Good morning, everyone, and welcome to the CCA's Fourth Quarter 2013 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.cca.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 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 non-GAAP measures. The reconciliation of the most comparable GAAP measures is provided in our corresponding earnings release and included in the supplemental financial data 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 any occurrences of unanticipated events. Participating on today's call will be our President and CEO, Damon Hininger; and Chief Financial Officer, Todd Mullenger. I'd now like to turn the call over to Mr. Hininger. Please go ahead, sir.

Thank you, Tricia. Good morning, and thank you to our valued shareholders, analysts and other participants for joining our call today. Joining me, in addition to Todd Mullenger, is David Garfinkel, who is our Vice President of Finance. What I'd like to do this morning is to start with the highlights for the fourth quarter of 2013 and then give a business update, and then I'll hand the call over to Todd. But first, a couple of global comments for new investors. 2013 marked our 12th consecutive year of EPS growth and a CAGR of 12.3% over the last 8 years of AFFO per share. And based on our guidance that we gave last night, we are well on our way to our 14th consecutive year. More importantly, our 10-year share price performance is north of 300%, showing our long-term track record of outperformance. Now with CCA you have a clear market leader with the company owning and controlling 60% of the privately owned beds in the U.S. marketplace. And with that, 90% of our NOI is generated from our own beds, and we enjoy a modest real estate maintenance CapEx of 5% of NOI. As for the market, we're experiencing extremely limited public sector investment on new government-owned capacity to deal with growth and overcrowding, with this [ph] lack of development is unprecedented in the last few decades within our industry. And with less than 10% penetration by the private sector, we have meaningful opportunities in the U.S. marketplace that are starting to materialize in a meaningful way. So now onto the highlights for the quarter and for the year, first of which was normalized FFO was nearly $73 million, representing a 30% growth from the fourth quarter of 2012. For the year, normalized FFO was nearly $295 million,…

Thank you, Damon, and good morning, everyone. In the fourth quarter of 2013, we generated $0.44 of adjusted EPS, while normalized FFO totaled $0.62 per share. Full year adjusted EPS totaled $1.92, while full year normalized FFO per share totaled $2.65. One important note to keep in mind when comparing 2013 per share amounts to 2012 and 2014, per share amounts were impacted by the issuance of 14 million shares made as part of the special REIT conversion dividend in mid-2013. However, the per share amounts, as reported in the GAAP financial statements, have not been restated to fully reflect shares issued as part of that stock dividend. Therefore, for your convenience, pro forma, per-share amounts for 2013 and 2012 calculated, assuming those shares have been outstanding for all of 2013 and 2012, are presented in both the press release and supplemental. Fourth quarter earnings exceeded our expectations, primarily due to lower-than-expected costs incurred in transitioning our California City facility to a lease-only structure, as well as lower-than-anticipated income tax expense, which resulted from the deductibility of the noncash impairment charges recorded in the fourth quarter. The sequential decline in EPS from the third quarter was due to several key items: We completed the removal of California populations at our Red Rock Arizona facility during the fourth quarter to make the facility available under a new contract with the state of Arizona by the first of this year. The emptying of the Red Rock facility negatively impacted fourth quarter EPS by approximately $0.03 compared to Q3. Next the activation of our Diamondback Correctional Facility, which included hiring staff and purchasing supplies, negatively impacted Q4 EPS by approximately $0.02 compared to Q3, as no inmates were housed at the facility during the fourth quarter. Finally, these negative items were partially offset…

Thank you, Todd. But let me bring to a close our comments and make these final points. Very excited about the REIT conversion being finalized this past year and for new REIT investors in the call, we are a company that: one, has had 13 consecutive years of EPS growth and a CAGR of 12.3% over the last 8 years of AFFO per share. And we are well on our way to our 14th consecutive year. So we've had a very strong and durable earnings performance record. More importantly, our 10-year share price performance is north of 300%, showing our long-term track record of outperformance. We're the clear market leader with the company owning and controlling 60% of the privately owned correctional beds in the U.S. marketplace. With that, 90% of our NOI is generated from our own beds, and we have a very modest real estate maintenance CapEx of 5% of NOI. Strong dividend payout ratio and also historical customer retention rates in excess of 90%. Strong balance sheet with debt-to-EBITDA of 3.3x, which, as you know, is very low compared to other REITs, but also very strong operational record, very valuable [ph] real estate assets with a 35-year life, high barriers to entry and diversed, highly rated government payers. And as for the business outlook, population increases are starting to manifest, which indicate a need currently and future for solutions that we provide. We're encouraged by the improving budget environment on the state side, but also certainly the budget on the Federal side, an extremely limited public sector investment on new government-owned capacity to deal with growth and overcrowding, and with less than 10% penetration, meaningful opportunities in the U.S. marketplace. And based on my earlier report, they're starting to materialize in a meaningful way. That concludes our prepared remarks. Thank you again for calling in to today's conference. And let me now turn the call back over to Tricia for Q&A.

[Operator Instructions] We'll go first to Manav Patnaik with Barclays.

This is actually Greg calling on for Manav. First, looking at your FFO guide as a base, it looks like you're expecting about mid single-digits growth for the year. Big picture, can you contextualize that around your 5% to 7% long-term growth aspirations and whether you are confident in reaching those levels in the near term?

Yes, so let me -- a couple of answers there. One of which is we do have a couple of moving parts this year. We've got the activation in Cal City. So we will see a little bit of work on that during the course of this year, but that'll be one little bit of a moving part this year. We have activated at Diamondback. We're hopeful we get the Oklahoma contracts so that could have some impact from a startup perspective during the course of the year. And then a couple of other moving parts. But again, at -- when we talk about that 5% to 7%, we're looking at it more kind of a 3- to 5-year time horizon and still feel like that's a good number for investors to look at long term.

Great. And appreciated your highlighting the current RFP pipeline. But maybe you can give some more thoughts on the pipeline for potential facility acquisitions or even smaller M&A?

So a couple of comments there. The first of which is, facility acquisitions, as I mentioned earlier, we think that could actually manifest its way in -- not just acquisition, but also maybe developments. So I mentioned the Utah opportunity earlier. That is one thing we are looking at, especially where we've got this environment where we've got over 300,000 inmates nationwide in facilities that are 50 to 100 years old. And also at the local level, where you've maybe gone 30, 40, 50, 60 years with the local jail, and they just don't have the bandwidth from a capital perspective to build a new facility to deal with that current level of need or future need. So we think the opportunities could be similar to what we've done in the past, like with Ohio and GEO did last year with a facility down in Texas where we do an acquisition, and we take over the operation or we just take over as landlord and help them with being a capital partner for both maintaining and expanding the facility as needed. But also, as I said earlier, could be opportunities where we can go in and provide a solution for them with a new build and again just be the landlord. So for competitive reasons, I won't mention any other by name, the only one I highlighted is Utah because it is in the public domain.

Okay. And I guess finally for me on the dividend. A year in the books as a REIT, I was wondering if you could give your thoughts on -- what your thought process is for potentially increasing past the 75% payout ratio and what you're looking at there.

Well, you're exactly right. What we've been talking about in the past year is getting a year under our belt as a REIT. So we're getting pretty close to that milestone. And as Todd said earlier, we've got a board meeting coming up at the -- in the month. So at that time, we will step back and have a sit down with the Board and talk about, with that kind of year milestone behind us, how we want to think about the dividend for the coming year.

We'll go next to Kevin McVeigh with Macquarie.

Damon, you should think about potentially partnering with different states on the development side and/or acquisitions. How would that impact the REIT structure, if at all, from a taxation perspective? And then ultimately, would the margins be similar to what you've kind of come to enjoy more on the owned-and-managed or managed-only, as we think about building out the model a little bit?

Let me tackle the last part first and then maybe have Todd help with the first one. But on the last part, if it is a build, design build own, but not manage, then our ROI hurdle that we've had for many years, the 12% to 15% would still apply. So we'd think about it the same way. So to your question about margins, then they would be similar to the own side that we currently enjoy. So on the first part, relative to the REIT structure...

Sure. Our REIT structure provides the flexibility to participate in all those opportunities Damon outlined.

Got it. And then If I heard it right, it sounded like kind of 6 of your partners have kind of upticked by about 4,500 inmates or so. How does that compare to kind of previous cycles? And would you expect kind of an acceleration relative to past cycles? Or is that pretty much as expected?

I would say it's a little bit of an uptick. I'm trying to remember off the top of my head, because I've been trying to give that number on a pretty consistent basis here the last probably, I don't know, probably 8, 10 quarters. And so it's a little higher. And Oklahoma's been a contributor of that, and I mentioned Tennessee. Arizona now, which is in the portfolio, they've seen an uptick, but also now to Colorado, which Colorado's had a little bit of up and down here in the last 36 months in their population. But as I said earlier, they're up 15% in utilization within our system out there. So I'd say, yes, it's modestly a little bit better than it was, say, 12 months ago. It's definitely a lot better than, let's say, 2 years ago.

Got it. And then obviously California, it seem like they dampen the out-of-state opportunity. Are there any other kind of Cal City opportunities within state that would have kind of help you become just a more formidable partner in-state, as you think about potential opportunities, with the state, obviously given the tentative [ph] relationship you have?

Hard to say definitively. I will say we enjoy a really great working relationship with CDCR. And to your point, a little bit, both with the out-of-state program and now a very strong partnership within Cal City. That partnership is growing and is getting more meaningful. So with the news on Monday, it's a little early to kind of predict on kind of what they will do here in the near term. So it will probably be a few weeks until we get more of a kind of reaction and feedback from the state on how they think about potential [ph] what they would do in-state further.

We'll go next to Kevin Campbell with Avondale Partners.

Could you guys maybe start by talking about the balance sheet a little bit? As you mentioned, you're relatively under-levered relative to peers. So is there any thought about levering up and doing a buyback or a special dividend? Are there restrictions on your ability to do that, et cetera?

Sure, Kevin. This is Todd. I'd say we're always working to maximize shareholder returns, which includes optimizing our capital policy and capital structure to do so. Past examples of actions we have taken in this area include previous share buybacks, initiating a dividend, and of course, executing a REIT conversion, resulting in a significant increase in the dividend payout. But we'll continue to evaluate our capital policy for opportunities to maximize shareholder returns going forward.

Is there any view about sort of the leverage ratios? You guys historically have probably been more comfortable at this leverage ratio, but now with the REIT conversion, has management had any change in view on that and be willing to operate at a higher level for an extended period?

We said, over the past year, we've got a capital policy in place that we put a cap on our leverage ratios around 4x. I think we said we'd be willing to go above that for some short period of time, if there was a perfect storm in terms of capital needs and demand for capital. And then we got -- a dividend payout ratio of around 3/4. We'll revisit that policy, as Damon mentioned, we revisit that every quarter with the board. We're going to revisit that again at the next board meeting. But as of today, that's our capital policy as previously stated is around 4x or a little above 3x. We got some runway there, very strong cash flow. So no changes at this point.

Okay. Damon, you mentioned Utah in your prepared remarks. Could you maybe give us a little bit more color on the opportunity there? Say the number of beds, the timing, et cetera.

Absolutely, Kevin. So what they're doing in Utah, they have a facility in Draper, Utah that we're looking to, basically do a swap, kind of a land swap. It's getting, as I understand it, kind of enveloped by the Metropolitan area of Salt Lake City. And so the Department of Corrections, the Legislature and a few other stakeholders are looking at, is there an opportunity to move basically that operation, which is about 5,000 beds, to another location that would be suitable for a correctional facility. And so they're in the process right now with these various stakeholders through basically kind of a commission, and I think they're partnered with MGT who has helped in the industry in the past on kind of helping Department of Corrections look at these types of solutions and help evaluate the most viable opportunity for the -- most viable solution, I should say. They're going through that process this year to determine what's most viable and then with that -- if they do move forward, procure it and solicit proposals from the industry. So the opportunity is to look at some existing facilities get displaced and then build or, I guess, turned over for private development, and then finding a new location that would be up to 5,000 beds. As we understand it, they likely -- if they do move forward, the solution would be for the government, for the Department of Corrections to still operate it and just look for a partner to provide the real estate solution. But the services component could still also be an option, too.

And your -- correct me if I'm wrong, sort of your average cost per bed build is -- or at least for the private sector is roughly $60,000. Is that a good number to think about in conjunction with this 5,000? Or because it would be such a large facility, you'd get more leverage and the cost would be lower?

That's probably still a pretty good number. It may be a tad better than that, to your point, with the higher quantity, but that's a pretty good number.

And I'm sorry, last question on Utah. Timing, have they given any sense as to when A, a decision will be made and then, when the facility might actually be used?

The -- they haven't given any indication on the latter when it would be used. But on the first part, this year, I mean they're actively going through a process this year into the summer on [indiscernible] doing this analysis to determine the best course of action for the state.

Okay. And then last question, you mentioned on Arizona, sort of in your opening script, you mentioned that the 1,500 beds were dedicated to Arizona. Now the contract, I thought was -- I just want to make sure that it's 500 this year and then 500 next year and -- or have they changed their mind and they're going to use all 1,500 in the short term?

No. It's a good question. So let me clarify that. The contract is just what you stated. But the contract is such to where we can't add alternate customers. So we couldn't put another population in there. So in essence, the 1,500 beds is dedicated for the state of Arizona, even though they don't have a contract for that amount. But as you've seen in the kind of news clips, there is a need and there is, as I mentioned earlier, it is a state that is growing. So we're hopeful that there may be some more demand there long term.

[Operator Instructions] We'll go next to Tobey Sommer with SunTrust.

What are your expectations for per diem pricing? We have seen more data suggesting that state budgets are healing, and I'm curious about your thoughts there.

Yes, Tobey, this is Damon. The budget environment has consistently continued to improve over the last 24, 36 months. So as we go back -- 3 years ago, we were still seeing a few states coming to us look for price reductions and on the whole we were able to offset those reductions through service reductions. But didn't see any of those type of requests last year. And again, we're mid-February, so we've got a few more months until the legislative sessions are over, and the budgets are finalized with a lot of our state partners. But on a whole, looking at a better environment with our existing portfolio or existing state portfolios -- portfolio, I should say, and in light of that has taken a little bit of the pressure off the pricing.

And -- do you feel like you're in a position to -- would you be able to harness some of that pricing and have a little bit of margin restoration, if there is a positive direction to per diems?

I think there's really 2 events. I think one it will be the budgets improving, and in turn states are going be in a position where they can fund a little higher per diem on an annual basis. But I think that's got to be somewhat connected also to what capacity is available nationwide, both with us and GEO. So I think if we see utilization go up, which we feel good, we've made good progress here in 2013, that continues to improve, along with the budgets continuing to improve, then I think that will manifest itself in some pricing improvement.

Okay. Kind of shifting gears a bit. Regarding the landlord-type development opportunities, are those primarily with existing customers? Or potentially new customers?

I would say, primarily with new customers. The unique thing with California City is there was a desire for that to be operated by the state, and there's a few states that feel strongly that the operation should be done by the state. And so I think what this does for us, and a Cal City solution is to go to some other jurisdictions, not only stateside but maybe even at the local level, where we could, say, maybe we take a little of the controversy away relative to who operates it, but we could still be a viable solution as it relates to being a real estate partner. We think this could be attractive. So I would say, primarily on new partners, not necessarily existing partners.

Okay. Follow-up to that. Did the conversations that you're having emanate from yourselves? Or did other potential new customers see what transpired in California and initiate conversations with you?

We've been talking about this, there's kind of -- primarily with Cal City and that solution. But we have talked about this for a while, especially since we're going through the REIT conversion and thought this could be maybe another way for us to grow the business. We've been talking about this for a while, and there's been a few jurisdictions that have expressed some interest. So these conversation are really coming from us.

Right. I'll get back in the queue.

All right and that will conclude today's question-and-answer session. I'd like to turn the conference back over to our speakers for any additional or closing remarks.

Very good, Tricia. This is Damon again, and just let me just say thank you very much for your time and participation today. More importantly, thank you for your investment in CCA. Your management team is focused on executing another good quarter and a year ending for 2014. And we look forward to reporting our progress during the course of the year. So thanks again for calling in and for our folks and friends up in Northeast, hopefully, you're staying warm. Thanks again.

Again, ladies and gentlemen, thank you for your participation. This will conclude today's conference.