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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

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

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

    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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    • If we assume an SI would want lots of
      equity...who wouldn't.....lets try this, dilution. In order to
      shore up the balance sheet lets assume dilution of 20mm
      new shares. The numbers with Opco's loses annualized
      are now $.17/share for a P/E of 53 ($24mm/139mm

      Not seeing what's happening at Opco is killing this
      company. Even with capacity stated near 90% we obviously
      are not getting the full effect of what really is
      happening there, IMO. Any ideas?

    • 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.

    • Just got his report....from First Union.
      estimates combined Opco and PZN would earn $.49 in 00' and
      $1 in 01. His discount of future earnings puts the
      stock at a level of $7-$8 per share, but based on
      EBIT...$7-$10...if I wrote this all down correctly.

      Interesting how we were just going through this exercise.

    • Any chance of getting his break down of numbers?
      I would sure like to see how he comes up with the
      bottom line.

      If this is true then whether we stay
      a REIT or convert to a c corp we are going to be
      stuck with a stock price under $10 for awile.

    • My understanding is Chris Haley had a range
      of earnings up to $1 next year and he selected
      $.49 for next year can you confirm?

    • as people have been trying to guess what earnings
      combined co would have...what number of shares are you
      using for the combined companies....opoc is in an
      interesting position they have the clients and ownership is
      very differnt than pzn...certainly they would be
      expecting shares

    • What number makes sense?

    • for you and everyone else who has tried to
      mathematically explain this turkey in which we have all
      invested. As a person whose life is devoted to science,
      even I can say that the complexities of this beast are
      nauseating in the least. The bottom line as I see it is that
      this entire reit experience has been a lesson in the
      shell game of fancy accounting, tax evasion, and
      mismanagement. However, feel not alone. Almost everyone who has
      invested in any reit is feeling these same pains as the
      word has been out for months that managers of most
      reits can not be trusted. Our management is just
      particularly laughable, clueless, and dishonest. At the next
      shareholder meeting, we shouldn't decide about converting to
      a C corporation (won't make a difference - see HOT)
      - rather we should vote for a new management team
      devoid of nepotism - perhaps headed by someone who
      really knows real-estate like Mort Zuckerman of Boston

    • 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

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

      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

      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

      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

    • PZN had operating income of $147 mil + earning of
      subs of $22.1 for Income Before Taxes = $169.1mil.
      (This does not include the $80 mil charge for reit
      conversion). CCA had Pretax operating loss of $138.4 mil. The
      two companies combined had Pretax Income of $30.7
      mil. CCA has the benefical effect of a tax loss booked
      at $54 mil. When you add $30.7mil + 54 mil you get
      Net Income of $84.7 mil. If you use 116 million
      shares that is Net Income of $.73 per share. BUT the
      benefical effect of the tax loss is held in new CCA which
      has never made a dime. So $.46 of the $.73 may not
      ever be realized unless New CCA become profitable
      (LOWER LEASE RATES). The operating income of the
      combined entities pretax is $.27 cents. This is why PZN
      stock is valued below $10.

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