CCA Announces A New Contract With The State Of California

October 5, 2007
Corrections Corporation of America (CCA) (NYSE: CXW), the nation's largest provider of corrections management services to government agencies, announced today that it has entered into a new agreement with the State of California Department of Corrections and Rehabilitation ("CDCR") for the housing of up to 7,772 inmates from the state of California. The new contract replaces and supersedes the previous contract CCA had with the CDCR, which provided housing for up to 5,670 inmates. Additionally, CCA announced that it expects to begin construction of our new 3,060-bed La Palma Correctional Center located in Eloy, Arizona, which it expects to be fully utilized by the CDCR.

CCA expects to complete construction of the new La Palma Correctional Center during the second quarter of 2009 at an estimated total cost of $205.0 million. However, CCA expects to open a portion of the new facility to begin receiving inmates from the state of California during the third quarter of 2008, with the continued receipt of California inmates through completion of construction, as phases of the facility become available.

CCA currently houses approximately 1,400 California inmates at its West Tennessee Detention Facility, Florence Correctional Center and Tallahatchie County Correctional Facility. CCA currently expects that it will ultimately provide the CDCR up to 960 beds at its Florence facility, 80 beds at its West Tennessee facility, 2,592 beds at its Tallahatchie facility, 1,080 beds at its North Fork facility and 3,060 beds at the new La Palma facility, with the final transfer from California occurring during the second quarter of 2009.

The new agreement, which is subject to appropriations by the California legislature, expires June 30, 2011, and provides for a minimum payment based on the greater of the actual occupancy or 90% of the capacity made available to the CDCR at each facility in which inmates are housed. In certain instances, however, the 90% guarantee will apply by housing units or by total beds allocated at a specific facility, and the guarantee may also apply 120 days after the first inmate arrives or when 90% of the relevant capacity is achieved, whichever occurs earlier. With respect to the new La Palma facility, the CDCR will be required to make a minimum payment based on the greater of the actual occupancy or 90% of the capacity available to the CDCR according to an activation schedule. All other terms of the contract remain substantially the same as the previous contract with the CDCR.

"We are proud of the confidence that the State of California Department of Corrections and Rehabilitation has expressed in CCA by entering into this new agreement increasing the overall population that we may house on their behalf," stated John Ferguson, president and CEO. "We are also pleased to be able to continue to satisfy the CDCR's out-of-state inmate population needs through the development of the new La Palma Correctional Center."

Ferguson continued, "This new facility will provide very meaningful economic benefits to the City of Eloy, the surrounding communities as well as to the state of Arizona by bringing over 500 new jobs, property tax revenue and community partnership opportunities."