CoreCivic, Inc.

Good morning. My name is David, and I'll be your conference operator. As a reminder, this call is being recorded. At this time, I'd like to welcome you to CoreCivics Q4 2020 and year-end results conference call. All lines have been placed on mute to avoid any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press the star key followed by the digit 1 on your touch-tone telephone. If you would like to withdraw your question, Simply press the star key followed by the digit 2. I would now like to turn the call over to Cameron Hopewell, Core Civics Managing Director of Investor Relations. Mr. Hopewell, you may begin your conference.

Thanks, David. Good morning, ladies and gentlemen, and thank you for joining us. Participating on today's call are Damon Heinegger, President and Chief Executive Officer, and David Garfinkel, Chief Financial Officer. We are also joined here in the room by our Vice President of Finance, Brian Hammons. The call today will focus on our financial results for the fourth quarter, provide general business updates, and an overview of the evolving impacts of the COVID-19 pandemic. During today's call, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities and Litigation Reform Act. Our actual results or trends may differ materially as a result of a variety of factors, including those identified in our fourth quarter 2020 earnings release, issued after market yesterday, and in our SEC filings, including forms 10-K, 10-Q, and 8-K reports. You are also cautioned that any forward-looking statements reflect management's current views only and that the company undertakes no obligation to revise or update such statements in the future. On this call, we will also discuss certain non-GAAP measures. A reconciliation of the most comparable GAAP measurement is provided in our corresponding earnings release and included in the supplemental financial data disclosure on the investor's page of our website, corecivic.com. With that, it's my pleasure to turn the call over to our president and CEO, Damon Heiniger. Damon?

Thank you, Cameron. Good morning, everyone, and thank you for joining us today for our fourth quarter 2020 conference call. Today we will provide you with an overview of our fourth quarter financial performance, update you on our continued response to the COVID-19 pandemic, discuss business development opportunities, discuss also last month's executive order impacting the Department of Justice's use of private facilities, update you on the potential sale of certain non-correctional real estate assets in our property segment, and provide you with an updated strategic overlook for the new year. Following my remarks, I will turn the call over to our CFO, Dave Garfinkel, who will review our financial results in greater detail. Our fourth quarter revenue of $473.5 million represented a 5% decline over the prior year quarter due to continued impact of the COVID-19 pandemic on occupancy within our safety and community segments. However, oxy rates in the fourth quarter appear to have stabilized versus the more significant declines we experienced in the second and third quarters of 2020. In the fourth quarter, the oxy rates across our safety and community segment increased by 70 basis points versus the third quarter of 2020. Normalized funds from operations, or FFO, for the fourth quarter was 63 cents per share, an increase of 7% compared with the fourth quarter of 2019. Our earnings growth was driven by a combination of new contract awards that were initiated within the last 12 months and lower G&A expenses, which helped to offset the reduction oxy we experienced as a result of the global pandemic, particularly lower utilization at our facilities under contract with immigration and customs enforcement. Dave will provide you with greater details about our fourth quarter financial results following the remainder of my comments. I'd like to provide a brief update on our ongoing response to the COVID-19 pandemic and its impact on our day-to-day operations. While it has been nearly a year since the onset of the pandemic, we continue to focus our daily efforts on working collaboratively with our government partners on our operational plans as guidelines from leading health experts have continued to evolve. Throughout the year, we worked tirelessly to ensure our operation policies adhere to the latest guidance from health experts, Our facility staff and residents had access to clinically effective personnel, personal protective equipment, and everyone in our facilities received the proper training and advice to help mitigate the risk of contracting and spreading the virus. These efforts continued unabated. Recently, many of our facilities began receiving shipments of the vaccine from state and local health departments. It is at the discretion of these state and local health authorities how to allocate the vaccine they receive And each community where we operate has unique differences in the process of developing their vaccine rollout plan. We've made every effort to evaluate these plans and to collaborate with state and local authorities to ensure our staff and residents are appropriately prioritized. In many cases, our frontline healthcare personnel were included in the early distribution phase, as were many of our other facility-level staff. In most cases, the individuals entrusted in our care have also been prioritized by public health officials. The availability of vaccines continues to be inconsistent, and that is what we are seeing across our facilities. But it is clear that over the next few months, there will be a significant increase in availability. In every case, as soon as we have access to the vaccine, we have the medical resources in place to quickly administer doses to our facility staff and residents in alignment with the prioritization directives of local authorities. We are committed to working closely with our government partners and local health officials to ensure everyone in our facilities has access to the vaccine as it comes available. During the fourth quarter, we continue to see a decline in positive cases within our facilities, similar to the trend we experienced in the third quarter. This trend has been consistent across our facilities, and we believe it is evidence that the operational policies we've put in place in response to COVID-19 are effective. We expect that new challenges in mitigating the risk of virus transmission will arise as facility operations begin to normalize. such as in-person visitation, classroom-based programming, and increased resident movement in and out of facilities, all of which will increase person-to-person interactions. However, we are working closely with our government partners to thoughtfully enact these changes over time in order to maintain the best possible measures of prevention. And I emphasize these changes will occur over time. We are still operating in a pandemic environment. I'm encouraged by the recent trend of decline in the number of positive cases and hospitalizations across the country. I am even more encouraged by the compassion and commitment our employees have shown to keep each other and the individuals in our care in what has proven to be one of the most challenging years we could have expected to face. While our work related to the pandemic continues, I am confident that our team at CoreCivic is dedicated to meeting the challenge. While so much of our attention over the last year has focused on responding to COVID-19, correctional systems around the country continue to face many other non-pandemic related challenges that have resulted in new opportunities for CoreCivic to help provide solutions. Just last week, the state of Alabama awarded us two new 30-year lease agreements for the development of two correctional facilities. Construction of both facilities will contain an aggregate of approximately 7,000 beds and represent two of the largest development projects in our company's history. The pricing of these leases will be finalized upon the close of project specific financing and the construction timeline facilities will be approximately three years. So it is too early to speak to the financial impact of the leases. However, we are very grateful to have the opportunity to help the state of Alabama address such a critical challenge. Upon signing the two new lease agreements, the governor of Alabama expressed the serious infrastructure concerns the state faces in their correction system, including dilapidated facilities, significant deferred maintenance cost, and the risk of federal court intervention. The conditions not only inhibit the health and safety of employees and residents of a facility, but they also create additional roadblocks to receiving critical rehabilitative programming and services to help put people on the road to successful reentry society. We look forward to helping the state address these serious challenges through our innovative real estate solutions. The solutions we offer continue to resonate with more and more government agencies that are facing serious challenges with their correctional infrastructure. Just two weeks ago, the state of Hawaii issued a request for interest concerning the planned development of a new Oahu Community Correctional Center, the largest jail facility in the state of Hawaii. The existing facility has exceeded its useful life and the state is in need of a new, modern facility to meet its current and future needs. This is only the beginning of the process. It typically takes multiple years. However, Hawaii joins Kansas and Alabama in recognizing the value in working with the private sector to deliver a critically needed upgrade to their correctional infrastructure. We delivered the industry's first solution of this kind to Kansas just last year, and we see growing momentum across the country for these solutions. It presents a promising opportunity for future growth, but we are also helping address serious challenges that will improve the health and safety for employees and inmates within existing facilities operating beyond their useful life. As you can see, we clearly have significant opportunities for growth, and we believe our ability to deliver flexible solutions to meet the unique needs of our government partners will continue to resonate in the market. Add to that the historic durability of our cash flows, and it is clear that we are well positioned to continue to respond to the challenging needs of our government partners and deliver on our capital allocation strategy of reducing leverage. In the fourth quarter, our total debt declined 297 million, or approximately 128 million, net of the change in our cash balance. This was achieved through a mix of cash flow generation throughout the quarter and the sale of a 42 property portfolio of GSA lease assets in December. Our total leverage ratio for the quarter was 3.5 times, a half turn reduction from the prior year's fourth quarter. We continue to target a total leverage ratio of two and a quarter times to two and three quarters times. This year, we intend to continue to deliver on our debt reduction strategy through positive cash flow generation and net proceeds generated by the sale of additional non-core real estate assets within our property segment. Last month, an executive order signed by President Biden directed the Attorney General not to renew Department of Justice contracts with privately operated criminal detention facilities. Two agencies of the Department of Justice utilize our services, the Federal Bureau of Prisons, or BOP, and the United States Marshal Service, or USMS. The BOP houses the inmates who have been convicted for federal crimes, and the USMS is responsible for prisoners who are awaiting trial in federal court. The BOP has experienced a significant decline in inmate populations over the last seven years and simply does not have as much of a need for prison capacity from the private sector. We currently have one prison contract with the BOP accounting for 2% of our total revenue for the year ended December 31, 2020. USMS populations have remained relatively consistent in recent years, so their capacity needs remain unchanged. With that, we do not believe the USMS currently has sufficient detention capacity that satisfies their need without the private sector. And we do not believe an alternative solution that provides all the benefits the private sector provides exists anywhere else. We're extremely proud of the critically important services we have provided the BOP during their period of need, which extended more than 20 years. One of the value propositions provided by the private sector is the ability to flexibly manage fluctuations and capacity needs, whether those needs are increasing or decreasing, so our government partners are not saddled with the cost of developing large-scale real estate assets that they may or may not need in the future. Our ability to deliver these solutions to our government partners is why we have successfully worked with both Democrats and Republicans, providing critically important services to address serious challenges for nearly 40 years. Now, before I turn the call over to Dave to review in greater detail our financial results, I wanted to highlight our continued innovative efforts to provide high-quality reentry programming to help tackle America's recidivism crisis. Last month, we announced the creation of a new role, Vice President Reentry Partnerships and Innovation. It will be served by Darren Swenson, who previously led Core Civics Community Segment, which provides residential and non-residential services to help justice-involved individuals attain employment, housing, healthcare, mental health, and addiction treatment, and family reunification as they successfully reintegrate into their communities. In his new role, Darren will serve as CoreCivic's top advocate and practitioner for reentry. The role will build on our ongoing efforts to cultivate meaningful partnerships with academics, issue experts, policy makers, and other organizations dedicated to effective reentry solutions and recidivism reducing outcomes. It will also focus on incorporating into our operations innovative programs and best practices learned from these partnerships. as well as share the lessons learned through the course of extensive effort to promote successful reentry programs and policies. We are excited for this potential impact this new role can have on improving outcomes for the government partners we serve and the individuals entrusted in our care. This represents yet another step forward in our leadership in the area of reentry and our commitment to advance our profession and offer even more innovative solutions. One final comment. I noted this earlier, but let me express again my deep appreciation and gratefulness to our Core Civic team. Their passion and heroic efforts supporting the individuals in our care during this pandemic has been inspiring to see, and for that, I remain thankful and honored to work alongside them. On that note, I'll now turn the caller of the day to provide a more detailed look at our financial results in the fourth quarter and full year of 2020. Dave?