2019
A N N U A L R E P O R T
Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 001-16109
CORECIVIC, INC.
(Exact name of registrant as specified in its charter)
MARYLAND
(State or other jurisdiction of
incorporation or organization)
62-1763875
(I.R.S. Employer
Identification No.)
5501 VIRGINIA WAY, BRENTWOOD, TENNESSEE 37027
(Address and zip code of principal executive office)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 263-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class
Common Stock, par value $.01 per share
Trading Symbol(s)
CXW
Name of each exchange
on which registered
New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes ☐ No ☒
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. (Check one):
Large accelerated filer
Non-accelerated filer
Emerging growth company
☒
☐
☐
Accelerated filer
Smaller reporting 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 Act.). Yes ☐ No ☒
The aggregate market value of the shares of the registrant's Common Stock held by non-affiliates was approximately $2,453,588,174 as
of June 30, 2019 based on the closing price of such shares on the New York Stock Exchange on that day. The number of shares of the
registrant's Common Stock outstanding on February 14, 2020 was 119,095,550.
Portions of the registrant's definitive Proxy Statement for the 2020 Annual Meeting of Stockholders, currently scheduled to be held on
May 14, 2020, are incorporated by reference into Part III of this Annual Report on Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE:
CORECIVIC, INC.
FORM 10-K
For the fiscal year ended December 31, 2019
TABLE OF CONTENTS
Item No.
Page
1.
1A.
1B.
2.
3.
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
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13.
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PART I
Business ....................................................................................................................................................
Overview .............................................................................................................................................
Operating Procedures and Offender Services for Correctional, Detention, and Residential
Reentry Facilities ..............................................................................................................................
Business Development ........................................................................................................................
2019 Accomplishments .......................................................................................................................
Facility Portfolio ..................................................................................................................................
Competitive Strengths .........................................................................................................................
Capital Strategy ...................................................................................................................................
Government Regulation .......................................................................................................................
Insurance .............................................................................................................................................
Employees ...........................................................................................................................................
Competition .........................................................................................................................................
Risk Factors ..............................................................................................................................................
Unresolved Staff Comments ....................................................................................................................
Properties ..................................................................................................................................................
Legal Proceedings ....................................................................................................................................
Mine Safety Disclosures ...........................................................................................................................
PART II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities ...................................................................................................................................
Market Price of and Distributions on Capital Stock ............................................................................
Dividend Policy ...................................................................................................................................
Issuer Purchases of Equity Securities ..................................................................................................
Selected Financial Data ............................................................................................................................
Management's Discussion and Analysis of Financial Condition and Results of Operations ....................
Overview .............................................................................................................................................
Critical Accounting Policies ................................................................................................................
Results of Operations ..........................................................................................................................
Liquidity and Capital Resources ..........................................................................................................
Inflation ...............................................................................................................................................
Seasonality and Quarterly Results .......................................................................................................
Quantitative and Qualitative Disclosures about Market Risk ...................................................................
Financial Statements and Supplementary Data ........................................................................................
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...................
Controls and Procedures ...........................................................................................................................
Other Information .....................................................................................................................................
PART III
Directors, Executive Officers and Corporate Governance .......................................................................
Executive Compensation ..........................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .
Certain Relationships and Related Party Transactions and Director Independence .................................
Principal Accounting Fees and Services ..................................................................................................
Exhibits and Financial Statement Schedules ............................................................................................
Form 10-K Summary ...............................................................................................................................
SIGNATURES
PART IV
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CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K, or Annual Report, contains statements as to our 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, as amended. All statements other than statements of current or historical fact
contained in this Annual Report, including statements regarding our future financial position, business strategy,
budgets, projected costs and plans, and objectives of management for future operations, are forward-looking
statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan,"
"projects," "will," and similar expressions, as they relate to us, are intended to identify forward-looking statements.
These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ
materially from the statements made in this Annual Report. These include, but are not limited to, the risks and
uncertainties associated with:
general economic and market conditions, including, but not limited to, the impact governmental budgets
can have on our contract renewals and renegotiations, per diem rates, and occupancy;
fluctuations in our operating results because of, among other things, changes in occupancy levels,
competition, contract renegotiations or terminations, increases in costs of operations, fluctuations in
interest rates, and risks of operations;
changes in the privatization of the corrections and detention industry, the acceptance of our services, the
timing of the opening of new facilities, and the commencement of new management contracts
(including the extent and pace at which new contracts are utilized), as well as our ability to utilize
available beds;
our ability to obtain and maintain correctional, detention, and residential reentry facility management
contracts because of reasons including, but not limited to, sufficient governmental appropriations,
contract compliance, negative publicity and effects of inmate disturbances;
increases in costs to develop or expand real estate properties 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, cost inflation, and material shortages, resulting in
increased construction costs;
changes in government policy, legislation and regulations that affect utilization of the private sector for
corrections, detention, and residential reentry services, in general, or our business, in particular,
including, but not limited to, the continued utilization of the South Texas Family Residential Center by
U.S. Immigration and Customs Enforcement, or ICE, under terms of the current contract, and the impact
of any changes to immigration reform and sentencing laws. (Our company does not, under longstanding
policy, lobby for or against policies or legislation that would determine the basis for, or duration of, an
individual's incarceration or detention.);
our ability to successfully identify and consummate future acquisitions and our ability to successfully
integrate the operations of our completed acquisitions and realize projected returns resulting therefrom;
our ability to meet and maintain qualification for taxation as a real estate investment trust, or REIT; and
the availability of debt and equity financing on terms that are favorable to us, or at all.
Any or all of our forward-looking statements in this Annual Report may turn out to be inaccurate. We have based
these forward-looking statements largely on our current expectations and projections about future events and
financial trends that we believe may affect our financial condition, results of operations, business strategy, and
financial needs. Our statements can be affected by inaccurate assumptions we might make or by known or unknown
risks, uncertainties and assumptions, including the risks, uncertainties, and assumptions described in "Risk Factors"
included elsewhere in this Annual Report and in other reports, documents, and other information we file with the
Securities and Exchange Commission, or the SEC, from time to time.
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In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this
Annual Report may not occur and actual results could differ materially from those anticipated or implied in the
forward-looking statements. When you consider these forward-looking statements, you should keep in mind the risk
factors and other cautionary statements in this Annual Report, including in "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Business" and "Risk Factors."
Our forward-looking statements speak only as of the date made. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information, future events or circumstances or
otherwise, except as required by law. All subsequent written and oral forward-looking statements attributable to us
or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this
Annual Report.
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ITEM 1. BUSINESS.
Overview
PART I.
We are a diversified government solutions company with the scale and experience needed to solve tough
government challenges in flexible, cost-effective ways. Through three segments, CoreCivic Safety, CoreCivic
Community, and CoreCivic Properties, we provide a broad range of solutions to government partners that serve the
public good through corrections and detention management, a growing network of residential reentry centers to help
address America's recidivism crisis, and government real estate solutions. We have been a flexible and dependable
partner for government for more than 35 years. Our employees are driven by a deep sense of service, high standards
of professionalism and a responsibility to help government better the public good.
Structured as a REIT, we are the nation's largest owner of partnership correctional, detention, and residential reentry
facilities and one of the largest prison operators in the United States. We also believe we are the largest private
owner of real estate used by U.S. government agencies. As of December 31, 2019, through our CoreCivic Safety
segment, we operated 50 correctional and detention facilities, 43 of which we owned, with a total design capacity of
approximately 73,000 beds. Through our CoreCivic Community segment, we owned and operated 29 residential
reentry centers with a total design capacity of approximately 5,000 beds. In addition, through our CoreCivic
Properties segment, we owned 28 properties for lease to third parties and used by government agencies, totaling 2.4
million square feet.
In addition to providing fundamental residential services, our correctional, detention, and residential 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. We also provide or
make available to offenders certain health care (including medical, dental, and mental health services), food
services, and work and recreational programs.
We are a Maryland corporation formed in 1983. Our principal executive offices are located at 5501 Virginia Way,
Brentwood, Tennessee, 37027, and our telephone number at that location is (615) 263-3000. Our website address is
www.corecivic.com. We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, definitive proxy statements, and amendments to those reports under the Securities Exchange
Act of 1934, as amended, or the Exchange Act, available on our website, free of charge, as soon as reasonably
practicable after these reports are filed with or furnished to the SEC. Information contained on our website is not
part of this Annual Report.
We began operating as a REIT effective January 1, 2013. We provide services and conduct other business activities
through taxable REIT subsidiaries, or TRSs. A TRS is a subsidiary of a REIT that is subject to applicable corporate
income tax and certain qualification requirements. Our use of TRSs enables us to comply with REIT qualification
requirements while providing correctional services at facilities we own and at facilities owned by our government
partners and to engage in certain other business operations. A TRS is not subject to the distribution requirements
applicable to REITs so it may retain income generated by its operations for reinvestment.
As a REIT, we generally are not subject to federal income taxes on our REIT taxable income and gains that we
distribute to our stockholders, including the income derived from our real estate and dividends we earn from our
TRSs. However, our TRSs will be required to pay income taxes on their earnings at regular corporate income tax
rates.
As a REIT, we generally are required to distribute annually to our stockholders at least 90% of our REIT taxable
income (determined without regard to the dividends paid deduction and excluding net capital gains). Our REIT
taxable income will not typically include income earned by our TRSs except to the extent our TRSs pay dividends to
the REIT.
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Our ongoing operations are organized into three principal business segments:
CoreCivic Safety segment, consisting of the 50 correctional and detention facilities that are owned, or
controlled via a long-term lease, and managed by CoreCivic, as well as those correctional and detention
facilities owned by third parties but managed by CoreCivic. CoreCivic Safety also includes the operating
results of our subsidiary that provides transportation services to governmental agencies, TransCor
America, LLC, or TransCor.
CoreCivic Community segment, consisting of the 29 residential reentry centers that are owned, or
controlled via a long-term lease, and managed by CoreCivic. CoreCivic Community also includes the
operating results of our electronic monitoring and case management services.
CoreCivic Properties segment, consisting of the 28 real estate properties owned by CoreCivic for lease to
third parties and used by government agencies.
For the years ended December 31, 2019, 2018, and 2017, our total facility net operating income, which we define as
a facility's revenues less operating expenses, was divided among our three business segments as follows:
Segment:
Safety
Community
Properties
For the Years Ended December 31,
2018
2017
2019
85.2 %
5.0 %
9.8 %
87.1 %
4.8 %
8.1 %
90.0 %
4.4 %
5.6 %
Our customers primarily consist of federal, state, and local government agencies. Federal correctional and detention
authorities primarily consist of ICE, the United States Marshals Service, or the USMS, and the Federal Bureau of
Prisons, or the BOP. Payments by federal correctional and detention authorities represented 51%, 48%, and 48% of
our total revenue for the years ended December 31, 2019, 2018, and 2017, respectively.
Our customer contracts for providing bed capacity and correctional, detention, and residential reentry services in our
CoreCivic Safety and CoreCivic Community segments typically have terms of three to five years and contain
multiple renewal options. Most of our facility contracts also contain clauses that allow the government agency to
terminate the contract at any time without cause, and our facility contracts are generally subject to annual or bi-
annual legislative appropriations of funds. Notwithstanding these termination clauses, the contract renewal rate for
properties we owned and operated in these segments was 94% over the five years ended December 31, 2019. The
government lease agreements in our CoreCivic Properties segment typically have terms of five to twenty years
including renewal options, and generally have more restrictive termination clauses. At December 31, 2019, the lease
agreements in our CoreCivic Properties segment had a weighted average lease term of 4.2 years remaining.
In our CoreCivic Safety and CoreCivic Community segments, we are compensated for providing bed capacity and
correctional, detention, and residential reentry services at a per diem rate based upon actual or minimum guaranteed
occupancy levels. Occupancy rates for a particular facility are typically low when first opened or immediately
following an expansion. However, beyond the start-up period, which typically ranges from 90 to 180 days, the
occupancy rate tends to stabilize. The average compensated occupancy of our correctional, detention, and
residential reentry facilities, based on rated capacity was as follows for the years 2019, 2018, and 2017:
CoreCivic Safety facilities
CoreCivic Community facilities
Total
2019
2018
2017
82 %
76 %
82 %
81 %
80 %
81 %
80 %
80 %
80 %
The average compensated occupancy of our CoreCivic Safety and CoreCivic Community facilities, excluding idled
facilities, was 93%, 93%, and 91% for the years 2019, 2018, and 2017, respectively.
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In our CoreCivic Properties segment, we own properties for lease to third parties and used by government agencies
where our occupancy percentage is based on leased square feet rather than bed capacity. The average occupancy of
these facilities was as follows for the years 2019, 2018, and 2017:
Leased portfolio
2019
2018
2017
99 %
100 %
100 %
Operating Procedures and Offender Services for Correctional, Detention, and Residential Reentry Facilities
Pursuant to the terms of our customer contracts, we are responsible for the overall operations of our facilities,
including staff recruitment, general administration of the facilities, facility maintenance, security, and supervision of
the offenders. We are required by our customer contracts to maintain certain levels of insurance coverage for
general liability, workers' compensation, vehicle liability, and property loss or damage. We also are required to
indemnify our customers for claims and costs arising out of our operations and, in certain cases, to maintain
performance bonds and other collateral requirements.
Reentry programs.
We believe a focus on inmate reentry provides great benefits for our communities – more people living healthy and
productive lives and contributing to strong families and local economies. We have committed to evolving our
model with an increased focus on reentry services, and we are working hard to equip the men and women in our care
with the services, support, and resources they need to be successful upon reentry.
We provide a wide range of evidence-based reentry programs and activities in our facilities. At most of the facilities
we manage, offenders have the opportunity to enhance their basic education from literacy through earning a high
school equivalency diploma endorsed by their respective state. In some cases, we also provide opportunities for
postsecondary educational achievements and chances to participate in college degree programs. A number of our
facilities that care for non-U.S. citizens offer adult education curricula recognized by several nations to which these
offenders may return, including a curriculum offered in conjunction with the Mexican government. We also provide
the Adult Education in Spanish program for offenders with that specific language need.
For the offenders who are close to taking their high school equivalency exam (either the GED or the HiSET), we
have invested in the equipment needed to use the GED/HiSET Academy software program, which is an offline
software program providing over 200 hours of individualized lessons up to the 12th grade. The GED/HiSET
Academy incorporates teaching best practices and provides an atmosphere to engage and motivate students to learn
everything they need to know to pass the GED/HiSET exam. As an example of the impact we are having, during
2019, the number of offenders in our facilities who passed high school equivalency exams totaled 1,376. According
to research from the independent RAND Corporation, "Evaluating the Effectiveness of Correctional Education"
published in 2013, inmates who obtain GEDs while in prison are 30% less likely to return to prison.
In addition, we offer a broad spectrum of career/technical education opportunities to help individuals learn
marketable job skills. Our trade programs are certified by the National Center for Construction Education and
Research, or NCCER. NCCER establishes the curriculum and certification for over 4,000 construction and trade
organizations. Graduates of these programs enter the job market with certified skills that significantly enhance
employability. According to research conducted by the RAND Corporation published in 2013, inmates who
complete vocational training are 28% more likely to find a job after release. During 2019, 5,136 offenders in
facilities we manage earned career and technical education certificates.
We are proud of the educational programs we offer and intend to maintain and continue to develop such programs.
Examples of programs we've recently offered include:
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facility
in Tennessee an opportunity
In 2019, we partnered with Persevere, a national non-profit organization, to offer offenders at our
Trousdale Turner
job
readiness/employability skills specific to the technology field. The instructor-led, self-paced program
utilizes both a coding instructor and a Technology Employability Specialist to ensure students are learning
the craft and how to obtain and maintain a job in the field, post-incarceration. Additionally, the program is
split into two phases that allows students to become certified Front-end Developers (phase 1) and Full
Stack Developers (phase 2) upon completion.
learn software coding and
to
In 2019, we increased our post-secondary educational offerings by growing our relationship with Ashland
University, based in Ohio, to deliver college-level programming to offenders at our Jenkins, Wheeler, and
Coffee correctional facilities in Georgia. This relationship allows enrollees to obtain an Associate's
Degree in General Studies or a Bachelor's Degree in Communication Studies or Interdisciplinary Studies
at no cost to them through Pell Grant funding. Students access coursework, tests, and interact with their
instructors through a secure Learning Management System via a tablet computer.
In late 2019, we launched a NCCER plumbing program at our Metro-Davidson County facility in
Nashville, Tennessee in conjunction with a regional company in Tennessee that offers comprehensive
services, including HVAC, plumbing, and electrical. The program is taught once a week by an instructor
of the service company and we provide the space and materials. Upon completion of the plumbing
program and release from the Metro-Davidson County facility, some of the students will be interviewed
for placement in the service company's four-year training and leadership program in order for them to
complete programming and become an apprentice plumber with the service company.
In 2018, through a relationship with Fuel Education, a company that specializes in digital learning
opportunities, we began offering an online Information Support and Services computer program at our Lee
Adjustment Center in Kentucky. This program allows students to enhance their computer knowledge and
was developed in coordination with the Commonwealth of Kentucky Department of Corrections, or
KYDOC, our government partner at the Lee facility. Students who successfully complete the approximate
10-month program will be awarded a base National Occupational Competency Testing Institute, or
NOCTI, credential with the opportunity to earn an advanced NOCTI credential in the future.
In 2016, our Coffee and Wheeler facilities in Georgia implemented state-of-the-art Diesel Maintenance
and Welding programs in coordination with the Georgia Department of Corrections, enabling students to
earn trade certificates from nearby community colleges. As of December 31, 2019, these programs
graduated 50 from the Diesel Maintenance program and 83 from the Welding program.
For those with assessed substance use disorders, we offer cognitive behavioral evidence-based treatment programs
with proven clinical outcomes, such as the Residential Drug Abuse Program. We offer both therapeutic community
models and intensive outpatient programs. We also offer drug and alcohol use education/DWI programs at some of
our locations. Our goal in providing substance use treatment is to stimulate internal motivation for change and
progress through the stages of change so that lasting behavioral change can occur. Our drug and alcohol education
programs help participants understand their relationships with drugs and alcohol and the links between drug and
alcohol use and crime, as well as assisting them in making better choices that can lead to healthier relationships in
their lives. According to a study by the Florida State University College of Criminology and Criminal Justice, "An
Assessment of Substance Abuse Treatment Programs in Florida's Prisons Using a Random Assignment
Experimental Design" submitted to the National Institute of Justice, Office of Justice Programs, U.S. Department of
Justice in 2016, inmates who completed addiction treatment in prison have significantly lower recidivism levels
regardless of the treatment model used. In 2019, 1,900 offenders in our care completed substance use disorder
programming.
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Additional program offerings include our Victim Impact Programs, available at a number of our facilities, which
seek to educate offenders about the negative effects their criminal conduct can have on others. Currently, 24 of our
facilities have received training to offer Victim Impact Programs to offenders at both Safety and Community sites.
In 2019, 1,247 offenders successfully completed Victim Impact Programs. All of our facility chaplains facilitate
diverse and inclusive opportunities for those in our care to engage in the practice of spirituality and to exercise
individual religious freedom. In several facilities, we offer faith-based programs with an emphasis on character
development, spiritual growth, and successful reentry. Presently, we utilize Threshold, as an innovative, evidence-
based inter-faith component of comprehensive reentry services. In 2019, 721 offenders in our care successfully
completed the Threshold program.
Our Reentry and Life Skills programs prepare individuals for life after incarceration by teaching them how to
successfully conduct a job search, how to manage their budget and financial matters, parenting skills, and
relationship and family skills. Equally significant, we offer cognitive behavioral programs aimed at changing anti-
social attitudes and behaviors in offenders, with a focus on altering the level of criminal thinking. In 2017, we
introduced a comprehensive reentry strategy we call "Go Further", a forward thinking, process approach to reentry.
"Go Further" encompasses all facility reentry programs, adds a proprietary cognitive/behavioral curriculum, and
encourages staff and offenders to take a collaborative approach to assist in reentry preparation. "Go Further" is
currently in place in 21 of our facilities, with plans to add additional facilities in 2020. In 2019, offenders in our
care completed 5,355 cognitive/behavioral evidence-based journals in preparation for returning to their
communities.
Across the country, our dedicated staff, along with the assistance of thousands of volunteers, work to provide
guidance, direction, and post-incarceration services to the men and women in our care. We believe these critical
reentry programs help fight the serious challenge of recidivism facing the United States.
Through our community corrections facilities, we provide an array of services to defendants and offenders who are
serving their full sentence, the last portion of their sentence, waiting to be sentenced, or awaiting trial while
supervised in a community environment. We offer housing and programs with a key focus on employment, job
readiness, life skills and various substance abuse treatment programs, in order to help offenders successfully reenter
their communities and reduce the risk of recidivism. In some of our community corrections facilities, we offer
housing and program services to parolees who have completed their sentence but lack a viable reentry plan.
Through a focus on employment and skill development, we provide a means for these parolees to successfully
reintegrate into their communities.
In addition, we provide day-reporting and substance abuse treatment programs at some of our community
corrections facilities. These programs, depending on the needs of the offender, can provide cognitive behavioral-
based programs to assist in the offender's successful reentry while holding the individual accountable while living in
the community.
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Lastly, we also provide a number of non-residential correctional alternative services, including electronic monitoring
and case management services, under our CoreCivic Community segment. Governmental customers use electronic
monitoring products and services to monitor low risk offenders as a way to help reduce overcrowding in correctional
facilities, as a monitoring and sanctioning tool, and to promote public safety by imposing restrictions on movement
and serving as a deterrent for alcohol usage. Providing these non-residential services is a natural complement to our
broad network of residential reentry facilities and can help keep individuals from going back to prison or being
incarcerated in the first place.
Ultimately, the work we do is intended to give people the tools to reintegrate with their communities permanently.
We are proud of the teachers, counselors, case managers, chaplains, and other offender support service professionals
who provide these services to the men and women entrusted in our care.
To further underscore our long-term commitment to reducing recidivism, in October 2017, we announced that we
launched a nationwide initiative to advocate for a range of government policies that will help former offenders
successfully reenter society and stay out of prison. We believe that as successful as we may be with our work inside
our facilities, offenders still face embedded societal barriers when they return to their communities. Supporting
recidivism-reducing policies is one way we can bridge the gap and give the men and women entrusted in our care a
better opportunity at never returning to prison. As part of the initiative, we apply government relations resources
and expertise to advocate for the following policies:
"Ban-the-Box" proposals to help improve former inmates' chances at getting a job;
Reduced legal barriers to make it easier and less risky for companies to hire former inmates;
Increased funding for reentry programs in areas such as education, addiction treatment, faith-based
offerings, victim impact and post-release employment; and
Social impact bond pilot programs that tie contractor payments to positive outcomes.
Operating guidelines.
The American Correctional Association, or ACA, is an independent organization comprised of corrections
professionals that establishes accreditation standards for correctional and detention facilities around the world.
Outside agency standards, such as those established by the ACA, provide us with the industry's most widely
accepted operational guidelines. ACA accredited facilities must be audited and re-accredited at least every three
years. We have sought and received ACA accreditation for 38, or approximately 95%, of the eligible facilities we
operated as of December 31, 2019, excluding our residential reentry facilities and our Eden Detention Center and
our Torrance County Detention Facility. We have not yet sought accreditation at the previously idled Eden and
Torrance facilities because they were only recently activated, although we currently intend to pursue accreditation.
During 2019, 14 of the facilities we manage were re-accredited by the ACA with an average score of 99.6%, making
our portfolio average 99.6%.
Beyond the standards provided by the ACA, our facilities are operated in accordance with a variety of company and
facility-specific policies and procedures, as well as various contractual requirements. Many of these policies and
procedures reflect the high standards generated by a number of sources, including the ACA, the National
Commission on Correctional Healthcare, the Occupational Safety and Health Administration, as well as federal,
state, and local government codes and regulations and longstanding correctional procedures.
In addition, our facilities are operated in compliance with the Prison Rape Elimination Act, or PREA, standards,
which became effective in August 2013. All confinement facilities covered under the PREA standards must be
audited at least every three years to maintain compliance with the PREA standards. Covered facilities include adult
prisons and jails, juvenile facilities, lockups (facilities housing detainees overnight), and community confinement
facilities, whether operated by the United States Department of Justice, or DOJ, or by a state, local, corporate, or
nonprofit authority. We utilize DOJ-certified PREA auditors to help ensure that all facilities operate in compliance
with applicable PREA regulations.
10
Our facilities operate under these established standards, policies, and procedures, and also are subject to annual
audits by our Quality Assurance Division, or QAD, which operates under, and reports directly to, our Office of
General Counsel and independently from our Operations Division. Through the QAD, we have devoted significant
resources to ensuring that our facilities meet outside agency and accrediting organization standards and guidelines.
The QAD employs a team of full-time auditors, who are subject matter experts from all major disciplines
within institutional operations. Annually, without advance notice, QAD auditors conduct on-site evaluations of each
CoreCivic Safety facility we operate using specialized audit tools, typically containing more than 1,000 audit
indicators across all major operational areas. In most instances, these audit tools are tailored to facility and partner
specific requirements. In addition, audit teams provide guidance to facility staff on operational best practices and
assist staff with addressing specific areas of need, such as meeting requirements of new partner contracts and
providing detailed training on compliance requirements for new departmental managers.
The QAD management team coordinates overall operational auditing and compliance efforts across all correctional,
detention, and residential reentry facilities we manage. In conjunction with subject matter experts and other
stakeholders having risk management responsibilities, the QAD management team develops performance
measurement tools used in facility audits. The QAD management team provides governance of the corrective action
plan process for any items of nonconformance identified through internal and external facility reviews. Our QAD
also contracts with teams of ACA certified correctional auditors to evaluate compliance with ACA standards at
accredited facilities. Similarly, the QAD routinely incorporates a review of facility compliance with key PREA
regulations during annual audits of company facilities.
In addition to our own internal audit and contract compliance efforts, we are also subject to oversight by our
government partners. As part of their standard monitoring and compliance programs, approximately 70% of our
federal and state government partners conduct formal contract-compliance audits and inspections at least annually at
CoreCivic Safety facilities. In addition to these annual audits of our facilities, many partners conduct additional
area-specific operational audits and inspections on a more frequent basis, including monthly, quarterly, and semi-
annually. Some of these audits and facility inspections by our partners are conducted on an unannounced basis. In
2019, our government partners conducted over 230 annual, semi-annual, quarterly, and monthly compliance audits
and inspections at our CoreCivic Safety facilities. In addition, the majority of our federal and state government
partners employ on-site contract monitors who monitor performance and contract compliance at our facilities on a
full- or part-time basis. In 2019, approximately 84% of the CoreCivic Safety facilities we manage have an onsite
contract monitor.
Business Development
We believe we own, or control via a long-term lease, approximately 58% of all privately owned prison beds in the
United States, manage nearly 39% of all privately managed prison beds in the United States, and are currently the
second largest private owner and provider of community corrections services in the nation. We also believe that we
are the largest private owner of real estate used by U.S. government agencies. Under the direction of our partnership
development department, we market our facilities and services to government agencies responsible for federal, state,
and local correctional, detention, and residential reentry facilities in the United States. Under the direction of our
real estate department, we intend to continue pursuing the acquisition and development of additional correctional,
detention, and residential reentry facilities, as well as other government-leased real estate assets with a bias toward
those used to provide mission-critical governmental services that we believe have a favorable investment return,
diversify our cash flows, and increase value to our stockholders.
We execute cross-departmental efforts to market CoreCivic Safety solutions to government partners that seek
corrections and detention management services, CoreCivic Community solutions to government partners seeking
residential reentry services, and CoreCivic Properties solutions to customers that need real estate and maintenance
services.
As indicated by the following chart, business from our federal customers, including primarily ICE, the USMS, and
the BOP, continues to be a significant component of our business, although the source of revenue is derived from
many contracts at various types of properties, i.e. correctional, detention, reentry, and leased. ICE and the USMS
each accounted for 10% or more of our total revenue during the last three years.
11
Percent of Total Revenue
48%
48%
17%
5%
25%
17%
6%
25%
16%
7%
Total Federal
ICE
USMS
BOP
51%
29%
60%
50%
40%
30%
20%
10%
0%
2019
2018
2017
Certain of our contracts with federal partners contain clauses that guarantee the federal partner access to a minimum
bed capacity in exchange for a fixed monthly payment. However, these contracts also generally provide the
government the ability to cancel the contract for non-appropriation of funds or for convenience. The solutions we
provide to our federal customers continue to be a significant component of our business. We believe our ability to
provide flexible solutions and fulfill emergent needs of our federal customers would be very difficult and costly to
replicate in the public sector.
State revenues from contracts at correctional, detention, and residential reentry facilities that we operate constituted
34%, 39%, and 41% of our total revenue during 2019, 2018, and 2017, respectively, and decreased 4.7% from
$706.8 million during 2018 to $673.4 million during 2019, largely due to declines in populations from the state of
California, as further described in Management's Discussion and Analysis of Financial Condition and Results of
Operations. No state partner accounted for 10% or more of our total revenue during these years.
Several of our state partners have experienced improvements in their budgets which has helped us secure recent per
diem increases at certain facilities. Further, several of our existing state partners, as well as prospective state
partners, are experiencing growth in offender populations and overcrowded conditions, are considering alternative
correctional capacity for their aged and inefficient infrastructure, or are seeking cost savings by utilizing the private
sector. Although we can provide no assurance that we will enter into any new contracts, we believe we are well
positioned to provide states with needed bed capacity, as well as the programming and reentry services they are
seeking. Since the beginning of 2018, we have completed the intake of new inmate populations as a result of new
contracts with Kansas, Kentucky, Ohio, Nevada, South Carolina, and Vermont, while Wyoming began utilizing an
existing contract it had not utilized in nearly a decade. In January 2020, we signed a new management contract with
Mississippi.
We believe the long-term growth opportunities of our business remain attractive as government agencies consider
their emergent needs, as well as the efficiency and offender programming opportunities we provide, as flexible
solutions to satisfy our partners' needs. Further, we expect our partners to continue to face challenges in maintaining
old facilities, developing new facilities, and expanding current facilities for additional capacity, which could result
in increased future demand for the solutions we provide.
We believe that we can further develop our business by, among other things:
Maintaining and expanding our existing customer relationships and filling existing beds within our
facilities, while maintaining an adequate inventory of available beds that we believe provides us with
flexibility and a competitive advantage when bidding for new management contracts;
Enhancing the terms of our existing contracts and expanding the services we provide under those
contracts;
Pursuing additional opportunities to lease our facilities to government and other third-party operators in
need of correctional, detention, and residential reentry capacity;
Pursuing mission-critical real estate solutions for government agencies including, but not limited to,
corrections and detention real estate assets;
12
Pursuing other asset acquisitions and business combinations through transactions with non-government
third parties;
Maintaining and expanding our focus on community corrections and reentry programming that align
with the needs of our government partners;
Pursuing additional opportunities that expand the scope of non-residential correctional alternative
solutions we provide to government agencies; and
Establishing relationships with new customers that have either previously not outsourced their
correctional facility management needs or have utilized other private enterprises.
We generally receive inquiries from or on behalf of government agencies that are considering outsourcing the
ownership and/or management of certain facilities or that have already decided to contract with a private enterprise.
When we receive such an inquiry, we determine whether there is an existing need for our correctional, detention,
and residential reentry facilities and/or services and whether the legal and political climate in which the inquiring
party operates is conducive to serious consideration of outsourcing. Based on these findings, an initial cost analysis
is conducted to further determine project feasibility.
Frequently, government agencies responsible for correctional, detention, and residential reentry facilities and
services procure space and services through solicitations or competitive procurements. As part of our process of
responding to such requests, members of our management team meet with the appropriate personnel from the
agency making the request to best determine the agency's needs. If the project fits within our strategy, we submit a
written response. A typical solicitation or competitive procurement requires bidders to provide detailed information,
including, but not limited to, the space and services to be provided by the bidder, its experience and qualifications,
and the price at which the bidder is willing to provide the facility and services (which services may include the
purchase, renovation, improvement or expansion of an existing facility or the planning, design and construction of a
new facility). The requesting agency selects a provider believed to be able to provide the requested bed capacity, if
needed, and most qualified to provide the requested services, and then negotiates the price and terms of the contract
with that provider.
2019 Accomplishments
In 2019, we entered into a number of new contracts, renewed several other significant contracts, and completed
numerous other transactions and milestones, including the following:
CoreCivic Safety:
1,376 offenders in our care passed high school equivalency exams, 5,136 earned career and technical
education certificates, 1,900 completed substance use disorder programming, 1,247 completed Victim
Impact Programs, 721 completed the Threshold program, and 5,355 completed cognitive/behavioral
evidence-based journals in our "Go Further" program in preparation for successfully returning to their
communities.
13
Increased our post-secondary educational offerings by growing our relationship with Ashland
University, based in Ohio, to deliver college-level programming to offenders at our Jenkins, Wheeler,
and Coffee facilities in Georgia. This relationship allows enrollees to obtain an Associate's Degree in
General Studies or Bachelor's Degree in Communication Studies or Interdisciplinary Studies at no cost
to them through Pell Grant funding.
Introduced a new computer coding program at our Trousdale Turner Correctional Center in Hartsville,
Tennessee. The program is offered by Persevere, a national nonprofit organization, and provides an
opportunity for those in our care at the facility to learn software coding and job readiness/employability
skill specific to the technology field. Students participating in the new program take classes and earn
industry certifications, which helps prepare them to find and maintain jobs in the technology field, post-
incarceration.
Executed a new contract with ICE to care for up to 2,348 adult detainees at our Adams County
Correctional Center in Mississippi. The new management contract has an initial term of 60 months,
with unlimited extension options thereafter upon mutual agreement.
Executed a new contract with ICE to activate our 910-bed Torrance County Detention Facility in New
Mexico. The Torrance facility had previously been idle since 2017. The new management contract has
an initial term of 60 months, with unlimited extension options thereafter upon mutual agreement.
Executed a new contract with the USMS to activate our 1,422-bed Eden Detention Center in Texas.
The Eden facility had previously been idle since 2017. The new management contract, which also
permits ICE to utilize capacity at the facility at any time in the future, has an indefinite term.
Executed a new contract with the Kansas Department of Corrections, or KDOC, to care for offenders at
our Saguaro Correctional Facility. The new management contract has an initial term of one year, with
two additional one-year extension options upon mutual agreement. The new contract with the KDOC
also provides that, upon mutual agreement, we may transfer offenders held under the contract to another
correctional facility that we operate.
Completed the $39.0 million, 512-bed expansion of our Otay Mesa Detention Center in California and
extended the contract with the federal government through December 2034, including two five-year
extension options. The expansion was a result of long-standing demand from the USMS and ICE, and
limited detention capacity in the Southwest region of the United States. Both the USMS and ICE
currently utilize the Otay Mesa facility under an existing contract that enables both agencies to utilize
the additional capacity.
14
CoreCivic Community:
Completed the integration of Rocky Mountain Offender Management Systems, LLC into Recovery
Monitoring Solutions Corporation, which provides non-residential correctional alternatives, including
electronic monitoring and case management services, to municipal, county, and state governments in
multiple states. This integration strengthens our focus on rehabilitation and recidivism and completes
the spectrum of correctional services we offer to government agencies.
Completed the acquisition of the South Raleigh Reentry Center, a 60-bed residential reentry center in
Raleigh, North Carolina. In connection with the acquisition, we provide reentry services for both male
and female residents under custody of the BOP.
Completed the acquisition of certain assets of Rehabilitation Services, Inc., resulting in the addition of
two residential reentry centers in Virginia. The Ghent Residential Reentry Center, a 36-bed residential
reentry center in Norfolk, Virginia and the James River Residential Reentry Center, an 84-bed
residential reentry center in Newport News, Virginia, provide reentry services for residents under
custody of the BOP. The residential reentry facilities can also serve an additional 34 home confinement
clients on behalf of the BOP.
CoreCivic Properties:
Completed the acquisition of a 37,000 square-foot office building in Detroit, Michigan that was built-to-
suit for the state of Michigan's Department of Health and Human Services, or MDHHS, in 2002. The
property is 100% leased to the Michigan Department of Technology, Management and Budget, or
MDTMB, on behalf of MDHHS through June 2028, and includes one six-year renewal option at the sole
discretion of the MDTMB.
Entered into a lease with the KYDOC for our previously idled 656-bed Southeast Correctional Complex
in Wheelwright, Kentucky, formerly known as the Southeast Kentucky Correctional Facility. The lease
is expected to commence in mid-2020 and has an initial term of ten years and includes five two-year
renewal options.
Continued construction of the new Lansing Correctional Facility in Kansas, and in December 2019,
began accepting offenders into the 512-bed minimum security complex ahead of schedule, with the
remaining 1,920-bed medium/maximum security complex completed in January 2020.
Corporate and Other:
Issued our first Environmental, Social and Governance, or ESG, report which details how we are
helping to tackle the national crisis of recidivism and provides quantified evidence of progress being
made toward company-wide reentry goals. We are the first company in our industry to release an ESG
report, demonstrating our commitment to transparency and accountability.
Partnered with other leaders in the private sector corrections and detention industry to launch the "Day 1
Alliance", or D1A, a newly formed trade and advocacy organization. The D1A is a unified voice
dedicated to educating Americans on the small but valued role the private sector plays in addressing
corrections and detention challenges in the United States. The D1A will not advocate on policies,
regulations, or legislation that impact the basis for or duration of an individual's incarceration or
detention.
Entered into a new $250.0 million Senior Secured Term Loan B, or Term Loan B, which bears interest
at the London Interbank Offered Rate, or LIBOR, plus 4.50%, with a 1.00% LIBOR floor (or, at our
option, a base rate plus 3.50%), and has a five-year maturity. Proceeds from the issuance of the Term
Loan B were used to partially fund the early redemption of the $325.0 million in aggregate principal
amount of 4.125% senior notes due in April 2020, or the 4.125% Senior Notes.
15
Facility Portfolio
CoreCivic Safety and Community Facilities and Facility Management Contracts
Our correctional, detention, and residential reentry facilities can generally be classified according to the level(s) of
security at such facility. Minimum security facilities have open housing within an appropriately designed and
patrolled institutional perimeter. Medium security facilities have either cells, rooms or dormitories, a secure
perimeter, and some form of external patrol. Maximum security facilities have cells, a secure perimeter, and
external patrol. Multi-security facilities have various areas encompassing minimum, medium or maximum security.
Our CoreCivic Safety and Community facilities can also be classified according to their primary function. The
primary functional categories are:
Correctional Facilities. Correctional facilities care for and provide contractually agreed upon programs
and services to sentenced adult prisoners, typically prisoners on whom a sentence in excess of one year
has been imposed.
Detention Facilities. Detention facilities care for and provide contractually agreed upon programs and
services to (i) individuals being detained by ICE, (ii) individuals who are awaiting trial who have been
charged with violations of federal criminal law (and are therefore in the custody of the USMS) or state
criminal law, and (iii) prisoners who have been convicted of crimes and on whom a sentence of one year
or less has been imposed.
Residential Facilities. Residential facilities provide space and residential services in an open and safe
environment to adults with children who have been detained by ICE and are awaiting the outcome of
immigration hearings. As contractually agreed upon, residential facilities offer services including, but
not limited to, educational programs, medical care, recreational activities, counseling, and access to
religious and legal services.
Community Corrections. Community corrections/residential reentry facilities offer housing and
programs to offenders who are serving the last portion of their sentence or who have been assigned to
the facility in lieu of a jail or prison sentence, with a key focus on employment, job readiness, and life
skills.
16
As of December 31, 2019, through our CoreCivic Safety segment, we operated 50 correctional and detention
facilities, 43 of which we owned and managed and seven of which we managed, but were owned by our government
partners. Through our CoreCivic Community segment, we also owned and managed 29 residential reentry centers.
Owned and managed facilities include facilities placed into service that we own or control via a long-term lease and
manage. The following table includes certain information regarding each facility, including the term of the primary
customer contract related to such facility.
Facility Name
Primary Customer
Design
Capacity
(A)
Security
Level
Facility
Type
(B)
Term
Remaining
Renewal
Options
(C)
CoreCivic Safety Facilities:
Safety - Owned and Managed:
Central Arizona Florence
Correctional Complex
Florence, Arizona
Eloy Detention Center
Eloy, Arizona
La Palma Correctional Center
Eloy, Arizona
Red Rock Correctional Center (D)
Eloy, Arizona
Saguaro Correctional Facility
Eloy, Arizona
Leo Chesney Correctional Center
Live Oak, California
Otay Mesa Detention Center
San Diego, California
Bent County Correctional Facility
Las Animas, Colorado
Crowley County Correctional
Facility
Olney Springs, Colorado
USMS
4,128 Multi
Detention Sep-23 (1) 5 year
ICE
1,500 Medium Detention Indefinite —
ICE
3,060 Multi
Detention Indefinite —
State of Arizona
2,024 Medium Correctional Jul-26
(2) 5 year
State of Hawaii
1,896 Multi
Correctional Jun-20 (1) 1 year
—
240
—
—
—
—
ICE
1,994 Minimum/ Detention Dec-24 (2) 5 year
Medium
State of Colorado
1,420 Medium Correctional Jun-20 —
State of Colorado
1,794 Medium Correctional Jun-20 —
Huerfano County Correctional Center
Walsenburg, Colorado
Kit Carson Correctional Center
Burlington, Colorado
Coffee Correctional Facility (E)
Nicholls, Georgia
—
—
752
Medium Correctional —
—
1,488 Medium Correctional —
—
State of Georgia
2,312 Medium Correctional Jun-20 (14) 1 year
17
Facility Name
Primary Customer
Design
Capacity
(A)
Security
Level
Facility
Type
(B)
Term
Remaining
Renewal
Options
(C)
Jenkins Correctional Center (E)
Millen, Georgia
McRae Correctional Facility
McRae, Georgia
Stewart Detention Center
Lumpkin, Georgia
Wheeler Correctional Facility (E)
Alamo, Georgia
Leavenworth Detention Center
Leavenworth, Kansas
State of Georgia
1,124 Medium Correctional Jun-20 (15) 1 year
BOP
1,978 Medium Correctional Nov-20 (1) 2 year
ICE
1,752 Medium Detention Indefinite —
State of Georgia
2,312 Medium Correctional Jun-20 (14) 1 year
USMS
1,033 Maximum Detention Dec-21 (1) 5 year
Lee Adjustment Center
Beattyville, Kentucky
Commonwealth of
Kentucky
816
Multi
Correctional Jun-20 (1) 1 year
Marion Adjustment Center
St. Mary, Kentucky
Prairie Correctional Facility
Appleton, Minnesota
Adams County Correctional Center
Adams County, Mississippi
Tallahatchie County Correctional
Facility (F)
Tutwiler, Mississippi
Crossroads Correctional Center (G)
Shelby, Montana
Nevada Southern Detention Center
Pahrump, Nevada
Elizabeth Detention Center
Elizabeth, New Jersey
Cibola County Corrections Center
Milan, New Mexico
Northwest New Mexico Correctional
Center
Grants, New Mexico
Torrance County Detention Facility
Estancia, New Mexico
—
—
826
Minimum/ Correctional —
Medium
—
1,600 Medium Correctional —
—
ICE
2,232 Medium Detention Aug-24 Indefinite
USMS
2,672 Multi
Correctional Jun-20 Indefinite
State of Montana
664
Multi
Correctional Jun-21 (1) 2 year
USMS
1,072 Medium Detention Sep-20 (2) 5 year
ICE
300
Minimum Detention Aug-20 (1) 1 year
USMS
1,129 Medium Detention Indefinite —
State of New Mexico
596
Multi
Correctional Jun-20 —
ICE
910
Multi
Detention May-24 Indefinite
18
Facility Name
Primary Customer
Design
Capacity
(A)
Security
Level
Facility
Type
(B)
Term
Remaining
Renewal
Options
(C)
Lake Erie Correctional
Institution (H)
Conneaut, Ohio
Northeast Ohio Correctional Center
Youngstown, Ohio
Cimarron Correctional Facility (I)
Cushing, Oklahoma
Davis Correctional Facility (I)
Holdenville, Oklahoma
Diamondback Correctional Facility
Watonga, Oklahoma
Shelby Training Center
Memphis, Tennessee
State of Ohio
1,798 Medium Correctional Jun-32 Indefinite
State of Ohio
2,016 Medium Correctional Jun-32 Indefinite
State of Oklahoma 1,692 Multi
Correctional Jun-20 —
State of Oklahoma 1,670 Multi
Correctional Jun-20 —
—
—
2,160 Multi
Correctional —
—
200
—
—
—
—
Trousdale Turner Correctional Center State of Tennessee 2,552 Multi
Hartsville, Tennessee
Correctional Jan-21
—
West Tennessee Detention Facility
Mason, Tennessee
Whiteville Correctional Facility (J)
Whiteville, Tennessee
Eden Detention Center
Eden, Texas
Houston Processing Center
Houston, Texas
Laredo Processing Center
Laredo, Texas
South Texas Family Residential
Center
Dilley, Texas
T. Don Hutto Residential Center
Taylor, Texas
Webb County Detention Center
Laredo, Texas
USMS
600
Multi
Detention Sep-21 (4) 2 year
State of Tennessee 1,536 Medium Correctional Jun-21 —
USMS
1,422 Medium Correctional Indefinite —
ICE
1,000 Medium Detention Mar-20 —
ICE
258
Minimum/ Detention Jul-23
Medium
Indefinite
ICE
2,400 —
Residential Sep-21 —
ICE
ICE
512
Medium Detention Mar-20 (2) 2 month
480
Medium Detention Feb-23 —
19
Facility Name
Primary Customer
Design
Capacity
(A)
Security
Level
Facility
Type
(B)
Term
Remaining
Renewal
Options
(C)
Safety - Managed Only:
Citrus County Detention Facility
Lecanto, Florida
Lake City Correctional Facility
Lake City, Florida
Marion County Jail
Indianapolis, Indiana
Hardeman County Correctional
Facility
Whiteville, Tennessee
Metro-Davidson County Detention
Facility
Nashville, Tennessee
Silverdale Facilities
Chattanooga, Tennessee
South Central Correctional Center
Clifton, Tennessee
Citrus County, FL
760
Multi
Detention Sep-20 Indefinite
State of Florida
893
Medium Correctional Jun-20 Indefinite
Marion County, IN 1,030 Multi
Detention Dec-27 —
State of Tennessee 2,016 Medium Correctional Jun-24 —
Davidson County, 1,348 Multi
Detention Jul-20
—
TN
Hamilton County,
1,046 Multi
Detention Sep-21 (4) 4 year
TN
State of Tennessee 1,676 Medium Correctional Jun-20 —
20
Facility Name
Primary Customer
CoreCivic Community Facilities:
Design
Capacity
(A)
Security
Level
Facility
Type
(B)
Term
Remaining
Renewal
Options
(C)
Oracle Transitional Center
Tucson, Arizona
—
92
—
Community —
Corrections
—
CAI Boston Avenue
San Diego, California
CAI Ocean View
San Diego, California
Adams Transitional Center
Denver, Colorado
Arapahoe Community Treatment
Center
Englewood, Colorado
Boulder Community Treatment
Center (K)
Boulder, Colorado
Centennial Community Transition
Center
Englewood, Colorado
Columbine Facility
Denver, Colorado
State of California
120
—
Community Jun-24 —
Corrections
BOP
483
—
Community May-20 (1) 1 year
Corrections
Adams County
102
—
Arapahoe County
135
—
Community Jun-20 —
Corrections
Community
Corrections Jun-20 —
Boulder County
69
—
Community
Corrections Jan-20
—
Arapahoe County
107
—
Community
Corrections Jun-20 —
Denver County
60
—
Commerce Transitional Center
Commerce City, Colorado
Adams County
136
—
Dahlia Facility
Denver, Colorado
Fox Facility and Training Center
Denver, Colorado
Henderson Transitional Center
Henderson, Colorado
Longmont Community Treatment
Center
Longmont, Colorado
Denver County
120
—
Denver County
90
—
Adams County
184
—
Boulder County
69
—
Community Jun-20 —
Corrections
Community Jun-20 —
Corrections
Community Jun-20 —
Corrections
Community Jun-20 —
Corrections
Community Jun-20 —
Corrections
Community
Corrections Jun-20 —
Ulster Facility
Denver, Colorado
Denver County
90
—
Community Jun-20 —
Corrections
South Raleigh Reentry Center
Raleigh, North Carolina
BOP
60
—
Community Sep-20 —
Corrections
21
Facility Name
Primary Customer
Design
Capacity
(A)
Security
Level
Facility
Type
(B)
Term
Remaining
Renewal
Options
(C)
Carver Transitional Center
Oklahoma City, Oklahoma
State of Oklahoma
494
—
Community Jun-20 (2) 1 year
Corrections
Oklahoma City Transitional Center
Oklahoma City, Oklahoma
State of Oklahoma
200
—
Community Jun-20 (2) 1 year
Corrections
Tulsa Transitional Center
Tulsa, Oklahoma
Turley Residential Center
Tulsa, Oklahoma
State of Oklahoma
390
—
Community Jun-20 (2) 1 year
Corrections
—
289
—
Community —
Corrections
—
Austin Residential Reentry Center
Del Valle, Texas
BOP
116
—
Community Apr-20 (4) 1 year
Corrections
Austin Transitional Center
Del Valle, Texas
State of Texas
460
—
Community Aug-20 —
Corrections
Corpus Christi Transitional Center
Corpus Christi, Texas
State of Texas
160
—
Community Aug-21 (3) 2 year
Corrections
Dallas Transitional Center
Hutchins, Texas
El Paso Multi-Use Facility
El Paso, Texas
El Paso Transitional Center
El Paso, Texas
State of Texas
300
—
State of Texas
360
—
State of Texas
224
—
Fort Worth Transitional Center
Fort Worth, Texas
State of Texas
248
—
Community Aug-20 —
Corrections
Community Aug-20 —
Corrections
Community Aug-20 —
Corrections
Community Aug-20 —
Corrections
Ghent Residential Reentry Center
Norfolk, Virginia
BOP
36
—
Community Feb-20 (2) 1 year
Corrections
James River Residential Reentry
Center
Newport News, Virginia
Cheyenne Transitional Center
Cheyenne, Wyoming
BOP
84
—
Community
Corrections Feb-20 (2) 1 year
State of Wyoming
116
—
Community Jun-20 (2) 1 year
Corrections
22
(A) Design capacity measures the number of beds, and accordingly, the number of offenders each facility is
designed to accommodate. Facilities housing detainees on a short-term basis may exceed the original
intended design capacity due to the lower level of services required by detainees in custody for a brief
period. From time to time, we may evaluate the design capacity of our facilities based on the customers
using the facilities, and the ability to reconfigure space with minimal capital outlays. We believe design
capacity is an appropriate measure for evaluating the operations in our CoreCivic Safety and CoreCivic
Community segments, because the revenue generated by each facility is based on a per diem or monthly
rate per offender cared for at the facility paid by the corresponding contracting governmental entity.
(B) We manage numerous facilities that have more than a single function (i.e., housing both long-term
sentenced adult prisoners and pre-trial detainees). The primary functional categories into which facility
types are identified was determined by the relative size of offender populations in a particular facility on
December 31, 2019. If, for example, a 1,000-bed facility cared for 900 adult offenders with sentences in
excess of one year and 100 pre-trial detainees, the primary functional category to which it would be
assigned would be that of correctional facilities and not detention facilities. It should be understood that
the primary functional category to which multi-user facilities are assigned may change from time to
time.
(C) Remaining renewal options represents the number of renewal options, if applicable, and the term of
each option renewal.
(D) Pursuant to the terms of a contract awarded by the state of Arizona in September 2012, the state of
Arizona has an option to purchase the Red Rock facility at any time during the term of the contract,
including extension options, based on an amortization schedule starting with the fair market value and
decreasing evenly to zero over the 20-year term of the contract.
(E) These facilities are subject to purchase options held by the Georgia Department of Corrections, or
GDOC, which grants the GDOC the right to purchase the facility for the lesser of the facility's
depreciated book value, as defined, or fair market value at any time during the term of the contract
between the GDOC and us.
(F) The facility is subject to a purchase option held by the Tallahatchie County Correctional Authority
which grants Tallahatchie County Correctional Authority the right to purchase the facility at any time
during the contract at a price generally equal to the cost of the premises less an allowance for
amortization originally over a 20-year period. The amortization period was extended through 2050 in
connection with an expansion completed during the fourth quarter of 2007.
(G) The state of Montana has an option to purchase the facility generally at any time during the term of the
contract with us at fair market value less the sum of a pre-determined portion of per-diem payments
made to us by the state of Montana.
(H) The state of Ohio has the irrevocable right to repurchase the facility before we may resell the facility to
a third party, or if we become insolvent or are unable to meet our obligations under the management
contract with the state of Ohio, at a price generally equal to the fair market value.
(I) These facilities are subject to purchase options held by the Oklahoma Department of Corrections, or
ODOC, which grants the ODOC the right to purchase the facility at its fair market value at any time
during the term of the contract with ODOC.
(J) The state of Tennessee has the option to purchase the facility in the event of our bankruptcy, or upon an
operational or financial breach under the management agreement, at a price equal to the book value, as
determined under such agreement.
(K) The contract at this facility expired on January 7, 2020, and was not renewed. The facility was leased
from a third-party and the lease also terminated in January 2020.
23
CoreCivic Properties
Through our CoreCivic Properties segment, we owned 28 properties for lease to third parties and used by
government agencies. We calculate annualized lease income as annualized contractual base rent for the last month
in a specified period, plus the annualized straight line rent adjustments for the last month in such period and the
annualized net expense reimbursements earned by us for the last month in such period. The following table includes
certain information regarding each property.
Tenant
Lease
Expiration
Year
(B)
Property
Type
(A)
Annualized
Lease
Income
(in
thousands)
Percentage
of Total
Annualized
Lease
Income
Leasable
Square
Feet
Annualized
Lease
Income per
Leased
Square
Foot
GL
2027
5,000
$
127
0.2 % $
26
Property Name
Primary Customer
GSA - U.S.
Immigration
and Customs
Enforcement
ICE-Fayetteville
Fayetteville, Arkansas
SSA-Harrison
Harrison, Arkansas
SSA-Hot Springs
Hot Springs, Arkansas
California City Correctional
Center
California City, California
Long Beach Community
Corrections Center
Long Beach, California
GSA - Social Security GL
2022
11,000 $
303
0.4 % $
26
Administration
GSA - Social Security GL
2025
11,000 $
277
0.4 % $
25
Administration
State of California
C
2020 (C) 522,000 $ 31,480
41.2 % $
60
The GEO Group, Inc. CC
2025
16,000 $
849
1.1 % $
54
Stockton Female Community
Corrections Facility
Stockton, California
WestCare California,
Inc.
Capital Commerce Center
Tallahassee, Florida
State of Florida -
Florida Dept. of
Business &
Professional
Regulation
CC
2020 (D) 15,000 $
180
0.2 % $
12
GL
2028 (E) 261,000 $
5,909
7.7 % $
23
Augusta Transitional Center
Augusta, Georgia
Georgia Department
of Corrections
CC
2020 (F) 29,000 $
484
0.6 % $
17
SSA-Milledgeville
Milledgeville, Georgia
GSA - Social Security GL
2030
9,000
$
167
0.2 % $
19
Administration
Southeast Correctional
Complex (G)
Wheelwright, Kentucky
Commonwealth of
Kentucky Department C
of Corrections
2030 (H) 127,000 $
—
—
$
—
24
Property Name
Primary Customer
Tenant
Lease
Expiration
Year
(B)
Property
Type
(A)
Annualized
Lease
Income
(in
thousands)
Percentage
of Total
Annualized
Lease
Income
Leasable
Square
Feet
Annualized
Lease
Income per
Leased
Square
Foot
SSA-Baltimore
Baltimore, Maryland
MDHHS-Detroit
Detroit, Michigan
SSA-Florissant
St Louis, Missouri
GSA - Social Security GL
2034
541,000 $ 23,378
30.6 % $
43
Administration
Michigan Department
of Technology,
Management and
Budget
GL
2028 (I) 37,000 $
955
1.3 % $
26
GSA - Social Security GL
2021
12,000 $
271
0.4 % $
22
Administration
IRS-Greenville
Greenville, North Carolina
GSA - Internal
Revenue Service
GL
2024
13,000 $
248
0.3 % $
22
SSA-Rockingham
Rockingham, North Carolina
NARA-Dayton
Dayton, Ohio
GSA - Social Security GL
2025
8,000
$
742
1.0 % $
97
Administration
GSA - National
Archives &
Records
Administration
GL
2023 (J) 217,000 $
1,915
2.5 % $
9
North Fork Correctional Facility State of Oklahoma
Sayre, Oklahoma
C
2021 (C) 466,000 $
7,258
9.5 % $
16
SSA-McAlester
McAlester, Oklahoma
SSA-Poteau
Poteau, Oklahoma
Broad Street Residential Reentry
Center
Philadelphia, Pennsylvania
Roth Hall Residential Reentry
Center
Philadelphia, Pennsylvania
Walker Hall Residential Reentry
Center
Philadelphia, Pennsylvania
GSA - Social Security GL
2021
9,000
$
222
0.3 % $
26
Administration
GSA - Social Security GL
2022
6,000
$
155
0.2 % $
25
Administration
—
CC
—
18,000 $
—
—
$
—
—
CC
—
18,000 $
—
—
$
—
—
CC
—
18,000 $
—
—
$
—
DHS-Chattanooga
Chattanooga, Tennessee
GSA - Department of GL
Homeland Security
2020
5,000
$
140
0.2 % $
29
DHS-Knoxville
Knoxville, Tennessee
GSA - Department of GL
Homeland Security
2019
5,000
$
144
0.2 % $
30
SSA-Balch Springs
Balch Springs, Texas
GSA - Social Security GL
2033
16,000 $
466
0.6 % $
29
Administration
25
Property Name
Primary Customer
Tenant
Lease
Expiration
Year
(B)
Property
Type
(A)
Annualized
Lease
Income
(in
thousands)
Percentage
of Total
Annualized
Lease
Income
Leasable
Square
Feet
Annualized
Lease
Income per
Leased
Square
Foot
SSA-Bryan
Bryan, Texas
SSA-Denton
Denton, Texas
SSA-Marshall
Marshall, Texas
GSA - Social Security GL
2022
10,000 $
281
0.4 % $
29
Administration
GSA - Social Security GL
2026
10,000 $
274
0.4 % $
29
Administration
GSA - Social Security GL
2029
7,000
$
158
0.2 % $
34
Administration
Total / Weighted Average
2,422,000 $ 76,383
100.0 % $
34
(A) GL=Government-Leased; C=Correctional; CC=Community Corrections.
(B) The year of lease expiration does not include renewal options, but does include the soft term, where
applicable. All leases with renewal options are noted in the following footnotes to this table.
(C) Lease contains indefinite renewal options.
(D) Lease contains one five-year renewal option.
(E) Lease contains two five-year renewal options.
(F) Lease contains three one-year renewal options.
(G) The KYDOC has an option to purchase the facility at any time during the term of the lease with us at a
price equal to the fair market value of the property.
(H) Lease contains five two-year renewal options.
(I) Lease contains one six-year renewal option.
(J) Lease contains two ten-year renewal options.
Development Projects
As more fully described hereafter, on January 24, 2018, we entered into a 20-year lease agreement with the Kansas
Department of Corrections, or KDOC, for a 2,432-bed correctional facility to be constructed in Lansing, Kansas.
We commenced construction of the facility in the first quarter of 2018 and, as of December 31, 2019, we had
capitalized $137.7 million associated with the construction project. In December 2019, the Lansing facility began
accepting offenders into the 512-bed minimum security complex ahead of schedule, with the remaining 1,920-bed
medium/maximum security complex completed in January 2020, for a total cost of approximately $155.0 million.
This transaction represents the first development of a privately owned, build-to-suit correctional facility to be
operated by a government agency through a long-term lease agreement. We will be responsible for facility
maintenance throughout the 20-year term of the lease, at which time ownership will revert to the state of Kansas.
26
Competitive Strengths
Through our three segments, CoreCivic Safety, CoreCivic Community, and CoreCivic Properties, we offer multiple
solutions to unique challenges, allowing government organizations to address their various needs while customizing
the solution based on their unique circumstances. Accordingly, we believe that we benefit from the following
competitive strengths:
Largest Private Owner of Real Estate used by Government Agencies. As of December 31, 2019, we owned, or
controlled via a long-term lease, approximately 16.1 million square feet of real estate, all used directly or indirectly
by government agencies, which we believe makes us the largest private owner of real estate used by U.S.
government agencies. Our complementary set of business assets provide critical infrastructure and services under
contracts with federal, state, and local government agencies that generally have credit ratings of single-A or better,
which also contributes to our steady, predictable cash flows.
In our CoreCivic Safety segment, we own, or control via a long-term lease, 13.0 million square feet of real estate
used to provide innovative, comprehensive, flexible, turn-key correctional and detention services to federal, state
and local government agencies. As of December 31, 2019, our CoreCivic Safety segment operated 50 facilities, 43
of which we owned, with a total design capacity of 72,689 beds, making us the nation's largest private prison owner
and one of the largest prison operators in the United States. Five of our prison facilities were idle as of December 31,
2019, containing 6,826 beds, and are available for growth opportunities. Our CoreCivic Safety segment generated
85.2% of our total facility net operating income during 2019.
In our CoreCivic Community segment, we own, or control via a long-term lease, 0.7 million square feet of real
estate representing, as of December 31, 2019, 29 residential reentry centers with a design capacity of 5,394 beds,
making us the second largest community corrections owner and operator in the United States. Our CoreCivic
Community segment generated 5.0% of our total facility net operating income during 2019.
In our CoreCivic Properties segment, as of December 31, 2019, we owned 2.4 million square feet of real estate
representing 28 properties that are for lease to third parties and used by government agencies. Our CoreCivic
Properties segment generated 9.8% of our total facility net operating income during 2019. In January 2020, we
completed the acquisition of a portfolio of 28 additional properties containing an aggregate of 445,000 square feet.
We believe our synergistic set of business segments, combined with our operating strategies, corrections-industry
commitment to rehabilitation, extensive government relationships, and deep real estate expertise, provide us with a
diversified platform for stable cash flows and sustainable growth, with multiple paths for organic expansions and
acquisitions.
First and Largest Private Prison Owner. Through our CoreCivic Safety segment, we are the nation's largest private
prison owner and one of the largest prison operators in the United States, which provides us significant credibility
with our current and prospective clients. We believe we own, or control via a long-term lease, approximately 58%
of all privately owned prison beds in the United States and manage nearly 39% of all privately managed prison beds
in the United States. We pioneered modern-day private prisons with a list of notable accomplishments, such as:
the first company to design, build, and operate a private prison;
the first company to manage a private maximum-security facility under a direct contract with the federal
government;
the first company to purchase a government-owned correctional facility from a government agency in the
United States and to manage the facility for the government agency;
the first company to lease a private prison to a state government; and
the first company to develop a privately-owned, build-to-suit correctional facility to be operated by a
government agency through a long-term lease agreement.
In addition to providing us with extensive experience and institutional knowledge, our size also helps us deliver
value to our customers by providing purchasing power and allowing us to achieve certain economies of scale.
27
ESG Accountability. In 2019, we issued our first ESG report which summarizes our activities in three key areas: our
environmental impact, our social responsibility commitments, and our corporate governance. The report covers the
year ended December 31, 2018, and details how we are helping to tackle the national crisis of recidivism and
provides quantified evidence of progress being made toward company-wide reentry goals. The report showcases our
advancement toward our reentry goals in five key programming areas: Educational Services, Treatment and
Behavioral Programs, Reentry Services, Chaplaincy and Religious Services, and Victim Impact Programs. In
addition, the ESG report informs our stakeholders on our initiation of a strategic energy management program and
provides information on "green" design elements in new and existing facilities. The report also gives stakeholders a
picture of how we govern ourselves by discussing our leadership structure and critical issues like political giving;
our human rights policy; supplier diversity; charitable giving; veterans hiring programs; PREA compliance; ethics;
and workforce rights, compensation, benefits, training and diversity.
The ESG report was prepared with reference to selected Global Reporting Initiative, or GRI, standards issued by the
Global Sustainability Standards Board. GRI is an international independent standards organization created to help
business, government and other organizations understand and communicate how their operations affect issues of
global importance, such as human rights, corruption and climate change. In conducting the ESG materiality
assessment contained in the report, we also considered the relevance and impact of our actions toward the United
Nations Sustainable Development Goals, or UN SDGs, which were established in 2015 as a blueprint for addressing
global societal challenges with measures that promote good health and well-being, clean and affordable energy,
decent work and economic growth, climate action, and peace and justice We are the first company in our industry to
release an ESG report, demonstrating our commitment to transparency and accountability.
The ESG report may be accessed on our website under "Social Responsibility." The information included in the
ESG report is not incorporated by reference into this Annual Report.
Available Beds within Our Existing Facilities. As of December 31, 2019, we had approximately 6,800 beds at five
prison facilities that are vacant and immediately available to use. We are actively engaged in marketing this
available capacity as solutions to meet the needs of potential customers. Historically, we have been successful in
substantially filling our inventory of available beds. For example, pursuant to a new management contract we
executed in November 2017, the KYDOC began utilizing our 816-bed Lee Adjustment Center in Kentucky, one of
our previously idled prison facilities, in the first quarter of 2018. More recently, in the second quarter of 2019, we
announced that we entered into new contracts under inter-governmental service agreements, or IGSAs, with ICE at
our previously idled 910-bed Torrance County Detention Facility in New Mexico and with the USMS at our
previously idled 1,422-bed Eden Detention Center in Texas. The activations of these two facilities were both
completed in the third quarter of 2019.
Available bed capacity can also be used for emergent needs. For example, during January 2020, we entered into an
emergency ninety-day contract with the state of Mississippi to care for up to 375 inmates at our Tallahatchie County
Correctional Facility, as the state of Mississippi was experiencing significant challenges in its correctional system.
The contract allows the state of Mississippi to utilize additional available beds at the facility based on their evolving
needs. This emergency contract exemplifies how critically important it is for state and federal partners to have
access to our real estate assets and associated service offerings to meet their unexpected needs. Our Tallahatchie
facility provided immediate capacity for the state of Mississippi to move a portion of its close-custody inmate
population, which we believe quickly improved the safety and security of their correctional system.
Well-Established Community Corrections Platform. Through our CoreCivic Community segment, as of December
31, 2019, we had a network of 29 residential reentry centers containing a total of 5,394 beds. We offer housing and
programs, with a key focus on employment, job readiness and life skills in order to help offenders successfully re-
enter the community and reduce the risk of recidivism. We also provide non-residential correctional alternatives,
including electronic monitoring and case management services, to municipal, county and state governments in
multiple states. We expect to continue to pursue opportunities that expand the scope of non-residential correctional
alternative solutions available to government agencies.
28
We are the second largest community corrections owner and operator in the United States. We believe this
recognition, along with our track record of successful acquisitions and the relationships we have established with
owners and potential sellers of reentry facilities, provides us with a platform for further growth and allows us to
continue to be an industry consolidator. In addition, we believe the demand for the housing and programs that
community corrections facilities offer will continue to grow as offenders are released from prison and due to an
increased awareness of the important role these programs play in an offender's successful transition from prison to
society. We expect to continue to pursue opportunities to acquire additional community corrections facilities in
order to provide these services to parolees, defendants, and offenders who are serving their full sentence, the last
portion of their sentence, waiting to be sentenced, awaiting trial while supervised in a community environment, or as
an alternative to incarceration. We also believe we have the opportunity to maximize utilization of available beds
within our community corrections portfolio that would further increase the number of individuals benefiting from
the services we provide in such facilities.
Flexible Real Estate Solutions and Attractive Real Estate Portfolio. Through our CoreCivic Properties segment, as
of December 31, 2019, we owned 28 properties for lease to third parties and used by government agencies, totaling
2.4 million square feet. In January 2020, we completed the acquisition of a portfolio of 28 additional properties
containing an aggregate of 445,000 square feet. We offer an extensive network of government relationships and the
capability to manage and maintain complex properties, built over our 35-year history. In addition, we offer our
customers an attractive portfolio of correctional, detention, and reentry facilities that can be leased for various needs
as an alternative to providing "turn-key" correctional, detention, and residential reentry bed space and services to our
government partners. In December 2019, we entered into a lease with the KYDOC for our previously idled 656-bed
Southeast Correctional Complex in Wheelwright, Kentucky. The lease is expected to commence in mid-2020 and
has an initial term of ten years and includes five two-year renewal options. The lease of this facility, along with the
lease of our 2,400-bed North Fork Correctional Facility to the ODOC originating in 2016 and the lease of our
California City Correctional Center to the California Department of Corrections and Rehabilitation originating in
2013, exemplify our ability to react quickly to our partners' needs with innovative and flexible solutions that make
the best use of taxpayer dollars. We previously operated these three correctional facilities for various state and
federal partners. We intend to pursue additional opportunities to lease prison facilities to government and other
third-party operators in need of correctional capacity.
On January 24, 2018, we entered into a 20-year lease agreement with the KDOC for a 2,432-bed correctional facility
to be constructed in Lansing, Kansas. We commenced construction of the facility in the first quarter of 2018. In
December 2019, the Lansing facility began accepting offenders into the 512-bed minimum security complex ahead
of schedule, with the remaining 1,920-bed medium/maximum security complex completed in January 2020. The
new facility replaces the Lansing Correctional Facility, Kansas' largest correctional complex for adult male inmates,
originally constructed in 1863. This transaction represents the first development of a privately owned, build-to-suit
correctional facility to be operated by a government agency through a long-term lease agreement. We will be
responsible for facility maintenance throughout the 20-year term of the lease, at which time ownership will revert to
the state of Kansas. With the extensively aged criminal justice infrastructure in the U.S. today, we believe we can
bring our flexible solutions like this to other government agencies.
Further, through multiple acquisitions during 2018 and 2019, we added approximately 1.2 million square feet to our
portfolio of assets that are leased to third parties and used by government agencies. We intend to pursue additional
opportunities to acquire government-leased assets, including residential reentry centers, with a bias toward those
used to provide mission-critical governmental services, that we believe have favorable investment returns, diversify
our cash flows, and increase value to our stockholders. On January 6, 2020, we announced that we completed the
acquisition of a portfolio of 28 properties, all of which are leased to the federal government through the General
Services Administration, or GSA. The 445,000 square foot portfolio serves numerous federal agencies, including
primarily the Social Security Administration, the Department of Homeland Security, and the Office of Hearings
Operations. The 28-property portfolio is strategically located throughout the mid-south, complementing our existing
real estate footprint, and each property was built-to-suit for its federal tenant.
29
Attractive REIT Profile. The breadth and size of our real estate portfolio make us an attractive REIT. As of
December 31, 2019, we owned or controlled 100 facilities containing approximately 16.1 million square feet which,
for the year ended December 31, 2019, generated 98% of our facility net operating income. Land and buildings
comprise approximately 89% of our gross fixed assets. The weighted average age of our portfolio of facilities in our
CoreCivic Safety, CoreCivic Community, and CoreCivic Properties segments is 20, 27, and 20 years, respectively.
These valuable assets are located in areas with high barriers to entry, particularly due to the unique permitting and
zoning requirements for these facilities. Further, the majority of our assets are constructed primarily of concrete and
steel, generally requiring lower maintenance capital expenditures than other types of commercial properties.
We believe we are the largest developer of mission-critical, criminal justice center real estate projects over the past
15 years. We also believe we are the largest private owner of real estate used by government agencies. We provide
space and services under contracts with federal, state, and local government agencies that generally have credit
ratings of single-A or better. In addition, a majority of our contracts have terms between one and five years, and we
have experienced customer retention of approximately 94% at facilities we owned and operated during the previous
five years, which contributes to our relatively predictable and stable revenue base. This stream of revenue combined
with our low maintenance capital expenditure requirement translates into steady, predictable cash flow. We believe
our REIT structure also provides a high dividend yield to our shareholders compared with other investments.
Offer Compelling Value to Correctional Agencies. We believe our government partners seek a compelling value
and service offering when selecting an outsourced correctional services provider. We believe we offer a cost-
effective alternative to our government partners by reducing their correctional services costs, including the
avoidance of long-term pension obligations and large capital investments in new prison beds. We endeavor to
improve operating performance and efficiency through the following key operating initiatives: (1) standardizing
supply and service purchasing practices and usage; (2) implementing a standard approach to staffing and business
practices; (3) improving offender management, resource consumption, and reporting procedures through the
utilization of numerous technological initiatives; (4) reconfiguring facility bed space to optimize capacity utilization;
and (5) improving productivity. Through ongoing company-wide initiatives, we continue to focus on efforts to
contain costs and improve operating efficiencies.
In 2017, we launched a nationwide initiative to advocate for a range of government policies that will help former
offenders successfully reenter society and stay out of prison. Through our strong commitment to community
corrections and reentry programs, we offer our government partners additional long-term value. Our evidence-based
reentry programs, including academic education, vocational training, substance abuse treatment, life skills training,
and faith-based programming, are customizable based on partner needs and are applied utilizing best practices
and/or industry standards. Our proprietary reentry process and cognitive/behavioral curriculum, "Go Further",
promotes a comprehensive approach to addressing the barriers to a successful return to society. Through our efforts
in community corrections and reentry programs, we can provide consistency and common standards across facilities.
We can also serve multiple levels of government on an as-needed basis, all toward reaching the goal we share with
our government partners of providing offenders with the opportunity to succeed when they are released, making our
communities safer, and, ultimately, reducing recidivism.
We also offer a wide variety of specialized services that address the unique needs of various segments of the
offender population. Because the offenders in the facilities we operate differ with respect to security levels, ages,
genders, and cultures, we focus on the particular needs of an offender population and tailor our services based on
local conditions and our ability to provide services on a cost-effective basis.
We believe our government partners and other agencies in the criminal justice sector also seek a compelling value
and service offering when pursuing solutions to their unique real estate needs. We believe our track record of
constructing quality assets on time and within budget, our design and construction methods, unique financing
alternatives, and our expertise and experience enable us to provide a compelling value proposition for the
construction of mission-critical government real estate assets. We also believe our robust preventive maintenance
program included in our service offering significantly reduces the risk of real estate neglect. We also offer utility
management services using environmentally-friendly, state-of-the-art technology.
30
Acquisitions, Development, and Expansion Opportunities. Several of our existing federal and state partners, as well
as prospective state partners, are experiencing growth in offender populations and overcrowded conditions, are
considering alternative correctional capacity for their aged or inefficient infrastructure, or are seeking cost savings
by utilizing the private sector. Competing budget priorities often impede our customers' ability to construct new
prison beds of their own or update older facilities, which we believe could result in further need for private sector
prison capacity solutions in the long-term. Over the long-term, we would like to see meaningful utilization of our
available capacity and better visibility from our customers into their potential future needs before we develop new
prison capacity on a speculative basis. We will, however, respond to customer demand and may develop or expand
correctional and detention facilities when we believe potential long-term returns justify the capital deployment, such
as the recent expansion of our Otay Mesa Detention Center. We expanded the Otay Mesa facility by 512 beds as a
result of long-standing demand from the USMS and ICE and limited detention capacity in the Southwest region of
the United States. The expansion was completed during the third quarter of 2019. Both the USMS and ICE
currently utilize the Otay Mesa Detention Center under an existing contract that enables both agencies to utilize the
additional capacity.
We are also pursuing additional investment opportunities in other real estate assets with a bias toward those used to
provide mission-critical governmental services, as well as other businesses that expand the range of solutions we
provide to government partners, and expect to complete additional acquisitions that would further diversify our cash
flows and generate attractive risk-adjusted returns for our shareholders. However, our pursuits in recent months have
been tempered by the decline in the market value of our public securities.
Proven Senior Management Team. Our senior management team has applied their prior experience and diverse
industry expertise to improve our operations, related financial results, and capital structure. Under our senior
management team's leadership, we have successfully executed strategies to diversify our business and offer a
broader range of solutions to government partners over the past several years resulting in the Company being
renamed and rebranded as CoreCivic, created new business opportunities with customers that have not previously
utilized the private corrections sector, converted to a REIT, completed several business combination transactions,
and successfully completed numerous financing transactions.
Financial Flexibility. As of December 31, 2019, we had cash on hand of $92.1 million and $412.7 million available
under our revolving credit facility, with a total weighted average effective interest rate of 4.4% on all outstanding
debt, while our total weighted average maturity on all outstanding debt was 6.3 years. For the year ended
December 31, 2019, our fixed charge coverage ratio was 5.0x and our debt leverage was 3.7x. During the year ended
December 31, 2019, we generated $354.4 million in cash through operating activities.
31
Capital Strategy
We reorganized our corporate structure to facilitate our qualification as a REIT for federal income tax purposes
effective for our taxable year beginning January 1, 2013. To qualify and be taxed as a REIT, we generally are
required to distribute annually to our stockholders at least 90% of our REIT taxable income (determined without
regard to the dividends paid deduction and excluding net capital gains), and are subject to regular corporate income
taxes to the extent we distribute less than 100% of our REIT taxable income (including capital gains) each year. The
amount, timing and frequency of future distributions, however, will be at the sole discretion of our Board of
Directors and will be declared based upon various factors, many of which are beyond our control, including our
financial condition and operating cash flows, the amount required to maintain qualification and taxation as a REIT
and reduce any income and excise taxes that we otherwise would be required to pay, limitations on distributions in
our existing and future debt instruments, limitations on our ability to fund distributions using cash generated through
our TRSs, alternative growth opportunities that require capital deployment, and other factors that our Board of
Directors may deem relevant. Because as a REIT we are required to distribute a substantial portion of our cash
generated from operations to stockholders as a dividend, growth opportunities may require more external capital
resources than were required prior to our conversion to a REIT. During 2019, our Board of Directors declared a
quarterly dividend of $0.44 in each quarter, totaling $211.9 million for the year, compared with a total of $205.7
million during 2018 and $199.8 million during 2017. In addition to the cash on hand and availability under our
revolving credit facility, we currently expect our REIT taxable income to be less than our operating cash flow,
primarily due to the deductibility of non-cash expenses such as depreciation on our real estate assets. This excess
cash flow provides us with the flexibility to (i) invest in additional facility acquisitions and developments, which
could include acquisitions of facilities from government partners, third parties, or additional business combinations,
(ii) pay down debt, (iii) increase dividends to our stockholders, or (iv) repurchase our common stock.
Our business development strategy includes marketing our available beds to existing and potential government
partners that seek corrections, detention, and reentry management services. We may also offer government partners
the opportunity to lease our idle facilities as an alternative to providing "turn-key" bed space and services to our
government partners. Successful efforts would generate significant cash flows without the need to incur substantial
capital expenditures.
Our business development strategy also includes mergers and acquisitions, or M&A, activities that will enable us to
further expand our network of residential reentry centers, grow our portfolio of government-leased properties, and
acquire other businesses that provide complementary services. We will continue to pursue opportunities to help our
government partners meet their infrastructure needs, primarily through the development and redevelopment of
criminal justice sector assets, but also by acquiring other real estate assets with a bias toward those used to provide
mission-critical governmental services, that we believe have favorable investment returns, diversify our cash flows,
and increase value to our stockholders. We will also respond to customer demand and may develop or expand
correctional and detention facilities when we believe potential long-term returns justify the capital deployment, like
the aforementioned expansion of our Otay Mesa Detention Center. These business development activities will
require capital. We currently expect to fund these growth opportunities with cash on hand and availability under our
revolving credit facility. As of December 31, 2019, we had cash on hand of $92.1 million and $412.7 million
available under our revolving credit facility. We may also seek to issue debt or equity securities from time to time
when we determine that market conditions and the opportunity to utilize the proceeds from the issuance of such
securities are favorable. We currently anticipate that any proceeds obtained through capital markets transactions
would be used to repay borrowings under our revolving credit facility or other secured indebtedness.
As a result of opposition to immigration policies and the association of private companies with the enforcement of
such policies, some banks have recently announced that they do not expect to continue providing credit or financial
services to private entities that operate correctional and detention facilities, including CoreCivic. The banks are
legally obligated to honor their commitments under our Second Amended and Restated Credit Agreement, or Bank
Credit Agreement, which expires in April 2023. However, we believe these announcements, as well as investor
concerns about the uncertainty of the impact on our business that could result from a change in the presidential
administration, have currently affected the market value of our securities. In light of these market conditions, we
have tempered our M&A activities and have sharpened the focus on our capital deployment strategy.
32
On December 2, 2019, we gave irrevocable notice that we would redeem all of our outstanding 4.125% Senior Notes
on January 1, 2020, or the Redemption Date, at a redemption price equal to 100% of the principal amount of the
4.125% Senior Notes, plus accrued and unpaid interest to but excluding the Redemption Date, or the Redemption
Amount. On December 27, 2019, and in accordance with the indenture governing the 4.125% Senior Notes, we
satisfied and discharged the 4.125% Senior Notes by irrevocably depositing the Redemption Amount due on the
Redemption Date with the trustee. Accordingly, the 4.125% Senior Notes are not included on our consolidated
balance sheet as of December 31, 2019.
On December 18, 2019, we entered into a new Term Loan B which bears interest at a rate of LIBOR plus 4.50%,
with a 1.00% LIBOR floor (or, at our 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 will be secured by a first lien on certain
specified real property assets, representing a loan-to-value of no greater than 80%. We can prepay the Term Loan B
at any time and from time to time, without premium or penalty, except that a premium of 1.0% of the amount
prepaid must accompany any prepayment made prior to December 18, 2020, with the proceeds of any new or
replacement tranche of term loans that are in the nature of what are commonly referred to as "B" term loans and that
bear interest with an all-in yield less than the all-in yield applicable to the Term Loan. The 1.0% prepayment
premium is also payable in respect of certain repricing events occurring prior to December 18, 2020. Proceeds from
the issuance of the Term Loan B were used to partially fund the early redemption of the 4.125% Senior Notes,
transaction fees and expenses, and to provide for general corporate purposes.
In April 2018, CoreCivic of Kansas, LLC, a wholly-owned subsidiary of ours, priced $159.5 million in aggregate
principal amount of non-recourse senior secured notes, or 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. We are
using the proceeds of the private placement, which are 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. We may pursue additional private placement
transactions similar to the Kansas Notes in the future.
In addition to the Kansas Notes, as of December 31, 2019, we had two secured, non-recourse mortgage notes
outstanding amounting to $172.3 million with interest rates of 4.5% each and maturing in 2033 and 2034. In
addition, as of December 31, 2019, we had $850.0 million principal amount of unsecured notes outstanding with
fixed interest rates, including $250.0 million at 4.75% maturing October 2027, $350.0 million at 4.625% maturing
May 2023, and $250.0 million at 5.0% maturing October 2022. Each issuance is redeemable at a "make-whole"
redemption price prior to three months in advance of the respective maturity, plus accrued and unpaid interest, and
thereafter at 100% of the aggregate principal amount plus accrued and unpaid interest. We do not currently plan to
refinance any of our senior notes prior to the date at which the "make-whole" premium expires.
In January 2020, we completed the acquisition of a portfolio of 28 properties, 24 of which the counter-party
contributed to a newly formed partnership of the Company's, for total consideration of $83.2 million, excluding
transaction-related expenses. All of the properties are leased to the federal government through the GSA. We
financed the acquisition with $7.7 million of cash, assumed debt of $52.2 million and the balance with the issuance
of 1.3 million limited partnership units that are convertible into cash or shares of our common stock following a
two-year period, using a "DownREIT" structure. The assumed debt carries a fixed interest rate of 4.9%, with fixed
monthly payments extending through November 2025, and a balloon payment of $46.2 million due at maturity. For
this acquisition, we were able to complete an accretive transaction despite what we believe is depressed market
value of our public securities, by fixing the number of limited partnership units to be issued based on a negotiated
share price collar between $21.00 and $25.00, or a 17% premium to the price of our common stock as of the date of
the acquisition. Creating a "DownREIT" structure provides us with another form of capital outside our traditional
debt and equity securities, and is attractive to potential sellers because they may be able to defer a substantial portion
of income taxes they otherwise may incur by selling their properties to another buyer.
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Government Regulation
Business Regulations
The industry in which we operate is subject to extensive federal, state, and local regulations, including educational,
health care, data privacy, and safety regulations, which are administered by many governmental and regulatory
authorities. Some of the regulations are unique to the corrections industry. Facility management contracts typically
include specific staffing requirements, reporting requirements, supervision, and on-site monitoring by
representatives of the contracting governmental agencies. Corrections and reentry personnel are customarily
required to meet certain training standards and, in some instances, facility personnel are required to be licensed and
subject to background investigation. Certain jurisdictions also require us to award subcontracts on a competitive
basis or to subcontract with certain types of businesses, such as small businesses and businesses owned by members
of minority groups. Our facilities are also subject to operational and financial audits by the governmental agencies
with which we have contracts. Failure to comply with these regulations and contract requirements can result in
material penalties or non-renewal or termination of facility management contracts.
Environmental Matters
Under various federal, state, and local environmental laws, ordinances and regulations, a current or previous owner
or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances
on, under, or in such property. Such laws often impose liability whether or not the owner or operator knew of, or
was responsible for, the presence of such hazardous or toxic substances. As an owner of real estate assets and as the
result of our operation and management of correctional, detention, and residential reentry facilities, we have been
subject to these laws, ordinances, and regulations. Phase I environmental assessments have been obtained on
substantially all of the properties we currently own. We are not aware of any environmental matters that are
expected to materially affect our financial condition or results of operations; however, if such matters are detected in
the future, the costs of complying with environmental laws may adversely affect our financial condition and results
of operations.
Health Insurance Portability and Accountability Act of 1996 and Privacy and Security Requirements
In 1996, Congress enacted the Health Insurance Portability and Accountability Act of 1996, or HIPAA. HIPAA was
designed to improve the portability and continuity of health insurance coverage, simplify the administration of
health insurance, and protect the privacy and security of health-related information.
Privacy regulations promulgated under HIPAA regulate the use and disclosure of individually identifiable health
information, whether communicated electronically, on paper, or orally. The regulations also provide patients with
significant rights related to understanding and controlling how their health information is used or disclosed.
Security regulations promulgated under HIPAA require that covered entities, including most health care providers,
health clearinghouses, group health plans, and their business associates, implement administrative, physical, and
technical safeguards to protect the security of individually identifiable health information that is maintained or
transmitted electronically. These privacy and security regulations require the implementation of compliance training
and awareness programs for our health care service providers and selected other employees primarily associated
with our employee medical plans. Further, covered entities and their business associates must provide notification
to affected individuals without unreasonable delay but not to exceed 60 days from discovery of a breach of
unsecured protected health information. Notification must also be made to the U.S. Department of Health and
Human Services, or DHHS, and, in certain situations involving large breaches, to the media. In a final rule released
in January 2013, DHHS modified the breach notification requirement by creating a presumption that all non-
permitted uses or disclosures of unsecured protected health information are breaches unless the covered entity or
business associate establishes that there is a low probability the information has been compromised.
34
Violations of the HIPAA privacy and security regulations could result in significant civil and criminal penalties, and
the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, which was
modified by the 2013 final HITECH rule, strengthened the enforcement provisions of HIPAA. HITECH broadens
the applicability of the criminal penalty provisions to employees of covered entities and requires DHHS to impose
penalties for violations resulting from willful neglect. HITECH also increases the amount of the civil penalties, with
penalties of up to $50,000 per violation for a maximum civil penalty of $1,500,000 in a calendar year for violations
of the same requirement. Further, HITECH authorizes state attorneys general to bring civil actions for injunctions or
damages in response to violations that threaten the privacy of state residents. In addition, under HITECH, DHHS is
required to perform periodic HIPAA compliance audits of covered entities and their business associates. These
provisions, as modified by the 2013 final HITECH rule, may be subject to interpretation by various courts and other
governmental authorities, thus creating potentially complex compliance issues.
In addition, there are numerous legislative and regulatory initiatives at the federal and state levels addressing the
privacy and security of patient health information. For example, federal and various state laws and regulations
strictly regulate the disclosure of patient identifiable information related to substance abuse treatment. Additionally,
we are subject to complex and evolving U.S. privacy laws and regulations, including those pertaining to the
handling of personal data that may not be preempted by the HIPAA privacy and security standards, such as the
California Consumer Privacy Act of 2018, or CCPA. Government authorities in numerous states, including Nevada,
Massachusetts and Washington are considering, or are in the process of implementing, new data protection
regulations. Many of these laws and regulations are subject to uncertain application, interpretation or enforcement
standards that could result in claims, changes to our business practices, data processing and security systems,
penalties, increased operating costs or other impacts on our businesses. For example, the CCPA recently went into
effect on January 1, 2020, and affords California residents, which include any employee in California, expanded
privacy protections. The recently enacted laws often provide for civil penalties for violations, as well as a private
right of action for data breaches that may increase data breach litigation. Further, while we are using internal and
external resources to monitor compliance with and to continue to modify our data processing practices and policies
in order to comply with evolving privacy laws, relevant regulatory authorities could determine that our data handling
practices fail to address all the requirements of certain new laws, which could subject us to penalties and/or
litigation. In addition, there is no assurance that our security controls over personal data, the training of employees
and vendors on data privacy and data security, and the policies, procedures and practices we implemented or may
implement in the future will prevent the improper disclosure of personal data. Improper disclosure of personal data
in violation of the CCPA and/or of other personal data protection laws could harm our reputation, cause loss of
consumer confidence, subject us to government enforcement actions (including fines), or result in private litigation
against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and/or
criminal prosecution, all of which could negatively affect our business and operating results.
Insurance
We maintain general liability insurance for all the facilities we operate, as well as insurance in amounts we deem
adequate to cover property and casualty risks, workers' compensation, and directors and officers liability. In
addition, each of our leases with third parties provides that the lessee will maintain insurance on each leased
property under the lessee's insurance policies providing for the following coverages: (i) fire, vandalism, and
malicious mischief, extended coverage perils, and all physical loss perils; (ii) comprehensive general public liability
(including personal injury and property damage); and (iii) workers' compensation. Under each of these leases, we
have the right to periodically review our lessees' insurance coverage and provide input with respect thereto.
Each of our management contracts and the statutes of certain states require the maintenance of insurance. We
maintain various insurance policies including employee health, workers' compensation, automobile liability, and
general liability insurance. Because we are significantly self-insured for employee health, workers' compensation,
automobile liability, and general liability insurance, the amount of our insurance expense is dependent on claims
experience, and our ability to control our claims experience. Our insurance policies contain various deductibles and
stop-loss amounts intended to limit our exposure for individually significant occurrences. However, the nature of
our self-insurance policies provides little protection for deterioration in overall claims experience or an increase in
medical costs. We are continually developing strategies to improve the management of our future loss claims but
can provide no assurance that these strategies will be successful. However, unanticipated additional insurance
expenses resulting from adverse claims experience or an increasing cost environment for general liability and other
types of insurance could adversely impact our results of operations and cash flows.
35
Employees
As of December 31, 2019, we employed 14,075 full- and part-time employees. Of such employees, 455 were
employed at our corporate offices and 13,620 were employed at our facilities and in our inmate transportation and
electronic monitoring businesses. We employ personnel in the following areas: clerical and administrative, facility
administrators/wardens, security, medical, quality assurance, transportation and scheduling, maintenance, teachers,
counselors, case managers, chaplains, and other support services.
We have not experienced a strike or work stoppage at any of our facilities. Approximately 1,330 employees at six
of our facilities are represented by labor unions. In the opinion of management, overall employee relations are good.
Competition
The correctional, detention, and residential reentry facilities we own, operate, or manage, as well as those facilities
we own but are managed by other operators, are subject to competition for offenders and residents from other
private operators. We compete primarily on the basis of bed availability, cost, the quality and range of services
offered, our experience in the design, construction, and management of correctional and detention facilities, and our
reputation. We compete with government agencies that are responsible for correctional, detention, and residential
reentry facilities and a number of companies, including, but not limited to, The GEO Group, Inc. and Management
and Training Corporation. We also compete in some markets with small local companies that may have a better
knowledge of the local conditions and may be better able to gain political and public acceptance. Other potential
competitors may in the future enter into businesses competitive with us without a substantial capital investment or
prior experience. We may also compete in the future for acquisitions and new development projects with companies
that have more financial resources than we have or those willing to accept lower returns than we are willing to
accept. Competition by other companies may adversely affect occupancy at our facilities, which could have a
material adverse effect on the operating revenue of our facilities. In addition, revenue derived from our facilities
will be affected by a number of factors, including the demand for beds, general economic conditions, and the age of
the general population.
We compete with numerous developers, real estate companies and other owners of commercial properties for
acquisitions of government-leased assets. Other real estate investors, including insurance companies, private equity
funds, sovereign wealth funds, pension funds, other REITs, and other well-capitalized investors will compete with
us to acquire government-leased properties. In addition, U.S. Government tenants are viewed as desirable tenants by
other landlords because of their strong credit profile, and properties leased to U.S. Government tenant agencies often
attract many potential buyers. This competition could increase prices for properties of the type we may pursue and
impede our ability to grow and diversify.
36
ITEM 1A. RISK FACTORS.
As the owner and operator of correctional, detention, and residential reentry facilities, we are subject to certain risks
and uncertainties associated with, among other things, the corrections and detention industry and pending or
threatened litigation in which we are involved. In addition, we are also currently subject to risks associated with real
estate ownership, our indebtedness, as well as our qualification as a REIT for federal income tax purposes effective
for our taxable years beginning January 1, 2013. The risks and uncertainties set forth below could cause our actual
results to differ materially from those indicated in the forward-looking statements contained herein and elsewhere.
The risks described below are not the only risks we face. Additional risks and uncertainties not currently known to
us or those we currently deem to be immaterial may also materially and adversely affect our business operations.
Any of the following risks could materially adversely affect our business, financial condition, or results of
operations.
Risks Related to Our Business and Industry
Our results of operations are dependent on revenues generated by our correctional, detention, and residential
reentry facilities, which are subject to the following risks associated with the corrections and detention industry.
We are subject to fluctuations in occupancy levels, and a decrease in occupancy levels could cause a decrease in
revenues and profitability. While a substantial portion of our cost structure is fixed, a substantial portion of our
revenue is generated under facility ownership and management contracts that specify per diem payments based upon
daily occupancy. We are dependent upon the governmental agencies with which we have contracts to provide
offenders for facilities we operate. We cannot control occupancy levels at the facilities we operate. Under a per diem
rate structure, a decrease in our occupancy rates could cause a decrease in revenue and profitability. For the years
2019, 2018, and 2017, the average compensated occupancy of our facilities, based on rated capacity, was 82%, 81%,
and 80%, respectively, for all of the facilities we operated, exclusive of facilities that are leased to third-party
operators where our revenue is generally not based on daily occupancy. Occupancy rates may, however, decrease
below these levels in the future. When combined with relatively fixed costs for operating each facility, a decrease in
occupancy levels could have a material adverse effect on our profitability.
We are dependent on government appropriations, and our results of operations may be negatively affected by
governmental budgetary challenges or government shutdowns. Our cash flow is subject to the receipt of sufficient
funding of, and timely payment by, contracting governmental entities. If the appropriate governmental agency does
not receive sufficient appropriations to cover its contractual obligations, it may terminate our contract or delay or
reduce payment to us. While we have historically been required to continue to perform under our government
contracts during government shutdowns, we are generally not paid until the government reopens. Any delays in
payment, or the termination of a contract, could have an adverse effect on our cash flow and financial condition. In
addition, federal, state and local governments are constantly under pressure to control additional spending or reduce
current levels of spending. In prior years, these pressures have been compounded by economic downturns.
Accordingly, we have been requested and may be requested in the future to reduce our existing per diem contract
rates or forego prospective increases to those rates. Further, our government partners could reduce offender
population levels in facilities we own or manage to contain their correctional costs. In addition, it may become more
difficult to renew our existing contracts on favorable terms or otherwise.
Competition may adversely affect the profitability of our business. We compete with government entities and other
private operators on the basis of bed availability, cost, quality and range of services offered, experience in designing,
constructing, and managing facilities, and reputation of management and personnel. While there are barriers to
entering the market for the ownership and management of correctional, detention, and residential reentry facilities,
these barriers may not be sufficient to limit additional competition. In addition, our government customers may
assume the management of a facility that they own and we currently manage for them upon the termination of the
corresponding management contract or, if such customers have capacity at their facilities, may take offenders and
residents currently cared for in our facilities and transfer them to government-run facilities. Since we are paid on a
per diem basis with no minimum guaranteed occupancy under most of our contracts, the loss of such offenders and
residents, and the resulting decrease in occupancy, would cause a decrease in our revenues and profitability.
37
Resistance to privatization of correctional, detention, and residential reentry facilities, and negative publicity
regarding inmate disturbances or perceived poor operational performance, could result in our inability to obtain
new contracts, the loss of existing contracts, or other unforeseen consequences. Privatization of correctional,
detention, and residential reentry facilities has not achieved complete acceptance by either government agencies or
the public at large. The operation of correctional, detention, and residential reentry facilities by private entities has
encountered resistance from certain groups, such as labor unions, prison reform organizations, activists and others
that believe that correctional, detention, and residential reentry facilities should only be operated by governmental
agencies. Any political platform or promise, governmental agency report, investigation or inquiry, public statement
by any governmental agency, policy or legislative change, or other similar occurrence or action, that seeks to, or
purports to, prohibit, eliminate, or otherwise restrict or limit in any way, the federal government's (or any state or
local government's) ability to contract with private operators of correctional, detention, and residential reentry
facilities, could negatively impact our growth and our ability to renew or maintain existing contracts or to obtain
new contracts and could have a material adverse effect on our business, financial condition, results of operations or
the market price of our common stock.
In addition, negative publicity regarding offenders escaping, rioting or any other disturbances at our facilities or any
public perception of poor operational performance at our facilities, contract non-compliance, or other conditions at a
privately managed facility may result in adverse publicity to us and the private corrections industry in general and
could negatively impact our growth and our ability to renew or maintain existing contracts or to obtain new
contracts, which could have a material adverse effect on our business, financial condition, results of operations or
the market price of our common stock.
We are subject to terminations, non-renewals, or competitive re-bids of our government contracts. We typically
enter into facility contracts with governmental entities for terms of up to five years, with additional renewal periods
at the option of the contracting governmental agency. Notwithstanding any contractual renewal option of a
contracting governmental agency, 49 of our facility contracts with the customers listed under "Business – Facility
Portfolio" are currently scheduled to expire on or before December 31, 2020 but have renewal options (21), or are
currently scheduled to expire on or before December 31, 2020 and have no renewal options (28). Although we
generally expect these customers to exercise renewal options or negotiate new contracts with us, one or more of
these contracts may not be renewed and we may not be able to negotiate a new contract on favorable terms or at all
with the corresponding governmental agency. In addition, these and any other contracting agencies may determine
not to exercise renewal options with respect to any of our contracts in the future. Our government partners can also
re-bid contracts in a competitive procurement process upon termination or non-renewal of our contract. Competitive
re-bids may result from the expiration of the term of a contract, including the initial term and any renewal periods,
or the early termination of a contract. Competitive re-bids are often required by applicable federal or state
procurement laws periodically in order to further competitive pricing and other terms for the government agency.
The aggregate revenue earned during the year ended December 31, 2019 for the 49 contracts with scheduled
maturity dates, notwithstanding contractual renewal options, on or before December 31, 2020 was $644.1 million, or
33% of total revenue.
Based on information available as of the date of this Annual Report, we believe we will renew all contracts with our
government partners that have expired or are scheduled to expire within the next twelve months that could have a
material impact on our financial statements. We believe our renewal rate on existing contracts remains high due to a
variety of reasons including, but not limited to, the constrained supply of available beds within the U.S. correctional
system, our ownership of the majority of the beds we operate, and the cost effectiveness of the services we provide.
However, we cannot assure we will continue to achieve such renewal rates in the future.
Governmental agencies typically may terminate a facility contract at any time without cause or use the possibility of
termination to negotiate a lower per diem rate. In the event any of our contracts are terminated or are not renewed on
favorable terms or otherwise, we may not be able to obtain additional replacement contracts. The non-
renewal, termination, renegotiation or competitive re-bid of any of our contracts with governmental agencies could
materially adversely affect our financial condition, results of operations and liquidity, including our ability to secure
new facility contracts from others.
38
Our ability to secure new contracts to develop and manage correctional, detention, and residential reentry facilities
depends on many factors outside our control. Our growth is generally dependent upon our ability to obtain new
contracts to develop and manage correctional, detention, and residential reentry facilities. This possible growth
depends on a number of factors we cannot control, including crime rates and sentencing patterns in various
jurisdictions, governmental budgetary constraints, and governmental and public acceptance of privatization. The
demand for our facilities and services could be adversely affected by the relaxation of enforcement efforts, the
expansion of alternatives to incarceration and detention, leniency in conviction or parole standards and sentencing
practices or through the decriminalization of certain activities that are currently proscribed by criminal laws. For
instance, any changes with respect to drugs and controlled substances or illegal immigration could affect the number
of persons arrested, convicted, and sentenced, thereby potentially reducing demand for correctional or detention
facilities to house them. Immigration reform laws are currently a focus for legislators and politicians at the federal,
state, and local level. Legislation has also been proposed in numerous jurisdictions that could lower minimum
sentences for some non-violent crimes and make more inmates eligible for early release based on good behavior.
On December 21, 2018, the President signed legislation, known as The First Step Act, that reduces sentences for
first-time offenders in possession of a gun when committing a crime, eliminates mandating life-time sentences for
three-time offenders, provides judges more discretion in crafting sentences for some drug-related offenses, and
allows offenders to seek a retroactive reduction in sentences affected by the disparity in the sentences for crack and
powder cocaine cases narrowed by the Fair Sentencing Act of 2010. (Although, under long-standing policy,
CoreCivic does not draft, lobby for, promote, or in any way take a position on policies that determine the basis or
duration of an individual's incarceration or detention, CoreCivic supported adoption of The First Step Act because
the legislation aligns with our publicly stated commitment to advocate for a range of recidivism-reducing policies by
providing additional resources to help ensure that incarcerated individuals are given the best possible chance to
successfully return to their communities and stay out of prison.) Also, the expansion of alternatives to incarceration
and detention, such as electronic monitoring, may reduce the number of offenders who would otherwise be
incarcerated or detained. Similarly, reductions in crime rates or increases in resources dedicated to prevent crime
could lead to a reduction in arrests, which could lead to a decrease in convictions and sentences requiring
incarceration at correctional facilities.
Moreover, certain jurisdictions recently have required successful bidders to make a significant capital investment in
connection with the financing of a particular project, a trend that could significantly burden our capital resources to
remain competitive. We may compete for such projects with companies that have more financial resources than we
have. Further, we may not be able to obtain the capital resources when needed. A prolonged downturn in the
financial capital markets or in our stock price could make it more difficult to obtain capital resources at favorable
rates of return or obtain capital resources at all.
We may face community opposition to facility location, which may adversely affect our ability to obtain new
contracts. Our success in obtaining new awards and contracts sometimes depends, in part, upon our ability to locate
land that can be leased or acquired, on economically favorable terms, by us or other entities working with us in
conjunction with our proposal to construct and/or manage a facility. Some locations may be in or near populous
areas and, therefore, may generate legal action or other forms of opposition from residents in areas surrounding a
proposed site. When selecting project sites, we attempt to conduct business in communities where local leaders and
residents generally support the establishment of a privatized correctional, detention, or residential reentry facility.
Future efforts to find suitable host communities may not be successful. We may incur substantial costs in evaluating
the feasibility of the development of a correctional or detention facility. As a result, we may report significant
charges if we decide to abandon efforts to develop a correctional or detention facility on a particular site. Further, in
many cases, the site selection is made by the contracting governmental entity. In such cases, site selection may be
made for reasons related to political and/or economic development interests and may lead to the selection of sites
that have less favorable environments.
39
Providing family residential services increases certain unique risks and difficulties compared to operating our other
facilities. In September 2014, we signed an amended agreement to provide at the South Texas Family Residential
Center safe and humane residential housing, as well as educational opportunities, to women and children (but no
unaccompanied children) under the custody of ICE, who are awaiting their due process before immigration courts.
In October 2016, we entered into an amended agreement that extended the term of the 2014 agreement through
September 2021. This is an important service to our federal government partner. At the same time, providing this
type of residential service subjects us to unique risks such as unanticipated increased costs and litigation that could
materially adversely affect our business, financial condition, or results of operations. For example, the contract
mandates resident-to-staff ratios that are higher than our typical contract, requires services unique to this contract
(e.g. child care and primary education services), and limits the use of security protocols and techniques typically
utilized in correctional and detention settings. These operational risks and others associated with privately managing
this type of residential facility could result in higher costs associated with staffing and lead to increased litigation.
Numerous lawsuits, to which we are not a party, have challenged the government's policy of detaining migrant
families, and government policies with respect to family immigration may impact the demand for the South Texas
Family Residential Center. Any court decision or government action that impacts our existing contract for the South
Texas Family Residential Center could materially affect our cash flows, financial condition, and results of
operations.
We may incur significant start-up and operating costs on new contracts before receiving related revenues, which
may impact our cash flows and not be recouped. When we are awarded a contract to provide or manage a facility,
we may incur significant start-up and operating expenses, including the cost of constructing the facility, purchasing
equipment and staffing the facility, before we receive any payments under the contract. These expenditures could
result in a significant reduction in our cash reserves and may make it more difficult for us to meet other cash
obligations. In addition, a contract may be terminated prior to its scheduled expiration, and as a result, we may not
recover these expenditures or realize any return on our investment.
Government agencies may investigate and audit our contracts and operational performance, and if any deficiencies
or improprieties are found, we may be required to cure those deficiencies or improprieties, refund revenues we have
received, or forego anticipated revenues, and we may be subject to penalties and sanctions, including contract
termination and prohibitions on our bidding in response to Requests for Proposals. Certain of the governmental
agencies with which we contract have the authority to audit and investigate our contracts with them. As part of that
process, government agencies may review our performance of the contract, our pricing practices, our cost structure
and our compliance with applicable performance requirements, laws, regulations and standards. The regulatory and
contractual environment in which we operate is complex and many aspects of our operations remain subject to
manual processes and oversight that make compliance monitoring difficult and resource intensive. A governmental
agency audit, review or investigation could result in a request to cure a performance or compliance issue, and if we
are unable to, or otherwise fail to do so, the failure could lead to the imposition of monetary penalties or revenue
deductions, or the termination of the contract in question and/or other contracts that we have with that governmental
agency. Similarly, for contracts that actually or effectively provide for certain reimbursement of expenses, if an
agency determines that we have improperly allocated costs to a specific contract, we may not be reimbursed for
those expenses, and we could be required to refund the amount of any such expenses that have been reimbursed. If a
government audit asserts improper or illegal activities by us, we may be subject to civil and criminal penalties and
administrative sanctions, including termination of contracts, forfeitures of profits, suspension of payments, fines and
suspension or disqualification from doing business with certain government entities. In addition to the potential civil
and criminal penalties and administrative sanctions, any adverse determination with respect to contractual or
regulatory violations could negatively impact our ability to bid in response to Requests for Proposals, or RFPs, in
one or more jurisdictions.
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Failure to comply with facility contracts or with unique and increased governmental regulation could result in
material penalties or non-renewal or termination of noncompliant contracts or our other contracts to provide or
manage correctional, detention, and residential reentry facilities. The industry in which we operate is subject to
extensive federal, state, and local regulations, including educational, health care, data privacy, and safety
regulations, which are administered by many regulatory authorities. Some of the regulations are unique to the
corrections industry, some are unique to government contractors, and the combination of regulations we face is
unique and complex. Facility contracts typically include reporting requirements, supervision, and on-site
monitoring by representatives of the contracting governmental agencies. Corrections and reentry personnel are
customarily required to meet certain training standards and, in some instances, facility personnel are required to be
licensed and subject to background investigation. Certain jurisdictions also require us to award subcontracts on a
competitive basis or to subcontract with certain types of businesses, such as small businesses and businesses owned
by members of minority groups. Our facilities are also subject to operational and financial audits by the
governmental agencies with which we have contracts. Federal regulations also require federal government
contractors like us to self-report evidence of certain forms of misconduct. We may not always successfully comply
with these regulations and contract requirements, and failure to comply can result in material penalties, including
financial penalties, non-renewal or termination of noncompliant contracts and/or our other facility contracts,
exclusion from new contract procurement or RFP bidding, and suspension or debarment from contracting with
certain government entities.
In addition, private prison managers are subject to government legislation and regulation attempting to restrict the
ability of private prison managers to house certain types of inmates, such as inmates from other jurisdictions or
inmates at medium or higher security levels. Legislation has been enacted in several states, and has previously been
proposed in the United States Congress, containing such restrictions. Such legislation, if enacted, could have an
adverse effect on us.
Our inmate transportation subsidiary, TransCor, is subject to regulations promulgated by the Departments of
Transportation and Justice. TransCor must also comply with the Interstate Transportation of Dangerous Criminals
Act of 2000, which covers operational aspects of transporting prisoners, including, but not limited to, background
checks and drug testing of employees; employee training; employee hours; staff-to-inmate ratios; prisoner restraints;
communication with local law enforcement; and standards to help ensure the safety of prisoners during transport.
Any changes in such regulations could result in an increase in the cost of our transportation operations.
From time to time, we enter into agreements with telecommunications providers to provide telephone services to
residents in our facilities. Although we are not a telecommunications provider, these services are subject to
regulations which may change from time to time. We are subject to the direct and indirect effects of these
regulations. Non-compliance with these regulations, either by us or by our telecommunications providers, subjects
us to risks which could result in increases to our costs or decreases in our revenue. The impact to our revenue is
limited because a significant amount of commissions paid by our telecommunications providers is passed along to
our customers or is reserved and must be used for the benefit of offenders in our care.
We depend on a limited number of governmental customers for a significant portion of our revenues. We currently
derive, and expect to continue to derive, a significant portion of our revenues from a limited number of
governmental agencies. The three primary federal governmental agencies with correctional and detention
responsibilities, ICE, the USMS, and the BOP accounted for 51% of our total revenues for the year ended December
31, 2019 ($1,013.4 million). ICE accounted for 29% of our total revenues for the year ended December 31, 2019
($579.4 million), the USMS accounted for 17% of our total revenues for the year ended December 31, 2019 ($338.7
million), and the BOP accounted for 5% of our total revenues for the year ended December 31, 2019 ($95.3 million).
Although the revenue generated from each of these agencies is derived from numerous management contracts and
various types of properties, i.e. correctional, detention, reentry, and leased, the loss or substantial reduction in value
of one or more of such contracts could have a material adverse impact on our financial condition, results of
operations, and cash flows. We expect to continue to depend upon these federal agencies and a relatively small
group of other governmental customers for a significant percentage of our revenues.
Revenue from our South Texas Family Residential Center was $171.1 million in 2019, $171.3 million in 2018, and
$170.6 million in 2017. The loss or reduction in value of this contract would have a material adverse impact on our
financial condition, results of operations, and cash flows.
41
Some of our leases with U.S. Government tenant agencies permit such government agency, as the tenant, to
vacate the property and discontinue paying rent prior to the expiration date of the relevant lease.
Some of our leases are currently in the soft-term period of the lease and tenants under such leases have the right to
vacate their space during a specified period before the stated terms of their leases expire. Of the non-correctional
properties in our CoreCivic Properties segment as of December 31, 2019, tenants occupying approximately 25% of
the leasable square feet and contributing approximately 10% of the annualized lease income of such properties have
exercisable rights to terminate their leases before the stated soft term of their lease expires. For fiscal policy reasons,
security concerns or other reasons, some or all of our U.S. Government tenant agencies under leases within the soft-
term period may decide to exercise their termination rights before the stated term of their lease expires. Such
terminations, if they were to occur and we were not able to lease the vacant space to another tenant in a timely
manner or at all, could have an adverse effect on our business, financial condition and results of operations.
We may not be able to successfully identify, consummate or integrate acquisitions.
We have an active acquisition program, the objective of which is to identify suitable acquisition targets that will
enhance our growth and diversify our cash flows. The pursuit of acquisitions may pose certain risks to us. We may
not be able to identify acquisition candidates that fit our criteria for growth, profitability and diversification strategy.
Even if we are able to identify such candidates, we may not be able to acquire them on terms satisfactory to us. We
will incur expenses and dedicate attention and resources associated with the review and pursuit of acquisition
opportunities, whether or not we consummate such acquisitions.
Additionally, even if we are able to identify and acquire suitable targets on agreeable terms, we may not be able to
successfully integrate their operations with ours. Achieving the anticipated benefits of any acquisition will depend in
significant part upon whether we integrate such acquired businesses in an efficient and effective manner. We may
not be able to achieve the anticipated operating and cost synergies or long-term strategic benefits of our acquisitions
within our anticipated timing, or at all. We may also assume liabilities in connection with acquisitions to which we
would otherwise not be exposed. An inability to realize the full extent of, or any of, the anticipated synergies or
other benefits of an acquisition, as well as any delays that may be encountered in the integration process, which may
delay the timing of such synergies or other benefits, could have an adverse effect on our business and results of
operations.
As a result of our acquisitions, we have recorded and will continue to record a significant amount of goodwill
and other intangible assets. In the future, our goodwill or other intangible assets may become impaired, which
could result in material non-cash charges to our results of operations.
We have a substantial amount of goodwill and other intangible assets resulting from business acquisitions. At least
annually, or whenever events or changes in circumstances indicate a potential impairment in the carrying value as
defined by U.S. generally accepted accounting principles, we will evaluate this goodwill for impairment by first
assessing qualitative factors 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 the reporting unit is less than the carrying amount. Estimated fair
values could change if there are changes in our capital structure, cost of debt, interest rates, capital expenditure
levels, operating cash flows, or market capitalization. Impairments of goodwill or other intangible assets could
require material non-cash charges to our results of operations.
We are dependent upon our senior management and our ability to attract and retain sufficient qualified
personnel.
The success of our business depends in large part on the ability and experience of our senior management. The
unexpected loss of any of these persons could materially adversely affect our business and operations.
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In addition, the services we provide are labor-intensive. The success of our business, and our ability to satisfy the
staffing and operational performance requirements of our contracts, require that we attract, hire, develop and retain
sufficient qualified personnel. When we are awarded a facility management contract or open a new facility, we
must hire operating management, correctional officers, and other personnel. Our inability to hire sufficient qualified
personnel on a timely basis, or experiencing excessive turnover or the loss of significant personnel at existing
facilities, could adversely affect our business and operations. Many of our contracts include specific staffing
requirements, and our failure to satisfy such requirements may result in the imposition of financial penalties or loss
of contract.
Legal proceedings related to, and adverse developments in our relationship with, our employees could adversely
affect our business, financial condition or results of operations.
We and our subsidiaries are party to a variety of claims and legal proceedings in the ordinary course of business,
including but not limited to claims and legal proceedings related to employment matters. Because the resolution of
claims and legal proceedings is inherently uncertain, there can be no assurance we will be successful in defending
against such claims or legal proceedings, or that management's assessment of the materiality of these matters,
including the reserves taken in connection therewith, will be consistent with the ultimate outcome of such claims or
legal proceedings. In the event management's assessment of materiality of current claims and legal proceedings
proves inaccurate or litigation that is material arises in the future, the resolution of such matters may have a material
adverse effect on our business, financial condition or results of operations.
As of December 31, 2019, we employed 14,075 full- and part-time employees. Approximately 1,330 of our
employees at six of our facilities, or approximately 9.4% of our workforce, are represented by labor unions. We
have not experienced a strike or work stoppage at any of our facilities and, in the opinion of management, overall
employee relations are good. New executive orders, administrative rules and changes in National Labor Relations
could increase organizing activity at locations where employees are currently not represented by a labor
organization. Increases in organizational activity or any future work stoppages could have a material adverse effect
on our business, financial condition, or results of operations.
We are subject to necessary insurance costs.
Workers' compensation, auto liability, employee health, and general liability insurance represent significant costs to
us. Because we are significantly self-insured for workers' compensation, auto liability, employee health, and general
liability risks, the amount of our insurance expense is dependent on claims experience, our ability to control our
claims experience, and in the case of workers' compensation and employee health, rising health care costs in general.
Unanticipated additional insurance costs could adversely impact our results of operations and cash flows, and the
failure to obtain or maintain any necessary insurance coverage could have a material adverse effect on us.
We may be adversely affected by inflation.
Many of our facility contracts provide for fixed fees or fees that increase by only small amounts during their terms.
If, due to inflation or other causes, our operating expenses, such as wages and salaries of our employees, insurance,
medical, and food costs, increase at rates faster than increases, if any, in our revenues, then our profitability would
be adversely affected. See "Management's Discussion and Analysis of Financial Condition and Results of
Operations – Inflation."
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We are subject to legal proceedings associated with owning and managing correctional, detention, and residential
reentry facilities.
Our ownership and management of correctional, detention, and residential reentry facilities, and the provision of
inmate transportation services by a subsidiary, expose us to potential third-party claims or litigation by prisoners or
other persons relating to personal injury or other damages resulting from contact with a facility, its managers,
personnel or other prisoners, including damages arising from a prisoner's escape from, or a disturbance or riot at, a
facility we own or manage, or from the misconduct of our employees. To the extent the events serving as a basis for
any potential claims are alleged or determined to constitute illegal or criminal activity, we could also be subject to
criminal liability. Such liability could result in significant monetary fines and could affect our ability to bid on
future contracts and retain our existing contracts. In addition, as an owner of real property, we may be subject to a
variety of proceedings relating to personal injuries of persons at such facilities. The claims against our facilities may
be significant and may not be covered by insurance. Even in cases covered by insurance, our deductible (or self-
insured retention) may be significant.
Technological changes or negative changes in the level of acceptance of, or resistance to, the use of electronic
monitoring products could cause our electronic monitoring products and other technology to become obsolete or
require the redesign of our electronic monitoring products, which could have a material adverse effect on our
business.
Technological changes within our electronic monitoring business may require us to expend resources in an effort to
acquire, maintain and/or utilize new electronic monitoring products and technology. We may not be able to
anticipate or respond to technological changes in a timely manner, and our response may not result in successful
electronic monitoring product offerings. If we are unable to anticipate or timely respond to technological changes,
our business could be adversely affected. Further, our business could be adversely affected if the level of acceptance
of or resistance to the use of electronic monitoring products and services by governmental customers were to change
over time in a negative manner so that governmental customers decide to decrease their usage levels and contracting
for electronic monitoring products and services.
We depend on a limited number of third parties to manufacture and supply our electronic monitoring products. If
our suppliers cannot provide the products or services we require in a timely manner and with such quality as we
expect, our ability to market and sell our electronic monitoring products and services could be harmed.
If our suppliers fail to supply, in a timely manner, electronic monitoring products that meet our quantity, quality,
cost requirements, or technical specifications, we may not be able to access alternative sources of these products
within a reasonable period of time or at commercially reasonable rates. A reduction or interruption in the supply of
such products, or a significant increase in the price of such products, could have a material adverse effect on our
marketing and sales initiatives, which could adversely affect our financial condition and results of operations. In
addition, contracts with such suppliers may not continue to be available on acceptable terms or at all.
We may be subject to costly product liability claims from the use of our electronic monitoring products, which
could damage our reputation, impair the marketability of our products and services and force us to pay costs and
damages that may not be covered by adequate insurance.
The operation of our electronic monitoring products and services entails a risk of product liability. We could be
subject to product liability claims to the extent these electronic monitoring products fail to perform as intended.
Even unsuccessful claims against us could result in the expenditure of funds in litigation, the diversion of
management time and resources, damage to our reputation and impairment of the marketability of our electronic
monitoring products and services. While we maintain liability insurance, it is possible that a successful claim could
be made against us, that the amount of our insurance coverage would not be adequate to cover the costs of defending
against or paying such a claim, and that damages payable by us would harm our business.
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We are subject to certain stockholder litigation.
In a memorandum to the BOP dated August 18, 2016, the DOJ directed that, as each contract with privately operated
prisons reaches the end of its term, the BOP should either decline to renew that contract or substantially reduce its
scope in a manner consistent with law and the overall decline of the BOP's inmate population. In addition to the
decline in the BOP's inmate population, the DOJ memorandum cites purported operational, programming, and cost
efficiency factors as reasons for the DOJ directive. On February 21, 2017, the newly appointed U.S. Attorney
General issued a memorandum rescinding the DOJ's prior directive stating the memorandum changed long-standing
policy and practice and impaired the BOP's ability to meet the future needs of the federal correctional system.
Following the release of the August 18, 2016 DOJ memorandum, a purported securities class action lawsuit was
filed against us and certain of our current and former officers in the United States District Court for the Middle
District of Tennessee, or the District Court, captioned Grae v. Corrections Corporation of America et al., Case No.
3:16-cv-02267. The lawsuit is brought on behalf of a putative class of shareholders who purchased or acquired our
securities between February 27, 2012 and August 17, 2016. In general, the lawsuit alleges that, during this
timeframe, our public statements were false and/or misleading regarding the purported operational, programming,
and cost efficiency factors cited in the DOJ memorandum and, as a result, our stock price was artificially inflated.
The lawsuit alleges that the publication of the DOJ memorandum on August 18, 2016 revealed the alleged fraud,
causing the per share price of our stock to decline, thereby causing harm to the putative class of shareholders.
On December 18, 2017, the District Court denied our motion to dismiss. On March 26, 2019, the District Court
certified the class proposed by the plaintiff. The United States Court of Appeals for the Sixth Circuit denied our
appeal of the class certification order on August 23, 2019. The case is currently in the fact discovery phase of
litigation.
We believe the lawsuit is entirely without merit and intend to vigorously defend against it. In addition, we maintain
insurance, with certain self-insured retention amounts, to cover the alleged claims which may mitigate the risk that
such litigation would have a material adverse effect on our financial condition, results of operations, or cash flows.
We are subject to risks associated with ownership of real estate.
Our ownership of correctional, detention, and residential reentry facilities and other government-leased assets
subjects us to risks typically associated with investments in real estate. Investments in real estate and, in particular,
correctional and detention facilities have limited or no alternative use and thus are relatively illiquid. Therefore, our
ability to divest ourselves of one or more of our facilities promptly in response to changing conditions is limited.
Investments in real estate properties subject us to risks involving potential exposure to environmental liability and
uninsured loss. Our operating costs may be affected by the obligation to pay for the cost of complying with existing
environmental laws, ordinances and regulations, as well as the cost of complying with future legislation. In addition,
although we maintain insurance for many types of losses, there are certain types of losses, such as losses from
earthquakes and acts of terrorism, which may be either uninsurable or for which it may not be economically feasible
to obtain insurance coverage in light of the substantial costs associated with such insurance. As a result, we could
lose both our capital invested in, and anticipated profits from, one or more of the properties we own. Further, it is
possible to experience losses that may exceed the limits of insurance coverage.
In addition, facility development and expansion projects pose additional risks, including cost overruns caused by
various factors, many of which are beyond our control, such as weather, labor conditions, and material shortages,
resulting in increased construction costs. Further, if we are unable to utilize the new bed capacity, our financial
results could deteriorate.
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Certain of our facilities are subject to options to purchase and reversions. Eleven of our facilities are subject to an
option to purchase by certain governmental agencies. Such options are exercisable by the corresponding contracting
governmental entity generally at any time during the term of the respective facility contract. Certain of these
purchase options are based on the depreciated book value of the facility, which essentially could result in the transfer
of ownership of the facility to the governmental agency at the end of the life used for accounting purposes, while
other options to purchase are exercisable at prices below fair market value. See "Business – Facility Portfolio." If
any of these options are exercised, there exists the risk that we will be unable to invest the proceeds from the sale of
the facility in one or more properties that yield as much cash flow as the property acquired by the government entity.
In addition, in the event any of these options is exercised, there exists the risk that the contracting governmental
agency will terminate the management contract associated with such facility. For the year ended December 31,
2019, the eleven facilities currently subject to these options generated $367.4 million in revenue (18.6% of total
revenue) and incurred $279.5 million in operating expenses.
Risks related to facility construction and development activities may increase our costs related to such activities.
When we are engaged to perform construction and design services for a facility, we typically act as the primary
contractor and subcontract with other companies that act as the general contractors. As primary contractor, we are
subject to the various risks associated with construction (including, without limitation, shortages of labor and
materials, work stoppages, labor disputes, and weather interference which could cause construction delays). In
addition, we are subject to the risk that the general contractor will be unable to complete construction at the
budgeted costs or be unable to fund any excess construction costs, even though we require general contractors to
post construction bonds and insurance. Under such contracts, we are ultimately liable for all late delivery penalties
and cost overruns.
We may be adversely affected by an increase in costs or difficulty of obtaining adequate levels of surety credit on
favorable terms.
We are often required to post bid or performance bonds issued by a surety company as a condition to bidding on or
being awarded a contract. Availability and pricing of these surety commitments are subject to general market and
industry conditions, among other factors. Increases in surety costs could adversely affect our operating results if we
are unable to effectively pass along such increases to our customers. We cannot assure you that we will have
continued access to surety credit or that we will be able to secure bonds economically, without additional collateral,
or at the levels required for any potential facility development or contract bids. If we are unable to obtain adequate
levels of surety credit on favorable terms, we would have to rely upon letters of credit under our revolving credit
facility which could entail higher costs if such borrowing capacity was even available when desired, and our ability
to bid for or obtain new contracts could be impaired.
46
Interruption, delay or failure of the provision of our technology services or information systems, or the
compromise of the security thereof, could adversely affect our business, financial condition or results of
operations.
Components of our business depend significantly on effective information systems and technologies, some of which
are provided and/or maintained by third parties. As with all companies that utilize information systems, we are
vulnerable to negative impacts to our business if the operation of those systems malfunctions or experiences errors,
interruptions or delays, or certain information contained therein is compromised. As a matter of course, we may
store or process the personal information of offenders, employees and other persons as required to provide our
services and such personal information or other data may be hosted or exchanged with our government partners and
other third-party providers. While we employ commercially reasonable, industry standard administrative, technical
and physical safeguards designed to protect the integrity and security of any personal data we collect or process,
despite the security measures we have in place, and any additional measures we may implement in the future, our
facilities and systems, and those of our third-party service providers, could be vulnerable to security breaches,
computer viruses, lost or misplaced data, programming errors, human errors, acts of vandalism, or other events. For
example, several well-known companies have recently disclosed high-profile security breaches involving
sophisticated and highly targeted attacks on their company's infrastructure or their customers' data, which were not
recognized or detected until after such companies had been affected notwithstanding the preventive measures they
had in place. Any security breach or event resulting in the interruption, delay or failure of our services or
information systems, or the misappropriation, loss, or other unauthorized disclosure of personal data or confidential
information, including confidential information about our employees, whether by us directly or our third-party
service providers, could damage our reputation, expose us to the risks of litigation and liability, result in significant
monetary penalties and/or regulatory actions for violation of applicable laws or regulations, disrupt our business and
result in significant costs for remedial measures to prevent future occurrences and mitigate past violations, result in
lost business, or otherwise adversely affect our results of operations. Although we maintain insurance covering
certain security and privacy damages and claim expenses, we may not carry insurance or maintain coverage
sufficient to compensate for all liability and in any event, insurance coverage would not address the reputational
damage that could result from a security incident. We did not log any such incidents in 2019, nor were we informed
by law enforcement of any such incidents.
We are subject to risks related to corporate social responsibility.
The growing integration of ESG factors in making investment decisions is relatively new, and frameworks and
methods used by investors for assessing ESG policies are not fully developed and vary considerably among the
investment community. During 2019, we issued our first ESG report to detail how we attempt to deliver on our
service commitment to our government partners and manage our operations responsibly and ethically. These
policies and practices, whether it be the standards we set for ourselves or ESG criteria established by third parties,
and whether or not we meet such standards, may influence our reputation. For example, the perception held by the
general public, our governmental partners, vendors, suppliers, other stakeholders, or the communities in which we
do business may depend, in part, on the standards we have chosen to aspire to meet, whether or not we meet these
standards on a timely basis or at all, and whether or not we meet external ESG factors they deem relevant.
Nonetheless, the subjective nature and wide variety of methods and processes used by various stakeholders,
including investors, to assess a company with respect to ESG criteria can result in the perception of negative ESG
factors or a misrepresentation of our ESG policies and practices. Our failure to achieve progress on our ESG policies
and practices on a timely basis, or at all, or to meet ESG criteria set by third parties, could adversely affect our
business, financial performance, or growth.
By electing to set and publicly share these ESG standards, our business may also face increased scrutiny related to
ESG activities. As a result, our reputation could be harmed if we fail to act responsibly in the areas in which we
report, such as safety and security, human rights, diversity, quality assurance and facility oversight, community
development, and environmental sustainability. Any harm to our reputation resulting from setting these standards or
our failure or perceived failure to meet such standards could impact: employee retention; the willingness of our
governmental partners, vendors and suppliers to do business with us; investors willingness or ability to purchase or
hold our securities; or our ability to access capital, any of which could adversely affect our business, financial
performance, and growth. Our ESG report is not a part of this Annual Report.
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As an owner and operator of correctional, detention, and residential reentry facilities, we are subject to risks
relating to acts of God, outbreaks of epidemic or pandemic disease, terrorist activity and war.
We may encounter staffing constraints as well as costs and expenses associated with owning and/or operating our
correctional, detention, and residential reentry facilities as a result of acts of God, outbreaks of epidemic or
pandemic disease (such as the 2019 novel coronavirus outbreak), war (including the potential for war), terrorist
activity (including threats of terrorist activity), political unrest, geopolitical uncertainty and other forms of civil
strife, in or around locations where we own and/or operate significant properties. These events could have a material
adverse effect on our business, financial condition, results of operations or the market price of our common stock.
Risks Related to Our Indebtedness
Our indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under
our debt securities.
We have a significant amount of indebtedness. As of December 31, 2019, we had total indebtedness of $1,986.9
million. Our indebtedness could have important consequences. For example, it could:
make it more difficult for us to satisfy our obligations with respect to our indebtedness;
increase our vulnerability to general adverse economic and industry conditions;
require us to dedicate a substantial portion of our cash flow from operations to payments on our
indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital
expenditures, dividends, and other general corporate purposes;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we
operate;
restrict us from pursuing strategic acquisitions or certain other business opportunities;
place us at a competitive disadvantage compared to our competitors that have less debt; and
limit our ability to borrow additional funds or refinance existing indebtedness on favorable terms, or at
all.
If we are unable to meet our debt service obligations, we may need to reduce capital expenditures and dividend
distributions, restructure or refinance our indebtedness, obtain additional equity financing or sell assets. We may be
unable to restructure or refinance our indebtedness, obtain additional equity financing or sell assets on satisfactory
terms or at all.
Our Credit Agreements, indentures related to our senior notes, and other debt instruments have restrictive
covenants that could limit our financial flexibility.
The indentures related to our aggregate original principal amount of $350.0 million 4.625% senior notes due 2023,
$250.0 million 5.0% senior notes due 2022, and $250.0 million 4.75% senior notes due 2027, collectively referred to
herein as our senior notes, and the credit agreements governing our Revolving Credit Facility and Term Loan A, or
our Bank Credit Agreement, and the credit agreement governing our Term Loan B, or our Term Loan B, and,
together with the Bank Credit Agreement, our Credit Agreements, contain restrictive covenants that limit our ability
to engage in activities that may be in our long-term best interests. Our Bank Credit Agreement requires us to
comply with certain financial covenants, including leverage and fixed charge coverage ratios. Our Term Loan B
requires us to comply with certain financial covenants, including a secured leverage ratio and, under specified
circumstances, a loan-to-value requirement. Our Credit Agreements include other restrictions that, among other
things, limit our ability to incur indebtedness; grant liens; engage in mergers, consolidations and liquidations; make
asset dispositions, make restricted payments and investments; issue disqualified stock; enter into transactions with
affiliates; and amend, modify or prepay certain indebtedness. The indentures related to our senior notes contain
limitations on our ability to effect mergers and change of control events, as well as other limitations on our ability to
create liens on our assets.
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Our failure to comply with these covenants could result in an event of default that, if not cured or waived, could
result in the acceleration of all or a substantial portion of our debt. We do not have sufficient working capital to
satisfy our debt obligations in the event of an acceleration of all or a significant portion of our outstanding
indebtedness.
Our indebtedness is secured by a substantial portion of our assets.
Subject to applicable laws and certain agreed-upon exceptions, our revolving credit facility and Term Loan A are
secured by a pledge of all of the capital stock of CoreCivic's domestic subsidiaries, 65% of the capital stock of
CoreCivic’s foreign subsidiaries, all of CoreCivic’s accounts receivable and all of CoreCivic's deposit accounts. Our
Term Loan B will be secured by a first lien on certain specified real property assets, representing a loan-to-value of
no greater than 80%. Subject to compliance with the restrictive covenants under our existing indebtedness, we may
incur additional indebtedness secured by existing or future assets of CoreCivic or our subsidiaries. In the event of a
default under our Credit Agreements or any other secured indebtedness, or if we experience insolvency, liquidation,
dissolution or reorganization, the holders of our secured debt instruments would first be entitled to payment from
their collateral security, and only after that would holders of our unsecured debt be entitled to payment from our
remaining assets. In such an event, there can be no assurance that we would have sufficient assets to pay amounts
due to holders of our unsecured debt, and such holders may receive less than the full amount to which they are
entitled.
Servicing our indebtedness will require a significant amount of cash or may require us to refinance our
indebtedness before it matures. Our ability to generate cash depends on many factors beyond our control and
there is no assurance that we will be able to refinance our debt on acceptable terms, or at all.
Currently, our Term Loan A and revolving credit facility both mature in April 2023. Our Term Loan B matures in
December 2024. We also have outstanding $350.0 million in aggregate principal amount of our 4.625% senior notes
due 2023, $250.0 million in aggregate principal amount of our 5.0% senior notes due 2022, and $250.0 million in
aggregate principal amount of our 4.75% senior notes due 2027. In addition, we have $331.9 million outstanding
under three non-recourse mortgage notes with interest rates ranging from 4.43% to 4.5% and various maturity dates
extending to January 2040. Our ability to make payments on our indebtedness, to refinance our indebtedness, and to
fund planned capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our
control.
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The risk exists that our business will be unable to generate sufficient cash flow from operations or that future
borrowings will not be available to us in an amount sufficient to enable us to pay our indebtedness, including our
existing senior notes, or to fund our other liquidity needs. We may need to refinance all or a portion of our
indebtedness, including our senior notes, on or before maturity. Our ability to refinance all or a portion of our
indebtedness on acceptable terms, or at all, will be dependent upon a number of factors, including our degree of
leverage, the value of our assets, borrowing and other financial restrictions imposed by lenders and conditions in the
credit markets at the time we refinance. If we are unable to refinance our indebtedness on acceptable terms, we may
be forced to agree to otherwise unfavorable financing terms or sell one or more properties at unattractive prices or
on disadvantageous terms. Any one of these options could have a material adverse effect on our business, financial
condition, results of operations and our ability to make distributions to our stockholders.
We are required to repurchase all or a portion of our senior notes upon a change of control, and our Credit
Agreements are subject to acceleration upon a change of control.
Upon certain change of control events, as that term is defined in the indentures for our senior notes, including a
change of control caused by an unsolicited third party, we are required to make an offer in cash to repurchase all or
any part of each holder's notes at a repurchase price equal to 101% of the principal thereof, plus accrued interest.
The source of funds for any such repurchase would be our available cash or cash generated from operations or other
sources, including borrowings, sales of equity or funds provided by a new controlling person or entity. Sufficient
funds may not be available to us, however, at the time of any change of control event to repurchase all or a portion
of the tendered notes pursuant to this requirement. Our failure to offer to repurchase notes, or to repurchase notes
tendered, following a change of control will result in a default under the respective indentures, which could lead to a
cross-default under our Credit Agreements and under the terms of our other indebtedness. In addition, terms of our
Credit Agreements, which are subject to acceleration upon the occurrence of a change in control (as described
therein), may prohibit us from making any such required repurchases. Prior to repurchasing the notes upon a change
of control event, we must either repay outstanding indebtedness under our Credit Agreements or obtain the consent
of the lenders under our Credit Agreements. If we do not obtain the required consents or repay our outstanding
indebtedness under our Credit Agreements, we would remain effectively prohibited from offering to repurchase the
notes, which would cause a default under the indentures governing the notes.
Despite current indebtedness levels, we may still incur more debt.
The terms of the indentures for our senior notes and our Credit Agreements restrict our ability to incur indebtedness;
however, we may nevertheless incur additional indebtedness in the future, and in the future, we may refinance all or
a portion of our indebtedness, including our Credit Agreements, and may incur additional indebtedness as a result so
long as we comply with the limitations in our senior notes and Credit Agreements while they are in effect. As of
December 31, 2019, we had $412.7 million of additional borrowing capacity available under our revolving credit
facility. The Bank Credit Agreement 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. In addition, so long as we comply with the limitations in our senior notes and Credit Agreements while
they are in effect, we may issue an indeterminate amount of debt securities from time to time when we determine
that market conditions and the opportunity to utilize the proceeds from the issuance of such debt securities are
favorable. If new debt is added to our and our subsidiaries' current debt levels, the related risks that we and they now
face could intensify.
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Our ability to incur more secured debt has been further limited by the Term Loan B.
The Term Loan B requires us to place liens on mortgaged properties representing a loan-to-value of no greater than
80%. Our Credit Agreements limit the amount of liens we can place on existing assets, further restricting the
amount of additional secured debt we are able to obtain. This limitation restricts our ability to obtain financing for
future needs and opportunities.
Our access to capital may be affected by general macroeconomic conditions.
Credit markets may tighten significantly for various reasons that may or may not result from company-specific
activities such that our ability to obtain new capital could be more challenging and more expensive. Further, we can
provide no assurance that the banks that have made commitments under our Bank Credit Agreement will continue to
operate as going concerns in the future or will agree to extend commitments beyond the maturity date. If any of the
banks in the lending group were to fail, or fail to renew their commitments, it is possible that the capacity under our
Bank Credit Agreement would be reduced. In the event that the availability under our Bank Credit Agreement was
reduced significantly, we could be required to obtain capital from alternate sources in order to continue with our
business and capital strategies. Our options for addressing such capital constraints would include, but not be limited
to (i) delaying certain capital expenditure projects, (ii) obtaining commitments from the remaining banks in the
lending group or from new banks to fund increased or new amounts under the terms of our Bank Credit Agreement,
(iii) accessing the public capital markets, or (iv) reducing our dividend (but not less than amounts required to
maintain our status as a REIT and avoid income and excise taxes), or eliminating the dividend should we elect to
forgo REIT status, which would be subject to certain additional approvals. Such alternatives could be on terms less
favorable than under existing terms, which could have a material effect on our consolidated financial position,
results of operations, or cash flows.
Increasing activist resistance to the use of public-private partnerships for correctional, detention, and residential
reentry facilities could impact our ability to obtain financing to grow our business or to refinance existing
indebtedness, which could have a material adverse effect on our business, financial condition and results of
operations.
Our company does not, under longstanding policy, lobby for or against policies or legislation that would determine
the basis for, or duration of, an individual's incarceration or detention. This strict policy also applies to external
government relations professionals working on our behalf at all levels of government. Nonetheless, contracting for
correctional, detention, and residential reentry facilities and related services has not achieved complete acceptance
by certain governments or the public at large. The operation of correctional, detention, and residential reentry
facilities by private entities has encountered resistance from certain groups, such as immigration advocates, labor
unions, prison reform organizations and other special interest groups that believe correctional, detention, and
residential reentry facilities should only be operated by governmental agencies, or that alternatives to immigrant
detention should be utilized to enforce the nation's border policies. Further, opposition to immigration policies and
the association of private companies with the enforcement of such policies have caused some banks to recently
announce that they do not expect to continue providing credit or financial services to private entities that operate
correctional, detention, and residential reentry facilities, including CoreCivic. These banks are legally obligated to
honor their commitments under our Bank Credit Agreement, which expires in April 2023. These decisions have
currently affected the capital markets for our securities, and we can provide no assurance that additional banks that
are party to our Bank Credit Agreement will not make similar decisions, or that new banks will be willing to become
party to our Bank Credit Agreement, or that the capital markets for our securities will improve. While we believe
we will continue to have access to capital, restrictions on our access to capital, or increases in the cost of capital,
could have a material adverse effect on our business, financial condition and results of operations.
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Rising interest rates would increase the cost of our variable rate debt.
In recent years, the Federal Reserve has incrementally raised the target range for the federal funds rate. As interest
rates increase, generally, the cost of borrowing increases. We have incurred and expect in the future to incur
indebtedness that bears interest at variable rates, including indebtedness under our Credit Agreements. Accordingly,
increases in interest rates would increase our interest costs, which could have a material adverse effect on us and our
ability to make distributions to our stockholders and pay amounts due on our debt or cause us to be in default under
certain debt instruments. In addition, an increase in market interest rates may lead holders of our common stock to
demand a higher yield on their shares from distributions by us, which could adversely affect the market price for our
common stock.
Risks Related to our REIT Structure
If we fail to remain qualified as a REIT, we would be subject to corporate income taxes and would not be able to
deduct distributions to stockholders when computing our taxable income.
We currently operate in a manner that is intended to allow us to qualify as a REIT for federal income tax purposes
commencing with our taxable year beginning January 1, 2013. However, we cannot assure you that we have
qualified or will remain qualified as a REIT. Qualification as a REIT requires us to satisfy numerous requirements
established under highly technical and complex sections of the Internal Revenue Code of 1986, as amended, or the
Code, which may change from time to time and for which there are only limited judicial and administrative
interpretations, and involves the determination of various factual matters and circumstances not entirely within our
control. For example, in order to qualify as a REIT, the REIT must derive at least 95% of its gross income in any
year from qualifying sources. In addition, a REIT is required to distribute annually to its stockholders at least 90% of
its REIT taxable income (determined without regard to the dividends paid deduction and by excluding capital gains)
and must satisfy specified asset tests on a quarterly basis.
If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax (including any
applicable alternative minimum tax for years before 2018) on our taxable income computed in the usual manner for
corporate taxpayers without deduction for distributions to our stockholders, and we may need to borrow additional
funds or issue securities to pay such additional tax liability. Any such corporate income tax liability could be
substantial and would reduce the amount of cash available for other purposes, including distributions to our
stockholders, because, unless we are entitled to relief under certain statutory provisions, we would be taxable as a C-
corporation, beginning in the year in which the failure occurs, and we would not be allowed to re-elect to be taxed as
a REIT for the following four years.
Even if we remain qualified as a REIT, we may owe taxes under certain circumstances.
Even if we qualify as a REIT, we will be subject to certain U.S. federal, state and local taxes on our income and
property, including on taxable income that we do not distribute to our stockholders, and on net income from certain
"prohibited transactions". In addition, the REIT provisions of the Code are complex and are not always subject to
clear interpretation. For example, a REIT must derive at least 95% of its gross income in any year from qualifying
sources, including rents from real property. Rents from real property include amounts received for the use of limited
amounts of personal property and for certain services. Whether amounts constitute rents from real property or other
qualifying income may not be entirely clear in all cases. We may fail to qualify as a REIT if we exceed the
permissible amounts of non-qualifying income unless such failures qualify for relief under certain statutory relief
provisions. Even if we qualify for statutory relief, we may be required to pay an excise or penalty tax (which could
be significant in amount) in order to utilize one or more such relief provisions under the Code to maintain our
qualification as a REIT. Furthermore, we conduct substantial activities through TRSs, and the income of those
subsidiaries is subject to U.S. federal income tax at regular corporate rates.
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To maintain our REIT status, we may be forced to obtain capital during unfavorable market conditions, which
could adversely affect our overall financial performance.
In order to qualify as a REIT, we will generally be required each year to distribute to our stockholders at least 90%
of our REIT taxable income (determined without regard to the dividends paid deduction and by excluding any net
capital gain), and we will be subject to tax to the extent our taxable income (including net capital gain) is not fully
distributed. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which
distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our net
capital gains, and 100% of our undistributed income from prior years. We currently intend to continue to make
distributions to our stockholders to comply with the distribution requirements of the Code as well as to reduce our
exposure to federal income taxes and the nondeductible excise tax. Differences in timing between the receipt of
income and the payment of expenses to arrive at taxable income, along with the effect of required debt amortization
payments, could require us to borrow funds to meet the distribution requirements that are necessary to achieve the
tax benefits associated with qualifying as a REIT. We may acquire additional capital through our issuance of
securities senior to our common stock, including additional borrowings or other indebtedness or the issuance of
additional securities. Issuance of such senior securities creates additional risks because leverage is a speculative
technique that may adversely affect common stockholders or noteholders. If the return on assets acquired with
borrowed funds or other leverage proceeds does not exceed the cost of the leverage, the use of leverage could
negatively affect our cash flow.
Additionally, the issuance of senior securities involves offering expenses and other costs, including interest
payments, which are borne indirectly by our common stockholders. Fluctuations in interest rates could increase
interest payments on our senior securities, and could reduce cash available for distributions on our common stock or
for payment on our debt securities. Increased operating costs, including the financing cost associated with any
leverage, may reduce our total return to common stockholders. Rating agency guidelines applicable to any senior
securities may impose asset coverage requirements, dividend limitations, voting right requirements (in the case of
senior equity securities), and other restrictions. Further, the terms of any senior securities or other borrowings may
impose additional requirements, restrictions and limitations that are more stringent than those required by a rating
agency that rates outstanding senior securities that may have an adverse effect on us and may affect our ability to
pay distributions to our stockholders. On the other hand, we may not be able to raise additional capital in the future
on favorable terms or at all. Unfavorable economic conditions could increase our funding costs, limit our access to
the capital markets or result in a decision by lenders not to extend credit to us.
Further, in order to maintain our REIT status, we may need to borrow funds to meet the REIT distribution
requirements even if the then-prevailing market conditions are not favorable for these borrowings. These borrowing
needs could result from differences in timing between the actual receipt of cash and inclusion of income for federal
income tax purposes or the effect of non-deductible capital expenditures, the creation of reserves, or required debt or
amortization payments. Our ability to access debt and equity capital on favorable terms or at all is dependent upon a
number of factors, including general market conditions, the market's perception of our growth potential, our current
and potential future earnings and cash distributions, and the market price of our securities. Issuance of debt or equity
securities will expose us to typical risks associated with leverage, including increased risk of loss.
To the extent our ability to issue debt or other senior securities such as preferred stock is constrained, we may
depend on the issuance of additional shares of common stock to finance new investments. If we raise additional
funds by issuing more shares of our common stock or senior securities convertible into, or exchangeable for, shares
of our common stock, the percentage ownership of our stockholders at that time would decrease, and you would
experience dilution.
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Performing services through our TRSs may increase our overall tax liability relative to other REITs or subject us
to certain excise taxes.
A TRS may hold assets and earn income, including income earned from the performance of correctional services,
that would not be qualifying assets or income if held or earned directly by a REIT. We conduct a significant portion
of our business activities through our TRSs. Our TRSs are subject to federal, foreign, state and local income tax on
their taxable income, and their after-tax net income generally is available for distribution to us but is not required to
be distributed to us. The TRS rules also impose a 100% excise tax on certain transactions between a TRS and its
parent REIT that are not conducted on an arm's-length basis. In addition, the TRS rules limit the deductibility of
interest paid or accrued by a TRS to its parent REIT to ensure that the TRS is subject to an appropriate level of
corporate income taxation. We believe our arrangements with our TRSs are on arm's-length terms and intend to
continue to operate in a manner that allows us to avoid incurring the 100% excise tax described above. There can be
no assurance, however, that we will be able to avoid application of the 100% excise tax or the limitations on interest
deductions discussed above.
The value of the securities we own in our TRSs is limited under the REIT asset tests.
Under the Code, no more than 20% of the value of the gross assets of a REIT may be represented by securities of
one or more TRSs. This limitation may affect our ability to increase the size of our TRSs' operations and assets, and
there can be no assurance that we will be able to comply with this limitation. If we are unable to comply with this
limitation, we would fail to qualify as a REIT. Furthermore, our significant use of TRSs may cause the market to
value shares of our common stock differently than the stock of other REITs, which may not use TRSs as
extensively. Although we intend to monitor the value of our investments in TRSs, there can be no assurance that we
will be able to comply with the 20% limitation discussed above.
We may be limited in our ability to fund distributions using cash generated through our TRSs.
At least 75% of gross income for each taxable year as a REIT must be derived from passive real estate sources and
no more than 25% of gross income may consist of dividends from our TRSs and other non-real estate income. This
limitation on our ability to receive dividends from our TRSs may affect our ability to fund cash distributions to our
stockholders using cash from our TRSs. Moreover, our TRSs are not required to distribute their net income to us,
and any income of our TRSs that is not distributed to us will not be subject to the REIT income distribution
requirement.
REIT ownership limitations may restrict or prevent you from engaging in certain transfers of our common stock.
In order to satisfy the requirements for REIT qualification, no more than 50% in value of all classes or series of our
outstanding shares of stock may be owned, actually or constructively, by five or fewer individuals (as defined in the
Code to include certain entities) at any time during the last half of each taxable year beginning with our 2014 taxable
year. To assist us in satisfying this share ownership requirement, our charter imposes ownership limits on each class
and series of our shares of stock. Under applicable constructive ownership rules, any shares of stock owned by
certain affiliated owners generally would be added together for purposes of the common stock ownership limits, and
any shares of a given class or series of preferred stock owned by certain affiliated owners generally would be added
together for purposes of the ownership limit on such class or series.
If anyone transfers shares of our common stock in a manner that would violate the ownership limits, or prevent us
from qualifying as a REIT under the federal income tax laws, those shares of common stock instead would be
transferred to a trust for the benefit of a charitable beneficiary and will be either redeemed by us or sold to a person
whose ownership of the shares will not violate the ownership limit. If this transfer to a trust fails to prevent such a
violation or fails to permit our continued qualification as a REIT, then the initial intended transfer would be null and
void from the outset. The intended transferee of those shares will be deemed never to have owned the shares.
Anyone who acquires shares in violation of the ownership limit or the other restrictions on transfer bears the risk of
suffering a financial loss when the shares of common stock are redeemed or sold if the market price of our shares of
common stock falls between the date of purchase and the date of redemption or sale.
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Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate
otherwise attractive investments.
To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other
things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our
stockholders and the ownership of our common stock. If we fail to comply with one or more of the asset tests at the
end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or
qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax
consequences. In order to meet these tests, we may be required to forego investments we might otherwise make or to
liquidate otherwise attractive investments. Thus, compliance with the REIT requirements may hinder our
performance and reduce amounts available for distribution to our stockholders.
The tax imposed on REITs engaging in "prohibited transactions" may limit our ability to engage in transactions
which would be treated as sales for federal income tax purposes.
A REIT's net income from prohibited transactions is subject to a 100% penalty tax. In general, prohibited
transactions are sales or other dispositions of property, other than foreclosure property, held primarily for sale to
customers in the ordinary course of business. Although we do not intend to hold any properties that would be
characterized as held for sale to customers in the ordinary course of our business, unless a sale or disposition
qualifies under certain statutory safe harbors, such characterization is a factual determination and no guarantee can
be given that the Internal Revenue Service, or IRS, would agree with our characterization of our properties or that
we will always be able to make use of the available safe harbors.
We have not established a minimum distribution payment level, and we may be unable to generate sufficient cash
flows from our operations to make distributions to our stockholders at any time in the future.
We are generally required to distribute to our stockholders at least 90% of our net taxable income (excluding net
capital gains) each year to qualify as a REIT under the Code. To the extent we satisfy the 90% distribution
requirement but distribute less than 100% of our net taxable income (including net capital gains), we will be subject
to federal corporate income tax on our undistributed net taxable income. We intend to distribute at least 100% of our
net taxable income (excluding net capital gains). However, our ability to make distributions to our stockholders may
be adversely affected by the issues described in the risk factors set forth in this Annual Report. Subject to satisfying
the requirements for REIT qualification, we intend to continue to make regular quarterly distributions to our
stockholders. Our Board of Directors has the sole discretion to determine the timing, form and amount of any
distributions to our stockholders. Our Board of Directors makes determinations regarding distributions based upon,
among other factors, our historical and projected results of operations, financial condition, cash flows and liquidity,
satisfaction of the requirements for REIT qualification and other tax considerations, capital expenditure and other
expense obligations, debt covenants, contractual prohibitions or other limitations and applicable law and such other
matters as our Board of Directors may deem relevant from time to time.
It is possible that we will not be able to continue to make distributions to our stockholders or that the level of any
distributions we do make to our stockholders will achieve a market yield or increase or even be maintained over
time, any of which could materially and adversely affect the market price of our shares of common stock.
Distributions could be dilutive to our financial results and may constitute a return of capital to our investors, which
would have the effect of reducing each stockholder's basis in its shares of common stock. We also may need to
borrow funds or use proceeds from the sale of assets to fund distributions.
Dividends payable by REITs, including us, generally do not qualify for the reduced tax rates available for some
dividends.
"Qualified dividends" payable to U.S. stockholders that are individuals, trusts and estates generally are subject to tax
at preferential rates. Subject to limited exceptions, dividends payable by REITs are not eligible for these reduced
rates and are taxable at ordinary income tax rates. The more favorable rates applicable to regular corporate qualified
dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be
relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could
adversely affect the value of the shares of REITs, including the shares of our common stock.
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Distributions that we make to our stockholders are treated as dividends to the extent of our earnings and profits as
determined for federal income tax purposes and are generally taxable to our stockholders as ordinary income.
However, our dividends are eligible for the lower rate applicable to "qualified dividends" to the extent they are
attributable to income that was previously subject to corporate income tax, such as the dividends we receive from
our TRSs or attributable to the accumulated earnings and profits in connection with acquisitions of C-corporations.
Also, a portion of our distributions may be designated by us as long-term capital gains to the extent that they are
attributable to capital gain income recognized by us. Our distributions may constitute a return of capital to the
extent that they exceed our earnings and profits as determined for federal income tax purposes. A return of capital
generally is not taxable, but has the effect of reducing the basis of a stockholder's investment in our shares of
common stock. Any such distributions that exceed a stockholder's tax basis in our shares of common stock
generally will be taxable as capital gains.
For tax years beginning after December 31, 2017 (but subject to a sunset expiration at the end of 2025), U.S.
stockholders that are individuals, trusts and estates generally are allowed a deduction in computing taxable income
equal to 20% of any dividends received from REITs (other than any portion that is a capital gain or qualified
dividend). Depending on the ordinary income tax rate applicable to investors who are individuals, trust and estates,
the 20% deduction for REIT dividends may offset (or eliminate) the relatively more favorable tax treatment
applicable to regular corporate qualified dividends.
We could have potential deferred and contingent tax liabilities from our REIT conversion that could limit, delay
or impede future sales of our properties.
Even though we qualify for taxation as a REIT, if we acquire any asset from a corporation which is or has been a C-
corporation in a transaction in which the basis of the asset in our hands is less than the fair market value of the asset
determined at the time we acquired the asset, and we subsequently recognize a gain on the disposition of the asset
during the five-year period beginning on the date on which we acquired the asset, then we will be required to pay tax
at the highest regular corporate tax rate on this gain to the extent of the excess of (a) the fair market value of the
asset over (b) our adjusted basis in the asset, in each case determined as of the date on which we acquired the asset.
These requirements could limit, delay or impede future sales of our properties. We currently do not expect to sell
any asset if the sale would result in the imposition of a material tax liability. We cannot, however, assure you that
we will not change our plans in this regard.
We may inherit tax liabilities and attributes in connection with acquisitions.
From time to time we may acquire other corporations or entities and, in connection with such acquisitions, we may
succeed to the historic tax attributes and liabilities of such entities. For example, in order to qualify as a REIT, at the
end of any taxable year, we must not have any earnings and profits accumulated in a non-REIT year. As a result, if
we acquire a C-corporation in certain transactions, we must distribute the corporation's earnings and profits
accumulated prior to the acquisition before the end of the taxable year in which we acquire the C-corporation. We
also could be required to pay the acquired entity's unpaid taxes even though such liabilities arose prior to the time
we acquired the entity.
Legislative or regulatory action affecting REITs could adversely affect us or our stockholders.
In recent years, numerous legislative, judicial and administrative changes have been made to the federal income tax
laws applicable to investments in REITs and similar entities. At any time, the federal income tax laws governing
REITs or the administrative interpretations of those laws may be amended. Changes to the tax laws, regulations and
administrative interpretations, which may have retroactive application, could adversely affect us and may impact our
taxation or that of our stockholders. Accordingly, we cannot assure you that any such change will not significantly
affect our ability to qualify for taxation as a REIT or the federal income tax consequences to us of such qualification.
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U.S. federal tax reform legislation could affect REITs generally, the geographic markets in which we operate,
our stock and our results of operations, both positively and negatively in ways that are difficult to anticipate.
As a REIT, we are generally not required to pay federal taxes otherwise applicable to regular corporations (except
for income generated by our TRSs) if we comply with the various tax regulations governing REITs. Stockholders,
however, are generally required to pay taxes on REIT dividends. Tax reform legislation affects the way in which
dividends paid on shares of our common stock are taxed and could impact our stock price or how stockholders and
potential
In addition, while certain elements
of tax reform legislation may not impact us directly as a REIT, they could impact the geographic markets in which
we operate, particularly affecting tenants of our leased property and their corporate tax obligations, if any.
in REITs generally.
investors view an
investment
Other Risks Related to Our Securities
The market price of our equity securities may vary substantially, which may limit our stockholders' ability to
liquidate their investment.
The trading prices of equity securities issued by REITs have historically been affected by changes in market interest
rates. One of the factors that may influence the price of our common stock in public trading markets is the annual
yield from distributions on our common stock as compared to yields on other financial instruments. An increase in
market interest rates, or a decrease in our distributions to stockholders, may lead prospective purchasers of our
shares to demand a higher annual yield, which could reduce the market price of our equity securities.
Other factors that could affect the market price of our equity securities include the following:
actual or anticipated variations in our quarterly results of operations;
changes in market valuations of companies in the corrections, detention, or residential reentry
industries;
changes in expectations of future financial performance or changes in estimates of securities analysts;
fluctuations in stock market prices and volumes;
issuances of common shares or other securities in the future; and
announcements by us or our competitors of acquisitions, investments or strategic actions.
The number of shares of our common stock available for future sale could adversely affect the market price of
our common stock.
We cannot predict the effect, if any, of future sales of common stock, or the availability of common stock for future
sale, on the market price of our common stock. Sales of substantial amounts of common stock (including stock
issued under equity compensation plans or stock issued pursuant to our Amended and Restated ATM Equity
Offering Sales Agreement), or the perception that these sales could occur, may adversely affect prevailing market
prices for our common stock.
Future offerings of debt or equity securities ranking senior to our common stock or incurrence of debt (including
under our Bank Credit Agreement) may adversely affect the market price of our common stock.
If we decide to issue debt or equity securities in the future ranking senior to our common stock or otherwise incur
indebtedness (including under our Bank Credit Agreement), it is possible that these securities or indebtedness will
be governed by an indenture or other instrument containing covenants restricting our operating flexibility and
limiting our ability to make distributions to our stockholders. Additionally, any convertible or exchangeable
securities that we issue in the future may have rights, preferences and privileges, including with respect to
distributions, more favorable than those of our common stock and may result in dilution to owners of our common
stock. Because our decision to issue debt or equity securities in any future offering or otherwise incur indebtedness
will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount,
timing or nature of our future offerings or financings, any of which could reduce the market price of our common
stock and dilute the value of our common stock.
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Our issuance of preferred stock could adversely affect holders of our common stock and discourage a takeover.
Our Board of Directors has the authority to issue up to 50.0 million shares of preferred stock without any action on
the part of our stockholders. Our Board of Directors also has the authority, without stockholder approval, to set the
terms of any new series of preferred stock that may be issued, including voting rights, dividend rights, liquidation
rights and other preferences superior to our common stock. In the event that we issue shares of preferred stock in
the future that have preferences superior to our common stock, the rights of the holders of our common stock or the
market price of our common stock could be adversely affected. In addition, the ability of our Board of Directors to
issue shares of preferred stock without any action on the part of our stockholders may impede a takeover of us and
discourage or prevent a transaction that may be favorable to our stockholders.
Our charter and bylaws and Maryland law could make it difficult for a third party to acquire our company.
The Maryland General Corporation Law and our charter and bylaws contain provisions that could delay, deter, or
prevent a change in control of our company or our management. These provisions could also discourage proxy
contests and make it more difficult for our stockholders to elect directors and take other corporate actions. These
provisions:
authorize us to issue "blank check" preferred stock, which is preferred stock that can be created and
issued by our Board of Directors, without stockholder approval, with rights senior to those of common
stock;
provide that directors may be removed with or without cause only by the affirmative vote of at least a
majority of the votes of shares entitled to vote thereon; and
establish advance notice requirements for submitting nominations for election to the Board of Directors
and for proposing matters that can be acted upon by stockholders at a meeting.
We are also subject to anti-takeover provisions under Maryland law, which could delay or prevent a change of
control. Together, these provisions of our charter and bylaws and Maryland law may discourage transactions that
otherwise could provide for the payment of a premium over prevailing market prices for our common stock, and also
could limit the price that investors are willing to pay in the future for shares of our common stock.
ITEM 1B.
UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
The properties we owned at December 31, 2019 are described under Item 1 and in Note 4 of the Notes to the
Consolidated Financial Statements contained in this Annual Report, as well as in Schedule III in Part IV of this
Annual Report.
58
ITEM 3. LEGAL PROCEEDINGS.
General
The nature of our business results in claims and litigation alleging that we are liable for damages arising from the
conduct of our employees or others. Based upon management's review of the potential claims and outstanding
litigation, and based upon management's experience and history of estimating losses, and taking into consideration
CoreCivic's self-insured retention amounts, management believes there are no pending legal proceedings that would
have a material effect on our financial position, results of operations or cash flows. However, claims and legal
proceedings are subject to inherent uncertainties, and unfavorable decisions and rulings could occur that could have
a material adverse impact on our financial position, results of operations or cash flows for the period in which such
decisions and rulings occur, or future periods. See "Risk Factors - Risks Related to our Business and Industry -
Legal proceedings related to, and adverse developments in our relationship with, our employees could adversely
affect our business, financial condition or results of operations."; "—We are subject to legal proceedings associated
with owning and managing correctional, detention, and residential reentry facilities."; and "—We are subject to
certain stockholder litigation."
Litigation
In a memorandum to the BOP dated August 18, 2016, the DOJ directed that, as each contract with privately operated
prisons reaches the end of its term, the BOP should either decline to renew that contract or substantially reduce its
scope in a manner consistent with law and the overall decline of the BOP's inmate population. In addition to the
decline in the BOP's inmate population, the DOJ memorandum cites purported operational, programming, and cost
efficiency factors as reasons for the DOJ directive. On February 21, 2017, the newly appointed U.S. Attorney
General issued a memorandum rescinding the DOJ's prior directive stating the memorandum changed long-standing
policy and practice and impaired the BOP's ability to meet the future needs of the federal correctional system.
Following the release of the August 18, 2016 DOJ memorandum, a purported securities class action lawsuit was
filed against us and certain of our current and former officers in the United States District Court for the Middle
District of Tennessee, or the District Court, captioned Grae v. Corrections Corporation of America et al., Case No.
3:16-cv-02267. The lawsuit is brought on behalf of a putative class of shareholders who purchased or acquired our
securities between February 27, 2012 and August 17, 2016. In general, the lawsuit alleges that, during this
timeframe, our public statements were false and/or misleading regarding the purported operational, programming,
and cost efficiency factors cited in the DOJ memorandum and, as a result, our stock price was artificially inflated.
The lawsuit alleges that the publication of the DOJ memorandum on August 18, 2016 revealed the alleged fraud,
causing the per share price of our stock to decline, thereby causing harm to the putative class of shareholders.
On December 18, 2017, the District Court denied our motion to dismiss. On March 26, 2019, the District Court
certified the class proposed by the plaintiff. The United States Court of Appeals for the Sixth Circuit denied our
appeal of the class certification order on August 23, 2019. The case is currently in the fact discovery phase of
litigation.
We believe the lawsuit is entirely without merit and intend to vigorously defend against it. In addition, we maintain
insurance, with certain self-insured retention amounts, to cover the alleged claims which may mitigate the risk that
such litigation would have a material adverse effect on our financial condition, results of operations, or cash flows.
See additional information required under this section described in Note 16 of the Notes to the Consolidated
Financial Statements contained in this Annual Report.
ITEM 4. MINE SAFETY DISCLOSURES
None.
59
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Price of and Distributions on Capital Stock
Our common stock is traded on the New York Stock Exchange, or NYSE, under the symbol "CXW." On February
14, 2020, the last reported sale price of our common stock was $16.85 per share and there were approximately 3,000
registered holders and approximately 41,000 beneficial holders, respectively, of our common stock.
Dividend Policy
During 2018 and 2019, CoreCivic's Board of Directors declared the following quarterly dividends on its common
stock:
Declaration Date
February 22, 2018
May 11, 2018
August 16, 2018
December 13, 2018
February 21, 2019
May 16, 2019
August 15, 2019
December 12, 2019
Record Date
April 2, 2018
July 2, 2018
October 1, 2018
January 2, 2019
April 1, 2019
July 1, 2019
October 1, 2019
January 6, 2020
Payable Date
April 16, 2018
July 16, 2018
October 15, 2018
January 15, 2019
April 15, 2019
July 16, 2019
October 15, 2019
January 15, 2020
Per Share
0.43
$
0.43
$
0.43
$
0.43
$
0.44
$
0.44
$
0.44
$
0.44
$
In order to qualify as a REIT, we are generally required each year to distribute to our stockholders at least 90% of
our REIT taxable income (determined without regard to the dividends paid deduction and excluding net capital
gains), and we will be subject to tax to the extent our net taxable income (including net capital gains) is not fully
distributed. While we intend to continue paying regular quarterly cash dividends at levels expected to fully distribute
our annual REIT taxable income, future dividends will be paid at the discretion of our Board of Directors and will
depend on our future earnings, our capital requirements, our financial condition, limitations under debt covenants,
opportunities for alternative uses of capital, the annual distribution requirements under the REIT provisions of the
Code, and on such other factors as our Board of Directors may consider relevant.
Issuer Purchases of Equity Securities
None.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data for the five years ended December 31, 2019, was derived from our
consolidated financial statements and the related notes thereto. This data should be read in conjunction with our
audited consolidated financial statements, including the related notes, and "Management's Discussion and Analysis
of Financial Condition and Results of Operations." Our audited consolidated financial statements, including the
related notes, as of December 31, 2019 and 2018, and for the years ended December 31, 2019, 2018, and 2017 are
included in this Annual Report.
60
CORECIVIC, INC. AND SUBSIDIARIES
SELECTED HISTORICAL FINANCIAL INFORMATION
(in thousands, except per share data)
STATEMENT OF OPERATIONS:
Revenues
Expenses:
Operating
General and administrative
Depreciation and amortization
Contingent consideration for acquisition
of businesses
Restructuring charges
Asset impairments
Operating income
Other (income) expense:
Interest expense, net
Expenses associated with debt refinancing
transactions
Other (income) expense
Income from continuing operations before income
taxes
Income tax expense
Net income
Basic earnings per share
Diluted earnings per share
Weighted average common shares outstanding:
2019
For the Years Ended December 31,
2016
2017
2018
2015
$ 1,980,689 $ 1,835,766 $ 1,765,498 $ 1,849,785 $ 1,793,087
1,422,769 1,315,250 1,249,537 1,275,586 1,256,128
127,078 106,865 107,822 107,027 103,936
144,572 156,501 147,129 166,746 151,514
—
—
4,706
—
—
955
1,699,125 1,586,281 1,505,102 1,553,369 1,512,533
281,564 249,485 260,396 296,416 280,554
—
4,010
—
6,085
—
1,580
—
—
614
84,401
80,753
68,535
67,755
49,696
602
(164 )
84,839
1,016
156
81,925
—
(90 )
68,445
—
489
68,244
701
(58 )
50,339
(8,353 )
(7,839 )
196,725 167,560 191,951 228,172 230,215
(8,361 )
$ 188,886 $ 159,207 $ 178,040 $ 219,919 $ 221,854
1.90
$
1.88
$
1.59 $
1.59 $
1.87 $
1.87 $
1.51 $
1.50 $
1.34 $
1.34 $
(13,911 )
(8,253 )
Basic
Diluted
119,028 118,544 118,084 117,384 116,949
119,164 118,716 118,465 117,791 117,785
BALANCE SHEET DATA:
Total assets
Total debt
Total liabilities
Stockholders' equity
2019
2018
December 31,
2017
2016
2015
$ 3,791,631 $ 3,655,660 $ 3,272,398 $ 3,271,604 $ 3,356,018
$ 1,959,372 $ 1,801,676 $ 1,447,187 $ 1,445,169 $ 1,452,077
$ 2,414,882 $ 2,240,601 $ 1,820,790 $ 1,812,641 $ 1,893,270
$ 1,376,749 $ 1,415,059 $ 1,451,608 $ 1,458,963 $ 1,462,748
61
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto
appearing elsewhere in this Annual Report on Form 10-K, or this Annual Report. In this Annual Report, we use the
term, the "Company," "CoreCivic," "we," "us," and "our" to refer to CoreCivic, Inc. and its subsidiaries unless
context indicates otherwise. This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements
as a result of certain factors, including, but not limited to, those described under Item 1A, "Risk Factors" and
included in other portions of this report.
OVERVIEW
We are a diversified government solutions company with the scale and experience needed to solve tough
government challenges in flexible, cost-effective ways. Through three segments, CoreCivic Safety, CoreCivic
Community, and CoreCivic Properties, we provide a broad range of solutions to government partners that serve the
public good through corrections and detention management, a growing network of residential reentry centers to help
address America's recidivism crisis, and government real estate solutions. We have been a flexible and dependable
partner for government for more than 35 years. Our employees are driven by a deep sense of service, high standards
of professionalism and a responsibility to help government better the public good.
As of December 31, 2019, through our CoreCivic Safety segment, we operated 50 correctional and detention
facilities, 43 of which we owned, with a total design capacity of approximately 73,000 beds. Through our CoreCivic
Community segment, we owned and operated 29 residential reentry centers with a total design capacity of
approximately 5,000 beds. In addition, through our CoreCivic Properties segment, we owned 28 properties for lease
to third parties and used by government agencies, totaling 2.4 million square feet. We are the nation's largest owner
of partnership correctional, detention, and residential reentry facilities and one of the largest prison operators in the
United States. We also believe we are the largest private owner of real estate used by U.S. government agencies.
Our size and experience provide us with significant credibility with our current and prospective customers, and
enable us to generate economies of scale in purchasing power for food services, health care and other supplies and
services we offer to our government partners.
We are structured as a real estate investment trust, or REIT. We began operating as a REIT effective January 1,
2013. See Item 1, "Business – Overview" for a description of how we are organized and how we provide
correctional services and conduct other operations through taxable REIT subsidiaries, or TRSs, in order to comply
with REIT qualification requirements.
Our Business
Through our CoreCivic Safety and CoreCivic Community segments, we are compensated for providing bed capacity
and correctional, detention, and residential reentry services at a per diem rate based upon actual or minimum
guaranteed occupancy levels. Federal, state, and local governments are constantly under budgetary constraints
putting pressure on governments to control correctional budgets, including per diem rates our customers pay to us as
well as pressure on appropriations for building new prison capacity.
The solutions we provide to our federal customers continue to be a significant component of our business. We
believe our ability to provide flexible solutions and fulfill emergent needs of our federal customers would be very
difficult and costly to replicate in the public sector.
62
Several of our state partners have experienced improvements in their budgets which has helped us secure recent per
diem increases at certain facilities. Further, several of our existing state partners, as well as prospective state
partners, are experiencing growth in offender populations and overcrowded conditions, are considering alternative
correctional capacity for their aged and inefficient infrastructure, or are seeking cost savings by utilizing the private
sector. Although we can provide no assurance that we will enter into any new contracts, we believe we are well
positioned to provide states with needed bed capacity, as well as the programming and reentry services they are
seeking. Since the beginning of 2018, we have completed the intake of new inmate populations as a result of new
contracts with Kansas, Kentucky, Ohio, Nevada, South Carolina, and Vermont, while Wyoming began utilizing an
existing contract it had not utilized in nearly a decade.
We believe the long-term growth opportunities of our business remain attractive as government agencies consider
their emergent needs, as well as the efficiency and offender programming opportunities we provide, as flexible
solutions to satisfy our partners' needs. Further, we expect our partners to continue to face challenges in maintaining
old facilities, developing new facilities, and expanding current facilities for additional capacity, which could result
in increased future demand for the solutions we provide.
Governments continue to experience many significant spending demands which have constrained correctional
budgets limiting their ability to expand existing facilities or construct new facilities. We believe the outsourcing of
corrections and detention management services to private operators allows governments to manage increasing
inmate populations while simultaneously controlling costs. We believe our customers discover that partnering with
private operators to provide residential services to their offenders introduces competition to their correctional
system, resulting in improvements to the quality and cost of services throughout their correctional system. Further,
the use of facilities owned and managed by private operators allows governments to expand correctional capacity
without incurring large capital commitments and allows them to avoid long-term pension obligations for their
employees.
We also believe that having beds immediately available to our partners provides us with a distinct competitive
advantage when bidding on new contracts. We believe the most significant opportunities for growth are in
providing our government partners with available beds within facilities we currently own or that we will develop.
Over the long-term, we would like to see meaningful utilization of our available capacity and better visibility from
our customers into their potential future needs before we develop new correctional or detention capacity on a
speculative basis. We will, however, respond to customer demand and may develop or expand correctional and
detention facilities when we believe potential long-term returns justify the capital deployment, like the recent
expansion of our Otay Mesa Detention Center in San Diego, California. We expanded the Otay Mesa facility by
512 beds as a result of long-standing demand from the United States Marshals Service, or the USMS, and the U.S.
Immigration and Customs Enforcement, or ICE, and limited detention capacity in the Southwest region of the
United States. The expansion was completed during the third quarter of 2019 at an estimated cost of approximately
$39.0 million. Both the USMS and ICE currently utilize the Otay Mesa Detention Center under an existing contract
that enables both agencies to utilize the additional capacity. We also believe that owning the facilities in which we
provide management services enables us to more rapidly replace business lost compared with managed-only
facilities, since we can offer the same beds to new and existing customers and, with customer consent, may have
more flexibility in moving our existing populations to facilities with available capacity. Our management contracts
generally provide our customers with the right to terminate our management contracts at any time without cause.
We are actively engaged in marketing our available capacity as solutions to meet the needs of potential customers.
Historically, we have been successful in substantially filling our inventory of available beds and the beds that we
have constructed. For example, pursuant to a new management contract we executed in November 2017, the
Commonwealth of Kentucky began utilizing our 816-bed Lee Adjustment Center in Kentucky, one of our previously
idled prison facilities, in the first quarter of 2018, and we completed the activation in the third quarter of 2018.
More recently, in the second quarter of 2019, we announced that we entered into new contracts under inter-
governmental service agreements, or IGSAs, with ICE at our previously idled 910-bed Torrance County Detention
Facility in New Mexico and with the USMS at our previously idled 1,422-bed Eden Detention Center in Texas.
Filling these available beds could provide substantial growth in revenues, cash flow, and earnings per share.
However, we can provide no assurance that we will be able to fill our available beds.
63
We are also pursuing additional investment opportunities in other real estate assets with a bias toward those used to
provide mission-critical governmental services, as well as other businesses that expand the range of solutions we
provide to government partners, and expect to complete additional acquisitions that would further diversify our cash
flows and generate attractive risk-adjusted returns for our shareholders.
We also remain steadfast in our efforts to contain costs. Approximately 60% of our operating expenses consist of
salaries and benefits. The turnover rate for correctional officers for our company, and for the corrections industry in
general, remains high. We are making investments in systems and processes intended to help manage our workforce
more efficiently and effectively, especially with respect to overtime and costs of turnover. We are also focused on
workers' compensation and medical benefits costs for our employees due to continued rising healthcare costs
throughout the country. Effectively managing these staffing costs requires a long-term strategy to control such
costs, and we continue to dedicate resources to enhance our benefits, provide specialized training and career
development opportunities to our staff in order to attract and retain quality personnel. Through ongoing company-
wide initiatives, we continue to focus on efforts to manage costs and improve operating efficiencies.
Through the combination of our initiatives to (i) increase our revenues by increasing the utilization of our available
beds, (ii) deliver new bed capacity through new facility construction and expansion opportunities, (iii) invest in real
estate-only solutions, (iv) acquire community corrections facilities, (v) acquire other businesses that expand the
range of solutions we provide to government partners and diversify our cash flows, and (vi) contain our operating
expenses, we believe we will be able to maintain our competitive advantage and continue to diversify the range of
services we provide to our customers at an attractive price, thereby producing value for our stockholders.
CRITICAL ACCOUNTING POLICIES
The consolidated financial statements in this report are prepared in conformity with U.S. generally accepted
accounting principles, or GAAP. As such, we are required to make certain estimates, judgments, and assumptions
that we believe are reasonable based upon the information available. These estimates and assumptions affect the
reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenue and expenses during the reporting period. A summary of our significant accounting policies is
described in Note 2 of the Notes to the Consolidated Financial Statements contained in this Annual Report. The
significant accounting policies and estimates which we believe are the most critical to aid in fully understanding and
evaluating our reported financial results include the following:
Asset impairments. The primary risk we face for asset impairment charges, excluding goodwill, is associated with
facilities we own. As of December 31, 2019, we had $2.7 billion in property and equipment, including $136.3
million in long-lived assets, excluding equipment, at five idled CoreCivic Safety correctional facilities. The
carrying values of the five idled facilities as of December 31, 2019 were as follows (in thousands):
Prairie Correctional Facility
Huerfano County Correctional Center
Diamondback Correctional Facility
Marion Adjustment Center
Kit Carson Correctional Center
$
14,863
16,266
39,729
11,351
54,041
$ 136,250
As of December 31, 2019, we also had two idled non-core facilities in our Safety segment containing 440 beds with
an aggregate net book value of $3.8 million; two facilities in our Community segment that became idle during 2019,
as further described hereafter, containing an aggregate of 381 beds with an aggregate net book value of $6.5 million;
and three previously leased residential reentry centers in our Properties segment that became idle in 2019, as further
described hereafter, containing an aggregate of 430 beds with an aggregate net book value of $9.3 million.
We incurred approximately $8.0 million, $8.2 million, and $8.9 million in operating expenses at these idled facilities
for the years ended December 31, 2019, 2018, and 2017, respectively.
64
During the second quarter of 2019, we idled a residential reentry center in Oklahoma due to declining utilization
from the state of Oklahoma and the consolidation of residents into our other reentry facilities located in the state.
Further, we received notice during the second quarter of 2019 of the Federal Bureau of Prisons', or the BOP,
decision to award the rebid of a contract at one of our residential reentry facilities in Arizona to another operator.
The residential reentry facility in Arizona was idled in the third quarter of 2019 upon expiration of its contract with
the BOP on August 31, 2019. As a result of these residential reentry centers becoming idle, we tested the facilities
for impairment during the second quarter of 2019. We concluded that the residential reentry facility in Oklahoma
had a recoverable value in excess of the corresponding carrying value. We concluded that the residential reentry
facility in Arizona would likely be marketed for use other than as a residential reentry facility, and recorded an asset
impairment of $4.3 million in the second quarter of 2019 to reduce the carrying value of the facility to its estimated
fair value as a commercial real estate property.
During the third quarter of 2019, leases at three single-tenant residential reentry centers in our CoreCivic Properties
segment expired and were not renewed. The three properties located in Pennsylvania total approximately 54,000
square feet and contain an aggregate of 430 beds with an aggregate net book value of $9.3 million as of December
31, 2019. We have begun to market the facilities to other potential customers to operate as a CoreCivic Community
facility or for future lease as a CoreCivic Properties facility. As a result of the expiration of the leases at the three
properties located in Pennsylvania, we tested the facilities for impairment during the third quarter of 2019. We
concluded that each of the properties had a recoverable value in excess of the corresponding carrying value.
We evaluate the recoverability of the carrying values of our long-lived assets, other than goodwill, when events
suggest that an impairment may have occurred. Such events primarily include, but are not limited to, the
termination of a management contract, a significant decrease in populations within a facility we own, and the
expiration and non-renewal of lease agreements in our CoreCivic Properties segment. Accordingly, we tested each
of the idled properties for impairment when we were notified by the respective customers or tenants that they would
no longer be utilizing such facility or property.
We re-perform the impairment analyses on an annual basis for each of the idle facilities or properties as well as any
other properties indicating indicators of impairment. In performing our annual impairment analyses, the estimates of
recoverability are initially based on projected undiscounted cash flows that are comparable to historical cash flows
from management contracts or lease agreements at facilities similar to the idled facilities, including historical
operations for the idled facilities when such facilities were operating. Our impairment evaluations also take into
consideration our historical experience in securing new management contracts to utilize correctional facilities that
had been previously idled for substantial periods of time. Such previously idled correctional facilities are currently
being operated under contracts that continue to generate cash flows resulting in the recoverability of the net book
value of the previously idled facilities by material amounts. We also perform sensitivity analyses that consider
reductions to such cash flows. Our sensitivity analyses included reductions in projected cash flows by as much as
half of the historical cash flows generated by the respective facility as well as prolonged periods of vacancies. In all
cases, the projected undiscounted cash flows in our analyses as of December 31, 2019, exceeded the carrying
amounts of each facility.
We also evaluate on a quarterly basis market developments for the potential utilization of each of these facilities in
order to identify events that may cause us to reconsider our most recent assumptions. Such events could include
negotiations with a prospective customer for the utilization of an idle facility at terms significantly less favorable
than those used in our most recent impairment analysis, or changes in legislation surrounding a particular facility
that could impact our ability to care for certain types of populations at such facility, or a demolition or substantial
renovation of a facility. Further, a substantial increase in the number of available beds at other facilities we own
could lead to a deterioration in market conditions and cash flows that we might be able to obtain under a new
contract at our idle facilities. Although they are not frequently received, an unsolicited offer to purchase any of our
idle facilities at amounts that are less than the carrying value could also cause us to reconsider the assumptions used
in our most recent impairment analysis.
65
We can provide no assurance that we will be able to secure agreements to utilize our idle properties, or that we will
not incur impairment charges in the future. By their nature, these estimates contain uncertainties with respect to the
extent and timing of the respective cash flows due to potential delays or material changes to historical terms and
conditions in contracts with prospective customers that could impact the estimate of cash flows. With respect to idle
correctional facilities, we believe the long-term trends favor an increase in the utilization of our correctional
facilities and management services. This belief is based on our experience in working with governmental agencies
faced with significant budgetary challenges, which is a primary contributing factor to the lack of appropriated
funding since 2009 to build new bed capacity by the federal and state governments with which we partner. Due to a
variety of factors, the lead time to negotiate contracts with our federal and state partners to utilize idle bed capacity
at correctional facilities is generally lengthy.
To further illustrate our historical experience in securing new management contracts to utilize idle beds in our
correctional facilities, the following are examples of new contracts we secured during 2019.
On May 1, 2019, the BOP announced that it elected not to renew the contract at our Adams County Correctional
Center in Adams County, Mississippi. On June 28, 2019, the BOP executed an amendment to the existing contract
to allow ICE to use up to 660 beds to care for adult male detainees. On July 18, 2019, the BOP contract, which was
originally scheduled to expire on July 31, 2019, was extended to August 30, 2019. On September 3, 2019, we
announced that we had entered into a new contract under an IGSA between Adams County, Mississippi and ICE for
up to 2,348 adult detainees at the Adams facility. The new management agreement commenced on August 31,
2019, and has an initial term of 60 months, with unlimited extension options thereafter upon mutual agreement.
Either party may terminate the contract with 120 days' written notice. ICE began utilizing the additional capacity at
the Adams facility under the new contract and, as of December 31, 2019, we cared for approximately 850 detainees
from ICE at the Adams facility. As a result of the transition at this facility, we performed an impairment analysis of
the Adams facility, which had a net carrying value of $96.5 million as of December 31, 2019, and concluded that
this asset has a recoverable value in excess of the carrying value.
On May 16, 2019, we announced that we entered into a new contract under an IGSA between Torrance County,
New Mexico and ICE to activate our 910-bed Torrance County Detention Facility in Estancia, New Mexico. The
Torrance facility had previously been idle since 2017 and had a net carrying value of $34.0 million as of December
31, 2019. The new management contract commenced on May 15, 2019, and has an initial term of 60 months, with
unlimited extension options thereafter upon mutual agreement. Either party may terminate the contract with 120
days' written notice. We began accepting ICE detainee populations into the Torrance facility in the third quarter of
2019 and, as of December 31, 2019, cared for approximately 300 detainees at the facility.
On May 23, 2019, we announced that we entered into a new contract under an IGSA between the City of Eden,
Texas and the United States Marshals Service, or USMS, to activate our 1,422-bed Eden Detention Center in Eden,
Texas. The new agreement also permits ICE to utilize capacity at the facility at any time in the future. The Eden
facility had previously been idle since 2017 and had a net carrying value of $37.0 million as of December 31, 2019.
The new management contract commenced on June 1, 2019, and has an indefinite term. Either party may terminate
the contract with 30 days' written notice. We began accepting populations into the Eden facility in the third quarter
of 2019 and, as of December 31, 2019, cared for an aggregate of approximately 1,000 detainees at the facility.
On December 9, 2019, we entered into a lease with the Commonwealth of Kentucky Department of Corrections, or
KYDOC, for our previously idled 656-bed Southeast Correctional Complex in Wheelwright, Kentucky, formerly
known as the Southeast Kentucky Correctional Facility. The lease is expected to commence in mid-2020 and has an
initial term of ten years and includes five two-year renewal options. The KYDOC has the option to purchase the
facility at its fair market value at any time during the term of the lease. The Southeast Correctional facility had
previously been idle since 2012 and had a net carrying value of $20.3 million as of December 31, 2019.
66
Goodwill impairments. As of December 31, 2019 and 2018, we had $50.5 million and $48.2 million, respectively,
of goodwill, established in connection with multiple business combination transactions. We evaluate the carrying
value of goodwill annually and whenever circumstances indicate the carrying value of goodwill may be impaired.
Under the provisions of Accounting Standards Update, or ASU, 2017-04, "Intangibles–Goodwill and Other (Topic
350): Simplifying the Test of Goodwill Impairment," we perform 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, we
determine it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then
performing a quantitative impairment test is not necessary. If a quantitative test is required, we perform 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 the income approach
and market approach. The income approach valuation 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. By their nature, valuation
techniques are subject to considerable judgment and require estimates of future cash flows as well as other factors,
which are often difficult to predict. Estimated fair values could change if there are changes in our capital structure,
cost of debt, interest rates, capital expenditure levels, operating cash flows, or market capitalization. Accordingly,
we may incur goodwill impairment charges in the future.
Self-funded insurance reserves. As of December 31, 2019 and 2018, we had $41.9 million and $35.1 million,
respectively, in accrued liabilities for employee health, workers' compensation, and automobile insurance claims.
We are significantly self-insured for employee health, workers' compensation, and automobile liability insurance
claims. As such, our insurance expense is largely dependent on claims experience and our ability to control our
claims. We have consistently accrued the estimated liability for employee health insurance claims based on our
history of claims experience and the estimated time lag between the incident date and the date we pay the claims.
We have accrued the estimated liability for workers' compensation claims based on an actuarial valuation of the
outstanding liabilities, discounted to the net present value of the outstanding liabilities, using a combination of
actuarial methods used to project ultimate losses, and our automobile insurance claims based on estimated
development factors on claims incurred. The liability for employee health, workers' compensation, and automobile
insurance includes estimates for both claims incurred and for claims incurred but not reported. These estimates
could change in the future. It is possible that future cash flows and results of operations could be materially affected
by changes in our assumptions, new developments, or by the effectiveness of our strategies.
liabilities under
Legal reserves. As of December 31, 2019 and 2018, we had $14.1 million and $13.9 million, respectively, in
accrued
the provisions of Accounting Standards Codification Subtopic 450-20, "Loss
Contingencies," or ASC 450, related to certain claims and legal proceedings in which we are involved. We have
accrued our best estimate of the probable costs for the resolution of these claims. In addition, we are subject to
current and potential future claims and legal proceedings for which little or no accrual has been reflected because
our current assessment of the potential exposure is nominal. These estimates have been developed in consultation
with our General Counsel's office and, as appropriate, outside counsel handling these matters, and are based upon an
analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible that future
cash flows and results of operations could be materially affected by changes in our assumptions, new developments,
or by the effectiveness of our litigation and settlement strategies.
67
RESULTS OF OPERATIONS
Our results of operations are impacted by the number of correctional and detention facilities we operated, including
43 we owned and seven owned by our government partners (CoreCivic Safety), the number of residential reentry
centers we owned and operated (CoreCivic Community), the number of facilities we leased to other operators
(CoreCivic Properties), and the facilities we owned that were not in operation. The following table sets forth the
changes in the number of facilities operated for the years ended December 31, 2019 and 2018.
Effective
Date
CoreCivic
Safety
Community Properties Total
51
26
12
January 2018
—
—
1
89
1
Facilities as of December 31, 2017
Acquisition of a leased property
in Florida
Acquisition of a portfolio of leased
properties in Arkansas, Missouri,
Oklahoma, Tennessee and Texas
Acquisition of a leased property in
Maryland
Acquisition of a leased property in Ohio
Facilities as of December 31, 2018
Acquisition of the South Raleigh Reentry
Center in North Carolina
Acquisition of a leased property in
Michigan
Sale of a leased property in Pennsylvania
Acquisition of certain assets of
Rehabilitation Services, Inc.
Lease of the Southeast Correctional
Complex
Facilities as of December 31, 2019
July 2018
August 2018
September 2018
February 2019
May 2019
June 2019
December 2019
December 2019
—
—
—
51
—
—
—
—
(1 )
50
—
12
12
—
—
26
1
1
27
1
—
—
—
1
(1 )
2
—
1
1
104
1
1
(1 )
2
—
29
1
28
—
107
Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
During the year ended December 31, 2019, we generated net income of $188.9 million, or $1.59 per diluted share,
compared with net income of $159.2 million, or $1.34 per diluted share, for the previous year. Financial results in
2019 and 2018 were impacted by several non-routine transactions. Results for 2019 included a $4.1 million gain,
net of taxes, for the settlement of a contractual dispute with respect to revenues that would have been recognized
during the previous several years. In addition, net income for 2019 and 2018 included $4.7 million and $1.6 million,
respectively, of asset impairments and $0.6 million and $1.0 million, respectively, of expenses associated with debt
refinancing transactions. Financial results in 2018 were also impacted by income tax charges of $1.0 million
resulting from the Tax Cuts and Jobs Act, or the TCJA, enacted in the fourth quarter of 2017, as further described
hereafter. Financial results in 2018 also reflected a charge of $6.1 million for contingent consideration associated
with an acquisition of a business, as further described hereafter.
68
Our Current Operations
Our ongoing operations are organized into three principal business segments:
CoreCivic Safety segment, consisting of the 50 correctional and detention facilities that are owned, or
controlled via a long-term lease, and managed by CoreCivic, as well as those correctional and detention
facilities owned by third parties but managed by CoreCivic. CoreCivic Safety also includes the operating
results of our subsidiary that provides transportation services to governmental agencies, TransCor
America, LLC, or TransCor.
CoreCivic Community segment, consisting of the 29 residential reentry centers that are owned, or
controlled via a long-term lease, and managed by CoreCivic. CoreCivic Community also includes the
operating results of our electronic monitoring and case management services.
CoreCivic Properties segment, consisting of the 28 real estate properties owned by CoreCivic for lease to
third parties and used by government agencies.
For the years ended December 31, 2019 and 2018, our total facility net operating income was divided among our
three business segments as follows:
Segment:
Safety
Community
Properties
For the Years Ended December 31,
2018
2019
85.2 %
5.0 %
9.8 %
87.1 %
4.8 %
8.1 %
69
Facility Operations
A key performance indicator we use to measure the revenue and expenses associated with the operation of the
correctional, detention, and residential reentry facilities we own or manage is expressed in terms of a compensated
man-day, which represents the revenue we generate and expenses we incur for one offender for one calendar day.
Revenue and expenses per compensated man-day are computed by dividing facility revenue and expenses by the
total number of compensated man-days during the period. A compensated man-day represents a calendar day for
which we are paid for the occupancy of an offender. We believe the measurement is useful because we are
compensated for operating and managing facilities at an offender per-diem rate based upon actual or minimum
guaranteed occupancy levels. We also measure our costs on a per-compensated man-day basis, which is largely
dependent upon the number of offenders we accommodate. Further, per compensated man-day measurements are
also used to estimate our potential profitability based on certain occupancy levels relative to design capacity.
Revenue and expenses per compensated man-day for all of the correctional, detention, and residential reentry
facilities placed into service that we owned or managed, exclusive of those held for lease, and for TransCor were as
follows for the years ended December 31, 2019 and 2018:
Revenue per compensated man-day
Operating expenses per compensated man-day:
Fixed expense
Variable expense
Total
Operating income per compensated man-day
Operating margin
Average compensated occupancy
Average available beds
Average compensated population
For the Years Ended
December 31,
2019
2018
$
79.72
$
76.50
$
42.20
16.11
58.31
$
21.41
26.9 %
81.9 %
40.40
16.30
56.70
19.80
25.9 %
80.7 %
78,236
64,107
78,047
63,012
Prior to the adoption of ASU 2016-02, "Leases (Topic 842)" and ASU 2018-11, "Targeted Improvements – Leases
(Topic 842)", cumulatively ASC 842, on January 1, 2019, a portion of the rental payments for the South Texas
Family Residential Center was classified as depreciation and interest expense for financial reporting purposes in
accordance with ASC 840-40-55, formerly Emerging Issues Task Force No. 97-10, "The Effect of Lessee
Involvement in Asset Construction." Accordingly, fixed expenses per compensated man-day in 2018 include
depreciation expense of $16.5 million and interest expense of $5.6 million in order to more properly reflect the cash
flows associated with the lease at the South Texas Family Residential Center. Upon adoption of ASC 842, all rental
payments associated with this lease are classified as operating expenses.
70
Revenue
Total revenue consists of management revenue we generate through CoreCivic Safety and CoreCivic Community in
the operation of correctional, detention, and residential reentry facilities, as well as the revenue we generate from
TransCor and our electronic monitoring and case management services. Total revenue also consists of rental
revenue we generate through CoreCivic Properties from facilities we lease to third-party operators. The following
table reflects the components of revenue for the years ended December 31, 2019 and 2018 (in millions):
For the Years Ended
December 31,
2019
2018
$ Change
% Change
Management revenue:
Federal
State
Local
Other
Total management revenue
Rental revenue
Other revenue
Total revenue
$ 1,013.8 $
673.4
102.9
113.1
891.0 $
706.8
99.9
80.1
1,903.2 1,777.8
57.9
0.1
$ 1,980.7 $ 1,835.8 $
77.3
0.2
122.8
(33.4 )
3.0
33.0
125.4
19.4
0.1
144.9
13.8 %
(4.7 %)
3.0 %
41.2 %
7.1 %
33.5 %
100.0 %
7.9 %
The $125.4 million, or 7.1%, increase in total management revenue was primarily a result of an increase in revenue
of approximately $31.9 million driven by an increase in the average daily compensated population. The increase in
total management revenue was also a result of an increase in revenue of approximately $93.5 million driven
primarily by an increase of 3.9% in average revenue per compensated man-day, the acquisition of Recovery
Monitoring Solutions Corporation, or RMSC, an electronic monitoring and case management subsidiary, in the
fourth quarter of 2018, and the gain for the settlement of a contractual dispute recognized in the third quarter of
2019, as previously discussed herein. The increase in average revenue per compensated man-day was primarily the
result of the effect of per diem increases at several of our facilities as well as a higher mix of federal populations at
higher per diem rates.
Average daily compensated population increased 1,095, or 1.7%, to 64,107 in 2019 compared to 63,012 in 2018.
Average daily compensated population increased primarily as a result of additional populations from the USMS and
ICE. Populations from ICE were particularly elevated during the second and third quarters of 2019 as Southwest
border apprehensions by ICE reached the highest levels in over a decade. We do not currently expect this trend to
recur in 2020. The new contract with the KYDOC to care for medium and close-security offenders at our previously
idled 816-bed Lee Adjustment Center in Kentucky also contributed to the increase in average daily compensated
population. The new contract with the KYDOC commenced on November 19, 2017, and we began receiving
offenders at the Lee facility late in the first quarter of 2018. These average daily compensated population increases
were partially offset by the continued and anticipated transfer of California inmates held in our out-of-state facilities
back to the state of California, which was completed during the second quarter of 2019.
The solutions we provide to our federal customers, including primarily ICE, the USMS, and the BOP, continue to be
a significant component of our business. Our federal customers generated approximately 51% and 48% of our total
revenue in 2019 and 2018, respectively, increasing $122.8 million, or 13.8%. The increase in federal revenues in
2019 primarily resulted from the combined effect of per diem increases for several of our federal contracts and a net
increase in federal populations at certain other facilities, primarily from the USMS and ICE. New contracts with the
USMS at our Tallahatchie County Correctional Facility and with ICE at our La Palma Correctional Center executed
in June 2018 and July 2018, respectively, contributed to these higher federal populations. The aforementioned new
IGSAs with ICE at our previously idled Torrance facility and with the USMS at our previously idled Eden facility,
both entered into in the second quarter of 2019, also contributed to the higher federal populations in 2019. Revenue
in 2019 also includes $2.0 million recognized in the third quarter of 2019 for a performance bonus earned under the
contract with the BOP at our Adams County Correctional Center.
71
State revenues from contracts at correctional, detention, and residential reentry facilities that we operate decreased
$33.4 million, or 4.7%, from 2018 to 2019. The decrease in state revenues was primarily a result of a continued, and
anticipated, transfer back to the state of California of all of the California inmates held in our out-of-state facilities,
which was completed during the second quarter of 2019, as further described hereafter. The decrease in state
revenues was partially offset by new contracts with the KYDOC at our Lee Adjustment Center and the state of Ohio
at our Northeast Ohio Correctional Center, and by new contracts with the states of Vermont, Wyoming and South
Carolina at our Tallahatchie County Correctional Facility, as previously discussed herein. Per diem increases
pursuant to numerous other state contracts and a net increase in state populations at certain other facilities also
contributed to the offset.
On August 9, 2019, we entered into a new contract with the Kansas Department of Corrections, or KDOC, pursuant
to a Request for Proposal issued by the KDOC to provide housing for up to 600 adult male offenders of medium
security or higher. The new contract commenced on August 1, 2019, and has an initial term of one year, with two
additional one-year extension options thereafter upon mutual agreement. On December 31, 2019, we cared for 120
offenders from the KDOC at our 1,896-bed Saguaro Correctional Facility in Eloy, Arizona, where we also care for
inmates from Hawaii. The contract with the KDOC also provides that, upon mutual agreement, we may transfer
offenders held under this contract to another correctional facility we operate.
The $33.0 million, or 41.2%, increase in other management revenue from 2018 to 2019 was primarily a result of the
acquisition of RMSC in the fourth quarter of 2018 and the gain for the settlement of a contractual dispute recognized
in the third quarter of 2019, as previously discussed herein.
The $19.4 million, or 33.5%, increase in rental revenue from 2018 to 2019 was primarily a result of acquisitions in
2018 and 2019 of multiple properties leased to third parties, as further described hereafter.
Operating Expenses
Operating expenses totaled $1,422.8 million and $1,315.3 million in 2019 and 2018, respectively. Operating
expenses consist of those expenses incurred in the operation and management of correctional, detention, and
residential reentry facilities, as well as those expenses incurred in the operations of TransCor and our electronic
monitoring and case management services. Operating expenses also consist of those expenses incurred in the
operation of facilities we lease to third-party operators.
Expenses incurred by CoreCivic Safety and CoreCivic Community in connection with the operation and
management of our correctional, detention, and residential reentry facilities, as well as those incurred in the
operations of TransCor and our electronic monitoring and case management services, increased $100.0 million, or
7.7%, during 2019 compared with 2018. Similar to our management revenue, there were several factors that
contributed to the increase in operating expenses incurred in these segments in 2019. The additional operating
expenses resulting from the activation of our previously idled Lee Adjustment Center due to a new contract award
from the KYDOC and the new contracts at our Tallahatchie facility contributed to the increase in operating
expenses. Additional expenses resulting from the acquisition of RMSC in the fourth quarter of 2018 also
contributed to the increase in operating expenses. In addition, operating expenses also increased due to activation
expenses incurred in connection with the aforementioned new IGSAs with ICE and the USMS at our previously
idled Torrance and Eden facilities, respectively. Operating expenses also increased as a result of the aforementioned
adoption of ASC 842 on January 1, 2019. Prior to adoption of ASC 842, a portion of the rental payments for the
South Texas Family Residential Center was classified as depreciation and interest expense in accordance with ASC
840-40-55. The aggregate depreciation and interest expense associated with the lease at the South Texas Family
Residential Center for 2018 totaled $22.1 million. Upon adoption of ASC 842, all rental payments associated with
this lease are classified as operating expenses. The increase in operating expenses in 2019 was partially offset by a
decrease in operating expenses at our Adams County Correctional Center as a result of the transition of contracts
from the BOP to ICE at the facility, as previously discussed herein.
Total expenses per compensated man-day increased to $58.31 during 2019 from $56.70 during 2018. Fixed
expenses per compensated man-day increased to $42.20 during 2019 from $40.40 during 2018. The increase in
fixed expenses per compensated man-day was primarily due to increases in salaries and benefits expenses, including
staffing expenses associated with the aforementioned activation of operations at our Torrance and Eden facilities.
72
As the economy has improved and the nation's unemployment rate has declined, we have experienced wage
pressures in certain markets across the country, and have provided wage increases to remain competitive. These
wage pressures contributed to the increase in fixed expenses per compensated man-day during 2019 when compared
to 2018. We continually monitor compensation levels very closely along with overall economic conditions and will
set wage levels necessary to help ensure the long-term success of our business. Further, we continually evaluate the
structure of our employee benefits package and training programs to ensure we are better able to attract and retain
our employees. Salaries and benefits represent the most significant component of our operating expenses,
representing approximately 60% of our total operating expenses during both 2019 and 2018.
Operating expenses incurred by CoreCivic Properties in connection with facilities we lease to third-party operators
increased $7.4 million, or 47.9%, during 2019 when compared to 2018. The increase in expenses in this segment
was primarily the result of acquisitions in 2018 and 2019 of multiple properties leased to third parties.
Facility Management Contracts
We enter into facility management contracts to provide bed capacity and management services to governmental
entities in our CoreCivic Safety and CoreCivic Community segments for terms typically ranging from three to five
years, with additional renewal periods at the option of the contracting governmental agency. Accordingly, a
substantial portion of our facility contracts are scheduled to expire each year, notwithstanding contractual renewal
options that a government agency may exercise. Although we generally expect these customers to exercise renewal
options or negotiate new contracts with us, one or more of these contracts may not be renewed by the corresponding
governmental agency. Further, our government partners can generally terminate our management contracts for non-
appropriation of funds or for convenience.
Based on information available as of the date of this Annual Report, we believe we will renew all contracts with our
government partners that have expired or are scheduled to expire within the next twelve months that could have a
material impact on our financial statements. We believe our renewal rate on existing contracts remains high due to a
variety of reasons including, but not limited to, the constrained supply of available beds within the U.S. correctional
system, our ownership of the majority of the beds we operate, and the cost effectiveness of the services we provide.
However, we cannot assure we will continue to achieve such renewal rates in the future.
CoreCivic Safety
CoreCivic Safety includes the operating results of the correctional and detention facilities that we operated during
each period. Total revenue generated by CoreCivic Safety increased $104.0 million, or 6.2%, from $1,676.0 million
during 2018 to $1,780.0 million during 2019. CoreCivic Safety's facility net operating income, or facility revenues
less operating expenses, increased $22.3 million, or 4.9%, from $453.6 million during 2018 to $475.8 million during
2019. The aggregate depreciation and interest expense associated with the lease at the South Texas Family
Residential Center in 2018, totaling $22.1 million, is not included in the 2018 net operating income amount, but is
included in the per compensated man-day statistics for 2018. During 2019 and 2018, CoreCivic Safety generated
85.2% and 87.1%, respectively, of our total facility net operating income.
73
The following table displays the revenue and expenses per compensated man-day for CoreCivic Safety's correctional
and detention facilities placed into service that we own and manage and for the facilities we manage but do not own,
inclusive of the transportation services provided by TransCor:
CoreCivic Safety Facilities:
Revenue per compensated man-day
Operating expenses per compensated man-day:
Fixed expense
Variable expense
Total
Operating income per compensated man-day
Operating margin
Average compensated occupancy
Average available beds
Average compensated population
For the Years Ended December 31,
2019
2018
$
81.16
$
78.05
$
42.84
16.63
59.47
$
21.69
26.7 %
82.4 %
72,962
60,085
41.03
16.92
57.95
20.10
25.8 %
80.8 %
72,833
58,834
Operating margins within the CoreCivic Safety facilities during 2019 were positively impacted by the
aforementioned new contract with the KYDOC at our Lee Adjustment Center. As California populations declined at
the Tallahatchie facility during the first half of 2018, we retained staff at the facility in anticipation of new contracts,
which we ultimately obtained from the USMS, and the states of Vermont, Wyoming, and South Carolina, resulting
in a favorable impact to operating margins in 2019 when compared to the prior year. An increase in populations
from the USMS and ICE across the portfolio, as well as per diem increases at several of our facilities, also positively
impacted operating margins when comparing 2019 to 2018. The positive impact on operating margins of these
events was partially offset by the start-up expenses incurred at our Torrance and Eden facilities as we prepared to
receive detainee and inmate populations from ICE and the USMS, respectively, in the third quarter of 2019. As a
result of these start-up expenses, the incremental operating losses incurred during the activation period at these two
facilities amounted to approximately $9.5 million in 2019.
During the first quarter of 2015, the adult inmate population held in state of California institutions first met a Federal
court order to reduce inmate populations below 137.5% of its capacity. Inmate populations in the state continued to
decline below the court ordered capacity limit which resulted in declining inmate populations in the out-of-state
program at facilities we own and operate. The state of California's budget for fiscal 2018-2019, signed by the
Governor of California in June 2018, anticipated that all inmates from California would be returned from out-of-
state facilities to the state of California by January 2019. In accordance with the budget for fiscal 2018-2019, all
California inmates were transferred from our 2,672-bed Tallahatchie County Correctional Facility in Tutwiler,
Mississippi back to California in the second quarter of 2018. However, due to the higher-than-expected population
in fiscal 2018-2019, California was unable to accept the transfer of the inmates cared for at our 3,060-bed La Palma
Correctional Center in Eloy, Arizona, our remaining out-of-state facility caring for California inmates at the time.
During January 2019, the Governor issued a proposed budget for fiscal 2019-2020, which assumed all California
inmates would be returned from out-of-state facilities by June 30, 2019. Accordingly, all remaining California
inmates were removed from our La Palma facility as of June 30, 2019. During 2019 and 2018, we cared for an
average daily population of approximately 500 and 2,900 California inmates, respectively, in facilities outside the
state of California. This decline in population resulted in a decrease in revenue of $56.1 million from 2018 to 2019.
Approximately 1% and 4%, respectively, of our total revenue in 2019 and 2018 was generated from the California
Department of Corrections and Rehabilitation in facilities housing inmates outside the state of California.
74
The Governor of California recently signed Assembly Bill 32, or AB32, which, subject to certain exceptions, as of
January 1, 2020, generally prohibits new contracts and renewals of existing contracts between private, for-profit
entities and government agencies for the operation of detention facilities within the state of California, with a
January 1, 2028 sunset for the use of private, for-profit entities by the state of California. While AB32 excludes
facilities leased from private, for-profit entities, such as our California City Correctional Center, the impact of AB32
on our California based detention and reentry facility contracts is currently unclear given the potential conflict
between federal and state law, and court challenges to the enforceability of AB32. On January 24, 2020, the U.S.
Government filed a lawsuit against the state of California challenging the enforceability of AB32 under applicable
law. We cannot predict the outcome of this lawsuit. However, we believe the restrictions to force a phase-out of
federal detention and residential reentry facilities under private management goes against federal law. In the event
AB32 is implemented as currently constructed, the federal government could be prohibited from renewing (i) its
contract to operate our Otay Mesa Detention Center which is currently scheduled to expire in December 2024, and
(ii) our various residential reentry contracts within the state of California, which are also scheduled to expire in
2020. The non-renewal of our contract to operate the Otay Mesa Detention Center, which was recently expanded
from 1,482 beds to 1,994 beds, would have a significant impact on our results of operations and cash flows.
On June 14, 2018, we announced that we entered into a new contract under an IGSA between the Tallahatchie
County Correctional Authority, Tutwiler, Mississippi and the USMS at our Tallahatchie County Correctional
Facility. The new contract, which also authorizes ICE to utilize the facility, commenced on June 14, 2018, and has
an initial term expiring June 30, 2020, with unlimited two-year extension options thereafter upon mutual agreement.
On September 19, 2018, we announced that we entered into a new contract with the Vermont Department of
Corrections to care for up to 350 of the State's inmates at our Tallahatchie facility. The new contract commenced on
October 1, 2018, and has an initial term of two years, with one additional two-year extension option thereafter upon
mutual agreement. We began receiving inmates from Vermont at our Tallahatchie facility during the fourth quarter
of 2018. As of December 31, 2019, we cared for approximately 475 offenders from the USMS, 125 detainees from
ICE, 275 inmates from Vermont, and approximately 150 offenders under additional new contracts from the states of
South Carolina and Wyoming at our Tallahatchie facility. On January 9, 2020, we announced that we entered into a
new emergency contract with the state of Mississippi to care for up to 375 of Mississippi's inmates at the
Tallahatchie facility, to assist the state with significant challenges in its correctional system. The contract has a term
of ninety days, which the state of Mississippi may extend for up to two additional ninety-day terms. The contract
also allows the state of Mississippi to utilize additional available beds at the facility. As of January 31, 2020, we
cared for 375 inmates from Mississippi.
On July 24, 2018, we announced that the city of Eloy agreed to modify an existing IGSA with ICE to add the La
Palma facility as a place of performance. The new contract commenced on July 24, 2018, and has an indefinite
term, subject to termination by either party with 90 days' written notice. As of December 31, 2019, we cared for
approximately 1,550 detainees from ICE at our La Palma facility.
As previously discussed herein, on May 1, 2019, the BOP announced that it elected not to renew the contract at our
Adams County Correctional Center in Adams County, Mississippi. On June 28, 2019, the BOP executed an
amendment to the existing contract to allow ICE to use up to 660 beds to care for adult male detainees. On July 18,
2019, the BOP contract, which was originally scheduled to expire on July 30, 2019, was extended to August 30,
2019. On September 3, 2019, we announced that we had entered into a new contract under an IGSA between
Adams County, Mississippi and ICE for up to 2,348 adult detainees at the Adams facility. The new management
agreement commenced on August 31, 2019, and has an initial term of 60 months, with unlimited extension options
thereafter upon mutual agreement. Either party may terminate the contract with 120 days' written notice. ICE began
utilizing the additional capacity at the Adams facility under the new contract and, as of December 31, 2019, we
cared for approximately 850 detainees from ICE at the Adams facility.
Effective August 1, 2019, we were awarded a new contract with the KDOC to care for offenders at our 1,896-bed
Saguaro Correctional Facility. The new management contract has an initial term of one year, with two additional
one-year extension options upon mutual agreement. We began receiving KDOC offenders in October 2019, and as
of December 31, 2019, we cared for 120 offenders from the state of Kansas at the Saguaro facility pursuant to this
contract. The contract with the KDOC also provides that, upon mutual agreement, we may transfer offenders held
under the contract to another correctional facility that we operate.
75
CoreCivic Community
CoreCivic Community includes the operating results of the residential reentry centers that we operated during each
period, along with the operating results of our electronic monitoring and case management services from the
acquisition dates of the subsidiaries providing those services. Total revenue generated by CoreCivic Community
increased $21.4 million, or 21.0%, from $101.8 million during 2018 to $123.3 million during 2019. CoreCivic
Community's facility net operating income increased $3.2 million, or 12.7%, from $24.9 million during 2018 to
$28.1 million during 2019. During 2019 and 2018, CoreCivic Community generated 5.0% and 4.8%, respectively,
of our total facility net operating income.
The following table displays the revenue and expenses per compensated man-day for CoreCivic Community's
residential reentry facilities placed into service that we own and manage, but exclusive of the electronic monitoring
and case management services given that revenue is not generated on a per compensated man-day basis for these
services:
CoreCivic Community Facilities:
Revenue per compensated man-day
Operating expenses per compensated man-day:
Fixed expense
Variable expense
Total
Operating income per compensated man-day
Operating margin
Average compensated occupancy
Average available beds
Average compensated population
For the Years Ended December 31,
2019
2018
$
58.14
$
54.67
$
32.66
8.37
41.03
$
17.11
29.4 %
76.3 %
5,274
4,022
31.52
7.62
39.14
15.53
28.4 %
80.1 %
5,214
4,178
Operating margins in the CoreCivic Community segment in 2019 were positively impacted by an increase in
revenue, primarily driven by per diem increases at a number of facilities across the portfolio. This positive impact
on operating margins was partially offset by the aforementioned decline in utilization from the state of Oklahoma at
one of our residential reentry centers in Oklahoma, which led to the consolidation of residents into our other reentry
facilities located in the state. We idled the Oklahoma reentry facility in the second quarter of 2019. Also, as
previously discussed herein, we idled a residential reentry center in Arizona in the third quarter of 2019 upon the
expiration of a BOP contract on August 31, 2019.
The acquisition of RMSC on December 1, 2018, which provides non-residential correctional alternatives, including
electronic monitoring and case management services, also positively impacted CoreCivic Community's facility net
operating income in 2019.
CoreCivic Properties
CoreCivic Properties includes the operating results of the properties we leased to third parties and that were used by
government agencies during each period. Total revenue generated by CoreCivic Properties increased $19.4 million,
or 33.5%, from $57.9 million during 2018 to $77.3 million during 2019. CoreCivic Properties' facility net operating
income increased $12.0 million, or 28.3%, from $42.5 million during 2018 to $54.5 million during 2019. During
2019 and 2018, CoreCivic Properties generated 9.8% and 8.1%, respectively, of our total facility net operating
income.
On January 19, 2018, we acquired the 261,000 square-foot Capital Commerce Center, located in Tallahassee,
Florida. Capital Commerce Center is 98% leased, including 87% leased to the state of Florida on behalf of the
Florida Department of Business and Professional Regulation.
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On January 24, 2018, we entered into a 20-year lease agreement with the KDOC for a 2,432-bed correctional facility
to be constructed in Lansing, Kansas. Construction of the facility commenced in the first quarter of 2018 and was
completed in January 2020. The new facility replaces the Lansing Correctional Facility, Kansas' largest correctional
complex for adult male inmates, originally constructed in 1863. We will be responsible for facility maintenance
throughout the 20-year term of the lease, at which time ownership will revert to the state of Kansas.
On July 17, 2018, we completed the acquisition of a portfolio of twelve properties which are 100% leased to the
U.S. Federal Government through the General Services Administration, or GSA, an independent agency of the
United States government on behalf of the Social Security Administration, or SSA, the Department of Homeland
Security, or DHS, and ICE.
On August 23, 2018, we acquired the 541,000 square-foot SSA-Baltimore office building. The office building was
purpose built to SSA specifications in 2014 under a 20-year firm term lease expiring in January 2034, and is backed
by the full faith and credit of the U.S. Federal Government through the GSA.
On September 21, 2018, we acquired a 217,000 square-foot, steel frame property in Dayton, Ohio that was built-to-
suit for the National Archives and Records Administration, or NARA, in 2002. The building is 100% leased to the
GSA on behalf of NARA through January 2023 and includes two additional 10-year renewal options. The building
provides 1.2 million cubic feet of storage space, approximately 90% of which is dedicated to archives of the Internal
Revenue Service.
On May 6, 2019, we completed the acquisition of a 37,000 square-foot office building in Detroit, Michigan, for $7.2
million, excluding transaction related expenses, that was built-to-suit for the state of Michigan's Department of
Health and Human Services, or MDHHS, in 2002. The property is 100% leased to the Michigan Department of
Technology, Management and Budget, or MDTMB, on behalf of MDHHS through June 2028 and includes one six-
year renewal option at the sole discretion of the MDTMB.
On December 9, 2019, we entered into a lease with the KYDOC for our previously idled 656-bed Southeast
Correctional Complex in Wheelwright, Kentucky, formerly known as the Southeast Kentucky Correctional Facility.
The lease is expected to commence in mid-2020 and has an initial term of ten years and includes five two-year
renewal options. The KYDOC has the option to purchase the facility at its fair market value at any time during the
term of the lease. The Southeast Correctional facility had previously been idle since 2012.
As previously discussed herein, during the third quarter of 2019, leases at three single-tenant residential reentry
centers located in Pennsylvania expired and were not renewed. The three properties total approximately 54,000
square feet and contain an aggregate of 430 beds. These three facilities generated total facility net operating income
of $1.0 million in 2018. We have begun to market the facilities to other potential customers to operate as a
CoreCivic Community facility or for future lease as a CoreCivic Properties facility.
General and administrative expense
For the years ended December 31, 2019 and 2018, general and administrative expenses totaled $127.1 million and
$106.9 million, respectively. General and administrative expenses consist primarily of corporate management
salaries and benefits, professional fees, including those associated with mergers and acquisitions, or M&A, and other
administrative expenses. General and administrative expenses increased from the prior year primarily as a result of
higher salaries, including incentive compensation, as well as professional fees and expenses associated with the
relocation of our corporate headquarters from a building we owned until September 2018 to a new building we lease
from a third party.
77
Depreciation and Amortization
For the years ended December 31, 2019 and 2018, depreciation and amortization expense totaled $144.6 million and
$156.5 million, respectively. Depreciation and amortization expense decreased primarily as a result of the
aforementioned adoption of ASC 842 on January 1, 2019. Prior to adoption of ASC 842, a portion of the rental
payments for the South Texas Family Residential Center was classified as depreciation and amortization expense in
accordance with ASC 840-40-55. Depreciation expense associated with the lease at the South Texas Family
Residential Center during 2018 amounted to $16.5 million. Upon adoption of ASC 842, all rental payments
associated with this lease are classified as operating expenses. The decrease in depreciation and amortization
expense was partially offset by the additional depreciation and amortization resulting from our M&A activities
during 2018 and 2019.
Contingent consideration for acquisition of businesses
As a result of better than estimated financial performance of Time to Change, Inc., a business we acquired in
November 2017, during the fourth quarter of 2018, we recognized a charge of $6.1 million for additional contingent
consideration owed to the seller associated with the acquisition. The total contingent consideration was paid in full
during the first quarter of 2019.
Asset impairments
As further described under "critical accounting policies", during the second quarter of 2019, we incurred asset
impairment charges of $4.7 million primarily related to a residential reentry center in Arizona that became idle in the
third quarter of 2019. During the second quarter of 2018, we incurred an asset impairment charge of $1.6 million
associated with the sale of our former corporate headquarters, which was completed in the third quarter of 2018.
Interest expense, net
Interest expense was reported net of interest income and capitalized interest for the years ended December 31, 2019
and 2018. Gross interest expense, net of capitalized interest, was $86.7 million and $82.2 million in 2019 and 2018,
respectively. Gross interest expense is based on outstanding borrowings under our revolving credit facility, our
outstanding Incremental Term Loan A, or Term Loan A, our outstanding new $250.00 million Senior Secured Term
Loan B, or Term Loan B, as further described hereafter, our outstanding senior notes, and our outstanding non-
recourse mortgage notes, as well as the amortization of loan costs and unused facility fees. The increase in gross
interest expense primarily resulted from an increase in the average outstanding balance on our revolving credit
facility and higher interest expense associated with the new non-recourse mortgage notes issued during 2018, as
further described hereafter. Partially offsetting the increase in interest expense was the reduction in interest expense
associated with the lease of the South Texas Family Residential Center. Interest expense associated with the lease of
this facility was $5.6 million during 2018, classified as such in accordance with ASC 840-40-55. As previously
described herein, upon adoption of ASC 842 on January 1, 2019, all rental payments associated with this lease are
classified as operating expenses.
We have benefited from relatively low interest rates on our revolving credit facility, which is largely based on the
London Interbank Offered Rate, or LIBOR. Based on our total leverage ratio, borrowings under our revolving credit
facility during 2018 and 2019 were at the base rate plus a margin of 0.50% or at LIBOR plus a margin of 1.50%, and
a commitment fee equal to 0.35% of the unfunded balance. Interest rates under the Term Loan A are the same as the
interest rates under our revolving credit facility.
78
On December 18, 2019, we entered into a new Term Loan B which bears interest at a rate of LIBOR plus 4.50%,
with a 1.00% LIBOR floor (or, at our 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 will be secured by a first lien on certain
specified real property assets, representing a loan-to-value of no greater than 80%. We can prepay the Term Loan B
at any time and from time to time, without premium or penalty, except that a premium of 1.0% of the amount
prepaid must accompany any prepayment made prior to December 18, 2020, with the proceeds of any new or
replacement tranche of term loans that are in the nature of what are commonly referred to as "B" term loans and that
bear interest with an all-in yield less than the all-in yield applicable to the Term Loan. The 1.0% prepayment
premium is also payable in respect of certain repricing events occurring prior to December 18, 2020.
On January 19, 2018, we acquired the 261,000 square-foot Capital Commerce Center located in Tallahassee, Florida
for a purchase price of $44.7 million. The acquisition was partially financed with a $24.5 million non-recourse
mortgage note, or the Capital Commerce Note, which is fully-secured by the Capital Commerce Center property,
with an interest rate of 4.5%, maturing in January 2033.
On April 20, 2018, CoreCivic of Kansas, LLC, a wholly-owned subsidiary of ours, priced $159.5 million in
aggregate principal amount of non-recourse senior secured notes, or 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. We 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, as further described hereafter,
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. We
capitalized $5.1 million and $0.9 million of interest during 2019 and 2018, respectively, associated with this
construction project.
On August 23, 2018, we acquired the 541,000 square-foot SSA-Baltimore office building for a purchase price of
$242.0 million. In connection with the acquisition, we assumed $157.3 million of in-place financing that was used
to fund the initial construction of the property in 2014. The assumed non-recourse mortgage note, or the SSA-
Baltimore Note, carries a fixed interest rate of 4.5%, with a balloon payment of $40.0 million due at maturity in
February 2034. The SSA-Baltimore Note is fully-secured by the SSA-Baltimore property.
Gross interest income was $2.3 million and $1.4 million in 2019 and 2018, respectively. Gross interest income is
earned on notes receivable, investments, cash and cash equivalents, and restricted cash. Total capitalized interest
was $6.0 million and $1.0 million during 2019 and 2018, respectively. Capitalized interest was primarily associated
with the construction of the Lansing Correctional Facility and the expansion of our Otay Mesa Detention Center, as
further described hereafter.
Income tax expense
As a REIT, we are entitled to a deduction for dividends paid, resulting in a substantial reduction in the amount of
federal income tax expense we recognize. Substantially all of our income tax expense is incurred based on the earnings
generated by our TRSs. Our overall effective tax rate is based on the taxable income primarily generated by our TRSs.
Our consolidated effective tax rate could fluctuate in the future based on changes in estimates of taxable income, the
relative amounts of taxable income generated by the TRSs and the REIT, the implementation of additional tax planning
strategies, changes in federal or state tax rates or laws affecting tax credits available to us, changes in other tax laws,
changes in estimates related to uncertain tax positions, or changes in state apportionment factors, as well as changes in
the valuation allowance applied to our deferred tax assets that are based primarily on the amount of state net operating
losses and tax credits that could expire unused.
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During the years ended December 31, 2019 and 2018, our financial statements reflected an income tax expense of
$7.8 million and $8.4 million, respectively. Our effective tax rate was 4.0% and 5.0% during 2019 and 2018,
respectively. The TCJA, enacted December 22, 2017, reduced the U.S. federal corporate tax rate from 35% to 21%,
required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously
tax deferred, and created new taxes on certain foreign-sourced earnings. However, the TCJA did not change the
dividends paid deduction applicable to REITs and, therefore, we generally will not be subject to federal income
taxes on our REIT taxable income and gains that we distribute to our stockholders. As a result of changes in the
U.S. federal corporate tax rates resulting from the TCJA, during the fourth quarter of 2017, we re-measured certain
deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is
generally 21%. In the fourth quarter of 2017, we recognized $4.5 million, which was included as a component of
income tax expense, for the revaluation of deferred tax assets and liabilities and other taxes associated with the
TCJA. During the third quarter of 2018, we revised our estimates of the revaluation of deferred tax assets and
liabilities resulting in the recognition of an additional charge of $1.0 million, which was also included as a
component of income tax expense.
Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017
Pursuant to Regulation S-K item 303, a detailed review of our performance for the year ended December 31, 2018
compared to our performance for the year ended December 31, 2017 is set forth in "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for
the year ended December 31, 2018, filed with the Securities and Exchange Commission, or SEC, on February 25,
2019.
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LIQUIDITY AND CAPITAL RESOURCES
Our principal capital requirements are for working capital, stockholder distributions, capital expenditures, and debt
service payments. Capital requirements may also include cash expenditures associated with our outstanding
commitments and contingencies, as further discussed in the notes to our financial statements. Additionally, our
capital expenditures may include M&A activities that will enable us to further expand our network of residential
reentry centers, grow our portfolio of government-leased properties, and acquire other businesses that provide
complementary services. We will continue to pursue opportunities to help our government partners meet their
infrastructure needs, primarily through the development and redevelopment of criminal justice sector assets, but also
by acquiring other real estate assets, with a bias toward those used to provide mission-critical governmental services,
that we believe have favorable investment returns, diversify our cash flows, and increase value to our stockholders.
We will also respond to customer demand and may develop or expand correctional and detention facilities when we
believe potential long-term returns justify the capital deployment.
To maintain our qualification as a REIT, we generally are required to distribute annually to our stockholders at least
90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding net
capital gains). Our REIT taxable income will not typically include income earned by our TRSs except to the extent
our TRSs pay dividends to the REIT. Our Board of Directors declared a quarterly dividend of $0.44 for each quarter
of 2019 totaling $211.9 million. The amount, timing and frequency of future distributions will be at the sole
discretion of our Board of Directors and will be declared based upon various factors, many of which are beyond our
control, including our financial condition and operating cash flows, the amount required to maintain qualification
and taxation as a REIT and to reduce any income and excise taxes that we otherwise would be required to pay,
limitations on distributions in our existing and future debt instruments, limitations on our ability to fund
distributions using cash generated through our TRSs, alternative growth opportunities that require capital
deployment, and other factors that our Board of Directors may deem relevant.
As of December 31, 2019, our liquidity was provided by cash on hand of $92.1 million, and $412.7 million available
under our revolving credit facility. During the years ended December 31, 2019 and 2018, we generated $354.4
million and $322.9 million, respectively, in cash through operating activities. We currently expect to be able to meet
our cash expenditure requirements for the next year utilizing these resources. Some banks that are party to our Second
Amended and Restated Credit Agreement, or Bank Credit Agreement, have announced that they do not expect to
continue to provide credit or financial services to private entities that operate correctional and detention facilities,
including CoreCivic. These banks are legally obligated to honor their commitments under our Bank Credit
Agreement, which expires in April 2023. These decisions have currently affected the capital markets for our
securities, and we can provide no assurance that additional banks that are party to our Bank Credit Agreement will
not make similar decisions, or that new banks will be willing to become party to our Bank Credit Agreement, or that
the capital markets for our securities will improve. We have no debt maturities until October 2022, when our $250.0
million of unsecured notes mature.
Our cash flow is subject to the receipt of sufficient funding of and timely payment by contracting governmental
entities. If the appropriate governmental agency does not receive sufficient appropriations to cover its contractual
obligations, it may terminate our contract or delay or reduce payment to us. Delays in payment from our major
customers or the termination of contracts from our major customers could have an adverse effect on our cash flow,
financial condition and, consequently, dividend distributions to our shareholders.
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Debt, equity and debt refinancing transactions
As of December 31, 2019, we had $350.0 million principal amount of unsecured notes outstanding with a fixed stated
interest rate of 4.625%, $250.0 million principal amount of unsecured notes outstanding with a fixed stated interest rate
of 5.0%, and $250.0 million principal amount of unsecured notes outstanding with a fixed stated interest rate of 4.75%.
In addition, we had $22.2 million outstanding under the Capital Commerce Note with a fixed stated interest rate of
4.5%, $159.5 million outstanding under the Kansas Notes with a fixed stated interest rate of 4.43%, and $150.1 million
outstanding under the SSA-Baltimore Note with a fixed stated interest rate of 4.5%. We also had $190.0 million
outstanding under our Term Loan A with a variable interest rate of 3.3%, $250.0 million outstanding under our new
Term Loan B with a variable interest rate of 6.3%, and $365.0 million outstanding under our revolving credit facility
with a variable weighted average interest rate of 3.3%. As of December 31, 2019, our total weighted average effective
interest rate was 4.4%, while our total weighted average maturity was 6.3 years. We may also seek to issue debt or
equity securities from time to time when we determine that market conditions and the opportunity to utilize the
proceeds from the issuance of such securities are favorable.
On December 2, 2019, we gave irrevocable notice that we would redeem all of our outstanding $325.0 million in
aggregate principal amount of 4.125% senior notes due in April 2020, or the 4.125% Senior Notes, on January 1,
2020, or the Redemption Date, at a redemption price equal to 100% of the principal amount of the 4.125% Senior
Notes, plus accrued and unpaid interest to but excluding the Redemption Date, or the Redemption Amount. On
December 27, 2019, and in accordance with the indenture governing the 4.125% Senior Notes, we satisfied and
discharged the 4.125% Senior Notes by irrevocably depositing the Redemption Amount due on the Redemption
Date with the trustee. Accordingly, the 4.125% Senior Notes are not included on our consolidated balance sheet as
of December 31, 2019. We incurred $0.6 million of expenses associated with this debt refinancing transaction.
On December 18, 2019, we entered into a new Term Loan B which bears interest at a rate of LIBOR plus 4.50%,
with a 1.00% LIBOR floor (or, at our 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 will be secured by a first lien on certain
specified real property assets, representing a loan-to-value of no greater than 80%. We can prepay the Term Loan B
at any time and from time to time, without premium or penalty, except that a premium of 1.0% of the amount
prepaid must accompany any prepayment made prior to December 18, 2020, with the proceeds of any new or
replacement tranche of term loans that are in the nature of what are commonly referred to as "B" term loans and that
bear interest with an all-in yield less than the all-in yield applicable to the Term Loan. The 1.0% prepayment
premium is also payable in respect of certain repricing events occurring prior to December 18, 2020. Proceeds from
the issuance of the Term Loan B were used to partially fund the early redemption of the 4.125% Senior Notes,
transaction fees and expenses, and to provide for general corporate purposes.
On August 28, 2018, we entered into an Amended and Restated ATM Equity Offering Sales Agreement, or ATM
Agreement, with multiple sales agents, pursuant to which we may offer and sell to or through the agents, from time
to time, shares of our common stock, par value $0.01 per share, having an aggregate gross sales price of up to
$200.0 million. Sales, if any, of our shares of common stock will be made primarily in "at-the-market" offerings, as
defined in Rule 415 under the Securities Act of 1933, as amended. The shares of common stock will be offered and
sold pursuant to our registration statement on Form S-3 and a related prospectus supplement, both filed with the
SEC on August 28, 2018. We intend to use substantially all of the net proceeds from any sale of shares of our
common stock to repay outstanding borrowings or for working capital and other general corporate purposes, which
may include investments. There were no shares of our common stock sold under the ATM Agreement during 2018
and 2019.
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Facility acquisitions, development, and capital expenditures
CoreCivic Properties
On December 9, 2019, we entered into a lease with the KYDOC for our previously idled 656-bed Southeast
Correctional Complex in Wheelwright, Kentucky, formerly known as the Southeast Kentucky Correctional Facility.
The lease is expected to commence in mid-2020 upon the completion of certain capital expenditures, estimated at
$4.5 million to $5.0 million. The lease has an initial term of ten years and includes five two-year renewal options.
The KYDOC has the option to purchase the facility at its fair market value at any time during the term of the lease.
The Southeast Correctional facility had previously been idle since 2012.
On May 6, 2019, we completed the acquisition of a 37,000 square-foot office building in Detroit, Michigan, for $7.2
million, excluding transaction related expenses, that was built-to-suit for the MDHHS in 2002. The property is
100% leased to the MDTMB on behalf of MDHHS through June 2028 and includes one six-year renewal option at
the sole discretion of the MDTMB.
On January 24, 2018, we entered into a 20-year lease agreement with the KDOC for a 2,432-bed correctional facility
to be constructed in Lansing, Kansas. We commenced construction of the facility in the first quarter of 2018 and, as
of December 31, 2019, we had capitalized $137.7 million associated with the construction project. In December
2019, the Lansing facility began accepting offenders into the 512-bed minimum security complex ahead of schedule,
with the remaining 1,920-bed medium/maximum security complex completed in January 2020, for a total project
cost of approximately $155.0 million. Construction of the facility was 100% funded with proceeds from the private
placement of the Kansas Notes, as previously described herein. This transaction represents the first development of a
privately owned, build-to-suit correctional facility to be operated by a government agency through a long-term lease
agreement. We will be responsible for facility maintenance throughout the 20-year term of the lease, at which time
ownership will revert to the state of Kansas. With the extensively aged criminal justice infrastructure in the U.S.
today, we believe we can bring our flexible solutions like this to other government agencies.
CoreCivic Community
On December 7, 2019, we completed the acquisition of certain assets of Rehabilitation Services, Inc., or RSI, for
$4.4 million, excluding transaction related expenses. The acquisition resulted in the addition of two residential
reentry centers in Virginia. The Ghent Residential Reentry Center, a 36-bed residential reentry center in Norfolk,
Virginia and the James River Residential Reentry Center, an 84-bed residential reentry center in Newport News,
Virginia provide reentry services for residents under custody of the BOP. The residential reentry facilities can also
serve an additional 34 home confinement clients on behalf of the BOP.
On February 20, 2019, we acquired the South Raleigh Reentry Center, a 60-bed residential reentry center in Raleigh,
North Carolina, for $0.9 million, excluding transaction-related expenses. We operate the South Raleigh facility
under a BOP reentry contract.
CoreCivic Safety
As a result of long-standing demand from the USMS and ICE, and limited detention capacity in the Southwest
region of the United States, during the fourth quarter of 2018, we began the expansion of our 1,482-bed Otay Mesa
Detention Center in San Diego, California by 512 beds. The expansion was completed during the third quarter of
2019 at an estimated cost of approximately $39.0 million. Both the USMS and ICE currently utilize the Otay Mesa
Detention Center under an existing contract that enables both agencies to utilize the additional capacity.
83
Several of our existing federal and state partners, as well as prospective state partners, are experiencing growth in
offender populations and overcrowded conditions, are considering alternative correctional capacity for their aged or
inefficient infrastructure, or are seeking cost savings by utilizing the private sector. Competing budget priorities
often impede our customers' ability to construct new prison beds of their own or update older facilities, which we
believe could result in further need for private sector prison capacity solutions in the long-term. Over the long-term,
we would like to see meaningful utilization of our available capacity and better visibility from our customers into
their potential future needs before we develop new prison capacity on a speculative basis. We will, however,
respond to customer demand and may develop or expand correctional and detention facilities when we believe
potential long-term returns justify the capital deployment, such as the aforementioned expansion of our Otay Mesa
Detention Center. We are also pursuing additional investment opportunities in other real estate assets with a bias
toward those used to provide mission-critical governmental services, as well as other businesses that expand the
range of solutions we provide to government partners, and expect to complete additional acquisitions that would
further diversify our cash flows and generate attractive risk-adjusted returns for our shareholders. However, our
pursuits in recent months have been tempered by the decline in the market value of our public securities.
Operating Activities
Our net cash provided by operating activities for the year ended December 31, 2019 was $354.4 million compared
with $322.9 million in 2018. Cash provided by operating activities represents our net income plus depreciation and
amortization, changes in various components of working capital, and various non-cash charges.
Investing Activities
Our cash flow used in investing activities was $244.6 million for the year ended December 31, 2019 and was
attributable to payments totaling $48.4 million, including payments of $34.1 million to the state of Montana in
connection with an agreement with the state of Montana to extend our ownership of the Crossroads Correctional
Center for the estimated duration of its useful life, and acquisitions completed in 2019, net of cash acquired. Our
cash flow used in investing activities also included capital expenditures of $193.3 million, including expenditures
for facility development and expansions of $136.1 million and $57.2 million for facility maintenance and
information technology capital expenditures.
Our cash flow used in investing activities was $291.1 million for the year ended December 31, 2018 and was
primarily attributable to capital expenditures of $121.6 million, including expenditures for facility development and
expansions of $58.2 million and $63.4 million for facility maintenance and information technology capital
expenditures. Our cash flow used in investing activities also included $175.6 million primarily attributable to the
acquisitions of Rocky Mountain Offender Management Systems, LLC, an electronic monitoring and case
management services provider, and Capital Commerce Center in the first quarter of 2018, the acquisitions of a
portfolio of twelve leased properties, the SSA-Baltimore office building, and the NARA property in the third quarter
of 2018, and the acquisition of RMSC in the fourth quarter of 2018.
Financing Activities
Cash flow used in financing activities was $64.8 million for the year ended December 31, 2019 and was primarily
attributable to dividend payments of $209.5 million and $3.5 million for the purchase and retirement of common
stock that was issued in connection with equity-based compensation. In addition, cash flow used in financing
activities included $325.0 million related to the aforementioned satisfaction and discharge of our 4.125% Senior
Notes. Cash flow used in financing activities also included $7.4 million of contingent consideration associated with
the acquisition of a business and $14.1 million of scheduled principal repayments under our Term Loan A and non-
recourse mortgage notes. These payments were partially offset by $164.0 million of net borrowings under our
revolving credit facility, $237.5 million of net proceeds from the issuance of the Term Loan B, and $97.2 million of
proceeds from the quarterly borrowings under the Kansas Notes during the construction period of the Lansing
Correctional Facility.
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Cash flow used in financing activities was $9.9 million for the year ended December 31, 2018 and was primarily
attributable to dividend payments of $204.2 million and $3.0 million for the purchase and retirement of common
stock that was issued in connection with equity-based compensation. In addition, cash flow used in financing
activities included $7.8 million of scheduled principal repayments under our Term Loan A and non-recourse
mortgage notes and $6.1 million of debt issuance and other refinancing and related costs. These payments were
partially offset by $119.5 million of net borrowings under our revolving credit facility, $24.5 million of proceeds
from the issuance of the Capital Commerce Note, and $62.3 million of proceeds from the quarterly borrowings
under the Kansas Notes during the construction period of the Lansing Correctional Facility.
Funds from Operations
Funds From Operations, or FFO, is a widely accepted supplemental non-GAAP measure utilized to evaluate the
operating performance of real estate companies. The National Association of Real Estate Investment Trusts, or
NAREIT, defines FFO as net income computed in accordance with GAAP, excluding gains or losses from sales of
property and extraordinary items, plus depreciation and amortization of real estate and impairment of depreciable
real estate and after adjustments for unconsolidated partnerships and joint ventures calculated to reflect funds from
operations on the same basis. We believe FFO is an important supplemental measure of our operating performance
and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of
REITs, many of which present FFO when reporting results.
We also present Normalized FFO as an additional supplemental measure as we believe it is more reflective of our core
operating performance. We may make adjustments to FFO from time to time for certain other income and expenses
that we consider non-recurring, infrequent or unusual, even though such items may require cash settlement, because
such items do not reflect a necessary component of our ongoing operations. Even though expenses associated with
M&A may be recurring, the magnitude and timing fluctuate based on the timing and scope of M&A activity, and
therefore, such expenses, which are not a necessary component of our ongoing operations, may not be comparable from
period to period. Start-up expenses represent the incremental operating losses incurred during the period we were
activating idle correctional facilities. Normalized FFO excludes the effects of such items.
FFO and Normalized FFO are supplemental non-GAAP financial measures of real estate companies' operating
performance, which do not represent cash generated from operating activities in accordance with GAAP and
therefore should not be considered an alternative for net income or as a measure of liquidity. Our method of
calculating FFO and Normalized FFO may be different from methods used by other REITs and, accordingly, may
not be comparable to such other REITs.
Our reconciliation of net income to FFO and Normalized FFO for the years ended December 31, 2019, 2018, and
2017 is as follows (in thousands):
For the Years Ended December 31,
2018
2017
2019
FUNDS FROM OPERATIONS:
Net income
Depreciation and amortization of real estate assets
Impairment of real estate assets
Gain on sale of real estate assets
Funds From Operations
Expenses associated with debt refinancing
transactions
Charges associated with adoption of tax reform
Expenses associated with mergers and acquisitions
Contingent consideration for acquisition of businesses
Start-up expenses
Goodwill and other impairments
Normalized Funds From Operations
$ 188,886 $ 159,207 $
101,771
1,580
—
262,558
107,402
4,428
(287 )
300,429
602
—
1,132
—
9,480
278
1,016
1,024
3,096
6,085
—
—
$ 311,921 $ 273,779 $
178,040
95,902
355
—
274,297
—
4,548
2,530
—
—
259
281,634
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Contractual Obligations
The following schedule summarizes our contractual obligations by the indicated period as of December 31, 2019 (in
thousands):
Long-term debt
Interest on senior and mortgage notes
Contractual facility developments and
other commitments
South Texas Family Residential Center
Leases
Total contractual cash obligations
2020
Payments Due By Year Ending December 31,
2023
$ 31,349 $ 39,087 $ 292,981 $ 904,110 $ 194,937 $ 524,401 $ 1,986,865
55,232 54,784 54,308 33,164 24,479 127,517 349,484
Thereafter
Total
2022
2024
2021
19,202
—
51,562 37,333
5,101
19,202
88,895
43,824
$ 161,760 $ 136,305 $ 351,361 $ 940,325 $ 222,455 $ 676,064 $ 2,488,270
—
—
3,039 24,146
—
—
3,051
—
—
4,072
—
—
4,415
The cash obligations in the table above do not include future cash obligations for variable interest expense
associated with our Term Loan A, Term Loan B or the balance on our outstanding revolving credit facility as
projections would be based on future outstanding balances as well as future variable interest rates, and we are unable
to make reliable estimates of either. The contractual facility developments included in the table above represent
development projects for which we have already entered into a contract with a customer that obligates us to
complete the development project. Certain of our other ongoing construction projects are not currently under
contract and thus are not included as a contractual obligation above as we may generally suspend or terminate such
projects without substantial penalty. With respect to the South Texas Family Residential Center, the cash
obligations included in the table above reflect the full contractual obligations of the lease of the site, excluding
contingent payments, even though the lease agreement provides us with the ability to terminate if ICE terminates the
amended IGSA associated with the facility.
We had $22.6 million of letters of credit outstanding at December 31, 2019 primarily to support our requirement to
repay fees and claims under our self-insured workers' compensation plan in the event we do not repay the fees and
claims due in accordance with the terms of the plan. The letters of credit are renewable annually. We did not have
any draws under any outstanding letters of credit during 2019, 2018, or 2017.
INFLATION
Many of our contracts include provisions for inflationary indexing, which mitigates an adverse impact of inflation
on net income. However, a substantial increase in personnel costs, workers' compensation or food and medical
expenses could have an adverse impact on our results of operations in the future to the extent that these expenses
increase at a faster pace than the per diem or fixed rates we receive for our management services. We outsource our
food service operations to a third party. The contract with our outsourced food service vendor contains certain
protections against increases in food costs.
SEASONALITY AND QUARTERLY RESULTS
Our business is subject to seasonal fluctuations. Because we are generally compensated for operating and managing
correctional, detention, and reentry facilities at a per diem rate, our financial results are impacted by the number of
calendar days in a fiscal quarter. Our fiscal year follows the calendar year and therefore, our daily profits for the
third and fourth quarters include two more days than the first quarter (except in leap years) and one more day than
the second quarter. Further, salaries and benefits represent the most significant component of operating expenses.
Significant portions of our unemployment taxes are recognized during the first quarter, when base wage rates reset
for unemployment tax purposes. Finally, quarterly results are affected by government funding initiatives,
acquisitions, the timing of the opening of new facilities, or the commencement of new management contracts and
related start-up expenses which may mitigate or exacerbate the impact of other seasonal influences. Because of
these seasonality factors, results for any quarter are not necessarily indicative of the results that may be achieved for
the full fiscal year.
86
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our primary market risk exposure is to changes in U.S. interest rates. We are exposed to market risk related to our
revolving credit facility, Term Loan A and Term Loan B because the interest rates on our revolving credit facility,
Term Loan A and Term Loan B are subject to fluctuations in the market. If the interest rate for our outstanding
indebtedness under the revolving credit facility, the Term Loan A, and the Term Loan B was 100 basis points higher
or lower during the years ended December 31, 2019, 2018, and 2017, our interest expense, net of amounts
capitalized, would have been increased or decreased by $5.0 million, $3.6 million, and $5.0 million, respectively.
As of December 31, 2019, we had outstanding $350.0 million of senior notes due 2023 with a fixed interest rate of
4.625%, $250.0 million of senior notes due 2022 with a fixed interest rate of 5.0%, and $250.0 million of senior
notes due 2027 with a fixed interest rate of 4.75%. We also had $22.2 million outstanding under the Capital
Commerce Note with a fixed interest rate of 4.5%, $159.5 million outstanding under the Kansas Notes with a fixed
interest rate of 4.43%, and $150.1 million outstanding under the SSA-Baltimore Note with a fixed interest rate of
4.5%. Because the interest rates with respect to these instruments are fixed, a hypothetical 100 basis point increase
or decrease in market interest rates would not have a material impact on our financial statements.
We may, from time to time, invest our cash in a variety of short-term financial instruments. These instruments
generally consist of highly liquid investments with original maturities at the date of purchase of three months or less.
While these investments are subject to interest rate risk and will decline in value if market interest rates increase, a
hypothetical 100 basis point increase or decrease in market interest rates would not materially affect the value of
these instruments. See the risk factor discussion captioned "Rising interest rates would increase the cost of our
variable rate debt" under Item 1A of this Annual Report on Form 10-K for more discussion on interest rate risks that
may affect our financial condition.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data required by Regulation S-X are included in this Annual Report on
Form 10-K commencing on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Management's Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of our senior management, including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of the end of the period covered by
this Annual Report. Based on that evaluation, our officers, including our Chief Executive Officer and Chief
Financial Officer, concluded that as of the end of the period covered by this Annual Report our disclosure controls
and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the
SEC's rules and forms and information required to be disclosed in the reports we file or submit under the Exchange
Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required disclosure.
87
Management's Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control
over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. The Company's internal control over financial reporting includes those policies and procedures that:
(i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with authorizations of management
and directors of the Company; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,
or disposition of the Company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Management assessed the effectiveness of the Company's internal control over financial reporting as of
December 31, 2019. In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework released
in 2013. Based on this assessment, management believes that, as of December 31, 2019, the Company's internal
control over financial reporting was effective.
The Company's independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report
on the Company's internal control over financial reporting. That report begins on page 89.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the fourth fiscal
quarter of 2019 that have materially affected, or are likely to materially affect, our internal control over financial
reporting.
88
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of CoreCivic, Inc. and Subsidiaries
Opinion on Internal Control Over Financial Reporting
We have audited CoreCivic, Inc. and Subsidiaries’ internal control over financial reporting as of December 31,
2019, based on criteria established in Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion,
CoreCivic, Inc. and Subsidiaries (the Company) maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2019, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the 2019 consolidated financial statements of the Company and our report dated February 20,
2020 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ Ernst & Young LLP
Nashville, Tennessee
February 20, 2020
89
ITEM 9B. OTHER INFORMATION
Dividend Declared for First Quarter 2020
On February 20, 2020, the Company's Board of Directors declared a dividend for the first quarter of 2020 of $0.44
per share to be paid on April 15, 2020 to stockholders of record as of the close of business on April 1, 2020.
90
PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required by this Item 10 will appear in, and is hereby incorporated by reference from, the
information under the headings "Proposal 1 – Election of Directors-Directors Standing for Election," "Executive
Officers-Information Concerning Executive Officers Who Are Not Directors," "Corporate Governance – Board of
Directors Meetings and Committees," "Corporate Governance – Independence and Financial Literacy of Audit
Committee Members," and "Security Ownership of Certain Beneficial Owners and Management – Section 16(a)
Beneficial Ownership Reporting Compliance" in our definitive proxy statement for the 2020 Annual Meeting of
Stockholders.
Our Board of Directors has adopted a Code of Ethics and Business Conduct applicable to the members of our Board
of Directors and our officers, including our Chief Executive Officer and Chief Financial Officer. In addition, the
Board of Directors has adopted Corporate Governance Guidelines and charters for our Audit Committee, Risk
Committee, Compensation Committee, Nominating and Governance Committee and Executive Committee. You
can access our Code of Ethics and Business Conduct, Corporate Governance Guidelines and current committee
charters under the "Investor Relations" tab on our website at www.corecivic.com.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item 11 will appear in, and is hereby incorporated by reference from, the
information under the headings "Executive and Director Compensation" in our definitive proxy statement for the
2020 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.
The information required by this Item 12 will appear in, and is hereby incorporated by reference from, the
information under the heading "Security Ownership of Certain Beneficial Owners and Management – Ownership of
Common Stock" in our definitive proxy statement for the 2020 Annual Meeting of Stockholders.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth certain information as of December 31, 2019 regarding compensation plans under
which our equity securities are authorized for issuance.
(c)
Number of
Securities
Remaining
Available
for Future
Issuance
Under Equity
Compensation
Plans (Excluding
Securities
Reflected in
Column
(a))
(a)
Number of
Securities
to be Issued
Upon Exercise
of Outstanding
Options
(b)
Weighted –
Average
Exercise Price
of Outstanding
Options
644,763 $
20.91
5,253,127 (1)
—
644,763 $
—
20.91
—
5,253,127
Plan Category
Equity compensation plans approved by
stockholders
Equity compensation plans not approved by
stockholders
Total
(1) Reflects shares of common stock available for issuance under our Amended and Restated 2008 Stock Incentive Plan and
our Non-Employee Directors' Compensation Plan, the only equity compensation plans approved by our stockholders under
which we continue to grant awards.
91
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
The information required by this Item 13 will appear in, and is hereby incorporated by reference from, the
information under the heading "Corporate Governance – Certain Relationships and Related Party Transactions" and
"Corporate Governance – Director Independence" in our definitive proxy statement for the 2020 Annual Meeting of
Stockholders.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this Item 14 will appear in, and is hereby incorporated by reference from, the
information under the heading "Proposal 2 – Ratification of Appointment of Independent Registered Public
Accounting Firm" in our definitive proxy statement for the 2020 Annual Meeting of Stockholders.
92
PART IV.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following documents are filed as part of this Annual Report:
(1)
Financial Statements:
The financial statements as set forth under Item 8 of this Annual Report on Form 10-K have been filed
herewith, beginning on page F-1 of this Annual Report.
(2)
Financial Statement Schedules:
Schedule III-Real Estate Assets and Accumulated Depreciation.
Information with respect to this item begins on page F-51 of this Annual Report on Form 10-K. Other
schedules are omitted because of the absence of conditions under which they are required or because the
required information is given in the financial statements or notes thereto.
(3)
Exhibits:
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
4.6
4.7
The following exhibits marked with an * are filed herewith. Exhibits marked with ** are furnished
herewith. Other exhibits have previously been filed with the Securities and Exchange Commission (the
"Commission") and are incorporated herein by reference:
Articles of Amendment and Restatement of the Company (previously filed as Exhibit 3.1 to the
Company's Current Report on Form 8-K (Commission File no. 001-16109), filed with the Commission
on May 20, 2013 and incorporated herein by this reference).
Articles of Amendment of the Company (previously filed as Exhibit 3.1 to the Company's Current
Report on Form 8-K (Commission File no. 001-16109), filed with the Commission on November 10,
2016 and incorporated herein by this reference).
Ninth Amended and Restated Bylaws of the Company (previously filed as Exhibit 3.3 to the Company's
Current Report on Form 10-K (Commission File no. 001-16109), filed with the Commission on
February 22, 2018 and incorporated herein by this reference).
Specimen of certificate representing shares of the Company's Common Stock (previously filed as
Exhibit 4.1 to the Company's Current Report on Form 8-K (Commission File no. 001-16109), filed with
the Commission on November 10, 2016 and incorporated herein by this reference).
Indenture (2023 Notes), dated as of April 4, 2013, by and among the Company, certain of its
subsidiaries, and U.S. Bank National Association, as Trustee (previously filed as Exhibit 4.3 to the
Company's Current Report on Form 8-K (Commission File no. 001-16109), filed with the Commission
on April 8, 2013 and incorporated herein by this reference).
Indenture (2022 Notes and 2027 Notes), dated as of September 25, 2015, by and between the Company
and U.S. Bank National Association, as Trustee (previously filed as Exhibit 4.1 to the Company's
Current Report on Form 8-K (Commission File no. 001-16109), filed with the Commission on
September 25, 2015 and incorporated herein by this reference).
Form of 4.625% Senior Note due 2023 (incorporated by reference to Exhibit A to Exhibit 4.2 hereof).
Form of 5.00% Senior Note due 2022 (incorporated by reference to Exhibit A to Exhibit 4.8 hereof).
Form of 4.75% Senior Note due 2027 (incorporated by reference to Exhibit A to Exhibit 4.9 hereof).
Supplemental Indenture (2023 Notes), dated as of September 4, 2013, by and among the Company,
certain of its subsidiaries, and U.S. Bank National Association, as Trustee (previously filed as Exhibit
4.2 to the Company's Quarterly Report on Form 10-Q (Commission File no. 001-16109), filed with the
Commission on November 7, 2013 and incorporated herein by this reference).
93
4.8
4.9
4.10
4.11
4.12
4.13
4.14
First Supplemental Indenture (2022 Notes), dated as of September 25, 2015, by and among the
Company, certain of its subsidiaries, and U.S. Bank National Association, as Trustee (previously filed
as Exhibit 4.2 to the Company's Current Report on Form 8-K (Commission File no. 001-16109), filed
with the Commission on September 25, 2015 and incorporated herein by this reference).
Second Supplemental Indenture (2027 Notes), dated as of October 13, 2017, by and among the
Company, the Guarantors, and U.S. Bank National Association, as Trustee (previously filed as Exhibit
4.2 to the Company's Current Report on Form 8-K (Commission File no. 001-16109), filed with the
Commission on October 13, 2017 and incorporated herein by this reference).
Schedule of additional Supplemental Indentures (2023 Notes), relating to the Supplemental Indenture in
Exhibit 4.7 hereof (previously filed as Exhibit 4.12 to the Company's Annual Report on Form 10-K
(Commission File no. 001-16109), filed with the Commission on February 25, 2016 and incorporated
herein by this reference).
Schedule of additional Supplemental Indentures (2022 Notes), relating to the Supplemental Indenture in
Exhibit 4.8 hereof (previously filed as Exhibit 4.13 to the Company's Annual Report on Form 10-K
(Commission File no. 001-16109), filed with the Commission on February 25, 2016 and incorporated
herein by this reference).
Supplemental Indenture (2023 Notes), dated as of January 7, 2019, by and among the Company, certain
of its subsidiaries, and Regions Bank, successor-in-interest to U.S. Bank National Association, as
Trustee (previously filed as Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q (Commission
File No. 001-16109), filed with the Commission on May 9, 2019 and incorporated herein by this
reference).
Supplemental Indenture (2022 Notes), dated as of January 7, 2019, by and among the Company, certain
of its subsidiaries, and Regions Bank, successor-in-interest to U.S. Bank National Association, as
Trustee (previously filed as Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q (Commission
File No. 001-16109), filed with the Commission on May 9, 2019 and incorporated herein by this
reference).
Supplemental Indenture (2027 Notes), dated as of January 7, 2019, by and among the Company, certain
of its subsidiaries, and Regions Bank, successor-in-interest to U.S. Bank National Association, as
Trustee (previously filed as Exhibit 4.4 to the Company's Quarterly Report on Form 10-Q (Commission
File No. 001-16109), filed with the Commission on May 9, 2019 and incorporated herein by this
reference).
4.15*
Description of Securities of CoreCivic, Inc.
10.1
10.2
10.3
10.4
Second Amended and Restated Credit Agreement, dated as of April 17, 2018. (previously filed as
Exhibit 10.1 to the Company's Current Report on Form 8-K (Commission File no. 001-16109), filed
with the Commission on April 18, 2018 and incorporated herein by this reference.)
The Company's Non-Employee Directors' Compensation Plan (previously filed as Appendix C to the
Company's definitive Proxy Statement relating to its Annual Meeting of Stockholders (Commission File
no. 001-16109), filed with the Commission on April 11, 2003 and incorporated herein by this
reference).
Form of Executive Non-qualified Stock Option Agreement for the Company's 2008 Stock Incentive
Plan (previously filed as Exhibit 10.2 to the Company's Current Report on Form 8-K (Commission File
no. 001-16109), filed with the Commission on February 21, 2008 and incorporated herein by this
reference).
Amended Form of Executive Non-qualified Stock Option Agreement for the Company's 2008 Stock
Incentive Plan (previously filed as Exhibit 10.2 to the Company's Current Report on Form 8-K
(Commission File no. 001-16109), filed with the Commission on February 23, 2009 and incorporated
herein by this reference).
94
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
Form of Director Non-qualified Stock Option Agreement for the Company's 2008 Stock Incentive Plan
(previously filed as Exhibit 10.3 to the Company's Current Report on Form 8-K (Commission File no.
001-16109), filed with the Commission on February 21, 2008 and incorporated herein by this
reference).
The Company's Amended and Restated 2008 Stock Incentive Plan (previously filed as Exhibit 10.1 of
the Company's Current Report on Form 8-K (Commission File no. 001-16109), filed with the
Commission on May 17, 2011 and incorporated herein by this reference).
Form of Executive Restricted Stock Unit Award Agreement for the Company's Amended and Restated
2008 Stock Incentive Plan (previously filed as Exhibit 10.1 to the Company's Current Report on Form
8-K (Commission File no. 001-16109), filed with the Commission on March 21, 2012 and incorporated
herein by this reference).
Form of Non-Employee Directors Restricted Stock Unit Award Agreement with deferral provisions for
the Company's Amended and Restated 2008 Stock Incentive Plan (previously filed as Exhibit 10.2 to
the Company's Current Report on Form 8-K (Commission File no. 001-16109), filed with the
Commission on March 21, 2012 and incorporated herein by this reference).
Form of Non-Employee Directors Restricted Stock Unit Award Agreement for the Company's Amended
and Restated 2008 Stock Incentive Plan (previously filed as Exhibit 10.3 to the Company's Current
Report on Form 8-K (Commission File no. 001-16109), filed with the Commission on March 21, 2012
and incorporated herein by this reference).
Form of Restricted Stock Unit Award Agreement for the Company's Amended and Restated 2008 Stock
Incentive Plan (Time-Vesting Form for Executive Officers) (previously filed as Exhibit 10.23 to the
Company's Annual Report on Form 10-K (Commission File no. 001-16109), filed with the Commission
on February 27, 2013 and incorporated herein by this reference).
Amended and Restated Non-Employee Director Deferred Compensation Plan (previously filed as
Exhibit 10.1 to the Company's Current Report on Form 8-K (Commission File no. 001-16109), filed
with the Commission on August 16, 2007 and incorporated herein by this reference).
Amendment to the Amended and Restated Non-Employee Director Deferred Compensation Plan
(previously filed as Exhibit 10.35 to the Company's Annual Report on Form 10-K (Commission File no.
001-16109), filed with the Commission on February 24, 2010 and incorporated herein by this
reference).
Amended and Restated Executive Deferred Compensation Plan (previously filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K (Commission File no. 001-16109), filed with the Commission
on August 16, 2007 and incorporated herein by this reference).
Form of Indemnification Agreement (previously filed as Exhibit 10.1 to the Company's Current Report
on Form 8-K (Commission File no. 001-16109), filed with the Commission on August 18, 2009 and
incorporated herein by this reference).
Restricted Stock Unit Award Cancellation Agreement, dated as of September 27, 2016, with Damon T.
Hininger (previously filed as Exhibit 10.1 to the Company's Current Report on Form 8-K (Commission
File no. 001-16109), filed with the Commission on September 27, 2016 and incorporated herein by this
reference).
Form of Executive Employment Agreement, effective as of January 1, 2018 (previously filed as Exhibit
10.28 to the Company's Current Report on Form 10-K (Commission File no. 001-16109), filed with the
Commission on February 22, 2018 and incorporated herein by this reference).
Letter Agreement, dated as of December 31, 2017, with Harley G. Lappin (previously filed as Exhibit
10.29 to the Company's Current Report on Form 10-K (Commission File no. 001-16109), filed with the
Commission on February 22, 2018 and incorporated herein by this reference).
95
10.18
10.19*
10.20
Amended and Restated ATM Equity OfferingSM Sales Agreement, dated August 28, 2018 (previously
filed as Exhibit 1.1 to the Company's Current Report on Form 8-K (Commission File no. 001-16109),
filed with the Commission on August 28, 2018 and incorporated herein by this reference).
Term Loan Credit Agreement, dated as of December 18, 2019, by and among the Company, Nomura
Corporate Funding Americas, LLC, as Administrative Agent and Nomura Securities International, Inc.,
as a Lead Arranger and Bookrunner.
The Company's Second Amended and Restated 2008 Stock Incentive Plan (previously filed as Exhibit
10.1 to the Company's Current Report on Form 8-K (Commission File no. 001-16109), filed with the
Commission on May 12, 2017 and incorporated herein by this reference).
21.1*
Subsidiaries of the Company.
23.1*
Consent of Independent Registered Public Accounting Firm.
31.1*
Certification of the Company's Chief Executive Officer pursuant to Securities and Exchange Act
Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of the Company's Chief Financial Officer pursuant to Securities and Exchange Act Rules
13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**
Certification of the Company's Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**
Certification of the Company's Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*
The following financial information from the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2019, formatted in Inline XBRL (Extensible Business Reporting Language)
includes: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the
Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Stockholders' Equity, and
(v) the Notes to Consolidated Financial Statements. The instance document does not appear in the
interactive data file because its XBRL tags are embedded within the Inline XBRL document.
104*
The cover page from the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2019, formatted in Inline XBRL (included in Exhibit 101).
ITEM 16. FORM 10-K SUMMARY
None.
96
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Annual
Report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 20, 2020
CORECIVIC, INC.
By:/s/ Damon T. Hininger
Damon T. Hininger, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Damon T. Hininger
Damon T. Hininger, President and Chief Executive Officer
(Principal Executive Officer and Director)
February 20, 2020
/s/ David M. Garfinkle
David M. Garfinkle, Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
February 20, 2020
/s/ Mark A. Emkes
Mark A. Emkes, Chairman of the Board of Directors
/s/ Donna M. Alvarado
Donna M. Alvarado, Director
/s/ Robert J. Dennis
Robert J. Dennis, Director
/s/ Stacia A. Hylton
Stacia A. Hylton, Director
/s/ Harley G. Lappin
Harley G. Lappin, Director
/s/ Anne L. Mariucci
Anne L. Mariucci, Director
/s/ Thurgood Marshall, Jr.
Thurgood Marshall, Jr., Director
/s/ Devin I. Murphy
Devin I. Murphy, Director
/s/ Charles L. Overby
Charles L. Overby, Director
/s/ John R. Prann, Jr.
John R. Prann, Jr., Director
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
97
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INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements of CoreCivic, Inc. and Subsidiaries
Report of Independent Registered Public Accounting Firm .................................................................................
Consolidated Balance Sheets as of December 31, 2019 and 2018 .......................................................................
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017 .......................
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017 ......................
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2019, 2018 and 2017 .......
Notes to Consolidated Financial Statements.........................................................................................................
F-2
F-5
F-6
F-7
F-8
F-9
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of CoreCivic, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of CoreCivic, Inc. and Subsidiaries (the Company)
as of December 31, 2019 and 2018, the related consolidated statements of operations, stockholders’ equity, and cash
flows for each of the three years in the period ended December 31, 2019, and the related notes and financial
statement schedule listed in the Index at Item 15(2) (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 framework) and our report dated February 20, 2020 expressed an unqualified
opinion thereon.
Adoption of New Accounting Standard
As discussed in Note 2 to the consolidated financial statements, the Company changed its method for accounting for
leases in 2019 due to the adoption of ASU No. 2016-02, “Leases” (ASC 842).
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is
to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which
they relate.
F-2
Impairment of Long-Lived Assets
Description of the Matter At December 31, 2019, the Company’s property and equipment, net of accumulated
depreciation, was $2,700.1 million, which includes $136.3 million related to five idled
facilities and $19.6 million related to other idle facilities. As discussed in Note 2 and Note
6 to the consolidated financial statements, long-lived assets other than goodwill are
reviewed for impairment when circumstances indicate the carrying value of an asset may
not be recoverable. When the estimated undiscounted cash flows associated with the asset
or group of assets are less than their carrying value, an impairment is recognized as the
difference between the carrying value of the asset and its fair value.
Auditing management’s evaluation of long-lived assets for impairment was subjective due
to the estimation uncertainty in determining the future undiscounted cash flows of facilities
where indicators of impairment are determined to be present. These estimates are
particularly sensitive to the assumption as to whether the Company will obtain contracts to
utilize idle facilities in the future, which can be affected by expectations about market
developments as well as management’s intent to hold and operate each facility over the
term and in the manner assumed in the analysis.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness
of controls over the Company’s long-lived asset impairment review process, including
controls over management’s review of evidence supporting the projected utilization of idle
facilities.
To test the Company’s long-lived asset impairment analysis, we performed audit
procedures that included, among others, evaluating evidence to support the projected
utilization of facilities and to support recoverability of net book values based on anticipated
cash flows. We also performed sensitivity analyses to evaluate the impact of changes in
future undiscounted cash flows.
Goodwill Impairment
Description of the Matter At December 31, 2019, the Company’s goodwill was $50.5 million, with $7.9 million
assigned to the Company's CoreCivic Safety reporting unit and $42.6 million assigned to
the CoreCivic Community reporting unit. As discussed in Note 2 and Note 3 to the
consolidated financial statements, goodwill is tested for impairment at the reporting unit
level at least annually.
Auditing management’s annual goodwill impairment test for the CoreCivic Community
reporting unit was complex and highly judgmental due to the significant estimation
required in determining the fair value of the reporting unit. In particular, the fair value
estimate is sensitive to certain significant assumptions, 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.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness
of controls over the Company’s goodwill impairment review process, including controls
over management’s review of the valuation methodologies and significant assumptions
described above.
To test the estimated fair value of the Company’s CoreCivic Community reporting unit, we
performed audit procedures that included, among others, assessing the methodologies
applied, testing the significant assumptions discussed above and the completeness and
accuracy of the underlying data used by the Company in its analysis. We compared the
significant assumptions used by management to recent historical results; assessed the
F-3
historical accuracy of management’s projected cash flow estimates; and performed
sensitivity analyses of changes in significant assumptions to evaluate the changes in fair
value of the reporting unit that would result from changes in the assumptions. We involved
a valuation specialist to assist in assessing the Company’s concluded valuation, valuation
methodologies and certain significant assumptions used in the valuation analysis.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2002.
Nashville, Tennessee
February 20, 2020
F-4
CORECIVIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
ASSETS
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowance of $3,217 and $2,542, respectively
Prepaid expenses and other current assets
$
Total current assets
Real estate and related assets:
Property and equipment, net of accumulated depreciation of $1,510,117
and $1,516,664, respectively
Other real estate assets
Goodwill
Non-current deferred tax assets
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses
Current portion of long-term debt
Total current liabilities
Long-term debt, net
Deferred revenue
Other liabilities
Total liabilities
Commitments and contingencies
Preferred stock – $0.01 par value; 50,000 shares authorized; none issued
and outstanding at December 31, 2019 and 2018, respectively
Common stock – $0.01 par value; 300,000 shares authorized;
119,096 and 118,674 shares issued and outstanding
at December 31, 2019 and 2018, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
December 31,
2019
2018
92,120 $
26,973
280,785
35,507
435,385
52,802
21,335
270,597
28,791
373,525
2,700,107
238,637
50,537
16,058
350,907
3,791,631 $
337,462 $
31,349
368,811
1,928,023
12,469
105,579
2,414,882
2,830,589
247,223
48,169
14,947
141,207
3,655,660
352,275
14,121
366,396
1,787,555
26,102
60,548
2,240,601
—
—
$
$
1,191
1,821,810
(446,252 )
1,376,749
3,791,631 $
1,187
1,807,202
(393,330 )
1,415,059
3,655,660
$
The accompanying notes are an integral part of these consolidated financial statements.
F-5
CORECIVIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
REVENUES
EXPENSES:
Operating
General and administrative
Depreciation and amortization
Contingent consideration for acquisition of businesses
Asset impairments
OPERATING INCOME
OTHER (INCOME) EXPENSE:
Interest expense, net
Expenses associated with debt refinancing transactions
Other (income) expense
INCOME BEFORE INCOME TAXES
Income tax expense
NET INCOME
BASIC EARNINGS PER SHARE
DILUTED EARNINGS PER SHARE
DIVIDENDS DECLARED PER SHARE
For the Years Ended December 31,
2018
$ 1,980,689 $ 1,835,766 $ 1,765,498
2017
2019
1,422,769
127,078
144,572
—
4,706
1,699,125
281,564
1,315,250
106,865
156,501
6,085
1,580
1,586,281
249,485
1,249,537
107,822
147,129
—
614
1,505,102
260,396
84,401
602
(164 )
84,839
196,725
(7,839 )
188,886 $
1.59 $
1.59 $
1.76 $
80,753
1,016
156
81,925
167,560
(8,353 )
159,207 $
1.34 $
1.34 $
1.72 $
68,535
—
(90 )
68,445
191,951
(13,911 )
178,040
1.51
1.50
1.68
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-6
CORECIVIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Asset impairments
Amortization of debt issuance costs and other non-cash interest
Expenses associated with debt refinancing transactions
Deferred income taxes
Other expenses and non-cash items
Non-cash revenue and other income
Non-cash equity compensation
Changes in assets and liabilities, net:
Accounts receivable, prepaid expenses and other assets
Accounts payable, accrued expenses and other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for facility development and expansions
Expenditures for other capital improvements
Acquisitions, net of cash acquired
Proceeds from sale of assets
Increase in other assets
Payments received on direct financing lease and notes receivable
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt and borrowings from credit facility
Scheduled principal repayments
Principal repayments of credit facility
Satisfaction and discharge of senior notes
Payment of debt issuance and other refinancing and related costs
Payment of lease obligations for financing leases
Contingent consideration for acquisition of businesses
Proceeds from exercise of stock options
Proceeds from sale/leaseback
Purchase and retirement of common stock
Dividends paid
Net cash used in financing activities
NET INCREASE IN CASH, CASH EQUIVALENTS
AND RESTRICTED CASH
CASH, CASH EQUIVALENTS AND RESTRICTED CASH,
beginning of period
CASH, CASH EQUIVALENTS AND RESTRICTED CASH,
end of period
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Debt assumed on acquisition of property
$
Establishment of right of use assets and lease liabilities
$
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
For the Years Ended December 31,
2018
2017
2019
$
188,886 $
159,207
$
178,040
144,572
4,706
3,351
602
(1,162 )
13,033
(11,292 )
17,267
(16,938 )
11,359
354,384
(136,128 )
(57,192 )
(48,396 )
4,295
(7,168 )
—
(244,589 )
1,146,691
(14,121 )
(648,000 )
(325,000 )
(4,296 )
(538 )
(7,398 )
876
—
(3,531 )
(209,522 )
(64,839 )
156,501
1,580
3,419
1,016
(4,436 )
7,909
(14,509 )
13,132
(19,470 )
18,531
322,880
(58,239 )
(63,438 )
(175,588 )
12,911
(6,703 )
—
(291,057 )
809,831
(7,816 )
(603,500 )
—
(6,087 )
(3,744 )
(1,500 )
2,367
7,783
(3,005 )
(204,198 )
(9,869 )
44,956
21,954
74,137
52,183
147,129
614
3,222
—
921
4,267
(14,528 )
13,286
(13,913 )
22,287
341,325
(17,576 )
(56,168 )
(48,867 )
970
(3,605 )
684
(124,562 )
475,500
(10,000 )
(461,500 )
—
(4,169 )
(2,483 )
—
6,534
—
(5,847 )
(200,326 )
(202,291 )
14,472
37,711
$
119,093 $
74,137
$
52,183
— $
137,946 $
157,280
—
$
$
—
—
Cash paid during the period for:
Interest (net of amounts capitalized of $6.0 million, $1.0 million, and
$0 in 2019, 2018, and 2017, respectively)
Income taxes paid
$
$
85,698 $
16,437 $
71,787
13,303
$
$
57,485
8,089
The accompanying notes are an integral part of these consolidated financial statements.
F-7
CORECIVIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017
(in thousands)
Additional
Total
Balance as of December 31, 2016
Net income
Retirement of common stock
Dividends declared on common stock ($1.68 per
share)
Restricted stock compensation, net of forfeitures
Restricted stock grants
Stock options exercised
Balance as of December 31, 2017
Net income
Retirement of common stock
Dividends declared on common stock ($1.72 per
share)
Restricted stock compensation, net of forfeitures
Restricted stock grants
Stock options exercised
Cumulative effect of adoption of new accounting
standard
Balance as of December 31, 2018
Net income
Retirement of common stock
Dividends declared on common stock ($1.76 per
share)
Restricted stock compensation, net of forfeitures
Restricted stock grants
Stock options exercised
Cumulative effect of adoption of new accounting
standard
Balance as of December 31, 2019
Common Stock
Shares
117,554 $
—
(176 )
Paid-in
Par Value Capital
Accumulated Stockholders'
Deficit
1,176 $ 1,780,350 $ (322,563 ) $ 1,458,963
— 178,040 178,040
(5,847 )
—
—
(2 )
(5,845 )
Equity
—
—
513
313
118,204 $
—
(139 )
—
—
5
3
13,286
(5 )
6,927
— (199,764 ) (199,764 )
13,286
—
—
—
6,930
—
1,182 $ 1,794,713 $ (344,287 ) $ 1,451,608
— 159,207 159,207
(3,005 )
—
—
(1 )
(3,004 )
—
—
462
147
—
—
5
1
— (205,675 ) (205,675 )
13,132
—
—
—
2,367
—
13,132
(5 )
2,366
—
118,674 $
—
(164 )
—
—
(2,575 )
(2,575 )
1,187 $ 1,807,202 $ (393,330 ) $ 1,415,059
— 188,886 188,886
(3,531 )
—
—
(2 )
(3,529 )
—
—
524
62
—
—
5
1
— (211,868 ) (211,868 )
17,267
—
—
—
876
—
17,267
(5 )
875
—
119,096 $
—
(29,940 )
1,191 $ 1,821,810 $ (446,252 ) $ 1,376,749
(29,940 )
—
The accompanying notes are an integral part of these consolidated financial statements.
F-8
CORECIVIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019, 2018 AND 2017
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 U.S.
government agencies. 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 growing network of residential reentry centers to help
address America's recidivism crisis, and government real estate solutions. As of December 31, 2019, through
its CoreCivic Safety segment, the Company operated 50 correctional and detention facilities, 43 of which the
Company owned, with a total design capacity of approximately 73,000 beds. Through its CoreCivic
Community segment, the Company owned and operated 29 residential reentry centers with a total design
capacity of approximately 5,000 beds. In addition, through its CoreCivic Properties segment, the Company
owned 28 properties for lease to third parties and used by government agencies, totaling 2.4 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 began operating as a real estate investment trust ("REIT") effective January 1, 2013. The Company
provides services and conducts other business activities through taxable REIT subsidiaries ("TRSs"). A TRS is
a subsidiary of a REIT that is subject to applicable corporate income tax and certain qualification
requirements. The Company's use of TRSs permits CoreCivic to engage in certain business activities in which
the REIT may not engage directly, so long as these activities are conducted in entities that elect to be treated
as TRSs under the Internal Revenue Code of 1986, as amended, and enable CoreCivic to, among other things,
provide correctional services at facilities it owns and at facilities owned by its government partners. A TRS is
not subject to the distribution requirements applicable to REITs so it may retain income generated by its
operations for reinvestment.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting
principles and include the accounts of CoreCivic on a consolidated basis with its wholly-owned subsidiaries.
All intercompany balances and transactions have been eliminated.
Certain reclassifications have been made to the consolidated balance sheet in 2018 and to the consolidated
statements of cash flows in 2018 and 2017 to conform to the current year presentation.
Cash and Cash Equivalents
CoreCivic considers all liquid deposits and investments with a maturity of three months or less at the time of
purchase to be cash equivalents.
F-9
Restricted Cash
Restricted cash at December 31, 2019 and 2018 included deposit accounts totaling $22.3 million and $17.2
million, respectively, to ensure the timely completion of construction of the Lansing Correctional Facility and
related debt service, as further discussed in Notes 6 and 11. Restricted cash at December 31, 2019 and 2018
also included $4.7 million and $4.1 million, respectively, to ensure the timely payment of certain operating
expenses, capital expenditures and debt service associated with the SSA-Baltimore property, also as further
discussed in Notes 6 and 11. The restricted cash accounts are required under the terms of the indebtedness
securing such properties.
Accounts Receivable and Allowance for Doubtful Accounts
At December 31, 2019 and 2018, accounts receivable of $280.8 million and $270.6 million, respectively, were
net of allowances for doubtful accounts totaling $3.2 million and $2.5 million, respectively. Accounts
receivable consist primarily of amounts due from federal, state, and local government agencies for the
utilization of CoreCivic's properties. Accounts receivable also consist of amounts due for operating and
managing the Company's correctional, detention, and residential reentry facilities, as well as its electronic
monitoring and case management services operations.
Accounts receivable are stated at estimated net realizable value. CoreCivic recognizes allowances for
doubtful accounts to ensure receivables are not overstated due to uncollectibility. Bad debt reserves are
maintained for customers based on a variety of factors, including the length of time receivables are past due,
significant one-time events, and historical experience. If circumstances related to customers change, estimates
of the recoverability of receivables would be further adjusted.
Property and Equipment
Property and equipment are carried at cost. Assets acquired by CoreCivic in conjunction with acquisitions are
recorded at estimated fair market value at the time of purchase. Betterments, renewals and significant repairs
that extend the life of an asset are capitalized; other repair and maintenance costs are expensed. Interest is
capitalized to the asset to which it relates in connection with the construction or expansion of real estate
properties. Construction costs directly associated with the development of a property are capitalized as part of
the cost of the development project. Such costs are written-off to expense whenever a project is abandoned.
The cost and accumulated depreciation applicable to assets retired are removed from the accounts and the gain
or loss on disposition is recognized in income. Depreciation is computed over the estimated useful lives of
depreciable assets using the straight-line method. Useful lives for property and equipment are as follows:
Land improvements
Buildings and improvements
Equipment and software
Office furniture and fixtures
5 – 20 years
5 – 50 years
3 – 10 years
5 years
F-10
Other Real Estate Assets
Other real estate assets are accounted for in accordance with Accounting Standards Codification ("ASC") 853,
"Service Concession Arrangements". ASC 853 stipulates that the facilities subject to the standard may not be
accounted for as a lease, nor should the infrastructure used in the service concession arrangement be
recognized as property and equipment by the operating entity. Instead, the contracts should be accounted for
under the applicable revenue standards. The Company owns four facilities that are accounted for as service
concession arrangements. The facilities accounted for under ASC 853 were constructed in periods prior to
2013.
On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2014-09, "Revenue from
Contracts with Customers" and its subsequent corresponding update, ASC 606. For facilities which CoreCivic
constructed for the public entity, two separate and distinct performance obligations exist. Service revenue is
recognized as provided. All revenues and costs related to the construction of the facilities were recognized
upon adoption of ASC 606. Revenue recognized related to the construction of the facilities for which cash has
not yet been received is recorded as a contract asset and is amortized and evaluated for impairment on an on-
going basis. For facilities contributed to a service contract, the cost of the facility is accounted for as costs to
fulfill the service contract and the cost is recognized over the term of the service contract. The costs related to
contract assets and costs to fulfill the service contracts are recoverable if the contract is terminated or not
renewed due to the existence of residual interest options.
Prior to the adoption of ASC 606, other real estate assets were stated at cost, net of accumulated amortization.
These assets represent the cost of all infrastructure to be transferred to the public entity grantors should the
grantors exercise their residual interest. The costs related to the facilities constructed for a governmental entity
were deferred as an other real estate asset, and the deferred costs were amortized in proportion to revenue
recognized over the term of the related services arrangement. The costs related to the facilities that were
constructed before entering into the service concession arrangement were amortized in proportion to revenue
recognized over the term of the related service contract as an investment in the service contract.
Accounting for the Impairment of Long-Lived Assets Other Than Goodwill
Long-lived assets other than goodwill are reviewed for impairment when circumstances indicate the carrying
value of an asset may not be recoverable. When circumstances indicate an asset may not be recoverable,
impairment is recognized when the estimated undiscounted cash flows associated with the asset or group of
assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to
its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values
are determined based on quoted market values, comparable sales data, discounted cash flows or internal and
external appraisals, as applicable.
Goodwill
Goodwill represents the cost in excess of the net assets of businesses acquired. As further discussed in Note 3,
goodwill is tested for impairment at least annually using a fair-value based approach.
Investment in Affiliates
Investments in affiliates that are equal to or less than 50%-owned over which CoreCivic can exercise
significant influence are accounted for using the equity method of accounting. Investments under the equity
method are recorded at cost and subsequently adjusted for contributions, distributions, and net income
attributable to the Company's ownership based on the governing agreement.
F-11
Debt Issuance Costs
Debt issuance costs, excluding those costs incurred related to CoreCivic's revolving credit facility, are
presented as a direct deduction from the face amount of the related liability on the consolidated balance sheets.
Debt issuance costs related to the Company's revolving credit facility are included in other assets on the
consolidated balance sheets. Generally, debt issuance costs are capitalized and amortized into interest expense
using the interest method, or on a straight-line basis over the term of the related debt, if not materially
different than the interest method. However, certain debt issuance costs incurred in connection with debt
refinancings are charged to expense in accordance with ASC 470-50, "Modifications and Extinguishments".
Revenue Recognition
CoreCivic maintains contracts with certain governmental entities to manage their facilities for fixed per diem
rates. CoreCivic also maintains contracts with various federal, state, and local governmental entities for the
housing of offenders in company-owned facilities at fixed per diem rates or monthly fixed rates. These
contracts usually contain expiration dates with renewal options ranging from annual to multi-year renewals.
Most of these contracts have current terms that require renewal every two to five years. Additionally, most
facility management contracts contain clauses that allow the government agency to terminate a contract
without cause, and are generally subject to legislative appropriations. CoreCivic generally expects to renew
these contracts for periods consistent with the remaining renewal options allowed by the contracts or other
reasonable extensions; however, no assurance can be given that such renewals will be obtained. Fixed
monthly rate revenue is recorded in the month earned and fixed per diem revenue, including revenue under
those contracts that include guaranteed minimum populations, is recorded based on the per diem rate
multiplied by the number of offenders housed or guaranteed during the respective period.
CoreCivic recognizes any additional management service revenues upon completion of services provided to
the customer. Certain of the government agencies also have the authority to audit and investigate CoreCivic's
contracts with them. If the agency determines that CoreCivic has improperly allocated costs to a specific
contract or otherwise was unable to perform certain contractual services, CoreCivic may not be reimbursed for
those costs and could be required to refund the amount of any such costs that have been reimbursed, or to pay
liquidated damages. In these instances, the amounts required to be returned to the customer are classified as
reductions to revenue. Prior to the adoption of ASU 2014-09 in the first quarter of 2018, these amounts were
reflected as operating expenses.
Rental revenue is recognized in accordance with ASC 842, "Leases". In accordance with ASC 842, minimum
rental revenue is recognized on a straight-line basis over the term of the related lease. Leasehold incentives are
recognized as a reduction to rental revenue on a straight-line basis over the term of the related lease. Rental
revenue associated with expense reimbursements from tenants is recognized in the period that the related
expenses are incurred based upon the tenant lease provision.
Other revenue consists primarily of ancillary revenues associated with operating correctional, detention and
residential reentry facilities, such as commissary, phone, and vending sales, and is recorded in the period the
goods and services are provided. Revenues generated from prisoner transportation services for governmental
agencies are recorded in the period the inmates have been transported to their destination.
F-12
Self-Funded Insurance and Litigation Reserves
CoreCivic is significantly self-insured for employee health, workers' compensation, automobile liability
claims, and general liability claims. As such, CoreCivic's insurance expense is largely dependent on claims
experience and CoreCivic's ability to control its claims experience. CoreCivic has consistently accrued the
estimated liability for employee health insurance based on its history of claims experience and time lag
between the incident date and the date the cost is paid by CoreCivic. CoreCivic has accrued the estimated
liability for workers' compensation claims based on an actuarially determined liability, discounted to the net
present value of the outstanding liabilities, using a combination of actuarial methods used to project ultimate
losses, and the Company's automobile insurance claims based on estimated development factors on claims
incurred. The liability for employee health, workers' compensation, and automobile insurance includes
estimates for both claims incurred and for claims incurred but not reported. CoreCivic records litigation
reserves related to general liability matters for which it is probable that a loss has been incurred and the range
of such loss can be estimated. These estimates could change in the future.
Income Taxes
CoreCivic began operating in compliance with REIT requirements for federal income tax purposes effective
January 1, 2013. As a REIT, the Company generally is not subject to corporate level federal income tax on
taxable income it distributes to its stockholders as long as it meets the organizational and operational
requirements under the REIT rules. However, certain subsidiaries have made an election to be treated as TRSs
in conjunction with the Company's REIT election. The TRS elections permit CoreCivic to engage in certain
business activities in which the REIT may not engage directly, so long as these activities are conducted in
entities that elect to be treated as TRSs under the Internal Revenue Code of 1986, as amended. A TRS is
subject to federal and state income taxes on the income from these activities and therefore, CoreCivic includes
a provision for taxes in its consolidated financial statements.
Income taxes are accounted for under the provisions of ASC 740, "Income Taxes". ASC 740 generally
requires CoreCivic to record deferred income taxes for the tax effect of differences between book and tax
bases of its assets and liabilities. Deferred income taxes reflect the available net operating losses and the net
tax effect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes using enacted tax rates in effect for the year
in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and
liabilities is recognized in the statement of operations in the period that includes the enactment date.
Realization of the future tax benefits related to deferred tax assets is dependent on many factors, including
CoreCivic's past earnings history, expected future earnings, the character and jurisdiction of such earnings,
unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of its deferred tax
assets, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of
realization of a deferred tax asset.
CoreCivic's deferred tax assets and liabilities are classified as non-current on the consolidated balance sheets.
See Note 13 for further discussion of the significant components of CoreCivic's deferred tax assets and
liabilities and the impact on deferred tax assets and liabilities that resulted from the lower corporate tax rates
enacted under the Tax Cuts and Jobs Act ("the TCJA") in December 2017.
Income tax contingencies are accounted for under the provisions of ASC 740. ASC 740 prescribes a
recognition threshold and measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. The guidance prescribed in ASC 740 establishes a
recognition threshold of more likely than not that a tax position will be sustained upon examination. The
measurement attribute requires that a tax position be measured at the largest amount of benefit that is greater
than 50% likely of being realized upon ultimate settlement.
F-13
Foreign Currency Transactions
CoreCivic has extended a working capital loan to Agecroft Prison Management, Ltd. ("APM"), the operator of
a correctional facility in Salford, England previously owned by a subsidiary of CoreCivic. The working
capital loan is denominated in British pounds; consequently, CoreCivic adjusts this receivable to the current
exchange rate at each balance sheet date and recognizes the unrealized currency gain or loss in current period
earnings. See Note 8 for further discussion of CoreCivic's relationship with APM.
Fair Value of Financial Instruments
To meet the reporting requirements of 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 December 31, 2019 and 2018, 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):
December 31,
2019
2018
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Note receivable from APM
Debt
2,989 $
$
4,037
$ (1,986,865 ) $ (1,964,366 ) $ (1,814,795 ) $ (1,744,045 )
3,949 $
2,887 $
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual results could differ from those
estimates and those differences could be material.
Concentration of Credit Risks
CoreCivic's credit risks relate primarily to cash and cash equivalents, restricted cash, and accounts receivable.
Cash and cash equivalents and restricted cash are primarily held in bank accounts and overnight investments.
CoreCivic maintains deposits of cash in excess of federally insured limits with certain financial institutions.
CoreCivic's accounts receivable represents amounts due primarily from governmental agencies. CoreCivic's
financial instruments are subject to the possibility of loss in carrying value as a result of either the failure of
other parties to perform according to their contractual obligations or changes in market prices that make the
instruments less valuable.
F-14
CoreCivic derives its revenues primarily from amounts earned under federal, state, and local government
contracts. For each of the years ended December 31, 2019, 2018, and 2017, federal correctional and detention
authorities represented 51%, 48%, and 48%, respectively, of CoreCivic's total revenue. Federal correctional
and detention authorities consist primarily of U.S. Immigration and Customs Enforcement ("ICE"), the United
States Marshals Service ("USMS"), and the Federal Bureau of Prisons ("BOP"). ICE accounted for 29%,
25%, and 25% of total revenue for 2019, 2018, and 2017, respectively. The USMS accounted for 17%, 17%,
and 16% of total revenue for 2019, 2018, and 2017, respectively. The BOP accounted for 5%, 6%, and 7% of
total revenue for 2019, 2018, and 2017, respectively. These federal customers have management contracts at
facilities CoreCivic owns and at facilities CoreCivic manages but does not own. State revenues from contracts
at correctional, detention, and residential reentry facilities that CoreCivic operates represented 34%, 39%, and
41% of total revenue during the years ended December 31, 2019, 2018, and 2017, respectively. ICE and the
USMS each generated 10% or more of total revenue during 2019, 2018, and 2017. Although the revenue
generated from each of these agencies is derived from numerous management contracts and various types of
properties, i.e. correctional, detention, reentry, and leased, the loss of one or more of such contracts could have
a material adverse impact on CoreCivic's financial condition and results of operations.
Accounting for Stock-Based Compensation
CoreCivic accounts for restricted stock-based compensation under the recognition and measurement principles
of ASC 718, "Compensation-Stock Compensation". CoreCivic amortizes the fair market value as of the grant
date of restricted stock unit ("RSU") awards over the vesting period using the straight-line method. The fair
market value of performance-based restricted stock units is amortized over the vesting period as long as
CoreCivic expects to meet the performance criteria. To the extent performance-based RSUs are expected to
increase or decrease based on revised estimates of performance, the related expense is adjusted accordingly.
If achievement of the performance criteria becomes improbable, an adjustment is made to reverse the expense
previously recognized. The Company estimates the number of awards expected to be forfeited and adjusts the
estimate when it is likely to change.
Recent Accounting Pronouncements – Lease Adoption
In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, "Leases (Topic
842)", which requires lessees to put most leases on their balance sheets but recognize expenses on their
income statements in a manner similar to previous accounting requirements. ASU 2016-02 also eliminated
previous real estate-specific provisions for all entities. For lessors, the ASU modifies the classification criteria
and the accounting for sales-type and direct financing leases. For finance leases and operating leases, a lessee
should recognize on the balance sheet a liability to make lease payments and a right-of-use ("ROU") asset
representing its right to use the underlying asset for the lease term, with each initially measured at the present
value of the lease payments. For public reporting entities such as CoreCivic, guidance in ASU 2016-02 is
effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, and
early adoption of the ASU is permitted. In July 2018, the FASB issued ASU 2018-11, "Targeted
Improvements – Leases (Topic 842)", which permits entities to adopt a new transition method whereby the
modified retrospective transition method would allow companies to recognize the cumulative-effect
adjustment in the period of adoption rather than the earliest period presented and continue to apply the legacy
guidance in ASC 840, "Leases", in the comparative periods presented. Further, ASU 2018-11 also allows
entities to elect, by class of underlying asset, to not separate non-lease components from the associated lease
components when certain criteria are met. Adoption results in an increase in long-term assets and liabilities
for leases where the Company is the lessee.
F-15
CoreCivic adopted ASU 2016-02 and ASU 2018-11, cumulatively ("ASC 842"), on January 1, 2019. The
Company elected the modified retrospective transition method and recognized the cumulative-effect
adjustment resulting from adoption of ASC 842 in the first quarter of 2019. CoreCivic also elected to adopt
the package of available practical expedients that permits lessees and lessors to not reassess certain items,
including whether any expired or existing contracts are or contain leases, lease classification of any expired or
existing leases, and initial direct costs for any expired or existing leases. In addition, the Company made an
accounting policy election to apply the "short-term lease exception" permitted by ASC 842 for all classes of
underlying assets. With the exception of the South Texas Family Residential Center lease, as further
described in Note 5, the Company also elected the practical expedient that permits lessees to make an
accounting policy election to account for each separate lease component of a contract and its associated non-
lease components as a single lease component. Prior to the adoption of ASC 842, a portion of the rental
payments for the South Texas Family Residential Center was classified as depreciation and interest expense in
accordance with ASC 840-40-55, formerly Emerging Issues Task Force No. 97-10, "The Effect of Lessee
Involvement in Asset Construction." Upon adoption of ASC 842, all rental payments associated with this
lease are classified as operating expenses.
Upon adoption of ASC 842, CoreCivic recognized a ROU asset of $115.6 million and a lease liability of $82.9
million for all operating leases identified by the Company as applicable under the guidance of ASC 842,
including the lease for the South Texas Family Residential Center. For those operating leases that contain
renewal options, the Company included the renewal period in the lease terms, and the related payments are
reflected in the ROU asset and lease liability, when it is reasonably certain that a renewal option will be
exercised. The ROU asset is included in other assets on the consolidated balance sheets, while the current
portion of the lease liability is included in accounts payable and accrued expenses, and the long-term portion
of the liability is included in other liabilities on the consolidated balance sheets. The Company also recognized
a net charge of approximately $29.9 million to accumulated deficit upon adoption of ASC 842. Because
CoreCivic does not generally have access to the interest rates implicit in its leases, the Company utilized its
incremental borrowing rate, based upon the terms and tenure of each base lease, as the discount rate when
calculating the present value of future minimum lease payments for each lease arrangement. The weighted
average discount rate associated with the operating leases at adoption of ASC 842 was 5.3%.
Recent Accounting Pronouncements – Other
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments – Credit Losses – Measurement of
Credit Losses on Financial Instruments," which will change how entities measure credit losses for most
financial assets and certain other instruments that are not measured at fair value through net income. The ASU
will replace the current "incurred loss" approach with an "expected loss" model for instruments measured at
amortized cost. For trade and other receivables, held-to-maturity debt securities, contract assets, loans and
other instruments, entities will be required to use a new forward-looking "expected loss" model that generally
will result in the earlier recognition of allowances for losses. The ASU is effective for the Company in the first
quarter of 2020. The Company is currently evaluating the effects of this ASU to determine the potential
impact on its financial statements. Based principally on the fact that the largest portion of the Company's
accounts receivable is with governmental agencies, the Company does not currently expect the new standard
will have a material impact on its financial statements.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the
American Institute of Certified Public Accountants and the Securities and Exchange Commission ("SEC") did
not, or are not expected to, have a material effect on the Company's results of operations or financial position.
F-16
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
$50.5 million and $48.2 million as of December 31, 2019 and 2018, respectively. Of these amounts, goodwill
was $7.9 million as of both December 31, 2019 and 2018 for the Company's CoreCivic Safety segment, and
was $42.6 million and $40.3 million as of December 31, 2019 and 2018, respectively, for its CoreCivic
Community segment. This goodwill was established in connection with multiple business combination
transactions.
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 not more likely than not that the fair value of a reporting unit is less than its
carrying amount, then performing a quantitative impairment test is not necessary. 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. These impairment tests are required to be
performed at least annually.
CoreCivic performed its impairment tests during the fourth quarter of 2019, 2018 and 2017. CoreCivic
performed a qualitative assessment for its goodwill allocated to the Company’s CoreCivic Safety segment.
CoreCivic performed a quantitative analysis for its goodwill allocated to its CoreCivic Community segment.
The quantitative analysis was prepared using valuation methodologies that include an income approach and
market approach. The income approach valuation included 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. Based on the
impairment tests performed, CoreCivic concluded no impairments had occurred for the years ended December
31, 2019 and 2018.
In March 2017, the Texas Department of Criminal Justice ("TDCJ") notified CoreCivic that, in light of the
current economic climate, as well as the fiscal constraints and budget outlook for the next biennium, the TDCJ
would not be awarding the contract for the Bartlett State Jail. The TDCJ had previously solicited proposals for
the rebid of the Bartlett facility, along with three other facilities that CoreCivic managed for the state of Texas.
The managed-only contracts at the four facilities were scheduled to expire in August 2017. However, in
collaboration with the TDCJ, the decision was made to close the Bartlett facility on June 24, 2017. In
anticipation of the termination of the contract and closing of the Bartlett facility, CoreCivic recorded an asset
impairment of $0.3 million during the first quarter of 2017 for the write-off of goodwill associated with the
facility. During the third quarter of 2017, CoreCivic was notified that the TDCJ selected other operators for
the three remaining facilities the Company managed for the state of Texas. CoreCivic had no goodwill
associated with these three facilities.
4. REAL ESTATE AND RELATED ASSETS
At December 31, 2019, CoreCivic owned 72 correctional, detention, and residential reentry real estate
properties, and 28 properties for lease to third parties. At December 31, 2019, CoreCivic also managed seven
correctional and detention facilities owned by governmental agencies.
F-17
Property and equipment, at cost, consists of the following (in thousands):
Land and improvements
Buildings and improvements
Equipment and software
Office furniture and fixtures
Construction in progress
Less: Accumulated depreciation
December 31,
2019
2018
435,628
38,278
29,521
$ 295,214 $ 294,774
3,411,583 3,490,725
432,196
34,968
94,590
4,210,224 4,347,253
(1,510,117 ) (1,516,664 )
$ 2,700,107 $ 2,830,589
Construction in progress primarily consists of properties under construction or expansion. Interest is
capitalized on construction in progress and amounted to $6.0 million and $1.0 million in 2019 and 2018,
respectively. There was no interest capitalized on construction in progress in 2017.
Depreciation expense was $137.7 million, $152.0 million, and $145.7 million for the years ended December
31, 2019, 2018, and 2017, respectively.
Eleven of the facilities owned by CoreCivic are subject to options that allow various governmental agencies to
purchase those facilities. Certain of these options to purchase are based on a depreciated book value while
others are based on a fair market value calculation. Four of the facilities that are subject to options are
accounted for in accordance with ASC 853 and are recorded in other real estate assets on the consolidated
balance sheets, as further described in Note 2. As of December 31, 2019, CoreCivic had approximately
$238.6 million in other real estate assets, including $147.8 million accounted for as a contract cost and $90.8
million accounted for as costs of fulfilling the related service contract. As of December 31, 2018, CoreCivic
had approximately $247.2 million in other real estate assets, including $150.1 million accounted for as a
contract cost and $97.1 million accounted for as costs of fulfilling the related service contract.
In June 2013, CoreCivic entered into an Economic Development Agreement ("EDA") with the Development
Authority of Telfair County ("Telfair County") in Telfair County, Georgia to implement a tax abatement plan
related to CoreCivic's bed expansion project at its McRae Correctional Facility. The tax abatement plan
provides for 90% abatement of real property taxes in the first year, decreasing by 10% over the subsequent
nine years. In June 2013, Telfair County issued bonds in a maximum principal amount of $15.0 million.
According to the EDA, legal title of CoreCivic's real property was transferred to Telfair County. Pursuant to
the EDA, the bonds were issued to CoreCivic, so no cash exchanged hands. Telfair County then leased the
real property back to CoreCivic. The lease payments are equal to the amount of the payments on the bonds.
At any time, CoreCivic has the option to purchase the real property by paying off the bonds, plus $100. Due
to the form of the transactions, CoreCivic has not recorded the bonds or the capital lease associated with the
sale lease-back transaction. The original cost of CoreCivic's property and equipment is recorded on the
balance sheet and is being depreciated over its estimated useful life.
5.
LEASES
As further described in Note 2, CoreCivic accounts for leases in accordance with ASC 842. CoreCivic leases
land and buildings from third-party lessors for multiple properties under operating leases that expire over
varying dates through 2032. The ROU asset related to these leases amounted to $108.1 million at December
31, 2019, while the current portion of the lease liability amounted to $26.9 million and the long-term portion
of the liability amounted to $51.2 million at December 31, 2019. As of December 31, 2019, the weighted-
average lease term of the operating leases was 4.2 years and the weighted average discount rate associated
with the operating leases was 5.2%.
F-18
CoreCivic leases the South Texas Family Residential Center and the site upon which it was constructed from a
third-party lessor. CoreCivic's lease agreement with the lessor is over a base period concurrent with an inter-
governmental service agreement ("IGSA") with ICE, which was amended in October 2016 to extend the term
of the agreement through September 2021. However, ICE can terminate the IGSA for convenience or non-
appropriation of funds, without penalty, by providing CoreCivic with at least a 60-day notice. In the event
CoreCivic cancels the lease with the third-party lessor prior to its expiration as a result of the termination of
the IGSA by ICE for convenience, and if CoreCivic is unable to reach an agreement for the continued use of
the facility within 90 days from the termination date, CoreCivic is required to pay a termination fee to the
third-party lessor based on the termination date, currently equal to $4.5 million and declining to zero by
October 2020. Under provisions of ASC 842, CoreCivic determined that the South Texas Family Residential
Center lease with the third-party lessor includes a non-lease component for food services representing
approximately 44% of the consideration paid under the lease.
The expense incurred for all operating leases, inclusive of short-term and variable leases, but exclusive of the
non-lease food services component of the South Texas Family Residential Center lease, was $34.8 million,
$30.7 million, and $28.9 million for the years ended December 31, 2019, 2018, and 2017, respectively. The
cash payments for operating leases are reflected as cash flows from operating activities on the accompanying
consolidated statements of cash flows and cash payments for financing leases are reflected as cash flows from
financing activities. Future minimum lease payments as of December 31, 2019 for the Company's operating
lease liabilities, inclusive of $49.7 million of payments expected to be made under the cancelable lease at the
South Texas facility (excluding the non-lease food services component), are as follows (in thousands):
2020
2021
2022
2023
2024
Thereafter
Total future minimum lease payments
Less amount representing interest
Total present value of minimum lease payments
$
$
32,797
25,438
3,886
3,306
3,144
21,033
89,604
(11,443 )
78,161
In addition, through its CoreCivic Properties segment, as of December 31, 2019, the Company owned $450.3
million in property, plant and equipment at 28 properties for lease to third parties and used by government
agencies under operating leases that expire over varying dates through 2034, some of which contain renewal
options. In accordance with ASC 842, minimum rental revenue is recognized on a straight-line basis over the
term of the related lease. Leasehold incentives are recognized as a reduction to rental revenue on a straight-
line basis over the term of the related lease. Rental revenue associated with expense reimbursements from
tenants is recognized in the period that the related expenses are incurred based upon the tenant lease provision.
See Note 6 for further discussion regarding a 20-year lease agreement with the Kansas Department of
Corrections ("KDOC"). Future undiscounted cash flows to be received from third-party lessees as of
December 31, 2019 for the Company's operating leases are as follows (in thousands):
2020
2021
2022
2023
2024
Thereafter
$
74,525
67,976
61,554
59,446
59,200
353,144
F-19
6.
REAL ESTATE TRANSACTIONS
Acquisitions
2017 Acquisitions. On January 1, 2017, CoreCivic acquired the Arapahoe Community Treatment Center, a
135-bed residential reentry center in Englewood, Colorado, for $5.5 million in cash, excluding transaction-
related expenses. The acquisition included a contract with Arapahoe County whereby CoreCivic provides
residential reentry services for up to 135 residents.
On February 10, 2017, CoreCivic acquired the Stockton Female Community Corrections Facility, a 100-bed
residential reentry center in Stockton, California, in a real estate-only transaction for $1.6 million, excluding
transaction-related expenses. The 100-bed Stockton facility is leased to a third-party operator pursuant to a
lease agreement that extends through April 2021 and includes one five-year lease extension option. The lessee
separately contracts with the California Department of Corrections and Rehabilitation to provide rehabilitative
and reentry services to female residents at the leased facility.
On August 1, 2017, CoreCivic acquired New Beginnings Treatment Center, Inc. ("NBTC"), an Arizona-based
community corrections company, along with the real estate used in the operation of NBTC's business from an
affiliate of NBTC, for an aggregate purchase price of $6.4 million, excluding transaction related expenses. In
connection with the acquisition, CoreCivic assumed a contract with the BOP to provide reentry services to
male and female adults at the 92-bed Oracle Transitional Center located in Tucson, Arizona.
On September 15, 2017, CoreCivic acquired a portfolio of four properties for an aggregate purchase price of
$8.7 million, excluding transaction related expenses. The acquisition included a 230-bed residential reentry
center leased to the state of Georgia, and three properties in North Carolina and Georgia leased to the General
Services Administration ("GSA"), an independent agency of the United States government, two of which are
occupied by the Social Security Administration ("SSA"), and one of which is occupied by the Internal
Revenue Service ("IRS").
In allocating the purchase price of the four acquisitions in 2017, CoreCivic recorded $20.1 million of net
tangible assets, $1.8 million of identifiable intangible assets, and $0.3 million of tenant improvements
associated with one of the North Carolina leased properties which was recognized as a receivable and is being
recovered by payments from the lessee. CoreCivic acquired the properties as strategic investments that further
expand the Company's network of residential reentry centers and further diversify the Company's cash flows
through government-leased properties.
2018 Acquisitions. On January 19, 2018, CoreCivic acquired the 261,000 square-foot Capital Commerce
Center, located in Tallahassee, Florida for a purchase price of $44.7 million, excluding transaction-related
costs and certain closing credits. Capital Commerce Center is 98% leased, including 87% leased to the state
of Florida on behalf of the Florida Department of Business and Professional Regulation. In allocating the
purchase price of this transaction, CoreCivic recorded $40.6 million of net tangible assets and $3.2 million of
identifiable intangible assets.
On July 17, 2018, CoreCivic acquired a portfolio of twelve properties for $12.0 million, excluding
transaction-related costs, 100% leased to the U.S. Federal Government through the GSA on behalf of the SSA,
the Department of Homeland Security, and ICE. In allocating the purchase price of this transaction, CoreCivic
recorded $11.1 million of net tangible assets and $1.9 million of identifiable intangible assets.
On August 23, 2018, CoreCivic acquired a 541,000 square-foot SSA office building in Baltimore, Maryland
("SSA-Baltimore") for a purchase price of $242.0 million, excluding transaction-related costs and certain
closing credits. The office building was purpose built to SSA specifications in 2014 under a 20-year firm term
lease expiring in January 2034, and is backed by the full faith and credit of the U.S. Federal Government
through the GSA. In connection with the acquisition and as further described in Note 6, CoreCivic assumed
$157.3 million of in-place financing that was used to fund the initial construction of the property in 2014. In
allocating the purchase price of this transaction, CoreCivic recorded $207.4 million of net tangible assets and
$38.9 million of identifiable intangible assets.
F-20
On September 21, 2018, CoreCivic acquired a 217,000 square-foot, steel frame property in Dayton, Ohio for
$6.9 million, excluding transaction-related costs and certain closing credits, that was built-to-suit for the
National Archives and Records Administration ("NARA") in 2002. The building is 100% leased to the GSA
on behalf of NARA through January 2023 and includes two additional 10-year renewal options. The building
provides 1.2 million cubic feet of storage space, approximately 90% of which is dedicated to archives of the
IRS. In allocating the purchase price of this transaction, CoreCivic recorded $6.9 million of net tangible assets
and $0.7 million of identifiable intangible assets.
CoreCivic acquired the 15 properties in 2018 as strategic investments that further diversify the Company's
cash flows through government-leased properties and broaden the solutions it provides to its government
partners.
2019 Acquisitions. On February 20, 2019, CoreCivic acquired the South Raleigh Reentry Center, a 60-bed
residential reentry center in Raleigh, North Carolina, for $0.9 million, excluding transaction-related expenses.
In connection with the acquisition, CoreCivic provides reentry services for both male and female residents
under custody of the BOP.
On May 6, 2019, CoreCivic acquired a 36,520-square foot office building in Detroit, Michigan, for $7.2
million, excluding transaction-related expenses, that was built-to-suit for the state of Michigan's Department
of Health and Human Services ("MDHHS") in 2002. The property is 100% leased to the Michigan
Department of Technology, Management and Budget ("MDTMB") on behalf of MDHHS through June 2028
and includes one six-year renewal option at the sole discretion of the MDTMB.
In allocating the purchase price of the acquisitions in 2019, CoreCivic recorded $7.4 million of net tangible
assets and $0.8 million of identifiable intangible assets. CoreCivic acquired the properties as strategic
investments that further expand the Company's network of residential reentry centers and enable the continued
delivery of critical services that help people reintegrate into the community, and also further diversify the
Company's cash flows through the acquisition of a government-leased property.
Financing Leasing Transactions
On January 24, 2018, CoreCivic entered into a 20-year lease agreement with the KDOC for a 2,432-bed
correctional facility to be constructed by the Company in Lansing, Kansas. The new facility replaces the
Lansing Correctional Facility, Kansas' largest correctional complex for adult male inmates, originally
constructed in 1863. CoreCivic will be responsible for facility maintenance throughout the 20-year term of
the lease, at which time ownership will revert to the state of Kansas. Construction of the facility commenced
in the first quarter of 2018, and construction was completed in January 2020. CoreCivic will account for the
lease with the KDOC as a multiple element lease with a portion of the lease payments attributable to the
capital lease. In addition, portions of the lease payments will be attributable to maintenance services and
capital maintenance, representing two separately valued non-lease components. As of December 31, 2019,
CoreCivic had capitalized $137.7 million associated with the construction of the project, recognized as a
construction receivable in Other Assets on the consolidated balance sheet until commencement of the
financing lease in 2020. The cash payments associated with the construction of the project are recognized as
expenditures for facility development and expansions on the consolidated statements of cash flows.
F-21
Idle Facilities
As of December 31, 2019, CoreCivic had five 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):
Facility
Prairie Correctional Facility
Huerfano County Correctional Center
Diamondback Correctional Facility
Marion Adjustment Center
Kit Carson Correctional Center
Design
Capacity
1,600
752
2,160
826
1,488
6,826
Date
Idled
2010
2010
2010
2013
2016
Net Carrying Values at
December 31,
2019
2018
$ 14,863 $ 15,278
16,660
40,962
11,770
55,507
$ 136,250 $ 140,177
16,266
39,729
11,351
54,041
As of December 31, 2019, CoreCivic also had two idled non-core facilities in its Safety segment containing
440 beds with an aggregate net book value of $3.8 million; two facilities in its Community segment that
became idle during 2019, as further described hereafter, containing an aggregate of 381 beds with an
aggregate net book value of $6.5 million; and three previously leased residential reentry centers in its
Properties segment that became idle in 2019, as further described hereafter, containing an aggregate of 430
beds with an aggregate net book value of $9.3 million. CoreCivic incurred approximately $8.0 million, $8.2
million, and $8.9 million in operating expenses at these idled facilities for the years ended December 31, 2019,
2018, and 2017, respectively.
CoreCivic considers the cancellation of a contract or an expiration and non-renewal of a lease agreement in its
CoreCivic Properties segment as an indicator 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. CoreCivic updates the impairment analyses on an annual basis for each of the idled properties
and evaluates on a quarterly basis market developments for the potential utilization of each of these properties
in order to identify events that may cause CoreCivic to reconsider its most recent assumptions. As a result of
CoreCivic's analyses, CoreCivic determined each of the idled properties to have recoverable values in excess
of the corresponding carrying values as of December 31, 2019.
During the second quarter of 2019, CoreCivic idled one residential reentry center in Oklahoma due to
declining utilization from the state of Oklahoma and the consolidation of residents into the Company's other
reentry facilities located in the state. Further, the Company received notice during the second quarter of 2019
of the BOP's decision to award the rebid of a contract at one of the Company's residential reentry facilities in
Arizona to another operator. The residential reentry facility in Arizona was idled in the third quarter of 2019
upon expiration of its contract with the BOP on August 31, 2019. As a result of these residential reentry
centers becoming idle, CoreCivic tested the facilities for impairment during the second quarter of 2019.
CoreCivic concluded that the residential reentry facility in Oklahoma had a recoverable value in excess of the
corresponding carrying value. CoreCivic concluded that the residential reentry facility in Arizona would
likely be marketed for use other than as a residential reentry facility, and therefore, recorded an asset
impairment of $4.3 million in the second quarter of 2019 to reduce the carrying value of the facility to its
estimated fair value as a commercial real estate property. The fair value measurement for the Arizona
residential reentry facility was estimated using unobservable Level 3 inputs, as defined in ASC 820, using
market comparable data for similar properties in the local market.
F-22
During the third quarter of 2019, leases at three single-tenant residential reentry centers in the Company's
CoreCivic Properties segment expired and were not renewed. The three properties located in Pennsylvania
total approximately 54,000 square feet and contain an aggregate of 430 beds with an aggregate net book value
of $9.3 million as of December 31, 2019. The Company has begun to market the facilities to other potential
customers to operate as a CoreCivic Community facility or for future lease as a CoreCivic Properties facility.
As a result of the expiration of the leases at the three properties located in Pennsylvania, CoreCivic tested the
facilities for impairment during the third quarter of 2019. CoreCivic concluded that each of the properties had
a recoverable value in excess of the corresponding carrying value.
To illustrate CoreCivic's historical experience in securing new management contracts to utilize idle beds in its
correctional facilities, the following are examples of new contracts the Company secured during 2019.
On May 1, 2019, the BOP announced that it elected not to renew the contract at the Company's Adams County
Correctional Center in Adams County, Mississippi. On June 28, 2019, the BOP executed an amendment to
the existing contract to allow ICE to use up to 660 beds to care for adult male detainees. On July 18, 2019, the
BOP contract, which was originally scheduled to expire on July 31, 2019, was extended to August 30, 2019.
On September 3, 2019, the Company announced that it had entered into a new contract under an IGSA
between Adams County, Mississippi and ICE for up to 2,348 adult detainees at the Adams facility. The new
management agreement commenced on August 31, 2019, and has an initial term of 60 months, with unlimited
extension options thereafter upon mutual agreement. Either party may terminate the contract with 120 days'
written notice. ICE began utilizing the additional capacity at the Adams facility under the new contract and,
as of December 31, 2019, the Company cared for approximately 850 detainees from ICE at the facility. As a
result of the transition at this facility, CoreCivic performed an impairment analysis of the Adams facility,
which had a net carrying value $96.5 million as of December 31, 2019, and concluded that this asset has a
recoverable value in excess of the carrying value.
On May 16, 2019, CoreCivic announced that it had entered into a new contract under an IGSA between
Torrance County, New Mexico and ICE to activate the Company's 910-bed Torrance County Detention
Facility in Estancia, New Mexico. The Torrance facility had previously been idle since 2017 and had a net
carrying value of $34.0 million as of December 31, 2019. The new management contract commenced on May
15, 2019, and has an initial term of 60 months, with unlimited extension options thereafter upon mutual
agreement. Either party may terminate the contract with 120 days' written notice. CoreCivic began accepting
ICE detainee populations into the Torrance facility in the third quarter of 2019 and, as of December 31, 2019,
cared for approximately 300 detainees at the facility.
On May 23, 2019, CoreCivic announced that it had entered into a new contract under an IGSA between the
City of Eden, Texas and the USMS to activate the Company's 1,422-bed Eden Detention Center in Eden,
Texas. The new agreement also permits ICE to utilize capacity at the facility at any time in the future. The
Eden facility had previously been idle since 2017 and had a net carrying value of $37.0 million as of
December 31, 2019. The new management contract commenced on June 1, 2019, and has an indefinite term.
Either party may terminate the contract with 30 days' written notice. CoreCivic began accepting populations
into the Eden facility in the third quarter of 2019 and, as of December 31, 2019, cared for an aggregate of
approximately 1,000 detainees at the facility.
On December 9, 2019, CoreCivic entered into a lease with the Commonwealth of Kentucky Department of
Corrections ("KYDOC") for its previously idled 656-bed Southeast Correctional Complex in Wheelwright,
Kentucky, formerly known as the Southeast Kentucky Correctional Facility. The lease is expected to
commence in mid-2020 and has an initial term of ten years and includes five two-year renewal options. The
KYDOC has the option to purchase the facility at its fair market value at any time during the term of the lease.
The Southeast Correctional facility had previously been idle since 2012 and had a net carrying value of $20.3
million as of December 31, 2019.
F-23
Asset Dispositions
In the second quarter of 2018, CoreCivic entered into an agreement to sell its former corporate headquarters
for $12.6 million. In connection with the agreement, the Company wrote-down the value of the property to its
net realizable value, recognizing an asset impairment charge of $1.6 million in the second quarter of 2018.
CoreCivic closed on the sale during the third quarter of 2018 and used the net proceeds from the sale to pay-
down a portion of the amounts outstanding under the Company's revolving credit facility.
On June 24, 2019, CoreCivic sold a property which was leased to a third-party and located in Chester,
Pennsylvania for $3.4 million. The property had a net carrying value of $3.1 million at the time of the sale,
with the gain on the sale of $0.3 million recognized in the second quarter of 2019 and reflected in other
(income) expense on the consolidated statement of operations.
7.
BUSINESS COMBINATIONS
On June 1, 2017, CoreCivic acquired the real estate operated by Center Point, Inc. ("Center Point"), a
California-based non-profit organization, for $5.3 million in cash, excluding transaction-related expenses.
CoreCivic consolidated a portion of Center Point's operations into the Company's preexisting residential
reentry center portfolio and assumed ownership and operations of the Oklahoma City Transitional Center, a
200-bed residential reentry center in Oklahoma City, Oklahoma.
On November 1, 2017, CoreCivic completed the acquisition of Time to Change, Inc. ("TTC"), a Colorado-
based community corrections company, for an aggregate purchase price of $22.0 million, excluding
transaction related expenses. As a result of better than estimated financial performance of the acquisition,
during the fourth quarter of 2018, the Company recognized the loss of $6.1 million for additional contingent
consideration associated with the acquisition. In connection with the acquisition, CoreCivic assumed
contracts with Adams County, Colorado to provide residential reentry services to male and female adults in
three facilities located in Colorado containing a total of 422 beds.
In allocating the purchase price for the two transactions in 2017, CoreCivic recorded the following (in
millions):
Tangible current assets and liabilities, net
Property and equipment
Intangible assets
Total identifiable assets
Goodwill
Total consideration
$
$
0.9
19.7
3.9
24.5
2.8
27.3
Effective January 1, 2018, CoreCivic closed on the acquisition of Rocky Mountain Offender Management
Systems, LLC ("RMOMS"), which provides non-residential correctional alternatives, including electronic
monitoring and case management services, to municipal, county, and state governments in seven states. The
aggregate purchase price was $7.0 million, excluding transaction-related expenses.
Effective December 1, 2018, CoreCivic closed on the acquisition of Recovery Monitoring Solutions
Corporation ("RMSC"), which provides non-residential correctional alternatives, including electronic
monitoring and case management services, to municipal, county, and state governments in four states. The
aggregate purchase price was $15.9 million, excluding transaction-related expenses.
F-24
In allocating the purchase price for the two transactions in 2018, CoreCivic recorded the following (in
millions):
Property and equipment
Intangible assets
Tangible assets and liabilities, net
Total identifiable assets, net
Goodwill
Total consideration
$
$
6.1
12.4
(2.8 )
15.7
7.2
22.9
On December 7, 2019, CoreCivic completed the acquisition of certain assets of Rehabilitation Services, Inc.
("RSI") for $4.4 million, excluding transaction related expenses. The acquisition resulted in the addition of
two residential reentry centers in Virginia. The Ghent Residential Reentry Center, a 36-bed residential reentry
center in Norfolk, Virginia and the James River Residential Reentry Center, an 84-bed residential reentry
center in Newport News, Virginia provide reentry services for residents under custody of the BOP. The
residential reentry facilities can also serve an additional 34 home confinement clients on behalf of the BOP.
In allocating the purchase price for the acquisition of certain assets of RSI in 2019, CoreCivic recorded the
following (in millions):
Property and equipment
Intangible assets
Total identifiable assets
Goodwill
Total consideration
$
$
1.3
0.7
2.0
2.4
4.4
Several factors gave rise to the goodwill recorded in the acquisitions of Center Point, TTC, RMOMS, RMSC,
and RSI, such as the expected benefit from synergies of the business combinations and the long-term contracts
for community corrections services that continue to broaden the scope of solutions CoreCivic provides. The
results of operations for these business combinations have been included in the Company's consolidated
financial statements from the dates of the acquisitions.
8.
INVESTMENT IN AFFILIATE
CoreCivic has a 50% ownership interest in APM, an entity holding the management contract for a correctional
facility, HM Prison Forest Bank, under a 25-year prison management contract with an agency of the United
Kingdom government. CoreCivic has determined that its joint venture investment in APM represents a
variable interest entity ("VIE") in accordance with ASC 810, "Consolidation" of which CoreCivic is not the
primary beneficiary. The Forest Bank facility, located in Salford, England, was previously constructed and
owned by a wholly-owned subsidiary of CoreCivic, which was sold in April 2001. All gains and losses under
the joint venture are accounted for using the equity method of accounting. During 2000, CoreCivic extended a
working capital loan to APM, which has an outstanding balance of $3.0 million as of December 31, 2019.
For the years ended December 31, 2019, 2018, and 2017, equity in losses of the joint venture was $128,000,
$100,000, and $62,000, respectively. The equity in losses and earnings of the joint venture is included in
other (income) expense in the consolidated statements of operations. As of December 31, 2019, CoreCivic's
equity investment in APM was $38,000 and is reported in other assets on the accompanying consolidated
balance sheets. The outstanding working capital loan of $3.0 million, combined with the $38,000 investment
in APM, represents CoreCivic's maximum exposure to loss in connection with APM.
F-25
9. OTHER ASSETS
Other assets consist of the following (in thousands):
Intangible assets:
Below market lease value, less accumulated
amortization of $8,850
Deferred leasing assets, less accumulated
amortization of $5,647 and $2,021, respectively
Other intangible assets, less accumulated
amortization of $8,182 and $5,118, respectively
Construction receivable - Kansas lease
ROU lease assets
Lease incentive assets
Debt issuance costs, less accumulated amortization of
$1,475 and $631, respectively
Cash equivalents and cash surrender value of life
insurance held in Rabbi trust
Straight-line rent receivable
Insurance receivable
Other
December 31,
2019
2018
—
32,738
41,129
43,856
14,517
137,665
108,118
5,454
17,311
—
—
6,096
2,628
3,322
14,448
7,836
13,179
5,933
13,977
10,729
6,599
6,579
$ 350,907 $ 141,207
The gross carrying amount of intangible assets amounted to $69.5 million and $109.9 million at December 31,
2019 and 2018, respectively. Amortization expense related to intangible assets was $6.8 million, $6.5 million,
and $3.4 million for 2019, 2018, and 2017, respectively, and depending upon the nature of the asset, was
either reported as operating expense or depreciation and amortization in the accompanying statement of
operations for the respective periods.
As of December 31, 2019, the estimated amortization expense related to intangible assets for each of the next
five years is as follows (in thousands):
2020
2021
2022
2023
2024
$
6,708
5,781
4,565
3,569
3,514
F-26
10. ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LONG-TERM LIABILITIES
Accounts payable and accrued expenses consist of the following (in thousands):
December 31,
Trade accounts payable
Accrued salaries and wages
Accrued dividends
Accrued workers' compensation and auto liability
Accrued litigation
Accrued employee medical insurance
Accrued property taxes
Accrued interest
ROU lease liability
Deferred revenue
Construction payable
Lease financing obligation
Other
$
2019
75,152 $
51,845
54,843
7,062
14,134
6,110
27,900
10,142
26,914
15,387
7,504
8,603
31,866
2018
96,642
42,556
52,572
6,901
13,937
5,442
27,288
12,957
—
15,173
21,099
12,771
44,937
$ 337,462 $ 352,275
The total liability for workers' compensation and auto liability was $35.8 million and $29.7 million as of
December 31, 2019 and 2018, respectively, with the long-term portion included in other long-term liabilities
on the accompanying consolidated balance sheets. These liabilities were discounted to the net present value of
the outstanding liabilities using a 3.0% rate in 2019 and 2018. These liabilities amounted to $40.4 million and
$33.4 million on an undiscounted basis as of December 31, 2019 and 2018, respectively.
Other long-term liabilities consist of the following (in thousands):
December 31,
2019
2018
5,417 $
$
5,804
28,769 22,798
10,919 11,507
7,634 18,817
—
1,622
$ 105,579 $ 60,548
51,247
1,593
Intangible contract liability
Accrued workers' compensation
Accrued deferred compensation
Lease financing obligation
ROU lease liability
Other
F-27
11. DEBT
Debt outstanding consists of the following (in thousands):
Revolving Credit Facility maturing April 2023. Interest payable
periodically at variable interest rates. The weighted average rate
at December 31, 2019 and 2018 was 3.3% and 4.0%, respectively.
Term Loan A maturing April 2023. Interest payable periodically at
variable interest rates. The rate at December 31, 2019 and 2018
was 3.3% and 4.0%, respectively. Unamortized debt issuance
costs amounted to $0.1 million at both December 31, 2019 and
2018.
Term Loan B maturing December 2024. Interest payable periodically
at variable interest rates. The rate at December 31, 2019 was 6.3%.
Unamortized debt issuance costs amounted to $4.6 million
at December 31, 2019.
4.625% Senior Notes maturing May 2023. Unamortized debt
issuance costs amounted to $2.1 million and $2.7 million
at December 31, 2019 and 2018, respectively.
4.125% Senior Notes. Unamortized debt issuance costs amounted
to $1.0 million at 2018.
5.0% Senior Notes maturing October 2022. Unamortized debt
issuance costs amounted to $1.3 million and $1.8 million at
December 31, 2019 and 2018, respectively.
4.75% Senior Notes maturing October 2027. Unamortized debt
issuance costs amounted to $3.1 million and $3.5 million at
December 31, 2019 and 2018, respectively.
4.5% Capital Commerce Center Non-Recourse Mortgage Note
maturing January 2033. Unamortized debt issuance costs
amounted to $0.3 million at both December 31, 2019 and 2018.
4.43% Lansing Correctional Center Non-Recourse Mortgage Note
maturing January 2040. Unamortized debt issuance costs amounted
to $3.3 million and $3.4 million at December 31, 2019
and 2018, respectively.
4.5% SSA- Baltimore Non-Recourse Mortgage Note maturing
February 2034. Unamortized debt issuance costs amounted to
$0.2 million and $0.3 million at December 31, 2019 and 2018,
respectively.
Total debt
Unamortized debt issuance costs
Unamortized original issue discount
Current portion of long-term debt
Long-term debt, net
December 31,
2019
2018
$
365,000 $
201,000
190,000
197,500
250,000
—
350,000
350,000
—
325,000
250,000
250,000
250,000
250,000
22,209
23,429
159,522
62,331
150,134
1,986,865
(14,993 )
(12,500 )
(31,349 )
1,928,023 $
155,535
1,814,795
(13,119 )
—
(14,121 )
1,787,555
$
F-28
Revolving Credit Facility. On April 17, 2018, CoreCivic entered into the Second Amended and Restated
Credit Agreement (referred to herein individually as the "Bank Credit Agreement") in an aggregate principal
amount of up to $1.0 billion. The Bank Credit Agreement 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 Agreement has a maturity of April 2023. The Bank Credit
Agreement 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 1.50%, 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 December 31, 2019, CoreCivic had $365.0 million in borrowings
outstanding under the Revolving Credit Facility as well as $22.3 million in letters of credit outstanding
resulting in $412.7 million available under the Revolving Credit Facility.
The Revolving 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 Revolving 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 December 31, 2019, CoreCivic was in
compliance with all such covenants. In addition, the Revolving 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 Revolving 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 policies and the association of private companies with the
enforcement of such policies, some banks have recently announced that they do not expect to continue
providing credit or financial services to private entities that operate correctional and detention facilities,
including CoreCivic. The banks are legally obligated to honor their commitments under the Bank Credit
Agreement, which expires in April 2023.
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
December 31, 2019, the outstanding balance of the Term Loan A was $190.0 million.
F-29
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"). 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 will be 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, except that a
premium of 1.0% of the amount prepaid must accompany any prepayment made prior to December 18, 2020,
with the proceeds of any new or replacement tranche of term loans that are in the nature of what are
commonly referred to as "B" term loans and that bear interest with an all-in yield less than the all-in yield
applicable to the Term Loan. The 1.0% prepayment premium is also payable in respect of certain repricing
events occurring prior to December 18, 2020. 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. Proceeds from the issuance of the Term Loan B were used to partially
fund the early redemption of the $325.0 million in aggregate principal amount of 4.125% senior notes due
2020 (the "4.125% Senior Notes"), as further described hereafter, transaction fees and expenses, and to
provide for general corporate purposes. CoreCivic capitalized approximately $4.6 million of costs associated
with the issuance of the Term Loan B.
Senior Notes. Interest on the $350.0 million aggregate principal amount of CoreCivic's 4.625% senior notes
issued in April 2013 (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 5.0% senior notes issued in September 2015 (the
"5.0% Senior Notes") accrues at the stated rate and is payable in April and October of each year. The 5.0%
Senior Notes are scheduled to mature on October 15, 2022. 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.
The 4.625% Senior Notes, the 5.0% Senior Notes, and the 4.75% 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 subsidiaries that guarantee the Revolving Credit Facility. CoreCivic may redeem all or part of the
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 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.
On December 2, 2019, CoreCivic gave irrevocable notice that the Company would redeem the 4.125% Senior
Notes on January 1, 2020 ("the Redemption Date") at a redemption price equal to 100% of the principal
amount of the 4.125% Senior Notes, plus accrued and unpaid interest to but excluding the Redemption Date
("the Redemption Amount"). On December 27, 2019, and in accordance with the indenture governing the
4.125% Senior Notes, CoreCivic satisfied and discharged the 4.125% Senior Notes by irrevocably depositing
the Redemption Amount due on the Redemption Date with the trustee. Accordingly, the 4.125% Senior Notes
are not included on the Company's consolidated balance sheet as of December 31, 2019. CoreCivic financed
the Redemption Amount with borrowings under its Revolving Credit Facility and net proceeds from the Term
Loan B. CoreCivic incurred $0.6 million of expenses associated with this debt refinancing transaction.
F-30
Non-Recourse Mortgage Notes:
Capital Commerce Center. As previously discussed herein, on January 19, 2018, CoreCivic acquired the
261,000 square-foot Capital Commerce Center, located in Tallahassee, Florida, for a purchase price of $44.7
million. The acquisition was partially financed with a $24.5 million non-recourse mortgage note (the "Capital
Commerce Note"), which is fully-secured by the Capital Commerce Center property, with an interest rate of
4.5%, maturing in January 2033. Principal and interest on the Capital Commerce Note are payable in equal
monthly payments over the 15-year term of the note. The Capital Commerce Note is pre-payable at any time
with a prepayment charge, if any, equal to an amount so as to maintain the same yield on the Capital
Commerce Note as if it had been carried through to its full term using Treasury instruments having a term
equal to the remaining term of the Capital Commerce Note as of the prepayment date. CoreCivic capitalized
approximately $0.4 million of costs associated with the Capital Commerce Note. As of December 31, 2019,
the outstanding balance of the mortgage note was $22.2 million.
Lansing Correctional Facility. 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 will be payable in quarterly payments beginning in July 2020 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 Agreement, the issuance and
service of the Kansas Notes, and the revenues and expenses associated with the facility lease, will not impact
the financial covenants associated with the Company's Credit Agreement. As of December 31, 2019, the
outstanding balance of the Kansas Notes was $159.5 million.
SSA-Baltimore. As previously discussed herein, on August 23, 2018, CoreCivic acquired the 541,000 square-
foot SSA-Baltimore office building for a purchase price of $242.0 million. In connection with the acquisition,
a wholly-owned unrestricted subsidiary of the Company assumed $157.3 million of in-place financing that
was used to fund the initial construction of the property in 2014. The assumed non-recourse mortgage note
(the "SSA-Baltimore Note") carries a fixed interest rate of 4.5% and requires monthly principal and interest
payments, with a balloon payment of $40.0 million due at maturity in February 2034. The SSA-Baltimore
Note is fully-secured by the SSA-Baltimore property. CoreCivic may pre-pay the SSA-Baltimore Note in
whole or in part upon not less than 30 days' and not more than 60 days' prior written notice and such pre-
payment shall include a "make-whole" amount. During the last 90 days of the permanent loan term and upon
30 days' prior written notice, CoreCivic may prepay the note in full, including any accrued and outstanding
interest on any permanent loan payment date, without the payment of the "make-whole" amount. CoreCivic
capitalized approximately $0.2 million of costs associated with the assumption of the SSA-Baltimore Note.
As of December 31, 2019, the outstanding balance of the SSA-Baltimore Note was $150.1 million.
CoreCivic may also seek to issue additional debt or equity securities from time to time when the Company
determines that market conditions and the opportunity to utilize the proceeds from the issuance of such
securities are favorable.
Guarantees and Covenants. All of the restricted domestic subsidiaries of CoreCivic (as the parent
corporation) have provided full and unconditional guarantees of the Senior Notes. All of CoreCivic's
subsidiaries guaranteeing the Senior Notes are 100% owned subsidiaries of CoreCivic; and the subsidiary
guarantees are full and unconditional and are joint and several obligations of the guarantors.
F-31
As of December 31, 2019, neither CoreCivic nor any of its subsidiary guarantors had any material or
significant restrictions on CoreCivic's ability to obtain funds from its subsidiaries by dividend or loan or to
transfer assets from such subsidiaries.
The indentures governing the Senior Notes contain certain customary covenants that, subject to certain
exceptions and qualifications, restrict CoreCivic's ability to, among other things, make restricted payments;
incur additional debt or issue certain types of preferred stock; create or permit to exist certain liens;
consolidate, merge or transfer all or substantially all of CoreCivic's assets; and enter into transactions with
affiliates. In addition, if CoreCivic sells certain assets (and generally does not use the proceeds of such sales
for certain specified purposes) or experiences specific kinds of changes in control, CoreCivic must offer to
repurchase all or a portion of the Senior Notes. The offer price for the Senior Notes in connection with an
asset sale would be equal to 100% of the aggregate principal amount of the notes repurchased plus accrued
and unpaid interest and liquidated damages, if any, on the notes repurchased to the date of purchase. The offer
price for the Senior Notes in connection with a change in control would be 101% of the aggregate principal
amount of the notes repurchased plus accrued and unpaid interest and liquidated damages, if any, on the notes
repurchased to the date of purchase. The Senior Notes are also subject to certain cross-default provisions with
the terms of CoreCivic's Bank Credit Agreement, as well as the credit agreement governing the Term Loan B
(referred to herein individually as the "Term Loan B Credit Agreement"), collectively referred to herein as
CoreCivic's "Credit Agreements", as more fully described hereafter.
Other Debt Transactions
Letters of Credit. At December 31, 2019 and 2018, CoreCivic had $22.3 million and $24.0 million,
respectively, in outstanding letters of credit. The letters of credit were issued to secure CoreCivic's workers'
compensation and general liability insurance policies, performance bonds, and utility deposits. Except for
$0.3 million outstanding at December 31, 2018, the letters of credit were provided by a sub-facility under the
Revolving Credit Facility.
Debt Maturities
Scheduled principal payments as of December 31, 2019 for the next five years and thereafter were as follows
(in thousands):
2020
2021
2022
2023
2024
Thereafter
Total debt
$
31,349
39,087
292,981
904,110
194,937
524,401
$ 1,986,865
Cross-Default Provisions
The provisions of CoreCivic's debt agreements relating to the Credit Agreements and the Senior Notes contain
certain cross-default provisions. Any events of default under the Credit Agreements that result in the lenders'
actual acceleration of amounts outstanding thereunder also result in an event of default under the Senior
Notes. Additionally, any events of default under the Senior Notes that give rise to the ability of the holders of
such indebtedness to exercise their acceleration rights also result in an event of default under the Credit
Agreements.
F-32
If CoreCivic were to be in default under the Credit Agreements, and if the lenders under the Credit
Agreements elected to exercise their rights to accelerate CoreCivic's obligations under the Credit Agreements,
such events could result in the acceleration of all or a portion of CoreCivic's Senior Notes, which would have
a material adverse effect on CoreCivic's liquidity and financial position. CoreCivic does not have sufficient
working capital to satisfy its debt obligations in the event of an acceleration of all or a substantial portion of
CoreCivic's outstanding indebtedness.
12. DEFERRED REVENUE
In September 2014, CoreCivic announced that it had agreed under an expansion of an existing IGSA between
the city of Eloy, Arizona and ICE to care for up to 2,400 individuals at the South Texas Family Residential
Center, a facility leased by CoreCivic in Dilley, Texas. Services provided under the original amended IGSA
commenced in the fourth quarter of 2014 and had an original term of up to four years. The agreement
provided for a fixed monthly payment in accordance with a graduated schedule. In October 2016, CoreCivic
entered into an amended IGSA that provided for a new, lower fixed monthly payment commencing in
November 2016, and extended the term of the contract through September 2021. The agreement can be
further extended by bi-lateral modification. However, ICE can also terminate the agreement for convenience
or non-appropriation of funds, without penalty, by providing CoreCivic with at least a 60-day notice. ICE
began housing the first residents at the facility in December 2014, and the site was completed during the
second quarter of 2015. In September 2018, the city of Dilley, Texas assumed the amended IGSA with ICE.
Under the fixed monthly payment schedule of the original amended IGSA, ICE agreed to pay CoreCivic $70.0
million in two $35.0 million installments during the fourth quarter of 2014 and graduated fixed monthly
payments over the remaining months of the contract. CoreCivic used the multiple-element arrangement
guidance prescribed in ASC 605, "Revenue Recognition" in determining the total revenue to be recognized
over the term of the amended IGSA. During the years ended December 31, 2019, 2018, and 2017, CoreCivic
recognized $170.6 million, $170.6 million, and $170.1 million, respectively, in revenue associated with the
amended IGSA with the unrecognized balance of the fixed monthly payments reported in deferred revenue.
The current portion of deferred revenue is reflected within accounts payable and accrued expenses while the
long-term portion is reflected in deferred revenue on the accompanying consolidated balance sheets. As of
December 31, 2019 and 2018, total deferred revenue associated with this agreement amounted to $26.1
million and $39.7 million, respectively.
13.
INCOME TAXES
As discussed in Note 1, the Company began operating in compliance with REIT requirements for federal
income tax purposes effective January 1, 2013. As a REIT, the Company must distribute at least 90 percent of
its taxable income (including dividends paid to it by its TRSs) and will not pay federal income taxes on the
amount distributed to its stockholders. In addition, the Company must meet a number of other organizational
and operational requirements, which the Company currently expects to continue to meet. Most states where
CoreCivic holds investments in real estate conform to the federal rules recognizing REITs. Certain
subsidiaries have made an election with the Company to be treated as TRSs in conjunction with the
Company's REIT election; the TRS elections permit CoreCivic to engage in certain business activities in
which the REIT may not engage directly. A TRS is subject to federal and state income taxes on the income
from these activities and therefore, CoreCivic includes a provision for taxes in its consolidated financial
statements.
F-33
The TCJA was enacted on December 22, 2017. The TCJA reduced the U.S. federal corporate tax rate from
35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries
that were previously tax deferred, and created new taxes on certain foreign-sourced earnings. However, the
TCJA did not change the dividends paid deduction applicable to REITs and, therefore, CoreCivic generally
will not be subject to federal income taxes on the Company's REIT taxable income and gains that it distributes
to its stockholders. In the fourth quarter of 2017, the Company recorded, in accordance with ASC 740, the tax
effects of enactment of the TCJA on existing deferred tax balances and there was no one-time transition tax on
foreign earnings. The Company re-measured certain deferred tax assets and liabilities based on the rates at
which they are expected to reverse in the future, which is generally 21%. In the fourth quarter of 2017, the
Company recognized a charge of $4.5 million, which was included as a component of income tax expense, for
the revaluation of deferred tax assets and liabilities and other taxes associated with the TCJA. CoreCivic
applied the guidance in the SEC Staff Accounting Bulletin 118, "Income Tax Accounting Implications of the
Tax Cuts and Jobs Act" when accounting for the enactment-date effects of the TCJA in 2017 and throughout
2018. During the third quarter of 2018, the Company revised its estimates of the revaluation of deferred tax
assets and liabilities resulting in the recognition of an additional charge of $1.0 million, which was also
included as a component of income tax expense. Upon this revision in the third quarter of 2018, the Company
completed its accounting for all of the enactment-date income tax effects of the TCJA.
Income tax expense is comprised of the following components (in thousands):
Current income tax expense
Federal
State
Deferred income tax expense (benefit)
Federal
State
Income tax expense
For the Years Ended December 31,
2017
2018
2019
$
5,324 $ 10,481 $ 10,202
2,788
2,308
3,677
12,990
12,789
9,001
(489 )
(673 )
(1,162 )
7,839 $
1,088
(3,422 )
(167 )
(1,014 )
(4,436 )
921
8,353 $ 13,911
$
Significant components of CoreCivic's deferred tax assets and liabilities as of December 31, 2019 and 2018,
are as follows (in thousands):
Noncurrent deferred tax assets:
Asset reserves and liabilities not yet deductible for tax
Tax over book basis of certain assets
Net operating loss and tax credit carryforwards
Intangible contract value
Other
$
Total noncurrent deferred tax assets
Less valuation allowance
Total noncurrent deferred tax assets
Noncurrent deferred tax liabilities:
Book over tax basis of certain assets
Intangible value
Other
Total noncurrent deferred tax liabilities
Net total noncurrent deferred tax assets
$
December 31,
2019
2018
28,247 $
1,451
5,130
262
103
35,193
(3,865 )
31,328
21,742
1,665
5,483
148
123
29,161
(3,986 )
25,175
(11,478 )
(2,264 )
(1,528 )
(15,270 )
16,058 $
(5,707 )
(2,370 )
(2,151 )
(10,228 )
14,947
F-34
A reconciliation of the income tax provision at the statutory income tax rate and the effective tax rate as a
percentage of income from continuing operations before income taxes for the years ended December 31, 2019,
2018, and 2017 is as follows:
Statutory federal rate
Dividends paid deduction
State taxes, net of federal tax benefit
Permanent differences
Charges associated with adoption of tax reform
Tax benefit of equity-based compensation
Other items, net
2019
2018
2017
21.0 %
(18.9 )
1.2
1.2
—
0.1
(0.6 )
4.0 %
21.0 %
(18.6 )
1.0
1.0
0.6
0.5
(0.5 )
5.0 %
35.0 %
(31.3 )
1.2
0.6
2.4
(0.5 )
(0.2 )
7.2 %
CoreCivic's effective tax rate was 4.0%, 5.0%, and 7.2% during 2019, 2018, and 2017, respectively. As a
REIT, CoreCivic is entitled to a deduction for dividends paid, resulting in a substantial reduction in the
amount of federal income tax expense it recognizes. Substantially all of CoreCivic's income tax expense is
incurred based on the earnings generated by its TRSs. CoreCivic's overall effective tax rate is based on its
taxable income primarily generated by its TRSs. The Company's consolidated effective tax rate could
fluctuate in the future based on changes in estimates of taxable income, the relative amounts of taxable income
generated by the TRSs and the REIT, the implementation of additional tax planning strategies, changes in
federal or state tax rates or laws affecting tax credits available to the Company, changes in other tax laws,
changes in estimates related to uncertain tax positions, or changes in state apportionment factors, as well as
changes in the valuation allowance applied to the Company's deferred tax assets that are based primarily on
the amount of state net operating losses and tax credits that could expire unused.
CoreCivic had no liabilities for uncertain tax positions as of December 31, 2019 and 2018. CoreCivic
recognizes interest and penalties related to unrecognized tax positions in income tax expense. CoreCivic does
not currently anticipate that the total amount of unrecognized tax positions will significantly change in the
next twelve months.
CoreCivic's U.S. federal income tax returns for tax years 2016 through 2018 remain subject to examination by
the IRS. All states in which CoreCivic files income tax returns follow the same statute of limitations as the
federal government, with the exception of the following states whose open tax years include 2015 through
2018: Arizona, California, Colorado, Kentucky, Minnesota, New Jersey, Texas, and Wisconsin.
In October 2019, the Company received notification that the IRS intended to commence an audit of the federal
income tax return of the Company's REIT for the year ended December 31, 2017. The IRS has begun its
audit. Audit outcomes and the timing of any settlements of asserted income tax liabilities, if any, are subject
to significant uncertainty. The generally applicable statute of limitations for assessments of United States
federal income taxes remains open for tax years 2016 to present.
F-35
14. STOCKHOLDERS' EQUITY
Dividends on Common Stock
The tax characterization of dividends per share on common shares as reported to stockholders was as follows
for the years ended December 31, 2019, 2018, and 2017:
Declaration Date
February 17, 2017
May 11, 2017
August 10, 2017
December 7, 2017
February 22, 2018
May 11, 2018
August 16, 2018
December 13, 2018
February 21, 2019
May 16, 2019
August 15, 2019
December 12, 2019
Record Date
April 3, 2017
July 3, 2017
October 2, 2017
January 2, 2018
April 2, 2018
July 2, 2018
October 1, 2018
January 2, 2019
April 1, 2019
July 1, 2019
October 1, 2019
January 6, 2020
Payable Date
April 17, 2017
July 17, 2017
October 16, 2017
January 15, 2018
April 16, 2018
July 16, 2018
October 15, 2018
January 15, 2019
April 15, 2019
July 16, 2019
October 15, 2019
January 15, 2020
Total
Ordinary
Income
Return of
Capital
0.363660 (1) 0.056340
0.363660 (1) 0.056340
0.363660 (1) 0.056340
0.387446 (2) 0.032554
0.396671 (3) 0.033329
0.396671 (3) 0.033329
0.396671 (3) 0.033329
0.374927 (4) 0.055073
0.383646 (5) 0.056354
0.383646 (5) 0.056354
0.383646 (5) 0.056354
— (6)
Per Share
$
$
$
$
$
$
$
$
$
$
$
— (6) $
0.42
0.42
0.42
0.42
0.43
0.43
0.43
0.43
0.44
0.44
0.44
0.44
(1) $0.000000 of this amount constitutes a "Qualified Dividend", as defined by the IRS.
(2) $0.051840 of this amount constitutes a "Qualified Dividend", as defined by the IRS.
(3) $0.053074 of this amount constitutes a "Qualified Dividend", as defined by the IRS.
(4) $0.041313 of this amount constitutes a "Qualified Dividend", as defined by the IRS.
(5) $0.042274 of this amount constitutes a "Qualified Dividend", as defined by the IRS.
(6) Taxable in 2020.
Future dividends will depend on CoreCivic's distribution requirements as a REIT, future cash flows and
earnings, capital requirements, financial condition, limitations under debt covenants, opportunities for
alternative uses of capital, and on such other factors as the Board of Directors of CoreCivic may consider
relevant.
Common Stock
Restricted shares. During 2019, CoreCivic issued approximately 934,000 shares of RSUs to certain of its
employees and non-employee directors, with an aggregate value of $20.1 million, including 850,000 RSUs to
employees and non-employee directors whose compensation is charged to general and administrative expense
and 84,000 RSUs to employees whose compensation is charged to operating expense. During 2018,
CoreCivic issued approximately 945,000 RSUs to certain of its employees and non-employee directors, with
an aggregate value of $20.5 million, including 850,000 RSUs to employees and non-employee directors
whose compensation is charged to general and administrative expense and 95,000 RSUs to employees whose
compensation is charged to operating expense.
F-36
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, were 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 could vest in any one performance period. The RSUs awarded to officers
and executive officers in 2019 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 evenly generally on the first, second, and third anniversary of the award. 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, 2019, 2020, and 2021, and which can be increased by 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. Based on performance achieved for 2019, the RSUs subject to performance-based vesting criteria were
increased by 145.8%, but were reduced to the 80% modifier based on CoreCivic's total shareholder return
relative to the peer group. Because the performance criteria for the fiscal years ending December 31, 2020 and
2021 have not yet been established, the values of the second and third RSU increments 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 equally on the first, second,
and third anniversary of the award. RSUs issued to non-employee directors vest one year from the date of
award.
Nonvested RSU transactions as of December 31, 2019 and for the year then ended are summarized below (in
thousands, except per share amounts).
Nonvested at December 31, 2018
Granted
Cancelled
Vested
Nonvested at December 31, 2019
Shares of
RSUs
Weighted
average
grant date
fair value
24.67
21.49
23.78
25.53
22.52
1,225 $
934 $
(73 ) $
(524 ) $
1,562 $
During 2019, 2018, and 2017, CoreCivic expensed $17.3 million ($1.8 million of which was recorded in
operating expenses and $15.5 million of which was recorded in general and administrative expenses), $13.1
million ($1.8 million of which was recorded in operating expenses and $11.3 million of which was recorded in
general and administrative expenses), and $13.3 million ($1.9 million of which was recorded in operating
expenses and $11.4 million of which was recorded in general and administrative expenses), net of forfeitures,
relating to RSUs, respectively. As of December 31, 2019, CoreCivic had $16.5 million of total unrecognized
compensation cost related to RSUs that is expected to be recognized over a remaining weighted-average
period of 1.6 years. The total fair value of restricted common stock and RSUs that vested during 2019, 2018,
and 2017 was $13.4 million, $15.3 million, and $16.6 million, respectively.
On August 28, 2018, CoreCivic entered into an Amended and Restated ATM Equity Offering Sales
Agreement, or ATM Agreement, with multiple sales agents, pursuant to which the Company may offer and
sell to or through the agents, from time to time, shares of the Company's common stock, par value $0.01 per
share, having an aggregate gross sales price of up to $200.0 million. Sales, if any, of the Company's shares of
common stock will be made primarily in “at-the-market” offerings, as defined in Rule 415 under the Securities
Act of 1933, as amended. The shares of common stock will be offered and sold pursuant to CoreCivic's
registration statement on Form S-3 and a related prospectus supplement, both filed with the SEC on August
28, 2018. CoreCivic intends to use substantially all of the net proceeds from any sale of shares of the
Company's common stock to repay outstanding borrowings or for working capital and other general corporate
purposes, which may include investments. There were no shares of the Company's common stock sold under
the ATM Agreement during 2018 and 2019.
F-37
Preferred Stock
CoreCivic has the authority to issue 50.0 million shares of $0.01 par value per share preferred stock (the
"Preferred Stock"). The Preferred Stock may be issued from time to time upon authorization by the Board of
Directors, in such series and with such preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or other provisions as may be fixed by CoreCivic's Board of
Directors.
Stock Option Plans
CoreCivic has equity incentive plans under which, among other things, incentive and non-qualified stock
options are granted to certain employees and non-employee directors of CoreCivic by the compensation
committee of CoreCivic's Board of Directors. The options are granted with exercise prices equal to the fair
market value on the date of grant. Vesting periods for options granted to employees generally range from
three to four years. Options granted to non-employee directors vest on a date approximately following the
first anniversary of the grant date. The term of such options is ten years from the date of grant.
Since 2012, CoreCivic has elected not to issue stock options to its non-employee directors, officers, and
executive officers as it had in prior years, and instead elected to issue all of its equity compensation in the
form of RSUs as previously described herein. All outstanding stock options were fully vested as of December
31, 2016.
Stock option transactions relating to CoreCivic's non-qualified stock option plans are summarized below (in
thousands, except exercise prices):
Outstanding at December 31, 2018
Granted
Exercised
Cancelled
Outstanding at December 31, 2019
Exercisable at December 31, 2019
Weighted-
Average
Exercise
Price of
options
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
No. of
options
706 $
—
(62 )
—
644 $
644 $
20.32
—
14.19
—
20.91
20.91
1.4
1.4
$ —
$ —
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference
between CoreCivic's stock price as of December 31, 2019 and the exercise price, multiplied by the number of
in-the-money options) that would have been received by the option holders had all option holders exercised
their options on December 31, 2019. This amount changes based on the fair market value of CoreCivic's stock.
The total intrinsic value of options exercised during the years ended December 31, 2019, 2018, and 2017 was
$0.5 million, $1.3 million, and $2.9 million, respectively.
At CoreCivic's 2011 annual meeting of stockholders held in May 2011, CoreCivic's stockholders approved an
amendment to the 2008 Stock Incentive Plan that increased the authorized limit on issuance of new awards to
an aggregate of up to 18.0 million shares. In addition, during the 2003 annual meeting the stockholders
approved the adoption of CoreCivic's Non-Employee Directors' Compensation Plan, authorizing CoreCivic to
issue up to 225,000 shares of common stock pursuant to the plan. As of December 31, 2019, CoreCivic had
5.0 million shares available for issuance under the Amended and Restated 2008 Stock Incentive Plan and 0.2
million shares available for issuance under the Non-Employee Directors' Compensation Plan.
F-38
15. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted average number of common
shares outstanding during the year. Diluted earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted into common stock or resulted
in the issuance of common stock that then shared in the earnings of the entity. For CoreCivic, diluted earnings
per share is computed by dividing net income by the weighted average number of common shares after
considering the additional dilution related to restricted share grants and stock options.
A reconciliation of the numerator and denominator of the basic earnings per share computation to the
numerator and denominator of the diluted earnings per share computation is as follows (in thousands, except
per share data):
For the Years Ended December 31,
2018
2017
2019
NUMERATOR
Basic:
Net income
Diluted:
Net income
DENOMINATOR
Basic:
$ 188,886 $ 159,207 $ 178,040
$ 188,886 $ 159,207 $ 178,040
Weighted average common shares outstanding
119,028 118,544 118,084
Diluted:
Weighted average common shares outstanding
Effect of dilutive securities:
119,028 118,544 118,084
Stock options
Restricted stock-based awards
Weighted average shares and assumed
conversions
BASIC EARNINGS PER SHARE
DILUTED EARNINGS PER SHARE
22
114
111
61
310
71
119,164 118,716 118,465
1.51
$
1.50
$
1.59 $
1.59 $
1.34 $
1.34 $
Approximately 486,000, 317,000, and 8,000 stock options were excluded from the computations of diluted
earnings per share for the years ended December 31, 2019, 2018, and 2017, respectively, because they were
anti-dilutive.
16. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The nature of CoreCivic's business results in claims and litigation alleging that it is liable for damages arising
from the conduct of its employees, offenders or others. The nature of such claims includes, but is not limited
to, claims arising from employee or offender misconduct, medical malpractice, employment matters, property
loss, contractual claims, including claims regarding compliance with contract performance requirements, and
personal injury or other damages resulting from contact with CoreCivic's facilities, personnel or offenders,
including damages arising from an offender's escape or from a disturbance at a facility. CoreCivic maintains
insurance to cover many of these claims, which may mitigate the risk that any single claim would have a
material effect on CoreCivic's consolidated financial position, results of operations, or cash flows, provided
the claim is one for which coverage is available. The combination of self-insured retentions and deductible
amounts means that, in the aggregate, CoreCivic is subject to substantial self-insurance risk.
F-39
CoreCivic records litigation reserves related to certain matters for which it is probable that a loss has been
incurred and the range of such loss can be estimated. Based upon management's review of the potential
claims and outstanding litigation, and based upon management's experience and history of estimating losses,
and taking into consideration CoreCivic's self-insured retention amounts, management believes a loss in
excess of amounts already recognized would not be material to CoreCivic's financial statements. In the
opinion of management, there are no pending legal proceedings that would have a material effect on
CoreCivic's consolidated financial position, results of operations, or cash flows. Any receivable for insurance
recoveries is recorded separately from the corresponding litigation reserve, and only if recovery is determined
to be probable. Adversarial proceedings and litigation are, however, subject to inherent uncertainties, and
unfavorable decisions and rulings resulting from legal proceedings could occur which could have a material
adverse impact on CoreCivic's consolidated financial position, results of operations, or cash flows for the
period in which such decisions or rulings occur, or future periods. Expenses associated with legal proceedings
may also fluctuate from quarter to quarter based on changes in CoreCivic's assumptions, new developments,
or by the effectiveness of CoreCivic's litigation and settlement strategies.
Insurance Contingencies
Each of CoreCivic's management contracts and the statutes of certain states require the maintenance of
insurance. CoreCivic maintains various insurance policies including employee health, workers' compensation,
automobile liability, and general liability insurance. These policies are fixed premium policies with various
deductible amounts that are self-funded by CoreCivic. Reserves are provided for estimated incurred claims
for which it is probable that a loss has been incurred and the range of such loss can be estimated.
Retirement Plan
All employees of CoreCivic are eligible to participate in the CoreCivic 401(k) Savings and Retirement Plan
(the "Plan") upon reaching age 18 and completing six months of qualified service. Eligible employees may
contribute up to 90% of their eligible compensation, subject to IRS limitations. For the years ended December
31, 2019, 2018, and 2017, CoreCivic provided a discretionary matching contribution equal to 100% of the
employee's contributions up to 5% of the employee's eligible compensation to employees with at least 500
hours of employment in the plan year. Employer matching contributions paid into the Plan each pay period
vest immediately pursuant to safe harbor provisions adopted by the Plan.
During 2019, 2018, and 2017, CoreCivic's discretionary contributions to the Plan, net of forfeitures, were
$14.2 million, $13.2 million, and $12.3 million, respectively.
Deferred Compensation Plans
CoreCivic provides two non-qualified deferred compensation plans (the "Deferred Compensation Plans") for
non-employee directors and for certain senior executives. The Deferred Compensation Plans are unfunded
plans maintained for the purpose of providing CoreCivic's directors and certain of its senior executives the
opportunity to defer a portion of their compensation. Under the terms of the Deferred Compensation Plans,
certain senior executives may elect to contribute on a pre-tax basis up to 50% of their base salary and up to
100% of their cash bonus, and non-employee directors may elect to contribute on a pre-tax basis up to 100%
of their director retainer and meeting fees. During the years ended December 31, 2019, 2018, and 2017,
CoreCivic matched 100% of employee contributions up to 5% of total cash compensation. CoreCivic also
contributes a fixed rate of return on balances in the Deferred Compensation Plans, determined at the beginning
of each plan year. Matching contributions and investment earnings thereon become vested 20% after two
years of service, 40% after three years of service, 80% after four years of service, and 100% after five or more
years of service. Distributions are generally payable no earlier than five years subsequent to the date an
individual becomes a participant in the Plan, or upon termination of employment (or the date a director ceases
to serve as a director of CoreCivic), at the election of the participant. Distributions to senior executives must
commence on or before the later of 60 days after the participant's separation from service or the fifteenth day
of the month following the month the individual attains age 65.
F-40
During 2019, 2018, and 2017, CoreCivic provided a fixed return of 5.0% in each year to participants in the
Deferred Compensation Plans. CoreCivic has purchased life insurance policies on the lives of certain
employees of CoreCivic, which are intended to fund distributions from the Deferred Compensation Plans.
CoreCivic is the sole beneficiary of such policies. At the inception of the Deferred Compensation Plans,
CoreCivic established an irrevocable Rabbi Trust to secure the plans' obligations. However, assets in the
Deferred Compensation Plans are subject to creditor claims in the event of bankruptcy. During 2019, 2018,
and 2017, CoreCivic recorded $0.2 million, $0.3 million, and $0.1 million, respectively, of matching
contributions as general and administrative expense associated with the Deferred Compensation Plans. Assets
in the Rabbi Trust were $14.4 million and $14.0 million as of December 31, 2019 and 2018, respectively, and
were reflected in other assets on the accompanying consolidated balance sheets. As of December 31, 2019 and
2018, CoreCivic's liability related to the Deferred Compensation Plans was $12.9 million and $12.3 million,
respectively, which was reflected in accounts payable and accrued expenses and other liabilities on the
accompanying consolidated balance sheets.
Employment and Severance Agreements
CoreCivic currently has employment agreements with several of its executive officers, which provide for the
payment of certain severance amounts upon termination of employment under certain circumstances or a
change of control, as defined in the agreements.
17. SEGMENT REPORTING
As of December 31, 2019, CoreCivic operated 50 correctional and detention facilities, 43 of which the
Company owned. In addition, CoreCivic owned and operated 29 residential reentry centers and owned 28
properties for lease to third parties. Management views CoreCivic's operating results in three operating
segments, CoreCivic Safety, CoreCivic Community, and CoreCivic Properties. CoreCivic Safety includes the
operating results of those correctional and detention facilities placed into service that were owned, or
controlled via a long-term lease, and managed by CoreCivic, as well as those correctional and detention
facilities owned by a third party and managed by CoreCivic. CoreCivic Safety also includes the operating
results of TransCor America, LLC, a subsidiary of the Company that provides transportation services to
governmental agencies. CoreCivic Community includes the operating results of those residential reentry
centers placed into service that were owned, or controlled via a long-term lease, and managed by CoreCivic.
CoreCivic Community also includes the operating results of the Company's electronic monitoring and case
management services. CoreCivic Properties includes the operating results of those properties leased to third
parties. The operating performance of the three segments can be measured based on their net operating
income. CoreCivic defines facility net operating income as a facility's revenues less operating expenses.
F-41
The revenue and net operating income for each of the three segments and a reconciliation to CoreCivic's
operating income is as follows for the three years ended December 31, 2019, 2018, and 2017 (in thousands):
For the Years Ended December 31,
2018
2017
2019
Revenue:
Safety
Community
Properties
Total segment revenue
Operating expenses:
Safety
Community
Properties
Total segment operating expenses
Facility net operating income:
Safety
Community
Properties
Total facility net operating income
Other revenue (expense):
Other revenue
Other operating expense
General and administrative
Depreciation and amortization
Contingent consideration for acquisition
of businesses
Asset impairments
Operating income
$ 1,779,958 $ 1,675,998 $ 1,648,224
74,263
123,265 101,841
40,440
57,899
1,980,530 1,835,738 1,762,927
77,307
1,304,121 1,222,418 1,185,621
51,501
11,831
1,422,083 1,314,736 1,248,953
95,159
22,803
76,898
15,420
475,837 453,580 462,603
22,762
28,609
558,447 521,002 513,974
28,106
54,504
24,943
42,479
159
(686 )
2,571
(584 )
(127,078 ) (106,865 ) (107,822 )
(144,572 ) (156,501 ) (147,129 )
28
(514 )
—
(4,706 )
—
(614 )
$ 281,564 $ 249,485 $ 260,396
(6,085 )
(1,580 )
The following table summarizes capital expenditures including accrued amounts for the years ended
December 31, 2019, 2018, and 2017 (in thousands):
For the Years Ended December 31,
2018
2017
2019
Capital expenditures:
Safety
Community
Properties
Corporate and other
Total capital expenditures
The total assets are as follows (in thousands):
Assets:
Safety
Community
Properties
Corporate and other
Total assets
$ 77,662 $ 94,559 $ 55,712
35,489
18,327
5,219
$ 190,741 $ 487,136 $ 114,747
5,859
15,689
95,109 365,628
11,260
12,111
December 31,
2019
2018
$ 2,606,127 $ 2,621,880
275,882 281,198
682,249 606,770
227,373 145,812
$ 3,791,631 $ 3,655,660
F-42
18. SUBSEQUENT EVENTS
On January 2, 2020, CoreCivic completed the acquisition of a portfolio of 28 properties, 24 of which the
counter-party contributed to a newly formed partnership of the Company's, for total consideration of $83.2
million, excluding transaction-related expenses. All of the properties are leased to the federal government
through the GSA. CoreCivic financed the acquisition with $7.7 million of cash, assumed debt of $52.2 million
and the balance with the issuance of 1.3 million limited partnership units that are convertible into cash or
shares of the Company's common stock following a two-year period, using a "DownREIT" structure. The
assumed debt carries a fixed interest rate of 4.9%, with fixed monthly payments extending through November
2025, and a balloon payment of $46.2 million due at maturity.
During February 2020, CoreCivic issued approximately 1.2 million RSUs to certain of CoreCivic's employees
and non-employee directors, with an aggregate value of $20.7 million. Unless earlier vested under the terms
of the RSU agreement, approximately 0.8 million RSUs were issued to officers and executive officers, a
portion of which vest evenly on the first, second, and third anniversary of the award, and a portion of which
are subject to vesting over a three-year period based upon satisfaction of certain annual performance criteria
for the fiscal years ending December 31, 2020, 2021, and 2022, and which can be increased or decreased
based on performance relative to the annual performance criteria, and further increased or decreased based on
total shareholder return relative to a peer group. Approximately 0.4 million RSUs issued to other employees
vest evenly on the first, second, and third anniversary of the award. RSUs issued to non-employee directors
vest on the first anniversary of the award. Any RSUs that become vested will be settled in shares of
CoreCivic's common stock.
On February 20, 2020, the Company's Board of Directors declared a quarterly dividend of $0.44 per common
share payable April 15, 2020 to stockholders of record on April 1, 2020.
19. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF CORECIVIC AND
SUBSIDIARIES
The following condensed consolidating financial statements of CoreCivic and subsidiaries have been prepared
pursuant to Rule 3-10 of Regulation S-X. These condensed consolidating financial statements have been
prepared from the Company's financial information on the same basis of accounting as the consolidated
financial statements.
F-43
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2019
(in thousands)
ASSETS
Parent
Combined
Subsidiary
Guarantors
Non-
Guarantor
Subsidiaries
$
45,427 $
—
45,309 $
7
154,533 545,291
32,600
203,044 623,207
3,084
1,384 $
26,966
86
3,966
32,402
Consolidating
Adjustments
and Other
Total
Consolidated
Amounts
92,120
26,973
(419,125 ) 280,785
35,507
(423,268 ) 435,385
— $
—
(4,143 )
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowance
Prepaid expenses and other current assets
Total current assets
Real estate and related assets:
Property and equipment, net
Other real estate assets
Goodwill
Non-current deferred tax assets
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable and accrued expenses
Current portion of long-term debt
Total current liabilities
Long-term debt, net
Non-current deferred tax liabilities
Deferred revenue
Other liabilities
Total liabilities
2,226,822 272,888 200,397
— 2,700,107
238,637
— 238,637
—
50,537
—
—
35,425
16,058
(478 )
2,411
—
606,718 136,125 173,268
(565,204 ) 350,907
$ 3,310,646 $ 1,061,457 $ 408,478 $ (988,950 ) $ 3,791,631
—
15,112
14,125
—
23,776
$ 261,588 $ 396,703 $ 102,404 $ (423,233 ) $ 337,462
31,349
(423,233 ) 368,811
(115,000 ) 1,928,023
—
(478 )
—
12,469
— 105,579
(538,711 ) 2,414,882
7,573
285,364 396,703 109,977
1,629,745 114,682 298,596
—
—
—
1,933,897 611,123 408,573
—
12,469
87,269
478
—
18,310
—
Total stockholders' equity
Total liabilities and stockholders' equity
1,376,749 450,334
(450,239 ) 1,376,749
$ 3,310,646 $ 1,061,457 $ 408,478 $ (988,950 ) $ 3,791,631
(95 )
F-44
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2018
(in thousands)
ASSETS
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowance
Prepaid expenses and other current assets
Total current assets
Real estate and related assets:
Property and equipment, net
Other real estate assets
Goodwill
Non-current deferred tax assets
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable and accrued expenses
Current portion of long-term debt
Total current liabilities
Long-term debt, net
Non-current deferred tax liabilities
Deferred revenue
Other liabilities
Total liabilities
Combined
Subsidiary
Guarantors
11,109 $ 40,348 $
Parent
Non-
Guarantor
Subsidiaries
$
—
254,766 445,105
4,412 26,939
270,287 512,392
1,345 $
— $ 21,335
1,809
1,951
26,440
Consolidating
Adjustments
and Other
Total
Consolidated
Amounts
52,802
21,335
(431,083 ) 270,597
28,791
(435,594 ) 373,525
— $
—
(4,511 )
2,255,361 310,989 264,239
—
247,223
—
1,165
38,112
— 2,830,589
— 247,223
—
48,169
—
33,057 15,112
14,947
(1,165 )
727 14,220
(465,170 ) 141,207
507,161 61,104
$ 3,313,816 $ 913,817 $ 329,956 $ (901,929 ) $ 3,655,660
—
8,720
$ 294,474 $ 377,699 $ 115,661 $ (435,559 ) $ 352,275
14,121
(435,559 ) 366,396
(115,000 ) 1,787,555
—
26,102
60,548
(551,724 ) 2,240,601
5,401
303,194 377,699 121,062
1,579,273 114,428 208,854
—
—
—
1,898,757 563,652 329,916
—
— 26,102
15,125 45,423
(1,165 )
—
—
1,165
—
Total stockholders' equity
Total liabilities and stockholders' equity
1,415,059 350,165
(350,205 ) 1,415,059
$ 3,313,816 $ 913,817 $ 329,956 $ (901,929 ) $ 3,655,660
40
F-45
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the year ended December 31, 2019
(in thousands)
REVENUES
EXPENSES:
Operating
General and administrative
Depreciation and amortization
Asset impairments
OPERATING INCOME
OTHER (INCOME) EXPENSE:
Interest expense, net
Expenses associated with debt refinancing
transactions
Other (income) expense
INCOME BEFORE INCOME TAXES
Income tax expense
INCOME BEFORE EQUITY IN
SUBSIDIARIES
Income from equity in subsidiaries
NET INCOME
Total
Non-
Consolidated
Guarantor
Amounts
Subsidiaries
$ 1,363,562 $ 1,627,226 $ 23,546 $ (1,033,645 ) $ 1,980,689
Consolidating
Adjustments
and Other
Combined
Subsidiary
Guarantors
Parent
42,680
93,575
4,706
1,065,596 1,381,676
84,398
43,231
—
1,206,557 1,509,305
157,005 117,921
—
7,766
—
9,142 (1,033,645 ) 1,422,769
— 127,078
— 144,572
4,706
—
16,908 (1,033,645 ) 1,699,125
— 281,564
6,638
71,969
5,658
6,774
—
84,401
109
493
72
(363 )
72,099
5,839
84,906 112,082
(6,129 )
(1,710 )
—
335
7,109
(471 )
—
602
—
(164 )
(208 )
(208 )
84,839
208 196,725
(7,839 )
—
83,196 105,953
105,690
—
$ 188,886 $ 105,953 $
(471 )
—
208 188,886
—
(105,690 )
(471 ) $ (105,482 ) $ 188,886
F-46
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the year ended December 31, 2018
(in thousands)
REVENUES
EXPENSES:
Operating
General and administrative
Depreciation and amortization
Contingent consideration for acquisition of
businesses
Asset impairments
OPERATING INCOME
OTHER (INCOME) EXPENSE:
Interest expense, net
Expenses associated with debt refinancing
transactions
Other (income) expense
INCOME BEFORE INCOME TAXES
Income tax expense
INCOME BEFORE EQUITY IN
SUBSIDIARIES
Income from equity in subsidiaries
NET INCOME
Parent
$ 1,279,991 $ 1,514,503 $
Combined
Subsidiary
Guarantors
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
and Other
Total
Consolidated
Amounts
8,243 $ (966,971 ) $ 1,835,766
994,505 1,284,616
70,456
61,206
36,409
92,702
3,100
—
2,593
(966,971 ) 1,315,250
— 106,865
— 156,501
6,085
1,580
—
—
1,131,281 1,416,278
98,225
148,710
—
—
5,693
2,550
—
—
6,085
1,580
(966,971 ) 1,586,281
— 249,485
67,340
10,905
2,508
—
80,753
1,016
160
68,516
80,194
(1,383 )
—
(105 )
10,800
87,425
(6,970 )
—
101
2,609
(59 )
—
1,016
—
156
—
—
81,925
— 167,560
(8,353 )
—
78,811
80,396
$ 159,207 $
80,455
—
80,455 $
(59 )
—
(59 ) $
— 159,207
(80,396 )
—
(80,396 ) $ 159,207
F-47
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the year ended December 31, 2017
(in thousands)
REVENUES
EXPENSES:
Operating
General and administrative
Depreciation and amortization
Asset impairments
OPERATING INCOME
OTHER (INCOME) EXPENSE:
Interest expense, net
Other (income) expense
INCOME BEFORE INCOME TAXES
Income tax expense
INCOME BEFORE EQUITY IN SUBSIDIARIES
Income from equity in subsidiaries
NET INCOME
Combined
Subsidiary
Guarantors
Consolidating
Adjustments
and Other
Total
Consolidated
Amounts
Parent
$ 1,194,690 $ 1,454,194 $ (883,386 ) $ 1,765,498
36,964
87,694
300
914,443 1,218,480
70,858
59,435
314
1,039,401 1,349,087
105,107
155,289
—
—
—
(883,386 ) 1,249,537
107,822
147,129
614
(883,386 ) 1,505,102
260,396
—
56,712
(255 )
56,457
98,832
(1,765 )
97,067
80,973
$ 178,040 $
11,823
103
11,926
93,181
(12,146 )
81,035
—
81,035 $
68,535
—
(90 )
62
68,445
62
191,951
(62 )
(13,911 )
—
178,040
(62 )
(80,973 )
—
(81,035 ) $ 178,040
F-48
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the year ended December 31, 2019
(in thousands)
Parent
$ 284,933 $ 61,845 $
Net cash provided by operating activities
(71,312 ) (79,477 )
Net cash used in investing activities
Net cash provided by (used in) financing activities (179,303 ) 22,600
Net increase in cash, cash equivalents
and restricted cash
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, beginning of year
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, end of year
$ 45,427 $ 45,316 $
11,109 40,348
34,318
4,968
Combined
Subsidiary
Guarantors
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
And Other
Total
Consolidated
Amounts
— $ 354,384
— (244,589 )
(64,839 )
—
7,606 $
(93,800 )
91,864
5,670
—
44,956
22,680
—
74,137
28,350 $
— 119,093
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the year ended December 31, 2018
(in thousands)
Combined
Subsidiary
Guarantors
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
And Other
Parent
4,786 $
$ 243,083 $ 75,011 $
Net cash provided by operating activities
Net cash used in investing activities
(109,114 ) (47,940 ) (134,003 )
Net cash provided by (used in) financing activities (148,605 ) (13,161 ) 151,897
Net increase (decrease) in cash, cash equivalents
and restricted cash
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, beginning of year
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, end of year
$ 11,109 $ 40,348 $
(14,636 ) 13,910
25,745 26,438
22,680 $
22,680
—
Total
Consolidated
Amounts
— $ 322,880
— (291,057 )
(9,869 )
—
—
21,954
—
52,183
— $
74,137
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the year ended December 31, 2017
(in thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Net increase in cash, cash equivalents and restricted cash
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH, beginning of year
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH, end of year
Combined
Subsidiary
Guarantors
Consolidating
Adjustments
And Other
Total
Consolidated
Amounts
Parent
$ 276,055 $
(55,242 )
(206,446 )
14,367
65,270 $
(69,320 )
4,155
105
— $ 341,325
(124,562 )
—
(202,291 )
—
14,472
—
11,378
26,333
—
37,711
$
25,745 $
26,438 $
— $
52,183
F-49
20.
SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Selected quarterly financial information for each of the quarters in the years ended December 31, 2019 and
2018 is as follows (in thousands, except per share data):
March 31,
2019
June 30,
2019
September 30,
2019
December 31,
2019
Revenue
Operating income
Net income
Basic earnings per share:
Net income
Diluted earnings per share:
Net income
Revenue
Operating income
Net income
Basic earnings per share:
Net income
Diluted earnings per share:
Net income
$ 484,064 $ 490,294 $ 508,522 $ 497,809
66,251
41,974
71,095
48,994
70,954
48,578
73,264
49,340
$
$
0.42 $
0.41 $
0.41 $
0.35
0.41 $
0.41 $
0.41 $
0.35
March 31,
2018
June 30,
2018
September 30,
2018
December 31,
2018
$ 440,916 $ 449,929 $ 462,728 $ 482,193
64,649
41,239
64,419
40,994
58,705
37,777
61,712
39,197
$
$
0.32 $
0.33 $
0.35 $
0.35
0.32 $
0.33 $
0.34 $
0.35
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8
F-57
CORECIVIC, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018, AND 2017
(in thousands)
For the Years Ended December 31,
2017
2018
2019
$ 3,697,160 $ 3,367,358 $ 3,306,896
29,730
37,827
(879 )
(6,216 )
$ 3,605,137 $ 3,697,160 $ 3,367,358
64,423
8,809
(4,040 )
(161,215 )
26,547
269,271
—
33,984
$ (1,075,389 ) $ (976,121 ) $ (888,745 )
(94,116 )
6,162
578
$ (1,053,670 ) $ (1,075,389 ) $ (976,121 )
(87,492 )
109,211
—
(99,361 )
93
—
Investment in Real Estate:
Balance at beginning of period
Additions through capital expenditures
Acquisitions
Asset impairments
Reclassifications and other
Balance at end of period
Accumulated Depreciation:
Balance at beginning of period
Depreciation
Disposals/Other
Asset impairments
Balance at end of period
F-58
Exhibit 21.1
LIST OF SUBSIDIARIES OF CORECIVIC, INC.
ACS Corrections of Texas, L.L.C., a Texas limited liability company
Alex City SSA, LLC, a Kentucky limited liability company
Avalon Corpus Christi Transitional Center, LLC, a Texas limited liability company
Avalon Correctional Services, Inc., a Nevada corporation
Avalon Transitional Center Dallas, LLC, a Texas limited liability company
Avalon Tulsa, L.L.C., an Oklahoma limited liability company
BG INS, LLC, a Kentucky limited liability company
BG SSA, LLC, a Kentucky limited liability company
Campbellsville SSA, LLC, a Kentucky limited liability company
Carver Transitional Center, L.L.C., an Oklahoma limited liability company
CCA Health Services, LLC, a Tennessee limited liability company
CCA International, LLC, a Delaware limited liability company
CCA South Texas, LLC, a Maryland limited liability company
CCA (UK) Ltd., a United Kingdom limited company
CoreCivic, LLC, a Delaware limited liability company
CoreCivic Government Solutions, LLC, a Maryland limited liability company
CoreCivic of Kansas Holdings LLC, a Maryland limited liability company
CoreCivic of Kansas LLC, a Maryland limited liability company
CoreCivic of Tallahassee, LLC, a Maryland limited liability company
CoreCivic of Tennessee, LLC, a Tennessee limited liability company
CoreCivic TRS, LLC, a Maryland limited liability company
Correctional Alternatives, LLC, a California limited liability company
Correctional Management, Inc., a Colorado corporation
EP Horizon Management, LLC, a Texas limited liability company
Fort Worth Transitional Center, L.L.C., an Oklahoma limited liability company
Government Real Estate Solutions LLC, a Delaware limited liability company
Green Level Realty, LLC, a Colorado limited liability company
Mid South Holdings LLC, a Delaware limited liability company1
National Offender Management Systems, LLC, a Colorado limited liability company
Prison Realty Management, LLC, a Tennessee limited liability company
Recovery Monitoring Solutions Corporation, a Texas corporation.
Rocky Mountain Offender Management Systems, LLC, a Colorado limited liability company
SSA Baltimore Holdings LLC, a Delaware limited liability company
SSA Baltimore LLC, a Delaware limited liability company
Southern Corrections System of Wyoming, L.L.C., an Oklahoma limited liability company
Technical and Business Institute of America, LLC, a Tennessee limited liability company
Time To Change, Inc., a Colorado corporation
TransCor America, LLC, a Tennessee limited liability company
TransCor Puerto Rico, Inc., a Puerto Rico corporation
Turley Residential Center, L.L.C., an Oklahoma limited liability company
1 Mid South Holdings LLC, a Delaware limited liability company, is the parent of twenty four subsidiaries organized
and operating in Kentucky, which carry on the same line of business (the ownership and operation of commercial
real estate).
CERTIFICATION OF THE CEO PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Damon T. Hininger, certify that:
1.
I have reviewed this Annual Report on Form 10-K of CoreCivic, Inc.;
Exhibit 31.1
2. Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statement made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this Annual Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Annual
Report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this Annual Report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this Annual Report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this Annual Report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this Annual Report based on such evaluation;
d) Disclosed in this Annual Report any change in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: February 20, 2020
/s/ Damon T. Hininger
Damon T. Hininger
President and Chief Executive Officer
CERTIFICATION OF THE CFO PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, David M. Garfinkle, certify that:
Exhibit 31.2
1.
I have reviewed this Annual Report on Form 10-K of CoreCivic, Inc.;
2. Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statement made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this Annual Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Annual
Report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this Annual Report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this Annual Report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this Annual Report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this Annual Report based on such evaluation;
d) Disclosed in this Annual Report any change in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: February 20, 2020
/s/ David M. Garfinkle
David M. Garfinkle
Executive Vice President, Chief
Financial Officer, and Principal
Accounting Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of CoreCivic, Inc. (the "Company") on Form 10-K for the period ending
December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I,
Damon T. Hininger, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as
adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Damon T. Hininger
Damon T. Hininger
President and Chief Executive Officer
February 20, 2020
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of CoreCivic, Inc. (the "Company") on Form 10-K for the period ending
December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David
M. Garfinkle, Executive Vice President, Chief Financial Officer, and Principal Accounting Officer of the Company,
certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ David M. Garfinkle
David M. Garfinkle
Executive Vice President, Chief
Financial Officer, and Principal
Accounting Officer
February 20, 2020
CoreCivic, Inc.
5-Year Cumulative Total Return
Benchmark
CoreCivic, Inc.
S&P 500
Russell 2000
FTSE NAREIT All Equity REITs
12/14
12/15
12/16
12/17
12/18
12/19
$100
$100
$100
$100
$78
$101
$96
$99
$79
$114
$116
$104
$77
$138
$133
$108
$66
$132
$118
$100
$69
$174
$148
$124
Indexed Return
Comparison of 5 Year Cumulative Total Return*
Among CoreCivic, Inc., the S&P 500 Index, the Russell 2000 Index,
and the FTSE NAREIT All Equity REITs Index
$200
$150
$100
$50
$0
12/14
12/15
12/16
12/17
12/18
12/19
CoreCivic, Inc.
S&P 500
Russell 2000
FTSE NAREIT All Equity REITs
* $100 invested on 12/31/14 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
APPENDIX TO 2019 ANNUAL LETTER
Reconciliation of Non-GAAP Disclosures
($ in thousands, except per share amounts)
Net Income
Special items:
Charges associated with adoption of tax reform
Expenses associated with debt refinancing transactions
Expenses associated with mergers and acquisitions
Start-up expenses
Contingent consideration for acquisition of businesses
Asset impairments
Diluted adjusted net income (A)
2019
$
For the Years Ended December 31,
2018
$
159,207
188,886
2017
$
178,040
-
602
1,132
9,480
-
4,706
204,806
$
1,024
1,016
3,096
-
6,085
1,580
172,008
$
4,548
-
2,530
-
-
614
185,732
$
Weighted average common shares outstanding - basic
119,028
118,544
118,084
Effect of dilutive securities:
Stock options
Restricted stock-based awards
Weighted average shares and assumed conversions - diluted
22
114
119,164
111
61
118,716
310
71
118,465
Adjusted Diluted Earnings Per Share
$
1.72
$
1.45
$
1.57
Net income
Depreciation and amortization of real estate assets
Impairment of real estate assets
Gain on sale of real estate assets
Funds From Operations (A)
Charges associated with adoption of tax reform
Expenses associated with debt refinancing transactions
Expenses associated with mergers and acquisitions
Start-up expenses
Contingent consideration for acquisition of businesses
Goodwill and other impairments
Normalized Funds From Operations (A)
2019
$
For the Years Ended December 31,
2018
$
2017
$
188,886
107,402
4,428
(287)
300,429
159,207
101,771
1,580
-
262,558
178,040
95,902
355
-
274,297
$
$
$
-
602
1,132
9,480
-
278
311,921
$
1,024
1,016
3,096
-
6,085
-
273,779
$
4,548
-
2,530
-
-
259
281,634
$
NORMALIZED FUNDS FROM OPERATIONS PER SHARE:
Diluted
$
2.62
$
2.31
$
2.38
A-1
APPENDIX TO 2019 ANNUAL LETTER
Reconciliation of Non-GAAP Disclosures
($ in thousands, except per share amounts)
For the Years Ended December 31,
2018
2019
2017
Net Income
Interest expense
Depreciation and amortization
Income tax expense
EBITDA (A)
Expenses associated with debt refinancing transactions
Expenses associated with mergers and acquisitions
Contingent consideration for acquisition of businesses
Depreciation expense associated with STFRC lease (A)
Interest expense associated with STFRC lease (A)
Start-up expenses
Asset impairments
Adjusted EBITDA (A)
$
$
$
188,886
86,661
144,572
7,839
427,958
602
1,132
-
-
-
9,480
4,706
443,878
$
$
$
159,207
82,129
156,501
8,353
406,190
1,016
3,096
6,085
(16,453)
(5,562)
-
1,580
395,952
$
178,040
69,507
147,129
13,911
408,587
$
-
2,530
-
(16,453)
(6,425)
-
614
388,853
$
(A)
Adjusted Net Income, EBITDA, Adjusted EBITDA, Funds From Operations (FFO), and Normalized FFO, and, where appropriate, their
corresponding per share metrics are non-GAAP financial measures. CoreCivic believes that these measures 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. CoreCivic believes that it is useful to provide investors, lenders and security
analysts disclosures of its results of operations on the same basis that is used by management. FFO, in particular, is a widely accepted non-GAAP
supplemental measure of REIT performance, grounded in the standards for FFO established by the National Association of Real Estate Investment
Trusts (NAREIT). 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.
EBITDA, Adjusted EBITDA, and Normalized FFO are useful as supplemental measures of performance of the Company's properties because they
don't take into account depreciation and amortization, or with respect to EBITDA, the impact of the Company's tax provisions and financing
strategies. 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 properties, management believes that assessing performance of the Company's properties without the impact of depreciation or
amortization is useful. However, prior to the adoption of ASC 842, "Leases" on January 1, 2019, a portion of the rental payments for the South
Texas Family Residential Center (STFRC) was classified as depreciation and interest expense for financial reporting purposes in accordance with
ASC 840-40-55, formerly Emerging Issues Task Force No. 97-10, "The Effect of Lessee Involvement in Asset Construction". Adjusted EBITDA
included such depreciation and interest expense in order to more properly reflect the cash flows associated with this lease. Upon adoption of ASC
842, all rental payments associated with this lease are classified as operating expenses. CoreCivic 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. Start-up expenses represent the incremental
operating losses incurred during the period we activate idle correctional facilities. Normalized FFO excludes the effects of such items. CoreCivic
calculates Adjusted Net Income by adding to GAAP Net Income expenses associated with the Company’s debt refinancing transactions, mergers
and acquisitions (M&A) activity, start-up expenses, and certain impairments and other items that the Company believes are unusual or nonrecurring
to provide an alternative measure of comparing operating performance for the periods presented. Even though expenses associated with mergers
and acquisitions may be recurring, the magnitude and timing fluctuate based on the timing and scope of M&A activity, and therefore, such
expenses, which are not a necessary component of the ongoing operations of the Company, may not be comparable from period to period. Other
companies may calculate Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO differently than the Company does, or
adjust for other items, and therefore comparability may be limited. Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO
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 indicators 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.
A-2
5501 Virginia Way, Suite 110
Brentwood, TN 37027
(615) 263-3000
Website: ir.corecivic.com
NYSE: CXW
BR21871N-0320-10KW