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CCA Overstates Profits as Economy Falters

The Corrections Corporation of America (CCA) held an investor conference call earlier this month. During the call, CCA officials celebrated that the company's income continues to increase while expanding private prison capacity across the country. Yet, digging deeper tells a different story.

According to Forbes.com, the private prison profiteer reduced its 2008 earnings outlook the second time in three months. According to Forbes, "The company now expects 2008 earnings of $1.18 per share to $1.20 per share, down from its earlier outlook of $1.21 to $1.24 a share."

Reports indicate that part of the company's failings deal with California and end of transfering state prisoners to a CCA managed facility. The company had increased staffing in anticipation of intaking California prisoners, and when that did not happen it impacted CCA's bottom line.

However, CCA Officials mentioned the following highlights compare that third quarter of 2008 to the third quarter of 2007:

  • Net income increased 13.8% to $37.9 million from $33.3 million;
  • Adjusted Free Cash Flow increased 12.5% to %62.0 million from $55.1 million;
  • Total average daily compensated population increased 5.4% to 77,695 during the third quarter of 2008 from 73,740 during the third quarter of 2007; and
  • 1,680 new beds placed into service during the third quarter of 2008.

According to CCA's records, the company's prison population increased by 6,534 beds placed in service since the end of the second quarter of 2007. CCA added capacity in Texas at the Eden Detention Center, where 129 new beds were added for a total of 1,558 beds.

An interesting development is that CCA has lost two Texas contracts this year. Due to a re-bid of management contracts for the state-owned B.M. Moore prison in Overton and the Diboll prison in Diboll, CCA no longer manages those prisons. Private prison company MTC has taken over their management.

So the economic downturn has impacted CCA's bottom line. What about othe private prison companies? It will be interesting to track these trends in Texas and across companies over the next year. Stay tuned!

 

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