Fast Growth CEOs Turn Uncertain About the Economy, but Remain Upbeat About Own Company's Prospects in `99, Finds PricewaterhouseCoopers.

NEW YORK--(BUSINESS WIRE)--Dec. 2, 1998--

PricewaterhouseCoopers' "Trendsetter Barometer" Interviewed CEOs

of 448 Product and Service Companies Identified in the Media

as the Fastest-Growing U.S. Businesses Over the Last Five Years;

The Surveyed Companies Range in Size From

Approximately $1 Million to $50 Million in Revenue/Sales

CEOs of America's fastest-growing companies shifted to an uncertain outlook on the economy just before the November elections. But despite their more cautious economic overview, many still say their own company is on track for strong, positive growth in 1999. These are the findings from the latest PricewaterhouseCoopers "Trendsetter Barometer" survey, released today.

Uncertainty Replaces Optimism

At the close of the 3rd quarter only 43 percent of "Trendsetter" CEOs said they are optimistic about the U.S. economy over the next 12 months (down 29 points from the prior quarter, and 34 points from a year ago). Most CEOs -- 44 percent -- now have an uncertain outlook, and 13 percent are pessimistic (up 10 points from the prior quarter and a year ago). In the product sector, only 39 percent remained optimistic, compared with 47 percent among service businesses.

In evaluating the condition of the U.S. economy today, only 49 percent say we are in a period of moderate economic growth (off 36 points from a year ago), 28 percent see no noticeable change, and 23 percent say we are in a moderate economic decline (up 21 points).

"Trendsetter" CEOs now expect the U.S. economy to grow at a 2.55 percent rate for 1998, off sharply from their 3.03 percent estimate in July.

Contributing to their wariness about the economy is a growing unease about market demand: 48 percent are now concerned that softening demand poses a potential barrier to their own company's growth over the next 12 months -- a two-year high, up 13 points from a year ago.

"These views were expressed just preceding the elections, when many were concerned that gridlock in Washington might prevent our country from effectively dealing with important economic and governance issues," said James D. Atwell, global private equity leader for PricewaterhouseCoopers. "Many complex factors are involved, but hopefully conditions will be improved by the close of the 4th quarter."

But despite their downshift on the economy, "Trendsetter" CEOs maintained a relatively positive outlook about their own company's growth in 1998 -- expecting a 20.6 percent revenue gain for the calendar year, following a 22.7 percent increase a year ago. Viewed separately, service companies expect to maintain a faster growth pace for 1998 than product companies -- 23.4 percent versus 18.1 percent.

Looking further ahead, "Trendsetter" CEOs are strongly positive about their own company's ability to accelerate growth over the next 12 months, even in a somewhat slower, more uncertain business environment. During this period they expect to grow by 25.7 percent, up from 24.8 percent a year ago. Service firms expect growth of 29.7 percent, versus 22.1 percent for product firms, a 34 percent differential.

"It is noteworthy that these CEOs remain positive about their own company's prospects over the next 12 months, despite any uncertainties they may have about the economy in general," noted Atwell. He added, "Service businesses may have more reason to be upbeat than their product sector counterparts, who have greater exposure to economic uncertainties abroad."

International Sales Lag

Overseas growth continues to slip for international marketers. This quarter, a net of 22 percent had increasing rather than decreasing revenues abroad, compared to a net of 39 percent a year ago. These businesses' international sales are expected to reach 18.2 percent of composite revenues over the next 12 months, down from 19.7 percent a year ago, before the Asian economic crisis -- a drop of 8 percent.

And there's no relief in sight. Going forward, concern about the relative strength of the U.S. dollar surged among international marketers: 32 percent see the dollar as a barrier to growth in the year ahead, up 8 points from a year ago.

"But despite unsettled conditions abroad, international marketers expect to grow faster over the next 12 months than their domestic-only counterparts: 27.8 percent versus 24.4 percent, a difference of 14 percent," said Atwell. "Although international markets may be less stable than a year ago, these rapid growth companies are demonstrating that overseas sales can still represent a significant opportunity for growth."

New Investments and Hiring Remain Solid

In keeping with their upbeat growth estimates going forward, "Trendsetter" companies are holding steady in their business and human resource investments. More than half (54 percent) are planning major new business investments over the next 12 months, down only 3 points from a year ago. Their projected level of spending, at 11.3 percent of revenues, is unchanged.

The pattern of planned investments is similar to a year ago, with two exceptions: fewer "Trendsetter" firms are planning to increase research & development spending, 22 percent (off 8 points from a year ago), and fewer are planning geographic expansion, 36 percent (off 3 points). In contrast, more are planning increased spending for sales promotion, 45 percent (up 3 points) and advertising, 40 percent (up 2 points).

Again, more "Trendsetter" companies plan increases in information technology than any other category -- 58 percent, the same high proportion as a year ago, but down 6 points from a recent high over the past two quarters.

Plans to hire new workers also remain steady: 78 percent plan to add workers over the next 12 months, down just 2 points this quarter. Only 3 percent plan to reduce their work force, and 19 percent expect to stay at approximately the same size.

The number of planned hirings, at 14.0 percent of the composite workforce, is up from 13.7 percent last quarter -- but down from the high of 18.7 percent a year ago when these businesses were overhiring in anticipation of an evaporating labor pool.

Hiring plans in the service sector remain significantly stronger: 81 percent are seeking a composite 20.2 percent increase in workforce -- compared with 74 percent of product companies seeking 9.8 percent new workers. Nearly one-sixth of service company new hires are full-time-equivalent part-timers, a typical occurrence at end-of-year holiday season.

"These rapidly growing companies are holding firm with their growth projections and investment plans as they navigate through uncertain economic seas," said Atwell. "What they may lack in optimism, they make up for in courage."

PricewaterhouseCoopers' "Trendsetter Barometer" is developed and compiled with assistance from the opinion and economic research firm of Business Science International.

PricewaterhouseCoopers (http://www.pwcglobal.com), the world's largest professional services organization, helps its clients build value, manage risk, and improve their performance.

Drawing on the talents of more than 140,000 people in 152 countries, PricewaterhouseCoopers provides a full range of business advisory services to leading global, national and local companies and to public institutions. These services include audit; accounting and tax advice; management, information technology and human resource consulting; financial advisory services including mergers & acquisitions, business recovery, project finance and litigation support; business process outsourcing services; and legal services through a global network of affiliated law firms.

PricewaterhouseCoopers refers to the U.S. firm of PricewaterhouseCoopers LLP and other members of the worldwide PricewaterhouseCoopers organizations.

Note to Editors: The name PricewaterhouseCoopers is one word, with uppercase P, uppercase C, and all other letters in lowercase.

If you have questions about this "Trendsetter Barometer" survey, please contact Pete Collins, survey director, at 212/259-4496, or [e-mail]