Corecivic, Inc. · NYSE:CXW
Corecivic — Corrections Corp of America — Lehman Brothers 2003 High Yield Bond and Syndicated Loan Conference
35 slides from Corecivic's conference presentation, Mar 20, 2003
Slide 1: Lehman Brothers 2003 High Yield Bond and Syndicated Loan Conference
By: Irving E. Lingo, Jr. Chief Financial Officer Corrections Corporation of America Lehman Brothers 2003 High Yield Bond and Syndicated Loan Conference March 19-21, 2003
Slide 2: Forward-Looking Statement
Forward-Looking Statement As defined within the Private Securities Litigation Reform Act of 1995, certain statements herein may be considered forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Factors
Slide 3: The Company
Established in 1983, CCA owns and operates minimum, medium and maximum-level security correctional facilities through contracts with over 50 federal, state and local agencies One of the nation's largest prison operators behind only the federal government and four states Currently provides management
Slide 4: Investment Thesis
Investment Thesis Federal and State Facilities are Operating in Excess of Capacity Budget Shortfalls Constrain Construction of New Beds Demographic Cycle Indicates Influx of Prisoners CCA's Existing Beds Provide Governmental Agencies with a Quick, Cost-Effective Solution to Overcrowding Conditions C
Slide 5: Agenda
Company Overview Corrections Industry Overview Business Overview Financial Review Q&A Agenda
Slide 6: Company Overview
ry ces ‘CORRECTIONS CORPORATION OF AMERICA Company Overview
Slide 7: Company Overview
Company Overview 38 owned facilities with 41,036 beds, 22 managed facilities with 19,188 beds Over 50 contracted agencies, the largest of which accounts for only 13.8% of total revenues One facility is under construction CCA Owned and Managed CCA Owned and Leased CCA Managed Only
Slide 8: CCA is the largest operator of privatized prisons in the nation
CCA is the largest operator of privatized prisons in the nation Company Overview Source: (1) Total Capacity as of March 1, 2003 (2) Total Capacity reported in company website, March 2003 (3) Private Adult Correctional Facility (Sept. 2001)
Slide 9: Quality Correctional Management
80% of the Company's facilities are ACA accredited Lifeline(tm) Program is estimated to result in 50% decrease in recidivism Recently implemented Distance Learning Program for staff and inmate education CCA's escape rate from 1999-2001 was 1.49 per 10,000 inmates vs. an escape rate of 6.49 (1) per 1
Slide 10: Corrections Industry Overview
Corrections Industry Overview
Slide 11: Non-Cyclical Industry
Historically, general economic downturns have not materially affected industry demand for beds Corrections Industry Overview Source: Bureau of Justice Statistics The incarceration rate is defined as the average number of people in the United States confined in prisons per 100,000 United States resid
Slide 12: Growth in Private Corrections
Growth has been driven by: Increased incarceration rates Lack of prison capacity in public sector As of December 31, 2001, 91,828 inmates were housed in private facilities, representing a 5.1% increase over 2000(1): 12.3%(1) of all federal inmates were held in private facilities 5.8%(1) of all state
Slide 13: Prisoner Populations vs. Capacity
Correctional systems are currently operating at or in excess of design capacity: At December 31, 2001, 22 states were operating at 100% or more of their highest capacity The Federal prison system was operating at 131% of its highest capacity at December 31, 2001 This overcrowding is expected to cont
Slide 14: Demographics
Statistics demonstrate that males between the ages of 18-24 are the demographic age group most likely to commit crimes and most likely to be caught, convicted and incarcerated From 1990 through 1996 this demographic was declining; the U.S. Census Bureau now projects a steady increase in this section
Slide 15: Federal Budget Initiatives
The 2003 Federal Budget includes the following: Funding for the U.S. Marshals Service of $696 million, representing an increase of $27.5 million or 4.1% Funding for the INS of over $6.1 billion, representing an increase of more than $1.4 billion or 29.7% The Office of Federal Detention Trustee was f
Slide 16: Business Overview
commeenons conporaTOvranenca | Business Overview
Slide 17: Management Contracts
Management contracts compensate the Company at an inmate per diem rate Certain contracts provide for guaranteed occupancy levels (California City, Cibola and McRae) Contracts typically have terms of one to five years with multiple renewal options Average term of 3-5 years Staggered roll-overs Approx
Slide 18: Operating Expenses
Operating expenses associated with correctional facilities are relatively stable - over 70% fixed The costs associated with facilities are comprised primarily of salaries and employee benefits, food and medical supplies With over $740 million in operating expenses in 2002, the Company believes there
Slide 19: Customers
CCA provides services under management contracts with a diverse base of single-A or better rated state, federal and local agencies Customers Business Overview
Slide 20: Proven Private Sector Advantages
Governmental entities can avoid the capital costs associated with prison construction, diverting funds to alternate uses Existence of competition fosters improved performance in traditional jail and prison systems Significant costs savings in design, construction and facility operations documented r
Slide 21: Financial Review
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Slide 22: 2002 Highlights
Financial Review 2002 Highlights Increased adjusted free cash flow from $71 million for the year ended 2001 to $85 million for the year ended 2002, representing a 15% increase on a per share basis Completed comprehensive senior debt refinancing, resulting in significant GAAP and cash interest saving
Slide 23: Improved Capital Structure
Improved Capital Structure Financial Review New Senior Secured Bank Credit Facility $75 million Term Loan A, matures 2006 - LIBOR +3.5% $565 million Term Loan B, matures 2008 - LIBOR +3.5% (expanded by $30 million in January 2003) $75 million revolver, matures 2006 - LIBOR +3.5% $250 million Senior
Slide 24: Recent Events
In January 2003, the Company purchased the 1,200 bed Crowley Correctional Center located in Olney Springs, Colorado Recent award of contract for up to 1,500 inmates at the Whiteville Correctional Facility. Delivery of inmates has begun; full occupancy anticipated late in the second quarter of 2003 A
Slide 25: Recent Financial Results
($ in millions) Financial Review Recent Financial Results The Company has disclosed certain supplemental financial information for the fourth quarter of 2002 on its website at www.correctionscorp.com, under the Investor Relations section, which includes a reconciliation to the comparable measure und
Slide 26: Capitalization
Financial Review Capitalization ($ in millions) GAAP Basis
Slide 27: Debt Maturity Schedule
Debt Maturity Schedule - as of December 31, 2002 Financial Review
Slide 28: Historical Financial Results
Financial Review Historical Financial Results
Slide 29: Historical Financial Results
Historical Financial Results Financial Review (1) After special items
Slide 30: Occupancy
Financial Overview Occupancy CCA has approximately 8,000 available beds and is actively pursuing numerous contract opportunities
Slide 31: Incremental EBITDA from Filling Beds
Financial Review Each 1,000 additional heads-in-beds adds an estimated $5.2 million to EBITDA, assuming a $15.06 margin per man-day for owned beds Incremental EBITDA from Filling Beds
Slide 32: Potential growth in Adjusted Free Cash Flow
Financial Review Potential growth in Adjusted Free Cash Flow may originate from three distinct sources: Filling the Company's remaining empty beds, and the expansion, acquisition or development of pre-committed new beds Continued margin improvement resulting from ongoing cost- saving initiatives Fur
Slide 33: Free Cash Flow
Financial Review Free Cash Flow Filling existing beds generates EBITDA with no corresponding capital investment The Company currently has approximately $101.5 million in NOL carryforwards; which should eliminate federal income taxes until at least 2004 Due to unique asset class, minimal capital expe
Slide 34: Conclusion
Conclusion Federal and State Facilities are Operating in Excess of Capacity Budget Shortfalls Constrain Construction of New Beds Demographic Cycle Indicates Influx of Prisoners CCA's Existing Beds Provide Governmental Agencies with a Quick, Cost-Effective Solution to Overcrowding Conditions The Comp
Slide 35: Calculation of Adjusted Free Cash Flow and EBITDA
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CALCULATION OF ADJUSTED FREE CASH FLOW AND EBITDA (UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) For the Three Months For the Twelve Months Ended December 31, Ended December 31, 2002 2001 2002 2001 Pre-tax income (loss) available to