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

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer

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

the Securities Exchange Act of 1934

For the month of ….  January ……………………………………………… ,  2021

CANON INC.

(Translation of registrant’s name into English)

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

(Address of principal executive offices)

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

Form 20-F X Form 40-F

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

Yes No X

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

SIGNATURES

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

CANON INC.

    (Registrant)

Date….	January 28, 2021	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, 2020

CONSOLIDATED RESULTS FOR THE FOURTH QUARTER

AND THE FISCAL YEAR ENDED DECEMBER 31, 2020

January 28, 2021

CONSOLIDATED RESULTS

				(Millions of yen, thousands of U.S. dollars, except per share amounts)
		Actual									Projected
	Year ended December 31, 2020		Year ended December 31, 2019		Change(%)			Year ended December 31, 2020		Year ending December 31, 2021		Change(%)
Net sales	¥	3,160,243	¥	3,593,299		-	12.1	$	30,386,952	¥	3,400,000		+	7.6
Operating profit		110,547		174,420		-	36.6		1,062,952		158,500		+	43.4
Income before income taxes		130,280		195,493		-	33.4		1,252,692		176,500		+	35.5
Net income attributable to Canon Inc.	¥	83,318	¥	124,964		-	33.3	$	801,135	¥	115,000		+	38.0
Net income attributable to Canon Inc. shareholders per share:
- Basic	¥	79.37	¥	116.79		-	32.0	$	0.76	¥	109.98		+	38.6
- Diluted		79.35		116.77		-	32.0		0.76		109.95		+	38.6
	Actual
	As of December 31, 2020		As of December 31, 2019		Change(%)			As of December 31, 2020
Total assets	¥	4,625,614	¥	4,771,918		-	3.1	$	44,477,058
Canon Inc. shareholders’ equity	¥	2,575,031	¥	2,685,496		-	4.1	$	24,759,913

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 JPY104=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of December 30, 2020, solely for the convenience of the reader.

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

- 1 -

I. Operating Results and Financial Conditions

2020 in Review

Looking back at 2020, the global economy fell significantly with no signs of controlling the spread of infections, although the balanced measures to curb infections and expand economic activities were implemented around the world amid the global coronavirus (“COVID-19”) pandemic. In the U.S., despite a record decline in consumption caused by movement restrictions implemented in the first half of the year, the economy gradually recovered in the second half of the year while repeating deregulation and tighter regulations of economic activities. In Europe, the consumption headed toward a recovery phase resulting from the easing of large-scale lockdowns and night curfews that were enacted in each country from March. The European economy, however, continued to slow down due to restrictions on economic activities being reinstated due to a resurgence of infections. In China, economic recovery has accelerated mainly through domestic demand and exports resulting from a rapid resumption of economic activities. Even in other emerging markets, despite restrictions on movement and economic activities in some countries, economies showed signs of recovery resulting from gradual resumption of economic activities amid the COVID-19 pandemic. In Japan, the recovery trend continued due to the resumption of economic activities and the easing of voluntary restrictions after the lifting of the State of Emergency, although infections began to rise again in November.

Amid these conditions, the markets in which Canon operates were greatly affected by the spread of COVID-19. For office multifunction devices (MFDs) and laser printers, demand for both monochrome and color models declined due to insufficient recovery of corporate activities in the spread of COVID-19. For cameras, despite a significant decline in demand due to the impact of COVID-19, demand headed toward an improvement phase due to a recovery in consumption in the second half of the year. For inkjet printers, the pace of recovery gradually increased in some emerging countries in the second half of the year, in addition to developed countries and China, where demand for products were solid due to a rise in remote working and education. For medical equipment, although restrictions on sales activities to medical institutions in the first half of the year due to the impact of COVID-19 were eased in the second half of the year, sales activities were nonetheless affected by the prolonged impact of COVID-19. For industrial equipment, demand for both FPD (Flat Panel Display) lithography equipment and semiconductor lithography equipment remained solid.

The average value of the yen for the year was ¥106.68 against the U.S. dollar, a year-on-year appreciation of approximately ¥2, and ¥122.07 against the euro, the same level as the previous year.

In 2020, sales of MFDs for the office and production printing market both decreased, although they showed signs of recovery since the second half of the year. Unit sales of laser printers, both monochrome and color models, were below those of the previous year. Sales of services and consumables also declined resulting from the moderate recovery in customers’ print volumes after cancellation of office closures in response to the spread of COVID-19 and the resumption of corporate activities. For interchangeable-lens digital cameras, although unit sales were below those of the previous year, sales were better than expected in the second half of the year due to strong sales of the EOS R5 and EOS R6 full-frame mirrorless cameras. As for inkjet printers, unit sales, including refillable ink tank models, were significantly above those of the previous year due to the recovery in demand in some emerging countries on top of demand for remote working and education in developed countries and China. In medical equipment, amid the postponement of installation and restrictions on sales activities, sales were slightly below those of the previous year, as a result of capturing demand for equipment supplies to medical institutions supported by the government of each country. For industrial equipment, despite solid demand for semiconductor lithography equipment for memory devices, and for organic LED (OLED) panel manufacturing equipment, sales for FPD lithography equipment decreased compared with those of the previous year as a result of postponement of installation due to the impact of COVID-19. As for network cameras, which are being used in a growing range of applications and where the market is growing, sales increased slightly from those of the previous year due to a moderate recovery in sales activities.

- 2 -

Under these conditions, net sales for the year decreased by 12.1% year-on-year to ¥3,160.2 billion. Gross profit as a percentage of net sales decreased by 1.3 points to 43.5%. Gross profit for the year decreased by 14.5% year-on-year to ¥1,375.9 billion. Operating expenses decreased by 11.9% year-on-year to ¥1,265.3 billion, due to the further promotion of efficiency for expenses throughout the entire Group. As a result, although operating profit decreased by 36.6% year-on-year to ¥110.5 billion, it exceeded the prediction which had been revised upward in the most recent forecast. Other income (deductions) decreased by ¥1.3 billion to ¥19.7 billion, mainly due to decrease of interest and dividend income, while income before income taxes decreased by 33.4% year on year to ¥130.3 billion and net income attributable to Canon Inc. decreased by 33.3% year on year to ¥83.3 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥79.37 for the year, a year-on-year decrease of ¥37.42.

Results by Segment

Looking at Canon’s full year performance by business unit, in the Office Business Unit, although sales of the new imageRUNNER ADVANCE DX series were strong, unit sales of MFDs for the office and the production printing market were below those of the previous year reflecting such factors as the moderate recovery in business negotiations following the resumption of in-office work. As for laser printers, unit sales of both monochrome and color models were below those of the previous year resulting from the continued economic slowdown caused by the COVID-19 pandemic. Sales of services and consumables also declined as a result of a moderate recovery in customers’ print volumes after the resumption of corporate activities. These factors resulted in total sales for the business unit of ¥1,440.2 billion, a year-on-year decrease of 17.8%, while income before income taxes decreased by 49.3% year-on-year to ¥86.5 billion.

As for the Imaging System Business Unit, although unit sales of interchangeable-lens digital cameras were below those of the previous year as the market continued to shrink and, the decline of the demand caused by COVID-19, the shift to mirrorless models accelerated, particularly for full-frame mirrorless models, due to the introduction of the new EOS R5 and EOS R6. As for inkjet printers, sales of printers and consumables increased significantly from the previous year as a result of capturing the recovered demand in some emerging countries as well as the demand for remote working and education in developed countries and China. These factors resulted in total sales for the business unit of ¥712.2 billion, a year-on-year decrease of 11.8%, while income before income taxes increased by 43.1% year-on-year to ¥71.1 billion thanks to improvements in profitability due to the effect of new products.

Within the Medical System Business Unit, although COVID-19 caused delay of installation of the large equipment and business negotiation, the demand of Computed tomography (CT) systems for the diagnosis of pneumonia and Diagnostic X-ray systems was captured with the support to emergency medical system maintenance and financial support for medical institutions from governments of each country. These factors resulted in total sales for the business unit of ¥436.1 billion, a year-on-year decrease of 0.6%, while income before income taxes decreased by 6.4% year-on-year to ¥25.5 billion.

As for the Industry & Others Business Unit, regarding semiconductor lithography equipment, demand for memory devices remained solid. As a result, unit sales were significantly above those of the previous year. In OLED panel manufacturing equipment, sales increased due to the resumption of installation work after the easing of COVID-19 travel restrictions. In FPD lithography equipment, although the installation work after the gradual easing of travel restrictions were resumed, unit sales were below those of the previous year. Despite the negative impact of COVID-19, sales for network cameras slightly increased as a result of strengthened sales activities based on diversified applications made possible by video analysis for such purposes as remote monitoring and monitoring of crowded and confined, as well as conventional market needs including crime prevention and disaster monitoring tools. These factors resulted in total sales for the business unit of ¥654.8 billion, a year-on-year decrease of 4.9%, while income before income taxes totaled ¥14.3 billion, a year-on-year decrease of 26.3%.

- 3 -

Cash Flow

During 2020, cash flow from operating activities slightly decreased by ¥24.7 billion year-on-year to ¥333.8 billion due to improvements to working capital, despite a sharp decrease in profit. Cash flow used in investing activities was restrained by ¥73.1 billion year-on-year to ¥155.4 billion mainly due to a decrease of investment in production equipment. Accordingly, free cash flow totaled positive ¥178.4 billion, an increase of ¥48.5 billion compared with those of the previous year.

Cash flow from financing activities recorded an outlay of ¥183.4 billion mainly arising from dividend payments and acquisition of treasury stock.

Owing to these factors, as well as the impact from foreign currency exchange adjustments, cash and cash equivalents decreased by ¥5.1 billion to ¥407.7 billion from the end of the previous year.

Outlook

As for the outlook for 2021, the growing availability of COVID-19 vaccinations means that vaccination programs will gradually be launched around the world. However, it is thought that it will take time to see a full-scale recovery in global economic activities through balanced measures to curb infections and expand economic activities. In Japan, a second State of Emergency was declared some regions, causing concerns about potential effects on the economy. In addition, prospects also remain uncertain throughout the world. However, the pace of the world economy is expected to recover moderately with the various economic measures and fiscal policies in each country and region over the long term.

In the markets in which Canon operates, for office MFDs, demand for the imageRUNNER ADVANCE DX series with advanced scan functions and cloud functionality is expected to increase and print volumes are expected to recover. For laser printers, demand is also expected to increase due to signs of recovery of operating conditions in office. As for interchangeable-lens digital cameras, although the overall market is expected to continue to shrink, sales promotion efforts will be strengthened amid the shift to mirrorless and the product mix will be improved. As for inkjet printers, demand is expected to remain solid due to the increase of print volumes while remote working and education needs remain stable due to the risk of additional infections. As for the medical equipment market, demand is expected to remain at around the same level as the previous year due to the risk of additional COVID-19 infections. For semiconductor lithography equipment, while demand for memory devices is expected to remain firm, demand for image sensors and automotive devices is expected to continue to increase. For FPD lithography equipment and OLED panel manufacturing equipment, demand will remain solid as panel manufacturers are expected to increase capital investments. As for network cameras, the market is also expected to trend towards expansion due to increasing demand for high-resolution cameras and the video analysis solutions that require them.

With regard to currency exchange rates on which Canon bases its performance outlook, Canon anticipates exchange rates of ¥105 to the U.S. dollar and ¥120 to the euro, representing appreciation of approximately ¥2 against both the U.S. dollar and the euro.

Upon taking into consideration the current economic forecast and the aforementioned currency exchange rates, Canon projects full-year consolidated net sales of ¥3,400.0 billion, a year-on-year increase of 7.6%; operating profit of ¥158.5 billion, a year-on-year increase of 43.4%; income before income taxes of ¥176.5 billion, a year-on-year increase of 35.5%; and net income attributable to Canon Inc. of ¥115.0 billion, a year-on-year increase of 38.0%.

- 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 Form 20-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, 2020		As of December 31, 2019		Change
ASSETS
Current assets:
Cash and cash equivalents		407,684		412,814		(5,130)
Short-term investments		71		1,767		(1,696)
Trade receivables, net		535,126		559,836		(24,710)
Inventories		562,807		584,756		(21,949)
Prepaid expenses and other current assets		283,455		286,792		(3,337)
Total current assets		1,789,143		1,845,965		(56,822)
Noncurrent receivables		17,276		17,135		141
Investments		49,994		48,361		1,633
Property, plant and equipment, net		1,037,680		1,089,671		(51,991)
Operating lease right-of-use assets		107,361		114,418		(7,057)
Intangible assets, net		318,497		347,921		(29,424)
Goodwill		915,564		898,661		16,903
Other assets		390,099		409,786		(19,687)
Total assets		4,625,614		4,771,918		(146,304)
LIABILITIES AND EQUITY
Current liabilities:
Short-term loans and current portion of long-term debt		392,235		42,034		350,201
Trade payables		303,809		305,312		(1,503)
Accrued income taxes		18,761		18,801		(40)
Accrued expenses		317,716		336,396		(18,680)
Current operating lease liabilities		32,307		31,884		423
Other current liabilities		261,361		237,576		23,785
Total current liabilities		1,326,189		972,003		354,186
Long-term debt, excluding current installments		4,834		357,340		(352,506)
Accrued pension and severance cost		345,897		368,507		(22,610)
Noncurrent operating lease liabilities		76,796		83,688		(6,892)
Other noncurrent liabilities		87,857		106,400		(18,543)
Total liabilities		1,841,573		1,887,938		(46,365)
Equity:
Canon Inc. shareholders’ equity:
Common stock		174,762		174,762		-
Additional paid-in capital		404,620		405,017		(397)
Legal reserve		69,436		67,572		1,864
Retained earnings		3,409,371		3,455,083		(45,712)
Accumulated other comprehensive income (loss)		(324,789)		(308,442)		(16,347)
Treasury stock, at cost		(1,158,369)		(1,108,496)		(49,873)
Total Canon Inc. shareholders’ equity		2,575,031		2,685,496		(110,465)
Noncontrolling interests		209,010		198,484		10,526
Total equity		2,784,041		2,883,980		(99,939)
Total liabilities and equity		4,625,614		4,771,918		(146,304)
	Millions of yen
	As of December 31, 2020		As of December 31, 2019
Notes:
1. Allowance for doubtful receivables		11,645		10,359
2. Accumulated depreciation		2,770,106		2,727,189
3. Accumulated other comprehensive income (loss):
Foreign currency translation adjustments		(113,646)		(96,282)
Net gains and losses on derivative instruments		100		(887)
Pension liability adjustments		(211,243)		(211,273)

- 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, 2020		Three months ended December 31, 2019		Change(%)
Net sales		945,735		953,469		-	0.8
Cost of sales		531,421		530,074
Gross profit		414,314		423,395		-	2.1
Operating expenses:
Selling, general and administrative expenses		265,505		294,659
Research and development expenses		72,576		76,314
		338,081		370,973
Operating profit		76,233		52,422		+	45.4
Other income (deductions):
Interest and dividend income		641		1,260
Interest expense		(260)		(227)
Other, net		3,570		(2,174)
		3,951		(1,141)
Income before income taxes		80,184		51,281		+	56.4
Income taxes		22,385		14,814
Consolidated net income		57,799		36,467
Less: Net income attributable to noncontrolling interests		4,210		3,852
Net income attributable to Canon Inc.		53,589		32,615		+	64.3
Results for the fiscal year	Millions of yen
	Year ended          December 31, 2020		Year ended          December 31, 2019		Change(%)
Net sales		3,160,243		3,593,299		-	12.1
Cost of sales		1,784,375		1,983,266
Gross profit		1,375,868		1,610,033		-	14.5
Operating expenses:
Selling, general and administrative expenses		993,009		1,137,110
Research and development expenses		272,312		298,503
		1,265,321		1,435,613
Operating profit		110,547		174,420		-	36.6
Other income (deductions):
Interest and dividend income		2,923		5,526
Interest expense		(854)		(1,038)
Other, net		17,664		16,585
		19,733		21,073
Income before income taxes		130,280		195,493		-	33.4
Income taxes		34,337		56,146
Consolidated net income		95,943		139,347
Less: Net income attributable to noncontrolling interests		12,625		14,383
Net income attributable to Canon Inc.		83,318		124,964		-	33.3

- 7 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

Consolidated statements of comprehensive income
Results for the fourth quarter	Millions of yen
	Three months ended December 31, 2020		Three months ended December 31, 2019		Change(%)
Consolidated net income		57,799		36,467		+	58.5
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		18,979		54,046
Net gains and losses on derivative instruments		412		(763)
Pension liability adjustments		9,900		(7,157)
		29,291		46,126
Comprehensive income (loss)		87,090		82,593		+	5.4
Less: Comprehensive income attributable to noncontrolling interests		5,143		5,897
Comprehensive income (loss) attributable to Canon Inc.		81,947		76,696		+	6.8
Results for the fiscal year	Millions of yen
	Year ended          December 31, 2020		Year ended          December 31, 2019		Change(%)
Consolidated net income		95,943		139,347		-	31.1
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(17,354)		(32,157)
Net gains and losses on derivative instruments		970		(1,068)
Pension liability adjustments		1,382		(3,630)
		(15,002)		(36,855)
Comprehensive income (loss)		80,941		102,492		-	21.0
Less: Comprehensive income attributable to noncontrolling interests		13,961		16,353
Comprehensive income (loss) attributable to Canon Inc.		66,980		86,139		-	22.2

- 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, 2020		Three months ended December 31, 2019		Change(%)
Office		399,186		447,009		-	10.7
Imaging System		233,434		237,237		-	1.6
Medical System		122,752		110,025		+	11.6
Industry and Others		215,112		181,224		+	18.7
Eliminations		(24,749)		(22,026)			-
Total		945,735		953,469		-	0.8
	Millions of yen
Sales by region	Three months ended December 31, 2020		Three months ended December 31, 2019		Change(%)
Japan		221,517		214,612		+	3.2
Overseas:
Americas		251,752		283,243		-	11.1
Europe		241,454		243,858		-	1.0
Asia and Oceania		231,012		211,756		+	9.1
		724,218		738,857		-	2.0
Total		945,735		953,469		-	0.8
Results for the fiscal year	Millions of yen
Sales by business unit	Year ended December 31, 2020		Year ended December 31, 2019		Change(%)
Office		1,440,212		1,752,107		-	17.8
Imaging System		712,238		807,414		-	11.8
Medical System		436,074		438,525		-	0.6
Industry and Others		654,813		688,433		-	4.9
Eliminations		(83,094)		(93,180)			-
Total		3,160,243		3,593,299		-	12.1
	Millions of yen
Sales by region	Year ended December 31, 2020		Year ended December 31, 2019		Change(%)
Japan		806,305		872,534		-	7.6
Overseas:
Americas		852,451		1,029,078		-	17.2
Europe		795,616		882,480		-	9.8
Asia and Oceania		705,871		809,207		-	12.8
		2,353,938		2,720,765		-	13.5
Total		3,160,243		3,593,299		-	12.1
*Based on the realignment of Canon’s internal reporting and management structure, from the beginning of the first quarter of 2020, Canon has reclassified certain businesses from the Industry and Others Business Unit to the Office Business Unit. Operating results for the three months ended December 31, 2019 and the year ended December 31, 2019 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 / Digital sheet-fed presses / Wide-format printers / Document solutions Imaging System Business Unit: Interchangeable-lens digital cameras / Digital compact cameras / Interchangeable lenses / Compact photo printers / Inkjet printers / Large format inkjet printers / Commercial photo printers / Image scanners / Calculators Medical System Business Unit: Digital radiography systems / Diagnostic X-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 / Network cameras / Digital camcorders / Digital cinema cameras / Multimedia projectors / Broadcast equipment / Micromotors / 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, 2018		174,762		404,389			67,116		3,501,950			(269,071	)		(1,058,502	)		2,820,644			189,501		3,010,145
Cumulative effects of accounting standard update—adoption of ASU No. 2017-12									122			(122	)					-			-		-
Equity transactions with noncontrolling interests and other				641								(424	)					217			(1,813	)	(1,596)
Dividends to Canon Inc. shareholders									(171,487	)								(171,487	)				(171,487)
Dividends to noncontrolling interests																					(5,557	)	(5,557)
Transfers to legal reserve							456		(456	)								-					-
Comprehensive income:
Net income									124,964									124,964			14,383		139,347
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments												(32,043	)					(32,043	)		(114	)	(32,157)
Net gains and losses on derivative instruments												(1,073	)					(1,073	)		5		(1,068)
Pension liability adjustments												(5,709	)					(5,709	)		2,079		(3,630)
Total comprehensive income (loss)																		86,139			16,353		102,492
Repurchases of treasury stock															(50,015	)		(50,015	)				(50,015)
Reissuance of treasury stock				(13	)				(10	)					21			(2	)				(2)
Balance at December 31, 2019		174,762		405,017			67,572		3,455,083			(308,442	)		(1,108,496	)		2,685,496			198,484		2,883,980
Cumulative effects of accounting standard update—adoption of ASU No. 2016-13									(159	)								(159	)		-		(159)
Equity transactions with noncontrolling interests and other				(316	)							(9	)		(15	)		(340	)		1,091		751
Dividends to Canon Inc. shareholders									(126,938	)								(126,938	)				(126,938)
Dividends to noncontrolling interests																					(4,526	)	(4,526)
Transfers to legal reserve							1,864		(1,864	)								-					-
Comprehensive income:
Net income									83,318									83,318			12,625		95,943
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments												(17,355	)					(17,355	)		1		(17,354)
Net gains and losses on derivative instruments												987						987			(17	)	970
Pension liability adjustments												30						30			1,352		1,382
Total comprehensive income (loss)																		66,980			13,961		80,941
Repurchases of treasury stock															(50,008	)		(50,008	)				(50,008)
Reissuance of treasury stock				(81	)				(69	)					150			0					0
Balance at December 31, 2020		174,762		404,620			69,436		3,409,371			(324,789	)		(1,158,369	)		2,575,031			209,010		2,784,041

- 10 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

5. CONSOLIDATED STATEMENTS OF CASH FLOWS

	Millions of yen
	Year ended     December 31, 2020		Year ended     December 31, 2019
Cash flows from operating activities:
Consolidated net income		95,943		139,347
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization		227,825		237,327
Loss on disposal of fixed assets		4,326		5,991
Deferred income taxes		(15,542)		(6,523)
Decrease in trade receivables		15,120		43,504
Decrease in inventories		16,075		19,895
Decrease in trade payables		(4,636)		(35,509)
Increase (decrease) in accrued income taxes		43		(22,279)
(Decrease) increase in accrued expenses		(16,413)		9,738
Decrease in accrued (prepaid) pension and severance cost		(16,601)		(13,722)
Other, net		27,665		(19,308)
Net cash provided by operating activities		333,805		358,461
Cash flows from investing activities:
Purchases of fixed assets		(164,719)		(215,671)
Proceeds from sale of fixed assets		7,815		885
Purchases of securities		(592)		(4,907)
Proceeds from sale and maturity of securities		558		828
Decrease (increase) in time deposits, net		1,652		(1,511)
Acquisitions of businesses, net of cash acquired		(127)		(8,880)
Other, net		(26)		688
Net cash used in investing activities		(155,439)		(228,568)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		2,100		-
Repayments of long-term debt		(11,095)		(8,678)
Increase in short-term loans, net		5,642		4,913
Transaction with noncontrolling interests		1,376		(1,769)
Dividends paid		(126,938)		(171,487)
Repurchases and reissuance of treasury stock		(50,008)		(50,012)
Other, net		(4,526)		(5,557)
Net cash used in financing activities		(183,449)		(232,590)
Effect of exchange rate changes on cash and cash equivalents		(47)		(5,134)
Net change in cash and cash equivalents		(5,130)		(107,831)
Cash and cash equivalents at beginning of year		412,814		520,645
Cash and cash equivalents at end of year		407,684		412,814

- 11 -

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, 2020		Year ended     December 31, 2019		Change(%)
Office
Net sales:
	External customers		1,437,188		1,749,165	-	17.8
	Intersegment		3,024		2,942	+	2.8
	Total		1,440,212		1,752,107	-	17.8
Operating cost and expenses			1,358,843		1,587,111	-	14.4
Operating profit			81,369		164,996	-	50.7
Other income (deductions)			5,114		5,439	-	6.0
Income before income taxes			86,483		170,435	-	49.3
Total assets			812,553		878,705	-	7.5
Depreciation and amortization			56,814		59,061	-	3.8
Capital expenditures			46,536		51,680	-	10.0
Imaging System
Net sales:
	External customers		711,317		806,425	-	11.8
	Intersegment		921		989	-	6.9
	Total		712,238		807,414	-	11.8
Operating cost and expenses			640,433		759,247	-	15.6
Operating profit			71,805		48,167	+	49.1
Other income (deductions)			(735)		1,499		-
Income before income taxes			71,070		49,666	+	43.1
Total assets			242,923		313,141	-	22.4
Depreciation and amortization			30,381		35,805	-	15.1
Capital expenditures			19,814		24,016	-	17.5
Medical System
Net sales:
	External customers		435,368		437,456	-	0.5
	Intersegment		706		1,069	-	34.0
	Total		436,074		438,525	-	0.6
Operating cost and expenses			410,830		411,781	-	0.2
Operating profit			25,244		26,744	-	5.6
Other income (deductions)			300		539	-	44.3
Income before income taxes			25,544		27,283	-	6.4
Total assets			286,749		273,525	+	4.8
Depreciation and amortization			11,781		11,760	+	0.2
Capital expenditures			7,244		7,074	+	2.4
Industry and Others
Net sales:
	External customers		577,130		598,653	-	3.6
	Intersegment		77,683		89,780	-	13.5
	Total		654,813		688,433	-	4.9
Operating cost and expenses			641,588		669,041	-	4.1
Operating profit			13,225		19,392	-	31.8
Other income (deductions)			1,090		33		-
Income before income taxes			14,315		19,425	-	26.3
Total assets			446,674		409,587	+	9.1
Depreciation and amortization			40,406		40,732	-	0.8
Capital expenditures			24,079		33,458	-	28.0
Corporate and Eliminations
Net sales:
	External customers		(760)		1,600		-
	Intersegment		(82,334)		(94,780)		-
	Total		(83,094)		(93,180)		-
Operating cost and expenses			(1,998)		(8,301)		-
Operating profit			(81,096)		(84,879)		-
Other income (deductions)			13,964		13,563		-
Income before income taxes			(67,132)		(71,316)		-
Total assets			2,836,715		2,896,960	-	2.1
Depreciation and amortization			88,443		89,969	-	1.7
Capital expenditures			64,054		95,000	-	32.6
Consolidated
Net sales:
	External customers		3,160,243		3,593,299	-	12.1
	Intersegment		-		-		-
	Total		3,160,243		3,593,299	-	12.1
Operating cost and expenses			3,049,696		3,418,879	-	10.8
Operating profit			110,547		174,420	-	36.6
Other income (deductions)			19,733		21,073	-	6.4
Income before income taxes			130,280		195,493	-	33.4
Total assets			4,625,614		4,771,918	-	3.1
Depreciation and amortization			227,825		237,327	-	4.0
Capital expenditures			161,727		211,228	-	23.4

*Based on the realignment of Canon’s internal reporting and management structure, from the beginning of the first quarter of 2020, Canon has reclassified certain businesses from the Industry and Others Business Unit to the Office Business Unit. Operating results for the fiscal year ended December 31, 2019 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.

- 12 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

8. NOTE ON SIGNIFICANT CHANGES IN SHAREHOLDER’S EQUITY

      None.

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 June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13, Financial Instruments – Credit Losses – (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires entities to use a current expected credit loss model to measure impairments of certain financial assets. Using this model results in earlier recognition of losses than under the incurred loss approach, which requires waiting to recognize a loss until it is probable of being incurred. Canon adopted the guidance from the quarter beginning January 1, 2020 with the modified retrospective basis through a cumulative effect adjustment directly to retained earnings as of the beginning of the period. The adoption of this guidance did not have a material impact on its consolidated results of operation and financial condition.

CORRECTION OF AN IMMATERIAL ERROR

On December 31, 2020, Canon revised its historical financial statements to accurately reflect vacation accrual adjustments in the appropriate periods. Canon also determined that correcting the aggregate error would be material to the current period although immaterial in the past period. As a result, Canon revised its financial statements for 2019 as follows.

Consolidated balance sheets	(Millions of yen)
	As of December 31, 2019
	As adjusted		As previously reported
Other assets		409,786		406,219
Accrued expenses		336,396		324,891
Retained earnings		3,455,083		3,462,182
Noncontrolling interests		198,484		199,323
Consolidated statements of income	(Millions of yen)
	Year ended December 31, 2019
	As adjusted		As previously reported
Selling, general and administrative expenses		1,137,110		1,136,863
Operating profit		174,420		174,667
Income before income taxes		195,493		195,740
Income taxes		56,146		56,223
Consolidated net income		139,347		139,517
Less: Net income attributable to noncontrolling interests		14,383		14,412
Net income attributable to Canon Inc.		124,964		125,105
Net income attributable to Canon Inc. shareholders per share:
Basic		116.79 yen		116.93 yen
Diluted		116.77 yen		116.91 yen
Consolidated statements of comprehensive income	(Millions of yen)
	Year ended December 31, 2019
	As adjusted		As previously reported
Consolidated net income		139,347		139,517
Less: Comprehensive income attributable to noncontrolling interests		16,353		16,382
Comprehensive income (loss) attributable to Canon Inc.		86,139		86,280
Consolidated statements of cash flows	(Millions of yen)
	Year ended December 31, 2019
	As adjusted		As previously reported
Consolidated net income		139,347		139,517
Increase in accrued expenses		9,738		9,491
Deferred income taxes		(6,523)		(6,446)

Accordingly, the consolidated statement of equity has been revised.

- 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, 2020		Year ended     December 31, 2019
Net income attributable to Canon Inc.
-Basic		83,318		124,964
-Diluted		83,315		124,962
	Number of shares
Average common shares outstanding
-Basic		1,049,802,197		1,069,956,767
-Diluted		1,050,031,888		1,070,114,940
	Yen
Net income attributable to
Canon Inc. shareholders per share:
-Basic		79.37		116.79
-Diluted		79.35		116.77

(2) SUBSEQUENT EVENT

On January 19, 2021, Canon borrowed ¥20 billion under its existing overdraft facilities with Mizuho Bank, Ltd. and MUFG Bank, Ltd. for required operating funds. The overdraft facilities bear interest at a rate equal to a base rate plus a spread.

- 14 -

NON-CONSOLIDATED

(Current Titles are Shown in the Parentheses)

Effective Date: March 30, 2021

Directors

(1) Director to be retired

Haruhiko Kato (Director)

(2) Candidate for new Director to be appointed

Yusuke Kawamura (Chairman & CEO, Institute of Glocal Policy Research) (Executive Counselor, Japan Securities Dealers Association)

- 15 -

NON-CONSOLIDATED

(Current Titles are Shown in the Parentheses)

Executive Officers

(1) Executive Officer to be retired

      Effective Date: March 31, 2021

Nobutoshi Mizusawa (Executive Officer, Deputy Chief Executive of Medical Systems and Components Operations)

(2) New Executive Officers to be appointed

      Effective Date: April 1, 2021

Toshiyuki Ishii	(Senior Vice President of Canon (China) Co., Ltd.)
Masahide Kinoshita	(Chief Executive of Peripheral Products Operations)
Shunji Sawa	(Plant Manager of Toride, Digital Printing Business Operations)

(3) Executive Officers to be promoted

      Effective Date: April 1, 2021

Senior Managing Executive Officer	Kenichi Nagasawa	(Managing Executive Officer, Group Executive of Corporate Intellectual Property and Legal Headquarters)
Senior Managing Executive Officer	Eiji Osanai	(Managing Executive Officer, Group Executive of Production Engineering Headquarters)
Senior Managing Executive Officer	Yuichi Ishizuka	(Managing Executive Officer, President & CEO of Canon Europa N.V., President & CEO of Canon Europe Ltd.)
Senior Managing Executive Officer	Takayuki Miyamoto	(Managing Executive Officer, Group Executive of Frontier Business Promotion Headquarters, Chief of Canon EXPO Project)
Senior Managing Executive Officer	Hiroaki Takeishi	(Managing Executive Officer, Chief Executive of Optical Products Operations)
Managing Executive Officer	Yoichi Iwabuchi	(Executive Officer, Group Executive of Information & Communication Systems Headquarters)
Managing Executive Officer	Toshihiko Kusumoto	(Executive Officer, Deputy Chief Executive of Digital Printing Business Operations)

- 16 -