Financial Review - Third Quarter 2010 Compared with Third Quarter 2009
-- Total revenues up 2.8% to $427.2 million from $415.4 million
-- Operating income up 10.7% to $85.2 million from $76.9 million
-- Adjusted Diluted EPS up 15.2% to $0.38 from $0.33
-- Adjusted Funds From Operations Per Diluted Share up 6.8% to
$0.63 from $0.59
-- EBITDA increased 9.1% to $111.5 million from $102.2 million
For the third quarter of 2010, CCA generated net income of $42.0 million, or $0.38 per diluted share, compared with net income of $45.3 million, or $0.39 per diluted share, for the third quarter of 2009. Total management revenue for the third quarter of 2010 increased 2.7% to $425.3 million from $414.2 million during the prior year period, primarily driven by a 2.9% increase in average daily inmate populations. Management revenue from our federal partners increased 12.6% to $186.3 million generated during the third quarter of 2010, compared with $165.5 million generated during the third quarter of 2009. The increase in federal revenue was primarily driven by an increase in populations from the Federal Bureau of Prisons (BOP) at our Adams County Correctional Center which commenced operations during the third quarter of 2009 and from the U.S. Marshals Service (USMS) at facilities located primarily in the southwestern region of the country. Management revenue from our state partners decreased to $210.7 million during the third quarter of 2010 compared with $218.3 million during the same period in 2009. State revenues were impacted by declines in inmate populations from the states of Arizona, Alaska, Washington and Minnesota, partially offset by an increase in inmate populations from the states of California and Georgia.
EBITDA for the third quarter of 2010 increased 9.1% to $111.5 million from $102.2 million during the third quarter of 2009. The increase in EBITDA is primarily due to the increase in total revenue. Funds From Operations decreased to $79.8 million during the third quarter of 2010 from $80.8 million in the prior year quarter, primarily due to an increase in income taxes paid over the prior year period. Adjusted Funds From Operations, which includes maintenance and technology capital expenditures, for the third quarter of 2010 increased to $70.0 million compared with $68.1 million during the prior year period. Adjusted Funds From Operations per diluted share increased to $0.63 during the third quarter of 2010 from $0.59 per diluted share in the prior year quarter. The increase in Adjusted Funds From Operations was primarily attributable to a $2.8 million reduction in maintenance capital expenditures during the third quarter of 2010 compared with the third quarter of 2009.
Income taxes paid in the third quarter of 2009 reflected the favorable tax depreciation provisions on qualified assets under the American Recovery and Reinvestment Act of 2009 combined with the implementation of several tax planning strategies during the prior year quarter. We currently expect our full year 2010 income taxes paid to be comparable to the full year 2009 despite higher taxable income in 2010, as we implemented additional tax planning strategies in 2010 and expect to benefit from similar favorable depreciation provisions under the Small Business Jobs and Credit Act of 2010.
Our per share results were also favorably impacted by the purchase of 6.4 million shares of our outstanding stock during the first nine months of 2010, at an aggregate cost of $128.4 million, pursuant to a share repurchase program approved by our Board of Directors in February 2010. These shares were repurchased with cash on hand, cash provided by operations and borrowings from our revolving credit facility.
Our total average daily compensated population increased 2.9% to 79,053 in the third quarter of 2010 from 76,835 in the third quarter of 2009. Our total portfolio occupancy decreased to 90.7% during the third quarter of 2010 from 91.2% during the third quarter of 2009. The decline in occupancy is due to the aforementioned change in inmate populations combined with a 3.5% increase in our average number of available beds to 87,201 during the third quarter of 2010 from 84,236 during the prior year quarter, as we completed construction of our Nevada Southern Detention Center in September 2010, which began receiving detainees in October 2010, and completed expansions of our Coffee and Wheeler facilities in May 2010.
Net income adjusted for special items, Adjusted Diluted EPS, EBITDA, Funds From Operations, Adjusted Funds From Operations, and their corresponding per share amounts, are measures calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles ("GAAP"). Please refer to the Supplemental Financial Information and related note following the financial statements herein for further discussion and reconciliations of these measures to GAAP measures.
Commenting on the third quarter financial results, Chief Executive Officer Damon Hininger stated, "We are pleased with our third quarter financial results, as we improved operating margins in both segments of the business and generated year-over-year adjusted earnings per share growth in a challenging business environment. All of our state partners have finalized their budgets and none have appropriated new funding for prison construction under their fiscal year 2011 budget. We believe this will result in absorption of a substantial portion of our available beds, fueling our long-term growth opportunities."
Hininger continued, "Additionally, we are pleased with the three recent contract awards -- the first for up to 1,200 detainees from the USMS at our California City facility, absorbing some of our available bed inventory, the second is our new contract from the state of Georgia to design, build and manage our Jenkins facility and finally, the award from the Texas Department of Criminal Justice (TDCJ) for the continued management of five Texas jail facilities. We believe these new contracts exemplify the value we bring to our government partners, continuing the favorable trend of utilizing the partnership prison industry to alleviate costs, including the avoidance of future pension obligations and saving taxpayer dollars. We are proud to have recently attained a milestone of managing over 80,000 inmates, and believe these trends bode well for CCA over the long-term."
First Nine Months of 2010 Compared with First Nine Months of 2009
-- Total revenues increased 2.6% to $1,242.8 million from
$1,211.4 million
-- Earnings Per Diluted Share up 4.2% to $1.00 from $0.96
-- Adjusted Diluted EPS increased 9.8% to $1.01 from $0.92
-- Adjusted Funds From Operations Per Diluted Share up 20.0%
to $1.80 from $1.50
-- Adjusted EBITDA up 4.9% to $312.8 million from $298.2 million
For the nine months ended September 30, 2010, CCA generated net income of $113.5 million, or $1.00 per diluted share, compared with net income of $112.5 million, or $0.96 per diluted share, for the nine months ended September 30, 2009. Excluding a non-cash charge of $1.7 million for the write-off of goodwill associated with the termination of the management contracts for the Gadsden and Hernando facilities incurred during the second quarter of 2010, we generated net income of $115.2 million, or $1.01 per diluted share, compared to $107.9 million, or $0.92 per diluted share, in the first nine months of 2009 excluding the reversal of reserves for uncertain tax positions and other income tax credits as well as expenses associated with debt refinancing transactions incurred during the first nine months of 2009. Operating income increased to $236.0 million during the first nine months of 2010 from $223.5 million during the same period in the prior year. The improvement in our financial results for the nine months ended September 30, 2010 resulted from a 2.8% increase in our average daily inmate populations, to 77,491 for the nine months ended September 30, 2010 from 75,400 during the nine months ended September 30, 2009. Operating expenses for the first nine months of 2010 included $4.1 million of bonuses paid to non-management level staff in-lieu of wage increases. General and administrative expenses for the nine months ended September 30, 2009 included $4.6 million of consulting fees associated with a company-wide initiative to improve operating efficiencies.
In addition to our operational improvements earnings per share for the first nine months of 2010 was favorably impacted by the aforementioned share repurchase program.
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