Good morning, everyone, and welcome to CCA's First 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 website at www.cca.com. 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 Litigations 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 discussion of non-GAAP measures. The reconciliation of 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, David Garfinkle. I'd now like to turn the call over to Mr. Hininger. Please go ahead, sir.

Thank you, Zach. 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 our Chairman of the Board, John Ferguson; Director, Bill Andrews; and also, our VP of Finance, Brian Hammonds, joining us on the call today. After my opening comments, I'll give a highlight of the results of the first quarter, then give a business update and then finally hand it off to David Garfinkle in a few minutes. But first, a couple of global comments for new REIT investors, first of which is to tell you that CCA's business is stronger than ever. 2013 marked our 13th consecutive year of EPS growth and a compounded average growth rate of 11% over the last 8 years of AFFO per share. And based on our guidance from last night, we are well on our way to our 14th consecutive year. More importantly, our 10-year share price performance is north of 250%, showing our long-term track record of outperformance. Now with CCA, you have a clear market leader with the company owning and controlling almost 60% of the privately owned beds in the U.S. marketplace. And with that, 95% of our net operating income is generated from our owned beds. But we also enjoy a very modest real estate maintenance CapEx of 5% of NOI. As for the market, we're experiencing extremely limited public sector investment on new government-owned capacity to address the challenges they face with growth, overcrowding and aging facilities. And this lack of development is unprecedented in the last few decades within our industry. And with less than 10% penetration by the private sector, we have meaningful opportunities in the U.S. marketplace as evidenced by our new agreements at our Cal City,…

Thank you, Damon, and good morning, everyone. After serving in a supportive role on these earnings call for many years, I can't tell you how excited I am to be sitting in this chair today. I would like to thank Damon, John, Bill and the rest of the Board of Directors for placing their confidence in me, and Todd for sharing his wisdom and guidance, which has enabled me to assume this responsibility. To our shareholders, I'm committed to continuing to be a good steward of our capital, which I realize is your investment. Now on to the quarter. In the first quarter of 2014, we generated $0.44 of adjusted EPS, while normalized FFO totaled $0.62 per share. One important reminder when comparing 2014 per share amounts to 2013, 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 have been outstanding for all of 2013, are presented in both the press release and supplemental. Pro forma adjusted EPS and normalized FFO per share in the prior year quarter were $0.44 and $0.61, respectively. These amounts excludes REIT conversion costs, refinancing expenses and the significant income tax benefit resulting from the reversal of net deferred tax liabilities associated with our conversion to a REIT. First quarter 2014 earnings were at the high end of our expectations primarily due to higher revenues, excluding the contract adjustment mentioned in our press release, which had no net P&L impact when you consider the same reduction to operating…

Thank you, Dave. So let me bring to a close our comments and make these finals points. As you know, we completed the conversion to a REIT the past year. And for new REIT investors on the call, we are a company that, one, has had 14 conservative years of EPS growth with a CAGR of 11% over the last 8 years of AFFO per share, well on our way to our 14th consecutive year, and we think this demonstrates a strong and durable earnings performance for CCA. More importantly our 10-year share price performance is north of 250%, showing our long-term track record of outperformance. We are the clear market leader with the company owning and controlling almost 60% of privately owned beds in the U.S. marketplace. With that, 95% of our NOI is generated from owned beds, and modest real estate maintenance CapEx at 5% of NOI. Historical customer retention rate is in excess of 90%, which we expect to maintain based on our renewal activity this year. Competitive dividend payout ratio at 80%, 6.25% increase in the annual amount in the first quarter of this year, all the while deploying $300 million in new facility CapEx shows our confidence in the business, all the while we have a very strong balance sheet with debt-to-EBITDA of 3.3x, which, as you know, is low compared to other REITs. So strong operating record, very viable real estate assets with 75-year life, high barriers to entry and diverse, highly-rated government payers make this industry and this investment very attractive. And with less than 10% penetration, meaningful opportunities in the U.S. marketplace. As for the business outlook, population increases we are seeing indicate a continued need for our solutions we provide, and we are encouraged by the improved budget environment on the…

[Operator Instructions] We'll go first to Manav Patnaik with Barclays.

This is actually Greg calling on for Manav. First, on -- as you're looking more and more into landlord-type contracts, I was wondering if your view on the 12% to 15% ROI targets has changed, especially for the contracts where you won't be taking on the operating risk.

This is Damon. The short answer is no. We are seeing pretty meaningful interest, as I said earlier, on the local side, city and counties. So this is somewhat uncharted territory to see if our solution would make sense, which is to buy the facility and lease it back to the government partner. We think there's a lot of value to provide not only in a case where help with an immediate capital infusion to a city or a county but also maybe help them get over the hurdle of dealing with some maybe deferred maintenance. And even if it's a county that has grown but they haven't been able to deal with the overcrowding, we can also help them with maybe optimizing the facility and/or expansion. So as of right now, we think our hurdle that we've set forth many years ago, we think, is appropriate. That is something we'll evaluate as we get further into these opportunities.

Okay, that's helpful. And I guess on the community services, 9 months into the CAI acquisition. I was wondering if you could give a little more color on the traction you're seeing in that business and maybe the opportunity you see there, especially in California.

Absolutely. So a couple of observations, one of which is on the federal side. So the Federal Bureau of Prisons is a major partner using those beds at CAI. And nationally, they have about 9,000 inmates in these facilities spread all over the country. And what we've seen over the last few years, the amount of beds they need has grown. The amount of funding they're getting from Congress has grown and pricing also has improved. So we're seeing kind of all the key metrics, population, pricing and also funding support from Congress, going in the right direction. And from a political perspective, it's been our kind of observation in talking to different stakeholders that Republicans and Democrats, they think that use of these beds is a good thing. So we think that there's going to be continued support for these type of facilities nationwide. Having a footprint in California with CAI is also, we think, a good thing. So it's kind of the second part to your question. As you know, California has gone through a significant change where they have moved population from the state level to a local level that's put a lot of strain on counties all over the state. And so we think having a footprint in San Diego could lead to providing a solution with other counties within the state of California. So nationally with the Federal Government, we think there's good opportunity there. And specifically in California, we also think having now a kind of foot in the door in that market in California is a good thing as counties deal with their issues at a local level going forward.

Great. And one more, if I can sneak it in. Your competitor on their call mentioned their interest in development of broader correctional complexes, especially for local governments. I was wondering if you guys have any interest in similar-type projects.

Yes, we're keeping a close eye on that. The -- around the country right now, we are seeing some kind of larger, I'd say, metropolitan areas looking at a complex that may have CapEx deployed on things in addition -- or, I guess, in addition to actual detention space. So you see some jurisdictions looking at a kind of a total turnkey solution where you have only jail space but also courtroom space, maybe space for law enforcement. So we're keeping a close eye on that. And there is, like I said, a little bit of activity where they're looking for somebody to provide that solution. So those, we think, are potential opportunities. I'd say on the earlier question, the opportunities where we can maybe go in and buy a jail, become the landlord and, again, give them certainty both [ph] on maintenance CapEx and where we'll also be their partner on dealing with growth and overcrowding, we think that may be is a little more of a higher or a bigger opportunity for us versus the early one about a complete turnkey solution on a complex.

And we'll go next to Tobey Sommer with SunTrust.

This is actually Frank in for Tobey. I wanted to ask, in your prepared remarks, you talked about 7 of 13 states have passed budgets and you're seeing some nice conversations with some of your state partners. Can you give us an idea in terms of a little more color on rates going forward? And two, are they asking for additional services, which is often something we see in conjunction with REITs?

So a couple of answers there. This is Damon. The answer is yes on additional services. As I mentioned earlier, our state contracts, many of them get renewed on July 1. And that typically is part of the negotiation where they're looking maybe for increased utilization and/or additional services. So we are seeing some interest on some additional services on some of our state partners. And as to pricing improvement, I'd say it's modestly better than it was last year, and that's been a trend. So we have seen pricing improve modestly here over the last 36 months. So we're encouraged by that improvement. And again, I think that's tied directly to states feeling [ph] a little bit about their budget environment and they're seeing revenues modestly [ph] improve, too.

Okay, great. And if I could ask a little bit about the U.S. Marshals business in the quarter. Any color you can provide there and your outlook going into 2Q.

Marshals overall were pretty stable, I think, in the quarter. We did have some fluctuation late last year, and that was most notably because we were transitioning marshals out of California City in anticipation of California going into that facility. So we had a little fluctuation in the populations late last year. But I think overall, for the -- for this year, it's been fairly stable.

Okay, great. And finally, let me ask a little bit about the hiring and turnover environment. What are you seeing in terms of getting good people and keeping good people out there? And has anything changed on that front?

Generally, I'd say just kind of looking at nationally, the environment has been fairly good. And we're obviously keeping a close eye on the economy and how that's affected unemployment and, in turn, wages around the country. And we've had some pockets, most notably in facilities that are near what I'd say the oil and gas industry where we've had some fluctuation and had to deal with both wage rates and turnover. But generally, it's been fairly stable. But it's something we're keeping a very close eye on. The second thing I would just note that just over half of our business is with the Federal Government, and the Department of Labor, through our partners, sets the wage rates for our staff. So that is a process that is reviewed annually by the Department of Labor and then if there's any adjustments, then that flows through our federal partners. So that one is fairly stable because -- there could be some increases. But for us, it's fairly stable because if there is increases, we're able to get reimbursed from our federal partners. So the bigger area is looking on the state side where we've got the state contracts. And again, I'd say generally fairly stable but keeping a close eye on it.

And we'll go next to Kevin McVeigh with Macquarie.

As we think about the payout ratio, it looks like it get ticked up a little bit in March of '14. I think that's a timing [ph] of the CapEx. But Damon, any thoughts on if we're around 80% now, do we continue to push that forward? And as we kind of shift a little bit, so that's question number one. And then just number two is, we kind of look to more the design and built. Does that impact kind of longer term targets you have for revenue growth and kind of AFFO and so on and so forth?

I'll take a crack on the first part of that. Our payout ratio ticked up in the first quarter primarily due to that acceleration of some HVAC equipment purchases during the first quarter that we don't expect to continue throughout the remainder of the year. So our annual payout ratio is still expected to approximate 80%. And with respect to increases in that payout ratio that it would go above obviously [ph] as a result of an increase in the dividend, which is a board decision. We evaluate that every quarter. And probably harder in -- at the end of the year during the first quarter once the final year has been completed. But we wouldn't expect any significant changes in the near term on that.

To take the second part of your question, Kevin, if I understand it correctly, the revenues you would see on our projects, they would be different, if I understand your question correctly, which is if it's an owned and managed facility, can you expect a higher total number of revenues? If we're providing services, you could also expect expenses providing those services. But clearly, yes, the profile or the amount of revenues coming in if we were just providing the real estate and maybe some small service like maintenance, then obviously [ph] that would affect the total amount of revenues come into that project since we don't have the big expenses for salary and benefits. So does that answer your question?

Yes, it does. It does, Damon. And then just as you're settling into this REIT structure, how has the reception been from an institutional perspective? As you continue to execute here, is the dialogue a little more active than when -- the initial conversion? Or just any thoughts around that as well.

The conversation's been good. The expectation which we had going into it is that we are a new company. And obviously, we went through the transition the same time as GEO. So a lot of investors were just really getting up to speed on who we are or what we do, what's our services we provide in our facilities. And so we've been working hard to educate a lot of investors on those kind of key, basic questions. But the reception's good. And again, as I went through some of the key things, we think we have a great story to tell relative to not only our performance in the past but also how we compare to the other REITs. So overall, it's been very well received. And we've taken full advantage. We became quickly members of NAREIT, and we've participated in all the NAREIT activities this past year and plan to do this year. And so that's been a great opportunity to touch [ph] a lot of individual investors very quickly.

I'd also add that we've been invited to more REIT and real estate conferences, and we're going to take full advantage of those opportunities as well.

Got it. And last one and I'll get back in the queue. For Trousdale County, when do you think that'll be kind of that $50 million run rate? Is that kind of more of a '16 event? I know it's going to be back half of '15, but should we think about kind of $25 million in '15 and then $50 million or so, fully loaded, into '16 from a revenue prospective?

It'd be a little premature to give anything real specific right now. But I'd say probably a little lower number in '15 because the construction would put us -- opening of the facility probably late third quarter or maybe fourth quarter. So we probably won't be able to achieve that level of performance into '15. And so that would require a meaningful amount of ramp-up in '16. So you really won't see probably a full utilization on an annual basis until '17, but you'll see, I'd say, meaningful contribution potentially in '16.

And we'll go next to Brian Ruttenbur with CRT Capital.

Question number one is what needs to happen in order for you guys to hit the top end of the AFFO range that you had given for 2014? Is it a margin issue? As they ramp, a ramp utilization issue? That's a relatively big range with a couple of quarters left for a REIT.

Well, it's a combination of things. I think it's obviously containing our expenses, looking out for the rest of the year anticipating inmate populations, which is always a little bit of a crystal ball. But I think we feel good about the guidance we have. It's consistent with the guidance that we had set forth in connection with our fourth quarter earnings release. But it's really just keeping on an eye on population, keeping an eye on costs and taking advantage of any opportunities that come along the way.

Great. The other question I have was on Oklahoma. And you mentioned the delay in the state. And how long a delay? Is this going to be years? Months? Quarters? Can you give us a little bit more color on that?

Oklahoma hasn't said anything publicly. Their procurement, when they advertise this out to the marketplace, they were anticipating the activation of the contract on May 1. So that hasn't happened. And so that led to our decision to re-idle the facility. But nothing I could say about the timing. Again, they haven't said anything publicly. I said the procurement is still active. I guess the only thing I would point to is that this is a state. This is one of the 8 I mentioned earlier that's growing. I mean, they've grown by 800 in our system here in the last couple of years and are projecting a growth going forward. So how much they can delay action on that if they're growing, that's really, I'd say, a question for them. The only thing I would just say or just maybe highlight is that the State Department or Department of Corrections, I should say, the Director just recently transitioned. We have a gentleman who came from Arizona, to the new director of Oklahoma. So he has come from out of state. So I think it's pretty natural when you have a new person that's the leader in the department come in and kind of take a full assessment of kind of all the things going on with the state of Oklahoma. This happened during the first part of this year, so that could be also part of the -- just the department taking a step back, kind of reassessing their needs and all the options they've got in front of them.

Okay. And then finally, on that same facility, is there opportunity to go federal with that facility? Or is that well positioned for some of the federal business coming down?

Absolutely. We think the Diamondback facility, which is just west of Oklahoma City [ph] we think could be a very attractive solution for the Federal Government. And we've -- actually, in the past when they've had procurements for incremental beds, we've proposed Diamondback. So we think that could be a very attractive solution, too.

And we'll go next to Brian Hoffman with Avondale Partners.

This is actually Clara Houin on for Brian. First, just on the pipeline of opportunities, how would you characterize the pipeline of non-public opportunities? And specifically, I guess, how does that pipeline of non-public opportunities stand this quarter versus how it's looked over the last several quarters?

This is Damon. I would say -- to the last part of your question, I would say that, that looks about the same as we've seen in the last few quarters. So a couple of key things we look at for kind of non-public opportunities on the state side is to look at how much capacity is being [ph] built within the respective state to deal with the overcrowding or growth. And as you've heard me earlier, generally we're seeing a very limited amount of investment on the states' side for new capacity. And then overlay that also with their 5-year projection on growth. So those [ph] states that we've looked at and mentioned in the past that are non-public, I'd say it's still about the -- kind of still in the same place where we're seeing meaningful growth and overcrowding and have opportunity deal with that by utilization of existing capacity in our system. That's our #1 offer. But if there's a need for a solution maybe in-state where we can do a design-build-own and manage, then we'll provide that solution, too.

Okay, great. And then as a follow-up, could you provide an update on the opportunity in Utah?

Nothing really notable to share today. The state is taking the steps to do an assessment on what would be the best course of action on their behalf to deal with their Draper facility. That is, getting the design or, say, kind of encroached by the development from Salt Lake City and looking at maybe a plan to find a new location to relocate the facility, maybe modernize it, making it a lot more efficient from a financial prospective and also improve the quality of the operations. So they're what I'd say is kind of the R&D phase this year. So it could be probably third, fourth quarter until we get more clarity on kind of what the state does going forward and how we can provide a solution as they go through that process.

[Operator Instructions] It appears we have no further questions at this time. I'd like to turn it back over to Mr. Hininger for closing remarks.

Thank you, Zach, and thank you to all the participants for your time and participation today. More importantly, thank you for your investment in CCA. Your management team is focused on executing on another good quarter and a strong end into 2014, and we look forward to reporting on our progress during the course of the year. So thank you again for calling in.

This does conclude today's conference. You may now disconnect, and have a wonderful day.