Canon 2003 Annual Report Download - page 32

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profit margins have also benefited from cost reductions achieved
through continued production reforms activities.
Selling, general and administrative expenses
The major components of selling, general and administrative
expenses are payroll, R&D, advertising expenses and other
marketing expenses. Selling, general and administrative
expenses increased by 9.6% from the previous year and
amounted to ¥1,154,476 million (U.S.$10,789 million). An
increase in R&D expenditures and advertising and other
marketing expenses largely accounted for this increase. Canon
maintains a high level of R&D expenditure to strengthen its R&D
capabilities. R&D expenditures grew 10.9% from the previous
year to ¥259,140 million (U.S.$2,422 million), resulting from
increased R&D activities in the areas of business machines and
cameras. Advertising and other marketing expenses increased by
39.8% from the previous year to ¥100,278 million (U.S.$937
million), reflecting management’s policy to strengthen Canon’s
corporate and brand image.
Operating profit
Operating profit in fiscal 2003 significantly increased by 31.2% to
¥454,424 million (U.S.$4,247 million) from fiscal 2002.
Operating profit in fiscal 2003 was 14.2% of net sales, compared
with 11.8% in fiscal 2002.
Other income (deductions)
Other income (deductions) improved by ¥10,088 million
(U.S.$94 million), owing to the increase in net interest income
resulting from the company’s strengthened financial condition, in
addition to the decrease in currency exchange losses and
improved earnings of equity affiliates.
Income before income taxes and minority interests
Income before income taxes and minority interests in fiscal 2003
was ¥448,170 million (U.S.$4,189 million), a 35.8% increase
from fiscal 2002, and constituted 14.0% of net sales.
Income taxes
Provision for income taxes increased by ¥27,950 million
(U.S.$261 million) from fiscal 2002, primarily as a result of the
increase in income before income taxes. The effective tax rate
during the term declined by 4.5% compared with fiscal 2002 due
to an increased tax credit for R&D expenditures arising from an
amendment to Japanese tax regulations.
Net income
Net income in fiscal 2003 increased substantially by 44.6% to
¥275,730 million (U.S.$2,577 million), which exceeds the growth
rate of income before income taxes. This represents an 8.6%
return on net sales.
Product information
On a consolidated basis, Canon divides its businesses into three
product groups: business machines, cameras and optical and
other products.
•The business machine product group includes office
imaging products, computer peripherals and business
information products.
Office imaging products include office network digital MFDs,
color network digital MFDs, office copying machines,
personal-use copying machines and full-color copying
machines.
Computer peripherals include laser beam printers, inkjet
printers, inkjet multifunction peripherals and image
scanners.
Business information products include micrographic
equipment, personal computers and calculators.
•The camera product group includes single lens reflex
(“SLR”) cameras, compact cameras, digital cameras and
digital video camcorders.
•The optical and other products product group includes
steppers for semiconductor chip production, mirror
projection mask aligners used in the production of LCDs,
television broadcasting lenses and medical equipment.
Effective January 2003, Canon reclassified certain products
that were historically included in business systems, now called
business information products. Facsimiles, including certain
personal digital MFDs, are now classified as office imaging
products. Products based on inkjet technology are now classified
as inkjet printers in computer peripherals. In connection with these
business alignment adjustments, copying machines were renamed
office imaging products and business systems were renamed
business information products. Information for previous fiscal years
has been reclassified to conform to the current classification.
Return on sales
9
0
99 00 01 02 03
2.8%
5.0%
5.8%
6.5%
8.6%