CCA Board of Directors Authorizes REIT Conversion

CCA Board of Directors Authorizes REIT Conversion 
Favorable Private Letter Ruling Received From Internal Revenue
Service; Electing REIT Status Effective January 1, 2013; Raises 2012
Guidance and Provides 2013 Guidance 
NASHVILLE, TN -- (Marketwire) -- 02/07/13 --   CCA (NYSE: CXW) (the
Company or Corrections Corporation of America), America's leader in
partnership corrections, announced today that its Board of Directors
(the Board) has unanimously authorized the Company to elect to
qualify as a Real Estate Investment Trust (REIT) for the taxable year
commencing January 1, 2013 (the REIT Conversion). This decision
follows the receipt of a favorable Private Letter Ruling (PLR) from
the IRS, and completion of the internal reorganization previously
announced. CCA has also received an opinion from Latham & Watkins
LLP, which advised CCA on its REIT conversion that CCA qualifies as a
REIT. 
John Ferguson, Chairman of the Board, stated, "Based on a thorough
analysis, our Board and management team believe that electing REIT
status will maximize value for our shareholders through increases in
free cash flow and dividends while continuing to provide significant
earnings growth capacity." 
Damon Hininger, President and CEO, stated, "The REIT structure will
create additional opportunities for shareholder value creation.
Additionally, our customers will experience no change in the people,
procedures or high quality of service they have come to expect from
CCA, nor will the conversion affect our employees." 
Shareholder Vote 
Shareholder approval of the REIT conversion is not required. However,
to ensure we meet REIT shareholder ownership restrictions, CCA plans
to present to shareholders a proposal at our Annual Meeting of
Stockholders in May 2013 to approve the addition of certain ownership
limitations in CCA's charter. 
Internal Reorganization 
As previously announced, the Company completed an internal
reorganization of its business operations at the end of last year
which will allow it to elect to qualify as a REIT for the taxable
year commencing January 1, 2013. Under our new REIT structure, we
will deliver certain services and hold and operate certain assets
through one or more taxable REIT subsidiaries (TRS). A TRS is a
subsidiary of a REIT that is subject to applicabl
e corporate income
tax. Our use of TRSs enables us to continue to engage in certain
businesses while complying with REIT qualification requirements. The
non-REIT qualified businesses that we hold through the TRSs include
our managed-only business and TransCor (our inmate transportation
business). In addition, certain other services will be provided by
the TRS for the benefit of the REIT. The vast majority of the income
tax expense we expect to incur will be related to earnings generated
by the TRSs. 
To maintain REIT status the Company will need and expects to meet a
number of ongoing REIT qualification requirements. One such
requirement generally mandates annual dividends to shareholders equal
to at least 90% of annual tax basis net income (the Minimum Annual
Dividend). A REIT is permitted to deduct dividends paid to its
shareholders from its corporate taxable income, and therefore, taxes
are paid by shareholders on the dividends received. The Company
intends to make quarterly dividend payments that in the aggregate
will be equal to or greater than the Minimum Annual Dividend
required. The Company is considering changing its quarterly dividend
payment schedule to April, July, October and January beginning in
2013. 
E&P Dividend and Other Conversion Items 
In order to comply with REIT rules, CCA's Board plans to declare a
special one-time dividend to distribute earnings and profits
accumulated prior to our REIT election of approximately $650 million
to $700 million during 2013 (the E&P Dividend). The Company intends
to pay the E&P Dividend with a combination of approximately 20% cash
and 80% common stock. CCA will publicly announce a record date and
payable date once determined by the Board. 
Note this E&P Dividend will be taxable in 2013 and the amount of cash
each shareholder receives may not be sufficient to cover the full
amount of federal and state taxes owed on this distribution.
Shareholders are encouraged to consult with their tax professional to
determine the personal tax consequence of this distribution. 
We estimate we will incur approximately $25 million in one-time
conversion expenses (REIT Conversion Costs), excluding any costs
associated with issuing new debt, refinancing existing debt or
modifying existing debt agreements. We also expect to record a
one-time income tax benefit of $115 million to $135 million in 2013
as a result of the reversal of certain net deferred tax liabilities.
We believe there will be no reclassification of assets from personal
property to real property in connection with the REIT Conversion,
thereby preventing any tax liabilities associated with the recapture
of depreciation expenses. 
Debt Capital Markets Transactions 
As discussed above, the Company intends to pay the E&P Dividend with
a combination of cash and common stock and to pay quarterly cash
dividends to meet the Minimum Annual Dividend requirement. The
Company expects to execute several debt capital markets transactions
during 2013 in order to obtain the covenant flexibility to make these
dividend payments and to raise additional capital to fund various
aspects of the REIT Conversion. The Company plans to refinance all of
its $465 million 7.75% Senior Notes due 2017 (7.75% Senior Notes) and
may also seek an amendment to its $785 million Revolving Credit
Facility to obtain greater operating flexibility under the REIT
structure. The Company also plans to raise additional debt capital to
fund the payment of up to 20% of the E&P Dividend in cash, debt
refinancing and issuance costs and the REIT Conversion Costs. The
specific timing of these transactions has not yet been determined.
Management is highly confident in CCA's ability to execute these
transactions in 2013 given the Company's modest leverage, strong
balance sheet and strong historical support from the credit markets. 
The opinion of Latham & Watkins LLP was based on various assumptions
relating to CCA's organization and operation, and was conditioned
upon fact-based representations made by CCA's management regarding
CCA's organization, assets, income, and the present and future
conduct of CCA's business operations. 
2012 and 2013 Financial Guidance 
Fourth Quarter and Full-year 2012 Guidance 
The Company is raising its 2012 financial guidance as follows: 


 
--  Fourth Quarter Adjusted Diluted EPS: $0.43 to $0.44
--  Full-year Adjusted Diluted EPS: $1.56 to $1.57
--  Full-year Funds From Operations (FFO) Per Diluted Share (adjusted to
    NAREIT definition): $2.34 to $2.35
--  Full-year Adjusted Funds From Operations (AFFO) Per Diluted Share
    (adjusted to NAREIT definition): $2.32 to $2.34

  
Both FFO and AFFO for 2012 have been adjusted to conform more closely
to NAREIT definitions and to be consistent with the calculations of
2013 guidance amounts below. The 2012 guidance excludes income
statement impacts associated with the REIT Conversion Costs and debt
refinancing expenses. 
Full-year 2013 Guidance 
The Company is providing full-year 2013 financial guidance as
follows: 


 
--  Adjusted Diluted EPS: $2.05 to $2.15
--  FFO per diluted share: $2.80 to $2.90
--  AFFO per diluted share: $2.72 to $2.87
--  Expected Annual Dividend per share: $2.04 to $2.16 -- subject to
    declaration by Board of
 Directors
--  Consolidated GAAP income tax rate: 8.5% to 9.0%

  
Our guidance includes an estimate of the impact from the additional
borrowings discussed above as well as the impact from ongoing annual
REIT compliance costs of $2 to $4 million. Our guidance excludes
charges associated with the one-time REIT Conversion Costs, debt
refinancing expenses (e.g. tender/call fees, write-off of deferred
debt issuance costs), reversal of certain deferred tax items
resulting from the REIT Conversion and shares of common stock issued
as part of the E&P Dividend. 
During 2013, we expect to invest approximately $85 million to $100
million in capital expenditures, consisting of $40 million to $45
million in on-going prison construction and expenditures related to
potential land acquisition, $20 million to $25 million in maintenance
capital expenditures on real estate assets, and $25 million to $30
million on capital expenditures on other assets and information
technology. 
Investor Conference Call and Presentation Information 
An investor conference call and simultaneous webcast has been
scheduled for 11:00 a.m. Eastern Time (10:00 a.m. Central and 8:00
a.m. Pacific Time) on February 8, 2013 to discuss the REIT
Conversion. The dial-in number for the live call is 888-359-3627
(U.S.) and 719-325-2393 (international). The participant passcode is
1440499. In addition, our 2013 REIT Conversion Presentation and a
live audio webcast of the conference call may be accessed on the
Conference Calls/Webcasts section of CCA's investor relations page at
www.cca.com. 
A replay of the audio webcast will be available on the website for
one year. A telephonic replay of the conference will be available
from 2:00 p.m. Eastern Time on Friday, February 8, 2013 until 2:00
p.m. Eastern Time on February 16, 2013 at 888-203-1112 (U.S.) and
719-457-0820 (International). The passcode for the telephonic replay
is 1440499. 
About CCA 
CCA is the nation's largest owner of partnership correction and
detention facilities and one of the largest prison operators in the
United States, behind only the federal government and three states.
We currently operate 67 facilities, including 47 company-owned
facilities, with a total design capacity of approximately 92,500 beds
in 20 states and the District of Columbia. CCA specializes in owning,
operating and managing prisons and other correctional facilities and
providing inmate residential services for governmental agencies. In
addition to providing the fundamental residential services relating
to inmates, our facilities offer a variety of rehabilitation and
educational programs, including basic education, religious services,
life skills and employment training and substance abuse treatment. 
Forward-Looking Statements 
This press release contains statements as to the Company's beliefs
and expectations of the outcome of future events that are
forward-looking statements as defined within the meaning of the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from the
statements made. These include, but are not limited to, the risks and
uncertainties associated with: (i) our ability to meet and maintain
REIT qualification tests; (ii) general economic and market
conditions, including the impact governmental budgets can have on our
per diem rates, occupancy and overall utilization; (iii) fluctuations
in our operating results because of, among other things, changes in
occupancy levels, competition, increases in cost of operations,
fluctuations in interest rates and risks of operations; (iv) our
ability to obtain and maintain correctional facility management
contracts, including as a result of sufficient governmental
appropriations and as a result of inmate disturbances; (v) changes in
the privatization of the corrections and detention industry, the
public acceptance of our services, the timing of the opening of and
demand for new prison facilities and the commencement of new
management contracts; (vi) the outcome of California's realignment
program and utilization of out of state private correctional
capacity; (vii) the availability of debt and equity financing on
terms that are favorable to us and (viii) increases in costs to
construct or expand correctional facilities that exceed original
estimates, or the inability to complete such projects on schedule as
a result of various factors, many of which are beyond our control,
such as weather, labor conditions and material shortages, resulting
in increased construction costs. 


 
                                                                            
                                                                            
                                                                            
Calculation of Adjusted Funds From Operations Per Share Guidance            
                                                                            
CCA's Historical Calculation                                                
                                                                            
                                                      For the Year Ending   
                                                       December 31, 2012    
                                                   ------------------------ 
                                                    Low End of  High End of 
                                                     Guidance     Guidance  
                                                   -----------  ----------- 
Net income                                         $   155,800  $   156,800 
Expenses associated with refinancing transactions                           
 and REIT conversion costs, net of tax                   4,000        4,000 
Income tax benefit for reversal of deferred taxes                           
 due to corporate restructuring                         (2,900)      (2,900)
                                                   -----------  ----------- 
                                                                            
Adjusted net income                                $   156,900  $   157,900 
Income tax expense                                      92,100       92,700 
Income taxes paid                                      (83,900)     (83,900)
Depreciation and amortization                          113,900      113,900 
Other non-cash items                                    15,000       15,500 
                                                   -----------  ----------- 
                                                                            
Funds From Operations                              $   294,000  $   296,100 
Maintenance and technology capital expenditures        (50,000)     (48,000)
                                                   -----------  ----------- 
                                                                            
Adjusted Funds From Operations                     $   244,000  $   248,100 
                                                   ===========  =========== 
                                                                            
Funds From Operations Per Diluted Share            $      2.92  $      2.94 
                                                   ===========  ===========
 
Adjusted Funds From Operations Per Diluted Share   $      2.43  $      2.47 
                                                   ===========  =========== 
                                                                            
                                                                            
CCA's New Calculation in Accordance with NAREIT Definition                  
                                                                            
                                                     For the Year Ending    
                                                      December 31, 2012     
                                                 -------------------------- 
                                                  Low End of    High End of 
                                                   Guidance      Guidance   
                                                 ------------  ------------ 
Adjusted net income                              $    156,900  $    157,900 
Depreciation of real estate assets                     78,000        79,000 
                                                 ------------  ------------ 
                                                                            
Funds From Operations                            $    234,900  $    236,900 
Maintenance capital expenditures on real estate                             
 assets                                               (18,600)      (18,600)
Other non-cash items                                   16,600        16,600 
                                                 ------------  ------------ 
                                                                            
Adjusted Funds From Operations                   $    232,900  $    234,900 
                                                 ============  ============ 
                                                                            
Funds From Operations Per Diluted Share          $       2.34  $       2.35 
                                                 ============  ============ 
Adjusted Funds From Operations Per Diluted Share $       2.32  $       2.34 
                                                 ============  ============ 
                                                                            
                                                                            
                                                     For the Year Ending    
                                                      December 31, 2013     
                                                 -------------------------- 
                                                   Low End of   High End of 
                                                    Guidance      Guidance  
                                                 ------------  ------------ 
Adjusted net income                              $    210,000  $    220,000 
Depreciation on real estate assets                     77,000        77,000 
                                                 ------------  ------------ 
                                                                            
Funds From Operations                            $    287,000  $    297,000 
Other non-cash expenses                                17,000        17,000 
Maintenance capital expenditures on real estate                             
 assets                                               (25,000)      (20,000)
                                                 ------------  ------------ 
                                                                            
Adjusted Funds From Operations                   $    279,000  $    294,000 
                                                 ============  ============ 
                                                                            
Funds From Operations Per Diluted Share          $       2.80  $       2.90 
                                                 ============  ============ 
Adjusted Funds From Operations Per Diluted Share $       2.72  $       2.87 
                                                 ============  ============ 

 
FFO and AFFO are widely accepted non-GAAP supplemental measures of
REIT performance following the standards established by the National
Association of Real Estate Investment Trusts (NAREIT). CCA believes
that FFO and AFFO are important operating measures that supplement
discussion and analysis of the Company's results of operations and
are used to review and assess operating performance of the Company
and its correctional facilities and their management teams. NAREIT
defines FFO as net income computed in accordance with generally
accepted accounting principles, excluding gains (or losses) from
sales of property and extraordinary items, plus depreciation and
amortization of real estate and impairment of depreciable real
estate. Because the historical cost accounting convention used for
real estate assets requires depreciation (except on land), this
accounting presentation assumes that the value of real estate assets
diminishes at a level rate over time. Because of the unique
structure, design and use of the Company's correctional facilities,
management believes that assessing performance of the Company's
correctional facilities without the impact of depreciation or
amortization is useful. CCA may make adjustments to FFO from time to
time for certain other income and expenses that it considers
non-recurring, infrequent or unusual, even though such items may
require cash settlement, because such items do not reflect a
necessary component of the ongoing operations of the Company.
Normalized FFO excludes the effects of such items. CCA calculates
AFFO by adding to Normalized FFO non-cash expenses such as the
amortization of deferred financing costs and stock-based
compensation, and by subtracting from Normalized FFO normalized
recurring real estate expenditures that are capitalized and then
amortized, but which are necessary to maintain a REIT's properties
and its revenue stream. Some of these capital expenditures contain a
discretionary element with respect to when they are incurred, while
others may be more urgent. Therefore, these capital expenditures may
fluctuate from quarter to quarter, depending on the nature of the
expenditures required, seasonal factors such as weather, and
budgetary conditions. Other companies may calculate FFO, Normalized
FFO, and AFFO differently than the Company does, or adjust for other
items, and therefore comparability may be limited. FFO, Normalized
FFO, and AFFO and their corresponding per share measures are not
measures of performance under GAAP, and should not be considered as
an alternative to cash flows from operating activities, a measure of
liquidity or an alternative to net income as indica
tors of the
Company's operating performance or any other measure of performance
derived in accordance with GAAP. This data should be read in
conjunction with the Company's consolidated financial statements and
related notes included in its filings with the Securities and
Exchange Commission.  
Contact:
Investors and Analysts:
Karin Demler
CCA
(615) 263-3005
Media:
Steven Owen
CCA
(615) 263-3107