-----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, OX3hNtO4GiOut86uSRkY9ctBOIvtjuDJ+TfuUPBZDesGKubKQBcKYCIn5Ym523ZW WiYhuFXMgtkgIPg10NhZOQ== 0000950144-97-012265.txt : 19971117 0000950144-97-012265.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950144-97-012265 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 001-13560 FILM NUMBER: 97718481 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 10-Q 9-30-97 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: SEPTEMBER 30, 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) TENNESSEE 62-1156308 - ------------------------------------------------------------------------------- State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 10 BURTON HILLS BOULEVARD NASHVILLE, TENNESSEE 37215 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (615) 263-3000 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) 102 WOODMONT BLVD., SUITE 800, NASHVILLE, TN 37205 - ------------------------------------------------------------------------------- (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 ----- ---- 79,279,774 - ------------------------------------------------------------------------------ (Outstanding shares of the issuer's common stock as of November 1, 1997.) EXHIBIT INDEX ON PAGE 12 2 CORRECTIONS CORPORATION OF AMERICA FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 INDEX
PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Balance Sheets September 30, 1997 (Unaudited) and December 31, 1996 3 Consolidated Statements of Operations Three months ended September 30, 1997 and 1996 (Unaudited) 4 Consolidated Statements of Operations Nine months ended September 30, 1997 and 1996 (Unaudited) 5 Consolidated Statements of Cash Flows Nine months ended September 30, 1997 and 1996 (Unaudited) 6-7 Notes to Consolidated Financial Statements (Unaudited) 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 Item 3. Quantitative and Qualitative Disclosures About Market Risk 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Default Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12
2 3 PART I - FINANCIAL INFORMATION CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, December 31, 1997 1996 ----------- ------------ ASSETS (unaudited) Current assets: Cash, cash equivalents and restricted cash $ 134,197 $ 8,282 Accounts receivable, less allowance 82,433 100,551 Prepaid expenses 7,733 2,940 Deferred tax assets -- 1,026 Other 2,294 1,643 --------- --------- Total current assets 226,657 114,442 --------- --------- Restricted investments -- 587 Deferred tax assets 94 -- Other assets 36,020 29,405 Property and equipment, net 266,457 288,697 Notes receivable 22,519 22,859 Investment in direct financing leases 66,963 12,898 --------- --------- $ 618,710 $ 468,888 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 47,635 $ 39,224 Accrued salaries and wages 7,714 5,487 Accrued property taxes 2,333 1,675 Deferred tax liabilities 696 -- Other accrued expenses 21,079 9,227 Current portion of long-term debt 45 8,281 --------- --------- Total current liabilities 79,502 63,894 --------- --------- Long-term debt, net of current portion 77,887 117,535 Deferred tax liabilities -- 4,717 Deferred gain on real estate transactions 131,813 -- Other long-term liabilities 247 990 --------- --------- Total liabilities 289,449 187,136 --------- --------- Shareholders' equity: Common stock - $1 par value 80,150 75,029 Additional paid-in capital 178,038 165,317 Retained earnings 78,574 42,132 Treasury stock, at cost (7,501) (726) --------- --------- Total shareholders' equity 329,261 281,752 --------- --------- $ 618,710 $ 468,888 ========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 3 4 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data)
Three months ended September 30 ------------------ 1997 1996 --------- ------- Revenues $ 127,069 $75,203 Expenses: Operating 93,062 54,428 Leases 6,826 693 General and administrative 4,267 3,327 Depreciation and amortization 3,011 2,489 --------- ------- Total expenses 107,166 60,937 --------- ------- Operating income 19,903 14,266 Interest expense (income), net (1,625) 763 --------- ------- Income before income taxes 21,528 13,503 Provision for income taxes 7,863 5,043 --------- ------- Net income $ 13,665 $ 8,460 ========= ======= Net income per share: Primary $ .16 $ .10 ========= ======= Fully diluted $ .15 $ .10 ========= ======= Weighted average shares outstanding: Primary 84,905 84,603 ========= ======= Fully diluted 90,496 90,851 ========= =======
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 4 5 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data) Nine months ended September 30 ----------------------- 1997 1996 ------- -------- Revenues $ 325,931 $ 205,933 Expenses: Operating 234,034 150,031 Leases 9,123 2,010 General and administrative 11,558 9,210 Depreciation and amortization 10,941 7,030 --------- --------- Total expenses 265,656 168,281 --------- --------- Operating income 60,275 37,652 Interest expense (income), net (273) 3,293 --------- --------- Income before income taxes 60,548 34,359 Provision for income taxes 23,276 13,186 --------- --------- Net income $ 37,272 $ 21,173 ========= ========= Net income per share: Primary $ .44 $ .26 ========= ========= Fully diluted $ .42 $ .25 ========= ========= Weighted average shares outstanding: Primary 84,459 82,270 ========= ========= Fully diluted 90,341 88,629 ========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 5 6 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine months ended September 30 ------------------ 1997 196 ---------- -------- Cash Flows from Operating Activities: Net income $ 37,272 $21,173 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,941 7,029 Deferred and other noncash income taxes 2,153 9,742 Other noncash items 275 432 (Gain) loss on disposal of assets (1,244) 19 Equity in earnings of unconsolidated entities (616) (650) Recognized gain on real estate transactions (2,591) -- Changes in assets and liabilities: Accounts receivable 18,186 (19,222) Prepaid expenses (4,793) (1,819) Other current assets (651) (400) Accounts payable 8,411 20,138 Accrued expenses 14,737 1,556 --------- ------- Net cash provided by operating activities 82,080 37,998 --------- ------- Cash Flows from Investing Activities: (Increase) decrease in restricted and escrow cash 3,450 (2,496) (Increase) decrease in restricted investments 587 (144) Increase in other assets (13,310) (9,547) Additions of property and equipment (224,887) (106,179) Proceeds from disposals of assets 380,904 6,533 Increase in direct financing leases (55,850) (3,693) Payments received on direct financing leases and notes receivable 2,057 342 --------- ------- Net cash provided by (used in) investing activities 92,951 (115,184) --------- ------- Cash Flows from Financing Activities: Proceeds from issuance of long-term debt -- 50,000 Payments on long-term debt (57,184) (19,300) Proceeds from (payments on) line of credit, net 11,000 (15,146) Payment of debt issuance costs (743) (743) Payment of prepayment penalties (1,782) -- Issuance of common stock -- 138,750 Payments of stock issuance costs -- (6,939) Proceeds from exercise of stock options and warrants 3,043 9,588 --------- ------- Net cash provided by (used in) financing activities (45,666) 156,210 --------- -------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 6 7 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine months ended September 30 ------------------------------ 1997 1996 ---------------------- -------------------- Net increase in cash 129,365 79,024 CASH AND CASH EQUIVALENTS, beginning of period 4,832 2,145 ------------ ------------ CASH AND CASH EQUIVALENTS, end of period $ 134,197 $ 81,169 ============ ============ Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 10,197 $ 4,984 ============ =========== Income taxes $ 5,577 $ 2,978 ============ =========== 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 669 $ 1,026 Additional paid-in capital 4,573 2,400 Retained earnings (830) (3,129) Treasury stock, at cost (4,412) (297) ============ ============ $ -- $ - ============ ============ Long-term debt was converted into common stock: $ 23 $ - Other assets (1,700) - Long-term debt 1,003 - Common stock 674 - Additional paid-in capital ------------ ------------ $ - $ - ============ ============
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 7 8 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheets as of September 30, 1997 and December 31, 1996, the consolidated statements of operations and cash flows for the nine month periods ended September 30, 1997 and 1996, and the consolidated statement of operations for the quarters ended September 30, 1997 and 1996 have been prepared by the Company in accordance with the accounting policies described in its 1996 Annual Report on Form 10-K 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 position, results of operations and changes in cash flows at September 30, 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 September 30, 1997, are not necessarily indicative of the operating results for the full year. 2. TRANSACTIONS WITH CCA PRISON REALTY TRUST In July 1997, the Company sold ten of its facilities to CCA Prison Realty Trust ("Prison Realty") for approximately $378,000,000 as described in the Form 8-K filed on August 1, 1997. Simultaneously with the sale of the facilities to Prison Realty, the Company entered into agreements to lease the facilities from Prison Realty pursuant to long-term, non-cancelable, triple net leases ("Leases") which require the Company to pay all operating expenses, taxes, insurance and other costs. As a result of the transactions the Company recorded a deferred gain of $134,404,000 that will be recognized over the terms of the leases. 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) (Unaudited Pro Forma) Three Months Ended September 30, Nine Months Ended September 30, 1997 1996 1997 1996 ---- ---- ---- ---- Basic earnings per share $ .18 $ .11 $ .49 $ .30 ============ ============= ============== ============= Diluted earnings per share $ .15 $ .10 $ .42 $ .25 ============ ============= ============== =============
8 9 4. SUBSEQUENT EVENT On October 1, 1997 the Company sold the Torrance County Detention Facility, located in Estancia, New Mexico to Prison Realty for $38,500,000. The Company will continue to operate the medium-security detention facility under the terms of the ten year operating lease, with terms substantially similar to those of the Leases. Annual first year rent for the facility is expected to be approximately $4,200,000. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. Management's Discussion and Analysis of Financial Condition and Results of Operations includes certain forward-looking statements about the Company's business, revenues, prospects, expenditures and operating and capital requirements. In addition, forward-looking statements may be included in various other Company documents to be issued in the future and in various oral statements by Company representatives to securities analysts and potential investors from time to time. Any such statements are subject to risks that could cause the actual results to vary materially. The risks and uncertainties associated with the forward-looking information include the strength of the markets in which the Company operates, competitive market conditions, general economic growth, interest rates and capital market conditions. Reference is hereby made to the more detailed discussion of such risks in the Company's annual report on Form 10-K. RESULTS OF OPERATIONS REVENUES AND EXPENSES FROM OPERATIONS Revenues for the third quarter and first nine months of 1997 increased 69% and 58%, respectively, over the comparable periods of 1996. Management revenues increased $51,114,000 and $118,559,000 for the third quarter and first nine months of 1997, respectively, as compared to the same periods of 1996, while transportation revenues increased $752,000 and $1,439,000, respectively, for the same relative time periods. The increase in management revenues was due to compensated mandays increasing by 54% and 46% for the third quarter and first nine months of 1997, respectively, over the comparable periods of 1996. During the third quarter of 1997, the Company opened two new facilities representing 2,500 beds and expanded five facilities representing 1,959 beds. These beds were in addition to the 8,131 beds brought on line in the first half of 1997 which resulted in the Company cumulatively adding 12,590 beds through the first nine months of 1997. Transportation revenues increased 28% and 18% for the third quarter and first nine months of 1997, respectively, over the comparable periods of 1996, primarily as a result of an expanded customer base and increased compensated mileage realized through the opening of two new transportation hubs in the first quarter of 1997 and more "mass transports," which are generally moves of 40 or more inmates per trip. Operating expenses for the third quarter and first nine months of 1997 increased 71% and 56%, respectively, over the comparable periods of 1996. This increase was due to the increased compensated mandays and compensated mileage that the Company realized in the third quarter and first nine months of 1997 as previously mentioned. As a percentage of revenues, operating expenses increased to 73% in the third quarter of 1997 as compared with 72% in the comparable period of 1996. The Company's cost per compensated manday was $31.73 during the third quarter of 1997 as compared to $27.84 in the comparable period of 1996. This increase was primarily due to the Company having seven facilities in the start-up phase of operation during the third quarter which resulted in increased personnel costs including employee training and overtime. 9 10 The significant increase in lease expense was the result of the Leases that the Company entered into with Prison Realty in July 1997 whereby, the Company sold ten of its facilities to Prison Realty and simultaneously entered into agreements to lease the facilities pursuant to long-term leases. Annual first year rent for these ten facilities is expected to be approximately $41,200,000. In the future, lease expense is expected to increase as the Company enters into additional sale/leaseback transactions with Prison Realty. General and administrative expenses for the third quarter and first nine months of 1997 increased 28% and 25% respectively, over the comparable periods of 1996. However, as a percentage of revenues, general and administrative expenses for the third quarter and first nine months of 1997 declined to 3.4% and 3.5% as compared to 4.4% and 4.5% for the comparable periods of 1996. The Company expects that as it continues to grow, general and administrative expenses will increase in volume but continue to decrease as a percentage of revenues. Depreciation and amortization for the third quarter and first nine months of 1997 increased 21% and 56%, respectively, over the comparable periods of 1996. The increases are due to the 59% growth in beds in operation at the end of the third quarter of 1997 as compared to the comparable period of 1996. OTHER EXPENSES Interest expense, net for the third quarter and first nine months of 1997 was actually interest income of $1,625,000 and $273,000 respectively. This change to interest income was primarily the result of the sale of the ten facilities to Prison Realty for an aggregate purchase price of approximately $378,000,000 which allowed the Company to pay off approximately $183,000,000 in debt and benefit from interest earnings on approximately $125,000,000 invested for a portion of the third quarter. 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, by assisting governmental agencies in the issuance of municipal bonds and most recently through the sale and leaseback of certain correctional facilities to Prison Realty. Cash flow from operations for the first nine months of 1997 was $82,080,000 as compared to $37,998,000 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 September 30, 1997, there was $15,000,000 borrowed under this facility. Letters of credit totaling $38,362,000 have been issued leaving the total unused commitment at $116,638,000. 10 11 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 September 30, 1997 there were $1,615,000 in letters of credit issued, leaving the unused commitment at $885,000. In July 1997, the Company sold ten of its facilities to Prison Realty for approximately $378,000,000. The proceeds were used to pay off $131,000,000 of credit facility debt, $42,206,000 of first mortgage debt and $9,442,000 of senior secured notes. The remaining proceeds will be used to fund existing construction projects and for general working capital purposes. Subsequent to the formation of Prison Realty, the Company granted Prison Realty an option to acquire facilities that it develops in the future. Management expects that as a result of this relationship, the Company will have access to additional capital that will help fund future growth. 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, the availability of future capital from Prison Realty 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. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 11 12 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. EXHIBIT INDEX 10.1 Lease Agreement between the Company and CCA Prison Realty Trust with respect to the Torrance County Detention Facility. 27 Financial Data Schedule. (For SEC use only) b) Reports on Form 8-K The Company filed a Current Report on Form 8-K on August 1, 1997, pursuant to Item 2 of such form, with respect to the sale of 10 correctional and detention facilities to CCA Prison Realty Trust. Certain financial statements of the Company were incorporated into the Form 8-K by reference to that certain Prospectus filed with the Commission pursuant to Rule 424 (b)(1) of the Securities Act of 1933, as amended, on July 15, 1997 (Commission File Nos. 33-25727 and 33-25727-01). The Company was deemed to be a co-registrant with respect to the securities offered thereby.
12 13 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) November 14, 1997 /s/ Darrell K. Massengale - --------------------------------------------------------------------------- (Date) Darrell K. Massengale Chief Financial Officer Secretary, Treasurer Principal Accounting Officer 13 EX-10.1 2 LEASE AGREEMENT 1 EXHIBIT 10.1 LEASE AGREEMENT (TORRANCE COUNTY) THIS LEASE AGREEMENT ("Lease") dated as of the 1st day of October, 1997, by and between CCA PRISON REALTY TRUST, a Maryland real estate investment trust ("Landlord") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee corporation ("Tenant"). RECITALS WHEREAS, Tenant (or one of Tenant's affiliates) has concurrently conveyed to Landlord the property described in Exhibit A hereto, and Landlord and Tenant desire that Landlord lease such property back to Tenant; and WHEREAS, Landlord and Tenant have entered into a Master Agreement to Lease dated July 18, 1997 (the "Master Agreement") which sets forth certain agreements of the parties with respect to the lease of various properties including the property that is the subject of this Lease; NOW, THEREFORE, in consideration of the premises and of their respective agreements and undertakings herein, Landlord and Tenant agree as follows: ARTICLE I PREMISES AND TERM 1.1 Leased Property. Landlord hereby leases to Tenant and Tenant leases from Landlord the Land located in Torrance County, New Mexico, described in Exhibit A hereto, and all Improvements, Fixtures, and Personal Property thereon or thereto (each as defined in the Master Agreement, and, together with said Land, the "Leased Property"); such Leased Property collectively known and described at the date hereof as the Torrance County Detention Facility; SUBJECT, HOWEVER, to the lien of the mortgage debt described in Exhibit B hereto, if any, and to all easements, liens, encumbrances, restrictions, agreements, and other title matters existing as of the date hereof and listed in Exhibit C hereto (collectively the "Permitted Exceptions"). 1.2 Term. The initial term (the "Fixed Term") of the Lease shall be for a fixed term of ten (10) years commencing on October 1, 1997 (the "Commencement Date") and expiring on September 30, 2007 (the "Expiration Date"). The Term of this Lease may be renewed on the mutual agreement of Landlord and Tenant as follows: (i) provided that Tenant gives Landlord notice on or before the date which is six (6) months prior to the Expiration Date, upon the mutual agreement of Landlord and Tenant, the Lease shall be renewed for one (1) additional five (5) year term (the "Extended Term") on the same terms and provisions (other than with respect to renewal) as the Fixed Term, as set forth in the Lease; (ii) provided that Tenant gives Landlord notice on or before the date which is six (6) months prior to the expiration of the Extended Term, upon the mutual agreement of Landlord and Tenant, the Lease shall be renewed for one (1) additional five (5) year term (the "Second Extended Term") on the same terms and provisions (other than with respect to renewal) as the Fixed Term, as set forth in the Lease; and (iii) provided that Tenant gives Landlord notice on or before the date which is six (6) months prior to the expiration of the Second Extended Term, upon the mutual agreement of Landlord and Tenant, the Lease shall be renewed for one (1) 2 additional five (5) year term (the "Third Extended Term") on the same terms and provisions (other than with respect to renewal) as the Fixed Term, as set forth in the Lease. Tenant's right to so extend the Term of the Lease is conditioned on Landlord's prior approval of the Extended Term, Second Extended Term, or Third Extended Term, as the case may be. The term "Term" used in this Agreement means the Fixed Term, Extended Term, Second Extended Term and Third Extended Term, as appropriate. The term "Lease Year" means each twelve (12) month period during the Term commencing on January 1 and ending on December 31, except the first Lease Year of each Lease shall be the period from the Commencement Date through the following December 31, and the last Lease Year shall end on the date of termination of the Lease if a day other than December 31. Landlord may terminate this Lease prior to the expiration of the Term hereof, at any time following the date which is five (5) years from the date hereof, upon written notice to Tenant not less than eighteen (18) months prior to the effective date of such termination. ARTICLE II RENT 2.1 Base Rent. Tenant shall pay Landlord Base Rent for the Term in advance in consecutive monthly installments payable on the first day of each month during the Term, the Extended Term, Second Extended Term and the Third Extended Term, commencing on the Commencement Date, in accordance with the Base Rent Schedule attached hereto as Exhibit D. If the Commencement Date or the Expiration Date shall be other than on the first day of a calendar month, the initial (or final, as appropriate) monthly installment of Base Rent payable pursuant to the Lease shall be prorated for the number of days until, in the case of this initial monthly installment, the first day of the calendar month following the Commencement Date and, in the case of the final monthly installment, the Expiration Date. 2.2 Additional Rent. The Base Rent shall be subject to such increases over the Term as determined pursuant to Section 2.02 of the Master Agreement. 2.3 Other Additional Rent. Tenant shall also pay all Other Additional Rent with respect to the Leased Property, as set forth in the Master Agreement. ARTICLE III OTHER TERMS AND CONDITIONS 3.1 Master Agreement Incorporated Herein. All provisions of the Master Agreement (except any provisions expressly therein not to be a part of an individual lease of leased property) are hereby incorporated in and are a part of this Lease of the Leased Property. 3.2 Recordation. At the request of Landlord or Tenant, a short form memorandum of this Lease may be recorded in the real estate records of any county which Landlord or Tenant deems appropriate in order to provide legal notice of the existence hereof. 2 3 IN WITNESS WHEREOF, the Landlord and the Tenant have executed this Lease or caused the same to be executed by their respective duly authorized officers as of the date first set forth above. CCA PRISON REALTY TRUST By: -------------------------------- Title: ----------------------------- CORRECTIONS CORPORATION OF AMERICA By: -------------------------------- Title: ------------------------------ EXHIBIT A [legal description] 4 EXHIBIT B Mortgage Debt Property: Torrance County Detention Facility This property is subject to the following Mortgage Debt: That certain deed of trust of First Union National Bank of Tennessee, as Administrative Agent, dated October 1, 1997. 5 EXHIBIT C Permitted Exceptions Property: Torrance County Detention Facility 6 EXHIBIT D Base Rent Schedule Property: Torrance County Detention Facility Tenant will pay to Landlord annual Base Rent of $4,235,000.00, payable in equal monthly installments of $352,916.67. Base Rent for the Extended Term, Second Extended Term and Third Extended Term shall be equal to the fair market rental value of the Leased Property as of the respective commencement dates thereof. EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMARRY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF CORRECTIONS CORPORATION OF AMERICA FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1996 JAN-01-1997 SEP-30-1997 134,197 0 82,433 0 0 226,657 266,457 0 618,710 79,502 77,887 0 0 80,150 249,111 618,710 0 325,931 0 265,656 0 0 (273) 60,548 23,276 37,272 0 0 0 37,272 .44 .42
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