UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 1-16152
CORNELL CORRECTIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 76-0433642
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
4801 Woodway
Suite 400W
Houston, Tx 77056-1805
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(713) 623-0790
---------------------------------------------------
(Registrants telephone number, including area code)
Indicate by a check mark whether Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ ] No [X]
At October 31, 1996 Registrant had outstanding 6,765,398 shares of its Common
Stock.
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CORNELL CORRECTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
($ IN THOUSANDS)
DECEMBER 31, SEPTEMBER 30,
1995 1996
-------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ..................... $ 390 $ 363
Accounts receivable, net ...................... 3,436 6,283
Current portion of amount receivable
from the California Department
of Corrections ........................ 216 178
Deferred tax asset ............................ 27 27
Restricted assets ............................. 284 1,022
Prepaid and other ............................. 187 653
-------- --------
Total current assets ...................... 4,540 8,526
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $430 and $960,
respectively .................................. 1,909 25,846
OTHER ASSETS:
Contract value, net ........................... 206 --
Goodwill, net ................................. 6,204 5,949
Amount receivable from the California
Department of Corrections, noncurrent ... 519 407
Deferred tax asset, noncurrent ................ 409 409
Deferred costs and other ...................... 397 1,284
-------- --------
Total assets .............................. $ 14,184 $ 42,421
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities ...... $ 2,991 $ 4,370
Current portion of long-term debt ............. 24 24
-------- --------
Total current liabilities ................ 3,015 4,394
LONG-TERM DEBT, net of current portion ............. 7,625 35,180
OTHER LONG-TERM LIABILITIES ........................ 491 618
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A common stock, $.01 par value,
9,000,000 shares authorized, 3,189,385
and 3,226,792 shares issued and
outstanding, respectively ................ 32 32
Class B common stock, $.01 par value,
1,000,000 shares authorized, none
and 277,441 shares issued and
outstanding, respectively ................ -- 3
Additional paid-in capital .................... 6,955 9,282
Retained deficit .............................. (1,331) (4,281)
Notes receivable from shareholders ............ -- (455)
Treasury stock (555,000 shares of
Class A common stock, at cost) ........... (2,603) (2,352)
-------- --------
Total stockholders' equity ............... 3,053 2,229
-------- --------
Total liabilities and stockholders'
equity .............................. $ 14,184 $ 42,421
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
CORNELL CORRECTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1995 1996 1995 1996
-------- -------- -------- --------
REVENUES:
Occupancy fees ............. $ 5,298 $ 10,552 $ 15,402 $ 21,519
Other income ............... 7 56 10 426
-------- -------- -------- --------
5,305 10,608 15,412 21,945
OPERATING EXPENSES .......... 4,184 8,537 12,214 17,998
DEPRECIATION AND AMORTIZATION 228 425 595 935
GENERAL AND ADMINISTRATIVE
EXPENSES ............... 842 1,759 2,393 3,388
-------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS 51 (113) 210 (376)
INTEREST EXPENSE ............ 149 2,163 418 2,661
INTEREST INCOME ............. (22) (36) (92) (87)
-------- -------- -------- --------
LOSS BEFORE PROVISION FOR
INCOME TAXES ........... (76) (2,240) (116) (2,950)
PROVISION FOR INCOME TAXES .. -- -- -- --
-------- -------- -------- --------
NET LOSS .................... $ (76) $ (2,240) $ (116) $ (2,950)
======== ======== ======== ========
LOSS PER SHARE .............. $ (.02) $ (.63) $ (0.03) $ (.87)
======== ======== ======== ========
NUMBER OF SHARES USED IN PER
SHARE CALCULATION ...... 4,076 3,574 4,075 3,383
======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
CORNELL CORRECTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
NINE MONTHS
ENDED SEPTEMBER 30,
---------------------
1995 1996
------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................... $ (116) $ (2,950)
Adjustments to reconcile net loss to net cash used in
operating activities -
Depreciation ........................................ 101 311
Amortization ........................................ 494 624
Non-cash stock-based compensation and financing
charges ......................................... -- 1,596
Change in assets and liabilities, net of effects from
acquisitions of businesses:
Accounts receivable ......................... (789) 29
Restricted assets ........................... 33 (131)
Other assets ................................ 3 (598)
Accounts payable and accrued liabilities .... (537) (279)
------- --------
Net cash used in operating activities ............... (811) (1,398)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................... (309) (687)
Acquisition of businesses, less cash acquired .......... -- (25,174)
------- --------
Net cash used in investing activities ............... (309) (25,861)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ........................... 4,500 30,856
Payments on long-term debt ............................. (3,447) (3,301)
Issuance of common stock ............................... -- 279
Direct costs related to issuance of common stock ....... -- (602)
------- --------
Net cash provided by financing activities ........... 1,053 27,232
------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS ............... (67) (27)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD ............................................. 928 390
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .............. $ 861 $ 363
======= ========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid during the period ............... $ 242 $ 970
======= ========
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
CORNELL CORRECTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all adjustments and disclosures
necessary to a fair presentation of these financial statements have been
included. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's registration
statement on Form S-1 (Registration No. 333-08243) declared effective by the
Securities and Exchange Commission on October 1, 1996.
NOTE 2. ACQUISITIONS
In May 1996, the Company acquired a 310-bed facility located in Houston,
Texas ("Reid Center"), previously operated by Texas Alcoholism Foundation, Inc.
In July 1996, the Company completed the acquisition of substantially all the
assets of MidTex Detentions, Inc. ("MidTex"), a private correctional center
operator for the Federal Bureau of Prisons, operating three facilities in
Central Texas with a capacity of 1,305 beds (collectively the "Big Spring
Correctional Center" or "BSCC".) Total consideration for these acquisitions was
approximately $25.7 million. The acquisitions were financed primarily through
borrowings under the Company's credit facilities and a short-term convertible
note dated July 3, 1996 (the "Convertible Bridge Note".) In connection with the
MidTex acquisition, the Company entered into various agreements for the use of
the facilities for approximately the next 35 years for a payment of $216,000
(annual payment in lieu of property taxes) per year.
The acquisition costs and the estimated fair market value of the assets
acquired and liabilities assumed associated with the above-mentioned
acquisitions are as follows (in thousands):
MIDTEX REID CENTER
-------- -------
Cash Paid ......................................... $ 23,200 $ 1,986
Transaction costs ................................. 470 90
-------- -------
Total purchase price ............... $ 23,670 $ 2,076
======== =======
Net assets acquired -
Cash ....................................... $ 486 $ --
Receivables, net ........................... 2,726 --
Other current assets ....................... 755 --
Property and equipment, net:
Prepaid facility use ................. 21,710 --
Other ................................ 10 2,090
Other assets ...................................... 5 --
Accounts payable and accrued liabilities .......... (2,022) (14)
-------- -------
$ 23,670 $ 2,076
======== =======
The carrying value of the prepaid facility use relates to the right to use
the three detention facilities retained by the City of Big Spring for 19, 20,
and 23 years, respectively, plus three five-year extensions. Extensions of the
lease agreement are at the option of the Company. The costs will be amortized
over the respective periods, including the option periods. The Company currently
intends to exercise these extensions.
Both the Reid Center and MidTex acquisitions have been accounted for as
purchases; therefore, the accompanying statements of operations reflect the
results of operations since their respective acquisition dates.
The unaudited consolidated results of operations on a pro forma basis as
though the Reid Center and MidTex had been acquired as of the beginning of the
Company's fiscal years 1995 and 1996 are as follows (amounts in thousands,
except per share data):
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1995 1996
--------- ----------
Total revenues .......... $27,688 $ 31,679
Net income (loss) ....... $ 326 $ (2,601)
Earnings (loss) per share $ .08 $ (.77)
NOTE 3. INITIAL PUBLIC OFFERING
On October 3, 1996, the Company completed an initial public offering
("IPO") of its common stock. Net proceeds to the Company from the sale of the
3,523,103 shares of common stock were approximately $38.6 million. On October 8,
1996, the Company repaid a total of $33.9 million of borrowings, $27.9 million
of which was borrowed under a credit agreement dated July 3, 1996 (the "1996
Credit Facility") and $6.0 million of which was borrowed under the Convertible
Bridge Note.
As a result of the repayments of the term loan facility and the stock
repurchase loan facility under the 1996 Credit Facility, such facilities were
canceled. The revolving credit facility of $2.5 million and the multiple-advance
term loan facility of $6.9 million are still available to the Company under the
terms of the 1996 Credit Facility.
NOTE 4. NON-RECURRING CHARGES
In connection with the 1996 Credit Facility, the Company incurred expenses,
issued certain options and warrants, and sold shares of common stock, for which
the Company recognized total deferred financing costs of $1.3 million, of which
$726,000 was noncash, to be amortized over the life of the 1996 Credit Facility.
Since the use of proceeds from the IPO were used to retire the outstanding
indebtedness under the 1996 Credit Facility, the total deferred financing costs
were charged to interest expense as of September 30, 1996. In addition, the
Company recognized noncash compensation expense of $870,000 during the third
quarter of 1996 in connection with options to purchase shares of common stock
granted in July 1996 to certain officers of the Company based upon the estimated
valuation of the shares of common stock compared to the exercise price on the
date of grant.
The audited consolidated results of operations on a pro forma basis (i)
assuming the Reid Center and MidTex had been acquired as of the beginning of the
Company's fiscal years 1995 and 1996, (ii) assuming the IPO had occurred at the
beginning of the Company's fiscal years 1995 and 1996, and (iii) excluding the
non-recurring charges recognized during the three months ended September 30,
1996, are as follows (amounts in thousands, except per share data):
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1995 1996
--------- ----------
Total revenues ... $27,688 $31,679
Net income ....... $ 1,329 $ 1,326
Earnings per share $ .17 $ .19
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company provides to governmental agencies the integrated development,
design, construction and operation of correctional facilities. The following
table sets forth the number of facilities under contract or award at the end of
the periods shown.
DECEMBER 31, SEPTEMBER 30,
1995 1996
------- --------
Contracts (1) ...................................... 19 24
Facilities in operation ............................ 12 18
Design capacity of facilities in operation ......... 1,347 3,114
Beds under contract (end of period) ................ 1,478 3,101
Contracted beds in operation (end of period) ....... 1,135 2,866
Average occupancy based on contracted beds in
operation (2) ...................................... 98.9% 97.2%
(1) Consists of facilities in operation, facilities under development and
facilities for which awards have been obtained.
(2) For the year ended December 31, 1995, and for the nine months ended
September 30, 1996, respectively.
During 1996, the Company has added the management of 2,202 beds through
opening or contracting to open five new facilities (587 beds) and the
acquisitions of MidTex and the Reid Center (1,615 beds). As of November 15,
1996, the Company had 25 contracts to operate 21 private correctional, detention
and pre-release facilities with an aggregate design capacity of 3,549 beds. Of
these facilities, 18 are currently in operation (3,114 beds) and three are under
development (435 beds). One of the three facilities under development is
scheduled to commence operations during the fourth quarter of 1996, and the
other two are scheduled to commence operations during the first quarter of 1997.
The Company derives substantially all its revenues from operating
correctional, detention and pre-release facilities for federal and state
governmental agencies in the United States. Revenues for operation of
correctional, detention and pre-release facilities are generally recognized on a
per diem rate based upon the number of occupant days for the period.
The Company's operating expenses consist primarily of facility personnel
costs, lease expense, insurance, utilities, food, medical services, supplies and
clothing. Depreciation and amortization includes amortization of prepaid
facility use costs pertaining to BSCC, amortization of intangible assets
including goodwill, and depreciation of buildings and other property and
equipment. General and administrative expenses consists primarily of salaries
and related overhead of the Company's corporate and administrative personnel who
provide senior management, accounting, finance, personnel and other services,
and costs of developing new contracts.
7
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentages of
total revenue represented by certain items in the Company's consolidated
statement of operations.
Three Months Nine Months
Ended September 30, Ended September 30,
--------------- ---------------
1995 1996 1995 1996
----- ----- ----- -----
Total revenues ........................ 100.0% 100.0% 100.0% 100.0%
Operating expenses .................... 78.9 80.5 79.2 82.0
Depreciation and amortization ......... 4.3 4.0 3.9 4.3
General and administrative expenses ... 15.9 16.6 15.5 15.4
----- ----- ----- -----
Income (loss) from operations ......... 0.9 (1.1) 1.4 (1.7)
Interest expense, net ................. 2.3 20.0 2.1 11.7
----- ----- ----- -----
Loss before income taxes .............. (1.4) (21.1) (0.7) (13.4)
Provision for income taxes ............ 0.0 0.0 0.0 0.0
----- ----- ----- -----
Net loss .............................. (1.4) (21.1) (0.7) (13.4)
===== ===== ===== =====
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
TOTAL REVENUES. Total revenues increased 100.0% to $10.6 million for the
three months ended September 30, 1996 from $5.3 million for the three months
ended September 30, 1995. The increase in occupancy fees of $5.3 million was due
principally to the acquisition of MidTex as of July 1, 1996, the opening of two
new pre-release facilities during the first quarter of 1996, and the acquisition
of the Reid Center as of May 1, 1996.
OPERATING EXPENSES. Operating expenses increased 104.0% to $8.5 million for
the three months ended September 30, 1996 from $4.2 million for the three months
ended September 30, 1995. The increase in operating expenses was due principally
to the acquisition of MidTex as of July 1, 1996, the opening of two new
pre-release facilities during the first quarter of 1996, and the acquisition of
the Reid Center as of May 1, 1996. As a percentage of revenues, operating
expenses increased to 80.5% from 78.9%.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
86.4% to $425,000 for the three months ended September 30, 1996 from $228,000
for the three months ended September 30, 1995. The increase was due principally
to the amortization of prepaid facility use costs of BSCC acquired in July 1996,
and depreciation of the Reid Center acquired in May 1996 and a new pre-release
facility which opened in January 1996.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 108.9% to $1.8 million for the three months ended September 30, 1996
from $842,000 for the three months ended September 30, 1995. Included in general
and administrative expenses for the three months ended September 30, 1996 was a
non-recurring, non-cash charge of $870,000 in connection with options to
purchase shares of common stock granted in July 1996 to certain officers of the
Company based upon the estimated valuation of the shares of common stock
compared to the exercise price on the date of grant. As a percentage of revenues
excluding the non-recurring charge, general and administrative expenses
decreased to 8.4% from 15.9% due principally to spreading fixed costs over a
larger revenue base.
INTEREST. Interest expense, net of interest income, increased to $2.1
million for the three months ended September 30, 1996 from $127,000 for the
three months ended September 30, 1995. The increase in net interest expense was
principally due to the $1.3 million non-recurring charge ($726,000 of which was
non-cash) to expense deferred financing costs associated with the 1996 Credit
Facility, borrowings under the
8
<PAGE>
Company's 1995 and 1996 Credit Facilities related to the acquisition of MidTex
as of July 1, 1996, the Company's purchase of certain outstanding stock in
November 1995, the construction and development of the two new pre-release
facilities which opened during the first quarter of 1996, and the acquisition of
the Reid Center in May 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
TOTAL REVENUES. Total revenues increased by 42.4% to $21.9 million for the
nine months ended September 30, 1996 from $15.4 million for the nine months
ended September 30, 1995. The increase in occupancy fees of $6.1 million, or
39.7% was due principally to the acquisition of the MidTex as of July 1, 1996,
the opening of two new pre-release facilities during the first quarter of 1996,
and the acquisition of the Reid Center as of May 1, 1996. The increase in other
income for the nine months ended September 30, 1996 to $426,000 from $10,000 for
the nine months ended September 30, 1995 was due primarily to the recognition of
the revenue related to a previously reserved note receivable of $206,000
pertaining to 1994 operations of the Wyatt Facility, the realization of which
has improved from prior periods due to payments received on the note and due to
the additional operating experience with the facility. Additional other income
relates to commissary operations and commissions earned at BSCC.
OPERATING EXPENSES. Operating expenses increased by 47.4% to $18.0 million
for the nine months ended September 30, 1996 from $12.2 million for the nine
months ended September 30, 1995. This increase is principally attributable to
the acquisition of MidTex as of July 1, 1996, the opening of two new pre-release
facilities during the first quarter of 1996 and the acquisition of the Reid
Center as of May 1, 1996. As a percentage of revenues, operating expenses
increased to 82.0% from 79.2%. The increase in operating expenses as a
percentage of revenues is principally due to incurring fixed operating costs
while experiencing lower occupancy during start-up at one of the new pre-release
facilities and a temporary decline in the occupancy at the Wyatt Facility during
the first quarter of 1996.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
57.1% to $935,000 for the nine months ended September 30, 1996 from $595,000 for
the nine months ended September 30, 1995. The increase was principally due to
the amortization of prepaid facility use costs of BSCC, opening of a new
pre-release facility in January 1996 and to the acquisition of Reid Center in
May 1996.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by 41.6% to $3.4 million for the nine months ended September 30, 1996
from $2.4 million for the nine months ended September 30, 1995. Included in
general and administrative expenses for the nine months ended September 30, 1996
was a non-recurring, non-cash charge of $870,000 in connection with options to
purchase shares of common stock granted in July 1996 to certain officers of the
Company based upon the estimated valuation of the shares of common stock
compared to the exercise price on the date of grant. As a percentage of revenues
excluding the non-recurring charge, general and administrative expenses
decreased to 11.5% from 15.5% due principally to spreading fixed costs over a
larger revenue base.
INTEREST. Interest expense, net of interest income, increased to $2.6
million for the nine months ended September 30, 1996 from $326,000 for the nine
months ended September 30, 1995. The increase in net interest expense was
principally due to the $1.3 million non-recurring charge ($726,000 of which was
non-cash) to expense deferred financing costs associated with the 1996 Credit
Facility, borrowings under the Company's 1995 and 1996 Credit Facilities related
to the acquisition of MidTex as of July 1, 1996, the Company's purchase of
certain outstanding stock in November 1995, the construction and development of
the two new pre-release facilities which opened during the first quarter of
1996, and the acquisition of the Reid Center in May 1996.
INCOME TAXES. The Company did not recognize any provision for income taxes
due to a taxable loss in both periods. As of September 30, 1996, the Company had
recognized a deferred tax asset of $436,000. Management of the Company believes
that this deferred tax asset is realizable.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
CHANGES IN FINANCIAL POSITION. As of September 30, 1996, total assets had
increased $28.2 million to $42.4 million since December 31, 1995. The increase
relates principally to the acquisitions of MidTex and the Reid Center for which
total consideration was $25.7 million. See Note 2 to the Consolidated Financial
Statements for the allocation of the respective acquisition costs. Deferred
costs increased due to the capitalization of direct IPO costs which were
reclassified to stockholders' equity upon completion of the IPO in October 1996.
Long-term debt increased $27.6 million as a result of financing the
aforementioned acquisitions. Additional paid-in capital increased $2.3 million
due to (i) the recognition of $1.6 million related to options granted to certain
officers of the Company, and to options and warrants issued in conjunction with
obtaining the 1996 Credit Facility, (ii) the recording of $455,000 for common
stock issued under stock options to certain stockholders, and (iii) the
recording of $254,000 for the sale of common stock to a stockholder. The
$455,000 of common stock issued under stock options to certain stockholders was
financed by the Company for the stockholders, thus the notes receivable from the
stockholders are presented as a reduction to stockholders' equity.
WORKING CAPITAL. The Company's working capital increased to $4.1 million at
September 30, 1996 from $1.5 million at December 31, 1995. This increase was
principally due to an increase in receivables resulting from the acquisition of
MidTex in July 1996 and the Reid Center in May 1996 and to financing under the
1995 Credit Facility for the purchase and construction of a new pre-release
facility that opened during the first quarter of 1996. A portion of the
construction costs were accrued as a current liability at December 31, 1995.
EXISTING CREDIT FACILITIES. As of September 30, 1996, the outstanding
indebtedness under the 1996 Credit Facility totaled $29.1 million, with a final
maturity date of December 31, 2002. The Company used borrowings under the 1996
Credit Facility to refinance outstanding borrowings under the 1995 Credit
Facility, to finance a portion of the MidTex acquisition and for working
capital.
The Company utilized the net proceeds from the IPO in early October 1996 to
retire the outstanding borrowings under the 1996 Credit Facility and the
Convertible Bridge Note. Therefore, immediately following the consummation of
the IPO, the Company had no material debt. The Company currently has a $2.5
million revolving credit facility for working capital purposes and a $6.9
million multiple-advance term loan facility available for new and expanded
facilities costs under the 1996 Credit Facility. The Company currently has no
outstanding borrowings under the 1996 Credit Facility.
CAPITAL EXPENDITURES. Capital expenditures for the nine months ended
September 30, 1996 were $687,000 and related to completion of construction and
purchase of furniture and equipment for the two newly opened pre-release
facilities, and for normal replacement of furniture and equipment at various
facilities.
CASH USED IN OPERATING ACTIVITIES. The Company had net cash used in
operating activities of $1.4 million for the nine months ended September 30,
1996 due principally to a loss from operations and to prepaid insurance,
deposits, and other items due to the additional acquired facilities and
facilities under development.
Management of the Company believes that cash flows anticipated to be
generated from operations, including recent acquisitions, will be sufficient to
meet the Company's current operating needs. Additionally, after utilizing $33.9
million of IPO proceeds to repay outstanding indebtedness in October 1996, the
Company had approximately $4 million of cash remaining. This cash, together with
the existing 1996 Credit Facility and with cash anticipated to be generated from
operations, is anticipated to provide sufficient liquidity to meet the Company's
working capital requirements for the near term. It is not anticipated that the
1996 Credit Facility will provide sufficient financing to finance construction
costs related to future institutional contract awards or significant future
acquisitions. The Company anticipates obtaining separate sources of financing to
finance such activities.
10
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company currently and from time to time is subject to claims and suits
arising in the ordinary course of business, including claims for damages for
personal injuries or for wrongful restriction of, or interference with, inmate
privileges. In the opinion of management of the Company, the outcome of the
proceedings to which the Company is currently a party will not have a material
adverse effect upon the Company's operations or financial condition.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
11.1 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
b. Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORNELL CORRECTIONS, INC.
(REGISTRANT)
Date: November 15, 1996 By: /S/ DAVID M. CORNELL
-----------------------
David M. Cornell
President and Chief Executive Officer
Date: November 15, 1996 By: /S/ STEVEN W. LOGAN
-------------------
Steven W. Logan
Treasurer and Chief Financial Officer
EXHIBIT 11.1
CORNELL CORRECTIONS, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1995 1996 1995 1996
------- ------- ------- -------
Net loss ........................... $ (76) $(2,240) $ (116) $ 2,950
======= ======= ======= =======
Shares used in computing
earnings (loss) per share:
Weighted average common shares
and common share equivalents. 3,188 3,479 3,187 3,288
Less: treasury shares ........ -- (555) -- (555)
Effect of shares issuable under
stock options plans and
warrants granted subsequent
to July 15, 1995, based
on the treasury stock method 888 650 888 650
------- ------- ------- -------
4,076 3,574 4,075 3,383
======= ======= ======= =======
Loss per share ..................... $ (.02) $ (.63) $ (.03) $ (.87)
======= ======= ======= =======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM [Identify specific financial statements] AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 363
<SECURITIES> 0
<RECEIVABLES> 6,283
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,526
<PP&E> 25,846
<DEPRECIATION> 0
<TOTAL-ASSETS> 42,421
<CURRENT-LIABILITIES> 4,394
<BONDS> 35,180
0
0
<COMMON> 35
<OTHER-SE> 2,194
<TOTAL-LIABILITY-AND-EQUITY> 42,421
<SALES> 21,945
<TOTAL-REVENUES> 21,945
<CGS> 0
<TOTAL-COSTS> 22,321
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,661
<INCOME-PRETAX> (2,950)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,950)
<EPS-PRIMARY> (0.87)
<EPS-DILUTED> 0
</TABLE>
