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: JUNE 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSACTION PERIOD FROM __________ TO __________. COMMISSION FILE NUMBER: 1-13560 --------- CORRECTIONS CORPORATION OF AMERICA - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) TENNESSEE 62-1156308 - ---------------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 10 BURTON HILLS BOULEVARD NASHVILLE, TENNESSEE 37215 - ---------------------------------------- ----------------------------------- (Address of principal executive offices) (Zip Code) (615) 263-3000 - -------------------------------------------------------------------------------- (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 ------ ------ 80,523,735 - -------------------------------------------------------------------------------- (Outstanding shares of the issuer's common stock as of August 1, 1998) 2 CORRECTIONS CORPORATION OF AMERICA FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 INDEX Page PART I. FINANCIAL INFORMATION: Number ------ Item 1. Financial Statements Consolidated Balance Sheets June 30, 1998 (Unaudited) and December 31, 1997 3 Consolidated Statements of Operations Three months ended June 30, 1998 and 1997 (Unaudited) 4 Consolidated Statements of Operations Six months ended June 30, 1998 and 1997 (Unaudited) 5 Consolidated Statements of Cash Flows Six months ended June 30, 1998 and 1997 (Unaudited) 6-7 Notes to Consolidated Financial Statements (Unaudited) 8-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-13 Item 3. Quantitative and Qualitative Disclosures About Market Risk 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 14 Item 2. Changes in Securities and Use of Proceeds 14 Item 3. Defaults Upon Senior Securities 14 Item 4. Submission of Matters to a Vote of Security Holders 14-15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 2 3 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands) June 30, December 31, 1998 1997 --------- --------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 133,455 $ 136,147 Accounts receivable, net of allowances 115,712 89,822 Prepaid expenses 7,374 4,868 Other 3,207 2,585 --------- --------- Total current assets 259,748 233,422 Property and equipment, net 432,785 266,493 Other long-term assets: Notes receivable 57,661 59,264 Investment in direct financing leases 76,024 90,184 Deferred tax assets 12,946 10,195 Other assets 56,437 38,382 --------- --------- $ 895,601 $ 697,940 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 63,737 $ 32,094 Accrued salaries and wages 11,699 9,778 Income taxes payable 3,875 14,128 Deferred tax liabilities 1,799 1,229 Other accrued expenses 25,157 20,361 Current portion of long-term debt 5,841 5,847 Current portion of deferred gain on real estate 13,223 13,223 --------- --------- Total current liabilities 125,331 96,660 Long-term debt, net of current portion 265,659 127,075 Deferred gain on real estate transactions 117,459 122,529 Other noncurrent liabilities -- 3,600 --------- --------- Total liabilities 508,449 349,864 --------- --------- Stockholders' equity: Preferred stock 376 380 Common stock 80,927 80,230 Additional paid-in capital 224,402 215,833 Retained earnings 99,670 92,475 Treasury stock, at cost (18,223) (40,842) --------- --------- Total stockholders' equity 387,152 348,076 --------- --------- $ 895,601 $ 697,940 ========= ========= The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 3 4 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data) Three months ended June 30 --------------------------- 1998 1997 --------- -------- Revenues $ 164,071 $107,024 Expenses: Operating 114,623 77,978 Lease 13,841 1,194 General and administrative 5,510 3,874 Depreciation and amortization 3,899 4,007 --------- -------- Total expenses 137,873 87,053 --------- -------- Operating income 26,198 19,971 Interest (income) expense, net (2,420) 854 --------- -------- Income before income taxes 28,618 19,117 Provision for income taxes 7,530 7,505 --------- -------- Net income $ 21,088 $ 11,612 ========= ======== Net income per common share: Basic $ .26 $ .15 ========= ======== Diluted $ .24 $ .13 ========= ======== Weighted average common shares outstanding: Basic 80,356 76,230 ========= ======== Diluted 90,064 90,211 ========= ======== The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 4 5 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data) Six months ended June 30 --------------------------- 1998 1997 --------- -------- Revenues $ 305,369 $198,862 Expenses: Operating 214,342 140,992 Lease 24,936 2,296 General and administrative 10,463 7,272 Depreciation and amortization 7,287 7,930 --------- -------- Total expenses 257,028 158,490 --------- -------- Operating income 48,341 40,372 Interest (income) expense, net (5,211) 1,352 --------- -------- Income before income taxes 53,552 39,020 Provision for income taxes 14,021 15,413 --------- -------- Net income $ 39,531 $ 23,607 ========= ======== Net income per common share: Basic $ .49 $ .31 ========= ======== Diluted $ .44 $ .27 ========= ======== Weighted average common shares outstanding: Basic 79,924 75,917 ========= ======== Diluted 90,252 89,937 ========= ======== The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 5 6 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six months ended June 30 ---------------------------- 1998 1997 --------- --------- Cash Flows from Operating Activities: Net income $ 39,531 $ 23,607 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,287 7,930 Deferred and other noncash income taxes 1,818 2,029 Other noncash items 243 183 Loss on disposal of assets 2 86 Equity in earnings of unconsolidated entities (544) (313) Recognized gain on real estate transactions (5,070) -- Changes in assets and liabilities, net of acquisition: Accounts receivable (24,253) 16,605 Prepaid expenses (2,367) (3,973) Other current assets (622) (1,334) Accounts payable 31,248 34,386 Income taxes payable (10,253) 11,220 Accrued expenses and other liabilities 1,705 8,789 --------- --------- Net cash provided by operating activities 38,725 99,215 --------- --------- Cash Flows from Investing Activities: Additions of property and equipment (189,225) (148,188) Decrease in restricted cash -- 2,851 Increase in other assets (12,414) (10,864) Acquisition of USCC subsidiaries, net of cash acquired (9,341) -- Investment in affiliates, net (157) -- Proceeds from disposals of assets 36,132 14 Increase in direct financing leases -- (55,850) Payments received on direct financing leases and notes receivable 2,627 1,133 --------- --------- Net cash used in investing activities (172,378) (210,904) --------- --------- Cash Flows from Financing Activities: Payments on long-term debt (22) (4,655) Proceeds from line of credit, net 140,000 119,500 Payment of debt issuance costs (2,925) (495) Proceeds from exercise of stock options and warrants 1,508 1,843 Purchase of treasury stock (7,600) -- --------- --------- Net cash provided by financing activities 130,961 116,193 --------- --------- Net increase (decrease) in cash (2,692) 4,504 CASH AND CASH EQUIVALENTS, beginning of period 136,147 4,832 --------- --------- CASH AND CASH EQUIVALENTS, end of period $ 133,455 $ 9,336 ========= ========= The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 6 7 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six months ended June 30 ------------------------- 1998 1997 -------- ------- Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest (net of amounts capitalized) $ 2,921 $ 3,102 ======== ======= Income taxes $ 22,231 $ 1,492 ======== ======= Supplemental Schedule of Noncash Investing and Financing Activities: The Company acquired treasury stock and issued common stock through the exercise of stock options: Common stock $ 398 $ 494 Additional paid-in capital 3,331 2,736 Retained earnings (114) (829) Treasury stock, at cost (3,615) (2,401) -------- ------- $ -- $ -- ======== ======= Long term debt was converted into common stock: Other assets $ 5 $ 15 Long-term debt (1,400) (900) Common stock 51 531 Additional paid-in capital 32 354 Retained earnings (31,500) -- Treasury stock 32,812 -- -------- ------- $ -- $ -- ======== ======= The Company converted a facility from investment in direct financing lease to property and equipment by acquiring the equity in the facility from the leasing entity: Accounts receivable $ 3,500 Property and equipment (16,207) $ -- Investment in direct financing leases 12,707 -- -------- ------- $ -- $ -- ======== ======= 7 8 CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheets as of June 30, 1998 and December 31, 1997, the consolidated statements of operations for the quarters ended June 30, 1998 and 1997, and the consolidated statements of operations and cash flows for the six month periods ended June 30, 1998 and 1997, have been prepared by the Company in accordance with the accounting policies described in its 1997 Annual Report on Form 10-K 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 position, results of operations and changes in cash flows at June 30, 1998 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 periods ended June 30, 1998, are not necessarily indicative of the operating results for the full year. 2. ACQUISITIONS In April 1998, the Company acquired all of the outstanding capital stock of eight subsidiaries of U.S. Corrections Corporation ("USCC") (the "USCC Acquisition") for approximately $10,000,000, less cash acquired. By virtue of the USCC Acquisition, the Company acquired contracts to manage four currently operating facilities in Kentucky, each of which is owned by CCA Prison Realty Trust ("Prison Realty"), as well as one each in Florida and Texas, each of which is owned by governmental entities of Florida and Texas, respectively. The Company, or one of its affiliates, currently leases the four Kentucky facilities from Prison Realty, or one of its affiliates, pursuant to the terms of that certain Master Agreement to Lease dated July 1997, between the Company and Prison Realty (the "Master Lease"). The Company also acquired by virtue of the USCC Acquisition the right to enter into contracts to manage two facilities currently under construction that are located in North Carolina and owned by Prison Realty. The Company expects to lease these two facilities from Prison Realty pursuant to the terms and conditions of the Master Lease. The total number of beds currently operating or under construction under all of the aforementioned management contracts equals 5,743. In April 1998, the Company acquired a 376-bed correctional facility from a governmental entity for $18,389,000 and assumed management of the facility. In May 1998, in consideration for relinquishing its right to purchase a facility, the Company agreed to pay a governmental agency $3,500,000. As a result, the Company converted the facility from a direct financing lease to property and equipment. In lieu of a cash payment, the entity agreed to utilize a credit for management revenue billings beginning in July 1998 until the credit is exhausted. 8 9 3. LONG-TERM DEBT The Company increased its revolving credit facility to $350,000,000 in June 1998. The facility matures in September 1999 and bears interest, at the election of the Company, at either the bank's prime rate or a rate which is 1.25% above the applicable 30, 60, or 90 day LIBOR rate. As of June 30, 1998, there was $210,000,000 borrowed under this facility. Letters of credit totaling $3,400,000 had been issued leaving the total unused commitment at $136,600,000. 4. MERGER In April 1998, the Company signed a definitive agreement to merge with Prison Realty in a transaction that will give the shareholders of the Company the right to receive 0.875 Prison Realty common shares for every share of Company common stock. Prison Realty will operate as a real estate investment trust and the merger is expected to be consummated on or about January 1, 1999, subject to customary conditions, including approvals by certain regulatory agencies and the shareholders of both companies. 5. EARNINGS PER SHARE The Company adopted the provisions of SFAS 128, "Earnings Per Share" effective December 31, 1997. Under the standards established by SFAS 128, earnings per share is measured at two levels: basic earnings per share and diluted earnings per share. Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares after considering the additional dilution related to convertible preferred stock, convertible subordinated notes, options and warrants. All earnings per share amounts presented herein have been restated to reflect the adoption of SFAS No. 128. In computing diluted earnings per common share, the Company's stock warrants and stock options are considered dilutive using the treasury stock method, and the Series B convertible preferred stock and the 8.5% convertible subordinated notes are considered dilutive using the if-converted method. The following table presents information necessary to calculate diluted earnings per share for the second quarter and six months ended June 30: Three months ended June 30 ----------------------- 1998 1997 ------- ------- Net Income $21,088 $11,612 Interest expense applicable to convertible subordinated notes, net of tax 147 173 ------- ------- Adjusted net income $21,235 $11,785 ======= ======= Weighted average common shares outstanding 80,356 76,230 Effect of dilutive options and warrants 4,543 8,264 Conversion of preferred stock 730 -- Conversion of convertible subordinated notes 4,435 5,717 ------- ------- Adjusted diluted common shares outstanding 90,064 90,211 ------- ------- Diluted earnings per share $ .24 $ .13 ======= ======= 9 10 Six months ended June 30 ----------------------- 1998 1997 ------- ------- Net Income $39,531 $23,607 Interest expense applicable to convertible subordinated notes, net of tax 307 351 ------- ------- Adjusted net income $39,838 $23,958 ======= ======= Weighted average common shares outstanding 79,924 75,917 Effect of dilutive options and warrants 4,828 8,303 Conversion of preferred stock 732 -- Conversion of convertible subordinated notes 4,768 5,717 ------- ------- Adjusted diluted common shares outstanding 90,252 89,937 ------- ------- Diluted earnings per share $ .44 $ .27 ======= ======= 6. NEW PRONOUNCEMENT In April 1998, the AICPA issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities", effective for fiscal years beginning after December 15, 1998. SOP 98-5 requires the costs of start-up activities to be expensed as incurred. In accordance with the provisions of SOP 98-5, the Company will adopt the new accounting method as of January 1, 1999 by recording a cumulative effect of a change in accounting principle. As of June 30, 1998, the Company's deferred start-up costs totaled $23,258,000. 7. COMPREHENSIVE INCOME In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income", effective for fiscal years beginning after December 15, 1997. SFAS No.130 requires that changes in the amounts of certain items, including gains and losses on certain securities, be shown in the financial statements. The Company adopted the provisions of SFAS No. 130 on January 1, 1998. The Company's comprehensive income is substantially equivalent to net income for the quarters ended and six months ended June 30, 1998 and 1997. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. Management's Discussion and Analysis of Financial Condition and Results of Operations includes certain forward-looking statements about the Company's business, revenues, prospects, expenditures and operating and capital requirements. In addition, forward-looking statements may be included in various other Company documents to be issued in the future and in various oral statements by Company representatives to securities analysts and potential investors from time to time. Any such statements are subject to risks that could cause the actual results to vary materially. The risks and uncertainties associated with the forward-looking information include the strength of the markets in which the Company operates, competitive market conditions, general economic growth, interest rates and capital market conditions. Reference is hereby made to the more detailed discussion of such risks in the Company's Annual Report on Form 10-K. 10 11 RESULTS OF OPERATIONS REVENUES AND OPERATING EXPENSES Revenues for the second quarter and first half of 1998 increased 53% and 54%, respectively, over the comparable periods of 1997. Management revenues increased $56,447,000 and $105,368,000 for the second quarter and first half of 1998, respectively, as compared to the same periods of 1997. The increase in management revenues was due to compensated mandays increasing by 56% and 54%, respectively, over the comparable periods of 1997. In April 1998, the Company acquired all of the issued and outstanding capital stock of eight corporate subsidiaries of USCC. By virtue of the USCC Acquisition, the Company acquired contracts to manage four currently operating facilities in Kentucky, each of which is owned by Prison Realty, as well as one facility in Florida and one in Texas, each of which is owned by governmental entities of Florida and Texas respectively. The USCC Acquisition resulted in a total of 3,181 beds brought on line in the second quarter of 1998. The Company also acquired a 376-bed facility from a governmental entity, expanded three existing facilities totaling 635 beds and opened a 1,440-bed facility for a cumulative total of 5,632 new beds added during the second quarter of 1998. These beds were in addition to the 2,381 beds brought on line in the first quarter of 1998 and resulted in the Company cumulatively adding 8,013 beds during the first half of 1998. Transportation revenues increased $600,000 and $1,140,000, respectively, for the second quarter and first quarter of 1998 over the same relative time periods of 1997. These increases were a result of continued expansion of the customer base and increased utilization of three hubs opened in 1997. Operating expenses for the second quarter and first half of 1998 increased 47% and 52%, respectively, over the comparable periods of 1997. This increase was due to the increased compensated mandays and compensated mileage that the Company realized in the second quarter and first half of 1998 as previously mentioned. While operating costs increased in volume, management operating costs per compensated manday decreased to $29.46 for the second quarter of 1998 as compared to $30.51 for the second quarter of 1997. The cost per compensated mandays has decreased due to the continued focus on cost containment and economies of scale realized with the opening of larger facilities and expansions of existing facilities. General and administrative expenses for the second quarter and first half of 1998 increased 42% and 44%, respectively, over the comparable periods of 1997. However, as a percentage of revenues, general and administrative expenses declined to 3.4% for the second quarter and first half of 1998 as compared to 3.6% and 3.7% for the comparable periods of 1997. As the Company continues to grow, general and administrative expenses should increase in volume but continue to decrease as a percentage of revenues. Depreciation and amortization for the second quarter and first half of 1998 declined 3% and 8%, respectively, over the comparable periods of 1997. The decrease is primarily due to the sale of 13 facilities to Prison Realty in 1997 and 1998. Lease expense increased significantly in the second quarter and first half of 1998 as a result of the lease agreements that the Company entered into with Prison Realty in 1997 and 1998. As of June 30, 1998, the Company had entered into lease agreements with Prison Realty on 17 facilities, including the four USCC facilities. OTHER EXPENSES Interest expense, net, for the second quarter and first six months of 1998 was actually interest income of $2,420,000 and $5,211,000, respectively, as compared to interest expense of $854,000 and $1,352,000 in the comparable periods of 1997. This change to interest income was primarily the result of the sale of facilities to Prison Realty which allowed the Company to benefit from interest earnings on its increased cash balances. 11 12 INCOME TAXES The Company's effective tax rate decreased to approximately 26% in the second quarter and first half of 1998. The decrease is due to the recognition of certain tax benefits realized in 1997 and 1998. The Company is recognizing these benefits over the next four years which should result in maintaining a consistent effective tax rate. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The Company's business is capital intensive in relation to the development of a correctional facility. 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. 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, by assisting governmental agencies in the issuance of municipal bonds and most recently through the sale and leaseback of certain correctional facilities to Prison Realty. Cash flow from operations, calculated on an EBITDA basis, for the first six months of 1998 was $55,628,000 as compared to $48,302,000 in the comparable period of 1997. The Company has strengthened its cash flow through its expanded business, additional focus on larger, more profitable facilities, the expansion of existing facilities where economies of scale can be realized, and the continuing effort of cost containment. In June 1998, the Company increased its revolving credit facility with a group of banks to $350,000,000. This facility matures in September 1999 and is used for general corporate purposes and the issuance of letters of credit. The credit facility bears interest, at the election of the Company, at either the bank's prime rate or a rate which is 1.25% above the applicable 30, 60, or 90 day LIBOR rate. Interest is payable quarterly with respect to prime rate loans and at the expiration of the applicable LIBOR period with respect to LIBOR based loans. There are no prepayment penalties associated with the credit facility. The credit facility requires the Company, among other things, to maintain certain net worth, leverage and debt service coverage ratios. The facility also limits certain payments and distributions. As of June 30, 1998, there was $210,000,000 borrowed under this facility. Letters of credit totaling $3,400,000 had been issued leaving the total unused commitment at $136,600,000. The Company also has a $2,500,000 credit facility with a bank that provides for the issuance of letters of credit and matures in September 1999. As of June 30, 1998 there were $1,595,000 in letters of credit issued, leaving the unused commitment at $905,000. The Company anticipates making cash investments in connection with future acquisitions and expansions. In addition, in accordance with the developing trend of private prison managers making strategic financial investments in facilities, the Company plans to use a portion of its cash to finance start-up costs, leasehold improvements and equity investments in facilities, if appropriate in connection with undertaking new contracts. The Company believes that the cash flow from operations, the availability of future capital from Prison Realty and amounts available under its credit facility will be sufficient to meet its capital requirements for the foreseeable future. Furthermore, management believes that additional resources may be available to the Company through a variety of other financing methods. YEAR 2000 COMPLIANCE In 1997, the Company made significant improvements to its computer systems, software and applications. Although the company believes that its software applications and programs are "year 2000 compliant", there can be no assurance that coding errors or other defects will not be discovered in the future. Also, the company has not initiated formal communications with 12 13 any of the entities that contract with it to determine the extent to which the Company is vulnerable to those third parties failure to remediate their own year 2000 issues. Any year 2000 compliance problem of the Company or other third parties could result in a material adverse effect on the Company's business, prospects, results of operations and financial condition. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 13 14 PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS In April, 1998, the Company became subject to seven lawsuits brought by various shareholders of the Company and relating to the proposed merger of the Company with and into Prison Realty. All of the lawsuits were filed in Chancery Court for Davidson County in Nashville, Tennessee. The lawsuits have since been consolidated into a single lawsuit in Chancery Court for Davidson County in Nashville, Tennessee. The lawsuit names the Company and its directors as defendants. The plaintiff in the action represents a putative class of all public holders of the Company's common stock. The consolidated complaint alleges, among other things, that the directors of the Company breached their fiduciary duties to the Company and/or the Company's public shareholders by approving the merger. The complaint seeks, among other things, preliminary and permanent injunctive relief prohibiting consummation of the merger as presently proposed and directing the Company or the individual defendants to adopt a procedure or process, such as an auction, to obtain the highest possible price for the Company. The complaints also seek unspecified damages, attorney's fees and other relief. The Company is contesting this action vigorously. Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. Item 3. DEFAULT UPON SENIOR SECURITIES None. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of shareholders of the Company was held on May 12, 1998. A total of 69,648,000 shares of the Company's common stock, constituting a quorum of those shares entitled to vote, were represented at the meeting by shareholders either present in person or by proxy. At such meeting the following seven (7) nominees for election as directors of the Company were elected without opposition, with no nominee for director receiving less that 67,858,000 votes, or 97% of the shares represented at the meeting: Samuel W. Bartholomew, Jr., Thomas W. Beasley, Lucius E. Burch, III, Doctor R. Crants, Jean-Pierre Cuny, Joseph F. Johnson, Jr., and R. Clayton McWhorter. The shareholders also approved and/or ratified the following proposals presented to them pursuant to the vote totals indicated next to each item: 14 15 PROPOSAL VOTE (# OF SHARES) FOR AGAINST ABSTAINED --- ------- --------- Approval of Company's Non-Employee Directors Compensation Plan (the "Plan") whereby the Non-Employee Directors' of the Company may elect to receive the cash compensation they are entitled to as an annual retainer for serving as a director of the Company in the form of shares of the Company's common stock. 64,429,000 5,072,000 147,000 Ratification of the grant of an option to purchase 80,000 shares of the Company's common stock to Joseph F. Johnson, Jr., a director of the Company. 54,713,000 14,694,000 240,000 Ratification of the action of the Board of Directors in selecting the firm of Arthur Andersen LLP to be the independent auditors of the Company for the fiscal year ending December 31, 1998. 69,508,000 77,000 64,000 Item 5. OTHER INFORMATION None. Item 6. EXHIBITS AND CURRENT REPORTS ON FORM 8-K a) Exhibits. 2.1 Agreement and Plan of Merger, dated as of April 18, 1998, by and between Corrections Corporation of America, and CCA Prison Realty Trust (previously filed as Exhibit 2.1 to the Company's Report on Form 8-K filed April 22, 1998 and incorporated herein by reference). 10.1 Amended and Restated Credit Agreement dated June 24, 1998 by and among Corrections Corporation of America as Borrower, certain subsidiaries of Borrower, certain Lenders, First Union National Bank, as the Administrative Agent for the Lenders, Canadian Imperial Bank of Commerce, as Documentation Agent, and NationsBank, N.A. as Syndication Agent. 10.2 Corrections Corporation of America Non-Employee Director's Compensation Plan (filed as Appendix A to the Company's definitive Proxy Statement filed March 31, 1998 relating to its 1998 Annual Meeting of Shareholders and incorporated herein by reference). 27 Financial Data Schedule (for SEC use only). 27.1 Restated Financial Data Schedule for the quarter ended June 30, 1997 (for SEC use only). b) Current Reports on Form 8-K Report on Form 8-K filed April 22, 1998 relating to the merger of Corrections Corporation of America with and into CCA Prison Realty Trust and the acquisition of all of the issued and outstanding capital stock of eight corporate subsidiaries of U.S. Corrections Corporation. 15 16 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) August 14, 1998 /s/ Darrell K. Massengale - ----------------------- ----------------------------------------- (Date) Darrell K. Massengale Chief Financial Officer Secretary, Principal Accounting Officer 16