(Millions of yen, thousands of U.S. dollars, except per share amounts)
Actual Projected
Three months ended March 31, 2010 Three months ended March 31, 2009 Change(%)
Three months ended March 31, 2010 Year ending December 31, 2010 Change(%)
Net sales ¥ 755,526 ¥ 687,034 + 10.0 $ 8,123,935 ¥ 3,750,000 + 16.9
Operating profit 86,843 20,032 + 333.5 933,796 360,000 + 65.9
88,852 22,394 + 296.8 955,398 360,000 + 64.1
Net income attributable
to Canon Inc. ¥ 56,811 ¥ 17,744 + 220.2 $ 610,871 ¥ 240,000 + 82.3
Net income attributable to Canon Inc. stockholders per share:
- Basic ¥ 46.02 ¥ 14.37 + 220.3 $ 0.49 ¥ 194.42 + 82.3
- Diluted 46.02 14.37 + 220.3 0.49 - -
As of March 31, 2010 As of December 31, 2009 Change(%) As of March 31, 2010
Total assets ¥ 4,032,810 ¥ 3,847,557 + 4.8 $ 43,363,548
Canon Inc. stockholders’ equity ¥ 2,675,909 ¥ 2,688,109 - 0.5 $ 28,773,215
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 JPY93 = U.S.$1, the approximate exchange rate on the Tokyo Foreign
Exchange Market as of March 31, 2010, solely for the convenience of the reader.

I. Operating Results and Financial Conditions
2010 First Quarter in Review
Looking back at the global economy in the first quarter of 2010, economic conditions have gradually begun to improve globally amid the recovery trend from the second half of 2009. Although the economic recovery in Europe has lagged mainly due to the financial concerns of the Greek government, the United States has recorded a steady revival in consumer spending and Japan has seen a sharp increase in exports, mainly to Asian countries. The economies of the Asian region, such as China and India, along with other emerging
countries, continued to achieve robust growth.
As for the markets in which Canon operates amid these conditions, within the office equipment market, while demand for monochrome models of network digital multifunction devices (MFDs) remained sluggish, demand for color models steadily recovered. Demand for laser printers also gained momentum compared
with the stagnant sales of the previous year. As for the consumer products market, demand for digital single-lens reflex (SLR) cameras displayed solid growth throughout global markets, whereas demand for compact digital cameras maintained growth in emerging markets, such as those in Asia, but remained
relatively sluggish in developed countries. With regard to inkjet printers, demand recovered gradually and the market size expanded from the year-ago period. In the industry and others market, the markets for semiconductor lithography equipment and liquid crystal display (LCD) lithography equipment showed positive signs with an upturn in order placements, owing to improved conditions within the semiconductor device and LCD panel markets. The average value of the yen during the year was ¥90.63 to the U.S. dollar,
a year-on-year appreciation of approximately ¥3, and ¥125.07 to the euro, a year-on-year depreciation of approximately ¥3.
Net sales for the quarter totaled ¥755.5 billion (U.S.$8,124 million), an increase of 10.0% from the year-ago period, thanks to robust sales of such consumer products as digital cameras and inkjet printers, along with a sales rebound for office products such as laser printers and other factors. The gross profit ratio rose 5.3 points year on year to 48.8%, mainly owing to the launch of new products and ongoing cost-cutting efforts, along with the rise in production turnover accompanying an increase in production.
Consequently, gross profit rose by 23.3% to ¥368.6 billion (U.S.$3,963 million). Operating expenses increased by just 1.1% owing to continued Group-wide efforts to thoroughly cut spending, resulting in a climb in operating profit of approximately 4.3 fold to ¥86.8 billion (U.S.$934 million). Other income (deductions) recorded a decrease of ¥0.4 billion (U.S.$4 million), reflecting a deterioration in currency exchange losses and other factors. As a result, income before income taxes totaled ¥88.9 billion (U.S.$955
million), a year-on-year jump of approximately 4.0 fold, while net income attributable to Canon Inc. also surged approximately 3.2 fold to ¥56.8 billion (U.S.$611 million).
Basic net income attributable to Canon Inc. stockholders per share was ¥46.02 (U.S.$0.49), an increase of ¥31.65 (U.S.$0.34) compared with the corresponding period of the previous year.

Results by Segment
Looking at Canon’s quarterly performance by business sector, within the Office Business Unit, while sales volume of color network digital MFDs increased in major regions boosted by the introduction of new products and the recovery in demand, sales volume for laser printers, which suffered flagging sales in the
previous year largely due to an adjustment of inventory levels, more than doubled, resulting in a substantial increase of 131%. Consequently, sales for the segment totaled ¥409.1 billion (U.S.$4,399 million), an increase of 8.0% year on year, and operating profit increased 50.5% to ¥72.1 billion (U.S.$775 million), mainly as a result of expanded sales and the rise in the gross profit ratio.
Within the Consumer Business Unit, sales volumes of such new digital SLR cameras as the competitively priced EOS Digital Rebel T1i (EOS 500D) and the new EOS Digital Rebel T2i (EOS 550D), along with the EOS 5D Mark II and EOS 7D advanced-amateur models, achieved healthy growth. As for compact digital
cameras, the Company launched three new ELPH (IXUS)-series models and five new PowerShot-series models, boosting sales volumes especially in emerging markets. Consequently, sales volume for digital cameras recorded a year-on-year increase of 11%. As for inkjet printers, the market realized a turnaround
and sales, particularly in Asia, displayed solid growth, contributing to an increase in sales volume of 8%.
As a result, sales for the segment rose 19.8% year on year to ¥290.3 billion (U.S.$3,121 million). Operating profit increased by 166.6% to ¥47.3 billion (U.S.$509 million), largely reflecting the substantial rise in the
gross profit ratio.
In the Industry and Others Business Unit, while the independent business-related sales of Group subsidiaries increased in line with the turnaround in business conditions, sales of both semiconductor lithography equipment and LCD lithography equipment remained slack due to the lingering effects of the
stagnant market from the previous year, resulting in a decline in sales of 4.1% to ¥82.3 billion (U.S.$885 million). Operating loss improved by ¥12.7 billion (U.S.$136 million) to ¥3.0 billion (U.S.$32 million),
owing to the rise in the gross profit ratio combined with a reduction in expenses.

Cash Flow
In the first quarter of 2010, cash flow from operating activities totaled ¥161.7 billion (U.S.$1,738 million), an increase of ¥109.2 billion (U.S.$1,174 million) year on year, mainly due to the significant increase in profit. Although investments to subsidiaries increased significantly, such as for the acquisition of shares of Océ N.V. to strengthen the printing business, capital investment was focused on items relevant to introducing new products, restraining the year-on-year increase of cash flow from investing activities
slightly by ¥9.1 billion (U.S.$98 million) to a total of ¥111.1 billion (U.S.$1,195 million). Accordingly, free cash flow totaled positive ¥50.6 billion (U.S.$544 million), a turnaround of ¥100.1 billion (U.S.$1,077
million) from the corresponding year-ago period.
Cash flow from financing activities recorded an outlay of ¥124.3 billion (U.S.$1,336 million), mainly arising from the dividend payout coupled with the partial repayment of borrowings of Océ N.V., which was made a subsidiary of Canon. Consequently, cash and cash equivalents decreased by ¥79.5 billion (U.S.$855 million) to ¥715.5 billion (U.S.$7,694 million) from the end of the previous year.

Outlook
As for the outlook in the second quarter and thereafter, although developed countries face uncertainty regarding future prospects due to such factors as fiscal challenges and employment problems, those economies appear to be steadily headed for recovery with China and other emerging nations, which are
expected to fuel global growth, likely to continue enjoying healthy expansion.
In the businesses in which Canon is involved, within the office equipment market, demand for such products as color network digital MFDs and laser printers is projected to lead toward a gradual recovery.
With respect to the consumer products market, demand for digital SLR cameras is expected to achieve solid growth while sales of compact digital cameras and inkjet printers will likely expand gradually in response to the economic turnaround. As for the industry and others market, demand for semiconductor lithography equipment is expected to recover strongly as device makers begin investing again and demand for LCD lithography equipment is also expected to increase as LCD panel manufacturers gear up to boost production.
With regard to currency exchange rates for the second quarter onward, on which Canon’s performance outlook is based, despite the continued uncertainty over future interest rate policies for major countries along with the speed and level of economic recovery and other factors, Canon anticipates exchange rates
for the period of ¥90 to the U.S. dollar and ¥125 to the euro, representing an appreciation of approximately ¥3 against the U.S. dollar, and approximately ¥5 against the euro compared with the previous year. Upon taking into consideration current business sentiment based on these foreign exchange rate assumptions, Canon projects net sales of ¥3,750.0 billion (U.S.$40,323 million), a year-on-year increase of 16.9%; operating profit of ¥360.0 billion (U.S.$3,871 million), a year-on-year increase of 65.9%; income before
income taxes of ¥360.0 billion (U.S.$3,871 million), a year-on-year increase of 64.1%; and net income attributable to Canon Inc. of ¥240.0 billion (U.S.$2,581 million), a year-on-year increase of 82.3%.