Good morning. My name is Savanna and I'll be your conference operator. As a reminder, this call is being recorded. At this time, I would like to welcome you to the CoreCivic's Fourth Quarter 2017 Earnings Conference. [Operator Instructions] I would now like to turn the conference over to Cameron Hopewell, CoreCivic's Managing Director of Investor Relations. Mr. Hopewell, you may begin your conference.

Thank you, Savanna. 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 including our answers to your questions 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 fourth quarter 2017 earnings release and in our SEC 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. On this call, we will also discuss certain 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 our Investors page of our website at www.ir.corecivic.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 and thank you to everyone for joining our call today. We're also joined here in our room by our Vice President of Finance, Brian Hammonds. Similar to prior quarters in 2017, our fourth quarter financial performance exceeded our most recent guidance and allowed us to close out the year on a positive note. Our normalized FFO of $0.60 per share was $0.03 ahead of the high end of our fourth quarter guidance, bringing our full year normalized FFO per share to $2.38 or $0.22 per share higher than the midpoint of our initial 2017 full year guidance. Our fourth quarter results were ahead of our expectations, principally due to improving utilization trends across the portfolio for United States Marshals and Immigrations and Customs Enforcement facilities, supported by stability in the balance of our portfolio. Dave will provide a more detailed summary of our fourth quarter financial performance at the conclusion of my remarks. Also included in yesterday's earnings release was our initial 2018 financial guidance. We currently expect to generate normalized FFO per share of $2.23 to $2.31 and AFFO per share of $2.16 to $2.24. Dave will cover in detail the primary drivers of our guidance, including an assumed reduction in California offenders housed out of state, a full year impact of additional interest expense resulting from our bond issuance last October and start-up expenses associated with the activation of a previously idle facility in Kentucky. However, it is important to note our 2018 guidance does not include the potential impact of new contracts, acquisitions or contractual pricing increases. These are important items to keep in mind, given we are seeing more opportunities to serve new and existing partners in the market then we have ever seen before since the recession of 2008.…

Thank you, Damon and good morning, everyone. In the fourth quarter, we generated $0.40 of adjusted EPS, ahead of our guidance range of $0.35 to $0.37. Normalized FFO totaled $0.60 per share compared to our guidance range of $0.55 to $0.57 and $0.04 ahead of the first call consensus estimate. AFFO totaled $0.53 per share, in line with our guidance range of $0.53 to $0.54. Adjusted figures exclude 4.5 million of income tax expense for the revaluation of deferred tax assets and liabilities and other taxes associated with the Tax Cuts and Jobs Act enacted in December 2017 and $1 million of M&A charges. Our per share results exceeded our forecast as revenues exceeded expectations, due to higher than expected revenue from the US Marshals Service and Immigration and Customs Enforcement or ICE. Adjusted EBITDA was $2.8 million higher than the midpoint of our guidance for the fourth quarter, reflecting stronger than expected operating performance. As mentioned in the press release, our per share results were lower than the prior year quarter, principally due to the previously disclosed renegotiation and extension of a contract with ICE at our South Texas Family Residential Center effective in November 2016 and the expiration of a contract with the Federal Bureau of Prisons at our Eden detention center, which collectively contributed to a reduction of approximately $0.06 per share. In addition, as you may recall from our prior earnings calls, we experienced the surge of detainees from ICE in the prior quarter that began in the third quarter of 2016, accelerated in the fourth quarter of 2016 and extended into the first quarter of 2017, creating a challenging comparative quarter for Q4 2017. Even though Q4 2017 ICE populations did not reach levels in the prior year quarter, they did exceed levels prior to…

[Operator Instructions] And we will take our first question from Kevin McVeigh from Deutsche Bank.

Damon, can you give us a sense, I mean, obviously it seems like there's a fair amount of opportunity at the federal level and you're well positioned to kind of serve it. Is there any way to just get a sense of when we may be able to see some of that start to come online? I mean just trying to kind of ring fence as the budget has been passed, what that ultimately can mean and how we should think about it, realizing that none of it’s in the guidance, but is there any way to just maybe ring fence? What some of that demand at the federal level could look like as we take think about 2018?

Let me go through all three federal partners to answer your question. So first with the Bureau of Prisons. They have seen a little decline continued into kind of late last year, early this year populations, but when we were all together in the industry conference back in January, they indicated with the two active procurements, CAR 18, which is again the currently managed only facility out of California, it’s good to say that they would award that. But the issue first maybe second quarter of this year is obviously first half and if they were moving forward on the 9500 bed and looking again to do that in to this year. So they basically kind of restated what they said last year moving forward on both those procurements, notably the 9500 beds which would obviously be incremental capacity for the company and for the industry. And don't get this answer as related to kind of all the budget activity that they're not going to move forward on that, in fact, I think based on kind of recent articles that you've probably read, maybe a little more we’re going to see to go ahead and move forward on those contracts, but again those won't happen until in to this year with the 9500 beds. With ICE, we have seen of normalization of populations. So as you know and kind of the first and second quarter last year, saw a dramatic drop in populations, but based on the numbers we just saw yesterday out of federal government for January, it looks like the ICE numbers have normalized and we are sort of seeing increased utilization. So that is incremental. It's not dramatic increases, but we are seeing incremental increases throughout the system. And then what we're hearing as it relates to…

Just two other quick ones. There have obviously been some talk about the government outsourcing some at the BOP turned in favor of the private operators. Is there any thought to that and what that could potentially mean and then is there any way to think about, you kind of mentioned that your guidance doesn't imply any step up from state funding, as budgets come in. Is there any way to think about what that could mean in terms of an uptick to offset some of the wage inflation and things like that, you've been saying. So two separate questions.

Absolutely. So let me tackle the first one. I'll have Dave tackle the second one. So I think this and you're seeing that not just with the Department of Justice and Homeland Security, but more globally, you’re hearing this conversation kind of national footprint within federal government. And so I think this discussion about what's the most cost effective solution for government, either public sector doing it or private sector doing it or in combination of both. So I think this conversation on looking kind of cost effective solutions that have been kind of tried and tested and provide high quality I think is beneficial for us. So I think that discussion is the dynamics of driving this procurement for 9500 beds for the Bureau of Prisons. I don't think in the last 18 years, I don't think the Bureau has ever gone out for a procurement quite that size for incremental capacity. Obviously, you had to rebid a couple of years ago of CAR 16, but new incremental capacity is a pretty notable amount in 9500 beds.

Yeah. On the per diem increases, obviously some of them are tied to the federal contracts where we have wage determinations and you get equitable adjustments to offset those wage adjustments. So those would have no impact on the bottom line, but at primarily the state level, if we're able to secure some increases through the appropriations process, it could be a couple of pennies, maybe a few pennies, most of those come out in July following the, most states have a July 1 to June 30 fiscal year. So we’ll be monitoring that and as Damon mentioned in his script, they're going to the legislative and budget process right now. So we'll be keeping a close eye on that.

And David, just to be clear, that would be not annualized, but if you get it in July, it would be a few pennies for this year as opposed to just an annualized impact, it would be a few pennies for -- as they came in for this year as opposed to?

Yes.

[Operator Instructions] And we'll take our next question from Tobey Sommer from SunTrust.

Damon, a question for you as the company is diversified and kind of gotten into some different businesses, I was wondering if you could comment on the return profile of your different lines of business and what you're seeing, if any, changes in those returns on a business line basis. I understand that the mix will impact things as a whole.

Absolutely. So, a couple of answers there. So the CoreCivic Safety, which is as you know the owner and operating prisons jail ten centers, which we've done since day one, that margin profile has been and continues to be very similar. We are seeing a little bit of price improvement, so you may see a little from there for margin per se, but that’s been relatively stable. The CoreCivic community side, the facilities where we own and operate, I’d say they’re very similar to the safety side from a margin perspective. Obviously, we've got a few facilities there that we own that's run by a third party, but the ones where we own or operate, I’d say the margin profile very similar to the CoreCivic Safety business. So the property side is probably the key part of your question. So here we are about four years into this business line, we've got Cal City, North Fork and now the development project in Kansas and then we've bought these GSA properties and then also the one in Tallahassee. And I'd say they're all a little different as it relates to kind of terms and obviously the late book terms, the quality of that assets, but what we've learned on -- specific on the side relative to correctional facilities, the margin is obviously higher, just because no level of services are flowing through that just because we're providing just the real estate, but I'd say we are seeing some opportunities and have some opportunities come across finish line where I'd say the actual production from earnings perspective are pretty consistent and what we see if we had owned and operated ourselves. But we also have opportunities and development opportunities where maybe it’s a little lower. And that is okay, because if we think about the operational risk and some of the headline risks relative to these operations, maybe look at a little lower kind of earnings profile. I don’t know anything else you want to add to that, Dave.

Look, my controller is sitting next to me and talking about segment reporting. We're not required to do segment reporting yet, but our objective would be sometime during 2018 to actually break that out in our financial statement, so you could see the different earnings profiles and margins, CoreCivic Safety, CoreCivic Community and CoreCivic Property separately. So we're working on that and at some point ’18, we would hope to publish it like that.

And Tobey, your question is a good one and what I would also say, we've learned a lot, especially in the last 24 months and again what I'm finding out as every jurisdiction is different relative to kind of their needs, what they're trying to accomplish, how long they need the assets, what risk profile they're relating to have, so maybe more risk with us versus more risk with them and also the FX kind of the returns and the length of the term and whatnot. So we're learning a lot, but I’d say this that the interest is very, very strong. I think the Kansas deal was a big deal just because there was so many eyes. I mentioned kind of states, but it was a lot of local jurisdictions that are looking at kind of similar needs within a respective jurisdiction. And again, when we talk to these folks, every deal, every kind of unique need they have is very unique I should say.

Following up on how you ended that answer, with respect to real estate only deals to replace older facilities in particular, are the people that we're watching that either state or local jurisdiction potential customers, do they need to see that facility actually built and operating or was it just the process and a successful conclusion, in other words, do we have to wait two years or more to get another deal or can those potential customers act more swiftly.

Yeah. Great question. That's a great question. And it's the latter. So it was the process, so how did the procurement, what scrutiny did they receive, this one, as you know, was very public. We had to go through a couple of legislative committees with ultimate approval at the finance council, which was chaired by the governor and then ultimately once that got done, we think that was the key milestone for these other jurisdictions. So the easy part, have you to look at from a real estate perspective is building a facility now, but we think this is the key milestone, which is getting done because there is a lot that I think other jurisdictions could learn and how they potentially kind of frame this need and opportunity within the respective jurisdictions. That's a great question. And I'll tell you in the two weeks since Kansas has gotten done, Dave and I have gotten numerous phone calls, not only just from potential partners from a construction perspective, but also a lot of jurisdictions, some of which we knew of, some of which we did not know of, we would say, hey, we've been watching this and we're interested and see what we can learn up to do a similar solution within our respective jurisdiction.

Are there any recompetes, kind of upsize to note and keep an eye on this year?

The only one that we're near term and we haven’t talked about this recently because we feel like we’re in really good shape, but it's our Adams County facility, it’s part of CAR 19 and it’s a 9500 beds. So -- but we feel really good about that one. Outside of that, I don't think anything real, real notable.

And then just a capital question if I could on the balance sheet. Given I guess medium term historical tendency to acquire businesses and the diversification effort that you have, what is the long-term leverage ratio that you aspire to kind of manage the debt level to and then secondarily, could you comment about the company's appetite to repurchase shares, given the pressure on the stock in the last year.

Yes. So as you know, we've maintained a very disciplined leverage policy of three to four times for our business. As we continue to grow our government lease properties portfolio, we believe this asset class could justify a higher leverage level, however, until we get more meaningful scale in this portfolio, our leverage really wouldn't be materially affected. So I guess -- and with respect to the stock repurchase question, I'd say in the past, we've been pretty opportunistic. It's a board decision. It’s an analysis we continue to assess with our board as we assess our capital allocation strategy and dividend policies. But I’d add just a couple of comments. We've added significance stockholder value through stock repurchases in the past, when it was the best use of capital, given the limited number of growth opportunities that were available at the time. We believe maintaining a borrowing capacity is important to capitalize on future growth opportunities and wouldn’t want to utilize all of our borrowing capacity on stock repurchases that could really require us to forego opportunities to grow and diversify our cash flows over the long term. If on the other hand we don't see attractive growth opportunities that require capital deployment and we have debt capacity under our capital policy, the stock repurchase program makes more sense, particularly at today's price.

And this concludes today's conference. Thank you for your participation and you may now disconnect.