UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

For the fiscal year ended December 31, 2017

OR

Commission File Number 001-16109

 

CORECIVIC, INC.

(Exact name of registrant as specified in its charter)

 

 

 

10 BURTON HILLS BLVD., NASHVILLE, TENNESSEE 37215

(Address and zip code of principal executive office)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 263-3000

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

 

 

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.). Yes ☐ No ☒

 

The aggregate market value of the shares of the registrant's Common Stock held by non-affiliates was approximately $3,239,937,829 as of June 30, 2017 based on the closing price of such shares on the New York Stock Exchange on that day.  The number of shares of the registrant's Common Stock outstanding on February 15, 2018 was 118,204,246.

 

DOCUMENTS INCORPORATED BY REFERENCE:

 

Portions of the registrant's definitive Proxy Statement for the 2018 Annual Meeting of Stockholders, currently scheduled to be held on May 10, 2018, are incorporated by reference into Part III of this Annual Report on Form 10-K.

 

 

 

---

 

CORECIVIC, INC.

FORM 10-K

For the fiscal year ended December 31, 2017

TABLE OF CONTENTS

 

 

2

---

CAUTIONARY STATEMENT REGARDING

FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K, or Annual Report, 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, as amended.  All statements other than statements of current or historical fact contained in this Annual Report, including statements regarding our future financial position, business strategy, budgets, projected costs and plans, and objectives of management for future operations, are forward-looking statements.  The words "anticipate," "believe," "continue," "estimate," "expect," "intend," "could," "may," "plan," "projects," "will," and similar expressions, as they relate to us, are intended to identify forward-looking statements.  These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made in this Annual Report.  These include, but are not limited to, the risks and uncertainties associated with:

Any or all of our forward-looking statements in this Annual Report may turn out to be inaccurate. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs.  Our statements can be affected by inaccurate assumptions we might make or by known or unknown risks, uncertainties and assumptions, including the risks, uncertainties, and assumptions described in "Risk Factors" included elsewhere in this Annual Report and in other reports, documents, and other information we file with the Securities and Exchange Commission, or the SEC, from time to time.

3

---

In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Annual Report may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.  When you consider these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this Annual Report, including in "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and "Risk Factors."

Our forward-looking statements speak only as of the date made.  We undertake no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise.  All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Annual Report.

 

 

4

---

PART I.

Overview

We are a diversified government solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways.  Through three business offerings, CoreCivic Safety, CoreCivic Properties, and CoreCivic Community, we provide a broad range of solutions to government partners that serve the public good through corrections and detention management, government real estate solutions, and a growing network of residential reentry centers to help address America's recidivism crisis.  We have been a flexible and dependable partner for government for more than 30 years.  Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good.

Structured as a REIT, we are one of the nation's largest owners of partnership correctional, detention, and residential reentry facilities and one of the largest prison operators in the United States.  We also believe we are the largest private owner of real estate used by government agencies.  As of December 31, 2017, we owned and managed 70 correctional, detention, and residential reentry facilities, and managed an additional seven correctional and detention facilities owned by our government partners, with a total design capacity of approximately 78,000 beds in 19 states.  In addition, as of December 31, 2017, we owned 12 properties leased to third parties and used by government agencies, totaling 1.1 million square feet in five states.  

In addition to providing fundamental residential services, our correctional, detention, and residential reentry facilities offer a variety of rehabilitation and educational programs, including basic education, faith-based services, life skills and employment training, and substance abuse treatment.  These services are intended to help reduce recidivism and to prepare offenders for their successful reentry into society upon their release.  We also provide or make available to offenders certain health care (including medical, dental, and mental health services), food services, and work and recreational programs.

We are a Maryland corporation formed in 1983.  Our principal executive offices are located at 10 Burton Hills Boulevard, Nashville, Tennessee, 37215, and our telephone number at that location is (615) 263-3000.  Our website address is www.corecivic.com.  We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, definitive proxy statements, and amendments to those reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, available on our website, free of charge, as soon as reasonably practicable after these reports are filed with or furnished to the SEC.  Information contained on our website is not part of this Annual Report.

We began operating as a REIT effective January 1, 2013.  We provide services and conduct other business activities through taxable REIT subsidiaries, or TRSs.  A TRS is a subsidiary of a REIT that is subject to applicable corporate income tax and certain qualification requirements.  Our use of TRSs enables us to comply with REIT qualification requirements while providing correctional services at facilities we own and at facilities owned by our government partners and to engage in certain other business operations.  A TRS is not subject to the distribution requirements applicable to REITs so it may retain income generated by its operations for reinvestment.

As a REIT, we generally are not subject to federal income taxes on our REIT taxable income and gains that we distribute to our stockholders, including the income derived from our real estate and dividends we earn from our TRSs. However, our TRSs will be required to pay income taxes on their earnings at regular corporate income tax rates.

As a REIT, we generally are required to distribute annually to our stockholders at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding net capital gains). Our REIT taxable income will not typically include income earned by our TRSs except to the extent our TRSs pay dividends to the REIT.

Our customers primarily consist of federal, state, and local correctional and detention authorities.  Federal correctional and detention authorities primarily consist of the Federal Bureau of Prisons, or the BOP, the United

5

---

States Marshals Service, or the USMS, and ICE.  Payments by federal correctional and detention authorities represented 48%, 52%, and 51% of our total revenue for the years ended December 31, 2017, 2016, and 2015, respectively.

Our customer contracts typically have terms of three to five years and contain multiple renewal options.  Most of our facility contracts also contain clauses that allow the government agency to terminate the contract at any time without cause, and our facility contracts and government lease agreements are generally subject to annual or bi-annual legislative appropriations of funds.

We are compensated for providing bed capacity and correctional, detention, and residential reentry services at a per diem rate based upon actual or minimum guaranteed occupancy levels.  Occupancy rates for a particular facility are typically low when first opened or immediately following an expansion.  However, beyond the start-up period, which typically ranges from 90 to 180 days, the occupancy rate tends to stabilize.  The average compensated occupancy of our facilities, based on rated capacity was as follows for the years 2017, 2016, and 2015:

 

 

The average compensated occupancy of our owned and managed facilities, excluding idled facilities, was 89%, 87%, and 89% for 2017, 2016, and 2015, respectively.

We also lease facilities to governmental agencies and third-party operators where our occupancy percentage is based on leased square feet rather than bed capacity.  These facilities generated 6%, 5%, and 5% of our facility net operating income, which we define as a facility's operating income or loss from operations before interest, taxes, asset impairments, depreciation, and amortization, in 2017, 2016, and 2015, respectively, and the occupancy of these facilities was as follows for the years 2017, 2016, and 2015:

 

 

We also provide transportation services to governmental agencies through TransCor America, LLC, or TransCor, a subsidiary of our wholly-owned TRS.  During the years ended December 31, 2017, 2016, and 2015, TransCor generated total revenue of $2.3 million, $2.6 million, and $4.1 million, respectively, or approximately 0.1%, 0.1%, and 0.2% of our total consolidated revenue in 2017, 2016, and 2015, respectively.  We believe TransCor provides a complementary service to our core business that enables us to respond quickly to our customers' transportation needs.

Operating Procedures and Offender Services for Correctional, Detention, and Residential Reentry Facilities

Pursuant to the terms of our customer contracts, we are responsible for the overall operations of our facilities, including staff recruitment, general administration of the facilities, facility maintenance, security, and supervision of the offenders.  We are required by our customer contracts to maintain certain levels of insurance coverage for general liability, workers' compensation, vehicle liability, and property loss or damage.  We also are required to indemnify our customers for claims and costs arising out of our operations and, in certain cases, to maintain performance bonds and other collateral requirements.  

We believe a focus on inmate reentry provides great benefits for our communities – more people living healthy and productive lives and contributing to strong families and local economies.  We have committed to evolving our model to focus more and more on reentry services, and we are working hard to equip the men and women in our care with the services, support, and resources they need to be successful.

6

---

To that end, we provide a wide range of evidence-based reentry programs and activities in our facilities.  At most of the facilities we manage, offenders have the opportunity to enhance their basic education from literacy through earning a high school equivalency diploma endorsed by their respective state. In some cases, we also provide opportunities for postsecondary educational achievements and chances to participate in college correspondence classes.  A number of our facilities that house non-citizens offer adult education curricula recognized by several nations to which these offenders may return, including a curriculum offered in conjunction with the Mexican government.  We also provide the Adult Education in Spanish program for offenders with that specific language need.

For the offenders who are close to taking their high school equivalency exam (either the GED or the HiSET), we have invested in the equipment needed to use the GED/HiSET Academy software program, which is an offline software program providing over 200 hours of individualized lessons up to the 12^th grade. The GED/HiSET Academy incorporates teaching best practices and provides an atmosphere to engage and motivate students to learn everything they need to know to pass the GED/HiSET exam. As an example of the impact we are having, during 2017, the number of offenders in our facilities who passed high school equivalency exams totaled 1,684, an increase of 3% from 2016.  In 2017, our Crowley County Correctional Facility and Coffee Correctional Facility led the state systems in Colorado and Georgia, respectively, in GED completions.  According to research from the independent RAND Corporation, "Evaluating the Effectiveness of Correctional Education" published in 2013, inmates who obtain GEDs while in prison are 30% less likely to return to prison.

In addition, we offer a broad spectrum of career/technical education opportunities to help individuals learn marketable job skills. Our trade programs are certified by the National Center for Construction Education and Research, or NCCER.  NCCER establishes the curriculum and certification for over 4,000 construction and trade organizations.  Graduates of these programs enter the job market with certified skills that significantly enhance employability.  During 2017, 4,483 offenders in facilities we manage earned career and technical education certificates.  We are proud of the educational programs we offer and intend to maintain and develop such programs.  For example, near the end of 2016, in coordination with the Georgia Department of Corrections, we developed programs at two facilities in the state to offer courses in welding and diesel truck maintenance, enabling students to earn trade certificates from nearby community colleges.  In 2017, 93 students graduated from these programs.

For those with assessed substance use disorders, we offer cognitive evidence-based treatment programs with proven clinical outcomes, such as the Residential Drug Abuse Program.  We offer both Residential Therapeutic Community models and intensive outpatient programs.  We also offer drug and alcohol use education/DWI programs at some of our locations.  Our goal in providing substance use treatment is to stimulate internal motivation for change and progress through the stages of change so that lasting behavioral alterations can occur.  Our drug and alcohol education programs help participants understand their relationships with drugs and the links between drug use and crime, as well as assisting them in making better choices that can lead to healthier relationships in their lives.  In 2017, 1,839 offenders completed substance use disorder programming.

Additional program offerings include our Victim Impact Programs, available at a number of our facilities, which seek to educate offenders about the negative effects their criminal conduct can have on others.  In 2017, seven facilities received training to offer Victim Impact Programs to offenders in both secure and community sites.  In addition, in 2017, 455 offenders successfully completed Victim Impact Programs.  All of our facilities offer opportunities for worship and/or study for a wide range of faith traditions represented in our populations.  Additionally, in many facilities, we offer faith-based programs, with an emphasis on reentry, character development, and spiritual growth.  During 2017, we transitioned to the Threshold Program, a multi-faith, evidence-based model, for our faith-based reentry component.

Our Reentry and Life Skills programs prepare individuals for life after incarceration by teaching them how to successfully conduct a job search, how to manage their budget and financial matters, parenting skills, and relationship and family skills.   Equally significant, we offer cognitive behavioral programs aimed at changing anti-social attitudes and behaviors in offenders, with a focus on altering the level of criminal thinking.  We recently introduced a comprehensive reentry strategy we call "Go Further", a forward thinking, systems approach to reentry.  "Go Further" embraces all facility reentry programs, adds a proprietary cognitive/behavioral curriculum, and encourages staff and offenders to take a collaborative approach to assist in reentry preparation.  "Go Further" is currently in place in five of our facilities, with plans to add additional facilities in 2018.

7

---

Across the country, our dedicated staff, along with the assistance of thousands of volunteers, work to provide guidance, direction, and post-incarceration services to the men and women in our care.  We believe, these critical reentry programs help fight the serious challenge of recidivism facing the United States.  

Through our community corrections facilities, we provide an array of services to defendants and offenders who are serving their full sentence, the last portion of their sentence, waiting to be sentenced, or awaiting trial while supervised in a community environment.  We offer housing and programs with a key focus on employment, job readiness, life skills and various substance abuse treatment programs, in order to help offenders successfully reenter their communities and reduce the risk of recidivism.  

In addition, in some of our community corrections facilities, we offer housing and program services to parolees who have completed their sentence but lack a viable reentry plan.  Through a focus on employment and skill development, we provide a means for these parolees to successfully reintegrate into their communities.

Lastly, we provide day-reporting and outpatient substance abuse treatment programs at some of our community corrections facilities.  These programs, depending on the needs of the offender, can provide cognitive behavioral-based programs to assist in the offender's successful reentry while holding the individual accountable while living in the community.

Ultimately, the work we do is about giving people the tools to reintegrate with their communities for good.  We are proud of the teachers, counselors, case managers, chaplains, and other inmate support service professionals who provided these extensive services to the men and women entrusted in our care.  

The American Correctional Association, or ACA, is an independent organization comprised of corrections professionals that establishes accreditation standards for correctional and detention institutions.  Outside agency standards, such as those established by the ACA, provide us with the industry's most widely accepted operational guidelines.  ACA accredited facilities must be audited and re-accredited at least every three years.  We have sought and received ACA accreditation for 35, or approximately 90%, of the eligible facilities we operated as of December 31, 2017, excluding our residential reentry facilities.  During 2017, nine of the facilities we manage were re-accredited by the ACA with an average score of 99.4%, making our portfolio average 99.5%.

Beyond the standards provided by the ACA, our facilities are operated in accordance with a variety of company and facility-specific policies and procedures, as well as various contractual requirements.  Many of these policies and procedures reflect the high standards generated by a number of sources, including the ACA, the National Commission on Correctional Healthcare, the Occupational Safety and Health Administration, as well as federal, state, and local government codes and regulations and longstanding correctional procedures.  

In addition, our facilities are operated in compliance with the Prison Rape Elimination Act, or PREA, standards, which became effective in August 2013.  All confinement facilities covered under the PREA standards must be audited at least every three years to be considered compliant with PREA. Covered facilities include adult prisons and jails, juvenile facilities, lockups (housing detainees overnight), and community confinement facilities, whether operated by the United States Department of Justice, or DOJ, or by a state, local, corporate, or nonprofit authority. We utilize DOJ-certified PREA auditors to help ensure that all facilities operate in compliance with applicable PREA regulations.

Our facilities operate under these established standards, policies, and procedures, and also are subject to annual audits by our Quality Assurance Division, or QAD, which operates under the auspices of, and reports directly to, our Office of General Counsel and independently from our Operations Division. Through the QAD, we have devoted significant resources to ensuring that our facilities meet outside agency and accrediting organization standards and guidelines.  

The QAD employs a team of full-time auditors, who are subject matter experts from all major disciplines within institutional operations.  Annually, without advance notice, QAD auditors conduct on-site evaluations of each facility we operate using specialized audit tools, typically containing more than 1,000 audit indicators across all major operational areas.  In most instances, these audit tools are tailored to facility and partner specific

8

---

requirements.  In addition, audit teams often work with facilities to address specific areas of need, such as meeting requirements of new partner contracts or providing detailed training of new departmental managers.

The QAD management team coordinates overall operational auditing and compliance efforts across all correctional, detention, and residential reentry facilities we manage.  In conjunction with subject matter experts and other stakeholders having risk management responsibilities, the QAD management team develops performance measurement tools used in facility audits. The QAD management team provides governance of the corrective action plan process for any items of nonconformance identified through internal and external facility reviews. Our QAD also contracts with teams of ACA certified correctional auditors to evaluate compliance with ACA standards at accredited facilities.  Similarly, the QAD routinely incorporates a review of facility compliance with key PREA regulations during audits of company facilities.

Business Development

We believe we own approximately 58% of all privately owned prison beds in the United States, manage nearly 39% of all privately managed prison beds in the United States, and are currently the second largest private owner and provider of community corrections services in the nation.  We also believe that we are the largest private owner of real estate used by government agencies.  Under the direction of our partnership development department, we market our facilities and services to government agencies responsible for federal, state, and local correctional, detention, and residential reentry facilities in the United States.  Under the direction of our real estate department, we intend to continue pursuing the acquisition and development of additional correctional, detention, and residential reentry facilities, as well as other government-leased real estate assets with a bias toward those used to provide mission-critical governmental services that we believe have a favorable investment return, diversify our cash flows, and increase value to our stockholders.

We execute cross-departmental efforts to market CoreCivic Safety solutions to government partners that seek corrections and detention management services, CoreCivic Properties solutions to customers that need real estate and maintenance services, and CoreCivic Community solutions to government partners seeking residential reentry services.  We also offer government partners a combination of these business offerings, and currently have two government partners utilizing all three.

As indicated by the following chart, business from our federal customers, including primarily the BOP, USMS, and ICE, continues to be a significant component of our business.  The BOP, USMS, and ICE were the only federal partners that accounted for 10% or more of our total revenue during the last three years.  

 

Certain of our contracts with federal partners contain clauses that guarantee the federal partner access to a minimum bed capacity in exchange for a fixed monthly payment.  However, these contracts also generally provide the government the ability to cancel the contract for non-appropriation of funds or for convenience.

The decline in federal revenue from 2016 to 2017 was primarily a result of an amendment to the inter-governmental service agreement, or IGSA, associated with our South Texas Family Residential Center, which became effective in the fourth quarter of 2016. See "Management's Discussion and Analysis of Financial Condition and Results of

9

---

Operations - Results of Operations" for a further discussion regarding our contract at the South Texas Family Residential Center.  In addition, populations in federal facilities, particularly within the BOP system nationwide, have declined over the past three years.  Inmate populations in the BOP system declined due, in part, to the retroactive application of changes to sentencing guidelines applicable to certain federal drug trafficking offenses.  

Despite this decline, we continue to believe utilization of private sector bed capacity and management services provides our federal partners with flexible and cost-effective solutions essential to their missions.  For example, in November 2016, we announced that the BOP exercised a two-year renewal option at our 1,978-bed McRae Correctional Facility.  The amended agreement commenced on December 1, 2016, and provides for caring for up to 1,724 federal inmates with a fixed monthly payment for 1,633 beds, compared to our previous contract which contained a fixed payment for 1,780 beds.  In addition, in July 2017, the BOP exercised a two-year renewal option at our 2,232-bed Adams County Correctional Center.  For the year ended December 31, 2017, we generated 5% of our total revenue through the remaining contracts with the BOP at these two correctional facilities.

Further, we believe our ability to provide flexible solutions and fulfill emergent needs of ICE would be very difficult and costly to replicate in the public sector, demonstrated by the contract with ICE at our 2,400-bed South Texas Family Residential Center, which was amended and extended in October 2016.  The October 2016 amendment extended the term of the contract through September 2021 and can be further extended by bi-lateral modification. In addition, in December 2016, we announced a new award to provide detention capacity to ICE at our 2,016-bed Northeast Ohio Correctional Center, and in April 2017, we announced a new contract award to provide up to 996 beds to the state of Ohio at this same facility.  We previously housed inmates from the BOP at the Northeast Ohio facility under a contract that expired in May 2015.  We believe these contracts provide further examples of the marketability of our real estate assets across multiple government customers.

State revenues from contracts at correctional, detention, and residential reentry facilities that we operate constituted 41%, 38%, and 40% of our total revenue during 2017, 2016, and 2015, respectively, and increased 2.4% from $710.4 million during 2016 to $727.8 million during 2017.  Approximately 6%, 6%, and 10% of our total revenue for 2017, 2016, and 2015, respectively, was generated from the California Department of Corrections and Rehabilitation, or CDCR, in facilities housing inmates outside the state of California.  The CDCR was our only state partner that accounted for 10% or more of our total revenue during these years.

Several of our state partners are projecting improvements in their budgets which has helped us secure recent per diem increases at certain facilities.  Further, several of our existing state partners, as well as prospective state partners, are experiencing growth in inmate populations and overcrowded conditions.  Although we can provide no assurance that we will enter into any new contracts, we believe we are well positioned to provide them with needed bed capacity, as well as the programming and reentry services they are seeking.  

We believe the long-term growth opportunities of our business remain attractive as governments consider their emergent needs, as well as the efficiency and offender programming opportunities we provide, as flexible solutions to satisfy our partners' needs.  Further, we expect our partners to continue to face challenges in maintaining old facilities, developing new facilities, and expanding current facilities for additional capacity, which could result in future demand for the solutions we provide.

10

---

We believe that we can further develop our business by, among other things:

We generally receive inquiries from or on behalf of government agencies that are considering outsourcing the ownership and/or management of certain facilities or that have already decided to contract with a private enterprise.  When we receive such an inquiry, we determine whether there is an existing need for our correctional, detention, and residential reentry facilities and/or services and whether the legal and political climate in which the inquiring party operates is conducive to serious consideration of outsourcing.  Based on these findings, an initial cost analysis is conducted to further determine project feasibility.

Frequently, government agencies responsible for correctional, detention, and residential reentry facilities and services procure space and services through solicitations or competitive procurements.  As part of our process of responding to such requests, members of our management team meet with the appropriate personnel from the agency making the request to best determine the agency's needs.  If the project fits within our strategy, we submit a written response. A typical solicitation or competitive procurement requires bidders to provide detailed information, including, but not limited to, the space and services to be provided by the bidder, its experience and qualifications, and the price at which the bidder is willing to provide the facility and services (which services may include the purchase, renovation, improvement or expansion of an existing facility or the planning, design and construction of a new facility). The requesting agency selects a firm believed to be able to provide the requested bed capacity, if needed, and most qualified to provide the requested services and then negotiates the price and terms of the contract with that firm.  

11

---

2017 Accomplishments

In 2017, we entered into a number of new contracts, renewed several other significant contracts, and completed numerous other transactions and milestones, including the following:

12

---

Facility Portfolio

General

Our correctional, detention, and residential reentry facilities can generally be classified according to the level(s) of security at such facility.  Minimum security facilities have open housing within an appropriately designed and patrolled institutional perimeter.  Medium security facilities have either cells, rooms or dormitories, a secure perimeter, and some form of external patrol.  Maximum security facilities have cells, a secure perimeter, and external patrol.  Multi-security facilities have various areas encompassing minimum, medium or maximum security.  

Our facilities can also be classified according to their primary function.  The primary functional categories are:

13

---

Facilities and Facility Management Contracts

As of December 31, 2017, we owned and managed 70 correctional, detention, and residential reentry facilities, and managed an additional seven correctional and detention facilities owned by our government partners.  In addition, as of December 31, 2017, we owned 12 properties leased to third parties and used by government agencies.  We also owned two corporate office buildings. Owned and managed facilities include facilities placed into service that we own or control via a long-term lease and manage. Managed-only facilities include facilities we manage that are owned by a government authority.  The following table sets forth all of the facilities that, as of December 31, 2017, we (i) owned and managed, (ii) owned, but were leased to a third party, and (iii) managed but are owned by a government authority.  The table includes certain information regarding each facility, including the term of the primary customer contract related to such facility, or, in the case of facilities we owned but leased to a third-party operator, the term of such lease.  

14

---