Edgar Filing: CANON INC

Form 6-K

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...................................... , 2008

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 27, 2008....		By....../s/...... Masashiro Kobayashi.................
	(Signature)*
		Masashiro Kobayashi
		General Manager
		Global Finance Management Center
		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, 2008

CONSOLIDATED RESULTS FOR THE THIRD QUARTER AND
THE NINE MONTHS ENDED SEPTEMBER 30, 2008

October 27, 2008

CONSOLIDATED RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008

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


	Actual								Projected
	Nine months		Nine months		Change(%)		Nine months		Year ending		Change(%)
	ended		ended				ended		December 31,
	September 30, 2008		September 30, 2007				September 30, 2008		2008
	(Unaudited)		(Unaudited)				(Unaudited)

Net sales	¥	3,099,421	¥	3,217,547		- 3.7	$	29,802,125	¥	4,250,000		- 5.2
Operating profit		460,249		563,097		- 18.3		4,425,471		580,000		- 23.3
Income before income taxes and minority interests		464,234		568,468		- 18.3		4,463,788		590,000		- 23.2
Net income	¥	297,526	¥	360,487		- 17.5	$	2,860,827	¥	375,000		- 23.2

Net income per share:
- Basic	¥	236.02	¥	276.67		- 14.7	$	2.27	¥	298.49		- 20.9
- Diluted		236.00		276.62		- 14.7		2.27		-		-

CONSOLIDATED RESULTS FOR THE THIRD QUARTER

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

Actual

Three months

Three months

Change(%)

Three months

ended

ended

ended

September 30, 2008

September 30, 2007

September 30, 2008

(Unaudited)

(Unaudited)

(Unaudited)

Net sales

985,989

1,050,823

- 6.2

9,480,663

Operating profit

129,266

174,221

- 25.8

1,242,942

Income before income taxes
and minority interests

124,989

162,327

- 23.0

1,201,817

Net income

83,041

105,304

- 21.1

798,471

Net income per share:

- Basic

65.91

81.94

- 19.6

0.63

- Diluted

65.91

81.93

- 19.6

0.63

Actual

As of

As of

Change(%)

As of

September 30, 2008

December 31, 2007

September 30, 2008

(Unaudited)

Total assets

4,291,774

4,512,625

- 4.9

41,267,058

Stockholders’ equity

2,933,902

2,922,336

+ 0.4

28,210,596

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 JPY104=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of September 30, 2008, 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 -

I. Operating Results and Financial Conditions

2008 Third Quarter in Review

Looking back at the global economy in the third quarter of 2008, in the United States, the financial crisis arising from the subprime mortgage debacle worsened following the failures of several securities firms amid stagnant housing investment along with slack consumer spending triggered by such factors as rising unemployment. In Europe, the economic slowdown was felt more intensely as financial uncertainty and rising prices led to sluggish consumer spending while export growth also lost momentum. Within Asia, despite the continued high growth rate of the Chinese economy, the negative effects of the American and European economies have triggered an evident slowdown in the region. In Japan, uncertainty over the future and anxiety stemming from poor corporate earnings have led to a drop in capital investments and consumer spending while exports, which had been sustaining the economy, were hit by the decelerating global economy and the sharp appreciation of the yen.

As for the markets in which Canon operates, within the office imaging products market, while demand for network digital multifunction devices (MFDs) continued to shift towards color models and products offering advanced functionality, market conditions weakened due to the impact of the deteriorating economy, mainly as a result of a drop-off in corporate-business demand. Within the market for printers and other computer peripherals, demand for laser beam printers was sluggish amid the economic slowdown. With regard to inkjet printers, the overall scale of the market remained relatively unchanged from the same period of the previous year as sales growth in emerging markets supplemented the reduced demand in major countries while demand in emerging markets continued to shift from single-function to multifunctional models. In the digital camera market, demand for digital single-lens-reflex (SLR) cameras maintained robust growth in each region. Compact digital cameras continued to enjoy healthy growth in emerging markets but, in other major regions, sales slowed considerably and market sentiment regarding excessive inventory led to further price declines. As for the optical equipment segment, while demand for steppers, utilized in the production of semiconductors, remained low due to restrained facility investment by device manufacturers, the market for aligners, used to produce liquid crystal display (LCD) panels, picked up momentum thanks to a recovery in facility investments by LCD panel manufacturers.

The average value of the yen for the quarter was ¥107.61 to the U.S. dollar, a year-on-year appreciation of about 9%, and ¥161.29 to the euro, remaining relatively unchanged from the year-ago period.

Amid these conditions, while sales volume increased for digital SLR cameras, the sharp appreciation of the yen against the U.S. dollar, coupled with flagging demand and falling prices due to the economic downturn, resulted in consolidated net sales of ¥986.0 billion (U.S.$9,481 million), a decrease of 6.2% from the year-ago period. Despite the continued launch of new products and cost-reduction activities, the gross profit ratio slipped 2.1 points from the year-ago period to 48.2% in the face of the rapid appreciation of the yen, escalating material prices, and declining market prices. As a result, third-quarter gross profit declined by 10.1% year on year to ¥475.2 billion (U.S.$4,569 million). Operating expenses in the third quarter decreased by 2.3% compared with the year-ago period owing to group-wide expense-reduction efforts. Consequently, third-quarter operating profit totaled ¥129.3 billion (U.S.$1,243 million), a year-on-year decrease of 25.8%. Other income (deductions) increased by ¥7.6 billion (U.S.$73 million) year on year due to an improvement in currency exchange losses despite decreased interest income. As a result, income before income taxes and minority interests totaled ¥125.0 billion (U.S.$1,202 million), a year-on-year decline of 23.0%, while third-quarter net income also recorded a decline of 21.1% to ¥83.0 billion (U.S.$798 million).

Basic net income per share for the quarter was ¥65.91 (U.S.$0.63), a year-on-year decline of ¥16.03 (U.S.$0.15).

- 2 -

Results by Product Segment

Looking at third-quarter consolidated results by business sector, within the business machines segment, the appreciation of the yen along with restrained investment in office equipment due to concern over business performance led to flagging demand for office imaging products in major regions, resulting in a decline in sales of 11.7%. As for computer peripherals, while sales volume of laser beam printers remained at a level comparable to the year-ago period, sales volume of consumables steadily expanded, contributing to a year-on-year sales increase of 2.5% overall amid the impact of the yen’s appreciation. Within the inkjet printer segment, home-use multifunction models and business-use MFDs equipped with faxing capabilities recorded increases in both unit sales as well as sales of related consumables, achieving a slight increase in sales on a local-currency basis, but a decline of 2.2% due to the appreciation of the yen. Accordingly, sales of computer peripherals overall grew 1.3% from the year-ago period. Third-quarter sales of business information products decreased by 14.8% year on year mainly due to a decline in sales of personal computers in the Japanese market. Collectively, sales of business machines overall for the quarter totaled ¥651.0 billion (U.S.$6,260 million), a decline of 5.1% from the year-ago period. Operating profit for the segment totaled ¥134.0 billion (U.S.$1,289 million), a year-on-year decline of 12.0%, as sales decreased and the gross profit ratio dipped mainly due to the effects of the rising value of the yen.

As for the digital camera segment, digital SLR models such as the high-resolution competitively priced EOS Rebel XSi (EOS 450D) and the advanced-amateur-model EOS 40D achieved healthy sales growth. With regard to compact digital cameras, although the company launched 9 new models—2 new stylish ELPH (IXUS)-series models and 7 new PowerShot-series models catering to a range of photographic demands—the impact of declining market conditions resulted in sales volume for compact digital cameras remaining relatively unchanged. As a result, total sales volume for digital cameras rose by approximately 4% year on year, but the appreciation of the yen against the U.S. dollar, along with fierce price competition in the market, led to a sales decrease of 6.8% from the year-ago period to ¥249.8 billion (U.S.$2,402 million). Operating profit for the camera segment decreased by 41.3% year on year to ¥45.1 billion (U.S.$434 million) due to such factors as the drop in sales and the deterioration of gross profit ratio resulting from declining market prices and the rising value of the yen.

In the optical and other products segment, while sales of aligners, used to produce LCD panels, gained momentum owing to the recovery of demand by LCD panel manufacturers, sales of steppers, used in the production of semiconductors, continued to lag as market conditions deteriorated. As a result, sales for the segment totaled ¥85.2 billion (U.S.$819 million), a year-on-year decrease of 12.2%, while operating profit for the segment increased by 47.0% year on year to ¥3.5 billion (U.S.$33 million).

Cash Flow

In the nine months ended September 30, 2008, Canon generated cash flow from operating activities of ¥435.4 billion (U.S.$4,187 million), a decrease of ¥127.2 billion (U.S.$1,223 million), reflecting the decrease in net income and increase in inventory. Cash flow from investing activities totaled ¥385.6 billion (U.S.$3,708 million), an increase of ¥44.7 billion (U.S.$429 million) year on year due to such factors as active facility investment to reinforce production capabilities and the acquisition of shares of Hitachi Displays, Ltd. towards the launch of Canon’s display business. As a result, free cash flow totaled ¥49.8 billion (U.S.$479 million), falling by ¥171.9 billion (U.S.$1,652 million) from the year-ago period.

Cash flow from financing activities recorded an outlay of ¥192.0 billion (U.S.$1,846 million), mainly resulting from the dividend payout of ¥145.0 billion (U.S.$1,394 million) and the purchase of treasury stocks. As a result, cash and cash equivalents, including the foreign currency translation adjustments of ¥65.0 billion (U.S.$625 million) impacted by the appreciation of the yen, totaled ¥737.3 billion (U.S.$7,090 million), decreasing by ¥207.1 billion (U.S.$1,992 million) from the previous year.

- 3 -

Outlook

With regard to the outlook for the global economy in the fourth quarter, as business conditions worldwide continue to deteriorate, there is an increased concern over the impact to the real economy, a situation brought about as a result of the worldwide plunge in stock prices triggered by the financial turbulence in the wake of failing financial institutions in the United States. Additionally, drastic fluctuations in currency exchange rates between major currencies have led to a heightened sense of uncertainty over the future. Amid this environment, while some degree of growth in such emerging markets as Asia and Russia is expected to continue, fourth-quarter business performance in developed countries is expected to be lackluster, and considerable time will be required to remove the sense of financial insecurity and realize an economic recovery.

As for the markets in which Canon operates, while the market for digital SLR cameras is projected to realize healthy expansion, the compact digital camera market is expected to record modest growth amid further intensifying price competition. Demand for network digital MFDs and laser beam printers will remain at a low level overall. While the market for aligners, used to produce LCD panels, is expected to continue recovering, owing to large-scale facility investments by LCD panel manufacturers, the market for steppers, utilized in the production of semiconductors, will likely remain stagnant.

With regard to currency exchange rates for the fourth quarter, on which Canon’s performance outlook for the full year is based, despite uncertainty over future interest rate policies and economic prospects for major countries, along with the recent sharp fluctuations, Canon anticipates exchange rates for the quarter of ¥100 to the U.S. dollar and ¥135 to the euro, representing a year-on-year appreciation of approximately 13% against the U.S. dollar, and about 21% against the euro. Upon taking into consideration third-quarter business results along with current market conditions and the expected business climate based on these foreign exchange rate assumptions, Canon now anticipates consolidated net sales of ¥4,250.0 billion (U.S.$40,865 million), operating profit of ¥580.0 billion (U.S.$5,577 million), income before income taxes and minority interests of ¥590.0 billion (U.S.$5,673 million) and net income of ¥375.0 billion (U.S.$3,606 million), a downward revision for each item from the previous announcement.

Consolidated Outlook


Fiscal year			Millions of yen
	Year ending				Change			Year ended		Change (%)
	December 31, 2008				Change			December 31, 2007		Change (%)
	Previous Outlook (A)		Revised Outlook (B)		(B - A)			Results (C)		(B - C) / C
Net sales	¥	4,590,000	¥	4,250,000	¥	(340,000	)	¥	4,481,346		- 5.2	%
Operating profit		770,000		580,000		(190,000	)		756,673		- 23.3	%
Income before income taxes and minority interests		785,000		590,000		(195,000	)		768,388		- 23.2	%
Net income	¥	500,000	¥	375,000	¥	(125,000	)	¥	488,332		- 23.2	%

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

Millions of yen

Thousands of

U.S. dollars

Three months

Three months

Three months

ended

ended

Change(%)

ended

September 30, 2008

September 30, 2007

September 30, 2008

(Unaudited)

(Unaudited)

(Unaudited)

Net sales

985,989

1,050,823

6.2

9,480,663

Cost of sales

510,833

522,471

4,911,855

Gross profit

475,156

528,352

10.1

4,568,808

Operating expenses:

Selling, general and administrative expenses

259,219

264,117

2,492,491

Research and development expenses

86,671

90,014

833,375

345,890

354,131

3,325,866

Operating profit

129,266

174,221

25.8

1,242,942

Other income (deductions):

Interest and dividend income

4,627

8,133

44,490

Interest expense

(10

)

(350

)

(96

)

Other, net

(8,894

)

(19,677

)

(85,519

)

(4,277

)

(11,894

)

(41,125

)

Income before income taxes
and minority interests

124,989

162,327

23.0

1,201,817

Income taxes

39,634

53,578

381,096

Income before minority interests

85,355

108,749

820,721

Minority interests

2,314

3,445

22,250

Net income

83,041

105,304

21.1

798,471

Note: Comprehensive income for the three months ended September 30, 2008 and 2007 was JPY15,063 million (U.S.$144,837 thousand) and JPY60,662 million, respectively.

Results for the nine months

Millions of yen

Thousands of

U.S. dollars

Nine months

Nine months

Nine months

ended

ended

Change(%)

ended

September 30, 2008

September 30, 2007

September 30, 2008

(Unaudited)

(Unaudited)

(Unaudited)

Net sales

3,099,421

3,217,547

3.7

29,802,125

Cost of sales

1,582,810

1,581,641

15,219,327

Gross profit

1,516,611

1,635,906

7.3

14,582,798

Operating expenses:

Selling, general and administrative expenses

794,228

812,528

7,636,808

Research and development expenses

262,134

260,281

2,520,519

1,056,362

1,072,809

10,157,327

Operating profit

460,249

563,097

18.3

4,425,471

Other income (deductions):

Interest and dividend income

15,593

25,500

149,933

Interest expense

(673

)

(1,145

)

(6,471

)

Other, net

(10,935

)

(18,984

)

(105,145

)

3,985

5,371

38,317

Income before income taxes
and minority interests

464,234

568,468

18.3

4,463,788

Income taxes

156,972

196,414

1,509,346

Income before minority interests

307,262

372,054

2,954,442

Minority interests

9,736

11,567

93,615

Net income

297,526

360,487

17.5

2,860,827

Note: Comprehensive income for the nine months ended September 30, 2008 and 2007 was JPY176,434 million (U.S.$1,696,481 thousand) and JPY417,296 million, respectively.

- 5 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

2. DETAILS OF SALES

Millions of yen

Thousands of

Results for the third quarter

U.S. dollars

Three months

Three months

Three months

Sales by product

ended

ended

Change(%)

ended

September 30, 2008

September 30, 2007

September 30, 2008

(Unaudited)

(Unaudited)

(Unaudited)

Business machines:

Office imaging products

269,816

305,715

11.7

2,594,385

Computer peripherals

360,649

355,962

1.3

3,467,779

Business information products

20,537

24,103

14.8

197,471

651,002

685,780

5.1

6,259,635

Cameras

249,774

267,987

6.8

2,401,673

Optical and other products

85,213

97,056

12.2

819,355

Total

985,989

1,050,823

6.2

9,480,663

Millions of yen

Thousands of

U.S. dollars

Three months

Three months

Three months

Sales by region

ended

ended

Change(%)

ended

September 30, 2008

September 30, 2007

September 30, 2008

(Unaudited)

(Unaudited)

(Unaudited)

Japan

196,971

218,665

9.9

1,893,952

Overseas:

Americas

286,120

313,805

8.8

2,751,154

Europe

316,655

338,918

6.6

3,044,760

Other areas

186,243

179,435

3.8

1,790,797

789,018

832,158

5.2

7,586,711

Total

985,989

1,050,823

6.2

9,480,663

Millions of yen

Thousands of

Results for the nine months

U.S. dollars

Nine months

Nine months

Nine months

Sales by product

ended

ended

Change(%)

ended

September 30, 2008

September 30, 2007

September 30, 2008

(Unaudited)

(Unaudited)

(Unaudited)

Business machines:

Office imaging products

868,915

938,143

7.4

8,354,952

Computer peripherals

1,103,810

1,116,649

1.1

10,613,558

Business information products

67,271

77,575

13.3

646,836

2,039,996

2,132,367

4.3

19,615,346

Cameras

779,185

787,561

1.1

7,492,163

Optical and other products

280,240

297,619

5.8

2,694,616

Total

3,099,421

3,217,547

3.7

29,802,125

Millions of yen

Thousands of

U.S. dollars

Nine months

Nine months

Nine months

Sales by region

ended

ended

Change(%)

ended

September 30, 2008

September 30, 2007

September 30, 2008

(Unaudited)

(Unaudited)

(Unaudited)

Japan

643,570

676,967

4.9

6,188,173

Overseas:

Americas

871,569

955,754

8.8

8,380,471

Europe

1,033,279

1,061,297

2.6

9,935,375

Other areas

551,003

523,529

5.2

5,298,106

2,455,851

2,540,580

3.3

23,613,952

Total

3,099,421

3,217,547

3.7

29,802,125

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


Computer peripherals :		Laser beam printers / Inkjet multifunction peripherals / Single function inkjet printers / Image scanners


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


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


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

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

- 6 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

3. SEGMENT INFORMATION BY PRODUCT


Results for the third quarter	Millions of yen								Thousands of
Results for the third quarter	Millions of yen								U.S. dollars
	Three months			Three months			Change(%)		Three months
	ended			ended					ended
	September 30, 2008			September 30, 2007					September 30, 2008
	(Unaudited)			(Unaudited)					(Unaudited)
Business machines
Net sales:
Unaffiliated customers	¥	651,002		¥	685,780		-	5.1	$	6,259,635
Intersegment		-			-			-		-

Total		651,002			685,780		-	5.1		6,259,635

Operating cost and expenses		516,982			533,409		-	3.1		4,970,981

Operating profit	¥	134,020		¥	152,371		-	12.0	$	1,288,654


Cameras
Net sales:
Unaffiliated customers	¥	249,774		¥	267,987		-	6.8	$	2,401,673
Intersegment		-			-			-		-

Total		249,774			267,987		-	6.8		2,401,673

Operating cost and expenses		204,686			191,131		+	7.1		1,968,135

Operating profit	¥	45,088		¥	76,856		-	41.3	$	433,538


Optical and other products
Net sales:
Unaffiliated customers	¥	85,213		¥	97,056		-	12.2	$	819,355
Intersegment		61,447			65,361		-	6.0		590,837

Total		146,660			162,417		-	9.7		1,410,192

Operating cost and expenses		143,206			160,067		-	10.5		1,376,980

Operating profit	¥	3,454		¥	2,350		+	47.0	$	33,212


Corporate and Eliminations
Net sales:
Unaffiliated customers	¥	-		¥	-			-	$	-
Intersegment		(61,447	)		(65,361	)		-		(590,837	)

Total		(61,447	)		(65,361	)		-		(590,837	)

Operating cost and expenses		(8,151	)		(8,005	)		-		(78,375	)

Operating profit	¥	(53,296	)	¥	(57,356	)		-	$	(512,462	)


Consolidated
Net sales:
Unaffiliated customers	¥	985,989		¥	1,050,823		-	6.2	$	9,480,663
Intersegment		-			-			-		-

Total		985,989			1,050,823		-	6.2		9,480,663

Operating cost and expenses		856,723			876,602		-	2.3		8,237,721

Operating profit	¥	129,266		¥	174,221		-	25.8	$	1,242,942


Note:		General corporate expenses of JPY52,608 million (U.S.$505,846 thousand) and JPY57,368 million in the three months ended September 30, 2008 and 2007, respectively, are included in “Corporate and Eliminations.”

- 7 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED


Results for the nine months	Millions of yen								Thousands of
Results for the nine months	Millions of yen								U.S. dollars
	Nine months			Nine months			Change(%)		Nine months
	ended			ended					ended
	September 30, 2008			September 30, 2007					September 30, 2008
	(Unaudited)			(Unaudited)					(Unaudited)
Business machines
Net sales:
Unaffiliated customers	¥	2,039,996		¥	2,132,367		-	4.3	$	19,615,346
Intersegment		-			-			-		-

Total		2,039,996			2,132,367		-	4.3		19,615,346

Operating cost and expenses		1,602,938			1,644,525		-	2.5		15,412,865

Operating profit	¥	437,058		¥	487,842		-	10.4	$	4,202,481


Cameras
Net sales:
Unaffiliated customers	¥	779,185		¥	787,561		-	1.1	$	7,492,163
Intersegment		-			-			-		-

Total		779,185			787,561		-	1.1		7,492,163

Operating cost and expenses		621,512			573,402		+	8.4		5,976,076

Operating profit	¥	157,673		¥	214,159		-	26.4	$	1,516,087


Optical and other products
Net sales:
Unaffiliated customers	¥	280,240		¥	297,619		-	5.8	$	2,694,616
Intersegment		183,364			173,278		+	5.8		1,763,115

Total		463,972			470,897		-	1.5		4,457,731

Operating cost and expenses		454,633			447,162		+	1.7		4,371,471

Operating profit	¥	8,971		¥	23,735		-	62.2	$	86,260


Corporate and Eliminations
Net sales:
Unaffiliated customers	¥	-		¥	-			-	$	-
Intersegment		(183,364	)		(173,278	)		-		(1,763,115	)

Total		(183,364	)		(173,278	)		-		(1,763,115	)

Operating cost and expenses		(39,911	)		(10,639	)		-		(383,758	)

Operating profit	¥	(143,453	)	¥	(162,639	)		-	$	(1,379,357	)


Consolidated
Net sales:
Unaffiliated customers	¥	3,099,421		¥	3,217,547		-	3.7	$	29,802,125
Intersegment		-			-			-		-

Total		3,099,421			3,217,547		-	3.7		29,802,125

Operating cost and expenses		2,639,172			2,654,450		-	0.6		25,376,654

Operating profit	¥	460,249		¥	563,097		-	18.3	$	4,425,471


Note:		General corporate expenses of JPY142,445 million (U.S.$1,369,663 thousand) and JPY162,661 million in the nine months ended September 30, 2008 and 2007, respectively, are included in “Corporate and Eliminations.”

- 8 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

4. CONSOLIDATED BALANCE SHEETS


	Millions of yen									Thousands of
	Millions of yen									U.S. dollars
	As of			As of			Change			As of
	September 30, 2008			December 31, 2007			Change			September 30, 2008
	(Unaudited)									(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	¥	737,319		¥	944,463		¥	(207,144	)	$	7,089,606
Short-term investments		5,726			20,499			(14,773	)		55,058
Trade receivables, net		608,429			794,240			(185,811	)		5,850,279
Inventories		664,078			563,474			100,604			6,385,365
Prepaid expenses and other current assets		306,759			286,111			20,648			2,949,605

Total current assets		2,322,311			2,608,787			(286,476	)		22,329,913

Noncurrent receivables		15,516			15,239			277			149,193
Investments		119,299			90,086			29,213			1,147,106
Property, plant and equipment, net		1,395,916			1,364,702			31,214			13,422,269
Other assets		438,732			433,811			4,921			4,218,577

Total assets	¥	4,291,774		¥	4,512,625		¥	(220,851	)	$	41,267,058


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term loans and current portion of long-term debt	¥	5,748		¥	18,317		¥	(12,569	)	$	55,269
Trade payables		507,421			514,226			(6,805	)		4,879,048
Accrued income taxes		59,928			150,726			(90,798	)		576,231
Accrued expenses		311,125			357,525			(46,400	)		2,991,587
Other current liabilities		169,410			215,911			(46,501	)		1,628,942

Total current liabilities		1,053,632			1,256,705			(203,073	)		10,131,077
Long-term debt, excluding current installments		9,581			8,680			901			92,125
Accrued pension and severance cost		41,383			44,710			(3,327	)		397,913
Other noncurrent liabilities		48,432			57,324			(8,892	)		465,693

Total liabilities		1,153,028			1,367,419			(214,391	)		11,086,808


Minority interests		204,844			222,870			(18,026	)		1,969,654

Stockholders’ equity:
Common stock		174,736			174,698			38			1,680,154
Additional paid-in capital		403,002			402,991			11			3,875,019
Legal reserve		53,493			46,017			7,476			514,356
Retained earnings		2,865,172			2,720,146			145,026			27,549,731
Accumulated other comprehensive income (loss)		(86,422	)		34,670			(121,092	)		(830,981	)
Treasury stock, at cost		(476,079	)		(456,186	)		(19,893	)		(4,577,683	)

Total stockholders’ equity		2,933,902			2,922,336			11,566			28,210,596

Total liabilities and stockholders’ equity	¥	4,291,774		¥	4,512,625		¥	(220,851	)	$	41,267,058


	Millions of yen									Thousands of
	Millions of yen									U.S. dollars
	As of			As of						As of
	September 30, 2008			December 31, 2007						September 30, 2008
Notes:	(Unaudited)									(Unaudited)

1.Allowance for doubtful receivables	¥	10,624		¥	14,547					$	102,154
2.Accumulated depreciation		1,722,705			1,594,374						16,564,471
3.Accumulated other comprehensive income (loss):
Foreign currency translation adjustments		(95,786	)		22,796						(921,019	)
Net unrealized gains and losses on securities		331			6,287						3,183
Net gains and losses on derivative instruments		4,793			(849	)					46,087
Pension liability adjustments		4,240			6,436						40,768

4.Time deposits and Marketable securities, which had been previously disclosed separately in the consolidated balance sheets, have been reclassified to Short-term investments to conform to the current year presentation.

-9-

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

5. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Millions of yen



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

Balance at December 31, 2007	¥	174,698	¥	402,991		¥	46,017	¥	2,720,146		¥	34,670		¥	(456,186	)	¥	2,922,336


Conversion of convertible debt and other		38		20														58
Cash dividends									(145,024	)								(145,024	)
Transfers to legal reserve							7,476		(7,476	)								-

Comprehensive income:
Net income									297,526									297,526
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments												(118,582	)					(118,582	)
Net unrealized gains and losses on securities												(5,956	)					(5,956	)
Net gains and losses on derivative instruments												5,642						5,642
Pension liability adjustments												(2,196	)					(2,196	)

Total comprehensive income																		176,434


Repurchase of treasury stock, net				(9	)										(19,893	)		(19,902	)


Balance at September 30, 2008 (Unaudited)	¥	174,736	¥	403,002		¥	53,493	¥	2,865,172		¥	(86,422	)	¥	(476,079	)	¥	2,933,902

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


Thousands of U.S. dollars

Balance at December 31, 2007	$	1,679,789	$	3,874,913		$	442,471	$	26,155,251		$	333,365		$	(4,386,404	)	$	28,099,385


Conversion of convertible debt and other		365		192														557
Cash dividends									(1,394,462	)								(1,394,462	)
Transfers to legal reserve							71,885		(71,885	)								-

Comprehensive income:
Net income									2,860,827									2,860,827
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments												(1,140,212	)					(1,140,212	)
Net unrealized gains and losses on securities												(57,269	)					(57,269	)
Net gains and losses on derivative instruments												54,250						54,250
Pension liability adjustments												(21,115	)					(21,115	)

Total comprehensive income																		1,696,481


Repurchase of treasury stock, net				(86	)										(191,279	)		(191,365	)


Balance at September 30, 2008 (Unaudited)	$	1,680,154	$	3,875,019		$	514,356	$	27,549,731		$	(830,981	)	$	(4,577,683	)	$	28,210,596

- 10 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

6. CONSOLIDATED STATEMENTS OF CASH FLOWS


Results for the nine months	Millions of yen						Thousands of
	Millions of yen						U.S. dollars
	Nine months			Nine months			Nine months
	ended			ended			ended
	September 30, 2008			September 30, 2007			September 30, 2008
	(Unaudited)			(Unaudited)			(Unaudited)

Cash flows from operating activities:
Net income	¥	297,526		¥	360,487		$	2,860,827
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		252,911			235,446			2,431,837
Loss on disposal of property, plant and equipment		4,699			5,599			45,183
Deferred income taxes		(1,908	)		(16,642	)		(18,346	)
Decrease in trade receivables		133,864			95,021			1,287,154
Increase in inventories		(122,385	)		(71,692	)		(1,176,779	)
Increase in trade payables		27,491			12,345			264,337
Decrease in accrued income taxes		(89,298	)		(42,499	)		(858,635	)
Increase (decrease) in accrued expenses		(23,499	)		10,224			(225,952	)
Decrease in accrued (prepaid) pension and severance cost		(7,059	)		(9,049	)		(67,875	)
Other, net		(36,907	)		(16,611	)		(354,876	)

Net cash provided by operating activities		435,435			562,629			4,186,875

Cash flows from investing activities:
Purchases of fixed assets		(342,830	)		(363,509	)		(3,296,442	)
Proceeds from sale of fixed assets		4,556			4,960			43,808
Purchases of available-for-sale securities		(7,206	)		(2,256	)		(69,288	)
Proceeds from sale of available-for-sale securities		4,062			6,831			39,058
Proceeds from maturity of held-to-maturity securities		10,000			10,000			96,154
Decrease in time deposits		4,929			16,362			47,394
Acquisitions of subsidiaries, net of cash acquired		(4,397	)		(12,520	)		(42,279	)
Purchases of other investments		(45,276	)		(2,293	)		(435,346	)
Other, net		(9,461	)		1,465			(90,972	)

Net cash used in investing activities		(385,623	)		(340,960	)		(3,707,913	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		6,510			1,851			62,596
Repayments of long-term debt		(14,875	)		(12,620	)		(143,029	)
Decrease in short-term loans		(2,630	)		(473	)		(25,288	)
Dividends paid		(145,024	)		(131,612	)		(1,394,462	)
Repurchases of treasury stock, net		(19,902	)		(450,279	)		(191,365	)
Other, net		(16,052	)		(9,532	)		(154,346	)

Net cash used in financing activities		(191,973	)		(602,665	)		(1,845,894	)

Effect of exchange rate changes on cash and cash equivalents		(64,983	)		(8,323	)		(624,837	)

Net decrease in cash and cash equivalents		(207,144	)		(389,319	)		(1,991,769	)

Cash and cash equivalents at beginning of period		944,463			1,155,626			9,081,375

Cash and cash equivalents at end of period	¥	737,319		¥	766,307		$	7,089,606

- 11 -

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

7. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

(1)

GROUP POSITION

Number of Group Companies



	September 30, 2008		December 31, 2007		Change
Subsidiaries		238		239		(1	)
Affiliates		18		15		3
Total		256		254		2

Change in Group of Entities

Subsidiaries


Addition:		13 Companies
Removal:		14 Companies

Affiliates (Carried at Equity Basis)


Addition:		3 Companies

Subsidiaries listed on domestic stock exchange

  Tokyo Stock Exchange (1st section): Canon Marketing Japan Inc., Canon Electronics Inc., Canon Finetech Inc.
  Tokyo Stock Exchange (2nd section): Canon Software Inc.
  Osaka Stock Exchange (2nd section): Canon Machinery Inc.
  JASDAQ: Tokki 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.”

8. OTHER

We have engaged Ernst & Young ShinNihon LLC to perform a review of the consolidated balance sheets as of September 30, 2008, the consolidated statements of income for the three and nine month periods ended September 30, 2008, and the consolidated statements of stockholders’ equity and cash flows for the nine month period ended September 30, 2008. This review engagement was performed in accordance with certain provisions of Statement of Auditing Standards No.100, “Interim Financial Information” (“SAS 100”), established by the American Institute of Certified Public Accountants. Additionally the consolidated interim financial information does not include certain disclosures, such as notes to financial statements, that are required under U.S. generally accepted accounting principles and by the United States Securities and Exchange Commission.

- 12 -

Canon Inc.
October 27, 2008

CONSOLIDATED FINANCIAL RESULTS FOR
THE THIRD QUARTER ENDED SEPTEMBER 30, 2008

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 (Year over year)		S 3
6.	PROFITABILITY		S 4
7.	IMPACT OF FOREIGN EXCHANGE RATES		S 4
8.	STATEMENTS OF CASH FLOWS		S 4
9.	R&D EXPENDITURE		S 5
10.	CAPITAL EXPENDITURE & DEPRECIATION AND AMORTIZATION		S 5
11.	INVENTORIES		S 5
12.	DEBT RATIO		S 5
13.	OVERSEAS PRODUCTION RATIO		S 5
14.	NUMBER OF EMPLOYEES		S 5


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


		2008						2007						Change year over year
		3rd quarter		2nd half (P)		Year		3rd quarter		2nd half		Year		3rd quarter			2nd half			Year
		3rd quarter		2nd half (P)		(P)		3rd quarter		2nd half		Year		3rd quarter			2nd half			Year

Japan
	Business machines		138,398		-		-		147,288		333,815		636,534		-6.0	%		-			-

	Office imaging products		87,598		-		-		95,542		201,046		384,546		-8.3	%		-			-
	Computer peripherals		38,929		-		-		37,036		100,205		186,214		+5.1	%		-			-
	Business information products		11,871		-		-		14,710		32,564		65,774		-19.3	%		-			-

	Cameras		33,055		-		-		36,766		77,005		149,892		-10.1	%		-			-

	Optical and other products		25,518		-		-		34,611		78,465		161,161		-26.3	%		-			-

	Total		196,971		452,701		899,300		218,665		489,285		947,587		-9.9	%		-7.5	%		-5.1	%

Overseas
	Business machines		512,604		-		-		538,492		1,155,140		2,299,008		-4.8	%		-			-

	Office imaging products		182,218		-		-		210,173		457,314		906,242		-13.3	%		-			-
	Computer peripherals		321,720		-		-		318,926		676,619		1,351,297		+0.9	%		-			-
	Business information products		8,666		-		-		9,393		21,207		41,469		-7.7	%		-			-

	Cameras		216,719		-		-		231,221		556,084		1,002,771		-6.3	%		-			-

	Optical and other products		59,695		-		-		62,445		114,113		231,980		-4.4	%		-			-

	Total		789,018		1,683,867		3,350,700		832,158		1,825,337		3,533,759		-5.2	%		-7.8	%		-5.2	%

	Americas
	Business machines		196,036		-		-		214,744		440,807		888,189		-8.7	%		-			-

	Office imaging products		72,804		-		-		89,450		186,185		373,093		-18.6	%		-			-
	Computer peripherals		119,360		-		-		120,543		244,911		495,676		-1.0	%		-			-
	Business information products		3,872		-		-		4,751		9,711		19,420		-18.5	%		-			-

	Cameras		74,971		-		-		84,963		225,428		390,768		-11.8	%		-			-

	Optical and other products		15,113		-		-		14,098		27,984		57,211		+7.2	%		-			-

	Total		286,120		610,751		1,196,200		313,805		694,219		1,336,168		-8.8	%		-12.0	%		-10.5	%

	Europe
	Business machines		231,460		-		-		244,203		543,342		1,067,998		-5.2	%		-			-

	Office imaging products		84,121		-		-		93,568		215,871		423,925		-10.1	%		-			-
	Computer peripherals		143,541		-		-		146,939		318,053		626,236		-2.3	%		-			-
	Business information products		3,798		-		-		3,696		9,418		17,837		+2.8	%		-			-

	Cameras		75,444		-		-		85,167		211,856		388,651		-11.4	%		-			-

	Optical and other products		9,751		-		-		9,548		21,709		42,637		+2.1	%		-			-

	Total		316,655		678,476		1,395,100		338,918		776,907		1,499,286		-6.6	%		-12.7	%		-6.9	%

	Other areas
	Business machines		85,108		-		-		79,545		170,991		342,821		+7.0	%		-			-

	Office imaging products		25,293		-		-		27,155		55,258		109,224		-6.9	%		-			-
	Computer peripherals		58,819		-		-		51,444		113,655		229,385		+14.3	%		-			-
	Business information products		996		-		-		946		2,078		4,212		+5.3	%		-			-

	Cameras		66,304		-		-		61,091		118,800		223,352		+8.5	%		-			-

	Optical and other products		34,831		-		-		38,799		64,420		132,132		-10.2	%		-			-

	Total		186,243		394,640		759,400		179,435		354,211		698,305		+3.8	%		+11.4	%		+8.7	%

Total
	Business machines		651,002		1,324,706		2,713,700		685,780		1,488,955		2,935,542		-5.1	%		-11.0	%		-7.6	%

	Office imaging products		269,816		562,501		1,161,600		305,715		658,360		1,290,788		-11.7	%		-14.6	%		-10.0	%
	Computer peripherals		360,649		717,039		1,460,200		355,962		776,824		1,537,511		+1.3	%		-7.7	%		-5.0	%
	Business information products		20,537		45,166		91,900		24,103		53,771		107,243		-14.8	%		-16.0	%		-14.3	%

	Cameras		249,774		593,889		1,123,300		267,987		633,089		1,152,663		-6.8	%		-6.2	%		-2.5	%

	Optical and other products		85,213		217,973		413,000		97,056		192,578		393,141		-12.2	%		+13.2	%		+5.1	%

	Total		985,989		2,136,568		4,250,000		1,050,823		2,314,622		4,481,346		-6.2	%		-7.7	%		-5.2	%

(P)=Projection

- S1 -


2. SEGMENT INFORMATION BY PRODUCT		Canon Inc. (Millions of yen)


		2008									2007									Change year over year
		3rd quarter			2nd half (P)			Year			3rd quarter			2nd half			Year			3rd quarter				2nd half			Year
		3rd quarter			2nd half (P)			(P)			3rd quarter			2nd half			Year			3rd quarter				2nd half			Year

Business machines
	Unaffiliated customers		651,002			1,324,706			2,713,700			685,780			1,488,955			2,935,542			-5.1	%			-11.0	%		-7.6	%
	Intersegment		-			-			-			-			-			-			-				-			-

	Total sales		651,002			1,324,706			2,713,700			685,780			1,488,955			2,935,542			-5.1	%			-11.0	%		-7.6	%

	Operating profit		134,020			242,762			545,800			152,371			314,790			650,261			-12.0	%			-22.9	%		-16.1	%
	% of sales		20.6%			18.3%			20.1%			22.2%			21.1%			22.2%			-				-			-

Cameras
	Unaffiliated customers		249,774			593,889			1,123,300			267,987			633,089			1,152,663			-6.8	%			-6.2	%		-2.5	%
	Intersegment		-			-			-			-			-			-			-				-			-

	Total sales		249,774			593,889			1,123,300			267,987			633,089			1,152,663			-6.8	%			-6.2	%		-2.5	%

	Operating profit		45,088			115,315			227,900			76,856			170,123			307,426			-41.3	%			-32.2	%		-25.9	%
	% of sales		18.1%			19.4%			20.3%			28.7%			26.9%			26.7%			-				-			-

Optical and other products
	Unaffiliated customers		85,213			217,973			413,000			97,056			192,578			393,141			-12.2	%			+13.2	%		+5.1	%
	Intersegment		61,447			113,283			235,200			65,361			130,742			238,659			-6.0	%			-13.4	%		-1.4	%

	Total sales		146,660			331,256			648,200			162,417			323,320			631,800			-9.7	%			+2.5	%		+2.6	%

	Operating profit		3,454			4,983			10,500			2,350			(305	)		21,080			+47.0	%			-			-50.2	%
	% of sales		2.4%			1.5%			1.6%			1.4%			-0.1%			3.3%			-				-			-

Corporate and Eliminations
	Unaffiliated customers		-			-			-			-			-			-			-				-			-
	Intersegment		(61,447	)		(113,283	)		(235,200	)		(65,361	)		(130,742	)		(238,659	)		-				-			-

	Total sales		(61,447	)		(113,283	)		(235,200	)		(65,361	)		(130,742	)		(238,659	)		-				-			-

	Operating profit		(53,296	)		(114,043	)		(204,200	)		(57,356	)		(116,811	)		(222,094	)		-				-			-

Consolidated
	Unaffiliated customers		985,989			2,136,568			4,250,000			1,050,823			2,314,622			4,481,346			-6.2	%			-7.7	%		-5.2	%
	Intersegment		-			-			-			-			-			-			-				-			-

	Total sales		985,989			2,136,568			4,250,000			1,050,823			2,314,622			4,481,346			-6.2	%			-7.7	%		-5.2	%

	Operating profit		129,266			249,017			580,000			174,221			367,797			756,673			-25.8	%			-32.3	%		-23.3	%
	% of sales		13.1%			11.7%			13.6%			16.6%			15.9%			16.9%			-				-			-

(P)=Projection

3. OTHER INCOME / DEDUCTIONS																							(Millions of yen)

		2008									2007									Change year over year
		3rd quarter			2nd half (P)			Year			3rd quarter			2nd half			Year			3rd quarter				2nd half			Year
		3rd quarter			2nd half (P)			(P)			3rd quarter			2nd half			Year			3rd quarter				2nd half			Year

	Interest and dividend, net		4,617			7,697			18,000			7,783			14,776			31,348			(3,166	)			(7,079	)		(13,348	)
	Forex gain / loss		(9,030	)		(4,286	)		(9,400	)		(20,388	)		(21,423	)		(31,943	)		+11,358				+17,137			+22,543
	Equity earnings / loss of affiliated companies		(509	)		(2,347	)		(3,400	)		200			349			5,634			(709	)			(2,696	)		(9,034	)
	Other, net		645			674			4,800			511			748			6,676			+134				(74	)		(1,876	)

	Total		(4,277	)		1,738			10,000			(11,894	)		(5,550	)		11,715			+7,617				+7,288			(1,715	)

(P)=Projection

- S2 -


4. SALES COMPOSITION BY PRODUCT		Canon Inc.



		2008										2007
		3rd quarter			2nd half (P)				Year			3rd quarter			2nd half			Year
		3rd quarter			2nd half (P)				(P)			3rd quarter			2nd half			Year

	Office imaging products
	Monochrome copying machines		41	%		39	%			41	%		44	%		43	%		45	%
	Color copying machines		38	%		39	%			37	%		35	%		36	%		35	%
	Others		21	%		22	%			22	%		21	%		21	%		20	%

	Computer peripherals
	Laser beam printers		75	%		70	%			72	%		74	%		71	%		73	%
	Inkjet printers		24	%		29	%			27	%		25	%		28	%		26	%
	Others		1	%		1	%			1	%		1	%		1	%		1	%

	Business information products
	Personal computers		60	%		60	%			60	%		61	%		62	%		62	%
	Others		40	%		40	%			40	%		39	%		38	%		38	%

	Cameras
	Digital cameras		74	%		76	%			75	%		75	%		77	%		76	%
	Video cameras		10	%		9	%			9	%		8	%		8	%		8	%
	Interchangeable lenses and others		16	%		15	%			16	%		17	%		15	%		16	%

	Optical and other products
	Semiconductor production equipment		35	%		46	%			46	%		42	%		43	%		46	%
	Others		65	%		54	%			54	%		58	%		57	%		54	%

(P)=Projection

* Figures related to analog personal copying machines, which were included in “Monochrome copying machines” of “Office imaging products,” are now included in “Others” of “Office imaging products.” Past figures have been reclassified to conform with the new presentation.

* The segment previously named “Film cameras / Lenses” is now named “Interchangeable lenses and others.”

5. SALES GROWTH IN LOCAL CURRENCY (Year over year)

		2008
		3rd quarter			2nd half (P)				Year
		3rd quarter			2nd half (P)				(P)

	Business machines
	Japan		-6.0	%		-				-
	Overseas		+1.3	%		-				-

	Total		-0.3	%		-3.2	%			-0.4	%

	Cameras
	Japan		-10.1	%		-				-
	Overseas		-0.9	%		-				-

	Total		-2.2	%		+3.4	%			+5.9	%

	Optical and other products
	Japan		-26.3	%		-				-
	Overseas		-1.9	%		-				-

	Total		-10.6	%		+16.8	%			+8.4	%

	Total
	Japan		-9.9	%		-7.5	%			-5.1	%
	Overseas		+0.4	%		+2.3	%			+3.9	%
	Americas		-0.3	%		-1.9	%			+1.2	%
	Europe		-4.3	%		-2.4	%			-0.5	%
	Other areas		+10.6	%		+21.0	%			+18.6	%

	Total		-1.7	%		+0.3	%			+2.0	%

								(P)=Projection

- S3 -


6. PROFITABILITY															Canon Inc.

		2008						2007
		1st -3rd quarter			Year (P)			1st-3rd quarter				Year

	ROE		13.5%			12.7%			16.6%				16.5%

	ROA		9.0%			8.5%			10.9%				10.8%

											(P)=Projection
7. IMPACT OF FOREIGN EXCHANGE RATES
(1) Exchange rates																	(Yen)

		2008										2007
		3rd quarter			2nd half (P)			Year (P)				3rd quarter				Year

	Yen/US$		107.61			103.49			104.07				117.67				117.50
	Yen/Euro		161.29			146.08			153.23				161.82				161.41

																	(P)=Projection

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

		2008
		3rd quarter			Year (P)

	US$		(30.3	)		(210.1	)
	Euro		(0.8	)		(59.6	)
	Other currencies		(1.1	)		(8.6	)

	Total		(32.2	)		(278.3	)

				(P)=Projection

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

		2008
		4th quarter (P)

	On sales
	US$		4.6
	Euro		2.2

	On operating profit
	US$		2.6
	Euro		1.7

		(P)=Projection
8. STATEMENTS OF CASH FLOWS										(Millions of yen)

		2008						2007
		3rd quarter			Year (P)			3rd quarter				Year

	Net cash provided by operating activities
	Net income		83,041			375,000			105,304				488,332
	Depreciation and amortization		89,221			360,000			92,202				341,694
	Other, net		(72,425	)		(75,000	)		(75,201	)			9,243

	Total		99,837			660,000			122,305				839,269

	Net cash used in investing activities		(96,082	)		(485,000	)		(131,607	)			(432,485	)

	Free cash flow		3,755			175,000			(9,302	)			406,784

	Net cash used in financing activities		(107,003	)		(225,000	)		(322,895	)			(604,383	)

	Effect of exchange rate changes on cash and cash equivalents		(25,828	)		(94,500	)		(10,224	)			(13,564	)

	Net change in cash and cash equivalents		(129,076	)		(144,500	)		(342,421	)			(211,163	)

	Cash and cash equivalents at end of period		737,319			800,000			766,307				944,463

											(P)=Projection

- S4 -


9. R&D EXPENDITURE					(Millions of yen)					Canon Inc.
	2008				2007
	3rd quarter		Year (P)		3rd quarter			Year

Business machines		28,062		-		27,929			122,570
Cameras		11,146		-		10,946			44,304
Optical and other products		47,463		-		51,139			201,387

Total		86,671		365,000		90,014			368,261

% of sales		8.8%		8.6%		8.6%			8.2%

							(P)=Projection

10. CAPITAL EXPENDITURE & DEPRECIATION AND AMORTIZATION


(Millions of yen)
		2008					2007
		3rd quarter		Year (P)		3rd quarter		Year
	Capital expenditure		101,356		410,000		136,347		428,549
	Depreciation and amortization		89,221		360,000		92,202		341,694
(P)=Projection

11. INVENTORIES


(1) Inventories	(Millions of yen)
		2008		2007		Difference
		Sep.30		Dec.31
Business machines			298,038		277,444	Difference		+20,594
Cameras			156,979		107,406		+49,573
Optical and other products			209,061		178,624		+30,437

Total			664,078		563,474		+100,604

(2) Inventories/Sales* (Days)



	2008		2007		Difference
	Sep.30		Dec.31
Business machines		40		34	Difference		+6
Cameras		51		31		+20
Optical and other products		208		169		+39
Total		58		44		+14


	*Index based on the previous six months sales.

12. DEBT RATIO



	2008		2007		Difference
	Sep.30		Dec.31
Total debt / Total assets		0.4%		0.6%	Difference	-0.2%

13. OVERSEAS PRODUCTION RATIO



	2008		2007
	1st-3rd quarter		Year
Overseas production ratio		40%		40%

14. NUMBER OF EMPLOYEES



	2008		2007		Difference
	Sep.30		Dec.31
Japan		60,127		55,227	Difference		+4,900
Overseas		88,778		76,125		+12,653

Total		148,905		131,352		+17,553

- S5 -