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): February 7, 2008
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 dated February 7, 2008. | ||||||||
Table of Contents
Item 2.02. Results of Operations and Financial Condition
On February 7, 2008, Corrections Corporation of America, a Maryland corporation (the “Company”), issued a press release announcing its 2007 fourth quarter and year end 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 February 7, 2008 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 February 7, 2008 |
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, hereunto duly authorized.
| Date: February 7, 2008 | 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 February 7, 2008 |
Exhibit 99.1
Contact: Karin Demler: (615) 263-3005
Corrections
Corporation
of America Announces
Fourth Quarter 2007 and Full—Year Financial Results
Fourth Quarter 2007 and Full—Year Financial Results
Full—Year EPS Up 23.3% to $1.06
Expects 2008 EPS of $1.21 to $1.28
NASHVILLE, Tenn. — February 7, 2008 — 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 fourth quarter and year ended
December 31, 2007.
Financial Review
Fourth Quarter of 2007 Compared with Fourth Quarter of 2006
| • | Net income increased to $34.9 million from $32.2 million |
| • | Net income per diluted share increased to $0.28 from $0.26 |
| • | Net income per diluted share, excluding special items (“Adjusted net income per diluted share”) increased to $0.29 from $0.26 |
| • | EBITDA increased to $91.8 million from $82.2 million |
| • | 1,680 expansion beds placed into service during the fourth quarter of 2007 |
Financial results for the fourth quarter were positively impacted by an increase in compensated
man-days from both federal and state customers. Management revenue from federal customers
increased 7.5% to $150.8 million during the fourth quarter of 2007 from $140.3 million during the
fourth quarter of 2006. The increase over the fourth quarter of 2006 was primarily the result of
an increase in utilization at our Stewart Detention Center resulting from our contract with the
Immigration and Customs Enforcement (“ICE”) that became effective in October 2006. Additionally,
revenue increased as a result of higher occupancies combined with per-diem increases obtained on
several contracts with the ICE and U.S. Marshals Service (“USMS”).
Management revenue from state customers increased 15.1% to $194.0 million during the fourth quarter
of 2007 from $168.5 million for the same period in 2006. The increase in state revenue from the
prior year quarter was primarily due to contract awards resulting in additional inmates from the
state of California, which now utilizes beds in three of our facilities, and the state of Arizona
at our Diamondback facility. We also experienced notable increases in populations that we house on
behalf of the states of Washington and Colorado at our North Fork Correctional Facility as well as
an increase in populations we house on behalf of the state of Hawaii at our new Saguaro
Correctional Facility that opened in July 2007. In addition to increasing populations, state
revenues were also positively impacted by per diem increases received under several existing
contracts. The state of
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10 Burton Hills Boulevard, Nashville, Tennessee 37215, Phone: 615-263-3000
CCA 2007 Fourth Quarter Financial Results
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Florida also fully utilized the additional 619 expansion beds we constructed for them at
their Bay Correctional Facility and their Gadsden Correctional Institution. Both of these
expansions were completed during the third quarter of 2007. These increases were partially offset
by a reduction in revenue resulting from lower populations at the D.C. Correctional Treatment
Facility.
Total portfolio occupancy increased to 97.9% during the fourth quarter of 2007 from 96.6% during
the fourth quarter of 2006, with compensated man-days increasing 7.3% to 6.9 million from 6.4
million. Total portfolio occupancy percentage increased from the fourth quarter of 2006 despite
placing into service over 4,600 new beds due to the completion of several expansion and development
projects during 2007.
Adjusted Free Cash Flow decreased to $47.1 million during the fourth quarter of 2007 from $49.1
million generated during the same period in 2006 as a result of a $13.0 million increase in income
tax payments over the fourth quarter of 2006. As previously disclosed, during 2006 we generated
sufficient taxable income to utilize our remaining federal net operating loss carryforwards.
Financial results were negatively impacted by a $1.6 million non-cash charge, or $0.01 per diluted
share, for the impairment of goodwill related to the management of two of our managed-only
facilities. This impairment charge resulted from poor operating performance combined with an
unfavorable, yet positive, forecast of future cash flows under the current management contracts at
these facilities.
Commenting on the financial results, President and CEO John Ferguson stated, “We are pleased with
our 2007 fourth quarter and full year financial results as our earnings continued to benefit from
increased demand for bed capacity and the utilization of new bed capacity we added to our system
since 2006. Last year we expressed our desire to begin the development of 4,000-6,000 new prison
beds during the course of 2007. I am pleased that during 2007 we brought over 4,600 beds online
and began the development of nearly 9,000 additional beds that will be added to our portfolio
during 2008 and into early 2009.”
Ferguson continued, “Based on projected demand for prison beds by many of our existing state and
federal customers we continue to pursue additional expansion and development opportunities.”
Full-Year 2007 Compared with Full-Year 2006
| • | Net income increased to $133.4 million from $105.2 million |
| • | Net income per diluted share increased to $1.06 from $0.86 |
| • | Adjusted net income per diluted share increased to $1.08 from 0.86 during 2006 |
| • | EBITDA, excluding a refinancing charge during the first quarter of 2006, (“Adjusted EBITDA”) increased to $346.7 million from $292.5 million |
Our financial results for 2007 reflected strong demand for prison beds, as occupancy for the full
year increased to 98.3% from 95.0% in 2006, despite an increase of over 3,000 average available
beds resulting from the completion of construction of over 6,200 beds during 2007 and 2006. We
were also awarded management contracts from new customers, and achieved solid per diem increases on
contracts that were renewed during the year, contributing to an increase in our operating margins
to 29.1% in 2007 from 27.5% in 2006.
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CCA 2007 Fourth Quarter Financial Results
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Adjusted net income per diluted 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.
Operations Highlights
For the quarters ended December 31, 2007 and 2006, key operating statistics for the continuing
operations of the Company were as follows:
| Quarter Ended December 31, | ||||||||||||
| Metric | 2007 | 2006 | % Change | |||||||||
Average Available Beds |
76,504 | 72,259 | 5.9 | % | ||||||||
Average Compensated Occupancy |
97.9 | % | 96.6 | % | 1.3 | % | ||||||
Total Compensated Man-Days |
6,892,259 | 6,423,138 | 7.3 | % | ||||||||
Average Daily Compensated Population |
74,916 | 69,817 | 7.3 | % | ||||||||
Revenue per Compensated Man-Day |
$ | 55.43 | $ | 53.47 | 3.7 | % | ||||||
Operating Expense per Compensated
Man-Day: |
||||||||||||
Fixed |
28.98 | 27.95 | 3.7 | % | ||||||||
Variable |
10.28 | 10.03 | 2.5 | % | ||||||||
Total |
39.26 | 37.98 | 3.4 | % | ||||||||
Operating Margin per Compensated Man-Day |
$ | 16.17 | $ | 15.49 | 4.4 | % | ||||||
Operating Margin |
29.2 | % | 29.0 | % | 0.7 | % | ||||||
Total revenue for the fourth quarter of 2007 increased 11.1% to $386.4 million from $347.8
million during the same period in 2006, as total compensated man-days increased to 6.9 million from
6.4 million, and as revenue per compensated man-day increased to $55.43 from $53.47. The increase
in revenue from the prior year period was primarily the result of higher inmate populations from
the state of California at our Florence and Tallahatchie facilities, the state of Arizona at our
Diamondback facility and from ICE at our Stewart facility.
Total operating expenses per compensated man-day increased 3.4% to $39.26 during the fourth quarter
of 2007 compared with $37.98 during the same period in 2006. Operating expenses per compensated
man-day during the fourth quarter of 2007 reflects facility ramp-up costs, several expense
anomalies, as well as general inflationary increases.
Financing Transaction
In December 2007, we entered into a new $450.0 million senior secured revolving credit facility
replacing our previous $250.0 million senior secured revolving credit facility. The new revolving
credit facility has an aggregate principal capacity of $450.0 million, including up to $100.0
million for letters of credit, and matures in December 2012. Terms of the new revolving credit
facility are substantially similar to those of the previous facility. Based on our current
leverage ratio, loans under the new revolving credit facility would currently bear interest at the
base rate plus a margin of 0.00% or at LIBOR plus a margin of 0.75%. The new revolving credit
facility will be utilized to fund development projects in anticipation of increasing demand by
existing and potential new customers, as well as for working capital, and general corporate purposes. We currently do not have any
outstanding borrowings under the new revolving credit facility; however, we currently have $34.9
million in letters of credit outstanding.
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CCA 2007 Fourth Quarter Financial Results
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Business Development Update
In January 2008, we amended our agreement with the State of California Department of Corrections
and Rehabilitation (“CDCR”) to allow for the housing of an additional 360 CDCR inmates. As a
result, we now have a contract that provides the CDCR with the ability to house up to 8,132 inmates
in six of the facilities we own.
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, 360 beds at our Red Rock facility and 3,060 beds at our new La
Palma facility. On February 1, 2008, we housed approximately 2,450 California inmates at our West
Tennessee, Florence and Tallahatchie facilities.
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 or | Additional | Following | Estimated | Total Cost | Potential | |||||||||||||||
| Development | Beds | Expansion | Completion | (in millions) | Customer(s) | |||||||||||||||
Eden Detention Center,
Texas |
129 | 1,422 | Q1 2008 | $ | 20.0 | (1) | BOP(2) | |||||||||||||
Kit Carson Correctional Center,
Colorado |
720 | 1,488 | Q1 2008 | 44.0 | Colorado (2) | |||||||||||||||
Bent County Correctional Facility,
Colorado |
720 | 1,420 | Q2 2008 | 44.0 | Colorado (2) | |||||||||||||||
Leavenworth Detention Center,
Kansas |
266 | 1,033 | Q2 2008 | 22.5 | USMS (2) | |||||||||||||||
Tallahatchie County Correctional
Facility, Mississippi |
848 | 2,672 | Q2 2008 | 56.0 | California (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 | |||||||||||||||
La Palma Correctional Center, |
Q3 2008 -- | |||||||||||||||||||
Arizona |
3,060 | 3,060 | Q2 2009 | 205.0 | California (2) | |||||||||||||||
Total |
8,731 | $ | 586.5 | |||||||||||||||||
(1)
The total estimated cost is for a renovation of the existing facility which will result in 129 additional beds.
(2)
We currently have contracts in place with the stated customers to occupy these facilities; however, the contracts do not provide a guarantee of utilization.
CCA 2007 Fourth Quarter Financial Results
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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, availability under our new $450.0 million revolving credit facility, and cash generated from
operations.
Expansions or Developments Completed during 2007
| Additional | ||||||||||||
| 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 | |||||||||
Tallahatchie County Correctional Facility,
Mississippi |
720 | Q4 2007 | State of California | |||||||||
North Fork Correctional Facility, Oklahoma |
960 | Q4 2007 | State of California | |||||||||
Total |
4,651 | |||||||||||
Guidance
We expect diluted earnings per share (“EPS”) for the first quarter of 2008 to be in the range of
$0.26 to $0.28, and full year 2008 EPS to be in the range of $1.21 to $1.28.
During 2008, we expect to invest approximately $418.8 million in capital expenditures, consisting
of approximately $370.7 million in prison construction and expansions that have been previously
announced, $34.7 million in maintenance capital expenditures and $13.4 million in information
technology. We also currently expect to pay approximately $60.0 million to $65.0 million in
federal and state income taxes during 2008.
Supplemental Financial Information and Investor Presentations
We have made available on our website supplemental financial information and other data for the
fourth 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 first quarter of 2008. Written
materials used in the investor presentations will also be available on our website beginning on or
about February 15, 2008. 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 fourth quarter 2007 and full-year 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
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CCA 2007 Fourth Quarter Financial Results
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available today at 6:00 p.m. eastern time through 11:59 p.m. eastern time on February 14,
2008, by dialing 888-203-1112, pass code 6533749.
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 78,000 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 Fourth 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)
| December 31, | ||||||||
| 2007 | 2006 | |||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 57,968 | $ | 29,029 | ||||
Investments |
— | 82,830 | ||||||
Accounts receivable, net of allowance of $3,914 and $2,261, respectively |
241,722 | 237,382 | ||||||
Deferred tax assets |
12,250 | 11,655 | ||||||
Prepaid expenses and other current assets |
21,142 | 17,554 | ||||||
Current assets of discontinued operations |
— | 966 | ||||||
Assets held for sale |
7,581 | — | ||||||
Total current assets |
340,663 | 379,416 | ||||||
Property and equipment, net |
2,086,980 | 1,805,098 | ||||||
Restricted cash |
6,511 | 11,826 | ||||||
Investment in direct financing lease |
14,503 | 15,467 | ||||||
Goodwill |
13,672 | 15,246 | ||||||
Other assets |
23,411 | 23,807 | ||||||
Total assets |
$ | 2,485,740 | $ | 2,250,860 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Accounts payable and accrued expenses |
$ | 213,240 | $ | 160,522 | ||||
Income taxes payable |
964 | 2,810 | ||||||
Current portion of long-term debt |
290 | 290 | ||||||
Current liabilities of discontinued operations |
237 | 760 | ||||||
Total current liabilities |
214,731 | 164,382 | ||||||
Long-term debt, net of current portion |
975,677 | 975,968 | ||||||
Deferred tax liabilities |
34,271 | 23,755 | ||||||
Other liabilities |
39,086 | 37,074 | ||||||
Total liabilities |
1,263,765 | 1,201,179 | ||||||
Commitments and contingencies |
||||||||
Common stock - $0.01 par value; 300,000 shares authorized;
124,472 and 122,084 shares issued and outstanding at December 31, 2007
and 2006, respectively |
1,245 | 1,221 | ||||||
Additional paid-in capital |
1,568,736 | 1,527,608 | ||||||
Retained deficit |
(348,006 | ) | (479,148 | ) | ||||
Total stockholders’ equity |
1,221,975 | 1,049,681 | ||||||
Total liabilities and stockholders’ equity |
$ | 2,485,740 | $ | 2,250,860 | ||||
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CCA 2007 Fourth 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 Twelve Months | |||||||||||||||
| Ended December 31, | Ended December 31, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
REVENUE: |
||||||||||||||||
Management and other |
$ | 385,591 | $ | 347,111 | $ | 1,475,821 | $ | 1,321,420 | ||||||||
Rental |
793 | 682 | 3,016 | 2,721 | ||||||||||||
| 386,384 | 347,793 | 1,478,837 | 1,324,141 | |||||||||||||
EXPENSES: |
||||||||||||||||
Operating |
274,735 | 248,514 | 1,058,050 | 968,327 | ||||||||||||
General and administrative |
19,902 | 16,876 | 74,399 | 63,593 | ||||||||||||
Depreciation and amortization |
21,379 | 17,986 | 78,514 | 67,236 | ||||||||||||
Goodwill impairment |
1,574 | — | 1,574 | — | ||||||||||||
| 317,590 | 283,376 | 1,212,537 | 1,099,156 | |||||||||||||
OPERATING INCOME |
68,794 | 64,417 | 266,300 | 224,985 | ||||||||||||
OTHER EXPENSES (INCOME): |
||||||||||||||||
Interest expense, net |
12,938 | 14,280 | 53,776 | 58,783 | ||||||||||||
Expenses associated with debt refinancing and
recapitalization transactions |
— | — | — | 982 | ||||||||||||
Other (income) expenses |
(22 | ) | 159 | (303 | ) | (254 | ) | |||||||||
| 12,916 | 14,439 | 53,473 | 59,511 | |||||||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES |
55,878 | 49,978 | 212,827 | 165,474 | ||||||||||||
Income tax expense |
(21,158 | ) | (17,976 | ) | (80,312 | ) | (60,813 | ) | ||||||||
INCOME FROM CONTINUING OPERATIONS |
34,720 | 32,002 | 132,515 | 104,661 | ||||||||||||
Income from discontinued operations, net of taxes |
226 | 150 | 858 | 578 | ||||||||||||
NET INCOME |
$ | 34,946 | $ | 32,152 | $ | 133,373 | $ | 105,239 | ||||||||
BASIC EARNINGS PER SHARE: |
||||||||||||||||
Income from continuing operations |
$ | 0.28 | $ | 0.27 | $ | 1.08 | $ | 0.88 | ||||||||
Income from discontinued operations, net of taxes |
— | — | 0.01 | — | ||||||||||||
Net income |
$ | 0.28 | $ | 0.27 | $ | 1.09 | $ | 0.88 | ||||||||
DILUTED EARNINGS PER SHARE: |
||||||||||||||||
Income from continuing operations |
$ | 0.28 | $ | 0.26 | $ | 1.05 | $ | 0.86 | ||||||||
Income from discontinued operations, net of taxes |
— | — | 0.01 | — | ||||||||||||
Net income |
$ | 0.28 | $ | 0.26 | $ | 1.06 | $ | 0.86 | ||||||||
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CCA 2007 Fourth Quarter Financial Results
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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 DILUTED EARNINGS PER SHARE
| For the Three Months | For the Twelve Months | |||||||||||||||
| Ended December 31, | Ended December 31, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Net income |
$ | 34,946 | $ | 32,152 | $ | 133,373 | $ | 105,239 | ||||||||
Special items: |
||||||||||||||||
Expenses associated with debt refinancing and
recapitalization transactions |
— | — | — | 982 | ||||||||||||
Goodwill impairment |
1,574 | — | 1,574 | — | ||||||||||||
Income tax benefit for special items |
— | — | — | (361 | ) | |||||||||||
Diluted adjusted net income |
$ | 36,520 | $ | 32,152 | $ | 134,947 | $ | 105,860 | ||||||||
Weighted average common shares outstanding — basic |
123,396 | 120,688 | 122,553 | 119,714 | ||||||||||||
Effect of dilutive securities: |
||||||||||||||||
Stock options and warrants |
2,106 | 3,072 | 2,480 | 3,018 | ||||||||||||
Restricted stock-based compensation |
405 | 310 | 348 | 326 | ||||||||||||
Weighted average shares and assumed conversions — diluted |
125,907 | 124,070 | 125,381 | 123,058 | ||||||||||||
Adjusted Diluted Earnings Per Share |
$ | 0.29 | $ | 0.26 | $ | 1.08 | $ | 0.86 | ||||||||
CALCULATION OF ADJUSTED FREE CASH FLOW
| For the Three Months | For the Twelve Months | |||||||||||||||
| Ended December 31, | Ended December 31, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Pre-tax income |
$ | 56,104 | $ | 50,128 | $ | 213,685 | $ | 166,052 | ||||||||
Expenses associated with debt refinancing and
recapitalization transactions |
— | — | — | 982 | ||||||||||||
Income taxes paid |
(19,924 | ) | (6,900 | ) | (51,255 | ) | (13,690 | ) | ||||||||
Depreciation and amortization |
21,379 | 17,986 | 78,514 | 67,236 | ||||||||||||
Depreciation and amortization for discontinued operations |
31 | 120 | 168 | 437 | ||||||||||||
Goodwill impairment |
1,574 | — | 1,574 | — | ||||||||||||
Income tax (benefit) expense for discontinued operations |
137 | 84 | 520 | 336 | ||||||||||||
Stock-based compensation reflected in G&A expenses |
1,860 | 1,136 | 6,478 | 4,840 | ||||||||||||
Amortization of debt costs and other non-cash interest |
959 | 1,037 | 3,931 | 4,433 | ||||||||||||
Maintenance and technology capital expenditures |
(15,042 | ) | (14,523 | ) | (47,500 | ) | (50,001 | ) | ||||||||
Adjusted Free Cash Flow |
$ | 47,078 | $ | 49,068 | $ | 206,115 | $ | 180,625 | ||||||||
-more-
CCA 2007 Fourth Quarter Financial Results
Page 10
Page 10
CALCULATION OF ADJUSTED EBITDA
| For the Three Months | For the Twelve Months | |||||||||||||||
| Ended December 31, | Ended December 31, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Net income |
$ | 34,946 | $ | 32,152 | $ | 133,373 | $ | 105,239 | ||||||||
Interest expense, net |
12,938 | 14,280 | 53,776 | 58,783 | ||||||||||||
Depreciation and amortization |
21,379 | 17,986 | 78,514 | 67,236 | ||||||||||||
Income tax expense |
21,158 | 17,976 | 80,312 | 60,813 | ||||||||||||
Goodwill impairment |
1,574 | — | 1,574 | — | ||||||||||||
Income from discontinued operations, net of taxes |
(226 | ) | (150 | ) | (858 | ) | (578 | ) | ||||||||
EBITDA |
$ | 91,769 | $ | 82,244 | $ | 346,691 | $ | 291,493 | ||||||||
Expenses associated with debt refinancing and
recapitalization transactions |
— | — | — | 982 | ||||||||||||
Adjusted EBITDA |
$ | 91,769 | $ | 82,244 | $ | 346,691 | $ | 292,475 | ||||||||
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 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. 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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