Quarter Ended
March 31,
Metric 2007 2006 % Change
------------------- --------- --------- --------
Average Available Beds 72,643 70,589 2.9%
Average Compensated Occupancy 98.0% 93.7% 4.6%
Total Compensated Man-Days 6,408,581 5,954,920 7.6%
Revenue per Compensated Man-Day $ 54.01 $ 52.07 3.7%
Operating Expense per Compensated Man-Day:
Fixed 28.55 28.82 -0.9%
Variable 9.49 9.74 -2.6%
--------- ---------
Total 38.04 38.56 -1.3%
--------- ---------
Operating Margin per Compensated Man-Day $ 15.97 $ 13.51 18.2%
========= =========
Operating Margin 29.6% 25.9% 14.3%
Total revenue for the first quarter of 2007 increased 11.5% to $350.9
million from $314.6 million during the same period in 2006, as total
compensated man-days increased 7.6% to 6.4 million from 6.0 million, and as
revenue per compensated man-day increased to $54.01 from $52.07, an
increase of 3.7%. The increase in revenue per compensated man-day is
substantially due to per diems obtained on new management contracts.
Average compensated occupancy for the three months ended March 31, 2007
increased to 98.0% from 93.7% for the same period in 2006, also as a result
of the commencement of new management contracts combined with an increase
in the demand for prison beds from a number of existing customers.
Fixed expenses decreased $0.27 per compensated man-day to $28.55 for the
three months ended March 31, 2007 compared with $28.82 per compensated
man-day during the same period in 2006. The decrease in fixed expenses was
primarily due to leveraging fixed costs over a higher inmate population.
Variable expenses also decreased to $9.49 per compensated man-day during
the first quarter of 2007 from $9.74 per compensated man-day during the
first quarter of 2006, a decrease of $0.25 per compensated man-day, or
2.6%. The decrease in variable expenses per compensated man-day was
primarily attributable to a decrease in inmate medical expenses resulting
from the increase in inmate populations under management contracts that
contain provisions limiting our medical risk.
Business Development Update
On May 2, 2007, we were awarded a contract to house up to 2,160 inmates at
our Diamondback Correctional Facility, in Watonga, Oklahoma, by the Arizona
Department of Corrections. The contract provides for an initial one-year
term, and includes four additional one-year renewal periods. The contract
also provides for a guaranteed 95% occupancy that becomes effective upon
reaching 95% capacity following an agreed ramp-up period. We currently
house approximately 1,400 Arizona inmates and approximately 650 Hawaiian
inmates at this facility. We currently expect to relocate the Hawaiian
inmates to our new 1,896-bed Saguaro Correctional Facility, in Eloy,
Arizona, upon its completion in June 2007.
In April 2007, through a competitive procurement process we were selected
for the continued management of the 1,030-bed Marion County Jail in
Indianapolis, Indiana. CCA has managed the Marion County Jail since 1997.
The facility currently holds approximately 1,000 inmates from Marion
County, Indiana. The contract, which is effective May 1, 2007 through
December 31, 2017, provides for a minimum guaranteed monthly average
occupancy of 1,025 inmates and may be extended by mutual agreement for up
to 10 years.
On March 29, 2007, as a result of anticipated demand for prison beds, we
announced the second 360-bed expansion of our 1,104-bed Tallahatchie County
Correctional Facility in Tutwiler, Mississippi. The two expansions of the
Tallahatchie facility aggregate 720 beds which we expect to complete for an
estimated cost of $39.0 million. Also on March 29, 2007, we announced our
intention to expand our 767-bed Leavenworth Detention Center, in
Leavenworth, Kansas, by 266 beds, at an estimated cost of $22.5 million.
This expansion will also include a renovation of the existing building
infrastructure to accommodate higher detainee populations.
Status of California Contract
On February 20, 2007, the Superior Court of California, County of
Sacramento, ruled that the Governor of California exceeded his authority in
issuing an emergency proclamation regarding prison overcrowding and that
the contracts entered into by the California Department of Corrections and
Rehabilitation ("CDCR") to utilize prison beds at private facilities
outside of California to relieve prison overcrowding were thus unauthorized
by the Emergency Services Act and that such contracts violate the
California Constitution. A judgment based on that ruling was entered on
April 2, 2007, including a permanent injunction against performing under
the contracts signed pursuant to the proclamation, which would include
contracts between us and the CDCR. The Governor and other state defendants
have appealed that judgment. The Court of Appeal of California, Third
Appellate District has temporarily stayed enforcement of this judgment,
which means our contract with the CDCR remains in effect. We cannot
predict the length of time this stay will remain in place or the ultimate
outcome of the appeal.
On April 26, 2007, the California legislature passed the "The Public Safety
and Offender Rehabilitation Services Act of 2007," which, among other
things, expands California's prison capacity through new construction and
authorizes the transfer of inmates out-of-state through June 2011 without
the consent of affected inmates. The Governor of California has indicated
that he will sign this legislation, and announced an intention to transfer
up to 8,000 inmates out of state. This statute may provide the Governor
additional authority to enter into contracts for out-of-state prison beds.
Although we believe that the legislative findings within the statute
further strengthen the Governor's original assertion of emergency authority
and support the constitutionality of that action, we cannot guarantee that
this statute will be persuasive to the Court of Appeal of California. If
the Court of Appeal were to lift its stay of the Superior Court's judgment,
then the injunction would result in the loss of inmates we currently house.
Regardless of the Court of Appeal's ruling, we cannot guarantee that the
state of California will fully utilize the contracting authority created by
this new statute, nor can we guarantee that this statute will not itself be
challenged for violating the California Constitution or on other grounds.
We currently have a contract with the CDCR which provides the CDCR the
ability to place California inmates in several of our facilities. As of
March 31, 2007 we held 356 California inmates. However, the number of beds
we make available to California is dependent on the demand for our
available beds from existing and potential customers and the capacity
available within the time frame desired by the state of California.
Facility Inventory and Development Update
Current Inventory
At April 30, 2007, CCA had available inventory of approximately 2,200 beds,
which consists of approximately 1,900 owned and managed beds and 300
managed only beds. Most of these beds are contractually committed to
existing customers; however, none of these contracts provide for guarantees
of occupancy. We expect that a significant portion of these beds will be
occupied over the next twelve months.
Facilities Currently Under Development or Expansion
In response to ongoing demand for bed capacity from a number of federal and
state agencies, we have undertaken the following expansion and development
projects:
Total Bed
Capacity Estimated
Following Estimated Total Cost Potential
Beds Expansion Completion (in millions) Customer(s)
----- --------- ---------- -------------- -----------
Facilities Under
Expansion
--------------------
Gadsden Correctional
Institution, State of
Florida 384 1,520 Q3 2007 (1) Florida
Bay Correctional
Facility, State of
Florida 235 985 Q3 2007 (1) Florida
North Fork
Correctional
Facility, Various
Oklahoma 960 2,400 Q4 2007 $ 55.0 States
Tallahatchie County Federal
Correctional and/or
Facility, Various
Mississippi 720 1,824 Q4 2007 39.0 States
Eden Detention
Center, Texas 129 1,354 Q1 2008 20.0(2) BOP
Bent County
Correctional
Facility,
Colorado 720 1,420 Q2 2008 44.0 Colorado(3)
Kit Carson
Correctional
Center,
Colorado 720 1,488 Q2 2008 44.0 Colorado(3)
Leavenworth
Detention Center,
Kansas 266 1,033 Q2 2008 22.5 USMS(3)
----- -------------
Total Expansion Beds 4,134 $ 224.5
----- -------------
New Facilities Under
Development
--------------------
Saguaro Correctional State of
Facility, Arizona 1,896 1,896 June 2007 $ 103.0 Hawaii
----- -------------
GRAND TOTAL 6,030 $ 327.5
===== =============
(1) The expansion costs of the Gadsden Correctional Institution and the Bay
Correctional Facility will be funded by the state of Florida. Our
management contracts for the Gadsden and Bay facilities expire on
June 30, 2007. The state of Florida issued an Invitiation to Negotiate
("ITN") for the management of the Gadsden and Bay facilities. The
Company has responded to the ITN; however, we can provide no assurance
that we will be successful in securing a contract for the continued
management of either of these facilities
(2) The total estimated cost is for a renovation of the existing facility
which will result in 129 additional beds.
(3) We currently have contracts in place with the stated customers to
occupy these facilities; however, the contracts do not provide a
guarantee of occupancy.
In addition to the above listed projects, we are actively pursuing
expansion opportunities as well as a number of additional sites for new
prison development. Our goal is to begin development of an additional
3,400 to 5,400 new beds in 2007.
Commenting on the Company's financial results, President and CEO John
Ferguson stated, "We are pleased with the Company's first quarter financial
results and the continued improvement in our overall financial performance.
Our revenues and operating margins continued to improve as a result of
increased inmate populations both at the federal and state levels."
"We are pleased to expand our relationship with the Arizona Department of
Corrections at our Diamondback Correctional Facility, and are gratified by
their continued confidence in our ability to satisfy their correctional
needs."
Ferguson continued, "The expansions that we are undertaking and the opening
of our new Saguaro facility will create additional capacity that we can
market over the next twelve months. We believe demand for new prison beds
will continue over the foreseeable future, and one of our primary efforts
going forward is adding beds that will allow us to serve this demand and to
be a just-in-time provider to our government partners."
Guidance
The Company expects diluted earnings per share ("EPS") for the second
quarter of 2007 to be in the range of $0.48 to $0.52, and full year EPS to
be in the range of $1.97 to $2.07.
The guidance above does not incorporate the effect of any incremental
inmates we may receive as a result of the Governor of California's recent
announcement to transfer up to 8,000 inmates out of state. While we are
optimistic that we will benefit from California's decision, management does
not presently have adequate information to reasonably estimate the impact
on 2007 operating results.
During 2007, CCA expects to invest approximately $275.5 million in capital
expenditures, consisting of approximately $220.5 million in prison
construction and expansions that have been previously announced, $37.0
million in maintenance capital expenditures and $18.0 million in
information technology.
Supplemental Financial Information and Investor Presentations
CCA has made available on its website supplemental financial information
and other data for the first quarter of 2007. 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.
The Company's management may meet with investors from time to time during
the second quarter of 2007. Written materials used in the investor
presentations will also be available on our website beginning on or about
May 15, 2007. 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 2:00 p.m. Central Time (3:00 p.m.
Eastern Time) today to discuss our 2007 first quarter 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 begin today at 6:00 p.m. Eastern Time through 11:59 p.m.
Eastern Time on May 10, 2007, by dialing 888-203-1112, pass code 6514583.
About the Company
Corrections Corporation of America 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
40 company-owned facilities, with a total design capacity of approximately
73,000 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 the Company's 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 a result of sufficient governmental appropriations
and as a result of inmate disturbances; (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; and (v) 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 the Company with the
Securities and Exchange Commission.
We take 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)
March 31, December 31,
ASSETS 2007 2006
------------ ------------
Cash and cash equivalents $ 58,767 $ 29,029
Investments 83,922 82,830
Accounts receivable, net of allowance of $2,783
and $2,261, respectively 224,378 237,382
Deferred tax assets 12,288 11,655
Prepaid expenses and other current assets 12,808 17,554
Current assets of discontinued operations 416 966
------------ ------------
Total current assets 392,579 379,416
Property and equipment, net 1,830,776 1,805,052
Restricted cash 11,973 11,826
Investment in direct financing lease 15,237 15,467
Goodwill 15,246 15,246
Other assets 23,146 23,807
Non-current assets of discontinued operations - 46
------------ ------------
Total assets $ 2,288,957 $ 2,250,860
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 148,039 $ 160,522
Income taxes payable 5,976 2,810
Current portion of long-term debt 290 290
Current liabilities of discontinued operations 367 760
------------ ------------
Total current liabilities 154,672 164,382
Long-term debt, net of current portion 975,895 975,968
Deferred tax liabilities 29,451 23,755
Other liabilities 41,535 37,074
------------ ------------
Total liabilities 1,201,553 1,201,179
------------ ------------
Commitments and contingencies
Common stock - $0.01 par value; 80,000 shares
authorized; 61,371 and 61,042 shares issued
and outstanding at March 31, 2007 and December
31, 2006, respectively 614 610
Additional paid-in capital 1,535,599 1,528,219
Retained deficit (448,809) (479,148)
------------ ------------
Total stockholders' equity 1,087,404 1,049,681
------------ ------------
Total liabilities and stockholders'
equity $ 2,288,957 $ 2,250,860
============ ============
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Quarter
Ended March 31,
--------------------
2007 2006
--------- ---------
REVENUE:
Management and other $ 349,838 $ 313,592
Rental 1,077 1,036
--------- ---------
350,915 314,628
--------- ---------
EXPENSES:
Operating 249,130 234,650
General and administrative 17,318 14,377
Depreciation and amortization 18,270 15,678
--------- ---------
284,718 264,705
--------- ---------
OPERATING INCOME 66,197 49,923
--------- ---------
OTHER (INCOME) EXPENSES:
Interest expense, net 13,934 15,126
Expenses associated with debt refinancing and
recapitalization transactions - 982
Other income (11) (12)
--------- ---------
13,923 16,096
--------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 52,274 33,827
Income tax expense (19,704) (12,483)
--------- ---------
INCOME FROM CONTINUING OPERATIONS 32,570 21,344
Loss from discontinued operations, net of taxes - (15)
--------- ---------
NET INCOME $ 32,570 $ 21,329
========= =========
BASIC EARNINGS PER SHARE:
Income from continuing operations $ 0.54 $ 0.36
Loss from discontinued operations, net of taxes - -
--------- ---------
Net income $ 0.54 $ 0.36
========= =========
DILUTED EARNINGS PER SHARE:
Income from continuing operations $ 0.52 $ 0.35
Loss from discontinued operations, net of taxes - -
--------- ---------
Net income $ 0.52 $ 0.35
========= =========
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS)
CALCULATION OF ADJUSTED FREE CASH FLOW
For the Quarter
Ended March 31,
------------------
2007 2006
-------- --------
Pre-tax income $ 52,274 $ 33,812
Expenses associated with debt refinancing and
recapitalization transactions - 982
Income taxes paid (798) -
Depreciation and amortization 18,270 15,678
Depreciation and amortization for discontinued
operations - 25
Income tax benefit for discontinued operations - (8)
Stock-based compensation reflected in G&A expenses 1,230 778
Amortization of debt costs and other non-cash interest 1,015 1,235
Maintenance and technology capital expenditures (10,456) (9,519)
-------- --------
Adjusted Free Cash Flow $ 61,535 $ 42,983
======== ========
CALCULATION OF ADJUSTED EBITDA
For the Quarter
Ended March 31,
-----------------
2007 2006
-------- --------
Net income $ 32,570 $ 21,329
Interest expense, net 13,934 15,126
Depreciation and amortization 18,270 15,678
Income tax expense 19,704 12,483
Loss from discontinued operations, net of taxes - 15
-------- --------
EBITDA $ 84,478 $ 64,631
Expenses associated with debt refinancing and
recapitalization transactions - 982
-------- --------
Adjusted EBITDA $ 84,478 $ 65,613
======== ========
CALCULATION OF ADJUSTED DILUTED EARNINGS PER SHARE
For the
Quarter Ended
March 31, 2006
--------------
Net income $ 21,329
Special items:
Expenses associated with debt refinancing and
recapitalization transactions 982
Income tax benefit for special items (362)
--------------
Adjusted net income $ 21,949
==============
Weighted average common shares outstanding - basic 59,300
Effect of dilutive securities:
Stock options and warrants 1,544
Restricted stock-based compensation 222
--------------
Weighted average shares and assumed conversions -
diluted 61,066
==============
Adjusted Diluted Earnings Per Share $ 0.36
==============
NOTE TO SUPPLEMENTAL FINANCIAL INFORMATION
Net income excluding special charges (Adjusted Diluted Earnings Per Share),
EBITDA, Adjusted 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, Adjusted Diluted Earnings Per Share and
Adjusted Free Cash Flow) and the operating performance of the Company's
correctional facilities (EBITDA and Adjusted EBITDA). EBITDA and Adjusted
EBITDA are useful as supplemental measures of the performance of the
Company's correctional facilities because they do not take into account
depreciation and amortization, tax provisions, or with respect to Adjusted
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, Adjusted EBITDA and
Adjusted Free Cash Flow from time to time for certain other income and
expenses that it considers non-recurring, infrequent or unusual, such as
the special charges in the preceding calculation of earnings per diluted
share excluding special charges (Adjusted Diluted Earnings Per Share), 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 Adjusted Diluted Earnings Per Share, EBITDA,
Adjusted EBITDA and Adjusted Free Cash Flow differently than the Company
does, or adjust for other items, and therefore comparability may be
limited. EPS excluding special charges (Adjusted Diluted Earnings Per
Share), EBITDA, Adjusted 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: Karin Demler (615) 263-3005