-----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, R7NKz4YyR0KvtsSimi7F4vVrUk5+nM83Z+RHPgWxVwGOwjyjZlReWSTrqS7igI9Q jAo76Tfqkl620Qw2JxC4LQ== 0000950144-98-007192.txt : 19980608 0000950144-98-007192.hdr.sgml : 19980608 ACCESSION NUMBER: 0000950144-98-007192 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980605 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: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-13560 FILM NUMBER: 98643519 BUSINESS ADDRESS: STREET 1: 10 BURTON HILLS BOULEVARD CITY: NASHVILLE STATE: TN ZIP: 37215 BUSINESS PHONE: 6152633000 MAIL ADDRESS: STREET 1: 10 BURTON HILLS BOULEVARD CITY: NASHVILLE STATE: TN ZIP: 37215 10-Q/A 1 CORRECTIONS CORPORATION OF AMERICAN AMEND. #1 1 FORM 10-Q/A 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, 1998 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) 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 --- --- 80,445,898 - ------------------------------------------------------------------------------- (Outstanding shares of the issuer's common stock as of June 1, 1998.) 2 CORRECTIONS CORPORATION OF AMERICA FORM 10-Q/A FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 INDEX
Page Number ------ PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Consolidated Balance Sheets March 31, 1998 (Unaudited) and December 31, 1997 3 Consolidated Statements of Operations Three months ended March 31, 1998 and 1997 (Unaudited) 4 Consolidated Statements of Cash Flows Three months ended March 31, 1998 and 1997 (Unaudited) 5-6 Notes to Consolidated Financial Statements (Unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 2. Changes in Securities and Use of Proceeds 11 Item 3. Defaults Upon Senior Securities 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11
2 3 PART I. FINANCIAL INFORMATION CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
March 31, December 31, 1998 1997 ----------- ------------ ASSETS (Unaudited) - ------ Current assets: Cash, cash equivalents and restricted cash $ 123,947 $ 136,147 Accounts receivable, net of allowances 100,083 89,822 Prepaid expenses 4,326 4,868 Other 3,231 2,585 --------- --------- Total current assets 231,587 233,422 Property and equipment, net 298,321 266,493 Other long-term assets: Notes receivable 58,095 59,264 Investment in direct financing leases 89,169 90,184 Deferred tax assets 10,569 10,195 Other assets 39,994 38,382 --------- --------- $ 727,735 $ 697,940 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable $ 19,683 $ 32,094 Accrued salaries and wages 9,219 9,778 Income taxes payable 4,608 14,128 Deferred tax liabilities 364 1,229 Other accrued expenses 24,835 20,361 Current portion of long-term debt 5,840 5,847 Current portion of deferred gain on real estate 13,223 13,223 --------- --------- Total current liabilities 77,772 96,660 Long-term debt, net of current portion 165,671 127,075 Deferred gain on real estate transactions 119,278 122,529 Other noncurrent liabilities 0 3,600 --------- --------- Total liabilities 362,721 349,864 --------- --------- Stockholders' equity: Preferred stock 380 380 Common stock 80,668 80,230 Additional paid-in capital 223,325 215,833 Retained earnings 78,583 92,475 Treasury stock, at cost (17,942) (40,842) --------- --------- Total stockholders' equity 365,014 348,076 --------- --------- $ 727,735 $ 697,940 ========= =========
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 March 31 -------------------- 1998 1997 --------- ------- Revenues $ 141,298 $91,838 Expenses: Operating 99,719 63,014 Lease 11,095 1,102 General and administrative 4,953 3,398 Depreciation and amortization 3,388 3,923 --------- ------- Total expenses 119,155 71,437 --------- ------- Operating income 22,143 20,401 Interest (income) expense, net (2,791) 498 --------- ------- Income before income taxes 24,934 19,903 Provision for income taxes 6,491 7,908 --------- ------- Net income $ 18,443 $11,995 ========= ======= Net income per common share: Basic $ 0.23 $ 0.16 ========= ======= Diluted $ 0.21 $ 0.14 ========= ======= Weighted average common shares outstanding: Basic 79,488 75,601 ========= ======= Diluted 90,436 89,659 ========= =======
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 CASH FLOWS (Unaudited) (in thousands)
Three months ended March 31 ---------------------- 1998 1997 --------- --------- Cash Flows from Operating Activities: Net income $ 18,443 $ 11,995 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 3,388 3,923 Deferred and other noncash income taxes 2,612 2,329 Other noncash items 122 92 Gain on disposal of assets -- (20) Equity in earnings of unconsolidated entities (350) (252) Recognized gain on real estate transactions (3,251) -- Changes in assets and liabilities: Accounts receivable (9,334) 30,830 Prepaid expenses 542 (1,204) Other current assets (646) (795) Accounts payable (12,411) 2,990 Income taxes payable (9,520) 4,615 Accrued expenses and other liabilities 315 4,759 --------- --------- Net cash provided by (used in) operating activities (10,090) 59,262 --------- --------- Cash Flows from Investing Activities: Additions of property and equipment (69,918) (70,919) Decrease in restricted cash -- 1,365 Increase in other assets (2,697) (6,165) Proceeds from disposals of assets 36,132 8 Increase in direct financing leases -- (55,850) Payments received on direct financing leases and notes receivable 1,257 215 --------- --------- Net cash used in investing activities (35,226) (131,346) --------- --------- Cash Flows from Financing Activities: Payments on long-term debt (11) (2,476) Proceeds from line of credit, net 40,000 74,000 Payment of debt issuance costs -- (248) Proceeds from exercise of stock options and warrants 727 992 Purchase of treasury stock (7,600) -- --------- --------- Net cash provided by financing activities 33,116 72,268 --------- --------- Net increase (decrease) in cash (12,200) 184 CASH AND CASH EQUIVALENTS, beginning of period 136,147 4,832 --------- --------- CASH AND CASH EQUIVALENTS, end of period $ 123,947 $ 5,016 ========= =========
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)
Three months ended March 31 ----------------- 1998 1997 -------- ----- Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest (net of amounts capitalized) $ 167 $ 840 ======== ===== Income taxes $ 13,403 $ 609 ======== ===== 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 374 $ 134 Additional paid-in capital 3,073 411 Retained earnings (114) -- Treasury stock, at cost (3,333) (545) -------- ----- $ -- $ -- ======== ===== Long term debt was converted into common stock: Other assets $ 5 $ 15 Long-term debt (1,400) (900) Common stock 51 531 Additional paid-in capital 32 354 Retained earnings (31,500) -- Treasury stock 32,812 -- -------- ----- $ -- $ -- ======== =====
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, 1998, and the consolidated statements of operations and cash flows for the three month periods ended March 31, 1998 and 1997, have been prepared by the Company in accordance with the accounting policies described in its 1997 Annual Report 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, 1998 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, 1998, are not necessarily indicative of the operating results for the full year. 2. NEW PRONOUNCEMENT In April 1998, the AICPA issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities", effective for fiscal years beginning after December 15, 1998. SOP 98-5 requires the costs of start-up activities to be expensed as incurred. In accordance with the provisions of SOP 98-5, the Company will adopt the new accounting method as of January 1, 1999 by recording a cumulative effect of a change in accounting principle. As of March 31, 1998, the Company's deferred start-up costs totaled $20,859,000. 3. COMPREHENSIVE INCOME In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income", effective for fiscal years beginning after December 15, 1997. SFAS No.130 requires that changes in the amounts of certain items, including gains and losses on certain securities, be shown in the financial statements. The Company adopted the provisions of SFAS No. 130 on January 1, 1998. The Company's comprehensive income is substantially equivalent to net income for the three months ended March 31, 1998 and 1997. 4. SUBSEQUENT EVENTS On April 17, 1998, the Company acquired all of the outstanding capital stock of eight subsidiaries of U.S. Corrections Corporation ("USCC") (the "USCC Acquisition"). By virtue of the USCC Acquisition, the Company acquired contracts to manage four currently operating facilities in Kentucky, each of which is owned by CCA Prison Realty Trust ("Prison Realty"), as well as one each in Florida and Texas, each of which is owned by governmental entities of Florida and Texas, respectively. The Company, or one of its affiliates, currently leases the four Kentucky facilities from Prison Realty, or one of its affiliates, pursuant to the terms of that certain Master Agreement to Lease dated July 18, 1997, between the Company and Prison Realty (the "Master Lease"). The Company also acquired by virtue of the USCC Acquisition the right to enter into contracts to manage two facilities currently under construction that are located in North Carolina and owned by Prison Realty. The Company expects to lease these two facilities from Prison Realty pursuant to the terms and conditions of the Master Lease. The total number of beds currently operating or under construction under all of such management contracts hereinbefore discussed equals 5,743. On April 18, 1998, the Company signed a definitive agreement to merge with Prison Realty in a transaction that will give the shareholders of the Company the right to receive 0.875 Prison Realty common shares for every share of Company common stock. Prison Realty will operate as a real estate investment trust and the merger is expected to be consummated on or about January 1, 1999, subject to customary conditions, including approvals by regulatory and governmental agencies and the shareholders of both companies. 7 8 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 OPERATING EXPENSES Revenues for the first quarter of 1998 increased 54% over the comparable period of 1997. Management revenues increased $48.9 million or 55%, and transportation revenues increased $531,000 or 19%, in the first three months of 1998 as compared to the same period in 1997. The increase in management revenues was primarily due to a 53% increase in compensated mandays. During the first quarter of 1998, the Company opened two new facilities totaling 2,000 beds and also realized the full period effect of 14,800 beds brought on line over the course of 1997. Transportation revenues increased as a result of continued expansion of the customer base and increased utilization of three new hubs opened in 1997. Operating expenses for the first quarter of 1998 increased 58% over the comparable quarter in 1997. This increase was due to the increased compensated mandays and compensated mileage that the Company realized in 1998 as previously mentioned. As a percentage of revenues, operating expenses increased to 70.6% for the first quarter of 1998 from 68.6% for the same period in 1997. The operating expense percentage was lower for the first quarter of 1997 due to revenues being higher for certain new facilities with guaranteed minimums. Operating expenses in the first quarter of 1998 were more in line with the fourth quarter of 1997, or 70.7%, which is reflective of normalized operations. Lease expense increased significantly as a result of the lease agreements that the Company entered into with Prison Realty in 1997 and 1998. As of the first quarter 1998, the Company had entered into sale/leaseback agreements with Prison Realty on 13 facilities. General and administrative expenses increased 46% for the first quarter of 1998 as compared to the first quarter of 1997. The increase was due to the expanded activity and staffing necessary to administer the increased beds under management. Even though they increased in amount, general and administrative expenses decreased as a percentage of revenues to 3.5% in the first quarter of 1998 from 3.7% during the comparable period in 1997. 8 9 Depreciation and amortization for the first quarter of 1998 decreased 14% as compared to the first quarter of 1997. This decrease was primarily due to the sale of the 13 facilities to Prison Realty during 1997 and early 1998. OTHER EXPENSES Interest expense, net for the first quarter of 1998 was actually interest income of $2.8 million. This change to interest income was primarily the result of the sale of facilities to Prison Realty which allowed the Company to benefit from interest earnings on its increased cash balances. INCOME TAXES The Company's effective tax rate decreased from 39.7% in the first quarter of 1997 to 26.0% in the first quarter of 1998. The decrease is due to the recognition of certain tax strategies implemented in conjunction with the sale/leaseback of facilities to Prison Realty in 1997 and 1998. The Company is recognizing these benefits over the next four years which should result in maintaining a consistent effective tax rate. 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 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 flows from operations, calculated on an EBITDA basis, for the first quarter of 1998 was $25,531,000 as compared to $24,324,000 in the first quarter of 1997. 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 certain leverage and debt service coverage ratios. The facility also limits certain payments and distributions. As of March 31, 1998, there was $110,000,000 borrowed under this facility. Letters of credit totaling $1,600,000 had been issued leaving the total unused commitment at $58,400,000. 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, 1998 there were $1,625,000 in letters of credit issued, leaving the unused commitment at $875,000. 9 10 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. 10 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities and Use of Proceeds None Item 3. Defaults 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 10.1 Lease Agreement between the Company and CCA Prison Realty Trust with respect to the Davis Correctional Facility (previously filed as Exhibit 10.30 to the Company's Registration Statement on Form S-3 (Commission File Number 333-43935-01) filed January 9, 1998 and incorporated herein by reference). 10.2 Exercise Agreement, dated as of December 11, 1997, by and between the Company and CCA Prison Realty Trust with respect to the Cimarron Correctional Facility (previously filed as Exhibit 10(ee) to CCA Prison Realty Trust's Annual Report on Form 10-K for the period ended December 31, 1997 and incorporated herein by reference). 10.3 Exercise Agreement, dated as of January 5, 1998, by and between the Company and CCA Prison Realty Trust with respect to the Davis Correctional Facility (previously filed as Exhibit 10(ff) to CCA Prison Realty Trust's Annual Report on Form 10-K for the period ended December 31, 1997 and incorporated herein by reference). *27 Financial Data Schedule (for SEC use only) 27.1 Restated Financial Data Schedule for the quarter ended March 31, 1997 (for SEC use only) --------- * Previously filed B. Reports on Form 8-K None 11 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned thereunto duly authorized. CORRECTIONS CORPORATION OF AMERICA Registrant June 5, 1998 /s/ Darrell K. Massengale - ---------------------------- -------------------------------------- Date Darrell K. Massengale Chief Financial Officer Secretary, Treasurer Principal Accounting Officer 12 EX-27.1 2 FINANCIAL DATA SCHEDULE (RESTATED)
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. 3-MOS DEC-31-1996 JAN-01-1997 MAR-31-1997 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 .16 .14
-----END PRIVACY-ENHANCED MESSAGE-----