Virginia Department of Corrections
PPEA Proposal
Design, Build, Finance, and Operate a Medium
Security Correctional Facility in Charlotte
County, Virginia

Presented by:
Corrections Corporation of America

10 Burton Hills Boulevard
Nashville, Tennessee 37215
Phone: (615) 263-3000
Fax: (615) 263-3090

Due: August 17, 2007 at 2:00 p.m.

Lucibeth Mayberry
Vice President, Research, Contracts and Proposals

August 16, 2007

Kimberley Lipp
Virginia Department of Corrections
6900 Atmore Drive
Richmond, Virginia 23225
RE:

PPEA Proposal – Design, Build, Finance & Operate a Medium Security
Correctional Facility in Charlotte County, Virginia

Dear Ms. Lipp:
In accordance with the provisions of the Virginia Public-Private Education Facilities and
Infrastructure Act of 2002, as amended (PPEA), Corrections Corporation of America (CCA) is
pleased to present the following conceptual phase proposal for a medium security correctional
facility. This proposal is submitted in response to the Department’s Public Notice of receipt and
acceptance of an unsolicited proposal for the above referenced facility. As the Commonwealth
is aware and as CCA has shown through our prior management of the Lawrenceville
Correctional Center and through our prior submissions under the PPEA process, CCA welcomes
any opportunity to renew our partnership with the Commonwealth and we hope to be allowed to
present more detailed project information under Part 2 of this procurement.
CCA is the industry founder and largest private corrections company in the United States. CCA
currently operates 65 facilities housing over 72,000 inmates for federal, state and local
government agencies. We believe our experience and expertise, as exhibited by our previous
relationship with the Commonwealth, allows us to provide additional prison capacity at a
significant cost savings to the taxpayers. Accordingly, we propose to partner with the
Commonwealth to determine the appropriate size, location and services for this facility. This
collaboration ensures that the new facility will meet the on-going needs of the Department of
Corrections.
Enclosed in the front pocket of the binder labeled “Original” is a certified check for the
minimum $5,000 proposal processing fee as required by the Commonwealth of Virginia
Guidelines and Procedures Revised October 1, 2006. As further required by the PPEA in
Section 1, Qualifications and Experience, Subsection j.1, please see the following sworn
certification: I, Lucibeth Mayberry, hereby certify that I am an authorized representative of
CCA and attest to the fact that CCA is not currently debarred or suspended by any federal, state
or local government entity.

Thank you for your consideration of this conceptual proposal. Please feel free to contact us if
additional information is required.
Sincerely,
//signature on file//
Lucibeth Mayberry
Vice President, Research, Contracts and Proposals

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

1. QUALIFICATION AND EXPERIENCE
a.

LEGAL STRUCTURE

Corrections Corporation of America is a Maryland corporation, originally incorporated in Delaware on
January 29, 1983. CCA is publicly held with approximately 31,000 shareholders of record in registered
and in street name. Originally listed on the NASDAQ in 1986, CCA moved to the New York Stock
Exchange in 1994 and currently trades under the stock symbol CXW. CCA is licensed to do business in
the Commonwealth of Virginia and plans to provide all financing, design, construction and management
of the proposed facility. Please refer to Attachment 1 for a copy of CCA’s certificate of registration to
transact business in the Commonwealth of Virginia.
Canteen Correctional Services, a division of Compass Group USA, a large publicly traded corporation,
provides food services in almost all CCA facilities and would provide food services in the proposed
facility. Canteen Correctional Services is headquartered in Charlotte, North Carolina.
ORGANIZATION AND MANAGEMENT STRUCTURE
Company headquarters for CCA is located in Nashville, Tennessee. Of the 16,000 company personnel,
over 300 are assigned to the corporate office, referred to within the organization as FSC – Facility
Support Center. The FSC reference is intended to highlight the fact that the corporate office’s primary
function is to serve and support our many facilities nationwide. Corporate support functions include:
facility management oversight; accounting; payroll; human resources; construction/real estate; health
services; information systems; training; physical plant management; public relations and
communications; inmate programs; legal affairs; policy and procedures; customer relations
management; research, contracts and proposals; and quality assurance.
During facility activations or transitions, each of these corporate disciplines will designate appropriate
personnel to work with facility staff to ensure that applicable policies, regulations and contract
requirements are met. Staff from CCA’s existing facilities may also be utilized to provide on-site
reinforcement and training.
CCA has achieved our position as the industry leader in private sector corrections primarily because of
the high caliber of corrections and business professionals we employ. Included among our employees
are a number of nationally recognized correctional professionals with a history of outstanding and
innovative achievements in public sector corrections management in both adult and juvenile systems.
For example, the wardens managing our facilities have an average of over 23 years of corrections
experience and an average tenure of over 10 years with CCA. The strength of CCA and our employees
was recently recognized by Forbes magazine as one of the 400 Best Big Companies in America.

CORRECTIONS CORPORATION OF AMERICA

1

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Provided immediately thereafter are brief biographies of John Ferguson, President and Chief Executive
Officer; Kenneth A. Bouldin, Executive Vice President and Chief Development Officer; Richard P.
Seiter, Executive Vice President and Chief Corrections Officer; William K. Rusak, Executive Vice
President and Chief Human Resources Officer; Todd J. Mullenger, Executive Vice President and Chief
Financial Officer; and G.A. Puryear IV, Executive Vice President and General Counsel, of CCA.

CORRECTIONS CORPORATION OF AMERICA

2

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

JOHN D. FERGUSON
President and Chief Executive Officer
John D. Ferguson has served as President and CEO of Corrections Corporation
of America since August 2000. He joined the Company following a 33-year
business career that includes extensive experience in finance, entrepreneurial
ventures, corporate turnarounds, and government service. Prior to joining CCA,
he served four years as the Commissioner of Finance and Administration for the
State of Tennessee.
Mr. Ferguson helped found the Bank of Germantown, near Memphis, in 1973
and assisted in the organization of its board of directors. He continued to serve
as a director of the bank and was Chairman and CEO from 1990 until 1995.
In 1982, Mr. Ferguson founded Equity Investment Corporation, a merger and
acquisitions firm, and served as CEO until 1993.
Just four years after graduating from college, Mr. Ferguson initiated his entrepreneurial career when he
founded Econocom in 1971, a computer sales and leasing company which he operated for ten years.
Mr. Ferguson graduated from Mississippi State University with a bachelor’s degree in accounting.
Experience:
•
•
•
•
•

President and Chief Executive Officer, CCA Corporate, 2000-present;
Commissioner of Finance and Administration, State of Tennessee, 1996-2000;
Chairman and Chief Executive Officer, Community Bancshares, Inc., 1990-1995;
Chief Executive Officer and Founder, Equity Investment Corporation, 1982-1993; and
Founder, Econocom, 1971-1981.

Professional Affiliations:
•
•
•
•
•
•

Board Member, Boy Scouts of America Middle Tennessee Council;
Board Member, Nashville Alliance for Public Education;
Board Member, Nashville Symphony;
Board Member, Tennessee Performing Arts Center;
2005 and 2006 Co-Chair, Boy Scouts of Middle Tennessee Annual Patron Luncheon; and
2005 Campaign Chairperson, United Way of Metropolitan Nashville.

CORRECTIONS CORPORATION OF AMERICA

3

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

KENNETH A. BOULDIN
Executive Vice President and Chief Development Officer
Kenneth A. Bouldin joined CCA in February 2003, bringing with him over 30
years of corporate management experience. He most recently served as
President of KAB Associates, Inc., a management consulting company.
In 1995, Mr. Bouldin co-founded Econotech, an IT staffing firm, which he sold
in 2000. Prior to establishing Econotech, he was Vice President and manager of
the Federal Marketing Group of Comdisco, Inc. where he was responsible for
federal government contracting.
Mr. Bouldin served as Chairman of the Board of Directors and President and
Chief Operating Officer of the Computer Dealers and Lessors Association, an
international trade association of 350 companies which he helped form, from
1992-95. In his early career, he co-founded Econocom, a business that sold and leased new and used
data processing equipment, which he led as Chairman and Chief Executive Officer for 17 years.
Mr. Bouldin graduated cum laude from the University of Tennessee with a Bachelor of Science degree
in Electrical Engineering. He also had a lengthy military career, rising to the rank of Major General and
serving as a commanding general of the 125th Army Reserve Command from 1990 through 1994.
Experience:
•
•
•
•
•
•

Executive Vice President and Chief Development Officer, CCA Corporate, 2003-present;
President, KAB Associates, Inc., 2000-2002;
Chairman and Chief Executive Officer, Econotech, 1995-2000;
Vice President, Comdisco, Inc., 1992-1995;
President and Chief Operating Officer, Computer Dealers and Lessor’s Association, 1988-1992;
and
Co-founder, Chairman and Chief Executive Officer, Econocom, 1971-1988.

Professional Affiliations:
•
•

Trustee, Reserve Officers Association of the United States; and
Former Member, Reserve Forces Policy Board.

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Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

RICHARD P. SEITER
Executive Vice President and Chief Corrections Officer
Richard P. Seiter joined CCA as Executive Vice President and Chief
Corrections Officer in January 2005 where he provides corporate management
and oversight of CCA's 65 facilities. A career correctional administrator, Mr.
Seiter has extensive experience in the corrections industry at both the federal
and state levels. He has served in a variety of roles with the Federal Bureau of
Prisons (BOP), including the Assistant Director for Industries, Education and
Training during which time he served as Chief Operating Officer of Federal
Prisons Industries, a government corporation that sells goods manufactured by
inmates. He also served as a BOP Warden in Illinois and Pennsylvania.
Mr. Seiter's state experience includes serving in a cabinet level position as
Director of the Ohio Department of Rehabilitation and Correction where he
oversaw the operations of 18 prison facilities, a staff of 8,000, and an annual budget of approximately
$400 million. He was also responsible for a prison construction program of approximately 10,000 beds
at a cost of $500 million.
Other past accomplishments in Mr. Seiter’s distinguished career included serving as the first Chief of the
NIC – National Institute of Corrections. From 1999 to 2004, he was an Associate Professor in the
Department of Sociology and Criminal Justice at Saint Louis University. Mr. Seiter has authored two
textbooks on corrections – Corrections: An Introduction (2005) and Correctional Administration:
Integrating Theory and Practice (2002) both published by Prentice Hall. From 1998 to 2002, he served
as Editor of Corrections Management Quarterly, published by Aspen Publishers.
Mr. Seiter holds a B.S. in Business Administration and earned his M.P.A. and Ph.D. in Public
Administration from Ohio State University.
Experience:
•
•
•
•
•
•
•

Executive Vice President and Chief Corrections Officer, CCA Corporate, 2005-present;
Associate Professor, Department of Sociology and Criminal Justice, Saint Louis University, St.
Louis, Missouri, 1999-2005;
Warden, BOP/Federal Correctional Institution, Greenville, Illinois, 1993-1999;
Chief Operating Officer, BOP/Federal Prisons Industries, 1989-1993;
Director, Ohio Department of Rehabilitation and Correction, 1983-1988;
Chief, National Institute of Corrections, 1982-1983; and
Warden, BOP/Federal Prison Camp, Allenwood, Pennsylvania, 1981-1982.

Professional Affiliations:
•
•

Member, American Correctional Association;
Member, American Probation and Parole Association;

CORRECTIONS CORPORATION OF AMERICA

5

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

•
•
•
•

Member, Association of State Correctional Administrators (Associate);
Member, North American Association of Wardens and Superintendents;
Member, American Society of Public Administration; and
Member, Academy of Criminal Justice Sciences.

CORRECTIONS CORPORATION OF AMERICA

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Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

WILLIAM K. RUSAK
Executive Vice President and Chief Human Resources Officer
William K. Rusak was named CCA’s Executive Vice President and Chief
Human Resources Officer in July 2006. He has nearly 30 years of experience
in human resources, labor issues, employee relations, and corporate strategy
and restructurings and served as a consultant to CCA’s Human Resources
department for three months prior to being selected to his current position.
Mr. Rusak has held numerous board positions internationally over the past
20 years, and has served in a variety of business and human resources roles
in his career, including President of two companies. For five years in
Nashville, he held the position of Vice President, Human Resources for the
American headquarters of the global company BBA Fiberweb, based out of
London, and one of the world’s largest organizations in the non-wovens
business.
From 1998-2000, Mr. Rusak was President of Country Business Services in New York, which
provides brokerage, financial and consulting services to buyers and sellers of small and mediumsized businesses. In Montreal for nine years, he served as Senior Vice President and Chief
Administrative Officer of a major Canadian textile manufacturer, Dominion Textile. Earlier in his
career, he also worked for Racemark International in New York and Firestone Tire and Rubber
Company in Akron.
Mr. Rusak earned a Bachelor of Law degree from La Salle University, and received specialized
training in business studies from McGill University in Montreal, Canada. He also attended the
executive management program at the Wharton School at the University of Pennsylvania.
Experience:
•
•
•
•

Executive Vice President and Chief Human Resources Officer, CCA Corporate, 2006-present;
Vice President, Human Resources, BBA Fiberweb/American headquarters, 2000-2006;
President, Country Business Services, New York, 1998-2000; and
Senior Vice President and Chief Administrative Officer, Dominion Textile/Montreal, 1989-1998.

CORRECTIONS CORPORATION OF AMERICA

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Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

TODD J. MULLENGER
Executive Vice President and Chief Financial Officer
Todd J. Mullenger was named Executive Vice President and Chief Financial
Officer (CFO) in March 2007, succeeding former CFO Irv Lingo upon his
retirement. Mr. Mullenger joined CCA in 1998 as Vice President, Finance, and
more recently served as Treasurer from 2001-2007. His prior experience
includes Assistant Vice President, Finance for Service Merchandise Companies,
Inc. He spent several years at Arthur Anderson LLP where his accounts
included the private corrections industry. He previously held positions with
American Medical International and General Electric Company-Motor Business
Group.
Mr. Mullenger is a Certified Public Accountant. He earned a Bachelor of
Science in Finance from the University of Iowa and a Master of Business
Administration from Middle Tennessee State University.

Experience:
•
•
•
•
•
•
•
•

Executive Vice President and Chief Financial Officer, CCA Corporate, 2007-present;
Vice President, Treasurer, CCA Corporate, 2001-2007;
Vice President, Finance, CCA Corporate, 1998-2001;
Assistant Vice President, Finance, Service Merchandise Companies, Inc., 1996-1998;
Manager, Audit and Business Advisory Services, Arthur Andersen LLP, 1993-1996;
Senior Staff, Audit and Business Advisory Services, Arthur Andersen LLP, 1989-1993;
Accounting Supervisor, American Medical International, 1985-1989; and
Financial Analyst, General Accountant, Cost Accountant and MIS Project Coordinator, General
Electric Company - Motor Business Group, 1981-1985.

CORRECTIONS CORPORATION OF AMERICA

8

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

G.A. (GUS) PURYEAR IV
Executive Vice President, General Counsel and Secretary
Prior to joining CCA as General Counsel in January 2001, Gus Puryear served
as Legislative Director and Counsel for Tennessee's U.S. Senator Bill Frist,
where he worked on legislation and other policy matters.
Among his distinguished political associations, Mr. Puryear served as a debate
advisor to Vice President Dick Cheney in the fall of 2000. He has also worked
as counsel to the U.S. Senate Committee on Governmental Affairs’ special
investigation of campaign finance abuses during the 1996 elections, which was
chaired by former Senator Fred Thompson.
Prior to his career on Capitol Hill, Mr. Puryear worked for Farris, Warfield &
Kanaday (now Stites & Harbison), a law firm in Nashville. He began his legal
career as a law clerk for the Honorable Rhesa Hawkins Barksdale, U.S. Circuit Judge for the Fifth
Circuit in Jackson, Mississippi.
Mr. Puryear earned a Bachelor of Arts degree with highest honors in Political Science from Emory
University and a Juris Doctor with honors from the University of North Carolina School of Law.
Experience:
•
•
•
•
•
•

Executive Vice President and General Counsel, CCA Corporate, 2001-present;
Debate Advisor to Vice President Dick Cheney, 2000;
Legislative Director and Counsel, Senator Bill Frist, 1998-2001;
Counsel, U.S. Senate Committee on Governmental Affairs’ Special Investigation of Campaign
Finance Abuses, 1997-1998;
Attorney, Farris, Warfield & Kanaday, 1994-1997; and
Law Clerk, U.S. Circuit Judge Rhesa Hawkins Barksdale, 1993-1994.

CORRECTIONS CORPORATION OF AMERICA

9

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Facility Operations Management
Management and oversight of CCA’s 65 facilities is accomplished through three business units, each
headed by an Operations Vice President who reports directly to the Chief Corrections Officer. Each
business unit is comprised of two divisions with 10-12 facilities in each division. A Managing Director
is responsible for direct oversight of the facilities in his/her division. The Managing Directors report
directly to their respective business unit's Vice President. Facility Wardens report directly to their
designated divisional Managing Director. Please refer to the following page for a map of CCA facilities
by business unit and division.
Vice President, Facility Operations - Business Unit 1: Corporate-level oversight for the facilities in
Divisions I and II falls under Brian Collins. Following a 25-year career in the service
industry with Wal-Mart Stores, Inc., Brian joined CCA in mid-2006 In his most recent
role prior to CCA, he served as Market Manager for Sam’s Club in Dallas, Texas where
he was responsible for $822 million in annual revenues, as well as market planning,
employee development, strategic planning for his market area, and financial and cost
control.
Vice President, Facility Operations - Business Unit 2: Corporate-level oversight for facilities in
Divisions III and IV fall under Jimmy L. Turner. A corrections professional with 25 years
of experience in the operation of correctional facilities, Mr. Turner has worked as a
Correctional Officer through Warden, and served in both public and private sectors. As
Vice President, he maintained oversight of all CCA facility operations from 1999 thru
2005, when facilities supervision was divided into three separate business units.

Vice President, Facility Operations - Business Unit 3: Corporate-level oversight for the facilities in
Divisions V and VI falls under Steven Conry. Most recently, he served as Chief of Facility
Operations with the New York City Department of Corrections (NYC) where the sphere of
his position encompassed 10,500 uniformed and civilian staff daily and 100,000 inmates
annually, including all of the Rikers Island Complex. His 23-year career with NYC gave
him extensive experience from Correctional Officer thru Warden, as well as management
and planning in headquarters administrative positions.

CORRECTIONS CORPORATION OF AMERICA

10

WA

Crossroads
Shelby MT

MT

ME

ND

OR

VT

MN

Prairie

NH
MA
CT RI

Appleton MN

ID

Idaho
Kuna ID

WI

SD

WY

MI
IA

NE

Youngstown OH

CO

Burlington CO

Leavenworth

KS

California City

Walsenburg CO

CA

Bent County

San Diego

Saguaro

San Diego CA

Eloy AZ

Central Arizona

Eloy

Cimarron

Camino Nuevo

Diamondback

Albuquerque NM

New Mexico Women's
Grants NM
Torrance County

Watonga OK

North Fork
Sayre OK

Estancia NM

Eloy AZ

Red Rock

Cibola

Milan NM

Florence AZ

Florence

Eloy AZ

West TN Hardeman

Cushing OK

OK

AR

Davis

NM

Holdenville OK

Otter Creek
Wheelwright KY

Bridgeport TX

Mineral Wells

Whiteville TN

Tallahatchie
Delta

Henderson TX

Bartlett
Bartlett TX

Business Unit 1

Diboll

Diboll TX

T. Don Hutto
Taylor TX

TX

Div II • Kaiser

Winn
Winnfield LA

LA

Clifton TN

SC

AL

GA
Stewart

Lumpkin GA

Houston TX

Wheeler
Alamo GA

McRae

McRae GA

Coffee

Wilkinson
Woodville MS

Nicholls GA

Bay Corr.

Panama City FL

Gadsden
Quincy FL

Bay Jail/Annex
Panama City FL

Houston

NC

TN
Silverdale

Chattanooga TN

MS

Dallas TX

B.M. Moore
Overton TX Bradshaw
Eden

Nashville TN

Greenwood MS

Dawson

Mineral Wells TX

Eden TX

Metro-Davidson

Whiteville South Central

Florence AZ

Lindsey Bridgeport

Div I • Thompson

Shelby

Memphis TN

Tutwiler MS

Jasksboro TX

Brian Collins - VP

Whiteville TN

Mason TN

VA

Lee Adj.

Beattyville KY

St. Mary KY

California City CA

AZ

MD DE

WV

Marion Adj.

KY

NJ

Washington DC

Indianapolis IN

MO

Las Animas CO

Elizabeth NJ

Correctional Treatment

Marion County

Leavenworth KS

Crowley

Olney Springs, CO

Huerfano

OH

IN

IL

Kit Carson

Elizabeth

PA

Northeast Ohio

NV
UT

NY

Lake City
Lake City FL

Citrus

Lecanto FL

Hernando
Brooksville FL

Business Unit 2
Jimmy Turner - VP

FL

Laredo
Laredo TX

Div III • M. Turner

Div IV • Garner

Webb County
Laredo TX

Willacy

Raymondville TX

Business Unit 3
Steve Conry - VP

Div V • Myers

Div VI • Martin

ALL CCA FACILITIES
By Business Unit & Divisions

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

b.

EXPERIENCE

WHO IS CCA?
Corrections Corporation of America (CCA) is the nation’s largest, most experienced owner and operator
of private corrections and detention facilities. In operating 65 facilities, with a total design capacity of
over 75,000 inmate beds, only the federal government and three states (California, Texas, and Florida)
operate larger systems. CCA currently manages contracts for 20 states, the District of Columbia, the
Federal Bureau of Prisons (BOP), the United States Marshals Service (USMS), Immigration and
Customs Enforcement (ICE) and nine local customers. As a full-service provider, we deliver value to
our customers through complete correctional services management including design/build, information
technology systems, medical, food service, security, rehabilitation and educational programs, employee
training, policies and procedures, and other inmate management services.
A key hallmark of CCA’s facilities management is seeking and maintaining accreditation with the
nationally recognized American Correctional Association (ACA). All CCA facilities are managed in
accordance with the guidelines of ACA; 56 of CCA’s 65 operating facilities are accredited, with
accreditation being sought for the remainder. CCA’s success in achieving and maintaining ACA
accreditation continues to be a strong indicator of the quality of our correctional management.
We are proud of the accomplishments CCA has achieved in our 24 years serving the correctional
management needs of various government agencies throughout the country and hope to assist the
Commonwealth of Virginia in meeting the State’s correctional needs. We believe our extensive history
and vast experience in corrections makes us especially qualified to meet and/or exceed the expectations
of the Virginia Department of Corrections.
EXPERIENCE WITH THE COMMONWEALTH OF VIRGINIA
In May 1996, CCA announced that it signed an agreement with the Commonwealth of Virginia to
design, build and manage a 1,500-bed medium security prison for adult male state inmates. The
Lawrenceville Correctional Center opened in March of 1998 and earned ACA accreditation in
November 1999. In October of 2002, the Commonwealth of Virginia, Department of Corrections issued
an RFP for the continued management of the Lawrenceville facility. The DOC elected to assume
operations of the facility upon the expiration of CCA’s existing contract in March 2003 and
subsequently awarded the new management contract to another private operator. CCA continued to
provide quality management services until the contract expiration and cooperated fully with the
transitioning of the facility to the Department of Corrections until the new vendor contract was executed.
Having previously housed Commonwealth inmates for approximately five years as operator of the
Lawrenceville Correctional Center, CCA has acquired a specific understanding of the needs of the
inmate population and will apply additional lessons learned since 2003 in the management of the

CORRECTIONS CORPORATION OF AMERICA

12

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

proposed facility. We value our history with the Virginia Department of Corrections and look forward
to reestablishing a strong working relationship with the Commonwealth.
CLIENT BASE
CCA maintains a varied client base nationwide housing adult male and female inmates; juveniles;
detainees; pre-trial; pre-release; sentenced; and minimum, medium, close, and maximum-security
inmate classifications. Of the 72,000+ inmates under CCA's care, over 22,000 are housed under
contracts with the federal government; 46,000+ are housed through our state government partners; with
4,000+ from local governments. These varied inmate populations are contracted with the following
government agencies:
•
•
•
•
•
•
•

Federal Bureau of Prisons;
United States Marshals Service;
U.S. Immigration and Customs Enforcement;
20 State Governments;
District of Columbia;
Bureau of Indian Affairs (BIA); and
9 Local Governments.

A CCA PARTNERSHIP
By partnering with CCA to manage a portion of a corrections system's inmate population, federal, state,
and local agencies can reduce expenses, avoid capital expenditures, increase flexibility in addressing
fluctuations in inmate populations, and enhance the quality of inmate programs fundamental to the
rehabilitation process. Four factors set CCA apart in providing the best value to our corrections
partners: performance, experience, cost-effective value, and specialized customer support.
1) Performance:
•

ACA Accreditation Scores: CCA is committed to not only obtaining and maintaining ACA
accreditation at our facilities, but to the achievement of exemplary performance as evidenced by
our companywide audit scores. CCA’s average ACA scores for the past ten years are as follows:

●
●
●
●
●

2006 – 99.4%
2005 – 99.1%
2004 – 98.8%
2003 – 98.7%
2002 – 98.7%

●
●
●
●
●

CORRECTIONS CORPORATION OF AMERICA

2001 – 98.8%
2000 – 99.5%
1999 – 99.2%
1998 – 99.3%
1997 – 98.7%

13

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT
•

Consistent and Long-Term Federal Performance: CCA’s status as the largest and most tenured
privatized corrections contractor to the federal government began with an October 1983 contract
from the former Immigration and Naturalization Service (now known as ICE) for our Houston
Processing Center, a relationship we are proud to maintain until this day. Based on this first
successful partnership, CCA expanded our federal relationships to include the USMS with whom
we have contracted since 1988, and the BOP since 1990.

•

Long-Term and Growing State Performance: State customers that we have served for:
o Over 20 years: Texas, Tennessee;
o Over 15 years: Louisiana, New Mexico;
o Over 10 years: Florida, Colorado, Oklahoma, Hawaii, Alaska, District of Columbia;
o Over 5 years: Georgia, Mississippi, Kentucky, Idaho, Montana; and
o New CCA customers (less than 5 years): Vermont, Minnesota, Washington, California,
Arizona, Wyoming.

•

Strong Base of Local Contract Performance: CCA assumed management of the Silverdale
Detention Facilities in 1984 making it the first privately-run adult county facility. Silverdale has
more than doubled in size under CCA’s management and continues to be managed by CCA
today. Since that time, CCA has consistently grown as an operator of facilities managed for
local governments and today serves nine municipalities.

2) Experience: As the founder of the private corrections industry, there is simply no private provider
more experienced than CCA. In our 24 year history, CCA has refined and improved upon our vision
of being the best full service adult corrections system in the United States resulting in our continuing
status as the industry leader in privatized corrections. Our industry leading record includes:
•

Facility Management: As the fifth largest prison system in the United States, CCA’s 16,000
employees are responsible for the daily care and custody of over 72,000 inmates in 65 facilities
located in 19 states and the District of Columbia. Our diverse adult inmate population includes
over 22,000 federal inmates, over 46,000 state inmates and over 4,000 local inmates.

•

Real Estate Development and Management: CCA’s in-house Real Estate Department includes
Site Acquisition; Design and Construction; and Facility Maintenance. In addition to designing,
constructing, expanding and maintaining our 41 CCA owned facilities; we design, build and
expand customer owned facilities under CCA management, 24 of which are currently being
maintained and cared for by CCA.
In order to meet current and anticipated customer demand, CCA has an additional 5,754
expansion beds presently under construction at various CCA owned and managed facilities.

CORRECTIONS CORPORATION OF AMERICA

14

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT
•

Facility Activations and Transitions: CCA has extensive experience in facility activations and
transitions. Over the past 24 years, CCA has successfully activated over 40 facilities and assumed
operation of over 30 facilities. Examples of our expertise include:
o Texas (Mass Facility Transition): At the stroke of midnight on January 15, 2004, CCA
completed the largest facility management transition in industry history – six new
facilities and more than 6,000 beds in the State of Texas.
o Otter Creek Correctional Center (Facility Mission Change): While a change in CCA
customer agencies is not uncommon among CCA facilities, the complete conversion at
Otter Creek Correctional Center in Wheelwright, Kentucky from an all-male to an allfemale facility was a first for CCA.
o Delta Correctional Facility (Facility Activation): CCA managed this 1,016-bed medium
security correctional facility for Mississippi’s Delta Correctional Authority from its
opening in 1996 until the State closed the facility in 2002 due to excess capacity in the
State’s corrections system. Under a new contract in March 2004, CCA worked quickly to
reopen the mothballed facility in an aggressive 11-week time period in order to begin
receiving inmates from the State of Mississippi in April.

•

Specialized Population Management: Encompassed within our full range of prison and jail
management options for all custody levels, genders, and age groups are a number of population
groups that offer CCA’s specialized management expertise. For example:
o T. Don Hutto Residential Center: Our partnership with ICE at this Texas facility
represents CCA’s first contract for the housing of families in ICE custody. This unique
residential center allows ICE to preserve the family unit during the immigration review
process.
o Out of State Inmate Housing: In response to inmate population growth and housing
capacity pressures within government correctional systems, CCA pioneered the housing
of inmates outside of an agency’s home state. This specialized management option
requires a high degree of cooperation and planning between the sending state agency and
CCA. Of particular sensitivity is that multiple out of state populations are often housed
within the same facility in order to meet immediate customer needs (in response to the
immediacy of these needs, CCA has coined the term “just in time beds”). CCA facilities
currently house over 7,600 out of state inmates from the following jurisdictions:
ƒ

Diamondback Correctional Facility, Watonga, Oklahoma: Arizona, Hawaii;

ƒ

Florence Correctional Center, Florence, Arizona: California, Washington (in addition
to ICE and USMS);

ƒ

Lee Adjustment Center, Beattyville, Kentucky: Vermont (in addition to Kentucky);

CORRECTIONS CORPORATION OF AMERICA

15

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

ƒ

North Fork Correctional Facility, Sayre, Oklahoma: Colorado, Vermont, Wyoming;

ƒ

Otter Creek Correctional Center, Wheelwright, Kentucky: Hawaii (in addition to
Kentucky);

ƒ

Prairie Correctional Facility, Appleton, Minnesota:
Minnesota);

ƒ

Red Rock Correctional Center, Eloy, Arizona: Alaska, Hawaii;

ƒ

Saguaro Correctional Facility, Eloy, Arizona: Hawaii;

ƒ

Tallahatchie County Correctional Facility, Tutwiler, Mississippi: California (in
addition to Mississippi and Tallahatchie County), Hawaii; and

ƒ

West Tennessee Detention Facility, Mason, Tennessee:
addition to BOP, ICE and USMS).

Washington (in addition to

California, Vermont (in

3) Cost-Effective Value: CCA innovatively seeks new methods and technologies to reduce costs to
our customers while maintaining the highest standards. Constant vigilance with respect to cost
drivers ensures that our per diems continue to represent the best value to our customers. CCA’s size
helps us deliver value to our customers by providing purchasing power and allows us to achieve
certain economies of scale.
In addition, contracting with CCA offers our government customers certainty in their budgeting
process. By contracting for a fixed per inmate per day rate, despite potential fluctuations in
operating costs, CCA accepts the risk of market and inflationary cost increases. A recent example of
the benefit that this provides came in 2005 when nationwide energy costs soared with natural gas
increasing by 64%. While CCA avoided approximately half of this increase due to fixed price
contracting, we did not recoup the additional costs through per diem increases with our customers
past their contractual annual inflationary adjustments. All associated operating cost increases were
absorbed by CCA.
Certainty in budgeting not only protects government agencies from these unanticipated costs, but
also allows customers to secure against known annual cost drivers that have historically caused
overruns in corrections budgets. Examples of these traditional cost drivers include: employee salary
and benefits costs, legal costs (including indemnification against inmate claims), on-site health care
costs, and facility maintenance costs.
Intense competition for scarce budget dollars often means that prison construction is weighed
against the need for new schools, hospitals, and other taxpayer priorities. As an alternative funding
source, CCA fully finances the prisons we build for our customers, delivering the cost of prison real
estate as part of our per diem. In addition, the associated construction costs are controlled by our
ability to competitively leverage our system-wide buying power and complete construction on an
aggressive time frame – 15 to 24 months for a 1,500 bed medium security prison. The continued
operation of these CCA owned facilities also serves as an ongoing revenue contributor to the
CORRECTIONS CORPORATION OF AMERICA

16

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

communities in which we are located. Valuable tax dollars and utilities fees provide significant
support to city and county budgets.
4) Specialized Customer Support: When a customer partners with CCA, the customer is contracting
not only for the management services of a specific facility but the expertise and resources of the
entire CCA system. This means that in times of emergency or unexpected circumstances, our
customers are able to call on the resources of CCA for assistance.
CCA has been able to support our customers during some of the country’s recent natural disasters.
In anticipation of Hurricane Wilma in fall 2005, CCA mobilized within 24 hours to provide
immediate transportation and temporary emergency housing for 1,200 U.S. Immigrations and
Customs Enforcement male and female detainees who were being evacuated via airlift from
government detention facilities throughout the State of Florida.
In addition, our support for Orleans Parrish in Louisiana continues to this day as our Winn
Correctional Center in Winn Parrish, Louisiana still houses approximately 72 inmates displaced by
Hurricane Katrina. The facility housed up to 400 displaced Louisiana inmates at the height of the
disaster.
CURRENT CONTRACTS
To illustrate our experience in operation, design and construction, and financial abilities, we are
providing a list of our current contract to include the following information:
• Facility Name;
• Facility Warden;
• Facility Address and Phone Number;
• Rated Capacity of the Facility;
• Services Provided at the Facility;
• Customer Name, Address, Phone Number and Email;
• Contract Number;
• Number of Years that Services Have Been Provided;
• Inmate Classification; and
• Samples of Related Construction/Expansion Projects.
With 24 years as a private corrections provider, CCA has extensive experience in construction,
expansion and start-up activities, as well as management and transitioning of correctional facilities and
superior maintenance and repair on 64 facilities nationwide. In fact, CCA has designed, constructed
and/or been involved in construction or expansion projects at more than 45 correctional facilities
managed for various local, state, and federal governmental entities. These construction projects range in
size from a 6,000 square foot (SF) fully-equipped kitchen/dining hall to a 534,248 SF adult correctional
center. The costs and time frame for construction projects related to each facility are provided
intermittently to illustrate the completion time relative to that project size and circumstances. Several
CORRECTIONS CORPORATION OF AMERICA

17

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

expansions are currently underway at a number of our facilities which are not yet included in this list.
(Note: the construction costs do not include the cost of FF&E and other related start-up expenses).
A key part of CCA’s success can be attributed to its innovative facility designs and the ability to bring
facilities on line quickly and efficiently through the construction phase. Over our 24 year history, CCA
has developed and maintained successful long-term relationships with nationally recognized design and
construction firms who specialize in corrections projects. These relationships have allowed us to
provide quicker responses to meet government building and management needs.
CCA has never been terminated as the operator of a facility on the grounds of contract noncompliance. CCA has not been involved on any project on which the Company or any member of
our project team has defaulted or declared bankruptcy or is in the process of doing so.
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

B.M. Moore Correctional Center
Neva Yarborough
8500 No. FM 3053
Overton, TX 75684
(903) 834-6186
500
CCA provides facility management for adult male inmates.
Texas Department of Criminal Justice (TDCJ)
Erica Minor, Contract Administrator
Contracts and Procurement, Client Services
and Governmental Contracts Branch
Two Financial Plaza, Suite 525
Huntsville, TX 77340
(936) 437-7129
Erica.Minor@tdcj.state.tx.us
696-CC-4-7-C0135
January 2004 – Present
January 15, 2009
Minimum and medium security
Bartlett State Jail
Carl White
1018 Arnold Drive
Bartlett, TX 76511
(254) 527-3300
1,001
CCA provides facility management for adult males inmates.
Texas Department of Criminal Justice
Erica Minor, Contract Administrator

CORRECTIONS CORPORATION OF AMERICA

18

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:
Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Contracts and Procurement, Client Services
and Governmental Contracts Branch
Two Financial Plaza, Suite 525
Huntsville, TX 77340
(936) 437-7129
Erica.Minor@tdcj.state.tx.us
696-SJ-4-7-C0130
April 1995 – Present
January 15, 2011
Minimum and medium security
Bay Correctional Facility
Bill Spivey
5400 Bayline Drive
Panama City, FL 32404
(850) 769-1455
985
CCA provides facility management for adult male inmates.
Florida Department of Corrections
Department Management Services
Rosalyn M. Ingram, C.P.M., Director Fleet Management and
Federal Property Assistance
4050 Esplanade Way, Building 4050, Suite 335
Tallahassee, FL 32399-0950
(850) 488-4290
rosalyn.ingram@dms.state.fl.us
DMS 06/07-53
June 1994 – Present
June 30, 2010
Medium security
216,348 SF precast concrete facility constructed in ten months
Bay County Jail and Annex
Joe Ponte
314 ½ Harmon (Jail) 32401
5600 Nehi Road (Annex) 32404
Panama City, FL
(850) 785-5245 (Jail) 769-7376 (Annex)
1,150
CCA provides facility management for male and female pre-trial and
sentenced misdemeanants and felons.
Bay County Board of Commissioners

CORRECTIONS CORPORATION OF AMERICA

19

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Rick Anglin, Contact Monitor
644 Mulberry Avenue
Panama City, FL 32401
(850) 914-6239
ranglin@co.bay.fl.us
No contract number cited.
September 1985 – Present
September 30, 2012
Minimum and medium security
46,000 SF all concrete facility and 11,500 SF addition, another 18,260 SF
addition
Bent County Correctional Facility
Brigham Sloan
11560 Road FF 75
Las Animas, CO 81054
(719) 456-2610
700
CCA provides facility management services for adult males.
Colorado Department of Corrections
Alison Morgan, Private Prisons Monitoring Unit
2862 S. Circle Drive
Colorado Springs, CO 80906
(719) 226-4929
Alison.Morgan@doc.state.co.us
06-CAA-00127
October 1996 – Present
June 30, 2008
Minimum and medium security
Bradshaw State Jail
Robert Shaw
3900 West Loop 571 No.
P.O. Box 9000 (mailing)
Henderson, TX 75652
(903) 655-0880
1,980
CCA provides facility management for adult male inmates.
Texas Department of Criminal Justice
Erica Minor, Contract Administrator
Contracts and Procurement, Client Services
and Governmental Contracts Branch

CORRECTIONS CORPORATION OF AMERICA

20

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:

Two Financial Plaza, Suite 525
Huntsville, TX 77340
(936) 437-7129
Erica.Minor@tdcj.state.tx.us
696-SJ-4-7-0131
January 2004 – Present
January 15, 2008
Minimum and medium security
Bridgeport Pre-Parole Transfer Facility
Mary Bradin
222 Lake Road
Bridgeport, TX 76426
(940) 683-2162
200
CCA provides facility management for adult female inmates.
Texas Department of Criminal Justice
Erica Minor, Contract Administrator
Contracts and Procurement, Client Services
and Governmental Contracts Branch
Two Financial Plaza, Suite 525
Huntsville, TX 77340
(936) 437-7129
Erica.Minor@tdcj.state.tx.us
696-PD-4-7-C0164
April 1995 – Present
February 28, 2011
Minimum security
California City Correctional Center
Chuck DeRosa
22844 Virginia Boulevard
P.O. Box 2590
California City, CA 93504
(760) 373-1764
2,304
CCA provides facility management for adult male inmates.
Federal Bureau of Prisons
Carey Cleland, Contracting Officer
P.O. Box 2760
California City, CA 93504
(760) 373-2285

CORRECTIONS CORPORATION OF AMERICA

21

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

c.cleland@bop.gov
J1PCc-006
September 2000 – Present
September 30, 2010
Low security
489,110 SF precast concrete facility

California City Correctional Center
California City, California

Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
Contract Number:

Camino Nuevo Correctional Facility
Barbara Wagner
4050 Edith Blvd. NE
Albuquerque, NM 87107-2222
(505) 343-7000
192
CCA provides facility management for adult female inmates.
New Mexico Corrections Department
Tim LeMaster, Deputy Director Contractual Services
P.O. Box 27116 (4337 New Mexico Hwy. 14)
Santa Fe, NM 87502
(505) 827-8541
06.770.1300.0018

CORRECTIONS CORPORATION OF AMERICA

22

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Years Provided:
Contract Expiration:
Classification:

2006 – Present
March 31, 2010
Minimum/medium pre-release

Facility Name:
Warden:
Facility Address:

Central Arizona Detention Center
Chuck Gilkey
1155 N. Pinal Pkwy
P.O. Box 1048
Florence, AZ 85232
(520) 868-3668
2,304
CCA provides facility management for adult male inmates.
Pascua Yaqui Tribe of Arizona
Robert Valenza, Tribe Contract Monitor
7474 Camino do Oeste
Tucson, AZ 85746
(520) 883-5000
pascuayaqui@nsn.gov
No contract number cited.
December 1996 – Present
Indefinite
Medium security
United States Air Force/Luke Air Force Base
Doug Janders CS-12, DAF, Contracting Officer
56th Contracting Squadron/LGCA, 14100 W. Eagle Street
Luke AFB AZ 85309-1217
623-856-7168
doug.janders@luke.af.mil
No contract number cited.
October 2000 – Present (USAF)
October 18, 2005 (open-ended)
Medium security
United States Marshals Service (USMS)
Donnell R. Sam, USMS Contracting Officer
United States Marshals Service
Headquarters Contract Team
CS#3 Room 926
Washington, DC 20530-1000
(202) 305-9422
donnell.sam@usdoj.gov
MS-03-D-0013
May 1995 - Present

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:

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23

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Contract Expiration:
Classification:
Construction:

May 3, 2008
Medium and maximum security
114,000 SF precast concrete facility (constructed in eight months); a 110,000
SF addition; a 161,000 SF addition; a 256-bed expansion completed in 1998;
and a 512-bed expansion completed in October 1998

Facility Name:
Warden:
Facility Address:

Cibola County Correctional Center
Walter Wells
2000 Cibola Loop
P.O. Box 3540
Milan, NM 87021
(505) 285-6991
1,129
CCA provides facility management adult male inmates.
Federal Bureau of Prisons
Charles Mitchell, Contracting Officer
P.O. Box 3540
Milan, NM 87021
(505) 285-5663
Cmitchell@bop.gov
J1PCc-007
April 1998 – Present
September 30, 2010
Low security

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
Fax:
E-Mail:
Contract Number
Years Provided:
Contract Expiration:

Cimarron Correctional Facility
Charles Ray
3700 South Kings Hwy.
Cushing, OK 74023
(918) 225-3336
960
CCA provides facility management for adult males inmates.
Oklahoma Department of Corrections
Renee Watkins, Administrator, Private Prisons Administration
2200 North Classen Boulevard, Suite 1200
Oklahoma City, OK 73106
(405) 425-7100
(405) 425-3654
Renee.Watkins@doc.state.ok.us
No contract number cited
May 1997 – Present
August 31, 2006 (negotiations underway for extension)

CORRECTIONS CORPORATION OF AMERICA

24

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Classification:
Construction:

Minimum and medium security
208,000 SF precast concrete facility completed in 13 months

Facility Name:
Warden:
Facility Address:

Citrus County Detention Facility
Jason Ellis
2604 W. Woodland Ridge Drive
Lecanto, FL 34461
(352) 527-3332
400
CCA provides facility management for adult and juvenile males and females,
both pre-trial and sentenced misdemeanants.
Citrus County, Florida
Charles Poliseno, Public Safety Director
3600 W. Sovereign Path, Ste. 2
Lecanto, FL 34461
(352) 527-5406
Charles.Poliseno@bocc.citrus.fl.us
No contract number cited
October 1995 – Present
September 30, 2010
Minimum and medium security
44,000 SF double cell 360-bed expansion project to include a new medical
unit, covered recreation, video visitation addition, food service renovation,
upgrade of central control, existing cell window replacement and
courtroom/public lobby addition, scheduled for a completion in January 2007
(Estimated cost of $17 Million)

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:

Coffee Correctional Facility
Todd Thomas
1153 North Liberty Street
P.O. Box 650
Nicholls, GA 31554
(912) 345-5058
1,524
CCA provides facility management for adult male inmates.
Georgia Department of Corrections
Tony Turpin, Field Operation Manager, Contract Facilities
2 Martin Luther King, Jr. Drive SE
Suite 1152, East Tower
Atlanta, GA 30334-4900
(404) 651-5132
Turpit00@dcor.state.ga.us

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25

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

467-019-955259-1
December 1998 – Present
June 30, 2007
Medium security
275,068 SF precast concrete facility

Facility Name:
Warden:
Facility Address:

Correctional Treatment Facility
John "Doug" Caulfield
1901 E Street, S.E.
Washington, DC 20003
(202) 547-7822
1,500
CCA provides facility management for adult males and female inmates.
District of Columbia Department of Corrections
John Soderberg, Contracts and Procurement Officer
441 4th St. NW
Washington, DC 20001
(202) 724-4233
john.soderberg@dc.gov
7005-AA-NS-4-WM
March 1997 – Present
January 30, 2017
Medium security

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:

Crossroads Correctional Center
Jim MacDonald
75 Heath Road
Shelby, MT 59474
(406) 434-7055
568
CCA provides facility management for adult male inmates.
Montana Department of Corrections
Mike Ferriter, Director
P.O. Box 201301
1539 11th Avenue
Helena, MT 59620
(406) 444-3930
mferriter@state.mt.us
No contract number cited.
September 1999 – Present
August 30, 2019
Minimum to close security

CORRECTIONS CORPORATION OF AMERICA

26

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Customer Name:

Phone:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:

United States Marshals Service (USMS)
Carol A. Whipkey, Contracting/ Ordering Officer
P.O. Box 2224
Great Falls, MT 59403
(406) 247-7034 (Rod Ostermiller or Robert Gard)
03-046-153
April 2003 – Present
Indefinite
Medium security
176,654 SF precast concrete facility; a 56 bed expansion completed in 2004
Crowley County Correctional Facility
Richard Smelser
6564 State Hwy. 96
Olney Springs, CO 81062-8700
(719) 267-3548
1,794
CCA provides facility management for adult male inmates.
Colorado Department of Corrections
Alison Morgan, Private Prisons Monitoring Unit
2862 S. Circle Drive
Colorado Springs, CO 80906
(719) 226-4929
Alison.Morgan@doc.state.co.us
06-CAA-00129
January 2003 – Present
June 20, 2007
Minimum, minimum-restricted and medium security
594-bed expansion completed in 2004
Davis Correctional Facility
Jim Keith
6888 East 133rd Road
Holdenville, OK 74848-9033
(405) 379-6400
960
CCA provides facility management for adult male inmates.
Oklahoma Department of Corrections
Renee Watkins, Administrator, Private Prisons Administration
2200 North Classen Boulevard, Suite 1200
Oklahoma City, OK 73106
(405) 425-7100

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27

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Fax:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

(405) 425-3654
Renee.Watkins@doc.state.ok.us
No contract number cited.
April 1996 – Present
August 31, 2006 (negotiations underway for extension)
Minimum and medium security
207,000 SF precast concrete facility

Facility Name:
Warden:
Facility Address:

Dawson State Jail
Chuck Keeton
106 West Commerce Street
Dallas, TX 72507
(214) 744-4422
2,216
CCA provides facility management for adult male inmates.
Texas Department of Criminal Justice
Erica Minor, Contract Administrator
Contracts and Procurement, Client Services
and Governmental Contracts Branch
Two Financial Plaza, Suite 525
Huntsville, TX 77340
(936) 437-7129
Erica.Minor@tdcj.state.tx.us
696-S-J-4-7-C0132
January 2004 – Present
January 15, 2011
Minimum and medium security

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:

Customer Name:

Phone:

Delta Correctional Facility
Raymond Byrd
3800 County Road 450
Greenwood, MS 38930
(662) 455-9099
1,172
CCA provides facility management for adult male inmates committed from the
State of Mississippi and male and female jail inmates for LeFlore County,
Mississippi.
Mississippi Department of Corrections
Emmit Sparkman, Deputy Commissioner
723 N. President Street
Jackson, MS 39202
(601) 359-5610

CORRECTIONS CORPORATION OF AMERICA

28

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:

esparkman@mdoc.state.ms.us
No contract number cited.
March 2004 – Present
July 31, 2007 (pending renewal)
Minimum and medium security
LeFlore County, Mississippi
Ricky Banks, Sheriff
P.O. Box 905
Greenwood, MS 38930
(662) 453-5141
N/A
No contract number cited.
June 2004 – Present
July 31, 2007 (co-terminus with MDOC contract)
Minimum and medium security
Diamondback Correctional Facility
Lane Blair
Route 2, Box 336
Watonga, OK 73772
(580) 614-2000
2,160
CCA provides total facility management for adult male inmates.
Arizona Department of Corrections
Sam Sublett, Division Director, Division of Offender Operations
1601 W. Jefferson
Phoenix, AZ 85007
(602) 542-3894
ssublett@adc.state.az.us
040171DC
March 2004 – Present
June 30, 2007
Medium security
Hawaii Department of Public Safety
Shari Kimoto, Administrator Mainland/FDC Branch
919 Ala Moana Boulevard, 4th Floor
Honolulu, HI 96814
(808) 837-8020
shari.l.kimoto@hawaii.gov
PSD 06-ID-52
July 2001 – Present
June 30, 2007 (plus two 2-year extensions)

CORRECTIONS CORPORATION OF AMERICA

29

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Classification:
Construction:

Minimum and medium security
472,598 SF precast concrete facility

Facility Name:
Warden:
Facility Address:

Diboll Correctional Center
Bobby Phillips
1604 South 1st Street
Diboll, TX 75941
(936) 829-2295
518
CCA provides facility management for adult male inmates.
Texas Department of Criminal Justice
Erica Minor, Contract Administrator
Contracts and Procurement, Client Services
and Governmental Contracts Branch
Two Financial Plaza, Suite 525
Huntsville, TX 77340
(936) 437-7129
Erica.Minor@tdcj.state.tx.us
696-CC-4-7-CO1
January 2004 – Present
January 16, 2009
Minimum security

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:

Phone:
Contract Number:
Contract Expiration:
Years Provided:
Classification:

Eden Detention Center
Charlie Felts
Highway 87 East
P.O. Box 605
Eden, TX 76837-0605
(325) 869-2295
1,225
CCA provides facility management for adult male inmates.
Federal Bureau of Prisons
Chip Whitworth, BOP Senior Secure Institution Manager
Eden Detention Center
(325) 869-2704
DJB1PC0005
April 30, 2011
October 1995 – Present
Low security

Facility Name:
Warden:

Elizabeth Detention Center
Charlotte Collins

Phone:
Rated Capacity:
Services Provided:
Customer Name:

CORRECTIONS CORPORATION OF AMERICA

30

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

625 Evans Street
Elizabeth, NJ 07201
(908) 352-3776
300
CCA provides facility management for adult male and female inmates.
U.S. Immigration and Customs Enforcement
Lori A. Ray, Contracting Officer
Office of the Federal Detention Trustee
National Place Building, Suite 1210
1331 Pennsylvania Avenue, NW
Washington, DC 20536
(202) 353-4601
lori.ray@usdoj.gov
ODT-5-C-0010
January 1997 – Present
September 30, 2008
Minimum security
Eloy Detention Center
Bruno Stolc
1705 East Hanna Road
Eloy, AZ 85231
(520) 466-4141
1,500
CCA provides facility management for adult male inmates.
U.S. Immigration and Customs Enforcement
Anthony Gomez, Deputy Assistant Director
Office of Acquisition Management
Detention and Removal Operations Program
U.S. Department of Homeland Security
HQ Procurement, Room 2208
425 "I" Street NW
Washington, DC 20536
(202) 307-6108
anthony.gomez@dhs.gov
DROIGSA-06-0002
April 1995 – Present
Indefinite
Low security
300,000 SF precast concrete facility; CCA bought the original 1,000-bed
facility in 1995, and expanded the facility by 500 beds in 1996

CORRECTIONS CORPORATION OF AMERICA

31

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name:

Phone:
Fax:
E-Mail:
Customer Name:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Facility Name:

Florence Correctional Center
John Gay
100 Bowling Road
P.O. Box 2667
Florence, AZ 85232-2667
(520) 868-9095
1,824
CCA provides facility management for adult male inmates.
Washington Department of Corrections
Gary Banning, Contracts and Regional Administrator
410 W. 5th Avenue
Olympia, WA 98504
(360) 586-2160
Glbanning@doc1.wa.gov
COCO6376
July 2004 – Present
August 30, 2007
Medium security
California Department of Corrections and Rehabilitation
Terri McDonald
660 “J” Street, Suite 300
Sacramento, CA 95814
(916) 202-6694
(916) 323-1752
Terri.McDonald@cdr.gov
U.S. Immigration and Customs Enforcement (ICE)
(ICE contract through USMS)
United States Marshals Service (USMS)
Donnell R. Sam, USMS Contracting Officer
Headquarters Contract Team
CS#3 Room 926
Washington, DC 20530-1000
(202) 305-9422
donnell.sam@usdoj.gov
MS-03-D-0013
July 2000 – Present
May 30, 2008
Maximum and medium security
340,025 SF precast concrete facility completed in December 1999 and a
26,001 SF, 224-bed expansion completed in 2004
Gadsden Correctional Institution

CORRECTIONS CORPORATION OF AMERICA

32

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Phone:
Classification:
Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Gwen Bowers
6044 Greensboro Hwy
Quincy, FL 32351
(850) 875-9701
1,520
CCA provides facility management for adult female inmates.
Florida Department of Management Services
Rosalyn M. Ingram, C.P.M., Director Fleet Management and Federal Property
Assistance
4050 Esplanade Way, Building 4050, Suite 335
Tallahassee, FL 32399-0950
(850) 488-4290
Rosalyn.Ingram@dms.myflorida.com
DMS 06/07-93
April 1998 – Present
June 30, 2010
(850) 442-3367
Minimum and medium security
Hardeman County Correctional Facility
Glen Turner
2520 Union Springs Road
P.O. Box 529
Whiteville, TN 38075
(731) 254-6000
2,016
CCA provides facility management services for adult male inmates.
Tennessee Department of Correction
Gayle Ray, Deputy Commissioner
320 6th Avenue N., 4th Floor, Rachel Jackson Building
Nashville TN 37243
(615) 741-1000
gayle.ray@state.tn.us
No contract number cited.
June 1997 – Present
May 31, 2009
Medium security
411,792 SF precast concrete facility, completed in 15 months and a 512-bed
expansion in five months ($58.3 Million)

CORRECTIONS CORPORATION OF AMERICA

33

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Hardeman County Correctional Facility
Whiteville, Tennessee

Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Hernando County Jail
Don Stewart
16425 Spring Hill Drive
Brooksville, FL 34604
(352) 799-7379
730
CCA provides facility management for males, females and juveniles, both pretrial and pre-sentenced.
Hernando County, Florida
Diane Rowden, Commissioner Chair
20 North Main
Brooksville, FL 34601
(352) 754-4020
Bocc@co.hernando.fl.us
No contract number cited.
October 1988 – Present
October 1, 2010
Multi-level security
Houston Processing Center
Robert Lacy, Jr.
15850 Export Plaza Drive
Houston, TX 77032
(281) 449-1481
905
CCA provides facility management for adult male and female inmates.
U.S. Immigration and Customs Enforcement

CORRECTIONS CORPORATION OF AMERICA

34

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:
Facility Name:
Warden:
Facility Address:

Phone:

Anthony Gomez, Deputy Assistant Director
Office of Acquisition Management
Detention and Removal Operations Program
U.S. Department of Homeland Security
HQ Procurement, Room 2208
425 "I" Street NW
Washington, DC 20536
(202) 307-6108
anthony.gomez@dhs.gov
ACD-3-C-0015
April 1984 – Present
September 30, 2007
Medium security
77,895 SF all concrete detention facility, constructed in six months and a 494bed expansion completed in 2005 ($30.6 Million)
Huerfano County Correctional Center
Robert Kurtz
304 Ray Sandoval Street
Walsenburg, CO 81089
(719) 738-3246
752
CCA provides facility management for adult male inmates.
Colorado Department of Corrections
Alison Morgan, Private Prisons Monitoring Unit
2862 S. Circle Drive
Colorado Springs, CO 80906
(719) 226-4929
Alison.Morgan@doc.state.co.us
06-CAA-00130
November 1997 – Present
June 30, 2008
Minimum, minimum-restricted and medium security
207,877 SF precast concrete facility completed in 18 months
Idaho Correctional Center
Phillip Valdez
14601 S. Pleasant Valley Road
Kuna, ID 83634-2721
P.O. Box 70010 (mailing)
Boise, ID 83707
(208) 331-2760

CORRECTIONS CORPORATION OF AMERICA

35

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:
Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

1,270
CCA provides facility management for adult male inmates.
Idaho Department of Correction
Sharon Lamm, Deputy Administrator, Evaluation and Compliance
1299 N. Orchard St., Ste. 110
Boise, ID 83706
(208) 658-2048
Slamm@corr.state.id.us
CPO 41594-L711J-07-05
2000 – Present
June 30, 2009
Minimum, medium and maximum security
321,737 SF precast concrete facility completed in October 1999
Kit Carson Correctional Center
Hoyt Brill
49777 County Road V
P.O. Box 309
Burlington, CO 80807
(719) 346-9450
768
CCA provides facility management for adult male inmates.
Colorado Department of Corrections
Alison Morgan, Private Prisons Monitoring Unit
2862 S. Circle Drive
Colorado Springs, CO 80906
(719) 226-4929
Alison.Morgan@doc.state.co.us
06-CAA-00128
November 1998 – Present
June 30, 2008
Minimum, minimum restricted and medium security
222,175 SF precast concrete facility completed in October 1998
Lake City Correctional Facility
Willie Ruffin
7906 East US Hwy 90
Lake City, FL 532055
(386) 755-3379
893
CCA provides facility management for male youthful offenders.
Florida Department of Management Services

CORRECTIONS CORPORATION OF AMERICA

36

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Rosalyn M. Ingram, C.P.M., Director Fleet Management and Federal Property
Assistance
4050 Esplanade Way, Building 4050, Suite 335
Tallahassee, FL 32399-0950
(850) 488-4290
Rosalyn.Ingram@dms.myflorida.com
DMS 05/06-78
January 1997 – Present
June 30, 2009
Youthful offenders (ages 18-24)
125,436 SF precast concrete facility, constructed in 12 months and a 543-bed
expansion completed in 2005 ($32.9 Million)

Lake City Correctional Facility
Lake City, Florida

Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:

Laredo Processing Center
Juan Diaz
4702 East Saunders
Laredo, TX 78041
(956) 727-4118
258
CCA provides facility management for adult male and female inmates.

CORRECTIONS CORPORATION OF AMERICA

37

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Facility Name:
Warden:
Facility Address:

U.S. Immigration and Customs Enforcement
Anthony Gomez, Deputy Assistant Director
Office of Acquisition Management
Detention and Removal Operations Program
U.S. Department of Homeland Security
HQ Procurement, Room 2208
425 "I" Street NW
Washington, DC 20536
(202) 307-6108
anthony.gomez@dhs.gov
ACD-3-C-0006
March 1985 – Present
December 31, 2009
Medium security
58,969 SF all concrete detention facility, constructed in four mouths ($5.1
Million)
Leavenworth Detention Center
Fred Lawrence
100 Highway Terrace
Leavenworth, KS 66048
(913) 727-3246
767
CCA provides facility management for adult male inmates.
United States Marshals Service
Donnell R. Sam, USMS Contracting Officer
United States Marshals Service
Headquarters Contract Team
CS#3 Room 926
Washington, DC 20530-1000
(202) 305-9422
donnell.sam@usdoj.gov
MS-99-D-0026
June 1992 – Present
December 31, 2011
Medium and maximum security
107,000 SF precast concrete facility, constructed in nine months; a 156-bed
expansion was completed in June 2000; and a 284-bed expansion completed
in 2004
Lee Adjustment Center
Randy Stovall
2648 Fairground Ridge Road

CORRECTIONS CORPORATION OF AMERICA

38

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

P.O. Box 900
Beattyville, KY 41311-0900
(606) 464-2886
816
CCA provides facility management for adult male inmates.
Kentucky Department of Corrections
LaDonna Thompson, Deputy Commissioner of Support Services
275 East Main Street
Frankfort, KY 40602
502-564-4726
ladonna.thompson@ky.gov
MOOOO5312
April 1998 – Present
May 11, 2007 (in process of renewing contract)
Minimum and medium security
Vermont Department of Corrections
Kevin W. Oddy, Corrections Service Specialist
67 Eastern Avenue, Suite 5
St. Johnsbury, VT 05819
(802) 751-0251
koddy@doc.state.vt.us
6495
February 2004 – Present
June 30, 2009
Minimum and medium security
167,701 SF concrete block facility; the existing 512-bed facility was expanded
by 256 beds, including medical, visitation and segregation buildings, and
completed in 1999
Lindsey State Jail
Karl Thomas
1620 Post Oak Road
Jacksboro, TX 76458
(940) 567-2272
1,031
CCA provides facility management for adult male inmates.
Texas Department of Criminal Justice
Erica Minor, Contract Administrator
Contracts and Procurement, Client Services
and Governmental Contracts Branch
Two Financial Plaza, Suite 525
Huntsville, TX 77340

CORRECTIONS CORPORATION OF AMERICA

39

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:

(936) 437-7129
Erica.Minor@tdcj.state.tx.us
696-SJ-4-7-C0133
January 2004 – Present
January 15, 2011
Minimum and medium security

Facility Name:
Warden:
Facility Address:

Marion Adjustment Center
Arvil "Butch" Chapman
95 Raywick Road
P.O. Box 10
St. Mary, KY 40063-0010
826
CCA provides facility management for adult male inmates.
Kentucky Department of Corrections
LaDonna Thompson, Deputy Commissioner of Support Services
275 East Main Street
Frankfort, KY 40602
502-564-4726
ladonna.thompson@ky.gov
MAC-M00005162-0
April 1998 – Present
December 7, 2007
Minimum security and community custody
223,312 SF concrete block facility (CCA built a 256-bed expansion only
which was completed in February 1999)

Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:

Marion County Jail II
Jeff Conway
730 E. Washington Street
Indianapolis, IN 46202
(317) 266-0882
1,030
CCA provides facility management for adult male and female inmates.
Marion County, Indiana
Gary Tingle, Sheriff
40 S. Alabama Street
Indianapolis, IN 46204
(317) 321-8229
SH20737@Indygov.org
No contract number cited
November 1997 – Present

CORRECTIONS CORPORATION OF AMERICA

40

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Contract Expiration:
Classification:
Construction:

December 31, 2017
Multi-level security
47,222 SF renovated concrete facility completed in November 1997

Facility Name:
Warden:
Facility Address:

McRae Correctional Facility
Mike Pugh
1000 Jim Hammock Drive
P.O. Box 368
Nicholls, GA 31055
(229) 868-7778
1,524
CCA provides facility management adult male inmates.
Federal Bureau of Prisons
James Spence, Contracting Officer
P.O. Box 368
McRae, GA 31055
(229) 868-7778
bop6618@bop.gov
J1PCc-008
December 2002 – Present
November 30, 2006
Low security
297,550 SF precast concrete building completed in March 2000

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:

Metro-Davidson County Detention Facility
Brian Gardner
5115 Harding Place
Nashville, TN 37211
(615) 831-7088
1,092
CCA provides facility management for adult male inmates.
Metropolitan Government of Nashville and Davidson County, Tennessee
Daron Hall, Sheriff
506 2nd Avenue North
Nashville, TN 37201-1085
(615) 862-8170
Dhall@dcso.nashville.org
15390
February 1992 – Present
July 31, 2007 (pending renewal)
Multi-security level

CORRECTIONS CORPORATION OF AMERICA

41

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Construction:

208,470 SF precast concrete structure, constructed in 15 months and
completed in February 1992

Facility Name:
Warden:
Facility Address:

Mineral Wells Pre-Parole Transfer Facility
Mike Phillips
759 Heintzelman Road
Mineral Wells, TX 76067-9273
(940) 325-6933
2,103
CCA provides facility management for adult male inmates.
Texas Department of Criminal Justice (TDCJ)
Erica Minor, Contract Administrator
Contracts and Procurement, Client Services
and Governmental Contracts Branch
Two Financial Plaza, Suite 525
Huntsville, TX 77340
(936) 437-7129
Erica.Minor@tdcj.state.tx.us
696-PD-4-7-C0163
January 1995 – Present
February 28, 2011
Minimum security

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
Contract Number:
Years Provided:
Contract Expiration:
Classification:

New Mexico Women’s Correctional Facility
Allen Cooper
1700 East Old Hwy 66
P.O. Box 800 (mailing)
Grants, NM 87020
(505) 287-2941
596
CCA provides facility management for adult female inmates.
New Mexico Department of Corrections
Tim LeMaster, Deputy Director Contractual Services
P.O. Box 27116, Santa Fe, NM 87502
4337 New Mexico Hwy. 14, Santa Fe, NM 87508
(505) 827-8541
77-40
June 1989 – Present
June 30, 2009
Multi-security level

CORRECTIONS CORPORATION OF AMERICA

42

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Construction:

187,247 SF all concrete facility, constructed in nine months with a 23,970 SF
addition constructed in five months, and second expansion of 57,303 SF
completed in March 2000

Facility Name:
Warden:
Facility Address:

Northeast Ohio Correctional Center
Joseph Gunja
2240 Hubbard Road (44505)
P.O. Box 1857 (mailing)
Youngstown, OH 44501-1857
(330) 746-3777
2,016
CCA provides facility for adult male inmates.
Mahoning County, Ohio
Mahoning County Sheriff's Department
Joseph F. Caruso, County Administrator
110 Fifth Avenue
Youngstown, OH 44405
(330) 740-2130
jcaruso@mahoningco.org
None
November, 2003 - Present
November 20, 2008 (plus 3 five-year option periods)
Federal Bureau of Prisons
Jennifer Unger, Administrative Contracting Officer
2240 Hubbard Road
P.O. Box 1857
Youngstown, OH 44501-1857
(330) 746-3377
jxunger@bop.gov
DJB1PC002
June, 2005 - Present
June 1, 2009
Low security
480,000 SF precast concrete facility, completed in ten months and a 500-bed
expansion in five months ($87.1 Million)

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:

North Fork Correctional Facility
Fred Figueroa
1605 East Main
Sayre, OK 73662-3122
(580) 928-8200
1,440

CORRECTIONS CORPORATION OF AMERICA

43

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Services Provided:
Customer Name:

Phone:
Fax:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:
Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

CCA provides facility management for adult male inmates.
Wyoming Department of Correction
Robert O. Lampert, Director
700 West 21st
Cheyenne, WY 82002
(307) 777-7208
(307) 777-7479
No contract number cited
June 2006 -Present
June 30, 2008
Medium and maximum security
Colorado Department of Corrections
Alison Morgan, Private Prisons Monitoring Unit
2862 S. Circle Drive
Colorado Springs, CO 80906
(719) 226-4929
Alison.Morgan@doc.state.co.us
07-CAA-00158
November 2006 – Present
June 30, 2008
Medium security
Vermont Department of Correction
Kevin Oddy, Correctional Supplemental Housing Manager
1229 Portland Street, Suite 101
St. Johnsbury, VT 05819
(802) 751-0255
Koddy@doc.state.vt.us
6495
June 2006-Present
June 30, 2009
Medium security
286,888 SF precast concrete facility, completed in 14 months by April 1998
Otter Creek Correctional Center
Joyce Arnold
Highway 306
P.O. Box 500
Wheelwright, KY 41669-0500
(606) 452-9700
656
CCA provides facility management for adult female inmates.
Kentucky Department of Corrections

CORRECTIONS CORPORATION OF AMERICA

44

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name:

LaDonna Thompson, Deputy Commissioner of Support Services
275 East Main Street
Frankfort, KY 40602
502-564-4726
ladonna.thompson@ky.gov
M-05176998
July 2005 – Present
July 14, 2009
Minimum to close security
Hawaii Department of Public Safety
Shari Kimoto, Administrator Mainland/FDC Branch
919 Ala Moana Blvd., Suite 400
Honolulu, HI 96814
(808) 837-8020
shari.l.kimoto@hawaii.gov
RFP No.: PSD-05-IDA/MB-19
September 2005 – Present
October 31, 2007
Community, minimum, medium, and close security
141,000 SF concrete block facility, a 256-bed expansion was completed in
January 1999 (CCA designed and constructed the expansion only)
Prairie Correctional Facility
Tim Wengler
445 So. Munsterman Street
P.O. Box 157
Appleton, MN 56208-2608
(320) 289-2052
1,550
CCA provides facility management for adult males.
Minnesota Department of Corrections
Erik Skon, Assistant Commissioner
1450 Energy Park Drive, Suite 200
St. Paul, MN 55108
(651) 642-0257
eskon@doc.state.mn.us
No contract number cited.
May 2004 – Present
June 30, 2008
Medium security
Washington Department of Corrections
James E. Thatcher, Superintendent

CORRECTIONS CORPORATION OF AMERICA

45

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Facility Name:
Warden:
Facility Address:

Out of State and Jail Facilities
925 Plum St. SE
Olympia, WA 98504
(360) 956-2140
jethatcher@doc1.wa.gov
COCO6376
July 2004 – Present
August 30, 2007
Medium security
306,557 SF precast concrete facility with a 774-bed expansion completed in
August 1997

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Red Rock Correctional Center
Jose (Frank) Luna
1750 East Arica Road
Eloy, AZ 85213
464-3800
1,596
Alaska Department of Corrections
Leitoni Tupou, Director of Institutions
4500 Diplomacy, Suite 109
Anchorage, AK 99508
(907) 269-7409
leitonitopou@correct.state.ak.us
2054861
2004 – Present
June 30, 2008
Medium security
Hawaii Department of Public Safety
Shari Kimoto, Administrator Mainland/FDC Branch
919 Ala Moana Blvd., Suite 400
Honolulu, HI 96814
(808) 837-8020
shari.l.kimoto@hawaii.gov
PSD 06-ID-53.
2006 – Present
June 30, 2009 (plus two 2-year extensions)
Maximum security
1,586 bed facility completed in June 2006 ($75 million)

Facility Name:
Warden:

San Diego Correctional Facility
Joe Easterling

Phone:
Rated Capacity:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name

CORRECTIONS CORPORATION OF AMERICA

46

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name:

Phone:
E-Mail:

446 Alta Road, Suite 5400
San Diego, CA 92158
(619) 661-9119
1,216
CCA provides facility management for adult inmates.
U.S. Immigration and Customs Enforcement
Lori Ray, Contracting Officer
Office of Federal Detention Trustee
4601 N. Fairfax Drive, Suite 910
Arlington, VA 22203
(202) 353-4601
lori.ray@usdoj.gov
ODT-5-C-003
June 1998 – Present
December 31, 2007
Minimum and medium security
265,609 SF precast concrete facility completed in December 1999
Shelby Training Center
Danny Scott
3420 Old Getwell Road
Memphis, TN 38118-3634
(901) 795-1580
200
CCA provides secure juvenile detention services for male inmates.
Delaware Department of Services for Children, Youth and Family
Joe Conaway
1825 Faulkland Rd.
Wilmington, DE 19805
(302) 995-8341
jconaway@state.de.us
YRS (CCA-SC) FY06-7906
June 1992 – Present
August 31, 2007
Minimum to medium security
Federal Bureau of Prisons
Stephanie Girard, Contracting Officer
Community Corrections Contracts
500 First Street NW, 6th Floor
Washington, DC 20534
(202) 307-3070
s.girard@bop.gov

CORRECTIONS CORPORATION OF AMERICA

47

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:

J-200c-505
January 1990 – Present
February 28, 2011
Medium security
Shelby County Juvenile Court – Youth Services Bureau
Wain Rubenstein, Administrator
600 Adams Street
Memphis, TN 38105
(901) 405-8465
Ruben-w@shelbyjuvenilecourt.com
No contract number cited
April 15, 1986 – Present
April 14, 2015
Minimum to medium security
State of Nevada Division of Child and Family Services
Sue Bobby/Paula Shelton
620 Belrose, Suite 107
Las Vegas, NV 89107
(702) 486-9705
Slbobby@defs.state.nv.us
No contract number cited
July 1989 – Present
August 31, 2007
Medium security
97,760 SF all concrete training center, constructed in 11 months, and two
additions consisting of 11,500 SF and 18,260 SF, both completed in four
months
Silverdale Detention Facilities
Dan Hobbs
7609 Standifer Gap Road (37421)
P.O. Box 23148 (mailing)
Chattanooga, TN 37422
(423) 892-0921
918
CCA provides facility management for adult males and females, both pre-trial
and sentenced inmates.
Hamilton County, Tennessee
Barbara Payne, Director of Corrections
317 Oak Street
Chattanooga, TN 37403
(423) 855-6121

CORRECTIONS CORPORATION OF AMERICA

48

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Barbarap@mail.hamiltontn.gov
No contract number cited
October 1984 – Present
September 19, 2016
Multi-level security
103,758 SF all concrete facility, with an expansion in 1985 of an 11,000 SF
dormitory which was constructed in six months; in 1986 a 6,000 SF full
service kitchen/dining hall was constructed in three months; and in 1998 a
128-bed 19,498 SF dormitory/visitation area was added (CCA designed and
constructed the expansions only)

Facility Name:
Warden:
Facility Address:

South Central Correctional Center
Cherry Lindamood
555 Forrest Avenue
P.O. Box 279
Clifton, TN 38425
(931) 676-5372
1,678
CCA provides facility management for adult male inmates.
Tennessee Department of Correction
Gayle Ray, Deputy Commissioner
320 6th Avenue N., 4th Floor, Rachel Jackson Building
Nashville, TN 37243
(615) 741-1000
gayle.ray@state.tn.us
FA-08-22102-00
March 1992 – Present
June 30, 2010
Minimum and medium security

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Stewart Correctional Facility
Vance Laughlin
79 Holder Road
P.O. Box 248
Lumpkin, GA 31815
(229) 838-5000
1,524
CCA provides facility management for adult male inmates.
U.S. Immigration and Customs Enforcement
Ronald Jean-Baptiste, Contracting Officer
U.S. Department of Homeland Security
Immigration & Customs Enforcement

CORRECTIONS CORPORATION OF AMERICA

49

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
Fax:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:

425 "I" Street, N.W.
Washington, DC 20536
(202) 307-9935
ronald.jean-baptiste@dhs.gov
DROIGSA-06-0003
October 2006 – Present
December 31, 2011
Medium security
297,550 square foot facility with precast concrete exterior walls and finished
masonry and concrete interior walls completed in 2005
T. Don Hutto Residential Center
Evelyn Hernandez
1001 Welch Street
P.O. Box 1063
Taylor, TX 76574
(512) 352-3502
480
CCA provides facility management for adult male and female residents and
families.
U.S. Immigrations and Customs Enforcement
Marcus Reyna, Asst. Field Office Director for Management
8940 Fourwinds Drive
San Antonio, TX 78239
(210) 967-7002
(210) 967-7033
marcus.reyna@dhs.gov
No contract number cited
May 2006 – Present
Indefinite
Minimum
136,000 SF precast concrete facility, completed in 12 months in February
1997
Tallahatchie County Correctional Facility
Robert Adams
295 US Hwy. 49 South
P.O. Box 368
Tutwiler, MS 38963
(662) 345-6567
1,104
CCA provides facility management adult male inmates.

CORRECTIONS CORPORATION OF AMERICA

50

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:
Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:

Mississippi Department of Corrections (MDOC)
Emmit Sparkman, Deputy Commissioner
723 N. President Street
Jackson, MS 39202
(601) 359-5610
esparkman@mdoc.state.ms.us
No contract number cited.
October 2004 – Present (MDOC)
May 18, 2000 – Present (Tallahatchie County)
June 30, 2007 (MDOC) (pending renewal)
Indefinite with 3 year renewals (Tallahatchie County)
MDOC and Tallahatchie County - medium security
Hawaii Department of Public Safety
Shari Kimoto, Administrator Mainland/FDC Branch
919 Ala Moana Blvd., Suite 400
Honolulu, HI 96814
(808) 837-8020
shari.l.kimoto@hawaii.gov
PSD 06-ID-53.
2004 – Present
June 30, 2008
Maximum and medium security
232,026 SF precast concrete facility completed in March 2000
Torrance County Detention Facility
Robert Ezell
County Road 49
P.O. Box 837
Estancia, NM 87016
(505) 384-2711
910
CCA provides facility management for pre-trial and sentenced adult male
inmates.
United States Marshals Service
U.S. Immigration and Customs Enforcement
Anthony Gomez, Contracting Officer
U.S. Department of Homeland Security
HQ Procurement, Room 2208
425 "I" Street NW
Washington, DC 20536
(202) 307-6108
anthony.gomez@dhs.gov

CORRECTIONS CORPORATION OF AMERICA

51

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Contract Number:
Years Provided:
Contract Expiration:
Contract Monitor:
Phone:
Classification:
Customer Name:

Phone:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Customer Name:

Phone:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

51-02-0062
December 1990 – Present
Indefinite
Thomas Bauman
(505) 384-6400
Medium security
New Mexico Corrections Department
Tim LeMaster, Deputy Director Contractual Services
P.O. Box 27116, Santa Fe, NM 87502
4337 New Mexico Hwy. 14, Santa Fe, NM 87508
(505) 827-8541
99V3
December 1990 – Present
June 30, 2007
Medium security
Torrance County, New Mexico
Board of County Commissioners
Robert Ayre, County Manager
P.O. Box 48
Estancia, NM 87016
(505) 384-2418
No contract number cited
May 10, 1993 – Present
Indefinite
Multi-level security
235,115 SF precast concrete structure, constructed in eight months and in
nine months a 156,000 SF expansion

CORRECTIONS CORPORATION OF AMERICA

52

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Torrance County Detention Facility
Estancia, New Mexico

Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:

Webb County Detention Center
Mario Garcia
9998 South Hwy 83
Laredo, TX 78046-8449
(956) 723-1985
480
CCA provides facility management adult male inmates
United States Marshals Service (USMS)
Donnell R. Sam, USMS Contracting Officer
Headquarters Contract Team
CS#3 Room 926
Washington, DC 20530-1000
(202) 305-9422
donnell.sam@usdoj.gov
MS-00-D-0008
February 2000 – Present
November 7, 2007
Medium security
West Tennessee Detention Facility
Marcel Mills
6299 Finde Naifeh Jr. Dr.
P.O. Box 509 (mailing)
Mason, TN 38049
(901) 294-3060
600
CCA provides facility management for adult male inmates.
United States Marshals Service (USMS)
Donnell R. Sam, USMS Contracting Officer
Headquarters Contract Team
CS#3 Room 926
Washington, DC 20530-1000
(202) 305-9422
donnell.sam@usdoj.gov
MS-02-D-0007
September 1990 – Present
February 3, 2009
Medium security

CORRECTIONS CORPORATION OF AMERICA

53

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Customer Name

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:

Facility Name:
Warden:
Facility Address:

Vermont Department of Corrections
Kevin Oddy, Correctional Supplemental Housing Manager
1229 Portland Street, Suite 101
St. Johnsbury, VT 05819
(802) 751-0255
Koddy@doc.state.vt.us
6495
May 2005 – Present
June 30, 2009
Medium security
141,867 SF precast concrete facility; the original facility was constructed in
seven months, a 16,832 SF addition was completed in five months in August
1991, a 19,200 SF addition was completed in four months in September 1996,
and a 1,667 SF medical expansion in October 1999
Wheeler Correctional Facility
Ralph Kemp
1100 North Broad Street
P.O. Box 466
Alamo, GA 30411
(912) 568-1732
1,524
CCA provides facility management for adult male inmates.
Georgia Department of Corrections
Tony Turpin, Field Operation Manager, Contract Facilities
2 Martin Luther King, Jr. Drive SE
Suite 1152, East Tower
Atlanta, GA 30334-4900
(404) 656-9772
Turpit00@dcor.state.ga.us
467-019-955259-2
November 1998 – Present
June 30, 2008
Medium security
275,068 SF precast concrete facility completed in October 1998 with a 66,962
SF 508-bed addition completed in January 1999, and a 69,185 SF 508-bed
expansion completed in July 1999
Whiteville Correctional Facility
Steve Dotson
1440 Union Springs Road
P.O. Box 679 (mailing)

CORRECTIONS CORPORATION OF AMERICA

54

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Construction:
Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years provided:
Contract Expiration:
Classification:
Construction:
Facility Name:
Warden:
Facility Address:
Phone:
Rated Capacity:

Whiteville, TN 38075
(731) 254-9400
1,536
CCA provides facility management for adult male inmates.
Tennessee Department of Correction
Gayle Ray, Deputy Commissioner
320 6th Avenue N., 4th Floor, Rachel Jackson Building
Nashville, TN 37243
(615) 741-1000
gayle.ray@state.tn.us
No contract number cited
July 1998 – Present
September 30, 2007
Medium security
336,767 SF precast concrete facility completed in July 1998
Wilkinson County Correctional Facility
Jackie Banks
2999 US Hwy. 61 North
P.O. Box 1079
Woodville, MS 39669
(601) 888-3199
1,000
CCA provides facility management for adult male inmates.
Mississippi Department of Corrections
Emmit Sparkman, Commissioner
723 N. President Street
Jackson, MS 39202
(601) 359-5610
esparkman@mdoc.state.ms.us
No contract number cited.
January 1998 – Present
September 25, 2007
Medium security
198,046 SF precast concrete facility, completed in 12 months in 1997
Willacy County State Jail
Orlando Perez
1695 South Buffalo Drive
Raymondville, TX 78580
(956) 689-4900
1,069

CORRECTIONS CORPORATION OF AMERICA

55

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Services Provided:
Customer Name:

Phone:
E-mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:
Facility Name:
Warden:
Facility Address:

Phone:
Rated Capacity:
Services Provided:
Customer Name:

Phone:
E-Mail:
Contract Number:
Years Provided:
Contract Expiration:
Classification:

CCA provides facility management for adult male inmates.
Texas Department of Criminal Justice
Erica Minor, Contract Administrator
Contracts and Procurement, Client Services
and Governmental Contracts Branch
Two Financial Plaza, Suite 525
Huntsville, TX 77340
(936) 437-7129
Erica.Minor@tdcj.state.tx.us
696-SJ-4-7-C0134
January 2004 – Present
January 15, 2011
Minimum and medium security
Winn Correctional Center
Tim Wilkinson
Gum Springs Road, Hwy 560
P.O. Box 1260
Winnfield, LA 71483-1260
(318) 628-3971
1,538
CCA provides facility management for adult male inmates.
Louisiana Department of Public Safety and Corrections
Bernard E. “Trey” Boudreaux III
Undersecretary/Management and Finance
P.O. Box 94304
504 Mayflower Street
Baton Rouge, LA 70804
(225) 342-6739
Treyb@corrections.state.la.us
407-604228
March 1990 – Present
June 30, 2008 (with extensions)
Medium security

CORRECTIONS CORPORATION OF AMERICA

56

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

c.

SUBCONTRACTORS

Canteen Correctional Services
Canteen Correctional Services was awarded a national contract to provide food services to CCA’s
facilities throughout the nation in 2002. A worldwide food service vendor that began operations in 1929
as a food vending company, Canteen is a division of Compass Group-USA. Compass is the world’s
largest provider of managed food service and conducts business in ninety countries around the globe.
Compass Group’s North American Division purchased Canteen Corporation in 1990, and thus Canteen
Correctional Services became a member of the Compass Group. As a member of the group, Canteen
Correctional Services has full access to all of the company’s support, both financial and management.
The first correctional account Canteen operated was in Arizona as a result of the Warden’s request to
assist in the provision of food and vending to the prisoners at the jail. This single account eventually led
to the adjacent county requesting their services and within a year they were operating five prisonerfeeding programs in the state.
Canteen has since become the nation’s largest provider of food service management to private
correctional management companies, including youthful offenders. Operating in 48 states and providing
meals to more than 300,000 inmates daily, they also provide commissary and laundry services to their
client family of more than 520 correctional facilities. Canteen employs more than 3,000 thousand
individuals who are totally dedicated to the corrections market and the management of inmate labor to
produce meals at their contracted facilities.
Michael Fortunato, President of Canteen Correctional Services, is headquartered in Franklin,
Massachusetts. Mr. Fortunato has been in the correctional food service industry for over 15 years. In
his capacity as President, he oversees the operation of accounts varying in size from a county jail in
Georgia housing 60 inmates to the entire State of Arizona prison system serving more than 32,000
inmates in 49 production kitchens.
James A. Carroll, Senior Vice President, was raised in the food service industry and has been involved
in the operation of correctional food service for more than 27 years. Mr. Carroll managed the 52,000inmate food service program for the Florida Department of Corrections for ten years prior to entering the
private sector as Vice President of Operations for Service America’s correctional food service division.
Mr. Carroll has worked with Mr. Fortunato for 12 years, and Mr. Adams for seven years. Consistency in
operations is evidenced by the long-term relationships of the company’s management.
In addition to the the Vice President of Operation and five District Managers, Canteen has a full-time
dietitian dedicated to CCA's business, two administrative staff, and the entire Canteen support staff.
Canteen is more than a service provider to CCA, Canteen is our partner with professional personnel who
recognize the importance of food service in the correctional environment and deliver quality food as
well as quality services to diversified inmate populations housed in CCA facilities.
CORRECTIONS CORPORATION OF AMERICA

57

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

d.

Further Information Contacts

Please contact the following CCA staff for further information.

JEB BEASLEY
Senior Director, State Customer Relations
Jeb Beasley joined CCA in 2004 as Senior Director, State Customer Relations,
where he manages CCA's relationships with the states of Virginia, Indiana,
Mississippi, Missouri, Arkansas, Oklahoma, Vermont, and Alaska.
Prior to joining CCA, Jeb worked at the Nashville Area Chamber of Commerce
as Director and also Interim Vice President of Government Relations. He
interned at the Office of the Secretary of the U.S. Senate in 1997 and later
served as the Middle Tennessee Field Representative for United States Senator
Bill Frist for two years.
Jeb holds a bachelor's degree in business administration from Belmont
University.
Experience:
•
•
•
•
•
•

Senior Director, State Customer Relations, CCA Corporate, 2004-present;
Interim Vice President, Government Relations, Nashville Chamber of Commerce, 2003-2004;
Director, Government Relations, Nashville Chamber of Commerce, 2003;
Middle Tennessee Field Representative, U.S. Senator Bill First, 2001-2003;
Marketing Assistant, Infrastructure Corporation of America, 1998-2000; and
Intern, Office of the Secretary of the U.S. Senate, 1997.

Professional Affiliations:
•

Member, Davidson County (TN) Drug Court Foundation Board.

Contact Information:
Jeb Beasley, Senior Director of Customer Relations
Corrections Corporation of America
10 Burton Hills Boulevard
Nashville, TN 37215
Office: (615) 263-6615
Cell: (615) 478-2260
Email: jeb.beasley@correctionscorp.com
CORRECTIONS CORPORATION OF AMERICA

58

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

e.

AUDITED FINANCIAL STATEMENTS

Please refer to Attachment 2 for CCA’s most recent audited financial statement.

f.

CONFLICT OF INTEREST

There are no persons known to CCA who would be obligated to disqualify themselves from
participation in any transaction arising from or in connection to the proposed project pursuant to The
Virginia State and Local Government Conflict of Interest Act, Chapter 31 (2.2-3100 et seq.) of Title 2.2.

g.

PLAN FOR OBTAINING QUALIFIED WORKERS

As the nation’s oldest and largest private corrections company CCA has had extensive experience at
staffing new facilities and will provide a diverse group of qualified staff for the proposed facility. One
example of CCA’s commitment to recruiting and retaining qualified staff is a recently developed
recruitment initiative entitled “From Camouflage to Corrections” which focuses on discharging military
personnel. An overview of CCA’s recruitment practices is outlined below.
Recruitment and Selection – Methods of recruitment for vacant positions are designed to attract
qualified applicants from outside the organization, as well as within. The procedures will include, at a
minimum:
• Recruitment strategies designed to attract qualified applicants from outside the organization;
• Schedules and post assignments that include cross sex staffing; and
• Establishing qualifications for applicants that permit experience to be substituted for education when
that experience is extensive and pertinent to the duties of the position.
CCA gives appropriate consideration to requests for re-assignment and internal transfer prior to filling a
vacant position. To help ensure that vacancies are filled in a timely manner, CCA uses every method
available to recruit employees including website position postings, internal company-wide postings,
utilizing local and state employment agencies, newspaper advertisements, job fairs, etc. CCA
encourages promotions from within but not to the exclusion of lateral entry by individuals from outside
the organization who possess the qualifications required for a position.
Retention – CCA strives to build employee retention and manage employee relations by identifying
employee concerns, providing effective coaching and disciplinary strategies, as well as tools for efficient
performance management. In an effort to provide the groundwork necessary to create and sustain a
positive employee relations climate and to communicate this throughout the facilities and the company,
CCA focuses on:
• Developing management-employee dialogue;
• Ensuring compliance with progressive discipline guidelines;
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Use of mentoring and counseling to assist line managers;
Use of employee development activities to promote positive employee relations;
Striving to institute a positive company culture;
Promoting methods that can aid in reducing stress in the corrections workplace; and
Responding to work and family concerns.

Minimizing employee turnover is a continuing effort in the corrections industry. In order to encourage
retention among new employees, CCA has developed a mentoring program to help facilitate acclimation
to corrections and the specific facility environments. Although the mentor is not intended to replace the
employee's supervisor, the mentor assists the new hire in becoming oriented to the workplace and to the
company. A routine report summarizing questionnaire responses is prepared and distributed by
corporate personnel to promote awareness in areas that may need additional focus for the new employee.
Continual training and communication among and within departments is a key to promoting an
environment that aids in the retention of staff.

h.

TRAINING PROGRAMS

OVERVIEW
Training is a keystone to CCA's success. Our company is built around the 16,000 employees who help
us manage safe, secure facilities with a strong programmatic emphasis. CCA's training program for all
employees meets and frequently exceeds the stringent training requirements set forth by the American
Correctional Association (ACA) and includes requirements for all categories of personnel, including
clerical/support, professional specialists, security/correctional officers, and administrative and
managerial employees.
CCA believes training should serve as an instrument for change, used to support and promote initiatives
aimed at making facilities safer, more secure and better places to come to work. This requires training to
go beyond the standards and become involved in the quality improvement process that is fundamental to
highly functioning correctional facilities with a commitment to actualizing staff development.
Our commitment to quality training is exemplified by the presence of a full-time Director of Staff
Development and Training who approves all CCA training curricula; Divisional Training Managers, one
of which is assigned to each of CCA's three business units to promote accountability; and a full-time
facility Training Manager. This management team works to ensure that all employee training needs are
met and implemented in accordance with ACA Standards, CCA policy, and contract requirements which
provides a training program with integrity, consistency, and compliance.
QUALIFIED TRAINERS
CCA Training Managers are required to successfully complete a 40-hour Training for Trainers program.
Instructors in firearms, chemical/inflammatory agents and less lethal munitions, batons, electronic
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restraint devices, defensive tactics, crisis prevention, and CPR are required to maintain current instructor
certifications in their respective specialty areas and also attend a presentation skills class for subject
matter experts.
All training delivered and submitted for training credit is conducted in accordance with standards
established for instructor qualification, lesson plan approval, training records processing procedures and
evaluation of the training program.
PLANNING AND RESOURCES
Ultimate responsibility for CCA's training programs rest with the Director of Staff Development and
Training, the facility Warden, and the facility Training Advisory Board. The Director of Staff
Development and Training serves as an active member of CCA's Operations Leadership Team which
allows training to serve as part of the planning and implementation on all operational initiatives and
permits training to lead staff into changes, as opposed to reacting after the fact.
CCA's corporate Training Advisory Team assists corporate Divisional Training Managers with annual
in-service training plans, meeting training standards, and delivering training that will make a difference
to facility operations and staff in the execution of their duties.
The facility Training Advisory Board assists with the development of its annual facility Training Plan.
The board consists of supervisors and line employees representing various areas of facility operations
and performs an active role in evaluating the effectiveness of current training efforts and identifying
future and special training needs. The board meets regularly to review the progress of the training
program and work with the Training Manager to address any special training needs.
Reports submitted to CCA’s Director of Staff Development and Training and used to track facility
training programs include an annual report providing information such as statistical data summarizing
the number of training activities and participants, associated costs, identified training highlights, and the
impact of training courses and activities; and, a Training Plan outlining program plans/goals and
schedules for the upcoming year developed with input from the Training Advisory Board.
In addition to the extensive resources available within the corporation, CCA is committed to working
closely with local, state and federal organizations in the planning and presentation of training programs
whenever possible. CCA's established relationships with training resources will continue to be an asset
in sponsoring and presenting training programs.
LEARNING MANAGEMENT SYSTEM
To ensure program integrity, consistency and compliance with training standards and requirements,
CCA has developed a computer-based initiative that includes the implementation of a Learning
Management System (LMS) which automates the training administration processes, enables on-line
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learning, and supports CCA’s competency and performance management programs. Additional
assistance and oversight of facility training programs is accomplished monthly by the Divisional
Training Managers through a system of monitoring of all training conducted by each site in comparison
to the annual training plan and made available through LMS. As a result, all training files for individual
CCA employees and for classes conducted within CCA are maintained electronically at CCA's corporate
office, with necessary back-up maintained on site.
PRE-SERVICE ORIENTATION CURRICULUM
CCA provides a 40-hour Pre-Service Orientation Program for all security and non-security employees
prior to being independently assigned to work. Training includes the following subject areas:
• CCA Overview - history and philosophy;
• Policy & Procedure Overview;
• Human Resources Management - job responsibilities and personnel policies;
• Sexual Harassment;
• Professionalism and Ethics - employee standards of conduct;
• Emergency Procedures/Incident Management Overview;
• Hostage Situations;
• Games Criminals Play - inmate manipulation;
• Inmate Management - classification, grievance and disciplinary procedures (rules and regulations);
• Institutional Safety;
• Criminal Justice System, Legal Issues and Inmate Rights;
• Suicide Intervention and Prevention Precautions;
• Special Needs Offenders;
• Tool and Key Control;
• True Colors/Team Building;
• Use of Force - regulations and tactics;
• Communicable Diseases and Infection Control;
• Medical and Psychiatric Referral;
• Prison Rape Elimination Act (PREA);
• Information Security; and
• Health Insurance Portability and Accountability Act of 1996 (HIPAA).
SPECIFIC PERSONNEL TRAINING REQUIREMENTS
Pre-Service and Correctional Officer Basic Training Curriculum
CCA requires that all security personnel complete additional initial training during their first year of
employment; in-service is required annually thereafter. In addition to Pre-Service Orientation, a fulltime Correctional Officer who works in direct and continuing contact with inmates receives 160 hours of
Basic Training and on-the-job training (OJT) during the first year of employment. Courses include the
following subject areas:
• Chemical/Inflammatory Agents Familiarization;
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Count Procedures;
Cultural Awareness;
Crime Scene Procedures;
Defensive Tactics;
Direct Supervision;
First-Aid/CPR;
Interpersonal Communications;
Interpersonal Communications II – Inmate Management;
Non-Violent Crisis Prevention and Intervention (CPI);
Policies/Procedures/Post Orders;
Radio Communications;
Report Writing;
Searches and Contraband Control;
Security Procedures and Security Threat Groups;
Stress Management;
Substance Abuse;
Transportation of Inmates;
Unit Management and Direct Supervision;
Use of Restraints;
ACA Accreditation;
Security Systems;
Crisis Communication;
Special Management Units; and
Inmate Problem Solving.

Support Personnel
During the first year of employment and in addition to Pre-Service Orientation, support personnel who
have daily contact with inmates receive an additional 40 hours of OJT. Support personnel will also
receive 40 hours in-service training during each subsequent year of employment. Training for this group
includes instruction designed to improve the employee’s ability to understand and effectively manage
inmate behavior.
Professional Specialist
During the first year of employment and in addition to Pre-Service Orientation, professional specialist
employees receive an additional 40 hours of OJT in their specialty area. Professional specialist
employees also receive in-service training during each subsequent year of employment.
Administrative and Management
During the first year of employment and in addition to Pre-Service Orientation, administrative and
managerial personnel receive an additional 40 hours of OJT. Employees in this category also receive inservice training during each subsequent year of employment.

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Special Operations and Response Team
CCA provides properly trained individuals assigned to the Special Operations and Response Team
(SORT) to respond to fire, escape, hostage situations, disturbances, power failures, and any other
incident that may arise. Each member of SORT must successfully complete all training specified in the
Pre-Service Orientation and Correctional Officer Basic Training Program and have at least one year of
experience as a Correctional Officer. Specialized training for SORT includes the following subject
areas:
• Hand Signals;
• Firearms Qualifications;
• Use of Chemical/Inflammatory Agents/Less Lethal Munitions;
• Use of Force/Deadly Force;
• Incident Response Plan Review;
• Baton Exercises and Squad Formations;
• Cell Extractions;
• Warning Signs of a Disturbance;
• Defensive Tactics Review;
• Spontaneous Knife Defense;
• Professionalism; and
• Pepper Ball.
Training of CCA personnel on any use of force products/equipment that are not approved in CCA's Use
of Force policy is prohibited. Any use of force training conducted outside of the facility and/or in
conjunction with other CCA facilities or outside agencies is coordinated in advance through the
corporate Director of Staff Development and Training.
Firearms Training
CCA personnel authorized to use firearms receive appropriate classroom and range firearms training.
Personnel authorized to use firearms must successfully complete the basic firearms training course and
must re-qualify annually. Employees authorized to use firearms must do so according to the guidelines
established in CCA's Use of Force policy.
Chemical and Inflammatory Agents Training
CCA personnel authorized to use chemical and/or inflammatory agents are trained in the appropriate use
of chemical/inflammatory agents, the effects of exposure, first aid treatment for exposure and
decontamination methods, knowledge of the proper procedures involved in the safe loading and delivery
of these agents, and the risk involved in utilization of different types of agents.
IN-SERVICE TRAINING
CCA provides 40 hours of annual in-service training to all employees in accordance with ACA
Standards, CCA policies, and in cooperation with applicable contract requirements. The in-service
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training program is designed around the principle that training is an instrument for change. To support
this principle, CCA has developed a 40-hour in-service training curriculum that has three distinct
components.
First, all employees receive training to meet required standards and satisfy physical skills training like
CPR, firearms, and self-defense for applicable staff.
Second, CCA has implemented a process called "Back-to-Basics" which recognizes that incidents can be
anticipated and prevented through a strategic review of practices and policies of all facility posts and
operations and by engaging employees assigned to those areas and processes. This provides a practical
needs assessment, as required by ACA, of potential areas of vulnerability through the active
participation of all employees as they participate in in-service training. Staff have the opportunity to
learn policy and practice not only through the classroom but by interviewing staff and observing ongoing operations in the facility, with employee in-service teams making recommendations for
improvement.
Finally, discipline specific e-learning courses continue to be developed for skilled employees within
their areas of work responsibility.
PROFESSIONAL DEVELOPMENT
Front Line Leadership Training
Fostering a good relationship between employees and supervisors is one of the most powerful means of
maintaining and motivating employees. CCA has developed and is implementing "Front Line
Leadership," a comprehensive supervisory training program that provides more resources than ever
before to prepare new supervisors for the challenges ahead. The year-long program includes
independent study, workshops, group activities, video presentations, partnership with an experienced
colleague, and a 360-degree evaluation. A main focus is the five major classifications that most directly
impact a Correctional Officer’s performance - Captains, Lieutenants, Sergeants, Unit Managers, and
Correctional Counselors.
Front Line Leadership has three primary components: To address development of skills necessary to be
an effective correctional supervisor; a three-day classroom event designed to positively influence
character-based traits that are critical to supervisors effectively engaging and leading the Correctional
Officers; and the final phase of this program lasting for one year where each participant is assigned a
coach or "maximizer" that has been trained in the framework and tenets of the program, as well as
expectations for this one-year responsibility. The participants and maximizers will also be involved in a
360 degree evaluation during month eight of this year-long program.

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Professional Educational Programs
As part of its ongoing commitment to support employees in their professional development, CCA also
provides administrative leave and/or reimbursement for employees attending approved professional
meetings, seminars, and similar work-related activities.

i.

DEPARTMENT OF MINORITY BUSINESS ENTERPRISE

As the oldest government contracting company in corrections management, CCA has gained insightful
experience into the process of identifying and seeking to establish relationships with disadvantaged
business enterprises ("DBE"). We recognize the importance of supporting diversity in our business
strategies, relationships, and workforce through the utilization of business enterprises owned by women,
persons with a disability, veterans, minorities, and small business, and in our hiring and recruitment
efforts (as reinforced by the company's Affirmative Action programs). It is an ongoing endeavor that we
continue to support and strive to improve upon as is further discussed below.
DIVERSITY BUSINESS INCLUSION (DBI) PROGRAM
As a company operating correctional facilities nationwide, CCA has sought to combine diversity with
our desire to provide our government partners the best possible cost effective service delivery while
utilizing the highest quality products. In the past, this has sometimes limited our access to
disadvantaged businesses in certain areas due to their inability to provide the necessary products and/or
services to CCA facilities at the price, quality, quantity, and/or scheduling needed to service our national
clientele at an optimum level of efficiency. Our continuing efforts to expand our ability to diversify our
purchasing power, however, have resulted in a new CCA initiative entitled, "DBI," or CCA's Diversity
Business Inclusion Program.
In early 2007, CCA contracted with Kinnard & Associates - a minority, woman-owned, consulting firm
based in Nashville, Tennessee - to assist in the development and implementation of a corporate DBI
program. In keeping with CCA’s commitment to utilize minorities, women, and other small
disadvantaged businesses, this enhanced diversity program adds an increased value to our company by
raising the standards of how we do business with DBE's as a corporate entity. Our continued efforts to
embrace diversity, both internally and externally, will serve as an asset to the business community
within the individual states in which we contract with our government partners, as well as broaden our
national company business culture.
CCA owned and managed facilities are often located in smaller communities where their presence can
make a sizable impact. This provides an even greater incentive for selecting small and/or disadvantaged
firms, whenever possible. If given the opportunity to partner with the Commonwealth of Virginia
through the design, construction and management/operation of the proposed facility, CCA will diligently
seek to further utilize disadvantaged firms in as many additional areas as possible, while maintaining our
dedication to quality and cost effectiveness. Not only will it grow our business model among DBE's, it
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can help to expand the local facility marketplace where businesses tend to overwhelmingly fit into the
DBE sector. This, in turn, helps connect the facility to the community as a dependable, reliable business
partner who is seen as an economic asset beyond being a large employer. Expanding our DBI initiative
also provides CCA an opportunity to increasingly partner with our government counterparts who
themselves have taken steps to implement programs to help ensure equal opportunity in procurements
and business development.
CCA's dedication to increasing our DBI Program extends to our subcontractors by seeking to identify
DBE's in our subcontracting commitments through our vendors, such as Canteen Correctional Services,
which manages CCA food service operations companywide.
The DBI Program is an on-going, integral component of CCA's business development and management
philosophy. CCA has and will continue to work diligently to identify DBE's, to access the specific types
of commodities and contractual services which are commensurate with the operations of the facility, and
to develop processes that will afford DBE's the opportunity to participate as CCA's financial partner.
Highlights of CCA’s DBI Program currently under development include:
• A process for identifying certified DBE’s and evaluating their capabilities for supplying CCA
facilities;
• A best practice whereby CCA will assist and encourage primary supply and construction service
vendors in identifying subcontracting opportunities for DBE’s who can be utilized as sources in both
the manufacturing of products supplied to CCA and whose services or products can be used in the
construction of new facilities and the expansion of existing facilities;
• Accurate recordkeeping and documentation of developmental and outreach efforts, as well as
accounting of business transactions with DBE’s contracting with CCA (and subcontracting with
primary vendors); and
• Resources for on-going developmental efforts to CCA staff and primary vendors (e.g., DBE
Directory, Policy & Procedures, etc.) to assure the endurance and growth of the Program.

j.

INFORMATION ON DESIGN AND CONSTRUCTION SUBCONTRACTORS
(1) SWORN CERTIFICATION
CCA’s sworn certification can be found in the cover letter signed by Lucibeth Mayberry, Vice
President, Research, Contracts and Proposals and an authorized representative of CCA.

(2) QUALIFICATION STATEMENT
If selected to submit a “Detailed Stage (Part 2)” proposal, CCA will pursue a design and
construction partner for this project and will ensure that a qualification statement is completed by
each party and submitted to the Commonwealth in accordance with PPEA guidelines.

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k.

WORKER SAFETY

CCA makes every effort to provide a safe environment and safe work conditions for staff and inmates.
In matters relating to occupational safety and health, CCA policy and practice adheres to federal, state,
and local codes. Compliance with established safety practices is the responsibility of each CCA
employee.
A Facility Safety Authority (FSA) is designated by the Warden and assigned to manage, direct, and
supervise the facility fire and safety program. This employee is also responsible for ensuring
compliance with all local, state, federal and OSHA standards/codes.
The facility FSA usually serves as the Team Safety Coordinator whose primary function is to perform
the administrative responsibilities for all Team Safety Program activities. In addition, the Team Safety
Coordinator works closely with all department heads to aide in the fulfillment of their loss control
responsibilities. The Team Safety Program, a safety and loss control program, includes the following
components, at a minimum:
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Facility specific programs for safe operation (e.g. lockout/tagout, hazard communication, respiratory
protection, personal protective equipment, annual hazard assessment);
Injury/Illness reporting procedures;
Meeting agendas;
Mandatory OSHA inspection guidelines; and
Minimal reference materials relating to federal, state, and local safety codes and ordinances.

A Team Safety Committee is formed to create and maintain an active interest in safety and loss control
and to assist in reducing the possibility of loss. The Team Safety Committee, which meets monthly,
consists (where applicable) of the following members:
• Team Safety Coordinator;
• Assistant Warden/Administrator;
• Facility Safety Authority;
• Manager, Human Resources;
• Training Manager;
• Maintenance Supervisor;
• Health Service Administrator;
• Manager, Quality Assurance;
• Business Manager;
• Food Service Manager;
• Departmental staff as directed by the Warden/Administrator; and
• Any facility employee who wishes to observe or make safety suggestions to the committee.
Employees must have prior approval from their supervisor to attend the meeting.

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Each department should also communicate safety topics specific to their department on a monthly basis.
Examples of specific department information may include:
• Security Department – Instruction given on the importance of following shake down procedures
while searching for contraband, exposure control, slips trips and falls, and safe driving.
• Maintenance Department – Reviewing manufacturer instructions on recently purchased equipment,
lock out tag out refresher training on new electrical supplies installed, and personal protective
equipment needed for welding and portable tool use.
• Administrative Department – Reviewing office equipment safety precautions, lifting, and storage
limitations.
• Health Services Department – Exposure control, oxygen storage requirements, and syringe usage.
Importance of updated Material Safety Data Sheets and patient lifting procedures are all important
topic of discussion.
The FSA is responsible for conducting random reviews of meeting minutes to ensure safety topics are
being addressed. All employees are responsible for taking appropriate measures to address general
safety hazards (e.g. cleaning up spills, putting out wet floor signs, etc.). In the event an employee is not
able or qualified to correct a safety hazard, the employee is responsible for ensuring the safety hazard is
reported. Reporting of safety hazards is not intended to take the place of completing a work order when
necessary.

l.

STUDENT INTERACTION

Virginia Code 22.1-296.1C does not apply to this proposed contract as CCA will not have direct contact
with students. However, CCA’s hiring policy, which includes a thorough background check and
criminal history check on each applicant, ensures compliance with the intent of the statute.

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Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

2.

PROJECT CHARACTERISTICS

a.

DESCRIPTION

CCA proposes to partner with the Commonwealth to determine the appropriate size, location and
services for this facility. This collaboration ensures that the new facility will meet the on-going needs of
the Department of Corrections (DOC) and allows the DOC to benefit from CCA’s innovation in facility
design. Our new facility design prototype has been under development since 2003 and can be seen in
our recently constructed Saguaro Correctional Center in Eloy, Arizona. The new campus prototype
reduces construction costs, reduces staffing costs, and maximizes housing unit size. The administration
building is outside the stun fence perimeter detection system. In addition to new design concepts, the
proposed facility will employ state-of-the art technology, including CCA’s new IMS2 inmate
management system, currently being deployed in CCA facilities across the country.
Other space functions are as follows:
• A full-size kitchen equipped with the latest appliances and systems available, including a walk-in
freezer, cooler, food warehouse and dry storage;
• Multi-purpose rooms within the housing units for counseling, leisure-time activities, programs, etc.;
• A medical area with space for medical and dental exams and patient rooms for those inmates
requiring treatment or isolation away from the general population;
• A centrally-located chapel and library area;
• Video visiting cubicles are provided within each housing unit;
• Covered outdoor recreation areas near the housing units for activities and exercise;
• A large intake/release area with adjacent personal property storage and uniform issue where inmates
arriving or leaving the facility are processed. An enclosed vehicle sally port is also proposed for
inmate reception and intake;
• An administrative building that includes space for public video visiting, CCA staff, conference
room, employee lounge, employee exercise room and locker rooms;
• Public lobby with adjacent toilet facilities;
• Centrally-located laundry and commissary facilities;
• A separate maintenance shop/warehouse building;
• Janitor, supply and storage closets located throughout the facility; and
• Separate, secure mechanical, electrical and security electronics rooms.
Specifically, CCA’s design will provide a physical plant that is in compliance with the following:
ACA Standards for Adult Correctional Institutions, latest edition;
Life Safety Codes, National Fire Protection Agency, current edition;
ADA Accessibility Guidelines for Buildings and Facilities (ADAAG); and
Applicable federal, state, and local laws, permits, approvals, ordinances and regulations.

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Lastly, construction costs are controlled by our ability to competitively leverage our system-wide buying
power and complete construction on an aggressive time frame – 15 to 24 months for a 1,500 bed
medium security prison. CCA offers a wealth of knowledge regarding design/build/manage projects and
would provide an experienced, time-tested partner for the Commonwealth of Virginia.

b.

WORK TO BE PERFORMED BY THE COMMONWEALTH

CCA will be responsible for the financing, designing, construction and operation of the proposed facility
and is not proposing any work to be done by the Commonwealth except for assistance in selection of a
preferred site.

c.

PERMITS

As indicated previously, CCA has experience in numerous construction projects. CCA will comply with
all statutory requirements and secure all required federal, state and local permits. After the site has been
identified CCA will work with the Commonwealth and the local community to obtain any necessary
permits.

d.

ANTICIPATED ADVERSE IMPACTS

CCA will work with the Commonwealth to select a site which reflects legislative priorities and
socioeconomic needs. However, the possibility of public opposition in the area near the potential
site of construction of the new facility cannot be disregarded. CCA is experienced in presenting the
benefits of new facility construction to the public and news media and will work diligently with
community leaders and any local resident or organization to address any possible public opposition
to this project.
We will initiate the Phase I Environmental Assessment upon site selection and it will determine
whether a Phase II study is warranted. To expedite the process, CCA is committed to commencing
further environmental reviews that may be required, boundary and topographic surveys, geotechnical
work, and other preliminary permitting as required by the Virginia Department of Transportation,
Department of Conservation and Recreation, and the U.S. Army Corp of Engineers.

e.

ANTICIPATED POSITIVE IMPACTS

Choosing CCA to design, build, finance and manage a new facility will provide the following benefits to
the Commonwealth and the local community:
• A significant positive economic impact can be expected through the creation of hundreds of jobs for
local residents and an annual payroll in the million dollar range. Further it is estimated that the
proposed facility would generate over a million dollars in state and local taxes and in other
expenditures annually.
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f.

No financing will be required of the Commonwealth or local community;
CCA’s experience in the construction and activation of new facilities will provide capacity for
the state corrections system in the shortest possible time; and
Partnering with CCA to manage the new facility will ensure the facility is managed by the most
experienced operator of private corrections facilities; and the DOC’s past partnership with CCA
in managing the Lawrenceville Correctional Center gives the Commonwealth the assurance that
the new facility will operate in accordance with the highest standards.

SCHEDULE

CCA would expect to complete the design of the facility within 4 to 6 months after reaching an
agreement with the Commonwealth with construction to take an additional 12 to 14 months.
Accordingly, the facility would be expected to be ready to begin accepting inmates in approximately 16
to 20 months after CCA receives approval to proceed.

g.

CONTINGENCY PLANS

CCA plans to meet the project schedule. In the unlikely event the project was delayed, we would be
willing to place our national CCA system as the Commonwealth’s disposal to assist in interim housing if
needed.

h.

ALLOCATION OF RISK

CCA has an extensive history of design/build projects for correctional facilities and has the resources
and experience to ensure timely completion. CCA can provide additional assurance to the
Commonwealth through its agreement with its Contractor by including certain financial requirements
such as the provision of a bond or the payment of penalties for failure to deliver substantial completion
within the time range required.

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j.

ASSUMPTIONS
As owner and operator of the facility, CCA would hold harmless and release the Commonwealth
from any suits, actions, claims, demands, or damages arising from the acts or omissions of CCA, its
officers, employees, subcontractors or agents and would indemnify the Commonwealth therefrom.
CCA often enters into cooperative agreements with local law enforcement agencies to share
resources during emergencies and would work together with law enforcement as appropriate.
During the Commonwealth's use of the facility for housing its inmates, the Commonwealth would
have access to the facility to observe operations and the correctional services being received.

PHASED OR PARTIAL OPENING

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Due Date: August 17, 2007, 2:00 p.m. EDT

CCA does not anticipate any phased or partial opening of the facility prior to full completion and
activation of the facility. CCA would coordinate with the DOC to develop a ramp-up schedule which
meets the needs of the Department. Generally, CCA would be prepared to receive approximately 50100 a week until the facility fully occupied.

k. & l.

OTHER ASSUMPTIONS AND CONTINGENCIES

CCA would propose appropriate assumptions and contingencies upon discussions with the
Commonwealth regarding particular needs with respect to this project.

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Commonwealth of Virginia, Department of Corrections
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Due Date: August 17, 2007, 2:00 p.m. EDT

3.

PROJECT FINANCING

a.

PRELIMINARY ESTIMATE

Based on the information available to CCA, we cannot estimate a daily inmate cost to the
Commonwealth at this time. The specific per diem will be established based upon factors including, but
not limited to, the cost of land for the project, final constructions costs and the Commonwealth’s
requirements relevant to inmate programming, sharing of medical expenses, transportation, etc.

b.

DEVELOPMENT, FINANCING AND OPERATION

CCA proposes to finance, build and manage the facility.
Commonwealth.

c.

No financing will be required from the

ASSUMPTIONS

The final per diem will be determined by mutual agreement between the Commonwealth and CCA
based upon the final specifications established by the Commonwealth.

d.

RISK FACTORS

As indicated above, CCA will provide all financing for the project. Accordingly there is no risk to the
Commonwealth or the local community in which the facility will be located.

e.

LOCAL, STATE AND FEDERAL RESOURCES

CCA does not anticipate requesting any local, state or federal resources other than assistance from the
Commonwealth in locating a mutually acceptable site and securing all required rights and permits for
construction on that site.

f.

REVENUE SOURCES

CCA would use a combination of cash on-hand, amounts under our line-of-credit or our access to the
debt and equity capital markets to fund the design and construction of the proposed facility.

g.

TAX-EXEMPT FINANCING

CCA is not a tax-exempt entity and does not qualify, nor need, tax-exempt financing for this project.
CCA’s combination of cash on-hand and amounts under our line-of-credit, and access to the debt and
equity capital markets, puts us head and shoulders above our competitors with regard to fiscal
management.

CORRECTIONS CORPORATION OF AMERICA

74

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

4.

PROJECT BENEFIT AND COMPATIBILITY

a.

BENEFITS

Safety and Recidivism
The proposed facility can be constructed in a timely manner which, once completed, will have an
immediate impact on the available prison capacity at the Commonwealth’s disposal. The facility
will benefit all the residents of the local community who can rest assured that the new facility is
secure and safe. The families of those incarcerated will also be reassured knowing that their loved
ones are being housed in a modern facility operated by the industry leader in private corrections. In
addition to the services described in this proposal, CCA could potentially offer programs designed to
reduce recidivism.
Cost and Risk Savings
The Commonwealth and local community will benefit from the ability of CCA to deliver the capital
aspects of this project; the start-up and delivery of future services; as well as the substantial
economic impact. The project is expected to save significant tax dollars on the capital construction
plus savings realized in the day-to-day operation and maintenance of the facility. One of the most
important cost savings benefits to the Commonwealth and the local community will be the shifting
of risk to CCA through indemnification.
Public Perception
The Mayor, Council and area members of the Virginia General Assembly will benefit from the
public’s support of the project. A commitment to this proposal by the Commonwealth will ensure
that the public understands their elected officials are committed to the protection of local citizens
and the safety and security of the facility.
Team Coordination
The local community will benefit from the tremendous amount of experience that CCA will bring to
this project. CCA has a proven track record of delivering projects on time and on budget and is
dedicated to maintaining a high level of customer service. Promotion of teamwork will be a priority
with special attention given to coordinating all actions with the Sheriff, elected officials, DOC,
affected agencies and interested area citizens groups.

b.

ANTICIPATED SUPPORT OR OPPOSITION

Public Support
We are confident that our project will ultimately be supported by the local community in which the
facility will be located. Our focus is on the safety of the inmates, staff and local residents. CCA is a
good corporate partner and will stimulate the local economy through the creation of jobs (both
construction and correctional) and tax payments.

CORRECTIONS CORPORATION OF AMERICA

75

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

Public Opposition
Initial public opposition from a small number of local residents may be expected in the area
surrounding the proposed site for the facility. CCA has significant experience in the construction and
activation of new facilities and will work diligently to allay any fears of local residents.

c.

INVOLVING AND INFORMING THE GENERAL PUBLIC, BUSINESS COMMUNITY, AND
GOVERNMENTAL AGENCIES

CCA will work with the local community throughout our discussions with the DOC to continually
update and expand our strategic communications and education plan. Targeted audiences include the
general public, business community and government agencies.
General Public
Community support and involvement in our project is of great importance. Our strategic
communication and education program will present the project with full disclosure and truthfulness.
The incarceration of citizens is one of the most serious, important and complex responsibilities of
government. As the founder of the private corrections industry and the largest private prison and jail
facility manager in the United States we understand the responsibility of providing for the welfare of
those citizens entrusted to our care; as well as our responsibility to protect the communities in which
our facilities are located. Because of CCA’s willingness to aggressively seek out and meet with a
wide range of constituents and groups and then speak openly about our many experiences we believe
we will gain the confidence, trust and support of the citizenry.
Our strategic communication and education plan would include the following elements developed in
cooperation with local officials:
• news releases as necessary;
• creation of a general talking facts sheet;
• meetings with members of the press and editorial boards;
• mailings; and
• community relations meetings with the general public.
Business Community and Governmental Agencies
We are committed to gaining the full support of the business community for our proposal by
scheduling meetings with area business leaders, major company boards, the Chamber of Commerce
and many others business organizations. We will inform them of our plans and encourage them to
partner with us based on the merits of our project; our level of experience; and their own self-interest
in a safer, more cost effective facility. Additionally, we recognize that direct and continuing
communications with local and Department officials will be especially critical to our project.

CORRECTIONS CORPORATION OF AMERICA

76

Commonwealth of Virginia, Department of Corrections
PPEA Unsolicited Proposal
Due Date: August 17, 2007, 2:00 p.m. EDT

d. & e.

COMPATIBILITY WITH LOCAL AND OTHER PLANS

The provision of basic services to the public, including a modern, secure medium security
correctional facility operated in accordance with standards developed by the American Correctional
Association, is critical to attracting and maintaining competitive industries and businesses in the
local community. CCA is not only the founder of the private corrections industry but is also the
largest provider of detention services to local, state and government correctional agencies. CCA has
extensive experience in the design, construction and management of correctional facilities and has a
proven track record of working with client agencies.
CCA is committed to developing plans which are in concert with the local community’s
comprehensive plans, local infrastructure development plans, local and state transportation plans,
and the local capital improvement program budget and any other government spending plans.

f.

PARTICIPATION BY MINORITY BUSINESS ENTERPRISES

As previously discussed in Section 1, CCA is committed to partnering with Minority Business
Enterprises for goods and services related to the construction and operation of the new facility. In fact,
our continuing efforts to expand our ability to diversify our purchasing power have resulted in CCA’s
new Diversity Business Inclusion Program. This enhanced diversity program adds an increased value to
our company by raising the standards of how we do business with MBE's as a corporate entity. Our
continued efforts to embrace diversity, both internally and externally, will serve as an asset to the
business community within the individual states in which we contract as well as broaden our national
company business culture.

CORRECTIONS CORPORATION OF AMERICA

77

ATTACHMENT
1

ATTACHMENT
2

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-16109
CORRECTIONS CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
MARYLAND
(State or other jurisdiction of
incorporation or organization)

62-1763875
(I.R.S. Employer
Identification No.)

10 BURTON HILLS BLVD., NASHVILLE, TENNESSEE 37215
(Address and zip code of principal executive office)
REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 263-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class

Name of each exchange on which registered

Common Stock, $.01 par value per share

New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [ ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [X]

Accelerated filer [ ]

Non- accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.). Yes [ ] No [X]
The aggregate market value of the shares of the registrant’s Common Stock held by non-affiliates was approximately $2,055,550,605 as of June 30,
2006, based on the closing price of such shares on the New York Stock Exchange on that day. The number of shares of the Registrant’s Common
Stock outstanding on February 23, 2007 was 61,372,476.

DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant’s definitive Proxy Statement for the 2007 Annual Meeting of Stockholders currently scheduled to be held on May 10,
2007, are incorporated by reference into Part III of this Annual Report on Form 10-K.

CORRECTIONS CORPORATION OF AMERICA
FORM 10-K
For the fiscal year ended December 31, 2006
TABLE OF CONTENTS
Page

Item No.
PART I
1.

1A.
1B.
2.
3.
4.

Business
Overview..................................................................................................................................................... 5
Operations ................................................................................................................................................... 5
Facility Portfolio ......................................................................................................................................... 9
Business Development .............................................................................................................................. 15
Competitive Strengths............................................................................................................................... 16
Business Strategy ...................................................................................................................................... 18
The Corrections and Detention Industry ................................................................................................... 19
Government Regulation ............................................................................................................................ 20
Insurance ................................................................................................................................................... 21
Employees................................................................................................................................................. 22
Competition............................................................................................................................................... 22
Risk Factors...................................................................................................................................................... 22
Unresolved Staff Comments ............................................................................................................................ 31
Properties.......................................................................................................................................................... 31
Legal Proceedings ............................................................................................................................................ 32
Submission of Matters to a Vote of Security Holders ...................................................................................... 32
PART II

5.

6.
7.

7A.
8.
9.
9A.
9B.

Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities ...................................................................................................... 32
Market Price of and Distributions on Capital Stock........................................................................... 32
Dividend Policy ................................................................................................................................. 33
Selected Financial Data .................................................................................................................................... 33
Management’s Discussion and Analysis of Financial Condition and Results of Operations ........................... 36
Overview............................................................................................................................................ 36
Critical Accounting Policies .............................................................................................................. 38
Results of Operations ......................................................................................................................... 39
Liquidity and Capital Resources ....................................................................................................... 58
Recent Accounting Pronouncements ................................................................................................. 63
Inflation.............................................................................................................................................. 63
Quantitative and Qualitative Disclosures about Market Risk........................................................................... 64
Financial Statements and Supplementary Data ................................................................................................ 64
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................... 64
Controls and Procedures................................................................................................................................... 65
Other Information ............................................................................................................................................ 69
PART III

10.
11.
12.
13.
14.

Directors, Executive Officers and Corporate Governance ............................................................................... 69
Executive Compensation.................................................................................................................................. 69
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters .............................................................................................................. 69
Certain Relationships and Related Transactions and Director Independence .................................................. 70
Principal Accountant Fees and Services........................................................................................................... 70
PART IV

15.

Exhibits and Financial Statement Schedules .................................................................................................... 71
SIGNATURES

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION
This annual report on Form 10-K contains statements that are forward-looking statements as defined
within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements give our current expectations of forecasts of future events. All statements other than
statements of current or historical fact contained in this annual report, including statements regarding
our future financial position, business strategy, budgets, projected costs, and plans and objectives of
management for future operations, are forward-looking statements. The words “anticipate,” “believe,”
“continue,” “estimate,” “expect,” “intend,” “may,” “plan,” “projects,” “will,” and similar expressions,
as they relate to us, are intended to identify forward-looking statements. These statements are based on
our current plans and actual future activities, and our results of operations may be materially different
from those set forth in the forward-looking statements. In particular these include, among other things,
statements relating to:
•

fluctuations in operating results because of changes in occupancy levels, competition, increases
in cost of operations, fluctuations in interest rates and risks of operations;

•

changes in the privatization of the corrections and detention industry and the public acceptance
of our services;

•

our ability to obtain and maintain correctional facility management contracts, including as the
result of sufficient governmental appropriations, inmate disturbances, and the timing of the
opening of new facilities and the commencement of new management contracts as well as our
ability to utilize current available beds and new capacity as development and expansion
projects are completed;

•

increases in costs to develop or expand correctional facilities that exceed original estimates, or
the inability to complete such projects on schedule as a result of various factors, many of which
are beyond our control, such as weather, labor conditions, and material shortages, resulting in
increased construction costs;

•

changes in government policy and in legislation and regulation of the corrections and detention
industry that adversely affect our business;

•

the availability of debt and equity financing on terms that are favorable to us; and

•

general economic and market conditions.

Any or all of our forward-looking statements in this annual report may turn out to be inaccurate. We
have based these forward-looking statements largely on our current expectations and projections about
future events and financial trends that we believe may affect our financial condition, results of
operations, business strategy and financial needs. They can be affected by inaccurate assumptions we
might make or by known or unknown risks, uncertainties and assumptions, including the risks,
uncertainties and assumptions described in “Risk Factors.”
In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances
discussed in this annual report may not occur and actual results could differ materially from those
anticipated or implied in the forward-looking statements. When you consider these forward-looking
statements, you should keep in mind the risk factors and other cautionary statements in this annual
report, including in “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and “Business.”
3

Our forward-looking statements speak only as of the date made. We undertake no obligation to
publicly update or revise forward-looking statements, whether as a result of new information, future
events or otherwise. All subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the cautionary statements
contained in this annual report.

4

PART I.
ITEM 1.

BUSINESS.

Overview
We are the nation’s largest owner and operator of privatized correctional and detention facilities and
one of the largest prison operators in the United States behind only the federal government and three
states. We currently operate 64 correctional, detention and juvenile facilities, including 40 facilities
that we own, with a total design capacity of approximately 72,000 beds in 19 states and the District of
Columbia. Further, we are constructing an additional 1,896-bed correctional facility in Eloy, Arizona
that is expected to be completed mid-2007. We also own three additional correctional facilities that we
lease to third-party operators.
We specialize in owning, operating, and managing prisons and other correctional facilities and
providing inmate residential and prisoner transportation services for governmental agencies. In
addition to providing the fundamental residential services relating to inmates, our facilities offer a
variety of rehabilitation and educational programs, including basic education, religious services, life
skills and employment training and substance abuse treatment. These services are intended to help
reduce recidivism and to prepare inmates for their successful reentry into society upon their release.
We also provide health care (including medical, dental, and psychiatric services), food services, and
work and recreational programs.
Our website address is www.correctionscorp.com. We make our Form 10-K, Form 10-Q, Form 8-K,
and Section 16 reports available on our website, free of charge, as soon as reasonably practicable after
these reports are filed with or furnished to the Securities and Exchange Commission (the “SEC”).
Information contained on our website is not part of this report.
Operations
Management and Operation of Correctional and Detention Facilities
Our customers consist of federal, state, and local correctional and detention authorities. For the years
ended December 31, 2006, 2005, and 2004, federal correctional and detention authorities represented
40%, 39%, and 38%, respectively, of our total revenue. Federal correctional and detention authorities
primarily consist of the Federal Bureau of Prisons, or the BOP, the United States Marshals Service, or
the USMS, and the U.S. Immigration and Customs Enforcement, or ICE.
Our management services contracts typically have terms of one to five years and contain multiple
renewal options. Most of our facility contracts also contain clauses that allow the government agency
to terminate the contract at any time without cause, and our contracts are generally subject to annual or
bi-annual legislative appropriation of funds.
We are compensated for operating and managing facilities at an inmate per diem rate based upon actual
or minimum guaranteed occupancy levels. Occupancy rates for a particular facility are typically low
when first opened or when expansions are first available. However, beyond the start-up period, which
typically ranges from 90 to 180 days, the occupancy rate tends to stabilize. For the years 2006, 2005,
and 2004, the average compensated occupancy of our facilities, based on rated capacity, was 94.9%,
91.4%, and 94.9%, respectively, for all of the facilities we owned or managed, exclusive of facilities
where operations have been discontinued. From a capacity perspective, as of December 31, 2006, we
had four facilities, our Stewart Detention Center, North Fork Correctional Facility, Florence
Correctional Center, and our newly constructed Red Rock Correctional Center, that provide us with
approximately 1,900 available beds. We believe we have been successful in substantially filling, or
5

entering into management contracts that are expected to substantially fill, our remaining inventory of
available beds, as set forth below.
In June 2006, we entered into a new agreement with Stewart County, Georgia to house detainees from
ICE under an inter-governmental service agreement between Stewart County and ICE. The agreement
enables ICE to accommodate detainees at our Stewart Detention Center. The agreement with Stewart
County is effective through December 31, 2011, and provides for an indefinite number of renewal
options. We began receiving ICE detainees at the Stewart facility in October 2006 and expect that ICE
detainees will substantially occupy the Stewart facility sometime during 2007.
During February 2005, we commenced construction of the Red Rock Correctional Center, a new
1,596-bed correctional facility located in Eloy, Arizona. The facility was completed during July 2006.
We relocated all of the Alaskan inmates from our Florence Correctional Center into this new facility
during the third quarter of 2006. The beds made available at the Florence facility are expected to be
used to satisfy anticipated state and federal demand for detention beds in the Arizona area, including
inmates from the state of California. As of December 31, 2006, the Red Rock facility housed 993
Alaskan inmates and 222 Hawaiian inmates.
In October 2006, we announced that as a result of an emergency proclamation declared by the
Governor of California, we entered into a new agreement with the State of California Department of
Corrections and Rehabilitation, or CDCR, to house up to approximately 1,000 California male inmates
at several of our facilities. The terms of the agreement include an initial three-year term which may be
extended for successive two-year terms by mutual agreement. We began receiving inmates on
November 3, 2006 at our West Tennessee Detention Facility, and as of December 31, 2006 we housed
230 CDCR inmates who volunteered to be transferred to our West Tennessee and Florence facilities.
On February 2, 2007, the Governor of California ordered the CDCR to begin the involuntary transfer
of prisoners to correctional facilities outside of California in a further effort to relieve prison
overcrowding. As a result of the Governor’s request, we agreed to amend the contract with the CDCR
to potentially provide up to 4,670 additional beds for a total of approximately 5,670 beds. The
amendment includes the potential utilization of additional beds at our Florence facility, the potential
utilization of beds in our Tallahatchie and Diamondback facilities that will be vacated when the state of
Hawaii transfers inmates to our new 1,896-bed Saguaro Correctional Facility (which is expected to be
completed mid-2007), as well as expansion beds at the North Fork and Tallahatchie facilities that we
expect to complete during the fourth quarter of 2007, as further described hereafter.
Lawsuits have been filed against California officials by employee unions, advocacy groups and others
seeking to halt the out-of-state inmate transfers. On February 20, 2007, a California trial court, the
Superior Court of California, County of Sacramento, ruled that the Governor of California acted in
excess of his authority in issuing the emergency proclamation and that the contracts entered into by the
CDCR to implement out of state transfers violated civil service principles contained in the State’s
constitution. The enforcement of this ruling is stayed for ten days following entry of judgment and we
expect that there will be no change in the status of inmates already transferred to our facilities while the
stay of enforcement is in place. We expect that the Governor of California will appeal this ruling and
seek an extension of the stay of enforcement pending the results of the appeal. However, we can
provide no assurance that the ruling will be appealed or that an extension of the stay will be granted,
and we cannot predict the ultimate outcome of the appeal should it occur. Further, we can provide no
assurances as to whether additional lawsuits will arise, how the California courts will ultimately rule on
such lawsuits, the timing of the transfer of inmates, the total number of inmates that will ultimately be
received or whether court rulings could require the return of inmates to California.
During December 2006, we entered into an agreement with Bent County, Colorado to house Colorado
male inmates under an inter-governmental service agreement between the County and State of
6

Colorado Department of Corrections. Under the agreement we may house up to 720 Colorado inmates,
subject to bed availability, at our North Fork Correctional Facility. The term of the contract includes an
initial term which commenced December 28, 2006 and runs through June 30, 2007, and provides for
mutually agreed extensions for a total contract term of up to five years. As of January 31, 2007, we had
received approximately 480 Colorado inmates at the North Fork facility. If adequate bed space is
available at the facility, Colorado may transfer additional inmates to the facility in order to meet any
growth in Colorado inmate populations.
Enhanced Focus on Delivering New Bed Capacity
As a result of increasing demand from both our federal and state customers and the utilization of a
significant portion of our existing available beds, we have intensified our efforts to deliver new
capacity to address the lack of available beds that our existing and potential customers are
experiencing. The following table sets forth current expansion and development projects at facilities
we own:

Facilities Under Development (1)
Crossroads Correctional Center,
Montana

Beds

Total Bed
Capacity
Following
Expansion

Estimated
Completion
Date

Potential
Customer(s)

96

664

Q1 2007

State of Montana
and USMS

1,896

1,896

Mid-2007

State of Hawaii

960

2,400

Q4 2007

Various States

Tallahatchie County Correctional
Facility, Mississippi

360

1,464

Q4 2007

Federal and /or
Various States

Eden Detention Center,
Texas

129

1,354

Q1 2008

BOP

Bent County Correctional Facility,
Colorado

720

1,420

Q2 2008

Colorado

Kit Carson Correctional Center,
Colorado

720

1,488

Q2 2008

Colorado

Saguaro Correctional Facility,
Arizona
North Fork Correctional Facility,
Oklahoma

(1)

These development projects are described in further detail in “Facilities Under Construction or
Development” hereafter.

Certain of our customers have also engaged us to expand certain facilities they own, that we manage
for them. During the first quarter of 2007, we substantially completed an expansion by 360-beds of the
400-bed Citrus County Detention Facility, owned by Citrus County and located in Lecanto, Florida.
We funded the expansion with cash on hand. If the County terminates our management contract at any
time prior to twenty years following completion of construction, the County would be required to pay
us an amount equal to the construction cost less an allowance for amortization over a twenty-year
period. In addition, the Florida Department of Management Services awarded to us contracts to
design, construct, and operate a 235-bed expansion of their Bay Correctional Facility in Panama City,
Florida and a 384-bed expansion of their Gadsden Correctional Institution in Quincy, Florida. Both of
these expansions will be funded by the state of Florida.
In addition to the above listed projects, we are actively pursuing a number of additional sites for new
prison development. We believe it is feasible to begin development of an additional 4,000 to 6,000 new
prison beds during the course of the next year.
7

Operating Procedures
Pursuant to the terms of our management contracts, we are responsible for the overall operations of our
facilities, including staff recruitment, general administration of the facilities, facility maintenance,
security, and supervision of the offenders. We are required by our contracts to maintain certain levels
of insurance coverage for general liability, workers’ compensation, vehicle liability, and property loss
or damage. We are also required to indemnify the contracting agencies for claims and costs arising out
of our operations and, in certain cases, to maintain performance bonds and other collateral
requirements. Approximately 85% of the facilities we operated at December 31, 2006 were accredited
by the American Correctional Association Commission on Accreditation. The American Correctional
Association, or the ACA, is an independent organization comprised of corrections professionals that
establish accreditation standards for correctional and detention institutions.
We provide a variety of rehabilitative and educational programs at our facilities. Inmates at most
facilities we manage may receive basic education through academic programs designed to improve
literacy levels and the opportunity to acquire GED certificates. We also offer vocational training to
inmates who lack marketable job skills. Our craft vocational training programs are accredited by the
National Center for Construction Education and Research. This organization provides training
curriculum and establishes industry standards for over 4,000 construction and trade organizations in the
United States and several foreign countries. In addition, we offer life skills transition planning
programs that provide inmates with job search skills, health education, financial responsibility training,
parenting, and other skills associated with becoming productive citizens. At many of our facilities, we
also offer counseling, education and/or treatment to inmates with alcohol and drug abuse problems
through our “Strategies for Change” and Residential Drug Addictions Treatment Program, or RDAP.
Equally significant, we offer cognitive behavioral programs aimed at changing the anti-social attitudes
and behaviors of offenders, and faith-based and religious programs that offer all offenders the
opportunity to practice their spiritual beliefs. These programs incorporate the use of thousands of
volunteers, along with our staff, that assist in providing guidance, direction, and post incarceration
services to offenders. We believe these programs help reduce recidivism.
We operate our facilities in accordance with both company and facility-specific policies and
procedures. The policies and procedures reflect the high standards generated by a number of sources,
including the ACA, the Joint Commission on Accreditation of Healthcare Organizations, the National
Commission on Correctional Healthcare, the Occupational Safety and Health Administration, federal,
state, and local government guidelines, established correctional procedures, and company-wide
policies and procedures that may exceed these guidelines. Outside agency standards, such as those
established by the ACA, provide us with the industry’s most widely accepted operational guidelines.
Our facilities not only operate under these established standards (we have sought and received
accreditation for 55 of the facilities we managed as of December 31, 2006) but are consistently
challenged by management to exceed these standards. This challenge is presented, in large part,
through an extensive, comprehensive Quality Assurance Program. We intend to apply for ACA
accreditation for all of our eligible facilities that are not currently accredited where it is economically
feasible to complete the 18-24 month accreditation process.
Our Quality Assurance Department independently operates under the auspices of, and reports directly
to, the Company’s Office of General Counsel. The Quality Assurance Department consists of two
major sections. The first is the Research and Data analysis Section which collects and analyzes
performance metrics across multiple databases. Through rigorous reporting and analyses of
comprehensive, comparative statistics across disciplines, divisions, business units and the Company as
a whole, the Research and Data Analysis Section provides timely, independently generated
performance and trend data to senior management. The second major section within the Quality
Assurance Department is the Operational Audit Section. This section consists of two full time audit
teams comprised of subject matter experts from all the major discipline areas within institutional
8

operations. These two audit teams conduct rigorous, on site annual evaluations of each facility within
the Company with only minimal advance notice. Highly specialized, discipline specific audit tools,
containing over 800 audited items are employed in this detailed, comprehensive process. The results
of these on site evaluations are used to discern areas of strength and areas in need of management
attention. The audit findings also comprise a major part of our continuous operational risk assessment
and management process. The Company has devoted significant resources to the Quality Assurance
Department, enabling us to monitor compliance with contractual requirements, outside agency and
accrediting organization standards. Quality Assurance closely monitors all efforts by our facilities to
deliver the exceptional quality of services and operations expected.
Prisoner Transportation Services
We provide transportation services to governmental agencies through our wholly-owned subsidiary,
TransCor America, LLC, or TransCor. TransCor is the largest third-party prisoner extradition
company in the United States. Through a “hub-and-spoke” network, TransCor provides nationwide
coverage to over 800 federal, state, and local agencies across the country. During the years ended
December 31, 2006, 2005, and 2004, TransCor generated total consolidated revenue of $15.1 million,
$14.6 million, and $19.1 million, respectively, comprising 1.1%, 1.2%, and 1.7% of our total
consolidated revenue in each respective year. We also provide transportation services for our existing
customers utilizing TransCor’s services. We believe TransCor provides a complementary service to
our core business that enables us to quickly respond to our customers’ transportation needs.
Facility Portfolio
General
Our facilities can generally be classified according to the level(s) of security at such facility. Minimum
security facilities have open housing within an appropriately designed and patrolled institutional
perimeter. Medium security facilities have either cells, rooms or dormitories, a secure perimeter, and
some form of external patrol. Maximum security facilities have cells, a secure perimeter, and external
patrol. Multi-security facilities have various areas encompassing minimum, medium or maximum
security. Non-secure facilities are facilities having open housing that inhibit movement by their
design. Secure facilities are facilities having cells, rooms, or dormitories, a secure perimeter, and some
form of external patrol.
Our facilities can also be classified according to their primary function. The primary functional
categories are:
• Correctional Facilities. Correctional facilities house and provide contractually agreed upon
programs and services to sentenced adult prisoners, typically prisoners on whom a sentence in
excess of one year has been imposed.
• Detention Facilities. Detention facilities house and provide contractually agreed upon programs
and services to (i) prisoners being detained by ICE, (ii) prisoners who are awaiting trial who
have been charged with violations of federal criminal law (and are therefore in the custody of the
USMS) or state criminal law, and (iii) prisoners who have been convicted of crimes and on
whom a sentence of one year or less has been imposed.
• Juvenile Facilities. Juvenile facilities house and provide contractually agreed upon programs
and services to juveniles, typically defined by applicable federal or state law as being persons
below the age of 18, who have been determined to be delinquents by a juvenile court and who
have been committed for an indeterminate period of time but who typically remain confined for
9

a period of six months or less. At December 31, 2006, we owned only one such juvenile facility.
The operation of juvenile facilities is not considered part of our strategic focus.
• Leased Facilities. Leased facilities are facilities that are within one of the above categories and
that we own but do not manage. These facilities are leased to third-party operators.
Facilities and Facility Management Contracts
We own 43 correctional, detention, and juvenile facilities in 14 states and the District of Columbia,
three of which we lease to third-party operators. We also own two corporate office buildings.
Additionally, we currently manage 24 correctional and detention facilities owned by government
agencies. The following table sets forth all of the facilities which we currently (i) own and manage, (ii)
own, but are leased to another operator, and (iii) manage but are owned by a government authority.
The table includes certain information regarding each facility, including the term of the primary
management contract related to such facility, or, in the case of facilities we own but lease to a thirdparty operator, the term of such lease. We have a number of management contracts and leases that
expire in 2007 (or have expired) with no remaining renewal options. We continue to operate, and,
unless otherwise noted, expect to continue to manage or lease these facilities, although we can provide
no assurance that we will maintain our contracts to manage or lease these facilities or when new
contracts will be renewed.
Primary
Customer

Design
Capacity (A)

Security
Level

Facility
Type (B)

Term

Remaining
Renewal
Options (C)

USMS

2,304

Multi

Detention

May 2007

(1) 1 year

ICE

1,500

Medium

Detention

Indefinite

-

Florence Correctional Center
Florence, Arizona

USMS

1,824

Multi

Correctional

May 2007

(1) 1 year

Red Rock Correctional Center
Eloy, Arizona

State of Alaska

1,596

Medium

Correctional

June 2008

(6) 1 year

California City Correctional Center
California City, California

BOP

2,304

Medium

Correctional

September
2007

(3) 1 year

San Diego Correctional Facility (D)
San Diego, California

ICE

1,016

Minimum/
Medium

Detention

June 2008

(5) 3 years

Bent County Correctional Facility
Las Animas, Colorado

State of
Colorado

700

Medium

Correctional

June 2007

(1) 1 year

Crowley County Correctional Facility
Olney Springs, Colorado

State of
Colorado

1,794

Medium

Correctional

June 2007

(1) 1 year

Huerfano County Correctional Center (E)
Walsenburg, Colorado

State of
Colorado

752

Medium

Correctional

June 2007

(1) 1 year

Kit Carson Correctional Center
Burlington, Colorado

State of
Colorado

768

Medium

Correctional

June 2007

(1) 1 year

Coffee Correctional Facility (F)
Nicholls, Georgia

State of
Georgia

1,524

Medium

Correctional

June 2007

(22) 1 year

BOP

1,524

Medium

Correctional

November
2007

(5) 1 year

Facility Name
Owned and Managed Facilities:
Central Arizona Detention Center
Florence, Arizona
Eloy Detention Center
Eloy, Arizona

McRae Correctional Facility
McRae, Georgia

10

Primary
Customer
ICE

Design
Capacity (A)
1,524

Security
Level
Medium

Facility
Type (B)
Correctional

Term
Indefinite

Remaining
Renewal
Options (C)
-

Wheeler Correctional Facility (F)
Alamo, Georgia

State of
Georgia

1,524

Medium

Correctional

June 2007

(22) 1 year

Leavenworth Detention Center
Leavenworth, Kansas

USMS

767

Maximum

Detention

December
2011

(3) 5 year

State of
Vermont

816

Minimum/
Medium

Correctional

June 2007

-

Marion Adjustment Center
St. Mary, Kentucky

Commonwealth
of Kentucky

826

Minimum

Correctional

December
2007

(3) 2 year

Otter Creek Correctional Center (G)
Wheelwright, Kentucky

Commonwealth
of Kentucky

656

Minimum/
Medium

Correctional

July 2007

(4) 2 year

State of
Minnesota

1,600

Medium

Correctional

June 2007

-

Tallahatchie County Correctional
Facility (H)
Tutwiler, Mississippi

State of
Hawaii

1,104

Medium

Correctional

June 2007

(2) 2 year

Crossroads Correctional Center (I)
Shelby, Montana

State of
Montana

664

Multi

Correctional

August 2007

(6) 2 year

Cibola County Corrections Center
Milan, New Mexico

BOP

1,129

Medium

Correctional

September
2007

(3) 1 year

New Mexico Women’s Correctional
Facility
Grants, New Mexico

State of
New Mexico

596

Multi

Correctional

June 2009

-

Torrance County Detention Facility
Estancia, New Mexico

USMS

910

Multi

Detention

Indefinite

-

Northeast Ohio Correctional Center
Youngstown, Ohio

BOP

2,016

Medium

Correctional

May 2009

(3) 2 year

Cimarron Correctional Facility (J)
Cushing, Oklahoma

State of
Oklahoma

960

Medium

Correctional

September
2007

(2) 1 year

Davis Correctional Facility (J)
Holdenville, Oklahoma

State of
Oklahoma

960

Medium

Correctional

September
2007

(2) 1 year

State of
Arizona

2,160

Medium

Correctional

June 2007

-

State of
Wyoming

1,440

Medium

Correctional

June 2008

-

USMS

600

Multi

Detention

February
2009

-

Shelby County,
Tennessee

200

Secure

Juvenile

April 2015

-

State of
Tennessee

1,536

Medium

Correctional

September
2007

(1) 1 year

State of
Texas

200

Medium

Correctional

February
2007

(4) 1 year

Facility Name
Stewart Detention Center
Lumpkin, Georgia

Lee Adjustment Center
Beattyville, Kentucky

Prairie Correctional Facility
Appleton, Minnesota

Diamondback Correctional Facility
Watonga, Oklahoma
North Fork Correctional Facility
Sayre, Oklahoma
West Tennessee Detention Facility
Mason, Tennessee
Shelby Training Center (K)
Memphis, Tennessee
Whiteville Correctional Facility (L)
Whiteville, Tennessee
Bridgeport Pre-Parole Transfer Facility
Bridgeport, Texas

11

Primary
Customer

Design
Capacity (A)

Security
Level

Facility
Type (B)

Term

Remaining
Renewal
Options (C)

Eden Detention Center
Eden, Texas

BOP

1,225

Medium

Correctional

April 2011

(3) 2 year

Houston Processing Center
Houston, Texas

ICE

905

Medium

Detention

September
2007

(1) 1 year

Laredo Processing Center
Laredo, Texas

ICE

258

Minimum/
Medium

Detention

December
2009

(4) 1 year

Webb County Detention Center
Laredo, Texas

USMS

480

Medium

Detention

May 2007

-

Mineral Wells Pre-Parole Transfer
Facility
Mineral Wells, Texas

State of
Texas

2,103

Minimum

Correctional

February
2007

(4) 1 year

ICE

512

Non-secure

Detention

Indefinite

-

District of
Columbia

1,500

Medium

Detention

March 2017

-

Managed Only Facilities:
Bay Correctional Facility
Panama City, Florida

State of
Florida

750

Medium

Correctional

June 2007

-

Bay County Jail and Annex
Panama City, Florida

Bay County,
Florida

1,150

Multi

Detention

September
2012

(1) 6 year

Citrus County Detention Facility
Lecanto, Florida

Citrus County,
Florida

760

Multi

Detention

September
2015

(1) 5 year

Gadsden Correctional Institution
Quincy, Florida

State of
Florida

1,136

Minimum/
Medium

Correctional

June 2007

-

Hernando
County, Florida

730

Multi

Detention

October 2010

-

Lake City Correctional Facility
Lake City, Florida

State of
Florida

893

Secure

Correctional

June 2009

-

Idaho Correctional Center
Boise, Idaho

State of
Idaho

1,270

Minimum/
Medium

Correctional

June 2009

-

Marion County,
Indiana

1,030

Multi

Detention

December
2006

-

Winn Correctional Center
Winnfield, Louisiana

State of
Louisiana

1,538

Medium/
Maximum

Correctional

September
2008

-

Delta Correctional Facility
Greenwood, Mississippi

State of
Mississippi

1,172

Minimum/
Medium

Correctional

September
2007

-

Wilkinson County Correctional Facility
Woodville, Mississippi

State of
Mississippi

1,000

Medium

Correctional

September
2007

(2) 1 year

ICE

300

Minimum

Detention

September
2008

(5) 3 year

State of New
Mexico

192

Multi

Correctional

March 2010

-

Facility Name

T. Don Hutto Residential Center
Taylor, Texas
D.C. Correctional Treatment Facility (M)
Washington, D.C.

Hernando County Jail
Brooksville, Florida

Marion County Jail
Indianapolis, Indiana

Elizabeth Detention Center
Elizabeth, New Jersey
Camino Nuevo Correctional Center
Albuquerque, New Mexico

12

Primary
Customer

Design
Capacity (A)

Security
Level

Facility
Type (B)

Term

Remaining
Renewal
Options (C)

Silverdale Facilities
Chattanooga, Tennessee

Hamilton
County,
Tennessee

918

Multi

Detention

January 2008

Indefinite

South Central Correctional Center
Clifton, Tennessee

State of
Tennessee

1,676

Medium

Correctional

July 2007

-

Metro-Davidson County Detention
Facility
Nashville, Tennessee

Davidson
County,
Tennessee

1,092

Multi

Detention

July 2007

(1) 1 year

Hardeman County Correctional Facility
Whiteville, Tennessee

State of
Tennessee

2,016

Medium

Correctional

May 2009

(3) 3 year

B. M. Moore Correctional Center
Overton, Texas

State of
Texas

500

Minimum/
Medium

Correctional

January 2007

(2) 1 year

Bartlett State Jail
Bartlett, Texas

State of
Texas

1,001

Minimum/
Medium

Correctional

January 2007

(4) 1 year

Bradshaw State Jail
Henderson, Texas

State of
Texas

1,980

Minimum/
Medium

Correctional

January 2007

(4) 1 year

Dawson State Jail
Dallas, Texas

State of
Texas

2,216

Minimum/
Medium

Correctional

January 2007

(4) 1 year

Diboll Correctional Center
Diboll, Texas

State of
Texas

518

Minimum/
Medium

Correctional

January 2007

(2) 1 year

Lindsey State Jail
Jacksboro, Texas

State of
Texas

1,031

Minimum/
Medium

Correctional

January 2007

(4) 1 year

Willacy State Jail
Raymondville, Texas

State of
Texas

1,069

Minimum/
Medium

Correctional

January 2007

(4) 1 year

Leo Chesney Correctional Center
Live Oak, California

Cornell
Corrections

240

Minimum

Owned/Leased

September
2010

-

Queensgate Correctional Facility
Cincinnati, Ohio

Hamilton
County, Ohio

850

Medium

Owned/Leased

February
2007

-

Community
Education
Partners

-

Non-secure

Owned/Leased

June 2008

(3) 5 year

Facility Name

Leased Facilities:

Community Education Partners (N)
Houston, Texas

(A) Design capacity measures the number of beds, and accordingly, the number of inmates each facility is designed to
accommodate. Facilities housing detainees on a short term basis may exceed the original intended design capacity for
sentenced inmates due to the lower level of services required by detainees in custody for a brief period. From time to
time we may evaluate the design capacity of our facilities based on customers using the facilities, and the ability to
reconfigure space with minimal capital outlays. As a result, the design capacity of certain facilities may vary from the
design capacity previously presented. We believe design capacity is an appropriate measure for evaluating prison
operations, because the revenue generated by each facility is based on a per diem or monthly rate per inmate housed at the
facility paid by the corresponding contracting governmental entity.
(B) We manage numerous facilities that have more than a single function (e.g., housing both long-term sentenced adult
prisoners and pre-trial detainees). The primary functional categories into which facility types are identified were
determined by the relative size of prisoner populations in a particular facility on December 31, 2006. If, for example, a
1,000-bed facility housed 900 adult prisoners with sentences in excess of one year and 100 pre-trial detainees, the primary
functional category to which it would be assigned would be that of correctional facilities and not detention facilities. It
should be understood that the primary functional category to which multi-user facilities are assigned may change from
time to time.
(C) Remaining renewal options represents the number of renewal options, if applicable, and the term of each option renewal.

13

(D) The facility is subject to a ground lease with the County of San Diego whereby the initial lease term is 18 years from the
commencement of the contract, as defined. The County has the right to buy out all, or designated portions of, the
premises at various times prior to the expiration of the term at a price generally equal to the cost of the premises, or the
designated portion of the premises, less an allowance for the amortization over a 20-year period. Upon expiration of the
lease, ownership of the facility automatically reverts to the County of San Diego.
(E) The facility is subject to a purchase option held by Huerfano County which grants Huerfano County the right to purchase
the facility upon an early termination of the contract at a price generally equal to the cost of the facility plus 80% of the
percentage increase in the Consumer Price Index, cumulated annually.
(F) The facility is subject to a purchase option held by the Georgia Department of Corrections, or GDOC, which grants the
GDOC the right to purchase the facility for the lesser of the facility’s depreciated book value or fair market value at any
time during the term of the contract between us and the GDOC.
(G) The facility is subject to a deed of conveyance with the city of Wheelwright, Kentucky which included provisions that
would allow assumption of ownership by the city of Wheelwright under the following occurrences: (1) we cease to
operate the facility for more than two years, (2) our failure to maintain at least one employee for a period of sixty
consecutive days, or (3) a conversion to a maximum security facility based upon classification by the Kentucky
Corrections Cabinet.
(H) The facility is subject to a purchase option held by the Tallahatchie County Correctional Authority which grants
Tallahatchie County Correctional Authority the right to purchase the facility at any time during the contract at a price
generally equal to the cost of the premises less an allowance for amortization over a 20-year period. During October 2005,
we completed an amendment to extend the amortization period through 2035, which could be further extended to 2050 in
the event we expand the facility by at least 200 beds. We currently expect to expand the facility by 360 beds, due to be
completed during the fourth quarter of 2007, which will extend the amortization period through 2050.
(I) The state of Montana has an option to purchase the facility generally at any time during the term of the contract with us at
fair market value less the sum of a pre-determined portion of per diem payments made to us by the state of Montana.
(J) The facility is subject to a purchase option held by the Oklahoma Department of Corrections, or ODC, which grants the
ODC the right to purchase the facility at its fair market value at any time.
(K) Upon the conclusion of the thirty-year ground lease with Shelby County, Tennessee, the facility will become the property
of Shelby County. Prior to such time, if the County terminates the lease without cause, breaches the lease or the State
fails to fund the contract, we may purchase the property for $150,000. If we terminate the lease without cause, or breach
the contract, we will be required to purchase the property for its fair market value as agreed to by the County and us.
(L) The state of Tennessee has the option to purchase the facility in the event of our bankruptcy, or upon an operational
breach, as defined, at a price equal to the book value of the facility, as defined.
(M) The District of Columbia has the right to purchase the facility at any time during the term of the contract at a price
generally equal to the present value of the remaining lease payments for the premises. Upon expiration of the lease,
ownership of the facility automatically reverts to the District of Columbia.
(N) The alternative educational facility is currently configured to accommodate 900 at-risk juveniles and may be expanded to
accommodate a total of 1,400 at-risk juveniles.

Facilities Under Construction or Development
In order to maintain an adequate supply of available beds to meet anticipated demand, while offering
the state of Hawaii the opportunity to consolidate its inmates into fewer facilities, during the fourth
quarter of 2005 we commenced construction of the Saguaro Correctional Facility, a new 1,896-bed
correctional facility located adjacent to our recently completed Red Rock Correctional Center in Eloy,
Arizona. The Saguaro Correctional Facility is expected to be completed mid-2007 at an estimated cost
of approximately $103 million. We currently expect to consolidate inmates from the state of Hawaii
from several of our other facilities to this new facility. Although we can provide no assurance, we
currently expect that growing state and federal demand for beds will ultimately absorb the beds vacated
by the state of Hawaii. As of December 31, 2006, we housed 1,873 inmates from the state of Hawaii.
During September 2005, we announced that Citrus County renewed its contract for our continued
management of the Citrus County Detention Facility located in Lecanto, Florida. The contract has a
ten-year base term with one five-year renewal option. The terms of the new agreement include a 360bed expansion that we commenced during the fourth quarter of 2005. The expansion of the facility,
which is owned by the County, was substantially completed during the first quarter of 2007 at a cost of
approximately $18.5 million, which we funded with cash on hand. If the County terminates the
management contract at any time prior to twenty years following completion of construction, the
County would be required to pay us an amount equal to the construction cost less an allowance for the
amortization over a twenty-year period.

14

In July 2006 we were notified by the state of Colorado that the State had accepted our proposal to
expand our 700-bed Bent County Correctional Facility in Las Animas, Colorado by 720 beds to fulfill
part of a 2,250-bed request for proposal issued by the state of Colorado in December 2005. As a result
of the award, we have now entered into an Implementation Agreement with the state of Colorado for
the expansion of our Bent County Correctional Facility by 720 beds. In addition, during November
2006 we entered into another Implementation Agreement to also expand our 768-bed Kit Carson
Correctional Center in Burlington, Colorado by 720 beds.
We expect to commence construction on the expansion of the Bent and Kit Carson facilities during the
first half of 2007. Construction of the Bent and Kit Carson facilities is estimated to cost approximately
$88 million. Both expansions are anticipated to be completed during the second quarter of 2008.
Based on our expectation of demand from a number of existing state and federal customers, during
August 2006 we announced our intention to expand our 1,440-bed North Fork Correctional Facility by
960 beds, our 1,104-bed Tallahatchie County Correctional Facility by 360 beds, and our 568-bed
Crossroads Correctional Center by 96 beds. The estimated cost to complete these expansions is
approximately $81 million.
During January 2007, we announced that we received a contract award from the BOP to house up to
1,558 federal inmates at our Eden Detention Center in Eden, Texas. We currently house approximately
1,300 BOP inmates at the Eden facility, under an existing inter-governmental service agreement
between the BOP and the City of Eden. The contract requires a renovation of the Eden facility, which
will result in an additional 129 beds. Upon completion, the Eden facility will have a rated capacity of
1,354 beds. Renovation of the Eden facility is expected to be completed in the first quarter of 2008 at
an estimated cost of $20.0 million.
Business Development
We are currently the nation’s largest provider of outsourced correctional management services. We
believe we manage approximately 50% of all beds under contract with private operators of correctional
and detention facilities in the United States.
Under the direction of our business development department and our senior management and with the
aid, where appropriate, of certain independent consultants, we market our services to government
agencies responsible for federal, state, and local correctional facilities in the United States. Business
from our federal customers, including primarily the BOP, USMS, and ICE, continues to be a
significant component of our business accounting for 40%, 39%, and 38% of total revenue in 2006,
2005, and 2004, respectively. The BOP, USMS, and ICE were our only customers that accounted for
10% or more of our total revenue during these years. The BOP accounted for 14%, 16%, and 16% of
total revenue for the years ended 2006, 2005, and 2004, respectively. The USMS accounted for 15%
of total revenue for each of the years ended 2006, 2005, and 2004. ICE accounted for 11%, 8%, and
8% of total revenue for 2006, 2005, and 2004, respectively. Contracts at the federal level generally
offer more favorable contract terms. For example, certain federal contracts contain “take-or-pay”
clauses that guarantee us a certain amount of management revenue, regardless of occupancy levels.
We currently expect business from our federal customers to continue to result in increasing revenue,
based on our belief that the federal government’s enhanced focus on illegal immigration and initiatives
to secure the nation’s borders will result in increased demand for federal detention services.
In addition, business from our state customers, which constituted 48% of total revenue during 2006,
increased 11.4% from $579.2 million during 2005 to $645.1 million during 2006, as we have also
experienced an increase in demand from state customers. While we believe we have been successful in
expanding our relationships with existing customers, we have also begun to provide correctional
services to states that have not previously utilized the private sector for their correctional needs.
15

We believe that we can further develop our business by, among other things:
• Maintaining and expanding our existing customer relationships and continuing to fill
existing beds within our facilities, while maintaining an adequate inventory of available
beds through new facility construction and expansion opportunities that we believe provides
us with flexibility and a competitive advantage when bidding for new management
contracts;
• Enhancing the terms of our existing contracts; and
• Establishing relationships with new customers who have either previously not outsourced
their correctional management needs or have utilized other private enterprises.
We generally receive inquiries from or on behalf of government agencies that are considering
outsourcing the management of certain facilities or that have already decided to contract with private
enterprise. When we receive such an inquiry, we determine whether there is an existing need for our
services and whether the legal and political climate in which the inquiring party operates is conducive
to serious consideration of outsourcing. Based on the findings, an initial cost analysis is conducted to
further determine project feasibility.
We pursue our business opportunities through Request for Proposals, or RFPs, and Request for
Qualifications, or RFQs. RFPs and RFQs are issued by government agencies and are solicited for bid
by private enterprises.
Generally, government agencies responsible for correctional and detention services procure goods and
services through RFPs and RFQs. Most of our activities in the area of securing new business are in the
form of responding to RFPs. As part of our process of responding to RFPs, members of our
management team meet with the appropriate personnel from the agency making the request to best
determine the agency’s needs. If the project fits within our strategy, we submit a written response to
the RFP. A typical RFP requires bidders to provide detailed information, including, but not limited to,
the service to be provided by the bidder, its experience and qualifications, and the price at which the
bidder is willing to provide the services (which services may include the renovation, improvement or
expansion of an existing facility or the planning, design and construction of a new facility). Based on
the proposals received in response to an RFP, the agency will award a contract to the successful bidder.
In addition to issuing formal RFPs, local jurisdictions may issue an RFQ. In the RFQ process, the
requesting agency selects a firm believed to be most qualified to provide the requested services and
then negotiates the terms of the contract with that firm, which terms include the price at which its
services are to be provided.
Competitive Strengths
We believe that we benefit from the following competitive strengths:
The Largest and Most Recognized Private Prison Operator. Our recognition as the industry’s leading
private prison operator provides us with significant credibility with our current and prospective clients.
We manage approximately 50% of all privately managed prison beds in the United States. We
pioneered modern-day private prisons with a list of notable accomplishments, such as being the first
company to design, build, and operate a private prison and the first company to manage a private
maximum-security facility under a direct contract with the federal government. In addition to
providing us with extensive experience and institutional knowledge, our size also helps us deliver
value to our customers by providing purchasing power and allowing us to achieve certain economies of
scale.
16

Available Beds within Our Existing Facilities. As of December 31, 2006, we had two facilities, our
Stewart County Correctional Facility and North Fork Correctional Facility, which had significant
vacancies and provided us with approximately 1,150 beds. We completed construction of our 1,596bed Red Rock Correctional Center in July 2006 which as of December 31, 2006 resulted in
approximately 750 available beds, including approximately 375 beds at our Florence Correctional
Center, from which we relocated the state of Alaska inmates to the Red Rock Correctional Center, and
approximately 375 beds that remain vacant at the Red Rock facility. Further, there were approximately
1,100 additional available beds at six of our other facilities as of December 31, 2006. Substantially all
of these available beds are either under contract or are targeted for specific customers. As a result, we
believe that substantially all of these beds will be utilized in the near term.
Development and Expansion Opportunities. As a result of persistent demand from both our federal and
state customers, the utilization of a significant portion of our available beds, and the expectation of an
environment that continues to be constrained by a lack of available supply of prison beds, we have
intensified our efforts to deliver new bed capacity through development of new prison facilities and the
expansion of certain of our existing facilities.
During 2005 we commenced construction of the new 1,896-bed Saguaro Correctional Facility adjacent
to the Red Rock facility. This new facility is expected to be complete mid-2007. We are also actively
pursuing a number of additional sites for new prison development. We believe it is feasible to begin
development of an additional 4,000 to 6,000 new prison beds during the course of the next year.
During 2006 and early 2007, we also announced our intention to expand six of the facilities we own by
an aggregate of 2,985 beds as a result of increasing demand from our existing customers. We expect
these expansions to be complete at various times over the next 18 months. Our customers have also
engaged us to expand certain facilities they own that we manage for them. We are funding a 360-bed
expansion of one such facility, while another customer is funding the expansion of two of their
facilities aggregating 619 beds. We expect to manage these expansion beds upon completion in 2007.
Although we have identified potential customers for a substantial portion of these new beds, we can
provide no assurance that these beds will be utilized. Further, none of the customers that we expect to
fill the expansion beds has provided a guarantee of occupancy.
Diverse, High Quality Customer Base. We provide services under management contracts with federal,
state, and local agencies that generally have credit ratings of single-A or better. In addition, a majority
of our contracts have terms between one and five years which contribute to our relatively predictable
and stable revenue base.
Proven Senior Management Team. Our senior management team has applied their prior experience
and diverse industry expertise to significantly improve our operations, related financial results, and
capital structure. Under our senior management team’s leadership, we have created new business
opportunities with customers that have not previously utilized the private corrections sector, expanded
relationships with existing customers, including all three federal correctional and detention agencies,
and successfully completed numerous recapitalization and refinancing transactions, resulting in
increases in revenues, operating income, facility operating margins, and profitability.
Financial Flexibility. As of December 31, 2006, we had cash on hand of $29.1 million, investments of
$82.8 million, and $112.1 million available under our $150.0 million revolving credit facility. During
the year ended December 31, 2006, we generated $172.0 million in cash through operating activities,
and as of December 31, 2006, we had net working capital of $226.9 million. In addition, we have an
effective “shelf” registration statement under which we may issue an indeterminate amount of
17

securities from time to time when we determine that market conditions and the opportunity to utilize
the proceeds from the issuance of such securities are favorable.
As a result of the completion of numerous recapitalization and refinancing transactions over the past
several years, we have significantly reduced our exposure to variable rate debt, eliminated all of our
subordinated indebtedness, lowered our after tax interest obligations associated with our outstanding
debt, further increasing our cash flow, and extended our total weighted average debt maturities. Also
as a result of the completion of these capital transactions, covenants under our senior bank credit
facility were amended to provide greater flexibility for, among other matters, incurring unsecured
indebtedness, capital expenditures, and permitted acquisitions. With the most recent pay-off of our
senior bank credit facility in January 2006 and the completion of our revolving credit facility in
February 2006, we removed the requirement to secure the senior bank credit facility with liens on our
real estate assets and, instead, collateralized the facility primarily with security interests in our accounts
receivable and deposit accounts. We also expanded our borrowing capacity with the revolving credit
facility. At December 31, 2006, our total weighted average stated interest rate was 6.9% and our total
weighted average debt maturity was 5.5 years. As an indication of the improvement of our operational
performance and financial flexibility, Standard & Poor’s Ratings Services has raised our corporate
credit rating from “B” at December 31, 2000 to “BB-” currently (an improvement by two ratings
levels), and our senior unsecured debt rating from “CCC+” to “BB-” (an improvement by four ratings
levels). Moody’s Investors Service has upgraded our senior unsecured debt rating from “Caa1” at
December 31, 2000 to “Ba2” currently (an improvement by five ratings levels).
Business Strategy
Our primary business strategy is to provide quality corrections services, offer a compelling value, and
increase occupancy and revenue, while maintaining our position as the leading owner, operator, and
manager of privatized correctional and detention facilities. We will also consider opportunities for
growth, including potential acquisitions of businesses within our line of business and those that provide
complementary services, provided we believe such opportunities will broaden our market and/or
increase the services we can provide to our customers.
Own and Operate High Quality Correctional and Detention Facilities. We believe that our customers
choose an outsourced correctional service provider based primarily on the quality services provided.
Approximately 85% of the facilities we operated as of December 31, 2006 are accredited by the ACA,
an independent organization of corrections industry professionals that establishes standards by which a
correctional facility may gain accreditation. We believe that this percentage compares favorably to the
percentage of government-operated adult prisons that are accredited by the ACA. We have experienced
wardens managing our facilities, with an average of over 23 years of corrections experience and an
average tenure of over ten years with us.
Offer Compelling Value. We believe that our customers also seek a compelling value and service
offering when selecting an outsourced correctional services provider. We believe that we offer a costeffective alternative to our customers by reducing their correctional services costs. We attempt to
accomplish this through improving operating performance and efficiency through the following key
operating initiatives: (1) standardizing supply and service purchasing practices and usage; (2)
implementing a standard approach to staffing and business practices in an effort to reduce our fixed
expenses; (3) improving inmate management, resource consumption, and reporting procedures through
the utilization of numerous technological initiatives; and (4) improving productivity and reducing
employee turnover. We also intend to continue to implement a wide variety of specialized services
that address the unique needs of various segments of the inmate population. Because the facilities we
operate differ with respect to security levels, ages, genders, and cultures of inmates, we focus on the
particular needs of an inmate population and tailor our services based on local conditions and our
ability to provide services on a cost-effective basis.
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Increase Occupancy and Revenue. Our industry benefits from significant economies of scale, resulting
in lower operating costs per inmate as occupancy rates increase. We believe we have been successful
in increasing occupancy and continue to pursue a number of initiatives intended to further increase our
revenue. We are focused on renewing and enhancing the terms of our existing contracts, and have
intensified our efforts to create new bed capacity and take advantage of additional expansion
opportunities that we believe have favorable investment returns and increase value to our stockholders.
The Corrections and Detention Industry
We believe we are well-positioned to capitalize on government outsourcing of correctional
management services because of our competitive strengths and business strategy. The key reasons for
this outsourcing trend include:
Growing United States Prison Population. The average annual growth rate of the prison population in
the United States between December 1995 and December 2005 was 3.1%. The growth rate declined
somewhat to 1.9% for the year ended December 31, 2005, with the sentenced state prison population
rising by 1.6%. However, for the year ended December 31, 2005, the sentenced prison population for
the federal government rose 4.4%. During 2005, the number of federal inmates increased 5.1%.
Federal agencies are collectively our largest customer and accounted for 40% of our total revenues
(when aggregating all of our federal contracts) for the year ended December 31, 2006. The Department
of Homeland Security has also increased its efforts to secure America’s borders and reduce illegal
immigration through its Secure Border Initiative, or SBI. According to the Department of Homeland
Security, the overall vision of SBI includes more agents to patrol America’s borders, secure ports of
entry and enforce immigration laws, and expand detention and removal capabilities to eliminate the
“catch and release” policy. In 2005, the President signed the Homeland Security Appropriations Bill
into law, which included an 11% increase for U.S. Customs and Border Protection, adding more border
patrol agents and funding for detention beds. In May 2006, the Senate passed legislation calling for
stronger border enforcement. We believe these initiatives could lead to meaningful growth to the
private corrections industry in general, and to our company in particular. We also believe growth will
come from the growing demographic of the 18 to 24 year-old at-risk population. Males between 18
and 24 years of age have demonstrated the highest propensity for criminal behavior and the highest
rates of arrest, conviction, and incarceration.
Prison Overcrowding. The significant growth of the prison population in the United States has led to
overcrowding in the state and federal prison systems. In 2005, at least 23 states and the federal prison
system reported operating at or above capacity. The federal prison system was operating at 34% above
capacity at December 31, 2005.
Acceptance of Privatization. The prisoner population housed in privately managed facilities in the
United States as of December 31, 2005 was approximately 107,400, or 7.0% of all inmates under
federal and state jurisdiction. At December 31, 2005, 14.4% of federal inmates and 6.0% of state
inmates were held in private facilities. Since December 31, 2000, the number of federal inmates held
in private facilities has increased approximately 74%, while the number held in state facilities has
increased approximately 7%. Fourteen states had prison population increases of at least 5% during the
year ended December 31, 2005. Five states, all of which are our customers, housed at least 25% of
their prison population in private facilities as of December 31, 2005 – New Mexico (43%), Wyoming
(41%), Hawaii (31%), Alaska (28%), and Montana (26%).
Governmental Budgeting Constraints. We believe the outsourcing of prison management services to
private operators allows governments to manage increasing inmate populations while simultaneously
controlling correctional costs and improving correctional services. The use of facilities owned and
managed by private operators allows governments to expand prison capacity without incurring large
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capital commitments required to increase correctional capacity. In addition, contracting with a private
operator allows governmental agencies to add beds without making significant capital investment or
incurring new debt. We believe these advantages translate into significant cost savings for government
agencies. The approved fiscal year 2007 budget for the ICE includes funding to sustain 27,500
detention beds a day during the fiscal year—up from 19,718 beds a day in fiscal year 2005. The
proposed fiscal year 2008 budget for ICE calls for an additional 950 detention beds a day for a total of
28,450 during the fiscal year. The approved fiscal year 2007 budget for the Office of the Federal
Detention Trustee (which has budgetary responsibility for USMS prisoner detention) allocates a total
of $1.225 billion and the proposed fiscal year 2008 budget for the Office of the Federal Detention
Trustee calls for a total of $1.294 billion. The approved fiscal year 2007 budget for the BOP provides a
total of $4.974 billion for BOP “Salaries and Expenses” (where “Contract Confinement” costs are
included), and the proposed fiscal year 2008 budget for BOP Salaries and Expenses calls for a total of
$5.181 billion during the fiscal year, of which $824 million is proposed for Contract Confinement. If
approved at that level, it would represent a significant increase in the Contract Confinement account
over the fiscal year 2007 level. We believe these numbers reflect a clear understanding by both the
administration and Congress of the need for additional capacity and a commitment to allocate
resources for additional public and private beds.
Government Regulation
Business Regulations
The industry in which we operate is subject to extensive federal, state, and local regulations, including
educational, health care, and safety regulations, which are administered by many regulatory authorities.
Some of the regulations are unique to the corrections industry and the combination of regulations we
face is unique. Facility management contracts typically include reporting requirements, supervision,
and on-site monitoring by representatives of the contracting governmental agencies. Corrections
officers and juvenile care workers are customarily required to meet certain training standards and, in
some instances, facility personnel are required to be licensed and subject to background investigation.
Certain jurisdictions also require us to award subcontracts on a competitive basis or to subcontract with
businesses owned by members of minority groups. Our facilities are also subject to operational and
financial audits by the governmental agencies with which we have contracts. Failure to comply with
these regulations can result in material penalties or non-renewal or termination of facility management
contracts.
In addition, private prison managers are increasingly subject to government legislation and regulation
attempting to restrict the ability of private prison managers to house certain types of inmates.
Legislation has been enacted in several states, and has previously been proposed in the United States
Congress, containing such restrictions. Although we do not believe that existing legislation will have a
material adverse effect on us, there can be no assurance that future legislation would not have such an
effect.
Environmental Matters
Under various federal, state, and local environmental laws, ordinances and regulations, a current or
previous owner or operator of real property may be liable for the costs of removal or remediation of
hazardous or toxic substances on, under, or in such property. Such laws often impose liability whether
or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic
substances. As an owner of correctional and detention facilities, we have been subject to these laws,
ordinances, and regulations as the result of our operation and management of correctional and
detention facilities. Phase I environmental assessments have been obtained on substantially all of the
properties we currently own. The cost of complying with environmental laws could materially
adversely affect our financial condition and results of operations.
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Americans with Disabilities Act
The correctional and detention facilities we operate and manage are subject to the Americans with
Disabilities Act of 1990, as amended. The Americans with Disabilities Act, or the ADA, has separate
compliance requirements for “public accommodations” and “commercial facilities” but generally
requires that public facilities such as correctional and detention facilities be made accessible to people
with disabilities. Noncompliance could result in the imposition of fines or an award of damages to
private litigants. Although we believe we are in compliance, additional expenditures incurred in order
to comply with the ADA at our facilities, if deemed necessary, would not likely have a material
adverse effect on our business and operations.
Health Insurance Portability and Accountability Act of 1996
In 1996, Congress enacted the Health Insurance Portability and Accountability Act of 1996, or HIPAA.
HIPAA is designed to improve the portability and continuity of health insurance coverage, simplify the
administration of health insurance, and protect the privacy and security of health-related information.
Privacy regulations promulgated under HIPAA regulate the use and disclosure of individually
identifiable health-related information, whether communicated electronically, on paper, or orally. The
regulations also provide patients with significant new rights related to understanding and controlling
how their health information is used or disclosed. Security regulations promulgated under HIPAA
require that health care providers implement administrative, physical, and technical practices to protect
the security of individually identifiable health information that is maintained or transmitted
electronically. Examples of mandated safeguards include requirements that notices of the entity’s
privacy practices be sent and that patients and insureds be given the right to access and request
amendments to their records. Authorizations are required before a provider, insurer, or clearinghouse
can use health information for marketing and certain other purposes. Additionally, health plans are
required to electronically transmit and receive certain standardized health care information. These
regulations require the implementation of compliance training and awareness programs for our health
care service providers associated with healthcare we provide to inmates, and selected other employees
primarily associated with our employee medical plans.
Insurance
We maintain a general liability insurance policy of $5.0 million per occurrence for all the facilities we
operate, as well as insurance in amounts we deem adequate to cover property and casualty risks,
workers’ compensation, and directors and officers liability. In addition, each of our leases with thirdparties provides that the lessee will maintain insurance on each leased property under the lessee’s
insurance policies providing for the following coverages: (i) fire, vandalism, and malicious mischief,
extended coverage perils, and all physical loss perils; (ii) comprehensive general public liability
(including personal injury and property damage); and (iii) workers’ compensation. Under each of
these leases, we have the right to periodically review our lessees’ insurance coverage and provide input
with respect thereto.
Each of our management contracts and the statutes of certain states require the maintenance of
insurance. We maintain various insurance policies including employee health, workers’ compensation,
automobile liability, and general liability insurance. Because we are significantly self-insured for
employee health, workers’ compensation, and automobile liability insurance, the amount of our
insurance expense is dependent on claims experience, and our ability to control our claims experience.
Our insurance policies contain various deductibles and stop-loss amounts intended to limit our
exposure for individually significant occurrences. However, the nature of our self-insurance policies
provides little protection for a deterioration in overall claims experience. Although we have
experienced modest improvements in claims experience in both employee medical and workers’
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compensation, we are continually developing strategies to improve the management of our future loss
claims but can provide no assurance that these strategies will be successful. Additionally, we have not
recently experienced the increases in general liability and other types of insurance we experienced over
the past few years that resulted from the terrorist attacks on September 11, 2001, and due to concerns
over corporate governance and corporate accounting scandals. However, unanticipated additional
insurance expenses resulting from adverse claims experience or an increasing cost environment for
general liability and other types of insurance could adversely impact our results of operations and cash
flows. See “Risk Factors – Risks Related to Our Business and Industry – We are subject to necessary
insurance costs.”
Employees
As of December 31, 2006, we employed approximately 16,000 employees. Of such employees,
approximately 300 were employed at our corporate offices and approximately 15,700 were employed
at our facilities and in our inmate transportation business. We employ personnel in the following
areas: clerical and administrative, facility administrators/wardens, security, medical, quality assurance,
transportation and scheduling, maintenance, teachers, counselors, and other support services.
Each of the correctional and detention facilities we currently operate is managed as a separate
operational unit by the facility administrator or warden. All of these facilities follow a standardized
code of policies and procedures.
We have not experienced a strike or work stoppage at any of our facilities. Approximately 1,100
employees at six of our facilities are represented by labor unions. In the opinion of management,
overall employee relations are generally considered good.
Competition
The correctional and detention facilities we operate and manage, as well as those facilities we own but
are managed by other operators, are subject to competition for inmates from other private prison
managers. We compete primarily on the basis of bed availability, cost, the quality and range of
services offered, our experience in the operation and management of correctional and detention
facilities, and our reputation. We compete with government agencies that are responsible for
correctional facilities and a number of privatized correctional service companies, including, but not
limited to, the GEO Group, Inc., Cornell Companies, Inc, and Management and Training Corporation.
We also compete in some markets with small local companies that may have a better knowledge of the
local conditions and may be better able to gain political and public acceptance. Other potential
competitors may in the future enter into businesses competitive with us without a substantial capital
investment or prior experience. We may also compete in the future for new development projects with
companies that have more financial resources than we have. Competition by other companies may
adversely affect the number of inmates at our facilities, which could have a material adverse effect on
the operating revenue of our facilities. In addition, revenue derived from our facilities will be affected
by a number of factors, including the demand for inmate beds, general economic conditions, and the
age of the general population.
ITEM 1A.

RISK FACTORS.

As the owner and operator of correctional and detention facilities, we are subject to certain risks and
uncertainties associated with, among other things, the corrections and detention industry and pending
or threatened litigation in which we are involved. In addition, we are also currently subject to risks
associated with our indebtedness. These risks and uncertainties set forth below could cause our actual
results to differ materially from those indicated in the forward-looking statements contained herein and
elsewhere. The risks described below are not the only risks we face. Additional risks and uncertainties
22

not currently known to us or those we currently deem to be immaterial may also materially and
adversely affect our business operations. Any of the following risks could materially adversely affect
our business, financial condition, or results of operations.
Risks Related to Our Business and Industry
Our results of operations are dependent on revenues generated by our jails, prisons, and detention
facilities, which are subject to the following risks associated with the corrections and detention
industry.
We are subject to fluctuations in occupancy levels. While a substantial portion of our cost structure is
fixed, a substantial portion of our revenues are generated under facility management contracts that
specify per diem payments based upon occupancy. Under a per diem rate structure, a decrease in our
occupancy rates could cause a decrease in revenue and profitability. Average compensated occupancy
for our facilities in operation for 2006, 2005, and 2004 was 94.9%, 91.4%, and 94.9%, respectively.
Occupancy rates may, however, decrease below these levels in the future.
Competition for inmates may adversely affect the profitability of our business. We compete with
government entities and other private operators on the basis of cost, quality, and range of services
offered, experience in managing facilities and reputation of management and personnel. While there
are barriers to entering the market for the management of correctional and detention facilities, these
barriers may not be sufficient to limit additional competition. In addition, our government customers
may assume the management of a facility that they own and we currently manage for them upon the
termination of the corresponding management contract or, if such customers have capacity at their
facilities, may take inmates currently housed in our facilities and transfer them to government run
facilities. Since we are paid on a per diem basis with no minimum guaranteed occupancy under most
of our contracts, the loss of such inmates and resulting decrease in occupancy would cause a decrease
in our revenues and profitability.
Escapes, inmate disturbances, and public resistance to privatization of correctional and detention
facilities could result in our inability to obtain new contracts or the loss of existing contracts. The
operation of correctional and detention facilities by private entities has not achieved complete
acceptance by either governments or the public. The movement toward privatization of correctional
and detention facilities has also encountered resistance from certain groups, such as labor unions and
others that believe that correctional and detention facilities should only be operated by governmental
agencies.
Moreover, negative publicity about an escape, riot or other disturbance or perceived poor conditions at
a privately managed facility may result in publicity adverse to us and the private corrections industry in
general. Any of these occurrences or continued trends may make it more difficult for us to renew or
maintain existing contracts or to obtain new contracts, which could have a material adverse effect on
our business.
We are subject to termination or non-renewal of our government contracts. We typically enter into
facility management contracts with governmental entities for terms of up to five years, with additional
renewal periods at the option of the contracting governmental agency. Notwithstanding any
contractual renewal option of a contracting governmental agency, 39 of our facility management
contracts with the customers listed under “Business – Facility Portfolio – Facilities and Facility
Management Contracts” have expired or are currently scheduled to expire on or before December 31,
2007. See “Business – Facility Portfolio – Facilities and Facility Management contracts.” One or
more of these contracts may not be renewed by the corresponding governmental agency. In addition,
these and any other contracting agencies may determine not to exercise renewal options with respect to
any of our contracts in the future. Governmental agencies typically may also terminate a facility
23

contract at any time without cause or use the possibility of termination to negotiate a lower fee for per
diem rates. In the event any of our management contracts are terminated or are not renewed on
favorable terms or otherwise, we may not be able to obtain additional replacement contracts. The nonrenewal or termination of any of our contracts with governmental agencies could materially adversely
affect our financial condition, results of operations and liquidity, including our ability to secure new
facility management contracts from others.
We are dependent on government appropriations. Our cash flow is subject to the receipt of sufficient
funding of and timely payment by contracting governmental entities. If the appropriate governmental
agency does not receive sufficient appropriations to cover its contractual obligations, it may terminate
our contract or delay or reduce payment to us. Any delays in payment, or the termination of a contract,
could have an adverse effect on our cash flow and financial condition. In addition, federal, state and
local governments are constantly under pressure to control additional spending or reduce current levels
of spending. These pressures may be compounded by negative economic developments. Accordingly,
we may be requested in the future to reduce our existing per diem contract rates or forego prospective
increases to those rates. In addition, it may become more difficult to renew our existing contracts on
favorable terms or otherwise.
Our ability to secure new contracts to develop and manage correctional and detention facilities
depends on many factors outside our control. Our growth is generally dependent upon our ability to
obtain new contracts to develop and manage new correctional and detention facilities. This possible
growth depends on a number of factors we cannot control, including crime rates and sentencing
patterns in various jurisdictions and acceptance of privatization. The demand for our facilities and
services could be adversely affected by the relaxation of enforcement efforts, leniency in conviction
and sentencing practices or through the decriminalization of certain activities that are currently
proscribed by our criminal laws. For instance, any changes with respect to drugs and controlled
substances or illegal immigration could affect the number of persons arrested, convicted, and
sentenced, thereby potentially reducing demand for correctional facilities to house them. Legislation
has been proposed in numerous jurisdictions that could lower minimum sentences for some non-violent
crimes and make more inmates eligible for early release based on good behavior. Also, sentencing
alternatives under consideration could put some offenders on probation with electronic monitoring who
would otherwise be incarcerated. Similarly, reductions in crime rates could lead to reductions in
arrests, convictions and sentences requiring incarceration at correctional facilities.
Moreover, certain jurisdictions recently have required successful bidders to make a significant capital
investment in connection with the financing of a particular project, a trend that will require us to have
sufficient capital resources to compete effectively. We may compete for such projects with companies
that have more financial resources than we have. Further, we may not be able to obtain the capital
resources when needed.
We may face community opposition to facility location, which may adversely affect our ability to obtain
new contracts. Our success in obtaining new awards and contracts sometimes depends, in part, upon
our ability to locate land that can be leased or acquired, on economically favorable terms, by us or
other entities working with us in conjunction with our proposal to construct and/or manage a facility.
Some locations may be in or near populous areas and, therefore, may generate legal action or other
forms of opposition from residents in areas surrounding a proposed site. When we select the intended
project site, we attempt to conduct business in communities where local leaders and residents generally
support the establishment of a privatized correctional or detention facility. Future efforts to find
suitable host communities may not be successful. In many cases, the site selection is made by the
contracting governmental entity. In such cases, site selection may be made for reasons related to
political and/or economic development interests and may lead to the selection of sites that have less
favorable environments.
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We may incur significant start-up and operating costs on new contracts before receiving related
revenues, which may impact our cash flows and not be recouped. When we are awarded a contract to
manage a facility, we may incur significant start-up and operating expenses, including the cost of
constructing the facility, purchasing equipment and staffing the facility, before we receive any
payments under the contract. These expenditures could result in a significant reduction in our cash
reserves and may make it more difficult for us to meet other cash obligations. In addition, a contract
may be terminated prior to its scheduled expiration and as a result we may not recover these
expenditures or realize any return on our investment.
Failure to comply with unique and increased governmental regulation could result in material
penalties or non-renewal or termination of our contracts to manage correctional and detention
facilities. The industry in which we operate is subject to extensive federal, state, and local regulations,
including educational, health care, and safety regulations, which are administered by many regulatory
authorities. Some of the regulations are unique to the corrections industry and the combination of
regulations we face is unique. Facility management contracts typically include reporting requirements,
supervision, and on-site monitoring by representatives of the contracting governmental agencies.
Corrections officers and juvenile care workers are customarily required to meet certain training
standards and, in some instances, facility personnel are required to be licensed and subject to
background investigation. Certain jurisdictions also require us to award subcontracts on a competitive
basis or to subcontract with businesses owned by members of minority groups. Our facilities are also
subject to operational and financial audits by the governmental agencies with whom we have contracts.
We may not always successfully comply with these regulations, and failure to comply can result in
material penalties or non-renewal or termination of facility management contracts.
In addition, private prison managers are increasingly subject to government legislation and regulation
attempting to restrict the ability of private prison managers to house certain types of inmates, such as
inmates from other jurisdictions or inmates at medium or higher security levels. Legislation has been
enacted in several states, and has previously been proposed in the United States Congress, containing
such restrictions. Such legislation may have an adverse effect on us.
Our inmate transportation subsidiary, TransCor, is subject to regulations stipulated by the Departments
of Transportation and Justice. TransCor must also comply with the Interstate Transportation of
Dangerous Criminals Act of 2000, which covers operational aspects of transporting prisoners,
including, but not limited to, background checks and drug testing of employees; employee training;
employee hours; staff-to-inmate ratios; prisoner restraints; communication with local law enforcement;
and standards to help ensure the safety of prisoners during transport. We are subject to changes in such
regulations, which could result in an increase in the cost of our transportation operations.
Moreover, the Federal Communications Commission, or the FCC, has published for comment a
petition for rulemaking, filed on behalf of an inmate family, which would prevent private prison
managers from collecting commissions from the operations of inmate telephone systems. We believe
that there are sound reasons for the collection of such commissions by all operators of prisons, whether
public or private. The FCC has traditionally deferred from rulemaking in this area; however, there is
the risk that the FCC could act to prohibit private prison managers, like us, from collecting such
revenues. Such an outcome could have a material adverse effect on our results of operations.
Government agencies may investigate and audit our contracts and, if any improprieties are found, we
may be required to refund revenues we have received, to forego anticipated revenues, and we may be
subject to penalties and sanctions, including prohibitions on our bidding in response to RFPs. Certain
of the governmental agencies with which we contract have the authority to audit and investigate our
contracts with them. As part of that process, government agencies may review our performance of the
contract, our pricing practices, our cost structure and our compliance with applicable laws, regulations
and standards. For contracts that actually or effectively provide for certain reimbursement of expenses,
25

if an agency determines that we have improperly allocated costs to a specific contract, we may not be
reimbursed for those costs, and we could be required to refund the amount of any such costs that have
been reimbursed. If a government audit asserts improper or illegal activities by us, we may be subject
to civil and criminal penalties and administrative sanctions, including termination of contracts,
forfeitures of profits, suspension of payments, fines and suspension or disqualification from doing
business with certain government entities. Any adverse determination could adversely impact our
ability to bid in response to RFPs in one or more jurisdictions.
We depend on a limited number of governmental customers for a significant portion of our revenues.
We currently derive, and expect to continue to derive, a significant portion of our revenues from a
limited number of governmental agencies. The loss of, or a significant decrease in, business from the
BOP, ICE, USMS, or various state agencies could seriously harm our financial condition and results of
operations. The three primary federal governmental agencies with correctional and detention
responsibilities, the BOP, ICE, and USMS, accounted for 40% of our total revenues for the fiscal year
ended December 31, 2006 ($529.7 million). The USMS accounted for 14.6% of our total revenues for
the fiscal year ended December 31, 2006 ($194.7 million), the BOP accounted for 14.3% of our total
revenues for the fiscal year ended December 31, 2006 ($190.8 million), and ICE accounted for 10.8%
of our total revenues for the fiscal year ended December 31, 2006 ($144.2 million). We expect to
continue to depend upon the federal agencies and a relatively small group of other governmental
customers for a significant percentage of our revenues.
A decrease in occupancy levels could cause a decrease in revenues and profitability. While a
substantial portion of our cost structure is generally fixed, a significant portion of our revenues are
generated under facility management contracts which provide for per diem payments based upon daily
occupancy. We are dependent upon the governmental agencies with which we have contracts to
provide inmates for our managed facilities. We cannot control occupancy levels at our managed
facilities. Under a per diem rate structure, a decrease in our occupancy rates could cause a decrease in
revenues and profitability. When combined with relatively fixed costs for operating each facility,
regardless of the occupancy level, a decrease in occupancy levels could have a material adverse effect
on our profitability.
We are dependent upon our senior management and our ability to attract and retain sufficient
qualified personnel.
We are dependent upon the continued service of each member of our senior management team,
including John D. Ferguson, our President and Chief Executive Officer. The unexpected loss of any of
these persons could materially adversely affect our business and operations. We only have
employment agreements with our President and Chief Executive Officer; Executive Vice President and
Chief Financial Officer; Executive Vice President and Chief Corrections Officer; Executive Vice
President and Chief Human Resources Officer; and Executive Vice President, General Counsel and
Secretary, all of which expire in 2007 subject to annual renewals unless either party gives notice of
termination.
In addition, the services we provide are labor-intensive. When we are awarded a facility management
contract or open a new facility, we must hire operating management, correctional officers, and other
personnel. The success of our business requires that we attract, develop, and retain these personnel.
Our inability to hire sufficient qualified personnel on a timely basis or the loss of significant numbers
of personnel at existing facilities could adversely affect our business and operations.
We are subject to necessary insurance costs.
Workers’ compensation, employee health, and general liability insurance represent significant costs to
us. Because we are significantly self-insured for workers’ compensation, employee health, and general
26

liability risks, the amount of our insurance expense is dependent on claims experience, our ability to
control our claims experience, and in the case of workers’ compensation and employee health, rising
health care costs in general. Further, additional terrorist attacks such as those on September 11, 2001,
and concerns over corporate governance and corporate accounting scandals, could make it more
difficult and costly to obtain liability and other types of insurance. Unanticipated additional insurance
costs could adversely impact our results of operations and cash flows, and the failure to obtain or
maintain any necessary insurance coverage could have a material adverse effect on us.
We may be adversely affected by inflation.
Many of our facility management contracts provide for fixed management fees or fees that increase by
only small amounts during their terms. If, due to inflation or other causes, our operating expenses,
such as wages and salaries of our employees, insurance, medical, and food costs, increase at rates faster
than increases, if any, in our management fees, then our profitability would be adversely affected. See
“Management’s Discussion and Analysis of Financial Condition and Results of Operations –
Inflation.”
We are subject to legal proceedings associated with owning and managing correctional and
detention facilities.
Our ownership and management of correctional and detention facilities, and the provision of inmate
transportation services by a subsidiary, expose us to potential third-party claims or litigation by
prisoners or other persons relating to personal injury or other damages resulting from contact with a
facility, its managers, personnel or other prisoners, including damages arising from a prisoner’s escape
from, or a disturbance or riot at, a facility we own or manage, or from the misconduct of our
employees. To the extent the events serving as a basis for any potential claims are alleged or
determined to constitute illegal or criminal activity, we could also be subject to criminal liability. Such
liability could result in significant monetary fines and could affect our ability to bid on future contracts
and retain our existing contracts. In addition, as an owner of real property, we may be subject to a
variety of proceedings relating to personal injuries of persons at such facilities. The claims against our
facilities may be significant and may not be covered by insurance. Even in cases covered by insurance,
our deductible (or self-insured retention) may be significant.
We are subject to risks associated with ownership of real estate.
Our ownership of correctional and detention facilities subjects us to risks typically associated with
investments in real estate. Investments in real estate and, in particular, correctional and detention
facilities have limited or no alternative use and thus, are relatively illiquid, and therefore, our ability to
divest ourselves of one or more of our facilities promptly in response to changed conditions is limited.
Investments in correctional and detention facilities, in particular, subject us to risks involving potential
exposure to environmental liability and uninsured loss. Our operating costs may be affected by the
obligation to pay for the cost of complying with existing environmental laws, ordinances and
regulations, as well as the cost of complying with future legislation. In addition, although we maintain
insurance for many types of losses, there are certain types of losses, such as losses from earthquakes
and acts of terrorism, which may be either uninsurable or for which it may not be economically
feasible to obtain insurance coverage, in light of the substantial costs associated with such insurance.
As a result, we could lose both our capital invested in, and anticipated profits from, one or more of the
facilities we own. Further, it is possible to experience losses that may exceed the limits of insurance
coverage.
In addition, our increased focus on facility development and expansions poses an increased risk,
including cost overruns caused by various factors, many of which are beyond our control, such as
27

weather, labor conditions, and material shortages, resulting in increased construction costs. Further, if
we are unable to utilize this new capacity, our financial results could deteriorate.
Certain of our facilities are subject to options to purchase and reversions. Ten of our facilities are or
will be subject to an option to purchase by certain governmental agencies. Such options are
exercisable by the corresponding contracting governmental entity generally at any time during the term
of the respective facility management contract. Certain of these purchase options are based on the
depreciated book value of the facility, which essentially results in the transfer of ownership of the
facility to the governmental agency at the end of the life used for accounting purposes. See “Business –
Facility Portfolio – Facilities and Facility Management Contracts.” If any of these options are
exercised, there exists the risk that we will be unable to invest the proceeds from the sale of the facility
in one or more properties that yield as much cash flow as the property acquired by the government
entity. In addition, in the event any of these options are exercised, there exists the risk that the
contracting governmental agency will terminate the management contract associated with such facility.
For the year ended December 31, 2006, the facilities subject to these options generated $231.0 million
in revenue (17.4% of total revenue) and incurred $164.5 million in operating expenses. Certain of the
options to purchase are exercisable at prices below fair market value. See “Business – Facility
Portfolio – Facilities and Facility Management Contracts.”
In addition, ownership of three of our facilities (including two that are also subject to options to
purchase) will, upon the expiration of certain ground leases with remaining terms generally ranging
from 10 to 12 years, revert to the respective governmental agency contracting with us. See “Business –
Facility Portfolio – Facilities and Facility Management Contracts.” At the time of such reversion, there
exists the risk that the contracting governmental agency will terminate the management contract
associated with such facility. For the year ended December 31, 2006, the facilities subject to reversion
generated $81.2 million in revenue (6.1% of total revenue) and incurred $56.3 million in operating
expenses.
Risks related to facility construction and development activities may increase our costs related to
such activities.
When we are engaged to perform construction and design services for a facility, we typically act as the
primary contractor and subcontract with other companies who act as the general contractors. As
primary contractor, we are subject to the various risks associated with construction (including, without
limitation, shortages of labor and materials, work stoppages, labor disputes, and weather interference)
which could cause construction delays. In addition, we are subject to the risk that the general contractor
will be unable to complete construction at the budgeted costs or be unable to fund any excess
construction costs, even though we require general contractors to post construction bonds and
insurance. Under such contracts, we are ultimately liable for all late delivery penalties and cost
overruns.
We may be adversely affected by the rising cost and increasing difficulty of obtaining adequate
levels of surety credit on favorable terms.
We are often required to post bid or performance bonds issued by a surety company as a condition to
bidding on or being awarded a contract. Availability and pricing of these surety commitments are
subject to general market and industry conditions, among other factors. Recent events in the economy
have caused the surety market to become unsettled, causing many reinsurers and sureties to reevaluate
their commitment levels and required returns. As a result, surety bond premiums generally are
increasing. If we are unable to effectively pass along the higher surety costs to our customers, any
increase in surety costs could adversely affect our operating results. We cannot assure you that we will
have continued access to surety credit or that we will be able to secure bonds economically, without
additional collateral, or at the levels required for any potential facility development or contract bids. If
28

we are unable to obtain adequate levels of surety credit on favorable terms, we would have to rely upon
letters of credit under our revolving credit facility, which would entail higher costs even if such
borrowing capacity was available when desired at the time, and our ability to bid for or obtain new
contracts could be impaired.
Our issuance of preferred stock could adversely affect holders of our common stock and discourage
a takeover.
Our board of directors has the power to issue up to 50.0 million shares of preferred stock without any
action on the part of our stockholders. Our board of directors also has the power, without stockholder
approval, to set the terms of any new series of preferred stock that may be issued, including voting
rights, dividend rights, preferences over our common stock with respect to dividends or in the event of
a dissolution, liquidation or winding up, and other terms. In the event that we issue additional shares
of preferred stock in the future that has preference over our common stock, with respect to payment of
dividends or upon our liquidation, dissolution or winding up, or if we issue preferred stock with voting
rights that dilute the voting power of our common stock, the rights of the holders of our common stock
or the market price of our common stock could be adversely affected. In addition, the ability of our
board of directors to issue shares of preferred stock without any action on the part of our stockholders
may impede a takeover of us and prevent a transaction favorable to our stockholders.
Our charter and bylaws and Maryland law could make it difficult for a third party to acquire our
company.
The Maryland General Corporation Law and our charter and bylaws contain provisions that could
delay, deter, or prevent a change in control of our company or our management. These provisions
could also discourage proxy contests and make it more difficult for our stockholders to elect directors
and take other corporate actions. These provisions:
• authorize us to issue “blank check” preferred stock, which is preferred stock that can be
created and issued by our board of directors, without stockholder approval, with rights
senior to those of common stock;
• provide that directors may be removed with or without cause only by the affirmative vote of
at least a majority of the votes of shares entitled to vote thereon; and
• establish advance notice requirements for submitting nominations for election to the board
of directors and for proposing matters that can be acted upon by stockholders at a meeting.
We are also subject to anti-takeover provisions under Maryland law, which could also delay or prevent
a change of control. Together, these provisions of our charter and bylaws and Maryland law may
discourage transactions that otherwise could provide for the payment of a premium over prevailing
market prices for our common stock, and also could limit the price that investors are willing to pay in
the future for shares of our common stock.
Risks Related to Our Leveraged Capital Structure
Our indebtedness could adversely affect our financial health and prevent us from fulfilling our
obligations under our debt securities.
We have a significant amount of indebtedness. As of December 31, 2006, we had total indebtedness of
$976.3 million. Our indebtedness could have important consequences. For example, it could:
• make it more difficult for us to satisfy our obligations with respect to our indebtedness;
29

• increase our vulnerability to general adverse economic and industry conditions;
• require us to dedicate a substantial portion of our cash flow from operations to payments on
our indebtedness, thereby reducing the availability of our cash flow to fund working capital,
capital expenditures, and other general corporate purposes;
• limit our flexibility in planning for, or reacting to, changes in our business and the industry
in which we operate;
• place us at a competitive disadvantage compared to our competitors that have less debt; and
• limit our ability to borrow additional funds or refinance existing indebtedness on favorable
terms.
Our revolving credit facility and other debt instruments have restrictive covenants that could affect
our financial condition.
The indenture related to our aggregate principal amount of $450.0 million 7.5% senior notes due 2011,
the indenture related to our aggregate principal amount of $375.0 million 6.25% senior notes due 2013,
and the indenture related to our aggregate principal amount of $150.0 million 6.75% senior notes due
2014, collectively referred to herein as our senior notes, and our revolving credit facility contain
financial and other restrictive covenants that limit our ability to engage in activities that may be in our
long-term best interests. Our ability to borrow under our revolving credit facility is subject to
compliance with certain financial covenants, including leverage and interest coverage ratios. Our
revolving credit facility includes other restrictions that, among other things, limit our ability to incur
indebtedness; grant liens; engage in mergers, consolidations and liquidations; make asset dispositions,
restricted payments and investments; enter into transactions with affiliates; and amend, modify or
prepay certain indebtedness. The indentures related to our senior notes contain limitations on our
ability to effect mergers and change of control events, as well as other limitations, including:
• limitations on incurring additional indebtedness;
• limitations on the sale of assets;
• limitations on the declaration and payment of dividends or other restricted payments;
• limitations on transactions with affiliates; and
• limitations on liens.
Our failure to comply with these covenants could result in an event of default that, if not cured or
waived, could result in the acceleration of all of our debts. We do not have sufficient working capital
to satisfy our debt obligations in the event of an acceleration of all or a significant portion of our
outstanding indebtedness.
Servicing our indebtedness will require a significant amount of cash. Our ability to generate cash
depends on many factors beyond our control.
Our ability to make payments on and to refinance our indebtedness and to fund planned capital
expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is
30

subject to general economic, financial, competitive, legislative, regulatory, and other factors that are
beyond our control.
The risk exists that our business will be unable to generate sufficient cash flow from operations or that
future borrowings will not be available to us under our revolving credit facility in an amount sufficient
to enable us to pay our indebtedness, including our existing senior notes, or new debt securities, or to
fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness,
including our senior notes, or new debt securities, on or before maturity. We may not, however, be
able to refinance any of our indebtedness, including our revolving credit facility and including our
senior notes, or new debt securities on commercially reasonable terms or at all.
We are required to repurchase all or a portion of our senior notes upon a change of control.
Upon certain change of control events, as that term is defined in the indentures for our senior notes,
including a change of control caused by an unsolicited third party, we are required to make an offer in
cash to repurchase all or any part of each holder’s notes at a repurchase price equal to 101% of the
principal thereof, plus accrued interest. The source of funds for any such repurchase would be our
available cash or cash generated from operations or other sources, including borrowings, sales of
equity or funds provided by a new controlling person or entity. Sufficient funds may not be available
to us, however, at the time of any change of control event to repurchase all or a portion of the tendered
notes pursuant to this requirement. Our failure to offer to repurchase notes, or to repurchase notes
tendered, following a change of control will result in a default under the respective indentures, which
could lead to a cross-default under our revolving credit facility and under the terms of our other
indebtedness. In addition, our revolving credit facility prohibits us from making any such required
repurchases. Prior to repurchasing the notes upon a change of control event, we must either repay
outstanding indebtedness under our revolving credit facility or obtain the consent of the lenders under
our revolving credit facility. If we do not obtain the required consents or repay our outstanding
indebtedness under our revolving credit facility, we would remain effectively prohibited from offering
to purchase the notes.
Despite current indebtedness levels, we may still incur more debt.
The terms of the indentures for our senior notes and our revolving credit facility restrict our ability to
incur significant additional indebtedness in the future. However, in the future we may refinance all or a
portion of our indebtedness, including our revolving credit facility, and may incur additional
indebtedness as a result. As of December 31, 2006, we had $112.1 million of additional borrowing
capacity available under our $150.0 million revolving credit facility. The revolving credit facility also
contains an accordion feature that allows for up to $100.0 million in additional availability, at our
option, if certain conditions are met. In addition, we have an effective “shelf” registration statement
under which we may issue an indeterminate amount of securities from time to time when we determine
that market conditions and the opportunity to utilize the proceeds from the issuance of such securities
are favorable. If new debt is added to our and our subsidiaries’ current debt levels, the related risks that
we and they now face could intensify.
ITEM 1B.

UNRESOLVED STAFF COMMENTS.

None.
ITEM 2.

PROPERTIES.

The properties we owned at December 31, 2006 are described under Item 1 and in Note 4 of the Notes
to the Financial Statements contained in this annual report.
31

ITEM 3.

LEGAL PROCEEDINGS.

General. The nature of our business results in claims and litigation alleging that we are liable for
damages arising from the conduct of our employees, inmates or others. The nature of such claims
include, but is not limited to claims arising from employee or inmate misconduct, medical malpractice,
employment matters, property loss, contractual claims, and personal injury or other damages resulting
from contact with our facilities, personnel, or prisoners, including damages arising from a prisoner’s
escape or from a disturbance or riot at a facility. We maintain insurance to cover many of these claims
which may mitigate the risk that any single claim would have a material effect on our consolidated
financial position, results of operations, or cash flows, provided the claim is one for which coverage is
available. The combination of self-insured retentions and deductible amounts means that, in the
aggregate, we are subject to substantial self-insurance risk.
We record litigation reserves related to certain matters for which it is probable that a loss has been
incurred and the range of such loss can be estimated. Based upon management’s review of the
potential claims and outstanding litigation and based upon management’s experience and history of
estimating losses, management believes a loss in excess of amounts already recognized would not be
material to our financial statements. In the opinion of management, there are no pending legal
proceedings that would have a material effect on our consolidated financial position, results of
operations, or cash flows. Any receivable for insurance recoveries is recorded separately from the
corresponding litigation reserve, and only if recovery is determined to be probable. Adversarial
proceedings and litigation are, however, subject to inherent uncertainties, and unfavorable decisions
and rulings could occur which could have a material adverse impact on our consolidated financial
position, results of operations, or cash flows for the period in which such decisions or rulings occur, or
future periods. Expenses associated with legal proceedings may also fluctuate from quarter to quarter
based on changes in our assumptions, new developments, or the effectiveness of our litigation and
settlement strategies.
ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.
PART II.
ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES.

Market Price of and Distributions on Capital Stock
Our common stock is traded on the New York Stock Exchange, or NYSE, under the symbol “CXW.”
On February 23, 2007 the last reported sale price of our common stock was $53.53 per share and there
were approximately 5,000 registered holders and approximately 31,000 beneficial holders,
respectively, of our common stock.
The following table sets forth, for the fiscal quarters indicated, the range of high and low sales prices of
the common stock as adjusted for the Company’s 3-for-2 stock split in September 2006.

32

Common Stock
SALES PRICE
HIGH
LOW
FISCAL YEAR 2006
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

$
$
$
$

30.86
36.45
45.26
49.71

$
$
$
$

26.74
28.60
34.37
42.65

FISCAL YEAR 2005
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

$
$
$
$

28.71
26.51
26.76
30.27

$
$
$
$

24.45
23.50
24.47
24.34

Dividend Policy
During the years ended December 31, 2006 and 2005, we did not pay any dividends on our common
stock. Pursuant to the terms of the indentures governing our senior notes, we are limited in the amount
of dividends we can declare or pay on our outstanding shares of common stock. Taking into
consideration these limitations, management and our board of directors regularly evaluate the merits of
declaring and paying a dividend. Future dividends, if any, will depend on our future earnings, our
capital requirements, our financial condition, alternative uses of capital, and on such other factors as
our board of directors may consider relevant.
ITEM 6.

SELECTED FINANCIAL DATA.

The following selected financial data for the five years ended December 31, 2006, was derived from
our consolidated financial statements and the related notes thereto. This data should be read in
conjunction with our audited consolidated financial statements, including the related notes, and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our
audited consolidated financial statements, including the related notes, as of December 31, 2006 and
2005, and for the years ended December 31, 2006, 2005, and 2004 are included in this annual report.

33

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
SELECTED HISTORICAL FINANCIAL INFORMATION
(in thousands, except per share data)
STATEMENT OF OPERATIONS:
Revenue:
Management and other
Rental

$

Total revenue
Expenses:
Operating
General and administrative
Depreciation and amortization
Total expenses
Operating income
Other (income) expense:
Interest expense, net
Expenses associated with debt refinancing and
recapitalization transactions
Change in fair value of derivative instruments
Other (income) expense

Income (loss) from discontinued operations, net of
taxes
Cumulative effect of accounting change

$ 1,188,649
3,991

$ 1,122,542
3,845

$ 1,003,865
3,742

$ 906,556
3,701

1,331,088

1,192,640

1,126,387

1,007,607

910,257

973,893
63,593
67,673

898,793
57,053
59,882

850,366
48,186
54,445

747,800
40,467
52,884

694,372
36,907
53,417

1,105,159

1,015,728

952,997

841,151

784,696

225,929

176,912

173,390

166,456

125,561

58,783

63,928

69,177

74,446

87,393

35,269
263

101
943

6,687
(2,900)
(414)

36,670
(2,206)
(359)

166,388
(61,149)

77,452
(26,888)

103,169
(41,514)

88,637
52,352

4,063
63,284

105,239

50,564

61,655

140,989

67,347

888
-

794
-

5,013
(80,276)

62,543

141,783

(7,916)

(1,462)

(15,262)

(20,959)

(442)
-

-

Net income (loss)
Distributions to preferred stockholders
$

2002

1,326,881
4,207

982
(224)

Income from continuing operations before
income taxes and cumulative effect of
accounting change
Income tax (expense) benefit
Income from continuing operations before
cumulative effect of accounting change

Net income (loss) available to common
stockholders

For the Years Ended December 31,
2005
2004
2003

2006

105,239

50,122

-

$

105,239

(continued)

34

50,122

$

61,081

$ 126,521

$

(28,875)

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
SELECTED HISTORICAL FINANCIAL INFORMATION
(in thousands, except per share data)
(continued)
For the Years Ended December 31,
2005
2004
2003

2006

2002

Basic earnings (loss) per share:
Income from continuing operations before
cumulative effect of accounting change
Income (loss) from discontinued operations, net
of taxes
Cumulative effect of accounting change

$

1.76

$

$

(0.01)
-

-

Net income (loss) available to common
stockholders

0.88

1.14

$

0.02
-

2.60

$

0.02
-

1.11
0.12
(1.93)

$

1.76

$

0.87

$

1.16

$

2.62

$

(0.70)

$

1.71

$

0.84

$

1.02

$

2.28

$

1.01

Diluted earnings (loss) per share:
Income from continuing operations before
cumulative effect of accounting change
Income (loss) from discontinued operations, net
of taxes
Cumulative effect of accounting change
Net income (loss) available to common
stockholders

$

Weighted average common shares outstanding:
Basic
Diluted

1.71

$

2005

2006
$
$
$
$

0.83

$
$
$
$

2,250,860
976,258
1,201,179
1,049,681

35

0.02
$

57,713
60,423

59,857
61,529

BALANCE SHEET DATA:
Total assets
Total debt
Total liabilities
Stockholders’ equity

(0.01)
-

-

2,086,313
975,636
1,169,682
916,631

1.04

0.02
$

52,589
59,671

2,023,078
1,002,295
1,207,084
815,994

$

48,368
57,074

December 31,
2004
$
$
$
$

2.30

0.10
(1.66)

41,504
48,312

2003
$
$
$
$

1,959,028
1,003,428
1,183,563
775,465

(0.55)

2002
$
$
$
$

1,874,071
955,959
1,140,073
733,998

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS
CONDITION AND RESULTS OF OPERATIONS.

OF

FINANCIAL

The following discussion should be read in conjunction with the financial statements and notes thereto
appearing elsewhere in this report. This discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including, but not limited to, those described
under “Risk Factors” and included in other portions of this report.
OVERVIEW
As of December 31, 2006, we owned 43 correctional, detention and juvenile facilities, three of which
we lease to other operators. We currently operate 64 facilities, with a total design capacity of
approximately 72,000 beds in 19 states and the District of Columbia. We are the nation’s largest
owner and operator of privatized correctional and detention facilities and one of the largest prison
operators in the United States behind only the federal government and three states. Our size and
experience provide us with significant credibility with our current and prospective customers, and
enables us to generate economies of scale in purchasing power for food services, health care and other
supplies and services we offer to our customers.
We are compensated for operating and managing prisons and correctional facilities at an inmate per
diem rate based upon actual or minimum guaranteed occupancy levels. The significant expansion of
the prison population in the United States has led to overcrowding in the federal and state prison
systems, providing us with opportunities for growth. Federal, state, and local governments are
constantly under budgetary constraints putting pressure on governments to control correctional
budgets, including per diem rates our customers pay to us. Although budgetary constraints have been
somewhat alleviated recently, governments continue to experience many significant spending demands
which have constrained correctional budgets limiting their ability to expand existing facilities or
construct new facilities. We believe the outsourcing of prison management services to private operators
allows governments to manage increasing inmate populations while simultaneously controlling
correctional costs and improving correctional services. We believe our customers discover that
partnering with private operators to provide residential services to their inmates introduces competition
to their prison system, resulting in improvements to the quality and cost of corrections services
throughout their correctional system. Further, the use of facilities owned and managed by private
operators allows governments to expand prison capacity without incurring large capital commitments
required to increase correctional capacity.
We also believe that having beds immediately available to our customers provides us with a distinct
competitive advantage when bidding on new contracts. While we have been successful in winning
contract awards to provide management services for facilities we do not own, and will continue to
pursue such management contracts, we believe the most significant opportunities for growth are in
providing our government partners with available beds within facilities we currently own or that we
develop. We also believe that owning the facilities in which we provide management services enables
us to more rapidly replace business lost compared with managed-only facilities, since we can offer the
same beds to new and existing customers and, with customer consent, may have more flexibility in
moving our existing inmate populations to facilities with available capacity. Our management
contracts generally provide our customers with the right to terminate our management contracts at any
time without cause.
As of December 31, 2006, we had four owned correctional facilities, our Stewart County Correctional
Facility, our North Fork Correctional Facility, our Florence Correctional Center, and our newly
constructed Red Rock Correctional Center that provided us with approximately 1,900 available beds.
We have recently entered into several management contracts that are expected to result in the
36

utilization of a substantial portion of these beds. As a result of persistent demand from both our federal
and state customers, the utilization of a significant portion of our available beds, and the expectation of
an environment that continues to be constrained with a limited supply of available prison beds, we
have intensified our efforts to deliver new bed capacity through the development of new prison
facilities and the expansion of certain of our existing facilities.
During 2006, we completed construction of our new 1,596-bed Red Rock Correctional Center in Eloy,
Arizona. During 2005 we commenced construction of the new 1,896-bed Saguaro Correctional
Facility adjacent to the Red Rock facility. This new facility is expected to be complete mid-2007.
During 2006 and early 2007, we also announced our intention to expand six of the facilities we own by
an aggregate of 2,985 beds as a result of increasing demand from our existing customers. We expect
these expansions to be complete at various times over the next 18 months. We are also actively
pursuing a number of additional sites for new prison development. We believe it is feasible to begin
development of an additional 4,000 to 6,000 new prison beds during the course of the next year.
Certain of our customers have also engaged us to expand certain facilities they own that we manage for
them. We are funding a 360-bed expansion of one such facility, which was substantially completed
during the first quarter of 2007, while another customer is funding the expansion of two of their
facilities aggregating 619 beds.
Although we have identified potential customers for a substantial portion of these new beds, we can
provide no assurance that these beds will be utilized. Further, none of the customers that we expect to
fill the expansion beds has provided a guarantee of occupancy.
As a result of the completion of numerous recapitalization and refinancing transactions over the past
several years, we have significantly reduced our exposure to variable rate debt, eliminated all of our
subordinated indebtedness, lowered our after tax interest obligations associated with our outstanding
debt, further increasing our cash flow, and extended our total weighted average debt maturities. Also as
a result of the completion of these capital transactions, covenants under our senior bank credit facility
were amended to provide greater flexibility for, among other matters, incurring unsecured
indebtedness, capital expenditures, and permitted acquisitions. With the most recent pay-off of our
senior bank credit facility in January 2006 and the completion of our revolving credit facility in
February 2006, we removed the requirement to secure the senior bank credit facility with liens on our
real estate assets and, instead, collateralized the facility primarily with security interests in our accounts
receivable and deposit accounts. We also expanded our borrowing capacity with the revolving credit
facility. Standard and Poor’s currently rates our senior unsecured debt as “BB-.” Moody’s Investors
Service currently rates our senior unsecured debt as “Ba2.” We believe these recapitalization and
refinancing transactions were important in providing us with the financial flexibility and liquidity to
increase our bed capacity for sustained growth.
We are also focusing our efforts on containing our costs. We believe the largest opportunity for
reducing our facility operating expenses is through the implementation of a standard approach to
staffing and business practices and through investments in technology. Approximately 63% of our
operating expenses consists of salaries and benefits. Containing these expenses will continue to be
challenging. Further, the turnover rate for correctional officers for our company, and for the
corrections industry in general, remains high. Although we believe we have been successful in
reducing workers’ compensation costs and containing medical benefits for our employees, such costs
continue to increase primarily as a result of continued rising healthcare costs throughout the country.
Reducing these staffing costs requires a long-term strategy to control such costs.
Through the combination of our initiatives to increase our revenues by taking advantage of our
available beds while maintaining an adequate supply of new beds, and our strategies to generate
savings and to contain our operating expenses, we believe we will be able to maintain our competitive
37

advantage and continue to improve the quality services we provide to our customers at an economical
price, thereby producing value to our stockholders.
CRITICAL ACCOUNTING POLICIES
The consolidated financial statements are prepared in conformity with accounting principles generally
accepted in the United States. As such, we are required to make certain estimates, judgments and
assumptions that we believe are reasonable based upon the information available. These estimates and
assumptions affect the reported amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the reporting period. A summary of our
significant accounting policies is described in Note 2 to our audited financial statements. The
significant accounting policies and estimates which we believe are the most critical to aid in fully
understanding and evaluating our reported financial results include the following:
Asset impairments. As of December 31, 2006, we had $1.8 billion in long-lived assets. We evaluate
the recoverability of the carrying values of our long-lived assets, other than goodwill, when events
suggest that an impairment may have occurred. In these circumstances, we utilize estimates of
undiscounted cash flows to determine if an impairment exists. If an impairment exists, it is measured
as the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.
Goodwill impairments. Statement of Financial Accounting Standards No. 142, “Goodwill and Other
Intangible Assets,” or SFAS 142, establishes accounting and reporting requirements for goodwill and
other intangible assets. Under SFAS 142, goodwill attributable to each of our reporting units is tested
for impairment by comparing the fair value of each reporting unit with its carrying value. Fair value is
determined using a collaboration of various common valuation techniques, including market multiples,
discounted cash flows, and replacement cost methods. These impairment tests are required to be
performed at least annually. We perform our impairment tests during the fourth quarter, in connection
with our annual budgeting process, and whenever circumstances indicate the carrying value of
goodwill may not be recoverable.
Income taxes. Income taxes are accounted for under the provisions of Statement of Financial
Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS 109 generally
requires us to record deferred income taxes for the tax effect of differences between book and tax bases
of our assets and liabilities.
Deferred income taxes reflect the available net operating losses and the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Realization of the future tax benefits related to deferred tax
assets is dependent on many factors, including our past earnings history, expected future earnings, the
character and jurisdiction of such earnings, unsettled circumstances that, if unfavorably resolved,
would adversely affect utilization of our deferred tax assets, carryback and carryforward periods, and
tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset.
Although we utilized our remaining federal net operating losses in 2006, we have approximately $9.5
million in net operating losses applicable to various states that we expect to carry forward in future
years to offset taxable income in such states. These net operating losses have begun to expire.
Accordingly, we have a valuation allowance of $2.7 million for the estimated amount of the net
operating losses that will expire unused, in addition to a $5.6 million valuation allowance related to
state tax credits that are also expected to expire unused. Although our estimate of future taxable
income is based on current assumptions we believe to be reasonable, our assumptions may prove
inaccurate and could change in the future, which could result in the expiration of additional net
operating losses or credits. We would be required to establish a valuation allowance at such time that
38

we no longer expected to utilize these net operating losses or credits, which could result in a material
impact on our results of operations in the future.
Self-funded insurance reserves. As of December 31, 2006 and 2005, we had $33.2 million and $33.6
million, respectively, in accrued liabilities for employee health, workers’ compensation, and
automobile insurance claims. We are significantly self-insured for employee health, workers’
compensation, and automobile liability insurance claims. As such, our insurance expense is largely
dependent on claims experience and our ability to control our claims. We have consistently accrued
the estimated liability for employee health insurance claims based on our history of claims experience
and the time lag between the incident date and the date the cost is paid by us. We have accrued the
estimated liability for workers’ compensation and automobile insurance claims based on a third-party
actuarial valuation of the outstanding liabilities, discounted to the net present value of the outstanding
liabilities. These estimates could change in the future. It is possible that future cash flows and results
of operations could be materially affected by changes in our assumptions, new developments, or by the
effectiveness of our strategies.
Legal reserves. As of December 31, 2006 and 2005, we had $13.3 million and $13.2 million,
respectively, in accrued liabilities related to certain legal proceedings in which we are involved. We
have accrued our estimate of the probable costs for the resolution of these claims based on a range of
potential outcomes. In addition, we are subject to current and potential future legal proceedings for
which little or no accrual has been reflected because our current assessment of the potential exposure is
nominal. These estimates have been developed in consultation with our General Counsel’s office and,
as appropriate, outside counsel handling these matters, and are based upon an analysis of potential
results, assuming a combination of litigation and settlement strategies. It is possible that future cash
flows and results of operations could be materially affected by changes in our assumptions, new
developments, or by the effectiveness of our strategies.
RESULTS OF OPERATIONS
The following table sets forth for the years ended December 31, 2006, 2005, and 2004, the number of
facilities we owned and managed, the number of facilities we managed but did not own, the number of
facilities we leased to other operators, and the facilities we owned that were not yet in operation.
Effective
Date

Owned
and
Managed

Facilities as of December 31, 2004
Expiration of the management contract
for the David L. Moss Criminal Justice
Center
Completion of construction at the Stewart
Detention Center

Leased

Incomplete

Total

38

25

3

1

67

July 1, 2005

-

(1)

-

-

(1)

October 10,
2005

1

-

-

(1)

-

39

24

3

-

66

July 1, 2006

1

-

-

-

1

July 1, 2006

-

1

-

-

1

40

25

3

-

68

Facilities as of December 31, 2005
Completion of construction at the Red Rock
Correctional Center
Management contract awarded for Camino
Nuevo Female Correctional Facility

Managed
Only

Facilities as of December 31, 2006

We also have an additional facility located in Eloy, Arizona that is under construction. This facility is
not counted in the foregoing table because it currently has no impact on our results of operations.
39

Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005
During the year ended December 31, 2006, we generated net income available to common stockholders
of $105.2 million, or $1.71 per diluted share, compared with net income available to common
stockholders of $50.1 million, or $0.83 per diluted share, for the previous year. Contributing to the net
income for 2006 compared to the previous year was an increase in operating income of $49.0 million,
from $176.9 million during 2005 to $225.9 million during 2006 as a result of an increase in occupancy
levels and new management contracts, partially offset by an increase in general and administrative
expenses and depreciation and amortization.
Net income available to common stockholders during 2005 was negatively impacted by a $35.3 million
pre-tax charge, or $0.38 per diluted share net of taxes, associated with debt refinancing transactions
completed during the first and second quarters, as further described hereafter. The charge consisted of
a tender premium paid to the holders of the 9.875% senior notes (who tendered their notes to us at a
price of 111% of par pursuant to a tender offer we made for the 9.875% senior notes in March 2005),
estimated fees and expenses associated with the tender offer, and the write-off of (i) existing deferred
loan costs associated with the purchase of the 9.875% senior notes, (ii) existing deferred loan costs
associated with a lump sum pay-down of our senior bank credit facility, and (iii) existing deferred loan
costs and third-party fees incurred in connection with obtaining an amendment to our old senior bank
credit facility.
Facility Operations
A key performance indicator we use to measure the revenue and expenses associated with the
operation of the facilities we own or manage is expressed in terms of a compensated man-day, and
represents the revenue we generate and expenses we incur for one inmate for one calendar day.
Revenue and expenses per compensated man-day are computed by dividing facility revenue and
expenses by the total number of compensated man-days during the period. A compensated man-day
represents a calendar day for which we are paid for the occupancy of an inmate. We believe the
measurement is useful because we are compensated for operating and managing facilities at an inmate
per-diem rate based upon actual or minimum guaranteed occupancy levels. We also measure our
ability to contain costs on a per-compensated man-day basis, which is largely dependent upon the
number of inmates we accommodate. Further, per man-day measurements are also used to estimate
our potential profitability based on certain occupancy levels relative to design capacity. Revenue and
expenses per compensated man-day for all of the facilities we owned or managed, exclusive of those
discontinued (see further discussion below regarding discontinued operations), were as follows for the
years ended December 31, 2006 and 2005:
For the Years Ended
December 31,
2005
2006
Revenue per compensated man-day
Operating expenses per compensated man-day:
Fixed expense
Variable expense
Total

$

Operating margin per compensated man-day

$

52.71

$

28.50
9.39
37.89

28.41
9.90
38.31
14.40

50.69

$

12.80

Operating margin

27.3%

25.3%

Average compensated occupancy

94.9%

91.4%

40

Average compensated occupancy for the year ended December 31, 2006 increased from the prior year
primarily as a result of increases in inmate populations across our portfolio, and also as a result of a full
year’s impact from a contract with the Federal Bureau of Prisons, or the BOP, that commenced in June
2005 at our Northeast Ohio Correctional Center. Compensated occupancy also increased as a result of
an increase in the population at our Prairie Correctional Facility largely as a result of additional
inmates from the states of Minnesota, Washington and Idaho, an increase in the population at our
Crowley County Correctional Facility, as well as an increase in population at our North Fork
Correctional Facility as a result of a new management contract with the state of Wyoming, which
commenced in June 2006. Further, inmate populations increased notably at our Otter Creek
Correctional Facility as a result of contracts with the states of Kentucky and Hawaii to house female
inmates to replace the inmates from the state of Indiana that were removed during the second quarter of
2005.
Business from our federal customers, including the BOP, the United States Marshals Service, or the
USMS, and U.S. Immigration and Customs Enforcement, or ICE, continues to be a significant
component of our business. Our federal customers generated 40% and 39% of our total revenue for the
years ended December 31, 2006 and 2005, respectively. In addition to the aforementioned contract
with the BOP at our Northeast Ohio facility, a modified contract with ICE at our T. Don Hutto
Residential Center in Taylor, Texas that commenced in May 2006 also contributed to an increase in
federal revenue during 2006.
Operating expenses totaled $973.9 million and $898.8 million for the years ended December 31, 2006
and 2005, respectively. Operating expenses consist of those expenses incurred in the operation and
management of adult and juvenile correctional and detention facilities, and for our inmate
transportation subsidiary.
Salaries and benefits represent the most significant component of fixed operating expenses with
approximately 63% of our operating expenses consisting of salaries and benefits. During 2006,
salaries and benefits expense at our correctional and detention facilities increased $37.1 million from
2005. However, salaries and benefits expense for the year ended December 31, 2006 decreased by
$0.20 per compensated man-day compared with the same period in the prior year, as we were able to
leverage our salaries and benefits over a larger inmate population and achieve savings in workers
compensation. Additionally, the decrease in salaries and benefits per compensated man-day was
caused by increased staffing levels in the prior year in anticipation of increased inmate populations at
our Northeast Ohio Correctional Center due to the commencement of the new BOP contract on June 1,
2005, and at our Otter Creek Correctional Center as a result of the aforementioned transition of state
inmate populations, partially offset by increased staffing levels at our Stewart Detention Center, North
Fork Correctional Facility, and the Red Rock Correctional Center as a result of the opening of each of
these facilities during 2006.
Facility variable expenses increased 5.4% from $9.39 per compensated man-day during 2005 to $9.90
per compensated man-day during 2006. The increase in facility variable expenses was primarily the
result of an increase in legal expenses resulting from the successful negotiation of a number of
outstanding legal matters in the prior year and general inflationary increases in the costs of services
such as our utilities, inmate medical, and food service expenses.
With regard to legal expenses during 2005, we settled a number of outstanding legal matters for
amounts less than reserves previously established for such matters which, on a net basis, reduced our
expenses during 2005. As a result, operating expenses associated with legal settlements increased by
$5.8 million during 2006 compared with the prior year. Expenses associated with legal proceedings
may fluctuate from quarter to quarter based on new lawsuits, changes in our assumptions, new
developments, or the effectiveness of our litigation and settlement strategies.
41

The operation of the facilities we own carries a higher degree of risk associated with a management
contract than the operation of the facilities we manage but do not own because we incur significant
capital expenditures to construct or acquire facilities we own. Additionally, correctional and detention
facilities have a limited or no alternative use. Therefore, if a management contract is terminated at a
facility we own, we continue to incur certain operating expenses, such as real estate taxes, utilities, and
insurance, that we would not incur if a management contract was terminated for a managed-only
facility. As a result, revenue per compensated man-day is typically higher for facilities we own and
manage than for managed-only facilities. Because we incur higher expenses, such as repairs and
maintenance, real estate taxes, and insurance, on the facilities we own and manage, our cost structure
for facilities we own and manage is also higher than the cost structure for the managed-only facilities.
The following tables display the revenue and expenses per compensated man-day for the facilities we
own and manage and for the facilities we manage but do not own:
For the Years Ended
December 31,
2005
2006
Owned and Managed Facilities:
Revenue per compensated man-day
Operating expenses per compensated man-day:
Fixed expense
Variable expense
Total

$

61.03

$

31.79
10.19
41.98

30.72
10.75
41.47

Operating margin per compensated man-day

$

19.56

58.95

$

16.97

Operating margin

32.1%

28.8%

Average compensated occupancy

93.9%

88.3%

Managed Only Facilities:
Revenue per compensated man-day
Operating expenses per compensated man-day:
Fixed expense
Variable expense
Total

$

38.39

$

23.22
8.12
31.34

24.43
8.43
32.86

Operating margin per compensated man-day

$

5.53

37.46

$

6.12

Operating margin

14.4%

16.3%

Average compensated occupancy

96.8%

96.7%

The following discussions under “Owned and Managed Facilities” and “Managed-Only Facilities”
address significant events that impacted our results of operations for the respective periods, and events
that are expected to affect our results of operations in the future.
Owned and Managed Facilities
During April 2006, we modified an agreement with Williamson County, Texas to house non-criminal
detainees from ICE under an inter-governmental service agreement between Williamson County and
ICE. The agreement enables ICE to accommodate non-criminal aliens being detained for deportation
at our T. Don Hutto Residential Center. We originally announced an agreement in December 2005 to
house up to 600 male detainees for ICE. However, for various reasons, the initial intake of detainees
originally scheduled to occur in February 2006 was delayed. The modified agreement, which was
effective beginning May 8, 2006, provides for an indefinite term. This new agreement contributed to
increased revenue and operating margins in 2006 compared with 2005. Further, the increase in the
42

operating margin was positively affected during 2006 because the agreement provides for a fixed
monthly payment based on the 512-bed capacity of the facility, even though detainee populations were
continuing to increase during the second half of 2006. We expect operating expenses at this facility to
increase as utilization continues to increase.
On December 23, 2004, we received a contract award from the BOP to house approximately 1,195
federal inmates at our 2,016-bed Northeast Ohio Correctional Center. The contract, awarded as part of
the Criminal Alien Requirement Phase 4 Solicitation ("CAR 4"), provides for an initial four-year term
with three two-year renewal options. The terms of the contract provide for a 50% guaranteed rate of
occupancy for 90 days following a Notice to Proceed, and a 90% guaranteed rate of occupancy
thereafter. The contract commenced June 1, 2005. As of December 31, 2006, we housed 1,334 BOP
inmates at this facility. Total revenue at this facility increased by $22.9 million during 2006 compared
with the prior year. This increase in revenue was also attributable to an increase in USMS inmates
held at this facility during 2006 compared with 2005.
During 2006, our 1,600-bed Prairie Correctional Facility in Appleton, Minnesota housed a daily
average of approximately 1,500 inmates as a result of new contract awards in mid-2004 and subsequent
increasing demand for beds from the states of Minnesota and Washington, and under a new contract
with the state of Idaho, compared with a daily average of approximately 867 inmates during 2005. As a
result, total revenue increased by $13.9 million at this facility during 2006 compared with the prior
year. In early 2006, we were notified by the state of Idaho of their intention to withdraw their inmates
from the Prairie facility. The state of Idaho completed this withdrawal during the fourth quarter of
2006. As of December 31, 2006, we housed 1,417 inmates from the states of Washington and
Minnesota.
Due to a combination of rate increases and/or an increase in population at our 1,794-bed Crowley
County Correctional Facility, 2,304-bed Central Arizona Detention Center, 905-bed Houston
Processing Center, and 656-bed Otter Creek Correctional Center, primarily from the state of Colorado,
the USMS and ICE, the state of Hawaii, and the state of Kentucky, respectively, total management and
other revenue at these facilities increased during 2006 from 2005 by $18.8 million.
Effective July 1, 2005, ICE awarded us a three-year contract for the continued management of ICE
detainees and USMS inmates at the 1,016-bed San Diego Correctional Facility located in San Diego,
California. The contract, which contains five three-year renewal options, provided for an increase in
the fixed monthly payment. Total revenue increased by $3.5 million during 2006 from 2005 as a result
of the increased rate and an increase in populations from ICE and USMS at this facility. In January
2007, an organization advocating rights for immigration detainees joined a lawsuit against ICE on
behalf of detainees at the San Diego facility charging that detainees are being held in overcrowded and
inhumane conditions at the facility. The Company was also named in the complaint. We cannot
predict the ultimate outcome of this lawsuit, or the potential impact the lawsuit could have on the
number of detainees we house or the revenue we generate at this facility.
During January 2006, we received notification from the BOP of its intent not to exercise its renewal
option at our 1,500-bed Eloy Detention Center in Eloy, Arizona. At December 31, 2005, the Eloy
facility housed approximately 500 inmates from the BOP and approximately 800 detainees from ICE,
pursuant to a subcontract between the BOP and ICE. The BOP completed the transfer of its inmates
from the Eloy facility to other BOP facilities by February 28, 2006. During February 2006, we reached
an agreement with the City of Eloy to manage detainees from ICE at this facility under an intergovernmental service agreement between the City of Eloy and ICE, effectively providing ICE the
ability to fully utilize the Eloy Detention Center for existing and potential future requirements. Under
our agreement with the City of Eloy, we are eligible for periodic rate increases that were not provided
in the previous contract with the BOP. As of December 31, 2006, this facility housed 1,495 ICE
detainees.
43

During the first quarter of 2006, we re-opened our 1,440-bed North Fork Correctional Facility located
in Sayre, Oklahoma, with a small population of inmates from the state of Vermont. The facility was
also re-opened in anticipation of additional inmate population needs from various existing state and
federal customers. Prior to its re-opening, this facility had been vacant since the third quarter of 2003,
when all of the Wisconsin inmates housed at the facility were transferred out of the facility in order to
satisfy a contractual provision mandated by the state of Wisconsin.
In June 2006, we entered into a new agreement with the state of Wyoming to house up to 600 of the
state's male medium-security inmates at our North Fork Correctional Facility. The terms of the
contract include an initial two-year period and may be renewed upon mutual agreement.
In October 2006, we announced that as a result of an emergency proclamation declared by the
Governor of California, we entered into a new agreement with the State of California Department of
Corrections and Rehabilitation (“CDCR”) to house up to approximately 1,000 California male inmates
at several of our facilities. The terms of the agreement include an initial three-year term and may be
extended for successive two-year terms by mutual agreement. We began receiving inmates on
November 3, 2006 at our West Tennessee facility, and as of December 31, 2006 we housed 230 CDCR
inmates who volunteered to be transferred to our West Tennessee and Florence facilities.
On February 2, 2007, the Governor of California ordered the CDCR to begin the involuntary transfer
of prisoners to correctional facilities outside of California in a further effort to relieve prison
overcrowding. As a result of the Governor’s request, we agreed to amend the contract with the CDCR
to potentially provide up to 4,670 additional beds for a total of approximately 5,670 beds. The
amendment includes the potential utilization of additional beds at our Florence facility, the potential
utilization of beds in our Tallahatchie and Diamondback facilities that will be vacated when the state of
Hawaii transfers inmates to our new Saguaro Correctional Facility (which is expected to be completed
mid-2007), as well as the expansion beds at the North Fork and Tallahatchie facilities that we expect to
complete during the fourth quarter of 2007, as further described hereafter.
The amended contract, which continues to be subject to appropriations, provides for a 90% guarantee
of the mutually agreed upon capacity allocated to CDCR offenders. Now that the involuntary transfer
program has been ordered the 90% guarantee applies to housing units allocated to the CDCR at each
facility on the earlier of achieving 90% of the capacity designated for CDCR offenders at each housing
unit or 120 days after the first inmate arrives at the housing unit. Capacity allocated to the CDCR is
subject to availability. Further, we can provide no assurance that the CDCR will utilize any additional
capacity.
Lawsuits have been filed against California officials by employee unions, advocacy groups and others
seeking to halt the out-of-state inmate transfers. On February 20, 2007, a California trial court, the
Superior Court of California, County of Sacramento, ruled that the Governor of California acted in
excess of his authority in issuing the emergency proclamation and that the contracts entered into by the
CDCR to implement out of state transfers violated civil service principles contained in the State’s
constitution. The enforcement of this ruling is stayed for ten days following entry of judgment and we
expect that there will be no change in the status of inmates already transferred to our facilities while the
stay of enforcement is in place. We expect that the Governor of California will appeal this ruling and
seek an extension of the stay of enforcement pending the results of the appeal. However, we can
provide no assurance that the ruling will be appealed or that an extension of the stay will be granted,
and we cannot predict the ultimate outcome of the appeal should it occur. Further, we can provide no
assurances as to whether additional lawsuits will arise, how the California courts will ultimately rule on
such lawsuits, the timing of the transfer of inmates, the total number of inmates that will ultimately be
received or whether court rulings could require the return of inmates to California.
44

During December 2006, we also entered into an agreement with Bent County, Colorado to house
Colorado male inmates under an inter-governmental service agreement between the County and State
of Colorado Department of Corrections. Under the agreement we may house up to 720 Colorado
inmates, subject to bed availability, at our North Fork Correctional Facility. The term of the contract
includes an initial term which commenced December 28, 2006 and runs through June 30, 2007, and
provides for mutually agreed extensions for a total contract term of up to five years. We initially
received approximately 240 Colorado inmates at the North Fork facility during December 2006. If
adequate bed space is available at the facility, Colorado may transfer additional inmates to the facility
in order to meet any growth in Colorado inmate populations.
As of December 31, 2006, the North Fork facility housed 796 inmates from the states of Vermont,
Wyoming, and Colorado. Based on our expectation of increased demand from a number of existing
state and federal customers, we intend to expand our North Fork Correctional Facility by 960 beds.
We began construction during the third quarter of 2006 and anticipate that construction will be
completed during the fourth quarter of 2007, at an estimated cost of $55.0 million.
During October 2005, construction was completed on the Stewart Detention Center in Stewart County,
Georgia and the facility became available for occupancy. Accordingly, we began depreciating the
facility in the fourth quarter of 2005 and ceased capitalizing interest on this project. During 2005, we
capitalized $2.8 million in interest costs incurred on this facility. The book value of the facility was
approximately $72.5 million upon completion of construction.
In June 2006, we entered into a new agreement with Stewart County, Georgia to house detainees from
ICE under an inter-governmental service agreement between Stewart County and ICE. The agreement
enables ICE to accommodate detainees at our Stewart Detention Center. The agreement with Stewart
County is effective through December 31, 2011, and provides for an indefinite number of renewal
options. We began receiving ICE detainees at the Stewart facility in October 2006 and expect that ICE
detainees will substantially occupy the Stewart facility sometime during 2007. As of December 31,
2006, we held 1,013 detainees at this facility.
During February 2005, we commenced construction of the Red Rock Correctional Center, a new
1,596-bed correctional facility located in Eloy, Arizona. The facility was completed during July 2006
for an aggregate cost of approximately $81 million. We relocated all of the Alaskan inmates from our
Florence Correctional Center into this new facility during the third quarter of 2006. The beds made
available at the Florence facility are expected to be used to satisfy anticipated state and federal demand
for detention beds in the Arizona area, including inmates from the state of California. As of December
31, 2006, the Red Rock facility housed 993 Alaskan inmates and 222 Hawaiian inmates. We expect to
relocate the Hawaiian inmates to our Saguaro Correctional Facility upon completion of construction
mid-2007.
While start-up activities and staffing expenses incurred in preparation for the arrival of detainees at the
Stewart Detention Center and inmates at the Red Rock and North Fork facilities had an adverse impact
on our results of operations during the second half of 2006, the utilization of this increased bed
capacity is expected to contribute to an increase in revenue and profitability in 2007.
Managed-Only Facilities
Our operating margins decreased at managed-only facilities during 2006 to 14.4% from 16.3% during
2005 primarily as a result of an increase in salaries and benefits caused in part by an increase in
employee medical insurance. The deterioration of operating margins at managed-only facilities was
also as a result of a new contract at the newly expanded Lake City Correctional Facility located in Lake
City, Florida. During November 2005, the Florida Department of Management Services, or Florida
DMS, solicited proposals for the management of the Lake City Correctional Facility beginning July 1,
45

2006. We responded to the proposal and were notified in April 2006 of the Florida DMS’s intent to
award a contract to us. We negotiated a three-year contract in exchange for a reduced per diem
effective July 1, 2006, which resulted in a reduction in revenue and operating margin at this facility
from the prior year. The Lake City Correctional Facility was expanded from 350 beds to 893 beds late
in the first quarter of 2005. The average daily inmate population at the Lake City Correctional Facility
during 2006 was 889 inmates compared with 689 inmates during 2005.
In December 2005, the Florida DMS announced that we were awarded contracts to design, construct,
and operate expansions through June 30, 2007 at the Bay Correctional Facility located in Panama City,
Florida by 235 beds and the Gadsden Correctional Institution located in Quincy, Florida by 384 beds.
Both of these expansions will be funded by the state of Florida for a fixed price and construction is
expected to be complete during the third quarter of 2007. We currently do not expect the costs to
exceed the fixed price and we believe any future changes in these costs would not be material.
In December 2006, the Florida DMS issued an Invitation to Negotiate (“ITN”) for the management of
the Gadsden and Bay facilities. We have responded to the ITN, but can provide no assurance that we
will be awarded a contract for our continued management of either of these facilities, or that we can
maintain current per diem rates. If we are not awarded the contracts to manage either of these
facilities, we would be required to report a non-cash charge for the impairment of tangible and
intangible assets of approximately $3.5 million to $4.0 million.
During October 2005, Hernando County, Florida completed an expansion by 382 beds of the Hernando
County Jail we manage in Brooksville, Florida, increasing the design capacity to 730 beds. As a result
of the expansion, the average daily inmate population during 2006 was 654 inmates compared with 483
inmates during 2005, contributing to an increase in revenue of $3.1 million during 2006 from the prior
year. However, the facility experienced an increase in operating expenses during 2006 to manage the
increasing population levels and as a result of an increase in expenses associated with outstanding
litigation, mitigating the increase in revenue.
During June 2005, Bay County, Florida solicited proposals for the management of the Bay County Jail
beginning October 1, 2006. During April 2006, we were selected for the continued management and
construction of both new and replacement beds at the facility. During May 2006, we signed a new
contract for the continued management of the Bay County Jail for a base term of six years with one
six-year renewal option. The construction of the new and replacement beds at the facility will be paid
by Bay County at a fixed price, and is expected to be complete during the second quarter of 2008. We
do not expect a material change in inmate populations resulting from these new agreements.
During September 2005, we announced that Citrus County renewed our contract for the continued
management of the Citrus County Detention Facility located in Lecanto, Florida. The terms of the new
agreement included a 360-bed expansion that commenced during the fourth quarter of 2005 and was
substantially completed during the first quarter of 2007 for a cost of approximately $18.5 million
funded by utilizing cash on hand. The facility has experienced an increase in operating expenses during
2006, primarily in the fourth quarter, as a result of the increase in staffing levels to support the new
inmate population expected to occupy the expansion beds.
During May 2006, we announced that we were awarded a contract with the New Mexico Department
of Corrections to operate and manage the State-owned Camino Nuevo Female Correctional Facility.
The 192-bed facility located in Albuquerque, New Mexico houses overflow offenders from our New
Mexico Women’s Correctional Facility located in Grants, New Mexico. Eventually, the facility will
also function as a pre-release center for female offenders that will be re-entering the community. The
facility began receiving an initial population of females in July 2006.

46

During 2006, our 1,270-bed Idaho Correctional Center experienced an increase in revenue of
approximately $1.4 million compared with the prior year primarily as a result of an increase in the
inmate population. The average daily inmate population during 2006 was 1,328 compared with an
average daily inmate population of 1,276 during 2006. This increase in population served to partially
offset the decreased operating margins experienced in 2006 at the facilities we manage but do not own.
General and administrative expense
For the years ended December 31, 2006 and 2005, general and administrative expenses totaled $63.6
million and $57.1 million, respectively. General and administrative expenses consist primarily of
corporate management salaries and benefits, professional fees and other administrative expenses, and
increased from 2005 primarily as a result of an increase in salaries and benefits, including an increase
of $1.6 million of restricted stock-based compensation awarded to employees who have historically
been awarded stock options and $1.6 million of stock option expense, which represents an increase of
$0.6 million over the $1.0 million of stock option expense in 2005, all of which was recorded in the
fourth quarter of 2005 as a result of the acceleration of vesting of all outstanding options as further
described hereafter.
In 2005, the Company made changes to its historical business practices with respect to awarding stockbased employee compensation as a result of, among other reasons, the issuance of Statement of
Financial Accounting Standards No. 123R, “Share-Based Payment,” or SFAS 123R. During the year
ended December 31, 2005, we recognized $1.7 million of general and administrative expense for the
amortization of restricted stock issued during 2005 to employees whose compensation is charged to
general and administrative expense. For the year ended December 31, 2006, we recognized
approximately $3.3 million of general and administrative expense for the amortization of restricted
stock granted to these employees in both 2005 and 2006, since the amortization period spans the threeyear vesting period of each restricted share award.
Further, on January 1, 2006, consistent with SFAS 123R we began recognizing general and
administrative expenses for the amortization of employee stock options granted after January 1, 2006
to employees whose compensation is charged to general and administrative expense, which heretofore
have not been recognized in our income statement, except with respect to the aforementioned
compensation charge of $1.0 million reported in the fourth quarter of 2005 for the acceleration of
vesting of outstanding options as further described hereafter. For the year ended December 31, 2006,
we recognized $1.6 million of general and administrative expense for the amortization of employee
stock options granted after January 1, 2006. As of December 31, 2006, we had $2.5 million of total
unrecognized compensation cost related to stock options that is expected to be recognized over a
remaining weighted-average period of 2.5 years.
Effective December 30, 2005, our board of directors approved the acceleration of the vesting of
outstanding options previously awarded to executive officers and employees under our Amended and
Restated 1997 Employee Share Incentive Plan and our Amended and Restated 2000 Stock Incentive
Plan. As a result of the acceleration, approximately 1.5 million unvested options became exercisable,
45% of which were otherwise scheduled to vest in February 2006. The purpose of the accelerated
vesting of stock options was to enable us to avoid recognizing compensation expense associated with
these options in future periods as required by SFAS 123R, estimated at the date of acceleration to be
$3.8 million in 2006, $2.0 million in 2007, and $0.5 million in 2008. In order to prevent unintended
benefits to the holders of these stock options, we imposed resale restrictions to prevent the sale of any
shares acquired from the exercise of an accelerated option prior to the original vesting date of the
option. The resale restrictions automatically expire upon the individual’s termination of employment.
All other terms and conditions applicable to such options, including the exercise prices, remained
unchanged. As a result of the acceleration, we recognized a non-cash, pre-tax charge of $1.0 million in
47

the fourth quarter of 2005 for the estimated value of the stock options that would have otherwise been
forfeited.
Our general and administrative expenses were also higher as a result of an increase in corporate
staffing levels. We continued to re-evaluate our organizational structure in 2005 and 2006 and
expanded our infrastructure to help ensure the quality and effectiveness of our facility operations. This
intensified focus contributed to the increase in salaries and benefits expense, as well as a number of
other general and administrative expense categories. We have also experienced increasing expenses to
implement and support numerous technology initiatives. We believe these strategies have contributed
to the increase in facility operating margins.
Depreciation and amortization
For the years ended December 31, 2006 and 2005, depreciation and amortization expense totaled $67.7
million and $59.9 million, respectively. The increase in depreciation and amortization from 2005
resulted from the combination of additional depreciation expense recorded on various completed
facility expansion and development projects, most notably our Stewart Detention Center and Red Rock
Correctional Center, and the additional depreciation on our investments in technology. The
investments in technology are expected to provide long-term benefits enabling us to provide enhanced
quality service to our customers while creating scalable operating efficiencies.
Interest expense, net
Interest expense was reported net of interest income and capitalized interest for the years ended
December 31, 2006 and 2005. Gross interest expense, net of capitalized interest, was $67.9 million
and $69.3 million, respectively, for the years ended December 31, 2006 and 2005. Gross interest
expense during these periods was based on outstanding borrowings under our senior bank credit
facility, our outstanding senior notes, convertible subordinated notes payable balances (until
converted), and amortization of loan costs and unused facility fees. The decrease in gross interest
expense from the prior year was primarily attributable to the recapitalization and refinancing
transactions completed during the first half of 2005 and additional refinancing transactions completed
during the first quarter of 2006, as further described hereafter.
Gross interest income was $9.1 million and $5.4 million, respectively, for the years ended December
31, 2006 and 2005. Gross interest income is earned on cash collateral requirements, a direct financing
lease, notes receivable, investments, and cash and cash equivalents, and increased due to the
accumulation of higher cash and investment balances generated from operating cash flows.
Capitalized interest was $4.7 million and $4.5 million during 2006 and 2005, respectively, and was
associated with various construction and expansion projects further described under “Liquidity and
Capital Resources” hereafter.
Expenses associated with debt refinancing and recapitalization transactions
For the years ended December 31, 2006 and 2005, expenses associated with debt refinancing and
recapitalization transactions were $1.0 million and $35.3 million, respectively. Charges of $1.0 million
in the first quarter of 2006 consisted of the write-off of existing deferred loan costs associated with the
pay-off and retirement of the old senior bank credit facility. Charges of $35.0 million in the first
quarter of 2005 consisted of a tender premium paid to the holders of the $250.0 million 9.875% senior
notes who tendered their notes to us at a price of 111% of par pursuant to a tender offer we made for
their notes in March 2005, the write-off of existing deferred loan costs associated with the purchase of
the $250.0 million 9.875% senior notes and the lump sum pay-down of the term portion of our senior
bank credit facility made with the proceeds from the issuance of $375.0 million of 6.25% senior notes,
48

and estimated fees and expenses associated with each of the foregoing transactions. The remaining
charges in 2005 consisted of the write-off of existing deferred loan costs and third-party fees and
expenses associated with an amendment to the senior bank credit facility obtained during the second
quarter of 2005, whereby we reduced the interest rate margins associated with the facility and prepaid
$20.0 million of the term portion of the facility with proceeds from a draw of a like amount on the
revolving portion of the facility.
Income tax expense
During the years ended December 31, 2006 and 2005, our financial statements reflected an income tax
provision of $61.1 million and $26.9 million, respectively.
Our effective tax rate was approximately 37% during the year ended December 31, 2006 compared to
approximately 35% during the year ended December 31, 2005. The lower effective tax rate during
2005 resulted from certain tax planning strategies implemented during the fourth quarter of 2004, that
were magnified by the recognition of deductible expenses associated with our debt refinancing
transactions completed during the first half of 2005. In addition, we also successfully pursued and
recognized investment tax credits of $0.7 million in 2005. The effective tax rate during 2006 was also
favorably impacted by an increase in the income tax benefits of equity compensation during 2006.
We currently expect our effective tax rate to increase slightly in 2007 as a result of an increase in our
projected taxable income in states with higher statutory tax rates as well as the negative impact of a
change in Texas tax law. Our overall effective tax rate is estimated based on our current projection of
taxable income and could change in the future as a result of changes in these estimates, the
implementation of additional tax strategies, changes in federal or state tax rates, changes in estimates
related to uncertain tax positions, or changes in state apportionment factors, as well as changes in the
valuation allowance applied to our deferred tax assets that are based primarily on the amount of state
net operating losses and tax credits that could expire unused.
Discontinued operations
On March 21, 2005, the Tulsa County Commission in Oklahoma provided us notice that, as a result of
a contract bidding process, the County elected to have the Tulsa County Sheriff's Office assume
management of the David L. Moss Criminal Justice Center upon expiration of the contract on June 30,
2005. Operations were transferred to the Sheriff’s Office on July 1, 2005. Total revenue and operating
expenses during 2005 were $10.7 million and $11.2 million, respectively. After depreciation expense
and income taxes, the facility experienced a loss of $0.4 million for the year ended December 31, 2005.
Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
During the year ended December 31, 2005, we generated net income available to common stockholders
of $50.1 million, or $0.83 per diluted share, compared with net income available to common
stockholders of $61.1 million, or $1.04 per diluted share, for the previous year. Contributing to the net
income for 2005 compared to the previous year was an increase in operating income of $3.5 million,
from $173.4 million during 2004 to $176.9 million during 2005 as a result of an increase in occupancy
levels and new management contracts, partially offset by an increase in general and administrative
expenses and depreciation and amortization.
Net income available to common stockholders during 2005 was negatively impacted by a $35.3 million
pre-tax charge, or $0.38 per diluted share net of taxes, associated with debt refinancing transactions
completed during the first and second quarters, as further described hereafter. The charge consisted of
a tender premium paid to the holders of the 9.875% senior notes (who tendered their notes to us at a
price of 111% of par pursuant to a tender offer we made for the 9.875% senior notes in March 2005),
49

estimated fees and expenses associated with the tender offer, and the write-off of (i) existing deferred
loan costs associated with the purchase of the 9.875% senior notes, (ii) existing deferred loan costs
associated with a lump sum pay-down of our senior bank credit facility, and (iii) existing deferred loan
costs and third-party fees incurred in connection with obtaining an amendment to our old senior bank
credit facility.
Facility Operations
Revenue and expenses per compensated man-day for all of the facilities we owned or managed,
exclusive of those discontinued (see further discussion below regarding discontinued operations), were
as follows for the years ended December 31, 2005 and 2004:
For the Years Ended
December 31,
2004
2005
Revenue per compensated man-day
Operating expenses per compensated man-day:
Fixed expense
Variable expense
Total

$

Operating margin per compensated man-day

$

50.69

$

27.59
9.21
36.80

28.50
9.39
37.89
12.80

49.21

$

12.41

Operating margin

25.3%

25.2%

Average compensated occupancy

91.4%

94.9%

Average compensated occupancy for the year ended December 31, 2005 decreased from the prior year
primarily as a result of the completion of construction of approximately 2,500 beds at seven facilities
throughout the second half of 2004 and the first quarter of 2005. In addition, we evaluate the design
capacity of our facilities from time to time based on the customers using the facilities and the ability to
reconfigure space with minimal capital outlays. In connection with the preparation of the 2005 budget,
we increased the previously reported design capacities by an aggregate of approximately 1,500 beds
effective January 1, 2005. Excluding these design capacity changes, as well as similar design capacity
changes made during the third quarter of 2004, compensated occupancy would have been 94.2% for
the year ended December 31, 2005.
Business from our federal customers, including the Bureau of Prisons, or the BOP, the United States
Marshals Service, or the USMS, and ICE, continues to be a significant component of our business.
Our federal customers generated 39% and 38% of our total revenue for the years ended December 31,
2005 and 2004, respectively.
Operating expenses totaled $898.8 million and $850.4 million for the years ended December 31, 2005
and 2004, respectively. Operating expenses consist of those expenses incurred in the operation and
management of adult and juvenile correctional and detention facilities, and for our inmate
transportation subsidiary.
Salaries and benefits represent the most significant component of fixed operating expenses with
approximately 64% of our operating expenses consisting of salaries and benefits. During 2005,
salaries and benefits expense at our correctional and detention facilities increased $34.6 million from
2004. Salaries have increased as a result of annual raises, the commencement of management
operations at the Delta Correctional Facility and the Northeast Ohio Correctional Center in April 2004,
and an increase in staffing levels as a result of the arrival of additional inmate populations at the
Northeast Ohio Correctional Center resulting from the commencement of a new contract with the BOP
50

in June 2005, and at several facilities where expansions have been completed. In addition, temporary
reductions in inmate populations at several other facilities, mostly during the first half of 2005, did not
justify a decrease in staffing levels at such facilities, resulting in an increase in salaries per
compensated man-day, as these fixed expenses were spread over fewer compensated man-days. These
increases were mitigated by successful cost containment efforts in employee medical and workers’
compensation expenses across the portfolio.
Facility variable expenses increased 2.0% from $9.21 per compensated man-day during 2004 to $9.39
per compensated man-day during 2005. The increase in facility variable expenses was primarily the
result of general inflationary increases in the costs of services such as our food service and inmate
medical expenses, partially offset by a reduction in expenses related to legal proceedings in which we
are involved.
We have been successful at settling certain legal proceedings in which we are involved on terms we
believe are favorable. During 2005, we settled a number of outstanding legal matters for amounts less
than reserves previously established for such matters, which resulted in a reduction to operating
expenses of approximately $2.7 million during 2005 compared with 2004. Expenses associated with
legal proceedings may fluctuate from quarter to quarter based on changes in our assumptions, new
developments, or by the effectiveness of our litigation and settlement strategies. Our recent success in
settling outstanding claims at amounts less than previously reserved is not likely to be sustained for the
long-term and it is possible that future cash flows and results of operations could be adversely affected
by increases in expenses associated with legal matters in which we become involved.
The following tables display the revenue and expenses per compensated man-day for the facilities we
own and manage and for the facilities we manage but do not own:
For the Years Ended
December 31,
2004
2005
Owned and Managed Facilities:
Revenue per compensated man-day
Operating expenses per compensated man-day:
Fixed expense
Variable expense
Total

$

58.95

$

30.81
9.96
40.77

31.79
10.19
41.98

Operating margin per compensated man-day

$

16.97

57.02

$

16.25

Operating margin

28.8%

28.5%

Average compensated occupancy

88.3%

90.3%

For the Years Ended
December 31,
2004
2005
Managed Only Facilities:
Revenue per compensated man-day
Operating expenses per compensated man-day:
Fixed expense
Variable expense
Total

$

37.46

$

22.42
7.99
30.41

23.22
8.12
31.34

Operating margin per compensated man-day

$

6.12

36.68

$

6.27

Operating margin

16.3%

17.1%

Average compensated occupancy

96.7%

103.3%

51

The following discussions under “Owned and Managed Facilities” and “Managed-Only Facilities”
address significant events that impacted our results of operations for the respective periods, and events
that are expected to affect our results of operations in the future.
Owned and Managed Facilities
On April 7, 2004, we announced that we resumed operations at our 2,016-bed Northeast Ohio
Correctional Center located in Youngstown, Ohio. Since then, we have managed federal prisoners
from United States federal court districts that have been experiencing a lack of detention space and/or
high detention costs. As of December 31, 2005, we housed 635 USMS prisoners at this facility
compared with 287 USMS prisoners at the facility as of December 31, 2004. The operating revenues
for 2004 were $3.4 million, while operating expenses were $8.5 million for 2004 at this facility
partially as a result of start-up activities and for staffing expenses in preparation for the arrival of
additional inmates at this facility. Prior to being awarded the contract with the USMS, this facility had
been idle since 2001. We believed that re-opening this facility put us in a competitive position to win
contract awards for the utilization of the facility.
On December 23, 2004, we received a contract award from the BOP to house approximately 1,195
BOP inmates at our Northeast Ohio Correctional Center. The contract, awarded as part of the Criminal
Alien Requirement Phase 4 Solicitation ("CAR 4"), provides for an initial four-year term with three
two-year renewal options. The terms of the contract provide for a 50% guaranteed rate of occupancy
for 90 days following commencement of the contract and a 90% guaranteed rate of occupancy
thereafter. The contract commenced June 1, 2005. As of December 31, 2005, we housed 1,224 BOP
inmates at this facility. Total revenue increased by $24.7 million during 2005 compared with 2004 as a
result of this new contract and from an increase in USMS prisoners at this facility.
During July 2004, an inmate disturbance at the Crowley County Correctional Facility located in Olney
Springs, Colorado resulted in damage to the facility, requiring us to transfer a substantial portion of the
inmates to other of our facilities and to facilities owned by the state of Colorado. Although repair of
the facility was substantially complete at December 31, 2004, Colorado continued to reduce inmate
populations at all four of our facilities in Colorado to as low as 2,564 in November 2004. However,
the impact was mitigated by the recovery of $1.0 million of business interruption and other insurance
proceeds recognized during the first quarter of 2005. As of December 31, 2005, we housed 1,144
inmates at this facility, compared with 695 inmates at December 31, 2004, despite a relocation of 189
inmates during 2005 from the state of Washington to our Prairie Correctional Facility, largely due to an
expansion of the Crowley facility by 594 beds completed during the third quarter of 2004. Our overall
inmate populations from the state of Colorado have also recovered. We housed 3,408 inmates from the
state of Colorado as of December 31, 2005, compared with 2,882 inmates just prior to the inmate
disturbance at the Crowley facility.
As a result of the completion of bed expansions at our Houston Processing Center and our
Leavenworth Detention Center during the fourth quarter of 2004, total revenue increased during 2005
from 2004 by a combined $13.3 million. We expanded the Houston Processing Center by 494 beds,
from a design capacity of 411 beds to 905 beds, in connection with a new contract with ICE to
accommodate additional detainee populations that were anticipated as a result of this contract, which
contains a guarantee that ICE will utilize 679 beds. We expanded the Leavenworth Detention Center
by 284 beds, from a design capacity of 483 beds to 767 beds, in connection with a new contract with
the USMS. The new USMS contract provides a guarantee that the USMS will utilize 400 beds.
During the second quarter of 2005, the state of Indiana removed all of its inmates from our 656-bed
Otter Creek Correctional Facility to utilize available capacity within the State’s correctional system.
All of the Indiana inmates were transferred to the state of Indiana by the end of the second quarter of
2005. However, during July 2005, we entered into an agreement with the Kentucky Department of
52

Corrections to manage up to 400 female inmates at this facility. The terms of the contract include an
initial two-year period, with four two-year renewal options. Beginning July 1, 2006, the state of
Kentucky guarantees an inmate population from any state of 90% of the facility design capacity,
subject to appropriation. We began receiving these inmates in August 2005. As of December 31, 2005,
we housed 390 Kentucky inmates at this facility.
During October 2005, we entered into an agreement with the state of Hawaii to house up to 140 female
Hawaii inmates at the Otter Creek Correctional Center. The terms of the contract include an initial oneyear period, with two one-year renewal options. The facility began receiving Hawaii inmates during
September 2005 under a 30-day contract completed in September 2005. As of December 31, 2005, we
housed 119 Hawaii inmates at this facility. Operating income decreased at this facility by $4.0 million
during 2005 compared to 2004.
As a result of declining inmate populations from the USMS and ICE at our 1,216-bed San Diego
Correctional Facility, total revenues decreased by $4.0 million during 2005 compared with 2004. The
average compensated occupancy during 2005 and 2004 was 96.5% and 108.5%, respectively.
However, effective July 1, 2005, ICE awarded us a contract for the continued management at this
facility. The contract, which governs the management of both USMS and ICE inmates, has a threeyear base term with five three-year renewal options, and includes a guaranteed inmate population of
900 ICE detainees and 300 USMS inmates.
During 2004, the state of Wisconsin reduced the number of inmates housed at both our 2,160-bed
Diamondback Correctional Facility and our 1,550-bed Prairie Correctional Facility, by opening various
facilities owned by the State. As discussed hereafter, the available beds at Diamondback Correctional
Facility, which resulted from the declining inmate population from the state of Wisconsin, have been
filled with inmates from the state of Arizona. The average daily inmate population housed from the
state of Wisconsin at our Prairie Correctional Facility declined from 773 inmates during 2004 to 18
inmates during 2005. The reduction in inmate populations from the state of Wisconsin were offset by
an increase in inmate populations from the states of Washington and Minnesota at the Prairie facility
resulting from new management contract awards from those states in mid-2004.
On March 4, 2004, we announced that we entered into an agreement with the state of Arizona to
manage up to 1,200 Arizona inmates at our Diamondback Correctional Facility. The agreement
represents the first time the State has partnered with us to provide residential services to its inmates.
As of December 31, 2005 and 2004, the facility housed approximately 1,170 and 800 inmates,
respectively, from the state of Arizona contributing to an increase of $5.0 million in total revenues at
this facility in 2005 compared with the prior year.
During July 2005, we announced our intention to cease operations at our T. Don Hutto Correctional
Center located in Taylor, Texas, effective early September 2005. However during the fourth quarter of
2005, the facility housed inmates from the Liberty County Jail we managed in Liberty, Texas on a
temporary basis due to the effects of Hurricane Rita on the Liberty County Jail. Although the Liberty
County Jail sustained no property damage, inmates were held in the T. Don Hutto Correctional Center
until power and other services were restored at the Liberty County Jail. Additionally, on October 20,
2005, we agreed to provide temporary housing for approximately 1,200 detainees from ICE housed in
government detention facilities throughout the state of Florida due to the anticipated arrival of
Hurricane Wilma and the emergency evacuation of all detainees in Florida. We initially housed
approximately 600 detainees at our T. Don Hutto Correctional Center and approximately 600 detainees
at our Florence Correctional Center. These detainee populations were returned to Florida during
December 2005.
During January 2006, we received notification from the BOP of its intent not to exercise its renewal
option at our 1,500-bed Eloy Detention Center, located in Eloy, Arizona. At December 31, 2005, the
53

Eloy facility housed approximately 500 inmates from the BOP and approximately 800 detainees from
ICE, pursuant to a subcontract between the BOP and ICE. The BOP completed the transfer of its
inmates from the Eloy facility to other BOP facilities by February 28, 2006. During February 2006, we
reached an agreement with the City of Eloy to manage detainees from ICE at this facility under an
inter-governmental service agreement between the City of Eloy and ICE, effectively providing ICE the
ability to fully utilize Eloy Detention Center for existing and potential future requirements. Under our
agreement with the City of Eloy, we are eligible for periodic rate increases that were not provided in
the existing contract with the BOP. Although the contract does not provide for a guaranteed
occupancy, we expect over time that the facility will be substantially occupied by ICE detainees.
During September 2003, we announced our intention to complete construction of the Stewart County
Correctional Facility located in Stewart County, Georgia. Construction on the 1,524-bed Stewart
County Correctional Facility began in August 1999 and was suspended in May 2000. Our decision to
complete construction of this facility was based on anticipated demand from several government
customers having a need for inmate bed capacity in the Southeast region of the country. During
October 2005, construction was completed and the facility was available for occupancy. Accordingly,
we began depreciating the new facility in the fourth quarter of 2005 and ceased capitalizing interest on
this project. During 2005 and 2004, we capitalized $2.8 million and $4.3 million, respectively, in
interest costs incurred on this facility. The book value of the facility was approximately $72.5 million
upon completion of construction. Because we did not have a contract to house inmates at this facility
immediately following completion of construction, our overall occupancy percentage was negatively
impacted as a result of the additional vacant beds available at the Stewart facility. In June 2006, we
entered into a new agreement with Stewart County, Georgia to house detainees from ICE under an
inter-governmental service agreement between Stewart County and ICE.
Managed-Only Facilities
Our operating margins declined at managed-only facilities from 17.1% during 2004 to 16.3% during
2005 primarily as a result of declines in inmate populations at the 1,150-bed Bay County Jail located in
Panama City, Florida and the 1,092-bed Metro-Davidson County Detention Facility located in
Nashville, Tennessee. These declines were partially offset by an increase in inmate populations at the
newly expanded Lake City Correctional Facility located in Lake City, Florida, particularly during the
second and third quarters of 2005.
Primarily as a result of declines in inmate populations at the Bay County Jail and the Metro-Davidson
County Detention Facility, total revenue decreased during 2005 from the comparable periods in 2004
by a combined $5.8 million. The decline in occupancy at the Metro-Davidson County Detention
Facility is the result of the loss of female inmates at the facility caused by the opening of a new femaleonly detention facility by Davidson County during the first quarter of 2005.
On March 23, 2004, we announced the completion of a contractual agreement with Mississippi's Delta
Correctional Authority to resume operations of the state-owned 1,016-bed Delta Correctional Facility
located in Greenwood, Mississippi. We managed the medium security correctional facility for the
Delta Correctional Authority since its opening in 1996 until the State closed the facility in 2002, due to
excess capacity in the State's corrections system. The initial contract was for one year, with one twoyear extension option. We began receiving inmates from the state of Mississippi at the facility on
April 1, 2004. In addition, after completing the contractual agreement with the Delta Correctional
Authority, we entered into an additional contract to manage inmates from Leflore County, Mississippi.
This one-year contract provides for housing for up to 160 male inmates and up to 60 female inmates,
and is renewable annually. As of December 31, 2005, we housed 972 and 123 inmates from the state
of Mississippi and Leflore County, respectively.

54

Effective July 1, 2005, the Florida DMS awarded us contract extensions for three medium-security
correctional facilities we manage on behalf of the state of Florida. Accordingly, we expect to continue
management operations of the 750-bed Bay Correctional Facility in Panama City, Florida; the 1,036bed Gadsden Correctional Institution in Quincy, Florida; and the recently expanded 893-bed Lake City
Correctional Facility in Lake City, Florida. The management contracts at Bay Correctional Facility
and Gadsden Correctional Institution were renewed for a period of two years. The management
contract at Lake City Correctional Facility was renewed for a one-year term.
In December 2005, the Florida DMS announced we were awarded contracts to design, construct, and
operate expansions at the Bay Correctional facility by 235 beds and the Gadsden facility by 384 beds.
Both of these expansions will be funded by the state of Florida and construction is expected to be
complete during the third quarter of 2007.
During October 2005, Hernando County, Florida completed an expansion by 382 beds of the 348-bed
Hernando County Jail we manage in Brooksville, Florida, which we expect to contribute to an increase
in revenue in the future.
During June 2005, Bay County, Florida solicited proposals for the management of the Bay County Jail
beginning October 1, 2006. During April 2006, we were selected for the continued management and
construction of both new and replacement beds at the facility. During May 2006, we signed a new
contract for the continued management of the Bay County Jail for a base term of six years with one
six-year renewal option. The construction of the new and replacement beds at the facility will be paid
by Bay County at a fixed price, and is expected to be complete during the second quarter of 2008. We
do not expect a material change in inmate populations resulting from these new agreements.
General and administrative expense
For the years ended December 31, 2005 and 2004, general and administrative expenses totaled $57.1
million and $48.2 million, respectively. General and administrative expenses consist primarily of
corporate management salaries and benefits, professional fees and other administrative expenses, and
increased from 2004 primarily as a result of an increase in salaries and benefits, combined with an
increase in professional services during 2005 compared with 2004. Also, the increase attributable to
salaries and benefits was caused in part by the recognition of restricted stock-based compensation of
$1.7 million during 2005 awarded to employees who have historically been awarded stock options, and
an additional $1.0 million for a charge associated with the acceleration of vesting effective December
30, 2005 of all outstanding stock options.
In 2005, the Company made changes to its historical business practices with respect to awarding stockbased employee compensation as a result of, among other reasons, the issuance of SFAS 123R. During
the year ending December 31, 2005, we recognized $1.7 million of general and administrative expense
for the amortization of restricted stock issued during 2005 to employees whose compensation is
charged to general and administrative expense. Because these employees have historically been
granted stock options rather than restricted stock, no such expense was recognized in our statement of
operations during 2004. As a result, the issuance of restricted stock rather than stock options to these
employees will contribute to a significant increase in our reported general and administrative expenses,
even though our overall financial position and total cash flows are not affected by this change in
compensation philosophy. This increase was exacerbated in 2006, when general and administrative
expense included the amortization of restricted stock granted to these employees in both 2005 and
2006, since the amortization period spans the three-year vesting period of the restricted shares.
Further, on January 1, 2006, we began recognizing general and administrative expenses for the
amortization of employee stock options granted after January 1, 2006, to employees whose
compensation is charged to general and administrative expense, which heretofore have not been
recognized in our income statement, except with respect to the aforementioned compensation charge of
55

$1.0 million recorded in the fourth quarter of 2005 for the acceleration of vesting of outstanding
options as further described hereafter.
Effective December 30, 2005, our board of directors approved the acceleration of the vesting of
outstanding options previously awarded to executive officers and employees under our Amended and
Restated 1997 Employee Share Incentive Plan and our Amended and Restated 2000 Stock Incentive
Plan. As a result of the acceleration, approximately 1.5 million unvested options became exercisable,
45% of which were scheduled to vest in February 2006. The purpose of the accelerated vesting of
stock options was to enable us to avoid recognizing compensation expense associated with these
options in future periods as required by SFAS 123R, which we were required to adopt by January 1,
2006, estimated at the date of acceleration to be $3.8 million in 2006, $2.0 million in 2007, and $0.5
million in 2008. In order to prevent unintended benefits to the holders of these stock options, we
imposed resale restrictions to prevent the sale of any shares acquired from the exercise of an
accelerated option prior to the original vesting date of the option. The resale restrictions automatically
expire upon the individual’s termination of employment. All other terms and conditions applicable to
such options, including the exercise prices, remained unchanged. As a result of the acceleration, we
recognized a non-cash, pre-tax charge of $1.0 million in the fourth quarter of 2005 for the estimated
value of the stock options that would have otherwise been forfeited.
Our general and administrative expenses were also higher as a result of an increase in corporate
staffing levels. In response to a number of inmate disturbances experienced during 2004, we reevaluated our organizational structure and expanded our infrastructure to help ensure the quality and
effectiveness of our facility operations. We have also expanded our infrastructure to implement and
support numerous technology initiatives that we believe will provide long-term benefits enabling us to
provide enhanced quality service to our customers while creating scalable efficiencies. This intensified
focus on quality assurance and technology has contributed, and is expected to continue to contribute, to
an increase in salaries and benefits expense, as well as a number of other general and administrative
expense categories.
We have also experienced increasing expenses to comply with increasing corporate governance
requirements, a significant portion of which was incurred to continue to comply with section 404 of the
Sarbanes-Oxley Act of 2002. We also continue to evaluate the potential need to expand our corporate
office infrastructure to improve outreach and oversight of our facility operations to reduce turnover and
improve facility performance. These initiatives could also lead to higher general and administrative
expenses in the future.
Depreciation and amortization
For the years ended December 31, 2005 and 2004, depreciation and amortization expense totaled $59.9
million and $54.4 million, respectively. The increase in depreciation and amortization from 2004
resulted from the combination of additional depreciation expense recorded on the various facility
expansion and development projects completed and the additional depreciation on our investments in
technology. The investments in technology are expected to provide long-term benefits enabling us to
provide enhanced quality service to our customers while creating scalable operating efficiencies.
Interest expense, net
Interest expense was reported net of interest income and capitalized interest for the years ended
December 31, 2005 and 2004. Gross interest expense, net of capitalized interest, was $69.3 million
and $73.2 million, respectively, for the years ended December 31, 2005 and 2004. Gross interest
expense during these periods is based on outstanding borrowings under our senior bank credit facility,
9.875% senior notes (until fully tendered), 7.5% senior notes, 6.25% senior notes, convertible
subordinated notes payable balances (until converted), and amortization of loan costs and unused credit
56

facility fees. The decrease in gross interest expense from the prior year was primarily attributable to
the recapitalization and refinancing transactions completed during the first half of 2005 partially offset
by an increasing interest rate environment as applicable to the variable interest rates on our senior bank
credit facility.
Gross interest income was $5.4 million and $4.0 million, respectively, for the years ended December
31, 2005 and 2004. Gross interest income is earned on cash collateral requirements, a direct financing
lease, notes receivable, investments, and cash and cash equivalents.
Capitalized interest was $4.5 million and $5.8 million during 2005 and 2004, respectively, and was
associated with various construction and expansion projects.
Expenses associated with debt refinancing and recapitalization transactions
For the years ended December 31, 2005 and 2004, expenses associated with debt refinancing and
recapitalization transactions were $35.3 million and $0.1 million, respectively. The charges in the first
quarter of 2005 consisted primarily of (i) a tender premium paid to the holders of the $250.0 million
9.875% senior notes who tendered their notes to us at a price of 111% of par pursuant to a tender offer
for the 9.875% notes in March 2005, (ii) the write-off of existing deferred loan costs associated with
the purchase of the $250.0 million 9.875% senior notes and lump sum pay-down of the term portion of
our senior bank credit facility made with the proceeds from the issuance of $375.0 million 6.25%
senior notes, and (iii) estimated fees and expenses associated with each of the foregoing transactions.
The charges in the second quarter of 2005 consisted of the write-off of existing deferred loan costs and
third-party fees and expenses associated with an amendment to the senior bank credit facility.
The charges in 2004 were associated with the redemption of the remaining series A preferred stock in
the first quarter of 2004 and the redemption of the remaining series B preferred stock in the second
quarter of 2004, as well as third party fees associated with the amendment to our senior bank credit
facility obtained during the second quarter of 2004.
Income tax expense
During the years ended December 31, 2005 and 2004, our financial statements reflected an income tax
provision of $26.9 million and $41.5 million, respectively.
Our effective tax rate was approximately 35% during the year ended December 31, 2005 compared to
approximately 40% during the year ended December 31, 2004. The lower effective tax rate during
2005 resulted from certain tax planning strategies implemented during the fourth quarter of 2004, that
were magnified by the recognition of deductible expenses associated with our debt refinancing
transactions completed during the first half of 2005. In addition, we also successfully pursued and
recognized investment tax credits of $0.7 million during 2005.
Discontinued operations
On March 18, 2003, we were notified by the Department of Corrections of the Commonwealth of
Virginia of its intention to not renew our contract to manage the 1,500-bed Lawrenceville Correctional
Center located in Lawrenceville, Virginia, upon the expiration of the contract, which occurred on
March 22, 2003. Results for 2004 include residual activity from the operation of this facility, including
primarily proceeds received from the sale of fully depreciated equipment. These results are reported as
discontinued operations.
During the first quarter of 2004, we received $0.6 million in proceeds from the Commonwealth of
Puerto Rico as a settlement for repairs we previously made to a facility we formerly operated in Ponce,
57

Puerto Rico. These proceeds, net of taxes, are presented as discontinued operations for year ended
December 31, 2004.
Due to operating losses incurred at the Southern Nevada Women’s Correctional Center, we elected to
not renew our contract to manage the facility upon the expiration of the contract. Accordingly, we
transferred operation of the facility to the Nevada Department of Corrections on October 1, 2004.
During 2004, the facility generated total revenue of $6.1 million and incurred total operating expenses
of $7.0 million.
On March 21, 2005, the Tulsa County Commission in Oklahoma provided us notice that, as a result of
a contract bidding process, the County elected to have the Tulsa County Sheriff's Office assume
management of the David L. Moss Criminal Justice Center upon expiration of the contract on June 30,
2005. Operations were transferred to the Sheriff’s Office on July 1, 2005. Total revenue and operating
expenses during 2005 were $10.7 million and $11.2 million, respectively, compared with total revenue
and operating expenses during 2004 of $21.9 million and $20.2 million, respectively.
Distributions to preferred stockholders
For the year ended December 31, 2004, distributions to preferred stockholders totaled $1.5 million.
During the first quarter of 2004, we redeemed the remaining 0.3 million outstanding shares of our
series A preferred stock at a price of $25.00 per share, plus accrued dividends to the redemption date.
Further, during the second quarter of 2004, we redeemed the remaining 1.0 million outstanding shares
of our series B preferred stock at a price of $24.46 per share, plus accrued dividends to the redemption
date.
LIQUIDITY AND CAPITAL RESOURCES
Our principal capital requirements are for working capital, capital expenditures, and debt service
payments. Capital requirements may also include cash expenditures associated with our outstanding
commitments and contingencies, as further discussed in the notes to our financial statements.
Additionally, we may incur capital expenditures to expand the design capacity of certain of our
facilities (in order to retain management contracts) and to increase our inmate bed capacity for
anticipated demand from current and future customers. We may acquire additional correctional
facilities that we believe have favorable investment returns and increase value to our stockholders. We
will also consider opportunities for growth, including potential acquisitions of businesses within our
line of business and those that provide complementary services, provided we believe such
opportunities will broaden our market share and/or increase the services we can provide to our
customers.
As a result of increasing demand from both our federal and state customers and the utilization of a
significant portion of our existing available beds, we have intensified our efforts to deliver new
capacity to address the lack of available beds that our existing and potential customers are
experiencing. We can provide no assurance, however, that the increased capacity that we construct will
be utilized. The following addresses certain significant projects that are currently in process:
During September 2005, we announced that Citrus County renewed our contract for the continued
management of the Citrus County Detention Facility located in Lecanto, Florida. The contract has a
ten-year base term with one five-year renewal option. The terms of the new agreement included a 360bed expansion that commenced during the fourth quarter of 2005. The expansion of the facility, which
is owned by the County, was substantially completed during the first quarter of 2007 for a cost of
approximately $18.5 million, funded by utilizing cash on hand. The remaining cost to complete the
expansion was $2.8 million as of December 31, 2006. If the County terminates the management
contract at any time prior to twenty years following completion of construction, the County would be
58

required to pay us an amount equal to the construction cost less an allowance for the amortization over
a twenty-year period.
In order to maintain an adequate supply of available beds to meet anticipated demand, while offering
the state of Hawaii the opportunity to consolidate its inmates into fewer facilities, we commenced
construction of the Saguaro Correctional Facility, a new 1,896-bed correctional facility located
adjacent to the Red Rock Correctional Center in Eloy, Arizona. The Saguaro Correctional Facility is
expected to be completed mid-2007 at an estimated cost of approximately $103 million with a
remaining cost to complete of $30.6 million as of December 31, 2006. We currently expect to
consolidate inmates from the state of Hawaii from several of our other facilities to this new facility.
Although we can provide no assurance, we currently expect that growing state and federal demand for
beds will ultimately absorb the beds vacated by the state of Hawaii. As of December 31, 2006, we
housed 1,873 inmates from the state of Hawaii.
In July 2006 we were notified by the state of Colorado that the State had accepted our proposal to
expand our 700-bed Bent County Correctional Facility in Las Animas, Colorado by 720 beds to fulfill
part of a 2,250-bed request for proposal issued by the state of Colorado in December 2005. As a result
of the award, we have now entered into an Implementation Agreement with the state of Colorado for
the expansion of our Bent County Correctional Facility by 720 beds. In addition, during November
2006 we entered into another Implementation Agreement to also expand our 768-bed Kit Carson
Correctional Center in Burlington, Colorado by 720 beds. Construction of the Bent and Kit Carson
facilities is estimated to cost approximately $88 million. Both expansions are anticipated to be
completed during the second quarter of 2008.
During January 2007, we announced that we received a contract award from the BOP to house up to
1,558 federal inmates at our Eden Detention Center in Eden, Texas. We currently house approximately
1,300 BOP inmates at the Eden facility, under an existing inter-governmental services agreement
between the BOP and the City of Eden. The contract requires a renovation and expansion of the Eden
facility, which will increase the rated capacity of the facility by 129 beds to an aggregate capacity of
1,354 beds. Renovation of the Eden facility is expected to be completed in the first quarter of 2008 at
an estimated cost of approximately $20.0 million.
Based on our expectation of demand from a number of existing state and federal customers, during
August 2006 we announced our intention to expand our 1,440-bed North Fork Correctional Facility by
960 beds, our 1,104-bed Tallahatchie County Correctional Facility in Tutwiler, Mississippi by 360
beds, and our 568-bed Crossroads Correctional Center in Shelby, Montana, by 96 beds. The estimated
cost to complete these expansions is approximately $81 million. As previously described herein, we
recently signed contracts with the state of Wyoming for up to 600 inmates and with the state of
Colorado for up to 720 inmates at the North Fork facility, which also houses inmates from the state of
Vermont. Although we expect any Colorado inmates housed at this facility to ultimately be transferred
to the facilities we are expanding in Colorado, we also expect the state of California to utilize this
facility. Our Tallahatchie facility was 90% occupied as of December 31, 2006, mostly with inmates
from the state of Hawaii, while our Crossroads facility was 97% occupied with inmates from the state
of Montana and the USMS.
The following table summarizes the aforementioned construction and expansion projects expected to
be completed through the second quarter of 2008:

59

Facility
Citrus County Detention Facility
Lecanto, FL
Crossroads Correctional Center
Shelby, MT
Saguaro Correctional Facility
Eloy, AZ

No. of
beds

Estimated
completion date

360

First quarter 2007

96

First quarter 2007

1,896

Estimated cost
to complete as of
December 31, 2006
(in thousands)
$

2,769

988

Mid-2007

30,573

North Fork Correctional Facility
Sayre, OK

960

Fourth quarter 2007

51,949

Tallahatchie County Correctional Facility
Tutwiler, MS

360

Fourth quarter 2007

19,830

Eden Detention Center
Eden, TX

129

First quarter 2008

20,000

Bent County Correctional Facility
Las Animas, CO

720

Second quarter 2008

44,596

Kit Carson Correctional Center
Burlington, CO

720

Second quarter 2008

42,977

Total

5,241

$

213,682

In order to retain federal inmate populations we currently manage in the San Diego Correctional
Facility, we may be required to construct a new facility in the future. The San Diego Correctional
Facility is subject to a ground lease with the County of San Diego. Under the provisions of the lease,
the facility is divided into three different properties (Initial, Existing and Expansion Premises), all of
which have separate terms ranging from June 2006 to December 2015, subject to extension by the
County. Upon expiration of any lease term, ownership of the applicable portion of the facility
automatically reverts to the County. The County has the right to buy out the Initial and Expansion
portions of the facility at various times prior to the end term of the ground lease at a price generally
equal to the cost of the premises, less an allowance for the amortization over a 20-year period. The
third portion of the lease (Existing Premises) included 200 beds that expired in June 2006 and was not
renewed. However, we did not lose any inmates at this facility as a result of the expiration, as we had
the ability to consolidate inmates from the Existing Premises to the Initial and Expansion Premises.
Ownership of the 200-bed Expansion Premises reverts to the County in December 2007. We are
currently negotiating with the County to extend the reversion date of the Expansion Premises.
However, if we are unsuccessful, we may be required to relocate a portion of the existing federal
inmate population to other available beds within or outside the San Diego Correctional Facility, which
could include the acquisition of an alternate site for the construction of a new facility. However, we
can provide no assurance that we will be able to retain these inmate populations.
We continue to pursue additional expansion and development opportunities to satisfy increasing
demand from existing and potential customers.
Additionally, we believe investments in technology can enable us to operate safe and secure facilities
with more efficient, highly skilled and better-trained staff, and to reduce turnover through the
deployment of innovative technologies, many of which are unique and new to the corrections industry.
During 2006, we capitalized $15.1 million of expenditures related to technology. These investments in
technology are expected to provide long-term benefits enabling us to provide enhanced quality service
60

to our customers while creating scalable operating efficiencies. We expect to incur approximately
$16.5 million in information technology expenditures during 2007.
We have the ability to fund our capital expenditure requirements including our construction projects, as
well as our information technology expenditures, working capital, and debt service requirements, with
investments and cash on hand, net cash provided by operations, and borrowings available under our
revolving credit facility.
The term loan portion of our old senior bank credit facility was scheduled to mature on March 31,
2008, while the revolving portion of the old facility, which as of December 31, 2005 had an
outstanding balance of $10.0 million along with $36.5 million in outstanding letters of credit under a
subfacility, was scheduled to mature on March 31, 2006. During January 2006, we completed the sale
and issuance of $150.0 million aggregate principal amount of 6.75% senior notes due 2014, the
proceeds of which were used in part to completely pay-off the outstanding balance of the term loan
portion of our old senior bank credit facility after repaying the $10.0 million balance on the revolving
portion of the old facility with cash on hand. Further, during February 2006, we closed on a new
revolving credit facility with various lenders providing for a new $150.0 million revolving credit
facility to replace the revolving portion of the old credit facility. The new revolving credit facility has
a five-year term and currently has no outstanding balance other than $37.9 million in outstanding
letters of credit under a subfacility. We have an option to increase the availability under the new
revolving credit facility by up to $100.0 million (consisting of revolving credit, term loans or a
combination of the two) subject to, among other things, the receipt of commitments for the increased
amount. Interest on the new revolving credit facility is based on a base rate plus a margin ranging from
0.00% to 0.50% or on LIBOR plus a margin ranging from 0.75% to 1.50%, subject to adjustment based
on our leverage ratio. The new revolving credit facility currently bears interest at a base rate or a
LIBOR plus a margin of 1.00%.
During the years ended December 31, 2005 and 2004, we were not required to pay income taxes, other
than primarily for the alternative minimum tax and certain state taxes, due to the utilization of existing
net operating loss carryforwards to offset our taxable income. However, in 2005 we paid $15.8 million
in tax payments primarily for the repayment of excess refunds we received in 2002 and 2003. During
2006, we generated sufficient taxable income to utilize our remaining federal net operating loss
carryforwards. As a result, we began paying federal income taxes during 2006, with an obligation to
pay a full year’s taxes beginning in 2007. We currently expect to pay approximately $60 million to
$65 million in federal and state income taxes during 2007.
As of December 31, 2006, our liquidity was provided by cash on hand of $29.1 million, investments of
$82.8 million, and $112.1 million available under our $150.0 million revolving credit facility. During
the years ended December 31, 2006 and 2005, we generated $172.0 million and $153.4 million,
respectively, in cash provided by operating activities, and as of December 31, 2006 and 2005, we had
net working capital of $226.9 million and $164.0 million, respectively. We currently expect to be able
to meet our cash expenditure requirements for the next year utilizing these resources. In addition, we
have an effective “shelf” registration statement under which we may issue an indeterminate amount of
securities from time to time when we determine that market conditions and the opportunity to utilize
the proceeds from the issuance of such securities are favorable.
As a result of the completion of numerous recapitalization and refinancing transactions over the past
several years, we have significantly reduced our exposure to variable rate debt, eliminated all of our
subordinated indebtedness, lowered our after tax interest obligations associated with our outstanding
debt, further increasing our cash flow, and extended our total weighted average debt maturities. Also
as a result of the completion of these capital transactions, covenants under our senior bank credit
facility were amended to provide greater flexibility for, among other matters, incurring unsecured
indebtedness, capital expenditures, and permitted acquisitions. With the most recent pay-off of our
61

senior bank credit facility in January 2006 and the completion of our revolving credit facility in
February 2006, we removed the requirement to secure the senior bank credit facility with liens on our
real estate assets and, instead, collateralized the facility primarily with security interests in our accounts
receivable and deposit accounts. At December 31, 2006, our total weighted average stated interest rate
was 6.9% and our total weighted average maturity was 5.5 years. As an indication of the improvement
of our operational performance and financial flexibility, Standard & Poor’s Ratings Services has raised
our corporate credit rating from “B” at December 31, 2000 to “BB-” currently (an improvement by two
ratings levels), and our senior unsecured debt rating from “CCC+” to “BB-” (an improvement by four
ratings levels). Moody’s Investors Service has upgraded our senior unsecured debt rating from “Caa1”
at December 31, 2000 to “Ba2” currently (an improvement by five ratings levels).
Operating Activities
Our net cash provided by operating activities for the year ended December 31, 2006 was $172.0
million compared with $153.4 million in 2005 and $126.0 million in 2004. Cash provided by
operating activities represents the year to date net income plus depreciation and amortization, changes
in various components of working capital, and adjustments for expenses associated with debt
refinancing and recapitalization transactions and various non-cash charges, including primarily
deferred income taxes. The increase in cash provided by operating activities during 2006 was primarily
the result of an increase in higher operating income, partially offset by negative fluctuations in working
capital.
Investing Activities
Our cash flow used in investing activities was $226.3 million for the year ended December 31, 2006,
and was primarily attributable to capital expenditures during the year of $163.1 million, including
$112.8 million for the expansion and development activities previously discussed herein, and $50.3
million for facility maintenance and information technology capital expenditures. Cash flow used in
investing activities was also impacted by the purchases of $63.8 million in investments. Our cash flow
used in investing activities was $116.3 million for the year ended December 31, 2005, and was
primarily attributable to capital expenditures during the year of $110.3 million, including $73.9 million
for expansion and development activities and $36.4 million for facility maintenance and information
technology capital expenditures. During the year ended December 31, 2004, our cash flow used in
investing activities was $116.2 million, primarily resulting from capital expenditures of $128.0 million,
including $80.5 million for expansion and development activities and $47.5 million for facility
maintenance and information technology capital expenditures.
Financing Activities
Our cash flow provided by financing activities was $18.6 million for the year ended December 31,
2006 and was primarily attributable to the aforementioned refinancing and recapitalization transactions
completed during 2006, combined with proceeds received from the exercise of stock options and the
income tax benefit of equity compensation. The income tax benefit of equity compensation was
reported as a financing activity in 2006 pursuant to SFAS 123R, and as an operating activity in prior
years.
Our cash flow used in financing activities was $23.1 million for the year ended December 31, 2005 and
was primarily attributable to the aforementioned refinancing and recapitalization transactions
completed during the first half of 2005. Proceeds from the issuance of the $375 million 6.25% senior
notes along with cash on hand were used to purchase all of the outstanding $250 million 9.875% senior
notes, make a lump sum prepayment on the senior bank credit facility of $110 million, and pay fees
and expenses related thereto. These transactions, combined with the second quarter amendment to the
senior bank credit facility, resulted in fees and expenses of $36.2 million paid during 2005.
62

Our cash flow used in financing activities was $29.5 million for 2004 and was primarily attributable to
the redemption of the remaining 0.3 million shares of series A preferred stock during March 2004,
which totaled $7.5 million, and the redemption of the remaining 1.0 million shares of series B
preferred stock during the second quarter of 2004, which totaled $23.5 million.
Contractual Obligations
The following schedule summarizes our contractual obligations by the indicated period as of December
31, 2006 (in thousands):
2007
Long-term debt
Environmental
remediation
Contractual facility
expansions
Operating leases
Total Contractual
Cash Obligations

$

2008
-

$

-

Payments Due By Year Ended December 31,
2009
2010
2011

Thereafter

Total

$

-

$

-

$ 450,000

$ 525,000

$ 975,000

284

-

-

-

-

-

284

77,624

32,718
444

453

462

471

1,723

110,342
3,988

462

$ 450,471

$ 526,723

$ 1,089,614

435
$ 78,343

$

33,162

$

453

$

The cash obligations in the table above do not include future cash obligations for interest associated
with our outstanding indebtedness. During 2006, we paid $65.2 million in interest, including
capitalized interest. We had $37.9 million of letters of credit outstanding at December 31, 2006
primarily to support our requirement to repay fees and claims under our workers’ compensation plan in
the event we do not repay the fees and claims due in accordance with the terms of the plan. The letters
of credit are renewable annually. We did not have any draws under any outstanding letters of credit
during 2006, 2005, or 2004.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”
(“FIN 48”), which is an interpretation of SFAS 109. FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of a tax position taken
or expected to be taken in a tax return. The guidance prescribed in FIN 48 establishes a recognition
threshold of more likely than not that a tax position will be sustained upon examination. The
measurement attribute of FIN 48 requires that a tax position be measured at the largest amount of
benefit that is greater than 50 percent likely of being realized upon ultimate settlement. FIN 48 is
effective for fiscal years beginning after December 15, 2006. We are in the process of evaluating the
impact that FIN 48 will have on our financial position and results of operations.
INFLATION
We do not believe that inflation has had or will have a direct adverse effect on our operations. Many
of our management contracts include provisions for inflationary indexing, which mitigates an adverse
impact of inflation on net income. However, a substantial increase in personnel costs, workers’
compensation or food and medical expenses could have an adverse impact on our results of operations
in the future to the extent that these expenses increase at a faster pace than the per diem or fixed rates
we receive for our management services.

63

SEASONALITY AND QUARTERLY RESULTS
Our business is somewhat subject to seasonal fluctuations. Because we are generally compensated for
operating and managing facilities at an inmate per diem rate, our financial results are impacted by the
number of calendar days in a fiscal quarter. Our fiscal year follows the calendar year and therefore, our
daily profits for the third and fourth quarters include two more days than the first quarter (except in
leap years) and one more day than the second quarter. Further, salaries and benefits represent the most
significant component of operating expenses. Significant portions of the Company’s unemployment
taxes are recognized during the first quarter, when base wage rates reset for state unemployment tax
purposes. Finally, quarterly results are affected by government funding initiatives, the timing of the
opening of new facilities, or the commencement of new management contracts and related start-up
expenses which may mitigate or exacerbate the impact of other seasonal influences. Because of these
seasonality factors, results for any quarter are not necessarily indicative of the results that may be
achieved for the full fiscal year.
ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.

Our primary market risk exposure is to changes in U.S. interest rates. In the event we have an
outstanding balance under our revolving credit facility, we would be exposed to market risk because
the interest rate on our revolving credit facility is subject to fluctuations in the market. As of
December 31, 2006, there were no amounts outstanding under our revolving credit facility (other than
$37.9 million in outstanding letters of credit). Therefore, a hypothetical 100 basis point increase or
decrease in market interest rates would not have a material impact on our financial statements.
As of December 31, 2006, we had outstanding $450.0 million of senior notes with a fixed interest rate
of 7.5%, $375.0 million of senior notes with a fixed interest rate of 6.25%, and $150.0 million of senior
notes with a fixed interest rate of 6.75%. Because the interest rates with respect to these instruments
are fixed, a hypothetical 100 basis point increase or decrease in market interest rates would not have a
material impact on our financial statements.
We may, from time to time, invest our cash in a variety of short-term financial instruments. These
instruments generally consist of highly liquid investments with original maturities at the date of
purchase of three months or less. While these investments are subject to interest rate risk and will
decline in value if market interest rates increase, a hypothetical 100 basis point increase or decrease in
market interest rates would not materially affect the value of these instruments.
ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements and supplementary data required by Regulation S-X are included in this
annual report on Form 10-K commencing on Page F-1.
ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

64

ACCOUNTANTS

ON

ITEM 9A.

CONTROLS AND PROCEDURES.

Management’s Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of our senior
management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this annual
report. Based on that evaluation, our senior management, including our Chief Executive Officer and
Chief Financial Officer, concluded that as of the end of the period covered by this annual report our
disclosure controls and procedures are effective in causing material information relating to us
(including our consolidated subsidiaries) to be recorded, processed, summarized and reported by
management on a timely basis and to ensure that the quality and timeliness of our public disclosures
complies with SEC disclosure obligations.
Management’s Report On Internal Control Over Financial Reporting
Management of Corrections Corporation of America (the “Company”) is responsible for establishing
and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. The Company’s internal control over financial reporting includes those policies
and procedures that:
(i)

pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company;

(ii)

provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company; and

(iii)

provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Company’s assets that could have a material effect
on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as
of December 31, 2006. In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated Framework.
Based on management’s assessment and those criteria, management believes that, as of December 31,
2006, the Company's internal control over financial reporting was effective.

65

The Company’s independent registered public accounting firm, Ernst & Young LLP, have issued an
attestation report on management’s assessment of the Company’s internal control over financial
reporting. That report begins on page 67.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the
period covered by this report that have materially affected, or are likely to materially affect, our
internal control over financial reporting.

66

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Corrections Corporation of America
We have audited management’s assessment, included in the accompanying Management’s Report on
Internal Control Over Financial Reporting, that Corrections Corporation of America and Subsidiaries
(“the Company”) maintained effective internal control over financial reporting as of December 31,
2006, based on criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The
Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on management’s assessment and an opinion on the
effectiveness of the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained
in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management’s assessment, testing and evaluating the design and
operating effectiveness of internal control, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that the Company maintained effective internal control over
financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the
COSO criteria. Also, in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2006, based on the COSO criteria.

67

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Corrections Corporation of America as of
December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’
equity, and cash flows for each of the three years in the period ended December 31, 2006 of
Corrections Corporation of America and our report dated February 22, 2007 expressed an unqualified
opinion thereon.

/s/ Ernst & Young LLP
Ernst & Young LLP

Nashville, Tennessee
February 22, 2007

68

ITEM 9B.

OTHER INFORMATION.

None.
PART III.
ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required by this Item 10 will appear in, and is hereby incorporated by reference from,
the information under the headings “Proposal I – Election of Directors-Directors Standing for
Election,” “Executive Officers-Information Concerning Executive Officers Who Are Not Directors,”
“Corporate Governance – Board of Directors Meetings and Committees,” and “Security Ownership of
Certain Beneficial Owners and Management – Section 16(a) Beneficial Ownership Reporting
Compliance” in our definitive proxy statement for the 2007 annual meeting of stockholders.
As a part of our comprehensive Corporate Compliance Manual, our Board of Directors has adopted a
Code of Ethics and Business Conduct applicable to the members of our Board of Directors and our
officers, including our Chief Executive Officer and Chief Financial Officer. In addition, the Board of
Directors has adopted Corporate Governance Guidelines and charters for our Audit Committee,
Compensation Committee, Nominating and Governance Committee and Executive Committee. You
can access our Code of Ethics and Business Conduct, Corporate Governance Guidelines and current
committee charters on our website at www.correctionscorp.com or request a copy of any of the
foregoing by writing to the following address - Corrections Corporation of America, Attention:
Secretary, 10 Burton Hills Boulevard, Nashville, Tennessee 37215.
ITEM 11.

EXECUTIVE COMPENSATION.

The information required by this Item 11 will appear in, and is hereby incorporated by reference from,
the information under the headings “Executive and Director Compensation,” in our definitive proxy
statement for the 2007 annual meeting of stockholders.
ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by this Item 12 will appear in, and is hereby incorporated by reference from,
the information under the heading “Security Ownership of Certain Beneficial Owners and
Management” in our definitive proxy statement for the 2007 annual meeting of stockholders.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth certain information as of December 31, 2006 regarding compensation
plans under which our equity securities are authorized for issuance.

69

Plan Category
Equity compensation plans
approved by stockholders
Equity compensation plans not
approved by stockholders
Total
(1)

(a)

(b)

Number of Securities
to be Issued Upon
Exercise of Outstanding
Options

Weighted – Average
Exercise Price of
Outstanding
Options

3,626,649

$20.26

-

-

3,626,649

$20.26

(c)
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plan
(Excluding Securities
Reflected in Column
(a))

1,223,010 (1)

1,223,010

Reflects shares of common stock available for issuance under our Amended and Restated 1997 Employee Share
Incentive Plan, the Amended and Restated 2000 Stock Incentive Plan, and the Non-Employee Directors’
Compensation Plan, the only equity compensation plans approved by our stockholders under which we continue to
grant awards.

ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.
The information required by this Item 13 will appear in, and is hereby incorporated by reference from,
the information under the heading “Corporate Governance – Certain Relationships and Related
Transactions” and “Corporate Governance – Director Independence” in our definitive proxy statement
for the 2007 annual meeting of stockholders.
ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required by this Item 14 will appear in, and is hereby incorporated by reference from,
the information under the heading “Proposal II – Ratification of Appointment of Independent
Registered Public Accounting Firm - Audit and Non-Audit Fees” in our definitive proxy statement for
the 2007 annual meeting of stockholders.

70

PART IV.
ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

The following documents are filed as part of this report:
(1)

Financial Statements.
The financial statements as set forth under Item 8 of this annual report on Form 10-K
have been filed herewith, beginning on page F-1 of this report.

(2)

Financial Statement Schedules.
Schedules for which provision is made in Regulation S-X are either not required to be
included herein under the related instructions or are inapplicable or the related
information is included in the footnotes to the applicable financial statements and,
therefore, have been omitted.

(3)

The Exhibits required by Item 601 of Regulation S-K are listed in the Index of Exhibits
included herewith.

71

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this
Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
CORRECTIONS CORPORATION OF AMERICA
Date: February 27, 2007

By:
/s/ John D. Ferguson
John D. Ferguson, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following
persons on behalf of the registrant and in the capabilities and on the dates indicated.
/s/ John D. Ferguson
John D. Ferguson, President and Chief Executive Officer and
Director (Principal Executive Officer)

February 27, 2007

/s/ Irving E. Lingo, Jr.
Irving E. Lingo, Jr., Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

February 27, 2007

/s/ William F. Andrews
William F. Andrews, Chairman of the Board and Director

February 27, 2007

/s/ Donna M. Alvarado
Donna M. Alvarado, Director

February 27, 2007

/s/ Lucius E. Burch, III
Lucius E. Burch, III, Director

February 27, 2007

/s/ John D. Correnti
John D. Correnti, Director

February 27, 2007

/s/ John R. Horne
John R. Horne, Director

February 27, 2007

/s/ C. Michael Jacobi
C. Michael Jacobi, Director

February 27, 2007

/s/ Thurgood Marshall, Jr.
Thurgood Marshall, Jr., Director

February 27, 2007

/s/ Charles L. Overby
Charles L. Overby, Director

February 27, 2007

/s/ John R. Prann, Jr.
John R. Prann, Jr., Director

February 27, 2007

/s/ Joseph V. Russell
Joseph V. Russell, Director

February 27, 2007

/s/ Henri L. Wedell
Henri L. Wedell, Director

February 27, 2007

72

INDEX OF EXHIBITS
Exhibits marked with an * are filed herewith. Other exhibits have previously been filed with the
Securities and Exchange Commission (the “Commission”) and are incorporated herein by reference.

Exhibit Number

Description of Exhibits

3.1

Amended and Restated Charter of the Company (previously filed as Exhibit
3.1 to the Company’s Annual Report on Form 10-K (Commission File no. 00116109), filed with the Commission on April 17, 2001 and incorporated herein
by this reference).

3.2

Amendment to the Amended and Restated Charter of the Company effecting
the reverse stock split of the Company’s Common Stock and a related
reduction in the stated capital stock of the Company (previously filed as
Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q (Commission
File no. 001-16109), filed with the Commission on August 13, 2001 and
incorporated herein by this reference).

3.3

Third Amended and Restated Bylaws of the Company (previously filed as
Exhibit 3.3 to the Company’s Amendment No. 3 to its Registration Statement
on Form S-4 (Commission File no. 333-96721), filed with the Commission on
December 30, 2002 and incorporated herein by this reference).

4.1

Provisions defining the rights of stockholders of the Company are found in
Article V of the Amended and Restated Charter of the Company, as amended
(included as Exhibits 3.1 and 3.2 hereto), and Article II of the Third Amended
and Restated Bylaws of the Company (included as Exhibit 3.3 hereto).

4.2

Specimen of certificate representing shares of the Company’s Common Stock
(previously filed as Exhibit 4.2 to the Company’s Annual Report on Form 10K (Commission File no. 001-16109), filed with the Commission on March 22,
2002 and incorporated herein by this reference).

4.3

Indenture, dated as of May 7, 2003, by and among the Company, certain of its
subsidiaries and U.S. Bank National Association, as Trustee (previously filed
as Exhibit 4.1 to the Company’s Current Report on Form 8-K (Commission
File no. 001-16109), filed with the Commission on May 7, 2003 and
incorporated herein by this reference).

4.4

Supplemental Indenture, dated as of May 7, 2003, by and among the Company,
certain of its subsidiaries and U.S. Bank National Association, as Trustee,
providing for the Company’s 7.5% Senior Notes due 2011 (“7.5% Notes”),
with form of note attached (previously filed as Exhibit 4.2 to the Company’s
Current Report on Form 8-K (Commission File no. 001-16109), filed with the
Commission on May 7, 2003 and incorporated herein by this reference).

73

Exhibit Number

Description of Exhibits

4.5

First Supplement, dated as of August 8, 2003, to the Supplemental Indenture,
dated as of May 7, 2003, by and among the Company, certain of its
subsidiaries and U.S. Bank National Association, as Trustee, providing for the
Company’s 7.5% Notes due 2011 (previously filed as Exhibit 4.2 to the
Company’s Quarterly Report on Form 10-Q (Commission File no. 001-16109),
filed with the Commission on August 12, 2003 and incorporated herein by this
reference).

4.6

Second Supplement, dated as of August 8, 2003, to the Supplemental
Indenture, dated as of May 7, 2003, by and among the Company, certain of its
subsidiaries and U.S. Bank National Association, as Trustee, providing for the
Company’s 7.5% Notes due 2011 (previously filed as Exhibit 4.3 to the
Company’s Quarterly Report on Form 10-Q (Commission File no. 001-16109),
filed with the Commission on August 12, 2003 and incorporated herein by this
reference).

4.7

Indenture, dated as of March 23, 2005, by and among the Company, certain of
its subsidiaries and U.S. Bank National Association, as Trustee, providing for
the Company’s 6.25% Senior Notes due 2013 with form of note attached
(previously filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K
(Commission File no. 001-16109), filed with the Commission on March 24,
2005 and incorporated herein by this reference).

4.8

Indenture, dated as of January 23, 2006, by and among the Company, certain
of its subsidiaries and U.S. Bank National Association, as Trustee (previously
filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K
(Commission File no. 001-16109), filed with the Commission on January 24,
2006 and incorporated herein by this reference).

4.9

Supplemental Indenture, dated as of January 23, 2006, by and among the
Company, certain of its subsidiaries and U.S. Bank National Association, as
Trustee, providing for the Company’s 6.75% Senior Notes due 2014, with
form of note attached (previously filed as Exhibit 4.2 to the Company’s
Current Report on Form 8-K (Commission File no. 001-16109), filed with the
Commission on January 24, 2006 and incorporated herein by this reference).

10.1

Credit Agreement, dated as of February 3, 2006, by and among the Company,
as Borrower, the lenders who are or may become a party to the agreement, and
Wachovia Bank, National Association, as Administrative Agent for the lenders
(previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8K (Commission File no. 001-16109), filed with the Commission on February
7, 2006 and incorporated herein by this reference).

10.2

Note Purchase Agreement, dated as of December 31, 1998 by and between the
Company and PMI Mezzanine Fund, L.P., including, as Exhibit R-1 thereto,
Registration Rights Agreement, dated as of December 31, 1998, by and
between the Company and PMI Mezzanine Fund, L.P. (previously filed as
Exhibit 10.22 to the Company’s Current Report on Form 8-K (Commission
File no. 000-25245), filed with the Commission on January 6, 1999 and
incorporated herein by this reference).
74

Exhibit Number

Description of Exhibits

10.3

Amendment to Note Purchase Agreement and Note by and between the
Company and PMI Mezzanine Fund, L.P., dated April 28, 2003 (previously
filed as Exhibit 10.2 to Amendment No. 2 to the Company’s Registration
Statement on Form S-3 (Commission File no. 333-104240), filed with the
Commission on April 28, 2003 and incorporated herein by this reference).

10.4

Waiver and Amendment, dated as of June 30, 2000, by and between the
Company and PMI Mezzanine Fund, L.P., with form of replacement note
attached thereto as Exhibit B (previously filed as Exhibit 10.5 to the
Company’s Current Report on Form 8-K (File no. 000-25245), filed with the
Commission on July 3, 2000 and incorporated herein by this reference).

10.5

Waiver and Amendment, dated as of March 5, 2001, by and between the
Company and PMI Mezzanine Fund, L.P., including, as an exhibit thereto,
Amendment to Registration Rights Agreement (previously filed as Exhibit
10.10 to the Company’s Annual Report on Form 10-K (Commission File no.
001-16109), filed with the Commission on April 17, 2001 and incorporated
herein by this reference).

10.6

Form of Amendment No. 2 to Registration Rights Agreement by and between
the Company and PMI Mezzanine Fund, L.P. (previously filed as Exhibit 10.3
to Amendment No. 2 to the Company’s Registration Statement on Form S-3
(Commission File no. 333-104240), filed with the Commission on April 28,
2003 and incorporated herein by this reference).

10.7

Registration Rights Agreement, dated as of December 31, 1998, by and
between Correctional Management Services Corporation, a predecessor of the
Company, and CFE, Inc. (previously filed as Exhibit 10.7 to the Company’s
Annual Report on Form 10-K (Commission File no. 001-16109), filed with the
Commission on March 7, 2006 and incorporated herein by this reference).

10.8

The Company’s Amended and Restated 1997 Employee Share Incentive Plan
(previously filed as Exhibit 10.15 to the Company’s Annual Report on Form
10-K (Commission File no. 001-16109), filed with the Commission on March
12, 2004 and incorporated herein by this reference).

10.9

Form of Non-qualified Stock Option Agreement for the Company’s Amended
and Restated 1997 Employee Share Incentive Plan (previously filed as Exhibit
10.17 to the Company’s Annual Report on Form 10-K (Commission File no.
001-16109), filed with the Commission on March 7, 2005 and incorporated
herein by this reference).

10.10

Old Prison Realty’s Non-Employee Trustees’ Compensation Plan (previously
filed as Exhibit 4.3 to Old Prison Realty’s Registration Statement on Form S-8
(Commission File no. 333-58339), filed with the Commission on July 1, 1998
and incorporated herein by this reference).

75

Exhibit Number

Description of Exhibits

10.11

Old CCA’s 1995 Employee Stock Incentive Plan, effective as of March 20,
1995 (previously filed as Exhibit 4.3 to Old CCA’s Registration Statement on
Form S-8 (Commission File no. 33-61173), filed with the Commission on July
20, 1995 and incorporated herein by this reference).

10.12

Old CCA’s Non-Employee Directors’ Compensation Plan (previously filed as
Appendix A to Old CCA’s definitive Proxy Statement relating to Old CCA’s
1998 Annual Meeting of Shareholders (Commission File no. 001-13560), filed
with the Commission on March 31, 1998 and incorporated herein by this
reference).

10.13

The Company’s Amended and Restated 2000 Stock Incentive Plan (previously
filed as Exhibit 10.20 to the Company’s Annual Report on Form 10-K
(Commission File no. 001-16109), filed with the Commission on March 12,
2004 and incorporated herein by this reference).

10.14

Amendment No. 1 to the Company’s Amended and Restated 2000 Stock
Incentive Plan (previously filed as Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q (Commission File no. 001-16109), filed with the
Commission on November 5, 2004 and incorporated herein by this reference).

10.15

The Company’s Non-Employee Directors’ Compensation Plan (previously
filed as Appendix C to the Company’s definitive Proxy Statement relating to
its Annual Meeting of Stockholders (Commission File no. 001-16109), filed
with the Commission on April 11, 2003 and incorporated herein by this
reference.

10.16

Form of Non-qualified Stock Option Agreement for the Company’s Amended
and Restated 2000 Stock Incentive Plan (previously filed as Exhibit 10.15 to
the Company’s Annual Report on Form 10-K (Commission File no. 00116109), filed with the Commission on March 7, 2006 and incorporated herein
by this reference).

10.17

Form of Restricted Stock Agreement for the Company’s Amended and
Restated 2000 Stock Incentive Plan (previously filed as Exhibit 10.16 to the
Company’s Annual Report on Form 10-K (Commission File no. 001-16109),
filed with the Commission on March 7, 2006 and incorporated herein by this
reference).

10.18

Form of Resale Restriction Agreement for certain stock option award
agreements issued under the Company’s Amended and Restated 1997
Employee Share Incentive Plan and the Company’s Amended and Restated
2000 Stock Incentive Plan (previously filed as Exhibit 10.1 to the Company’s
Current Report on Form 8-K (Commission File no. 001-16109), filed with the
Commission on December 14, 2005 and incorporated herein by this reference).

76

Exhibit Number

Description of Exhibits

10.19

Form of Resale Restriction Agreement for key employees for certain stock
option award agreements issued under the Company’s Amended and Restated
1997 Employee Share Incentive Plan and the Company’s Amended and
Restated 2000 Stock Incentive Plan (previously filed as Exhibit 10.2 to the
Company’s Current Report on Form 8-K (Commission File no. 001-16109),
filed with the Commission on December 14, 2005 and incorporated herein by
this reference).

10.20 *

First Amended and Restated Employment Agreement, dated as of February 27,
2007, by and between the Company and John D. Ferguson.

10.21

Employment Agreement, dated as of January 3, 2005, by and between the
Company and Irving E. Lingo, Jr. (previously filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K (Commission File no. 001-16109),
filed with the Commission on January 6, 2005 and incorporated herein by this
reference).

10.22

Employment Agreement, dated as of February 1, 2003, by and between the
Company and Kenneth A. Bouldin (previously filed as Exhibit 10.34 to the
Company’s Annual Report on Form 10-K (Commission File no. 001-16109),
filed with the Commission on March 28, 2003 and incorporated herein by this
reference).

10.23

Employment Agreement, dated as of May 1, 2003, by and between the
Company and G.A. Puryear IV (previously filed as Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q (Commission File no. 001-16109),
filed with the Commission on August 12, 2003 and incorporated herein by this
reference).

10.24

Employment Agreement, dated as of January 3, 2005, by and between the
Company and Richard P. Seiter (previously filed as Exhibit 10.2 to the
Company’s Current Report on Form 8-K (Commission File no. 001-16109),
filed with the Commission on January 6, 2005 and incorporated herein by this
reference).

10.25

Employment Agreement, dated as of July 1, 2006, by and between the
Company and William K. Rusak (previously filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K (Commission File no. 001-16109),
filed with the Commission on July 6, 2006 and incorporated herein by this
reference).

10.26*

Summary of Director and Executive Officer Compensation.

21*

Subsidiaries of the Company.

23.1*

Consent of Ernst & Young LLP.

31.1*

Certification of the Company’s Chief Executive Officer pursuant to Securities
and Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
77

Exhibit Number

Description of Exhibits

31.2*

Certification of the Company’s Chief Financial Officer pursuant to Securities
and Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

32.2*

Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

78

Exhibit 21
LIST OF SUBSIDIARIES OF CORRECTIONS CORPORATION OF AMERICA
First Tier Subsidiaries:

CCA of Tennessee, LLC, a Tennessee limited liability company
Prison Realty Management, Inc., a Tennessee corporation
CCA Properties of America, LLC, a Tennessee limited liability company
CCA Properties of Texas, L.P., a Delaware limited partnership
CCA Western Properties, Inc., a Delaware corporation

Second Tier Subsidiaries:

CCA Properties of Arizona, LLC, a Tennessee limited liability company
CCA Properties of Tennessee, LLC, a Tennessee limited liability company
CCA International, Inc., a Delaware corporation
Technical and Business Institute of America, Inc., a Tennessee corporation
TransCor America, LLC, a Tennessee limited liability company
TransCor Puerto Rico, Inc., a Puerto Rico corporation
CCA (UK) Ltd., a United Kingdom corporation

79

Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
Registration Statement (Form S-8 No. 333-70625) pertaining to the Corrections Corporation of
America (formerly Prison Realty Trust) Amended and Restated 1997 Employee Share Incentive
Plan,
Registration Statement (Form S-4 No. 333-41778) pertaining to the merger of Corrections
Corporation of America, a Tennessee corporation, with and into CCA of Tennessee, Inc.,
Registration Statement (Form S-8 No. 333-69352) pertaining to the Corrections Corporation of
America Amended and Restated 2000 Stock Incentive Plan,
Registration Statement (Form S-8 No. 333-115492) pertaining to the registration of additional
shares for the Corrections Corporation of America Amended and Restated 2000 Stock Incentive
Plan,
Registration Statement (Form S-8 No. 333-115493) pertaining to the Corrections Corporation of
America Non-Employee Directors’ Compensation Plan,
Registration Statement (Form S-8 No. 333-69358) pertaining to the Corrections Corporation of
America 401(k) Savings and Retirement Plan,
Registration Statement (Form S-3/A No. 333-104240) pertaining to a shelf registration of debt
securities, guarantees of debt securities, preferred stock, common stock, or warrants, and
pertaining to certain shares of common stock registered on behalf of a selling shareholder; and
Registration Statement (Form S-3 ASR No. 333-131072) pertaining to a shelf registration of debt
securities, guarantees of debt securities, preferred stock, or any combination of the foregoing,
including by way of units consisting of more than one security;
of our report dated February 22, 2007 with respect to the consolidated financial statements of
Corrections Corporation of America and Subsidiaries included herein and our report dated February
22, 2007 with respect to Corrections Corporation of America and Subsidiaries’ management’s
assessment of the effectiveness of internal control over financial reporting and the effectiveness of
internal control over financial reporting of Corrections Corporation of America and Subsidiaries,
included herein.

/s/ Ernst & Young LLP
Ernst & Young LLP

Nashville, Tennessee
February 22, 2007

Exhibit 31.1
CERTIFICATION OF THE CEO PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, John D. Ferguson, certify that:
1. I have reviewed this annual report on Form 10-K of Corrections Corporation of America;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statement made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this
report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over financial reporting.

Date: February 27, 2007

/s/ John D. Ferguson
John D. Ferguson
President and Chief Executive Officer

Exhibit 31.2
CERTIFICATION OF THE CFO PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Irving E. Lingo, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of Corrections Corporation of America;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statement made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this
report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over financial reporting.

Date: February 27, 2007

/s/ Irving E. Lingo, Jr.
Irving E. Lingo, Jr.
Executive Vice President, Chief Financial Officer,
Assistant Secretary and Principal Accounting Officer

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Corrections Corporation of America (the “Company”) on
Form 10-K for the period ending December 31, 2006 as filed with the Securities and Exchange
Commission on the date hereof (the “Report”), I, John D. Ferguson, President and Chief Executive
Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the
Sarbanes-Oxley Act of 2002, that:
(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company
and will be retained by the Company and furnished to the Securities and Exchange Commission or its
staff upon request.

/s/ John D. Ferguson
John D. Ferguson
President and Chief Executive Officer
February 27, 2007

Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Corrections Corporation of America (the “Company”) on
Form 10-K for the period ending December 31, 2006 as filed with the Securities and Exchange
Commission on the date hereof (the “Report”), I, Irving E. Lingo, Jr., Executive Vice President and
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to
§906 of the Sarbanes-Oxley Act of 2002, that:
(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company
and will be retained by the Company and furnished to the Securities and Exchange Commission or its
staff upon request.

/s/ Irving E. Lingo, Jr.
Irving E. Lingo, Jr.
Executive Vice President, Chief Financial Officer,
Assistant Secretary and Principal Accounting Officer
February 27, 2007

INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements of Corrections Corporation of America and Subsidiaries
Report of Independent Registered Public Accounting Firm..................................................................................................... F-2
Consolidated Balance Sheets as of December 31, 2006 and 2005............................................................................................ F-3
Consolidated Statements of Operations for the years ended
December 31, 2006, 2005 and 2004........................................................................................................................................ F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 2006, 2005 and 2004........................................................................................................................................ F-5
Consolidated Statements of Stockholders’ Equity for the years ended
December 31, 2006, 2005 and 2004........................................................................................................................................ F-7
Notes to Consolidated Financial Statements ............................................................................................................................... F-10

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders of
Corrections Corporation of America
We have audited the accompanying consolidated balance sheets of Corrections Corporation of America and Subsidiaries as of
December 31, 2006 and 2005 and the related consolidated statements of operations, stockholders’ equity and cash flows for each of
the three years in the period ended December 31, 2006. These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
As discussed in Note 2 to the consolidated financial statements, the accompanying consolidated balance sheet as of December 31,
2005 has been restated.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position
of Corrections Corporation of America and Subsidiaries at December 31, 2006 and 2005, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended December 31, 2006, in conformity with U.S.
generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, effective January 1, 2006, Corrections Corporation of America
changed its accounting for stock-based compensation in connection with the adoption of Statement of Financial Standards No.
123R, “Share-Based Payment”.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
effectiveness of Corrections Corporation of America’s internal control over financial reporting as of December 31, 2006, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated February 22, 2007 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP
Ernst & Young LLP
Nashville, Tennessee
February 22, 2007

F-2

CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
December 31,
ASSETS

2006

Cash and cash equivalents
Restricted cash
Investments
Accounts receivable, net of allowance of $2,261 and $2,258, respectively
Deferred tax assets
Prepaid expenses and other current assets
Total current assets

$

Property and equipment, net
Investment in direct financing lease
Goodwill
Other assets
Total assets

29,121
11,826
82,830
238,256
11,655
17,554
391,242

2005
(Restated,
see Note 2)
$

64,901
11,284
19,014
176,560
32,488
15,884
320,131

1,805,098

1,710,794

15,467
15,246
23,807

16,322
15,246
23,820

$

2,250,860

$

2,086,313

$

160,785
2,810
290
497
164,382

$

141,090
1,435
11,836
1,774
156,135

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses
Income taxes payable
Current portion of long-term debt
Current liabilities of discontinued operations
Total current liabilities
Long-term debt, net of current portion
Deferred tax liabilities
Other liabilities
Total liabilities

975,968
23,755
37,074
1,201,179

963,800
12,087
37,660
1,169,682

610
1,528,219
(479,148)
1,049,681

595
1,505,986
(5,563)
(584,387)
916,631

Commitments and contingencies
Common stock - $0.01 par value; 80,000 shares authorized; 61,042 and 59,541 shares issued
and outstanding at December 31, 2006 and 2005, respectively
Additional paid-in capital
Deferred compensation
Retained deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity

$

2,250,860

The accompanying notes are an integral part of these consolidated financial statements.

F-3

$

2,086,313

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
2006
REVENUE:
Management and other
Rental

$

EXPENSES:
Operating
General and administrative
Depreciation and amortization
OPERATING INCOME
OTHER (INCOME) EXPENSE:
Interest expense, net
Expenses associated with debt refinancing and recapitalization
transactions
Other (income) expense
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES

For the Years Ended December 31,
2005

1,326,881
4,207
1,331,088

$

INCOME FROM CONTINUING OPERATIONS
Income (loss) from discontinued operations, net of taxes
NET INCOME
Distributions to preferred stockholders
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS
BASIC EARNINGS (LOSS) PER SHARE:
Income from continuing operations after preferred stock distributions
Income (loss) from discontinued operations, net of taxes
Net income available to common stockholders
DILUTED EARNINGS (LOSS) PER SHARE:
Income from continuing operations after preferred stock distributions
Income (loss) from discontinued operations, net of taxes
Net income available to common stockholders

1,122,542
3,845
1,126,387

898,793
57,053
59,882
1,015,728

850,366
48,186
54,445
952,997

225,929

176,912

173,390

58,783

63,928

69,177

982
(224)
59,541

35,269
263
99,460

101
943
70,221

77,452

103,169

(61,149)

(26,888)

105,239

50,564

(41,514)
61,655

-

(442)

888

105,239

50,122

62,543

-

-

(1,462)

$

105,239

$

50,122

$

61,081

$

1.76
1.76

$

0.88
(0.01)
0.87

$

1.14
0.02
1.16

1.71
1.71

$

0.84
(0.01)
0.83

$

$
$
$

$

$

The accompanying notes are an integral part of these consolidated financial statements.

F-4

$

973,893
63,593
67,673
1,105,159

166,388

Income tax expense

1,188,649
3,991
1,192,640

2004

$

$

1.02
0.02
1.04

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Amortization of debt issuance costs and other non-cash interest
Expenses associated with debt refinancing and recapitalization
transactions
Deferred income taxes
Other (income) expense
Other non-cash items
Income tax benefit of equity compensation
Non-cash equity compensation
Changes in assets and liabilities, net:
Accounts receivable, prepaid expenses and other assets
Accounts payable, accrued expenses and other liabilities
Income taxes payable
Net cash provided by operating activities

$

For the Years Ended December 31,
2005

105,239

$

50,122

$

2004
62,543

67,673
4,433

60,068
5,341

54,574
6,750

982
31,141
(228)
458
(18,161)
6,175

35,269
21,255
248
1,097
6,900
4,084

101
14,934
783
1,107
3,683
1,262

(63,716)
18,423
19,536
171,955

(20,193)
9,947
(20,772)
153,366

(28,654)
(12,396)
21,294
125,981

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for facility development and expansions
Expenditures for other capital improvements
Proceeds from sale of investments
Purchases of investments
(Increase) decrease in restricted cash
Proceeds from sale of assets
Decrease in other assets
Payments received on direct financing lease and notes receivable
Net cash used in investing activities

(112,791)
(50,331)
(63,816)
(255)
71
57
758
(226,307)

(73,895)
(36,410)
(10,328)
1,848
1,046
726
665
(116,348)

(80,548)
(47,480)
5,000
(160)
(66)
179
6,257
601
(116,217)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt
Scheduled principal repayments
Other principal repayments
Payment of debt issuance and other refinancing and related costs
Proceeds from exercise of stock options and warrants
Purchase and retirement of common stock
Income tax benefit of equity compensation
Purchase and redemption of preferred stock
Payment of dividends
Net cash provided by (used in) financing activities

150,000
(138)
(148,950)
(3,976)
15,765
(12,290)
18,161
18,572

375,000
(1,233)
(370,135)
(36,240)
9,586
(33)
(23,055)

(843)
(993)
4,945
(31,028)
(1,612)
(29,531)

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS

(35,780)

13,963

(19,767)

CASH AND CASH EQUIVALENTS, beginning of year

64,901

50,938

70,705

CASH AND CASH EQUIVALENTS, end of year

$

(Continued)

F-5

29,121

$

64,901

$

50,938

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Continued)
2006
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest (net of amounts capitalized of $4,658, $4,543, and $5,839
in 2006, 2005, and 2004, respectively)
Income taxes
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Convertible subordinated notes were converted to common stock:
Long-term debt
Common stock
Additional paid-in capital
Other assets
Accounts payable and accrued expenses

For the Years Ended December 31,
2005

$
$

60,575
13,690

$

-

$

$ 61,877
$ 15,776

$ (30,000)

The accompanying notes are an integral part of these consolidated financial statements.

F-6

$
$

65,592
3,511

$

-

50
29,928
12
10
$-

2004

$-

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
(in thousands)
Common Stock
Series A
Preferred
Stock
BALANCE, December 31, 2003

$

Series B
Preferred
Stock

7,500

$

Shares

Additional
Paid-In
Capital

Par Value

23,528

52,530

$ 525

-

-

-

-

-

$ (695,590)

Accumulated
Other
Comprehensive
Income (Loss)
$
(586)

62,543
-

586

62,543
586

62,543

-

63,129

Retained
Earnings
(Deficit)

Deferred
Compensation

$ 1,441,567

$

(1,479)

Total
Stockholders’
Equity
$

775,465

Comprehensive income:
-

Net income
-

Change in fair value of interest rate cap, net of tax

-

Total comprehensive income

-

Distributions to preferred stockholders

-

-

-

-

Income tax benefit of equity compensation

-

-

-

-

Redemption of preferred stock

-

-

-

-

-

3,683

-

(1,462)

-

(1,462)

-

-

-

3,683

(7,500)

(23,528)

-

-

-

-

-

-

(31,028)

Issuance of common stock

-

-

2

-

50

-

-

-

50

Amortization of deferred compensation, net of
forfeitures

-

-

(8)

-

(106)

1,318

-

-

1,212

-

-

$ (634,509)

-

4,945
815,994

Restricted stock grant
Stock options exercised
BALANCE, December 31, 2004

$

BALANCE, December 31, 2004

$

-

$
$

-

79
519
53,122

$

53,122

$

1
5
531

1,574
4,940
$ 1,451,708

(1,575)
(1,736)

$

531

$ 1,451,708

Comprehensive income:

$

$

(1,736)

$ (634,509)

$

$
-

$

815,994

-

-

-

-

-

-

50,122

-

50,122

Total comprehensive income

-

-

-

-

-

-

50,122

-

50,122

Conversion of subordinated notes

-

-

5,043

50

29,928

-

-

-

29,978

Issuance of common stock

-

-

2

-

68

-

-

-

68

Net income

Retirement of common stock

-

-

(1)

-

(33)

-

-

-

(33)

Amortization of deferred compensation, net of
forfeitures

-

-

(23)

-

(142)

3,169

-

-

3,027

Stock option compensation expense

-

-

-

-

989

-

-

-

989

Income tax benefit of equity compensation

-

-

-

-

6,900

-

-

-

6,900

296

3

6,993

(6,996)

-

-

-

106

1

999

-

-

-

1,000

Restricted stock grant
Warrants exercised

-

-

F-7

-

Stock options exercised
BALANCE, December 31, 2005

$

-

$

996

-

10

59,541

$

8,576

595

$ 1,505,986

$

-

(5,563)

-

8,586

$
-

$ (584,387)

$

916,631

(Continued)
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
(in thousands)
(Continued)

BALANCE, December 31, 2005

$

Common Stock

Series B
Preferred
Stock

Series A
Preferred
Stock
-

$

Shares

Par value

-

59,541

-

$

(5,563)

$ (584,387)

Accumulated
Other
Comprehensive
Income (Loss)
$
-

-

-

105,239

-

105,239

-

-

105,239

-

105,239

Additional
Paid-In
Capital

595

$ 1,505,986

-

-

-

-

Retained
Earning
(Deficit)

Deferred
Compensation
$

Total
Stockholders’
Equity
$

916,631

Comprehensive income:
-

Net income
Total comprehensive income
Issuance of common stock

-

-

-

-

50

-

-

-

50

Retirement of common stock
Amortization of deferred compensation, net of
forfeit res
Stock option compensation expense

-

-

(364)

(4)

(12,286)

-

-

-

(12,290)

-

-

(56)
-

(1)
-

4,565
1,561

-

-

-

4,564
1,561

Income tax benefit of equity compensation

-

-

-

-

18,161

-

-

-

18,161

Reclassification of deferred compensation on nonvested
stock upon adoption of SFAS 123R

-

-

-

-

(5,563)

5,563

-

-

-

-

$
-

256
1,665

3
17

(3)
15,748

-

-

$
-

15,765

Restricted stock grant
Stock options exercised
BALANCE, December 31, 2006

$
-

61,042

$
610

$ 1,528,219

$
-

The accompanying notes are an integral part of these consolidated financial statements.

F-8

$ (479,148)

$

1,049,681

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006, 2005 AND 2004
1.

ORGANIZATION AND OPERATIONS
Corrections Corporation of America (together with its subsidiaries, the “Company”) is the nation’s largest owner and
operator of privatized correctional and detention facilities and one of the largest prison operators in the United States,
behind only the federal government and three states. As of December 31, 2006, the Company owned 43 correctional,
detention and juvenile facilities, three of which the Company leases to other operators. At December 31, 2006, the
Company operated 65 facilities, including 40 facilities that it owned, located in 19 states and the District of Columbia.
The Company is also constructing an additional 1,896-bed correctional facility in Eloy, Arizona that is expected to be
completed mid-2007.
The Company specializes in owning, operating and managing prisons and other correctional facilities and providing
inmate residential and prisoner transportation services for governmental agencies. In addition to providing the
fundamental residential services relating to inmates, the Company’s facilities offer a variety of rehabilitation and
educational programs, including basic education, religious services, life skills and employment training and substance
abuse treatment. These services are intended to help reduce recidivism and to prepare inmates for their successful
reentry into society upon their release. The Company also provides health care (including medical, dental and
psychiatric services), food services, and work and recreational programs.
The Company’s website address is www.correctionscorp.com. The Company makes its Form 10-K, Form 10-Q, Form
8-K, and Section 16 reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) available on
its website, free of charge, as soon as reasonably practicable after these reports are filed with or furnished to the
Securities and Exchange Commission (the “SEC”).

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RESTATEMENT
Basis of Presentation
The consolidated financial statements include the accounts of the Company on a consolidated basis with its whollyowned subsidiaries. All intercompany balances and transactions have been eliminated.
Restatement of the December 31, 2005 Balance Sheet
The Company has historically classified accrued workers’ compensation and automobile claims liabilities within
accounts payable and accrued expenses, which is included in total current liabilities on the consolidated balance sheet.
During 2006, management concluded that a portion of this liability should be classified in other long-term liabilities.
As a result, the Company has restated the accompanying December 31, 2005 balance sheet to conform to the 2006
presentation.
The following is a summary of the line items impacted by the restatement of the December 31, 2005 balance sheet.
December 31, 2005

Accounts payable and accrued expenses
Total current liabilities
Other liabilities

As Previously
Reported
$
158,267
$
173,312
$
20,483

$
$
$

Adjustments
(17,177)
(17,177)
17,177

$
$
$

Restated
141,090
156,135
37,660

Stock Split
On August 3, 2006, the Company announced that its Board of Directors had declared a 3-for-2 stock split to be
effected in the form of a 50% stock dividend on its common stock. The stock dividend was payable on September 13,
2006, to stockholders of record on September 1, 2006. Each shareholder of record at the close of business on the
record date received one additional share of the Company's common stock for every two shares of common stock held
on that date. Shareholders received cash in lieu of fractional shares. The number of common shares and per share
amounts have been retroactively restated in the accompanying financial statements and these notes to the financial
F-9

statements to reflect the increase in common shares and corresponding decrease in the per share amounts resulting
from the 3-for-2 stock split.
Cash and Cash Equivalents
The Company considers all liquid debt instruments with a maturity of three months or less at the time of purchase to
be cash equivalents.
Restricted Cash
Restricted cash at December 31, 2006 was $11.8 million, of which $5.6 million represents cash collateral for a guarantee
agreement as further described in Note 17 and $6.2 million represents cash for a capital improvements, replacements,
and repairs reserve. Restricted cash at December 31, 2005 was $11.3 million, of which $5.4 million represents cash
collateral for the guarantee agreement and $5.9 million represents cash for a capital improvements, replacements, and
repairs reserve.
Accounts Receivable and Allowance for Doubtful Accounts
At December 31, 2006 and 2005, accounts receivable of $238.3 million and $176.6 million were each net of allowances
for doubtful accounts totaling $2.3 million. Accounts receivable consist primarily of amounts due from federal, state,
and local government agencies for operating and managing prisons and other correctional facilities and providing
inmate residential and prisoner transportation services.
Accounts receivable are stated at estimated net realizable value. The Company recognizes allowances for doubtful
accounts to ensure receivables are not overstated due to uncollectibility. Bad debt reserves are maintained for
customers in the aggregate based on a variety of factors, including the length of time receivables are past due,
significant one-time events and historical experience. If circumstances related to customers change, estimates of the
recoverability of receivables would be further adjusted.
Investments
Investments consist of cash invested in auction rate securities held by a large financial institution. Auction rate
securities have legal maturities that typically are at least twenty years, but have their interest rates reset approximately
every 28-35 days under an auction system. Because liquidity in these instruments is provided from third parties (the
buyers and sellers in the auction) and not the issuer, auctions may fail. In those cases, the auction rate securities remain
outstanding, with their interest rate set at the maximum rate which is established in the securities. Despite the fact that
auctions rarely fail, the only time the issuer must redeem an auction rate security for cash is at its maturity. Because
auction rate securities are frequently re-priced, they trade in the market like short-term investments. These investments
are carried at fair value, and are classified as current assets because they are generally available to support the
Company’s current operations. Investment income earned on auction rate securities is classified net of interest expense
on the consolidated statement of operations and was $3.2 million, $0.3 million, and $0.2 million for the years ended
December 31, 2006, 2005, and 2004, respectively.
Property and Equipment
Property and equipment are carried at cost. Assets acquired by the Company in conjunction with acquisitions are
recorded at estimated fair market value in accordance with the purchase method of accounting. Betterments, renewals
and significant repairs that extend the life of an asset are capitalized; other repair and maintenance costs are expensed.
Interest is capitalized to the asset to which it relates in connection with the construction or expansion of facilities. The
cost and accumulated depreciation applicable to assets retired are removed from the accounts and the gain or loss on
disposition is recognized in income. Depreciation is computed over the estimated useful lives of depreciable assets
using the straight-line method. Useful lives for property and equipment are as follows:
Land improvements
Buildings and improvements
Equipment
Office furniture and fixtures

5 – 20 years
5 – 50 years
3 – 5 years
5 years

Intangible Assets Other Than Goodwill
Intangible assets other than goodwill include contract acquisition costs, a customer list, and contract values established
in connection with certain business combinations. Contract acquisition costs (included in other non-current assets in
the accompanying consolidated balance sheets) and contract values (included in other non-current liabilities in the
accompanying consolidated balance sheets) represent the estimated fair values of the identifiable intangibles acquired in
F - 10

connection with mergers and acquisitions completed during 2000. Contract acquisition costs and contract values are
generally amortized into amortization expense using the interest method over the lives of the related management
contracts acquired, which range from three months to approximately 19 years. The customer list (included in other
non-current assets in the accompanying consolidated balance sheets), which was acquired in connection with the
acquisition of a prisoner extradition company on December 31, 2002, is being amortized over seven years, which is the
expected life of the customer list.
Accounting for the Impairment of Long-Lived Assets Other Than Goodwill
Long-lived assets other than goodwill are reviewed for impairment when circumstances indicate the carrying value of
an asset may not be recoverable. For assets that are to be held and used, impairment is recognized when the estimated
undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment
exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between
the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or
internal and external appraisals, as applicable.
Goodwill
Goodwill represents the cost in excess of the net assets of businesses acquired in the Company’s managed-only
segment. As further discussed in Note 3, goodwill is tested for impairment at least annually using a fair-value based
approach.
Investment in Direct Financing Lease
Investment in direct financing lease represents the portion of the Company’s management contract with a
governmental agency that represents capitalized lease payments on buildings and equipment. The lease is accounted
for using the financing method and, accordingly, the minimum lease payments to be received over the term of the lease
less unearned income are capitalized as the Company’s investment in the lease. Unearned income is recognized as
income over the term of the lease using the interest method.
Investment in Affiliates
Investments in affiliates that are equal to or less than 50%-owned over which the Company can exercise significant
influence are accounted for using the equity method of accounting.
Debt Issuance Costs
Generally, debt issuance costs, which are included in other assets in the consolidated balance sheets, are capitalized and
amortized into interest expense on a straight-line basis, which is not materially different than the interest method, over
the term of the related debt. However, certain debt issuance costs incurred in connection with debt refinancings are
charged to expense in accordance with Emerging Issues Task Force Issue No. 96-19, “Debtor’s Accounting for a
Modification or Exchange of Debt Instruments.”
Management and Other Revenue
The Company maintains contracts with certain governmental entities to manage their facilities for fixed per diem rates.
The Company also maintains contracts with various federal, state, and local governmental entities for the housing of
inmates in company-owned facilities at fixed per diem rates or monthly fixed rates. These contracts usually contain
expiration dates with renewal options ranging from annual to multi-year renewals. Most of these contracts have
current terms that require renewal every two to five years. Additionally, most facility management contracts contain
clauses that allow the government agency to terminate a contract without cause, and are generally subject to legislative
appropriations. The Company generally expects to renew these contracts for periods consistent with the remaining
renewal options allowed by the contracts or other reasonable extensions; however, no assurance can be given that such
renewals will be obtained. Fixed monthly rate revenue is recorded in the month earned and fixed per diem revenue is
recorded based on the per diem rate multiplied by the number of inmates housed during the respective period. The
Company recognizes any additional management service revenues when earned. Certain of the government agencies
also have the authority to audit and investigate the Company’s contracts with them. For contracts that actually or
effectively provide for certain reimbursement of expenses, if the agency determines that the Company has improperly
allocated costs to a specific contract, the Company may not be reimbursed for those costs and could be required to
refund the amount of any such costs that have been reimbursed.
Other revenue consists primarily of revenues generated from prisoner transportation services for governmental
agencies.
F - 11

Rental Revenue
Rental revenue is recognized based on the terms of the Company’s leases.
Self-Funded Insurance Reserves
The Company is significantly self-insured for employee health, workers’ compensation, automobile liability insurance
claims, and general liability claims. As such, the Company’s insurance expense is largely dependent on claims
experience and the Company’s ability to control its claims experience. The Company has consistently accrued the
estimated liability for employee health insurance based on its history of claims experience and time lag between the
incident date and the date the cost is paid by the Company. The Company has accrued the estimated liability for
workers’ compensation and automobile insurance based on a third-party actuarial valuation of the outstanding
liabilities, discounted to the net present value of the outstanding liabilities. The Company records litigation reserves
related to general liability matters for which it is probable that a loss has been incurred and the range of such loss can
be estimated. These estimates could change in the future.
Income Taxes
Income taxes are accounted for under the provisions of Statement of Financial Accounting Standards No. 109,
“Accounting for Income Taxes” (“SFAS 109”). SFAS 109 generally requires the Company to record deferred income
taxes for the tax effect of differences between book and tax bases of its assets and liabilities.
Deferred income taxes reflect the available net operating losses and the net tax effect of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. Realization of the future tax benefits related to deferred tax assets is dependent on many factors, including
the Company’s past earnings history, expected future earnings, the character and jurisdiction of such earnings,
unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of its deferred tax assets,
carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a
deferred tax asset.
Foreign Currency Transactions
The Company has extended a working capital loan to Agecroft Prison Management, Ltd. (“APM”), the operator of a
correctional facility in Salford, England previously owned by a subsidiary of the Company. The working capital loan is
denominated in British pounds; consequently, the Company adjusts these receivables to the current exchange rate at
each balance sheet date and recognizes the unrealized currency gain or loss in current period earnings. See Note 6 for
further discussion of the Company’s relationship with APM.
Fair Value of Financial Instruments
To meet the reporting requirements of Statement of Financial Accounting Standards No. 107, “Disclosures About Fair
Value of Financial Instruments,” the Company calculates the estimated fair value of financial instruments using quoted
market prices of similar instruments or discounted cash flow techniques. At December 31, 2006 and 2005, there were
no material differences between the carrying amounts and the estimated fair values of the Company’s financial
instruments, other than as follows (in thousands):
December 31,
2005

2006

Investment in direct financing lease
Note receivable from APM
Debt

$
$
$

Carrying
Amount
16,322
6,180
(976,258)

$
$
$

Fair Value
20,475
10,140
(982,500)

$
$
$

Carrying
Amount
17,080
5,428
(975,636)

$
$
$

Fair Value
21,926
9,104
(987,026)

Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates and
those differences could be material.

F - 12

Concentration of Credit Risks
The Company’s credit risks relate primarily to cash and cash equivalents, restricted cash, investments, accounts
receivable, and an investment in a direct financing lease. Cash and cash equivalents and restricted cash are primarily
held in bank accounts and overnight investments. The Company’s investments consist of cash invested in auction rate
securities held by a large financial institution. The Company’s accounts receivable and investment in direct financing
lease represent amounts due primarily from governmental agencies. The Company’s financial instruments are subject
to the possibility of loss in carrying value as a result of either the failure of other parties to perform according to their
contractual obligations or changes in market prices that make the instruments less valuable.
The Company derives its revenues primarily from amounts earned under federal, state, and local government
management contracts. For the years ended December 31, 2006, 2005, and 2004, federal correctional and detention
authorities represented 40%, 39%, and 38%, respectively, of the Company’s total revenue. Federal correctional and
detention authorities consist primarily of the Federal Bureau of Prisons, or BOP, the United States Marshals Service, or
USMS, and the U.S. Immigration and Customs Enforcement, or ICE. The BOP accounted for 14%, 16%, and 16%,
respectively, of total revenue for each of these years ended 2006, 2005, and 2004. The USMS accounted for 15% of
total revenue for each of the years ended 2006, 2005, and 2004. The ICE accounted for 11%, 8%, and 8%,
respectively, of total revenue for 2006, 2005, and 2004. These federal customers have management contracts at
facilities the Company owns and at facilities the Company manages but does not own. No other customer generated
more than 10% of total revenue during 2006, 2005, or 2004.
Comprehensive Income
Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income” establishes standards for
reporting and displaying comprehensive income and its components in a full set of general purpose financial
statements. Comprehensive income encompasses all changes in stockholders’ equity except those arising from
transactions with stockholders.
The Company reports comprehensive income in the consolidated statements of stockholders’ equity.
Accounting for Stock-Based Compensation
Restricted Stock
The Company amortizes the fair market value of restricted stock awards over the vesting period using the straight-line
method. The fair market value of performance-based restricted stock is amortized over the vesting period as long as
the Company expects to meet the performance criteria. If achievement of the performance criteria becomes
improbable, an adjustment is made to reverse the expense previously incurred.
Other Stock-Based Compensation
In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting
Standards No. 123R, “Share-Based Payment” (“SFAS 123R”), which is a revision of Statement of Financial Accounting
Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). SFAS 123R supersedes Accounting
Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and amends Statement of
Financial Accounting Standards No. 95, “Statement of Cash Flows.” Generally, the approach in SFAS 123R is similar
to the fair value method of accounting for stock-based employee compensation described in SFAS 123. However,
SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative, which
was permitted under SFAS 123.
The Company adopted the fair value recognition provisions of SFAS 123R on January 1, 2006 using the "modified
prospective" method. The “modified prospective” method requires compensation cost to be recognized beginning
with the effective date (a) based on the requirements of SFAS 123R for all share-based payments granted after the
effective date and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to the effective
date of SFAS 123R that remained unvested on the effective date.
At December 31, 2006, the Company had equity incentive plans, which are described more fully in Note 15. The
Company accounts for those plans under the recognition and measurement principles of SFAS 123R. All options
granted under those plans had an exercise price equal to the market value of the underlying common stock on the date
of grant.

F - 13

Effective December 30, 2005, the Company’s board of directors approved the acceleration of the vesting of
outstanding options previously awarded to executive officers and employees under its Amended and Restated 1997
Employee Share Incentive Plan and its Amended and Restated 2000 Stock Incentive Plan. As a result of the
acceleration, approximately 1.5 million unvested options became exercisable, 45% of which were otherwise scheduled
to vest in February 2006. All of the unvested options were "in-the-money" on the effective date of acceleration.
The purpose of the accelerated vesting of stock options was to enable the Company to avoid recognizing
compensation expense associated with these options in future periods as required by SFAS 123R, estimated at the date
of acceleration to be $3.8 million in 2006, $2.0 million in 2007, and $0.5 million in 2008. In order to prevent
unintended benefits to the holders of these stock options, the Company imposed resale restrictions to prevent the sale
of any shares acquired from the exercise of an accelerated option prior to the original vesting date of the option. The
resale restrictions automatically expire upon the individual’s termination of employment. All other terms and
conditions applicable to such options, including the exercise prices, remained unchanged. As a result of the
acceleration, the Company recognized a non-cash, pre-tax charge of $1.0 million in the fourth quarter of 2005 for the
estimated value of the stock options that would have otherwise been forfeited.
Prior to adoption of SFAS 123R on January 1, 2006, the Company accounted for equity incentive plans under the
recognition and measurement principles of APB 25. As such, no employee compensation cost for the Company’s
stock options is reflected in net income prior to January 1, 2006, except for the aforementioned $1.0 million recognized
in the fourth quarter of 2005 as a result of the accelerated vesting of outstanding options on December 30, 2005. The
following table illustrates the effect on net income and earnings per share for the years ended December 31, 2005 and
2004 if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee
compensation as well as $6.3 million of unrecognized compensation expense associated with the accelerated vesting of
all stock options in 2005 (in thousands, except per share data).
For the Years Ended December 31,
2004
2005
As Reported:
Income from continuing operations and after
preferred stock distributions
Income (loss) from discontinued operations, net of taxes
Net income available to common stockholders

$

Pro Forma:
Income from continuing operations and after
preferred stock distributions
Income (loss) from discontinued operations, net of taxes
Net income available to common stockholders

$

As Reported:
Basic earnings (loss) per share:
Income from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income available to common stockholders

$

As Reported:
Diluted earnings (loss) per share:
Income from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income available to common stockholders

$

Pro Forma:
Basic earnings (loss) per share:
Income from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income available to common stockholders

$

Pro Forma:
Diluted earnings (loss) per share:
Income from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income available to common stockholders

$

F - 14

$

$

$

$

$

$

50,564
(442)
50,122

$

42,519
(442)
42,077

$

0.88
(0.01)
0.87

$

0.84
(0.01)
0.83

$

0.74
(0.01)
0.73

$

0.71
(0.01)
0.70

$

60,193
888
61,081

$

56,181
888
57,069

$

1.14
0.02
1.16

$

1.02
0.02
1.04

$

1.07
0.02
1.09

$

$

0.95
0.02
0.97

The effect of applying SFAS 123 for disclosing compensation costs under such pronouncement may
not be representative of the effects on reported net income available to common stockholders for
future years.
Recent Accounting Pronouncements
In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes” (“FIN 48”), which is an interpretation of SFAS 109. FIN 48 prescribes a recognition
threshold and measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. The guidance prescribed in FIN 48
establishes a recognition threshold of more likely than not that a tax position will be sustained upon
examination. The measurement attribute of FIN 48 requires that a tax position be measured at the
largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate
settlement. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company
is in the process of evaluating the impact that FIN 48 will have on the Company’s financial position
and results of operations.
3.

GOODWILL AND INTANGIBLES
Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”
(“SFAS 142”), establishes accounting and reporting requirements for goodwill and other intangible
assets. Under SFAS 142, goodwill attributable to each of the Company’s reporting units is tested
for impairment by comparing the fair value of each reporting unit with its carrying value. Fair value
is determined using a collaboration of various common valuation techniques, including market
multiples, discounted cash flows, and replacement cost methods. These impairment tests are
required to be performed at least annually. The Company performs its impairment tests during the
fourth quarter, in connection with the Company’s annual budgeting process, and whenever
circumstances indicate the carrying value of goodwill may not be recoverable.
As a result of the transfer of operations of the David L. Moss Criminal Justice Center to the Tulsa
County Sheriff’s Office on July 1, 2005, as further described in Note 14, the Company recognized a
goodwill impairment charge of $0.1 million. The charge for the David L. Moss facility is included
in loss from discontinued operations, net of taxes, in the accompanying statement of operations for
the year ended December 31, 2005.
During the fourth quarter of 2005, in connection with the Company’s annual budgeting process and
annual goodwill impairment analysis, the Company recognized a goodwill impairment charge of
$0.2 million related to the management of the 380-bed Liberty County Jail/Juvenile Center. This
impairment charge resulted from recent poor operating performance combined with an unfavorable
forecast of future cash flows under the current management contract. This charge was computed
using a discounted cash flow method and is included in depreciation and amortization in the
accompanying statement of operations for the year ended December 31, 2005. During September
2006, the Company received notification from the Liberty County Commission in Liberty County,
Texas that, as a result of a contract bidding process, the County elected to transfer management of
the Liberty County Jail/Juvenile Center to another operator which occurred in January 2007. The
Company expects to reclassify the results of operations, net of taxes, and the assets and liabilities of
this facility as discontinued operations beginning in the first quarter of 2007 for all periods
presented. The termination is not expected to have a material impact on the Company’s financial
statements.
The components of the Company’s other identifiable intangible assets and liabilities are as follows
(in thousands):
F - 15

December 31, 2005
Gross Carrying
Accumulated
Amount
Amortization

December 31, 2006
Accumulated
Gross Carrying
Amortization
Amount
Contract acquisition costs
Customer list
Contract values

$

873
765
(35,688)

$

(857)
(437)
22,459

$

873
765
(35,688)

$

(855)
(328)
19,294

Total

$

(34,050)

$

21,165

$

(34,050)

$

18,111

Contract acquisition costs and the customer list are included in other non-current assets, and
contract values are included in other non-current liabilities in the accompanying consolidated
balance sheets. Contract values are amortized using the interest method. Amortization income, net
of amortization expense, for intangible assets and liabilities during the years ended December 31,
2006, 2005, and 2004 was $4.6 million, $4.2 million and $3.4 million, respectively. Interest
expense associated with the amortization of contract values for the years ended December 31, 2006,
2005, and 2004 was $1.5 million, $1.8 million, and $2.1 million, respectively. Estimated
amortization income, net of amortization expense, for the five succeeding fiscal years is as follows
(in thousands):
2007
2008
2009
2010
2011

4.

$ 4,552
4,552
3,095
2,534
134

PROPERTY AND EQUIPMENT
At December 31, 2006, the Company owned 45 real estate properties, including 43 correctional,
detention and juvenile facilities, three of which the Company leases to other operators, and two
corporate office buildings. At December 31, 2006, the Company also managed 25 correctional and
detention facilities owned by government agencies.
Property and equipment, at cost, consists of the following (in thousands):
December 31,
2005

2006
Land and improvements
Buildings and improvements
Equipment
Office furniture and fixtures
Construction in progress

$

40,625
1,899,701
157,763
25,712
110,124
2,233,925
(428,827)

$

37,673
1,810,706
126,549
24,386
71,627
2,070,941
(360,147)

$

1,805,098

$

1,710,794

Less: Accumulated depreciation

Construction in progress primarily consists of correctional facilities under construction or expansion
and software under development for internal use capitalized in accordance with Statement of
Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use.” Interest is capitalized on construction in progress in accordance with Statement of Financial
Accounting Standards No. 34, “Capitalization of Interest Cost” and amounted to $4.7 million, $4.5
million, and $5.8 million in 2006, 2005, and 2004, respectively.
F - 16

Depreciation expense was $72.2 million, $63.9 million, and $57.8 million for the years ended
December 31, 2006, 2005, and 2004, respectively.
As of December 31, 2006, ten of the facilities owned by the Company are subject to options that
allow various governmental agencies to purchase those facilities. Certain of these options to
purchase are based on a depreciated book value while others are based on a fair market value
calculation. In addition, three facilities, including two that are also subject to purchase options, are
constructed on land that the Company leases from governmental agencies under ground leases.
Under the terms of those ground leases, the facilities become the property of the governmental
agencies upon expiration of the ground leases. The Company depreciates these properties over the
shorter of the term of the applicable ground lease or the estimated useful life of the property.
During the first quarter of 2006, the Company re-opened its North Fork Correctional Facility in
Sayre, Oklahoma with a small population of inmates from the state of Vermont. The facility was
also re-opened in anticipation of additional inmate population needs from various existing state and
federal customers. In June 2006, the Company entered into a new agreement with the state of
Wyoming to house up to 600 of the state’s male medium-security inmates at the North Fork
Correctional Facility. The terms of the contract include an initial two-year period and may be
renewed upon mutual agreement. Prior to its re-opening, this facility had been vacant since the
third quarter of 2003, when all of the Wisconsin inmates housed at the facility were transferred in
order to satisfy a contractual provision mandated by the state of Wisconsin.
In June 2006, the Company entered into a new agreement with Stewart County, Georgia to house
detainees from ICE under an inter-governmental service agreement between Stewart County and
ICE. The agreement will enable ICE to accommodate detainees at the Company’s Stewart Detention
Center in Lumpkin, Georgia. The agreement between Stewart County and the Company is effective
through December 31, 2011, and provides for an indefinite number of renewal options. The
Company began receiving ICE detainees at the Stewart facility during October 2006.
During February 2005, the Company commenced construction of the Red Rock Correctional
Center, a new correctional facility located in Eloy, Arizona. The facility was completed during July
2006 for an aggregate cost of approximately $81 million. The beds available at the Red Rock
facility are substantially occupied by inmates from the states of Hawaii and Alaska.
5.

FACILITY ACQUISITIONS, EXPANSIONS, AND CONSTRUCTION IN PROGRESS
During September 2005, the Company announced that Citrus County renewed its contract for the
Company’s continued management of the Citrus County Detention Facility located in Lecanto,
Florida. The contract has a ten-year base term with one five-year renewal option. The terms of the
new agreement include a 360-bed expansion that the Company commenced during the fourth
quarter of 2005. The expansion of the facility, which is owned by the County, was substantially
completed during January 2007 at a cost of approximately $18.5 million, funded by the Company
utilizing cash on hand. If the County terminates the management contract at any time prior to
twenty years following completion of construction, the County would be required to pay the
Company an amount equal to the construction cost less an allowance for the amortization over a
twenty-year period.
In order to maintain an adequate supply of available beds to meet anticipated demand, while
offering the state of Hawaii the opportunity to consolidate its inmates into fewer facilities, the
Company commenced construction during the fourth quarter of 2005 of the Saguaro Correctional
Facility, a new correctional facility located adjacent to the recently completed Red Rock
Correctional Center in Eloy, Arizona. The Saguaro Correctional Facility is expected to be
F - 17

completed mid-2007 at an estimated cost of approximately $103 million. The Company currently
expects to consolidate inmates from the state of Hawaii from several of the Company’s other
facilities to this new facility. Although the Company can provide no assurance, it currently expects
that growing state and federal demand for beds will ultimately absorb the beds vacated by the state
of Hawaii.
In July 2006, the Company was notified by the state of Colorado that the State had accepted the
Company’s proposal to expand its 700-bed Bent County Correctional Facility in Las Animas,
Colorado by 720 beds to fulfill part of a 2,250-bed request for proposal issued by the state of
Colorado in December 2005. As a result of the award, the Company has now entered into an
Implementation Agreement with the state of Colorado for the expansion of its Bent County
Correctional Facility by 720 beds. In addition, during November 2006 the Company entered into
another Implementation Agreement to also expand its 768-bed Kit Carson Correctional Center in
Burlington, Colorado by 720 beds.
The Company expects to commence construction on the expansion of the Bent and Kit Carson
facilities during the first half of 2007. Construction of the Bent and Kit Carson facilities is
estimated to cost a combined total of approximately $88 million. Both expansions are anticipated to
be completed during the second quarter of 2008.
Based on the Company’s expectation of demand from a number of existing state and federal
customers, during August 2006 the Company announced its intention to expand its North Fork
Correctional Facility, Tallahatchie County Correctional Facility in Tutwiler, Mississippi, and its
Crossroads Correctional Center in Shelby, Montana. The estimated cost to complete these
expansions is approximately $81 million.

During January 2007, the Company announced that it received a contract award from the BOP
to house up to 1,558 federal inmates at its Eden Detention Center in Eden, Texas. The
Company currently houses approximately 1,300 BOP inmates at the Eden facility, under an
existing inter-governmental services agreement between the BOP and the City of Eden. The
contract requires a renovation and expansion of the Eden facility, which will increase the rated
capacity of the facility by 129 beds to an aggregate capacity of 1,354 beds. Renovation of the
Eden facility is expected to be completed during the first quarter of 2008 at an estimated cost of
$20.0 million.
6.

INVESTMENT IN AFFILIATE
The Company has determined that its joint venture in APM is a variable interest entity (“VIE”) in
accordance with Interpretation No. 46, “Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No. 51” (“FIN 46”), of which the Company is not
the primary beneficiary. The Company has a 50% ownership interest in APM, an entity holding the
management contract for a correctional facility, HM Prison Forest Bank, under a 25-year prison
management contract with an agency of the United Kingdom government. The Forest Bank
facility, located in Salford, England, was previously constructed and owned by a wholly-owned
subsidiary of the Company, which was sold in April 2001. All gains and losses under the joint
venture are accounted for using the equity method of accounting. During 2000, the Company
extended a working capital loan to APM, which totaled $6.4 million, including accrued interest, as
of December 31, 2006. The outstanding working capital loan represents the Company’s maximum
exposure to loss in connection with APM.
For the year ended December 31, 2006, equity in earnings of joint venture was $ 0.1 million, while
for the years ended December 31, 2005 and 2004, equity in loss of joint venture was $0.3 million
F - 18

and $0.6 million, respectively, which is included in other (income) expense in the consolidated
statements of operations. Because the Company’s investment in APM has no carrying value, equity
in losses of APM are applied as a reduction to the net carrying value of the note receivable balance,
which is included in other assets in the accompanying consolidated balance sheets.
7.

INVESTMENT IN DIRECT FINANCING LEASE
At December 31, 2006, the Company’s investment in a direct financing lease represents net
receivables under a building and equipment lease between the Company and the District of
Columbia for the D.C. Correctional Treatment Facility.
A schedule of future minimum rentals to be received under the direct financing lease in future years
is as follows (in thousands):
2007
2008
2009
2010
2011
Thereafter
Total minimum obligation
Less unearned interest income
Less current portion of direct financing lease

$

2,793
2,793
2,793
2,793
2,793
14,658
28,623
(12,301)
(855)

Investment in direct financing lease

$

15,467

During the years ended December 31, 2006, 2005, and 2004, the Company recorded interest income
of $2.0 million, $2.1 million, and $2.2 million, respectively, under this direct financing lease.
8.

OTHER ASSETS
Other assets consist of the following (in thousands):
December 31,
2005

2006
Debt issuance costs, less accumulated amortization
of $7,820 and $8,539, respectively
Notes receivable, net
Cash surrender value of life insurance
Deposits
Customer list, less accumulated amortization of $437 and $328,
respectively
Contract acquisition costs, less accumulated amortization
of $857 and $855, respectively
Other

$

$

F - 19

15,920
4,248
2,040
1,232

$

16,138
4,241
1,540
1,375

328

437

16
23

18
71

23,807

$

23,820

9.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following (in thousands):
December 31,
2005

2006
Trade accounts payable
Accrued salaries and wages
Accrued workers’ compensation and auto liability
Accrued litigation
Accrued employee medical insurance
Accrued property taxes
Accrued interest
Other

10.

$

48,393
28,587
8,422
13,303
8,602
13,063
16,750
23,665

$

37,993
23,159
9,579
13,186
6,860
12,802
13,814
23,697

$

160,785

$

141,090

DISTRIBUTIONS TO STOCKHOLDERS
Series A Preferred Stock
During 2004, the Company declared and paid a cash dividend on the outstanding shares of its Series
A Preferred Stock each quarter at a rate of 8% per annum of the stock’s stated value of $25.00 per
share through the date the Series A Preferred Stock was redeemed. See Note 15 for further
discussion of redemptions of the Company’s Series A Preferred Stock during 2004.
Series B Preferred Stock
The Company declared and paid a paid-in-kind dividend on the outstanding shares of its Series B
Preferred Stock each quarter since the issuance of the Series B Preferred Stock in September 2000
through the third quarter of 2003 at a rate of 12% per annum of the stock’s stated value of $24.46
per share. Beginning in the fourth quarter of 2003, pursuant to the terms of the Series B Preferred
Stock, the Company declared and paid a cash dividend on the outstanding shares of Series B
Preferred Stock, at a rate of 12% per annum of the stock’s stated value. See Note 15 for further
discussion of the tender offer for the Company’s Series B Preferred Stock during 2003 and the
redemption of the remaining shares of Series B Preferred Stock during 2004.
Common Stock
No distributions for common stock were made for the years ended December 31, 2006, 2005, and
2004. The indentures governing the Company’s senior unsecured notes limit the amount of
dividends the Company can declare or pay on outstanding shares of its common stock. Taking into
consideration these limitations, the Company’s management and its board of directors regularly
evaluate the merits of declaring and paying a dividend. Future dividends, if any, will depend on the
Company’s future earnings, capital requirements, financial condition, alternative uses of capital, and
on such other factors as the board of directors of the Company considers relevant.

F - 20

11.

DEBT
Debt consists of the following (in thousands):
December 31,
2005

2006
Senior Bank Credit Facility:
Term Loan E Facility, with quarterly principal payments of varying amounts
with unpaid balance due in March 2008; interest payable periodically at
variable interest rates. The interest rate was 6.0% at December 31, 2005.
This loan was paid-off in connection with issuance of the 6.75% Senior
Notes in January 2006.

$

Revolving Loan, principal due at maturity in March 2006, interest payable
periodically at variable interest rates. The interest rate was 5.9% at
December 31, 2005. This facility was replaced with the Revolving Credit
Facility during the first quarter of 2006, as further described hereafter.

-

$

138,950

-

10,000

-

-

7.5% Senior Notes, principal due at maturity in May 2011; interest payable
semi-annually in May and November at 7.5%.

250,000

250,000

7.5% Senior Notes, principal due at maturity in May 2011; interest payable
semi-annually in May and November at 7.5%. These notes were issued with
a $2.3 million premium, of which $1.3 million and $1.5 million was
unamortized at December 31, 2006 and 2005, respectively.

201,258

201,548

6.25% Senior Notes, principal due at maturity in March 2013; interest payable
semi-annually in March and September at 6.25%.

375,000

375,000

6.75% Senior Notes, principal due at maturity in January 2014; interest
payable semi-annually in January and July at 6.75%.

150,000

-

Revolving Credit Facility, principal due at maturity in February 2011; interest
payable periodically at variable interest rates.

Other
Less: Current portion of long-term debt
$

976,258
(290)
975,968

$

138
975,636
(11,836)
963,800

Senior Indebtedness
As of December 31, 2005, the Company’s senior secured bank credit facility (the “Senior Bank
Credit Facility”) was comprised of a $139.0 million term loan expiring March 31, 2008 (the “Term
Loan E Facility”) and a revolving loan (the “Revolving Loan”) with a capacity of up to $125.0
million, which included a $75.0 million subfacility for letters of credit, expiring on March 31, 2006.
In connection with a substantial prepayment in March 2005 with net proceeds from the issuance of
the 6.25% Senior Notes (as defined hereafter), along with cash on hand, the Company amended the
Senior Bank Credit Facility to permit the incurrence of additional unsecured indebtedness to be
used for the purpose of purchasing, through a tender offer, the 9.875% Senior Notes (as defined
hereafter), prepaying a portion of the then outstanding term loan portion of the Senior Bank Credit
Facility (the “Term Loan D Facility”), and paying the related tender premium, fees, and expenses
incurred in connection therewith. The tender offer for the 9.875% Senior Notes and pay-down of
the Term Loan D Facility resulted in expenses associated with refinancing transactions of $35.0
million during the first quarter of 2005, consisting of a tender premium paid to the holders of the
9.875% Senior Notes who tendered their notes to the Company at a price of 111% of par, estimated
fees and expenses associated with the tender offer, and the write-off of existing deferred loan costs
associated with the purchase of the 9.875% Senior Notes and lump sum pay-down of the Term Loan
D Facility.
F - 21

During January 2006, in connection with the sale and issuance of the 6.75% Senior Notes (as
defined hereafter), the Company used the net proceeds to completely pay-off the outstanding
balance of the Term Loan E Facility, after repaying the remaining $10.0 million balance on the
Revolving Loan in January 2006 with cash on hand. Additionally, in February 2006, the Company
reached an agreement with a group of lenders to enter into a new $150.0 million senior secured
revolving credit facility with a five-year term (the “Revolving Credit Facility”). The Revolving
Credit Facility was used to replace the existing Revolving Loan, including any outstanding letters of
credit issued thereunder. The Company incurred a pre-tax charge of approximately $1.0 million
during the first quarter of 2006 for the write-off of existing deferred loan costs associated with the
retirement of the Revolving Loan and pay-off of the Term Loan E Facility.
The Revolving Credit Facility has a $10.0 million sublimit for swingline loans and a $100.0 million
sublimit for the issuance of standby letters of credit. The Company has an option to increase the
availability under the Revolving Credit Facility by up to $100.0 million (consisting of revolving
credit, term loans, or a combination of the two) subject to, among other things, the receipt of
commitments for the increased amount. Interest on the Revolving Credit Facility is based on either
a base rate plus a margin ranging from 0.00% to 0.50% or a LIBOR plus a margin ranging from
0.75% to 1.50%. The applicable margin rates are subject to adjustment based on the Company’s
leverage ratio. The Revolving Credit Facility currently bears interest at a base rate or a LIBOR plus
a margin of 1.00%.
The Revolving Credit Facility is secured by a pledge of all of the capital stock of the Company’s
domestic subsidiaries, 65% of the capital stock of the Company’s foreign subsidiaries, all of the
Company’s accounts receivable, and all of the Company’s deposit accounts.
The Revolving Credit Facility requires the Company to meet certain financial covenants, including,
without limitation, a maximum total leverage ratio and a minimum interest coverage ratio. As of
December 31, 2006, the Company was in compliance with all such covenants. In addition, the
Revolving Credit Facility contains certain covenants which, among other things, limits both the
incurrence of additional indebtedness, investments, payment of dividends, transactions with
affiliates, asset sales, acquisitions, capital expenditures, mergers and consolidations, prepayments
and modifications of other indebtedness, liens and encumbrances and other matters customarily
restricted in such agreements. In addition, the Revolving Credit Facility is subject to certain crossdefault provisions with terms of the Company’s other indebtedness.
$250 Million 9.875% Senior Notes. Interest on the $250.0 million aggregate principal amount of
the Company’s 9.875% unsecured senior notes (the “9.875% Senior Notes”) accrued at the stated
rate and was payable semi-annually on May 1 and November 1 of each year. The 9.875% Senior
Notes were scheduled to mature on May 1, 2009. As previously described herein, all of the 9.875%
Senior Notes were purchased through a tender offer by the Company during the first quarter of
2005.
$250 Million 7.5% Senior Notes. Interest on the $250.0 million aggregate principal amount of the
Company’s 7.5% unsecured senior notes issued in May 2003 (the “$250 Million 7.5% Senior
Notes”) accrues at the stated rate and is payable semi-annually on May 1 and November 1 of each
year. The Company capitalized approximately $7.7 million of costs associated with the issuance of
the $250 Million 7.5% Senior Notes, which are scheduled to mature on May 1, 2011. At any time
on or before May 1, 2006, the Company could have redeemed up to 35% of the notes with the net
proceeds of certain equity offerings, as long as 65% of the aggregate principal amount of the notes
remained outstanding after the redemption. The Company may redeem all or a portion of the notes
on or after May 1, 2007. Redemption prices are set forth in the indenture governing the $250
F - 22

Million 7.5% Senior Notes. The $250 Million 7.5% Senior Notes are guaranteed on an unsecured
basis by all of the Company’s domestic subsidiaries.
$200 Million 7.5% Senior Notes. Interest on the $200.0 million aggregate principal amount of the
Company’s 7.5% unsecured senior notes issued in August 2003 (the “$200 Million 7.5% Senior
Notes”) accrues at the stated rate and is payable on May 1 and November 1 of each year. However,
the notes were issued at a price of 101.125% of the principal amount of the notes, resulting in a
premium of $2.25 million, which is amortized as a reduction to interest expense over the term of the
notes. The Company capitalized approximately $4.6 million of costs associated with the issuance of
the $200 million 7.5% Senior Notes, which were issued under the existing indenture and
supplemental indenture governing the $250 Million 7.5% Senior Notes.
$375 Million 6.25% Senior Notes. As previously described herein, on March 23, 2005, the
Company completed the sale and issuance of $375.0 million aggregate principal amount of its
6.25% unsecured senior notes (the “6.25% Senior Notes”) in a private placement to qualified
institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. During
April 2005, the Company filed a registration statement with the SEC, which the SEC declared
effective May 4, 2005, to exchange the 6.25% Senior Notes for a new issue of identical debt
securities registered under the Securities Act of 1933, as amended. Proceeds from the original note
offering, along with cash on hand, were used to purchase, through a cash tender offer, all of the
9.875% Senior Notes, to pay-down $110.0 million of the then outstanding Term Loan D Facility
portion of the Senior Bank Credit Facility, and to pay fees and expenses in connection therewith.
The Company capitalized approximately $7.5 million of costs associated with the issuance of the
6.25% Senior Notes.
Interest on the 6.25% Senior Notes accrues at the stated rate and is payable on March 15 and
September 15 of each year. The 6.25% Senior Notes are scheduled to mature on March 15, 2013.
At any time on or before March 15, 2008, the Company may redeem up to 35% of the notes with
the net proceeds of certain equity offerings, as long as 65% of the aggregate principal amount of the
notes remains outstanding after the redemption. The Company may redeem all or a portion of the
notes on or after March 15, 2009. Redemption prices are set forth in the indenture governing the
6.25% Senior Notes.
$150 Million 6.75% Senior Notes. During January 2006, the Company completed the sale and
issuance of $150.0 million aggregate principal amount of its 6.75% unsecured senior notes (the
“6.75% Senior Notes”) pursuant to a prospectus supplement under an automatically effective shelf
registration statement that was filed by the Company with the SEC on January 17, 2006. The
Company used the net proceeds from the sale of the 6.75% Senior Notes to prepay the $139.0
million balance outstanding on the term loan indebtedness under the Company's Senior Bank Credit
Facility, to pay fees and expenses, and for general corporate purposes. The Company reported a
charge of $0.9 million during the first quarter of 2006 in connection with the prepayment of the
term portion of the Senior Bank Credit Facility. The Company capitalized approximately $2.9
million of costs associated with the issuance of the 6.75% Senior Notes.
Interest on the 6.75% Senior Notes accrues at the stated rate and is payable on January 31 and July
31 of each year. The 6.75% Senior Notes are scheduled to mature on January 31, 2014. At any
time on or before January 31, 2009, the Company may redeem up to 35% of the notes with the net
proceeds of certain equity offerings, as long as 65% of the aggregate principal amount of the notes
remains outstanding after the redemption. The Company may redeem all or a portion of the notes
on or after January 31, 2010. Redemption prices are set forth in the indenture governing the 6.75%
Senior Notes.
F - 23

Guarantees and Covenants. In connection with the registration with the SEC of the 9.875% Senior
Notes pursuant to the terms and conditions of a Registration Rights Agreement, after obtaining
consent of the lenders under a previously outstanding senior bank credit facility, the Company
transferred the real property and related assets of the Company (as the parent corporation) to certain
of its subsidiaries effective December 27, 2002. Accordingly, the Company (as the parent
corporation to its subsidiaries) has no independent assets or operations (as defined under Rule 310(f) of Regulation S-X). As a result of this transfer, assets with an aggregate net book value of
$1.8 billion are no longer directly available to the parent corporation to satisfy the obligations under
the $250 Million 7.5% Senior Notes, the $200 Million 7.5% Senior Notes, the 6.25% Senior Notes,
or the 6.75% Senior Notes (collectively, “the Senior Notes”). Instead, the parent corporation must
rely on distributions of the subsidiaries to satisfy its obligations under the Senior Notes. All of the
parent corporation’s domestic subsidiaries, including the subsidiaries to which the assets were
transferred, have provided full and unconditional guarantees of the Senior Notes. Each of the
Company’s subsidiaries guaranteeing the Senior Notes are wholly-owned subsidiaries of the
Company; the subsidiary guarantees are full and unconditional and are joint and several obligations
of the guarantors; and all non-guarantor subsidiaries are minor (as defined in Rule 3-10(h)(6) of
Regulation S-X).
As of December 31, 2006, neither the Company nor any of its subsidiary guarantors had any
material or significant restrictions on the Company’s ability to obtain funds from its subsidiaries by
dividend or loan or to transfer assets from such subsidiaries.
The indentures governing the Senior Notes contain certain customary covenants that, subject to
certain exceptions and qualifications, restrict the Company’s ability to, among other things; make
restricted payments; incur additional debt or issue certain types of preferred stock; create or permit
to exist certain liens; consolidate, merge or transfer all or substantially all of the Company’s assets;
and enter into transactions with affiliates. In addition, if the Company sells certain assets (and
generally does not use the proceeds of such sales for certain specified purposes) or experiences
specific kinds of changes in control, the Company must offer to repurchase all or a portion of the
Senior Notes. The offer price for the Senior Notes in connection with an asset sale would be equal
to 100% of the aggregate principal amount of the notes repurchased plus accrued and unpaid
interest and liquidated damages, if any, on the notes repurchased to the date of purchase. The offer
price for the Senior Notes in connection with a change in control would be 101% of the aggregate
principal amount of the notes repurchased plus accrued and unpaid interest and liquidated damages,
if any, on the notes repurchased to the date of purchase. The Senior Notes are also subject to certain
cross-default provisions with the terms of the Company’s Revolving Credit Facility, as more fully
described hereafter.
$30 Million Convertible Subordinated Notes
As of December 31, 2004, the Company had outstanding an aggregate of $30.0 million of
convertible subordinated notes due February 28, 2007 (the “$30.0 Million Convertible Subordinated
Notes”). Prior to May 2003, these notes accrued interest at 8% per year and were scheduled to
mature February 28, 2005, subject to extension of such maturity until February 28, 2006 or
February 28, 2007 by the holder. During May 2003, the Company and the holder amended the
terms of the notes, reducing the interest rate to 4% per year and extending the maturity date to
February 28, 2007. The amendment also extended the date on which the Company could generally
require the holder to convert all or a portion of the notes into common stock to any time after
February 28, 2005 from any time after February 28, 2004.
On February 10, 2005, the Company provided notice to the holders of the $30 Million Convertible
Subordinated Notes that the Company would require the holders to convert all of the notes into
F - 24

shares of the Company’s common stock on March 1, 2005. The conversion of the $30 Million
Convertible Subordinated Notes resulted in the issuance of approximately 5.0 million shares of the
Company’s common stock.
Other Debt Transactions
Letters of Credit. At December 31, 2006 and 2005, the Company had $37.9 million and $36.5
million, respectively, in outstanding letters of credit. The letters of credit were issued to secure the
Company’s workers’ compensation and general liability insurance policies, performance bonds and
utility deposits. The letters of credit outstanding at December 31, 2006 were provided by a subfacility under the Revolving Credit Facility.
Debt Maturities
Scheduled principal payments as of December 31, 2006 for the next five years and thereafter are as
follows (in thousands):
2007
2008
2009
2010
2011
Thereafter

$

Total principal payments
Unamortized bond premium

450,000
525,000
975,000
1,258

Total debt

$

976,258

Cross-Default Provisions
The provisions of the Company’s debt agreements relating to the Revolving Credit Facility and the
Senior Notes contain certain cross-default provisions. Any events of default under the Revolving
Credit Facility that results in the lenders’ actual acceleration of amounts outstanding thereunder also
result in an event of default under the Senior Notes. Additionally, any events of default under the
Senior Notes which give rise to the ability of the holders of such indebtedness to exercise their
acceleration rights also result in an event of default under the Revolving Credit Facility.
If the Company were to be in default under the Revolving Credit Facility, and if the lenders under
the Revolving Credit Facility elected to exercise their rights to accelerate the Company’s
obligations under the Revolving Credit Facility, such events could result in the acceleration of all or
a portion of the Company’s Senior Notes, which would have a material adverse effect on the
Company’s liquidity and financial position. The Company does not have sufficient working capital
to satisfy its debt obligations in the event of an acceleration of all or a substantial portion of the
Company’s outstanding indebtedness.

F - 25

12.

INCOME TAXES
The income tax expense is comprised of the following components (in thousands):
For the Years Ended December 31,
2005
2004
2006
Current provision (benefit)
Federal
State

$

Deferred provision (benefit)
Federal
State

28,440
1,568
30,008

$

363
(485)
(122)

27,286
(276)
27,010

29,247
1,894
31,141

Income tax provision

$

61,149

$

$

20,508
2,286
22,794

16,666
2,054
18,720

26,888

$

41,514

The current income tax provisions for 2006, 2005, and 2004 are net of $16.0 million, $22.2 million,
and $28.5 million, respectively, of tax benefits of operating loss carryforwards.
Significant components of the Company’s deferred tax assets and liabilities as of December 31,
2006 and 2005, are as follows (in thousands):
December 31,
2005

2006
Current deferred tax assets:
Asset reserves and liabilities not yet deductible for tax
Net operating loss and tax credit carryforwards
Net current deferred tax assets

$

Current deferred tax liabilities:
Other

11,760
1,690
13,450

$

(1,950)

(1,795)

Net total current deferred tax assets

$

Noncurrent deferred tax assets:
Asset reserves and liabilities not yet deductible for tax
Tax over book basis of certain assets
Net operating loss and tax credit carryforwards
Other
Total noncurrent deferred tax assets
Less valuation allowance

11,655

21,053
13,385
34,438

$

32,488

14,030
26,995
16,999
8,221
66,245
(8,292)

3,767
30,103
31,114
11,037
76,021
(8,252)

Net noncurrent deferred tax assets

57,953

67,769

Noncurrent deferred tax liabilities:
Book over tax basis of certain assets
Other
Total noncurrent deferred tax liabilities

(81,001)
(707)
(81,708)

Net total noncurrent deferred tax liabilities

$

(23,755)

(79,676)
(180)
(79,856)
$

(12,087)

Deferred income taxes reflect the available net operating losses and the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes
F - 26

and the amounts used for income tax purposes. Realization of the future tax benefits related to
deferred tax assets is dependent on many factors, including the Company’s past earnings history,
expected future earnings, the character and jurisdiction of such earnings, unsettled circumstances
that, if unfavorably resolved, would adversely affect utilization of its deferred tax assets, carryback
and carryforward periods, and tax strategies that could potentially enhance the likelihood of
realization of a deferred tax asset.
The tax benefits associated with equity-based compensation reduced income taxes payable by $18.2
million during 2006 and increased current deferred tax assets by $6.9 million and $3.7 million
during 2005 and 2004, respectively. Such benefits were recorded as increases to stockholders’
equity.
A reconciliation of the income tax provision at the statutory income tax rate and the effective tax
rate as a percentage of income from continuing operations before income taxes for the years ended
December 31, 2006, 2005, and 2004 is as follows:
2006
Statutory federal rate
State taxes, net of federal tax benefit
Permanent differences
Change in valuation allowance
Adjustments to prior year’s tax returns
Other items, net

35.0%
2.2
0.8
0.0
0.0
(1.2)

36.8%

2005

2004

35.0%
0.7
1.9
2.3
(3.2)
(2.0)
34.7%

35.0%
4.0
3.2
2.1
(4.4)
0.3
40.2%

Although the Company utilized its remaining federal net operating losses in 2006, the Company has
approximately $9.5 million in net operating losses applicable to various states that it expects to
carry forward in future years to offset taxable income in such states. These net operating losses
have begun to expire. Accordingly, the Company has a valuation allowance of $2.7 million for the
estimated amount of the net operating losses that will expire unused, in addition to a $5.6 million
valuation allowance related to state tax credits that are also expected to expire unused. Although
the Company’s estimate of future taxable income is based on current assumptions that it believes to
be reasonable, the Company’s assumptions may prove inaccurate and could change in the future,
which could result in the expiration of additional net operating losses or credits. The Company
would be required to establish a valuation allowance at such time that it no longer expected to
utilize these net operating losses or credits, which could result in a material impact on its results of
operations in the future.
The Company’s effective tax rate was 36.8%, 34.7%, and 40.2% during 2006, 2005, and 2004,
respectively. The effective tax rate during 2006 was favorably impacted by an increase in the
income tax benefits of equity compensation during 2006 compared with prior years. The lower
effective tax rate during 2005 resulted from certain tax planning strategies implemented during the
fourth quarter of 2004 that were magnified by the recognition of deductible expenses associated
with the Company’s debt refinancing transactions completed during the first and second quarters of
2005. In addition, the Company also successfully pursued and recognized investment tax credits of
$0.7 million during 2005. The Company’s overall effective tax rate is estimated based on the
Company’s current projection of taxable income and could change in the future as a result of
changes in these estimates, the implementation of additional tax strategies, changes in federal or
state tax rates, changes in estimates related to uncertain tax positions, or changes in state
apportionment factors, as well as changes in the valuation allowance applied to the Company’s
deferred tax assets that are based primarily on the amount of state net operating losses and tax
credits that could expire unused.
F - 27

13.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
A senior bank credit facility obtained in May 2002 and in place prior to the previously outstanding
Senior Bank Credit Facility required the Company to hedge at least $192.0 million of the term loan
portions of the facility within 60 days following the closing of the loan. In May 2002, the Company
entered into an interest rate cap agreement to fulfill this requirement, capping LIBOR at 5.0% (prior
to the applicable spread) on outstanding balances of $200.0 million through the expiration of the cap
agreement on May 20, 2004. The Company paid a premium of $1.0 million to enter into the interest
rate cap agreement. The Company continued to amortize this premium as the estimated fair values
assigned to each of the hedged interest payments expired throughout the term of the cap agreement,
amounting to $0.6 million in 2004. The Company met the hedge accounting criteria under
Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and
Hedging Activities” (“SFAS 133”) and related interpretations in accounting for the interest rate cap
agreement. As a result, the interest rate cap agreement was marked to market each reporting period,
and the change in the fair value of the interest rate cap agreement of $0.6 million during the year
ended December 31, 2004 was reported through other comprehensive income in the statement of
stockholders’ equity until its expiration in 2004.

14.

DISCONTINUED OPERATIONS
Under the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), the identification and classification
of a facility as held for sale, or the termination of any of the Company’s management contracts by
expiration or otherwise, may result in the classification of the operating results of such facility, net
of taxes, as a discontinued operation, so long as the financial results can be clearly identified, and so
long as the Company does not have any significant continuing involvement in the operations of the
component after the disposal or termination transaction.
The results of operations, net of taxes, and the assets and liabilities of two correctional facilities,
each as further described below, have been reflected in the accompanying consolidated financial
statements as discontinued operations in accordance with SFAS 144 for the years ended December
31, 2006, 2005, and 2004. In addition, during the first quarter of 2004, the Company received $0.6
million in proceeds from the Commonwealth of Puerto Rico as a settlement for repairs the
Company previously made to a facility the Company formerly operated in Ponce, Puerto Rico.
These proceeds, net of taxes, are included in 2004 as discontinued operations.
Due to operating losses incurred at the Southern Nevada Women’s Correctional Center, the
Company elected to not renew its contract to manage the facility upon the expiration of the contract.
Accordingly, the Company transferred operation of the facility to the Nevada Department of
Corrections on October 1, 2004.
During March 2005, the Company received notification from the Tulsa County Commission in
Oklahoma that, as a result of a contract bidding process, the County elected to have the Tulsa
County Sheriff's Office manage the 1,440-bed David L. Moss Criminal Justice Center, located in
Tulsa. The Company’s contract expired on June 30, 2005. Accordingly, the Company transferred
operation of the facility to the Tulsa County Sheriff’s Office on July 1, 2005.
The following table summarizes the results of operations for these facilities for the years ended
December 31, 2006, 2005, and 2004 (in thousands):

F - 28

For the Years Ended December 31,
2005
2004
2006
REVENUE:
Managed-only

$

EXPENSES:
Managed-only
Depreciation and amortization

-

$

Other income
INCOME (LOSS) BEFORE INCOME TAXES
Income tax benefit (expense)
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF TAXES

$

-

(674)

-

15

-

(659)

-

217

-

$

11,169
186
11,355

-

OPERATING INCOME (LOSS)

10,681

$

(442)

28,578

27,179
129
27,308
1,270
160
1,430
(542)

$

888

The assets and liabilities of the discontinued operations presented in the accompanying consolidated
balance sheets are as follows (in thousands):
December 31,
2005
2006

ASSETS
Total assets

$

-

$

-

$

497

$

1,774

$

497

$

1,774

LIABILITIES
Accounts payable and accrued expenses
Total current liabilities

During September 2006, the Company received notification from the Liberty County Commission
in Liberty County, Texas that, as a result of a contract bidding process, the County elected to
transfer management of the 380-bed Liberty County Jail/Juvenile Center to another operator.
Accordingly, the Company’s contract with the County expired in January 2007. The Company
expects to reclassify the results of operations, net of taxes, and the assets and liabilities of this
facility as discontinued operations beginning in the first quarter of 2007 for all periods presented.
The termination is not expected to have a material impact on the Company’s financial statements.
15.

STOCKHOLDERS’ EQUITY
Common Stock
Restricted shares. During 2006, the Company issued approximately 256,000 shares of restricted
common stock to certain of the Company’s employees, with an aggregate value of $7.4 million,
including 202,000 restricted shares to employees whose compensation is charged to general and
administrative expense and 54,000 restricted shares to employees whose compensation is charged to
operating expense. During 2005, the Company issued approximately 296,000 shares of restricted
common stock to certain of the Company's employees, with an aggregate value of $7.7 million,
including 233,000 restricted shares to employees whose compensation is charged to general and
administrative expense and 63,000 shares to employees whose compensation is charged to operating
expense.
F - 29

The employees whose compensation is charged to general and administrative expense have
historically been issued stock options as opposed to restricted common stock. However, in 2005 the
Company made changes to its historical business practices with respect to awarding stock-based
employee compensation as a result of, among other reasons, the issuance of SFAS 123R, whereby
the Company issued a combination of stock options and restricted common stock to such
employees. The Company established performance-based vesting conditions on the restricted stock
awarded to the Company’s officers and executive officers. Unless earlier vested under the terms of
the restricted stock, approximately 137,000 shares issued in 2006 and approximately 162,000 shares
issued in 2005 to officers and executive officers are subject to vesting over a three-year period
based upon the satisfaction of certain performance criteria. No more than one-third of such shares
may vest in the first performance period; however, the performance criteria are cumulative for the
three-year period. Because the first performance criteria with respect to the restricted shares issued
in 2005 were satisfied, one-third of such shares issued and still outstanding on the date the
performance criteria were deemed satisfied, or 53,000 restricted shares, became vested in March
2006. Unless earlier vested under the terms of the restricted stock, the remaining 119,000 shares of
restricted stock issued in 2006 and 134,000 shares of restricted stock issued in 2005 to certain other
employees of the Company vest during 2009 and 2008, respectively, as long as the employees
awarded such shares do not terminate employment prior to the vesting dates.
During 2004, the Company issued approximately 79,000 shares of restricted common stock to
certain of the Company’s wardens valued at $1.6 million on the date of the award. All of the shares
granted during 2004 vest during 2007.
Nonvested restricted common stock transactions as of December 31, 2006 and for the year then
ended are summarized below (in thousands, except per share amounts).
Weighted
average grant date
fair value

Shares of
restricted
common stock
Nonvested at December 31, 2005
Granted
Cancelled
Vested

477
256
(57)
(178)

$
$
$
$

21.41
28.82
26.28
16.00

Nonvested at December 31, 2006

498

$

26.60

During 2006, 2005, and 2004, the Company expensed $4.6 million ($1.3 million of which was
recorded in operating expenses and $3.3 million of which was recorded in general and
administrative expenses), $3.0 million ($1.3 million of which was recorded in operating expenses
and $1.7 million of which was recorded in general and administrative expenses), and $0.9 million of
operating expenses, net of forfeitures, relating to the restricted common stock, respectively.
Series A Preferred Stock
The Company had originally authorized 20.0 million shares of $0.01 par value non-voting preferred
stock, of which 4.3 million shares were designated as Series A Preferred Stock. The Company
issued 4.3 million shares of its Series A Preferred Stock on January 1, 1999 in connection with a
merger completed during 1999. The shares of the Company’s Series A Preferred Stock were
redeemable at any time by the Company on or after January 30, 2003 at $25.00 per share, plus
dividends accrued and unpaid to the redemption date. Shares of the Company’s Series A Preferred
Stock had no stated maturity, sinking fund provision or mandatory redemption and were not
F - 30

convertible into any other securities of the Company. Dividends on shares of the Company’s Series
A Preferred Stock were cumulative from the date of original issue of such shares and were payable
quarterly in arrears at a fixed annual rate of 8.0%.
Redemption of Series A Preferred Stock in 2003. Immediately following consummation of an
offering of common stock and the $250 Million 7.5% Senior Notes in May 2003, the Company gave
notice to the holders of its outstanding Series A Preferred Stock that it would redeem 4.0 million
shares of the 4.3 million shares of Series A Preferred Stock outstanding at a redemption price equal
to $25.00 per share, plus accrued and unpaid dividends to the redemption date. The redemption was
completed in June 2003.
Redemption of Series A Preferred Stock in 2004. During the first quarter of 2004, the Company
completed the redemption of the remaining 0.3 million shares of Series A Preferred Stock at a
redemption price equal to $25.00 per share, plus accrued and unpaid dividends through the
redemption date.
Series B Preferred Stock
In order to satisfy the real estate investment trust distribution requirements with respect to its 1999
taxable year, during 2000 the Company authorized an additional 30.0 million shares of $0.01 par
value preferred stock, designated 12.0 million shares of such preferred stock as non-voting Series B
Preferred Stock and subsequently issued 7.5 million shares to holders of the Company’s common
stock as a stock dividend.
The shares of Series B Preferred Stock issued by the Company provided for cumulative dividends
payable at a rate of 12% per year of the stock’s stated value of $24.46. The dividends were payable
quarterly in arrears, in additional shares of Series B Preferred Stock through the third quarter of
2003, and in cash thereafter, provided that all accrued and unpaid cash dividends were made on the
Company’s Series A Preferred Stock. The shares of the Series B Preferred Stock were callable by
the Company, at a price per share equal to the stated value of $24.46, plus any accrued dividends, at
any time after six months following the later of (i) three years following the date of issuance or (ii)
the 91st day following the redemption of the Company’s then outstanding 12% Senior Notes.
Approximately 4.2 million shares of Series B Preferred Stock were converted into 14.3 million
shares of common stock during two conversion periods in 2000. The remaining shares of Series B
Preferred Stock, as well as additional shares issued as dividends, were not convertible into shares of
the Company’s common stock.
Series B Restricted Stock. During 2001, the Company issued 0.2 million shares of Series B
Preferred Stock under two Series B Preferred Stock restricted stock plans (the “Series B Restricted
Stock Plans”), which were valued at $2.0 million on the date of the award. The restricted shares of
Series B Preferred Stock were granted to certain of the Company’s key employees and wardens.
Under the terms of the Series B Restricted Stock Plans, the shares in the key employee plan vested
in equal intervals over a three-year period expiring in May 2004, while the shares in the warden
plan vested all at one time in May 2004. During the year ended December 31, 2004, the Company
expensed $0.3 million, net of forfeitures, relating to the Series B Restricted Stock Plans.
Tender Offer for Series B Preferred Stock. Following the completion of an offering of common
stock and the $250 Million 7.5% Senior Notes in May 2003, the Company purchased 3.7 million
shares of its Series B Preferred Stock for $97.4 million pursuant to the terms of a cash tender offer.
The tender offer price of the Series B Preferred Stock (inclusive of all accrued and unpaid
dividends) was $26.00 per share.
F - 31

Redemption of Series B Preferred Stock. During the second quarter of 2004, the Company
completed the redemption of the remaining 1.0 million shares of its Series B Preferred Stock at the
stated rate of $24.46 per share plus accrued dividends through the redemption date.
Stock Warrants
In connection with a merger completed during 2000, the Company issued stock purchase warrants
for the purchase of 319,000 shares of the Company’s common stock as partial consideration to
acquire the voting common stock of the acquired entity. The warrants issued allowed the holder to
purchase approximately 213,000 shares of the Company’s common stock at an exercise price of
$0.01 per share and approximately 106,000 shares of the Company’s common stock at an exercise
price of $9.40 per share. These warrants were scheduled to expire on September 29, 2005. On May
27, 2003 and September 23, 2005, the holder of the warrants purchased approximately 213,000
shares and approximately 106,000 shares, respectively, of common stock pursuant to the warrants at
an exercise price of $0.01 per share and $9.40 per share, respectively. Also, in connection with the
merger completed during 2000, the Company assumed the obligation to issue warrants for the
purchase of approximately 112,600 shares of its common stock, at an exercise price of $22.20 per
share. The expiration date of such warrants is December 31, 2008.
Stock Option Plans
The Company has equity incentive plans under which, among other things, incentive and nonqualified stock options are granted to certain employees and non-employee directors of the
Company by the compensation committee of the Company’s board of directors. The options are
granted with exercise prices equal to the fair market value on the date of grant. Vesting periods for
options granted to employees generally range from one to four years. Options granted to nonemployee directors vest at the date of grant. The term of such options is ten years from the date of
grant.
Stock option transactions relating to the Company’s incentive and non-qualified stock option plans
are summarized below (in thousands, except exercise prices):

Outstanding at December 31, 2005
Granted

No. of
options
4,994
437

Exercised

(1,665)

Cancelled
Outstanding at December 31, 2006

(139)
3,627

Exercisable at December 31, 2006

3,276

WeightedAverage
Exercise Price
of options
$
17.24
29.63
9.47
70.61
$
20.26
$

19.31

WeightedAverage
Remaining
Contractual
Term

Aggregate
Intrinsic
Value

6.1

$ 68,040

5.8

$ 65,352

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the
difference between the Company’s average stock price during 2006 and the exercise price,
multiplied by the number of in-the-money options) that would have been received by the option
holders had all option holders exercised their options on December 31, 2006. This amount changes
based on the fair market value of the Company’s stock. The total intrinsic value of options exercised
during the years ended December 31, 2006, 2005, and 2004 was $44.8 million, $17.5 million, and
$7.4 million, respectively.
F - 32

The weighted average fair value of options granted during 2006, 2005, and 2004 was $10.18, $8.89,
and $8.05 per option, respectively, based on the estimated fair value using the Black-Scholes
option-pricing model. The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average assumptions:
2006
Expected dividend yield
Expected stock price volatility
Risk-free interest rate
Expected life of options

0.0%
25.2%
4.7%
6 years

2005

2004

0.0%
26.9%
4.1%
6 years

0.0%
36.6%
3.6%
6 years

The Company estimates expected stock price volatility based on actual historical changes in the
market value of the Company’s stock. The risk-free interest rate is based on the U.S. Treasury yield
with a term that is consistent with the expected life of the stock options. The expected life of stock
options is based on the Company’s historical experience and is calculated separately for groups of
employees that have similar historical exercise behavior.
Nonvested stock option transactions relating to the Company’s incentive and non-qualified stock
option plans as of December 31, 2006 and changes during the year ended December 31, 2006 are
summarized below (in thousands, except exercise prices):
Weighted
average grant
date fair value

Number of
options
Nonvested at December 31, 2005
Granted
Cancelled
Vested

437
(27)
(60)

$
$
$
$

10.18
10.06
12.00

Nonvested at December 31, 2006

350

$

9.88

As of December 31, 2006, the Company had $2.5 million of total unrecognized compensation cost
related to stock options that is expected to be recognized over a remaining weighted-average period
of 2.5 years. Notwithstanding the aforementioned accelerated vesting of all options on December
30, 2005 to avoid future compensation charges and a change in the Company’s historical business
practices in 2005 with respect to awarding stock-based employee compensation by reducing the
amount of stock options being issued and issuing restricted common stock to many employees who
have historically been issued stock options largely as a result of the pending adoption of SFAS
123R, as a result of adopting Statement 123R on January 1, 2006, the Company's income from
continuing operations before income taxes and net income for the year ended December 31, 2006,
are $1.6 million and $1.0 million lower, respectively, than if it had continued to account for sharebased compensation under APB 25. Basic and diluted earnings per share for year ended December
31, 2006 are both $0.02 lower than if the Company had continued to account for share-based
compensation under APB 25. The pro forma effects on net income and earnings per share as if
compensation cost for the stock option plans had been determined based on the fair value of the
options at the grant date for 2005 and 2004 consistent with the provisions of SFAS 123R are
disclosed in Note 2.
On November 10, 2005, the FASB issued FASB Staff Position No. FAS 123(R)-3, “Transition
Election Related to Accounting for the Tax Effects of Share-Based Payment Awards” (the “FSP”).
The FSP provides that companies may elect to use a specified “short-cut” method to calculate the
historical pool of windfall tax benefits upon adoption of SFAS 123R. The Company elected to use
F - 33

the “short-cut” method when SFAS 123R was adopted on January 1, 2006. Prior to the adoption of
SFAS 123R, the Company reported all tax benefits of equity compensation as operating cash flows
in the consolidated statement of cash flows. In accordance with SFAS 123R, for the year ended
December 31, 2006 the presentation of the statement of cash flows has changed from prior periods
to report tax benefits from equity compensation of $18.2 million resulting from tax deductions in
excess of the compensation cost recognized for those equity awards (excess tax benefits) as
financing cash flows.
At the Company’s 2003 annual meeting of stockholders held in May 2003, the Company’s
stockholders approved an increase in the number of shares of common stock available for issuance
under the 2000 Stock Incentive Plan by 2.25 million shares raising the total to 6.0 million shares. In
addition, the stockholders approved the adoption of the Company’s Non-Employee Directors’
Compensation Plan, authorizing the Company to issue up to 112,500 shares of common stock
pursuant to the plan. These changes were made in order to provide the Company with adequate
means to retain and attract quality directors, officers and key employees through the granting of
equity incentives. As of December 31, 2006, the Company had 1.1 million shares available for
issuance under the 2000 Stock Incentive Plan and another existing plan, and 0.1 million shares
available for issuance under the Non-Employee Directors’ Compensation Plan.
16.

EARNINGS PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128, “Earnings Per Share”
(“SFAS 128”), basic earnings per share is computed by dividing net income available to common
stockholders by the weighted average number of common shares outstanding during the year.
Diluted earnings per share reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity. For the Company, diluted
earnings per share is computed by dividing net income available to common stockholders as
adjusted, by the weighted average number of common shares after considering the additional
dilution related to convertible subordinated notes, restricted common stock plans, and stock options
and warrants.
A reconciliation of the numerator and denominator of the basic earnings per share computation to
the numerator and denominator of the diluted earnings per share computation is as follows (in
thousands, except per share data):

F - 34

2006
NUMERATOR
Basic:
Income from continuing operations after preferred stock
distributions

$

Income (loss) from discontinued operations, net of taxes
Net income available to common stockholders

$

Diluted:
Income from continuing operations after preferred stock
distributions
Interest expense applicable to convertible notes, net of taxes
Diluted income from continuing operations after
preferred stock distributions

$

$

DENOMINATOR
Basic:
Weighted average common shares outstanding
Diluted:
Weighted average common shares outstanding
Effect of dilutive securities:
Stock options and warrants
Convertible notes
Restricted stock-based compensation
Weighted average shares and assumed conversions
BASIC EARNINGS (LOSS) PER SHARE:
Income from continuing operations after preferred stock
distributions

$

Income (loss) from discontinued operations, net of taxes
Net income available to common stockholders

$

DILUTED EARNINGS (LOSS) PER SHARE:
Income from continuing operations after preferred stock
distributions

$

Income (loss) from discontinued operations, net of taxes
Net income available to common stockholders

17.

105,239
105,239

$

105,239
-

$

$

$

105,239

50,564
(442)
50,122

$

50,564
129

$

$

50,693
(442)

105,239
-

Income (loss) from discontinued operations, net of taxes
Diluted net income available to common
stockholders

For the Years Ended December 31,
2005
2004

$

50,251

60,193
888
61,081

60,193
720
60,913
888

$

61,801

59,857

57,713

52,589

59,857

57,713

52,589

1,509
163
61,529

1,724
816
170
60,423

1,952
5,043
87
59,671

1.76
1.76

$

1.71
1.71

$

$

$

0.88
(0.01)
0.87

$

0.84
(0.01)
0.83

$

$

$

1.14
0.02
1.16

1.02
0.02
1.04

COMMITMENTS AND CONTINGENCIES
Legal Proceedings
General. The nature of the Company’s business results in claims and litigation alleging that it is
liable for damages arising from the conduct of its employees, inmates or others. The nature of such
claims include, but is not limited to, claims arising from employee or inmate misconduct, medical
malpractice, employment matters, property loss, contractual claims, and personal injury or other
damages resulting from contact with the Company’s facilities, personnel or prisoners, including
damages arising from a prisoner’s escape or from a disturbance or riot at a facility. The Company
maintains insurance to cover many of these claims, which may mitigate the risk that any single
claim would have a material effect on the Company’s consolidated financial position, results of
operations, or cash flows, provided the claim is one for which coverage is available. The
combination of self-insured retentions and deductible amounts means that, in the aggregate, the
Company is subject to substantial self-insurance risk.
F - 35

The Company records litigation reserves related to certain matters for which it is probable that a
loss has been incurred and the range of such loss can be estimated. Based upon management’s
review of the potential claims and outstanding litigation and based upon management’s experience
and history of estimating losses, management believes a loss in excess of amounts already
recognized would not be material to the Company’s financial statements. In the opinion of
management, there are no pending legal proceedings that would have a material effect on the
Company’s consolidated financial position, results of operations, or cash flows. Any receivable for
insurance recoveries is recorded separately from the corresponding litigation reserve, and only if
recovery is determined to be probable. Adversarial proceedings and litigation are, however, subject
to inherent uncertainties, and unfavorable decisions and rulings could occur which could have a
material adverse impact on the Company’s consolidated financial position, results of operations, or
cash flows for the period in which such decisions or rulings occur, or future periods. Expenses
associated with legal proceedings may also fluctuate from quarter to quarter based on changes in the
Company’s assumptions, new developments, or by the effectiveness of the Company’s litigation
and settlement strategies.
Insurance Contingencies
Each of the Company’s management contracts and the statutes of certain states require the
maintenance of insurance. The Company maintains various insurance policies including employee
health, workers’ compensation, automobile liability, and general liability insurance. These policies
are fixed premium policies with various deductible amounts that are self-funded by the Company.
Reserves are provided for estimated incurred claims for which it is probable that a loss has been
incurred and the range of such loss can be estimated.
Guarantees
Hardeman County Correctional Facilities Corporation (“HCCFC”) is a nonprofit, mutual benefit
corporation organized under the Tennessee Nonprofit Corporation Act to purchase, construct,
improve, equip, finance, own and manage a detention facility located in Hardeman County,
Tennessee. HCCFC was created as an instrumentality of Hardeman County to implement the
County’s incarceration agreement with the state of Tennessee to house certain inmates.
During 1997, HCCFC issued $72.7 million of revenue bonds, which were primarily used for the
construction of a 2,016-bed medium security correctional facility. In addition, HCCFC entered into
a construction and management agreement with the Company in order to assure the timely and
coordinated acquisition, construction, development, marketing and operation of the correctional
facility.
HCCFC leases the correctional facility to Hardeman County in exchange for all revenue from the
operation of the facility. HCCFC has, in turn, entered into a management agreement with the
Company for the correctional facility.
In connection with the issuance of the revenue bonds, the Company is obligated, under a debt
service deficit agreement, to pay the trustee of the bond’s trust indenture (the “Trustee”) amounts
necessary to pay any debt service deficits consisting of principal and interest requirements
(outstanding principal balance of $52.0 million at December 31, 2006 plus future interest
payments), if there is any default. In addition, in the event the state of Tennessee, which is currently
utilizing the facility to house certain inmates, exercises its option to purchase the correctional
facility, the Company is also obligated to pay the difference between principal and interest owed on
the bonds on the date set for the redemption of the bonds and amounts paid by the state of
F - 36

Tennessee for the facility plus all other funds on deposit with the Trustee and available for
redemption of the bonds. Ownership of the facility reverts to the state of Tennessee in 2017 at no
cost. Therefore, the Company does not currently believe the state of Tennessee will exercise its
option to purchase the facility. At December 31, 2006, the outstanding principal balance of the
bonds exceeded the purchase price option by $12.9 million. The Company also maintains a
restricted cash account of $5.6 million as collateral against a guarantee it has provided for a forward
purchase agreement related to the bond issuance.
Retirement Plan
All employees of the Company are eligible to participate in the Corrections Corporation of America
401(k) Savings and Retirement Plan (the “Plan”) upon reaching age 18 and completing one year of
qualified service. Eligible employees may contribute up to 90% of their eligible compensation
subject to IRS limitations. For the years ended December 31, 2006, 2005, and 2004, the Company
provided a discretionary matching contribution equal to 100% of the employee’s contributions up to
5% of the employee’s eligible compensation to employees with at least one thousand hours of
employment in the plan year, and who were employed by the Company on the last day of the plan
year. Employer contributions and investment earnings or losses thereon become vested 20% after
two years of service, 40% after three years of service, 80% after four years of service, and 100%
after five or more years of service.
During the years ended December 31, 2006, 2005, and 2004, the Company’s discretionary
contributions to the Plan, net of forfeitures, were $7.5 million, $6.8 million, and $6.0 million,
respectively.
Deferred Compensation Plans
During 2002, the compensation committee of the board of directors approved the Company’s
adoption of two non-qualified deferred compensation plans (the “Deferred Compensation Plans”)
for non-employee directors and for certain senior executives that elect not to participate in the
Company’s 401(k) Plan. The Deferred Compensation Plans are unfunded plans maintained for the
purpose of providing the Company’s directors and certain of its senior executives the opportunity to
defer a portion of their compensation. Under the terms of the Deferred Compensation Plans, certain
senior executives may elect to contribute on a pre-tax basis up to 50% of their base salary and up to
100% of their cash bonus, and non-employee directors may elect to contribute on a pre-tax basis up
to 100% of their director retainer and meeting fees. The Company matches 100% of employee
contributions up to 5% of total cash compensation. The Company also contributes a fixed rate of
return on balances in the Deferred Compensation Plans, determined at the beginning of each plan
year. Matching contributions and investment earnings thereon vest over a three-year period from
the date of each contribution. Vesting provisions of the Plan were amended effective January 1,
2005 to conform with the vesting provisions of the Company’s 401(k) Plan for all matching
contributions beginning in 2005. Distributions are generally payable no earlier than five years
subsequent to the date an individual becomes a participant in the Plan, or upon termination of
employment (or the date a director ceases to serve as a director of the Company), at the election of
the participant, but not later than the fifteenth day of the month following the month the individual
attains age 65.
During 2006, 2005 and 2004, the Company provided a fixed return of 7.5%, 7.5% and 7.7%,
respectively, to participants in the Deferred Compensation Plans. The Company has purchased life
insurance policies on the lives of certain employees of the Company, which are intended to fund
distributions from the Deferred Compensation Plans. The Company is the sole beneficiary of such
policies. At the inception of the Deferred Compensation Plans, the Company established an
F - 37

irrevocable Rabbi Trust to secure the plans’ obligations. However, assets in the Deferred
Compensation Plans are subject to creditor claims in the event of bankruptcy. During 2006, 2005
and 2004, the Company recorded $256,000, $194,000 and $162,000, respectively, of matching
contributions as general and administrative expense associated with the Deferred Compensation
Plans. As of December 31, 2006 and 2005, the Company’s liability related to the Deferred
Compensation Plans was $3.6 million and $2.4 million, respectively, which was reflected in
accounts payable, accrued expenses and other liabilities in the accompanying balance sheets.
Employment and Severance Agreements
The Company currently has employment agreements with several of its executive officers, which
provide for the payment of certain severance amounts upon termination of employment under
certain circumstances or a change of control, as defined in the agreements.
18.

SEGMENT REPORTING
As of December 31, 2006, the Company owned and managed 40 correctional and detention
facilities, and managed 25 correctional and detention facilities it does not own. Management views
the Company’s operating results in two reportable segments: owned and managed correctional and
detention facilities and managed-only correctional and detention facilities. The accounting policies
of the reportable segments are the same as those described in Note 2. Owned and managed facilities
include the operating results of those facilities owned and managed by the Company. Managedonly facilities include the operating results of those facilities owned by a third party and managed
by the Company. The Company measures the operating performance of each facility within the
above two reportable segments, without differentiation, based on facility contribution. The
Company defines facility contribution as a facility’s operating income or loss from operations
before interest, taxes, depreciation and amortization. Since each of the Company’s facilities within
the two reportable segments exhibit similar economic characteristics, provide similar services to
governmental agencies, and operate under a similar set of operating procedures and regulatory
guidelines, the facilities within the identified segments have been aggregated and reported as one
reportable segment.
The revenue and facility contribution for the reportable segments and a reconciliation to the
Company’s operating income is as follows for the three years ended December 31, 2006, 2005, and
2004 (in thousands):

F - 38

2006
Revenue:
Owned and managed
Managed-only
Total management revenue

$

For the Years Ended December 31,
2005
2004

960,543
350,968
1,311,511

$

840,800
333,051
1,173,851

$

787,397
315,633
1,103,030

Operating expenses:
Owned and managed
Managed-only
Total operating expenses

652,740
300,356
953,096

598,786
278,650
877,436

563,058
261,609
824,667

Facility contribution:
Owned and managed
Managed-only
Total facility contribution

307,803
50,612
358,415

242,014
54,401
296,415

224,339
54,024
278,363

Other revenue (expense):
Rental and other revenue
Other operating expense
General and administrative expense
Depreciation and amortization
Operating income

19,577
(20,797)
(63,593)
(67,673)
225,929

18,789
(21,357)
(57,053)
(59,882)
176,912

23,357
(25,699)
(48,186)
(54,445)
173,390

$

$

$

The following table summarizes capital expenditures for the reportable segments for the years
ended December 31, 2006, 2005, and 2004 (in thousands):
2006
Capital expenditures:
Owned and managed
Managed-only
Corporate and other
Discontinued operations
Total capital expenditures

$

For the Years Ended December 31,
2005
2004

126,819
19,936
19,656
166,411

$

$

$

90,515
5,288
19,292
115,095

$

$

84,691
5,137
40,899
44
130,771

The assets for the reportable segments are as follows (in thousands):
December 31,
2005

2006
Assets:
Owned and managed
Managed-only
Corporate and other
Total assets

19.

$

$

1,792,348
119,044
339,468
2,250,860

$

$

1,672,941
92,101
321,271
2,086,313

SUBSEQUENT EVENTS
During February 2007, the Company issued 145,000 shares of restricted common stock to the
Company’s employees, with an aggregate value of $7.7 million. Unless earlier vested under the
terms of the restricted stock, 73,000 shares issued to officers and executive officers are subject to
vesting over a three year period based upon satisfaction of certain performance criteria for the fiscal
years ending December 31, 2007, 2008 and 2009. No more than one third of such shares may vest
in the first performance period; however, the performance criteria are cumulative for the three year
period. Unless earlier vested under the terms of the restricted stock, the remaining 72,000 shares of
restricted stock issued to certain other employees of the Company vest during 2010.

F - 39

20.

SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Selected quarterly financial information for each of the quarters in the years ended December 31,
2006 and 2005 is as follows (in thousands, except per share data):
March 31,
2006
Revenue
Operating income
Net income

June 30,
2006

September 30,
2006

December 31,
2006

$

316,014
49,900
21,329

$

326,220
55,119
25,628

$

339,267
56,229
26,130

$

349,587
64,681
32,152

Basic earnings per share:
Net income

$

0.36

$

0.43

$

0.44

$

0.53

Diluted earnings per share:
Net income

$

0.35

$

0.42

$

0.42

$

0.52

March 31,
2005
Revenue
Operating income
Income (loss) from discontinued operations, net of
taxes
Net income (loss)

$

280,887
39,562

June 30,
2005
$

(620)
(8,939)

290,189
38,225

September 30,
2005
$

427
14,863

304,367
48,694

December 31,
2005
$

20,793

317,197
50,431
(249)
23,405

Basic earnings (loss) per share:
Net income (loss)

$

(0.16)

$

0.25

$

0.35

$

0.40

Diluted earnings (loss) per share:
Net income (loss)

$

(0.16)

$

0.25

$

0.34

$

0.39

F - 40