CoreCivic Inc (CXW) 2014 Q2 法說會逐字稿

Good morning, everyone, and welcome to the CCA's second quarter 2014 earnings conference call. If you need a copy of our press release or supplemental financial data, both documents are available on the investor page of our web site at www.cca.com.

Before we begin, let me remind today's listeners, this call contains forward-looking statements, pursuant to the Safe Harbor provisions of the Securities and Litigation Reform Act. These statements are subject to risks and uncertainties that could cause actual results to differ materially from statements made today. Factors that could cause operating and financial results to differ are described in the press release, as well as our Form 10-K and other documents filed with the SEC.

This call may include discussions on non-GAAP measures. The reconciliation of the most [comparabled] GAAP measurement is provided in our corresponding earnings release, and included in the supplemental financial data on our website. We are under no obligation to update or revise any forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrences of unanticipated events.

Please note today's call is being recorded. Participating on today's call will be our President and CEO, Damon Hininger; and Chief Financial Officer, David Garfinkle.

I would now like to turn the call over to Mr. Hininger. Please go ahead, sir.

Thank you, Tasha. Good morning and thank you to our valued shareholders, analysts, and other participants for joining our call today. In addition to David Garfinkle, we also have on the line, John Ferguson, our Chairman of the Board; and also Brian Hammonds, our Vice President of Finance.

After this opening, I will give a highlight of the results of the second quarter, and then give a business update, and then, finally, hand off to David Garfinkle.

Let's go straight into the order and get highlights. First of which, normalized FFO was nearly $80 million, an increase in operating cash flow as compared to last year. Second, you have seen this quarter, and will see going forward for a few quarters, a decline in our revenues, when comparing year-over-year. This has had minimal impact on our earnings as adjusted net income is actually up year-over-year, and this represents, in large part, our successful efforts this past year in transitioning out of several underperforming, managed-only contracts.

Now, you know that this year we have been working diligently on our new Toronto project, and on Thursday, July 3, the State of Tennessee executed the final agreement, which is the agreement between the State of Tennessee and Trousdale County. We're very excited about this new $140 million project that should be completed and online during the last half of 2015, and we're proud that it will help ease overcrowding in the State of Tennessee.

The durable nature of our cash flow growth has enabled us to pay a $0.51 dividend during the quarter and work towards an annual rate of $2.04 a share. We are only just over a year as a REIT and we did a 6.25% increase to our dividend in the first quarter, and we think this is a really great indicator in our confidence in the business.

At the same time, as we're focused on delivering continued shareholder value, we are also consistent in managing our business with discipline. At the end of the quarter, our debt-to-EBITDA was down a tad to 3.1 times, which you know is low compared to other REITs.

Our outstanding credit metrics, scale of our real estate assets with a 75-year life, extremely durable earnings record, high barriers to entry, diverse, highly-rated government payers, and longer contract terms have allowed us to enjoy industry record low pricing in debt market this past year. We are winning with our solutions and all the ways that are most important to us in customer loyalty and customer satisfaction, and for many years, CCA has enjoyed strong customer retention rates, in excess of 90%, and each spring/late summer, we renew many of our contracts with our state partners.

With our July first renewal now in hand we have carried on our record with 100% renewal rate year-to-date for 2014 and achieving a five-year average of 94% renewal rate for our own facilities. As reported last year, we are extremely pleased about our new lease agreement with California at our California City facility. This is a great solution for California, providing in-state capacity at a critical juncture in their Federal Court overcrowding case.

And similar to our Cal City solution we're seeing around the country, more meaningful interest, primarily in the local market, which we define as city or counties, for this similar type of partnership, where we would purchase a government-owned facility, and then lease it back to the government jurisdiction.

Now, because we know we have a tremendous opportunity to create value for our shareholders, by offering our partners solutions that optimize capacity within our existing own facilities, this continues to be our number one priority. Because optimizing this existing capacity could add significant cash flow with very limited CapEx. And we are sitting here today with our occupancy percentage in the mid-80s, which is similar to what we were at just a little over 10 years ago, coming out of the last recession. Our occupancy peaked around 98% in 2007, which led us to build additional capacity for new and existing partners.

And we've made great progress against this goal, during the last half of 2013, with us providing new capacity at both our 2,400 bed North Fork facility, and 1,700 bed Cimarron facility, both in Oklahoma, which are now fully utilized, with the entire capacity also at our Cal City facility being absorbed by California, and the entire Red Rock capacity of 1,500 beds is now dedicated in meeting Arizona's needs. But even with this progress, our CCA team continues to actively identify ways to meet the significant needs of existing or new partners, to utilize this existing capacity, as we look to the balance of 2014.

As I wrap up this section, just a note about CAI. This is the acquisition we did, just over a year ago. We're still very thrilled about the financial and operational performance of these facilities, that are both located in San Diego. We see this business, which is residential reentry, as a natural broadening of our scope of reentry services we provide, as well as being a nice platform to contribute to our growth for the foreseeable future. And we are currently pursuing additional organic and acquisition opportunities in this area.

Now, let me provide a few specific updates on the business, and let me first turn to the state book-of-business, and there is a couple of notable updates since we talked in May.

First of which is, we are still very excited and thankful for our new Arizona contract, and this is utilizing capacity that was formerly used by California at our Red Rock facility. Currently, our population is nearly at 500 at this facility. I should also note that the 2015 budget has been enacted in Arizona and it includes funding for a second allotment of 500 beds at our Red Rock facility. This facility showed a 31% occupancy in the quarter, and it will be a $0.13 to $0.15 earnings swing, when at full utilization, versus 2014 performance.

As I said earlier, we're extremely excited about our Trousdale Facility. This 2,552-bed prison that's going to be here, just Northeast of Nashville, and, of course, it will help the state deal and address overcrowding they've had within the state. This new contract will be our first one in nearly ten years here within the State of Tennessee. And just as a reminder, this facility, once fully utilized, will contribute about $50 million in revenues and about $0.10 to $0.12 in earnings, at full utilization.

Now a couple of specific observations about the current landscape and how state partners will be looking at CCA to help address their challenges.

First to note is that eight existing state customers have seen increases in the past 12 months, at combined total of about 6,200 inmates, and this is a very meaningful increase. A couple examples is one of Tennessee. Tennessee is one of the states that has increased by over 1,400 inmates over the last three years, and even with our new Trousdale Facility that I mentioned earlier, they are projected to still have meaningful overcrowding over the next few years.

Another one of these states is Oklahoma. Oklahoma has increased the utilization of our in-state beds by a thousand inmates over the last two years, and they currently have a RFP on the street for up to 2,000 beds, to meet their current and projected needs.

Arizona will be the last partner I will highlight here. The State of Arizona had has seen an increase in their system by 1,100 inmates over the last 12 months, and, of course, Red Rock, our new facility that's servicing the State of Arizona, is well=positioned to meet that continued needs from the state.

And looking forward, our 11 state customers, where we provide owned and managed solutions, even when excluding California, are expecting a bed shortfall in the next five years, which can result in overcrowding situations. As for state budgets, all of our state partners have completed their respective legislative sessions; 12 of our state partners had legislative sessions this year and all 12 passed budgets that are levels that fully fund our contracts, and nine, actually, either funded increases in our per diems or population levels.

At a higher level, we are seeing state economies modestly improving and several states are exceeding their revenue forecast. With this, we continue to be cautiously optimistic that this will manifest itself into pricing improvement going forward, but in the near-term, we are also encouraged that this will improve budget environment, had led to recent actions taken by Tennessee and Arizona, and moving forward in using the private sector to manage the very real challenges of growth, overcrowding, and aging infrastructure.

As for requested new public sector capacity, we have observed minimal new appropriations for construction of new government-owned capacity to address overcrowding and population growth over the last few years. With the legislative season behind us, that also is the case this year. This limited amount of public sector investment and (indiscernible) is unprecedented. And to make matters worse, our research indicates that there is about 200,000 public sector prison beds in operation today that are in facilities 75- to 100-years-old.

Let me now move to the [third] book of business, and first a comment about ICE. As reported broadly in the media, ICE, or Immigration Customs Enforcement, is dealing with a significant challenge in the housing of families in the Southwest. We understand this challenge and we're working hard to meet their needs by proposing several solutions that may play a part in addressing the issue.

Responding to pressing challenges, like this one is a role we play for our partners all around the country. And as always, we are committed to providing a safe, humane, and appropriate environment for any partnership we might undertake with ICE, and our goal is to be one part of the solution to this unprecedented situation.

Coming now to the next year's Federal budget, fiscal year 2015 budgets for our Federal partners have not been approved by Congress and it appears likely that, once again, there will be a continued resolution passed in September that will fund the Federal Government agencies for a period of time after the new fiscal year begins on October 1.

Based on Congressional appropriation activity thus far, however, it would appear that the Bureau of Prisons and the United States Martial Service will see modest increases over fiscal year 2015 funding, and also in line with the President's request; but most notably, we will be sufficient to fund our contracts with those agencies.

While ICE is likely have a funding sufficient to support at least 3,400 detention beds, on a daily basis, this is well above the President's request for just over 30,000 detention beds. One other note on ICE funding, in mid July, President Obama sent to Congress an emergency supplemental appropriations request for $3.7 billion to help address the border surge. Of this request, $879 million was requested for ICE for increased and upgraded detention space and transportation costs to deal with immigrant family units. However, Congress was unable to approve an emergency supplemental package prior to their August recess, and until Congress returns in early September, we understand that ICE will be reprogramming around $300 million of current fiscal year funding, in order to address short-term detention demands related to this population.

So with that, very pleased about the quarter. I greatly appreciate the CCA management team, wardens and our entire team of CCA correction professionals here in Nashville and nationwide, and help to support our efforts.

With that, let me now turn the call over to Dave.

Thank you, Damon, and good morning everyone. In the second quarter of 2014, we generated $0.49 of adjusted EPS, compared to our May guidance range of $0.45 to $0.47. FFO totaled $0.68 per share, compared to our May guidance range of $0.63 to $0.65.

Second quarter adjusted EPS and FFO per share exceeded our expectations, primarily due to higher than anticipated revenues, including higher ICE populations and higher transportation revenue from one of our state partners, combined with lower income tax expense and slightly lower net interest expense. Similar to the first quarter, the lower income tax resulted from some additional tax planning strategies and lower taxable income in our taxable REIT subsidiary, driven mainly by our managed only segment.

There were several factors affecting the comparison of Q2 2014 results with Q2 2013. As mentioned in our press release, revenue decreased by approximately $23.2 million, due to the loss of several management contracts. However, facility NOI at these facilities decreased by only $300,000.

Facility NOI also declined as a result of the transition of our Red Rock facility to a new management contract, effective January 1, 2014, and for the transition of the management contract at the Idaho Correctional Center to the State of Idaho, effective July 1, 2014. The Red Rock facility averaged 1,400 California inmates during the second quarter of 2013. Most of these inmates were transferred to other CCA-owned facilities during the second half of 2013, as we prepared the Red Rock facility for a new contract with the State of Arizona.

We held 500 Arizona inmates at the facility during Q2 2014, and we expect an additional 500 inmates at the Red Rock facility during the first quarter of 2015. These NOI reductions were offset by an improvement in NOI for increases in inmate populations and at our California City facility.

Further, as a reminder, Q2 2013 financial results reflected a $5 million income tax benefit, and an offsetting onetime bonus of $5 million to hourly employees, in lieu of a merit increase. The onetime bonuses reflected an operating expenses, which also negatively impacted per mandate results in the prior-year period, presented in our supplemental disclosure report.

As we have discussed for several quarters now, per share amounts were impacted by the issuance of 14 million shares, as part of the special REIT conversion dividend in May 2013. However, the 2013 per share amounts, as reported in the GAAP financial statements, have not been restated to fully reflect shares issued as part of the stock dividend; therefore, for your convenience, pro forma per share amounts for 2013,calculated assuming those shares to have been outstanding for all of 2013, are presented in both the press release and supplemental. This is the last quarterly period where this pro forma comparison must be made, as those shares were outstanding for a full quarter, for the first time, beginning in the third quarter of 2013.

Finally, adjusted EPS and normalized FFO exclude non-cash impairment charges in both periods, including $2.2 million in Q2 2014, associated with the anticipated fourth quarter sale of our Houston Educational Facility, which is a non-core, that was previously leased as a day school to a provider of services for at-risk youth. Adjusted EPS and normalized FFO in the prior-year period also exclude debt refinancing and reconversion cost.

Moving next to a discussion of our guidance, as indicated in the press release, adjusted EPS guidance for the full year is a range of $1.87 to $1.93, an increase from $1.84 to $1.92, while Q3 2014 adjusted EPS guidance is a range of $0.46 to $0.48.

We have also increased full year FFO per share guidance to $2.59 to $2.65, from our previous estimate of $2.56 to $2.64. AFFO per share guidance is now $2.53 to $2.58, up from $2.49 to $2.58. I've just a few highlights regarding third quarter guidance. Recently, we have seen a reduction in US Marshals' populations, but we've also seen strength in ICE populations.

The $0.06 range reflects range of assumptions around the future of these Federal inmate populations. As previously mentioned, transportation revenues spiked during the second quarter, as a result of a high number of transports, for the exchange of a certain number of inmates with a different classification by one of our state partners, which we do not expect to repeat in Q3 or Q4.

We expect our effective income tax rate to normalize around 6% to 8% in Q3, and we expect net interest expense to return to approximately $10.5 million in Q3 and Q4. Each of these factors is expected to result in a reduction of about a penny per share from Q2 to Q3, for a total reduction of $0.03 per share. Factors that we expect will improve Q3 results, compared with Q2, include completion of deactivation of the Diamondback facility, near the end of the second quarter of 2014, and the absence of the transition of operations at the Idaho Correctional Center to the State of Idaho.

Our operating guidance is based on our existing contract base, and is not dependent on any new contract awards. Q3 and full-year G&A expense are expected to be just north of 6% of total revenues. Depreciation expense for the full-year 2014 is estimated at $114 million to $116 million. We are assuming a consolidated GAAP income tax rate of approximately 5% to 7% for the full year, which is lower than previously forecasted, because of the low rates during the first half of the year.

I will now turn it back over to Damon.

Thank you, Dave. So let me bring to close our comments and make these final points.

As many of you know, [reconverging was] finalized this passed year, and for new REIT investors on the call, we are a Company that, one, has had 13 consecutive years of EPS growth, and a compounded average growth rate of 11% over the last eight years for AFFO per share, and we are well on our way to our 14th consecutive year. This shows a very strong and durable earnings performance by the Company. More importantly, our ten-year share price performance is north of 250%, showing our long-term track record of our performance.

We are the clear market leader, with the Company owning and controlling almost 60% of the privately-owned beds in the US marketplace, and with that, 95% of our net operating income is generated from our own beds, and we enjoy a very modest real estate maintenance CapEx of 5% of NOI.

Historical customer retention rates in excess of 90%, which we easily maintained based on our renewal activity this summer, a very competitive dividend payout ration of 80%, and a 6.25% increase in our annual amount, while deploying $300 million in new facility CapEx shows our confidence in the business, all the while having the strong balance sheet with a debt-to-EBITDA at 3.1 times, which as you know, is very low compared to other REITs.

So, very strong operating record, very viable real estate assets with 75-year life, high [barrier entry], and a diverse, highly-rated government payers. And with less than 10% penetration in the US marketplace, we see meaningful opportunities in front of us. As for the near-term business outlook, population increases we are seeing, indicate continued need for solutions we provide. And we are very encouraged by the improving budget environment on the state side.

Extremely limited public sector investment on new government-owned capacity to deal with growth, overcrowding, aging infrastructure, and again, that tend has continued this year, based on the recent legislative session, we have existing capacity to deal with these challenges of our partners and fill in this capacity could add significant cash flow.

We've clearly got more to do, but last year, first quarter 2013, we had 6,400 owned beds at our North Fork, Cal City, Cimarron facilities, running anywhere between 50% to 80% occupancy, and now all three are near 100%, so we've made good progress, but clearly, we have more to do. So, with the increased utilization of existing owned beds, the future contribution of our new trial facility, and new contract with Arizona at Red Rock, purchased opportunities increasing for government-owned prisons, and residential re-entry acquisition opportunities, we feel we have a great earnings return story of 5% to 7% over the next three to five years. And, of course, this is on top of a 6% dividend yield.

So, that concludes or prepared remarks. Thank you again for calling [into] today's conference. And let me turn the call over to Tasha for Q&A.

(Operator Instructions). We'll take our first question from Kevin McVeigh with Macquarie. Please go ahead.

Damon, I'm wondering if you could give us a sense, as you're thinking about the business, obviously, the yield 6% which is in and of itself is pretty impressive, but how are you thinking about kind of the total return in terms of revenue? And then ultimately, return overall?

And if you kind of think about overall earnings growth and then, ultimately, what it would look like organic, and if you were to do some transactions as well, because it definitely sounds like there may be acquisition opportunities as well, just so we got a sense of how you're thinking about total return for the business over a three- to five-year period?

Kevin, let me answer that with a couple of points. To your point about organic versus acquisition, I think it's fair to say that would be probably more organic than acquisition. It's going to be some opportunities in the reentry area, as I mentioned in my comments. And, of course, we executed last year with CAI. We think that in that part of the business, which is, again, the reentry, a lot of that opportunity will come through acquisition opportunities versus organic, but could be a little bit organic in that piece of business.

As relates to what I call adult secure, so that would be adult correctional, detention, jail facilities, at the federal or state, I think that most of that is going to be organic, and that will come in a couple of different ways, one of which is existing capacity that we'd sell to new partners, or expanding relationships with existing partners, or build-to-suit opportunities, like Trousdale, that we just executed on here last month.

The only other thing I would say that adds to the acquisition side is, we see as kind of a opening opportunity, or kind of developing opportunity, and that is on the local market, on buying local jails and becoming the landlord. So, we see that as more acquisitions. There could be an opportunity here and there at the local market going forward, where you got maybe a jurisdiction that has a very old jail and they're looking for someone to provide a new jail, so we can build-to-suit, and again, just be the landlord.

But I think as we think about the opportunity here in the near-term, it would be more on the acquisition side. You take that and fold that into, say, okay, what would be the return story? We think a 5% to [7%] in earnings growth, over the next three to five years, is a good number for the investors to think about. And that would be on top of a 6% dividend yield.

So, somewhere in the range of, say, 11% to 13% total return.

That's super helpful. And then, the other thing is, it definitely sounds like pricing starting to firm here. How should we think about -- because, I know, obviously when things were a little bit tougher, we're kind of net-neutral with the Federal Government helping out the states here, how are we thinking about that from a revenue contribution perspective in 2014 into 2015 -- 2015 into 2016, rather?

We're still being, I would say, maybe a tad conservative on that. It is improving; globally, state budgets are improving, and in turn, that is trickling down to the a little bit of pricing improvement, either for new contracts, renewals, or getting our set escalators and our existing contracts.

So, last year was an improvement over two years ago and this year, clearly, [was an] improvement over last year. So, we're seeing some modest improvement, but I would say, as relates to a key contributor over the next couple years, I wouldn't necessarily point to pricing power, but it is improving. It will be a nice little contributor, but not, what I would say, [the] catalyst.

Great. Thanks so much.

Thank you, Kevin.

Thank you. Our next question will come from Manav Patnaik from Barclays. Please go ahead.

Hi, this is actually Greg calling, on for Manav. Good morning.

Good morning Greg.

Hi. You talked a little bit about bolstering your reentry capabilities that you gained with CAI. Thinking about potential M&A in that space, how do the targets compare in size to CAI? Would you need a number of smaller acquisitions, or are there some larger players in that space?

It's a little bit all over the board. I would say CAI was, maybe, if you look kind of on a 25th to 75th percentile, CAI was maybe a little bit on the higher side, relative to size and scope. So, I would say we're looking at some opportunities that are maybe a little smaller, and looking at opportunities that are a little bigger. So, I would say it's a little bit all over the board.

Okay. And you've mentioned the few managed-only contracts in 2013 that you exited, that weren't as profitable. I was wondering if there are still contracts in that managed-only portfolio that are similar in nature and that you could see potential pruning in the future?

[There is]. So, we've got, still, a fair amount of managed-only contracts in the portfolio and they are great contracts. We have, overall, have had some nice contracts for many years on that side of the business. Is there one or two more that, if we get up to a renewal, or we maybe see some pricing pressure like we've seen in the last couple of years, that we may kind of reassess our desire to move forward on that? I would say absolutely, that's just part of the business and we'll evaluate that along the way.

Again, we do have some contracts, many of them, several of them, I should say, that we've had five, ten, 15, 20 years, and they have been good contributors and we have been able to maintain growth of expenses with pruning increases or populations increases. I will say, also, though, I think we've talked about this a fair amount with investors the last couple years, that the growth in that part of the business is really not there.

Growth in our industry, say 20 years ago or longer, there was a fair amount of manage-only opportunities, whereas now, they are very limited. If fact, if I think, the last five years, there is only probably about three or four, less than a handful, of managed-only opportunities. I don't see that as a contributor going forward for the Company, and really, for the industry. But again, the ones we have currently, we will asses along the way. We've got some good ones. If we get some pressure like we did in the past, then we'll reassess at the appropriate time.

Fair enough. And then, I guess finally for me, on the numbers, just trying to bridge the acceleration that's kind of implied from the third quarter, the fourth quarter. Is there an implied increase in utilization? And what are the moving pieces from the third quarter into the fourth quarter?

I think it's a combination of both, anticipated occupancy increases, as well as some expense savings. We've had some negative experience in the inmate and medical area in certain contracts where we have unlimited exposure. So, we've kind of assumed that trend would continue in the very near term, i.e. a little bit in Q3, but expecting that to normalize, like a lot of large numbers would be in our favor on that levelling out as the year goes by.

Thanks a lot, guy.

Thank you.

Thank you. Our next question will come from Tobey Sommer with SunTrust. Please go ahead.

Hi. This is Frank in for Tobey.

Good morning, Frank.

Hey there. In your prepared remarks, you mentioned US Marshals as being a little bit soft going into 3 Q. Can you talk a little bit about your forecast for the year and what visibility you have in that US Marshals' population?

I might have Dave add on to this, but one thing that we're seeing is, actually, a couple of key leading indicators is, with sequestration that came to pass late last year, it did have an impact on hiring decisions and hiring freezes, with a couple agencies, we've most notably noted, what I would say, kind of the front tend, the law enforcement agencies to see their total employee head count go down just because they did have either some pressure to not do hiring, or actually had a hiring freeze.

And then, we also saw that manifest itself into the US Attorney's offices around the country. We saw both, kind of both those fronts, and kind of leading indicators where we saw a lower head count in those organizations or agencies and, of course, that's the front end, where you see Federal inmates or Federal prisoners come into the Federal system. And that has an impact on the Marshal service.

What we're seeing now is with the sequestration behind us, and some budgets, certainly, for this year and next year, a lot of those pressures, or potentially policies, were put in place, where hiring freezes have been lifted and we're starting to see a little bit of increase. We should see that have an impact. Will it have a meaningful impact before the end of the year? Probably not.

So, we're kind of being cautious as we think the rest of the year. But at least on the front end, starting to see a little bit of relief there.

I don't know if you have anything to add to that, Dave?

We've seen, at least we believe, there have been some resources diverted towards the Southern border, particularly Border Patrol Agents have been diverted from the Southwest region of the United States, to the immigrate population in South Texas, which I think has contributed to both, the reduction in Marshals' population and an increase in ICE detainees. So --

Okay. That's helpful. And I guess just a follow-up on that, in terms of the outlook for ICE, and the funding, and what's happening in Texas, what opportunities do you see; and what do you think the pace of that could be, as we look forward to the next couple of quarters?

ICE has been, really, a long-term customer; in fact, it's our first partner, going back to 1983. We know them very well. And we have been in contact with them, virtually, on a daily basis going into the summer, as they have been dealing with these issues and challenges on the Southwest border.

And so, we have gone through different solutions that we can provide within existing facilities, or new solutions, or anything that they think would be, maybe, of interest or of value to them, as they deal with this challenge. So, it appears that there is, I'll say, a lot of urgency, because of what you're seeing in the newspapers right now. I know [GEO] has been awarded the contract, or I guess a change in contract, with the current facility out in Texas, and some activity there, also seen in Texas with existing facilities. And also, I think one in Louisiana, so I think that's an indication of the timing and urgency for ICE.

So, I think the next couple quarters, I think to use what you just said, I think probably seeing some activity in next couple quarters is possible. Again, [can't] say anything definitive right now. It's something that we're going to continue discussions with them and continue to provide different solutions that may be attractive to them.

Okay. Great. Thanks very much.

We'll take our next question from Brian Ruttenbur with CRT Capital. Please go ahead.

Yes, thank you very much. Some of the questions have already been asked, but I wanted to get into you repeating yourself. To start off with, on Trousdale County, can you go over the economics again? I know it's going to start the end of 2015, but can you give us the economics one more time?

Absolutely. Good morning, Brian.

Good morning.

It is just north of $50 million in revenues, and about $0.10 to $0.12 in earnings, at full utilization.

Great. Thank you very much. The ICE opportunity that was just being addressed, with the $405 million coming out on, I think, yesterday, from the President, [the] President took from other budgets to bridge a gap between now and the end of the fiscal year, have you talked to any of ICE that says, This much is going to be going to managing the population versus enforcement and stopping the flow of the immigrants? Do you know any kind of numbers around any of this?

I don't think anything is public. That, I think, came together very quickly, because as you know, or saw last week, I should say, Congress, the House, and Senate tried to come together on a funding bill before the recess. It didn't happen.

So, it's our sense is that came together very quickly over the weekend, knowing they wanted to put something together, so it was [put] over the weekend. And as I understand it, it was approved last night, and in the range of about $300 million. So, the actual kind of where each dollar goes to, don't know that detail.

Okay. And then, along the lines of the community corrections, would you be looking internationally? Are you going to focus domestically, still? [The GEO], yesterday, as you know, probably, came out and was talking about opportunity they're pursuing in community corrections and the UK. I didn't know if that is something that you have shied away from or moved out of the international market. Would you go back into the international market in the community corrections area?

Yes. In the near-term, it would be focused purely on the US marketplace. And long-term, never say never on international, but as we think about reentry and the opportunities, it is focused purely on the US marketplace.

And the last question, going back a little bit to ICE, a lot of the need is for youth and families, mothers with children, I believe is a lot of the need. You're out of a lot of the youth market, would you be willing to get back into that housing of under age?

The families has been the key thing ICE is working on. As you know, HHS is more focused on the unaccompanied minors. So, families is a population we know very, very well. We had a facility near Austin, Texas, in Taylor, that for about three-plus years, held families for ICE.

So, we know that population very well, We know the standards, and requirements, and the training that staffers undertake for that population, so that's something we're very comfortable with and have done in the past.

Great. Thank you very much.

Thank you, Brian.

Thank you. We'll take our next question from Barry Klein with Macquarie. Please go ahead.

Hey, guys.

Good morning.

Good morning. Just a clarification. I don't know if I missed this in the prepared remarks, you discussed the tax rate and, historically, I thought you talked about guidance of 8% to 9% tax rate. Can you just give me a little bit more clarification on what the tax rate will be this year and what we should expect going forward on the effective tax rate?

Sure. This is Dave. I'll respond to that.

We are forecasting a tax rate of 6% to 8% in Q3, and 5% to 7% for the full year. So, we had some unusually low tax rates during the first and second quarters of this year. We implemented some tax planning strategies in both quarters that generated some income tax benefits, primarily, stating of tax benefits. Then, we have experienced lower than what we're forecasting in taxable income in our taxable REIT subsidiary. That's driven, mostly, by the managed-only market.

So, as we transitioned our Idaho facility, for example, from CCA to the State of Idaho, we had some transition expenses that drove down the pre-tax income in the taxable REIT subsidiary. But like I said, we expect that to normalize back to 6% to 8% in Q3.

So, going forward into future years, should I look at a tax rate of 6% to 8%, or should I look at your previous guidance of 8% to 9%?

When you're getting to that level of detail, it's hard. The gross dollars of those percentages don't make a material difference. It's largely going to be driven by the allocation of pre-tax income between the REIT and taxable REIT subsidiary. So, most of our owned and managed business is going to be in the REIT demand, think of the managed-only business in the TRF. So, as the income grows on the owned and managed business, it would drive your tax rate lower. If the managed-only business were to grow, it would result in a higher tax rate.

But I think, probably 6% to 8%; 6% to 9%, 6% to 10% is a safe rage. It's hard to predict, depending on that allocation.

Okay. Thanks a lot. Very helpful.

Thank you.

(Operator Instructions). Our next question [will be a] follow-up from Tobey Sommer with SunTrust. Please go ahead.

Thanks. I [had] one quick one. As you see improvement in some of the state budgets and some nice turns on the ICE side, just wanted to ask about the hiring and staffing environment you're seeing out there? Your ability to get good people and keep good people?

Great question. We have seen our efforts to recruit and retain employees work out very well. We've been enjoying a pretty nice turn-over percentage, compared to other service industries, other companies that have a high service component.

But we do have a few challenges here and there, most notably our facilities that are around the oil and gas industry, where we have seen some escalation of wages for that industry having an impact on our facilities. But overall, as I look across the map and think about our facilities, we have had pretty good success on recruiting and retaining employees.

The other thing I would just note, as a reminder, great hedge is that with just over half our business on the Federal side, being with the Federal Government, those direct contracts require us to pay wage termination, as set by the Department of Labor. If those wages increase, then we have to increase our salaries by equal amount. But in turn, then, we can go back to the customer and get reimbursed dollar for dollar. So, those are good contracts to hedge a little bit if we do see some escalation there. And that's just over half our business.

So overall, generally pretty pleased on our efforts.

Again, [have] some pockets where we've had some challenges, and again we got the ICE feature in our Federal contracts that helped us a little bit on escalation under those contracts.

Great. Thanks a lot.

Thank you.

And it appears we have no further questions at this time.

All right. Well, thanks again, Tasha, and thank you for everyone on the call for your participation today, and most importantly, for investors, thank you for your investment in CCA. We are eternally grateful in your investment in the Company and your confidence in us.

Your Management Team is focused on executing another good quarter and a strong ending to 2014, and we really look forward to reporting on our progress later this year.

Have a great rest of your day and again thanks for calling in.

This concludes today's conference. You may now disconnect your lines and have a wonderful day.