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: MARCH 31, 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: 0-15719
-------
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
--- ---
14,707,965
- - -----------------------------------------------------------------------------
(Outstanding shares of the issuer's common stock as of May 1, 1995.)
THERE IS NO EXHIBIT INDEX
Total number of sequentially numbered pages is 10.
2
CORRECTIONS CORPORATION OF AMERICA
INDEX
Page
PART I. FINANCIAL INFORMATION: Number
------
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1995 (Unaudited) and December 31, 1994 3
Consolidated Statements of Operations
Three months ended March 31, 1995 and 1994
(Unaudited) 4
Consolidated Statements of Cash Flows
Three months ended March 31, 1995 and 1994
(Unaudited) 5-6
Notes to Consolidated Financial Statements
(Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Default Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
2
3
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31,
1995 1994
----------- ------------
ASSETS (Unaudited)
------
Current assets:
Cash, cash equivalents and restricted cash $ 7,335 $ 4,126
Accounts receivable, less allowance for doubtful accounts of 24,811 22,922
$61 in 1995 and $181 in 1994
Prepaid expenses 784 1,026
Deferred taxes 2,522 3,132
Other 982 775
--------- ---------
Total current assets 36,434 31,981
Restricted investments 69 69
Other assets 9,856 9,430
Property and equipment, net 79,158 78,402
Investment in direct financing lease 10,032 10,118
--------- ---------
$ 135,549 $ 130,000
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 4,384 $ 6,217
Accrued salaries and wages 1,448 1,785
Accrued property taxes 707 1,335
Other accrued expenses 5,584 4,699
Current portion of long-term debt 5,730 3,853
--------- ---------
Total current liabilities 17,853 17,889
Long-term debt, net of current portion 43,978 46,492
Deferred taxes 3,682 3,627
Other long-term liabilities 2,722 3,670
--------- ---------
Total liabilities 68,235 71,678
--------- ---------
Stockholders' equity:
Common stock 13,295 12,800
Additional paid-in capital 50,949 44,138
Retained earnings 3,736 1,692
Treasury stock, at cost (666) (308)
--------- ---------
Total stockholders' equity 67,314 58,322
--------- ---------
$ 135,549 $ 130,000
========= =========
3
4
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
Three months ended
March 31
------------------------
1995 1994
----------- -----------
Revenues $ 34,606 $ 27,404
Expenses:
Operating 25,447 21,793
Depreciation and amortization 1,068 1,035
----------- -----------
26,515 22,828
----------- -----------
Contribution from operations 8,091 4,576
Other expenses:
General and administrative 2,872 2,116
Interest, net 808 911
----------- -----------
3,680 3,027
----------- -----------
Income before income taxes 4,411 1,549
Income taxes 1,737 168
----------- -----------
Net income 2,674 1,381
Preferred stock dividends - 106
----------- -----------
Net income allocable to common stockholders $ 2,674 $ 1,275
=========== ===========
Net income per share:
Primary $ 0.17 $ 0.10
=========== ===========
Fully diluted $ 0.17 $ 0.10
=========== ===========
Weighted average shares outstanding:
Primary 15,618 12,475
=========== ===========
Fully diluted 16,115 12,762
=========== ===========
4
5
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three months ended
March 31
-----------------------
1995 1994
----------- ----------
Cash Flows from Operating Activities:
Net income $ 2,674 $ 1,381
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,303 1,285
Deferred income taxes 975 -
Loss (gain) on disposal of property and equipment (12) 6
Changes in assets and liabilities:
Accounts receivable (1,880) (232)
Prepaid expenses 241 167
Other current assets (207) (78)
Accounts payable (1,833) 556
Accrued expenses (80) 477
----------- ----------
Net cash provided by operating activities 1,181 3,562
----------- ----------
Cash Flows from Investing Activities:
Increase in restricted and escrow cash (118) (123)
Increase in other assets (956) (570)
Acquisition of property and equipment (1,623) (1,461)
Proceeds from disposals of property and equipment 21 -
Payments received on direct financing leases 77 69
----------- ----------
Net cash used in investing activities (2,599) (2,085)
----------- ----------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt 7,519 350
Payments on long-term debt (1,456) (1,511)
Payments of short-term obligations refinanced by long-term (700) -
debt
Payment of international placement fees (248) -
Payments of dividends on preferred stock - (106)
Proceeds from exercise of stock options 24 51
Repurchase of stock warrants (630) -
----------- ----------
Net cash provided by (used in) financing activities 4,509 (1,216)
----------- ----------
Net increase in cash 3,091 261
CASH AND CASH EQUIVALENTS, beginining of period 3,802 5,992
----------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 6,893 $ 6,253
=========== ==========
5
6
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three months ended
March 31
--------------------------
1995 1994
-------------- --------------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 475 $ 715
============== ==============
Income taxes $ 657 $ 39
============== ==============
Supplemental Schedule of Noncash Investing and Financing
Activities:
The Company acuired treasury stock and issued common
stock through the exercise of stock options:
Common stock $ (49) $ (20)
Additional paid-in capital (310) (75)
Retained earnings (deficit) - 9
Treasury stock, at cost 359 86
-------------- --------------
$ - $ -
============== ==============
Long term debt was converted into common stock:
Other assets $ (86) $ -
Long-term debt 6,700 -
Common Stock (444) -
Additional paid-in capital (6,170) -
-------------- --------------
$ - $ -
============== ==============
6
7
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of March 31, 1995, and the
consolidated statements of operations and cash flows for the three
month periods ended March 31, 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 March 31, 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 March 31, 1995, are not necessarily
indicative of the operating results for the full year.
2. 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.
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 first quarter of 1995 increased 26% over the
comparable period of 1994. Management revenues increased $6,855,000
and transportation revenues increased $347,000 in the first three
months of 1995 as compared to the same period in 1994. The increase
in management revenues was due to average occupancy increasing 3.5%
along with compensated mandays increasing by 25%. The Company opened
the Central Arizona Detention Facility in Florence, Arizona, in the
fourth quarter of 1994 and also realized the full period effect of
1994 expansions to existing facilities. The 19% increase in
transportation revenues was due to a marketing effort resulting in an
expanded customer base and therefore increased compensated mileage.
Operating expenses for the first quarter of 1995 increased 17% over
the comparable quarter in 1994. This increase was due to the
increased compensated mandays and compensated mileage that the Company
realized in 1995 as previously mentioned.
Depreciation and amortization remained relatively flat with only a 3%
increase in the first quarter of 1995 as compared to the first quarter
of 1994. While increasing in dollar amount depreciation and
amortization actually decreased as a percentage of revenue. This is a
result of
7
8
the trend in new contracts moving towards the government financing and
owning the fixed assets while contracting out the operations with the
private sector.
OTHER EXPENSES
General and administrative expenses increased 36% for the first
quarter of 1995 as compared to the comparable quarter of 1994. The
increased expenses were incurred in order to manage the new beds
being brought on line in 1995 and 1996. The Company is in the process
of bringing 6,210 beds on line over the next eighteen months. As
these facilities open then general and administrative cost will again
decrease as a percentage of revenues.
Interest expense, net, decreased 11% from the first quarter of 1994 to
the first quarter of 1995. This is due to the Company making
regularly scheduled debt payments, the reduction of $9,800,000 of debt
in June 1994, with proceeds from an equity issuance and the conversion
of $6,700,000 convertible subordinated notes in March 1995.
Income taxes increased from $167,000 in the first quarter of 1994 to
$1,737,000 in the first quarter of 1995. This increase is due to the
Company's complete utilization of net operating loss carryforwards and
therefore being subject to the full statutory tax rates.
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 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.
The Company has a working capital revolving credit facility with a
bank which provides for borrowings of up to $15,000,000. The facility
requires interest payments to be made monthly and bears interest, at
the election of the Company, of either the Bank's prime rate or LIBOR
plus 2%, 9.0% and 8.13%, respectively at March 31, 1995. The facility
consists of a working capital line, which includes letters of credit.
As of March 31, 1995, There were no amounts borrowed against the
facility but $7,361,000 of letters of credit had been issued leaving
the unused commitment at $7,639,000.
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.
8
9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
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 January 12, 1995,
reporting the acquisition of TransCor America, Inc.,
was filed during the quarter for which this quarterly
report is filed.
9
10
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
May 9 , 1995 /s/ Darrell K. Massengale
- - --------------------------------------- ----------------------------
Date Darrell K. Massengale
Chief Financial Officer
Secretary, Treasurer
Principal Accounting Officer
10