CCA announces ICE contract extension

Corrections Corporation of America, a Nashville-based operator of prisons and detention centers, has extended a contract with Immigration and Customs Enforcement, a positive sign for the troubled company. 

The contract renewal comes weeks after the Department of Homeland Security announced it would be evaluating ICE’s contracts with private operators and the Department of Justice said it would end contracts with private companies running prisons on concerns of safety and security.

CCA shares have tumbled in the aftermath of the announcements, falling 47 percent through Monday, and the company announced a restructuring in September that would include 55 layoffs. CCA shares climbed 1.4 percent Tuesday to $14.55.

“It’s notable with this ongoing review that here we are, the 18th of October, we are announcing this extension of the contract,” CEO Damon Hininger said in a conference call Tuesday. “We think we have a great, great story to show, what we've done historically, and they'll come to the same conclusion that, we've been a really, really good tool for ICE."

The contract, which lasts through 2021, concerns a 2,400-bed South Texas Family Residential Center. As part of the agreement, CCA will drop costs by 40 percent, mainly through staff reductions, CCA officials said. The contract was made originally in 2014, when the country faced an influx of border crossings that reached crisis level, according to the company. The center is now operating in a more normalized environment.

The Texas center is one of CCA's eight facilities contracting with ICE that will be assessed by an ICE subcommittee. In making the case for an ongoing relationship with ICE, Hininger pointed to its "high-quality services," as well as the cost to replace CCA operations.

"Building, staffing and operating new facilities to replace all the capacity currently provided by the private sector would cost ICE billions of dollars and result in costly long-term obligations," Hininger said. "By contracting for capacity of services from private providers, like CCA, ICE is able to avoid being committed long-term to these obligations and utilize the flexibility of the private sector to meet its changing needs. We believe we provide these needed solutions at a meaningful cost savings to the American taxpayer and are confident the subcommittee's review will draw similar conclusions."

The South Texas Family Residential Center was the subject of an Aug. 14 Washington Post article that said CCA was paid the same regardless of the number of beds occupied. Fourteen percent of CCA's 2015 revenue came from the center, according to the Washington Post, citing financial documents concerning the deal and interviews with immigration and homeland security officials.

CCA officials said Tuesday that the new ICE contract includes a fixed monthly rate.

While its three contracts with the Federal Bureau of Prisons are still a concern for the company, CCA officials said conversations have increased with both state officials and ICE, as the number of border crossings grows. The rate of family unit apprehension in fiscal year 2016 was 13 percent higher than in 2014 and 94 percent higher than in 2015, Hininger said during the call.

CCA estimated its net income would fall in 2017 compared to 2016, dropping from as high as $207 million to as high as $170 million.

Reach Jamie McGee at 615-259-8071 and on Twitter @JamieMcGee_.