December 4, 2021

Remarkable Mate

Remarkable business & finance

Expect Balance Sheet, Contract & Occupancy Updates on Upcoming 3Q Call

By M. Marin



• Strengthening balance sheet

• Contracts with new and existing customers

CoreCivic (NYSE:CXW) intends to report on November 8, 2021. We expect the ongoing focus on strengthening the balance sheet and negotiations with existing and prospective new customers to be discussed on the upcoming call. In addition, we expect an update on occupancies. Occupancies through 1H21 had improved but had not recovered to pre-COVID levels. CXW’s average compensated occupancy for the Safety and Community businesses in 2Q21 was 71.6% compared to 74.9% in 2Q20. Nevertheless, 2Q21 adjusted EBITDA was up slightly to $101.7 million compared to $101.1 million in 2Q20, despite lower occupancy rates as a result of the COVID-19 pandemic and the absence of revenue from facilities that CXW sold recently. Moreover, as vaccine rates rise, occupancies are expected to continue to improve, although the COVID-19 pandemic could continue to impact utilization levels of CXW’s facilities in the near-term.

Debt repayments, maturity extensions & shareholder returns

CXW has accessed the capital markets this year to refinance existing debt, extend its weighted average debt maturities and reduce its reliance on banks and other external source of cash. Recent asset sales are also consistent with these goals. At the end of 2Q21, the company had no major debt maturities coming due before 2023 and the weighted average debt maturity was 6.0 years. Given CXW’s plan to use some of the proceeds from a recent tack-on offering to purchase $174.0 million of 2023 senior notes and other debt, we estimate that the company’s pro forma 2023 maturity schedule is significantly lower and the weighted average debt maturity is higher. The debt offerings also enabled CXW to reduce its reliance on banks and other external source of cash and demonstrated ongoing investor interest in the company’s securities. The company also expects to allocate a substantial portion of its free cash flow to returning capital to shareholders through share buybacks and / or dividends, in addition to debt repayment.

Contract renewals / extensions & other solutions to secure utilization of facilities

As contracts near end dates, the company also continues to engage in discussions with the USMS and other government agencies to secure occupancy and facilities usage through contract renewals and / or extensions or other solutions. For example, CXW recently entered into a new three-year lease agreement for its Northwest New Mexico 596-bed facility, with automatic extension options. CoreCivic currently operates the Northwest New Mexico Correctional Center under a contract with New Mexico. The new lease agreement commences on November 1, 2021, at which time the company will transition the facility to the New Mexico Corrections Department. Earlier in 2021, CXW signed a new contract with Mahoning County, Ohio to utilize up to 990 beds at the company’s 2,016-bed Northeast Ohio Correctional Center. The Northeast Ohio Correctional Center also houses about 800 inmates under a management contract with the state of Ohio. CXW will continue to operate the correctional facility under both contracts. The company has engaged in discussions with other government agencies to secure utilization of the West Tennessee Detention facility for a contract that expired at the end of September.

Moreover, the company believes that need for states such as Alabama and Hawaii to replace old, outdated facilities with modern ones underscores the state of prison facilities throughout most of the country and the need for states and federal authorities to access privately run facilities. CXW is analyzing and responding to several RFPs (requests for proposal).

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