Canon 2005 Annual Report Download - page 42

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Selling, General and Administrative Expenses and
Research and Development Expenses
The major components of selling, general and administrative
expenses are payroll, R&D, advertising expenses and other mar-
keting expenses. Although R&D expenses grew 4.1% from the
previous year to ¥286,476 million (U.S.$2,428 million), keeping
spending growth below the growth rate for net sales, the sell-
ing, general and administrative expenses to net sales ratio
improved 0.7 points. In general, Canon maintains a high level
of R&D expenditure to strengthen its R&D capabilities. R&D
expenditures grew in fiscal 2005 from the previous year, result-
ing from increased R&D activities.
Operating Profit
Operating profit in fiscal 2005 increased by 7.2% to ¥583,043
million (U.S.$4,941 million) from fiscal 2004. Operating profit
in fiscal 2005 was 15.5% of net sales, compared with 15.7%
in fiscal 2004.
Other Income (Deductions)
Other income (deductions) improved by ¥20,638 million
(U.S.$175 million), attributable to an increase of interest rev-
enue, resulting from such factors as an increase in surplus
funds accompanying the improved balance sheet and a rise in
interest rates in the United States, along with a decrease in cur-
rency exchange losses.
Income Before Income Taxes and Minority
Interests
Income before income taxes and minority interests in fiscal
2005 was ¥612,004 million (U.S.$5,186 million), a 10.8%
increase from fiscal 2004, and constituted 16.3% of net sales.
Income Taxes
Provision for income taxes increased by ¥18,771 million
(U.S.$159 million) from fiscal 2004, primarily as a result of the
increase in income before income taxes and minority interests.
The effective tax rate during fiscal 2005 declined by 0.3% com-
pared with fiscal 2004.
Net Income
Net income in fiscal 2005 increased by 11.9% to ¥384,096
million (U.S.$3,255 million), which exceeds the growth rate of
income before income taxes and minority interests. This repre-
sents a 10.2% return on net sales.
Product Information
Canon divides its businesses into three product groups: busi-
ness machines, cameras and optical and other products.
•The business machines product group includes office
imaging products, computer peripherals and business infor-
mation products.
Office imaging products include office network digital MFDs,
color network digital MFDs, office copying machines, per-
sonal-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 equip-
ment, personal computers and calculators.
•The cameras product group includes SLR cameras, com-
pact 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 2004, Canon has changed classification of
product categories with regards to information system busi-
ness, which had been classified in “Optical and other prod-
ucts,” to “Business machines (Office imaging products)” in
order to better reflect the current relation with those products.
Accordingly, information for previous fiscal years has been
reclassified to conform with the current classification.