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CFO Survey

Survey: CFO Outlook Dips in Second Quarter

  • Anticipated Expenses and Economic Uncertainty Result in Lower Confidence
  • CFOs Remain Cautious on Capital Spending, but More Positive on Credit Conditions

MORRISTOWN, N.J. and NEW YORK, N.Y., July 30, 2010 – Chief Financial Officers are expressing less confidence and more caution, with realizations that the U.S. economy and their own businesses may still be vulnerable.  According to the second quarter 2010 “CFO Outlook Survey,” released today by Financial Executives International (FEI) and Baruch College’s Zicklin School of Business, CFOs will face a number of added expenses over the next 12 months, including new costs related to taxes, financial regulatory reform and healthcare.  While confidence is down, and areas such as IPO activity and the rate of capital spending remain slow, CFOs’ outlook toward credit is more favorable and various findings demonstrate substantial progress since 2009.

After rising for four consecutive quarters, the Q2 CFO Optimism Index for the U.S. economy experienced a nearly five point decrease (down from 58.14 to 53.60), and CFOs’ outlook for their own companies fell slightly from 69.49 to 67.40.  CFOs’ tapering confidence this quarter is reflected in some of their current and forward-looking business plans.  When asked about their companies’ current capital spending, over two-thirds of respondents state that they are still spending cautiously or holding off on all or nearly all capital investments (69%).   Comparatively, this number is slightly less than the 84 percent who indicated the same behavior this time last year.  Respondents this quarter (largely comprised of private entities at 81% of the sample) overwhelmingly have no plans to take their companies public, with only four percent considering an IPO sometime in the next two years.

CFOs this quarter also indicated that they anticipate a number of newly added expenses to appear on their balance sheets over the next year.  When asked about the potential impact the financial regulatory reform package would have, the most-cited effect was increased banking costs (45%), followed by additional compliance and reporting requirements and costs (39%).  Separately, the majority of CFOs (53%) also predict their taxes will increase.  Despite expected tax increases, a large majority of CFOs (78%) remain confident that their business decisions will remain unaffected by the tax outlook.

“The quarterly CFO Outlook Survey has shown that, while the worst is likely behind us, CFOs are still being prudent when navigating their companies fully out of the recession,” said Marie Hollein, President and CEO of FEI. “With unemployment levels still high, it is not surprising that CFOs have retracted some of the economic confidence they expressed earlier this year.  We are seeing CFOs in recovery mode, and to prepare for potential costs in a number of areas, they are taking a more cautious approach to protect their companies in the long-term.”

While cautiousness continues, CFOs are still demonstrating signs that conditions have changed since 2009.  Despite this quarter’s dip, CFOs are considerably more optimistic than they were this time last year.  CFOs’ economic confidence this quarter is 22 percent higher than Q2 2009 (41.90), and confidence in their businesses is up 31 percent from Q2 2009 (55.44).  Similar to last quarter, CFOs are expecting increases in net earnings (20%), revenue (11%) and hiring and technology spending (both at 7%) over the next 12 months. 

“The quarter was characterized by a moderating of hopes and expectations,” said John Elliott, Dean of the Zicklin School of Business at Baruch College. “With the exception of technology spending, almost all of the expected increases for the next 12 months are smaller than they were last quarter.  On the other hand, an 11 percent increase in revenues and 20 percent increases in earnings, supported by hiring and investments continue to signal improvement in the economy, albeit slowly.”

Cos. Prepare to Pay Back Debt in 2011/12; Fewer See Credit/Debt Restrictions

CFOs are now conveying more relief in their access to credit.  Less than one fifth of respondents (17%) feel that it will be more difficult to access credit over the next six months, compared to the 24 percent of CFOs who shared this sentiment when asked in the third quarter of 2009.  A large majority now believe that credit conditions will remain the same, and an additional 21 percent believe access to credit will be easier. With regard to lending, most CFOs feel that amounts being lent have gone unchanged versus the start of the year.

Cash positions remain very similar to last quarter, with respondents to this quarter’s survey reporting, on average, that 15 percent of their company’s assets are currently held in cash.  In terms of debt-to-equity ratio, the average among all respondents is 13.4.  Respondents were split on their satisfaction level with their debt-to-equity ratio: while half (50%) felt that it is where they would like it to be, another 44 percent felt it was either too low (14%) or too high (30%). CFOs also responded that their companies on average have 21 percent of their outstanding long-term debt due to lenders in 2011, and another 17 percent due to lenders the following year. The majority of companies plan to use cash generated in their businesses to fund these obligations and 26 percent plan to issue new debt.

Healthcare Vexing CFOs

CFOs this quarter continue to weigh in on the imminent impact of healthcare reform, and how it will influence their companies and employees.  While several months have gone by since the package was passed, CFOs are still preparing for a 10 percent increase in healthcare costs over the next 12 months; the same time last year, they anticipated only a seven percent increase.  Similar to previous quarters, CFOs still plan to take extreme measures to offset potential added costs.  Two thirds (66%) plan to increase the monthly amount that their employees pay for benefits, and over a third (34%) also plan to decrease the scope of the healthcare package.

However, by and large, companies have held off communicating with their staffs potential healthcare-related changes.  Only 29 percent of CFOs’ companies have begun conversations with employees on how rising healthcare costs under the new law will affect their package.  CFOs are split on the intricacy of negotiating new packages with staff - while the majority (58%) have found the process more difficult than expected, 42 percent stated that the process has been easier than expected.

Additional Findings:

Full survey results and historical data comparisons are available at or from Nicole Madison at The study is also available online at the Financial Executives Research Foundation bookstore and on the Baruch College home page at

Overview of the Survey:

This quarter, the CFO Outlook Survey, conducted by Financial Executives International and Baruch College’s Zicklin School of Business, interviewed 279 corporate CFOs electronically from July 8-16. CFOs from both public and private companies and from a broad range of industries, revenues and geographic areas, including some off-shore companies, are represented. Survey respondents are members of Financial Executives International.

Financial Executives International has been conducting surveys gauging the country’s economic outlook from the perspective of CFOs for more than 11 years.

About FEI

Financial Executives International is the leading advocate for the views of corporate financial management. Its 15,000 members hold policy-making positions as chief financial officers, treasurers and controllers at companies from every major industry. FEI enhances member professional development through peer networking, career management services, conferences, teleconferences and publications. Members participate in the activities of 85 chapters, 74 in the U.S. and 11 in Canada. FEI is headquartered in Morristown, NJ, with additional offices in Washington, DC, and Toronto.

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About Baruch

Baruch College is a senior college of the City University of New York. The Zicklin School of Business at Baruch College is the largest and most diverse AACSB accredited collegiate school of business in the nation. Baruch has a long tradition of producing accounting and finance graduates who become leaders as CPAs and CFOs.

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Media Contacts: Nicole Madison of FD +1-212-850-5647; Kristen Lewko of FD +1-212-850-5756