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SECURITIES AND EXCHANGE COMMISSION
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2005 | |
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from ____________ to ____________ | ||
OR | ||
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Date of event requiring this shell company report |
Commission file number 001-15122 |
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
Title of each class | Name of each exchange on which registered | |
(1) Common Stock (the “shares”) | New York Stock Exchange* | |
(2) American Depositary Shares (“ADSs”), each of which represents one share | New York Stock Exchange |
(Title of Class)
to Section 15(d) of the Act.
None
(Title of Class)
of capital or common stock as of the close of the period covered by the
annual report.
ADSs, were outstanding.
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required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
elected to follow.
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CERTAIN DEFINED TERMS, CONVENTIONS AND PRESENTATION OF FINANCIAL INFORMATION | 1 | |||||
FORWARD-LOOKING INFORMATION | 1 | |||||
PART I | ||||||
Item 1. Identity of Directors, Senior Management and Advisers | 2 | |||||
Item 2. Offer Statistics and Expected Timetable | 2 | |||||
Item 3. Key Information | 2 | |||||
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Item 4. Information on the Company | 9 | |||||
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Item 5. Operating and Financial Review and Prospects | 23 | |||||
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Item 6. Directors, Senior Management and Employees | 39 | |||||
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Item 7. Major Shareholders and Related Party Transactions | 46 | |||||
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Selected financial data *1: | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||
(Millions of yen except average number of shares and per share data) | ||||||||||||||||||||
Net sales | ¥ | 3,754,191 | ¥ | 3,467,853 | ¥ | 3,198,072 | ¥ | 2,940,128 | ¥ | 2,907,573 | ||||||||||
Operating profit | 583,043 | 543,793 | 454,424 | 346,359 | 281,839 | |||||||||||||||
Income before cumulative effect of change in accounting principle | 384,096 | 343,344 | 275,730 | 190,737 | 163,869 | |||||||||||||||
Net income | 384,096 | 343,344 | 275,730 | 190,737 | 167,561 | |||||||||||||||
Advertising expenses | 106,250 | 111,770 | 100,278 | 71,725 | 66,837 | |||||||||||||||
Research and development expenses | 286,476 | 275,300 | 259,140 | 233,669 | 218,616 | |||||||||||||||
Depreciation of property, plant and equipment | 205,727 | 174,397 | 168,636 | 158,469 | 147,286 | |||||||||||||||
Capital expenditures | 383,784 | 318,730 | 210,038 | 198,702 | 207,674 | |||||||||||||||
Long-term debt, excluding current installments | 27,082 | 28,651 | 59,260 | 81,349 | 95,526 | |||||||||||||||
Common stock | 174,438 | 173,864 | 168,892 | 167,242 | 165,287 | |||||||||||||||
Stockholders’ equity | 2,604,682 | 2,209,896 | 1,865,545 | 1,591,950 | 1,458,476 | |||||||||||||||
Total assets | 4,043,553 | 3,587,021 | 3,182,148 | 2,942,706 | 2,844,756 | |||||||||||||||
Average number of common shares in thousands | 887,174 | 885,365 | 878,649 | 876,716 | 875,960 | |||||||||||||||
Per share data: | ||||||||||||||||||||
Income before cumulative effect of change in accounting principle: | ||||||||||||||||||||
Basic | ¥ | 432.94 | ¥ | 387.80 | ¥ | 313.81 | ¥ | 217.56 | ¥ | 187.07 | ||||||||||
Diluted | 432.55 | 386.78 | 310.75 | 214.80 | 184.55 | |||||||||||||||
Net income: | ||||||||||||||||||||
Basic | ¥ | 432.94 | ¥ | 387.80 | ¥ | 313.81 | ¥ | 217.56 | ¥ | 191.29 | ||||||||||
Diluted | 432.55 | 386.78 | 310.75 | 214.80 | 188.70 | |||||||||||||||
Cash dividends declared | 100.00 | 65.00 | 50.00 | 30.00 | 25.00 | |||||||||||||||
Cash dividends declared (U.S.$)*2 | $ | 0.870 | $ | 0.601 | $ | 0.464 | $ | 0.254 | $ | 0.196 |
1. | The above financial data are prepared in accordance with U.S. generally accepted accounting principles. | ||
2. | Annual cash dividends declared (U.S.$) translated from yen based on a weighted average of the noon buying rates for yen in New York city as reported by the Federal Reserve Bank of New York in effect on the date of each semiannual dividend payment. |
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Yen exchange rates per U.S. dollar: | Average | Term end | High | Low | |||||||||||||
2001 | 122.18 | 131.04 | 114.26 | 131.47 | |||||||||||||
2002 | 124.81 | 118.75 | 115.71 | 134.77 | |||||||||||||
2003 | 115.83 | 107.13 | 106.93 | 121.42 | |||||||||||||
2004 | 107.63 | 102.68 | 102.56 | 114.30 | |||||||||||||
2005 | - Year | 110.74 | 117.88 | 120.93 | 102.26 | ||||||||||||
- 1(st) half | 110.91 | 110.91 | 102.26 | ||||||||||||||
- July | 112.25 | 113.42 | 110.47 | ||||||||||||||
- August | 110.84 | 112.12 | 109.37 | ||||||||||||||
- September | 113.29 | 113.32 | 109.66 | ||||||||||||||
- October | 116.36 | 116.36 | 113.54 | ||||||||||||||
- November | 119.66 | 119.66 | 116.63 | ||||||||||||||
- December | 117.88 | 120.93 | 115.78 | ||||||||||||||
2006 | - January | 116.88 | 117.55 | 113.96 | |||||||||||||
- February | 115.82 | 118.95 | 115.82 | ||||||||||||||
- March | 117.48 | 119.07 | 115.89 |
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• | engineering improvements; | ||
• | economies of scale; | ||
• | improvements in manufacturing processes; and | ||
• | improved serviceability of products. |
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• | less developed technological infrastructure, which can affect production or other activities or result in lower customer acceptance of Canon’s services; | ||
• | difficulties in recruiting and retaining personnel; | ||
• | potentially adverse tax consequences; | ||
• | longer payment cycles; | ||
• | unfavorable political or economic factors; and | ||
• | unexpected legal or regulatory changes. |
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• | competitors will be able to develop similar technology independently; | ||
• | Canon’s pending patent applications may not be issued; | ||
• | the steps Canon takes to prevent misappropriation or infringement of its intellectual property may not be successful; and | ||
• | intellectual property laws may not adequately protect Canon’s intellectual property, particularly in some emerging markets. |
• | refrain from selling the affected product in certain markets; | ||
• | make royalty payments or pay monetary damages; | ||
• | seek to develop non-infringing technologies, which may not be feasible; or | ||
• | seek to acquire licenses to the infringed technology, which may not be available on commercially reasonable terms, if at all. |
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• | In 2000, the Canon Inc. Optics R&D Center, a research and development, or R&D facility for optical technology, was established in Tochigi, Japan. | ||
• | In 2000, Canon Inc. changed the listing of its American Depository Receipts (ADRs) to the New York Stock Exchange (NYSE) from the Nasdaq National Markets. | ||
• | In 2001, Canon Vietnam Co., Ltd. was established in Hanoi, Vietnam as a production site for bubble jet printers. | ||
• | In 2001, Canon Zhongshan Business Machines Co., Ltd. was established in Zhongshan, China as a production site for laser beam printers. | ||
• | In 2001, Canon (Suzhou) Inc. was established in Suzhou, China as a production site for digital copying machines and digital multifunction devices. | ||
• | In January 2003, Canon Aptex Inc. and Copyer Co., Ltd., two of Canon Inc.’s manufacturing subsidiaries in Japan, merged to become Canon Finetech Inc. The merger was conducted with the aim of concentrating and further strengthening the core competencies of the two merged companies in office equipment-related technologies. | ||
• | In April 2003, Fukushima Canon Inc. was established as a wholly-owned subsidiary through the spin-off of Fukushima Plant, with the aim of establishing a high value-added manufacturing company equipped with product-launching capability. | ||
• | In April 2003, Canon N.T.C.’s marketing operations were spun off and merged with Canon System & Support Inc., and its real estate operations were spun off into Canon Facility Management, Inc. Following the corporate spin-offs, Canon N.T.C.’s operations focuses on development and manufacturing. | ||
• | In January, 2004, Canon Precision Inc., or Canon Precision, a wholly-owned subsidiary of Canon Inc., merged with Hirosaki Precision, Inc., or Hirosaki Precision, a wholly-owned subsidiary of Canon Precision. Hirosaki Precision was merged into Canon Precision, the surviving company. Canon Precision targets the improved efficiency and specialization of business operations. Since both Canon Precision and Hirosaki Precision were consolidated subsidiaries of Canon Inc., the merger has no impact on Canon’s current or future business results. | ||
• | On October 15, 2004, the Company entered into an agreement with Canon Sales Co., Inc. and Canotec Co., Inc., or Canotec, joint equity shareholders of Niigata Canotec Co., Inc., or Niigata Canotec, to acquire all outstanding shares of Niigata Canotec. Therefore, on January 1, 2005, Niigata Canotec became a wholly-owned subsidiary of the Company and changed its name to Canon Imaging System Technologies Inc. By making Canon Imaging System Technologies, Inc. a wholly-owned subsidiary of the Company, Canon aims to raise the level of its technical capacity and improve development efficiency by enabling closer coordination. | ||
• | On January 1, 2005, Canotec and FastNet, Inc. merged, and the merged entity changed its name to Canon Network Communications, Inc. The purpose of the merger was to increase management efficiency by consolidating the Canon Group’s network and Internet service operations. Canon Network Communications, Inc. aims to strengthen Information Technology Management Services, dealing with all stages from the establishment of comprehensive network systems to their operation and management. | ||
• | On September 30, 2005, Canon acquired all of the issued and outstanding shares of ANELVA Corporation, which possesses advanced vacuum technology, and made it into a subsidiary. ANELVA Corporation’s corporate name was changed to Canon ANELVA Corporation as of October 1, 2005. By making Canon ANELVA Corporation a subsidiary of the Company, Canon aims to promote the in-house production of manufacturing equipment which is indispensable to differentiate Canon products from the competitions in various fields, including Canon’s new display business. | ||
• | On October 19, 2005, Canon acquired the share of NEC Machinery Corporation (listed on the Second Section of the Osaka Securities Exchange Co.,Ltd.), which possesses advanced automation technologies, through tender offer and made it into a subsidiary. NEC Machinery Corporation’s corporate name was changed to Canon Machinery Inc. as of December 17, 2005. By making Canon Machinery Inc. a subsidiary of the Company, Canon aims to make further advance in its production reform activities, including the automation of production processes for Canon products. |
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Years ended December 31 | ||||||||||||||||||||
2005 | change | 2004 | change | 2003 | ||||||||||||||||
(Millions of yen except percentage data) | ||||||||||||||||||||
Business machines: | ||||||||||||||||||||
Office imaging products | ¥ | 1,153,240 | 2.9 | % | ¥ | 1,120,972 | 3.6 | % | ¥ | 1,081,995 | ||||||||||
Computer peripherals | 1,244,906 | 8.3 | 1,149,914 | 5.6 | 1,089,312 | |||||||||||||||
Business information products | 104,255 | -10.9 | 117,067 | -5.2 | 123,493 | |||||||||||||||
2,502,401 | 4.8 | 2,387,953 | 4.1 | 2,294,800 | ||||||||||||||||
Cameras | 879,186 | 15.2 | 763,079 | 16.8 | 653,540 | |||||||||||||||
Optical and other products | 372,604 | 17.6 | 316,821 | 26.9 | 249,732 | |||||||||||||||
Total | ¥ | 3,754,191 | 8.3 | ¥ | 3,467,853 | 8.4 | ¥ | 3,198,072 | ||||||||||||
Years ended December 31 | ||||||||||||||||||||
2005 | change | 2004 | change | 2003 | ||||||||||||||||
(Millions of yen except percentage data) | ||||||||||||||||||||
Japan | ||||||||||||||||||||
Unaffiliated customers | ¥ | 979,748 | 6.6 | % | ¥ | 919,153 | 7.3 | % | ¥ | 856,851 | ||||||||||
Intersegment | 2,046,173 | 8.7 | 1,882,973 | 13.3 | 1,662,172 | |||||||||||||||
Total | 3,025,921 | 8.0 | 2,802,126 | 11.2 | 2,519,023 | |||||||||||||||
Americas | ||||||||||||||||||||
Unaffiliated customers | ¥ | 1,139,784 | 7.8 | % | ¥ | 1,057,066 | 1.2 | % | ¥ | 1,044,998 | ||||||||||
Intersegment | 7,424 | -16.2 | 8,863 | 9.4 | 8,101 | |||||||||||||||
Total | 1,147,208 | 7.6 | 1,065,929 | 1.2 | 1,053,099 | |||||||||||||||
Europe | ||||||||||||||||||||
Unaffiliated customers | ¥ | 1,178,672 | 8.1 | % | ¥ | 1,090,712 | 12.6 | % | ¥ | 968,938 | ||||||||||
Intersegment | 2,206 | -47.0 | 4,161 | 7.8 | 3,861 | |||||||||||||||
Total | 1,180,878 | 7.9 | 1,094,873 | 12.5 | 972,799 | |||||||||||||||
Others | ||||||||||||||||||||
Unaffiliated customers | ¥ | 455,987 | 13.7 | % | ¥ | 400,922 | 22.5 | % | ¥ | 327,285 | ||||||||||
Intersegment | 646,530 | 9.3 | 591,677 | 17.6 | 503,119 | |||||||||||||||
Total | 1,102,517 | 11.1 | 992,599 | 19.5 | 830,404 | |||||||||||||||
Eliminations | ||||||||||||||||||||
Unaffiliated customers | ¥ | — | — | % | ¥ | — | — | % | ¥ | — | ||||||||||
Intersegment | (2,702,333 | ) | — | (2,487,674 | ) | — | (2,177,253 | ) | ||||||||||||
Total | (2,702,333 | ) | — | (2,487,674 | ) | — | (2,177,253 | ) | ||||||||||||
Consolidated | ||||||||||||||||||||
Unaffiliated customers | ¥ | 3,754,191 | 8.3 | % | ¥ | 3,467,853 | 8.4 | % | ¥ | 3,198,072 | ||||||||||
Intersegment | — | — | — | — | — | |||||||||||||||
Total | 3,754,191 | 8.3 | 3,467,853 | 8.4 | 3,198,072 | |||||||||||||||
Note: | The segments are defined under Japanese GAAP. In grouping of segment information by product, Japanese GAAP requires that consideration be given to similarities of product types and characteristics, manufacturing methods, sales markets, and other factors that are similar. In grouping of segment information by geographic area, Japanese GAAP requires that consideration be given to geographic proximity, as well as similarities of economic activities, interrelationships of business activities and similar factors. Segment information by geographic area is determined by the location of the Company or its relevant subsidiary making the sale. |
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• | Business machines |
• | Cameras |
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• | Steppers and Aligners |
Oki Electric Industry Co., Ltd. | (LED printers, multifunction printers and facsimiles) | |
Matsushita Electric Industrial Co., Ltd. | (electrophotography) | |
Ricoh Company, Ltd. | (electrophotography) | |
Sanyo Electric Co., Ltd. | (electronic still camera) | |
Samsung Electronics Co., Ltd. | (laser beam printers, multifunction printers and facsimiles) | |
Brother Industries, Ltd. | (electrophotography and facsimiles) | |
Kyocera Mita Corporation | (electrophotography) | |
Konica Minolta Holding Co.,Ltd. | (business machines) | |
Toshiba Corporation | (business machines) |
Jerome H. Lemelson Patent Incentives, Inc. | (computer systems, image recording apparatus, and communication apparatus) | |
Energy Conversion Devices, Inc. | (solar battery) | |
Honeywell Inc. | (camera and video products) | |
Gilbert P. Hyatt U.S. Philips Corporation | (microcomputer) | |
Nano-Proprietary Inc. | (FED technology) |
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International Business Machines Corporation | (information handling systems) | |
Hewlett-Packard Company | (bubble jet printers) | |
Xerox Corporation | (business machines) | |
Matsushita Electric Industrial Co., Ltd. | (video tape recorders and video cameras) | |
Eastman Kodak Co. | (electro-photography and image processing technology) | |
Ricoh Company, Ltd. | (electrophotography products, facsimiles and word processors) |
1. | European Union Directive on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment or RoHS Directive, and Directive on Waste Electrical and Electronic Equipment or WEEE Directive. |
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• | manufacture products that consume less electricity to prevent global warming and to conserve energy, | ||
• | use recycled parts and recycled materials, | ||
• | reduce the types of raw materials used in order to conserve resources, and | ||
• | accelerate the date by which the requirements of the law are implemented to promote the elimination of hazardous substances. |
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Proportion of | Proportion of | |||||||||
ownership interest | voting power | |||||||||
Name of company | Head office location | owned | held | |||||||
Canon Sales Co., Inc. | Tokyo, Japan | 50.3 | % | 51.1 | % | |||||
Canon U.S.A., Inc. | New York, U.S.A. | 100.0 | % | 100.0 | % | |||||
Canon Europa N.V. | Amstelveen, The Netherlands | 100.0 | % | 100.0 | % |
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Floor space | ||||||
(including | ||||||
Name and location | leased space) | Principal activities and products manufactured | ||||
Domestic | (Thousands of | |||||
square feet) | ||||||
Headquarters, Tokyo | 2,267 | R&D, corporate administration, other functions | ||||
Mizonokuchi Human Resources Development center, Kanagawa | 78 | Human Resources Development Training & administration | ||||
Kosugi Office, Kanagawa | 398 | Development of software for office imaging products | ||||
Fuji-Susono Research Park, Shizuoka | 1,038 | R&D in electrophotographic technologies | ||||
Hiratsuka Development Center, Kanagawa | 375 | Development of displays, electronic devices | ||||
Ayase Office, Kanagawa | 394 | R&D and manufacturing of semiconductor devices | ||||
Optics R&D Center, Tochigi | 473 | R&D in optical technologies, development of broadcasting equipment | ||||
Tamagawa Plant, Kanagawa | 434 | Development of Ink Jet printers, Ink Jet chemical products | ||||
Yako Development Center, Kanagawa | 509 | Development of inkjet printers, Ink Jet chemical products | ||||
Utsunomiya Plant, Tochigi | 1,442 | Manufacturing of EF lenses, video camcorder lenses, broadcasting lenses, lenses for business machines, other specialized optical lenses | ||||
Toride Plant, Ibaraki | 2,910 | R&D in electrophotographic technologies, mass-production trials and support; manufacturing of chemical products | ||||
Ami Plant, Ibaraki | 1,338 | Manufacturing of office imaging products, chemical products, semiconductor production equipment; design and manufacturing of factory automation equipment and metal molds | ||||
Utsunomiya Optical Products Plant, Tochigi | 1,420 | R&D, manufacturing, sales and servicing of semiconductor equipment; sales of broadcasting equipment; R&D and sales of medical equipment | ||||
Canon Electronics Inc., Saitama and Gunma | 1,074 | Development, production and sales of camera components, magnetic heads, sensors, micrographics, document scanners, LBPs, laser scanner units, portable data terminals, semiconductor equipment | ||||
Canon Finetech Inc, Ibaraki, Tokyo, Yamanashi, and Fukui | 899 | Production and sales of business machines, business machine peripherals, chemical products, business-use printers | ||||
Canon Precision Inc., Aomori | 1,280 | Development, production and sales of motors; production of toner cartridges, sensors | ||||
Optron Inc., Ibaraki | 150 | Polishing of optical crystals (for steppers, cameras, telescopes), vapor deposition materials |
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Floor space | ||||||
(including | ||||||
Name and location | leased space) | Principal activities and products manufactured | ||||
Domestic | (Thousands of | |||||
square feet) | ||||||
Canon Chemicals Inc., Ibaraki | 1,756 | Toner cartridges and advanced-function parts, plastic precision-molded parts, metal molds | ||||
Canon Components Inc., Saitama | 430 | Image sensor units, printed circuit boards, Ink Jet print heads/ink tanks | ||||
Oita Canon Inc., Oita | 1,149 | SLR cameras, digital SLR and compact cameras, digital video camcorders, visual communication cameras | ||||
Nagahama Canon Inc., Shiga | 1,059 | LBPs, toner cartridges, a-si drums, Ink Jet print heads/ink tanks | ||||
Oita Canon Materials Inc., Oita | 1,201 | Chemical products for copying machines and printers | ||||
Ueno Canon Materials Inc., Mie | 541 | Chemical products for copying machines and printers | ||||
Fukushima Canon Inc., Fukushima | 970 | Production of inkjet printers, Ink Jet print heads/ink tanks; analysis of software and fonts | ||||
Canon Semiconductor Equipment Inc., Ibaraki | 583 | Development and production of semiconductor production-related equipment; production of small-sized copying machines and copying units | ||||
Canon Ecology Industry Inc., Ibaraki and Saitama | 329 | Recycling of toner cartridges; business machine repair | ||||
Nisca Corporation, Yamanashi | 470 | Development, design, production and sales of business machines, information products, optical equipment | ||||
Miyazaki Daishin Canon Co., Ltd., Miyazaki | 121 | Digital video camcorders, digital cameras, electronics packaging | ||||
Canon ANELVA Corporation | 562 | Electron devices, panel devices, electronic components for R&D | ||||
Canon Machinery Inc. | 296 | Semiconductor, electronic components, energy relation | ||||
SED Inc. | 291 | Flat-screen SED (Surface-conduction Electron-emitter Display) panels |
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Floor space | ||||||
(including | ||||||
Name and location | leased space) | Principal activities and products manufactured | ||||
Overseas | (Thousands of | |||||
square feet) | ||||||
[Europe] | ||||||
Canon Giessen GmbH, Giessen, Germany | 362 | Production and remanufacturing of copying machines; refilling of toner cartridges; remanufacturing of semiconductor production equipment | ||||
Canon Bretagne S.A.S., Liffre, France | 506 | Production of low-speed copying machines and toner cartridges; recycling of toner cartridges | ||||
[America] | ||||||
Canon Virginia, Inc., Virginia, U.S. | 828 | Production of LBPs, toner cartridges, toner for copying machines | ||||
[Asia] | ||||||
Canon Inc., Taiwan, Taiwan | 414 | Production of SLR and compact cameras, EFS and other lenses, precision-metal molds | ||||
Canon Opto (Malaysia) Sdn. Bhd., Selangor, Malaysia | 551 | Production of Digital cameras, EF lenses, optical lens parts | ||||
Canon Dalian Business Machines, Inc., Dalian China | 1,095 | Production and recycling of toner cartridges; production of LBPs, MFDs | ||||
Cannon Zhuhai, Inc., Zhuhai, China | 678 | Production of Compact cameras, digital cameras, LBPs, MFDs, image scanners, contact image sensors | ||||
Tianjin Canon Inc., Tianjin, China | 148 | Production and sales of copying machines | ||||
Canon Hi-Tech (Thailand) Ltd., Ayutthaya, Thailand | 976 | Ink Jet printers, personal-use copying machines, facsimile machines, MFDs | ||||
Canon Engineering (Thailand) Ltd., Ayutthaya, Thailand | 129 | Metal molds, plastic injection mold parts | ||||
Canon Zhongshan Business Machines Co., Ltd., Zhongshan, China | 492 | Production of laser beam printers | ||||
Canon Vietnam Co., Ltd., Hanoi, Vietnam | 1,043 | Production of Ink Jet printers | ||||
Canon (Suzhou) Inc., Suzhou, China | 797 | Production of Color and monochrome digital copying machines | ||||
Canon Finetech (Suzhou) Business Machines Inc., Suzhou, China | 305 | Production of digital printers, peripherals, service parts | ||||
Thai Nisca Co. Ltd., Ayutthaya, Thailand | 190 | Production and sales of optical equipment and OA equipment | ||||
Canon Finetech Industries Development Co., Ltd., Shenzhen, China | 215 | Production and sales of copying machines, semi-finished products, parts | ||||
Canon Ayutthaya (Thailand) Ltd., Thailand | 182 | Ink Jet printers, personal-use copying machines, facsimile machines, MFDs |
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2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||
Net sales (Millions of yen) | ¥ | 3,754,191 | ¥ | 3,467,853 | ¥ | 3,198,072 | ¥ | 2,940,128 | ¥ | 2,907,573 | ||||||||||
Gross profit to net sales ratio | 48.5 | % | 49.4 | % | 50.3 | % | 47.6 | % | 44.0 | % | ||||||||||
R&D expense to net sales ratio | 7.6 | % | 7.9 | % | 8.1 | % | 7.9 | % | 7.5 | % | ||||||||||
Operating profit to net sales ratio | 15.5 | % | 15.7 | % | 14.2 | % | 11.8 | % | 9.7 | % | ||||||||||
Inventory turnover within days | 47 days | 49 days | 49 days | 51 days | 57 days | |||||||||||||||
Debt to total assets ratio | 0.8 | % | 1.1 | % | 3.1 | % | 5.0 | % | 10.4 | % | ||||||||||
Stockholders’ equity to total assets ratio | 64.4 | % | 61.6 | % | 58.6 | % | 54.1 | % | 51.3 | % |
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2005 | Change | 2004 | ||||||||||
(Millions of yen, except per share | ||||||||||||
amounts and percentage data) | ||||||||||||
Net sales | ¥ | 3,754,191 | +8.3 | % | ¥ | 3,467,853 | ||||||
Operating profit | 583,043 | +7.2 | 543,793 | |||||||||
Income before income taxes and minority interests | 612,004 | +10.8 | 552,116 | |||||||||
Net income | 384,096 | +11.9 | 343,344 | |||||||||
Net income per share: | ||||||||||||
Basic | 432.94 | +11.6 | 387.80 | |||||||||
Diluted | 432.55 | +11.8 | 386.78 |
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• | The business machines product groupincludes office imaging products, computer peripherals and business information products. |
• | Office imaging products include office network digital MFDs, color network digital MFDs, office copying machines, personal-use copying machines and full-color copying machines. | ||
• | Computer peripherals include laser beam printers, inkjet printers, inkjet multifunction peripherals and image scanners. | ||
• | Business information products include micrographic equipment, personal computers and calculators. |
• | The cameras product groupincludes SLR cameras, compact cameras, digital cameras and digital video camcorders. | ||
• | The optical and other products product groupincludes steppers for semiconductor chip production, mirror projection mask aligners used in the production of LCDs, television broadcasting lenses and medical equipment. |
2005 | Change | 2004 | ||||||||||
(Millions of yen, except percentage data) | ||||||||||||
Business machines: | ||||||||||||
Office imaging products | ¥ | 1,153,240 | +2.9 | % | ¥ | 1,120,972 | ||||||
Computer peripherals | 1,244,906 | +8.3 | 1,149,914 | |||||||||
Business information products | 104,255 | -10.9 | 117,067 | |||||||||
Total business machines | 2,502,401 | +4.8 | 2,387,953 | |||||||||
Cameras | 879,186 | +15.2 | 763,079 | |||||||||
Optical and other products | 372,604 | +17.6 | 316,821 | |||||||||
Total | ¥ | 3,754,191 | +8.3 | % | ¥ | 3,467,853 | ||||||
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2005 | Change | 2004 | ||||||||||
(Millions of yen, except percentage data) | ||||||||||||
Japan | ¥ | 856,205 | +0.8 | % | ¥ | 849,734 | ||||||
Americas | 1,145,950 | +8.2 | 1,059,425 | |||||||||
Europe | 1,181,258 | +8.0 | 1,093,295 | |||||||||
Others | 570,778 | +22.6 | 465,399 | |||||||||
Total | ¥ | 3,754,191 | +8.3 | % | ¥ | 3,467,853 | ||||||
Note: This summary of net sales by region of destination is determined by the location of the customer. |
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2004 | Change | 2003 | ||||||||||
(Millions of yen, except per share | ||||||||||||
amounts and percentage data) | ||||||||||||
Net sales | ¥ | 3,467,853 | +8.4 | % | ¥ | 3,198,072 | ||||||
Operating profit | 543,793 | +19.7 | 454,424 | |||||||||
Income before income taxes and minority interests | 552,116 | +23.2 | 448,170 | |||||||||
Net income | 343,344 | +24.5 | 275,730 | |||||||||
Net income per share: | ||||||||||||
Basic | 387.80 | +23.6 | 313.81 | |||||||||
Diluted | 386.78 | +24.5 | 310.75 |
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• | The business machines product groupincludes office imaging products, computer peripherals and business information products. |
• | Office imaging products include office network digital MFDs, color network digital MFDs, office copying machines, personal-use copying machines and full-color copying machines. | ||
• | Computer peripherals include laser beam printers, inkjet printers, inkjet multifunction peripherals and image scanners. | ||
• | Business information products include micrographic equipment, personal computers and calculators. |
• | The cameras product groupincludes single lens reflex (“SLR”) cameras, compact cameras, digital cameras and digital video camcorders. | ||
• | The optical and other products product groupincludes steppers for semiconductor chip production, mirror projection mask aligners used in the production of LCDs, television broadcasting lenses and medical equipment. |
2004 | Change | 2003 | ||||||||||
(Millions of yen, except percentage data) | ||||||||||||
Business machines: | ||||||||||||
Office imaging products | ¥ | 1,120,972 | +3.6 | % | ¥ | 1,081,995 | ||||||
Computer peripherals | 1,149,914 | +5.6 | 1,089,312 | |||||||||
Business information products | 117,067 | -5.2 | 123,493 | |||||||||
Total business machines | 2,387,953 | +4.1 | 2,294,800 | |||||||||
Cameras | 763,079 | +16.8 | 653,540 | |||||||||
Optical and other products | 316,821 | +26.9 | 249,732 | |||||||||
Total | ¥ | 3,467,853 | +8.4 | % | ¥ | 3,198,072 | ||||||
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2004 | Change | 2003 | ||||||||||
(Millions of yen, except percentage data) | ||||||||||||
Japan | ¥ | 849,734 | +6.0 | % | ¥ | 801,400 | ||||||
Americas | 1,059,425 | +1.4 | 1,045,166 | |||||||||
Europe | 1,093,295 | +12.8 | 969,042 | |||||||||
Others | 465,399 | +21.7 | 382,464 | |||||||||
Total | ¥ | 3,467,853 | +8.4 | % | ¥ | 3,198,072 | ||||||
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As of/for the year ended December 31, 2005 | ||||||||||||||||||||
Optical | ||||||||||||||||||||
Business | and other | Corporate and | ||||||||||||||||||
machines | Cameras | products | Eliminations | Consolidated | ||||||||||||||||
(Millions of yen) | ||||||||||||||||||||
Net sales: | ||||||||||||||||||||
Unaffiliated customers | ¥ | 2,502,401 | ¥ | 879,186 | ¥ | 372,604 | — | ¥ | 3,754,191 | |||||||||||
Intersegment | — | — | 158,114 | ¥ | (158,114 | ) | — | |||||||||||||
Total | 2,502,401 | 879,186 | 530,718 | (158,114 | ) | 3,754,191 | ||||||||||||||
Operating cost and expenses | 1,960,373 | 705,480 | 491,898 | 13,397 | 3,171,148 | |||||||||||||||
Operating profit | ¥ | 542,028 | ¥ | 173,706 | ¥ | 38,820 | ¥ | (171,511 | ) | ¥ | 583,043 | |||||||||
Assets | ¥ | 1,427,277 | ¥ | 480,957 | ¥ | 517,527 | ¥ | 1,617,792 | ¥ | 4,043,553 | ||||||||||
Depreciation and amortization | 123,037 | 27,662 | 28,011 | 47,231 | 225,941 | |||||||||||||||
Capital expenditure | 201,887 | 57,678 | 15,955 | 108,264 | 383,784 |
As of/for the year ended December 31, 2004 | ||||||||||||||||||||
Optical | ||||||||||||||||||||
Business | and other | Corporate and | ||||||||||||||||||
machines | Cameras | products | Eliminations | Consolidated | ||||||||||||||||
(Millions of yen) | ||||||||||||||||||||
Net sales: | ||||||||||||||||||||
Unaffiliated customers | ¥ | 2,387,953 | ¥ | 763,079 | ¥ | 316,821 | — | ¥ | 3,467,853 | |||||||||||
Intersegment | — | — | 138,419 | ¥ | (138,419 | ) | — | |||||||||||||
Total | 2,387,953 | 763,079 | 455,240 | (138,419 | ) | 3,467,853 | ||||||||||||||
Operating cost and expenses | 1,866,869 | 632,281 | 426,408 | (1,498 | ) | 2,924,060 | ||||||||||||||
Operating profit | ¥ | 521,084 | ¥ | 130,798 | ¥ | 28,832 | ¥ | (136,921 | ) | ¥ | 543,793 | |||||||||
Assets | ¥ | 1,338,817 | ¥ | 399,207 | ¥ | 418,418 | ¥ | 1,430,579 | ¥ | 3,587,021 | ||||||||||
Depreciation and amortization | 115,830 | 21,880 | 24,895 | 30,087 | 192,692 | |||||||||||||||
Capital expenditure | 134,128 | 39,783 | 52,264 | 92,555 | 318,730 |
As of/for the year ended December 31, 2003 | ||||||||||||||||||||
Optical | ||||||||||||||||||||
Business | and other | Corporate and | ||||||||||||||||||
machines | Cameras | products | Eliminations | Consolidated | ||||||||||||||||
(Millions of yen) | ||||||||||||||||||||
Net sales: | ||||||||||||||||||||
Unaffiliated customers | ¥ | 2,294,800 | ¥ | 653,540 | ¥ | 249,732 | — | ¥ | 3,198,072 | |||||||||||
Intersegment | — | — | 132,389 | ¥ | (132,389 | ) | — | |||||||||||||
Total | 2,294,800 | 653,540 | 382,121 | (132,389 | ) | 3,198,072 | ||||||||||||||
Operating cost and expenses | 1,809,235 | 527,222 | 392,004 | 15,187 | 2,743,648 | |||||||||||||||
Operating profit | ¥ | 485,565 | ¥ | 126,318 | ¥ | (9,883 | ) | ¥ | (147,576 | ) | ¥ | 454,424 | ||||||||
Assets | ¥ | 1,266,881 | ¥ | 317,672 | ¥ | 412,117 | ¥ | 1,185,478 | ¥ | 3,182,148 | ||||||||||
Depreciation and amortization | 118,806 | 17,712 | 20,276 | 26,810 | 183,604 | |||||||||||||||
Capital expenditure | 106,013 | 25,894 | 31,170 | 46,961 | 210,038 |
Notes:
(1) | General corporate expenses of Yen 171,522 million, Yen 136,929 million and Yen 147,616 million in the years ended December 31, 2005, 2004 and 2003, respectively, are included in “Corporate and Eliminations.” For the fiscal year ended December 31, 2004, a gain of Yen 17,141 million is also included, which relates to the Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities. | |
(2) | Corporate assets of Yen 1,239,255 million, Yen 1,430,599 million and Yen 1,185,506 million as of December 31, 2005, 2004 and 2003, respectively, which mainly consist of cash and cash equivalents, marketable securities, investments and corporate properties, are included in “Corporate and Eliminations.” | |
(3) | The segments are defined under Japanese GAAP. In grouping of segment information by product, Japanese GAAP requires that consideration be given to similarities of product types and characteristics, manufacturing methods, sales markets, and other factors that are similar. |
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As of/for the year ended December 31, 2005 | ||||||||||||||||||||||||
Corporate and | ||||||||||||||||||||||||
Japan | Americas | Europe | Others | Eliminations | Consolidated | |||||||||||||||||||
(Millions of yen) | ||||||||||||||||||||||||
Net sales: | ||||||||||||||||||||||||
Unaffiliated customers | ¥ | 979,748 | ¥ | 1,139,784 | ¥ | 1,178,672 | ¥ | 455,987 | — | ¥ | 3,754,191 | |||||||||||||
Intersegment | 2,046,173 | 7,424 | 2,206 | 646,530 | ¥ | (2,702,333 | ) | — | ||||||||||||||||
Total | 3,025,921 | 1,147,208 | 1,180,878 | 1,102,517 | (2,702,333 | ) | 3,754,191 | |||||||||||||||||
Operating cost and expenses | 2,362,019 | 1,110,415 | 1,147,658 | 1,071,155 | (2,520,099 | ) | 3,171,148 | |||||||||||||||||
Operating profit | ¥ | 663,902 | ¥ | 36,793 | ¥ | 33,220 | ¥ | 31,362 | ¥ | (182,234 | ) | ¥ | 583,043 | |||||||||||
Assets | ¥ | 2,419,012 | ¥ | 406,101 | ¥ | 569,750 | ¥ | 312,472 | ¥ | 336,218 | ¥ | 4,043,553 |
As of/for the year ended December 31, 2004 | ||||||||||||||||||||||||
Corporate and | ||||||||||||||||||||||||
Japan | Americas | Europe | Others | Eliminations | Consolidated | |||||||||||||||||||
(Millions of yen) | ||||||||||||||||||||||||
Net sales: | ||||||||||||||||||||||||
Unaffiliated customers | ¥ | 919,153 | ¥ | 1,057,066 | ¥ | 1,090,712 | ¥ | 400,922 | — | ¥ | 3,467,853 | |||||||||||||
Intersegment | 1,882,973 | 8,863 | 4,161 | 591,677 | ¥ | (2,487,674 | ) | — | ||||||||||||||||
Total | 2,802,126 | 1,065,929 | 1,094,873 | 992,599 | (2,487,674 | ) | 3,467,853 | |||||||||||||||||
Operating cost and expenses | 2,206,141 | 1,025,628 | 1,071,552 | 965,080 | (2,344,341 | ) | 2,924,060 | |||||||||||||||||
Operating profit | ¥ | 595,985 | ¥ | 40,301 | ¥ | 23,321 | ¥ | 27,519 | ¥ | (143,333 | ) | ¥ | 543,793 | |||||||||||
Assets | ¥ | 1,793,679 | ¥ | 341,616 | ¥ | 533,865 | ¥ | 271,566 | ¥ | 646,295 | ¥ | 3,587,021 |
As of/for the year ended December 31, 2003 | ||||||||||||||||||||||||
Corporate and | ||||||||||||||||||||||||
Japan | Americas | Europe | Others | Eliminations | Consolidated | |||||||||||||||||||
(Millions of yen) | ||||||||||||||||||||||||
Net sales: | ||||||||||||||||||||||||
Unaffiliated customers | ¥ | 856,851 | ¥ | 1,044,998 | ¥ | 968,938 | ¥ | 327,285 | — | ¥ | 3,198,072 | |||||||||||||
Intersegment | 1,662,172 | 8,101 | 3,861 | 503,119 | ¥ | (2,177,253 | ) | — | ||||||||||||||||
Total | 2,519,023 | 1,053,099 | 972,799 | 830,404 | (2,177,253 | ) | 3,198,072 | |||||||||||||||||
Operating cost and expenses | 2,025,442 | 998,492 | 946,282 | 806,281 | (2,032,849 | ) | 2,743,648 | |||||||||||||||||
Operating profit | ¥ | 493,581 | ¥ | 54,607 | ¥ | 26,517 | ¥ | 24,123 | ¥ | (144,404 | ) | ¥ | 454,424 | |||||||||||
Assets | ¥ | 1,600,726 | ¥ | 306,140 | ¥ | 546,625 | ¥ | 249,755 | ¥ | 478,902 | ¥ | 3,182,148 |
Notes:
(1) | General corporate expenses of Yen 171,522 million, Yen 136,929 million and Yen 147,616 million in the years ended December 31, 2005, 2004 and 2003, respectively, are included in “Corporate and Eliminations.” For the fiscal year ended December 31, 2004, a gain of Yen 17,141 million is also included, which relates to the Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities. | |
(2) | Corporate assets of Yen 1,239,255 million, Yen 1,430,599 million and Yen 1,185,506 million as of December 31, 2005, 2004 and 2003, respectively, which mainly consist of cash and cash equivalents, marketable securities, investments and corporate properties, are included in “Corporate and Eliminations.” | |
(3) | Segment information by geographic area is determined by the location of the Company or its relevant subsidiary making the sale. The segments are defined under Japanese GAAP. In grouping of segment information by geographic area, Japanese GAAP requires that consideration be given to geographic proximity, as well as similarities of economic activities, interrelationships of business activities and other similar factors. |
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• | Core Technology Development Headquarters (where component engineering and base technology R&D, such as optics technology, nanotechnology and production engineering, is conducted) | ||
• | Leading-Edge Technology Development Headquarters (where most advanced technology R&D, aiming to create new technological capabilities, is conducted) | ||
• | Platform Technology Development Headquarters (where platform technology R&D, such as system Large Scale Integration (“LSI”) chips, network technology and visual information technology, is conducted) | ||
• | Device Technology Development Headquarters (where key device R&D, such as for semiconductor devices, is conducted) |
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Payments Due By Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Total | 1 year | 1-3 years | 3-5 years | 5 years | ||||||||||||||||
Contractual Obligations: | ||||||||||||||||||||
Long-Term Debt: | ||||||||||||||||||||
Capital Lease Obligations | ¥ | 8,784 | 4,159 | 4,064 | 538 | 23 | ||||||||||||||
Other Long-Term Debt | 23,290 | 833 | 21,605 | 774 | 78 | |||||||||||||||
Operating Lease Obligations | 52,589 | 14,571 | 18,693 | 9,823 | 9,502 | |||||||||||||||
Purchase commitments for : | ||||||||||||||||||||
Property Plant and Equipment | 87,244 | 87,244 | — | — | — | |||||||||||||||
Parts and Raw Materials | 67,831 | 67,831 | — | — | — | |||||||||||||||
Total | ¥ | 239,738 | 174,638 | 44,362 | 11,135 | 9,603 | ||||||||||||||
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Name | Position | Date of | Business experience | |||
(Date of birth) | (Group executive/function) | commencement | (*current position/function) | |||
Fujio Mitarai | Chairman, President & CEO | 4/1961 | Entered the Company | |||
(Sept. 23, 1935) | 1/1979 | President of Canon U.S.A., Inc. | ||||
3/1981 | Director | |||||
3/1985 | Managing Director | |||||
1/1989 | In charge of HQ administration | |||||
3/1989 | Senior Managing Director | |||||
3/1993 | Executive Vice President | |||||
9/1995 | President & C.E.O. | |||||
3/2006 | Chairman, President & CEO* | |||||
Tsuneji Uchida | Executive Vice President | 4/1965 | Entered the Company | |||
(Oct. 30, 1941) | (Chief Executive of Image Communication Products Operations HQ) | 4/1995 | Group Executive of Lens Products Group | |||
3/1997 | Director | |||||
4/1997 | Deputy Chief Executive of Camera Operations HQ/Group Executive of Photo Products Group | |||||
4/1999 | Chief Executive of Camera Operations HQ | |||||
7/1999 | In charge of promotion of digital photo business | |||||
1/2000 | In charge of promotion of digital photo home business | |||||
1/2001 | Chief Executive of Image Communications Products HQ* | |||||
3/2001 | Managing Director | |||||
3/2003 | Senior Managing Director | |||||
3/2006 | Executive Vice President* | |||||
Toshizo Tanaka | Senior Managing Director | 4/1964 | Entered the Company | |||
(Oct. 8, 1940) | (Group Executive of Finance & Accounting HQ) | 1/1992 | Deputy Group Executive of Finance & Accounting HQ | |||
3/1995 | Director | |||||
4/1995 | Group Executive of Finance & Accounting HQ* | |||||
3/1997 | Managing Director | |||||
3/2001 | Senior Managing Director* | |||||
Nobuyoshi Tanaka | Senior Managing Director | 4/1970 | Entered the Company | |||
(Dec. 23, 1945) | (Group Executive of Corporate Intellectual Property & Legal HQ) | 1/1991 | Senior General Manager of Semiconductor Production Equipment Development Center | |||
3/1993 | Director | |||||
4/1993 | Chief Executive of Optical Products HQ | |||||
4/1999 | Group Executive of Corporate Intellectual Property & Legal HQ* | |||||
3/2001 | Managing Director | |||||
3/2006 | Senior Managing Director* | |||||
Junji Ichikawa | Senior Managing Director | 4/1965 | Entered Shiba Electronics Co., Ltd. | |||
(Feb. 9, 1943) | (Chief Executive of Optical Products HQ) | 1/1970 | Entered the Company | |||
4/1994 | Group Executive of Peripheral Group 1 | |||||
3/1997 | Director | |||||
4/1997 | Deputy Chief Executive of Peripheral Products HQ | |||||
4/2000 | Chief Executive of Peripheral Products HQ | |||||
3/2001 | Managing Director | |||||
4/2003 | Group Executive of Production Management HQ | |||||
4/2004 | Chief Executive of Optical Products HQ* | |||||
3/2006 | Senior Managing Director* | |||||
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Name | Position | Date of | Business experience | |||||
(Date of birth) | (Group executive/function) | commencement | (*current position/function) | |||||
Hajime Tsuruoka | Senior Managing Director | 3/1970 | Entered Meiji Seika Kaisha Ltd. | |||||
(July 9, 1943) | 11/1973 | Entered the Company | ||||||
4/1995 | President of Canon Italia S.p.A. | |||||||
3/1997 | Director | |||||||
9/1997 | President of Canon Deutschland GmbH | |||||||
3/1999 | President of Canon Europa N.V.* | |||||||
3/2001 | Managing Director | |||||||
3/2006 | Senior Managing Director* | |||||||
Akiyoshi Moroe | Managing Director | 4/1968 | Entered the Company | |||||
(Sept. 28, 1944) | (Group Executive of General Affairs HQ) | 7/1996 | Deputy Group of Executive of Human Resource Management & Organization HQ | |||||
3/1999 | Director | |||||||
4/1999 | Group Executive of General Affairs HQ* | |||||||
10/2000 | Group Executive of Information & Communications Systems HQ | |||||||
3/2003 | Managing Director* | |||||||
Kunio Watanabe | Managing Director | 4/1969 | Entered the Company | |||||
(Oct. 3, 1944) | (Group Executive of Corporate Strategy & Development HQ) | 4/1995 | Group Executive of Corporate Strategy & Development HQ* | |||||
3/1999 | Director | |||||||
3/2003 | Managing Director* | |||||||
Hironori Yamamoto | Managing Director | 4/1969 | Entered the Company | |||||
(Dec. 23, 1943) | (Group Executive of Production Management HQ, | 1/1998 | Deputy Group Executive of Production Management HQ | |||||
Group Executive of Global Environment Promotion HQ) | 3/1999 | Director | ||||||
7/1999 | Group Executive of Core Technology Development HQ/Deputy Group Executive of Display Development HQ | |||||||
4/2001 | Group Executive of Display Development HQ | |||||||
3/2004 | Managing Director* | |||||||
7/2005 | Group Executive of Production Management HQ* | |||||||
3/2006 | Group Executive of Global Environment Promotion HQ* | |||||||
Yoroku Adachi | Managing Director | 4/1970 | Entered the Company | |||||
(Jan. 11, 1948) | 3/2001 | Chairman of Canon Singapore Pte. Ltd. | ||||||
Chairman of Canon HongKong Co., Ltd. Director | ||||||||
4/2003 | President of Canon (China) Co., Ltd. | |||||||
3/2005 | Managing Director * | |||||||
4/2005 | President of Canon U.S.A., Inc.* | |||||||
Yasuo Mitsuhashi | Managing Director | 4/1974 | Entered the Company | |||||
(Nov. 23, 1949) | (Chief Executive of Peripheral Products HQ) | 2/2001 | Chief Executive of Chemical Products HQ | |||||
3/2001 | Director | |||||||
4/2003 | Chief Executive of Peripheral Products HQ* | |||||||
3/2005 | Managing Director * | |||||||
Katsuichi Shimizu | Director | 4/1970 | Entered the Company | |||||
(Nov. 13, 1946) | (Chief Executive of Inkjet Products HQ) | 4/2001 | Deputy Chief Executive of Office Imaging Products HQ | |||||
3/2003 | Director* | |||||||
4/2003 | Chief Executive of Inkjet Products HQ* | |||||||
Ryoichi Bamba | Director | 4/1972 | Entered the Company | |||||
(Nov. 25, 1946) | 4/1998 | Senior Vice President of Canon U.S.A., Inc. | ||||||
2/2003 | Executive Vice President of Canon U.S.A., Inc.* | |||||||
3/2003 | Director* | |||||||
Tomonori Iwashita | Director | 4/1972 | Entered the Company | |||||
(Jan. 28, 1949) | (Deputy Chief Executive of Image Communication Products HQ) | 4/1999 | Senior General Manager of Camera Development Center | |||||
1/2001 | Group Executive of Photo Products Group | |||||||
3/2003 | Director* | |||||||
4/2003 | Deputy Chief Executive of Image Communication Products HQ* | |||||||
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Name | Position | Date of | Business experience | |||||
(Date of birth) | (Group executive/function) | commencement | (*current position/function) | |||||
Toshio Honma | Director | 4/1972 | Entered the Company | |||||
(Mar. 10, 1949) | (Group Executive of L Printer Business Promotion HQ) | 4/2001 | Deputy Chief Executive of i Printer Products HQ | |||||
3/2003 | Director* | |||||||
4/2003 | Group Executive of Business Promotion HQ | |||||||
7/2003 | Group Executive of L Printer Business Promotion HQ* | |||||||
Shigeru Imaiida | Director | 4/1972 | Entered the Company | |||||
(Sept. 16, 1948) | 8/1999 | Senior General Manager of Production Engineering Center | ||||||
3/2003 | Director* | |||||||
4/2004 | Group Executive of Production Management HQ | |||||||
7/2005 | Deputy Group Executive of Production Management HQ | |||||||
10/2005 | Director of Canon ANELVA Co. | |||||||
3/2006 | Senior Managing Director of Canon ANELVA Co.* | |||||||
Masahiro Osawa | Director | 4/1971 | Entered the Company | |||||
(May 26, 1947) | (Group Executive of Global Procurement HQ) | 7/1997 | Vice President of Canon U.S.A., Inc. | |||||
2/2003 | Senior Vice President of Canon U.S.A., Inc. | |||||||
7/2003 | Deputy Group Executive of Finance & Accounting HQ | |||||||
3/2004 | Director* | |||||||
4/2004 | Group Executive of Global Procurement HQ* | |||||||
Keijiro Yamazaki | Director | 4/1971 | Entered the Company | |||||
(Oct. 14, 1948) | (Group Executive of Human Resource Management & Organization HQ, Group Executive of Information & Communications Systems HQ) | 4/1999 | General Manager of Human Resource Management & Organization Div. | |||||
1/2000 | Deputy Group Executive of Human Resource Management & Organization HQ | |||||||
3/2004 | Director* | |||||||
4/2004 | Group Executive of Information & Communications Systems HQ* | |||||||
3/2006 | Group Executive of Human Resource Management & Organization HQ* | |||||||
Shunichi Uzawa | Director | 8/1978 | Entered the Company | |||||
(Jan. 26, 1949) | (Group Executive of Core Technology Development HQ) | 1/1998 | Senior General Manager of Nano-technology Research Center | |||||
4/2001 | Deputy Group Executive of Display Development HQ | |||||||
3/2004 | Director* | |||||||
4/2004 | Group Executive of SED Development HQ | |||||||
10/2004 | President of SED Inc. | |||||||
1/2006 | Group Executive of Core Technology Development HQ* | |||||||
Masaki Nakaoka | Director | 4/1975 | Entered the Company | |||||
(Jan. 3, 1950) | (Group Executive of Office Imaging Products HQ) | 1/1997 | Senior General Manager of Office Imaging Products Development Center 1 | |||||
4/1999 | Group Executive of Office Imaging Products Group 1 | |||||||
4/2001 | Deputy Chief Executive of Office Imaging Products HQ | |||||||
3/2004 | Director* | |||||||
4/2005 | Chief Executive of Office Imaging Products HQ* | |||||||
Toshiyuki Komatsu | Director | 4/1972 | Entered the Company | |||||
(Jan. 19, 1950) | (Group Executive of Leading-Edge Technology Development HQ) | 1/1998 | Senior General Manager of Canon Research Center | |||||
1/2000 | Deputy Group Executive of Core Technology Development HQ | |||||||
3/2004 | Director* | |||||||
4/2004 | Group Executive of Leading-Edge Technology Development HQ* | |||||||
7/2005 | Group Executive of Core Technology Development HQ | |||||||
Shigeyuki Matsumoto | Director | 4/1977 | Entered the Company | |||||
(Nov. 15, 1950) | (Group Executive of Device Technology Development Headquarters) | 1/2002 | Group Executive of Device Technology Development Headquarters* | |||||
3/2004 | Director* | |||||||
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Name | Position | Date of | Business experience | |||||
(Date of birth) | (Group executive/function) | commencement | (*current position/function) | |||||
Haruhisa Honda | Director | 4/1974 | Entered the Company | |||||
(Oct. 14, 1948) | (Chief Executive of Chemical Products Operations) | 4/1995 | Senior General Manager of Cartridge Development Center | |||||
3/2004 | Director* | |||||||
4/2004 | Chief Executive of Chemical Products Operations* | |||||||
Tetsuro Tahara | Director | 4/1971 | Entered the Company | |||||
(Jan. 31, 1949) | 4/1999 | Senior General Manager of Office Imaging Products Production Management Center | ||||||
4/2002 | Deputy Chief Executive of Office Imaging Products HQ | |||||||
4/2003 | President of Canon (Suzhou) Inc.* | |||||||
3/2006 | Director* | |||||||
Seijiro Sekine | Director | 4/1972 | Entered the Company | |||||
(Oct. 20, 1948) | (Group Executive of Logistics HQ) | 4/1995 | General Manager of Business Information Systems Division | |||||
1/2001 | Deputy Group Executive of Information & Communication Systems HQ | |||||||
10/2004 | Group Executive of Logistics HQ* | |||||||
3/2006 | Director* | |||||||
Shunji Onda | Director | 4/1972 | Entered the Company | |||||
(Mar. 13, 1950) | (Senior General Manager of Optical Products Business Administration Center) | 1/1999 | General Manager of Peripheral Products Chief Executive Office | |||||
1/2002 | General Manager of Finance Division | |||||||
4/2004 | Senior General Manager of Optical Products Business Administration Center* | |||||||
3/2006 | Director* | |||||||
Teruomi Takahashi | Corporate Auditor | 9/1971 | Entered the Company | |||||
(June 10, 1943) | 3/1999 | Director | ||||||
4/1999 | Chief Executive of Chemical Products HQ | |||||||
2/2001 | Chief Executive of BJ Products HQ | |||||||
4/2001 | Chief Executive of i Printer Products HQ | |||||||
4/2003 | Chief Executive of Chemical Products HQ | |||||||
3/2004 | Corporate Auditor * | |||||||
Kunihiro Nagata | Corporate Auditor | 4/1970 | Entered the Company | |||||
(Mar.16, 1948) | 1/1991 | General Manager of Business Machines Accounting Dept. | ||||||
4/1995 | Senior General Manager of Business Machines Accounting & Production Planning Center | |||||||
10/2000 | General Manager of Corporate Planning Division | |||||||
1/2003 | Deputy Group Executive of Corporate Strategy Development HQ | |||||||
3/2004 | Corporate Auditor * | |||||||
Tadashi Ohe | Corporate Auditor | 4/1969 | Registration as a lawyer* | |||||
(May 20, 1944) | 4/1989 | Instructor of Judicial Training Institution | ||||||
3/1994 | Corporate Auditor, the Company* | |||||||
Yoshinobu Shimizu | Corporate Auditor | 3/1973 | Registered as Certified Public Accountant* | |||||
(Oct. 26, 1944) | 6/1990 | Representative Partner of Showa Ota & Co. | ||||||
5/2002 | Deputy Chief Executive Officer of Century Ota Showa & Co. (renamed Ernst & Young ShinNihon) | |||||||
3/2006 | Corporate Auditor, the Company* | |||||||
Minoru Shishikura | Corporate Auditor | 4/1976 | Entered The Dai-Ichi Mutual Life Insurance Co. | |||||
(Sept. 13, 1953) | 4/1998 | General Manager of Metropolitan Corporate Loan Dept. of The Dai-Ichi Mutual Life Insurance Co. | ||||||
4/2000 | General Manager of Loan Department of The Dai-Ichi Mutual Life Insurance Co. | |||||||
4/2002 | General Manager of Credit Department of The Dai-Ichi Mutual Life Insurance Co. | |||||||
3/2006 | Corporate Auditor, the Company* | |||||||
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Total | Japan | Americas | Europe | Others | ||||||||||||||||
December 31, 2005 | ||||||||||||||||||||
Business machines | 77,906 | 29,964 | 7,297 | 8,988 | 31,657 | |||||||||||||||
Cameras | 18,308 | 5,263 | 1,552 | 1,405 | 10,088 | |||||||||||||||
Optical and other products | 13,762 | 8,249 | 999 | 435 | 4,079 | |||||||||||||||
Corporate | 5,607 | 5,161 | 90 | 94 | 262 | |||||||||||||||
Total | 115,583 | 48,637 | 9,938 | 10,922 | 46,086 | |||||||||||||||
December 31, 2004 | ||||||||||||||||||||
Business machines | 74,772 | 29,928 | 7,833 | 8,997 | 28,014 | |||||||||||||||
Cameras | 16,534 | 5,008 | 1,400 | 1,402 | 8,724 | |||||||||||||||
Optical and other products | 11,397 | 6,458 | 908 | 391 | 3,640 | |||||||||||||||
Corporate | 5,554 | 4,709 | 117 | 108 | 620 | |||||||||||||||
Total | 108,257 | 46,103 | 10,258 | 10,898 | 40,998 | |||||||||||||||
December 31, 2003 | ||||||||||||||||||||
Business machines | 70,214 | 29,734 | 7,820 | 9,520 | 23,140 | |||||||||||||||
Cameras | 15,856 | 4,698 | 1,318 | 1,006 | 8,834 | |||||||||||||||
Optical and other products | 11,308 | 6,580 | 908 | 619 | 3,201 | |||||||||||||||
Corporate | 5,189 | 4,368 | 134 | 162 | 525 | |||||||||||||||
Total | 102,567 | 45,380 | 10,180 | 11,307 | 35,700 | |||||||||||||||
Effective January 2004, Canon has changed the classification of its information system business. The information system business which had been included in “Optical and other products”, was reclassified as “Business machines (Office imaging products)” in order to better reflect its relation with the other products of the business machines group. Accordingly, information for previous fiscal years has been reclassified to conform with the current classification.
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Name | Position | Number of shares | ||||
Fujio Mitarai | Chairman, President & CEO | 60,800 | ||||
Tsuneji Uchida | Executive Vice President | 5,600 | ||||
Toshizo Tanaka | Senior Managing Director | 11,768 | ||||
Nobuyoshi Tanaka | Senior Managing Director | 12,355 | ||||
Junji Ichikawa | Senior Managing Director | 10,531 | ||||
Hajime Tsuruoka | Senior Managing Director | 7,695 | ||||
Akiyoshi Moroe | Managing Director | 10,955 | ||||
Kunio Watanabe | Managing Director | 8,235 | ||||
Hironori Yamamoto | Managing Director | 4,900 | ||||
Yoroku Adachi | Managing Director | 6,095 | ||||
Yasuo Mitsuhashi | Managing Director | 4,985 | ||||
Katsuichi Shimizu | Director | 5,625 | ||||
Ryoichi Bamba | Director | 3,000 | ||||
Tomonori Iwashita | Director | 3,700 | ||||
Toshio Honma | Director | 6,595 | ||||
Shigeru Imaiida | Director | 4,535 | ||||
Masahiro Osawa | Director | 3,295 | ||||
Keijiro Yamazaki | Director | 3,100 | ||||
Shunichi Uzawa | Director | 3,395 | ||||
Masaki Nakaoka | Director | 2,000 | ||||
Toshiyuki Komatsu | Director | 1,400 | ||||
Shigeyuki Matsumoto | Director | 2,235 | ||||
Haruhisa Honda | Director | 2,926 | ||||
Tetsuro Tahara | Director | 435 | ||||
Seijiro Sekine | Director | 2,560 | ||||
Shunji Onda | Director | 2,435 | ||||
Teruomi Takahashi | Corporate Auditor | 7,231 | ||||
Kunihiro Nagata | Corporate Auditor | 1,300 | ||||
Tadashi Ohe | Corporate Auditor | 15,400 | ||||
Yoshinobu Shimizu | Corporate Auditor | — | ||||
Minoru Shishikura | Corporate Auditor | 1,000 | ||||
Total | 216,086 | |||||
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Name of major shareholder | Shares owned | Percentage | ||||||
(In thousands) | ||||||||
The Dai-Ichi Mutual Life Insurance Co. | 59,090 | 6.7 | % | |||||
Moxley and Co. | 49,388 | 5.6 | % | |||||
Japan Trustee Services Bank, Ltd. | 48,360 | 5.4 | % | |||||
(Trust Account) | ||||||||
The Master Trust Bank of Japan, Ltd. | 39,888 | 4.5 | % | |||||
(Trust Account) | ||||||||
State Street Bank and Trust Company 505103 | 24,740 | 2.8 | % | |||||
State Street Bank and Trust Company | 21,629 | 2.4 | % | |||||
Nomura Securities Co., Ltd. | 19,735 | 2.2 | % | |||||
Mizuho Corporate Bank, Ltd. | 18,946 | 2.1 | % | |||||
The Chase Manhattan Bank, N.A. London | 18,653 | 2.1 | % | |||||
Sompo Japan Insurance Inc. | 15,273 | 1.7 | % |
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• | On December 17, 2002, the European Commission instituted an investigation into the printer and supply market. Canon received a questionnaire in connection with the investigation of the printer and supply market on January 3, 2003 and Canon has submitted its response. The investigation is yet to be closed. | ||
• | On January 16, 2003, the Dusseldorf District Court in Germany issued rulings in Canon’s favor in two patent infringement actions filed by Canon against Pelikan Hardcopy Deutschland GmbH and Pelikan Hardcopy European Logistics & Services GmbH (collectively, “Pelikan Hardcopy”). Pelikan Hardcopy has appealed the decision. On November 20, 2003, the Dusseldorf District Court in Germany issued a ruling in Canon’s favor in another patent infringement action filed by Canon against Pelikan Hardcopy. Pelikan Hardcopy has appealed the decision. The Dusseldorf High Court issued rulings in Canon’s favor in one of the three appeals by Pelikan Hardcopy. On November 17, 2005, the Dusseldorf High Court issued rulings in Canon’s favor in another of the three appeals by Pelikan Hardcopy. The remaining one of the appeals has been suspended by the Court since April 19, 2004. | ||
• | In October 2003, on-the-spot investigation was made against Canon by the Japanese Fair Trade Commission (“FTC”). Their allegation against us was that Canon was interfering with the businesses of the cartridge remanufacturers by frequently changing the design of color LBP cartridges. This investigation was terminated by FTC on October 21, 2004, without taking any action. | ||
• | In November 2003, a lawsuit was filed by a former employee against the Company at the Tokyo District Court in Japan. The lawsuit alleges that the former employee is entitled to Yen 45.9 billion as compensation for an invention related to certain technology used by the Company, and the former employee has sued for a partial payment of Yen 1 billion and interest thereon. The case is still pending and the final outcome is not yet determinable. | ||
• | In February 2003, a lawsuit was filed by St. Clair Intellectual Property Consultants, Inc. (“St. Clair”) against the Company and one of its subsidiaries in the United States District Court of Delaware, which accused the Company of infringement of patents related to certain technology. In connection with this case, in October 2004, a jury preliminarily found damages against the Company of approximately Yen 4 billion based on a percentage of certain product sales in the United States through 2003. Subsequent to this jury finding, St. Clair also made a motion to the court for damages relating to certain 2004 sales, using the same royalty rate awarded by the jury. There are additional defenses that are yet to be litigated in a follow-up non-jury trial solely before a judge; thus, a final decision by the court has not yet been reached. In March 2006, the Company and St. Clair have entered into a settlement agreement, pursuant to which they have agreed to settle the lawsuit and withdraw it. | ||
• | In Germany, Verwertungsgesellschaft Wort (“VG Wort”), a collecting agency representing certain copyright holders, has filed a series of lawsuits seeking to impose copyright levies upon digital products such as PCs and printers, that allegedly enable the reproduction of copyrighted materials, against the companies importing and distributing these digital products. In May 2004, VG Wort filed a civil lawsuit against Hewlett-Packard GmbH seeking for levies on multi-function printers. This is an industry test case under which Hewlett-Packard GmbH represents other companies sharing common interests, and Canon has undertaken to be bound by the final decision of this court case. The court of first instance and the court of appeals held that the multi-function printers were subject to a levy. In particular, the court of appeals ordered Hewlett-Packard GmbH to pay the amount equivalent to the levies imposed on photocopiers (EUR 38.35 to EUR 613.56 per unit, depending on printing speed and color printing capability). This lawsuit is currently under appeal before the German Federal Supreme Court. With regard to single-function printers, VG Wort filed a separate lawsuit on January 3, 2006 against Canon seeking for payment of copyright levies. Canon, other companies and the industry associations have expressed opposition to such extension of the levy scope and the final conclusion of these court cases including the amount of levies to be imposed, remains uncertain. | ||
• | On April 16, 2004, Canon filed two patent infringement actions against Recycle • Assist Co., Ltd. (“Recycle • Assist”) before the Tokyo District Court. On December 8, 2004, the Tokyo District Court issued rulings in Recycle • Assist’s favor in the two actions. On December 21, 2004, Canon appealed against the decisions of the two actions. On January 31, 2006, the Intellectual Property High Court issued a ruling in favor of Canon in one of the two appeal cases. On February 13, 2006, Recycle • Assist further appealed against this ruling of the Intellectual Property High Court. The remaining appeal case is pending before the Intellectual Property High Court. |
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TSE | TOPIX | Nikkei Stock Average | ||||||||||||||||||||||
(Canon Inc.) | (Reference data) | (Reference data) | ||||||||||||||||||||||
(Japanese yen) | (Points) | (Japanese yen) | ||||||||||||||||||||||
Period | High | Low | High | Low | High | Low | ||||||||||||||||||
2001 Year | ¥ | 5,330 | ¥ | 3,150 | 1,441.00 | 983.00 | ¥ | 14,529.41 | ¥ | 9,504.41 | ||||||||||||||
2002 Year | 5,250 | 3,620 | 1,144.02 | 807.35 | 11,979.85 | 8,303.39 | ||||||||||||||||||
2003 Year | 6,210 | 3,910 | 1,114.40 | 770.46 | 11,161.71 | 7,607.88 | ||||||||||||||||||
2004 1(st) quarter | 5,670 | 4,920 | 1,189.38 | 1,017.84 | 11,869.00 | 10,299.43 | ||||||||||||||||||
2(nd) quarter | 5,820 | 5,220 | 1,225.97 | 1,051.57 | 12,195.66 | 10,489.84 | ||||||||||||||||||
3(rd) quarter | 5,810 | 4,910 | 1,197.74 | 1,073.69 | 11,988.12 | 10,545.89 | ||||||||||||||||||
4(th) quarter | 5,540 | 5,030 | 1,149.85 | 1,068.85 | 11,500.95 | 10,575.23 | ||||||||||||||||||
2004 Year | 5,820 | 4,910 | 1,225.97 | 1,017.84 | 12,195.66 | 10,299.43 | ||||||||||||||||||
2005 1(st) quarter | 5,790 | 5,190 | 1,206.93 | 1,128.75 | 11,975.46 | 11,212.63 | ||||||||||||||||||
2(nd) quarter | 6,000 | 5,380 | 1,202.46 | 1,104.30 | 11,911.90 | 10,770.58 | ||||||||||||||||||
3(rd) quarter | 6,190 | 5,380 | 1,430.80 | 1,174.16 | 13,678.44 | 11,540.93 | ||||||||||||||||||
4(th) quarter | 7,170 | 5,940 | 1,673.18 | 1,363.66 | 16,445.56 | 12,996.29 | ||||||||||||||||||
2005 Year | 7,170 | 5,190 | 1,673.18 | 1,104.30 | 16,445.56 | 10,770.58 |
TSE | TOPIX | Nikkei Stock Average | ||||||||||||||||||||||
(Canon Inc.) | (Reference data) | (Reference data) | ||||||||||||||||||||||
(Japanese yen) | (Points) | (Japanese yen) | ||||||||||||||||||||||
Period | High | Low | High | Low | High | Low | ||||||||||||||||||
2005 July | ¥ | 6,130 | ¥ | 5,530 | 1,207.48 | 1,174.92 | ¥ | 11,913.50 | ¥ | 11,540.93 | ||||||||||||||
August | 5,710 | 5,380 | 1,283.23 | 1,174.16 | 12,612.16 | 11,614.71 | ||||||||||||||||||
September | 6,190 | 5,520 | 1,430.80 | 1,274.63 | 13,678.44 | 12,498.40 | ||||||||||||||||||
October | 6,460 | 5,940 | 1,447.45 | 1,363.66 | 13,783.60 | 12,996.29 | ||||||||||||||||||
November | 6,870 | 6,110 | 1,553.27 | 1,444.73 | 15,013.24 | 13,606.50 | ||||||||||||||||||
December | 7,170 | 6,760 | 1,673.18 | 1,538.99 | 16,445.56 | 14,880.18 | ||||||||||||||||||
2006 January | 7,320 | 6,850 | 1,721.92 | 1,538.85 | 16,754.60 | 15,059.52 | ||||||||||||||||||
February | 7,370 | 6,970 | 1,719.17 | 1,568.50 | 16,777.37 | 15,389.58 | ||||||||||||||||||
March | 7,930 | 7,160 | 1,735.25 | 1,595.93 | 17,125.64 | 15,553.14 |
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NYSE | ||||||||
(Canon Inc.) | ||||||||
(U.S. dollars) | ||||||||
Period | High | Low | ||||||
2001 Year | $ | 42.900 | $ | 26.480 | ||||
2002 Year | 40.400 | 30.150 | ||||||
2003 Year | 53.000 | 33.730 | ||||||
2004 1(st) quarter | 52.630 | 46.680 | ||||||
2(nd) quarter | 53.940 | 46.920 | ||||||
3(rd) quarter | 53.350 | 44.440 | ||||||
4(th) quarter | 54.390 | 47.290 | ||||||
2004 Year | 54.390 | 44.440 | ||||||
2005 1(st) quarter | 54.490 | 50.530 | ||||||
2(nd) quarter | 55.710 | 51.000 | ||||||
3(rd) quarter | 55.050 | 48.960 | ||||||
4(th) quarter | 60.420 | 51.570 | ||||||
2005 Year | 60.420 | 48.960 |
NYSE | ||||||||
(Canon Inc.) | ||||||||
(U.S. dollars) | ||||||||
Period | High | Low | ||||||
2005 July | $ | 55.050 | $ | 48.960 | ||||
August | 51.970 | 49.010 | ||||||
September | 54.280 | 50.400 | ||||||
October | 56.060 | 51.570 | ||||||
November | 57.840 | 52.300 | ||||||
December | 60.420 | 57.010 | ||||||
2006 January | 63.920 | 59.540 | ||||||
February | 62.900 | 59.440 | ||||||
March | 66.930 | 60.650 |
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Item 10. Additional Information
A. Share capital
B. Memorandum and articles of association
Objects and Purposes in Canon Inc. (the “Company”)’s Articles of Incorporation
Objects of the Company provided in Article 2 of the Company’s Articles of Incorporation shall be to engage in the following business:
(1) | Manufacture and sale of optical machineries and instruments of various kinds. | |||
(2) | Manufacture and sale of acoustic, electrical and electronic machineries and instruments of various kinds. | |||
(3) | Manufacture and sale of precision machineries and instruments of various kinds. | |||
(4) | Manufacture and sale of medical machineries and instruments of various kinds. | |||
(5) | Manufacture and sale of general machineries, instruments and equipments of various kinds. | |||
(6) | Manufacture and sale of parts, materials, etc. relative to the products mentioned in each of the preceding items. | |||
(7) | Production and sale of software products. | |||
(8) | Manufacture and sale of pharmaceutical products | |||
(9) | Telecommunications business, and information service business such as information processing service business, information providing service business, etc. | |||
(10) | Contracting for telecommunications works, electrical works and machinery and equipment installation works. | |||
(11) | Sale, purchase and leasing of real properties and contracting for architectural works. | |||
(12) | Manpower providing business, property leasing business and travel business. | |||
(13) | Business relative to investigation, analysis of the environment and purification process of soil, water, etc. | |||
(14) | Any and all business relative to each of the preceding items. |
Provisions Regarding Directors
There is no provision in the Company’s Articles of Incorporation as to a Director’s power to vote on a proposal, arrangement or contract in which the Director is materially interested, but, under the Commercial Code of Japan, a director is required to refrain from voting on such matters at meetings of the board of directors.
The Commercial Code provides that compensation for directors is determined at a general meeting of shareholders of a company. Within the upper limit approved by the shareholders’ meeting, the board of directors will determine the amount of compensation for each director. The board of directors may, by its resolution, leave such decision to the discretion of the company’s representative director.
The Commercial Code provides that the incurrence by a company of a significant loan from a third party should be approved by the company’s board of directors. The Company’s Regulations of the Board of Directors have adopted this policy.
There is no mandatory retirement age for the Company’s Directors under the Commercial Code or its Articles of Incorporation.
There is no requirement concerning the number of shares an individual must hold in order to qualify him as a Director of the Company under the Commercial Code or its Articles of Incorporation.
Holding of Shares by Foreign Investors
Other than the Japanese unit share system that is described in “Rights of Shareholders - Japanese Unit Share System” below, there are no limitations on the rights of non-residents or foreign shareholders to hold or exercise voting rights on the Company’s shares imposed by the laws of Japan or the Company’s Articles of Incorporation or other constituent documents.
Rights of Shareholders
Set forth below is information relating to the Company’s common stock, including brief summaries of the relevant provisions of its Articles of Incorporation and Regulations for Handling of Shares, as currently in effect, and of the Commercial Code of Japan and related legislation.
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(1) | the stated capital; | |||
(2) | the additional paid-in capital; | |||
(3) | the accumulated legal reserve; | |||
(4) | the legal reserve to be set aside in respect of the dividends concerned and proposed payment by way of appropriation of retained earnings; and | |||
(5) | other matters specified in the Implementation Ordinance of the Commercial Code. |
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• | to receive annual and interim dividends, | ||
• | to receive shares and/or cash by way of retirement, consolidation, subdivision, conversion, exchange or transfer of shares, company split or merger, | ||
• | to be allotted rights to subscribe for new shares and other securities when such rights are granted to shareholders, | ||
• | to participate in any distribution of surplus assets upon liquidation, | ||
• | to institute a representative action by shareholders, and | ||
• | to demand that a director suspend illegal and certain other acts. |
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• | a reduction of stated capital, | ||
• | amendment of the articles of incorporation (except amendments which the board of directors are authorized to make under the Commercial Code as described in “Stock Splits” and “Japanese Unit Share System” above), | ||
• | the removal of a director or corporate auditor, | ||
• | establishment of a 100% parent-subsidiary relationship by way of share exchange or share transfer, | ||
• | a dissolution, merger or consolidation, | ||
• | a corporate separation, | ||
• | the transfer of the whole or an important part of the Company’s business, | ||
• | the taking over of the whole of the business of any other corporation, | ||
• | any issuance of new shares at a “specially favourable” price, stock acquisition rights (shinkabu yoyakuken) with “specially favourable” conditions or bonds with stock acquisition rights (shinkabu yoyakuken-tsuki shasai) with “specially favourable” conditions to persons other than shareholders, and | ||
• | release of part of directors’ or corporate auditors’ liabilities to their corporation. At least two-thirds of the outstanding shares having voting rights present at the meeting must approve these actions. The voting rights of holders of ADSs are exercised by the depositary based on instructions from those holders. |
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(a) | Information with respect to Japanese exchange regulations affecting the Company’s security holders is as follows: |
The Foreign Exchange and Foreign Trade Law of Japan, as amended and effective from April 1, 1998, and the cabinet orders and ministerial ordinances thereunder (the “Foreign Exchange Regulations”) govern certain aspects relating to the issuance of securities by the Company and the acquisition and holding of such securities by “non-residents of Japan” and by “foreign investors”, as hereinafter defined. | ||||
“Non-residents of Japan” are defined as individuals who are not resident in Japan and corporations whose principal offices are located outside Japan. Generally, branches and other offices of Japanese corporations located outside Japan are regarded as non-residents of Japan, while branches and other offices located within Japan of non-resident corporations are regarded as residents of Japan. “Foreign investors” are defined to be (i) individuals not resident in Japan, (ii) corporations which are organized under the laws of foreign countries or whose principal offices are located outside Japan, (iii) corporations of which 50% or more of the shares are held by (i) and / or (ii) above and (iv) corporations in respect of which (a) a majority of the officers are non-resident individuals or (b) a majority of the officers having the power to represent the corporation are non-resident individuals. | ||||
Issuance of Securities by the Company: | ||||
Under the Foreign Exchange Regulations, the issue of securities outside Japan by the Company is, in principle, not subject to a prior notification requirement, but subject to a post reporting requirement of the Minister of Finance. Under the Foreign Exchange Regulations as currently in effect, payments of principal, premium and interest in respect of securities and any additional amounts payable pursuant to the terms thereof may in general be paid when made without any restrictions under the Foreign Exchange Regulations. | ||||
Acquisition of Shares: | ||||
In general, the acquisition of shares of stock of a Japanese company listed on any Japanese stock by a non-resident of Japan from a resident of Japan is not subject to a prior notification requirement, but subject to a post reporting requirement of the Minister of Finance by such resident. | ||||
In the case where a foreign investor intends to acquire listed shares (whether from a resident or a non-resident of Japan, from another foreign investor or from or through a designated securities company) and as a result of such acquisition the number of shares held, directly or indirectly, by such foreign investor would become 10% or more of the total outstanding shares of the company, the foreign investor must generally report such acquisition to the Minister of Finance and other Ministers having jurisdiction over the business of the subject company within 15 days from and including the date of such acquisition. In certain exceptional cases, a prior notification is required in respect of such acquisition. |
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• | certain financial institutions; | ||
• | insurance companies; | ||
• | dealers and traders in securities or foreign currencies; | ||
• | persons holding Canon shares or ADSs as part of a hedge, straddle, conversion or other integrated transaction; | ||
• | persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar; | ||
• | partnerships or other entities classified as partnerships for U.S. federal income tax purposes; | ||
• | persons liable for the alternative minimum tax; | ||
• | tax-exempt organizations; | ||
• | persons holding Canon shares or ADSs that own or are deemed to own 10% or more of any class of Canon stock; or | ||
• | persons who acquired Canon shares or ADSs pursuant to the exercise of any employee stock option or otherwise as compensation. |
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• | a citizen or resident of the United States; | ||
• | a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any political subdivision thereof; or | ||
• | an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source. |
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450 Fifth Street, N.W., Washington D.C. 20549
20 Broad Street, New York, New York 10005
http://www.sec.gov
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2005 | 2004 | |||||||||||||||
Cost | Fair value | Cost | Fair value | |||||||||||||
(Millions of yen) | ||||||||||||||||
Due within one year | ¥ | 71 | ¥ | 71 | ¥ | 301 | ¥ | 341 | ||||||||
Due after one year through five years | 1,811 | 3,243 | 1,607 | 2,191 | ||||||||||||
Due after five years | 3,352 | 3,376 | 1,049 | 1,047 | ||||||||||||
Equity securities | 11,474 | 26,550 | 10,302 | 26,950 | ||||||||||||
¥ | 16,708 | ¥ | 33,240 | ¥ | 13,259 | ¥ | 30,529 | |||||||||
2005 | 2004 | |||||||||||||||
Cost | Fair value | Cost | Fair value | |||||||||||||
(Millions of yen) | ||||||||||||||||
Due after one year through five years | ¥ | 20,961 | ¥ | 20,961 | ¥ | 21,460 | ¥ | 21,460 | ||||||||
Millions of yen | ||||||||||||||||
U.S.$ | euro | Others | Total | |||||||||||||
Forwards to sell foreign currencies: | ||||||||||||||||
Contract amounts | ¥ | 361,072 | 251,195 | 32,921 | 645,188 | |||||||||||
Estimated fair value | (4,829 | ) | (1,459 | ) | (352 | ) | (6,640 | ) | ||||||||
Forwards to buy foreign currencies: | ||||||||||||||||
Contract amounts | ¥ | 30,033 | 5,974 | 10,417 | 46,424 | |||||||||||
Estimated fair value | 17 | (296 | ) | (893 | ) | (1,172 | ) |
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Weighted Average | Expected maturity date | |||||||||||||||||||||||||||||||||||
interest | Estimated | |||||||||||||||||||||||||||||||||||
rates* | Total | 2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | fair value | ||||||||||||||||||||||||||||
(Millions of yen except interest rate data) | ||||||||||||||||||||||||||||||||||||
Year ended December 31, 2005: | ||||||||||||||||||||||||||||||||||||
Japanese yen notes | 2.61 | % | ¥ | 20,000 | — | ¥ | 10,000 | ¥ | 10,000 | — | — | — | ¥ | 20,848 | ||||||||||||||||||||||
Japanese yen convertible debentures | 1.30 | 649 | — | — | 649 | — | — | — | 3,052 | |||||||||||||||||||||||||||
Other long-term debt | 2.40 | 11,425 | ¥ | 4,992 | 3,318 | 1,702 | ¥ | 895 | ¥ | 417 | ¥ | 101 | 11,294 | |||||||||||||||||||||||
Total | ¥ | 32,074 | ¥ | 4,992 | ¥ | 13,318 | ¥ | 12,351 | ¥ | 895 | ¥ | 417 | ¥ | 101 | ¥ | 35,194 | ||||||||||||||||||||
Weighted Average | Expected maturity date | |||||||||||||||||||||||||||||||||||
interest | Estimated | |||||||||||||||||||||||||||||||||||
rates* | Total | 2005 | 2006 | 2007 | 2008 | 2009 | Thereafter | fair value | ||||||||||||||||||||||||||||
(Millions of yen except interest rate data) | ||||||||||||||||||||||||||||||||||||
Year ended December 31, 2004: | ||||||||||||||||||||||||||||||||||||
Japanese yen notes | 2.46 | % | ¥ | 25,200 | ¥ | 5,200 | — | ¥ | 10,000 | ¥ | 10,000 | — | — | ¥ | 26,559 | |||||||||||||||||||||
Japanese yen convertible debentures | 1.28 | 1,796 | 309 | — | — | 1,487 | — | — | 6,634 | |||||||||||||||||||||||||||
Other long-term debt | 2.38 | 11,534 | 4,370 | ¥ | 5,046 | 1,401 | 587 | ¥ | 105 | ¥ | 25 | 11,427 | ||||||||||||||||||||||||
Total | ¥ | 38,530 | ¥ | 9,879 | ¥ | 5,046 | ¥ | 11,401 | ¥ | 12,074 | ¥ | 105 | ¥ | 25 | ¥ | 44,620 | ||||||||||||||||||||
Note: | All long-term debt as of December 31, 2005, is fixed rate debt. All long-term debt as of December 31, 2004, is fixed rate debt except loans, principally from banks which include both fixed and floating rate debt. |
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• | All services provided to Canon necessary to perform an annual or semi-annual audit or review to comply with the standards of the Public Company Accounting Oversight Board (United States), in any jurisdiction, including tax services and accounting consultation necessary to comply with the standards of the Public Company Accounting Oversight Board (United States) in those jurisdictions, and any engagement of an Independent Registered Public Accounting Firm for any audit or non-audit service involving estimated fees exceeding Yen 10,000,000 per single engagement must be approved by the full board of corporate auditors. | |
• | Certain other services may be pre-approved under detailed categories of audit and non-audit services established annually by the board of corporate auditors, as long as those services do not exceed specified maximum yen limits for aggregate fees relating to each of those categories. Any engagement of an Independent Registered Public Accounting Firm by these means must be reported to the board of corporate auditors at its next regularly scheduled meeting. | |
• | For services that are not covered by the above two means of pre-approval, the board of corporate auditors has delegated pre-approval authority to the Chairman of the board of corporate auditors. Any engagement of an Independent Registered Public Accounting Firm by the Chairman is required to be reported to the board of corporate auditors at its next regularly scheduled meeting. |
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Additional services may be pre-approved by the board of corporate auditors on an individual basis.
No services were provided for which pre-approval was waived pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
Fees and Services.
The following table discloses the aggregate fees accrued or paid to Canon’s principal accountant for each of the last two fiscal years and briefly describes the services performed:
Year ended December 31, 2005 | Year ended December 31, 2004 | |||||||
(Millions of yen) | ||||||||
Audit fees | ¥ | 968 | ¥ | 690 | ||||
Audit-related fees | 439 | 74 | ||||||
Tax fees | 49 | 32 | ||||||
All other fees | 92 | 90 | ||||||
Total | ¥ | 1,548 | ¥ | 886 | ||||
Audit feesinclude fees billed for professional services rendered for audits of Canon’s annual consolidated financial statements, review of consolidated quarterly financial statements, statutory audits of the Company and its subsidiaries. | |
Audit-related feesinclude fees billed for assurance and related services such as due diligence, accounting consultations and audits in connection with mergers and acquisitions, employee benefit plan audits, internal control reviews, and consultations concerning financial accounting and reporting standards. | |
Tax feesinclude fees billed for services related to tax compliance, including the preparation of tax returns and claims for refund, tax planning and tax advice, including assistance with tax audits and appeals, advice related to mergers and acquisitions, tax services for employee benefit plans and assistance with respect to requests for rulings from tax authorities. | |
All other feesinclude fees billed primarily for services rendered with respect to learning products and services. | |
Ernst & Young ShinNihon served as Canon’s principal accountant for fiscal 2005 and 2004. |
• | the board of corporate auditors is established pursuant to applicable Japanese law and Canon’s Articles of Incorporations; | |||
• | under Japanese legal requirements, the board of corporate auditors is separate from the board of directors; | |||
• | the board of corporate auditors is not elected by the management of Canon and no executive officer of Canon is a member of the board of corporate auditors; | |||
• | all of the members of the board of corporate auditors meet specific independence requirements from Canon and the Canon Group, the management and the auditing firm, as set forth by Japanese legal provisions; | |||
• | the board of corporate auditors, in accordance with and to the extent permitted by Japanese law, is responsible for the appointment, retention and oversight of the work of Canon’s external auditors engaged for the purpose of issuing audit reports on Canon’s annual financial statements; | |||
• | the board of corporate auditors adopted a complaints procedure (which became effective prior to July 31, 2005) in accordance with Rule 10A-3(b)(3) of the Exchange Act; | |||
• | the board of corporate auditors is authorized to engage independent counsel and other advisers, as it deems appropriate; and | |||
• | the board of corporate auditors is provided for appropriate funding for payment of (i) compensation to Canon’s external auditors engaged for the purpose of issuing audit reports on Canon’s annual financial statements, (ii) compensation to independent counsel and other advisers engaged by the board of corporate auditors, and (iii) ordinary administrative expenses of the board of corporate auditors in carrying out its duties. |
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(a) Total Number of | (b) Average Price | (c) Total Numbers of | (d) Maximum Numbers | |||||||||||||
Shares Purchased | Paid per Share | Shares Purchased as | of Shares that May | |||||||||||||
Part of Publicly | Yet Be Purchased | |||||||||||||||
Announced Plans or | Under the Plans or | |||||||||||||||
(Shares) | (Yen) | Programs | Programs | |||||||||||||
January 1 - January 31 | 1,938 | 5,418 | — | — | ||||||||||||
February 1 - February 28 | 2,853 | 5,455 | — | — | ||||||||||||
March 1 - March 31 | 1,614 | 5,558 | — | — | ||||||||||||
April 1 - April 30 | 2,528 | 5,736 | — | — | ||||||||||||
May 1 - May 31 | 1,658 | 5,641 | — | — | ||||||||||||
June 1 - June 30 | 2,867 | 5,909 | — | — | ||||||||||||
July 1 - July 31 | 1,986 | 5,959 | — | — | ||||||||||||
August 1 - August 31 | 1,100 | 5,610 | — | — | ||||||||||||
September 1 - September 30 | 2,776 | 5,675 | — | — | ||||||||||||
October 1 - October 31 | 3,488 | 6,167 | — | — | ||||||||||||
November 1 - November 30 | 1,491 | 6,450 | — | — | ||||||||||||
December 1 - December 31 | 1,861 | 6,963 | — | — |
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Consolidated financial statement of Canon Inc. and Subsidiaries: | Page number | ||||
Report of Ernst & Young ShinNihon, Independent Registered Public Accounting Firm | 65 | ||||
Report of KPMG AZSA & Co., Independent Registered Public Accounting Firm | 66 | ||||
Consolidated Balance Sheets as of December 31, 2005 and 2004 | 67 | ||||
Consolidated Statements of Income for the years ended December 31, 2005, 2004 and 2003 | 68 | ||||
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2005, 2004 and 2003 | 69 | ||||
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003 | 70 | ||||
Notes to Consolidated Financial Statements | 71 | ||||
Schedule: | |||||
Schedule II Valuation and Qualifying Accounts for the years ended December 31, 2005, 2004 and 2003 | 114 |
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Canon Inc.
January 26, 2006
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Canon Inc.:
Tokyo, Japan
January 28, 2004
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December 31 | ||||||||
2005 | 2004 | |||||||
(Millions of yen) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | ¥ | 1,004,953 | ¥ | 887,774 | ||||
Marketable securities(Note 3) | 172 | 1,554 | ||||||
Trade receivables, net(Note 4) | 689,427 | 602,790 | ||||||
Inventories(Note 5) | 510,195 | 489,128 | ||||||
Prepaid expenses and other current assets(Notes 7 and 13) | 253,822 | 250,906 | ||||||
Total current assets | 2,458,569 | 2,232,152 | ||||||
Noncurrent receivables(Note 19) | 14,122 | 14,567 | ||||||
Investments(Notes 3 and 10) | 104,486 | 97,461 | ||||||
Property, plant and equipment, net(Notes 6, 7 and 10) | 1,148,821 | 961,714 | ||||||
Other assets(Notes 7, 8, 9, 12 and 13) | 317,555 | 281,127 | ||||||
Total assets | ¥ | 4,043,553 | ¥ | 3,587,021 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Short-term loans and current portion of long-term debt(Note 10) | ¥ | 5,059 | ¥ | 9,879 | ||||
Trade payables(Note 11) | 505,126 | 465,396 | ||||||
Income taxes(Note 13) | 110,844 | 105,565 | ||||||
Accrued expenses(Note 19) | 248,205 | 205,296 | ||||||
Other current liabilities(Note 13) | 209,394 | 197,029 | ||||||
Total current liabilities | 1,078,628 | 983,165 | ||||||
Long-term debt, excluding current installments(Note 10) | 27,082 | 28,651 | ||||||
Accrued pension and severance cost(Note 12) | 80,430 | 132,522 | ||||||
Other noncurrent liabilities(Note 13) | 52,395 | 45,993 | ||||||
Total liabilities | 1,238,535 | 1,190,331 | ||||||
Minority interests | 200,336 | 186,794 | ||||||
Commitments and contingent liabilities(Note 19) | ||||||||
Stockholders’ equity: | ||||||||
Common stock | ||||||||
Authorized 2,000,000,000 shares; issued 888,742,779 shares in 2005 and 887,977,251 shares in 2004(Note 14) | 174,438 | 173,864 | ||||||
Additional paid-in capital(Note 14) | 403,246 | 401,773 | ||||||
Legal reserve(Note 15) | 42,331 | 41,200 | ||||||
Retained earnings(Note 15) | 2,018,289 | 1,699,634 | ||||||
Accumulated other comprehensive income (loss)(Note 16) | (28,212 | ) | (101,312 | ) | ||||
Treasury stock, at cost 1,145,682 shares in 2005 and 1,120,867 shares in 2004 | (5,410 | ) | (5,263 | ) | ||||
Total stockholders’ equity | 2,604,682 | 2,209,896 | ||||||
Total liabilities and stockholders’ equity | ¥ | 4,043,553 | ¥ | 3,587,021 | ||||
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Year ended December 31 | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
(Millions of yen) | ||||||||||||
Net sales | ¥ | 3,754,191 | ¥ | 3,467,853 | ¥ | 3,198,072 | ||||||
Cost of sales(Notes 9, 12 and 19) | 1,935,148 | 1,754,510 | 1,589,172 | |||||||||
Gross profit | 1,819,043 | 1,713,343 | 1,608,900 | |||||||||
Selling, general and administrative expenses(Notes 1, 9, 12 and 19) | 949,524 | 894,250 | 895,336 | |||||||||
Research and development expenses | 286,476 | 275,300 | 259,140 | |||||||||
Operating profit | 583,043 | 543,793 | 454,424 | |||||||||
Other income (deductions): | ||||||||||||
Interest and dividend income | 14,252 | 7,118 | 9,284 | |||||||||
Interest expense | (1,741 | ) | (2,756 | ) | (4,627 | ) | ||||||
Other, net(Notes 1, 3 and 18) | 16,450 | 3,961 | (10,911 | ) | ||||||||
28,961 | 8,323 | (6,254 | ) | |||||||||
Income before income taxes and minority interests | 612,004 | 552,116 | 448,170 | |||||||||
Income taxes(Note 13) | 212,785 | 194,014 | 162,653 | |||||||||
Income before minority interests | 399,219 | 358,102 | 285,517 | |||||||||
Minority interests | 15,123 | 14,758 | 9,787 | |||||||||
Net income | ¥ | 384,096 | ¥ | 343,344 | ¥ | 275,730 | ||||||
(Yen) | ||||||||||||
Net income per share(Note 17): | ||||||||||||
Basic | ¥ | 432.94 | ¥ | 387.80 | ¥ | 313.81 | ||||||
Diluted | 432.55 | 386.78 | 310.75 | |||||||||
Cash dividends per share | 100.00 | 65.00 | 50.00 |
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Year ended December 31 | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
(Millions of yen) | ||||||||||||
Common stock: | ||||||||||||
Balance at beginning of year | ¥ | 173,864 | ¥ | 168,892 | ¥ | 167,242 | ||||||
Conversion of convertible debt | 574 | 4,972 | 1,650 | |||||||||
Balance at end of year | 174,438 | 173,864 | 168,892 | |||||||||
Additional paid-in capital: | ||||||||||||
Balance at beginning of year | 401,773 | 396,939 | 394,088 | |||||||||
Conversion of convertible debt and other | 574 | 4,966 | 1,649 | |||||||||
Stock exchanged under exchange offering | — | 114 | — | |||||||||
Capital transactions by consolidated subsidiaries and affiliated companies | 899 | (246 | ) | 1,202 | ||||||||
Balance at end of year | 403,246 | 401,773 | 396,939 | |||||||||
Legal reserve: | ||||||||||||
Balance at beginning of year | 41,200 | 39,998 | 38,803 | |||||||||
Transfers from retained earnings | 1,131 | 1,202 | 1,195 | |||||||||
Balance at end of year | 42,331 | 41,200 | 39,998 | |||||||||
Retained earnings: | ||||||||||||
Balance at beginning of year | 1,699,634 | 1,410,442 | 1,164,445 | |||||||||
Net income for the year | 384,096 | 343,344 | 275,730 | |||||||||
Cash dividends | (64,310 | ) | (52,950 | ) | (28,538 | ) | ||||||
Transfers to legal reserve | (1,131 | ) | (1,202 | ) | (1,195 | ) | ||||||
Balance at end of year | 2,018,289 | 1,699,634 | 1,410,442 | |||||||||
Accumulated other comprehensive income (loss): | ||||||||||||
Balance at beginning of year | (101,312 | ) | (143,275 | ) | (166,467 | ) | ||||||
Other comprehensive income (loss) for the year, net of tax | 73,100 | 41,963 | 23,192 | |||||||||
Balance at end of year | (28,212 | ) | (101,312 | ) | (143,275 | ) | ||||||
Treasury stock: | ||||||||||||
Balance at beginning of year | (5,263 | ) | (7,451 | ) | (6,161 | ) | ||||||
Repurchase, net | (147 | ) | (503 | ) | (1,290 | ) | ||||||
Stock exchanged under exchange offering | — | 2,691 | — | |||||||||
Balance at end of year | (5,410 | ) | (5,263 | ) | (7,451 | ) | ||||||
Total stockholders’ equity | ¥ | 2,604,682 | ¥ | 2,209,896 | ¥ | 1,865,545 | ||||||
Disclosure of comprehensive income: | ||||||||||||
Net income for the year | ¥ | 384,096 | ¥ | 343,344 | ¥ | 275,730 | ||||||
Other comprehensive income (loss) for the year, net of tax(Note 16): | ||||||||||||
Foreign currency translation adjustments | 53,979 | 4,050 | (15,277 | ) | ||||||||
Net unrealized gains and losses on securities | (1,397 | ) | 686 | 7,952 | ||||||||
Net gains and losses on derivative instruments | (481 | ) | (396 | ) | 37 | |||||||
Minimum pension liability adjustments | 20,999 | 37,623 | 30,480 | |||||||||
Other comprehensive income (loss) | 73,100 | 41,963 | 23,192 | |||||||||
Total comprehensive income for the year | ¥ | 457,196 | ¥ | 385,307 | ¥ | 298,922 | ||||||
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Year ended December 31 | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
(Millions of yen) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | ¥ | 384,096 | ¥ | 343,344 | ¥ | 275,730 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 225,941 | 192,692 | 183,604 | |||||||||
Loss on disposal of property, plant and equipment | 13,784 | 24,597 | 12,639 | |||||||||
Deferred income taxes | (766 | ) | 9,060 | (3,035 | ) | |||||||
Increase in trade receivables | (48,391 | ) | (53,595 | ) | (36,638 | ) | ||||||
(Increase) decrease in inventories | 27,558 | (40,050 | ) | (15,823 | ) | |||||||
Increase in trade payables | 16,018 | 65,873 | 1,129 | |||||||||
Increase in income taxes | 1,998 | 21,689 | 3,441 | |||||||||
Increase in accrued expenses | 31,241 | 8,196 | 37,131 | |||||||||
Increase (decrease) in accrued pension and severance cost | (16,221 | ) | (16,924 | ) | 29,445 | |||||||
Other, net | (29,580 | ) | 6,647 | (21,974 | ) | |||||||
Net cash provided by operating activities | 605,678 | 561,529 | 465,649 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchases of fixed assets | (395,055 | ) | (256,714 | ) | (199,720 | ) | ||||||
Proceeds from sale of fixed assets | 14,827 | 7,431 | 9,354 | |||||||||
Purchases of available-for-sale securities | (5,680 | ) | (388 | ) | (249 | ) | ||||||
Purchases of held-to-maturity securities | — | (21,544 | ) | — | ||||||||
Proceeds from sale of available-for-sale securities | 12,337 | 9,735 | 6,544 | |||||||||
Acquisitions of subsidiaries, net of cash acquired | (17,657 | ) | — | — | ||||||||
Proceeds from sale of subsidiary common stock | — | 9,731 | — | |||||||||
Purchases of other investments | (19,531 | ) | (8,628 | ) | (24,341 | ) | ||||||
Other, net | 9,618 | 7,410 | 8,464 | |||||||||
Net cash used in investing activities | (401,141 | ) | (252,967 | ) | (199,948 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of long-term debt | 1,716 | 2,115 | 4,132 | |||||||||
Repayments of long-term debt | (15,187 | ) | (43,175 | ) | (25,301 | ) | ||||||
Decrease in short-term loans | (12,011 | ) | (3,046 | ) | (49,224 | ) | ||||||
Dividends paid | (64,310 | ) | (52,950 | ) | (28,538 | ) | ||||||
Purchases of treasury stock, net | (147 | ) | (494 | ) | (1,071 | ) | ||||||
Other, net | (4,000 | ) | (4,718 | ) | (2,037 | ) | ||||||
Net cash used in financing activities | (93,939 | ) | (102,268 | ) | (102,039 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 6,581 | (8,818 | ) | 5,365 | ||||||||
Net increase in cash and cash equivalents | 117,179 | 197,476 | 169,027 | |||||||||
Cash and cash equivalents at beginning of year | 887,774 | 690,298 | 521,271 | |||||||||
Cash and cash equivalents at end of year | ¥ | 1,004,953 | ¥ | 887,774 | ¥ | 690,298 | ||||||
Supplemental disclosure for cash flow information(Note 21): | ||||||||||||
Cash paid during the year for: | ||||||||||||
Interest | ¥ | 1,919 | ¥ | 2,981 | ¥ | 4,570 | ||||||
Income taxes | 211,540 | 164,450 | 162,247 |
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1. | Basis of Presentation and Significant Accounting Policies | |
(a) | Description of Business | |
Canon Inc. (the “Company”) and subsidiaries (collectively “Canon”) is one of the world’s leading manufacturers in such fields as office imaging products, computer peripherals, business information products, cameras, and optical related products. Office imaging products consist mainly of copying machines and digital multifunction devices. Computer peripherals consist mainly of laser beam and inkjet printers. Business information products consist mainly of computer information systems, micrographics and calculators. Cameras consist mainly of single lens reflex (“SLR”) cameras, compact cameras, digital cameras and video camcorders. Optical related products include steppers and aligners used in semiconductor chip production, projection aligners used in the production of liquid crystal displays (“LCDs”), broadcasting lenses and medical equipment. Canon’s consolidated net sales for the years ended December 31, 2005, 2004 and 2003 were distributed as follows: office imaging products 31%, 33% and 34%, computer peripherals 33%, 33% and 34%, business information products 3%, 3% and 4%, cameras 23%, 22% and 20%, and optical and other products 10%, 9% and 8%, respectively. | ||
Sales are made principally under the Canon brand name, almost entirely through sales subsidiaries. These subsidiaries are responsible for marketing and distribution, and primarily sell to retail dealers in their geographical area. Approximately 74%, 73% and 73% of consolidated net sales for the years ended December 31, 2005, 2004 and 2003 were generated outside Japan, with 30%, 30% and 33% in the Americas, 32%, 31% and 30% in Europe, and 12%, 12% and 10% in other areas, respectively. | ||
Canon sells laser beam printers on an OEM basis to Hewlett-Packard Company; such sales constituted approximately 21%, 21% and 20% of consolidated net sales for the years ended December 31, 2005, 2004 and 2003, respectively. | ||
Canon’s manufacturing operations are conducted primarily at 23 plants in Japan and 17 overseas plants which are located in countries or regions such as the United States, Germany, France, Taiwan, China, Malaysia, Thailand and Vietnam. |
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1. | Basis of Presentation and Significant Accounting Policies (continued) | |
(b) | Basis of Presentation | |
The Company and its domestic subsidiaries maintain their books of account in conformity with financial accounting standards of Japan. Foreign subsidiaries maintain their books of account in conformity with financial accounting standards of the countries of their domicile. | ||
Certain adjustments and reclassifications have been incorporated in the accompanying consolidated financial statements to conform with U.S. generally accepted accounting principles. These adjustments were not recorded in the statutory books of account. | ||
(c) | Principles of Consolidation | |
The consolidated financial statements include the accounts of the Company, its majority owned subsidiaries and those variable interest entities where the Company is the primary beneficiary under FASB Interpretation No. 46 (revised December 2003) (“FIN 46R”), “Consolidation of Variable Interest Entities.” All significant intercompany balances and transactions have been eliminated. | ||
(d) | Use of Estimates | |
The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant estimates and assumptions are reflected in valuation and disclosure of revenue recognition, allowance for doubtful receivables, valuation of inventories, environmental liabilities, valuation of deferred tax assets and employee retirement and severance benefit plans. Actual results could differ materially from those estimates. | ||
(e) | Cash Equivalents | |
All highly liquid investments acquired with an original maturity of three months or less are considered to be cash equivalents. |
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1. | Basis of Presentation and Significant Accounting Policies (continued) | |
(f) | Translation of Foreign Currencies | |
Assets and liabilities of the Company’s subsidiaries located outside Japan with functional currencies other than Japanese yen are translated into Japanese yen at the rates of exchange in effect at the balance sheet date. Income and expense items are translated at the average exchange rates prevailing during the year. Gains and losses resulting from translation of financial statements are excluded from earnings and are reported in other comprehensive income (loss). | ||
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 income (deductions). Foreign currency exchange losses, net were Yen 3,710 million, Yen 17,800 million and Yen 20,311 million for the years ended December 31, 2005, 2004 and 2003, respectively. | ||
(g) | Marketable Securities and Investments | |
Canon classifies investments in debt and marketable equity securities as available-for-sale, or held-to-maturity securities. Canon does not hold any trading securities which are bought and held primarily for the purpose of sale in the near term. Available-for-sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, are reported as a separate component of other comprehensive income (loss) until realized. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. | ||
Available-for-sale and held-to-maturity securities are regularly reviewed for other-than-temporary declines in carrying value based on criteria that include the length of time and the extent to which the market value has been less than cost, the financial condition and near-term prospects of the issuer and Canon’s intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value. When such a decline exists, Canon recognizes an impairment loss to the extent by which the cost basis of the investment exceeds the fair value of the investment. Fair value is determined based on quoted market prices, projected discounted cash flows or other valuation techniques as appropriate. | ||
Realized gains and losses are determined on the average cost method and reflected in earnings. | ||
Other securities are stated at cost and reviewed periodically for impairment. |
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1. | Basis of Presentation and Significant Accounting Policies (continued) | |
(h) | Allowance for Doubtful Receivables | |
Allowance for doubtful trade and finance receivables is maintained for all customers based on a combination of factors, including aging analysis, macroeconomic conditions, significant one-time events, and historical experience. 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. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. When all collection options are exhausted including legal recourse, the accounts or portions thereof are deemed to be uncollectible and charged against the allowance. | ||
(i) | Inventories | |
Inventories are stated at the lower of cost or market value. Cost is determined principally by the average method for domestic inventories and the first-in, first-out method for overseas inventories. | ||
(j) | Investments in Affiliated Companies | |
Investments in affiliated companies over which Canon has the ability to exercise significant influence, but does not hold a controlling financial interest, are accounted for by the equity method. | ||
(k) | Impairment of Long-Lived Assets | |
Long-lived assets, such as property, plant and equipment, and acquired intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. |
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1. | Basis of Presentation and Significant Accounting Policies (continued) | |
(l) | Property, Plant and Equipment | |
Property, plant and equipment are stated at cost. Depreciation is calculated principally by the declining-balance method, except for certain assets which are depreciated by the straight-line method over the estimated useful lives of the assets. The depreciation period ranges from 3 years to 60 years for buildings and 2 years to 20 years for machinery and equipment. | ||
Assets leased to others under operating leases are stated at cost and depreciated to the estimated residual value of the assets by the straight-line method over the period ranging from 2 years to 5 years. | ||
(m) | Goodwill and Other Intangible Assets | |
Goodwill and intangible assets with indefinite useful lives are not amortized, but are instead tested for impairment annually in the fourth quarter of each year, or more frequently if indicators of potential impairment exist. Intangible assets with finite useful lives, consisting primarily of software and license fees, are amortized using the straight-line method over the estimated useful lives, which range from 3 years to 5 years for software and 5 years to 10 years for license fees. Certain costs incurred in connection with developing or obtaining internal use software are capitalized. These costs consist of payments made to third parties and the salaries of employees working on such software development. Costs incurred in connection with developing internal use software are capitalized at the application development stage. In addition, Canon develops or obtains certain software to be sold where related costs are capitalized after establishment of technological feasibility. | ||
(n) | Environmental Liabilities | |
Liabilities for environmental remediation and other environmental costs are accrued when environmental assessments or remedial efforts are probable and the costs can be reasonably estimated. Such liabilities are adjusted as further information develops or circumstances change. Costs of future obligations are not discounted to their present values. | ||
(o) | Income Taxes | |
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. |
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1. | Basis of Presentation and Significant Accounting Policies (continued) | |
(o) | Income Taxes (continued) | |
Canon records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not realizable. | ||
(p) | Issuance of Stock by Subsidiaries and Equity Investees | |
The change in the Company’s proportionate share of a subsidiary’s or equity investee’s equity resulting from the issuance of stock by the subsidiary or equity investee is accounted for as an equity transaction. | ||
(q) | Net Income per Share | |
Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding during each year. Diluted net income per share includes the effect from potential issuance of common stock based on the assumption that all convertible debentures were converted into common stock. | ||
(r) | Revenue Recognition | |
Canon generates revenue principally through the sale of consumer products, equipment, supplies, and related services under separate contractual arrangements. Canon recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred and title and risk of loss have been transferred to the customer, the sales price is fixed or determinable, and collectibility is probable. | ||
For arrangements with multiple elements, which may include any combination of equipment, installation and maintenance, Canon allocates revenue to each element based on its relative fair value if such element meets the criteria for treatment as a separate unit of accounting as prescribed in the Emerging Issues Task Force Issue No. 00-21 (“EITF 00-21”), “Revenue Arrangements with Multiple Deliverables.” Otherwise, revenue is deferred until the undelivered elements are fulfilled as a single unit of accounting. | ||
Revenue from sales of consumer products including office imaging products, computer peripherals, business information products and cameras is recognized upon shipment or delivery, depending upon when title and risk of loss transfer to the customer. |
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1. | Basis of Presentation and Significant Accounting Policies (continued) | |
(r) | Revenue Recognition (continued) | |
Revenue from sales of optical equipment such as steppers and aligners sold with customer acceptance provisions related to their functionality is recognized when the equipment is installed at the customer site and the specific criteria of the equipment functionality are successfully tested and demonstrated by Canon. Service revenue is derived primarily from maintenance contracts on equipment sold to customers and is recognized over the term of the contract. | ||
Most office imaging products are sold with service maintenance contracts for which the customer typically pays a base service fee plus a variable amount based on usage. Revenue from these service maintenance contracts is recognized as services are provided. | ||
Revenue from the sale of equipment under sales-type leases is recognized at the inception of the lease. Income on sales-type leases and direct-financing leases is recognized over the life of each respective lease using the interest method. Leases not qualifying as sales-type leases or direct-financing leases are accounted for as operating leases and related revenue is recognized over the lease term. | ||
Canon records estimated reductions to sales at the time of sale for sales incentive programs including product discounts, customer promotions and volume-based rebates. Estimated reductions in sales are based upon historical trends and other known factors at the time of sale. In addition, Canon provides price protection to certain resellers of its products, and records reductions to sales for the estimated impact of price protection obligations when announced. | ||
Estimated product warranty costs are recorded at the time revenue is recognized and are included in selling, general and administrative expenses. Estimates for accrued product warranty costs are based on historical experience, and are affected by ongoing product failure rates, specific product class failures outside of the baseline experience, material usage and service delivery costs incurred in correcting a product failure. | ||
(s) | Research and Development Costs | |
Research and development costs are expensed as incurred. | ||
(t) | Advertising Costs | |
Advertising costs are expensed as incurred. Advertising expenses were Yen 106,250 million, Yen 111,770 million and Yen 100,278 million for the years ended December 31, 2005, 2004 and 2003, respectively. |
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1. | Basis of Presentation and Significant Accounting Policies (continued) | |
(u) | Shipping and Handling Costs | |
Shipping and handling costs totaled Yen 50,052 million, Yen 46,953 million and Yen 40,660 million for the years ended December 31, 2005, 2004 and 2003, respectively, and are included in selling, general and administrative expenses in the consolidated statements of income. | ||
(v) | Derivative Financial Instruments | |
All derivatives are recognized at fair value and are included in prepaid expenses and other current assets, or other current liabilities on the consolidated balance sheets. On the date the derivative contract is entered into, Canon designates the derivative as either a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value” hedge), or a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge). Canon formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. Canon also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, Canon discontinues hedge accounting prospectively. | ||
Changes in the fair value of a derivative that is designated and qualifies as a fair-value hedge, along with the loss or gain on the hedged asset or liability or unrecognized firm commitment of the hedged item that is attributable to the hedged risk, are recorded in earnings. Changes in the fair value of a derivative that is designated and qualifies as a cash-flow hedge are recorded in other comprehensive income (loss), until earnings are affected by the variability in cash flows of the hedged item. Gains and losses from hedging ineffectiveness are included in other income (deductions). Gains and losses excluded from the assessment of hedge effectiveness (time value component) are included in other income (deductions). | ||
Canon also uses certain derivative financial instruments which are not designated as hedges. Canon records these derivative financial instruments on the consolidated balance sheets at fair value. The changes in fair values are immediately recorded in earnings. | ||
(w) | Guarantees | |
Canon recognizes, at the inception of a guarantee, a liability for the fair value of the obligation it has undertaken in issuing guarantees. |
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1. | Basis of Presentation and Significant Accounting Policies (continued) | |
(x) | New Accounting Standards | |
In November 2004, the FASB issued SFAS No. 151, “Inventory Costs—an amendment of ARB No. 43, Chapter 4” (“SFAS 151”). SFAS 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Among other provisions, the new rule requires that items such as idle facility expense, excessive spoilage, double freight, and rehandling costs be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal” as stated in ARB No. 43. Additionally, SFAS 151 requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 is effective for fiscal years beginning after June 15, 2005 and is required to be adopted by Canon in the first quarter beginning January 1, 2006. Canon is currently evaluating the effect that the adoption of SFAS 151 will have on its consolidated results of operations and financial condition but does not expect SFAS 151 to have a material impact. | ||
In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets—an amendment of APB Opinion No. 29” (“SFAS 153”). SFAS 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, “Accounting for Nonmonetary Transactions,” and replaces it with an exception for exchanges that do not have commercial substance. SFAS 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for the fiscal periods beginning after June 15, 2005 and was adopted by Canon in the third quarter ended September 30, 2005. The adoption of SFAS 153 did not have a material impact on the consolidated results of operations and financial condition of Canon. | ||
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS 154”). SFAS 154 replaces APB Opinion No. 20, “Accounting Changes” and SFAS No. 3 “Reporting Accounting Changes in Interim Financial Statements,” and provides guidance on the accounting for and reporting of accounting changes and error corrections. SFAS 154 establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and is required to be adopted by Canon in the first quarter beginning January 1, 2006. Canon is currently evaluating the effect that the adoption of SFAS 154 will have on its consolidated results of operations and financial condition but does not expect SFAS 154 to have a material impact. |
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1. | Basis of Presentation and Significant Accounting Policies (continued) | |
(x) | New Accounting Standards (continued) | |
In June 2005, the FASB issued FSP FAS 143-1, “Accounting for Electronic Equipment Waste Obligations” (“FSP 143-1”). FSP 143-1 provides guidance on the accounting for certain obligations associated with the Waste Electrical and Electronic Equipment Directive (the “Directive”), adopted by the European Union (“EU”). Under the Directive, the waste management obligation for historical equipment (products put on the market on or prior to August 13, 2005) remains with the commercial user until the customer replaces the equipment. FSP 143-1 is required to be applied to the later of the first reporting period ending after June 8, 2005 or the date of the Directive’s adoption into law by the applicable EU member countries. Canon adopted FSP 143-1 in the third quarter ended September 30, 2005 and has determined that its effect did not have a material impact on its consolidated results of operations and financial condition in 2005. | ||
In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“FSP 115-1”). FSP 115-1 provides guidance on determining when investments in certain debt and equity securities are considered impaired, whether that impairment is other-than-temporary, and on measuring such impairment loss. FSP 115-1 also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. FSP 115-1 is required to be applied to reporting periods beginning after December 15, 2005 and is required to be adopted by Canon in the first quarter beginning January 1, 2006. Canon is currently evaluating the effect that the adoption of FSP 115-1 will have on its consolidated results of operations and financial condition but does not expect FSP 115-1 to have a material impact. |
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1. | Basis of Presentation and Significant Accounting Policies (continued) | |
(y) | Reclassification | |
Certain reclassifications have been made to the prior years’ consolidated financial statements to conform with the presentation used for the year ended December 31, 2005. | ||
2. | Foreign Operations |
2005 | 2004 | 2003 | ||||||||||
(Millions of yen) | ||||||||||||
Total assets | ¥ | 1,751,011 | ¥ | 1,500,197 | ¥ | 1,339,854 | ||||||
Net assets | 767,711 | 632,657 | 564,041 | |||||||||
Net sales | 2,774,443 | 2,548,700 | 2,341,221 | |||||||||
Net income | 81,916 | 70,227 | 74,274 |
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3. | Marketable Securities and Investments |
December 31, 2005 | ||||||||||||||||
Gross | Gross | |||||||||||||||
unrealized | unrealized | |||||||||||||||
holding | holding | Fair | ||||||||||||||
Cost | gains | losses | value | |||||||||||||
(Millions of yen) | ||||||||||||||||
Current: | ||||||||||||||||
Available-for-sale: | ||||||||||||||||
Bank debt securities | ¥ | 71 | ¥ | — | ¥ | — | ¥ | 71 | ||||||||
Equity securities | 101 | — | — | 101 | ||||||||||||
¥ | 172 | ¥ | — | ¥ | — | ¥ | 172 | |||||||||
Noncurrent: | ||||||||||||||||
Available-for-sale: | ||||||||||||||||
Government bonds | ¥ | 525 | ¥ | 7 | ¥ | — | ¥ | 532 | ||||||||
Corporate debt securities | 85 | 3 | — | 88 | ||||||||||||
Fund trusts | 4,553 | 1,446 | — | 5,999 | ||||||||||||
Equity securities | 11,373 | 15,086 | 10 | 26,449 | ||||||||||||
16,536 | 16,542 | 10 | 33,068 | |||||||||||||
Held-to-maturity: | ||||||||||||||||
Corporate debt securities | 20,961 | — | — | 20,961 | ||||||||||||
¥ | 37,497 | ¥ | 16,542 | ¥ | 10 | ¥ | 54,029 | |||||||||
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3. | Marketable Securities and Investments (continued) |
December 31, 2004 | ||||||||||||||||
Gross | Gross | |||||||||||||||
unrealized | unrealized | |||||||||||||||
holding | holding | Fair | ||||||||||||||
Cost | gains | losses | value | |||||||||||||
(Millions of yen) | ||||||||||||||||
Current: | ||||||||||||||||
Available-for-sale: | ||||||||||||||||
Corporate debt securities | ¥ | 138 | ¥ | — | ¥ | — | ¥ | 138 | ||||||||
Bank debt securities | 71 | — | — | 71 | ||||||||||||
Fund trusts | 92 | 40 | — | 132 | ||||||||||||
Equity securities | 1,117 | 100 | 4 | 1,213 | ||||||||||||
¥ | 1,418 | ¥ | 140 | ¥ | 4 | ¥ | 1,554 | |||||||||
Noncurrent: | ||||||||||||||||
Available-for-sale: | ||||||||||||||||
Government bonds | ¥ | 536 | ¥ | 26 | ¥ | 25 | ¥ | 537 | ||||||||
Corporate debt securities | 56 | 19 | — | 75 | ||||||||||||
Fund trusts | 2,064 | 574 | 12 | 2,626 | ||||||||||||
Equity securities | 9,185 | 16,628 | 76 | 25,737 | ||||||||||||
11,841 | 17,247 | 113 | 28,975 | |||||||||||||
Held-to-maturity: | ||||||||||||||||
Corporate debt securities | 21,460 | — | — | 21,460 | ||||||||||||
¥ | 33,301 | ¥ | 17,247 | ¥ | 113 | ¥ | 50,435 | |||||||||
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3. | Marketable Securities and Investments (continued) |
Available-for-sale securities | ||||||||
Cost | Fair value | |||||||
(Millions of yen) | ||||||||
Due within one year | ¥ | 71 | ¥ | 71 | ||||
Due after one year through five years | 1,811 | 3,243 | ||||||
Due after five years | 3,352 | 3,376 | ||||||
¥ | 5,234 | ¥ | 6,690 | |||||
Held-to-maturity securities | ||||
Cost | Fair value | |||
(Millions of yen) | ||||
Due after one year through five years | ¥20,961 | ¥20,961 |
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4. | Trade Receivables |
December 31 | ||||||||
2005 | 2004 | |||||||
(Millions of yen) | ||||||||
Notes | ¥ | 27,328 | ¥ | 30,261 | ||||
Accounts | 673,827 | 584,186 | ||||||
701,155 | 614,447 | |||||||
Less allowance for doubtful receivables | (11,728 | ) | (11,657 | ) | ||||
¥ | 689,427 | ¥ | 602,790 | |||||
5. | Inventories |
December 31 | ||||||||
2005 | 2004 | |||||||
(Millions of yen) | ||||||||
Finished goods | ¥ | 359,934 | ¥ | 352,656 | ||||
Work in process | 132,520 | 121,613 | ||||||
Raw materials | 17,741 | 14,859 | ||||||
¥ | 510,195 | ¥ | 489,128 | |||||
6. | Property, Plant and Equipment |
December 31 | ||||||||
2005 | 2004 | |||||||
(Millions of yen) | ||||||||
Land | ¥ | 199,595 | ¥ | 182,330 | ||||
Buildings | 997,351 | 824,969 | ||||||
Machinery and equipment | 1,164,480 | 1,053,121 | ||||||
Construction in progress | 59,558 | 74,599 | ||||||
2,420,984 | 2,135,019 | |||||||
Less accumulated depreciation | (1,272,163 | ) | (1,173,305 | ) | ||||
¥ | 1,148,821 | ¥ | 961,714 | |||||
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7. | Finance Receivables and Operating Leases |
December 31 | ||||||||
2005 | 2004 | |||||||
(Millions of yen) | ||||||||
Total minimum lease payments receivable | ¥ | 204,774 | ¥ | 180,707 | ||||
Unguaranteed residual values | 13,849 | 10,816 | ||||||
Executory costs | (2,785 | ) | (2,533 | ) | ||||
Unearned income | (23,632 | ) | (20,880 | ) | ||||
192,206 | 168,110 | |||||||
Less allowance for doubtful receivables | (8,372 | ) | (6,068 | ) | ||||
183,834 | 162,042 | |||||||
Less amount due within one year | (69,211 | ) | (61,187 | ) | ||||
¥ | 114,623 | ¥ | 100,855 | |||||
Financing | Operating | |||||||
leases | leases | |||||||
(Millions of yen) | ||||||||
Year ending December 31: | ||||||||
2006 | ¥ | 81,967 | ¥ | 3,691 | ||||
2007 | 58,998 | 1,846 | ||||||
2008 | 38,347 | 1,131 | ||||||
2009 | 18,314 | 533 | ||||||
2010 | 6,483 | 40 | ||||||
Thereafter | 665 | 9 | ||||||
¥ | 204,774 | ¥ | 7,250 | |||||
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8. | Acquisitions |
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9. | Goodwill and Other Intangible Assets |
December 31, 2005 | December 31, 2004 | |||||||||||||||
Gross | Gross | |||||||||||||||
carrying | Accumulated | carrying | Accumulated | |||||||||||||
amount | amortization | amount | amortization | |||||||||||||
(Millions of yen) | ||||||||||||||||
Software | ¥ | 121,729 | ¥ | 70,535 | ¥ | 121,546 | ¥ | 79,517 | ||||||||
License fees | 20,567 | 11,329 | 24,603 | 14,183 | ||||||||||||
Other | 23,291 | 4,997 | 6,976 | 3,585 | ||||||||||||
¥ | 165,587 | ¥ | 86,861 | ¥ | 153,125 | ¥ | 97,285 | |||||||||
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9. | Goodwill and Other Intangible Assets (continued) |
Year ended December 31 | ||||||||
2005 | 2004 | |||||||
(Millions of yen) | ||||||||
Balance at beginning of year | ¥ | 24,233 | ¥ | 22,067 | ||||
Goodwill acquired during the year | 15,391 | 3,156 | ||||||
Impairment losses | — | (42 | ) | |||||
Recognition of acquired company’s tax benefits | — | (1,298 | ) | |||||
Translation adjustments | 537 | 350 | ||||||
Balance at end of year | ¥ | 40,161 | ¥ | 24,233 | ||||
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10. | Short-Term Loans and Long-Term Debt |
December 31 | ||||||||
2005 | 2004 | |||||||
(Millions of yen) | ||||||||
Loans, principally from banks, maturing in installments through 2018; bearing weighted average interest of 1.40% and 3.05% at December 31, 2005 and 2004, respectively, partially secured by mortgage of property, plant and equipment | ¥ | 2,641 | ¥ | 2,949 | ||||
1.88% Japanese yen notes, due 2005 | — | 5,000 | ||||||
1.71% Japanese yen notes, due 2005 | — | 200 | ||||||
2.95% Japanese yen notes, due 2007 | 10,000 | 10,000 | ||||||
2.27% Japanese yen notes, due 2008 | 10,000 | 10,000 | ||||||
1.20% Japanese yen convertible debentures, due 2005 | — | 309 | ||||||
1.30% Japanese yen convertible debentures, due 2008 | 649 | 1,487 | ||||||
Capital lease obligations | 8,784 | 8,585 | ||||||
32,074 | 38,530 | |||||||
Less amount due within one year | (4,992 | ) | (9,879 | ) | ||||
¥ | 27,082 | ¥ | 28,651 | |||||
(Millions of yen) | ||||
Year ending December 31: | ||||
2006 | ¥ | 4,992 | ||
2007 | 13,318 | |||
2008 | 12,351 | |||
2009 | 895 | |||
2010 | 417 | |||
Thereafter | 101 | |||
¥ | 32,074 | |||
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10. | Short-Term Loans and Long-Term Debt (continued) |
11. | Trade Payables |
December 31 | ||||||||
2005 | 2004 | |||||||
(Millions of yen) | ||||||||
Notes | ¥ | 17,567 | ¥ | 51,081 | ||||
Accounts | 487,559 | 414,315 | ||||||
¥ | 505,126 | ¥ | 465,396 | |||||
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12. | Employee Retirement and Severance Benefits |
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12. | Employee Retirement and Severance Benefits (continued) |
Year ended December 31 | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
(Millions of yen) | ||||||||||||
Service cost — benefits earned during the year | ¥ | 25,801 | ¥ | 26,571 | ¥ | 29,024 | ||||||
Interest cost on projected benefit obligation | 16,172 | 19,108 | 20,806 | |||||||||
Expected return on plan assets | (19,651 | ) | (17,054 | ) | (13,959 | ) | ||||||
Amortization of unrecognized net obligation at transition | 345 | 344 | 344 | |||||||||
Amortization of prior service cost | (8,007 | ) | (6,814 | ) | (5,515 | ) | ||||||
Recognized actuarial loss | 10,542 | 12,505 | 15,807 | |||||||||
Settlement loss resulting from plan termination | — | 2,784 | — | |||||||||
Settlement loss resulting from transfer of substitutional portion of | ||||||||||||
EPFs to the Japanese government | — | 69,651 | — | |||||||||
¥ | 25,202 | ¥ | 107,095 | ¥ | 46,507 | |||||||
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12. | Employee Retirement and Severance Benefits (continued) |
December 31 | ||||||||
2005 | 2004 | |||||||
(Millions of yen) | ||||||||
Change in benefit obligations: | ||||||||
Benefit obligations at beginning of year | ¥ | 582,212 | ¥ | 752,390 | ||||
Service cost | 25,801 | 26,571 | ||||||
Interest cost | 16,172 | 19,108 | ||||||
Plan participants’ contributions | 1,161 | 1,142 | ||||||
Amendments | (6,212 | ) | (2,781 | ) | ||||
Actuarial gain | 3,340 | (5,728 | ) | |||||
Benefits paid | (12,239 | ) | (14,143 | ) | ||||
Settlement on plan termination | — | (6,482 | ) | |||||
Transfer of substitutional portion of EPFs to the Japanese government | — | (191,784 | ) | |||||
Acquisition | 10,106 | 84 | ||||||
Foreign currency exchange rate changes | 167 | 3,957 | ||||||
Other | (15 | ) | (122 | ) | ||||
Benefit obligations at end of year | 620,493 | 582,212 | ||||||
Change in plan assets: | ||||||||
Fair value of plan assets at beginning of year | 418,798 | 472,228 | ||||||
Actual return on plan assets | 93,844 | 32,744 | ||||||
Employer contributions | 40,059 | 31,018 | ||||||
Plan participants’ contributions | 1,161 | 1,142 | ||||||
Benefits paid | (12,239 | ) | (14,143 | ) | ||||
Settlement on plan termination | — | (2,274 | ) | |||||
Transfer of substitutional portion of EPFs to the Japanese government | — | (104,992 | ) | |||||
Acquisition | 3,486 | — | ||||||
Foreign currency exchange rate changes | 409 | 3,075 | ||||||
Fair value of plan assets at end of year | 545,518 | 418,798 | ||||||
Funded status | (74,975 | ) | (163,414 | ) | ||||
Unrecognized actuarial loss | 110,424 | 191,376 | ||||||
Unrecognized prior service cost | (101,552 | ) | (102,427 | ) | ||||
Unrecognized net transition obligation being recognized over 22 years | 3,955 | 4,300 | ||||||
Net amount recognized | ¥ | (62,148 | ) | ¥ | (70,165 | ) | ||
Amounts recognized in the consolidated balance sheets consist of: | ||||||||
Prepaid pension cost | ¥ | 3,089 | ¥ | 3,142 | ||||
Accrued pension and severance cost | (80,430 | ) | (132,522 | ) | ||||
Intangible assets | — | 57 | ||||||
Accumulated other comprehensive income (loss) | 15,193 | 59,158 | ||||||
Net amount recognized | ¥ | (62,148 | ) | ¥ | (70,165 | ) | ||
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12. | Employee Retirement and Severance Benefits (continued) |
December 31 | ||||||||
2005 | 2004 | |||||||
(Millions of yen) | ||||||||
Accumulated benefit obligation | ¥ | 578,627 | ¥ | 540,615 |
December 31 | ||||||||
2005 | 2004 | |||||||
(Millions of yen) | ||||||||
Plans with projected benefit obligations in excess of plan assets: | ||||||||
Projected benefit obligations | ¥ | 587,162 | ¥ | 577,022 | ||||
Fair value of plan assets | 510,287 | 411,918 | ||||||
Plans with accumulated benefit obligations in excess of plan assets: | ||||||||
Accumulated benefit obligations | 545,375 | 512,216 | ||||||
Fair value of plan assets | 506,634 | 386,921 |
December 31 | ||||||||
2005 | 2004 | |||||||
Discount rate | 2.7% | 2.7% | ||||||
Assumed rate of increase in future compensation levels | 3.3% | 3.0% |
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12. | Employee Retirement and Severance Benefits (continued) |
Year ended December 31 | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Discount rate | 2.7% | 2.7% | 2.7% | |||||||||
Assumed rate of increase in future compensation levels | 3.0% | 2.0% | 2.0% | |||||||||
Expected long-term rate of return on plan assets | 4.6% | 3.6% | 3.6% |
December 31 | Target | |||||||||||
2005 | 2004 | allocation | ||||||||||
Asset category: | ||||||||||||
Equity securities | 50.8% | 43.0% | 46.3% | |||||||||
Debt securities | 34.6% | 37.2% | 35.6% | |||||||||
Cash | 0.7% | 1.7% | 0.3% | |||||||||
Life insurance company general accounts | 13.5% | 14.5% | 17.1% | |||||||||
Other | 0.4% | 3.6% | 0.7% | |||||||||
100.0% | 100.0% | 100.0% | ||||||||||
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12. | Employee Retirement and Severance Benefits (continued) |
(Millions of yen) | ||||
Years ending December 31: | ||||
2006 | ¥ | 9,798 | ||
2007 | 10,658 | |||
2008 | 12,237 | |||
2009 | 13,328 | |||
2010 | 14,629 | |||
2011 – 2015 | 93,055 |
13. | Income Taxes |
Year ended December 31, 2005 | ||||||||||||
Japanese | Foreign | Total | ||||||||||
(Millions of yen) | ||||||||||||
Income before income taxes and minority interests | ¥ | 492,709 | ¥ | 119,295 | ¥ | 612,004 | ||||||
Income taxes: | ||||||||||||
Current | ¥ | 172,595 | ¥ | 40,956 | ¥ | 213,551 | ||||||
Deferred | 3,441 | (4,207 | ) | (766 | ) | |||||||
¥ | 176,036 | ¥ | 36,749 | ¥ | 212,785 | |||||||
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13. | Income Taxes (continued) |
Year ended December 31, 2004 | ||||||||||||
Japanese | Foreign | Total | ||||||||||
(Millions of yen) | ||||||||||||
Income before income taxes and minority interests | ¥ | 447,864 | ¥ | 104,252 | ¥ | 552,116 | ||||||
Income taxes: | ||||||||||||
Current | ¥ | 162,679 | ¥ | 22,275 | ¥ | 184,954 | ||||||
Deferred | (1,065 | ) | 10,125 | 9,060 | ||||||||
¥ | 161,614 | ¥ | 32,400 | ¥ | 194,014 | |||||||
Year ended December 31, 2003 | ||||||||||||
Japanese | Foreign | Total | ||||||||||
(Millions of yen) | ||||||||||||
Income before income taxes and minority interests | ¥ | 337,093 | ¥ | 111,077 | ¥ | 448,170 | ||||||
Income taxes: | ||||||||||||
Current | ¥ | 132,204 | ¥ | 33,484 | ¥ | 165,688 | ||||||
Deferred | (5,828 | ) | 2,793 | (3,035 | ) | |||||||
¥ | 126,376 | ¥ | 36,277 | ¥ | 162,653 | |||||||
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13. | Income Taxes (continued) |
Year ended December 31 | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Japanese statutory income tax rate | 40.0 | % | 42.0 | % | 42.0 | % | ||||||
Increase (reduction) in income taxes resulting from: | ||||||||||||
Expenses not deductible for tax purposes | 0.3 | 0.4 | 0.2 | |||||||||
Tax benefits not recognized on operating losses of subsidiaries | — | 0.1 | 0.1 | |||||||||
Income of foreign subsidiaries taxed at lower than Japanese statutory tax rate | (1.9 | ) | (2.1 | ) | (2.5 | ) | ||||||
Tax credit for research and development expenses | (3.9 | ) | (4.0 | ) | (4.0 | ) | ||||||
Effect of enacted changes in tax laws and rates | — | — | 0.8 | |||||||||
Other | 0.3 | (1.3 | ) | (0.3 | ) | |||||||
Effective income tax rate | 34.8 | % | 35.1 | % | 36.3 | % | ||||||
December 31 | ||||||||
2005 | 2004 | |||||||
(Millions of yen) | ||||||||
Prepaid expenses and other current assets | ¥ | 52,116 | ¥ | 47,679 | ||||
Other assets | 61,325 | 84,686 | ||||||
Other current liabilities | (3,500 | ) | (2,873 | ) | ||||
Other noncurrent liabilities | (36,329 | ) | (30,049 | ) | ||||
¥ | 73,612 | ¥ | 99,443 | |||||
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13. | Income Taxes (continued) |
December 31 | ||||||||
2005 | 2004 | |||||||
(Millions of yen) | ||||||||
Deferred tax assets: | ||||||||
Inventories | ¥ | 13,459 | ¥ | 11,364 | ||||
Accrued business tax | 8,599 | 10,149 | ||||||
Accrued pension and severance cost | 28,665 | 34,680 | ||||||
Minimum pension liability adjustments | 5,592 | 22,778 | ||||||
Research and development — costs capitalized for tax purposes | 23,629 | 22,499 | ||||||
Property, plant and equipment | 21,839 | 17,406 | ||||||
Accrued expenses | 20,132 | 17,976 | ||||||
Net operating losses carried forward | 1,388 | 1,799 | ||||||
Other | 24,362 | 24,258 | ||||||
Total gross deferred tax assets | 147,665 | 162,909 | ||||||
Less valuation allowance | (3,345 | ) | (3,495 | ) | ||||
Net deferred tax assets | 144,320 | 159,414 | ||||||
Deferred tax liabilities: | ||||||||
Undistributed earnings of foreign subsidiaries | (6,806 | ) | (5,638 | ) | ||||
Net unrealized gains on securities | (6,480 | ) | (6,833 | ) | ||||
Tax deductible reserve | (14,307 | ) | (11,975 | ) | ||||
Financing lease revenue | (35,395 | ) | (30,196 | ) | ||||
Other | (7,720 | ) | (5,329 | ) | ||||
Total gross deferred tax liabilities | (70,708 | ) | (59,971 | ) | ||||
Net deferred tax assets | ¥ | 73,612 | ¥ | 99,443 | ||||
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13. | Income Taxes (continued) |
(Millions of yen) | ||||
Within one year | ¥ | 1,943 | ||
After one year through five years | 2,012 | |||
After five years through ten years | 94 | |||
Indefinite period | 648 | |||
Total | ¥ | 4,697 | ||
14. | Common Stock |
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15. | Legal Reserve and Retained Earnings |
102
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16. | Other Comprehensive Income (Loss) |
Year ended December 31 | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
(Millions of yen) | ||||||||||||
Foreign currency translation adjustments: | ||||||||||||
Balance at beginning of year | ¥ | (79,751 | ) | ¥ | (83,801 | ) | ¥ | (68,524 | ) | |||
Adjustments for the year | 53,979 | 4,050 | (15,277 | ) | ||||||||
Balance at end of year | (25,772 | ) | (79,751 | ) | (83,801 | ) | ||||||
Net unrealized gains and losses on securities: | ||||||||||||
Balance at beginning of year | 7,470 | 6,784 | (1,168 | ) | ||||||||
Adjustments for the year | (1,397 | ) | 686 | 7,952 | ||||||||
Balance at end of year | 6,073 | 7,470 | 6,784 | |||||||||
Net gains and losses on derivative instruments: | ||||||||||||
Balance at beginning of year | (693 | ) | (297 | ) | (334 | ) | ||||||
Adjustments for the year | (481 | ) | (396 | ) | 37 | |||||||
Balance at end of year | (1,174 | ) | (693 | ) | (297 | ) | ||||||
Minimum pension liability adjustments: | ||||||||||||
Balance at beginning of year | (28,338 | ) | (65,961 | ) | (96,441 | ) | ||||||
Adjustments for the year | 20,999 | 37,623 | 30,480 | |||||||||
Balance at end of year | (7,339 | ) | (28,338 | ) | (65,961 | ) | ||||||
Total accumulated other comprehensive income (loss): | ||||||||||||
Balance at beginning of year | (101,312 | ) | (143,275 | ) | (166,467 | ) | ||||||
Adjustments for the year | 73,100 | 41,963 | 23,192 | |||||||||
Balance at end of year | ¥ | (28,212 | ) | ¥ | (101,312 | ) | ¥ | (143,275 | ) | |||
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Year ended December 31 | ||||||||||||
Before-tax | Tax (expense) | Net-of-tax | ||||||||||
amount | or benefit | amount | ||||||||||
(Millions of yen) | ||||||||||||
2005: | ||||||||||||
Foreign currency translation adjustments | ¥ | 55,345 | ¥ | (1,366 | ) | ¥ | 53,979 | |||||
Net unrealized gains and losses on securities: | ||||||||||||
Amount arising during the year | 9,005 | (3,892 | ) | 5,113 | ||||||||
Reclassification adjustments for gains and losses realized in net income | (10,793 | ) | 4,283 | (6,510 | ) | |||||||
Net change during the year | (1,788 | ) | 391 | (1,397 | ) | |||||||
Net gains and losses on derivative instruments: | ||||||||||||
Amount arising during the year | (9,137 | ) | 3,658 | (5,479 | ) | |||||||
Reclassification adjustments for gains and losses realized in net income | 8,333 | (3,335 | ) | 4,998 | ||||||||
Net change during the year | (804 | ) | 323 | (481 | ) | |||||||
Minimum pension liability adjustments | 40,364 | (19,365 | ) | 20,999 | ||||||||
Other comprehensive income (loss) | ¥ | 93,117 | ¥ | (20,017 | ) | ¥ | 73,100 | |||||
2004: | ||||||||||||
Foreign currency translation adjustments | ¥ | 4,400 | ¥ | (350 | ) | ¥ | 4,050 | |||||
Net unrealized gains and losses on securities: | ||||||||||||
Amount arising during the year | 5,022 | (2,202 | ) | 2,820 | ||||||||
Reclassification adjustments for gains and losses realized in net income | (3,698 | ) | 1,564 | (2,134 | ) | |||||||
Net change during the year | 1,324 | (638 | ) | 686 | ||||||||
Net gains and losses on derivative instruments: | ||||||||||||
Amount arising during the year | (1,673 | ) | 708 | (965 | ) | |||||||
Reclassification adjustments for gains and losses realized in net income | 929 | (360 | ) | 569 | ||||||||
Net change during the year | (744 | ) | 348 | (396 | ) | |||||||
Minimum pension liability adjustments | 78,179 | (40,556 | ) | 37,623 | ||||||||
Other comprehensive income (loss) | ¥ | 83,159 | ¥ | (41,196 | ) | ¥ | 41,963 | |||||
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16. | Other Comprehensive Income (Loss) (continued) |
Year ended December 31 | ||||||||||||
Before-tax | Tax (expense) | Net-of-tax | ||||||||||
amount | or benefit | amount | ||||||||||
(Millions of yen) | ||||||||||||
2003: | ||||||||||||
Foreign currency translation adjustments: | ||||||||||||
Amount arising during the year | ¥ | (19,115 | ) | ¥ | 3,469 | ¥ | (15,646 | ) | ||||
Reclassification adjustments for gains and losses realized in net income | 369 | — | 369 | |||||||||
Net change during the year | (18,746 | ) | 3,469 | (15,277 | ) | |||||||
Net unrealized gains and losses on securities: | ||||||||||||
Amount arising during the year | 12,129 | (4,477 | ) | 7,652 | ||||||||
Reclassification adjustments for gains and losses realized in net income | 515 | (215 | ) | 300 | ||||||||
Net change during the year | 12,644 | (4,692 | ) | 7,952 | ||||||||
Net gains and losses on derivative instruments: | ||||||||||||
Amount arising during the year | (726 | ) | 305 | (421 | ) | |||||||
Reclassification adjustments for gains and losses realized in net income | 790 | (332 | ) | 458 | ||||||||
Net change during the year | 64 | (27 | ) | 37 | ||||||||
Minimum pension liability adjustments | 70,218 | (39,738 | ) | 30,480 | ||||||||
Other comprehensive income (loss) | ¥ | 64,180 | ¥ | (40,988 | ) | ¥ | 23,192 | |||||
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17. | Net Income per Share |
Year ended December 31 | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
(Millions of yen) | ||||||||||||
Net income | ¥ | 384,096 | ¥ | 343,344 | ¥ | 275,730 | ||||||
Effect of dilutive securities: | ||||||||||||
1.20% Japanese yen convertible debentures, due 2005 | 5 | 24 | 36 | |||||||||
1.30% Japanese yen convertible debentures, due 2008 | 18 | 72 | 86 | |||||||||
Diluted net income | ¥ | 384,119 | ¥ | 343,440 | ¥ | 275,852 | ||||||
(Number of shares) | ||||||||||||
Average common shares outstanding | 887,173,810 | 885,365,124 | 878,648,844 | |||||||||
Effect of dilutive securities: | ||||||||||||
1.20% Japanese yen convertible debentures, due 2005 | 123,837 | 462,823 | 2,664,354 | |||||||||
1.30% Japanese yen convertible debentures, due 2008 | 745,954 | 2,125,278 | 6,382,560 | |||||||||
Diluted common shares outstanding | 888,043,601 | 887,953,225 | 887,695,758 | |||||||||
(Yen) | ||||||||||||
Net income per share: | ||||||||||||
Basic | ¥ | 432.94 | ¥ | 387.80 | ¥ | 313.81 | ||||||
Diluted | 432.55 | 386.78 | 310.75 |
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18. | Derivatives and Hedging Activities |
107
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18. | Derivatives and Hedging Activities (continued) |
December 31 | ||||||||
2005 | 2004 | |||||||
(Millions of yen) | ||||||||
To sell foreign currencies | ¥ | 645,188 | ¥ | 584,208 | ||||
To buy foreign currencies | 46,424 | 34,201 |
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19. | Commitments and Contingent Liabilities |
(Millions of yen) | ||||
Year ending December 31: | ||||
2006 | ¥ | 14,571 | ||
2007 | 10,723 | |||
2008 | 7,970 | |||
2009 | 5,684 | |||
2010 | 4,139 | |||
Thereafter | 9,502 | |||
Total future minimum lease payments | ¥ | 52,589 | ||
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19. | Commitments and Contingent Liabilities (continued) |
Year ended December 31 | ||||||||
2005 | 2004 | |||||||
(Millions of yen) | ||||||||
Balance at beginning of year | ¥ | 14,264 | ¥ | 10,512 | ||||
Addition | 18,510 | 13,319 | ||||||
Utilization | (15,580 | ) | (9,400 | ) | ||||
Other | (448 | ) | (167 | ) | ||||
Balance at end of year | ¥ | 16,746 | ¥ | 14,264 | ||||
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19. | Commitments and Contingent Liabilities (continued) |
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20. | Disclosures about the Fair Value of Financial Instruments and Concentrations of Credit Risk |
December 31 | ||||||||||||||||
2005 | 2004 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
amount | fair value | amount | fair value | |||||||||||||
(Millions of yen) | ||||||||||||||||
Long-term debt, including current installments | ¥ | (32,074 | ) | ¥ | (35,194 | ) | ¥ | (38,530 | ) | ¥ | (44,620 | ) | ||||
Foreign exchange contracts: | ||||||||||||||||
Assets | 2,250 | 2,250 | 4,875 | 4,875 | ||||||||||||
Liabilities | (10,062 | ) | (10,062 | ) | (11,020 | ) | (11,020 | ) |
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20. | Disclosures about the Fair Value of Financial Instruments and Concentrations of Credit Risk (continued) |
21. | Supplemental Cash Flow Information |
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Balance at | Add | Deduct | Add | Balance | ||||||||||||||||
beginning of | charge to | bad debts | translation | at end of | ||||||||||||||||
period | income | written off | adjustments | period | ||||||||||||||||
(Millions of yen) | ||||||||||||||||||||
Year ended December 31, 2005: | ||||||||||||||||||||
Allowance for doubtful receivables | ¥ | 11,657 | ¥ | 560 | ¥ | 1,180 | ¥ | 691 | ¥ | 11,728 | ||||||||||
Year ended December 31, 2004: | ||||||||||||||||||||
Allowance for doubtful receivables | ¥ | 14,423 | ¥ | 449 | ¥ | 3,515 | ¥ | 300 | ¥ | 11,657 | ||||||||||
Year ended December 31, 2003: | ||||||||||||||||||||
Allowance for doubtful receivables | ¥ | 12,031 | ¥ | 5,232 | ¥ | 2,878 | ¥ | 38 | ¥ | 14,423 | ||||||||||
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(a) | The following consolidated financial statements and schedule II included in Item 17. “Financial Statements.” |
Report of Ernst & Young ShinNihon, Independent Registered Public Accounting Firm | |||
Report of KPMG AZSA & Co., Independent Registered Public Accounting Firm | |||
Consolidated Balance Sheets as of December 31, 2005 and 2004 | |||
Consolidated Statements of Income for the years ended December 31, 2005, 2004 and 2003 | |||
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2005, 2004 and 2003 | |||
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003 | |||
Notes to Consolidated Financial Statements |
Schedule II Valuation and Qualifying Accounts for the years ended December 31, 2005, 2004 and 2003 | |||
(b) | List of exhibits |
1.1 | Articles of Incorporation of Canon Inc. (Translation) | ||
1.2 | Regulations of the Board of Directors of Canon Inc. (Translation), incorporated by reference from the annual report on Form20-F (Commission file number 001-15122) filed on June 10, 2004 | ||
2 | Regulations for Handling of Shares of Canon Inc. (Translation), incorporated by reference from the annual report on Form20-F (Commission file number 001-15122) filed on June 16, 2005 | ||
8 | List of Significant Subsidiaries (See “Organizational Structure” in Item 4.C. of this Form 20-F) | ||
11.1 | Canon Group Code of Conduct (Translation) , incorporated by reference from the annual report on Form20-F (Commission file number 001-15122) filed on June 10, 2004 | ||
11.2 | Code of Ethics (Supplement to The Canon Group Code of Conduct) (Translation), incorporated by reference from the annual report on Form20-F (Commission file number 001-15122) filed on June 10, 2004 | ||
12 | 302 Certifications | ||
13 | 906 Certification |
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CANON INC. (Registrant) | ||||
By: | /s/ Toshizo Tanaka | |||
(Senior Managing Director, | ||||
Group Executive of Finance and Accounting Headquarters) | ||||
30-2, Shimomaruko 3-chome,
Ohta-ku, Tokyo 146-8501, Japan
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Exhibit number | Title | |
Exhibit 1.1 | Articles of Incorporation of Canon Inc. (Translation) | |
Exhibit 1.2 | Regulations of the Board of Directors of Canon Inc. (Translation), incorporated by reference from the annual report on Form 20-F (Commission file number 001-15122) filed on June 10, 2004 | |
Exhibit 2 | Regulations for Handling of Shares of Canon Inc. (Translation), incorporated by reference from the annual report on Form 20-F (Commission file number 001-15122) filed on June 16, 2005 | |
Exhibit 8 | List of Significant Subsidiaries (See “Organizational Structure” in Item 4.C. of this Form 20-F) | |
Exhibit 11.1 | Canon Group Code of Conduct (Translation) , incorporated by reference from the annual report on Form 20-F (Commission file number 001-15122) filed on June 10, 2004 | |
Exhibit 11.2 | Code of Ethics (Supplement to The Canon Group Code of Conduct) (Translation), incorporated by reference from the annual report on Form 20-F (Commission file number 001-15122) filed on June 10, 2004 | |
Exhibit 12 | 302 Certifications | |
Exhibit 13 | 906 Certification |
117