Edgar Filing: CANON INC

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FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the month of January 30, 2003

CANON INC.

(Translation of registrant’s name into English)

30-2, Shimomaruko 3-Chome, Ohta-ku, Tokyo 146-8501, Japan

(Address of principal executive offices)

[Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F [ X ] Form 40-F [ ]

[Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes [ ] No [ X ]

[If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):
82- ______________

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		CANON INC.

		(Registrant)

Date	January 30, 2003	By	/s/ Shunji Onda

			(Signature)*


			Shunji Onda General Manager, Finance Division Canon Inc.

*Print the name and title of the signing officer under his signature.

The following materials are included.

1.		Results for the fourth quarter and the fiscal year ended December 31, 2002
2.		Notice regarding spin-off by Canon Inc. of Fukushima Plant
3.		Notice of Purchase of Its Own Shares (Acquisition of Its Own Shares Pursuant to Article 210 of the Commercial Code)

TABLE OF CONTENTS


RESULTS FOR THE FOURTH QUARTER AND THE FISCAL YEAR ENDED DECEMBER 31, 2002
Notice regarding spin-off by Canon Inc. of Fukushima Plant
Notice of Purchase of Its Own Shares (Acquisition of Its Own Shares Pursuant to Article 210 of the Commercial Code)

RESULTS FOR THE FOURTH QUARTER
AND THE FISCAL YEAR ENDED DECEMBER 31, 2002


CONSOLIDATED RESULTS		January 30, 2003

(Millions of yen, thousands of U.S. dollars, except per share amounts)

Actual

Projected

Year ended

Year ending

December 31, 2002

December 31, 2001

Change(%)

December 31, 2002

December 31, 2003

Change(%)

Net sales

2,940,128

2,907,573

+ 1.1

24,501,067

3,120,000

+ 6.1

Operating profit

346,359

281,839

+ 22.9

2,886,325

360,000

+ 3.9

Income before income taxes

330,017

281,566

+ 17.2

2,750,142

350,000

+ 6.1

Income before cumulative effect of change
in accounting principle

190,737

163,869

+ 16.4

1,589,475

—

Net income

190,737

167,561

+ 13.8

1,589,475

205,000

+ 7.5

Earnings per share:

Income before cumulative effect of change
in accounting principle:

- Basic

217.56

187.07

+ 16.3

1.81

—

- Diluted

214.80

184.55

+ 16.4

1.79

—

Net income:

- Basic

217.56

191.29

+ 13.7

1.81

233.55

+ 7.3

- Diluted

214.80

188.70

+ 13.8

1.79

—

Actual

As of

December 31, 2002

December 31, 2001

Change(%)

December 31, 2002

Total assets

2,942,706

2,844,756

+ 3.4

24,522,550

Stockholders’ equity

1,591,950

1,458,476

+ 9.2

13,266,250


Notes:	1.	Canon’s consolidated financial statements conform with accounting principles generally accepted in the United States of America
	2.	U.S. dollar amounts are translated from yen at the rate of US$ = JPY 120, the approximate exchange rate on the Tokyo Foreign Exchange Market as of December 30, 2002, solely for the convenience of the reader

NON-CONSOLIDATED RESULTS

(Millions of yen, except per share amounts)

Actual

Projected

Year ended

Year ending

December 31, 2002

December 31, 2001

Change(%)

December 31, 2003

Change(%)

Net sales

1,789,005

1,707,459

+ 4.8

1,920,000

+ 7.3

Operating profit

237,193

193,389

+ 22.7

256,000

+ 7.9

Ordinary profit

240,982

211,127

+ 14.1

255,000

+ 5.8

Net income

144,184

39,163

+ 268.2

154,000

+ 6.8

Earnings per share:

- Basic

164.46

44.71

+ 267.8

175.45

+ 6.7

- Diluted

162.38

44.21

+ 267.3

—

Dividend per share

30.00

25.00

—

30.00

—

Actual

As of

December 31, 2002

December 31, 2001

Change(%)

Total assets

1,848,136

1,658,066

+ 11.5

Stockholders’ equity

1,235,309

1,118,443

+ 10.4

- 1 -

Management Policy

Under the corporate philosophy of kyosei—living and working together for the common good—Canon’s basic management policy is to contribute to the prosperity and well being of the world while endeavoring to become a truly excellent global corporate group targeting continued growth and development.

Management objectives
Aiming to increase corporate value, Canon Inc. launched Phase II of its Excellent Global Corporation Plan in 2001. This five-year management initiative, which will conclude in 2005, targets the fulfillment of the following four conditions with the aim of completing Canon’s transition to a truly excellent global corporation:

1)		Securing the No. 1 position worldwide in all core business areas
2)		Building up R&D strength capable of continually creating new businesses
3)		Achieving a strong financial position
4)		Fostering a corporate culture whereby all employees work ardently to achieve the company’s goals

Mid- to long-term management strategies
In order to achieve the objectives above, we are executing the following mid- and long-term management strategies:

1) Becoming No.1 in core businesses

     Among our core businesses, we are already No. 1 worldwide in the areas of copying machines and laser beam printers. We intend, however, to create new business opportunities while also leading the way in expanding the color market through the active introduction of color office copiers, developing the “print-on-demand” market with high-speed copiers, and promoting service businesses that offer document solutions.
     With regard to digital cameras, we intend to leverage our expertise in optical and image-processing technologies to continuously launch competitive products, thereby supporting our goal of becoming a top manufacturer in turns of operational scale and profitability.
     In the field of Bubble Jet printers, we will continue to improve printing speeds while reaching new heights in photo-image quality. Last year, Canon and five other companies proposed an industry standard, tentatively named DPS, enabling digital still cameras to be connected directly to printers for image output. Taking full advantage of this standard, we will aggressively introduce compliant digital cameras and printers. Furthermore, by enhancing such products as photo-print software and printer paper, we will work to expand the home photo-printing market.
     Canon is uniquely positioned as one of the few companies to possess world-leading technology for both cameras and photo-quality color printers. Fully utilizing this technological advantage and Canon’s high brand recognition, we are focusing our efforts on the home photo printing sector to secure the No.1 share of the digital photo market.
     In the area of semiconductor production equipment, we aim to accelerate the development of base technologies and speed up the in-house production of key components to realize the early launch of next-generation tools in pursuit of the No. 1 position in the industry. Furthermore, in the LCD aligner market, we will focus on product development to further build on the No.1 share position that we attained last year.

2) Strengthening of R&D

To become No. 1 in our core businesses and create new business areas, we will concentrate our efforts on strengthening the company’s R&D capabilities. In addition to strengthening product “engine” technology, platform technologies, and common base technologies, we will enhance the organizational structure of our overseas R&D operations.

- 2 -

3) Achieving a strong financial position

We believe that the establishment of a healthy financial constitution is essential for the realization of continued corporate growth. While Canon Inc. has been actively strengthening its financial position, we will continue to promote cash-flow management to achieve financial strength befitting a truly excellent global company.

In addition to the management strategies above, we will continue working to establish the “Three Regional Headquarters System” by enhancing the headquarters functions of Canon’s regional marketing headquarters in Europe and the Americas. We have also been actively reorganizing the Canon Group in Japan to achieve an optimal organization and bolster the competitive strength of each company, and will continue these initiatives. Overseas, we have reorganized our sales structure in South America and adopted a new streamlined sales structure in the EU that better accommodates market integration in the region. We are also keeping a close eye on developments in China and are strengthening our marketing structure there accordingly.
Other measures being undertaken to improve revenues for the Group include increasing the penetration and scale of worldwide production reformation activities, optimizing production allocation based on a shift to China and Southeast Asia, reducing inventories and shortening production lead times through supply-chain management, and accelerating the in-house production of key parts. Through these activities we will target growth for the Canon Group and seek to heighten Canon’s corporate value as represented by such financial indicators as ROA (Return on Assets) and ROE (Return on Equity).

Business challenges and countermeasures
     One of the challenges that Canon faces is the establishment of stable business management that offers resilience against the influence of exchange rate fluctuations. With an overseas sales ratio of more than 70%, we are heavily exposed to this risk. For the short term, we will work to alleviate the impact of changes in exchange rates by shifting production overseas and by increasing the proportion of locally procured parts.
     For the long term, we will establish product development operations in the United States and Europe, enabling each region—Japan, the Americas and Europe—to develop, produce and export its own products all over the world. Through the realization of international diversification across our production and marketing operations, we believe that the impact of exchange rate fluctuations can be minimized.
     We also view environmental concerns as a management issue of extreme importance. From the product development stage through to production, sales, use, recovery and recycling, we focus our efforts into creating environmentally conscious products designed with energy savings, resource conservation, and the elimination of harmful substances in mind. Furthermore, we actively disclose environmental information and support local environmental activities.

Measures for improvement of corporate management organizations
     Canon will continue striving to improve its corporate governance via the company’s board of directors and auditing system. Under the current system, as a rule, all matters of importance are actively discussed and decided at management meetings attended by all directors. Moreover, various management advisory committees have been set up to consult company-wide on important management themes. Each committee serves to accelerate and rationalize the decision-making process while supplementing the business-division system and performing a checking function. Moreover, to construct a management structure, which responds more promptly to changes in the business environment, a proposal will be made to shorten the term of office of Canon directors from two years to one at a general shareholders’ meeting to be held in March 2003.
     The company has also established a code of conduct, which calls on all Group employees to strictly observe the law as well as company rules and regulations. Contained in the Canon Code of Conduct handbook and distributed to all employees, this is one way we have been able to further strengthen compliance and awareness.
     Canon has made a practice of keeping shareholders and other investors abreast of management conditions through means such as corporate policy briefings, quarterly announcements of operating results and the company’s Web site, and will continue its proactive disclosure of accurate, timely information.
     Through these systems and on the basis of the strong sense of mission and ethics held by our management, Canon will continue to reinforce its corporate governance.

- 3 -

Dividend policy
With regard to profit distribution, Canon recognizes its dividend policy as one of the company’s most important management issues. For fiscal 2002, Canon plans to increase its annual dividend from 25 yen per share, equivalent to the amount paid in fiscal 2001, to 30 yen. This reflects the strong results we achieved for the year and appreciation for continued shareholder support. We intend to maintain stable dividend payments in the future, contingent upon the combination of consolidated financial performance, as well as capital requirements to fund future business expansion and improve profitability.

Round lot policy
Currently, one trading unit, or round lot, for Canon’s stock on the Tokyo Stock Exchange consists of 1,000 shares. The Tokyo Stock Exchange has requested that some listed companies with a high stock price reduce the number of shares making up a trading unit with the aim of encouraging participation in the market by individual investors. While we appreciate that reduced-quantity round lots can increase liquidity and attract new investors, it is the company’s basic policy that the issue should be assessed in a prudent manner in accordance with future market demands. As we believe that Canon’s stock now enjoys a reasonable level of liquidity, the related costs of smaller round lot investment would not be justified at this time.

- 4 -

Operating Results and Financial Conditions

2002 in Review

Looking back at the global economy in 2002, at the beginning of the year the U.S economy pointed to signs of an economic upturn, led mainly by progress made in the area of inventory adjustment. In the second half of the year, however, the economic recovery in the United States began losing its momentum, owing to deterioration in consumer confidence, which resulted in sluggish consumer spending; and the collapse of several major companies, which led to a decline in business confidence. While European economies recovered moderately overall in 2002, the pace of recovery decelerated in Germany and France during the latter half of the year. In Asia, China’s economy continued to grow substantially while the other economies in the region sustained modest growth. The Japanese economy remained stagnant throughout the year with no signs of a recovery amid the harsh backdrop of falling stock prices and growing uncertainty over prospects of a recovery in the global economy, especially in the United States.

As for the markets in which the Canon Group operates, flagging global demand for personal computers resulted in reduced demand for printers and other IT-related equipment while corporate-use digital copying machines, especially multifunction and color machines, posted favorable results. The digital camera and digital video camcorder markets continued to show strong growth in Japan and overseas, supported by robust demand. In the field of semiconductor-production equipment, price declines in the memory device market due to weak sales of personal computers inhibited a recovery in capital spending by chip manufacturers. The average value of the yen in 2002 was ¥124.73 to the U.S. dollar, and ¥118.39 to the euro, a depreciation of 3% and 8%, respectively, compared with the previous year.

Amid these conditions, Canon’s consolidated net sales in 2002 totaled ¥2,940.1 billion (US$24,501 million), a 1.1% increase from the previous year, owing to a significant rise in sales of digital cameras and digital video camcorders, and steady growth in the copying machine segment. Net income also rose 13.8% to ¥190.7 billion (US$1,589 million). The results mark record highs for the company in both consolidated net sales and net income, and the third consecutive year of sales and profit growth. Canon’s gross profit ratio during the term improved 3.6% to 47.6%, reflecting the positive effects of R&D reformation activities, which have realized significantly shortened product-development lead times, making possible the launch of successive competitive new products for consistently stable product prices; along with cost reductions achieved through continued production-reformation activities, and the lower value of the yen. Selling, general and administrative expenses rose 5.5% from the previous year as R&D expenditures grew 6.9% to ¥233.7 billion (US$1,948 million). Selling expenses also increased due to advertising and sales promotion costs. As a result of the above, operating profit in 2002 totaled ¥346.4 billion (US$2,886 million), reflecting double digit growth of 22.9%.

In the area of other income and expenses, the promotion of cash flow management has bolstered financial strength, making possible an improvement in net interest income of ¥3.6 billion (US$30 million) compared with the previous year, achieving a positive figure in this category for the first time. Currency exchange losses, however, increased by ¥8.7 billion (US$72 million) while securities contributed to the company’s retirement benefit trust in the previous year realized a ¥15.5 billion gain. Consequently, non-operating income and expenses worsened by ¥16.1 billion (US$134 million) from the previous year. As a result of the above, income before income taxes totaled ¥330.0 billion (US$2,750 million), a year-on-year increase of 17.2%, and net income also grew by 13.8% to ¥190.7 billion (US$1,589 million).

Basic earnings per share for 2002 was ¥217.56 (US$1.81), a year-on-year increase of ¥26.27 (US$0.22).

- 5 -

Results by Product Segment

In the business machine segment, Canon’s imageRUNNER-series lineup of 16 to 105 copy-per-minute digital networked black-and-white multifunction copying machines showed steady sales growth in 2002. In particular, the mid-range iR2200/2800/3300 series and the high-end iR5000/6000 series, iR7200 and iR105 model recorded healthy sales during the term. While the color copying machine market showed some growth during the year, reflecting the growing acceptance of color office documents, sales of Canon color copying machines decreased slightly in 2002 due to a decrease in unit sales of high-end models. Overall, year-on-year sales of copying machines realized an increase of 5.2%. In the field of computer peripherals, the introduction of new Bubble Jet printer products, such as the BJ S500/300-series lineup and PIXUS 950i/550i models, contributed to strong sales of Bubble Jet printers in the Japanese and U.S. markets while laser beam printer sales declined due to inventory adjustment by Canon’s OEM partner in the first half of 2002. As a result, computer peripheral sales overall suffered a slight decline of 0.7%. Within the business system sub-segment, including facsimile machines, micrographics and calculators, facsimile machine sales grew steadily, supported by strong sales of multifunction models. The negative impact of declining personal computer sales in Japan, however, resulted in a 12.0% decrease in sales of business systems. Consequently, sales of business machines overall remained at approximately the same level as for the previous year, increasing by 0.1% to ¥2,226.2 billion (US$18,552 million). Cost-cutting measures, however, along with healthy sales of price-competitive mid-range and high-end copying machines and Bubble Jet printers favorably affected the operating profit ratio. As a result, operating profit for the business machine segment increased by 22.7% to ¥411.0 billion (US$3,425 million).

Within the camera segment, demand for digital cameras continued to be strong worldwide, with the successive launches of new compact PowerShot-series and IXY DIGITAL-series models bolstering Canon’s lineup and contributing to a significant increase in sales. Also well received by the market were the EOS D60 and EOS-1Ds digital SLR models, which were introduced last year as well. By comparison, sales of conventional film cameras continued to slip in 2002 amid the increasing popularity of digital models and price competition. Sales of digital video camcorders continued to show substantial growth through the introduction of new ZR-series, Elura-series and Optura-series models. Consequently, camera sales overall enjoyed double-digit 27.4% growth in 2002, totaling ¥485.8 billion (US$4,048 million). Greatly improved profitability for camera products, realized through the rapid rise in sales of digital cameras and video camcorders coupled with effective cost-cutting measures and a decline in the price of electronic components, boosted operating profit in the camera segment by 94.5% to ¥70.3 billion (US$586 million).

Sales of optical and other products decreased by 24.6% to ¥228.2 billion (US$1,901 million) due to a drop in demand for semiconductor-production equipment, reflecting the restrained capital spending by memory device manufacturers. Optical and other products, which recorded an operating profit of ¥23.9 billion in 2001, suffered operating losses of ¥11.7 billion (US$97 million) in 2002.

Cash Flow

Cash flow from operating activities in 2002 increased by ¥143.2 billion (US$1,193 million) from the previous year to ¥448.9 billion (US$3,741 million), mainly due to the increase in net income and the reduction of working capital. Capital expenditure totaled ¥198.7 billion (US$1,656 million), a decrease of ¥9.0 billion (US$75 million), mainly used for the development of the company’s headquarters facilities and construction of a new factory for manufacturing copying machines in Suzhou, China. Cash flow from investing activities totaled ¥230.2 billion (US$1,918 million), including payment of ¥21.1 billion (US$176 million) for the purchase of outstanding stock of Canon System and Support Inc., Canon N.T.C., Inc., and Canon (Schweiz) AG from their minority shareholders to realize full ownership of the three subsidiaries. As a result, free cash flow, or cash flow from operating activities minus cash flow from investing activities, remained positive at ¥218.7 billion (US$1,823 million), marking the fourth consecutive year that Canon has maintained a free cash flow of over ¥100.0 billion.

Cash flow from financing activities recorded an outlay of ¥183.7 billion (US$1,531 million), mainly as a result of active efforts to repay short-term loans toward the goal of improving Canon’s financial position. This, accompanied by the redemption of the company’s straight bonds of ¥37.0 billion (US$308 million) in 2002, resulted in cash and cash equivalents of ¥521.3 billion (US$4,344 million) at the end of 2002. While this represents a ¥15.0 billion (US$125 million) increase from the end of the previous year, cash and cash equivalents remain at a high level.

- 6 -

Non-consolidated Results and Dividend

Canon’s non-consolidated net sales in 2002 grew by 4.8% to ¥1,789.0 billion (US$14,908 million) while ordinary profit grew by 14.1% to ¥240.9 billion (US$2,008 million), both representing record highs for the company. Non-consolidated net income, however, increased significantly by 268.2% to ¥144.1 billion (US$1,201 million), owing to a one-time amortization of net transition obligations in accordance with the introduction of the new Japanese pension accounting method in 2001.

In response to continued shareholder support, the Board of Directors intends to propose a ¥5.00 (US$0.04) increase in the company’s year-end dividend to ¥17.50 (US$0.15) which, when combined with the interim dividend of ¥12.50 (US$0.10), would bring the company’s annual dividend rate to ¥30.00 (US$0.25) per share.

Outlook

Regarding the outlook for the global economy, in the United States, there are concerns over depressed consumer spending and employment conditions are not expected to improve. Additionally, the likelihood of a military strike against Iraq has also led to uncertainty regarding prospects of a recovery. In Japan, consumer spending is expected to remain flat while a delay in the recovery of the U.S. economy would negatively affect export sales. Consequently, the overall feeling of economic stagnation in Japan will probably continue. In Europe and Asia, a slowdown in economic growth is anticipated in 2003, mostly due to the lack of growth in the economies of Japan and the United States.

In the businesses in which Canon is involved, stable demand is projected for full-color copying machines and laser beam printers, and the digital camera market is expected to continue expanding. Within the semiconductor-production equipment market, although restrained capital investment by chip manufacturers is likely to continue, it is expected that there will be signs of recovery in orders by the end of the year.

Although uncertainty surrounds several factors that could affect currency exchange rates, such as military action against Iraq and concerns involving North Korea, significant changes in rates are not anticipated with the yen expected to be slightly stronger against the U.S. dollar and weaker against the euro than during 2002.

In fiscal 2003 Canon anticipates consolidated net sales of ¥3,120.0 billion (US$26,000 million), consolidated income before income taxes of ¥350.0 billion (US$2,917 million), and consolidated net income of ¥205.0 billion (US$1,708 million). The company also forecasts non-consolidated net sales of ¥1,920.0 billion (US$16,000 million), non-consolidated ordinary profit of ¥255.0 billion (US$2,125 million), and non-consolidated net income of ¥154.0 billion (US$1,283 million). These forecasts assume currency exchange rates of ¥120.00 to the U.S. dollar and the euro.

These reports contain forward-looking statements which reflect management’s current views with respect to certain future events and financial performance. Actual results may differ materially from those projected or implied in any forward-looking statements. Further, certain forward-looking statements are based upon assumptions of future events which may not prove to be accurate. (Cautionary Statements for Purposes of the Safe Harbor Provisions of the United States Private Securities Litigation Reform Act of 1995.)

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- 8 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

CONSOLIDATED STATEMENTS OF INCOME

Result for the fourth quarter

Thousands of

Millions of yen

U.S. dollars

Three months

ended

December 31, 2002

December 31, 2001

Change(%)

December 31, 2002

Net sales

861,663

¥753,317

+ 14.4

7,180,525

Cost of sales

444,236

427,388

3,701,967

Gross profit

417,427

325,929

+ 28.1

3,478,558

Selling, general and administrative expenses

303,826

284,056

2,531,883

Operating profit

113,601

41,873

+ 171.3

946,675

Other income (deductions):

Interest and dividend income

2,143

1,948

17,858

Interest expense

(1,774

)

(2,463

)

(14,783

)

Other, net

(9,524

)

1,495

(79,367

)

(9,155

)

980

(76,292

)

Income before income taxes

104,446

42,853

+ 143.7

870,383

Income taxes

43,776

13,304

364,800

Income before minority interests

60,670

29,549

505,583

Minority interests

602

(479

)

5,016

Net income

60,068

30,028

+ 100.0

500,567


Note:		Canon’s comprehensive income consists of net income, change in foreign currency translation adjustments, change in net unrealized gains (losses) on securities, change in minimum pension liability adjustments and change in net gains (losses) on derivative financial instruments. Comprehensive income for the three months ended December 31, 2002 and 2001 were JPY 42,520 million (U.S.$354,333 thousand) and JPY 37,312 million, respectively.

Result for the fiscal year

Thousands of

Millions of yen

U.S. dollars

Year ended

December 31, 2002

December 31, 2001

Change(%)

December 31, 2002

Net sales

2,940,128

2,907,573

+ 1.1

24,501,067

Cost of sales

1,540,097

1,626,959

12,834,142

Gross profit

1,400,031

1,280,614

+ 9.3

11,666,925

Selling, general and administrative expenses

1,053,672

998,775

8,780,600

Operating profit

346,359

281,839

+ 22.9

2,886,325

Other income (deductions):

Interest and dividend income

9,198

9,571

76,650

Interest expense

(6,788

)

(10,712

)

(56,567

)

Other, net

(18,752

)

868

(156,266

)

(16,342

)

(273

)

(136,183

)

Income before income taxes

330,017

281,566

+ 17.2

2,750,142

Income taxes

134,703

115,154

1,122,525

Income before minority interests

195,314

166,412

1,627,617

Minority interests

4,577

2,543

38,142

Income before cumulative effect of change in accounting principle

190,737

163,869

+ 16.4

1,589,475

Cumulative effect of accounting change

—

3,692

—

Net income

190,737

167,561

+ 13.8

1,589,475


Note:		Canon’s comprehensive income consists of net income, change in foreign currency translation adjustments, change in net unrealized gains (losses) on securities, change in minimum pension liability adjustments and change in net gains (losses) on derivative financial instruments. Comprehensive income for the years ended December 31, 2002 and 2001 were JPY 159,438 million (U.S.$1,328,650 thousand) and JPY 178,975 million, respectively.

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CANON INC. AND SUBSIDIARIES

CONSOLIDATED

DETAILS OF SALES

Result for the fourth quarter

Thousands of

Millions of yen

U.S. dollars

Three months

ended

Sales by product

December 31, 2002

December 31, 2001

Change(%)

December 31, 2002

Business machines:

Copying machines

249,285

246,125

+ 1.3

2,077,375

Computer peripherals

316,059

249,858

+ 26.5

2,633,825

Business systems

68,085

75,836

- 10.2

567,375

633,429

571,819

+ 10.8

5,278,575

Cameras

158,504

119,165

+ 33.0

1,320,867

Optical and other products

69,730

62,333

+ 11.9

581,083

Total

861,663

753,317

+ 14.4

7,180,525

Thousands of

Millions of yen

U.S. dollars

Three months

ended

Sales by region

December 31, 2002

December 31, 2001

Change(%)

December 31, 2002

Japan

202,242

206,644

- 2.1

1,685,350

Overseas:

Americas

302,072

257,830

+ 17.2

2,517,267

Europe

258,288

221,811

+ 16.4

2,152,400

Other areas

99,061

67,032

+ 47.8

825,508

659,421

546,673

+ 20.6

5,495,175

Total

861,663

753,317

+ 14.4

7,180,525

Result for the fiscal year

Thousands of

Millions of yen

U.S. dollars

Year ended

Sales by product

December 31, 2002

December 31, 2001

Change(%)

December 31, 2002

Business machines:

Copying machines

938,338

891,814

+ 5.2

7,819,483

Computer peripherals

1,018,418

1,025,352

- 0.7

8,486,817

Business systems

269,439

306,323

- 12.0

2,245,325

2,226,195

2,223,489

+ 0.1

18,551,625

Cameras

485,778

381,367

+ 27.4

4,048,150

Optical and other products

228,155

302,717

- 24.6

1,901,292

Total

2,940,128

2,907,573

+ 1.1

24,501,067

Thousands of

Millions of yen

U.S. dollars

Year ended

Sales by region

December 31, 2002

December 31, 2001

Change(%)

December 31, 2002

Japan

732,551

827,288

- 11.5

6,104,592

Overseas:

Americas

1,010,166

982,104

+ 2.9

8,418,050

Europe

857,167

806,104

+ 6.3

7,143,058

Other areas

340,244

292,077

+ 16.5

2,835,367

2,207,577

2,080,285

+ 6.1

18,396,475

Total

2,940,128

2,907,573

+ 1.1

24,501,067

- 10 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

SEGMENT INFORMATION BY PRODUCT

Result for the fourth quarter


											Thousands of
			Millions of yen								U.S. dollars

			Three months			Three months					Three months
			ended			ended					ended
			December 31, 2002			December 31, 2001			Change(%)		December 31, 2002

Business machines:
Net sales:
	Unaffiliated customers		¥	633,429		¥	571,819			+ 10.8	$	5,278,575
	Intersegment			—			—			—		—

		Total		633,429			571,819			+ 10.8		5,278,575

Operating cost and expenses				503,717			506,313			- 0.5		4,197,642

Operating profit				129,712			65,506			+ 98.0		1,080,933

Cameras:
Net sales:
	Unaffiliated customers		¥	158,504		¥	119,165			+ 33.0	$	1,320,867
	Intersegment			—			—			—		—

		Total		158,504			119,165			+ 33.0		1,320,867

Operating cost and expenses				136,437			108,947			+ 25.2		1,136,975

Operating profit				22,067			10,218			+ 116.0		183,892

Optical and other products:
Net sales:
	Unaffiliated customers		¥	69,730		¥	62,333			+ 11.9	$	581,083
	Intersegment			37,248			25,364			+ 46.9		310,400

		Total		106,978			87,697			+ 22.0		891,483

Operating cost and expenses				107,215			92,660			+ 15.7		893,458

Operating profit				(237	)		(4,963	)		—		(1,975	)

Corporate and Eliminations:
Net sales:
	Unaffiliated customers		¥	—		¥	—			—	$	—
	Intersegment			(37,248	)		(25,364	)		—		(310,400	)

		Total		(37,248	)		(25,364	)		—		(310,400	)

Operating cost and expenses				693			3,524			- 80.3		5,775

Operating profit				(37,941	)		(28,888	)		—		(316,175	)

Consolidated:
Net sales:
	Unaffiliated customers		¥	861,663		¥	753,317			+14.4	$	7,180,525
	Intersegment			—			—			—		—

		Total		861,663			753,317			+ 14.4		7,180,525

Operating cost and expenses				748,062			711,444			+ 5.1		6,233,850

Operating profit				113,601			41,873			+ 171.3		946,675


Note:		General corporate expenses of JPY 37,908 million (U.S.$315,900 thousand) and JPY 28,955 million in the three months ended December 31, 2002 and 2001, respectively, are included in “Corporate and Eliminations.”

- 11 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

Result for the fiscal year

Thousands of

Millions of yen

U.S. dollars

Year ended

December 31, 2002

December 31, 2001

Change(%)

December 31, 2002

Business Machines:

Net sales:

Unaffiliated customers

2,226,195

2,223,489

+ 0.1

18,551,625

Intersegment

—

Total

2,226,195

2,223,489

+ 0.1

18,551,625

Operating cost and expenses

1,815,179

1,888,571

- 3.9

15,126,492

Operating profit

411,016

334,918

+ 22.7

3,425,133

Assets

1,296,829

1,280,949

+ 1.2

10,806,908

Depreciations and amortization

106,865

105,907

+ 0.9

890,542

Capital expenditure

104,877

121,333

- 13.6

873,975

Cameras:

Net sales:

Unaffiliated customers

485,778

381,367

+ 27.4

4,048,150

Intersegment

—

Total

485,778

381,367

+ 27.4

4,048,150

Operating cost and expenses

415,488

345,223

+ 20.4

3,462,400

Operating profit

70,290

36,144

+ 94.5

585,750

Assets

263,532

215,173

+ 22.5

2,196,100

Depreciations and amortization

14,118

12,745

+ 10.8

117,650

Capital expenditure

15,627

16,871

- 7.4

130,225

Optical and Other Products:

Net sales:

Unaffiliated customers

228,155

302,717

- 24.6

1,901,292

Intersegment

139,608

116,748

+ 19.6

1,163,400

Total

367,763

419,465

- 12.3

3,064,692

Operating cost and expenses

379,415

395,615

- 4.1

3,161,792

Operating profit

(11,652

)

23,850

—

(97,100

)

Assets

338,377

361,799

- 6.5

2,819,808

Depreciations and amortization

19,817

15,291

+ 29.6

165,142

Capital expenditure

23,767

36,057

- 34.1

198,058

Corporate and Eliminations:

Net sales:

Unaffiliated customers

—

Intersegment

(139,608

)

(116,748

)

—

(1,163,400

)

Total

(139,608

)

(116,748

)

—

(1,163,400

)

Operating cost and expenses

(16,313

)

(3,675

)

—

(135,942

)

Operating profit

(123,295

)

(113,073

)

—

(1,027,458

)

Assets

1,043,968

986,835

+ 5.8

8,699,734

Depreciations and amortization

24,460

18,357

+ 33.2

203,833

Capital expenditure

54,431

33,413

+ 62.9

453,592

Consolidated:

Net sales:

Unaffiliated customers

2,940,128

2,907,573

+ 1.1

24,501,067

Intersegment

—

Total

2,940,128

2,907,573

+ 1.1

24,501,067

Operating cost and expenses

2,593,769

2,625,734

- 1.2

21,614,742

Operating profit

346,359

281,839

+ 22.9

2,886,325

Assets

2,942,706

2,844,756

+ 3.4

24,522,550

Depreciations and amortization

165,260

152,300

+ 8.5

1,377,167

Capital expenditure

198,702

207,674

- 4.3

1,655,850


Notes:	1.	General corporate expenses of JPY 123,193 million (U.S.$1,026,608 thousand) and JPY 113,128 million in the years ended December 31, 2002 and 2001, respectively, are included in “Corporate and Eliminations.”
	2.	Corporate assets of JPY 1,044,036 million (U.S.$8,700,300 thousand) and JPY 986,801 million as of December 31, 2002 and 2001, respectively, which mainly consist of cash and cash equivalents, marketable securities and corporate properties, are included in “Corporate and Eliminations.”

- 12 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

SEGMENT INFORMATION BY GEOGRAPHIC AREA

Result for the fiscal year

Thousands of

Millions of yen

U.S. dollars

Year ended

December 31, 2002

December 31, 2001

Change(%)

December 31, 2002

Japan:

Net sales:

Unaffiliated customers

789,066

858,580

– 8.1

6,575,550

Intersegment

1,475,091

1,378,031

+ 7.0

12,292,425

Total

2,264,157

2,236,611

+ 1.2

18,867,975

Operating cost and expenses

1,867,817

1,893,448

– 1.4

15,565,142

Operating profit

396,340

343,163

+ 15.5

3,302,833

Assets

1,485,238

1,376,939

+ 7.9

12,376,983

Americas:

Net sales:

Unaffiliated customers

1,007,572

983,561

+ 2.4

8,396,433

Intersegment

9,791

17,475

– 44.0

81,592

Total

1,017,363

1,001,036

+ 1.6

8,478,025

Operating cost and expenses

969,542

969,630

– 0.0

8,079,517

Operating profit

47,821

31,406

+ 52.3

398,508

Assets

346,021

346,046

– 0.0

2,883,508

Europe:

Net sales:

Unaffiliated customers

852,931

805,243

+ 5.9

7,107,759

Intersegment

4,639

2,449

+ 89.4

38,658

Total

857,570

807,692

+ 6.2

7,146,417

Operating cost and expenses

836,341

806,495

+ 3.7

6,969,508

Operating profit

21,229

1,197

+ 1,673.5

176,909

Assets

460,521

423,295

+ 8.8

3,837,675

Others:

Net sales:

Unaffiliated customers

290,559

260,189

+ 11.7

2,421,325

Intersegment

426,914

299,410

+ 42.6

3,557,617

Total

717,473

559,599

+ 28.2

5,978,942

Operating cost and expenses

699,420

546,291

+ 28.0

5,828,501

Operating profit

18,053

13,308

+ 35.7

150,441

Assets

202,388

174,553

+ 15.9

1,686,567

Corporate and Eliminations:

Net sales:

Unaffiliated customers

—

Intersegment

(1,916,435

)

(1,697,365

)

—

(15,970,292

)

Total

(1,916,435

)

(1,697,365

)

—

(15,970,292

)

Operating cost and expenses

(1,779,351

)

(1,590,130

)

—

(14,827,926

)

Operating profit

(137,084

)

(107,235

)

—

(1,142,366

)

Assets

448,538

523,923

– 14.4

3,737,817

Consolidated:

Net sales:

Unaffiliated customers

2,940,128

2,907,573

+1.1

24,501,067

Intersegment

—

Total

2,940,128

2,907,573

+ 1.1

24,501,067

Operating cost and expenses

2,593,769

2,625,734

– 1.2

21,614,742

Operating profit

346,359

281,839

+ 22.9

2,886,325

Assets

2,942,706

2,844,756

+ 3.4

24,522,550


Notes:	1.	General corporate expenses of JPY 123,193 million (U.S.$1,026,608 thousand) and JPY 113,128 million in the years ended December 31, 2002 and 2001, respectively, are included in “Corporate and Eliminations.”
	2.	Corporate assets of JPY 1,044,036 million (U.S.$8,700,300 thousand) and JPY 986,801 million as of December 31, 2002 and 2001, respectively, which mainly consist of cash and cash equivalents, marketable securities and corporate properties, are included in “Corporate and Eliminations.”

- 13 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

5. CONSOLIDATED BALANCE SHEETS


													Thousands of
				Millions of yen									U.S. dollars

				As of			As of						As of
				December 31, 2002			December 31, 2001			Change			December 31, 2002

ASSETS
	Current assets:
		Cash and cash equivalents		¥	521,271		¥	506,234		¥	15,037		$	4,343,925
		Marketable securities			7,255			4,772			2,483			60,458
		Trade receivables, less allowance			498,587			456,635			41,952			4,154,892
		Inventories			432,251			448,300			(16,049	)		3,602,092
		Prepaid expenses and other current assets			245,610			214,353			31,257			2,046,750

			Total current assets		1,704,974			1,630,294			74,680			14,208,117
	Noncurrent receivables and restricted funds				20,568			21,125			(557	)		171,400
	Investments				64,037			66,168			(2,131	)		533,642
	Net property, plant and equipment				830,304			821,125			9,179			6,919,200
	Other assets				322,823			306,044			16,779			2,690,191

			Total assets	¥	2,942,706		¥	2,844,756		¥	97,950		$	24,522,550

LIABILITIES AND STOCKHOLDERS’ EQUITY
	Current liabilities:
		Short-term loans		¥	66,754		¥	200,104		¥	(133,350	)	$	556,283
		Trade payables			408,464			354,446			54,018			3,403,867
		Income taxes			80,169			65,324			14,845			668,075
		Accrued expenses			154,621			157,335			(2,714	)		1,288,508
		Other current liabilities			91,832			76,974			14,858			765,267

			Total current liabilities		801,840			854,183			(52,343	)		6,682,000
	Long-term debt, excluding current installments				81,349			95,526			(14,177	)		677,908
	Accrued pension and severance cost				285,129			237,537			47,592			2,376,075
	Other noncurrent liabilities				26,193			17,645			8,548			218,275

			Total liabilities		1,194,511			1,204,891			(10,380	)		9,954,258

	Minority interests				156,245			181,389			(25,144	)		1,302,042
	Stockholders’ equity:
		Common stock			167,242			165,287			1,955			1,393,683
		Additional paid-in capital			394,088			392,456			1,632			3,284,067
		Retained earnings			1,203,248			1,036,178			167,070			10,027,067
		Accumulated other comprehensive income (loss)			(166,467	)		(135,168	)		(31,299	)		(1,387,225	)
		Treasury stock			(6,161	)		(277	)		(5,884	)		(51,342	)

			Total stockholders’ equity		1,591,950			1,458,476			133,474			13,266,250

			Total liabilities and stockholders’ equity	¥	2,942,706		¥	2,844,756		¥	97,950		$	24,522,550


								Thousands of
		Millions of yen						U.S. dollars

		As of			As of			As of
		December 31, 2002			December 31, 2001			December 31, 2002

Allowance for doubtful receivables		¥	12,031		¥	11,091		$	100,258
Accumulated depreciation			1,077,694			1,025,107			8,980,783
Accumulated other comprehensive income (loss):
	Foreign currency translation adjustments		(68,524	)		(52,660	)		(571,034	)
	Net unrealized gains (losses) on securities		(1,168	)		564			(9,733	)
	Minimum pension liability adjustments		(96,441	)		(80,649	)		(803,675	)
	Net losses on derivative financial instruments		(334	)		(2,423	)		(2,783	)

- 14 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

6. CONSOLIDATED STATEMENTS OF RETAINED EARNINGS


								Thousands of
		Millions of yen						U.S. dollars

		Year ended			Year ended			Year ended
		December 31, 2002			December 31, 2001			December 31, 2002

Balance at beginning of period		¥	1,036,178		¥	888,761		$	8,634,817
	Net income		190,737			167,561			1,589,475
	Cash dividends		(23,663	)		(20,144	)		(197,192	)
	Other		(4	)		—			(33	)

Balance at end of period		¥	1,203,248		¥	1,036,178		$	10,027,067

7. CONSOLIDATED STATEMENTS OF CASH FLOWS


									Thousands of
			Millions of yen						U.S. dollars

			Year ended			Year ended			Year ended
			December 31, 2002			December 31, 2001			December 31, 2002

Net income			¥	190,737		¥	167,561		$	1,589,475
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization			165,260			152,300			1,377,167
	Loss on disposal of property, plant and equipment			13,137			20,323			109,475
	Gain on securities contributed to retirement benefit trust			—			(15,536	)		—
	Deferred income taxes			(1,788	)		2,172			(14,900	)
	Decrease (increase) in trade receivables			(47,077	)		47,844			(392,308	)
	Decrease in inventories			14,029			73,858			116,908
	Increase (decrease) in trade payables			64,040			(161,157	)		533,667
	Increase in income taxes			14,935			10,561			124,458
	Increase in accrued expenses			12,901			2,177			107,508
	Other, net			22,776			5,649			189,800

		Net cash provided by operating activities		448,950			305,752			3,741,250
Cash flows from investing activities:
	Capital expenditure			(198,702	)		(207,674	)		(1,655,850	)
	Proceeds from sale of property, plant and equipment			11,971			10,224			99,758
	Payment for purchase of marketable securities			(2,751	)		(9,225	)		(22,925	)
	Proceeds from sale of marketable securities			1,099			9,473			9,158
	Payment for purchase of investments			(30,331	)		(2,452	)		(252,758	)
	Other			(11,506	)		7,062			(95,883	)

		Net cash used in investing activities		(230,220	)		(192,592	)		(1,918,500	)
Cash flows from financing activities:
	Proceeds from long-term debt			10,609			7,417			88,408
	Repayment of long-term debt			(60,690	)		(40,423	)		(505,750	)
	Decrease in short-term loans			(101,125	)		(64,292	)		(842,708	)
	Dividends paid			(23,663	)		(20,144	)		(197,192	)
	Other			(8,845	)		(3,786	)		(73,708	)

		Net cash used in financing activities		(183,714	)		(121,228	)		(1,530,950	)
Effect of exchange rate changes on cash and cash equivalents				(19,979	)		20,340			(166,492	)

Net change in cash and cash equivalents				15,037			12,272			125,308
Cash and cash equivalents at beginning of period				506,234			493,962			4,218,617

Cash and cash equivalents at end of period			¥	521,271		¥	506,234		$	4,343,925

- 15 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

8.		BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

(1)		CHANGES IN GROUP OF ENTITIES


		Subsidiaries
		Addition:		25 companies
		Removal:		33 companies
		Affiliates (Carried at Equity Basis)
		Addition:		3 companies
		Removal:		5 companies

(2)

SIGNIFICANT ACCOUNTING POLICIES

			The accompanying consolidated financial statements reflect the adjustments which management believes are necessary to conform them with accounting principles generally accepted in the United States of America.

	1.		Marketable Securities and Marketable Investments

			Canon’s consolidated financial statements are based on Statement of Financial Accounting Standards No. 115 (SFAS 115), “Accounting for Certain Investments in Debt and Equity Securities.” Under SFAS 115, certain investments in debt and equity securities should be classified as trading, available-for-sale or held-to-maturity. Canon’s marketable securities and marketable investments consist of available-for-sale securities.

			Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of other comprehensive income (loss) until realized.

	2.		Inventories

			Inventories are stated at the lower of cost or market. Cost is determined principally by the average method for domestic inventories and the first-in, first-out method for overseas inventories.

	3.		Depreciation

			Depreciation is calculated principally by the declining-balance method over the estimated useful lives of assets.

	4.		Employee Retirement and Severance Benefits

			Canon has been adopting Statement of Financial Accounting Standards No. 87 (SFAS 87), “Employer’s Accounting for Pensions.”

	5.		Derivative Instruments and Hedging Activities Canon has been adopting Statement of Financial Accounting Standards No. 133(SFAS 133), “Accounting for Derivative and Hedging Activities”and No. 138 (SFAS 138), “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133” since January 1, 2001. Both standards establish accounting and reporting standards for derivative instruments and for hedging activities, and require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.

	6.		New Accounting Standards

			In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No.141 (SFAS 141), “Business Combinations,” and Statement of Financial Accounting Standards No. 142 (SFAS 142), “Goodwill and Other Intangible Assets.” Canon adopted the provisions of SFAS 141 and SFAS 142 on January 1, 2002, with the exception of the immediate requirement to use the purchase method of accounting for all future business combinations completed after June 30, 2001. In adopting SFAS 142, Canon evaluated the useful life and the remaining value for all intangible-assets and reclassified amortized assets apart from goodwill by March 31, 2002. Also, Canon completed the first step of the transitional assessment by June 30, 2002. In the first step, significant impairment loss of goodwill was not recognized. The adoption of SFAS 141 and 142 did not have a material effect on Canon’s consolidated financial position and results of operations.

			In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144 (SFAS 144), “Accounting for the Impairment or Disposal of Long-Lived Assets.” Canon adopted the provisions of SFAS 144 on January 1, 2002. The adoption of SFAS 144 did not have a material effect on Canon’s consolidated financial position and results of operations.

- 16 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

9.		MARKETABLE SECURITIES AND DERIVATIVE CONTRACTS

(1)		MARKET VALUE ON MARKETABLE SECURITIES


		Millions of yen

		As of December 31, 2002							As of December 31, 2001

		Acquisition		Estimated		Unrealized			Acquisition		Estimated		Unrealized
		Cost		Fair Value		Gains/Losses			Cost		Fair Value		Gains/Losses

Marketable securities:
	Governmental bond securities	¥	59	¥	61	¥	2		¥	55	¥	55	¥	0
	Corporate debt securities		5,698		5,728		30			3,623		3,682		59
	Bank debt securities		91		91		0			91		91		0
	Fund trust		220		310		90			0		0		0
	Equity securities		1,194		1,065		(129	)		1,008		944		(64	)

		¥	7,262	¥	7,255	¥	(7	)	¥	4,777	¥	4,772	¥	(5	)

Investment securities:
	Governmental bond securities	¥	220	¥	227	¥	7		¥	201	¥	201	¥	0
	Corporate debt securities		5,149		5,173		24			5,553		5,820		267
	Bank debt securities		150		150		0			0		0		0
	Fund trust		2,302		2,109		(193	)		1,891		1,971		80
	Equity securities		5,263		7,011		1,748			6,430		11,419		4,989

		¥	13,084	¥	14,670	¥	1,586		¥	14,075	¥	19,411	¥	5,336

Thousands of U.S. dollars

As of December 31, 2002

Acquisition

Estimated

Unrealized

Cost

Fair Value

Gains/Losses

Marketable securities:

Governmental bond securities

492

508

Corporate debt securities

47,484

47,734

250

Bank debt securities

758

Fund trust

1,833

2,583

750

Equity securities

9,950

8,875

(1,075

)

60,517

60,458

(59

)

Investment securities:

Governmental bond securities

1,833

1,892

Corporate debt securities

42,909

43,108

199

Bank debt securities

1,250

Fund trust

19,183

17,575

(1,608

)

Equity securities

43,858

58,425

14,567

109,033

122,250

13,217

- 17 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

(2)

DERIVATIVE CONTRACTS


			Millions of yen										Thousands of U.S. dollars

			As of December 31, 2002					As of December 31, 2001					As of December 31, 2002

			Contract		Estimated			Contract		Estimated			Contract		Estimated
			Amount		Fair Value			Amount		Fair Value			Amount		Fair Value

Trade receivables and anticipated sales transactions:
		To sell foreign currencies	¥	388,145	¥	1,490		¥	250,888	¥	(13,499	)	$	3,234,542	$	12,417
		To buy foreign currencies		6,652		(391	)		13,743		399			55,433		(3,258	)
Long-term debt (including due within a year):
	Interest rate swaps:
		Receive-fixed	¥	180	¥	1		¥	21,548	¥	575		$	1,500	$	8
		Pay-fixed		57,270		(1,149	)		62,788		(1,463	)		477,250		(9,575	)

- 18 -

CANON INC.

NON-CONSOLIDATED

1. NON-CONSOLIDATED STATEMENTS OF INCOME
( Parent company only )

Millions of yen

Year ended

December 31,

2002

2001

Change(%)

Net sales

1,789,005

1,707,459

+4.8

Cost of sales

1,149,326

1,129,305

Gross profit

639,679

578,153

+10.6

Selling, general and administrative expenses

402,485

384,763

Operating profit

237,193

193,389

+22.7

Other income (deductions):

Interest and dividend income

10,543

15,117

Interest expense

(282

)

(4,005

)

Other, net

(6,470

)

6,626

3,789

17,737

Ordinary profit

240,982

211,127

+14.1

Non-ordinary loss, net

8,693

163,118

Income before income taxes

232,289

48,009

Income taxes

88,105

8,846

Net income

144,184

39,163

+268.2

Earnings per share:

Yen

Basic

164.46

44.71

Note:

Amounts less than 1 million yen have been omitted.

2. DETAILS OF SALES
( Parent company only )

Sales by product

Millions of yen

Year ended

December 31,

2002

2001

Change(%)

Business machines:

Copying machines

400,167

406,387

-1.5

Computer peripherals

853,917

813,194

+5.0

Business systems

84,596

68,085

+24.3

1,338,680

1,287,667

+4.0

Cameras

346,433

269,986

+28.3

Optical and other products

103,890

149,805

-30.6

Total

1,789,005

1,707,459

+4.8

Sales by region

Millions of yen

Year ended

December 31,

2002

2001

Change(%)

Japan

298,905

329,809

-9.4

Overseas:

Americas

686,119

634,010

+8.2

Europe

562,156

533,795

+5.3

Other areas

241,822

209,842

+15.2

1,490,099

1,377,649

+8.2

Total

1,789,005

1,707,459

+4.8

Note: Amounts less than 1 million yen have been omitted.

- 19 -

CANON INC.

NON-CONSOLIDATED

3. NON-CONSOLIDATED BALANCE SHEETS
( Parent company only )


				Millions of yen

				As of			As of
				December 31,			December 31,
				2002			2001			Change

ASSETS
	Current assets:
		Cash		¥	64,262		¥	121,061		¥	(56,799	)
		Trade receivables			577,372			385,941			191,431
		Marketable securities			474			103			371
		Inventories			176,305			171,512			4,793
		Prepaid expenses and other current assets			144,653			120,819			23,834
		Allowance for doubtful accounts			(10,986	)		(9,803	)		(1,183	)

			Total current assets		952,082			789,635			162,447

	Fixed assets:
		Net property, plant and equipment			440,501			420,368			20,133
		Intangibles			27,668			39,105			(11,437	)
		Investments and other fixed assets			427,937			408,976			18,961
		Allowance for doubtful accounts			(52	)		(20	)		(32	)

			Total fixed assets		896,054			868,431			27,623

			Total assets	¥	1,848,136		¥	1,658,066		¥	190,070

LIABILITIES AND STOCKHOLDERS’ EQUITY
	Current liabilities:
		Trade payables		¥	279,901		¥	242,926		¥	36,975
		Short-term loans			53,772			26,306			27,466
		Income taxes			62,629			50,397			12,232
		Other current liabilities			44,803			53,274			(8,471	)

			Total current liabilities		441,106			372,904			68,202

	Long-term debt, excluding current installments				15,032			18,950			(3,918	)
	Accrued pension and severance cost				156,687			147,768			8,919

			Total liabilities		612,827			539,622			73,205

	Stockholders’ equity:
		Common stock			167,242			165,287			1,955
		Additional paid-in capital			298,778			296,370			2,408
		Retained earnings			774,287			653,898			120,389
		Net unrealized gains on securities			1,162			3,163			(2,001	)
		Treasury stock			(6,162	)		(276	)		(5,886	)

			Total stockholders’ equity		1,235,309			1,118,443			116,866

			Total liabilities and stockholders’ equity	¥	1,848,136		¥	1,658,066		¥	190,070


	Millions of yen

	As of		As of
	December 31,		December 31,
	2002		2001

Accumulated depreciation	¥	575,256	¥	558,938

Note: Amounts less than 1 million yen have been omitted.

- 20 -

NON-CONSOLIDATED

Directors

(1)

Candidates for new Directors to be appointed


Director	Katsuichi Shimizu	(Deputy Chief Executive, Office Imaging Products Operations (present))
Director	Ryoichi Banba	(Senior Vice President, Canon U.S.A., Inc.(present))
Director	Tomonori Iwashita	(Group Executive, Photo Products Group (present))
Director	Toshio Honma	(Deputy Chief Executive, i Printer Products Operations (present))
Director	Shigeru Imaiida	(Senior General Manager, Production Engineering Center (present))

(2)

Directors to be retired


Director	Toru Takahashi	(Adviser to be appointed)
Director	Muneo Adachi	(Adviser to be appointed)

(3)

Candidates for Directors to be promoted


Senior Managing Director	Kinya Uchida	(Managing Director; President, Canon U.S.A., Inc. (present))
Senior Managing Director	Akira Tajima	(Managing Director; Chief Executive, Optical Products Operations (present))
Senior Managing Director	Tsuneji Uchida	(Managing Director; Chief Executive, Image Communication Products Operations (present))
Managing Director	Akiyoshi Moroe	(Director; Group Executive, General Affairs Headquarters (present))
Managing Director	Kunio Watanabe	(Director; Group Executive, Corporate Planning Development Headquarters (present))
Managing Director	Ikuo Soma	(Director; Chief Executive, Office Imaging Products Operations (present))

- 21 -

January 30, 2003

CONSOLIDATED RESULTS FOR THE FOURTH QUARTER
AND THE FISCAL YEAR ENDED DECEMBER 31, 2002

SUPPLEMENTARY REPORT

TABLE OF CONTENTS


		PAGE

1.	SALES BY REGION AND PRODUCT (2002)		S1
2.	SALES BY REGION AND PRODUCT (2003/Projection)		S2
3.	SALES COMPOSITION BY PRODUCT		S3
4.	SALES GROWTH IN LOCAL CURRENCY		S3
5.	SEGMENT INFORMATION BY PRODUCT (2002)		S4
6.	OTHER INCOME/DEDUCTIONS (2002)		S4
7.	SEGMENT INFORMATION BY PRODUCT (2003/Projection)		S5
8.	OTHER INCOME/DEDUCTIONS (2003/Projection)		S5
9.	P&L SUMMARY (1st Quarter 2003/Projection)		S5
10.	PROFITABILITY		S6
11.	IMPACT OF FOREIGN EXCHANGE RATES		S6
12.	CASH FLOWS		S6
13.	R&D EXPENDITURE		S6
14.	CAPITAL EXPENDITURE & DEPRECIATION AND AMORTIZATION		S7
15.	INVENTORIES		S7
16.	DEBT RATIO		S7
17.	OVERSEAS PRODUCTION RATIO		S7
18.	NUMBER OF EMPLOYEES		S7

[NOTES]

This report contains forward-looking statements which reflect management’s current views with respect to certain future events and financial performance. Actual results may differ materially from those projected or implied in any forward-looking statements.

Further, certain forward-looking statements are based upon assumptions of future events which may not prove to be accurate. (Cautionary Statements for Purposes of the Safe Harbor Provisions of the United States Private Securities Litigation Reform Act of 1995.)


1. SALES BY REGION AND PRODUCT (2002)		(Millions of yen)


					2002				2001				Change year over year

					4th quarter		Year		4th quarter		Year		4th quarter			Year

Japan
		Business machines				153,789		550,229		156,593		597,582		-1.8	%		-7.9	%

				Copying machines		65,362		254,032		63,463		251,529		+3.0	%		+1.0	%
				Computer peripherals		54,782		155,412		51,374		160,528		+6.6	%		-3.2	%
				Business systems		33,645		140,785		41,756		185,525		-19.4	%		-24.1	%

			Cameras			26,693		92,581		26,601		89,509		+0.3	%		+3.4	%

			Optical and other products			21,760		89,741		23,450		140,197		-7.2	%		-36.0	%

				Total		202,242		732,551		206,644		827,288		-2.1	%		-11.5	%

Overseas
			Business machines			479,640		1,675,966		415,226		1,625,907		+15.5	%		+3.1	%

				Copying machines		183,923		684,306		182,662		640,285		+0.7	%		+6.9	%
				Computer peripherals		261,277		863,006		198,484		864,824		+31.6	%		-0.2	%
				Business systems		34,440		128,654		34,080		120,798		+1.1	%		+6.5	%

			Cameras			131,811		393,197		92,564		291,858		+42.4	%		+34.7	%

			Optical and other products			47,970		138,414		38,883		162,520		+23.4	%		-14.8	%

				Total		659,421		2,207,577		546,673		2,080,285		+20.6	%		+6.1	%

	Americas
			Business machines			230,038		797,498		202,416		805,051		+13.6	%		-0.9	%

				Copying machines		88,182		344,566		95,477		335,209		-7.6	%		+2.8	%
				Computer peripherals		127,571		395,665		93,110		420,753		+37.0	%		-6.0	%
				Business systems		14,285		57,267		13,829		49,089		+3.3	%		+16.7	%

			Cameras			62,557		180,454		44,910		132,523		+39.3	%		+36.2	%

			Optical and other products			9,477		32,214		10,504		44,530		-9.8	%		-27.7	%

				Total		302,072		1,010,166		257,830		982,104		+17.2	%		+2.9	%

	Europe
			Business machines			197,704		676,885		171,794		638,563		+15.1	%		+6.0	%

				Copying machines		80,943		280,915		73,700		253,635		+9.8	%		+10.8	%
				Computer peripherals		100,185		338,071		80,875		325,412		+23.9	%		+3.9	%
				Business systems		16,576		57,899		17,219		59,516		-3.7	%		-2.7	%

			Cameras			52,449		156,244		37,405		124,265		+40.2	%		+25.7	%

			Optical and other products			8,135		24,038		12,612		43,276		-35.5	%		-44.5	%

				Total		258,288		857,167		221,811		806,104		+16.4	%		+6.3	%

	Other areas
			Business machines			51,898		201,583		41,016		182,293		+26.5	%		+10.6	%

				Copying machines		14,798		58,825		13,485		51,441		+9.7	%		+14.4	%
				Computer peripherals		33,521		129,270		24,499		118,659		+36.8	%		+8.9	%
				Business systems		3,579		13,488		3,032		12,193		+18.0	%		+10.6	%

			Cameras			16,805		56,499		10,249		35,070		+64.0	%		+61.1	%

			Optical and other products			30,358		82,162		15,767		74,714		+92.5	%		+10.0	%

				Total		99,061		340,244		67,032		292,077		+47.8	%		+16.5	%

Total
			Business machines			633,429		2,226,195		571,819		2,223,489		+10.8	%		+0.1	%

				Copying machines		249,285		938,338		246,125		891,814		+1.3	%		+5.2	%
				Computer peripherals		316,059		1,018,418		249,858		1,025,352		+26.5	%		-0.7	%
				Business systems		68,085		269,439		75,836		306,323		-10.2	%		-12.0	%

			Cameras			158,504		485,778		119,165		381,367		+33.0	%		+27.4	%

			Optical and other products			69,730		228,155		62,333		302,717		+11.9	%		-24.6	%

				Total		861,663		2,940,128		753,317		2,907,573		+14.4	%		+1.1	%

- S1 -

2. SALES BY REGION AND PRODUCT (2003/Projection)


		(Millions of yen)


				2003 (P)								2002

				1st quarter		1st half		2nd half		Year		1st quarter		1st half		2nd half		Year

Japan
		Business machines			137,600		280,800		294,800		575,600		137,966		273,194		277,035		550,229

			Copying machines		71,300		142,800		142,300		285,100		63,691		128,451		125,581		254,032
			Computer peripherals		32,500		69,700		84,100		153,800		34,492		70,112		85,300		155,412
			Business systems		33,800		68,300		68,400		136,700		39,783		74,631		66,154		140,785

		Cameras			20,800		48,200		58,300		106,500		18,626		43,269		49,312		92,581

		Optical and other products			22,400		47,200		71,400		118,600		21,796		44,675		45,066		89,741

			Total		180,800		376,200		424,500		800,700		178,388		361,138		371,413		732,551

Overseas
		Business machines			404,200		833,200		877,300		1,710,500		379,393		798,489		877,477		1,675,966

			Copying machines		165,000		343,900		349,600		693,500		165,499		343,980		340,326		684,306
			Computer peripherals		209,500		427,900		461,300		889,200		181,543		389,343		473,663		863,006
			Business systems		29,700		61,400		66,400		127,800		32,351		65,166		63,488		128,654

		Cameras			82,500		193,300		246,200		439,500		67,085		168,123		225,074		393,197

		Optical and other products			42,500		77,300		92,000		169,300		26,225		56,733		81,681		138,414

			Total		529,200		1,103,800		1,215,500		2,319,300		472,703		1,023,345		1,184,232		2,207,577

	Americas
		Business machines			193,300		392,700		409,200		801,900		179,268		372,610		424,888		797,498

			Copying machines		81,200		167,500		174,600		342,100		82,776		172,924		171,642		344,566
			Computer peripherals		98,900		199,300		206,100		405,400		81,135		170,130		225,535		395,665
			Business systems		13,200		25,900		28,500		54,400		15,357		29,556		27,711		57,267

		Cameras			32,200		79,100		108,100		187,200		29,371		75,309		105,145		180,454

		Optical and other products			8,900		15,400		22,200		37,600		8,422		14,853		17,361		32,214

			Total		234,400		487,200		539,500		1,026,700		217,061		462,772		547,394		1,010,166

	Europe
		Business machines			163,100		337,800		363,800		701,600		155,303		325,728		351,157		676,885

			Copying machines		70,200		148,000		148,000		296,000		68,229		140,783		140,132		280,915
			Computer peripherals		79,500		160,900		184,900		345,800		73,027		155,961		182,110		338,071
			Business systems		13,400		28,900		30,900		59,800		14,047		28,984		28,915		57,899

		Cameras			36,700		85,900		101,500		187,400		27,482		68,475		87,769		156,244

		Optical and other products			7,100		14,000		22,900		36,900		5,967		12,414		11,624		24,038

			Total		206,900		437,700		488,200		925,900		188,752		406,617		450,550		857,167

	Other areas
		Business machines			47,800		102,700		104,300		207,000		44,822		100,151		101,432		201,583

			Copying machines		13,600		28,400		27,000		55,400		14,494		30,273		28,552		58,825
			Computer peripherals		31,100		67,700		70,300		138,000		27,381		63,252		66,018		129,270
			Business systems		3,100		6,600		7,000		13,600		2,947		6,626		6,862		13,488

		Cameras			13,600		28,300		36,600		64,900		10,232		24,339		32,160		56,499

		Optical and other products			26,500		47,900		46,900		94,800		11,836		29,466		52,696		82,162

			Total		87,900		178,900		187,800		366,700		66,890		153,956		186,288		340,244

Total
		Business machines			541,800		1,114,000		1,172,100		2,286,100		517,359		1,071,683		1,154,512		2,226,195

			Copying machines		236,300		486,700		491,900		978,600		229,190		472,431		465,907		938,338
			Computer peripherals		242,000		497,600		545,400		1,043,000		216,035		459,455		558,963		1,018,418
			Business systems		63,500		129,700		134,800		264,500		72,134		139,797		129,642		269,439

		Cameras			103,300		241,500		304,500		546,000		85,711		211,392		274,386		485,778

		Optical and other products			64,900		124,500		163,400		287,900		48,021		101,408		126,747		228,155

			Total		710,000		1,480,000		1,640,000		3,120,000		651,091		1,384,483		1,555,645		2,940,128

[Additional columns below]

[Continued from above table, first column(s) repeated]

(Millions of yen)


				Change year over year

				1st quarter			1st half			2nd half			Year

Japan
		Business machines			-0.3	%		+2.8	%		+6.4	%		+4.6	%

			Copying machines		+11.9	%		+11.2	%		+13.3	%		+12.2	%
			Computer peripherals		-5.8	%		-0.6	%		-1.4	%		-1.0	%
			Business systems		-15.0	%		-8.5	%		+3.4	%		-2.9	%

		Cameras			+11.7	%		+11.4	%		+18.2	%		+15.0	%

		Optical and other products			+2.8	%		+5.7	%		+58.4	%		+32.2	%

			Total		+1.4	%		+4.2	%		+14.3	%		+9.3	%

Overseas
		Business machines			+6.5	%		+4.3	%		-0.0	%		+2.1	%

			Copying machines		-0.3	%		-0.0	%		+2.7	%		+1.3	%
			Computer peripherals		+15.4	%		+9.9	%		-2.6	%		+3.0	%
			Business systems		-8.2	%		-5.8	%		+4.6	%		-0.7	%

		Cameras			+23.0	%		+15.0	%		+9.4	%		+11.8	%

		Optical and other products			+62.1	%		+36.3	%		+12.6	%		+22.3	%

			Total		+12.0	%		+7.9	%		+2.6	%		+5.1	%

	Americas
		Business machines			+7.8	%		+5.4	%		-3.7	%		+0.6	%

			Copying machines		-1.9	%		-3.1	%		+1.7	%		-0.7	%
			Computer peripherals		+21.9	%		+17.1	%		-8.6	%		+2.5	%
			Business systems		-14.0	%		-12.4	%		+2.8	%		-5.0	%

		Cameras			+9.6	%		+5.0	%		+2.8	%		+3.7	%

		Optical and other products			+5.7	%		+3.7	%		+27.9	%		+16.7	%

			Total		+8.0	%		+5.3	%		-1.4	%		+1.6	%

	Europe
		Business machines			+5.0	%		+3.7	%		+3.6	%		+3.7	%

			Copying machines		+2.9	%		+5.1	%		+5.6	%		+5.4	%
			Computer peripherals		+8.9	%		+3.2	%		+1.5	%		+2.3	%
			Business systems		-4.6	%		-0.3	%		+6.9	%		+3.3	%

		Cameras			+33.5	%		+25.4	%		+15.6	%		+19.9	%

		Optical and other products			+19.0	%		+12.8	%		+97.0	%		+53.5	%

			Total		+9.6	%		+7.6	%		+8.4	%		+8.0	%

	Other areas
		Business machines			+6.6	%		+2.5	%		+2.8	%		+2.7	%

			Copying machines		-6.2	%		-6.2	%		-5.4	%		-5.8	%
			Computer peripherals		+13.6	%		+7.0	%		+6.5	%		+6.8	%
			Business systems		+5.2	%		-0.4	%		+2.0	%		+0.8	%

		Cameras			+32.9	%		+16.3	%		+13.8	%		+14.9	%

		Optical and other products			+123.9	%		+62.6	%		-11.0	%		+15.4	%

			Total		+31.4	%		+16.2	%		+0.8	%		+7.8	%

Total
		Business machines			+4.7	%		+3.9	%		+1.5	%		+2.7	%

			Copying machines		+3.1	%		+3.0	%		+5.6	%		+4.3	%
			Computer peripherals		+12.0	%		+8.3	%		-2.4	%		+2.4	%
			Business systems		-12.0	%		-7.2	%		+4.0	%		-1.8	%

		Cameras			+20.5	%		+14.2	%		+11.0	%		+12.4	%

		Optical and other products			+35.1	%		+22.8	%		+28.9	%		+26.2	%

			Total		+9.0	%		+6.9	%		+5.4	%		+6.1	%

(P)=Projection

- S2 -

3. SALES COMPOSITION BY PRODUCT


		2003 (P)												2002												2001

		1st quarter			1st half			2nd half			Year			4th quarter			1st half			2nd half			Year			4th quarter			Year

Copying machines
	Monochrome		83	%		82	%		81	%		82	%		80	%		82	%		81	%		82	%		81	%		81	%
	Color		17	%		18	%		19	%		18	%		20	%		18	%		19	%		18	%		19	%		19	%

	Digital*		—			—			—			—			89	%		90	%		89	%		89	%		85	%		84	%
	Analog*		—			—			—			—			11	%		10	%		11	%		11	%		15	%		16	%

Computer peripherals
	Laser beam printers		72	%		72	%		70	%		71	%		68	%		69	%		71	%		70	%		62	%		71	%
	Bubble Jet printers		25	%		25	%		27	%		26	%		28	%		27	%		26	%		26	%		34	%		25	%
	Others		3	%		3	%		3	%		3	%		4	%		4	%		3	%		4	%		4	%		4	%

Business systems
	Facsimiles		43	%		44	%		46	%		45	%		50	%		44	%		47	%		46	%		40	%		36	%
	Personal computers		45	%		44	%		42	%		43	%		39	%		45	%		42	%		43	%		48	%		54	%
	Others		12	%		12	%		12	%		12	%		11	%		11	%		11	%		11	%		12	%		10	%

Cameras
	Film cameras / Lenses		27	%		25	%		23	%		24	%		28	%		34	%		29	%		31	%		42	%		46	%
	Digital cameras		51	%		53	%		57	%		55	%		49	%		43	%		47	%		45	%		39	%		33	%
	Video camcorders		22	%		22	%		20	%		21	%		23	%		23	%		24	%		24	%		19	%		21	%

Optical and other products
	Semiconductor production equipment		62	%		60	%		55	%		57	%		56	%		43	%		51	%		48	%		57	%		59	%
	Others		38	%		40	%		45	%		43	%		44	%		57	%		49	%		52	%		43	%		41	%


*Among office-use monochrome models (body only)		(P)=Projection

4. SALES GROWTH IN LOCAL CURRENCY


		2003 (P)												2002
		Change year over year												Change year over year

		1st quarter			1st half			2nd half			Year			4th quarter			1st half			2nd half			Year

Business machines
	Japan		-0.3	%		+2.8	%		+6.4	%		+4.6	%		-1.8	%		-10.4	%		-5.4	%		-7.9	%
	Overseas		+12.6	%		+8.6	%		+0.6	%		+4.5	%		+12.2	%		-10.7	%		+8.4	%		-1.4	%

	Total		+9.1	%		+7.1	%		+2.0	%		+4.5	%		+8.4	%		-10.6	%		+4.7	%		-3.1	%

Cameras
	Japan		+11.7	%		+11.4	%		+18.2	%		+15.0	%		+0.3	%		+7.2	%		+0.4	%		+3.4	%
	Overseas		+27.8	%		+18.2	%		+10.1	%		+13.5	%		+37.2	%		+16.6	%		+38.9	%		+28.6	%

	Total		+24.3	%		+16.8	%		+11.5	%		+13.8	%		+29.0	%		+14.4	%		+29.7	%		+22.7	%

Optical and other products
	Japan		+2.8	%		+5.7	%		+58.4	%		+32.2	%		-7.2	%		-40.2	%		-31.2	%		-36.0	%
	Overseas		+67.5	%		+39.8	%		+13.0	%		+24.0	%		+22.1	%		-36.7	%		+6.1	%		-16.6	%

	Total		+38.1	%		+24.8	%		+29.1	%		+27.2	%		+11.1	%		-38.3	%		-11.1	%		-25.6	%

Total
	Japan		+1.4	%		+4.2	%		+14.3	%		+9.3	%		-2.1	%		-14.0	%		-8.8	%		-11.5	%
	Overseas		+17.8	%		+11.9	%		+3.3	%		+7.3	%		+17.1	%		-9.4	%		+12.9	%		+1.6	%
	Americas		+19.1	%		+13.5	%		-0.5	%		+5.9	%		+18.1	%		-12.0	%		+12.9	%		+0.4	%
	Europe		+8.3	%		+6.1	%		+8.7	%		+7.5	%		+7.0	%		-7.6	%		+5.3	%		-1.3	%
	Others		+40.2	%		+22.7	%		+1.5	%		+11.1	%		+47.2	%		-5.7	%		+35.2	%		+13.6	%

	Total		+13.3	%		+9.9	%		+5.9	%		+7.8	%		+11.9	%		-10.7	%		+6.7	%		-2.1	%

(P)=Projection

- S3 -


5. SEGMENT INFORMATION BY PRODUCT (2002)		(Millions of yen)


			2002						2001						Change year over year

			4th quarter			Year			4th quarter			Year			4th quarter			Year

Business machines
	Unaffiliated customers			633,429			2,226,195			571,819			2,223,489			+10.8	%		+0.1	%
	Intersegment			—			—			—			—			—			—

		Total sales		633,429			2,226,195			571,819			2,223,489			+10.8	%		+0.1	%

		Operating profit		129,712			411,016			65,506			334,918			+98.0	%		+22.7	%
		% of sales		20.5	%		18.5	%		11.5	%		15.1	%		—			—

Cameras
	Unaffiliated customers			158,504			485,778			119,165			381,367			+33.0	%		+27.4	%
	Intersegment			—			—			—			—			—			—

		Total sales		158,504			485,778			119,165			381,367			+33.0	%		+27.4	%

		Operating profit		22,067			70,290			10,218			36,144			+116.0	%		+94.5	%
		% of sales		13.9	%		14.5	%		8.6	%		9.5	%		—			—

Optical and other products
	Unaffiliated customers			69,730			228,155			62,333			302,717			+11.9	%		-24.6	%
	Intersegment			37,248			139,608			25,364			116,748			+46.9	%		+19.6	%
		Total sales		106,978			367,763			87,697			419,465			+22.0	%		-12.3	%

		Operating profit		-237			-11,652			-4,963			23,850			—			—
		% of sales		-0.2	%		-3.2	%		-5.7	%		5.7	%		—			—

Corporate and Eliminations
	Unaffiliated customers			—			—			—			—			—			—
	Intersegment			-37,248			-139,608			-25,364			-116,748			—			—

		Total sales		-37,248			-139,608			-25,364			-116,748			—			—

		Operating profit		-37,941			-123,295			-28,888			-113,073			—			—

Consolidated
	Unaffiliated customers			861,663			2,940,128			753,317			2,907,573			+14.4	%		+1.1	%
	Intersegment			—			—			—			—			—			—

		Total sales		861,663			2,940,128			753,317			2,907,573			+14.4	%		+1.1	%

		Operating profit		113,601			346,359			41,873			281,839			+171.3	%		+22.9	%
		% of sales		13.2	%		11.8	%		5.6	%		9.7	%		—			—


6. OTHER INCOME/DEDUCTIONS (2002)		(Millions of yen)


	2002				2001				Change year over year

	4th quarter		Year		4th quarter		Year		4th quarter		Year

Interest & dividend, net		369		2,410		-515		-1,141		+884		+3,551
Forex gain / loss		-8,339		-23,468		3,417		-14,801		-11,756		-8,667
Equity earnings / loss		-859		-3,521		-1,293		-1,845		+434		-1,676
of affiliated companies
Others, net		-326		8,237		-629		17,514		+303		-9,277

Total		-9,155		-16,342		980		-273		-10,135		-16,069

- S4 -


7. SEGMENT INFORMATION BY PRODUCT (2003/Projection)


			2003 (P)												2002

			1st quarter			1st half			2nd half			Year			1st quarter			1st half			2nd half			Year

Business machines
	Unaffiliated customers			541,800			1,114,000			1,172,100			2,286,100			517,359			1,071,683			1,154,512			2,226,195
	Intersegment			—			—			—			—			—			—			—			—

		Total sales		541,800			1,114,000			1,172,100			2,286,100			517,359			1,071,683			1,154,512			2,226,195

		Operating profit		89,100			184,000			227,400			411,400			82,571			177,851			233,165			411,016
		% of sales		16.4	%		16.5	%		19.4	%		18.0	%		16.0	%		16.6	%		20.2	%		18.5	%

Cameras
	Unaffiliated customers			103,300			241,500			304,500			546,000			85,711			211,392			274,386			485,778
	Intersegment			—			—			—			—			—			—			—			—

		Total sales		103,300			241,500			304,500			546,000			85,711			211,392			274,386			485,778

		Operating profit		11,900			30,000			46,600			76,600			10,696			28,055			42,235			70,290
		% of sales		11.5	%		12.4	%		15.3	%		14.0	%		12.5	%		13.3	%		15.4	%		14.5	%

Optical and other products
	Unaffiliated customers			64,900			124,500			163,400			287,900			48,021			101,408			126,747			228,155
	Intersegment			25,000			58,000			65,000			123,000			28,774			63,259			76,349			139,608

		Total sales		89,900			182,500			228,400			410,900			76,795			164,667			203,096			367,763

		Operating profit		—			—			4,000			4,000			-4,455			-8,491			-3,161			-11,652
		% of sales		0.0	%		0.0	%		1.8	%		1.0	%		-5.8	%		-5.2	%		-1.6	%		-3.2	%

Corporate and Eliminations
	Unaffiliated customers			—			—			—			—			—			—			—			—
	Intersegment			-25,000			-58,000			-65,000			-123,000			-28,774			-63,259			-76,349			-139,608

		Total sales		-25,000			-58,000			-65,000			-123,000			-28,774			-63,259			-76,349			-139,608

		Operating profit		-28,000			-64,000			-68,000			-132,000			-24,261			-57,387			-65,908			-123,295

Consolidated
	Unaffiliated customers			710,000			1,480,000			1,640,000			3,120,000			651,091			1,384,483			1,555,645			2,940,128
	Intersegment			—			—			—			—			—			—			—			—

		Total sales		710,000			1,480,000			1,640,000			3,120,000			651,091			1,384,483			1,555,645			2,940,128

		Operating profit		73,000			150,000			210,000			360,000			64,551			140,028			206,331			346,359
		% of sales		10.3	%		10.1	%		12.8	%		11.5	%		9.9	%		10.1	%		13.3	%		11.8	%

[Additional columns below]

[Continued from above table, first column(s) repeated]

(Millions of yen)


			Change year over year

			1st quarter			1st half			2nd half			Year

Business machines
	Unaffiliated customers			+4.7	%		+3.9	%		+1.5	%		+2.7	%
	Intersegment			—			—			—			—

		Total sales		+4.7	%		+3.9	%		+1.5	%		+2.7	%

		Operating profit		+7.9	%		+3.5	%		-2.5	%		+0.1	%
		% of sales		—			—			—			—

Cameras
	Unaffiliated customers			+20.5	%		+14.2	%		+11.0	%		+12.4	%
	Intersegment			—			—			—			—

		Total sales		+20.5	%		+14.2	%		+11.0	%		+12.4	%

		Operating profit		+11.3	%		+6.9	%		+10.3	%		+9.0	%
		% of sales		—			—			—			—

Optical and other products
	Unaffiliated customers			+35.1	%		+22.8	%		+28.9	%		+26.2	%
	Intersegment			-13.1	%		-8.3	%		-14.9	%		-11.9	%

		Total sales		+17.1	%		+10.8	%		+12.5	%		+11.7	%

		Operating profit		—			—			—			—
		% of sales		—			—			—			—

Corporate and Eliminations
	Unaffiliated customers			—			—			—			—
	Intersegment			—			—			—			—

		Total sales		—			—			—			—

		Operating profit		—			—			—			—

Consolidated
	Unaffiliated customers			+9.0	%		+6.9	%		+5.4	%		+6.1	%
	Intersegment			—			—			—			—

		Total sales		+9.0	%		+6.9	%		+5.4	%		+6.1	%

		Operating profit		+13.1	%		+7.1	%		+1.8	%		+3.9	%
		% of sales		—			—			—			—

(P)=Projection


8. OTHER INCOME/DEDUCTIONS (2003/Projection)		(Millions of yen)


		2003 (P)								2002

		1st quarter		1st half		2nd half		Year		1st quarter		1st half		2nd half		Year

Interest & dividend, net			800		1,300		1,200		2,500		702		1,252		1,158		2,410
Forex gain / loss			-3,600		-8,600		-5,200		-13,800		-4,466		-18,173		-5,295		-23,468
Equity earnings / loss of affiliated companies			-1,100		-1,800		-300		-2,100		-1,636		-1,800		-1,721		-3,521
Others, net			900		2,100		1,300		3,400		2,866		5,888		2,349		8,237

	Total		-3,000		-7,000		-3,000		-10,000		-2,534		-12,833		-3,509		-16,342

[Additional columns below]

[Continued from above table, first column(s) repeated]


		Change year over year

		1st quarter		1st half		2nd half		Year

Interest & dividend, net			98		48		42		90
Forex gain / loss			866		9,573		95		9,668
Equity earnings / loss of affiliated companies			536		0		1,421		1,421
Others, net			-1,966		-3,788		-1,049		-4,837

	Total		-466		5,833		509		6,342

(P)=Projection


9. P&L SUMMARY (1st Quarter 2003/Projection)		(Millions of yen)


		2003(P)		2002

		1st quarter		1st quarter		Change year over year

Net sales			710,000		651,091		+9.0	%

	Operating profit		73,000		64,551		+13.1	%

	Income before income taxes		70,000		62,017		+12.9	%

Net income			39,000		31,654		+23.2	%

(P)=Projection

- S5 -

10. PROFITABILITY


				2002						2001
	2003 (P)
	Year			4th quarter			Year			4th quarter			Year

ROE		12.2	%		15.3	%		12.5	%		8.3	%		12.2	%

ROA		6.7	%		8.3	%		6.6	%		4.3	%		5.9	%

(P)=Projection

11. IMPACT OF FOREIGN EXCHANGE RATES

(1) Exchange rates

(Yen)


	2003 (P)				2002				2001

	1st quarter		Year		4th quarter		Year		4th quarter		Year

Yen/US$		120.00		120.00		122.56		124.73		123.53		121.60
Yen/Euro		120.00		120.00		122.54		118.39		110.57		108.80

(P)=Projection


(2) Impact of foreign exchange rates on sales		(Billions of yen)

2003 (P)

2002

1st quarter

Year

4th quarter

Year

US$

-32.1

-57.0

-3.1

+30.9

Euro

+5.8

+10.3

+21.3

+58.3

Other currencies

-1.3

-2.7

+0.8

+4.1

Total

-27.6

-49.4

+19.0

+93.3

(P)=Projection


(3) Impact of foreign exchange rates per yen		(Billions of yen)


		2003 (P)		2003 (P)
		1st quarter		Year

On sales
	US$		2.6		11.4
	Euro		1.5		6.5

On operating profit
	US$		1.1		5.0
	Euro		1.0		4.5

(P)=Projection


12. CASH FLOWS		(Millions of yen)


						2002						2001
			2003 (P)
			Year			4th quarter			Year			4th quarter			Year

Net cash provided by operating activities
	Net income			205,000			60,068			190,737			30,028			167,561
	Depreciation and amortization			177,000			48,977			165,260			43,389			152,300
	Other, net			2,000			25,532			92,953			7,753			(14,109	)

		Total		384,000			134,577			448,950			81,170			305,752

		Net cash used in investing activities		(227,000	)		(60,546	)		(230,220	)		(53,592	)		(192,592	)

Free cash flow				157,000			74,031			218,730			27,578			113,160

		Net cash provided by (used in) financing activities		(50,000	)		(21,373	)		(183,714	)		(3,238	)		(121,228	)

		Effect of exchange rate changes on cash & cash equivalents		(1,971	)		(15,360	)		(19,979	)		28,454			20,340

Net change in cash and cash equivalents				105,029			37,298			15,037			52,794			12,272

Cash and cash equivalents at end of each period				626,300			521,271			521,271			506,234			506,234

(P)=Projection


13. R&D EXPENDITURE		(Millions of yen)


			2003 (P)			2002			2001
			Year			Year			Year

	Business machines			—			110,290			108,150
	Cameras			—			25,975			22,527
	Optical and other products			—			97,404			87,939

		Total		255,000			233,669			218,616

% of sales				8.2	%		7.9	%		7.5	%

(P)=Projection

- S6 -

14. CAPITAL EXPENDITURE & DEPRECIATION AND AMORTIZATION

(Millions of yen)


			2003 (P)		2002		2001
			Year		Year		Year

Capital expenditure
	Business machines			—		104,877		121,333
	Cameras			—		15,627		16,871
	Optical and other products			—		23,767		36,057
	Corporate and eliminations			—		54,431		33,413

		Total		205,000		198,702		207,674

Depreciation and amortization
	Business machines			—		106,865		105,907
	Cameras			—		14,118		12,745
	Optical and other products			—		19,817		15,291
	Corporate and eliminations			—		24,460		18,357

		Total		177,000		165,260		152,300

(P)=Projection

15. INVENTORIES


	(1) Inventories		(Millions of yen)


	2002		2001
	Dec.31		Dec.31		Difference

Business machines		247,804		287,064		-39,260
Cameras		53,343		49,325		+4,018
Optical and other products		131,104		111,911		+19,193

Total		432,251		448,300		-16,049


	(2) Inventories/Sales*		(Days)


		2002		2001
		Dec.31		Dec.31		Difference

Business machines			39		48		-9
Cameras			35		44		-9
Optical and other products			189		144		+45

	Total		51		57		-6

Index based on the previous six months sales.

16. DEBT RATIO


	2002			2001
	Dec.31			Dec.31			Difference

Total debt / Total assets		5.0	%		10.4	%		-5.4	%

17. OVERSEAS PRODUCTION RATIO


	2002			2001
	Dec.31			Dec.31

Overseas production ratio		38	%		35	%

18. NUMBER OF EMPLOYEES


	2002		2001
	Dec.31		Dec.31		Difference

Japan		44,443		44,809		-366
Overseas		53,359		48,811		+4,548

Total		97,802		93,620		+4,182

- S7 -

January 30, 2003

Canon LOGO

FOR IMMEDIATE RELEASE


	Canon Inc. Headquarter office 30-2, Shimomaruko 3-chome, Ohta-ku, Tokyo 146-8501, Japan Phone:+81-3-3758-2111

Notice regarding spin-off by Canon Inc. of Fukushima Plant

TOKYO, January 30, 2003—Canon Inc. announced on October 29, 2002, plans to spin-off its Fukushima Plant into a wholly owned subsidiary. Following consideration of the separation method and post-separation structure, Canon Inc.’s Board of Directors today adopted a resolution to separate the Fukushima facility into a newly established subsidiary, Fukushima Canon Inc., and transfer such business to the new company, effective April 1, 2003, in accordance with the Commercial Code that provides for corporate separation.

1. Objective of Corporate Separation
Through the spin-off into an independent high value-added mass-production base for the company’s Bubble Jet printer products operations, Canon Inc. aims to strengthen its management structure and accelerate the decision-making process with Fukushima Plant playing a new supporting role within the Canon Group as a highly cost-competitive excellent company in the local community.

2. Summary of Corporate Separation

(1)

Schedule
Board of Directors approval of separation plans
Corporate separation becomes effective
Commercial registration of corporate separation

January 30, 2003
April 1, 2003
April 1, 2003

	(2)		Corporate Separation Method 1. Form of Corporate Separation
			Canon Inc. will separate and transfer the business of its Fukushima Plant through the establishment of a new company, Fukushima Canon Inc., by means of simplified corporate separation.
			2. Reason for Adopting Corporate Separation Method
			Fukushima Plant represents a core manufacturing facility in an important business area. The decision to establish a wholly owned subsidiary through corporate separation was made with the aim of achieving more agile factory management while maintaining the present functions and role that the Fukushima Plant plays in the Canon Group.

	(3)		Allocation of Shares
			1,600 shares of common stock will be issued upon separation of the newly established company, which will be allocated in full to Canon Inc.

	(4)		Cash Distribution
			None

Page 1 of 4

	(5)		Assumed Rights/Obligations
			Fukushima Canon Inc. will assume all rights and obligations related to Fukushima Plant’s Bubble Jet printer and related product-manufacturing business.

	(6)		Expectation of Fulfillment of Obligations
			At this time no circumstances that would impede the fulfillment of obligations by Canon Inc. or the newly established company after the corporate separation are foreseen.

	(7)		New Directors and Corporate Auditor
			Directors
			Takeshi Izumi (Current plant manager, Fukushima Plant, i Printer Products Operations, Canon Inc.)
			Osamu Miyagawa (Current deputy plant manager, Fukushima Plant, i Printer Products Operations, Canon Inc.)
			Hideki Fukasawa (Current deputy plant manager, Fukushima Plant, i Printer Products Operations, Canon Inc.)
			Kazuhiro Akiyama (Current general manager, Fukushima General Affairs Division, Fukushima Plant, i Printer Products Operations, Canon Inc.)
			Teruomi Takahashi (Current director, chief executive, i Printer Products Operations, Canon Inc.)
			Shigeru Imaiida (Current senior general manager, Production Engineering Center, Production Management Headquarters, Canon Inc.)
			Corporate Auditor
			Kyoji Amano (Current general manager, Budget & Management Administration Division, Finance & Accounting Headquarters, Canon Inc.)

Overview of the Companies Party to the Corporate Separation

(1)

Ceding Company


1. Name		Canon Inc.
2. Business activities		Production and sales of optical products; audio, electric and electronic products, precision products and medical equipment; development and sales of software; provision of telecommunication, data processing and other information services.
3. Date of incorporation		August 10, 1937
4. Head office		30-2 Shimomaruko 3-Chome, Ohta-ku, Tokyo
5. Representative		President and CEO Fujio Mitarai
6. Capital		Yen 167,242 million (as of the end of Dec. 2002)
7. Total number of issued shares		879,136,244 shares (as of the end of Dec. 2002)
8. Shareholders’ equity		Yen 1,235,309 million (as of the end of Dec. 2002)
9. Total assets		Yen 1,848,136 million (as of the end of Dec. 2002)
10. Fiscal year end		December 31
11. Number of employees		19,741 (as of the end of Dec. 2002)
12. Major business contacts		Customers: Canon U.S.A., Inc.; Canon Europa N.V.; Canon Sales Co., Inc. Suppliers: Oita Canon Inc.; Canon Hi-Tech (Thailand) Ltd.; Canon Chemicals Inc.
13. Major shareholders and their share percentages		The Dai-ichi Mutual Life Insurance Company (6.72%); Japan Trustee Services Bank, Ltd. (Trust Account) (5.51%); The Master Trust Bank of Japan, Ltd. (Trust Account) (5.24%)
14. Main banks		Mizuho Corporate Bank, Ltd.; Sumitomo Mitsui Banking Corporation; The Bank of Tokyo-Mitsubishi, Ltd.

Page 2 of 4

15.

Business results for the previous three fiscal years

(unit: millions of yen, except per-share amounts)


Fiscal year ending	December 2000		December 2001		December 2002

Net sales		1,684,209		1,707,459		1,789,005
Operating profit		178,762		193,389		237,193
Ordinary profit		155,947		211,127		240,982
Net income		88,414		39,163		144,184
Net income per share (unit: 1 yen)		101.32		44.71		164.46
Dividend per share (unit: 1 yen)		21.00		25.00		30.00
Stockholders’ equity per share (unit: 1 yen)		1,251.31		1,276.45		1,407.34

(2)

Seceding Company (New Company)


1. Name		Fukushima Canon Inc.
2. Business activities		Production of Bubble Jet printers and related products
3. Date of incorporation		April 1, 2003
4. Head office		2, Aza Nihon-Enoki, Sakura-shimo, Fukushima-shi, Fukushima
5. Representative		President and CEO Takeshi Izumi
6. Capital		Yen 80,000,000
7. Total number of issued shares		1,600 shares
8. Fiscal year end		December 31
9. Number of employees		Approximately 1,330
10. Major shareholders and their share percentages		Canon Inc. (100%)

	(3)		Relationship between the Companies
			Capital: The newly established company will be a wholly owned subsidiary of the ceding company.
			Human Resources: All of the employees of the newly established company will be transferred from the ceding company.
			Business Connections: The ceding company will be the main customer of the newly established company.

Description of business operations to be separated

	(1)		Description of Fukushima Plant business operations: Production of Bubble Jet printers and related products

	(2)		Business Results of Fukushima Plant for the Fiscal Year Ending December 31, 2002

(unit: millions of yen)

Fukushima Plant

Canon Inc.'s

(A)

results (B)

(A)/(B) x 100%

Net sales

(production output) 84,577

1,789,005

4.73

(3)

Assets and Liabilities to be Transferred and their Book Values (as of December 31, 2002)

(unit: millions of yen)

Assets

Liabilities

Item

Book value

Item

Book value

Current Assets

6,277

Current Liabilities

Fixed Assets

7,074

Fixed Liabilities

11,377

Total

13,351

Total

11,418

Page 3 of 4

Details of Canon Inc. after the Corporate Separation


(1) Name		Canon Inc.
(2) Business activities		Production and sales of optical products; audio, electric and electronic products, precision products and medical equipment; development and sales of software; provision of telecommunication, data processing and other information services.
(3) Head office		30-2 Shimomaruko 3-Chome, Ohta-ku, Tokyo
(4) Representative		President and CEO Fujio Mitarai
(5) Capital		Yen 167,242 million
(6) Total assets		Yen 1,836,718 million
(7) Fiscal year end		December 31

	(8)		Possible Influence on Business Performance

1. Post-separation Non-consolidated Forecast

(unit: millions of yen)


	Fiscal Year Ending December 31, 2003

Net sales		1,920,000
Ordinary profit		255,000
Net income		154,000

			Note: While the influence of estimated costs and income related to the corporate separation have been factored into the above forecast, as these amounts are minimal, they have not been listed.

2. Post-separation Consolidated Forecast

(unit: millions of yen)


	Fiscal Year Ending December 31, 2003

Net sales		3,120,000
Income before income taxes		350,000
Net income		205,000

Note: As the newly established company will be a wholly owned subsidiary, there will be no material impact on consolidated business results.

Page 4 of 4

Canon LOGO

Notice of Purchase of Its Own Shares
(Acquisition of Its Own Shares Pursuant to Article 210 of the
Commercial Code)

Canon Inc. resolved at the meeting of its Board of Directors held today that it will propose the acquisition of its own shares pursuant to Article 210 of the Commercial Code at the upcoming 102nd Ordinary General Meeting of Shareholders of Canon Inc. scheduled to be held on March 28, 2003.

Reason for Acquisition of Its Own Shares

In accordance with the creation of the system for buying additional shares of less-than-one-unit shares pursuant to “The Law to Revise Part of the Commercial Code, etc.” effective as of April 1, 2003 (Law No. 44, 2002), Canon Inc. has decided to propose partial amendment to its Articles of Incorporation at the upcoming 102nd Ordinary General Meeting of Shareholders scheduled to be held on March 28, 2003 and adopt such system, thus, in order to respond to sales requests from less-than-one-unit shareholders, Canon Inc. needs to become capable of acquiring its own shares when necessary.

2.		Details of Acquisition (To be acquired through the end of the Ordinary General Meeting of Shareholders to be held for the first business term after the abovementioned resolution of the shareholders meeting)

(1)		Type of shares to be acquired: Common Stock

(2)		Aggregate number of shares to be acquired: 1 million shares (ratio against total outstanding shares: 0.11%)

(3)		Aggregate acquisition price: 5 billion yen

Canon Inc.
January 30, 2003

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