Form 6-K

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

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer

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

the Securities Exchange Act of 1934


For the month of ….		November		……………………………………………… ,		2023



		CANON INC.
		(Translation of registrant’s name into English)

		30-2, Shimomaruko 3-Chome, Ohta-ku, Tokyo 146-8501, Japan
		(Address of principal executive offices)

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


Form 20-F		X		Form 40-F

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


Yes				No		X

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

SIGNATURES

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


CANON INC.
(Registrant)


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




		Sachiho Tanino General Manager Consolidated Accounting Div. Canon Inc.

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

The following materials are included.

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

[English summary with full translation of consolidated financial information]

Quarterly Report filed with the Japanese government

pursuant to

the Financial Instruments and Exchange Law of Japan

For the third quarter ended

September 30, 2023

CANON INC.

Tokyo, Japan

CONTENTS


		Page
I	Corporate Information

	(1) Consolidated Financial Summary		2

	(2) Description of Business		2

II	The Business

	(1) Risk Factors		3

	(2) Operating Results and Financial Conditions		3

	(3) Significant Business Contracts Entered into in the Third Quarter of Fiscal 2023		11

III	Company Information

	(1) Shares		12

	(2) Directors and Executive Officers		14

IV	Financial Statements

	(1) Consolidated Financial Statements		15

	(2) Other Information		54

Disclaimer Regarding Forward-Looking Statements

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

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

I.	Corporate Information

(1)

Consolidated Financial Summary


	Millions of yen (except per share amounts)
	Nine months ended September 30, 2023			Nine months ended September 30, 2022			Three months ended September 30, 2023		Three months ended September 30, 2022		Year ended December 31, 2022
Net sales		3,017,254			2,874,239			1,025,247		996,090		4,031,414
Income before income taxes		275,982			231,969			87,320		79,076		352,440
Net income attributable to Canon Inc.		183,947			159,118			62,134		54,118		243,961
Comprehensive income (loss)		424,798			480,656			106,056		105,086		476,959
Canon Inc. shareholders’ equity		—			—			3,291,205		3,122,629		3,113,105
Total equity		—			—			3,535,504		3,354,224		3,349,030
Total assets		—			—			5,619,004		5,301,056		5,095,530
Net income attributable to Canon Inc. shareholders per share:
Basic (yen)		182.98			153.70			62.65		52.90		236.71
Diluted (yen)		182.91			153.65			62.62		52.88		236.63
Canon Inc. shareholders’ equity to total assets (%)		—			—			58.6		58.9		61.1
Net cash provided by operating activities		269,885			188,481			—		—		262,603
Net cash used in investing activities		(204,021	)		(132,350	)		—		—		(180,820	)
Net cash provided by (used in) financing activities		65,080			(29,582	)		—		—		(146,844	)
Cash and cash equivalents at end of period		—			—			520,745		465,298		362,101

Notes:

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

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

(2)

Description of Business

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

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

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

II.

The Business

(1)

Risk Factors

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

(2)

Operating Results and Financial Conditions

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

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

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

(2)

Operating Results and Financial Conditions (continued)

[Third quarter results]

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


	Millions of yen (except per share amounts and percentage data)
	Three months ended September 30, 2023		Change			Three months ended September 30, 2022
Net sales		1,025,247		+2.9	%		996,090
Gross profit		482,050		+6.9			451,033
Operating expenses		399,426		+8.1			369,593
Operating profit		82,624		+1.5			81,440
Other income (deductions)		4,696		—			(2,364	)
Income before income taxes		87,320		+10.4			79,076
Net income attributable to Canon Inc.		62,134		+14.8			54,118

Net income attributable to Canon Inc. shareholders per share:
Basic		62.65		+18.4			52.90
Diluted		62.62		+18.4			52.88

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

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

(2)

Operating Results and Financial Conditions (continued)

[Nine-month results]

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


	Millions of yen (except per share amounts and percentage data)
	Nine months ended September 30, 2023		Change			Nine months ended September 30, 2022
Net sales		3,017,254		+5.0	%		2,874,239
Gross profit		1,420,831		+8.5			1,309,463
Operating expenses		1,161,458		+10.3			1,053,408
Operating profit		259,373		+1.3			256,055
Other income (deductions)		16,609		—			(24,086	)
Income before income taxes		275,982		+19.0			231,969
Net income attributable to Canon Inc.		183,947		+15.6			159,118

Net income attributable to Canon Inc. shareholders per share:
Basic		182.98		+19.1			153.70
Diluted		182.91		+19.0			153.65

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

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

(2)

Operating Results and Financial Conditions (continued)

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


Printing Business Unit	Millions of yen (except percentage data)
	Nine months ended September 30, 2023		Change			Nine months ended September 30, 2022
Net sales:
Office		716,782		+12.6	%		636,591
Prosumer		699,764		-5.1			737,454
Production		282,074		+11.0			254,096

External customers total		1,698,620		+4.3			1,628,141
Intersegment		4,824		+12.1			4,302

Total		1,703,444		+4.3			1,632,443
Operating cost and expenses		1,547,489		+5.1			1,471,916

Operating Profit		155,955		-2.8			160,527
Income before income taxes		161,533		-5.1			170,231

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


Imaging Business Unit	Millions of yen (except percentage data)
	Nine months ended September 30, 2023		Change			Nine months ended September 30, 2022
Net sales:
Cameras		390,428		+8.4	%		360,334
Network cameras and Others		241,745		+20.7			200,362

External customers total		632,173		+12.7			560,696
Intersegment		174		-48.1			335

Total		632,347		+12.7			561,031
Operating cost and expenses		520,456		+8.7			478,688

Operating Profit		111,891		+35.9			82,343
Income before income taxes		113,025		+35.5			83,414

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

(2)

Operating Results and Financial Conditions (continued)


Medical Business Unit	Millions of yen (except percentage data)
	Nine months ended September 30, 2023		Change			Nine months ended September 30, 2022
Net sales:
External customers total		388,672		+7.3	%		362,240
Intersegment		904		+243.7			263

Total		389,576		+7.5			362,503
Operating cost and expenses		371,641		+8.8			341,449

Operating Profit		17,935		-14.8			21,054
Income before income taxes		17,927		-17.1			21,621

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


Industrial Business Unit	Millions of yen (except percentage data)
	Nine months ended September 30, 2023		Change			Nine months ended September 30, 2022
Net sales:
Optical equipment		143,676		-12.8	%		164,813
Industrial equipment		63,724		+1.1			63,019

External customers total		207,400		-9.0			227,832
Intersegment		8,365		+40.7			5,947

Total		215,765		-7.7			233,779
Operating cost and expenses		180,495		-4.6			189,126

Operating Profit		35,270		-21.0			44,653
Income before income taxes		35,678		-21.9			45,700

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

(2)

Operating Results and Financial Conditions (continued)

Financial Conditions


	Millions of yen (except percentage data)
	September 30, 2023			Change		December 31, 2022
Total assets		5,619,004			+523,474		5,095,530
Total liabilities		2,083,500			+337,000		1,746,500
Canon Inc. shareholders’ equity		3,291,205			+178,100		3,113,105
Noncontrolling interests		244,299			+8,374		235,925
Total equity		3,535,504			+186,474		3,349,030
Total liabilities and equity		5,619,004			+523,474		5,095,530
Canon Inc. shareholders’ equity as a percentage of total assets		58.6	%		-2.5		61.1	%

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

Cash Flows


	Millions of yen
	Nine months ended September 30, 2023			Change		Nine months ended September 30, 2022
Net cash provided by operating activities		269,885			+81,404		188,481
Net cash used in investing activities		(204,021	)		-71,671		(132,350	)
Free cash flow		65,864			+9,733		56,131
Net cash provided by (used in) financial activities		65,080			+94,662		(29,582	)
Effect of exchange rate changes on cash and cash equivalents		27,700			-9,654		37,354
Net change in cash and cash equivalents		158,644			+94,741		63,903
Cash and cash equivalents at beginning of period		362,101			-39,294		401,395
Cash and cash equivalents at end of period		520,745			+55,447		465,298

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

(2)

Operating Results and Financial Conditions (continued)

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

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

(2)

Operating Results and Financial Conditions (continued)

Non-GAAP Financial Measures

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

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

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


	Billions of yen
	Nine months ended September 30, 2023
Net cash provided by operating activities		269.9
Net cash used in investing activities		(204.0	)

Free cash flow		65.9

(2)

Operating Results and Financial Conditions (continued)

Accounting Estimates and Assumptions

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

Prioritized Management Issues to be Addressed

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

Research and Development Expenses

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

Property, Plant and Equipment

(1)

Major Property, Plant and Equipment

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

(2)

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

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

Name and location

Principal activities and products manufactured

Date of
completion

Canon Inc.,

Hiratsuka Plant

Kanagawa, Japan

New production base (Others and Corporate)

February

2023

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

(3)

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

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

III.

Company Information

(1)

Shares

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


	As of September 30, 2023
Total number of issued shares		1,333,763,464

Stock Acquisition Rights

(1)	Stock options

Not applicable.

(2) Other stock acquisition rights

Not applicable.

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

Not applicable.

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


	Change during this quarter		As of September 30, 2023
Issued Shares (Number of shares)		—		1,333,763,464
Common Stock (Millions of yen)		—		174,762
Additional Paid-in Capital (Millions of yen)		—		306,288

Major Shareholders

Not applicable.

(1)

Shares (continued)

Voting Rights

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


	As of June 30, 2023
Classification	Number of shares (shares)		Number of voting rights (units)
Shares without voting rights		—		—
Shares with restricted voting rights (Treasury stock, etc.)		—		—
Shares with restricted voting rights (Others)		—		—
Shares with full voting rights (Treasury stock, etc.)		334,635,400		—
Shares with full voting rights (Others)		997,785,500		9,977,855
Fractional unit shares (Note)		1,342,564		—
Total number of issued shares		1,333,763,464		—
Total voting rights held by all shareholders		—		9,977,855

Note:

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

Treasury Stock, etc.


	Number of shares owned (Number of shares)		Number of shares owned / Number of shares issued
Canon Inc.		334,635,400		25.09	%

Total		334,635,400		25.09	%

(2)

Directors and Executive Officers

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

Changes in functions of director are below:


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

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

Changes in functions of executive officers are below:


Takashi Takeya		(Managing Executive Officer: Senior General Manager of Global Logistics Management Center, Senior General Manager of Economic Security Office)

Hideki Sanatake		(Executive Officer: Group Executive of Corporate Intellectual Property and Legal Headquarters)

Katsuhito Sakurai		(Executive Officer: Unit Executive of Device Development Unit)

The Number of Directors and Executive Officers by Gender

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

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

IV.

Financial Statements (Unaudited)

(1)

Consolidated Financial Statements

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


	Page
Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022		16
Consolidated Statements of Income and Consolidated Statements of Comprehensive Income for the nine months ended September 30, 2023 and 2022		18
Consolidated Statements of Income and Consolidated Statements of Comprehensive Income for the three months ended September 30, 2023 and 2022		20
Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022		22
Notes to Consolidated Financial Statements		23

CANON INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)


	Millions of yen
	September 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents (Notes 1, 18 and 19)		520,745			362,101
Short-term investments (Notes 2 and 18)		4,321			10,905
Trade receivables (Note 3)		622,081			636,803
Inventories (Note 4)		913,872			808,312
Current lease receivables (Note 6)		159,947			137,038
Prepaid expenses and other current assets (Notes 12, 14 and 18)		256,424			215,990
Allowance for credit losses (Notes 3 and 6)		(16,044	)		(15,235	)

Total current assets		2,461,346			2,155,914

Noncurrent receivables (Note 16)		12,291			12,996
Investments (Notes 2 and 18)		74,264			65,128
Property, plant and equipment, net (Note 5)		1,101,574			1,035,065
Operating lease right-of-use assets (Note 15)		123,751			117,843
Intangible assets, net		271,331			280,995
Goodwill (Note 7)		1,040,689			972,626
Noncurrent lease receivables (Note 6)		323,198			279,332
Other assets		214,443			179,297
Allowance for credit losses (Note 6)		(3,883	)		(3,666	)

Total assets		5,619,004			5,095,530

CANON INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited) (continued)


	Millions of yen
	September 30, 2023			December 31, 2022
Liabilities and equity
Current liabilities:
Short-term loans and current portion of long-term debt (Notes 9 and 17)		607,573			296,384
Short-term loans related to financial services		40,200			41,200
Other short-term loans and current portion of long-term debt		567,373			255,184
Trade payables (Note 8)		344,065			355,930
Accrued income taxes		45,251			48,414
Accrued expenses (Note 16)		393,784			365,847
Current operating lease liabilities (Note 15)		36,489			33,281
Other current liabilities (Notes 12, 14 and 18)		298,154			265,497

Total current liabilities		1,725,316			1,365,353

Long-term debt, excluding current portion of long-term debt (Note 17)		2,920			2,417
Accrued pension and severance cost		169,745			189,215
Noncurrent operating lease liabilities (Note 15)		88,899			85,331
Other noncurrent liabilities (Note 12)		96,620			104,184

Total liabilities		2,083,500			1,746,500

Equity:
Canon Inc. shareholders’ equity (Note 10):
Common stock		174,762			174,762
(Number of authorized shares)		(3,000,000,000	)		(3,000,000,000	)
(Number of issued shares)		(1,333,763,464	)		(1,333,763,464	)
Additional paid-in capital		404,934			404,838
Legal reserve		61,554			64,509
Retained earnings		3,720,726			3,664,735
Accumulated other comprehensive income (loss) (Note 11)		287,503			62,623
Treasury stock, at cost		(1,358,274	)		(1,258,362	)
(Number of shares)		(345,963,587	)		(318,250,096	)

Total Canon Inc. shareholders’ equity		3,291,205			3,113,105
Noncontrolling interests (Note 10)		244,299			235,925

Total equity (Note 10)		3,535,504			3,349,030

Total liabilities and equity		5,619,004			5,095,530

CANON INC. AND SUBSIDIARIES

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

Consolidated Statements of Income


	Millions of yen
	Nine months ended September 30, 2023			Nine months ended September 30, 2022
Net sales (Notes 6, 11, 12 and 14):
Products and Equipment		2,382,158			2,290,449
Services		635,096			583,790

		3,017,254			2,874,239
Cost of sales (Notes 15 and 19):
Products and Equipment		1,292,731			1,290,688
Services		303,692			274,088

		1,596,423			1,564,776

Gross profit		1,420,831			1,309,463
Operating expenses:
Selling, general and administrative expenses (Notes 11, 15 and 19)		914,628			832,335
Research and development expenses		246,830			221,073

		1,161,458			1,053,408

Operating profit		259,373			256,055
Other income (deductions):
Interest and dividend income		9,103			3,167
Interest expense		(1,474	)		(737	)
Other, net (Notes 2, 11, 14 and 19)		8,980			(26,516	)

		16,609			(24,086	)

Income before income taxes		275,982			231,969
Income taxes		77,951			61,962

Consolidated net income		198,031			170,007
Less: Net income attributable to noncontrolling interests		14,084			10,889

Net income attributable to Canon Inc.		183,947			159,118


	Yen			Yen
Net income attributable to Canon Inc. shareholders per share (Note 13):
Basic		182.98			153.70
Diluted		182.91			153.65

CANON INC. AND SUBSIDIARIES

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

Consolidated Statements of Comprehensive Income


	Millions of yen
	Nine months ended September 30, 2023			Nine months ended September 30, 2022
Consolidated net income		198,031			170,007
Other comprehensive income (loss), net of tax (Note 11):
Foreign currency translation adjustments		223,928			309,018
Net unrealized gains and losses on securities		60			(21	)
Net gains and losses on derivative instruments		(1,214	)		(1,867	)
Pension liability adjustments		3,993			3,519

		226,767			310,649

Comprehensive income (loss) (Note 10)		424,798			480,656
Less: Comprehensive income attributable to noncontrolling interests		15,971			12,757

Comprehensive income (loss) attributable to Canon Inc.		408,827			467,899

CANON INC. AND SUBSIDIARIES

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

Consolidated Statements of Income


	Millions of yen
	Three months ended September 30, 2023			Three months ended September 30, 2022
Net sales (Notes 6, 11 12 and 14):
Products and Equipment		807,581			793,367
Services		217,666			202,723

		1,025,247			996,090
Cost of sales (Notes 15 and 19):
Products and Equipment		437,241			450,569
Services		105,956			94,488

		543,197			545,057

Gross profit		482,050			451,033
Operating expenses:
Selling, general and administrative expenses (Notes 11, 15 and 19)		315,099			294,576
Research and development expenses		84,327			75,017

		399,426			369,593

Operating profit		82,624			81,440
Other income (deductions):
Interest and dividend income		3,550			1,542
Interest expense		(659	)		(207	)
Other, net (Notes 2, 11, 14 and 19)		1,805			(3,699	)

		4,696			(2,364	)

Income before income taxes		87,320			79,076
Income taxes		21,379			21,827

Consolidated net income		65,941			57,249
Less: Net income attributable to noncontrolling interests		3,807			3,131

Net income attributable to Canon Inc.		62,134			54,118


	Yen			Yen
Net income attributable to Canon Inc. shareholders per share (Note 13):
Basic		62.65			52.90
Diluted		62.62			52.88

CANON INC. AND SUBSIDIARIES

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

Consolidated Statements of Comprehensive Income


	Millions of yen
	Three months ended September 30, 2023			Three months ended September 30, 2022
Consolidated net income		65,941			57,249
Other comprehensive income (loss), net of tax (Note 11):
Foreign currency translation adjustments		40,004			42,987
Net unrealized gains and losses on securities		21			(21	)
Net gains and losses on derivative instruments		(752	)		617
Pension liability adjustments		842			4,254

		40,115			47,837

Comprehensive income (loss) (Note 10)		106,056			105,086
Less: Comprehensive income attributable to noncontrolling interests		4,248			3,965

Comprehensive income (loss) attributable to Canon Inc.		101,808			101,121

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)


	Millions of yen
	Nine months ended September 30, 2023			Nine months ended September 30, 2022
Cash flows from operating activities:
Consolidated net income		198,031			170,007
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization		174,112			166,225
Loss (gain) on disposal of fixed assets		3,059			(9,549	)
Deferred income taxes		(10,060	)		(6,081	)
Decrease in trade receivables		61,379			8,399
Increase in inventories		(41,126	)		(153,886	)
Increase in lease receivables (Note 6)		(19,082	)		(11,070	)
(Decrease) increase in trade payables		(26,576	)		75,275
Decrease in accrued income taxes		(4,964	)		(12,740	)
Increase in accrued expenses		1,072			20,144
Decrease in accrued pension and severance cost		(22,926	)		(29,442	)
Contribution of cash to retirement benefit trust		(18,000	)		—
Other, net (Note 15)		(25,034	)		(28,801	)

Net cash provided by operating activities		269,885			188,481

Cash flows from investing activities:
Purchases of fixed assets (Note 5)		(156,948	)		(132,251	)
Proceeds from sale of fixed assets (Note 5)		2,533			14,316
Proceeds from maturity of held to maturity securities		—			2,151
Purchases of securities		(6,685	)		(20,053	)
Proceeds from sale and maturity of securities		13,181			6,518
Acquisitions of businesses, net of cash acquired (Notes 7 and 19)		(56,219	)		(5,890	)
Other, net		117			2,859

Net cash used in investing activities		(204,021	)		(132,350	)

Cash flows from financing activities:
Repayments of long-term debt		(1,456	)		(1,546	)
Decrease in short-term loans related to financial services, net (Note 9)		(1,000	)		(800	)
Increase in other short-term loans, net (Note 9)		306,280			197,840
Dividends paid		(130,870	)		(119,326	)
Repurchases and reissuance of treasury stock, net		(100,014	)		(100,012	)
Other, net		(7,860	)		(5,738	)

Net cash provided by (used in) financing activities		65,080			(29,582	)

Effect of exchange rate changes on cash and cash equivalents		27,700			37,354

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

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

Supplemental disclosure for cash flow information:
Cash paid during the period for:
Interest		1,435			657
Income taxes		97,792			91,607

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(1)	Basis of Presentation and Significant Accounting Policies

(a)

Basis of Presentation

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

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

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

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


	September 30, 2023		December 31, 2022
Consolidated subsidiaries		334		330
Affiliated companies		11		10

Total		345		340

(b)

Principles of Consolidation

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

(c)

Recent Accounting Guidance

Recently adopted accounting guidance

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

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

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

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

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(2)	Investments

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


	Millions of yen
	September 30, 2023
	Cost		Gross unrealized holding gains		Gross unrealized holding losses		Fair value
Current:
Corporate bonds		1,353		3		—		1,356

Noncurrent:
Corporate bonds		5,427		37		4		5,460

		6,780		40		4		6,816


	Millions of yen
	December 31, 2022
	Cost		Gross unrealized holding gains		Gross unrealized holding losses		Fair value
Current:
Corporate bonds		9,277		35		11		9,301

Noncurrent:
Corporate bonds		4,850		—		65		4,785

		14,127		35		76		14,086

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


	Millions of yen
	Fair value
Due within one year		1,356
Due after one year through five years		5,460

Total		6,816

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(2)	Investments (continued)

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


	Millions of yen
	Nine months ended September 30, 2023			Nine months ended September 30, 2022
Net gains (losses) recognized during the period on equity securities		6,331			(6,451	)
Less: Net gains (losses) recognized during the period on equity securities sold during the period		152			61

Unrealized gains (losses) recognized during the period on equity securities still held at September 30		6,179			(6,512	)


	Millions of yen
	Three months ended September 30, 2023			Three months ended September 30, 2022
Net gains (losses) recognized during the period on equity securities		(2,024	)		(1,219	)
Less: Net gains (losses) recognized during the period on equity securities sold during the period		128			83

Unrealized gains (losses) recognized during the period on equity securities still held at September 30		(2,152	)		(1,302	)

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

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

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(3)	Trade Receivables

Trade receivables are summarized as follows:


	Millions of yen
	September 30, 2023			December 31, 2022
Notes		34,899			30,535
Accounts		587,182			606,268

Trade receivables		622,081			636,803
Allowance for credit losses		(13,991	)		(13,305	)

		608,090			623,498

(4)	Inventories

Inventories are summarized as follows:


	Millions of yen
	September 30, 2023		December 31, 2022
Finished goods		555,974		486,826
Work in process		279,689		253,026
Raw materials		78,209		68,460

		913,872		808,312

(5)	Property, Plant and Equipment, net

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


	Millions of yen
	September 30, 2023			December 31, 2022
Land		284,116			275,261
Buildings		1,856,128			1,760,058
Machinery and equipment		2,007,527			1,893,745
Construction in progress		53,292			60,914
Finance lease right-of-use assets		8,495			7,315

Cost		4,209,558			3,997,293
Less: accumulated depreciation		(3,107,984	)		(2,962,228	)

Property, plant and equipment, net		1,101,574			1,035,065

SEC Form 6-K filed by Canon Inc.