Quarter Ended
September 30,
Metric 2008 2007 % Change
--------- --------- ---------
Average Available Beds 81,505 75,328 8.2%
Average Compensated Occupancy 95.3% 97.9% -2.7%
Total Compensated Man-Days 7,147,895 6,784,057 5.4%
Average Daily Compensated Population 77,695 73,740 5.4%
Revenue per Compensated Man-Day $ 57.23 $ 54.94 4.2%
Operating Expense per Compensated Man-Day:
Fixed 30.50 29.25 4.3%
Variable 9.83 9.98 -1.5%
--------- ---------
Total 40.33 39.23 2.8%
--------- ---------
Operating Margin per Compensated Man-Day $ 16.90 $ 15.71 7.6%
========= =========
Operating Margin 29.5% 28.6% 3.1%
Total revenue for the third quarter of 2008 increased 8.9% to $411.9 million from $378.3 million during the same period in 2007, as total compensated man-days increased to 7.1 million from 6.8 million, and as revenue per compensated man-day increased to $57.23 from $54.94. The increase in revenue from the prior year period was predominately due to higher inmate populations from the state of California combined with per diem increases from several federal and state contracts. Total operating expenses per compensated man-day increased 2.8% to $40.33 during the third quarter of 2008 compared with $39.23 during the same period in 2007. The 4.3% increase in fixed expenses per compensated man-day was primarily due to an increase in salaries and benefits largely attributable to operating inefficiencies at our new La Palma Correctional Center where inmate populations have not yet reached stabilized occupancy levels, as well as general inflationary increases. Near the end of the second quarter of 2008, the California Department of Corrections and Rehabilitation ("CDCR") suspended the ramp-up of inmate populations at the Tallahatchie County Correctional Facility so that we could comply with certain medical requirements as set forth by a federal medical receiver appointed to oversee the healthcare delivery within the California correctional system. However, we have continued to receive additional inmates from the state of California at certain of our other facilities. During September 2008, we finalized terms of a corrective action plan with the CDCR and the federal medical receiver, and on November 5, 2008 resumed the ramp-up of California inmate populations at the Tallahatchie facility. At September 30, 2008, we housed approximately 5,100 inmates from the state of California at six of our facilities. On November 1, 2008, we were housing 5,512 California inmates at these same facilities. Commenting on the CDCR contract at our Tallahatchie facility, John Ferguson, CEO and Chairman stated, "Although negotiations of the corrective action plan have taken longer than anticipated, implementation of the corrective action plan allows inmate transfers to our Tallahatchie facility to resume and has allowed us to establish a positive working relationship with the federal medical receiver's office." Business Development Update CCA has completed the first two phases consisting of 2,040 beds at our La Palma Correctional Center in Eloy, Arizona. Phase one consisting of 1,020 beds came on-line in July 2008 and phase two also consisting of 1,020 beds came on-line in October 2008. CCA expects to complete the final 1,020 beds during the first quarter of 2009, resulting in a total design capacity of 3,060 beds at the La Palma facility. Subsequent to quarter end we entered into an agreement to house U.S. Marshals Service (USMS) inmates at our D.C. Correctional Treatment Facility in the District of Columbia. The agreement does not provide a limit on the number of detainees we may house on behalf of the USMS but is subject to availability of beds at the D.C. facility. Subsequent to quarter end we also completed two expansion projects. On October 17, 2008, the 660-bed expansion of our Cimarron Correctional Facility located in Oklahoma was completed, increasing the total design capacity of the Cimarron facility to 1,692-beds. We currently believe these beds will ultimately be utilized by the state of Oklahoma or by other customers that may have a need for immediate bed capacity. On October 24, 2008, the final 128-bed expansion of our Tallahatchie County Correctional Facility located in Mississippi was completed, increasing the total design capacity of the Tallahatchie facility to 2,672-beds. These beds are currently under contract by the state of California. Pursuant to a re-bid of the management contracts, during September 2008, CCA was notified by the Texas Department of Criminal Justice ("TDCJ") of its intent to transfer the management of the 500-bed B.M. Moore Correctional Center in Overton, Texas and the 518-bed Diboll Correctional Center in Diboll, Texas to another operator, upon the expiration of the management contracts on January 16, 2009. Both of these facilities are owned by the TDCJ. The termination of the management contracts is not expected to have a material effect on the Company's financial results. Facility Development Update Facilities Currently Under Development or Expansion Based upon our expectation of increased demand for bed capacity on behalf of a number of state and federal agencies, we expect to complete the following expansion and development projects:
Facilities Total Bed Estimated
Under Capacity Remaining
Expansion or Additional Following Estimated Spend (1) Potential
Development Beds Expansion Completion (in millions) Customer(s)
---------- --------- ----------- ---------- -------------
Owned
Facilities:
Adams County
Correctional Federal or
Center, Various
Mississippi 2,232 2,232 Q4 2008 $ 21.8 States
La Palma
Correctional
Center,
Arizona (2) 1,020 3,060 Q1 2009 20.8 California (3)
Trousdale
Correctional Federal or
Center, Various
Tennessee 2,040 2,040 Q1 2010 122.0 States
Nevada Southern
Detention
Center, Nevada 1,072 1,072 Q2 2010 71.0 OFDT(3)
Managed Only
Facilities:
Silverdale
Facilities, Hamilton
Tennessee 128 1,046 Q4 2008 -(4) County
---------- ----------
Total 6,492 $ 235.6
========== ==========
(1) The total estimated remaining spend on all the expansion and
development beds outlined above is $235.6 million. However, we
estimate the total cost to construct all of the beds represented in
the table above to be $561.5 million.
(2) At September 30, 2008, the La Palma Correctional Center currently had
1,020 beds completed and in service. However an additional 1,020 beds
were placed into service on October 1, 2008, and the final 1,020 beds
are expected to be completed during the first quarter of 2009. Upon
completion of construction of the entire project, the La Palma facility
will have a total design capacity of 3,060 beds.
(3) The management contract in place with the stated customer at this
facility provides for a limited guaranteed inmate population.
The expansion costs of Silverdale Facilities and Idaho Correctional
Center, facilities managed by CCA but owned by the customer, will be
funded by the customer.
(4) The expansion costs of Silverdale Facilities, managed by
CCA but owned by the customer, will be funded by the customer.
In addition to the above listed projects, we continue to pursue additional development and expansion opportunities in order to satisfy increasing demand from existing and potential customers.
Expansions or Developments Completed During 2007 and 2008
Expansions or New Facilities Additional
Completed Beds Completed Customer(s)
--------- --------- ----------------
2007
Citrus County Detention Facility,
Florida 360 Q1 2007 Citrus County
Crossroads Correctional Center, State of Montana
Montana 96 Q1 2007 and USMS
Saguaro Correctional Facility,
Arizona 1,896 Q2 2007 State of Hawaii
Gadsden Correctional Institution,
Florida 384 Q3 2007 State of Florida
Bay Correctional Facility, Florida 235 Q3 2007 State of Florida
Tallahatchie County Correctional State of
Facility, Mississippi 720 Q4 2007 California
North Fork Correctional Facility, Various Existing
Oklahoma 960 Q4 2007 State Customers
---------
Total 2007 Additional Beds Completed 4,651
---------
2008
Eden Detention Center, Texas 129 Q1 2008 BOP
Kit Carson Correctional Center, State of
Colorado 720 Q1 2008 Colorado
Bent County Correctional Facility, State of
Colorado 720 Q2 2008 Colorado
Leavenworth Detention Center, Kansas 266 Q2 2008 USMS
Tallahatchie County Correctional State of
Facility, Mississippi 720 Q2 2008 California
La Palma Correctional Center, State of
Arizona 1,020 Q3 2008 California
State of
Davis Correctional Facility, Oklahoma and/or
Oklahoma 660 Q3 2008 Various States
State of
Oklahoma Federal
Cimarron Correctional Facility, and/or Various
Oklahoma 660 Q4 2008 States
La Palma Correctional Center, State of
Arizona 1,020 Q4 2008 California
Tallahatchie County Correctional State of
Facility, Mississippi 128 Q4 2008 California
---------
Total 2008 Additional Beds Completed 6,043
---------
Total 10,694
=========
Liquidity Update
We believe we have the ability to fund our capital expenditure
requirements, including all construction projects under development as well
as our maintenance and information technology expenditures, working
capital, and debt service requirements, with cash on hand, net cash
provided by operations, and borrowings available under our $450 million
revolving credit facility. None of our outstanding debt requires scheduled
principal repayments, and we have no debt maturities until May 2011. We
have a strong and flexible balance sheet that we believe will enable us to
continue to grow while maintaining a conservative capital structure. At
September 30, 2008, our liquidity was provided by cash on hand of $28.7
million and approximately $237.2 million available under our $450.0 million
revolving credit facility. During the nine months ended September 30,
2008, we generated $222.9 million in cash through operating activities, and
as of September 30, 2008, we had net working capital of $78.2 million.
Guidance
We expect diluted earnings per share ("EPS") for the fourth quarter of 2008
to be in the range of $0.30 to $0.32, resulting in full year 2008 EPS to be
in the range of $1.18 to $1.20.
During 2008, we expect to invest approximately $508.8 million in capital
expenditures, consisting of approximately $465.4 million in prison
construction and expansions that have been previously announced, $29.9
million in maintenance capital expenditures and $13.5 million in
information technology. We also currently expect to pay approximately
$55.0 million in federal and state income taxes during 2008.
We have revised fourth quarter guidance primarily as a result of the
following: 1) longer than anticipated delays in state of California inmate
transfers to our Tallahatchie County facility, 2) a slower than anticipated
ramp-up of state of California inmate populations at other facilities, 3)
delays in negotiating the new USMS contract at our D.C. Correctional
Treatment Facility and 4) recent and projected reductions in inmate
populations from the states of Washington and Minnesota resulting from
earlier than anticipated utilization of new, state-owned bed capacity.
Looking forward to the balance of 2008 and into 2009, we are monitoring the
challenges faced by our customers as a result of the down-turn in the
economy and the unusual financial environment. As most state legislatures
are out of session, it is unclear what steps our customers may take to
address current and future budget shortfalls. Although this environment
increases uncertainty in the short-term, we believe the long-term
implications are very positive as states may defer or cancel plans for
constructing new state-owned prison bed capacity, which should ensure a
continuation of the supply and demand imbalance that has been benefiting
the private prison industry.
Supplemental Financial Information and Investor Presentations
We have made available on our website supplemental financial information
and other data for the third quarter of 2008. We do not undertake any
obligation, and disclaim any duty, to update any of the information
disclosed in this report. Interested parties may access this information
through our website at www.correctionscorp.com under "Financial
Information" of the Investor section.
Management may meet with investors from time to time during the fourth
quarter of 2008. Written materials used in the investor presentations will
also be available on our website beginning on or about November 18, 2008.
Interested parties may access this information through our website at
www.correctionscorp.com under "Webcasts" of the Investor section.
Webcast and Replay Information
We will host a webcast conference call at 10:00 a.m. central time (11:00
a.m. eastern time) today, to discuss our third quarter 2008 financial
results. To listen to this discussion, please access "Webcasts" on the
Investor page at www.correctionscorp.com. The conference call will be
archived on our website following the completion of the call. In addition,
a telephonic replay will be available today at 2:00 p.m. eastern time
through 11:59 p.m. eastern time on November 13, 2008, by dialing
888-203-1112, pass code 4294978.
About CCA
CCA is the nation's largest owner and operator of privatized correctional
and detention facilities and one of the largest prison operators in the
United States, behind only the federal government and three states. We
currently operate 64 facilities, including 42 company-owned facilities,
with a total design capacity of approximately 82,000 beds in 19 states and
the District of Columbia. We specialize in owning, operating and managing
prisons and other correctional facilities and providing inmate residential
and prisoner transportation services for governmental agencies. In
addition to providing the fundamental residential services relating to
inmates, our facilities offer a variety of rehabilitation and educational
programs, including basic education, religious services, life skills and
employment training and substance abuse treatment. These services are
intended to reduce recidivism and to prepare inmates for their successful
re-entry into society upon their release. We also provide health care
(including medical, dental and psychiatric services), food services and
work and recreational programs.
Forward-Looking Statements
This press release contains statements as to our beliefs and expectations
of the outcome of future events that are forward-looking statements as
defined within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from the
statements made. These include, but are not limited to, the risks and
uncertainties associated with: (i) fluctuations in our operating results
because of, among other things, changes in occupancy levels, competition,
increases in cost of operations, fluctuations in interest rates and risks
of operations; (ii) changes in the privatization of the corrections and
detention industry, the public acceptance of our services, the timing of
the opening of and demand for new prison facilities and the commencement of
new management contracts; (iii) our ability to obtain and maintain
correctional facility management contracts, including as the result of
sufficient governmental appropriations, inmate disturbances, and the timing
of the opening of new facilities and the commencement of new management
contracts as well as our ability to utilize current available beds and new
capacity as development and expansion projects are completed; (iv)
increases in costs to construct or expand correctional facilities that
exceed original estimates, or the inability to complete such projects on
schedule as a result of various factors, many of which are beyond our
control, such as weather, labor conditions and material shortages,
resulting in increased construction costs; (v) changes in governmental
policy and in legislation and regulation of the corrections and detention
industry including, but not limited to, judicial challenges regarding the
transfer of California inmates to out-of-state private correctional
facilities; (vi) the availability of debt and equity financing on terms
that are favorable to us; and (vii) general economic and market conditions.
Other factors that could cause operating and financial results to differ
are described in the filings made from time to time by us with the
Securities and Exchange Commission.
CCA takes no responsibility for updating the information contained in this
press release following the date hereof to reflect events or circumstances
occurring after the date hereof or the occurrence of unanticipated events
or for any changes or modifications made to this press release.
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
September 30, December 31,
ASSETS 2008 2007
------------ ------------
Cash and cash equivalents $ 28,736 $ 57,968
Accounts receivable, net of allowance of $3,059
and $3,914, respectively 242,574 241,116
Deferred tax assets 14,789 12,250
Prepaid expenses and other current assets 20,700 21,133
Assets held for sale - 7,581
Current assets of discontinued operations 175 615
------------ ------------
Total current assets 306,974 340,663
Property and equipment, net 2,456,949 2,086,980
Restricted cash 6,669 6,511
Investment in direct financing lease 13,698 14,503
Goodwill 13,672 13,672
Other assets 21,907 23,411
------------ ------------
Total assets $ 2,819,869 $ 2,485,740
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 219,021 $ 212,749
Income taxes payable 8,905 964
Current portion of long-term debt 290 290
Current liabilities of discontinued operations 566 728
------------ ------------
Total current liabilities 228,782 214,731
Long-term debt, net of current portion 1,155,460 975,677
Deferred tax liabilities 42,884 34,271
Other liabilities 39,505 39,086
------------ ------------
Total liabilities 1,466,631 1,263,765
------------ ------------
Commitments and contingencies
Common stock - $0.01 par value; 300,000 shares
authorized; 125,597 and 124,472 shares issued
and outstanding at September 30, 2008 and
December 31, 2007, respectively 1,256 1,245
Additional paid-in capital 1,589,572 1,568,736
Retained deficit (237,590) (348,006)
------------ ------------
Total stockholders' equity 1,353,238 1,221,975
------------ ------------
Total liabilities and stockholders' equity $ 2,819,869 $ 2,485,740
============ ============
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------ ------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
REVENUE:
Management and other $ 410,664 $ 377,069 $ 1,193,530 $ 1,085,158
Rental 1,221 1,187 3,617 3,375
----------- ----------- ----------- -----------
411,885 378,256 1,197,147 1,088,533
----------- ----------- ----------- -----------
EXPENSES:
Operating 292,599 273,450 850,220 778,937
General and
administrative 20,866 18,362 60,222 54,497
Depreciation and
amortization 23,564 20,074 67,152 57,272
----------- ----------- ----------- -----------
337,029 311,886 977,594 890,706
----------- ----------- ----------- -----------
OPERATING INCOME 74,856 66,370 219,553 197,827
----------- ----------- ----------- -----------
OTHER EXPENSES
(INCOME):
Interest expense, net 15,087 13,249 42,671 40,838
Other income (360) (200) (356) (281)
----------- ----------- ----------- -----------
14,727 13,049 42,315 40,557
----------- ----------- ----------- -----------
INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES 60,129 53,321 177,238 157,270
Income tax expense (22,038) (20,170) (66,765) (59,275)
----------- ----------- ----------- -----------
INCOME FROM CONTINUING
OPERATIONS 38,091 33,151 110,473 97,995
Income (loss) from
discontinued
operations, net of
taxes (200) 104 (57) 432
----------- ----------- ----------- -----------
NET INCOME $ 37,891 $ 33,255 $ 110,416 $ 98,427
=========== =========== =========== ===========
EARNINGS PER SHARE:
Basic $ 0.30 $ 0.27 $ 0.89 $ 0.81
=========== =========== =========== ===========
Diluted $ 0.30 $ 0.26 $ 0.87 $ 0.79
=========== =========== =========== ===========
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS)
CALCULATION OF ADJUSTED FREE CASH FLOW
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Income from continuing
operations before income taxes $ 60,129 $ 53,321 $ 177,238 $ 157,270
Income taxes paid (16,702) (9,655) (39,474) (31,331)
Depreciation and amortization 23,564 20,074 67,152 57,272
Income (loss) from discontinued
operations, net of taxes (200) 104 (57) 432
Income tax expense (benefit)
for discontinued operations (115) 64 (26) 262
Stock-based compensation
reflected in G&A expenses 2,198 1,579 6,336 4,618
Amortization of debt costs and
other non-cash interest 940 969 2,900 2,972
Maintenance and technology
capital expenditures (7,861) (11,353) (23,053) (32,458)
--------- --------- --------- ---------
Adjusted Free Cash Flow $ 61,953 $ 55,103 $ 191,016 $ 159,037
========= ========= ========= =========
CALCULATION OF EBITDA
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Net income $ 37,891 $ 33,255 $ 110,416 $ 98,427
Interest expense, net 15,087 13,249 42,671 40,838
Depreciation and amortization 23,564 20,074 67,152 57,272
Income tax expense 22,038 20,170 66,765 59,275
(Income) loss from discontinued
operations, net of taxes 200 (104) 57 (432)
---------- --------- ---------- ---------
EBITDA $ 98,780 $ 86,644 $ 287,061 $ 255,380
========== ========= ========== =========
NOTE TO SUPPLEMENTAL FINANCIAL INFORMATION EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures. The Company believes that these measures are important operating measures that supplement discussion and analysis of the Company's results of operations and are used to review and assess operating performance of the Company and its correctional facilities and their management teams. The Company believes that it is useful to provide investors, lenders and security analysts disclosures of its results of operations on the same basis as that used by management. Management and investors review both the Company's overall performance (including GAAP EPS, net income, and Adjusted Free Cash Flow) and the operating performance of the Company's correctional facilities (EBITDA). EBITDA is a useful supplemental measure of the performance of the Company's correctional facilities because it does not take into account depreciation and amortization, tax provisions, or with respect to EBITDA, the impact of the Company's financing strategies. Because the historical cost accounting convention used for real estate assets requires depreciation (except on land), this accounting presentation assumes that the value of real estate assets diminishes at a level rate over time. Because of the unique structure, design and use of the Company's correctional facilities, management believes that assessing performance of the Company's correctional facilities without the impact of depreciation or amortization is useful. The calculation of Adjusted Free Cash Flow substitutes capital expenditures incurred to maintain the functionality and condition of the Company's correctional facilities in lieu of a provision for depreciation; Adjusted Free Cash Flow also excludes certain other non-cash expenses that do not affect the Company's ability to service debt. The Company may make adjustments to GAAP net income, EBITDA and Adjusted Free Cash Flow from time to time for certain other income and expenses that it considers non-recurring, infrequent or unusual, even though such items may require cash settlement, because such items do not reflect a necessary component of the ongoing operations of the Company. Other companies may calculate EBITDA and Adjusted Free Cash Flow differently than the Company does, or adjust for other items, and therefore comparability may be limited. EBITDA and Adjusted Free Cash Flow are not measures of performance under GAAP, and should not be considered as an alternative to cash flows from operating activities, a measure of liquidity or an alternative to net income as indicators of the Company's operating performance or any other measure of performance derived in accordance with GAAP. This data should be read in conjunction with the Company's consolidated financial statements and related notes included in its filings with the Securities and Exchange Commission.
Contact Information: Contact: Investors and Analysts: Karin Demler CCA (615) 263-3005 Financial Media: David Gutierrez Dresner Corporate Services (312) 780-7204