<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: SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSACTION PERIOD FROM__________TO __________.
COMMISSION FILE NUMBER: 1-13560
CORRECTIONS CORPORATION OF AMERICA
(Exact name of Registrant as specified in its charter)
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 ____
74,928,848
- --------------------------------------------------------------------------------
(Outstanding shares of the issuer's common stock as of November 1, 1996.)
EXHIBIT INDEX ON PAGE 11
Total number of sequentially numbered pages is 12.
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CORRECTIONS CORPORATION OF AMERICA
INDEX
Page
PART I. FINANCIAL INFORMATION: Number
------
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1996 (Unaudited) and December 31, 1995 3
Consolidated Statements of Operations
Nine months ended September 30, 1996 and 1995
(Unaudited) 4
Consolidated Statements of Operations
Three months ended September 30, 1996 and 1995
(Unaudited) 5
Consolidated Statements of Cash Flows
Nine months ended September 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 9-10
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
2
<PAGE> 3
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and restricted cash $ 84,234 $ 2,714
Accounts receivable 58,991 39,661
Prepaid expenses 3,388 1,569
Deferred taxes 1,218 1,646
Other 1,420 1,020
--------- ---------
Total current assets 149,251 46,610
--------- ---------
Restricted investments 587 443
Other assets 27,875 19,642
Property and equipment, net 231,567 137,019
Investment in direct financing lease 13,021 9,764
--------- ---------
$ 422,301 $ 213,478
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 30,895 $ 10,757
Accrued salaries and wages 5,006 3,480
Accrued property taxes 1,630 1,623
Other accrued expenses 8,988 8,637
Current portion of long-term debt 10,674 11,020
--------- ---------
Total current liabilities 57,193 35,517
--------- ---------
Long-term debt, net of current portion 90,765 74,865
Deferred taxes 4,334 4,164
Other long-term liabilities 1,485 2,228
--------- ---------
Total liabilities 153,777 116,774
--------- ---------
Stockholders' equity:
Common stock - $1 par value 74,775 64,540
Additional paid-in capital 161,572 16,560
Retained earnings 32,426 15,641
Treasury stock, at cost (249) (37)
--------- ---------
Total stockholders' equity 268,524 96,704
--------- ---------
$ 422,301 $ 213,478
========= =========
</TABLE>
3
<PAGE> 4
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nine months ended
September 30
------------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues $205,933 $144,911
Expenses:
Operating 151,440 111,897
General and administrative 9,811 10,793
Depreciation and amortization 7,030 4,453
-------- --------
168,281 127,143
-------- --------
Contribution from operations 37,652 17,768
Interest expense, net 3,293 2,707
-------- --------
Income before income taxes 34,359 15,061
Provision for income taxes 13,186 5,897
-------- --------
Net income $ 21,173 $ 9,164
======== ========
Net income per common share:
Primary $ 0.26 $ 0.13
======== ========
Fully diluted $ 0.25 $ 0.12
======== ========
Weighted average common shares outstanding: 82,270 74,559
======== ========
</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
September 30
-----------------------
1996 1995
------- -------
<S> <C> <C>
Revenues $75,203 $49,515
Expenses:
Operating 54,931 36,290
General and administrative 3,517 4,284
Depreciation and amortization 2,489 1,537
------- -------
60,937 42,111
------- -------
Contribution from operations 14,266 7,404
Interest expense, net 763 1,046
------- -------
Income before income taxes 13,503 6,358
Provision for income taxes 5,043 2,341
------- -------
Net income $ 8,460 $ 4,017
======= =======
Net income per common share:
Primary $ 0.10 $ 0.06
======= =======
Fully diluted $ 0.10 $ 0.05
======= =======
Weighted average common shares outstanding: 84,603 77,196
======= =======
</TABLE>
5
<PAGE> 6
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30
----------------------
1996 1995
--------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 21,173 $ 9,164
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 7,029 4,456
Deferred income taxes 9,742 3,549
Loss on disposal of property and equipment 19 7
Equity in earnings of unconsolidated entities (650) (526)
Changes in assets and liabilities:
Accounts receivable (19,222) (11,389)
Prepaid expenses (1,819) (388)
Other current assets (400) (250)
Accounts payable 20,138 8,303
Accrued expenses 1,988 2,520
--------- --------
Net cash provided by operating activities 37,998 15,446
--------- --------
Cash Flows from Investing Activities:
Increase in restricted and escrow cash (2,496) (36)
Increase in restricted investments (144) (518)
Increase in other assets (9,547) (26,568)
Acquisition of property and equipment (106,179) (21,847)
Proceeds from disposals of property and equipment 6,533 45
Increase in direct financing lease (3,693) -0-
Payments received on direct financing lease and notes
receivable 342 235
--------- --------
Net cash used in investing activities (115,184) (48,689)
--------- --------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt 50,000 7,604
Payments on long-term debt (19,300) (5,549)
Proceeds from payments on line of credit, net (15,146) 2,416
Payments of short-term obligations refinanced by long-term
debt -0- 17,480
Payment of debt issuance costs (743) (495)
Issuance of common stock 138,750 8,683
Payments of stock issuance costs (6,939) -0-
Proceeds from exercise of stock options and warrants 9,588 350
Repurchase of stock warrants -0- (630)
--------- --------
Net cash provided by financing activities 156,210 29,859
--------- --------
</TABLE>
6
<PAGE> 7
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30
---------------------
1996 1995
-------- --------
<S> <C> <C>
Net increase (decrease) in cash 79,024 (3,384)
-------- --------
CASH AND CASH EQUIVALENTS, beginning of period 2,145 4,285
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 81,169 $ 901
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 4,984 $ 2,843
======== ========
Income taxes $ 2,978 $ 2,516
======== ========
Supplemental Schedule of Noncash Investing and Financing
Activities:
The Company acquired property and equipment by
assuming long-term debt:
Property and equipment $ 0 $ 27,392
Long-term debt 0 (27,392)
-------- --------
$ 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
======== ========
The Company acquired treasury stock and issued common
stock through the exercise of stock options:
Common stock $ (1,026) $ (234)
Additional paid-in capital (2,400) (681)
Retained earnings 3,129 540
Treasury stock, at cost 297 375
-------- --------
$ 0 $ 0
======== ========
</TABLE>
7
<PAGE> 8
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheets as of September 30, 1996 and December
1995, the consolidated statements of operations and cash flows for the
nine month periods ended September 30, 1996 and 1995, and the consolidated
statements of operations for the quarters ended September 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 September
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 September 30, 1996, are not necessarily
indicative of the operating results for the full year.
Certain reclassifications of 1995 amounts have been made to conform with
the 1996 presentation.
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, are reflective of the
dividend.
8
<PAGE> 9
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 third quarter and first nine months of 1996 increased 52%
and 42%, respectively, over the comparable periods of 1995. Management
revenues increased $25,544,000 and $60,133,000 for the third quarter and
first nine months of 1996, respectively, as compared to the same periods
of 1995, while transportation revenues increased $144,000 and $889,000 for
the same relative time periods. The increase in management revenues was
due to compensated mandays increasing by 57% and 52% for third quarter and
first nine months of 1996, respectively, over the comparable periods of
1995. Through a series of new facility openings and existing facility
expansions during 1995 and 1996, the Company added approximately 6,600
beds to the domestic operations. These additional beds are reflected in
1996 revenues as compared to 1995. The 6% and 13% increase in
transportation revenues for the third quarter and nine months 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, while increasing in dollar amount 49% and 35% for the
third quarter and first nine months of 1996, respectively, as compared to
the same periods of 1995, actually decreased as a percentage of revenue
for both periods. As more beds have been brought on line, the Company has
been able to realize more economies of scale and in effect bring operating
expenses down as a percentage of revenues. During 1996, the Company has
been able to further integrate the facilities acquired in 1995 into the
Company's operational systems.
General and administrative expenses for the third quarter and first nine
months of 1996 decreased 18% and 9% respectively, over the comparable
periods of 1995. This decrease is due to the pooling expenses associated
with acquisitions in the 1995 periods as well as the Company's ability to
reduce duplication in the general and administrative areas by integrating
the acquired facilities into its systems. 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 third quarter and first nine months
of 1996 increased 62% and 58% respectively, over the comparable periods of
1995. This increase was a result of the Company expanding five of its
owned facilities by a total of 1,350 beds.
OTHER EXPENSES
Interest expense, net, decreased 27% for the third quarter and increased
22% for the first nine months of 1996, respectively, as compared to the
same periods in 1995. The increase for the nine month period is the result
of an additional $50,000,000 in convertible, subordinated debt funded in
February and April, 1996. The decrease in the third quarter is due to a
significant increase in interest income as the Company had approximately
$104,000,000 in cash on average for the quarter from the secondary
offering.
9
<PAGE> 10
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 nine months of 1996 was
$37,998,000 as compared to $15,446,000 for 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.
In September, 1996, the Company entered into a new credit facility with a
group of banks which expanded its capacity from $25,000,000 to
$170,000,000. The credit facility provides for general corporate
borrowings and the issuance of a maximum of $136,000,000 in 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 .5% above the
applicable 30, 60 or 90 day LIBOR rate. Interest is payable quarterly with
respect to prime rate loans and at the expiration of the applicable LIBOR
period with respect to LIBOR rate based loans. 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 September 30, 1996, there were
no borrowings under the facility. Letters of Credit totaling $28,250,000
have been issued leaving the unused commitment at $141,750,000.
In September, 1996, the Company also closed a $2,500,000 credit facility
with a bank which provides for the issuance of letters of credit. As of
September 30, 1996 there were $1,377,000 in letters of credit issued
leaving the unused commitment at $1,123,000.
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%, are 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, S.A., an
affiliate of the Company, acquired $20,000,000 of convertible subordinated
notes under the same terms and conditions.
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,
proceeds from the secondary offering 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.
10
<PAGE> 11
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
None
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
11
<PAGE> 12
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)
November 12, 1996 /s/ Darrell K. Massengale
- ----------------------------------- -------------------------------------------
(Date) Darrell K. Massengale
Treasurer
(Principal Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000739404
<NAME> CORRECTIONS CORPORATION OF AMERICA
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 84,234
<SECURITIES> 0
<RECEIVABLES> 58,991
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 149,251
<PP&E> 231,567
<DEPRECIATION> 0
<TOTAL-ASSETS> 422,301
<CURRENT-LIABILITIES> 57,193
<BONDS> 90,765
0
0
<COMMON> 74,775
<OTHER-SE> 193,749
<TOTAL-LIABILITY-AND-EQUITY> 422,301
<SALES> 0
<TOTAL-REVENUES> 205,933
<CGS> 0
<TOTAL-COSTS> 168,281
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,293
<INCOME-PRETAX> 34,359
<INCOME-TAX> 13,186
<INCOME-CONTINUING> 21,173
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,173
<EPS-PRIMARY> .26
<EPS-DILUTED> .25
</TABLE>
