HOUSTON, May 9, 2006 (PRIMEZONE) -- Cornell Companies, Inc. (NYSE:CRN) today reported results for the period ended March 31, 2006. The Company reported net income of $0.7 million, or $0.05 per diluted share, compared with a net loss of $2.3 million, or $0.17 per diluted share, in the same period last year. This year's first-quarter results included $1.6 million of start-up costs (net of start-up revenues) for new facilities, $0.5 million of losses from discontinued operations, and $0.6 million of losses associated with New Morgan Academy. In addition, the 2006 first quarter results included a pre-tax impact of approximately $2.6 million, representing the annual true-up calculation under the terms of the guaranteed population contract for the Regional Correctional Center. The 2005 first quarter results included a total of approximately $1.0 million of start-up costs (net of start-up revenues) for new facilities, $1.4 million of losses from discontinued operations, and $0.5 million of losses associated with New Morgan Academy. 2005 first quarter results also included a pre-tax restructuring charge of approximately $2.1 million.
First-quarter 2006 pro forma income was $2.8 million, or $0.20 per diluted share, versus a loss of $0.7 million, or $0.05 per diluted share, in the comparable 2005 quarter. Pro forma numbers exclude the effects of start-up costs (net of start-up revenues) for new facilities and losses associated with New Morgan Academy. Cornell calculates pro forma numbers for comparative purposes to help investors better understand the operating results attributable to the Company's core continuing business operations. Reconciliations of these non-Generally Accepted Accounting Principles (GAAP) measures to the comparable GAAP measures are included in the attachments hereto.
James E. Hyman, Cornell's chairman and chief executive officer, said, "We are pleased with the results of our continued focus on execution. The first quarter demonstrated strong financial and operational performance, culminating with the opening -- on time and on budget -- of our Moshannon Valley Correctional Center project. For the rest of 2006, management remains committed to building solid platforms for each of our business lines that will enable us to deliver to customer and shareholder requirements."
First-Quarter Summary (Amounts in thousands, except per share data)
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First Quarter Ended
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As Reported 3/31/2006 3/31/2005
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Revenue from operations $ 83,847 $ 73,640
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Income from operations 7,209 4,348
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Net loss from discontinued
operations (526) (1,433)
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Net income (loss) 684 (2,273)
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EPS -- diluted $ 0.05 $ (0.17)
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Shares outstanding used in
diluted per share
computation 13,953 13,428
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Pro Forma, excluding New Morgan
Academy and pre-opening and
start-up costs and related
revenue (see Note)
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Revenue $ 83,847 $ 70,653
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Income from operations 10,302 6,420
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Net income (loss) 2,829 (738)
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EPS -- diluted $ 0.20 $ (0.05)
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(Note) See reconciliation of historical GAAP and non-GAAP information attached.
First-Quarter Results
Revenues increased 13.9 percent to $83.8 million for the first quarter of 2006 from $73.6 million in the 2005 period. In addition to the $2.6 million contract true-up calculation for the Regional Correctional Center, strong contributions from core programs, the acquisition of CSI in April 2005 , and new facilities/programs initiated in 2006 including Mesa Verde Community Correctional Facility contributed to the revenue increase.
Pro forma revenues, which exclude the impact of start-up revenues, were $83.8 million in the first quarter of 2006, compared with $70.7 million in the prior year's quarter. Average contract occupancy levels were 99.1 percent in residential facilities compared with 93.6 percent in last year's first quarter.
The Company reported income from operations of $7.2 million for the first quarter of 2006 compared with $4.3 million in the same quarter of 2005. As noted, 2006 results were impacted by a $2.4 million contract true-up calculation (net of receipts tax) for the Regional Correctional Center. In addition, the first quarter results reflect approximately $0.7 million in pre-tax charges related to the adoption of Statement of Financial Accounting Standards No. 123R. 2005 first quarter results included a restructuring charge of approximately $2.1 million. Additionally, comparisons of income from operations were affected by $2.7 million in net start-up costs in 2006 and $1.7 million in 2005, and on-going costs related to New Morgan Academy of $0.4 million in 2006 and 2005.
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 $10.3 million in the first quarter of 2006 compared with $6.4 million in the 2005 first quarter. The increase in 2006 first quarter pro forma results was principally attributable to the aforementioned conditions.
Update on Moshannon Valley
During the first quarter of 2006, Cornell received a Notice to Proceed (NTP) at its Moshannon Valley Correctional Center. The NTP was effective as of April 1, 2006, and the facility began accepting inmates shortly thereafter. The facility is operated under a 95% take-or-pay contract with the Federal Bureau of Prisons.
Outlook for 2006
Cornell expects second-quarter results to range from earnings per share of $0.21 to $0.25 on an as-reported basis, and earnings per share of $0.25 to $0.29 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 attachments hereto.
After incorporating first quarter performance, the Company expects full year earnings per share to range from $0.61 to $0.68 on an as-reported basis, and from $0.89 to $0.96 on a pro forma basis, which excludes pre-opening and start-up costs for new facilities, and losses associated with New Morgan Academy.
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 11:00 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 11059626. The replay will be available through May 16, 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 Commission'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 82 facilities in 18 states and the District of Columbia. Cornell has a total service capacity of 19,442.
The Cornell Companies, Inc. logo is available at http://www.primezone.com/newsroom/prs/?pkgid=1468
CORNELL COMPANIES, INC.
FINANCIAL HIGHLIGHTS
(in thousands, except per share amounts)
Three Months Ended
March 31,
---------------------
2006 2005
-------- --------
Revenues $ 83,847 $ 73,640
Operating expenses 65,143 54,531
Pre-opening and start-up expenses (A) 2,657 4,694
Depreciation and amortization 3,726 3,729
General and administrative expenses 5,112 6,338
-------- --------
Income from operations 7,209 4,348
Interest expense, net 5,043 5,744
-------- --------
Income (loss) before provision (benefit)
for income taxes and discontinued
operations 2,166 (1,396)
Provision (benefit) for income taxes 956 (556)
-------- --------
Income (loss) before discontinued
operations 1,210 (840)
Discontinued operations, net of tax benefit (526) (1,433)
-------- --------
Net income (loss) $ 684 $ (2,273)
======== ========
Earnings (loss) per share:
-- Basic $ 0.05 $ (.17)
-- Diluted $ 0.05 $ (.17)
Number of shares used in per share
computation:
-- Basic 13,851 13,428
-- Diluted 13,953 13,428
Total service capacity (end of period)
(B) 17,800 17,188
Contracted beds in operation (end of
period) (B) 12,124 11,353
Average contract occupancy (B) (C) 99.1% 93.6%
Average contract occupancy excluding
start-up operations (B) 99.1% 100.7%
(A) Revenues associated with reported start-up expenses were $0.0
million and $3.0 million for the quarters ended March 31, 2006
and 2005, 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) March 31, December 31,
2006 2005
-------- --------
Cash and cash equivalents $ 1,721 $ 13,723
Investment securities 7,975 7,250
Working capital 56,133 57,286
Property and equipment, net 327,616 323,861
Total assets 498,367 510,628
Long-term debt 264,948 266,659
Total debt 274,649 276,360
Stockholders' equity 167,551 165,461
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, 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. 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
March 31,
-------------------
2006 2005
-------- --------
GAAP revenues from operations $ 83,847 $ 73,640
Less: Start-up revenue -- 2,987
-------- --------
Pro forma revenues from operations $ 83,847 $ 70,653
======== ========
GAAP income from operations $ 7,209 $ 4,348
Plus:
New Morgan Academy loss from operations 436 365
Pre-opening and start-up expenses, net
of start-up revenue 2,657 1,707
-------- --------
Pro forma income from operations $ 10,302 $ 6,420
======== ========
GAAP net income (loss) $ 684 $ (2,273)
Plus:
New Morgan Academy net loss 577 528
Pre-opening and start-up expenses, net of
start-up revenue 1,568 1,007
-------- --------
Pro forma net income (loss) $ 2,829 $ (738)
======== ========
GAAP earnings (loss) per share
-- diluted: $ 0.05 $ (0.17)
Plus:
New Morgan Academy 0.04 0.04
Pre-opening and start-up expenses, net of
start-up revenues 0.11 0.08
-------- --------
Pro forma earnings (loss) per share
-- diluted $ 0.20 $ (0.05)
======== ========
RECONCILIATION OF HISTORICAL GAAP BASIS
RESULTS TO HISTORICAL NON-GAAP BASIS
INFORMATION (in thousands):
---------------------------------------
Three Months Ended
March 31,
-------------------
2006 2005
-------- --------
GAAP income from operations $ 7,209 $ 4,348
Plus:
Depreciation and amortization 3,726 3,729
Pre-opening and start-up expenses, net of
start-up revenue 2,657 1,707
-------- --------
EBITDA $ 13,592 $ 9,784
======== ========
RECONCILIATION OF FORWARD-
LOOKING INFORMATION:
-----------------------------
Second Quarter Twelve Months
Ending Ending
June 30, 2006 December 31, 2006
----------------- -----------------
GAAP earnings per share --
diluted $ 0.21 -- 0.25 $ 0.61 -- 0.68
New Morgan Academy 0.04 0.17
Pre-opening and start-up
expenses, net of start up
revenue -- 0.11
----------------- -----------------
Pro forma earnings per share
-- diluted $ 0.25 -- 0.29 $ 0.89 -- 0.96
================= =================
Cornell Companies, Inc.
Operating Statistics from Continuing Operations
For the Three Months Ended March 31, 2006 and 2005
Three Months Ended March 31,
--------------------------------------------
2006 2005
--------------------- ---------------------
% %
---------- ---------- ---------- ----------
Contracted beds in
operation:
Secure Institutional (a) 8,057 67% 7,553 67%
Adult Community-Based
Corrections (a) 2,461 20% 2,074 18%
Juvenile (a) 1,606 13% 1,726 15%
---------- ---------- ---------- ----------
Total 12,124 100% 11,353 100%
========== ========== ========== ==========
Number of billed mandays:
Secure Institutional 714,067 51% 636,578 49%
Adult Community-Based
Corrections:
Residential 234,766 17% 187,851 14%
Non-residential (b) 134,790 10% 135,596 10%
Juvenile:
Residential 132,075 9% 142,607 11%
Non-residential (b) 185,007 13% 203,089 16%
---------- ---------- ---------- ----------
Total 1,400,705 100% 1,305,722 100%
========== ========== ========== ==========
Revenues:
Secure Institutional $ 38,321 46% $ 30,857 42%
Adult Community-Based
Corrections:
Residential 15,006 18% 11,720 16%
Non-residential 1,228 1% 926 1%
Juvenile:
Residential 22,829 27% 23,885 33%
Non-residential 6,463 8% 6,252 8%
---------- ---------- ---------- ----------
Total $ 83,847 100% $ 73,640 100%
========== ========== ========== ==========
Average revenue per diem:
Secure Institutional $ 53.67 $ 48.47
Adult Community-Based
Corrections:
Residential $ 63.92 $ 62.39
Non-residential (b) $ 9.11 $ 6.83
Juvenile:
Residential $ 172.85 $ 167.49
Non-residential (b) $ 34.93 $ 30.78
---------- ----------
Total $ 59.86 $ 56.40
========== ==========
(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.