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CANON ANNUAL REPORT 2015
42
paid a total consideration of ¥665.5 billion for a right to
acquire all the ordinary shares of TMSC, which is exercis-
able upon the clearance of necessary competition regula-
tory authorities. The Company borrowed the consideration
through bank borrowing of ¥660 billion provisionally, which
is due on September 30, 2016. The Company plans to make
its final decision on whether to use own funds, borrowings
or a combination of both, to fund the acquisition, by that
time. Canon’s management seeks to meet its capital require-
ments with generating cash flow principally from its operating
activities. Therefore, its capital resources are primarily sourced
from internally generated funds. Accordingly, Canon includes
information with regard to free cash flow as management
frequently monitors this indicator, and believes that such indi-
cator is beneficial to an investor’s understanding. Furthermore,
Canon’s management believes that this indicator is significant
in understanding Canon’s current liquidity and the alternatives
of use in financing activities because it takes into consider-
ation its operating and investing activities. Canon refers to this
indicator together with relevant U.S. GAAP financial measures
shown in its consolidated statements of cash flows and con-
solidated balance sheets for cash availability analysis.
Net cash used in financing activities totaled ¥210,202 mil-
lion in fiscal 2015, mainly resulting from the dividend pay-
out of ¥174,711 million. The Company paid dividends in fiscal
2015 of ¥160.00 per share.
To the extent Canon relies on external funding for its liquid-
ity and capital requirements, it generally has access to vari-
ous funding sources, including the 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 the current portion of long-
term debt) amounted to ¥688 million at December 31, 2015
compared with ¥1,018 million at December 31, 2014. Long-
term debt (excluding the current portion) amounted to ¥881
million at December 31, 2015 compared with ¥1,148 million
at December 31, 2014.
Canon’s long-term debt mainly consists of lease obligations.
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
Ratings 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 March 11, 2016, Canon’s debt ratings are: Moody’s:
Aa1 (long-term); S&P: AA (long-term), A-1+ (short-term); and
R&I: AA+ (long-term). Canon does not have any rating down-
grade 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.
Canon’s management policy in recent periods to optimize
inventory levels is intended to maintain an appropriate balance
among relevant imperatives, including minimizing working
capital, avoiding undue exposure to the risk of inventory obso-
lescence, and maintaining the ability to sustain sales despite
the occurrence of unexpected disasters.
Reflecting the foregoing circumstances, Canon’s total inven-
tory turnover ratios were 47, 50, and 52 days at the end of
the fiscal years 2015, 2014, and 2013, respectively and the
improvements over the last three years are in line with Canon’s
expectations and its revised inventory management policy.
Increase in property, plant and equipment on an accrual
basis in 2015 amounted to ¥195,120 million compared with
¥182,343 million in 2014 and ¥188,826 million in 2013. For
2016, Canon projects its increase in property, plant and equip-
ment will be approximately ¥230,000 million.
Employer contributions to Canon’s worldwide defined ben-
efit pension plans were ¥19,565 million in 2015, ¥22,146
Working Capital Ratio
3.0
2.5
2.0
1.5
1.0
0
0.5
2014 2015201320122011
Return on Canon Inc.
Shareholders’ Equity (%)
12
9
6
3
0
2014 2015201320122011
FINANCIAL OVERVIEW
Increase in Property,
Plant and Equipment (Billions of yen)
300
200
0
100
2014 2015201320122011