Canon 2002 Annual Report Download - page 37

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LIQUIDITY
Cash and cash equivalents in fiscal 2002 increased ¥15,037
million (U.S.$125 million) to ¥521,271 million (U.S.$4,344
million), compared with ¥506,234 million in 2001 and
¥493,962 million in 2000. Canon’s cash and cash equivalents
are typically denominated in Japanese yen, with the remainder
denominated in foreign currencies such as the U.S. dollar.
Cash flow from operating activities in 2002 increased by
¥143,198 million (U.S.$1,193 million) to ¥448,950 million
(U.S.$3,741 million), compared with ¥305,752 million in 2001
and ¥346,616 million in 2000, mainly due to an increase in net
income and a significant increase of trade payables. Trade
receivables and trade payables both decreased in 2001 and
increased in 2002. The effect of change in trade payables,
however, was larger than the effect of change in trade
receivables since the payment terms are generally longer than
the collection terms, and as a result contributed to the increase
in net operating cash flows.
Net cash used in investing activities, which mainly consists
of capital expenditure, for 2002 was ¥230,220 million
(U.S.$1,919 million), compared with ¥192,592 million in 2001
and ¥212,804 million in 2000. For fiscal 2002, the amount
includes payment of ¥21,204 million (U.S.$177 million) for the
purchase of outstanding stock of Canon System and Support
Inc., Canon N.T.C., Inc., and Canon (Schweiz) AG from their
minority shareholders to realize full ownership of the three
subsidiaries. Capital expenditures in 2003 are projected to be
roughly comparable to those in 2002.
Net cash used in financing activities for 2002 amounted to
¥183,714 million (U.S.$1,531 million), mainly as a result of
repayment of short-term loans to improve Canon’s financial
position, accompanied by the redemption of bonds, compared
to ¥121,228 million in 2001 and ¥100,597 million in 2000.
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 has recently begun 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 additional share
capital, long-term debt or by borrowing in the short-term market.
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
loans) amounted to ¥66,754 million (U.S.$556 million) at
December 31, 2002 compared to ¥200,104 million at
December 31, 2001. Long-term debt (excluding current
portion) amounted to ¥81,349 million (U.S.$678 million) at
December 31, 2002 compared to ¥95,526 million at
December 31, 2001.
Substantially all of Canon’s short-term loans consist of
borrowings from banks under uncommitted lines of credit.
Canon’s long-term debt generally consists of secured or partially
secured term loans from banks, bearing interest at floating rates,
as well as fixed rate notes and convertible debentures issued in
the domestic market with original maturities of five to fifteen years.
Like most other Japanese companies, Canon does not
maintain committed bank credit lines. Canon and other
Japanese companies have relied for liquidity in part upon
relationships with institutional lenders, particularly Japanese
commercial banks. The Company has uncommitted bank
overdraft facilities of approximately ¥1,323 million with its
principal commercial banks.
CAPITAL RESOURCES
Capital expenditure in 2002 amounted to ¥198,702 million
(U.S.$1,656 million) compared with ¥207,674 million in 2001
and ¥170,986 million in 2000. In 2002, capital expenditures
were mainly used for the construction of the Company’s
headquarters facilities and a new factory for manufacturing
copying machines in Suzhou, China.
Working capital in 2002 increased ¥127,023 million
(U.S.$1,059 million), to ¥903,134 million (U.S.$7,526 million),
compared with ¥776,111 million in 2001 and ¥696,609
million in 2000. The increase was primarily attributable to the
decrease of short-term loans. Canon believes its working capital
will be sufficient for its requirements for the foreseeable future.
Canon’s capital requirements are primarily dependent on
management’s business plans regarding the levels and timing
of capital expenditures and investments.
The working capital ratio (current assets to current
liabilities) for 2002 was 2.13, compared to 1.91 for 2001 and
1.71 for 2000.
Return on assets rose to 6.6% in 2002, compared to 5.9%
in 2001 and 4.9% in 2000. This increase was due mainly to
increased net income. Return on stockholders’ equity also
rose to 12.5% in 2002, compared with 12.2% in 2001 and
10.7% in 2000.
The debt ratio (total debt to total assets) declined to 5.0% in
2002 from 10.4% in 2001, which reflects Canon’s financial
policy to reduce debt.