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Corrections Corporation of America Message Board

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  • toptalk99 toptalk99 Jan 24, 2000 5:41 PM Flag

    Food for thought....

    A source I respect has compiled a summary update,
    based on the limited information available (such as the
    recent 8-K filed in December). PZN and/or the Investor
    Group will probably not comment until proxies are
    mailed regarding the Investor involvement.
    The most
    interesting piece of information, IMHO, is that the
    reconstituted CCA must have reported EBITDA in the quarter
    preceding the close, ie the March 2000 Q1, of $44.3m or
    greater, for the deal to go forward. This I found is the
    only guidance PZN has given about the ongoing
    profitability of a re-merged CCA. Well, the $44.3m must be a
    readily obtainable number for CCA,not a reach, or
    Fortress/Blackstone/BAC, not to mention Merrill, wouldn't be going to all
    this trouble on spec.
    Therefore, I conclude that
    $44.3m of EBITDA is readily attainable in Q1.
    Yet Q1
    contains most of the year's $300m, 7500+ bed expansion
    program, so EBITDA run rates post the expansion should
    significantly exceed $44.3m as occupancy builds in the Q1
    Even more significantly, Q1 still sees
    California City with only 300 inmates and continuing low
    occupancy in Youngstown. It obviously does not include the
    cash flow that can be generated by CCA if 4,900 FBOP
    inmates arrive to swell CCA occupancy to the high 90's.
    In other words, a Q1 EBITDA number of $44.3m is not
    a heavy number.
    Now, if we take this low
    $44.3m/Q1 number and annualize it to $177.2m and divide by
    the current fully diluted shares outstanding and add
    the est. 2.64m shares to be distributed to
    shareholders of the private companies for re-merging with us,
    we have 122.14m shares outstanding.
    EBITDA of
    $177.2m divided by 122.14m gives us EBITDA per share of
    $1.45 for a re-merged CCA without the Investor Group
    dilution. At the recent price of $4.75 the shares are
    trading at 3.3x a conservative annualized EBITDA number.
    If we include the 48.5m shares the Investor Group's
    preferred converts into, and the 11.5m shares our rights
    offering converts into, the share base grows to 182.14m,
    shrinking the EBITDA/share to $0.97, hence increasing the
    P/EBITDA ratio to a 4.9x. Generally, the market
    trading at 12x. Now the warrants will add a further 29.5m
    shares, taking EBITDA/share to
    $0.84 and expanding the
    P/EBITDA to 5.7x, but of course we won't see the warrant's
    shares for possibly many years.
    In other words, this
    stock seems dirt cheap at these prices.
    The above
    seems logical, IMHO.
    Any constructive comments?

37.17Dec 19 4:05 PMEST

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