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Corrections Corporation of America Message Board

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  • RetiredPaperman RetiredPaperman Nov 25, 1999 1:54 PM Flag

    Quick check again on the numbers

    If I understand it correctly, while the new Act
    allows REITs to own 100% of the stock of taxable
    subsidiaries, the Act still limits the total amount of profits
    that those subsidiaries can contribute to the parent.
    Therefore, while it would be OK for PZN to own all the stock
    of CCA, it will not work in our situation because
    OPCO would contribute too much profit.

    Just a
    point of clarification, it may sound silly to say that
    OPCO would contribute too much profit to PZN when OPCO
    is losing money but please understand that if OPCO
    was paying "market" rates to PZN, OPCO would be
    handsomly profitable and PZN would be generating the
    losses.

    It is particularly important to understand THAT as
    we get the occasional call to set OPCO free from
    PZN.

    Without above-market lease payments from OPCO, and OPCO's
    ability to generate new business, PZN is a collection of
    prisons who's value declines each year as the leases
    slowly wind down. This is especially true given what
    doc's actions have done to our Balance Sheet this past
    year. That is why a combined PZN/OPCO "c" corp wouldn't
    earn 50 cents a share next year. If we had not done
    the REIT and instead simply merged PZN with CCA, our
    2000 earnings would probably be close to $1.20/share.

 
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