Good morning. My name is Ron and I'll be your conference operator. At this time, I'd like to welcome you to Corrections Corporation of America's Third Quarter 2015 Financial Results Conference Call. All lines have been placed on mute to avoid any background noise. After the speaker's remarks, there will be a question and answer session [Operator Instructions]. Thank you. I would now like to turn the call over to Cameron Hopewell, CCA's Managing Director of Investor Relations. Mr. Hopewell, you may begin your conference.

Thanks operator. Good morning ladies and gentlemen and thank you for joining us. Participating on today's call are Damon Hininger, President and Chief Executive Officer, and David Garfinkle, Chief Financial Officer. During today's call, our remarks will include forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities and Litigation Reform Act. Our actual results or trends may differ materially as a result of a variety of factors, including those identified in our third quarter 2015 earnings release and in our Securities and Exchange Commission filings, including the forms 10-K, 10-Q and 8-K reports. You are also cautioned that any forward-looking statements reflect management's current views only and that the Company undertakes no obligation to revise or update such statements in the future. This call will include a discussion of non-GAAP measures. A reconciliation of the most comparable GAAP measurement is provided in our corresponding earnings release and included in the supplemental financial data on the Investors page of our Web site at www.cca.com. With that, it's my pleasure to turn the call over to our President and CEO, Damon Hininger.

Thank you, Cameron and good morning, to everyone and thank you for joining our call today. I really appreciate it. Also joining us for today's call is Brian Hammonds, our VP of Finance. I will briefly touch on some key financial highlights from the third quarter of 2015 before reviewing recent developments across our business portfolio. Following my remarks, Dave will provide an in-depth review of our financial performance and cover the factors impacting our fourth quarter 2015 guidance. As we disclosed in our earnings announcement last evening, we generated revenue of $460 million, representing a 12.6% increase from the prior year period and normalized funds from operations of $0.64 per share, in line with high end of our third quarter guidance we provided in August. Dave will provide a full overview of these and other drivers of our financial performance in the third quarter at the conclusion of my remarks. Moving next to recent facility development projects, as I indicated on our second quarter call in August, we completed construction of our 1,500 bed Otay Mesa Detention Center near the end of the third quarter. However, for several reasons the transfer of offenders from the San Diego Correctional Facility to the new facility was delayed until the third week of October. While the temporary delay created a modest increase in transition related expenses, we know the additional 500 bed capacity at the new Otay Mesa facility will be an attractive long term solution to our government partners, who have historically expressed a need for additional bed capacity in the area. Construction of our 2,500 bed Trousdale Turner Correctional Center in Tennessee continued on schedule, to be completed in time to commence ramping operations and begin accepting offenders from the state of Tennessee in the first quarter of 2016. Bringing…

Thank you, Damon, and good morning everyone. In the third quarter, we generated $0.45 of adjusted EPS compared to our August guidance range of $0.43 to $0.45 and $0.02 ahead of the First Call consensus estimate. Normalized FFO totaled $0.64 per share, at the high end of our August guidance range of $0.62 and $0.64 and AFFO totaled $0.63 per share, $0.02 ahead of the high-end of our August guidance range of $0.60 to $0.61. The most significant factors affecting third quarter results compared with the prior year quarter include the decline in inmate populations from the State of California, which were generally consistent with our projections and the previously announced termination of the contract with the Federal Bureau of Prisons at our Northeast Ohio Correctional Center effective May 31st. The decline in California populations contributed to a reduction in per share results by about $0.08 from the prior year quarter. As expected, the third quarter also reflects operating losses at the managed-only Winn Correctional Center, which we terminated effective September 30, 2015 and start-up expenses to prepare for the transition of inmate populations from the San Diego Correctional Facility to our newly constructed Otay Mesa Detention Center, which was completed last month. The negative financial impact of these events was mitigated by the first full quarter of operations at our South Texas Family Residential Center, where construction was completed during the second quarter of 2015, and the increase from the prior year quarter in average daily populations from the State of Arizona by about 1,000 inmates at our Red Rock facility for a new contract that commenced in 2014, as well as the short-term contract that began in the third quarter of 2015. Operating margins declined from the prior year primarily because of necessary staffing required during the decline…

Thank you [Operator Instructions]. And your first question will come from the line of Tobey Sommer from SunTrust. Please go ahead.

Wanted to ask about California, how important will it be to get the forecast from the state as we look out into 2016 and try to see what their thoughts are about their inmate population forecast? Thanks.

Tobey, this is Damon. Thanks for your question. I think it's always been the case with California that we're looking as we think about the future when they released, either their budget proposals or population forecasts. So, as I think about 2016, I think the most notable milestone we've got in front of us is when Governor Brown releases his initial budget proposal in January, that should indicate how they think about not only the contract amount for 2017 fiscal year but also may give some indication on population. So I see that as a next big milestone and after that the budget typically gets revised in May as you know and then they may provide another five year forecast for population. So January will be the milestone and then later in spring as they go through the budget negotiations.

And could you walk me through how Trousdale next year is expected to contribute to EBITDA as it ramps up, when should it be at pretty solid full contribution as opposed to maybe being a near-term drag as it ramps?

Tobey, this is Dave, I'll handle that one. As we mentioned, we expect to ramp to begin in January first quarter and extend through the second quarter of 2016. It will probably start generating profits as soon as it hits around the 75%, 80% occupancy, but I'd expect the run rate to really be in place by the third quarter of 2016.

And my last question, I'll get back in the queue is, Damon, you talked about how some of the news flow has been a little bit negative in some instances. But if I ask you about how your customer relationships are with the folks with whom you're -- and for whom you're providing services, how would you characterize the tenure of those relationships today?

Great question Tobey and I would say very-very strong at the federal, state and local level. We've had great partnerships with the federal partners for many years as you know and relationships with the state level are very strong too. So hearing this stuff kind of talk about globally, the things that matter most to me is our employees, our shareholders, our communities we operate in, but also our partners. And our partners have been great to work with and have lot of confidence on operations and we don't take that for granted. We know we've got to operate our facilities at a very high quality and provide great value to our partners. So we're focused on doing that, I think we do a good job at it.

Your next question will come from Kevin McVeigh with Macquarie. Please go ahead.

Great, thanks. I wonder -- could you give us sense of the MTC contract in Ohio, how -- any sense without getting too specific, how large that could potentially be? And then how long they're locked into that and at some point I'd imagine you take that over from a managed perspective. Is that the best way to think about it?

Kevin, this is Damon. Thanks for your question.

Hi Damon Sure.

Good morning.

Good morning.

I think that facility is about the same size of Lake Erie, which is about 2,000 beds. I'm trying to recall, I don't know of top of my head how long MTC has been in the contract, but I want to say it's more than 5, maybe less than 10 years left in it. But as we understand it, the procurement will come out and we're looking purely at a transaction of selling to real estate by taking it off the Ohio State balance sheet and having a private sector own it and then MTC continue to operate it. Now down the road when MTC's contract comes close to expiration and they do an RFP and that could be an opportunity for the operations side, but I see first it's -- purely it's a real estate transaction and then ultimately potentially could be an operations opportunity.

And are there any other opportunities like that in the pike size Damon, without getting again too specific from a state perspective?

I don't see anything near term at the state level, but we are seeing some stuff starting to percolate at the local level. So could be an opportunity for us to either build or purchase or expand or renovate a local jail facility either operated by a city or a county government. So we are starting to see some meaningful interest at the local level, but don't see anything right now at the state level.

And then just thinking a little more, kind of longer-term with obviously the acquisitions residential re-entry, how do we balance that against California versus kind of managed-only beds? Is it just more diversification amongst the revenue stream, that try to take some of the noise in California out or just you know more along the lines of just more focus on owned and manage as opposed to manage only?

Yes, so a couple of answers there. Let me first talk about own and manage or manage only. So we do still the manage only opportunity or manage only operations today and what I try to express to the investment community is that, if we get nice increases in the per diem that can keep in line with the increases we're seeing on the expense side and produced a -- we think a repo margin, then we will be very motivated to keep those contracts on a long-term. Having said that, if we have some that are starting to get upside down like the one we had and we'll take the appropriate steps either to not try to renew the contract or procurement or express interest in state to take -- back out their operation or give to another private provider. To your first part of your question, a couple of answers there, one of which is diversification is a kind of key part of our strategy as we think about these acquisition opportunities. The second thing in the re-entry market, the timing just is really, really good. It's very fragmented as I said in my script. And this kind of national dialog about kind of smart on crime, looking at kind of resources that can be invested to help individuals be more successful once they get released from facilities. There is a lot of motivation at the state and the federal level to put more resources to these facilities. And so, that's also part of the strategy. The Avalon acquisition we think is very well timed because of now it's kind of national dialog about resources being deployed for these types of facilities, but also we see the market to Avalon is in Oklahoma, Texas and Wyoming being great markets. In fact Texas, which is the majority of the facilities that we're acquiring from Avalon, this is a market that's grown by 50% over the last 10 years in half way houses and community corrections beds. And so, having this portfolio where we could leverage these facilities and expand them to meet the increased needs in Texas and Oklahoma, Wyoming, the time is just really, really good. And again the numbers were there, they're making more resources available to expand the use of these beds in those locations.

And then my last question and I'll get back in the queue. In terms of ICE, are we seeing share of wallet continue to shift more towards the private operators or just any thoughts on how that's been trending?

I didn't hear the first part of your question there, Kevin.

On ICE facilities Damon, are we seen the share of wallet continue to trend more towards the private operators as opposed to counties or what have your or is that kind of been running at the same level?

I'd say -- this is Dave, I'd say.

Hi Dave.

I would say it's probably primarily because of some standards that local jails can't meet in terms of conditions of detention. So we're seeing a little bit of consolidation out jails into the private sector than we've seen in the past.

[Operator Instructions] Our next question will come from the line of Michael Curtis with Cannacord Genuity. Please go ahead.

Just going back to the Ohio RFP, curious about the structure there since you guys would potentially own the facility and they would manage it. Just given that MTC has kind of had some struggles recently, does that pose any risk kind of to -- I don't know if it's operations or just upticks at all?

This is Damon, appreciate your question Michael. I don't think so. MTC is got a great track record in Ohio. They operated our Lake Erie facility for about 13 years before we were successful on that transaction and taken over operation. And so I don't see any change there. I think if that was -- went down the path and you're try to kind of determine what kind of worst case scenario is if there was a need to change operators, of course we got that expertise and we could do that at the appropriate time. But as I sit here today and think about the reputation and operations MTC has got in Ohio, I think this contract will come to term and again the state will take appropriate steps to either renew the contract or maybe do an RFP to let other operators to perform that service.

So that's more of a local issue there, in terms of MTC. And then on -- so moving to California, I appreciate all the color on the year end numbers and then when the next kind of pivot points are, is there kind of floor to where these things can go, especially considering the renewals that you recently did? Is there a floor kind of how low the prisoners can go?

I think the indication that the state did in the summer of this year was 5,000 was a number that they were looking towards as they go into the following fiscal year, which would be July 1st of next year. And so that's the last public statement from the State of California. So I think we'll get additional clarity as we go into January with the new budget proposal.

And then on the, the BOP with the -- obviously the 6,000 prisoners are being released, and that's pretty well understood at this point. I've read a couple of things on the potential of this to reach out to more offenders and for the potential more releases. I'm kind of wondering what the makeup of the prisoner releases would be. Would it be kind of similar to what we've seen in the 6,000 where a third is kind of more of a immigrant population or would it be different at all?

It's hard to say Michael. There're some things being talked about, but it'd be really hard to say what the number would be and with that what percentage would be, determine aliens, so that'd be pure speculation on my part. The Bureau to their credit, they sit down with us at CCAG or MTC twice a year to give to us a overview of the next 12 months to 18 months from a budget perspective talk generally about some operational issues that are mutual interest and also population forecast. And they have and as you know, they haven't projected a forecast past 2016. So I think they're grapping a little bit of, one, what is being proposed or suggested relative to what the base looks like going forward and also is there going to be increase or decrease at that point. So 2016, I think with the 6,000 inmates that are being released could be a period of time to where that they see what their forecast looks like, the dust is kind of settled with these releases and then they can get a better sense of what the trends look like, especial in the front end with prosecutions from U.S. Attorney's offices around the country, and also additional assets that are being deployed, not only the Attorneys but also with the judicial program. So, as a long way of saying, we don't really have any clarity, just the Bureau I don't think has a lot of clarity right now past 2016. But it could be the case, once we get into next year, and you get a sense of what all these trends look like then you could get some little more clarity either short-term or long-term on their population forecasts.

Your next question will come from Andrew Berg with Post Advisory Group. Please go ahead.

A couple questions, first, with respect to the Arizona opportunity, you said you're the only respondent to that. If you were to win that, do you have the capacity right now to take that on or is that going to result in new spend to build capacity?

Yes, good question. And the answer is, both. We do have some capacity today at our Red Rock facility which actually we're holding some inmates in there today because of the displaced populations from the Kingman Facility. But we would have to be some expansion there too, to get to the full 1,000. But just a reminder, that facility is about 1,500 benches or 1,500 beds, we'd have to do about a 400 bed expansion to go up to total of 2,000 beds at that facility.

And you have no other cost to have those beds?

I don't think we've said. Yes, it's probably about $15 million, $20 million.

And then with respect to your capitalization, if we take everything into account for what you've done subsequent to quarter end, is the way to think about this that your secured debt went up by a 258 million, the 158 million you would have drawn for Avalon, plus the 100 million of the term loan?

That's right.

And accordingly your revolver availability, I think you said at the end of the quarter was 490 million that would go up by a net 58 -- the 158 million drawn less the 100 million you generated?

That's correct, you got it.

Okay. Just wanted to make sure I got that right. And then lastly with respect to the headwinds you saw, I think and you've talked about both the coming up in the fourth quarter, the current quarter and what you saw in the third quarter from ramping up facilities, can you put a dollar amount on that?

I'm sorry, for dollar amount of what?

The expense headwind you guys experienced from ramp up either with San Diego, I mean, I think you said you are already starting to have some expense related to Trousdale?

Yes, that was about for the Otay Mesa transition, it was about $2 million of unanticipated in Q3, it's a similar number in Q4. So it's a $0.02 to $0.03, so pretty similar number in both Q3 and Q4. Trousdale is a $0.03 which is somewhere around 3 million plus of start-up cost in Q4.

And there are no further questions at this time. Please continue.

All right, well, thank you so much for calling in today. I appreciate the opportunity to give you an update on CCA and the forecast for the rest of the year. We look forward to giving you an update in 2016, in our February earnings call. Thank you again for participating.

Ladies and gentlemen, this does conclude the conference call for today. Thank for your participation, you may now disconnect your lines.