Corrections Corporation of America (CXW)

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Corrections Corporation of America (CXW)

Q4 2009 Earnings Call

February 10, 2010 11:00 AM ET


John D. Ferguson - Chairman of the Board

Damon T. Hininger - President, Chief Executive Officer, Director

Todd J. Mullenger - Chief Financial Officer, Executive Vice President

William F. Andrews - Director

David Garfinkle - Vice President, Finance and Controller.


Jamie Sullivan - RBC Capital Markets

Todd Van Fleet - First Analysis

T.C. Robillard - Signal Hill Group

Toby Summer - SunTrust Robinson Humphrey

Kevin Campbell - Avondale Partners

Manav Patnaik - Barclays Capital

Chuck Ruff - Insight Management



Good morning everyone and welcome to CCA's Fourth Quarter 2009 Earnings Conference Call. If you need a copy of our press release or supplemental financial data, both documents are available on the investor page of our website at

Good morning everyone and welcome to Corrections Corporation of America's First Quarter 2009 Earnings Conference Call. If you need a copy of our press release or supplemental financial data, both documents are available on the investor page of our website at

Before we begin, let me remind today's listeners that this call contains forward-looking statements pursuant to the Safe Harbor provisions of the Securities and Litigation Reform Act.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made today. Factors that could cause operating and financial results to differ are described in the press release, as well as our Form 10-K and other documents filed with the SEC.

This call may include discussions of the non-GAAP measures. The reconciliation of the most comparable GAAP measurement is provided in our corresponding earnings release and included in the supplemental financial data on our website.

We are under no obligation to update or revise any forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events.

Participating on today's call will be our Chairman of the Board, John Ferguson; President and CEO, Damon Hininger; and Chief Financial Officer, Todd Mullenger.

I'd now like to turn the call over to Mr. Ferguson. Please go ahead, sir.

John Ferguson

Welcome everyone to CCA’s Fourth Quarter 2009 Earnings Call as well as a discussion about our 2010 forward-looking guidance. In addition to the three that were mentioned, in the room with us is Bill Andrews, one of our directors and David Garfinkle, our Vice President - Finance and Controller.

So with that I will turn it over to Todd Mullenger.

Todd Mullenger

Thank you John, and good morning everyone. Moving straight to discussions of our financial results.

In the fourth quarter of 2009, we generated $0.36 of EPS compared to $0.32 per share in Q4 2008, which represents a 13% increase. Full year EPS normalized for unusual items totalled $1.28 representing a 7% increase over a $1.20 in 2008.

Total revenues for the fourth quarter were up 4% over the last year reflecting a 5% increase in average daily-compensated populations. The primary drivers of our year-over-year revenue and earnings grow include increased compensated man-days from the states of California and Arizona as well as commencement of our new BOP contract at our Adams County facility.

Revenues for compensated man-day decreased 0.6% in Q4 2009 versus Q4 2008. The decrease in average per diem was driven primarily by the replacement of family detainees at our T. Don Hutto facility with an all female adult population requiring a lower per diem.

Combined with year-over-year increases in U.S. Marshall populations under a contract that provides for a lower tiered per diem above a certain population level. Excluding these impacts per diems increased by approximately 1% year-over-year in the quarter. Average compensated occupancy for the quarter was 91.5% compared to 92.8%.

We're continued to be pleased with operating expense performance, operating expenses per man-day in Q4 2009 were $39.97 compared to $40.22 a year ago, which represents a decrease of approximately 1%. The decrease in cost per man-day reflect contract modifications from our customers and the impact of our company wide initiative focussed on improving operating efficiencies.

In addition during Q4 2009, we've recognized a significant improvement in our workers compensation expense, as a results of adjustments coming from an updated actual estimates.

These improvements in operating cost were offset by operating inefficiencies as several of our facilities including North Georgia, which operated at 20% of capacity. Our Red Rock facility due to the ramps down of the Alaska populations, and our Prairie facility resulting from Minnesota and Washington populations ramping down.

As a result of the operating inefficiencies in North Georgia, Prairie and Red Rock, operating margins per man-day declined slightly from $18.32 in Q4 2008, $18.19 in Q4 2009 with operating margins range remaining flat year-over-year.

Adjusted free cash flow for the quarter totalled $64 million or $0.55 per share and $240 million or $2.04 per share for the full year. Cash tax payments for the full year totalled approximately $64 million or approximately 27% of pre-tax income which is much lower than our 34% GAAP tax rate reflected in the 2009 income statement.

The lower cash tax rate was accomplished due to certain tax planning strategies. Although, we'll work diligently to minimize our cash taxes going forward, cash taxes are expected to be approximately 31% in 2010 versus 27% in 2009 and as compared to 38.5% GAAP tax rate reflected in EPS guidance for 2010.

With regards to our share repurchase program announced in November of 2008, we did not repurchase any shares during the fourth quarter. Though the number of shares we repurchased today it's still close to approximately $10.7 million at a total cost of $125 million. That plan expired effective December 31, 2009.

Moving next to discussion of our guidance, as indicated in the press release full year guidance is in the range of $1.16 to $1.26. Guidance for EPS, guidance for Q1 is in the range of $0.28 to $0.30. We are also initiating guidance on free cash flow per share. However we are only providing full year guidance giving the significant volatility in quarterly cash taxes.

As we have commented on previously, unlike other industries our depreciation expense is not reflective of the ongoing maintenance CapEx that we will incur to maintain our facilities.

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