CORRESP 1 filename1.htm CORRESP

May 18, 2017

VIA EDGAR

Mr. Eric McPhee

Senior Staff Accountant

Office of Real Estate and Commodities

United States Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, D.C. 20549

 

  RE: The GEO Group, Inc.

Form 10-K for the fiscal year ended December 31, 2016

Filed on February 27, 2017

File No. 001-14260

Form 8-K

Filed February 28, 2017

File No. 001-14260

Dear Mr. McPhee:

On behalf of The GEO Group, Inc. (the “Company” or “GEO”), we hereby respond to the Staff’s comment letter, dated May 9, 2017, regarding the above referenced Form 10-K for the year ended December 31, 2016 filed on February 27, 2017 (the “Form 10-K”) and the Form 8-K filed on February 28, 2017 (the “Form 8-K”). Please note that, for the Staff’s convenience, we have recited the Staff’s comment in boldface type and provided our response to the comment immediately thereafter.

Form 10-K for the fiscal year ended December 31, 2016

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Funds from Operations, page 81

 

1. We note that certain adjustments to “NAREIT Defined FFO” and “Normalized Funds from Operations” have been presented net of tax. Please tell us how you considered the guidance in Question 102.11 of the updated Compliance and Disclosure Interpretations issued on May 17, 2016. This comment should also be applied to the presentation within your earnings release filed on Form 8-K and within the supplemental information posted on your website.

Response:

We acknowledge the Staff’s comment and we will revise the presentation and definition of FFO and Normalized FFO in future earnings releases, supplemental materials and periodic filings to be consistent with the proposed presentation attached hereto as Exhibit I.

Form 8-K filed February 28, 2017

Exhibit 99.1

 

2. We note your calculation of EBITDA contains adjustments for items other than interest, taxes, depreciation and amortization. Please revise in future filings to ensure that measures calculated differently from EBITDA are not characterized as EBITDA. See Question 103.01 of the updated Compliance and Disclosure Interpretations issued on May 17, 2016. This comment should also be applied to your presentation within the supplemental information posted on your website.

Response:

We acknowledge the Staff’s comment and we will revise the presentation and definition of EBITDA in future earnings releases and supplemental materials to be consistent with the proposed presentation attached hereto as Exhibit II.

 

3. In future filings, please revise to present a separate EBITDA reconciliation to comply with Item 10(e)(1)(i)(B) of Regulation S-K which requires a reconciliation of non-GAAP financial measures disclosed or released with the most directly comparable GAAP measure (i.e. net income). Further, your reconciliation should begin with the GAAP measure, so the non-GAAP measures do not receive undue prominence. See Question 102.10 of the updated Compliance and Disclosure Interpretations issued on May 17, 2016. This comment should also be applied to your presentation within the supplemental information posted on your website.

Response:

We acknowledge the Staff’s comment and we will revise the presentation of the EBITDA reconciliation in future earnings releases and supplemental materials to be consistent with the proposed presentation attached hereto as Exhibit II.

 

Sincerely,

AKERMAN LLP

/s/ Esther L. Moreno

Esther L. Moreno
For the Firm

 

cc: Securities and Exchange Commission

  Jeffrey Lewis, Staff Accountant

The GEO Group, Inc.

  Brian R. Evans, Senior Vice President and Chief Financial Officer

  John J. Bulfin, Esq., Senior Vice President and General Counsel

  Ronald A. Brack, Vice President, Chief Accounting Officer and Controller

Akerman LLP

  Stephen K. Roddenberry, Esq.

  Larry W. Ross II

Exhibit I

 

LOGO   

 

     Q4 2016     Q4 2015     FY 2016     FY 2015  

Net Income attributable to GEO

    $ 49,436     $ 44,058     $ 148,715     $ 139,438  

Add:

         

Real Estate Related Depreciation and Amortization

      15,482       14,933       61,179       57,758  

Gain on sale of real estate assets ***

      (952 )      —         (952 )      —    
  

 

 

    

 

 

    

 

 

    

 

 

  

Equals: NAREIT defined FFO

    $ 63,966     $ 58,991     $ 208,942     $ 197,196  
  

 

 

    

 

 

    

 

 

    

 

 

  

Add:

         

Non-recurring tax benefits**

      (2,031 )      —         (2,031 )      —    

Loss on extinguishment of debt

      —         —         15,885       —    

Start-up expenses

      —         —         1,939       4,658  

M&A related expenses

      —         —         —         2,232  

Tax effect of adjustments to Funds From Operations ****

      —         —         (749 )      173  
  

 

 

    

 

 

    

 

 

    

 

 

  

Equals: FFO, normalized

    $ 61,935     $ 58,991     $ 223,986     $ 204,259  
  

 

 

    

 

 

    

 

 

    

 

 

  

Add:

         

Non-Real Estate Related Depreciation & Amortization

      13,548       13,196       53,737       48,998  

Consolidated Maintenance Capital Expenditures

      (4,699 )      (5,622 )      (23,419 )      (23,551 ) 

Stock Based Compensation Expenses

      3,098       3,107       12,773       11,709  

Amortization of debt issuance costs, discount and/or premium and other non-cash interest

      3,791       1,977       12,121       6,963  
  

 

 

    

 

 

    

 

 

    

 

 

  

Equals: AFFO

    $ 77,673     $ 71,649     $ 279,198     $ 248,378  
  

 

 

    

 

 

    

 

 

    

 

 

  

Weighted average common shares outstanding - Diluted

      74,460       74,059       74,323       73,995  

FFO/AFFO per Share - Diluted

         

Normalized FFO Per Diluted Share

    $ 0.83     $ 0.80     $ 3.01     $ 2.76  
  

 

 

    

 

 

    

 

 

    

 

 

  

AFFO Per Diluted Share

    $ 1.04     $ 0.97     $ 3.76     $ 3.36  
  

 

 

    

 

 

    

 

 

    

 

 

  

Regular Common Stock Dividends per common share

    $ 0.65     $ 0.65     $ 2.60     $ 2.51  
  

 

 

    

 

 

    

 

 

    

 

 

  

 

* all figures in ‘000s, except per share data
** adjusmtent to tax provision
*** no tax impact
**** tax adjustments relate to start-up expenses and M&A expenses

Exhibit II

 

LOGO   

 

     Q4 2016     Q4 2015     FY 2016     FY 2015  

Net Income

    $ 49,342     $ 44,015     $ 148,498     $ 139,315  

Add (Subtract):

         

Equity in earnings of affiliates, net of income tax provision

      (1,983 )      (1,584 )      (6,925 )      (5,533 ) 

Income tax provision

      (4,096 )      434       7,904       7,389  

Interest expense, net of interest income

      24,745       23,880       100,222       94,558  

Loss on extinguishment of debt

      —         —         15,885       —    

Depreciation and amortization

      29,030       28,129       114,916       106,756  

General and administrative expenses

      40,262       39,276       148,709       137,040  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net Operating Income, net of operating lease obligations

    $ 137,300     $ 134,150     $ 529,209     $ 479,525  
  

 

 

    

 

 

    

 

 

    

 

 

  

Add:

         

Operating lease expense, real estate

      6,505       8,397       32,232       27,765  

Start-up expenses, pre-tax

      —         —         1,939       4,658  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net Operating Income (NOI)

    $ 143,805     $ 142,547     $ 563,380     $ 511,948  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net Income

    $ 49,342     $ 44,015     $ 148,498     $ 139,315  

Income tax

      (4,122 )      760       10,245       9,427  

Interest expense, net of interest income

      24,745       23,880       116,107       94,558  

Depreciation and amortization

      29,030       28,129       114,916       106,756  
  

 

 

    

 

 

    

 

 

    

 

 

  

EBITDA

    $ 98,995     $ 96,784     $ 389,766     $ 350,056  
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjustments

         

Net loss attributable to noncontrolling interests

      94       43       217       123  

Stock based compensation expenses, pre-tax

      3,098       3,107       12,773       11,709  

Start-up expenses, pre-tax

      —         —         1,939       4,658  

M&A related expenses, pre-tax

      —         —         —         2,174  

Gain on sale of real estate assets, pre-tax

      (952 )      —         (952 )      —    
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA

    $ 101,235     $ 99,934     $ 403,743     $ 368,720  
  

 

 

    

 

 

    

 

 

    

 

 

  

 

* all figures in ‘000s