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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED:  MARCH 31, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM            TO           

COMMISSION FILE NUMBER: 001-16109

 

CORECIVIC, INC.

(Exact name of registrant as specified in its charter)

 

 

MARYLAND

62-1763875

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

 

5501 VIRGINIA WAY

BRENTWOOD, TENNESSEE  

37027

(Zip Code)

(Address of principal executive offices)

 

 

(615) 263-3000

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

             Title of each class

     Trading Symbol(s)

Name of each exchange on which registered

              Common Stock

              CXW

               New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  

Indicate the number of shares outstanding of each class of Common Stock as of May 1, 2020:

Shares of Common Stock, $0.01 par value per share: 119,628,544 shares outstanding.

 

 

 

 


CORECIVIC, INC.

 

FORM 10-Q

 

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020

 

INDEX

 

 

 

PAGE

PART 1 – FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

1

    a)

 

Consolidated Balance Sheets as of March 31, 2020 (Unaudited) and December 31, 2019

 

1

    b)

 

Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2020 and 2019

 

2

    c)

 

Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2020 and 2019

 

3

    d)

 

Consolidated Statement of Stockholders' Equity (Unaudited) for the quarterly period ended March 31, 2020

 

4

    e)

 

Consolidated Statement of Stockholders' Equity (Unaudited) for the quarterly period ended March 31, 2019

 

5

    f)

 

Notes to Consolidated Financial Statements (Unaudited)

 

6

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

24

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

41

Item 4.

 

Controls and Procedures

 

41

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

42

Item 1A.

 

Risk Factors

 

42

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

43

Item 3.

 

Defaults Upon Senior Securities

 

43

Item 4.

 

Mine Safety Disclosures

 

43

Item 5.

 

Other Information

 

43

Item 6.

 

Exhibits

 

44

 

 

 

 

 

SIGNATURES

 

45

 

 

 

 


PART I – FINANCIAL INFORMATION

ITEM 1. – FINANCIAL STATEMENTS.

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

ASSETS

 

March 31, 2020

 

 

December 31, 2019

 

Cash and cash equivalents

 

$

335,491

 

 

$

92,120

 

Restricted cash

 

 

16,850

 

 

 

26,973

 

Accounts receivable, net of credit loss reserve of $4,839 and $3,217, respectively

 

 

272,598

 

 

 

280,785

 

Prepaid expenses and other current assets

 

 

34,962

 

 

 

35,507

 

Total current assets

 

 

659,901

 

 

 

435,385

 

Real estate and related assets:

 

 

 

 

 

 

 

 

   Property and equipment, net of accumulated depreciation of $1,540,249

       and $1,510,117, respectively

 

 

2,758,682

 

 

 

2,700,107

 

   Other real estate assets

 

 

235,691

 

 

 

238,637

 

Goodwill

 

 

50,537

 

 

 

50,537

 

Non-current deferred tax assets

 

 

13,663

 

 

 

16,058

 

Other assets

 

 

360,325

 

 

 

350,907

 

Total assets

 

$

4,078,799

 

 

$

3,791,631

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

318,365

 

 

$

337,462

 

Current portion of long-term debt, net

 

 

34,891

 

 

 

31,349

 

Total current liabilities

 

 

353,256

 

 

 

368,811

 

Long-term debt, net

 

 

2,236,427

 

 

 

1,928,023

 

Deferred revenue

 

 

9,061

 

 

 

12,469

 

Other liabilities

 

 

101,379

 

 

 

105,579

 

Total liabilities

 

 

2,700,123

 

 

 

2,414,882

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Preferred stock – $0.01 par value; 50,000 shares authorized; none issued and outstanding

   at March 31, 2020 and December 31, 2019, respectively

 

 

 

 

 

 

Common stock – $0.01 par value; 300,000 shares authorized; 119,629 and 119,096 shares

   issued and outstanding at March 31, 2020 and December 31, 2019, respectively

 

 

1,196

 

 

 

1,191

 

Additional paid-in capital

 

 

1,822,855

 

 

 

1,821,810

 

Accumulated deficit

 

 

(468,646

)

 

 

(446,252

)

Total stockholders' equity

 

 

1,355,405

 

 

 

1,376,749

 

Non-controlling interest – operating partnership

 

 

23,271

 

 

 

 

Total equity

 

 

1,378,676

 

 

 

1,376,749

 

Total liabilities and equity

 

$

4,078,799

 

 

$

3,791,631

 

 

The accompanying notes are an integral part of these consolidated financial statements.

1


CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

 

For the Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

REVENUES

 

$

491,101

 

 

$

484,064

 

EXPENSES:

 

 

 

 

 

 

 

 

Operating

 

 

362,315

 

 

 

345,832

 

General and administrative

 

 

31,279

 

 

 

29,445

 

Depreciation and amortization

 

 

37,952

 

 

 

35,523

 

Asset impairments

 

 

536

 

 

 

 

 

 

 

432,082

 

 

 

410,800

 

OPERATING INCOME

 

 

59,019

 

 

 

73,264

 

OTHER (INCOME) EXPENSE:

 

 

 

 

 

 

 

 

Interest expense, net

 

 

22,538

 

 

 

21,436

 

Other (income) expense

 

 

(533

)

 

 

4

 

 

 

 

22,005

 

 

 

21,440

 

INCOME BEFORE INCOME TAXES

 

 

37,014

 

 

 

51,824

 

Income tax expense

 

 

(3,776

)

 

 

(2,484

)

NET INCOME

 

 

33,238

 

 

 

49,340

 

Net income attributable to non-controlling interest

 

 

(1,181

)

 

 

 

NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

 

$

32,057

 

 

$

49,340

 

BASIC EARNINGS PER SHARE

 

$

0.27

 

 

$

0.42

 

DILUTED EARNINGS PER SHARE

 

$

0.27

 

 

$

0.41

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

2


CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED AND AMOUNTS IN THOUSANDS)

 

 

 

For the Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

33,238

 

 

$

49,340

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

37,952

 

 

 

35,523

 

Asset impairments

 

 

536

 

 

 

 

Amortization of debt issuance costs and other non-cash interest

 

 

1,356

 

 

 

857

 

Deferred income taxes

 

 

2,395

 

 

 

1,140

 

Non-cash revenue and other income

 

 

(2,705

)

 

 

(2,937

)

Non-cash equity compensation

 

 

4,610

 

 

 

3,812

 

Other expenses and non-cash items

 

 

3,810

 

 

 

3,423

 

Changes in assets and liabilities, net:

 

 

 

 

 

 

 

 

Accounts receivable, prepaid expenses and other assets

 

 

7,648

 

 

 

(2,564

)

Accounts payable, accrued expenses and other liabilities

 

 

(14,780

)

 

 

(11,921

)

Income taxes payable

 

 

1,317

 

 

 

1,150

 

Net cash provided by operating activities

 

 

75,377

 

 

 

77,823

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Expenditures for facility development and expansions

 

 

(22,233

)

 

 

(36,037

)

Expenditures for other capital improvements

 

 

(8,618

)

 

 

(9,972

)

Acquisitions, net of cash acquired

 

 

(8,849

)

 

 

(30,931

)

Proceeds from sale of assets

 

 

42

 

 

 

331

 

Increase in other assets

 

 

(2,411

)

 

 

(1,391

)

Net cash used in investing activities

 

 

(42,069

)

 

 

(78,000

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of debt and borrowings from credit facility

 

 

374,000

 

 

 

197,141

 

Scheduled principal repayments

 

 

(7,553

)

 

 

(2,876

)

Principal repayments of credit facility

 

 

(108,000

)

 

 

(153,000

)

Payment of debt issuance and other refinancing and related costs

 

 

(285

)

 

 

(85

)

Payment of lease obligations for financing leases

 

 

(135

)

 

 

(134

)

Contingent consideration for acquisition of businesses

 

 

 

 

 

(6,378

)

Dividends paid

 

 

(54,527

)

 

 

(52,365

)

Purchase and retirement of common stock

 

 

(3,560

)

 

 

(3,070

)

Proceeds from exercise of stock options

 

 

 

 

 

207

 

Net cash provided by (used in) financing activities

 

 

199,940

 

 

 

(20,560

)

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND

     RESTRICTED CASH

 

 

233,248

 

 

 

(20,737

)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period

 

 

119,093

 

 

 

74,137

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period

 

$

352,341

 

 

$

53,400

 

NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

      Debt assumed on acquisition of property portfolio

 

$

52,217

 

 

$

 

      Establishment of right of use assets and lease liabilities

 

$

62

 

 

$

82,917

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest (net of amounts capitalized of $0.5 million and $0.9 million in 2020 and

    2019, respectively)

 

$

12,881

 

 

$

18,522

 

Income taxes refunded, net

 

$

(285

)

 

$

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3


 

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020

(UNAUDITED AND AMOUNTS IN THOUSANDS)

 

 

 

Stockholders' Equity

 

 

Non-controlling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

Interest -

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

Operating

 

 

Total

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Equity

 

 

Partnership

 

 

Equity

 

Balance as of December 31, 2019

 

 

119,096

 

 

$

1,191

 

 

$

1,821,810

 

 

$

(446,252

)

 

$

1,376,749

 

 

 

 

 

$

1,376,749

 

Net income

 

 

 

 

 

 

 

 

 

 

 

32,057

 

 

 

32,057

 

 

 

1,181

 

 

 

33,238

 

Retirement of common stock

 

 

(207

)

 

 

(2

)

 

 

(3,558

)

 

 

 

 

 

(3,560

)

 

 

 

 

 

(3,560

)

Dividends declared on common stock

   ($0.44 per share)

 

 

 

 

 

 

 

 

 

 

 

(53,415

)

 

 

(53,415

)

 

 

 

 

 

(53,415

)

Restricted stock compensation, net of forfeitures

 

 

 

 

 

 

 

 

4,610

 

 

 

 

 

 

4,610

 

 

 

 

 

 

4,610

 

Restricted stock grants

 

 

740

 

 

 

7

 

 

 

(7

)

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative effect of adoption of new

   accounting standard

 

 

 

 

 

 

 

 

 

 

 

(1,036

)

 

 

(1,036

)

 

 

 

 

 

(1,036

)

Contributions to operating partnership

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,271

 

 

 

23,271

 

Distributions to non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,181

)

 

 

(1,181

)

Balance as of March 31, 2020

 

 

119,629

 

 

$

1,196

 

 

$

1,822,855

 

 

$

(468,646

)

 

$

1,355,405

 

 

$

23,271

 

 

$

1,378,676

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4


 

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019

(UNAUDITED AND AMOUNTS IN THOUSANDS)

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

 

Stockholders'

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

 

Equity

 

Balance as of December 31, 2018

 

 

118,674

 

 

$

1,187

 

 

$

1,807,202

 

 

$

(393,330

)

 

 

$

1,415,059

 

   Net income

 

 

 

 

 

 

 

 

 

 

 

49,340

 

 

 

 

49,340

 

Retirement of common stock

 

 

(143

)

 

 

(1

)

 

 

(3,069

)

 

 

 

 

 

 

(3,070

)

Dividends declared on common stock

    ($0.44 per share)

 

 

 

 

 

 

 

 

 

 

 

(52,994

)

 

 

 

(52,994

)

Restricted stock compensation, net of forfeitures

 

 

 

 

 

 

 

 

3,812

 

 

 

 

 

 

 

3,812

 

Restricted stock grants

 

 

521

 

 

 

5

 

 

 

(5

)

 

 

 

 

 

 

 

Stock options exercised

 

 

16

 

 

 

 

 

 

207

 

 

 

 

 

 

 

207

 

Cumulative effect of adoption of new

   accounting standard

 

 

 

 

 

 

 

 

 

 

 

(29,940

)

 

 

 

(29,940

)

Balance as of March 31, 2019

 

 

119,068

 

 

$

1,191

 

 

$

1,808,147

 

 

$

(426,924

)

 

 

$

1,382,414

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5


 

CORECIVIC, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

MARCH 31, 2020

 

1.

ORGANIZATION AND OPERATIONS

CoreCivic, Inc. (together with its subsidiaries, the "Company" or "CoreCivic") is the nation's largest owner of partnership correctional, detention, and residential reentry facilities and one of the largest prison operators in the United States.  The Company also believes it is the largest private owner of real estate used by U.S. government agencies. Through three segments, CoreCivic Safety, CoreCivic Community, and CoreCivic Properties, the Company provides a broad range of solutions to government partners that serve the public good through corrections and detention management, a network of residential reentry centers to help address America's recidivism crisis, and government real estate solutions.  As of March 31, 2020, through its CoreCivic Safety segment, the Company operated 50 correctional and detention facilities, 43 of which the Company owned, with a total design capacity of approximately 73,000 beds.  Through its CoreCivic Community segment, the Company owned and operated 28 residential reentry centers with a total design capacity of approximately 5,000 beds.  In addition, through its CoreCivic Properties segment, the Company owned 57 properties for lease to third parties and used by government agencies, totaling 3.3 million square feet.

In addition to providing fundamental residential services, CoreCivic's correctional, detention, and reentry facilities offer a variety of rehabilitation and educational programs, including basic education, faith-based services, life skills and employment training, and substance abuse treatment.  These services are intended to help reduce recidivism and to prepare offenders for their successful reentry into society upon their release.  CoreCivic also provides or makes available to offenders certain health care (including medical, dental, and mental health services), food services, and work and recreational programs.

CoreCivic began operating as a real estate investment trust ("REIT") effective January 1, 2013.  The Company provides services and conducts other business activities through taxable REIT subsidiaries ("TRSs"). A TRS is a subsidiary of a REIT that is subject to applicable corporate income tax and certain qualification requirements. The Company's use of TRSs permits CoreCivic to engage in certain business activities in which the REIT may not engage directly, so long as these activities are conducted in entities that elect to be treated as TRSs under the Internal Revenue Code of 1986, as amended, and enable CoreCivic to, among other things, provide correctional services at facilities it owns and at facilities owned by its government partners.  A TRS is not subject to the distribution requirements applicable to REITs so it may retain income generated by its operations for reinvestment.  

2.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying unaudited interim consolidated financial statements have been prepared by the Company and, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of results for the unaudited interim periods presented.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted.  The results of operations for the interim period are not necessarily indicative of the results to be obtained for the full fiscal year.  Reference is made to the audited financial statements of CoreCivic included in its Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (the "SEC") on February 20, 2020 (the "2019 Form 10-K") with respect to certain significant accounting and financial reporting policies as well as other pertinent information of the Company.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, "Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments," which changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The ASU replaces the "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost. For trade and other receivables, held-to-maturity debt securities, contract assets, loans and other instruments, entities are now required to use a new forward-looking "expected loss" model that generally will result in the earlier recognition of allowances for losses. Upon its effective date, CoreCivic adopted the ASU in the first quarter of 2020. The Company recognized a charge of $1.0 million to accumulated deficit upon adoption of ASU 2016-13. Based principally on the fact that the largest portion of the Company's accounts receivable is with governmental agencies with high credit ratings, the adoption of ASU 2016-13 did not have a material impact on its financial statements.

6


 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants and the SEC did not, or are not expected to, have a material effect on the Company's results of operations or financial position.

Fair Value of Financial Instruments

To meet the reporting requirements of Accounting Standards Codification ("ASC") 825, "Financial Instruments", regarding fair value of financial instruments, CoreCivic calculates the estimated fair value of financial instruments using market interest rates, quoted market prices of similar instruments, or discounted cash flow techniques with observable Level 1 inputs for publicly traded debt and Level 2 inputs for all other financial instruments, as defined in ASC 820, "Fair Value Measurement".  At March 31, 2020 and December 31, 2019, there were no material differences between the carrying amounts and the estimated fair values of CoreCivic's financial instruments, other than as follows (in thousands):

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

Carrying

Amount

 

 

Fair Value

 

 

Carrying

Amount

 

 

Fair Value

 

Note receivable from Agecroft Prison Management, LTD

 

$

2,805

 

 

$

3,767

 

 

$

2,989

 

 

$

3,949

 

Debt

 

$

(2,297,529

)

 

$

(2,183,779

)

 

$

(1,986,865

)

 

$

(1,964,366

)

  

3.

GOODWILL

ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test of Goodwill Impairment", establishes accounting and reporting requirements for goodwill and other intangible assets.  Goodwill was $50.5 million as of both March 31, 2020 and December 31, 2019.  Of this amount, goodwill was $7.9 million as of both March 31, 2020 and December 31, 2019 for the Company's CoreCivic Safety segment, and was $42.6 million as of both March 31, 2020 and December 31, 2019 for its CoreCivic Community segment.  This goodwill was established in connection with multiple business combination transactions.  

Under the provisions of ASU 2017-04, CoreCivic performs a qualitative assessment to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing a quantitative impairment test is not necessary.  If a quantitative test is required, CoreCivic performs an assessment to identify the existence of impairment and to measure the excess of a reporting unit's carrying amount over its fair value by using a combination of various common valuation techniques, including market multiples and discounted cash flows under valuation methodologies that include an income approach and a market approach.  The income approach valuation includes certain significant assumptions impacting projected future cash flows, such as projected revenue, projected operating costs, and the weighted average cost of capital, which are affected by expectations about future market or economic conditions.  These impairment tests are required to be performed at least annually.  CoreCivic performs its impairment tests during the fourth quarter, in connection with its annual budgeting process and whenever circumstances indicate the carrying value of goodwill may not be recoverable.   

Because of the potential impact of the coronavirus ("COVID-19") on the recoverability of goodwill, CoreCivic performed a qualitative assessment for its goodwill allocated to the Company’s CoreCivic Safety and Community segments, and concluded that no impairments had occurred as of March 31, 2020.   However, the long-term impacts of COVID-19, if any, on future cash flows are difficult to predict.  The Company can provide no assurance that goodwill impairments will not occur in the future as a result of the impact of COVID-19 or otherwise.  The Company will conduct additional impairment tests if, and when, warranted by the impact of COVID-19 on the Company's business segments.


7


 

4.

REAL ESTATE TRANSACTIONS

Acquisitions

On January 2, 2020, CoreCivic completed the acquisition of a portfolio of 28 properties, 24 of which the counter-party contributed to a newly formed partnership of the Company's, for total consideration of $83.2 million, excluding transaction-related expenses.  All of the properties are leased to the federal government through the General Services Administration ("GSA"), an independent agency of the United States government. CoreCivic financed the acquisition with $7.7 million of cash, assumed debt of $52.2 million, as further described in Note 5, and the balance with the issuance of 1.3 million shares of Class A Common Interests in Government Real Estate Solutions, LLC, an unrestricted subsidiary controlled by the Company ("GRES"), that are convertible into cash or, at the Company's option, shares of the Company's common stock following a two-year holding period on a one-for-one basis (the "Operating Partnership Units"), using a "DownREIT" structure. In allocating the purchase price of the acquisition, CoreCivic recorded $77.4 million of net tangible assets, $7.5 million of identifiable intangible assets, and $4.9 million of tenant improvements. CoreCivic acquired the portfolio of properties as a strategic investment that further diversifies the Company's cash flows through government-leased properties.

CoreCivic has determined that its joint venture investment in GRES represents a variable interest entity ("VIE") in accordance with ASC 810, "Consolidation".  CoreCivic has 100% voting control in GRES. Accordingly, CoreCivic concluded that it is the primary beneficiary of GRES and consolidates the VIE.  The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. Included in property and equipment, net of accumulated depreciation, on our consolidated balance sheet as of March 31, 2020 is $82.0 million related to GRES.  The debt related to GRES at March 31, 2020 was $52.0 million, as further described in Note 5.  

Financing Leasing Transactions

On January 24, 2018, CoreCivic entered into a 20-year lease agreement with the Kansas Department of Corrections ("KDOC") for a 2,432-bed correctional facility to be constructed by the Company in Lansing, Kansas.  The new facility replaces the Lansing Correctional Facility, Kansas' largest correctional complex for adult male inmates, originally constructed in 1863.  CoreCivic is responsible for facility maintenance throughout the 20-year term of the lease, at which time ownership will revert to the state of Kansas.  Construction of the facility commenced in the first quarter of 2018, and construction was completed in January 2020, at which time the lease commenced.  CoreCivic accounts for the lease with the KDOC partially as a financing receivable under ASU 2016-02, "Leases (Topic 842)", with the remaining portion of the lease payments attributable to maintenance services and capital expenditures as revenue streams under ASC 606, "Revenue from Contracts with Customers".   As of March 31, 2020, the financing receivable was $150.8 million recognized in Other Assets on the consolidated balance sheet.  Prior to commencement of the lease, the costs incurred to construct the facility were reflected as a construction receivable and, as of December 31, 2019, was $137.7 million recognized in Other Assets on the consolidated balance sheet.  The cash payments associated with the construction of the project are reported as expenditures for facility development and expansions on the consolidated statements of cash flows.


8


 

Idle Facilities

As of March 31, 2020, CoreCivic had five idled correctional facilities in the CoreCivic Safety segment that are currently available and being actively marketed as solutions to meet the needs of potential customers. The following table summarizes each of the idled facilities and their respective carrying values, excluding equipment and other assets that could generally be transferred and used at other facilities CoreCivic owns without significant cost (dollars in thousands):

 

 

 

 

 

 

 

 

 

Net Carrying Values

 

 

 

Design

 

 

Date

 

March 31,

 

 

December 31,

 

Facility

 

Capacity

 

 

Idled

 

2020

 

 

2019

 

Prairie Correctional Facility

 

 

1,600

 

 

2010

 

$

14,668

 

 

$

14,863

 

Huerfano County Correctional Center

 

 

752

 

 

2010

 

 

16,108

 

 

 

16,266

 

Diamondback Correctional Facility

 

 

2,160

 

 

2010

 

 

39,293

 

 

 

39,729

 

Marion Adjustment Center

 

 

826

 

 

2013

 

 

11,247

 

 

 

11,351

 

Kit Carson Correctional Center

 

 

1,488

 

 

2016

 

 

53,600

 

 

 

54,041

 

 

 

 

6,826

 

 

 

 

$

134,916

 

 

$

136,250

 

 

As of March 31, 2020, CoreCivic also had two idled non-core facilities in its Safety segment containing an aggregate of 440 beds with a total net book value of $3.7 million; two facilities in its Community segment that became idle during 2019, containing an aggregate of 381 beds with a total net book value of $6.0 million; and three previously leased residential reentry centers in its Properties segment that became idle in 2019, containing an aggregate of 430 beds with a total net book value of $9.3 million.  

CoreCivic incurred approximately $2.1 million and $2.0 million in operating expenses at these idled facilities for the three months ended March 31, 2020 and 2019, respectively.  

On April 15, 2020, CoreCivic sold one of the idled facilities in its Community segment, containing 92 beds, for a gross sales price of $1.6 million.  Based on the anticipated sale, CoreCivic reported an impairment charge of $0.5 million in the first quarter of 2020 based on the realizable value resulting from the sale.

CoreCivic considers the cancellation of a contract or an expiration and non-renewal of a lease agreement in its CoreCivic Properties segment as an indicator of impairment, and tested each of the idled properties for impairment when it was notified by the respective customers or tenants that they would no longer be utilizing such property.  CoreCivic updates the impairment analyses on an annual basis for each of the idled properties and evaluates on a quarterly basis market developments for the potential utilization of each of these properties in order to identify events that may cause CoreCivic to reconsider its most recent assumptions, such as the agreement to sell a property at less than its carrying value.  As a result of CoreCivic's analyses, except for the aforementioned impairment associated with a sale of a residential reentry facility in the Community segment, CoreCivic determined each of the idled properties to have recoverable values in excess of the corresponding carrying values.

 

9


 

5.

DEBT

Debt outstanding as of March 31, 2020 and December 31, 2019 consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Revolving Credit Facility maturing April 2023. Interest payable

    periodically at variable interest rates. The weighted average rate

    at March 31, 2020 and December 31, 2019 was 2.4% and 3.3%,

    respectively.

 

$

631,000

 

 

$

365,000

 

Term Loan A maturing April 2023.  Interest payable periodically at

    variable interest rates. The rate at March 31, 2020 and

    December 31, 2019 was 2.5% and 3.3%, respectively.

    Unamortized debt issuance costs amounted to $0.1 million at

    both March 31, 2020 and December 31, 2019.

 

 

187,500

 

 

 

190,000

 

Term Loan B maturing December 2024.  Interest payable periodically

    at variable interest rates. The rate at March 31, 2020 and

    December 31, 2019 was 5.5% and 6.3%, respectively.

    Unamortized debt issuance costs amounted to $4.4 million and

    $4.6 million at March 31, 2020 and December 31, 2019, respectively.

 

 

246,875

 

 

 

250,000

 

4.625% Senior Notes maturing May 2023.  Unamortized debt issuance

    costs amounted to $1.9 million and $2.1 million at March 31, 2020

    and December 31, 2019, respectively.

 

 

350,000

 

 

 

350,000

 

5.0% Senior Notes maturing October 2022.  Unamortized debt issuance

    costs amounted to $1.2 million and $1.3 million at March 31, 2020

    and December 31, 2019, respectively.

 

 

250,000

 

 

 

250,000

 

4.75% Senior Notes maturing October 2027.  Unamortized debt issuance

    costs amounted to $3.0 million and $3.1 million at March 31, 2020

    and December 31, 2019, respectively.

 

 

250,000

 

 

 

250,000

 

4.5% Capital Commerce Center Non-Recourse Mortgage Note

    maturing January 2033.  Unamortized debt issuance costs amounted

    to $0.3 million at both March 31, 2020 and December 31, 2019.

 

 

21,896

 

 

 

22,209