Business & Finance
Mon, February 16, 2009Fri, February 13, 2009Thu, February 12, 2009Wed, February 11, 2009Tue, February 10, 2009Mon, February 9, 2009Fri, February 6, 2009Thu, February 5, 2009Wed, February 4, 2009Corrections Corporation of America: Corrections Corporation of America Announces Fourth Quarter 2008 and Full-Year Financial Re
Published in Business and Finance on Tuesday, February 10th 2009 at 4:35 GMT, Last Modified on 2009-02-10 04:41:39 by Market Wire
NASHVILLE, TN--(Marketwire - February 10, 2009) - Corrections Corporation of America (
Financial Review
Fourth Quarter of 2008 Compared with Fourth Quarter of 2007
-- Net income per diluted share grew 14.3% to $0.32 from $0.28 -- Adjusted Free Cash Flow increased 38.0% to $65.0 million from $47.1 million -- EBITDA increased 16.7% to $107.0 million from $91.7 million -- 1,808 expansion beds placed into service during the fourth quarter of 2008 -- Completed construction of 2,232-bed Adams County Correctional Center
Total revenues for the fourth quarter of 2008 increased 8.8%, primarily driven by a 5.2% increase in per diem rates combined with a 4.1% increase in inmate populations. Management revenue from federal customers increased 7.5% to $162.0 million generated during the fourth quarter of 2008 compared with $150.6 million generated during the prior year period. Management revenue from state customers increased 12.5% to $218.3 million during the fourth quarter of 2008 from $194.0 million for the same period in 2007. The growth in inmate populations was primarily attributable to increased inmate populations from the states of California and Idaho as well as from the U.S. Immigration and Customs Enforcement ("ICE"). The growth in inmate populations was partially offset by declines in inmate populations from the states of Minnesota, New Mexico, Washington and Wyoming.
Total portfolio occupancy decreased to 92.9% during the fourth quarter of 2008 from 98.0% during the fourth quarter of 2007, primarily due to a 9.9% increase in the average number of available beds from the fourth quarter of 2007 as a result of placing approximately 10,000 new beds into service since the end of the third quarter of 2007.
Adjusted Free Cash Flow increased to $65.0 million during the fourth quarter of 2008 from $47.1 million generated during the same period in 2007. The 38.0% increase in Adjusted Free Cash Flow primarily resulted from stronger operating results combined with a decrease in income taxes paid and a decrease in maintenance and technology capital expenditures.
Commenting on the financial results, Chief Executive Officer, John Ferguson stated, "We are pleased with our 2008 fourth quarter and full year financial results as our earnings benefited from increased demand and higher per diem rates. We are also pleased that our development efforts in 2008 have provided us with an attractive inventory of beds that positions us for continued leadership and growth in our industry."
Full-Year 2008 Compared with Full-Year 2007
-- Net income per diluted share increased 13.2% to $1.20 from $1.06 -- Adjusted Free Cash Flow increased 24.2% to $256.0 million from $206.1 million -- EBITDA increased 13.9% to $394.3 million from $346.1 million -- 8,275 additional beds placed into service during 2008
Our financial results for 2008 reflected a 9.8% increase in revenues driven by a 4.5% increase in per diem rates combined with a 5.5% increase in average daily inmate populations primarily from the states of California and Arizona as well as from ICE. In addition, operating margins per man-day increased 7.9% with operating margin rates increasing from 29.4% in 2007 to 30.4% in 2008.
EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures. Please refer to the Supplemental Financial Information and related note following the financial statements herein for further discussion and reconciliations of these measures to GAAP financial measures.
Operations Highlights
For the quarters ended December 31, 2008 and 2007, key operating statistics for the continuing operations of the Company were as follows:
Quarter Ended December 31, Metric 2008 2007 % Change --------- --------- --------- Average Available Beds 82,847 75,354 9.9% Average Compensated Occupancy 92.9% 98.0% -5.2% Total Compensated Man-Days 7,077,087 6,795,468 4.1% Average Daily Compensated Population 76,925 73,864 4.1% Revenue per Compensated Man-Day $ 58.21 $ 55.34 5.2% Operating Expense per Compensated Man-Day: Fixed 29.82 28.73 3.8% Variable 10.27 10.28 -0.1% --------- --------- Total 40.09 39.01 2.8% --------- --------- Operating Margin per Compensated Man-Day $ 18.12 $ 16.33 11.0% ========= ========= Operating Margin 31.1% 29.5% 5.4%
Total revenue for the fourth quarter of 2008 increased 8.8% to $414.4 million from $380.8 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 5.2%.
Total operating expenses per compensated man-day increased 2.8% during the fourth quarter of 2008 compared with the same period in 2007. Operating expenses per compensated man-day during the fourth quarter of 2008 reflect an increase in salaries and wages associated with mandatory wage increases at certain facilities holding federal prisoners combined with additional staffing levels hired at our La Palma facility in anticipation of receiving additional inmate populations from the state of California. These increases were partially offset by better than average claims experience in workers' compensation and employee medical expenses.
Facility Development Update Completed or Customer(s) or Additional Estimated Potential Capacity Completion Customer(s) ---------- -------------- -------------------- Expansions and New Facilities Completed 2008 Eden Detention Center, Texas 129 Q1 2008 BOP Kit Carson Correctional Center, Colorado 720 Q1 2008 State of Colorado Bent County Correctional Facility, Colorado 720 Q2 2008 State of Colorado Leavenworth Detention Center, Kansas 266 Q2 2008 USMS Tallahatchie County Correctional Facility, Mississippi 848 Q2 and Q4 2008 State of California La Palma Correctional Center, Arizona 2,040 Q3 and Q4 2008 State of California Davis Correctional Facility, State of Oklahoma Oklahoma and/or Various 660 Q3 2008 States Cimarron Correctional State of Oklahoma, Facility, Oklahoma Federal and/or 660 Q4 2008 Various States Adams County Correctional Federal and/or Center, Mississippi 2,232 Q4 2008 Various States ---------- Total 2008 Beds Completed 8,275 ========== 2009 La Palma Correctional Center, Arizona 1,020 Q1 2009 State of California ========== Facilities Under Development Nevada Southern Detention Office of Federal Center, Nevada 1,072 Q2 2010 Detention Trustee ==========
During 2008, we announced that we were awarded a contract with the Office of the Federal Detention Trustee ("OFDT") to design, build, and operate a facility expected to house approximately 1,000 federal prisoners. The contract provides for a guarantee of 750 prisoners and includes an initial term of five years with three five-year renewal options. We will commence construction of our new Nevada Southern Detention Center upon receipt of a Notice to Proceed from the OFDT. During 2008, we also commenced development of a new 2,040-bed correctional facility in Trousdale County, Tennessee. However, we have temporarily suspended the construction of this facility until we have greater clarity around the timing of future bed absorption by our customers. We will continue to monitor our customers' needs, and could promptly resume construction of the facility at little or no incremental cost from our original estimate.
Liquidity Update
Stock Repurchase Plan Update
In November 2008, we announced that our Board of Directors approved a stock repurchase program to repurchase up to $150 million of our common stock. Through February 6, 2009, we have purchased 2.5 million shares at a total cost of $37.9 million. As of February 6, 2009, we had 123.2 million shares outstanding.
Capital Resources
At December 31, 2008, our liquidity was provided by cash on hand of $34.1 million and $191.3 million available under our revolving credit facility. During the year ended December 31, 2008, we generated $256.0 million in adjusted free cash flow, and as of December 31, 2008, we had net working capital of $146.5 million. We believe we have the ability to fund our stock repurchase program as well as our capital expenditure requirements, working capital and debt service requirements, with cash on hand, net cash provided by operations, and borrowings available under our revolving credit facility. None of our outstanding debt requires scheduled principal repayments, and we have no debt maturities until May 2011.
Guidance
We expect diluted earnings per share ("EPS") for the first quarter of 2009 to be in the range of $0.24 to $0.26, and full year 2009 EPS to be in the range of $1.10 to $1.20.
As a reminder, our first quarter is negatively impacted by two fewer days than the fourth quarter and, for 2009, will have one fewer day than the first quarter of 2008 due to the leap year. The first quarter is also negatively impacted by unemployment taxes as base wage rates reset for state unemployment tax purposes.
Our guidance reflects higher depreciation expense as a result of placing expansion and development projects into service during 2008 at an aggregate cost of approximately $587.0 million. Guidance also reflects higher interest expense resulting from higher debt balances and a decline in capitalized interest on expansion and development projects. We estimate the year over year increase in interest expense and depreciation and amortization expense to negatively impact full-year 2009 EPS by $0.10 to $0.12. While our guidance anticipates full-year 2009 EBITDA levels to be comparable to 2008, the increase in interest expense and depreciation and amortization expense result in a decline in 2009 EPS compared to 2008.
During 2009, we expect to invest approximately $132.1 million in capital expenditures, consisting of approximately $78.5 million in prison construction and expansions that have been previously announced, $40.2 million in maintenance capital expenditures and $13.4 million in information technology. We are slowing the pace of investment in new beds planned for 2009 compared to 2008 until we have greater clarity around the timing of future bed absorption by our customers. We plan to continue our share repurchase program announced in November 2008, while monitoring our over arching objective of maintaining liquidity. We also expect a 2009 GAAP income tax rate of approximately 38%, with cash taxes expected to approximate GAAP income tax expense.
We remain cautious about the economic outlook through 2009, given the uncertainty and poor visibility around government budgets and spending associated with the economic downturn. However, we believe the long-term growth opportunities of our business remain very attractive as insufficient bed development by our customers should result in a continuation of the supply and demand imbalance that has been benefiting the private corrections industry. The investments we are making in bed development will help ensure we capitalize on those opportunities when the environment improves.
Supplemental Financial Information and Investor Presentations
We have made available on our website supplemental financial information and other data for the fourth 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 first quarter of 2009. Written materials used in the investor presentations will also be available on our website beginning on or about February 25, 2009. 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 fourth quarter 2008 and full-year 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 6:00 p.m. eastern time through 11:59 p.m. eastern time on February 17, 2009, by dialing 888-203-1112, pass code 2899394.
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 44 company-owned facilities, with a total design capacity of approximately 85,000 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) general economic and market conditions, including the impact governmental budgets can have on our per diem rates and occupancy; (ii) 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; (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) 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; (v) risks associated with judicial challenges regarding the transfer of California inmates to out of state private correctional facilities; and (vi) 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. 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 SHARE AMOUNTS) December 31, ------------------------ ASSETS 2008 2007 ----------- ----------- Cash and cash equivalents $ 34,077 $ 57,842 Accounts receivable, net of allowance of $2,689 and $3,914, respectively 263,073 236,886 Deferred tax assets 16,108 12,250 Prepaid expenses and other current assets 23,544 21,010 Current assets of discontinued operations 1,497 5,094 Assets held for sale - 7,581 ----------- ----------- Total current assets 338,299 340,663 Property and equipment, net 2,478,824 2,086,219 Restricted cash 6,710 6,511 Investment in direct financing lease 13,414 14,503 Goodwill 13,672 13,672 Other assets 20,455 23,401 Non-current assets of discontinued operations - 771 ----------- ----------- Total assets $ 2,871,374 $ 2,485,740 =========== =========== LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable and accrued expenses $ 189,940 $ 208,949 Income taxes payable 450 964 Current portion of long-term debt 290 290 Current liabilities of discontinued operations 1,143 4,528 ----------- ----------- Total current liabilities 191,823 214,731 Long-term debt, net of current portion 1,192,632 975,677 Deferred tax liabilities 68,349 34,271 Other liabilities 38,211 39,086 ----------- ----------- Total liabilities 1,491,015 1,263,765 ----------- ----------- Commitments and contingencies Common stock - $0.01 par value; 300,000 shares authorized; 124,673 and 124,472 shares issued and outstanding at December 31, 2008 and 2007, respectively 1,247 1,245 Additional paid-in capital 1,576,177 1,568,736 Retained deficit (197,065) (348,006) ----------- ----------- Total stockholders’ equity 1,380,359 1,221,975 ----------- ----------- Total liabilities and stockholders’ equity $ 2,871,374 $ 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 Twelve Months Ended December 31, Ended December 31, ------------------------ ------------------------ 2008 2007 2008 2007 ----------- ----------- ----------- ----------- REVENUE: Management and other $ 413,153 $ 379,627 $ 1,594,068 $ 1,451,751 Rental 1,221 1,187 4,838 4,562 ----------- ----------- ----------- ----------- 414,374 380,814 1,598,906 1,456,313 ----------- ----------- ----------- ----------- EXPENSES: Operating 286,726 269,252 1,124,002 1,036,087 General and administrative 20,086 19,902 80,308 74,399 Depreciation and amortization 24,278 21,361 90,809 78,539 Goodwill impairment - 554 - 554 ----------- ----------- ----------- ----------- 331,090 311,069 1,295,119 1,189,579 ----------- ----------- ----------- ----------- OPERATING INCOME 83,284 69,745 303,787 266,734 ----------- ----------- ----------- ----------- OTHER EXPENSES (INCOME): Interest expense, net 16,733 12,938 59,404 53,776 Other (income) expenses 601 (27) 292 (308) ----------- ----------- ----------- ----------- 17,334 12,911 59,696 53,468 ----------- ----------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 65,950 56,834 244,091 213,266 Income tax expense (25,000) (21,520) (92,127) (80,460) ----------- ----------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS 40,950 35,314 151,964 132,806 Income (loss) from discontinued operations, net of taxes (425) (368) (1,023) 567 ----------- ----------- ----------- ----------- NET INCOME $ 40,525 $ 34,946 $ 150,941 $ 133,373 =========== =========== =========== =========== BASIC EARNINGS PER SHARE: Income from continuing operations $ 0.32 $ 0.28 $ 1.22 $ 1.08 Income (loss) from discontinued operations, net of taxes - - (0.01) 0.01 ----------- ----------- ----------- ----------- Net income $ 0.32 $ 0.28 $ 1.21 $ 1.09 =========== =========== =========== =========== DILUTED EARNINGS PER SHARE: Income from continuing operations $ 0.32 $ 0.28 $ 1.21 $ 1.06 Income (loss) from discontinued operations, net of taxes - - (0.01) - ----------- ----------- ----------- ----------- Net income $ 0.32 $ 0.28 $ 1.20 $ 1.06 =========== =========== =========== =========== 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 Twelve Months Ended December 31, Ended December 31, -------------------- -------------------- 2008 2007 2008 2007 --------- --------- --------- --------- Income from continuing operations before income taxes $ 65,950 $ 56,834 $ 244,091 $ 213,266 Income taxes paid (15,440) (19,924) (54,914) (51,255) Depreciation and amortization 24,278 21,361 90,809 78,539 Depreciation and amortization for discontinued operations 31 49 652 143 Goodwill impairment - 554 - 554 Goodwill impairment for discontinued operations - 1,020 - 1,020 Income (loss) from discontinued operations, net of taxes (425) (368) (1,023) 567 Income tax expense (benefit) for discontinued operations (260) (225) (648) 372 Stock-based compensation reflected in G&A expenses 2,208 1,860 8,544 6,478 Amortization of debt costs and other non-cash interest 912 959 3,812 3,931 Maintenance and technology capital expenditures (12,268) (15,042) (35,321) (47,500) --------- --------- --------- --------- Adjusted Free Cash Flow $ 64,986 $ 47,078 $ 256,002 $ 206,115 ========= ========= ========= ========= CALCULATION OF EBITDA For the Three Months For the Twelve Months Ended December 31, Ended December 31, --------------------- -------------------- 2008 2007 2008 2007 ---------- ---------- ---------- --------- Net income $ 40,525 $ 34,946 $ 150,941 $ 133,373 Interest expense, net 16,733 12,938 59,404 53,776 Depreciation and amortization 24,278 21,361 90,809 78,539 Income tax expense 25,000 21,520 92,127 80,460 Goodwill impairment - 554 - 554 Income from discontinued operations, net of taxes 425 368 1,023 (567) ---------- ---------- ---------- --------- EBITDA $ 106,961 $ 91,687 $ 394,304 $ 346,135 ========== ========== ========== =========
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 useful as a supplemental measure of the performance of the Company's correctional facilities because it does not take into account depreciation and amortization or tax provisions. 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.
