Corrections Corporation of America: CCA Announces 2014 Second Quarter Financial Results

Tickers: CXW
Raises Full-Year EPS Guidance NASHVILLE, TN -- (Marketwired) -- 08/06/14 -- CCA (NYSE: CXW) (the "Company" or "Corrections Corporation of America"), America's largest owner of partnership correctional and detention facilities, announced today its financial results for the second quarter of 2014.

Second Quarter 2014 Financial Highlights

  • Diluted EPS of $0.48
  • Adjusted Diluted EPS of $0.49
  • Normalized FFO Per Diluted Share of $0.68
  • AFFO Per Diluted Share of $0.68
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Net income generated in the second quarter of 2014 totaled $55.7 million, or $0.48 per diluted share, compared to $20.4 million, or $0.19 per diluted share generated in the second quarter of 2013. Net income after adjusting for special items, increased to $58.0 million, or $0.49 per diluted share during the second quarter of 2014, compared to $57.1 million, or $0.52 per diluted share during the second quarter of 2013. Special items include non-cash impairment charges in both quarters, and debt refinancing and REIT conversion costs in the prior year quarter.

Second quarter 2014 per share amounts, as compared to the second quarter 2013 per share amounts, were negatively impacted by the issuance of 13.9 million shares of common stock in connection with the payment of a special dividend on May 20, 2013. Pro forma Adjusted Diluted EPS, calculated as if the shares were issued at the beginning of 2013, was $0.49 in the second quarter of 2013. Normalized FFO per diluted share was $0.68 in the second quarter of 2014 compared with Pro forma Normalized FFO per share of $0.66 in the second quarter of 2013.

Second quarter 2013 financial results were affected by an income tax benefit of approximately $5.0 million resulting from tax planning strategies implemented during the second quarter of 2013, which was offset by the Company's decision to provide a Special Incentive Bonus totaling approximately $5.0 million to non-management level staff in lieu of merit increases in 2013.

CCA President and Chief Executive Officer, Damon Hininger, stated, "We are pleased with our second quarter financial results, with adjusted diluted earnings per share coming in $0.02 higher than the high end of the guidance we provided in May."

Hininger continued, "During the second quarter we were also pleased to have announced that the state of Tennessee and Trousdale County executed an intergovernmental service agreement, the final step in allowing us to move forward on construction of our new Trousdale facility which we expect to be completed late in 2015."

Operating Results

Total revenue for the second quarter of 2014 totaled $410.7 million compared to $425.0 million in the second quarter of 2013. The decline in revenue was primarily attributable to contract losses that resulted in a reduction of revenue of $23.2 million, while the impact on facility net operating income (NOI) for these contract losses was a decline of only $0.3 million from the second quarter of 2013 to the second quarter of 2014. In addition, revenue declined due to a reduction in populations from the United States Marshals Service primarily at our California City facility. These reductions in revenue were partially offset by an increase in revenue resulting from the new lease of our California City facility effective December 1, 2013, our acquisition on July 31, 2013 of Correctional Alternatives Inc., increases in populations from the states of Oklahoma, Tennessee and New Mexico under existing contracts, and an increase in population from the state of Arizona pursuant to a new management contract at our Red Rock facility that commenced January 1, 2014.

In total, NOI increased $2.1 million, from $121.0 million in the second quarter of 2013 to $123.1 million in the second quarter of 2014, despite a reduction in facility NOI of $4.9 million resulting from the transition of our Red Rock facility to a new management contract effective January 1, 2014, and despite expenses associated with the transition of the management contract at the Idaho Correctional Center to the state of Idaho effective July 1, 2014. These reductions were offset by an improvement in NOI for increases in inmate populations and at our California City facility. NOI for the second quarter of 2013 was also negatively impacted by the aforementioned Special Incentive Bonus.

Adjusted net income, NOI, FFO, Normalized FFO and AFFO, and their corresponding per share amounts, are measures calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles (GAAP). 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 measures.

Guidance

The Company expects Adjusted Diluted EPS for the third quarter to be in the range of $0.46 to $0.48 and Adjusted Diluted EPS for fourth quarter to be in the range of $0.47 to $0.51, resulting in an increase in full year 2014 Adjusted Diluted EPS in the range of $1.87 to $1.93 from the previous range of $1.84 to $1.92. The Company also increased guidance for FFO per diluted share for the full-year 2014 to be in the range of $2.59 to $2.65, from $2.56 to $2.64, while full-year 2014 AFFO per diluted share is in the range of $2.53 to $2.58 from $2.49 to $2.58.

During 2014, we expect to invest approximately $150.0 million to $165.0 million in capital expenditures, consisting of $100.0 million to $110.0 million in on-going prison construction and expenditures related to potential land acquisitions, $25.0 million in maintenance capital expenditures on real estate assets, and $25.0 million to $30.0 million on capital expenditures on other assets and information technology.

Supplemental Financial Information and Investor Presentations

We have made available on our website supplemental financial information and other data for the second quarter of 2014. 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.cca.com under "Financial Information" of the Investors section.

The Second Quarter Investor Presentation will be available on our website beginning on or about August 30, 2014. Interested parties may access this information through our website at www.cca.com under "Webcasts" of the Investors 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) on August 7, 2014, to discuss our second quarter 2014 financial results and future outlook. To listen to this discussion, please access "Webcasts" on the Investors page at www.cca.com. The conference call will be archived on our website following the completion of the call. In addition, a telephonic replay will be available at 2:00 p.m. eastern time on August 7, 2014 through 2:00 p.m. eastern time on August 15, 2014, by dialing (888) 203-1112 or (719) 457-0820, pass code 3358950.

About CCA

CCA, a publicly traded real estate investment trust (REIT), is the nation's largest owner of partnership correction and detention facilities and one of the largest prison operators in the United States, behind only the federal government and three states. We currently own or control 52 correction and detention facilities and manage 12 additional facilities owned by our government partners, with a total design capacity of approximately 84,500 beds in 19 states and the District of Columbia. CCA specializes in owning, operating and managing prisons and other correctional facilities and providing inmate residential, community re-entry 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, faith-based services, life skills and employment training and substance abuse treatment.

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, occupancy, and overall utilization; (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, but not limited to, sufficient governmental appropriations, contract compliance 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) changes in government policy and in legislation and regulation of the corrections and detention industry that affect our business, including but not limited to, California's continued utilization of out of state private correctional capacity; (vi) our ability to meet and maintain REIT qualification status; and (vii) 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 we make from time to time 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)
June 30, December 31,
ASSETS 2014 2013
Cash and cash equivalents $ 46,615 $ 77,909
Accounts receivable, net of allowance of $968 and $1,265, respectively 246,894 244,957
Current deferred tax assets 6,351 9,241
Prepaid expenses and other current assets 29,007 20,612
Current assets of discontinued operations - 15
Total current assets 328,867 352,734
Property and equipment, net 2,538,996 2,546,613
Restricted cash 2,607 5,589
Investment in direct financing lease 4,382 5,473
Goodwill 16,110 16,110
Non-current deferred tax assets 5,875 3,078
Other assets 76,657 77,828
Total assets $ 2,973,494 $ 3,007,425
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 237,438 $ 252,277
Income taxes payable 676 1,243
Current liabilities of discontinued operations 370 886
Total current liabilities 238,484 254,406
Long-term debt 1,195,000 1,205,000
Other liabilities 40,380 45,512
Total liabilities 1,473,864 1,504,918
Commitments and contingencies
Preferred stock -- $0.01 par value; 50,000 shares authorized; none issued and outstanding at June 30, 2014 and December 31, 2013, respectively - -
Common stock -- $0.01 par value; 300,000 shares authorized; 116,413 and 115,923 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively 1,164 1,159
Additional paid-in capital 1,734,404 1,725,363
Accumulated deficit (235,938 ) (224,015 )
Total stockholders' equity $ 1,499,630 $ 1,502,507
Total liabilities and stockholders' equity $ 2,973,494 $ 3,007,425
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2014 2013 2014 2013
REVENUE:
Owned and controlled properties $ 348,557 $ 348,889 $ 687,726 $ 690,663
Managed only and other 62,137 76,116 127,190 151,065
Total revenue 410,694 425,005 814,916 841,728
EXPENSES:
Operating:
Owned and controlled properties 229,635 234,903 454,854 464,347
Managed only and other 57,975 69,098 120,136 137,876
Total operating expenses 287,610 304,001 574,990 602,223
General and administrative 26,559 25,360 51,951 56,592
Depreciation and amortization 28,752 27,675 57,136 55,052
Asset impairments 2,238 - 2,238 -
345,159 357,036 686,315 713,867
OPERATING INCOME 65,535 67,969 128,601 127,861
OTHER (INCOME) EXPENSE:
Interest expense, net 8,364 11,912 18,712 24,478
Expenses associated with debt refinancing transactions - 36,303 - 36,528
Other (income) expense (613 ) (37 ) (1,000 ) 64
7,751 48,178 17,712 61,070
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 57,784 19,791
110,889

66,791
Income tax (expense) benefit (2,052 ) 3,377 (3,419 ) 137,824
INCOME FROM CONTINUING OPERATIONS 55,732 23,168 107,470 204,615
Loss from discontinued operations, net of taxes - (2,739 ) - (3,094 )
NET INCOME $ 55,732 $ 20,429 $ 107,470 $ 201,521
BASIC EARNINGS PER SHARE:
Income from continuing operations $ 0.48 $ 0.22 $ 0.93 $ 1.97