HOUSTON, May 9, 2005 (PRIMEZONE) -- Cornell Companies, Inc. (NYSE:CRN) today reported results for the period ended March 31, 2005. The Company reported a net loss of $2.3 million, or $0.17 per diluted share, compared with net income of $0.7 million, or $0.05 per diluted share, in same period last year. This year's first-quarter results included $1.0 million of start-up costs (net of start-up revenues) for new facilities, $0.8 million of losses from discontinued operations, and $0.5 million of losses associated with New Morgan Academy. Cornell had previously announced an anticipated restructuring charge in the first quarter 2005 of $1.5 million, or $0.07 per diluted share. Due to more aggressive action with respect to management streamlining, Cornell took an actual charge of $2.1 million, or $0.10 per diluted share. The 2004 first quarter results included a total of approximately $1.1 million for start-up costs for new facilities and losses associated with New Morgan Academy.
First-quarter 2005 pro forma loss was $0.7 million, or $0.05 per diluted share, versus earnings of $1.8 million, or $0.14 per diluted share, in the comparable 2004 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 took numerous actions in the first quarter to restructure ourselves and focus on improving our risk-adjusted returns on our investments in financial and management resources. In the first quarter, our core operations performed well. We're now focusing on lean operations, filling underutilized capacity, reducing overhead and redesigning our business development processes. We're on track to deliver against the financial commitments that we've made for the year."
First-Quarter Summary (Amounts in thousands, except per share data)
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First Quarter Ended
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As Reported 3/31/2005 3/31/2004
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Revenue from operations $ 74,693 $ 66,386
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Income from operations 3,435 5,655
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Net income (loss) from
discontinued operations (840) 113
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Net income (loss) (2,271) 706
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EPS -- diluted $ (0.17) $ 0.05
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Shares outstanding used in
diluted per share
computation 13,428 13,312
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Pro Forma, excluding New
Morgan Academy and
pre-opening and start-up
costs and related
revenue (a)
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Revenue $ 71,706 $ 65,793
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Income from operations 5,507 7,142
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Net income (loss) (736) 1,822
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EPS -- diluted $ (0.05) $ 0.14
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(a) See reconciliation of historical GAAP and non-GAAP information
attached.
First-Quarter Results
Revenues increased 12.5 percent to $74.7 million for the first quarter of 2005 from $66.4 million in the 2004 period. Strong contributions from existing facilities including Big Spring Correctional Center, as well as new facilities/programs initiated in 2004 including Walnut Grove Youth Correctional Facility, Southern Peaks Regional Treatment Center, Regional Correctional Center and the Las Vegas Correctional Center accounted for the revenue increase. Pro forma first-quarter 2005 revenues, which exclude the impact of start-up revenues, were $71.7 million compared with $65.8 million in the prior year's quarter. Average contract occupancy levels were 93.6 percent in residential facilities compared with 100.8 percent in last year's first quarter. Excluding start-up operations, average contract occupancy was 100.7 percent in the Company's residential facilities in the 2005 quarter and 101.4 percent in the 2004 period.
The Company reported income from operations of $3.4 million for the first quarter of 2005 compared with $5.7 million in the same quarter of 2004. As a result of Cornell's plan to streamline management and close several underperforming programs, the Company took a charge of $2.1 million in the first quarter of 2005. The decrease in 2005 first quarter results was also due to increased professional fees associated with items including Sarbanes-Oxley compliance, executive recruitment services and business development, and depreciation from assets acquired and placed in service in 2004. Additionally, comparisons of income from operations were affected by $1.7 million in net start-up costs in 2005 and $1.1 million in 2004, and on-going costs related to New Morgan Academy of $0.4 million in 2005 and 2004.
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 $5.5 million in the first quarter of 2005 compared with $7.1 million in the 2004 first quarter. The decrease in 2005 first quarter pro forma results was principally attributed to the previously noted management streamlining.
CSI Integration Proceeding as Planned
The integration of the Company's April 1, 2005 acquisition of Correctional Systems, Inc. (CSI) is proceeding smoothly. The acquisition added nearly 1,000 new beds to Cornell's service capacity, expanded its national footprint and increased the Company's reach in California, New Mexico and Texas. The acquisition was immediately accretive to earnings.
IGSA Guarantees Population of 500 at RCC
On March 20, 2005, Cornell announced that Bernalillo County, New Mexico, and the U.S. Office of the Detention Trustee signed an Intergovernmental Service Agreement (IGSA) that guarantees a population of 500 federal detainees at the Company's Regional Correctional Center (RCC) in Albuquerque. The population's ramp up is progressing. The facility has a total service capacity of 970 beds.
Project Updates
The Company provided the following update on projects and new business awards:
-- In Phillipsburg, Pa., construction of the Moshannon Valley
Correctional Center remains on schedule. Cornell currently
anticipates that the 1,300-bed facility will open on March 26,
2006 under the terms of a contract with the Federal Bureau of
Prisons.
-- At Southern Peaks Regional Treatment Center in Colorado, ramp-up
continues with the current population at 90, at close of
business, Friday, May 6, 2005. Cornell expects this facility
to reach a population of 156 by the end of the year.
Outlook for 2005
As part of previously announced program closures, Cornell anticipates it will incur a charge of approximately $0.3 million, or $0.01 per share, in the second quarter. The Company expects second-quarter results to range from loss per share of $0.02 to income per share of $0.02 on an as-reported basis, and income per share of $0.08 to $0.12 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.
For the full year, the Company expects earnings per share to range from $0.11 to $0.18 on an as-reported basis, and from $0.42 to $0.49 on a pro forma basis, which excludes pre-opening and start-up costs for new facilities, and losses associated with New Morgan Academy.
The 2005 guidance reflects an annual estimated effective tax rate of approximately 49.0 percent. It represents a blended annual effective tax rate of approximately 35.0 percent on discontinued operations and 41.1 percent on continuing operations. It also includes contributions from CSI, as well as the anticipated closure of certain programs.
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 11029914. The replay will be available through May 16, 2005 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."
The company logo can be found at: http://www.primezone.com/newsroom/prs/?pkgid=1468
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current plans and actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. Important factors that could cause actual results to differ include, among others, (1) the outcomes of pending putative class action shareholder and derivative lawsuits, and related insurance coverage, (2) Cornell's ability to win new contracts and to execute its growth strategy, (3) risks associated with acquisitions and the integration thereof (including the ability to achieve administrative and operating cost savings and anticipated synergies), (4) the timing and costs of the opening of new programs and facilities or the expansions of existing facilities, (5) Cornell's ability to negotiate contracts at those facilities for which it currently does not have an operating contract, (6) significant charges to expense of deferred costs associated with financing and other projects in development if management determines that one or more of such projects is unlikely to be successfully concluded, (7) results from alternative deployment or sale of facilities such as New Morgan Academy or the inability to do so, (8) Cornell's ability to complete the construction of the Moshannon Valley Correctional Center as anticipated, (9) changes in governmental policy and/or funding to discontinue or not renew existing arrangements, to eliminate or discourage the privatization of correctional, detention and pre-release services in the United States, or to eliminate rate increase, (10) the availability of financing on terms that are favorable to Cornell, and (11) fluctuations in operating results because of occupancy levels and/or mix, competition (including competition from two competitors that are substantially larger than Cornell), increases in cost of operations, fluctuations in interest rates and risks of operations.
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 (http://www.cornellcompanies.com) has 83 facilities in 17 states and the District of Columbia, which includes two facilities under development or construction. Cornell has a total service capacity of 18,498, including capacity for 1,514 individuals that will be available upon completion of facilities under development or construction.
CORNELL COMPANIES, INC.
FINANCIAL HIGHLIGHTS
($000's except per share amounts)
Three Months Ended
March 31,
-----------------------
2005 2004
-------- --------
Revenues $ 74,693 $ 66,386
Operating expenses 56,443 51,801
Pre-opening and start-
up expenses (A) 4,694 1,646
Depreciation and
amortization 3,793 3,135
General and
administrative
expenses 6,338 4,160
Gain on sale of assets (10) (11)
-------- --------
Income from operations 3,435 5,655
Interest expense, net 5,744 4,649
-------- --------
Income (loss) before
provision (benefit)
for income taxes
and discontinued
operations (2,309) 1,006
Provision (benefit)
for income taxes (878) 413
-------- --------
Income (loss) before
discontinued
operations (1,431) 593
Discontinued
operations, net of
tax provision
(benefit) (840) 113
-------- --------
Net income (loss) $ (2,271) $ 706
======== ========
Earnings (loss) per
share:
-- Basic $ (.17) $ (0.05)
-- Diluted $ (.17) $ (0.05)
Number of shares used
in per share
computation:
-- Basic 13,428 13,081
-- Diluted 13,428 13,312
Total service capacity
(end of period) (B) 17,510 16,290
Contracted beds in
operation (end of
period) (B) 11,409 9,356
Average contract
occupancy (B) (C) 93.6% 100.8%
Average contract
occupancy excluding
start-up
operations (B) 100.7% 101.4%
(A) Revenues associated with reported start-up expenses were $3.0
million and $0.6 million for the quarters March 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:
------------------
March 31, December 31,
2005 2004
---------- ----------
Cash and cash equivalents $23,133 $ 9,895
Investment securities 41,625 51,740
Working capital 103,643 107,597
Property and equipment, net 284,463 282,255
Total assets 501,026 507,631
Long-term debt 276,893 279,528
Total debt 285,894 288,533
Stockholders' equity 159,088 161,312
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, 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: ($000's except per share amounts)
-------------------------------------------------
Three Months Ended
March 31,
----------------------
2005 2004
-------- --------
GAAP revenues from
operations $ 74,693 $ 66,386
Less: Start-up revenue 2,987 593
-------- --------
Pro forma revenues from
operations $ 71,706 $ 65,793
======== ========
GAAP income from operations $ 3,435 $ 5,655
Plus:
New Morgan Academy loss
from operations 365 434
Pre-opening and start-up
expenses, net of
start-up revenue 1,707 1,053
-------- --------
Pro forma income from
operations $ 5,507 $ 7,142
======== ========
GAAP net income (loss) $ (2,271) $ 706
Plus:
New Morgan Academy net
loss 528 494
Pre-opening and start-up
expenses, net of
start-up revenue 1,007 622
-------- --------
Pro forma net income (loss) $ (736) $ 1,822
======== ========
GAAP earnings (loss) per
share -- diluted: $ (0.17) $ 0.05
Plus:
New Morgan Academy 0.04 0.04
Pre-opening and start-up
expenses, net of
start-up revenues 0.08 0.05
-------- --------
Pro forma earnings (loss)
per share -- diluted $ (0.05) $ 0.14
======== ========
RECONCILIATION OF HISTORICAL GAAP BASIS
RESULTS TO HISTORICAL NON-GAAP BASIS
INFORMATION: (000's)
----------------------------------------------
Three Months Ended
March 31,
-------------------
2005 2004
------- -------
GAAP income from operations $ 3,435 $ 5,655
Plus:
Depreciation and
amortization 3,793 3,135
Pre-opening and start-up
expenses, net of start-up
revenue 1,707 1,053
------- -------
EBITDA $ 8,935 $ 9,843
======= =======
RECONCILIATION OF FORWARD-LOOKING
INFORMATION: (000's except per share amounts)
----------------------------------------------------
Second Quarter Twelve Months Ending
Ending June 30, December 31, 2005
2005
----------------- -----------------
GAAP earnings/(loss) per
share -- diluted $ (0.02) -- 0.02 $ 0.11 -- 0.18
New Morgan Academy 0.04 0.15
Pre-opening and
start-up expenses,
net of start up
revenue 0.06 0.16
----------------- -----------------
Pro forma earnings per
share -- diluted $ 0.08 -- 0.12 $ 0.42 -- 0.49
================= =================
Cornell Companies, Inc.
Operating Statistics from Continuing Operations
For the Three Months Ended March 31, 2005 and 2004
Three Months Ended March 31,
----------------------------------------------
2005 2004
---------------------- ----------------------
% %
---------- ---------- ---------- ----------
Contracted beds
in operation:
---------------
Secure
Institutional (1) 7,553 66% 5,844 62%
Adult Community-
Based
Corrections (1) 2,074 18% 1,854 20%
Juvenile (1) 1,782 16% 1,658 18%
---------- ---------- ---------- ----------
Total 11,409 100% 9,356 100%
========== ========== ========== ==========
Number of billed
mandays:
----------------
Secure
Institutional 636,578 48% 536,908 44%
Adult Community-
Based
Corrections
Residential 187,851 14% 182,540 15%
Non-residential (2) 142,769 11% 146,825 12%
Juvenile:
Residential 143,819 11% 142,790 12%
Non-residential (2) 207,381 16% 207,843 17%
---------- ---------- ---------- ----------
Total 1,318,398 100% 1,216,906 100%
========== ========== ========== ==========
Revenues:
---------
Secure Institutional $ 30,858 41% $ 25,784 39%
Adult Community-
Based Corrections
Residential 11,720 16% 11,185 17%
Non-residential 1,255 2% 1,217 2%
Juvenile:
Residential 24,711 33% 22,885 34%
Non-residential 6,149 8% 5,315 8%
---------- ---------- ---------- ----------
Total $ 74,693 100% $ 66,386 100%
========== ========== ========== ==========
Average revenue per
diem:
-------------------
Secure Institutional $ 48.47 $ 48.02
Adult Community-
Based Corrections
Residential $ 62.39 $ 61.27
Non-residential (2) $ 8.79 $ 8.29
Juvenile:
Residential $ 171.82 $ 160.27
Non-residential (2) $ 29.65 $ 25.57
---------- ----------
Total $ 56.65 $ 54.55
========== ==========
(1) Residential Contract Capacity Only
(2) Non-residential "mandays" includes a mix of day units and
hourly units. Mental health facilities are reported in hours.