Stockholders' Equity

9 Months Ended

Sep. 30, 2013

Stockholders' Equity

7. STOCKHOLDERS’ EQUITY

Dividends on Common Stock

During 2012 and the first nine months of 2013, CCA’s Board of Directors declared the following quarterly dividends on its common stock:

Declaration Date	Record Date	Payable Date	Per Share
May 11, 2012	June 8, 2012	June 22, 2012	$	0.20
August 20, 2012	September 14, 2012	September 28, 2012	$	0.20
November 6, 2012	November 30, 2012	December 14, 2012	$	0.20
February 22, 2013	April 3, 2013	April 15, 2013	$	0.53
May 16, 2013	July 3, 2013	July 15, 2013	$	0.48
August 16, 2013	October 2, 2013	October 15, 2013	$	0.48

In addition, on April 8, 2013, CCA’s Board of Directors declared a special dividend to shareholders of $675.0 million, or approximately $6.66 per share of common stock, in connection with CCA’s previously announced plan to qualify and convert to a REIT for federal income tax purposes effective as of January 1, 2013. The special dividend was paid in satisfaction of requirements that CCA distribute its previously undistributed accumulated earnings and profits attributable to tax periods ending prior to January 1, 2013. CCA paid the special dividend on May 20, 2013 to shareholders of record as of April 19, 2013.

Each CCA shareholder could elect to receive payment of the special dividend either in all cash, all shares of CCA common stock or a combination of cash and CCA common stock, with the total amount of cash payable to shareholders limited to a maximum of 20% of the total value of the special dividend, or $135 million. The total amount of cash elected by shareholders exceeded 20% of the total value of the special dividend. As a result, the cash payment was prorated among those shareholders who elected to receive cash, and the remaining portion of the special dividend was paid in shares of CCA common stock. The total number of shares of CCA common stock distributed pursuant to the special dividend was 13.9 million and was determined based on shareholder elections and the average closing price per share of CCA common stock on the New York Stock Exchange for the three trading days after May 9, 2013, or $38.90 per share.

Restricted Stock and Restricted Stock Units

During the first nine months of 2013, CCA issued 415,000 shares of restricted common stock and common stock units to certain of its employees and non-employee directors, with an aggregate fair value of $15.3 million, including 369,000 restricted shares or units to employees and non-employee directors whose compensation is charged to general and administrative expense and 46,000 restricted shares to employees whose compensation is charged to operating expense. During 2012, CCA issued 349,000 shares of restricted common stock and common stock units to certain of its employees and non-employee directors, with an aggregate fair value of $9.2 million, including 290,000 restricted shares or units to employees and non-employee directors whose compensation is charged to general and administrative expense and 59,000 restricted shares to employees whose compensation is charged to operating expense.

As a result of the aforementioned special dividend paid on May 20, 2013, CCA issued 139,000 shares of restricted common stock and common stock units to employee and non-employee directors who held unvested shares as of the record date. The shares of restricted common stock and common stock units were issued at the $38.90 price per share as described above. The total special dividend to restricted stock and unit holders totaled $6.1 million, including $2.8 million to restricted stockholders and $3.3 million to restricted stock unit holders. Like all accumulated dividends on restricted stock and units, the special dividend remains subject to the same vesting conditions of the underlying shares or units.

With respect to the shares and units issued in 2013, unless earlier vested under the terms of the restricted stock unit agreement, the restricted stock units issued to officers and executive officers vest evenly over a three-year period, while the shares issued to other employees “cliff” vest on the third anniversary of the award. Shares of restricted common stock units issued to non-employee directors vest on the first anniversary of the award. With respect to shares issued prior to 2013, CCA established performance-based vesting conditions on the shares of restricted common stock and common stock units awarded to its officers and executive officers. Unless earlier vested under the terms of the agreements, shares or units issued to officers and executive officers are subject to vesting over a three-year period based upon the satisfaction of certain performance criteria. No more than one-third of such shares or units may vest in the first performance period; however, the performance criteria are cumulative for the three-year period. Unless earlier vested under the terms of the agreements, the shares of restricted stock issued to the other employees vest after three years of continuous service, and restricted stock units issued to non-employee directors vest approximately one year from the issue date.

During the three months ended September 30, 2013, CCA expensed $2.6 million, net of estimated forfeitures, relating to restricted common stock and common stock units ($0.3 million of which was recorded in operating expenses and $2.3 million of which was recorded in general and administrative expenses). During the three months ended September 30, 2012, CCA expensed $2.0 million, net of estimated forfeitures, relating to restricted common stock and common stock units ($0.3 million of which was recorded in operating expenses and $1.7 million of which was recorded in general and administrative expenses).

During the nine months ended September 30, 2013, CCA expensed $7.3 million, net of estimated forfeitures, relating to restricted common stock and common stock units ($0.9 million of which was recorded in operating expenses and $6.4 million of which was recorded in general and administrative expenses). During the nine months ended September 30, 2012, CCA expensed $5.6 million, net of estimated forfeitures, relating to restricted common stock and common stock units ($0.8 million of which was recorded in operating expenses and $4.8 million of which was recorded in general and administrative expenses). As of September 30, 2013, approximately 938,000 shares of restricted common stock and common stock units remained outstanding and subject to vesting, including approximately 123,000 shares issued in connection with the special dividend.

Stock Options

In February 2013, CCA elected not to issue stock options to its non-employee directors, officers, and executive officers as it had in the past and instead elected to issue all of its equity compensation in the form of restricted common stock and common stock units as described above. During the three months ended September 30, 2013 and 2012, CCA expensed $0.7 million and $1.2 million, respectively, net of estimated forfeitures, relating to its outstanding stock options. During the nine months ended September 30, 2013 and 2012, CCA expensed $2.4 million and $3.5 million, respectively, net of estimated forfeitures, relating to its outstanding stock options.

In connection with mandatory anti-dilution provisions of CCA’s equity incentive plans, as it pertains to the special dividend, an adjustment was made to all options outstanding to (i) increase the number of shares subject to an option by multiplying the number of shares by 1.175 (the “Adjustment Factor”) and (ii) reduce the exercise price per share of common stock subject to the options by dividing the initial exercise price by the Adjustment Factor. The Adjustment Factor was determined by the percentage increase in CCA’s common stock resulting from the stock portion of the special dividend after taking into consideration the portion of the special dividend paid in cash. The adjustment affected all employees and non-employee directors who had outstanding option grants on May 20, 2013 (49 people) and resulted in approximately 0.5 million of incremental options awarded. As the adjustment was designed to equalize the fair value of the option award for the special dividend, and because CCA’s equity incentive plans included mandatory anti-dilution provisions, there was no incremental compensation cost resulting from the adjustments to the options outstanding. As of September 30, 2013, options to purchase 2.8 million shares of common stock were outstanding with a weighted average exercise price of $18.98.