CoreCivic(CXW) - 2020 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents CoreCivic, Inc.'s unaudited consolidated financial statements and management's analysis for Q3 and nine months ended September 30, 2020 Item 1. Financial Statements Presents CoreCivic, Inc.'s unaudited consolidated financial statements for Q3 and nine months ended September 30, 2020, with detailed notes Consolidated Balance Sheets Total assets increased to $4.04 million from $3.79 million at year-end 2019, driven by higher cash and cash equivalents Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $282,462 | $92,120 | | Total current assets | $593,987 | $435,385 | | Property and equipment, net | $2,703,475 | $2,700,107 | | Total assets | $4,041,203 | $3,791,631 | | Liabilities & Equity | | | | Total current liabilities | $317,376 | $368,811 | | Long-term debt, net | $2,043,692 | $1,928,023 | | Total liabilities | $2,605,211 | $2,414,882 | | Total stockholders' equity | $1,412,721 | $1,376,749 | Consolidated Statements of Operations Revenues decreased in Q3 2020 to $468.3 million from $508.5 million, leading to a significant drop in net income to $26.7 million Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $468,266 | $508,522 | $1,432,008 | $1,482,880 | | Operating Income | $45,166 | $71,095 | $143,418 | $215,313 | | Net Income Attributable to Common Stockholders | $26,717 | $48,994 | $80,960 | $146,912 | | Diluted EPS | $0.22 | $0.41 | $0.68 | $1.23 | Consolidated Statements of Cash Flows Net cash from operating activities decreased to $281.5 million for the nine months ended September 30, 2020, with reduced investing and financing outflows Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $281,513 | $304,072 | | Net cash used in investing activities | ($63,390) | ($198,054) | | Net cash used in financing activities | ($43,527) | ($107,077) | | Net increase (decrease) in cash | $174,596 | ($1,059) | Notes to Consolidated Financial Statements Key disclosures include the Board's decision to revoke REIT status, suspend dividends for debt reduction, and details on real estate transactions - The Board of Directors approved a plan to revoke the Company's REIT election and become a taxable C Corporation, effective January 1, 2021, discontinuing the quarterly dividend to prioritize debt reduction[28][92] - In January 2020, the company acquired a portfolio of 28 properties leased to the federal government for $83.2 million, financed through cash, assumed debt, and Operating Partnership Units[37] - As of September 30, 2020, the company had five idled correctional facilities with a total carrying value of $132.6 million[41][114] - The company is involved in several legal proceedings, including a class action lawsuit related to detainee labor and a securities class action lawsuit following a 2016 DOJ memorandum[81][83] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance decline due to COVID-19, strategic REIT status revocation, and segment performance - Net income for Q3 2020 was $26.7 million, down from $49.0 million in Q3 2019, attributed to lower resident populations, pandemic-related expenses, and tax structure change costs[135] - The Board of Directors approved a plan to revoke the company's REIT election and become a taxable C Corporation, effective January 1, 2021, discontinuing the quarterly dividend to prioritize debt reduction[113][210] - The COVID-19 pandemic negatively impacted operations by reducing ICE, USMS, and state populations due to border entry denials, criminal justice system disruptions, and inmate releases[147][150][211] Facility Net Operating Income by Segment (in millions) | Segment | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Safety | $100.7 | $119.7 | $308.1 | $360.8 | | Community | $3.0 | $6.7 | $12.9 | $21.4 | | Properties | $16.7 | $13.6 | $48.0 | $40.7 | Item 3. Quantitative and Qualitative Disclosures About Market Risk Primary market risk is interest rate changes on variable-rate debt, with a 100 basis point increase impacting interest expense by $6.4 million - The primary market risk is interest rate changes on variable-rate debt, including the revolving credit facility, Term Loan A, and Term Loan B[243] - A hypothetical 100 basis point increase in interest rates would have increased interest expense by $6.4 million for the nine months ended September 30, 2020[243] - Fixed-rate debt, including Senior Notes and non-recourse mortgage notes, mitigates a significant portion of interest rate risk[244] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of the end of the reporting period[246] - No material changes in internal control over financial reporting occurred during the quarter[246] PART II – OTHER INFORMATION This section provides updates on legal proceedings, risk factors, and a list of exhibits filed with the Form 10-Q Item 1. Legal Proceedings This section incorporates legal proceedings detailed in Note 8, including class action lawsuits related to detainee labor and securities - The company refers to Note 8 of the financial statements for details on legal proceedings[249] Item 1A. Risk Factors Updates risk factors, highlighting COVID-19 impact and potential failure to realize benefits from REIT election revocation - The COVID-19 pandemic is a major risk factor, causing reduced ICE, USMS, and state populations, disruptions to the justice system, and increased personnel costs[251][252] - A new risk is that the anticipated benefits of revoking the REIT election may not be realized or may not offset the costs of the transition[256][257] Item 6. Exhibits Lists exhibits filed with Form 10-Q, including credit agreement amendments and required CEO/CFO certifications - Lists filed exhibits, including amendments to the Term Loan Credit Agreement and the Second Amended and Restated Credit Agreement, dated August 4, 2020[260] - Includes required CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[260]