CoreCivic Receives Termination Notice From U.S. Immigration and Customs Enforcement At South Texas Family Residential Center
CoreCivic (NYSE: CXW) has received a termination notice from U.S. Immigration and Customs Enforcement (ICE) for the South Texas Family Residential Center, effective August 9, 2024. The facility generated $156.6 million in 2023 and $39.3 million in Q1 2024. CoreCivic estimates an annualized earnings per share reduction of $0.38 to $0.41 due to the closure.
The facility, initially opened in the Obama-Biden administration, shifted its focus to detain single adults in 2021. Currently housing 1,561 individuals, CoreCivic leases the facility and land from a third-party lessor, with lease terms extending through September 2026. The company has suspended its financial guidance for 2024 due to cost uncertainties related to the closure.
- The termination of the lease agreement can help CoreCivic mitigate further financial losses.
- CoreCivic acted promptly by providing a 60-day notice of lease termination to the lessor.
- The immediate termination notice from ICE is set to impact CoreCivic's annual earnings per share by $0.38 to $0.41.
- Revenues of $156.6 million in 2023 and $39.3 million in Q1 2024 from the facility will be lost.
- CoreCivic has suspended its financial guidance for 2024 due to uncertainties related to the closure.
- The facility, which houses 1,561 individuals, represents a significant operational responsibility.
- Termination rights allow ICE to end agreements without penalty, highlighting a risk of future terminations.
Insights
CoreCivic's recent notification from ICE to terminate the contract for the South Texas Family Residential Center is a significant development. For retail investors, the most pressing concern is the financial impact. The facility generated
Suspending financial guidance for 2024 signals uncertainty, impacting investor confidence. The estimated reduction in earnings per share (EPS) by
With ICE's termination rights allowing them to opt-out with just a 60-day notice, CoreCivic faces high operational risks in such agreements. Investors should be wary of similar dependencies on single clients or facilities, reflecting the need to diversify revenue streams to mitigate such risks.
For the longer term, this could present an opportunity for CoreCivic to re-evaluate its portfolio and invest in more secure contracts or diversify into other services to stabilize revenue streams.
The termination of the agreement between CoreCivic and ICE reflects broader industry trends and regulatory risks. The shift in ICE's operational strategy and the high degree of federal oversight and policy changes create a volatile environment for companies dependent on government contracts. This move might signal a trend towards reducing reliance on private facilities, which could impact CoreCivic's business model.
Investors should consider the potential for similar terminations at other facilities. The regulatory landscape and public sentiment against private detention facilities have been evolving and this could foreshadow further contract cancellations or adverse policy shifts. Analyzing market trends, including government spending in the private corrections sector, can help gauge the long-term viability of such investments.
While this specific termination impacts short-term revenues, it also underscores the importance of understanding the political and regulatory environment in which CoreCivic operates. Diversifying into less politically sensitive segments might be a prudent strategy for the company and its investors moving forward.
BRENTWOOD, Tenn., June 10, 2024 (GLOBE NEWSWIRE) -- CoreCivic, Inc. (NYSE: CXW) ("CoreCivic") received notification today from U.S. Immigration and Customs Enforcement ("ICE") that the agency intends to terminate an inter-governmental service agreement (“IGSA”) between CoreCivic and ICE for services at the South Texas Family Residential Center in Dilley, TX (the “Facility”) effective in 60 days, or on or about August 9, 2024.
For the year ended December 31, 2023, and for the quarter ended March 31, 2024, total revenues at the Facility were
South Texas Family Residential Center was initially opened during the Obama-Biden administration to improve conditions for a high volume of families then arriving at the border. The facility features such amenities as turf soccer fields and onsite medical care. During 2021, the facility's mission shifted to detention of single adults. The population at the Facility stood at 1,561 as of June 9, 2024.
CoreCivic leases the Facility and the site upon which it was constructed from a third-party lessor. CoreCivic's lease agreement with the lessor is over a base period concurrent with the IGSA, which was amended in September 2020 to extend the term of the agreement through September 2026. ICE's termination rights, which permit ICE to terminate the agreement for convenience or non-appropriation of funds, without penalty, by providing CoreCivic with at least a 60-day notice, were unchanged under the extension. Concurrent with the extension of the amended IGSA, the lease with the third-party lessor for the site was also extended through September 2026, and permits CoreCivic to terminate the lease agreement with a notification period of at least 60 days. CoreCivic has provided such notice of lease termination to the lessor.
About CoreCivic
CoreCivic is a diversified, government-solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. We provide a broad range of solutions to government partners that serve the public good through high-quality corrections and detention management, a network of residential and non-residential alternatives to incarceration to help address America’s recidivism crisis, and government real estate solutions. We are the nation’s largest owner of partnership correctional, detention and residential reentry facilities, and believe we are the largest private owner of real estate used by government agencies in the United States. We have been a flexible and dependable partner for government for more than 40 years. Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good. Learn more at www.corecivic.com.
Cautionary Note Regarding Forward-Looking Statements
This press release includes forward-looking statements concerning the termination of the IGSA, the anticipated financial impact, and the termination of CoreCivic’s lease agreement for the Facility. These forward-looking statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. Such forward-looking statements may be affected by risks and uncertainties in CoreCivic’s business and market conditions. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Important factors that could cause actual results to differ are described in the filings made from time to time by CoreCivic with the Securities and Exchange Commission (“SEC”) and include the risk factors described in CoreCivic’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 20, 2024. Except as required by applicable law, CoreCivic undertakes no obligation to update forward-looking statements made by it to reflect events or circumstances occurring after the date hereof or the occurrence of unanticipated events.
| Contact: | Investors: Michael Grant - Managing Director, Investor Relations - (615) 263-6957 Media: Steve Owen – Vice President, Communications - (615) 263-3107 | |
FAQ
What is the financial impact of ICE's termination notice on CoreCivic's earnings?
When will the termination of the agreement with ICE become effective?
How much revenue did the South Texas Family Residential Center generate in 2023?
Why did CoreCivic suspend its financial guidance for 2024?
What is the current population at the South Texas Family Residential Center?
