The company's confidence in the long-term global demand for cheaper energy allows it to plan for steady capex growth in the face of fluctuations in cash flow, according to Ferraioli. Indeed, the company's capex ratio has continued to rise for more than three years.

4) They Are Ready to Move — Literally.
To maintain efficient use of capital and a flexible approach to markets, companies investing in capital equipment are attempting to make sure that equipment is as light and portable as possible. The idea is to be able to quickly shift manufacturing to adapt to new markets. "If you walked into any of our production facilities on day one and you went back there in a year, it would be different," says George of Esterline. "We're continually looking at ways to improve how we move our product through."

Similarly, Shaw Group has just built a facility in Lake Charles, Louisiana, that will use modular techniques in constructing nuclear-power plants. Rather than building a plant entirely on site, the company will assemble large sections in the factory and ship them to the construction site to be put together. "It's cheaper, more efficient, and safer doing these things in the plant," said Ferraioli, noting that the company has spent $100 million on the plant.

5) They Believe That Information Technology Matters.
Increasingly, companies are learning that gaining a foothold in new markets requires a more tightly integrated IT architecture. So they are investing in ERP and other back-end systems that can provide a foundation for a truly global business by better managing all corporate data.

In the next three years, Integra LifeSciences will lay out "significant capex" to implement an ERP system, says CFO Henneman. "This company runs off more different systems than it should because we've done a fair number of acquisitions over the years. The time has come for us to develop a global system to operate more efficiently."

Companies also invest in IT to better interact with an expanding client base. Maximus sank money into its ERP system to meld an array of legacy systems into "a common framework that allows us to plug and play with client systems," says Walker. The company wants to be "shovel ready" if the expansion of Medicaid and other federal-state programs under the new health-care law spawns new demand for its services.

6) They Are Focused on Returns.
One of the biggest reasons companies with hefty amounts of cash on hand put it into capex is that they feel it provides the best return on their investments. "We're extremely focused on return on invested capital, and when we look at different ways to make investments of our cash or earnings," says Jeff Hall, the CFO of Express Scripts, "investments in capex come at the top of the list because they have the highest return."

Good acquisitions rank second, he says, "and if we still have cash remaining after we fill the first two buckets, then we're left with looking at how do we want to return that cash to shareholders," including dividends and share buybacks.

But investment in one of those categories does not necessarily conflict with investment in another. After recently buying a glass company in Argentina, Owens-Illinois will triple the size of the acquisition to serve what the company regards as an underserved market for fine wines. "So you make the acquisition. And then you go in with another $20 million or $30 million of capital to modernize and expand," says CFO White. "Capex goes hand in hand with M&A."

David M. Katz is New York bureau chief of CFO.

Going Without the Flow

Sustaining rising capital expenditures (capex) demands strong corporate will — and, often, steady cash flow. Sometimes, however, companies keep spending even when their free cash flow is declining.

How often is such an approach strategic, rather than obligatory? An analysis done for CFO by Charles Mulford, a Georgia Tech accounting professor and managing director of research at Cash Flow Analytics, suggests the answer may be "rarely."

The search unearthed seven public, non-financial-services companies with rising capex and falling free cash flow over one- and three-year periods ending in March 2010. The companies (all of which have market caps greater than $1 billion, increases in reported capex to revenue of greater than 20%, and decline in reported free cash flow of up to 20%) are: Dendreon, NCR, MEMC Electronic Materials, Overseas Shipholding Group, Patterson-UTI Energy, Pride International, and Royal Caribbean Cruises.

Most seem locked into capex increases by the nature of their businesses. Dendreon, a biotechnology firm, endured steady losses as it developed a prostate-cancer drug that went on the market in May. NCR contributes to a reserve fund devoted to potential environmental liabilities.

Two oil drillers, Pride and Patterson, and Overseas, a bulk shipper, spent to keep their equipment in shape even as the economic downturn threatened sales. And, even as tourism took a dive, Royal Caribbean still was contractually obliged to pay for ships as well as to pay off maturing debt.

Sometimes, though, atypically high capex in the face of weak cash flow is a bet on the future: MEMC, a chipmaker, invested in new raw-materials production and solar energy despite uncertain demand in its industry. In a July earnings release, Ahmad Chatila, the company's chief executive, said the outlays are "all meant to catalyze future growth." — D.M.K.

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LinkedIn Company Connections:

• Esterline Technologies |
• Maximus Inc. |
• Owens-Illinois |
• Cash Flow Analytics LLC |
• Integra LifeSciences Holdings |
• The Shaw Group |
• Express Scripts |
• Dendreon |
• NCR |
• MEMC Electronic Materials |
• Overseas Shipholding Group |
• Patterson-UTI Energy