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Previous: FIREPLACE MANUFACTURERS INC, 10QSB, 1995-08-14 |
Next: FIRST TRUST OF INSURED MUNICIPAL BONDS SERIES 115, 485BPOS, 1995-08-14 |
<PAGE> 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, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
SECURITIES EXCHANGE ACT OT 1934
FOR THE TRANSACTION PERIOD FROM TO .
---------- ----------
COMMISSION FILE NUMBER: 1-13560
-------
CORRECTIONS CORPORATION OF AMERICA
----------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 62-1156308
------------------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
102 WOODMONT BLVD., SUITE 800
NASHVILLE, TENNESSEE 37205
------------------------------------------ -------------------
(Address of principal executive offices) (Zip Code)
(615) 292-3100
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NONE
--------------------------------------------------------------------------------
(Former name, address and fiscal year if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
15,146,774
--------------------------------------------------------------------------------
(Outstanding shares of the issuer's common stock as of August 1, 1995.)
EXHIBIT INDEX ON PAGE 12.
1
<PAGE> 2
CORRECTIONS CORPORATION OF AMERICA
INDEX
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION: Number
------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1995 (Unaudited) and December 31, 1994 3
Consolidated Statements of Operations
Six months ended June 30, 1995 and 1994
(Unaudited) 4
Consolidated Statements of Operations
Three months ended June 30, 1995 and 1994
(Unaudited) 5
Consolidated Statements of Cash Flows
Six months ended June 30, 1995 and 1994
(Unaudited) 6-8
Notes to Consolidated Financial Statements
(Unaudited) 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Default Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
2
<PAGE> 3
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
------------- ----------------
ASSETS (Unaudited)
------
<S> <C> <C>
Current assets:
Cash, cash equivalents and restricted cash $ 6,837 $ 4,361
Accounts receivable, less allowance for doubtful accounts of
$78 in 1995 and $50 in 1994 37,946 26,231
Prepaid expenses 2,166 1,298
Deferred taxes 3,187 3,285
Other 1,243 933
---------- -------------
Total current assets 51,379 36,108
---------- -------------
Restricted investments 0 69
Other assets 14,020 10,292
Property and equipment, net 87,521 82,758
Investment in direct financing lease 9,945 10,118
---------- -------------
$ 162,865 $ 139,345
========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 11,836 $ 8,396
Accrued salaries and wages 2,128 2,688
Accrued property taxes 1,129 1,462
Other accrued expenses 6,009 5,167
Current portion of long-term debt 7,676 5,159
---------- -------------
Total current liabilities 28,778 22,872
---------- -------------
Long-term debt, net of current portion 42,956 47,386
Deferred taxes 3,885 3,628
Other long-term liabilities 2,475 3,758
---------- -------------
Total liabilities 78,094 77,644
---------- -------------
Commitments and contingencies
Stockholders' equity:
Common stock 15,197 14,162
Additional paid-in capital 62,604 44,034
Retained earnings 8,666 3,813
Treasury stock, at cost (1,696) (308)
---------- -------------
Total stockholders' equity 84,771 61,701
---------- -------------
$ 162,865 $ 139,345
========== =============
</TABLE>
3
<PAGE> 4
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six months ended
June 30
---------------------
1995 1994
------------ -------------
<S> <C> <C>
Revenues $ 89,520 $ 67,076
Expenses:
Operating 68,580 53,152
Depreciation and amortization 2,480 2,207
------------ -------------
71,060 55,359
------------ -------------
Contribution from operations 18,460 11,717
Other expenses:
General and administrative 7,837 5,370
Interest, net 1,594 1,818
------------ -------------
9,431 7,188
------------ -------------
Income before income taxes 9,029 4,529
Provision for income taxes 3,579 856
------------ -------------
Net income 5,450 3,673
Preferred stock dividends 0 204
------------ -------------
Net income allocable to common stockholders $ 5,450 $ 3,469
============= =============
Earnings per share:
Primary $ 0.31 $ 0.25
============= =============
Fully diluted $ 0.31 $ 0.24
============= =============
Weighted average shares outstanding:
Primary 17,557 13,886
============= =============
Fully diluted 17,844 14,228
============= =============
</TABLE>
4
<PAGE> 5
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
June 30
--------------------
1995 1994
----------- ------------
<S> <C> <C>
Revenues $ 47,865 $ 34,603
Expenses:
Operating 36,478 27,636
Depreciation and amortization 1,285 1,119
----------- ------------
37,763 28,755
----------- ------------
Contribution from operations 10,102 5,848
Other expenses:
General and administrative 4,536 2,833
Interest, net 731 888
----------- ------------
5,267 3,721
----------- ------------
Income before income taxes 4,835 2,127
Provision for income taxes 1,927 365
----------- ------------
Net income 2,908 1,762
Preferred stock dividends 0 98
----------- ------------
Net income allocable to common stockholders $ 2,908 $ 1,664
=========== ============
Earnings per share:
Primary $ 0.16 $ 0.12
=========== ============
Fully diluted $ 0.16 $ 0.12
=========== ============
Weighted average shares outstanding:
Primary 18,034 14,124
=========== ============
Fully diluted 18,056 14,287
=========== ============
</TABLE>
5
<PAGE> 6
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30
------------------
1995 1994
---------------- ---------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 5,450 $ 3,673
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,860 2,904
Defferred income taxes 2,490 (29)
Loss on disposal of property and equipment 19 9
Changes in assets and liabilities:
Accounts receivable (11,698) (2,346)
Prepaid expenses (868) (1,291)
Other current assets (310) (671)
Accounts payable 3,440 2,148
Accrued expenses (140) 1,119
------------ ------------
Net cash provided by operating activities 1,243 5,516
------------ ------------
Cash Flows from Investing Activities:
Increase (decrease) in restricted and escrow cash 85 (120)
Decrease in restricted investments 69 0
Increase in other assets (4,379) (879)
Acquisition of property and equipment (6,758) (6,547)
Proceeds from disposals of property and equipment 21 2
Payments received on direct financing leases 155 139
------------ ------------
Net cash used in investing activities (10,807) (7,405)
------------ ------------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt 7,519 7,878
Payments on long-term debt (3,410) (12,646)
Proceeds from short-term borrowings, net 1,215 0
Payments of short-term obligations refinanced by long-term
debt (700) 0
Payment of international placement fees (495) 0
Issuance of common stock 8,311 10,599
Payments of stock issuance costs 0 (404)
Payments of dividends on preferred stock 0 (275)
Proceeds from exercise of stock options 315 169
Repurchase of stock warrants (630) 0
------------ ------------
Net cash provided by financing activities 12,125 5,321
------------ ------------
Net increase in cash 2,561 3,432
CASH AND CASH EQUIVALENTS, beginining of period 4,036 7,029
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 6,597 $ 10,461
============ ============
</TABLE>
6
<PAGE> 7
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30
-----------------
1995 1994
------------ -------------
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 1,982 $ 2,307
============ =============
Income taxes $ 1,690 $ 247
============ =============
Supplemental Schedule of Noncash Investing and Financing
Activities:
The Company intends to finance contruction in progress
through the issuance of long-term debt:
Property and equipment $ 0 $ 2,211
Other long-term liabilities 0 (2,211)
------------ -------------
$ 0 $ 0
============ =============
The Company entered into an international alliance and
equity participation which included the deferral of certain
issuance costs:
Other assets $ 0 $ 3,488
Other accrued expenses 0 (495)
Other long-term liabilities 0 (3,465)
Additional paid-in capital 0 472
------------ -------------
$ 0 $ 0
============ =============
Long-term debt was converted into common stock:
Other assets $ (53) $ 0
Long-term debt 6,700 0
Common stock (444) 0
Additional paid-in capital (6,203) 0
------------ -------------
$ 0 $ 0
============ =============
The Company's redeemable convertible preferred stock
was converted into common stock:
Other assets $ 0 $ (290)
Preferred stock 0 5,000
Common stock 0 (700)
Additional paid-in capital 0 (4,010)
------------ -------------
$ 0 $ 0
============ =============
</TABLE>
7
<PAGE> 8
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30
--------------------
1995 1994
-------------- ---------------
<S> <C> <C>
The Company acquired treasury stock and issued common
stock through the exercise of stock options:
Common stock $ (205) $ (57)
Additional paid-in capital (1,183) (124)
Retained earnings (deficit) 0 307
Treasury stock, at cost (1,388) (126)
------------- ---------------
$ 0 $ 0
============= ===============
</TABLE>
8
<PAGE> 9
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of June 30, 1995, the consolidated
statements of operations and cash flows for the six month periods
ended June 30, 1995 and 1994, and the consolidated statement of
operations for the quarters ended June 30, 1995 and 1994 have been
prepared by the Company in accordance with the accounting policies
described in its 1994 Annual Report and should be read in conjunction
with the notes thereto.
In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the
financial positions, results of operations and changes in cash flows
at June 30, 1995 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The results of
operations for the period ended June 30, 1995, are not necessarily
indicative of the operating results for the full year.
2. LONG-TERM DEBT
In March 1995, the Company converted $6,700,000 of convertible
subordinated notes into 443,692 shares of common stock. The notes had
been outstanding since 1989 and had earned 8.5% interest. The
conversion prices ranged from $14.33 to $16.74 and included a
provision which permitted the Company to require conversion after the
stock had a market value of 150% of the conversion price for a
specified period.
3. BUSINESS COMBINATION
In April, 1995, the Company acquired Concept, Inc. in a business
combination accounted for in a pooling-of-interest. The consolidated
balance sheet as of June 30, 1995, the consolidated statements of
operations and cash flows for the six month periods ended June 30,
1995 and 1994 and the consolidated statement of operations for the
quarters ended June 30, 1995 and 1994 have been restated accordingly
to reflect the combination.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES AND EXPENSES FROM FACILITY OPERATIONS
Revenues for the second quarter and first half of 1995 increased 38%
and 33%, respectively, over the comparable periods of 1994.
Management revenues increased $13,032,000 and $21,867,000 for the
second quarter and first half of 1995, respectively, as compared to
the same periods of 1994, while transportation revenues increased
$230,000 and $577,000 for the same relative time periods. The
increase in management revenues was due to compensated mandays
increasing by 24% and 26% for the second quarter and first half of
1995, respectively, over the comparable periods of 1994. The Company
opened the Eloy Detention Center in Eloy, Arizona, in the third
quarter of 1994, the Central Arizona Detention Facility in Florence,
Arizona, in the fourth quarter of 1994, and the B. M. Moore
Pre-Release Center in Overton, Texas, at the end of the second quarter
of 1995. The Company also realized the full period effect in 1995 of
1994 expansions to existing facilities. The 11% and 15% increase in
9
<PAGE> 10
transportation revenues for the second quarter and first half of 1995,
respectively, over the comparable periods of 1994 was due to a
marketing effort resulting in an expanded customer base and therefore
increased compensated mileage.
Operating expenses for the second quarter and first half of 1995
increased 32% and 29%, respectively, over the comparable periods of
1994. This was due to the increase in compensated mandays based on the
growth in beds on line and the increase in compensated mileage as
previously mentioned.
Depreciation and amortization, while increasing in dollar amount 15%
and 12% for the second quarter and first half or 1995, respectively,
as compared to the same periods in 1994, actually decreased as a
percentage of revenue for both periods. This is a result of the trend
in new contracts moving towards the government financing and owing the
fixed assets while contracting out the operations with the private
sector.
OTHER EXPENSES
General and administrative expenses for the second quarter and
first half of 1995 increased 60% and 46% respectively, over the
comparable periods of 1994. Included in the second quarter of 1995
were expenses of approximately $700,000 of non-recurring pooling
expenses. After backing these non-recurring charges out general and
administrative expenses decreased as a percentage of revenues. The
net increased expenses in amount were incurred in order to manage the
new beds being brought on line in 1995 and 1996. The Company is in
the process of bringing 7,210 beds on line over the next fifteen
months. As these facilities open general and administrative cost
will continue to decrease as a percentage of revenues.
Interest expense, net, decreased 18% and 12% for the second quarter
and first half of 1995, respectively, as compared to the same periods
in 1994. This is due to the Company making regularly scheduled debt
payments, the reduction of $9,800,000 of debt in June 1994, with
proceeds from an equity issuance and the conversion of $3,000,000 and
$6,700,000 convertible subordinated notes in December 1994 and March
1995, respectively.
The Company realized the complete utilization of its net operating
loss carryforwards prior to 1995 therefore resulting in being subject
to the full statutory tax rates beginning in 1995.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's business is capital intensive. The Company's efforts to
obtain contracts, construct additional facilities, and maintain its
day-to-day operations have required the utilization of cash flow from
operations and the continued acquisition of funds through borrowings
and equity offerings. Thus far the Company has financed these
activities through the sale of capital stock, subordinated convertible
notes and senior secured debt, through the issuance of taxable and
tax-exempt bonds, by bank borrowings, and by assisting governmental
agencies in the issuance of municipal bonds.
Subsequent to the end of the second quarter of 1995 the Company
renegotiated its working capital revolving credit facility. The
facility now provides for borrowings of up to $25,000,000, requires
interest payments to be made quarterly and bears interest, at the
election of the Company, of either the Bank's prime rate or LIBOR plus
2%, 9.0% and 8.13%, respectively at June 30, 1995. The facility
consists of a working capital line, which includes letters of credit.
As of June 30, 1995, there was $2,000,000 borrowed against the
facility and $7,661,000 of letters of credit had been issued leaving
the unused commitment at $15,339,000.
Concept, Inc. also has a credit facility with a bank. The credit
facility provides for borrowings of up to $1,000,000, requires monthly
interest payments and bears interest at the bank's prime rate, 9.0% at
June 30, 1995. As of June 30, 1995, no amounts were borrowed against
this facility.
10
<PAGE> 11
In June, 1995, the Company sold 272,5000 shares of common stock at
$30.50 per share to Sodexho, S.A., an affiliate of the Company. The
proceeds will be used to finance the expansion of an existing
facility.
Future expansion and the acquisition and construction of additional
facilities may require further financing, the form of which will vary
depending upon prevailing market and other conditions. The trend in
growth opportunities has been a movement towards the government
financing and owning the fixed assets while contracting out the
operations with the private sector.
Management believes that cash flow from operations, borrowing capacity
and access to alternative financing techniques are adequate to meet
its future financial requirements.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the Company held
on May 26, 1995, the nominees for election as Directors of
the Company were elected without opposition. The amendment
of the Company's certificate of incorporation increasing
the amount of authorized common stock from 30,000,000 to
50,000,000 was ratified. On this motion 8,575,125 shares,
voted in favor of the motion, 403,496 shares votes against
and 259,435 shares abstained. On the motion to ratify and
approve the Company's 1995 Employee Stock Incentive Plan,
7,182,524 shares were voted in favor of this proposal,
1,803,667 shares voted against and 251,864 shares
abstained.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) 27 Financial Data Schedule (for SEC use only)
b) A current report on Form 8-K dated May 11, 1995,
reporting the acquisition of Concept, Inc. in a
business combination accounted for as a
pooling-of-interest, was filed during the quarter for
which this quarterly report is filed. Subsequent to
the end of the quarter a current amended report on
Form 8-K/A dated July 10, 1995, was filed to update
the initial report.
12
<PAGE> 13
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 11, 1995 /s/ Darrell K. Massengale
----------------------------------- ------------------------------
(Date) Darrell K. Massengale
Treasurer
(Principal Accounting Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 690,000
<SECURITIES> 0
<RECEIVABLES> 3,176,000
<ALLOWANCES> 133,000
<INVENTORY> 0
<CURRENT-ASSETS> 4,170,000
<PP&E> 19,000,000
<DEPRECIATION> 4,290,000
<TOTAL-ASSETS> 19,476,000
<CURRENT-LIABILITIES> 2,084,000
<BONDS> 6,862,000
<COMMON> 107,000
0
0
<OTHER-SE> 9,833,000
<TOTAL-LIABILITY-AND-EQUITY> 19,476,000
<SALES> 5,518,000
<TOTAL-REVENUES> 5,626,000
<CGS> 4,501,000
<TOTAL-COSTS> 4,501,000
<OTHER-EXPENSES> 289,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 240,000
<INCOME-PRETAX> 596,000
<INCOME-TAX> 89,000
<INCOME-CONTINUING> 507,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 507,000
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
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