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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 001-16109

 

CORECIVIC, INC.

(Exact name of registrant as specified in its charter)

 

 

MARYLAND

62-1763875

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

 

5501 VIRGINIA WAY

BRENTWOOD, TENNESSEE

37027

(Zip Code)

(Address of principal executive offices)

 

 

(615) 263-3000

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

CXW

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each class of Common Stock as of May 3, 2024:

Shares of Common Stock, $0.01 par value per share: 111,256,728 shares outstanding.


 

CORECIVIC, INC.

 

FORM 10-Q

 

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

 

INDEX

 

 

 

PAGE

PART 1 – FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

1

    a)

 

Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023

 

1

    b)

 

Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2024 and 2023

 

2

    c)

 

Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2024 and 2023

 

3

    d)

 

Consolidated Statement of Stockholders' Equity (Unaudited) for the quarterly period ended March 31, 2024

 

4

    e)

 

Consolidated Statement of Stockholders' Equity (Unaudited) for the quarterly period ended March 31, 2023

 

5

    f)

 

Notes to Consolidated Financial Statements (Unaudited)

 

6

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

17

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

35

Item 4.

 

Controls and Procedures

 

35

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

36

Item 1A.

 

Risk Factors

 

36

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

36

Item 3.

 

Defaults Upon Senior Securities

 

36

Item 4.

 

Mine Safety Disclosures

 

36

Item 5.

 

Other Information

 

36

Item 6.

 

Exhibits

 

37

 

 

 

 

 

SIGNATURES

 

38

 

 

 

 


 

PART I – FINANCIAL INFORMATION

ITEM 1. – FINANCIAL STATEMENTS.

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

ASSETS

 

March 31, 2024

 

 

December 31, 2023

 

Cash and cash equivalents

 

$

111,399

 

 

$

121,845

 

Restricted cash

 

 

7,978

 

 

 

7,111

 

Accounts receivable, net of credit loss reserve of $6,349 and $6,827, respectively

 

 

274,311

 

 

 

312,174

 

Prepaid expenses and other current assets

 

 

32,612

 

 

 

26,304

 

Assets held for sale

 

 

 

 

 

7,480

 

Total current assets

 

 

426,300

 

 

 

474,914

 

Real estate and related assets:

 

 

 

 

 

 

   Property and equipment, net of accumulated depreciation of $1,846,456 
       and $
1,821,015, respectively

 

 

2,095,606

 

 

 

2,114,522

 

   Other real estate assets

 

 

199,248

 

 

 

201,561

 

Goodwill

 

 

4,844

 

 

 

4,844

 

Other assets

 

 

301,360

 

 

 

309,558

 

Total assets

 

$

3,027,358

 

 

$

3,105,399

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

254,066

 

 

$

285,857

 

Current portion of long-term debt

 

 

110,487

 

 

 

11,597

 

Total current liabilities

 

 

364,553

 

 

 

297,454

 

Long-term debt, net

 

 

984,085

 

 

 

1,083,476

 

Deferred revenue

 

 

17,761

 

 

 

18,315

 

Non-current deferred tax liabilities

 

 

91,799

 

 

 

96,915

 

Other liabilities

 

 

125,237

 

 

 

131,673

 

Total liabilities

 

 

1,583,435

 

 

 

1,627,833

 

Commitments and contingencies

 

 

 

 

 

 

Preferred stock – $0.01 par value; 50,000 shares authorized; none issued and outstanding
   at March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

Common stock – $0.01 par value; 300,000 shares authorized; 111,568 and 112,733 
   shares issued and outstanding at March 31, 2024 and December 31, 2023,
   respectively

 

 

1,116

 

 

 

1,127

 

Additional paid-in capital

 

 

1,742,111

 

 

 

1,785,286

 

Accumulated deficit

 

 

(299,304

)

 

 

(308,847

)

Total stockholders' equity

 

 

1,443,923

 

 

 

1,477,566

 

Total liabilities and stockholders' equity

 

$

3,027,358

 

 

$

3,105,399

 

 

The accompanying notes are an integral part of these consolidated financial statements.

1


 

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

 

For the Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

REVENUE

 

$

500,686

 

 

$

458,002

 

EXPENSES:

 

 

 

 

 

 

Operating

 

 

378,103

 

 

 

354,537

 

General and administrative

 

 

36,465

 

 

 

32,679

 

Depreciation and amortization

 

 

31,730

 

 

 

31,042

 

 

 

 

446,298

 

 

 

418,258

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

Interest expense, net

 

 

(18,613

)

 

 

(19,151

)

Expenses associated with debt repayments
     and refinancing transactions

 

 

(27,242

)

 

 

 

Gain on sale of real estate assets, net

 

 

568

 

 

 

 

Other expense

 

 

(58

)

 

 

(47

)

INCOME BEFORE INCOME TAXES

 

 

9,043

 

 

 

20,546

 

Income tax benefit (expense)

 

 

500

 

 

 

(8,146

)

NET INCOME

 

$

9,543

 

 

$

12,400

 

BASIC EARNINGS PER SHARE

 

$

0.08

 

 

$

0.11

 

DILUTED EARNINGS PER SHARE

 

$

0.08

 

 

$

0.11

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

2


 

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED AND AMOUNTS IN THOUSANDS)

 

 

For the Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

9,543

 

 

$

12,400

 

Adjustments to reconcile net income to net cash provided by
      operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

31,730

 

 

 

31,042

 

Amortization of debt issuance costs and other non-cash interest

 

 

974

 

 

 

1,198

 

Expenses associated with debt repayments and refinancing
    transactions

 

 

27,242

 

 

 

 

Gain on sale of real estate assets, net

 

 

(568

)

 

 

 

Deferred income taxes

 

 

(5,116

)

 

 

1,565

 

Non-cash revenue and other income

 

 

(696

)

 

 

(695

)

Non-cash equity compensation

 

 

6,081

 

 

 

4,884

 

Other expenses and non-cash items

 

 

1,847

 

 

 

1,842

 

Changes in assets and liabilities, net:

 

 

 

 

 

 

Accounts receivable, prepaid expenses and other assets

 

 

30,720

 

 

 

60,720

 

Accounts payable, accrued expenses and other liabilities

 

 

(31,403

)

 

 

(23,128

)

Net cash provided by operating activities

 

 

70,354

 

 

 

89,828

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Expenditures for facility development and expansions

 

 

(3,558

)

 

 

(2,380

)

Expenditures for other capital improvements

 

 

(8,524

)

 

 

(6,815

)

Net proceeds from sale of assets

 

 

8,243

 

 

 

59

 

Decrease (increase) in other assets

 

 

86

 

 

 

(1,371

)

Net cash used in investing activities

 

 

(3,753

)

 

 

(10,507

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from issuance of debt and borrowings from credit facility

 

 

500,000

 

 

 

70,000

 

Scheduled principal repayments

 

 

(2,836

)

 

 

(2,412

)

Principal repayments of credit facility

 

 

 

 

 

(60,000

)

Other repayments of debt

 

 

(494,339

)

 

 

(153,754

)

Payment of debt defeasance, issuance and other refinancing and related costs

 

 

(29,865

)

 

 

(35

)

Payment of lease obligations for financing leases

 

 

(150

)

 

 

(146

)

Dividends paid on restricted stock units

 

 

(20

)

 

 

(131

)

Purchase and retirement of common stock

 

 

(48,970

)

 

 

(29,832

)

Net cash used in financing activities

 

 

(76,180

)

 

 

(176,310

)

NET DECREASE IN CASH, CASH EQUIVALENTS AND
      RESTRICTED CASH

 

 

(9,579

)

 

 

(96,989

)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period

 

 

128,956

 

 

 

162,165

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period

 

$

119,377

 

 

$

65,176

 

NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

Establishment of right of use assets and lease liabilities

 

$

 

 

$

224

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

Interest

 

$

22,324

 

 

$

6,333

 

Income taxes (refunded) paid

 

$

(96

)

 

$

200

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

3


 

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

(UNAUDITED AND AMOUNTS IN THOUSANDS)

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2023

 

 

112,733

 

 

$

1,127

 

 

$

1,785,286

 

 

$

(308,847

)

 

$

1,477,566

 

Net income

 

 

 

 

 

 

 

 

 

 

 

9,543

 

 

 

9,543

 

Retirement of common stock

 

 

(3,381

)

 

 

(33

)

 

 

(49,234

)

 

 

 

 

 

(49,267

)

Restricted stock compensation, net of forfeitures

 

 

 

 

 

 

 

 

6,081

 

 

 

 

 

 

6,081

 

Restricted stock grants

 

 

2,216

 

 

 

22

 

 

 

(22

)

 

 

 

 

 

 

Balance as of March 31, 2024

 

 

111,568

 

 

$

1,116

 

 

$

1,742,111

 

 

$

(299,304

)

 

$

1,443,923

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4


 

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

(UNAUDITED AND AMOUNTS IN THOUSANDS)

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2022

 

 

114,988

 

 

$

1,150

 

 

$

1,807,689

 

 

$

(376,431

)

 

$

1,432,408

 

Net income

 

 

 

 

 

 

 

 

 

 

 

12,400

 

 

 

12,400

 

Retirement of common stock

 

 

(2,980

)

 

 

(30

)

 

 

(29,924

)

 

 

 

 

 

(29,954

)

Dividends on RSUs

 

 

 

 

 

 

 

 

 

 

 

(6

)

 

 

(6

)

Restricted stock compensation, net of forfeitures

 

 

 

 

 

 

 

 

4,884

 

 

 

 

 

 

4,884

 

Restricted stock grants

 

 

1,677

 

 

 

17

 

 

 

(17

)

 

 

 

 

 

 

Balance as of March 31, 2023

 

 

113,685

 

 

$

1,137

 

 

$

1,782,632

 

 

$

(364,037

)

 

$

1,419,732

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5


 

CORECIVIC, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

MARCH 31, 2024

 

1.
ORGANIZATION AND OPERATIONS

CoreCivic, Inc. (together with its subsidiaries, the "Company" or "CoreCivic") 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 ("U.S."). Through three segments, CoreCivic Safety, CoreCivic Community, and CoreCivic Properties, the Company provides a broad range of solutions to government partners that serve the public good through corrections and detention management, a network of residential reentry centers to help address America's recidivism crisis, and government real estate solutions. As of March 31, 2024, through its CoreCivic Safety segment, the Company operated 43 correctional and detention facilities, 39 of which the Company owned, with a total design capacity of approximately 65,000 beds. Through its CoreCivic Community segment, the Company operated 23 residential reentry centers with a total design capacity of approximately 5,000 beds. In addition, through its CoreCivic Properties segment, the Company owned 6 properties, with a total design capacity of approximately 10,000 beds.

In addition to providing fundamental residential services, CoreCivic's correctional, detention, and reentry 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. CoreCivic also provides or makes available to offenders certain health care (including medical, dental, and mental health services), food services, and work and recreational programs.

 

2.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying unaudited interim consolidated financial statements have been prepared by the Company and, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of results for the unaudited interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. The results of operations for the interim period are not necessarily indicative of the results to be obtained for the full fiscal year. Reference is made to the audited financial statements of CoreCivic included in its Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the "SEC") on February 20, 2024 (the "2023 Form 10-K") with respect to certain significant accounting and financial reporting policies as well as other pertinent information of the Company.

Risks and Uncertainties

On January 26, 2021, President Biden issued the Executive Order on Reforming Our Incarceration System to Eliminate the Use of Privately Operated Criminal Detention Facilities ("Private Prison EO"). The Private Prison EO directs the Attorney General to not renew United States Department of Justice ("DOJ") contracts with privately operated criminal detention facilities. The United States Marshals Service ("USMS") is an agency of the DOJ that utilizes CoreCivic's facilities and services, and accounted for 20% and 21% of CoreCivic's total revenue for the three months ended March 31, 2024 and the twelve months ended December 31, 2023, respectively. Another federal agency that utilizes CoreCivic's facilities and services, U.S. Immigration and Customs Enforcement ("ICE"), is not covered by the Private Prison EO, as ICE is an agency of the Department of Homeland Security ("DHS"), not the DOJ.

CoreCivic currently has two detention facilities that have direct contracts with the USMS. Because of the lack of alternative bed capacity, one of the contracts was renewed upon its expiration in September 2023 and now expires in September 2028. The second direct contract with the USMS expires in September 2025. It is too early to predict the outcome of the expiration of the contract scheduled to expire in September 2025, and future developments could occur prior to the scheduled expiration date.

6


 

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No 2023-07, "Improvements to Reportable Segment Disclosures (Topic 280)" ("ASU 2023-07"). ASU 2023-07 updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker ("CODM") and included within each reported measure of a segment's profit or loss. ASU 2023-07 also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment's profit or loss in assessing segment performance and deciding how to allocate resources. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of ASU 2023-07 should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. The Company is currently evaluating the impact of adopting ASU 2023-07 and expects to adopt it for the year ending December 31, 2024, including any additional required disclosures.

In December 2023, the FASB issued ASU No. 2023-09, "Improvements to Income Tax Disclosures (Topic 740)" ("ASU 2023-09"). ASU 2023-09 requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as additional information on income taxes paid. ASU 2023-09 is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 will result in the required additional disclosures being included in the Company's consolidated financial statements, once adopted. The Company is currently evaluating the impact of adopting ASU 2023-09 and expects to adopt it for the year ending December 31, 2025, including any additional required disclosures.

In March 2024, the SEC adopted final rules designed to enhance public company disclosures related to the risks and impacts of climate-related matters (the "Climate Disclosure Rules"). The Climate Disclosure Rules include disclosures relating to climate-related risks and risk management as well as the board and management's governance of such risks. In addition, the Climate Disclosure Rules include requirements to disclose, in the audited consolidated financial statements, the financial effects of severe weather events and other natural conditions meeting certain thresholds, as well as carbon offsets and renewable energy credits. Larger registrants, including CoreCivic, will also be required to disclose information about greenhouse gas emissions, which will be subject to a phased-in assurance requirement. Applicability of the Climate Disclosure Rules begins for CoreCivic for the fiscal year ending December 31, 2025. On April 4, 2024, the SEC announced that it would stay the Climate Disclosure Rules as it faces legal challenges regarding implementation of such rules. The Company is currently assessing the impact of these rules on the Company's consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants and the SEC applicable to financial statements beginning January 1, 2024 or later did not, or are not expected to, have a material effect on the Company's results of operations or financial position.

Fair Value of Financial Instruments

To meet the reporting requirements of Accounting Standards Codification ("ASC") 825, "Financial Instruments", regarding fair value of financial instruments, CoreCivic calculates the estimated fair value of financial instruments using market interest rates, quoted market prices of similar instruments, or discounted cash flow techniques with observable Level 1 inputs for publicly traded debt and Level 2 inputs for all other financial instruments, as defined in ASC 820, "Fair Value Measurement". At March 31, 2024 and December 31, 2023, there were no material differences between the carrying amounts and the estimated fair values of CoreCivic's financial instruments, other than as follows (in thousands):

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

Carrying
Amount

 

 

Fair Value

 

 

Carrying
Amount

 

 

Fair Value

 

Note receivable from Agecroft Prison Management, LTD

 

$

2,861

 

 

$

3,034

 

 

$

2,886

 

 

$

3,061

 

Debt

 

$

(1,109,516

)

 

$

(1,111,845

)

 

$

(1,106,691

)

 

$

(1,090,326

)


 

7


 

3.
REAL ESTATE TRANSACTIONS

Assets Held For Sale and Dispositions

In January 2024, CoreCivic completed the sale of a facility in Colorado and reported in its CoreCivic Community segment. The sale generated net sales proceeds of $8.0 million, resulting in a gain on sale of $0.5 million reported in the first quarter of 2024. The facility was classified as held for sale as of December 31, 2023. CoreCivic will continue to operate the facility through the expiration of the current management contract in June 2024. In addition, in March 2024, CoreCivic completed the sale of an unused parcel of land in Texas. The sale generated net sales proceeds of $0.2 million, resulting in a gain on sale of $0.1 million also reported in the first quarter of 2024.

During the full year 2023, CoreCivic completed the sales of three community corrections facilities leased to government agencies and reported in CoreCivic's Properties segment and one vacant parcel of land. The sales of these four assets generated aggregate net sales proceeds of $10.8 million, resulting in an aggregate net gain on sale of $0.8 million after transaction costs.

Idle Facilities

As of March 31, 2024, CoreCivic had eight idle correctional facilities that are currently available and being actively marketed as solutions to meet the needs of potential customers. The following table summarizes each of the idled facilities and their respective design capacities, carrying values, excluding equipment and other assets that could generally be transferred and used at other facilities CoreCivic owns without significant cost (dollars in thousands):

 

 

 

 

 

 

Net Carrying Values

 

 

 

Design

 

 

March 31,

 

 

December 31,

 

Facility

 

Capacity

 

 

2024

 

 

2023

 

Prairie Correctional Facility

 

 

1,600

 

 

$

13,019

 

 

$

13,230

 

Huerfano County Correctional Center

 

 

752

 

 

 

14,148

 

 

 

14,058

 

Diamondback Correctional Facility

 

 

2,160

 

 

 

33,312

 

 

 

33,764

 

Marion Adjustment Center

 

 

826

 

 

 

10,054

 

 

 

9,968

 

Kit Carson Correctional Center

 

 

1,488

 

 

 

47,643

 

 

 

47,638

 

West Tennessee Detention Facility

 

 

600

 

 

 

18,321

 

 

 

18,568

 

Midwest Regional Reception Center

 

 

1,033

 

 

 

49,466

 

 

 

49,736

 

North Fork Correctional Facility

 

 

2,400

 

 

 

59,352

 

 

 

60,044

 

 

 

 

10,859

 

 

$

245,315

 

 

$

247,006

 

 

As of March 31, 2024, CoreCivic also had one idled non-core facility in its Safety segment containing 240 beds with a net book value of $2.8 million, and two idled facilities in its Community segment, containing an aggregate of 450 beds with an aggregate net book value of $3.3 million. CoreCivic incurred operating expenses at these idled facilities of approximately $3.5 million and $2.9 million during the period they were idle for the three months ended March 31, 2024 and 2023, respectively.

On December 6, 2022, the Company received notice from the California Department of Corrections and Rehabilitation ("CDCR") of its intent to terminate the lease agreement for the Company's 2,560-bed California City Correctional Center by March 31, 2024, due to the state's declining inmate population. The California City facility was idled effective April 1, 2024, and the Company is marketing the facility to potential customers.

The Company estimated undiscounted cash flows for each facility with an impairment indicator, including the idle facilities described above. The Company's estimated undiscounted cash flows reflect the Company’s most recent expectations around potential utilization and/or sale of the facilities and projected cash flows based on historical cash flows, cash flows of comparable facilities, and recent contract negotiations for utilization, as applicable. The Company concluded that the estimated undiscounted cash flows exceeded carrying values for each facility as of March 31, 2024 and December 31, 2023.

CoreCivic evaluates, on a quarterly basis, market developments for the potential utilization of each of its idle properties in order to identify events that may cause CoreCivic to reconsider its assumptions with respect to the recoverability of book values as compared to undiscounted cash flows. CoreCivic considers the cancellation of a contract in its Safety or Community segment or an expiration and non-renewal of a lease agreement in its CoreCivic Properties segment as indicators of impairment and tests each of the idled properties for impairment when it is notified by the respective customers or tenants that they would no longer be utilizing such property.

 

8


 

4.
DEBT

Debt outstanding as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Revolving Credit Facility maturing October 2028. Interest
payable periodically at variable interest rates
.

 

$

 

 

$

 

Term Loan maturing October 2028. Interest payable
periodically at variable interest rates
. The rate at
    March 31, 2024 and December 31, 2023 was
8.7%.
    Unamortized debt issuance costs amounted to $
1.4 million and
    $
1.5 million at March 31, 2024 and December 31, 2023, respectively.

 

 

123,437

 

 

 

125,000

 

4.75% Senior Notes maturing October 2027. Unamortized debt
    issuance costs amounted to $
1.4 million and $1.5 million at
    March 31, 2024 and December 31, 2023, respectively.

 

 

243,068

 

 

 

243,068

 

8.25% Senior Notes maturing April 2026. Unamortized debt
    issuance costs amounted to $
5.8 million at December 31, 2023.
    The 8.25% Senior Notes were redeemed on April 15, 2024, as
    further described below.

 

 

98,774

 

 

 

593,113

 

8.25% Senior Notes maturing April 2029. Unamortized debt
    issuance costs amounted to $
9.6 million at March 31, 2024.

 

 

500,000

 

 

 

 

4.43% Lansing Correctional Facility Non-Recourse Mortgage
    Note maturing
January 2040. Unamortized debt issuance
    costs amounted to $
2.5 million and $2.6 million at
    March 31, 2024 and December 31, 2023, respectively.

 

 

144,237

 

 

 

145,510

 

Total debt

 

 

1,109,516

 

 

 

1,106,691

 

Unamortized debt issuance costs

 

 

(14,944

)

 

 

(12,052

)

Net unamortized original issue premium

 

 

 

 

 

434

 

Current portion of long-term debt

 

 

(110,487

)

 

 

(11,597

)

Long-term debt, net

 

$

984,085

 

 

$

1,083,476

 

 

Bank Credit Facility. On October 11, 2023, CoreCivic entered into a Fourth Amended and Restated Credit Agreement (referred to herein as the "Bank Credit Facility") in an aggregate principal amount of $400.0 million, consisting of a $125.0 million term loan (the "Term Loan") and a revolving credit facility with a borrowing capacity of $275.0 million (the "Revolving Credit Facility"). The Bank Credit Facility has a maturity of October 2028. The Bank Credit Facility includes an option to increase the availability under the Revolving Credit Facility and to request additional term loans from the lenders in an aggregate amount not to exceed the greater of (a) $200.0 million and (b) 50% of consolidated EBITDA for the most recently ended four-quarter period, subject to, among other things, the receipt of commitments for the increased amount. At CoreCivic's option, interest on outstanding borrowings under the Bank Credit Facility is based on either a base rate plus a margin ranging from 1.75% to 3.5% based upon the Company’s then-current total leverage ratio, or at Term SOFR (as defined in the Bank Credit Facility), which is a forward-looking term rate based on the Secured Overnight Financing Rate ("SOFR") plus a margin ranging from 2.75% to 4.5% based on the Company’s then-current total leverage ratio. The Revolving Credit Facility includes a $25.0 million sublimit for swing line loans that enables CoreCivic to borrow at the base rate plus the applicable margin from the Administrative Agent (as defined in the Bank Credit Facility) on same-day notice.

9


 

Based on the Company's total leverage ratio, interest on loans under the previous bank credit facility through October 10, 2023, was at a base rate plus a margin of 2.25% or at the Bloomberg Short-Term Bank Yield ("BSBY") plus a margin of 3.25%, and a commitment fee equal to 0.45% of the unfunded balance of the then-existing revolving credit facility, which had a borrowing capacity of $250.0 million. Since October 11, 2023, loans under the Bank Credit Facility bore interest at a base rate plus a margin of 2.25% or at Term SOFR plus a margin of 3.25%, and a commitment fee equal to 0.45% of the unfunded balance of the Revolving Credit Facility, as the interest rate spreads were fixed under the terms of the Bank Credit Facility until the first calculation date occurring after the first full fiscal quarter after the closing date of the Bank Credit Facility. Based on the Company's total leverage ratio at March 31, 2024, during the second quarter of 2024 the interest rate spread for base rate loans will decline to 2.00%, the interest rate spread for Term SOFR loans will reduce to 3.00%, and the commitment fee will decrease to 0.40%. The Revolving Credit Facility also has a $100.0 million sublimit for the issuance of standby letters of credit. As of March 31, 2024, CoreCivic had no borrowings outstanding under the Revolving Credit Facility. As of March 31, 2024, CoreCivic had $18.0 million in letters of credit outstanding resulting in $257.0 million available under the Revolving Credit Facility. The Term Loan, which had an outstanding principal balance of $123.4 million as of March 31, 2024, requires scheduled quarterly principal payments through October 2028, and is pre-payable without penalty.

The Bank Credit Facility requires CoreCivic to meet certain financial covenants, including, without limitation, a total leverage ratio of not more than 4.50 to 1.00, a secured leverage ratio of not more than 2.50 to 1.00, and a fixed charge coverage ratio of not less than 1.75 to 1.00. As of March 31, 2024, CoreCivic was in compliance with all such covenants. The Bank Credit Facility is secured by a pledge of all of the capital stock (or other ownership interests) of CoreCivic's domestic restricted subsidiaries, 65% of the capital stock (or other ownership interests) of CoreCivic's "first-tier" foreign subsidiaries, all of the accounts receivable of the Company and its domestic restricted subsidiaries, and substantially all of the deposit accounts of the Company and its domestic restricted subsidiaries. In the event that (a) the consolidated total leverage equals or exceeds 4.25 to 1.00 or (b) the Company incurs certain debt above a specified threshold, each known as a "springing lien" event, certain intangible assets and unencumbered real estate assets that meet a 50% loan-to-value requirement are required to be added as collateral. In addition, the Bank Credit Facility contains certain covenants that, among other things, limit the incurrence of additional indebtedness, payment of dividends and other customary restricted payments, permitted investments, transactions with affiliates, asset sales, mergers and consolidations, liquidations, prepayments and modifications of other indebtedness, liens and other encumbrances and other matters customarily restricted in such agreements, and in each case subject to customary carveouts. The Bank Credit Facility is subject to cross-default provisions with respect to the terms of certain of CoreCivic's other material indebtedness and is subject to acceleration upon the occurrence of a change of control.

Senior Notes. Interest on the $243.1 million remaining aggregate principal amount of CoreCivic's 4.75% senior unsecured notes issued in October 2017 with an original principal amount of $250.0 million (the "4.75% Senior Notes") accrues at the stated rate and is payable in April and October of each year. The 4.75% Senior Notes are scheduled to mature on October 15, 2027. During 2023, the Company purchased $6.9 million principal amount of the 4.75% Senior Notes through open market purchases, reducing the outstanding balance of the 4.75% Senior Notes to $243.1 million as of December 31, 2023. Interest on the $98.8 million remaining aggregate principal amount of CoreCivic's 8.25% senior unsecured notes issued in April and September 2021 with an original principal amount of $675.0 million (the "Old 8.25% Senior Notes") accrued at the stated rate and was payable in April and October of each year. The Old 8.25% Senior Notes were scheduled to mature on April 15, 2026. During 2022 and 2023, the Company purchased $81.9 million principal amount of the Old 8.25% Senior Notes through open market purchases reducing the outstanding balance of the Old 8.25% Senior Notes to $593.1 million.

On March 4, 2024, the Company commenced a cash tender offer (the "Tender Offer") for any and all of the $593.1 million outstanding principal amount of its outstanding Old 8.25% Senior Notes. As a result of the Tender Offer, $494.3 million aggregate principal amount of the Old 8.25% Senior Notes, or approximately 83.3% of the aggregate principal amount of the Old 8.25% Senior Notes outstanding, had been validly tendered and not validly withdrawn. The Company accepted for purchase and paid for all of the Old 8.25% Senior Notes that were validly tendered and not validly withdrawn. Holders of the Old 8.25% Senior Notes who validly tendered received in cash $1,043.75 per $1,000 principal amount of the Old 8.25% Senior Notes validly tendered, plus accrued and unpaid interest from the October 15, 2023 interest payment date for the Old 8.25% Senior Notes up to, but not including, the settlement date, March 12, 2024. On March 15, 2024, the Company announced that it delivered an irrevocable notice to the holders of all CoreCivic's Old 8.25% Senior Notes that had not been validly tendered or had been validly withdrawn in the Tender Offer, that CoreCivic had elected to redeem in full the Old 8.25% Senior Notes that remained outstanding on April 15, 2024. The remaining principal amount of the outstanding Old 8.25% Senior Notes, which amounted to $98.8 million, was redeemed on April 15, 2024, at a redemption price equal to 104.125% of the principal amount of the outstanding Old 8.25% Senior Notes, plus accrued and unpaid interest on such Old 8.25% Senior Notes to, but not including, April 15, 2024.

10


 

In connection with the Tender Offer, on March 12, 2024, the Company completed an underwritten registered public offering of $500.0 million aggregate principal amount of 8.25% senior unsecured notes due 2029 (the "New 8.25% Senior Notes"), which are guaranteed by all the Company's subsidiaries that guarantee the Bank Credit Facility, the 4.75% Senior Notes, and the Old 8.25% Senior Notes (until their repayment and satisfaction on April 15, 2024). The New 8.25% Senior Notes were offered pursuant to CoreCivic's shelf registration statement on Form S-3, which became effective upon filing with the SEC on March 4, 2024. The net proceeds from the issuance of the New 8.25% Senior Notes totaled approximately $490.3 million, after deducting underwriting discounts and offering expenses. The Company used the net proceeds from the offering of the New 8.25% Senior Notes, together with borrowings under the Revolving Credit Facility and cash on hand, to fund the Tender Offer, and to redeem the remaining outstanding balance of the Old 8.25% Senior Notes on April 15, 2024. CoreCivic recorded charges totaling $27.2 million during the first quarter of 2024 associated with the Tender Offer and redemption of the Old 8.25% Senior Notes, including the non-cash write-off of loan issuance costs and original issue premium.

The 4.75% Senior Notes, the New 8.25% Senior Notes, and the Old 8.25% Senior Notes (until their repayment and satisfaction on April 15, 2024) (collectively, the "Senior Notes") are senior unsecured obligations of the Company and are guaranteed by all of the Company's existing and future subsidiaries that guarantee the Bank Credit Facility. CoreCivic may redeem all or part of the 4.75% Senior Notes at any time prior to three months before their maturity date at a "make-whole" redemption price, plus accrued and unpaid interest thereon to, but not including, the redemption date. Thereafter, the 4.75% Senior Notes are redeemable at CoreCivic's option, in whole or in part, at a redemption price equal to 100% of the aggregate principal amount of the notes to be redeemed plus accrued and unpaid interest thereon to, but not including, the redemption date. The Company may redeem all or part of the New 8.25% Senior Notes at any time prior to April 15, 2026, in whole or in part, at a "make-whole" redemption price, plus accrued and unpaid interest thereon to, but not including, the redemption date. Thereafter, the New 8.25% Senior Notes are redeemable at CoreCivic's option, in whole or in part, at a redemption price expressed as a percentage of the principal amount thereof, which percentage is 104.125% beginning on April 15, 2026, 102.063% beginning on April 15, 2027, and 100% beginning on April 15, 2028, plus, in each such case, accrued and unpaid interest thereon to, but not including, the redemption date.

The indentures governing the Senior Notes contain certain customary covenants that, subject to certain exceptions and qualifications, restrict CoreCivic's ability to, among other things, create or permit to exist certain liens and consolidate, merge or transfer all or substantially all of CoreCivic's assets. In addition, if CoreCivic experiences specific kinds of changes in control, CoreCivic must offer to repurchase all or any portion of the Senior Notes. The offer price for the Senior Notes in connection with a change in control would be 101% of the aggregate principal amount of the notes repurchased plus accrued and unpaid interest, if any, on the notes repurchased to the date of purchase. The indenture related to the Old 8.25% Senior Notes (until their repayment and satisfaction on April 15, 2024) and the indenture related to the New 8.25% Senior Notes additionally limit CoreCivic's ability to incur indebtedness, make restricted payments and investments and prepay certain indebtedness. The Senior Notes are also subject to cross-default provisions with certain of CoreCivic's other indebtedness, which includes the Bank Credit Facility.

Lansing Correctional Facility Non-Recourse Mortgage Note. On April 20, 2018, CoreCivic of Kansas, LLC (the "Issuer"), a wholly-owned unrestricted subsidiary of the Company, priced $159.5 million in aggregate principal amount of non-recourse senior secured notes of the Issuer (the "Kansas Notes"), in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. The Kansas Notes have a yield to maturity of 4.43% and are scheduled to mature in January 2040, 20 years following completion of the project, which occurred in January 2020. Principal and interest on the Kansas Notes are payable in quarterly payments, which began in July 2020 and continue until maturity. CoreCivic may redeem all or part of the Kansas Notes at any time upon written notice of not less than 30 days and not more than 60 days prior to the date fixed for such prepayment, with a "make-whole" amount, together with interest on the Kansas Notes accrued to, but not including, the redemption date. Because the Issuer has been designated as an unrestricted subsidiary of the Company under terms of the Bank Credit Facility, the issuance and service of the Kansas Notes, and the revenues and expenses associated with the facility lease, do not impact the financial covenants associated with the Bank Credit Facility. As of March 31, 2024, the outstanding balance of the Kansas Notes was $144.2 million.

Debt Maturities. Scheduled principal payments as of March 31, 2024 for the remainder of 2024, the next five years, and thereafter were as follows (in thousands):

 

2024 (remainder)

 

$

107,536

 

2025

 

 

12,073

 

2026

 

 

15,701

 

2027

 

 

262,423

 

2028

 

 

97,995

 

2029

 

 

507,985

 

Thereafter

 

 

105,803

 

Total debt

 

$

1,109,516

 

 

11


 

 

5.
STOCKHOLDERS' EQUITY

Share Repurchase Program

On May 12, 2022, the Company's Board of Directors ("BOD") approved a share repurchase program to repurchase up to $150.0 million of the Company's common stock. On August 2, 2022, the BOD increased the authorization to repurchase under the share repurchase program by up to an additional $75.0 million of the Company's common stock, or a total aggregate authorized amount to repurchase up to $225.0 million of the Company's common stock. Repurchases of the Company's outstanding common stock will be made in accordance with applicable securities laws and may be made at the Company's discretion based on parameters set by the BOD from time to time in the open market, through privately negotiated transactions, or otherwise. The share repurchase program has no time limit and does not obligate the Company to purchase any particular amount of its common stock. The authorization for the share repurchase program may be terminated, suspended, increased or decreased by the BOD in its discretion at any time. Through December 31, 2023, the Company repurchased 10.1 million shares of its common stock at a total cost of $112.6 million, excluding costs associated with the share repurchase program, or $11.16 per share. During the three months ended March 31, 2024, the Company repurchased 2.7 million shares of its common stock at a total cost of $39.4 million, excluding costs associated with the share repurchase program, or $14.52 per share. As of March 31, 2024, the Company had repurchased a total of 12.8 million common shares at an aggregate cost of approximately $152.0 million, or $11.87 per share, and had approximately $73.0 million of repurchase authorization available under the share repurchase program.

Restricted Stock Units

During the three months ended March 31, 2024, CoreCivic issued approximately 1.5 million restricted common stock units ("RSUs") to certain of its employees and non-employee directors, with an aggregate value of $23.0 million, including 1.4 million RSUs to employees and non-employee directors whose compensation is charged to general and administrative expense and 0.1 million RSUs to employees whose compensation is charged to operating expense. During the full year 2023, CoreCivic issued approximately 2.0 million RSUs to certain of its employees and non-employee directors, with an aggregate value of $22.3 million, including 1.8 million RSUs to employees and non-employee directors whose compensation is charged to general and administrative expense and 0.2 million RSUs to employees whose compensation is charged to operating expense.

CoreCivic has established performance-based vesting conditions on a portion of the RSUs awarded to its officers and executive officers that, unless earlier vested under the terms of the agreements, are subject to vesting over a three-year period based upon the satisfaction of certain annual performance criteria. The RSUs awarded to officers and executive officers in 2022, 2023 and 2024 consist of a combination of awards with performance-based conditions and time-based conditions. Unless earlier vested under the terms of the RSU agreements, the RSUs with time-based vesting conditions vest in equal amounts over three years on the later of (i) the anniversary date of the grant or (ii) the delivery of the audited financial statements by the Company's independent registered public accountant for the applicable fiscal year. The RSUs with performance-based vesting conditions are divided into one-third increments, each of which is subject to vesting based upon satisfaction of certain annual performance criteria established at the beginning of the fiscal years ending December 31, 2022, 2023, and 2024 for the 2022 awards, December 31, 2023, 2024, and 2025 for the 2023 awards, and December 31, 2024, 2025, and 2026 for the 2024 awards, and which can be increased up to 150% or decreased to 0% based on performance relative to the annual performance criteria, and further increased or decreased using a modifier of 80% to 120% based on CoreCivic's total shareholder return relative to a peer group. Because the performance criteria for the fiscal years ending December 31, 2025 and 2026 have not yet been established, the values of the third RSU increment of the 2023 awards and of the second and third increments of the 2024 awards for financial reporting purposes will not be determined until such criteria are established. A portion of the RSU award granted to CoreCivic's chief executive officer in 2024 contains a single performance-based vesting condition that results in full vesting on the later of (i) the second anniversary of the award or (ii) the delivery of the audited financial statements by the Company's independent registered public accountant for the fiscal year ending December 31, 2025, if the performance criteria is met for the year ending December 31, 2025, or no vesting if the performance criteria is not met for such year. Time-based RSUs issued to other employees, unless earlier vested under the terms of the agreements, generally vest in equal amounts over three years on the later of (i) the anniversary date of the grant or (ii) the delivery of the audited financial statements by the Company's independent registered public accountant for the applicable fiscal year. RSUs issued to non-employee directors generally vest one year from the date of award. As of March 31, 2024, approximately 3.3 million RSUs remained outstanding and subject to vesting.

During the three months ended March 31, 2024, CoreCivic expensed $6.1 million, net of forfeitures, relating to RSUs ($0.6 million of which was recorded in operating expenses and $5.5 million of which was recorded in general and administrative expenses). During the three months ended March 31, 2023, CoreCivic expensed $4.9 million, net of forfeitures, relating to RSUs ($0.5 million of which was recorded in operating expenses and $4.4 million of which was recorded in general and administrative expenses).

12


 

6.
EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the year. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. For CoreCivic, diluted earnings per share is computed by dividing net income by the weighted average number of common shares after considering the additional dilution related to restricted stock-based awards.

A reconciliation of the numerator and denominator of the basic earnings per share computation to the numerator and denominator of the diluted earnings per share computation is as follows (in thousands, except per share data):

 

 

 

For the Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

NUMERATOR

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Net income

 

$

9,543

 

 

$

12,400

 

Diluted:

 

 

 

 

 

 

Net income

 

$

9,543

 

 

$

12,400

 

DENOMINATOR

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

112,306

 

 

 

114,533

 

Diluted:

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

112,306

 

 

 

114,533

 

Effect of dilutive securities:

 

 

 

 

 

 

Restricted stock-based awards

 

 

1,181

 

 

 

937

 

Weighted average shares and assumed conversions

 

 

113,487

 

 

 

115,470

 

BASIC EARNINGS PER SHARE

 

$

0.08

 

 

$

0.11

 

DILUTED EARNINGS PER SHARE

 

$

0.08

 

 

$

0.11

 

 

 

7.
COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The nature of CoreCivic's business results in claims and litigation alleging that it is liable for damages arising from the conduct of its employees, offenders or others. The nature of such claims includes, but is not limited to, claims arising from employee or offender misconduct, medical malpractice, employment matters, property loss, contractual claims, including claims regarding compliance with contract performance requirements, and personal injury or other damages resulting from contact with CoreCivic's facilities, personnel or offenders, including damages arising from an offender's escape or from a disturbance at a facility. CoreCivic maintains insurance to cover many of these claims, which may mitigate the risk that any single claim would have a material effect on CoreCivic's consolidated financial position, results of operations, or cash flows, provided the claim is one for which coverage is available. The combination of self-insured retentions and deductible amounts means that, in the aggregate, CoreCivic is subject to self-insurance risk.

Based upon management's review of the potential claims and outstanding litigation, and based upon management's experience and history of estimating losses, and taking into consideration CoreCivic's self-insured retention amounts, management believes a loss in excess of amounts already recognized would not be material to CoreCivic's consolidated financial statements. Adversarial proceedings and litigation are, however, subject to inherent uncertainties, and unfavorable decisions and rulings resulting from legal proceedings could occur which could have a material impact on CoreCivic's consolidated financial position, results of operations, or cash flows for the period in which such decisions or rulings occur, or future periods. Expenses associated with legal proceedings may also fluctuate from quarter to quarter based on changes in CoreCivic's assumptions, new developments, or by the effectiveness of CoreCivic's litigation and settlement strategies.

13


 

CoreCivic records a liability in the consolidated financial statements for loss contingencies when a loss is known or considered probable, and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded. Any receivable for insurance recoveries is recorded separately from the corresponding litigation reserve, and only if recovery is determined to be probable and the amount of payment can be determined. CoreCivic does not accrue for anticipated legal fees and costs and expenses those items as incurred.

ICE Detainee Labor and Related Matters. On May 31, 2017, two former ICE detainees, who were detained at the Company's Otay Mesa Detention Center ("OMDC") in San Diego, California, filed a class action lawsuit against the Company in the United States District Court for the Southern District of California. The complaint alleged that the Company forces detainees to perform labor under threat of punishment in violation of state and federal anti-trafficking laws and that OMDC's Voluntary Work Program ("VWP") violates state labor laws including state minimum wage laws. ICE requires that CoreCivic offer and operate the VWP in conformance with ICE standards and ICE prescribes the minimum rate of pay for VWP participants. The Plaintiffs seek compensatory damages, exemplary damages, restitution, penalties, and interest as well as declaratory and injunctive relief on behalf of former and current detainees. On April 1, 2020, the district court certified a nationwide anti-trafficking claims class of former and current detainees who participated in an ICE VWP at a CoreCivic facility. It also certified a state law class of former and current detainees who participated in a VWP wherever the Company held ICE detainees in California. The Company has exhausted appeals of the class certification order. The claims resulting in certified classes will now proceed in the United States District Court for the Southern District of California, where the discovery process has commenced. A second California lawsuit concerning OMDC has been stayed pending the outcome of class proceedings in the first California case described above.

Due to the stage of the ongoing proceedings, the Company cannot reasonably predict the outcomes, nor can it estimate the amount of loss or range of loss, if any, that may result. As a result, the Company has not recorded an accrual relating to these matters at this time, as losses are not considered probable or reasonably estimable at this stage of these lawsuits.

8.
INCOME TAXES

Income taxes are accounted for under the provisions of ASC 740, "Income Taxes". ASC 740 generally requires CoreCivic to record deferred income taxes for the tax effect of differences between book and tax bases of its assets and liabilities. Deferred income taxes reflect the available net operating losses and the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the consolidated statement of operations in the period that includes the enactment date. Realization of the future tax benefits related to deferred tax assets is dependent on many factors, including CoreCivic's past earnings history, expected future earnings, the character and jurisdiction of such earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of its deferred tax assets, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. CoreCivic recorded an income tax benefit of $0.5 million for the three months ended March 31, 2024 and an income tax expense of $8.1 million for the three months ended March 31, 2023. The Company’s net income tax benefit in the first quarter of 2024 varied from its statutory tax rate primarily due to a $2.6 million tax benefit for stock-based compensation vesting. The Company’s net income tax expense in the first quarter of 2023 varied from its statutory tax rate primarily due to a $2.3 million charge for the revaluation of deferred tax liabilities due to an internal restructuring.

The Inflation Reduction Act of 2022 (the "Inflation Reduction Act") was signed into law on August 16, 2022. Among other provisions, the Inflation Reduction Act creates an excise tax of 1% on the fair value of net stock repurchases in excess of share issuances made by publicly traded U.S. corporations, effective for repurchases after December 31, 2022. The impact of this excise tax on the Company’s financial position, and/or liquidity, in future periods, will vary based on the level of net stock repurchases in excess of share issuances made by the Company in a given year. The Company has concluded that the excise tax associated with stock repurchases is properly recognized as a component of equity given that it is a direct cost associated with the repurchase of common stock. The excise tax recognized during the first quarters of 2024 and 2023 was estimated to be $0.2 million and $0.1 million, respectively, associated with the repurchase of 2.7 million and 2.5 million shares, respectively, during the quarters, net of the shares issued during the same period for restricted stock plans as permitted by the issuance offset rule under the Inflation Reduction Act.

14


 

Income Tax Contingencies

ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance prescribed in ASC 740 establishes a recognition threshold of more likely than not that a tax position will be sustained upon examination. The measurement attribute requires that a tax position be measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

CoreCivic had no liabilities recorded for uncertain tax positions as of March 31, 2024 and December 31, 2023. CoreCivic recognizes interest and penalties related to unrecognized tax positions in income tax expense. CoreCivic does not currently anticipate that the total amount of unrecognized tax positions will significantly change in the next twelve months.

9.
SEGMENT REPORTING

As of March 31, 2024, CoreCivic operated 43 correctional and detention facilities, 39 of which the Company owned. In addition, CoreCivic operated 23 residential reentry centers and owned 6 properties held for lease to government agencies. Management views CoreCivic's operating results in three operating segments, CoreCivic Safety, CoreCivic Community, and CoreCivic Properties. CoreCivic Safety includes the operating results of those correctional and detention facilities placed into service that were owned, or controlled via a long-term lease, and managed by CoreCivic, as well as those correctional and detention facilities owned by a third party and managed by CoreCivic. CoreCivic Safety also includes the operating results of TransCor America, LLC, a subsidiary of the Company that provides transportation services to governmental agencies. CoreCivic Community includes the operating results of those residential reentry centers placed into service that were owned, or controlled via a long-term lease, and managed by CoreCivic. CoreCivic Community also includes the operating results of the Company's electronic monitoring and case management services. CoreCivic Properties includes the operating results of those properties held for lease to government agencies. The operating performance of the three segments can be measured based on their net operating income. CoreCivic defines facility net operating income as a facility's revenues less operating expenses.

15


 

The revenue and facility net operating income for each of the three segments and a reconciliation to CoreCivic's income before income taxes is as follows for the three months ended March 31, 2024 and 2023 (in thousands):

 

 

 

For the Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Revenue:

 

 

 

 

 

 

Safety

 

$

457,746

 

 

$

417,650

 

Community

 

 

29,900

 

 

 

26,414

 

Properties

 

 

13,039

 

 

 

13,837

 

Total segment revenue

 

 

500,685

 

 

 

457,901

 

Operating expenses:

 

 

 

 

 

 

Safety

 

 

350,098

 

 

 

328,398

 

Community

 

 

24,144

 

 

 

22,715

 

Properties

 

 

3,835

 

 

 

3,361

 

Total segment operating expenses

 

 

378,077

 

 

 

354,474

 

Facility net operating income:

 

 

 

 

 

 

Safety

 

 

107,648

 

 

 

89,252

 

Community

 

 

5,756

 

 

 

3,699

 

Properties

 

 

9,204

 

 

 

10,476

 

Total facility net operating income

 

 

122,608

 

 

 

103,427

 

Other revenue (expense):

 

 

 

 

 

 

Other revenue

 

 

1

 

 

 

101

 

Other operating expense

 

 

(26

)

 

 

(63

)

General and administrative

 

 

(36,465

)

 

 

(32,679

)

Depreciation and amortization

 

 

(31,730

)

 

 

(31,042

)

Interest expense, net

 

 

(18,613

)

 

 

(19,151

)

Expenses associated with debt repayments
    and refinancing transactions

 

 

(27,242

)

 

 

 

Gain on sale of real estate assets, net

 

 

568

 

 

 

 

Other expense

 

 

(58

)

 

 

(47

)

 Income before income taxes

 

$

9,043

 

 

$

20,546

 

The following table summarizes capital expenditures including accrued amounts for the three months ended March 31, 2024 and 2023 (in thousands):

 

 

For the Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Capital expenditures:

 

 

 

 

 

 

Safety

 

$

7,497

 

 

$

3,569

 

Community

 

 

1,907

 

 

 

414

 

Properties

 

 

305

 

 

 

48

 

Corporate and other

 

 

908

 

 

 

2,192

 

Total capital expenditures

 

$

10,617

 

 

$

6,223

 

The total assets are as follows (in thousands):

 

 

March 31, 2024

 

 

December 31, 2023

 

Assets:

 

 

 

 

 

 

     Safety

 

$

2,235,054

 

 

$

2,284,243

 

     Community

 

 

204,315

 

 

 

213,145

 

     Properties

 

 

396,237

 

 

 

402,889

 

     Corporate and other

 

 

191,752

 

 

 

205,122

 

Total Assets

 

$

3,027,358

 

 

$

3,105,399

 

 

 

16


 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this quarterly report on Form 10-Q, or Quarterly Report. In this Quarterly Report we use the terms, the "Company," "CoreCivic," "we," "us," and "our" to refer to CoreCivic, Inc. and its subsidiaries unless context indicates otherwise.

This Quarterly Report 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, as amended. All statements other than statements of current or historical fact contained herein, including statements regarding our future financial position, business strategy, budgets, projected costs and plans, and objectives of management for future operations, are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "projects," "will," and similar expressions, as they relate to us, are intended to identify forward-looking statements. 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:

changes in government policy, legislation and regulations that affect utilization of the private sector for corrections, detention, and residential reentry services, in general, or our business, in particular, including, but not limited to, the continued utilization of our correctional and detention facilities by the federal government, including as a consequence of the United States Department of Justice, or DOJ, not renewing contracts as a result of President Biden's Executive Order on Reforming Our Incarceration System to Eliminate the Use of Privately Operated Criminal Detention Facilities, or the Private Prison EO, impacting utilization primarily by the United States Federal Bureau of Prisons, or BOP, and the United States Marshals Service, or USMS, and the impact of any changes to immigration reform and sentencing laws (we do 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);
our ability to obtain and maintain correctional, detention, and residential reentry facility management contracts because of reasons including, but not limited to, sufficient governmental appropriations, contract compliance, negative publicity and effects of inmate disturbances;
changes in the privatization of the corrections and detention industry, the acceptance of our services, the timing of the opening of new facilities and the commencement of new management contracts (including the extent and pace at which new contracts are utilized), as well as our ability to utilize available beds;
general economic and market conditions, including, but not limited to, the impact governmental budgets can have on our contract renewals and renegotiations, per diem rates, and occupancy;
fluctuations in our operating results because of, among other things, changes in occupancy levels; competition; contract renegotiations or terminations; inflation and other increases in costs of operations, including a continuing rise in labor costs; fluctuations in interest rates and risks of operations;
government budget uncertainty, the impact of the debt ceiling and the potential for government shutdowns and changing budget priorities;
our ability to successfully identify and consummate future development and acquisition opportunities and realize projected returns resulting therefrom;
our ability to have met and maintained qualification for taxation as a real estate investment trust, or REIT, for the years we elected REIT status; and
the availability of debt and equity financing on terms that are favorable to us, or at all.

Any or all of our forward-looking statements in this Quarterly Report may turn out to be inaccurate. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. Our statements can be affected by inaccurate assumptions we might make or by known or unknown risks, uncertainties and assumptions, including the risks, uncertainties, and assumptions described in our Annual Report on Form 10-K for the year ended December 31, 2023 (including those risks and uncertainties described under Part I, Item 1A. Risk Factors) filed with the Securities and Exchange Commission, or the SEC, on February 20, 2024, or the 2023 Form 10-K, and in other reports, documents, and other information we file with the SEC from time to time. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We undertake no obligation to publicly update or revise any forward-looking statements made in this Quarterly Report, except as may be required by law.

17


 

All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements.

OVERVIEW

The Company

We are a diversified government solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. Through three segments, CoreCivic Safety, CoreCivic Community, and CoreCivic Properties, we provide a broad range of solutions to government partners that serve the public good through corrections and detention management, a network of residential reentry centers to help address America's recidivism crisis, and government real estate solutions. We have been a flexible and dependable partner for government for over 40 years. Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good.

We are the nation's largest owner of partnership correctional, detention, and residential reentry facilities and one of the largest prison operators in the United States. As of March 31, 2024, through our CoreCivic Safety segment, we operated 43 correctional and detention facilities, 39 of which we owned, with a total design capacity of approximately 65,000 beds. Through our CoreCivic Community segment, we owned and operated 23 residential reentry centers with a total design capacity of approximately 5,000 beds. In addition, through our CoreCivic Properties segment, we owned 6 properties, with a total design capacity of approximately 10,000 beds.

In addition to providing fundamental residential services, our correctional, detention, and residential reentry 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. We also provide or make available to offenders certain health care (including medical, dental, and mental health services), food services, and work and recreational programs.

We are a Maryland corporation formed in 1983. Our principal executive offices are located at 5501 Virginia Way, Brentwood, Tennessee, 37027, and our telephone number at that location is (615) 263-3000. Our website address is www.corecivic.com. We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the SEC in accordance with the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such reports include our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K and our definitive proxy statement. We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. In addition, we routinely post on the “Investors” page of our website news releases, announcements and other statements about our business and results of operations, some of which may contain information that may be deemed material to investors. Therefore, we encourage investors to monitor the “Investors” page of our website and review the information we post on that page. Information contained on our website is not incorporated by reference herein and is not part of this Quarterly Report.

The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at the following address: www.sec.gov.

On January 26, 2021, President Biden issued the Private Prison EO. The Private Prison EO directs the Attorney General to not renew DOJ contracts with privately operated criminal detention facilities. Two agencies of the DOJ, the BOP and the USMS, utilize our services. The BOP houses inmates who have been convicted, and the USMS is generally responsible for detainees who are awaiting trial. The Private Prison EO only applies to agencies that are part of the DOJ, which includes the BOP and USMS. U.S. Immigration and Customs Enforcement, or ICE, facilities are not covered by the Private Prison EO, as ICE is an agency of the Department of Homeland Security, or DHS, not the DOJ. For the three months ended March 31, 2024, USMS and ICE accounted for 20% ($101.1 million) and 31% ($153.8 million), respectively, of our total revenue. For the twelve months ended December 31, 2023, USMS and ICE accounted for 21% ($400.4 million) and 30% ($565.5 million), respectively, of our total revenue.

Unlike the BOP, the USMS does not own detention capacity and relies on the private sector, along with various government agencies, for its detainee population. We no longer operate any prison contracts for the BOP. We currently have two detention facilities that have direct contracts with the USMS. Because of the lack of alternative bed capacity, one of the contracts was renewed upon its expiration in September 2023, and now expires in September 2028. The second direct contract expires in September 2025. It is too early to predict the outcome of the expiration of the contract scheduled to expire in September 2025, and future developments could occur prior to the scheduled expiration date.