Canon 2006 Annual Report Download - page 50

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Net cash used in financing activities totaled ¥107,487
million (U.S.$903 million) in fiscal 2006, mainly resulting from
adecrease in loan repayments accompanying the company’s
strengthened financial position despite a large increase in the
dividend payout. The Company paid dividends in fiscal 2006 of
¥83.33 (U.S.$0.70) per share, which was an increase of ¥16.66
(U.S.$0.14) per share over the prior year (after adjusting for the
effect of 3 for 2 stock split in 2006).
Canon seeks to meet its liquidity and capital requirements
principally with cash flow from operations. Consistent with this
objective, Canon continued to reduce its reliance on external
funding for capital investments in favor of relying upon inter-
nally 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 con-
tinue to be able to do so in the future, there can be no assur-
ance 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 ¥15,362 million (U.S.$129 million) at
December 31, 2006 compared to ¥5,059 million at December
31, 2005. Long-term debt (excluding current portion) amounted
to ¥15,789 million (U.S.$133 million) at December 31, 2006
compared to ¥27,082 million at December 31, 2005.
Canon’s long-term debt generally consists of lease obliga-
tions, as well as fixed-rate notes and convertible debentures
which Canon has issued in the domestic market with original
maturities of ten 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 February 28, 2007, 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 2006 amounted to ¥379,657
million (U.S.$3,190 million) compared with ¥383,784 million in
fiscal 2005 and ¥318,730 million in fiscal 2004. In fiscal 2005,
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 2007, Canon projects its capital
expenditures will be approximately ¥480,000 million (U.S.$4,034
million). The capital expenditures include investments in new
production plants and new facilities of Canon.
Employer contributions to Canon’s worldwide defined
benefit pension plans were ¥44,981 million (U.S.$378 million)
in fiscal 2006, ¥40,059 million in fiscal 2005, ¥31,018 million
in fiscal 2004. During fiscal 2007, Canon expects to make cash
contributions of approximately ¥17,369 million (U.S.$146
million) to its defined benefit pension plans.
Capital Expenditure
(Millions of yen)
400,000
0
02 03 04 05 06
198,702 210,038
318,730
383,784 379,657