CCA’s Plan during the Economic Downturn

A candid conversation with CCA leadership on the company’s positioning, preparedness and plan during the recession

The inaugural companywide town hall meeting of 2009 kicked off by addressing the national economic mood and financial climate. During the February meeting, company leadership focused on the near-term prognosis and longer-term future of the company during an era of fiscal turmoil, at a level unprecedented in the lives of many employees.

What’s in store for CCA this year? What changes may be made as the company weathers the recession? Here, a diverse body of company leaders openly discusses current challenges facing CCA and correctional agencies, along with their plan to maintain momentum.

Panel of Experts
Damon Hininger, CCA President and chief operating officer
Tony Grande, CCA executive vice president and chief development officer
Bill Rusak, CCA executive vice president and chief human resources officer
Todd Mullenger, CCA executive vice president and chief financial officer

Financial Challenges

Correct Perspectives: What are the biggest financial challenges facing the company?

Damon Hininger: CCA is facing challenges only because our state and federal customers are experiencing millions, if not billions, of dollars in budget shortfalls. So, we have some excess bed capacity currently. But our challenges are vastly smaller than perhaps a majority of companies. Without a doubt, our company is sound and stable at its core, and the long-term viability of our company and our ability to grow are solid.

Tony Grande: As governments across the country streamline their budgets, our state and federal customers are under intense budgetary pressure. With budgetary shortfalls, they are looking at every alternative to save money. As a result, corrections spending is being scrutinized. Our customers are considering every measure to reduce expenses, including scaling back some of CCA’s populations or per diem rates. Budget constraints are also forcing many states to delay and even cancel their own plans to build prison capacity, which should create a greater need for CCA bed capacity over the long run.

Todd Mullenger: We’re waiting to see what the federal stimulus package brings to each state and how that will affect decision making. Some of our loyal customers have requested a reduction in per diem rates. We are working hard to manage through these requests.

CP: How are committed projects being affected?

Tony: Awards for contracts have been delayed due to budget short falls. As an example, the Bureau of Prison has delayed award of its open procurements until a permanent federal budget passes. Budget troubles have also caused our state partners to postpone commitments for additional capacity, which is the central issue behind our postponing the construction of the Trousdale facility in Tennessee.

Todd: Despite such considerations, our company’s liquidity remains positive. We have a strong balance sheet and good cash flow. Financing for current projects is available from current funding sources.

CP: How is Business Development shoring up interest in new partners and maintaining positive partnerships with existing customers despite these challenges?

Tony: Research supports the strength of our industry and company to deliver value to government and taxpayers – during and after this economic downturn. State inmate populations continue to climb, and as states continue exploring cost-effective measures, more are considering the flexibility and affordability presented by public-private partnership. We believe we will be in a strong position once the recession is eased, because states will have high inmate populations, limited capacity and a desire to find efficiency for public dollars.

We will continue to work with our customers to find solutions in alignment with their budgetary needs and, at the same time, allow us to keep facilities open and staffed. At times, this demands that we amend contracts to achieve greater savings and, frankly, be very creative as we try to balance the customer needs with our own commitments to our employees and shareholders.

Careers and Benefits

CP: Are existing jobs stable?

Bill Rusak: We are doing everything possible to safeguard the livelihoods of our employees and the operations of our facilities. It is important for us to continue our commitment every day to safe and secure operations. That is the key to our continued viability.

CP: Will the 401(K) plan be affected?

Bill: We will continue to match 401(K) contributions up to five percent. For career-minded employees, this is a strong benefit. They will continue to receive the same benefits package that has been available. Our benefits are generally even more competitive than many private sector companies and as competitive as public corrections.

Specific Efficiency Plans

CP: What other changes can employees expect immediately or anticipate in the near future?

Damon: Management has developed a comprehensive action plan to enhance efficiencies. Our plans include cost reductions, improved productivity, enhanced service quality and overall innovations to streamline processes.

CP: What changes are underway at the Facility Support Center to enhance efficiency?

Damon: Serious efforts underway at the FSC to ensure increased efficiency, among them: Business Development – We’re reviewing all contracts for places to renegotiate and/or offset request for reductions and minimizing team meetings for customer relations managers who live outside of Nashville, in order to reduce travel expenses.

Conferences – We have cancelled the annual human resources managers meeting and will focus on video conferences and other ways to communicate. Operations cancelled the annual wardens meeting and will identify other ways to save travel expenses.

Construction – The Real Estate and Construction department is researching ways to reduce construction and ongoing costs with new designs and vendors, allowing us to retain cash to continue to pay for ongoing business expenses, including salaries and benefits.

Cost Reduction – Management has cancelled the Tennessee Titans box at the stadium.

Executive Pay – We anticipate freezing salaries.

Finance – Finance is reviewing processes to improve cash flow.

Hiring Freeze – We are implementing a hiring freeze at the FSC for any new, unbudgeted positions.

Inmate Medical – Health Services is identifying new, lower cost providers for inmate health insurance.

Outsourcing – Legal is minimizing use of external services.

Programs – The Inmate Programs department is identifying new ways to deliver programs.

Purchasing –The Purchasing department is reviewing all vendor contracts for potential savings.

CP: How are other opportunities to increase efficiency being recognized and implemented?

Bill: We believe all of our employees have the ideas that can add to improving our performance at facilities and the FSC. We are introducing a companywide improvement plan that will allow all employees to contribute their suggestions toward our goal of fending off our current economic woes and positioning us for a prosperous future. We have contracted with a nationally-known consulting company which is helping some top FORTUNE 100 companies streamline their operations. Teams within CCA – both from the FSC and the facilities - will begin analyzing all areas of our daily operations and help us identify ways to work smarter. This isn’t about working harder or working longer. It’s about having smarter processes that save us time and costs.

By K. Danielle Edwards
Correct Perspectives, May 2009

Sound Out

C/O Kilpatrick at Diamondback:

First off I would like to thank the CCA adminstation for clarifying quite a few questions that I have been wondering about. They seem to have everything well in hand and I hope that we as a company will be able to power through this recession and come out ahead and stronger than before. The new CCA EXCELerate I think is one of the most innovative ideas that I've seen coming from a large corporation. It shows that this CCA listens to the individual opinions of their staff and takes these opinions seriously. I can see that the CCA family will continue to grow and prosper even after this recession. I am also proud to see that the adminstration didn't automatically look to lay-offs as a means to cut costs. I have worked for some other companies in the past and this was always their main solution when financial turmoil struck. Again I say that I will continue to work for this company as long as I'm able. Thanks again to Mr. Hininger, Mr. Grande, Mr. Rusak, Mr. Mullenger and everyone else that has helped, is helping, and will help CCA through this difficult but manageable time.

M. Toney at North Fork:

The economy is down, but prices are still going up everywhere. It is going to get harder to purchess and do things every where. This is getting very difficult for for faimlys also. This is a hard time for all. I know we can get through this if we just stay as a faimly, not arguee over the little stuff, Really think if it a want or NEED.

Linda Sevison at Idaho Correctional Center:

I appreciate the fact the our leadership has been up front with information regarding our company's status in this time of economic turmoil. During the Town Hall meeting, they were straightforward and honest and didn't try to paint a picture that was an illusion of wine and roses. They explained the need for conservation of supplies and curbing expenses and why we all need to be accountable for what we do at each of our facilities. By facing reality and accepting the facts as they are, we will be prepared to meet the demands of the future, and we will be successful as a company.

Lyle Russell at Red Rock:

When the economy went south, alot of people including myself were concerned about their jobs. I appreciate the fact that people are not being laid off, but when I reviewed the company's financial report, I was baffled as to why we did not receive any raises. The company has made more money than at this time last year. I am also aware that the company has been awarded several new management contracts this year despite the failing economy. I feel the current state of the economy will benefit CCA because I feel that more government agencies will turn to CCA to save money