Good morning. My name is Keyla and I’ll be your conference operator today. At this time, I’d like to welcome you to the Corrections Corporation of America Second Quarter 2015 Earnings Conference Call. All lines have been placed on mute to avoid any background noise. After the speakers’ remarks there will be a question and answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to Cameron Hopewell, CCA's Managing Director of Investor Relations. Mr. Hopewell, you may begin your conference.

Thanks, Keyla. Good morning ladies and gentlemen and thank you for joining us. Participating on today's call are Damon Hininger, President and Chief Executive Officer; and David Garfinkle, Chief Financial Officer. During today's call, our remarks will include forward-looking statements pursuant to the Safe Harbor provisions of the Securities and Litigation Reform Act. Actual results or trends may differ materially as a result of a variety of factors, including those identified in our earnings release and with our various filings with the SEC. You are also cautioned that any forward-looking statements reflect management's current views only and that the Company undertakes no obligation to revise or update such statements in the future. This call will include discussion of non-GAAP measures. A reconciliation of the most comparable GAAP measurements are provided in our corresponding earnings release and included in the supplemental financial data on the Investors page of our website at www.cca.com. With that, it's my pleasure to turn the call over to Damon Hininger.

Thank you, Cameron. Good morning and thank you for joining our call today. Also joining us on today’s call is Brian Hammonds, who is our Vice President of Finance and also Tony Grande, who is our Chief Development Officer. I will start off today by highlighting a few key financial results from the second quarter of 2015 before providing an update on recent business developments and opportunities. Following my remarks, Dave will provide a more in-depth review of our second quarter financial performance and will walk through the factors impacting our updated full year 2015 guidance. Highlights from our second quarter 2015 financial performance include, revenues of $459 million representing an 11.8% increase from the comparable period of 2014. Total net operating income of $141 million, an increase of approximately 15% over the prior year and normalized Funds From Operations of $0.74 per share, an increase of 8.8%. Both our EPS and FFO results exceeded the high-end of our guidance for the second quarter as a result of populations from immigration and customs enforcement and the BOP trending higher than forecasted during the second quarter. We also experienced favorable expense trends which benefited our second quarter results. Dave will provide additional color on the drivers of our financial performance following my remarks. In June, our unsecured credit rating was upgraded to investment grade by Moody’s, which we believe reflects the strength of the company's balance sheet and our track record of consistently growing the business while responsibly manage leverage. In July, we amended the terms of our revolving credit facility to extend the maturity and improve pricing. Again Dave will touch on this in more detail, but is very important to highlight our continued access to long-term capital for growth opportunities at very attractive rates. As for growth opportunities, I…

Thank you, Damon, and good morning, everyone. In the second quarter, we generated $0.55 of EPS compared to our May guidance range of $0.49 to $0.51 and $0.05 ahead of the first call consensus estimates. FFO totaled $0.74 per share ahead of our May guidance, ahead of our May guidance range of $0.67 to $0.69 and AFFO totaled $0.73 per share, compared to our May guidance range of $0.65 to $0.67. Our results exceeded previous estimates due to generally higher than expected federal population from the US Immigrations and Customs Enforcement, and the Federal Bureau of Prisons. As we mentioned on the last call, ICE population stabilized and subsequently increased following passage of a budget in March for the Department of Homeland Security. Operating expenses also came in lower than our forecast. Compared to the second quarter of the prior year, these second quarter results represent increases in adjusted EPS, FFO per share and AFFO per share of 12%, 9% and 7%, respectively. These increases were attained through the continued ramp of new contracts with the State of Arizona at our Red Rock facility and ICE at our South Texas Family Residential Center, partially offset by a reduction in populations from the prior year from the State of California and ICE as facilities other than the South Texas facility. So even though ICE populations were better than forecasted, they were still below the prior year. Our balance sheet remains very strong with leverage decreasing to 2.9 times, fixed charge coverage increasing to 9.8 times and solid liquidity. At June 30, we had $41 million of cash on hand and $323 million of availability on our $900 million bank credit facility. The construction of our new Trousdale-Turner Correctional Center and Otay Mesa Detention Center, both continue on track for completion later…

Thank you. [Operator Instructions] We will take our first from Michael Curtis with Canaccord Genuity.

Hey guys, nice quarter. I appreciate all the color and thanks for taking my questions. Just a little bit more on South Texas, and I’m sorry if I missed these before, But just a confirmation actually, you said in the second quarter that you had 960 beds in operation and then in third quarter, we would see full utilization, is that correct?

That’s correct. Yes, so we – basically, during a quarter, second quarter actually to say, Michael, we had the activation of the initial beds during the remainder of the quarter we got the full facility in operation as we went into the third quarter.

Gotcha, Gotcha. Okay. Thanks, sorry?

Michael, we had 960 in April and then that went up to the full 2400 in May, so that will have a modest impact on revenues in Q3. So I think we said that will increase by about a few million dollars.

Okay, excellent, thanks. And so, actually that's my next question. That increase of $1 million, is that's on top of the roughly $65.9 million recognized in the second quarter?

Right, that’s right. Since the revenues calculated, it’s a little bit complex the way the accounting works, because the payments from ICE are fixed payments, but the revenues have to be recognized under a multiple element arrangement, most of the revenue is based on when the beds come online. So, the full 2400 beds were not online for the full second quarter, but will be the full third quarter. So that will be a few million dollars of additional revenue.

Excellent. Thanks, and then, so on the expense side of that, is there anything that we should kind of be modeling in that’s kind of in excess of the depreciation and interest, like how should we think about the expense side of it?

No, I don’t think so. I think, staffing levels, kind of normalized in the second quarter as well. So I would expect that to be consistent going forward and rent expense to third-party lessor, the only unusual part of that lease as I mentioned was the depreciation and interest. So, nothing else should really impact Q3 or Q4 going forward.

Big driver of our expense is on our own side or a big part, I should say, of our own side is medical, but in this case, medical is operated by the government. So we don’t have that variation.

Excellent, that's all for me. Thanks again and nice quarter.

Thanks, Michael.

Thank you.

We will take our next question from Kevin McVeigh with Macquarie.

Great, thanks. Hey I want to - Damon or David, can you give us a sense of – and it just might be a little too far, but, what a new California contract could potentially look like? Is the one time it comes up at the end of 2016 and then, are there any goal posts you would look at in terms of being able to get a sense of how that progresses?

Kevin, let me, this is Damon, let me answer that.

Hey Damon

So, I would say, the scope and kind of the general terms and conditions are going to be – I’d say fairly consistent somewhere to what we have today. So quite simply, we think it will just be a multi-year extension of the current contract. And we’ve had discussions with the State of California, really to your question about mile post or milestone that the passage of the budget was key on their side. So then they have the certainly, what the budget environment is going to look like for the coming fiscal year. And so, once they got past that point and really sort of the conversation with us on the contract extension. So those are progressing, we’re hopeful to have that wrapped up fairly soon.

Got it and then Damon, with Ohio coming up; I mean obviously, you’ve been successful with Ohio in the past. If I heard you right, it sounds like MTC is managing it now. What would be the optionality around that to the extent you were able to secure that from an M&A perspective? And ultimately be able to kind of go in and take over the management as well? How would that work?

Well, we understand that the procurement, it won’t necessarily prohibit, but really will envision whoever is successful to the procurement process will takeover operation. We understand it is – this is going to be a procurement that basically just sell the assets so an opportunity for us to come in if we were successful, we’d be the landlord and do a long-term lease agreement or some type of the lease agreement with the state. So that’s how we understand it. MTC has got a multi-year contract and so we understand the state doesn’t really want to disrupt that management contract.

Got it and then, just, you provided a little bit on CAR-16, but any other kind of thoughts in terms of when we should get final numbers in terms of how that sets?

Yes, so all the facilities are in Texas today to 10,800, the states for performance are Nevada, Arizona, New Mexico, Texas, Oklahoma, Louisiana, and Mississippi I believe and so it really pretty confines geographical requirement for this procurement and of course we’ve got capacity in Mississippi and Oklahoma we think would be attractive. So, the procurement is progressing. We submit our proposals. We understand here in the next couple of months are going to start going out doing site inspections of all the proposed facilities that all take us into the fall, but probably do a little bit of back and forth like they specifically do for clarifications, maybe try to make sure they understand all the kind of points and all the offer for proposals and then I think that typically also to do public hearings once they get close to award which will probably take us in this spring. So we think probably summer, maybe late summer 2016 is when they act on it and then, whoever is successful on the award which we think will be multiple award since it’s the quantity is well over 10,000, performance will start in kind of early to mid-2017.

Super, thank you.

Absolutely, Kevin.

[Operator Instructions] We will take our next from Tobey Sommer with SunTrust.

Thanks, Damon. Following up on the last question, how do the facilities that you currently house California inmates in Oklahoma and Mississippi compare to Texas-based facilities across the most important dimensions including price?

I would say, can answer the last one, or the last part of it, but I would say, the facilities, I’d say compare very favorably, housing California inmates which have California has a lot of, I’d say unique requirement, both with the operation, but also some of it, little bit related to fiscal plan. We think these facilities would be very attractive to the bureau just no one – them as a partner. I’ve been working with them for many years. So we think this will be attractive solutions and again they are in the geographical requirement which was a key consideration for the bureau say put this procurement together.

And you went through a lot of numbers relative to California, and I appreciate it. But my pen doesn't work all that fast. So, if you could go over a couple of them, I think you had said that your expectation at year end had been for 6,000 inmates at the end of the first quarter call and now you have a slightly lower range. Could you give me that number again, please?

Sure, yes, this is Dave, Kevin, we had last quarter projected the populations with a decline to a little over 6,000 inmates by the end of the calendar year and we are now projecting them to decline to around 5,500 to 6,000.

But one other key thing, Kevin, I am sorry, Tobey, excuse me, in addition to that is, we are expecting when we into the call in May, that kind of 2,500, 2,000 into the year gets a 4,000 reduction by July 1 of next year. And that is consistent, so when the budget came out and that’s consistent with what we expected. So even though we’ll have a little volatility, kind of up or down a little bit on kind of the ramp down from now until July 1, the new base has been set at 5,000. And so, that is consistent with what we thought going into the call and it was consistent with what we saw with the actual budget from the Governor.

Right, so the endpoint hasn't changed, just the arc on the curve to get there?

That’s right.

That’s exactly right.

Okay. And if I think about California, you mentioned that their forecast is for inmate population growth, but in recent years, the company has been innovative or excuse me, the state has been innovative in trying to offset those population forecast increases. And is there anything that you are hearing from them of new moves, new actions, that they may implement to kind of further reduce the prospects of inmate population growth?

We are not hearing anything additional. So we’ve got folks in Sacramento that are in constant discussions with all the appropriate stakeholders within the state government. And the two big things as you know is, realignment and also prop 47 which is the most recent development of they had an impact on their populations. But we are not getting a sense of anything additional to the state that’s looking at or considering. We also know that there is very limited additional capacity within the State of California and so, even if there was, that would be a multi-year investment to get those beds online. So, we don’t hear anything more additional to the state’s considering. So I do see an increase over next couple of years and it could be the case whether looking at the private sector either in-state or out-state to help do with that growth.

And just a reminder, they do publish their populations on their website every week and obviously, we watch that very closely. In the past few we have actually – there have been increases.

Right, right. In the - along the same lines, how do we think - how should we think about the discussions at the Federal level and in Congress about some changes to sentencing that that may influence kind of longer-term trends? How would you frame that for us?

Absolutely, Tobey, so it’s couple things I would point to. First with ICE, they are a very unique partner because their capacity needs kind of nationwide are driven by the budgets, so that’s a pretty straightforward process once they see the number out of Congress for the funding for the coming fiscal year than a Manger Detention capacity and needs nationwide based on that number. So I put that one aside since it is kind of unique. Marshals Service, they are, their populations I should say are driven purely by the number of prosecutions come out of US Attorney’s Offices around the country. And a leading indicator that we look at on a regular basis is the amount of US Attorneys that are hired and in place around the country. And in late 2013, the total nationwide number of Deputy US Attorneys around the country were at about 2004 levels. That was a result of – we think there is a couple things one of which is sequestration but also Department of Justice that had some hiring freezes for certain agencies during that period of time. But we have now seen the Marshals Service, or excuse me, we have now seen now the US Attorney’s Offices around the country, they have hired in the last 18 months and getting back to I’d say levels, closer to maybe 2006, 2007 levels and it’s early to tell, but three of the last five months, we have seen month-over-month increases in Marshal populations nationwide. And that is following about 18 months of decline. So, my view on the Marshals Service is a little bit of a wait and see as we get later into 2015 and early 2016, is that a trend where there is now more attorneys around the country doing prosecutions…

Thank you very much, Damon, very helpful. Just two final questions for me. Could you update us on sort of the quantity and intensity of direct negotiations you are having with customers, because not all of your sales wins that have come as a result of publicly known procurements? And then secondly, could you just comment on what the M&A pipeline looks like? Thank you.

Absolutely, so on the first part, I will say several partners, most notably on the state side and part of is the negotiation part of it is just increased utilization of existing contracts. So we’ve contracts in place that don’t have a necessarily a cap. So it’s just a matter of the Department of Corrections calling us in a certain locale and paying if we’ve got capacity in certain location they increase it by a certain amount. So, part of it maybe is a negotiation, but part of it also is just continued utilization of existing contracts. It doesn’t have to be renegotiated. On the last part, we are seeing continued activity on the M&A side, as we said before with our acquisition in 2013 with CIO in San Diego, we think there is some other companies out there, kind of similarly sized that could be attractive as we continue kind of build our presence in the re-entry market. So we are seeing good activity on that front also.

Thank you very much.

[Operator Instructions] We will take our next from Barry Klein with Macquarie.

Hey guys. Thanks for taking my questions. A couple of smaller questions. You were talking about the status of some of the RFPs, Arizona on the Federal level and then a few on the Federal level. You’ve talked about Oklahoma in the past, I didn't hear anything about Oklahoma. Is that still in process of potentially of an RFP and just wondering what the status is on that one?

Yes, we think that is still an opportunity. So I mentioned in my remarks that the trigger there was like Arizona and some of these other locations the passage of their respective budgets and so Governor Fallon did get that enacted by July 1st. They being the DOC do get increased funding and so we are closely monitoring how it could be a solution for them in that respective state.

Okay, but no RFP has been announced or no date - and no date or anything like that?

That’s correct. Yes.

Okay Would that would go through an RFP process or would that be sort of a private agreement bypassing the RFP? What’s your expectation on that?

I think that, that really depends on with the Department of Corrections and they have oversight from the Board of Corrections. So, I think what they are doing is, now that they’ve got the budget in hand or having a conversation with the Board of Corrections on the appropriate way to secure additional beds.

Okay, got you. And then, the Arizona, the inmates that were accepted into Red Rock, the 500 inmates for the six months. Just curious if any cash flow from that is included in guidance?

Yes, I’ll cover that one. So, just kind of cross-walking our prior guidance, be in the second quarter, so, changes to prior guidance are really due to acceleration of the decline in California as we mentioned, that was about $0.05, Louisiana, extending the date on which they are going to terminate that contract. They are taking the full 180 days impacting our prior guidance by about $0.02 to the negative and so it’s operating at a loss. A one month delay in the transition from Otay Mesa from San Diego, sorry, to Otay Mesa is about another penny. But that is offset by some additional populations in Arizona as you are referring to and that’s about $0.02 impact from our prior guidance.

Okay, gotcha. Okay, so that’s – so everything – all of that is included in the updated guidance that you put out?

That’s correct.

Okay. And then finally, you mentioned something on the effective tax rate. I didn't – did you provided the guidance on the effective tax rate?

Yes, I didn’t say it specifically, it’s around 5.5%, but if you look at the calculations in our press release, you can calculate what our guidance is for the effective tax and it’s around 5.5%.

Okay and that's the rate. In that ballpark is what we should expect in the coming years?

It’s hard to tell the coming years, but sitting here today, at least looking out for the rest of this year, I would say, yes.

Okay. All right, thanks for the time.

You are welcome.

And there are no further questions in the queue. I would like to turn it back to Damon Hininger for any closing remarks.

Thanks, Keyla. Thank you again for your time and participation in today’s conference call. I would also like to take a moment to thank the thousands of CCA professionals here in Nashville and nationwide for the work they do everyday within our facilities. Our management team remains focused on executing our plans for the long-term value correction – creation, and we look forward to reporting on our progress in the second half of this year. Thanks again for calling in.

That concludes today’s conference. We thank you for your participation.