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

[Presentation]

Good morning, ladies and gentlemen. I'm Mark 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 2021 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 preceding video. While no video can fully capture the extraordinary challenges we all faced in 2020, we believe it is important to acknowledge the courage, sacrifice and leadership shown by our brave team members in the face of the COVID-19 pandemic, which, as you know, affected those involved in the criminal justice system and those who care for them in profound ways. The video also shows that in 2020, our company continued to strive to better the public good by providing solutions to the government's most pressing challenges. Despite the limitations resulting from the pandemic, our focus on giving people second chances and helping them get their lives back on track, remain 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, to enable increased access and participation by our stockholders during these unprecedented times, the company has opted to hold its Annual Meeting of Stockholders in a virtual format, with our stockholders attending virtually through the Internet. While we're able to safely conduct this meeting virtually, it's important to remember that most of our employees remain 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. Our team members are heroes, and that's why the company awarded frontline employees approximately $6.3 million in hero bonuses in appreciation of their service and dedication during this time. The company also awarded frontline employees additional paid time off in 2020, including approximately $8.4 million in quarantine pay to encourage those who might be ill to stay home and protect their fellow team members and facility residents, and all the program benefited approximately 13,000 employees. We can't say it too many times. 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. I also want to call your attention to the CoreCivic Environmental, Social and Governance report available on the Social Responsibility 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 with 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. 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 14, 2021, and will remain available for at least 6 months. The rules of conduct for 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 in this meeting are: to elect 11 members to serve on the Board of Directors of the company for the upcoming year; 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, 2021; and 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. 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 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 and Mr. Hininger, 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 Operating Officer; David Churchill, Executive Vice President, Human Resources and Chief Human Resource 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. The Board of Directors of the company fixed March 17, 2021, as the record date for determining stockholders entitled to vote at this meeting. I have 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 120,270,694 shares of common stock. There are present at the meeting, in person or by proxy a majority of the shares of the outstanding common stock of the company, 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 30, 2021. All of the documents concerning the call and notice of this meeting will be filed with the 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 do not need to take 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 one 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 presented at the annual meeting for consideration. The first item of business on our agenda is the election of directors. 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 2022 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, 2021. 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 is in attendance this virtual meeting and will be available to answer questions later in our question-and-answer session. The Board of Directors unanimously recommends the 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, 2021. 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 for our named executive officers. We will now address any questions received relating 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, and we will transition to the live portion of our meeting.

Mr. Chairman, there are no questions on the related voted items.

This concludes discussion on all formal matters to be brought before the stockholders, and I now declare the polls open for each matter to be voted on.

Mr. Chairman, there are no questions on the related voted items.

Only stockholders of CoreCivic as of March 17, 2021, the record date, or their duly authorized proxies are entitled to vote. If you have already voted by proxy, you may 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 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, there are represented at today's meeting in person or by proxy at least 100,066,200 shares or 83.2% of the total number of shares outstanding that are entitled to vote at this meeting. My preliminary vote shows the following results. The nominees for election to the Board of Directors have been duly elected. The appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the year ending December 31, 2021, has been ratified, and the executive compensation of the company's named executive officers 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. We will now transition to the consideration of general questions presented by stockholders. As we prepare to make that transition, there's one other update that I'm pleased to share. Late last year, the Service Employees International Union Master Trust presented a stockholder proposal to encourage CoreCivic to conduct a racial equity audit. After very productive discussions with the proponent of this proposal, we reached a constructive agreement to adopt this proposal. In accordance with that proposal, we anticipate furnishing a report of that effort by the end of this calendar year. We agree with the proponents that the responsibility for fostering diversity, equity and inclusion is a responsibility we all share. 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 such questions received through the Internet. Mr. Hininger, are there any questions?

Yes, sir, and thank you. We do have some questions. Let me read the first one, and it goes, Mr. Emkes, Mr. Hininger, Board members and fellow investors of CoreCivic. My name is Mary Baudouin, and I represent The Jesuits of the U.S. Central and Southern Province and other shareholders of the Interfaith Center of Corporate Responsibility. We began attending CoreCivic annual meetings nearly 10 years ago to press the adoption of human rights policy. We definitely did not expect to be in a position where we would be actually congratulating your company on the significant progress that you have made in implementing that policy through training, risk assessment and transparent reporting at all levels of your company. But I'm here today to extend congratulations to you and your staff for the bold steps that you have taken to evaluate human right impacts under the United Nations Guiding Principles Reporting Framework and to identify specific opportunities to improve that protection and promotion of human rights for inmates and detainees in your care and for your personnel. We believe that the processes and instruments you are developing are breaking new ground into areas of human rights, risk assessment in the corrections field at a time when this is solely needed and desired by investors, contractors, citizens and those in your care and their families. With this in mind, I have 2 questions. Question number one, does CoreCivic have plans and opportunities to share the human rights risk assessment model and methodologies with other public and private correction entities? That's question number one. And then question number two is, does CoreCivic plan to go even deeper into evaluating human rights risk at the facility and supplier level? And if so, how are you planning on ensuring that action is taken to address the risk that you find and that these actions are reported on your future ESG reports? So Mary, let me first say thank you so much for your very strong engagement with the company over the years. Really, really appreciate all the constructive conversations that we've had over the years. And with that, let me have your questions answered by Scott Craddock, who you know well. He is our Vice President and Chief Ethics and Compliance Officer. Scott?

Thank you, Damon, and thank you, Mary. We appreciate your organization's long-standing interest in CoreCivic and your consistent positive engagement with us over the years. Our progress on human rights is an example of the positive outcomes that can result from constructive, open engagement with our stakeholders. Our recent appointment of Daren Swenson as Vice President, Reentry Partnerships and Innovation is indicative of our desire to expand upon our active engagement with stakeholders like you. Turning to your first question. We've been focused on developing and applying our risk assessment model within our own organization, and that work is ongoing. We've made significant progress, but we have more work to do. That said, we are very open to sharing our work with other correctional systems or interested parties, public or private, and plan to look for opportunities to do so in the future. With regard to your second question, our 2021 implementation plan with respect to our human rights policy, which is baked into our overall corporate strategic plan, includes elements designed to address both facility level and supplier level risk. We have recently completed the field work for the pilot at a facility level human rights risk assessment and look forward to refining the pilot into a scalable model that we can deploy to other facilities. At the supplier level, we are working to complete a third-party risk assessment and deploy a supplier code of ethics that will help identify risks, communicate our expectations and hold suppliers accountable if necessary. More generally, our human rights commitment is fundamental to the ethical wins that frames our overall ESG and business strategies. Our objective is to integrate human rights and ESG into our strategy such that our actions, our business activities and operations will necessarily address those risks. For example, our efforts related to reentry, DEI and helping our partners build safer, more humane facilities, all as outlined in our most recent ESG report, illustrates this approach. Damon, thank you very much.

So there is no more questions at this time, Mr. Chairman.

Before concluding, I would once again express, on behalf of the Board of Directors, our deepest appreciation for the heroic efforts of our employees throughout the company, both on the front lines and in support of our frontline efforts. Thank you for attending and for your continued support of the company.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.