Good morning. My name is Keith and I will be your conference operator. As a reminder, this call is being recorded. At this time, I'd like to welcome you to the Corrections Corporation of America's Second Quarter 2016 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. Please go ahead, sir.

Thanks, Keith. 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 second quarter 2016 earnings release and in our Securities and Exchange Commission filings, including 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 section of our website at www.cca.com. With that, it's my pleasure to turn the call over to our President and CEO, Damon Hininger.

Thanks, Cameron and good morning to everyone joining our call today. Also joining us is Brian Hammonds, our VP of Finance. CCA is the leading provider of correctional, detention and community corrections real estate and services in the United States. We collaborate with our government partners to provide flexible, timely and cost effective solutions to address their unique needs. At the core of these needs are mission-critical real estate assets that require design and construction management expertise as well as significant capital investment over a multi-year construction period. We provide these services to three departments within the federal government, the Federal Bureau of Prisons, the United States Marshals Service and Immigration and Customs Enforcement as well as many states, including the District of Columbia and a handful of local municipalities. There are many common themes facing government operated correctional systems including significant deferred maintenance on existing prison infrastructure due to budget limitations or shortfalls, a lack of funding for new prison development necessary to replace existing government owned facility that have reached the end of their lifecycle or a lack of funding to add additional capacity to alleviate overcrowding in their existing facilities as a result of population growth, the need for additional resources to provide offenders with academic, vocational and other appropriate developmental and rehabilitative opportunities throughout their period of incarceration and the need to expand community-based reentry services offered to offenders reaching the end of their sentences and returning to their communities, which are often proven to reduce the rate of recidivism. We are well-positioned to be the ideal partner for governments that are actively addressing any or all of these themes in their correctional system. CCA's existing facility portfolio is modern and operationally efficient, allowing our government partners the opportunity to lower their operating expenses when compared…

Thank you, Damon, and good morning, everyone. In the second quarter, we generated $0.49 of EPS, compared to our May guidance range of $0.44 to $0.46, and $0.04 ahead of the first call consensus estimate. FFO totaled $0.69 per share, exceeding our May guidance range of $0.64 to $0.66. And AFFO totaled $0.65 per share, ahead of our May guidance range of $0.61 to $0.63. Per share results exceeded expectations, largely due to stronger revenue driven by higher-than-anticipated inmate populations across numerous facilities as well as revenue from the new lease with the state of Oklahoma at our North Fork Correctional Center we announced in May 6. As in the first quarter, federal revenue was particularly strong in the southwest during the second quarter. Financial results for the quarter exceeded expectations, even though they fell short of expectations by $0.01 per share at our newly constructed Trousdale Turner Correctional Center. As we generated $0.01 per share of net operating income in the facility but had forecasted $0.02 per share during the quarter. We began the ramp of the 2,552-bed trial sale facility in January and expected the ramp to be completed by the end of the second quarter. However, with the support of our government partner, we paused the ramp during the second quarter to help ensure a safe and orderly operational activation according to our standards. We resumed the ramp last month and now expect the ramp to be complete by the end of the third quarter 2016. Nevertheless, our forecast reflects certain incremental expenses associated with start up operations continuing into the fourth quarter of 2016. As a result, we don't expect normalized operations until the first quarter of 2017. The pause in ramp and higher start up expenses, which are very difficult to predict for a facility…

Thanks Dave, and thank you again for calling in today's conference call, and let me now turn the call over to the operator for a question-and-answer session.

[Operator Instructions] We'll take our first question from Michael Kodesch with Canaccord. Please go ahead.

Hi. Good morning, guys, and thanks for taking my question. Also really appreciate all the color on what's going on in South Texas, and Family Residential. First of all, just a clarification on guidance. For your Cibola County contract that was lost, in guidance, are you guys assuming that that FFO contribution there is just kind of loss on September 30 or do you have some kind of other - what's the ramp down of that?

No, that's correct. That contract has an occupancy guarantee, and we're right now modeling the nonrenewal effective September 30. So vacant facility for all of Q4, and that was $0.01 for the quarter, for the forecast.

Okay, that's really helpful. And then on that contract, what's the annual FFO impact, I'm sorry if I missed that.

Is about a $0.04 impact. So our $0.01 per share in the fourth quarter is pretty representative for our full year.

Okay, and then just my last question here. Just kind of with all of the other recent residential re-entry acquisitions that you've been doing. What percent of EBITDA exposure are you kind of at now relative to the total portfolio on that residential re-entry piece?

Yes, for the second quarter, it was about $5 million or about 4.5%, a little bit more than 4.5% of our total adjusted EBITDA.

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

With respect to the South Texas in ICE business, what you can comment on the outcomes? Do you have an expectation as far as a timeline either the solicited proposals or the outcome of your existing business with ICE in this regard?

Toby, this is Damon. So the procurement required for [indiscernible] submitted on July 15, so we've met that timetable and they've got our proposal in hand. As it relates to kind of final negotiations of an agreement, it's really hard to say today when that would be ramped up. Conversations are ongoing as we speak. So I think the progress in the month of August, but I couldn't necessarily circle a date and then we hope to get completions of those discussions.

But it's a relatively near-term thing. Is it a kind of solicitation that doesn't necessarily go to a formal RFP afterwards, but is kind of done through our alternative intergovernmental type transaction?

Two parallel paths here. So they did a procurement, basically, open it up, solicited proposals, we participated in that process. Our view on that was they were trying to really kind of open it up the see what other opportunities out there to help services requirement. And then they also -- on's the second path engages directly. And those conversations are ongoing today. So again, through the process that were undertake with them, we really haven’t circled a date, and they haven’t circled a date, and hope we can conclude those discussions, but they are ongoing. So it is, I'd say, maybe a little more to your question, it's a little more I think on a faster paced conversation than maybe in a typical procurement process.

Could you update us on Car 16, and your current view of what the timing of that might be this year?

Yes. So being first week of August and most of our - most of the contract issue stay in this procurement is a reminder, it was advertised for 10,800 beds, we have the lowest quantity of the total. I think Geo has got over 60%, MTC has got about 2,000 beds and we've got 1,400, 1,500 beds up for rebid. So we've got the smallest of the total. The most of the contract, ours included, expire first or second quarter 2017. So to your question, we think a decision could happen, potentially third quarter maybe it slips into the fourth quarter, but we think a decision is probably likely in that timetable since most of these contracts expire early next year.

Is Charlesdale, kind of, what you described about the pause, is that generally a function of the national economy just being so strong?

That's exactly right. So we spent a lot of time, like we do for any new activation, understanding labor market, understanding kind of what the dynamics are good, bad and different. And Toby, you know the national area, it's just has been a very hot market here, locally with the Davidson County and City of Nashville. So that has had some ripple effects to the labor market where travel turn rate is located. So we are on that. We had constant conversations with Tennessee Department of Corrections and we felt it's appropriate to hit the pause button on the ramp, which they were extremely supportive because we're both aligned to the fact that we want a safe and secure facility through the ramp-up period. So with that, we worked through that process, put a couple of things in place to help with the labor market recruitment, and it felt like probably about late June, we are in a really, really good place to go ahead and start to ramp back up with Tennessee.

On the California ballot initiative, I guess, any kind of color you can give there about an expectation for a potential impact or how the CDCR may interpret and implement this? And maybe you can contextualize it for us with a historical ballot initiatives, is this the kind of thing we don't really learn until after it either passes or grow up, until after it passes, if it does?

Yes. Absolutely. A couple of good questions there. So as I said in my remarks, the State of California, they've got a $10.6 billion budget. And with the LAO coming out with their report, saying it's in the tens of millions of dollars, so that means either $10 million or maybe up to $100 million, that's obviously a pretty small percentage of the total overall budget. So that's I guess one way to look at it. The second is that we think about potential impact on our operations, as I was trying to provide a little color there in my remarks, we've got two facilities that are all sale, very secure facilities that are suitable for medium security or maximum security inmates. And as I think, Toby, that has been a real premium for capacity for that type of capacity, I should say, within the state of California. So with Prop 47 focused primarily, really almost exclusively for non-violent convictions. And with that number from LAO saying, it's only tens of millions of dollars impact on a $10.6 billion budget for CDCR is and also no one in our capacity is very complimentary for some of the challenges they have for in-state for higher custody inmates. Impact, you can’t stay definitively, but impact appears it could be fairly minimal.

And then do you think - you have a lot of conversations on the real estate-only solutions, and you've had some transactions be consummated. Do you - at this point, would you expect to be able to consummate another opportunity over the next year?

Yes. Yes, we got a really good conversations with state and local jurisdictions. Getting a couple across the finish line like Cal City and North Fork are very helpful. So we're not just talking about it in concept, but we could actually point to California and Oklahoma saying this is proof-of-concept, and here are the reasons why we were successful in those locations and why it's been very, very helpful for them. And so having those where we've got that in our kind of marketing book talked to other jurisdictions has very helpful. So I’d say, we feel good about the prospect and getting another one across the finish line here in the next 12 months.

My last question, Dave, you mentioned the overtime rules and how it doesn't have much of an impact and won't come into effect until end of the year. Is there any way to gauge an annual impact on '17?

Yes, not yet, Toby. We're going through that analysis right now. We've engaged an outside consultant to help us. It's a lot of data and a lot of sensitivity analysis, what ifs, there's a lot of strategies to deploy about what you do with compensation amounts. Whether they pull them up to the new threshold or try to deal with issues on how much overtime people will work. So at this point, it's too early to say. We should have a better sense in the upcoming quarters.

We'll take our next question from Andrew Berg with Post Advisory Group.

Two questions. One, just going back to South Texas. Can you comment at all whether as part of the negotiations the thought process is to potentially adjust compensation but also extend the contract for a longer period of time?

Yes, I think that's all part of the - that’s definitely is all part of the conversation. So yes, that's a little bit to my point earlier about back in 2014 when they approached us, they were definitely focused on dealing with the crisis on the border. And so I think they were thinking short-term. And with that, I want to get something up and running really quickly. We take it as an encouraging sign that they've come out now with the procurement, but they've engaged and that they're looking towards the future of having this requirement longer-term.

And with respect to [indiscernible], can you provide any color? I mean, regarding the potential revenue or EBITDA impact. Is it safe to just look at the [indiscernible] and apply it towards that facility and that's the potential loss, which the grand scheme of things, seems like it's not a tremendously negative impact on you guys?

That's a fair statement and as I mentioned earlier, it's probably about $0.04 per year.

And gentlemen, it appears we have no further questions. I'll return the floor to you for any additional or closing remarks.

All right, very good. Well thank you so much for participating in today's call and as always to our investors, thank you so much for your investment within CCA, and we look forward to giving you update a little later in the year. Thank you.

And this will conclude today's program. Thanks for your participation. You may now disconnect, and have a great day.