<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, 1996
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
--- ---
74,552,589
(Outstanding shares of the issuer's common stock as of August 1, 1996.)
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CORRECTIONS CORPORATION OF AMERICA
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION: Number
------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1996 (Unaudited) and December 31, 1995 3
Consolidated Statements of Operations
Six months ended June 30, 1996 and 1995
(Unaudited) 4
Consolidated Statements of Operations
Three months ended June 30, 1996 and 1995
(Unaudited) 5
Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and 1995
(Unaudited) 6-7
Notes to Consolidated Financial Statements
(Unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Default Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
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CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash, cash equivalents and restricted cash $124,477 $ 2,714
Accounts receivable, less allowance 57,286 39,661
Prepaid expenses 3,328 1,569
Deferred taxes 1,286 1,646
Other 1,455 1,020
-------- --------
Total current assets 187,832 46,610
-------- --------
Restricted investments 587 443
Other assets 23,809 19,642
Property and equipment, net 178,223 137,019
Investment in direct financing lease 12,982 9,764
-------- --------
$403,433 $213,478
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 23,038 $ 10,757
Accrued salaries and wages 4,174 3,480
Accrued property taxes 1,115 1,623
Other accrued expenses 8,746 8,637
Current portion of long-term debt 9,344 11,020
-------- --------
Total current liabilities 46,417 35,517
-------- --------
Long-term debt, net of current portion 94,246 74,865
Deferred taxes 4,332 4,164
Other long-term liabilities 1,732 2,228
-------- --------
Total liabilities 146,727 116,774
-------- --------
Commitments and contingencies
Stockholders' equity:
Common stock - $1 par value 74,278 32,270
Additional paid-in capital 157,950 48,830
Retained earnings 24,869 15,641
Treasury stock, at cost (391) (37)
-------- --------
Total stockholders' equity 256,706 96,704
-------- --------
$403,433 $213,478
======== ========
</TABLE>
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CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
June 30
------------------
1996 1995
------- -------
<S> <C> <C>
Revenues $67,453 $51,251
Expenses:
Operating 49,325 40,457
General and Administrative 3,369 3,928
Depreciation and amortization 2,264 1,482
------- -------
Contribution from operations 12,495 5,384
Interest expense, net 1,180 768
------- -------
Income before income tax 11,315 4,616
Income taxes 4,308 1,860
------- -------
Net income $ 7,007 $ 2,756
======= =======
Net income per share:
Primary $ .09 $ .04
======= =======
Fully diluted $ .08 $ .04
======= =======
Weighted average shares outstanding: 82,001 74,884
======= =======
</TABLE>
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CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six months ended
June 30
----------------
1996 1995
-------- -------
<S> <C> <C>
Revenues $130,730 $95,396
Expenses:
Operating 96,509 75,607
General and administrative 6,294 6,509
Depreciation and amortization 4,541 2,917
-------- -------
Contribution from operations 23,386 10,363
Interest expense, net 2,530 1,661
-------- -------
Income before income tax 20,856 8,702
Income taxes 8,143 3,556
-------- -------
Net income $ 12,713 $ 5,146
======== =======
Net income per share:
Primary $ .16 $ .07
======== =======
Fully diluted $ .15 $ .07
======== =======
Weighted average shares outstanding: 81,065 73,028
======== =======
</TABLE>
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CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
Six months ended
June 30
--------------------
1996 1995
-------- -------
<C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 12,713 $ 5,146
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 4,541 2,917
Deferred and other noncash income taxes 7,041 2,490
Loss on disposal of assets 29 19
Equity in earnings of unconsolidated entities (530) (227)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (17,473) (12,032)
Prepaid expenses (1,759) (820)
Other current assets (435) (379)
Accounts payable 12,281 3,640
Accrued expenses 399 252
--------- ---------
Net cash provided by operating activities 16,807 1,006
--------- ---------
Cash Flows from Investing Activities:
(Increase) decrease in restricted and escrow cash (407) 164
Increase in other assets (5,145) (4,379)
Additions of property and equipment (44,302) (6,768)
Proceeds from disposals of assets 22 21
Increase in Direct Financing Lease (3,590) 0
Payments received on direct financing lease and notes
receivable 234 163
--------- ---------
Net cash used in investing activities (53,188) (10,809)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt 50,000 7,604
Payments on long-term debt (17,831) (3,439)
Payments on line of credit, net (14,464) 1,214
Payments of short-term obligations refinanced by long-term
debt 0 (700)
Payment of debt issuance cost (496) (495)
Issuance of common stock 132,750 8,341
Payments of stock issuance costs (6,939) 0
Proceeds from exercise of stock options and warrants 8,861 315
Repurchase of stock warrants 0 (630)
--------- ---------
Net cash provided by financing activities 157,881 12,210
--------- ---------
</TABLE>
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CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
Six months ended
June 30
----------------
1996 1995
-------- -------
<S> <C> <C>
Net increase in cash 121,500 2,407
CASH AND CASH EQUIVALENTS, beginning of period 2,145 4,265
-------- -------
CASH AND CASH EQUIVALENTS, end of period $123,645 $ 6,672
======== =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 2,431 $ 2,048
======== =======
Income taxes $ 1,877 $ 1,690
======== =======
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 $ 717 $ 205
Additional paid-in capital 1,673 1,183
Retained earnings (3,042) 0
Treasury stock, at cost 652 (1,387)
-------- -------
$ 0 $ 0
======== =======
Long-term debt was converted into common stock:
Other assets $ 0 $ (53)
Long-term debt 0 6,700
Common stock 0 (444)
Additional paid-in capital 0 (6,203)
-------- -------
$ 0 $ 0
======== =======
</TABLE>
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CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of June 30, 1996, the consolidated
statements of operations and cash flows for the six month periods ended
June 30, 1996 and 1995, and the consolidated statement of operations for
the quarters ended June 30, 1996 and 1995 have been prepared by the
Company in accordance with the accounting policies described in its 1995
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,
1996 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, 1996, are not necessarily
indicative of the operating results for the full year.
2. LONG-TERM DEBT
In February, 1996, the company sold $30,000,000 of convertible subordinated
notes. The notes bear interest at 7.5%, payable quarterly and mature in
2002. The Company used the proceeds to repay the principal outstanding
under the company's bank loan and line of credit, $12,353,000 and
$17,000,000, respectively.
In April, 1996, as a result of its preemptive right triggered in
connection with the issuance of convertible subordinated notes, the company
sold $20,000,000 of convertible subordinated notes to Sodexho, S.A. with
terms identical to the aforementioned notes. The proceeds were used to fund
construction of facility expansions.
3. STOCKHOLDERS' EQUITY
In June, 1996, the Company completed a public offering of 1,850,000 shares
of common stock at a price to the public of $75.00 per share. The
proceeds of the offering, after deducting all associated costs, were
$131,948,000.
Also in June, 1996, the Company announced a two-for-one stock split to be
effected in the form of a stock dividend. The dividend was distributed on
July 2, 1996, to all shareholders of record on June 19, 1996. The
consolidated balance sheet and consolidated statements of operations and
cash flows, as well as all earnings per share data, reflect the dividend
as of June 30, 1996.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES AND EXPENSES FROM OPERATIONS
Revenues for the second quarter and first half of 1996 increased 32% and
37%, respectively, over the comparable periods of 1995. Management
revenues increased $15,945,000 and $34,589,000 for the second quarter and
first half of 1996, respectively, as compared to the
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same periods of 1995, while transportation revenues increased $257,000 and
$745,000 for the same relative time periods. The increase in management
revenues was due to compensated mandays increasing by 52% and 48% for the
second quarter and first half of 1996, respectively, over the comparable
periods of 1995. Through a series of new facility openings in 1995 and
1996 and existing facility expansions during 1995, the Company was able to
add approximately 6,900 beds to the domestic operations which are
reflected in 1996 revenues as compared to 1995. The 11% and 17% increase
in transportation revenues for the second quarter and first half of 1996,
respectively, over the comparable periods of 1995 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 1996 increased
22% and 28%, respectively, over the comparable periods of 1995. 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.
General and administrative expenses for the second quarter and first half
of 1996 decreased 14% and 3% respectively, over the comparable periods of
1995. In 1995 the Company acquired two companies that were accounted for
as pooling of interests which resulted in a duplication of services for
General and Administrative expenses. Also included in the second quarter
of 1995 were expenses of approximately $700,000 of non-recurring pooling
expenses. As the Company continues to grow General and Administrative
expenses should grow in volume but continue to decrease as a percentage of
revenues.
Depreciation and amortization for the second quarter and first half of
1996, increased 53% and 56%, respectively, over the comparable periods of
1995. The increases are due to the growth in total beds in facilities
owned by the company.
OTHER EXPENSES
Interest expense, net, increased 54% and 52% for the second quarter and
first half of 1996, respectively, as compared to the same periods in 1995.
The increases are due to the Company assuming debt related to the Eloy
Detention Center in July, 1995, when the Company acquired the remaining
50% of the investment in a partnership, which owns that facility, and due
to the Company issuing $20,000,000 of Convertible Subordinated Notes in
April, 1996.
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, and by assisting governmental agencies in the issuance of
municipal bonds.
Cash flow from operations for the first six months of 1996 was $16,807,000
as compared to $1,006,000 in the comparable period in 1995. 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. Cash flow from operations has allowed the
Company to fund growth and to continue to retire debt on an accelerated
basis.
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The company's working capital revolving credit facility with a U.S. bank
matures May 31, 1998. The credit facility provides for borrowings of up
to $25,000,000 for working capital and certain 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 2% above the applicable 30, 60 or
90 day LIBOR rate. Interest is payable monthly with respect to prime rate
loans and at the expiration of the applicable LIBOR period with respect to
LIBOR rate based loans. The credit facility is secured by certain
accounts receivable and real and personal property at certain of the
company's facilities. There are no prepayment penalties associated with
the credit facility. The credit facility requires the company, among
other things, to maintain maximum leverage ratios and a minimum debt
service coverage ratio. The facility also limits certain payments and
distributions. As of June 30, 1996, there were no borrowings against the
facility. Letters of Credit totaling $4,404,000 have been issued leaving
the unused commitment at $20,596,000.
In February, 1996, the company issued $30,000,000 of its convertible
subordinated notes to an investor. The proceeds were used to repay the
outstanding principal, at the date of funding, under the company's working
capital credit facility and construction loan. The notes bear interest at
7.5%, payable quarterly and require the company to maintain specific ratio
requirements relating to net worth, cash flow and debt coverage. In
April, 1996, as a result of its preemptive right triggered in connection
with the issuance of convertible subordinated notes, Sodexho acquired
$20,000,000 of convertible subordinated notes under the same terms and
conditions.
In connection with the construction and development of certain facilities,
the company caused a U.S. bank to issue two letters of credit totaling
$59,500,000. The letters of credit support certain industrial development
bonds, the proceeds of which were used to construct such facilities. The
company guaranteed to the bank the repayment in full of any amounts drawn
on such letters of credit as a result of a default under the related
bonds. In the event the company is required to fund amounts pursuant to
these guarantees then the company will obtain ownership rights to these
facilities. The company's reimbursement obligations are secured by all of
the collateral that secures the company's credit facility with the U.S.
bank described above and are cross-defaulted with such credit facility.
The company anticipates making cash investments in connection with future
acquisitions and expansions. In addition, in accordance with the
developing trend of private prison manages toward 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
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.
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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
14, 1996, 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 50,000,000 shares to 150,000,000 shares was
ratified. On this motion 22,182,504 shares, voted in favor of the
motion, 2,803,070 shares votes against and 49,770 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) None
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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 12, 1996 /s/ DarrellK.Massengale
- --------------- -------------------------
(Date) Darrell K. Massengale
Treasurer
Principal Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CORRECTIONS CORPORATION OF AMERICA FOR THE SIX MONTHS
ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 124,477
<SECURITIES> 0
<RECEIVABLES> 57,286
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 187,832
<PP&E> 178,223
<DEPRECIATION> 0
<TOTAL-ASSETS> 403,433
<CURRENT-LIABILITIES> 46,417
<BONDS> 94,246
0
0
<COMMON> 74,278
<OTHER-SE> 182,428
<TOTAL-LIABILITY-AND-EQUITY> 403,433
<SALES> 0
<TOTAL-REVENUES> 130,730
<CGS> 0
<TOTAL-COSTS> 107,344
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,530
<INCOME-PRETAX> 20,856
<INCOME-TAX> 8,143
<INCOME-CONTINUING> 12,713
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,713
<EPS-PRIMARY> .16
<EPS-DILUTED> .15
</TABLE>
