Cornell Companies, Inc. (NYSE:CRN) today reported results for the
three months ended March 31, 2010, and provided guidance for the
second quarter of 2010 and the full year.
James E. Hyman, Cornell's chairman, president and chief
executive officer, said, "Our first quarter performance again
demonstrated the Company's ability to execute against our plan and
sets the stage for continued performance through 2010. Looking
ahead, our announced merger with The GEO Group, Inc. should only
strengthen the ability of the combined company to deliver value to
our customers, employees and shareholders."
First-Quarter Summary (in thousands, except per
share data)
|
Three Months Ended
|
As Reported
|
3/31/2010
|
3/31/2009
|
Revenue from operations
|
$ 100,006
|
|
$ 99,710
|
|
Income from operations
|
12,865
|
|
15,788
|
|
Net income
|
3,849
|
|
5,734
|
|
Income available to shareholders
|
3,280
|
|
5,257
|
|
EPS – diluted
|
$ 0.22
|
|
$ 0.36
|
|
Diluted shares outstanding used in per share computation
|
14,882
|
|
14,629
|
|
First Quarter Results
Revenues grew 0.3 percent to $100.0 million for the first
quarter of 2010 from $99.7 million in the 2009 period. The
increase was principally due to the activation of the Hudson
Correctional Facility in the fourth quarter of 2009. The
higher revenues were partially offset by the termination of our
contracts for our two small male California community correctional
facilities in December 2009. Average contract occupancy levels were
87.8 percent for our residential facilities compared with 93.2
percent in the first quarter of 2009. The increase in
capacity from the activation of the Hudson Correctional Facility in
the fourth quarter of 2009 and the second expansion of our D. Ray
James Prison (DRJ) in April 2009, along with spare capacity at our
two small California community correctional facilities, primarily
accounted for this decrease in overall occupancy.
Income from operations was $12.9 million for the first quarter
of 2010 as compared to $15.8 million in the first quarter of 2009.
For the first quarter of 2010 the Company reported net income
of $3.8 million, as compared to net income of $5.7 million in last
year's first quarter.
For the first quarter of 2010 the Company reported income
available to shareholders of $3.3 million, or $0.22 per diluted
share, as compared to net income available to shareholders of $5.3
million, or $0.36 per diluted share, in last year's first
quarter.
The Company capitalized no interest in the first quarter of
2010, compared with capitalized interest of $0.7 million (or $0.03
per diluted share, after taxes) in the first quarter of 2009.
Merger Update
As previously announced on April 19, 2010, the Company and
The GEO Group Inc. (NYSE:GEO) entered into a definitive merger
agreement, pursuant to which GEO would acquire all of the
outstanding common stock of the Company. Under the terms of the
definitive agreement, stockholders of Cornell will have the option
to elect to receive either (x) 1.3 shares of GEO common stock for
each share of Cornell common stock or (y) an amount of cash
consideration equal to the greater of (i) the fair market value of
one share of GEO common stock plus $6.00 or (ii) the fair market
value of 1.3 shares of GEO common stock. In order to preserve the
tax-deferred treatment of the transaction, no more than 20% of the
outstanding shares of Cornell common stock may be exchanged for the
cash consideration. If elections are made such that the aggregate
cash consideration to be received by Cornell stockholders would
exceed $100 million in the aggregate, such excess amount may be
paid at the election of GEO in shares of GEO common stock or in
cash. The merger is expected to close in the third quarter of
2010, subject to the approval of the issuance of GEO common stock
by GEO's shareholders, approval of the transaction by Cornell's
stockholders and federal regulatory agencies, as well as the
fulfillment of other customary terms and conditions.
Earnings Outlook for Second Quarter, Full
Year
For the second quarter of 2010, management expects earnings to
range from $0.20 to $0.24 per share. This range includes an
estimated reduction of $0.09 per share for anticipated advisory and
other professional costs associated with the proposed merger
transaction. It also includes a reduction of $0.03 due to a more
accelerated ramp down than expected by the Georgia Department of
Corrections (GADOC) of inmates in conjunction with our transition
of our D. Ray James Prison to the Federal Bureau of Prisons (BOP).
For the full year, management anticipates earnings of $1.21 to
$1.29 per share. This range reflects the estimated reduction of
$0.09 per share for anticipated merger advisory costs and the
additional transition impact at our D. Ray James facility of
$0.03.
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
currently housed there to the BOP contract effective October 1,
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 use as its base case that
the Arizona Department of Corrections will maintain their use of
our Great Plains facility at their present level for the entire
year. Actual results could differ materially from management's
expectations based on actual usage of the facility (which could
reflect either increases or decreases). Ultimate resolution of this
matter will likely depend on the timing of Arizona's budget process
and may not occur until the third quarter of 2010.
-
All Other Facilities: In terms of occupancies, our guidance
assumes that all other facilities continue with the levels
previously discussed, with the exception of our two small male
Community Correctional Facilities in California (totaling 622 beds
of service capacity). The Company assumes these two facilities will
be empty for the entire second half of 2010.
Other major operating assumptions remain the same as previously
discussed in our fourth quarter 2009 earnings release.
Quarterly Webcast
Cornell's management will host a conference call and
simultaneous webcast at 2:00 p.m. Eastern time today. The webcast
may be accessed through Cornell's home page,
www.cornellcompanies.com. An audio replay and podcast will
be available on the Company's Web site, or can be heard by dialing
(800) 406-7325 or (303) 590-3030 and providing confirmation code
4291310. The replay will be available through Thursday, May 13,
2010 by phone and through Friday, May 6, 2011 on the Web site. This
earnings release also can be found on Cornell's Web site under
"Investor Relations – Press Releases."
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. These
include but are not limited to risks and uncertainties associated
with general economic and market conditions, including the impact
governmental budgets can have on our per diem rates and occupancy,
Cornell'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
preliminary Joint Proxy Statement on Schedule 14A filed by Cornell
with the SEC on May 5, 2010 and other filings made by us from time
to time with the Securities and Exchange Commission, which are
available free of charge on the SEC's Web site at www.sec.gov.
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. All information set forth in this release is current as
of the date of this release. Cornell undertakes no duty to update
any statement in light of new information or future events.
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in
respect of the proposed merger transaction with GEO. In
connection with the proposed merger transaction, Cornell will file
with the Securities and Exchange Commission ("SEC") a Joint Proxy
Statement on Schedule 14A. The preliminary Joint Proxy Statement on
Schedule 14A was filed with the SEC on May 5, 2010. SHAREHOLDERS OF
CORNELL ARE URGED TO READ THE JOINT PROXY STATEMENT AND ANY OTHER
RELEVANT DOCUMENTS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. Investors and security holders can
obtain free copies of the definitive Joint Proxy Statement on
Schedule 14A and other relevant documents when they become
available by contacting Investor Relations, Cornell Companies,
Inc., 1700 West Loop South, Suite 1500, Houston, Texas, telephone:
(888) 624-0816. In addition, documents filed with the SEC by
Cornell Companies are available free of charge at the SEC's web
site at www.sec.gov.
Information regarding the identity of the persons who may, under
SEC rules, be deemed to be participants in the solicitation of
stockholders of Cornell in connection with the merger transaction,
and their interests in the solicitation, can be found in the
preliminary Joint Proxy Statement on Schedule 14A filed with the
SEC on May 5, 2010.
About Cornell Companies
Cornell Companies, Inc. (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 March 31, 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
CORNELL COMPANIES, INC.
|
FINANCIAL HIGHLIGHTS
|
(in thousands, except per share data)
|
(unaudited)
|
|
|
|
|
Three Months Ended March 31,
|
|
2010
|
2009
|
|
|
|
Revenues
|
$100,006
|
$99,710
|
Operating expenses, excluding depreciation and amortization
|
76,683
|
72,891
|
Depreciation and amortization
|
4,699
|
4,893
|
General and administrative expenses
|
5,759
|
6,138
|
Income from operations
|
12,865
|
15,788
|
Interest expense, net
|
6,185
|
5,953
|
Income from operations before provision for income
taxes
|
6,680
|
9,835
|
Provision for income taxes
|
2,831
|
4,101
|
Net income
|
3,849
|
5,734
|
Non-controlling interest
|
569
|
477
|
Income available to Cornell Companies, Inc.
|
$3,280
|
$5,257
|
|
|
|
Earnings per share:
|
|
|
- Basic
|
$0.22
|
$0.36
|
- Diluted
|
$0.22
|
$0.36
|
|
|
|
Number of shares used in per share computation:
|
|
|
- Basic
|
14,756
|
14,572
|
- Diluted
|
14,882
|
14,629
|
|
|
|
Total service capacity
|
21,392
|
20,192
|
Contracted beds in operation (end of period)
|
17,639
|
16,780
|
Average contract occupancy (A)
|
87.8%
|
93.2%
|
(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. Additionally, 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)
|
March 31,
|
December 31,
|
|
2010
|
2009
|
Cash and cash equivalents
|
$ 18,061
|
$ 27,724
|
Working capital
|
55,293
|
64,575
|
Property and equipment, net
|
457,274
|
455,523
|
Total assets
|
643,765
|
650,565
|
Long-term debt
|
287,286
|
289,841
|
Total debt
|
300,697
|
303,254
|
Stockholders' equity
|
257,665
|
258,738
|
|
|
|
MCF Reserve Balances:
|
|
|
Bond Fund Payment Account
|
12,317
|
9,813
|
Debt Service Reserve Fund
|
23,372
|
23,372
|
|
|
CORNELL COMPANIES, INC.
OPERATING STATISTICS FROM CONTINUING
OPERATIONS
|
|
For the Three Months Ended March 31, 2010 and
2009
|
|
|
|
|
Three Months Ended March 31,
|
|
2010
|
|
2009
|
|
|
|
|
%
|
|
|
|
%
|
Contracted beds in operation1:
|
|
|
|
|
|
|
|
|
Adult Secure Services
|
|
14,121
|
|
80%
|
|
12,793
|
|
76%
|
Adult Community-based Services
|
|
2,325
|
|
13%
|
|
2,625
|
|
16%
|
Abraxas Youth & Family Services
|
|
1,193
|
|
7%
|
|
1,362
|
|
8%
|
Total
|
|
17,639
|
|
100%
|
|
16,780
|
|
100%
|
|
|
|
|
|
|
|
|
|
Number of billed mandays:
|
|
|
|
|
|
|
|
|
Adult Secure Services
|
|
1,057,226
|
|
68%
|
|
1,057,823
|
|
66%
|
Adult Community-based Services:
|
|
|
|
|
|
|
|
|
Residential
|
|
243,661
|
|
16%
|
|
246,866
|
|
16%
|
Non-residential2
|
|
62,221
|
|
4%
|
|
61,860
|
|
4%
|
Abraxas Youth & Family Services:
|
|
|
|
|
|
|
|
|
Residential
|
|
94,431
|
|
6%
|
|
102,096
|
|
6%
|
Non-residential2
|
|
105,097
|
|
6%
|
|
122,647
|
|
8%
|
Total
|
|
1,562,636
|
|
100%
|
|
1,591,292
|
|
100%
|
|
|
|
|
|
|
|
|
|
Revenues (in 000's):
|
|
|
|
|
|
|
|
|
Adult Secure Services
|
$
|
58,819
|
|
59%
|
$
|
56,858
|
|
57%
|
Adult Community-based Services:
|
|
|
|
|
|
|
|
|
Residential
|
|
17,126
|
|
17%
|
|
16,602
|
|
17%
|
Non-residential
|
|
586
|
|
1%
|
|
561
|
|
1%
|
Abraxas Youth & Family Services:
|
|
|
|
|
|
|
|
|
Residential
|
|
18,381
|
|
18%
|
|
20,165
|
|
20%
|
Non-residential
|
|
5,094
|
|
5%
|
|
5,524
|
|
5%
|
Total
|
$
|
100,006
|
|
100%
|
$
|
99,710
|
|
100%
|
|
|
|
|
|
|
|
|
|
Average revenue per diem:
|
|
|
|
|
|
|
|
|
Adult Secure Services
|
$
|
55.64
|
|
|
$
|
53.75
|
|
|
Adult Community-based Services:
|
|
|
|
|
|
|
|
|
Residential
|
$
|
70.29
|
|
|
$
|
67.25
|
|
|
Non-residential2
|
$
|
9.42
|
|
|
$
|
9.07
|
|
|
Abraxas Youth & Family Services:
|
|
|
|
|
|
|
|
|
Residential
|
$
|
194.65
|
|
|
$
|
197.51
|
|
|
Non-residential2
|
$
|
48.47
|
|
|
$
|
45.04
|
|
|
Total
|
$
|
64.00
|
|
|
$
|
62.66
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from Operations (in
000's)3:
|
|
|
|
|
|
|
|
|
Adult Secure Services
|
$
|
13,500
|
|
|
$
|
17,118
|
|
|
Adult Community-based Services
|
|
5,636
|
|
|
|
4,767
|
|
|
Abraxas Youth & Family Services
|
|
(175)
|
|
|
|
734
|
|
|
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.
CONTACT: Cornell Companies, Inc.
Charles Seigel, Vice President, Public Policy
(713) 623-0790
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