Corrections Corp. of America said it earned $37.3 million in the second quarter, down 12 percent from a year ago, as it ramped its work at two prisons and had to absorb higher labor costs. Per diluted share, the company's profits were 38 cents after one-time items, a penny above what analysts had been looking for.
CCA officials also attributed part of the earnings drop to lower inmate counts in Washington, D.C., and Colorado but said lower interest costs helped make up some of the gap. Revenues for the quarter at Nashville-based CCA rose slightly to $443 million, but company officials said the higher labor expenses and lower occupancy rate lowered its operating profit per man-day to $17.25 from $18.95 last year.
Executives also said they are still exploring converting Corrections Corp. of America to a real estate investment trust that would deliver its services through a taxable subsidiary. The possible move, which the company first disclosed in May, still needs the nod from Internal Revenue Service officials, with whom CCA is in talks.
"[W]e believe that, if our preliminary analyses are substantiated, an election to become a REIT effective January 1, 2013 remains a possibility," the company said. "However, this is a very complex process, and the precise timing and outcome of the process are still uncertain."
Shares of CCA (Ticker: CXW) moved up more than 3 percent to $32 in after-hours trading Wednesday. That's their highest level since mid-2007.
Nursing home operator Advocat said it lost $534,000 in the second quarter, compared to a profit of more than $2 million a year ago. Per diluted share, its losses came to 9 cents.
Revenues at Brentwood-based Advocat fell about 3 percent to $77.1 million, but operating expenses climbed $1.1 million as the company invested in the opening of new facilities in Kentucky and West Virginia. CEO Kelly Gill said the losses from those start-up facilities — both are expected to add to earnings next year — totaled $1 million in the first half of this year. And while Advocat's skilled-nursing occupancy rate dipped from a year ago and reimbursements for Medicare and managed-care residents fell, Gill said his team is looking to grow Advocat's footprint.
"We have reached the phase of our strategic plan where we are actively seeking opportunities to grow our portfolio," Gill said. "We now have the ability to add and integrate additional licensed beds with greater ease increasing our operating margins while incurring only modest incremental growth in general and administrative expense."
Shares of Advocat (Ticker: AVCA) fell more than 4 percent Wednesday to close at $5.94. Year to date, they're up about 7 percent.