UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2008

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM            TO

COMMISSION FILE NUMBER: 001-16109

CORRECTIONS CORPORATION OF AMERICA

(Exact name of registrant as specified in its charter)

MARYLAND		62-1763875
(State or other jurisdiction of		(I.R.S. Employer Identification Number)
incorporation or organization)

10 BURTON HILLS BLVD., NASHVILLE, TENNESSEE 37215
(Address and zip code of principal executive offices)

(615) 263-3000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x             No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x		Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).       Yes o             No x

Indicate the number of shares outstanding of each class of Common Stock as of August 4, 2008:

Shares of Common Stock, $0.01 par value per share: 125,365,790 shares outstanding.

CORRECTIONS CORPORATION OF AMERICA

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2008

INDEX

		PAGE
PART 1 — FINANCIAL INFORMATION
Item 1. Financial Statements
a) Consolidated Balance Sheets (Unaudited) as of June 30, 2008 and December 31, 2007			1
b) Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2008 and 2007			2
c) Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2008 and 2007			3
d) Consolidated Statement of Stockholders’ Equity (Unaudited) for the six months ended June 30, 2008			4
e) Consolidated Statement of Stockholders’ Equity (Unaudited) for the six months ended June 30, 2007			5
f) Notes to Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3. Quantitative and Qualitative Disclosures About Market Risk			37
Item 4. Controls and Procedures			37
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			37
Item 1A. Risk Factors			38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38
Item 3. Defaults Upon Senior Securities			38
Item 4. Submission of Matters to a Vote of Security Holders			38
Item 5. Other Information			39
Item 6. Exhibits			39
SIGNATURES			41
Ex-10.1 First Amendment to the Amended and Restated Corrections Corporation of America 2000 Stock Incentive Plan
Ex-10.2 Director and Executive Officer Compensation
Ex-10.3 Second Supplemental Indenture
EX-31.1 Section 302 Certification of the CEO
EX-31.2 Section 302 Certification of the CFO
EX-32.1 Section 906 Certification of the CEO
EX-32.2 Section 906 Certification of the CFO

PART I — FINANCIAL INFORMATION

ITEM 1.		— FINANCIAL STATEMENTS.

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

		June 30,				December 31,
		2008				2007
ASSETS
Cash and cash equivalents		$	14,287			$	57,968
Accounts receivable, net of allowance of $3,750 and $3,914, respectively			246,618				241,722
Deferred tax assets			12,843				12,250
Prepaid expenses and other current assets			24,423				21,142
Assets held for sale			—				7,581
Total current assets			298,171				340,663
Property and equipment, net			2,370,892				2,086,980
Restricted cash			6,628				6,511
Investment in direct financing lease			13,975				14,503
Goodwill			13,672				13,672
Other assets			22,850				23,411
Total assets		$	2,726,188			$	2,485,740
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses		$	244,370			$	213,240
Income taxes payable			6,632				964
Current portion of long-term debt			290				290
Current liabilities of discontinued operations			147				237
Total current liabilities			251,439				214,731
Long-term debt, net of current portion			1,085,532				975,677
Deferred tax liabilities			41,703				34,271
Other liabilities			39,018				39,086
Total liabilities			1,417,692				1,263,765
Commitments and contingencies
Common stock — $0.01 par value; 300,000 shares authorized; 125,302 and 124,472 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively			1,253				1,245
Additional paid-in capital			1,582,724				1,568,736
Retained deficit			(275,481	)			(348,006	)
Total stockholders’ equity			1,308,496				1,221,975
Total liabilities and stockholders’ equity		$	2,726,188			$	2,485,740

The accompanying notes are an integral part of these consolidated financial statements.

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
REVENUE:
Management and other		$	398,407			$	361,659			$	785,974			$	711,497
Rental			1,209				1,111				2,396				2,188
			399,616				362,770				788,370				713,685
EXPENSES:
Operating			283,201				259,239				560,499				508,369
General and administrative			19,803				18,817				39,356				36,135
Depreciation and amortization			22,176				18,928				43,588				37,198
			325,180				296,984				643,443				581,702
OPERATING INCOME			74,436				65,786				144,927				131,983
OTHER EXPENSES (INCOME):
Interest expense, net			13,934				13,655				27,584				27,589
Other (income) expense			(91	)			(70	)			2				(81	)
			13,843				13,585				27,586				27,508
INCOME BEFORE INCOME TAXES			60,593				52,201				117,341				104,475
Income tax expense			(23,066	)			(19,599	)			(44,816	)			(39,303	)
NET INCOME		$	37,527			$	32,602			$	72,525			$	65,172
EARNINGS PER SHARE:
Basic		$	0.30			$	0.27			$	0.58			$	0.53
Diluted		$	0.30			$	0.26			$	0.57			$	0.52

The accompanying notes are an integral part of these consolidated financial statements.

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

(UNAUDITED AND AMOUNTS IN THOUSANDS)

		For the Six Months
		Ended June 30,
		2008				2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	72,525			$	65,172
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			43,588				37,198
Amortization of debt issuance costs and other non-cash interest			1,960				2,003
Deferred income taxes			6,050				7,305
Income tax benefit of equity compensation			(6,779	)			(14,256	)
Other (income) expense			2				(81	)
Non-cash equity compensation			4,704				3,490
Other non-cash items			745				223
Changes in assets and liabilities, net:
Accounts receivable, prepaid expenses and other assets			(8,115	)			11,945
Accounts payable, accrued expenses and other liabilities			(1,111	)			4,455
Income taxes payable			12,447				12,076
Net cash provided by operating activities			126,016				129,530
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for facility development and expansions			(272,473	)			(81,454	)
Expenditures for other capital improvements			(15,953	)			(21,059	)
Decrease in restricted cash			—				5,641
Purchases of investments			—				(1,936	)
Proceeds from sale of assets			82				40
Increase in other assets			(1,024	)			(859	)
Payments received on direct financing leases and notes receivable			468				414
Net cash used in investing activities			(288,900	)			(99,213	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt			132,500				—
Principal repayments of debt			(22,500	)			—
Payment of debt issuance costs			(89	)			—
Income tax benefit of equity compensation			6,779				14,256
Purchase and retirement of common stock			(3,367	)			(2,644	)
Proceeds from exercise of stock options			5,880				10,020
Net cash provided by financing activities			119,203				21,632
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(43,681	)			51,949
CASH AND CASH EQUIVALENTS, beginning of period			57,968				29,121
CASH AND CASH EQUIVALENTS, end of period		$	14,287			$	81,070
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amounts capitalized of $7,709 and $3,133 in 2008 and 2007, respectively)		$	27,260			$	30,837
Income taxes		$	22,772			$	21,676

The accompanying notes are an integral part of these consolidated financial statements.

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2008

(UNAUDITED AND AMOUNTS IN THOUSANDS)

		Common Stock								Additional
										Paid-in				Retained
		Shares				Par Value				Capital				Deficit				Total
Balance as of December 31, 2007			124,472			$	1,245			$	1,568,736			$	(348,006	)		$	1,221,975
Comprehensive income:
Net income			—				—				—				72,525				72,525
Total comprehensive income			—				—				—				72,525				72,525
Issuance of common stock			—				—				13				—				13
Retirement of common stock			(126	)			(1	)			(3,366	)			—				(3,367	)
Amortization of deferred compensation, net of forfeitures			(25	)			—				2,886				—				2,886
Income tax benefit of equity compensation			—				—				6,779				—				6,779
Stock option compensation expense			—				—				1,805				—				1,805
Restricted stock grant			266				2				(2	)			—				—
Stock options exercised			715				7				5,873				—				5,880
Balance as of June 30, 2008			125,302			$	1,253			$	1,582,724			$	(275,481	)		$	1,308,496

The accompanying notes are an integral part of these consolidated financial statements.

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2007

(UNAUDITED AND AMOUNTS IN THOUSANDS)

		Common Stock								Additional
										Paid-in				Retained
		Shares				Par Value				Capital				Deficit				Total
Balance as of December 31, 2006			122,084			$	1,221			$	1,527,608			$	(479,148	)		$	1,049,681
Comprehensive income:
Net income			—				—				—				65,172				65,172
Total comprehensive income			—				—				—				65,172				65,172
Issuance of common stock			—				—				12				—				12
Retirement of common stock			(99	)			(1	)			(2,643	)			—				(2,644	)
Amortization of deferred compensation, net of forfeitures			(80	)			(1	)			2,497				—				2,496
Income tax benefit of equity compensation			—				—				14,256				—				14,256
Stock option compensation expense			—				—				982				—				982
Restricted stock grant			308				3				(3	)			—				—
Stock options exercised			1,470				15				10,005				—				10,020
Cumulative effect of accounting change			—				—				—				(2,231	)			(2,231	)
Balance as of June 30, 2007			123,683			$	1,237			$	1,552,714			$	(416,207	)		$	1,137,744

The accompanying notes are an integral part of these consolidated financial statements.

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2008

1. ORGANIZATION AND OPERATIONS

As of June 30, 2008, Corrections Corporation of America, a Maryland corporation (together with its subsidiaries, the “Company”), owned 44 correctional, detention and juvenile facilities, three of which are leased to other operators. As of June 30, 2008, the Company operated 65 facilities, including 41 facilities that it owned, located in 19 states and the District of Columbia. The Company is also constructing an additional 2,232-bed facility in Adams County, Mississippi that is expected to be completed in the fourth quarter of 2008, a 3,060-bed facility in Eloy, Arizona that is expected to be completed in the first quarter of 2009, and a 2,040-bed facility in Trousdale County, Tennessee that is expected to be completed in the fourth quarter of 2009. Further, during the second quarter of 2008 the Company was awarded a contract by the Office of Federal Detention Trustee to design, build, and operate a new correctional facility in Pahrump, Nevada, which is currently expected to be completed during the fourth quarter of 2009 or first quarter of 2010.

The Company specializes in owning, operating and managing prisons and other correctional facilities and providing inmate residential and prisoner transportation services for governmental agencies. In addition to providing the fundamental residential services relating to inmates, the Company’s facilities offer a variety of rehabilitation and educational programs, including basic education, religious services, life skills and employment training, and substance abuse treatment. These services are intended to reduce recidivism and to prepare inmates for their successful re-entry into society upon their release. The Company also provides health care (including medical, dental and psychiatric services), food services and work and recreational programs.

The Company’s website address is www.correctionscorp.com. The Company makes its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and Section 16 reports under the Securities Exchange Act of 1934, as amended, available on its website, free of charge, as soon as reasonably practicable after these reports are filed with or furnished to the Securities and Exchange Commission (the “SEC”).

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim consolidated financial statements have been prepared by the Company and, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of results for the unaudited interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. The results of operations for the interim period are not necessarily indicative of the results to be obtained for the full

fiscal year. Reference is made to the audited financial statements of the Company included in its Annual Report on Form 10-K as of and for the year ended December 31, 2007 (the “2007 Form 10-K”) with respect to certain significant accounting and financial reporting policies as well as other pertinent information of the Company.

3. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill was $13.7 million as of June 30, 2008 and December 31, 2007 and was associated with the facilities the Company manages but does not own. This goodwill was established in connection with the acquisitions of two service companies during 2000.

The components of the Company’s amortized intangible assets and liabilities are as follows (in thousands):

		June 30, 2008								December 31, 2007
		Gross Carrying				Accumulated				Gross Carrying				Accumulated
		Amount				Amortization				Amount				Amortization
Contract acquisition costs		$	873			$	(860	)		$	873			$	(859	)
Contract values			(35,688	)			27,883				(35,688	)			25,977
Total		$	(34,815	)		$	27,023			$	(34,815	)		$	25,118

Contract acquisition costs are included in other non-current assets, and contract values are included in other non-current liabilities in the accompanying balance sheets. Contract values are amortized using the interest method. Amortization income, net of amortization expense, for intangible assets and liabilities during the three months ended June 30, 2008 and 2007 was $1.2 million and $1.1 million, respectively, while amortization income, net of amortization expense, for intangible assets and liabilities during each of the six months ended June 30, 2008 and 2007 was $2.3 million. Interest expense associated with the amortization of contract values for the three months ended June 30, 2008 and 2007 was $0.2 million and $0.3 million, respectively, while interest expense associated with the amortization of contract values for the six months ended June 30, 2008 and 2007 was $0.4 million and $0.6 million, respectively. Estimated amortization income, net of amortization expense, for the remainder of 2008 and the five succeeding fiscal years is as follows (in thousands):

2008 (remainder)		$	2,331
2009			3,204
2010			2,534
2011			134
2012			134
2013			134

4. DISCONTINUED OPERATIONS

In November 2007, the Company accepted an unsolicited offer to sell a facility located in Houston, Texas and leased to a third-party operator. In accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal

of Long-Lived Assets” (“SFAS 144”), the Company classified the $7.6 million net book value of the facility as held for sale as of December 31, 2007. During February 2008, at the request of the operator the Company agreed to extend the proposed closing date and fix the sales price through June 30, 2008. During the second quarter of 2008, the third-party operator elected not to purchase the facility and instead signed a new lease for the facility effective July 1, 2008. As a result, the Company has reclassified the facility previously classified as held for sale as an asset to be held and used and the asset is now reported in property and equipment in the accompanying consolidated balance sheet. Further, in accordance with SFAS 144, the Company reclassified the results of operations of this facility to be included in income from continuing operations for all periods presented.

As a result of Shelby County’s evolving relationship with the Tennessee Department of Children’s Services (“DCS”) whereby the DCS prefers to oversee the juveniles at facilities under DCS control, the Company will cease operations of the 200-bed Shelby Training Center located in Memphis, Tennessee in August 2008. The Company expects to reclassify the results of operations, net of taxes, and the assets and liabilities of this facility as discontinued operations upon termination of operations in the third quarter of 2008 for all periods presented. The termination of the management contract is not expected to have a material effect on the Company’s financial statements.

In May 2008, the Company notified the Bay County Commission of its intention to exercise the Company’s option to terminate the operational management contract for the 1,150-bed Bay County Jail and Annex in Panama City, Florida, effective October 9, 2008. The Company currently expects to reclassify the results of operations, net of taxes, and the assets and liabilities of this facility as discontinued operations upon termination of operations in the fourth quarter of 2008 for all periods presented. The termination of the management contract is not expected to have a material effect on the Company’s financial statements.

In addition to the foregoing, during 2006 and 2005, the Company transferred management of two facilities it did not own to other operators. The Company did not operate either of these facilities, and therefore there were no results of operations, during the three and six months ended June 30, 2008 and 2007. The liabilities of these two facilities presented in the accompanying consolidated balance sheets are as follows (amounts in thousands):

LIABILITIES		June 30, 2008				December 31, 2007
Accounts payable and accrued expenses		$	147			$	237
Total current liabilities		$	147			$	237

5. DEBT

Debt outstanding as of June 30, 2008 and December 31, 2007 consists of the following (in thousands):

		June 30,				December 31,
		2008				2007
Revolving Credit Facility, principal due at maturity in December 2012; interest payable periodically at variable interest rates.		$	110,000			$	-
7.5% Senior Notes, principal due at maturity in May 2011; interest payable semi-annually in May and November at 7.5%.			250,000				250,000
7.5% Senior Notes, principal due at maturity in May 2011; interest payable semi-annually in May and November at 7.5%. These notes were issued with a $2.3 million premium, of which $0.8 million and $1.0 million was unamortized at June 30, 2008 and December 31, 2007, respectively.			200,822				200,967
6.25% Senior Notes, principal due at maturity in March 2013; interest payable semi-annually in March and September at 6.25%.			375,000				375,000
6.75% Senior Notes, principal due at maturity in January 2014; interest payable semi-annually in January and July at 6.75%.			150,000				150,000
			1,085,822				975,967
Less: Current portion of long-term debt			(290	)			(290	)
		$	1,085,532			$	975,677

Revolving Credit Facility. During December 2007, the Company entered into a new $450.0 million senior secured revolving credit facility (the “New Revolving Credit Facility”) arranged by Banc of America Securities LLC and Wachovia Capital Markets, LLC. The New Revolving Credit Facility replaced the Company’s previous $250.0 million senior secured Revolving Credit Facility. The New Revolving Credit Facility will be utilized to fund development projects in anticipation of increasing demand by existing and potential new customers, as well as for working capital, capital expenditures and general corporate purposes. The Company capitalized approximately $1.9 million during the fourth quarter of 2007 for the costs related to the issuance of the New Revolving Credit Facility in accordance with EITF 98-14, “Debtors Accounting for Changes in Line-of-Credit or Revolving-Debt Arrangements.”

The New Revolving Credit Facility has an aggregate principal capacity of $450.0 million and matures in December 2012. At the Company’s option, interest on outstanding borrowings will be based on either a base rate plus a margin ranging from 0.00% to 0.50% or a London Interbank Offered Rate (“LIBOR”) plus a margin ranging from 0.75% to 1.50%. The applicable margins are subject to adjustments based on the Company’s leverage ratio. Based on the Company’s current leverage ratio, loans under the New Revolving Credit Facility currently bear interest at the base rate plus a margin of 0.00% or at LIBOR plus a margin of 0.75%. As of June 30, 2008, the Company had $110.0 million of outstanding borrowings under the New Revolving Credit Facility as well as $33.6 million in letters of credit outstanding.

The New Revolving Credit Facility has a $20.0 million sublimit for swing line loans and a $100.0 million sublimit for the issuance of standby letters of credit. The Company has an option to increase the availability under the New Revolving Credit Facility by up to $300.0 million (consisting of revolving credit, term loans, or a combination of the two) subject to, among other things, the receipt of commitments for the increased amount.

The New Revolving Credit Facility is secured by a pledge of all of the capital stock of the Company’s domestic subsidiaries, 65% of the capital stock of the Company’s foreign subsidiaries, all of the Company’s accounts receivable, and all of the Company’s deposit accounts.

The New Revolving Credit Facility requires the Company to meet certain financial covenants, including, without limitation, a maximum total leverage ratio, a maximum secured leverage ratio, and a minimum interest coverage ratio. As of June 30, 2008, the Company was in compliance with all such covenants. In addition, the New Revolving Credit Facility contains certain covenants which, among other things, limit both the incurrence of additional indebtedness, investments, payment of dividends, transactions with affiliates, asset sales, acquisitions, capital expenditures, mergers and consolidations, prepayments and modifications of other indebtedness, liens and encumbrances and other matters customarily restricted in such agreements. In addition, the New Revolving Credit Facility is subject to certain cross-default provisions with terms of the Company’s other indebtedness.

$250 Million 7.5% Senior Notes. Interest on the $250.0 million aggregate principal amount of the Company’s 7.5% unsecured senior notes issued in May 2003 (the “$250 Million 7.5% Senior Notes”) accrues at the stated rate and is payable semi-annually on May 1 and November 1 of each year. The $250 Million 7.5% Senior Notes are scheduled to mature on May 1, 2011. The Company may currently redeem all or a portion of the notes at redemption prices as set forth in the indenture governing the $250 Million 7.5% Senior Notes. The $250 Million 7.5% Senior Notes are guaranteed on an unsecured basis by all of the Company’s domestic subsidiaries.

$200 Million 7.5% Senior Notes. Interest on the $200.0 million aggregate principal amount of the Company’s 7.5% unsecured senior notes issued in August 2003 (the “$200 Million 7.5% Senior Notes”) accrues at the stated rate and is payable semi-annually on May 1 and November 1 of each year. However, the notes were issued at a price of 101.125% of the principal amount of the notes, resulting in a premium of $2.25 million, which is amortized as a reduction to interest expense over the term of the notes. The $200 Million 7.5% Senior Notes were issued under the existing indenture and supplemental indenture governing the $250 Million 7.5% Senior Notes.

$375 Million 6.25% Senior Notes. Interest on the $375.0 million aggregate principal amount of the Company’s 6.25% unsecured senior notes issued in March 2005 (the “6.25% Senior Notes”) accrues at the stated rate and is payable on March 15 and September 15 of each year. The 6.25% Senior Notes are scheduled to mature on March 15, 2013. The Company may redeem all or a portion of the notes on or after March 15,

2009. Redemption prices are set forth in the indenture governing the 6.25% Senior Notes.

$150 Million 6.75% Senior Notes. Interest on the $150.0 million aggregate principal amount of the Company’s 6.75% unsecured senior notes issued in January 2006 (the “6.75% Senior Notes”) accrues at the stated rate and is payable on January 31 and July 31 of each year. The 6.75% Senior Notes are scheduled to mature on January 31, 2014. At any time on or before January 31, 2009, the Company may redeem up to 35% of the notes with the net proceeds of certain equity offerings, as long as 65% of the aggregate principal amount of the notes remains outstanding after the redemption. The Company may redeem all or a portion of the notes on or after January 31, 2010. Redemption prices are set forth in the indenture governing the 6.75% Senior Notes.

6. STOCKHOLDERS’ EQUITY

During the first six months of 2008, the Company issued 266,000 shares of restricted common stock to the Company’s employees, with an aggregate fair value of $7.1 million, including 205,000 restricted shares to employees whose compensation is charged to general and administrative expense and 61,000 restricted shares to employees whose compensation is charged to operating expense. During 2007, the Company issued 312,000 shares of restricted common stock to certain of the Company’s employees, with an aggregate fair value of $8.3 million, including 254,000 restricted shares to employees whose compensation is charged to general and administrative expense and 58,000 shares to employees whose compensation is charged to operating expense.

The Company established performance-based vesting conditions on the restricted stock awarded to the Company’s officers and executive officers. Unless earlier vested under the terms of the restricted stock, shares issued to officers and executive officers are subject to vesting over a three-year period based upon the satisfaction of certain performance criteria. No more than one-third of such shares may vest in the first performance period; however, the performance criteria are cumulative for the three-year period. Unless earlier vested under the terms of the restricted stock, the shares of restricted stock issued to the other employees of the Company vest after three years of continuous service.

During the three months ended June 30, 2008, the Company expensed $1.4 million, net of forfeitures, relating to restricted common stock ($0.2 million of which was recorded in operating expenses and $1.2 million of which was recorded in general and administrative expenses). During the three months ended June 30, 2007, the Company expensed $1.4 million, net of forfeitures, relating to restricted common stock ($0.2 million of which was recorded in operating expenses and $1.2 million of which was recorded in general and administrative expenses).

During the six months ended June 30, 2008, the Company expensed $2.9 million, net of forfeitures, relating to restricted common stock ($0.6 million of which was recorded in operating expenses and $2.3 million of which was recorded in general and

administrative expenses). During the six months ended June 30, 2007, the Company expensed $2.5 million, net of forfeitures, relating to restricted common stock ($0.4 million of which was recorded in operating expenses and $2.1 million of which was recorded in general and administrative expenses). As of June 30, 2008, 732,000 shares of restricted stock remained outstanding and subject to vesting.

During the six months ended June 30, 2008, the Company issued to its directors, officers, and executive officers options to purchase 623,000 shares of common stock with an aggregate fair value of $4.8 million, with a weighted average exercise price of $26.49 per share. During 2007, the Company issued to its officers, executive officers, and non-employee directors options to purchase 567,000 shares of common stock with an aggregate fair value of $4.9 million, with a weighted average exercise price of $27.28 per share. The Company estimates the fair value of stock options using the Black-Scholes option pricing model. Unless earlier vested under their terms, one third of the stock options issued to the Company’s executive officers vest on the anniversary of the grant date over a three-year period while one fourth of the stock options issued to the Company’s other officers vest on the anniversary of the grant date over a four-year period.

During the three months ended June 30, 2008 and 2007, the Company expensed $0.9 million and $0.7 million, net of forfeitures, relating to its outstanding stock options. During the six months ended June 30, 2008 and 2007, the Company expensed $1.8 million and $1.0 million, net of forfeitures, relating to its outstanding stock options. As of June 30, 2008, options to purchase 5.0 million shares of common stock were outstanding with a weighted average exercise price of $13.67.

7. EARNINGS PER SHARE

In accordance with Statement of Financial Accounting Standards No. 128, “Earnings Per Share,” basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. For the Company, diluted earnings per share is computed by dividing net income as adjusted, by the weighted average number of common shares after considering the additional dilution related to restricted common stock plans and stock options and warrants.

A reconciliation of the numerator and denominator of the basic earnings per share computation to the numerator and denominator of the diluted earnings per share computation is as follows (in thousands, except per share data):

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2008				2007				2008				2007
NUMERATOR
Basic:
Net income		$	37,527			$	32,602			$	72,525			$	65,172
Diluted:
Diluted net income		$	37,527			$	32,602			$	72,525			$	65,172
DENOMINATOR
Basic:
Weighted average common shares outstanding			124,376				122,270				124,200				121,925
Diluted:
Weighted average common shares outstanding			124,376				122,270				124,200				121,925
Effect of dilutive securities:
Stock options and warrants			1,713				2,732				1,785				2,754
Restricted stock-based compensation			169				286				194				301
Weighted average shares and assumed conversions			126,258				125,288				126,179				124,980
BASIC EARNINGS PER SHARE:
Net income		$	0.30			$	0.27			$	0.58			$	0.53
DILUTED EARNINGS PER SHARE:
Net income		$	0.30			$	0.26			$	0.57			$	0.52

8. COMMITMENTS AND CONTINGENCIES

General. The nature of the Company’s business results in claims and litigation alleging that it is liable for damages arising from the conduct of its employees, inmates or others. The nature of such claims includes, but is not limited to, claims arising from employee or inmate misconduct, medical malpractice, employment matters, property loss, contractual claims, and personal injury or other damages resulting from contact with the Company’s facilities, personnel or inmates, including damages arising from an inmate’s escape or from a disturbance or riot at a facility. The Company maintains insurance to cover many of these claims, which may mitigate the risk that any single claim would have a material effect on the Company’s consolidated financial position, results of operations, or cash flows, provided the claim is one for which coverage is available. The combination of self-insured retentions and deductible amounts means that, in the aggregate, the Company is subject to substantial self-insurance risk.

The Company records litigation reserves related to certain matters for which it is probable that a loss has been incurred and the range of such loss can be estimated. Based upon management’s review of the potential claims and outstanding litigation and based upon management’s experience and history of estimating losses, management believes a loss in excess of amounts already recognized would not be material to the Company’s financial statements. In the opinion of management, there are no pending legal proceedings that would have a material effect on the Company’s consolidated financial position, results of operations, or cash flows. Any receivable for insurance recoveries is recorded separately from the corresponding litigation reserve, and only if

recovery is determined to be probable. Adversarial proceedings and litigation are, however, subject to inherent uncertainties, and unfavorable decisions and rulings could occur which could have a material adverse impact on the Company’s consolidated financial position, results of operations, or cash flows for the period in which such decisions or rulings occur, or future periods. Expenses associated with legal proceedings may also fluctuate from quarter to quarter based on changes in the Company’s assumptions, new developments, or by the effectiveness of the Company’s litigation and settlement strategies.

Hardeman County Correctional Facilities Corporation (“HCCFC”) is a nonprofit, mutual benefit corporation organized under the Tennessee Nonprofit Corporation Act to purchase, construct, improve, equip, finance, own and manage a detention facility located in Hardeman County, Tennessee. HCCFC was created as an instrumentality of Hardeman County to implement the County’s incarceration agreement with the state of Tennessee to house certain inmates.

During 1997, HCCFC issued $72.7 million of revenue bonds, which were primarily used for the construction of a 2,016-bed medium security correctional facility. In addition, HCCFC entered into a construction and management agreement with the Company in order to assure the timely and coordinated acquisition, construction, development, marketing and operation of the correctional facility.

HCCFC leases the correctional facility to Hardeman County in exchange for all revenue from the operation of the facility. HCCFC has, in turn, entered into a management agreement with the Company for the correctional facility.

In connection with the issuance of the revenue bonds, the Company is obligated, under a debt service deficit agreement, to pay the trustee of the bond’s trust indenture (the “Trustee”) amounts necessary to pay any debt service deficits consisting of principal and interest requirements (outstanding principal balance of $48.8 million at June 30, 2008 plus future interest payments). In the event the state of Tennessee, which is currently utilizing the facility to house certain inmates, exercises its option to purchase the correctional facility, the Company is also obligated to pay the difference between principal and interest owed on the bonds on the date set for the redemption of the bonds and amounts paid by the state of Tennessee for the facility plus all other funds on deposit with the Trustee and available for redemption of the bonds. Ownership of the facility reverts to the state of Tennessee in 2017 at no cost. Therefore, the Company does not currently believe the state of Tennessee will exercise its option to purchase the facility. At June 30, 2008, the outstanding principal balance of the bonds exceeded the purchase price option by $14.0 million.

9. INCOME TAXES

Income taxes are accounted for under the provisions of Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS 109 generally requires the Company to record deferred income taxes for the tax effect of differences between book and tax bases of its assets and liabilities.

Deferred income taxes reflect the available net operating losses and the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of the future tax benefits related to deferred tax assets is dependent on many factors, including the Company’s past earnings history, expected future earnings, the character and jurisdiction of such earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of its deferred tax assets, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset.

The Company’s effective tax rate was approximately 38.1% and 38.2% during the three and six months ended June 30, 2008, respectively, compared with approximately 37.5% and 37.6% during the same periods in the prior year. The Company’s overall effective tax rate is estimated based on the Company’s current projection of taxable income and could change in the future as a result of changes in these estimates, the implementation of tax strategies, changes in federal or state tax rates, changes in tax laws, or changes in state apportionment factors, as well as changes in the valuation allowance applied to the Company’s deferred tax assets that are based primarily on the amount of state net operating losses and tax credits that could expire unused.

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which is an interpretation of SFAS 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance prescribed in FIN 48 establishes a recognition threshold of more likely than not that a tax position will be sustained upon examination. The measurement attribute of FIN 48 requires that a tax position be measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

Upon adoption of FIN 48 on January 1, 2007, the Company recognized a $2.2 million increase in the liability for uncertain tax positions net of certain benefits associated with state net operating losses, which was recorded as an adjustment to the January 1, 2007 balance of retained earnings. The Company has a $5.8 million liability recorded for uncertain tax positions as of June 30, 2008, included in other non-current liabilities in the accompanying balance sheet. The Company recognizes interest and penalties related to unrecognized tax positions in income tax expense. The total amount of unrecognized tax positions that, if recognized, would affect the effective tax rate is $5.0 million. The Company does not currently anticipate that the total amount of unrecognized tax positions will significantly increase or decrease in the next twelve months.

During the third quarter of 2008, the Company was notified that the Internal Revenue Service will commence an audit of the Company’s federal income tax return for the year ended December 31, 2006. Since the audit has not yet begun it is too early to predict the outcome of the audit.

10. SEGMENT REPORTING

As of June 30, 2008, the Company owned and managed 41 correctional and detention facilities, and managed 24 correctional and detention facilities it did not own. Management views the Company’s operating results in two reportable segments: (1) owned and managed correctional and detention facilities and (2) managed-only correctional and detention facilities. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in the notes to consolidated financial statements included in the Company’s 2007 Form 10-K. Owned and managed facilities include the operating results of those facilities placed into service that were owned and managed by the Company. Managed-only facilities include the operating results of those facilities owned by a third party and managed by the Company. The Company measures the operating performance of each facility within the above two reportable segments, without differentiation, based on facility contribution. The Company defines facility contribution as a facility’s operating income or loss from operations before interest, taxes, depreciation and amortization. Since each of the Company’s facilities within the two reportable segments exhibit similar economic characteristics, provide similar services to governmental agencies, and operate under a similar set of operating procedures and regulatory guidelines, the facilities within the identified segments have been aggregated and reported as one reportable segment.

The revenue and facility contribution for the reportable segments and a reconciliation to the Company’s operating income is as follows for the three and six months ended June 30, 2008 and 2007 (dollars in thousands):

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2008				2007				2008				2007
Revenue:
Owned and managed		$	304,684			$	268,501			$	597,300			$	527,741
Managed-only			92,239				89,320				184,451				176,206
Total management revenue			396,923				357,821				781,751				703,947
Operating expenses:
Owned and managed			196,189				177,409				387,101				347,645
Managed-only			80,097				76,336				161,262				149,850
Total operating expenses			276,286				253,745				548,363				497,495
Facility contribution:
Owned and managed			108,495				91,092				210,199				180,096
Managed-only			12,142				12,984				23,189				26,356
Total facility contribution			120,637				104,076				233,388				206,452
Other revenue (expense):
Rental and other revenue			2,693				4,949				6,619				9,738
Other operating expense			(6,915	)			(5,494	)			(12,136	)			(10,874	)
General and administrative			(19,803	)			(18,817	)			(39,356	)			(36,135	)
Depreciation and amortization			(22,176	)			(18,928	)			(43,588	)			(37,198	)
Operating income		$	74,436			$	65,786			$	144,927			$	131,983

The following table summarizes capital expenditures for the reportable segments for the three and six months ended June 30, 2008 and 2007 (in thousands):

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2008				2007				2008				2007
Capital expenditures:
Owned and managed		$	152,103			$	66,263			$	314,558			$	102,979
Managed-only			1,168				2,133				2,751				4,144
Corporate and other			2,082				4,363				5,748				10,743
Total capital expenditures		$	155,353			$	72,759			$	323,057			$	117,866

The assets for the reportable segments are as follows (in thousands):

		June 30, 2008				December 31, 2007
Assets:
Owned and managed		$	2,464,506			$	2,161,375
Managed-only			120,910				121,599
Corporate and other			140,772				202,766
Total assets		$	2,726,188			$	2,485,740

ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report.

This quarterly report on Form 10-Q contains statements as to our beliefs and expectations of the outcome of future events that are forward-looking statements as defined within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of current or historical fact contained herein, including statements regarding our future financial position, business strategy, budgets, projected costs and plans, and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” “projects,” “will,” and similar expressions, as they relate to us, are intended to identify forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. These include, but are not limited to, the risks and uncertainties associated with:

	•		fluctuations in operating results because of changes in occupancy levels, competition, increases in cost of operations, fluctuations in interest rates, and risks of operations;
	•		changes in the privatization of the corrections and detention industry and the public acceptance of our services;
	•		our ability to obtain and maintain correctional facility management contracts, including as the result of sufficient governmental appropriations, inmate disturbances, and the timing of the opening of new facilities and the commencement of new management contracts as well as our ability to utilize current available beds and new capacity as development and expansion projects are completed;
	•		increases in costs to develop or expand correctional facilities that exceed original estimates, or the inability to complete such projects on schedule as a result of various factors, many of which are beyond our control, such as weather, labor conditions, and material shortages, resulting in increased construction costs;
	•		changes in governmental policy and in legislation and regulation of the corrections and detention industry that adversely affect our business including, but not limited to, judicial challenges regarding the transfer of California inmates to out-of-state private correctional facilities;
	•		the availability of debt and equity financing on terms that are favorable to us; and
	•		general economic and market conditions.

Any or all of our forward-looking statements in this quarterly report may turn out to be inaccurate. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. They can be affected by inaccurate assumptions we might make or by known or unknown risks, uncertainties and assumptions, including the risks, uncertainties and assumptions described in “Risk Factors” disclosed in detail in our annual report on Form 10-K for the fiscal year ended December 31, 2007, filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2008 (File No. 001-16109) (the “2007 Form 10-K”) and in other reports we file with the SEC from time to time. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We

undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this report and in the 2007 Form 10-K.

OVERVIEW

The Company

As of June 30, 2008, we owned 44 correctional, detention and juvenile facilities, three of which we leased to other operators. As of June 30, 2008, we operated 65 facilities, including 41 facilities that we owned, with a total design capacity of approximately 80,000 beds in 19 states and the District of Columbia. We are also constructing an additional 2,232-bed facility in Adams County, Mississippi that is expected to be completed in the fourth quarter of 2008, a 3,060-bed facility in Eloy, Arizona that is expected to be completed in the first quarter of 2009, and a 2,040-bed facility in Trousdale County, Tennessee that is expected to be completed in the fourth quarter of 2009. Further, during the second quarter of 2008 we were awarded a contract by the Office of Federal Detention Trustee to design, build, and operate a new correctional facility in Pahrump, Nevada, which is currently expected to be completed during the fourth quarter of 2009 or first quarter of 2010.

We specialize in owning, operating, and managing prisons and other correctional facilities and providing inmate residential and prisoner transportation services for governmental agencies. In addition to providing the fundamental residential services relating to inmates, our facilities offer a variety of rehabilitation and educational programs, including basic education, religious services, life skills and employment training and substance abuse treatment. These services are intended to reduce recidivism and to prepare inmates for their successful re-entry into society upon their release. We also provide health care (including medical, dental and psychiatric services), food services and work and recreational programs.

Our website address is www.correctionscorp.com. We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and Section 16 reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), available on our website, free of charge, as soon as reasonably practicable after these reports are filed with or furnished to the SEC.

CRITICAL ACCOUNTING POLICIES

The consolidated financial statements in this report are prepared in conformity with accounting principles generally accepted in the United States. As such, we are required to make certain estimates, judgments, and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. A summary of our significant accounting policies is described in our 2007 Form 10-K. The significant accounting policies and estimates which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

Asset impairments. As of June 30, 2008, we had $2.4 billion in property and equipment. We evaluate the recoverability of the carrying values of our long-lived assets, other than goodwill, when events suggest that an impairment may have occurred. Such events primarily include, but are not limited to, the termination of a management contract or a significant decrease in inmate populations within a correctional facility we own or manage. In these circumstances, we utilize estimates of undiscounted cash flows to determine if an impairment exists. If an impairment exists, it is measured as the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.

Goodwill impairments. As of June 30, 2008, we had $13.7 million of goodwill. We evaluate the carrying value of goodwill during the fourth quarter of each year, in connection with our annual budgeting process, and whenever circumstances indicate the carrying value of goodwill may not be recoverable. Such circumstances primarily include, but are not limited to, the termination of a management contract or a significant decrease in inmate populations within a reporting unit. We test for impairment by comparing the fair value of each reporting unit with its carrying value. Fair value is determined using a collaboration of various common valuation techniques, including market multiples, discounted cash flows, and replacement cost methods. Each of these techniques requires considerable judgment and estimations which could change in the future.

Income taxes. Income taxes are accounted for under the provisions of Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS 109 generally requires us to record deferred income taxes for the tax effect of differences between book and tax bases of our assets and liabilities.

Deferred income taxes reflect the available net operating losses and the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of the future tax benefits related to deferred tax assets is dependent on many factors, including our past earnings history, expected future earnings, the character and jurisdiction of such earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of our deferred tax assets, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset.

We have approximately $7.5 million in net operating losses applicable to various states that we expect to carry forward in future years to offset taxable income in such states. Accordingly, we have a valuation allowance of $2.0 million for the estimated amount of the net operating losses that will expire unused, in addition to a $5.6 million valuation allowance related to state tax credits that are also expected to expire unused. Although our estimate of future taxable income is based on current assumptions that we believe to be reasonable, our assumptions may prove inaccurate and could change in the future, which could result in the expiration of additional net operating losses or credits. We would be required to establish a valuation allowance at such time that we no longer expected to utilize these net operating losses or credits, which could result in a material impact on our results of operations in the future.

Self-funded insurance reserves. As of June 30, 2008, we had $36.1 million in accrued liabilities for employee health, workers’ compensation, and automobile insurance claims. We are significantly self-insured for employee health, workers’ compensation, and

automobile liability insurance claims. As such, our insurance expense is largely dependent on claims experience and our ability to control our claims. We have consistently accrued the estimated liability for employee health insurance claims based on our history of claims experience and the time lag between the incident date and the date the cost is paid by us. We have accrued the estimated liability for workers’ compensation and automobile insurance claims based on a third-party actuarial valuation of the outstanding liabilities, discounted to the net present value of the outstanding liabilities. These estimates could change in the future. It is possible that future cash flows and results of operations could be materially affected by changes in our assumptions, new developments, or by the effectiveness of our strategies.

Legal reserves. As of June 30, 2008, we had $16.1 million in accrued liabilities related to certain legal proceedings in which we are involved. We have accrued our estimate of the probable costs for the resolution of these claims based on a range of potential outcomes. In addition, we are subject to current and potential future legal proceedings for which little or no accrual has been reflected because our current assessment of the potential exposure is nominal. These estimates have been developed in consultation with our General Counsel’s office and, as appropriate, outside counsel handling these matters, and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible that future cash flows and results of operations could be materially affected by changes in our assumptions, new developments, or by the effectiveness of our strategies.

RESULTS OF OPERATIONS

Our results of operations are impacted by the number of facilities we owned and managed, the number of facilities we managed but did not own, the number of facilities we leased to other operators, and the facilities we owned that were not yet in operation. The following table sets forth the changes in the number of facilities operated for the periods presented.

						Owned
		Effective				and				Managed
		Date				Managed				Only				Leased				Total
Facilities as of December 31, 2006							40				25				3				68
Expiration of the management contract for the Liberty County Jail/Juvenile Center		January 1, 2007					—				(1	)			—				(1	)
Completion of construction of the Saguaro Correctional Facility		June 6, 2007					1				—				—				1
Facilities as of December 31, 2007							41				24				3				68
Facilities as of June 30, 2008							41				24				3				68

We also have three additional facilities that are under construction. During the three and six months ended June 30, 2008 we incurred $2.9 million and $3.5 million, respectively, of operating expenses at one of these facilities in preparation for the receipt of inmates, which began during the third quarter of 2008.

Our results of operations are also impacted by the number of beds created as a result of expansion projects completed at facilities we own or at facilities we manage but do not own. The following table sets forth the number of beds placed into service since January 1, 2007 as a result of facility expansion projects:

				Expansion				Owned or
Facility		Quarter Completed		Beds				Managed-Only
Citrus County Detention Facility		First quarter 2007			360			Managed-Only
Crossroads Correctional Center		First quarter 2007			96			Owned
Gadsden Correctional Institution		Third quarter 2007			384			Managed-Only
Bay Correctional Facility		Third quarter 2007			235			Managed-Only
North Fork Correctional Facility		Fourth quarter 2007			960			Owned
Tallahatchie County Correctional Facility		Fourth quarter 2007			720			Owned
		Second quarter 2008			720			Owned
Kit Carson Correctional Center		First quarter 2008			720			Owned
Eden Detention Center		First quarter 2008			129			Owned
Bent County Correctional Facility		Second quarter 2008			720			Owned
Leavenworth Detention Center		Second quarter 2008			266			Owned
					5,310

Three and Six Months Ended June 30, 2008 Compared to the Three and Six Months Ended June 30, 2007

Net income was $37.5 million, or $0.30 per diluted share, for the three months ended June 30, 2008, compared with net income of $32.6 million, or $0.26 per diluted share, for the three months ended June 30, 2007. During the six months ended June 30, 2008, we generated net income of $72.5 million, or $0.57 per diluted share, compared with net income of $65.2 million, or $0.52 per diluted share, for the six months ended June 30, 2007.

Net income during the three and six months ended June 30, 2008 was favorably impacted by the increase in operating income of $8.7 million, or 13.1%, for the three-month period over the same period in the prior year and $12.9 million, or 9.8%, for the six-month period over the same period in the prior year. Contributing to the increase in operating income during 2008 compared with the previous year was an increase in inmate populations and the commencement of new management contracts, partially offset by increases in general and administrative expenses and depreciation and amortization.

Facility Operations

A key performance indicator we use to measure the revenue and expenses associated with the operation of the facilities we own or manage is expressed in terms of a compensated man-day, which represents the revenue we generate and expenses we incur for one inmate for one

calendar day. Revenue and expenses per compensated man-day are computed by dividing facility revenue and expenses by the total number of compensated man-days during the period. We believe the measurement is useful because we are compensated for operating and managing facilities at an inmate per-diem rate based upon actual or minimum guaranteed occupancy levels. We also measure our ability to contain costs on a per-compensated man-day basis, which is largely dependent upon the number of inmates we accommodate. Further, per compensated man-day measurements are also used to estimate our potential profitability based on certain occupancy levels relative to design capacity. Revenue and expenses per compensated man-day for all of the facilities placed into service that we owned or managed were as follows for the three and six months ended June 30, 2008 and 2007:

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2008				2007				2008				2007
Revenue per compensated man-day		$	56.69			$	54.08			$	56.34			$	54.04
Operating expenses per compensated man-day:
Fixed expense			29.23				28.10				29.47				28.32
Variable expense			10.23				10.25				10.05				9.87
Total			39.46				38.35				39.52				38.19
Operating margin per compensated man-day		$	17.23			$	15.73			$	16.82			$	15.85
Operating margin			30.4	%			29.1	%			29.9	%			29.3	%
Average compensated occupancy			97.0	%			99.0	%			97.0	%			98.5	%
Average compensated population			76,936				72,715				76,240				71,965

Average compensated population for the quarter ended June 30, 2008 increased 4,221 from 72,715 in the second quarter of 2007 to 76,936 in the second quarter of 2008. The increase in average compensated population resulted primarily from the placement of 6,750 beds into service since the end of the first quarter of 2007. These new beds were largely the result of the opening of our 1,896-bed Saguaro Correctional Facility in June 2007, the 960-bed expansion of our North Fork Correctional Facility completed in the fourth quarter of 2007, the 1,440-bed expansion of our Tallahatchie County Correctional Facility also completed during the fourth quarter of 2007 as well as the second quarter of 2008, and the 720-bed expansions at our Kit Carson Correctional Center in the first quarter of 2008 and Bent County Correctional Facility in the second quarter of 2008.

State revenues increased $31.6 million, or 18.4%, from $171.7 million for the three months ended June 30, 2007 to $203.3 million for the three months ended June 30, 2008, and $59.3 million, or 17.4%, from $340.4 million for the six months ended June 30, 2007 to $399.7 million for the six months ended June 30, 2008. State revenues increased as certain states, such as the state of California, turned to the private sector to help alleviate their overcrowding situations, while other states utilized additional bed capacity we constructed for them or contracted to utilize additional beds at our facilities. We were also successful in achieving certain per diem increases caused by a strong demand for prison beds. We expect this demand to continue as government agencies remain constrained by their lack of capital available to construct new bed capacity. However, a prolonged downturn in the economy could constrain our ability to obtain per diem increases from our state customers.

Business from our federal customers, including primarily the Federal Bureau of Prisons, or the BOP, the U.S. Marshals Service, or the USMS, and U.S. Immigration and Customs Enforcement, or ICE, continues to be a significant component of our business. Our federal customers generated approximately 39% and 41% of our total revenue for the six months ended June 30, 2008 and 2007, respectively, increasing 5.6%, from $292.2 million during the six months ended June 30, 2007 to $308.7 million during the six months ended June 30, 2008. Similar to business from our state customers, we were successful in achieving per diem increases under several of our federal management contracts as a result of a strong demand for prison beds.

Operating expenses totaled $283.2 million and $259.2 million for the three months ended June 30, 2008 and 2007, respectively, while operating expenses for the six months ended June 30, 2008 and 2007 totaled $560.5 million and $508.4 million, respectively. Operating expenses consist of those expenses incurred in the operation and management of adult and juvenile correctional and detention facilities and for our inmate transportation subsidiary.

Fixed expenses per compensated man-day during the three-month periods increased 4.0% from $28.10 in 2007 to $29.23 in 2008. Fixed expenses per compensated man-day during the six-month periods increased 4.1% from $28.32 in 2007 to $29.47 in 2008 primarily as a result of an increase in salaries and benefits. Salaries and benefits represent the most significant component of fixed operating expenses and represent approximately 63% of total operating expenses during both the three and six months ended June 30, 2008. During the three and six months ended June 30, 2008, facility salaries and benefits expense increased $15.8 million and $33.3 million, respectively. Salaries and benefits increased most notably at the aforementioned facilities such as our Saguaro facility that opened in June 2007 and our North Fork and Tallahatchie facilities where expansion beds were placed into service.

Fixed costs per man-day will be negatively impacted as we commence operations at newly developed facilities or as we hire additional staff at facilities we expand until the occupancy at such facilities reach stabilized levels. Further, as we fill our available beds, the opportunity to leverage our fixed costs, such as salaries and benefits, over a larger inmate population will be diminished. We have also experienced tightening labor markets for correctional officers in certain areas and across a wider geographic area for nursing staff. These labor conditions could require us to incur additional expenses to maintain staffing levels and control turnover.

Facility variable expenses increased $0.18 per compensated man-day during the six months ended June 30, 2008 compared with the same period in the prior year. The increase in facility variable operating expenses was largely due to increased costs at facilities where new beds were placed into service. Additionally, we experienced an increase in legal expenses during the first six months of 2008 compared with the same period in the prior year. Expenses associated with legal proceedings may fluctuate from quarter to quarter based on new or threatened litigation, changes in our assumptions, new developments, or the effectiveness of our litigation and settlement strategies. These increases were mitigated by an abatement during the second quarter of gross receipts taxes resulting from a successful negotiation.

We continually evaluate the profitability of certain management contracts and may elect to terminate such contracts from time to time based on a variety of factors but primarily based on poor operating performance. Although generally more profitable, the operation of the

facilities we own carries a higher degree of risk associated with a management contract than the operation of the facilities we manage but do not own because we incur significant capital expenditures to construct or acquire facilities we own. Additionally, correctional and detention facilities have a limited or no alternative use. Therefore, if a management contract is terminated on a facility we own, we continue to incur certain operating expenses, such as real estate taxes, utilities, and insurance, that we would not incur if a management contract were terminated for a managed-only facility. As a result, revenue per compensated man-day is typically higher for facilities we own and manage than for managed-only facilities. Because we incur higher expenses, such as repairs and maintenance, real estate taxes, and insurance, on the facilities we own and manage, our cost structure for facilities we own and manage is also higher than the cost structure for the managed-only facilities. The following tables display the revenue and expenses per compensated man-day for the facilities placed into service that we own and manage and for the facilities we manage but do not own:

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2008				2007				2008				2007
Owned and Managed Facilities:
Revenue per compensated man-day		$	65.49			$	62.37			$	65.09			$	62.33
Operating expenses per compensated man-day:
Fixed expense			31.14				30.14				31.47				30.40
Variable expense			11.04				11.07				10.71				10.66
Total			42.18				41.21				42.18				41.06
Operating margin per compensated man-day		$	23.31			$	21.16			$	22.91			$	21.27
Operating margin			35.6	%			33.9	%			35.2	%			34.1	%
Average compensated occupancy			97.3	%			99.6	%			97.3	%			99.2	%
Average compensated population			51,121				47,310				50,424				46,782

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2008				2007				2008				2007
Managed Only Facilities:
Revenue per compensated man-day		$	39.26			$	38.64			$	39.26			$	38.66
Operating expenses per compensated man-day:
Fixed expense			25.46				24.31				25.55				24.46
Variable expense			8.63				8.71				8.77				8.41
Total			34.09				33.02				34.32				32.87
Operating margin per compensated man-day		$	5.17			$	5.62			$	4.94			$	5.79
Operating margin			13.2	%			14.5	%			12.6	%			15.0	%
Average compensated occupancy			96.5	%			97.9	%			96.5	%			97.2	%
Average compensated population			25,815				25,405				25,816				25,183

Owned and Managed Facilities

Our operating margins at owned and managed facilities for the three months ended June 30, 2008 increased to 35.6% compared with 33.9% for the same three-month period in 2007. Additionally, operating margins at our owned and managed facilities for the six months ended June 30, 2008 increased to 35.2% compared with 34.1% for the same six-month period in 2007. The increase in operating margins at our owned and managed facilities is largely the result of the increase in the average compensated population during the three and six months ended June 30, 2008 as compared to the same periods in the prior year. The increase in average compensated population was largely the result of placing into service our 1,896-bed Saguaro Correctional Facility in June 2007 and the completion of approximately 2,400 expansion beds at our North Fork Correctional Facility and Tallahatchie County Correctional Facility. Further, the aforementioned demand experienced with our federal and state customers has resulted in an increase in the overall average revenue per compensated man-day resulting from new contracts at higher average per diems than on existing contracts and from annual per diem increases.

The most notable increases in compensated population during 2008 occurred at the Saguaro facility due to its opening in June 2007, the North Fork facility resulting from higher inmate populations from various existing state customers, and the Tallahatchie facility resulting from the receipt of inmate populations from the state of California. Our total revenues increased by $20.7 million and $38.9 million at these three facilities during the three and six months ended June 30, 2008, respectively, compared to the same periods in the prior year. As a result of the recently completed bed expansions, the North Fork and Tallahatchie facilities also have approximately 1,400 available beds as of June 30, 2008 that are expected to be used to house inmates from our existing state customers.

The Saguaro Correctional Facility was constructed to provide the state of Hawaii the opportunity to consolidate its inmate populations into fewer facilities, while providing us with an additional supply of beds to meet anticipated demand. We completed construction of the Saguaro Correctional Facility in June 2007 at a cost of approximately $102.6 million. While the consolidation of inmates from Hawaii did not result in a significant increase in total inmate populations, the consolidation created additional capacity at our Diamondback and Tallahatchie facilities, which was substantially utilized by additional inmate populations from the states of Arizona and California, respectively, pursuant to new management contracts. The consolidation also created additional capacity at our Red Rock Correctional Center, which was substantially utilized with additional inmate populations from the state of California during the second quarter of 2008.

On October 5, 2007, we announced that we had entered into a new agreement with the CDCR for the housing of up to 7,772 inmates from the state of California. The new contract replaced and superseded the previous contract we had with the CDCR, which provided housing for up to 5,670 inmates. In January 2008, this agreement was further amended to allow for an additional 360 CDCR inmates. As a result, we now have a contract that provides the CDCR with the ability to house up to 8,132 inmates in six of the facilities we own. The new agreement, which is subject to appropriations by the California legislature, expires June 30, 2011, and provides for a minimum payment based on the greater of the actual occupancy or 90% of the capacity made available to the CDCR at each facility in which inmates are housed. The minimum payments are subject to specific terms and conditions in the new contract at each facility that houses CDCR inmates.

In October 2007, we announced that we would begin construction of our new 3,060-bed La Palma Correctional Center, which we expect to be fully utilized by the CDCR. We expect to complete construction of the new La Palma Correctional Center during the first quarter of 2009 at an estimated total cost of $205.0 million. However, we opened a portion of the new facility and began receiving inmates from the state of California during the third quarter of 2008, and expect to continue to receive additional California inmates through completion of construction, as phases of the facility become available. As a condition of undertaking the substantial cost required to construct the La Palma Correctional Center, the CDCR agreed to occupy the beds allocated to it in accordance with a Phase-In Schedule, and to make a minimum payment based on the greater of the actual occupancy or 90% of the capacity available to CDCR according to the Phase-In Schedule.

We currently expect that we will ultimately provide the CDCR up to 960 beds at our Florence Correctional Center, 80 beds at our West Tennessee Detention Facility, 2,592 beds at our Tallahatchie facility, 1,080 beds at our North Fork facility, 360 beds at our Red Rock facility, and 3,060 beds at the new La Palma facility, with the final transfer from California occurring during the second quarter of 2009. As of June 30, 2008, we held 4,297 inmates from the state of California.

We remain optimistic that the state of California will continue to utilize out-of-state beds to alleviate its severe overcrowding situation. However, several legal proceedings have challenged the State’s ability to send inmates out-of-state. Legislative enactments or additional legal proceedings, including a proceeding under federal jurisdiction that could potentially reduce the number of inmates in the California prison system, may prohibit the out-of-state transfer of inmates or could result in the return of inmates we currently house for the CDCR. If transfers from California are limited as a result of one or more of these proceedings, we would market the beds designated for the CDCR, including those that will be provided at our new La Palma Correctional Center, to other federal and state customers. While we currently believe we would ultimately be able to fill a substantial portion of such beds, the utilization would likely be at a much slower pace.

We have recently experienced delays in the intake of CDCR inmates compared to our previous expectations. These delays have been necessary to ensure that we are in compliance with certain medical requirements as set forth by a federal medical receiver appointed to oversee the healthcare delivery within the California correctional system. However, we continue to expect the CDCR to fully utilize all of the 8,132 beds available under our contract. Although, we can provide no assurance as to the timing of the receipt of inmates from the CDCR, the receipt of which could be delayed as a result of legal challenges, operational disruptions, or for unforeseen circumstances.

As a result of weakness in inmate populations from the District of Columbia, the 1,500-bed D.C. Correctional Treatment Facility experienced a decline in occupancy from 74% during the first six months of 2007 to 58% during the first six months of 2008, negatively impacting margins on our owned and managed business. We are currently in negotiations with the District of Columbia to permit the utilization of available space by the USMS, but can provide no assurance that we will be successful.

Managed-Only Facilities

Our operating margins decreased at managed-only facilities during the three months ended June 30, 2008 to 13.2% from 14.5% during three months ended June 30, 2007. Similarly, our managed-only operating margins also decreased during the six months ended June 30, 2008 to 12.6% from 15.0% during the six months ended June 30, 2007. The managed-only business remains very competitive which continues to put pressure on per diem rates resulting in only marginal increases in the managed-only revenue per compensated man-day.

Operating expenses per compensated man-day increased to $34.09 during the second quarter of 2008 from $33.02 during the same period in the prior year. The increase in operating expenses per compensated man-day was caused in part by an increase in salaries and benefits due in part to annual merit increases as well as increased employee benefits.

During September 2005, we announced that Citrus County renewed our contract for the continued management of the Citrus County Detention Facility. The terms of the new agreement included a 360-bed expansion that was substantially completed during the first quarter of 2007 for a cost of approximately $18.5 million, funded by utilizing cash on hand. The facility, which now has a design capacity of 760 beds, experienced an increase in inmate populations during 2008. During the six months ended June 30, 2008, the facility maintained an average daily inmate population of 672 inmates compared with an average daily inmate population of 571 inmates during the six months ended June 30, 2007, which resulted in an increase in revenue and operating margin at this facility, and partially offset the decline in operating margins at managed-only facilities.

In April 2008, we agreed with the New Mexico Department of Corrections to suspend operations of the 192-bed Camino Nuevo Correctional Center in Albuquerque, New Mexico, and transfer existing populations to our New Mexico Women’s Correctional Facility in Grants, New Mexico. Operations were suspended due to consistently low inmate populations that were not adequate to maintain efficient operations. The Camino Nuevo facility operated at a loss of $0.2 million and $0.5 million during the three and six months ended June 30, 2008, respectively, compared with operating income of $0.1 million and $0.3 million during the three and six months ended June 30, 2007, respectively, inclusive of depreciation expense.

In May 2008, we notified the Bay County Commission of our intention to exercise our option to terminate the operational management contract for the 1,150-bed Bay County Jail and Annex in Panama City, Florida, effective October 9, 2008. The Bay County Jail and Annex operated at a loss of $0.5 million and $0.7 million during the three and six months ended June 30, 2008, respectively, compared with operating income of $0.2 million for each of the three and six months ended June 30, 2007, inclusive of depreciation expense. We expect to reclassify the results of operations, net of taxes, and the assets and liabilities of this facility as discontinued operations upon termination of operations in the fourth quarter of 2008 for all periods presented.

Although the managed-only business is attractive because it requires little or no upfront investment and relatively modest ongoing capital expenditures, we expect the managed-only business to remain competitive. Any reductions to our per diem rates or the lack of per diem increases at managed-only facilities would likely result in a further deterioration in our operating margins.

During the three months ended June 30, 2008 and 2007, managed-only facilities generated 10.1% and 12.5%, respectively, of our total facility contribution, compared with 9.9% and 12.8%, for the six months ended June 30, 2008 and 2007, respectively. We define facility contribution as a facility’s operating income or loss before interest, taxes, goodwill impairment, depreciation, and amortization.

General and administrative expense

For the three months ended June 30, 2008 and 2007, general and administrative expenses totaled $19.8 million and $18.8 million, respectively, while general and administrative expenses totaled $39.4 million and $36.1 million, respectively, during the six months ended June 30, 2008 and 2007. General and administrative expenses increased from 2007 primarily as a result of an increase in salaries and benefits for an increase in corporate staffing levels to help ensure the quality and effectiveness of our facility operations and to intensify our efforts on developing new bed capacity. Stock-based compensation also increased to $2.1 million during the second quarter of 2008 from $1.8 million during the second quarter of 2007, and to $4.1 million for the first six months of 2008 compared with $3.0 million during the first six months of 2007.

As a result of our intensified efforts to develop new capacity, we incurred charges of $0.1 million during each of the three months ended June 30, 2008 and 2007, and $0.6 million and $0.2 million during the six months ended June 30, 2008 and 2007, respectively, in connection with the abandonment of certain development projects. General and administrative expenses could increase in the future for the write-off of additional pre-acquisition costs we incur in the event we decide to abandon any such projects.

Depreciation and amortization

For the three months ended June 30, 2008 and 2007, depreciation and amortization expense totaled $22.2 million and $18.9 million, respectively. For the six months ended June 30, 2008 and 2007, depreciation and amortization expense totaled $43.6 million and $37.2 million, respectively. The increase in depreciation and amortization from the comparable periods in 2007 resulted from the combination of additional depreciation expense recorded on various completed facility expansion and development projects, most notably our Saguaro Correctional Facility placed into service in June 2007, and the additional depreciation on our investments in technology and other capital expenditures. We currently expect depreciation and amortization expense to increase in future quarters as we complete additional facility expansion and development projects.

Interest expense, net

Interest expense is reported net of interest income and capitalized interest for the three and six months ended June 30, 2008 and 2007. Gross interest expense, net of capitalized interest, was $14.7 million and $16.4 million, respectively, for the three months ended June 30, 2008 and 2007 and was $29.5 million and $33.0 million, respectively, for the six months ended June 30, 2008 and 2007. Gross interest expense is based on outstanding borrowings under our revolving credit facility, our senior notes, as well as the amortization of loan costs and unused facility fees. We expect gross interest expense to increase in future quarters as we utilize our revolving credit facility to fund our expansion and development projects.

Gross interest income was $0.8 million and $2.7 million for the three months ended June 30, 2008 and 2007, respectively. Gross interest income was $1.9 million and $5.4 million for the six months ended June 30, 2008 and 2007, respectively. Gross interest income is earned on cash collateral requirements, a direct financing lease, notes receivable, investments, and cash and cash equivalents, and decreased due to the lower cash and investment balances, which were used to fund our expansion and development projects.

Capitalized interest was $4.1 million and $1.7 million during the three months ended June 30, 2008 and 2007, respectively, and was $7.7 million and $3.1 million during the six months ended June 30, 2008 and 2007, respectively. Capitalized interest was associated with various construction and expansion projects further described under “Liquidity and Capital Resources” hereafter.

Income tax expense

We incurred income tax expense of $23.1 million and $44.8 million for the three and six months ended June 30, 2008, respectively, while we incurred income tax expense of $19.6 million and $39.3 million for the three and six months ended June 30, 2007, respectively.

Our effective tax rate was 38.1% and 38.2% during the three and six months ended June 30, 2008 compared with 37.5% and 37.6% during the three- and six-month periods in the prior year. We currently expect our annual effective tax rate to increase slightly in 2008 compared to 2007 as a result of an increase in our projected taxable income in states with higher statutory tax rates and the full year impact of an adverse change in Texas tax law. Our effective tax rate is estimated based on our current projection of taxable income and could fluctuate based on changes in these estimates, the implementation of tax strategies, changes in federal or state tax rates, changes in tax laws, or changes in state apportionment factors, as well as changes in the valuation allowance applied to our deferred tax assets that are based primarily on the amount of state net operating losses and tax credits that could expire unused.

LIQUIDITY AND CAPITAL RESOURCES

Our principal capital requirements are for working capital, capital expenditures, and debt service payments. Capital requirements may also include cash expenditures associated with our outstanding commitments and contingencies, as further discussed in the notes to the financial statements and as further described in our 2007 Form 10-K. Additionally, we may incur capital expenditures to expand the design capacity of certain of our facilities (in order to retain management contracts) and to increase our inmate bed capacity for anticipated demand from current and future customers. We may acquire additional correctional facilities that we believe have favorable investment returns and increase value to our stockholders. We will also consider opportunities for growth, including potential acquisitions of businesses within our line of business and those that provide complementary services, provided we believe such opportunities will broaden our market share and/or increase the services we can provide to our customers.

As a result of increasing demand from both our federal and state customers and the utilization of a significant portion of our existing available beds, we have intensified our efforts to deliver new capacity to address the lack of available beds that our existing and potential customers are experiencing. We can provide no assurance, however, that the increased

capacity that we construct will be utilized. The following addresses certain significant projects that are currently in process:

In August 2006, we announced our intention to expand our Tallahatchie County Correctional Facility in Tutwiler, Mississippi by 360 beds. Based on anticipated demand, we announced in March 2007 that we expected to complete an additional 360-bed expansion at this facility. Both of these expansions were completed during the fourth quarter of 2007. In order to satisfy demand for prison beds for the state of California and/or other state customers, during July 2007 we announced our intention to further expand our Tallahatchie facility by an additional 848 beds to ultimately bring the design capacity at this facility to a total of 2,672 beds. During the second quarter of 2008, we placed 720 beds of the 848-bed expansion into service and expect to complete the remaining 128 beds during the third quarter of 2008. We currently estimate these expansions to cost approximately $93.5 million in the aggregate. As previously described herein, we expect to house up to 2,592 inmates from the state of California at the Tallahatchie facility pursuant to the newest contract with the CDCR.

In May 2007, we announced our intention to expand two of our owned facilities located in Oklahoma based on our expectation of increased demand from the state of Oklahoma and a number of other existing state customers. We are expanding our 1,032-bed Cimarron Correctional Facility in Cushing, Oklahoma and our 1,010-bed Davis Correctional Facility in Holdenville, Oklahoma by 660 beds each. Currently, the state of Oklahoma occupies both facilities which are running at or near full capacity. Both expansions are expected to be completed by the end of the third quarter of 2008 at an estimated total cost of $80.0 million.

In July 2007, we announced the commencement of construction of a new 1,668-bed correctional facility in Adams County, Mississippi. Construction of the new facility is estimated to be completed during the fourth quarter of 2008 at an estimated cost of approximately $105.0 million. During the second quarter of 2008, we announced that we would increase the size of the Adams County Correctional Center to 2,232 beds at an incremental cost of $30.0 million. We currently expect construction of these beds to also be completed during the fourth quarter of 2008. We do not currently have a management contract to utilize these new beds, but will market the new beds to various existing and potential customers.

In October 2007, we announced our intention to construct our new 3,060-bed La Palma Correctional Center located in Eloy, Arizona, which we expect to be fully utilized by the CDCR. We expect to complete construction of the new La Palma Correctional Center during the first quarter of 2009 at an estimated total cost of $205.0 million. However, we opened a portion of the new facility and began receiving inmates from the state of California during the third quarter of 2008, and expect to continue to receive additional California inmates through completion of construction, as phases of the facility become available.

In February 2008, we announced our intention to construct our new 2,040-bed Trousdale Correctional Center in Trousdale County, Tennessee. We have begun construction of our new Trousdale Correctional Center and expect to complete construction of the facility during the fourth quarter of 2009 at an estimated cost of approximately $143.0 million.

In May 2008, we announced that we had been awarded a contract by the Office of the Federal Detention Trustee (“OFDT”) to design, build, and operate a new correctional facility located in Pahrump, Nevada, approximately 65 miles outside of Las Vegas,

Nevada. Our new 1,072-bed Nevada Southern Detention Center is expected to house approximately 1,000 federal prisoners. The contract provides for a guarantee of up to 750 inmates or detainees and includes an initial term of five years with three five-year renewal options. Construction of our Nevada Southern Detention Center is expected to be complete during the fourth quarter of 2009 or first quarter of 2010, at an estimated cost of $83.5 million.

The following table summarizes the aforementioned construction and expansion projects. Estimated costs include pre-acquisition costs (as applicable), land acquisition costs, design and construction costs, capitalized interest, as well as furniture, fixtures, and equipment required to operate the beds:

								Estimated remaining
								cost to complete as
		No. of				Estimated		of June 30, 2008
Facility		beds				completion date		(in thousands)
Tallahatchie County Correctional Facility
Tutwiler, MS			128			Third quarter 2008		$	11,957
Cimarron Correctional Facility
Cushing, OK			660			Third quarter 2008			11,960
Davis Correctional Facility
Holdenville, OK			660			Third quarter 2008			6,661
La Palma Correctional Center						Third quarter 2008 -
Eloy, AZ			3,060			First quarter 2009			52,880
Adams County Correctional Center
Adams County, MS			2,232			Fourth quarter 2008			50,739
Trousdale Correctional Center
Hartsville, TN			2,040			Fourth quarter 2009			130,800
Nevada Southern Detention Center
Pahrump, NV			1,072			Fourth quarter 2009			81,317
Total			9,852					$	346,314