Table of Contents

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 September 30, 2003

CANON INC.

---

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

---

[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
CONSOLIDATED RESULTS FOR THE THIRD QUARTER AND THE NINE MONTHS ENDED SEPTEMBER 30, 2003
Operating Results and Financial Conditions
SUPPLEMENTARY REPORT

---

Table of Contents

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 November 4, 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.

CONSOLIDATED RESULTS FOR THE THIRD QUARTER AND THE NINE MONTHS ENDED SEPTEMBER 30, 2003

 

---

Table of Contents

CONSOLIDATED RESULTS FOR THE THIRD QUARTER AND
THE NINE MONTHS ENDED SEPTEMBER 30, 2003

October 30, 2003

CONSOLIDATED RESULTS FOR THE THIRD QUARTER

			(Millions of yen, thousands of U.S. dollars, except per share amounts)
			Actual
			Three months				Three months								Three months
			ended				ended				Change(%)				ended
			September 30, 2003				September 30, 2002								September 30, 2003
			(Unaudited)				(Unaudited)								(Unaudited)
Net sales			¥	767,599			¥	693,982			+	10.6			$	6,915,306
Operating profit				125,562				92,730			+	35.4				1,131,189
Income before income taxes				117,336				98,376			+	19.3				1,057,081
Net income				73,005				57,464			+	27.0				657,703
Earnings per share:
	— Basic		¥	83.03			¥	65.54			+	26.7			$	0.75
	— Diluted			82.27				64.69			+	27.2				0.74

CONSOLIDATED RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003

			(Millions of yen, thousands of U.S. dollars, except per share amounts)
			Actual																Projected
			Nine months				Nine months								Nine months				Year ending
			ended				ended				Change(%)				ended				December 31,				Change(%)
			September 30, 2003				September 30, 2002								September 30, 2003				2003
			(Unaudited)				(Unaudited)								(Unaudited)
Net sales			¥	2,303,187			¥	2,078,465			+	10.8			$	20,749,432			¥	3,183,000			+	8.3
Operating profit				341,536				232,758			+	46.7				3,076,901				450,000			+	29.9
Income before income taxes				332,842				225,571			+	47.6				2,998,577				440,000			+	33.3
Net income				200,772				130,669			+	53.6				1,808,757				263,000			+	37.9
Earnings per share:
	— Basic		¥	228.58			¥	149.06			+	53.3			$	2.06			¥	298.96			+	37.4
	— Diluted			226.26				147.15			+	53.8				2.04				—				—
			Actual
			As of				As of								As of
			September 30,				December 31,				Change(%)				September 30,
			2003				2002								2003
			(Unaudited)				(Audited)								(Unaudited)
Total assets			¥	3,109,142			¥	2,942,706			+	5.7			$	28,010,288
Stockholders’ equity			¥	1,795,462			¥	1,591,950			+	12.8			$	16,175,333

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 U.S.$1 = JPY111, the approximate exchange rate on the Tokyo Foreign Exchange Market as of September 30, 2003, solely for the convenience of the reader.

---

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

- 1 -

---

Table of Contents

Operating Results and Financial Conditions

2003 Third Quarter in Review

Looking back at the global economy in the third quarter of 2003, the U.S. economy, while showing no improvement in the job market, achieved an economic upturn attributable to healthy consumer spending as a result of tax cuts, and growth in capital investment in the private sector, particularly in the area of information technology. The economies of Europe remained stagnant due to a decrease in exports and restrained production resulting from the appreciation of the euro, while Asian economies, including China and Thailand, showed economic growth. The Japanese economy, while experiencing a gradual improvement in exports for the term, remained flat overall and showed no signs of recovery in consumer spending or employment and income conditions.

As for the markets in which the Canon Group operates, the digital camera market continued to show robust growth while network digital multifunction devices (MFDs) and computer peripherals, such as printers, struggled amid severe price competition. In the field of optical equipment, although signs of a full-fledged recovery remain to be seen in demand for semiconductor-production equipment, the market for projection aligners used in the production of liquid crystal displays (LCDs) expanded, fueled by increased demand for LCD televisions. The average value of the yen for the half was ¥117.54 to the U.S. dollar and ¥132.07 to the euro, representing a year-on-year increase of 2% against the dollar, and a decrease of 11% against the euro.

Amid these conditions, Canon’s consolidated net sales for the third quarter increased by 10.6% from the year-ago period to ¥767.6 billion (U.S.$6,915 million), boosted again by a significant rise in sales of digital cameras and color network digital MFDs. On a quarterly basis, net income recorded an all-time high of ¥73.0 billion (U.S.$658 million), a year-on-year increase of 27.0%. Canon’s gross profit for the quarter increased by 17.0% compared to the corresponding period last year, which was made possible through R&D reforms, which have supported the timely launch of competitive new products, and cost savings realized through sustained production reforms. Selling, general and administrative expenses for the third quarter rose 9.9% year on year—which is within the increase in sales—owing to increases in advertising and sales-promotion spending. Consequently, operating profit in the third quarter totaled ¥125.6 billion (U.S.$1,131 million), a substantial increase of 35.4%. Other income (deductions) declined by ¥13.9 billion (U.S.$125 million) as a result of increased currency exchange losses on foreign-currency-denominated trade receivables arising from the sudden appreciation of the yen against the dollar in the latter half of September. As a result, income before income taxes in the third quarter totaled ¥117.3 billion (U.S.$1,057 million), a year-on-year increase of 19.3%. The effective tax rate during the quarter decreased by 4.2% compared with the previous year as a result of an increased tax credit for R&D expenditures arising from an amendment to Japanese tax regulations. Consequently, net income in the third quarter of 2003 totaled ¥73.0 billion (U.S.$658 million), a year-on-year increase of 27.0%.

Basic earnings per share for the quarter amounted to ¥83.03 (U.S.$0.75), a year-on-year increase of ¥17.49 (U.S.$0.16).

Results by Product Segment

In the business machine segment, Canon’s powerful imageRUNNER (iR)-series lineup of digital networked black-and-white multifunction copying machines realized healthy sales growth worldwide. In particular, the low-end iR 1600 series continued to record strong sales during the term. Among color network digital MFDs, the iR C3200/iR C3200N, released domestically at the end of last year, has been well received in both Japan and abroad, which also substantially contributed to increased sales of office imaging products. Overall, sales of office imaging products for the quarter realized a year-on-year increase of 7.3%. In the field of computer peripherals, unit sales of laser beam printers showed robust growth, particularly among low-end models. Inkjet printers also recorded a strong unit-sales performance, with sales of the i550 and i850 models remaining brisk, and products such as the MultiPASS MP700/MP730 high-speed multifunction inkjet systems and the i70 portable color printer achieving substantial sales growth. As a result, sales of computer peripherals in the third quarter increased by 4.1% despite the effects of severe price competition. Sales of business information products, including computers, micrographics and calculators, decreased by 12.5% due to declining personal computer sales in the domestic market. As a result of the above, third quarter sales of business machines overall totaled ¥544.1 billion (U.S.$4,901 million), a 4.4% increase year on year. In addition to cost-cutting measures and the introduction of new price-competitive products, which contributed to a 2.8% improvement in the operating profit margin, a steady increase in sales volume boosted third-quarter operating profit by 19.3% year on year to ¥123.4 billion (U.S.$1,112 million).

Within the camera segment, amid the continued strong demand for digital models worldwide, the PowerShot-series, including the PowerShot-A70, and the Digital ELPH-series, including the S400 Digital

- 2 -

---

Table of Contents

ELPH, have contributed to a significant increase in sales. Canon’s digital SLR models have also achieved strong sales growth, particularly the EOS 10D, which was introduced in the first half of this year. The company’s new EOS DIGITAL REBEL, just released in September, has also been well received. Sales of conventional film cameras, however, continued to slip during the quarter amid the increasing popularity of digital models and price competition. In the field of digital video camcorders, the Optura 300 and Optura Xi mega-pixel models, and the ZR70MC and ZR65MC entry-level models achieved healthy sales for the period. As a result, camera sales overall reached ¥155.8 billion (U.S.$1,403 million) for the third quarter, representing an increase of 34.4% year on year for continued double-digit growth performance. Operating profit for the camera segment appreciably advanced 91.9% to ¥38.7 billion (U.S.$349 million), attributable to the rapid growth in sales of digital cameras, along with a substantial 7.4% improvement in the operating profit margin due to the effects of cost-saving initiatives.

The optical and other products segment registered a sales increase of 18.9% to ¥67.8 billion (U.S.$611 million), due to a substantial increase in sales of aligners for the production of LCDs, reflecting the shift from CRT computer displays to LCD monitors, as well as an expansion of the LCD television market. Though registering increased sales, a reduced gross profit ratio due to severe competition in the market resulted in the optical and other products segment suffering an operating loss of ¥3.6 billion (U.S.$32 million) for the quarter, compared with a ¥2.9 billion operating loss for the corresponding period of the previous year.

Cash Flows

Between January 1 and September 30, 2003, Canon maintained cash flows from operating activities of ¥326.4 billion (U.S.$2,941 million), a year-on-year increase of ¥12.1 billion (U.S.$109 million) for the period, reflecting substantial net income growth, as well as an increase in depreciation. Capital expenditure totaled ¥150.1 billion (U.S.$1,352 million), which was used mainly to expand production capabilities in Japan and overseas. Cash flows from investing activities totaled ¥159.9 billion (U.S.$1,441 million), including a ¥12.7 billion (U.S.$114 million) outlay for the acquisition of Sumitomo Metal System Solutions Co. Ltd., now Canon System Solutions Inc. As a result, free cash flow, or cash flow from operating activities minus cash flow from investing activities, totaled positive ¥166.5 billion (U.S.$1,500 million).

Cash flows from financing activities recorded an outlay of ¥94.2 billion (U.S.$848 million), mainly resulting from active efforts to repay short-term and long-term loans toward the goal of improving the company’s financial position. Consequently, cash and cash equivalents, which totaled ¥585.2 billion (U.S.$5,272 million), remained at a high level, representing a ¥64.0 billion (U.S.$576 million) increase from the end of last year.

Outlook

Regarding the outlook for the global economy in the fourth quarter, the U.S. economy is likely to show a moderate recovery while personal consumption is expected to lose momentum due to the diminishing effects of tax cuts. The Japanese economy is expected to remain sluggish owing to flat consumer spending and a slowdown in export expansion, reflecting the rapid appreciation of the yen since the latter half of September. While the appreciation of the euro seems to have settled, the economies of Europe will probably show stagnant growth as exports and production are not expected to improve significantly. In China and Southeast Asia, exports are expected to make a recovery and the economy will likely show steady growth.

In the businesses in which Canon is involved, the digital camera market is expected to continue enjoying rapid growth while stable demand is projected for full-color network digital MFDs and laser beam printers. Within the semiconductor-production equipment market, capital investment by memory device manufacturers is expected to show an upward trend sometime after next year while orders for aligners by LCD manufacturers are expected to enjoy continued growth.

Although uncertainty surrounds several factors that could affect currency exchange rates, significant changes in rates are not anticipated. The yen is expected to be stronger against the U.S. dollar by about 8%, and weaker against the euro by about 9% compared with the previous year.

Upon considering the current market and currency exchange environments, the company has revised upward its net sales forecasts for fiscal 2003, now anticipating consolidated net sales of ¥3,183.0 billion (U.S.$28,676 million), while maintaining previous forecasts for consolidated income before income taxes and consolidated net income. The company also projects non-consolidated net sales of ¥2,017 billion (U.S.$18,171 million), non-consolidated ordinary profit of ¥325.0 billion (U.S.$2,928 million), and non-consolidated net income of ¥232.0 billion (U.S.$2,090 million). These forecasts assume currency exchange rates of ¥110.00 to the U.S. dollar and ¥127.00 to the euro for the remainder of 2003.

- 3 -

---

Table of Contents

Consolidated Outlook
Fiscal year

		Millions of yen
		Year ending
		December 31, 2003												Year ended
										Change				December 31, 2002				Change (%)
		Previous Outlook (A)				Revised Outlook (B)				(B - A)				Results (C)				(B / C)
Net sales		¥	3,180,000			¥	3,183,000			¥	3,000			¥	2,940,128			+	8.3	%
Income before income taxes			440,000				440,000				0				330,017			+	33.3	%
Net income			263,000				263,000				0				190,737			+	37.9	%

Non-Consolidated Outlook
Fiscal year

		Millions of yen
		Year ending
		December 31, 2003												Year ended
										Change				December 31, 2002				Change (%)
		Previous Outlook (A)				Revised Outlook (B)				(B - A)				Results (C)				(B / C)
Net sales		¥	1,977,000			¥	2,017,000			¥	40,000			¥	1,789,005			+	12.7	%
Ordinary profit			325,000				325,000				0				240,982			+	34.9	%
Net income			227,000				232,000				5,000				144,184			+	60.9	%

- 4 -

---

Table of Contents

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

1.		CONSOLIDATED STATEMENTS OF INCOME
		Results for the third quarter

																Thousands of
				Millions of yen												U.S. dollars
				Three months				Three months								Three months
				ended				ended								ended
				September 30, 2003				September 30, 2002				Change(%)				September 30, 2003
				(Unaudited)				(Unaudited)								(Unaudited)
Net sales				¥	767,599			¥	693,982				+10.6			$	6,915,306
Cost of sales					378,784				361,640								3,412,468
		Gross profit			388,815				332,342				+17.0				3,502,838
Selling, general and administrative expenses					263,253				239,612								2,371,649
		Operating profit			125,562				92,730				+35.4				1,131,189
Other income (deductions):
	Interest and dividend income				2,077				2,321								18,712
	Interest expense				(1,005	)			(1,532	)							(9,054	)
	Other, net				(9,298	)			4,857								(83,766	)
					(8,226	)			5,646								(74,108	)
		Income before income taxes			117,336				98,376				+19.3				1,057,081
Income taxes					41,980				39,388								378,198
		Income before minority interests			75,356				58,988								678,883
Minority interests					2,351				1,524								21,180
		Net income		¥	73,005			¥	57,464				+27.0			$	657,703

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 three months ended September 30, 2003 and 2002 were JPY 61,456 million (U.S.$553,658 thousand) and JPY 63,548 million, respectively.

Results for the nine months

																Thousands of
				Millions of yen												U.S. dollars
				Nine months				Nine months								Nine months
				ended				ended								ended
				September 30, 2003				September 30, 2002				Change(%)				September 30, 2003
				(Unaudited)				(Unaudited)								(Unaudited)
Net sales				¥	2,303,187			¥	2,078,465				+10.8			$	20,749,432
Cost of sales					1,138,498				1,095,861								10,256,738
		Gross profit			1,164,689				982,604				+18.5				10,492,694
Selling, general and administrative expenses					823,153				749,846								7,415,793
		Operating profit			341,536				232,758				+46.7				3,076,901
Other income (deductions):
	Interest and dividend income				6,707				7,055								60,423
	Interest expense				(3,655	)			(5,014	)							(32,928	)
	Other, net				(11,746	)			(9,228	)							(105,819	)
					(8,694	)			(7,187	)							(78,324	)
		Income before income taxes			332,842				225,571				+47.6				2,998,577
Income taxes					124,781				90,927								1,124,154
		Income before minority interests			208,061				134,644								1,874,423
Minority interests					7,289				3,975								65,666
		Net income		¥	200,772			¥	130,669				+53.6			$	1,808,757

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 nine months ended September 30, 2003 and 2002 were JPY 229,046 million (U.S.$2,063,477 thousand) and JPY 116,918 million, respectively.

- 5 -

---

Table of Contents

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

2.		DETAILS OF SALES
		Results for the third quarter

																Thousands of
				Millions of yen												U.S. dollars
				Three months				Three months								Three months
				ended				ended								ended
				September 30, 2003				September 30, 2002				Change(%)				September 30, 2003
				(Unaudited)				(Unaudited)								(Unaudited)
Sales by product
Business machines:
	Office imaging products			¥	252,001			¥	234,932			+	7.3			$	2,270,279
	Computer peripherals				261,830				251,605			+	4.1				2,358,829
	Business information products				30,219				34,546			-	12.5				272,243
					544,050				521,083			+	4.4				4,901,351
Cameras					155,755				115,882			+	34.4				1,403,198
Optical and other products					67,794				57,017			+	18.9				610,757
		Total		¥	767,599			¥	693,982			+	10.6			$	6,915,306

																Thousands of
				Millions of yen												U.S. dollars
				Three months				Three months								Three months
				ended				ended								ended
				September 30, 2003				September 30, 2002				Change(%)				September 30, 2003
				(Unaudited)				(Unaudited)								(Unaudited)
Sales by region
Japan				¥	189,528			¥	169,171			+	12.0			$	1,707,459
Overseas:
	Americas				251,499				245,322			+	2.5				2,265,757
	Europe				226,200				192,262			+	17.7				2,037,838
	Other areas				100,372				87,227			+	15.1				904,252
					578,071				524,811			+	10.1				5,207,847
		Total		¥	767,599			¥	693,982			+	10.6			$	6,915,306

Results for the nine months

																Thousands of
				Millions of yen												U.S. dollars
				Nine months				Nine months								Nine months
				ended				ended								ended
				September 30, 2003				September 30, 2002				Change(%)				September 30, 2003
				(Unaudited)				(Unaudited)								(Unaudited)
Sales by product
Business machines:
	Office imaging products			¥	784,624			¥	751,884			+	4.4			$	7,068,685
	Computer peripherals				793,092				727,893			+	9.0				7,144,973
	Business information products				94,292				112,989			-	16.5				849,477
					1,672,008				1,592,766			+	5.0				15,063,135
Cameras					439,556				327,274			+	34.3				3,959,964
Optical and other products					191,623				158,425			+	21.0				1,726,333
		Total		¥	2,303,187			¥	2,078,465			+	10.8			$	20,749,432

																Thousands of
				Millions of yen												U.S. dollars
				Nine months				Nine months								Nine months
				ended				ended								ended
				September 30, 2003				September 30, 2002				Change(%)				September 30, 2003
				(Unaudited)				(Unaudited)								(Unaudited)
Sales by region
Japan				¥	573,447			¥	530,309			+	8.1			$	5,166,189
Overseas:
	Americas				762,587				708,094			+	7.7				6,870,153
	Europe				690,719				598,879			+	15.3				6,222,694
	Other areas				276,434				241,183			+	14.6				2,490,396
					1,729,740				1,548,156			+	11.7				15,583,243
		Total		¥	2,303,187			¥	2,078,465			+	10.8			$	20,749,432

Notes:		Effective 1st quarter of fiscal 2003, Canon has revised the product categories contained within the Business machines segment. The new categories are: “Office imaging products,” “Computer peripherals,” and “Business information products.” Accordingly, previous year’s sales for each category have been restated in accordance with the changes.
		1.	The primary products included in each of the product segments are as follows:
			Business machines:
			Office imaging products : Office network digital multifunction devices (MFDs) / Color network digital MFDs /                                               Office copying machines / Personal-use copying machines / Full-color copying machines / etc.
			Computer peripherals : Laser beam printers / Inkjet printers / Inkjet multifunction peripherals / Image scanners / etc.
			Business information products : Computer information systems / Micrographic equipment / Personal information products / etc.
			Cameras : SLR cameras / Compact cameras / Digital cameras / Digital video camcorders / etc.
			Optical and other products : Semiconductor production equipment / Mirror projection mask aligners for LCD panels /                                               Broadcasting equipment / Medical equipment / Components / etc.
		2.	The countries and regions included in each regional category are as follows:
			Americas: United States of America, Canada, Latin America / Europe: England, Germany, France, Netherlands /
			Other Areas: Asian regions, China, Oceania

- 6 -

---

Table of Contents

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

3.		SEGMENT INFORMATION BY PRODUCT
		Results for the third quarter

																Thousands of
				Millions of yen												U.S. dollars
				Three months				Three months								Three months
				ended				ended								ended
				September 30, 2003				September 30, 2002				Change(%)				September 30, 2003
				(Unaudited)				(Unaudited)								(Unaudited)
Business machines
Net sales:
	Unaffiliated customers			¥	544,050			¥	521,083				+4.4			$	4,901,351
	Intersegment				—				—				—				—
		Total			544,050				521,083				+4.4				4,901,351
Operating cost and expenses					420,650				417,630				+0.7				3,789,639
Operating profit					123,400				103,453				+19.3				1,111,712
Cameras
Net sales:
	Unaffiliated customers			¥	155,755			¥	115,882				+34.4			$	1,403,198
	Intersegment				—				—				—				—
		Total			155,755				115,882				+34.4				1,403,198
Operating cost and expenses					117,060				95,714				+22.3				1,054,594
Operating profit					38,695				20,168				+91.9				348,604
Optical and other products
Net sales:
	Unaffiliated customers			¥	67,794			¥	57,017				+18.9			$	610,757
	Intersegment				36,952				39,101				-5.5				332,901
		Total			104,746				96,118				+9.0				943,658
Operating cost and expenses					108,337				99,042				+9.4				976,009
Operating profit					(3,591	)			(2,924	)			—				(32,351	)
Corporate and Eliminations
Net sales:
	Unaffiliated customers			¥	—			¥	—				—			$	—
	Intersegment				(36,952	)			(39,101	)			—				(332,901	)
		Total			(36,952	)			(39,101	)			—				(332,901	)
Operating cost and expenses					(4,010	)			(11,134	)			—				(36,125	)
Operating profit					(32,942	)			(27,967	)			—				(296,776	)
Consolidated
Net sales:
	Unaffiliated customers			¥	767,599			¥	693,982				+10.6			$	6,915,306
	Intersegment				—				—				—				—
		Total			767,599				693,982				+10.6				6,915,306
Operating cost and expenses					642,037				601,252				+6.8				5,784,117
Operating profit					125,562				92,730				+35.4				1,131,189

Note:

General corporate expenses of JPY 32,961 million (U.S.$296,946 thousand) and JPY 27,919 million in the three months ended September 30, 2003 and 2002, respectively, are included in “Corporate and Eliminations.”

- 7 -

---

Table of Contents

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

Results for the nine months

																Thousands of
				Millions of yen												U.S. dollars
				Nine months				Nine months								Nine months
				ended				ended								ended
				September 30, 2003				September 30, 2002				Change(%)				September 30, 2003
				(Unaudited)				(Unaudited)								(Unaudited)
Business machines
Net sales:
	Unaffiliated customers			¥	1,672,008			¥	1,592,766				+5.0			$	15,063,135
	Intersegment				—				—				—				—
		Total			1,672,008				1,592,766				+5.0				15,063,135
Operating cost and expenses					1,311,187				1,311,462				-0.0				11,812,495
Operating profit					360,821				281,304				+28.3				3,250,640
Cameras
Net sales:
	Unaffiliated customers			¥	439,556			¥	327,274				+34.3			$	3,959,964
	Intersegment				—				—				—				—
		Total			439,556				327,274				+34.3				3,959,964
Operating cost and expenses					351,067				279,051				+25.8				3,162,766
Operating profit					88,489				48,223				+83.5				797,198
Optical and other products
Net sales:
	Unaffiliated customers			¥	191,623			¥	158,425				+21.0			$	1,726,333
	Intersegment				110,989				102,360				+8.4				999,901
		Total			302,612				260,785				+16.0				2,726,234
Operating cost and expenses					307,356				272,200				+12.9				2,768,973
Operating profit					(4,744	)			(11,415	)			—				(42,739	)
Corporate and Eliminations
Net sales:
	Unaffiliated customers			¥	—			¥	—				—			$	—
	Intersegment				(110,989	)			(102,360	)			—				(999,901	)
		Total			(110,989	)			(102,360	)			—				(999,901	)
Operating cost and expenses					(7,959	)			(17,006	)			—				(71,703	)
Operating profit					(103,030	)			(85,354	)			—				(928,198	)
Consolidated
Net sales:
	Unaffiliated customers			¥	2,303,187			¥	2,078,465				+10.8			$	20,749,432
	Intersegment				—				—				—				—
		Total			2,303,187				2,078,465				+10.8				20,749,432
Operating cost and expenses					1,961,651				1,845,707				+6.3				17,672,531
Operating profit					341,536				232,758				+46.7				3,076,901

Note:

General corporate expenses of JPY103,069 million (U.S.$928,550 thousand) and JPY85,285 million in the nine months ended September 30, 2003 and 2002, respectively, are included in “Corporate and Eliminations.”

- 8 -

---

Table of Contents

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

4.

CONSOLIDATED BALANCE SHEETS

																	Thousands of
					Millions of yen												U.S. dollars
					As of				As of								As of
					September 30,				December 31,								September 30,
					2003				2002				Change				2003
					(Unaudited)				(Audited)								(Unaudited)
ASSETS
	Current assets:
		Cash and cash equivalents			¥	585,222			¥	521,271			¥	63,951			$	5,272,270
		Marketable securities				1,292				7,255				(5,963	)			11,640
		Trade receivables				483,079				498,587				(15,508	)			4,352,063
		Inventories				493,940				432,251				61,689				4,449,910
		Prepaid expenses and other current assets				282,610				245,610				37,000				2,546,036
			Total current assets			1,846,143				1,704,974				141,169				16,631,919
	Noncurrent receivables					16,807				20,568				(3,761	)			151,414
	Investments					74,711				64,037				10,674				673,072
	Net property, plant and equipment					842,403				830,304				12,099				7,589,216
	Other assets					329,078				322,823				6,255				2,964,667
			Total assets		¥	3,109,142			¥	2,942,706			¥	166,436			$	28,010,288
LIABILITIES AND STOCKHOLDERS’ EQUITY
	Current liabilities:
		Short-term loans			¥	45,730			¥	66,754			¥	(21,024	)		$	411,982
		Trade payables				423,570				408,464				15,106				3,815,946
		Income taxes				68,731				80,169				(11,438	)			619,198
		Accrued expenses				180,452				154,621				25,831				1,625,694
		Other current liabilities				84,921				91,832				(6,911	)			765,054
			Total current liabilities			803,404				801,840				1,564				7,237,874
	Long-term debt, excluding current installments					70,233				81,349				(11,116	)			632,730
	Accrued pension and severance cost					250,268				285,129				(34,861	)			2,254,667
	Other noncurrent liabilities					29,783				26,193				3,590				268,315
			Total liabilities			1,153,688				1,194,511				(40,823	)			10,393,586
	Minority interests					159,992				156,245				3,747				1,441,369
	Stockholders’ equity:
		Common stock				168,840				167,242				1,598				1,521,081
		Additional paid-in capital				396,567				394,088				2,479				3,572,676
		Retained earnings				1,375,482				1,203,248				172,234				12,391,730
		Accumulated other comprehensive income (loss)				(138,193	)			(166,467	)			28,274				(1,244,982	)
		Treasury stock				(7,234	)			(6,161	)			(1,073	)			(65,172	)
			Total stockholders’ equity			1,795,462				1,591,950				203,512				16,175,333
			Total liabilities and stockholders’ equity		¥	3,109,142			¥	2,942,706			¥	166,436			$	28,010,288
																	Thousands of
					Millions of yen												U.S. dollars
					As of				As of								As of
					September 30,				December 31,								September 30,
					2003				2002								2003
					(Unaudited)				(Audited)								(Unaudited)
Allowance for doubtful receivables					¥	14,216			¥	12,031							$	128,072
Accumulated depreciation						1,112,748				1,077,694								10,024,757
Accumulated other comprehensive income (loss):
	Foreign currency translation adjustments					(80,493	)			(68,524	)							(725,162	)
	Net unrealized gains and losses on securities					4,880				(1,168	)							43,964
	Minimum pension liability adjustments					(65,322	)			(96,441	)							(588,486	)
	Net gains and losses on derivative financial instruments					2,742				(334	)							24,703

- 9 -

---

Table of Contents

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

5.		CONSOLIDATED STATEMENTS OF CASH FLOWS
		Results for the nine months

												Thousands of
				Millions of yen								U.S. dollars
				Nine months				Nine months				Nine months
				ended				ended				ended
				September 30, 2003				September 30, 2002				September 30, 2003
				(Unaudited)				(Unaudited)				(Unaudited)
Net income				¥	200,772			¥	130,669			$	1,808,757
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization				131,068				116,283				1,180,793
	Loss on disposal of property, plant and equipment				8,796				14,121				79,243
	Deferred income taxes				(5,510	)			6,370				(49,640	)
	Decrease in trade receivables				17,875				19,153				161,036
	Increase in inventories				(64,613	)			(30,698	)			(582,099	)
	Increase in trade payables				20,897				60,999				188,261
	Decrease in income taxes				(10,927	)			(16,552	)			(98,441	)
	Increase in accrued expenses				27,422				20,045				247,045
	Other, net				662				(6,017	)			5,964
		Net cash provided by operating activities			326,442				314,373				2,940,919
Cash flows from investing activities:
	Capital expenditure				(150,119	)			(144,201	)			(1,352,423	)
	Proceeds from sale of property, plant and equipment				6,175				7,850				55,631
	Payment for purchase of available-for-sale securities				(714	)			(3,574	)			(6,432	)
	Proceeds from sale of available-for-sale securities				6,959				663				62,694
	Payment for purchase of other investments				(24,310	)			(22,596	)			(219,009	)
	Other				2,092				(7,816	)			18,845
		Net cash used in investing activities			(159,917	)			(169,674	)			(1,440,694	)
Cash flows from financing activities:
	Proceeds from long-term debt				3,344				3,132				30,126
	Repayment of long-term debt				(30,182	)			(34,991	)			(271,910	)
	Decrease in short-term loans				(35,906	)			(98,484	)			(323,477	)
	Dividends paid				(28,538	)			(23,663	)			(257,099	)
	Other				(2,893	)			(8,335	)			(26,063	)
		Net cash used in financing activities			(94,175	)			(162,341	)			(848,423	)
Effect of exchange rate changes on cash and cash equivalents					(8,399	)			(4,619	)			(75,667	)
Net change in cash and cash equivalents					63,951				(22,261	)			576,135
Cash and cash equivalents at beginning of year					521,271				506,234				4,696,135
Cash and cash equivalents at end of period				¥	585,222			¥	483,973			$	5,272,270

- 10 -

---

Table of Contents

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

6.		BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
(1)		NUMBER OF GROUP COMPANIES

		September 30, 2003				December 31, 2002				Change
Subsidiaries			200				195				5
Affiliates			18				19				(1	)
Total			218				214				4

CHANGES IN GROUP OF ENTITIES

Subsidiaries
	Addition:				13 Companies
	Removal:				8   Companies
Affiliates (Carried at Equity Basis)
	Addition:				1   Company
	Removal:				2   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, except for the segment information, as required by Statement of Financial Accounting Standards No.131, “Disclosures about Segments of an Enterprise and Related Information.”
		We have engaged KPMG to complete a review of the consolidated financial statements as of and for nine months ended September 30, 2003, in accordance with Statement of Auditing Standards No.100, “Interim Financial Information,” established by the American Institute of Certified Public Accountants.

- 11 -

---

Table of Contents

CONSOLIDATED FINANCIAL RESULTS FOR THE THIRD QUARTER
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2003

SUPPLEMENTARY REPORT

TABLE OF CONTENTS

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

 

---

Table of Contents

Canon Inc.

1.

SALES BY REGION AND PRODUCT

																												(Millions of yen)
				2003												2002												Change year over year
				3rd quarter				4th quarter				Year				3rd quarter				4th quarter				Year				3rd quarter				4th quarter				Year
								(P)				(P)
Japan
	Business machines				127,002				170,386				581,300				123,246				153,789				550,229				+3.0	%			+10.8	%			+5.6	%
		Office imaging products			68,318				85,872				305,200				62,032				67,221				262,052				+10.1	%			+27.7	%			+16.5	%
		Computer peripherals			35,426				62,003				178,600				33,220				59,732				169,613				+6.6	%			+3.8	%			+5.3	%
		Business information products			23,258				22,511				97,500				27,994				26,836				118,564				-16.9	%			-16.1	%			-17.8	%
	Cameras				28,376				38,242				113,400				22,619				26,693				92,581				+25.5	%			+43.3	%			+22.5	%
	Optical and other products				34,150				33,725				121,100				23,306				21,760				89,741				+46.5	%			+55.0	%			+34.9	%
		Total			189,528				242,353				815,800				169,171				202,242				732,551				+12.0	%			+19.8	%			+11.4	%
Overseas
	Business machines				417,048				426,306				1,687,400				397,837				479,640				1,675,966				+4.8	%			-11.1	%			+0.7	%
		Office imaging products			183,683				197,104				762,400				172,900				204,026				761,079				+6.2	%			-3.4	%			+0.2	%
		Computer peripherals			226,404				220,405				896,900				218,385				268,331				886,343				+3.7	%			-17.9	%			+1.2	%
		Business information products			6,961				8,797				28,100				6,552				7,283				28,544				+6.2	%			+20.8	%			-1.6	%
	Cameras				127,379				171,502				535,900				93,263				131,811				393,197				+36.6	%			+30.1	%			+36.3	%
	Optical and other products				33,644				39,652				143,900				33,711				47,970				138,414				-0.2	%			-17.3	%			+4.0	%
		Total			578,071				637,460				2,367,200				524,811				659,421				2,207,577				+10.1	%			-3.3	%			+7.2	%
	Americas
	Business machines				189,818				173,390				753,900				194,850				230,038				797,498				-2.6	%			-24.6	%			-5.5	%
		Office imaging products			92,592				85,923				362,200				91,115				96,742				378,804				+1.6	%			-11.2	%			-4.4	%
		Computer peripherals			93,774				83,363				377,300				100,142				129,469				403,591				-6.4	%			-35.6	%			-6.5	%
		Business information products			3,452				4,104				14,400				3,593				3,827				15,103				-3.9	%			+7.2	%			-4.7	%
	Cameras				55,203				84,367				244,700				42,588				62,557				180,454				+29.6	%			+34.9	%			+35.6	%
	Optical and other products				6,478				6,756				28,500				7,884				9,477				32,214				-17.8	%			-28.7	%			-11.5	%
		Total			251,499				264,513				1,027,100				245,322				302,072				1,010,166				+2.5	%			-12.4	%			+1.7	%
	Europe
	Business machines				168,229				203,204				724,500				153,453				197,704				676,885				+9.6	%			+2.8	%			+7.0	%
		Office imaging products			71,383				95,122				330,700				66,039				90,325				315,344				+8.1	%			+5.3	%			+4.9	%
		Computer peripherals			94,046				104,020				382,800				85,193				104,594				351,089				+10.4	%			-0.5	%			+9.0	%
		Business information products			2,800				4,062				11,000				2,221				2,785				10,452				+26.1	%			+45.9	%			+5.2	%
	Cameras				51,881				67,035				218,000				35,320				52,449				156,244				+46.9	%			+27.8	%			+39.5	%
	Optical and other products				6,090				7,542				26,000				3,489				8,135				24,038				+74.5	%			-7.3	%			+8.2	%
		Total			226,200				277,781				968,500				192,262				258,288				857,167				+17.7	%			+7.5	%			+13.0	%
	Other areas
	Business machines				59,001				49,712				209,000				49,534				51,898				201,583				+19.1	%			-4.2	%			+3.7	%
		Office imaging products			19,708				16,059				69,500				15,746				16,959				66,931				+25.2	%			-5.3	%			+3.8	%
		Computer peripherals			38,584				33,022				136,800				33,050				34,268				131,663				+16.7	%			-3.6	%			+3.9	%
		Business information products			709				631				2,700				738				671				2,989				-3.9	%			-6.0	%			-9.7	%
	Cameras				20,295				20,100				73,200				15,355				16,805				56,499				+32.2	%			+19.6	%			+29.6	%
	Optical and other products				21,076				25,354				89,400				22,338				30,358				82,162				-5.6	%			-16.5	%			+8.8	%
		Total			100,372				95,166				371,600				87,227				99,061				340,244				+15.1	%			-3.9	%			+9.2	%
Total
	Business machines				544,050				596,692				2,268,700				521,083				633,429				2,226,195				+4.4	%			-5.8	%			+1.9	%
		Office imaging products			252,001				282,976				1,067,600				234,932				271,247				1,023,131				+7.3	%			+4.3	%			+4.3	%
		Computer peripherals			261,830				282,408				1,075,500				251,605				328,063				1,055,956				+4.1	%			-13.9	%			+1.9	%
		Business information products			30,219				31,308				125,600				34,546				34,119				147,108				-12.5	%			-8.2	%			-14.6	%
	Cameras				155,755				209,744				649,300				115,882				158,504				485,778				+34.4	%			+32.3	%			+33.7	%
	Optical and other products				67,794				73,377				265,000				57,017				69,730				228,155				+18.9	%			+5.2	%			+16.1	%
		Total			767,599				879,813				3,183,000				693,982				861,663				2,940,128				+10.6	%			+2.1	%			+8.3	%

(P)=Projection

---

(Note)

From the 1st quarter of 2003, facsimiles which included personal digital MFDs etc. based on electrophotography technology were reclassified and are now included in Copying Machines, renamed Office Imaging Products. Those products based on inkjet technology were moved to Inkjet Printers in Computer Peripherals. In connection with this adjustment, Business Systems were renamed Business Information Products.

Values for the previous year are restated to conform to the reclassification.

- S1 -

---

Table of Contents

Canon Inc.

2.

SEGMENT INFORMATION BY PRODUCT

(P)=Projection

3.

OTHER INCOME / DEDUCTIONS

(P)=Projection

- S2 -

---

Table of Contents

Canon Inc.

4.

SALES COMPOSITION BY PRODUCT

(P)=Projection

---

*

Among office-use monochrome copying machines (hardware only)

5.

SALES GROWTH IN LOCAL CURRENCY

(P)=Projection

---

- S3 -

---

Table of Contents

Canon Inc.

6.

P&L SUMMARY (4th Quarter 2003/Projection)

(P)=Projection

7.

PROFITABILITY

(P)=Projection

8.

IMPACT OF FOREIGN EXCHANGE RATES

(1)

Exchange rates

(P)=Projection

(2)

Impact of foreign exchange rates on sales (Year over year)

(P)=Projection

(3)

Impact of foreign exchange rates per yen

(P)=Projection

9.

CASH FLOWS

(P)=Projection

- S4 -

---

Table of Contents

Canon Inc.

10.

R&D EXPENDITURE

(P)=Projection

11.

CAPITAL EXPENDITURE & DEPRECIATION AND AMORTIZATION

(P)=Projection

12.

INVENTORIES

(1)

Inventories

(2)

Inventories/Sales*

---

*

Index based on the previous six months sales.

13.

DEBT RATIO

14.

OVERSEAS PRODUCTION RATIO

15.

NUMBER OF EMPLOYEES

- S5 -