CoreCivic, Inc. (CXW) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. And welcome to the CoreCivic, Inc. 2020 Virtual Annual Meeting of Stockholders. At this time, I'd like to turn the virtual meeting over to Mr. Mark A. Emkes, the Chairman of the Board of Directors of CoreCivic, Inc. Please go ahead.

Ladies and gentlemen, I'm Mark A. Emkes, Chairman of the Board of Directors of CoreCivic, Inc. On behalf of the Board of Directors and CoreCivic's officers, it's my pleasure to welcome you to the company's 2020 Virtual Annual Meeting of Stockholders. We appreciate the interest and support you expressed for the company by attending today's meeting. We hope you enjoyed the video we played before the meeting began. The video showcases the success our company has achieved by delivering on unprecedented commitments we made back in 2014 to, first, strengthen our reentry and rehabilitation programming; and second, to better the public good by providing solutions to government's most pressing challenges. We believe the video demonstrates that our focus on giving people second chances is fundamental to our company's work. We will continue to grow our efforts in this area, and we look forward to updating you each year on our progress. As a result of the public health and safety concerns arising from the COVID-19 pandemic and to enable increased access and participation by our stockholders during these unprecedented and difficult times, the company has opted to hold its Annual Meeting of Stockholders in a virtual format with our stockholders attending this annual meeting virtually through the Internet. While we're able to safely conduct this meeting in a virtual format, it's important to remember that most of our employees are on the front lines of this pandemic. They are essential workers dedicated to keeping those in our care, our communities and each other safe. COVID-19 has presented extraordinary challenges for all facilities, public and private alike. And this great team has worked hard to respond to an unprecedented situation appropriately, thoroughly and with compassion. It's truly been a heroic effort, which is why the company announced last month that every frontline employee would receive a $500 hero bonus in appreciation of their service and dedication during this time. The company also awarded frontline employees additional paid time-off to use this year. In all, the program will benefit about 13,000 of our employees with a total investment of approximately $8 million. Heroes really do work here, and we owe them our deepest gratitude and support for the selfless way they risk their own health on a daily basis to help ensure the well-being of others. This virtual meeting is being recorded. A recording will be made available by a link on this website by 5:00 p.m. Eastern Time tomorrow, May 15, 2020, and will remain available for at least 6 months. The rules of conduct of our virtual meeting and a disclaimer regarding forward-looking statements have been posted on the virtual meeting website. The proxies for this annual meeting are Mr. Damon Hininger and Mr. David Garfinkle. We previously mailed to each stockholder a notice of Internet availability of proxy materials that contained instructions on how to access the company's proxy statement and annual report. These documents are also available on the virtual meeting website. The items of business for consideration at this meeting are, one, to elect 11 members to serve on the Board of Directors of the company for the upcoming year; two, to ratify, by nonbinding vote, the appointment by the company's Audit Committee of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020; three, to hold an advisory vote to approve the compensation of the company's named executive officers, commonly referred to as the say-on-pay vote; and four, to approve the CoreCivic, Inc. 2020 Stock Incentive Plan. In accordance with the company's bylaws, I will act as Chairman and will conduct the meeting. Cole Carter, who is the Executive Vice President, General Counsel and Secretary of the company, will act as Secretary of the meeting. I would like to make this -- take this opportunity to introduce the other members of the company's Board of Directors. Each is present at this virtual meeting. Damon Hininger, who is also our President and Chief Executive Officer; Donna Alvarado; Bob Dennis; Stacia Hylton; Harley Lappin; Anne Mariucci; Thurgood Marshall, Jr.; Devin Murphy; Charles Overby; and John Prann. In addition to Mr. Carter, I would also like to introduce the other members of the company's executive management team. Each of these members of management is present at the virtual meeting. Dave Garfinkle, Executive Vice President and Chief Financial Officer; Tony Grande, Executive Vice President and Chief Development Officer; Patrick Swindle, Executive Vice President and Chief Corrections Officer; David Churchill, Senior Vice President, Human Resources and Chief Human Resources Officer; and Lucibeth Mayberry, Executive Vice President, Real Estate. Our agenda for the formal matters to be brought before the stockholders will be as follows: one, to take care of the necessary appointments and documentation for the meeting; two, to establish a quorum; and three, to take votes on the proposals mentioned earlier. Stockholders attending the meeting through the Internet may submit questions in the field provided in the web portal during the meeting, as provided in the rules of conduct. We will answer questions that have been submitted regarding the voting items on the agenda, following the discussion of the voting items and before the closing of the polls. We will answer general questions regarding the company following the adjournment of the formal business of this virtual meeting. As set forth in the rules of conduct, we ask that you limit yourself to 2 questions so that we can give all stockholders an equal chance to be heard. The Board of Directors of the company fixed March 18, 2020 as the record date for determining stockholders entitled to vote at this meeting. I've appointed Natalie Hairston from American Election services as inspector of election for today's meeting. As inspector, Natalie will determine the presence of a quorum and serve as judge of voting on all matters requiring a stockholder vote at this meeting. Natalie is present at this virtual meeting and has taken the oath of inspector of election. The bylaws of the company provide that the presence in person or by proxy of stockholders entitled to cast the majority of all the votes entitled to be cast at this annual meeting shall constitute a quorum. Ms. Hairston has submitted her report and has reported as follows. There were outstanding on the record date a total of 119,628,697 shares of common stock. There are present at the meeting, in person or by proxy, at least 106,019,607 shares of this outstanding common stock of the company or 88.62%, which are entitled to vote. This constitutes a quorum. This meeting is now duly convened and will proceed. Would the minutes of today's meeting reflect that we have a copy of the notice of Internet availability of proxy materials and affidavit of mailing, certifying that the notice was mailed to the stockholders of record of the company on or about March 18, 2020. All of the documents concerning the call and notice of this meeting will be filed with records of the company. Before the meeting, Mr. Carter notified me that there were no additional stockholder nominations or proposals properly presented for consideration at this meeting other than those reflected in the proxy statement. As such, the business of this meeting is limited to the matters set forth on the agenda. Stockholders who have voted online or sent in proxies need take no further action with regard to any matter to be voted on today, unless such stockholders wish to change their vote. If you have not yet voted or wish to change your vote, please record your vote via the Internet by clicking on the Vote Here button on the web portal of our virtual meeting website and follow the instructions. Now I will present the items to be voted upon. Please note, if a stockholder has a question about 1 of the voting items on the agenda, that question must be submitted in the field provided in the web portal at or before the time the voting items are before the annual meeting for consideration. The first item of business on our agenda is the election of directors. The 11 directors are up for election at today's meeting. Because this is an uncontested election pursuant to the company's bylaws, nominees receiving a majority of votes cast, or more votes for than against his or her election, will be elected as directors. The directors elected today will hold office until the 2021 Annual Meeting of Stockholders or until their successors are duly elected and qualified. The Board of Directors unanimously recommends that stockholders vote for the election of each of the director nominees. The second item of business on our agenda is the ratification of the appointment by the company's Audit Committee of Ernst & Young LLP to serve as the independent registered public accounting firm of the company for the fiscal year ending December 31, 2020. The affirmative vote of the holders of a majority of the shares present in person or represented by proxy at this meeting and entitled to vote is required to ratify the appointment of Ernst & Young. A representative from Ernst & Young LLP, Brent Wyper, is in attendance at this virtual meeting and will be available to answer questions later in our question-and-answer session. The Board of Directors unanimously recommends that stockholders vote for ratification of the selection of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2020. The third item of business on our agenda is the nonbinding advisory vote that asks the stockholders to approve the compensation of our named executive officers, otherwise known as the say-on-pay vote. While the vote is nonbinding, the Board will review the voting results and take them into consideration when making future decisions regarding the compensation of our named executive officers. The affirmative vote of the holders of a majority of the shares present in person or represented by proxy at this meeting and entitled to vote is required to approve, on an advisory basis, the say-on-pay vote. The Board unanimously recommends that stockholders vote for the nonbinding advisory vote to approve the compensation of our named executive officers. The fourth and final item of business on our agenda is the approval of the CoreCivic, Inc. 2020 Stock Incentive Plan. The affirmative vote of the holders of majority of the shares present in person or represented by proxy at this meeting and entitled to vote is required to approve the CoreCivic, Inc. 2020 Stock Incentive Plan. The Board unanimously recommends that stockholders vote for the approval of the CoreCivic, Inc., 2020 Stock Incentive Plan. We will now address any questions received related to any of the voting items. We will not take more than 1 minute to read a question so that we can give all stockholders an equal chance to participate. Mr. Hininger will now read questions received through the Internet relating to any of the voting items.

Mr. Chairman, thank you. There doesn't appear to be any questions related to the items up for vote.

Thank you, Mr. Hininger. So this concludes the discussion on all formal matters to be brought before the stockholders, and I now declare the polls for each matter to be voted on open as of 10:19 a.m. Central Time. Only stockholders of CoreCivic as of March 18, 2020, the record date, or their duly authorized proxies are entitled to vote. If you have already voted by proxy, you need not vote again unless you want to change your vote. If you have not yet voted or wish to change your vote, you may do so through the Internet by clicking on the voting button on the web portal and following the instructions there. Detailed information on each of the proposals is included in the proxy statement. [Voting]

Now that everyone has had the opportunity to vote, I declare the polls are hereby closed at 10:20 a.m. Central Time and direct the inspector of election to tabulate the preliminary results. Let me now ask the inspector of election for a preliminary report on the vote.

Mr. Chairman, the preliminary vote report shows the following results. The 11 nominees for election to the Board of Directors have each been duly elected. The appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the year ending December 31, 2020 has been ratified. The executive compensation of the company's named executive Officers has been approved. And the CoreCivic, Inc. 2020 Stock Incentive Plan has been approved.

Thank you, Ms. Hairston. I now direct the inspector of election to furnish the Secretary with the preliminary report of the results of the election and that the report be incorporated into the minutes of this meeting. We will be reporting the final vote results on a Form 8-K to be filed within 4 business days. The formal meeting is now completed and adjourned. Before we transition to the question-and-answer session, I want to call your attention to the CoreCivic environmental, social and governance report available on the What We Do section of our website. The ESG report highlights our commitment to be a positive force in the lives of our employees and those residents entrusted to our care. We believe the report articulates a compelling story about how CoreCivic serves our government partners responsibly and respectfully for the dignity and humanity of all persons. As with each of our commitments, we look forward to updating you on this story in the years to come. And there's one other update that I'm pleased to share. Earlier this year, the Service Employees International Union Master Trust presented a stockholder proposal to encourage CoreCivic to consider human rights experience and expertise among the other factors it considers and studies before nominating an individual to serve as a director on our Board. After very productive discussions with the proponent of this proposal, we reached a constructive agreement to incorporate this consideration into our corporate governance guidelines. You can see those guidelines in the Investors section of our corporate website at corecivic.com. Human rights experience and expertise, if any, are now described in the biographies of our directors in our 2020 proxy statement. And with that fellow stockholders, we will now consider your general questions about the company. If you wish to ask a question and you haven't already submitted your question via the virtual meeting website, please do so now. All questions must be made in accordance with our rules of conduct. Mr. Hininger, once again, will read the questions received through the Internet. Mr. Hininger, are there any questions?

Yes, there is, Mr. Chairman. So I will begin asking the questions. Thank you for that. So our first question comes from Mary Baudouin with the Jesuits of the U.S. Central and Southern Province. And she is commending us about our second ESG report, which you noted, we just released here in the last 24 hours. So thank you for that compliment, Mary. We're very excited finally to get that out and continue to kind of show our progress that we're making relative to our operations. Mary's question is around some of the recommendations. So she asked the question, which revolves around 2 recommendations, which is expanding the risk-assessment process at the facility level. "And with your supply chain and vendors, what resources will CoreCivic devote to expansion? And what is your time line for beginning this process?" So Mr. Chairman, if I may, since this is ESG related, I'm happy to answer this question. So Mary, again, thank you for your compliments about our report -- our second report that just came out and also for your question. So the short answer is we continue to evaluate what additional resources we need to have, not only just at the facility, but also to review an audit and making sure we're hitting the mark on some of these goals that we've set forth, not only with ESG, but human rights-related and other areas of focus like quality assurance. And so that's a very dynamic process. We're working not only with our facilities, asking the questions, making sure we hit the mark, but also talking about -- or talking with our partners, our governments partners, and what they're doing and maybe some recommendation they have for us. And then finally, we're also looking at what's going on nationally. So American Correctional Association and others, what advice, what policies, what views have they disseminated nationally that is kind of the best practice or recommendation and how we can incorporate that into our facilities. And as it relates to the second part of your question, relative to the supply chain and vendors. Obviously, we have -- most vendors and suppliers are pretty consolidated. We don't have a lot that provide kind of services or products or facilities. We have kind of these national vendors. But all that's become even more important with the recent COVID-19 and making sure that we've got good supply chain as it relates to key things like items for our medical facilities, things for foodservice or whatnot. We have not seen any disruption there, but it does lend the question of, as we go forward, is there additional work we can do there to make sure those are continuing to be solid for a potential of another disruption like we're having now with the COVID-19. So again, Mary, thank you for your question. And Mr. Chairman, I'll go to the next question. So actually, Mr. Chairman, the next 3 questions actually are very much related. So one question came in from Mr. Edgar Hernández, who is the SEIU Master Trust Pension Fund -- from the Master Trust Pension Fund. We also got a question from Sister [ Wynn Perry ] with the Sisters of Charity of the Blessed Virgin Mary from Iowa. And then on the third question, and all these questions are very closely related. So let me read the question. Again, they're all closely related. I'm going to actually ask Patrick Swindle, who is near to our operations, to answer them. So the first question is, "Reading reports about conditions and maybe some activity related to COVID-19 at our South Texas Family Residential Center and Otay Mesa Detention Facility, I'd like to know what CoreCivic is doing to keep the detainees, prisoners and CoreCivic staff safe?" The second question, again, which is related to Otay Mesa. The question is, "What is CoreCivic doing to test staff, residents and educate staff or residents about precautions?" And then the third question, again, which I think we can consolidate these together for 1 answer, and that is, "During COVID-19, how do you mitigate the risk of COVID-19 to the population in your families, especially immigrants and children being held in your custody? And also, how have you addressed overcrowding?" So Mr. Swindle, let me consolidate these three questions and ask you to answer and reply to them, please. Thank you.

All right. Thank you, Mr. Hininger. So in looking at COVID, in January, we created a cross-functional team, both medical and operations and HR, to both monitor and learn about the virus. And as you all know, we've learned a lot since then, and much of the guidance has evolved since the virus originated here domestically the U.S., and it certainly influenced and impacted our response. Early on and consistently throughout the process, we've used the CDC as a baseline for our response and used it to guide the actions we've taken so as to protect the populations that we serve as well as the staff that we have coming in and out of our facilities each day. The cornerstone of that has been through the processes education. It's making sure that all of our team members and all the individuals in our care understand how COVID passes from individual to individual and how one can best protect themselves through hand washing, social distancing and maximizing -- or minimizing, rather, the contact they have with others that might have been exposed. And so we've used many of those guidelines through education but also through our response. Early in the process of our response, we enhanced the availability of sanitation, so deep cleaning within our facilities. We worked very closely with our partners. And as you all know, we have multiple partners, both state and federal, that we're coordinating with in addition to the baseline CDC response, to help guide our actions. And so we're able to see best practices across the industry and implement those and carry them across all of our facilities to the extent that we're allowed to do that by our partners. And so some of the actions that we took is minimizing the entry points. So in an ideal environment, we have folks that are able to come into our facilities. Obviously, that creates a potential for an introduction of the virus into our environments in the current setting. And so we've minimized entry from external parties into facilities. We've implemented screening processes at our facilities, temperature checks at the front entrance as well as a questionnaire to ensure that folks understand to the extent they may have been in certain environments or may have been exposed or maybe presenting -- they're not coming into our facilities and potentially passing the virus. We've made large PPE purchases, personal protective equipment. The equipment includes masks. It includes smocks, gloves, and we're deploying those as appropriate. And we've made purchases to make masks available for all inmates, detainees, residents, clients, employees we have in the organization to the extent that they want to use those. And we're following our customer guidelines in terms of how those are used. One of the dynamics of COVID is that it puts certain populations particularly at risk. We worked aggressively early to identify the at-risk populations that we might have in our facilities to try to house those individuals together and provide a heightened level of protection for those individuals. We're providing those protections for everyone, but particularly for those at risk, we want to ensure that the environment for them is protected as possible. From a population standpoint, as many of you all know, and you can see in our earnings report, our facilities are operating below their design capacity. So to the extent that it's been possible within the environments where we house our populations, we’ve been able to place the individuals in our care as distant as possible. So we've been able to spread out the housing and maximize social distancing. And then within the day-to-day operations, we have also minimized the number of times where folks have to come together in an aggregated setting. So whether that be in an education environment, a foodservice environment, recreation environment, we've managed schedules in ways to minimize the opportunities for large groups to be able to congregate at a particular point in time in a location. As it relates to testing, we followed CDC guidance for testing of the populations. There's strong guidance provided for the testing of folks that are showing symptomology. One of the dynamics we've seen in our system is that some states or customers have made the decision to test all inmate populations within those states. That's certainly not universal, and we've seen it on a limited basis. But the one note that I would make there is that the symptomatic populations, in some ways, don't fully identify the number of folks that may be COVID positive. And in fact, many of the folks that become COVID positive present asymptomatically. And so for example, you've seen some of the data from our Tennessee operations where we've tested all of our facilities. And we've seen the majority of those populations in those facilities that have come off of the initial -- the individual that tested positive come off of quarantine status, and the balance will be coming off this week. And so what we found is many of the individuals that have tested positive in that case never manifest with symptoms. The last thing that I would say is we're presuming that, from an operational stance that we're going to have to maintain very strong protective measures in place for the populations that we serve for the foreseeable future. As the environments open back up and the communities around us, that creates additional opportunities for entry of COVID into our facilities. If anything, we're using that as an indication to us that we need to further continue to monitor and enhance our processes to both minimize the potential for spread into our facilities but also to maximize and to rapidly provide care for any individual that may present with COVID-related symptoms. So with that, Mr. Hininger, I'll turn the floor back over to you.

Mr. Swindle, thank you so much. Mr. Chairman, there's no further questions.

I would just like to add one thing to Mr. Swindle's comments as prisons are one of the few areas that have actually enacted mass testing. And as Mr. Swindle indicated, there are a large number of COVID positives coming out of those tests, but 96% of those right now are asymptomatic. So that data is being shared with medical professionals and with government officials because it's data that doesn't exist throughout the general population because they haven't been able to do mass testing. And Mr. Hininger, I think you mentioned that there are no further questions?

That's correct, sir.

So having said that, before concluding, I would like to once again express, on behalf of the Board of Directors, our deepest appreciation for the heroic efforts of employees throughout the company, both on the front lines and in support of the front line efforts. And thanks to everyone for attending and for your continued support of the company.