Canon 2005 Annual Report Download - page 48

46
Net cash used in financing activities totaled ¥93,939 million
(U.S.$796 million) in fiscal 2005, mainly resulting from a
decrease in loan repayments accompanying the company’s
strengthened financial position despite a large increase in the
dividend payout. The Company paid dividends in fiscal 2005 of
¥100 (U.S.$0.85) per share, which was an increase of ¥35
(U.S.$0.30) per share over the prior year.
Canon seeks to meet its liquidity and capital requirements
principally with cash flow from operations. Consistent with this
objective, Canon continued to reduce its reliance on external
funding for capital investments in favor of relying upon inter-
nally 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 liq-
uidity and capital requirements, it generally has access to vari-
ous funding sources, including 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 current portion of long-term
debt) amounted to ¥5,059 million (U.S.$43 million) at Decem-
ber 31, 2005 compared to ¥9,879 million at December 31,
2004. Long-term debt (excluding their current portions)
amounted to ¥27,082 million (U.S.$230 million) at December
31, 2005 compared to ¥28,651 million at December 31, 2004.
Canon’s long-term debt generally consists of secured or
partially-secured term loans from banks, bearing interest at
fixed rates, lease obligations, as well as fixed-rate notes and
convertible debentures which Canon has issued in the domes-
tic market with original maturities of ten to fifteen years.
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
Rating 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 December 31, 2005, Canon’s debt ratings are:
Moody’s: Aa2 (long-term); S&P: AA (long-term), A-1+ (short-
term); and R&I: AA+ (long-term). Canon does not have any
rating downgrade 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.
Capital expenditure in fiscal 2005 amounted to ¥383,784
million (U.S.$3,252 million) compared with ¥318,730 million in
fiscal 2004 and ¥210,038 million in fiscal 2003. In fiscal 2005,
capital expenditures were mainly used to expand production
capabilities in both domestic and overseas regions, and to bol-
ster the Company’s R&D-related infrastructure. In addition,
Canon has been continually investing in tools and dies for busi-
ness machines, in which the amount invested is generally the
same each year. For fiscal 2006, Canon projects its capital
expenditures will be approximately ¥465,000 million
(U.S.$3,941 million). The capital expenditures include invest-
ments in new production plants and new facilities of Canon.
Employer contributions to Canon’s worldwide defined bene-
fit pension plans were ¥40,059 million (U.S.$339 million) in
fiscal 2005, ¥31,018 million in fiscal 2004, ¥29,944 million in
fiscal 2003. During fiscal 2006, Canon expects to make cash
contributions of approximately ¥45,352 million (U.S.$384 mil-
lion) to its defined benefit pension plans.
400,000
0
Capital Expenditure
(Millions of yen)
01 02 03 04 05
198,702 210,038
318,730
383,784
207,674