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

Kevin McVeigh - Deutsche Bank Tobey Sommer - SunTrust.

Good morning. My name is Savanna and I'll be your conference operator. As a reminder, this call is being recorded. At this time, I would like to welcome you to the CoreCivic's Fourth Quarter 2017 Earnings Conference.

[Operator Instructions] I would now like to turn the conference over to Cameron Hopewell, CoreCivic's Managing Director of Investor Relations. Mr. Hopewell, you may begin your conference..

Thank you, Savanna. 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 2017 earnings release and in our SEC 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 on our Investors page of our website at www.ir.corecivic.com. 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. We're also joined here in our room by our Vice President of Finance, Brian Hammonds. Similar to prior quarters in 2017, our fourth quarter financial performance exceeded our most recent guidance and allowed us to close out the year on a positive note.

Our normalized FFO of $0.60 per share was $0.03 ahead of the high end of our fourth quarter guidance, bringing our full year normalized FFO per share to $2.38 or $0.22 per share higher than the midpoint of our initial 2017 full year guidance.

Our fourth quarter results were ahead of our expectations, principally due to improving utilization trends across the portfolio for United States Marshals and Immigrations and Customs Enforcement facilities, supported by stability in the balance of our portfolio.

Dave will provide a more detailed summary of our fourth quarter financial performance at the conclusion of my remarks. Also included in yesterday's earnings release was our initial 2018 financial guidance. We currently expect to generate normalized FFO per share of $2.23 to $2.31 and AFFO per share of $2.16 to $2.24.

Dave will cover in detail the primary drivers of our guidance, including an assumed reduction in California offenders housed out of state, a full year impact of additional interest expense resulting from our bond issuance last October and start-up expenses associated with the activation of a previously idle facility in Kentucky.

However, it is important to note our 2018 guidance does not include the potential impact of new contracts, acquisitions or contractual pricing increases. These are important items to keep in mind, given we are seeing more opportunities to serve new and existing partners in the market then we have ever seen before since the recession of 2008.

Over the last two years, we have continued to see tightening labor markets in pockets across the country and we have responded by increasing wages and incentives in order to retain current staff and attract quality new staff throughout the company.

We have budgeted for continued increases in salary costs of 2018, but our guidance does not assume meaningful per diem increases because in many cases, particularly in state and local contracts, our pricing is subject to a legislative appropriation process.

This approach to our guidance is not intended to suggest we don't anticipate additional revenues to offset some of these added costs.

In fact, most of our government partners are feeling the effects of the improving economy and tight labor markets in their own correctional systems and as a result are requesting additional funding for similar salary increases to assist in their hiring and retention efforts.

The appropriations process is always challenging for corrections budgets, but the country’s stronger economic growth is having a positive impact on state tax revenues and creating opportunities for increased funding.

This is the time of the year when budgets are being formalized and debated in state legislatures ahead of the new fiscal year, beginning on July 1 and we will be working hard to educate key stakeholders about the scope and value of our services to ensure our contracts receive their appropriate funding levels.

We're also seeing the most significant amount of new opportunities to provide our unique services and solutions to government partners than we have seen in over a decade.

These opportunities could lead to meaningful upside to our cash flows because we have approximately 10,000 beds available in idle facilities and more than 4000 beds in partially utilized facilities that could effectively provide solutions for these opportunities without the need of additional capital deployment.

Now, it's not lost on me that we have not been above 90% in system utilization since late 2010 and I think for the first time in quite some time, we have a path to reach that mark. So let me first touch on state level opportunities. Late last year, Idaho issued an RFP to house and manage up to 1000 adult male meme security offenders outside the state.

Proposals were due last week and we have responded with several potential locations that provide a compelling cost effective solution. In October, we entered into a contract with Nevada to house up to 200 offenders at our Saguaro correctional facility in Arizona and received offender populations in November.

Given our existing contract with the state and a quality operation provided at our Saguaro facility, we believe we are uniquely positioned to serve as a solution for the state should additional capacity be needed in the future.

We have a similar situation in Kentucky where we are in the process of activating our 816 bed Lee adjustment Center under a new contract with the state we announced back in November. The state prison and county jail systems are severely overcrowded and our two additional idle facilities in the state could help them address some of their challenges.

We expect the Lee adjustment center to begin receiving offender populations within the next month and we currently expect to reach normalized operations by the end of the second quarter.

In Colorado, last month, it was announced that the Department of Corrections selected our 752-bed Huerfano County Correctional Center as the facility of the state would like to lease in order to add immediate capacity to their correctional system to alleviate the backup of offenders sentenced to the state prison term that are temporarily being held in county jails due to lack of available prison beds.

This facility has been vacant since 2010 and it once again shows the enduring value of our assets. We are actively engaged in discussions with Department of Corrections regarding a new lease agreement.

Staying with opportunities to lease our idle facilities to government partners, we have been engaged in discussions with the Department of Corrections in Oklahoma for a potential lease of our 2160-bed Diamondback correctional facility.

This opportunity has been slow to develop as the state faces significant budget challenges and the legislature has struggled to reach consensus on how to fill various state budget gaps.

Provided the state's budgetary issues can be resolved, we know the lease arrangement we have proposed for our Diamondback facility presents a compelling solution to a critical need for Oklahoma.

There are also indications from the Commonwealth of Puerto Rico that the Governor’s fiscal plan to address the territory’s debt crisis includes potentially moving up to 3200 offenders off the island in order to reduce the annual budget for the Department of Corrections and Rehabilitation and this could start as early as July 1 of this year.

We have successfully worked with Puerto Rico a few years ago when they housed a population at one of our Oklahoma facility and we would be pleased to do so once again should they choose to proceed with this plan. At the federal level, we also have multiple opportunities, starting first with the Federal Bureau of Prisons.

The bureau has two outstanding procurements for which we are competing. CAR 18 is a rebid of the managed only 2355-bed TAF facility in California, which is currently operated by MTC. Responses were due to the BOP last year and an award announcement is expected in the first half of 2018.

CAR 19 is a procurement for up to 9540 beds that was issued in 2017 and is intended to provide additional bed capacity for the private sector to alleviate overcrowded conditions in BOP operated facilities and to increased utilization of the bureau's most cost effective beds.

We have submitted multiple facilities for the CAR 19 procurement and an award announcement is expected in the second half of 2018. As a reminder, today, we only have two contracts with the BOP for correctional facility capacity, representing 5% of our total revenue.

Looking next at the United States Marshals Service, we continue to see prisoner populations increase during the fourth quarter and into 2018. This trend began in the summer of 2017 as the process of nominating and receiving Senate confirmations for new US attorneys has continued to progress.

As more of these positions get filled, we expect average daily prison populations for the Marshals will continue to increase and we expect to see increased utilization of our existing capacity under contracts with United States Marshals Service.

We also continue to see a trend towards increased utilization of existing contracts and new contracts with Immigration and Customs Enforcement. On last quarter's call, we reviewed the RFI issued b ICE for either new or existing detention capacity of up to 3000 beds to assist the agency's mission in four different regions; Chicago. Detroit. St.

Paul and Salt Lake City. I indicated at the time that the agency would likely need to have Congress increase its annual appropriations for detention or removal operations in order to see movement of procuring additional capacity.

Passing a full year funding bill for the federal government has continued to be a challenge and the government continues to be funded through continued resolutions.

However, we continue to see increases in our facility utilization by ICE in the fourth quarter of 2017 and into the first month and a half of 2018, primarily due to southwest border apprehensions returning to historical norms and we know the agency is seeking a funding increase above the current level of 39,000 beds.

It is important to note that the existing continued resolution which goes through March 23 provides sufficient funding for our existing federal contracts, even with the trend of increased utilization we are seeing from ICE and the United States Marshals Service.

The federal government has operated for many years under continued resolutions, so we don't see this year's budget activity in Congress as a unique situation. Further, we believe our federal partners have the ability to respond to new or emerging capacity needs and their current funding environment.

Finally, it is important for investors to know that over the last ten plus years, if ICE gets an increase in detention funding from one fiscal year to the next, that serves as the new base going forward. We have not seen a funding reduction enacted, only increases for the maintaining of prior year funding.

In addition to opportunities to grow the company through new and expanded contracts for existing facility capacity, we are very excited about the growth potential of our expanded M&A pipeline and opportunities for new development projects. We continue to target expanding our CoreCivic community platform through additional M&A transactions.

CoreCivic community’s goals of reducing recidivism and strengthening communities goes to the heart of our company's mission. So we're enthusiastic about the continued growth. In 2017, we closed on six acquisitions of community correction facilities, adding eight facilities and nearly 1200 beds to our portfolio.

We continue to see attractive returns in this market and have a sufficient pipeline of targets to continue to close at least one acquisition per quarter.

We will continue to expand the reach and capabilities of our CoreCivic community platform through our M&A strategy and maintain our goal of continued to diversify the company by growing this business line to represent at least 10% of our EBITDA by the end of 2019.

At the onset of 2018, we acquired Rocky Mountain Offender Management Systems, a company that provides non-residential community based correctional alternatives to municipal, county and state governments in eight states.

This is a big deal for us because now being able to provide nonresidential services such as electronic monitoring, case management and testing services, we know this is a natural complement to our broad network of residential reentry facilities.

And this acquisition also helps us to ensure that we can be there to help the individuals we work with stay on course whether diverting individuals from prison on the front end or helping them stay out once released. CoreCivic community is driven to tackle America's recidivism crisis.

To achieve that, we have to help the men and women we work with to effectively reintegrate with their communities, reconnect with family and regain their financial footing. We have also had exciting news out of CoreCivic properties early in 2018 on both the M&A front and the new development front.

In the fall, we announced our first acquisition of government lease real estate assets outside our traditional correctional detention or residential reentry portfolios. These three facilities we acquired are leased by federal agencies through the General Services Administration or GSA.

For quite some time, we have expressed our intention to expand our real estate portfolio into government leased assets with a bias towards those that are mission critical, which will allow us to leverage our extensive real estate management capabilities we presently employ at nearly 100 facilities totaling over 17 million square foot of real estate as well as our 35-year history of developing real estate solutions for federal, state and local governments.

Between the real estate assets leased by the federal government through GSA and similar real estate lease by assets or by state excuse me and local government AMCs, the addressable market for potential acquisitions in this substantial and our M&A pipeline has expanded materially, as we continued to pursue opportunities in this market.

In late January, we announced our first sizable transaction in this space through a $44 million acquisition of the Capital Commerce Center, a 261,000 square foot office building located in Tallahassee, Florida based primarily to the state's Department of Business and Professional Regulation.

The Capital Commerce Center is a good example of the type of property we are targeting in this market. First, we are looking for high credit quality federal, state and local government tenants, our lease with DBPR is backed by the full faith and AAA credit of the state of Florida. Second, we are looking at properties with long term leases.

At 261,000 square feet and over ten years remaining of primary lease, we believe this property hits these targets as well. Close proximity to the state capital and significant building improvements also made the property an attractive acquisition target.

Following this acquisition, CoreCivic properties now comprises 13 lease properties, representing 1.4 million square feet of real estate and approximately 8% of the company’s adjusted EBITDA with nearly 100% of these properties least.

Unlike the residential reentry M&A market, which is very fragmented with small operators, the government lease real estate market includes many public and privately held portfolios of assets that could be added to our CoreCivic property portfolio to create meaningful scale.

We are building a very robust pipeline of individual asset and portfolio acquisition targets and we are excited by the progress we've made to date. As 2018 progresses, we expect to provide further guidance on our acquisition targets in this area.

Now on to new development opportunities, a few weeks ago, we announced that the state of Kansas had awarded us a new development and a 20-year lease agreement to replace the state's 150-year old Lansing correctional facility.

We will be designing and constructing a state-of-the-art 2432-bed 400,000 square foot correctional facility for the state on property adjacent to the existing 2405 bed Lansing Correctional Facility, the state's largest correctional complex for adult male inmates, which was originally constructed in 1860s.

The new facility is expected to require 160 million to 165 million to construct over a period of approximate 24 months. Upon construction and completion, we will commence a 20-year non-accountable lease agreement with the Kansas Department of Corrections in which they will provide all operations personnel at the facility.

We will receive a lease payment of 14.9 million annually, plus annual rent inflators of approximately 2% per year. CoreCivic will also be responsible for facility maintenance throughout the 20-year lease period.

This is a significant milestone as it represents our industry’s first correctional facility to be developed through a public private partnership and leased and operated by a government agency.

We know there are significant opportunities to replace this kind of project across the country based on the over 200,000 beds in operation today at facilities similar to the Lansing correctional facility.

Well past their useful life, expensive to maintain, less safe for staff and for inmates and unnecessarily expensive to operate due to out of date facility design. The primary reason this pervasive issue of data correctional infrastructure continues is due to a lack of funding necessary to finance large scale expensive replacement projects.

Collectively, we estimate $15 billion to $20 billion of required investments are desperately needed for these type of facilities.

We believe public private partnerships similar to what we just entered into with Kansas are the key to solving this infrastructure challenge and we know that many governments were closely watching the developments out of Kansas throughout the RFP process and subsequent award announcement.

In summary, we see a great deal of opportunity to continue to grow and diversify our company in 2018. With the overarching strategy is to be a government solutions company with the scale and experience needed to solve tough government challenges in flexible cost effective ways.

While the number of new opportunities is certainly exciting, I am really happy of the progress of our reentry program and initiatives to reduce recidivism.

Whenever I travel and visit our facilities, I love how our people view our company's purpose to make sure that those who come into our care leave with the best possible chance of never coming back. This is why we made unprecedented commitments in 2014 to strengthen our evidence based reentry programming and activities at our facilities.

We are proud of the progress we've made, what we've learned along the way and how we're pressing ahead.

Some of our highlights over the last year that I'm really proud of include launching a new initiative to advocate for federal and state policies aimed at reducing recidivism, including support for ban-the-box legislation and making reentry policies part of the company's political giving criteria.

In 2017, the number of individuals in our facilities who passed GED exams increased by 3% over 2016 and two of our facilities led in two separate states, all public and private facilities in GED completions. We have now helped over 12,000 inmates in the last six years receive their GED or high set.

At our Coffee Correctional Facility, we graduated that facility’s first class of inmates achieving technical certificates in gas metal arc welding and diesel truck maintenance. This program is an incredible partnership with the Georgia Partner Corrections and the Technical College System of Georgia.

Our programs Department also achieved the first implementation across our facility to a threshold, a nationally recognized faith based program used by our partners at the Federal Bureau of Prisons. We will be building on our 2014 commitments in announcing a new goal with this program in the weeks ahead.

I am proud of the difference we're making in the lives of inmates and residents entrusted in our care. We are fully committed to playing a bigger role in tackling America's recidivism crisis.

And finally to our employees who are chaplains, nurses, mothers, veterans and many others, these are good people doing a great job and I'm sincerely honored to serve alongside all of you.

With that, I'd like to turn the call over to Dave to review our fourth quarter 2017 financial results and provide additional details on our initial full year 2018 financial guidance.

Dave?.

Thank you, Damon and good morning, everyone. In the fourth quarter, we generated $0.40 of adjusted EPS, ahead of our guidance range of $0.35 to $0.37. Normalized FFO totaled $0.60 per share compared to our guidance range of $0.55 to $0.57 and $0.04 ahead of the first call consensus estimate.

AFFO totaled $0.53 per share, in line with our guidance range of $0.53 to $0.54. Adjusted figures exclude 4.5 million of income tax expense for the revaluation of deferred tax assets and liabilities and other taxes associated with the Tax Cuts and Jobs Act enacted in December 2017 and $1 million of M&A charges.

Our per share results exceeded our forecast as revenues exceeded expectations, due to higher than expected revenue from the US Marshals Service and Immigration and Customs Enforcement or ICE. Adjusted EBITDA was $2.8 million higher than the midpoint of our guidance for the fourth quarter, reflecting stronger than expected operating performance.

As mentioned in the press release, our per share results were lower than the prior year quarter, principally due to the previously disclosed renegotiation and extension of a contract with ICE at our South Texas Family Residential Center effective in November 2016 and the expiration of a contract with the Federal Bureau of Prisons at our Eden detention center, which collectively contributed to a reduction of approximately $0.06 per share.

In addition, as you may recall from our prior earnings calls, we experienced the surge of detainees from ICE in the prior quarter that began in the third quarter of 2016, accelerated in the fourth quarter of 2016 and extended into the first quarter of 2017, creating a challenging comparative quarter for Q4 2017.

Even though Q4 2017 ICE populations did not reach levels in the prior year quarter, they did exceed levels prior to the surge.

Per share results from the prior quarter were also negatively impacted by our decision to reduce exposure to variable rate debt and extend our weighted average maturities, resulting in an increase in interest expense from the repayment of borrowings under our revolving credit facility with net proceeds from the issuance in October 2017 of 250 million 10-year unsecured notes at a fixed interest rate of 4.75%.

Our floating rate debt is now at the lowest level it has been in over six years. These declines were partially offset by new contracts with the states of Arizona and Tennessee, which were still ramping up populations in the prior year quarter as well as a new contract with Nevada, which commenced in the fourth quarter of 2017.

Financial results also included 7 M&A transactions throughout 2017 with an investment totaling $50 million for eight residential reentry centers and three properties leased to the General Services Administration.

Of these 11 properties, 6 are residential reentry centers that we own and operate under our CoreCivic community portfolio and five are real estate only properties operated by third party tenants under our CoreCivic properties portfolio.

Our CoreCivic community portfolio generated 6.6% of our adjusted EBITDA during the fourth quarter of 2017, which as of December 31 comprised of 26 residential reentry centers we owned and managed with a total design capacity of 5214 beds in six states.

Our CoreCivic properties portfolio generated 7.8% of our adjusted EBITDA during the fourth quarter of 2017, which as of December 31 comprised of 12 properties leased to third parties totaling 1.1 million square feet in five states.

CoreCivic properties portfolio is 100% leased at December 31 with very stable cash flows under leases with fixed monthly rents.

We expect to execute additional M&A transactions to expand our CoreCivic community and CoreCivic properties portfolios as part of our long term strategy to diversify our cash flows, supplementing the strong cash flows we generate from our CoreCivic safety portfolio.

In January 2018, just last month, we acquired the 261,000 square foot Capital Commerce Center in Tallahassee, Florida, 98% leased with the primary tenant being the state of Florida on behalf of the Florida Department of Business and Professional Regulation, which recently signed a 10-year extension that will commence upon completion of building improvements expected to occur in the fourth quarter of 2018.

The purchase price for this property was 44.7 million, excluding transaction related costs and certain closing credits. We are evaluating the acquisition of government leased properties, which generate unlevered returns in the market generally from 5% to 8% depending on property characteristics.

We are targeting returns higher than the midpoint of this range, which enables us to achieve levered returns that exceed our weighted average cost of capital, utilizing non-recourse secured debt.

We financed the Capital Commerce Center acquisition through a combination of borrowings from our revolving credit facility and a $24.5 million mortgage note carrying a fixed interest rate of 4.5% maturing in 2033.

At December 31, we had 52 million of cash on hand and nearly 700 million of availability on our $900 million revolving credit facility and no debt maturities until 2020. We have a strong balance sheet with leverage of 3.6 times and fixed charge coverage of 5.6 times using the trailing 12 months.

We are in an excellent position to grow our cash flows through the utilization of idle bed capacity and have the flexibility to take advantage of M&A and other growth opportunities that require capital deployment.

Our capital expenditure forecast, which is included in the press release, includes approximately 55 million to 60 million of capital expenditures in 2018 for construction of the new Lansing Correctional Facility in Kansas, which has a total estimated project cost of 155 million to 165 million and a construction timeline of about two years.

Continuing with a discussion of our earnings guidance, as indicated in the press release, adjusted EPS for the first quarter of 2018 is a range of $0.31 to $0.33. Normalized FFO and AFFO per share guidance for the first quarter are both $0.51 to $0.53. For the full year, adjusted EPS guidance is a range of $1.41 to $1.49.

Full year normalized FFO per share guidance is a range of $2.23 to $2.32 and full year AFFO per share guidance is $2.16 to $2.24. Certainly, one of the most significant assumptions reflected in our 2018 guidance pertains to inmate populations from the state of California we care for at two facilities we own in Mississippi and Arizona.

As indicated in the press release, our 2018 guidance contemplates a per share reduction of approximately $0.10 from 2017 for a decrease in these inmate populations.

As you may recall from last quarter's earnings call, we modified our Q4 2017 guidance to include 1250 inmates at our 2672 bed Tallahassee facility in Mississippi after originally expecting California to vacate this facility by the end of calendar 2017.

Because of projected lower inmate populations in the state system, the proposed budget issued by the Governor of California last month now contemplates the removal of all of the California inmates from one of our -- two out of state facilities by June 30, 2018 and the removal of inmates from our other out of state facility by fall 2019.

Although the proposed budget acknowledges that estimates of population reductions are subject to considerable uncertainty, our guidance generally conforms with the state's draft budget, reflecting the removal of all of the California inmates from our Tallahassee facility by June 30, 2018 and a reduction in California inmate populations from our 3060 bed La Palma correctional center in Arizona beginning in the third quarter of 2018 from approximately 3000 inmates to 1500 inmates by December 31, 2018.

During the fourth quarter of 2017, we cared for an average daily population of 1250 California inmate at Tallahatchie and 3100 at La Palma. As of last night, we cared for 1150 inmates from California at our Tallahatchie facility and 3089 at our La Palma facility.

Despite this assumes significant reduction in California populations, the range of our guidance for 2018 indicates adjusted EBITDA will be roughly in line with adjusted EBITDA we generated in 2017 due to projected higher federal and state inmate populations, some coming from higher utilization of existing contracts and some coming from new contracts already executed.

As many of our long term investors know, California populations have been difficult to predict and like last quarter, we have periodically adjusted our guidance because of changes in forecasted populations. Obviously, we stand ready to meet the needs of California if it is unable to meet its projected inmate population reductions.

On the other hand, we continue to market this capacity to other prospective customers.

Over the past 60 days, we have engaged five separate jurisdictions with opportunities to potentially utilize a portion and potentially all of the capacity at the Tallahatchie facility, although our guidance does not assume we replace any of the California populations at either of these facilities.

To help you frame the financial impact of our California populations, if you assume the entire out of state California population vacated January 1, 2018, earnings per share would decrease from 2017 by approximately $0.30.

Revenue from California's out of state program constituted 6% of revenue in 2017 and is expected to generate 4% of our revenue in 2018.

Crosswalk in Q4 2017 to Q1, 2018, as you may recall from prior years, Q1 is seasonally weaker because of two fewer days in the quarter and because approximately 75% of our unemployment taxes are incurred during the first quarter, resulting in a collective $0.04 per share decline from Q4 to Q1.

We also expect to incur operating losses at our Lee adjustment center of $0.03 to $0.04 per share for staffing and other start up related expenses associated with a new contract with the Commonwealth of Kentucky, most of which will be incurred in the first quarter of 2018 and is included in our guidance.

Our full year 2018 guidance includes higher interest expense associated with both the bond issuance completed in October 2017 and rising interest rates that are applicable to outstanding balances on our variable rate revolving credit facility.

Our 2018 guidance includes $0.03 of FFO per share generated from acquisitions we completed in 2017 and so far in 2018, net of not real estate depreciation and interest expense used to finance these acquisitions.

Although we continue to pursue a number of attractive investment opportunities that are accretive to FFO per share using our long-term weighted average cost of capital, our guidance does not include any new M&A activity beyond those already announced.

Further, we continue active discussions with potential customers at both the federal and state level to utilize our idle facilities and available capacity. Those publicly known at the state level include Colorado, Idaho, Kentucky, Oklahoma and Puerto Rico as well as several opportunities we are pursuing that are not publicly known.

At the federal level, future needs include ICE demand of up to 3000 beds pursuant to a request for information ICE published last quarter, the BOP CAR 19 solicitation for 9540-beds as well as increasing demand that could be manifested in the short term through higher utilization of existing contracts from both ICE and the US Marshals Service.

However, our guidance does not include any new contract awards beyond those previously announced because the timing of government actions on new contracts is always difficult to predict. Any new contract awards could also come with startup costs that are not included in our guidance.

The full year adjusted EBITDA guidance in our press release enables you to calculate our estimated effective income tax rate of 2.5% to 3.5% and provides you with our estimate of total depreciation and interest expense for the first quarter and full year 2018. We expect G&A expenses to be approximately 6% of total revenue.

I will now turn the call back to Savanna to open up the lines for questions..

[Operator Instructions] And we will take our first question from Kevin McVeigh from Deutsche Bank..

Damon, can you give us a sense, I mean, obviously it seems like there's a fair amount of opportunity at the federal level and you're well positioned to kind of serve it.

Is there any way to just get a sense of when we may be able to see some of that start to come online? I mean just trying to kind of ring fence as the budget has been passed, what that ultimately can mean and how we should think about it, realizing that none of it’s in the guidance, but is there any way to just maybe ring fence? What some of that demand at the federal level could look like as we take think about 2018?.

Let me go through all three federal partners to answer your question. So first with the Bureau of Prisons.

They have seen a little decline continued into kind of late last year, early this year populations, but when we were all together in the industry conference back in January, they indicated with the two active procurements, CAR 18, which is again the currently managed only facility out of California, it’s good to say that they would award that.

But the issue first maybe second quarter of this year is obviously first half and if they were moving forward on the 9500 bed and looking again to do that in to this year.

So they basically kind of restated what they said last year moving forward on both those procurements, notably the 9500 beds which would obviously be incremental capacity for the company and for the industry.

And don't get this answer as related to kind of all the budget activity that they're not going to move forward on that, in fact, I think based on kind of recent articles that you've probably read, maybe a little more we’re going to see to go ahead and move forward on those contracts, but again those won't happen until in to this year with the 9500 beds.

With ICE, we have seen of normalization of populations. So as you know and kind of the first and second quarter last year, saw a dramatic drop in populations, but based on the numbers we just saw yesterday out of federal government for January, it looks like the ICE numbers have normalized and we are sort of seeing increased utilization.

So that is incremental. It's not dramatic increases, but we are seeing incremental increases throughout the system. And then what we're hearing as it relates to the budget which we think are going to be kind of the key catalyst on additional capacity for ICE, really two key milestones.

One of which is March 23 excuse me when current continued resolution expires. There is a hope and expectation that Congress will increase funding for ICE and we've heard kind of in a range of potentially going up from the current amount of 39,000 beds to about 44,000 beds, so incremental about 5000 beds.

So if that is the case, we do think it's a probably a approach on kind of two fronts to use that increased funding for new capacity, either through existing contracts or potential new contracts. So we think potentially could be the summer if that all comes to pass on the budget front, it could be the summer until you see some activity on that front.

And then finally, I was a little further down the road on ICE, but in the President's budget, you probably saw that embedded as it relates to ICE funding for next fiscal year, the request is 52000 beds.

So currently at 39, the hope is that they get to about 44,000 the rest of this fiscal year after they worked out, a funding bill after March 23 and then up to 52,000. SO, the 52,000 is a little softer, just because it's got to go through deliberation with Congress before they ultimately enact that by hopefully October 1.

And then finally with Marshals Service, we're not seeing any discussion on kind of what I’d say new contracts, but we've got a lot of existing contracts that have really no ceilings on increased utilization and so with these US attorney positions getting field around the country, we have seen not only in the southwest Florida, but places like here in West Tennessee and in Kansas, increased utilization and at levels that we haven’t seen in several years and nationwide, that's reflective of what’s happened kind of locally that there are about 52,000, 53,000 nationwide population for the Marshals service and that’s above their -- basically the level they got to last year at 49,000, towards the end of last year.

So that’s with ICE, Marshals and BOP kind of timing and what we expect potentially on opportunities. And you asked about the Federal, but let me just say quickly on States, I mean, we're seeing a lot of activity on the States. We signed three contracts last year with Ohio, Kentucky and Nevada.

I’ve told a lot of folks that it's been at least five years, maybe ten years that we have signed three new state contracts in one calendar year and here we are, in the first part of 2018, we got the development contract with Kansas and then also been selected all those leases not executed in Colorado.

So we've seen a lot of activity here in the last 12 months with States and then you've got states Idaho actively out in the market looking for beds..

Just two other quick ones. There have obviously been some talk about the government outsourcing some at the BOP turned in favor of the private operators.

Is there any thought to that and what that could potentially mean and then is there any way to think about, you kind of mentioned that your guidance doesn't imply any step up from state funding, as budgets come in.

Is there any way to think about what that could mean in terms of an uptick to offset some of the wage inflation and things like that, you've been saying. So two separate questions..

Absolutely. So let me tackle the first one. I'll have Dave tackle the second one. So I think this and you're seeing that not just with the Department of Justice and Homeland Security, but more globally, you’re hearing this conversation kind of national footprint within federal government.

And so I think this discussion about what's the most cost effective solution for government, either public sector doing it or private sector doing it or in combination of both. So I think this conversation on looking kind of cost effective solutions that have been kind of tried and tested and provide high quality I think is beneficial for us.

So I think that discussion is the dynamics of driving this procurement for 9500 beds for the Bureau of Prisons. I don't think in the last 18 years, I don't think the Bureau has ever gone out for a procurement quite that size for incremental capacity.

Obviously, you had to rebid a couple of years ago of CAR 16, but new incremental capacity is a pretty notable amount in 9500 beds..

Yeah. On the per diem increases, obviously some of them are tied to the federal contracts where we have wage determinations and you get equitable adjustments to offset those wage adjustments.

So those would have no impact on the bottom line, but at primarily the state level, if we're able to secure some increases through the appropriations process, it could be a couple of pennies, maybe a few pennies, most of those come out in July following the, most states have a July 1 to June 30 fiscal year.

So we’ll be monitoring that and as Damon mentioned in his script, they're going to the legislative and budget process right now. So we'll be keeping a close eye on that..

And David, just to be clear, that would be not annualized, but if you get it in July, it would be a few pennies for this year as opposed to just an annualized impact, it would be a few pennies for -- as they came in for this year as opposed to?.

Yes..

[Operator Instructions] And we'll take our next question from Tobey Sommer from SunTrust..

Damon, a question for you as the company is diversified and kind of gotten into some different businesses, I was wondering if you could comment on the return profile of your different lines of business and what you're seeing, if any, changes in those returns on a business line basis. I understand that the mix will impact things as a whole..

Absolutely. So, a couple of answers there. So the CoreCivic Safety, which is as you know the owner and operating prisons jail ten centers, which we've done since day one, that margin profile has been and continues to be very similar.

We are seeing a little bit of price improvement, so you may see a little from there for margin per se, but that’s been relatively stable. The CoreCivic community side, the facilities where we own and operate, I’d say they’re very similar to the safety side from a margin perspective.

Obviously, we've got a few facilities there that we own that's run by a third party, but the ones where we own or operate, I’d say the margin profile very similar to the CoreCivic Safety business. So the property side is probably the key part of your question.

So here we are about four years into this business line, we've got Cal City, North Fork and now the development project in Kansas and then we've bought these GSA properties and then also the one in Tallahassee.

And I'd say they're all a little different as it relates to kind of terms and obviously the late book terms, the quality of that assets, but what we've learned on -- specific on the side relative to correctional facilities, the margin is obviously higher, just because no level of services are flowing through that just because we're providing just the real estate, but I'd say we are seeing some opportunities and have some opportunities come across finish line where I'd say the actual production from earnings perspective are pretty consistent and what we see if we had owned and operated ourselves.

But we also have opportunities and development opportunities where maybe it’s a little lower. And that is okay, because if we think about the operational risk and some of the headline risks relative to these operations, maybe look at a little lower kind of earnings profile. I don’t know anything else you want to add to that, Dave..

Look, my controller is sitting next to me and talking about segment reporting.

We're not required to do segment reporting yet, but our objective would be sometime during 2018 to actually break that out in our financial statement, so you could see the different earnings profiles and margins, CoreCivic Safety, CoreCivic Community and CoreCivic Property separately.

So we're working on that and at some point ’18, we would hope to publish it like that..

And Tobey, your question is a good one and what I would also say, we've learned a lot, especially in the last 24 months and again what I'm finding out as every jurisdiction is different relative to kind of their needs, what they're trying to accomplish, how long they need the assets, what risk profile they're relating to have, so maybe more risk with us versus more risk with them and also the FX kind of the returns and the length of the term and whatnot.

So we're learning a lot, but I’d say this that the interest is very, very strong. I think the Kansas deal was a big deal just because there was so many eyes. I mentioned kind of states, but it was a lot of local jurisdictions that are looking at kind of similar needs within a respective jurisdiction.

And again, when we talk to these folks, every deal, every kind of unique need they have is very unique I should say..

Following up on how you ended that answer, with respect to real estate only deals to replace older facilities in particular, are the people that we're watching that either state or local jurisdiction potential customers, do they need to see that facility actually built and operating or was it just the process and a successful conclusion, in other words, do we have to wait two years or more to get another deal or can those potential customers act more swiftly..

Yeah. Great question. That's a great question. And it's the latter. So it was the process, so how did the procurement, what scrutiny did they receive, this one, as you know, was very public.

We had to go through a couple of legislative committees with ultimate approval at the finance council, which was chaired by the governor and then ultimately once that got done, we think that was the key milestone for these other jurisdictions.

So the easy part, have you to look at from a real estate perspective is building a facility now, but we think this is the key milestone, which is getting done because there is a lot that I think other jurisdictions could learn and how they potentially kind of frame this need and opportunity within the respective jurisdictions.

That's a great question.

And I'll tell you in the two weeks since Kansas has gotten done, Dave and I have gotten numerous phone calls, not only just from potential partners from a construction perspective, but also a lot of jurisdictions, some of which we knew of, some of which we did not know of, we would say, hey, we've been watching this and we're interested and see what we can learn up to do a similar solution within our respective jurisdiction..

Are there any recompetes, kind of upsize to note and keep an eye on this year?.

The only one that we're near term and we haven’t talked about this recently because we feel like we’re in really good shape, but it's our Adams County facility, it’s part of CAR 19 and it’s a 9500 beds. So -- but we feel really good about that one. Outside of that, I don't think anything real, real notable..

And then just a capital question if I could on the balance sheet.

Given I guess medium term historical tendency to acquire businesses and the diversification effort that you have, what is the long-term leverage ratio that you aspire to kind of manage the debt level to and then secondarily, could you comment about the company's appetite to repurchase shares, given the pressure on the stock in the last year..

Yes. So as you know, we've maintained a very disciplined leverage policy of three to four times for our business.

As we continue to grow our government lease properties portfolio, we believe this asset class could justify a higher leverage level, however, until we get more meaningful scale in this portfolio, our leverage really wouldn't be materially affected.

So I guess -- and with respect to the stock repurchase question, I'd say in the past, we've been pretty opportunistic. It's a board decision. It’s an analysis we continue to assess with our board as we assess our capital allocation strategy and dividend policies. But I’d add just a couple of comments.

We've added significance stockholder value through stock repurchases in the past, when it was the best use of capital, given the limited number of growth opportunities that were available at the time.

We believe maintaining a borrowing capacity is important to capitalize on future growth opportunities and wouldn’t want to utilize all of our borrowing capacity on stock repurchases that could really require us to forego opportunities to grow and diversify our cash flows over the long term.

If on the other hand we don't see attractive growth opportunities that require capital deployment and we have debt capacity under our capital policy, the stock repurchase program makes more sense, particularly at today's price..

And this concludes today's conference. Thank you for your participation and you may now disconnect..