CoreCivic, Inc.

Good morning. My name is Travis, and I will be your conference operator. As a reminder, this call is being recorded. At this time, I'd like to welcome you to the CoreCivics first quarter 2021 earnings 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 would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star 2. Thank you. 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.

Thank you, Travis. 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 first quarter and provide you with some general business updates. 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 first quarter 2021 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 that we provide on our investors page at CoreCivic.com. With that, it's my pleasure to turn the call over to our president and CEO, Damon Heinegger. Damon?

Thank you, Cameron. Good morning, everyone, and thank you for joining us today for our first quarter 2021 conference call. Before I start my usual remarks, I would like to note that this week is National Correctional Officers and Employees Week. On the first Saturday in May of 1984, then President Ronald Reagan issued a proclamation claiming, calling I should say, upon the country to pay tribute to correctional professionals. This proclamation created a week of recognition of the work done by correctional officers. Later, in 1996, Congress changed the name of National Correctional Officers Week to National Correctional Officers and Employees Week to rightfully credit all the women and men who served by working in corrections. With the year that has just passed, it is especially important to recognize the men and women who worked day in and day out in facilities across the country. I would like to express my deep and sincere thanks and gratitude, not only to the core civic team of professionals, but to all who work in our profession. Going now to our agenda for the call, we will provide you with an overview of our first quarter financial performance, update you on continued response to the COVID-19 pandemic, discuss business development opportunities, discuss the latest developments with our government partners, update you on the potential sale of certain non-correctional real estate assets in our property segment, and provide you with an updated strategic outlook. Following my remarks, I will turn the call over to our CFO, Dave Garfinkel, who will review our financial results in greater detail. Our first quarter revenue of $454.7 million represented a 7% decline over the prior year quarter due to continued impact of the COVID-19 pandemic on occupancy within our safety and community segments and the sale of 42 GSA lease assets within our property segment in December of 2020. As mentioned late last year, we saw criminal justice related populations decline mostly due to a reduction in new intakes. rather than early releases with a disproportionate impact on our community segment, which is considered a lower risk population. Governments have acted faster to transfer certain residents assigned to our reentry facilities to non-residential statuses such as furloughs, home confinement, or early releases to create additional space for enhanced social distancing within our reentry facilities. Although only being approximately 5% of our revenues, our community segments' occupancy registered 51.6% in the quarter versus 73.5% in Q1 of 2020. However, both safety and community occupancy rates in the first quarter remain relatively stable with those experienced in the third and fourth quarters of 2020. Normalized funds from operations, or FFO, for the quarter was 44 cents per share, a decline of 19% compared with the first quarter of 2020. However, this decline was primarily driven by our decision to convert to a taxable C corporation effective January 1st of this year. We have added a new disclosure in our first quarter supplemental financial information document available on our website. which provides a pro forma results for 2020 reflecting income tax expense by applying our estimated tax rate to pre-tax income in the prior year. Comparing our first quarter 2021 normalized FFO of 44 cents per share to our pro forma first quarter 2020 normalized FFO of 46 cents per share, it shows a decline of just 4%. Our adjusted EBITDA of $96.3 million was also resilient, declining only approximately 4% also compared to the first quarter of 2020, a quarter that was not materially impacted by COVID-19. Our GAAP results included some larger than average special items, including a one-time non-cash $114 million in income tax expense resulting from the reevaluation of the company's net deferred tax liabilities. due to the completion of all necessary actions taken to revoke our reelection, and approximately $52 million from our recently announced litigation settlement. Dave will provide greater details about our first quarter financial results, including reconciling between our GAAP and normalized results, following the remainder of my comments. As I have for the last year, I will kick off our operational and business development discussion with an update on our ongoing response to the COVID-19 pandemic and its continuing impact on our day-to-day operations. We have worked diligently throughout the pandemic to collaborate with our government partners, be responsive to evolving guidance from leading health experts, secure our supply chain with clinically effective personal protective equipment for residents and facility staff, and provide proper training and advice to help mitigate the risk of contracting and spreading the virus. Since the approval of the COVID-19 vaccines, we have made every effort to coordinate with our partners as well as state and local health departments. As I described on our last conference call in February, how to allocate the vaccines they receive is at the discretion of the state and local health authorities and each community where we operate has unique differences in the process of developing their vaccine rollout plans. The great news is that vaccine supplies continue to grow, which has accelerated our ability to administer doses to residents and our employees. We have been disclosing weekly updates on the number of vaccine doses we have been able to administer on our website. Our latest data shows we have administered approximately 19,000 doses. 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 becomes available. And so far, I believe we have made great progress. During the first quarter, we continue to see a decline in positive cases within our facilities. This trend has been consistent across all of our facilities. and we are optimistic that additional vaccination availability will continue this trend. We expect that new challenges in mitigating the risk of virus transmission will arise as facility operations begin to normalize. We have already seen some partners reinstate in-person visitation, and many are looking to restart classroom-based programming. We continue to work closely with our government partners to thoughtfully enact these changes over time in order to maintain the best possible measures of prevention. We are continuing to evaluate the impact of the executive order signed by President Biden issued in January that directed the Attorney General to not 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. As a reminder, the BOP houses inmates who have been convicted for federal crimes, and the United States Marshal Service is responsible for prisoners who are awaiting trial in federal court. The BOP has experienced a significant decline in inmate populations since 2013, 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 approximately 2% of our total revenue. Marshal service populations have remained relatively consistent in recent years, so their capacity needs remain unchanged. We continue to believe that the marshals do not have sufficient detention capacity that satisfies its current needs without much of the capacity we provide. We currently have four contracts with the marshals that expire in 2021. The first is at our Northeast Ohio Correctional Center, which is set to expire May 30th of 2021. We are exploring opportunities with various government agencies, including the state of Ohio, the primary user of the Northeast Ohio facility, on a coordinated approach that meets the needs of all agencies. Our contracts at the 600-bed West Tennessee detention facility and 1,033-bed Leavenworth detention facility are set to expire in September and December, respectively. The Marshalls also utilize less than 100 of the 664 beds at our Crossroads Correctional Center under a contract that was scheduled to expire in April of 2021, but was extended through June and is not expected to be renewed thereafter. We currently expect the marshals to relocate detainees presently held at the Crossroads Correctional Center. The state of Montana, which utilizes the remaining capacity at the Crossroads facility, has expressed interest in utilizing the soon-to-be vacated capacity at the facility beginning in July. We do not yet know if the marshals will relocate the detainees at our West Tennessee and Lovemore facilities. We continue to work with the marshals to find solutions that will allow the agency to continue to fulfill its mission. Our third federal partner is Immigration Customs Enforcement, or ICE. They continue to be the government partner with the most significant impact from COVID-19 on their capacity utilization. The largest driver of their lower utilization levels has been the enactment of Title 42 since March of last year, which was put in place to prevent essentially all asylum claims at the country's borders and ports of entry in order to prevent the spread of COVID-19. In the simplest of terms, Title 42 allows the government to remove all individuals illegally crossing the southwest border back to Mexico regardless of their country of origin or validity of their asylum claim. In recent months, the administration has discontinued applying Title 42 to unaccompanied minors, which is why there has been a sharp increase in the number of children in custody of the US government. This is not a population we serve, so we have not been impacted. We primarily provide ICE with detention capacity for adult populations. We have one facility in Dilley, Texas that has a family mission. The purpose-built facility was opened in 2014 when the Obama-Biden administration was dealing with a humanitarian crisis on the southwest border. The crisis was due to a significant increase in the number of families illegally crossing into the country, a trend that has continued since that time. In recent weeks, the administration has announced its intent to shift the mission of our family facility to a family staging center, with the goal of processing families into the country within 72 hours. We are working with ICE to implement the operational changes at this facility as the agency prepares for Title 42 to not be applied to families at the border. It is unclear when Title 42 will no longer be applied to adults who represent a significant majority of the people being apprehended after having entered the country illegally. However, We believe that increasing vaccination rates and availability will eventually remove the need to keep our borders and ports of entry closed. We provide critical capacity to ICE that assists them in processing these individuals, so we would expect to see demand for our capacity to increase meaningfully once this occurs. Looking now at state level opportunities, I will begin with an update on our efforts to complete the financing of two new facilities that we would construct and lease to the state of Alabama. There has been a great deal of headlines in recent weeks, but we are continuing to move forward. It is unfortunate that reckless and irresponsible activists who claim to represent the interest of the incarcerated individuals in Alabama are in effect advocating for outdated facilities less rehabilitation space, and potentially dangerous and less humane conditions for correctional staff and inmates. Opposition to the governor's solution represents an extremism that puts political agendas over people. I encourage those opposed to this project to learn what conditions are currently like for inmates in Alabama. The solution by the state that we are providing also does nothing to inhibit or prevent the state from pursuing additional criminal justice reform initiatives or making additional investments to improve reentry opportunity for formerly incarcerated individuals. If socially conscious investors are truly focused on tangible societal benefits and not politically motivated activism, there are a few important points I'd like to clarify. This project will replace correctional beds that have far outlived their useful life, facilities that the state's governor has described as dilapidated and structurally failing. It will not increase available space to incarcerate. The facilities will be managed and operated by the state of Alabama, not CoreCivic. These are not privately run prisons. These new facilities will greatly improve the quality of life for both inmates and dedicated state employees who will be operating them, making it easier to recruit and retain correctional staff. Modernizing antiquated correctional infrastructure, providing space for more reentry programming, and improving the lives of incarcerated individuals provides a direct benefit to society that everyone should be proud to help deliver. Shortly after the close of the first quarter, we completed the offering of $450 million in senior unsecured notes. For the last few years, we have received inquiry into our ability of the company's access to the debt capital markets, and we were pleased that our response is an emphatic yes. There was strong investor interest in the bond offering, which is why we ultimately increased the size of the issuance. We view this offering as an opportunity to push out our debt maturity schedule, enhancing our ability to continue to use our cash flows to repay debt and minimize future refinancing risk. We continue to have four remaining non-core real estate assets sell for sale, which we anticipate will generate net proceeds of up to $120 million. We are hopeful to consummate this sale of these assets during the second quarter of 2021. accelerating the pace of our debt reduction strategy to lower leverage between two and a quarter and two and three quarter times debt to EBITDA. I would like to briefly discuss a couple additional topics before turning the call over to Dave. First, we are excited to announce that in the next few weeks we'll be issuing our third annual ESG report. The report will provide interested parties with a fresh look at how we uphold our commitment to valuing human dignity within our facilities and provide quality services. Our process for reporting is robust, transparent, and always seeking improvement. The report contains extensive information on how we operate, our achievements in developing and implementing robust educational and reentry programming, and the tangible progress that we have made in advocacy to remove barriers to successful reentry, amongst many others. We are proud of our progress and transparency in the area of ESG reporting, and our doors remain open to engagement and opportunities to make additional progress. Lastly, I wanted to highlight that in recent years, the federal government has officially designated the month of April as Second Chance Month. It is a time to raise public awareness about the need to give those who have been convicted of crimes and complete their sentences a real opportunity for and a second chance at successfully reentering our communities. At CoreCivic, this focus on reentry and reducing recidivism has been and continues to be a major part of what we do year round. We believe we have a moral, social, and economic obligation to provide those who have been entrusted into our care with the tools they need to successfully re-enter their communities upon release and to stay out of prison. We launched an unprecedented effort many years ago to advocate for state and federal legislation aimed at reducing the rate at which formerly incarcerated individuals return to prison. Our advocacy has included providing protections for employees who hire incarcerated individuals, increasing funding for reentry programs, restoration of Pell Grants for education and training while in prison, and restoration of voting rights after incarceration, among others. We have achieved meaningful progress in those areas, but there is much more work to be done. We know America's recidivism crisis will not be solved overnight. But if the public, private, and nonprofit communities all work together, we can continue to improve the opportunities for the formerly incarcerated individuals to rebuild their lives after prison and for other justice-involved individuals to avoid incarceration altogether. I'll now turn the call over to Dave to provide a more detailed look at our financial results in the first quarter of 2021, as well as factors that could affect our business for the remainder of the year. Dave?