Corrections Corp. of America has been sued by the family of a security guard who was killed last year during an inmate riot at the company's Natchez, Miss., facility. Relatives of Catlin Carithers say CCA's policies endangered guards by "depriving inmates of basic needs and treating them inhumanely." The company says it has worked with law enforcement officials investigating the riot and supports the prosecution of those deemed responsible.
Analyst Kevin Campbell at Avondale Partners has run through the details of California Gov. Jerry Brown's new (court-mandated) plan to reduce overcrowding in the state's prisons and sees a mixed bag for Corrections Corp. of America. On the one hand, Campbell says competitor GEO Group looks better positioned to benefit from Brown's plan to use more private prison beds in the state because it has more capacity there. But on the other hand, Brown's plan also calls for a slower return of California inmates now being housed by CCA in other states. Rather than cut the out-of-state tally from more than 8,000 to about 2,700 by mid-2014 as previously envisioned, Brown now plans to trim that number to about 4,100.
At first glance Friday, investors appeared to be OK with Brown's plan, pushing CCA shares (Ticker: CXW) up 1.7 percent to $37.07.
Corrections Corp. of America executives said Thursday that an internal investigation of its operations at Idaho's largest prison show that workers there cooked the staffing books by some 4,800 hours. State officials say they, too, will take a close look at the company's records before making any decisions on what to do with the $29 million-per-year contract, which expires in 14 months.
Ray and company spokesman Steve Owen said the unstaffed hours account for a fraction of total staffing time during the seven-month stretch. The prison didn’t experience any significant increase in inmate violence during the period, they said. Even so, Owen said the company is taking the staffing vacancies and the falsified reports seriously.
“We will take appropriate disciplinary action with the involved personnel, and we will work to enhance the staffing, training and record keeping processes at the facility,” he said.
SEE ALSO: Staffing scrutiny for CCA in Idaho
Manav Patnaik at Barclays Capital on Tuesday raised his price target for shares of Corrections Corp. of America to $45 from $38 and reiterated his 'overweight' rating of the prison operator. Driving his move are improving fundamentals: Almost half of the company's state customers are budgeting for price increases and more than that expect more inmates in the coming year. Shares of CCA (Ticker: CXW) rose more than 3 percent Tuesday to more than $40 and have climbed about 14 percent so far this year.
New Hampshire officials have decided to spike plans to build a private prison after a consultant's report said there were "significant issues" with bids submitted by Corrections Corp. of America and three of its competitors.
MGT determined that the net cost in 2012 dollars of housing inmates — including staffing, overhead, maintenance, and food — is $36,435 per male inmate and $37,573 per female inmate. The consultants projected that over 20 years, the figures would increase by 68 percent for the men and 99 percent for the women.
Corrections Corp. of America executives this morning said they have agreed to terms with Banc of America Securities, Wachovia Capital Markets and other lenders to grow their revolving credit facility to $900 million from $785 million. The Nashville-based prison management company also has secured an accordion feature that lets it add another $100 million to the revolver and has extended its maturity to late 2017. In its recent annual report, officials said the moves give them "greater operating flexibility" under their new real estate investment trust structure.
SEE ALSO: CCA to hit up debt market
The Securities and Exchange Commission has ruled in favor of Corrections Corp. of America on the company’s request to exclude a shareholder resolution regarding its planned REIT conversion from its proxy materials in advance of the company’s annual meeting in May.
The resolution was filed by CCA shareholder Alex Friedmann, president of the Private Corrections Institute, a non-profit organization that bills itself as a watchdog to the private prison industry. It would have required CCA’s board of directors to issue a report to stockholders addressing issues related to REIT conversion.
Earlier this year, Nashville-based CCA said the REIT conversion (see related story here) will lower the company's taxes and require it to pay out 90 percent of its profits as dividends. As part of the move, the company said it will pay a special dividend to distribute previously accumulated profits.
Friedmann’s request asked for disclosure of disadvantages to stockholders and/or advantages to the company when CCA makes REIT dividend distributions in the form of stock rather than cash.
Friedmann also wanted CCA (Ticker: CXW) to disclose to shareholders tax implications of REITs and to explain REIT-related decisions in light of the company’s previous REIT conversion in 1999, which was later reversed. The previous REIT conversion was followed by shareholder lawsuits, a plunge in stock prices and a 1-for-10 reverse stock split to prevent it from being delisted from the NYSE.
"Should CCA’s REIT conversion turn out badly, as did the company’s first attempt to become a REIT, the company and its board cannot claim they were unaware that they should have fully informed shareholders about CCA’s history with respect to REITs," Friedmann said in a press release.