Edgar Filing: CANON INC

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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

For the month of October , 2007

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 October 25, 2007	By	/s/ Hiroshi Kawashimo
		(Signature)*

		Hiroshi Kawashimo Deputy Senior General Manager Global Finance Center Canon Inc.

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

The following material is included.

1. CONSOLIDATED RESULTS FOR THE THIRD QUARTER AND THE NINE MONTHS ENDED SEPTEMBER 30, 2007

CONSOLIDATED RESULTS FOR THE THIRD QUARTER AND
THE NINE MONTHS ENDED SEPTEMBER 30, 2007

October 25, 2007

CONSOLIDATED RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007

(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, 2007		September 30, 2006				September 30, 2007		2007
	(Unaudited)		(Unaudited)				(Unaudited)

Net sales	¥	3,217,547	¥	2,940,224	+	9.4	$	27,978,670	¥	4,560,000	+	9.7
Operating profit		563,097		511,163	+	10.2		4,896,496		773,000	+	9.3
Income before income taxes and minority interests		568,468		521,371	+	9.0		4,943,200		788,000	+	9.6
Net income	¥	360,487	¥	329,761	+	9.3	$	3,134,670	¥	500,000	+	9.8


Net income per share:
- Basic	¥	276.67	¥	247.66	+	11.7	$	2.41	¥	396.49	+	15.9
- Diluted		276.62		247.57	+	11.7		2.41		—		—

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, 2007

September 30, 2006

September 30, 2007

(Unaudited)

(Unaudited)

(Unaudited)

Net sales

1,050,823

987,969

6.4

9,137,591

Operating profit

174,221

172,686

0.9

1,514,965

Income before income taxes
and minority interests

162,327

180,326

–

10.0

1,411,539

Net income

105,304

115,587

–

8.9

915,687

Net income per share:

- Basic

81.94

86.80

–

5.6

0.71

- Diluted

81.93

86.78

–

5.6

0.71

Actual

As of

As of

Change(%)

As of

September 30, 2007

December 31, 2006

September 30, 2007

(Unaudited)

Total assets

4,295,325

4,521,915

–

5.0

37,350,652

Stockholders’ equity

2,819,596

2,986,606

–

5.6

24,518,226


Notes:	1.	Canon’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.
	2.	U.S. dollar amounts are translated from yen at the rate of JPY115=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of September 28, 2007, solely for the convenience of the reader.




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

-1-

I. Operating Results and Financial Conditions

2007 Third Quarter in Review

Looking back at the global economy in the third quarter of 2007, economic expansion was fairly steady during the term. In the United States, despite concern over the economic fallout of the subprime loan crisis, the impact was limited and the economy continued to display moderate growth. In Europe, while export growth proved sluggish, the region headed toward moderate recovery as domestic demand expanded in major European countries, boosted by such factors as increased consumer spending. Within Asia, the Chinese economy maintained a high rate of growth while other economies in the region also enjoyed generally favorable conditions. In Japan, although consumer spending grew at a sluggish pace, the economy maintained a trend toward recovery boosted by such factors as increased capital spending.

As for the markets in which the Canon Group operates, within the camera segment, demand for digital single-lens reflex (SLR) cameras and compact digital cameras continued to realize healthy growth during the term. Within the office imaging products market, sales of network digital multifunction devices (MFDs) remained solid as demand shifted in all regions toward color models and advanced functionality. In the computer peripherals segment, which includes printers, demand for laser beam printers continued growing for both color and monochrome models. Among inkjet printers, as the shift in demand from single-function to multifunction machines gained momentum, price competition for multifunction models increased in severity. In the optical equipment segment, while demand for steppers, used in the production of semiconductors, indicated a moderate recovery, the market for projection aligners, used to produce liquid crystal display (LCD) panels, declined due to restrained investment by LCD manufacturers. The average value of the yen in the third quarter was ¥117.67 to the U.S. dollar and ¥161.82 to the euro, representing year-on-year decreases of about 1% against the U.S. dollar and about 9% against the euro.

Amid these conditions, Canon’s consolidated net sales for the third quarter increased by 6.4% from the year-ago period to ¥1,050.8 billion (U.S.$9,138 million), boosted by a solid rise in sales of digital cameras and color network MFDs, along with the positive effect of favorable currency exchange rates. The gross profit ratio in the third quarter improved 0.9 points year on year to 50.3%. The improved gross profit ratio was mainly the result of such factors as the launch of new products and continued cost-reduction efforts, which absorbed the effects of escalating raw material costs, declining sales price in the consumer products market, and an increase in depreciation expense due to the implementation of a change in accounting method to calculate depreciation of fixed assets. Owing to the improved gross profit ratio, third quarter gross profit increased by 8.3% to ¥528.4 billion (U.S.$4,594 million). Operating expenses for the third quarter increased by 12.3% from the year-ago period to ¥354.1 billion (U.S.$3,079 million), mainly due to an increase in depreciation expense, a factor that also led to a rise in cost of sales, along with R&D spending of ¥90.0 billion (U.S.$783 million), representing a year-on-year increase of 27.3%. Consequently, third-quarter operating profit totaled ¥174.2 billion (U.S.$1,515 million), a year-on-year increase of 0.9%. Other income (deductions) decreased by ¥19.5 billion (U.S.$170 million), due to an increase in currency exchange loss on foreign-currency-denominated trade receivables. Income before income taxes and minority interests in the third quarter totaled ¥162.3 billion (U.S.$1,412 million), a year-on-year decrease of 10.0%, and third quarter net income totaled ¥105.3 billion (U.S.$916 million), a decrease of 8.9% compared with last year.

Basic net income per share for the third quarter was ¥81.94 (U.S.$0.71), a year-on-year decrease of ¥4.86 (U.S.$0.04).

-2-

Results by Product Segment

In the business machine segment, demand for network digital MFDs, which are grouped in the office imaging products sub-segment, continued to expand for color models in both the domestic Japanese and overseas markets. Additionally, among color network digital MFDs, the competitively priced iR C2880 series and the high-end iR C5185 series continued to enjoy strong sales. Among monochrome network digital MFDs, the iR5055 series and the new energy-saving iR3025 series contributed to expanded sales. Overall, sales of office imaging products for the third quarter recorded a year-on-year increase of 13.2%. In the field of computer peripherals, while laser beam printers achieved year-on-year unit sales growth amid strong demand for monochrome models, and consumables also grew favorably, sales in value terms for the segment remained at the same approximate level as the same period last year due to an increase in low-priced models as a percentage of unit sales as market demand shifted toward low-end models. As for inkjet printers, despite a continuing decline in unit sales for single-function models and severe price competition in the market, sales in value terms increased by 12.8%, boosted by such factors as increased unit sales of multifunction models, such as the PIXMA MP600, and healthy sales growth for consumables. As a result, sales of computer peripherals for the third quarter realized a year-on-year increase of 2.9%. Within the field of business information products, demand for document scanners grew, contributing to a sales increase of 1.6%. Collectively, sales of business machines for the third quarter totaled ¥685.8 billion (U.S.$5,963 million), a year-on-year increase of 7.2%. Operating profit for the business machine segment totaled ¥152.4 billion (U.S.$1,325 million), a year-on-year increase of 9.5%, made possible by such factors as increased sales and an improved gross profit ratio.

Within the camera segment, demand for digital SLR cameras fueled growth, with particularly strong sales for the competitively priced EOS DIGITAL REBEL XTi and the new advanced-amateur model EOS 40D, launched in the third quarter of this year, which, in turn, led to expanded sales of interchangeable lenses for SLR cameras. Sales of compact digital cameras also continued to expand steadily with healthy demand for stylish ELPH-series models as well as for PowerShot-series models, which cater to a diverse range of shooting styles. Accordingly, unit sales of digital cameras for the third quarter expanded approximately 20% compared with the year-ago period. As a result, camera sales overall for the term increased by 14.0% year on year to ¥268.0 billion (U.S.$2,330 million). Operating profit for the camera segment totaled ¥76.9 billion (U.S.$668 million), a year-on-year increase of 14.0%, boosted by such factors as the suppression of price declines through the launch of new products and continued cost-reduction efforts, as well as sales growth.

In the optical and other products segment, while steppers, used in the production of semiconductors, enjoyed steady demand, sales of optical products decreased for the three-month period amid declining demand for aligners for the production of LCD panels as investment by LCD manufacturers remained at a low level. As a result, third-quarter sales for the segment totaled ¥97.0 billion (U.S.$844 million), a year-on-year decrease of 14.4%. Operating profit for the segment decreased by 83.6% year on year to ¥2.4 billion (U.S.$20 million).

Cash Flow

In the nine months ended September 30, 2007, Canon generated cash flow from operating activities of ¥562.6 billion (U.S.$4,892 million), a year-on-year increase of ¥102.9 billion (U.S.$895 million), reflecting the growth in net sales and net income and the change in working capital. Cash flow from investing activities totaled ¥340.9 billion (U.S.$2,965 million), due to such factors as active capital investment, used mainly to expand production capabilities. As a result, free cash flow totaled ¥221.7 billion (U.S.$1,927 million), representing a ¥90.2 billion (U.S.$784 million) improvement from ¥131.5 billion for the year-ago period.

Cash flow from financing activities recorded an outlay of ¥602.7 billion (U.S.$5,241 million), mainly resulting from the dividend payout of ¥131.6 billion (U.S.$1,144 million) in accordance with the company’s basic policy regarding profit distribution and the ¥450.0 billion (U.S.$3,913 million) purchase of treasury stock with the aim of improving capital efficiency and ensuring a flexible capital strategy. Consequently, cash and cash equivalents totaled ¥766.3 billion (U.S.$6,664 million), representing a ¥389.3 billion (U.S.$3,385 million) decrease from the end of the previous year.

-3-

Outlook

As for the global economic outlook in the fourth quarter, although uncertainty surrounds such factors as the future direction of crude-oil and raw-material prices and a slowdown in the U.S. economy, the global economy is expected to continue growing gradually.

In the businesses in which Canon is involved, demand for both digital SLR cameras and compact digital cameras is expected to continue enjoying robust growth. As for network digital MFDs and laser beam printers, while additional demand is projected for full-color models, severe price competition and shifting demand toward lower-priced models are expected to continue. Within the semiconductor-production equipment market, demand for steppers indicates a trend toward steady performance supported by increasing orders from chip manufacturers, while demand for projection aligners used in the production of LCD panels is expected to continue being sluggish as investment levels by LCD manufacturers remain low.

Following a review of the current business climate and currency exchange trends, the company has revised its forecast for the 2007 fiscal year and now anticipates consolidated net sales of ¥4,560.0 billion (U.S.$39,652 million) while maintaining its forecasts for consolidated income before income taxes and minority interests of ¥788.0 billion (U.S.$6,852 million), and consolidated net income of ¥500.0 billion (U.S.$4,348 million). These forecasts reflect an increase in depreciation expense of around ¥63.0 billion (U.S.$548 million) for the full business year, resulting from the change in the accounting method used to calculate depreciation. Additionally, these forecasts assume exchange rates of ¥115 to the U.S. dollar and ¥160 to the euro, representing an approximately 2% appreciation of the yen against the U.S. dollar, and an approximately 5% depreciation of the yen against the euro compared with the previous year.

Consolidated Outlook

Fiscal year


			Millions of yen
	Year ending				Change			Year ended		Change (%)
	December 31, 2007							December 31, 2006
	Previous Outlook (A)		Revised Outlook (B)		(B - A)			Results (C)		(B - C) / C

Net sales	¥	4,580,000	¥	4,560,000	¥	(20,000	)	¥	4,156,759	+	9.7	%
Income before income taxes and minority interests		788,000		788,000		—			719,143	+	9.6	%
Net income		500,000		500,000		—			455,325	+	9.8	%

This document contains forward-looking statements with respect to future results, performance and achievements that are subject to risk and uncertainties and reflect management’s views and assumptions formed by available information. All statements other than statements of historical fact are statements that could be considered forward-looking statements. When used in this document, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project” or “should” and similar expressions, as they relate to Canon, are intended to identify forward-looking statements. Many factors could cause the actual results, performance or achievements of Canon to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products by other companies, lack of acceptance of new products or services by Canon’s targeted customers, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, both referenced and not referenced in this document. A detailed description of these and other risk factors is included in Canon’s annual report on Form 20-F, which is on file with the United States Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. Canon does not intend or assume any obligation to update these forward-looking statements.

-4-

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

II. Financial Statements

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

Change(%)

ended

September 30, 2007

September 30, 2006

September 30, 2007

(Unaudited)

(Unaudited)

(Unaudited)

Net sales

1,050,823

987,969

6.4

9,137,591

Cost of sales

522,471

499,928

4,543,226

Gross profit

528,352

488,041

8.3

4,594,365

Operating expenses:

Selling, general and administrative expenses

264,117

244,663

2,296,670

Research and development expenses

90,014

70,692

782,730

354,131

315,355

3,079,400

Operating profit

174,221

172,686

0.9

1,514,965

Other income (deductions):

Interest and dividend income

8,133

7,299

70,722

Interest expense

(350

)

(560

)

(3,043

)

Other, net

(19,677

)

901

(171,105

)

(11,894

)

7,640

(103,426

)

Income before income taxes and minority interests

162,327

180,326

–

10.0

1,411,539

Income taxes

53,578

61,031

465,896

Income before minority interests

108,749

119,295

945,643

Minority interests

3,445

3,708

29,956

Net income

105,304

115,587

–

8.9

915,687

Note: Comprehensive income for the three months ended September 30, 2007 and 2006 was JPY60,662 million (U.S.$527,496 thousand) and JPY135,362 million, respectively.

Results for the nine months

Thousands of

Millions of yen

U.S. dollars

Nine months

Nine months

Nine months

ended

ended

Change(%)

ended

September 30, 2007

September 30, 2006

September 30, 2007

(Unaudited)

(Unaudited)

(Unaudited)

Net sales

3,217,547

2,940,224

9.4

27,978,670

Cost of sales

1,581,641

1,473,470

13,753,400

Gross profit

1,635,906

1,466,754

11.5

14,225,270

Operating expenses:

Selling, general and administrative expenses

812,528

738,372

7,065,461

Research and development expenses

260,281

217,219

2,263,313

1,072,809

955,591

9,328,774

Operating profit

563,097

511,163

10.2

4,896,496

Other income (deductions):

Interest and dividend income

25,500

18,442

221,739

Interest expense

(1,145

)

(1,185

)

(9,957

)

Other, net

(18,984

)

(7,049

)

(165,078

)

5,371

10,208

46,704

Income before income taxes and minority interests

568,468

521,371

9.0

4,943,200

Income taxes

196,414

179,845

1,707,948

Income before minority interests

372,054

341,526

3,235,252

Minority interests

11,567

11,765

100,582

Net income

360,487

329,761

9.3

3,134,670

Note: Comprehensive income for the nine months ended September 30, 2007 and 2006 was JPY417,296 million (U.S.$3,628,661 thousand) and JPY352,837 million, respectively.

-5-

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

Sales by product

ended

ended

Change(%)

ended

September 30, 2007

September 30, 2006

September 30, 2007

(Unaudited)

(Unaudited)

(Unaudited)

Business machines:

Office imaging products

305,715

269,983

13.2

2,658,391

Computer peripherals

355,962

345,790

2.9

3,095,322

Business information products

24,103

23,723

1.6

209,591

685,780

639,496

7.2

5,963,304

Cameras

267,987

235,141

14.0

2,330,322

Optical and other products

97,056

113,332

–

14.4

843,965

Total

1,050,823

987,969

6.4

9,137,591

Thousands of

Millions of yen

U.S. dollars

Three months

Three months

Three months

Sales by region

ended

ended

Change(%)

ended

September 30, 2007

September 30, 2006

September 30, 2007

(Unaudited)

(Unaudited)

(Unaudited)

Japan

218,665

219,251

–

0.3

1,901,435

Overseas:

Americas

313,805

299,811

4.7

2,728,739

Europe

338,918

297,762

13.8

2,947,113

Other areas

179,435

171,145

4.8

1,560,304

832,158

768,718

8.3

7,236,156

Total

1,050,823

987,969

6.4

9,137,591

Results for the nine months

Thousands of

Millions of yen

U.S. dollars

Nine months

Nine months

Nine months

Sales by product

ended

ended

Change(%)

ended

September 30, 2007

September 30, 2006

September 30, 2007

(Unaudited)

(Unaudited)

(Unaudited)

Business machines:

Office imaging products

938,143

855,420

9.7

8,157,765

Computer peripherals

1,116,649

992,453

12.5

9,709,991

Business information products

77,575

78,219

–

0.8

674,566

2,132,367

1,926,092

10.7

18,542,322

Cameras

787,561

695,426

13.2

6,848,357

Optical and other products

297,619

318,706

–

6.6

2,587,991

Total

3,217,547

2,940,224

9.4

27,978,670

Thousands of

Millions of yen

U.S. dollars

Nine months

Nine months

Nine months

Sales by region

ended

ended

Change(%)

ended

September 30, 2007

September 30, 2006

September 30, 2007

(Unaudited)

(Unaudited)

(Unaudited)

Japan

676,967

665,549

1.7

5,886,670

Overseas:

Americas

955,754

894,284

6.9

8,310,904

Europe

1,061,297

908,705

16.8

9,228,670

Other areas

523,529

471,686

11.0

4,552,426

2,540,580

2,274,675

11.7

22,092,000

Total

3,217,547

2,940,224

9.4

27,978,670


Notes:	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 multifunction peripherals / Single function inkjet printers / Image scanners / etc.

		Business information products : Computer information systems / Document scanners / Personal information products / etc.


		Cameras : Digital SLR cameras / Compact digital cameras / Interchangeable lenses / Digital video camcorders / etc.

		Optical and other products : Semiconductor production equipment / Mirror projection mask aligners for LCD panels / Broadcasting equipment / Medical equipment / Large format printers / Components / etc.

-6-

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			Change(%)		ended
	September 30, 2007			September 30, 2006					September 30, 2007
	(Unaudited)			(Unaudited)					(Unaudited)
Business machines
Net sales:
Unaffiliated customers	¥	685,780		¥	639,496		+	7.2	$	5,963,304
Intersegment		—			—			—		—

Total		685,780			639,496		+	7.2		5,963,304

Operating cost and expenses		533,409			500,397		+	6.6		4,638,339

Operating profit		152,371			139,099		+	9.5		1,324,965


Cameras
Net sales:
Unaffiliated customers	¥	267,987		¥	235,141		+	14.0	$	2,330,322
Intersegment		—			—			—		—

Total		267,987			235,141		+	14.0		2,330,322

Operating cost and expenses		191,131			167,751		+	13.9		1,662,009

Operating profit		76,856			67,390		+	14.0		668,313


Optical and other products
Net sales:
Unaffiliated customers	¥	97,056		¥	113,332		–	14.4	$	843,965
Intersegment		65,361			49,879		+	31.0		568,357

Total		162,417			163,211		–	0.5		1,412,322

Operating cost and expenses		160,067			148,852		+	7.5		1,391,887

Operating profit		2,350			14,359		–	83.6		20,435


Corporate and Eliminations
Net sales:
Unaffiliated customers	¥	—		¥	—			—	$	—
Intersegment		(65,361	)		(49,879	)		—		(568,357	)

Total		(65,361	)		(49,879	)		—		(568,357	)

Operating cost and expenses		(8,005	)		(1,717	)		—		(69,609	)

Operating profit		(57,356	)		(48,162	)		—		(498,748	)


Consolidated
Net sales:
Unaffiliated customers	¥	1,050,823		¥	987,969		+	6.4	$	9,137,591
Intersegment		—			—			—		—

Total		1,050,823			987,969		+	6.4		9,137,591

Operating cost and expenses		876,602			815,283		+	7.5		7,622,626

Operating profit		174,221			172,686		+	0.9		1,514,965


Note:		General corporate expenses of JPY57,368 million (U.S.$498,852 thousand) and JPY48,073 million in the three months ended September 30, 2007 and 2006, respectively, are included in “Corporate and Eliminations.”

-7-

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			Change(%)		ended
	September 30, 2007			September 30, 2006					September 30, 2007
	(Unaudited)			(Unaudited)					(Unaudited)
Business machines
Net sales:
Unaffiliated customers	¥	2,132,367		¥	1,926,092		+	10.7	$	18,542,322
Intersegment		—			—			—		—

Total		2,132,367			1,926,092		+	10.7		18,542,322

Operating cost and expenses		1,644,525			1,492,428		+	10.2		14,300,218

Operating profit		487,842			433,664		+	12.5		4,242,104


Cameras
Net sales:
Unaffiliated customers	¥	787,561		¥	695,426		+	13.2	$	6,848,357
Intersegment		—			—			—		—

Total		787,561			695,426		+	13.2		6,848,357

Operating cost and expenses		573,402			519,300		+	10.4		4,986,105

Operating profit		214,159			176,126		+	21.6		1,862,252


Optical and other products
Net sales:
Unaffiliated customers	¥	297,619		¥	318,706		–	6.6	$	2,587,991
Intersegment		173,278			138,585		+	25.0		1,506,766

Total		470,897			457,291		+	3.0		4,094,757

Operating cost and expenses		447,162			419,737		+	6.5		3,888,366

Operating profit		23,735			37,554		–	36.8		206,391


Corporate and Eliminations
Net sales:
Unaffiliated customers	¥	—		¥	—			—	$	—
Intersegment		(173,278	)		(138,585	)		—		(1,506,766	)

Total		(173,278	)		(138,585	)		—		(1,506,766	)

Operating cost and expenses		(10,639	)		(2,404	)		—		(92,515	)

Operating profit		(162,639	)		(136,181	)		—		(1,414,251	)


Consolidated
Net sales:
Unaffiliated customers	¥	3,217,547		¥	2,940,224		+	9.4	$	27,978,670
Intersegment		—			—			—		—

Total		3,217,547			2,940,224		+	9.4		27,978,670

Operating cost and expenses		2,654,450			2,429,061		+	9.3		23,082,174

Operating profit		563,097			511,163		+	10.2		4,896,496


Note:		General corporate expenses of JPY162,661 million (U.S.$1,414,443 thousand) and JPY136,004 million in the nine months ended September 30, 2007 and 2006, respectively, are included in “Corporate and Eliminations.”

-8-

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,			Change			September 30,
	2007			2006						2007
	(Unaudited)									(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	¥	766,307		¥	1,155,626		¥	(389,319	)	$	6,663,539
Time deposits		25,814			41,953			(16,139	)		224,470
Marketable securities		10,436			10,445			(9	)		90,748
Trade receivables, net		684,238			761,947			(77,709	)		5,949,896
Inventories		607,792			539,057			68,735			5,285,148
Prepaid expenses and other current assets		290,258			273,321			16,937			2,523,982

Total current assets		2,384,845			2,782,349			(397,504	)		20,737,783
Noncurrent receivables		14,438			14,335			103			125,548
Investments		99,577			110,418			(10,841	)		865,887
Property, plant and equipment, net		1,370,748			1,266,425			104,323			11,919,548
Other assets		425,717			348,388			77,329			3,701,886

Total assets	¥	4,295,325		¥	4,521,915		¥	(226,590	)	$	37,350,652


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term loans and current portion of long-term debt	¥	14,926		¥	15,362		¥	(436	)	$	129,791
Trade payables		505,495			493,058			12,437			4,395,609
Income taxes		93,022			133,745			(40,723	)		808,887
Accrued expenses		322,653			303,353			19,300			2,805,678
Other current liabilities		203,968			217,789			(13,821	)		1,773,635

Total current liabilities		1,140,064			1,163,307			(23,243	)		9,913,600
Long-term debt, excluding current installments		6,239			15,789			(9,550	)		54,252
Accrued pension and severance cost		49,154			83,876			(34,722	)		427,426
Other noncurrent liabilities		59,587			55,536			4,051			518,148

Total liabilities		1,255,044			1,318,508			(63,464	)		10,913,426

Minority interests		220,685			216,801			3,884			1,919,000

Stockholders’ equity:
Common stock		174,698			174,603			95			1,519,113
Additional paid-in capital		403,208			403,510			(302	)		3,506,157
Legal reserve		45,823			43,600			2,223			398,461
Retained earnings		2,592,495			2,368,047			224,448			22,543,435
Accumulated other comprehensive income (loss)		59,527			2,718			56,809			517,626
Treasury stock		(456,155	)		(5,872	)		(450,283	)		(3,966,566	)

Total stockholders’ equity		2,819,596			2,986,606			(167,010	)		24,518,226

Total liabilities and stockholders’ equity	¥	4,295,325		¥	4,521,915		¥	(226,590	)	$	37,350,652


										Thousands of
	Millions of yen									U.S. dollars
	As of			As of						As of
	September 30,			December 31,						September 30,
	2007			2006						2007
	(Unaudited)									(Unaudited)
Allowance for doubtful receivables	¥	15,984		¥	13,849					$	138,991
Accumulated depreciation		1,537,689			1,382,944						13,371,209
Accumulated other comprehensive income (loss):
Foreign currency translation adjustments		25,046			22,858						217,791
Net unrealized gains and losses on securities		7,496			8,065						65,183
Net gains and losses on derivative instruments		2,763			(1,663	)					24,026
Pension liability adjustments		24,222			(26,542	)					210,626

-9-

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

5. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


Millions of yen

												Accumulated
												other						Total
		Common		Additional					Retained			comprehensive			Treasury			stockholders’
		Stock		paid-in capital			Legal reserve		earnings			income (loss)			stock			equity


	Balance at December 31, 2006	¥	174,603	¥	403,510		¥	43,600	¥	2,368,047		¥	2,718		¥	(5,872	)	¥	2,986,606


	Cumulative effect of a change in accounting principle — adoption of EITF 06-2, net of tax									(2,204	)								(2,204	)
	Conversion of convertible debt and other		95		(306	)													(211	)
	Cash dividends									(131,612	)								(131,612	)
	Transfers to legal reserve							2,223		(2,223	)								—

	Comprehensive income:
	Net income									360,487									360,487
	Other comprehensive income (loss), net of tax
	Foreign currency translation adjustments												2,188						2,188
	Net unrealized gains and losses on securities												(569	)					(569	)
	Net gains and losses on derivative instruments												4,426						4,426
	Pension liability adjustments												50,764						50,764

	Total comprehensive income																		417,296


	Repurchase of treasury stock, net				4											(450,283	)		(450,279	)

	Balance at September 30, 2007 (Unaudited)	¥	174,698	¥	403,208		¥	45,823	¥	2,592,495		¥	59,527		¥	(456,155	)	¥	2,819,596

	Balance at December 31, 2005	¥	174,438	¥	403,246		¥	42,331	¥	2,018,289		¥	(28,212	)	¥	(5,410	)	¥	2,604,682


	Conversion of convertible debt and other		122		146														268
	Cash dividends									(104,298	)								(104,298	)
	Transfers to legal reserve							969		(969	)								—

	Comprehensive income:
	Net income									329,761									329,761
	Other comprehensive income (loss), net of tax
	Foreign currency translation adjustments												23,132						23,132
	Net unrealized gains and losses on securities												536						536
	Net gains and losses on derivative instruments												(863	)					(863	)
	Minimum pension liability adjustments												271						271

	Total comprehensive income																		352,837


	Repurchase of treasury stock, net															(289	)		(289	)

	Balance at September 30, 2006 (Unaudited)	¥	174,560	¥	403,392		¥	43,300	¥	2,242,783		¥	(5,136	)	¥	(5,699	)	¥	2,853,200






Thousands of U.S. dollors

	Balance at December 31, 2006	$	1,518,287	$	3,508,783		$	379,131	$	20,591,712		$	23,635		$	(51,061	)	$	25,970,487


	Cumulative effect of a change in accounting principle - adoption of EITF 06-2, net of tax									(19,165	)								(19,165	)
	Conversion of convertible debt and other		826		(2,661	)													(1,835	)
	Cash dividends									(1,144,452	)								(1,144,452	)
	Transfers to legal reserve							19,330		(19,330	)								—

	Comprehensive income:
	Net income									3,134,670									3,134,670
	Other comprehensive income (loss), net of tax
	Foreign currency translation adjustments												19,026						19,026
	Net unrealized gains and losses on securities												(4,948	)					(4,948	)
	Net gains and losses on derivative instruments												38,487						38,487
	Pension liability adjustments												441,426						441,426

	Total comprehensive income																		3,628,661


	Repurchase of treasury stock, net				35											(3,915,505	)		(3,915,470	)

	Balance at September 30, 2007 (Unaudited)	$	1,519,113	$	3,506,157		$	398,461	$	22,543,435		$	517,626		$	(3,966,566	)	$	24,518,226

-10-

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

6. CONSOLIDATED STATEMENTS OF CASH FLOWS


							Thousands of
Results for the nine months	Millions of yen						U.S. dollars
	Nine months			Nine months			Nine months
	ended			ended			ended
	September 30, 2007			September 30, 2006			September 30, 2007
	(Unaudited)			(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income	¥	360,487		¥	329,761		$	3,134,670
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		235,446			187,923			2,047,357
Loss on disposal of property, plant and equipment		5,599			8,619			48,687
Deferred income taxes		(16,642	)		8,531			(144,713	)
Decrease in trade receivables		95,021			49,294			826,270
Increase in inventories		(71,692	)		(57,873	)		(623,409	)
Increase (decrease) in trade payables		12,345			(16,387	)		107,348
Decrease in income taxes		(42,499	)		(36,088	)		(369,557	)
Increase in accrued expenses		10,224			6,455			88,904
Decrease in accrued pension and severance cost		(9,049	)		(19,110	)		(78,687	)
Other, net		(16,611	)		(1,371	)		(144,444	)

Net cash provided by operating activities		562,629			459,754			4,892,426

Cash flows from investing activities:
Purchases of fixed assets		(363,509	)		(318,790	)		(3,160,948	)
Proceeds from sale of fixed assets		4,960			12,233			43,130
Purchases of available-for-sale securities		(2,256	)		(7,497	)		(19,617	)
Proceeds from sale and maturity of available-for-sale securities		6,831			3,046			59,400
Proceeds from maturity of held-to-maturity securities		10,000			—			86,957
Decrease in time deposits		16,362			489			142,278
Acquisitions of subsidiaries, net of cash acquired		(12,520	)		(605	)		(108,870	)
Purchases of other investments		(2,293	)		(7,407	)		(19,939	)
Other, net		1,465			(9,746	)		12,739

Net cash used in investing activities		(340,960	)		(328,277	)		(2,964,870	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		1,851			943			16,096
Repayments of long-term debt		(12,620	)		(4,514	)		(109,739	)
Decrease in short-term loans		(473	)		(692	)		(4,113	)
Dividends paid		(131,612	)		(104,298	)		(1,144,452	)
Purchases of treasury stock, net		(450,279	)		(275	)		(3,915,470	)
Other, net		(9,532	)		2,970			(82,887	)

Net cash used in financing activities		(602,665	)		(105,866	)		(5,240,565	)

Effect of exchange rate changes on cash and cash equivalents		(8,323	)		(6,076	)		(72,374	)

Net change in cash and cash equivalents		(389,319	)		19,535			(3,385,383	)

Cash and cash equivalents at beginning of period		1,155,626			1,004,953			10,048,922

Cash and cash equivalents at end of period	¥	766,307		¥	1,024,488		$	6,663,539

-11-

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

7. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

(1) GROUP POSITION

Number of Group Companies



	September 30, 2007		December 31, 2006		Change

Subsidiaries		234		219		15
Affiliates		17		14		3

Total		251		233		18

Change in Group of Entities


Subsidiaries
Addition:		19 Companies
Removal:		4 Companies

Affiliates (Carried at Equity Basis)
Addition:		6 Companies
Removal:		3 Companies

Subsidiaries listed on domestic stock exchange

Tokyo Stock Exchange (1st section): Canon Marketing Japan Inc., Canon Electronics Inc., Canon Finetech Inc., Argo 21 Corporation

Tokyo Stock Exchange (2nd section): Canon Software Inc.

Osaka Stock Exchange (2nd section): Canon Machinery Inc.

JASDAQ: Nisca Corporation

Osaka Stock Exchange (Hercules): e-System Corporation

(2)		SIGNIFICANT ACCOUNTING POLICIES

		The accompanying consolidated financial statements reflect the adjustments which management believes are necessary to conform them with U.S. generally accepted accounting principles, except for the segment information, as required by Statement of Financial Accounting Standards No.131, “Disclosure about Segments of an Enterprise and Related Information.”

		The disclosure is omitted for other than listed below, since no significant change has occurred since the date of the annual financial statements.

		Change of Depreciation Method

		On April 1, 2007, the Company and its domestic subsidiaries elected to change the declining balance method of depreciating machinery and equipment from the fixed-percentage-on-declining base application to the 250% declining balance application. Estimated salvage values were also reduced in conjunction with this change. The change in depreciation methods caused an increase in depreciation expense by JPY40,363 million (U.S.$ 350,983thousand) for the nine months ended September 30, 2007.

8. OTHER

We have engaged Ernst & Young ShinNihon to perform a review of the consolidated statements of income, the consolidated balance sheets, the consolidated statements of the stockholders’ equity and the consolidated statements of cash flows as of and for the three and nine months ended September 30, 2007. This review engagement was partially performed in accordance with Statement of Auditing Standards No.100, “Interim Financial Information” (“SAS 100”), established by the American Institute of Certified Public Accountants, and the consolidated interim financial information does not include certain disclosures, such as notes to financial statements, compared with that required under U.S. generally accepted accounting principles and by the United States Securities and Exchange Commission.

-12-

Canon Inc.
October 25, 2007

CONSOLIDATED FINANCIAL RESULTS FOR
THE THIRD QUARTER ENDED SEPTEMBER 30, 2007

SUPPLEMENTARY REPORT

TABLE OF CONTENTS


		PAGE
1.	SALES BY REGION AND PRODUCT	S 1
2.	SEGMENT INFORMATION BY PRODUCT	S 2
3.	OTHER INCOME / DEDUCTIONS	S 2
4.	SALES COMPOSITION BY PRODUCT	S 3
5.	SALES GROWTH IN LOCAL CURRENCY	S 3
6.	P&L SUMMARY (4th Quarter 2007/Projection)	S 4
7.	PROFITABILITY	S 4
8.	IMPACT OF FOREIGN EXCHANGE RATES	S 4
9.	STATEMENTS OF CASH FLOWS	S 4
10.	R&D EXPENDITURE	S 5
11.	CAPITAL EXPENDITURE & DEPRECIATION AND AMORTIZATION	S 5
12.	INVENTORIES	S 5
13.	DEBT RATIO	S 5
14.	OVERSEAS PRODUCTION RATIO	S 5
15.	NUMBER OF EMPLOYEES	S 5



			Canon Inc.

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



	2007						2006						Change year over year
	3rd quarter		4th quarter (P)		Year (P)		3rd quarter		4th quarter		Year		3rd quarter			4th quarter			Year

Japan
Business machines		147,288		—		—		140,645		177,294		619,713		+4.7	%		—			—

Office imaging products		95,542		—		—		87,242		93,838		359,935		+9.5	%		—			—
Computer peripherals		37,036		—		—		37,972		66,209		190,981		-2.5	%		—			—
Business information products		14,710		—		—		15,431		17,247		68,797		-4.7	%		—			—

Cameras		36,766		—		—		34,275		40,676		139,625		+7.3	%		—			—

Optical and other products		34,611		—		—		44,331		48,771		172,952		-21.9	%		—			—

Total		218,665		283,833		960,800		219,251		266,741		932,290		-0.3	%		+6.4	%		+3.1	%

Overseas
Business machines		538,492		—		—		498,851		587,701		2,071,374		+7.9	%		—			—

Office imaging products		210,173		—		—		182,741		236,667		825,990		+15.0	%		—			—
Computer peripherals		318,926		—		—		307,818		339,746		1,207,427		+3.6	%		—			—
Business information products		9,393		—		—		8,292		11,288		37,957		+13.3	%		—			—

Cameras		231,221		—		—		200,866		305,763		902,240		+15.1	%		—			—

Optical and other products		62,445		—		—		69,001		56,330		250,855		-9.5	%		—			—

Total		832,158		1,058,620		3,599,200		768,718		949,794		3,224,469		+8.3	%		+11.5	%		+11.6	%

Americas
Business machines		214,744		—		—		211,464		239,816		865,697		+1.6	%		—			—

Office imaging products		89,450		—		—		81,700		99,908		361,328		+9.5	%		—			—
Computer peripherals		120,543		—		—		125,150		134,218		484,624		-3.7	%		—			—
Business information products		4,751		—		—		4,614		5,690		19,745		+3.0	%		—			—

Cameras		84,963		—		—		75,304		133,312		362,104		+12.8	%		—			—

Optical and other products		14,098		—		—		13,043		16,234		55,845		+8.1	%		—			—

Total		313,805		405,746		1,361,500		299,811		389,362		1,283,646		+4.7	%		+4.2	%		+6.1	%

Europe
Business machines		244,203		—		—		212,212		272,115		916,108		+15.1	%		—			—

Office imaging products		93,568		—		—		77,285		111,718		369,709		+21.1	%		—			—
Computer peripherals		146,939		—		—		131,983		155,646		531,224		+11.3	%		—			—
Business information products		3,696		—		—		2,944		4,751		15,175		+25.5	%		—			—

Cameras		85,167		—		—		77,472		122,190		362,670		+9.9	%		—			—

Optical and other products		9,548		—		—		8,078		11,295		35,527		+18.2	%		—			—

Total		338,918		466,703		1,528,000		297,762		405,600		1,314,305		+13.8	%		+15.1	%		+16.3	%

Other areas
Business machines		79,545		—		—		75,175		75,770		289,569		+5.8	%		—			—

Office imaging products		27,155		—		—		23,756		25,041		94,953		+14.3	%		—			—
Computer peripherals		51,444		—		—		50,685		49,882		191,579		+1.5	%		—			—
Business information products		946		—		—		734		847		3,037		+28.9	%		—			—

Cameras		61,091		—		—		48,090		50,261		177,466		+27.0	%		—			—

Optical and other products		38,799		—		—		47,880		28,801		159,483		-19.0	%		—			—

Total		179,435		186,171		709,700		171,145		154,832		626,518		+4.8	%		+20.2	%		+13.3	%

Total
Business machines		685,780		836,533		2,968,900		639,496		764,995		2,691,087		+7.2	%		+9.4	%		+10.3	%

Office imaging products		305,715		372,757		1,310,900		269,983		330,505		1,185,925		+13.2	%		+12.8	%		+10.5	%
Computer peripherals		355,962		435,451		1,552,100		345,790		405,955		1,398,408		+2.9	%		+7.3	%		+11.0	%
Business information products		24,103		28,325		105,900		23,723		28,535		106,754		+1.6	%		-0.7	%		-0.8	%

Cameras		267,987		393,039		1,180,600		235,141		346,439		1,041,865		+14.0	%		+13.5	%		+13.3	%

Optical and other products		97,056		112,881		410,500		113,332		105,101		423,807		-14.4	%		+7.4	%		-3.1	%

Total		1,050,823		1,342,453		4,560,000		987,969		1,216,535		4,156,759		+6.4	%		+10.4	%		+9.7	%

(P)=Projection

-S1-

Canon Inc.


2. SEGMENT INFORMATION BY PRODUCT		(Millions of yen)



		2007										2006												Change year over year
			3rd quarter			4th quarter (P)			Year (P)				3rd quarter			4th quarter			Year						3rd quarter			4th quarter			Year

	Business machines
	Unaffiliated customers			685,780			836,533			2,968,900				639,496			764,995			2,691,087						+7.2	%		+9.4	%		+10.3	%
	Intersegment			—			—			—				—			—			—						—			—			—

	Total sales			685,780			836,533			2,968,900				639,496			764,995			2,691,087						+7.2	%		+9.4	%		+10.3	%

	Operating profit			152,371			190,458			678,300				139,099			165,565			599,229						+9.5	%		+15.0	%		+13.2	%
	% of sales			22.2	%		22.8	%		22.8	%			21.8	%		21.6	%		22.3	%					—			—			—

	Cameras
	Unaffiliated customers			267,987			393,039			1,180,600				235,141			346,439			1,041,865						+14.0	%		+13.5	%		+13.3	%
	Intersegment			—			—			—				—			—			—						—			—			—

	Total sales			267,987			393,039			1,180,600				235,141			346,439			1,041,865						+14.0	%		+13.5	%		+13.3	%

	Operating profit			76,856			108,841			323,000				67,390			92,612			268,738						+14.0	%		+17.5	%		+20.2	%
	% of sales			28.7	%		27.7	%		27.4	%			28.7	%		26.7	%		25.8	%					—			—			—

	Optical and other products
	Unaffiliated customers			97,056			112,881			410,500				113,332			105,101			423,807						-14.4	%		+7.4	%		-3.1	%
	Intersegment			65,361			61,322			234,600				49,879			52,102			190,687						+31.0	%		+17.7	%		+23.0	%

	Total sales			162,417			174,203			645,100				163,211			157,203			614,494						-0.5	%		+10.8	%		+5.0	%

	Operating profit			2,350			565			24,300				14,359			3,921			41,475						-83.6	%		-85.6	%		-41.4	%
	% of sales			1.4	%		0.3	%		3.8	%			8.8	%		2.5	%		6.7	%					—			—			—

	Corporate and Eliminations
	Unaffiliated customers			—			—			—				—			—			—						—			—			—
	Intersegment			(65,361	)		(61,322	)		(234,600	)			(49,879	)		(52,102	)		(190,687	)					—			—			—

	Total sales			(65,361	)		(61,322	)		(234,600	)			(49,879	)		(52,102	)		(190,687	)					—			—			—

	Operating profit			(57,356	)		(89,961	)		(252,600	)			(48,162	)		(66,228	)		(202,409	)					—			—			—

	Consolidated
	Unaffiliated customers			1,050,823			1,342,453			4,560,000				987,969			1,216,535			4,156,759						+6.4	%		+10.4	%		+9.7	%
	Intersegment			—			—			—				—			—			—						—			—			—

	Total sales			1,050,823			1,342,453			4,560,000				987,969			1,216,535			4,156,759						+6.4	%		+10.4	%		+9.7	%

	Operating profit			174,221			209,903			773,000				172,686			195,870			707,033						+0.9	%		+7.2	%		+9.3	%
	% of sales			16.6	%		15.6	%		17.0	%			17.5	%		16.1	%		17.0	%					—			—			—

																							(P)=Projection

3. OTHER INCOME / DEDUCTIONS																						(Millions of yen)

		2007										2006												Change year over year
			3rd quarter			4th quarter (P)			Year (P)				3rd quarter			4th quarter			Year						3rd quarter			4th quarter			Year

	Interest and dividend, net			7,783			8,045			32,400				6,739			7,706			24,963						+1,044			+339			+7,437
	Forex gain / loss			(20,388	)		508			(30,400	)			(2,428	)		(8,737	)		(25,804	)					(17,960	)		+9,245			(4,596	)
	Equity earnings / loss of affiliated companies			200			315			5,800				715			1,428			4,237						(515	)		(1,113	)		+1,563
	Other, net			511			761			7,200				2,614			1,505			8,714						(2,103	)		(744	)		(1,514	)

	Total			(11,894	)		9,629			15,000				7,640			1,902			12,110						(19,534	)		+7,727			+2,890

																							(P)=Projection

-S2-

Canon Inc.


4. SALES COMPOSITION BY PRODUCT
		2007									2006
		3rd quarter			4th quarter (P)			Year (P)			3rd quarter			4th quarter			Year
	Office imaging products
	Monochrome copying machines		46	%		45	%		47	%		52	%		49	%		52	%
	Color copying machines		35	%		36	%		35	%		30	%		34	%		31	%
	Others		19	%		19	%		18	%		18	%		17	%		17	%
	Computer peripherals
	Laser beam printers		74	%		68	%		73	%		76	%		68	%		73	%
	Inkjet printers (includes inkjet MFPs)		25	%		31	%		26	%		23	%		31	%		26	%
	Others		1	%		1	%		1	%		1	%		1	%		1	%
	Business information products
	Personal computers		61	%		61	%		61	%		65	%		61	%		64	%
	Others		39	%		39	%		39	%		35	%		39	%		36	%
	Cameras
	Film cameras / Lenses		17	%		14	%		15	%		16	%		14	%		15	%
	Digital cameras		75	%		79	%		77	%		74	%		76	%		75	%
	Video cameras		8	%		7	%		8	%		10	%		10	%		10	%
	Optical and other products
	Semiconductor production equipment		42	%		45	%		47	%		52	%		53	%		52	%
	Others		58	%		55	%		53	%		48	%		47	%		48	%

																(P)=Projection

5. SALES GROWTH IN LOCAL CURRENCY (Year over year)
		2007
		3rd quarter			4th quarter (P)			Year (P)
	Business machines
	Japan		+4.7	%		—			—
	Overseas		+3.8	%		—			—
	Total		+4.0	%		+8.9	%		+6.8	%
	Cameras
	Japan		+7.3	%		—			—
	Overseas		+10.4	%		—			—
	Total		+10.0	%		+12.5	%		+9.2	%
	Optical and other products
	Japan		-21.9	%		—			—
	Overseas		-11.2	%		—			—
	Total		-15.4	%		+7.4	%		-4.3	%
	Total
	Japan		-0.3	%		+6.4	%		+3.1	%
	Overseas		+4.2	%		+10.8	%		+7.2	%
	Americas		+3.4	%		+6.8	%		+4.7	%
	Europe		+5.9	%		+10.7	%		+7.9	%
	Other areas		+2.6	%		+21.3	%		+10.8	%
	Total		+3.2	%		+9.8	%		+6.3	%

							(P)=Projection

-S3-

Canon Inc.


6. P&L SUMMARY (4th Quarter 2007/Projection)									(Millions of yen)
				2007				2006			Change year over year
		4th quarter(P)					4th quarter				Change year over year
	Net sales			1,342,453				1,216,535				+10.4	%
	Operating profit			209,903				195,870				+7.2	%
	Income before income taxes and minority interests			219,532				197,772				+11.0	%
	Net income			139,513				125,564				+11.1	%

									(P)=Projection

7. PROFITABILITY
			2007								2006
		1st-3rd quarter					Year(P)				1st-3rd quarter			Year
	ROE			16.6	%			16.8	%			16.1	%		16.3	%
	ROA			10.9	%			11.0	%			10.6	%		10.6	%

													(P)=Projection

8. IMPACT OF FOREIGN EXCHANGE RATES
	(1) Exchange rates																		(Yen)
			2007											2006
		3rd quarter				4th quarter(P)					Year(P)			3rd quarter			4th quarter		Year
	Yen/US$			117.67				115.00				117.98			116.29			117.81		116.43
	Yen/Euro			161.82				160.00				160.29			148.19			151.89		146.51

																		(P)=Projection

	(2) Impact of foreign exchange rates on sales (Year over year)									(Billions of yen)
			2007
		3rd quarter					4th quarter(P)				Year(P)
	US$			(0.5	)			(13.9	)			+20.2
	Euro			+20.8				+18.7				+98.8
	Other currencies			+2.9				+1.4				+9.9
	Total			+23.2				+6.2				+128.9

								(P)=Projection

	(3) Impact of foreign exchange rates per yen	(Billions of yen)
				2007
		4th quarter(P)
	On sales
	US$			4.7
	Euro			2.4
	On operating profit
	US$			2.9
	Euro			1.9

			(P)=Projection

9. STATEMENTS OF CASH FLOWS													(Millions of yen)
			2007								2006
		3rd quarter					Year(P)				3rd quarter			Year
	Net cash provided by operating activities
	Net income			105,304				500,000				115,587			455,325
	Depreciation and amortization			92,202				355,000				79,768			262,294
	Other, net			(75,201	)			(47,000	)			(59,479	)		(22,378	)
	Total			122,305				808,000				135,876			695,241
	Net cash used in investing activities			(131,607	)			(448,000	)			(117,980	)		(460,805	)
	Free cash flow			(9,302	)			360,000				17,896			234,436
	Net cash used in financing activities			(322,895	)			(609,700	)			(48,034	)		(107,487	)
	Effect of exchange rate changes on cash and cash equivalents			(10,224	)			(10,900	)			(537	)		23,724
	Net change in cash and cash equivalents			(342,421	)			(260,600	)			(30,675	)		150,673
	Cash and cash equivalents at end of period			766,307				895,000				1,024,488			1,155,626

													(P)=Projection

-S4-

Canon Inc.


	10. R&D EXPENDITURE	(Millions of yen)

			2007												2006
				3rd quarter			4th quarter(P)					Year(P)				3rd quarter				4th quarter			Year
	Business machines				27,929			—					—				23,869				35,024			113,770
	Cameras				10,946			—					—				10,487				10,739			41,122
	Optical and other products				51,139			—					—				36,336				45,325			153,415
	Total				90,014			99,719					360,000				70,692				91,088			308,307
	% of sales				8.6	%		7.4	%				7.9	%			7.2	%			7.5	%		7.4	%
																				(P)=Projection


	11. CAPITAL EXPENDITURE & DEPRECIATION AND AMORTIZATION																		(Millions of yen)
				2007											2006
				3rd quarter			4th quarter(P)					Year(P)				3rd quarter				4th quarter			Year
	Capital expenditure				136,347			107,311					440,000				120,256				106,105			379,657
	Depreciation and amortization				92,202			119,554					355,000				79,768				74,371			262,294
																				(P)=Projection
	12. INVENTORIES
	(1) Inventories						(Millions of yen)
				2007			2006				Difference
				Sep.30			Dec.31				Difference
	Business machines				315,581			288,815					+26,766
	Cameras				116,748			87,515					+29,233
	Optical and other products				175,463			162,727					+12,736
	Total				607,792			539,057					+68,735

(2) Inventories/Sales*										(Days)
				2007			2006				Difference
				Sep.30			Dec.31				Difference
	Business machines				41			38					+3
	Cameras				38			27					+11
	Optical and other products				164			136					+28
	Total				51			45					+6
	* Index based on the previous six months sales.

	13. DEBT RATIO
				2007			2006				Difference
				Sep.30			Dec.31				Difference
	Total debt / Total assets				0.5	%		0.7	%				-0.2	%

	14. OVERSEAS PRODUCTION RATIO
				2007			2006
				1st-3rd quarter			Year
	Overseas production ratio				40	%		39	%

	15. NUMBER OF EMPLOYEES
				2007			2006				Difference
				Sep.30			Dec.31				Difference
	Japan				54,671			50,753					+3,918
	Overseas				75,106			67,746					+7,360
	Total				129,777			118,499					+11,278

-S5-

The principal 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