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CXW: Occupancies Improving; La Palma Transition Nearing Completion; Balance Sheet Strength Reflecting CXW Initiatives

By M. Marin



CXW Tightened Guidance Range - Reflecting Positive Trends

Transition at La Palma facility expected to be completed by yearend

CoreCivic (NYSE:CXW) expects average daily ICE populations to increase in subsequent quarters & tightened 2022 guidance toward the higher end of the range, reflecting positive trends including higher populations at its facilities and the winding down of the La Palma transition. The company expects average daily ICE populations to increase in 4Q22. FFO (funds from operation) per share guidance is now in the range of $1.22 to $1.26. Guidance for this metric previously was $1.19 to $1.26. The increase reflects the expectation of completing the transition at La Palma shortly and the expectation of rising occupancies in 4Q22. Compensated occupancy in the company’s Safety & Community facilities averaged 70.1% in 3Q22, up sequentially from 69.5% in 2Q22. Management’s comments indicate that occupancy improvements have continued in recent weeks.

Divestitures enhance CXW’s liquidity…

Separately, CXW reported a 3Q22 gain on the sale of real estate assets of $83.8 million. CXW’s divestitures of non-core assets have been a consistent part of the company’s strategy to strengthen its operating footprint and balance sheet to enhance shareholder value. The proceeds of this and other divestitures enhance the company’s liquidity. CXW has earmarked a portion of its capital deployment to share repurchases, as well as debt reduction. The proceeds from asset sales simplify the company’s portfolio and facilitate CXW’s strategy to strengthen its operating footprint and balance sheet. CXW has earmarked a portion of its capital deployment for share repurchases, as well as debt reduction.

… & facilitate debt reduction / maturity extension measures

CXW has reduced and refinanced debt substantially over the past few quarters. CXW reduced its debt balance by $109.1 million during 3Q22, net of the change in cash. Long-term debt was $1.10 billion at the end of 3Q22, down from $1.492 billion at the end of 2021 and compared to $1.748 billion at the end of 2020. CXW had $185.3 million of cash at the end of 3Q22 plus an additional $13.8 million of restricted cash. Recent debt offerings and asset sales have enabled CXW to reduce its reliance on banks and other external sources of cash and demonstrated ongoing investor interest in the company’s securities.

Following recent measures, the company has no major debt maturities coming due before May 2023. CXW expects to repay the May 2023 debt maturity using its cash position –CXW had $185.3 million of cash at the end of 3Q22 – and capacity under its currently undrawn $250.0 million revolver. Other than the notes maturing in 2023, CXW has no other maturities before 2026.

… & share repurchases

We expect the company to prioritize actions to enhance shareholder, including share repurchases. Through November 1, 2022, the company had repurchased 6.6 million shares in 2022 for an aggregate gross $74.5 million, with roughly $150.5 million remaining under the repurchase plan. Depending on market conditions, we would anticipate further share buybacks.

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