Cameron Hopewell - Managing Director of IR Damon Hininger - President and CEO David Garfinkle - CFO.

Michael Kodesch - Canaccord Genuity Tobey Sommer - SunTrust Kevin Mcveigh - Deutsche Bank.

Good Morning. My name is Rachel, and I will be your conference operator. As a reminder, this call is being recorded. At this time, I’d like to welcome you to the CoreCivic’s First Quarter 2017 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 instruction] Thank you. I would now like to turn the call over to Cameron Hopewell, CoreCivic’s Managing Director of Investor Relations. Mr. Hopewell, you may now begin your conference..

Thanks, Rachel. 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 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 first quarter 2017 earnings release and in our Securities and Exchange Commission 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. This call will include a discussion of non-GAAP measures.

A reconciliation of the most comparable GAAP measurements is provided in our corresponding earnings release, and included in the supplemental financial data on the Investors page of our website that you can find at www.Corecivic.com/investors. With that, it’s my pleasure to turn the call over to our President and CEO, Damon Hininger..

Thank you, Cameron, and good morning and thank you to everyone for joining our call today. Also joining us here in the room is Vice President of Finance, Brian Hammonds.

2017 has been off to an extremely fast start due to a multiple opportunities that we have seen to revise solutions for our government partners across each of our free line of business.

Like most of you we have closely followed the developments with the transition of the new administration at the federal level which will continue over the next few months as numerous leadership appointments remain unconfirmed.

At the same time we have also been busy marketing our unique and cost effective real estate solutions in perusing opportunities with all levels of government. Year-to-date we have been actively engaged with opportunities representing well over billion dollars and new real estate development projects.

Not all of these are likely to come to fruition but we believe that magnitude speaks to the positive market response to the Corecivic plan and the diverse range of solution we bring to the table. Our financial performance in the first quarter was strong compared with our initial forecast provided in early February.

We generated adjusted diluted earnings per share $0.43 and normalized funds from operation per diluted share of $0.63 exceeding the high end of our guidance by $0.04 and $0.05 per share respectively.

Dave will walk you through all the details leading to our performance in the quarter but more generally we are official managed operations and expenses across our entire facility portfolio and overall utilization was modestly better than our previous forecast.

Our forecast for the balance of the year has various puts and takes from our previous financial guidance some of which I will highlight. Importantly our guidance also does not include any additional new contracts or accretive acquisitions of which however, we see the potential for multiple throughout the year.

In recent quarters we have discussed increasing at the state level and shortly following the close of the first quarter we contracted with the state of Ohio to house up to 996 offenders at our Northeast Ohio Correctional Center on behalf of the Ohio department of rehabilitation and correction.

On our last call I mentioned the availability of capacity at our Northeast Ohio correctional center and the state need for additional correctional capacity given their system was operating in access of 130% of design capacity, we are very proud of the high quality service our staff at the Lake Erie correctional institutional has provided over the last five years which has provided us this opportunity to expand our partnering with the state to a second facility and we look forward to commitment the admitted contract in July.

We continue to actively pursue additional opportunities most notably in Oklahoma and Kentucky as well as other states that are not publicly disclosed.

Including the new contract with the state Ohio we have the potential to observe over 8,000 beds or more than 10% of our total company owned beds and 2017 with new contracts with state customers in both ideal and active facilities.

Additionally, we continue to see meaningful progress promoting new real estate solutions offered by Corecivic properties with more states considering a privately financed solution to address their aging prison infrastructure.

In the last few months five states have publicly disclosed that they are considering their public private partnership approach to replace outdated prison capacity that would result in the long term lease of the new real estate solutions from the private sectors.

Alabama, Kansas, Vermont, Wisconsin, and Waiome have acknowledged their interest and evaluated such a solution.

In these entities Corecivic was designed financed and constructed state of the art correctional facility to the exact specifications of the state partner to replace inefficient and outdated government owned facilities and upon completion of construction we would commence a lease agreement with the state that would continue to provide the operations at the new facility.

These kind of transactions allow government to, one avoid copy and binding capacity and spending hundreds of millions of dollar from the taxpayers to replace their prison infrastructure.

Second, shift the risk of keeping a large scale prison construction project on time and on budget which has been a consistent problem with government directed prison construction projects through a lease agreement negotiated prior to the construction of the facility.

Third, avoid spending any taxpayer money until the facility construction is complete and the certificate of occupancy is obtained.

Fourth, generate day-to-day operational cost savings from operating at modern efficient facility and shift the responsibility of maintaining to Corecivic allowing for a comprehensive facility maintenance program that is no longer impacted by year-to-year budget constraints which often result in significant deferred maintenance on government owned facilities.

This is all the while the state maintained complete operation control of the facility. We believe these types of transactions offer a compelling value to government looking for solutions across a broad spectrum of property types and we will continue to cultivate and persuade these opportunities.

In addition to the publicly disclosed opportunities we are actively engaged in discussions with a number of other state and local governments who are interested in similar solutions. Our confident in the growth potential for Corecivic properties continues to increase as we engage with more potential partners.

During the first quarter our state occupancy rates were largely consistent with the fourth quarter of 2016 aside from modest increases in our two Colorado correctional facilities due to underlying population growth the state has recently experienced and an increase from Hawaii at our Saguaro correctional facility as the state is rebate in the housing unit as [indiscernible] correctional facility and needed to relocate populations during this construction.

The [indiscernible] increases were partially offset by reduction in the number of California offender house in our two facilities outside the state. If you recall in January of this year the government of California released initial budget proposal for fiscal year 2018 beginning on July 1 of 2017.

The Governor expected the new regulations resulting from proposition 57 to be implemented this year and allow the state to remove all offenders from one of the two remaining outer state facilities.

We have worked closely with CDCR as they begin to gradually drawdown population at our 2,600 bed Tallahatchie County Correctional facility Mississippi during the first quarter and focused on facilitating outer state population to more optimally occupy our 3000 bed La Palma Correctional Center in Arizona.

Today, we are housing approximately 3000 inmates at the La Palma facility and approximately 1300 offender at the Tallahatchie County facility. We have identified multiple potential partners that have interest in available capacity at Tallahatchie County facility and will provide updates in the future on these marketing efforts.

We are also closely watching the trend in the state overall correctional population which in recent math have grown more quickly than the last projection issued by the state.

Later this month the Governor will release the mayor revision of his fiscal 2018 budget proposal which will provide us with an updated view of the state expected utilization of the outer state capacity.

On a year-over-year basis our state level performance was positively impacted by the full utilization of our 2552 bed Trousdale Turner correctional facility in Tennessee during the first quarter of 2017 versus the facility beginning its operational ramp in the first quarter of 2016.

The current quarter also benefited from the ramp of our newly extended 2024 bed Red Rock correctional center which begin in the middle of 2016. Both capital projects were completed on time and on budget. Moving next to discuss the only competitive rebid outstanding with a state customer.

During the third quarter of 2016 the Texas department of criminal justice or TDCJ solicited proposals for the rebid of four state jail facilities we current manage for the state. The current manage only contracts for these four facilities are scheduled to expire August of 2017.

The four manage only facilities have a total capacity of approximately 5000 beds and facility level net operating results were approximately breakeven during the three months of 2017.

On March 31, the TDCJ notified us that in light of the current economic climate as well as the fiscal constraints and budget outlook for the TDCJ for the upcoming fiscal year they would not be worrying the contract for the Bartlett State Jail.

One of the facilities included in the mentioned rebid but instead they have decided to close as manage only facility. We are in the process of working with TDCJ to help ensure a successful conclusion of operations at Bartlett and continue to wait a decision regarding the remaining three facilities.

In summary we have experienced very robust activity at the state and local levels both in terms of new contract awards favorably impacting first quarter results as well as promising potential new opportunities. The remainder of my comments will focus on recent developments at the federal level.

I will touch on recent budget developments and provide an update on our outlook with immigration and customer enforcement the federal bureau prisons and the United States marshal service. Congress had until tomorrow evening May 5 to provide or to pass a bill to fund the federal government through September 30, 2017.

Over the weekend it appears that Congress came to an agreement on the fiscal year 2017 package that would fund the remaining 11 appropriation bills through the end of the fiscal year.

I will describe later in more detail but this package will give updated funding levels and policy guidance for all federal agencies including those agencies who we do business with. We expect the Congress pass and the President to sign on to this bill before the end of the day on the 5th.

The highlights in this package for immigrations and customs enforcement include $6.4 billion for ICE which is $550 million over FY 2016 enacted levels, $3.7 billion for retention and removal programs.

Within this amount the bill provides ICE with the funding necessary to maintain an average of 39,324 retention beds over the fiscal year 2017 an increase of 5324 detention bed and nearly 50% over the previous fiscal year. There are multiple factors that could lead ICE for additional capacity.

However, the current trends and data reported by ICE appear to suggest additional needs may not be required immediately. The latest data on total apprehensions by the U.S. custom and border protection along the southwest border declined substantially in February and March of 2017.

During this time we saw a modest decline in utilization in our ICE facilities consistent with our initial forecast provided in February which assumed utilization would not remain at the very high levels we experienced in the fourth quarter of 2016.

While there are typically seasonal declines in illegal border crossings and apprehension in January and February the decline experienced this year were larger than historical norms and the declines continued into March.

Leadership at DHS has attributed to the declines of the implementation of new policies and executive orders issued by the new administration which have resulted in fewer attempts to illegally cross along the Southwest border.

The number of illegal crossings typically increased in the spring and summer so we could see the trends experienced early in 2017 begin to reverse.

Given how quickly the rate of apprehensions can change along the Southwest border this tends to have quickest impact on the capacity needs of ICE and could drive a need for the flexibility of additional capacity assuming sufficient funds are available.

The Attorney General recently announced a renewed commitment by the Department of Justice to pursue criminal immigration enforcement and structured all federal prosecutors to prioritize immigration related offenses for prosecution.

Border patrol agents have also been instructed to no longer release individuals apprehended illegal crossing the border into the interior of the country commonly referred to as catch and release a policy that has been keenly been used in the past.

While we wait to see how these policies will be implemented they would appear likely to increase the detention capacity needs for ICE over the medium to long term. An additional factor that will impact the long term needs for ICE is the rate of apprehensions within the interior of the country.

Interior enforcement under the new administration has been focused of many media reports. The number of ICE arrest in the interior of the country from January through mid March 2017 increased approximately 33% over the same period in 2016.

The administration has indicated a desire to hire approximately 10,000 new ICE agents in order to increase the agency resources for enforcing immigration law but doing so will require additional funding from Congress.

Assuming additional funding is granted, it would also take multiple years to screen, hire and train that many additional agents unless current hiring policy is significantly streamlined so we believe that meaningful increase in interior enforcement will take the agency sometime.

All of these factors lend to our continue belief that ICE may have many needs that warrant expanding our partnership over the long term. We have successfully worked with ICE and its predecessor agency INS for 34 years and we believe our record of providing high quality operations and need to flexibility will position us well as new needs arise.

Speaking of our longstanding partnership last month we announced a one year extension of our contract with ICE that are 1,000 beds Huston processing center a contract dating back to 1984.

The extension period will allow sufficient time to negotiate a long term contractual agreement potentially through an inner growth governmental service agreement with a local municipality. The facility is ideally located near the Southern border and is in close proximity to the ICE Huston field office.

We believe ICE will continue to have significant demand for the facility over the long term and we are proud of the confidence that ICE has placed in Corecivic throughout the 34 years of operations at the Huston processing center.

With respect to the fiscal year 2017 Armless agreement funding for the BOP will remain relatively stable with no meaningful changes to its typical funding levels.

The highlights in this package for the bureau prisons include language in the agreement that requires BOP to develop and submit a capacity realignment plan no later than 90 days after enactment of the fiscal year 2017 Armless act.

However the bureau’s overall center population still sits near 189,000 or approximately 28,000 below its peak from three years ago. To that end on April 30, 2017 our contract with the federal bureau prison and our 1422 bed Eden detention center expires.

Our contracted Eden was part of the CAR 16 rebid which was a competitive rebid of 10800 beds provided by the private sector to the BOP in the state of Texas.

There still has not been a formal award announcement but the bureau has indicated that it will ultimately only award [36,000] beds as part of the procurement and we are here and it can awarded any day now.

However, two weeks ago the BOP issued free solicitation notice for CAR 19 which is for the management and operation of privately owned correctional facilities for up to 9,540 beds with each facility having between 1,200 and 1,800 beds. The formal RFP expected to be released on May 24 and responses are due on July 24.

The free solicitation did not stay when contract awards will be announced or when contract performance would commence, however we are encouraged with the Bureau’s decision to continue to partner with the private sector to meet its system wide needs.

Between CAR 16 and CAR 19 the Bureau would add a minimum return utilization of private sector beds to similar levels as part of the [DAG] memo from last August. We are disappointed with the decision to allow our contract to expire, but we do know the facility will be highly competitive option for the penny CAR 19 solicitation.

We also believe that Eden facility would be attractive option for ICE given its location in the southern border should the demand for detention capacity materialize.

Looking finally at the United States marshals, the average daily detaining population in the first quarter of 2017 was relatively consistent in most districts except for declines in the Arizona and Texas districts primarily due to a lower number of prosecutions related to immigration offenses.

With respect to the FY 17 autonomous agreement funding for United States Marshal service would remain relatively stable with no meaningful changes to its typical funding levels.

The recent changes to prioritize prosecution for immigration related offenses announced by the Attorney General which I mentioned earlier may lead to increases in average daily detaining populations over the medium to long term, particularly in districts along the southern border, but the reduced utilization areas did provide for a modest headwind because we provide approximately 4,100 beds to the marshals that are operations in Arizona.

We have updated our 2017 guidance to reflect this short term reduction in utilization of our marshal service in Arizona as David will explain in greater detail shortly. In the long run the Marshals will be impacted by the resources available to and the enforcement priorities of the Department of Justice.

The DoJ has many steps remaining in the transition and the new administration as the President and the Attorney General have many outstanding deployments yet to be announced or confirmed by the Senate including numerous United States attorneys, directors for the Bureau of Prisons and United States Marshal Service along with many other key positions.

As such the transition of new administration will continue for some time. However, we believe our value proposition and operational track record positions us well should the Marshals have additional capacities overtime. I would like to close with an update on our pipeline of acquisition targets in the residential reentry market.

In the first quarter, we completed two small acquisitions for a total $7 million a135 bed facility in Colorado and 100 bed facility in California both complementing our existing portfolio of reentry facilities in those respective states.

We continue to cultivate and pursue attractive acquisition targets in the residential reentry market that will complement our existing portfolio and the accretive on an FFO per share basis.

The pipeline is robust as it has been since we began our strategic growth initiative in this space four years ago and we expect to continue a cadence of closing approximately one acquisition per quarter with valuations ranging from $5 million to $50 million.

With that I would like to turn the call over Dave to review our first quarter 2017 financial results and provide additional details on our updated full year 2017 financial guidance.

Dave?.

Thank you, Damon, and good morning, everyone. In the first quarter, we generated $0.42 of EPS and $0.43 of adjusted EPS compared to our guidance range of $0.37 to $0.39 and $0.05 ahead of consensus estimates. Normalized FFO totaled $0.63 per share compared to our guidance range of $0.57 to $0.58 and $0.06 ahead of consensus estimates.

AFFO totaled $0.62 per share ahead of our prior guidance range of $0.55 to $0.56 and $0.07 ahead of consensus estimates. Our per share result exceeded our forecast as revenues and operating expenses were both better than anticipated by above equal amounts in our internal model.

As you may recall from our comments last quarter we did not expect the elevated population levels from immigration and customs enforcement experienced during the fourth quarter of 2016 to be sustainable and therefore our population projections in the first quarter were lower than the fourth quarter.

Our federal population levels did in fact declined during the first quarter. They did not decline at the pace we had projected. Operating expenses were also lower than forecasted as expense controls the chief during the fourth quarter were again realized in the first quarter.

AFFO per share further exceeded expectations by more than EPS and FFO per share because maintenance capital expenditures on real estate were $2.1 million lower than expected. Maintenance capital expenditures can fluctuate from quarter to quarter although they are typically lowest in the first quarter.

We have maintained our annual guidance for maintenance CapEx on real estate so we expect the outsized AFFO performance in the first quarter relative to EPS and FFO to contract in future quarters. Adjusted EPS of $0.43 was 7.5% higher than the prior year quarter of $0.40 while normalized FFO per share increased by 5% from the prior year quarter.

This earnings per share growth was generated from the successful execution of numerous business and strategic development activities within each of the three Corecivic branded government solutions.

Growth in Corecivic safety included a full quarter under a new contract with the state of Tennessee at our Trousdale Turner correctional facility activated in January 2016 a new contract with the state of Arizona at our newly expended Red Rock correctional center completed in January 2017 and higher average daily populations from ICE across multiple facilities when compared with the prior year quarter.

Growth in Corecivic community included four acquisitions totaling $50 million for ten residential reentry centers from the beginning of 2016 through the end of the first quarter of 2017 included two small acquisitions during the first quarter for $7.1 million.

Growth in Corecivic properties included the execution of new lease with the state of Oklahoma at our North Fork correctional center affected in May 2016.

The positive impact of these transactions was partially offset by the previously disclosed renegotiation and extension of the contract for the South Texas family residential center which took effect in early November 2016 and a reduction in California population.

Our balance sheet remains strong with leverage of 3.3 times and fixed charge coverage of 6.7 times using the trailing 12 months. We calculate leverage by dividing our total principle debt outstanding net of cash by adjusted EBITDA.

Based on our updated guidance for 2017 which doesn't not assume EBITDA from any new contracts M&A activity or the impact on leverage for any capital market transactions our total leverage picks at 3.6 times.

On March 31 we had $43 million of cash in hand and 468 million of availability on our $900 million revolving bank credit facility and no debt maturities until 2020.

We have no material capital commitments and are in excellent position to grow our cash flows in the current environment through the utilization of ideal bed capacity and have the flexibility to take advantage of M&A and other growth opportunities that require capital deployment. Moving next to discussion of our guidance.

As indicated in the press release adjusted EPS guidance for the second quarter of 2017 is in the range of $0.35 to $0.36, normalized FFO per share guidance for the second quarter is $0.54 and $0.55 while AFFO per share guidance is in range of $0.52 to $0.53.

For the full year adjusted EPS guidance in the range of $1.50 to $1.56 up from $1.46 to $1.54 from our prior guidance. Full year normalized FFO per share guidance is in range of $2.27 to $2.33 and adds up from $2.22 to $2.30 from our prior guidance.

And full year AFFO per share guidance is $2.18 to $2.24 compared with $2.13 to $2.21 in our prior guidance.

The increase in our annual 2017 guidance reflects the key 1B and other business and operational improvements extending through the year partially offset by startup expenses and a measured ramp of Ohio inmates under the new contract with the state of Ohio.

Our guidance is also tempered by lower federal populations and inmates from the state of California compared with our previous forecast. There are a number of factors to note when cross walking Q1 actual results to Q2 guidance in the rest of the year.

First as Damon discussed apprehensions on the Southwest border were substantially lower late in the first quarter which continued in April.

This population in our facilities typically follow the national trend, our forecast contemplates the continuation of these low levels of ICE and marshal populations in the second quarter gradually returning to more normal levels during the second half of the year.

This reduction not only affects the cross walk from Q1 to Q2 but also had a negative impact in our prior guidance as I previously mentioned.

Although we were directionally accurate in projecting the decline in ICE and Marshal populations during the peak winter months in the first quarter it is particularly difficult to estimate how immigration and detention activity will be affected by policies of the current administration even though congress has agreed on funding for the current fiscal year.

A range of population assumptions has been incorporated into our guidance. Next during April we announced that we contracted with the state of Ohio for up to 996 offenders to be cared for at our Northeast Ohio correctional center.

We do not expect to begin the ramp until July but have already begun hiring and preparing staff to receive the offenders in July with full contract utilization not accepted to be completed until beginning of the first quarter 2018.

This new contract negatively impacts the second quarter compared to the first quarter by $0.02 by startup expenses which is included in our updated guidance. We expect this new contract to generate approximately $0.05 per share in 2018.

Finally and partially offsetting these negatively fluctuations from Q1 to Q2 as you may recall from the prior discussion Q1 is seasonally weaker because approximately 75% of our unemployment taxes are incurred during the first quarter resulting in a $0.02 per share increase from Q1 to Q2 or lower unemployment tax expense in Q2 relative to Q1.

This has always been in our forecast and therefore has no impact on our previous guidance. Our 2017 guidance includes $0.05 per share net of interest expense generated from the four acquisitions of ten residential reentry centers we have completed over the past 12 months which essentially remains unchanged from our previous guidance.

Although, we continue to pursue a number of attractive investment opportunities specifically in the reentry space, but there are accretive to earnings in FFO per share using our long term weighted average cost capital, our guidance does not include any new M&A activity.

The magnitude and timing of our M&A activities is difficult to predict and therefore we will update our guidance on a quarterly basis if and when we successfully complete such transactions.

Further we have been engaged in active discussions with potential customers at both the Federal and state level to utilize our Eden facilities and available capacity. The execution of the agreement with the state of Ohio is a good example.

However, our guidance did not include any new contract awards beyond those previously announced as the timing and government actions and new contract is always difficult to predict. Any new contract awards could also come with additional start-up costs that are not included in our guidance either.

The adjusted EBITDA guidance in our press release which was increased by $5.2 million at the mind point compared with our prior guidance enables you to calculate our estimated effective income tax rate of 5% to 6%, and provides you with our estimate of total depreciation and interest expense for the second quarter and full year of 2017.

We expect G&A expenses to be between 5.5% and 5.75% quarter percent of total revenue for each period. I will now turn the call back to Rachel to open up the lines for questions..

Thank you [Operator Instructions]. And we will take our first question from Michael Kodesch with Canaccord Genuity..

Hey, good morning guys and thanks for taking my questions, very comprehensive prepared remarks there.

Just starting with Eden, I guess, I want to kind of ask a little bit about how you guys are approaching that and maybe what you are hearing from the BOP in terms of bidding that in the CAR 19, it seems little awkward for them to let the contract expire and then month or two later consider turning this facility back on so, I mean do you think that are you talking that up to government’s inefficiency or is that more of you guys focusing more on perusing an ICE contract there? Thanks..

Michael, great question.

This is Damon and let me tackle that one I think it’s more the change in administration and the priorities of the new administration, so you are right, it does quite make sense when you think about you got a facility like Eden and other facilities in the CAR 16, let them expire and then potentially re-contract with them in the CAR 19.

But one thing we heard from the bureau is that under CAR 16 they were really they are at the one yard line on awarding those contracts as we understand it.

And so, if they step back and kind of re-advertise that took it up 10,800 beds by their own estimate they would probably take a year to kind of re-go through that process, re-advertise it, get right proposals and then award but their view is just go ahead and put a bow on CAR 16 we have already got it basically finalize with 3600 beds but with that I think it's no coincident that when they are getting close to the bed earlier we think could be any day now and award a CAR 16 we think it's no coincidence that they have advertised for 9500 beds to CAR 19, so I think that was a sign for both only the operators like us but also local communities.

[Technical Difficulty] on additional capacity so today’s point they can go into 18 and secure these beds and probably refine from a capacity perspective. The other thing is another leading indicator which I alluded to my comments is U.S. attorneys so there are lot of U.S.

attorney vacancies around the country and so if you don't have the prosecutors of course that's going to affect the prosecutions. So I know the bureau is looking at kind of those two numbers both on vacancies and U.S.

attorneys’ numbers but also marshal numbers but also again indicating they need additional beds but they probably wait a little while and award CAR 19 a little further down the road..

Great. That's really helpful color. I guess just one more question on CAR 19, we saw that come out and it expanded in overall I guess, procurement 13000 beds I notice that your Adams facility is up for renewal I think in July it's got one year renewal I think extension on it.

Is that have you guys sort of that's being rebid into the CAR 19 contract so you essentially get us back to the original allotment?.

We have not heard that formally. We are watching that closely but yes we do have an extension period on that we do understand that likely will come to pass, we will do the extension but as it relates to the CAR 19 or other procurement we don't know anything formally..

Alright. Fair enough. I guess moving on to your community acquisitions and your pipeline there.

Are you guys seeing any other big portfolios out in the market I mean anything like center point I think CEC was kind of the last big well that got taken out but are you guys seeing any other portfolios there?.

Yes Michael there really are not a lot of large portfolios out there, CEC was obviously the largest our acquisition [Adlon] in the 15 was probably the second largest corrections provider in the country and as you know it's a very fragmented market full of very small operators up and non-profits the real estate mayor may not be owned and operated by the same entity.

So, it is a really a rollup strategy and it's identifying sourcing those opportunities trying to find out which ones are interested in selling.

So unfortunately there is not a lot of large portfolios to acquire but the ones we are finding, we are finding very attractive and very accretive even though they are small dollar amounts and our efforts to try to consolidate and acquire as many as we can at the attractive prices..

Thanks. Yes. Okay. And then just one last one for I have to ask question about ICE, of your idle capacity out there I think you have got a couple of kind of a long Southern border there and with the Eden obviously back there that could make a lot of sense too.

But which facilities do you think make the most sense from ICE’s perspective?.

Yes we have got facilities from Kentucky to Colorado that are either partially [indiscernible] or complete vacant today.

So let me first talk about the facilities that we don't think would probably make a lot of sense for ICE just because we have got line of sight near term of some opportunities and that is there are three facilities in Kentucky so we think we are really good shape potentially utilization if one, if not all three facilities there with the state of Kentucky based underneath and also their growth and then also we continue to hear rate interest from the state Oklahoma about our Diamondback facilities so those two states collectively vacant capacity is about 4500 beds so we feel like we are good line of sight with those two partners in those two respective states.

But with that we don't think those are really in line for ICE opportunities.

But we think in addition to Eden and also some incremental capacity we have got in Arizona we think the capacity we have got in Tallahatchie could be of interest to ICE especially with the close location to [Memphis] which is big hub and then also our facility up in Minnesota which is the priory so we are hearing that as I mentioned earlier with the increase prioritization of interior enforcement that in your path there has been more kind of interest in demand for bed in the Southwest border they actually could be some interest on capacity and key locations either we have got lot resources with -- like Memphis or also some activity they have got on the Northern border so we think those two facilities would be notable in addition to what we have got on Southwest border for ICE..

Great, just one last quick one because you mentioned and I will hop back in the queue but on Minnesota you mentioned you guys are probably looking at ICE there have you guys kind of abandon the thought of going with the state there.

I know the state was kind of pursuing it but back and forth in the assembly?.

Absolutely not, Minnesota we think could make a lot of sense for that facility, it’s a new modern facility into state that has had some growth and overcrowding and it’s got some backup the population and local jail, so working into that conversation, so we have got a kind of multipath approach for a solution there at the priory, so we think it’s visible to eyes, so we also think it make a lot of sense for the state of Minnesota..

Great. It’s very helpful. I will jump back in the queue. Thanks..

Thank you Michael..

And next we will move to Tobey Sommer with SunTrust..

Thanks. I was hoping that you could comment a little bit further about two kind of divergent trends, one is the current population trends at ICE coming down from winter activity and the expectation that demand and contracting to support future needs is going to drive growth.

How do we kind of see that on fully, how long does it take to get to the actual new contract announcements do you think?.

Yes, great question. So, sitting here today Tobey and this is Damon I think that it’s notable, very notable that ICE got approval for funding for over 39,000 beds and we were doing a lot of homework on this yesterday, but it’s been about eight maybe nine years that ICE has got in this amount of increase year-over-year in funding.

So, we think increase of 15% or about 5,000 beds is really notable, so I think that shows one kind of expectation and there what the need is and also support they have got from congress.

The second to your question about contracts so, we have got some contract already with ICE today that are underutilized, so part of that capacity growth we think is not necessarily new contract, but just more optimization over increased civilization at the existing contract with ICE and our sense is with others either at a local level or some of our peers within the industry that’s part of the case too where they’ve got contracts already in place but just have opportunity of drive more capacity under those existing contract vehicles.

So new contracts we think could be triggered by the new funding for fiscal year 2018 and we’ve kind of heard numbers kind of all over the board on potential [indiscernible] utilization for the next fiscal which is going to start on October 01, but as we get closer to probably, probably September because August is going to be the recess for the congress as we get into September and kind of circle around and number for ICE then I think that’s where you can see potential activity on new contracts for increased utilization for ICE for the detention needs going to the new fiscal year..

Okay, thank you.

From a broad perspective you had a range of kind of customer behavior about near term either opportunities or maybe withdrawing a little bit of the demand new terms only come back to market later, I am curious about your appetite for capital deployment for new construction in what kind of conditions or terms you might need in that deployment to make you feel comfortable to kind of think this in action?.

Tobey, let me make sure I find your question.

Are you talking about specific customer or you are just talking about more generally about capital deployment?.

I thought I let you answer it generally if you, ICE seems to have the most kind of volatility ups and downs so I had them in mind but a general answer would suffice?.

Yes let me say generally then I will provide specific thoughts on ICE. But generally, if we have got a state like Georgia which we have had a great run way there was solutions what we provide in the state and we provided great solutions on the problematic side.

I said last quarter but I would love to say it again we had number one and number two in that state facility that had most GED completions in 2016 so we are very proud of our team in Georgia what they have done for that state.

But if Georgia came to market and said they needed a new facility and typically have done contracts for 20 – 25 years then yes we would be very aggressive on pursuing that opportunity and deploying capital for additional capacity either expanding facilities or building new facility.

So generally if you have got a partner either where we do business today or we feel good about kind of their long term needs and support of the private sector then yes we will be very aggressive on that front.

As it relates to ICE, the view we have had here in the last couple of months is that we have got vacant capacity in places like Minnesota or Tallahatchie that we are going to be very aggressive on providing great solutions that are very comprehensive and providing the solution to the mission for ICE.

So no capital deployment so that's a pretty straight forward answer.

But if it is a case where ICE came to us and said we want to facilitate or need expansion existed facility that would be a little longer conversation and we would want to understand kind of the long term need and then also with that get some of our risk mitigated through contract term either through compensation or length of term or potential fixed payment.

So that would be a little longer conversation with ICE that conversation gets a little bit easier as you heard me say recently, is that if it's an expansion out of facilities that we have got in [indiscernible] Arizona or I San Diego where the capital is probably pretty modest so we are just leveraging these operations then that's probably a little easier conversation but it will be a little longer conversation because again we would want to have a pretty good view of kind of long term demand for ICE if we had to deploy capital.

Anything to add to that David..

Obviously coming close to 10000 idle beds and idle facilities across the country we think we have got plenty of capacity to accommodate any demands from our federal partners. So there wouldn't be they are just conveniently located so we would need to deploy capital except for the circumstances in which Damon mentioned..

Okay and then [indiscernible] an increase and funding for beds I was curious if you could recall some sort of relationship between ICE’s populations and the populations in demand at the other two federal agencies and kind of the extent to which there is interplay in other words an increase in ICE activity impact the other two customers?.

That's a good question. Let me think about that for a minute. So we are doing little homework on ICE’s funding yesterday and as I recall it was really kind of 2008, 2009 fiscal years where you saw pretty meaningful increase year-over-year on ICE funding but thinking back about that time with Marshals and BOP.

BOP was growing they were growing up until 2013 so I could tell you how close and parallel they were in growth but there was growth there from 2009 to 2013 with the BOP and Marshal Service.

I want to say, I think we’re doing time two, I want to say 2006 and 2007 I think they saw a little bit of decline national wide but I want to say at same period of time.

So there is some linkage there and so it could be the case where you see the same thing here with this increased funding for ICE and as you know Tobey it's not universally the same time ICE might see utilization go pretty quickly whereas Marshal and BOP it's a little more gradual overtime..

Thank you. Just two questions from me. If you could elaborate on the real-estate only solutions and comment on your kind of prospect to get something done here in 2017 as well as give us an update on how ICE populations in the South Texas family facility? Thank you..

Absolutely. So let me tackle both of those.

So the first one we feel really good about the real-estate only solution I will tell you why we have had really two notable milestones here in the last couple of years so first of which is we made the trail on a lease with California and city facility and then last year did the lease with Oklahoma at our North Fork facility and both facilities have been great solutions in those two states.

One thing I didn’t appreciate when we got those solutions in place is that if there is a [boiler] that goes out or if there is a leak in the roof or you got the air conditioner goes out, we are there tomorrow fixing it.

And what I heard from leadership here recently in Oklahoma was one of their facilities and they had a boiler go out or had a leak in the roof, it may be weeks, months if not the next fiscal year until they can get that fixed.

So that’s one thing I didn’t really appreciate in this solution is that we are there tomorrow fixing whatever may happen either because of natural disaster or a system failure and as again a part of the overall kind of value proposition on these real estate only solutions. But the second milestone is we’re out today.

We’ve been talking about for sometime about how this could potentially be a great solution for states where we don’t have a footprint today but we are ready to go in and develop a new project to replace an [old equated] facility. So I think it’s really notable.

You got five states today talking publicly how the private sector could be a great solution in a respected state and what’s also notable is you got one state which is Kansas actually out in the market with a procurement.

And I’ve been with this company now 25 years this month and I’ll tell you one of the hardest things is for a jurisdiction to really go through the process, appreciate the value proposition and with that take the step for procurement.

So we think that’s really notable that you’ve got not only five states talking publicly but you’ve got one actually going up the market looking for proposals and we think that’s really notable.

So, the last part of your question on this point is we think very – we think there’s a very good chance so we could have one if not a couple of states that go ahead and get one across the finish line and actually accept one of these proposal for a solution to replace an old and equated facility.

Switching gears to your second question, we have seen just like with our other ICE facilities, we have seen a decline in our family population at our South Texas facility, so it’s kind of in the overall kind of seeing that ICE is shared with us and the leadership within DHS which is this has really been a unprecedented decline since March through their early summer months.

And so they are kind of categorizing the whole issue with family population with the overall detention population nationwide which is been a kind of unprecedented decline for a period of time as we come out of spring into early summer. Anything to add to those two points, David..

No, there’s nothing to add, thanks..

Thank you very much..

[Toby] thank you..

And next we move onto Kevin Mcveigh with Deutsche Bank..

Great, thanks for this very helpful context.

What type as you kind of think about development opportunities, twofold question, what type of returns are you thinking about in terms of relative to historical goals across the group and then even at some point can those developments lead to owned and managed in terms of a longer term opportunity, that’s my first question?.

Yes, so I mean I guess your last part to the first part of the question I guess you are saying.

So we think that the real estate owned solution really opens the playing field for more opportunities with other jurisdictions and so where you got a state like Wisconsin or [Indiscernible] that are talking publicly about private sector company and being in a real estate solution for replacement of old and [equated] facility we see that long term being just that.

We provide the real estate, they do the operation. And so we’ve been very clear on that, that our goal as we want to be very very respectful of what the wishes and desires are that jurisdiction long term.

So if they are very clear in the front and saying, hey this is all about we mean a road state solution, there will never be an opportunity to operate facility but we are very comfortable with that, and again with Cal City in California and Oklahoma that’s been the case in both solutions, make a license for those jurisdictions that we’ve been very very happy with the returns on those two projects.

So to your first part of your question is that on the returns, what we are thinking about is as we think about these development deals is that it will be a little lower than our historical returns which is being communicated to the market at 13% to 15% ROI or EBITDA return on capital deployment, we think it’s appropriate for us to go below that just because one, we don’t have the operational risk and some of the other risk that you have with the operation.

So we think that could be in high single digits on a return, but every situation, every deposit is going to be a little different, so it’s going to determine based on the project to sell the length of term, how comfortable we feel by the respected utilization of long term, that will be instructive on how we think about the appropriate return, but I think high single digits would be appropriate for real estate owned solution if not lower double digit..

Got it.

And then it sounds like you brought some additional capacity online, I mean is that just given how robust the federal opportunity is to give yourself more room as opposed to going back six months there was a lot opportunity both the state level maybe not as much as the Federal, is that just kind of the service in both aspects of the business given robustness at the federal level? Is that the best way to think about it, relative to because I know we are not building anything in terms of speculative from a longer term perspective, I know that there was build out an -- of demand this feels like it’s a little more near term in terms of those beds coming online?.

Yes, so make sure I’m following your question. Yes, we are definitely taking our foot off the pedal in any speculative capacity, so you will not be hearing us talking about that anything in the near term.

But I think if we see a meaningful absorption in places like Kentucky and Oklahoma and all the other opportunities that we have talked about will dilate that, so to be kind of a case by case either because we see sort of the May end at the federal level which sitting here today other than ICE it’s going to be a little bit of a wait and see, but at the state level if we see opportunities there then we’ll – with us appropriate.

Most of the state that we’ve done business with it’s when you – infact when you get a new facility and a new contract it could be the case where I should say simple conversation with us and they are going to say, we are at full utilization with your facility, here’s the five year forecast what the population needs and so maybe either we optimize or do a maybe a small expansion of the facility to help accommodate maybe some additional growth.

So I think about kind of the near term we’ve got a bunch of available beds, at appropriate locations we’ve got a lot of interest from ICE and other state partners.

So I think the only real capital deployment we would have in the near term outside of M&A on the re-entry side would be these real estate owned solutions that we talked about or maybe some potentially small expansion around the country that we have where we’ve got increased utilization within existing partner..

Very helpful. Thank you..

Absolutely, thank you..

And next we move to [YY] Kai with Philadelphia Financial. Please go ahead, Mr. Kai your line is open.

This is Jordan for [YY] actually.

I am just wondering do you have any update to the slide that you put out with pending facilities available for lease where you listed last quarter or when will that slide be out and already?.

Looking at the camera so we are preparing our investor presentation now it will be on the road in a couple of weeks.

We’ve got this May 15 circled as the date we’ll post that and yes, we could probably put that same schedule that you are referring to, I think I know is talking about with calculating what the impact on FFO per share would be if we utilized all of our idle and underutilized capacity.

And this is the same number as of quarter end it was close to – a little bit over 8000 beds and then with [Indiscernible] coming online it’s getting close to 10,000 idle beds and I think last quarter we said that was about $1 in the calculation but given some of the opportunities that we see particularly with certain states and with real estate only solutions at least in one case they would not generate margins consistent with the average and the portfolio should be more closer to that $0.65 to $0.75 per share..

And it does look like his line is disconnected. We’ll move onto Michael Kodesch with Canaccord Genuity..

Hey thanks guys. Just want a quick follow up here.

Just talking about how the ICE capacity utilization from your existing facilities kind of brought this question up but what percentage of your ICE contracts are fixed price I mean we are talking about the upside from the incentive part of the contract I guess you can say where you go above and beyond kind of a set occupancy?.

Well, I don't know if I have got an answer for that one. I don't know if I can give you a number, yes I would say most of them at least in the fourth quarter of Q4 comparable with Q1 in the fourth quarter there was maximum utilization and our contracts with ICE were well over the minimum guarantees.

In our forecast probably towards the lower end of that there are a couple that are below the guarantee but they don't know below the guarantee so I would say our forecast is relatively conservative towards the low end of those guarantee so not much downside but some upside to the extent that utilization picked up..

Great and then just lastly on [indiscernible] obviously the OIG report came out which looked to be largely more oversight from the United States Marshal perspective but I mean should we expect anything else to come of that or I mean are they pretty happy with your facility operation there it's just going to be little bit more oversight from their perspective or should we be expecting anything else?.

Yes Michael that's -- so yes lot of the recommendations were for the Marshal service I think they concurred on all of them which we very much support and think that makes a lot of sense.

There is clearly a few things that we could have done better but we have already rectified and take the appropriate action but overall very, very satisfied with the facility and with the operation for the Marshal service perspective..

Super. That's it from me. Good quarter guys. Thanks..

Thanks Michael. .

And at this time I would like to turn the call back over to Mr. Hininger for any additional or closing remarks..

Well, thank you Ms. Rachel, and thanks again for everyone on the call for joining us on today extremely to our investors, extremely grateful of your investment in CXW and we look forward to reporting to you again with our second quarter results in early August. Thanks so much..

And that will conclude today's call. We thank you for your participation..