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): May 6, 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 | ||||||||
Table of Contents
Item 2.02. Results of Operations and Financial Condition
On May 6, 2008, Corrections Corporation of America, a Maryland corporation (the “Company”), issued a press release announcing its 2008 first 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 May 6, 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 May 6, 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: May 6, 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 May 6, 2008 |
Exhibit 99.1
Corrections Corporation
of America Announces
First Quarter 2008 Financial Results
And Additional construction to Increase Design Capacity of
Adams County Correctional Center
First Quarter 2008 Financial Results
And Additional construction to Increase Design Capacity of
Adams County Correctional Center
NASHVILLE, Tenn. — May 6, 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 first quarter ended March 31, 2008.
Financial Review
First Quarter of 2008 Compared with First Quarter of 2007
| n | Net income increased to $35.0 million from $32.6 million | ||
| n | Net income per diluted share increased to $0.28 from $0.26 | ||
| n | EBITDA increased to $91.4 million from $84.1 million | ||
| n | Adjusted Free Cash Flow increased to $72.7 million from $61.5 million | ||
| n | 849 expansion beds placed into service during the first quarter of 2008 |
Financial results for the first
quarter of 2008 were positively impacted by an increase in average
daily compensated inmate populations from both federal and state customers. Management revenue
from federal customers increased 6.9% to $152.0 million during the first quarter of 2008 from
$142.2 million during the first quarter of 2007. The increase in federal revenue from the first
quarter of 2007 resulted from an increase in utilization at our Stewart Detention Center under a
contract with the Immigration and Customs Enforcement (“ICE”) that became effective in October
2006, combined with the utilization by the U.S. Marshals Service (“USMS”) of the 360-bed expansion
at the Citrus County Detention Facility completed during the first quarter of 2007 as well as an
increase in populations from all three federal agencies at several other facilities.
Management revenue from state customers
increased 16.4% to $196.4 million during the first quarter
of 2008 from $168.7 million for the same period in 2007. The increase in state revenue from the
prior year quarter primarily resulted from contract awards resulting in additional inmates from the
state of California, which now utilizes beds in five of our facilities, as well as the state of
Arizona for which we house inmates at our Diamondback Correctional Facility. Additionally, our
inmate populations from the state of Florida increased as a result of the expansions at Gadsden
Correctional Institution and Bay Correctional Facility, both of which were completed during the
third quarter of 2007. These increases were partially offset by a reduction in revenue resulting
from lower populations at our D.C. Correctional Treatment Facility.
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CCA First Quarter 2008 Financial Results
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Also contributing to the improvement in federal and state revenue were increases in per diems
obtained on several management contracts.
Our average daily compensated population increased 6.1% to 75,544 during the first quarter of 2008
from 71,206 during the first quarter of 2007. However, total portfolio occupancy decreased to
97.0% during the first quarter of 2008 from 98.0% during the first quarter of 2007 as a result of
placing nearly 5,000 new beds into service since the first quarter of 2007.
Adjusted Free Cash Flow increased to $72.7 million during the first quarter of 2008 from $61.5
million generated during the same period in 2007. The increase in Adjusted Free Cash Flow was
primarily attributable to an improvement in operating performance driven by new management
contracts and a decrease in maintenance and technology capital expenditures.
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.
Commenting on the financial results, President and CEO John Ferguson stated, “We delivered solid
financial performance during the first quarter, and we are optimistic about our prospects in future
quarters as we deliver new bed capacity. We continue to effectively execute our development
program and expect to bring on-line approximately 6,900 additional beds during the remainder of
2008, preparing a foundation for future growth.”
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.”
Operations Highlights
For the quarters ended March 31, 2008 and 2007, key operating statistics for the continuing
operations of the Company were as follows:
| Quarter Ended March 31, | ||||||||||||
| Metric | 2008 | 2007 | % Change | |||||||||
Average Available Beds |
77,899 | 72,643 | 7.2 | % | ||||||||
Average Compensated Occupancy |
97.0 | % | 98.0 | % | -1.0 | % | ||||||
Total Compensated Man-Days |
6,874,470 | 6,408,581 | 7.3 | % | ||||||||
Average Daily Compensated Population |
75,544 | 71,206 | 6.1 | % | ||||||||
Revenue per Compensated Man-Day |
$ | 55.98 | $ | 54.01 | 3.6 | % | ||||||
Operating Expense per Compensated Man-Day: |
||||||||||||
Fixed |
29.70 | 28.55 | 4.0 | % | ||||||||
Variable |
9.88 | 9.49 | 4.1 | % | ||||||||
Total |
39.58 | 38.04 | 4.0 | % | ||||||||
Operating Margin per Compensated Man-Day |
$ | 16.40 | $ | 15.97 | 2.7 | % | ||||||
Operating Margin |
29.3 | % | 29.6 | % | -1.0 | % | ||||||
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CCA First Quarter 2008 Financial Results
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Total revenue for the first quarter of 2008 increased 10.8% to $388.4 million from $350.5 million
during the same period in 2007, as total compensated man-days increased to 6.9 million from 6.4
million, and as revenue per compensated man-day increased to $55.98 from $54.01. The increase in
revenue from the prior year period was predominately due to higher inmate populations from the
state of California at our Florence and Tallahatchie facilities, the state of Arizona at our
Diamondback facility as well as from the USMS at the Citrus facility and from ICE at our Stewart
facility.
Total operating expenses per compensated man-day increased 4.0% to $39.58 during the first quarter
of 2008 compared with $38.04 during the same period in 2007. In addition to general inflationary
increases, our operating expenses included incremental costs associated with ramping-up inmate
populations at a number of our facilities, primarily those facilities where expansion projects have
recently been completed or where expansions will be completed in the near term.
Business Development Update
Today, CCA is announcing its intent to increase the total capacity of its Adams County Correctional
Center, in Adams County, Mississippi which is currently under construction, by an additional
564-beds. The incremental cost of construction is estimated to be $30.0 million and is anticipated
to be completed during the first quarter of 2009. Upon completion of the additional beds, the
Adams County facility will have a total design capacity of 2,232 beds at a total estimated cost of
$135.0 million.
Although we currently do not have a management contract for the Adams County facility, CCA decided
to move forward with increasing the design capacity based on anticipated demand from federal and
state agencies.
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CCA First Quarter 2008 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:
| Estimated | ||||||||||||||||||||
| Facilities Under Expansion or | Additional | Total Bed Capacity | Estimated | Total Cost | Potential | |||||||||||||||
| Development | Beds | Following Expansion | Completion | (in millions) | Customer(s) | |||||||||||||||
Bent County Correctional Facility,
Colorado |
720 | 1,420 | Q2 2008 | $ | 45.0 | Colorado (1) | ||||||||||||||
Leavenworth Detention Center,
Kansas |
266 | 1,033 | Q2 2008 | 22.0 | USMS (1) | |||||||||||||||
Tallahatchie County
Correctional Facility, |
720 | 2,672 | Q2 2008 | 53.5 | ||||||||||||||||
Mississippi |
128 | Q3 2008 | California (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 |
1,668 | 2,232 | Q4 2008 | 135.0 | Federal or | |||||||||||||||
Center, Mississippi |
564 | Q1 2009 | Various States | |||||||||||||||||
La Palma Correctional Center, |
3,060 | 3,060 | Q3 2008 - | 205.0 | California (1) | |||||||||||||||
Arizona |
Q2 2009 | |||||||||||||||||||
Trousdale Correctional Center, Tennessee |
2,040 | 2,040 | Q4 2009 | 143.0 | Various States and Federal | |||||||||||||||
Total |
10,486 | $ | 693.5 | |||||||||||||||||
| (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. |
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.
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CCA First Quarter 2008 Financial Results
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Expansions or Developments Completed During 2007 and During First Quarter of 2008
| Additional | ||||||||||||
| Expansions or New Facilities Completed | Beds | Completed | Customer(s) | |||||||||
2007 |
||||||||||||
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 2007 Additional Beds Completed |
4,651 | |||||||||||
2008 |
||||||||||||
Eden Detention Center, Texas |
129 | Q1 2008 | BOP | |||||||||
Kit Carson Correctional Center, Colorado |
720 | Q1 2008 | State of Colorado | |||||||||
Total 2008 Additional Beds Completed |
849 | |||||||||||
Total |
5,500 | |||||||||||
Guidance
We expect diluted earnings per share (“EPS”) for the second quarter of 2008 to be in the range of
$0.28 to $0.30, and full year 2008 EPS to be in the range of $1.21 to $1.28.
During 2008, we expect to invest approximately $495.4 million in capital expenditures, consisting
of approximately $450.0 million in prison construction and expansions that have been previously
announced, $31.9 million in maintenance capital expenditures and $13.5 million in information
technology. We also currently expect to pay approximately $50.0 million to $55.0 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
first quarter of 2008. 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 second quarter of 2008. Written
materials used in the investor presentations will also be available on our website beginning on or
about May 13, 2008. Interested parties may access this information through our website at
www.correctionscorp.com under “Webcasts” of the Investor section.
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CCA First Quarter 2008 Financial Results
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Webcast and Replay Information
We will host a webcast conference call at 11:00 a.m. eastern time (10:00 a.m. central time) today,
to discuss our first quarter 2008 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 2:00 p.m. eastern time through 11:59 p.m. eastern time on May 13, 2008, by
dialing 888-203-1112, pass code 7611394.
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 78,500 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 First Quarter 2008 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)
| March 31, | December 31, | |||||||
| ASSETS | 2008 | 2007 | ||||||
Cash and cash equivalents |
$ | 50,470 | $ | 57,968 | ||||
Accounts receivable, net of allowance of $3,998 and
$3,914, respectively |
231,547 | 241,722 | ||||||
Deferred tax assets |
14,916 | 12,250 | ||||||
Prepaid expenses and other current assets |
13,584 | 21,142 | ||||||
Assets held for sale |
7,578 | 7,581 | ||||||
Total current assets |
318,095 | 340,663 | ||||||
Property and equipment, net |
2,231,354 | 2,086,980 | ||||||
Restricted cash |
6,580 | 6,511 | ||||||
Investment in direct financing lease |
14,243 | 14,503 | ||||||
Goodwill |
13,672 | 13,672 | ||||||
Other assets |
22,781 | 23,411 | ||||||
Total assets |
$ | 2,606,725 | $ | 2,485,740 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Accounts payable and accrued expenses |
$ | 207,320 | $ | 213,240 | ||||
Income taxes payable |
11,450 | 964 | ||||||
Current portion of long-term debt |
290 | 290 | ||||||
Current liabilities of discontinued operations |
151 | 237 | ||||||
Total current liabilities |
219,211 | 214,731 | ||||||
Long-term debt, net of current portion |
1,045,605 | 975,677 | ||||||
Deferred tax liabilities |
39,338 | 34,271 | ||||||
Other liabilities |
39,392 | 39,086 | ||||||
Total liabilities |
1,343,546 | 1,263,765 | ||||||
Commitments and contingencies |
||||||||
Common stock - $0.01 par value; 300,000 shares
authorized; 124,965 and 124,472 shares issued and
outstanding at March 31, 2008 and December 31, 2007,
respectively |
1,250 | 1,245 | ||||||
Additional paid-in capital |
1,574,937 | 1,568,736 | ||||||
Retained deficit |
(313,008 | ) | (348,006 | ) | ||||
Total stockholders’ equity |
1,263,179 | 1,221,975 | ||||||
Total liabilities and stockholders’ equity |
$ | 2,606,725 | $ | 2,485,740 | ||||
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CCA First Quarter 2008 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 | ||||||||
| Ended March 31, | ||||||||
| 2008 | 2007 | |||||||
REVENUE: |
||||||||
Management and other |
$ | 387,567 | $ | 349,838 | ||||
Rental |
793 | 698 | ||||||
| 388,360 | 350,536 | |||||||
EXPENSES: |
||||||||
Operating |
277,294 | 249,130 | ||||||
General and administrative |
19,553 | 17,318 | ||||||
Depreciation and amortization |
21,412 | 18,225 | ||||||
| 318,259 | 284,673 | |||||||
OPERATING INCOME |
70,101 | 65,863 | ||||||
OTHER EXPENSES (INCOME): |
||||||||
Interest expense, net |
13,650 | 13,934 | ||||||
Other (income) expenses |
93 | (11 | ) | |||||
| 13,743 | 13,923 | |||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES |
56,358 | 51,940 | ||||||
Income tax expense |
(21,601 | ) | (19,578 | ) | ||||
INCOME FROM CONTINUING OPERATIONS |
34,757 | 32,362 | ||||||
Income from discontinued operations, net of taxes |
241 | 208 | ||||||
NET INCOME |
$ | 34,998 | $ | 32,570 | ||||
BASIC EARNINGS PER SHARE: |
||||||||
Income from continuing operations |
$ | 0.28 | $ | 0.27 | ||||
Income from discontinued operations, net of taxes |
— | — | ||||||
Net income |
$ | 0.28 | $ | 0.27 | ||||
DILUTED EARNINGS PER SHARE: |
||||||||
Income from continuing operations |
$ | 0.28 | $ | 0.26 | ||||
Income from discontinued operations, net of taxes |
— | — | ||||||
Net income |
$ | 0.28 | $ | 0.26 | ||||
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CCA First Quarter 2008 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 FREE CASH FLOW
| For the Three Months
Ended March 31, |
||||||||
| 2008 | 2007 | |||||||
Income from continuing operations before income taxes |
$ | 56,358 | $ | 51,940 | ||||
Income taxes paid |
(376 | ) | (798 | ) | ||||
Depreciation and amortization |
21,412 | 18,225 | ||||||
Depreciation and amortization for discontinued operations |
— | 45 | ||||||
Income from discontinued operations, net of taxes |
241 | 208 | ||||||
Income tax expense for discontinued operations |
149 | 126 | ||||||
Stock-based compensation reflected in G&A expenses |
2,020 | 1,230 | ||||||
Amortization of debt costs and other non-cash interest |
993 | 1,015 | ||||||
Maintenance and technology capital expenditures |
(8,138 | ) | (10,456 | ) | ||||
Adjusted Free Cash Flow |
$ | 72,659 | $ | 61,535 | ||||
CALCULATION OF EBITDA
| For the Three Months
Ended March 31, |
||||||||
| 2008 | 2007 | |||||||
Net income |
$ | 34,998 | $ | 32,570 | ||||
Interest expense, net |
13,650 | 13,934 | ||||||
Depreciation and amortization |
21,412 | 18,225 | ||||||
Income tax expense |
21,601 | 19,578 | ||||||
Income from discontinued operations, net of taxes |
(241 | ) | (208 | ) | ||||
EBITDA |
$ | 91,420 | $ | 84,099 | ||||
NOTE TO SUPPLEMENTAL FINANCIAL INFORMATION
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). EBITDA is a useful supplemental measure of the performance of the Company’s
correctional facilities because it does not take into account depreciation and amortization and tax
provisions. 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
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CCA First Quarter 2008 Financial Results
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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, EBITDA and Adjusted Free Cash Flow from time
to time for certain other income and expenses that it considers non-recurring, infrequent or
unusual and because such items do not reflect a necessary component of the ongoing operations of
the Company. Other companies may calculate EBITDA and Adjusted Free Cash Flow differently than the
Company does, or adjust for other items, and therefore comparability may be limited. 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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