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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 7, 2007 (August 6, 2007)
Corrections Corporation of America
(Exact name of registrant as specified in its charter)
| 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
(Address of principal executive offices) (Zip Code)
(615) 263-3000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Item 2.02. Results of Operations and Financial Condition
On August 6, 2007, Corrections Corporation of America, a Maryland corporation (the “Company”), issued a press release announcing its 2007 second quarter financial 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 furnished pursuant to this Item 2.02 of Form 8-K shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange 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 2.02. 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 6, 2007 and may change thereafter.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On August 6, 2007, the Company also announced that Kenneth Bouldin has decided to retire from his position as the Company’s Executive Vice President and Chief Development Officer, effective August 31, 2007.
Item 9.01. Financial Statements and Exhibits
(d) The following exhibit is furnished as part of this Current Report pursuant to Item 2.02:
| Exhibit 99.1 - Press Release dated August 6, 2007 |
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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, hereunto duly authorized.
| Date: August 7, 2007 | CORRECTIONS CORPORATION OF AMERICA | |
|
By: /s/ Todd J. Mullenger Todd J. Mullenger Executive Vice President and Chief Financial Officer |
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EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press Release dated August 6, 2007 |
EXHIBIT
99.1
News
Release
Contact: Karin Demler: (615) 263-3005
Corrections
Corporation
of
America
Announces 2007 Second Quarter Financial Results
Announces 2007 Second Quarter Financial Results
NASHVILLE, Tenn. — August 6, 2007 — Corrections Corporation of America (NYSE: CXW) (the
“Company” or “CCA”), the nation’s largest provider of corrections management services to government
agencies, today announced its financial results for the three- and six-month periods ended June 30,
2007. The number of common shares and per share amounts in this release have been retroactively
restated to reflect the increase in common shares and corresponding decrease in the per share
amounts resulting from the Company’s two-for-one stock split that was distributed on July 6, 2007
to the stockholders of record on June 29, 2007.
Financial Review
Second Quarter of 2007 Compared with Second Quarter of 2006
For the three months ended June 30, 2007, the Company reported net income of $32.6 million, or
$0.26 per diluted share, compared with net income of $25.6 million, or $0.21 per diluted share, for
the three-month period in 2006, an increase of 23.8% per diluted share.
Operating income for the second quarter of 2007 was $65.8 million, compared with $55.2 million for
the same period in the prior year. EBITDA increased 18.4% to $84.8 million during the second
quarter of 2007, from $71.6 million during the second quarter of 2006. Financial results for the
second quarter were primarily impacted by continued demand for prison beds from both federal and
state customers.
Management revenue from federal customers increased $20.7 million, or 16.0%, to $150.0 million
during the second quarter of 2007 from $129.3 million during the second quarter of 2006, as a
result of higher inmate populations from the Immigration and Customs Enforcement (“ICE”) and the
U.S. Marshals Service (“USMS”). Federal revenues were positively impacted by a new management
contract from ICE at our Stewart Detention Center that began receiving detainees in October 2006
and a full quarter impact of a new management contract at our T. Don Hutto Residential Center that
became effective in May 2006. Additionally, federal revenues were favorably impacted by the
backfilling of the vacated beds in our Florence Correctional Center with additional USMS detainees
as a result of the commencement of operations at our new Red Rock Correctional Center in July 2006.
Management revenue from state customers also increased by approximately $13.8 million, or 8.7%, to
$171.7 million during the second quarter 2007 from $157.9 million for the same period in 2006.
State revenues were primarily impacted by an increase in populations from several state customers
including primarily Colorado, Wyoming, and California.
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10 Burton Hills Boulevard, Nashville, Tennessee 37215, Phone: 615-263-3000
CCA 2007 Second Quarter Financial Results
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Total portfolio occupancy increased to 99.0% during the second quarter of 2007 from 94.9% during
the second quarter of 2006, with compensated man-days increasing 8.6%, to 6.6 million from 6.1
million. Total portfolio occupancy increased despite a 4.1% increase in our average available beds
from the second quarter of 2006 as a result of the completion of several expansion and development
projects.
Adjusted Free Cash Flow decreased by $1.6 million to $42.4 million during the second quarter of
2007 from $44.0 million generated during the same period in 2006, as an increase in Adjusted Free
Cash Flow resulting from improved operating performance was offset by an increase in payments for
income taxes. We paid $20.9 million in income taxes during the second quarter of 2007 compared
with $3.0 million during the second quarter 2006. As we previously disclosed, during 2006 we
generated sufficient taxable income to utilize our remaining federal net operating loss
carryforwards. As a result, we were obligated to pay a full year’s taxes beginning in 2007. We
currently estimate that we will pay between $10.0 million and $12.0 million in federal and state
income taxes during each of the third and fourth quarters of 2007.
First Six Months of 2007 Compared with First Six Months of 2006
For the six months ended June 30, 2007, we generated net income of $65.2 million, or $0.52 per
diluted share, compared with $47.0 million, or $0.38 per diluted share, for the six months ended
June 30, 2006. Financial results for the first six months of 2006 included a pre-tax charge of
approximately $1.0 million for refinancing transactions completed during the first quarter of 2006.
Earnings per diluted share excluding this special charge amounted to $0.39 per diluted share.
Operating income for the first six months of 2007 increased to $132.0 million compared with $105.1
million for the first six months of 2006. EBITDA, adjusted for the refinancing charge during the
first half of 2006, (“Adjusted EBITDA”) also increased for the six months ended June 30, 2007, to
$169.3 million compared with $137.2 million during the same period in 2006. The improvement in our
financial results for the six months ended June 30, 2007 resulted from essentially the same factors
that affected our second quarter financial results.
Adjusted Free Cash Flow, which does not include the refinancing charge during 2006, increased
19.4%, or $16.9 million during the first six months of 2007 to $103.9 million compared with $87.0
million during the first six months of 2006. The increase in adjusted free cash flow primarily
resulted from strong operating results despite the increase in payments for income taxes of $18.6
million.
Earnings Per Diluted Share Excluding Special Charges (Adjusted Diluted Earnings Per Share),
Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures. 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 financial measures.
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CCA 2007 Second Quarter Financial Results
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Operations Highlights
For the quarters ended June 30, 2007 and 2006, key operating statistics for the continuing
operations of the Company were as follows:
| Quarter Ended June 30, | ||||||||||||
| Metric | 2007 | 2006 | % Change | |||||||||
Average Available Beds |
73,450 | 70,574 | 4.1 | % | ||||||||
Average Compensated Occupancy |
99.0 | % | 94.9 | % | 4.3 | % | ||||||
Total Compensated Man-Days |
6,617,046 | 6,094,628 | 8.6 | % | ||||||||
Revenue per Compensated Man-Day |
$ | 54.08 | $ | 52.55 | 2.9 | % | ||||||
Operating Expense per Compensated
Man-Day: |
||||||||||||
Fixed |
28.10 | 28.15 | -0.2 | % | ||||||||
Variable |
10.25 | 9.91 | 3.4 | % | ||||||||
Total |
38.35 | 38.06 | 0.8 | % | ||||||||
Operating Margin per Compensated Man-Day |
$ | 15.73 | $ | 14.49 | 8.6 | % | ||||||
Operating Margin |
29.1 | % | 27.6 | % | 5.4 | % | ||||||
Operating margins increased to 29.1% during the second quarter of 2007 from 27.6% during the
second quarter of 2006. The increase in operating margins from the prior year period was
substantially the result of higher inmate populations, including most notably the commencement of
management contracts at our Stewart, T. Don Hutto, and North Fork facilities. These margin
improvements were net of approximately $1.9 million of start-up expenses incurred at our Saguaro
Correctional Facility which opened in June 2007. The prior year quarter included $0.3 million of
start-up expenses at our Red Rock Correctional Center which opened in July 2006.
We expect to incur additional ramp-up and transportation expenses during the second half of 2007
resulting from the transfer of Hawaiian inmates from our Diamondback Correctional Facility and our
Tallahatchie County Correctional Facility to our new Saguaro facility. We also expect to incur
additional expenses associated with the transition at our Diamondback facility of existing Arizona
inmate populations in exchange for a larger Arizona population as a result of a new management
contract with the state of Arizona. Additionally, we expect to incur transportation and ramp-up
expenses associated with the receipt of California inmates at our Tallahatchie facility.
Accordingly, we expect margin rates and EBITDA to be negatively impacted by this disruption until
occupancy at these facilities returns to their previous levels.
Total revenue for the second quarter of 2007 increased 11.7% to $362.8 million from $324.9 million
during the same period in 2006, as total compensated man-days increased to 6.6 million from 6.1
million, and as revenue per compensated man-day increased to $54.08 from $52.55. Average
compensated occupancy for the three months ended June 30, 2007 increased to 99.0% from 94.9% for
the three months ended June 30, 2006.
Fixed expenses per compensated man-day decreased to $28.10 during the second quarter of 2007
compared with $28.15 per compensated man-day during the same period in 2006, a decrease of
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CCA 2007 Second Quarter Financial Results
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$0.05 per compensated man-day. The decrease in fixed expenses per compensated man-day was
primarily the result of leveraging our fixed expenses over a higher inmate population, partially
offset by start-up costs at our Saguaro facility.
Variable expenses increased to $10.25 per compensated man-day during the second quarter of 2007
from $9.91 per compensated man-day during the second quarter of 2006, an increase of $0.34 per
compensated man-day. The increase in variable expenses per compensated man-day was primarily
attributable to an increase in inmate medical expenses due to an increase in offsite medical care
at select facilities, as well as general inflationary increases.
Business Development Update
In June 2007, we entered into a new agreement with the state of Vermont for the continued
management of an unspecified number of inmates at four of our facilities. We currently house
approximately 580 Vermont inmates at our Lee Adjustment Center, North Fork Correctional Facility
and West Tennessee Detention Facility. The new contract, which commenced July 1, 2007, includes a
daily guarantee for the occupancy of 400 inmates, expires June 30, 2009, and contains two renewal
options for two years each.
In addition, in May 2007, we were notified by the Florida Department of Management Services of its
recommendation to award to us contracts for the continued management of the Bay Correctional
Facility in Panama City, Florida and the Gadsden Correctional Institution in Quincy, Florida, both
owned by the state of Florida. During July 2007, we completed the negotiations and executed a
definitive agreement to operate both facilities for a term of three years, with an indefinite
number of two-year renewal options.
Also during July 2007, we were awarded a new contract for the continued management of the South
Central Correctional Center in Clifton, Tennessee. The new contract, which commenced July 1, 2007,
expires June 30, 2010 and contains one two-year renewal option.
Status of California
Although the judicial and regulatory environment with respect to California’s overcrowded prison
system remains uncertain, we continue to be optimistic that the private corrections industry and
CCA specifically will be viewed as a partial solution to their overcrowded conditions. Despite
the uncertainty regarding the ultimate outcome of the various ongoing legal challenges, the
California Department of Corrections and Rehabilitation is currently continuing with their plan to
transfer inmates out of state. At July 31, 2007, we held 477 California inmates at three of our
facilities and believe we will continue to receive additional inmates for the remainder of the
year. However, we can provide no assurance that we will receive additional inmates. Additionally,
we cannot predict the ultimate outcome of the various legal issues still ongoing and whether the
inmates we receive from California will ultimately be required to be returned to the California
system.
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Facility Development Update
Construction of our new 1,896-bed Saguaro Correctional Facility was completed and the facility held
a grand opening event in June 2007. We are currently in the process of relocating approximately
1,200 Hawaiian inmates from our Diamondback Correctional Facility and our Tallahatchie County
Correctional Facility to the Saguaro facility. The beds that will be made available at the
Diamondback facility are expected to be utilized by the state of Arizona pursuant to a new contract
awarded in May 2007, and the beds vacated at Tallahatchie are expected to be utilized by the state
of California.
In May 2007, we announced our intention to expand two company-owned facilities located in Oklahoma
based on our expectation of increased demand from Oklahoma and a number of other existing state
customers. We are expanding our 1,032-bed Cimarron Correctional Facility in Cushing, Oklahoma and
our 1,010-bed Davis Correctional Facility in Holdenville, Oklahoma by 660 beds each. Both
expansions are currently expected to be completed by the end of the third quarter of 2008 at an
estimated total cost of approximately $90.0 million.
In July 2007, we announced our intention to commence construction of a new 1,668-bed correctional
facility in Adams County, Mississippi. Construction of the new facility is currently estimated to
be completed during the fourth quarter of 2008 at an estimated cost of approximately $105.0
million. We do not currently have a management contract to utilize these new beds, but will market
the new beds to various existing and potential customers.
In July 2007, we also announced that we expect to commence another expansion by 848-beds of our
Tallahatchie County Correctional Facility in addition to the previously announced 720-bed expansion
of this facility. The 848-bed expansion is expected to be completed during the second quarter of
2008 at an estimated incremental cost of approximately $52.0 million. Following the completion of
these expansions, the Tallahatchie facility will have a total design capacity of 2,672 beds. We
currently expect to make these expansion beds available to California under an existing contract,
or to other states that have a need for additional bed capacity.
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Facilities Currently Under Development or Expansion
Based upon our expectation of increased demand for bed capacity on behalf of a number of state and
federal agencies, we expect to complete the following expansion and development projects:
| Total Bed | ||||||||||||||||||||
| Capacity | Estimated | |||||||||||||||||||
| Facilities Under Expansion | Expansion | Following | Estimated | Cost | ||||||||||||||||
| or Development | Beds | Expansion | Completion | (in millions) | Potential Customer(s) | |||||||||||||||
Gadsden Correctional Institution,
Florida |
384 | 1,520 | Q3 2007 | (1) | State of Florida(2) | |||||||||||||||
Bay Correctional Facility, Florida |
235 | 985 | Q3 2007 | (1) | State of Florida(2) | |||||||||||||||
North Fork Correctional Facility,
Oklahoma |
960 | 2,400 | Q4 2007 | $ | 55.0 | Various States | ||||||||||||||
Tallahatchie County Correctional |
720 | Q4 2007 | California(2) and/ | |||||||||||||||||
Facility, Mississippi |
848 | 2,672 | Q2 2008 | 91.0 | or Various States | |||||||||||||||
Eden Detention Center,
Texas |
129 | 1,354 | Q1 2008 | 20.0 | (3) | BOP(2) | ||||||||||||||
Bent County Correctional Facility,
Colorado |
720 | 1,420 | Q2 2008 | 44.0 | Colorado(2) | |||||||||||||||
Kit Carson Correctional Center,
Colorado |
720 | 1,488 | Q2 2008 | 44.0 | Colorado(2) | |||||||||||||||
Leavenworth Detention Center,
Kansas |
266 | 1,033 | Q2 2008 | 22.5 | USMS(2) | |||||||||||||||
Cimarron Correctional Facility,
Oklahoma |
660 | 1,692 | Q3 2008 | 45.0 | Various States | |||||||||||||||
Davis Correctional Facility,
Oklahoma |
660 | 1,670 | Q3 2008 | 45.0 | Various States | |||||||||||||||
Adams County Correctional Center,
Mississippi |
1,668 | 1,668 | Q4 2008 | 105.0 | Federal or Various States | |||||||||||||||
Total |
7,970 | $ | 471.5 | |||||||||||||||||
| (1) | The expansion costs of the Gadsden Correctional Institution and the Bay Correctional Facility, facilities owned by the state of Florida and managed by the Company, will be funded by the state of Florida. | |
| (2) | We currently have contracts in place with the stated customers to occupy these facilities; however, the contracts do not provide a guarantee of occupancy. | |
| (3) | The total estimated cost is for a renovation of the existing facility which will result in 129 additional beds. |
In addition to the above listed projects, the Company continues to pursue additional
development and expansion opportunities in order to satisfy increasing demand from existing and
potential customers. We believe we have the ability to fund our current development activity with
cash on hand, investments, availability under our $150.0 million revolving credit facility, and
cash generated from operations.
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Expansions or Developments Completed during 2007
| Expansion | ||||||||||||
| Expansions or New Facilities Completed | Beds | Completed | Customer(s) | |||||||||
Citrus County Detention Facility, Florida |
360 | Q1 2007 | Citrus County | |||||||||
Crossroads Correctional Center, Montana |
96 | Q1 2007 | State of Montana and USMS | |||||||||
Saguaro Correctional Facility, Arizona |
1,896 | Q2 2007 | State of Hawaii | |||||||||
Total |
2,352 | |||||||||||
Commenting on the financial results, President and CEO John Ferguson stated, “We are pleased
with our second quarter financial results as our earnings continued to benefit from higher inmate
populations at a number of facilities. Our margins also improved due to leveraging fixed costs
over higher inmate populations.”
Ferguson continued, “In June, we opened our new Saguaro Correctional Facility and are in the
process of transferring the inmates we house on behalf of the state of Hawaii at our Tallahatchie
and Diamondback facilities to the new facility. We also have begun to receive additional
California inmates at our Tallahatchie facility and expect to continue to receive additional
inmates from the state of California through the remainder of 2007 and into 2008. We continue to
receive additional Arizona inmates at our Diamondback facility as a result of our new contract with
the state of Arizona increasing the number of inmates we will house for them out of state. All of
these contracts should contribute to our anticipated earnings growth in 2008.”
“Finally, we continue to move forward on our development and expansion efforts as evidenced by our
recent announcement of the development of our new 1,668-bed facility in Adams County, Mississippi,
another expansion of our Tallahatchie facility by 848-beds, and the expansions of our Cimarron and
Davis facilities by 660 beds each. While we have met our goal of beginning development of an
additional 4,000 to 6,000 new beds during 2007, with the announcement of these expansion and
development projects, we continue to pursue additional expansion and development opportunities to
stay ahead of the increasing demand from many of our customers.”
Retirement of Chief Development Officer
Effective August 31, 2007, Kenneth Bouldin has decided to retire from his position as CCA’s
Executive Vice President and Chief Development Officer, a position he has held since February 2003.
Bouldin has agreed to remain with CCA to provide assistance with the transition and other matters
related to business development as needed for a one-year period. CCA will divide Bouldin’s
responsibilities into two senior vice president functions.
Accordingly, it is expected that our Board of Directors will formally approve the promotions of
Anthony Grande and Damon Hininger to the positions of Senior Vice President of Business
Development. Grande, who currently serves as a vice president in our business development department,
a position he has held since January 2003, will continue to oversee our state customer
relationships. Hininger, a 15-year veteran of CCA who has also served as a vice
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CCA 2007 Second Quarter Financial Results
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president in our business development department since December 2000, will continue to oversee our
federal and local customer relationships.
Commenting on Bouldin’s decision, John Ferguson, President and Chief Executive Officer, said, “On
behalf of the Board of Directors and management, I thank Ken for his many contributions and
dedicated service to CCA over the past four years. He leaves behind Tony and Damon, two seasoned
individuals who will continue to carry-out our efforts in growing our business and providing our
customers cost effective solutions to their corrections management needs.”
Bouldin added, “Now is the time from both a personal and business perspective for me to step down
from an executive management role. The business development department has tremendous employee
talent and maturity, supported by excellent processes and procedures. I leave my post with the
confidence that a strong and capable team is prepared to continue the success we have enjoyed
together.”
Guidance
The Company expects diluted earnings per share (“EPS”) for the third quarter of 2007 to be in the
range of $0.23 to $0.25, and fourth quarter of 2007 to be in the range of $0.26 to $0.28, resulting
in full year EPS to be in the range of $1.01 to $1.05.
During 2007, we expect to invest approximately $349.5 million in capital expenditures, consisting
of approximately $295.7 million in prison construction and expansions that have been previously
announced, $36.6 million in maintenance capital expenditures and $17.2 million in information
technology.
Supplemental Financial Information and Investor Presentations
We have made available on our website supplemental financial information and other data for the
second quarter of 2007. 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.correctionscorp.com under “Financial Information” of the Investor
section.
Management may meet with investors from time to time during the third quarter of 2007. Written
materials used in the investor presentations will also be available on our website beginning on or
about August 15, 2007. Interested parties may access this information through our website at
www.correctionscorp.com under “Webcasts” of the Investor section.
Webcast and Replay Information
We will host a webcast conference call at 10:00 a.m. eastern time (9:00 a.m. central time)
tomorrow, August 7, 2007, to discuss our 2007 second quarter and six month 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 our website following the
completion of the call. In addition, a telephonic replay will be available tomorrow at 1:00 p.m.
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CCA 2007 Second Quarter Financial Results
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eastern time through 11:59 p.m. eastern time on August 14, 2007, by dialing 888-203-1112, pass code
3588348.
About CCA
CCA 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. We currently operate 65 facilities, including 41 company-owned facilities, with
a total design capacity of approximately 75,000 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) 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; (ii)
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; (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) 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; and (v) 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 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.
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CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| June 30, | December 31, | |||||||
| 2007 | 2006 | |||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 81,070 | $ | 29,029 | ||||
Investments |
84,766 | 82,830 | ||||||
Accounts receivable, net of allowance of $3,200 and $2,261 respectively |
212,736 | 237,382 | ||||||
Deferred tax assets |
8,970 | 11,655 | ||||||
Prepaid expenses and other current assets |
30,769 | 17,554 | ||||||
Current assets of discontinued operations |
416 | 966 | ||||||
Total current assets |
418,727 | 379,416 | ||||||
Property and equipment, net |
1,883,329 | 1,805,052 | ||||||
Restricted cash |
6,346 | 11,826 | ||||||
Investment in direct financing lease |
15,000 | 15,467 | ||||||
Goodwill |
15,246 | 15,246 | ||||||
Other assets |
23,201 | 23,807 | ||||||
Non-current assets of discontinued operations |
— | 46 | ||||||
Total assets |
$ | 2,361,849 | $ | 2,250,860 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Accounts payable and accrued expenses |
$ | 176,492 | $ | 160,522 | ||||
Income taxes payable |
630 | 2,810 | ||||||
Current portion of long-term debt |
290 | 290 | ||||||
Current liabilities of discontinued operations |
317 | 760 | ||||||
Total current liabilities |
177,729 | 164,382 | ||||||
Long-term debt, net of current portion |
975,823 | 975,968 | ||||||
Deferred tax liabilities |
29,131 | 23,755 | ||||||
Other liabilities |
41,422 | 37,074 | ||||||
Total liabilities |
1,224,105 | 1,201,179 | ||||||
Commitments and contingencies |
||||||||
Common stock - $0.01 par value; 300,000 shares authorized; 123,683
and 122,084 shares issued and outstanding at June 30, 2007 and
December 31, 2006, respectively |
1,237 | 1,221 | ||||||
Additional paid-in capital |
1,552,714 | 1,527,608 | ||||||
Retained deficit |
(416,207 | ) | (479,148 | ) | ||||
Total stockholders’ equity |
1,137,744 | 1,049,681 | ||||||
Total liabilities and stockholders’ equity |
$ | 2,361,849 | $ | 2,250,860 | ||||
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CCA 2007 Second Quarter Financial Results
Page 11
Page 11
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| For the Three Months | For the Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
REVENUE: |
||||||||||||||||
Management and other |
$ | 361,659 | $ | 323,843 | $ | 711,497 | $ | 637,435 | ||||||||
Rental |
1,111 | 1,049 | 2,188 | 2,085 | ||||||||||||
| 362,770 | 324,892 | 713,685 | 639,520 | |||||||||||||
EXPENSES: |
||||||||||||||||
Operating |
259,239 | 237,435 | 508,369 | 472,085 | ||||||||||||
General and administrative |
18,817 | 15,961 | 36,135 | 30,338 | ||||||||||||
Depreciation and amortization |
18,928 | 16,298 | 37,198 | 31,976 | ||||||||||||
| 296,984 | 269,694 | 581,702 | 534,399 | |||||||||||||
OPERATING INCOME |
65,786 | 55,198 | 131,983 | 105,121 | ||||||||||||
OTHER EXPENSES: |
||||||||||||||||
Interest expense, net |
13,655 | 14,552 | 27,589 | 29,678 | ||||||||||||
Expenses associated with debt refinancing and
recapitalization transactions |
— | — | — | 982 | ||||||||||||
Other (income) expenses |
(70 | ) | (102 | ) | (81 | ) | (114 | ) | ||||||||
| 13,585 | 14,450 | 27,508 | 30,546 | |||||||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES |
52,201 | 40,748 | 104,475 | 74,575 | ||||||||||||
Income tax expense |
(19,599 | ) | (15,070 | ) | (39,303 | ) | (27,553 | ) | ||||||||
INCOME FROM CONTINUING OPERATIONS |
32,602 | 25,678 | 65,172 | 47,022 | ||||||||||||
Loss from discontinued operations, net of taxes |
— | (50 | ) | — | (65 | ) | ||||||||||
NET INCOME |
$ | 32,602 | $ | 25,628 | $ | 65,172 | $ | 46,957 | ||||||||
BASIC EARNINGS PER SHARE: |
||||||||||||||||
Income from continuing operations |
$ | 0.27 | $ | 0.21 | $ | 0.53 | $ | 0.39 | ||||||||
Loss from discontinued operations, net of taxes |
— | — | — | — | ||||||||||||
Net income |
$ | 0.27 | $ | 0.21 | $ | 0.53 | $ | 0.39 | ||||||||
DILUTED EARNINGS PER SHARE: |
||||||||||||||||
Income from continuing operations |
$ | 0.26 | $ | 0.21 | $ | 0.52 | $ | 0.38 | ||||||||
Loss from discontinued operations, net of taxes |
— | — | — | — | ||||||||||||
Net income |
$ | 0.26 | $ | 0.21 | $ | 0.52 | $ | 0.38 | ||||||||
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CCA 2007 Second Quarter Financial Results
Page 12
Page 12
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS)
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS)
CALCULATION
OF ADJUSTED FREE CASH FLOW
| For the Three Months | For the Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Pre-tax income |
$ | 52,201 | $ | 40,698 | $ | 104,475 | $ | 74,510 | ||||||||
Expenses associated with debt refinancing and
recapitalization transactions |
— | — | — | 982 | ||||||||||||
Income taxes paid |
(20,878 | ) | (3,044 | ) | (21,676 | ) | (3,044 | ) | ||||||||
Depreciation and amortization |
18,928 | 16,298 | 37,198 | 31,976 | ||||||||||||
Depreciation and amortization for discontinued operations |
— | 28 | — | 53 | ||||||||||||
Income tax (benefit) expense for discontinued operations |
— | (29 | ) | — | (37 | ) | ||||||||||
Stock-based compensation reflected in G&A expenses |
1,809 | 1,791 | 3,039 | 2,569 | ||||||||||||
Amortization of debt costs and other non-cash interest |
988 | 1,091 | 2,003 | 2,326 | ||||||||||||
Maintenance and technology capital expenditures |
(10,649 | ) | (12,848 | ) | (21,105 | ) | (22,367 | ) | ||||||||
Adjusted Free Cash Flow |
$ | 42,399 | $ | 43,985 | $ | 103,934 | $ | 86,968 | ||||||||
CALCULATION OF ADJUSTED EBITDA
| For the Three Months | For the Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2007 | 2005 | 2006 | 2006 | |||||||||||||
Net income |
$ | 32,602 | $ | 25,628 | $ | 65,172 | $ | 46,957 | ||||||||
Interest expense, net |
13,655 | 14,552 | 27,589 | 29,678 | ||||||||||||
Depreciation and amortization |
18,928 | 16,298 | 37,198 | 31,976 | ||||||||||||
Income tax expense |
19,599 | 15,070 | 39,303 | 27,553 | ||||||||||||
(Income) loss from discontinued operations, net of taxes |
— | 50 | — | 65 | ||||||||||||
EBITDA |
$ | 84,784 | $ | 71,598 | $ | 169,262 | $ | 136,229 | ||||||||
Expenses associated with debt refinancing and
recapitalization transactions |
— | — | — | 982 | ||||||||||||
Adjusted EBITDA |
$ | 84,784 | $ | 71,598 | $ | 169,262 | $ | 137,211 | ||||||||
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CCA 2007 Second Quarter Financial Results
Page 13
Page 13
CALCULATION OF ADJUSTED DILUTED EARNINGS PER SHARE
| For the Three Months | For the Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Net income |
$ | 32,602 | $ | 25,628 | $ | 65,172 | $ | 46,957 | ||||||||
Special items: |
||||||||||||||||
Expenses associated with debt refinancing and
recapitalization transactions |
— | — | — | 982 | ||||||||||||
Income tax benefit for expenses associated with debt
refinancing transactions |
— | — | — | (363 | ) | |||||||||||
Diluted adjusted net income available to common stockholders |
$ | 32,602 | $ | 25,628 | $ | 65,172 | $ | 47,576 | ||||||||
Weighted average common shares outstanding — basic |
122,270 | 119,499 | 121,925 | 119,052 | ||||||||||||
Effect of dilutive securities: |
||||||||||||||||
Stock options and warrants |
2,732 | 2,835 | 2,754 | 2,961 | ||||||||||||
Restricted stock-based compensation |
286 | 258 | 301 | 351 | ||||||||||||
Weighted average shares and assumed conversions — diluted |
125,288 | 122,592 | 124,980 | 122,364 | ||||||||||||
Adjusted Diluted Earnings Per Share |
$ | 0.26 | $ | 0.21 | $ | 0.52 | $ | 0.39 | ||||||||
NOTE TO SUPPLEMENTAL FINANCIAL INFORMATION
Net income excluding special charges (Adjusted Diluted Earnings Per Share), EBITDA, Adjusted
EBITDA and Adjusted free cash flow 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 (including GAAP EPS, net
income, Adjusted Diluted Earnings Per Share and Adjusted free cash flow) and the operating
performance of the Company’s correctional facilities (EBITDA and Adjusted EBITDA). EBITDA and
Adjusted EBITDA are useful as supplemental measures of the performance of the Company’s
correctional facilities because they do not take into account depreciation and amortization, tax
provisions, or with respect to Adjusted EBITDA, the impact of the Company’s 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 free cash flow substitutes capital expenditures incurred to maintain the
functionality and condition of the Company’s correctional facilities in lieu of a provision for
depreciation; Adjusted free cash flow also excludes certain other non-cash expenses that do not
affect the Company’s ability to service debt.
The Company may make adjustments to GAAP net income, Adjusted EBITDA and Adjusted free cash flow
from time to time for certain other income and expenses that it considers non-recurring, infrequent
or unusual, such as the special charges in the preceding calculation of earnings per diluted share
excluding special charges (Adjusted Diluted Earnings Per Share), 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 Diluted Earnings Per Share, EBITDA,
Adjusted EBITDA and Adjusted free cash flow differently than the Company does, or adjust for other
items, and therefore comparability may be limited. EPS excluding special charges (Adjusted Diluted
Earnings Per Share), EBITDA, Adjusted EBITDA and Adjusted free cash flow 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.
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