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Previous: ADVANCED TOBACCO PRODUCTS INC, 10-K, 1998-09-29 |
Next: INTEGRATED SECURITY SYSTEMS INC, NT 10-K, 1998-09-29 |
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSACTION PERIOD FROM __________ TO __________.
AMENDMENT NO. 1
COMMISSION FILE NUMBER: 1-13560
---------
CORRECTIONS CORPORATION OF AMERICA
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
TENNESSEE 62-1156308
- ---------------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10 BURTON HILLS BOULEVARD
NASHVILLE, TENNESSEE 37215
- ---------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
(615) 263-3000
- --------------------------------------------------------------------------------
(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
------ ------
80,523,735
- --------------------------------------------------------------------------------
(Outstanding shares of the issuer's common stock as
of August 1, 1998)
This Amendment No. 1 amends the Quarterly Report on Form 10-Q
filed by the Registrant on August 14, 1998, by amending the following
item as set forth in the pages attached hereto.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 133,455 $ 136,147
Accounts receivable, net of allowances 115,712 89,822
Prepaid expenses 7,374 4,868
Other 3,207 2,585
--------- ---------
Total current assets 259,748 233,422
Property and equipment, net 432,785 266,493
Other long-term assets:
Notes receivable 57,661 59,264
Investment in direct financing leases 76,024 90,184
Deferred tax assets 12,946 10,195
Other assets 56,437 38,382
--------- ---------
$ 895,601 $ 697,940
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 63,737 $ 32,094
Accrued salaries and wages 11,699 9,778
Income taxes payable 3,875 14,128
Deferred tax liabilities 1,799 1,229
Other accrued expenses 25,157 20,361
Current portion of long-term debt 5,841 5,847
Current portion of deferred gain on real estate 13,223 13,223
--------- ---------
Total current liabilities 125,331 96,660
Long-term debt, net of current portion 265,659 127,075
Deferred gain on real estate transactions 117,459 122,529
Other noncurrent liabilities -- 3,600
--------- ---------
Total liabilities 508,449 349,864
--------- ---------
Stockholders' equity:
Preferred stock 376 380
Common stock 80,927 80,230
Additional paid-in capital 224,402 215,833
Retained earnings 99,670 92,475
Treasury stock, at cost (18,223) (40,842)
--------- ---------
Total stockholders' equity 387,152 348,076
--------- ---------
$ 895,601 $ 697,940
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
3
<PAGE> 3
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
June 30
---------------------------
1998 1997
--------- --------
<S> <C> <C>
Revenues $ 164,071 $107,024
Expenses:
Operating 114,623 77,978
Lease 13,841 1,194
General and administrative 5,510 3,874
Depreciation and amortization 3,899 4,007
--------- --------
Total expenses 137,873 87,053
--------- --------
Operating income 26,198 19,971
Interest (income) expense, net (2,420) 854
--------- --------
Income before income taxes 28,618 19,117
Provision for income taxes 7,530 7,505
--------- --------
Net income $ 21,088 $ 11,612
========= ========
Net income per common share:
Basic $ .26 $ .15
========= ========
Diluted $ .24 $ .13
========= ========
Weighted average common shares outstanding:
Basic 80,356 76,230
========= ========
Diluted 90,064 90,211
========= ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
4
<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
---------------------------
1998 1997
--------- --------
<S> <C> <C>
Revenues $ 305,369 $198,862
Expenses:
Operating 214,342 140,992
Lease 24,936 2,296
General and administrative 10,463 7,272
Depreciation and amortization 7,287 7,930
--------- --------
Total expenses 257,028 158,490
--------- --------
Operating income 48,341 40,372
Interest (income) expense, net (5,211) 1,352
--------- --------
Income before income taxes 53,552 39,020
Provision for income taxes 14,021 15,413
--------- --------
Net income $ 39,531 $ 23,607
========= ========
Net income per common share:
Basic $ .49 $ .31
========= ========
Diluted $ .44 $ .27
========= ========
Weighted average common shares outstanding:
Basic 79,924 75,917
========= ========
Diluted 90,252 89,937
========= ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
5
<PAGE> 5
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30
----------------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 39,531 $ 23,607
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 7,287 7,930
Deferred and other noncash income taxes 1,818 2,029
Other noncash items 243 183
Loss on disposal of assets 2 86
Equity in earnings of unconsolidated entities (544) (313)
Recognized gain on real estate transactions (5,070) --
Changes in assets and liabilities, net of acquisition:
Accounts receivable (24,253) 16,605
Prepaid expenses (2,367) (3,973)
Other current assets (622) (1,334)
Accounts payable 31,248 34,386
Income taxes payable (10,253) 11,220
Accrued expenses and other liabilities 1,705 8,789
--------- ---------
Net cash provided by operating activities 38,725 99,215
--------- ---------
Cash Flows from Investing Activities:
Additions of property and equipment (189,225) (148,188)
Decrease in restricted cash -- 2,851
Increase in other assets (12,414) (10,864)
Acquisition of USCC subsidiaries, net of cash acquired (9,341) --
Investment in affiliates, net (157) --
Proceeds from disposals of assets 36,132 14
Increase in direct financing leases -- (55,850)
Payments received on direct financing leases and notes receivable 2,627 1,133
--------- ---------
Net cash used in investing activities (172,378) (210,904)
--------- ---------
Cash Flows from Financing Activities:
Payments on long-term debt (22) (4,655)
Proceeds from line of credit, net 140,000 119,500
Payment of debt issuance costs (2,925) (495)
Proceeds from exercise of stock options and warrants 1,508 1,843
Purchase of treasury stock (7,600) --
--------- ---------
Net cash provided by financing activities 130,961 116,193
--------- ---------
Net increase (decrease) in cash (2,692) 4,504
CASH AND CASH EQUIVALENTS, beginning of period 136,147 4,832
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 133,455 $ 9,336
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
6
<PAGE> 6
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30
-------------------------
1998 1997
-------- -------
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest (net of amounts capitalized) $ 2,921 $ 3,102
======== =======
Income taxes $ 22,231 $ 1,492
======== =======
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 $ 398 $ 494
Additional paid-in capital 3,331 2,736
Retained earnings (114) (829)
Treasury stock, at cost (3,615) (2,401)
-------- -------
$ -- $ --
======== =======
Long term debt was converted into common stock:
Other assets $ 5 $ 15
Long-term debt (1,400) (900)
Common stock 51 531
Additional paid-in capital 32 354
Retained earnings (31,500) --
Treasury stock 32,812 --
-------- -------
$ -- $ --
======== =======
The Company converted a facility from investment in direct financing lease to
property and equipment by acquiring the equity in the facility from the
leasing entity:
Accounts receivable $ 3,500
Property and equipment (16,207) $ --
Investment in direct financing leases 12,707 --
-------- -------
$ -- $ --
======== =======
</TABLE>
7
<PAGE> 7
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheets as of June 30, 1998 and December 31,
1997, the consolidated statements of operations for the quarters ended
June 30, 1998 and 1997, and the consolidated statements of operations
and cash flows for the six month periods ended June 30, 1998 and 1997,
have been prepared by the Company in accordance with the accounting
policies described in its 1997 Annual Report on Form 10-K 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
position, results of operations and changes in cash flows at June 30,
1998 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 periods ended June 30, 1998, are not necessarily
indicative of the operating results for the full year.
2. ACQUISITIONS
In April 1998, the Company acquired all of the outstanding capital
stock of eight subsidiaries of U.S. Corrections Corporation ("USCC")
(the "USCC Acquisition") for approximately $10,000,000, less cash
acquired. By virtue of the USCC Acquisition, the Company acquired
contracts to manage four currently operating facilities in Kentucky,
each of which is owned by CCA Prison Realty Trust ("Prison Realty"), as
well as one each in Florida and Texas, each of which is owned by
governmental entities of Florida and Texas, respectively. The Company,
or one of its affiliates, currently leases the four Kentucky facilities
from Prison Realty, or one of its affiliates, pursuant to the terms of
that certain Master Agreement to Lease dated July 1997, between the
Company and Prison Realty (the "Master Lease"). The Company also
acquired by virtue of the USCC Acquisition the right to enter into
contracts to manage two facilities currently under construction that
are located in North Carolina and owned by Prison Realty. The Company
expects to lease these two facilities from Prison Realty pursuant to
the terms and conditions of the Master Lease. The total number of beds
currently operating or under construction under all of the
aforementioned management contracts equals 5,743.
In April 1998, the Company acquired a 376-bed correctional facility
from a governmental entity for $18,389,000 and assumed management of
the facility.
In May 1998, in consideration for relinquishing its right to purchase a
facility, the Company agreed to pay a governmental agency $3,500,000.
As a result, the Company converted the facility from a direct financing
lease to property and equipment. In lieu of a cash payment, the entity
agreed to utilize a credit for management revenue billings beginning in
July 1998 until the credit is exhausted.
8
<PAGE> 8
3. LONG-TERM DEBT
The Company increased its revolving credit facility to $350,000,000 in
June 1998. The facility matures in September 1999 and bears interest,
at the election of the Company, at either the bank's prime rate or a
rate which is 1.25% above the applicable 30, 60, or 90 day LIBOR rate.
As of June 30, 1998, there was $210,000,000 borrowed under this
facility. Letters of credit totaling $3,400,000 had been issued leaving
the total unused commitment at $136,600,000.
4. MERGER
In April 1998, the Company signed a definitive agreement to merge with
Prison Realty in a transaction that will give the shareholders of the
Company the right to receive 0.875 Prison Realty common shares for
every share of Company common stock. Prison Realty will operate as a
real estate investment trust and the merger is expected to be
consummated on or about January 1, 1999, subject to customary
conditions, including approvals by certain regulatory agencies and the
shareholders of both companies.
5. EARNINGS PER SHARE
The Company adopted the provisions of SFAS 128, "Earnings Per Share"
effective December 31, 1997. Under the standards established by SFAS
128, earnings per share is measured at two levels: basic earnings per
share and diluted earnings per share. Basic earnings per share is
computed by dividing net income by the weighted average number of
common shares outstanding during the year. Diluted earnings per share
is computed by dividing net income by the weighted average number of
common shares after considering the additional dilution related to
convertible preferred stock, convertible subordinated notes, options
and warrants. All earnings per share amounts presented herein have been
restated to reflect the adoption of SFAS No. 128.
In computing diluted earnings per common share, the Company's stock
warrants and stock options are considered dilutive using the treasury
stock method, and the Series B convertible preferred stock and the 8.5%
convertible subordinated notes are considered dilutive using the
if-converted method. The following table presents information necessary
to calculate diluted earnings per share for the second quarter and six
months ended June 30:
<TABLE>
<CAPTION>
Three months ended
June 30
-----------------------
1998 1997
------- -------
<S> <C> <C>
Net Income $21,088 $11,612
Interest expense applicable to convertible subordinated
notes, net of tax 147 173
------- -------
Adjusted net income $21,235 $11,785
======= =======
Weighted average common shares outstanding 80,356 76,230
Effect of dilutive options and warrants 4,543 8,264
Conversion of preferred stock 730 --
Conversion of convertible subordinated notes 4,435 5,717
------- -------
Adjusted diluted common shares outstanding 90,064 90,211
------- -------
Diluted earnings per share $ .24 $ .13
======= =======
</TABLE>
9
<PAGE> 9
<TABLE>
<CAPTION>
Six months ended
June 30
-----------------------
1998 1997
------- -------
<S> <C> <C>
Net Income $39,531 $23,607
Interest expense applicable to convertible subordinated
notes, net of tax 307 351
------- -------
Adjusted net income $39,838 $23,958
======= =======
Weighted average common shares outstanding 79,924 75,917
Effect of dilutive options and warrants 4,828 8,303
Conversion of preferred stock 732 --
Conversion of convertible subordinated notes 4,768 5,717
------- -------
Adjusted diluted common shares outstanding 90,252 89,937
------- -------
Diluted earnings per share $ .44 $ .27
======= =======
</TABLE>
6. NEW PRONOUNCEMENT
In April 1998, the AICPA issued Statement of Position ("SOP") 98-5,
"Reporting on the Costs of Start-Up Activities", effective for fiscal
years beginning after December 15, 1998. SOP 98-5 requires the costs of
start-up activities to be expensed as incurred. In accordance with the
provisions of SOP 98-5, the Company will adopt the new accounting
method as of January 1, 1999 by recording a cumulative effect of a
change in accounting principle. As of June 30, 1998, the Company's
deferred start-up costs and project development costs subject to the
provisions of SOP 98-5 totaled $27,732,000.
7. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income", effective for fiscal years
beginning after December 15, 1997. SFAS No.130 requires that changes in
the amounts of certain items, including gains and losses on certain
securities, be shown in the financial statements. The Company adopted
the provisions of SFAS No. 130 on January 1, 1998. The Company's
comprehensive income is substantially equivalent to net income for the
quarters ended and six months ended June 30, 1998 and 1997.
10
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amended report to be signed on its behalf by
the undersigned thereunto duly authorized.
CORRECTIONS CORPORATION OF AMERICA
-----------------------------------
(Registrant)
September 28, 1998 /s/ Darrell K. Massengale
- ----------------------- -----------------------------------------
(Date) Darrell K. Massengale
Chief Financial Officer
Secretary, Principal Accounting Officer
16
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