Good day, and welcome to the CoreCivic Q4 2018 Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] And I now like to turn the conference over to Cameron Hopewell, Managing Director of Investor Relations. Please go ahead.

Thanks, Travis. 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 including our answers to your questions will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities and Litigation Reform Act. Our actual results or trends may differ materially as a result of a variety of factors including those identified in our fourth quarter 2018 earnings release and in our Securities and Exchange Commission's filings, including forms 10-K, 10-Q, and 8-K reports. 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. On this call, we will also discuss certain 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 that we provide on the investor's page of our website at corecivic.com. With that it's my pleasure to turn the call over to our President and CEO, Damon Hininger. Damon?

Thank you, Cameron. Good morning everyone, and thank you for joining our fourth quarter 2018 conference call today. We're also joined here in a room by our Vice President of Finance, Bryan Hammonds. Today, I'll provide a brief overview of CoreCivic for anyone new joining us followed by a summary of our fourth quarter performance, and finally some thoughts on our outlook for 2019 and beyond. CoerCivic is a diversified real estate investment trust specializing in delivering government real estate solutions to serve the public good. We are the country's largest private owner of government-leased real estate assets with a 104 facilities totaling over 17 million square feet of real estate and a 35-year history of delivering a broad range of solutions to help solve tough government challenges in flexible cost effective ways. Our unique diversified portfolio of assets generates a steady, recurring cash flow stream underwritten by investment grade government tenants. Each of our three complementary business statements provides specialized real estate to government tenants. Our Safety segment focuses on corrections and detention facility ownership and management, and includes 51 correctional and detention facilities with a design capacity to safely and securely care for nearly 73,000 people. Our Community segment is a growing network of residential reentry centers and non-residential community-based corrections alternatives that help address America's recidivism crisis and includes 26 residential reentry facilities with a design capacity support of 5,214 individuals. Finally, our Property segment is a quickly growing portfolio of mission-critical government-leased properties that as of the end of the fourth quarter includes 27 properties representing nearly 2.3 million square feet of real estate. Our financial performance in the fourth quarter was in line with our expectations and with the result of strong top-line growth trends across each of our three business segments. Total revenue in…

Thank you, Damon, and good morning everyone. In the fourth quarter, we generated $0.40 of adjusted EPS compared to our guidance range of $0.39 to $0.41 and in line with first call consensus estimates. Normalized FFO totaled $0.63 per share compared to our guidance range of $0.61 to $0.63 and $0.01 ahead of the first call consensus estimates. AFFO totaled $0.59 per share compared to our guidance range of $0.59 to $0.61. Q4 2018 adjusted amounts exclude charges of $6.1 million for contingent consideration associated with the acquisition in 2017 of residential re-entry service provider based on financial performance that was better than estimated at $0.8 million of M&A expenses, while Q4 2017 adjusted amounts exclude $4.5 million for charges associated with the enactment of the tax cut and jobs act in December 2017 and $1 million dollars of M&A expenses. For the full-year, normalized FFO is $2.31 compared to our most recent guidance range of $2.29 to $2.31 and a penny ahead of the first call consensus estimate of $2.30. As we discussed on last quarter's call, despite a decline in populations from the state of California at our La Palma correctional center in Arizona and at our Tallahatchie County Correctional Facility in Mississippi, we've retained elevated staffing levels at these facilities in anticipation of a new contract awards from Puerto Rico or to utilize our available capacity under existing contracts. While we have not yet been awarded a contract from the government of Puerto Rico as we had hoped, we continue to remain optimistic about a new contract award. Because timing is difficult to predict, our guidance does not include this contract award. Puerto Rico notwithstanding occupancy increased La Palma from 80% in Q3 to 91% in Q4 an increase to Tallahatchie from 39% Q3 to 68% in…

Thank you, Dave. So before we turn it over for Q&A, I would like to take a moment to highlight some of the notable accomplishments of our reentry programs in 2018. Thanks to the dedication of course of a teachers, counselors, case managers, chaplains and other company professionals. In 2018 we were nearly able to get 6,500 offenders to receive their high school equivalency or career technical education certifications. Our Crowley County Correctional Facility led the State of Colorado and GED completion for the second year in a row, our newly activated lay adjustment center in Kentucky we coordinated with the Department of Corrections to offer a 10-month online information and support services computer program to offenders. Upon completion, offenders will receive a base national Occupational Competency Testing Institute credential. Over 2,000 offenders completed evidence-based substance abuse recovery and treatment programs, a 10% increase from 2017, and finally, we expanded our Go Further reentry program from five to 13 CoreCivic facilities. This program supplements our facility of reentry programs by adding a proprietary cognitive behavioral curriculum and encourages staff and offenders to take a collaborative approach to assist in reentry preparations. This is only a small sample of the programming accomplishments achieved in course - facilities in 2018 and I am very proud of the real lasting impact these programs have for the men and women interested in our care. I invite you to look at the reentry section of our website which is constantly being updated with information, with information on and accomplishments of the programs and services we offer. Our commitment to reentry through these programs is making a difference in reducing recidivism in America. So with that, I'll turn it over to Travis to open it up for Q&A. Thank you.

Thank you. [Operator Instructions] First question comes from Tobey Sommer, SunTrust.

Thanks. Damon, I wonder if you could talk a little bit about CAR XIX and BOP inmate population forecasts both from an overall perspective as well as more specifically the criminal alien subset, what kind of signs are you seeing that CAR XIX the process is proceeding kind of behind the scene and then what's your expectation for both of those populations and the trajectory this year and then next?

Very good. Tobey, thank you very much. So a couple of answers there, let me first say, with the government shutdown, it did slowdown some of that kind of regular communication we have with BOP, notably, I think I've shared with you that the [technical difficulty] to their credit made twice a year meet with the industry at ACA Conferences to give a full forecast of populations, but also budget and then our procurement activity along with some kind of shared interest on kind of operational changes or merging issues within the facility. So with ACA, it happened right in the middle of the government shutdown. So during ACA, BOP didn't actually have any officials there. So we missed our kind of early year report that we usually get from the BOP. So, I hear that the last data point we had with a BOP kind of formally as the communication industry was going into fiscal year 2019, they expected a continued kind of decline in populations through their first part of the year, kind of bottom out and then it starts to increase towards the end of the fiscal year of 2019. And if you look at the numbers, kind of the most recent numbers that appears to be pretty accurate, if you look at kind of the - in first couple months into this fiscal year, as the data appears to be pretty accurate based on the kind of last forecast they gave to the industry. But I guess more informally also we talked to the BOP on a regular basis. We do know that with the first step back and also some of the activity around the implementation of the budget, we do know that they're kind of working behind the scenes to kind of get a full and accurate kind of forecast for the rest of this year. So, I think in the coming days and weeks especially with the government shutdown in this week with the present day holiday we'll get probably a little more clarity of kind of how to think in the rest of the year. I guess the final part of your question was back or 2019, we did hear late last week that you're still indicating an award on the procurement in the second quarter, so we're thinking probably April, May of this year. Don't know, anything to add to that, Dave?

That's right. Yes.

And if you could refresh me on CAR XIX, I know you have a - one of your facilities up for week and completed part of that, of the total procurement how much of it represents sort of incremental capacity in potentially new contracts for the industry essentially?

Yes, I think make sure I get the math here right, David, but I think yes, if you look at 9,500 of beds of that total Adams County is part of a re-bid of that total, so if you subtract that, which would be about 2,000, 2,200 beds then I'd say that kind of the net increase for the industry will be about 7,000 right. Is that about right, Dave?

Yes. And there are couple contracts that are under extension that could use about 5,000 of those beds that could be awarded under…

-- under short-term agreement. I think we can get long-term agreement yes, that's…

Under CAR XIX, yes.

Yes, so let me restate that last point, Tobey, because this is an important one but there are a couple of agreements in place today. Very short term in nature that bureau is using, it could be the case where they get awarded a new contract on CAR XIX that could be out there for a longer term, so that obviously could impact the net increase of the industry in to the company.

Okay. Thank you for that clarification. And then with respect to your comment on the U.S. Marshals population kind of thinking that, that might be rising continuing to rise this year. How do we think about the relationship and the timing difference between U.S. Marshals populations rising and a later effect on BOP population?

Yes, good question, and it's not precise, but you would have, if, if you ask the bureau and the marshals too of course. I think they would generally say a kind of like six month to 12 month lag. So from the time you start to see a, a meaningful increase in marshal population as they go through the court process through the various federal districts around the country, it's usually six months to 12 months, it could be a little longer again depending kind of the location and the kind of complexity of the individual cases obviously, but that's probably a pretty good pretty good number. So I think if you see the increases that we talked about in 2018 Marshal Service and then you've got the bureau talking about kind of incremental demand that they hopefully will have satisfied through Core team that would be about 12 months maybe a little longer maybe about 18 months if you kind of start from the beginning of the increase with Marshal to the ultimate timing of when the BOP awards then activates those contracts. So anything add to that, David?

That's right, yes.

Okay. I'll just ask a couple more and I'll get back in the queue with respect to your, your better guidance for profit in 2019. How do you assess the, the dividend payout and kind of where you want that to be now that you are, you've got an upward trajectory in, in EBITDA?

Yes, so, great question. So actually timing wise tomorrow actually is our first of the year board meeting here in Nashville. Hence that will be our natural conversation that we will have with the board. So yes, now that guidance has been fully communicated to the market that will be a topic for the, agenda for the, the full board. So and I think it will be indicated that yes that's we talk about the dividend and I'll say every quarter but obviously give it a little more discussion as we get the full-year guidance out for the full-year and gives the board a kind of a full wholesome view of kind of all the dynamics throughout the company inter-forecast. Anything to add to that, David?

Yes, obviously Tobey, they look at a number of factors including trajectory of our cash flows or cash today FFO payout ratio we've guided to around an 80% AFFO payout ratio, leverage levels which we're, we're on the high end of the, of our leverage policy, and then opportunities to deploy capital into new investments so some of these factors lean toward a, a dividend increase such as the trajectory of our cash flow and the AFFO payout ratio. On the other hand we see a lot of opportunities full of capital in the, in two new investments with attractive risk adjusted returns that will further diversify our cash flow. So it's going to be a robust discussion I'm sure and we'll make an announcement following the, the meeting tomorrow.

Okay. Thank you. And then last question from me and I'll get back in the queue. Damon, could you may be of your idle facilities, which ones are the most desired as reflected by your customer conversations and not to say you don't like them all but which one may be the least desired?

Yes, good question. So let me kind of go from east to west here, so the two additional facilities we've got to say that Kentucky obviously, Kentucky would be the most interested in those. And I think the activity we've seen in the last 18 months with the new contract that lead and our effort to make sure we really had a great start up there and activation by all accounts and they feel really good about that. Then I think it positions us very well for incremental opportunity there inside of Kentucky. So I feel good about those opportunities within that state. And then going, going out west in Oklahoma then we've got the Diamond backs still, it's still vacant within, within Oklahoma just south, or excuse me, Northwest of Oklahoma City and Oklahoma continues to have challenges that you see from some of the recent press clips here in the last few months about kind of the need they have within their own department but also potential initial capacity. So we're going through a change with the new government or just got inaugurated here in the last 60-days. So we're educating him and his administration along with the department on kind of what the opportunity could be there within that state. But I also would say with that facility being located in the United States that is I think a great facility for solutions either from another out of state partner or a federal government. So I feel good about opportunities within that facility to provide some really great solutions if it's dealing with overcrowding or dealing with infrastructural issues or like there was a new opportunity like Puerto Rico that we talked about earlier that could be a great solution too. So, I feel good about that…

[Indiscernible] that's all.

Yes. So they keep me honest here, but yea I think I got all of them. So hopefully you give little more color.

Thanks very much. I'll get back in the queue.

Tobey, thank you.

[Operator Instructions] Our next question comes from Kevin McClure, Wells Fargo Securities.

Good morning. Thank you for taking the questions. So the border security bill that was just passed provided more funding on average for detention beds. I'm curious your thoughts on where you see ICE deploying that capacity. Alternatively, they also have an RFI out there for up to 3,000 beds they issued about two years ago, I'm wondering if the enhanced funding prompts them to kind of resurrect that RFI and turn it into RFP and where do you see those beds going.

Good morning. Thanks for your question. So the short answer is it's going to be a little bit of a wait and see on what ICE does. As you know, we just got signed last week and with the Presidents Day holiday this week, we really haven't gotten any kind of direction or thoughts from additional need from ICE here near term. But I think in the coming days or weeks that'll manifest itself I'm sure through conversations with the company and through maybe other form for the industry, but anything to add to that David?

No, we've got probably a couple thousand beds available for either U.S. Marshals or ICE. So we'll see I would expect that they would utilize existing contracts before they enter into new contracts. If that's the route they take, but we're positioned well with available capacity.

Okay. And then Puerto Rico, thanks for that color there, you maintained elevated staffing levels at Tallahatchie in anticipation of the contract. I'm wondering how much did - do you estimate that cost you in terms of just inefficiency during the quarter and how long would you be willing to continue with those staffing levels while you await a contract before you decide to look for other customers?

Dave and I are tag team on this. So I'll have Dave kind of answer for your question then I'll give you a little more color on Puerto Rico itself.

Yes, I guess I'd say we did maintain elevated staffing levels in the third quarter as well we announced that we're going to maintain higher staffing levels in the fourth quarter for either the Government of Puerto Rico or utilization of existing contracts and I think that turned out to be a smart decision because we're able to accommodate additional federal populations not only at Tallahatchie, but Tallahatchie in La Palma as well. So we're in the same situation today. We're able to utilize staff at those facilities. Sometimes we transfer staff to other facilities if there's not a need at that facility and we have a need at another facility that's one of the benefits we provide as we provide flexible staffing solutions as well. But sitting here today I wouldn't say where we have excessive staff going into 2019 in the first quarter here because of the increases in populations that we've seen from the federal government at, at both those facilities.

And I'll just add I was down in San Juan recently and met with the team that we've got working on the island for this solution. And I walked away kind of incrementally more encouraged about the opportunities provide a solution to Puerto Rico, it's clear that the, the challenges continue and persist which is the fiscal situation and also some of these facilities are just really challenged from a fiscal plan perspective. So as I've kind of went around San Juan and met with various stakeholders the message was clear that our solution is providing safe humane with a very robust program solution to Puerto Rico was very attractive to all stakeholders. And I think kind of near-term what the Commonwealth is doing is just putting a little more clarity on exactly what they would do on kind of the back end for consolidation of facilities on the island for inmates that are vacating that capacity and move into the course of the facility. So more to come on that front, but it's clear that conditions continue persist on an island and our solutions are broadly accepted and very much supported by various stakeholders.

And one final point on that Kevin, if we do get that contract award depending on how many inmates they want to send to the mainland and, and how quickly we could need additional staff and we've offered the government of Puerto Rico that we would be happy to take some of the staff that they currently are using in Puerto Rico since they are obviously familiar with population.

Got it, okay. Thank you. California, so they're down to one facility now La Palma got 90% occupied. Just how curious is, they have first right of refusal to use that facility. Can you remind me how many beds they can, they theoretically have a claim on? And the reason I ask is, is they say populations don't decline as quickly as they forecast and at the same time you have growth or demand from federal customers. Can the federal customers supersede California, that they communicated desire to drawdown their population or do they have a claim on a certain number of beds?

I'd say they have a contract that expires in June. Right now their budget calls for them to reduce their population completely by the end of June and that would be a conversation we have. I don't think we'd get into a spat over who has claimed to which bed. They've been a very good partner as we worked with them over the years. And know transferring populations in some cases to different facilities. And so, that's a conversation we'd have at appropriate time, but right now we're planning - they've reduced from 2,000 to 1,600 as of yesterday. It looks like they're going to exit that facility by the end of June, if they don't, we're there for them. We will not abandon them and we'll work with them as well as the federal partners. As I mentioned we've got capacity at other facilities even in Arizona where the California population resides today, so we'd be able to work, we believe we'd be able to work with both partners in order to satisfy any demand that's needed.

Yes. And let me just add. It's a great question. Let me just add, we look at kind of the trends within the state of California and their most recent report indicates that they are at a 133.9% within their facilities in the state of California. And so it does give you a number that means there are about 3,000 vacant beds below the cap, which is also important number for them to kind of keep an eye on, because obviously they don't want to make sure they're well below that cap. So, and I think if you also go back, I was looking at this yesterday if you go back to August of last year the weekly reports for populations I think of all those weeks since August 1 to today or this week, they've only increase it I think three weeks out of that whole period, so most of the weeks are showing a week-over-week decline. So all indications is they'll be out by June. Obviously [indiscernible] issue that may arise in California, but I think the trend is pretty clear that they probably are going to be out by the end of second quarter.

Okay. Thank you. Final question for me and then I'll hop back in the queue. Any thoughts on your 2020 notes taking them out early, take some of the refi risk off the table or are you kind of content to address them next year? Thank you.

Yes. That's something on the forefront of my mind, Kevin. Obviously those $325 million mature in April of 2020. They do have a make whole through December 31 I believe it is of this year. Bond market is improving, but probably not at a place where we'd be interested in doing something opportunistically at this point. We've got few quarters yet before we need to pull the trigger on that. I think another avenue at least more likely depending on where bond markets go between now and the end of the year, we've got the $350 million accordion on our credit facility so we could execute term loan either term loan A or term loan B. So that would be the back-up plan or the number one plan depending on where the bond market, if the bond markets not there, I'd expect we'd be looking at a term loan.

Got it. Thank you for the time.

Thank you.

[Operator Instructions] We have no further questions in the queue at this time.

Thank you very much, and to our investors we're very grateful for your investment. We're excited by the important work that we're doing in our facilities. We are making obviously big, big impacts and the people are interested in our care. So we're grateful for your investment, so we can make those changes in people's lives. So we will have another call in May and give you an update on our, our results for the first part of the year. Thank you so much. Have a good day.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.