EX-99.1 2 g05834exv99w1.htm EX-99.1 PRESS RELEASE EX-99.1 Press Release
 

EXHIBIT 99.1
 

(Geo logo)
NEWS RELEASE


 
      One Park Place, Suite 700 n 621 Northwest 53rd Street n Boca Raton, Florida 33487 n www.thegeogroupinc.com
CR-07-09
THE GEO GROUP REPORTS FOURTH QUARTER 2006 RESULTS
AND INCREASES 2007 GUIDANCE BY $0.15 EPS
•   4Q Income from Continuing Operations Increased to $10.5 Million — $0.52 EPS
 
•   4Q Pro-Forma Income from Continuing Operations Increased to $10.7 Million — $0.53 EPS
 
•   4Q Revenue Increased to $247.4 Million from $164.9 Million
 
•   Increases Pro Forma 2007 Guidance by $0.15 EPS
Boca Raton, Fla. — February 27, 2007 — The GEO Group (NYSE: GEO) (“GEO”) today reported fourth quarter and full-year 2006 financial results. GEO reported fourth quarter 2006 Income from Continuing Operations of $10.5 million, or $0.52 per share, based on 20.2 million diluted weighted average shares outstanding, compared with a loss of $1.3 million, or $0.09 per share, based on 15.0 million diluted weighted average shares outstanding in the fourth quarter of 2005. GEO reported 2006 Income from Continuing Operations of $30.3 million, or $1.70 per share, based on 17.9 million diluted weighted average shares outstanding, compared with $5.9 million, or $0.39 per share, based on 15.0 million diluted weighted average shares outstanding for 2005.
Fourth quarter 2006 pro forma income from continuing operations increased 197% to $10.7 million, or $0.53 per share from $3.6 million, or $0.24 per share, in the fourth quarter of 2005. Pro forma income from continuing operations for 2006 increased 166% to $32.4 million, or $1.81 per share, from $12.2 million, or $0.81 per share, for 2005. Please see the section of this press release below entitled “Important Information on GEO’s Non-GAAP Financial Measures” for information on how GEO defines Pro Forma Income from Continuing Operations.
George C. Zoley, Chairman and Chief Executive Officer of GEO, said: “We are very pleased with our strong operational and financial performance during 2006. The primary factors driving our improved financial results are the successful acquisition and integration of Correctional Services Corporation in November 2005; stronger results at a number of our federal facilities due to improved contract terms and higher occupancy levels as a result of the U.S. Secure Border Initiative; and new contract wins by our three business units of U.S. Corrections, GEO Care, and International Services.
“We continue to have a strong organic growth pipeline with projects totaling more than 5,400 beds under development representing more than $94 million in expected annual operating revenues. These projects are expected to start between the first quarter of 2007 and the second quarter of 2008. In addition, our successful acquisition of CentraCore Properties Trust allows our company to regain control of 11 important facilities and has positioned us to pursue future potential growth opportunities through the expansion of existing facilities.”
Pro Forma Income from Continuing Operations excludes the items set forth in the table below, which presents a reconciliation of pro forma income from continuing operations to GAAP Income from Continuing Operations for the fourth quarter and year-end 2006.
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NEWS RELEASE
Table 1. Reconciliation of Pro Forma Income from Continuing Operations to GAAP Income from Continuing Operations
                                 
(In thousands except per share data)   13 Weeks Ended     13 Weeks Ended     52 Weeks Ended     52 Weeks Ended  
    31-Dec-06     1-Jan-06     31-Dec-06     1-Jan-06  
Income from Continuing Operations
   $ 10,537     $ (1,323 )   $ 30,308     $ 5,879  
2006
                                
Start-Up Expenses
     926               2,045          
Deferred Financing Fees
     —               803          
International Tax Benefit
     (750 )             (750 )        
2005
                                
International Tax Benefit
             (8,517 )             (8,517 )
Start-Up Expenses
             592               592  
Michigan Impairment Charge
             12,630               12,630  
Job Reclassification Expenses
             242               242  
U.S. Job Creation Tax Benefit
             —               (1,704 )
Queens Transition Costs
             —               479  
Deferred Financing Fees
             —               752  
Jena, Louisiana Write-Off
             —               2,596  
Insurance Adjustment
             —               (789 )
 
                        
Pro Forma Income from Continuing Operations
   $ 10,713     $ 3,624     $ 32,406     $ 12,160  
 
                        
 
                                
Diluted Earnings Per Share
                                
Income from Continuing Operations
   $ 0.52     $ (0.09 )   $ 1.70     $ 0.39  
2006
                                
Start-Up Expenses
     0.05               0.11          
Deferred Financing Fees
     —               0.04          
International Tax Benefit
     (0.04 )             (0.04 )        
2005
                                
International Tax Benefit
             (0.56 )             (0.56 )
Start-Up Expenses
             0.03               0.03  
Michigan Impairment Charge
             0.85               0.85  
Job Reclassification Expenses
             0.01               0.01  
U.S. Job Creation Tax Benefit
             —               (0.11 )
Queens Transition Costs
             —               0.03  
Deferred Financing Fees
             —               0.05  
Jena, Louisiana Write-Off
             —               0.17  
Insurance Adjustment
             —               (0.05 )
 
                        
Diluted Pro Forma Earnings Per Share
   $ 0.53     $ 0.24     $ 1.81     $ 0.81  
 
                        
 
                                
Weighted Average Shares Outstanding
     20,170       14,978       17,872       15,015  
Revenue
GEO reported a 50% increase in fourth quarter 2006 revenue to $247.4 million from $164.9 million in the fourth quarter of 2005. Fourth quarter 2006 revenue includes $37 million in pass-through construction revenues. GEO reported a 40% increase in 2006 revenue to $860.9 million from $612.9 million in 2005. 2006 revenue includes $74 million in pass-through construction revenues. Exclusive of pass-through construction revenues, GEO reported fourth quarter 2006 operating revenues of $210.4 million and year-end 2006 operating revenues of $786.9 million. U.S. Corrections revenue for 2006 increased to $612.8 million from $473.3 million for 2005. International Services revenue for 2006 increased to $103.6 million from $98.8 million for 2005. GEO Care revenue for 2006 increased to $70.4 million from $32.6 million for 2005.
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NEWS RELEASE
Adjusted EBITDA and Adjusted EBITDAR
Fourth quarter 2006 Adjusted EBITDA increased 71% to $25.2 million from $14.7 million in the fourth quarter of 2005. Adjusted EBITDAR for the fourth quarter of 2006 increased 49% to $31.2 million from $20.9 million for the fourth quarter of 2005. Adjusted EBITDA for 2006 increased 86% to $91.2 million from $49.1 million for 2005. Adjusted EBITDAR for 2006 increased 54% to $116.9 million from $75.7 million for 2005. Please see the section of this press release below entitled “Important Information on GEO’s Non-GAAP Financial Measures” for information on how GEO defines Adjusted EBITDA and Adjusted EBITDAR.
The following table presents a reconciliation from Adjusted EBITDA and Adjusted EBITDAR to GAAP Net Income for the fourth quarter and year-end 2006.
Table 2. Reconciliation from Adjusted EBITDA and Adjusted EBITDAR to GAAP Net Income
                                 
(In thousands)   13 Weeks Ended     13 Weeks Ended     52 Weeks Ended     52 Weeks Ended  
    31-Dec-06     1-Jan-06     31-Dec-06     1-Jan-06  
Net Income
   $ 10,515     $ (807 )   $ 30,031     $ 7,006  
Discontinued Operations
     22       (516 )     277       (1,127 )
Interest Expense, Net
     3,355       4,641       17,544       13,862  
Income Tax Provision
     5,363       (13,707 )     16,505       (11,826 )
Depreciation and Amortization
     4,467       4,949       22,235       15,876  
 
                        
EBITDA
   $ 23,722     $ (5,440 )   $ 86,592     $ 23,791  
 
                                
Adjustments, Pre-tax
                                
2006
                                
Start-Up Expenses
     1,494               3,298          
Deferred Financing Fees
     —               1,295          
2005
                                
International Tax Benefit
             (2,057 )             (2,057 )
Start-Up Expenses
             977               977  
Michigan Impairment Charge
             20,859               20,859  
Job Reclassification Expenses
             400               400  
Queens Transition Costs
             —               798  
Deferred Financing Fees
             —               1,360  
Jena, Louisiana Write-Off
             —               4,255  
Insurance Adjustment
             —               (1,300 )
 
                        
Adjusted EBITDA
   $ 25,216     $ 14,739     $ 91,185     $ 49,083  
 
                        
 
                                
Lease Rental Expense
     5,960       6,123       25,700       26,611  
 
                        
 
                                
Adjusted EBITDAR
   $ 31,176     $ 20,862     $ 116,885     $ 75,694  
 
                        
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NEWS RELEASE
Adjusted Free Cash Flow
Adjusted Free Cash Flow for the fourth quarter of 2006 increased 106% to $9.9 million from $4.8 million for the fourth quarter of 2005. Adjusted Free Cash Flow for 2006 increased 136% to $47.9 million from $20.3 million for 2005. Please see the section of this press release below entitled “Important Information on GEO’s Non-GAAP Financial Measures” for information on how GEO defines Adjusted Free Cash Flow.
The following table presents a reconciliation from Adjusted Free Cash Flow to GAAP Income from Continuing Operations for the fourth quarter and year-end 2006.
Table 3. Reconciliation of Adjusted Free Cash Flow to GAAP Income from Continuing Operations
                                 
(In thousands)   13 Weeks Ended     13 Weeks Ended     52 Weeks Ended     52 Weeks Ended  
    31-Dec-06     1-Jan-06     31-Dec-06     1-Jan-06  
Income from Continuing Operations
   $ 10,537     $ (1,323 )   $ 30,308     $ 5,879  
Depreciation and Amortization
     4,467       4,949       22,235       15,876  
Income Tax Provision
     5,363       (13,707 )     16,505       (11,826 )
Income Taxes Paid
     (2,199 )     3,068       (11,336 )     (632 )
Stock Based Compensation Included in G&A
     424       —       1,341       —  
Maintenance Capital Expenditures
     (8,049 )     (7,979 )     (10,665 )     (13,564 )
Equity in Earnings of Affiliates, Net of Income Tax
     (538 )     (2,280 )     (1,576 )     (2,079 )
Minority Interest
     (80 )     (202 )     (125 )     (742 )
Write-off of Deferred Financing Fees
     —       —       1,295       1,360  
Start-Up Expenses
     —       977       —       977  
Michigan Impairment Charge
     —       20,859       —       20,859  
Job Reclassification Expenses
     —       400       —       400  
Queens Transition Costs
     —       —       —       798  
Jena, Louisiana Write-Off
     —       —       —       4,255  
Insurance Adjustment
     —       —       —       (1,300 )
 
                        
Adjusted Free Cash Flow
   $ 9,925     $ 4,762     $ 47,982     $ 20,261  
 
                        
Important Information on GEO’s Non-GAAP Financial Measures
Pro Forma Income from Continuing Operations, Adjusted EBITDA, Adjusted EBITDAR, and Adjusted Free Cash Flow are non-GAAP financial measures. Pro Forma Income from Continuing Operations is defined as Income from Continuing Operations excluding Start-Up Expenses, Deferred Financing Fees, and the other items set forth in Table 1 above. Adjusted EBITDA is defined as EBITDA excluding Start-Up Expenses, Deferred Financing Fees, and the other items set forth in Table 2 above. Adjusted EBITDAR is defined as Adjusted EBITDA including Lease Rental Expense. Adjusted Free Cash Flow is defined as Income from Continuing Operations after giving effect to the items set forth in Table 3 above. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measurements of these items is included in Tables 1, 2, and 3 respectively set forth above in this press release. GEO believes that these financial measures are important operating measures that supplement discussion and analysis of GEO’s financial results derived in accordance with GAAP. These non-GAAP financial measures should be read in conjunction with GEO’s consolidated financial statements and related notes included in GEO’s filings with the Securities and Exchange Commission.
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NEWS RELEASE
2007 Financial Guidance
GEO is increasing its 2007 earnings guidance to a pro forma range of $1.90 to $2.05 per share, exclusive of $0.12 per share in after-tax start-up expenses associated with facility openings. GEO expects 2007 operating revenues to be in the range of $890 million to $910 million exclusive of pass-through construction revenues.
GEO expects first quarter 2007 earnings to be in a pro forma range of $0.37 to $0.39 per share, exclusive of $0.06 per share in after-tax start-up expenses. GEO expects first quarter 2007 operating revenues to be in the range of $215 million to $220 million exclusive of pass-through construction revenues.
GEO expects second quarter 2007 earnings to be in a pro forma range of $0.47 to $0.51 per share, exclusive of $0.01 per share in after-tax start-up expenses. GEO expects second quarter 2007 operating revenues to be in the range of $221 million to $226 million exclusive of pass-through construction revenues.
GEO expects third quarter 2007 earnings to be in a pro forma range of $0.50 to $0.54 per share, exclusive of $0.05 per share in after-tax start-up expenses. GEO expects third quarter 2007 operating revenues to be in the range of $224 million to $229 million exclusive of pass-through construction revenues.
GEO expects fourth quarter 2007 earnings to be in a pro forma range of $0.56 to $0.61 per share. GEO expects fourth quarter 2007 operating revenues to be in the range of $230 million to $235 million exclusive of pass-through construction revenues.
GEO’s 2007 financial guidance does not include any potential contracts for the utilization of GEO’s available bed capacity at the Northlake Correctional Facility in Baldwin, Michigan or the LaSalle Correctional Facility in Jena, Louisiana. The upper end of GEO’s 2007 earnings guidance includes a modest contribution from increased utilization of the New Castle Correctional Facility in New Castle, Indiana.
                       
2007 Operating Revenue Guidance (In Millions)                      
(Exclusive of Pass-Through Construction Revenue)   1Q 2007   2Q 2007   3Q 2007   4Q 2007     FY 2007
Previously Issued Guidance
                     $880 - $905
       
Revised Guidance (February 27, 2007)
   $215 - $220   $221 - $226   $224 - $229   $230 - $235     $890 - $910
       
                       
2007 Earnings Per Share                      
    1Q 2007   2Q 2007   3Q 2007   4Q 2007     FY 2007
Previously Issued GAAP Guidance
                     $1.65 - $1.80
 
                      
After-Tax Start-Up Expenses
                     $0.10
 
                      
Previously Issued Pro Forma Guidance
                     $1.75 - $1.90
 
                      
       
Revised GAAP Guidance (February 27, 2007)
   $0.31 - $0.33   $0.46 - $0.50   $0.45 - $0.49   $0.56 - $0.61     $1.78 - $1.93
 
                      
After-Tax Start-Up Expenses
   $0.06   $0.01   $0.05   —     $0.12
       
Revised Pro Forma Guidance (February 27, 2007)
   $0.37- $0.39   $0.47 - $0.51   $0.50 - $0.54   $0.56 - $0.61     $1.90 - $2.05
       
Diluted Weighted Average Shares Outstanding (In Millions)
   20.2   20.2   20.2   20.2     20.2
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NEWS RELEASE
Conference Call Information
GEO has scheduled a conference call and simultaneous webcast at 3:00 PM (Eastern Time) today to discuss GEO’s fourth quarter 2006 financial results as well as GEO’s progress and outlook. The call-in number for the U.S. is 1-800-299-0148 and the international call-in number is 1-617-801-9711. The participant pass-code for the conference call is 94502562. 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.thegeogroupinc.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 March 27, 2007 at 1-888-286-8010 (U.S.) and 1-617-801-6888 (International). The pass-code for the telephonic replay is 28385790. GEO will discuss Non-GAAP (“Pro Forma”) basis information on the conference call. A reconciliation from Non-GAAP (“Pro Forma”) basis information to GAAP basis results may be found on the Conference Calls/Webcasts section of GEO’s investor relations home page at www.thegeogroupinc.com.
About The GEO Group, Inc.
The GEO Group, Inc. (“GEO”) is a world leader in the delivery 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, Canada, and the United Kingdom. GEO’s worldwide operations include 64 correctional and residential treatment facilities with a total design capacity of approximately 55,000 beds.
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 estimated earnings, revenues and costs and our ability to maintain growth and strengthen contract relationships. 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 2007 given the various risks to which its business is exposed; (2) GEO’s ability to successfully pursue further growth and continue to enhance shareholder value; (3) GEO’s ability to access the capital markets in the future on satisfactory terms or at all; (4) risks associated with GEO’s ability to control operating costs associated with contract start-ups; (5) 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; (6) GEO’s ability to win management contracts for which it has submitted proposals and to retain existing management contracts; (7) GEO’s ability to obtain future financing on acceptable terms; (8) GEO’s ability to sustain company-wide occupancy rates at its facilities; and (9) other factors contained in GEO’s Securities and Exchange Commission filings, including the forms 10-K, 10-Q and 8-K reports.
Fourth quarter and year-end financial tables to follow:

 

 

NEWS RELEASE
THE GEO GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN AND FIFTY-TWO WEEKS ENDED
DECEMBER 31, 2006 AND JANUARY 1, 2006
(In thousands, except per share data)
(UNAUDITED)
                                 
    Thirteen Weeks Ended     Fifty-two Weeks Ended  
    December 31, 2006     January 1, 2006     December 31, 2006     January 1, 2006  
Revenues
   $ 247,404     $ 164,874     $ 860,882     $ 612,900  
Operating expenses
     210,246       159,227       718,178       540,128  
Depreciation and amortization
     4,467       4,949       22,235       15,876  
General and administrative expenses
     13,894       13,165       56,268       48,958  
 
                        
Operating income
     18,797       (12,467 )     64,201       7,938  
Interest income
     2,881       2,281       10,687       9,154  
Interest expense
     (6,236 )     (6,922 )     (28,231 )     (23,016 )
Write off of deferred financing fees from extinguishment of debt
     —       —       (1,295 )     (1,360 )
 
                        
Income before income taxes, minority interest, equity in earnings of affiliate and discontinued operations
     15,442       (17,108 )     45,362       (7,284 )
Provision for income taxes
     5,363       (13,707 )     16,505       (11,826 )
Minority interest
     (80 )     (202 )     (125 )     (742 )
Equity in earnings (loss) of affiliate
     538       2,280       1,576       2,079  
 
                        
Income from continuing operations
     10,537       (1,323 )     30,308       5,879  
Income (loss) from discontinued operations
     (22 )     516       (277 )     1,127  
 
                        
Net income
   $ 10,515     $ (807 )   $ 30,031     $ 7,006  
 
                        
Weighted-average common shares outstanding:
                                
Basic
     19,405       14,493       17,221       14,370  
 
                        
Diluted
     20,170       14,978       17,872       15,015  
 
                        
Income per common share:
                                
Basic:
                                
Income from continuing operations
   $ 0.54     $ (0.09 )   $ 1.76     $ 0.41  
Income (loss) from discontinued operations
     0.00       0.03       (0.02 )     0.08  
 
                        
Net income per share-basic
   $ 0.54     $ (0.06 )   $ 1.74     $ 0.49  
 
                        
Diluted:
                                
Income from continuing operations
   $ 0.52     $ (0.09 )   $ 1.70     $ 0.39  
Income (loss) from discontinued operations
     0.00       0.04       (0.02 )     0.08  
 
                        
Net income per share-diluted
   $ 0.52     $ (0.05 )   $ 1.68     $ 0.47  
 
                        
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NEWS RELEASE
The GEO Group, Inc. — Operating Data
                                 
    13 Weeks     13 Weeks     52 Weeks     52 Weeks  
    Ended     Ended     Ended     Ended  
    December 31, 2006     January 1, 2006     December 31, 2006     January 1, 2006  
*Revenue-producing beds
     48,873       43,187       48,873       43,187  
*Compensated man-days
     4,154,112       3,161,501       15,788,208       12,607,525  
*Average occupancy1
     98.5 %     99.0 %     97.4 %     97.5 %
 
    *Includes South Africa
 
    1 Does not include GEO’s idle facilities.
THE GEO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2006 and January 1, 2006
                 
    2006     2005  
    (In thousands, except per  
    share data)  
ASSETS
                
Current Assets
                
Cash and cash equivalents
   $ 111,520     $ 57,094  
Restricted cash
     13,953       8,882  
Accounts receivable, less allowance for doubtful accounts of $926 and $224
     162,867       127,612  
Deferred income tax asset
     19,492       19,755  
Other current assets
     14,922       15,826  
Current assets of discontinued operations
     —       123  
 
            
Total current assets
     322,754       229,292  
 
            
Restricted Cash
     19,698       17,484  
Property and Equipment, Net
     287,374       282,236  
Assets Held for Sale
     1,610       5,000  
Direct Finance Lease Receivable
     47,367       38,492  
Deferred Income Tax Assets
     4,941       —  
Goodwill and Other Intangible Assets, Net
     41,554       52,127  
Other Non Current Assets
     18,155       14,880  
 
            
 
   $ 743,453     $ 639,511  
 
            
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
 
                
Current Liabilities
                
Accounts payable
   $ 48,890     $ 27,762  
Accrued payroll and related taxes
     31,320       26,985  
Accrued expenses
     77,675       70,177  
Current portion of deferred revenue
     1,830       1,894  
Current portion of capital lease obligations, long-term debt and non-recourse debt
     12,685       8,441  
Current liabilities of discontinued operations
     1,303       1,260  
 
            
Total current liabilities
     173,703       136,519  
 
            
Deferred Revenue
     1,755       3,267  
Deferred Tax Liability
     —       2,085  
Minority Interest
     1,297       1,840  
Other Non Current Liabilities
     24,816       19,601  
Capital Lease Obligations
     16,621       17,072  
Long-Term Debt
     144,971       219,254  
Non-Recourse Debt
     131,680       131,279  
Total shareholders’ equity
     248,610       108,594  
 
            
 
   $ 743,453     $ 639,511  
 
            
- End -