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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED:  MARCH 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM            TO           

COMMISSION FILE NUMBER: 001-16109

 

CORECIVIC, INC.

(Exact name of registrant as specified in its charter)

 

 

MARYLAND

62-1763875

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

 

5501 VIRGINIA WAY

BRENTWOOD, TENNESSEE  

37027

(Zip Code)

(Address of principal executive offices)

 

 

(615) 263-3000

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

CXW

New York Stock Exchange

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  

Indicate the number of shares outstanding of each class of Common Stock as of April 29, 2022:

Shares of Common Stock, $0.01 par value per share: 121,593,309 shares outstanding.

 

 

 

 


 

CORECIVIC, INC.

 

FORM 10-Q

 

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

 

INDEX

 

 

 

PAGE

PART 1 – FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

1

    a)

 

Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021

 

1

    b)

 

Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2022 and 2021

 

2

    c)

 

Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2022 and 2021

 

3

    d)

 

Consolidated Statement of Stockholders' Equity (Unaudited) for the quarterly period ended March 31, 2022

 

4

    e)

 

Consolidated Statement of Stockholders' Equity (Unaudited) for the quarterly period ended March 31, 2021

 

5

    f)

 

Notes to Consolidated Financial Statements (Unaudited)

 

6

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

19

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

40

Item 4.

 

Controls and Procedures

 

40

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

41

Item 1A.

 

Risk Factors

 

41

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

41

Item 3.

 

Defaults Upon Senior Securities

 

41

Item 4.

 

Mine Safety Disclosures

 

41

Item 5.

 

Other Information

 

41

Item 6.

 

Exhibits

 

42

 

 

 

 

 

SIGNATURES

 

43

 

 

 

 


 

PART I – FINANCIAL INFORMATION

ITEM 1. – FINANCIAL STATEMENTS.

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

ASSETS

 

March 31, 2022

 

 

December 31, 2021

 

Cash and cash equivalents

 

$

378,204

 

 

$

299,645

 

Restricted cash

 

 

12,330

 

 

 

11,062

 

Accounts receivable, net of credit loss reserve of $8,488 and $7,931, respectively

 

 

262,467

 

 

 

282,809

 

Prepaid expenses and other current assets

 

 

27,759

 

 

 

26,872

 

Assets held for sale

 

 

 

 

 

6,996

 

Total current assets

 

 

680,760

 

 

 

627,384

 

Real estate and related assets:

 

 

 

 

 

 

 

 

   Property and equipment, net of accumulated depreciation of $1,685,556

       and $1,657,709, respectively

 

 

2,269,913

 

 

 

2,283,256

 

   Other real estate assets

 

 

216,161

 

 

 

218,915

 

Goodwill

 

 

4,844

 

 

 

4,844

 

Other assets

 

 

357,874

 

 

 

364,539

 

Total assets

 

$

3,529,552

 

 

$

3,498,938

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

326,003

 

 

$

305,592

 

Current portion of long-term debt

 

 

37,072

 

 

 

35,376

 

Total current liabilities

 

 

363,075

 

 

 

340,968

 

Long-term debt, net

 

 

1,483,948

 

 

 

1,492,046

 

Deferred revenue

 

 

26,311

 

 

 

27,551

 

Non-current deferred tax liabilities

 

 

90,836

 

 

 

88,157

 

Other liabilities

 

 

173,865

 

 

 

177,748

 

Total liabilities

 

 

2,138,035

 

 

 

2,126,470

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Preferred stock – $0.01 par value; 50,000 shares authorized; none issued and outstanding

   at March 31, 2022 and December 31, 2021, respectively

 

 

 

 

 

 

Common stock – $0.01 par value; 300,000 shares authorized; 121,586 and 120,285 shares

   issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

1,216

 

 

 

1,203

 

Additional paid-in capital

 

 

1,870,065

 

 

 

1,869,955

 

Accumulated deficit

 

 

(479,764

)

 

 

(498,690

)

Total stockholders' equity

 

 

1,391,517

 

 

 

1,372,468

 

Total liabilities and stockholders' equity

 

$

3,529,552

 

 

$

3,498,938

 

 

The accompanying notes are an integral part of these consolidated financial statements.

1


CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

 

For the Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

REVENUE

 

$

452,988

 

 

$

454,718

 

EXPENSES:

 

 

 

 

 

 

 

 

Operating

 

 

344,629

 

 

 

332,884

 

General and administrative

 

 

31,101

 

 

 

29,530

 

Depreciation and amortization

 

 

32,028

 

 

 

32,712

 

Shareholder litigation expense

 

 

 

 

 

51,745

 

Asset impairments

 

 

 

 

 

1,308

 

 

 

 

407,758

 

 

 

448,179

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(22,920

)

 

 

(18,428

)

Gain on sale of real estate assets, net

 

 

2,261

 

 

 

 

Other income (expense)

 

 

1,042

 

 

 

(148

)

INCOME (LOSS) BEFORE INCOME TAXES

 

 

25,613

 

 

 

(12,037

)

Income tax expense

 

 

(6,610

)

 

 

(113,531

)

NET INCOME (LOSS)

 

$

19,003

 

 

$

(125,568

)

BASIC EARNINGS (LOSS) PER SHARE

 

$

0.16

 

 

$

(1.05

)

DILUTED EARNINGS (LOSS) PER SHARE

 

$

0.16

 

 

$

(1.05

)

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

2


 

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED AND AMOUNTS IN THOUSANDS)

 

 

For the Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

19,003

 

 

$

(125,568

)

Adjustments to reconcile net income (loss) to net cash provided by

      operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

32,028

 

 

 

32,712

 

Asset impairments

 

 

 

 

 

1,308

 

Amortization of debt issuance costs and other non-cash interest

 

 

1,730

 

 

 

1,566

 

Gain on sale of real estate assets, net

 

 

(2,261

)

 

 

 

Deferred income taxes

 

 

2,679

 

 

 

96,469

 

Non-cash revenue and other income

 

 

(1,753

)

 

 

385

 

Non-cash equity compensation

 

 

5,267

 

 

 

4,213

 

Other expenses and non-cash items

 

 

1,343

 

 

 

2,403

 

Changes in assets and liabilities, net:

 

 

 

 

 

 

 

 

Accounts receivable, prepaid expenses and other assets

 

 

19,369

 

 

 

13,670

 

Accounts payable, accrued expenses and other liabilities

 

 

20,302

 

 

 

72,438

 

Net cash provided by operating activities

 

 

97,707

 

 

 

99,596

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Expenditures for facility development and expansions

 

 

(2,916

)

 

 

(4,001

)

Expenditures for other capital improvements

 

 

(9,007

)

 

 

(12,221

)

Net proceeds from sale of assets

 

 

9,316

 

 

 

30

 

Increase in other assets

 

 

(1,205

)

 

 

(1,167

)

Net cash used in investing activities

 

 

(3,812

)

 

 

(17,359

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Scheduled principal repayments

 

 

(7,903

)

 

 

(9,945

)

Principal repayments of credit facility

 

 

 

 

 

(20,000

)

Payment of debt defeasance, issuance and other refinancing and related costs

 

 

(13

)

 

 

(125

)

Payment of lease obligations for financing leases

 

 

(142

)

 

 

(136

)

Contingent consideration for acquisition of business

 

 

 

 

 

(1,000

)

Dividends paid

 

 

(866

)

 

 

(1,611

)

Purchase and retirement of common stock

 

 

(5,144

)

 

 

(1,634

)

Net cash used in financing activities

 

 

(14,068

)

 

 

(34,451

)

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

79,827

 

 

 

47,786

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period

 

 

310,707

 

 

 

136,768

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period

 

$

390,534

 

 

$

184,554

 

NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

      Establishment of right of use assets and lease liabilities

 

$

550

 

 

$

322

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest (net of amounts capitalized of $0.2 million and $0.0 million in 2022 and

    2021, respectively)

 

$

4,668

 

 

$

9,251

 

Income taxes paid

 

$

1

 

 

$

69

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3


 

 

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

(UNAUDITED AND AMOUNTS IN THOUSANDS)

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2021

 

 

120,285

 

 

$

1,203

 

 

$

1,869,955

 

 

$

(498,690

)

 

$

1,372,468

 

Net income

 

 

 

 

 

 

 

 

 

 

 

19,003

 

 

 

19,003

 

Retirement of common stock

 

 

(518

)

 

 

(5

)

 

 

(5,139

)

 

 

 

 

 

(5,144

)

Dividends on RSUs

 

 

 

 

 

 

 

 

 

 

 

(77

)

 

 

(77

)

Restricted stock compensation, net of

   forfeitures

 

 

 

 

 

 

 

 

5,267

 

 

 

 

 

 

5,267

 

Restricted stock grants

 

 

1,819

 

 

 

18

 

 

 

(18

)

 

 

 

 

 

 

Balance as of March 31, 2022

 

 

121,586

 

 

$

1,216

 

 

$

1,870,065

 

 

$

(479,764

)

 

$

1,391,517

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4


 

 

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

(UNAUDITED AND AMOUNTS IN THOUSANDS)

 

 

 

Stockholders' Equity

 

 

Non-controlling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

Interest -

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

Operating

 

 

Total

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Equity

 

 

Partnership

 

 

Equity

 

Balance as of December 31, 2020

 

 

119,638

 

 

$

1,196

 

 

$

1,835,494

 

 

$

(446,519

)

 

$

1,390,171

 

 

$

23,271

 

 

$

1,413,442

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(125,568

)

 

 

(125,568

)

 

 

 

 

 

 

(125,568

)

Retirement of common stock

 

 

(220

)

 

 

(2

)

 

 

(1,632

)

 

 

 

 

 

(1,634

)

 

 

 

 

 

(1,634

)

Dividends on RSUs

 

 

 

 

 

 

 

 

 

 

 

(218

)

 

 

(218

)

 

 

 

 

 

(218

)

Restricted stock compensation, net of forfeitures

 

 

 

 

 

 

 

 

4,213

 

 

 

 

 

 

4,213

 

 

 

 

 

 

4,213

 

Restricted stock grants

 

 

859

 

 

 

9

 

 

 

(9

)

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2021

 

 

120,277

 

 

$

1,203

 

 

$

1,838,066

 

 

$

(572,305

)

 

$

1,266,964

 

 

$

23,271

 

 

$

1,290,235

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5


 

 

CORECIVIC, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

MARCH 31, 2022

 

1.

ORGANIZATION AND OPERATIONS

CoreCivic, Inc. (together with its subsidiaries, the "Company" or "CoreCivic") is the nation's largest owner of partnership correctional, detention, and residential reentry facilities and one of the largest prison operators in the United States.  The Company also believes it is the largest private owner of real estate used by government agencies in the U.S. Through three segments, CoreCivic Safety, CoreCivic Community, and CoreCivic Properties, the Company provides a broad range of solutions to government partners that serve the public good through corrections and detention management, a network of residential reentry centers to help address America's recidivism crisis, and government real estate solutions.  As of March 31, 2022, through its CoreCivic Safety segment, the Company operated 45 correctional and detention facilities, 41 of which the Company owned, with a total design capacity of approximately 68,000 beds.  Through its CoreCivic Community segment, the Company owned and operated 24 residential reentry centers with a total design capacity of approximately 5,000 beds.  In addition, through its CoreCivic Properties segment, the Company owned 10 properties for lease to third parties and used by government agencies, totaling 1.8 million square feet.

In addition to providing fundamental residential services, CoreCivic's correctional, detention, and reentry facilities offer a variety of rehabilitation and educational programs, including basic education, faith-based services, life skills and employment training, and substance abuse treatment.  These services are intended to help reduce recidivism and to prepare offenders for their successful reentry into society upon their release.  CoreCivic also provides or makes available to offenders certain health care (including medical, dental, and mental health services), food services, and work and recreational programs.

CoreCivic operated as a real estate investment trust ("REIT") from January 1, 2013 through December 31, 2020.  As a REIT, the Company provided services and conducted other business activities through taxable REIT subsidiaries ("TRSs"). A TRS is a subsidiary of a REIT that is subject to applicable corporate income tax rates and certain qualification requirements. The Company's use of TRSs permitted CoreCivic to engage in certain business activities in which the REIT could not engage directly, so long as those activities were conducted in entities that elected to be treated as TRSs under the Internal Revenue Code of 1986, as amended, and enabled CoreCivic to, among other things, provide correctional services at facilities it owns and at facilities owned by its government partners.  

On August 5, 2020, the Company announced that the Board of Directors ("BOD") unanimously approved a plan to revoke the Company's REIT election and become a taxable C Corporation, effective January 1, 2021.  As a result, the Company no longer operates under REIT rules, including the requirement to distribute at least 90% of its taxable income to its stockholders, which provides the Company with greater flexibility to use its free cash flow.  Effective January 1, 2021, the Company is subject to federal and state income taxes on its taxable income at applicable tax rates, and is no longer entitled to a tax deduction for dividends paid.  The Company continued to operate as a REIT for the 2020 tax year, and existing REIT requirements and limitations, including those established by the Company’s organizational documents, remained in place until January 1, 2021. The BOD also voted unanimously to discontinue the Company's quarterly dividend and prioritize allocating the Company’s free cash flow to reduce debt.

  


6


 

 

2.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying unaudited interim consolidated financial statements have been prepared by the Company and, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of results for the unaudited interim periods presented.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted.  The results of operations for the interim period are not necessarily indicative of the results to be obtained for the full fiscal year.  Reference is made to the audited financial statements of CoreCivic included in its Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the "SEC") on February 18, 2022 (the "2021 Form 10-K") with respect to certain significant accounting and financial reporting policies as well as other pertinent information of the Company.

Risks and Uncertainties

On January 26, 2021, President Biden issued the Executive Order on Reforming Our Incarceration System to Eliminate the Use of Privately Operated Criminal Detention Facilities ("Private Prison EO"). The Private Prison EO directs the Attorney General to not renew United States Department of Justice ("DOJ") contracts with privately operated criminal detention facilities.  Two agencies of the DOJ, the United States Marshals Service ("USMS") and the Federal Bureau of Prisons ("BOP"), utilize CoreCivic's services. U.S. Immigration and Customs Enforcement ("ICE") facilities are not covered by the Private Prison EO, as ICE is an agency of the Department of Homeland Security ("DHS"), not the DOJ, although it is possible that the federal government could choose to take similar action on ICE facilities in the future. We currently have six detention facilities that have separate contracts where the USMS is the primary customer within the facility that all expire at various times over the next several years, with the exception of two contracts that have indefinite terms.  As a result of the Private Prison EO, the Company expects that one contract with the BOP may not be renewed when it expires in November 2022. During 2021, the Company had four direct contracts with the USMS that expired and were not renewed.  At one of these facilities, the Company entered into a new contract with a local government agency to utilize the beds previously contracted by the USMS.  The local government agency is responsible for County inmates and federal detainees, including USMS detainees, and the County is using the facility to address its population needs.  At another of these facilities, the Company expanded a state contract to utilize the beds previously contracted by the USMS.  The remaining two facilities currently remain idle.  The Company expects that there may be further developments as each contract with the USMS reaches its expiration date, and will work with the USMS to enable it to continue to fulfill its mission. However, the Company can provide no assurance that contracts with the USMS will be renewed or replaced upon their expiration.  The USMS and the BOP prison contracts accounted for 23% and 2%, respectively, of CoreCivic's total revenue for the year ended December 31, 2021.

Recent Accounting Pronouncements

Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants and the SEC applicable to financial statements beginning January 1, 2022 or later did not, or are not expected to, have a material effect on the Company's results of operations or financial position.

Fair Value of Financial Instruments

To meet the reporting requirements of Accounting Standards Codification ("ASC") 825, "Financial Instruments", regarding fair value of financial instruments, CoreCivic calculates the estimated fair value of financial instruments using market interest rates, quoted market prices of similar instruments, or discounted cash flow techniques with observable Level 1 inputs for publicly traded debt and Level 2 inputs for all other financial instruments, as defined in ASC 820, "Fair Value Measurement".  At March 31, 2022 and December 31, 2021, there were no material differences between the carrying amounts and the estimated fair values of CoreCivic's financial instruments, other than as follows (in thousands):

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

Carrying

Amount

 

 

Fair Value

 

 

Carrying

Amount

 

 

Fair Value

 

Note receivable from Agecroft Prison Management, LTD

 

$

2,977

 

 

$

3,386

 

 

$

3,063

 

 

$

3,491

 

Debt

 

$

(1,544,029

)

 

$

(1,539,662

)

 

$

(1,551,932

)

 

$

(1,560,346

)



7


 

 

 

3.

GOODWILL

ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test of Goodwill Impairment", establishes accounting and reporting requirements for goodwill and other intangible assets.  Goodwill was $4.8 million as of both March 31, 2022 and December 31, 2021, all of which was related to the Company's CoreCivic Safety segment.

CoreCivic performs its impairment tests during the fourth quarter in connection with its annual budgeting process, and whenever circumstances indicate the carrying value of goodwill may not be recoverable.  Under the provisions of ASU 2017-04, CoreCivic performs a qualitative assessment to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If, after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company performs a quantitative impairment test.  If a quantitative test is required, CoreCivic performs an assessment to identify the existence of impairment and to measure the excess of a reporting unit's carrying amount over its fair value by using a combination of various common valuation techniques, including market multiples and discounted cash flows under valuation methodologies that include an income approach and a market approach. The income valuation approach includes certain significant assumptions impacting projected future cash flows, such as projected revenue, projected operating costs, and the weighted average cost of capital, which are affected by expectations about future market or economic conditions.  These impairment tests are required to be performed at least annually.  

4.

REAL ESTATE TRANSACTIONS

Assets Held For Sale and Dispositions

As of December 31, 2021, CoreCivic had two facilities in its CoreCivic Community segment held for sale.  The aggregate carrying value of the property and equipment of these two facilities, amounting to $7.0 million, was reflected as assets held for sale on the Company's consolidated balance sheet as of December 31, 2021.  The Company closed on the sale of these two facilities, one of which was idled, in the first quarter of 2022.  The aggregate net sales proceeds of the two facilities was $9.3 million, resulting in a net gain on sale of $2.3 million.

During 2021, CoreCivic also completed the sale of five government leased properties in the Company's Properties segment.  The sales of the five properties generated aggregate net proceeds of $125.0 million, after the repayment of debt and other transaction-related costs, resulting in an aggregate net gain on sale of $38.7 million.  

CoreCivic determined that its joint venture investment in Government Real Estate Solutions, LLC ("GRES"), an unrestricted subsidiary previously controlled by the Company, represented a variable interest entity ("VIE") in accordance with ASC 810, "Consolidation".  CoreCivic had 100% voting control in GRES. Accordingly, CoreCivic concluded that it was the primary beneficiary of GRES and consolidated the VIE.  The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.  During June 2021, CoreCivic provided notice to the partners of GRES of its intent to distribute the remaining assets and terminate the partnership.  The Company terminated the partnership in September 2021 and cancelled the applicable Operating Partnership Units for no consideration.  During the third quarter of 2021, the Company reported an increase to stockholders' equity of $17.4 million resulting from the termination of the partnership.

8


 

Idle Facilities

As of March 31, 2022, CoreCivic had seven idled CoreCivic Safety correctional facilities that are currently available and being actively marketed as solutions to meet the needs of potential customers. The following table summarizes each of the idled facilities and their respective carrying values, excluding equipment and other assets that could generally be transferred and used at other facilities CoreCivic owns without significant cost (dollars in thousands):

 

 

 

 

 

 

 

Net Carrying Values

 

 

 

Design

 

 

March 31,

 

 

December 31,

 

Facility

 

Capacity

 

 

2022

 

 

2021

 

Prairie Correctional Facility

 

 

1,600

 

 

$

14,195

 

 

$

14,416

 

Huerfano County Correctional Center

 

 

752

 

 

 

15,070

 

 

 

15,230

 

Diamondback Correctional Facility

 

 

2,160

 

 

 

36,490

 

 

 

36,917

 

Marion Adjustment Center

 

 

826

 

 

 

10,639

 

 

 

10,743

 

Kit Carson Correctional Center

 

 

1,488

 

 

 

50,506

 

 

 

50,950

 

West Tennessee Detention Facility

 

 

600

 

 

 

20,364

 

 

 

20,622

 

Leavenworth Detention Center

 

 

1,033

 

 

 

53,615

 

 

 

54,162

 

 

 

 

8,459

 

 

$

200,879

 

 

$

203,040

 

 

As of March 31, 2022, CoreCivic also had one idled non-core facility in its Safety segment containing 240 beds with a net book value of $3.1 million, and three idled facilities in its Community segment, containing an aggregate of 650 beds with an aggregate net book value of $8.7 million.  

CoreCivic incurred operating expenses at these idled facilities of approximately $2.0 million during the period they were idle for both the three months ended March 31, 2022 and 2021.  The 2022 amount excludes $3.5 million of operating expenses incurred at the West Tennessee Detention Facility and the Leavenworth Detention Center during the first quarter of 2022.  The West Tennessee facility was idled upon the expiration of a USMS contract on September 30, 2021, and the Leavenworth facility was idled upon the expiration of a USMS contract on December 31, 2021.  Although recently idled, CoreCivic has retained a certain staffing level at both facilities in order to quickly respond should the Company enter into new contracts with government agencies in the near-term.  The Company also continued to incur expenses related to transportation services provided by staff at the Leavenworth facility during the first quarter of 2022.

The Company estimated undiscounted cash flows for each facility with an impairment indicator, including the idle facilities described above. The Company’s estimated undiscounted cash flows reflect the Company’s most recent expectations around potential utilization of the facilities and projected cash flows based on historical cash flows, cash flows of comparable facilities, and recent contract negotiations for utilization. The Company concluded that the estimated undiscounted cash flows exceeded carrying values for each facility as of March 31, 2022 and December 31, 2021.

CoreCivic evaluates on a quarterly basis market developments for the potential utilization of each of its idle properties in order to identify events that may cause CoreCivic to reconsider its assumptions with respect to the recoverability of book values as compared to undiscounted cash flows.  CoreCivic considers the cancellation of a contract in its Safety or Community segment or an expiration and non-renewal of a lease agreement in its CoreCivic Properties segment as indicators of impairment, and tested each of the idled properties for impairment when it was notified by the respective customers or tenants that they would no longer be utilizing such property.

 

 


9


 

 

 

5.

DEBT

Debt outstanding as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Revolving Credit Facility maturing April 2023. Interest payable

    periodically at variable interest rates.

 

$

 

 

$

 

Term Loan A maturing April 2023.  Interest payable periodically at

    variable interest rates. The rate at March 31, 2022 and

    December 31, 2021 was 1.7% and 1.4%, respectively.

 

 

167,500

 

 

 

170,000

 

Term Loan B maturing December 2024.  Interest payable periodically

    at variable interest rates. The rate at both March 31, 2022 and

    December 31, 2021 was 5.5%.  Unamortized debt issuance

    costs amounted to $1.8 million and $2.0 million

    at March 31, 2022 and December 31, 2021, respectively.

 

 

124,063

 

 

 

128,750

 

4.625% Senior Notes maturing May 2023.  Unamortized debt

    issuance costs amounted to $0.3 million and $0.4 million at

    March 31, 2022 and December 31, 2021, respectively.

 

 

173,650

 

 

 

173,650

 

4.75% Senior Notes maturing October 2027.  Unamortized debt

    issuance costs amounted to $2.2 million and $2.3 million at

    March 31, 2022 and December 31, 2021, respectively.

 

 

250,000

 

 

 

250,000

 

8.25% Senior Notes maturing April 2026.  Unamortized debt

    issuance costs amounted to $12.2 million and $12.9 million at

    March 31, 2022 and December 31, 2021, respectively.

 

 

675,000

 

 

 

675,000

 

4.43% Lansing Correctional Facility Non-Recourse Mortgage Note

    maturing January 2040.  Unamortized debt issuance costs

    amounted to $2.9 million and $3.0 million at March 31, 2022 and

    December 31, 2021, respectively.

 

 

153,816

 

 

 

154,532

 

Total debt

 

 

1,544,029

 

 

 

1,551,932

 

Unamortized debt issuance costs

 

 

(19,435

)

 

 

(20,588

)

Net unamortized original issue discount

 

 

(3,574

)

 

 

(3,922

)

Current portion of long-term debt

 

 

(37,072

)

 

 

(35,376

)

Long-term debt, net

 

$

1,483,948

 

 

$

1,492,046

 

 

Revolving Credit Facility.  On April 17, 2018, CoreCivic entered into a Second Amended and Restated Credit Agreement (referred to herein as the "Bank Credit Facility") in an aggregate principal amount of up to $1.0 billion.  The Bank Credit Facility provides for a term loan of $200.0 million (the "Term Loan A") and a revolving credit facility in an aggregate principal amount of up to $800.0 million (the "Revolving Credit Facility"). The Bank Credit Facility has a maturity of April 2023.  The Bank Credit Facility also contains an "accordion" feature that provides for uncommitted incremental extensions of credit in the form of increases in the revolving commitments or incremental term loans of up to $350.0 million. At CoreCivic's option, interest on outstanding borrowings under the Revolving Credit Facility is based on either a base rate plus a margin ranging from 0.00% to 1.00% or at the London Interbank Offered Rate ("LIBOR") plus a margin ranging from 1.00% to 2.00% based on CoreCivic's then-current leverage ratio.  The Revolving Credit Facility includes a $30.0 million sublimit for swing line loans that enables CoreCivic to borrow at the base rate from the Administrative Agent on same-day notice.

Based on CoreCivic's total leverage ratio, loans under the Revolving Credit Facility currently bear interest at the base rate plus a margin of 0.50% or at LIBOR plus a margin of 1.25%, and a commitment fee equal to 0.35% of the unfunded balance.  The Revolving Credit Facility also has a $50.0 million sublimit for the issuance of standby letters of credit. As of March 31, 2022, CoreCivic had no borrowings outstanding under the Revolving Credit Facility.  As of March 31, 2022, CoreCivic had $14.7 million in letters of credit outstanding resulting in $785.3 million available under the Revolving Credit Facility.  

10


 

The Bank Credit Facility is secured by a pledge of all of the capital stock of CoreCivic's domestic restricted subsidiaries, 65% of the capital stock of CoreCivic's foreign subsidiaries, all of CoreCivic's accounts receivable, and all of CoreCivic's deposit accounts. The Bank Credit Facility requires CoreCivic to meet certain financial covenants, including, without limitation, a maximum total leverage ratio, a maximum secured leverage ratio, and a minimum fixed charge coverage ratio.  As of March 31, 2022, CoreCivic was in compliance with all such covenants.  In addition, the Bank Credit Facility contains certain covenants that, among other things, limit the incurrence of additional indebtedness, payment of dividends and other customary restricted payments, permitted investments, transactions with affiliates, asset sales, mergers and consolidations, liquidations, prepayments and modifications of other indebtedness, liens and other encumbrances and other matters customarily restricted in such agreements.  In addition, the Bank Credit Facility is subject to certain cross-default provisions with terms of CoreCivic's other unsecured indebtedness, and is subject to acceleration upon the occurrence of a change of control.

As a result of opposition to immigration, detention and incarceration policies and the association of private companies with such policies, some banks, including several that are currently parties to the Bank Credit Facility, have announced that they do not expect to continue providing credit or financial services to private entities that own or operate correctional and detention facilities, including CoreCivic, or to otherwise participate in the provision of credit or financial services in connection with the development or operation of correctional and detention facilities that are associated with private companies.  The banks that are currently parties to the Bank Credit Facility are obligated to honor their commitments under the Bank Credit Facility until its maturity.

Incremental Term Loan A. Interest rate margins under the Term Loan A are the same as the interest rate margins under the Revolving Credit Facility.  The Term Loan A also has the same collateral requirements, financial and certain other covenants, and cross-default provisions as the Revolving Credit Facility.  The Term Loan A, which is pre-payable without penalty, also has a maturity concurrent with the Revolving Credit Facility due April 2023, with scheduled quarterly principal payments through April 2023.  As of March 31, 2022, the outstanding balance of the Term Loan A was $167.5 million.  

Senior Secured Term Loan B. On December 18, 2019, CoreCivic entered into a new $250.0 million Senior Secured Term Loan B ("Term Loan B" and, together with the Bank Credit Facility, the "Credit Agreements").  The Term Loan B bears interest at a rate of LIBOR plus 4.50%, with a 1.00% LIBOR floor (or, at CoreCivic's option, a base rate plus 3.50%), and has a five-year maturity with scheduled quarterly principal payments through December 2024.  The Term Loan B is secured by a first lien on certain specified real property assets, representing a loan-to-value of no greater than 80%.  CoreCivic can prepay the Term Loan B at any time and from time to time, without premium or penalty. The Term Loan B was issued at a price of 95% of the principal amount of the Term Loan B, resulting in a discount of $12.5 million, which is amortized into interest expense over the term of the Term Loan B.  CoreCivic capitalized approximately $5.1 million of costs associated with the issuance of the Term Loan B.  During October 2021 and in accordance with the terms of the Term Loan B, CoreCivic repaid $90.0 million of the outstanding balance of the Term Loan B using cash on hand.  As a result, the Company reported a charge of $4.1 million for the pro rata write-off of unamortized debt issuance costs and the original issue discount.  As of March 31, 2022, the outstanding balance of the Term Loan B was $124.1 million.  

Senior Notes.  Interest on the $173.7 million remaining principal balance outstanding on CoreCivic's 4.625% senior notes issued in April 2013 with an original principal amount of $350.0 million (the "4.625% Senior Notes") accrues at the stated rate and is payable in May and November of each year.  The 4.625% Senior Notes are scheduled to mature on May 1, 2023.  Interest on the $250.0 million aggregate principal amount of CoreCivic's 4.75% senior notes issued in October 2017 (the "4.75% Senior Notes") accrues at the stated rate and is payable in April and October of each year.  The 4.75% Senior Notes are scheduled to mature on October 15, 2027.  Interest on the $675.0 million aggregate principal amount of CoreCivic's 8.25% senior notes issued in April and September 2021 (the "8.25% Senior Notes"), as further described hereinafter, accrues at the stated rate and is payable in April and October of each year.  The 8.25% Senior Notes are scheduled to mature on April 15, 2026.  

The 4.625% Senior Notes, the 4.75% Senior Notes, and the 8.25% Senior Notes, collectively referred to herein as the "Senior Notes", are senior unsecured obligations of the Company and are guaranteed by all of the Company's existing and future subsidiaries that guarantee the Bank Credit Facility.  CoreCivic may redeem all or part of the 4.625% Senior Notes and the 4.75% Senior Notes at any time prior to three months before their respective maturity date at a "make-whole" redemption price, plus accrued and unpaid interest thereon to, but not including, the redemption date.  Thereafter, the 4.625% Senior Notes and the 4.75% Senior Notes are redeemable at CoreCivic's option, in whole or in part, at a redemption price equal to 100% of the aggregate principal amount of the notes to be redeemed plus accrued and unpaid interest thereon to, but not including, the redemption date. The Company may redeem all or part of the 8.25% Senior Notes at any time prior to April 15, 2024, in whole or in part, at a "make-whole" redemption price, plus accrued and unpaid interest thereon to, but not including, the redemption date.  Thereafter, the 8.25% Senior Notes are redeemable at CoreCivic's option, in whole or in part, at a redemption price expressed as a percentage of the principal amount thereof, which percentage is 104.125% beginning on April 15, 2024 and 100% beginning on April 15, 2025, plus, in each such case, accrued and unpaid interest thereon to, but not including, the redemption date.

11


 

On April 14, 2021, the Company completed an underwritten registered offering of $450.0 million aggregate principal amount of 8.25% senior unsecured notes due 2026 (the "Original 8.25% Senior Notes"). The Original 8.25% Senior Notes were priced at 99.0% of face value and as a result have an effective yield to maturity of 8.50%. The net proceeds from the issuance of the Original 8.25% Senior Notes totaled approximately $435.1 million, after deducting the original issuance and underwriting discounts and estimated offering expenses. The Company used a significant amount of the net proceeds from the offering of the Original 8.25% Senior Notes (i) to redeem all of the $250.0 million aggregate principal amount of CoreCivic's 5.0% senior notes issued in September 2015 (the "5.0% Senior Notes"), including the payment of the applicable "make-whole" redemption amount of $15.5 million and accrued interest, and (ii) to otherwise repay or reduce its other indebtedness, including repurchasing $149.0 million of its 4.625% Senior Notes at an aggregate purchase price of $151.2 million in privately negotiated transactions, reducing the outstanding balance of the 4.625% Senior Notes, which was originally $350.0 million, to $201.0 million.  In the second and fourth quarters of 2021, the Company purchased an additional $27.3 million of its 4.625% Senior Notes at par in open market purchases, further reducing the outstanding balance of the 4.625% Senior Notes to $173.7 million.

The "make-whole" redemption amount paid in connection with the redemption of the 5.0% Senior Notes, originally scheduled to mature on October 15, 2022, and the aggregate price paid for the 4.625% Senior Notes in excess of the principal amount of the notes repurchased resulted in charges of $19.2 million during the second quarter of 2021, including costs associated with the repurchases and the proportionate write-off of existing debt issuance costs.  The remaining net proceeds were used to pay down a portion of the amounts outstanding under the Revolving Credit Facility and for general corporate purposes.  

On September 29, 2021, CoreCivic completed an underwritten registered tack-on offering of $225.0 million in aggregate principal amount of 8.25% Senior Notes due 2026 (the "Additional 8.25% Senior Notes") at an issue price of 102.25% of their aggregate principal amount, plus accrued interest from the April 14, 2021 issue date for the Original 8.25% Senior Notes, resulting in an effective yield to maturity of 7.65% for the Additional 8.25% Senior Notes.  The Additional 8.25% Senior Notes and the Original 8.25% Senior Notes, together the 8.25% Senior Notes, constitute a single class of securities and have identical terms, other than issue date and issue price.  The issuance of the Additional 8.25% Senior Notes increased the total aggregate principal amount of 8.25% Senior Notes outstanding to $675.0 million.  The net proceeds from the issuance of the Additional 8.25% Senior Notes totaled approximately $225.5 million, after deducting the underwriting discounts and estimated offering expenses and including the original issuance premium.

Lansing Correctional Facility Non-Recourse Mortgage Note.  On April 20, 2018, CoreCivic of Kansas, LLC (the "Issuer"), a wholly-owned unrestricted subsidiary of the Company, priced $159.5 million in aggregate principal amount of non-recourse senior secured notes of the Issuer (the "Kansas Notes"), in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.  The private placement closed on June 1, 2018.  The Company used the proceeds of the private placement, which were drawn on quarterly funding dates beginning in the second quarter of 2018, to fund construction of the Lansing Correctional Facility, along with costs and expenses of the project.  The Kansas Notes have a yield to maturity of 4.43% and are scheduled to mature in January 2040, 20 years following completion of the project, which occurred in January 2020. Principal and interest on the Kansas Notes are payable in quarterly payments, which began in July 2020 and continue until maturity. CoreCivic may redeem all or part of the Kansas Notes at any time upon written notice of not less than 30 days and not more than 60 days prior to the date fixed for such prepayment, with a "make-whole" amount, together with interest on the Kansas Notes accrued to, but not including, the redemption date. CoreCivic capitalized approximately $3.4 million of costs associated with the private placement. Because the Issuer has been designated as an unrestricted subsidiary of the Company under terms of the Company's Credit Agreements, the issuance and service of the Kansas Notes, and the revenues and expenses associated with the facility lease, do not impact the financial covenants associated with the Company's Credit Agreements.  As of March 31, 2022, the outstanding balance of the Kansas Notes was $153.8 million.

 

Debt Maturities.  Scheduled principal payments as of March 31, 2022 for the remainder of 2022, the next five years, and thereafter were as follows (in thousands):

 

2022 (remainder)

 

$

27,473

 

2023

 

 

354,796

 

2024

 

 

96,597

 

2025

 

 

5,823

 

2026

 

 

681,326

 

2027

 

 

256,855

 

Thereafter

 

 

121,159

 

Total debt

 

$

1,544,029

 

 

 

 

12


 

 

6.

STOCKHOLDERS' EQUITY

Dividends on Common Stock

As further discussed in Note 1, on August 5, 2020, the BOD voted unanimously to approve a plan to revoke the Company’s REIT election and become a taxable C Corporation, effective January 1, 2021; the BOD also voted unanimously to discontinue the quarterly dividend and prioritize allocating the Company's free cash flow to reduce debt levels.  

Restricted Stock Units

During the first quarter of 2022, CoreCivic issued approximately 2.1 million restricted common stock units ("RSUs") to certain of its employees and non-employee directors, with an aggregate value of $21.0 million, including 1.9 million RSUs to employees and non-employee directors whose compensation is charged to general and administrative expense and 0.2 million RSUs to employees whose compensation is charged to operating expense. During 2021, CoreCivic issued approximately 2.7 million RSUs to certain of its employees and non-employee directors, with an aggregate value of $21.8 million, including 2.5 million RSUs to employees and non-employee directors whose compensation is charged to general and administrative expense and 0.2 million RSUs to employees whose compensation is charged to operating expense.

Since 2015, CoreCivic has established performance-based vesting conditions on the RSUs awarded to its officers and executive officers that, unless earlier vested under the terms of the agreements, are subject to vesting over a three-year period based upon the satisfaction of certain annual performance criteria, and no more than one-third of the RSUs can vest in any one performance period.  The RSUs awarded to officers and executive officers in 2020, 2021 and 2022 consist of a combination of awards with performance-based conditions and time-based conditions.  Unless earlier vested under the terms of the RSU agreements, the RSUs with time-based vesting conditions vest in equal amounts over three years on the later of (i) the anniversary date of the grant or (ii) the delivery of the audited financial statements by the Company’s independent registered public accountant for the applicable fiscal year. The RSUs with performance-based vesting conditions are divided into one-third increments, each of which is subject to vesting based upon satisfaction of certain annual performance criteria established at the beginning of the fiscal years ending December 31, 2020, 2021, and 2022 for the 2020 awards, December 31, 2021, 2022, and 2023 for the 2021 awards, and December 31, 2022, 2023, and 2024 for the 2022 awards, and which can be increased up to 150% or decreased to 0% based on performance relative to the annual performance criteria, and further increased or decreased using a modifier of 80% to 120% based on CoreCivic's total shareholder return relative to a peer group.  Because the performance criteria for the fiscal years ending December 31, 2023 and 2024 have not yet been established, the values of the third RSU increment of the 2021 awards and of the second and third increments of the 2022 awards for financial reporting purposes will not be determined until such criteria are established.  Time-based RSUs issued to other employees, unless earlier vested under the terms of the agreements, generally vest in equal amounts over three years on the later of (i) the anniversary date of the grant or (ii) the delivery of the audited financial statements by the Company’s independent registered public accountant for the applicable fiscal year. RSUs issued to non-employee directors generally vest one year from the date of award.  

During the three months ended March 31, 2022, CoreCivic expensed $5.3 million, net of forfeitures, relating to RSUs ($0.4 million of which was recorded in operating expenses and $4.9 million of which was recorded in general and administrative expenses).  During the three months ended March 31, 2021, CoreCivic expensed $4.2 million, net of forfeitures, relating to RSUs ($0.5 million of which was recorded in operating expenses and $3.7 million of which was recorded in general and administrative expenses). As of March 31, 2022, approximately 4.0 million RSUs remained outstanding and subject to vesting.