CCA Announces 2012 Fourth Quarter Financial Results

Diluted Earnings per Share up 9.8%; Adjusted Diluted Earnings per Share up 7.3%; Normalized FFO per Diluted Share up 8.5%; AFFO per Diluted Share up 13.0%

Marketwired

NASHVILLE, TN--(Marketwire - Feb 13, 2013) -  CCA (NYSE: CXW) (the "Company" or "Corrections Corporation of America"), America's largest owner of partnership correctional and detention facilities, announced today its financial results for the fourth quarter of 2012.

Fourth Quarter 2012 Highlights

  • Diluted EPS up 9.8% to $0.45
  • Adjusted Diluted EPS up 7.3% to $0.44
  • Normalized FFO Per Diluted Share up 8.5% to $0.64
  • AFFO Per Diluted Share up 13.0% to $0.61

For the fourth quarter of 2012, the Company reported Normalized FFO of $0.64 per share compared to $0.59 per share in the same period of 2011. The 8.5% increase in Normalized FFO per share reflects a slight increase in operating income, adjusted to exclude REIT conversion costs, combined with a reduction in interest expense. 

Normalized FFO is calculated by eliminating certain items from FFO which, by their nature, are not comparable from period to period or that tend to obscure the Company's actual operating performance. A reconciliation of Normalized FFO can be found later in this release.

CCA President and Chief Executive Officer, Damon Hininger, stated, "We are pleased to report financial results that were above expectations. As we reported last week, we are also very excited to have announced our decision to elect REIT status effective January 1, 2013. We believe this demonstrates our commitment to creating value for our shareholders."

Revenue for the fourth quarter of 2012 totaled $436.9 million compared to $437.1 million in the same period of 2011. Revenue for the fourth quarter of 2012 reflects:

  • Stable compensated man-days: 7.38 million in the fourth quarter of 2012 compared to 7.39 million in the fourth quarter of 2011
  • A slight increase in revenue per compensated man-day: $59.09 in the fourth quarter of 2012 compared to $58.97 in the fourth quarter of 2011

Fourth quarter 2012 revenues and compensated man-days reflect higher populations from our Lake Erie Correctional Institution which we purchased from the state of Ohio and assumed operations effective January 1, 2012. In addition, we completed construction of our Jenkins Correctional Center during the first quarter of 2012 and began ramping-up state of Georgia populations during the same quarter. We also experienced increases in inmate populations from our new contract with the Commonwealth of Puerto Rico as we began ramping-up populations at our Cimarron Correctional Facility during the first quarter of 2012, as well as increased populations from the state of Idaho pursuant to a new contract at our Kit Carson Correctional Center in Colorado and from the state of Oklahoma at our Cimarron and Davis facilities in Oklahoma pursuant to a newly expanded contract. These population increases were offset by declines in populations from the U. S. Marshals Service, Kentucky, California, Colorado and the District of Columbia.

Fourth quarter 2012 operating expenses, general and administrative expense, and depreciation expense totaled $354.0 million (adjusted to exclude approximately $2.3 million of REIT conversion costs), compared to $354.7 million in the same period of 2011. Total operating expenses increased primarily due to an increase in wage and benefits expense and depreciation expense offset by a reduction in general and administrative expense. Interest expense declined by approximately $5.1 million in the fourth quarter of 2012 compared to the same period of 2011 due to a reduction in debt balances and a lower weighted average interest rate.

Adjusted net income, FFO, Normalized FFO and AFFO, and their corresponding per share amounts, are measures calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles (GAAP). We have modified our calculation of FFO and AFFO to conform with NAREIT guidelines. Please refer to the Supplemental Financial Information and related note following the financial statements herein for further discussion and reconciliations of these measures to GAAP measures.

Guidance

We expect Adjusted Diluted EPS for the first quarter of 2013 to be in the range of $0.47 to $0.48, and full-year 2013 to be in the range of $2.05 to $2.15. We also expect FFO for the first quarter of 2013 to be in the range of $0.66 to $0.68 per diluted share and full-year 2013 to be in the range of $2.80 to $2.90. AFFO Per Diluted Share for the first quarter of 2013 is expected to be in the range of $0.64 to $0.66 and $2.72 to $2.87 for the full-year 2013.

Guidance excludes REIT conversion costs, debt refinancing costs, the reversal of certain net deferred tax liabilities associated with the REIT conversion as well as the impact of any shares to be issued as part of the E&P dividend. For more specifics on those items related to the REIT conversion, please refer to the press release and investor presentation we issued on February 7, 2013.

First quarter 2013 guidance compared to fourth quarter 2012, reflects $5.0 million, or 5¢ per diluted share, for the seasonal increase in unemployment taxes, which we experience during the first quarter of each year. First quarter guidance also reflects two fewer operating days in the quarter compared with the fourth quarter, which negatively impacts the first quarter of 2013 by 2.5¢ per share. First quarter and full-year guidance assumes general and administrative expense equal to approximately 5.25% of total revenues, including the increase related to ongoing REIT compliance costs. Full-year guidance reflects an expected increase in depreciation expense as well as an increase in interest expense related to the incurrence of additional debt to fund the E&P dividend and REIT conversion costs. Guidance also assumes a consolidated GAAP income tax rate of 8.5% to 9.0%.

With regards to inmates we house for the state of California, our guidance assumes all of the approximately 1,500 inmates at our Red Rock facility are returned to the custody of California between July 2013 and December 2013, in order to make space available for the state of Arizona under our previously announced new contract beginning in 2014. To the extent the state of California needs replacement capacity for their inmates being displaced at our Red Rock facility, we have other beds in our system we could make available to California. 

During 2013, we expect to invest approximately $85 million to $100 million in capital expenditures, consisting of $40 million to $45 million in on-going prison construction and expenditures related to potential land acquisition, $20 million to $25 million in maintenance capital expenditures on real estate assets, and $25 million to $30 million on capital expenditures on other assets and information technology.

Supplemental Financial Information and Investor Presentations

We have made available on our website supplemental financial information and other data for the fourth quarter of 2012. We do not undertake any obligation, and disclaim any duty to update any of the information disclosed in this report. Interested parties may access this information through our website at www.cca.com under "Financial Information" of the Investors section. 

The Fourth Quarter Investor Presentation will be available on our website beginning on or about March 11, 2013. Interested parties may access this information through our website at www.cca.com under "Webcasts" of the Investors section.

Webcast and Replay Information

We will host a webcast conference call at 10:00 a.m. central time (11:00 a.m. eastern time) on February 14, 2013, to discuss our fourth quarter 2012 financial results and future outlook. To listen to this discussion, please access "Webcasts" on the Investors page at www.cca.com. The conference call will be archived on our website following the completion of the call. In addition, a telephonic replay will be available at 2:00 p.m. eastern time on February 14, 2013 through 1:59 p.m. eastern time on February 22, 2013, by dialing (888) 203-1112 or (719) 457-0820, pass code 8510479. 

About CCA

CCA is the nation's largest owner of partnership correction and detention facilities and one of the largest prison operators in the United States, behind only the federal government and three states. We own or control 51 facilities and currently operate 67 facilities, with a total design capacity of approximately 92,500 beds in 20 states and the District of Columbia. CCA specializes in owning, operating and managing prisons and other correctional facilities and providing inmate residential services for governmental agencies. In addition to providing the fundamental residential services relating to inmates, our facilities offer a variety of rehabilitation and educational programs, including basic education, religious services, life skills and employment training and substance abuse treatment.

Forward-Looking Statements

This press release contains statements as to the Company's beliefs and expectations of the outcome of future events that are forward-looking statements as defined within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. These include, but are not limited to, the risks and uncertainties associated with: (i) our ability to meet and maintain REIT qualification tests; (ii) general economic and market conditions, including the impact governmental budgets can have on our per diem rates, occupancy and overall utilization; (iii) the availability of debt and equity financing on terms that are favorable to us; (iv) fluctuations in our operating results because of, among other things, changes in occupancy levels, competition, increases in cost of operations, fluctuations in interest rates and risks of operations; (v) our ability to obtain and maintain correctional facility management contracts, including as a result of sufficient governmental appropriations and as a result of inmate disturbances; (vi) changes in the privatization of the corrections and detention industry, the public acceptance of our services, the timing of the opening of and demand for new prison facilities and the commencement of new management contracts; (vii) the outcome of California's realignment program and utilization of out of state private correctional capacity; and (viii) increases in costs to construct or expand correctional facilities that exceed original estimates, or the inability to complete such projects on schedule as a result of various factors, many of which are beyond our control, such as weather, labor conditions and material shortages, resulting in increased construction costs.

 
 
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
     
    December 31,
ASSETS   2012   2011
             
Cash and cash equivalents   $ 62,897   $ 55,802
Accounts receivable, net of allowance of $2,578 and $1,218, respectively     252,764     269,685
Deferred tax assets     8,022     11,768
Prepaid expenses and other current assets     27,059     18,676
Current assets of discontinued operations     -     3,498
    Total current assets     350,742     359,429
             
Property and equipment, net     2,568,791     2,608,740
             
Restricted cash     5,022     5,013
Investment in direct financing lease     7,467     9,233
Goodwill     11,988     11,988
Other assets     30,732     25,047
Non-current assets of discontinued operations     -     181
             
    Total assets   $ 2,974,742   $ 3,019,631
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
             
Accounts payable and accrued expenses   $ 166,000   $ 195,726
Income taxes payable     102     605
Current liabilities of discontinued operations     356     2,031
    Total current liabilities     166,458     198,362
             
Long-term debt     1,111,545     1,245,014
Deferred tax liabilities     139,526     136,503
Other liabilities     35,593     31,730
             
    Total liabilities     1,453,122     1,611,609
             
Commitments and contingencies            
             
Preferred stock - $0.01 par value; 50,000 shares authorized; none issued and outstanding at December 31, 2012 and 2011, respectively     -     -
Common stock - $0.01 par value; 300,000 shares authorized; 100,105 and 99,528 shares issued and outstanding at December 31, 2012 and 2011, respectively     1,001     995
Additional paid-in capital     1,146,488     1,129,435
Retained earnings     374,131     277,592
             
    Total stockholders' equity   $ 1,521,620   $ 1,408,022
             
    Total liabilities and stockholders' equity   $ 2,974,742   $ 3,019,631
             
             
             
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)  
   
    For the Three Months Ended December 31,     For the Twelve Months
Ended December 31,
 
    2012     2011     2012     2011  
REVENUE:                                
  Management and other   $ 436,580     $ 436,531     $ 1,757,221     $ 1,722,139  
  Rental     281       551       2,664       2,204  
      436,861       437,082       1,759,885       1,724,343  
EXPENSES:                                
  Operating     305,728       302,007       1,252,184       1,190,873  
  General and administrative     21,985       24,991       88,935       91,227  
  Depreciation and amortization     28,632       27,707       113,933       108,216  
      356,345       354,705       1,455,052       1,390,316  
                                 
OPERATING INCOME     80,516       82,377       304,833       334,027  
                                 
OTHER (INCOME) EXPENSES:                                
  Interest expense, net     13,022       18,120       58,363       72,940  
  Expenses associated with debt refinancing transactions     103       -       2,099       -  
  Other (income) expense     31       42       (338 )     304  
      13,156       18,162       60,124       73,244  
                                 
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES     67,360       64,215       244,709       260,783  
                                 
Income tax expense     (21,952 )     (22,852 )     (87,586 )     (97,017 )
                                 
INCOME FROM CONTINUING OPERATIONS     45,408       41,363       157,123       163,766  
                                 
  Loss from discontinued operations, net of taxes     -       (841 )     (362 )     (1,256 )
                                 
NET INCOME   $ 45,408     $ 40,522     $ 156,761     $ 162,510  
                                 
BASIC EARNINGS PER SHARE:                                
  Income from continuing operations   $ 0.46     $ 0.42     $ 1.58     $ 1.56  
  Loss from discontinued operations, net of taxes     -       (0.01 )     -       (0.01 )
    Net income   $ 0.46     $ 0.41     $ 1.58     $ 1.55  
                                 
DILUTED EARNINGS PER SHARE:                                
  Income from continuing operations   $ 0.45     $ 0.42     $ 1.56     $ 1.55  
  Loss from discontinued operations, net of taxes     -       (0.01 )     -       (0.01 )
    Net income   $ 0.45     $ 0.41     $ 1.56     $ 1.54  
                                 
DIVIDENDS PER SHARE   $ 0.20     $ -     $ 0.60     $ -  
                                 
                                 
                                 
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
CALCULATION OF ADJUSTED DILUTED EPS
 
    For the Three Months Ended December 31,   For the Twelve Months
Ended December 31,
    2012     2011   2012     2011
                             
Net income   $ 45,408     $ 40,522   $ 156,761     $ 162,510
Special items:                            
  Expenses associated with debt refinancing transactions    
103
     
-
   
2,099
     
-
  Expenses associated with pursuit of REIT conversion    
2,326
     
-
   
4,236
     
-
  Income tax benefit for reversal of deferred taxes due to corporate restructuring    
(2,891
)    
-
   
(2,891
)    
-
  Income tax benefit for special items     (896 )     -     (2,340 )     -
                             
Adjusted net income   $ 44,050     $ 40,522   $ 157,865     $ 162,510
                             
Weighted average common shares outstanding - basic     99,679       99,135     99,545       104,736
Effect of dilutive securities:                            
  Stock options     1,086       547     864       603
  Restricted stock-based compensation     334       276     214       196
Weighted average shares and assumed conversions - diluted     101,099      
99,958
   
100,623
     
105,535
                             
Adjusted Diluted Earnings Per Share   $ 0.44     $ 0.41   $ 1.57     $ 1.54
                     
                       
                             
CALCULATION OF FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS  
             
    For the Three Months Ended December 31,     For the Twelve Months
Ended December 31,
 
    2012     2011     2012     2011  
                                 
Net income   $ 45,408     $ 40,522     $ 156,761     $ 162,510  
Depreciation of real estate assets     20,148       18,885       79,145       73,705  
Depreciation of real estate assets of discontinued operations    
-
     
-
     
-
     
345
 
Funds From Operations   $ 65,556     $ 59,407     $ 235,906     $ 236,560  
                                 
Expenses associated with debt refinancing transactions     103       -       2,099       -  
Expenses associated with pursuit of REIT conversion     2,326       -       4,236       -  
Income tax benefit for special items     (896 )     -       (2,340 )     -  
Income tax benefit for reversal of deferred taxes due to corporate restructuring    
(2,891
)    
-
     
(2,891
)    
-
 
Normalized Funds From Operations   $ 64,198     $ 59,407     $ 237,010     $ 236,560  
                                 
Maintenance capital expenditures on real estate assets     (6,428 )     (9,269 )     (18,643 )     (20,056 )
Stock-based compensation     3,202       2,582       12,296       10,331  
Amortization of debt costs and other non-cash interest     1,036       1,097       4,316       4,331  
Adjusted Funds From Operations   $ 62,008     $ 53,817     $ 234,979     $ 231,166  
Normalized Funds From Operations Per Diluted Share   $ 0.64     $ 0.59     $ 2.36     $ 2.24  
Adjusted Funds From Operations Per Diluted Share   $ 0.61     $ 0.54     $ 2.34     $ 2.19  
                                 
                                 
                                 
CALCULATION OF ADJUSTED FUNDS FROM OPERATIONS PER SHARE GUIDANCE  
             
    For the Quarter Ending
March 31, 2013
    For the Year Ending December 31, 2013  
    Low End of Guidance     High End of Guidance     Low End of Guidance     High End of Guidance  
                                 
Adjusted net income   $ 48,000     $ 49,000     $ 210,000     $ 220,000  
Depreciation on real estate assets     19,000       20,000       77,000       77,000  
                                 
Funds From Operations   $ 67,000     $ 69,000     $ 287,000     $ 297,000  
                                 
Other non-cash expenses     4,000       4,250       17,000       17,000  
Maintenance capital expenditures on real estate assets     (5,250 )     (6,250 )     (25,000 )     (20,000 )
                                 
Adjusted Funds From Operations   $ 65,750     $ 67,000     $ 279,000     $ 294,000  
                           
Funds From Operations Per Diluted Share   $ 0.66     $ 0.68     $ 2.80     $ 2.90  
Adjusted Funds From Operations Per Diluted Share   $ 0.64     $ 0.66     $ 2.72     $ 2.87  
                                 

NOTE TO SUPPLEMENTAL FINANCIAL INFORMATION

FFO and AFFO are widely accepted non-GAAP supplemental measures of REIT performance following the standards established by the National Association of Real Estate Investment Trusts (NAREIT). CCA believes that FFO and AFFO are important operating measures that supplement discussion and analysis of the Company's results of operations and are used to review and assess operating performance of the Company and its correctional facilities and their management teams. NAREIT defines FFO as net income computed in accordance with generally accepted accounting principles, excluding gains (or losses) from sales of property and extraordinary items, plus depreciation and amortization of real estate and impairment of depreciable real estate. Because the historical cost accounting convention used for real estate assets requires depreciation (except on land), this accounting presentation assumes that the value of real estate assets diminishes at a level rate over time. Because of the unique structure, design and use of the Company's correctional facilities, management believes that assessing performance of the Company's correctional facilities without the impact of depreciation or amortization is useful. CCA may make adjustments to FFO from time to time for certain other income and expenses that it considers non-recurring, infrequent or unusual, even though such items may require cash settlement, because such items do not reflect a necessary component of the ongoing operations of the Company. Normalized FFO excludes the effects of such items. CCA calculates AFFO by adding to Normalized FFO non-cash expenses such as the amortization of deferred financing costs and stock-based compensation, and by subtracting from Normalized FFO normalized recurring real estate expenditures that are capitalized and then amortized, but which are necessary to maintain a REIT's properties and its revenue stream. Some of these capital expenditures contain a discretionary element with respect to when they are incurred, while others may be more urgent. Therefore, these capital expenditures may fluctuate from quarter to quarter, depending on the nature of the expenditures required, seasonal factors such as weather, and budgetary conditions. Other companies may calculate FFO, Normalized FFO, and AFFO differently than the Company does, or adjust for other items, and therefore comparability may be limited. FFO, Normalized FFO, and AFFO and their corresponding per share measures are not measures of performance under GAAP, and should not be considered as an alternative to cash flows from operating activities, a measure of liquidity or an alternative to net income as indicators of the Company's operating performance or any other measure of performance derived in accordance with GAAP. This data should be read in conjunction with the Company's consolidated financial statements and related notes included in its filings with the Securities and Exchange Commission.

Contact:

Investors and Analysts:
Karin Demler
CCA
(615) 263-3005

Financial Media:
Dave Gutierrez
Dresner Corporate Services
(312) 780-7204
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