Canon 2008 Annual Report Download - page 61

59
All o
f
Canon’s lon
g
-term debt is
fi
xed rate debt. Canon believes
that fair value changes, and cash fl ows resulting from reasonable
near-term changes in interest rates would be immaterial.
Accordin
g
l
y
, Canon considers interest rate risk is insi
g
ni
fi
cant. See
also Note 11 o
f
the Notes to Consolidated Financial Statements
.
Chan
g
es in the fair value of derivative fi nancial instruments
designated as cash fl ow hedges, including foreign exchange
contracts associated with
f
orecasted intercompany sales, are
reported in accumulated other comprehensive income (loss).
These amounts are subsequentl
y
reclassi
fi
ed into earnin
g
s
through other income
(
deductions
)
in the same period as the
hedged items affect earnings. Substantially all such amounts
recorded in accumulated other comprehensive income
(
loss
)
at
y
ear-end are expected to be reco
g
nized in earnin
g
s over the
next 12 mont
h
s. Canon exc
l
u
d
es t
h
e time va
l
ue com
p
onent
from the assessment of hedge effectiveness. Changes in the
fair value of a foreign exchange contract for the period between
the date that the
f
orecasted intercompan
y
sales occur and its
maturit
y
d
ate are reco
g
nize
d
in earnin
g
s an
d
not consi
d
ere
d
hedge ineffectiveness
.
The amount of the hedging ineffectiveness was not material
f
or the
y
ears ended December 31, 2008, 2007 and 2006. The
amounts o
f
net losses excluded
f
rom the assessment o
f
hed
g
e
effectiveness (time value com
p
onent) which was recorded in
other income
(
deductions
)
was ¥3,701 million
(
U.S.$41 million
)
,
¥6,883 million and ¥5,917 million
f
or the years ended
December 31, 2008, 2007 and 2006, respectivel
y.
Canon has entered into certain
f
orei
g
n currenc
y
exchan
g
e
contracts to manage its foreign currency exposures. These foreign
currency exchange contracts have not been designated as hedges.
Accordin
g
l
y
, the chan
g
es in
f
air values o
f
the contracts are
recorded in earnin
g
s immediatel
y.
LOOKING FORWARD
Regarding the global economy, given the combined e
ff
ects o
f
economic downturns in the leadin
g
industrialized countries and
d
ece
l
eration in emer
g
in
g
countries, it is expecte
d
t
h
at
g
rowt
h
rates will decrease greatly and a strong sense of stagnation will
continue. The business conditions for Canon are also ex
p
ected to
continue to be severe due to
f
actors such as the trend o
f
a stron
g
y
en in the
f
orei
g
n exchan
g
e markets. Much o
f
the deterioration
in market conditions for Canon’s three product
g
roups occurred
in the fourth quarter of fi scal 2008 so that the full-year 2009
net sales volumes for Canon’s product groups are likely to decline
f
urther
f
rom
fi
scal 2008 levels and continue to adversel
y
a
ff
ect
Canon’s operatin
g
resu
l
ts. Canon expects net sa
l
es vo
l
umes to
remain at su
pp
ressed levels in fi scal 2010 and to continue to
adversely affect fi scal 2010 operating results
.
Under these conditions, Canon, in the
f
ourth
y
ear o
f
Phase
III (2006 to 2010) o
f
its “Excellent Global Corporation Plan”, will
make the most of mana
g
ement reforms achieved to date and
take all measures for future growth in order to achieve further
improvements in management quality. In other words, Canon
will respond swi
f
tl
y
to the present di
ffi
cult business conditions
and structure itsel
f
as a lean or
g
anization b
y
usin
g
this
y
ear to
prepare to take advantage of improved conditions in the future.
Toward that goal, Canon’s key objectives will be, fi rst of all,
to achieve timel
y
introductions o
f
new products satis
f
actor
y
to
customers in ever
y
aspect o
f
f
unctionalit
y
, desi
g
n, ease o
f
use,
reliabilit
y
and cost performance, and to secure No. 1 market
p
ositions in each of its businesses.
Next, amid a strong yen, massive
fl
uctuations in raw material
prices,
f
allin
g
product prices and conditions chan
g
in
g
in other
respects, Canon will work to lower its costs b
y
,
f
or example,
pursuing production and procurement reform activities to an
even greater degree and practicing prototype-less development.
Furthermore, in the
f
ace o
f
sta
g
nant market conditions, Canon
will improve the qualit
y
o
f
products thorou
g
hl
y
b
y
renewin
g
its
appreciation of product qualit
y
as the lifeblood of a manufacturer
and taking to heart the supremacy of quality
.
Additionally, through collaboration with Hitachi Displays,
Ltd., o
f
which Canon acquired shares durin
g
the current term,
Canon wi
ll
concentrate on stren
g
t
h
enin
g
t
h
e
d
isp
l
a
y
operation
as a new core business. Canon also aims to add signifi cant
strength in new businesses by actively launching new products in
the
fi
eld o
f
medical equipment and b
y
pursuin
g
other initiatives
as well
.
With e
y
es focused on takin
g
Canon to new hei
g
hts, promot-
ing its perpetua
l
d
eve
l
opment an
d
turning it into a tru
l
y exce
ll
ent
global company that continues to prosper, Canon will work to
stren
g
then its unique core technolo
gy
research s
y
stem and
d
eve
l
op mana
g
ement personne
l
, w
h
i
l
e a
l
so
d
evotin
g
even
greater efforts to social contribution activities
.
Business machines se
g
men
t
O
ffi
ce imaging product
s
In the offi ce ima
g
in
g
products se
g
ment, it has become more
important to provide added value in the form of networking,
integration, color printing and multi
f
unction models. Also, in
addition to the stable market
f
or mid-se
g
ment o
ffi
ce products,
Canon expects that the market
f
or hi
g
her-end models and
low-end multifunction models will expand in the long term.
The market for color network digital MFDs continued to grow,
but sales o
f
monochrome network di
g
ital MFDs decreased in
2008 due to the
g
lobal economic downturn and the shi
f
tin
g
m
a
rk
et
t
r
e
n
d
fr
o
m m
o
n
oc
hr
o
m
e
to
co
l
o
r m
ode
l
s
. In r
ece
n
t
years, there has been a new printer-based multifunction printer
(
“MFP”
)
market emerging that has been created by printer
vendors as the
y
seek to enter the copier and MFD market
.
To maintain an
d
en
h
ance a competitive e
dg
e an
d
to meet
more sop
h
isticate
d
customer
d
eman
d
s, Canon is strengt
h
ening
its marketing capabilities by reinforcing its hardware and software
product lineups and b
y
improvin
g
f
unctionalit
y
. In 2008, Canon
stren
g
thened the product lineups o
f
its color di
g
ital devices as
w
ell
as
i
ts
m
o
n
och
r
o
m
e
m
ach
in
es
a
n
d
m
a
in
ta
in
ed
i
ts
m
a
r
ket
s
h
are
b
y executing
b
usiness strategies in
l
ine wit
h
current
market trends
.