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Corrections Corporation of America Announces Second Quarter Results
Net Income Per Share of $0.18 Before Extraordinary Charge
Adjusted Free Cash Flow Per Share Increases 11.3%
NASHVILLE, Tenn., Aug. 7 /PRNewswire-FirstCall/ -- Corrections Corporation of America (NYSE: CXW) (the "Company") today announced its operating results for the three and six month periods ended June 30, 2002.
Financial Highlights (dollars in thousands, except per share data):
Three Months Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
Total revenue $ 243,304 $ 239,898 $ 478,736 $ 474,401
Adjusted free cash
flow (1) $ 18,463 $ 16,233 $ 34,905 $ 30,548
Adjusted free cash
flow per diluted
share (1) $ 0.59 $ 0.53 $ 1.12 $ 1.01
EBITDA (1) $ 46,617 $ 48,110 $ 91,690 $ 95,237
Income tax (expense)
benefit $ (571) $ (624) $ 32,016 $ 166
Income (loss) from
continuing operations
and after preferred stock
distributions $ 5,994 $ (4,695) $ 39,910 $ (15,857)
Income (loss) from
discontinued
operations (719) 229 (688) 1,263
Extraordinary charge (36,670) -- (36,670) --
Cumulative effect of
accounting change -- -- (80,276) --
Net loss available
to common
stockholders $ (31,395) $ (4,466) $ (77,724) $ (14,594)
Diluted earnings (loss) per share:
Income (loss) from
continuing
operations $ 0.20 $ (0.19) $ 1.26 $ (0.66)
Income (loss) from
discontinued
operations (0.02) 0.01 (0.02) 0.05
Extraordinary charge (1.14) -- (1.03) --
Cumulative effect of
accounting change -- -- (2.25) --
Net loss available to
common
stockholders $ (0.96) $ (0.18) $ (2.04) $ (0.61)
Average compensated
occupancy 89.2% 89.3% 88.3% 88.8%
Facility operating
margin 22.8% 22.9% 22.5% 22.8%
As of June 30,
2002 2001
Total assets $ 1,868,715 $ 2,004,947
Total debt $ 966,161 $ 996,669
Total market capitalization (market value of
equity plus debt) $ 1,635,979 $ 1,506,649
Total number of facilities 62 65
For the second quarter of 2002, the Company reported a net loss available to common stockholders of $31.4 million, or $0.96 per diluted share, compared with a net loss available to common stockholders of $4.5 million, or $0.18 per diluted share, for the second quarter of 2001.
For the six months ended June 30, 2002, the Company reported a net loss available to common stockholders of $77.7 million, or $2.04 per diluted share, compared with a net loss available to common stockholders of $14.6 million, or $0.61 per diluted share, for the comparable prior year period.
Results for the second quarter and six months ended June 30, 2002, include the effects of an extraordinary charge of $36.7 million associated with the Company's refinancing of its senior indebtedness as further discussed below. The per diluted share effect of this charge amounted to $1.14 for the three months ended June 30, 2002, and $1.03 for the six months ended June 30, 2002. Excluding the effect of the extraordinary charge, the Company generated net income available to common stockholders of $5.3 million, or $0.18 per diluted share, for the three months ended June 30, 2002.
Results for the six months ended June 30, 2002, also include the effect of a non-cash charge of $80.3 million, or $2.25 per diluted share, for the cumulative effect of a change in accounting for goodwill in accordance with Statement of Financial Accounting Standards No. 142 ("SFAS 142") and a one- time cash income tax benefit of $32.2 million, or $0.91 per diluted share, resulting from an income tax change that was signed into law in March. Excluding these transactions, and the effect of the aforementioned extraordinary charge, for the six months ended June 30, 2002, the Company generated net income available to common stockholders of $7.0 million, or $0.24 per diluted share.
Cash flow from operations continued to improve, with the Company generating adjusted free cash flow of $18.5 million, or $0.59 per diluted share, during the second quarter of 2002, compared with $16.2 million, or $0.53 per diluted share, during the second quarter of 2001, representing an 11.3% increase in the adjusted free cash flow per diluted share results. The improvement in adjusted free cash flow was largely due to cash interest savings partially offset by an increase in income tax payments. The cash interest savings were due to significant repayments of debt during 2001, combined with lower interest rates primarily resulting from our successful refinancing. Income tax payments increased for taxes due in the Commonwealth of Puerto Rico.
Consolidated revenues for the second quarter of 2002 amounted to $243.3 million, compared with $239.9 million for the second quarter of 2001. Consolidated EBITDA for the second quarter of 2002 was $46.6 million, compared with $48.1 million for the second quarter of 2001. Average compensated occupancy for the second quarter of 2002 was 89.2%, compared with 89.3% for the second quarter of 2001.
Commenting on the second quarter results, President and CEO John Ferguson stated, "The Company generated solid operating results during our fiscal second quarter. Adjusted free cash flow per diluted share increased 11.3% over the comparable prior year period, and we generated an operating profit prior to the extraordinary charge related to our successful refinancing. As a result of the refinancing, the Company is now in a positive working capital position."
Debt Refinancing
As previously disclosed, the Company completed a comprehensive refinancing of its senior debt in May of 2002. The new financing consists of a senior secured bank credit facility in the aggregate amount of $715 million, which includes a revolving credit facility of up to $75 million with a term of four years, a $75 million term loan A with a maturity of four years, and a $565 million term loan B with a maturity of six years. All borrowings under the new senior secured bank credit facility initially bear interest at a base rate plus 2.5%, or LIBOR plus 3.5%, at the Company's option. The refinancing also included the purchase of substantially all of the Company's existing $100 million 12% senior notes, and the issuance of $250 million of seven-year senior notes at 9.875%.
As a result of this refinancing and the related early extinguishment of the existing senior secured bank credit facility and senior notes, the Company recorded an extraordinary loss of approximately $36.7 million during the second quarter, which included the write-off of existing deferred loan costs, certain bank fees paid, premiums paid to redeem the 12% senior notes, and certain other costs associated with the refinancing.
Discontinued Operations
As a result of the previously announced termination of the contracts to manage the Ponce Young Adult Correctional Facility and the Ponce Adult Correctional Facility on May 4, 2002, and the sale of the Company's interest in a juvenile facility on June 28, 2002, in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the Company has reported the operating results of these facilities as discontinued operations for the three and six months ended June 30, 2002 and 2001.
Operating EBITDA/Liquidity
EBITDA for the quarter amounted to $46.6 million, while debt service cost for the quarter, excluding non-cash items and costs associated with the refinancing, amounted to approximately $24.7 million. At June 30, 2002, the Company had cash on hand of approximately $65.8 million and $61.2 million available under a $75 million working capital line of credit.
Operations Update
At June 30, 2002, key operating statistics for the continuing operations of the Company were as follows:
Quarter Ended June 30,
Metric 2002 2001
Average Available Beds 59,520 59,908
Average Compensated Occupancy 89.2% 89.3%
Total Compensated Man-Days 4,829,421 4,868,283
Revenue per Compensated Man-Day $ 49.34 $ 47.97
Operating Expense per Compensated Man-Day:
Fixed $ 27.75 $ 27.02
Variable 10.32 9.97
Total $ 38.07 $ 36.99
Operating Margin per Compensated Man-Day $ 11.27 $ 10.98
Operating Margin 22.8% 22.9%
Consolidated EBITDA for the second quarter of 2002 was $46.6 million, compared with $48.1 million for the second quarter of 2001. EBITDA for the prior year included the operating results of the Company's Pamlico Correctional Facility, which was sold on June 28, 2001. The sale of this facility, which had been leased to a governmental agency, was the primary reason for the decline in EBITDA from the prior year.
Operating margins increased slightly to $11.27 per compensated man-day in the second quarter of 2002 from $10.98 per compensated man-day in the prior year. The operating margin ratio remained essentially unchanged at 22.8% compared with 22.9% in the prior year.
Contract Update
As previously announced, on May 7, 2002, the Company received notice from the Commonwealth of Puerto Rico terminating the Company's contract to manage the 1,000-bed medium security Guayama Correctional Center. This followed a prior notice from the Commonwealth of Puerto Rico terminating our contracts to manage the Ponce Adult Correctional Facility and the Ponce Young Adult Correctional Facility. Operations of both Ponce facilities were transferred to the Commonwealth of Puerto Rico on May 4, 2002. Operations of the Guayama Correctional Center were transferred to the Commonwealth of Puerto Rico on August 6, 2002.
On May 30, 2002, the Company announced a contract award from the Federal Bureau of Prisons to house 1,500 federal detainees at the Company's McRae Correctional Facility located in McRae, Georgia. The initial term of the contract is for three years and includes seven one-year renewal options. Under the provisions of the award, the Company could earn revenues of up to approximately $109 million in the first three years of the contract. The contract with the BOP guarantees at least 95% occupancy on a take-or-pay basis, and is expected to commence late in the fourth quarter of 2002.
"Although we were disappointed with the loss of the contracts in Puerto Rico," Ferguson stated, "we nevertheless remain encouraged regarding the overall environment for private correctional services. While the budget difficulties that affect almost every governmental entity present short-term challenges with respect to per-diem rates, the fact remains that these governmental entities are also constrained with respect to funds available for prison construction. We expect little in the way of new prison construction while inmate populations should continue to rise. This demand should lead to higher occupancies and greater profitability for the Company going forward."
About the Company
The Company is the nation's largest owner and operator of privatized correctional and detention facilities and one of the largest prison operators in the United States, behind only the federal government and four states. The Company currently owns 40 correctional, detention and juvenile facilities, three of which are leased to other operators, and one additional facility which is not yet in operation. The Company currently operates 61 facilities (including the McRae, Georgia facility which is anticipated to commence full operations during the fourth quarter of 2002), including 37 company-owned facilities, with a total design capacity of approximately 60,000 beds in 21 states and the District of Columbia. The Company specializes in owning, operating and managing prisons and other correctional facilities and providing inmate residential and prisoner transportation services for governmental agencies. In addition to providing the fundamental residential services relating to inmates, the Company's facilities offer a variety of rehabilitation and educational programs, including basic education, life skills and employment training and substance abuse treatment. These services are intended to reduce recidivism and to prepare inmates for their successful re-entry into society upon their release. The Company also provides health care (including medical, dental and psychiatric services), food services and work and recreational programs.
Forward-Looking Statements
This press release contains statements as to the Company's beliefs and expectations of the outcome of future events that are forward-looking statements as defined within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. These include, but are not limited to, the risks and uncertainties associated with: (i) fluctuations in the Company's operating results because of, among other things, changes in occupancy levels, competition, increases in cost of operations, fluctuations in interest rates and risks of operations; (ii) the growth in the privatization of the corrections and detention industry, the public acceptance of the Company's services and the timing of the opening of new prison facilities; and (iii) general economic and market conditions. Other factors that could cause operating and financial results to differ are described in the filings made from time to time by the Company with the Securities and Exchange Commission.
The Company takes no responsibility for updating the information contained in this press release following the date hereof to reflect events or circumstances occurring after the date hereof or the occurrence of unanticipated events or for any changes or modifications made to this press release or the information contained herein by any third-parties, including, but not limited to, any wire or internet services.
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS June 30, December 31,
2002 2001
Cash and cash equivalents $ 65,785 $ 46,307
Restricted cash 12,674 12,537
Accounts receivable, net of allowance of $755
and $729, respectively 125,470 137,421
Prepaid expenses and other current assets 14,734 13,303
Current assets of discontinued operations 11,522 6,763
Total current assets 230,185 216,331
Property and equipment, net 1,568,289 1,566,786
Investment in direct financing lease 18,617 18,873
Assets held for sale 836 22,312
Goodwill 24,432 104,019
Other assets 26,356 36,593
Non-current assets of discontinued operations -- 6,366
Total assets $ 1,868,715 $ 1,971,280
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 138,556 $ 144,023
Income tax payable 6,798 9,002
Distributions payable 5,205 15,853
Fair value of interest rate swap agreement -- 13,564
Current portion of long-term debt 21,508 792,009
Current liabilities of discontinued operations 400 2,269
Total current liabilities 172,467 976,720
Long-term debt, net of current portion 944,653 171,591
Deferred tax liabilities 55,106 56,511
Other liabilities 18,916 19,297
Total liabilities 1,191,142 1,224,119
Commitments and contingencies
Preferred stock - $0.01 par value; 50,000 shares authorized:
Series A - 4,300 shares issued and outstanding;
stated at liquidation preference of $25.00
per share 107,500 107,500
Series B - 4,160 and 3,948 shares issued
and outstanding at June 30, 2002 and
December 31, 2001, respectively; stated at
liquidation preference of $24.46 per share 101,753 96,566
Common stock -$0.01 par value; 80,000 shares
authorized; 27,990 and 27,921 shares issued
and 27,990 and 27,920 shares outstanding at
June 30, 2002 and December 31, 2001,
respectively 280 279
Additional paid-in capital 1,342,881 1,341,958
Deferred compensation (2,176) (3,153)
Retained deficit (870,960) (793,236)
Treasury stock, 1 share, at cost, at
December 31, 2001 -- (242)
Accumulated other comprehensive loss (1,705) (2,511)
Total stockholders' equity 677,573 747,161
Total liabilities and stockholders' equity $ 1,868,715 $ 1,971,280
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
REVENUE:
Management and
other $ 242,354 $ 238,283 $ 476,839 $ 470,556
Rental 950 1,615 1,897 3,845
243,304 239,898 478,736 474,401
EXPENSES:
Operating 188,118 184,336 372,363 364,184
General and
administrative 8,344 8,434 15,535 17,034
Depreciation and
amortization 12,932 12,769 25,142 25,343
209,394 205,539 413,040 406,561
OPERATING INCOME 33,910 34,359 65,696 67,840
OTHER (INCOME) EXPENSE:
Equity in (earnings)
loss of joint venture 90 90 (27) 175
Interest expense, net 22,469 33,113 51,285 67,286
Change in fair value
of interest rate
swap agreement (51) 327 (3,462) 6,296
(Gain) loss on sale
of assets 54 (39) 51 (39)
Unrealized foreign
currency transaction
(gain) loss (422) (41) (327) 344
22,140 33,450 47,520 74,062
INCOME (LOSS) BEFORE
INCOME TAXES,
EXTRAORDINARY CHARGE
AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 11,770 909 18,176 (6,222)
Income tax (expense)
benefit (571) (624) 32,016 166
INCOME (LOSS) FROM
CONTINUING OPERATIONS
BEFORE EXTRAORDINARY
CHARGE AND CUMULATIVE
EFFECT OF ACCOUNTING
CHANGE 11,199 285 50,192 (6,056)
Income (loss) from
discontinued
operations, net
of taxes (719) 229 (688) 1,263
Extraordinary charge (36,670) -- (36,670) --
Cumulative effect of
accounting change -- -- (80,276) --
NET INCOME (LOSS) (26,190) 514 (67,442) (4,793)
Distributions to
preferred
stockholders (5,205) (4,980) (10,282) (9,801)
NET LOSS AVAILABLE TO
COMMON
STOCKHOLDERS $ (31,395) $ (4,466) $ (77,724) $ (14,594)
BASIC EARNINGS (LOSS) PER SHARE:
Income (loss) from
continuing operations
before extraordinary
charge and cumulative
effect of accounting
change $ 0.22 $ (0.19) $ 1.44 $ (0.66)
Income (loss) from
discontinued
operations, net
of taxes (0.03) 0.01 (0.02) 0.05
Extraordinary charge (1.33) -- (1.33) --
Cumulative effect of
accounting change -- -- (2.90) --
Net loss available
to common
stockholders $ (1.14) $ (0.18) $ (2.81) $ (0.61)
DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) from
continuing operations
before extraordinary
charge and cumulative
effect of accounting
change $ 0.20 $ (0.19) $ 1.26 $ (0.66)
Income (loss) from
discontinued
operations, net
of taxes (0.02) 0.01 (0.02) 0.05
Extraordinary charge (1.14) -- (1.03) --
Cumulative effect of
accounting change -- -- (2.25) --
Net loss available to
common
stockholders $ (0.96) $ (0.18) $ (2.04) $ (0.61)
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
CALCULATION OF EARNINGS (LOSS) PER SHARE
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
NUMERATOR
Basic:
Income (loss) from
continuing operations
before extraordinary
charge and cumulative
effect of accounting
change and after
preferred stock
distributions $ 5,994 $ (4,695) $ 39,910 $ (15,857)
Income (loss) from
discontinued
operations, net
of taxes (719) 229 (688) 1,263
Extraordinary charge (36,670) -- (36,670) --
Cumulative effect of
accounting change -- -- (80,276) --
Net loss available
to common
stockholders $ (31,395) $ (4,466) $ (77,724) $ (14,594)
Diluted:
Income (loss) from
continuing operations
before extraordinary
charge and cumulative
effect of
accounting change
and after preferred
stock
distributions $ 5,994 $ (4,695) $ 39,910 $ (15,857)
Interest expense
applicable to
convertible notes 598 -- 5,045 --
Diluted income (loss)
from continuing
operations before
extraordinary charge
and cumulative effect
of accounting change
and after preferred stock
distributions 6,592 (4,695) 44,955 (15,857)
Income (loss) from
discontinued operations,
net of taxes (719) 229 (688) 1,263
Extraordinary charge (36,670) -- (36,670) --
Cumulative effect of
accounting change -- -- (80,276) --
Diluted net loss
available to common
stockholders $ (30,797) $ (4,466) $ (72,679) $ (14,594)
DENOMINATOR
Basic:
Weighted average common
shares outstanding 27,659 24,653 27,650 23,938
Diluted:
Weighted average common
shares outstanding 27,659 24,653 27,650 23,938
Effect of dilutive securities:
Stock options and
warrants 637 -- 646 --
Stockholder litigation 310 -- 310 --
Convertible notes 3,370 -- 6,741 --
Restricted stock-based
compensation 255 -- 255 --
Weighted average shares
and assumed
conversions 32,231 24,653 35,602 23,938
BASIC EARNINGS (LOSS) PER SHARE:
Income (loss) from
continuing operations
before extraordinary
charge and cumulative
effect of accounting
change $ 0.22 $ (0.19) $ 1.44 $ (0.66)
Income (loss) from
discontinued operations,
net of taxes (0.03) 0.01 (0.02) 0.05
Extraordinary charge (1.33) -- (1.33) --
Cumulative effect of
accounting change -- -- (2.90) --
Net loss available
to common
stockholders $ (1.14) $ (0.18) $ (2.81) $ (0.61)
DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) from
continuing operations
before extraordinary
charge and cumulative
effect of accounting
change $ 0.20 $ (0.19) $ 1.26 $ (0.66)
Income (loss) from
discontinued operations,
net of taxes (0.02) 0.01 (0.02) 0.05
Extraordinary charge (1.14) -- (1.03) --
Cumulative effect of
accounting change -- -- (2.25) --
Net loss available
to common
stockholders $ (0.96) $ (0.18) $ (2.04) $ (0.61)
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
CALCULATION OF ADJUSTED FREE CASH FLOW AND EBITDA
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
Pre-tax loss available
to common
stockholders $ (30,824) $ (3,842) $ (109,740) $ (14,760)
Extraordinary charge 36,670 -- 36,670 --
Cumulative effect of
accounting change -- -- 80,276 --
Income taxes paid (4,080) (855) (4,110) (2,267)
Depreciation and
amortization 12,932 12,769 25,142 25,343
Depreciation and
amortization for
discontinued
operations 1,867 407 2,115 534
Income tax expense
(benefit) for
discontinued
operations (1,251) 413 (397) 428
Amortization of debt
costs and other
non-cash interest 2,937 5,567 9,123 11,167
Change in fair value
of derivative
instruments (51) 327 (3,462) 6,296
Series B preferred
stock dividend
satisfied with series
B preferred stock 3,055 2,830 5,982 5,501
Maintenance capital
expenditures (2,792) (1,383) (6,694) (1,694)
Adjusted free
cash flow $ 18,463 $ 16,233 $ 34,905 $ 30,548
ADJUSTED FREE CASH FLOW PER SHARE:
BASIC $ 0.67 $ 0.66 $ 1.26 $ 1.28
DILUTED $ 0.59 $ 0.53 $ 1.12 $ 1.01
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2002 2001 2002 2001
Operating income $ 33,910 $ 34,359 $ 65,696 $ 67,840
Depreciation and
amortization 12,932 12,769 25,142 25,343
Discontinued operations,
net of taxes (719) 229 (688) 1,263
Depreciation and
amortization for
discontinued
operations 1,867 407 2,115 534
Income tax expense
(benefit) for
discontinued
operations (1,251) 413 (397) 428
Interest income for
discontinued operations (31) (67) (87) (171)
Gain on sale of assets
for discontinued
operations (91) -- (91) --
EBITDA $ 46,617 $ 48,110 $ 91,690 $ 95,237
Note (1) EBITDA and adjusted free cash flow are presented because we believe they are frequently used by securities analysts, investors and other interested parties as a supplemental measure of company performance. However, other companies may calculate EBITDA and adjusted free cash flow differently than we do. EBITDA and adjusted free cash flow are not measures of performance under generally accepted accounting principles and should not be considered as an alternative to cash flows from operating activities or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measure of performance derived in accordance with generally accepted accounting principles. This data should be read in conjunction with our combined and consolidated financial statements and related notes included in our filings with the Securities and Exchange Commission.
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SOURCE Corrections Corporation of America
-0- 08/07/2002
/CONTACT: Karin Demler of Corrections Corporation of America,