-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OZn6adwwXNdbvzvxBiJpGc1Jrp4kHuf0xX/6rxiryNFKZg9UZKJNhE1r9AWEnNiY kdzppSdfSUQdDYwV/vlCfw== 0000950144-97-005885.txt : 19970520 0000950144-97-005885.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950144-97-005885 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORRECTIONS CORPORATION OF AMERICA CENTRAL INDEX KEY: 0000739404 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-FACILITIES SUPPORT MANAGEMENT SERVICES [8744] IRS NUMBER: 621156308 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13560 FILM NUMBER: 97606728 BUSINESS ADDRESS: STREET 1: 102 WOODMONT BLVD STE 800 CITY: NASHVILLE STATE: TN ZIP: 37205 BUSINESS PHONE: 6152923100 10-Q 1 CORRECTIONS CORPORATION OF AMERICA 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSACTION PERIOD FROM TO . ---------- ---------- COMMISSION FILE NUMBER: 1-13560 ------- CORRECTIONS CORPORATION OF AMERICA ---------------------------------- (Exact name of Registrant as specified in its charter) DELAWARE 62-1156308 - ------------------------------------------- -------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 102 WOODMONT BLVD., SUITE 800 NASHVILLE, TENNESSEE 37205 - ------------------------------------------- -------------------------------- (Address of principal executive offices) (Zip Code) (615) 292-3100 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) NONE - ------------------------------------------------------------------------------- (Former name, address and fiscal year if changed since last report.) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- 76,111,394 - ------------------------------------------------------------------------------- (Outstanding shares of the issuer's common stock as of May 1, 1997.) THERE IS NO EXHIBIT INDEX Total number of sequentially numbered pages is 10. 2 CORRECTIONS CORPORATION OF AMERICA INDEX
Page Number ------ PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Consolidated Balance Sheets March 31, 1997 (Unaudited) and December 31, 1996 3 Consolidated Statements of Operations Three months ended March 31, 1997 and 1996 (Unaudited) 4 Consolidated Statements of Cash Flows Three months ended March 31, 1997 and 1996 (Unaudited) 5-6 Notes to Consolidated Financial Statements (Unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 PART II. OTHER INFORMATION Item 1. Legal Proceedings 10 Item 2. Changes in Securities 10 Item 3. Default Upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10
2 3 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
March 31, December 31, 1997 1996 ----------- ------------ (Unaudited) ASSETS Current assets: Cash, cash equivalents and restricted cash $ 7,101 $ 8,282 Accounts receivable, net of allowances 69,743 100,551 Prepaid expenses 4,144 2,940 Deferred tax assets 22 1,026 Other 2,438 1,643 -------- ---------- Total current assets 83,448 114,442 Restricted investments 587 587 Other assets 34,787 29,405 Property and equipment, net 356,725 288,697 Notes receivable 22,748 22,859 Investment in direct financing leases 68,622 12,898 -------- ---------- $566,917 $468,888 ======== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $42,214 $ 39,224 Accrued salaries and wages 6,410 5,487 Accrued property taxes 605 1,675 Other accrued expenses 18,748 9,227 Current portion of long-term debt 7,249 8,281 -------- ---------- Total current liabilities 75,226 63,894 Long-term debt, net of current portion 189,191 117,535 Deferred tax liabilities 4,812 4,717 Other noncurrent liabilities 742 990 -------- ---------- Total liabilities 269,971 187,136 -------- ---------- Stockholders' equity: Common stock 75,945 75,029 Additional paid-in capital 167,082 165,317 Retained earnings 54,127 42,132 Treasury stock, at cost (208) (726) -------- ---------- Total stockholders' equity 296,946 281,752 -------- ---------- $566,917 $468,888 ======== ==========
3 4 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data)
Three months ended March 31 ------------------------------ 1997 1996 ------- ------- Revenues $91,838 $63,277 Expenses: Operating 63,919 47,184 General and administrative 3,595 2,925 Depreciation and amortization 3,923 2,277 ------- ------- 71,437 52,386 ------- ------- Operating income 20,401 10,891 Interest expense, net 498 1,350 ------- ------- Income before income taxes 19,903 9,541 Provision for income taxes 7,908 3,835 ------- ------- Net income $11,995 $ 5,706 ======= ======= Net income per common share: Primary $ 0.14 $ 0.07 ======= ======= Fully diluted $ 0.14 $ 0.07 ======= ======= Weighted average common shares outstanding: Primary $83,942 $80,502 ======= ======= Fully diluted $89,659 $87,168 ======= =======
4 5 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Three months ended March 31 ------------------------- 1997 1996 ------- ------- Cash Flows from Operating Activities: Net income $ 11,995 $ 5,706 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,923 2,277 Deferred and other noncash income taxes 2,329 6,077 Other noncash items 92 - Loss (gain) on disposal of assets (20) 11 Equity in earnings of unconsolidated entities (252) (150) Changes in assets and liabilities: Accounts receivable 30,830 (8,034) Prepaid expenses (1,204) 62 Other current assets (795) (309) Accounts payable 2,990 2,250 Accrued expenses 9,374 (3,823) -------- ------- Net cash provided by operating activities 59,262 4,067 -------- ------- Cash Flows from Investing Activities: Decrease (increase) in restricted and escrow cash 1,365 (402) Increase in other assets (6,165) (2,771) Additions of property and equipment (70,919) (9,602) Proceeds from disposals of assets 8 6 Increase in direct financing leases (55,850) - Payments received on direct financing leases and notes receivable 215 91 -------- ------- Net cash used in investing activities (131,346) (12,678) -------- ------- Cash Flows from Financing Activities: Proceeds from issuance of long-term debt - 30,000 Payments on long-term debt (2,476) (15,444) Proceeds from (payments on) line of credit, net 74,000 (9,723) Payment of debt issuance cost (248) (496) Proceeds from exercise of stock options and warrants 992 3,044 -------- ------- Net cash provided by financing activities 72,268 7,381 -------- ------- Net increase (decrease) in cash 184 (1,230) CASH AND CASH EQUIVALENTS, beginning of period 4,832 2,145 -------- ------- CASH AND CASH EQUIVALENTS, end of period $ 5,016 $ 915 ======== =======
5 6 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Three months ended March 31 ------------------------- 1997 1996 ----- ------- Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 840 $ 1,986 ===== ======= Income taxes $ 609 $ 1,565 ===== ======= Supplemental Schedule of Noncash Investing and Financing Activities: The Company acquired treasury stock and issued common stock through the exercise of stock options: Common stock $ 134 $ 911 Additional paid-in capital 411 2,885 Retained earnings - (2,847) Treasury stock, at cost (545) (949) ----- ------- $ - $ - ===== ======= Long term debt was converted into common stock: Other assets $ 15 $ - Long-term debt (900) - Common Stock 531 - Additional paid-in capital 354 - ----- ------- $ - $ - ===== =======
6 7 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheet as of March 31, 1997, and the consolidated statements of operations and cash flows for the three month periods ended March 31, 1997 and 1996, have been prepared by the Company in accordance with the accounting policies described in its Annual Report to Stockholders for the year ended December 31, 1996 and should be read in conjunction with the notes thereto. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial positions, results of operations and changes in cash flows at March 31, 1997 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The results of operations for the period ended March 31, 1997, are not necessarily indicative of the operating results for the full year. 2. INVESTMENT IN DIRECT FINANCING LEASES In January 1997, the Company purchased the fixed and movable assets of a correctional treatment facility in Washington, D.C. for $52,000,000, and agreed to make certain renovations totaling $3,850,000. The Company has entered into additional agreements to manage this facility and lease it back to Washington, D.C. over a period of twenty years. 3. EARNINGS PER SHARE Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"), has been issued effective for fiscal periods ending after December 15, 1997. SFAS 128 establishes standards for computing and presenting earnings per share. The Company is required to adopt the provisions of SFAS 128 in the fourth quarter of 1997. Under the standards established by SFAS 128, earnings per share is measured at two levels: basic earnings per share and diluted earnings per share. Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares after considering the additional dilution related to preferred stock, convertible debt, options and warrants. The following pro forma amounts represent the basic earnings per share and diluted earnings per share as if the Company had adopted SFAS 128 for the quarters presented:
(Unaudited Pro Forma) Three Months Ended March 31, 1997 1996 ---- ---- Basic earnings per share $.16 $.09 ==== ==== Diluted earnings per share $.14 $.07 ==== ====
7 8 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RISK FACTORS This report, press releases and other public statements by the Company contain "forward-looking statements," within the meaning of various provisions of the federal securities laws, that address activities, events or developments that will or may occur in the future. These statements are based on assumptions and analyses made by the Company in light of its experience and perception of historical trends, current conditions and expected future developments, and other factors believed appropriate in the circumstances. Actual results and developments are subject to a number of risks and uncertainties, including general economic, market or business conditions; opportunities (or lack thereof) that may be presented to and pursued by the Company; competitive actions by other companies; changes in laws or regulations; and other factors as may be discussed from time to time in the Company's SEC reports and other filings, many of which are beyond the control of the Company. Accordingly, readers are cautioned not to place undue reliance on such forward looking statements, which speak only as of the date made and which the Company undertakes no obligation to revise to reflect events after the date made. RESULTS OF OPERATIONS REVENUES AND OPERATING EXPENSES Revenues for the first quarter of 1997 increased 45% over the comparable period of 1996. Management revenues increased $28,302,000 or 47%, and transportation revenues increased $259,000 or 10%, in the first three months of 1997 as compared to the same period in 1996. The increase in management revenues was due to a 37% increase in compensated mandays. During the first quarter of 1997, the Company opened six new facilities totaling 3,496 beds and expanded one existing facility representing 256 beds. The Company also realized the full period effect in the first quarter of 1997 of 3,835 beds brought on line over the course of 1996. Transportation revenues increased due to an expanded customer base and compensated mileage realized through the opening of two new transportation hubs. In the first quarter of 1997 the Company recognized after-tax, development-fee income of $1,341,000 related to a contract to design, construct and equip a facility. Operating expenses for the first quarter of 1997 increased 35% over the comparable quarter in 1996. This increase was due to the increased compensated mandays and compensated mileage that the Company realized in 1997 as previously mentioned. As a percentage of revenues, however, operating expenses declined to 70% in 1997 from 75% in 1996 as the Company continues to benefit from economies of scale and cost containment. General and administrative expenses increased 23% for the first quarter of 1997 as compared to the comparable quarter of 1996. The increase was due to the expanded activity and staffing necessary to administer the increased beds under management. Even though increasing in amount, general and administrative expenses decreased as a percentage of revenues to 3.9% in 1997 from 4.6% in 1996 during the comparable period. Depreciation and amortization for the first quarter of 1997 increased 72% as compared to the comparable quarter of 1996. This increase was due to the growth in total beds in facilities owned by the Company. Interest expense, net, decreased 63% for the first quarter of 1997 over the first quarter of 1996 primarily due to the fact that several facilities were under construction and the associated interest expense was capitalized during this phase of operation. 8 9 FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The Company's business is capital intensive in relation to the development of a correctional facility. The Company's efforts to obtain contracts, construct additional facilities and maintain its day-to-day operations have required the continued acquisition of funds through borrowings and equity offerings. The Company has financed these activities through the sale of capital stock, subordinated convertible notes and senior secured debt, through the issuance of taxable and tax-exempt bonds, by bank borrowings, and by assisting governmental agencies in the issuance of municipal bonds. Cash flow from operations for the first quarter of 1997 was $59,262,000 as compared to $4,067,000 in the comparable period in 1996. The Company has strengthened its cash flow through its expanded business, additional focus on larger, more profitable facilities, the expansion of existing facilities where economies of scale can be realized, and the continuing effort of cost containment. The Company has a revolving credit facility with a group of banks which matures in September, 1999. The credit facility provides for borrowings of up to $170,000,000 for general corporate purposes and letters of credit. The credit facility bears interest, at the election of the Company, at either the bank's prime rate or a rate which is .5% above the applicable 30, 60, or 90 day LIBOR rate. Interest is payable quarterly with respect to prime rate loans and at the expiration of the applicable LIBOR period with respect to LIBOR based loans. There are no prepayment penalties associated with the credit facility. The credit facility requires the Company, among other things, to maintain maximum leverage ratios and a minimum debt service coverage ratio. The facility also limits certain payments and distributions. As of March 31, 1997, there was $78,000,000 borrowed under this facility. Letters of credit totaling $63,519,000 have been issued leaving the total unused commitment at $28,481,000. The Company also has a $2,500,000 credit facility with a bank that provides for the issuance of letters of credit and matures in September, 1999. As of March 31, 1997 there were $1,568,000 in letters of credit issued, leaving the unused commitment at $932,000. The Company anticipates making cash investments in connection with future acquisitions and expansions. In addition, in accordance with the developing trend of private prison managers toward making strategic financial investments in facilities, the Company plans to use a portion of its cash to finance start-up costs, leasehold improvements and equity investments in facilities, if appropriate in connection with undertaking new contracts. The Company believes that the cash flow from operations and amounts available under its credit facility will be sufficient to meet its capital requirements for the foreseeable future. Furthermore, management believes that additional resources may be available to the Company through a variety of other financing methods. 9 10 PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Default Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K A. Exhibits i) 27 - Financial Data Schedule (for SEC use only) B. Reports on Form 8-K None. 10 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CORRECTIONS CORPORATION OF AMERICA ----------------------------------- Registrant May 15, 1997 /s/Darrell K. Massengale - ---------------------- ---------------------------- Date Darrell K. Massengale Chief Financial Officer Secretary, Treasurer Principal Accounting Officer 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF CORRECTIONS CORPORATION OF AMERICA FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS DEC-31-1996 JAN-01-1997 MAR-31-1997 1 7,101 0 69,743 0 0 83,448 356,725 0 566,917 75,226 189,191 0 0 75,945 221,001 566,917 0 91,838 0 71,437 0 0 498 19,903 7,908 11,995 0 0 0 11,995 .14 .14
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