Canon (CAJFF) 6-K Current report (foreign)

FORM6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer

Pursuant to Rule13a-16 or15d-16 of

the Securities Exchange Act of 1934

For the month of ….  January ……………………………………………… ,  2019

CANON INC.

(Translation of registrant’s name into English)

30-2, Shimomaruko 3-Chome, Ohta-ku, Tokyo 146-8501, Japan

(Address of principal executive offices)

[Indicate by check mark whether the registrant files or will file annual reports under cover Form20-F orForm 40-F.

Form 20-F X Form 40-F

[Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule12g3-2(b) under the Securities Exchange Act of 1934.

Yes No X

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

SIGNATURES

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

CANON INC.

    (Registrant)

Date….	January 30, 2019	By....../s/.......... Sachiho Tanino.............
		(Signature)*
		Sachiho Tanino                      General Manager                      Consolidated Accounting Div.                      Canon Inc.

*Print the name and title of the signing officer under his signature.

The following materials are included.

1.  RESULTS FOR THE FOURTH QUARTER AND THE FISCAL YEAR ENDED DECEMBER 31, 2018

RESULTS FOR THE FOURTH QUARTER

AND THE FISCAL YEAR ENDED DECEMBER 31, 2018

January 30, 2019

CONSOLIDATED RESULTS

				(Millions of yen, thousands of U.S. dollars, except per share amounts)
		Actual									Projected
	Year ended December 31, 2018		Year ended December 31, 2017		Change(%)			Year ended December 31, 2018		Year ending December 31, 2019		Change(%)
Net sales	¥	3,951,937	¥	4,080,015		-	3.1	$	35,603,036	¥	3,900,000		-	1.3
Operating profit		342,952		321,605		+	6.6		3,089,658		325,000		-	5.2
Income before income taxes		362,892		353,884		+	2.5		3,269,297		347,500		-	4.2
Net income attributable to Canon Inc.	¥	252,755	¥	241,923		+	4.5	$	2,277,072	¥	240,000		-	5.0
Net income attributable to Canon Inc. shareholders per share:
- Basic	¥	234.09	¥	222.88		+	5.0	$	2.11	¥	222.27		-	5.0
- Diluted		234.08		222.88		+	5.0		2.11		222.26		-	5.0
	Actual
	As of December 31, 2018		As of December 31, 2017		Change(%)			As of December 31, 2018
Total assets	¥	4,899,465	¥	5,198,291		-	5.7	$	44,139,324
Canon Inc. shareholders’ equity	¥	2,827,602	¥	2,870,630		-	1.5	$	25,473,892

Notes:	1.	Canon’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.
	2.	U.S. dollar amounts are translated from yen at the rate of JPY 111= U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of December 28, 2018, solely for the convenience of the reader.

Canon Inc.	30-2, Shimomaruko3-chome,Ohta-ku,
Headquarter office	Tokyo146-8501, Japan
	Phone:+81-3-3758-2111

- 1 -

I. Operating Results and Financial Conditions

2018 in Review

Looking back at the global economy in 2018, the U.S. economy steadily recovered as corporate earnings and employment conditions improved. In Europe, while domestic demand remained firm, the rate of growth decelerated due to sluggish export growth. In China, the economy slowed down due to sluggish capital investments and a decline in consumer spending. The economies of other emerging markets also worsened, due to such factors as local currency depreciation. In Japan, the economy recovered moderately supported by continuing improvements in employment conditions. As a result, the global economy overall continued to realize a moderate recovery. However, the pace of economic growth slowed down from the latter half of the year as a result of trade friction.

As for the markets in which Canon operates amid these conditions, office multifunction devices (“MFDs”) and laser printers enjoyed solid demand due to the shift from monochrome to color models and robust demand in emerging markets. The decline of the camera market continued and the market for inkjet printers was slightly below the level of the previous year. On the other hand, demand for medical equipment grew moderately. Within the Industry and Others sector, capital investment in semiconductor lithography equipment increased, while capital investment in organic LED (“OLED”) panel manufacturing equipment faced a temporary slowdown. Demand for network cameras enjoyed solid growth.

The average value of the yen during the year was ¥110.43 against the U.S. dollar, ayear-on-year appreciation of approximately ¥2, and ¥130.29 against the euro, ayear-on-year depreciation of approximately ¥4.

During 2018, unit sales of office MFDs increased compared with the previous year due to the expanded sales of color models, mainly outside of Japan. Additionally, unit sales of both monochrome and color laser printers increased compared with the previous year, supported by the steady sales of newly launched models. Total sales volume of interchangeable-lens digital cameras decreased compared with the previous year due to contraction of the market mainly for entry-class models. However, sales of mirrorless cameras increased. Looking at inkjet printers, although sales unit of refillable ink tank models increased in emerging markets, unit sales overall decreased compared with the previous year, due to decreasing demand in developed economies. For medical equipment, newly launched diagnostic ultrasound systems and magnetic resonance imaging (“MRI”) systems experienced solid demand, mainly outside of Japan, achieving increased sales compared with the previous year. For industrial equipment, sales of semiconductor lithography equipment increased significantly compared with the previous year, thanks to favorable market conditions. However, manufacturing equipment for OLED panels decreased compared with the previous year mainly due to a slowdown in investment in OLED panels. Sales of network cameras increased steadily in response to the growing market. Under these conditions, net sales for the year decreased by 3.1% year on year to ¥3,951.9 billion. In addition, the gross profit ratio dropped by 2.4 points to 46.4%. This was mainly due to the fact that certain costs that were under operating expenses have been reclassified under cost of sales following the adoption of new accounting standards related to revenue recognitions. Excluding the impact of this reclassification, the gross profit ratio increased by 0.6 points to 49.4%. Operating expenses decreased by 10.6% year on year to ¥1,492.6 billion, thanks to Group-wide efforts to thoroughly manage expenses as well as impairment loss on goodwill of commercial printing business during the previous year in addition to the impact of the aforementioned reclassification of figures related to the adoption of new accounting standards. As a result, operating profit increased by 6.6% to ¥343.0 billion. Other income (deductions) decreased by ¥12.3 billion, mainly due to gain on securities contributed to the retirement benefit trust during the previous year, while income before income taxes increased by 2.5% year on year to ¥362.9 billion and net income attributable to Canon Inc. increased by 4.5% to ¥252.8 billion.

Basic net income attributable to Canon Inc. shareholders per share for the year was ¥234.09, ayear-on-year increase of ¥11.21.

- 2 -

Results by Segment

Looking at Canon’s full-year performance by business unit, starting with the Office Business Unit, unit sales of office MFDs increased from the previous year, thanks to expanded sales of such color models as the imageRUNNER ADVANCE Gen3 2nd Edition series, which enhances convenience through compatibility with external cloud services, and the imageRUNNER C3020 series of strategic models for emerging markets. As for laser printers, sales of hardware increased from the previous year, supported by steady sales mainly of new models that achieve low power consumption, compact body designs and high productivity. Sales of consumables remained at the same level as the previous year. These factors resulted in total sales for the business unit of ¥1,807.3 billion, ayear-on-year increase of 0.1%, while income before income taxes increased by 17.3% year on year to ¥229.2 billion partly due to impairment loss on goodwill during the previous year.

Looking at the Imaging System Business Unit, although unit sales of interchangeable-lens digital cameras decreased overall compared with the previous year due to shrinking market, Canon maintained the top share of the overall interchangeable-lens digital cameras market, mainly in key countries in Europe and the Americas as well as in Japan and China. In mirrorless cameras, sales were strong for such new models as the EOS R, Canon’s first mirrorless camera equipped with a full-frame sensor, and the entry-class EOS Kiss M. As for digital compact cameras, although unit sales decreased compared with the previous year amid the shrinking market, sales of such high-value-added models as the PowerShotG-series enjoyed solid demand. For inkjet printers, unit sales of refillable ink tank models increased significantly in emerging markets. However, unit sales decreased overall compared with the previous year, mainly due to the shrinking market in developed economies. For large format inkjet printers, the imagePROGRAF TX series, which is suitable for outputting CAD drawings and poster designs, garnered high praise from the market and enjoyed solid sales. As a result, sales for the business unit decreased by 11.3% year on year to ¥1,008.2 billion, while income before income taxes decreased by 31.1% year on year to ¥121.3 billion.

Within the Medical System Business Unit, sales increased due to such newly launched products as the Alphenix-series of next-generation diagnosticX-ray systems and the Vantage Orian, a high-image-quality MRI system incorporating leading-edge technology. As a result, sales for the business unit increased by 0.3% year on year to ¥437.6 billion, while income before income taxes increased by 31.0% year on year to ¥29.5 billion.

In the Industry and Others Business Unit, unit sales of semiconductor lithography equipment increased from the previous year due to increasing demand for memory devices used in data centers. However, for flat panel display (“FPD”) lithography equipment and OLED panel manufacturing equipment, sales decreased compared with the previous year mainly due to a temporary slowdown in investment in OLED panels. As for network cameras, Axis enjoyed solid sales amid increasing market demand. Consequently, sales for the business unit increased by 1.6% year on year to ¥805.2 billion, while income before income taxes increased by 60.7% year on year to ¥67.6 billion.

Cash Flow

During 2018, cash flow from operating activities totaled ¥365.3 billion, a decrease of ¥225.3 billion compared with the previous year, mainly owing to increased working capital and payment of income taxes. Cash flow from investing activities increased by ¥30.6 billionyear-on-year to ¥195.6 billion mainly due to an increase in payment for acquisitions of businesses. Accordingly, free cash flow totaled ¥169.7 billion, a decrease of ¥255.9 billion compared with the correspondingyear-ago period.

Cash flow from financing activities recorded an outlay of ¥354.8 billion, mainly owing to the dividend payout, and the repayment of long-term debt.

Owing to these factors, as well as the impact from foreign currency translation adjustments, cash and cash equivalents decreased by ¥201.2 billion to ¥520.6 billion from the end of the previous year.

- 3 -

Outlook

As for the outlook for 2019, with regard to the U.S. economy, while consumer spending is expected to grow steadily, the rate of growth is expected to slow due to the waning effects of the country’s tax reform. For the European economy, external demand is expected to remain weak in Germany and uncertainty surrounding impasses in Brexit negotiations is expected to continue. Although China is working to stabilize its economy through changes in monetary and fiscal policy, conditions are expected to worsen due to trade friction, and as aknock-on effect, emerging economies, including Southeast Asia, are expected to remain weak. With regard to the Japanese economy, while capital investment continues to increase, external demand is expected to remain at a standstill. The global economy is expected to continue to slow down from the latter half of 2018 and overall, there are concerns of further economic slowdown occurring as a result of intensifying trade friction.

In the businesses in which Canon is involved, for office MFDs, color models are expected to grow steadily. Overall demand for laser printers is expected to remain at the same level as that of the previous year, supported by the trend of shifting from monochrome to color models and increasing demand in emerging markets. For interchangeable-lens digital cameras, while demand for interchangeable-lens digital cameras equipped with full-frame sensors is expected to grow steadily, overall demand is expected to decrease. Projections for digital compact cameras indicate continued market contraction, centered mainly onlow-priced models. With regard to inkjet printers, demand is expected to continue to decrease slightly from the previous year.

As for the medical equipment market, demand is expected to remain firm, mainly outside of Japan, with increasing demand in emerging markets and increased demand for advanced medical care in the United States and Europe. Looking at industrial equipment, as for the semiconductor lithography equipment, while demand for automotive devices is expected to increase, capital investment is expected to slow down for memory devices. For FPD lithography equipment and OLED panel manufacturing equipment, capital investment in small- andmedium-size display panels is expected to continue to slow down. As for network cameras, demand is expected to continue expanding for high-spec models and image analysis software due to the growing use of network cameras for a widening range of applications.

With regard to currency exchange rates for the year, on which Canon’s performance outlook is based, Canon anticipates exchange rates of ¥105 to the U.S. dollar and ¥125 to the euro, representing appreciations of approximately ¥5 against both the U.S. dollar and the euro compared with the annual average rates of the previous year.

Upon taking into consideration the current economic forecast, Canon projects full-year consolidated net sales in 2019 of ¥3,900.0 billion, ayear-on-year decrease of 1.3%; operating profit of ¥325.0 billion, ayear-on-year decrease of 5.2%; income before income taxes of ¥347.5 billion, ayear-on-year decrease of 4.2%; and net income attributable to Canon Inc. of ¥240.0 billion, ayear-on-year decrease of 5.0%.

- 4 -

This document contains forward-looking statements with respect to future results, performance and achievements that are subject to risk and uncertainties and reflect management’s views and assumptions formed by available information. All statements other than statements of historical fact are statements that could be considered forward-looking statements. When used in this document, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project” or “should” and similar expressions, as they relate to Canon, are intended to identify forward-looking statements. Many factors could cause the actual results, performance or achievements of Canon to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products by other companies, lack of acceptance of new products or services by Canon’s targeted customers, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, both referenced and not referenced in this document. A detailed description of these and other risk factors is included in Canon’s annual report on Form20-F, which is on file with the United States Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. Canon does not intend or assume any obligation to update these forward-looking statements.

II. Basic Concept Regarding the Selection of Accounting Standards

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

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

- 5 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

III. Financial Statements

1. CONSOLIDATED BALANCE SHEETS

	Millions of yen
	As of December 31, 2018		As of December 31, 2017		Change
ASSETS
Current assets:
Cash and cash equivalents		520,645		721,814		(201,169)
Short-term investments		956		1,965		(1,009)
Trade receivables, net		612,953		650,872		(37,919)
Inventories		611,281		570,033		41,248
Prepaid expenses and other current assets		304,346		287,965		16,381
Total current assets		2,050,181		2,232,649		(182,468)
Noncurrent receivables		18,230		35,444		(17,214)
Investments		42,556		48,320		(5,764)
Property, plant and equipment, net		1,090,992		1,126,620		(35,628)
Intangible assets, net		391,021		420,972		(29,951)
Goodwill		908,511		936,722		(28,211)
Other assets		397,974		397,564		410
Total assets		4,899,465		5,198,291		(298,826)
LIABILITIES AND EQUITY
Current liabilities:
Short-term loans and current portion of long-term debt		38,527		39,328		(801)
Trade payables		352,489		380,654		(28,165)
Accrued income taxes		41,264		77,501		(36,237)
Accrued expenses		321,137		330,188		(9,051)
Other current liabilities		276,237		281,809		(5,572)
Total current liabilities		1,029,654		1,109,480		(79,826)
Long-term debt, excluding current installments		361,962		493,238		(131,276)
Accrued pension and severance cost		382,789		365,582		17,207
Other noncurrent liabilities		107,147		133,816		(26,669)
Total liabilities		1,881,552		2,102,116		(220,564)
Equity:
Canon Inc. shareholders’ equity:
Common stock		174,762		174,762		-
Additionalpaid-in capital		404,389		401,386		3,003
Legal reserve		67,116		66,879		237
Retained earnings		3,508,908		3,429,312		79,596
Accumulated other comprehensive income (loss)		(269,071)		(143,228)		(125,843)
Treasury stock, at cost		(1,058,502)		(1,058,481)		(21)
Total Canon Inc. shareholders’ equity		2,827,602		2,870,630		(43,028)
Noncontrolling interests		190,311		225,545		(35,234)
Total equity		3,017,913		3,096,175		(78,262)
Total liabilities and equity		4,899,465		5,198,291		(298,826)
	Millions of yen
	As of December 31, 2018		As of December 31, 2017
Notes:
1. Allowance for doubtful receivables		11,477		13,378
2. Accumulated depreciation		2,671,922		2,638,055
3. Accumulated other comprehensive income (loss):
Foreign currency translation adjustments		(63,815)		30,208
Net unrealized gains and losses on securities		-		5,484
Net gains and losses on derivative instruments		308		(180)
Pension liability adjustments		(205,564)		(178,740)

- 6 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

2. CONSOLIDATED STATEMENTS OF INCOME AND

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Consolidated statements of income
Results for the fourth quarter	Millions of yen
	Three months ended December 31, 2018			Three months ended December 31, 2017			Change(%)
Net sales		1,058,340			1,120,291			-	5.5
Cost of sales		569,063			574,258
Gross profit		489,277			546,033			-	10.4
Operating expenses:
Selling, general and administrative expenses		306,413			347,901
Research and development expenses		83,286			87,632
Impairment losses on goodwill		-			33,912
		389,699			469,445
Operating profit		99,578			76,588			+	30.0
Other income (deductions):
Interest and dividend income		1,174			1,478
Interest expense		(144	)		(236	)
Other, net		(646	)		10,687
		384			11,929
Income before income taxes		99,962			88,517			+	12.9
Income taxes		24,204			28,776
Consolidated net income		75,758			59,741
Less: Net income attributable to noncontrolling interests		4,044			5,138
Net income attributable to Canon Inc.		71,714			54,603			+	31.3
Results for the fiscal year	Millions of yen
	Year ended December 31, 2018			Year ended December 31, 2017			Change(%)
Net sales		3,951,937			4,080,015			-	3.1
Cost of sales		2,116,383			2,089,461
Gross profit		1,835,554			1,990,554			-	7.8
Operating expenses:
Selling, general and administrative expenses		1,176,760			1,301,666
Research and development expenses		315,842			333,371
Impairment losses on goodwill		-			33,912
		1,492,602			1,668,949
Operating profit		342,952			321,605			+	6.6
Other income (deductions):
Interest and dividend income		6,604			6,012
Interest expense		(797	)		(818	)
Other, net		14,133			27,085
		19,940			32,279
Income before income taxes		362,892			353,884			+	2.5
Income taxes		96,150			98,024
Consolidated net income		266,742			255,860
Less: Net income attributable to noncontrolling interests		13,987			13,937
Net income attributable to Canon Inc.		252,755			241,923			+	4.5

- 7 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

Consolidated statements of comprehensive income
Results for the fourth quarter	Millions of yen
	Three months ended December 31, 2018		Three months ended December 31, 2017	Change(%)
Consolidated net income		75,758	59,741	+        26.8
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(57,818)	9,001
Net unrealized gains and losses on securities		-	(4,859)
Net gains and losses on derivative instruments		1,158	909
Pension liability adjustments		(33,020)	20,975
		(89,680)	26,026
Comprehensive income (loss)		(13,922)	85,767	-
Less: Comprehensive income attributable to noncontrolling interests		(62)	7,731
Comprehensive income (loss) attributable to Canon Inc.		(13,860)	78,036	-
Results for the fiscal year	Millions of yen
	Year ended December 31, 2018		Year ended December 31, 2017	Change(%)
Consolidated net income		266,742	255,860	+        4.3
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(93,146)	47,090
Net unrealized gains and losses on securities		(141)	(9,362)
Net gains and losses on derivative instruments		488	2,588
Pension liability adjustments		(30,570)	21,207
		(123,369)	61,523
Comprehensive income (loss)		143,373	317,383	-        54.8
Less: Comprehensive income attributable to noncontrolling interests		6,918	18,807
Comprehensive income (loss) attributable to Canon Inc.		136,455	298,576	-        54.3

- 8 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

3. DETAILS OF SALES

Results for the fourth quarter	Millions of yen
Sales by business unit	Three months ended December 31, 2018		Three months ended December 31, 2017		Change(%)
Office		471,572		477,346		-	1.2
Imaging System		297,532		340,920		-	12.7
Medical System		118,187		103,682		+	14.0
Industry and Others		198,140		221,137		-	10.4
Eliminations		(27,091)		(22,794)			-
Total		1,058,340		1,120,291		-	5.5
	Millions of yen
Sales by region	Three months ended December 31, 2018		Three months ended December 31, 2017		Change(%)
Japan		235,774		242,692		-	2.9
Overseas:
Americas		305,527		303,277		+	0.7
Europe		280,169		289,104		-	3.1
Asia and Oceania		236,870		285,218		-	17.0
		822,566		877,599		-	6.3
Total		1,058,340		1,120,291		-	5.5
*From the beginning of the third quarter of 2018, Canon has reclassified certain businesses from Office Business Unit to Industry and Others Business Unit. Net sales for the three months ended December 31, 2017 also have been restated.
Results for the fiscal year	Millions of yen
Sales by business unit	Year ended December 31, 2018		Year ended December 31, 2017		Change(%)
Office		1,807,301		1,804,782		+	0.1
Imaging System		1,008,165		1,136,188		-	11.3
Medical System		437,578		436,187		+	0.3
Industry and Others		805,211		792,850		+	1.6
Eliminations		(106,318)		(89,992)			-
Total		3,951,937		4,080,015		-	3.1
	Millions of yen		Millions of yen
Sales by region	Year ended December 31, 2018		Year ended December 31, 2017		Change(%)
Japan		869,577		884,828		-	1.7
Overseas:
Americas		1,076,402		1,107,515		-	2.8
Europe		1,015,428		1,028,415		-	1.3
Asia and Oceania		990,530		1,059,257		-	6.5
		3,082,360		3,195,187		-	3.5
Total		3,951,937		4,080,015		-	3.1
*From the beginning of the third quarter of 2018, Canon has reclassified certain businesses from Office Business Unit to Industry and Others Business Unit. Net sales for the year ended December 31, 2017 also have been restated.

Notes:	1.	The primary products included in each of the segments are as follows: Office Business Unit : Office multifunction devices (MFDs) / Laser multifunction printers (MFPs) / Laser printers / Digital continuous feed presses / Digitalsheet-fed presses / Wide-format printers / Document solutions Imaging System Business Unit : Interchangeable-lens digital cameras / Digital compact cameras / Digital camcorders / Digital cinema cameras / Interchangeable lenses / Compact photo printers / Inkjet printers / Large format inkjet printers / Commercial photo printers / Image scanners / Multimedia projectors / Broadcast equipment / Calculators Medical System Business Unit : Digital radiography systems / DiagnosticX-ray systems / Computed tomography (CT) systems / Magnetic resonance imaging (MRI) systems / Diagnostic ultrasound systems / Clinical chemistry analyzers / Ophthalmic equipment Industry and Others Business Unit : Semiconductor lithography equipment / FPD (Flat panel display) lithography equipment / Vacuum thin-film deposition equipment / Organic LED (OLED) panel manufacturing equipment / Die bonders / Micromotors / Network cameras / Handy terminals / Document scanners
	2.	The principal countries and regions included in each regional category are as follows: Americas: United States of America, Canada, Latin America Europe: United Kingdom, Germany, France, Netherlands, European countries, Middle East and Africa Asia and Oceania: China, Asian countries, Australia

- 9 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

4. CONSOLIDATED STATEMENTS OF EQUITY

Millions of yen

	Common Stock		Additional paid-in capital		Legal reserve		Retained earnings			Accumulated other comprehensive income (loss)			Treasury stock			Total Canon Inc. shareholders’ equity			Noncontrolling interests			Total equity
Balance at December 31, 2016		174,762		401,385		66,558		3,350,728			(199,881	)		(1,010,423	)		2,783,129			211,493		2,994,622
Equity transactions with noncontrolling interests and other				1													1			(1	)	-
Dividends to Canon Inc. shareholders								(162,887	)								(162,887	)				(162,887)
Dividends to noncontrolling interests																				(4,814	)	(4,814)
Acquisition of subsidiaries																				60		60
Transfers to legal reserve						321		(321	)								-					-
Comprehensive income:
Net income								241,923									241,923			13,937		255,860
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments											44,168						44,168			2,922		47,090
Net unrealized gains and losses on securities											(9,767	)					(9,767	)		405		(9,362)
Net gains and losses on derivative instruments											2,562						2,562			26		2,588
Pension liability adjustments											19,690						19,690			1,517		21,207
Total comprehensive income (loss)																	298,576			18,807		317,383
Repurchases of treasury stock														(50,036	)		(50,036	)				(50,036)
Reissuance of treasury stock								(131	)					1,978			1,847					1,847
Balance at December 31, 2017		174,762		401,386		66,879		3,429,312			(143,228	)		(1,058,481	)		2,870,630			225,545		3,096,175
Cumulative effects of accounting standard update—adoption of ASUNo.2014-09								(106	)								(106	)		(76	)	(182)
Cumulative effects of accounting standard update—adoption of ASUNo. 2016-01								5,343			(5,343	)					-			-		-
Equity transactions with noncontrolling interests and other				3,003							(4,200	)					(1,197	)		(36,518	)	(37,715)
Dividends to Canon Inc. shareholders								(178,159	)								(178,159	)				(178,159)
Dividends to noncontrolling interests																				(5,558	)	(5,558)
Transfers to legal reserve						237		(237	)								-					-
Comprehensive income:
Net income								252,755									252,755			13,987		266,742
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments											(89,823	)					(89,823	)		(3,323	)	(93,146)
Net unrealized gains and losses on securities											(141	)					(141	)		-		(141)
Net gains and losses on derivative instruments											488						488			-		488
Pension liability adjustments											(26,824	)					(26,824	)		(3,746	)	(30,570)
Total comprehensive income (loss)																	136,455			6,918		143,373
Repurchases of treasury stock														(25	)		(25	)				(25)
Reissuance of treasury stock								0						4			4					4
Balance at December 31, 2018		174,762		404,389		67,116		3,508,908			(269,071	)		(1,058,502	)		2,827,602			190,311		3,017,913

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

5. CONSOLIDATED STATEMENTS OF CASH FLOWS

	Millions of yen
	Year ended     December 31, 2018		Year ended     December 31, 2017
Cash flows from operating activities:
Consolidated net income		266,742		255,860
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization		251,554		261,881
Loss on disposal of fixed assets		5,726		6,935
Impairment losses on goodwill		-		33,912
Gain on securities contributed to retirement benefit trust		-		(17,836)
Deferred income taxes		(11,849)		(17,603)
(Increase) decrease in trade receivables		(17,724)		3,563
(Increase) decrease in inventories		(61,755)		2,967
Increase (decrease) in trade payables		(31,212)		4,951
Increase (decrease) in accrued income taxes		(35,284)		46,296
Increase in accrued expenses		2,541		18,503
Increase (decrease) in accrued (prepaid) pension and severance cost		(17,738)		522
Other, net		14,292		(9,394)
Net cash provided by operating activities		365,293		590,557
Cash flows from investing activities:
Purchases of fixed assets		(191,399)		(189,484)
Proceeds from sale of fixed assets		9,634		26,444
Purchases of securities		(2,311)		(2,220)
Proceeds from sale and maturity of securities		1,615		970
Decrease in time deposits, net		401		3,373
Acquisitions of businesses, net of cash acquired		(13,346)		(6,557)
Other, net		(209)		2,464
Net cash used in investing activities		(195,615)		(165,010)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		439		1,570
Repayments of long-term debt		(136,094)		(126,578)
Increase in short-term loans, net		2,501		5,628
Transactions with noncontrolling interests		(37,942)		-
Dividends paid		(178,159)		(162,887)
Repurchases and reissuance of treasury stock		(21)		(50,034)
Other, net		(5,554)		(8,163)
Net cash used in financing activities		(354,830)		(340,464)
Effect of exchange rate changes on cash and cash equivalents		(16,017)		6,538
Net change in cash and cash equivalents		(201,169)		91,621
Cash and cash equivalents at beginning of year		721,814		630,193
Cash and cash equivalents at end of year		520,645		721,814

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

6. NOTE FOR GOING CONCERN ASSUMPTION

      Not applicable.

7. SEGMENT INFORMATION

  SEGMENT INFORMATION BY BUSINESS UNIT

Results for the fiscal year		Millions of yen
		Year ended     December 31, 2018		Year ended     December 31, 2017		Change(%)
Office
Net sales:
	External customers		1,804,002		1,802,542	+	0.1
	Intersegment		3,299		2,240	+	47.3
	Total		1,807,301		1,804,782	+	0.1
Operating cost and expenses			1,586,497		1,615,521	-	1.8
Operating profit			220,804		189,261	+	16.7
Other income (deductions)			8,383		6,108	+	37.2
Income before income taxes			229,187		195,369	+	17.3
Total assets			923,261		946,213	-	2.4
Depreciation and amortization			64,964		72,346	-	10.2
Capital expenditures			48,127		46,769	+	2.9
Imaging System
Net sales:
	External customers		1,007,365		1,135,584	-	11.3
	Intersegment		800		604	+	32.5
	Total		1,008,165		1,136,188	-	11.3
Operating cost and expenses			891,210		962,663	-	7.4
Operating profit			116,955		173,525	-	32.6
Other income (deductions)			4,299		2,388	+	80.0
Income before income taxes			121,254		175,913	-	31.1
Total assets			393,004		387,088	+	1.5
Depreciation and amortization			40,541		41,695	-	2.8
Capital expenditures			25,796		28,508	-	9.5
Medical System
Net sales:
	External customers		437,305		434,985	+	0.5
	Intersegment		273		1,202	-	77.3
	Total		437,578		436,187	+	0.3
Operating cost and expenses			408,739		414,246	-	1.3
Operating profit			28,839		21,941	+	31.4
Other income (deductions)			640		564	+	13.5
Income before income taxes			29,479		22,505	+	31.0
Total assets			247,282		238,824	+	3.5
Depreciation and amortization			9,365		5,212	+	79.7
Capital expenditures			7,454		8,963	-	16.8
Industry and Others
Net sales:
	External customers		703,265		706,904	-	0.5
	Intersegment		101,946		85,946	+	18.6
	Total		805,211		792,850	+	1.6
Operating cost and expenses			739,665		752,122	-	1.7
Operating profit			65,546		40,728	+	60.9
Other income (deductions)			2,061		1,339	+	53.9
Income before income taxes			67,607		42,067	+	60.7
Total assets			383,568		376,064	+	2.0
Depreciation and amortization			38,582		39,736	-	2.9
Capital expenditures			24,091		16,620	+	45.0
Corporate and Eliminations
Net sales:
	External customers		-		-		-
	Intersegment		(106,318)		(89,992)		-
	Total		(106,318)		(89,992)		-
Operating cost and expenses			(17,126)		13,858		-
Operating profit			(89,192)		(103,850)		-
Other income (deductions)			4,557		21,880		-
Income before income taxes			(84,635)		(81,970)		-
Total assets			2,952,350		3,250,102	-	9.2
Depreciation and amortization			98,102		102,892	-	4.7
Capital expenditures			95,036		80,529	+	18.0
Consolidated
Net sales:
	External customers		3,951,937		4,080,015	-	3.1
	Intersegment		-		-		-
	Total		3,951,937		4,080,015	-	3.1
Operating cost and expenses			3,608,985		3,758,410	-	4.0
Operating profit			342,952		321,605	+	6.6
Other income (deductions)			19,940		32,279	-	38.2
Income before income taxes			362,892		353,884	+	2.5
Total assets			4,899,465		5,198,291	-	5.7
Depreciation and amortization			251,554		261,881	-	3.9
Capital expenditures			200,504		181,389	+	10.5

*From the beginning of the third quarter of 2018, Canon has reclassified certain businesses from Office Business Unit to Industry and Others Business Unit. Total assets as of December 31, 2017, and capital expenditures and operating results for the year ended December 31, 2017 also have been restated.

*Corporate expenses include certain corporate research and development expenses. Amortization costs of identified intangible assets resulting from the purchase price allocation of Canon Medical Systems Corporation are also included in corporate expenses.

*While Canon previously disclosed operating profit as segment profit, Canon has newly adopted income before income taxes as segment profit from the beginning of the fourth quarter of 2018. Due to the increase of other income (deductions) from the adoption of ASUNo. 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, Canon has changed its business performance measure. Please refer to “III. Financial Statements 9. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES” on page 13 for more detailed information about the change in the accounting standard.

- 12 -

CANON INC. AND SUBSIDIARIES

8. NOTE ON SIGNIFICANT CHANGES IN SHAREHOLDERS’ EQUITY

      Not applicable.

9. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

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

Recently Issued Accounting Guidance

In May 2014, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard related to revenue from contracts with customers, as amended. This standard requires an entity to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Canon adopted this guidance from the first quarter beginning January 1, 2018. Canon applied the modified retrospective method of adoption to contracts that were not completed as of the adoption. The cumulative-effects to the retained earnings and the impact on the consolidated result of operations for the fourth quarter and the year ended December 31, 2018 from the adoption of this standard were not material. In addition, in conjunction with the adoption of this standard, Canon has reconsidered the scope of performance obligations related to services, and as a result, certain costs related to service were also reclassified from operating expenses to cost of sales. The reclassified amounts for the fourth quarters and the year ended December 31, 2018 were ¥29,505 million and ¥115,700 million, respectively.

In January 2016, the FASB issued an amendment which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This guidance includes the requirement that equity investments that do not result in consolidation and are not accounted for under the equity method be measured at fair value with changes in the fair value recognized in net income. Canon adopted this guidance from the first quarter beginning January 1, 2018, and Canon recognized a cumulative-effect adjustment to retained earnings of ¥5,343 million as of January 1, 2018 for theafter-tax unrealized gains ofavailable-for-sale equity securities previously recognized in accumulated other comprehensive income.

In March 2017, the FASB issued an amendment which requires an entity to disaggregate the service cost component from the other components of net benefit cost and report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component, such as in other income (deductions). The amendments also allow only the service cost component to be eligible for capitalization (for example, as a cost of internally manufactured inventory). The amendments in this guidance should be applied retrospectively for the presentation of the service cost component and the other components of net benefit cost, and prospectively for the capitalization of the service cost component of net benefit cost. Canon adopted this guidance from the first quarter beginning January 1, 2018 and the adoption of this standard resulted in the decrease in operating profit and the increase in other income of ¥2,448 million and ¥3,110 million for the fourth quarters ended December 31, 2017 and 2016, respectively, and ¥9,874 million and ¥12,441 million for the years ended December 31, 2017 and 2016, respectively.

- 13 -

CANON INC. AND SUBSIDIARIES

10. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Results for the fiscal year	Millions of yen
	Year ended     December 31, 2018		Year ended     December 31, 2017
Net income attributable to Canon Inc.
-Basic		252,755		241,923
-Diluted		252,755		241,923
	Number of shares
Average common shares outstanding
-Basic		1,079,753,008		1,085,439,370
-Diluted		1,079,802,327		1,085,439,370
	Yen
Net income attributable to
Canon Inc. shareholders per share:
-Basic		234.09		222.88
-Diluted		234.08		222.88

(2) SUBSEQUENT EVENT

There is no significant subsequent event.

- 14 -

NON-CONSOLIDATED

(Current Titles are Shown in the Parentheses)

Effective Date: March 28, 2019

Director

(1) Director to be retired

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

Audit & Supervisory Board Members

(1) Candidates for new Audit & Supervisory Board Member to be appointed

Hiroaki Sato	(Senior Principal Engineer of Digital Business Platform Development Headquarters)
Yutaka Tanaka	(Lawyer)

(2) Audit & Supervisory Board Members to be retired

Kazuto Ono

Tadashi Ohe

- 15 -

NON-CONSOLIDATED

(Current Titles are Shown in the Parentheses)

Effective Date: April 1, 2019

Executive Officers

(1) New Executive Officers to be appointed

Saijiro Endo	(Senior General Manager of Office Imaging Products Development Planning & Management Center)
Toshiyuki Matsuda	(Group Executive of Peripherals Marketing Group)
Takeshi Ichikawa	(Senior General Manager of Semiconductor Device Research & Development Center)
Hiroto Okawara	(Senior General Manager of Image Solutions Development Center 2)

(2) Executive Officers to be promoted

Managing Executive Officer	Soichi Hiramatsu	(Executive Officer, Group Executive of Procurement Headquarters)
Managing Executive Officer	Takashi Takeya	(Executive Officer, Senior General Manager of Global Logistics Management Center)
Managing Executive Officer	Go Tokura	(Executive Officer, Chief Executive of Image Communication Business Operations)
Managing Executive Officer	Hisahiro Minokawa	(Executive Officer, Group Executive of Human Resources Management & Organization Headquarters)

- 16 -