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): August 12, 2014 (August 6, 2014)
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):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | 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.
On August 6, 2014, Corrections Corporation of America, a Maryland corporation (the “Company”), issued a press release announcing its 2014 second 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 August 6, 2014 and may change thereafter.
Item 9.01. Financial Statements and Exhibits.
(d) The following exhibit is furnished as part of this Current Report:
| Exhibit 99.1 |
– |
Press Release dated August 6, 2014 | ||
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: August 12, 2014 |
CORRECTIONS CORPORATION OF AMERICA | |||||
| By: | /s/ David M. Garfinkle | |||||
|
| ||||||
| David M. Garfinkle Executive Vice President and Chief Financial Officer | ||||||
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Press Release dated August 6, 2014 | |
Exhibit 99.1
| News Release |
|
| Contact: | Investors and Analysts: Karin Demler, CCA at (615) 263-3005 |
| Financial Media: Dave Gutierrez, Dresner Corporate Services at (312) 780-7204 |
CCA ANNOUNCES 2014 SECOND QUARTER FINANCIAL RESULTS
RAISES FULL-YEAR EPS GUIDANCE
NASHVILLE, Tenn. – August 6, 2014 – CCA (NYSE: CXW) (the “Company” or “Corrections Corporation of America”), America’s largest owner of partnership correctional and detention facilities, announced today its financial results for the second quarter of 2014.
Second Quarter 2014 Financial Highlights
| • | Diluted EPS of $0.48 |
| • | Adjusted Diluted EPS of $0.49 |
| • | Normalized FFO Per Diluted Share of $0.68 |
| • | AFFO Per Diluted Share of $0.68 |
Net income generated in the second quarter of 2014 totaled $55.7 million, or $0.48 per diluted share, compared to $20.4 million, or $0.19 per diluted share generated in the second quarter of 2013. Net income after adjusting for special items, increased to $58.0 million, or $0.49 per diluted share during the second quarter of 2014, compared to $57.1 million, or $0.52 per diluted share during the second quarter of 2013. Special items include non-cash impairment charges in both quarters, and debt refinancing and REIT conversion costs in the prior year quarter.
Second quarter 2014 per share amounts, as compared to the second quarter 2013 per share amounts, were negatively impacted by the issuance of 13.9 million shares of common stock in connection with the payment of a special dividend on May 20, 2013. Pro forma Adjusted Diluted EPS, calculated as if the shares were issued at the beginning of 2013, was $0.49 in the second quarter of 2013. Normalized FFO per diluted share was $0.68 in the second quarter of 2014 compared with Pro forma Normalized FFO per share of $0.66 in the second quarter of 2013.
Second quarter 2013 financial results were affected by an income tax benefit of approximately $5.0 million resulting from tax planning strategies implemented during the second quarter of 2013, which was offset by the Company’s decision to provide a Special Incentive Bonus totaling approximately $5.0 million to non-management level staff in lieu of merit increases in 2013.
10 Burton Hills Blvd., Nashville, Tennessee 37215
Second Quarter 2014 Financial Results
Page 2
CCA President and Chief Executive Officer, Damon Hininger, stated, “We are pleased with our second quarter financial results, with adjusted diluted earnings per share coming in $0.02 higher than the high end of the guidance we provided in May.”
Hininger continued, “During the second quarter we were also pleased to have announced that the state of Tennessee and Trousdale County executed an intergovernmental service agreement, the final step in allowing us to move forward on construction of our new Trousdale facility which we expect to be completed late in 2015.”
Operating Results
Total revenue for the second quarter of 2014 totaled $410.7 million compared to $425.0 million in the second quarter of 2013. The decline in revenue was primarily attributable to contract losses that resulted in a reduction of revenue of $23.2 million, while the impact on facility net operating income (NOI) for these contract losses was a decline of only $0.3 million from the second quarter of 2013 to the second quarter of 2014. In addition, revenue declined due to a reduction in populations from the United States Marshals Service primarily at our California City facility. These reductions in revenue were partially offset by an increase in revenue resulting from the new lease of our California City facility effective December 1, 2013, our acquisition on July 31, 2013 of Correctional Alternatives Inc., increases in populations from the states of Oklahoma, Tennessee and New Mexico under existing contracts, and an increase in population from the state of Arizona pursuant to a new management contract at our Red Rock facility that commenced January 1, 2014.
In total, NOI increased $2.1 million, from $121.0 million in the second quarter of 2013 to $123.1 million in the second quarter of 2014, despite a reduction in facility NOI of $4.9 million resulting from the transition of our Red Rock facility to a new management contract effective January 1, 2014, and despite expenses associated with the transition of the management contract at the Idaho Correctional Center to the state of Idaho effective July 1, 2014. These reductions were offset by an improvement in NOI for increases in inmate populations and at our California City facility. NOI for the second quarter of 2013 was also negatively impacted by the aforementioned Special Incentive Bonus.
Adjusted net income, NOI, FFO, Normalized FFO and AFFO, and their corresponding per share amounts, are measures calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles (GAAP). 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 measures.
Guidance
The Company expects Adjusted Diluted EPS for the third quarter to be in the range of $0.46 to $0.48 and Adjusted Diluted EPS for fourth quarter to be in the range of $0.47 to $0.51, resulting in an increase in full year 2014 Adjusted Diluted EPS in the range of $1.87 to $1.93 from the previous range of $1.84 to $1.92. The Company also increased guidance for FFO per diluted share for the full-year 2014 to be in the range of $2.59 to $2.65, from $2.56 to $2.64, while full-year 2014 AFFO per diluted share is in the range of $2.53 to $2.58 from $2.49 to $2.58.
Second Quarter 2014 Financial Results
Page 3
During 2014, we expect to invest approximately $150.0 million to $165.0 million in capital expenditures, consisting of $100.0 million to $110.0 million in on-going prison construction and expenditures related to potential land acquisitions, $25.0 million in maintenance capital expenditures on real estate assets, and $25.0 million to $30.0 million on capital expenditures on other assets and information technology.
Supplemental Financial Information and Investor Presentations
We have made available on our website supplemental financial information and other data for the second quarter of 2014. 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.cca.com under “Financial Information” of the Investors section.
The Second Quarter Investor Presentation will be available on our website beginning on or about August 30, 2014. Interested parties may access this information through our website at www.cca.com under “Webcasts” of the Investors section.
Webcast and Replay Information
We will host a webcast conference call at 10:00 a.m. central time (11:00 a.m. eastern time) on August 7, 2014, to discuss our second quarter 2014 financial results and future outlook. To listen to this discussion, please access “Webcasts” on the Investors page at www.cca.com. The conference call will be archived on our website following the completion of the call. In addition, a telephonic replay will be available at 2:00 p.m. eastern time on August 7, 2014 through 2:00 p.m. eastern time on August 15, 2014, by dialing (888) 203-1112 or (719) 457-0820, pass code 3358950.
About CCA
CCA, a publicly traded real estate investment trust (REIT), is the nation’s largest owner of partnership correction and detention facilities and one of the largest prison operators in the United States, behind only the federal government and three states. We currently own or control 52 correction and detention facilities and manage 12 additional facilities owned by our government partners, with a total design capacity of approximately 84,500 beds in 19 states and the District of Columbia. CCA specializes in owning, operating and managing prisons and other correctional facilities and providing inmate residential, community re-entry 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, faith-based services, life skills and employment training and substance abuse treatment.
Second Quarter 2014 Financial Results
Page 4
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) general economic and market conditions, including the impact governmental budgets can have on our per diem rates, occupancy, and overall utilization; (ii) 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; (iii) our ability to obtain and maintain correctional facility management contracts, including, but not limited to, sufficient governmental appropriations, contract compliance and as a result of inmate disturbances; (iv) 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; (v) changes in government policy and in legislation and regulation of the corrections and detention industry that affect our business, including but not limited to, California’s continued utilization of out of state private correctional capacity; (vi) our ability to meet and maintain REIT qualification status; and (vii) 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. Other factors that could cause operating and financial results to differ are described in the filings we make from time to time 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.
Second Quarter 2014 Financial Results
Page 5
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| June 30, | December 31, | |||||||
| 2014 | 2013 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents |
$ | 46,615 | $ | 77,909 | ||||
| Accounts receivable, net of allowance of $968 and $1,265, respectively |
246,894 | 244,957 | ||||||
| Current deferred tax assets |
6,351 | 9,241 | ||||||
| Prepaid expenses and other current assets |
29,007 | 20,612 | ||||||
| Current assets of discontinued operations |
— | 15 | ||||||
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|
|||||
| Total current assets |
328,867 | 352,734 | ||||||
| Property and equipment, net |
2,538,996 | 2,546,613 | ||||||
| Restricted cash |
2,607 | 5,589 | ||||||
| Investment in direct financing lease |
4,382 | 5,473 | ||||||
| Goodwill |
16,110 | 16,110 | ||||||
| Non-current deferred tax assets |
5,875 | 3,078 | ||||||
| Other assets |
76,657 | 77,828 | ||||||
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|
|||||
| Total assets |
$ | 2,973,494 | $ | 3,007,425 | ||||
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|||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Accounts payable and accrued expenses |
$ | 237,438 | $ | 252,277 | ||||
| Income taxes payable |
676 | 1,243 | ||||||
| Current liabilities of discontinued operations |
370 | 886 | ||||||
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|
|
|
|||||
| Total current liabilities |
238,484 | 254,406 | ||||||
| Long-term debt |
1,195,000 | 1,205,000 | ||||||
| Other liabilities |
40,380 | 45,512 | ||||||
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|
|||||
| Total liabilities |
1,473,864 | 1,504,918 | ||||||
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| Commitments and contingencies |
||||||||
| Preferred stock — $0.01 par value; 50,000 shares authorized; none issued and outstanding at June 30, 2014 and December 31, 2013, respectively |
— | — | ||||||
| Common stock — $0.01 par value; 300,000 shares authorized; 116,413 and 115,923 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively |
1,164 | 1,159 | ||||||
| Additional paid-in capital |
1,734,404 | 1,725,363 | ||||||
| Accumulated deficit |
(235,938 | ) | (224,015 | ) | ||||
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|
|||||
| Total stockholders’ equity |
$ | 1,499,630 | $ | 1,502,507 | ||||
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|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 2,973,494 | $ | 3,007,425 | ||||
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|
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|
|||||
Second Quarter 2014 Financial Results
Page 6
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
|||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| REVENUE: |
||||||||||||||||
| Owned and controlled properties |
$ | 348,557 | $ | 348,889 | $ | 687,726 | $ | 690,663 | ||||||||
| Managed only and other |
62,137 | 76,116 | 127,190 | 151,065 | ||||||||||||
|
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|
|||||||||
| Total revenue |
410,694 | 425,005 | 814,916 | 841,728 | ||||||||||||
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|
|||||||||
| EXPENSES: |
||||||||||||||||
| Operating: |
||||||||||||||||
| Owned and controlled properties |
229,635 | 234,903 | 454,854 | 464,347 | ||||||||||||
| Managed only and other |
57,975 | 69,098 | 120,136 | 137,876 | ||||||||||||
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|
|||||||||
| Total operating expenses |
287,610 | 304,001 | 574,990 | 602,223 | ||||||||||||
| General and administrative |
26,559 | 25,360 | 51,951 | 56,592 | ||||||||||||
| Depreciation and amortization |
28,752 | 27,675 | 57,136 | 55,052 | ||||||||||||
| Asset impairments |
2,238 | — | 2,238 | — | ||||||||||||
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|||||||||
| 345,159 | 357,036 | 686,315 | 713,867 | |||||||||||||
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| OPERATING INCOME |
65,535 | 67,969 | 128,601 | 127,861 | ||||||||||||
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|||||||||
| OTHER (INCOME) EXPENSE: |
||||||||||||||||
| Interest expense, net |
8,364 | 11,912 | 18,712 | 24,478 | ||||||||||||
| Expenses associated with debt refinancing transactions |
— | 36,303 | — | 36,528 | ||||||||||||
| Other (income) expense |
(613 | ) | (37 | ) | (1,000 | ) | 64 | |||||||||
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|||||||||
| 7,751 | 48,178 | 17,712 | 61,070 | |||||||||||||
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| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES |
57,784 | 19,791 | 110,889 | 66,791 | ||||||||||||
| Income tax (expense) benefit |
(2,052 | ) | 3,377 | (3,419 | ) | 137,824 | ||||||||||
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| INCOME FROM CONTINUING OPERATIONS |
55,732 | 23,168 | 107,470 | 204,615 | ||||||||||||
| Loss from discontinued operations, net of taxes |
— | (2,739 | ) | — | (3,094 | ) | ||||||||||
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| NET INCOME |
$ | 55,732 | $ | 20,429 | $ | 107,470 | $ | 201,521 | ||||||||
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| BASIC EARNINGS PER SHARE: |
||||||||||||||||
| Income from continuing operations |
$ | 0.48 | $ | 0.22 | $ | 0.93 | $ | 1.97 | ||||||||
| Loss from discontinued operations, net of taxes |
— | (0.03 | ) | — | (0.03 | ) | ||||||||||
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| Net income |
$ | 0.48 | $ | 0.19 | $ | 0.93 | $ | 1.94 | ||||||||
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| DILUTED EARNINGS PER SHARE: |
||||||||||||||||
| Income from continuing operations |
$ | 0.48 | $ | 0.21 | $ | 0.92 | $ | 1.94 | ||||||||
| Loss from discontinued operations, net of taxes |
— | (0.02 | ) | — | (0.03 | ) | ||||||||||
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| Net income |
$ | 0.48 | $ | 0.19 | $ | 0.92 | $ | 1.91 | ||||||||
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| REGULAR DIVIDENDS DECLARED PER SHARE |
$ | 0.51 | $ | 0.48 | $ | 1.02 | $ | 1.01 | ||||||||
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| SPECIAL DIVIDENDS DECLARED PER SHARE |
$ | — | $ | 6.66 | $ | — | $ | 6.66 | ||||||||
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Second Quarter 2014 Financial Results
Page 7
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EPS
| For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
|||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net income |
$ | 55,732 | $ | 20,429 | $ | 107,470 | $ | 201,521 | ||||||||
| Special items: |
||||||||||||||||
| Expenses associated with debt refinancing transactions, net of tax |
— | 33,092 | — | 33,299 | ||||||||||||
| Expenses associated with REIT conversion, net of tax |
— | 1,641 | — | 9,118 | ||||||||||||
| Asset impairments, net of tax |
2,235 | 1,911 | 2,235 | 1,911 | ||||||||||||
| Income tax benefit for reversal of deferred taxes due to REIT conversion |
— | — | — | (137,686 | ) | |||||||||||
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| Diluted adjusted net income |
$ | 57,967 | $ | 57,073 | $ | 109,705 | $ | 108,163 | ||||||||
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|||||||||
| Weighted average common shares outstanding – basic |
116,114 | 107,400 | 115,944 | 103,755 | ||||||||||||
| Effect of dilutive securities: |
||||||||||||||||
| Stock options |
835 | 1,284 | 899 | 1,420 | ||||||||||||
| Restricted stock-based compensation |
247 | 307 | 236 | 258 | ||||||||||||
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| Weighted average shares and assumed conversions - diluted |
117,196 | 108,991 | 117,079 | 105,433 | ||||||||||||
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| Adjusted Diluted Earnings Per Share |
$ | 0.49 | $ | 0.52 | $ | 0.94 | $ | 1.03 | ||||||||
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| Pro forma Adjusted Diluted Earnings Per Share(1) |
$ | 0.49 | $ | 0.49 | $ | 0.94 | $ | 0.93 | ||||||||
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| (1) | The Pro forma Adjusted Diluted EPS for the three and six months ended June 30, 2013 reflects the issuance of 13.9 million shares in connection with the payment of a special dividend in May 2013 as if those shares were issued at the beginning of the period presented. See Page 9 for a reconciliation of reported diluted weighted average shares outstanding to pro forma diluted weighted average shares outstanding. |
Second Quarter 2014 Financial Results
Page 8
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CALCULATION OF FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
| For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
|||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net income |
$ | 55,732 | $ | 20,429 | $ | 107,470 | $ | 201,521 | ||||||||
| Depreciation of real estate assets |
21,431 | 19,957 | 42,508 | 39,562 | ||||||||||||
| Depreciation of real estate assets for discontinued operations |
— | 157 | — | 299 | ||||||||||||
| Impairment of real estate assets, net of tax |
2,235 | — | 2,235 | — | ||||||||||||
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|||||||||
| Funds From Operations |
$ | 79,398 | $ | 40,543 | $ | 152,213 | $ | 241,382 | ||||||||
| Expenses associated with debt refinancing transactions, net of tax |
— | 33,092 | — | 33,299 | ||||||||||||
| Expenses associated with REIT conversion, net of tax |
— | 1,641 | — | 9,118 | ||||||||||||
| Goodwill and other impairments, net of tax |
— | 1,911 | — | 1,911 | ||||||||||||
| Income tax benefit for reversal of deferred taxes due to REIT conversion |
— | — | — | (137,686 | ) | |||||||||||
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| Normalized Funds From Operations |
$ | 79,398 | $ | 77,187 | $ | 152,213 | $ | 148,024 | ||||||||
| Maintenance capital expenditures on real estate assets |
(4,221 | ) | (4,396 | ) | (12,949 | ) | (8,530 | ) | ||||||||
| Stock-based compensation |
3,631 | 3,193 | 6,924 | 6,398 | ||||||||||||
| Amortization of debt costs and other non-cash interest |
777 | 919 | 1,548 | 1,966 | ||||||||||||
| Other non-cash revenue and expenses |
(16 | ) | — | (32 | ) | — | ||||||||||
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| Adjusted Funds From Operations |
$ | 79,569 | $ | 76,903 | $ | 147,704 | $ | 147,858 | ||||||||
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| Normalized Funds From Operations Per Diluted Share |
$ | 0.68 | $ | 0.71 | $ | 1.30 | $ | 1.40 | ||||||||
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| Adjusted Funds From Operations Per Diluted Share |
$ | 0.68 | $ | 0.71 | $ | 1.26 | $ | 1.40 | ||||||||
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| Pro forma Normalized FFO Per Diluted Share(1) |
$ | 0.68 | $ | 0.66 | $ | 1.30 | $ | 1.28 | ||||||||
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| Pro forma AFFO Per Diluted Share(1) |
$ | 0.68 | $ | 0.66 | $ | 1.26 | $ | 1.27 | ||||||||
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| (1) | The Pro forma Adjusted Diluted Normalized FFO and AFFO for the three and six months ended June 30, 2013 reflects the issuance of 13.9 million shares in connection with the payment of a special dividend in May 2013 as if those shares were issued at the beginning of the period presented. See Page 9 for a reconciliation of reported diluted weighted average shares outstanding to pro forma diluted weighted average shares outstanding. |
Second Quarter 2014 Financial Results
Page 9
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
RECONCILIATION OF REPORTED DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING TO PRO FORMA DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
| For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
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| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Weighted average shares outstanding and assumed conversions – diluted |
117,196 | 108,991 | 117,079 | 105,433 | ||||||||||||
| Non-GAAP Adjustment: |
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| Shares issued in Special Dividend (1) |
— | 13,876 | — | 13,876 | ||||||||||||
| Weighted average impact |
— | (6,404 | ) | — | (3,220 | ) | ||||||||||
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| Pro forma diluted shares outstanding |
117,196 | 116,463 | 117,079 | 116,089 | ||||||||||||
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| (1) | Reflects the issuance of shares in connection with the Special Dividend in May 2013 as if those shares were issued at the beginning of the period presented. See Note B hereafter. |
CALCULATION OF ADJUSTED FUNDS FROM OPERATIONS PER SHARE GUIDANCE
| For the Quarter Ending September 30, 2014 |
For the Year Ending December 31, 2014 |
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| Low End of Guidance |
High End of Guidance |
Low End of Guidance |
High End of Guidance |
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| Net income |
$ | 54,000 | $ | 56,000 | $ | 218,765 | $ | 225,765 | ||||||||
| Asset impairments, net of tax |
— | — | 2,235 | 2,235 | ||||||||||||
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| Adjusted net income |
$ | 54,000 | $ | 56,000 | $ | 221,000 | $ | 228,000 | ||||||||
| Depreciation on real estate assets |
21,000 | 21,000 | 85,000 | 85,000 | ||||||||||||
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| Funds From Operations |
$ | 75,000 | $ | 77,000 | $ | 306,000 | $ | 313,000 | ||||||||
| Other non-cash expenses |
4,200 | 4,300 | 17,000 | 17,000 | ||||||||||||
| Maintenance capital expenditures on real estate assets |
(7,000 | ) | (7,000 | ) | (25,000 | ) | (25,000 | ) | ||||||||
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| Adjusted Funds From Operations |
$ | 72,200 | $ | 74,300 | $ | 298,000 | $ | 305,000 | ||||||||
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| Funds From Operations Per Diluted Share |
$ | 0.64 | $ | 0.65 | $ | 2.59 | $ | 2.65 | ||||||||
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| Adjusted Funds From Operations Per Diluted Share |
$ | 0.61 | $ | 0.63 | $ | 2.53 | $ | 2.58 | ||||||||
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Second Quarter 2014 Financial Results
Page 10
NOTES TO SUPPLEMENTAL FINANCIAL INFORMATION
Note A: Adjusted Net Income, EBITDA, Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO), and their corresponding per share metrics are non-GAAP financial measures. FFO and AFFO are widely accepted non-GAAP supplemental measures of REIT performance following the standards established by the National Association of Real Estate Investment Trusts (NAREIT). CCA 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. CCA believes that it is useful to provide investors, lenders and security analysts’ disclosures of its results of operations on the same basis that is used by management.
NAREIT defines FFO as net income computed in accordance with generally accepted accounting principles, excluding gains (or losses) from sales of property and extraordinary items, plus depreciation and amortization of real estate and impairment of depreciable real estate. EBITDA, FFO and AFFO are useful as supplemental measures of performance of the Company’s corrections facilities because they don’t take into account depreciation and amortization, or with respect to EBITDA, the impact of the Company’s tax provisions and 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. CCA may make adjustments to FFO from time to time for certain other income and expenses that it considers non-recurring, infrequent or unusual, even though such items may require cash settlement, because such items do not reflect a necessary component of the ongoing operations of the Company. Normalized FFO excludes the effects of such items. CCA calculates AFFO by adding to Normalized FFO non-cash expenses such as the amortization of deferred financing costs and stock-based compensation, and by subtracting from Normalized FFO recurring real estate expenditures that are capitalized and then amortized, but which are necessary to maintain a REIT’s properties and its revenue stream. Some of these capital expenditures contain a discretionary element with respect to when they are incurred, while others may be more urgent. Therefore, these capital expenditures may fluctuate from quarter to quarter, depending on the nature of the expenditures required, seasonal factors such as weather, and budgetary conditions. CCA calculates Adjusted Net Income by adding or deducting from GAAP Net Income amounts associated with the Company’s debt refinancing, REIT conversion, mergers and acquisitions activity and certain impairments that the Company believes are unusual or nonrecurring to provide an alternative measure of comparing operating performance for the periods presented.
Other companies may calculate Adjusted Net Income, EBITDA, FFO, Normalized FFO, and AFFO differently than the Company does, or adjust for other items, and therefore comparability may be limited. Adjusted Net Income, EBITDA, FFO, Normalized FFO, and AFFO and their corresponding per share measures 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.
Note B: On May 20, 2013, CCA paid a special dividend in connection with its conversion to a REIT. The shareholders were allowed to elect to receive their payment of the special dividend either in all cash, all shares of CCA common stock, or a combination of cash and CCA common stock, except that CCA placed a limit on the aggregate amount of cash payable to the shareholders. Under ASC 505, “Equity” and ASU 2010-01, “Accounting for Distributions to Shareholders with Components of Stock and Cash, a consensus of the FASB Emerging Issues Task Force”, a distribution that allows shareholders to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in per share results prospectively. As such, the stock portion of the special dividend is presented prospectively in basic and diluted per share results and was not presented retroactively for all periods presented as it would, for example, with a stock split or a stock dividend. As a result CCA believes investors would benefit from seeing the operating performance for the comparable periods accounting for the effect of the special dividend in both periods. Therefore, for comparison purposes, CCA has presented per share results on a pro forma basis as if the shares issued in the special dividend were issued as of the beginning of the periods presented.
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