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Corrections Corporation of America Message Board

  • flipper_58 flipper_58 Nov 23, 1999 2:05 PM Flag

    Quick check again on the numbers

    For 9 months.....including non-cash expenses such
    as depreciation...what Opco and PZN would look like
    combined.

    Opco had a loss of ($84mm), PZN had net of
    169mm...totaled that's $85mm net or appx. $.71/share.

    NOW
    lets pay UNcle sugar out of that too. What 40%? That
    leaves a net of $.41 a share or a P/E or 22
    right?

    Not to make things worst but Opco in the 3rd quarter
    had a loss of $32mm or $128MM annualized...that's
    means combined PZN/Opco would have earnings of
    $41mm...take out $17mm for taxes and that's $24mm for the
    combined organization or apprx. $.20/share for a P/E of
    45. Ouch. So de-REIT might get them only $24mm of
    retained earnings plus the non-cash items. Short term
    would be rough it appears to me.

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    • It seems that you are calculating by combining
      9-month numbers and annual projections in the same
      breath. Subtracting OPCO's 12 mo. losses from PZN's 9 mo.
      earnings, etc. Calculating P/E based on 9 mo. figures.
      That, or else I got lost in your analysis completely.

    • wouldn't it had been nice at this juncture for a single investor purchasing that amount of shares to encourage a feeding frenzy on this turkey?

    • There's a message with a couple of questions for you over at the CSCQ message board. Why don't you wonder over and answer those questions?

    • His assumptions include:

      - $300 million
      from the SI at $10 per share.

      - $410 million in
      completed projects in 2000, $310 million in 2001.

      -
      all fees, chargebacks, etc. eliminated.

      - tax
      rate of 35%.

      - no assumption is given on
      occupancy.

      As Flipper says, he arrives at $0.49 EPS for 2000,
      $1.05 for 2001, and EBITDA for 2000 of
      $1.96.

      Based on this he gets an $8.5 target based on EPS using
      a 40% discount to a market P/E of 29, and a $7 to
      $10 target based on a 25% discount to similar
      companies which sell at 5 to 7 times
      EBITDA.

      Flipper: my number for Q3 of 1998 was after-tax. I took
      CCA's net income (obviously after-tax) of $21.1 mm and
      added PZN's income of $6.4 million assuming a 40% tax
      rate. That gives you $27.5 million total times 4
      divided by 118 mm current shares equals $0.93 per share
      annualized.

      This raises a disturbing question. If the combined
      entities could earn $110 million on an annualized basis
      pre-merger with the number of beds it had then, how it could
      now earn $77 million (Haley's number for 2000) with
      significantly more beds. I realize the company has taken on
      debt to pay dividends which lowers the profitability
      of the enterprise, but it doesn't seem like they
      have been doing that in the magnitude implied by these
      numbers.

    • This may be very simplistic, but what
      ultimately happened with this ghostly transaction the way
      I
      see it is that the shareholder got an additional 20%
      tacked on to their value by taking money that
      would
      have been paid to the IRS and putting it into the
      sharehold's hands. Also, the shareholder
      also wins because
      it take the money out through dividends. Thus,
      earning have only been taxed
      once to the end
      recipient.

      The way the two companies are now
      structured may have added a small amount of
      additional
      expenses, but it really trued up the value of this company.
      Assuming these combined companies
      added only a minor %
      of expenses, then this was trully an ingenious
      transaction. Assuming the
      strength of the company is as
      strong as it was before as an operating entity, then the
      dividend
      return should be about 9-12% making the value of the
      stock about $20-25. If the growth rate is
      10% per
      year, then the value of the stock is somewhere in the
      range of $35-40 per share.

      Also, this created a
      great way to smoke screen out a lot of the bad press
      CCA was getting as an
      operator in the
      privatization of a public service.


      Disclaimer- due
      to YAHOO's divulging of names, I must tell you that
      all of the above
      information contains many risks
      and it is completely speculative of the intents of
      management
      and their foresight. Do not use this information to
      make an investment decision and base your
      decision
      solely upon the information that is presented for the
      SEC's review and audited by an
      accredited CPA firm
      with the SEC.

    • The following is from the WSJ.

      "The REIT
      Modernization Act would allow a REIT to own as much as 100% of
      the stock of a taxable REIT subsidiary that provides
      various services to REIT tenants and others. Currently,
      REITs can own as much as 10% of the voting stock of a
      taxable corporation."

      "The change could resolve
      potential conflict-of-interest issues: Since a REIT cannot
      own more than 10%, the other 90% often ends up being
      owned personally by the REIT's management or other
      friendly parties"

      Does anyone know if this will
      apply to PZN. If it does then maybe what is going on is
      that OPCO will merge with PZN and PZN will stay a
      REIT!

      Interesting possibility....

    • OK, I give up. Trying to figure out a combined
      OPCO/PZN is too frustrating. Chris Haley has me really
      depressed. So keep the f***ing REIT. Just pay me (and
      everyone else) the rest of the regular and special
      dividends before 12/31 and get it over with. Forget the SI.
      Pay the divs with debentures off the shelf ($200MM
      left). I'll take 'em at 12%, knowing they can't get
      diluted no matter what happens down the road (assuming no
      BK or foreclosures by senior debt holders). But they
      look safer than stock, and more likely than
      cash.

      Does anyone know why they can't do that? NHY? Anyone?

    • Two of my real time quote sources are showing volume at around 4.2 million shares. Did I miss a huge trade?

    • Doesn't it amaze you that the company that made
      the big block trade waited until a time period when
      millions of potential traders were on the road and getting
      ready for Thanksgiving. That was pretty smart on their
      part to slip that one under everyones noses without
      creating much noise.

    • I agree completely that what you describe is what
      SHOULD happen. Perhaps I'm just too jaded by this world
      of resetting options and golden parachutes in which
      management is the only interested party that never seems to
      get screwed.

      Despite the fact that everyone
      outside of Baron and Sodexho was given their ownership in
      OPCO for free, I can practically guarantee that in a
      re-merger scenario everyone will get value, if not par, for
      their holdings.

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