Good morning, everyone, and welcome to CCA's Second Quarter 2013 Earnings Conference Call. If you need a copy of our press release or supplemental financial data, both documents are available on the Investors page of our website at www.cca.com. Today's conference is being recorded. And before we begin, let me remind today's listeners that 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 in the SEC. This call might include discussion of non-GAAP measures, a reconciliation of the most comparable 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. Participating on today's call will be our President and CEO, Damon Hininger; and Chief Financial Officer, Todd Mullenger. I'd now like to turn the call over to Mr. Hininger. Please go ahead.

Thank you, Lisa. Good morning, and thank you to our valued shareholders and other participants for joining our call today. In addition to Todd Mullenger joining me on this call, we also have our Chairman, John Ferguson; our VP of Finance, David Garfinkle; and board member, Bill Andrews. I may give a highlight for the results of the quarter we just closed and also give a business update, then I'll pass it over to Todd, here, in a few minutes. So let me first just make a global comments about the company. 2012 marked our 12th consecutive year of EPS growth and a CAGR of 11% over the last 7 years of AFFO per share. And based on our guidance last night, we are well on our way to our 13th consecutive year of positive earnings growth. More importantly, our 10-year share price performance inclusive of our recent E&P payment is north of 400%, which shows our long-term track record of out-performance. Now a couple of highlights for the quarter and also for the year. For the quarter, first of which is FFO was $0.71 per diluted share, representing a 24.6% growth from second quarter of last year, but also the durable nature of our cash flow growth has enabled us to increase our dividend by 4% in the second quarter, to an annual rate of $1.92. With a secure and attractive payout ratio of 77%, we are well positioned to continue our recent record of providing a dividend at above average levels, a competitive advantage in delivering superior total shareholder return. At the same time, we are focused on delivering continued shareholder value, we are also consistent in managing our business with discipline. Earlier this year, we took advantage of historically low interest rates to extend our debt maturities…

Thank you, Damon, and good morning, everyone. In the second quarter 2013 we generated $0.52 of adjusted EPS, compared to our May guidance range of $0.49 to $0.50. Normalized FFO totaled $0.71 per share as did AFFO per share. These numbers have been adjusted to exclude debt refinancing costs, REIT conversion costs and noncash asset impairment charges. Second quarter EPS and FFO per share exceeded our expectations, primarily due to lower-than-anticipated operating expenses and a spike in ICE populations. The lower-than-anticipated operating expenses were partially the result of a favorable settlement of a litigation matter, which won't be duplicated in Q3 of 2013. Q2 was also unfavorably impacted by approximately $2 million of facility ramp down and closure costs at Wilkinson and Mineral Wells. In Q2, we also realized an un-forecasted $5 million tax benefit as a result of tax planning strategies completed in Q2. That tax benefit allowed us to record a one-time bonus in the same amount, and will be paid primarily to non-exempt hourly employees in lieu of a merit increase this year. No executives or other key management personnel will be included in that special bonus payout. Also during the second quarter, we completed the distribution of the $675 million special dividend as required in connection with our REIT conversion. This distribution consisted of approximately $135 million of cash and 13.9 million shares of common stock. This was the final transaction necessary to complete our REIT conversion. Moving next to a discussion of our guidance. As indicated in the press release, adjusted EPS for the full year is now a range of $1.95 to $1.99, our Q3 adjusted EPS guidance is a range of $0.45 to $0.47, and Q4 is a range of $0.48 to $0.50. Full-year FFO guidance is a range of $2.65 to $2.69,…

Thank you, Todd. So let me bring to a close our comments and make these final points. So we've completed the last hurdle early this year for the REIT conversion. And for any new REIT investors on our call, I wanted to point out that we are a company that: one, has had 12 consecutive years of EPS growth and a CAGR of 11% over the last 7 years for AFFO per share; and as I mentioned earlier, we're well on our way to our 13th consecutive year of positive growth, but also again shows us to be very strong and durable from earnings perspective. More importantly, our 10-year share price performance, inclusive of E&P, is north of 400%, showing our long track record of out-performance. We have an above-average dividend payout ratio and also a historical customer retention rate in excess of 90%. Combined with a strong balance sheet and debt-to-EBITDA just under 3x, which you know is very low compared to other REITs, we also combine that with a strong operational record, very viable real estate assets with a 75-year life, high barriers of entry and diverse highly-rated government payers. As for the business outlook. In summary, we're encouraged by some of the modest pop increases we've seen this year. We are also encouraged by the improved budget environment we're seeing on the state side, so we're also seeing extremely limited public sector investment on new government owned capacity to deal with growth and overcrowding, and our recent increase in population in Oklahoma is a great example of this. We are also currently, in the United States marketplace, at less than 10% penetration in the corrections industry, so we see meaningful opportunities for us, going forward, over the next 3 to 5 years. So that concludes our prepared remarks. Thank you again for calling in today's conference. And let me now turn it over -- back over to Lisa for Q&A.

[Operator Instructions] We will take our first question from Manav Patnaik with Barclays.

Could you guys just elaborate a little bit more on the CAI acquisition? And sort of the strategic rationale behind getting that? And what sort of the outlook is in terms of more such, I guess, diversification type of deal?

Absolutely. Manav, this is Damon. And I would say we looked at CAI as a standalone transaction. It met our ROI threshold and saw as a good opportunity to obviously add value to the company and, long term, to our shareholders. But a couple of key things that was very interesting and attractive on this transaction. One of which is there was 2 partners under contract with CAI that we have a lot of familiarity with, and Federal Bureau of Prisons and San Diego County. We've got a facility, as you know, in San Diego County that we've been operating since the mid-'90s, so we know both folks on the county side of the government but also the Sheriff's Department very well. So that was attractive to us because we had those relationships and know how they think relative to these types of operations. But also, BOP is again been a long term partner for CCA, so we saw that as an attractive feature in this transaction. But we also saw this an opportunity to have a little bit of a more of a footprint in California as they deal with the overcrowding and realignment and potentially how that creates a little more stress and burden for counties. And again, being in San Diego County where we know all the players, and having this facility, we thought that it would be a good, also, strategic fit because of not only the needs in California, but also the relationship we have globally with the State of California. The last thing I would just mention about this transaction as we talked through this, is that we have, when you think about it, really 2 links of the -- kind of 3 links of the chain rolled out to Federal prisoner inmates. So we've been working long term with the Marshals Service, going back to the '80s, and these are individuals that are arrested by Federal law-enforcement, put to Marshals Service custody and ultimately go through the court process. And if you're ultimately convicted as guilty of the crime, then they're handed over to BOP. So we work with the marshals on kind of the front end when someone goes into the Federal system. We've been working with the BOP, which is kind of the midpoint, where they serve their sentence on their federal crime. They really see this type of facility being kind of on the back end, where they're towards the end of their sentence and ultimately given release into the community. So really, getting another link in the chain with a system where these individuals go through for Federal crimes, we thought would be a good fit. So I guess a pretty good flavor, kind of everything kind of went through our mind as it relates to this transaction. And this is -- this BOP contract, I should note, with CAI is the third largest in the country. So...

Right. I guess that makes sense. Just 2 follow-ups. One, can you, I guess, the existing footprint in California and the Customs obviously makes a sense. Like how do you guys anticipate on leveraging your footprint with their services? I mean, they're clearly a much smaller company, so I get the aspect of having -- adding the third leg to the services you provide. But would that entail, in order to grow that, entail making more such acquisitions in different regions?

Possibly, it's a very fragmented industry. And round numbers, I think there's about 9,000 individuals that are in these contracts nationwide. So long term, this could make sense, something we'll be taking a look at. Another thing, Manav, that was interesting to us is that, as you know, we've got several facilities currently in the portfolio that are vacant that we think could be a good solution for other BOP resident community centers. One example, as you know, that's on our inventory list that's been vacant several years is our Shelby Training Center down in Memphis, Tennessee. We think that could be a good solution like the CAI facilities are in San Diego. So that's something that's kind of going through our mind too where we've got some existing capacity that may be a good fit for these requirements. And I guess to the first part of your question, the CAI, being in close proximity to our existing San Diego facility, we do think there's some leverage their too where we could use our existing operation to help support the other facilities. So those are all kind of key things that went through our mind.

Okay. Just 2 more quick things for me, one just housekeeping. Todd, like what should we estimate for total D&A for the year? I guess, I think, last time it was $116 million, just wonder if that changes with CAI. And then just from a pipeline perspective, just around, more specifically, the asset purchases or facility purchases from states. Any sense of what's that pipeline looks like? Should we expect one a year? Could it accelerate? How does that look?

Your first question, Manav, on depreciation and amortization, around guidance $115 million to $116 million, full year. And the second part of the question, I'll let Damon address on CAI initiatives.

No, just more on the facility purchase initiatives. Just how many other states out there are looking to sell facilities like Ohio?

We haven't put a precise number to it. We've had discussions with, I'd say, several states on this type of a transaction. But they are not publicly discussed. And on the local side, we also think there are several local jurisdictions that could be a good fit, relative to this type of transaction. As I mentioned, I think, in the May call, we were complementary of GEO [ph] and the recent transaction they did in Texas, at the local side. So you now you've got both us and them have completed 2 transactions here in the last 12, 18 months, one that's state side, local side. So I'd say several on the state, several on the local side.

Our next question comes from Tobey Sommer with SunTrust.

Damon, from a broad perspective, your conversations with -- about new opportunities, whether it's deploying capital and buying a facility from a customer or prospective customer or talking about new facilities, would you describe the tone of those conversations as any different than they were 6 or 12 months ago?

Yes, Tobey. I would say it's modestly better and it's better than it was a year ago. And last year was better than 2 years ago. So, yes, I would say it's on a trend where it's getting modestly better. Not only the tone, but I guess I would also point to the actions. As I think about, specifically, Oklahoma and Arizona, those -- Oklahoma has increased their contract with us, Arizona has awarded the contract to us. Those are 2 states, like other states, that were dealing with a very challenging fiscal environment here in the last 3 to 4 years. Our sense was is that, they were waiting it out and trying to truly appreciate have they reached the bottom relative to the decreasing revenues they were seeing from a budget perspective and defer some decisions. So I would say not only the tone is improving, but I'd say these recent actions also are indicative of states feeling a little better about now is the time to make some decisions to deal with growth or overcrowding related to corrections.

So if I were to apply that to some of the RFPs that have been in the market over the last several years, they've kind of lingered than pushed out in terms of decision makings, kind of goes to what you just said. Going forward, in this kind of climate, should we expect an emerging RFP to therefore go to its conclusion in a more timely fashion?

Yes. I'd say there's kind of 2 answers that question. I would say, going back to Arizona, I think that's another great example to part of your question, which is here is a state that I think from the time they awarded going back to when they did their first advertisement, I think was about 3 years, which was pretty long compared to historical kind of timeframe for awarding on procurements. So I do think that is going to be better again in this environment, where, again, states feeling a little better about their revenues and go ahead and pull the trigger once they announce a procurement. Every state, Tobey, is a little different on kind of timing and when they'll do a procurement and how quickly they award. But I'd say, yes, I think, generally it's going to be better, I said -- as I said earlier, these actions, these recent actions, I think, are indicative of states feeling a lot better.

Damon, what would a normalized cycle time be?

Well I would say if you go on the state side, I'll just give you -- again, every state is a little different in their process and some states do it directly from the Department of Corrections when they do procurement, sometimes they have to go through another agency like administrative services or some type of procurement agency. But you've seen some states move as quickly as 6 months, but you've seen some states that may take 2 years. So that -- to give you a range, I couldn't give you a precise, but the other thing I would say is that it depends on their situation, too. With California going back, I guess, now 6, 7 years when they were in this emergency situation and deal with overcrowding, I think they acted fairly quickly when they got to a point where they realized they had to reduce their overcrowding. So if there's something really compelling going on the states, and it could be a little sooner, but if it's a state where they're looking over the next 3 to 5 years projecting growth and are not making a capital investment to deal with it, that growth, and they could be a little more orderly, a little thoughtful on how long they take on their procurement.

One other point I'd add to that, much of our historical growth in the past has come under existing contracts. I think Oklahoma is a perfect example of that, where they just send us incremental populations as their populations grow under existing contracts, and you don't see them going out and issuing RFPs to procure those beds. They just expand populations under existing contracts.

That's a very good point. Yes, you look back over the last 10 years, that's where a lot of that has come from, it's just existing contracts where we've done amendments and change in scope.

Okay, that's helpful. And then, Todd, I just have one last question, I'll get back in the queue. Is there an opportunity over the next several quarters for the rating -- the debt rating of the company to perhaps improve?

There's an opportunity for the rating improve over time. How quickly that transpires, it's difficult to say. But based on the recent upgrade we had from S&P and some of the comments coming from Moody's and Fitch, post-refinancing, I think there's an opportunity. I can't put a timeframe on it.

[Operator Instructions] And we'll take our next question from Kevin McVeigh with Macquarie.

I wonder if -- this is kind of a little more longer term, but, Damon, why don't you give us your thoughts on kind of industry growth rates? And just trying to understand from a secular perspective, obviously, the industry's matured a little bit but it seems like budgets are kind of structurally more challenged going forward. Do you see kind of the challenging budgets going forward offsetting some of that positive secular growth? And what I mean is, just maybe a longer-term uptick in the growth rate than what you would've expected heading into this downturn?

Good question. I guess, let me give you a couple observations. So if you go back over the last decade or, I guess, last 13 years, and look at the period of time between the recession on the overall growth rate of all 50 states and the Federal government, the rate has been anywhere from as high as a 3% down to low as 1%. Again those were the times between recession, and they've seen this current recession and then the -- also the one [indiscernible] in 2001, as you know, was basically flat growth with a little bit of decline in certain jurisdictions. As I look and think about the next 5 to 10 years, I think that could be possible where you see that kind of normal rate again. Again, kind of the range that's kind of 1 to 3, could be a little lower, could be a little higher, year-over-year. But I'd say that's probably in the normal environment. We are not in a challenged economic environment with a recession. Historically, that has indicated to be a pretty good number for kind of forecast perspective. What I would say is very different figure today versus, say, 13 years ago. That could be a positive for the industry and for the company, is that as I mentioned over the last 3 fiscal years, there's been limited investment on new public capacity at the state side and at the Federal side. You've heard me say that President Obama's budget for coming year is not proposing any new capacity for the BOP. Marshals now completely rely on either us or local sheriff for capacity that makes it very limited capacity development state side versus 13 years ago. You'd still have pretty meaningful building programs both at state government, but also the Federal government. So as they deal with that growth in overcrowding over, let's say, next 5, 10 years, we think there is a better likelihood they're coming knocking on our door to deal with that growth. So I'd say those are some of the kind of key characteristics. Again, some of those based on historical, but also kind of recent events with the limited funding for new public capacity. And other thing I would just say is that, and this has been well discussed and talked about and debated nationally, but the challenges for states dealing with pension and health care costs and some dealing with very significant unfunded pension liabilities, those are -- continued constraint on budget dollars. And I think that again puts in well-positioned to be there as they deal with these other costs line items in their budget, looking to us to help us -- helping them, I should say, create a very good solutions that are cost effective on the correction side.

Got it, that's helpful. And then just switching gears to CAI a little bit. I just want to make sure I understand. If you were to kind of sync up with California and San Diego, would those beds be to the county or to the state? Number one. And then number two, I just want to make sure I kind of understand, is it kind of part of traditional CAI service offerings or is it more traditional court incarceration in terms of what will you have in San Diego County?

So, yes, 2 answers there. So the relationship currently between CAI is with San Diego County. And again, we've got a longer relationship with the county already. So as I think about California, and they're overcrowded, as you know, they've gone through this huge shift here in the last 2 years through realignment where they're moving more individuals to the local level. And so we think San Diego County, and dealing with realignment, which is coming from the state level, there could be future needs there. So again, having a footprint in that county with existing facilities we think is a good thing as they deal with realignment. As it relates to your second question, we've operated really for a couple of decades minimum security facilities or pre-release facilities, what's a little different with these facility versus others we've done, is just the really kind of the design of the facility, but also these facilities in San Diego do allow individuals during the day to do -- have employment. So help them get gainfully employed locally, so they're -- they've got a job prior to release. So that is kind of a nuance, a little different phase of the operation, but like -- so we've been operating minimum security facilities nationally for many years.

I'd just add to that. CAI's excellent reputation in California could also provide opportunity to meet the needs of other counties outside San Diego, within California.

Got it. So if it's -- if I have it right, it's about a $14 million run-rate now, with upside, does that sound fair?

Yes.

Yes.

And just a couple other points of information. So that $14 million run rate is with about 400 out of 600 beds filled. So there's about 200 vacant beds available for use by San Diego or, potentially, another user.

Got it. And then, just -- does that fall follow under the TRS or the QRS?

It'd be a combination of both.

[Operator Instructions] And we have no further questions at this time. I'd like to turn the conference back over to Mr. Hininger for any further or closing remarks.

All right. Thank you, Lisa. I want to tell everyone, thank you very much for your time and participation today. More importantly, to our investors, thank you very much for your investment in CCA. Your management team is focused on executing on another good quarter and a strong ending to 2013. And we look forward to reporting our progress during the rest of this year. So thanks, again, for participating in today's call.

And that concludes today's teleconference. Thank you for your participation.