Corrections Corporation Of America's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Corrections Corporation of America (CXW)

Q2 2012 Earnings Call

August 9, 2012 11:00 am ET


Damon T. Hininger – President and Chief Executive Officer

Todd J. Mullenger – Chief Financial Officer and Executive Vice President


Kevin S. Campbell – Avondale Partners LLC

Todd Van Fleet – First Analysis Securities Corp.

Tobey Sommer – Suntrust Robinson Humphrey

Manav Shiv Patnaik – Barclays Capital, Inc.

Kevin McVeigh – Macquarie



Good morning everyone, and welcome to CCA Second Quarter 2012 Earnings Conference Call. If you need a copy of our press release or supplemental financial data both documents are available on the investor page of our website at Before we begin, let me remind today's listeners that this call contains forward-looking statements, pursuant to the Safe Harbor provisions of the Securities and Litigation Reform Act.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made today. Factors that could cause operating and financial results to differ are described in the press release as well as our Form 10-K and other documents filed with the SEC.

This call may include discussions of non-GAAP measures. The reconciliation of the most comparable GAAP measurement is provided in our corresponding earnings release and included in the supplemental financial data on our website.

We are under no obligation to update or revise any forward-looking statements that maybe made to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events.

Participating on today's call will be our President and CEO, Damon Hininger, and Chief Financial Officer, Todd Mullenger.

I would now like to turn the call over to Mr. Hininger. Please go ahead, sir.

Damon T. Hininger

Thank you, Melisa, and good morning and thank you all for joining our call today. With me today is our Chairman, John Ferguson, and CFO, Todd Mullenger. And also joining us is our Chief Corrections Officer, Harley Lappin and our VP of Finance, David Garfinkle.

In a few minutes, Todd will take you through the numbers for the quarter. Then I’ll discuss the marketplace and also give an update on private REITs, after which we look forward to taking your questions.

First though, let me make some comments on the past quarter. First, we had strong cash flow performance for the quarter with FFO near $54 million and reported $0.38 in adjusted EPS.

We also had a very significant couple of contract wins this past quarter with Idaho and Oklahoma, the two brand new contracts that obviously utilize up to 1,000 beds of existing capacity in our system. Now, Oklahoma is already ramping up into our Cimarron facility, and we expect the ramp up of Idaho to start this month. And we think that these win show again the value of our existing beds which are just-in-time.

So with these two contracts, in addition to our Puerto Rico contract that we got awarded earlier this year, again showed that our existing capacity being very attractive to customers as they grow. And also, we just had a recent development were another customer has come out with the procurement with the Bureau of Prisons looking for 1,000 beds in existing capacity.

We also know two other jurisdictions that are looking for up to a 1,000 beds in existing facilities and we think these procurements could be out the next 6 months to 12 months.

We're also very excited that we’ve kicked off officially our dividend program and we paid our first dividend of $0.20 on June 22. And also with our Cimarron facility ramping up with Puerto Rico and then also, Jenkins facility in Georgia ramping up with the State of Georgia inmates, both of those have ramped up nicely during the four months and both contracts are virtually full today.

On the cost control side, we continue to focus on cost and efficiency as we've announced in our press release, but we did had some noise in the quarter as it relates to activation of our Jenkins and ramp up at Puerto Rico. Also quarter-over-quarter was impacted by salary increases that we had implemented last year.

Look here in a second, I’m going to turn the call over to Todd, but before I do, I would like to thank all of you for the outpouring support you’d given me and the company after we lost one of our team members back in May at our Adams County facility. I visited the facility again this past week and I am so proud of the team there, as we moved forward from this tragic loss.

With that, let me turn it over to Todd.

Todd J. Mullenger

Thank you, Damon, and good morning, everyone. In the second quarter of 2012 we generated $0.38 of adjusted EPS excluding the costs associated with our repayment of senior notes and the re-feasibility study. Funds from operations or FFO totaled $0.55 per share while adjusted funds from operations or AFFO totaled $0.43 per share. As a reminder FFO and AFFO per share are always below average in Q2 due to the fact that nearly 100% of the estimated income tax payments for the first half of the year are made in Q2. FFO per share for the first half of the year totaled $1.37.

Year-over-year in the quarter we saw revenues increased by $13 million driven largely by increases in per diem, the assumption of operations in our Lake Erie, Ohio facility, activation of the Jenkins County, Georgia facility, intake of Puerto Rico inmates at Cimarron, partially offset by declines in populations in our Colorado and CTF facilities. While revenues increased $13 million, we experienced a slight decline year-over-year in net income, largely the result of startup of our Jenkins facility and ramp up of Puerto Rico populations at Cimarron, a decline in populations at our Coffee and Wheeler, Georgia facilities, which were impacted by the opening of Jenkins, increases in wages and benefits expenses and declines in populations at our Colorado and CTF facilities.

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