Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 5, 2004
Corrections Corporation of America
| Maryland | 001-16109 | 62-1763875 | ||
|
|
||||
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer | ||
| Identification No.) |
10 Burton Hills Boulevard, Nashville, Tennessee 37215
(615) 263-3000
Not Applicable
| Item 7. Financial Statements and Exhibits | ||||||||
| Item 12. Results of Operations and Financial Condition | ||||||||
| SIGNATURE | ||||||||
| EXHIBIT INDEX | ||||||||
| Ex-99.1 Press Release | ||||||||
Table of Contents
Item 7. Financial Statements and Exhibits
(c) The following exhibit is furnished as part of this Current Report pursuant to Item 12:
| Exhibit 99.1 - Press Release dated August 5, 2004 |
Item 12. Results of Operations and Financial Condition
On August 5, 2004, Corporations Corporation of America, a Maryland corporation (the “Company”), issued a press release announcing its 2004 second quarter results. A copy of the release is furnished as a part of this Current Report as Exhibit 99.1 and is incorporated herein in its entirety by this reference. The release contains certain financial information calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles, or GAAP, which the Company believes is useful to investors and other interested parties. The Company has included information concerning this non-GAAP information in the release, including a reconciliation of such information to the most comparable GAAP measures, the reasons why the Company believes such information is useful, and the Company’s use of such information for additional purposes.
The information in this Current Report is being furnished pursuant to Item 12 of Form 8-K and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Act of 1934, as amended, and Section 11 of the Securities Act of 1933, as amended, or otherwise subject to the liabilities of those sections. This Current Report will not be deemed an admission by the Company as to the materiality of any information in this report that is required to be disclosed solely by Item 12. The Company does not undertake a duty to update the information in this Current Report and cautions that the information included in this Current Report is current only as of August 5, 2004 and may change thereafter.
Table of Contents
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: August 5, 2004 | CORRECTIONS CORPORATION OF AMERICA | |
|
By: /s/ Irving E. Lingo, Jr. Irving E. Lingo, Jr. Executive Vice President and Chief Financial Officer |
Table of Contents
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press Release dated August 5, 2004 |
Exhibit 99.1 News Release [CORRECTIONS CORPORATION OF AMERICA LOGO] Contact: Karin Demler: (615) 263-3005 CORRECTIONS CORPORATION OF AMERICA ANNOUNCES 2004 SECOND QUARTER RESULTS REVENUES FOR SECOND QUARTER INCREASE 13.9% TO $289.4 MILLION AVERAGE COMPENSATED OCCUPANCY INCREASES TO 95.8% NASHVILLE, TENN. - AUGUST 5, 2004 - CORRECTIONS CORPORATION OF AMERICA (NYSE: CXW) (the "Company") today announced its financial results for the three- and six-month periods ended June 30, 2004. FINANCIAL HIGHLIGHTS SECOND QUARTER OF 2004 COMPARED WITH SECOND QUARTER OF 2003 For the three-month period ended June 30, 2004, the Company reported net income available to common stockholders of $14.8 million, or $0.38 per diluted share, compared with $12.1 million, or $0.34 per diluted share, for the same period in 2003. Results for the second quarter of 2003 included the following special items: - A charge of approximately $4.1 million, or $0.11 per diluted share, associated with the Company's recapitalization transactions completed in May 2003; - A non-cash gain of $2.9 million, or $0.08 per diluted share, associated with the extinguishment of a promissory note issued in connection with the final payment of the state court portion of the Company's 2001 stockholder litigation settlement; and - A charge of approximately $4.5 million, or $0.12 per diluted share, for a premium paid associated with the Company's tender offer for the Company's series B cumulative preferred stock completed during the second quarter of 2003. Excluding the above mentioned special items, the Company generated net income available to common stockholders of $17.8 million, or $0.50 per diluted share, during the second quarter of 2003. In accordance with generally accepted accounting principles ("GAAP"), results for 2003 do not include a provision for income taxes due to the application of a valuation allowance applied to net deferred tax assets, which was substantially reversed at December 31, 2003. The Company estimates that net income available to common stockholders for the second quarter of 2003, adjusted for the special items and for an income tax provision using an estimated combined federal and state effective tax rate of 40% (the approximate rate currently being used for 2004) would have been $9.3 million, or $0.26 per diluted share. The second quarter earnings per diluted share for 2004 represents a 46% increase over estimated second quarter 2003 earnings per diluted share on an adjusted and as-taxed basis. Please refer to the Illustration -more-
CCA 2004 Second Quarter Results Page 2 of Net Income Adjusted for Special Items and Assuming a Tax Provision and related information for the three and six months ended June 30, 2003, following the financial statements herein. Operating income for the three months ended June 30, 2004, was $43.8 million compared with $40.8 million for the same period in the prior year. EBITDA adjusted for special items ("Adjusted EBITDA") for the second quarter of 2004 was $56.7 million, compared with $54.2 million for the second quarter of 2003. The financial results for the second quarter of 2004 reflect a 13.9% increase in revenues resulting from higher occupancy levels, as well as savings in interest and preferred stock distributions resulting from the refinancing and recapitalization transactions completed during the second and third quarters of 2003. These improvements were partially offset by approximately $3.9 million in operating losses incurred at the Company's Northeast Ohio Correctional Center, Tallahatchie County Correctional Facility and the Delta Correctional Facility primarily as a result of start-up activities resulting from new contract awards during the second quarter of 2004, compared with $1.4 million in operating losses at the Northeast Ohio and Tallahatchie facilities during last year's second quarter. Adjusted free cash flow decreased slightly to $25.8 million during the three-month period ended June 30, 2004, compared with $26.2 million generated during the same period in 2003. In addition to the aforementioned increase in operating losses incurred in connection with start-up activities, adjusted free cash flow for the second quarter of 2004 was negatively impacted by an increase of $5.2 million in cash used for investments in technology and facility improvements compared with the same period in the prior year. Please refer to the Calculation of Adjusted Free Cash Flow and Adjusted EBITDA and related information following the financial statements herein. REDEMPTION OF SERIES B PREFERRED STOCK During the second quarter of 2004, the Company redeemed the remaining 1.0 million shares of its outstanding 12.0% series B cumulative preferred stock at the stated value of $24.46 per share plus accrued dividends, utilizing cash on hand. Following the redemption of the series B cumulative preferred stock, the Company has extinguished all of its preferred stock issuances. FIRST HALF OF 2004 COMPARED WITH FIRST HALF OF 2003 For the six months ended June 30, 2004, the Company generated net income available to common stockholders of $29.1 million, or $0.74 per diluted share, compared to $29.6 million, or $0.89 per diluted share, for the six months ended June 30, 2003. Excluding the special items described above, all of which occurred during the three-month period ended June 30, 2003, and adjusting for an income tax provision, the Company estimates that net income available to common stockholders for the first half of 2003 would have been $17.4 million, or $0.52 per diluted share. The $0.74 in earnings per diluted share for the first six months of 2004 represents a 42% increase in adjusted diluted earnings per share over the same period in the prior year. Please refer to the Illustration of Net Income Adjusted for Special Items and Assuming a Tax Provision and related information for the three and six months ended June 30, 2003, following the financial statements herein. Operating income for the first half of 2004 increased to $86.2 million compared with $83.1 million for the first half of 2003. Excluding the aforementioned special items for the first six months of 2003, Adjusted EBITDA for the six months ended June 30, 2004, increased to $112.0 million compared with $109.2 million during the same period in the prior year. The improved financial performance for the first six -more-
CCA 2004 Second Quarter Results Page 3 months resulted from many of the same items driving the Company's second quarter results: higher revenues resulting from increased occupancy levels, savings in interest and preferred stock distributions resulting from the refinancing and recapitalization transactions completed during the second and third quarters of 2003, partially offset by the aforementioned increase in operating losses incurred in connection with the start-up activities and staffing expenses at the Company's Northeast Ohio, Tallahatchie and Delta facilities. The combined operating losses for the six months ended June 30, 2004, and 2003 at these facilities were $5.8 million and $2.8 million, respectively. Adjusted Free Cash Flow also decreased during the first half of 2004 to $52.8 million compared with $56.6 million during the first half of 2003. In addition to operating losses incurred in connection with the aforementioned start-up activities, Adjusted Free Cash Flow for the first six months of 2004 was negatively impacted by an increase of $11.6 million in cash used for investments in technology and facility improvements compared with the same period in the prior year. Please refer to the Calculation of Adjusted Free Cash Flow and Adjusted EBITDA and related information following the financial statements herein. OPERATIONS HIGHLIGHTS For the three months ended June 30, 2004 and 2003, key operating statistics for the continuing operations of the Company were as follows:
CCA 2004 Second Quarter Results Page 4 quarter of 2003. Revenue per compensated man-day decreased from $51.08 in the second quarter of 2003 to $49.14 during the current quarter reflecting lower per-diems associated primarily with the aforementioned Texas contract award. Fixed operating expenses per compensated man-day consisting primarily of salaries and benefits, decreased due to leveraging such costs over a larger inmate population during the second quarter of 2004 compared with the second quarter of 2003. Variable operating expenses per compensated man-day decreased primarily as a result of lower inmate medical expenses. Under the terms of the new Texas management contracts, the TDCJ retained responsibility for all inmate medical requirements. BUSINESS DEVELOPMENT HIGHLIGHTS On May 10, 2004, the Company announced the completion of a contractual agreement to house inmates from the State of Hawaii at its owned and operated Tallahatchie County Correctional Facility. The new agreement expires on June 30, 2006. The Company's current contracts to house Hawaiian inmates in its owned and operated Diamondback Correctional Facility, located in Watonga, Oklahoma, and its Florence Correctional Facility, located in Florence, Arizona, which expired on June 30, 2004, were also extended for an additional two years. Beginning August 15, 2004, the combined contracts guarantee a minimum monthly average of 1,500 inmates to be housed at these three facilities. As of June 30, 2004, the Company housed 1,516 Hawaiian inmates at these three facilities. On May 20, 2004, the Company announced that it entered into new agreements with the states of Minnesota and North Dakota to house portions of those states' inmates at its owned and operated Prairie Correctional Facility located in Appleton, Minnesota. Under the agreement with Minnesota, the Company will manage an unspecified number of medium-security, male inmates at the Prairie facility. The population may fluctuate based on the State's needs and the space available at the Prairie facility. The terms of the contract include an initial one-year period through June 30, 2005, with two one-year renewal options. The agreement with North Dakota, which became effective in March 2004 has an initial term through February 2005 with an indefinite number of annual renewal options. This contract, similar to the Minnesota agreement, does not indicate a specific inmate population to be managed by the Company and is also expected to vary based on the State's needs and space availability. On June 1, 2004, the Company announced the completion of a contractual agreement to manage a population of up to 128 Colorado maximum-security inmates at the Company's owned and operated Tallahatchie County Correctional Facility. The terms of the contract include a one-year agreement effective through June 30, 2005, with four one-year renewal options. On July 1, 2004, the Company announced the completion of a contractual agreement with the State of Washington Department of Corrections. The Company will manage male, medium-security inmates at its owned and operated Crowley County Correctional Facility located in Olney Springs, Colorado, and at its owned and operated Prairie Correctional Facility. The Company expects to receive an initial population of approximately 300 Washington inmates. The terms of the contract provide an initial one-year period through June 30, 2005, with an unspecified number of renewal options. As expected and previously disclosed, the State of Wisconsin opened two new facilities owned by the State and has removed all inmates from the Company's Diamondback Correctional Facility and continues to reduce the number of inmates housed at the Prairie Correctional Facility. The decline in Wisconsin inmate populations at the Diamondback facility has been offset by a new contract announced during the first quarter of 2004 to house Arizona inmates at that facility. At June 30, 2004, 493 Wisconsin inmates remained housed at the Prairie facility. The Company currently expects a further reduction in the -more-
CCA 2004 Second Quarter Results Page 5 population of inmates from the State of Wisconsin. However, the timing and quantity of inmates to be removed remains uncertain. The Company continues to pursue potential customers to utilize beds it expects to become available at the Prairie Facility, but can provide no assurances that it will be successful. Commenting on the Company's second quarter results, John Ferguson, president and CEO stated, "Our second quarter and first half operating results reflect considerably higher revenues resulting from a number of new contracts as well as overall higher occupancy levels. We also continue to see the benefits from our efforts over the past two years of refinancing our debt and simplifying our capital structure." Ferguson continued, "Much of the Company's new contract activity, as well as a number of outstanding requests for proposal, are from states that either were not or are not currently utilizing the private sector. This new contract activity is also consistent with a recent report from the Bureau of Justice Statistics showing that in the period from July 1, 2002, through June 30, 2003, additions to the U.S. prison population nearly doubled compared with additions to the U.S. prison population during the previous 12-month period. We believe that this ongoing demand, combined with little visible new bed construction, will lead to continued prison overcrowding. This environment should provide numerous opportunities for our company to fill its remaining empty beds and, in appropriate situations, to deliver new beds to meet customer needs." GUIDANCE The Company expects fully-diluted earnings per share ("EPS") for the third quarter of 2004 to be in the range of $0.39 to $0.41. Expectations for the fourth quarter are in the range of $0.39 to $0.41, resulting in guidance for full-year EPS in the range of $1.53 to $1.57. As previously conveyed, the guidance includes a provision for income taxes. During 2004, the Company expects to invest approximately $134.6 million in capital expenditures consisting of approximately $84.6 million in prison construction and expansions, $28.6 million in maintenance capital expenditures and approximately $21.4 million in information technology. SUPPLEMENTAL FINANCIAL INFORMATION The Company has made available on its website supplemental financial information and other data for the three and six months ended June 30, 2004. The Company does not undertake any obligation, and disclaims any duty, to update any of the information disclosed in this report. Interested parties may access this information through the Company's website at www.correctionscorp.com under the Financial Information of the Investor section. WEBCAST AND REPLAY INFORMATION The Company will host a webcast conference call at 2:00 p.m. Central Daylight Time (3:00 p.m. Eastern Daylight Time) today to discuss its second-quarter financial results. To listen to this discussion, please access "Webcasts" on the Investor page at www.correctionscorp.com. The conference call will be archived on the Company's website following the completion of the call. In addition, a telephonic replay will begin today at 4:00 p.m. Central Daylight Time through 11:59 p.m. Central Daylight Time on August 12, 2004, by dialing 1-800-405-2236, pass code 11003575. -more-
CCA 2004 Second Quarter Results Page 6 ABOUT THE COMPANY The Company is the nation's largest owner and operator of privatized correctional and detention facilities and one of the largest prison operators in the United States, behind only the federal government and three states. The Company currently operates 65 facilities, including 38 company-owned facilities, with a total design capacity of approximately 66,000 beds in 20 states and the District of Columbia. The Company specializes in owning, operating and managing prisons and other correctional facilities and providing inmate residential and prisoner transportation services for governmental agencies. In addition to providing the fundamental residential services relating to inmates, the Company's facilities offer a variety of rehabilitation and educational programs, including basic education, 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. The Company also provides health care (including medical, dental and psychiatric services), food services and work and recreational programs. FORWARD-LOOKING STATEMENTS This press release contains statements as to the Company's beliefs and expectations of the outcome of future events that are forward-looking statements as defined within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. These include, but are not limited to, the risks and uncertainties associated with: (i) fluctuations in the Company's operating results because of, among other things, changes in occupancy levels, competition, increases in cost of operations, fluctuations in interest rates and risks of operations; (ii) changes in the privatization of the corrections and detention industry, the public acceptance of the Company's services and the timing of the opening of and demand for new prison facilities; (iii) 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 the Company's control, such as weather, labor conditions and material shortages, resulting in increased construction costs; and (iv) general economic and market conditions. Other factors that could cause operating and financial results to differ are described in the filings made from time to time by the Company with the Securities and Exchange Commission. The Company takes no responsibility for updating the information contained in this press release following the date hereof to reflect events or circumstances occurring after the date hereof or the occurrence of unanticipated events or for any changes or modifications made to this press release or the information contained herein by any third-parties, including, but not limited to, any wire or internet services. -more-
CCA 2004 Second Quarter Results Page 7 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) JUNE 30, December 31, ASSETS 2004 2003 - --------------------------------------------------------------------- ------------- ------------- Cash and cash equivalents $ 50,137 $ 84,231 Restricted cash 12,876 12,823 Accounts receivable, net of allowance of $1,646 and $1,999, respectively 158,489 136,465 Deferred tax assets 46,092 50,473 Prepaid expenses and other current assets 14,532 8,028 Current assets of discontinued operations -- 1,158 ----------- ----------- Total current assets 282,126 293,178 Property and equipment, net 1,630,612 1,586,979 Investment in direct financing lease 17,426 17,751 Goodwill 15,563 15,563 Deferred tax assets -- 6,739 Other assets 32,492 38,818 ----------- ----------- Total assets $ 1,978,219 $ 1,959,028 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY - --------------------------------------------------------------------- Accounts payable and accrued expenses $ 168,685 $ 156,806 Income tax payable 489 913 Current portion of long-term debt 2,529 1,146 Current liabilities of discontinued operations -- 761 ----------- ----------- Total current liabilities 171,703 159,626 Long-term debt, net of current portion 1,000,676 1,002,282 Deferred tax liabilities 6,002 -- Other liabilities 21,799 21,655 ----------- ----------- Total liabilities 1,200,180 1,183,563 ----------- ----------- Commitments and contingencies Preferred stock - $0.01 par value; 50,000 shares authorized: Series A - stated at liquidation preference of $25.00 per share -- 7,500 Series B - stated at liquidation preference of $24.46 per share -- 23,528 Common stock - $0.01 par value; 80,000 shares authorized; 35,185 and 35,020 shares issued and outstanding at June 30, 2004 and December 31, 2003, respectively 352 350 Additional paid-in capital 1,446,455 1,441,742 Deferred compensation (2,324) (1,479) Retained deficit (666,444) (695,590) Accumulated other comprehensive loss -- (586) ----------- ----------- Total stockholders' equity 778,039 775,465 ----------- ----------- Total liabilities and stockholders' equity $ 1,978,219 $ 1,959,028 =========== =========== -more-
CCA 2004 Second Quarter Results Page 8 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CCA 2004 Second Quarter Results Page 9 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL INFORMATION CALCULATION OF ADJUSTED FREE CASH FLOW AND EBITDA (UNAUDITED AND AMOUNTS IN THOUSANDS)
CCA 2004 Second Quarter Results Page 10 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES ILLUSTRATION OF NET INCOME ADJUSTED FOR SPECIAL ITEMS AND ASSUMING A TAX PROVISION (UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)