0000950144-95-002342.txt : 19950815 0000950144-95-002342.hdr.sgml : 19950815 ACCESSION NUMBER: 0000950144-95-002342 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD 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: 95563492 BUSINESS ADDRESS: STREET 1: 102 WOODMONT BLVD STE 800 CITY: NASHVILLE STATE: TN ZIP: 37205 BUSINESS PHONE: 6152923100 10-Q 1 FORM 10-Q OF CORRECTIONS CORP. 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: JUNE 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) SECURITIES EXCHANGE ACT OT 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 --- --- 15,146,774 -------------------------------------------------------------------------------- (Outstanding shares of the issuer's common stock as of August 1, 1995.) EXHIBIT INDEX ON PAGE 12. 1 2 CORRECTIONS CORPORATION OF AMERICA INDEX
Page PART I. FINANCIAL INFORMATION: Number ------ Item 1. Financial Statements Consolidated Balance Sheets June 30, 1995 (Unaudited) and December 31, 1994 3 Consolidated Statements of Operations Six months ended June 30, 1995 and 1994 (Unaudited) 4 Consolidated Statements of Operations Three months ended June 30, 1995 and 1994 (Unaudited) 5 Consolidated Statements of Cash Flows Six months ended June 30, 1995 and 1994 (Unaudited) 6-8 Notes to Consolidated Financial Statements (Unaudited) 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 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 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
June 30, December 31, 1995 1994 ------------- ---------------- ASSETS (Unaudited) ------ Current assets: Cash, cash equivalents and restricted cash $ 6,837 $ 4,361 Accounts receivable, less allowance for doubtful accounts of $78 in 1995 and $50 in 1994 37,946 26,231 Prepaid expenses 2,166 1,298 Deferred taxes 3,187 3,285 Other 1,243 933 ---------- ------------- Total current assets 51,379 36,108 ---------- ------------- Restricted investments 0 69 Other assets 14,020 10,292 Property and equipment, net 87,521 82,758 Investment in direct financing lease 9,945 10,118 ---------- ------------- $ 162,865 $ 139,345 ========== ============= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable $ 11,836 $ 8,396 Accrued salaries and wages 2,128 2,688 Accrued property taxes 1,129 1,462 Other accrued expenses 6,009 5,167 Current portion of long-term debt 7,676 5,159 ---------- ------------- Total current liabilities 28,778 22,872 ---------- ------------- Long-term debt, net of current portion 42,956 47,386 Deferred taxes 3,885 3,628 Other long-term liabilities 2,475 3,758 ---------- ------------- Total liabilities 78,094 77,644 ---------- ------------- Commitments and contingencies Stockholders' equity: Common stock 15,197 14,162 Additional paid-in capital 62,604 44,034 Retained earnings 8,666 3,813 Treasury stock, at cost (1,696) (308) ---------- ------------- Total stockholders' equity 84,771 61,701 ---------- ------------- $ 162,865 $ 139,345 ========== =============
3 4 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data)
Six months ended June 30 --------------------- 1995 1994 ------------ ------------- Revenues $ 89,520 $ 67,076 Expenses: Operating 68,580 53,152 Depreciation and amortization 2,480 2,207 ------------ ------------- 71,060 55,359 ------------ ------------- Contribution from operations 18,460 11,717 Other expenses: General and administrative 7,837 5,370 Interest, net 1,594 1,818 ------------ ------------- 9,431 7,188 ------------ ------------- Income before income taxes 9,029 4,529 Provision for income taxes 3,579 856 ------------ ------------- Net income 5,450 3,673 Preferred stock dividends 0 204 ------------ ------------- Net income allocable to common stockholders $ 5,450 $ 3,469 ============= ============= Earnings per share: Primary $ 0.31 $ 0.25 ============= ============= Fully diluted $ 0.31 $ 0.24 ============= ============= Weighted average shares outstanding: Primary 17,557 13,886 ============= ============= Fully diluted 17,844 14,228 ============= =============
4 5 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data)
Three months ended June 30 -------------------- 1995 1994 ----------- ------------ Revenues $ 47,865 $ 34,603 Expenses: Operating 36,478 27,636 Depreciation and amortization 1,285 1,119 ----------- ------------ 37,763 28,755 ----------- ------------ Contribution from operations 10,102 5,848 Other expenses: General and administrative 4,536 2,833 Interest, net 731 888 ----------- ------------ 5,267 3,721 ----------- ------------ Income before income taxes 4,835 2,127 Provision for income taxes 1,927 365 ----------- ------------ Net income 2,908 1,762 Preferred stock dividends 0 98 ----------- ------------ Net income allocable to common stockholders $ 2,908 $ 1,664 =========== ============ Earnings per share: Primary $ 0.16 $ 0.12 =========== ============ Fully diluted $ 0.16 $ 0.12 =========== ============ Weighted average shares outstanding: Primary 18,034 14,124 =========== ============ Fully diluted 18,056 14,287 =========== ============
5 6 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Six months ended June 30 ------------------ 1995 1994 ---------------- --------------- Cash Flows from Operating Activities: Net income $ 5,450 $ 3,673 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,860 2,904 Defferred income taxes 2,490 (29) Loss on disposal of property and equipment 19 9 Changes in assets and liabilities: Accounts receivable (11,698) (2,346) Prepaid expenses (868) (1,291) Other current assets (310) (671) Accounts payable 3,440 2,148 Accrued expenses (140) 1,119 ------------ ------------ Net cash provided by operating activities 1,243 5,516 ------------ ------------ Cash Flows from Investing Activities: Increase (decrease) in restricted and escrow cash 85 (120) Decrease in restricted investments 69 0 Increase in other assets (4,379) (879) Acquisition of property and equipment (6,758) (6,547) Proceeds from disposals of property and equipment 21 2 Payments received on direct financing leases 155 139 ------------ ------------ Net cash used in investing activities (10,807) (7,405) ------------ ------------ Cash Flows from Financing Activities: Proceeds from issuance of long-term debt 7,519 7,878 Payments on long-term debt (3,410) (12,646) Proceeds from short-term borrowings, net 1,215 0 Payments of short-term obligations refinanced by long-term debt (700) 0 Payment of international placement fees (495) 0 Issuance of common stock 8,311 10,599 Payments of stock issuance costs 0 (404) Payments of dividends on preferred stock 0 (275) Proceeds from exercise of stock options 315 169 Repurchase of stock warrants (630) 0 ------------ ------------ Net cash provided by financing activities 12,125 5,321 ------------ ------------ Net increase in cash 2,561 3,432 CASH AND CASH EQUIVALENTS, beginining of period 4,036 7,029 ------------ ------------ CASH AND CASH EQUIVALENTS, end of period $ 6,597 $ 10,461 ============ ============
6 7 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Six months ended June 30 ----------------- 1995 1994 ------------ ------------- Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 1,982 $ 2,307 ============ ============= Income taxes $ 1,690 $ 247 ============ ============= Supplemental Schedule of Noncash Investing and Financing Activities: The Company intends to finance contruction in progress through the issuance of long-term debt: Property and equipment $ 0 $ 2,211 Other long-term liabilities 0 (2,211) ------------ ------------- $ 0 $ 0 ============ ============= The Company entered into an international alliance and equity participation which included the deferral of certain issuance costs: Other assets $ 0 $ 3,488 Other accrued expenses 0 (495) Other long-term liabilities 0 (3,465) Additional paid-in capital 0 472 ------------ ------------- $ 0 $ 0 ============ ============= Long-term debt was converted into common stock: Other assets $ (53) $ 0 Long-term debt 6,700 0 Common stock (444) 0 Additional paid-in capital (6,203) 0 ------------ ------------- $ 0 $ 0 ============ ============= The Company's redeemable convertible preferred stock was converted into common stock: Other assets $ 0 $ (290) Preferred stock 0 5,000 Common stock 0 (700) Additional paid-in capital 0 (4,010) ------------ ------------- $ 0 $ 0 ============ =============
7 8 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Six months ended June 30 -------------------- 1995 1994 -------------- --------------- The Company acquired treasury stock and issued common stock through the exercise of stock options: Common stock $ (205) $ (57) Additional paid-in capital (1,183) (124) Retained earnings (deficit) 0 307 Treasury stock, at cost (1,388) (126) ------------- --------------- $ 0 $ 0 ============= ===============
8 9 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheet as of June 30, 1995, the consolidated statements of operations and cash flows for the six month periods ended June 30, 1995 and 1994, and the consolidated statement of operations for the quarters ended June 30, 1995 and 1994 have been prepared by the Company in accordance with the accounting policies described in its 1994 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 June 30, 1995 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 June 30, 1995, are not necessarily indicative of the operating results for the full year. 2. LONG-TERM DEBT In March 1995, the Company converted $6,700,000 of convertible subordinated notes into 443,692 shares of common stock. The notes had been outstanding since 1989 and had earned 8.5% interest. The conversion prices ranged from $14.33 to $16.74 and included a provision which permitted the Company to require conversion after the stock had a market value of 150% of the conversion price for a specified period. 3. BUSINESS COMBINATION In April, 1995, the Company acquired Concept, Inc. in a business combination accounted for in a pooling-of-interest. The consolidated balance sheet as of June 30, 1995, the consolidated statements of operations and cash flows for the six month periods ended June 30, 1995 and 1994 and the consolidated statement of operations for the quarters ended June 30, 1995 and 1994 have been restated accordingly to reflect the combination. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS REVENUES AND EXPENSES FROM FACILITY OPERATIONS Revenues for the second quarter and first half of 1995 increased 38% and 33%, respectively, over the comparable periods of 1994. Management revenues increased $13,032,000 and $21,867,000 for the second quarter and first half of 1995, respectively, as compared to the same periods of 1994, while transportation revenues increased $230,000 and $577,000 for the same relative time periods. The increase in management revenues was due to compensated mandays increasing by 24% and 26% for the second quarter and first half of 1995, respectively, over the comparable periods of 1994. The Company opened the Eloy Detention Center in Eloy, Arizona, in the third quarter of 1994, the Central Arizona Detention Facility in Florence, Arizona, in the fourth quarter of 1994, and the B. M. Moore Pre-Release Center in Overton, Texas, at the end of the second quarter of 1995. The Company also realized the full period effect in 1995 of 1994 expansions to existing facilities. The 11% and 15% increase in 9 10 transportation revenues for the second quarter and first half of 1995, respectively, over the comparable periods of 1994 was due to a marketing effort resulting in an expanded customer base and therefore increased compensated mileage. Operating expenses for the second quarter and first half of 1995 increased 32% and 29%, respectively, over the comparable periods of 1994. This was due to the increase in compensated mandays based on the growth in beds on line and the increase in compensated mileage as previously mentioned. Depreciation and amortization, while increasing in dollar amount 15% and 12% for the second quarter and first half or 1995, respectively, as compared to the same periods in 1994, actually decreased as a percentage of revenue for both periods. This is a result of the trend in new contracts moving towards the government financing and owing the fixed assets while contracting out the operations with the private sector. OTHER EXPENSES General and administrative expenses for the second quarter and first half of 1995 increased 60% and 46% respectively, over the comparable periods of 1994. Included in the second quarter of 1995 were expenses of approximately $700,000 of non-recurring pooling expenses. After backing these non-recurring charges out general and administrative expenses decreased as a percentage of revenues. The net increased expenses in amount were incurred in order to manage the new beds being brought on line in 1995 and 1996. The Company is in the process of bringing 7,210 beds on line over the next fifteen months. As these facilities open general and administrative cost will continue to decrease as a percentage of revenues. Interest expense, net, decreased 18% and 12% for the second quarter and first half of 1995, respectively, as compared to the same periods in 1994. This is due to the Company making regularly scheduled debt payments, the reduction of $9,800,000 of debt in June 1994, with proceeds from an equity issuance and the conversion of $3,000,000 and $6,700,000 convertible subordinated notes in December 1994 and March 1995, respectively. The Company realized the complete utilization of its net operating loss carryforwards prior to 1995 therefore resulting in being subject to the full statutory tax rates beginning in 1995. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The Company's business is capital intensive. The Company's efforts to obtain contracts, construct additional facilities, and maintain its day-to-day operations have required the utilization of cash flow from operations and the continued acquisition of funds through borrowings and equity offerings. Thus far 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. Subsequent to the end of the second quarter of 1995 the Company renegotiated its working capital revolving credit facility. The facility now provides for borrowings of up to $25,000,000, requires interest payments to be made quarterly and bears interest, at the election of the Company, of either the Bank's prime rate or LIBOR plus 2%, 9.0% and 8.13%, respectively at June 30, 1995. The facility consists of a working capital line, which includes letters of credit. As of June 30, 1995, there was $2,000,000 borrowed against the facility and $7,661,000 of letters of credit had been issued leaving the unused commitment at $15,339,000. Concept, Inc. also has a credit facility with a bank. The credit facility provides for borrowings of up to $1,000,000, requires monthly interest payments and bears interest at the bank's prime rate, 9.0% at June 30, 1995. As of June 30, 1995, no amounts were borrowed against this facility. 10 11 In June, 1995, the Company sold 272,5000 shares of common stock at $30.50 per share to Sodexho, S.A., an affiliate of the Company. The proceeds will be used to finance the expansion of an existing facility. Future expansion and the acquisition and construction of additional facilities may require further financing, the form of which will vary depending upon prevailing market and other conditions. The trend in growth opportunities has been a movement towards the government financing and owning the fixed assets while contracting out the operations with the private sector. Management believes that cash flow from operations, borrowing capacity and access to alternative financing techniques are adequate to meet its future financial requirements. 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 At the Annual Meeting of Stockholders of the Company held on May 26, 1995, the nominees for election as Directors of the Company were elected without opposition. The amendment of the Company's certificate of incorporation increasing the amount of authorized common stock from 30,000,000 to 50,000,000 was ratified. On this motion 8,575,125 shares, voted in favor of the motion, 403,496 shares votes against and 259,435 shares abstained. On the motion to ratify and approve the Company's 1995 Employee Stock Incentive Plan, 7,182,524 shares were voted in favor of this proposal, 1,803,667 shares voted against and 251,864 shares abstained. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K a) 27 Financial Data Schedule (for SEC use only) b) A current report on Form 8-K dated May 11, 1995, reporting the acquisition of Concept, Inc. in a business combination accounted for as a pooling-of-interest, was filed during the quarter for which this quarterly report is filed. Subsequent to the end of the quarter a current amended report on Form 8-K/A dated July 10, 1995, was filed to update the initial report. 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) August 11, 1995 /s/ Darrell K. Massengale ----------------------------------- ------------------------------ (Date) Darrell K. Massengale Treasurer (Principal Accounting Officer) 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS MAR-31-1996 APR-01-1995 JUN-30-1995 690,000 0 3,176,000 133,000 0 4,170,000 19,000,000 4,290,000 19,476,000 2,084,000 6,862,000 107,000 0 0 9,833,000 19,476,000 5,518,000 5,626,000 4,501,000 4,501,000 289,000 0 240,000 596,000 89,000 507,000 0 0 0 507,000 .05 .05