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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, 2021

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 April 30, 2021:

Shares of Common Stock, $0.01 par value per share: 120,276,916 shares outstanding.

 

 

 

 


 

CORECIVIC, INC.

 

FORM 10-Q

 

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

 

INDEX

 

 

 

PAGE

PART 1 – FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

I

    a)

 

Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020

 

1

    b)

 

Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2021 and 2020

 

2

    c)

 

Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2021 and 2020

 

3

    d)

 

Consolidated Statement of Stockholders' Equity (Unaudited) for the quarterly period ended March 31, 2021

 

4

    e)

 

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

 

5

    f)

 

Notes to Consolidated Financial Statements (Unaudited)

 

6

Item 2.

 

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

 

20

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, 2021

 

 

December 31, 2020

 

Cash and cash equivalents

 

$

168,141

 

 

$

113,219

 

Restricted cash

 

 

16,413

 

 

 

23,549

 

Accounts receivable, net of credit loss reserve of $6,105 and $6,103, respectively

 

 

259,620

 

 

 

267,705

 

Prepaid expenses and other current assets

 

 

27,681

 

 

 

33,243

 

Assets held for sale

 

 

281,523

 

 

 

279,406

 

Total current assets

 

 

753,378

 

 

 

717,122

 

Real estate and related assets:

 

 

 

 

 

 

 

 

   Property and equipment, net of accumulated depreciation of $1,572,711

       and $1,559,388, respectively

 

 

2,333,340

 

 

 

2,350,272

 

   Other real estate assets

 

 

225,341

 

 

 

228,243

 

Goodwill

 

 

5,902

 

 

 

5,902

 

Non-current deferred tax assets

 

 

 

 

 

11,113

 

Other assets

 

 

395,843

 

 

 

396,663

 

Total assets

 

$

3,713,804

 

 

$

3,709,315

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

346,494

 

 

$

274,318

 

Current portion of long-term debt

 

 

38,914

 

 

 

39,087

 

Total current liabilities

 

 

385,408

 

 

 

313,405

 

Long-term debt, net

 

 

1,719,115

 

 

 

1,747,664

 

Deferred revenue

 

 

22,804

 

 

 

18,336

 

Non-current deferred tax liabilities

 

 

85,356

 

 

 

 

Other liabilities

 

 

210,886

 

 

 

216,468

 

Total liabilities

 

 

2,423,569

 

 

 

2,295,873

 

Commitments and contingencies

 

 

 

 

 

 

 

 

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

   at March 31, 2021 and December 31, 2020, respectively

 

 

 

 

 

 

Common stock – $0.01 par value; 300,000 shares authorized; 120,277 and 119,638 shares

   issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

1,203

 

 

 

1,196

 

Additional paid-in capital

 

 

1,838,066

 

 

 

1,835,494

 

Accumulated deficit

 

 

(572,305

)

 

 

(446,519

)

Total stockholders' equity

 

 

1,266,964

 

 

 

1,390,171

 

Non-controlling interest – operating partnership

 

 

23,271

 

 

 

23,271

 

Total equity

 

 

1,290,235

 

 

 

1,413,442

 

Total liabilities and equity

 

$

3,713,804

 

 

$

3,709,315

 

 

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,

 

 

 

2021

 

 

2020

 

REVENUES

 

$

454,718

 

 

$

491,101

 

EXPENSES:

 

 

 

 

 

 

 

 

Operating

 

 

332,884

 

 

 

362,315

 

General and administrative

 

 

29,530

 

 

 

31,279

 

Depreciation and amortization

 

 

32,712

 

 

 

37,952

 

Shareholder litigation expense

 

 

51,745

 

 

 

 

Asset impairments

 

 

1,308

 

 

 

536

 

 

 

 

448,179

 

 

 

432,082

 

OPERATING INCOME

 

 

6,539

 

 

 

59,019

 

OTHER (INCOME) EXPENSE:

 

 

 

 

 

 

 

 

Interest expense, net

 

 

18,428

 

 

 

22,538

 

Other (income) expense

 

 

148

 

 

 

(533

)

 

 

 

18,576

 

 

 

22,005

 

INCOME (LOSS) BEFORE INCOME TAXES

 

 

(12,037

)

 

 

37,014

 

Income tax expense

 

 

(113,531

)

 

 

(3,776

)

NET INCOME (LOSS)

 

 

(125,568

)

 

 

33,238

 

Net income attributable to non-controlling interest

 

 

 

 

 

(1,181

)

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON

      STOCKHOLDERS

 

$

(125,568

)

 

$

32,057

 

BASIC EARNINGS (LOSS) PER SHARE

 

$

(1.05

)

 

$

0.27

 

DILUTED EARNINGS (LOSS) PER SHARE

 

$

(1.05

)

 

$

0.27

 

 

 

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,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(125,568

)

 

$

33,238

 

Adjustments to reconcile net income (loss) to net cash provided by

      operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

32,712

 

 

 

37,952

 

Asset impairments

 

 

1,308

 

 

 

536

 

Amortization of debt issuance costs and other non-cash interest

 

 

1,566

 

 

 

1,356

 

Deferred income taxes

 

 

96,469

 

 

 

2,395

 

Non-cash revenue and other income

 

 

385

 

 

 

(2,705

)

Non-cash equity compensation

 

 

4,213

 

 

 

4,610

 

Other expenses and non-cash items

 

 

2,403

 

 

 

3,810

 

Changes in assets and liabilities, net:

 

 

 

 

 

 

 

 

Accounts receivable, prepaid expenses and other assets

 

 

13,670

 

 

 

7,648

 

Accounts payable, accrued expenses and other liabilities

 

 

72,438

 

 

 

(13,463

)

Net cash provided by operating activities

 

 

99,596

 

 

 

75,377

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Expenditures for facility development and expansions

 

 

(4,001

)

 

 

(22,233

)

Expenditures for other capital improvements

 

 

(12,221

)

 

 

(8,618

)

Acquisitions, net of cash acquired

 

 

 

 

 

(8,849

)

Net proceeds from sale of assets

 

 

30

 

 

 

42

 

Increase in other assets

 

 

(1,167

)

 

 

(2,411

)

Net cash used in investing activities

 

 

(17,359

)

 

 

(42,069

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of debt and borrowings from credit facility

 

 

 

 

 

374,000

 

Scheduled principal repayments

 

 

(9,945

)

 

 

(7,553

)

Principal repayments of credit facility

 

 

(20,000

)

 

 

(108,000

)

Payment of debt issuance and other refinancing and related costs

 

 

(125

)

 

 

(285

)

Payment of lease obligations for financing leases

 

 

(136

)

 

 

(135

)

Contingent consideration for acquisition of businesses

 

 

(1,000

)

 

 

 

Dividends paid

 

 

(1,611

)

 

 

(54,527

)

Purchase and retirement of common stock

 

 

(1,634

)

 

 

(3,560

)

Net cash provided by (used in) financing activities

 

 

(34,451

)

 

 

199,940

 

NET INCREASE IN CASH, CASH EQUIVALENTS AND

     RESTRICTED CASH

 

 

47,786

 

 

 

233,248

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period

 

 

136,768

 

 

 

119,093

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period

 

$

184,554

 

 

$

352,341

 

NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

      Debt assumed on acquisition of property portfolio

 

$

 

 

$

52,217

 

      Establishment of right of use assets and lease liabilities

 

$

322

 

 

$

62

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest (net of amounts capitalized of $0.0 million and $0.5 million in 2021 and

    2020, respectively)

 

$

9,251

 

 

$

12,881

 

Income taxes paid (refunded), net

 

$

69

 

 

$

(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, 2021

(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, 2020

 

 

119,638

 

 

$

1,196

 

 

$

1,835,494

 

 

$

(446,519

)

 

$

1,390,171

 

 

$

23,271

 

 

$

1,413,442

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(125,568

)

 

 

(125,568

)

 

 

 

 

 

 

(125,568

)

Retirement of common stock

 

 

(220

)

 

 

(2

)

 

 

(1,632

)

 

 

 

 

 

(1,634

)

 

 

 

 

 

(1,634

)

Dividends on RSUs

 

 

 

 

 

 

 

 

 

 

 

(218

)

 

 

(218

)

 

 

 

 

 

(218

)

Restricted stock compensation, net of

   forfeitures

 

 

 

 

 

 

 

 

4,213

 

 

 

 

 

 

4,213

 

 

 

 

 

 

4,213

 

Restricted stock grants

 

 

859

 

 

 

9

 

 

 

(9

)

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2021

 

 

120,277

 

 

$

1,203

 

 

$

1,838,066

 

 

$

(572,305

)

 

$

1,266,964

 

 

$

23,271

 

 

$

1,290,235

 

 

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, 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.

 

5


 

 

CORECIVIC, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

MARCH 31, 2021

 

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 government agencies in the U.S. 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, 2021, through its CoreCivic Safety segment, the Company operated 47 correctional and detention facilities, 42 of which the Company owned, with a total design capacity of approximately 70,000 beds.  Through its CoreCivic Community segment, the Company owned and operated 26 residential reentry centers with a total design capacity of approximately 5,000 beds.  In addition, through its CoreCivic Properties segment, the Company owned 15 properties for lease to third parties and used by government agencies, totaling 2.7 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 operated as a real estate investment trust ("REIT") from January 1, 2013 through December 31, 2020.  As a REIT, the Company provided services and conducted other business activities through taxable REIT subsidiaries ("TRSs"). A TRS is a subsidiary of a REIT that is subject to applicable corporate income tax rates and certain qualification requirements. The Company's use of TRSs permitted CoreCivic to engage in certain business activities in which the REIT could not engage directly, so long as those activities were conducted in entities that elected to be treated as TRSs under the Internal Revenue Code of 1986, as amended, and enabled 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.  

On August 5, 2020, the Company announced that the Board of Directors ("BOD") unanimously approved a plan to revoke the Company's REIT election and become a taxable C Corporation, effective January 1, 2021.  As a result, the Company is no longer required to operate under REIT rules, including the requirement to distribute at least 90% of its taxable income to its stockholders, which provides the Company with greater flexibility to use its free cash flow.  Effective January 1, 2021, the Company is subject to federal and state income taxes on its taxable income at applicable tax rates, and is no longer entitled to a tax deduction for dividends paid.  The Company continued to operate as a REIT for the 2020 tax year, and existing REIT requirements and limitations, including those established by the Company’s organizational documents, remained in place until January 1, 2021. The BOD also voted unanimously to discontinue the Company's quarterly dividend and prioritize allocating the Company’s free cash flow to reduce debt.  


6


 

 

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, 2020 filed with the Securities and Exchange Commission (the "SEC") on February 22, 2021 (the "2020 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

Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants and the SEC applicable to financial statements beginning January 1, 2021 or later 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, 2021 and December 31, 2020, 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, 2021

 

 

December 31, 2020

 

 

 

Carrying

Amount

 

 

Fair Value

 

 

Carrying

Amount

 

 

Fair Value

 

Note receivable from Agecroft Prison Management, LTD

 

$

3,121

 

 

$

3,929

 

 

$

3,094

 

 

$

3,896

 

Debt

 

$

(1,779,572

)

 

$

(1,750,259

)

 

$

(1,809,517

)

 

$

(1,774,016

)

  

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 $5.9 million as of both March 31, 2021 and December 31, 2020, all of which was related to the Company's CoreCivic Safety 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 more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company performs a quantitative impairment test.  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 valuation approach 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.   

7


 

4.

REAL ESTATE TRANSACTIONS

Acquisitions and Dispositions

On January 2, 2020, CoreCivic completed the acquisition of a portfolio of 28 properties, 24 of which the counter-party contributed to Government Real Estate Solutions, LLC ("GRES"), an unrestricted subsidiary controlled by the Company, for total consideration of $83.2 million, excluding transaction-related expenses.  All of the properties were 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, and the balance with the issuance of 1.3 million shares of Class A Common Interests in 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 partnership 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.

On December 23, 2020, CoreCivic completed the sale of 42 government-leased properties, including the portfolio of 28 properties acquired in 2020 and the remaining properties acquired in 2017 and 2018, in a single transaction to a third party for an aggregate price of $106.5 million, generating net proceeds of $27.8 million after the repayment of the debt related to GRES, and other transaction-related costs. Net cash proceeds were used to pay-down a portion of the amounts outstanding under the Company's revolving credit facility. In accordance with a Tax Protection Agreement, the Company agreed to provide certain tax protection payments to the contributing partners of GRES, limited to the cash and certain other resources held by GRES.  After considering the tax protection payments in connection with this sale, the Company reported a net loss on sale of $17.9 million.

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.  Our consolidated balance sheet as of March 31, 2021 includes property and equipment, net of accumulated depreciation, of $6.4 million related to GRES.  

Assets Held for Sale

The Company intends to pursue the sale of certain assets in the Properties segment, utilizing any net proceeds, after the repayment of non-recourse mortgage notes associated with such properties, in furtherance of the Company’s revised capital allocation strategy.  As of March 31, 2021, CoreCivic had four real estate assets classified as held for sale, including an additional asset that was not classified as held for sale at December 31, 2020. The aggregate net book value of the property and equipment of these four properties amounting to $243.6 million, and the other assets associated with the properties, consisting of deferred leasing costs and other assets amounting to $37.9 million, are reflected as assets held for sale on the Company's consolidated balance sheet as of March 31, 2021.  Although the Company can provide no assurance, based on interest expressed to date, CoreCivic expects to close on the sale of these assets during 2021.

Idle Facilities

As of March 31, 2021, CoreCivic had five idled CoreCivic Safety correctional facilities 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

 

 

March 31,

 

 

December 31,

 

Facility

 

Capacity

 

 

2021

 

 

2020

 

Prairie Correctional Facility

 

 

1,600

 

 

$

14,439

 

 

$

14,646

 

Huerfano County Correctional Center

 

 

752

 

 

 

15,731

 

 

 

15,895

 

Diamondback Correctional Facility

 

 

2,160

 

 

 

37,928

 

 

 

38,346

 

Marion Adjustment Center

 

 

826

 

 

 

10,943

 

 

 

11,047

 

Kit Carson Correctional Center

 

 

1,488

 

 

 

52,311

 

 

 

52,757

 

 

 

 

6,826

 

 

$

131,352

 

 

$

132,691

 

8


 

 

 

As of March 31, 2021, CoreCivic also had one idled non-core facility in its Safety segment containing 240 beds with a total net book value of $3.0 million; three facilities in its Community segment, containing an aggregate of 650 beds with an aggregate net book value of $9.1 million; and two previously leased properties in its Properties segment containing 49,000 square feet with an aggregate net book value of $7.1 million.  CoreCivic also had an additional idled non-core facility in the Properties segment that was reclassified as held for sale during the first quarter of 2021.  CoreCivic recognized an impairment charge of $1.3 million associated with this facility, based on its estimated net realizable value less costs to sell, pursuant to an agreement to sell this property, which is expected to be consummated during the second quarter of 2021.  CoreCivic incurred approximately $2.1 million and $1.9 million in operating expenses at all of these idled facilities for the period they were idle during the three months ended March 31, 2021 and 2020, respectively.  

Two of the three idled facilities in the CoreCivic Community segment are located in Oklahoma. As a result of the lower resident populations from the state of Oklahoma because of COVID-19, CoreCivic transferred the remaining resident populations at its 390-bed Tulsa Transitional Center to Oklahoma's system, idling the Tulsa facility during the third quarter of 2020.  Closure of the Tulsa facility followed the closure of the 200-bed Oklahoma City Transitional Center during the second quarter of 2020, and the 289-bed Turley Residential Center in Oklahoma in 2019.  CoreCivic reactivated the Turley Residential Center during the first quarter of 2021 pursuant to a new contract awarded from the United States Federal Bureau of Prisons ("BOP") during the fourth quarter of 2020 for residential reentry and home confinement services to be provided in the state of Oklahoma, and provides the BOP additional reentry services at its owned and operated Oklahoma Reentry Opportunity Center, which supplements the existing utilization by the state of Oklahoma, pursuant to this new contract.

During April 2021, as a result of lower resident populations from Denver County because of COVID-19, CoreCivic transferred the resident populations at its 90-bed Ulster Facility in Colorado to its Dahlia Facility in Colorado, idling the Ulster Facility.  

CoreCivic 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.  CoreCivic considers the cancellation of a contract in its Safety or Community segment or an expiration and non-renewal of a lease agreement in its CoreCivic Properties segment as indicators 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.

 

9


 

 

5.

DEBT

Debt outstanding as of March 31, 2021 and December 31, 2020 consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Revolving Credit Facility maturing April 2023. Interest payable

    periodically at variable interest rates. The weighted average rate

    at March 31, 2021 and December 31, 2020 was 1.6% and 1.7%,

    respectively.

 

$

199,000

 

 

$

219,000

 

Term Loan A maturing April 2023.  Interest payable periodically at

    variable interest rates. The rate at both March 31, 2021 and

    December 31, 2020 was 1.6%.  Unamortized debt issuance

    costs amounted to $0.1 million at both March 31, 2021

    and December 31, 2020.

 

 

177,500

 

 

 

180,000

 

Term Loan B maturing December 2024.  Interest payable periodically

    at variable interest rates. The rate at both March 31, 2021 and

    December 31, 2020 was 5.5%.  Unamortized debt issuance

    costs amounted to $3.8 million and $4.1  million

    at March 31, 2021 and December 31, 2020, respectively.

 

 

232,813

 

 

 

237,500

 

4.625% Senior Notes maturing May 2023.  Unamortized debt issuance

    costs amounted to $1.3 million and $1.5 million at

    March 31, 2021 and December 31, 2020, respectively.

 

 

350,000

 

 

 

350,000

 

5.0% Senior Notes maturing October 2022.  Unamortized debt issuance

    costs amounted to $0.7 million and $0.8 million at

    March 31, 2021 and December 31, 2020, respectively.

 

 

250,000

 

 

 

250,000

 

4.75% Senior Notes maturing October 2027.  Unamortized debt issuance

    costs amounted to $2.6 million and $2.7 million at

    March 31, 2021 and December 31, 2020, 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, 2021 and December 31, 2020.

 

 

20,606