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): November 8, 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)) |
| Item 2.02. Results of Operations and Financial Condition | ||||||||
| Item 9.01. Financial Statements and Exhibits | ||||||||
| SIGNATURE | ||||||||
| EXHIBIT INDEX | ||||||||
| EX-99.1 PRESS RELEASE | ||||||||
Table of Contents
Item 2.02. Results of Operations and Financial Condition
On November 8, 2007, Corrections Corporation of America, a Maryland corporation (the “Company”), issued a press release announcing its 2007 third 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 November 8, 2007 and may change thereafter.
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 November 8, 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: November 8, 2007 | CORRECTIONS CORPORATION OF AMERICA | |
|
By: /s/ Todd J Mullenger Todd J Mullenger Executive Vice President and Chief Financial Officer |
Table of Contents
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press Release dated November 8, 2007 |
Exhibit 99.1
Contact: Karin Demler: (615) 263-3005
CORRECTIONS CORPORATION OF AMERICA ANNOUNCES
THIRD QUARTER 2007 FINANCIAL RESULTS WITH EPS UP 23.8% TO $0.26
THIRD QUARTER 2007 FINANCIAL RESULTS WITH EPS UP 23.8% TO $0.26
—
INCREASES FULL-YEAR GUIDANCE
NASHVILLE, Tenn. — November 8, 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 nine-month periods
ended September 30, 2007.
Financial Review
Third Quarter of 2007 Compared with Third Quarter of 2006
| • | Net income increased 27.6% to $33.3 million from $26.1 million | ||
| • | Net income per diluted share increased 23.8% to $0.26 from $0.21 | ||
| • | EBITDA increased 17.1% to $86.8 million from $74.1 million | ||
| • | Adjusted Free Cash Flow increased 23.5% to $55.1 million from $44.6 million |
Financial results for the third quarter were positively impacted by an increase in compensated
man-days as demand and utilization of additional prison beds continued from both federal and state
customers. Management revenue from federal customers increased 13.2% to $151.4 million during the
third quarter of 2007 from $133.7 million during the third quarter of 2006. This increase was
primarily the result of a new contract with Immigration and Customs Enforcement (“ICE”) at our
Stewart Detention Center that became effective in October 2006. We also experienced an increase in
revenue from the U.S. Marshals Service (“USMS”) resulting from increases in inmate populations at
several of our facilities, as well as from per diem increases obtained on federal contracts.
Management revenue from state customers increased by 12.4% to $185.2 million during the third
quarter 2007 from $164.7 million for the same period in 2006. The increase in state revenue from
the prior year quarter was primarily due to additional inmates we received from the states of
California and Arizona pursuant to new contract awards, increases in inmate populations from
several other existing state customers, and an increase in average per diem rates.
Total portfolio occupancy increased to 98.1% during the third quarter of 2007 from 94.6% during the
third quarter of 2006, with compensated man-days increasing 8.2%, to 6.8 million from 6.3 million.
Total portfolio occupancy increased from the third quarter of 2006 despite placing into
service nearly 3,000 new beds due to the completion of several expansion and development projects
during 2007.
Adjusted Free Cash Flow increased 23.5% to $55.1 million during the third quarter of 2007 from
$44.6 million generated during the same period in 2006. Adjusted Free Cash Flow increased as a
result of improved operating performance, partially offset by a $5.9 million increase in income tax
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10 Burton Hills Boulevard, Nashville, Tennessee 37215, Phone: 615-263-3000
CCA 2007 Third Quarter Financial Results
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payments. As we previously disclosed, during 2006 we generated sufficient taxable income to
utilize our remaining federal net operating loss carryforwards. As a result, we expect to pay
approximately $50.0 million in taxes for 2007, compared with $13.7 million in 2006.
The improvement in financial results was net of approximately $1.2 million of transportation costs
we incurred primarily to relocate Hawaiian inmates from our Tallahatchie and Diamondback facilities
to our new Saguaro Correctional Facility in Eloy, Arizona, and to refill the vacated beds at
Tallahatchie and Diamondback with inmates transported from the states of California and Arizona,
respectively. Our financial results were also negatively impacted by a deterioration in
profitability of an additional $1.4 million at the Tallahatchie facility during the third quarter
of 2007 compared with the third quarter of 2006, as we increased staffing levels to accommodate
additional inmates expected from the state of California. Third quarter results were also
negatively impacted by the hiring of additional staff and other start-up expenses incurred in
advance of filling new beds at several facilities, including Saguaro, North Fork, Bay Correctional,
and Gadsden. We expect to continue to incur such expenses at other facilities as additional
expansion and development projects commence operations.
Commenting on the financial results, President and CEO John Ferguson stated, “We are pleased with
our third quarter financial results as our earnings continued to benefit from higher inmate
populations and significant utilization of new capacity brought online since last year.
Additionally, we are pleased with the rapid utilization of vacated beds at our Diamondback and
Tallahatchie facilities due largely to our dedicated and professional staff.”
“We continue to move forward on our development and expansion efforts as evidenced by our recent
announcement of the development of our new 3,060-bed facility for our new contract with the state
of California, and we continue to pursue additional expansion and development opportunities to stay
ahead of the increasing demand from many of our customers.”
First Nine Months of 2007 Compared with First Nine Months of 2006
| • | Net income increased 34.6% to $98.4 million from $73.1 million | ||
| • | Net income per diluted share increased 31.7% to $0.79 from $0.60 | ||
| • | EBITDA, excluding a refinancing charge during the first quarter of 2006, (“Adjusted EBITDA”) increased 21.2% to $256.1 million from $211.3 million | ||
| • | Adjusted Free Cash Flow, which does not include the refinancing charge during 2006, increased 20.8% to $159.0 million from $131.6 million |
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 Third Quarter Financial Results
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Operations Highlights
For the quarters ended September 30, 2007 and 2006, key operating statistics for the continuing
operations of the Company were as follows:
| Quarter Ended September 30, | ||||||||||
| Metric | 2007 | 2006 | % Change | |||||||
Average Available Beds |
75,328 | 72,259 | 4.2% | |||||||
Average Compensated Occupancy |
98.1 | % | 94.6 | % | 3.7% | |||||
Total Compensated Man-Days |
6,799,140 | 6,286,530 | 8.2% | |||||||
Average Daily Compensated Population |
73,904 | 68,332 | 8.2% | |||||||
Revenue per Compensated Man-Day |
$ | 55.06 | $ | 52.86 | 4.2% | |||||
Operating Expense per Compensated
Man-Day: |
||||||||||
Fixed |
29.37 | 28.59 | 2.7% | |||||||
Variable |
9.99 | 9.91 | 0.8% | |||||||
Total |
39.36 | 38.50 | 2.2% | |||||||
Operating Margin per Compensated Man-Day |
$ | 15.70 | $ | 14.36 | 9.3% | |||||
Operating Margin |
28.5 | % | 27.2 | % | 4.8% | |||||
Operating margins increased to 28.5% during the third quarter of 2007 from 27.2% during the
third 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 with ICE at our Stewart facility, the state of California at our Florence,
Tallahatchie and West Tennessee facilities and the state of Arizona at our Diamondback facility.
Total revenue for the third quarter of 2007 increased 12.4% to $379.9 million from $337.9 million
during the same period in 2006, as total compensated man-days increased to 6.8 million from 6.3
million, and as revenue per compensated man-day increased to $55.06 from $52.86. Average
compensated occupancy for the three months ended September 30, 2007 increased to 98.1% from 94.6%
for the three months ended September 30, 2006.
Fixed expenses per compensated man-day increased 2.7% to $29.37 during the third quarter of 2007
compared with $28.59 per compensated man-day during the same period in 2006. The increase was
primarily the result of a 2.7% increase in salaries and benefits per compensated man-day. In
addition to general inflationary increases in salaries and benefits, we incurred start-up expenses
as we ramped-up operations at our Saguaro, Tallahatchie, North Fork, Bay Correctional and Gadsden
facilities. The increases in salaries and benefits per compensated man-day were partially offset
by leveraging salaries and benefits over a larger inmate population across our portfolio.
Variable expenses increased slightly to $9.99 per compensated man-day during the third quarter of
2007 from $9.91 per compensated man-day during the third quarter of 2006. The increase in variable
expenses per compensated man-day was primarily due to general inflationary increases, partially
offset by a decrease in expenses related to legal proceedings in which we are involved and a modest
decrease in inmate medical expenses primarily resulting from entering into new management contracts
that limit our exposure to medical claims.
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CCA 2007 Third Quarter Financial Results
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Financing Transaction
In September 2007, we successfully expanded the borrowing capacity under our revolving credit
facility by $100.0 million, from $150.0 million to $250.0 million. All other terms of the
revolving credit facility remain the same. We expect to utilize the additional borrowing capacity
to fund expansion and development projects.
Business Development Update
In August 2007, we entered into an agreement with the Idaho Department of Corrections to house an
initial population of 120 inmates from the state of Idaho at our North Fork Correctional Facility
in Sayre, Oklahoma. At November 1, 2007, we housed 120 Idaho inmates at the North Fork facility.
In October 2007, we entered into a new agreement with the State of California Department of
Corrections and Rehabilitation (“CDCR”) for the housing of up to 7,772 inmates from the state of
California. The new contract replaces and supersedes the previous contract CCA had with the CDCR,
which provided housing for up to 5,670 inmates. Additionally, we announced that we would begin
construction of the new 3,060-bed La Palma Correctional Center located in Eloy, Arizona, which we
believe will be fully utilized by the CDCR.
We expect to complete construction of the new La Palma Correctional Center during the second
quarter of 2009 at an estimated total cost of $205.0 million. However, we expect to open a portion
of the new facility to begin receiving inmates from the state of California during the third
quarter of 2008, with the continued receipt of California inmates through completion of
construction, as phases of the facility become available.
We currently expect that we will ultimately provide the CDCR up to 960 beds at our Florence
facility, 80 beds at our West Tennessee facility, 2,592 beds at our Tallahatchie facility, 1,080
beds at our North Fork facility and 3,060 beds at our new La Palma facility, with the final
transfer from California occurring during the second quarter of 2009. At November 1, 2007, we
housed approximately 1,700 California inmates at our West Tennessee, Florence and Tallahatchie
facilities.
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CCA 2007 Third Quarter Financial Results
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Facility Development Update
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 | Potential | |||||||||
| or Development | Beds | Expansion | Completion | (in millions) | Customer(s) | |||||||||
North Fork Correctional Facility, Oklahoma |
960 | 2,400 | Q4 2007 | $ | 55.0 | California (1) and/ or Various States |
||||||||
Tallahatchie County Correctional |
720 | Q4 2007 | ||||||||||||
Facility, Mississippi |
848 | 2,672 | Q2 2008 | 93.0 | California (1) | |||||||||
Eden Detention Center, Texas |
129 | 1,422 | Q1 2008 | 20.0 | (2) | BOP (1) | ||||||||
Bent County Correctional Facility, Colorado |
720 | 1,420 | Q2 2008 | 44.0 | Colorado (1) | |||||||||
Kit Carson Correctional Center, Colorado |
720 | 1,488 | Q1 2008 | 44.0 | Colorado (1) | |||||||||
Leavenworth Detention Center, Kansas |
266 | 1,033 | Q2 2008 | 22.5 | USMS (1) | |||||||||
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 |
|||||||||
La Palma Correctional Center, Arizona |
3,060 | 3,060 | Q3 2008 — Q2 2009 |
205.0 | California | |||||||||
Total |
10,411 | $ | 678.5 | |||||||||||
| (1) | We currently have contracts in place with the stated customers to occupy these facilities; however, the contracts do not provide a guarantee of utilization. | |
| (2) | 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, we continue 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 $250.0 million revolving credit facility, and cash
generated from operations. However, we are currently evaluating financing alternatives that could
increase the amount of debt capital to fund additional expansion and development opportunities we
are pursuing.
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CCA 2007 Third Quarter Financial Results
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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 | |||||
Gadsden Correctional Institution, Florida |
384 | Q3 2007 | State of Florida | |||||
Bay Correctional Facility, Florida |
235 | Q3 2007 | State of Florida | |||||
Total |
2,971 | |||||||
Guidance
The Company expects diluted earnings per share (“EPS”) for the 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 $1.04 to $1.06, an
increase from full year guidance previously issued of $1.01 to $1.05.
During 2007, we expect to invest approximately $369.8 million in capital expenditures, consisting
of approximately $317.5 million in prison construction and expansions that have been previously
announced, $35.7 million in maintenance capital expenditures and
$16.6 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
third 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 fourth quarter of 2007. Written
materials used in the investor presentations will also be available on our website beginning on or
about November 13, 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 3:00 p.m. eastern time (2:00 p.m. central time) today, to
discuss our 2007 third quarter and nine 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 today at 6:00 p.m. eastern time through 11:59 p.m. eastern time on November 15,
2007, by dialing 888-203-1112, pass code 1084705.
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CCA 2007 Third Quarter Financial Results
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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 over 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; (v) risks associated
with judicial challenges regarding the transfer of California inmates to out of state private
correctional facilities; and (vi) 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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CCA 2007 Third Quarter Financial Results
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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)
| September 30, | December 31, | |||||||
| ASSETS | 2007 | 2006 | ||||||
Cash and cash equivalents |
$ | 89,443 | $ | 29,029 | ||||
Investments |
76,035 | 82,830 | ||||||
Accounts receivable, net of allowance of $3,565 and $2,261 respectively |
215,981 | 237,382 | ||||||
Deferred tax assets |
11,573 | 11,655 | ||||||
Prepaid expenses and other current assets |
17,538 | 17,554 | ||||||
Current assets of discontinued operations |
416 | 966 | ||||||
Total current assets |
410,986 | 379,416 | ||||||
Property and equipment, net |
1,974,629 | 1,805,052 | ||||||
Restricted cash |
6,430 | 11,826 | ||||||
Investment in direct financing lease |
14,755 | 15,467 | ||||||
Goodwill |
15,246 | 15,246 | ||||||
Other assets |
22,567 | 23,807 | ||||||
Non-current assets of discontinued operations |
— | 46 | ||||||
Total assets |
$ | 2,444,613 | $ | 2,250,860 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Accounts payable and accrued expenses |
$ | 216,107 | $ | 160,522 | ||||
Income taxes payable |
3,500 | 2,810 | ||||||
Current portion of long-term debt |
290 | 290 | ||||||
Current liabilities of discontinued operations |
237 | 760 | ||||||
Total current liabilities |
220,134 | 164,382 | ||||||
Long-term debt, net of current portion |
975,750 | 975,968 | ||||||
Deferred tax liabilities |
29,466 | 23,755 | ||||||
Other liabilities |
40,596 | 37,074 | ||||||
Total liabilities |
1,265,946 | 1,201,179 | ||||||
Commitments and contingencies |
||||||||
Common stock - $0.01 par value; 300,000 shares authorized; 124,051
and 122,084 shares issued and outstanding at September 30, 2007 and
December 31, 2006, respectively |
1,241 | 1,221 | ||||||
Additional paid-in capital |
1,560,378 | 1,527,608 | ||||||
Retained deficit |
(382,952 | ) | (479,148 | ) | ||||
Total stockholders’ equity |
1,178,667 | 1,049,681 | ||||||
Total liabilities and stockholders’ equity |
$ | 2,444,613 | $ | 2,250,860 | ||||
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CCA 2007 Third Quarter Financial Results
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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 Nine Months | |||||||||||||||
| Ended September 30, | Ended September 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
REVENUE: |
||||||||||||||||
Management and other |
$ | 378,733 | $ | 336,874 | $ | 1,090,230 | $ | 974,309 | ||||||||
Rental |
1,187 | 1,061 | 3,375 | 3,146 | ||||||||||||
| 379,920 | 337,935 | 1,093,605 | 977,455 | |||||||||||||
EXPENSES: |
||||||||||||||||
Operating |
274,946 | 247,728 | 783,315 | 719,813 | ||||||||||||
General and administrative |
18,362 | 16,379 | 54,497 | 46,717 | ||||||||||||
Depreciation and amortization |
20,074 | 17,411 | 57,272 | 49,387 | ||||||||||||
| 313,382 | 281,518 | 895,084 | 815,917 | |||||||||||||
OPERATING INCOME |
66,538 | 56,417 | 198,521 | 161,538 | ||||||||||||
OTHER
EXPENSES (INCOME): |
||||||||||||||||
Interest expense, net |
13,249 | 14,825 | 40,838 | 44,503 | ||||||||||||
Expenses associated with debt refinancing and
recapitalization transactions |
— | — | — | 982 | ||||||||||||
Other income |
(200 | ) | (299 | ) | (281 | ) | (413 | ) | ||||||||
| 13,049 | 14,526 | 40,557 | 45,072 | |||||||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES |
53,489 | 41,891 | 157,964 | 116,466 | ||||||||||||
Income tax expense |
(20,234 | ) | (15,643 | ) | (59,537 | ) | (43,196 | ) | ||||||||
INCOME FROM CONTINUING OPERATIONS |
33,255 | 26,248 | 98,427 | 73,270 | ||||||||||||
Loss from discontinued operations, net of taxes |
— | (118 | ) | — | (183 | ) | ||||||||||
NET INCOME |
$ | 33,255 | $ | 26,130 | $ | 98,427 | $ | 73,087 | ||||||||
BASIC EARNINGS PER SHARE: |
||||||||||||||||
Income from continuing operations |
$ | 0.27 | $ | 0.22 | $ | 0.81 | $ | 0.61 | ||||||||
Loss from discontinued operations, net of taxes |
— | — | — | — | ||||||||||||
Net income |
$ | 0.27 | $ | 0.22 | $ | 0.81 | $ | 0.61 | ||||||||
DILUTED EARNINGS PER SHARE: |
||||||||||||||||
Income from continuing operations |
$ | 0.26 | $ | 0.21 | $ | 0.79 | $ | 0.60 | ||||||||
Loss from discontinued operations, net of taxes |
— | — | — | — | ||||||||||||
Net income |
$ | 0.26 | $ | 0.21 | $ | 0.79 | $ | 0.60 | ||||||||
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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 Ended | For the Nine Months | |||||||||||||||
| September 30, | Ended September 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Pre-tax income |
$ | 53,489 | $ | 41,773 | $ | 157,964 | $ | 116,283 | ||||||||
Expenses associated with debt refinancing and
recapitalization transactions |
— | — | — | 982 | ||||||||||||
Income taxes paid |
(9,655 | ) | (3,746 | ) | (31,331 | ) | (6,790 | ) | ||||||||
Depreciation and amortization |
20,074 | 17,411 | 57,272 | 49,387 | ||||||||||||
Depreciation and amortization for discontinued operations |
— | 127 | — | 180 | ||||||||||||
Income tax (benefit) expense for discontinued operations |
— | (70 | ) | — | (107 | ) | ||||||||||
Stock-based compensation reflected in G&A expenses |
1,579 | 1,135 | 4,618 | 3,704 | ||||||||||||
Amortization of debt costs and other non-cash interest |
969 | 1,070 | 2,972 | 3,396 | ||||||||||||
Maintenance and technology capital expenditures |
(11,353 | ) | (13,111 | ) | (32,458 | ) | (35,478 | ) | ||||||||
Adjusted Free Cash Flow |
$ | 55,103 | $ | 44,589 | $ | 159,037 | $ | 131,557 | ||||||||
CALCULATION OF ADJUSTED EBITDA
| For the Three Months Ended | For the Nine Months | |||||||||||||||
| September 30, | Ended September 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Net income |
$ | 33,255 | $ | 26,130 | $ | 98,427 | $ | 73,087 | ||||||||
Interest expense, net |
13,249 | 14,825 | 40,838 | 44,503 | ||||||||||||
Depreciation and amortization |
20,074 | 17,411 | 57,272 | 49,387 | ||||||||||||
Income tax expense |
20,234 | 15,643 | 59,537 | 43,196 | ||||||||||||
Loss from discontinued operations, net of taxes |
— | 118 | — | 183 | ||||||||||||
EBITDA |
$ | 86,812 | $ | 74,127 | $ | 256,074 | $ | 210,356 | ||||||||
Expenses associated with debt refinancing and
recapitalization transactions |
— | — | — | 982 | ||||||||||||
Adjusted EBITDA |
$ | 86,812 | $ | 74,127 | $ | 256,074 | $ | 211,338 | ||||||||
NOTE TO SUPPLEMENTAL FINANCIAL INFORMATION
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, 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.
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CCA 2007 Third Quarter Financial Results
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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 Adjusted EBITDA, 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 EBITDA, Adjusted
EBITDA and Adjusted free cash flow differently than the Company does, or adjust for other items,
and therefore comparability may be limited. 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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