Damon T. Hininger - Chief Executive Officer, President, Director and Member of Executive Committee Todd J.

Mullenger - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Assistant Secretary

Manav Patnaik - Barclays Capital, Research Division Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division Kevin D. McVeigh - Macquarie Research

Thank you, Lisa. Good morning, and thank you to our valued shareholders and other participants for joining our call today.

In addition to Todd Mullenger joining me on this call, we also have our Chairman, John Ferguson; our VP of Finance, David Garfinkle; and board member, Bill Andrews. I may give a highlight for the results of the quarter we just closed and also give a business update, then I'll pass it over to Todd, here, in a few minutes.

So let me first just make a global comments about the company. 2012 marked our 12th consecutive year of EPS growth and a CAGR of 11% over the last 7 years of AFFO per share.

And based on our guidance last night, we are well on our way to our 13th consecutive year of positive earnings growth. More importantly, our 10-year share price performance inclusive of our recent E&P payment is north of 400%, which shows our long-term track record of out-performance.

Now a couple of highlights for the quarter and also for the year. For the quarter, first of which is FFO was $0.71 per diluted share, representing a 24.6% growth from second quarter of last year, but also the durable nature of our cash flow growth has enabled us to increase our dividend by 4% in the second quarter, to an annual rate of $1.92.

With a secure and attractive payout ratio of 77%, we are well positioned to continue our recent record of providing a dividend at above average levels, a competitive advantage in delivering superior total shareholder return. At the same time, we are focused on delivering continued shareholder value, we are also consistent in managing our business with discipline.

Earlier this year, we took advantage of historically low interest rates to extend our debt maturities by raising $675 million in senior notes with 7- to 10-year maturities and a fixed rate of 4 1/8 and 4 5/8, these pricings were record lows both for the company and the industry. At the end of the quarter, our debt-to-EBITDA was just under 3x, which, as you know, is low compared to other REITs.

Recognizing our outstanding credit metrics, scale of our real estate assets with a 75-year life, extremely durable earnings record, high barriers to entry, diverse highly rated government payers and a strong customer retention rate in excess of 90%, Moody's improved its outlook of our corporate credit to positive, in April, while at the same time, S&P upgraded us. As reported on Monday, we're very excited about our acquisition of CAI.

CAI has built a wonderful reputation with their operations and this acquisition allows us to expand our strong extensive relationships with the BOP in San Diego County. Further, the long-standing contracts in difficult-to-replace correctional assets we obtained through this acquisition, aligns very well with our strategy of providing real estate to existing and potential government partners.

Now while we can never predict the timing or amount of our investment activities like this one, we are excited about continuing to expand our portfolio in a balanced, forward-thinking way to create value for our shareholders. But just as important, we have a tremendous opportunity to create value for our shareholders by increasing the occupancy within our existing facilities, which remains our #1 priority.

We're sitting here today with our occupancy percentage in the mid-80s, which is similar to where we were about 10 years ago coming out of the last recession. Our occupancy peak around 98% in 2007, which led us to build additional capacity for new or existing partners.

And our CCA team is being aggressive to find existing or new partners to utilize its existing capacity as we look to the balance of 2013 and into 2014. Now as I wrap up this section, I wanted to highlight what we announced in July, which is a very positive development with our new California contract, which extends the agreement with our largest state partner for more than 3 years.

This agreement includes a provision that would allow us, with mutual agreement from California, to move California inmates currently housed at our Red Rock facility in Arizona to any other CCA facility. I'm excited to report today that we've already utilized that provision.

California has agreed to allow us to transfer a small portion of our Red Rock population temporarily to our Florence, Arizona facility. Although California hasn't communicated anything definitive to CCA about keeping the current population level of inmates out-of-state long term, we are nonetheless encouraged by this step.

Let me now provide a few specific updates on the business, and first on the state side. There's a few updates on the state portfolio since we talked in May.

The first of which is the State of Oklahoma has shown a continued need for additional beds in-state. We have been able to meet their needs by providing additional beds at Cimarron facility.

Now this takes another facility within the CCA portfolio, that averaged 66% occupancy in 2012, to nearly 100%. But this action shows the tremendous value of our real estate.

The State of Oklahoma called over the summer requesting more beds at this facility, and we were able to provide spaces to them within a matter of days. We also are very excited about our new Arizona contract in Arizona, utilizing capacity currently used by California at our Red Rock facility.

Retrofits are underway, and we are still targeting a January 1, 2014 start date. Now a couple of specific observations about the current landscape and how state partners will be looking to ask CCA to help them address their challenges.

First of which is that we've got 9 existing state customers that have grown in the past 12 months at a combined total of about 4,100 inmates. And looking forward, our 12 state customers where we provide owned and managed solutions, and this is excluding California, that they are expecting a bed shortfall of nearly 17,000 beds over the next 5 years.

And we're also pursuing 6 new state prospects, and this group of 6 is projecting their overcrowd in the next 5 years to be over 8,000 inmates. Now California I'll discuss in detail -- in greater detail in a few minutes, I should say, but as for state customer budgets, state economies continue to improve and many states are exceeding their revenue forecast.

With this, we continue to be cautiously optimistic that this will manifest itself into pricing improvement going forward, but in the near term, we're also encouraged that this improved budget environment has led to recent actions taken by Idaho, Oklahoma and Arizona in moving forward in using the private sector to manage the very real challenges of growth and overcrowding. Last year, as you know, we closed the first-of-its-kind transaction within our industry by buying government-owned prison.

This type of solution, which is monetizing a government-owned asset with a fixed income stream provided through a long-term management contract, we know in this budget environment is attractive to other state and local governments. At state budgets and requested capacity, we continue to observe minimal new appropriations for construction of new government-owned capacity to address overcrowding and population growth, and this is really the third consecutive year of limited funding for new capacity.

Now on the federal side of the business, just a couple of comments as it relates to their current-year funding but also next year's budget. So for current-year funding, in late March, Congress passed a full-year continuing resolution, or CR, to fund the Federal government through the end of the fiscal year, which ends on September 30, 2013.

As it relates to BOP, ICE and United States Marshals Service, the funding bill provides the full appropriation for our contracts with those 3 respective agencies. For the President's proposed budget in 2014, he released that on April 10 of this year, and our review of the budget proposal shows appropriate funding levels for the United States Marshals Service, BOP and ICE, but also shows increased funding for the BOP for additional 1,000 contract confinement beds.

Now we'll know for ICE, we continue to believe that ICE budget will be somewhat in flux until efforts on achieving immigration reform are completed. I'll also, while we're talking on the Federal side, talk about a current BOP procurement and on August 1 of last year, the BOP released a procurement for a contractor owned and operated up to 1,500 bed facility that must be ready to accept inmates within 150 days of award or no later September 1 of this year.

That proposals were due on September 18 of last year and, based on the timeline, we think award will be later this year or early next year. So let me now get towards the end of my comments and just talk about California.

And as I mentioned earlier, we extended our contract with California to June 30, 2016, but also want to note that the state filed, in May, a stay request with the Supreme Court, and specifically with Supreme Court Justice Kennedy, to delay the December 2013 compliance date for implementation of the 3-judge panel's order requiring the state to operate at 137.5% of design capacity. To achieve compliance by December of this year, the state would have to reduce their population within their 33 facilities by approximately 9,000 inmates.

Now with what we reported last Friday that a stay would not be granted by the Supreme Court, prior to the action by the court, the state has indicated publicly that they plan to delay the return of inmates housed out-of-state, as well as seek additional capacity. As for funding of our contract, the budget passed by the legislature this summer reduced funding for the out-of-state program by -- to approximately 5,000 inmates at our facilities.

Now the administration has proposed draft legislation, which includes an additional $150 million to fully fund the out-of-state inmate placement program, as well as allow the state to acquire additional capacity in order to achieve compliance with the 3-judge panel order. It is also important to note that the court has waived all laws to allow the state to comply with the order, which includes allowing inmates to involuntarily be housed out-of-state, even when the government's executive order expires.

So the state is reacting to this news of the Supreme Court denying them of stay, which happened again last Friday, and with that we are in close contact with them on providing options that we think could be helpful to achieve compliance with the Federal court. So we're very pleased about the quarter and full year, And I wanted to say a sincere appreciation the CCA management team, wardens and our entire team of CCA correctional professionals here in Nashville but also nationwide.

I appreciate their work and support to the company. With that, I'll now hand the call over to Todd.

Thank you, Damon, and good morning, everyone. In the second quarter 2013 we generated $0.52 of adjusted EPS, compared to our May guidance range of $0.49 to $0.50.

Normalized FFO totaled $0.71 per share as did AFFO per share. These numbers have been adjusted to exclude debt refinancing costs, REIT conversion costs and noncash asset impairment charges.

Second quarter EPS and FFO per share exceeded our expectations, primarily due to lower-than-anticipated operating expenses and a spike in ICE populations. The lower-than-anticipated operating expenses were partially the result of a favorable settlement of a litigation matter, which won't be duplicated in Q3 of 2013.

Q2 was also unfavorably impacted by approximately $2 million of facility ramp down and closure costs at Wilkinson and Mineral Wells. In Q2, we also realized an un-forecasted $5 million tax benefit as a result of tax planning strategies completed in Q2.

That tax benefit allowed us to record a one-time bonus in the same amount, and will be paid primarily to non-exempt hourly employees in lieu of a merit increase this year. No executives or other key management personnel will be included in that special bonus payout.

Also during the second quarter, we completed the distribution of the $675 million special dividend as required in connection with our REIT conversion. This distribution consisted of approximately $135 million of cash and 13.9 million shares of common stock.

This was the final transaction necessary to complete our REIT conversion. Moving next to a discussion of our guidance.

As indicated in the press release, adjusted EPS for the full year is now a range of $1.95 to $1.99, our Q3 adjusted EPS guidance is a range of $0.45 to $0.47, and Q4 is a range of $0.48 to $0.50. Full-year FFO guidance is a range of $2.65 to $2.69, and full-year AFFO guidance is in the range of $2.58 to $2.66.

Guidance excludes REIT conversion costs, refinancing costs, CAI acquisition costs and any other special items. There are a number of items to consider for purposes of financial modeling.

With regards to the third quarter guidance, the impact from the issuance of the 13.9 million shares as part of the special REIT conversion dividend was not fully reflected in Q2 shares outstanding, as the shares were issued midway through Q2 on May 20. As a result, weighted average shares outstanding will increase from 109 million in Q2 to approximately 117 million in Q3.

This increase in weighted average shares outstanding has a $0.035 negative impact on earnings per share sequentially from Q2 to Q3. We also expect to experience a decline in ICE populations from the spike we saw in Q2, which accounts for about $0.01 to $0.02 per share of the decline from Q2 to Q3.

And then, as mentioned earlier, Q2 included a reduction of operating expenses associated with the settlement of a litigation matter, which will not be duplicated in Q3, call that another $0.01 reduction from Q2 to Q3. We also expect to incur approximately $2 million of additional closure and ramp down costs in Q3 associated with Mineral Wells, Dawson and merit adjustment, an amount similar to that incurred in Q2, however we don't expect any ramp down in closure costs in Q4.

Regarding our recently announced acquisition of Correctional Alternatives Inc., as stated in Monday's press release, the acquisition is expected to increase our revenues by approximately $14 million and EBITDA by approximately $5 million on a fully annualized basis, excluding transaction-related expenses and transitional costs. After considering ongoing depreciation and amortization expenses, we expect the acquisition will be approximately $0.03 accretive to fully annualized pro forma 2014 earnings, with a neutral impact on 2013 earnings due to transition costs.

As mentioned in the press release, our guidance continues to assume all of the approximately 1,500 California inmates that were housed at our Red Rock facility at the end of Q2 will be returned to the custody of California by the end of the year in order to make space available for inmates under our new contract with the State of Arizona. Even though California is considering alternatives that could result in CCA retaining some or all of the inmates in Red Rock, past December 31, we've left this assumption in place as California has not yet finalized its plan for these inmates.

However, as Damon mentioned, we are discussing with California the beds available on our system that we could make available to replace the capacity they are losing at Red Rock, and to otherwise assist them with any additional needs. If we were to keep some or all the Red Rock inmates, costs incurred related to the relocation of these inmates would likely result in a relatively neutral impact on 2013 earnings guidance due to transportation costs and start up costs associated with activated -- activating vacant housing units at partially occupied facilities or activating a completely vacant facility.

As a result of the special REIT-related stock dividend, weighted average shares outstanding for each of Q3 and Q4 is expected to approximate 117 million shares, while full-year weighted average shares outstanding is estimated at 112 million shares. Finally, some investors have requested we provide pro forma in 2012 per share amounts adjusted for the stock dividend, but the date of services don't adjust for stock dividends.

So assuming the 13.9 million shares from our May stock dividend have been issued on January 1, 2012, full-year pro forma 2012 adjusted EPS is $1.38, while normalized 2012 full-year FFO per share is $2.06 and 2012 pro forma normalized FFO per share is $2.05. I will now turn it back over to Damon.

Thank you, Todd. So let me bring to a close our comments and make these final points.

So we've completed the last hurdle early this year for the REIT conversion. And for any new REIT investors on our call, I wanted to point out that we are a company that: one, has had 12 consecutive years of EPS growth and a CAGR of 11% over the last 7 years for AFFO per share; and as I mentioned earlier, we're well on our way to our 13th consecutive year of positive growth, but also again shows us to be very strong and durable from earnings perspective.

More importantly, our 10-year share price performance, inclusive of E&P, is north of 400%, showing our long track record of out-performance. We have an above-average dividend payout ratio and also a historical customer retention rate in excess of 90%.

Combined with a strong balance sheet and debt-to-EBITDA just under 3x, which you know is very low compared to other REITs, we also combine that with a strong operational record, very viable real estate assets with a 75-year life, high barriers of entry and diverse highly-rated government payers. As for the business outlook.

In summary, we're encouraged by some of the modest pop increases we've seen this year. We are also encouraged by the improved budget environment we're seeing on the state side, so we're also seeing extremely limited public sector investment on new government owned capacity to deal with growth and overcrowding, and our recent increase in population in Oklahoma is a great example of this.

We are also currently, in the United States marketplace, at less than 10% penetration in the corrections industry, so we see meaningful opportunities for us, going forward, over the next 3 to 5 years. So that concludes our prepared remarks.

Thank you again for calling in today's conference. And let me now turn it over -- back over to Lisa for Q&A.

Could you guys just elaborate a little bit more on the CAI acquisition? And sort of the strategic rationale behind getting that?

And what sort of the outlook is in terms of more such, I guess, diversification type of deal?

Absolutely. Manav, this is Damon.

And I would say we looked at CAI as a standalone transaction. It met our ROI threshold and saw as a good opportunity to obviously add value to the company and, long term, to our shareholders.

But a couple of key things that was very interesting and attractive on this transaction. One of which is there was 2 partners under contract with CAI that we have a lot of familiarity with, and Federal Bureau of Prisons and San Diego County.

We've got a facility, as you know, in San Diego County that we've been operating since the mid-'90s, so we know both folks on the county side of the government but also the Sheriff's Department very well. So that was attractive to us because we had those relationships and know how they think relative to these types of operations.

But also, BOP is again been a long term partner for CCA, so we saw that as an attractive feature in this transaction. But we also saw this an opportunity to have a little bit of a more of a footprint in California as they deal with the overcrowding and realignment and potentially how that creates a little more stress and burden for counties.

And again, being in San Diego County where we know all the players, and having this facility, we thought that it would be a good, also, strategic fit because of not only the needs in California, but also the relationship we have globally with the State of California. The last thing I would just mention about this transaction as we talked through this, is that we have, when you think about it, really 2 links of the -- kind of 3 links of the chain rolled out to Federal prisoner inmates.

So we've been working long term with the Marshals Service, going back to the '80s, and these are individuals that are arrested by Federal law-enforcement, put to Marshals Service custody and ultimately go through the court process. And if you're ultimately convicted as guilty of the crime, then they're handed over to BOP.

So we work with the marshals on kind of the front end when someone goes into the Federal system. We've been working with the BOP, which is kind of the midpoint, where they serve their sentence on their federal crime.

They really see this type of facility being kind of on the back end, where they're towards the end of their sentence and ultimately given release into the community. So really, getting another link in the chain with a system where these individuals go through for Federal crimes, we thought would be a good fit.

So I guess a pretty good flavor, kind of everything kind of went through our mind as it relates to this transaction. And this is -- this BOP contract, I should note, with CAI is the third largest in the country.

So...

Right. I guess that makes sense.

Just 2 follow-ups. One, can you, I guess, the existing footprint in California and the Customs obviously makes a sense.

Like how do you guys anticipate on leveraging your footprint with their services? I mean, they're clearly a much smaller company, so I get the aspect of having -- adding the third leg to the services you provide.

But would that entail, in order to grow that, entail making more such acquisitions in different regions?

Possibly, it's a very fragmented industry. And round numbers, I think there's about 9,000 individuals that are in these contracts nationwide.

So long term, this could make sense, something we'll be taking a look at. Another thing, Manav, that was interesting to us is that, as you know, we've got several facilities currently in the portfolio that are vacant that we think could be a good solution for other BOP resident community centers.

One example, as you know, that's on our inventory list that's been vacant several years is our Shelby Training Center down in Memphis, Tennessee. We think that could be a good solution like the CAI facilities are in San Diego.

So that's something that's kind of going through our mind too where we've got some existing capacity that may be a good fit for these requirements. And I guess to the first part of your question, the CAI, being in close proximity to our existing San Diego facility, we do think there's some leverage their too where we could use our existing operation to help support the other facilities.

So those are all kind of key things that went through our mind.

Okay. Just 2 more quick things for me, one just housekeeping.

Todd, like what should we estimate for total D&A for the year? I guess, I think, last time it was $116 million, just wonder if that changes with CAI.

And then just from a pipeline perspective, just around, more specifically, the asset purchases or facility purchases from states. Any sense of what's that pipeline looks like?

Should we expect one a year? Could it accelerate?

How does that look?

Your first question, Manav, on depreciation and amortization, around guidance $115 million to $116 million, full year. And the second part of the question, I'll let Damon address on CAI initiatives.

No, just more on the facility purchase initiatives. Just how many other states out there are looking to sell facilities like Ohio?

We haven't put a precise number to it. We've had discussions with, I'd say, several states on this type of a transaction.

But they are not publicly discussed. And on the local side, we also think there are several local jurisdictions that could be a good fit, relative to this type of transaction.

As I mentioned, I think, in the May call, we were complementary of GEO [ph] and the recent transaction they did in Texas, at the local side. So you now you've got both us and them have completed 2 transactions here in the last 12, 18 months, one that's state side, local side.

So I'd say several on the state, several on the local side.

Damon, from a broad perspective, your conversations with -- about new opportunities, whether it's deploying capital and buying a facility from a customer or prospective customer or talking about new facilities, would you describe the tone of those conversations as any different than they were 6 or 12 months ago?

Yes, Tobey. I would say it's modestly better and it's better than it was a year ago.

And last year was better than 2 years ago. So, yes, I would say it's on a trend where it's getting modestly better.

Not only the tone, but I guess I would also point to the actions. As I think about, specifically, Oklahoma and Arizona, those -- Oklahoma has increased their contract with us, Arizona has awarded the contract to us.

Those are 2 states, like other states, that were dealing with a very challenging fiscal environment here in the last 3 to 4 years. Our sense was is that, they were waiting it out and trying to truly appreciate have they reached the bottom relative to the decreasing revenues they were seeing from a budget perspective and defer some decisions.

So I would say not only the tone is improving, but I'd say these recent actions also are indicative of states feeling a little better about now is the time to make some decisions to deal with growth or overcrowding related to corrections.

So if I were to apply that to some of the RFPs that have been in the market over the last several years, they've kind of lingered than pushed out in terms of decision makings, kind of goes to what you just said. Going forward, in this kind of climate, should we expect an emerging RFP to therefore go to its conclusion in a more timely fashion?

Yes. I'd say there's kind of 2 answers that question.

I would say, going back to Arizona, I think that's another great example to part of your question, which is here is a state that I think from the time they awarded going back to when they did their first advertisement, I think was about 3 years, which was pretty long compared to historical kind of timeframe for awarding on procurements. So I do think that is going to be better again in this environment, where, again, states feeling a little better about their revenues and go ahead and pull the trigger once they announce a procurement.

Every state, Tobey, is a little different on kind of timing and when they'll do a procurement and how quickly they award. But I'd say, yes, I think, generally it's going to be better, I said -- as I said earlier, these actions, these recent actions, I think, are indicative of states feeling a lot better.

Damon, what would a normalized cycle time be?

Well I would say if you go on the state side, I'll just give you -- again, every state is a little different in their process and some states do it directly from the Department of Corrections when they do procurement, sometimes they have to go through another agency like administrative services or some type of procurement agency. But you've seen some states move as quickly as 6 months, but you've seen some states that may take 2 years.

So that -- to give you a range, I couldn't give you a precise, but the other thing I would say is that it depends on their situation, too. With California going back, I guess, now 6, 7 years when they were in this emergency situation and deal with overcrowding, I think they acted fairly quickly when they got to a point where they realized they had to reduce their overcrowding.

So if there's something really compelling going on the states, and it could be a little sooner, but if it's a state where they're looking over the next 3 to 5 years projecting growth and are not making a capital investment to deal with it, that growth, and they could be a little more orderly, a little thoughtful on how long they take on their procurement.

One other point I'd add to that, much of our historical growth in the past has come under existing contracts. I think Oklahoma is a perfect example of that, where they just send us incremental populations as their populations grow under existing contracts, and you don't see them going out and issuing RFPs to procure those beds.

They just expand populations under existing contracts.

That's a very good point. Yes, you look back over the last 10 years, that's where a lot of that has come from, it's just existing contracts where we've done amendments and change in scope.

Okay, that's helpful. And then, Todd, I just have one last question, I'll get back in the queue.

Is there an opportunity over the next several quarters for the rating -- the debt rating of the company to perhaps improve?

There's an opportunity for the rating improve over time. How quickly that transpires, it's difficult to say.

But based on the recent upgrade we had from S&P and some of the comments coming from Moody's and Fitch, post-refinancing, I think there's an opportunity. I can't put a timeframe on it.

I wonder if -- this is kind of a little more longer term, but, Damon, why don't you give us your thoughts on kind of industry growth rates? And just trying to understand from a secular perspective, obviously, the industry's matured a little bit but it seems like budgets are kind of structurally more challenged going forward.

Do you see kind of the challenging budgets going forward offsetting some of that positive secular growth? And what I mean is, just maybe a longer-term uptick in the growth rate than what you would've expected heading into this downturn?

Good question. I guess, let me give you a couple observations.

So if you go back over the last decade or, I guess, last 13 years, and look at the period of time between the recession on the overall growth rate of all 50 states and the Federal government, the rate has been anywhere from as high as a 3% down to low as 1%. Again those were the times between recession, and they've seen this current recession and then the -- also the one [indiscernible] in 2001, as you know, was basically flat growth with a little bit of decline in certain jurisdictions.

As I look and think about the next 5 to 10 years, I think that could be possible where you see that kind of normal rate again. Again, kind of the range that's kind of 1 to 3, could be a little lower, could be a little higher, year-over-year.

But I'd say that's probably in the normal environment. We are not in a challenged economic environment with a recession.

Historically, that has indicated to be a pretty good number for kind of forecast perspective. What I would say is very different figure today versus, say, 13 years ago.

That could be a positive for the industry and for the company, is that as I mentioned over the last 3 fiscal years, there's been limited investment on new public capacity at the state side and at the Federal side. You've heard me say that President Obama's budget for coming year is not proposing any new capacity for the BOP.

Marshals now completely rely on either us or local sheriff for capacity that makes it very limited capacity development state side versus 13 years ago. You'd still have pretty meaningful building programs both at state government, but also the Federal government.

So as they deal with that growth in overcrowding over, let's say, next 5, 10 years, we think there is a better likelihood they're coming knocking on our door to deal with that growth. So I'd say those are some of the kind of key characteristics.

Again, some of those based on historical, but also kind of recent events with the limited funding for new public capacity. And other thing I would just say is that, and this has been well discussed and talked about and debated nationally, but the challenges for states dealing with pension and health care costs and some dealing with very significant unfunded pension liabilities, those are -- continued constraint on budget dollars.

And I think that again puts in well-positioned to be there as they deal with these other costs line items in their budget, looking to us to help us -- helping them, I should say, create a very good solutions that are cost effective on the correction side.

Got it, that's helpful. And then just switching gears to CAI a little bit.

I just want to make sure I understand. If you were to kind of sync up with California and San Diego, would those beds be to the county or to the state?

Number one. And then number two, I just want to make sure I kind of understand, is it kind of part of traditional CAI service offerings or is it more traditional court incarceration in terms of what will you have in San Diego County?

So, yes, 2 answers there. So the relationship currently between CAI is with San Diego County.

And again, we've got a longer relationship with the county already. So as I think about California, and they're overcrowded, as you know, they've gone through this huge shift here in the last 2 years through realignment where they're moving more individuals to the local level.

And so we think San Diego County, and dealing with realignment, which is coming from the state level, there could be future needs there. So again, having a footprint in that county with existing facilities we think is a good thing as they deal with realignment.

As it relates to your second question, we've operated really for a couple of decades minimum security facilities or pre-release facilities, what's a little different with these facility versus others we've done, is just the really kind of the design of the facility, but also these facilities in San Diego do allow individuals during the day to do -- have employment. So help them get gainfully employed locally, so they're -- they've got a job prior to release.

So that is kind of a nuance, a little different phase of the operation, but like -- so we've been operating minimum security facilities nationally for many years.

I'd just add to that. CAI's excellent reputation in California could also provide opportunity to meet the needs of other counties outside San Diego, within California.

Got it. So if it's -- if I have it right, it's about a $14 million run-rate now, with upside, does that sound fair?

Yes.

Yes.

And just a couple other points of information. So that $14 million run rate is with about 400 out of 600 beds filled.

So there's about 200 vacant beds available for use by San Diego or, potentially, another user.

Got it. And then, just -- does that fall follow under the TRS or the QRS?

It'd be a combination of both.

All right. Thank you, Lisa.

I want to tell everyone, thank you very much for your time and participation today. More importantly, to our investors, thank you very much for your investment in CCA.

Your management team is focused on executing on another good quarter and a strong ending to 2013. And we look forward to reporting our progress during the rest of this year.

So thanks, again, for participating in today's call.