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 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 02/08/07 | ||||||||
Table of Contents
Item 2.02. Results of Operations and Financial Condition
On February 8, 2007, Corrections Corporation of America, a Maryland corporation (the “Company”), issued a press release announcing its 2006 fourth quarter and year end 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 8, 2007 and may change thereafter.
Item 9.01. Financial Statements and Exhibits
(d) The following exhibits are furnished as part of this Current Report pursuant to Item 2.02:
| Exhibit 99.1 - Press Release dated February 8, 2007 |
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 8, 2007 | CORRECTIONS CORPORATION OF AMERICA | |
|
By: /s/ Irving E. Lingo, Jr. Irving E. Lingo, Jr. Executive Vice President and Chief Financial Officer |
Table of Contents
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press Release dated February 8, 2007 |
EXHIBIT 99.1
Contact: Karin Demler: (615) 263-3005
Corrections
Corporation
of America
Announces 2006 Fourth Quarter and Full-Year Financial Results
Announces 2006 Fourth Quarter and Full-Year Financial Results
NASHVILLE, Tenn. - February 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 twelve-month periods
ended December 31, 2006. 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 CCA’s three-for-two stock split that was paid on September 13,
2006 to the stockholders of record on September 1, 2006.
Financial Review
Fourth Quarter of 2006 Compared with Fourth Quarter of 2005
For the three months ended December 31, 2006, CCA reported net income of $32.2 million, or $0.52
per diluted share, compared with net income of $23.4 million, or $0.39 per diluted share, for the
same period in 2005, an increase of 33.3% per diluted share. The 2006 fourth quarter period
represents the sixth consecutive quarter of year-over-year double digit increases in diluted
earnings per share. Financial results for the fourth quarter of 2005 included a pre-tax charge of
approximately $1.0 million, or $0.01 per diluted share after taxes, for the acceleration of vesting
of all stock options outstanding effective December 30, 2005. Excluding this special charge, net
income was $0.40 per diluted share for the fourth quarter of 2005.
Operating income for the fourth quarter of 2006 was $64.7 million, compared with $50.4 million for
the fourth quarter of 2005. EBITDA adjusted for special items (“Adjusted EBITDA”) increased 23.0%
to $82.6 million during the quarter ended December 31, 2006 from $67.1 million during the same
period in 2005. Results were substantially driven by strong demand for prison beds from both
federal and state customers. Management revenue from federal customers increased $15.8 million, or
12.6%, from $125.2 million during the fourth quarter of 2005 to $141.0 million during the fourth
quarter of 2006. Federal revenues were favorably impacted by new contracts at our T. Don Hutto
Residential Center and our Eloy Detention Center, which experienced increased detainee populations
from the U.S. Immigration and Customs Enforcement (“ICE”), and at our Northeast Ohio facility,
which experienced increased inmate populations from the Federal Bureau of Prisons (“BOP”) as a
result of a new contract award in 2005. Management revenue from state customers increased $14.0
million, or 9.0%, from $154.6 million during the fourth quarter of 2005 to $168.5 million during
the fourth quarter of 2006. During the fourth quarter of 2006, state revenues were positively
impacted by an increase in inmate populations from Colorado, Minnesota, Hawaii, Wyoming, and
Washington. As a result of the increases in federal and state inmate populations, portfolio
occupancy increased from 93.1% during the fourth quarter of 2005 to 96.6% during the fourth quarter
of 2006.
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10 Burton Hills Boulevard, Nashville, Tennessee 37215, Phone: 615-263-3000
CCA 2006 Fourth Quarter and
Full Year Financial Results
Page 2
Full Year Financial Results
Page 2
Adjusted Free Cash Flow, which does not include special items, exceeded $40 million for the
sixth consecutive quarter, increasing 18.4% to $49.1 million during the fourth quarter of 2006 from
$41.5 million generated during the same period in 2005. The increase was attributable to the
increase in operating income, partially offset by increases in maintenance and technology capital
expenditures and income tax payments.
Full-Year 2006 Compared with Full-Year 2005
For the twelve months ended December 31, 2006, the Company generated net income of $105.2 million,
or $1.71 per diluted share, compared with $50.1 million, or $0.83 per diluted share, for the twelve
months ended December 31, 2005. Financial results for 2006 included a pre-tax charge of $1.0
million, or $0.01 per diluted share, net of taxes, for refinancing charges incurred during the
first quarter of 2006, compared with a pre-tax charge of $35.3 million for refinancing transactions
completed during the first and second quarters of 2005. Financial results for 2005 also included a
pre-tax charge of approximately $1.0 million for the acceleration of vesting of all outstanding
stock options effective December 30, 2005. Earnings per diluted share in 2006 and 2005 excluding
these special items amounted to $1.72 and $1.22 per diluted share, respectively, representing an
increase of 41.0%.
Operating income for 2006 increased to $225.9 million compared with $176.9 million for 2005.
Adjusted EBITDA also increased for the twelve months ended December 31, 2006, to $293.8 million
compared with $237.5 million during the same period in 2005. Consistent with the previous three
quarters in 2006, the increases in operating income and Adjusted EBITDA for the year ended December
31, 2006 were substantially due to higher inmate populations under existing contracts at a number
of CCA’s facilities as well as the commencement of new management contracts. Total portfolio
occupancy for 2006 increased to 94.9% compared to 91.4% in 2005, while total compensated man-days
increased 7.4% from 23.2 million in 2005 to 24.9 million in 2006.
Adjusted Free Cash Flow increased by $52.4 million during 2006 to $180.6 million from $128.2
million during 2005. Although strong operating results contributed significantly to the increase
in Adjusted Free Cash Flow, the prior year period was negatively impacted by $15.8 million in
income tax payments primarily for the repayment of taxes associated with excess refunds received by
the Company in 2002 and 2003, as described in the Company’s fourth quarter 2004 earnings release.
Excluding these tax payments, Adjusted Free Cash Flow increased $37.3 million, or 26.0%, despite an
increase in maintenance and technology capital expenditures of $13.8 million during 2006.
Adjusted Diluted Earnings Per Share, EBITDA, 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, 2006 and 2005, key operating statistics for the continuing
operations of CCA were as follows:
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CCA 2006 Fourth Quarter and
Full Year Financial Results
Page 3
Full Year Financial Results
Page 3
| Quarter Ended December 31, | ||||||||||||
| Metric | 2006 | 2005 | % Change | |||||||||
Average Available Beds |
72,639 | 70,685 | 2.8 | % | ||||||||
Average Compensated Occupancy |
96.6 | % | 93.1 | % | 3.8 | % | ||||||
Total Compensated Man-Days |
6,454,592 | 6,053,534 | 6.6 | % | ||||||||
Revenue per Compensated Man-Day |
$ | 53.43 | $ | 51.66 | 3.4 | % | ||||||
Operating Expense per Compensated
Man-Day: |
||||||||||||
Fixed |
27.97 | 28.05 | (0.3 | )% | ||||||||
Variable |
10.03 | 9.87 | 1.6 | % | ||||||||
Total |
38.00 | 37.92 | 0.2 | % | ||||||||
Operating Margin per Compensated Man-Day |
$ | 15.43 | $ | 13.74 | 12.3 | % | ||||||
Operating Margin |
28.9 | % | 26.6 | % | 8.6 | % | ||||||
Total revenue for the fourth quarter of 2006 increased 10.2% to $349.6 million from $317.2
million during the same period in 2005, as total compensated man-days increased 6.6% to 6.5 million
from 6.1 million, and as revenue per compensated man-day increased to $53.43 from $51.66, an
increase of 3.4%. Average compensated occupancy for the three months ended December 31, 2006
increased to 96.6% from 93.1% for the same period in 2005.
Fixed expenses decreased $0.08 per compensated man-day to $27.97 during the fourth quarter of 2006
compared with $28.05 per compensated man-day during the same period in 2005. The decrease in fixed
expenses was essentially the result of lower than anticipated increases in salaries and benefits
primarily in the area of workers compensation, as well as the resulting leveraging of these fixed
costs over a higher number of compensated man-days. Also contributing to the decrease was a
reduction in utilities due to unseasonably warm weather experienced by much of the country.
Variable expenses increased to $10.03 per compensated man-day during the fourth quarter of 2006
from $9.87 per compensated man-day during the fourth quarter of 2005, an increase of $0.16 per
compensated man-day, or 1.6%. The increase in variable expenses per compensated man-day was
primarily attributable to expenses associated with the start-up of operations at the Stewart
Detention Center, which began receiving detainees from ICE in October 2006 pursuant to a new
contract award, the North Fork Correctional Facility, which re-commenced operations during the
first quarter of 2006 and continues to experience increasing inmate populations from various
states, and at our newly constructed Red Rock Correctional Center, which opened in July 2006.
As a result of the aforementioned revenue increases, expense controls and approximately 400,000
additional man-days, operating margins increased 8.6% to 28.9% from 26.6% in the fourth quarter of
2005.
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CCA 2006 Fourth Quarter and
Full Year Financial Results
Page 4
Full Year Financial Results
Page 4
Business Development Update
In January 2007, the Company announced that it received a contract award from the BOP to house up
to 1,558 federal inmates at the Company’s Eden Detention Center in Eden, Texas. CCA currently
houses approximately 1,300 BOP inmates at the Eden facility under an existing Inter-Governmental
Services Agreement (“IGSA”) between the BOP and the City of Eden. The contract, awarded as part of
the Criminal Alien Requirement Phase 6 Solicitation (“CAR 6”), becomes effective May 1, 2007 and
has an initial four-year term with three two-year renewal options. Under the new CAR 6 contract,
we will receive a fixed monthly payment based on a guaranteed population equal to 90% of the
current rated capacity and a per diem payment for each additional inmate thereafter.
The new CAR 6 contract requires a renovation and expansion of the existing Eden facility, which
will increase the rated capacity of the Eden facility by 129 beds to an aggregate capacity of 1,354
beds. Renovation of the Eden facility is expected to be completed during the first quarter of 2008
at an estimated cost of $20.0 million. Following completion of the renovation, the fixed monthly
payment under the contract will be adjusted to 90% of the new rated capacity and a per diem payment
for each additional inmate thereafter.
In December 2006, CCA announced it entered into an agreement with Bent County, Colorado to house
Colorado inmates at its 1,440 bed North Fork Correctional Facility under an IGSA between the County
and the Colorado Department of Corrections. Under this agreement we may house up to 720 Colorado
inmates, subject to bed availability, at the North Fork facility. The contract includes an initial
term which commenced December 28, 2006 and runs through June 30, 2007, and provides for mutually
agreed extensions for a total contract term of up to five years. At January 31, 2007, we housed
approximately 480 Colorado inmates at the North Fork facility. Colorado may transfer additional
inmates to the facility to meet additional inmate population needs if adequate bed space is
available. On January 31, 2007, the North Fork facility housed approximately 1,000 inmates from the
states of Colorado, Wyoming and Vermont.
CCA is currently expanding two of its facilities in Colorado, the Bent County Correctional Facility
and the Kit Carson Correctional Center, by 720 beds each. Both expansions are expected to be
completed during the second quarter of 2008. Colorado inmates housed at the North Fork facility are
currently expected to be transferred to our Bent County or Kit Carson facilities following the
expansion of these facilities.
As previously disclosed, the Company received notification from the Liberty County Commission in
Liberty, Texas that the County would transfer management of the 380-bed Liberty County
Jail/Juvenile Center to another operator. On January 1, 2007, we ceased operating the Liberty
County facility. The termination is not expected to have a material impact on our financial
statements.
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CCA 2006 Fourth Quarter and
Full Year Financial Results
Page 5
Full Year Financial Results
Page 5
Status of California Contract
In October 2006, CCA entered into an agreement with the California Department of Corrections and
Rehabilitation (“CDCR”) to house up to approximately 1,000 California inmates at several of our
facilities. We currently house approximately 350 California inmates that volunteered to be
transferred to our West Tennessee Detention Facility and our Florence Correctional Facility.
On February 2, 2007, the Governor of California asked the CDCR to begin the involuntary transfer of
prisoners to correctional facilities outside of California in an effort to relieve prison
overcrowding.
As a result of the Governor’s request, CCA and the CDCR amended the contract to potentially provide
up to 4,670 additional beds for a total of approximately 5,670 beds. The amendment includes the
potential utilization of beds in our Tallahatchie and Diamondback facilities that will be vacated
when the state of Hawaii transfers inmates to our new Saguaro Correctional Facility (which is
expected to be completed in June 2007), as well as the expansion beds at the North Fork and
Tallahatchie facilities (expected to be completed during the fourth quarter of 2007).
The amended contract, which continues to be subject to appropriations, provides for a 90%
guarantee of the mutually agreed upon capacity allocated to CDCR offenders. Now that the
involuntary transfer program has begun the 90% guarantee applies to housing units allocated to the
CDCR at each facility on the earlier of achieving 90% of the capacity designated for CDCR offenders
at each housing unit or 120 days after the first inmate arrives at the housing unit. Capacity
allocated to the CDCR is subject to availability. Further, the Company can provide no assurance
that the CDCR will utilize any additional capacity.
It is important to note that several employee unions and advocacy groups in California have
filed lawsuits against California officials seeking to prevent the housing of California inmates
outside of California. We cannot predict if additional lawsuits may arise, how the California
courts will ultimately rule on such lawsuits, the timing of the transfer of inmates, the total
number of inmates ultimately received or whether rulings could require the return of inmates to
California.
Facility Inventory and Development Update
Current Inventory
At January 31, 2007, CCA had available inventory of approximately 3,000 beds, which consists of
approximately 2,300 owned and managed beds and 700 managed only beds. Most of these beds are
contractually committed to existing customers; however none of these contracts provide for
guarantees of occupancy. We expect that a significant portion of these beds will be occupied over
the next twelve months.
Facilities Currently Under Development or Expansion
In response to ongoing demand for bed capacity from a number of federal and state agencies, the
Company has undertaken the following expansion and development projects:
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CCA 2006 Fourth Quarter and
Full Year Financial Results
Page 6
Full Year Financial Results
Page 6
| Total Bed | ||||||||||||||||||||
| Capacity | Estimated | |||||||||||||||||||
| Following | Estimated | Cost | Potential | |||||||||||||||||
| Beds | Expansion | Completion | (in millions) | Customer(s) | ||||||||||||||||
Facilities Under Expansion |
||||||||||||||||||||
Gadsden Correctional Institution,
Florida |
384 | 1,520 | Q3 2007 | (1) | State of Florida | |||||||||||||||
Bay Correctional Facility, Florida |
235 | 985 | Q3 2007 | (1) | State of Florida | |||||||||||||||
Citrus County Detention Facility,
Florida |
360 | 760 | Q1 2007 | $ | 18.5 | Citrus County(2) | ||||||||||||||
Crossroads
Correctional Center, Montana |
96 | 664 | Q1 2007 | 5.5 | State of Montana and USMS(2) | |||||||||||||||
North Fork Correctional Facility,
Oklahoma |
960 | 2,400 | Q4 2007 | 55.0 | Various States | |||||||||||||||
Tallahatchie
County Correctional Facility, Mississippi |
360 | 1,464 | Q4 2007 | 20.5 | Federal and /or Various States | |||||||||||||||
Eden Detention Center,
Texas |
129 | 1,354 | Q1 2008 | 20.0 | (3) | BOP | ||||||||||||||
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) | |||||||||||||||
Total Expansion Beds |
3,964 | $ | 207.5 | |||||||||||||||||
New Facilities Under Development |
||||||||||||||||||||
Saguaro Correctional Facility,
Arizona |
1,896 | 1,896 | Mid-2007 | $ | 103.0 | State of Hawaii | ||||||||||||||
GRAND TOTAL |
5,860 | $ | 310.5 | |||||||||||||||||
(1)
The expansion costs of the Gadsden Correctional Institution and the Bay Correctional Facility will be funded by the state of Florida. Our management contracts for the
Gadsden and Bay facilities expire on June 30, 2007. The state of Florida issued an Invitiation to Negotiate (“ITN”) for the management of the Gadsden and Bay facilties. The Company
will respond to the ITN; however, we can provide no assurance that we will be successful in securing a contract for the continued management of either of these facilities.
(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, we are actively pursuing a number of additional
sites for new prison development. We continue to believe it is feasible to begin development of an
additional 4,000 to 6,000 new prison beds during the course of the year.
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CCA 2006 Fourth Quarter and
Full Year Financial Results
Page 7
Full Year Financial Results
Page 7
Commenting on the Company’s financial results, President and CEO John Ferguson stated, “The
financial results for the fourth quarter cap a very strong year for our company. Our revenues and
operating margins improved significantly as a result of continued growth in inmate populations,
both at the federal and state levels.
“For several years we have anticipated that increasing demand for prison beds, combined with limited
new prison development would result in the absorption of our inventory of available beds. This in
turn would necessitate an acceleration of our development efforts. This has indeed been the case,
as we entered into a number of new agreements during 2006 which should substantially utilize our
remaining capacity.”
Ferguson continued, “Looking forward we are excited at our prospects. Our research indicates that
in the states with which we currently do business, less than 4,000 new prison beds are slated to
come on line over the next three years. These same states are expecting inmate growth during this
period to substantially exceed this new capacity. In response to this environment, we expect to add
over 5,800 prison beds to our capacity over the next 15 months. In addition, we have a goal to
begin the development of an additional 4,000 to 6,000 new beds in 2007, which would result in
additional capacity becoming available during 2008 and 2009. We believe our strong financial
position gives us the capacity to deliver these beds with minimal financial risk.”
Guidance
The Company expects diluted earnings per share (“EPS”) for the first quarter of 2007 to be in the
range of $0.43 to $0.47, and full year EPS to be in the range of $1.95 to $2.05. The results
exclude the impact on EPS, if any, of the adoption of Financial Accounting Standards Board
Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes.” The impact, if any, will be
reflected as a cumulative effect of accounting change during the first quarter of 2007.
During 2007, CCA expects to invest approximately $228.0 million in capital expenditures, consisting
of approximately $175.5 million in prison construction and expansions that have been previously
announced, $36.0 million in maintenance capital expenditures and $16.5 million in information
technology.
Supplemental Financial Information and Investor Presentations
CCA has made available on its website supplemental financial information and other data for the
fourth quarter of 2006. 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.
The Company’s management may meet with investors from time to time during the first quarter of
2007. Written materials used in the investor presentations will also be available on our website
beginning on or about February 12, 2007. Interested parties may access this information through
our website at www.correctionscorp.com under “Webcasts” of the Investor section.
Webcast and Replay Information
CCA will host a webcast conference call at 2:00 p.m. Central Time (3:00 p.m. Eastern Time) today to
discuss its 2006 fourth quarter and full-year financial results. To listen to this discussion,
please
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CCA 2006 Fourth Quarter and
Full Year Financial Results
Page 8
Full Year Financial Results
Page 8
access “Webcasts” on the Investor page at www.correctionscorp.com. The conference call will
be archived on the Company’s website following the completion of the call. In addition, a
telephonic replay will begin today at 5:00 p.m. Central Time through 11:59 p.m. Central Time on
February 15, 2007, by dialing 877-519-4471 (International 973-341-3080), pass code 8309496.
About the Company
The Company is the nation’s largest owner and operator of privatized correctional and detention
facilities and one of the largest prison operators in the United States, behind only the federal
government and three states. The Company currently operates 64 facilities, including 40
company-owned facilities, with a total design capacity of approximately 72,000 beds in 19 states
and the District of Columbia. The Company specializes in owning, operating and managing prisons
and other correctional facilities and providing inmate residential and prisoner transportation
services for governmental agencies. In addition to providing the fundamental residential services
relating to inmates, the Company’s facilities offer a variety of rehabilitation and educational
programs, including basic education, religious services, life skills and employment training and
substance abuse treatment. These services are intended to reduce recidivism and to prepare inmates
for their successful re-entry into society upon their release. The Company also provides health
care (including medical, dental and psychiatric services), food services and work and recreational
programs.
Forward-Looking Statements
This press release contains statements as to the Company’s beliefs and expectations of the outcome
of future events that are forward-looking statements as defined within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks
and uncertainties that could cause actual results to differ materially from the statements made.
These include, but are not limited to, the risks and uncertainties associated with: (i)
fluctuations in the Company’s operating results because of, among other things, changes in
occupancy levels, competition, increases in cost of operations, fluctuations in interest rates and
risks of operations; (ii) changes in the privatization of the corrections and detention industry,
the public acceptance of the Company’s services, the timing of the opening of and demand for new
prison facilities and the commencement of new management contracts; (iii) the Company’s 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 the
Company’s 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
the Company with the Securities and Exchange Commission.
The Company takes no responsibility for updating the information contained in this press release
following the date hereof to reflect events or circumstances occurring after the date hereof or the
occurrence of unanticipated events or for any changes or modifications made to this press release.
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CCA 2006 Fourth Quarter and
Full Year Financial Results
Page 9
Full Year Financial Results
Page 9
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, | December 31, | |||||||
| 2006 | 2005 | |||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 29,121 | $ | 64,901 | ||||
Restricted cash |
11,826 | 11,284 | ||||||
Investments |
82,830 | 19,014 | ||||||
Accounts receivable, net of allowance of $2,261 and $2,258, respectively |
238,256 | 176,560 | ||||||
Deferred tax assets |
11,655 | 32,488 | ||||||
Prepaid expenses and other current assets |
17,554 | 15,884 | ||||||
Total current assets |
391,242 | 320,131 | ||||||
Property and equipment, net |
1,805,098 | 1,710,794 | ||||||
Investment in direct financing lease |
15,467 | 16,322 | ||||||
Goodwill |
15,246 | 15,246 | ||||||
Other assets |
23,807 | 23,820 | ||||||
Total assets |
$ | 2,250,860 | $ | 2,086,313 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Accounts payable and accrued expenses |
$ | 160,785 | $ | 141,090 | ||||
Income taxes payable |
2,810 | 1,435 | ||||||
Current portion of long-term debt |
290 | 11,836 | ||||||
Current liabilities of discontinued operations |
497 | 1,774 | ||||||
Total current liabilities |
164,382 | 156,135 | ||||||
Long-term debt, net of current portion |
975,968 | 963,800 | ||||||
Deferred tax liabilities |
23,755 | 12,087 | ||||||
Other liabilities |
37,074 | 37,660 | ||||||
Total liabilities |
1,201,179 | 1,169,682 | ||||||
Commitments and contingencies |
||||||||
Common stock - $0.01 par value; 80,000 shares authorized; 61,042
and 59,541 shares issued and outstanding at December 31, 2006 and
2005, respectively |
610 | 595 | ||||||
Additional paid-in capital |
1,528,219 | 1,505,986 | ||||||
Deferred compensation |
— | (5,563 | ) | |||||
Retained deficit |
(479,148 | ) | (584,387 | ) | ||||
Total stockholders’ equity |
1,049,681 | 916,631 | ||||||
Total liabilities and stockholders’ equity |
$ | 2,250,860 | $ | 2,086,313 | ||||
CCA 2006 Fourth Quarter and
Full Year Financial Results
Page 10
Full Year Financial Results
Page 10
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 Quarter | For the Year | |||||||||||||||
| Ended December 31, | Ended December 31, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
REVENUE: |
||||||||||||||||
Management and other |
$ | 348,526 | $ | 316,161 | $ | 1,326,881 | $ | 1,188,649 | ||||||||
Rental |
1,061 | 1,036 | 4,207 | 3,991 | ||||||||||||
| 349,587 | 317,197 | 1,331,088 | 1,192,640 | |||||||||||||
EXPENSES: |
||||||||||||||||
Operating |
249,924 | 234,440 | 973,893 | 898,793 | ||||||||||||
General and administrative |
16,876 | 16,576 | 63,593 | 57,053 | ||||||||||||
Depreciation and amortization |
18,106 | 15,750 | 67,673 | 59,882 | ||||||||||||
| 284,906 | 266,766 | 1,105,159 | 1,015,728 | |||||||||||||
OPERATING INCOME |
64,681 | 50,431 | 225,929 | 176,912 | ||||||||||||
OTHER (INCOME) EXPENSES: |
||||||||||||||||
Interest expense, net |
14,280 | 15,683 | 58,783 | 63,928 | ||||||||||||
Expenses associated with debt refinancing and
recapitalization transactions |
— | — | 982 | 35,269 | ||||||||||||
Other (income) expenses |
189 | 23 | (224 | ) | 263 | |||||||||||
| 14,469 | 15,706 | 59,541 | 99,460 | |||||||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES |
50,212 | 34,725 | 166,388 | 77,452 | ||||||||||||
Income tax expense |
(18,060 | ) | (11,071 | ) | (61,149 | ) | (26,888 | ) | ||||||||
INCOME FROM CONTINUING OPERATIONS |
32,152 | 23,654 | 105,239 | 50,564 | ||||||||||||
Loss from discontinued operations, net of taxes |
— | (249 | ) | — | (442 | ) | ||||||||||
NET INCOME |
$ | 32,152 | $ | 23,405 | $ | 105,239 | $ | 50,122 | ||||||||
BASIC EARNINGS (LOSS) PER SHARE: |
||||||||||||||||
Income from continuing operations |
$ | 0.53 | $ | 0.40 | $ | 1.76 | $ | 0.88 | ||||||||
Loss from discontinued operations, net of taxes |
— | — | — | (0.01 | ) | |||||||||||
Net income |
$ | 0.53 | $ | 0.40 | $ | 1.76 | $ | 0.87 | ||||||||
DILUTED EARNINGS (LOSS) PER SHARE: |
||||||||||||||||
Income from continuing operations |
$ | 0.52 | $ | 0.39 | $ | 1.71 | $ | 0.84 | ||||||||
Loss from discontinued operations, net of taxes |
— | — | — | (0.01 | ) | |||||||||||
Net income |
$ | 0.52 | $ | 0.39 | $ | 1.71 | $ | 0.83 | ||||||||
-more-
CCA 2006 Fourth Quarter and
Full Year Financial Results
Page 11
Full Year Financial Results
Page 11
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 Quarter | For the Year | |||||||||||||||
| Ended December 31, | Ended December 31, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
Pre-tax income |
$ | 50,212 | $ | 34,476 | $ | 166,388 | $ | 77,010 | ||||||||
Expenses associated with debt refinancing and
recapitalization transactions |
— | — | 982 | 35,269 | ||||||||||||
Income taxes paid |
(6,900 | ) | (140 | ) | (13,690 | ) | (15,776 | ) | ||||||||
Depreciation and amortization |
18,106 | 15,750 | 67,673 | 59,882 | ||||||||||||
Depreciation and amortization for discontinued operations |
— | — | — | 186 | ||||||||||||
Income tax benefit for discontinued operations |
— | (116 | ) | — | (217 | ) | ||||||||||
Stock-based compensation reflected in G&A expenses |
1,136 | 1,499 | 4,840 | 2,673 | ||||||||||||
Amortization of debt costs and other non-cash interest |
1,037 | 1,307 | 4,433 | 5,341 | ||||||||||||
Maintenance and technology capital expenditures |
(14,523 | ) | (11,326 | ) | (50,001 | ) | (36,205 | ) | ||||||||
Adjusted Free Cash Flow |
$ | 49,068 | $ | 41,450 | $ | 180,625 | $ | 128,163 | ||||||||
CALCULATION OF ADJUSTED EBITDA
| For the Quarter | For the Year | |||||||||||||||
| Ended December 31, | Ended December 31, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
Net income |
$ | 32,152 | $ | 23,405 | $ | 105,239 | $ | 50,122 | ||||||||
Interest expense, net |
14,280 | 15,683 | 58,783 | 63,928 | ||||||||||||
Depreciation and amortization |
18,106 | 15,750 | 67,673 | 59,882 | ||||||||||||
Income tax expense |
18,060 | 11,071 | 61,149 | 26,888 | ||||||||||||
Loss from discontinued operations, net of taxes |
— | 249 | — | 442 | ||||||||||||
EBITDA |
$ | 82,598 | $ | 66,158 | $ | 292,844 | $ | 201,262 | ||||||||
Stock option compensation expense associated
with accelerated vesting |
— | 989 | — | 989 | ||||||||||||
Expenses associated with debt refinancing and
recapitalization transactions |
— | — | 982 | 35,269 | ||||||||||||
Adjusted EBITDA |
$ | 82,598 | $ | 67,147 | $ | 293,826 | $ | 237,520 | ||||||||
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CCA 2006 Fourth Quarter and
Full Year Financial Results
Page 12
Full Year Financial Results
Page 12
CALCULATION OF ADJUSTED DILUTED EARNINGS PER SHARE
| For the Year Ended | ||||||||||||
| For the Quarter Ended | December 31, | |||||||||||
| December 31, 2005 | 2006 | 2005 | ||||||||||
Net income |
$ | 23,405 | $ | 105,239 | $ | 50,122 | ||||||
Special items: |
||||||||||||
Expenses associated with debt refinancing and
recapitalization transactions |
— | 982 | 35,269 | |||||||||
Stock option compensation expense associated with
accelerated vesting |
989 | — | 989 | |||||||||
Income tax benefit for special items |
(315 | ) | (361 | ) | (12,587 | ) | ||||||
Adjusted net income available to common stockholders |
24,079 | 105,860 | 73,793 | |||||||||
Interest expense applicable to convertible notes, net of taxes |
— | — | 129 | |||||||||
Diluted adjusted net income available to common stockholders |
$ | 24,079 | $ | 105,860 | $ | 73,922 | ||||||
Weighted average common shares outstanding — basic |
58,965 | 59,857 | 57,713 | |||||||||
Effect of dilutive securities: |
||||||||||||
Stock options and warrants |
1,611 | 1,509 | 1,724 | |||||||||
Convertible notes |
— | — | 816 | |||||||||
Restricted stock-based compensation |
222 | 163 | 170 | |||||||||
Weighted average shares and assumed conversions — diluted |
60,798 | 61,529 | 60,423 | |||||||||
Adjusted Diluted Earnings Per Share |
$ | 0.40 | $ | 1.72 | $ | 1.22 | ||||||
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.
###