Canon 2004 Annual Report Download - page 46

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44
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following summarizes Canon’s contractual obligations at December 31, 2004.
(Millions of yen)
Payments Due By Period
Total Less than 1 year 1-3 years 3-5 years More than 5 years
Contractual Obligations:
Long-Term Debt
Capital Lease Obligations ¥8,585 4,144 3,782 635 24
Other Long-Term Debt 29,945 5,735 12,665 11,544 1
Operating Leases Obligations 49,532 12,714 15,858 10,671 10,289
Purchase Commitments for
Property Plant and Equipment 39,286 39,286 — — —
Parts and Raw Materials 55,666 55,666 — — —
Total ¥183,014 117,545 32,305 22,850 10,314
(Thousands of U.S. dollars)
Payments Due By Period
Total Less than 1 year 1-3 years 3-5 years More than 5 years
Contractual Obligations:
Long-Term Debt
Capital Lease Obligations $82,548 39,846 36,366 6,106 230
Other Long-Term Debt 287,932 55,144 121,779 110,999 10
Operating Leases Obligations 476,269 122,250 152,481 102,605 98,933
Purchase Commitments for
Property Plant and Equipment 377,750 377,750 — — —
Parts and Raw Materials 535,250 535,250 — — —
Total $1,759,749 1,130,240 310,626 219,710 99,173
Canon provides warranties generally less than one year
against defects in materials and workmanship on most of its
consumer products. A liability for estimated product warranty
related cost is established at the time revenue is recognized
and is included in accrued expenses. Estimates for accrued
product warranty cost are primarily based on historical
experience, and are affected by ongoing product failure rates,
specific product class failures outside of the baseline
experience, material usage and service delivery costs incurred
in correcting a product failure. As of December 31, 2004, the
accrued product warranty cost amounted to ¥14,264 million
(U.S.$137 million).
At December 31, 2004, commitments outstanding for the
purchase of property, plant and equipment approximated
¥39,286 million ($378 million), and commitments outstanding
for the purchase of parts and raw materials approximated
¥55,666 million ($535 million), both for use in the ordinary
course of its business. Canon anticipates that funds needed to
fulfill these commitments will be generated internally through
operations.
On September 14, 2004, the Company and Toshiba
Corporation (“Toshiba”) entered into an agreement to jointly
establish SED Inc. for the development, production and
marketing of next-generation flat-screen SED (Surface-
conduction Electron-emitter Display) panels. The Company
and Toshiba initially contributed approximately ¥500 million
($5 million) in cash, each. Under the agreement, the Company
is further committed to contribute 50% of the financing
requirements for SED Inc. through the establishment of a
prototype production line.
Canon’s management believes that current financial
resources, cash generated from operations and Canon’s
potential capacity for additional debt and/or equity financing
will be sufficient to fund current and future capital
requirements.