CFO SignalsTM What North America’s top finance executives are …€¦ · Findings at a glance 3...

CFO SignalsTM

What North America’s top finance executives are thinking – and doing

4th Quarter 2014

Full Report

CFO Signals™

2 CFO Signals

About the CFO Signals survey

Each quarter, CFO Signals™ tracks the thinking and actions of CFOs

representing many of North America’s largest and most influential

companies. This is the fourth quarter report for 2014.

For more information about the survey, please see the methodology section

at the end of this document or contact [email protected].

Who participated this quarter?

One hundred and two CFOs responded during the two-week period ending

November 21. Seventy-two percent of respondents are from public

companies, and 82% are from companies with more than $1B in annual

revenue. For more information, please see the “About the survey” section of

this report.

Findings at a glance 3

Summary 4

Key charts 6

Topical highlights 9

Appendix

• Detailed findings 24

• Longitudinal data tables 35

• Industry trends 38

• Country trends 47

• About the survey 51

IMPORTANT NOTES ABOUT THIS SURVEY REPORT:

All participating CFOs have agreed to have their responses aggregated

and presented.

Please note that this is a “pulse survey” intended to provide CFOs with

quarterly information regarding their CFO peers’ thinking across a variety

of topics. It is not, nor is it intended to be, scientific in any way, including

in its number of respondents, selection of respondents, or response rate,

especially within individual industries. Accordingly, this report summarizes

findings for the surveyed population but does not necessarily indicate

economy- or industry-wide perceptions or trends. Except where noted, we

do not comment on findings for segments with fewer than 5 respondents.

Please see the Appendix for more information about survey methodology.

This publication contains general information only, and Deloitte is not, by

means of this publication, rendering accounting, business, financial,

investment, tax, legal, or other professional advice or services. This

publication is not a substitute for such professional advice or services, nor

should it be used as a basis for any decision or action that may affect

your business. Before making any decisions that may impact your

business, you should consult a qualified professional advisor.

Participation by country

25 23

13 13

8 6 5 5 4

Participation by industry

US 77.4%

Canada 16.7%

Mexico 5.9%

mailto:[email protected]

Findings at a Glance

3 CFO Signals

Perceptions

How do you regard the current and future status of the North American, Chinese,

and European economies? Views of North America are again strongest, with a very

high 63% of CFOs describing conditions as good (up from 44% last quarter), and the

same proportion expecting better conditions in a year (up from 55% last quarter). Thirty-

four percent regard China’s economy as good (up from 27% last quarter), and 25%

expect improvement (down from 29% last quarter). Just 2% describe Europe as good,

and only 13% see it improving over the next year. Page 9.

What is your perception of the capital markets? Forty-nine percent of CFOs say

external financial and economic risks are higher than normal, and 61% believe US

markets are overvalued (both numbers are about the same as last quarter). An

overwhelming 88% say debt is currently an attractive financing option, and 48% of public

company CFOs view equity financing favorably (up sharply from 30%). Page 10.

Priorities

What is your company’s business focus for the next year? CFOs again indicate a

substantial bias toward growing revenue and investing cash over lowering costs and

returning cash—despite the fact that their capital spending expectations remain muted

(see below). They are biased toward growth in current geographies over new

geographies and toward organic over inorganic growth. Page 11.

Expectations

Compared to the past 12 months, how do you expect your key operating metrics

to change over the next 12 months? Revenue growth expectations, which reached

their three-year high last quarter, receded from 6.8%* to 6.0%* but are still

comparatively strong. Earnings expectations, coming off their highest level in more than

a year, declined from 10.9%* to a still-strong 9.7%*. Capital spending rose from 5.0%* to

5.5%*—mostly because US CFOs’ estimates bounced back from last quarter’s survey-

low 3.5%* to 5.8%* this quarter. Pages 12-14.

Sentiment

Compared to three months ago, how do you feel now about the financial

prospects for your company? Continuing a string of seven straight quarters of positive

net optimism, net optimism rose to a very strong +33.3. Forty-nine percent of CFOs

express rising optimism (44% last quarter), and just 16% express declining optimism.

Net optimism is lowest for Manufacturing, Energy/Resources, and Services. Page 15.

Overall, what external or internal risk worries you the most? CFOs’ most worrisome

risks largely focus on the degree to which troubles in Europe, Asia, and Latin America

will ultimately impact performance at home. And many relay worries that policymakers

will struggle in trying to spur growth. Page 16.

*These averages are means that have been adjusted to eliminate the effects of stark outliers.

Special Topic: Uncertainty

Which sources of uncertainty are most impacting your business planning?

CFOs’ answers are diverse and largely industry-dependent. Where most sectors

agree, however, is around uncertainty related to North American economies,

geopolitical events, and industry-specific regulation. Also common are concerns about

monetary policy (and related interest rates) and input prices. Page 17.

What is the most important thing you have done as CFO to help your company

manage uncertainty? Tactics vary considerably, but most revolve around one of

three themes: ensuring business performance (increasing focus on strategies,

efficiencies, and key decisions); managing operating risk (strengthening risk

management priorities, risk awareness, and risk management approaches); and

managing balance sheet risk (strengthening balance sheets, ensuring liquidity, and

managing exposure to interest and FX rates). Page 18.

Special Topic: Rates and Prices

How are you approaching the current environment of low interest rates and low

energy prices? About three-quarters of CFOs expect higher interest rates over the

next year, but only about one-third say this expectation is affecting their pricing plans.

Higher energy prices are generally not expected and are mostly not built into pricing

plans either. CFOs say prices are largely back to pre-recession levels—and headed

higher. Just under half say their prices are higher now than pre-recession, and well

over half say their prices will be higher in a year. Page 19.

Special Topic: Retirement Risk

How aggressive have you been in de-risking your pension/retirement

obligations? Compared to 3Q13, companies appear more likely to have utilized

aggressive risk reduction tactics. Use of voluntary lump-sum pay-outs for both retirees

and former employees has risen, as have outright plan terminations. Page 20.

Assuming adoption of new mortality tables that increase your GAAP pension

liability, what “premium” would you pay to settle all/part of your plan(s)?

Forty-three percent of CFOs said they are willing to pay a premium above their GAAP

liability, with Healthcare/Pharma, Retail/Wholesale, and Manufacturing most likely to

express interest. Few are willing to pay a premium above 5%, and nearly half say they

do not know what premium they would pay or would not terminate their plans. Page 21.

4 CFO Signals

* Net optimism is calculated as the difference between the proportions of those expressing rising and falling optimism. Accordingly, this metric does not explicitly

account for the level of “no change” responses.

Summary Despite global concerns, strong optimism heading into 2015

Last quarter, CFOs’ sentiment built on positive

momentum that had emerged in the second quarter of

this year. And their much-improved year-over-year

performance expectations made a compelling case for

sustained economic acceleration going forward.

Since then, further strengthening of economic

indicators suggests the US economy is finally on a

strong, self-sustaining growth path. But are large-

company CFOs buying it?

The short answer, based on this quarter’s survey

findings, is yes. Despite lingering concerns about the

potential frailty of the global economic recovery,

growing worries about geopolitical disruptors, and

uncertainty in the aftermath of US mid-term elections,

the tenor of CFOs this quarter is clearly one of rising

optimism and confidence.

Confidence despite concerns

Many important macroeconomic events have

transpired since our last survey, and most seem to

add uncertainty, raise the likelihood of future

disruptive events, or both. Performance of several

major economic regions has gotten decidedly worse,

geopolitical issues have not subsided, and US equity

markets have been rattled. And, not surprisingly,

CFOs’ outlooks for European and Chinese economies

have faltered.

Still, performance of the US economy has been

strong—enough so that the US Federal Reserve

ended its bond-buying program on schedule and is

considering dates for raising interest rates.

Accordingly, CFOs’ confidence in North American

economies remains high, and that appears to be

fueling confidence in their own companies’ prospects.

Net optimism* rose from a very strong +32.0 last

quarter to +33.3 this quarter, extending an already-

long positive streak. Moreover, just 16% of CFOs

express declining optimism—again one the lowest

proportions in the history of this survey.

Behind this sentiment are performance expectations

that remain near recent highs. Revenue growth

expectations, which reached their three-year high last

quarter, receded slightly but are still comparatively

strong. Earnings expectations, coming off their

highest level in more than a year, declined but are

also relatively strong. Domestic hiring expectations

declined but are still near their four-year high, and

60% of CFOs again expect gains (matching the

highest proportion in three years).

Emerging patterns in capital investment?

So what are companies doing in response to these

positive outlooks? For several quarters (including this

one), CFOs have indicated a bias toward growing

revenue over reducing costs and toward investing

cash over returning it. But capex expectations have

not followed suit, and last quarter’s US expectation hit

its lowest level in the survey’s history. This quarter’s

expectations are only marginally higher, even though

the expected dividend growth rate is also near its

survey low.

Last quarter we posited that already-established

capacity, rising use of cheap-to-scale digital

technologies, and the exchange of company-owned

assets for outsourced cloud-based services provided at

least part of the explanation, and this quarter’s findings

appear to further support this hypothesis.

Sources of uncertainty

This quarter we asked CFOs about the sources of

uncertainty that are most affecting their business

planning, and the answers were diverse and largely

industry-dependent. Where most sectors agree,

however, is around uncertainty related to geopolitical

events, industry-specific regulation and (if cracks

materialize) North American economies. Also common

were concerns about monetary policy (and related

interest rates) and input prices.

CFOs’ most worrisome risks mirror these findings, with

strong concerns about the degree to which troubles in

Europe, Asia, and Latin America will ultimately impact

performance at home. And they remain worried that

policymakers will struggle in trying to spur growth.

.

Own-company optimism (Net optimism)

Economy optimism – North America*

Economy optimism – Europe*

Economy optimism – China*

Revenue growth

Earnings growth

Capital investment growth

Domestic employment growth

Summary of sentiment and expectations (Optimism is measured relative to prior quarter, and growth numbers are expectations for next 12 months)

Developments since 3Q14 survey

• US economy accelerated; labor market improved; Fed ended bond buying.

• Eurozone recovery stalled; ECB increased stimulus efforts.

• China economy slowed; government loosened monetary policy.

• Russia and Japan in/near recession.

• US mid-term elections yield Republican majority in House and Senate.

• Ebola outbreak spread.

• Middle East tensions escalated.

• US equities tumbled, but S&P 500 rebounded to 4.3% above last quarter.

• Oil prices declined sharply.

Well below

5-year average

Well above

5 yr. average

Well above

last quarter

Well below

last quarter

*Newer metrics assessed relative to 7-quarter average

5 CFO Signals

How CFOs are combatting uncertainty

Obviously, such uncertainties make planning difficult,

so this quarter we asked CFOs for the most important

things they have personally done to help their

companies navigate in the current business

environment.

Tactics vary considerably, but most revolve around

one of three themes: ensuring business performance

(increasing focus on strategies, efficiencies, and key

decisions); managing operating risk (strengthening

risk management priorities, risk awareness, and risk

management approaches); and managing balance

sheet risk (strengthening balance sheets, ensuring

liquidity, and managing exposure to interest and FX

rates. Please see page 18 for specific examples.

Interplay of interest rates, energy costs, and

company prices

Most companies have also been planning around

uncertain futures for interest rates and energy costs.

Accordingly, this quarter we asked about CFOs’

expectations for both and their impacts on their own

companies’ pricing.

About three-quarters of CFOs expect higher interest

rates over the next year. But well under one-quarter

express high confidence, and only about one-third say

their interest rate expectations are actually affecting

their pricing plans—possibly a reflection of lingering

doubts. Higher energy prices, on the other hand, are

generally not expected and are mostly not built into

pricing plans.

Whatever the case, it appears prices are largely back

to pre-recession levels—and headed higher. Just

under half of CFOs say their prices are higher now

than pre-recession, and 21% say they are lower.

Moreover, well over half say their prices will be higher

in a year, and just 18% say they will be lower.

Summary (cont.)

Reducing exposure to retirement risks

With new Society of Actuaries (SOA) mortality tables

coming into play that will increase pension liabilities for

many companies, we asked CFOs about their efforts to

reduce retirement plan risks and their willingness to buy

out of their GAAP pension liabilities.

Compared to results from our 3Q13 survey, companies

appear increasingly likely to have utilized relatively

aggressive risk reduction tactics. Use of voluntary

lump-sum pay-outs for both retirees and former

employees has risen, as have outright plan

terminations. Moreover, 43% of CFOs expressed

willingness to settle their pension plans at a premium

above their GAAP liability.

What’s next?

As we enter 2015, “quantitative easing” has ended,

corporate performance is generally strong, US equity

markets are near historic highs, the US government

appears funded (at least for now), and both interest

rates and oil prices are near record lows.

This quarter, CFOs added an eighth-straight quarter to

their streak of positive sentiment—a streak that has

largely proved to be on the mark. But the relative health

and resiliency of North American economies again

underlies a good portion of their sentiment. And this

begs important questions about how long North

America can continue to accelerate if the rest of the

global economy continues to struggle.

On the horizon are important decisions within several

major economies about monetary and fiscal policy, the

continuation of several geopolitical conflicts, and the

emergence of new agendas within the US Congress.

Continued performance will require navigating these

challenges and surely several others not yet apparent.

Accordingly, CFOs’ streak of optimism seems likely to

be tested over the next calendar year.

How do CFOs’ expectations compare

to those of Deloitte’s lead partners?*

This quarter we surveyed more than 170 of the

lead client service partners (LCSPs) serving

many of our largest clients. Here is what we

found:

• Like the CFOs, they are bullish on the

North American economies—even a bit

more bullish.

• They are overwhelmingly negative in their

perceptions of Europe’s economy, but not

as negative as their CFO counterparts.

• They are mixed on China (similar to the

CFOs) but mostly optimistic, with higher

expectations for next year.

• Like the CFOs, most think equity markets

are overvalued, and very few think they

are undervalued.

• About half see higher-than-normal risk in

the business environment—about the

same as the CFOs.

• They have a positive outlook for all major

sectors, especially for Technology.

As you read through this report, please

watch for “participant-only insights”

(orange text) containing LCSP survey

results, particularly on pages 7 and 9. In

addition, see the individual industry

summaries (starting on page 38) for the key

forces LCSPs say are affecting each sector.

* Statements reflect consolidated opinions

expressed by surveyed individual LCSPs and do

not necessarily reflect the opinions of Deloitte.

To

tal

U.S

.

Canada

Mexic

o

Manufa

ctu

ring

Reta

il /

Whole

sale

Technolo

gy

Energ

y /

Resourc

es

Fin

ancia

l S

erv

ices

Healthcare

/ P

harm

a

T/M

/E

Serv

ices

(n=102*) (n=79) (n=17) (n=6) (n=23) (n=13) (n=5) (n=13) (n=25) (n=5) (n=6) (n=8)

Revenue growth 6.0% 5.9% 5.0% 9.8% 5.3% 4.6% 6.8% 4.0% 6.8% 12.1% 8.4% 5.0%

Earnings growth 9.7% 10.8% 4.5% 10.5% 13.5% 6.7% 9.6% 3.4% 5.9% 24.5% 23.0% 7.2%

Capital spending growth 5.5% 5.8% 2.7% 8.3% 4.2% 5.7% 16.0% 5.7% 9.6% -1.3% 0.8% -5.0%

Domestic personnel growth 2.1% 1.7% 2.2% 6.1% 2.9% 1.8% 1.8% 1.7% 1.9% -0.5% 2.4% 1.8%

Breakdown by

country and industry

Consolidated expectations CFOs’ expected year-over-year growth in key metrics (compared to the value of the S&P 500 index at the survey midpoint)

0

500

1,000

1,500

2,000

2,500

0%

5%

10%

15%

20%

25%

Revenue growth

Earnings growth

Capital spendinggrowth

Domestic personnelgrowth

S&P 500 price atsurvey periodmidpoint

* Sample sizes may not sum to total due to responses from “other” categories.

Key Charts: Expectations CFOs’ expected year-over-year increases in key metrics

6 CFO Signals

Highest two industry expectations

Lowest two industry expectations

US equitymarkets

Externalfinancial /

economic risk

CFOs Deloitte LCSPsParticipant-only insight*

Key Charts: Sentiment Sentiment regarding the health of major economic zones, industries, and capital markets

7 CFO Signals

Economic optimism Average rating based on five-point scales for current state (“very bad” to “very good”) and expected

state one year from now (“much worse” to “much better”)

Very

good

Much

better

Neutral Same

CFOs - Current Status CFOs - One Year From Now Deloitte LCSPs - Current Status Deloitte LCSPs - One Year From Now

Very

bad

Much

worse

Very

good

Much

better

Neutral Same

Very

bad

Much

worse

Very

good

Much

better

Neutral Same

Very

bad

Much

worse

North America Europe China

Industry optimism Participant-only insight*

Average Deloitte Partner rating based on five-point

scales for expected state of each industry one year

from now (“much worse” to “much better”)

Capital market sentiment Average rating based on five-point scales for US equity markets

(“undervalued” to “overvalued”) and external financial/economic

risk (“lower than normal” to “higher than normal”)

Much

better

Much

worse

Same

Overvalued

Undervalued

Neutral

Higher

than normal

Lower

than normal

Neutral

Man

ufa

ctu

ring

Re

tail/

Wh

ole

sale

Tech

no

log

y

Ene

rgy/R

esou

rce

s

Fin

ancia

l S

erv

ices

He

alth

care

/Ph

arm

a

Tele

com

/Media

/Ente

rtain

mt.

Serv

ice

s

Participant-only insights* Participant-only insights*

See appendix for industry-by-

industry breakdown of sentiment.

Own-company optimism Difference between the percent of CFOs citing higher and lower optimism

regarding their company’s prospects compared to the previous quarter

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

= Fourth quarters of calendar years

* Participant-only insights are provided to current and frequent survey

participants. Statements reflect consolidated opinions expressed by

surveyed individual lead client service partners (LCSPs) from North

America and do not necessarily reflect the opinions of Deloitte.

Topical highlights

8 CFO Signals

Perceptions

CFO Signals

How do you regard the current and future status of the

North American, Chinese, and European economies?

CFOs’ assessment based on five-point Likert scales: “very bad”

to “very good” and “much worse” to “much better” (n=102)

Much better in a year

Much worse in a year

Very bad

now Very good

now

3 4 5 1 2

3

4

1

2

Good and

getting better

Bad but

getting better

Bad and

getting worse

Good but

getting worse

North America

China

Europe

4Q 1Q 3Q 2Q

2013

3Q

CH

Assessment of economies How do CFOs regard the current and future health of some of the world’s

major economic zones?

North America remains the bright spot—by a widening margin:

North America

Current conditions hit a new high; expectations for the next year

remain strong.

• A very high 63% of CFOs describe the North American economy as

good or very good (up from 44% last quarter), and just 4% describe it

as bad (3% last quarter).

• Sixty-three percent believe conditions will be better a year from now

(up from 55% last quarter, and about even with the first two quarters of

this year). Just 3% expect conditions to be worse (equal to last

quarter), and 34% expect them to stay the same.

Europe

Perceptions of Europe’s position and trajectory declined sharply.

• Just 2% (5% last quarter) of CFOs describe Europe’s economy as

good or very good. Seventy-three percent describe the economy as

bad, far above last quarter’s 47% and an abrupt reversion to the low

confidence indicated in our surveys at the end of last year.

• Just 13% of CFOs expect the economy to be better a year from now

(down from 23%, 27%, and 32% over the last three quarters), and

37% expect it to be worse (up from 26%, 23%, and 14% over the last

three quarters).

China

Perceptions of China’s economy remain mediocre.

• Thirty-four percent of CFOs say China’s economy is good, up from

27% last quarter and about even with the levels from the end of last

year. Twenty percent now regard the economy as bad (up from 13%

last quarter and about even with levels earlier in the year).

• Twenty-five percent of CFOs believe the economy will be better a year

from now (down from 29% last quarter and well below the levels from

the end of last year), and 17% believe it will be worse (15% last

quarter).

2Q

9

2014

NA

EU

CH

4Q

NA

EU

CH

Deloitte LCSPs

Participant-only insight*

* Participant-only insights are provided to current and frequent survey

participants. Statements reflect consolidated opinions expressed by

surveyed individual lead client service partners (LCSPs) from North

America and do not necessarily reflect the opinions of Deloitte.

Perceptions

10 CFO Signals

What is your perception of the capital markets?

CFOs’ assessments based on five-point semantic differential scale

with opposing choices as noted (n=102)

Please see appendix for industry-specific findings.

Assessment of markets How do CFOs perceive pricing and risk within the financial markets?

Risk perceived as high, but financing availability is good and

improving:

• Risk is higher than normal: Forty-nine percent of CFOs say

external financial and economic risks are higher than normal (47%

last quarter); 17% say they are lower (14% last quarter). Financial

Services CFOs are again most likely to see higher risk (68%), and

Technology CFOs are lowest (20%). Nearly 60% of Canadian CFOs

see higher risk, while the US and Mexico are at 47% and 50%,

respectively.

• US markets are overvalued: Only 5% say US equity markets are

undervalued, and 61% say they are overvalued (7% and 63% last

quarter, respectively). More than 80% of CFOs from Financial

Services and Technology say markets are overvalued, while

Healthcare/Pharma CFOs are most likely to see them as correctly

valued.

• Debt financing is very attractive: An overwhelming 88% say debt

is currently an attractive financing option (86% last quarter), and

nearly two-thirds of all CFOs say it is a very attractive option (same

as last quarter). All industries are 75% or higher; Mexico is lowest

among the countries at 50%.

• Equity financing’s attractiveness is mixed: Forty-eight percent of

public company CFOs say equity is attractive (30% last quarter), and

22% say it isn’t (36% last quarter). About 40% of private company

CFOs say it is attractive (up from just 20%), and just 21% say it isn’t.

Technology and Energy/Resources are most likely to say equity is

attractive (both about 61%), and Healthcare/Pharma is the outlier at

0%. Canada is the highest among the countries by a wide margin at

59% (The US and Mexico are at 43% and 33%, respectively).

Market valuation

and risk

1

2

3

4

5

1 2 3 4 5

US equity

markets are

undervalued

US equity

markets are

overvalued

External financial/economic risk is

lower than normal


higher than normal

1

2

3

4

5

1 2 3 4 5

Debt

financing is

unattractive

Debt

financing is

attractive

Equity financing is

unattractive

Equity financing is

attractive

Debt

and equity

4Q14 3Q14

Priorities

11 CFO Signals

What is your company’s business focus for the next year?

CFOs’ assessments based on five-point semantic differential scale


Business focus Where do CFOs say their companies are focusing their efforts?

Growth remains the clear focus:

• Revenue over cost: There is still a significant bias toward growing

revenue over reducing costs, but sector differences became more

notable this quarter. Overall, about 54% of CFOs say they are

biased toward revenue growth, and 25% claim a focus on cost

reduction. Financial Services and Manufacturing are the most

growth-oriented (both above 65%), and Energy/Resources is lowest

at just 23%.

• Investing cash over returning it: There is again a focus on

investing cash over returning it to shareholders (43% vs. 26%), but

sector differences became more notable in this area as well.

Retail/Wholesale is the most biased toward investing cash at 62%,

with Manufacturing second at 52%. On the other hand, 60% of

Technology CFOs say they are biased toward giving cash back.

• A mix of new and old products: Overall, 47% of CFOs say their

companies are focused on new offerings over old ones, and 38%

claim the reverse. The real story is at the industry level, however.

Manufacturing, Energy/Resources, and Services CFOs are focused

predominantly on current offerings, while the rest are focused on

new offerings (Technology and Healthcare/Pharma are highest at

about 80%).

• Mostly current geographies: Overall, 58% of CFOs say their

companies are predominantly focused on current geographies

versus 28% who cite new geographies. Only Retail/Wholesale and

T/M/E are mostly focused on new geographies.

• Organic growth over inorganic growth: The bias is again firmly

toward organic growth over inorganic (53% versus 26%), with

Energy/Resources the most biased toward inorganic growth at 39%.

1 2 3 4 5

1

2

3

4

5

1 2 3 4 5

Grow revenue

Reduce costs

Invest

cash

Return

cash

New

geographies

Current

geographies

New offerings

Current offerings


1

2

3

4

5

1 2 3 4 5

Offense vs.

defense

New business vs.

current

Organic Inorganic

Inorganic vs.

organic

2Q14 1Q14 4Q13 4Q14 3Q14

0%

5%

10%

15%

20%

25%

Expectations

12 CFO Signals

*All averages have been adjusted to eliminate the effects of stark outliers.


Earnings(mean)

Earnings (median)

Revenue (mean)

Revenue (median)

Compared to the past 12 months, how do you

expect your revenue and earnings to change

over the next 12 months?

CFOs’ expected change year-over-year*

(n=96)

Revenue and earnings What are CFOs’ expectations for their companies’ year-over-year revenue

and earnings?

Revenue*

Revenue growth expectations declined, but are still among the highest

in the last three years:

• Revenue growth expectations fell to 6.0% from 6.8% last quarter. The

median is again 5.0%, with 90% of CFOs expecting year-over-year gains.

Variability of responses is near the survey low for this metric.

• Country-specific expectations are 5.9% for the US (down from 6.2%),

5.0% for Canada (down from 9.3%), and 9.8% for Mexico (up from 8.8%).

• Healthcare/Pharma and T/M/E have the highest expectations at 12.1%

and 8.4%, respectively, while Energy/Resources and Retail/Wholesale

CFOs have lowest expectations at 4.0 and 4.6%, respectively.

Earnings*

Earnings growth expectations declined, but are still relatively strong—

bolstered mostly by the Healthcare/Pharma and T/M/E sectors:

• Earnings expectations fell to 9.7% from 10.9% last quarter. The median

remained at 8.0%, and 86% of CFOs expect year-over-year gains.

Variability of responses is again comparatively low.

• Country-specific expectations are 10.8% for the US (11.6% last quarter),

4.5% for Canada (10.2% last quarter), and 10.5% for Mexico (7.2% last

quarter).

• Healthcare/Pharma and T/M/E CFOs have the highest expectations at

24.5% and 23.0%, respectively; Energy/Resources and Financial

Services are lowest at 3.4% and 5.9%, respectively.

(n=95)

Expectations

13 CFO Signals

Capital spending (median)

Dividends

(median)**

* All averages have been adjusted to eliminate the effects of stark outliers.

** Dividend averages include only public companies; the median has been

zero for all quarters.


Compared to the past 12 months, how do you

expect your dividends and capital spending to

change over the next 12 months?


Dividends (mean)

(n=91)

Capital spending (mean) (n=94)

Dividends and investment What are CFOs’ expectations for their companies’ year-over-year dividends

and capital investment?

Dividends*

Dividend growth expectations continued to decline:

• Dividend growth expectations declined to 3.0% from last quarter’s 4.1%.

The median is again 0%, and 44% expect year-over-year gains.

• Country-specific expectations are 3.1% for the US (down from 3.8% last

quarter), 3.1% for Canada (up from 2.6% last quarter), and 1.8% for

Mexico (drastically down from 12.4% last quarter).

• Energy/Resources reported 3.9%; Services reported 0.4%.

Capital investment*

US expectations rebounded substantially from last quarter’s lowest-

ever levels, but Canada fell substantially:

• Capital spending expectations rose to 5.5%, up from last quarter’s

5.0%. The median remained the same at 5.0%. Sixty-two percent of

CFOs expect year-over-year gains, up slightly from last quarter's 60%.

Variability of expectations increased significantly, but is still in-line with

most quarters.

• Country-specific expectations are 5.8% for the US (above the survey

low of 3.5% last quarter), 2.7% for Canada (9.7% last quarter), and

8.3% for Mexico (9.9% last quarter).

• Technology reported the highest expectations at 16.0%.

Healthcare/Pharma and Services both expect a contraction in capital

expenditures compared to the previous 12 months.

0%

2%

4%

6%

8%

10%

12%

14%

Expectations

14 CFO Signals

Domestic staffing (median)

Offshore personnel

(median)

Compared to the past 12 months, how do you expect

your domestic and offshore hiring to change over the

next 12 months?


Offshore personnel

(mean) (n=86)

Domestic staffing

(mean) (n=99)

Employment What are CFOs’ expectations for their companies’ year-over-year hiring?

Domestic hiring*

Hiring expectations declined, but are again near their four-year high:

• Domestic hiring expectations fell to 2.1%, down from last quarter’s 2.3%.

The median remained at 1.0%, and 60% of CFOs expect year-over-year

gains, consistent with last quarter's level.

• Country-specific expectations are 1.7% for the US (same as last quarter),

2.2% for Canada (3.5% last quarter), and 6.1% for Mexico (6.5% last

quarter).

Offshore hiring*

Offshore hiring expectations declined, but are still relatively high:

• Offshore hiring decreased to 2.0% from last quarter’s 2.6%. The median

remained at 0.0%.

• Country-specific expectations are 2.1% for the US, 1.3% for Canada, and

2.0% for Mexico.

• T/M/E CFOs have the highest expectations at 3.8%. Retail/Wholesale,

and Services reported less than 1.0%. Forty-four percent of CFOs expect

year-over-year gains.

*All averages have been adjusted to eliminate the effects of stark outliers.


0%

1%

2%

3%

4%

5%

6%

Sentiment

15 CFO Signals

How does your optimism regarding your

company’s prospects compare to last quarter?

Percent of CFOs selecting each sentiment/reason combination (n=102)

Own-company optimism How do CFOs feel about their company’s prospects compared to last

quarter?

Sentiment still improving; Manufacturing CFOs again among least

optimistic (three quarters in a row):

• Optimism holding: After seven straight quarters of positive net

optimism, CFOs’ outlooks are still improving. Forty-nine percent of

CFOs express rising optimism (above last quarter’s 44%), and just

16% express declining optimism—up a bit since last quarter’s all-

time low, but still one of the lowest levels in the 19-quarter history of

this survey.

• More signs of stabilization: When sentiment hits a low, it is usually

in the third or fourth quarter of a calendar year. This year is different,

with optimism remaining strong (and even rising) going into the end

of this year.

• US and Canada very upbeat: Net optimism for Canada is highest

at +41, down slightly from +44. The US rose from +29 last quarter to

+34 this quarter, and Mexico fell from +71 to zero.

• Manufacturing, Energy/Resources, and Services again

significantly pessimistic: About 20% of Manufacturing and

Energy/Resources CFOs report declining optimism, as do 38% of

Services CFOs. Net optimism is lowest for Manufacturing and

Energy/Resources at +13 and +15, respectively.

• Healthcare/Pharma, Financial Services, Technology, and T/M/E

very optimistic: All four sectors indicate net optimism at or above

+44.

-40%

-20%

0%

20%

40%

60%

80%

100%More optimistic primarily due to external factors(e.g., economy, industry, and market trends)

More optimistic primarily due to internal/company-specific factors (e.g.,products/services, operations, financing)

No notable change

Less optimistic primarily due to internal/company-specific factors (e.g.,products/services, operations, financing)

Less optimistic primarily due to external factors(e.g., economy, industry, and market trends)

Net optimism(% more optimistic minus % less optimistic)


35.3%

2.9%

12.7%

33.3%

18.6%

30.4%

Sentiment

16 CFO Signals

Overall, what external or internal risk worries you the most?

Consolidation and paraphrasing of CFOs’ free-form comments* (n=92)

Competition

Demand • Unemployment

• Consumer confidence/spending

Internal execution

• Cyber security (2)

Economy

• Frailty of global economic recovery (14)

• European economy (11)

• China economy (6)

• US economy

• Market bubbles/corrections

• Conditions in Latin America

• Housing recovery

Capital / Currency • Interest rate increases/decreases (13)

• Exchange rates/volatility (5)

• Inflation

Macro / Economy

* Arrows indicate notable movements since last quarter’s

survey. Category movements are indicated by block

bullets. Strong movements are indicated by multiple

arrows.

This chart presents a summary of CFOs’ free-form

responses. CFO comments have been consolidated and

paraphrased, and parentheses denote counts for

particular response themes. For a more detailed summary

of comments by industry, please see the appendix.

Industry / Company

• Federal regulation – new/burdensome (16)

• State-level regulation

• Lack of clarity around regulations

• Mexican energy reform

• Complexity of regulation

• Emerging and uncertain accounting/capital rules

• Risk that regulators’ actions will inhibit growth

• Environmental regulation

• Slowing permitting

• Government regulation of health care

Regulation

Security

Talent • Succession planning

• Hiring good senior talent

• General talent availability

• Tax policy/reform (4)

• Pace of political decision-making/gridlock (3)

• Government spending/fiscal policy (2)

• Government ability to spur growth

• Inability of US Government to pass meaningful reforms

Policy

Government

Most worrisome risks Which internal and external risks do CFOs regard as most

worrisome?

Economic worries returned, and geopolitical worries continued

to escalate:

• Economic worries: After declining last quarter, worries about

the global economy—specifically about the durability of the

global economic recovery—rose across nearly all industries.

Concerns about the US continued to decline, but those around

Europe and China escalated.

• Interest rates and FX: Worries about interest rate movements

and shocks rose sharply (especially within Financial Services),

as did concerns about exchange rates (especially within

Manufacturing).

• Geopolitical events: Geopolitical risk concerns rose again this

quarter, with continuing concern about the Ukraine crisis and the

Middle East across most industries.

• Competition: Concerns earlier in the year about hyper-

competition, irrational competitor behavior, poor margins,

industry headwinds, and pricing pressures continued to decline

this quarter.

• Policy and regulation: Concerns about new regulation, heavy-

handedness, and costs of compliance declined again this

quarter, but concerns about tax reform continued to rise, as did

worries about governments’ ability to pass reforms and spur

growth.

• Execution: Execution concerns, which hit a high last quarter,

largely continued this quarter. The concerns are diverse,

ranging from executing against strategies to managing operating

risks to being second-guessed by activist investors.

• Cyber security: Concerns about data security stayed about the

same.

• Irrational competitor behavior

• Price competition at retail

• Online competition

• Competitive forces

• Brand perception

Margins

• Oil/gas prices (7)

• Cost control (3)

• Input prices

• Construction costs

• Industry pricing

• Cost of providing benefits to employees

Geopolitics • Geopolitical risk (11)

• Wars in Ukraine (2)

• Wars in Middle East (3)

• Latin American conflict

• Pension obligations

• Slowing growth of our largest business unit

• Acquisition integration risk

• Managing operations

• Strategy execution

• Product performance

• Being second-guessed by (short-term-oriented)

activist investors

• Operating risks

17 CFO Signals

To what degree is uncertainty around the following areas

affecting business planning?

Percent of CFOs citing the degree of uncertainty regarding the following areas (n=102)

Impact of uncertainty To what degree is uncertainty affecting business planning?

North America is the key source of economic uncertainty:

• North American economies a very strong factor: Nearly fifty-

five percent of CFOs say economic uncertainty is significantly

affecting their planning, with nearly 20% citing very high impact.

Energy/Resources and Retail/Wholesale are highest.

• Geopolitical events a major factor: Nearly half of CFOs say

uncertainty in this area is having a substantial impact. Technology

and Healthcare/Pharma are more likely to cite higher impact.

• Chinese and European economies relatively minor: Only 26%

of CFOs say uncertainty around the European economy is

significantly affecting their planning, and only 25% say the same

for the Chinese economy. Services is highest for both economies.

Policy uncertainty is strongly impacting business planning:

• Industry-specific regulation a strong impediment to business

planning: Nearly 70% of CFOs say uncertainty is affecting their

planning (40% say to a high degree). Healthcare/Pharma and

Energy/Resources are highest at more than 92%.

• Monetary policy also an important factor: Nearly 55% of CFOs

say uncertainty is affecting their planning (20% say to a high

degree). Financial Services is highest at 96%.

• Fiscal policy impacting planning: Nearly 40% say uncertainty

in this area is affecting their planning (7% say to a high degree).

Financial Services is again highest at 68%.

• Health care policy and post-election politics relatively minor:

About 32% say health care policy uncertainty is significantly

affecting their business planning (Healthcare/Pharma is at 100%),

and 25% say post-mid-term election politics are doing so.

Capital and commodity markets are having moderate impact:

• Commodity/input prices a substantial factor: Forty-six percent

say uncertainty is a factor (17% claim high impact). Manufacturing

and Energy/Resources are highest at 74% and 69%, respectively.

• Capital markets a significant factor: Both debt and equity

markets are a significant factor for about one-third of CFOs.

Financial Services is highest at more than 70%.

5.0%

30.4%

30.4%

5.9%

6.9%

22.8%

4.0%

13.9%

9.8%

5.9%

12.7%

6.9%

14.9%

17.6%

18.6%

9.8%

5.9%

14.9%

7.9%

18.8%

11.8%

17.6%

11.8%

10.8%

25.7%

26.5%

26.5%

30.4%

48.0%

30.7%

18.8%

42.6%

42.2%

41.2%

29.4%

33.3%

35.6%

21.6%

20.6%

34.3%

32.4%

22.8%

29.7%

23.8%

30.4%

24.5%

29.4%

46.1%

18.8%

3.9%

3.9%

19.6%

6.9%

8.9%

39.5%

1.0%

5.9%

10.8%

16.7%

2.9%

North American economy

European economy

Chinese economy

Monetary policy/interest rates

Fiscal policy

Health care policy

Industry-specific regulation

Post mid-term election politics

Equity markets

Debt markets

Commodity/input prices

Geopolitical events

Very little impact Little impact Neutral Moderate impact Very high impact

0% 40% 60% 80% 100% 20%

Special topic: Uncertainty

CFOs’ write-in responses:

• Latin American economies

• Environmental regulations

• Tax policy/environment

• Cyber security

• Security and stability


18 CFO Signals

Special topic: Uncertainty

Ensure Performance

GENERAL BALANCE SHEET

• Enhancing balance sheet

• Ensure strong balance sheet

• Strengthening balance sheet

• Bullet-proof the balance sheet

• Protect the balance sheet

• Conservative capital management

• Maintain financial strength and flexibility

• Provide a conservative balance sheet and

have strong relationships with banks

• Ensure strong balance sheet; hedge revenue

• Use financial derivatives to reduce exposure

and volatility

DEBT / LEVERAGE

• Extend debt maturities

• Extended debt maturity profile across

portfolio

• Extend debt maturity profile

• Deleverage

• Manage financial risks

• Restructure

• Reduce leverage

• Lower cost of capital

• Access new channels of financing -

investment grade and unsecured bond

market

LIQUIDITY

• Increase liquidity to allowed continued risk

taking

• Put greater liquidity onto balance sheet

• Improve liquidity

• Maintain strong liquidity

• Manage cash

• Conservative cash position

• Own asset-liability management to ensure

company is taking appropriate risk without

putting company at risk of big interest rate

movements

• Introduce cash flow planning

• Focus on cash flow

INTEREST RATES

• Locked in 90% of interest rate exposure for

the next 10 years

• Hedge interest rates and commodities

CURRENCY/FX

• Currency hedging

• Locked in foreign exchange for next 24

months for most exposed currencies

* This chart presents a categorized summary of CFOs’ free-form responses. Most responses are

completely or nearly verbatim, but some have been paraphrased or edited for clarity. Parentheses

denote counts for a particular response theme. The number of responses does not match the

number of respondents because some CFOs provided more than one response.

BUSINESS STRATEGY

• Provide clearer roadmap to future

• Comprehensive strategic planning

• Drive focus

• Improve governance

• Put stronger emphasis on 3 year strategic plan

• Align multi-year strategy/plan with current plan

• Pace investment spend with top line trends

• Align changing revenue trend, cost base, cash flow

• Focus on efficiency and increasing gross margins

• Drive efficiencies and productivity

• Create optionality in operations

• Emphasize profitable growth

• Focus on innovative growth

• Invest in competitive differentiation

• Eliminate underperforming assets

• License out most operations of losing segment

COST / EFFICIENCY MANAGEMENT

• Reduce costs (4)

• Reduce fixed cost base

• Reduce overhead costs

• Focus on cost, cycle time, and quality of processes

• Make cost structure more variable where possible

• Support work to reduce cost with rate base approaches

• More centralized approach to management of spend

Manage Operating Risk Manage Balance Sheet Risk

PLANNING

• Ensure action plans for downside/upside scenarios

• Prepare for downside scenarios and communicate

• Tail-scenario modeling and action plans

• Scenario planning

• Single enterprise-wide ERP and forecast/planning tool to

enable scenario planning

• Attempt to “guarantee” returns on specific projects

• Increase visibility around forecasting

• Doing better forecasts

ANALYSIS

• Increase capability around analysis / cash modeling

• Report expense drivers to help decide to cease/outsource

activities and determine volume needed for scale

• Critical thinking discipline and analytical rigor

• Better internal understanding of leverage in units

• Rigorous, company-wide monthly reporting and

reforecasting process - forces organization (not just

Finance) to consider trends emerging in businesses

• Provide information to assess risks and opportunities

• Explain tradeoffs around investment, risk, and cash

REPORTING / COMMUNICATION

• Communicate reality to senior management group

• Transparency and visibility into the financials

• Good accounting and strict principles

• Facilitate better communication among business leaders to

drive sharing of best market intelligence

RISK STRATEGY

• Develop risk mitigating strategies

• Reduce overall company/market risks

• Reduce risk in supply chain

• Take risk off of the table opportunistically

• Diversify product and revenue base

• Maintained disciplined allocation of capital and

risk/return hurdles

• Hedge interest rates and commodities

• Look at M&A opportunities to expand our scope

of business and hedge our bets

RISK AWARENESS

• Improve dialogue on risks

• Greater assessment of risk on projects

• Invest more time in ensuring we fully

understand/ integrate risks and enhance

strategies to mitigate

• Raise awareness of risks and force prioritization

conversations

• Increased awareness of risks and risk mitigation

plans, focus on what we can control (continuous

improvement)

• Provide analysis and support to quantify risks

associated with our business drivers

• Ensure businesses understand own risks - often

overlooked or under-appreciated

RISK PREPAREDNESS / MANAGEMENT

• Implement ERM (3)

• Developed more robust ERM process

• Implemented compliance function

• Improved implementation of enterprise risk

management regimen

• Put in place contingency operating plans

• Establish formal contingency planning process

• Introduce contingency planning

• Highlight areas of risk and involve SBUs in

mitigation activities - communication and

resolution

• Forecast scenarios to drive discipline on

managing risk

REGULATORY / RISK

• Aggressively manage regulatory relationships

• Clarify regulatory implications

• Contingency planning around regulatory

uncertainty

What is the most important thing CFOs have done to help their companies manage uncertainty?*

(n=93)

CFOs’ response to uncertainty What have CFOs done to help their

organizations manage in uncertain times?

CFOs’ actions vary, but most revolve

around the following:

• Ensuring business performance:

Establishing new strategies, focus, cost

efficiency, financial plans, and analytical

approaches.

• Managing operating risk: Establishing

comprehensive risk management

strategies, general risk awareness, and risk

management approaches/systems.

• Managing balance sheet risk:

Strengthening balance sheets, ensuring

liquidity and flexibility, and managing

exposure to interest and FX rates.

19 CFO Signals

How are companies approaching low interest rates

and low energy prices?

CFOs’ selections based on five-point semantic differential scale


Views on interest rates and energy prices How are companies viewing and approaching current low interest

rates and low energy prices?

Higher interest rates are anticipated, higher energy prices are

not—and neither is strongly affecting pricing plans yet:

• Higher interest rates expected, but not strongly affecting

pricing plans: Overall, 72% of CFOs believe interest rates will

be higher in a year. Only 16% express high confidence, so

there still appears to be some doubt. This may explain why

only about one-third of CFOs say interest rates are affecting

their pricing. Among Financial Services CFOs, however, 64%

expect higher rates, and 72% say their expectations are

affecting their pricing.

• Higher energy prices not expected, and mostly not built

into pricing plans: Only 27% of CFOs believe energy prices

will be higher in a year, and very few express high confidence.

CFOs from Energy/Resources are the most likely to expect

higher energy prices (31%), and more than 60% of these say

their energy prices expectations are affecting their own

companies’ pricing plans (in other industries, only

Manufacturing is above 25%).

Even with low interest rates and low energy prices,

companies’ pricing is high—and headed higher:

• Prices are largely back to pre-recession levels: About half

of CFOs say their prices are higher now than pre-recession,

with all industries more likely to say their prices are higher

now, and just 21% overall saying they are lower.

Retail/Wholesale, Technology, and Healthcare/Pharma CFOs

are highest at about 60%, and Financial Services and

Energy/Resources are lowest at about 45%.

• Enough confidence to plan for higher prices: About 55% of

CFOs say their prices will be higher next year, and just 18%

say they will be lower. All industries are more likely to expect

higher prices, led by Manufacturing at 65%, and both

Retail/Wholesale and Technology next at roughly 61%.

Healthcare/Pharma and T/M/E are lowest at 40% and 33%,

respectively.

2.0%

14.7%

1.0%

19.0%

2.9%

7.8%

2.0%

15.7%

16.8%

18.0%

14.7%

12.7%

24.5%

38.2%

55.5%

36.0%

26.5%

30.5%

55.8%

21.6%

25.7%

16.0%

37.3%

26.5%

15.7%

9.8%

1.0%

11.0%

18.6%

22.5%

Special topic: Rates and prices

Interest rates will be higher

in a year

Interest rate expectations are

affecting our pricing plans

Energy prices will be higher

in a year

Energy price expectations are not


Our prices will be higher

in a year

Interest rates will be lower

in a year

Interest rate expectations are not


Energy price expectations are


Our prices will be lower

in a year

Energy prices will be lower

in a year

Our prices are higher now

than pre-recession

Our prices are lower now

than pre-recession

INTEREST

RATES

ENERGY

PRICES

COMPANY

PRICES

Neutral Agree much more

with left statement

Agree more

with left statement

Agree more

with right statement

Agree much more

with right statement


20 CFO Signals

20

Retirement risk How are companies managing their retirement risk?

Companies appear increasingly likely to have utilized more

aggressive tactics for managing their retirement risk:

• Approximately 75% of respondents have pension plans: (This is

deduced from the fact that 75% of CFOs considered this question

relevant to them.) Manufacturing, Energy/Resources, and

Healthcare/Pharma appear most likely to have plans; Technology

and Services appear least likely.

• Nearly 45% of those who have (or have had) pensions plans

have utilized at least one “aggressive” de-risking tactic: There

are substantial differences across industries. At the high end are

Manufacturing, Energy/Resources, and Healthcare/Pharma (all at or

above 60%). On the low end are Technology, TME, and Services (all

at or below 27%). These patterns are similar to those in our previous

surveys and are likely due to a substantial difference in industries’

respective use of retirement plans.

• Use of several aggressive risk management tactics has

increased: The attractiveness of eliminating (or greatly reducing)

retirement risks has led to accelerated use of voluntary lump-sum

pay-outs for both retirees (25% of CFOs) and terminated employees

(42% of CFOs). Outright plan terminations, a component of which is

annuity buy-outs, have risen as well (to 17%).

• Liability-driven investment (LDI) is still popular as a less-

aggressive risk management strategy: In our 3Q13 survey, about

55% of CFOs indicated some degree of LDI use, and just under half

of those were doing so with 50% or more of their plan assets. While

we did not ask about LDI in this survey, our recent experience with

clients indicates rising LDI usage with a trend toward moving higher

proportions of assets into fixed income investments (although this

trend has been tempered somewhat by expected increases in

interest rates).

No risk

management

How aggressive have you been in de-risking

your pension/retirement obligations?

Percent of CFOs citing past use or intended use (within a year) of each strategy (n=77)*

Risk

elimination Active Risk Management

50%

10%

20%

30%

40%

60%

Less than 50% of plan

assets in fixed income

4Q

11

2Q

13

Number of strategies

employed already or

within year

Proportion of respondents

claiming use of strategies

At least one 44%

1 29%

2 16%

3 10%

4 1%

5 1%


Form

er em

plo

yees

Retire

es

Retire

es

Form

er em

plo

yees

4Q

14

* Those without current or past plans were asked to skip this question

More than 50% of plan

assets in fixed income

Special topic: Retirement obligations

21 CFO Signals

21

Value of settling pension plans With new mortality tables coming out that are likely to increase many

companies’ pension liabilities, what are companies willing to pay to

settle their pension plans once and for all?

About half of companies are willing to settle their pensions, and

about half are not:

• Forty-three percent willing to pay a premium above their GAAP

liability: Healthcare/Pharma, Retail/Wholesale, and Manufacturing

are most likely to express interest at 80%, 67%, and 53%,

respectively.

• Few willing to pay a premium above 5%: Only 3% of CFOs

indicate willingness to settle at above 5% of their GAAP liability—

sentiment that may have been influenced by other organizations’

recent settlement of their plans at par. Our recent client experience

suggests retiree buyouts can likely be done at or near par once the

impact of new mortality tables has been incorporated—suggesting

buyouts will gain traction as the new tables are adopted.

• Many unlikely to terminate their plans—at least in the near term:

Nearly half of CFOs say they do not know what premium they would

pay or would not terminate their plans (consistent with our previous

question regarding pension risk, where about two-thirds of

companies had not considered plan terminations or had considered

them but decided against them). Energy/Resources appears most

reluctant to terminate their plans, with 64% of CFOs in the “don’t

know or won’t terminate” camp, and 27% in the “only below our

GAAP liability” camp.

0%

10%

20%

30%

40%

50%

60%

Only below ournew/higher

GAAP liability

Equal to ournew/higher

GAAP liability

Up to 5%above ournew/higher

GAAP liability

More than 5%above ournew/higher

GAAP liability

Don't know orwon't terminate

Assuming new mortality tables increase your GAAP pension liability,

what “premium” would you pay to settle all/part of your plan(s)?

Percent of respondents citing each level of premium they would be willing to pay (n=72)*

Special topic: Retirement obligations


Appendix

22 CFO Signals

Detailed findings

23 CFO Signals

Perceptions How do CFOs perceive pricing and risk within the capital markets?

24 CFO Signals

* Sample sizes for industries may not sum to total due to responses from “other” industries.

Markets and risk

1

2

3

4

5

1 2 3 4 5

US equity

markets are

undervalued

US equity

markets are

overvalued


lower than normal


higher than normal

Manufacturing (n=23)

Retail /

Wholesale (n=13)

Technology (n=5)

Energy /

Resources (n=13)

Financial

Services (n=25)

Healthcare /

Pharma (n=5)

Telecom /

Media / Ent. (n=6)

Services (n=8)

Total

(n=102*)

1

2

3

4

5

1 2 3 4 5

Debt

financing is

unattractive

Debt

financing is

attractive

Equity Financing is

unattractive

Equity financing is

attractive

Debt and equity

Five-point semantic differential scale.

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5

Priorities What is your company’s business focus for the next year?

Grow revenue

Grow via new offerings

Grow in new geographies

Grow organically

Invest cash

25 CFO Signals

Reduce costs

Grow via current offerings

Grow via acquisition

Return Cash

Grow in current geographies



Total (n=102*)


Retail /

Wholesale (n=13)

Technology (n=5)

Energy /

Resources (n=13)

Financial

Services (n=25)

Healthcare /

Pharma (n=5)

Telecom /

Media / Ent. (n=6)

Services (n=8)

3Q14 4Q14 2Q14 1Q14 Cross-industry

-15%

-10%

-5%

0%

5%

10%

15%

20%

Dividends - 1Q14 Dividends - 2Q14 Dividends - 3Q14 Dividends - 4Q14 Capital spending - 1Q14 Capital spending - 2Q14 Capital spending - 3Q14 Capital spending - 4Q14

Expectations Compared to the past 12 months, how do you expect your company’s operating results and investments to change over the next 12 months?

26 CFO Signals

Operating Results*

* Averages have been adjusted to eliminate the effects of stark outliers. Sample sizes for industries may not sum to total due to responses from “other” industries.

Investments*

(n=102*) (n=23) (n=13) (n=5) (n=13) (n=25) (n=5) (n=6) (n=8)

Open-ended entry of percentages.

-5%

0%

5%

10%

15%

20%

25%

30%

Revenue - 1Q14 Revenue - 2Q14 Revenue - 3Q14 Revenue - 4Q14 Earnings - 1Q14 Earnings - 2Q14 Earnings - 3Q14 Earnings - 4Q14

(n=102*) (n=23) (n=13) (n=5) (n=13) (n=25) (n=5) (n=6) (n=8)

-2%

0%

2%

4%

6%

8%

10%

Domestic - 1Q14 Domestic - 2Q14 Domestic - 3Q14 Domestic - 4Q14

Offshore (company-owned) - 1Q14 Offshore (company-owned) - 2Q14 Offshore (company-owned) - 3Q14 Offshore (company-owned) - 4Q14

Expectations Compared to the past 12 months, how do you expect your company’s employment to change over the next 12 months?

27 CFO Signals

Employment*

* Averages have been adjusted to eliminate the effects of stark outliers. Sample sizes for industries may not sum to total due to responses from “other” industries.

Open-ended entry of percentages.

(n=102*) (n=23) (n=13) (n=5) (n=13) (n=25) (n=5) (n=6) (n=8)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Less optimistic primarily due to external factors (e.g., economy, industry, and market trends)

Less optimistic primarily due to internal/company-specific factors (e.g., products/services, operations, financing, assets)

No notable change

More optimistic primarily due to internal/company-specific factors (e.g., products/services, operations, financing, assets)

More optimistic primarily due to external factors (e.g., economy, industry, and market trends)

Sentiment How does your optimism regarding your company’s prospects compare to last quarter?

28 CFO Signals

Total (n=102*)


Retail /

Wholesale (n=13)

Technology (n=5)

Energy /

Resources (n=13)

Financial

Services (n=25)

Healthcare /

Pharma (n=5)

Services (n=8)

Telecom /

Media / Ent. (n=6)


Single select.

Sentiment Overall, what external or internal risk worries you the most?

29 CFO Signals

* While we have attempted to display CFOs’ verbatim answers wherever possible, we have consolidated and reworded some answers in the interest of

economy and participant confidentiality. Sample sizes for industries may not sum to total due to responses from “other” industries.

Total

(n=92)*

Manufacturing

(n=20)

Retail /

Wholesale

(n=10)

Technology

(n=5)

Energy /

Resources

(n=11)

Financial

Services

(n=24)

Healthcare /

Pharma

(n=5)

Telecom /

Media / Ent.

(n=6)

Services

(n=7)

External

MACRO/ECONOMY

Currency/FX rates (5)

Geopolitical risks/instability

(5)

European economy (3)

Chinese economy (2)

Global economic

recession/volatility (2)

Latin American economy

Middle East unrest

Unemployment

Consumer confidence

Inflation risk

Impact of commodity prices

on demand

US housing market and

mortgage interest rates

Oil prices

GOVERNMENT

Federal regulation – risk of

new/burdensome

Government ability to spur

growth

Inability of US Government to

pass meaningful reforms

MACRO/ECONOMY

Frailty of economic recovery

around the world (2)

European economy

Chinese economy

Demand shocks

War in Ukraine

Chinese economy

Oil/gas prices

Geopolitical risks/instability

Terrorist attacks (domestic)

Interest rates

Equity markets

GOVERNMENT

Congressional stalemate

continues

Rule of law

Risk that regulators will

inhibit growth through ill-

conceived actions

MACRO/ECONOMY

Chinese economy (2)

Geopolitical risks / global

stability (2)

War in Ukraine

War in Middle East

Global economy

Rising interest rates

GOVERNMENT

Regulation – risk of

new/burdensome (2)

Political risks

MACRO/ECONOMY

Oil/gas price weakness (5)

Slow/no global growth

Slack demand

War / terrorism

Interest rates

Equity market volatility

GOVERNMENT

Market regulation in the

energy sector (2)

EPA regulation

State regulation

Mexican energy reform

MACRO/ECONOMY

Frailty of economic recovery

around the world (7)

Rising interest rates (5)

European economy (4)

Geo-political events that

could hurt economies (2)

Crisis in Middle East (2)

Low interest rates continuing

(2)

Interest rate shocks (2)

Low quality of job growth (2)

Europe moving into deeper

recession, carrying emerging

markets with them

Too much stimulus in the

economy driving distortions

US monetary policy

Equity market correction

GOVERNMENT


new/burdensome (11)

Complexity of regulation

Uncertain tax laws in key

markets

Emerging and uncertain

accounting/capital rules

MACRO/ECONOMY

Impact of global economy on

pricing environment and

access for new products

Inflation

MACRO/ECONOMY

Consumer spending

Excess stimulus by central

banks igniting inflation

GOVERNMENT


new/burdensome

MACRO/ECONOMY

Europe's economy (3)

Commodity pricing

World economy

Chinese economy

Lack of growth

Quebec economy

GOVERNMENT

Environmental regulation

Slowing permitting

Regulatory risk

Industry /

Company

Pension obligations

Construction costs

Cost control

Internal execution

Price competition at retail

Slowing growth of our largest

business unit

Cyber-risks/security

Online competition

Cyber-risks/security

Cost of providing benefits to

employees

Managing operations

Competitive forces

Delivering services cost-

effectively

Strategy execution

Succession planning

Acquisition integration risk

Hiring good senior talent

Brand perception

Irrational competitors

Product performance

Cost management

Being second-guessed by

(short-term-oriented) activist

investors

Pricing in our industry

Operating risks

Open-ended text entry.

30

Special topic: Uncertainty To what degree is uncertainty around the following areas impacting your business planning?


Retail/Wholesale (n=13)

Technology (n=5)

Energy/Resources (n=13)

Financial Services (n=25)

Healthcare/Pharma (n=5)

Services (n=8)

Telecom/Media/Ent. (n=6)

9%

17%

22%

13%

13%

17%

17%

17%

9%

9%

30%

17%

13%

17%

9%

30%

18%

22%

17%

22%

4%

9%

26%

17%

30%

43%

52%

39%

36%

39%

57%

57%

17%

30%

22%

39%

30%

22%

17%

9%

27%

22%

4%

9%

48%

48%

13%

9%

4%

4%

9%

14%

26%

4%


European economy

Chinese economy


Fiscal policy

Health care policy



Equity markets

Debt markets


Geopolitical events

8%

54%

46%

8%

8%

8%

8%

8%

8%

8%

15%

8%

8%

15%

8%

15%

8%

8%

8%

23%

38%

23%

54%

69%

46%

31%

38%

62%

54%

54%

54%

54%

15%

23%

15%

46%

54%

38%

23%

23%

15%

31%

15%

15%

8%

8%

8%

8%

20%

20%

20%

40%

40%

40%

40%

20%

20%

20%

20%

20%

20%

20%

40%

60%

40%

60%

80%

60%

40%

20%

20%

40%

20%

20%

20%

20%

20%

20%

20%

20%

40%

20%

20%

80%

20%

20%

20%

46%

46%

8%

15%

33%

8%

8%

8%

23%

15%

8%

15%

17%

8%

31%

15%

31%

8%

8%

23%

23%

15%

15%

23%

17%

15%

38%

38%

23%

31%

54%

8%

15%

62%

38%

25%

8%

46%

38%

31%

15%

38%

23%

8%

8%

8%

8%

85%

54%

15%

20%

20%

20%

40%

40%

40%

20%

20%

40%

40%

20%

20%

20%

20%

20%

40%

80%

60%

40%

40%

20%

20%

40%

20%

20%

60%

40%

20%

20%

40%

60%

100%

60%

20%

17%

50%

67%

17%

17%

17%

17%

17%

17%

17%

17%

17%

33%

33%

33%

17%

50%

67%

50%

33%

67%

83%

50%

33%

50%

50%

17%

17%

33%

17%

17%

33%

17%

33%

17%

33%

33%

13%

13%

38%

13%

29%

13%

13%

25%

13%

25%

13%

13%

38%

13%

13%

29%

13%

13%

13%

25%

38%

50%

38%

38%

13%

13%

43%

38%

50%

13%

50%

25%

50%

38%

13%

38%

38%

25%

38%

25%

25%

25%

25%

0%

13%

38%

38%

32%

32%

32%

12%

16%

8%

28%

32%

8%

16%

8%

24%

12%

29%

20%

24%

32%

28%

52%

20%

20%

32%

28%

25%

16%

8%

40%

60%

24%

24%

20%

60%

40%

28%

56%

33%

56%

8%

8%

68%

16%

32%


European economy

Chinese economy


Fiscal policy

Health care policy



Equity markets

Debt markets


Geopolitical events


CFO Signals

* Totals in bar charts may not sum to 100% due to rounding.

Very little impact Little impact Neutral Moderate impact Very high impact

Special topic: Rates and prices How are you viewing/approaching the current environment of low interest rates and low energy prices?

31 CFO Signals



Total (n=102*)


Retail /

Wholesale (n=13)

Technology (n=5)

Energy /

Resources (n=13)

Financial

Services (n=25)

Healthcare /

Pharma (n=5)

Telecom /

Media / Ent. (n=6)

Services (n=8)

Interest rates

higher in a year

Interest rate

expectations are

affecting our pricing

plans

Energy prices will be

higher in a year

Energy price

expectations are not


plans

Our prices will be

higher in a year

Interest rates

lower in a year

Interest rate expectations

are not affecting our

pricing plans

Energy price

expectations are


plans

Our prices will be

lower in a year

Energy prices will be

lower in a year

Our prices are

higher now than

pre-recession

Our prices are

lower now than

pre-recession

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 51 2 3 4 5

4Q14 Cross-industry

32

Special topic: Retirement obligations How aggressive have you been in de-risking your pension/retirement obligations?

0% 25% 50% 75%

Plan termination

Retiree medical buy-outs

Annuity buy-outs

Voluntary lump-sumpayouts (Former

employees)

Voluntary lump-sumpayouts (Retirees)

Medicarecoordinators/exchanges

0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75%0% 25% 50% 75%

Total (n=77**)


Retail /

Wholesale (n=10)

Technology (n=2)

Energy /

Resources (n=12)

Financial

Services (n=17)

Healthcare /

Pharma (n=5)

Services (n=5)

Telecom /

Media / Ent. (n=4)

** Those without current or past plans were asked to skip this question.

Single select.

CFO Signals


33

0% 25% 50% 75%

Don't know or won't

More than 5% above ournew/higher GAAP liability

Up to 5% above our new/higherGAAP liability

Equal to our new/higher GAAPliability

Only below our new/higherGAAP liability

0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75%0% 25% 50% 75%

Total (n=72**)


Retail /

Wholesale (n=9)

Technology (n=1)

Energy /

Resources (n=11)

Financial

Services (n=16)

Healthcare /

Pharma (n=5)

Services (n=5)

Telecom /

Media / Ent. (n=4)

Special topic: Retirement obligations Assuming adoption of new mortality tables that increase you GAAP pension liability, what premium would you pay to settle all/part of your plan(s)?

Single-select from list (choices = not considered, decided

against, planned for longer term, planned for this year,

implemented); plotted in this chart is percent of CFOs who

chose one of the latter two options

CFO Signals

** Those without current or past plans were asked to skip this question.


Longitudinal data tables

34 CFO Signals

2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

Revenue 9.3% 10.9% 6.5% 8.2% 7.1% 6.8% 6.3% 5.9% 6.6% 4.8% 5.6% 5.4% 5.7% 5.0% 4.1% 4.6% 6.1% 6.8% 6.0%

6.0% 10.0% 5.0% 5.0% 5.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%

84% 93% 81% 89% 80% 83% 87% 79% 85% 82% 83% 81% 84% 78% 82% 90% 90% 89% 90%

Earnings 17.3% 19.5% 12.0% 12.6% 14.0% 9.3% 10.1% 12.8% 10.5% 8.0% 10.9% 12.1% 10.3% 8.0% 8.6% 7.9% 8.9% 10.9% 9.7%

6.0% 10.0% 8.0% 10.0% 10.0% 8.0% 9.0% 9.5% 8.5% 6.0% 7.0% 10.0% 10.0% 9.0% 8.0% 7.0% 8.0% 8.0% 8.0%

89% 93% 80% 83% 83% 82% 84% 79% 81% 84% 76% 84% 83% 82% 82% 84% 83% 90% 86%

Dividends 6.5% 8.6% 4.1% 4.4% 3.7% 3.5% 2.4% 2.2% 3.9% 2.5% 2.5% 3.6% 4.5% 3.4% 4.0% 5.7% 4.1% 4.1% 3.0%

0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

38% 39% 28% 36% 35% 41% 27% 31% 33% 30% 29% 38% 40% 39% 37% 47% 45% 45% 44%

Capital spending 12.4% 8.3% 8.7% 11.8% 10.7% 7.9% 9.6% 12.0% 11.4% 4.6% 4.2% 7.8% 7.5% 4.9% 6.4% 6.5% 6.8% 5.0% 5.5%5.0% 5.0% 4.0% 5.0% 10.0% 5.0% 5.0% 6.0% 10.0% 3.0% 0.0% 0.0% 3.5% 2.4% 3.0% 3.0% 5.0% 5.0% 5.0%

62% 58% 57% 61% 69% 59% 61% 68% 70% 53% 43% 57% 57% 54% 59% 57% 64% 60% 62%

Number of domestic personnel 3.1% 2.0% 1.8% 1.8% 2.0% 1.2% 1.0% 2.1% 2.1% 0.6% 1.0% 0.9% 2.4% 1.3% 1.4% 1.0% 1.6% 2.3% 2.1%

0.5% 2.0% 1.0% 1.0% 2.0% 1.0% 1.0% 1.0% 1.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 1.0% 1.0% 1.0%

50% 60% 48% 61% 64% 52% 51% 51% 52% 40% 40% 43% 46% 47% 48% 42% 58% 58% 60%

Number of offshore personnel 3.5% 2.8% 3.6% 3.7% 4.1% 2.9% 4.8% 3.7% 3.8% 1.5% 0.5% 2.4% 2.5% 1.9% 4.1% 2.5% 1.9% 2.6% 1.9%0.0% 0.0% 0.0% 0.0% 2.0% 0.0% 0.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

41% 49% 47% 41% 57% 37% 50% 43% 41% 30% 32% 39% 36% 33% 42% 34% 42% 45% 44%

2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

Optimism (% more optimistic) 63.5% 46.8% 53.3% 62.4% 39.7% 28.6% 28.6% 63.0% 39.1% 38.8% 29.1% 51.0% 59.0% 41.9% 54.2% 46.8% 44.3% 43.7% 49.0%

Neutrality (% no change) 19.3% 16.8% 26.0% 22.0% 28.3% 18.6% 32.1% 21.9% 32.6% 21.2% 31.3% 30.1% 27.7% 33.9% 33.4% 33.0% 37.2% 44.6% 35.3%

Pessimism (% less optimistic) 17.2% 36.4% 20.7% 15.6% 32.0% 52.8% 39.3% 15.1% 28.3% 40.0% 39.6% 18.9% 13.3% 24.2% 20.8% 20.2% 18.6% 11.7% 15.6%

Net optimism (% more optimistic less % less optimistic)46.3% 10.4% 32.6% 46.8% 7.7% -24.2% -10.7% 47.9% 10.8% -1.2% -10.5% 32.1% 45.7% 17.7% 33.4% 26.6% 25.7% 32.0% 33.3%

S&P 500 price at survey period midpoint 1,088 1,072 1,200 1,343 1,333 1,123 1,161 1,361 1,317 1,418 1,387 1,520 1,667 1,656 1,798 1,839 1,878 1,955 2,040

S&P gain/loss QoQ -1.5% 11.9% 11.9% -0.7% -15.8% 3.4% 17.2% -3.2% 7.7% -2.2% 9.6% 9.7% -0.7% 8.6% 2.3% 2.1% 4.1% 4.3%S&P

Ope

rati

ng

Res

ults

Inve

stm

ent

Opt

imis

mEm

ploy

men

t

35 CFO Signals

* All means have been adjusted to eliminate the effects of stark outliers. The “Survey Mean” column contains arithmetic means since 2Q10.

** Averages for optimism numbers may not add to 100% due to rounding.

Longitudinal trends Expectations and sentiment

CFOs’ Year-Over-Year Expectations* (Mean growth rate, median growth rate, and percent of CFOs who expect gains)

CFO and Equity Market Sentiment**

Longitudinal trends Means and distributions for key metrics

36 CFO Signals

Vertical lines indicate range for

responses between 5th and 95th

percentiles.

Horizontal marks indicate outlier-

adjusted means.

Dotted lines indicate 3-year

average (mean).

-40%

-20%

0%

20%

40%

60%

80%

100%

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

-40%

-20%

0%

20%

40%

60%

80%

100%

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

-20%

-10%

0%

10%

20%

30%

40%

50%

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

Revenue

growth

Earnings

growth

Capital spending

growth

Domestic employment

growth

-20%

-10%

0%

10%

20%

30%

40%

50%

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

Industry trends

37 CFO Signals

38 CFO Signals

Manufacturing

Earnings

Revenue

Capital spending

Dividends

Offshore hiring

Domestic hiring

Domestic and offshore hiring

Dividends and capital spending

(13.9%)

Operating metrics expectations

CFOs’ expected change year-over-year (mean)

Revenue and earnings

External forces (participant-only insight*)

Deloitte LCSPs' assessment of some of the most

important external forces affecting their clients (n=65)

0% 25% 50% 75% 100%

Much worse Worse Same Better Much better

Future performance (participant-only insight*)

Deloitte LCSPs’ expectation for how this sector will be

performing a year from now (n=125)

Average

* Participant-only insights are provided to current and frequent survey participants. Statements

reflect consolidated opinions expressed by surveyed individual lead client service partners

(LCSPs) from North America and do not necessarily reflect the opinions of Deloitte.

-5%

0%

5%

10%

15%

20%

25%

30%

-5%

0%

5%

10%

15%

20%

-5%

0%

5%

10%

Demand/Growth

• Global economic growth (17)

• Consumer confidence/spending (9)

• Currency/FX rates (5)

• Global operations/coordination (4)

• Business demand (3)

• Govt. spending (2)

• Geo-political turmoil (2)

• M&A

Innovation

• Tech innovation/R&D (6)

Competition

• Falling price points (4)

• Foreign/global competition (3)

• Price competition (2)

Prices/Costs

• Commodity/materials prices (7)

• Regulatory burdens (5)

• Low interest rates (5)

• Low energy costs (4)

• Labor costs (3)

• Taxes (2)

• Health care costs

39 CFO Signals

Retail/Wholesale

Earnings Revenue

Capital spending

Dividends

Offshore hiring

Domestic hiring






Demand/Growth

• Consumer confidence/income (23)

• Economic growth (4)

• Difficulty forecasting with shifting

demand (3)

• Currency/FX rates

• Market disruption

• Changing demographics

• Lack of new products

Innovation

• eCommerce evolution/logistics (5)

• Tech shifts (3)

• Omni-channel shopping

• Changing delivery methods

Competition

• Competing with internet pure-

plays

• Competitive pricing

Prices/Costs

• Consumer power/pricing

constraints (2)

• Rising commodity costs

• Rising shipping costs

• Margin squeeze

• Tax reforms

• Cybersecurity




0% 25% 50% 75% 100%



Deloitte LCSPs' expectation for how this sector will be


Average -5%

0%

5%

10%

15%

20%

25%

30%

-5%

0%

5%

10%

15%

20%

-5%

0%

5%

10%




40 CFO Signals

Technology

Earnings

Revenue

Capital spending

Dividends

Offshore hiring

Domestic hiring






Demand/Growth


• Business confidence (2)

• High market valuations/speculation

(2)

• Consumer confidence

• Counterfeiting

• Pace of changing customer

interests/needs

• Trade Policy

Innovation

• Speed of change/obsolescence (7)

• Movement to cloud (2)

Competition

• Intense competition (2)

• Apprehension to invest in faux

innovation

• Disintermediation

• Foreign competition

Prices/Costs

• Regulatory burdens (2)

• Cybersecurity

• Evolving operating models

• Global mfg. costs

• Productivity




0% 25% 50% 75% 100%





Average -5%

0%

5%

10%

15%

20%

25%

30%

-5%

0%

5%

10%

15%

20%

(15%) (11%)

-5%

0%

5%

10%




(-15.3%)

41 CFO Signals

Energy/Resources

Earnings

Revenue

Capital spending

Dividends

Offshore hiring

Domestic hiring






Demand/Growth

• Earnings growth despite low volume

growth and rate pressure (4)

• Canada—ability to get product to

market

• Low oil prices reduce capex, depress

oil/gas

• Geo-political conflict

• Talent shortages

Competition

• US energy independence;

resulting global shifts (4)

• Saudi moves

• Mexico deregulation

• Impact of lower OPEC influence

on supply/pricing

Prices/Costs

• Oil/crude pricing (15)

• Energy reforms (12)

• Impact of global supply shifts on

price trends

• Climate/EPA regulation (5)

• Natural gas prices (3)

• Managing production costs with

low oil prices

• Rising costs from regulatory

requirements

• P&U low rate pressures

• Lower fuel prices driving better

P&U performance

• Cybersecurity data/grid risk




0% 25% 50% 75% 100%





Average -5%

0%

5%

10%

15%

20%

25%

30%

-5%

0%

5%

10%

-5%

0%

5%

10%

15%

20%




42 CFO Signals

Financial Services

Earnings

Revenue

Capital spending

Dividends

Offshore hiring

Domestic hiring






Demand/Growth


• Global economies/markets

uncertainty (4)

• Business confidence (3)

• Countries’ debt/tax problems

• Excess capital in specific markets

• Availability of capital and seed

investments

• M&A

Innovation

• Innovation in technology

• Digital revolution

• Moving to cashless society

• New delivery models

Competition

• Competition among peers and

other sectors

• Asset overvaluation

Prices/Costs

• Regulatory burdens/changes (29)

• Growing capital requirements

• Interest rates/low interest rates

(15)

• Federal Reserve action

• Emerging insurance risks




0% 25% 50% 75% 100%





Average -5%

0%

5%

10%

15%

20%

25%

30%

-5%

0%

5%

10%

15%

20%

-5%

0%

5%

10%




43 CFO Signals

Healthcare/Pharma

Earnings

Revenue

Capital spending

Dividends

Offshore hiring

Domestic hiring






Demand/Growth

• Aging populations (3)

Innovation

• Commercial innovation (2)

• R&D pipeline success

• Technology

Competition

• Consolidation (3)

• Restructuring

• Disaggregation

• Generics competition

Prices/Costs

• Govt. regulation/intervention (15)

• ACA requirements (7)

• FDA actions (2)

• Uncertainty from new Congress

• Value provided at reasonable

cost

• Challenges to health care

spending




0% 25% 50% 75% 100%





Average -5%

0%

5%

10%

15%

20%

25%

30%

-5%

0%

5%

10%

15%

20%

(-8.7%)

-5%

0%

5%

10%




44 CFO Signals

Telecom/Media/Entertainment (T/M/E)

Earnings

Revenue

Capital spending

Dividends

Offshore hiring

Domestic hiring






Demand/Growth

• Consumer spending (2)

• FCC regulation (2)

• Consumer fatigue; changing interests

(2)

• European economy

• Global economy improvement

• Advertising spending

• Audience fragmentation

• New revenue streams

• International investments

Innovation

• Technological disruption (5)

• Innovation (2)

• Business model shifts (2)

• Delivery given Internet evolution

• Rate of technological obsolescence

Competition

• Competition (4)

• M&A/consolidation (3)

• Alternative access options

• Chinese competitors in US

• Non-traditional competitors

Prices/Costs

• Regulation (9)

• Price pressures (2)

• Piracy

• Cost containment




0% 25% 50% 75% 100%





Average -5%

0%

5%

10%

15%

20%

25%

30%

-5%

0%

5%

10%

15%

20%

(43%)

(-6.7%)

-5%

0%

5%

10%

(-5.5%)




45 CFO Signals

Services

Earnings

Revenue

Capital spending

Dividends

Offshore hiring

Domestic hiring






Demand/Growth


• Consumer spending/confidence (3)

• Business expansion

• Talent shortage/challenges (3)

• Services related to global

investments

• Shrinking market

Innovation

• Impact of technological innovation (2)

Prices/Costs

• Pricing constraints (2)

• Competition on price

• Increased value

expectations/lower price points

• Perceptions of value changing

• Slow sales processes

• Interest rates

• Accounting overregulation

• Taxes




0% 25% 50% 75% 100%





Average -5%

0%

5%

10%

15%

20%

25%

30%

-5%

0%

5%

10%

(-5.0%) -5%

0%

5%

10%

15%

20%




Country trends

46 CFO Signals

-5%

0%

5%

10%

15%

20%

-5%

0%

5%

10%

-5%

0%

5%

10%

15%

20%

25%

30%

47 CFO Signals

United States

Dividends and

capital spending

Earnings

Revenue

Capital spending Dividends

Offshore hiring

Domestic hiring

Operational Metrics


Domestic and offshore

hiring

Revenue and

earnings

-5%

0%

5%

10%

-5%

0%

5%

10%

15%

20%

25%

30%

48 CFO Signals

Canada

Dividends and

capital spending

Earnings

Revenue

Capital spending

Dividends

Offshore hiring

Domestic hiring

Operational Metrics


(-9.4%)


hiring

Revenue and

earnings

-5%

0%

5%

10%

15%

20%

-5%

0%

5%

10%

15%

20%

-5%

0%

5%

10%

-5%

0%

5%

10%

15%

20%

25%

30%

(-9.4%)

49 CFO Signals

Mexico

Dividends and

capital spending

Earnings Revenue

Capital spending

Dividends

Offshore hiring

Domestic hiring

Operational Metrics



hiring

Revenue and

earnings

About the survey

50 CFO Signals

Public, 72.3%

Private, 27.7%

No (Holding Company or

Group), 82.2%

Yes (Subsid. of North

American Company),

9.9%

Yes (Subsid. of Non-North

American Company),

7.9%

Demographics

51 CFO Signals

$1B - $5B, 41.2%

Less than $1B, 17.6%

More than $10B, 17.6%

$5.1B - $10B, 23.6%

Annual Revenue ($US) (n=102)

Ownership (n=101)

Subsidiary Company (n=101)

81% - 100%, 61.4%

61% - 80%, 15.8%

41% - 60%, 12.9%

21% - 40%, 5.9%

20% or less, 4.0%

Revenue from North America (n=101)

CFO of Another

Organization, 31.4%

Controller, 18.6%

Treasurer, 7.8%

Financial Planning/ Analysis

Leader, 6.9% Tax Director, 0.0% Public

Accounting Professional,

2.0%

Consultant, 2.0%

Business Unit Leader,

12.7%

Other, 18.6%

US, 77.4%

Canada, 16.7%

Mexico, 5.9%

Demographics (cont.)

CFO Signals

CFO Experience (Years) (n=102)

Previous CFO Role (n=102)

Country (n=102)

Industry (n=102)

52

Manufactur-ing, 22.5%

Retail / Wholesale,

12.7%

Technology, 4.9% Energy /

Resources, 12.7%

Financial Services,

24.5%

Healthcare/ Pharma,

4.9%

Tel / Med / Ent, 5.9%

Services, 7.8%

Other, 3.9%

Less than 5, 40.2%

5 to 10, 29.4%

11 to 20, 24.5%

More than 20, 5.9%

Methodology

Background

The Deloitte North American CFO Survey is a quarterly survey of CFOs from large, influential companies across North America. The

purpose of the survey is to provide these CFOs with quarterly information regarding the perspectives and actions of their CFO peers

across four areas: business environment, company priorities and expectations, finance priorities and CFOs’ personal priorities.

Participation

This survey seeks responses from client CFOs across the United States, Canada, and Mexico. The sample includes CFOs from

public and private companies that are predominantly over $3B in annual revenue. Respondents are nearly exclusively CFOs.

Participation is open to all sectors except for government.

Survey Execution

At the opening of each survey period, CFOs receive an email containing a link to an online survey hosted by a third-party service

provider. The response period is typically two weeks, and CFOs receive a summary report approximately two weeks after the survey

closes. Only CFOs who respond to the survey receive the summary report for the first two weeks after the report is released.

Nature of Results

This survey is a “pulse survey” intended to provide CFOs with information regarding their CFO peers’ thinking across a variety of

topics; it is not, nor is it intended to be, scientific in any way, including in its number of respondents, selection of respondents, or

response rate – especially within individual industries. Accordingly, this report summarizes findings for the surveyed population but

does not necessarily indicate economy- or industry-wide perceptions or trends.

53 CFO Signals

As used in this survey, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

Copyright © 2014 Deloitte Development LLC. All rights reserved.

Member of Deloitte Touche Tohmatsu Limited.

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