EXHIBIT 99.1
NEWS RELEASE (CCA CORRECTIONS CORPORATION OF AMERICA LOGO)
Contact: Karin Demler: (615)263-3005
CORRECTIONS CORPORATION OF AMERICA
ANNOUNCES 2005 FOURTH QUARTER AND YEAR END FINANCIAL RESULTS
NASHVILLE, TENN. - FEBRUARY 9, 2006 - CORRECTIONS CORPORATION OF AMERICA (NYSE:
CXW) (the "Company"), the nation's largest provider of corrections management
services to government agencies, today announced its financial results for the
three- and twelve-month periods ended December 31, 2005.
FINANCIAL REVIEW
FOURTH QUARTER OF 2005 COMPARED WITH FOURTH QUARTER OF 2004
For the three months ended December 31, 2005, the Company reported net income
available to common stockholders of $23.4 million, or $0.58 per diluted share,
compared with net income available to common stockholders of $14.9 million, or
$0.38 per diluted share, for the same period in the prior year.
Financial results for the fourth quarter of 2005 included a pre-tax charge of
approximately $1.0 million, or $0.02 per diluted share after taxes, for the
previously announced acceleration of vesting of all outstanding stock options
effective December 30, 2005. Excluding this special charge, net income available
to common stockholders was $0.60 per diluted share for the fourth quarter of
2005. Financial results for the fourth quarter of 2004 included income tax
charges related to an assessment by the Internal Revenue Service of taxes
associated with prior refunds received by the Company during 2002 and 2003,
partially offset by a net income tax benefit for the implementation of tax
planning strategies. Excluding these items, net income available to common
stockholders was $0.41 per diluted share for the fourth quarter of 2004.
Operating income for the fourth quarter of 2005 was $50.4 million, including the
$1.0 million charge for the accelerated vesting of stock options, compared with
$44.9 million for the fourth quarter of 2004. EBITDA Adjusted for Special Items
("Adjusted EBITDA") for the three months ended December 31, 2005, increased
14.0% to $67.1 million, compared with $58.9 million for the same period in 2004.
The financial results for the three months ended December 31, 2005, were
positively affected by a new management contract with the Federal Bureau of
Prisons ("BOP") at the Company's Northeast Ohio Correctional Center that
commenced in June 2005, as well as increased inmate populations at a number of
the Company's facilities, including the Prairie, Lake City, Diamondback, and
Crowley facilities.
Adjusted Free Cash Flow increased 37.6% to $41.5 million during the three months
ended December 31, 2005, compared with $30.1 million generated during the same
period in 2004, primarily as a result of the increase in net income, as well as
a decrease in facility maintenance capital expenditures.
Financial results for the fourth quarter of 2005 were positively impacted by the
successful pursuit of certain tax strategies at both the state and federal
level, contributing to the favorable 31.9% effective tax rate for the fourth
quarter of 2005, and 34.7% effective tax rate for the year ended December 31,
2005. The effective tax rate during the fourth quarter of 2004 was 44.7%
resulting from the aforementioned
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10 Burton Hills Boulevard, Nashville, Tennessee 37215, Phone: 615-263-3000
CCA 2005 Fourth Quarter Results
Page 2
IRS assessment, and 40.2% for the year ended December 31, 2004. Although the
Company implemented several successful tax strategies during 2005, certain of
these strategies generated one-time benefits and were magnified by the
recognition of deductible expenses associated with the Company's debt
refinancing transactions completed during the first half of 2005. The Company
currently estimates its 2006 tax rate to be approximately 38%.
YEAR ENDED DECEMBER 31, 2005 COMPARED WITH THE YEAR ENDED DECEMBER 31, 2004
For the twelve months ended December 31, 2005, the Company generated net income
available to common stockholders of $50.1 million, or $1.25 per diluted share,
compared with $61.1 million, or $1.55 per diluted share, for the twelve months
ended December 31, 2004. In addition to the $1.0 million charge for the
accelerated vesting of stock options reflected during the fourth quarter of
2005, financial results for 2005 included a pre-tax charge of $35.3 million for
refinancing transactions completed during the first and second quarters.
Earnings per diluted share excluding these special items amounted to $1.84 per
diluted share. Financial results for 2005 also included a charge of $0.03 per
diluted share, net of taxes, for the amortization of restricted stock issued to
employees who had historically been granted stock options.
In addition to the $0.03 per diluted share income tax charge during the fourth
quarter of 2004, financial results for the year ended December 31, 2004,
included an income tax benefit of $0.03 per diluted share during the third
quarter of 2004, primarily resulting from a change in estimated income taxes
associated with certain financing transactions completed during 2003. Therefore,
these items had no net impact on diluted earnings per share for the year ended
December 31, 2004.
Operating income for the twelve months ended December 31, 2005, increased to
$176.9 million, compared with $173.4 million for the same period in the prior
year. Operating income was negatively impacted by an increase in general and
administrative expense, which included $2.7 million for stock-based compensation
not reflected in the prior year, as well as an increase in depreciation and
amortization expense primarily resulting from several expansions completed
during 2004. Adjusted EBITDA for the year ended December 31, 2005, increased to
$237.5 million compared with $226.9 million during 2004.
Adjusted Free Cash Flow increased 13.8% during 2005 to $128.2 million compared
with $112.6 million during 2004. Adjusted Free Cash Flow was favorably impacted
by a $12.2 million reduction in maintenance and technology capital expenditures
and was negatively impacted by an increase in cash taxes paid by $12.3 million,
primarily for the previously disclosed repayment during the first half of 2005
associated with excess refunds received by the Company in 2002 and 2003.
Earnings Per Diluted Share Excluding Special Charges, EBITDA, Adjusted EBITDA
and Adjusted Free Cash Flow are non-GAAP financial measures. Please refer to the
Supplemental Financial Information and related note following the financial
statements herein for further discussion and reconciliations of these measures
to GAAP financial measures.
OPERATIONS HIGHLIGHTS
For the three months ended December 31, 2005 and 2004, key operating statistics
for the continuing operations of the Company were as follows:
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CCA 2005 Fourth Quarter Results
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QUARTER ENDED DECEMBER 31,
--------------------------
Metric 2005 2004
------ ---------- ----------
Average Available Beds 70,685 66,558
Average Compensated Occupancy 93.1% 92.9%
Total Compensated Man-Days 6,053,534 5,686,367
Revenue per Compensated Man-Day $ 51.66 $ 49.76
Operating Expense per Compensated Man-Day:
Fixed 28.05 27.57
Variable 9.87 9.52
---------- ----------
Total 37.92 37.09
---------- ----------
Operating Margin per Compensated Man-Day $ 13.74 $ 12.67
========== ==========
Operating Margin 26.6% 25.5%
Operating margins increased from 25.5% during the fourth quarter 2004 to 26.6%
in the fourth quarter 2005. The increase in margins from the prior-year period
was substantially the result of the aforementioned higher inmate populations at
a number of the Company's facilities. The Company discloses a complete listing
of occupancies by facility in its Supplemental Financial Information posted on
its website at www.correctionscorp.com.
Total revenue for the fourth quarter of 2005 increased 9.9% to $317.2 million
from $288.5 million during the fourth quarter of 2004, as total compensated
man-days increased 6.5% to 6.1 million from 5.7 million compensated man-days,
and as revenue per compensated man-day increased to $51.66 from $49.76, an
increase of 3.8%. In addition, average compensated occupancy for the fourth
quarter of 2005 increased to 93.1% from 92.9% in the fourth quarter of 2004. A
significant factor affecting occupancy percentage was an increase in the
previously reported design capacities of a number of facilities based on the
nature of the customer utilizing the facilities. These reconfigurations are
typically completed with minimal capital outlays. Excluding these changes in
design capacity, average compensated occupancy for the three months ended
December 31, 2005, would have been 95.2%.
Fixed expenses for the three months ended December 31, 2005, increased to $28.05
per compensated man-day compared with $27.57 per compensated man-day during the
same period in 2004, an increase of $0.48 per compensated man-day. The increase
in fixed expenses per compensated man-day was primarily the result of an
increase in salaries and benefits of $0.39 per compensated man-day, as well as
an increase in utilities of $0.24 per compensated man-day resulting from
increasing energy costs. The increase in salaries and benefits was driven by
annual pay increases, and the effects of increased staffing and overtime for the
new contract at the Company's Northeast Ohio facility, as well as for overtime
incurred to handle population increases at the Houston Processing Center, Lake
City Correctional Facility, and the Prairie Correctional Facility.
Variable expenses for the fourth quarter of 2005 increased to $9.87 per
compensated man-day compared with $9.52 per compensated man-day during the
fourth quarter of 2004, an increase of $0.35 per compensated man-day. The
increase in variable expenses per compensated man-day resulted primarily from an
increase in expenses related to legal proceedings in which the Company is
involved, partially offset by a reduction in inmate medical.
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REFINANCING SUMMARY
Subsequent to year-end, the Company refinanced its senior bank credit facility,
paying off the $139.0 million balance of the term portion of the facility with
the proceeds from the issuance of $150.0 million of 6.75% senior unsecured notes
due 2014, after paying-off the remaining $10.0 million balance of the revolving
portion of the facility with cash on hand. In connection with the refinancing,
the Company increased its borrowing capacity by obtaining a new $150.0 million
revolving credit facility which currently has no outstanding balance. The new
revolving credit facility is secured primarily by security interests in the
Company's accounts receivable and is not secured by liens on any of the
Company's real estate assets. The Company intends to use the new facility to
fund capital expenditures and for general corporate purposes. As a result of the
refinancing and repayments, the interest rates on all of the Company's
outstanding indebtedness are fixed, with a total weighted average interest rate
of 6.9%.
BUSINESS DEVELOPMENT UPDATE
On December 21, 2005, the Company announced that it had reached an agreement
with the United States Immigration and Customs Enforcement ("ICE") to manage up
to 600 detainees at the Company's T. Don Hutto Correctional Center in Taylor,
Texas. The Company currently expects to begin receiving ICE detainees in late
February 2006 and expects the facility will be substantially occupied before the
end of the second quarter of 2006.
On January 11, 2006, the Company announced that it received notification from
the Federal Bureau of Prisons ("BOP") of its intent not to exercise its renewal
option at the Company's 1,500-bed Eloy Detention Center in Eloy, Arizona. On
January 31, 2006, the Eloy facility housed approximately 300 inmates from the
BOP and approximately 850 detainees from ICE pursuant to a subcontract between
the BOP and ICE. The Company is currently in discussions with ICE about plans to
allow ICE to continue utilizing the Eloy facility for existing and potential
future requirements. However, the Company can provide no assurance that it will
ultimately reach an agreement to continue housing ICE detainees at the Eloy
facility.
In order to maintain an adequate supply of available beds to meet anticipated
demand, while offering the state of Hawaii the opportunity to consolidate its
inmates into fewer facilities, the Company recently commenced construction of
the new 1,896-bed Saguaro Correctional Facility, located adjacent to the
1,596-bed Red Rock Correctional Facility currently under construction in Eloy,
Arizona. The Saguaro facility is expected to cost approximately $100.1 million.
Construction of the Red Rock Correctional Facility is expected to be completed
late in the second or early third quarter of 2006, while construction of the
Saguaro Correctional Facility is expected to be completed during the second half
of 2007. The Company currently expects to relocate approximately 750 Alaskan
inmates from the Florence Correctional Center to the Red Rock Correctional
Facility, and to consolidate inmates from the state of Hawaii from several of
the Company's facilities to the Saguaro Correctional Facility. The Company
currently houses approximately 1,850 inmates from the state of Hawaii at several
of its correctional facilities.
Commenting on the Company's financial results, President and CEO John Ferguson
stated, "We are obviously pleased with the fourth quarter and full-year results
for 2005, a year that ultimately reflected the benefits of a number of
initiatives we have pursued for quite some time. With respect to revenues, we
benefited from our recent contract with the Federal Bureau of Prisons at
Northeast Ohio, as well as from higher inmate populations at a number of our
recently completed expansions including Houston, Leavenworth and Lake City. We
continued to strengthen our capital structure, as evidenced by the
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CCA 2005 Fourth Quarter Results
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refinancing completed in the first quarter of 2005, which significantly reduced
interest expense for the year. Finally, we continued to control operating costs,
experiencing an increase of less than 3% per man-day over 2004."
Ferguson continued, "Looking forward, we remain optimistic about prospects for
our remaining inventory of beds. As a result, we commenced construction of our
Red Rock facility in early 2005 and are now proceeding with our new Saguaro
facility. Despite the cancellation of its contract with us at our Eloy facility,
the Federal Bureau of Prisons has informed the private sector of a specific need
for several thousand beds over the next five years. We continue to pursue the
CAR 5 opportunity for 1,200 beds, which we expect will be awarded during the
first half of the year. In addition, the Bureau of Immigrations and Custom
Enforcement, under its Secure Border Initiative, should also require several
thousand additional beds in the near term, and we will consider the needs of
this agency as well as a number of other customers in making plans for
additional bed capacity."
GUIDANCE
The Company expects diluted earnings per share for the first quarter of 2006 to
be in the range of $0.47 to $0.50, and full year EPS to be in the range of $2.10
to $2.17, excluding $0.02 per diluted share, net of taxes, for expenses
associated with the aforementioned debt refinancing transactions completed in
the first quarter of 2006. This guidance includes expenses totaling $0.09 per
diluted share, net of taxes, for stock-based compensation, compared with $0.03
per diluted share, net of taxes, during 2005 for the amortization of restricted
stock.
During 2006, the Company expects to invest approximately $154.6 million in
capital expenditures, consisting of approximately $111.0 million in prison
construction and expansions, $28.1 million in maintenance capital expenditures
and $15.5 million in information technology.
SUPPLEMENTAL FINANCIAL INFORMATION AND INVESTOR PRESENTATIONS
The Company has made available on its website supplemental financial information
and other data for the fourth quarter and year ended December 31, 2005. The
Company does not undertake any obligation, and disclaims any duty, to update any
of the information disclosed in this report. Interested parties may access this
information through the Company's website at www.correctionscorp.com under
"Financial Information" of the Investor section.
The Company's management may meet with investors from time to time during the
first quarter of 2006. Written materials used in the investor presentations will
also be available on the Company's website beginning February 13, 2006.
Interested parties may access this information through the Company's website at
www.correctionscorp.com under "Webcasts" of the Investor section.
WEBCAST AND REPLAY INFORMATION
The Company will host a webcast conference call at 2:00 p.m. Central Time (3:00
p.m. Eastern Time) today to discuss its 2005 fourth quarter financial results.
To listen to this discussion, please access "Webcasts" on the Investor page at
www.correctionscorp.com. The conference call will be archived on the Company's
website following the completion of the call. In addition, a telephonic replay
will begin today at 5:00 p.m. Central Time through 11:59 p.m. Central Time on
February 16, 2006, by dialing 877-519-4471, pass code 6951068.
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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 three states. The
Company currently operates 63 facilities, including 39 company-owned facilities,
with a total design capacity of approximately 71,000 beds in 19 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 the Company's 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 and demand
for new prison facilities and the commencement of new management contracts;
(iii) the Company's ability to obtain and maintain correctional facility
management contracts, including as the result of sufficient governmental
appropriations and as the result of inmate disturbances; (iv) increases in costs
to construct or expand correctional facilities that exceed original estimates,
or the inability to complete such projects on schedule as a result of various
factors, many of which are beyond the Company's control, such as weather, labor
conditions and material shortages, resulting in increased construction costs;
and (v) 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 Securities and Exchange Commission.
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.
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CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31,
-----------------------
2005 2004
---------- ----------
ASSETS
Cash and cash equivalents $ 64,901 $ 50,938
Restricted cash 11,284 12,965
Investments 19,014 8,686
Accounts receivable, net of allowance of $2,258 and $1,380, respectively 176,560 154,288
Deferred tax assets 32,488 56,410
Prepaid expenses and other current assets 15,884 16,636
Current assets of discontinued operations -- 2,365
---------- ----------
Total current assets 320,131 302,288
Property and equipment, net 1,710,794 1,659,858
Investment in direct financing lease 16,322 17,073
Goodwill 15,246 15,563
Other assets 23,820 28,144
Non current assets of discontinued operations -- 152
---------- ----------
Total assets $2,086,313 $2,023,078
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 158,267 $ 144,815
Income taxes payable 1,435 22,207
Current portion of long-term debt 11,836 3,182
Current liabilities of discontinued operations 1,774 2,061
---------- ----------
Total current liabilities 173,312 172,265
Long-term debt, net of current portion 963,800 999,113
Deferred tax liabilities 12,087 14,132
Other liabilities 20,483 21,574
---------- ----------
Total liabilities 1,169,682 1,207,084
---------- ----------
Commitments and contingencies
Common stock - $0.01 par value; 80,000 shares authorized; 39,694
and 35,415 shares issued and outstanding at December 31, 2005 and
2004, respectively 397 354
Additional paid-in capital 1,506,184 1,451,885
Deferred compensation (5,563) (1,736)
Retained deficit (584,387) (634,509)
---------- ----------
Total stockholders' equity 916,631 815,994
---------- ----------
Total liabilities and stockholders' equity $2,086,313 $2,023,078
========== ==========
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CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE QUARTER FOR THE YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31,
------------------- -----------------------
2005 2004 2005 2004
-------- -------- ---------- ----------
REVENUE:
Management and other $316,161 $287,524 $1,188,649 $1,122,542
Rental 1,036 971 3,991 3,845
-------- -------- ---------- ----------
317,197 288,495 1,192,640 1,126,387
-------- -------- ---------- ----------
EXPENSES:
Operating 234,440 216,300 898,793 850,366
General and administrative 16,576 12,836 57,053 48,186
Depreciation and amortization 15,750 14,495 59,882 54,445
-------- -------- ---------- ----------
266,766 243,631 1,015,728 952,997
-------- -------- ---------- ----------
OPERATING INCOME 50,431 44,864 176,912 173,390
-------- -------- ---------- ----------
OTHER EXPENSES:
Interest expense, net 15,683 17,368 63,928 69,177
Expenses associated with debt refinancing and
recapitalization transactions -- -- 35,269 101
Other expenses 23 449 263 943
-------- -------- ---------- ----------
15,706 17,817 99,460 70,221
-------- -------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 34,725 27,047 77,452 103,169
Income tax expense (11,071) (12,102) (26,888) (41,514)
-------- -------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS 23,654 14,945 50,564 61,655
Income (loss) from discontinued operations, net of taxes (249) (18) (442) 888
-------- -------- ---------- ----------
NET INCOME 23,405 14,927 50,122 62,543
Distributions to preferred stockholders -- -- -- (1,462)
-------- -------- ---------- ----------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 23,405 $ 14,927 $ 50,122 $ 61,081
======== ======== ========== ==========
BASIC EARNINGS PER SHARE:
Income from continuing operations $ 0.60 $ 0.42 $ 1.31 $ 1.71
Income (loss) from discontinued operations, net of taxes (0.01) -- (0.01) 0.03
-------- -------- ---------- ----------
Net income available to common stockholders $ 0.59 $ 0.42 $ 1.30 $ 1.74
======== ======== ========== ==========
DILUTED EARNINGS PER SHARE:
Income from continuing operations $ 0.58 $ 0.38 $ 1.26 $ 1.53
Income (loss) from discontinued operations, net of taxes -- -- (0.01) 0.02
-------- -------- ---------- ----------
Net income available to common stockholders $ 0.58 $ 0.38 $ 1.25 $ 1.55
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CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CALCULATION OF ADJUSTED FREE CASH FLOW
FOR THE QUARTER FOR THE YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31,
------------------- -------------------
2005 2004 2005 2004
-------- -------- -------- --------
Pre-tax income available to common stockholders $ 34,476 $ 27,029 $ 77,010 $102,595
Expenses associated with debt refinancing and
recapitalization transactions -- -- 35,269 101
Income taxes paid (140) (170) (15,776) (3,511)
Depreciation and amortization 15,750 14,495 59,882 54,445
Depreciation and amortization for discontinued operations -- 16 186 129
Income tax (benefit) expense for discontinued operations (116) (14) (217) 542
Stock-based compensation reflected in G&A expenses 1,499 -- 2,673 --
Amortization of debt costs and other non-cash interest 1,307 1,530 5,341 6,750
Maintenance and technology capital expenditures (11,326) (12,770) (36,205) (48,423)
-------- -------- -------- --------
ADJUSTED FREE CASH FLOW $ 41,450 $ 30,116 $128,163 $112,628
======== ======== ======== ========
CALCULATION OF EBITDA AND ADJUSTED EBITDA
FOR THE QUARTER FOR THE YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31,
------------------ -------------------
2005 2004 2005 2004
------- ------- -------- --------
Net income $23,405 $14,927 $ 50,122 $ 62,543
Interest expense, net 15,683 17,368 63,928 69,177
Depreciation and amortization 15,750 14,495 59,882 54,445
Income tax expense 11,071 12,102 26,888 41,514
(Income) loss from discontinued operations, net of taxes 249 18 442 (888)
------- ------- -------- --------
EBITDA $66,158 $58,910 $201,262 $226,791
Stock option compensation expense associated with
accelerated vesting 989 -- 989 --
Expenses associated with debt refinancing and
recapitalization transactions -- -- 35,269 101
------- ------- -------- --------
ADJUSTED EBITDA $67,147 $58,910 $237,520 $226,892
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CALCULATION OF ADJUSTED DILUTED EARNINGS PER SHARE
FOR THE YEAR ENDED
DECEMBER 31, 2005
------------------
Net income available to common stockholders $ 50,122
Special items:
Expenses associated with debt refinancing and recapitalization
transactions 35,269
Stock option compensation expense associated with accelerated vesting 989
Income tax benefit for special items (12,587)
--------
Adjusted net income available to common stockholders 73,793
Interest expense applicable to convertible notes, net of taxes 129
--------
Diluted adjusted net income available to common stockholders $ 73,922
========
Weighted average common shares outstanding - basic 38,475
Effect of dilutive securities:
Stock options and warrants 1,149
Convertible notes 544
Restricted stock-based compensation 113
--------
Weighted average shares and assumed conversions - diluted 40,281
--------
ADJUSTED DILUTED EARNINGS PER SHARE $ 1.84
========
NOTE TO SUPPLEMENTAL FINANCIAL INFORMATION
Net income excluding special charges, EBITDA, Adjusted EBITDA and Adjusted free
cash flow are non-GAAP financial measures. The Company believes that these
measures 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, and Adjusted free cash flow) and the operating
performance of the Company's correctional facilities (EBITDA and Adjusted
EBITDA). EBITDA and Adjusted EBITDA are useful as supplemental measures of the
performance of the Company's correctional facilities because they do not take
into account depreciation and amortization, tax provisions, or with respect to
Adjusted EBITDA the impact of the Company's financing strategies. 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 GAAP net income, 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, such as the special
charges in the preceding calculation of earnings per diluted share excluding
special charges, even though such items may or may not require cash settlement,
because such items do not reflect a necessary component of the ongoing
operations of the Company. Other companies may calculate EBITDA, Adjusted EBITDA
and Adjusted free cash flow differently than the Company does, or adjust for
other items, and therefore comparability may be limited. EPS excluding special
charges, EBITDA, 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.
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