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Corrections Corporation of America Message Board

  • hdcafe hdcafe Jun 2, 1999 12:46 PM Flag

    IS PZN A MOMENTUM STOCK??

     

    To the down side this ole dead horse is falling
    to book value. Maybe, some MM's may enter the
    picture with some buy orders before to long..We could use
    all the support we could get...This dividend of over
    18% will no doubt be cut to about half that...Any
    news on the bond yet?

    This topic is deleted.
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    • It amazing how many people come on this board,
      don't read a single posts and start making rambling on
      like they know what their talking
      about...

      hdcafe...read post #2307..PLEASE....point 2....there are NO
      Market Makers...this is a listed stock. This the second
      or third time I've read about MM's on a listed
      stock.

    • 12 3/16 at 3:35

      Greg

    • 105 Bid

      10 Ask

      Lots of buyers.

      Greg

    • Much more going one here than accounting
      mistake

      1) Accounting mistake costs them ~$35mm, but fees
      going up $80mm, difference represents business problems
      at OPCO (how is one time payment on 21,500 beds an
      accounting mistake???)
      2) Utilization in Q4 of owned/mgd.
      facilities was disclosed at 80%. This is beneath historical
      avg. and expectations in mid 90's. This was buried pre
      the merger, and this low utilization was a big piece
      of cash flow issue at OPCO

      In my opinion,
      this merger was a disaster. As a PZN shareholder I had
      $2.85 of real cash FFO turn into $2.50 of FFO that is
      "phantom" in nature (before it was solid cash lease
      payments, now PZN is paying its own rent with fees that are
      ammortized).

      So, whilst everybody that is long the stock continues
      to say no big deal, people have sold for a reason.
      THe stock did not drop 9 points for gratituitous
      reasons. So although it is easy to scream "ambulance
      chasing", and many times it is ambulance chasing, in this
      case i believe reasonable grounds.

      Think a lot
      of people who own the stock now would probably
      agree, although won't admit there was a serious
      disclosure issue.

      I make no comment on current
      valuation of business. Think it is neither cheap nor
      expensive. For those of you who claim dividend yield is huge
      (reitmeister particularly), that is a foolish arguement. THe
      current economics of the business don't prudently support
      such a high dividend, and it is probably in the
      company's best interest to pair it down.

      JMHO.

    • attachged link re:
      REITS.

      http://www.nareit.com/reitstry.html

      A REIT is LEGALLY required to pay out 95% of its
      taxable income! PZN Cannot cut dividend below this level
      or they no longer qualify as a REIT.

    • PZN has been paying out more than the minimum
      distribution required by tax law. Obviously if taxable income
      decreases, the minimum distribution would also decrease.
      Pending REIT legislation would reduce 95% to 90%.

    • define taxable income i think-

      for example
      although they will report ~$2.50 of FFO, FAD (Funds
      available for Distribution) is a much lower number. This is
      the cash that is really available to pay the
      dividend. I know one analyst has an FAD estimate of $1.80
      this year. So effectively they borrow to pay dividend,
      which is unsustainable. So if they want to continue
      with aggessive accounting relative to long
      ammortization of fees, maybe they have to keep paying a
      dividend north of FAD which is unsustainable. Maybe if
      they change accounting to ammortize more fees up
      front, this lowers FFO to a level more in-line with FAD.
      I guess net/net i am unclear if REIT rules define
      "taxable income" as FAD or FFO. ANy experts out there?

    • Taxable income is similar to but not identical to GAAP
      income; it is generally lower than FFO/FAD because it
      includes deductions for depreciation and amortization.

    • Taxable income isn't subjective - it is defined
      by law; it's what is reported on the tax
      return.

      FFO (Funds From Operations)is a REIT term defined by
      the industry, designed to approximate operating cash
      flow (net income plus depreciation and amortization of
      real estate capital costs).

      FAD (Funds
      Available for Distribution) is an analyst's/investor's
      concept - how much is available to pay dividends. The
      point of contention between PZN and some analysts
      centers on how this number is affected by the special
      fees being paid to OPCO. Put simply, some analysts
      have taken the position that the fees reduce the
      amount of cash available for dividends. PZN's contention
      is that the fees are properly considered part of the
      lease or building costs and should only reduce FAD to
      the extent of debt service.

      To the accountant
      in me, PZN's position is correct. Why should the
      tenant inducement fees be treated differently than the
      architect's fees, or zoning fees or legal fees, or the cost
      of bricks?

      Yes, when you add up all the
      costs, a prison now will cost PZN $40,000 per bed
      instead of $35,000 that everyone expected. And yes, that
      will increase the amount being borrowed and interest
      costs. But if they are getting 20% lease income (instead
      of 22%), it's still a good deal.

      Some
      analysts are still steamed by the fact that the lessee who
      is getting these fees is a private company. If it
      were a public company, though, PZN would not be
      getting 20% lease income.

    • I encourage many more mature, sensible posts like
      yours. I do believe that the primary reason that
      analysts are steamed is because they think Doc deceived
      them. The analysts have a self-
      fulling prophesy,
      they proclaim the stock is unattractive, and it

      becomes unattractive. Kind of like arguing with a
      newspaper. They buy ink by the barrel. They can spread more
      ill will in a minute than you can overcome in a year.
      They have us stockholders over the barrel burning our
      butts until Doc apologizes or fences are mended to
      their satisfaction. mho

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