Cornell Companies, Inc. (NYSE:CRN) today reported
results for the three and six months ended June 30, 2010.
James E. Hyman, Cornell's chairman, president and chief
executive officer, said, "Our second quarter performance reflects
the Company's continued ability to execute against our plan, both
with existing operations and with preparation for the transition of
our D. Ray James Prison to the Federal Bureau of Prisons (BOP) on
time effective October 1st. Looking ahead, our proposed merger with
The GEO Group, Inc. should only strengthen the ability of the
combined company to deliver value to our customers, employees and
shareholders."
Second-Quarter
Summary (in thousands, except per share data) |
|
Three Months
Ended |
Six Months
Ended |
As Reported |
6/30/2010 |
6/30/2009 |
6/30/2010 |
6/30/2009 |
Revenue from operations |
$ 103,871 |
$ 105,334 |
$ 203,877 |
$ 205,044 |
Income from operations |
16,522 |
19,590 |
29,387 |
35,376 |
Net income |
5,716 |
7,628 |
9,564 |
13,360 |
Income available to stockholders |
5,130 |
7,230 |
8,409 |
12,487 |
EPS – diluted |
$ 0.34 |
$ 0.48 |
$ 0.56 |
$ 0.84 |
Diluted shares outstanding used in per share
computation |
15,111 |
14,970 |
15,050 |
14,952 |
Second Quarter Results
Revenues were $103.9 million for the second quarter of 2010 as
compared to $105.3 million for the same period in 2009. Much
of the decrease came from the ongoing transition of our D. Ray
James Prison from the Georgia Department of Corrections (GADOC) to
the BOP contract (which is effective October 1, 2010). In addition,
the lower revenues also reflected the termination of our management
contract for our Dallas County Judicial Treatment Center in
November 2009 and contracts for our two small California community
correctional facilities in December 2009. Average contract
occupancy levels were 85.8 percent for our residential facilities
compared with 91.1 percent in last year's second quarter. The
increase in capacity from the activation of the Hudson Correctional
Facility in the fourth quarter of 2009, the capacity temporarily
created by the ongoing transition of our D. Ray James Prison to the
BOP, along with spare capacity at our two small facilities in
California, primarily accounted for this decrease in overall
occupancy.
Income from operations was $16.5 million for the second quarter
of 2010 as compared to $19.6 million in the second quarter of
2009. The second quarter of 2010 included revenues of
approximately $2.7 million (or $0.10 per diluted share, after
taxes) resulting from the guaranteed population contract at the
Regional Correctional Center for the contract years March 26, 2007
through March 25, 2008 and March 26, 2008 through March 25, 2009.
The Company incurred approximately $2.3 million of pre-tax (or
$0.09 per diluted share, after taxes) advisory and other
professional costs associated with the proposed merger transaction
in the second quarter of 2010. For the second quarter of 2010 the
Company reported net income of $5.7 million, as compared to net
income of $7.6 million in last year's second quarter. For the
second quarter of 2010 the Company reported income available to
stockholders of $5.1 million, or $0.34 per diluted share, as
compared to income available to stockholders of $7.2 million, or
$0.48 per diluted share, in last year's second quarter.
Six-Months Results
For the six months ended June 30, 2010, revenues were $203.9
million as compared to $205.0 million for the first six months of
2009. The decrease was principally related to the D. Ray James
Prison facility transition, and as well the available capacity at
those programs (including our two small California community
correctional facilities) mentioned earlier. As previously
noted, the 2010 period included revenues of approximately $2.7
million resulting from the guaranteed population contract at the
Regional Correctional Center for the contract years March 26, 2007
through March 25, 2008 and March 26, 2008 through March 25,
2009.
Income from operations was $29.4 million for the first six
months of 2010 compared with $35.4 million in the same period in
2009. As previously noted, the Company incurred approximately
$2.3 million of advisory and other professional costs associated
with the proposed merger transaction in the 2010 six month period.
Net income was $9.6 million compared with net income of $13.4
million in the previous year's first six months. For the six
months ended June 30, 2010, the Company reported income available
to stockholders of $8.4 million, or $0.56 per diluted share, as
compared to income available to stockholders of $12.5 million, or
$0.84 per diluted share, in last year's six month period ended June
30, 2009. The Company capitalized no interest in the first
six months of 2010, compared with capitalized interest of $0.7
million (or $0.03 per diluted share, after taxes) in the first six
months of 2009.
Merger Update
As previously announced on April 19, 2010, the Company, The GEO
Group Inc. (GEO) and GEO Acquisition III, Inc. entered into an
agreement and plan of merger, as amended, pursuant to which Cornell
will become a wholly owned subsidiary of GEO. The merger is
expected to close in the third quarter of 2010, subject to receipt
of GEO and Cornell stockholder approvals as well as the
satisfaction of other customary closing conditions.
Operational Outlook for Second Half of 2010
For the remainder of 2010 management notes the following major
operational considerations:
- D. Ray James Transition to BOP: The Company continues the
transition of its D. Ray James Prison from the GADOC inmates
formerly housed there to the BOP contract effective October 1,
2010. The ramp down of the GADOC inmates was completed in July
2010. The Company expects to spend approximately $8.0 million in
capital expenditures, primarily for FF&E items and facility
maintenance improvements related to the older parts of the facility
to prepare D. Ray James for BOP inmates.
- Great Plains: The Company continues to serve the Arizona
Department of Corrections through their use of our Great Plains
facility.
- All Other Facilities: In terms of occupancies, we continue to
assume that all other facilities continue with the levels
previously discussed, with the exception of our small female High
Plains Correctional Facility in Colorado (272 beds), which the
Company now assumes will remain empty for the entire second half of
2010.
Other major operating assumptions remain the same as previously
discussed in our first quarter 2010 earnings release. Due to the
previously announced agreement and plan of merger with GEO, the
Company will not conduct an investor call to discuss these results
or our outlook.
This earnings release can be found on Cornell's Website under
"Investor Relations – Press Releases."
About Cornell Companies
Cornell Companies, Inc. (http://www.cornellcompanies.com) is a
leading private provider of corrections, treatment and educational
services outsourced by federal, state and local governmental
agencies. Cornell provides a diversified portfolio of
services for adults and juveniles, including incarceration and
detention, transition from incarceration, drug and alcohol
treatment programs, behavioral rehabilitation and treatment, and
grades 3-12 alternative education in an environment of dignity and
respect, emphasizing community safety and rehabilitation in support
of public policy. At June 30, 2010, the Company had 68
facilities in 15 states and the District of Columbia and a total
service capacity of 21,392.
The Cornell Companies, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=1468
Important Additional Information About the
Transaction
This press release may be deemed to be solicitation material in
respect of the proposed merger between GEO and Cornell. The
proposed transaction will be submitted to the respective
stockholders of GEO and Cornell for their consideration. In
connection with the proposed transaction, GEO has filed with the
Securities and Exchange Commission (the "SEC") a registration
statement on Form S-4, as amended, that includes a definitive joint
proxy statement of GEO and Cornell and that also constitutes a
prospectus of GEO. The respective stockholders of the companies are
urged to read the definitive Joint Proxy Statement/Prospectus and
any other relevant documents filed with the SEC, as well as any
amendments or supplements to those documents, because they will
contain important information. You may obtain a free copy of the
definitive Joint Proxy Statement/Prospectus, as well as other
filings containing information about the companies at the SEC's web
site (http://www.sec.gov). Copies of the definitive Joint Proxy
Statement/Prospectus and the SEC filings that are incorporated by
reference in the Joint Proxy Statement/Prospectus can be obtained,
free of charge, by directing a request to Pablo E. Paez, Director,
Corporate Relations, (561) 999-7306, ppaez@geogroup.com, One
Park Place, Suite 700, 621 Northwest 53rd Street, Boca Raton,
Florida 33487.
Participants in the Solicitation
GEO, Cornell and their respective directors and executive
officers and other persons may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction.
Information regarding GEO's directors and executive officers is
available in its Annual Report on Form 10-K for the year ended
January 3, 2010, which was filed with the SEC on
February 22, 2010, and its proxy statement for its 2010 annual
meeting of stockholders, which was filed with the SEC on
March 24, 2010, and information regarding Cornell's directors
and executive officers is available in Cornell's Annual Report on
Form 10-K, for the year ended December 31, 2009, which was
filed with the SEC on February 26, 2010 and its Form 10-K/A,
which was filed with the SEC on April 30, 2010. Other
information regarding the participants in the proxy solicitation
and a description of their direct and indirect interests, by
security holdings or otherwise, are contained in the definitive
Joint Proxy Statement/Prospectus and other relevant materials filed
with the SEC. You may obtain free copies of these documents as
described in the preceding paragraph.
Forward-Looking Statements
Statements regarding the Company's outlook for 2010, ability to
succeed, growth for 2010 and beyond, long-term demand, future
earnings, completion of preparations for the BOP inmates at D. Ray
James Prison, timing of the transition of the D. Ray James Prison
from the GADOC inmates to the BOP contract, continued use by the
Arizona Department of Corrections of our Great Plains facility, and
results of operations, the anticipated benefits, and expected
closing date, of the proposed merger with GEO, as well as any other
statements that are not historical facts, are forward-looking
statements within the meaning of applicable securities laws that
involve certain risks, uncertainties and assumptions that could
materially affect actual results. These include but are not
limited to risks, uncertainties and assumptions associated with
general economic and market conditions, including the impact
governmental budgets can have on our per diem rates and occupancy,
the Company's ability to perform according to its current
expectations, changes in supply and demand, actions by government
agencies and other third parties, access to capital and other risks
and uncertainties detailed in the Company's most recent Form 10-K,
the definitive Joint Proxy Statement/Prospectus filed on July 15,
2010, and as supplemented on July 22, 2010, and other filings made
by us from time to time with the SEC. Should one or more of
these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from the statements made. Any forward-looking statement made
by the Company in this release is current as of the date of this
release. Factors or events that could cause the Company's actual
results to differ may emerge from time to time, and it is not
possible to predict all of them. The Company undertakes no
obligation to publicly update any forward-looking statement in
light of new information, future events or otherwise, except as may
be required by law.
CORNELL COMPANIES,
INC. |
FINANCIAL
HIGHLIGHTS |
(in thousands, except
per share data) |
|
|
|
|
|
|
Three Months Ended June
30, |
Six Months Ended June
30, |
|
2010 |
2009 |
2010 |
2009 |
|
|
|
|
|
Revenues |
$103,871 |
$105,334 |
$203,877 |
$205,044 |
Operating expenses, excluding depreciation
and amortization |
74,793 |
74,734 |
151,476 |
147,627 |
Depreciation and amortization |
4,555 |
4,740 |
9,254 |
9,633 |
General and administrative expenses |
8,001 |
6,270 |
13,760 |
12,408 |
Income from operations |
16,522 |
19,590 |
29,387 |
35,376 |
Interest expense, net |
6,160 |
6,576 |
12,346 |
12,529 |
Income before provision for income
taxes |
10,362 |
13,014 |
17,041 |
22,847 |
Provision for income taxes |
4,646 |
5,386 |
7,477 |
9,487 |
Net income |
5,716 |
7,628 |
9,564 |
13,360 |
Non-controlling interest |
586 |
398 |
1,155 |
873 |
Income available to Cornell Companies,
Inc. |
$5,130 |
$7,230 |
$8,409 |
$12,487 |
|
|
|
|
|
Earnings per share: |
|
|
|
|
- Basic |
$0.34 |
$0.49 |
$0.56 |
$0.84 |
- Diluted |
$0.34 |
$0.48 |
$0.56 |
$0.84 |
|
|
|
|
|
Number of shares used in per share
computation: |
|
|
|
|
- Basic |
14,944 |
14,881 |
14,903 |
14,878 |
- Diluted |
15,111 |
14,970 |
15,050 |
14,952 |
|
|
|
|
|
Total service capacity (end of
period) |
21,392 |
20,892 |
21,392 |
20,892 |
Contracted beds in operation (end of
period) |
17,639 |
17,480 |
17,639 |
17,480 |
Average contract occupancy (A) |
85.8% |
91.1% |
86.9% |
92.2% |
|
|
|
|
|
(A) Average contract occupancy
percentages are calculated based on actual occupancy for the period
as a percentage of the contracted capacity for residential
facilities in operation. These percentages do not reflect the
operations of non-residential community-based programs. At certain
residential facilities, our contracted capacity is lower than the
facility's service capacity. In addition, certain facilities have
and are currently operating above the contracted capacity. As a
result, average contract occupancy percentages can exceed 100% if
the average actual occupancy exceeded contracted capacity. |
|
|
|
|
|
|
Balance Sheet
Data: |
|
|
(in thousands) |
June 30, 2010 |
December 31, 2009 |
Cash and cash equivalents |
$ 16,164 |
$ 27,724 |
Working capital |
55,259 |
64,575 |
Property and equipment, net |
460,421 |
455,523 |
Total assets |
653,555 |
650,565 |
Long-term debt |
287,332 |
289,841 |
Total debt |
300,740 |
303,254 |
Stockholders' equity |
263,598 |
258,738 |
|
|
|
MCF Reserve Balances: |
|
|
Bond Fund Payment Account |
15,957 |
9,813 |
Debt Service Reserve Fund |
23,373 |
23,372 |
|
|
CORNELL COMPANIES,
INC. |
OPERATING STATISTICS
FROM CONTINUING OPERATIONS |
For the Three and Six
Months Ended June 30, 2010 and 2009 |
|
|
|
|
Three Months
Ended June 30, |
Six Months Ended
June 30, |
|
2010 |
2009 |
2010 |
2009 |
|
|
% |
|
% |
|
% |
|
% |
Contracted beds in
operation1: |
|
|
|
|
|
|
|
|
Adult Secure Services |
14,121 |
80% |
13,493 |
77% |
14,121 |
80% |
13,493 |
77% |
Adult Community-based Services |
2,325 |
13% |
2,625 |
15% |
2,325 |
13% |
2,625 |
15% |
Abraxas Youth & Family Services |
1,193 |
7% |
1,362 |
8% |
1,193 |
7% |
1,362 |
8% |
Total |
17,639 |
100% |
17,480 |
100% |
17,639 |
100% |
17,480 |
100% |
|
|
|
|
|
|
|
|
|
Number of billed
mandays4: |
|
|
|
|
|
|
|
|
Adult Secure Services |
1,032,973 |
67% |
1,072,158 |
66% |
2,090,199 |
67% |
2,129,981 |
66% |
Adult Community-based Services: |
|
|
|
|
|
|
|
|
Residential |
244,641 |
16% |
266,263 |
16% |
488,302 |
16% |
513,130 |
16% |
Non-residential2 |
58,110 |
4% |
53,547 |
3% |
120,332 |
4% |
115,407 |
3% |
Abraxas Youth & Family Services: |
|
|
|
|
|
|
|
|
Residential |
100,758 |
6% |
110,777 |
7% |
195,189 |
6% |
212,873 |
7% |
Non-residential2 |
109,142 |
7% |
136,337 |
8% |
214,239 |
7% |
258,984 |
8% |
Total |
1,545,624 |
100% |
1,639,082 |
100% |
3,108,261 |
100% |
3,230,375 |
100% |
|
|
|
|
|
|
|
|
|
Revenues (in
000's): |
|
|
|
|
|
|
|
|
Adult Secure Services |
$61,149 |
59% |
$59,272 |
56% |
$119,969 |
59% |
$116,130 |
56% |
Adult Community-based Services: |
|
|
|
|
|
|
|
|
Residential |
17,456 |
16% |
17,801 |
17% |
34,582 |
17% |
34,403 |
17% |
Non-residential |
584 |
1% |
554 |
1% |
1,170 |
1% |
1,112 |
1% |
Abraxas Youth & Family Services: |
|
|
|
|
|
|
|
|
Residential |
19,645 |
19% |
21,549 |
20% |
38,026 |
18% |
41,714 |
20% |
Non-residential |
5,037 |
5% |
6,158 |
6% |
10,130 |
5% |
11,685 |
6% |
Total |
$103,871 |
100% |
$105,334 |
100% |
$203,877 |
100% |
$205,044 |
100% |
|
|
|
|
|
|
|
|
|
Average revenue per
diem4: |
|
|
|
|
|
|
|
|
Adult Secure Services |
$56.61 |
|
$55.28 |
|
$56.12 |
|
$54.52 |
|
Adult Community-based Services: |
|
|
|
|
|
|
|
|
Residential |
$71.35 |
|
$66.85 |
|
$70.82 |
|
$67.05 |
|
Non-residential2 |
$10.05 |
|
$10.35 |
|
$9.72 |
|
$9.64 |
|
Abraxas Youth & Family Services: |
|
|
|
|
|
|
|
|
Residential |
$194.97 |
|
$194.53 |
|
$194.82 |
|
$195.96 |
|
Non-residential2 |
$46.15 |
|
$45.17 |
|
$47.28 |
|
$45.12 |
|
Total |
$65.48 |
|
$64.26 |
|
$64.73 |
|
$63.47 |
|
|
|
|
|
|
|
|
|
|
Income from Operations (in
000's)3: |
|
|
|
|
|
|
|
|
Adult Secure Services |
$17,528 |
|
$17,493 |
|
$31,030 |
|
$34,608 |
|
Adult Community-based Services |
6,194 |
|
5,864 |
|
11,830 |
|
10,631 |
|
Abraxas Youth & Family Services |
1,125 |
|
3,197 |
|
949 |
|
3,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Residential
contract capacity only. |
2
Non-residential "mandays" includes a mix of day units and hourly
units. Mental health facilities are reported in hours. |
3 Segment-level
income from operations excludes general and administrative
expenses, amortization of intangibles and corporate overhead
charges that are included in consolidated income from
operations. |
4 Number of
billed mandays and average revenue per diem for the three and six
months ended June 30, 2010, exclude the impact of the $2.7 million
of revenues which resulted from the guaranteed population contract
at the Regional Correctional Center as recorded in these respective
periods. |
___________________________________ |
CONTACT: Cornell Companies, Inc.
Charles Seigel, Vice President, Public Policy
(713) 623-0790
Cornell (NYSE:CRN)
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