EX-99.1 3 g08934exv99w1.htm EX-99.1 PRESS RELEASE DATED AUGUST 8, 2007 EX-99.1 Press Release dated August 8, 2007
 

EXHIBIT 99.1
     
(Geo Logo)   (News Release Words)
One Park Place, Suite 700 n 621 Northwest 53rd Street n Boca Raton, Florida 33487 n www.thegeogroupinc.com
CR-07-29
THE GEO GROUP REPORTS SECOND QUARTER 2007 RESULTS
•   2Q GAAP Income from Continuing Operations Increased to $12.4 Million — $0.24 EPS
 
•   2Q Pro-Forma Income from Continuing Operations Increased to $13.5 Million — $0.26 EPS
 
•   2Q Revenue Increased to $258.2 Million from $208.7 Million
 
•   GEO Increases 2007 Earnings Guidance to Pro Forma Range of $1.05 to $1.09 EPS
Boca Raton, Fla. — August 8, 2007 — The GEO Group (NYSE: GEO) (“GEO”) today reported second quarter and year-to-date 2007 financial results. All financial results in this press release have been adjusted to reflect the effect of GEO’s June 1, 2007 2-for-1 stock split as well as GEO’s October 2, 2006 3-for-2 stock split.
GEO reported second quarter 2007 GAAP Income from Continuing Operations of $12.4 million, or $0.24 per share, based on 51.6 million diluted weighted average shares outstanding compared to $6.4 million, or $0.20 per share, based on 32.8 million diluted weighted average shares outstanding in the second quarter of 2006. For the first half of 2007, GEO reported GAAP Income from Continuing Operations of $17.5 million, or $0.38 per share, based on 46.6 million diluted weighted average shares outstanding compared to $11.1 million, or $0.35 per share, based on 31.3 million diluted weighted average shares outstanding for the first half of 2006.
Second quarter 2007 Pro Forma Income from Continuing Operations increased to $13.5 million, or $0.26 per share, based on 51.6 million diluted weighted average shares outstanding from Pro Forma Income from Continuing Operations of $7.6 million, or $0.23 per share, based on 32.8 million diluted weighted average shares outstanding in the second quarter of 2006. For the first half of 2007, Pro Forma Income from Continuing Operations increased to $22.5 million, or $0.48 per share, on 46.6 million diluted weighted average shares outstanding from Pro Forma Income from Continuing Operations of $12.5 million, or $0.40 per share, based on 31.3 million diluted weighted average shares outstanding for the first half of 2006.
George C. Zoley, Chairman and Chief Executive Officer of GEO, said: “We are very pleased with our earnings results which reflect strong performance from our three business units as a result of better-than-expected performance by a number of our facilities and new contract wins. Our organic growth pipeline remains strong with projects totaling more than 11,000 beds under development, including projects we activated in the first half of the year, representing more than $198 million in combined annual operating revenues.”
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 second quarter and first six months of 2007. 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.
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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     26 Weeks Ended     26 Weeks Ended  
    1-Jul-07     2-Jul-06     1-Jul-07     2-Jul-06  
Income from continuing operations
   $ 12,367     $ 6,431     $ 17,463     $ 11,105  
Start-up expenses, net of tax
     1,163       378       2,085       589  
Write-off of deferred financing fees from extinguishment of debt, net of tax
     —       803       2,972       803  
 
                        
Pro forma income from continuing operations
   $ 13,530     $ 7,612     $ 22,520     $ 12,497  
 
                        
 
                                
Diluted earnings per share
                                
Income from Continuing Operations
   $ 0.24     $ 0.20     $ 0.38     $ 0.35  
Start-up expenses, net of tax
     0.02       0.01       0.04       0.02  
Write-off of deferred financing fees from extinguishment of debt, net of tax
     —       0.02       0.06       0.03  
 
                        
Diluted pro forma earnings per share
   $ 0.26     $ 0.23     $ 0.48     $ 0.40  
 
                        
 
                                
Weighted average shares outstanding
     51,592       32,772       46,577       31,338  
Revenue
GEO reported second quarter 2007 revenue of $258.2 million compared to $208.7 million in the second quarter of 2006. Exclusive of pass-through construction revenues, GEO reported second quarter 2007 operating revenues of $231.9 million. U.S. Corrections revenue for the second quarter of 2007 increased to $169.0 million from $150.7 million for the second quarter of 2006. International Services revenue for the second quarter of 2007 increased to $33.3 million from $24.9 million for the second quarter of 2006. GEO Care revenue for the second quarter of 2007 increased to $29.5 million from $15.5 million for the second quarter of 2006.
For the first half of 2007, GEO reported revenue of $495.2 million compared to $394.6 million for the first half of 2006. Exclusive of pass-through construction revenues, GEO reported operating revenues of $447.2 million for the first half of 2007. U.S. Corrections revenue for the first half of 2007 increased to $333.4 million from $297.5 million for the first half of 2006. International Services revenue for the first half of 2007 increased to $62.2 million from $48.0 million for the first half of 2006. GEO Care revenue for the first half of 2007 increased to $51.6 million from $30.4 million for the first half of 2006.
Adjusted EBITDA
Second quarter 2007 Adjusted EBITDA increased to $37.4 million from $23.0 million in the second quarter of 2006. Adjusted EBITDA for the first half of 2007 increased to $67.0 million from $41.7 million for the first half of 2006. 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. The following table presents a reconciliation from Adjusted EBITDA to GAAP Net Income for the second quarter and first six months of 2007.
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NEWS RELEASE
Table 2. Reconciliation from Adjusted EBITDA to GAAP Net Income
                                 
(In thousands)   13 Weeks Ended     13 Weeks Ended     26 Weeks Ended     26 Weeks Ended  
    1-Jul-07     2-Jul-06     1-Jul-07     2-Jul-06  
Net income
   $ 12,367     $ 6,318     $ 17,630     $ 10,874  
Discontinued operations
     —       113       (167 )     231  
Interest expense, net
     7,633       5,022       15,458       10,385  
Income tax provision
     7,004       3,595       10,145       6,288  
Depreciation and amortization
     8,471       6,024       15,752       11,688  
 
                        
EBITDA
   $ 35,475     $ 21,072     $ 58,818     $ 39,466  
 
                                
Adjustments, pre-tax
                                
Start-up expenses
     1,877       609       3,365       949  
Write-off of deferred financing fees from extinguishment of debt
     —       1,295       4,794       1,295  
 
                        
Adjusted EBITDA
   $ 37,352     $ 22,976     $ 66,977     $ 41,710  
 
                        
Adjusted Free Cash Flow
Adjusted Free Cash Flow for the second quarter of 2007 increased to $19.5 million from $12.0 million for the second quarter of 2006. Adjusted Free Cash Flow for the first half of 2007 increased to $34.1 million from $23.5 million for the first half of 2006. 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 second quarter and first six months of 2007.
Table 3. Reconciliation of Adjusted Free Cash Flow to GAAP Income from Continuing Operations
                                 
(In thousands)   13 Weeks Ended     13 Weeks Ended     26 Weeks Ended     26 Weeks Ended  
    1-Jul-07     2-Jul-06     1-Jul-07     2-Jul-06  
Income from Continuing Operations
   $ 12,367     $ 6,431     $ 17,463     $ 11,105  
Depreciation and Amortization
     8,471       6,024       15,752       11,688  
Income Tax Provision
     7,004       3,595       10,145       6,288  
Income Taxes Paid
     (8,101 )     (4,595 )     (13,717 )     (4,867 )
Stock Based Compensation Included in G&A
     780       313       1,354       490  
Maintenance Capital Expenditures
     (2,901 )     (1,598 )     (5,297 )     (3,321 )
Equity in Earnings of Affiliates, Net of Income Tax
     (506 )     (351 )     (889 )     (628 )
Dividends from Equity Affiliates
     —       —       —       —  
Minority Interest
     100       (35 )     191       (26 )
Amortization of Debt Costs and Other Non-Cash Interest
     458       287       952       568  
Write-off of Deferred Financing Fees
     —       1,295       4,794       1,295  
Start-Up Expenses
     1,877       609       3,365       949  
 
                        
Adjusted Free Cash Flow
   $ 19,549     $ 11,975     $ 34,113     $ 23,541  
 
                        
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NEWS RELEASE
Important Information on GEO’s Non-GAAP Financial Measures
Pro Forma Income from Continuing Operations, Adjusted EBITDA, 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 and Deferred Financing Fees as set forth in Table 1 above. Adjusted EBITDA is defined as EBITDA excluding Start-Up Expenses and Deferred Financing Fees as set forth in Table 2 above. 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 above in Tables 1, 2, and 3, respectively. 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.
2007 Financial Guidance
As a result of GEO’s second quarter earnings results, GEO is increasing its 2007 earnings guidance to a pro forma range of $1.05 to $1.09 per share, exclusive of $0.07 per share associated with the write-off of deferred financing fees during the first quarter of 2007 and $0.08 per share in after-tax start-up expenses associated with facility openings. GEO is increasing its 2007 operating revenue guidance to a range of $895 million to $905 million exclusive of pass-through construction revenues.
GEO is maintaining its third quarter 2007 earnings guidance in the pro forma range of $0.27 to $0.29 per share, exclusive of $0.04 per share in after-tax start-up expenses. GEO is maintaining its third quarter 2007 operating revenue guidance in the range of $223 million to $228 million exclusive of pass-through construction revenues. GEO is maintaining its fourth quarter 2007 earnings guidance in the pro forma range of $0.30 to $0.32 per share. GEO is maintaining its fourth quarter 2007 operating revenue guidance in the range of $225 million to $230 million exclusive of pass-through construction revenues.
2007 Operating Revenue Guidance (In Millions)
                                           
(Exclusive of Pass-Through Construction Revenue)   1Q 2007     2Q 2007     3Q 2007     4Q 2007       FY 2007  
 
                                          
Revenue Guidance (August 8, 2007)
   $ 215.3A     $ 231.9A     $ 223 - $228     $ 225 - $230       $ 895 - $905  
 
                                
2007 Earnings Per Share
                                           
    1Q 2007     2Q 2007     3Q 2007     4Q 2007       FY 2007  
 
                                          
GAAP EPS Guidance (August 8, 2007)
   $ 0.13A     $ 0.24A     $ 0.23 - $0.25     $ 0.30 - $0.32       $ 0.90 - $0.94  
After-Tax Start-Up Expenses
   $ 0.02A     $ 0.02A     $ 0.04       —       $ 0.08  
Deferred Financing Fees
   $ 0.07A       —       —       —       $ 0.07  
 
                                
Revised Pro Forma Guidance (August 8, 2007)
   $ 0.22A     $ 0.26A     $ 0.27 - $0.29     $ 0.30 - $0.32       $ 1.05 - $1.09  
 
                                
 
                                          
Diluted Weighted Average Shares Outstanding (In Millions)
     41.6       51.6       51.6       51.6         49.1  
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NEWS RELEASE
Conference Call Information
GEO has scheduled a conference call and simultaneous webcast at 11:00 AM (Eastern Time) on Wednesday, August 8, 2007 to discuss GEO’s second quarter 2007 financial results as well as its progress and outlook. The call-in number for the U.S. is 1-800-299-9630 and the international call-in number is 1-617-786-2904. The participant pass-code for the conference call is 85324576. 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 September 8, 2007 at 1-888-286-8010 (U.S.) and 1-617-801-6888 (International). The pass-code for the telephonic replay is 57625129. 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, and the United Kingdom. GEO’s worldwide operations include 68 correctional and residential treatment facilities with a total design capacity of approximately 59,000 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.
Second quarter and six months financial tables to follow:

 

 

NEWS RELEASE
THE GEO GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN AND TWENTY-SIX WEEKS ENDED
JULY 1, 2007 AND JULY 2, 2006
(In thousands, except per share data)
(UNAUDITED)
                                 
    Thirteen Weeks Ended     Twenty-six Weeks Ended  
    July 1, 2007     July 2, 2006     July 1, 2007     July 2, 2006  
Revenues
   $ 258,183     $ 208,688     $ 495,186     $ 394,569  
Operating expenses
     207,373       172,415       401,477       326,161  
Depreciation and amortization
     8,471       6,024       15,752       11,688  
General and administrative expenses
     15,741       14,292       30,795       28,301  
 
                        
Operating income
     26,598       15,957       47,162       28,419  
Interest income
     1,000       2,807       4,240       5,023  
Interest expense
     (8,633 )     (7,829 )     (19,698 )     (15,408 )
Write off of deferred financing fees from extinguishment of debt
     —       (1,295 )     (4,794 )     (1,295 )
 
                        
Income before income taxes, minority interest, equity in earnings of affiliate and discontinued operations
     18,965       9,640       26,910       16,739  
Provision for income taxes
     7,004       3,595       10,145       6,288  
Minority interest
     (100 )     35       (191 )     26  
Equity in earnings of affiliate, net of income tax expense of $223, $22, $433 and $40
     506       351       889       628  
 
                        
Income from continuing operations
     12,367       6,431       17,463       11,105  
Income (loss) from discontinued operations, net of tax expense (benefit) of $-, $(61), $109 and $(126)
     —       (113 )     167       (231 )
 
                        
Net income
   $ 12,367     $ 6,318     $ 17,630     $ 10,874  
 
                        
Weighted-average common shares outstanding:
                                
Basic
     50,091       31,326       45,115       30,213  
 
                        
Diluted
     51,592       32,772       46,577       31,338  
 
                        
Income per common share:
                                
Basic:
                                
Income from continuing operations
   $ 0.25     $ 0.21     $ 0.39     $ 0.37  
Income (loss) from discontinued operations
     —       (0.01 )     —       (0.01 )
 
                        
Net income per share-basic
   $ 0.25     $ 0.20     $ 0.39     $ 0.36  
 
                        
Diluted:
                                
Income from continuing operations
   $ 0.24     $ 0.20     $ 0.38     $ 0.35  
Income (loss) from discontinued operations
     —       (0.01 )     —       —  
 
                        
Net income per share-diluted
   $ 0.24     $ 0.19     $ 0.38     $ 0.35  
 
                        
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NEWS RELEASE
The GEO Group, Inc.
Operating Data
                                 
    13 Weeks     13 Weeks     26 Weeks     26 Weeks  
    Ended     Ended     Ended     Ended  
    July 1, 2007     July 2, 2006     July 1, 2007     July 2, 2006  
*Revenue-producing beds
     49,775       45,789       49,775       45,789  
*Compensated man-days
     4,348,798       3,852,051       8,635,166       7,623,623  
*Average occupancy1
     96.5 %     96.7 %     97.1 %     96.4 %
 
    *Includes International Services and GEO Care
 
    1 Does not include GEO’s idle facilities.
THE GEO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
JULY 1, 2007 AND DECEMBER 31, 2006
(In thousands)
                 
    July 1, 2007     December 31, 2006  
    (Unaudited)          
ASSETS
                
Current Assets
                
Cash and cash equivalents
   $ 76,849     $ 111,520  
Restricted cash
     13,168       13,953  
Accounts receivable, less allowance for doubtful accounts of $806 and $902
     171,062       162,867  
Deferred income tax asset
     16,152       19,492  
Other current assets
     22,976       14,922  
 
            
Total current assets
     300,207       322,754  
 
            
Restricted Cash
     21,233       19,698  
Property and Equipment, Net
     719,256       287,374  
Assets Held for Sale
     1,412       1,610  
Direct Finance Lease Receivable
     43,362       39,271  
Deferred income tax assets, net
     2,897       4,941  
Goodwill and Other Intangible Assets, Net
     40,790       41,554  
Other Non Current Assets
     34,355       26,251  
 
            
 
   $ 1,163,512     $ 743,453  
 
            
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current Liabilities
                
Accounts payable
   $ 64,929     $ 48,890  
Accrued payroll and related taxes
     34,882       31,320  
Accrued expenses
     66,549       77,675  
Current portion of deferred revenue
     —       1,830  
Current portion of capital lease obligations, long-term debt and non-recourse debt
     21,896       12,685  
Current liabilities of discontinued operations
     —       1,303  
 
            
Total current liabilities
     188,256       173,703  
 
            
Deferred Revenue
     —       1,755  
Minority Interest
     1,792       1,297  
Other Non Current Liabilities
     25,830       24,816  
Capital Lease Obligations
     16,205       16,621  
Long-Term Debt
     304,887       144,971  
Non-Recourse Debt
     130,568       131,680  
Total shareholders’ equity
     495,974       248,610  
 
            
 
   $ 1,163,512     $ 743,453  
 
            
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