Canon 2013 Annual Report Download - page 43

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FINANCIAL OVERVIEW 41
SALES BY REGION
Millions of yen
Thousands of
U.S. dollars
2013 change 2012 change 2011 2013
Japan ¥ 715,863 -0.6% ¥ 720,286 +3.7% ¥ 694,450 $ 6,817,743
Americas 1,059,501 +12.7% 939,873 -2.3% 961,955 10,090,486
Europe 1,124,929 +10.9% 1,014,038 -8.9% 1,113,065 10,713,609
Asia and Oceania 831,087 +3.2% 805,591 +2.2% 787,963 7,915,114
Total ¥3,731,380 +7.2% ¥3,479,788 -2.2% ¥ 3,557,433 $35,536,952
Note: This summary of net sales by geographic area is determined by the location where the product is shipped to the customers.
A summary of net sales by geographic area is provided below.
Operating profit by segment
Please refer to the table of segment information in Note 21 of
the Notes to Consolidated Financial Statements.
Operating profit for the Office Business Unit in 2013
increased by ¥63,330 million (U.S.$603 million) to ¥266,908
million (U.S.$2,542 million). This increase resulted from the
sales increase.
Operating profit for the Imaging System Business Unit
in 2013 decreased by ¥6,524 million (U.S.$62 million) to
¥203,794 million (U.S.$1,941 million). This decrease resulted
primarily from the increase in expense due to depreciation
of the yen.
Operating profit for the Industry and Others Business Unit
in 2013 declined by ¥31,241 million (U.S.$298 million), largely
owing to the decrease in sales.
FOREIGN OPERATIONS AND FOREIGN
CURRENCY TRANSACTIONS
Canon’s marketing activities are performed by subsidiaries in
various regions in local currencies, while the cost of sales is
generally in yen. Given Canon’s current operating structure,
appreciation of the yen has a negative impact on net sales
and the gross profit ratio. To reduce the financial risks from
changes in foreign exchange rates, Canon utilizes derivative
financial instruments, which consist principally of forward
currency exchange contracts.
The operating profit on foreign operation sales is usually
lower than that from domestic operations because foreign
operations consist mainly of marketing activities. Marketing
activities are generally less profitable than production activ-
ities, which are mainly conducted by the Company and
its domestic subsidiaries. Please refer to the table of geo-
graphic information in Note 21 of the Notes to Consolidated
Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents in 2013 increased by
¥122,231 million (U.S.$1,164 million) to ¥788,909 million
(U.S.$7,513 million), compared with ¥666,678 million in
2012 and ¥773,227 million in 2011. Canon’s cash and cash
equivalents are typically denominated both in Japanese
yen and in U.S. dollars, with the remainder denominated
in foreign currencies.
Net cash provided by operating activities in 2013 increased
by ¥123,565 million (U.S.$1,177 million) from the previous
year to ¥507,642 million (U.S.$4,835 million). Cash flow from
operating activities consisted of the following key compo-
nents: the major component of Canon’s cash inflow is cash
received from customers, and the major components of
Canon’s cash outflow are payments for parts and materials,
selling, general and administrative expenses, R&D expenses
and income taxes.
For 2013, cash inflow from cash received from customers
increased due to the increase in sales. There were no signif-
icant changes in Canon’s collection rates. Cash outflow for
payments for parts and materials decreased, as a result of our
efforts to decrease inventory. Cash outflow for payments for
selling, general and administrative expenses increased due
to the impact of Japanese Yen on operating expenses denom-
inated in foreign currencies. On the other hand, operation
expenses in local currency base declined due to cost reduc-
tion activities of group companies. Cash outflow for income
taxes increased due to the increase in taxable income.
Net cash used in investing activities in 2013 was ¥250,212
million (U.S.$2,383 million), increasing by ¥37,472 million
(U.S.$357 million) from ¥212,740 million in 2012, due to the
increasing amount of time deposits included in short-term
investments. Purchases of fixed assets were focused on items
relevant to new products.
Canon defines “free cash flow” by deducting cash flows
from investing activities from cash flows from operating
activities. For 2013, free cash flow totaled ¥257,430 million
(U.S.$2,452 million) as compared with ¥171,337 million for
2012. Canon’s management recognizes that constant and
intensive investment in facilities and R&D is required to
maintain and strengthen the competitiveness of its prod-
ucts. Canon’s management seeks to meet its capital require-
ments with cash flow principally earned from its operations.
Therefore, its capital resources are primarily sourced from
internally generated funds.
Accordingly, Canon has included information with regard
to free cash flow, as its management frequently monitors this
indicator, and believes that such indicator is beneficial to