Canon 2014 Annual Report Download - page 44

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42
Canon has also commenced a public tender offer for all
of the issued shares of Axis AB on March 3, 2015, in order
to further ensure its goal of becoming the world lead-
er in network surveillance camera systems for consider-
ation of a maximum amount of approximately 23.6 billion
Swedish krona (approximately ¥333.7 billion with transla-
tion at the rate of ¥14.13 = 1 Swedish krona). Canon’s man-
agement seeks to meet its capital requirements, including
the acquisition of Axis AB, with generating cash flow prin-
cipally from its operating activities. Therefore, its capital
resources are primarily sourced from internally generat-
ed funds. Accordingly, Canon includes information with
regard to free cash flow as management frequently mon-
itors this indicator, and believes that such indicator is
beneficial to an investor’s understanding. Furthermore,
Canon’s management believes that this indicator is signif-
icant in understanding Canon’s current liquidity and the
alternatives of use in financing activities because it takes
into consideration its operating and investing activities.
Canon refers to this indicator together with relevant U.S.
GAAP financial measures shown in its consolidated state-
ments of cash flows and consolidated balance sheets for
cash availability analysis.
Net cash used in financing activities totaled ¥300,886 mil-
lion in fiscal 2014, mainly resulting from repurchase of trea-
sury stock of ¥149,813 million, and dividends of ¥145,790
million. The Company paid dividends in fiscal 2014 of
¥130.00 per share.
To the extent Canon relies on external funding for its
liquidity and capital requirements, it generally has access
to various funding sources, including the issuance of addi-
tional share capital, long-term debt or short-term loans.
While Canon has been able to obtain funding from its tradi-
tional financing sources and from the capital markets, and
believes it will continue to be able to do so in the future,
there can be no assurance that adverse economic or other
conditions will not affect Canon’s liquidity or long-term
funding in the future.
Short-term loans (including the current portion of long-
term debt) amounted to ¥1,018 million at December 31, 2014
compared with ¥1,299 million at December 31, 2013. Long-
term debt (excluding the current portion) amounted to
¥1,148 million at December 31, 2014 compared with ¥1,448
million at December 31, 2013.
Canon’s long-term debt mainly consists of lease obligations.
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 Ratings Services (“S&P”). In addition, Canon main-
tains a rating from Rating and Investment Information, Inc.
(“R&I”), a rating agency in Japan, for access to the Japanese
capital market.
As of March 13, 2015, Canon’s debt ratings are:
Moody’s: Aa1 (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.
Canon’s management policy in recent periods to opti-
mize inventory levels is intended to maintain an appro-
priate balance among relevant imperatives, including
minimizing working capital, avoiding undue exposure to
the risk of inventory obsolescence, and maintaining the
ability to sustain sales despite the occurrence of unexpect-
ed disasters.
Reflecting the foregoing circumstances, Canon’s total
inventory turnover ratios were 50, 52, and 57 days at the
end of the fiscal years 2014, 2013, and 2012, respectively
and the improvements over the last three years are in line
with Canon’s expectations and its revised inventory man-
agement policy.
Increase in Property,
Plant and Equipment
(Billions of yen)
300
200
0
100
20142013201220112010
Working Capital Ratio
3.0
2.5
2.0
1.5
1.0
0
0.5
20142013201220112010
Return on Canon Inc.
Stockholders’ Equity
(%)
12
9
6
3
0
20142013201220112010
FINANCIAL OVERVIEW