The 2011 CFO Outlook survey indicates a recovering U.S. economy, with 64% of CFOs expecting revenue growth and 47% planning to hire more employees. However, concerns persist around healthcare costs, the budget deficit, and the housing market's impact on economic stability. The report highlights differing perspectives between manufacturing and services sectors, with manufacturers more engaged in international trade and optimistic about global growth.

1. bank of america merrill lynch eXecUTiVe SUmmary
2011 CFO Outlook executive summary and key Findings
a survey of Chief Financial Officers from u.s. Companies
In its thirteenth year, the annual CFO Outlook surveys top financial decision-makers from across the nation. This
proprietary study provides insight into how U.S. companies view the domestic and world economies, and gauges
the outlook for revenue, financing, M&A activity and involvement in foreign markets.
overview
key Data:
the 2011 CFO Outlook takes the pulse of corporate
america three years after what many economists believe • nearly half of all CFOs (47%) expect their companies
was the worst financial crisis since the great depression to hire additional employees in 2011, up from 28
of the 1930s. this financial crisis set into motion a series percent in last year’s study.
of events that included the collapse of large financial • the majority of u.s. companies (64%) are expecting
institutions, downturns in stock markets, collapse of the growth in both revenues and profits.
housing bubble, declines in consumer wealth, failure of • Financial executives gave the current economy a
key businesses, high levels of unemployment and a score of 47 out of 100, up slightly from last year’s
significant decline in economic activity. the results of this score of 44.
study provide valuable insight into how u.s. companies,
both manufacturers and services and commodities
in addition, u.s. companies overall are highly involved in
companies, assess the current and future state of the
foreign markets and are forecasting international sales
u.s. and world economies and their industry sectors in
growth in 2011.
the aftermath of this crisis.
CFOs of u.s. companies are, however, not without
The major findings concerns. they are significantly concerned about the
according to the latest CFO Outlook, the state of the potential impact healthcare reform, the budget deficit and
u.s. economy and the manufacturing sector are showing the housing market will have on the u.s. economy next
signs of a steady recovery. CFOs’ assessment of the year. Within their own companies, their biggest financial
world economy and the services and commodities concern is healthcare costs, followed by cost of materials
sector are even more optimistic and indicative of a more (applicable only to manufacturers), revenue growth, cash
rapid turnaround. looking ahead to 2011, most u.s. flow and consumer confidence.
companies are forecasting stability for the manufacturing
results of the 2011 CFO Outlook clearly show that not
sector and growth for the u.s. economy and the services
only do u.s. manufacturers and services and commodities
and commodities sector.
companies share similar economic views, they also have
in terms of corporate performance in 2011, the majority of similar financial concerns, challenges and solutions.
u.s. companies are expecting growth in both revenues and specifically, CFOs provide comparable ratings for the
profits and are planning to hire additional employees – all domestic economy and the manufacturing sector and both
positive signs that corporate america is on the rebound. feel optimistic about the outlook for the u.s. economy.
Other positive indicators include the fact that companies’ internally, they both report high levels of financial concern
r&d expenses, capital expenditures and borrowing needs about healthcare costs and revenue growth. What’s
are comparable to pre-recession levels. more, manufacturers and services and commodities
companies are strikingly similar in terms of their financial
2011 CFO OutlOOk exeCutive summary and key Findings Page 1

2. product/service usage, expected m&a activity and level of Summary of key findings
capital expenditures. externally, they are equally concerned
the details which follow are intended to provide an economic
about the potential impact that healthcare reform, the
snapshot of the views of CFOs from both the manufacturing
budget deficit and the housing market will have on the
and services and commodities sectors:
u.s. economy in 2011.
economy
despite these similarities, there are several striking
• CFOs of u.s. companies still have a negative view of the
differences between u.s. manufacturers and services and
u.s. economy at this time, giving it an average score of
commodities companies. the first, and most profound
“47” on a scale ranging from 0 (extremely weak) to 100
difference, is that u.s. manufacturers are significantly more
(extremely strong). this view is consistent among both
involved in international trade than services and commodities
manufacturers (“48”) and services and commodities
companies. Compared to services and commodities
companies (“47”).
companies, manufacturers are significantly more likely
• While healthcare costs have been an important concern
to buy from foreign suppliers, sell to foreign markets and
in recent years, this year CFOs are reporting that their
have operations in foreign countries. as a result, u.s.
biggest financial concern, by far, is healthcare costs
manufacturers are more likely than other u.s. companies
(54%). Other concerns include revenue growth (44%), cash
to look internationally for growth opportunities and to monitor
flow (39%), consumer confidence (35%) and corporate
foreign competition. manufacturers give both the world
taxes (33%). Both manufacturers and services and
economy and their sector significantly higher marks than
commodities companies are equally concerned about
services and commodities companies. they are significantly
these factors.
more likely than services and commodities companies to
have r&d investments that are higher than pre-recession • in comparison, CFOs have a more positive view of
levels, and they are directionally more likely than services and the world economy giving it an average rating of “51.”
commodities companies to forecast increases in revenues manufacturers give the current state of the world
and capital expenditures for 2011. economy significantly higher marks (“52”) than services
and commodities companies (“49”).
For services and commodities companies, the focus is
• as for each industry sector, the consensus among
on u.s. markets. CFOs of services and commodities
CFOs is that the current state of the u.s. services and
companies are optimistic about the 2011 outlook for their
commodities sector is more positive (“56”) than the
sector, as reflected in their forecast for revenue growth
manufacturing sector (“48”).
and pricing increases. several additional measures bode
• despite the gloominess of the current economic
well for the services and commodities sector: services
state, 56% of all CFOs are forecasting expansion for
and commodities companies are more likely to forecast
the domestic economy in 2011, a view that is shared
increases in their foreign market sales, to hire additional
by both manufacturing CFOs (55%) and services and
permanent employees and to consider financing for u.s.
commodities CFOs (56%).
expansion. additionally, they are slightly more likely than
manufacturers to report an increase in their borrowing • Forecasts for 2011 industry performance are mixed –
needs and to report that the credit available to their 58% predict expansion in the services and commodities
company has increased since last year. Collectively, these sector compared to only 47% in manufacturing.
results suggest that the services and commodities sector • the following three measures suggest that u.s.
is strong and seeking expansion in the coming year. companies are looking optimistically at the year ahead:
1) 64% are expecting revenue growth in 2011;
2) 55% are expecting profit margins to increase; and
3) 33% are reporting an increase in capital expenditures
for next year.
2011 CFO OutlOOk exeCutive summary and key Findings Page 2

3. • Overall, the top three factors that CFOs feel will most mergers and acquisitions (m&a)
impact the u.s. economy next year are healthcare • twenty-six percent of manufacturing company CFOs
reform (54%), the budget deficit (52%) and the housing expect to participate in a merger or acquisition in 2011,
market (43%). a finding that is consistent across both manufacturing
(25%) and services and commodities (27%) sectors.
financing
• among those companies expecting m&a activity next
• in 2011, 61% of u.s. companies expect their borrowing
year, the overwhelming majority (91%) report that they
needs to remain the same compared to this year, 24%
will be making the acquisition, while only 4% say they
will borrow more and 14% will borrow less.
will be acquired by another company.
• among those that plan to decrease their borrowing,
• Overall and in both the manufacturing and services and
the most frequently mentioned reason is that they have
commodities sectors, 55% of CFOs report that there are
experienced an increase in their revenues/profits, and
more businesses available at lower prices than there
therefore, have less need to borrow money (38%). Other
were one year ago. twenty-seven percent do not think
reasons are economic uncertainty (24%), excess capacity
more businesses today are attractively priced.
(23%), concerns about future taxes and government
regulation (22%) and insufficient demand (21%). • Forty-eight percent of CFOs think the purchase price of
companies as a multiple of earnings will stay the same
• as global credit markets ease, it is not surprising that
in 2011, while 31% feel it will increase.
only 27% of CFOs forecast an increase in their cost of
capital. the majority (60%) expect that their financing international outlook
costs will remain the same in 2011 and 12% believe • Overall, 68% of u.s. companies surveyed have some form
their cost of capital will decrease. this view is consistent of foreign market involvement (85% of manufacturers
across both industry sectors. and 51% of services and commodities companies). as a
• two-thirds of all u.s. companies, regardless of industry, whole, 56% buy from foreign markets, 49% sell to foreign
will seek financing in 2011. the top two needs companies markets and 31% have operations in foreign countries.
have for financing are capital expenditures (38%) and • looking ahead, projections for international sales growth in
working capital (35%). 2011 are optimistic with 61% expecting their international
• the majority of CFOs (69%) plan to use internal sources sales to increase.
as a means of financing in 2011. Other types of financing • the top four international markets in 2011 will be asia
that will be used are cash flow financing (44%), asset- (67%), latin america (59%), europe (56%) and Canada
based financing (40%) and leasing (36%). Only 6% of (50%). in general, both manufacturers and services
companies will not require financing. Both manufacturers and commodities companies are forecasting growth in
and services and commodities companies use similar the same foreign markets. the lone exception is that
types of financing. manufacturers are significantly more likely than services
and commodities companies to predict growth in latin
labor costs and Product Pricing
america (64% vs. 51%).
• Fifty-eight percent of u.s. companies predict their labor
costs will increase in 2011 and 48% intend to increase hiring Plans and r&D investments
the prices of their products. interestingly, services and • Overall, and among both manufacturers and services
commodities companies are significantly more likely to and commodities companies, most are planning to
predict their labor costs and prices will increase (68% hire additional permanent employees (47%), contract
and 52%, respectively) than manufacturers (49% and employees (46%) or both permanent and contract
45% respectively). employees 47% next year. about half of all companies
surveyed (48%) have no plans to change the size of their
labor force in 2011, and 6% will be laying off employees.
2011 CFO OutlOOk exeCutive summary and key Findings Page 3

4. – among those companies that are not planning to hire methodology
additional permanent employees next year, their top
From september 20, 2010 through October 29, 2010,
three reasons are insufficient demand (61%), worries
granite research Consulting completed telephone
about the sustainability of the economic recovery
interviews with 801 financial executives drawn from a
(45%), and uncertainties about higher healthcare/
random sampling of u.s. manufacturing and services and
insurance costs (33%).
commodities companies with annual revenues between
• Overall, about six in ten u.s. companies report that their $25 million and $2 billion. since more than 50% of survey
2010 r&d expenses are about the same as they were participants have C-suite titles, and most of them are
prior to the recession of 2008. in total, 18% say their CFOs, all participants are referred to as CFOs throughout
r&d expenditures are higher than pre-recession levels the report. the statistical range of error for the total
(23% manufacturing and 12% services and commodities sample is plus or minus 4%, for each individual sector
companies) which suggest companies are beginning (manufacturing or services and commodities) the margin
to recover following the global financial crisis and of error is plus or minus 5%. When significant differences
u.s. recession. are noted throughout the report, they are based on a 90%
confidence level.
more information
the full study will be available mid January. visit the
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