BUSINESS COMBINATIONS

12 Months Ended

Dec. 31, 2015

BUSINESS COMBINATIONS

6. BUSINESS COMBINATIONS

During the fourth quarter of 2015, CCA closed on the acquisition of 100% of the stock of Avalon Correctional Services, Inc. (“Avalon”), along with two additional facilities operated by Avalon. Avalon, a privately held community corrections company that operates 11 community corrections facilities with approximately 3,000 beds in Oklahoma, Texas, and Wyoming, specializes in community correctional services, drug and alcohol treatment services, and residential re-entry services. Avalon provides these services for various federal, state, and local agencies, many with which CCA currently partners. CCA acquired Avalon as a strategic investment that continues to expand the re-entry assets owned and services provided by the Company. The aggregate purchase price of $157.5 million, excluding transaction related expenses of $3.0 million through December 31, 2015, includes two earn-outs, including one for $2.0 million based on the achievement of certain utilization milestones over 12 months following the acquisition, and another for $5.5 million based on the completion of and transition to a newly constructed facility that will deliver the contracted services provided at the Dallas Transitional Center. CCA currently expects both earn-outs to be achieved. The acquisition was funded utilizing cash from CCA’s $900.0 Million Revolving Credit Facility, as defined hereafter.

In allocating the purchase price for the transaction, CCA recorded the following (in millions):

Property and equipment	$	119.2
Intangible assets		17.9
Total identifiable assets		137.1
Goodwill		20.4
Total consideration	$	157.5

The allocation of the purchase price is preliminary and may be subject to change within the measurement period of one year from the acquisition date. The primary areas of the preliminary purchase price allocation that are not finalized include determining the composition and valuation of intangible assets and goodwill. Several factors gave rise to the goodwill recorded in the acquisition, such as the expected benefit from synergies of the combination and the long-term contracts for community corrections services that continues to broaden the scope of solutions CCA provides, from incarceration through release. The results of operations for Avalon have been included in the Company’s consolidated financial statements from the date of acquisition.