Good morning everyone and welcome to Corrections Corporation of America's First Quarter 2009 Earnings Conference Call. If you need a copy of our press release or supplemental financial data, both documents are available on the investor page of our website at www.correctionscorp.com Before we begin, let me remind today's listeners that this call contains forward-looking statements pursuant to the Safe Harbor provisions of the Securities and Litigation Reform Act. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made today. Factors that could cause operating and financial results to differ are described in the press release, as well as our Form 10-K and other documents filed with the SEC. This call may include discussions of the non-GAAP measures. The reconciliation of the most comparable GAAP measurement is provided in our corresponding earnings release or posted on our website. We are under no obligation to update or revise any forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events. Participating on today's call will be our Chairman of the Board and CEO, John Ferguson; President and Chief Financial Officer, Damon Hininger; and Chief Financial Officer, Todd Mullenger. I'd now like to turn the call over to Mr. Ferguson. Please go ahead, sir.

Thank you, moderator and welcome everyone to Corrections Corporation's first quarter earnings conference call. In addition to those that the moderator said was in the room, we have David Garfinkle, our Vice President of Finance and Controller, to assist us on some of the questions. We are very pleased with our results and we will get started with Todd reviewing of the financials.

Thank you, John and good morning everyone. Moving straight to a discussion of our financial results, in the first quarter of 2009, we generated $0.29 of EPS compared to EPS for last year's Q1 of $0.28. We exceeded the earnings guidance provided in February as a result of better than expected operating expense performance combining with a slight acceleration of our share repurchase program over that assumed in February, more on those in a minute. EBITDA in Q1 increased 9.6% to $99.6 million for the quarter, Adjusted free cash flow for the quarter totaled $73 million or $0.61 per share. Keep in mind that we paid the cash taxes in Q1, with two payments made in Q2. As a result, Q1 cash taxes are higher than average with Q2 lower than average. Focusing on adjusted free cash flow, as we have mentioned in the past, unlike other industries, our depreciation expense is not reflective of the ongoing maintenance CapEx that we will incur to maintain our facilities. For example; depreciation and amortization expense totaled nearly $25 million in Q1 versus only $10.3 million of facility maintenance and IT CapEx for the quarter. So as we have commented before, we believe adjusted free cash flow is in many ways a better measure than EPS for the return we are delivering to our shareholders. Total revenue for the first quarter was up 6.5% over last year, an increase of nearly $25 million. Average daily compensated population for the quarter increased 4.2% compared to the prior year. Revenue for compensated man-day for the quarter increased 3.9% to $58.45. Average compensated occupancy for the quarter declined from 97% to 89.4%, which taken by itself appears negative. However, keep in mind that our average daily compensated populations actually increased 4.2% with the decline in occupancy…

Thank you, Todd and thank you so much callers for calling into the conference today. I would like to break my comments into two topics, the first of which is our business strategy in our short term and long term focus, and second, our market observations and opportunities. So first our business strategy in a short term and long term focus. Our vision has been and continues to be the best full service adult corrections system in the United States. We believe this mission continues to be relevant and appropriate even in the current economic environment. As it relates to our business strategy, our plan continues to be to build capacity in front of demand. I will give some recent examples later in my comments on why this continues to be a sound strategy. Let me first say that the U.S. marketplace still looks very favorable for the company and the industry. A couple of metrics that shows the long term opportunities for the company. First, of the $65 billion U.S. corrections marketplace only approximately 7.8% is managed by the private sector. We think this still shows a largely un-penetrated market here in the U.S. Second, of the incremental inmate growth in 2007 among all 50 states, which was approximately 27,000, about 49% of that growth was captured in house in five facilities. We think this shows the maturity of the market and companies like CCA to manage this type of population, but also shows the constraints that states are feeling on building new capacity. And third and finally the supply and demand imbalance. Of the 19 state customers that CCA does business with, we are currently estimating those states will have an incremental growth that will be twice as much as their funded planned capacity by 2013. As it…

Okay. As we finish up my remarks I just want to take a minute and highlight what I think are the important takeaways from our earnings announcement of press release and the comments by Todd and Damon. First, I think it -- as obviously we're pleased with our first quarter with a growth in earnings per share, growth in revenue, growth in EBITDA, growth in free cash flow is a significant accomplishment in today's challenging economic environment. We believe that these put us in a pretty select class of businesses in America today and helps demonstrate that the company as a resistance to the current recession. I'll also point out once again as we mentioned last time, that 2009's performance includes somewhere between 10 - $0.12 a share of additional depreciation and interest costs. We believe the supply and demand imbalance continues and that there will be insufficient public sector capital investments. They will ensure that the storage of beds in the public sector will continue. We think that recent CAR 8 and state of Arizona awards validates this demand and of course our business strategy. We hope should you recognize the benefit from the repurchase of nearly 8.5% of our outstanding shares. And even with the purchase of these shares as well as placing over 9300 beds into service in the last 15 months, we continue to have strong balance sheet, good liquidity and strong cash flow. And then if you -- as we pointed out there were some 10,900 vacant beds in our system on May 1, in addition to 1000 beds that we now have under development in Nevada. And if you put potential to that we would estimate that the potential annual incremental facility EBITDA for those beds is well in excess of $90 million and well north of $0.40 a share and of course as William pointed out some 5200 of those beds are under contract. Before we enter into the question and answer session, I do want to ask the shareholders on the line today. Those of you who have not voted for the annual meeting coming up next Thursday, there is a shareholder proposal that requires certain disclosure which we think would put CCA in a unique position, one it's unfavorable, one that if the proposal is good public policy should be, one that requires all companies to do, as opposed to just selecting a few. So that we would ask each of who have not voted yet or even if you voted to change the vote, to vote against the shareholder proposal. So, with that moderator, we would be happy to open the lines up to answer any questions.

Thank you, Mr. Ferguson. (Operator Instructions). We'll go first to Kevin Campbell with Avondale Partners.

All right. Good morning, and thanks for taking my question here. I hope you could start off by discussing the outlook for filling the remaining 6700 beds. I mean, what would be your expectations as to not specifically whom am I selling but over what timeframe perhaps you might look to fill those beds?

Well, we've got several states both existing customers and new customers that would be prospects. It would be difficult to say, with any obviously clarity today on the actual timing and utilization of those beds. But as I mentioned earlier, our short-term focus is all about trying to get the excess capacity utilized.

And, are there any -- it doesn't sound like any of the existing RFPs opportunities for those beds?

Well, we've got, as I mentioned we have got the Georgia procurements are still pending. So that's all within the state of Georgia, and that all will be new construction and then obviously the BOP requirements are one for our existing capacity, our existing population. And then also we're not involved to CAR 9. So, the procurements I outlined that would not be -- those would not be candidates.

Okay. And could you talk a little bit more about the opportunities for consolidation? You mentioned I think that is a good opportunity, what -- is there anything out there sort of percolating that's more of near-term?

No, I mean I think that this is something we're always looking at and always talking to the both, existing or future customers. But obviously, not anything I could specify on today.

Okay. And then looking at some of the states, as we've talked about before Washington and Minnesota have brought on new capacity and drew down populations. Should we be looking at or expecting any states, Wyoming for instance that are bringing on beds that might be then drawing down population in the back half of the year, can you give us some clarity there?

Well, I think you would -- outlined in the press release, the states where we think we've got some drawdown population, I mentioned specifically the numbers on Minnesota and Washington. So one of the things we do obviously everyday, we talk to all of our states to understand their capacity, it's long-term and short-term. And there may be in fluctuation. So, we think we've adequately discussed and have a fair understanding of what their needs are for the rest of the year and we'll guide it quarterly into our guidance.

And last question before I jump back in the queue, can you give some color as to what your expectations are for California? I know you don't like to be specific, but at this point it looks like you have around 1300 inmates, they were doing prior to the slowdown, 3 to 400 a month. Are you more conservative than say 3 to 400 a month from this point? Or if you could just give us some clarity so we have some expectations there.

Yeah Kevin, this is Todd. Really I don't want to parse guidance on a customer-by-customer basis. One reason for that, unique to California is what we've learned from past experience. Any number we put out there is compared to data presented on the State to California's website related to other state transfers. And that data has been very inaccurate, inconsistent in the past, which can create unwarranted concerns. That said, California is committed to using the beds. Those beds are fully funded in our budget and we're optimistic they will eventually get to 8100 beds.

Okay. Thank you.

Thanks, Kevin.

Our next question will come from Emily Shank with Barclays Capital.

Hi, good afternoon. This is actually Jason Trihio (ph) in for Emily.

Good afternoon.

Good afternoon. First, you actually touched on this briefly in some sense, but outside of the current CapEx guidance, if you have given us are there any new greenfield facilities that you're contemplating for 2009 perhaps the occupancy would have ramped up?

Yeah, nothing we're contemplating. We suspend a construction on Turbeville and like we said publicly, we want to see some additional utilization of existing capacity before we initiated any speculative building, which is what Turbeville is. So, asking the bill that's suited for more dropdowns on another facility, going to suspend a new Greenfield initiation in 2009.

All right, great. That's helpful. And then just lastly, I thought you can quantify for us the supply demand imbalance if you look at the industry broadly over the next couple of years, how does the demand for new beds stock up, both to public supply but also to private supply, just any of the states that you cover as well as the federal government?

Well, it's very full and dynamic couple of numbers both on the population demand and also potential funded capacity. I would say there is a lot of things that can drive the population. And then also we think also in this environment, especially on the safe side with every dollar getting scrutinized and resources very scarce in this environment, even some planned capacity may not ultimately be funded. So, it's a pretty much a moving number. But it was really clear to us is that if you look out through 2012, 2013 just the known planned capacity that's out there versus the incremental growth, the growth is twice as much as the planned capacity. So we think that that's going to continue to be case here in the short to mid term.

All right, great. That's very helpful. Thank you very much.

And we'll go next to ManAv Patnaik with Barclays Capital.

Hi. Good afternoon, guys. First congrats on the good quarter and I guess welcome Damon to the call and thank you for providing all that color both Todd and Damon on the industry and the guidance. And it's definitely helpful. Just a few add on questions, you mentioned eight of the 19 states customers have already passed their budgets and there is six (ph) -- go from last time who had come up looking for negotiating terms. I was just curious if you could give a little more color on if there is any overlap there like any of those six customers looking for negotiations out of those eight that passed their budgets? And also somewhere along the lines you mentioned that you are expecting increases some of the state customers, are those also within those eight that you mentioned or just a little more clarity around those?

A couple -- Good morning and I guess couple of comments there let me just talk about this current fiscal year, as I said we're more within 60 days at the end of the year. So, we don't think I'd say don't know for sure but we're hopeful that we're kind of not going to see additional pressure this fiscal year. So, I don't know that for sure but we just think with 60 days less are pretty close. Going into next fiscal year obviously if the economy in the recession continues to worsen, we could see some same level of kind of engagement from our customers and another level of negotiation. But going into the new fiscal year, that pressure probably won't be felt until the last half of this fiscal year, which should be the first or second quarter of 2010. Relative to your question about the eight of the 19 customers that passed their budget, I couldn't tell you exactly which ones are allowing pretty increases or not and we won't be able to parse that out in that greater detail. But we should have a little more clarity here the next month or so with these remaining states passing their budget and any pressure from additional on the podiums or compensation to us.

Todd's comment about the range is trying to take all that into consideration.

But I mean just, is there any overlap between the six and the eight, that's all I'm asking. I'm not looking for a specific state customer. Just curious if there was overlap in the six that came from negotiations and the eight that passed their budget?

I don't have that in front of me. So I couldn't say definitely, there may be a case of couple there, but I couldn't tell you definitely.

All right, fair enough. And then I guess a question and maybe for Todd on the managed only side. Could you give us a little color on what or how we should model the margins there going forward and maybe some idea on just how per diems might work out in that aspect too?

On a managed only side, we've said historically that's where all the competition comes from.

Yep.

Personally for us it's about 10% of our facility level EBITDA. We've obviously seen some pressure historically. We're becoming more and more disciplined in our pricing there in terms of the minimum level of EBITDA we're willing to accept. So we'll probably see some continued pressure going forward. With that said we don't have a whole lot of managed only contracts coming up for renegotiation that would encourage a lot of competition, there is one or two. So but in terms of specifics around margin I'm not sure I'm prepared to give you any guidance on kind of long term margins in the managed only side.

Got it, but I guess could you just then point out what the reason for the drop from the 16.5 in the fourth quarter down to 13 this quarter?

Some of that's got to be seasonality on some of the populations perhaps and mix on some of it. You're also going to have items such as unemployment taxes that impact Q1 versus Q4. So, there is some items like that.

And I guess just final sort of housekeeping item. What was your total construction CapEx this quarter?

Total construction CapEx for the quarter, including new build $10.3 million, that's maintenance. He's asking on new construction.

Yes.

15.5 on the new construction.

All right got it. Thank you guys.

Thank you.

(Operator Instructions). We will go next to Todd Van Fleet with First Analysis.

Hi good morning guys. A nice quarter, am I coming through okay here?

You are.

Yes.

And I wanted to ask Todd on new pricing to be extent that you can help us flush this out. The business that you had a year ago, I mean is there anyway to parse out business mix in terms of revenue per compensated man-day which I think you reported as what 58.45 this quarter. Is there anyway to segment the upward drift here? So if I were to look at revenue per comp man-day a year ago was about $56, today it's 58.45. How much of that increase is due to a shift in business mix and how much is due to pricing year-over-year? Can you is there a way to -- I know that there is a way, but do you have that information there available for us?

Yeah. I don't have that here with us. Some it is mix, some it's pricing leverage but I think at the end of the day when you look at our operating margins, an increase of 4.4% in operating margins year-over-year. I think that's reflective of whether it's mix or pricing leverage that it's fair amount of that stuff at the bottom line.

Sure. Sure, I guess I am just try to get a sense for kind of reading what you're saying regarding, you are getting the pricing request from some customers but, so other customers you are getting pricing increase. So, ignoring the mix issue, would you say that on balance you would expect pricing to be a positive influence for you this year or a negative influence?

Positive.

Okay. But you don't want to say at this point, how much whether it's 1, 2, or 3% what have you?

Yeah I don't want to put guidance to that.

All right. Maybe I should stop bleeding the question, maybe I should just watch your answer. On operating expenses, great job in the quarter. In the quarter, you would have expected or you have two more days in the December quarter right. And but you also have higher payable taxes in Q1. So were there new contract negotiations that kicked in at the beginning of this year that we're seeing impact to March result relative to the December result? Just trying to understand why we would have seen a sequential decline in operating expense apart from just a fewer number of days?

Yeah. I think it's a combination of things; one, a redoubling of our efforts on controlling operating expenses, so in an environment where there is limitations on our ability to grow the top-line we focus more and more attention on controlling expenses. And historically we've done good job over there in the past. But in this economic environment you are supposed to focus even more attention on doing that. And so, some of the results on supplies even on utilities and a couple of smaller areas, are a result of kind of a redoubling of our efforts if you will on controlling operating expenses. And that's going to be a focus moving forward during the balance of the year, as it is for many companies in corporate America.

The result of any renegotiated or contracts with or agreements with your customers such that the ones you did won a little bit pricing concession that we're seeing the impact of lower cost base as well because of those contract renegotiations?

Not, not really.

So, I guess lastly on balance and is it fair to describe your take on -- you look across the landscape, obviously the situation is what it is from a fiscal point of view, and populations are still increasing and the pressure continues to go so on. But would it fair to describe on balance and you can call it State versus Federal if you'd like, but on balance so we're still in bit of a holding pattern here with respect to procurements and new business activity for say another 3 to 6 months?

I would say there's going to be a continued pressure as a result of uncertainty around the budget with most states around initiating new bed procurement. That said, state of Arizona, significant budget and they decided to move forward with new bed procurement there. So, a lot will be dependent upon the individual states situation. But I'd say on balance the uncertainty around state budgets will limit their ability to initiate new bed procurements.

Okay, thank you.

And our next question will come from Mark Paulstar (ph) with Lucent Investment Management.

Thank you. I apologize, I missed the middle portion of the call. So I'm going to do my best not to repeat questions. Can you talk about the remaining cash spend for the two development facilities in North Georgia and Nevada?

As we've outlined in the press release, we've got, we've broken out the detail there in terms of CapEx for the remainder of the year. So we've got about $60 million in prison construction for 2009 in total. And then we'll have about 30 to $40 million left to spend to complete those projects we've initiated in 2009, left to spend in 2010.

Great and if you were to win Georgia extension -- can I use a historical expansion construction cost or is there anything unusual about how that would come through?

You can use the average historical.

Okay. And then one of the states that you're contracted with has just put out solicitation and mentioned that some of the public state systems had gotten back to them. Do you have any particular feel of state systems that might have more than 300, 500 bed capacity in a place most of those wouldn't be your customers but maybe in the Northeast or somewhere that might be able to be competitive with your own bed capacity at this point?

Good morning Mark. This is Damon, don't have a definitive list in front of me but there are some states that does have capacity from time to time. And also we monitor very closely as it relates to marketing of those beds so other states. One thing -- I think that's challenging for one state to buy beds from another state is that a lot of time that is not a long-term commitment. So as the state populations kind of fluctuate and they may have their capacity available their own, maybe only willing to make six months to 12 months commitment and make those beds available. So even though those pockets may be out there may not be pretty attractive to states that are especially trying to figure out a solution for several years.

Okay. So it's more about the commitment than the critical mass of having a large number of beds in a single facility?

Right.

Okay. And then my last question, just mathematically and I am looking at against EBITDA, the conversations that we've had regarding the buyback being above the development hurdle rate, you're still I think nicely above a 20% return on the buyback at 16 - $17. Is there a point where development is a better idea even if the point return doesn't look quite as good?

Those are never issues we factor in to the decision making around repurchasing shares, are with liquidity, progressive (ph) return. Yeah there is some risk associated with new bed development that you don't have with the share buyback, right? The share buyback, you don't have construction risk, you don't have operating risk. So those things had to go and hop around our decision. We've got -- that said and we just got $25 million left authorized under the current repurchase plan. And while we don't want to take anymore options for deploying capital off the table including a share repurchase program, we're hopeful the stock price increases to a level that doesn't make our ROI hurdle rate for restructuring to that.

Is it fair to say that the current return is, basically I'm just thinking you could buy 4 or $5 million worth of EBITDA for a million shares, which at this point would be 20 some percent?

Yeah, we haven't got into specifics around what the ROI is on the repurchasing stock at certain repurchase prices and don't want to do that I think for obvious reasons. So, don't want to tip our hand there.

Fair enough. Thanks for your time.

Sure.

And we take a question now from Clint Finley with Davenport.

Good morning, guys. I think we've talked recently about prison reform from Senator Webb and others, what kind of timeline do you think we're looking at before we see any action here?

Good morning, this is Damon. This short answer is don't know. I know that Senator Webb put forth his panel to look at a kind of broad and sweeping level of analysis on the criminal justice system and potential reforms. And I think you've outlined some narrow areas of focus potential kind of timeline. But I think it's very early in the process. So, the result to recommendation's conclusion to that is probably going to be I would say, over probably several years. So I think it's probably too early to say what it looks like and timing and impact.

And just given his areas of focus, any idea of the impact on the private sector here?

We're right now looking at it at a very broad level. And that's always been really disseminated out in both media and also in some of his remarks up on the Hill. But as of right now, it does not look like specifically our book of business and I should say, our book of business with the private corrections area is going to be an area of focus, but it's, I think it's too early to tell.

Thanks, guys. Nice quarter.

Thank you.

And we have follow-up question from Kevin Campbell with Avondale Partners.

Thanks. Can you just confirm for us whether or not you kept all of those Colorado inmates in your other three facilities? I just want to make sure that they didn't get distributed to other Colorado facilities run by the state.

Yeah. So, the inmates coming out of Huerfano, we have retained all those inmates.

Okay. And looking at some of the proposals, I think Mark was talking about Alaska having issued an RFP, Tennessee has a proposal in their budget potentially for closing one of your facilities. So, is that incorporated in say, the roll into your guidance if something were to happen to one of those two or even some other facilities? Is that -- again, if those would happen, are you accounting for that at this point in your guidance? I guess it's a really question.

Well, Kevin, let me -- this is Damon, and let me kind of address both of those separately. As it relates to Alaska, we mentioned, I mentioned in my prepared remarks that we're also always looking opportunities for moving inmates in our system to take advantage of excess capacity. And obviously I mentioned that Arizona award the 12, I would say solution as an example of this. So, we have discussed with Alaska, the prospect of moving their population out of the state of Arizona to another CCA facility and there appears to be genuine interest to do that. So this will make capacity available in Arizona for potentially other customers, which we think would be very attractive to several states. So, we've done business with the State of Alaska for 15 years. They set their bar very high relative to sources they expect out of their contract. So we think obviously being the incumbent, we're well suited to meet their needs going forward. But it is an open procurement, and if they do get potential offers, we think that their worst case, the risk would be in 2010 versus 2009. As it relates to Whitefield, that is a budget proposal from the Governor here in State of Tennessee for this upcoming fiscal year. And it's also very early kind in the a process, so on finalizing I should say early, but it s going to probably sometime until they finalize the budget for 2010. And it makes us -- as it makes its way through the legislature. So kind of use the baseball analogy, it's probably an early innings, probably going to be several more innings before we see a final outcome on this. And again I would say that any outcome -- potential worse case outcome on Whitefield would be a 2010 versus 2009.

Okay and looking at Alaska real quickly. If you were to compete with some of these public states, I mean historically the states themselves can't compete on a -- as well as on the labor front. And so do -- is there any reason why in this instance competing for other state's inmates that they would be better suited to go up against you on the labor cost front?

Yeah, I think there is going to be several challenges if I consider another state. One is what I mentioned earlier. It's been our experience it's pretty well communicated out into the industry that if the state has capacity available and they are offering to another state, there is a very narrow window relative to their willingness and commitment to allow that capacity to be made available. So maybe six to 12 months. So with the state of Alaska that's potentially looking at a three year horizon only having a six to 12 month commitment may not be very closely aligned to their interest. The second thing is that state may not be willing to make an investment both from a staffing and also a CapEx perspective, especially if they require significant programs to accommodate another state. So from both the financial perspective, but also a timing perspective it may be not advantageous for Alaska to consider those options.

And then last question on Alaska. Is there any thoughts -- what's the size of the prisons that they're going to build in I guess -- from that two (ph). Is that moving forward? Is that being put on hold, because of budgetary concerns?

It is -- I think in significant debate within the legislature, I think the last report I read was that they were hoping to get about 20 million appropriate this upcoming year. But I think the last estimate and I think is still influx is that they've impaired down to six million. So that probably is a subject for continued debate. But based on timing, I think they are still kind of looking at that 2012-2013 window for this facility come online. That is I'd say if they were successful to get funding based on the current timeline.

Okay, and then last question as it relates to your labor costs. So, obviously your fixed costs were little bit higher. You had the issue with startup expenses, I think. And if you were to back off those facilities where you had the cost from the startup expenses, would you have seen better leverage on your labor expenses or your fixed cost than you might have otherwise expected?

Then we otherwise might have expected. I didn't drill down into that level of detail for perhaps the discussion today. Let me say we have seen some improvement in turnover with the economic downturn and the unemployment rates going gone from 4% to 8%. It's on its way to 10%. And that may have a favorable impact on operating expenses going forward, but little too early to quantify at this point.

Okay so really on the operating expense line there probably was little related to sort of labor cost being lower, because of the economy and it was more to the items that you mentioned that were fixed or variable cost.

Yes.

Okay thank you.

And Mr. Ferguson, there are no questions in the queue sir. I'd like to turn the call back over to you for any additional or closing remarks.

Thank you moderator and thank everyone for taking the time to hear our comments. As I said earlier, we are very pleased with the performance of this quarter and we continue to hope that we can provide value to you as shareholders. And we will see you in about 90 days. Thank you.

Ladies and gentlemen that does conclude today's conference. We thank you for your participation.