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 ….		August		……………………………………………… ,		2020

 

		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.

 

 

Date…		August 6, 2020						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 second quarter ended June 30, 2020

[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 second quarter ended

June 30, 2020

 

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 Second quarter of Fiscal 2020			7
III		Company Information
		(1)   Shares			8
		(2)   Directors and Executive Officers			13
IV		Financial Statements
		(1)   Consolidated Financial Statements			14
		(2)   Other Information			51

Disclaimer Regarding Forward-Looking Statements

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

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

 

1

I.	Corporate Information

 

(1)	Consolidated Financial Summary

 

		Millions of yen (except per share amounts)
		Six months ended June 30, 2020				Six months ended June 30, 2019				Three months ended June 30, 2020				Three months ended June 30, 2019				Year ended December 31, 2019
Net sales			1,455,627				1,770,335				673,315				905,869				3,593,299
Income (loss) before income taxes			27,288				97,188				(7,223	)			51,075				195,740
Net income (loss) attributable to Canon Inc.			13,071				65,827				(8,835	)			34,519				125,105
Comprehensive income (loss)			(25,823	)			20,664				8,222				(4,387	)			102,662
Canon Inc. shareholders’ equity			—				—				2,525,056				2,706,003				2,692,595
Total equity			—				—				2,728,529				2,899,866				2,891,918
Total assets			—				—				4,670,703				4,814,612				4,768,351
Net income (loss) attributable to Canon Inc. shareholders per share:
Basic (yen)			12.41				61.22				(8.45	)			32.21				116.93
Diluted (yen)			12.41				61.22				(8.45	)			32.20				116.91
Canon Inc. shareholders’ equity to total assets (%)			—				—				54.1				56.2				56.5
Cash flows from operating activities			140,831				113,173				—				—				358,461
Cash flows from investing activities			(72,874	)			(110,775	)			—				—				(228,568	)
Cash flows from financing activities			22,249				(107,544	)			—				—				(232,590	)
Cash and cash equivalents at end of period			—				—				500,046				407,492				412,814

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, 352 consolidated subsidiaries, and 8 affiliates accounted for using the equity method, as of June 30, 2020, collectively, the “Group”) is engaged in development, manufacturing, sales, and servicing activities in areas such as office, imaging systems, medical systems, and industrial equipment. No material change in Canon’s business has occurred during the six months ended June 30, 2020.

No additions or removals of significant group entities have occurred during the six months ended June 30, 2020.

 

2

II.	The Business

 

(1)	Risk Factors

No occurrence of new risks have been identified during the six months ended June 30, 2020. 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 global economy in the first half of 2020, the global economy recorded a decline, said to be the worst since the Great Depression due to severely limited economic activity caused by the coronavirus disease 2019 (“COVID-19”) global pandemic. In the U.S., some states started the process of gradually reopening their economies in early May. The U.S. economy, however, contracted significantly mainly due to a slowdown in consumption caused by the restrictions placed on people’s movement. The European economy fell significantly due to a rapid slowdown in consumption caused by large-scale lockdown in each country. In China, signs of recovery in domestic demand and exports were seen as the economy gradually reopened, and the Chinese economy turned from negative growth for the previous quarter to positive in this second quarter. Even in other emerging markets, economic activity stagnated due to the spread of infection and drops in resource prices. As for Japan, the economic slowdown worsened due to among other factors, the exercising of self-restraint with regard to going out in consideration of the Emergency Declaration of April.

Amid these conditions, in the markets in which Canon operates, as for office multifunction devices (MFDs) and laser printers, demand for both monochrome and color models declined. As for cameras, the trend of market contraction accelerated due to the impact of COVID-19. As for inkjet printers, although reduced demand in some emerging markets were seen, demand in developed countries and China increased due to remote working and learning. For medical equipment, the prolonged impact of COVID-19 as well as travel restrictions and other measures to prevent infection adversely affected sales activities. In industrial equipment, although demand for FPD (Flat Panel Display) lithography equipment remained restrained, demand for semiconductor lithography equipment remained solid.

The average values of the yen during the second quarter and the first half of the year were ¥107.59 and ¥108.34 against the U.S. dollar, respectively, year-on-year appreciation of approximately ¥2 for both periods, and ¥118.66 and ¥119.47 against the euro, respectively, year-on-year appreciation of approximately ¥5 for both periods.

 

3

(2)	Operating Results and Financial Conditions (continued)

[Second quarter results]

As for the second quarter, sales of MFDs for the office and production printing market both decreased. As for laser printers, unit sales of both monochrome and color models were below those of last year in the same period, mainly reflecting the economic slowdown due to COVID-19. Sales of services and consumables also declined, as customers’ print volumes decreased mainly due to the impact of continuous office closures. Although top market share of the interchangeable-lens digital camera market was firmly maintained, unit sales were below those of last year in the same period, reflecting market contraction and sluggish demand due to COVID-19. As for inkjet printers, unit sales were above those of last year in the same period due to a rise in demand linked to remote working and learning in developed countries and China. As for medical equipment, because of delays in equipment installation at medical institutions and also limited sales & marketing activities due to the impact of COVID-19, overall sales were below those of last year in the same period. In industrial equipment, sales were below those of last year in the same period, despite solid demand towards memory related devices, as a result of continued postponement of FPD lithography equipment installation due to the impact of COVID-19. As for network cameras, which are being used in a growing range of various applications and where the market continued to growth, sales were below those of last year in the same period, due to stagnant sales & marketing activities affected by COVID-19. Under these conditions, second-quarter net sales decreased by 25.7% year-on-year to ¥673.3 billion. Gross profit as a percentage of net sales dropped by 4.0 points to 40.9%. Operating expenses decreased by 19.3% year-on-year to ¥293.1 billion, due to the further promotion of efficiency for expenses throughout the entire Group as well as effects of foreign currency fluctuation. As a result, operating loss totaled ¥17.8 billion. Other income (deductions) rose by ¥2.6 billion to ¥10.5 billion, mainly due to valuation gain on securities compared with the previous year, while loss before income taxes totaled ¥7.2 billion and net loss attributable to Canon Inc. totaled ¥8.8 billion.

Basic net income and loss attributable to Canon Inc. shareholders per share was a negative ¥8.45 for the second quarter, a year-on-year decrease of ¥40.66.

[First-half results]

As for the first half, sales of MFDs for the office and production printing market both decreased although unit sales of MFDs for the production printing market remained solid in the first quarter of 2020. As for laser printers, unit sales of both monochrome and color models were below those of last year in the same period, mainly reflecting the economic slowdown due to COVID-19. Sales of services and consumables also declined, as customers’ print volumes decreased mainly due to the impact of continuous office closures. Although top market share of the interchangeable-lens digital camera market was firmly maintained, unit sales were below those of last year in the same period, reflecting market contraction and sluggish demand due to COVID-19. As for inkjet printers, unit sales were above those of last year in the same period due to a rise in demand linked to remote working and learning in developed countries and China. As for medical equipment, because of delays in equipment installation at medical institutions and also limited sales & marketing activities due to the impact of COVID-19, overall sales were below those of last year in the same period. In industrial equipment, sales were below those of last year in the same period, despite solid demand towards image sensors supporting the development of the IoT (Internet of Things) in the first quarter and memory related devices in the first half in 2020, as a result of continued postponement of FPD lithography equipment installation due to the impact of COVID-19. As for network cameras, which are being used in a growing range of various applications and where the market continued to growth, sales in the first quarter of 2020 increased than those of last year in the same period. However, sales in the first half of 2020 were below those of last year in the same period, due to stagnant sales & marketing activities affected by COVID-19. Under these conditions, net sales for the first half of the year decreased by 17.8% year on year to ¥1,455.6 billion. Gross profit as a percentage of net sales dropped by 1.4 points to 43.6%. Operating expenses decreased by 13.2% year-on-year to ¥618.9 billion, due to the further promotion of efficiency for expenses throughout the entire Group as well as effects of foreign currency fluctuation. As a result, operating profit for the first half of the year decreased by 81.9% to ¥15.1 billion. Other income (deductions) decreased by ¥1.5 billion to ¥12.2 billion compared with the previous year, while income before income taxes decreased by 71.9% to ¥27.3 billion and first-half net income attributable to Canon Inc. decreased by 80.1% to ¥13.1 billion.

Basic net income and loss attributable to Canon Inc. shareholders per share was a positive ¥12.41 for the first half, a year-on-year decrease of ¥48.81.

 

4

(2)	Operating Results and Financial Conditions (continued)

Looking at Canon’s first half performance by business unit, in the Office Business Unit, unit sales of MFDs for the production printing market remained solid in the first quarter of 2020. Although, on the other hand, new products of the imageRUNNER ADVANCE DX series were launched, unit sales of MFDs for the office and the production printing market were below those of last year in the second quarter of 2020 due to delays in business negotiations and equipment installations as the spread of COVID-19 caused office closures, resulting in a decrease of unit sales in the first half than those of last year in the same period. As for laser printers, unit sales for both monochrome and color models were below those of last year in the same period due to the ongoing economic slowdown. Sales of services and consumables also declined, as customers’ print volumes decreased mainly due to the impact of office closures for an extended period. These factors resulted in sales for the combined first six months of the year totaled ¥705.2 billion, a year-on-year decrease of 19.8%, while income before income taxes totaled ¥48.1 billion, a year-on-year decrease of 45.3%.

Within the Imaging System Business Unit, unit sales of interchangeable-lens digital cameras were below those of last year in the same period. This also reflected the impact of COVID-19 on sales activities despite the deterioration of mainly developed countries stopping towards the second half of the quarter. As for inkjet printers, unit sales in emerging market were below those of last year in the same period due to the impact of COVID-19. In developed countries and China, however, sales grew due to expanding demand resulting from remote working and learning. As a result, overall unit sales were above those of last year in the same period. These factors resulted in sales for the combined first six months of the year totaled ¥293.4 billion, a year-on-year decrease of 23.0%, while income before income taxes totaled ¥1.8 billion, a year-on-year decrease of 90.5%.

Within the Medical System Business Unit, although sales of Computed tomography (CT) systems for the diagnosis of pneumonia, Diagnostic X-ray systems and related components grew, there were fewer opportunities to hold business discussion with customers due to the cancelation of academic conferences and trade shows in the wake of COVID-19. Additionally, due to delays in equipment installation at medical institutions, these factors resulted in sales for the combined first six months of the year totaled ¥207.9 billion, a year-on-year decrease of 3.1%, while income before income taxes totaled ¥10.2 billion, a year-on-year increase of 1.5% thanks to cost reduction.

For the Industry and Others Business Unit, regarding semiconductor lithography equipment, demand towards image sensors supporting the development of the IoT in the first quarter and memory related devices in the first half remained solid in 2020. As a result, unit sales were significantly above those of last year in the same period. As for FPD lithography equipment, although demand related to PCs and tablets increased, unit sales were below those of last year in the same period due to delays in equipment installation which were unavoidable, caused by travel restrictions in the wake of COVID-19. As for network cameras, although continuous expansion of the market, based on a rise in existing demand of crime prevention and disaster monitoring, and additionally diversifying needs such as the video analysis, was expected, sales decreased, affected by the stagnation of sales activity due to COVID-19. These factors resulted in sales for the combined first six months of the year totaled ¥286.4 billion, a year-on-year decrease of 16.4%, while income before income taxes totaled ¥1.8 billion, a year-on-year decrease of 88.2%.

Financial Conditions

Total assets decreased by ¥97.6 billion to ¥4,670.7 billion at June 30, 2020, compared to the end of previous year, mainly due to a decrease of trade receivables. Total liabilities increased by ¥65.7 billion to ¥1,942.2 billion at June 30, 2020, compared to the end of previous year, mainly due to an increase of short term loans, although trade payables and accrued expenses decreased. Total equity decreased by ¥163.4 billion to ¥2,728.5 billion at June 30, 2020, compared to the end of previous year, mainly due to the dividends to Canon Inc. shareholders, the repurchasing of treasury stock and an increase of accumulated other comprehensive loss resulting from the appreciation of the yen.

 

5

(2)	Operating Results and Financial Conditions (continued)

During the first half of 2020, cash flow from operating activities totaled ¥140.8 billion, an increase of ¥27.7 billion compared with the same period of the previous year, mainly due to working capital improvement, despite a sharp drop in profit. Cash flow used in investing activities decreased by ¥37.9 billion year on year to ¥72.9 billion mainly due to a decrease of investment in production equipment affected by lockdown related to COVID-19. Accordingly, free cash flow totaled positive ¥68.0 billion, increased by ¥65.6 billion compared with the corresponding year-ago period.

As for cash flow from financing activities, proceed of ¥22.2 billion was recorded, mainly due to an increase in short-term loans.

Owing to these factors, as well as the impact from foreign currency translation adjustments, cash and cash equivalents increased by ¥87.2 billion to ¥500.0 billion from the end of the previous year.

Non-GAAP Financial Measures

We have reported our financial results in accordance with U.S. GAAP. In addition, we have discussed our results using “free cash flow,” which is a non-GAAP measure.

We believe this measure, which takes into consideration the Company’s operating and investing activities, is beneficial to an investor’s understanding of Canon’s current liquidity and the alternatives of use in financing activities.

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

 

		Billions of yen
		Six months ended June 30, 2020
Net cash provided by operating activities			140.8
Net cash used in investing activities			(72.9	)
Free cash flow			68.0

 

6

(2)	Operating Results and Financial Conditions (continued)

Management Issues to be Addressed

No material changes or issues with respect to business operations and finances have occurred during the six months ended June 30, 2020.

Research and Development Expenses

Canon’s research and development expenses for the six months ended June 30, 2020 totaled ¥131.7 billion.

Property, Plant and Equipment

 

(1)

Major Property, Plant and Equipment

There were no significant additional plans for new construction or retirement of property, plant and equipment during the first half of 2020.

 

(2)

Prospect of Capital Investment in the first half of Fiscal 2020

The new construction of property, plant and equipment, which had been in progress as of December 31, 2019 and was completed during the first half of 2020, is as follows:

 

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

 

(3)	Significant Business Contracts Entered into in the Second Quarter of Fiscal 2020

No material contracts were entered into during the three months ended June 30, 2020.

 

7

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, Sapporo and New York Stock Exchanges. Total issued shares are as follows:

 

		As of June 30, 2020
Total number of issued shares			1,333,763,464

Stock Acquisition Rights

 

(1)	Stock options

The descriptions of the stock option plans as of June 30, 2020 are below.

The Stock Option Plan Approved on March 27, 2020

1. Grantees of share options

The Company’s 4 directors (excluding outside directors) and 30 executive officers.

2. Number of share options

The number of share options that the Board of Directors are authorized to issue is 886.

3. Number of shares acquired upon exercise of a share option

The number of shares acquired upon exercise of one share option (the “Allotted Number of Shares”) is 100 common shares, and the total number of shares to be delivered due to the exercise of share options is 88,600 common shares. However, in the case that the Company conducts a share split (including an allotment without consideration (musho-wariate) of shares of common stock of the Company; the same shall apply to all references to the share split herein) or share consolidation on and after the date of shareholders’ resolution adopting the proposal at the above-mentioned General Meeting of Shareholders (the “Allotment Date”), the number of shares acquired shall be adjusted in accordance with the following formula, rounding down any fraction of less than one share resulting from such adjustment.

 

Number of shares   acquired after   adjustment		=		Number of shares   acquired before   adjustment		×		Ratio of share split   or share   consolidation

In addition to the above, in any event that makes it necessary to adjust the number of shares acquired, including a merger and company split, on and after the Allotment Date, the Company may make appropriate adjustment to the Number of Shares Acquired within a reasonable range.

4. Cash payment for share options (yen)

The cash payment required for each stock acquisition right shall be ¥1 per share to be acquired upon exercise of each stock acquisition right, multiplied by the number of shares acquired.

5. Period during which share options are exercisable

From May 2, 2020 to May 1, 2050

 

8

6. Issue price and amount of increased stated capital (yen)

The issue price and amount of increased stated capital per share is ¥1,460 and ¥730, respectively. The issue price is total amount of the exercise price of each stock acquisition (¥1 per share) and the fair value of the stock acquisition rights at the allotment date. In addition, the amount of capital to be increased due to the issuance of shares upon exercise of the stock acquisition rights shall be a half of the maximum amount of capital increase, etc, which is calculated in accordance with Article 17, Paragraph 1 of the Company Accounting Regulations (Kaisha Keisan Kisoku), and any fraction less than ¥1 arising therefrom shall be rounded up to the nearest ¥1.

7. Other conditions for exercise of share options

(i) Those to whom stock acquisition rights are allotted (the “Holder(s)”) shall be entitled to exercise all the stock acquisition rights together within 10 days (in case the last day is not a business day, the following business day) from the day immediately following the day when they cease to hold any position as a director or an executive officer of the Company.

(ii) In the event that the Company recognizes any violation of laws and regulations, misconduct of the duties, act conflicting with the duty of due care or duty of loyalty, or any other act equivalent thereto of the Holder, the Company may limit, subject to a resolution by the Board of Directors of the Company, the number of offered stock acquisition rights that may be exercised by such Holder.

8. Restriction on acquisition of share options by transfer

An acquisition of share options by way of transfer requires the approval of the Board of Directors.

9. Treatment of the stock acquisition rights upon restructuring transaction

If the Company conducts a merger (limited to the case where the Company is dissolved due to the merger), or a share exchange or transfer (both, limited to the case where the Company becomes a wholly-owned subsidiary) (collectively, the “Structural Reorganization”), the Company shall, in each of the above cases, allot stock acquisition rights of any of the relevant companies listed in “a” through “e” of Article 236, Paragraph 1, Item 8 of the Company Law (the “Reorganized Company”) to the Holders holding the stock acquisition rights remaining at the time immediately preceding the effective date of the relevant Structural Reorganization (the “Remaining Stock Acquisition Rights”) (the effective date of the relevant Structural Reorganization shall mean, in the case of a merger, the date on which the merger becomes effective; in the case of a consolidation; the date of establishment of a newly-incorporated company through consolidation; in the case of a share exchange, the date on which the share exchange becomes effective; and in the case of a share transfer, the date of establishment of a wholly-owning parent company through the share transfer; hereinafter the same shall apply). Provided, however, that the foregoing shall be on the condition that transfer of such stock acquisition rights by the Reorganized Company in accordance with each of the following items is stipulated in a merger agreement, a consolidation agreement, a share exchange agreement or a share transfer plan.

(i) Number of stock acquisition rights of the Reorganized Company to be allotted:

A number equal to the number of the Remaining Stock Acquisition Rights held by the Holder shall be transferred to such Holder.

(ii) Class of shares of the Reorganized Company to be acquired upon exercise of stock acquisition rights:

Common stock of the Reorganized Company.

(iii) Number of shares of the Reorganized Company to be acquired upon exercise of stock acquisition rights:

To be determined in accordance with 3 above, taking into consideration, among others, the conditions of Structural Reorganization.

 

9

(iv) Value of assets to be contributed upon exercise of each stock acquisition right:

The value of assets to be contributed upon exercise of each stock acquisition right to be allotted shall be the amount obtained by multiplying (x) the exercise price after reorganization set forth below by (y) the number of shares of the Reorganized Company to be acquired upon exercise of the relevant stock acquisition rights as determined in accordance with (iii) above. The “exercise price after reorganization” shall be one (1) yen per share of the Reorganized Company to be acquired upon exercise of each of its stock acquisition rights.

(v) Exercise period of stock acquisition rights:

From and including whichever is the later of (x) the commencement date of the period during which the stock acquisition rights may be exercised or (y) the effective date of the Structural Reorganization, to and including the expiration date of the period during which the stock acquisition rights may be exercised as provided.

(vi) Matters regarding stated capital and capital reserves increased due to the issuance of shares upon exercise of stock acquisition rights:

(a) The increased amount of stated capital to be increased due to the issuance of shares upon exercise of the stock acquisition rights will be one half (1/2) of the maximum amount of increase of stated capital, etc. to be calculated in accordance with Article 17, Paragraph 1 of the Company Accounting Regulations (Kaisha Keisan Kisoku). Any fractional amount of less than one (1) yen resulting from such calculation will be rounded up to one (1) yen.

(b) The increased amount of capital reserves to be increased due to the issuance of shares upon exercise of the stock acquisition rights shall be the maximum amount of increases of stated capital, etc., mentioned in (a) above, after the subtraction of increased amount of stated capital mentioned in (a) above.

(vii) Restrictions on acquisition of stock acquisition rights by transfer:

The stock acquisition rights cannot be acquired through transfer, unless such acquisition is expressly approved by a resolution of the Board of Directors of the Reorganized Company.

(viii) Conditions for exercise of stock acquisition rights:

(a) Those to whom stock acquisition rights are allotted (the “Holder(s)”) shall be entitled to exercise all the stock acquisition rights together within 10 days (in case the last day is not a business day, the following business day) from the day immediately following the day when they cease to hold any position as a Director or an Executive Officer.

(b) In the event that the Company recognizes any violation of laws and regulations, misconduct of the duties, act conflicting with the duty of due care or duty of loyalty, or any other act equivalent thereto of the Holder, the Company may limit, subject to a resolution by the Board of Directors of the Company, the number of offered stock acquisition rights that may be exercised by such Holder.

(c) Besides the above, other conditions shall be stipulated in an agreement to be executed between the Reorganized Company and the Holder, based on the resolution of the Board of Directors’ meeting of the Reorganized Company.

(ix) Events regarding the Company’s acquisition of stock acquisition rights:

If a proposal for the approval of a merger agreement under which the Reorganized Company will become an absorbed company or a proposal for the approval for a share exchange agreement or a share transfer plan under which the Reorganized Company will become a wholly owned subsidiary is approved by the shareholders of the Reorganized Company at a Meeting of Shareholders (or by the Board of Directors if no resolution of a Meeting of Shareholders is required for such approval), the Reorganized Company will be entitled to acquire the share options, without compensation, on a date separately designated by the Board of Directors.

 

(2)	Other stock acquisition rights

Not applicable.

 

10

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 term				As of June 30, 2020
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

 

		As of June 30, 2020
		Number of shares owned (Number of shares)				Number of shares owned / Number of shares issued
The Master Trust Bank of Japan, Ltd. (Trust Account)			90,864,800				8.69%
Japan Trustee Services Bank, Ltd. (Trust Account)			41,047,000				3.93%
SMBC Nikko Securities Inc.			25,049,800				2.40%
The Dai-Ichi Life Insurance Company, Limited			24,320,780				2.33%
Barclays Securities Japan Limited			24,224,217				2.32%
Mizuho Bank, Ltd.			22,558,173				2.16%
Japan Trustee Services Bank, Ltd. (Trust Account 5)			20,472,200				1.96%
State Street Bank West Client – Treaty 505234			18,794,828				1.80%
Japan Trustee Services Bank, Ltd. (Trust Account 7)			16,919,000				1.62%
OBAYASHI CORPORATION			16,527,607				1.58%
Total			300,778,405				28.76%

Notes:

1:	Custody Bank of Japan, Ltd. was established through a joint share transfer method by Japan Trustee Services Bank, Ltd., Trust & Custody Services Bank, Ltd. and JTC Holdings, Ltd. on 27, July 2020.

2:	Apart from the above shares, The Dai-Ichi Life Insurance Company, Limited held 6,180,000 shares contributed to a trust fund for its retirement and severance plans.

3:	Apart from the above shares, Mizuho Bank, Ltd., held 9,057,000 shares contributed to a trust fund for its retirement and severance plans.

4:	Apart from the above shares, the Company owns 287,987,477 shares (21.59% of total issued shares) of treasury stock.

 

11

(1)	Shares (continued)

Voting Rights

 

		As of June 30, 2020
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.)			287,987,400				—
Shares with full voting rights (Others)			1,044,391,100				10,443,911
Fractional unit shares (Note)			1,384,964				—
Total number of issued shares			1,333,763,464				—
Total voting rights held by all shareholders			—				10,443,911

Note:

In “Fractional unit shares” under “Number of shares,” 77 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.			287,987,400				21.59	%
Total			287,987,400				21.59	%

 

12

(2)	Directors and Executive Officers

The resignation of a director is below:

 

Change in functions of directors are below:

 

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, 2019 and the end of this quarter.

Changes in functions of executive officers are below:

 

The Number of Directors and Executive Officers by Gender

Males: 46, Females: 2 (Females account for 4.2% of the total.)

The totaled number consisted of 10 Directors or Corporate Auditors and 38 Executive Officers as of June 30, 2020.

 

13

IV.	Financial Statements (Unaudited)

 

(1)	Consolidated Financial Statements

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

 

		Page
Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019			15
Consolidated Statements of Income and Consolidated Statements of Comprehensive Income for the six months ended June 30, 2020 and 2019			17
Consolidated Statements of Income and Consolidated Statements of Comprehensive Income for the three months ended June 30, 2020 and 2019			19
Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019			21
Notes to Consolidated Financial Statements			22

 

14

CANON INC. AND SUBSIDIARIES

Consolidated Balance Sheets

 

		Millions of yen
		June 30, 2020				December 31, 2019
Assets
Current assets:
Cash and cash equivalents (Notes 17 and 18)			500,046				412,814
Short-term investments (Notes 2 and 17)			125				1,767
Trade receivables, net (Note 3)			404,013				559,836
Inventories (Note 4)			603,738				584,756
Prepaid expenses and other current assets (Notes 6,11,13 and 17)			310,472				286,792
Total current assets			1,818,394				1,845,965
Noncurrent receivables (Note 15)			21,186				17,135
Investments (Notes 2 and 17)			46,544				48,361
Property, plant and equipment, net (Note 5)			1,059,378				1,089,671
Operating lease right-of-use assets (Note 14)			109,485				114,418
Intangible assets, net			330,017				347,921
Goodwill			890,637				898,661
Other assets (Note 6)			395,062				406,219
Total assets			4,670,703				4,768,351

 

15

CANON INC. AND SUBSIDIARIES

Consolidated Balance Sheets (continued)

 

		Millions of yen
		June 30, 2020				December 31, 2019
Liabilities and equity
Current liabilities:
Short-term loans and current portion of long-term debt (Notes 8 and 16)			199,548				42,034
Trade payables (Note 7)			274,072				305,312
Accrued income taxes			16,691				18,801
Accrued expenses (Note 15)			279,235				324,891
Current operating lease liabilities (Note 14)			30,839				31,884
Other current liabilities (Notes 11,13 and 17)			241,617				237,576
Total current liabilities			1,042,002				960,498
Long-term debt, excluding current installments (Notes 8 and 16)			359,027				357,340
Accrued pension and severance cost			365,755				368,507
Noncurrent operating lease liabilities (Note 14)			80,028				83,688
Other noncurrent liabilities			95,362				106,400
Total liabilities			1,942,174				1,876,433
Commitments and contingent liabilities (Note 15)
Equity:
Canon Inc. shareholders’ equity (Note 9):
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			404,633				405,017
Legal reserve			69,438				67,572
Retained earnings			3,388,054				3,462,182
Accumulated other comprehensive income (loss) (Note 10)			(353,479	)			(308,442	)
Treasury stock, at cost			(1,158,352	)			(1,108,496	)
(Number of shares)			(287,987,477	)			(269,928,993	)
Total Canon Inc. shareholders’ equity			2,525,056				2,692,595
Noncontrolling interests (Note 9)			203,473				199,323
Total equity (Note 9)			2,728,529				2,891,918
Total liabilities and equity			4,670,703				4,768,351

 

16

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

Consolidated Statements of Income

 

		Millions of yen
		Six months ended June 30, 2020				Six months ended June 30, 2019
Net sales (Notes 6,10,11 and 13):
Products and Equipment			1,122,829				1,388,434
Services			332,798				381,901
			1,455,627				1,770,335
Cost of sales (Notes 14 and 18):
Products and Equipment			661,832				790,484
Services			159,817				183,089
			821,649				973,573
Gross profit			633,978				796,762
Operating expenses:
Selling, general and administrative expenses (Notes 14 and 18)			487,191				564,827
Research and development expenses			131,665				148,382
			618,856				713,209
Operating profit			15,122				83,553
Other income (deductions):
Interest and dividend income			1,625				2,917
Interest expense			(388	)			(536	)
Other, net (Notes 2,10,13 and 18)			10,929				11,254
			12,166				13,635
Income before income taxes			27,288				97,188
Income taxes			8,304				25,130
Consolidated net income			18,984				72,058
Less: Net income attributable to noncontrolling interests			5,913				6,231
Net income attributable to Canon Inc.			13,071				65,827
		Yen				Yen
Net income attributable to Canon Inc. shareholders per share (Note 12):
Basic			12.41				61.22
Diluted			12.41				61.22
Cash dividends per share			40.00				80.00

 

17

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income

 

		Millions of yen
		Six months ended June 30, 2020				Six months ended June 30, 2019
Consolidated net income			18,984				72,058
Other comprehensive income (loss), net of tax (Note 10):
Foreign currency translation adjustments			(35,576	)			(54,171	)
Net gains and losses on derivative instruments			515				100
Pension liability adjustments			(9,746	)			2,677
			(44,807	)			(51,394	)
Comprehensive income (loss) (Note 9)			(25,823	)			20,664
Less: Comprehensive income (loss) attributable to noncontrolling interests			6,152				6,142
Comprehensive income (loss) attributable to Canon Inc.			(31,975	)			14,522

 

18

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

Consolidated Statements of Income

 

		Millions of yen
		Three months ended June 30, 2020				Three months ended June 30, 2019
Net sales (Notes 6,10,11 and 13):
Products and Equipment			522,877				715,372
Services			150,438				190,497
			673,315				905,869
Cost of sales (Notes 14 and 18):
Products and Equipment			322,392				409,533
Services			75,608				89,929
			398,000				499,462
Gross profit			275,315				406,407
Operating expenses:
Selling, general and administrative expenses (Notes 14 and 18)			229,348				288,833
Research and development expenses			63,722				74,447
			293,070				363,280
Operating profit (loss)			(17,755	)			43,127
Other income (deductions):
Interest and dividend income			487				1,357
Interest expense			(202	)			(252	)
Other, net (Notes 2,10,13 and 18)			10,247				6,843
			10,532				7,948
Income (loss) before income taxes			(7,223	)			51,075
Income taxes			(2,121	)			13,908
Consolidated net income (loss)			(5,102	)			37,167
Less: Net income attributable to noncontrolling interests			3,733				2,648
Net income (loss) attributable to Canon Inc.			(8,835	)			34,519
		Yen				Yen
Net income (loss) attributable to Canon Inc. shareholders per share (Note 12):
Basic			(8.45	)			32.21
Diluted			(8.45	)			32.20
Cash dividends per share			40.00				80.00

 

19

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income

 

		Millions of yen
		Three months ended June 30, 2020				Three months ended June 30, 2019
Consolidated net income (loss)			(5,102	)			37,167
Other comprehensive income (loss), net of tax (Note 10):
Foreign currency translation adjustments			25,456				(42,741	)
Net gains and losses on derivative instruments			(34	)			333
Pension liability adjustments			(12,098	)			854
			13,324				(41,554	)
Comprehensive income (loss) (Note 9)			8,222				(4,387	)
Less: Comprehensive income (loss) attributable to noncontrolling interests			3,843				2,455
Comprehensive income (loss) attributable to Canon Inc.			4,379				(6,842	)

 

20

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

 

		Millions of yen
		Six months ended June 30, 2020				Six months ended June 30, 2019
Cash flows from operating activities:
Consolidated net income			18,984				72,058
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization			108,531				117,370
(Gain) loss on disposal of fixed assets			(1,852	)			2,864
Deferred income taxes			(5,073	)			(7,339	)
Decrease in trade receivables			141,098				56,342
Increase in inventories			(28,375	)			(31,097	)
Decrease in trade payables			(32,394	)			(21,809	)
Decrease in accrued income taxes			(1,821	)			(7,290	)
Decrease in accrued expenses			(40,611	)			(21,898	)
Decrease in accrued (prepaid) pension and severance cost			(6,539	)			(6,614	)
Other, net (Note 14)			(11,117	)			(39,414	)
Net cash provided by operating activities			140,831				113,173
Cash flows from investing activities:
Purchases of fixed assets (Note 5)			(81,800	)			(104,877	)
Proceeds from sale of fixed assets (Note 5)			7,381				78
Purchases of securities			(212	)			(1,474	)
Proceeds from sale and maturity of securities			237				692
(Increase) decrease in time deposits, net			1,600				(3,659	)
Acquisitions of businesses, net of cash acquired			(127	)			(1,716	)
Other, net			47				181
Net cash used in investing activities			(72,874	)			(110,775	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			2,100				—
Repayments of long-term debt			(585	)			(642	)
Increase in short-term loans, net			157,553				32,111
Transactions with noncontrolling interests			1,376				362
Dividends paid			(85,107	)			(86,380	)
Repurchases and reissuance of treasury stock, net			(50,008	)			(50,006	)
Other, net			(3,080	)			(2,989	)
Net cash provided by (used in) financing activities			22,249				(107,544	)
Effect of exchange rate changes on cash and cash equivalents			(2,974	)			(8,007	)
Net change in cash and cash equivalents			87,232				(113,153	)
Cash and cash equivalents at beginning of period			412,814				520,645
Cash and cash equivalents at end of period			500,046				407,492
Supplemental disclosure for cash flow information:
Cash paid during the period for:
Interest			553				483
Income taxes			14,555				48,989

 

21

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(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) were 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, 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.

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

The number of consolidated subsidiaries and affiliated companies that were accounted for by the equity method as of June 30, 2020 and December 31, 2019 are summarized as follows:

 

		June 30, 2020				December 31, 2019
Consolidated subsidiaries			352				361
Affiliated companies			8				8
Total			360				369

 

(b)

Principles of Consolidation

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

 

22

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(1)	Basis of Presentation and Significant Accounting Policies (continued)

 

(c)

Recent Accounting Guidance

Recently adopted 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.

 

23

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(2)	Investments

The unrealized and realized gains and losses related to equity securities for the six months and three months ended June 30, 2020 and 2019 are as follows:

 

		Millions of yen
		Six months ended June 30, 2020				Six months ended June 30, 2019
Net gains and (losses) recognized during the period on equity securities			(516	)			174
Less: Net gains and (losses) recognized during the period on equity securities sold during the period			287				(51	)
Unrealized gains and (losses) recognized during the period on equity securities still held at June 30.			(803	)			225
		Millions of yen
		Three months ended June 30, 2020				Three months ended June 30, 2019
Net gains and (losses) recognized during the period on equity securities			4,084				(1,047	)
Less: Net gains and (losses) recognized during the period on equity securities sold during the period			105				—
Unrealized gains and (losses) recognized during the period on equity securities still held at June 30.			3,979				(1,047	)

The carrying amount of non-marketable equity securities without readily determinable fair value totaled ¥8,875 million and ¥8,448 million at June 30, 2020 and December 31, 2019, respectively. The impairment or other adjustments resulting from observable price changes recorded during the six months ended June 30, 2020 and 2019 were not significant.

There were no available-for-sale debt securities at June 30, 2020 and December 31, 2019.

Time deposits with original maturities of more than three months are ¥125 million and ¥1,767 million at June 30, 2020 and December 31, 2019, respectively, and are included in short-term investments in the accompanying consolidated balance sheets.

 

24

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(3)	Trade Receivables

Trade receivables are summarized as follows:

 

		Millions of yen
		June 30, 2020				December 31, 2019
Notes			24,812				32,952
Accounts			390,825				537,243
Less allowance for doubtful receivables			(11,624	)			(10,359	)
			404,013				559,836

 

(4)	Inventories

Inventories are summarized as follows:

 

		Millions of yen
		June 30, 2020				December 31, 2019
Finished goods			358,476				367,332
Work in process			191,932				165,399
Raw materials			53,330				52,025
			603,738				584,756

 

(5)	Property, Plant and Equipment

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

 

		Millions of yen
		June 30, 2020				December 31, 2019
Land			272,529				273,014
Buildings			1,655,203				1,658,270
Machinery and equipment			1,813,212				1,802,624
Construction in progress			68,522				77,953
Finance lease right-of-use assets			5,051				4,999
			3,814,517				3,816,860
Less accumulated depreciation			(2,755,139	)			(2,727,189	)
			1,059,378				1,089,671

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

 

25

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(6)	Lessor Accounting

Lease income is included in Products and Equipment sales in the accompanying consolidated statement of income. Supplemental income statement information is as follows:

 

		Millions of yen
		Six months ended June 30, 2020				Six months ended June 30, 2019
Lease income - sales-type and direct financing leases
Revenue at lease commencement			39,342				55,368
Interest income on lease receivables			9,504				10,148
Sales-type and direct financing leases income total			48,846				65,516
Lease income – operating leases			11,454				12,182
Variable lease income			2,324				3,171
Total lease income			62,624				80,869
		Millions of yen
		Three months ended June 30, 2020				Three months ended June 30, 2019
Lease income - sales-type and direct financing leases
Revenue at lease commencement			16,510				29,980
Interest income on lease receivables			4,482				5,227
Sales-type and direct financing leases income total			20,992				35,207
Lease income – operating leases			5,446				5,741
Variable lease income			1,066				1,485
Total lease income			27,504				42,433

Allowance for Credit Losses

Finance receivables represent financing leases which consist of sales-type leases and direct financing leases resulting from the sales of Canon’s and complementary third-party products. These receivables typically have terms ranging from 1 year to 7 years. Finance receivables are ¥323,441 million and ¥340,533 million at June 30, 2020 and December 31, 2019, respectively.

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

 

		Millions of yen
		Six months ended June 30, 2020				Six months ended June 30, 2019
Balance at beginning of period			2,627				2,675
Charge-offs			(968	)			(672	)
Provision			1,544				512
Translation adjustments and other*			242				(21	)
Balance at end of period			3,445				2,494

 

*	Includes the impact of adopting ASU No. 2016-13, Financial Instruments – Credit Losses – (Topic 326): Measurement of Credit Losses on Financial Instruments. Please refer to Note 1(c) for more detailed information.

 

26

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(6)	Lessor Accounting (continued)

 

Canon has policies in place to ensure that its products are sold to customers with an appropriate credit history and continuously monitors its customers’ credit quality based on information including length of period in arrears, macroeconomic conditions, initiation of legal proceedings against customers and bankruptcy filings. The allowance for credit losses of finance receivables is evaluated collectively based on historical experiences of credit losses, and reasonable and supportable forecasts. An additional reserve for individual accounts is recorded when Canon becomes aware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings. Finance receivables which are past due or individually evaluated for impairment at June 30, 2020 and December 31, 2019 are not significant.

Information about transferring finance receivables

Canon has syndication arrangements to sell its entire interests in finance receivables to the third-party financial institutions. The transactions under the arrangements are accounted for as sales in accordance with ASC 860 “Transfers and Servicing.” There were no significant transfers of finance receivables for the six months ended June 30, 2019 while the transfers of finance receivables were ¥8,775 million for the six months ended June 30, 2020. The amount remained uncollected were ¥32,387 million and ¥28,616 million at June 30, 2020 and December 31, 2019, respectively. Cash proceeds from the transactions are included in other, net under the cash flow from operating activities in the consolidated statement of cash flows. Canon continues to provide collection and administrative services for the financial institutions. The amount associated with the servicing liability measured at fair value was not material at June 30, 2020 and December 31, 2019, respectively. Canon also retains limited recourse obligations which cover credit defaults. The recourse obligation was not material at June 30, 2020 and December 31, 2019, respectively.

 

(7)	Trade Payables

Trade payables are summarized as follows:

 

		Millions of yen
		June 30, 2020				December 31, 2019
Notes			54,663				56,865
Accounts			219,409				248,447
			274,072				305,312

 

(8)	Short-Term Loans and Long-Term Debt

Short-term loans consisting of bank borrowings at June 30, 2020 and December 31, 2019 were ¥198,297 million and ¥40,800 million, respectively.

Canon has revolving credit facilities expiring in December 2021. The outstanding loans under the credit facilities are ¥354,000 million at a floating interest of 0.05%, are included in long-term debt, excluding current installments in the consolidated balance sheets. Canon has no unused credit facilities as of June 30, 2020.

 

27

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(9)

Equity

The changes in the carrying amounts of total equity, equity attributable to Canon Inc. shareholders and equity attributable to noncontrolling interests in the consolidated balance sheets for the six months ended June 30, 2020 and 2019 are as follows:

 

		Millions of yen
		Common stock				Additional paid-in capital				Legal reserve				Retained earnings				Accumulated other comprehensive income (loss)				Treasury stock				Total Canon Inc. shareholders’ equity				Non- controlling interests				Total equity
Balance at December 31, 2019			174,762				405,017				67,572				3,462,182				(308,442	)			(1,108,496	)			2,692,595				199,323				2,891,918
Cumulative effects of accounting standard update — adoption of ASU No.2016-13															(159	)											(159	)			—				(159	)
Equity transactions with noncontrolling interests and other							(303	)											9								(294	)			1,068				774
Dividends to Canon Inc. shareholders															(85,107	)											(85,107	)							(85,107	)
Dividends to noncontrolling interests																															(3,080	)			(3,080	)
Transfer to legal reserve											1,866				(1,866	)			17								—								—
Comprehensive income:
Net income (loss)															13,071												13,071				5,913				18,984
Other comprehensive income(loss), net of tax
Foreign currency translation adjustments																			(35,569	)							(35,569	)			(7	)			(35,576	)
Net gains and losses on derivative instruments																			521								521				(6	)			515
Pension liability adjustments																			(9,998	)							(9,998	)			252				(9,746	)
Total comprehensive income (loss)																											(31,975	)			6,152				(25,823	)
Repurchases and reissuance of treasury stock							(81	)							(67	)							(49,856	)			(50,004	)			10				(49,994	)
Balance at June 30, 2020			174,762				404,633				69,438				3,388,054				(353,479	)			(1,158,352	)			2,525,056				203,473				2,728,529

 

		Millions of yen
		Common stock				Additional paid-in capital				Legal reserve				Retained earnings				Accumulated other comprehensive income (loss)				Treasury stock				Total Canon Inc. shareholders’ equity				Non- controlling interests				Total equity
Balance at December 31, 2018			174,762				404,389				67,116				3,508,908				(269,071	)			(1,058,502	)			2,827,602				190,311				3,017,913
Cumulative effects of accounting standard update — adoption of ASU No.2017-12															122				(122	)							—				—				—
Equity transactions with noncontrolling interests and other							265																				265				399				664
Dividends to Canon Inc. shareholders															(86,380	)											(86,380	)							(86,380	)
Dividends to noncontrolling interests																															(2,989	)			(2,989	)
Transfer to legal reserve											361				(361	)											—								—
Comprehensive income:
Net income (loss)															65,827												65,827				6,231				72,058
Other comprehensive income(loss), net of tax
Foreign currency translation adjustments																			(53,843	)							(53,843	)			(328	)			(54,171	)
Net gains and losses on derivative instruments																			100								100				—				100
Pension liability adjustments																			2,438								2,438				239				2,677
Total comprehensive income (loss)																											14,522				6,142				20,664
Repurchases and reissuance of treasury stock							(13	)							(5	)							(49,988	)			(50,006	)							(50,006	)
Balance at June 30, 2019			174,762				404,641				67,477				3,488,111				(320,498	)			(1,108,490	)			2,706,003				193,863				2,899,866

 

28

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

 

(9)	Equity (continued)

 

 

The changes in the carrying amounts of total equity, equity attributable to Canon Inc. shareholders and equity attributable to noncontrolling interests in the consolidated balance sheets for the three months ended June 30, 2020 and 2019 are as follows:

 

		Millions of yen
		Common stock				Additional paid-in capital				Legal reserve				Retained earnings				Accumulated other comprehensive income (loss)				Treasury stock				Total Canon Inc. shareholders’ equity				Non- controlling interests				Total equity
Balance at March 31, 2020			174,762				405,024				69,334				3,396,998				(366,693	)			(1,158,482	)			2,520,943				199,995				2,720,938
Equity transactions with noncontrolling interests and other							(321	)							57												(264	)			(322	)			(586	)
Dividends to noncontrolling interests																															(53	)			(53	)
Transfer to legal reserve											104				(104	)											—								—
Comprehensive income:
Net income (loss)															(8,835	)											(8,835	)			3,733				(5,102	)
Other comprehensive income(loss), net of tax
Foreign currency translation adjustments																			25,464								25,464				(8	)			25,456
Net gains and losses on derivative instruments																			(34	)							(34	)			—				(34	)
Pension liability adjustments																			(12,216	)							(12,216	)			118				(12,098	)
Total comprehensive income (loss)																											4,379				3,843				8,222
Repurchases and reissuance of treasury stock							(70	)							(62	)							130				(2	)			10				8
Balance at June 30, 2020			174,762				404,633				69,438				3,388,054				(353,479	)			(1,158,352	)			2,525,056				203,473				2,728,529

 

		Millions of yen
		Common stock				Additional paid-in capital				Legal reserve				Retained earnings				Accumulated other comprehensive income (loss)				Treasury stock				Total Canon Inc. shareholders’ equity				Non- controlling interests				Total equity
Balance at March 31, 2019			174,762				404,389				67,314				3,453,760				(279,137	)			(1,058,504	)			2,762,584				191,483				2,954,067
Equity transactions with noncontrolling interests and other							265																				265				37				302
Dividends to noncontrolling interests																															(112	)			(112	)
Transfer to legal reserve											163				(163	)											—								—
Comprehensive income:
Net income (loss)															34,519												34,519				2,648				37,167
Other comprehensive income(loss), net of tax
Foreign currency translation adjustments																			(42,420	)							(42,420	)			(321	)			(42,741	)
Net gains and losses on derivative instruments																			335								335				(2	)			333
Pension liability adjustments																			724								724				130				854
Total comprehensive income (loss)																											(6,842	)			2,455				(4,387	)
Repurchases and reissuance of treasury stock							(13	)							(5	)							(49,986	)			(50,004	)							(50,004	)
Balance at June 30, 2019			174,762				404,641				67,477				3,488,111				(320,498	)			(1,108,490	)			2,706,003				193,863				2,899,866

 

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