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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD __________ TO _______________
COMMISSION FILE NUMBER 1-14472
CORNELL CORRECTIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0433642
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4801 WOODWAY, SUITE #100E, HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 623-0790
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 [X] No [_]
At July 31, 1997 Registrant had outstanding 6,858,384 shares of its Common
Stock.
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<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CORNELL CORRECTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, JUNE 30,
1996 1997
---------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ....................... $ 4,874 $ 1,579
Accounts receivable, net ........................ 4,976 8,383
Current portion of notes receivable ............. 211 403
Prepaids and other .............................. 1,248 1,337
Restricted assets ............................... 1,124 1,331
---------- ----------
Total current assets ......................... 12,433 13,033
PROPERTY AND EQUIPMENT, net ........................ 26,074 31,743
OTHER ASSETS:
Goodwill, net ................................... 5,864 5,694
Notes receivable, noncurrent .................... 620 501
Deferred tax asset, noncurrent .................. 488 488
Deferred costs and other ........................ 1,345 1,823
---------- ----------
Total assets ................................. $ 46,824 $ 53,282
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities ........ $ 4,403 $ 5,432
Current portion of long-term debt ............... 283 2,283
---------- ----------
Total current liabilities .................... 4,686 7,715
LONG-TERM DEBT, net of current portion ............. 462 309
OTHER LONG-TERM LIABILITIES ........................ 625 2,721
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 10,000,000
shares authorized, none outstanding ........... -- --
Common stock, $.001 par value, 30,000,000 shares
authorized, 7,320,398 and 7,413,384 shares
issued and outstanding, respectively .......... 7 7
Additional paid-in capital ...................... 47,562 47,753
Stock option loans .............................. (455) (455)
Retained deficit ................................ (3,710) (2,415)
Treasury stock (555,000 shares of common
stock, at cost) ............................... (2,353) (2,353)
---------- ----------
Total stockholders' equity ................... 41,051 42,537
---------- ----------
Total liabilities and stockholders' equity ... $ 46,824 $ 53,282
========== ==========
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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
1996 1997 1996 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Occupancy fees .................. $ 5,884 $ 14,766 $ 10,967 $ 27,886
Other income .................... -- 74 370 155
---------- ---------- ---------- ----------
5,884 14,840 11,337 28,041
OPERATING EXPENSES ................ 4,900 11,759 9,461 22,556
DEPRECIATION AND AMORTIZATION ..... 273 671 510 1,120
GENERAL AND ADMINISTRATIVE EXPENSES 914 1,149 1,629 2,218
---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS ..... (203) 1,261 (263) 2,147
INTEREST EXPENSE .................. 268 102 498 209
INTEREST INCOME ................... (23) (31) (51) (86)
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES .................... (448) 1,190 (710) 2,024
PROVISION FOR INCOME TAXES ........ -- 395 -- 729
---------- ---------- ---------- ----------
NET INCOME (LOSS) ................. $ (448) $ 795 $ (710) $ 1,295
========== ========== ========== ==========
INCOME (LOSS) PER SHARE ........... $ (.13) $ .11 $ (.20) $ .18
========== ========== ========== ==========
NUMBER OF SHARES USED IN PER SHARE
CALCULATION ..................... 3,523 7,171 3,523 7,139
========== ========== ========== ==========
</TABLE>
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)
SIX MONTHS ENDED
JUNE 30,
1996 1997
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .................................... $ (710) $ 1,295
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities --
Depreciation ........................................ 185 395
Amortization ........................................ 325 725
Change in assets and liabilities, net of
effects from acquisition of businesses --
Accounts receivable .............................. (472) (1,971)
Restricted assets ................................ (41) (207)
Other assets ..................................... (282) (760)
Accounts payable and accrued liabilities ......... 43 559
Other liabilities ................................ -- 2,020
-------- --------
Net cash provided by (used in) operating activities . (952) 2,056
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................. (467) (1,795)
Acquisition of businesses, less cash acquired ........ (4,251) (5,594)
-------- --------
Net cash used in investing activities ............... (4,718) (7,389)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ......................... 9,520 9,000
Payments on long-term debt ........................... (3,301) (7,153)
Proceeds from exercise of stock options .............. -- 191
Proceeds from issuance of common stock ............... 24 --
Direct costs related to issuance of common stock ..... (407) --
-------- --------
Net cash provided by financing activities ........... 5,836 2,038
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ... 166 (3,295)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....... 390 4,874
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............. $ 556 $ 1,579
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid (net of interest capitalized) .......... $ 460 $ 294
======== ========
Income taxes paid .................................... $ -- $ 412
======== ========
The accompanying notes are an integral part of
these consolidated financial statements.
- 4 -
<PAGE>
CORNELL CORRECTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 for 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 1996 Annual
Report on Form 10-K as filed with the Securities and Exchange Commission.
2. ACQUISITIONS
On January 31, 1997, the Company acquired the assets of Interventions Co.
("Interventions"). The Company paid an aggregate purchase price of $6,003,000
comprised of $3,523,000 in cash, $2,250,000 for the repayment of Interventions'
outstanding notes payable, and $230,000 of transaction costs. The Company
financed the purchase with $2,000,000 of borrowings from the multiple-advance
term loan facility under its 1996 Credit Facility and the remainder with cash.
The acquisition is being treated as a purchase for accounting purposes.
The operations acquired from Interventions include (i) a 300 bed residential
pre-release correctional center in Dallas County, Texas, (ii) various
non-residential aftercare treatment programs for an additional 170 probationers
in Dallas, Texas, and (iii) a 44 bed juvenile residential transitional living
center program in San Antonio, Texas. In addition, the Company acquired from
Interventions the 72,000 square foot, 150 bed capacity facility in San Antonio
in which the juvenile transitional living center is operated.
The acquisition costs and the estimated fair market value of the assets
acquired and liabilities assumed associated with the Interventions acquisitions
are as follows (in thousands):
Cash paid .............................................. $ 5,773
Transaction costs ...................................... 230
--------
Total purchase price ............................... $ 6,003
========
Net assets acquired --
Cash ................................................ $ 409
Receivables, net .................................... 1,509
Other current assets ................................ 54
Property and equipment .............................. 4,577
Accounts payable and accrued liabilities ............ (546)
--------
Total purchase price ............................... $ 6,003
========
In May 1997, the Company entered into a letter of understanding to acquire
substantially all of the assets of the privately held, not-for-profit Abraxas
Group, Inc., based in Pittsburgh, Pennsylvania. Abraxas, a nationally recognized
leader in the treatment of juveniles, provides residential, educational and
community based treatment services to over 1,300 youths in Pennsylvania, Ohio,
Delaware and the District of Columbia, generating approximately $30 to $35
million in annual revenues. Closing of the transaction is subject to various
conditions, including completion of due diligence and receipt of required
governmental and other consents.
- 5 -
<PAGE>
3. LONG-TERM DEBT
As of June 30, 1997, the Company had borrowings outstanding under the 1996
Credit Facility of $2,000,000. Currently, the 1996 Credit Facility will mature
and all amounts, if any, outstanding thereunder will be due on December 31,
1997. Although the Company intends to refinance any amounts due under the 1996
Credit Facility prior to its maturity, the amount due at June 30, 1997 has been
classified as current portion of long-term debt pending such refinancing.
4. EARNINGS PER SHARE
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, EARNINGS PER SHARE ("SFAS No. 128"). SFAS
No. 128 replaces Accounting Principles Board Opinion 15, EARNINGS PER SHARE, and
simplifies the computation of earnings (loss) per share ("EPS") by replacing the
presentation of primary EPS with basic EPS. Basic EPS is computed by dividing
income available to common stockholders by the weighted-average number of common
shares outstanding for the period. SFAS No. 128 also requires dual presentation
of basic and diluted EPS on the face of the income statement for entities with
complex capital structures. SFAS No. 128 is effective for financial statements
issued for periods ending after December 15, 1997, including interim periods.
Earlier application is not permitted. Restatement of all prior period EPS data
is required. Management of the Company believes that the adoption of SFAS No.
128 will not have a material effect on previously reported EPS.
- 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 and detention facilities. The
following table sets forth the number of facilities and beds under contract or
award at the end of the periods shown.
DECEMBER 31, JUNE 30,
1996 1997
-------- --------
Contracts (1) ................................. 24 33
Facilities in operation ....................... 16 21
Design capacity of facilities in operation .... 3,142 4,046
Beds under contract (end of period) ........... 3,254 5,367
Contracted beds in operation (end of period) .. 2,899 3,541
Average occupancy based on contracted
beds in operation(2) ........................ 97.0% 96.4%
- ------------
(1) Consists of facilities in operation, facilities under development and
facilities for which awards have been obtained.
(2) For any applicable facilities, includes reduced occupancy during the
start-up phase.
During the first half of 1997, the Company has added the management of 2,095
beds through opening or contracting to open 3 new facilities (1,645 beds) and
the acquisition of Interventions (450 beds). As of June 30, 1997, the Company
had 33 contracts to operate 24 private correctional, detention and pre-release
facilities with an aggregate design capacity of 5,872 beds. Of these facilities,
21 are currently in operation (4,046 beds), 2 are under development and 1
commenced operation by the Company on July 1, 1997. Both facilities under
development are scheduled to commence operations during 1998.
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 the Big Spring Facility, amortization of
intangible assets including goodwill, amortization of facility start-up costs,
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 SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------- -----------------
1996 1997 1996 1997
------ ------ ------ ------
Total revenues ....................... 100.0% 100.0% 100.0% 100.0%
Operating expenses ................... 83.3 79.2 83.5 80.4
Depreciation and amortization ........ 4.7 4.6 4.5 4.0
General and administrative expenses .. 15.5 7.7 14.3 7.9
------ ------ ------ ------
Income (loss) from operations ........ (3.5) 8.5 (2.3) 7.7
Interest expense, net ................ 4.1 0.5 4.0 0.5
------ ------ ------ ------
Income (loss) before provision
for income taxes ................... (7.6) 8.0 (6.3) 7.2
Provision for income taxes ........... 0.0 2.6 0.0 2.6
------ ------ ------ ------
Net income (loss) .................... (7.6) 5.4 (6.3) 4.6
====== ====== ====== ======
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
TOTAL REVENUES. Total revenues increased 152.2% to $14.8 million for the
three months ended June 30, 1997 from $5.9 million for the three months ended
June 30, 1996. The increase in revenues of approximately $8.9 million was due
principally to the acquisition of MidTex in July 1996, the acquisition of the
Reid Center in May 1996, the acquisition of Interventions in January 1997, and
the opening of two new juvenile facilities and one new pre-release center during
the first quarter of 1997.
OPERATING EXPENSES. Operating expenses increased 140.0% to $11.8 million for
the three months ended June 30, 1997 from $4.9 million for the three months
ended June 30, 1996. The increase in operating expenses was due principally to
the acquisition of MidTex in July 1996, the acquisition of the Reid Center in
May 1996, the acquisition of Interventions in January 1997, and the opening of
two new juvenile facilities and one new pre-release center during the first
quarter of 1997. As a percentage of revenues, operating expenses decreased to
79.2% from 83.3%. The decrease in operating expenses as a percentage of revenues
is principally due to higher operating margins at the Big Spring Facility which
was acquired in July 1996 and improved occupancy of certain facilities as
compared to the prior year period.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 145.8%
to $671,000 for the three months ended June 30, 1997 from $273,000 for the three
months ended June 30, 1996. The increase was due principally to the amortization
of prepaid facility use costs of the Big Spring Facility acquired in July 1996,
depreciation of the Reid Center acquired in May 1996 and the Griffin Juvenile
Facility acquired in January 1997, and depreciation and amortization of deferred
start-up costs of the three new facilities opened during the first quarter of
1997. In addition, amortization costs include approximately $187,000 to expense
start-up costs related to the non-renewal of a 120 bed juvenile contract as of
June 30, 1997.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 25.7% to $1.1 million for the three months ended June 30, 1997 from
$914,000 for the three months ended June 30, 1996. The increase in general and
administrative expenses resulted from adding corporate and administrative
personnel, including a new chief operating officer position, to manage the
increased business of the Company, and from additional costs of administering
the Company since the initial public offering in the fourth quarter of 1996. As
a percentage of revenues general and administrative expenses decreased to 7.7%
from 15.5% due principally to spreading fixed costs over a larger revenue base.
- 8 -
<PAGE>
INTEREST. Interest expense, net of interest income, decreased to $71,000 for
the three months ended June 30, 1997 from $245,000 for the three months ended
June 30, 1996. The decrease in net interest expense was principally due to lower
outstanding borrowings under the Company's 1996 and 1995 Credit Facilities for
the respective periods.
INCOME TAXES. For the three months ended June 30, 1997, the Company
recognized a provision for income taxes at an estimated effective rate of 33%
compared to no provision for income taxes for the three months ended June 30,
1996 due to a taxable loss. The effective income tax rate applied in 1997
includes a benefit for the reversal of previously reserved deferred tax assets
resulting from prior net operating losses which are expected to be utilized in
1997.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
TOTAL REVENUES. Total revenues increased by 147.3% to $28.0 million for the
six months ended June 30, 1997 from $11.3 million for the six months ended June
30, 1996. The increase in revenues of $16.7 million was due principally to the
acquisition of MidTex in July 1996, the acquisition of the Reid Center in May
1996, the acquisition of Interventions in January 1997, and the opening of two
new juvenile facilities and one new pre-release center during the first quarter
of 1997.
OPERATING EXPENSES. Operating expenses increased by 138.4% to $22.6 million
for the six months ended June 30, 1997 from $9.5 million for the six months
ended June 30, 1996. The increase in operating expenses was due principally to
the acquisition of MidTex in July 1996, the acquisition of the Reid Center in
May 1996, the acquisition of Interventions in January 1997, and the opening of
two new juvenile facilities and one new pre-release center during the first
quarter of 1997. As a percentage of revenues, operating expenses decreased to
80.4% from 83.5%. The decrease in operating expenses as a percentage of revenues
is principally due to higher operating margins at the Big Spring Facility which
was acquired in July 1996 and improved occupancy of certain facilities as
compared to the prior year period.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 119.6%
to $1.1 million for the six months ended June 30, 1997 from $510,000 for the six
months ended June 30, 1996. The increase was due principally to the amortization
of prepaid facility use costs of the Big Spring Facility acquired in July 1996,
depreciation of the Reid Center acquired in May 1996 and the Griffin Juvenile
Facility acquired in January 1997, and depreciation and amortization of deferred
start-up costs of the three new facilities opened during the first quarter of
1997. In addition, amortization costs include approximately $187,000 to expense
start-up costs related to the non-renewal of a contract as of June 30, 1997.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by 36.2% to $2.2 million for the six months ended June 30, 1997 from
$1.6 million for the six months ended June 30, 1996. The increase in general and
administrative expenses resulted from adding corporate and administrative
personnel, including a new chief operating officer position, to manage the
increased business of the Company, and from additional costs of administering
the Company since the initial public offering in the fourth quarter of 1996. As
a percentage of revenues general and administrative expenses decreased to 7.9%
from 14.4% due principally to spreading fixed costs over a larger revenue base.
INTEREST. Interest expense, net of interest income, decreased to $123,000 for
the six months ended June 30, 1997 from $447,000 for the six months ended June
30, 1996. The decrease in net interest expense was principally due to lower
outstanding borrowings under the Company's 1996 and 1995 Credit Facilities for
the respective periods.
- 9 -
<PAGE>
INCOME TAXES. For the six months ended June 30, 1997, the Company recognized
a provision for income taxes at an estimated effective annual rate of 36%
compared to no provision for income taxes for the six months ended June 30, 1997
due to a taxable loss. The effective income tax rate applied in 1997 includes a
benefit for the reversal of previously reserved deferred tax assets resulting
from prior net operating losses which are expected to be utilized in 1997.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. The Company's primary capital requirements are for working capital,
start-up costs related to new operating contracts, furniture, fixtures and
equipment, supply purchases, new facility renovations, acquisitions and new
facility construction. Working capital requirements generally increase
immediately prior to the Company commencing management of a new facility as the
Company incurs start-up costs and purchases necessary equipment and supplies
before facility management revenue (through occupancy fees) is realized. Some of
the Company's management contracts have required the Company to make substantial
initial expenditures of cash in connection with the opening or renovating of a
facility. Substantially all these start-up expenditures are fully or partially
recoverable as pass-through costs or are reimbursable from the contracting
governmental agency over the term of the contract.
CHANGES IN FINANCIAL POSITION. As of June 30, 1997, total assets had
increased $6.5 million to $53.3 million since December 31, 1996. The increase
related principally to the acquisition of Interventions in January 1997. The
Company paid $6.0 million for Interventions' assets including the retirement of
$2.3 million of pre-acquisition bank debt. The purchase price was paid with $2.0
million of borrowings from the 1996 Credit Facility and the remainder with cash.
WORKING CAPITAL. The Company's working capital decreased to $5.3 million at
June 30, 1997 from $7.7 million at December 31, 1996. This decrease was
principally due to the use of cash to fund a portion of the Interventions
acquisition in January 1997 and the classification of $2.0 million of
indebtedness outstanding under the 1996 Credit Facility as current at June 30,
1997. Increases to working capital include increased receivables resulting from
newly opened facilities and the timing of certain collections, and a $2.0
million cash advance from the State of Georgia for the construction and
development of the newly awarded 500 bed contract in Charlton County, Georgia.
CASH PROVIDED BY OPERATING ACTIVITIES. The Company had net cash provided by
operating activities of $2.1 million for the six months ended June 30, 1997.
Significant sources of cash include $2.4 million of net income plus depreciation
and amortization and a $2.0 million advance from the State of Georgia for the
construction and development of the newly awarded Charlton County contract. This
advance will be applied to future per diem billings to the State of Georgia once
the facility begins operating. Significant uses of operating cash during the
period include increased accounts receivable and start-up costs for facilities
under development, and increased prepaid insurance and other items related to
the additional acquired and newly opened facilities.
CAPITAL EXPENDITURES. Capital expenditures for the six months ended June 30,
1997 were $1.8 million and related to construction-in-progress for the Big
Spring Facility's 516 bed expansion unit and for the 500 bed Charlton County,
Georgia facility, improvements and furniture and equipment at the newly opened
facilities and normal replacement of furniture and equipment at various
facilities.
- 10 -
<PAGE>
EXISTING CREDIT FACILITIES. Under the 1996 Credit Facility, as amended, the
Company has a $15.0 million credit facility comprised of a $5.0 million
revolving credit facility for working capital purposes and a $10.0 million
multiple-advance term loan facility available for new and expanded facilities
costs. The Company intends to refinance amounts due under the 1996 Credit
Facility prior to its maturity on December 31, 1997.
Management of the Company believes that the cash flows generated from
operations, together with the credit available under the 1996 Credit Facility,
will provide sufficient liquidity to meet the Company's working capital
requirements for the near term. To the extent that the 1996 Credit Facility does
not provide sufficient financing to fund construction costs related to
institutional contract awards or significant future acquisitions, the Company
anticipates obtaining separate sources of financing to fund such activities.
INFLATION
Management of the Company believes that inflation has not had a material
effect on the Company's results of operations during the past three years.
However, most of the Company's facility management contracts provide for
payments to the Company of either fixed per diem fees or per diem fees that
increase by only small amounts during the terms of the contracts. Inflation
could substantially increase the Company's personnel costs (the largest
component of facility management expense) or other operating expenses at rates
faster than any increases in occupancy fees.
- 11 -
<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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 20, 1997, the Company held its 1997 Annual Meeting of Stockholders.
The matters voted on at the meeting and the results thereof are as follows:
A. Election of Directors.
Stockholders elected the persons listed below as directors whose terms expire
at the 1998 Annual Meeting of Stockholders. Results by nominee were:
Authority
Voted For Withheld
---------- ----------
David M. Cornell ......................... 5,269,081 4,058
Campbell A. Griffin, Jr. ................. 5,269,081 4,058
Richard T. Henshaw, III .................. 5,269,381 3,758
Peter A. Leidel .......................... 5,265,881 7,258
Tucker Taylor ............................ 5,265,881 7,258
B. Ratification of Appointment of Independent Public Accountants.
Stockholders ratified the appointment of Arthur Andersen LLP as the
Company's independent public accountants for the fiscal year ending December 31,
1997, with 5,270,189 shares voted for, 1,450 shares voted against and 1,500
abstentions.
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
- 12 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CORNELL CORRECTIONS, INC.
Date: September 30, 1997 By: /s/ DAVID M. CORNELL
DAVID M. CORNELL
Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
Date: September 30, 1997 By: /s/ STEVEN W. LOGAN
STEVEN W. LOGAN
Chief Financial Officer, Treasurer
and Secretary
(Principal Financial Officer)
- 13 -
EXHIBIT 11.1
CORNELL CORRECTIONS, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------- --------------------
1996 1997 1996 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss) ............................................... $ (448) $ 795 $ (710) $ 1,295
======== ======== ======== ========
Shares used in computing earnings (loss) per share:
Weighted average common shares and common share equivalents ... 3,190 7,398 3,190 7,359
Less treasury shares .......................................... (555) (555) (555) (555)
Effect of shares issuable under stock options
and warrants based on the treasury stock method ............. 888 328 888 335
-------- -------- -------- --------
3,523 7,171 3,523 7,139
======== ======== ======== ========
Earnings (loss) per share ....................................... $ (0.13) $ 0.11 $ (0.20) $ 0.18
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,579
<SECURITIES> 0
<RECEIVABLES> 8,383
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,033
<PP&E> 32,863
<DEPRECIATION> (1,120)
<TOTAL-ASSETS> 53,282
<CURRENT-LIABILITIES> 7,715
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 42,530
<TOTAL-LIABILITY-AND-EQUITY> 53,282
<SALES> 0
<TOTAL-REVENUES> 28,041
<CGS> 0
<TOTAL-COSTS> 25,894
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 209
<INCOME-PRETAX> 2,024
<INCOME-TAX> 729
<INCOME-CONTINUING> 1,295
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,295
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0
</TABLE>
