SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report, February 27, 2004
(Date of earliest event reported)
AVALON CORRECTIONAL SERVICES, INC.
(Exact name of Registrant as
specified in its corporate charter)
Commission File Number: 0-20307
Nevada 13-3592263
(State of Incorporation) (I.R.S. Employer I.D. Number)
13401 Railway Drive, Oklahoma City, Oklahoma 73114
(Address of principal executive offices)
(405) 752-8802
(Registrant's telephone number, including area code)
Item 7. Financial Statements and Exhibits
The following exhibits are included with this report:
Exhibit No. Description
99.1 Company Press Release dated February 27, 2004
Item 12. Results of Operations and Financial Condition
On February 27, 2004, Avalon Correctional Services, Inc. (the "Company")
issued a press release announcing that the Company restated the consolidated
financial statements for the year ended December 31, 2002 and for the quarterly
periods ending March 31, June 30 and September 30, 2003, resulting from
reevaluation of the amortization period of intangible assets related to the
value of contracts previously acquired in business combinations. A copy of the
release is included as an exhibit to this report.
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.
AVALON CORRECTIONAL SERVICES, INC.
Date: February 27, 2004 By: s// David Grose
__________________________________
David Grose
Title: Vice President of Finance
INDEX TO EXHIBITS
Exhibit No. Description
99.1 Company Press Release dated February 27, 2004
For Immediate Release Company Tiffany Smith
February 27, 2004 Contact: (405) 752-8802
AVALON ANNOUNCES RESTATEMENT OF 2002 AND 2003 FINANCIAL STATEMENTS
OKLAHOMA CITY, Oklahoma, February 27, 2004 - Avalon Correctional Services, Inc.
(NASDAQ:CITY) today reported that the Company has restated consolidated
financial statements for the year ended December 31, 2002 and for the quarterly
periods ending March 31, June 30 and September 30, 2003, resulting from
reevaluation of the amortization period of intangible assets related to the
value of contracts previously acquired in business combinations. Upon original
implementation of Statement of Financial Accounting Standards ("SFAS") No. 142,
the Company determined that intangible assets related to the value of contracts
previously acquired in business combinations had indefinite lifes, and therefore
were not amortized. After communication with the SEC staff resulting in a
reevaluation of the life of contract intangibles, the Company has restated the
consolidated financial statements as of and for the year ended December 31,
2002, to amortize contract intangibles over a fifteen-year life (the life
assigned prior to the implementation of SFAS No. 142 on January 1, 2002).
Intangible assets originally determined to have indefinite lives
totaled $2,631,000 at December 31, 2002. The effect of the restatement reduced
total assets from $39,916,000, as originally reported at December 31, 2002, to
$39,691,000, reduced total liabilities from $29,602,000 to $29,517,000 (due to
income tax effects) and therefore reduced stockholders' equity from $7,138,000
to $6,998,000. The restatement also reduced 2002 net income from $1,261,000, or
$0.22 per diluted share, to $1,121,000, or $0.20 per diluted share. Amortization
of the assets will reduce reported net income in future periods, but has no
effect on cash flows. A summary of the effects of these items on previously
reported results of operations for certain affected periods follows:
As
Originally Effect of
Year Ended December 31, 2002 Reported Restatement Restated
- -------------------------------------------------- --------------- ------------- ------------
Revenues $ 27,456,000 $ - $ 27,456,000
Costs and expenses 25,563,000 225,000 25,788,000
--------------- ------------- -----------
Net income before income tax expense $ 1,893,000 $ (225,000) $ 1,668,000
Income tax expense 632,000 (85,000) 547,000
--------------- ------------- -----------
Net income $ 1,261,000 $ (140,000) $ 1,121,000
=============== ============== ==========
Basic income per share $ .26 $ (.03) $ .23
=============== ============= ===========
Diluted income per share $ .22 $ (.02) $ .20
=============== ============== ===========
The consolidated financial statements for the year ended December 31, 2001
were not impacted as the restatement pertains to the implementation of SFAS No.
142 on January 1, 2002.
First quarter 2003 - The effect of the restatement reduced total assets
from $40,262,000, as originally reported at March 31, 2003, to $39,982,000,
reduced total liabilities from $29,654,000 to $29,548,000 (due to income tax
effects) and therefore reduced stockholders' equity from $7,786,000 to
$7,612,000.
As
Originally Effect of
First quarter 2003 Reported Restatement Restated
- ------------------------------------------------- -------------- ------------ ------------
Revenues $ 6,170,000 $ - $ 6,170,000
Costs and expenses 5,683,000 56,000 5,739,000
------------- ------------ ------------
Net income before income tax expense $ 487,000 $ (56,000) $ 431,000
Income tax expense 192,000 (21,000) 171,000
------------- ------------ -------------
Net income $ 295,000 $ (35,000) $ 260,000
============= ============ ============
Basic income per share $ .06 $ (.01) $ .05
============= ============ ============
Diluted income per share $ .05 $ - $ .05
============= ============ ============
Second quarter 2003 - The effect of the restatement reduced total assets
from $40,342,000, as originally reported at June 30, 2003, to $40,005,000,
reduced total liabilities from $29,446,000 to $29,319,000 (due to income tax
effects) and therefore reduced stockholders' equity from $8,374,000 to
$8,164,000.
As
Originally Effect of
Second Quarter 2003 Reported Restatement Restated
- -------------------------------------- --------------- ------------ ------------
Revenues $ 6,112,000 - $ 6,112,000
Costs and expenses 5,710,000 57,000 5,767,000
-------------- --------- ------------
Net income before income tax expense $ 402,000 $ (57,000) $ 345,000
Income tax expense 114,000 (21,000) 93,000
-------------- --------- ------------
Net income $ 288,000 $ (36,000) $ 252,000
============== ========= ============
Basic income per share $ .06 $ (.01) $ .05
============== ========= ============
Diluted income per share $ .05 $ - $ .05
============== ========= ============
Third quarter 2003 - The effect of the restatement reduced total assets
from $40,884,000, as originally reported at September 30, 2003, to $40,491,000,
reduced total liabilities from $29,638,000 to $29,490,000 (due to income tax
effects) and therefore reduced stockholders' equity from $8,966,000 to
$8,721,000.
As
Originally Effect of
Third Quarter 2003 Reported Restatement Restated
- -------------------------------------- ------------- ------------ -----------
Revenues $ 6,346,000 $ - $ 6,346,000
Costs and expenses 5,807,000 56,000 5,863,000
------------- ------------- -----------
Net income before income tax expense $ 539,000 $ (56,000) $ 483,000
Income tax expense 193,000 (21,000) 172,000
------------- ------------- ----------
Net income $ 346,000 $ (35,000) $ 311,000
============= ============= ===========
Basic income per share $ .07 $ (.01) $ .06
============= ============= ==========
Diluted income per share $ .06 $ - $ .06
============= ============= ==========
About Avalon Correctional Services, Inc.:
Avalon Correctional Services, Inc. is a leading developer and manager of
private community correctional facilities and alternative correctional
programming in the United States. Avalon currently manages offenders in 12
correctional facilities in 3 states, Oklahoma, Texas and Colorado. The Company
specializes in programs designed to prepare offenders for their return to
society and programs designed as an alternative to incarceration. Avalon is in
its nineteenth year of operations. The Company offers offender rehabilitation
programs and a low cost form of incarceration that can help to reduce the costs
for taxpayers. For additional corporate information about Avalon please visit
the company web site at - www.avaloncorrections.com or contact us at
1-800-919-9113.
Safe Harbor Statement Information in this news release contains
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. For these statements, we claim the protection of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
only predictions or statements of current plans that are constantly under review
by the Company. These forward-looking statements involve risks, uncertainties
and assumptions and such statements are qualified by important factors that may
cause actual results to differ materially from those expressed in the
forward-looking statements, including those factors detailed from time to time
in the Company's filings, with the Securities and Exchange Commission. The
foregoing information should be read in conjunction with the Company's filings
with the Securities and Exchange Commission including, but not limited to, the
Company's recent quarterly reports on Form 10-Q and its recent annual report on
Form 10-K including the exhibits to such reports. The forward-looking statements
contained in this news release are made as of the date hereof. The Company has
no obligation to update or revise these forward-looking statements to reflect
the occurrence of future events or circumstances. Additional information on
factors that may affect the business and financial results of the Company can be
found in filings of the Company with the Securities and Exchange Commission at
www.sec.gov/edgar/searchedgar/companysearch.html.