"Ready to GO: 72% of Mid-Sized Companies Will Increase Capital Spending
in Next 12 Months, a CapitalSource Finance/Gallup Poll Finds"
Middle-market companies are signaling strong optimism about their growth
and the overall economy, with a full 72 percent planning to increase
capital spending in the coming year. Larger companies are even more upbeat,
with eight in ten planning on spending, and 39 percent reporting expected
capital expenditures to exceed $5 million.
These were among the key findings from a recent CapitalSource (NYSE: CSE)
Gallup national survey of 500 top financial executives at mid-sized
companies (revenues between $25 million and $500 million). This segment of
the market includes approximately 57,000 companies that as a group employ
approximately 3 million people nationwide.
"Based on our extensive experience with companies of this size, we're not
surprised that the vast majority of them are moving ahead with growth
plans, despite the slowdown affecting some business sectors," said John
Delaney, CEO of CapitalSource Finance. "Middle-market companies tend to be
more nimble, and have seen and survived multiple economic cycles. These
businesses know how to navigate through changing conditions and often are
the first to recognize cyclical shifts and seize the opportunities they
Other key survey findings include:
-Spending priorities: Financing equipment (78%) and technology (70%) were
the top priorities named by respondents. More than 40% also indicated
plans to add to their workforce in the next 12 months.
-Economic outlook: Despite geopolitical unrest and some consumer
uncertainty, eight in 10 respondents (80%) feel the economy will strengthen
somewhat or strengthen considerably in the next 12 months, while only 4%
think the economy will weaken.
-Growth: Approximately two-thirds (68%) of chief financial officers or
senior financial executives believe their companies will grow with the
economy, with the majority predicting this growth would come sooner rather
later (fourth quarter '03, or 2004.)
-Funding sources: Although most companies (56%) plan to fund growth by
either cash or self-funding, one in three plan to raise debt (31%).
Options mentioned most often as possible sources for debt financing were
cash flow financing (55%), leasing and equipment financing (46%),
asset-based funding (34%) and commercial mortgages (21%).
-Sarbanes-Oxley Act: More than half of the mid-sized companies (59%) are
familiar with the legislation with larger companies much more familiar than
the smaller ones (74% compared to 51% of smaller companies). Of those who
knew of the legislation, nearly half (47%) felt it might encourage private
companies to remain private and some public companies to privatize.
"If midsize private companies want to become public they should adopt many
best corporate governance practices to be more appealing to lenders and the
investing community," said Delaney.
"From our lending experiences, we have found that a sizable portion of the
middle market will always have a healthy appetite for capital throughout
the economic cycle," Delaney said. "The survey results reflect a prudent
optimism among a majority of middle-market companies that we believe could
play a key role in an economic recovery."
About CapitalSource Finance LLC
CapitalSource is a specialty finance company offering asset-based, senior,
cash flow and mezzanine financing to small and mid-sized borrowers through
three focused lending units: Corporate Finance, Healthcare Finance and
* The Healthcare Finance group provides a variety of financing products
small to mid-sized healthcare service companies,
* The Structured Finance group provides innovative debt facilities to
companies active in the real estate and finance industries, and
* The Corporate Finance group partners with private equity and leveraged
buyout firms to deliver senior and mezzanine financing to their
Headquartered in Chevy Chase, Md., CapitalSource has a national network of
offices in Atlanta, Boston, Buffalo, Chicago, Dallas, Los Angeles,
Nashville, New York, Philadelphia and San Francisco. The company has more
than 260 employees. More information is available at
www.capitalsource.com or toll free at 866-876-8723.
This report is based on the results of a survey conducted by The Gallup
Organization on behalf of CapitalSource Finance LLC. A national
cross-section of mid-size companies, defined as those with annual sales of
$25 million to $500 million dollars, was sampled. In each company, the
chief financial officer or equivalent position was interviewed by
telephone. A total of 500 telephone interviews were completed from August
to September 2003. Results based on the entire sample have a margin of
error of plus or minus 4.4 percentage points at the 95% confidence level.