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CCA Announces Third Quarter 2010 Financial Results
NASHVILLE, TN, Nov 03, 2010 (MARKETWIRE via COMTEX) --
CCA (NYSE: CXW) (the "Company" or "Corrections Corporation of America"), America's leader in partnership corrections and the nation's largest provider of corrections management services to government agencies, announced today its financial results for the third quarter and nine months ended September 30, 2010.
Financial Review - Third Quarter 2010 Compared with Third Quarter 2009
-- Total revenues up 2.8% to $427.2 million from $415.4 million
-- Operating income up 10.7% to $85.2 million from $76.9 million
-- Adjusted Diluted EPS up 15.2% to $0.38 from $0.33
-- Adjusted Funds From Operations Per Diluted Share up 6.8% to
$0.63 from $0.59
-- EBITDA increased 9.1% to $111.5 million from $102.2 million
For the third quarter of 2010, CCA generated net income of $42.0 million, or $0.38 per diluted share, compared with net income of $45.3 million, or $0.39 per diluted share, for the third quarter of 2009. Net income in the prior year quarter included unusual income tax benefits of $7.0 million primarily for the reversal of reserves for uncertain tax positions. Excluding these tax benefits, net income per diluted share ("Adjusted Diluted EPS") increased $0.05 from $0.33 in the prior year quarter, an increase of 15.2%.
Total management revenue for the third quarter of 2010 increased 2.7% to $425.3 million from $414.2 million during the prior year period, primarily driven by a 2.9% increase in average daily inmate populations. Management revenue from our federal partners increased 12.6% to $186.3 million generated during the third quarter of 2010, compared with $165.5 million generated during the third quarter of 2009. The increase in federal revenue was primarily driven by an increase in populations from the Federal Bureau of Prisons (BOP) at our Adams County Correctional Center which commenced operations during the third quarter of 2009 and from the U.S. Marshals Service (USMS) at facilities located primarily in the southwestern region of the country. Management revenue from our state partners decreased to $210.7 million during the third quarter of 2010 compared with $218.3 million during the same period in 2009. State revenues were impacted by declines in inmate populations from the states of Arizona, Alaska, Washington and Minnesota, partially offset by an increase in inmate populations from the states of California and Georgia.
EBITDA for the third quarter of 2010 increased 9.1% to $111.5 million from $102.2 million during the third quarter of 2009. The increase in EBITDA is primarily due to the increase in total revenue. Funds From Operations decreased to $79.8 million during the third quarter of 2010 from $80.8 million in the prior year quarter, primarily due to an increase in income taxes paid over the prior year period. Adjusted Funds From Operations, which includes maintenance and technology capital expenditures, for the third quarter of 2010 increased to $70.0 million compared with $68.1 million during the prior year period. Adjusted Funds From Operations per diluted share increased to $0.63 during the third quarter of 2010 from $0.59 per diluted share in the prior year quarter. The increase in Adjusted Funds From Operations was primarily attributable to a $2.8 million reduction in maintenance capital expenditures during the third quarter of 2010 compared with the third quarter of 2009.
Income taxes paid in the third quarter of 2009 reflected the favorable tax depreciation provisions on qualified assets under the American Recovery and Reinvestment Act of 2009 combined with the implementation of several tax planning strategies during the prior year quarter. We currently expect our full year 2010 income taxes paid to be comparable to the full year 2009 despite higher taxable income in 2010, as we implemented additional tax planning strategies in 2010 and expect to benefit from similar favorable depreciation provisions under the Small Business Jobs and Credit Act of 2010.
Our per share results were also favorably impacted by the purchase of 6.4 million shares of our outstanding stock during the first nine months of 2010, at an aggregate cost of $128.4 million, pursuant to a share repurchase program approved by our Board of Directors in February 2010. These shares were repurchased with cash on hand, cash provided by operations and borrowings from our revolving credit facility.
Our total average daily compensated population increased 2.9% to 79,053 in the third quarter of 2010 from 76,835 in the third quarter of 2009. Our total portfolio occupancy decreased to 90.7% during the third quarter of 2010 from 91.2% during the third quarter of 2009. The decline in occupancy is due to the aforementioned change in inmate populations combined with a 3.5% increase in our average number of available beds to 87,201 during the third quarter of 2010 from 84,236 during the prior year quarter, as we completed construction of our Nevada Southern Detention Center in September 2010, which began receiving detainees in October 2010, and completed expansions of our Coffee and Wheeler facilities in May 2010.
Net income adjusted for special items, Adjusted Diluted EPS, EBITDA, Funds From Operations, Adjusted Funds From Operations, and their corresponding per share amounts, are measures calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles ("GAAP"). Please refer to the Supplemental Financial Information and related note following the financial statements herein for further discussion and reconciliations of these measures to GAAP measures.
Commenting on the third quarter financial results, Chief Executive Officer Damon Hininger stated, "We are pleased with our third quarter financial results, as we improved operating margins in both segments of the business and generated year-over-year adjusted earnings per share growth in a challenging business environment. All of our state partners have finalized their budgets and none have appropriated new funding for prison construction under their fiscal year 2011 budget. We believe this will result in absorption of a substantial portion of our available beds, fueling our long-term growth opportunities."
Hininger continued, "Additionally, we are pleased with the three recent contract awards -- the first for up to 1,200 detainees from the USMS at our California City facility, absorbing some of our available bed inventory, the second is our new contract from the state of Georgia to design, build and manage our Jenkins facility and finally, the award from the Texas Department of Criminal Justice (TDCJ) for the continued management of five Texas jail facilities. We believe these new contracts exemplify the value we bring to our government partners, continuing the favorable trend of utilizing the partnership prison industry to alleviate costs, including the avoidance of future pension obligations and saving taxpayer dollars. We are proud to have recently attained a milestone of managing over 80,000 inmates, and believe these trends bode well for CCA over the long-term."
First Nine Months of 2010 Compared with First Nine Months of 2009
-- Total revenues increased 2.6% to $1,242.8 million from
$1,211.4 million
-- Earnings Per Diluted Share up 4.2% to $1.00 from $0.96
-- Adjusted Diluted EPS increased 9.8% to $1.01 from $0.92
-- Adjusted Funds From Operations Per Diluted Share up 20.0%
to $1.80 from $1.50
-- Adjusted EBITDA up 4.9% to $312.8 million from $298.2 million
For the nine months ended September 30, 2010, CCA generated net income of $113.5 million, or $1.00 per diluted share, compared with net income of $112.5 million, or $0.96 per diluted share, for the nine months ended September 30, 2009. Excluding a non-cash charge of $1.7 million for the write-off of goodwill associated with the termination of the management contracts for the Gadsden and Hernando facilities incurred during the second quarter of 2010, we generated net income of $115.2 million, or $1.01 per diluted share, compared to $107.9 million, or $0.92 per diluted share, in the first nine months of 2009 excluding the reversal of reserves for uncertain tax positions and other income tax credits as well as expenses associated with debt refinancing transactions incurred during the first nine months of 2009.
Operating income increased to $236.0 million during the first nine months of 2010 from $223.5 million during the same period in the prior year. The improvement in our financial results for the nine months ended September 30, 2010 resulted from a 2.8% increase in our average daily inmate populations, to 77,491 for the nine months ended September 30, 2010 from 75,400 during the nine months ended September 30, 2009. Operating expenses for the first nine months of 2010 included $4.1 million of bonuses paid to non-management level staff in-lieu of wage increases. General and administrative expenses for the nine months ended September 30, 2009 included $4.6 million of consulting fees associated with a company-wide initiative to improve operating efficiencies.
In addition to our operational improvements earnings per share for the first nine months of 2010 was favorably impacted by the aforementioned share repurchase program.
Operations Highlights
For the quarters ended September 30, 2010 and 2009, key operating statistics for the continuing operations of CCA were as follows:
Quarter Ended
September 30,
Metric 2010 2009 % Change
--------- --------- ---------
Average Available Beds 87,201 84,236 3.5%
Average Compensated Occupancy 90.7% 91.2% -0.5%
Total Compensated Man-Days 7,272,886 7,068,839 2.9%
Average Daily Compensated Population 79,053 76,835 2.9%
Revenue per Compensated Man-Day $ 58.48 $ 58.60 -0.2%
Operating Expense per Compensated Man-Day:
Fixed 30.14 30.80 -2.1%
Variable 9.53 9.96 -4.3%
--------- ---------
Total 39.67 40.76 -2.7%
--------- ---------
Operating Margin per Compensated Man-Day $ 18.81 $ 17.84 5.4%
========= =========
Operating Margin 32.2% 30.4% 5.9%
Revenue per compensated man-day in the third quarter of 2010 decreased 0.2% to $58.48 from $58.60 in the third quarter of 2009. However, operating expenses per compensated man-day decreased 2.7% to $39.67 from $40.76. A change in mission at our T. Don Hutto facility from housing families to female detainees at the end of 2009 contributed to reductions in both revenue and expenses per compensated man-day, as the per diem and operating requirements are both lower under the revised management contract. Also contributing to the reduction in operating expenses per compensated man-day was the favorable impact of continuing to generate compensated man-days guaranteed at our California City facility during the ramp-down phase of a contract with the BOP which terminated September 30, 2010, as well as our ongoing company-wide initiative to reduce operating expenses. These favorable impacts were partially offset by $2.6 million of start-up expenses we incurred at our Nevada Southern Detention Center.
Partnership Development Update
On October 15, 2010, the TDCJ announced its intent to award a new contract for the continued management of all five of the state jails we manage for it totaling 7,345 beds. The facilities include the Bartlett State Jail, Bradshaw State Jail, Dawson State Jail, Lindsey State Jail and Willacy State Jail. Our new contract with the TDCJ was awarded as part of a competitive procurement process, based on the upcoming expiration of our existing contract. The terms of the agreement provide that CCA will continue to manage the five jails under a base term effective through August 31, 2013 with two two-year renewal options.
On October 1, 2010 our new Nevada Southern Detention Center in Pahrump, Nevada, commenced operations by receiving our first federal prisoners at the facility. This new facility is expected to house approximately 1,000 federal prisoners under a contract with the Office of Federal Detention Trustee, which provides for a guarantee of up to 750 detainees and includes an initial term of five years with three five-year renewal options.
On September 27, 2010, we announced a new agreement with California City, California to manage USMS detainees at our 2,304-bed California City Correctional Center under an Intergovernmental Service Agreement (IGA). The management contract allows the housing of inmates and detainees from multiple federal agencies. Under the new 15-year agreement, CCA began ramping populations at the facility on October 1, 2010 and expects that the USMS will utilize approximately 1,200 beds by the end of the third quarter of 2011. CCA had planned to close the facility effective October 1, 2010 at the conclusion of a previous contract with the BOP but this new agreement will allow a portion of the California City facility to remain operational.
On September 24, 2010, we assumed management of the 1,884-bed Graceville Correctional Facility in Graceville, Florida pursuant to a new management contract we announced in April 2010. The transition of the management of the facility, which is owned by the state of Florida, resulted from a re-bid of management contracts at four Florida facilities. Pursuant to this re-bid, we also retained the management contract at the 985-bed Bay Correctional Facility in Panama City, Florida and assumed management of the 985-bed Moore Haven Correctional Facility in Moore Haven, Florida on August 1, 2010.
On September 17, 2010, we announced we were awarded a contract by the Georgia Department of Corrections to manage up to 1,150 male inmates in the Jenkins Correctional Center, which will be constructed, owned and operated by CCA in Millen, Georgia. CCA commenced development of the new Jenkins Correctional Center during the third quarter of 2010, with an estimated total construction cost of approximately $57.0 million. Construction is expected to be completed during the first quarter of 2012 and CCA expects that the ramp-up from Georgia will begin shortly thereafter. The contract has an initial one-year base term with 24 one-year renewal options. Additionally the contract provides for a population guarantee of 90% following a 120-day ramp-up period.
As of October 31, 2010, we had approximately 11,000 unoccupied beds at facilities that had availability of 100 or more beds, and an additional 1,124 beds under development. This inventory of beds available is reduced to approximately 10,000 beds after taking into consideration the beds committed pursuant to management contracts.
Liquidity Update
In February 2010, we announced a stock repurchase program to repurchase up to $250.0 million of our common stock through June 30, 2011. Through October 31, 2010, we have purchased 6.4 million shares at a total cost of $128.4 million. As of October 31, 2010, we had 110.2 million shares outstanding.
At September 30, 2010, our liquidity was provided by cash on hand of $34.4 million and $149.5 million available under our revolving credit facility. We believe we have the ability to fund our capital expenditure requirements, stock repurchase program, working capital and debt service requirements with cash on hand, net cash provided by operations, and borrowings available under our revolving credit facility. None of our outstanding debt requires scheduled principal repayments, and we have no debt maturities until December 2012.
At September 30, 2010, we had accounts receivable outstanding from the state of California totaling $95.9 million, including past due amounts caused by delays in the passage of the state budget. Now that the budget has passed we expect the state of California to resume payments during the fourth quarter.
Guidance
We expect EPS for the fourth quarter of 2010 to be in the range of $0.33 to $0.35, resulting in full year 2010 Adjusted Diluted EPS to be in the range of $1.35 to $1.37, with full year Adjusted Funds From Operations Per Diluted Share to be in the range of $2.26 to $2.32. Full year per share amounts exclude the aforementioned charges associated with the termination of our management contracts at the Gadsden Correctional Institution and the Hernando County Jail.
Our earnings guidance incorporates our best estimate of the range of potential outcomes related to budget uncertainties and other variables, including the risk of population declines from our partners and the potential for additional pricing pressure. We believe the long-term growth opportunities of our business remain very attractive as insufficient bed development by our partners should result in a return to the supply and demand imbalance that has benefited the partnership corrections industry.
During 2010, we expect to invest approximately $142.1 million to $157.1 million in capital expenditures, consisting of approximately $99.7 million to $109.7 million in on-going prison construction and expenditures related to potential land acquisitions and $42.4 million to $47.4 million in maintenance and information technology. We also expect an effective income tax rate of approximately 38.0%, with payments for income taxes expected to approximate $61.2 million to $61.9 million for the full year.
Supplemental Financial Information and Investor Presentations
We have made available on our website supplemental financial information and other data for the third quarter of 2010. We do not undertake any obligation, and disclaim any duty to update any of the information disclosed in this report. Interested parties may access this information through our website at www.cca.com under "Financial Information" of the Investors section.
Management may meet with investors from time to time during the fourth quarter of 2010. Written materials used in the investor presentations will also be available on our website beginning on or about November 11, 2010. Interested parties may access this information through our website at www.cca.com under "Webcasts" of the Investors section.
Webcast and Replay Information
We will host a webcast conference call at 10:00 a.m. central time (11:00 a.m. eastern time) tomorrow, November 4, 2010, to discuss our third quarter 2010 financial results. To listen to this discussion, please access "Webcasts" on the Investors page at www.cca.com. The conference call will be archived on our website following the completion of the call. In addition, a telephonic replay will be available at 6:00 p.m. eastern time on November 4, 2010 through 11:59 p.m. eastern time on November 11, 2010, by dialing (888) 203-1112 or (719) 457-0820, pass code 2326451.
About CCA
CCA is the nation's largest owner and operator of partnership correction and detention facilities and one of the largest prison operators in the United States, behind only the federal government and three states. We currently operate 66 facilities, including 45 company-owned facilities, with a total design capacity of approximately 90,000 beds in 19 states and the District of Columbia. We specialize 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, our facilities offer a variety of rehabilitation and educational programs, including basic education, religious services, 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. We also provide 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 our 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) general economic and market conditions, including the impact governmental budgets can have on our per diem rates, occupancy and overall utilization; (ii) fluctuations in our 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; (iii) our ability to obtain and maintain correctional facility management contracts, including as a result of sufficient governmental appropriations and as a result of inmate disturbances; (iv) changes in the privatization of the corrections and detention industry, the public acceptance of our services, the timing of the opening of and demand for new prison facilities and the commencement of new management contracts; (v) judicial challenges regarding the transfer of California inmates to out of state private correctional facilities; and (vi) increases in costs to construct or expand correctional facilities that exceed original estimates, or the inability to complete such projects on schedule as a result of various factors, many of which are beyond our control, such as weather, labor conditions and material shortages, resulting in increased construction costs. Other factors that could cause operating and financial results to differ are described in the filings made from time to time by us with the Securities and Exchange Commission.
CCA 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.
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
September 30, December 31,
ASSETS 2010 2009
------------ -----------
Cash and cash equivalents $ 34,435 $ 45,815
Accounts receivable, net of allowance of $1,907
and $1,500, respectively 346,189 235,139
Deferred tax assets 11,275 11,842
Prepaid expenses and other current assets 28,152 26,056
Current assets of discontinued operations 2,006 6,403
------------ -----------
Total current assets 422,057 325,255
Property and equipment, net 2,539,880 2,517,948
Restricted cash 6,754 6,747
Investment in direct financing lease 11,161 12,185
Goodwill 11,988 11,988
Other assets 26,368 27,324
Non-current assets of discontinued operations 56 4,296
------------ -----------
Total assets $ 3,018,264 $ 2,905,743
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 199,580 $ 190,777
Income taxes payable 473 481
Current liabilities of discontinued operations 2,357 3,325
------------ -----------
Total current liabilities 202,410 194,583
Long-term debt 1,236,234 1,149,099
Deferred tax liabilities 108,497 88,260
Other liabilities 31,957 31,255
------------ -----------
Total liabilities 1,579,098 1,463,197
------------ -----------
Commitments and contingencies
Common stock - $0.01 par value; 300,000 shares
authorized; 110,121 and 115,962 shares issued
and outstanding at September 30, 2010 and
December 31, 2009, respectively 1,101 1,160
Additional paid-in capital 1,366,688 1,483,497
Retained earnings (deficit) 71,377 (42,111)
------------ -----------
Total stockholders' equity 1,439,166 1,442,546
------------ -----------
Total liabilities and stockholders' equity $ 3,018,264 $ 2,905,743
============ ===========
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 Nine Months
Ended September 30, Ended September 30,
------------------ ----------------------
2010 2009 2010 2009
-------- -------- ---------- ----------
REVENUE:
Management and other $426,628 $414,984 $1,240,824 $1,209,923
Rental 522 455 2,007 1,484
-------- -------- ---------- ----------
427,150 415,439 1,242,831 1,211,407
-------- -------- ---------- ----------
EXPENSES:
Operating 292,160 291,475 868,060 848,401
General and administrative 23,606 21,704 62,087 65,015
Depreciation and amortization 26,195 25,313 76,715 74,497
-------- -------- ---------- ----------
341,961 338,492 1,006,862 987,913
-------- -------- ---------- ----------
OPERATING INCOME 85,189 76,947 235,969 223,494
-------- -------- ---------- ----------
OTHER EXPENSES (INCOME):
Interest expense, net 17,925 18,339 52,499 54,935
Expenses associated with debt
refinancing transactions - - - 3,838
Other (income) expenses (131) 49 (75) (230)
-------- -------- ---------- ----------
17,794 18,388 52,424 58,543
-------- -------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 67,395 58,559 183,545 164,951
Income tax expense (25,284) (15,084) (69,653) (55,539)
-------- -------- ---------- ----------
INCOME FROM CONTINUING
OPERATIONS 42,111 43,475 113,892 109,412
Income (loss) from
discontinued operations,
net of taxes (147) 1,777 (404) 3,051
-------- -------- ---------- ----------
NET INCOME $ 41,964 $ 45,252 $ 113,488 $ 112,463
======== ======== ========== ==========
BASIC EARNINGS PER SHARE:
Income from continuing
operations $ 0.38 $ 0.38 $ 1.01 $ 0.94
Income (loss) from
discontinued operations,
net of taxes - 0.01 - 0.03
-------- -------- ---------- ----------
Net income $ 0.38 $ 0.39 $ 1.01 $ 0.97
======== ======== ========== ==========
DILUTED EARNINGS PER SHARE:
Income from continuing
operations $ 0.38 $ 0.38 $ 1.00 $ 0.93
Income (loss) from
discontinued operations,
net of taxes - 0.01 - 0.03
-------- -------- ---------- ----------
Net income $ 0.38 $ 0.39 $ 1.00 $ 0.96
======== ======== ========== ==========
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CALCULATION OF ADJUSTED DILUTED EARNINGS PER SHARE
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Net income $ 41,964 $ 45,252 $ 113,488 $ 112,463
Special Items:
Reversal of reserve for
uncertain tax positions and
other additional income tax
credits - (6,974) - (6,974)
Goodwill impairment for
discontinued operations - - 1,684 -
Expenses associated with debt
refinancing transactions - - - 3,838
Income tax benefit for special
items - - - (1,465)
--------- --------- --------- ---------
Diluted adjusted net income $ 41,964 $ 38,278 $ 115,172 $ 107,862
========= ========= ========= =========
Weighted average common shares
outstanding - basic 110,160 114,771 112,814 116,391
Effect of dilutive securities:
Stock options 711 1,154 773 870
Restricted stock-based
compensation 192 244 157 191
--------- --------- --------- ---------
Weighted average shares and
assumed conversions - diluted 111,063 116,169 113,744 117,452
========= ========= ========= =========
Adjusted Diluted Earnings Per
Share $ 0.38 $ 0.33 $ 1.01 $ 0.92
========= ========= ========= =========
CALCULATION OF EBITDA AND ADJUSTED EBITDA
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Net income $ 41,964 $ 45,252 $ 113,488 $ 112,463
Interest expense, net 17,925 18,339 52,499 54,935
Depreciation and amortization 26,195 25,313 76,715 74,497
Income tax expense 25,284 15,084 69,653 55,539
(Income) loss from discontinued
operations, net of taxes 147 (1,777) 404 (3,051)
--------- --------- --------- ---------
EBITDA 111,515 102,211 312,759 294,383
Expenses associated with debt
refinancing transactions - - - 3,838
--------- --------- --------- ---------
ADJUSTED EBITDA $ 111,515 $ 102,211 $ 312,759 $ 298,221
========= ========= ========= =========
CALCULATION OF FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------ --------------------
2010 2009 2010 2009
-------- -------- --------- ---------
Net income $ 41,964 $ 45,252 $ 113,488 $ 112,463
Income tax expense 25,284 15,084 69,653 55,539
Expenses associated with debt
refinancing transactions - - - 3,838
Income tax benefit for debt
refinancing transactions - - - (1,465)
Income taxes paid (17,226) (8,852) (44,213) (49,691)
Depreciation and amortization 26,195 25,313 76,715 74,497
Depreciation and amortization for
discontinued operations 379 219 2,222 631
Goodwill impairment for
discontinued operations - - 1,684 -
Income tax expense (benefit) for
discontinued operations (89) 617 (253) 1,402
Stock-based compensation
reflected in G&A expense 2,224 2,063 6,503 6,422
Amortization of debt costs and
other non-cash interest 1,061 1,088 3,197 2,935
-------- -------- --------- ---------
Funds From Operations $ 79,792 $ 80,784 $ 228,996 $ 206,571
Maintenance and technology
capital expenditures (9,835) (12,667) (24,413) (30,856)
-------- -------- --------- ---------
Adjusted Funds From Operations $ 69,957 $ 68,117 $ 204,583 $ 175,715
======== ======== ========= =========
Funds From Operations Per Diluted
Share $ 0.72 $ 0.70 $ 2.01 $ 1.76
======== ======== ========= =========
Adjusted Funds From Operations
Per Diluted Share $ 0.63 $ 0.59 $ 1.80 $ 1.50
======== ======== ========= =========
CALCULATION OF ADJUSTED FUNDS FROM OPERATIONS PER SHARE GUIDANCE
For the Year Ending
December 31, 2010
--------------------
Low End High End
of of
Guidance Guidance
--------- ---------
Net income $ 152,599 $ 154,298
Income tax expense 92,343 93,371
Income taxes paid (61,235) (61,917)
Depreciation and amortization 106,303 106,303
Other non-cash items 12,500 13,000
--------- ---------
Funds From Operations $ 302,510 $ 305,055
Maintenance and technology capital expenditures (47,400) (42,400)
--------- ---------
Adjusted Funds From Operations $ 255,110 $ 262,655
========= =========
Funds From Operations Per Diluted Share $ 2.68 $ 2.70
========= =========
Adjusted Funds From Operations Per Diluted Share $ 2.26 $ 2.32
========= =========
NOTE TO SUPPLEMENTAL FINANCIAL INFORMATION
Adjusted net income, adjusted diluted earnings per share, EBITDA, Adjusted EBITDA, Funds From Operations and Adjusted Funds From Operations, and their corresponding per share metrics are non-GAAP financial measures. The Company believes that these measures are important operating measures that supplement discussion and analysis of the Company's results of operations and are used to review and assess operating performance of the Company and its correctional facilities and their management teams. The Company believes that it is useful to provide investors, lenders and security analysts disclosures of its results of operations on the same basis as that used by management.
Management and investors review both the Company's overall performance using GAAP and non-GAAP measures including EPS, adjusted diluted EPS, net income, Funds From Operations and Adjusted Funds From Operations, and their corresponding per share metrics, as well as EBITDA and Adjusted EBITDA to assess the operating performance of the Company's correctional facilities. EBITDA, Adjusted EBITDA, Funds From Operations and Adjusted Funds From Operations are useful as supplemental measures of the performance of the Company's correctional facilities because they do not take into account depreciation and amortization, or with respect to EBITDA and Adjusted EBITDA, the impact of the Company's tax provisions and financing strategies. Because the historical cost accounting convention used for real estate assets requires depreciation (except on land), this accounting presentation assumes that the value of real estate assets diminishes at a level rate over time. Because of the unique structure, design and use of the Company's correctional facilities, management believes that assessing performance of the Company's correctional facilities without the impact of depreciation or amortization is useful. The calculation of Adjusted Funds From Operations substitutes capital expenditures incurred to maintain the functionality and condition of the Company's correctional facilities in lieu of a provision for depreciation. Some of these capital expenditures contain a discretionary element with respect to when they are incurred, while others may be more urgent. Therefore, maintenance capital expenditures may fluctuate from quarter to quarter, depending on the nature of the expenditures required, seasonal factors such as weather, and budgetary conditions. The calculation of Funds From Operations and Adjusted Funds From Operations also reflect the amount of income taxes paid. We continuously evaluate tax planning strategies to reduce the effective tax rate for financial reporting purposes as well as strategies to reduce the amount of taxes we pay. As a result, the amount of taxes we pay may fluctuate from period to period depending on the effectiveness of our strategies. The amount of taxes we pay may also result from many factors beyond our control, such as changes in tax law. Finally, income taxes paid fluctuate significantly from quarter to quarter based on statutory methods of computing inter-period payment requirements and the date such taxes are due.
The Company may make adjustments to GAAP net income, EBITDA, Adjusted EBITDA, Funds From Operations and Adjusted Funds From Operations from time to time for certain other income and expenses that it considers non-recurring, infrequent or unusual, even though such items may require cash settlement, because such items do not reflect a necessary component of the ongoing operations of the Company. Other companies may calculate Adjusted net income, EBITDA, Adjusted EBITDA, Funds From Operations and Adjusted Funds From Operations differently than the Company does, or adjust for other items, and therefore comparability may be limited. Adjusted net income, EBITDA, Adjusted EBITDA, Funds From Operations and Adjusted Funds From Operations, and their corresponding per share measures are not measures of performance under GAAP, and should not be considered as an alternative to cash flows from operating activities, a measure of liquidity or an alternative to net income as indicators of the Company's operating performance or any other measure of performance derived in accordance with GAAP. This data should be read in conjunction with the Company's consolidated financial statements and related notes included in its filings with the Securities and Exchange Commission.
Contact: Investors and Analysts: Karin Demler CCA (615) 263-3005 Financial Media: Dave Gutierrez Dresner Corporate Services (312) 780-7204
SOURCE: Corrections Corporation of America