SEC Form 6-K filed by Canon Inc.

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

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

[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.

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

The following materials are included.

[English summary with full translation of consolidated financial information]

Quarterly Report filed with the Japanese government

pursuant to

the Financial Instruments and Exchange Law of Japan

For the second quarter ended

June 30, 2023

CANON INC.

Tokyo, Japan

CONTENTS

Disclaimer Regarding Forward-Looking Statements

This quarterly report includes forward-looking statements (within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934) concerning Canon Inc. (the “Company”) and its subsidiaries (collectively “Canon”). To the extent that statements in this quarterly report do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on the current assumptions and beliefs of Canon in light of the information currently available to them, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause Canon’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Canon undertakes no obligation to publicly update any forward-looking statements after the date of this quarterly report. Investors are advised to consult any further disclosures by Canon in its subsequent filings with the U.S. Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 and its other filings.

The risks, uncertainties and other factors referred to above include, but are not limited to, foreign currency exchange rate fluctuations; the uncertainty of Canon’s ability to implement its plans to localize production and other measures to reduce the impact of foreign currency exchange rate fluctuations; uncertainty as to economic conditions in Canon’s major markets; uncertainty of continued demand for Canon’s high-value-added products; Canon’s ability to continue to develop products and to market products that incorporate new technology on a timely basis, are competitively priced, and achieve market acceptance; the possibility of losses resulting from foreign currency transactions designed to reduce financial risks from changes in foreign currency exchange rates; disasters, outages or similar events; and inventory risk due to disruptions in supply chains and shifts in market demand.

1

Notes:

Canon prepares quarterly consolidated financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Financial information presented in sections “II. The Business” is also in conformity with U.S. GAAP.

The Canon Group (consisting of the Company, 332 consolidated subsidiaries, and 10 affiliates accounted for using the equity method, as of June 30, 2023, collectively, the “Group”) is engaged in development, manufacturing, sales, and servicing activities in areas such as printing, imaging, medical, industrial and others and corporate. No material change in Canon’s business has occurred during the six months ended June 30, 2023.

No additions or removals of significant group entities have occurred during the six months ended June 30, 2023.

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No new material risks have been identified during the six months ended June 30, 2023. No material changes have been identified pursuant to the risk factors of Canon’s business indicated in the Annual Securities Report (Yukashoken Houkokusho) of the previous fiscal year.

Looking back at the first half of 2023, although economic recovery showed signs of weakness in some regions, there was a moderate recovery overall. By region, in the United States, thanks to the strong employment situation, consumer spending remained steady. In Europe, however, the economy remained stagnant due to the downward pressure caused by rising interest rates. In China, despite domestic demand recovering thanks to the lifting of the government’s Zero-COVID strategy, the demand in real estate markets decreased. In other emerging countries, the economy remained solid, mostly centering around consumer spending and the service industry. In Japan, the economy recovered moderately driven by solid export, the recovery of consumer spending and capital investments.

In the markets in which Canon operates, while concerns about an economic slowdown due to inflation and rising interest rate affected some markets, businesses remained firm thanks to the recovery of supplies following the resolution of component shortages and logistical disruptions. On a product basis, demand for office multifunction devices (MFDs) remained firm thanks to strong demand for high-productivity printing. For inkjet printers, the demand from customers working from home slowed. For laser printers, while demand slowed due to the curbing of corporate investments, new demand was generated through diversifying work styles. For cameras, demand remained solid, mainly for mirrorless cameras. For medical equipment, while there was a drop-off following a period of increased demand last year in response to the COVID-19 pandemic, demand remained firm mainly in Europe. For semiconductor lithography equipment, although demand for memory devices declined, investments stayed robust mainly for power devices, analog devices, and sensors. For FPD (Flat Panel Display) lithography equipment, demand declined due to reduced investments by panel manufacturers.

The average value of the yen during the second quarter and the first half of the year was ¥137.57 and ¥135.09 against the U.S. dollar, respectively, a year-on-year depreciation of approximately ¥8 and a year-on-year depreciation of approximately ¥12, and ¥149.62 and ¥145.88 against the euro, respectively, a year-on-year depreciation of approximately ¥12 and a year-on-year depreciation of approximately ¥11.

3

[Second quarter results]

Summarized results of the consolidated statements of income for the three months ended June 30, 2023 and June 30, 2022 are as follows:

As for the second quarter, net sales for the second quarter increased by 2.2% year-on-year to ¥1,020.9 billion due to solid demand and new products that were well-received in the market, as well as the favorable effects of depreciation of the yen. Net sales for the first half of the year increased by 6.1% year-on-year to ¥1,992.0 billion. Gross profit as a percentage of net sales increased by 1.0 points year-on-year to 47.5% due to well-received adjustments to product prices, improvement of product costs, resulting from easing of component shortages and logistics disruptions, and depreciation of the yen. Gross profit for the second quarter increased by 4.5% year-on-year to ¥484.8 billion. Operating expenses increased by 7.4% year-on-year to ¥392.5 billion due to an increase in sales personnel and sales-related expenses accompanying a growth in sales. In addition, operating expenses denominated in foreign currencies increased due to the depreciation of the yen. As a result, operating profit decreased by 6.3% year-on-year to ¥92.3 billion. On the other hand, operating profit for the first half of the year increased by 1.2% year-on-year to ¥176.7 billion. Other income (deductions) increased by ¥22.1 billion year-on-year to ¥8.9 billion, due to gain on valuation of securities and a decrease of currency exchange losses from liabilities denominated in foreign currencies. As a result, income before income taxes increased by 18.7% year-on-year to ¥101.1 billion and net income attributable to Canon Inc. increased by 10.8% year-on-year to ¥65.4 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥64.78 for the second quarter, a year-on-year decrease of ¥7.93.

4

[First-half results]

Summarized results of the consolidated statements of income for the six months ended June 30, 2023 and June 30, 2022 are as follows:

As for the first half, net sales increased by 6.1% year-on-year to ¥1,992.0 billion due to a recovery of supply following a shortage of components and logistical disruptions, which had constrained business and solid demand and new products that were well-received in the market, as well as the favorable effects of depreciation of the yen. Gross profit as a percentage of net sales increased by 1.4 points year-on-year to 47.1%, due to well-received adjustments to product prices, improvement of product costs, resulting from easing of component shortages and logistics disruptions, and depreciation of the yen. Gross profit for the first half of the year increased by 9.4% year-on-year to ¥938.8 billion. Operating expenses increased by 11.4% year-on-year to ¥762.0 billion, due to an increase in sales personnel and sales-related expenses accompanying a growth in sales. In addition, operating expenses denominated in foreign currencies increased due to the depreciation of the yen. As a result, operating profit for the first half of the year increased by 1.2% year-on-year to ¥176.7 billion. Other income (deductions) increased by ¥11.9 billion year-on-year to ¥33.6 billion, due to gain on valuation of securities and a decrease of currency exchange losses from liabilities denominated in foreign currencies. As a result, income before income taxes for the first half of the year increased by 23.4% to ¥188.7 billion and first-half net income attributable to Canon Inc. increased by 16.0% to ¥121.8 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥120.36 for the first half, a year-on-year decrease of ¥19.54.

5

Operating results by segment (“business unit”) for the six months ended June 30, 2023 and June 30, 2022 are as follows:

As for the Printing Business Unit, MFDs for offices continued to sell well, significantly exceeding unit sales of the same period from the previous year, as the product supply shortage was abated, while demand for products including the imageRUNNER ADVANCE DX C5800 mid-speed color MFD series were solid. As for inkjet printers, the number of unit sales decreased compared with the same period of the previous year as the surge in demand from users working from home subsided. As for laser printers, the number of unit sales decreased compared with the same period of the previous year, when supplies of products recovered, partly due to the curbing of corporate investments. Regarding equipment for the production printing market, the number of unit sales increased compared with the same period of the previous year, with the new strengthened product lineup of imagePRESS V series models strengthened by the addition of the imagePRESS V1350. As a result, sales of the Printing Business Unit increased by 5.1% year-on-year to ¥1,133.1 billion. Due to such effects as weak consumables sales, net income before tax for the first half of year decreased by 9.1% year-on-year to ¥114.7 billion.

As for the Imaging Business Unit, Unit sales of the interchangeable-lens digital cameras, increased due to steady sales of the EOS R6 Mark II full-frame mirrorless camera, EOS R7 and EOS R10 APS-C size mirrorless cameras, released last year. The new entry-level EOS R50 and EOS R100 models, launched this year, were also well-received in the market. The market demand for some models even surpassed production capacity. Unit sales of lenses surpassed those of the same period of the previous year thanks to strong sales of RF-series interchangeable-lenses. Sales of network cameras increased thanks to strong demand and enhanced sales activity that leveraged the products’ expanding range of applications.

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As a result, sales for the first half of the Imaging Business Unit increased by 15.0% year-on-year to ¥219.2 billion, while net income before tax for the first half increased by 55.5% compared with the same period of the previous year to ¥72.5 billion as a result of improved profitability due to an enhanced product mix that included new products and non-recurring expenses incurred to close a certain production facility in previous year.

As for the Medical Business Unit, while there was a drop-off following a period of increased demand last year in response to COVID-19, sales remained firm mainly in Europe. As a result, sales of the Medical Business Unit increased by 8.8% year-on-year to ¥257.2 billion. Net income before taxes for the first half decreased by 24.7% year-on-year to ¥11.3 billion due to an increase in personnel to strengthen sales.

As for the Industrial Business Unit, the number of semiconductor lithography equipment sold exceeded that of the same period of the previous year, supported by strengthened production capacity, and led by continued strong demand for power devices. For FPD lithography equipment, unit sales decreased compared with previous year due to reduced investments by panel manufacturers as the panel market worsened. As a result, net sales of the Industrial Business Unit decreased by 6.7% year-on-year to ¥136.9 billion, and net income before tax for the first half decreased by 31.0% year-on-year to ¥19.8 billion.

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Financial Conditions

Total assets increased by ¥475.8 billion to ¥5,571.3 billion at June 30, 2023 compared to the end of the previous year, mainly due to the increase of cash and cash equivalents and inventories, combined with the impact of the depreciation of the yen. Inventories increased due to delays in delivery of some key parts and work in process inventory to prepare for the expected increase in production in the next quarter. Total liabilities increased by ¥279.8 billion to ¥2,026.3 billion at June 30, 2023 compared to the end of previous year, mainly due to the increase of short-term loans. The balance of total equity increased by ¥196.0 billion to ¥3,545.1 billion at June 30, 2023 compared to the end of previous year, mainly due to the accumulation of net income attributable to Canon Inc. and the increase of accumulated other comprehensive income resulting from the depreciation of the yen although the payment of dividends to Canon Inc. shareholders and the repurchases of treasury stock decreased total equity. As a result, Canon Inc. shareholders’ equity as a percentage of total assets declined by 1.8 points to 59.3% compared to the end of the previous year. However, Canon continuously has achieved its goal of developing a solid financial base, measured as equity as a percentage of total assets.

8

Cash Flows

In the first half of the year, cash flow from operating activities increased by ¥25.5 billion year-on-year to ¥154.1 billion as a result of an increase in profit and working capital improvement, such as trade receivables. Cash flow used in investing activities increased by ¥11.0 billion to ¥94.4 billion from the same period of the previous fiscal year, when income temporarily increased due to the sales of an overseas branch office despite decrease in purchase of securities. Canon defines “free cash flow” as cash flows from operating activities less cash flows from investing activities. Free cash flow increased by ¥14.5 billion compared with the previous year to ¥59.7 billion.

Cash flow from financing activities increased by ¥121.2 billion year-on-year to ¥98.7 billion due to the increase in short-term loans despite increased dividend payouts of ¥3.4 billion and repurchases of ¥58.1 billion of treasury stock.

Owing to these factors, as well as the impact from foreign currency exchange adjustments, cash and cash equivalents increased by ¥180.1 billion to ¥542.2 billion from the end of the previous year.

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Non-GAAP Financial Measures

Canon has reported its financial results in accordance with U.S. GAAP. In addition, Canon has discussed its results using “free cash flow,” which is a non-GAAP measure.

Canon believes this measure, which takes into consideration its operating and investing activities, is beneficial to an investor’s understanding of its current liquidity and the alternatives of uses in financing activities.

A reconciliation of this non-GAAP financial measure and the most directly comparable measure calculated and presented in accordance with U.S. GAAP is set forth on the following table.

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Accounting Estimates and Assumptions

No material changes with respect to accounting estimates and assumptions have occurred during the six months ended June 30, 2023.

Prioritized Management Issues to be Addressed

No material changes or issues with respect to prioritized business operations and finances have occurred during the six months ended June 30, 2023.

Research and Development Expenses

Canon’s research and development expenses for the six months ended June 30, 2023 totalled ¥162.5 billion.

Property, Plant and Equipment

There were no significant additional plans for new construction or retirement of property, plant and equipment during the first half of 2023.

The new construction of property, plant and equipment, which had been in progress as of December 31, 2022 and was completed during the first half of 2023, is as follows:

There were no significant plans relevant to the retirement of property, plant and equipment.

No material contracts were entered into during the three months ended June 30, 2023.

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Total number of authorized shares is 3,000,000,000 shares. The common stock of Canon is listed on the Tokyo, Nagoya, Fukuoka, and Sapporo Stock Exchanges. Total issued shares are as follows:

Stock Acquisition Rights

The descriptions of the stock option plans as of June 30, 2023 are below.

The Stock Option Plan Approved on March 30, 2023

1. Grantees of share options

The Company’s 3 directors (excluding outside directors) and 32 executive officers.

2. Number of share options

The number of share options that the Board of Directors are authorized to issue is 840.

3. Number of shares acquired upon exercise of a share option

The number of shares acquired upon exercise of one share option (the “Allotted Number of Shares”) is 100 common shares, and the total number of shares to be delivered due to the exercise of share options is 84,000 common shares. However, in the case that the Company conducts a share split (including an allotment without consideration (musho-wariate) of shares of common stock of the Company; the same shall apply to all references to the share split herein) or share consolidation on and after the date of shareholders’ resolution adopting the proposal at the above-mentioned General Meeting of Shareholders (the “Allotment Date”), the number of shares acquired shall be adjusted in accordance with the following formula, rounding down any fraction of less than one share resulting from such adjustment.

In addition to the above, in any event that makes it necessary to adjust the number of shares acquired, including a merger and company split, on and after the Allotment Date, the Company may make appropriate adjustment to the number of shares acquired within a reasonable range.

4. Cash payment for share options (yen)

The cash payment required for each stock acquisition right shall be ¥1 per share to be acquired upon exercise of each stock acquisition right, multiplied by the number of shares acquired.

5. Period during which share options are exercisable

From April 29, 2023 to April 28, 2053

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6. Issue price and amount of increased stated capital (yen)

The issue price and amount of increased stated capital per share is ¥2,800 and ¥1,400, respectively. The issue price is total amount of the exercise price of each stock acquisition (¥1 per share) and the fair value of the stock acquisition rights at the Allotment Date. The fair value of the stock acquisition rights shall be calculated by using the Black-Scholes Model based on some conditions to be applied on the Allotment Date. In addition, the amount of capital to be increased due to the issuance of shares upon exercise of the stock acquisition rights shall be a half of the maximum amount of capital increase, etc., which is calculated in accordance with Article 17, Paragraph 1 of the Company Accounting Regulations (Kaisha Keisan Kisoku), and any fraction less than ¥1 arising therefrom shall be rounded up to the nearest ¥1.

7. Other conditions for exercise of share options

(i) Those to whom stock acquisition rights are allotted (the “Holder(s)”) shall be entitled to exercise all the stock acquisition rights together within 10 days (in case the last day is not a business day, the following business day) from the day immediately following the day when they cease to hold any position as a director or an executive officer of the Company.

(ii) In the event that the Company recognizes any violation of laws and regulations, misconduct of the duties, act conflicting with the duty of due care or duty of loyalty, or any other act equivalent thereto of the Holder, the Company may limit, subject to a resolution by the Board of Directors of the Company, the number of offered stock acquisition rights that may be exercised by such Holder.

8. Restriction on acquisition of share options by transfer

An acquisition of share options by way of transfer requires the approval of the Board of Directors.

9. Treatment of the stock acquisition rights upon restructuring transaction

If the Company conducts a merger (limited to the case where the Company is dissolved due to the merger), an absorption-type or incorporation-type company split (both, limited to the case where the Company becomes a split company), or a share exchange or transfer (both, limited to the case where the Company becomes a wholly-owned subsidiary) (collectively, the “Structural Reorganization”), the Company shall, in each of the above cases, allot stock acquisition rights of any of the relevant companies listed in “a” through “e” of Article 236, Paragraph 1, Item 8 of the Companies Act of Japan (the “Reorganized Company”) to the Holders holding the stock acquisition rights remaining at the time immediately preceding the effective date of the relevant Structural Reorganization (the “Remaining Stock Acquisition Rights”) (the effective date of the relevant Structural Reorganization shall mean, in the case of a merger, the date on which the merger becomes effective; in the case of a consolidation; the date of establishment of a newly-incorporated company through consolidation; in the case of an absorption-type company split, the date on which the absorption-type company split becomes effective; in the case of an incorporation-type company split, the date of establishment of a newly-incorporated company through the incorporation-type company split; in the case of a share exchange, the date on which the share exchange becomes effective; and in the case of a share transfer, the date of establishment of a wholly-owning parent company through the share transfer; hereinafter the same shall apply). Provided, however, that the foregoing shall be on the condition that transfer of such stock acquisition rights by the Reorganized Company in accordance with each of the following items is stipulated in a merger agreement, a company split agreement, a company split plan, a consolidation agreement, a share exchange agreement or a share transfer plan.

(i) Number of stock acquisition rights of the Reorganized Company to be allotted:

A number equal to the number of the Remaining Stock Acquisition Rights held by the Holder shall be transferred to such Holder.

(ii) Class of shares of the Reorganized Company to be acquired upon exercise of stock acquisition rights:

Common stock of the Reorganized Company.

(iii) Number of shares of the Reorganized Company to be acquired upon exercise of stock acquisition rights:

To be determined in accordance with 3 above, taking into consideration, among others, the conditions of Structural Reorganization.

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(iv) Value of assets to be contributed upon exercise of each stock acquisition right:

The value of assets to be contributed upon exercise of each stock acquisition right to be allotted shall be the amount obtained by multiplying (x) the exercise price after reorganization set forth below by (y) the number of shares of the Reorganized Company to be acquired upon exercise of the relevant stock acquisition rights as determined in accordance with (iii) above. The “exercise price after reorganization” shall be one 1 yen per share of the Reorganized Company to be acquired upon exercise of each of its stock acquisition rights.

(v) Exercise period of stock acquisition rights:

From and including whichever is the later of (x) the commencement date of the period during which the stock acquisition rights may be exercised or (y) the effective date of the Structural Reorganization, to and including the expiration date of the period during which the stock acquisition rights may be exercised as provided.

(vi) Matters regarding stated capital and capital reserves increased due to the issuance of shares upon exercise of stock acquisition rights:

(a) The increased amount of stated capital to be increased due to the issuance of shares upon exercise of the stock acquisition rights will be one half (1/2) of the maximum amount of increase of stated capital, etc. to be calculated in accordance with Article 17, Paragraph 1 of the Company Accounting Regulations (Kaisha Keisan Kisoku). Any fractional amount of less than one 1 yen resulting from such calculation will be rounded up to one 1 yen.

(b) The increased amount of capital reserves to be increased due to the issuance of shares upon exercise of the stock acquisition rights shall be the maximum amount of increases of stated capital, etc., mentioned in (a) above, after the subtraction of increased amount of stated capital mentioned in (a) above.

(vii) Restrictions on acquisition of stock acquisition rights by transfer:

The stock acquisition rights cannot be acquired through transfer, unless such acquisition is expressly approved by a resolution of the Board of Directors of the Reorganized Company.

(viii) Conditions for exercise of stock acquisition rights:

(a) Those to whom stock acquisition rights are allotted (the “Holder(s)”) shall be entitled to exercise all the stock acquisition rights together within 10 days (in case the last day is not a business day, the following business day) from the day immediately following the day when they cease to hold any position as a Director or an Executive Officer of the Company.

(b) In the event that the Company recognizes any violation of laws and regulations, misconduct of the duties, act conflicting with the duty of due care or duty of loyalty, or any other act equivalent thereto of the Holder, the Company may limit, subject to a resolution by the Board of Directors of the Company, the number of offered stock acquisition rights that may be exercised by such Holder.

(ix) Events regarding the Company’s acquisition of stock acquisition rights:

If a proposal for the approval of a merger agreement under which the Company will become a dissolved company, a proposal for the approval of a company split agreement or a company split plan under which the Company will become a split company or a proposal for the approval of a share exchange agreement or a share transfer plan under which the Company will become a wholly owned subsidiary is approved by the Company’s shareholders at a Meeting of Shareholders (or by the Board of Directors if no resolution of a Meeting of Shareholders is required for such approval), the Company will be entitled to acquire the stock acquisition rights, without compensation, on a date separately designated by the Board of Directors.

Not applicable.

Exercise status of bonds with share subscription rights containing an adjustable exercise price clause

Not applicable.

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Change in Issued Shares, Common Stock and Additional Paid in Capital

Major Shareholders

Notes:

15

Voting Rights

Note:

In “Fractional unit shares” under “Number of shares,” 75 shares of treasury stock are included.

Treasury Stock, etc.

16

There were no changes in Directors and Audit & Supervisory Board Members, and their functions between the filing date of the Annual Securities Report (Yukashoken Houkokusho) for the fiscal year ended December 31, 2022 and the end of this quarter.

There were no changes in members of executive officers between the filing date of the Annual Securities Report (Yukashoken Houkokusho) for the fiscal year ended December 31, 2022 and the end of this quarter.

Changes in functions of executive officers are below:

The Number of Directors and Executive Officers by Gender

Males: 48, Females: 2 (Females account for 4.0% of the total.)

The total number consisted of 10 Directors or Corporate Auditors and 40 Executive Officers as of June 30, 2023.

17

Index of Consolidated Financial Statements of Canon Inc. and Subsidiaries:

18

CANON INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

19

CANON INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited) (continued)

20

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Unaudited)

Consolidated Statements of Income

21

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Unaudited) (continued)

Consolidated Statements of Comprehensive Income

22

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Unaudited) (continued)

Consolidated Statements of Income

23

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Unaudited) (continued)

Consolidated Statements of Comprehensive Income

24

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

25

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The Company issued convertible debentures in the United States in May 1969 and established a program in which its American Depositary Receipts (ADRs) are traded in the U.S. over-the-counter market. Since then, under the U.S. Securities Act of 1933 and the U.S. Securities Exchange Act of 1934, as amended, the Company has prepared its annual consolidated financial statements in accordance with U.S. GAAP and filed them with the U.S. Securities and Exchange Commission on Form 20-F. The Company’s ADRs were listed on the NYSE in September 2000 after being quoted on NASDAQ from February 1972 to September 2000. On February 24, 2023, the Company filed Form 25 with the SEC in connection with the delisting from the NYSE. The delisting became effective on March 6, 2023. In the future, the Company plans to file an application for the termination of registration of its ADRs with the SEC when the requirements have been met.

Canon’s quarterly consolidated financial statements are prepared in accordance with the recognition and measurement criteria of U.S. GAAP. Certain footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

Canon has reclassified certain items in the consolidated statements of cash flows for the six months ended June 30, 2022 to conform to the current year’s presentation.

The number of consolidated subsidiaries and affiliated companies that were accounted for by the equity method as of June 30, 2023 and December 31, 2022 are summarized as follows:

The quarterly consolidated financial statements include the accounts of the Company, its majority owned subsidiaries and those variable interest entities where the Company or its consolidated subsidiaries are the primary beneficiaries. All intercompany balances and transactions have been eliminated.

Recently adopted accounting guidance

In October 2021, ASU No. 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”-ASC 805 (“Business Combinations”), was issued by the Financial Accounting Standards Board (“FASB”). The standard requires us to apply ASC 606 “Revenue from Contracts with Customers” to recognize and measure contract assets and contract liabilities acquired in a business combination. Canon adopted the standard from interim and annual reporting periods beginning January 1, 2023. The adoption of this standard did not have a material impact on its consolidated results of operations and financial condition.

In March 2022, ASU No. 2022-02, “Troubled Debt Restructurings and Vintage Disclosures”-ASC 326 (“Credit Losses”), was issued by FASB. The standard requires us to expand disclosures for certain loan re-financings and restructurings, and requires current-period gross write-offs by year of origination for financing receivables and net investments in leases. Canon adopted the standard from interim and annual reporting periods beginning January 1, 2023. The adoption of this standard did not have a material impact on its consolidated results of operations and financial condition.

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

In September 2022, ASU No. 2022-04, “Disclosure of Supplier Finance Program Obligations”-ASC 405-50 (“Liabilities - Supplier Finance Programs”), was issued by FASB. The standard requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about obligations outstanding at the end of the reporting period, including a rollforward of those obligations. Canon adopted the standard, which requires disclosure of the key terms of the programs and information about obligations outstanding, from interim and annual reporting periods beginning January 1, 2023. The standard’s requirement to disclose a rollforward of obligations outstanding is effective for annual reporting periods beginning after December 15, 2023. The adoption of this standard did not have a material impact on its consolidated results of operations and financial condition. For further information, please refer to Note 7.

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

The cost, gross unrealized holding gains, gross unrealized holding losses and fair value for available-for-sale debt securities included in short-term investments and investments by major security type at June 30, 2023 and December 31, 2022 are as follows:

Maturities of available-for-sale debt securities included in short-term investments and investments in the accompanying consolidated balance sheets at June 30, 2023 are as follows:

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

The unrealized and realized gains and losses related to equity securities for the six months and three months ended June 30, 2023 and 2022 are as follows:

The carrying amount of non-marketable equity securities without readily determinable fair value totaled ¥6,977 million and ¥6,808 million at June 30, 2023 and December 31, 2022, respectively. The impairment or other adjustments resulting from observable price changes recorded during the six months ended June 30, 2023 and 2022 were not material.

Time deposits with original maturities of more than three months are ¥2,130 million and ¥1,604 million at June 30, 2023 and December 31, 2022, respectively, and are included in short-term investments in the accompanying consolidated balance sheets.

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

Trade receivables are summarized as follows:

Inventories are summarized as follows:

Property, plant and equipment are stated at cost less accumulated depreciation and are summarized as follows:

Fixed assets presented in the consolidated statements of cash flows includes property, plant and equipment and intangible assets.

30

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

Lease income is included in products and equipment sales in the accompanying consolidated statements of income. Supplemental income statement information is as follows: