The Geo Group, Inc. : The GEO Group Reports First Quarter 2012 Results; Accelerates Dividend Policy to Third Quarter 2012 and Will Increase Cash Dividend in Fourth Quarter 2012
05/07/2012| 07:35am US/Eastern
Recommend:
0
1Q12 Net Income of $15.1 Million - $0.25 EPS
1Q12 Pro Forma Net Income of $18.8 Million - $0.31 Pro Forma EPS
Increases 2012 Pro Forma EPS Guidance to $1.54 to $1.60 and
Confirms 2012 Adjusted Funds from Operations Guidance of $3.18 to
$3.34 per Share
Board Accelerates Dividend Policy Implementation; Expects to
Declare Quarterly Cash Dividend of $0.10 per Share in 3Q12 and will
Increase Quarterly Cash Dividend to $0.15 per Share in 4Q12
The GEO Group, Inc. (NYSE: GEO) ("GEO") today reported its
financial results for the first quarter 2012 and announced that GEO's
Board of Directors (GEO's "Board") has accelerated the implementation of
GEO's dividend policy and expects to declare a quarterly cash dividend
of $0.10 per share in the third quarter of 2012, which will increase to
$0.15 per share in the fourth quarter of 2012.
Financial Results - First Quarter 2012 Compared with First Quarter
2011
GEO reported total revenues for the first quarter 2012 of $412.3 million
compared to total revenues of $391.8 million for the first quarter 2011.
GEO reported net income for the first quarter 2012 of $15.1 million, or
$0.25 per diluted share, compared to net income of $16.4 million, or
$0.25 per diluted share for the first quarter of 2011. GEO's first
quarter 2012 net income includes $3.1 million, after-tax, in
start-up/transition expenses; $0.4 million after-tax in international
bid and proposal expenses; and $0.3 million after-tax in transaction
related expenses in connection with GEO's announced acquisition of the
partnership interests in Municipal Corrections Finance, L.P. ("MCF").
Excluding these items, GEO reported Pro Forma net income of $18.8
million, or $0.31 per diluted share, for the first quarter 2012 compared
to Pro Forma net income of $22.7 million, or $0.35 per diluted share for
the first quarter 2011. First quarter 2012 Adjusted EBITDA increased to
$74.2 million from $73.1 million in the first quarter 2011. Adjusted
Funds from Operations for the first quarter 2012 increased to $58.1
million, or $0.95 per diluted share, compared to $47.0 million, or $0.73
per diluted share, for the first quarter 2011.
George C. Zoley, Chairman and Chief Executive Officer of GEO, said: "We
are pleased with our first quarter results, which continue to reflect
strong operational and financial performance from our diversified
business units. We have increased our earnings outlook for 2012, and our
Board has accelerated the implementation of our new dividend policy. We
now expect to declare a quarterly cash dividend of $0.10 per share in
the third quarter, and we will increase the quarterly cash dividend to
$0.15 per share in the fourth quarter. This dividend policy is
indicative of our long-term view that we can return value to our
shareholders while continuing to naturally deleverage and pursue quality
growth."
Business Segments Revenue
U.S. Corrections & Detention
For the first quarter 2012, U.S. Corrections & Detention revenue
increased by approximately $4.5 million year-over-year to $246.1
million. First quarter 2012 revenues for U.S. Corrections & Detention
reflect the activation of the Adelanto ICE Processing Center East in
California in August 2011 and the Riverbend Correctional Facility in
Georgia in December 2011 along with the opening of the Karnes Civil
Detention Center in Texas and an expansion to the New Castle
Correctional Facility in Indiana in the first quarter 2012. These
facility activations were offset by deactivation of the Regional
Correctional Center in New Mexico in the second quarter 2011, the Leo
Chesney Community Correctional Facility in California in the third
quarter 2011, and the Desert View and Central Valley Community
Correctional Facilities in California in the fourth quarter 2011.
GEO Care
For the first quarter 2012, GEO Care revenue increased by approximately
$12.8 million year-over-year to $109.7 million. This revenue increase
was driven primarily by GEO's acquisition of BI Incorporated ("BI") in
February 2011 as well as the activation of the 100-bed Montgomery County
Mental Health Treatment Facility in Texas in March 2011 partially offset
by the deactivation of the 177-bed Brooklyn Residential Reentry Center
in the third quarter 2011.
International Services
For the first quarter 2012, International Services revenue increased by
approximately $3.4 million year-over-year to $56.5 million driven
primarily by positive foreign exchange rate fluctuations and the
activation of the Dungavel House Immigration Removal Centre in Scotland
in the third quarter 2011 partially offset by the deactivation of the
Campsfield House Immigration Removal Centre in England in the second
quarter 2011.
Reconciliation Tables and Supplemental Disclosure
GEO has made available a Supplemental Disclosure which contains
reconciliation tables of pro forma net income to net income, Adjusted
EBITDA to net income, Adjusted Funds from Operations to net income along
with supplemental financial and operational information on GEO's
business segments. Please see the section of this press release below
entitled "Note to Reconciliation Tables and Supplemental Disclosure -
Important Information on GEO's Non-GAAP Financial Measures" for
information on how GEO defines pro forma net income, Adjusted EBITDA,
and Adjusted Funds from Operations. GEO's Reconciliation Tables can be
found herein and in GEO's Supplemental Disclosure which is available on
GEO's Investor Relations webpage at www.geogroup.com.
2012 Financial Guidance
GEO has increased its earnings guidance for 2012. GEO expects its full
year 2012 revenues to be in a range of $1.65 billion to $1.66 billion
and its 2012 pro forma earnings per share to be in a range of $1.54 to
$1.60 per share, excluding $0.12 per share in after-tax
start-up/transition expenses, international bid and proposal expenses,
and M&A related expenses.
GEO expects its 2012 Adjusted EBITDA to be in a range of $330 million to
$340 million and its 2012 Adjusted Funds from Operations to be in a
range of $195 million to $205 million, or $3.18 to $3.34 per share.
GEO expects its second quarter 2012 revenues to be in a range of $410
million to $415 million and its pro forma earnings per share to be in a
range of $0.40 to $0.42 per share, excluding $0.03 per share in
after-tax start-up/transition expenses, international bid and proposal
expenses, and M&A related expenses.
GEO's increased earnings guidance reflects the previously announced
continuation of the Golden State Community Correctional Facility
contract in California through December 14, 2012 partially offset by the
expected deactivation/transition of GEO's managed-only contracts for the
East Mississippi, Walnut Grove, and Marshall County Correctional
Facilities, which the State of Mississippi has decided to competitively
rebid this year. GEO had previously announced its decision to
discontinue its management contract for the East Mississippi
Correctional Facility effective July 19, 2012, and GEO's increased
earnings guidance for 2012 now assumes that all three contracts will be
deactivated/transitioned in the second half of the year.
GEO's 2012 financial guidance does not assume the potential reactivation
of approximately 7,000 current beds in inventory which GEO is actively
marketing to local, state, and federal customers. The after-tax carrying
costs associated with keeping the facilities idle represent
approximately $0.14 per share, of which more than half are non-cash
expenses. GEO's guidance also reflects approximately $0.18 per share in
after-tax intangibles amortization expense mostly related to the
acquisitions of Cornell Companies and BI.
Stock Repurchase Program
On July 14, 2011, GEO's Board of Directors approved a stock repurchase
program of up to $100.0 million of GEO's common stock effective through
December 31, 2012. Through the end of the first quarter 2012, GEO had
repurchased approximately 3.9 million shares of its common stock for
approximately $75.0 million.
Dividend Policy
GEO announced today that its Board has decided to accelerate the
implementation of its new dividend policy to the third quarter 2012 and
to increase the quarterly cash dividend in the fourth quarter 2012. GEO
expects to declare quarterly cash dividends of $0.10 per share in the
third quarter 2012 and $0.15 per share in the fourth quarter 2012. The
declaration of each quarterly cash dividend will be subject to approval
by GEO's Board and to meeting the requirements of all applicable laws
and regulations. GEO's Board retains the power to modify, suspend or
cancel its dividend policy as it may deem necessary or appropriate in
the future.
Municipal Corrections Finance, L.P. ("MCF")
GEO announced today that it has signed a definitive agreement to
purchase 100% of the partnership interests in Municipal Corrections
Finance, L.P. for approximately $27.0 million. The transaction will give
GEO full ownership interest in 11 correctional properties, representing
10,000 beds, which are currently leased and operated by GEO and will
save GEO approximately $155.0 million in future net cash payments,
becoming accretive to earnings after 2012.
Conference Call Information
GEO has scheduled a conference call and simultaneous webcast at 11:00 AM
(Eastern Time) today to discuss GEO's first quarter 2012 financial
results as well as its progress and outlook. The call-in number for the
U.S. is 1-888-680-0893 and the international call-in number is
1-617-213-4859. The participant pass-code for the conference call is
41268942. In addition, a live audio webcast of the conference call may
be accessed on the Conference Calls/Webcasts section of GEO's investor
relations home page at www.geogroup.com.
A replay of the audio webcast will be available on the website for one
year. A telephonic replay of the conference call will be available until
June 7, 2012 at 1-888-286-8010 (U.S.) and 1-617-801-6888
(International). The pass-code for the telephonic replay is 35646752.
About The GEO Group, Inc.
The GEO Group, Inc. is the world's leading diversified provider of
correctional, detention, and residential treatment services to federal,
state, and local government agencies around the globe. GEO offers a
turnkey approach that includes design, construction, financing, and
operations. GEO represents government clients in the United States,
Australia, South Africa, and the United Kingdom. GEO's worldwide
operations include 20,000 employees, 113 correctional, detention and
residential treatment facilities, including projects under development,
and 79,000 owned and/or managed beds.
Note to Reconciliation Tables and Supplemental Disclosure - Important
Information on GEO's Non-GAAP Financial Measures
Pro Forma Net Income, Adjusted EBITDA and Adjusted Funds From Operations
are non-GAAP financial measures that are presented as supplemental
disclosures.
Pro Forma Net Income is defined as net income adjusted for net
income/loss attributable to non-controlling interests,
start-up/transition expenses, net of tax, international bid and proposal
expenses, net of tax, and M&A-related expenses, net of tax. GEO believes
that Pro Forma Net Income is useful to investors as it provides
information about the performance of GEO's overall business because such
measure eliminates the effects of certain unusual or non-recurring
charges that are not directly attributable to GEO's underlying operating
performance, it provides disclosure on the same basis as that used by
GEO's management and it provides consistency in GEO's financial
reporting and therefore continuity to investors for comparability
purposes. GEO's management uses Pro Forma Net Income to monitor and
evaluate its operating performance and to facilitate internal and
external comparisons of the historical operating performance of GEO and
its business units.
Adjusted EBITDA is defined as net income before net interest expense,
income tax provision, depreciation and amortization, and tax provision
on equity in earnings of affiliate, adjusted for net income/loss
attributable to non-controlling interests, stock-based compensation,
pre-tax, start-up/transition expenses, pre-tax, international bid and
proposal expenses, pre-tax, and M&A-related expenses, pre-tax. GEO
believes that Adjusted EBITDA is useful to investors as it provides
information about the performance of GEO's overall business because such
measure eliminates the effects of certain unusual or non-recurring
charges that are not directly attributable to GEO's underlying operating
performance, it provides disclosure on the same basis as that used by
GEO's management and it provides consistency in GEO's financial
reporting and therefore continuity to investors for comparability
purposes. GEO's management uses Adjusted EBITDA to monitor and evaluate
its operating performance and to facilitate internal and external
comparisons of the historical operating performance of GEO and its
business units.
Adjusted Funds From Operations is defined as net income excluding
depreciation and amortization, income tax provision, income taxes
refunded/paid, stock-based compensation, maintenance capital
expenditures, equity in earnings of affiliates, net of tax, amortization
of debt costs and other non-cash interest, net income/loss attributable
to non-controlling interests, start-up/transition expenses, M&A-related
expenses, and international bid and proposal expenses. GEO believes that
Adjusted Funds From Operations is useful to investors as it provides
information regarding cash that GEO's operating business generates
before taking into account certain cash and non-cash items that are
non-operational or infrequent in nature, it provides disclosure on the
same basis as that used by GEO's management and it provides consistency
in GEO's financial reporting and therefore continuity to investors for
comparability purposes. GEO's management uses Adjusted Funds From
Operations to monitor and evaluate its operating performance and to
facilitate internal and external comparisons of the historical operating
performance of GEO and its business units.
GEO has made available a Supplemental Disclosure which contains
reconciliation tables of pro forma net income to net income, Adjusted
EBITDA to net income, Adjusted Funds from Operations to net income along
with supplemental financial and operational information on GEO's
business segments. GEO's Reconciliation Tables can be found herein and
in GEO's Supplemental Disclosure which is available on GEO's Investor
Relations webpage at www.geogroup.com.
Safe-Harbor Statement
This press release contains forward-looking statements regarding
future events and future performance of GEO that involve risks and
uncertainties that could materially affect actual results, including
statements regarding financial guidance for second quarter 2012 and full
year 2012, our expectation to declare quarterly cash dividends and the
timing, amount and any future increase of such dividends, and our
estimates regarding the timing of when the acquisition of 100% of the
partnership interests in MCF will be accretive. Factors that could cause
actual results to vary from current expectations and forward-looking
statements contained in this press release include, but are not limited
to: (1) GEO's ability to meet its financial guidance for 2012 given the
various risks to which its business is exposed; (2) GEO's ability to
declare a quarterly cash dividend beginning in the third quarter 2012;
(3) GEO's ability to successfully pursue further growth and continue to
create shareholder value; (4) GEO's ability to consummate the
acquisition of 100% of the partnership interests in MCF within the
anticipated timeframe; (5) risks associated with GEO's ability to
control operating costs associated with contract start-ups; (6) GEO's
ability to timely open facilities as planned, profitably manage such
facilities and successfully integrate such facilities into GEO's
operations without substantial costs; (7) GEO's ability to win
management contracts for which it has submitted proposals and to retain
existing management contracts; (8) GEO's ability to obtain future
financing on acceptable terms; (9) GEO's ability to sustain company-wide
occupancy rates at its facilities; (10) any difficulties encountered in
maintaining relationships with customers, employees or suppliers as a
result of the transactions with Cornell and BI; (11) GEO's ability to
access the capital markets in the future on satisfactory terms or at
all; and (12) other factors contained in GEO's Securities and Exchange
Commission filings, including the Form 10-K, 10-Q and 8-K reports.
First quarter 2012 financial tables to follow:
THE GEO GROUP, INC. CONSOLIDATED STATEMENTS OF
INCOME FOR THE THIRTEEN WEEKS ENDED APRIL 1,
2012 AND APRIL 3, 2011 (In thousands, except per
share data) (UNAUDITED)
Thirteen Weeks Ended
April 1, 2012
April 3, 2011
Revenues
$
412,342
$
391,766
Operating expenses
319,128
299,286
Depreciation and amortization
23,215
18,802
General and administrative expenses
27,441
32,788
Operating income
42,558
40,890
Interest income
1,807
1,569
Interest expense
(20,807
)
(16,961
)
Income before income taxes and equity in earnings of affiliates
23,558
25,498
Provision for income taxes
9,247
9,780
Equity in earnings of affiliates, net of income tax provision of
$321 and $1,024
748
662
Net income
15,059
16,380
Net (income) loss attributable to noncontrolling interests
(34
)
410
Net income attributable to The GEO Group, Inc.
$
15,025
$
16,790
Weighted-average common shares outstanding:
Basic
60,768
64,291
Diluted
60,929
64,731
Income per Common Share Attributable to The GEO Group, Inc. -- Basic
$
0.25
$
0.26
Income per Common Share Attributable to The GEO Group, Inc. -- Diluted
$
0.25
$
0.26
THE GEO GROUP, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS APRIL 1, 2012 AND JANUARY 1, 2012 (In
thousands, except share data)
April 1, 2012
January 1, 2012
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents
$
48,999
$
44,753
Restricted cash and investments (including VIEs1 of
$29,373 and $35,435, respectively)
38,398
42,535
Accounts receivable, less allowance for doubtful accounts of $2,829
and $2,453
282,902
292,783
Deferred income tax assets, net
28,726
28,726
Prepaid expenses and other current assets
31,380
50,532
Total current assets
430,405
459,329
Restricted Cash and Investments (including VIEs of
$33,624 and $38,930, respectively)
61,379
57,912
Property and Equipment, Net (including VIEs of
$161,440 and $162,665, respectively)
1,717,091
1,706,171
Assets Held for Sale
5,505
4,363
Direct Finance Lease Receivable
31,077
32,146
Deferred Income Tax Assets, Net
1,711
1,711
Goodwill
508,076
508,066
Intangible Assets, Net
195,652
200,342
Other Non-Current Assets
83,322
79,576
Total Assets
$
3,034,218
$
3,049,616
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable
$
55,830
$
69,653
Accrued payroll and related taxes
48,660
38,642
Accrued expenses
111,984
126,857
Current portion of capital lease obligations, long-term debt and
non-recourse debt (including VIEs of $21,000 and $20,770,
respectively)
56,020
53,666
Total current liabilities
272,494
288,818
Deferred Income Tax Liabilities
125,209
125,209
Other Non-Current Liabilities
59,142
56,381
Capital Lease Obligations
12,719
13,087
Long-Term Debt
1,312,832
1,319,068
Non-Recourse Debt (including VIEs of $102,442 and
$108,335, respectively)
201,653
208,532
Total Shareholders' Equity
1,050,169
1,038,521
Total Liabilities and Shareholders' Equity
$
3,034,218
$
3,049,616
1 Variable interest entities or "VIEs"
Reconciliation Tables for First Quarter 2012
Reconciliation of Pro Forma Net Income to
Net Income
(In thousands except per share data)
13 Weeks
13 Weeks
Ended
Ended
1-Apr-12
3-Apr-11
Net Income
$
15,059
$
16,380
Net (Income) loss attributable to non-controlling interests
(34
)
410
Start-up/transition expenses, net of tax
3,055
2,189
International bid and proposal expenses, net of tax
418
-
M&A Related Expenses, net of tax
273
3,735
Pro forma net income
$
18,771
$
22,714
Diluted earnings per share
$
0.25
$
0.25
Net (Income) loss attributable to non-controlling interests
-
0.01
Start-up/transition expenses, net of tax
0.05
0.03
International bid and proposal expenses, net of tax
0.01
-
M&A Related Expenses, net of tax
-
0.06
Diluted pro forma earnings per share
$
0.31
$
0.35
Weighted average common shares outstanding-diluted
60,929
64,731
Reconciliation from Adjusted EBITDA to
Net Income
(In thousands)
13 Weeks
13 Weeks
Ended
Ended
1-Apr-12
3-Apr-11
Net Income
$
15,059
$
16,380
Interest expense, net
19,000
15,392
Income tax provision
9,247
9,780
Depreciation and amortization
23,215
18,802
Tax provision on equity in earnings of affiliate
321
1,024
EBITDA
$
66,842
$
61,378
Adjustments
Net (Income) loss attributable to non-controlling interests
$
(34
)
$
410
Start-up/transition expenses, pre-tax
4,889
3,567
Stock-Based Compensation, pre-tax
1,506
2,061
International bid and proposal expenses, pre-tax
565
-
M&A Related Expenses, pre-tax
453
5,657
Adjusted EBITDA
$
74,221
$
73,073
Reconciliation of Adjusted Funds from
Operations to Net Income
(In thousands)
13 Weeks
13 Weeks
Ended
Ended
1-Apr-12
3-Apr-11
Net Income
$
15,059
$
16,380
Net (Income) loss attributable to non-controlling interests
(34
)
410
Depreciation and Amortization
23,215
18,802
Income Tax Provision
9,247
9,780
Income Taxes Refunded (Paid)
9,331
(940
)
Stock-Based Compensation
1,506
2,061
Maintenance Capital Expenditures
(6,122
)
(8,319
)
Equity in Earnings of Affiliates, Net of Income Tax
(748
)
(662
)
Amortization of Debt Costs and Other Non-Cash Interest
690
226
Start-up/Transition Expenses
4,889
3,567
M&A Related Expenses
453
5,657
International Bid and Proposal Expenses
565
-
Adjusted Funds from Operations
$
58,051
$
46,962
Adjusted Funds from Operations Per Diluted Share
$
0.95
$
0.73
Weighted average common shares outstanding-diluted
60,929
64,731
The GEO Group, Inc. Pablo E. Paez, 866-301-4436 Vice
President, Corporate Relations
Recommend:
