Corrections Corporation of America (NYSE:CXW) (the
“Company” or “CCA”), America's largest owner of partnership
correctional, detention, and reentry facilities, announced today
that Immigration and Customs Enforcement ("ICE") has amended and
extended its Intergovernmental Service Agreement ("IGSA") with the
City of Eloy, Arizona, for CCA's leased and operated 2,400-bed
South Texas Family Residential Center. The updated agreement
provides for a new, lower fixed monthly payment commencing in
November 2016, with a new term extending through September 2021,
subject to termination upon 60-day notice from ICE. The
agreement can be further extended by bi-lateral modification.
Concurrently, CCA and the third-party lessor of the South Texas
Family Residential Center have agreed to modify the lease agreement
to reflect a reduced monthly lease expense effective in November
2016, with a new term concurrent with the IGSA.
CCA entered into the original agreement in
September 2014 to provide residential housing and services at the
South Texas Family Residential Center, when the country was faced
with an unprecedented humanitarian crisis of family units crossing
the southern border from Central America. CCA executed a plan
to ready the site and complete construction of the facility at an
extraordinary pace, and prepared the facility for a staged ramp
capable of housing up to 2,400 residents by May 2015. Over the past
several months, CCA has worked collaboratively with ICE to identify
substantial cost savings opportunities afforded under a more stable
operating environment.
"The South Texas Family Residential Center is just one example
of how we work to help our government partners effectively meet
incredibly serious challenges, and we are gratified in the
confidence ICE has placed in us with this extension," said Damon
Hininger, CCA's Chief Executive Officer. "Our facility is the
only setting in the country that has been specifically designed for
a family residential mission and meets ICE family residential
standards. We have continuously proven our ability to deliver
flexible, innovative solutions for our government customers in a
collaborative manner. Furthermore, our consistent
high-quality execution demonstrates our capabilities to be an ideal
partner for future opportunities as customers' needs
evolve."
2016 & 2017 Guidance
Based on current business conditions and reflecting the contract
changes at the South Texas Family Residential Center, we have
provided the following updated financial guidance for 2016 and
initial financial guidance for the full year 2017:
|
Third Quarter2016 |
|
|
|
|
|
Full Year2016 |
|
|
|
|
|
Full Year2017 |
•
Diluted EPS |
$0.43 to $0.45 |
|
|
|
|
|
$1.73 to $1.75 |
|
|
|
|
|
$1.33 to $1.43 |
• Adjusted Diluted
EPS |
$0.47
to $0.48 |
|
|
|
|
|
$1.78
to $1.81 |
|
|
|
|
|
$1.35
to $1.45 |
• FFO per diluted
share |
$0.63
to $0.65 |
|
|
|
|
|
$2.52
to $2.55 |
|
|
|
|
|
$2.09
to $2.19 |
• Normalized FFO per
diluted share |
$0.67
to $0.68 |
|
|
|
|
|
$2.57
to $2.60 |
|
|
|
|
|
$2.11
to $2.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our guidance reflects a range of potential outcomes associated
with contract renewals. However, our guidance does not
include any new contract awards, potential capital markets or
refinancing transactions, or any new M&A activity because the
magnitude and timing of any such transactions are difficult to
predict. Nonetheless, we continue to pursue transactions that
will grow our reentry and real estate platforms, diversify our
business model, and create long-term shareholder value, while
continuing to give back to those communities where we do
business.
Capital Allocation Strategy Update
Taking into account our updated financial outlook, as well as
numerous opportunities to deploy capital to create shareholder
value, we are currently assessing our capital allocation and
dividend policies, which we will review with our Board of Directors
during the fourth quarter of 2016.
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 Tuesday, October 18, 2016, to
discuss the matters addressed in this press release and our updated
financial guidance for full year 2016 along with initial full year
2017 financial guidance. To listen to this discussion, please
access “Presentations, Webcasts and Events” of the Investors
section 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 1:00 p.m. Central Time (2:00
p.m. Eastern Time) on October 18, 2016, through 1:00 p.m. Central
Time (2:00 p.m. Eastern Time) on October 26, 2016. To access the
telephonic replay, dial 888-203-1112 and enter passcode
3583572.
About CCA
CCA, a publicly traded real estate investment trust (REIT), is
the nation’s largest owner of partnership correctional, detention,
and residential reentry facilities and one of the largest prison
operators in the United States. We own or control 74
correctional, detention and reentry facilities, with a design
capacity of approximately 75,000 beds, and manage 11 additional
facilities owned by our government partners with a total design
capacity of approximately 14,000 beds, in 20 states and the
District of Columbia. CCA specializes in owning, operating and
managing prisons and other correctional facilities and providing
residential, community reentry and prisoner transportation services
for governmental agencies. In addition to providing
fundamental residential services, 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. These services are intended to
help reduce recidivism and to prepare offenders for their
successful reentry into society upon their release.
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 within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended, and 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,
detention, and residential reentry 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,
detention, and residential reentry facilities and the commencement
of new management contracts, as well as our ability to utilize
current available beds and new capacity as new development and
expansion projects are completed; (v) changes in government
policy regarding the utilization of the private sector for
corrections and detention capacity and our services by the U.S.
Department of Justice and the Department of Homeland Security; (vi)
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 utilization of
out-of-state private correctional capacity, and the impact of any
changes to immigration reform and sentencing laws (Our company does
not, under longstanding policy, lobby for or against policies or
legislation that would determine the basis for, or duration of, an
individual's incarceration or detention.); (vii) our ability to
successfully integrate operations of our acquisitions and realize
projected returns resulting therefrom; (viii) the ability to
attract and retain key personnel; (ix) escalation in salaries,
wages, incentives and the costs of providing employee health care;
(x) our ability to meet and maintain qualification for taxation as
a REIT; (xi) the availability of debt and equity financing on terms
that are favorable to us; and (xii) increases in costs to
construct or expand correctional and other 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 delays and increased 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 or the information
contained herein by any third-parties, including, but not limited
to, any wire or internet services.
CORRECTIONS CORPORATION OF AMERICA AND
SUBSIDIARIESSUPPLEMENTAL FINANCIAL
INFORMATION (UNAUDITED AND AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
CALCULATION OF ADJUSTED NET INCOME, NORMALIZED FUNDS
FROM OPERATIONS & ADJUSTED EBITDA GUIDANCE
|
For the Quarter
EndingSeptember 30, 2016 |
For the Year Ending December 31,
2016 |
|
Low End of Guidance |
High End of Guidance |
Low End of Guidance |
High End of Guidance |
Net income |
$ |
50,900 |
|
$ |
52,900 |
|
$ |
204,000 |
|
$ |
207,000 |
|
Restructuring charges |
|
4,000 |
|
|
4,000 |
|
|
4,000 |
|
|
4,000 |
|
Expenses
associated with mergers and acquisitions |
|
100 |
|
|
100 |
|
|
2,000 |
|
|
2,000 |
|
Adjusted net
income |
$ |
55,000 |
|
$ |
57,000 |
|
$ |
210,000 |
|
$ |
213,000 |
|
|
|
|
|
|
Net income |
$ |
50,900 |
|
$ |
52,900 |
|
$ |
204,000 |
|
$ |
207,000 |
|
Depreciation of real
estate assets |
|
23,500 |
|
|
23,500 |
|
|
93,500 |
|
|
93,500 |
|
Funds From
Operations |
$ |
74,400 |
|
$ |
76,400 |
|
$ |
297,500 |
|
$ |
300,500 |
|
Restructuring charges |
|
4,000 |
|
|
4,000 |
|
|
4,000 |
|
|
4,000 |
|
Expenses
associated with mergers and acquisitions |
|
100 |
|
|
100 |
|
|
2,000 |
|
|
2,000 |
|
Normalized Funds From
Operations |
$ |
78,500 |
|
$ |
80,500 |
|
$ |
303,500 |
|
$ |
306,500 |
|
Diluted EPS |
$ |
0.43 |
|
$ |
0.45 |
|
$ |
1.73 |
|
$ |
1.75 |
|
Adjusted EPS per
diluted share |
$ |
0.47 |
|
$ |
0.48 |
|
$ |
1.78 |
|
$ |
1.81 |
|
FFO per diluted
share |
$ |
0.63 |
|
$ |
0.65 |
|
$ |
2.52 |
|
$ |
2.55 |
|
Normalized FFO per
diluted share |
$ |
0.67 |
|
$ |
0.68 |
|
$ |
2.57 |
|
$ |
2.60 |
|
|
|
|
|
|
Net income |
$ |
50,900 |
|
$ |
52,900 |
|
$ |
204,000 |
|
$ |
207,000 |
|
Interest expense |
|
17,000 |
|
|
17,500 |
|
|
67,500 |
|
|
68,500 |
|
Depreciation and
amortization |
|
43,000 |
|
|
43,000 |
|
|
167,500 |
|
|
167,500 |
|
Income tax expense |
|
2,500 |
|
|
3,000 |
|
|
9,500 |
|
|
10,000 |
|
EBITDA |
$ |
113,400 |
|
$ |
116,400 |
|
$ |
448,500 |
|
$ |
453,000 |
|
Restructuring
charges |
|
4,000 |
|
|
4,000 |
|
|
4,000 |
|
|
4,000 |
|
Expenses associated
with mergers and acquisitions |
|
100 |
|
|
100 |
|
|
2,000 |
|
|
2,000 |
|
Depreciation associated
with STFRC lease |
|
(10,600 |
) |
|
(10,600 |
) |
|
(38,600 |
) |
|
(38,600 |
) |
Interest expense
associated with STFRC lease |
|
(2,900 |
) |
|
(2,900 |
) |
|
(9,900 |
) |
|
(9,900 |
) |
Adjusted EBITDA |
$ |
104,000 |
|
$ |
107,000 |
|
$ |
406,000 |
|
$ |
410,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CALCULATION OF ADJUSTED NET INCOME, NORMALIZED FUNDS
FROM OPERATIONS & ADJUSTED EBITDA GUIDANCE
|
For the Year Ending December 31,
2017 |
|
Low End of Guidance |
High End of Guidance |
Net income |
$ |
157,500 |
|
$ |
169,500 |
|
Expenses
associated with mergers and acquisitions |
|
2,000 |
|
|
2,000 |
|
Adjusted net
income |
$ |
159,500 |
|
$ |
171,500 |
|
|
|
|
Net income |
$ |
157,500 |
|
$ |
169,500 |
|
Depreciation of real
estate assets |
|
90,500 |
|
|
90,500 |
|
Funds From
Operations |
$ |
248,000 |
|
$ |
260,000 |
|
Expenses
associated with mergers and acquisitions |
|
2,000 |
|
|
2,000 |
|
Normalized Funds From
Operations |
$ |
250,000 |
|
$ |
262,000 |
|
Diluted EPS |
$ |
1.33 |
|
$ |
1.43 |
|
Adjusted EPS per
diluted share |
$ |
1.35 |
|
$ |
1.45 |
|
FFO per diluted
share |
$ |
2.09 |
|
$ |
2.19 |
|
Normalized FFO per
diluted share |
$ |
2.11 |
|
$ |
2.21 |
|
|
|
|
Net income |
$ |
157,500 |
|
$ |
169,500 |
|
Interest expense |
|
64,000 |
|
|
67,000 |
|
Depreciation and
amortization |
|
148,000 |
|
|
148,000 |
|
Income tax expense |
|
13,500 |
|
|
14,500 |
|
EBITDA |
$ |
383,000 |
|
$ |
399,000 |
|
Expenses associated
with mergers and acquisitions |
|
2,000 |
|
|
2,000 |
|
Depreciation associated
with STFRC lease |
|
(16,600 |
) |
|
(16,600 |
) |
Interest expense
associated with STFRC lease |
|
(6,400 |
) |
|
(6,400 |
) |
Adjusted EBITDA |
$ |
362,000 |
|
$ |
378,000 |
|
|
|
|
|
|
|
|
NOTE TO SUPPLEMENTAL FINANCIAL
INFORMATION
Adjusted Net Income, EBITDA, Adjusted EBITDA, Funds From
Operations (FFO), and Normalized FFO, and, where appropriate, their
corresponding per share metrics are non-GAAP financial
measures. CCA 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. CCA believes that it is
useful to provide investors, lenders and security analysts
disclosures of its results of operations on the same basis that is
used by management. FFO, in particular, is a widely accepted
non-GAAP supplemental measure of REIT performance, grounded in the
standards for FFO established by the National Association of Real
Estate Investment Trusts (NAREIT).
NAREIT defines FFO as net income computed in accordance with
generally accepted accounting principles, excluding gains (or
losses) from sales of property and extraordinary items, plus
depreciation and amortization of real estate and impairment of
depreciable real estate. EBITDA, Adjusted EBITDA, and
Normalized FFO are useful as supplemental measures of performance
of the Company's corrections facilities because they don't take
into account depreciation and amortization, or with respect to
EBITDA, the impact of the Company's tax provisions and 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 properties,
management believes that assessing performance of the Company's
properties without the impact of depreciation or amortization is
useful. However, a portion of the rental payments for the
South Texas Family Residential Center is classified as depreciation
and interest expense for financial reporting purposes.
Adjusted EBITDA includes such depreciation and interest expense in
order to more properly reflect the cash flows associated with this
lease. CCA may make adjustments to FFO 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. Normalized FFO
excludes the effects of such items. CCA calculates Adjusted
Net Income by adding to GAAP Net Income expenses associated with
the Company’s debt refinancing, mergers and acquisitions activity,
restructuring charges, and certain impairments that the Company
believes are unusual or nonrecurring to provide an alternative
measure of comparing operating performance for the periods
presented. Even though expenses associated with mergers and
acquisitions may be recurring, the magnitude and timing fluctuate
based on the timing and scope of M&A activity, and therefore,
such expenses, which are not a necessary component of the ongoing
operations of the Company, may not be comparable from period to
period.
Other companies may calculate Adjusted Net Income, EBITDA,
Adjusted EBITDA, FFO, and Normalized FFO differently than the
Company does, or adjust for other items, and therefore
comparability may be limited. Adjusted Net Income, EBITDA,
Adjusted EBITDA, FFO, and Normalized FFO and their corresponding
per share measures 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:
Investors: Cameron Hopewell - Managing Director, Investor Relations - (615) 263-3024
Media: Steve Owen - Managing Director, Communications - (615) 263-3107
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