Canon 2007 Annual Report Download - page 61

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59
Canon’s long-term debt consists generally of fixed rate.
Accordingly, Canon considers interest rate risk is insignificant.
For debt obligations, the table below presents principal cash
flows by expected maturity dates and related weighted average
interest rates, as of December 31, 2007.
LONG-TERM DEBT (including due within one year)
Millions of yen
Weighted average Expected maturity date Estimated
interest rates Total 2008 2009 2010 2011 2012 Thereafter Fair Value
Japanese yen notes 2.27% ¥10,000 ¥10,000 ¥ — ¥ — ¥ — ¥ — ¥ — ¥10,065
Japanese yen convertible
debentures 1.30% 128 128—————668
Other long-term debt 1.80% 13,981 5,301 4,052 2,446 1,504 455 223 13,981
Total ¥24,109 ¥15,429 ¥4,052 ¥2,446 ¥1,504 ¥455 ¥223 ¥24,714
Thousands of U.S. dollars
Weighted average Expected maturity date Estimated
interest rates Total 2008 2009 2010 2011 2012 Thereafter Fair Value
Japanese yen notes 2.27% $ 87,719 $ 87,719 $ — $ — $ — $ — $ — $ 88,289
Japanese yen convertible
debentures 1.30% 1,123 1,123—————5,860
Other long-term debt 1.80% 122,640 46,500 35,544 21,456 13,193 3,991 1,956 122,640
Total $211,482 $135,342 $35,544 $21,456 $13,193 $3,991 $1,956 $216,789
Changes in the fair value of derivative financial instruments
designated as cash flow hedges, including foreign exchange
contracts associated with forecasted intercompany sales, are
reported in accumulated other comprehensive income (loss).
These amounts are subsequently reclassified into earnings
through other income (deductions) in the same period as the
hedged items affect earnings. Substantially all amounts recorded
in accumulated other comprehensive income (loss) at year-end
are expected to be recognized in earnings over the next 12
months. Canon excludes the time value component from the
assessment of hedge effectiveness. Changes in the fair value
of a foreign exchange contract for the period between the
date that the forecasted intercompany sales occur and its
maturity date are recognized in earnings and not considered
hedge ineffectiveness.
The amount of the hedging ineffectiveness was not mate-
rial for the years ended December 31, 2007, 2006 and 2005.
The amount of net gains or losses excluded from the assess-
ment of hedge effectiveness (time value component) which
was recorded in other income (deductions) was net losses of
¥6,883 million (U.S.$60 million), ¥5,917 million and ¥3,725
million for the years ended December 31, 2007, 2006 and
2005, respectively.
Canon has entered into certain foreign currency exchange
contracts to manage its foreign currency exposures. These
foreign currency exchange contracts have not been designated
as hedges. Accordingly, the changes in fair values of the
contracts are recorded in earnings immediately.
LOOKING FORWARD
Though there is a slight sense of uncertainty regarding the
future and global economies are now confronted with factors
heightening the risk of economic downturn such as financial
market confusion due to the subprime loan issue and the
impacts of rising crude oil prices, Canon expects modest eco-
nomic growth to continue on the whole led by the high eco-
nomic growth of the BRIC countries. On the other hand,
however, it is expected that competition will intensify and
business conditions for Canon will become increasingly severe.
In addressing those business and economic conditions,
Canon, views the current fiscal year, the third year of Phase III
(2006 to 2010) of our “Excellent Global Corporation Plan,” as
a key period for firmly positioning itself for achieving its 2010
objectives, and will actively work to further strengthen and
enhance its management base.
Toward that goal, Canon will focus on strengthening prod-
uct development capabilities, the source of competitiveness in
all of its operations, introduce superior products to those of its
competitors, and achieve the real global No.1 market positions
in all of its core businesses.
Additionally, Canon will work to lower its cost rate even
further by automating production and moving forward with
efforts to produce more key parts in-house through measures
like advancing the stable adoption of automated assembly
equipment, and by undertaking production and procurement