in the event of default is ¥1,893 million at September 30, 2023. The carrying amounts of the liabilities recognized for Canon’s obligations as a guarantor under those guarantees at September 30, 2023 were not significant.

Canon also offers assurance-type warranties under which it generally guarantees the performance of products delivered and services rendered for a certain period or term. Estimated product warranty costs are recorded at the time revenue is recognized and are included in selling, general and administrative expenses in the accompanying consolidated statements of income. Estimates for accrued product warranty costs are based on historical experience. Accrued product warranty costs are included in accrued expenses in the accompanying consolidated balance sheets and changes in accrued product warranty cost for the nine months ended September 30, 2023 and 2022 are summarized as follows:

Nine months ended September 30, 2023

 

     Millions of yen  

Balance at December 31, 2022

     20,887  

Addition

     14,854  

Utilization

     (13,505

Other

     (1,627
  

 

 

 

Balance at September 30, 2023

          20,609  
  

 

 

 

Nine months ended September 30, 2022

 

     Millions of yen  

Balance at December 31, 2021

     16,949  

Addition

     14,382  

Utilization

     (12,406

Other

     (348
  

 

 

 

Balance at September 30, 2022

     18,577  
  

 

 

 

 

43


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(16)

Commitments and Contingent Liabilities (continued)

 

Legal proceedings

Canon is involved in various claims and legal actions arising in the ordinary course of business. Canon has recorded provisions for liabilities when it is probable that liabilities have been incurred and the amount of loss can be reasonably estimated. Canon reviews these provisions at least quarterly and adjusts these provisions to reflect the impact of the negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Based on its experience, although litigation is inherently unpredictable, Canon believes that any damage amounts claimed in outstanding matters are not a meaningful indicator of Canon’s potential liability. In the opinion of management, any reasonably possible range of losses from outstanding matters would not have a material adverse effect on Canon’s consolidated financial position, results of operations, or cash flows.

 

(17)

Disclosures about the Fair Value of Financial Instruments and Concentrations of Credit Risk

Fair value of financial instruments

The estimated fair values of Canon’s financial instruments at September 30, 2023 and December 31, 2022 are set forth below. The following summary excludes cash and cash equivalents, trade receivables, noncurrent receivables, short-term loans, trade payables and accrued expenses, and the fair values of these instruments approximate their carrying amounts. The summary also excludes investments and derivative instruments which are disclosed in Note 2 and Note 18, and Note 14, respectively.

 

     Millions of yen  
     September 30, 2023     December 31, 2022  
     Carrying
amount
    Estimated
fair value
    Carrying
amount
    Estimated
fair value
 

Long-term debt, including current portion of long-term debt

     (54,182     (54,182     (54,205     (54,205

The following methods and assumptions are used to estimate the fair value in the above table.

Long-term debt

Canon’s long-term debt instruments are classified as Level 2 instruments and valued based on the present value of future cash flows associated with each instrument discounted using current market borrowing rates for similar debt instruments of comparable maturity. The levels are more fully described in Note 18.

Limitations of fair value estimates

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Concentrations of credit risk

No single customer accounted for more than 10 percent of consolidated trade receivables as of September 30, 2023 and December 31, 2022.

 

44


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(18)

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy that prioritizes the inputs used to measure fair value is as follows:

 

Level 1 -    Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 -    Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 -    Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable, which reflect the reporting entity’s own assumptions about the assumptions that market participants would use in establishing a price.

Assets and liabilities measured at fair value on a recurring basis

The following tables present Canon’s assets and liabilities that are measured at fair value on a recurring basis consistent with the fair value hierarchy at September 30, 2023 and December 31, 2022.

 

     Millions of yen  
     September 30, 2023  
     Level 1      Level 2      Level 3      Total  

Assets:

                                               

Cash and cash equivalents

     —         2,166        —         2,166  

Short-term investments:

           

Available-for-sale:

           

Corporate bonds

     —         1,356        —         1,356  

Investments:

           

Available-for-sale:

           

Corporate bonds

     —         5,460        —         5,460  

Fund trusts and others

     285        472        —         757  

Equity securities

     25,221        —         —         25,221  

Prepaid expenses and other current assets:

           

Derivatives

     —         506        —         506  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     25,506        9,960        —         35,466  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Other current liabilities:

           

Derivatives

     —         3,942        —         3,942  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     —         3,942        —         3,942  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

45


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(18)

Fair Value Measurements (continued)

 

     Millions of yen  
     December 31, 2022  
     Level 1      Level 2      Level 3      Total  

Assets:

                                               

Cash and cash equivalents

     —         627        —         627  

Short-term investments:

           

Available-for-sale:

           

Corporate bonds

     —         9,301        —         9,301  

Investments:

           

Available-for-sale:

           

Corporate bonds

     —         4,785        —         4,785  

Fund trusts and others

     255        383        —         638  

Equity securities

     21,770        —         —         21,770  

Prepaid expenses and other current assets:

           

Derivatives

     —         2,715        —         2,715  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     22,025        17,811        —         39,836  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Other current liabilities:

           

Derivatives

     —         1,262        —         1,262  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     —         1,262        —         1,262  
  

 

 

    

 

 

    

 

 

    

 

 

 

Level 1 investments are comprised principally of Japanese equity securities, which are valued using an unadjusted quoted market price in active markets with sufficient volume and frequency of transactions. Level 2 assets and liabilities are comprised principally of corporate bonds included in cash and cash equivalents, investments or short-term investments, and derivatives. Corporate bonds included in cash and cash equivalents, and investments or short-term investments are valued using quoted prices for identical assets in markets that are not active or quotes obtained from counterparties or third parties.

Derivative financial instruments are comprised of foreign exchange contracts. Level 2 derivatives are valued using quotes obtained from counterparties or third parties, which are periodically validated by pricing models using observable market inputs, such as foreign currency exchange rates and interest rates, based on market approach.

Assets and liabilities measured at fair value on a nonrecurring basis

During the nine months ended September 30, 2023 and 2022, there were no circumstances that required any significant assets or liabilities to be measured at fair value on a nonrecurring basis.

 

46


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(19)

Supplemental Information

Foreign Currency Exchange Gains and Losses

Gains and losses resulting from foreign currency transactions, including foreign exchange contracts, and translation of assets and liabilities denominated in foreign currencies are included in other, net of other income (deductions) in the consolidated statements of income. Foreign currency exchange gains and losses were net losses of ¥13,381 million and ¥47,078 million for the nine months ended September 30, 2023 and 2022, respectively, and were a net gain of ¥450 million and a net loss of ¥10,006 million for the three months ended September 30, 2023 and 2022, respectively.

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs were ¥32,465 million and ¥29,130 million for the nine months ended September 30, 2023 and 2022, respectively, and were ¥11,668 million and ¥11,062 million for the three months ended September 30, 2023 and 2022, respectively, and are included in selling, general and administrative expenses in the consolidated statements of income.

Shipping and Handling Costs

Shipping and handling costs totaled ¥46,800 million and ¥43,940 million for the nine months ended September 30, 2023 and 2022, respectively, and were ¥15,428 million and ¥16,081 million for the three months ended September 30, 2023 and 2022, respectively, and are included in selling, general and administrative expenses in the consolidated statements of income.

Components of Net Periodic Benefit Cost

Net periodic benefit cost for Canon’s employee retirement and severance defined benefit plans for the nine months ended September 30, 2023 and 2022 consisted of the following components:

 

                                                                     
     Millions of yen  
     Nine months ended
 September 30, 2023 
    Nine months ended
 September 30, 2022 
 

Service cost

     19,711       23,871  

Interest cost

     17,359       9,500  

Expected return on plan assets

     (27,155     (29,979

Amortization of prior service credit

     (5,852     (6,197

Amortization of actuarial loss

     6,813       8,643  

Curtailments and settlements

     —        (622
  

 

 

   

 

 

 
     10,876       5,216  
  

 

 

   

 

 

 

 

47


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(19)

Supplemental Information (continued)

 

Net periodic benefit cost for Canon’s employee retirement and severance defined benefit plans for the three months ended September 30, 2023 and 2022 consisted of the following components:

 

                                                             
     Millions of yen  
     Three months ended
 September 30, 2023 
    Three months ended
 September 30, 2022 
 

Service cost

     6,461       8,003  

Interest cost

     5,960       3,198  

Expected return on plan assets

     (9,318     (10,093

Amortization of prior service credit

     (1,965     (2,080

Amortization of actuarial loss

     2,355       2,902  

Curtailments and settlements

     —        15  
  

 

 

   

 

 

 
     3,493       1,945  
  

 

 

   

 

 

 

Service cost component of net periodic benefit cost for Canon’s employee retirement and severance defined benefit plans is included in cost of sales and operating expenses in the consolidated statements of income. The components other than the service cost component are included in other, net of other income (deductions) in the consolidated statements of income.

Cash Equivalents

Certain debt securities with original maturities of less than three months, classified as available-for-sale debt securities of ¥2,166 million and ¥627 million at September 30, 2023 and December 31, 2022, respectively, are included in cash and cash equivalents in the consolidated balance sheets. Fair value for these securities approximates their cost.

Acquisitions of businesses, net of cash acquired

The payment made to the securities firm acting as the tender offer agent for the shares acquired through the tender offer described Note 21, is included in Acquisitions of businesses, net of cash acquired in the consolidated statements of cash flows in an amount of ¥10,249 million.

 

48


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(20)

Segment Information

Canon reports in four reportable segments: the Printing Business Unit, the Imaging Business Unit, the Medical Business Unit and the Industrial Business Unit with Others and Corporate, which are based on the organizational structure and information reviewed by Canon’s management to evaluate results and allocate resources.

Based on the realignment of Canon’s internal management structure, from the fourth quarter ended December 31, 2022, Canon has changed the name and structure of segments from Industrial and Others Business Unit and Corporate and eliminations to Industrial Business Unit, Others and Corporate and Eliminations. Also, a certain business, which was previously included in Others, has been presented within the Printing Business Unit from the beginning of the first quarter of 2023. Operating results for the three and nine months ended September 30, 2022 have also been reclassified.

The primary products included in each segment are as follows:

 

Printing Business Unit:   

Office multifunction devices (MFDs) / Document solutions/

Laser multifunction printers (MFPs) / Laser printers / Inkjet printers /

Image scanners / Calculators / Digital continuous feed presses /

Digital sheet-fed presses / Large format printers

Imaging Business Unit:   

Interchangeable-lens digital cameras / Interchangeable lenses /

Digital compact cameras / Compact photo printers / MR Systems /

Network cameras / Video management software / Video

content analytics software / Digital camcorders / Digital cinema cameras /

Broadcast equipment / Projectors

Medical Business Unit:   

Computed tomography (CT) systems / Diagnostic ultrasound systems /

Diagnostic X-ray systems / Magnetic resonance imaging (MRI) systems /

Clinical chemistry analyzers / Digital radiography systems /

Ophthalmic equipment

Industrial Business Unit:   

Semiconductor lithography equipment / FPD (Flat panel display) lithography equipment / OLED Display Manufacturing Equipment /

Vacuum thin-film deposition equipment / Die bonders

Others:    Handy terminals / Document scanners

The accounting policies of the segments are substantially the same as the accounting policies used in Canon’s quarterly consolidated financial statements. Canon evaluates performance of, and allocates resources to, each segment based on income before income taxes.

 

49


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(20)

Segment Information (continued)

 

 

Information about operating results for each segment for the nine months ended September 30, 2023 and 2022 is as follows:

 

     Millions of yen  
     Printing      Imaging      Medical     Industrial      Others
and
Corporate
    Eliminations     Consolidated  

2023:

                 

Net sales:

                 

External customers

     1,698,620        632,173        388,672       207,400        90,389       —        3,017,254  

Intersegment

     4,824        174        904       8,365        50,970       (65,237     —   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

     1,703,444        632,347        389,576       215,765        141,359       (65,237     3,017,254  

Operating cost and expenses

     1,547,489        520,456        371,641       180,495        201,365       (63,565     2,757,881  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Operating profit

     155,955        111,891        17,935       35,270        (60,006     (1,672     259,373  

Other income (deductions)

     5,578        1,134        (8     408        15,109       (5,612     16,609  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Income before income taxes

     161,533        113,025        17,927       35,678        (44,897     (7,284     275,982  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
     Millions of yen  
     Printing      Imaging      Medical     Industrial      Others
and
Corporate
    Eliminations     Consolidated  

2022:

                 

Net sales:

                 

External customers

     1,628,141        560,696        362,240       227,832        95,330       —        2,874,239  

Intersegment

     4,302        335        263       5,947        61,772       (72,619     —   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

     1,632,443        561,031        362,503       233,779        157,102       (72,619     2,874,239  

Operating cost and expenses

     1,471,916        478,688        341,449       189,126        210,048       (73,043     2,618,184  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Operating profit

     160,527        82,343        21,054       44,653        (52,946     424       256,055  

Other income (deductions)

     9,704        1,071        567       1,047        (30,464     (6,011     (24,086
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Income before income taxes

     170,231        83,414        21,621       45,700        (83,410     (5,587     231,969  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

50


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(20)

Segment Information (continued)

 

 

Information about operating results for each segment for the three months ended September 30, 2023 and 2022 is as follows:

 

     Millions of yen  
     Printing      Imaging      Medical     Industrial      Others
and
Corporate
    Eliminations     Consolidated  

2023:

                 

Net sales:

                 

External customers

     568,502        220,614        132,044       76,547         27,540       —        1,025,247  

Intersegment

     1,858        72        362       2,302        17,204       (21,798     —   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

     570,360        220,686        132,406       78,849        44,744       (21,798     1,025,247  

Operating cost and expenses

     524,317        180,503        125,767       63,081        70,245       (21,290     942,623  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Operating profit

     46,043        40,183        6,639       15,768        (25,501     (508     82,624  

Other income (deductions)

     764        369        (20     131        3,512       (60     4,696  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Income before income taxes

     46,807        40,552        6,619       15,899        (21,989     (568     87,320  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
     Millions of yen  
     Printing      Imaging      Medical     Industrial      Others
and
Corporate
    Eliminations     Consolidated  

2022:

                 

Net sales:

                 

External customers

       552,951        202,848        126,006       85,307        28,978       —        996,090  

Intersegment

     1,827        85        68       1,730        24,812       (28,522     —   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

     554,778        202,933        126,074       87,037        53,790       (28,522     996,090  

Operating cost and expenses

     513,766        166,318        119,642       70,156        73,543       (28,775     914,650  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Operating profit

     41,012        36,615        6,432       16,881        (19,753     253       81,440  

Other income (deductions)

     2,944        190        169       147        (5,725     (89     (2,364
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Income before income taxes

     43,956        36,805        6,601        17,028        (25,478     164       79,076  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Intersegment sales are recorded at the same prices used in transactions with third parties. Expenses not directly associated with specific segments are allocated based on the most reasonable measures applicable. Corporate expenses include certain corporate research and development expenses. Amortization costs of identified intangible assets resulting from the purchase price allocation of Toshiba Medical Systems Corporation (currently, Canon Medical Systems Corporation) are also included in corporate expenses.

 

51


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(20)

Segment Information (continued)

 

 

Information about sales by product and service to external customers by business unit for the nine months ended September 30, 2023 and 2022 is as follows:

 

     Millions of yen  
     Nine months ended
 September 30, 2023 
     Nine months ended
 September 30, 2022 
 

Printing

     

Office multifunction devices

     450,747        402,301  

Office others

     266,035        234,290  
  

 

 

    

 

 

 

Office

     716,782        636,591  

Laser printers

     444,754        474,844  

Inkjet printers and Others

     255,010        262,610  
  

 

 

    

 

 

 

Prosumer

     699,764        737,454  

Production

     282,074        254,096  
  

 

 

    

 

 

 

Total

     1,698,620        1,628,141  

Imaging

     

Cameras

     390,428        360,334  

Network cameras and Others

     241,745        200,362  
  

 

 

    

 

 

 

Total

     632,173        560,696  

Medical

     

Diagnostic equipment

     388,672        362,240  
  

 

 

    

 

 

 

Industrial

     

Optical equipment

     143,676        164,813  

Industrial equipment

     63,724        63,019  
  

 

 

    

 

 

 

Total

     207,400        227,832  
  

 

 

    

 

 

 

Others and Corporate

     90,389        95,330  
  

 

 

    

 

 

 

Consolidated

     3,017,254        2,874,239  
  

 

 

    

 

 

 

 

52


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(20)

Segment Information (continued)

 

 

Information about sales by product and service to external customers by business unit for the three months ended September 30, 2023 and 2022 is as follows:

 

     Millions of yen  
     Three months ended
 September 30, 2023 
     Three months ended
 September 30, 2022 
 

Printing

     

Office multifunction devices

     151,160        149,375  

Office others

     88,268        78,952  
  

 

 

    

 

 

 

Office

     239,428        228,327  

Laser printers

     145,277        150,131  

Inkjet printers and Others

     85,305        81,585  
  

 

 

    

 

 

 

Prosumer

     230,582        231,716  

Production

     98,492        92,908  
  

 

 

    

 

 

 

Total

     568,502        552,951  

Imaging

     

Cameras

     138,629        132,064  

Network cameras and Others

     81,985        70,784  
  

 

 

    

 

 

 

Total

     220,614        202,848  

Medical

     

Diagnostic equipment

     132,044          126,006  
  

 

 

    

 

 

 

Industrial

     

Optical equipment

     53,074        64,897  

Industrial equipment

     23,473        20,410  
  

 

 

    

 

 

 

Total

     76,547        85,307  
  

 

 

    

 

 

 

Others and Corporate

     27,540        28,978  
  

 

 

    

 

 

 

Consolidated

     1,025,247        996,090  
  

 

 

    

 

 

 

Based on the realignment of Canon’s internal management structure, from the fourth quarter ended December 31, 2022, Canon has changed certain product categories and some product sales, which were previously included in Others, have been added to Lithography equipment and are presented as Optical equipment. Also, certain businesses, which were previously included in Office multifunction devices and Others and Corporate, have been presented as Inkjet printers and Others from the beginning of the first quarter of 2023. Operating results for the three and nine months ended September 30, 2022 have also been reclassified.

 

53


CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

 

(20)

Segment Information (continued)

 

 

Information by major geographic area for the nine months ended September 30, 2023 and 2022 is as follows:

 

     Millions of yen  
     Japan      Americas      Europe      Asia and
Oceania
     Total  

2023:

              

Net sales:

     652,598        944,583        790,223        629,850        3,017,254  

2022:

              

Net sales:

     627,576        893,993        720,649        632,021        2,874,239  

Information by major geographic area for the three months ended September 30, 2023 and 2022 is as follows:

 

     Millions of yen  
     Japan      Americas      Europe      Asia and
Oceania
     Total  

2023:

              

Net sales:

     213,428        328,008        270,461        213,350        1,025,247  

2022:

              

Net sales:

     201,091        311,553        251,981        231,465        996,090  

Net sales are attributed to areas based on the location where the product is shipped to the customers.

 

(21)

Subsequent Events

On October 2, 2023, Canon Marketing Japan Inc., a subsidiary of the Company, acquired 93.10% of the issued shares of Tokyo Nissan Computer System Co., Ltd. (currently, TCS Co., Ltd. , changed the company name on November 1, 2023) excluding treasury stock through a public cash tender offer for consideration of ¥10,249 million in order to expand its IT solution business. In addition, on November 1, 2023, it acquired 6.90% of the issued shares of the acquired company through squeeze out so that the acquired company became its wholly owned subsidiary company for a total consideration of ¥11,009 million. Further information related to the accounting for this business combination has not been disclosed, because none of the activities required to complete the initial accounting for this acquisition have been completed as of the issuance date of the consolidated financial statements for the third quarter of 2023.

 

(2)

Other Information

The Board of Directors approved an interim cash dividend at the meeting held on July 27, 2023 as below:

 

  1.

Total amount of interim cash dividends:

69,939 million yen

 

  2.

Amount of an interim cash dividend per share:

70 yen

 

  3.

Payment date:

August 25, 2023

Note:

The interim dividend was paid to registered shareholders as of June 30, 2023.

 

54