HOUSTON, March 14, 2006 (PRIMEZONE) -- Cornell Companies, Inc. (NYSE:CRN) today reported results for the period ended December 31, 2005.
James E. Hyman, Cornell's chairman and chief executive officer, said, "We are pleased to announce results that demonstrate the continued progress that Cornell made in the fourth quarter. Our full year 2005 results outperformed the guidance we reaffirmed after the third quarter on both an as-reported and pro forma basis. This performance positions us for success in 2006, where we remain focused on increasing population at our underutilized facilities and continuing to operate excellent programs that deliver value to our customers."
Fourth-Quarter Summary (in thousands, except per share data)
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Fourth Quarter Twelve Months Ended
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As Reported 12/31/2005 12/31/2004 12/31/2005 12/31/2004
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Revenue from
operations $ 79,435 $ 73,902 $ 310,775 $ 277,190
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Income (loss)
from operations 7,199 (3,007) 27,866 14,459
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Net loss from
discontinued
operations (228) (712) (3,622) (2,433)
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Net income (loss) 1,613 (6,145) 306 (7,433)
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EPS -- diluted $ 0.12 $ (0.46) $ 0.02 $ (0.56)
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Shares outstanding
used in per
share computation 13,848 13,261 13,668 13,203
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Pro Forma, excluding New Morgan Academy,
charges related to the early extinguishment of debt,
and pre-opening and start-up costs and related revenue: (a)
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Revenue $ 79,435 $ 71,761 $ 306,016 $ 274,048
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Income from
operations 8,238 8,816 33,705 31,708
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Net income 2,534 1,274 4,969 5,256
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EPS - diluted $ 0.18 $ 0.10 $ 0.36 $ 0.40
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(a) See reconciliation of historical GAAP and non-GAAP
information attached.
Fourth-Quarter Results
For the quarter ended December 31, 2005, the Company reported net income of $1.6 million, or $0.12 per diluted share, compared with a net loss of $6.1 million, or $0.46 per diluted share, in the same period last year. This year's fourth-quarter results included $0.3 million of start-up costs for new facilities, $0.2 million of losses from discontinued operations, and $0.6 million of losses associated with New Morgan Academy. The 2004 fourth-quarter results included a total of approximately $1.1 million for start-up costs (net of start-up revenues) for new facilities, $0.7 million of losses from discontinued operations, and $0.8 million of non-impairment losses associated with New Morgan Academy. The 2004 fourth-quarter results also included a pre-tax non-cash impairment charge of $9.3 million related to the New Morgan Academy.
Fourth-quarter 2005 pro forma net income was $2.5 million, or $0.18 per diluted share, versus pro forma net income of $1.3 million, or $0.10 per diluted share, in the comparable 2004 quarter. Pro forma amounts exclude the effects of pre-opening and start-up costs (net of start-up revenues) for new facilities, losses associated with New Morgan Academy (including the 2004 impairment charge) and charges related to the early extinguishment of debt.
Revenues increased 7.5 percent to $79.4 million for the fourth-quarter of 2005 from $73.9 million in the 2004 period. While revenues from core operations remained strong, facilities acquired April 1, 2005 from Correctional Systems, Inc., as well as those facilities/programs initiated in 2004 -- Walnut Grove Youth Correctional Facility, Regional Correctional Center and Southern Peaks Regional Treatment Center -- further contributed to the revenue increase. The effects of these increases were partially offset by the impact from the temporary closure of the Campbell Griffin Treatment Center during the fourth quarter of 2005. Average contract occupancy levels were 98.4 percent in residential facilities compared with 96.2 percent in last year's fourth-quarter.
Pro forma fourth-quarter 2005 revenues, which exclude the impact of start-up revenues, were $79.4 million compared with $71.8 million in the prior year's quarter.
The Company reported income from operations of $7.2 million for the fourth-quarter of 2005 compared with a loss of $3.0 million in the same quarter of 2004. The increase in 2005 fourth-quarter results was due to improved/increased operations at those facilities previously noted, and also reflected the continuing benefit of the restructuring activity undertaken in the first-quarter of 2005 to streamline management and eliminate underperforming programs. The increase in fourth-quarter results was also due to a decrease in professional fees, partially offset by an increase in depreciation for assets acquired and placed in service in 2005. Results for 2004 also reflect the impact of a $9.3 million impairment charge related to New Morgan Academy. Additionally, comparisons of income from operations were affected by $0.6 million in net start-up costs in 2005 and $1.9 million in 2004, and on-going costs related to New Morgan Academy of $0.5 million and $0.6 million in 2005 and 2004, respectively.
Excluding the effects of start-up costs (net of start-up revenues) for new facilities and losses associated with New Morgan Academy, pro forma income from operations was $8.2 million in the fourth-quarter of 2005 compared with $8.8 million in the 2004 quarter. The decrease in 2005 fourth-quarter results is primarily attributable to the Regional Correctional Center, which was included in net start-up expenses in 2004 and therefore excluded from pro forma income from operations.
Full-Year Results
For the year ended December 31, 2005, revenues increased 12.1 percent to $310.8 million from $277.2 million reported in 2004, principally due to contributions from those facilities/programs previously noted, as well as the Las Vegas Center and certain alternative education programs, which were initiated in late 2004. Income from operations was $27.9 million for this year compared with $14.5 million in the prior year. Net income was $0.3 million, or $0.02 per diluted share, compared with a net loss of $7.4 million, or $0.56 per diluted share, in the previous year. The 2005 period included charges totaling $2.4 million to streamline management and close several underperforming programs. The 2004 period included a $2.4 million charge from the early extinguishment of debt and a $9.3 million impairment charge for the New Morgan Academy.
Pro forma 2005 revenues were $306.0 million compared with $274.0 million in the prior year, and pro forma income from operations was $33.7 million compared with $31.7 million. Pro forma net income was $5.0 million, or $0.36 per diluted share, compared with $5.3 million, or $0.40 per diluted share, for the year ended December 31, 2004.
Discontinued Operations
As previously announced, Cornell took actions to shut down operations at several underperforming facilities/programs during the first and second quarters of 2005. The increase in the net loss from discontinued operations in 2005 over the 2004 period reflects reduced revenues as the programs were shut down, asset impairment charges, and other related closure costs.
Update on Moshannon Valley
Construction at the Moshannon Valley Correctional Center in Phillipsburg, PA was completed in the first quarter of 2006 according to schedule. The 1,300-bed adult secure facility will open at the end of this month, and we anticipate the arrival of inmates shortly thereafter. This facility will be operated under a take-or-pay contract with the Federal Bureau of Prisons.
Outlook for 2006
The Company expects first-quarter 2006 results to range from a loss per share of $0.01 to earnings per share of $0.03 on an as-reported basis, and earnings of $0.15 to $0.19 per share on a pro forma basis, which excludes pre-opening and start-up costs for new facilities, and losses associated with New Morgan Academy.
For the full year, the Company expects earnings to range from $0.59 to $0.66 per share on an as-reported basis, and earnings of $0.87 to $0.94 per share on a pro forma basis, which excludes pre-opening and start-up costs for new facilities, and losses associated with New Morgan Academy. Reconciliations of these forward-looking non-GAAP measures to the comparable GAAP measures are included in the attached financial data tables.
The 2006 guidance reflects an annual effective tax rate of approximately 35.0 percent on discontinued operations and 41.3 percent on continuing operations.
Quarterly Webcast
Cornell's management will host a conference call and simultaneous webcast at 11 a.m. Eastern today. The webcast may be accessed through Cornell's home page, www.cornellcompanies.com. A replay will also be available on the above web site and by dialing 800-405-2236 or 303-590-3000 and providing confirmation code 11053499. The replay will be available through March 21, 2006 by phone and for 30 days on the web site. This earnings release can be found on Cornell's website at www.cornellcompanies.com under "Investor Relations -- Press Releases."
This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based our forward-looking statements on management's beliefs and assumptions based on information available to management at the time the statements are made. Actual results may differ materially from those expressed or implied by forward-looking statements as a result of many factors or events, including the risks and uncertainties we discuss in our filings with the Securities and Exchange Commission. Our filings with the Securities and Exchange Commission are available free of charge on the Securities and Exchange Commissions's web site at http://www.sec.gov. Each forward looking-statement speaks only as of the date of the particular statement, and we undertake no obligation to update or revise any forward looking-statement, whether as a result of new information, future events or otherwise. Information in this release is subject to adjustment resulting from further review and the obtaining of additional information that may impact our consolidated financial statements.
This release includes non-GAAP (pro forma) revenue, non-GAAP (pro forma) income from operations, non-GAAP (pro forma) net income, and non-GAAP (pro forma) net income per share data. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP (pro forma) measures used by other companies. Our management believes that the presentation of non-GAAP (pro forma) revenue, non-GAAP (pro forma) income from operations, non-GAAP (pro forma) net income, and non-GAAP (pro forma) net income per share data, when shown in conjunction with the corresponding GAAP measures, provides useful information to investors regarding financial and business trends relating to our financial condition and results of operations. Our management further believes that where the adjustments used in calculating non-GAAP (pro forma) revenue, non-GAAP (pro forma) income from operations, non-GAAP (pro forma) net income, and non-GAAP (pro forma) net income per share data are based on specific, identified charges that impact different line items in our statements of operations that it is useful to investors to know how these specific line items in the statements of operations are affected by these adjustments.
Cornell Companies, Inc. is a leading private provider of corrections, treatment and educational services outsourced by federal, state and local governmental agencies. Cornell provides a diversified portfolio of services for adults and juveniles, including incarceration and detention, transition from incarceration, drug and alcohol treatment programs, behavioral rehabilitation and treatment, and grades 3-12 alternative education in an environment of dignity and respect, emphasizing community safety and rehabilitation in support of public policy. The Company (www.cornellcompanies.com) has 83 facilities in 18 states and the District of Columbia, which includes one facility under construction. Cornell has a total service capacity of 19,506, including capacity for 1,300 individuals that will be available upon completion of the facility under construction.
The Cornell Companies, Inc. logo can be found at:http://www.primezone.com/newsroom/prs/?pkgid=1468
CORNELL COMPANIES, INC.
FINANCIAL HIGHLIGHTS
(in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Revenues $ 79,435 $ 73,902 $ 310,775 $ 277,190
Operating expenses 63,462 54,923 238,305 211,157
Pre-opening and start-up
expenses (A) 563 4,080 9,017 8,803
Impairment of long-lived
assets -- 9,300 -- 9,300
Depreciation and
amortization 3,821 3,683 15,200 13,187
General and administrative
expenses 4,390 4,923 20,387 20,284
--------- --------- --------- ---------
Income (loss) from
operations 7,199 (3,007) 27,866 14,459
Interest expense, net 5,003 5,942 21,723 20,354
Loss on extinguishment of
debt -- -- -- 2,361
--------- --------- --------- ---------
Income (loss) before
provision for income
taxes and discontinued
operations 2,196 (8,949) 6,143 (8,256)
Provision (benefit) for
income taxes 355 (3,516) 2,215 (3,256)
--------- --------- --------- ---------
Income (loss) before
discontinued operations 1,841 (5,433) 3,928 (5,000)
Discontinued operations,
net of tax benefit (228) (712) (3,622) (2,433)
--------- --------- --------- ---------
Net income (loss) $ 1,613 $ (6,145) $ 306 $ (7,433)
========= ========= ========= =========
Earnings (loss) per share:
-- Basic $ 0.12 $ (0.46) $ 0.02 $ (0.56)
-- Diluted $ 0.12 $ (0.46) $ 0.02 $ (0.56)
Number of shares used in
per share computation:
-- Basic 13,761 13,261 13,554 13,203
-- Diluted 13,848 13,261 13,668 13,203
Total service capacity
(end of period) (B) 19,469 17,346 19,469 17,346
Contracted beds in
operation (end of
period) (B) 11,764 11,479 11,764 11,479
Average contract
occupancy (B) (C) 98.4% 96.2% 97.3% 98.6%
Average contract
occupancy excluding
start-up operations (B) 98.4% 101.8% 101.8% 101.9%
(A) Revenues associated with reported start-up expenses were $0.0
million and $2.1 million for the quarters ended December 31, 2005
and 2004, respectively. Revenues associated with reported
start-up expenses were $4.8 million and $3.1 million for the full
years ended December 31, 2005 and 2004, respectively.
(B) Data presented excludes discontinued operating facilities.
(C) Average contract occupancy percentages are based on actual
occupancy for the period as a percentage of the contracted
capacity of residential facilities in operation. Since certain
facilities have service capacities that exceed contracted
capacities, average contract occupancy percentages can exceed
100% if the average actual occupancy exceeded contracted
capacity.
Balance Sheet Data:
------------------
(in thousands) December 31, December 31,
2005 2004
----------- -----------
Cash and cash equivalents $ 13,723 $ 9,895
Investment securities 7,250 51,740
Working capital 57,286 107,597
Property and equipment, net 323,861 282,255
Total assets 510,628 507,631
Long-term debt 266,659 279,528
Total debt 276,360 288,533
Stockholders' equity 165,461 161,312
Non-GAAP Financial Measures
The Company uses non-GAAP financial measures to assess the operating results and effectiveness of the Company's core continuing business operations. Pro forma measures exclude the effect of pre-opening and start-up revenues and costs, charges related to the early extinguishment of debt, and revenues and costs associated with New Morgan Academy. Earnings before interest, taxes, depreciation and amortization (EBITDA) measures operating income before depreciation and amortization, excluding the effect of pre-opening and start-up expenses, net of start-up revenue. The Company calculates EBITDA amounts for comparative purposes to assist investors in analyzing its business performance. These non-GAAP financial measures may not be comparable to similarly titled measurements used by other companies and should not be used as a substitute for net income, earnings per share or other GAAP operating measurements. Set forth below are reconciliations to GAAP measures of non-GAAP measures used herein.
RECONCILIATION OF HISTORICAL GAAP BASIS RESULTS TO HISTORICAL
NON-GAAP BASIS INFORMATION (in thousands, except per
share data):
-------------------------------------------------------------
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2005 2004 2005 2004
--------- --------- --------- ---------
GAAP revenues from
operations $ 79,435 $ 73,902 $ 310,775 $ 277,190
Less: Start-up revenue -- 2,141 4,759 3,142
--------- --------- --------- ---------
Pro forma revenues from
operations $ 79,435 $ 71,761 $ 306,016 $ 274,048
========= ========= ========= =========
GAAP income (loss) from
operations $ 7,199 $ (3,007) $ 27,866 $ 14,459
Plus:
New Morgan Academy loss
from operations 476 584 1,581 2,288
Pre-opening and start-up
expenses, net of
start-up revenue 563 1,939 4,258 5,661
Impairment on long-lived
assets -- 9,300 -- 9,300
--------- --------- --------- ---------
Pro forma income from
operations $ 8,238 $ 8,816 $ 33,705 $ 31,708
========= ========= ========= =========
GAAP net income (loss) $ 1,613 $ (6,145) $ 306 $ (7,433)
Plus:
New Morgan Academy net
loss 589 788 2,151 2,469
Pre-opening and start-up
expenses, net of
start-up revenue 332 1,144 2,512 3,340
Impairment on long-lived
assets -- 5,487 -- 5,487
Loss on extinguishment
of debt -- -- -- 1,393
--------- --------- --------- ---------
Pro forma net income $ 2,534 $ 1,274 $ 4,969 $ 5,256
========= ========= ========= =========
GAAP income (loss) per
share--diluted $ 0.12 $ (0.46) $ 0.02 $ (0.56)
Plus:
New Morgan Academy 0.04 0.06 0.16 0.19
Pre-opening and start-up
expenses, net of
start-up revenue 0.02 0.09 0.18 0.25
Impairment on long-lived
assets -- 0.41 -- 0.41
Loss on extinguishment
of debt -- -- -- 0.11
--------- --------- --------- ---------
Pro forma earnings per
share--diluted $ 0.18 $ 0.10 $ 0.36 $ 0.40
========= ========= ========= =========
RECONCILIATION OF HISTORICAL GAAP BASIS
RESULTS TO HISTORICAL NON-GAAP BASIS
INFORMATION (in thousands):
---------------------------------------
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
2005 2004 2005 2004
--------- --------- --------- ---------
GAAP income (loss)
from operations $ 7,199 $ (3,007) $ 27,866 $ 14,459
Plus:
Depreciation and
amortization 3,821 3,683 15,200 13,187
Pre-opening and
start-up expenses,
net of start-up
revenue 563 1,939 4,258 5,661
--------- --------- --------- ---------
EBITDA $ 11,583 $ 2,615 $ 47,324 $ 33,307
========= ========= ========= =========
RECONCILIATION OF FORWARD-LOOKING INFORMATION:
---------------------------------------------
First Quarter Twelve Months
Ending Ending
March 31, 2006 December 31, 2006
--------------------------------------------
GAAP earnings (loss)
per share -- diluted $ (0.01) -- 0.03 $ 0.59 -- 0.66
New Morgan Academy 0.03 0.15
Pre-opening and
start-up expenses,
net of start up
revenue 0.13 0.13
--------------------------------------------
Pro forma earnings
per share -- diluted $ 0.15 -- 0.19 $ 0.87 -- 0.94
============================================
Cornell Companies, Inc.
Operating Statistics from Continuing Operations
For the Three and Twelve Months Ended December 31, 2005 and 2004
Three Months Ended December 31,
--------------------------------------
2005 2004
------------------ ------------------
% %
---------- ------ ---------- ------
Contracted beds in operation:
Secure Institutional (A) 7,697 65% 7,679 67%
Adult Community-Based (A) 2,461 21% 2,074 18%
Juvenile (A) 1,606 14% 1,726 15%
---------- ------ ---------- ------
Total 11,764 100% 11,479 100%
========== ====== ========== ======
Number of billed mandays:
Secure Institutional 703,947 51% 655,084 50%
Adult Community-Based
Residential 234,254 17% 185,438 14%
Non-residential (B) 130,614 10% 124,738 10%
Juvenile:
Residential 130,870 10% 144,062 11%
Non-residential (B) 171,969 12% 191,311 15%
---------- ------ ---------- ------
Total 1,371,654 100% 1,300,633 100%
========== ====== ========== ======
Revenues (in 000's):
Secure Institutional $ 35,256 44% $ 31,779 43%
Adult Community-Based
Residential 14,258 18% 11,543 16%
Non-residential 1,421 2% 919 1%
Juvenile:
Residential 22,048 28% 24,179 33%
Non-residential 6,452 8% 5,482 7%
---------- ------ ---------- ------
Total $ 79,435 100% $ 73,902 100%
========== ====== ========== ======
Average revenue per diem:
Secure Institutional $ 50.08 $ 48.51
Adult Community-Based
Residential $ 60.87 $ 62.25
Non-residential (B) $ 10.88 $ 7.37
Juvenile:
Residential $ 168.47 $ 167.84
Non-residential (B) $ 37.52 $ 28.66
---------- ----------
Total $ 57.91 $ 56.82
========== ==========
Twelve Months Ended December 31,
--------------------------------------
2005 2004
------------------ ------------------
% %
---------- ------ ---------- ------
Contracted beds in operation:
Secure Institutional (A) 7,697 65% 7,679 67%
Adult Community-Based (A) 2,461 21% 2,074 18%
Juvenile (A) 1,606 14% 1,726 15%
---------- ------ ---------- ------
Total 11,764 100% 11,479 100%
========== ====== ========== ======
Number of billed mandays:
Secure Institutional 2,682,950 49% 2,370,027 48%
Adult Community-Based
Residential 908,813 17% 716,325 15%
Non-residential (B) 517,045 10% 494,306 10%
Juvenile:
Residential 555,151 10% 567,287 12%
Non-residential (B) 757,642 14% 743,805 15%
---------- ------ ---------- ------
Total 5,421,601 100% 4,891,750 100%
========== ====== ========== ======
Revenues (in 000's):
Secure Institutional $ 131,684 42% $ 114,818 42%
Adult Community-Based
Residential 55,225 18% 44,483 16%
Non-residential 4,860 2% 4,067 1%
Juvenile:
Residential 93,086 30% 93,343 34%
Non-residential 25,920 8% 20,479 7%
---------- ------ ---------- ------
Total $ 310,775 100% $ 277,190 100%
========== ====== ========== ======
Average revenue per diem:
Secure Institutional $ 49.08 $ 48.45
Adult Community-Based
Residential $ 60.77 $ 62.10
Non-residential (B) $ 9.40 $ 8.23
Juvenile:
Residential $ 167.68 $ 164.54
Non-residential (B) $ 34.21 $ 27.53
---------- ----------
Total $ 57.32 $ 56.66
========== ==========
(A) Residential Contract Capacity Only
(B) Non-residential "mandays" includes a mix of day units and
hourly units. Mental health facilities are reported in hours.