EXHIBIT 99.1
NEWS RELEASE [CORRECTIONS CORPORATION OF AMERICA LOGO]
Contact: Karin Demler, Investor Relations, 615-263-3005
CORRECTIONS CORPORATION OF AMERICA
REPORTS 2003 THIRD QUARTER RESULTS
NET INCOME INCREASES TO $18.2 MILLION
REVENUE INCREASES 10.0% OPERATING INCOME IMPROVES 17.6%
NASHVILLE, Tenn. - November 5, 2003 - Corrections Corporation of America (NYSE:
CXW) (the "Company"), the nation's leading provider of private corrections,
today reported its operating results for the three and nine month periods ended
September 30, 2003.
FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED SEPTEMBER 30, 2003 VS. 2002
For the third quarter of 2003, the Company generated net income available to
common stockholders of $18.2 million, or $0.47 per diluted share, compared with
net income available to common stockholders of $11.0 million, or $0.36 per
diluted share, for the third quarter of 2002. Results for the third quarter of
2003 included a charge of approximately $2.6 million, or $0.07 per diluted
share, associated with the Company's debt refinancing transactions completed
during August 2003, as further described below. Results for the third quarter of
2002 included a charge of approximately $0.6 million, or $0.02 per diluted share
for a change in fair value of derivative instruments.
Excluding the above-mentioned special items, the Company generated net income
available to common stockholders of $20.8 million(1), or $0.54 per diluted
share, for the third quarter of 2003, compared with net income available to
common stockholders of $11.6 million, or $0.38 per diluted share, in the same
period in the prior year, representing an increase of $0.16 per diluted share,
or 42%. The effects of these special items are further illustrated in the
following table:
THREE MONTHS ENDED
SEPTEMBER 30,
2003 2002
------- -------
Net income available to common stockholders $18,201 $10,973
Expenses associated with debt refinancing and recapitalization transactions 2,552 --
Change in fair value of derivative instruments -- 628
------- -------
$20,753 $11,601
======= =======
Per diluted share $ 0.54 $ 0.38
======= =======
Operating income for the third quarter of 2003 increased to $40.8 million
compared with $34.7 million for the third quarter of 2002, an increase of 17.6%.
EBITDA adjusted for special items ("Adjusted EBITDA")(1) for the third quarter
of 2003 increased to $54.1 million compared with $48.0 million from the third
quarter of 2002, representing an increase of 12.8%. The increases in Adjusted
EBITDA and operating income were primarily the result of higher occupancy levels
and operating margins, including contributions resulting from the opening of the
McRae Correctional Facility in December 2002 and the acquisition of the Crowley
County Correctional Facility in January 2003.
-More-
10 Burton Hills Boulevard, Nashville, Tennessee 37215, Phone 615-263-3000
CCA 2003 Third Quarter Results
November 5, 2003
Page 2
Adjusted free cash flow(1) for the third quarter of 2003 amounted to $27.3
million, unchanged from the third quarter 2002. The increase in cash generated
from higher occupancy levels and operating margins was partially offset by an
increase in cash used for investments in technology and facility improvements
compared with the same period in the prior year. Readers should refer to the
Calculation of Adjusted Free Cash Flow and Adjusted EBITDA following the
financial statements herein.
NINE MONTHS ENDED SEPTEMBER 30, 2003 VS. 2002
For the nine months ended September 30, 2003, the Company generated net income
available to common stockholders of $47.8 million, or $1.36 per diluted share,
compared with a net loss available to common stockholders of $66.8 million, or
$2.31 per diluted share, for the nine months ended September 30, 2002. Results
for the nine months ended September 30, 2003, included the following special
items:
- A charge of approximately $6.7 million, or $0.19 per diluted
share, associated with the Company's debt refinancing and
recapitalization transactions completed during 2003;
- A non-cash gain of $2.9 million, or $0.08 per diluted share,
associated with the extinguishment of a promissory note issued
during the second quarter of 2003 in connection with the final
payment of the state court portion of the Company's 2001
stockholder litigation settlement. The gain was reflected as a
change in fair value of derivative instruments because the
determination of the note's value was based on changes in the
trading price of the Company's common stock; and
- A charge of approximately $4.5 million, or $0.12 per diluted
share, for additional distributions paid to holders of series
B preferred stock that tendered their shares in connection
with the Company's tender offer during the second quarter of
2003. The additional distributions represented a tender
premium over and above the regular dividend accruing on
approximately 3.7 million shares that were tendered on May 13,
2003.
Results for the nine months ended September 30, 2002, included the following
special items:
- A charge of approximately $36.7 million associated with the
Company's debt refinancing and recapitalization transactions
completed during the second quarter of 2002;
- A tax benefit of approximately $32.2 million resulting from
the enactment in March 2002 of the "Job Creation and Worker
Assistance Act," enabling the Company to carry back net
operating losses from 2001 to offset taxable income generated
in 1997 and 1996;
- A favorable change in the fair value of derivative instruments
of $2.8 million in accordance with Statement of Financial
Accounting Standards No. 133; and
- A non-cash charge of $80.3 million for the cumulative effect
of accounting change for goodwill in accordance with Statement
of Financial Accounting Standards No. 142.
Excluding these special items, during the first nine months of 2003, the Company
generated net income available to common stockholders of $56.0 million, or $1.59
per diluted share, compared with $15.1 million, or $0.52 per diluted share, for
the same period in the prior year. The effects of these special items are
further illustrated in the following table:
-More-
CCA 2003 Third Quarter Results
November 5, 2003
Page 3
NINE MONTHS ENDED
SEPTEMBER 30,
2003 2002
-------- --------
Net income (loss) available to common stockholders $ 47,763 $(66,751)
Expenses associated with debt refinancing and recapitalization transactions 6,687 36,670
Income tax benefit -- (32,224)
Change in fair value of derivative instruments (2,900) (2,834)
Cumulative effect of accounting change -- 80,276
Excess distributions to series B preferred stockholders 4,472 --
-------- --------
$ 56,022 $ 15,137
======== ========
Per diluted share $ 1.59 $ 0.52
======== ========
Operating income for the first nine months of 2003 increased to $124.0 million
compared with $96.8 million for the first nine months of 2002. Excluding the
special items, Adjusted EBITDA for the nine months ended September 30, 2003
increased to $163.3 million compared with $135.0 million for the same period in
the prior year. Adjusted free cash flow also increased for the nine-month period
ended September 30, 2003 to $83.9 million, compared with $62.2 million for the
prior year period.
THIRD QUARTER 2003 DEBT REFINANCING TRANSACTIONS
In August 2003, the Company completed the sale and issuance of $200.0 million
aggregate principal amount of senior notes in a private placement to qualified
institutional buyers pursuant to Rule 144A under the Securities Act of 1933. The
new senior notes, which are scheduled to mature May 1, 2011, were issued at a
price of 101.125% of the principal amount of the notes, and pay interest at a
rate of 7.5% per annum. Proceeds from the note offering, along with cash on
hand, were used to pay-down approximately $240.3 million of the term loan
portion of the senior bank credit facility. In connection with the pay-down, the
Company also amended the senior bank credit facility to provide a $125.0 million
revolving credit facility (increased from $75.0 million) that expires March 31,
2006, and a $275.0 million term loan expiring March 31, 2008. The interest rates
applicable to the term portion of the facility were reduced to LIBOR + 2.75%
from LIBOR + 3.50%. In addition, covenants under the amended facility provide
greater operating flexibility.
Also during August 2003, the Company legally defeased the remaining $3.1 million
outstanding 12% senior notes. Under the terms of the indenture governing such
notes, the notes were deemed to have been repaid in full.
IRS AUDIT RESOLUTION
As previously disclosed in the Company's periodic public filings with the SEC,
during 2001 the Internal Revenue Service completed an audit of the Company's
2000 federal income tax return and proposed a significant adjustment that would
have required the Company to pay approximately $56.0 million in cash plus
penalties and interest. The Company protested the finding with the Appeals
Office of the IRS and did not establish a reserve for this matter because the
Company believed the proposed adjustment was without merit. During October 2003,
the Appeals Office of the IRS notified the Company that it had withdrawn the
proposed adjustment and accordingly closed the audit with no material impact to
the Company.
-More-
CCA 2003 Third Quarter Results
November 5, 2003
Page 4
OPERATIONS HIGHLIGHTS
For the quarters ended September 30, 2003 and 2002, key operating statistics for
continuing operations were as follows:
THREE MONTHS ENDED SEPTEMBER 30,
Metric 2003 2002
---------- ----------
Average Available Beds 58,732 56,924
Average Compensated Occupancy 93.7% 90.2%
Total Compensated Man-Days 5,063,682 4,725,712
Revenue per Compensated Man-Day $ 50.82 $ 49.60
---------- ----------
Operating Expense per Compensated Man-Day:
Fixed 28.00 27.41
Variable 10.12 10.50
---------- ----------
Total 38.12 37.91
---------- ----------
Operating Margin per Compensated Man-Day $ 12.70 $ 11.69
========== ==========
Operating Margin 25.0% 23.6%
Total revenue for the three months ended September 30, 2003 increased 10.0% to
$263.4 million from $239.4 million in the prior year. Total compensated man-days
increased to 5.1 million from 4.7 million, while average compensated occupancy
for the quarter increased to 93.7% from 90.2% in the prior year third quarter.
Revenue per compensated man-day for the third quarter of 2003 increased to
$50.82 compared with $49.60 in the prior year third quarter.
Operating margins increased to $12.70 per compensated man-day in the third
quarter of 2003 from $11.69 per compensated man-day in the prior year third
quarter, while operating margins improved to 25.0% compared with 23.6%. The
higher margins were driven by increasing occupancy levels, increases in per-diem
rates at a number of facilities and strong expense control. Total operating
expenses per man-day increased $0.21 over the prior year comparable quarter
while variable expenses actually declined $0.38 per man-day from the prior year
due primarily to reductions achieved in the areas of food and medical expense.
BUSINESS DEVELOPMENT HIGHLIGHTS
On September 10, 2003, the Company announced its intention to expand the Crowley
County Correctional Facility located in Olney Springs, Colorado by 624 beds,
increasing the total design capacity to 1,824 beds. The anticipated cost of the
expansion is approximately $22 million and is estimated to be completed during
the third quarter of 2004. The expansion is being undertaken in anticipation of
increasing demand from Colorado and Wyoming.
In addition, the Company previously announced its intention to complete the
construction of the Stewart County Detention Center located in Stewart County,
Georgia. The anticipated cost to complete the facility is approximately $19
million with completion also estimated to occur during the third quarter of
2004. The Company's decision to complete the project is based on anticipated
demand from several government customers having a need for inmate bed capacity
in the Southeast region of the country.
-More-
CCA 2003 Third Quarter Results
November 5, 2003
Page 5
On October 2, 2003, the Company announced a new contract with the United States
Immigration and Customs Enforcement agency ("ICE") for up to 905 detainees at
its Houston Processing Center located in Houston, Texas. The Company also
announced its intention to expand the facility by 494 beds, increasing its
design capacity to 905 beds. The anticipated cost of expansion is approximately
$29 million and is estimated to be completed during the first quarter of 2005.
The expansion is being undertaken as a result of the ICE contract, which
contains a guarantee that ICE will utilize 679 beds when the expansion is
completed.
On October 30, 2003, the Company announced a new contract with the Department of
Corrections in the State of Indiana to manage up to 1,000 medium security male
inmates. The eight-year contract will replace an existing contract between the
Company and Indiana, retroactive to January 1, 2003. The Company currently
manages an Indiana population of approximately 650 inmates in its Otter Creek
Correctional Center in Wheelwright, Kentucky. The new contract provisions are
comparable to the Company's existing contract with Indiana. The contract does
not guarantee any inmates in addition to the number of inmates the Company
currently manages, nor does it guarantee that the Company will continue to
manage the existing level of inmates.
Commenting on the Company's results, President and CEO John Ferguson stated,
"The results for the third quarter clearly reflect the outcomes of our business
development and cost control initiatives of the past two years. Earnings are up
substantially while occupancies and operating margins continue to improve. Our
efforts with respect to the balance sheet are also bearing results as we now
have the ability to invest in new opportunities such as the recently announced
Crowley, Stewart and Houston opportunities. Looking ahead, although there are
always challenges to face, we strongly believe that the long-term fundamentals
for our industry remain positive."
FUTURE FINANCIAL GUIDANCE
The Company expects operating income for the fourth quarter 2003 to be in the
range of $39.0 to $42.0 million, with estimates for the full year of 2003 in the
range of $163.0 to $166.0 million.
SUPPLEMENTAL FINANCIAL INFORMATION
The Company has made available on its website supplemental financial information
and other data for the third quarter of 2003. The Company does not undertake any
obligation, and disclaims any duty, to update any of the information disclosed
in this report. You may access this information through the Company's website at
www.correctionscorp.com/investor.
WEBCAST TODAY
Corrections Corporation of America will webcast its third quarter earnings
conference call today at 3:00 p.m Eastern Time/2:00 p.m. Central Time. Investors
and the media are invited to listen to the call through the Company's website,
www.correctionscorp.com/investor, under "Webcasts and Conference Calls." A
telephonic replay will be available beginning at approximately 5:00 p.m. Central
Time today, through November 12, 2003. The replay number is 1-800-405-2236,
confirmation code 556547. A replay of the conference call will also be available
on the Company's website at www.correctionscorp.com/investor, under "Webcasts
and Conference Calls."
-More-
CCA 2003 Third Quarter Results
November 5, 2003
Page 6
ABOUT THE COMPANY
The Company is the nation's largest owner and operator of privatized
correctional and detention facilities and one of the largest prison operators in
the United States, behind only the federal government and four states. The
Company currently operates 59 facilities, including 38 company-owned facilities,
with a total design capacity of approximately 59,000 beds in 20 states and the
District of Columbia. The Company specializes in owning, operating, and managing
prisons and other correctional facilities and providing inmate residential and
prisoner transportation services for governmental agencies. In addition to
providing the fundamental residential services relating to inmates, the
Company's facilities offer a variety of rehabilitation and educational programs,
including basic education, religious services, life skills and employment
training and substance abuse treatment. These services are intended to reduce
recidivism and to prepare inmates for their successful re-entry into society
upon their release. The Company also provides health care (including medical,
dental and psychiatric services), food services and work and recreational
programs.
FORWARD LOOKING STATEMENTS
This press release contains statements as to the Company's beliefs and
expectations of the outcome of future events that are forward-looking statements
as defined within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from the statements made.
These include, but are not limited to, the risks and uncertainties associated
with: (i) fluctuations in our operating results because of, among other things,
changes in occupancy levels, competition, increases in cost of operations,
fluctuations in interest rates and risks of operations; (ii) changes in the
privatization of the corrections and detention industry, the public acceptance
of the Company's services and the timing of the opening of new prison facilities
and the renewal of existing contracts; and (iii) general economic and market
conditions. Other factors that could cause operating and financial results to
differ are described in the filings made from time to time by the Company with
the SEC.
The Company takes no responsibility for updating the information contained in
this press release following the date hereof to reflect events or circumstances
occurring after the date hereof or the occurrence of unanticipated events or for
any changes or modifications made to this press release or the information
contained herein by any third-parties, including, but not limited to, any wire
or internet services.
-More-
CCA 2003 Third Quarter Results
November 5, 2003
Page 7
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SEPTEMBER 30, December 31,
ASSETS 2003 2002
------ ------------- ------------
Cash and cash equivalents $ 68,943 $ 65,406
Restricted cash 12,796 7,363
Accounts receivable, net of allowance 139,478 119,197
Income tax receivable 59 32,499
Prepaid expenses and other current assets 6,949 12,299
Current assets of discontinued operations 1,158 17,583
---------- ----------
Total current assets 229,383 254,347
Property and equipment, net 1,580,571 1,551,781
Investment in direct financing lease 17,907 18,346
Goodwill 20,294 20,902
Other assets 35,562 28,211
Non-current assets of discontinued operations -- 484
---------- ----------
Total assets $1,883,717 $1,874,071
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Accounts payable and accrued expenses $ 155,534 $ 151,516
Income tax payable 3,600 3,685
Distributions payable 150 5,330
Current portion of long-term debt 2,914 23,054
Current liabilities of discontinued operations 1,690 2,381
---------- ----------
Total current liabilities 163,888 185,966
Long-term debt, net of current portion 1,004,128 932,905
Other liabilities 21,817 21,202
---------- ----------
Total liabilities 1,189,833 1,140,073
---------- ----------
Commitments and contingencies
Preferred stock - $0.01 par value:
Series A - stated at liquidation preference of $25.00 per share 7,500 107,500
Series B - stated at liquidation preference of $24.46 per share 23,528 107,831
Common stock - $0.01 par value 350 280
Additional paid-in capital 1,439,587 1,343,066
Deferred compensation (1,913) (1,604)
Retained deficit (774,348) (822,111)
Accumulated other comprehensive loss (820) (964)
---------- ----------
Total stockholders' equity 693,884 733,998
---------- ----------
Total liabilities and stockholders' equity $1,883,717 $1,874,071
========== ==========
-More-
CCA 2003 Third Quarter Results
November 5, 2003
Page 8
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------------- --------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
REVENUE:
Management and other $ 262,486 $ 238,558 $ 765,080 $ 692,945
Rental 945 884 2,797 2,781
--------- --------- --------- ---------
263,431 239,442 767,877 695,726
--------- --------- --------- ---------
EXPENSES:
Operating 199,654 183,351 575,455 537,341
General and administrative 9,819 8,127 29,366 23,662
Depreciation and amortization 13,157 13,268 39,106 37,893
--------- --------- --------- ---------
222,630 204,746 643,927 598,896
--------- --------- --------- ---------
OPERATING INCOME 40,801 34,696 123,950 96,830
--------- --------- --------- ---------
OTHER (INCOME) EXPENSE:
Equity in (earnings) loss of joint venture (88) 90 (44) 63
Interest expense, net 19,078 17,959 56,459 69,377
Expenses associated with debt refinancing and
recapitalization transactions 2,552 -- 6,687 36,670
Change in fair value of derivative instruments -- 628 (2,900) (2,834)
(Gain) loss on disposal of assets (6) 6 (21) 57
Unrealized foreign currency transaction gain (49) (115) (199) (442)
--------- --------- --------- ---------
21,487 18,568 59,982 102,891
--------- --------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 19,314 16,128 63,968 (6,061)
Income tax (expense) benefit (277) 375 (107) 33,263
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 19,037 16,503 63,861 27,202
Income (loss) from discontinued operations, net of taxes -- (238) (1,692) 1,897
Cumulative effect of accounting change -- -- -- (80,276)
--------- --------- --------- ---------
NET INCOME (LOSS) 19,037 16,265 62,169 (51,177)
Distributions to preferred stockholders (836) (5,292) (14,406) (15,574)
--------- --------- --------- ---------
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS $ 18,201 $ 10,973 $ 47,763 $ (66,751)
========= ========= ========= =========
BASIC EARNINGS (LOSS) PER SHARE:
Income from continuing operations before cumulative effect
of accounting change $ 0.53 $ 0.41 $ 1.57 $ 0.42
Income (loss) from discontinued operations, net of taxes -- (0.01) (0.05) 0.07
Cumulative effect of accounting change -- -- -- (2.90)
--------- --------- --------- ---------
Net income (loss) available to common stockholders $ 0.53 $ 0.40 $ 1.52 $ (2.41)
========= ========= ========= =========
DILUTED EARNINGS (LOSS) PER SHARE:
Income from continuing operations before cumulative effect
of accounting change $ 0.47 $ 0.37 $ 1.41 $ 0.40
Income (loss) from discontinued operations, net of taxes -- (0.01) (0.05) 0.07
Cumulative effect of accounting change -- -- -- (2.78)
--------- --------- --------- ---------
Net income (loss) available to common stockholders $ 0.47 $ 0.36 $ 1.36 $ (2.31)
========= ========= ========= =========
-More-
CCA 2003 Third Quarter Results
November 5, 2003
Page 9
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
CALCULATION OF ADJUSTED FREE CASH FLOW AND EBITDA
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
----------------------- ------------------------
2003 2002 2003 2002
-------- -------- -------- ---------
Pre-tax income (loss) available to common stockholders $ 18,478 $ 10,598 $ 47,870 $(100,014)
Expenses associated with debt refinancing and recapitalization
transactions 2,552 -- 6,687 36,670
Cumulative effect of accounting change -- -- -- 80,276
Income taxes paid (228) -- (1,729) (4,110)
Depreciation and amortization 13,157 13,268 39,106 37,893
Depreciation and amortization for discontinued operations -- 309 1,074 2,941
Income tax expense for discontinued operations -- 125 -- 600
Amortization of debt costs and other non-cash interest 2,089 1,313 5,707 10,436
Change in fair value of derivative instruments -- 628 (2,900) (2,834)
Series B preferred stock dividends satisfied with series B preferred
stock and non-recurring tender premium 686 3,142 10,476 9,124
Maintenance capital expenditures (9,435) (2,132) (22,355) (8,826)
-------- -------- -------- ---------
ADJUSTED FREE CASH FLOW $ 27,299 $ 27,251 $ 83,936 $ 62,156
======== ======== ======== =========
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
----------------------- ---------------------------
2003 2002 2003 2002
------- -------- --------- ---------
Net income (loss) $19,037 $ 16,265 $ 62,169 $ (51,177)
Interest expense, net 19,078 17,959 56,459 69,377
Depreciation and amortization 13,157 13,268 39,106 37,893
Income tax expense (benefit) 277 (375) 107 (33,263)
Cumulative effect of accounting change -- -- -- 80,276
(Income) loss from discontinued operations, net of taxes -- 238 1,692 (1,897)
------- -------- --------- ---------
EBITDA 51,549 47,355 159,533 101,209
Expenses associated with debt refinancing and recapitalization
transactions 2,552 -- 6,687 36,670
Change in fair value of derivative instruments -- 628 (2,900) (2,834)
------- -------- --------- ---------
ADJUSTED EBITDA $54,101 $ 47,983 $ 163,320 $ 135,045
======= ======== ========= =========
(1) Net income, excluding certain special items; Adjusted EBITDA; and Adjusted
free cash flow are non-GAAP financial measures. The Company believes that net
income, excluding special items; Adjusted EBITDA; and Adjusted free cash flow
are important operating measures that supplement discussion and analysis of the
Company's results of operations, and are used to review and assess operating
performance of the Company and its correctional facilities and their management
teams. The Company believes that it is useful to provide investors, lenders and
security analysts disclosures of its results of operations on the same basis as
that used by management.
Management and investors review both the Company's overall performance
(including GAAP EPS; net income excluding special items; and Adjusted free cash
flow) and the operating performance of the Company's correctional facilities
(Adjusted EBITDA). Adjusted EBITDA is useful as a supplemental measure of the
performance of the Company's correctional facilities because it does not take
into account depreciation and amortization or the impact of the Company's
financing strategies or tax provisions. Because the historical cost accounting
convention used for real estate assets requires depreciation (except on land),
this accounting presentation assumes that the value of real estate assets
diminishes at a level rate over time. Because of the unique structure, design
and use of the Company's correctional facilities, management believes that
assessing performance of the Company's correctional facilities without the
impact of depreciation or amortization is useful. The calculation of Adjusted
free cash flow substitutes capital expenditures incurred to maintain the
functionality and condition of the Company's correctional facilities in lieu of
a provision for depreciation; Adjusted free cash flow also excludes certain
other non-cash expenses that do not affect the Company's ability to service
debt.
The Company may make adjustments to Adjusted EBITDA and Adjusted free cash flow
from time to time for certain other income and expenses that it considers
non-recurring, infrequent or unusual, even though such items may require cash
settlement, because such items do not reflect a necessary component of the
ongoing operations of the Company. Other companies may calculate Adjusted EBITDA
and Adjusted free cash flow differently than the Company does, and therefore
comparability may be limited. Adjusted EBITDA and Adjusted free cash flow are
not measures of performance under GAAP, and should not be considered as an
alternative to cash flows from operating activities or as a measure of liquidity
or an alternative to net income as indicators of the Company's operating
performance or any other measure of performance derived in accordance with GAAP.
This data should be read in conjunction with the Company's consolidated
financial statements and related notes included in its filings with the
Securities and Exchange Commission.
-END-