(Millions of yen, thousands of U.S. dollars, except per share amounts)
Actual Projected
Three months endedm March 31, 2009 Three months ended
March 31, 2008 Change(%)
Three months ended March 31, 2009
Year ending December 31, 2009 Change(%)
Net sales ¥ 687,034 ¥ 1,007,538 - 31.8 $ 7,010,551 ¥ 3,330,000 - 18.7
Operating profit 20,032 170,830 - 88.3 204,408 180,000 - 63.7
22,394 166,642 - 86.6 228,510 180,000 - 62.6
Net income attributable
to Canon Inc. ¥ 17,744 ¥ 106,644 - 83.4 $ 181,061 ¥ 110,000 - 64.4
Net income attributable to Canon Inc. stockholders per share:
- Basic ¥ 14.37 ¥ 84.57 - 83.0 $ 0.15 ¥ 89.11 - 63.8
- Diluted 14.37 84.56 - 83.0 0.15 - -
As of
March 31, 2009 As of December 31, 2008 Change(%)
As of March 31, 2009
Total assets ¥ 3,751,117 ¥ 3,969,934 - 5.5 $ 38,276,704
Canon Inc. stockholders’ equity ¥ 2,647,032 ¥ 2,659,792 - 0.5 $ 27,010,531
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 JPY98 = U.S.$1, the approximate exchange rate on the Tokyo Foreign
Exchange Market as of March 31, 2009, solely for the convenience of the reader.

I. Operating Results and Financial Conditions
2009 First Quarter in Review
Looking back at the global economy in the first quarter of 2009, the severity of the global recession that struck last year increased among developed and emerging countries. In the United States, deteriorating employment conditions and other factors continued to negatively affect personal consumption, whereas in Europe, exports continued to shrink and consumer spending weakened further. In Japan, reductions in corporate capital spending, coupled with a decrease in exports and declining inventory levels mainly in the manufacturing industry, have clearly had a negative impact on the real economy. Furthermore, growth in
Asia and other emerging economies decelerated due to waning exports, thereby depriving the global economy of an engine for growth. As for the foreign exchange market, although the unilateral appreciation of the yen that began in early autumn last year reversed, the yen remained relatively highly valued against other foreign currencies during the quarter.
As for the markets in which Canon operates amid these conditions, within the office imaging products market, sales of monochrome and color network digital multifunction devices (MFDs) remained low due to continued restrained corporate investment in each region. In the computer peripherals market, in addition to a drop in demand for monochrome models, sales of color laser beam printers, which had enjoyed healthy expansion, fell below the year-ago level. With regard to inkjet printers, a significant decrease in demand for
single-function models resulted in a contraction of the market compared with the previous year. As for the cameras segment, while demand for digital single-lens reflex (SLR) cameras achieved solid growth, demand for compact digital cameras declined amid further drops in prices. With respect to the optical
equipment segment, demand fell for both aligners, used to produce liquid crystal display (LCD) panels, and for steppers, utilized in the production of semiconductors. The average value of the yen during the first-quarter was ¥93.86 to the U.S. dollar, a year-on-year appreciation of about 12%, and ¥121.85 to the euro, a year-on-year appreciation of approximately 29%.
Net sales for the period totaled ¥687.0 billion (U.S.$7,011 million), a year-on-year decline of 31.8%, mainly due to the effects of substantially reduced sales volumes arising from decreased demand for network MFDs and laser beam printers, along with the substantial rise in the value of the yen. Despite the
launch of new products and ongoing cost-cutting efforts targeting an improved gross profit ratio, such factors as the appreciation of the yen, reduction in sales volumes and falling product prices led to a 6.1 point decline in the ratio to 43.5%. Consequently, gross profit decreased by 40.2% to ¥298.8 billion
(U.S.$3,049 million). Although, operating expenses declined by 15.3% owing to a Group-wide effort to curb expenses, operating profit dropped 88.3% to ¥20.0 billion (U.S.$204 million). Other income (deductions) reversed to positive by ¥6.6 billion (U.S.$67 million), mainly due to an improvement in
currency exchange losses. As a result, income before income taxes totaled ¥22.4 billion (U.S.$229 million), a decline of 86.6%, while net income attributable to Canon Inc. also recorded a decrease of 83.4% to ¥17.7
billion (U.S.$181 million).
Basic net income attributable to Canon Inc. stockholders per share was ¥14.37 (U.S.$0.15), a year-on-year decline of ¥70.20 (U.S.$0.72).

Results by Product Segment
Looking at Canon’s first-quarter performance by business sector, within the business machines segment, demand for office equipment declined significantly amid the rapid deterioration of economic conditions. As for office imaging products, while demand for digital commercial printers increased, flagging sales in major regions for network digital MFDs along with the strong yen resulted in a year-on-year decline in sales of 31.3% for the segment. In the field of computer peripherals, the significant drop in demand for
laser beam printers along with the decline in sales due to the need to reduce distribution inventories, combined with the appreciation of the yen, resulted in a sales decrease of 41.9% compared with the year-ago period. As for inkjet printers, amid a shrinking global market, while sales volume displayed solid
growth in the Americas which contributed to minimizing the decrease of sales volume for the segment overall, the impact of the yen’s appreciation and falling prices resulted in a decline in sales by 26.6%.
Consequently, sales for the computer peripherals segment overall dropped by 38.0%. As for business information products, reduced personal computer sales in the Japanese domestic market resulted in a sales decline of 23.7%. Collectively, sales of business machines overall totaled ¥451.6 billion (U.S.$4,608 million), down 34.7%, while operating profit totaled ¥59.1 billion (U.S.$603 million), falling 63.8% mainly due to the significant decrease in gross profit stemming from the reduction in sales.
Within the cameras segment, the high-resolution, competitively priced EOS Digital Rebel XSi (EOS 450D) and advanced-amateur model EOS 5D Mark II digital SLR cameras continued to enjoy healthy sales during the quarter, contributing to growth in sales volume. As for compact digital cameras, although the
introduction of four new ELPH (IXUS)-series models and four PowerShot-series models was well received, sales volume contracted year on year amid stagnant market conditions. Consequently, along with the impact of falling average sales prices and the appreciation of the yen, sales for the cameras segment overall declined by 24.4% to ¥165.5 billion (U.S.$1,689 million). Additionally, operating profit for the sector decreased by 82.9% to ¥7.8 billion (U.S.$80 million) mainly as a result of the drop in sales value coupled
with the significant decline in the gross profit ratio.
In the optical and other products segment, sales of steppers remained stagnant due to aggravating market conditions for memory chips. As a result, sales for the segment totaled ¥69.9 billion (U.S.$713 million), a decline of 27.8%. Operating profit dropped to negative ¥11.3 billion (U.S.$116 million) due to the significant drop in sales and other factors.

Cash Flow
In the first quarter of 2009, Canon generated cash flow from operating activities of ¥52.4 billion (U.S.$535 million), a decrease of ¥55.0 billion (U.S.$562 million) compared with the previous year, mainly reflecting
the reduction in consolidated net income. As capital investments was focused on items relevant to introducing new products and achieving cost reductions, cash flow from investing activities totaled ¥102.0 billion (U.S.$1,041 million), a year-on-year decrease of ¥87.5 billion (U.S.$892 million). Accordingly, free cash flow totaled negative ¥49.6 billion (U.S.$506 million), a decrease of ¥32.4 billion (U.S.$331 million) from the year-ago period.
Cash flow from financing activities recorded an outlay of ¥71.0 billion (U.S.$724 million), mainly arising from the dividend payout of ¥67.9 billion (U.S.$693 million). Consequently, cash and cash equivalents decreased by ¥102.0 billion (U.S.$1,041 million) to ¥577.2 billion (U.S.$5,890 million) from the end of the previous year.

Outlook
As for the outlook for the global economy in the second quarter and thereafter, although countries worldwide began launching various economic stimulus packages and financial policies in response to the
current global recession, it is still expected to take considerable time before the effects of such measures will be felt and the global economy realizes a turnaround.
In the businesses in which Canon is involved, demand for network digital MFDs and laser beam printers is projected to remain sluggish for both monochrome and color models due to market reluctance in purchasing office equipment. Demand for inkjet printers and compact digital cameras is expected to remain
stagnant in the near term due to the drop in consumer sentiment resulting from the weak economy, whereas demand for digital SLR cameras is expected to remain strong. With respect to steppers and aligners, demand is expected to further decline as device makers and LCD panel manufacturers reassess their capital
expenditure plans.
With regard to currency exchange rates for the second quarter onward, on which Canon’s performance outlook for the full year is based, despite the continued uncertainty over future interest rate policies, economic prospects and other factors for major countries, Canon anticipates exchange rates for the period
of ¥95 to the U.S. dollar and ¥125 to the euro, representing an appreciation of approximately 9% against the U.S. dollar, and about 22% against the euro for the full year. Upon taking into consideration first-quarter business results along with current market conditions based on these foreign exchange rate assumptions, Canon has revised its previously announced projections and now anticipates net sales of ¥3,330.0 billion (U.S.$33,980 million), operating profit of ¥180.0 billion (U.S.$1,837 million), income before income taxes of ¥180.0 billion (U.S.$1,837 million) and net income attributable to Canon Inc. of ¥110.0 billion (U.S.$1,122 million).