CoreCivic Inc (CXW) 2003 Q2 法說會逐字稿

Good afternoon ladies and gentlemen and thank you for standing by. Welcome to the Corrections Corporation of America 2003 second quarter conference call. At this time all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question and answer session. If anyone does need assistance at any time during today's conference, please press the star followed by the zero. As a reminder this conference is being recorded this day, August 6th, 2003.

Let me remind listeners, this conference call contains statements that are forward looking as defined with the Private Securities Litigation Reform Act of 1995. These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Factors that could cause operating and financial results to differ are described in the company's form 10-k as well as in other documents filed with the securities and exchange commission and these factors include but are not limited to the growth of the private corrections and detention industry, the company's ability to obtain and maintain facility management contracts and general economic market conditions. The company does not undertake any obligation to publicly release the result of any revisions to forward looking statements that may be made to reflect events or circumstances after the date hereof, or the reflective occurrence of unanticipated events. Participating in today's call will be the company's Chairman of the board, William Andrews; President and Chief Executive Officer, John Ferguson, and its Chief Financial Officer, Irv Lingo. I would now like to turn the conference over to Mr. Andrews. Please go ahead, sir.

Good afternoon. Thank you for joining us for our second quarter earnings release. It is raining in Nashville, but it is a good day at corrections corporation and I'm going to turn you over to John Ferguson and Irv Lingo; they'll be reporting to you today and then we are all here to answer your questions. Irv?

If you hear any rumbling, it is thunder and not my stomach. Things are good here and we registered another solid quarter. Revenues were up 9.6%, operating income was up 26%, adjusted free cash flow increased 42%, and adjusted EBITDA was up 20%. The company registered solid improvement in other areas such as occupancy, margin, and of course significant improvements in our debt ratios.

Turning to earnings, for the three month ended June 30th, the company reported net income available to common shareholders at 12.1 million, at 33 cents per diluted share. Compared to a net loss, of 31.4 million or $1.14 a share in the prior year. There were several special items affecting both quarters as indicated in the press release, and excluding the affects of the special items net in the second quarter of 2003, 17.8 million and that's 50 cents per diluted share compared to net income last year of 5.2 million, or 18 cents per diluted share. Operating income for the second quarter increased to 40.8 million and that was compared to 32.4 million last year. Excluding special items, EBITDA for the second quarter was 54.2 million compared with 45.1 million for the second quarter of last year. Same store EBITDA for this quarter increased approximately 10 % over the prior year.

Adjusted free cash flow, that is essentially net income plus depreciation and less cash dividends and less maintenance cap ex, amounted to 26.2 million compared to 18.5 million last year, and that's a 42% increase. Adjusted free cash flow per share amounted to 72 cents versus 59 cents in the previous year's second quarter, an increase in 22%.

The increase in adjusted free cash flow is driven by a significant increase in the operating income, again from 32 million to 40 million for the current quarter. As well as reduction in interest expense down to 19.7 million from 22.5 million last year. The reduction of interest expense was brought about lower debt balances, lower spreads we achieved on last year's refinancing, and the overall better rate environment that we were experiencing a year ago at this time.

Moving to operations, consolidated revenues for the quarter were 254 million up from 231.9 million last year. That's a 9.6% increase. There were 4.9 million compensated man days versus 4.6 million man days in last year's second quarter. Average portfolio occupancy increased from 88.6% to 91.1%. Revenue per man day increased to $51.08 versus $49.45 in the prior year and that represents our 9th consecutive quarter of increases in revenue per man day. As I mentioned in last quarter's conference call, we continue to benefit from the revenue side due to our large contract award at McRae and also at While Veil, as well as the purchase of the Crowley facility in January of this year. In addition, we're also benefiting from increases in detainee populations in a number of facilities in the southwest.

Operating costs were held in check this quarter. They actually only increased 7 cents per man day to $38.09 from $38.02. Fixed cost increased to $28.40 from $27.84 last year. That's an increase of 56 cents in fixed costs, salaries and benefits that make up 86% of the fixed costs. They are actually up 80 cents per man day. The increase in salaries and benefits was due to wage increases as well as higher benefit costs that we incurred this quarter. The increase in salaries was partially offset by a decrease in utilities cost during the quarter. Variable costs actually declined to $9.69 a day from $10.18 a day last year. We registered decreases in cost per man day in just about every area of variable costs, particularly food, inmate medical, and legal. Food decreased 33 cents a man day or over 10% as a result of our decision to outsource food service at all of our facilities.. Inmate medical costs per day declined over 13% to $2.26 a day from $2.61 last year second quarter. And that decline resulted primarily from certain contract modifications where we reduced or eliminated our responsibilities for medical. In addition, we negotiated more favorable pharmaceutical contracts and continued to reduce our reliance on outsourced nursing. The end result was that margins increased $1.56 a day to $12.99 cents and that versus $11.43 last year. Our margin percentage was up to 25.4% from 23.1% last year. And we continue to believe that operating margins of 25% are sustainable for 2003.

G&A expense increased to $10 million from 8.3 million last year. As I indicated in last quarter's call. the primary reason underlying the increase, our additional headquarters personnel we added in the area of operations, business development, and IT. We continue to anticipate a run rate for the year of approximately $38 million and that would equate to about 4% of revenues, and we believe that's a reasonable level for G&A expenses. The end result is that we had a pretty strong quarter operationally and otherwise. Occupancies are higher and revenue per man day were higher. Operating costs were held in check and operating margins were considerably higher.

Turning to our capital market activities, I am assuming listeners are by now familiar with the results of the financing we did in May of this year. The particulars are summarized in the press release and we thoroughly discussed that financing in our last conference call. Suffice it to say, we believe that that financing was a major step for restructuring our balance sheet for the future, and we are quite pleased with the execution and the follow-up reaction in the capital markets to that transaction. I believe most participants on the call are also familiar with the fact that we decided to take another step here recently improving our capital structure by offering an additional $200 million in senior unsecured notes. This was essentially an opportunistic transaction. Rates were at historical lows and we wanted to fix the rate and extend the maturity on an additional portion of our floating rate debt. I think everyone is aware of the deterioration in the last two weeks, or rather the severe deterioration in the bond market. So despite the fact that we didn't hit the absolute lows in interest rates, we are nevertheless pleased with the outcome of this transaction. The new senior notes are due in 2011. They are priced at approximately 7.25%. The proceeds from the financing, which we expect to close that financing this Friday, along with $50 million from cash on hand would towards paying the amounts outstanding on the senior secured credit facility and to pay deal costs. In conjunction with the senior note offering we expect to amend our senior secured credit facility, increasing the revolving commitment from 75 million to 125 million, lowering the rate on the term portion of the facility from 3 1/2% over [INAUDIBLE] to 2 3/4 over [INAUDIBLE]. Modifying certain covenants, the most important of which will result in the increase in cap ex the company can deploy in a given year.

As a result of this transaction, the previous transaction, our capital structure has clearly improved. As we fixed the rate on approximately 75% of the company's outstanding debt. This year alone, we expect to fix 250 million of our debt at 7 1/2% and $200 million at 7.25%. These are clearly very favorable rates under any circumstances and they are particularly favorable for a single B credit. Also as a result of this transaction we achieved certain covenant flexibility we were seeking, enabling us to take advantage of appropriate opportunities to grow us on business over the next several years. With that, I will turn to our outlook.

In each of the last few conference calls and a number of analyst presentations have I made in the past year, I continue to emphasize the positive dynamics of the business including growing prison populations with little additional prison infrastructure being added in. In just a moment, John Ferguson will discuss the opportunities we see in the future as well as touch on the highlights of the recent report released in the past week or so from the Bureau of Justice Statistics. I believe the results for our second quarter clearly reflect the impact of this positive environment. Turning to our outlook, in the past ,we have provided guidance as to the company's expectations regarding EBITDA. On June 13th of this year, the Securities and Exchange Commission issued additional guidance on rules regarding non-GAAP disclosures. Specifically, it recommends EBITDA, as a measure of performance, be reconciled to net income as opposed to operating income or other GAAP measures. Now, we have previously reconciled our EBITDA guidance to operating income, so in order to better comply with this SEC interpretation, in the future, we will provide guidance as to operating income rather than EBITDA. And that said, the company expects operating income for the third quarter to be in a range of 40 to 42 million with estimates for the full year of operating income in the range of 161 to 166 million. One more thing I would say we expect depreciation and amortization for the third and fourth quarters of this year to be in the neighborhood of 13.5 million dollars per quarter. With that, I will turn it over to John to talk about some of our business development activities.

The events of note for second quarter would -- I would think would be the fact that we reached in excess of 97% average occupancy and our -- in our Whiteville, Tennessee facility. A contract we entered into with the state of Tennessee last October. We of course announced that we entered into a contract with the state of Alabama. A new customer for CCA, in which we will house up to 1440, minimum security inmates in our Tallahatchee County facility. This is a short-term contract, but we anticipate the state of Alabama to prepare a request for proposal for meeting their long-term needs. We also reported that due to some contract issues, that we made a decision to consolidate some of our inmates into our Diamondback Facility in Watonga, Oklahoma which will idle the North Fork facility in Sayre, Oklahoma, and as we have indicated previously, we do not see that this will have a material affect on 2003 numbers. We will also report that the governor of Wisconsin recently signed the 2003-2004 budget which there was funding to open up additional bed capacity within the state of Wisconsin which should happen some time in the first half of 2004. The consequences of that plus the continued growth in inmate population needs in Wisconsin will leave us at the inability to forecast what we think the long-term affect of that would be. And we will just speak to the overall demand here in a few minutes.

As we have previously in talking about population changes from period to period and quarter to quarter, if you look at our average inmate population from second quarter of 2002 and compare it to second quarter of 2003, we have actually seen a decline of 97 inmates, average inmates, for the comparative periods. But if you were to remove the discontinued facilities that we have had during that period of time, that would be in Virginia, Puerto Rico, Delta Correctional Facility in Mississippi and Okachobi. And not give credit for the Crowley facility which we purchased in January. There has actually been a net increase of an excess of 3,000 inmates average for that period of time. That would support the -- almost the 300,000 compensated man days when we compare second quarter of 2002 against second quarter of 2003. If we compare first quarter 2003 to first quarter -- I mean second quarter 2003 to rb we actually add decline of 1584 inmates on average, but if you factor out Virginia and Okachobi, it is at 100 inmates decline for that period of time.

If we just take a snap shot of our populations on March 31st, of 53,888 which is 91.75% and a snap shot of our June 30, 2003, inmate population which is 53,485 or 91.07% or roughly, a 400 bed decline, we can attribute that to declines in the population with both our Oklahoma customers as well as the Wisconsin customers. The populations at midnight last night were 54,976 or 93.6% I want to take a look at the current availability of beds that CCA has today. In the spring of 2002, when we were visiting with many investors, talking to them about the senior unsecured debt that we were at that time selling, we disclosed that we had a little over 2 1/2 or right at 2 1/2 thousands available beds. This past spring when we were out talking to investors about the purchase of our common stock as well as other senior unsecured, we pointed out that we had just a tad over 8,000 available beds and as we look at the available beds today it is 6800. So you can see the absorption that has taken place over that period of time. We have three facilities that are now idle. That would be in North Fork that we just talked about. The one in Youngstown, Ohio which we reported on every quarter and the unfinished facility in Stewart, Georgia. In addition to that, we have roughly nine facilities that make up approximately about 1800 beds available. That would be where there is at least a hundred available beds or more. I would point out that it is fairly easy to have visibility for the absorption of at least 75% of the 1800 beds over the next nine to 12 months. If you were to take our population percentages with the removal of the three idle facilities, we are actually at a hundred percent occupied in all of the facilities, other than the three, that I pointed out.

So let's talk a little about the opportunities, and that's really what I was doing as I pointed out the available inventory. Irv mentioned that we wanted to point out some information reported in the Bureau of Justice statistics in the last 10 days. The highlight of that is there was a 2.6% year to year growth in inmates in the jurisdiction of state and federal government which is the largest increase in three years. That actually is broken down at 2.4% growth at the state level and 4.2% at the federal level. We think that the global statistics are of note. But we think it is more important to look at CCA and the opportunities it has available. If I take the 13 of our 20 state customers that currently do business with us, using a CCA-owned facility, plus add to that 10 states we currently have discussions with, that it is very appealing we have available beds. That population growth year to year has been 4.35%. So the area in which CCA is operating and strong business development activity has been almost twice what the global statistics. We also think that these numbers may be discounting the real picture of what's happening out there because we are -- because we know that some of the growth is being masked by unassigned inmates at local jails. Some of those are in the numbers and some are not. But if you take a look at the inmates that were in the jails and a year to year comparison, that actually was a 5.4% growth or 34,000 plus inmates. And that would compare to a 3.7 percent compounded growth over the previous six years, or an average of 21,000 inmates. So we think of note is not only the inmate population growth within those jurisdictions, but also at the jail which is where all people go prior to being sentenced to a state prison. So simply, we say demand is growing and the supply is not. And CCA, at the 23 or so state either customers or prospects, has capacity. We have a national platform, and we definitely have capital to meet whatever the demands might be.

At the federal level, we have experienced a steady growth in the use of capacity by both the Marshalls and the INS which we have had growth with the contracts with the Federal Bureau of Prisons. And we believe that the continued growth by the U.S. Marshalls and the Immigration and Customs Enforcement Service, previously the INS, will continue. This is validated by two recent presolicitation notices issued by the U.S. Marshall's Service and the Office of Detention Trustee for approximately 4500 beds in southern Texas and Maryland/D.C. areas. And we also continue to observe demand exceeding what we can supply in a dozen or so current contracts we have with the U.S. Marshalls and the Immigration and Custom Enforcement Agencies. Again, we think the uniqueness of cca is having the capacity, the national platform, the capital to meet this growth and any expanding growth.

So to sum up our unique position, CCA currently has 6,800 available beds. We have a national platform. We have capital to expand beyond these available beds. We have also identified expansion opportunities anywhere from 2 to 4,000 beds based on our current customers and their expansion needs. So, we believe that with the current environment of increased inmate growth and the lack of new bed construction, CCA should continue to have numerous opportunities to fill our remaining empty beds, and then in appropriate situations, to deliver new beds to meet our customer needs. With that we will open it up to questions.

Thank you, sir. At this time ladies and gentlemen, we will begin the question and answer session. If you do have a question, please press the star followed by a 1 on the push button phone. If you want to decline from the polling process, simply press the star followed by 2. You will hear a 3 tone prompt acknowledging your selection and your questions will be polled in the order they are received. If you are using speaker phone equipment today, you will need to lift the hand set before pressing the numbers. One moment please for our first question. Our first question is from Andrew Mayer with Jefferies and Company. Please go ahead.

Good afternoon.

Hi.

Hi, there.

Wanted to review a couple things that you said toward the end. You have nine facilities with available capacity of approximately 1800 beds. And then I believe you said you expected that the existing customers would or customers that you knew would take approximately 75% of those 1800 beds in 9 to 12 months. Did I understand that correctly?

That's correct. The visibility of how -- probably 75% of the beds can be absorbed over the next 9 to 12 months.

And that's kind of the turbulence -- the potential turbulence with Wisconsin prisoners in Oklahoma notwithstanding?

No. If Wisconsin did open capacity within their state, which at the moment they have plans to do, and did not have inmate growth in the state and absorbed most of that, then we would experience the loss of the inmates. I would say that as I finished up with the environment right now, even if we were to lose some of the Wisconsin inmates to capacity in Wisconsin, we feel that over a 2 to 3 year horizon that those beds would eventually be absorbed by some of these 23 or so state customers, plus the federal activity that we are experiencing.

Do you have Wisconsin prisoners in other places than Diamondback?

Yes. We have roughly 1,300 in Appleton, Minnesota which we call our prairie facility.

Thank you. And then you reflected this spring you had 8,000 -- approximately 8,000 available beds and today it is more like 6,800?

Yes.

The delta between those two is principally Whiteville and the Alabama temporary arrangement, or tell me --

Well, let's see. It would be Whiteville and Alabama I guess would be the two dramatic numbers. We do have some facilities that we had listed previously. We had absorption in Colorado. We had absorption in our Florence, Arizona facility.

Andy, when you say temporary, I mean, it is kind of an emergency contract situation, but the needs for Alabama are clearly not temporary.

Right. And you don't regard -- I mean, the likelihood that a request for proposal for a permanent solution would not envision further new construction?

We don't know. The problem within Alabama exceeds the supply that we're now meeting for them. In other words, they have two inmates for every one designed bed. And some fairly old facilities. I think that this administration's desire is to deal with their correctional system long-term and the 1,440 beds that we are providing are really not a significant piece of their overall solution.

I don't think we can say the 1,440, the permanent RFP would not envision construction, but given the fact that this was an emergency situation I would hope that having the beds available in Tallahatchee would give us an advantage on permanent rfp.

Thank you. Understood.

Thank you. Our next question is from Susan Jansen with Lehman Brothers.

Good morning, everyone and congratulations on another fine quarter.

Okay.

I wanted to just touch on a broader picture issue that we have talked about in the past. I just wanted to get your thoughts on, having completed a couple of refinancings and gotten your capital base much more the way I think you have wanted it for a while. And that is the longer term usage of your free cash flow. Under my expectations your free cash flow in '03 and '04 is going to be very, very substantial. After you have, you know, your maintenance cap ex and your interest expense. And I think you have said in the past that you would use it in part for deleveraging and part for growth. What is your strategy right now, and at what -- and what is your target leverage level, if you will?

We clearly, in the past, were a deleveraging story. We work hard to try to convey to our constituencies. We have equity investors and we care very much about our debt holders that the need to delever it now as our EBITDA continues to grow is not nearly as strong a need as it was some time ago. So what we have tried to Telegraph here is that this is an environment when we should be rationally try to expand market share and take advantage of our access to capital to grow the company. If we can grow the company using internally generated cash, we are in affect delevering, because your EBITDA is going up. So, we worked hard with the rating agencies and the with the debt holders to explain where we are going here. And I think people should expect to see us on a rational basis, (A), filling the remaining empty beds. And that's job one. But (B), to the extent that they can't be satisfied by the empty beds. We do have the capital and we talked times before about the attractive rates that I think we can get when we deploy this capital. You will see us growing the business. I think you will see us doing it in a rational way that the shareholders will like and the debt holders will like. As far as a target leverage level, I don't know that I have one. We clearly have the notion of wanting to drive our ratings from single B into the mid to high double B's. It is possible for investment rates -- we are kind of far removed to be going there right now. But we will continue to maintain a dialogue with the rating agencies and somewhere around 50% which is about where we are -- we are there now, doesn't give me a lot of heartburn.

Thank you very much, Irv.

Thank you. Our next question is from Jim McDonald with First Analysts.

Good quarter, guys.

Thank you.

You talked about expansions and it sounds like the need is now. Does that mean we might hear some expansion announcements in the near term?

We -- I think the first -- let me go back to what I said. The first order of business is to fill the empty beds to the extent we can expand a facility, that would be the second order of business. And a new facility would be the third order of business. It depends on the year -- customers but I think based on customer needs right now that it would not be a stretch to hear us in the not too distant future here announcing a facility expansion.

Could you just kind of go over -- you went over Wisconsin to some extent. Could you go over three other jurisdictions, Colorado, I was wondering whether the pricing was impacted at this annual go around, Florida and what your thoughts are on the new opportunities in Florida, and D.C. seems to be slightly soft in the quarter.

Colorado we did have a per diem reduction. It took place on July 1. Based on the inmate growth that we're starting to see there and they more really constrained into the new budget to fund much inmate growth that I'd say the run rate for inmate population by the end of this month would absorb the affect of the margin contribution that was lost to the per diem reduction.

In Florida,that's a little bit of a moving target. There are five privately managed facilities in Florida. CCA manages three of them. Wackenhut manages two. All of those facilities for the period starting July 1, 2004 are up for a rebid. That doesn't means that exactly what will happen, but they are and we have -- we are anticipating that we would. Overlaying that is the need for 1,086 beds that have been authorized. In addition, there has been discussion about a new 1,800-bed privately run facility. And most recently there was I guess notice by whoever does the forecasting in Florida that they missed their estimates by some 3,000 beds that they need much more quickly. So, it is fairly dynamic and it is hard to assess the opportunities from, you know, any threats that might be out there. But it is a state that is in need of new bed capacity and we hope to be, you know, in the thick of that. On D.C., are you referring to the facility we run in D.C.?

Correct.

We have seen the inmate population I guess here recently, slowly start to grow. There are limits at the D.C. jail which I think have now been met. And so the options for them to meet their needs at our facility and we have other opportunities we are working in utilizing some of the other beds there.

Thanks very much.

Thank you, Jim.

Thank you. Our next question is from Jeffrey Kessler with Lehman Brothers.

Thank you. Let me join in a good quarter. 6,800 beds, three facilities, can you just go through the status of each one? Let us know where we're at, what the prospects are for -- I realize you get tired of talking about Youngstown, but the fact is we want to know what the possibility of filling those 6,800 beds are.

Well, as it relates to Youngstown, we continue to have discussion with some of the federal bureaus and agencies about some of their needs in that area. And we think that we can meet some of the dilemmas they have in meeting some of the detention bed needs in the area. We also are observing several northeastern states who are experiencing a capacity problem who have indicated that they might consider the utilization of a private sector bed out of state to meet those demands. The other facility in [INAUDIBLE] County, Georgia, we continue to feel that Georgia currently does, but will definitely in the future need those beds. This facility is a stone's throw from Alabama.

And if Alabama continues to utilize more beds in some fashion and we think the private sector might consider, it gives us options. And the fact that these 3,000 surprised need beds in Florida, this facility is actually 100 miles from the Florida state line. So, we think we have opportunity there as well as developing federal opportunities in the southeastern United States. I think we are satisfying some of the need in McRae, Georgia and this facility is in that area. And then in North Fork we have a couple of situation that we don't want to list by name where we think there are opportunities. Having North Fork empty in someways makes it more attractive to some customers that we have.

Is McRae completely filled at this point?

I think we're about 200 beds short of being filled.

Very, very close.

One other -- hello?

Yes, we're here.

One other question and that is on capital raising, without, you know, having to qualify, you know, our capital ability is better than our competitors, et cetera, et cetera. I was wondering if you could talk about -- you have one of your competitors using rental, just wondering have you considered the use of any of these mixing them into -- mixing them into your capital plans or are you going to just stick with what you've got right now in terms of being able to raise capital?

The latter. I mean, I've been down this road before. We're not in the business of special purpose entities -- really what I'm talking about is a securitization kind of loan. In this last financing, for example, we were able to break some of our collateral out of the secured pool on the bank facility. So we are trying to move more to being an unincumbered borrower. The rates we are getting are for more competitive than anything we would get leasing. We are looking at the amount of flexibility we have. The rates are very attractive. We are able to turn around and deal much faster. So I -- I personally believe that our access to capital is clearly superior to anybody else in the industry. And that gives us an advantage when we start talking about the expansions. And new opportunities.

Okay. Thank you.

Thank you. Ladies and gentlemen, if there are any additional questions, please press the star followed by 1 at this time. As a reminder, if you are using speaker phone equipment, you will need to lift the hand set before pressing the numbers. Our next question is a follow-up from Jim McDonald.

Irv, could you go over the DNA forecast for the out quarters here? What are you bringing on-line or is it the fact that the negative amortization is going away or what's happening there?

Jim, I think we're adding -- you know, we are deploying some cap ex as we go forward and I think there are some things other than bricks and mortar we are capitalizing that is increasing our amortization. We were 13 million for this quarter and so I think we are just conservatively saying it is going to be about a half a million dollars higher. I don't have anything much more specific than that right now.

The negative amortization is continuing at a million and a quarter?

Yes.

Thanks very much.

Thank you. There appears to be no further questions at this time. Gentlemen, please continue.

As usual, I'll try to summarize what was discussed here today. Irv indicated our revenues were up 9 1/2% for the quarter. Our operating income was up 26%. Our free cash flow up 42%. And our EBITDA up 20%. As a result of our occupancy going up which is now at 91.1%. Working on the capital structure which we have been doing for the last two years with three financings, we certainly have strengthened our balance sheet. We now have more long-term debt. I think Irv indicated 75% of our debt it is now fixed, long-term which protects us and gives us more stable interest rate structure going forward. We have sufficient and really very attractive free cash flow and with the improved financial flexibility we have had some relaxation in our covenants, and we can now grow and finance any type of new business that may come to us.

In business development, John said the one new customer we got in the last quarter was Alabama. And that filled, or is filling our idle facility in Tallahatchee. John indicated we have 6,800 beds still vacant at the present time and we look at this as an opportunity because we are in a growth mode and we are going to fill those beds. John indicated we had North Fork, Oklahoma, and Youngstown and Stewart, Georgia empty and we will do something about filling those facilities.

The industry statistics are up for the first time in three years. The 2.6% is the number they are using for prison growth. But in our markets, we see a 4.3% prison growth. We do believe that with the budget difficulties that most states are now facing, that although it is creating problems with us at the present time in contract renewals, we do believe that this has to cause future business expansion for us going forward. We do look at this in a positive way at this point. And we do think this company now is poised to not only continue to grow, but grow at an attractive rate. Thank you for your attention today and we look forward to our next earnings call.

Thank you, sir. Ladies and gentlemen, this does conclude the Corrections Corporation of America's second quarter conference call. If you would like to listen to a replay of today's conference, please dial 1-800-405-2236. And enter access number 547571 followed by the pound sign. Again, if you would like to listen to a replay, dial 1-800-405-2236. With access number 547571 followed by the pound sign. Once again, thank you so much for your participation today and you may now disconnect.