TD Bank Survey: CFOs plan to increase capital expenditures in 2012

Cherry Hill, N.J. -- Middle market CFOs, buoyed by increasing optimism fueled by sales growth, are prepared to increase capital expenditures by dipping into their stockpile of cash reserves, according to a survey by TD Bank. The top three areas of expected capital deployment include technology (40%), improvements to existing facilities (17%), construction of new facilities (12%),



According to the survey, three-quarters of financial decision-makers at mid-sized companies say they expect sales to increase over the next 12 months despite lingering economic headwinds, with half (51%) expecting to increase their capital expenditures in 2012, up from 39% last year.



"Middle market companies, much like their larger brethren, have hoarded cash since late 2008, with the expectation that worse days were ahead," said Walter Owens, head of specialty and corporate banking at TD Bank. Now with interest rates at record lows and the Fed promising to stay the course through 2012 into 2013, the negative headwinds are abating and companies are making strategic capital investments so that they emerge stronger."



Despite persisting economic headaches across the globe, about two-thirds of financial executives said their company's sales increased over the past 12 months (66%), including 29% who saw increases of 10% or more. Looking ahead to the next 12 months:

• Seventy five percent expect sales to increase;


• Twenty seven percent expect an increase of 10% or more; and


• Nine percent expect a decrease in sales.

As companies steeled for a double-dip recession that never materialized, 54.5% of executives said they stockpiled at least a modest amount of cash to mitigate any risk of a downturn. Now about half are ready to put some of that capital to work.



Aside from the overall economic climate, cash flow, margins and revenue are expected to be the biggest impediments to making capital investments over the next 12 months (43%), followed by the political climate, regulation and government policy (25%), sufficient funding (11%), expenses (6%) and having enough trained staff (6%).



As a hedge against a possible continued lull in the economy, businesses are most likely to reduce expenses (34%), followed by investing in new business lines (14%), freezing hiring (10%), freezing wages (9%), paying down debt (8%) and increasing liquidity or cash reserves (7%). Only 5% are most likely to use layoffs as a hedge against continued economy problems.