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 3, 2007
Corrections Corporation of America
(Exact name of registrant as specified in its charter)
| Maryland | 001-16109 | 62-1763875 | ||
|
|
||||
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer | ||
| Identification No.) |
10 Burton Hills Boulevard, Nashville, Tennessee 37215
(Address of principal executive offices) (Zip Code)
(615) 263-3000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02. Results of Operations and Financial Condition | ||||||||
| Item 9.01. Financial Statements and Exhibits | ||||||||
| SIGNATURE | ||||||||
| EXHIBIT INDEX | ||||||||
| Ex-99.1 Press Release | ||||||||
Table of Contents
Item 2.02. Results of Operations and Financial Condition
On May 3, 2007, Corrections Corporation of America, a Maryland corporation (the “Company”), issued a press release announcing its 2007 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 3, 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 May 3, 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: May 3, 2007 | CORRECTIONS CORPORATION OF AMERICA | |
|
By: /s/ Todd J. Mullenger Todd J. Mullenger Executive Vice President and Chief Financial Officer |
Table of Contents
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press Release dated May 3, 2007 |
Exhibit 99.1
Contact: Karin Demler: (615) 263-3005
Corrections Corporation of America
Announces 2007 First Quarter Financial Results
Announces 2007 First Quarter Financial Results
CCA Also Announces New Contract Award from
Arizona Department of Corrections
Arizona Department of Corrections
NASHVILLE, Tenn. - May 3, 2007 - Corrections Corporation of America (NYSE: CXW)
(the “Company” or “CCA”), the nation’s largest provider of corrections management services to
government agencies, announced today its financial results for the three-month period ended March
31, 2007.
Financial Review
First Quarter of 2007 Compared with First Quarter 2006
For the three months ended March 31, 2007, CCA reported net income of $32.6 million, or $0.52 per
diluted share, compared with $21.3 million, or $0.35 per diluted share, for the same period in the
prior year. Financial results for the first quarter of 2006 included a charge of $0.01 per diluted
share for refinancing transactions completed in January 2006. Excluding the refinancing charge in
the prior year quarter, earnings per diluted share increased 44.4% representing the seventh
consecutive quarter of year-over-year double digit increases in diluted earnings per share.
Operating income for the first quarter of 2007 was $66.2 million, compared with $49.9 million for
the same period in 2006. EBITDA adjusted for the refinancing charge in 2006 (“Adjusted EBITDA”)
increased 28.8% to $84.5 million during the first quarter of 2007 from $65.6 million during the
same period in 2006. Results were substantially driven by strong demand for prison beds from both
federal and state customers. Management revenue from federal customers increased $18.7 million, or
15.1%, from $123.5 million during the first quarter of 2006 to $142.2 million during the first
quarter of 2007. Federal revenues were favorably impacted by new contracts from the U.S.
Immigration and Customs Enforcement (“ICE”) at our T. Don Hutto Residential Center, our Stewart
Detention Center and our Eloy Detention Center. Management revenue from state customers increased
$14.8 million, or 9.6%, from $154.0 million during the first quarter of 2006 to $168.7 million
during the first quarter of 2007. During the first quarter of 2007, state revenues were positively
impacted by an increase in inmate populations from Colorado, Hawaii, Wyoming, California and
Minnesota. As a result of the increases in federal and state inmate populations, portfolio
occupancy increased from 93.7% during the first quarter of 2006 to 98.0% during the first quarter
of 2007.
Adjusted Free Cash Flow, which does not include special items, increased 43.2% to $61.5 million
during the three months ended March 31, 2007 from $43.0 million generated during the same period in
2006, as a result of the increase in operating income. Adjusted Free Cash Flow for the first
quarter of 2007 and 2006 included minimal income tax payments. However, income tax payments for
the remainder of 2007 are expected to total between $50.0 million and $60.0 million.
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
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10 Burton Hills Boulevard, Nashville, Tennessee 37215, Phone: 615-263-3000
CCA 2007 First Quarter Financial Results
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following the financial statements herein for further discussion and reconciliations of these
measures to GAAP financial measures.
Operations Highlights
For the quarters ended March 31, 2007 and 2006, key operating statistics for the continuing
operations of CCA were as follows:
| Quarter Ended March 31, | ||||||||||||
| Metric | 2007 | 2006 | % Change | |||||||||
Average Available Beds |
72,643 | 70,589 | 2.9 | % | ||||||||
Average Compensated Occupancy |
98.0 | % | 93.7 | % | 4.6 | % | ||||||
Total Compensated Man-Days |
6,408,581 | 5,954,920 | 7.6 | % | ||||||||
Revenue per Compensated Man-Day |
$ | 54.01 | $ | 52.07 | 3.7 | % | ||||||
Operating Expense per Compensated
Man-Day: |
||||||||||||
Fixed |
28.55 | 28.82 | -0.9 | % | ||||||||
Variable |
9.49 | 9.74 | -2.6 | % | ||||||||
Total |
38.04 | 38.56 | -1.3 | % | ||||||||
Operating Margin per Compensated Man-Day |
$ | 15.97 | $ | 13.51 | 18.2 | % | ||||||
Operating Margin |
29.6 | % | 25.9 | % | 14.3 | % | ||||||
Total revenue for the first quarter of 2007 increased 11.5% to $350.9 million from $314.6
million during the same period in 2006, as total compensated man-days increased 7.6% to 6.4 million
from 6.0 million, and as revenue per compensated man-day increased to $54.01 from $52.07, an
increase of 3.7%. The increase in revenue per compensated man-day is substantially due to per
diems obtained on new management contracts. Average compensated occupancy for the three months
ended March 31, 2007 increased to 98.0% from 93.7% for the same period in 2006, also as a result of
the commencement of new management contracts combined with an increase in the demand for prison
beds from a number of existing customers.
Fixed expenses decreased $0.27 per compensated man-day to $28.55 for the three months ended March
31, 2007 compared with $28.82 per compensated man-day during the same period in 2006. The decrease
in fixed expenses was primarily due to leveraging fixed costs over a higher inmate population.
Variable expenses also decreased to $9.49 per compensated man-day during the first quarter of 2007
from $9.74 per compensated man-day during the first quarter of 2006, a decrease of $0.25 per
compensated man-day, or 2.6%. The decrease in variable expenses per compensated man-day was
primarily attributable to a decrease in inmate medical expenses resulting from the increase in
inmate populations under management contracts that contain provisions limiting our medical risk.
Business Development Update
On May 2, 2007, we were awarded a contract to house up to 2,160 inmates at our Diamondback
Correctional Facility, in Watonga, Oklahoma by the Arizona Department of Corrections. The
contract provides for an initial one-year term, and includes four additional one-year renewal
periods. The contract
also provides for a guaranteed 95% occupancy that becomes effective upon reaching 95% capacity
following an agreed ramp-up period. We currently house approximately 1,400 Arizona inmates and
approximately 650 Hawaiian inmates at this facility. We currently expect to relocate the Hawaiian
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CCA 2007 First Quarter Financial Results
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inmates to our new 1,896-bed Saguaro Correctional Facility, in Eloy, Arizona, upon its completion
in June 2007.
In April 2007, through a competitive procurement process we were selected for the continued
management of the 1,030-bed Marion County Jail in Indianapolis, Indiana. CCA has managed the
Marion County Jail since 1997. The facility currently holds approximately 1,000 inmates from
Marion County, Indiana. The contract, which is effective May 1, 2007 through December 31, 2017,
provides for a minimum guaranteed monthly average occupancy of 1,025 inmates and may be extended by
mutual agreement for up to 10 years.
On March 29, 2007, as a result of anticipated demand for prison beds, we announced the second
360-bed expansion of our 1,104-bed Tallahatchie County Correctional Facility in Tutwiler,
Mississippi. The two expansions of the Tallahatchie facility aggregate 720 beds which we expect to
complete for an estimated cost of $39.0 million. Also on March 29, 2007, we announced our
intention to expand our 767-bed Leavenworth Detention Center, in Leavenworth Kansas, by 266 beds,
at an estimated cost of $22.5 million. This expansion will also include a renovation of the
existing building infrastructure to accommodate higher detainee populations.
Status of California Contract
On February 20, 2007, the Superior Court of California, County of Sacramento, ruled that the
Governor of California exceeded his authority in issuing an emergency proclamation regarding prison
overcrowding and that the contracts entered into by the California Department of Corrections and
Rehabilitation (“CDCR”) to utilize prison beds at private facilities outside of California to
relieve prison overcrowding were thus unauthorized by the Emergency Services Act and that such
contracts violate the California Constitution. A judgment based on that ruling was entered on
April 2, 2007, including a permanent injunction against performing under the contracts signed
pursuant to the proclamation, which would include contracts between us and the CDCR. The Governor
and other state defendants have appealed that judgment. The Court of Appeal of California, Third
Appellate District has temporarily stayed enforcement of this judgment, which means our contract
with the CDCR remains in effect. We cannot predict the length of time this stay will remain in
place or the ultimate outcome of the appeal.
On April 26, 2007, the California legislature passed the “The Public Safety and Offender
Rehabilitation Services Act of 2007,” which, among other things, expands California’s prison
capacity through new construction and authorizes the transfer of inmates out-of-state through June
2011 without the consent of affected inmates. The Governor of California has indicated that he
will sign this legislation, and announced an intention to transfer up to 8,000 inmates out of
state. This statute may provide the Governor additional authority to enter into contracts for
out-of-state prison beds. Although we believe that the legislative findings within the statute
further strengthen the Governor’s original assertion of emergency authority and support the
constitutionality of that action, we cannot guarantee that this statute will be persuasive to the
Court of Appeal of California. If the Court of Appeal were to lift its stay of the Superior
Court’s judgment, then the injunction would result in the loss of inmates we currently house.
Regardless of the Court of Appeal’s ruling, we cannot guarantee that the state of California will
fully utilize the contracting authority created by this new statute, nor can we guarantee that this
statute will not itself be challenged for violating the California Constitution or on other
grounds.
We currently have a contract with the CDCR which provides the CDCR the ability to place California
inmates in several of our facilities. As of March 31, 2007 we held 356 California inmates.
However, the
number of beds we make available to California is dependent on the demand for our available beds
from existing and potential customers and the capacity available within the time frame desired by
the state of California.
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CCA 2007 First Quarter Financial Results
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Facility Inventory and Development Update
Current Inventory
At April 30, 2007, CCA had available inventory of approximately 2,200 beds, which consists of
approximately 1,900 owned and managed beds and 300 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, we have
undertaken the following expansion and development projects:
| Total Bed | ||||||||||||||||||
| Capacity | Estimated | |||||||||||||||||
| Following | Estimated | Total 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 | |||||||||||||
North Fork Correctional Facility,
Oklahoma |
960 | 2,400 | Q4 2007 | $ | 55.0 | Various States | ||||||||||||
Tallahatchie
County Correctional Facility, Mississippi |
720 | 1,824 | Q4 2007 | 39.0 | Federal and/or Various States | |||||||||||||
Eden Detention Center,
Texas |
129 | 1,354 | Q1 2008 | 20.0 | (2) | BOP | ||||||||||||
Bent County Correctional Facility,
Colorado |
720 | 1,420 | Q2 2008 | 44.0 | Colorado(3) | |||||||||||||
Kit Carson Correctional Center,
Colorado |
720 | 1,488 | Q2 2008 | 44.0 | Colorado(3) | |||||||||||||
Leavenworth Detention Center,
Kansas |
266 | 1,033 | Q2 2008 | 22.5 | USMS(3) | |||||||||||||
Total Expansion Beds |
4,134 | $ | 224.5 | |||||||||||||||
New Facilities Under Development |
||||||||||||||||||
Saguaro Correctional Facility,
Arizona |
1,896 | 1,896 | June 2007 | $ | 103.0 | State of Hawaii | ||||||||||||
GRAND TOTAL |
6,030 | $ | 327.5 | |||||||||||||||
| (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 facilities. The Company has responded 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) | The total estimated cost is for a renovation of the existing facility which will result in 129 additional beds. | |
| (3) | We currently have contracts in place with the stated customers to occupy these facilities; however, the contracts do not provide a guarantee of occupancy. |
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CCA 2007 First Quarter Financial Results
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In addition to the above listed projects, we are actively pursuing expansion opportunities as
well as a number of additional sites for new prison development. Our goal is to begin development
of an additional 3,400 to 5,400 new beds in 2007.
Commenting on the Company’s financial results, President and CEO John Ferguson stated, “We are
pleased with the Company’s first quarter financial results and the continued improvement in our
overall financial performance. Our revenues and operating margins continued to improve as a result
of increased inmate populations both at the federal and state levels.”
“We are pleased to expand our relationship with the Arizona Department of Corrections at our
Diamondback Correctional Facility, and are gratified by their continued confidence in our ability
to satisfy their correctional needs.”
Ferguson continued, “The expansions that we are undertaking and the opening of our new Saguaro
facility will create additional capacity that we can market over the next twelve months. We
believe demand for new prison beds will continue over the foreseeable future, and one of our
primary efforts going forward is adding beds that will allow us to serve this demand and to be a
just-in-time provider to our government partners.”
Guidance
The Company expects diluted earnings per share (“EPS”) for the second quarter of 2007 to be in the
range of $0.48 to $0.52, and full year EPS to be in the range of $1.97 to $2.07.
The guidance above does not incorporate the effect of any incremental inmates we may receive as a
result of the Governor of California’s recent announcement to transfer up to 8,000 inmates out of
state. While we are optimistic that we will benefit from California’s decision, management does
not presently have adequate information to reasonably estimate the impact on 2007 operating
results.
During 2007, CCA expects to invest approximately $275.5 million in capital expenditures, consisting
of approximately $220.5 million in prison construction and expansions that have been previously
announced, $37.0 million in maintenance capital expenditures and $18.0 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
first 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.
The Company’s management may meet with investors from time to time during the second quarter of
2007. Written materials used in the investor presentations will also be available on our website
beginning on or about May 15, 2007. Interested parties may access this information through our
website at www.correctionscorp.com under “Webcasts” of the Investor section.
Webcast and Replay Information
We will host a webcast conference call at 2:00 p.m. Central Time (3:00 p.m. Eastern Time) today to
discuss our 2007 first quarter 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 begin today at 6:00
p.m.
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CCA 2007 First Quarter Financial Results
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Eastern Time through 11:59 p.m. Eastern Time on May 10, 2007, by dialing 888-203-1112, pass
code 6514583.
About the Company
Corrections Corporation of America 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 64 facilities, including
40 company-owned facilities, with a total design capacity of approximately 73,000 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 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 our operating results because of, among other things, changes in occupancy levels,
competition, increases in cost of operations, fluctuations in interest rates and risks of
operations; (ii) changes in the privatization of the corrections and detention industry, the public
acceptance of our services, the timing of the opening of and demand for new prison facilities and
the commencement of new management contracts; (iii) our ability to obtain and maintain correctional
facility management contracts, including as a result of sufficient governmental appropriations and
as a result of inmate disturbances; (iv) increases in costs to construct or expand correctional
facilities that exceed original estimates, or the inability to complete such projects on schedule
as a result of various factors, many of which are beyond our control, such as weather, labor
conditions and material shortages, resulting in increased construction costs; and (v) general
economic and market conditions. Other factors that could cause operating and financial results to
differ are described in the filings made from time to time by the Company with the Securities and
Exchange Commission.
We take 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 First 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)
| March 31, | December 31, | |||||||
| ASSETS | 2007 | 2006 | ||||||
Cash and cash equivalents |
$ | 58,767 | $ | 29,029 | ||||
Investments |
83,922 | 82,830 | ||||||
Accounts receivable, net of allowance of $2,783 and $2,261, respectively |
224,378 | 237,382 | ||||||
Deferred tax assets |
12,288 | 11,655 | ||||||
Prepaid expenses and other current assets |
12,808 | 17,554 | ||||||
Current assets of discontinued operations |
416 | 966 | ||||||
Total current assets |
392,579 | 379,416 | ||||||
Property and equipment, net |
1,830,776 | 1,805,052 | ||||||
Restricted cash |
11,973 | 11,826 | ||||||
Investment in direct financing lease |
15,237 | 15,467 | ||||||
Goodwill |
15,246 | 15,246 | ||||||
Other assets |
23,146 | 23,807 | ||||||
Non-current assets of discontinued operations |
— | 46 | ||||||
Total assets |
$ | 2,288,957 | $ | 2,250,860 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Accounts payable and accrued expenses |
$ | 148,039 | $ | 160,522 | ||||
Income taxes payable |
5,976 | 2,810 | ||||||
Current portion of long-term debt |
290 | 290 | ||||||
Current liabilities of discontinued operations |
367 | 760 | ||||||
Total current liabilities |
154,672 | 164,382 | ||||||
Long-term debt, net of current portion |
975,895 | 975,968 | ||||||
Deferred tax liabilities |
29,451 | 23,755 | ||||||
Other liabilities |
41,535 | 37,074 | ||||||
Total liabilities |
1,201,553 | 1,201,179 | ||||||
Commitments and contingencies |
||||||||
Common stock - $0.01 par value; 80,000 shares authorized; 61,371
and 61,042 shares issued and outstanding at March 31, 2007 and
December 31, 2006, respectively |
614 | 610 | ||||||
Additional paid-in capital |
1,535,599 | 1,528,219 | ||||||
Retained deficit |
(448,809 | ) | (479,148 | ) | ||||
Total stockholders’ equity |
1,087,404 | 1,049,681 | ||||||
Total liabilities and stockholders’ equity |
$ | 2,288,957 | $ | 2,250,860 | ||||
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CCA 2007 First 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 Quarter | ||||||||
| Ended March 31, | ||||||||
| 2007 | 2006 | |||||||
REVENUE: |
||||||||
Management and other |
$ | 349,838 | $ | 313,592 | ||||
Rental |
1,077 | 1,036 | ||||||
| 350,915 | 314,628 | |||||||
EXPENSES: |
||||||||
Operating |
249,130 | 234,650 | ||||||
General and administrative |
17,318 | 14,377 | ||||||
Depreciation and amortization |
18,270 | 15,678 | ||||||
| 284,718 | 264,705 | |||||||
OPERATING INCOME |
66,197 | 49,923 | ||||||
OTHER (INCOME) EXPENSES: |
||||||||
Interest expense, net |
13,934 | 15,126 | ||||||
Expenses associated with debt refinancing and recapitalization transactions |
— | 982 | ||||||
Other income |
(11 | ) | (12 | ) | ||||
| 13,923 | 16,096 | |||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES |
52,274 | 33,827 | ||||||
Income tax expense |
(19,704 | ) | (12,483 | ) | ||||
INCOME FROM CONTINUING OPERATIONS |
32,570 | 21,344 | ||||||
Loss from discontinued operations, net of taxes |
— | (15 | ) | |||||
NET INCOME |
$ | 32,570 | $ | 21,329 | ||||
BASIC EARNINGS PER SHARE: |
||||||||
Income from continuing operations |
$ | 0.54 | $ | 0.36 | ||||
Loss from discontinued operations, net of taxes |
— | — | ||||||
Net income |
$ | 0.54 | $ | 0.36 | ||||
DILUTED EARNINGS PER SHARE: |
||||||||
Income from continuing operations |
$ | 0.52 | $ | 0.35 | ||||
Loss from discontinued operations, net of taxes |
— | — | ||||||
Net income |
$ | 0.52 | $ | 0.35 | ||||
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CCA 2007 First 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 FREE CASH FLOW
| For the Quarter Ended | ||||||||
| March 31, | ||||||||
| 2007 | 2006 | |||||||
Pre-tax income |
$ | 52,274 | $ | 33,812 | ||||
Expenses associated with debt refinancing and recapitalization transactions |
— | 982 | ||||||
Income taxes paid |
(798 | ) | — | |||||
Depreciation and amortization |
18,270 | 15,678 | ||||||
Depreciation and amortization for discontinued operations |
— | 25 | ||||||
Income tax benefit for discontinued operations |
— | (8 | ) | |||||
Stock-based compensation reflected in G&A expenses |
1,230 | 778 | ||||||
Amortization of debt costs and other non-cash interest |
1,015 | 1,235 | ||||||
Maintenance and technology capital expenditures |
(10,456 | ) | (9,519 | ) | ||||
Adjusted Free Cash Flow |
$ | 61,535 | $ | 42,983 | ||||
CALCULATION OF ADJUSTED EBITDA
| For the Quarter Ended | ||||||||
| March 31, | ||||||||
| 2007 | 2006 | |||||||
Net income |
$ | 32,570 | $ | 21,329 | ||||
Interest expense, net |
13,934 | 15,126 | ||||||
Depreciation and amortization |
18,270 | 15,678 | ||||||
Income tax expense |
19,704 | 12,483 | ||||||
Loss from discontinued operations, net of taxes |
— | 15 | ||||||
EBITDA |
$ | 84,478 | $ | 64,631 | ||||
Expenses associated with debt refinancing and recapitalization transactions |
— | 982 | ||||||
Adjusted EBITDA |
$ | 84,478 | $ | 65,613 | ||||
-more-
CCA 2007 First Quarter Financial Results
Page 10
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CALCULATION OF ADJUSTED DILUTED EARNINGS PER SHARE
| For the Quarter | ||||
| Ended March 31, 2006 | ||||
Net income |
$ | 21,329 | ||
Special items: |
||||
Expenses associated with debt refinancing and
recapitalization transactions |
982 | |||
Income tax benefit for special items |
(362 | ) | ||
Adjusted net income |
$ | 21,949 | ||
Weighted average common shares outstanding — basic |
59,300 | |||
Effect of dilutive securities: |
||||
Stock options and warrants |
1,544 | |||
Restricted stock-based compensation |
222 | |||
Weighted average shares and assumed conversions — diluted |
61,066 | |||
Adjusted Diluted Earnings Per Share |
$ | 0.36 | ||
NOTE TO SUPPLEMENTAL FINANCIAL INFORMATION
Net income excluding special charges (Adjusted Diluted Earnings Per Share), EBITDA, Adjusted
EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures. The Company believes that
these measures are important operating measures that supplement discussion and analysis of the
Company’s results of operations and are used to review and assess operating performance of the
Company and its correctional facilities and their management teams. The Company believes that it
is useful to provide investors, lenders and security analysts disclosures of its results of
operations on the same basis as that used by management.
Management and investors review both the Company’s overall performance (including GAAP EPS, net
income, Adjusted Diluted Earnings Per Share and Adjusted Free Cash Flow) and the operating
performance of the Company’s correctional facilities (EBITDA and Adjusted EBITDA). EBITDA and
Adjusted EBITDA are useful as supplemental measures of the performance of the Company’s
correctional facilities because they do not take into account depreciation and amortization, tax
provisions, or with respect to Adjusted EBITDA, the impact of the Company’s financing strategies.
Because the historical cost accounting convention used for real estate assets requires depreciation
(except on land), this accounting presentation assumes that the value of real estate assets
diminishes at a level rate over time. Because of the unique structure, design and use of the
Company’s correctional facilities, management believes that assessing performance of the Company’s
correctional facilities without the impact of depreciation or amortization is useful. The
calculation of Adjusted Free Cash Flow substitutes capital expenditures incurred to maintain the
functionality and condition of the Company’s correctional facilities in lieu of a provision for
depreciation; Adjusted Free Cash Flow also excludes certain other non-cash expenses that do not
affect the Company’s ability to service debt.
The Company may make adjustments to GAAP net income, Adjusted EBITDA and Adjusted Free Cash Flow
from time to time for certain other income and expenses that it considers non-recurring, infrequent
or unusual, such as the special charges in the preceding calculation of earnings per diluted share
excluding special charges (Adjusted Diluted Earnings Per Share), even though such items may require
cash settlement, because such items do not reflect a necessary component of the ongoing operations
of the Company. Other companies may calculate Adjusted Diluted Earnings Per Share, EBITDA,
Adjusted EBITDA and Adjusted Free Cash Flow differently than the Company does, or adjust for other
items, and therefore comparability may be limited. EPS excluding special charges (Adjusted Diluted
Earnings Per Share), EBITDA, Adjusted EBITDA and Adjusted Free Cash Flow are not measures of
performance under GAAP, and should not be considered as an alternative to cash flows from operating
activities, a measure of liquidity or an alternative to net income as indicators of the Company’s
operating performance or any other measure of performance derived in accordance with GAAP. This
data should be read in conjunction with the Company’s consolidated financial statements and related
notes included in its filings with the Securities and Exchange Commission.
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