-----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, LITe41p6tYmyJcsbQtQkpA3/96+o/v25tmQTPnwZFvivYrHir+kcUN00nPY7ZbjW C/kIWjxCjG4trNT6muwLHg== 0000950144-95-003242.txt : 19951119 0000950144-95-003242.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950144-95-003242 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 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: 95592669 BUSINESS ADDRESS: STREET 1: 102 WOODMONT BLVD STE 800 CITY: NASHVILLE STATE: TN ZIP: 37205 BUSINESS PHONE: 6152923100 10-Q 1 CORRECTIONS CORP. OF AMERICA FORM 10-Q 09-30-95 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, 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 ----- ----- 31,866,202 - ------------------------------------------------------------------------------- (Outstanding shares of the issuer's common stock as of November 1, 1995.) EXHIBIT INDEX ON PAGE 13 Total number of sequentially numbered pages is 14. 2 CORRECTIONS CORPORATION OF AMERICA INDEX
Page PART I. FINANCIAL INFORMATION: Number ------ Item 1. Financial Statements Consolidated Balance Sheets September 30, 1995 (Unaudited) and December 31, 1994 3 Consolidated Statements of Operations Nine months ended September 30, 1995 and 1994 (Unaudited) 4 Consolidated Statements of Operations Three months ended September 30, 1995 and 1994 (Unaudited) 5 Consolidated Statements of Cash Flows Nine months ended September 30, 1995 and 1994 (Unaudited) 6-8 Notes to Consolidated Financial Statements (Unaudited) 9-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-12 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 2. Changes in Securities 13 Item 3. Default Upon Senior Securities 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13
2 3 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, December 31, 1995 1994 ----------------- ------------------ ASSETS (Unaudited) ------ Current assets: Cash, cash equivalents and restricted cash $ 1,261 $ 4,609 Accounts receivable, less allowance for doubtful accounts of $0 in 1995 and $50 in 1994 39,191 27,775 Prepaid expenses 1,939 1,551 Deferred taxes 3,374 3,285 Other 1,183 933 ------------- -------------- Total current assets 46,948 38,153 ------------- -------------- Restricted investments 587 69 Other assets 36,399 10,518 Property and equipment, net 128,992 82,934 Investment in direct financing lease 9,856 10,118 ------------- -------------- $ 222,782 $ 141,792 ============= ============== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable $ 17,071 $ 8,768 Accrued salaries and wages 2,676 3,273 Accrued property taxes 1,660 1,462 Other accrued expenses 8,410 5,404 Current portion of long-term debt 14,332 5,759 ------------- -------------- Total current liabilities 44,149 24,666 ------------- -------------- Long-term debt, net of current portion 64,038 47,984 Deferred taxes 4,156 3,628 Other long-term liabilities 20,656 3,757 ------------- -------------- Total liabilities 132,999 80,035 ------------- -------------- Commitments and contingencies Stockholders' equity: Common stock 15,933 14,845 Additional paid-in capital 62,492 43,353 Retained earnings 12,040 3,866 Treasury stock, at cost (682) (307) ------------- -------------- Total stockholders' equity 89,783 61,757 ------------- -------------- $ 222,782 $ 141,792 ============= ==============
3 4 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data)
Nine months ended September 30 ---------------- 1995 1994 ---------------- ----------------- Revenues $ 144,911 $ 109,384 Expenses: Operating 110,615 87,914 Depreciation and amortization 3,889 3,266 ------------- -------------- 114,504 91,180 ------------- -------------- Contribution from operations 30,407 18,204 Other expenses: General and administrative 12,640 8,596 Interest, net 2,706 2,568 ------------- -------------- 15,346 11,164 ------------- -------------- Income before income taxes 15,061 7,040 Provision for income taxes 5,897 1,129 ------------- -------------- Net income 9,164 5,911 Preferred stock dividends 0 204 -------------- -------------- Net income allocable to common stockholders $ 9,164 $ 5,707 ============== ============== Earnings per share: Primary $ 0.49 $ 0.38 ============== ============== Fully diluted $ 0.48 $ 0.37 ============== ============== Weighted average shares outstanding: Primary 18,640 15,160 ============== ============== Fully diluted 19,116 15,484 ============== ==============
4 5 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data)
Three months ended September 30 ----------------- 1995 1994 ------------- ------------- Revenues $ 56,653 $ 38,565 Expenses: Operating 42,942 31,209 Depreciation and amortization 1,409 1,042 ----------- ----------- 44,351 32,251 ----------- ------------ Contribution from operations 12,302 6,314 Other expenses: General and administrative 4,803 3,226 Interest, net 1,111 713 ----------- ------------ 5,914 3,939 ----------- ------------ Income before income taxes 6,388 2,375 Provision for income taxes 2,318 178 ----------- ------------ Net income 4,070 2,197 Preferred stock dividends 0 0 ----------- ------------ Net income allocable to common stockholders $ 4,070 $ 2,197 =========== ============ Earnings per share: Primary $ 0.21 $ 0.13 =========== ============ Fully diluted $ 0.21 $ 0.13 =========== ============ Weighted average shares outstanding: Primary 19,299 16,392 =========== ============ Fully diluted 19,457 16,543 =========== ============
5 6 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine months ended September 30 ----------------- 1995 1994 ---------------- ------------------ Cash Flows from Operating Activities: Net income $ 9,164 $ 5,911 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,456 4,296 Deferred income taxes 3,549 0 Loss (gain) on disposal of property and equipment 7 (21) Changes in assets and liabilities: Accounts receivable (11,389) (2,803) Prepaid expenses (388) (363) Other current assets (250) (255) Accounts payable 8,303 1,366 Accrued expenses 2,520 1,081 ------------ ------------ Net cash provided by operating activities 15,972 9,212 ------------ ------------ Cash Flows from Investing Activities: Increase in restricted and escrow cash (36) (245) Increase in restricted investments (518) 0 Increase in other assets (27,094) (2,584) Acquisition of property and equipment (21,847) (17,753) Proceeds from disposals of property and equipment 45 12 Payments received on direct financing leases 235 215 ------------ ------------ Net cash used in investing activities (49,215) (20,355) ------------ ------------ Cash Flows from Financing Activities: Proceeds from issuance of long-term debt 7,604 11,797 Payments on long-term debt (5,549) (12,871) Proceeds from short-term borrowings, net 2,416 21 Short-term obligations to be refinanced by long-term debt 17,480 0 Payment of international placement fees (495) 0 Issuance of common stock 8,683 10,660 Payments of stock issuance costs 0 (404) Payments of dividends on preferred stock 0 (275) Payments of dividends on common stock 0 (16) Proceeds from exercise of stock options 350 199 Repurchase of stock warrants (630) 0 ------------ ------------ Net cash provided by financing activities 29,859 9,111 ------------ ------------ Net decrease in cash (3,384) (2,032) CASH AND CASH EQUIVALENTS, beginining of period 4,285 7,229 ------------ ------------ CASH AND CASH EQUIVALENTS, end of period $ 901 $ 5,197 ============ ============
6 7 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine months ended September 30 ----------------- 1995 1994 --------------- ------------------- Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 2,843 $ 2,891 ============ ============= Income taxes $ 2,516 $ 332 ============ ============= 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 $ 2,307 Other long-term liabilities 0 (2,307) ------------ ------------- 0 $ 0 ============ ============= The Company acquired property and equipment by assuming long-term debt: Property and equipment $ 27,392 $ 0 Long-term debt (27,392) 0 ------------ ------------- $ 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 (742) Other long-term liabilities 0 (3,218) 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)
Nine months ended September 30 ----------------- 1995 1994 ---------------- ----------------- The Company acquired treasury stock and issued common stock through the exercise of stock options: Common stock $ (234) $ (74) Additional paid-in capital (681) (201) Retained earnings 540 307 Treasury stock, at cost 375 (32) ------------- --------------- $ 0 $ 0 ============= ===============
8 9 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheets as of September 30, 1995 and December 31, 1994, the consolidated statements of operations and cash flows for the nine month periods ended September 30, 1995 and 1994, and the consolidated statements of operations for the quarters ended September 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 September 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 September 30, 1995, are not necessarily indicative of the operating results for the full year. 2. OTHER ASSETS On September 28, 1995, the Company acquired all of the assets associated with the Eden Detention Center in Eden, Texas, from the former operator for $18,300,000 and assumed management of the facility. The Company owned the facility temporarily until October 25, 1995, when the assets were then sold to a non-profit corporation. The non-profit corporation issued 20 year bonds to refinance the facility. The Company maintains the management of the facility pursuant to a contract with the city. 3. PROPERTY AND EQUIPMENT, NET In July 1995, the Company exercised an option to acquire the other 50% partnership interests in United Concept, Limited partnership ("UCLP"). The Company now owns all 1,000 shares of common stock and first National Bank of Chicago owns one share of voting preferred stock. In acquiring all of the common stock the Company acquired property and equipment of approximately $32,642,000 and the financial results and operations of UCLP are consolidated into the Company's financial statements. 4. 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. In conjunction with the Company acquiring the other 50% of UCLP in July, 1995, the Company assumed long-term debt of approximately $27,392,000. The notes bear interest at 10%, with monthly principal and interest payments, and mature in January 2000. 9 10 5. OTHER LONG-TERM LIABILITIES In conjunction with acquiring the assets of Eden Detention Center, the Company borrowed approximately $18,200,000 from it's credit facility. The borrowings were paid off in full when the facility was refinanced with long-term bonds. 6. BUSINESS COMBINATIONS In April, 1995, the Company acquired Concept, Inc. ("CI"). In August, 1995, the Company acquired Correction Management Affiliates, Inc. ("CMA"), Correctional Services Group, Inc. ("CSG") and Corrections Partners, Inc. ("CPI"). Both transactions were stock for stock swaps and both were accounted for as poolings of interest. The Consolidated Balance Sheets as of September 30, 1995, and December 31, 1994, the Consolidated Statements of Operations and Cash Flows for the nine month periods ended September 30, 1995 and 1994, and the Consolidated Statements of Operations for the quarters ended September 30, 1995 and 1994 have been restated accordingly to reflect the combinations. 7. EQUITY Subsequent to the end of the quarter the Company announced a two-for-one stock split to be effected in the form of a stock dividend. The dividend was distributed on October 31, 1995, to all shareholders of record on October 17, 1995. The Consolidated Balance Sheets as of September 30, 1995 and December 31, 1994, do not reflect the effect of the split. 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 third quarter and first nine months of 1995 increased 47% and 33%, respectively, over the comparable periods of 1994. Management revenues increased $17,615,000 and $34,476,000 for the third quarter and first nine months of 1995, respectively, as compared to the same periods of 1994, while transportation revenues increased $473,000 and $1,050,000 for the same relative time periods. The increase in management revenues was due to compensated mandays increasing by 21% and 24% for third quarter and first nine months of 1995, respectively, over the comparable periods of 1994. The Company opened the Metro Juvenile Center in Nashville, Tennessee in the second quarter of 1994, 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, the B. M. Moore Pre-Release Center in Overton, Texas, and the Southwest Indiana Regional Youth Village in Vincennes, Indiana, in the second quarter of 1995 and the Bay Correctional Facility in Panama City, Florida in the third quarter of 1995. The Company also realized the full period effect in 1995 of 1994 expansions to existing facilities. The 23% and 18% increase in transportation revenues for the third quarter and nine months half of 1995, respectively, over the comparable periods of 1994 was due to a marketing effort resulting in an expanded customer base, increased staffing and vehicles and therefore increased compensated mileage. Operating expenses for the third quarter and first nine months of 1995 increased 38% and 26%, 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 35% and 19% for the third quarter and first nine months of 1995, respectively, as compared to the same periods in 1994, actually decreased as a percentage of revenue for both periods. 10 11 The recent trend in new contracts has resulted in 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 third quarter and first nine months of 1995 increased 49% and 47% respectively, over the comparable periods of 1994. Included in the third quarter and first nine months of 1995, respectively, were expenses of approximately $210,000 and $910,000 of non-recurring pooling expenses. The growth in general and administrative expenses has been incurred in order to manage the new beds being brought on line in 1995 and 1996. The Company is in the process of bringing 8,276 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, increased 56% and 5% for the third quarter and first nine months of 1995, respectively, as compared to the same periods in 1994. This is due to the Company incurring debt related to new facilities opened in 1994 and 1995. The Company realized the complete utilization of its net operating loss carryforwards prior to 1995 and, therefore, is 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. In July, 1995, the Company renegotiated its credit facility with a bank. The facility 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%, 8.75% and 7.88%, respectively at September 30, 1995. The facility consists of a working capital line, which includes letters of credit. In order to facilitate the temporary financing related to the Eden Detention Center, the Company received a $3,000,000 overline for the credit facility. As of September 30, 1995, there was $21,180,000 borrowed against the facility and $6,394,000 of letters of credit had been issued. In June, 1995, the Company sold 272,500 shares of common stock at $30.50 per share to Sodexho, S.A., an affiliate of the Company pursuant to a pre-emptive right under the June 1994 Securities Purchase Agreement between the Company and Sodexho. The proceeds were used to finance the expansion of an existing facility. In July, 1995, the Company and Sodexho entered into an amendment to the Securities Purchase Agreement. Pursuant to the original Securities Purchase Agreement Sodexho purchased an option to acquire $20,000,000 of 8.75% convertible subordinated notes exercisable through December 31, 1997. These notes had a conversion price equal to the greater of (i) 20% over the closing price of the Company's Common Stock on the day prior to the closing of such purchase or (ii) $18.00. Under that Agreement, the Company had the right, at its option to limit this purchase to $10,000,000 in 1995, $5,000,000 in 1996 and $5,000,000 in 1997. The Securities Purchase Agreement, as amended, provides that the notes when issued will bear interest at a rate of LIBOR plus 135 basis points and will have a conversion price of $27.30. Under the amended Agreement, Sodexho may purchase $10,000,000 of the notes after September 30, 1995 and before December 31, 1997 and the remaining $10,000,000 of the notes after February 15, 1996 and before December 31, 1997. 11 12 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. 12 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities On October 3, 1995, the Company authorized a 2-for-1 stock split, paid in the form of a one-share dividend for every share of common stock held by stockholders of record on October 17, 1995. As a result of the stock split, the Company's publicly traded warrants were amended to provide that each warrant entitles the holder thereof to purchase two shares of the Company's common stock for an exercise price of $8.50. The dividend was paid on October 31, 1995. 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) 27 Financial Data Schedule (for SEC use only) b) A current report on Form 8-K dated August 31, 1995, reporting the acquisition of Correction Management Affiliates, Inc., Correctional Services Group, Inc. and Corrections Partners, Inc. in a business combination accounted for as a pooling-of-interest, was filed during the quarter for which this quarterly report is filed. A current amended report on Form 8-K/A dated July 10, 1995, reporting the acquisition of Concept, Inc., was filed during the quarter for which this quarterly report is filed. 13 14 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, 1995 /s/ Darrell K. Massengale - -------------------------------------------- ------------------------------ (Date) Darrell K. Massengale Treasurer (Principal Accounting Officer) 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF CORRECTIONS CORPORATION OF AME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 1 1,261 0 39,191 0 0 46,948 128,992 0 222,782 44,149 64,038 15,933 0 0 73,850 222,782 0 144,911 0 114,504 12,640 0 2,706 15,061 5,897 9,164 0 0 0 9,164 .49 .48
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