Q1 2020 Earnings Call
During this unprecedented time. Our number one priority is the health and safety of those entrusted to our care our employees and our communities were more than 35 years. We have worked closely with our government Partners to develop and Implement industry best practices to handle the potential spread of infectious diseases.
Our executive management team has deep expertise leading the company through times of economic volatility rapid fluctuations in customer needs and operational complexities. Am I myself have been with the company for over twenty eight years and have served in my current role for almost eleven years.
Dave has been with the company for nearly twenty years and has served the last six years of CFO.
Our operational leaders have Decades of experience addressing complex and unique challenges across the corrections industry both public and private. I am very confident in our team's ability. Just leave the company through these difficult times and I'm impressed with the speed at which we deployed comprehensive plan to tackle the virus.
I know what year is it for Patrick Swindell are cheap corrections officer. He directed in early March the activation of our Emergency Operations Center or within our facility support center here in Brentwood Tennessee to manage and direct leadership and resources across our portfolios appropriate throughout the pandemic.
We structure our platform to follow FEMA's National incident command system protocols. So we are following emergency response best practices.
It's 2004 reoc platform has followed these FEMA protocols. So we have dedicated operations staff who have been thoroughly trained and have conducted live simulations in preparation for constructive and it's like natural disasters within our facilities, but also like the one we are currently currently experiencing.
We also formed a covid-19 task force, which is chaired by one of our long-term senior operations leaders Steve Connery who is also a former executive with the New York City Department of Correction. The task force is made up of our medical experts including our chief medical officer and operations leadership and is charged with monitoring the progression of October nineteen working with each facility developed response plans and exploring emergency contingency options.
the resulting covid-19 medical action plans were developed for each safety and Community facility these plans include implementing current guidelines from the CDC and World Health Organization for covid-19 at all costs of facilities structuring plans to separate high risk individuals in our care who are potentially more susceptible to the virus off virgin employees to stay at home if they are ill
Have medical staff participate in the intake process to identify those who are deemed high risk of being infected with or Contracting covid-19 working closely with our government Partners to schedule an in-person visitation at our facilities and finally working with local and State Health departments to conduct appropriate testing.
We quickly pushed out guidance to our facilities to actively promote healthy habits for individuals in our care including regular hand hygiene respiratory etiquette and avoiding touching of one's faith. We also implemented strategies for practicing social distancing for all individuals within our facilities.
We also trade all our employees to help prevent the spread of covid-19 and other respiratory diseases through similar guidance expanding the guy ins for win. Our employees are outside of the facilities.
It all course. It fixes Salty's staff adhere to the CDC recommendations for cleaning and disinfection.
This includes cleaning and disinfecting surfaces objects and shared equipment that are frequently touched or used by staff members or those in our care.
Our facilities used commercial cleaners and epa-registered disinfectants that are effective against the virus that causes covid-19 following label instructions to ensure their safe and effective.
We have adequate supplies of Port these intensified cleaning and disinfecting practices.
The initial Nationwide shortage of personal protective equipment and covid-19 testing equipment required us to coordinate a portfolio light supply chain. In order to provide face masks to all staff and individuals in our care consistent with CDC recommendations and ensure availability of testing equipment.
And guidance from the CDC on the use of masks recently changed. We have worked hard too quickly sure that we are in full compliance.
We also had to coordinate with each of our government Partners as their policies involved to expand utilization of PPE.
Importantly with PPE we provided information materials and instructions to employees and those in our Care on how to properly use the equipment to reduce the risk of contamination. The CC makes it clear that the mass recommendation compliments but does not replace other critical steps to help prevent the spread of covid-19.
Other measures like social hygiene recommendations as I mentioned earlier are the primary measures to reduce the spread of the virus.
B r supply chain for PPE and testing equipment are most critical supply lines of food Pharmaceuticals and other medical equipment were bolstered in advance and we may currently do not anticipate a significant supply chain disruption nor have we experienced one?
The combination of our detail facility-level action plans are covid-19 task force mobilized and our Emergency Operations Center functional We believe We position the company to be well prepared to appropriately and thoroughly respond to the buyers with care for the safety and well-being of those entrusted to us and our communities.
As a 24/7 operation was a largest challenges. We Face the Staffing particularly in a strong economy with low unemployment. We along with all public and private collection systems. It's a stiff competition in the market the last few years to attract and retain Talent while the unprecedented increase in unemployment since the start of the pandemic May significantly expand upon available. These Corrections is facing an additional Challenge and Staffing with covid-19. Now that is when you have a tests come back positive for either staff or in fact, we follow the guidelines that you should for actively isolate for up to 14 days others who may have come in contact with the individual.
In certain cases, you could see an individual facility temporarily lose a meaningful percentage of their Correctional staff created the need for us to take additional steps to fill critical posts.
Our action plans included it contingencies to employ staff from other facilities from around the country with lower covid-19 impacts to support facilities that may have higher covid-19 impact temporary reductions in available staff. This is an important contingency plan that we have utilized which can't necessarily be replicated in the public sector when their employee pulls are consumed in a single state.
Other challenges our government Partners face are that many of their facilities are overcrowded or operating the design capacity and outdated with physical plant designs that do not allow use of separation.
Social distancing according to the c c d c is a critical step everyone should take in order to reduce the spread of the virus. When a facility is operating above its design capacity. There is less available square feet per resident in some cases making social distancing in accordance with CDC guides impossible.
Our facility designs are generally more modern and allow for easier seperation and social distancing plans.
And as they are break of the virus has infected various public Correctional systems. Our bed capacity has done to comment important part of our government Partners ability to adhere to the CDC guidelines regarding this scene and separation of covid-19 positive individuals.
Examples of this are with both the states of Kansas and Nevada who have extended agreements with us to allow for a lower density within assistance by utilizing a city within our store or facility in Arizona. What is yet to be determined is if these measures to reduce density and capacity levels will be implemented on a more permanent basis across our nation's Correctional systems. But as always we believe our capacity serves an important role in reducing overcrowding among of our among our government partners.
Challenge is related to outdated facilities can create many situations that increase the risk of transmission of the virus. For example, many older facilities use Central HV AC systems that recirculate are throughout the entire facility.
This is particularly impactful with Airborne communicable diseases.
Another example could be that an older facilities medical units, maybe lack negative pressure rooms that allow individuals that have been tested positive to be medically isolated.
Our portfolio of Correctional real estate assets is newer and more modern. So we do not face the type of significant real estate limitations that many other systems face.
And here are a few numbers around this in stages where we conduct business within our safety statement. Our facilities are approximately half the average age of the state's public prisons off.
In fact, there are 39 prisons or about 43,000 beds within our state customer group that are fifty years old or older and even seven prisons that are a hundred years old or older.
Let me now provide some detail on the number of confirmed cases. We have experienced to date March 19th. We had our first confirmed case that affected a staff member and on March 28th was when we had our first president. That was a confirmed case.
As of Tuesday of this week, we had a hundred Forty-Eight staff cases and 1630 confirm resident cases. These are not necessarily Active cases just came that we confirmed over the last 60 plus days to put this in perspective. We have approximately 15,000 employees working for the company and an average of $56,000 off in our seventy plus prisons detention and Community Corrections facilities over the last 60 days.
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Pants with Jordy of the confirmed cases we have had for a systematic at the time of testing which is consistent with what other correctional systems around the country are reporting.
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And as of Tuesday, we currently have three staff members and thirteen residents that were receiving local medical treatment near their places of work or facilities where they are housed.
Finally, it is estimated that approximately 218 have died nationally because of covid-19 related causes and tragically we have had two deaths which actually were this week and they are being monitored for pending autopsies or official death rulings as both tested positive for covid-19, but also have a pre-existing medical issues and multi-day hospitalizations.
Finally on this topic with us working with nearly twenty government Partners around the country. We have worked closely with our pro-active testing within our facilities. The most recent project to conduct wide-scale testing is the same Tennessee and that effort is ongoing this week going into later this month check out course of it. Com for news releases for more information. What is taking place here in Tennessee, but also information for family members of incarcerated individuals, which includes detail about are 24/7 Information Hotline with a live operator.
And we have made it known that we believe the data gathered from these math testing efforts can also be critical to public and private health professionals government leaders wage and scientists around the country as we better as we tried to better understand this virus.
Oh that'll take a few minutes to review how covid-19 pandemic has generally impacted. The utilization trends of our government Partners Immigration and Customs Enforcement has experienced the most significant impact of any of our partners and for Unique reasons.
Today, they're total detention population is approximately thirty thousand Nationwide which is a sharp decline from their population at year end 2019 roughly 43,000 detainees off. Some of this decline has been the result of Iceberg actively releasing detainees that are deemed to be higher risk.
However, the largest impact has been the result of reduced activity at the Southwest border and the federal government's decision to deny entry at the border to Asylum Seekers. And anyone crossing the border wage the proper documentation in an effort to contain the spread of covid-19. These factors have resulted in a reduction in the number of people being apprehended and detained by choice.
Beyond
Certainly of how long the pandemic will play out. We are also uncertain on how long the federal government will keep these border restrictions in place.
As our largest customer representative, possibly 28% of our Revenue in the first quarter. This reduction in utilization has a material effect on our near-term earnings. But as of now, there is no indication that will have a long-term impact on Ice demand for our Real Estate Solutions.
They should transfer United States Marshal Service the Federal Bureau of Prisons and obviously declined as a result of covid-19. This is due to disruption in the criminal justice system adds. The number of courts in session and prosecutions have have declines and with many state local government agencies too excited to release certain offenders to reduce the number of covid-19 transmission.
With some states already starting to reopen their economies and even more following several plans over the next few months. We expect a coinciding gradual resumption of Old Government activities returning to prepay demek levels.
Now that we probably cover our response to the covid-19 and impact on our government partners are experiencing an out like to take a moment to touch on our first Cup results.
In the first quarter, we posted total revenue of 491 million a 1.5% increase year-over-year and normalized ffo per share of $0.54 or a penny above the height of our first quarter twenty twenty guys that we reaffirmed last month.
The primary driver our financial performance in the quarter versus our original guidance was the experienced that we experienced lower-than-expected operating expenses in our safety portfolio.
At this time, we are not providing Financial guidance for the second quarter or four year 2020 due to the uncertainties around the length of the covid-19 pendek off the timing and pace of the recovery and policy choices by federal state and local governments.
We remain focused on position the company for the long-term understanding that the phonemic pandemic will eventually pass and our government Partners will continue to face the same challenges that were present throughout the nineteen and perhaps even more it is with that Focus that we continue to make prudent Investments That We Believe will provide long-term benefits.
As I mentioned earlier the key to our long-term success is our entire course of 18 to show our appreciation for their service and dedication during the pandemic all front-line employees wage hero bonus. We have also provide additional paid leave and Healthcare benefits for our employees. We believe it is the right thing to do for our employees wage is so dedicated and steadfast through a very difficult time.
One thing that is certain is that government revenues will see a meaningful reduction this year due to the shutdown of certain portions of the economy.
The pace of economic recovery will also affect future tax revenues, which is this time is difficult to predict and will likely vary greatly state-by-state.
A reduction in tax revenues can be a challenge for state agencies as budget cuts are often the result. The good news is that most states are in a better physical health than the latch option due to the financial crisis with larger rainy day funds to weather disruptions and the economic disruption occurring today is not the result of structural issues within the economy or an industry.
They're also discussions in Washington about a potential federal aid to State and local governments to assist in the recovery, which we will continue to monitor.
Even without a door a quick economic recovery. We have experienced we have the experience to whether these challenges as we did successfully during the last recession and drawn-out economic recovery.
Today, we have not seen any negative negative budgetary impacts to our contracts, but we are prepared to address these situations and mitigate are risks that they arise.
As you can see we have been very proactive in our response to his unprecedented pandemic and we are upholding our commitment to bettering the public good weather sucked into covid-19 or the work. We do everyday to help people prepare to return to our communities. We believe strongly in the role that we play in the difference we make in people's lives.
That before I turn it over today. I want you to know that we're continuing to focus on our core Mission and doing everything we can to support our employees then visuals in our care package unit. He's and our government Partners you can see these commitments are ingrained in our response to covid-19. Here are just a few examples.
For employees. We have expanded health care and PTO benefits and provided a hero bonus.
The residents we have negotiated free phone calls from vendors and obtained government authorization to waive medical co-pays.
Our communities we have offered our idle capacity at no cost to help local Health Systems combat, covid-19 and Hospital capacity shortfalls. We've also donated to local food banks and covid-19 response funds.
And we have worked collaboratively with our government Partners to roll out new and enhanced policies and protocols response to the pandemic working aggressively to ensure consistent supply chain of critical items and it remains flexible and Nimble to address needs as they arise.
This represents only a small sample of our response efforts. I encourage all of you to go to our website and corecivic.com to see all the material we have published about covid-19 response wage weekly updates on our efforts.
All right now like to pass the call over today to provide more detailed look of our financial results in the first quarter the strength of our balance sheet and liquidity position and other recent Trend with Dave. Thank you Damon and good morning everyone in the first quarter. We generated $0.27 of eps or $0.30 of adjusted EPS compared to our guidance range of $26.29 on a normalized ffo total $0.54 per share compared to our guidance range of $49.53 a f f o total $0.58 per share compared to our guidance range of $50.54 off and adjusted even it was a hundred point four million dollars for the quarter compared to our guidance range of 96 to $99 adjusted amount to exclude expenses associated with m&a transactions off on recurring deferred tax expense, both of which were included in our guidance and $500,000 of asset impairments associated with the sale of an idle residential re-entry Center for 1.6 month.
Hours completed in the second quarter Revenue was slightly blower forecast for the quarter due to reduction in March. However, our financial results for the quarter exceeded our guidance levels due to positive variances cameras operating expense categories as well as in G&A expenses. Our first quarter results were largely unaffected by covid-19. Although are compensated populations declined by 1300 days from March 20th, when the federal government closed the nation's Southern border to March 31st, in order to help contain the spread of covid-19 due to uncertainties related to the potential impacts the pandemic we went through our full-year financial guidance on April 1st our management team and board have been through numerous crises and have been actively managing this one under protocols that build off historical experience that have been specifically tailored to the Dynamics of covid-19.
We've been focused on the on the potential impact for Frontline staff and residents entrusted to our care and have made Investments to help ensure their safety is Damon described. I will provide them with additional color about the potential Financial impact is we're also focused on maintaining the long-term Financial Health of the company. However, quantifying the financial impact of covid-19 is challenging in these unprecedented the times as government actions and responses continue to evolve we expect the largest financial impact of covid-19 on our business to be reflected in our safety segment and more particularly our federal wage populations within this segment at the beginning of the year. We expect a reduction in ice population throughout 2020 compared with 2019 because of a dramatic rise in such populations during 2019. When Southwest border apprehensions reached the highest levels in over a decade as we do not believe these high levels would be sustained. However, the decision by the federal government to deny entry at the birth.
The border to Asylum Seekers and anyone crossing the southern border without proper documentation or authority in an effort to contain the spread of covid-19 as Amplified the reduction in people being apprehended and detained. Yes further disruptions to the criminal justice system have also contributed to a reduction in the number of US Marshals populations and to a lesser extent State populations is the number of courts in session with us and prosecution's have declined due to shelter-in-place orders and other covid-19 related restrictions on individuals businesses and services.
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From state and local government agencies have released vulnerable inmate populations. But so far. This has occurred more in local jails than in State Correctional Facilities where the design is more conducive to promoting social distancing separating certain populations and reducing offender interactions is Damon described nonetheless. Our total compensated populations have declined by an additional two thousand offenders or 3% since the end of March through the end of April again, most of which are ice and Marshalls detainee's management revenue for April was 3% lower than March excluding the impact of one pack a day in April compared with March. We cannot predict how long asylum-seekers and anyone attempting to cross the southern border without proper documentation or authority will be denied entry. Therefore. It is difficult to quantify the impact of our more transient Federal offender populations. It is also difficult to predict the actions of our state Partners in response to any outbreaks in public or private correctional facilities, and we cannot predict how long the cross
Justice system will be disrupted or how long it may population levels will remain below their pre covid-19 levels. I will note that none of our management contracts and the safety segment have been modified because of covid-19 our community segment produces about 5% of our net operating income the residents in our community segments are usually serving the last portion of their sins and are preparing for release from government custody wage or or are referred to our programs as a diversion from prison or jail placement, like our safety segment the disruption in court hearings as well as an overall desire to minimize movement within the system have result of a reduction in the number of referrals to our community facilities. Additionally some of our government Partners have transferred certain residents assigned to our re-entry facilities to non-residential statuses such a home confinement or early releases to create additional space for enhanced social distancing within our re-entry facilities.
Further residents are responsible for a portion of the subsistence payments which could be impacted by by a curtailment and work programs available to them negatively affecting our Revenue to the fact that the government agency does not supplement such payments conversely. It is also possible that government agencies will increase the utilization of our community facilities or home confinement Services as an alternative to incarceration. The Federal Bureau of Prisons has begun implementing plans to release certain federal prisoners from custody and placed them directly into home confinement, which could mitigate some of the reduction in populations. We have seen so far.
Our property segment which produces about 12% of our net operating income and consists of fifty-seven properties including with our most recent portfolio acquisition completed in January 2020. 45,000 is least to the federal government through the general Services Administration and seven properties least two state agencies. Although most of the tenants in this segment temporarily closed their offices by order of the agencies leasing the properties. We do not currently expect the financial performance of our property segment to be materially affected by covid-19 and with ninety-nine percent of the revenue in this segment generated from federal and state governments. We do not expect any rent concessions at least modifications or any bad debts because of all the uncertainties associated with our safety and Community segments. We have suspended our financial guidance until we can produce more reliable estimates in the face of these uncertainties. However, we are pleased to manage a strong balance sheet with ample liquidity. It is a March 31st. We hit over $335 billion dollars of cash on hand off.
$155 million of availability
A revolving credit facility in addition to a 350 million accordion feature under our credit facility which matures in 2023 our cash balance reflects a partial draw we made on our credit facility at the end of March out of an abundance of caution due to uncertainties associated with covid-19 and to maintain maximum balance sheet and operating flexibility except for the dividend payment. We made in a pack our cash balance is slightly higher today than we have not seen any change in the timing of payments from our government Partners despite many of their offices being closed our leverage measured by net debt-to-ebitda is 3.85 X using the trailing twelve months and we have no debt maturities until October 2022. Therefore we have no need and do not anticipate accessing the capital markets in the office.
We will continue to monitor government assistance made available to businesses and will Avail ourselves of certain Provisions under the cares act the further bolster liquidity without putting undue burdens on our strategy one notable benefit includes the deferral of the employer portion of Social Security taxes, which will enable us to defer payments of approximately Thirty million dollars accumulated this year half of which is due December 31st, 2021 with the other half due December 31st, 2022. The other notable benefit permits us to accelerate expense recognition for tax purposes on certain qualified improved property retroactive to 2018.
We have taken action to reduce operating expenses including expenses. Although we have and will continue to incur incremental operating expenses because of covid-19 at least until the exercise last month. We announced the hero bonus to be paid to all facilities staff who are working through these challenging conditions, including those mandated to stay at home because of covid-19 that we estimate of a total between 6 and 1/2 + 7 and 1/2 million dollars during the second quarter. We have also provided additional PTO and are encouraging incremental expenses to procure personal protective equipment wage going to 1 and 1/2 to 2 million dollars each. Although we have had a relatively small number of inmates require hospitalization due to covid-19. We do not expect the material increase in our inmate medical expenses.
With the completion of construction of our Lansing Correctional Facility in January 2020, which was a hundred percent financed with proceeds from a private placement. We have no material Capital commitments as a result of the uncertainties associated with covid-19, including volatility in the equity markets. We do not currently expect to complete any additional Acquisitions for the remainder of 2020 or until we have further Clarity around the impact of covid-19 on our business. We are targeting a 10% reduction in our maintenance Capital expenditures, which we now expect it to Old fifty-four million dollars split evenly between real estate and non real estate assets our 2018 capital expenditure forecast also includes approximately seven million dollars for ten in improvements of leasing commissions unchanged from our estimates at the beginning of the year associated with new lease agreements.
Even though we are on.
Unable to provide Financial projections with the level of precision. We're accustomed providing we expect to remain in compliance with all of our debt covenants and generate significant positive cash flows. After maintenance Capital expenditures thousand two hundred million dollars are most restrictive covenant is the total leverage Covenant in our bank credit facility, which requires us to maintain on a quarterly basis and net debt-to-ebitda ratio five and half time using eBay for the trailing four quarters based on current populations and our internal forecast. We are comfortably below this Covenant. We also we have also developed several Financial models with reasonable downside scenarios, including various levels of different timelines of disruption. None of which breach a net debt-to-ebitda of five times. Our business is very durable and continues to generate cash flow even during these unprecedented disruptions to the economy and criminal justice system. This resiliency is due to the essential nature of our facilities and services in our safety and Community segments. First name.
Hands by the diversification and stability of our property segment Although our cash flows have no doubt been impacted by the pandemic. We firmly believe that our cash flows will return to pre pre pandemic level. However, it is difficult to predict how quickly that occurs.
I'd like to close my prepared remarks with a brief note on our dividend which currently yields 15% the dividend declaration is a board decision and we are meeting with our board quite frequently during the covid-19 damage following our historical calendar our next dividend would typically be payable in July and therefore we have more than a month before the board would be required to declare the dividend if it was to adhere to our historical calendar, which simply provides more time to assess the operating environment before making any decisions on Capital allocation. I will now turn the call back to the operator carry to open up the line for questions.
Thank you. If you would like to ask a question during this time, simply, press star. Then the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key Bank you are first question will be from Joe gone from Noble capital.
Good morning, and thanks for taking my questions. We just like a little bit more into the ice population combined, you know, listen to your competitors call last week and they talked about, you know, they have some guaranteed minimum contracts that are helping in this time to keep up a certain level of of revenues is one of you can speak a little bit more about you know, does corecivic also offer under such type contracts, you know a little bit more about you know, the the decline and the ice populations and I'm not always populations, you know, we're off the scale do they land in terms of margin contribution to your to the business versus, you know, the state contracts or the US Marshal?
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Yeah, Joe, this is Damon. Good morning. And thank you for your question. So couple answers there and I'm a tag team a little bit with Dave on this but look at that are federal contracts. I know you asked is but let me give you a kind of an overview of our federal contracts we have about Twenty One Federal contracts and of those about fourteen of them have a monthly fixed payment provision, So the seven contracts again Federal contracts. They do not have those fixed monthly payments are mostly smaller facilities and they have multiple customer. Whereas the 14 at do have V monthly payments. Um, the partner is either the anchor customer or they have the exclusive use to the entire facility wage. So, uh, so these Provisions are offered by government in our contracts really is a way to ensure for them that they have access to our capacity oil capacity and services notably our staffing levels.
Making sure those are stable even though their needs met materially fluctuate. So there there are really important provision for government to give them that that Comfort cuz again, their populations can fluctuate an intern for us. It gives us great predictability of Staffing levels and expenses needed at each individual facility. You have two little bit about the the Stateside we've got a fair amount of our state agreements that have similar Provisions for those populations are typically uh more stable because there are longer-term population versus ice and Marshall service or kind of a more transient population and may only be in our facilities for every 60 or or nine hundred ninety days or anything to add to that day. But yeah, I'd say, uh to your point on margins of revenues for the first quarter month was 28% of our total revenue. I would say those margins for ice are slightly higher than the average just because it's Damon mentioned they're more transient populations and therefore there's yep.
Or risk associated with those populations. So margins are typically higher but we do have those fixed monthly payments the same and describe that protect us on the downside and I would say today off those populations are around or slightly below those those fixed population levels.
Okay, great. And also if you guys you know, you talked about the Deep experience a lot of the team has so if we look back at you know, the Great Recession and you know at that time again as we talk a little bit about here in the call, you know states were having issues with their finances off. You just give us your what was your guys experienced then were States looking for concessions. If so, you know, you know, how did you guys deal with them, you know a little bit more color on that would be appreciated.
Absolutely, and it's a great great question. So I see a couple of things we learn during that period of time kind of 2009 through the 2011/2012. One of which is Thursday. We we expected but it really didn't appreciate how long it would be a how impactful would be for State budgets. And so, uh, I think you know 2089 we figured it would impact Thursday. I just be really didn't hit them as quickly as you think it would of it really hit them, you know 2010/2011. So I think what we've got to do from that lesson is understand that it may have a real near-term impact but over the next, you know, 1224, maybe 36 months. It could have impact as you know, respective States recover. And so that we've got a we've got a plan accordingly wage. The second thing is during that period of time a little bit to your question. We learned in working with our partners, you know way we can kind of reconfigure the operations. Um, then maybe make a dog
I see more efficient, but maybe.
Allow for maybe some change in scope and requirements in the contract that could allow for some cost savings back to government on the whole during that period of time. It wasn't perfect customer is a little different on the whole we were able to provide some cost savings but didn't materially impact our margins. And so we've got again that play book and we'll use it as appropriate as long as we go through this with our our respective States. This is kind of an obvious Point alluded to this in my comments, but you know, obviously something very different today than ten years ago is restate relates to our state customers and Thursday is States during that period of time where they had you know challenges with their physical condition maybe would overcrowd their facilities potentially significant leakage in a measure to kind of provide cost savings. I think this is good news. I think that the the mood and the feeling of doing that has changed even before covid-19 birth.
You know overcrowding significantly facilities. It's just uh, um challenging for many obvious obvious reasons. And so I think that part of the Playbook maybe ten years ago is not necessarily there today and then they giving us the other thing I would say is with covid-19 with social distancing and reducing or having a desired I should say to reduce density and again over credit. I think that's going to be top-of-mind, uh, even though, you know state government are going to have to work through this challenging economic environment. So I don't anything you would add to that date but emphasize that part I'd say the biggest wage impact to US during the Great Recession was loss of populations due to overcrowding in jail systems. And as they mentioned it's just hard to believe that governments are going to want to do Thursday even in the face of severe budget challenges. Um, so so I think that'll be different this time around than the last time around. I also say, you know, we we do have a play book club.
That that we created during the last downturn when it comes to working with our government Partners in how do identify those cost savings as I think you know, Joe most of our contacts page mandatory Staffing patterns and there are certain critical posts that that you're never going to not fill but there are certain positions within a facility that could be reduced with constipation with the partner Unfortunately, they could reduce programs and that's that's one of the tragic outcomes of challenging budget times when when you want to make sure I'm in mates are getting the programs so that when they get released, um, they are able to uh, pull the job and they have the skills so they don't end up devising back into the system. Um, so there are there are some things that that could be done to to uh work with the Foreigner to identify cost savings the programs usually the last one but there's ways to operate facilities safely and securely dead.
with fewer staff again
Not taking those critical posts away and they're probably the other the last thing I'd say is you know on the employment front so over the last several years, uh, you know, uh attractive or retaining staff has been in the top three of our Enterprise risk management process and we've had to provide outside wage adjustments and Facilities where we were severely challenged wage another unfortunate situation in this, uh economy is uh that uh more jobs will be plentiful. So perhaps we will not have as many of those outside Market adjustments that we've had in the past month. So we're we're happily hiring at all of our facilities and um will we'll certainly expect to have a larger talent pool as we identify wage attract and retain our staff.
Thanks for that color one more for me and I'll jump back in line and notice during the quarter that you've lost the contract if when you give me the little more detail on that and our state still out there in this environment. I know you know, we had talked previously about I think was Idaho and and Alabama and maybe even Oklahoma, you know this potential business there. I mean, where do we stand on those Banks? Yeah. Thank you for that for that question. So yeah, I think we had one small contract offering the the quarter didn't have the material impact for the uh for the quarter or for the rest of the year to your question about kind of new business prospects as you can appreciate everything. He's basically been put on hold and so give you a little color and it didn't answer your question a little bit about some specific, uh prospects. Um, when we go through a procurement process, you know, typically them
A government will do an RFP or request-for-proposal. We submit a we submit a bid and then part of that is doing um, not only maybe in person interviews but more importantly they'll want to go tour the facilities being considered by us as part of our proposal and of course with all the travel restrictions all that has been halted with some activity we had with some current procurements. So Thursday you highlighted Idaho Idaho is still an active, uh opportunity and we've actually been working with them D be a little creative on you know, giving them some additional details facilities that we propose to them be a kind of virtual conference or video conferencing or videos and whatnot. So those are still pending again kind of to the you know, the the big question obviously in front of all of them whenever they kind of gets back to normal and it again I'll be kind of jurisdiction by jurisdiction, but we are still we are still seeing kind of active needs ugh kind of near-term and we do think probably some procurement. Yep.
These are probably resuming probably later later this year. Probably using this summer. I should say. I don't think you add to that David. No, just one final point on the Lost contract. It was a very small contract was also in a facility that we leased so long that lease terminated along with the termination of the
Contract so we did not like we have an idle facility as a result of that contract termination.
Thank you. I appreciate it. Thanks Joe.
Thank you or next question will be from Kenneth Williamson from JP Morgan.
Hey, thanks for taking my call. Sorry there. I I apologize. I I missed part of the call but your contracts what percentage of your countenance have like a minimum wage level that you are paid for regardless of occupancy.
Yeah, thank you for that for that question. So probably most interest would be our federal contract which is just over half of our total business as a company. So we had about Twenty One Federal contracts with the with the federal government. I should say to have what we call monthly fixed payment Provisions. Um, so Twenty-One, excuse me. I'm sorry twenty thousand contracts and 14 of those have monthly fixed payment Provisions. Um, and so the 7th at do not again a pretty pretty small facilities and typically have multiple customers in there June 14th at do have the monthly fixed payment. It's because the government is either the anchor tenant tenant or a customer in those facilities or they were both schools are views of the entire facility. So it does give us a great certainty on kind of what the needs are for the government to have to have those provisions and it's really a nice wage.
A benefit for the government because they wanted to make sure that even though their populations May fluctuate and turn their needs met fluctuate. They've got access to to to our capacity and then David actually mentioned earlier to see if you look at those agreements getting those fourteen of the twenty one that has those monthly payments populations are are generally today consistent with those Provisions in those contracts. So anything to add to that day, but I think that covers it. Yeah, I think I was so basically of those fourteen you're you're already at that kind of the the occupancy level is such that you are you're receiving those those minimum monthly fixed payments today. I wouldn't say that was the case throughout the first quarter, but as the Border has found, you know, basically shut down those populations of declined to about the levels that are guaranteed.
And is there are those facilities are there any of those facilities that are not profitable when they're operating at those minimum levels? No.
Okay. Thanks. That's all I had. Thank you.
Thank you are next question will be from Jordan Sherman from Ranger global.
Yes, Hi Jacqueline. Just me follow up on that question on the state side of the already guaranteed minimums.
We do. I don't know if you don't stop you had Dave the exact number but I'd say probably the majority of our state agreements to maybe a little less than that. But God those populations again are very very stable there, you know typically populations that are very long term and so they may be you know in our facilities one to maybe five or ten years. So those populations even without those Provisions are very very stable. And even even today even last 60 days. I mentioned earlier I think the the high and low within that side which is about thirty thirty-five thousand individuals. I think the high and low is within a thousand from the from the top to the bottom. So again, it's very stable here the last 60 days. Yeah. That's right. If you look on our supplemental disclosure report where we just took the occupancy of every one of our facilities in the major customers, if you look at the ones that have a state customer and you trended it they are very stable populations, uh, you know, usually in the ninety-two a phone number
Percent occupancy level so they don't fluctuate very often. And therefore you don't really have to have the protections that you do on a federal contract where you've got transient populations at
Adams well, understood. I just want to follow up on this on the opportunities on the state side, Alabama in particular I guess is is a was the most active looking at the replaced air facilities. Where does that stand?
So even with this is Damon again, so even with the covid-19 and how it again it's kind of halted a lot of activities around procurements. That one still is very active. And so there's Thursday and a move from where there was a lot of discussions in person in Alabama with the Department of Corrections and other other parties that they manage in the procurement. A lot of that has now moved to video conferencing. So it's still a very active a procurement. I haven't we haven't heard any indication relative to kind of the ultimate timeline being affected there has been a couple of just kind of respect to do dates for like clarifications or or negotiation details provided, uh from negotiation sessions, but still very active still looking for several facility three facilities, and we think potentially one of them could be awarded into this year and then maybe the other to the next year or so or anything to add to that day, but initial initial, yep.
They're actually do next week on Alabama and then um, Idaho, uh still an opportunity out there think during the covid-19. They've kind of put things on on pause. So we've brought them with a couple options in terms of facilities. So, um still optimistic. I just don't think that's going to come well, uh, everybody's trying to deal with this crisis in the short-term and I should also decide loses its in my comments, but in the last week of probably two weeks, we got extensions with both state of Nevada and state of Kansas. Both. Both agencies were looking potentially to move populations with his back in state, but they decided to extend them a year again because we think that they want to continue to kind of reduce over private in our system and not have any or lower density. I should say Biscoe covid-19. So those are those that could be a sign of potentially some additional needs to hear near-term. And then we did this close on that in the press release was Mississippi expanded their contract in New Jersey.
cool from 375 to 1000
Right. I just I want to come back to the Nevada the the two extensions but I guess the reason I ask is particular about about Alabama is because that doesn't require because there's a new facility is that would require a touring of existing facilities. So I thought maybe that would be on the might be on a different track. Yeah that but yeah, that's fair. That's exactly right. Yeah. Like I said the discussion on that one. We're mostly in person leading up to two covid-19. So it's slow down just a tad say probably just to kind of wait probably at the most.
And then I'm just wondering in response to state budget potential issues about the about the opportunity side for the overcrowding of a new facilities. It would seem that going forward that you know, many states will not didn't have it in the past but probably won't have in the future or the funding for any new facilities. I'm wondering what how many Kansas like opportunities are might be out. There might be coming down the pike as a result of any Financial stress that comes along.
Yeah, so, this is Damon again great great question. So, you know after Alabama the one that is in most public here recently that you may have heard about was Nebraska. So they they put out an RFI earlier this year again. I got slow down just just a tad but we think that's still a very live and meaningful opportunity for the the industry. And I think you know, we've we've been kind of talking about, you know, kind of the real estate solution be in an important way to you know, help jurisdictions that you know, looking for cost-effective ways to modernize their systems that again it's too early to tell but I think with this covid-19 that could accelerate because again, if you got facilities that are you know, a hundred years old that you know don't have modern systems don't have negative pressure rooms. There could be a real Catalyst thousand of these jurisdictions make a lot more quickly out to the marketplace to try to modernize our system. So I don't have anything to announce today, but it does it does feel like that potentially a couple other jurisdictions are going to take a bath.
look at that and then maybe try to follow Alabama and Nebraska has laid everything you asked that David I don't think science teacher point I think it's you know where the private sector can come in and provide the capital that took the government's are now going to be even more challenged to provide that that bodes well for that future opportunity for us and you know I guess this is an obvious point that I've made before but by modernizing our system obviously it's a better environment healthier environment but also provide meaningful savings so if it's a really a double benefit your modernize our system but also likely it's going to either of you know cost savings if not budget-neutral
Yeah, that's that's that was I was thinking just quickly, Nebraska. How many what's the what's the any details around the size of that opportunity? I think it's what they've advertised somewhere in the range of fifteen hundred fifty thousand beds. Okay, and then just one question on the testing you gave the numbers of people that that have been that have tested or had been positive. I think a number of cases you mentioned how I guess is you said most of the people were asymptomatic when you were testing. How is the testing your how you deciding who tests and how many tests you can actually do? Yeah great great question. So a couple answers we've been testing as directed by CDC for people that are expressing symptoms or showing symptoms. I should say in addition to doing, you know, uh temperature checks of both staff and inmates, but there has been some jurisdictions like, Tennessee who have said
Want to test everybody so we want to test a Falstaff and all inmates. And so again, we want to work closer to the partners and mirror what they're doing in their system with our system. And so, uh, you going back to town see we did Trousdale Turner last week. We've got several studies this week going in the next couple of weeks. And in this case with trials, I think it was north of ninety percent of the folks that were tested who were offering positive we're showing we're showing no symptoms. And again from what we've heard from our partners, but also what's been reported publicly that appears to be pretty consistent what we're seeing in Iraq and other places. Like I said, we've we've heard nationally there's States who reported testing and not all of them have reported but the states that have reported back in about half that have been reported as positive. So so again, it's it really just depends on the jurisdiction. Uh, if it's no direction for the jurisdiction on mass testing then we're off.
CDC guidelines, but if course if it's like, Tennessee who wants to do full testings, and we're also going to collaborate and mirror they're testing policy.
For those who are positive but asymptomatic, are they isolated as well as part of the protocol exactly, right? That's exactly what we're doing and get the benefit. We have a new age or modern facilities. We can we can do that where some jurisdictions may be challenged to do that. Is it? Thank you very much. Thank you. Thank you.
Thank you. This is the operator. I'd like to turn the call back over to the company for closing remarks.
Thank you. Carry, before we conclude the call. I would like to remind everyone that are angels shareholder meeting and proxy vote is next Thursday, May 14th, consistent with maintaining safety and health during this pandemic. We have made this year's meeting completely virtual for the first time making it available for all to listen to the webcast at your convenience. We will also be punished, you know, our 2019 es do you report to build upon the industry first issue report that we published last May we're excited for this year's report which includes even more disclosure and metrics that we believe will be useful for the investment community.
I would like to thank everyone for joining us on today's call. I hope everyone continues to stay safe as we all continue to do our part to address covid-19 demek and push forward to providing you with another update when we report our second-quarter results in August. Thank you again.
Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.
and then