Corecivic, Inc. · NYSE:CXW

Corecivic — Corrections Corporation of America — Q4 2014 Earnings Presentation

55 slides from Corecivic's earnings presentation, February 2015

1. Slide 1: Fourth Quarter 2014 Investor Presentation

   February 2015 Fourth Quarter 2014 Investor Presentation

2. Slide 2: Forward-Looking Statements

   Forward-Looking Statements 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

3. Slide 3: Attractive Investment Characteristics

   Attractive Investment Characteristics  Attractive dividend » $0.54 quarterly dividend, $2.16 annualized, or ≈5.5% yield as of February 20, 2015 » Increased quarterly dividend rate by 5.9% in 1Q15  Only 10% of the $80B U.S. corrections market is privatized(1) » Market penetration has increased from

4. Slide 4: About CCA

   About CCA

5. Slide 5: Who We Are

   Who We Are  Established in 1983, CCA owns and operates minimum, medium and maximum-security level correctional facilities, federal detention and residential facilities as well as residential re-entry facilities  Operate as a Real Estate Investment Trust (REIT) » Real Estate is an essential core of

6. Slide 6: Who We Are

   Who We Are  The nation's largest owner of partnership correction and detention facilities in the United States  As of December 31, 2014, CCA has 64 facilities located in 19 states and the District of Columbia » Owned/Controlled and Operate 49 facilities » Operate 12 facilities owned by our governm

7. Slide 7: Clear Industry Leader

   Clear Industry Leader  CCA is the clear leader of the private corrections market, at about 40% of the United States market and nearly 57% of all privately owned/controlled corrections, detention and residential beds in the United States. Partnership Corrections Market Share 90,000 80,000 70,000 60,

8. Slide 8: National Portfolio with Geographic Diversity

   National Portfolio with Geographic Diversity  We have 52 owned/controlled facilities and 12 managed-only facilities located in 19 states and the District of Columbia  We currently have 3 facilities under development with design capacity for 5,964 net additional beds Portfolio as of December 31, 20

9. Slide 9: High Quality, Diverse Customer Base

   High Quality, Diverse Customer Base  85 agreements with federal, state and local agencies » Further diversification within federal agency customers: • > 100 potential customers within federal agencies: 94 U.S. Marshall districts; 24 ICE field offices; and the Federal Bureau of Prisons • Staggered c

10. Slide 10: CCA Value Proposition

    CCA Value Proposition Near-Term Benefits Long-Term Benefits Cost Benefits: Cost Benefits:  RFP/competitive bidding process to negotiate  Reduced long-term pension obligations for terms at market price government partners  CCA pays property taxes at its facilities » State and local pension plans a

11. Slide 11: CCA Value Proposition

    CCA Value Proposition Cost savings are achieved through: 1. Operational Cost Savings Operating Cost Per Total CCA Average Day in Government Real Estate Government-Run Owned Per Percent Facility(1) Cost Per Day Cost Per Day Diem(2) Savings BOP $73.00 $12.00 $85.00 $70.55 17.0% California $128.00 $12.

12. Slide 12: Strong and Stable Cash Flows

    Strong and Stable Cash Flows

13. Slide 13: Recession Resilient Cash Flows

    Recession Resilient Cash Flows  Strong AFFO growth while maintaining modest leverage  Durable cash flows during significant economic downturn » CCA repurchased approximately 20% of its outstanding shares from 2008-2011 $3.50 7.0x AFFO Per Diluted Share $3.00 6.0x $2.57 $2.66 $2.49 Leverage Ratio $

14. Slide 14: Recession Resilient Cash Flow

    Recession Resilient Cash Flow  Because of the unique nature of CCA's asset class, in the depth of the recession, as other REITs were issuing equity under duress, CCA's strong and stable cash flow supported a substantial stock repurchase program Value of Stock Average % of Shares Year-end Year Repur

15. Slide 15: Recession Resilient Cash Flows

    Recession Resilient Cash Flows  From 2006 to 2014, per diem rates have increased 20.5% in aggregate  12% CAGR in Pro Forma Adjusted EPS from 2006 to 2014(1)  Difficult to replace real estate assets = high contract retention and high barriers to entry » Difficult permitting and zoning, long develo

16. Slide 16: High Dividend Return for Shareholders

    High Dividend Return for Shareholders C-Corp REIT $2.50 $2.16 $2.04 $2.00 $1.92 $1.50 $1.00 $0.80 $0.50 $- (1) (2) 2012 2013 2014 2015 (1) CCA initiated a quarterly dividend of $0.20 per share in the second quarter of 2012 (2) Adjusted to exclude the effects of a special dividend paid in 2013 16

17. Slide 17: Financial Highlights

    Financial Highlights For the Three Months Ended For the Full-Year Ended December 31, December 31, 2014 2013 2014 2013 Adjusted Diluted EPS (1) $0.49 $0.44 $1.92 $1.92 Pro Forma Adjusted Diluted EPS (2) $0.49 $0.44 $1.92 $1.83 Normalized FFO per diluted share (1) $0.67 $0.62 $2.65 $2.65 Pro Forma Nor

18. Slide 18: Corrections Industry Trends

    Corrections Industry Trends

19. Slide 19: Public Prisons are Overcrowded

    Public Prisons are Overcrowded  At December 31, 2013, 27 states and the federal government were operating at 100% or more of capacity(1) » Overcrowding produces unsafe conditions; poor inmate quality of life » Reduced rehabilitation opportunities; increased recidivism  No meaningful public sector

20. Slide 20: Many Public Prisons are Old, Unsafe & Costly

    Many Public Prisons are Old, Unsafe & Costly  > 200,000 public prison beds are > 75 years old(1) 140,000 120,659 120,000 94,956 100,000 80,000 60,000 40,000 20,000 - 75 - 100 years 100 or more years  Replacing old public prisons provides operational cost savings & improves safety and living condit

21. Slide 21: Increasing Market Penetration

    Increasing Market Penetration  Compelling value proposition has driven privatized market penetration higher % of Market Share for Private Operators(1) 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (1) Bureau of Justice Statistics, Prisone

22. Slide 22: Criminal Justice Efforts

    Criminal Justice Efforts  As corrections professionals, CCA shares a deep commitment with our partners to help inmates successfully re-enter society  Recently published research from BJS found that approximately 68% of released prisoners were arrested for a new crime within 3 years, and approximat

23. Slide 23: Criminal Justice Proposed Reforms

    Criminal Justice Proposed Reforms  As a matter of longstanding corporate policy, CCA does not lobby, oppose or endorse any legislation that affect sentencing or sentencing guidelines  The federal government is considering changes to sentencing guidelines primarily for drug-related offenses(1) » Ju

24. Slide 24: Potential for Growth

    Potential for Growth

25. Slide 25: Opportunities for Growth & Value Creation

    Opportunities for Growth & Value Creation  Expect to generate 5% to 7% average annual earnings growth over next 3 to 5 years without the need to raise new capital » Facility Development • Trousdale Turner Correctional Center (TN) – 2,552 bed facility for Tennessee with an initial ramp expected to b

26. Slide 26: Opportunities for Growth & Value Creation

    Opportunities for Growth & Value Creation Strategic Acquisitions Capital Deployment  Residential re-entry facilities  Build and fill new beds ‐ Fragmented market ‐ Expand existing facilities & ‐ Opportunity to develop operational greenfield development efficiencies through scale  Acquire existing

27. Slide 27: Growth Through Facility Acquisition

    Growth Through Facility Acquisition  In 2011, CCA purchased and assumed operations of the state-owned Lake Erie, Ohio facility, and industry first transaction » Additional transactions could result in increased interest from other partners » In 2012, GEO announced the acquisition of a facility owne

28. Slide 28: Growth Through Strategic Acquisitions

    Growth Through Strategic Acquisitions  In 2013, CCA acquired Correctional Alternatives, Inc. ("CAI") for $36.5 million » Private owner-operator of community correctional facilities in California with excellent reputation » Annual run-rate at the time of acquisition was ≈ $14 million in revenues, ≈

29. Slide 29: Market-Driven Growth

    Market-Driven Growth Market Dynamics 1 2 3 4 5 Improving Desire to improve Public works Large portfolio of Municipal credit economy & tax cost efficiency of projects lack old, costly public ratings pressure collections government capital funding prisons Issues 1 2 3 4 5 • Overcrowding • Unfunded pen

30. Slide 30: Market Driven Growth – Scenario 1

    Market Driven Growth – Scenario 1  Scenario 1 – Continued Economic Recovery: » Increased tax collections fund budget increases for law enforcement and corrections » Prison overcrowding persists » Inmate populations projected to increase » Increased desire for government cost savings to fund public

31. Slide 31: Market Driven Growth – Scenario 2

    Market Driven Growth – Scenario 2  Scenario 2 – Economic Recovery Stalls: » Prison overcrowding persists » Inmate populations projected to increase » Increased desire for government cost savings to fund public works projects & budget shortfalls » Need to reduce unfunded pension obligations  Expect

32. Slide 32: Strong Balance Sheet Supports Future Growth

    Strong Balance Sheet Supports Future Growth

33. Slide 33: Strong Balance Sheet and Simple Capital Structure

    Strong Balance Sheet and Simple Capital Structure  Our low cost of capital is a competitive advantage Staggered Debt Maturities $700M » $325M Sr. Notes @ 4.125%, due April $600M $525M 2020 $500M » $350M Sr. Notes @ 4.625%, due May 2023 $400M $325M $350M » $900M Revolver @ LIBOR + 1.75%, $300M matur

34. Slide 34: Capital Allocation Policy

    Capital Allocation Policy Maintain Ample Liquidity and Solid Balance Sheet Maximum 4x Debt Leverage Payout ≈ 80% AFFO in Dividends (1) Invest ≈ 20% AFFO in Growth  Paid out of internally generated  Invest in facility acquisitions and cash flow development to grow earnings  Revisit payout ratio an

35. Slide 35: Operational Overview

    Operational Overview

36. Slide 36: Operational Philosophy

    Operational Philosophy  CCA integrates several Correctional Components: » Safety & Security is our First priority » Perform quality services for our government partners and the offenders entrusted in our care » Provide effective programs such as drug treatment, education and vocational options to r

37. Slide 37: Professional Services with Significant Oversight

    Professional Services with Significant Oversight  Detailed contracts specify services to be provided » Detailed, prescriptive statement of work which specifies all services required to be provided • Including meeting jurisdiction's guidelines and correctional standards  CCA facilities are subject

38. Slide 38: Quality Assurance

    Quality Assurance  Quality, in the form of Operational Excellence, is a core value and essential guiding principle for CCA  CCA's Quality Assurance Division is independent of company operations and resides within the Legal Department and reports to the General Counsel of CCA  CCA Audit tools cont

39. Slide 39: Quality Assurance

    Quality Assurance  CCA conducts Unannounced Audits of each facility at least once annually  The Quality Assurance process requires timely corrective action plans that address root causes of deficiencies and monitors progress in correcting deficiencies  In addition to a comprehensive Quality Assur

40. Slide 40: Offender Re-Entry Programming

    Offender Re-Entry Programming  Offenders often lack skills and education. In an effort to reduce recidivism, CCA offers an array of programs: » A variety of inmate services are offered by CCA and/or many of the volunteer organizations throughout our systems • Academic education & high school equiva

41. Slide 41: Appendix

    Appendix

42. Slide 42: Utilizing Available Capacity Drives Earnings Growth

    Utilizing Available Capacity Drives Earnings Growth ($ in thousands) Estimated Potential Total Beds Available Average Annual Incremental at December 31, 2014 Margin(2) EBITDA Owned and Controlled Vacant Facility Capacity(1) 5,994 $ 23.21 $ 50,779,070 Owned and Controlled beds at Facilities with > 10

43. Slide 43: Reconciliation to Adjusted Diluted EPS

    Reconciliation to Adjusted Diluted EPS ($ in thousands, except per share amounts) For the Quarter Ended For the Twelve Month Ended December 31, December 31, 2014 2013 2014 2013 Net income $ 30,006 $ 47,471 $ 195,022 $ 300,835 Special items: Expenses associated with debt refinancing transactions, net

44. Slide 44: Calculation of FFO, Normalized FFO and AFFO

    Calculation of FFO, Normalized FFO and AFFO ($ in thousands, except per share amounts) For the Quarter Ended For the Twelve Month Ended December 31, December 31, 2014 2013 2014 2013 Net income $ 30,006 $ 47,471 $ 195,022 $ 300,835 Depreciation of real estate assets 21,640 20,974 85,560 80,990 Deprec

45. Slide 45: Calculation of NOI

    Calculation of NOI ($ in thousands) For the Quarter Ended For the Twelve Month Ended December 31, December 31, 2014 2013 2014 2013 Revenue owned and controlled properties $ 368,087 $ 354,938 $ 1,409,597 $ 1,390,032 Operating expenses owned and controlled properties (246,943) (245,154) (933,217) (942

46. Slide 46: Calculation of EBITDA and Adjusted EBITDA

    Calculation of EBITDA and Adjusted EBITDA ($ in thousands) For the Quarter Ended For the Twelve Month Ended December 31, December 31, 2014 2013 2014 2013 Net income $ 30,006 $ 47,471 $ 195,022 $ 300,835 Interest expense, net 10,447 10,270 39,535 45,126 Depreciation and amortization 28,512 29,489 113

47. Slide 47: Reconciliation to Pro-Forma AFFO Per Diluted Share

    Reconciliation to Pro-Forma AFFO Per Diluted Share ($ amounts in thousands, except per share amounts) 2015 (Low-End of Guidance) 2014 2013 2012 2011 2010 2009 2008 2007 2006 Net income $ 229,000 $ 195,022 $ 300,835 $ 156,761 $ 162,510 $ 157,193 $ 154,954 $ 150,941 $ 133,373 $ 105,239 Depreciation of

48. Slide 48: Reconciliation to 2015 Guidance

    Reconciliation to 2015 Guidance ($ in thousands, except per share amounts) First Quarter 2015 Full-Year 2015 Low High Low High Net income $ 52,000 $ 53,000 $ 229,000 $ 238,000 Depreciation of real estate assets 21,000 21,000 86,000 86,000 Funds from Operations $ 73,000 $ 74,000 $ 315,000 $ 324,000 O

49. Slide 49: Financial Modeling Considerations

    Financial Modeling Considerations  Facilities are comprised of multiple housing units » E.G.: 1,500-bed facility may be comprised of five 300-bed housing units » Individual housing units may be mothballed until populations are available to fill » Cash operating expenses of an idle facility bed ≈ $1

50. Slide 50: Financial Modeling Considerations

    Financial Modeling Considerations  Q4 2014 Weighted Average Cost of Debt (effective rate): 3.6% » $900 million revolver at LIBOR + 1.75% ($525.0 million drawn at December 31, 2014) » $325 million, 4.125% senior notes due 2020 » $350 million, 4.625% senior notes due 2023  Weighted Average Diluted S

51. Slide 51: Comparable REITs

    Comparable REITs Sector Companies Rationale Hospitals • Medical Properties Trust • High operational component • Obsolescence risk associated with the real estate • Exposed to government payors • High barriers to entry Skilled Nursing • Omega Healthcare • High exposure to government payors • Sabra He

52. Slide 52: Comparable REIT Valuations

    Comparable REIT Valuations Dividend Company Ticker FFO Multiple Yield CCA CXW 15.1x 5.3% Medical Properties Trust MPW 12.0x 5.6% Omega Healthcare OHI 14.4x 5.2% Sabra Health Care SBRA 14.0x 4.8% National Health Investors NHI 15.7x 4.7% Senior Housing Properties SNH 13.0x 6.9% LTC Properties LTC 17.7

53. Slide 53: Contracting Process and Terms

    Contracting Process and Terms  Compensated per inmate, per day – "Per Diem" » Some contracts (approximately one-third) provide occupancy guarantees to ensure customer access to beds  Three contract types: » Owned/Controlled: CCA owns/controls and operates the prison • Single, consolidated per diem

54. Slide 54: Contracting Process and Terms

    Contracting Process and Terms  Procurements typically involve competitive bid process » Per diems set through contract-by-contract competitive bids & negotiation • Unlike healthcare industry – No national reimbursement rate structure » Bed availability often a key requirement • Short execution peri

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Corrections Corporation of America — Q4 2014 Earnings Presentation on 6ix