Canon 2004 Annual Report Download - page 44

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42
As a result, free cash flow, or cash flow from operating
activities minus cash flow from investing activities, totaled
¥308,562 million (U.S.$2,967 million) for fiscal 2004 as
compared to ¥265,701 million for fiscal 2003.
Net cash used in financing activities totaled ¥102,268
million (U.S.$983 million) in fiscal 2004, mainly resulting from
Canon’s active efforts to repay loans toward the goal of
improving Canon’s financial position. The company also paid
dividends in fiscal 2004 of 65 yen (U.S.$ 0.63) per share,
which was an increase of 15 yen (U.S.$ 0.14) per share over
the prior year.
Canon seeks to meet its liquidity and capital requirements
principally with cash flow from operations and, to a lesser
extent, with short-term loans and long-term debt. Consistent
with this objective, Canon continued to reduce its reliance on
external funding for capital investments in favor of relying
upon internally generated cash flows. This approach is
supplemented with group-wide treasury and cash
management activities undertaken at the parent company
level. Canon believes that its working capital is sufficient for its
present requirements.
To the extent Canon relies on external funding for its
liquidity and capital requirements, it generally has access to
various funding sources, including issuance of additional share
capital, long-term debt or short-term loans. While Canon has
been able to obtain funding from its traditional financing
sources and from the capital markets, and believes it will
continue to be able to do so in the future, there can be no
assurance that adverse economic or other conditions will not
affect Canon’s liquidity or long-term funding in the future.
Short-term loans (including current portion of long-term
debt) amounted to ¥9,879 million (U.S.$95 million) at
December 31, 2004 compared to ¥39,136 million at
December 31, 2003. Long-term debt (excluding their current
portions) amounted to ¥28,651 million (U.S.$275 million) at
December 31, 2004 compared to ¥59,260 million at
December 31, 2003.
Canon’s long-term debt generally consists of secured or
partially-secured term loans from banks, bearing interest at
fixed rates and floating rates, as well as fixed rate-notes and
convertible debentures which Canon has issued in the
domestic market with original maturities of five to fifteen
years.
In order to facilitate access to global capital markets,
Canon obtains credit ratings from two rating agencies,
Moody’s Investors Services, Inc. (“Moody’s”) and Standard
and Poor’s Rating Services (“S&P”). In addition, Canon
maintains a rating from Rating and Investment Information,
Inc. (“R&I”), a rating agency in Japan, for access to the
Japanese capital market.
As of January 14, 2005, Canon’s debt ratings are:
Moody’s: Aa2 (long-term); S&P: AA (long-term), A-1+ (short-
term); and R&I: AA+ (long-term). Canon does not have any
rating downgrade triggers that would accelerate the maturity
of a material amount of its debt. A downgrade in Canon’s
credit ratings or outlook could, however, increase the cost of
its borrowings.
Capital expenditure in fiscal 2004 amounted to ¥318,730
million (U.S.$3,065 million) compared with ¥210,038 million
in fiscal 2003 and ¥198,702 million in fiscal 2002. In fiscal
2004, capital expenditures were mainly used to expand
production capabilities in both domestic and overseas regions,
and to bolster the company’s R&D-related infrastructure. In
addition, Canon has been continually investing in tools and
dies for business machines, in which the amount invested is
generally the same each year. For fiscal 2005, Canon projects
its capital expenditures will be approximately ¥375,000 million
(U.S.$3,606 million). The capital expenditures include an
investment in new production plants and new facilities of
Canon.
Employer contributions to Canon’s worldwide defined
benefit pension plans were ¥31,018 million (U.S.$298 million)
in fiscal 2004, ¥29,944 million in fiscal 2003, ¥33,661 million
in fiscal 2002. During fiscal 2005, Canon expects to make cash
contributions of approximately ¥36,183 million (U.S.$348
million) to its defined benefit pension plans.
300,000
0
Capital expenditure
(Millions of yen)
198,702
210,038
318,730
207,674
170,986
0400 01 02 03