CoreCivic (CXW) Suspends Quarterly Dividend While It Evaluates Corporate Structure, Capital Allocation Alternatives

CoreCivic, Inc. (NYSE: CXW) (the Company) announced today that its Board of Directors has elected to evaluate corporate structure and capital allocation alternatives. The Board has concurrently decided to suspend the Company's quarterly dividend while it assesses how best to use its substantial free cash flow to enhance service excellence, build shareholder value, and offer and implement unique solutions for our government partners and the communities we serve together.

Damon T. Hininger, CoreCivic's President and Chief Executive Officer, said:

“While the unprecedented challenges posed by the COVID-19 pandemic continue to be a priority to ensure the safety of our staff and individuals in our care, we are also focused on creating long-term shareholder value and delivering on our company’s purpose. We believe alternatives to our current corporate structure and capital allocation strategy may better serve the interests of the Company, our shareholders, our employees, individuals in our care within our facilities, and the communities we care so deeply about.

“We are a financially strong company. Nevertheless, our debt and equity securities have been trading at significant discounts to their historic multiples in recent years and to multiples applied to other real estate asset classes for many years. We do not believe these trading prices properly reflect our stable cash flow generation or the value of our real estate.”

As a real estate investment trust (REIT), CoreCivic is required to pay out most of the Company’s earnings in dividends, which requires it to rely on the capital markets to fund future growth.

Hininger added, "At the market prices we have experienced for our debt and equity securities, capital has become increasingly expensive. We are examining whether other approaches may improve our growth prospects and long-term shareholder returns, while also improving our credit profile and long-term cost of capital.

"Alternative corporate structures could allow the Company flexibility to allocate the Company's substantial free cash flow to the highest returning opportunities which could include debt repayment, prudent return of capital to shareholders, or funding attractive growth opportunities. Growth opportunities include increasing our investment in programs and services that will expand on the leadership role we play in addressing the most pressing issues facing America's criminal justice system. Every day we see programs such as GED, vocational education, substance-abuse treatment and job placement assistance help those individuals in our care get their lives back on track. Additionally, we believe alternative structures could expand opportunities for the Company to meet other partner needs that cannot be undertaken in our current structure."

Management is confident that the action taken on the dividend as a first step will not impact the Company’s status as a REIT for the 2020 tax year, as the Company expects to substantially reduce its minimum distribution requirement under provisions in the CARES Act.

The next step of the process will be to evaluate alternative corporate structure and capital allocation strategies to determine the best approach to maximize long-term shareholder value, while also retaining flexibility for addressing the needs of our government partners and communities. The process will include an analysis of potential opportunities to recycle capital invested in certain leased assets.

CoreCivic has engaged Moelis & Company as financial advisor and Bass, Berry & Sims PLC and Latham & Watkins, LLP as legal advisors to assist in the process. The Company expects to finalize this evaluation in the third quarter of 2020.

Business Update and Preliminary April and May 2020 Financial Results

CoreCivic continues to generate strong cash flows from its largely governmental customer base while working hard to protect our employees, those entrusted to our care, and our communities during the COVID-19 pandemic. In April 2020, the Company generated $158.1 million in revenue, a 4.2% decline compared with March 2020, and net income of $10.2 million. Approximately half of the decline in revenue was due to April having one less day, while the remainder of the decline was predominantly due to a reduction in occupancy from multiple government partners related to COVID-19. This revenue decline from March was offset by favorable trends in operating expenses, as Normalized Funds From Operations (Normalized FFO) for the month of April was $22.4 million, a 5.5% increase compared with March 2020.

In May 2020, the Company generated $159.6 million in revenue, a 0.9% increase compared with April 2020, and net income of $15.3 million. The increase in revenue was primarily due to May having one additional day. Compared with the prior month, net income increased in May primarily due to favorable trends in operating and general & administrative expenses. Normalized FFO for the month of May was $25.0 million, an 11.9% increase compared with April 2020.

Normalized FFO is a measure calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles (GAAP). Please refer to the Supplemental Financial Information and related note following the financial statements herein for further discussion and reconciliation of this non-GAAP measure to net income, the most directly comparable GAAP measure.

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