Canon 2015 Annual Report Download - page 43

CANON ANNUAL REPORT 2015 41
STRATEGY BUSINESS SEGMENT CORPORATE STRUCTURE FINANCIAL SECTION CORPORATE DATA
SALES BY REGION
Millions of yen
2015 change 2014 change 2013
Japan ¥ 714,280 -1.4% ¥ 724,317 +1.2% ¥ 715,863
Americas 1,144,422 +10.4% 1,036,500 -2.2% 1,059,501
Europe 1,074,366 -1.5% 1,090,484 -3.1% 1,124,929
Asia and Oceania 867,203 -1.0% 875,951 +5.4% 831,087
Total ¥3,800,271 +2.0% ¥3,727,252 -0.1% ¥3,731,380
Note: This summary of net sales by geographic area is determined by the location where the product is shipped to the customers.
A summary of net sales by geographic area is provided below.
Operating profit by segment
Please refer to the table of segment information in Note 21 of
the Notes to Consolidated Financial Statements.
Operating profit for the Office Business Unit in 2015
decreased by 0.5% to ¥290,586 million, owing to the increase
in R&D and other expenses.
Despite operating profit for the Imaging System Business
Unit in 2015 decreased by 5.7% from the previous year to
¥183,439 million, in response to the sales decline, operating
profit ratio remained at the same level year on year, owing to
the improvement in profitability from the sales shift to high-
added-value models in camera, along with the positive effects
of favorable currency exchange rates.
Operating profit for the Industry and Others Business Unit
in 2015, despite an improvement from the previous year
resulted from sales increase, recorded a loss of ¥13,079 mil-
lion due to upfront investment in next-generation technolo-
gies and new businesses.
FOREIGN OPERATIONS AND FOREIGN
CURRENCY TRANSACTIONS
Canon’s marketing activities are performed by subsidiaries in
various regions in local currencies, while the cost of sales is
generally in yen. Given Canon’s current operating structure,
appreciation of the yen has a negative impact on net sales
and the gross profit ratio. To reduce the financial risks from
changes in foreign exchange rates, Canon utilizes derivative
financial instruments, which consist principally of forward cur-
rency exchange contracts.
The operating profit on foreign operation sales is usually
lower than that from domestic operations because foreign
operations consist mainly of marketing activities. Marketing
activities are generally less profitable than production activities,
which are mainly conducted by the Company and its domestic
subsidiaries. Please refer to the table of geographic information
in Note 21 of the Notes to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by ¥210,967 million to
¥633,613 million in fiscal 2015 compared to the previous year
primarily due to the acquisition of Axis. Canon’s cash and cash
equivalents are primarily denominated in Japanese yen and in
U.S. dollars, with the remainder denominated in other currencies.
Net cash provided by operating activities decreased by
¥109,203 million to ¥474,724 million in fiscal 2015 com-
pared to the previous year due to the decrease in profit along
with the increase in working capital. The major component
of Canon’s cash inflow is cash received from customers, and
the major components of Canon’s cash outflow are payments
for parts and materials, selling, general and administrative
expenses, R&D expenses and income taxes.
For fiscal 2015, cash inflow from cash received from cus-
tomers increased thanks to sales growth. There were no sig-
nificant changes in Canon’s collection rates. Cash outflow for
payments for parts and materials decreased due to efforts to
reduce inventory level. Cash outflow for payments for sell-
ing, general and administrative expenses increased due to the
translation effect on operating expenses denominated in for-
eign currencies that resulted from the depreciation of the yen.
The increase also reflects the acquisition of Axis and other
companies. Cash outflow for income taxes increased due to
an increase in taxable income.
Net cash used in investing activities increased by ¥184,321
million to ¥453,619 million in fiscal 2015. This mainly
reflects the acquisition of Axis to enhance Canon’s network
camera business.
Canon defines “free cash flow” as cash flows from operat-
ing activities less cash flows from investing activities. For fis-
cal 2015, free cash flow decreased by ¥293,524 million to
¥21,105 million as compared with ¥314,629 million for fis-
cal 2014. Canon’s management recognizes that constant
and intensive investment in facilities and R&D is required to
maintain and strengthen the competitiveness of its prod-
ucts. On March 17, 2016, the Board of Directors of the
Company approved an acquisition of Toshiba Medical Systems
Corporation (“TMSC”) from Toshiba Corporation (“Toshiba”)
to make TMSC a subsidiary, and concurrently it has entered
into a share transfer agreement with Toshiba. The Company